Emcor group, inc. reports third quarter 2021 results
Norwalk, conn.--(business wire)--emcor group, inc. (nyse: eme) today reported results for the quarter ended september 30, 2021. for the third quarter of 2021, net income was $99.7 million, or $1.85 per diluted share, compared to net income of $61.2 million, or $1.11 per diluted share, for the third quarter of 2020. net income for the third quarter of 2020 was negatively impacted by the tax effect of the goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded in the second quarter of 2020 within our u.s. industrial services segment. excluding such tax effect, non-gaap net income for the third quarter of 2020 was $97.0 million, or $1.76 per diluted share. revenues for the third quarter of 2021 totaled $2.52 billion, up 14.5% from the third quarter of 2020. operating income for the third quarter of 2021 was $137.4 million, or 5.4% of revenues, compared to operating income of $135.9 million, or 6.2% of revenues, for the third quarter of 2020. selling, general and administrative expenses for the third quarter of 2021 totaled $243.9 million, or 9.7% of revenues, compared to $226.8 million, or 10.3% of revenues, for the third quarter of 2020. the company's income tax rate for the third quarter of 2021 was 27.2%, compared to an income tax rate of 54.7% for the third quarter of 2020. the company’s tax rate for the third quarter of 2020 was impacted by the previously referenced tax effect of the impairment charges recorded in the second quarter of 2020. remaining performance obligations as of september 30, 2021 were $5.38 billion, compared to $4.53 billion as of september 30, 2020. total remaining performance obligations grew approximately $848.6 million year-over-year. tony guzzi, chairman, president, and chief executive officer of emcor, commented, “building off the momentum from the first half of the year, the company delivered strong results in the third quarter with double-digit year-over-year revenue growth across all segments, resulting in record quarterly revenues, net income, and diluted earnings per share, as well as third quarter records for gross profit and operating income. importantly, demand for our services remained robust as remaining performance obligations increased 18.7% year-over-year to a record $5.38 billion.” mr. guzzi added, “our u.s. construction segments executed exceptionally well, posting combined record revenues, up 12.0% year-over-year, as well as strong operating income margins, reflecting our team’s continued resilience and ability to navigate a challenging operating environment. while global supply chains continue to present us with challenges, we were able to mitigate the majority of these disruptions, within our construction segments, through a combination of diligent planning coupled with excellent supplier relationships. our u.s. building services segment faced the most difficult comparison given the significant non-recurring cost cutting measures taken in the prior year period due to the pandemic. while this, combined with the recent supply chain challenges and increased fuel prices versus the prior year, impacted operating margins, the segment still delivered a solid 5.0% operating margin and grew revenues by 13.6%. our u.s. industrial services segment operated as expected, with 35.4% revenue growth as demand for our services continued to build versus the prior year period, which was significantly impacted by the effects of the covid-19 pandemic. we expect to execute a better fall turnaround season versus the year ago period, as well as benefit from improved demand heading into 2022. finally, our u.k. building services segment continued to grow and deliver for its customers, resulting in double-digit year-over-year revenue and operating income growth of 17.6% and 23.6%, respectively, partially aided by favorable foreign exchange rates.” revenues for the first nine months of 2021 totaled $7.26 billion, an increase of 11.5%, compared to $6.52 billion for the first nine months of 2020. net income for the first nine months of 2021 was $281.9 million, or $5.17 per diluted share, compared to net income of $53.2 million, or $0.96 per diluted share, for the first nine months of 2020. excluding the impact of the previously referenced impairment charges recorded in the second quarter of 2020, non-gaap net income for the first nine months of 2020 was $251.8 million, or $4.54 per diluted share. operating income for the first nine months of 2021 was $387.8 million, representing an operating margin of 5.3%, compared to operating income of $119.2 million and an operating margin of 1.8% for the first nine months of 2020. excluding the $232.8 million of non-cash impairment charges recorded in the second quarter of 2020, non-gaap operating income for the first nine months of 2020 was $352.0 million, representing a non-gaap operating margin of 5.4%. selling, general and administrative expenses totaled $710.9 million, or 9.8% of revenues, for the first nine months of 2021, compared to $659.0 million, or 10.1% of revenues, for the first nine months of 2020. please see the attached tables for a reconciliation of non-gaap operating income, non-gaap operating margin, non-gaap net income, and non-gaap diluted earnings per share to the comparable gaap measures for the three and nine months ended september 30, 2020. based on our year-to-date performance, emcor is raising its full-year 2021 revenue guidance to $9.80 billion to $9.85 billion, an increase from the prior guidance of approximately $9.50 billion. the company now also expects full-year 2021 diluted earnings per share to be in the range of $6.95 to $7.15, an increase from the prior guidance range of $6.65 to $7.05. mr. guzzi concluded, “given our strong year-to-date results and record remaining performance obligations, we are raising our full year 2021 guidance for revenue and diluted earnings per share. despite recent supply chain challenges and continued covid-related hurdles, we remain committed to delivering best-in-class services to our customers, maintaining a balanced capital allocation strategy, and driving long-term value for our shareholders. i am proud of our employees’ resilience and am confident that with our healthy balance sheet, robust project pipeline and disciplined execution, we are positioned for long-term sustainable growth.” additional share repurchase program the company also announced today that its board of directors has authorized a new share repurchase program for the company to repurchase up to an additional $300 million of its outstanding common stock. mr. guzzi said, “this new share repurchase program reflects our board’s confidence in emcor’s strong free cash flow and overall financial position. we are excited about the growth opportunities within each of our segments and remain committed to creating long-term shareholder value through a combination of organic investments, accretive acquisitions, share repurchases, and dividends.” as of september 30, 2021, the company had already repurchased $137.3 million of its outstanding common stock under its current $200 million share repurchase program launched in march 2020. the new share repurchase program will be funded from the company’s operations. the shares will be repurchased from time to time in the open market or through privately negotiated transactions at the company’s discretion, subject to market conditions and in accordance with applicable regulatory requirements. the repurchase program does not obligate the company to acquire any particular amount of common stock and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. emcor group, inc. is a fortune 500 leader in mechanical and electrical construction services, industrial and energy infrastructure and building services. this press release and other press releases may be viewed at the company’s website at www.emcorgroup.com. emcor routinely posts information that may be important to investors in the “investor relations” section of our website at www.emcorgroup.com. investors and potential investors are encouraged to consult the emcor website regularly for important information about emcor. emcor group's third quarter conference call will be available live via internet broadcast today, thursday, october 28, at 10:30 am eastern daylight time. the live call may be accessed through the company's website at www.emcorgroup.com. forward looking statements: this release contains certain forward-looking statements. any such comments speak only as of october 28, 2021 and emcor assumes no obligation to update any such forward-looking statements, unless required by law. these forward-looking statements may include statements regarding anticipated future operating and financial performance, the nature and impact of our remaining performance obligations, our ability to pursue acquisitions, our ability to return capital to shareholders, market opportunities, market growth, and customer trends. these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated (whether expressly or implied) by the forward-looking statements. accordingly, these statements are no guarantee of future performance or events. such risks and uncertainties include, but are not limited to, adverse effects of general economic conditions, changes in the political environment, changes in the specific markets for emcor’s services, adverse business conditions, the availability and pricing of supplies and other materials, the availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity, mix of business, and the impact of the covid-19 pandemic and related government orders and mandates on our revenue and operations. certain of the risk factors associated with emcor’s business are also discussed in part i, item 1a “risk factors,” of the company’s 2020 form 10-k, in part ii item 1a “risk factors,” of the company’s quarterly report on form 10-q for the quarterly period ended september 30, 2021, and in other reports filed from time to time with the securities and exchange commission and available at www.sec.gov and www.emcorgroup.com. such risk factors should be taken into account in evaluating any forward-looking statements. non-gaap measures: this release also includes certain financial measures, including non-gaap operating income, non-gaap operating margin, non-gaap net income, and non-gaap diluted eps, that were not prepared in accordance with u.s. generally accepted accounting principles (gaap). reconciliations of those non-gaap financial measures to the most directly comparable gaap financial measures are included in this release. the company uses these non-gaap measures as key performance indicators for the purpose of evaluating performance internally. we also believe that these non-gaap measures provide investors with useful information with respect to our ongoing operations. any non-gaap financial measures presented are not, and should not be viewed as, substitutes for financial measures required by gaap, have no standardized meaning prescribed by gaap, and may not be comparable to the calculation of similar measures of other companies. emcor group, inc. financial highlights condensed consolidated statements of operations (in thousands, except share and per share information) (unaudited) for the three months ended september 30, for the nine months ended september 30, 2021 2020 2021 2020 revenues $ 2,521,672 $ 2,201,714 $ 7,263,387 $ 6,515,567 cost of sales 2,140,329 1,838,530 6,164,692 5,504,036 gross profit 381,343 363,184 1,098,695 1,011,531 selling, general and administrative expenses 243,922 226,793 710,912 658,964 restructuring expenses — 536 — 605 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — — 232,750 operating income 137,421 135,855 387,783 119,212 net periodic pension (cost) income 908 751 2,738 2,211 interest expense, net (1,286) (1,484) (3,965) (6,082) income before income taxes 137,043 135,122 386,556 115,341 income tax provision 37,303 73,936 104,523 62,179 net income including noncontrolling interests 99,740 61,186 282,033 53,162 net income attributable to noncontrolling interests — — 169 — net income attributable to emcor group, inc. $ 99,740 $ 61,186 $ 281,864 $ 53,162 basic earnings per common share $ 1.86 $ 1.11 $ 5.19 $ 0.96 diluted earnings per common share $ 1.85 $ 1.11 $ 5.17 $ 0.96 weighted average shares of common stock outstanding: basic 53,700,603 54,979,310 54,290,002 55,302,385 diluted 53,984,658 55,200,245 54,559,721 55,509,722 dividends declared per common share $ 0.13 $ 0.08 $ 0.39 $ 0.24 emcor group, inc. condensed consolidated balance sheets (in thousands) (unaudited) september 30, 2021 december 31, 2020 assets current assets: cash and cash equivalents $ 663,905 $ 902,867 accounts receivable, net 2,181,730 1,922,096 contract assets 245,489 171,956 inventories 64,489 53,338 prepaid expenses and other 70,954 70,679 total current assets 3,226,567 3,120,936 property, plant and equipment, net 153,584 158,427 operating lease right-of-use assets 268,657 242,155 goodwill 888,303 851,783 identifiable intangible assets, net 602,234 582,893 other assets 157,333 107,646 total assets $ 5,296,678 $ 5,063,840 liabilities and equity current liabilities: current maturities of long-term debt and finance lease liabilities $ 16,328 $ 16,910 accounts payable 637,865 671,886 contract liabilities 780,666 722,252 accrued payroll and benefits 494,133 450,955 other accrued expenses and liabilities 263,178 247,597 operating lease liabilities, current 57,953 53,632 total current liabilities 2,250,123 2,163,232 long-term debt and finance lease liabilities 259,337 259,619 operating lease liabilities, long-term 228,561 205,362 other long-term obligations 416,607 382,383 total liabilities 3,154,628 3,010,596 equity: total emcor group, inc. stockholders’ equity 2,141,348 2,052,668 noncontrolling interests 702 576 total equity 2,142,050 2,053,244 total liabilities and equity $ 5,296,678 $ 5,063,840 emcor group, inc. condensed consolidated statements of cash flows for the nine months ended september 30, 2021 and 2020 (in thousands) (unaudited) 2021 2020 cash flows - operating activities: net income including noncontrolling interests $ 282,033 $ 53,162 adjustments to reconcile net income to net cash provided by operating activities: depreciation and amortization 36,088 34,881 amortization of identifiable intangible assets 48,159 44,765 provision for credit losses 5,829 3,409 deferred income taxes (3,650) (28,104) non-cash expense for impairment of goodwill, identifiable intangible assets, and other long-lived assets — 232,750 non-cash share-based compensation expense 8,467 8,510 other reconciling items 624 1,169 changes in operating assets and liabilities, excluding the effect of businesses acquired (263,609) 196,292 net cash provided by operating activities 113,941 546,834 cash flows - investing activities: payments for acquisitions of businesses, net of cash acquired (113,658) (44,930) proceeds from sale or disposal of property, plant and equipment 1,930 1,891 purchases of property, plant and equipment (25,954) (34,180) distributions from unconsolidated entities 196 — net cash used in investing activities (137,486) (77,219) cash flows - financing activities: proceeds from revolving credit facility — 200,000 repayments of revolving credit facility — (250,000) proceeds from long-term debt — 300,000 repayments of long-term debt and debt issuance costs — (280,049) repayments of finance lease liabilities (3,253) (3,390) dividends paid to stockholders (21,224) (13,280) repurchases of common stock (183,247) (99,048) taxes paid related to net share settlements of equity awards (4,020) (2,574) issuances of common stock under employee stock purchase plan 5,418 4,887 payments for contingent consideration arrangements (6,758) (4,070) distributions to noncontrolling interests (43) (70) net cash used in financing activities (213,127) (147,594) effect of exchange rate changes on cash, cash equivalents, and restricted cash (1,870) (1,304) (decrease) increase in cash, cash equivalents, and restricted cash (238,542) 320,717 cash, cash equivalents, and restricted cash at beginning of year (1) 903,562 359,920 cash, cash equivalents, and restricted cash at end of period (2) $ 665,020 $ 680,637 _________ emcor group, inc. segment information (in thousands) (unaudited) for the three months ended september 30, 2021 2020 revenues from unrelated entities: united states electrical construction and facilities services $ 527,935 $ 472,084 united states mechanical construction and facilities services 999,584 891,509 united states building services 632,455 556,514 united states industrial services 232,218 171,532 total united states operations 2,392,192 2,091,639 united kingdom building services 129,480 110,075 total operations $ 2,521,672 $ 2,201,714 for the nine months ended september 30, 2021 2020 revenues from unrelated entities: united states electrical construction and facilities services $ 1,473,590 $ 1,344,275 united states mechanical construction and facilities services 2,862,195 2,516,062 united states building services 1,838,750 1,563,107 united states industrial services 702,763 776,554 total united states operations 6,877,298 6,199,998 united kingdom building services 386,089 315,569 total operations $ 7,263,387 $ 6,515,567 emcor group, inc. segment information (in thousands) (unaudited) for the three months ended september 30, 2021 2020 operating income (loss): united states electrical construction and facilities services $ 44,055 $ 45,928 united states mechanical construction and facilities services 82,302 80,048 united states building services 31,589 38,449 united states industrial services (3,012) (8,907) total united states operations 154,934 155,518 united kingdom building services 6,582 5,327 corporate administration (24,095) (24,454) restructuring expenses — (536) total operations 137,421 135,855 other items: net periodic pension (cost) income 908 751 interest expense, net (1,286) (1,484) income before income taxes $ 137,043 $ 135,122 for the nine months ended september 30, 2021 2020 operating income (loss): united states electrical construction and facilities services $ 127,024 $ 117,866 united states mechanical construction and facilities services 226,511 192,156 united states building services 91,233 86,325 united states industrial services (5,663) 9,800 total united states operations 439,105 406,147 united kingdom building services 23,040 16,442 corporate administration (74,362) (70,022) restructuring expenses — (605) impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — (232,750) total operations 387,783 119,212 other items: net periodic pension (cost) income 2,738 2,211 interest expense, net (3,965) (6,082) income before income taxes $ 386,556 $ 115,341 emcor group, inc. reconciliation of 2021 and 2020 non-gaap operating income and non-gaap operating margin (in thousands, except for percentages) (unaudited) in our press release, we provide non-gaap operating income and non-gaap operating margin for the three and nine months ended september 30, 2020. the following tables provide a reconciliation between operating income and operating margin determined on a non-gaap basis to the most directly comparable gaap measures for such periods. for the three months ended september 30, for the nine months ended september 30, 2021 2020 2021 2020 gaap operating income $ 137,421 $ 135,855 $ 387,783 $ 119,212 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — — 232,750 non-gaap operating income $ 137,421 $ 135,855 $ 387,783 $ 351,962 for the three months ended september 30, for the nine months ended september 30, 2021 2020 2021 2020 gaap operating margin 5.4 % 6.2 % 5.3 % 1.8 % impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — % — % — % 3.6 % non-gaap operating margin 5.4 % 6.2 % 5.3 % 5.4 % emcor group, inc. reconciliation of 2021 and 2020 non-gaap net income (in thousands) (unaudited) in our press release, we provide non-gaap net income for the three and nine months ended september 30, 2020. the following table provides a reconciliation between net income determined on a non-gaap basis to the most directly comparable gaap measure for such periods. for the three months ended september 30, for the nine months ended september 30, 2021 2020 2021 2020 gaap net income $ 99,740 $ 61,186 $ 281,864 $ 53,162 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — — 232,750 tax effect of impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — 35,776 — (34,089) non-gaap net income $ 99,740 $ 96,962 $ 281,864 $ 251,823 emcor group, inc. reconciliation of 2021 and 2020 non-gaap diluted earnings per share (unaudited) in our press release, we provide non-gaap diluted earnings per common share for the three and nine months ended september 30, 2020. the following table provides a reconciliation between diluted earnings per common share determined on a non-gaap basis to the most directly comparable gaap measure for such periods. for the three months ended september 30, for the nine months ended september 30, 2021 2020 2021 2020 gaap diluted earnings per common share $ 1.85 $ 1.11 $ 5.17 $ 0.96 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — — 4.19 tax effect of impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — 0.65 — (0.61) non-gaap diluted earnings per common share $ 1.85 $ 1.76 $ 5.17 $ 4.54
