10-QPeriod: Q2 FY2021

EMCOR Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 29, 2021For Securities:EME

Summary

EMCOR Group, Inc. reported strong financial performance for the second quarter and first half of 2021, achieving record revenues, gross profit, operating income, and diluted earnings per share for the second quarter. Revenues increased by 21.0% year-over-year in Q2 2021 to $2.44 billion and by 10.0% for the first half of the year to $4.74 billion. This growth was driven by broad-based increases across most segments, with the exception of the United States industrial services segment, which continues to be impacted by market conditions in the oil and gas sector. The company also saw a significant improvement in operating income, turning an operating loss in the prior year's comparable periods (heavily impacted by a large goodwill impairment) into substantial operating income in 2021. Net income attributable to EMCOR Group, Inc. for Q2 2021 was $97.4 million, translating to diluted EPS of $1.78, a significant recovery from a loss per share of $1.52 in Q2 2020. For the first six months of 2021, net income was $182.1 million, with diluted EPS of $3.32, a substantial improvement from a net loss of $8.0 million and diluted EPS of ($0.14) in the prior year period. The company's backlog of remaining performance obligations stood at a robust $5.11 billion as of June 30, 2021, indicating strong future revenue potential. Despite a decrease in cash and cash equivalents, the company highlighted its strong balance sheet and liquidity to manage its operations.

Financial Highlights

50 data points
Beta

Revenue

$2.44B

15.4% Gross Margin

Net Income

$97.35M

4.0% Net Margin

EPS (Diluted)

$1.78

Total Assets

$5.13B

Cash & Equivalents

$668.91M

Free Cash Flow

$82.02M

Financial Statements
Beta
Revenue$2.44B
Cost of Revenue$2.06B
Gross Profit$376.28M
SG&A Expenses$242.92M
Operating Income$133.36M
Net Income$97.35M
EPS (Basic)$1.79
EPS (Diluted)$1.78
Shares Outstanding (Basic)54.30M
Shares Outstanding (Diluted)54.59M

Key Highlights

  • 1Q2 2021 revenues of $2.44 billion represent a 21.0% increase year-over-year, reaching record levels for the quarter.
  • 2Diluted EPS for Q2 2021 was $1.78, a substantial turnaround from a loss of $1.52 in Q2 2020, reflecting improved profitability.
  • 3The United States industrial services segment continues to face headwinds due to adverse market conditions in the oil and gas industry, impacting its revenue and profitability.
  • 4The company reported a strong backlog of $5.11 billion in remaining performance obligations as of June 30, 2021, signaling robust future revenue streams.
  • 5Operating income significantly improved, moving from a substantial loss in Q2 2020 (impacted by impairments) to $133.4 million in Q2 2021.
  • 6EMCOR repurchased approximately $138.0 million of its common stock in the first six months of 2021, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

The primary driver of EMCOR's revenue growth in Q2 2021 was a broad-based increase across most of its reportable segments, particularly in United States electrical and mechanical construction and facilities services, and United States building services. This growth was partly due to a recovery from the impacts of the COVID-19 pandemic in the prior year and increased demand in sectors like commercial construction and healthcare.

In Q2 2020, EMCOR recorded a significant non-cash goodwill impairment charge of $232.8 million, primarily related to its United States industrial services segment, due to the impact of the COVID-19 pandemic on the oil and gas markets. Excluding this impairment charge, operating income saw a substantial increase in Q2 2021, demonstrating improved underlying operational performance.

The United States industrial services segment continues to be negatively impacted by adverse market conditions in the oil and gas industry, including sustained lower demand and a lagging recovery. While there has been modest sequential growth, customers are canceling or deferring projects, impacting demand for EMCOR's services in this segment. Management remains cautiously optimistic but acknowledges the ongoing challenges.

EMCOR believes it has sufficient financial resources to meet its short-term and long-term liquidity requirements. Its primary sources of liquidity include cash and cash equivalents, cash generated from operations, and its revolving credit facility. Short-term requirements are met through these sources, while long-term needs are expected to be covered by operating cash flow and potential debt financing. The company also actively manages its working capital and has a strong backlog supporting future cash generation.