Quarter Four 2019 Financial Results

February 27, 2020

Fourth Quarter 2019 Financial Results

Forward-Looking Statements and Non-GAAP Financial Disclosures

Forward Looking Statements:

This material and related presentation contain certain forward-looking statements. Any such comments speak only as of this date 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 the forward- looking statements. Accordingly, these statements are no guarantee of future performance. 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, availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity, mix of business, and the impact of the February 2020 ransomware attack. Certain of the risk factors associated with EMCOR's business are also discussed in Part I, Item 1A "Risk Factors," of the Company's 2019 Form 10-K and in other reports filed from time to time with the Securities and Exchange Commission and available at www.sec.govand www.emcorgroup.com. Such risk factors should be taken into account in evaluating any forward-looking statements.

Non-GAAP Measures:

This material and related presentation also include certain financial measures 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 presentation. 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 on-going 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.

2

Fourth Quarter 2019 Financial Results

EMCOR Participants

Tony Guzzi

Chairman, President & Chief Executive Officer

Mark Pompa

EVP, Chief Financial Officer & Treasurer

Maxine Mauricio

SVP & General Counsel

Kevin Matz

EVP, Shared Services

3

Fourth Quarter 2019 Financial Results

2019 Executive Summary

  • Record operating performance in 2019
    • Record year for revenues, operating income, net income and diluted earnings per share from continuing operations
    • Total revenues increased 12.8% to $9.17 billion
      • Full year revenues increased in all reporting segments
    • Full year diluted EPS from continuing operations of $5.75 in 2019 vs. proforma diluted EPS from continuing operations of $4.91 in 2018
    • Strong operating cash flow of $355.7 million
  • Total Remaining Performance Obligations (RPO) increased $72 million or 1.8% from 12/31/18

4

Fourth Quarter 2019 Financial Results

2019 Executive Summary

  • U.S. Electrical Construction and Facilities Services segment revenues increased by $262.3 million vs. 2018 with an operating margin of 7.3%
  • U.S. Mechanical Construction and Facilities Services segment revenues increased by $377.5 million vs. 2018 with an operating margin of 6.7%
  • U.S. Building Services segment revenues increased by $231.4 million vs. 2018 with an operating margin of 5.4%
  • U.S. Industrial Services segment revenues increased by $164.4 million vs. 2018 with an operating margin of 4.1%
  • U.K. Building Services segment revenues increased by $8.4 million vs. 2018 with an operating margin of 4.3%

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Fourth Quarter 2019 Financial Results

2019 Executive Summary

  • Diverse RPO of $4.04 billion, up 1.8% compared to 12/31/18
  • U.S. RPO UP $78 million or 2.0%
    • Domestic Construction DOWN
    • U.S. Building Services Segment UP
    • U.S. Industrial Services Segment UP

Dec. 2019

vs.

Dec. 2018

$(47)M

-1.4%

$107M 24.6%

$18M 20.3%

Private Sector DOWN (Commercial, Hospitality &

$(92)M

Gaming, Industrial / Manufacturing and Short Duration

-3.6%

Projects)

Public Sector UP (Transportation, Water / Wastewater,

$164M

Institutional, Healthcare)

11.5%

  • Balance sheet remains strong and liquid, including

approximately $359 million of cash

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Fourth Quarter 2019 Financial Results

2019 - Qtr. 4 Financial Results Highlights

  • Revenues increased 7.8% quarter-over-quarter to $2.40 billion

Change from

Qtr. 4

Qtr. 4 2018

($ Millions) (Unaudited)

2019

$

%

U.S. Electrical Construction & Facilities Services

$ 564.5

$

30.4

5.7%

U.S. Mechanical Construction & Facilities Services

895.6

100.9

12.7%

Total U.S. Construction

1,460.1

131.3

9.9%

U.S. Building Services

539.0

53.0

10.9%

U.S. Industrial Services

299.3

(13.3)

-4.3%

Total U.S. Operations

2,298.4

171.0

8.0%

U.K. Building Services

105.5

3.6

3.6%

7.8%

Total EMCOR

$ 2,403.9

$

174.6

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Fourth Quarter 2019 Financial Results

2019 - Qtr. 4 Financial Results Highlights

  • SG&A expenses increased to $240.9 million or 10.0% of revenues vs. $220.9 million or 9.9% of revenues for Qtr. 4 2018
  • Operating income of $122.9 million or 5.1% of revenues

(Unaudited)

  • U.S. Electrical Construction and Facilities Services of $41.3 million: $8.2 million or 24.7% increase
  • U.S. Mechanical Construction and Facilities Services of $68.9 million: $5.3 million or 8.3% increase

Operating Margin

For the Quarter Ended

December 31,

2019

2018

7.3%

6.2%

7.7%

8.0%

Total U.S. Construction

7.5%

7.3%

  • U.S. Building Services of $24.2 million: $0.8 million or

3.1% decrease

4.5%

5.1%

  • U.S. Industrial Services of $13.1 million: $2.2 million or

14.5% decrease

4.4%

4.9%

  • U.K. Building Services of $4.0 million: $0.9 million or

27.4% increase

3.7%

3.0%

Total EMCOR Operating Margin

5.1%

5.1%

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Fourth Quarter 2019 Financial Results

Key Financial Data - Income Statement

($ Thousands, except per share information) (Unaudited)

For the Quarter Ended

December 31,

Variance

2019

2018

$

%

Revenues

$

2,403,940

$

2,229,308

$

174,632

7.8%

Gross Profit

364,747

336,151

28,596

8.5%

15.2%

15.1%

Selling, General and Administrative Expenses

240,917

220,891

20,026

9.1%

Restructuring Expenses

956

1,613

(657)

N/M

Operating Income

$

122,874

$

113,647

$

9,227

8.1%

5.1%

5.1%

Diluted Earnings per Common Share from

Continuing Operations

$

1.54

$

1.38

$

0.16

11.6%

  • Qtr. 4 2019 income tax rate 27.8%
  • Qtr. 4 2019 cash provided by operations of $178.8 million

9

Fourth Quarter 2019 Financial Results

2019 Financial Results Highlights

  • Revenues up $1.04 billion or 12.8% to $9.17 billion

Change from 2018

($ Millions)

2019

$

%

U.S. Electrical Construction & Facilities Services

$ 2,216.6

$

262.3

13.4%

U.S. Mechanical Construction & Facilities Services

3,340.3

377.5

12.7%

Total U.S. Construction

5,556.9

639.8

13.0%

U.S. Building Services

2,106.9

231.4

12.3%

U.S. Industrial Services

1,087.5

164.4

17.8%

Total U.S. Operations

8,751.3

1,035.6

13.4%

U.K. Building Services

423.3

8.4

2.0%

12.8%

Total EMCOR

$ 9,174.6

$

1,044.0

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Fourth Quarter 2019 Financial Results

2019 Financial Results Highlights

  • SG&A expenses increased to $893.5 million or 9.7% of revenues vs. $799.2 million or 9.8% of revenues for 2018
  • Operating income of $460.9 million or 5.0% of revenues

Operating Margin

For the Year Ended

December 31,

- U.S. Electrical Construction and Facilities Services of

2019

2018

$161.7 million: $22.3 million or 16.0% increase

7.3%

7.1%

  • U.S. Mechanical Construction and Facilities Services of

$225.0 million: $5.2 million or 2.4% increase

6.7%

7.4%

Total U.S. Construction

7.0%

7.3%

  • U.S. Building Services of $114.8 million: $20.9 million or 22.3% increase
  • U.S. Industrial Services of $44.3 million: $16.7 million or 60.2% increase
  • U.K. Building Services of $18.3 million: $2.4 million or 15.0% increase

5.4%5.0%

4.1%3.0%

4.3%3.8%

Total EMCOR Operating Margin

5.0%

5.0%

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Fourth Quarter 2019 Financial Results

Key Financial Data - Income Statement

($ Thousands, except per share information)

For the Year Ended

December 31,

Variance

2019

2018

$

%

Revenues

$

9,174,611

$

8,130,631

$

1,043,980

12.8%

Gross Profit

1,355,868

1,205,453

150,415

12.5%

14.8%

14.8%

Selling, General and Administrative Expenses

893,453

799,157

94,296

11.8%

Restructuring Expenses

1,523

2,306

(783)

N/M

Impairment Loss on Identifiable Intangible Assets

-

907

(907)

N/M

Operating Income

$

460,892

$

403,083

$

57,809

14.3%

5.0%

5.0%

Diluted Earnings per Common Share from Continuing Operations

$

5.75

$

4.89

$

0.86

17.6%

Non-GAAP Operating Income Excluding:

- Impairment Loss on Identifiable Intangible Assets

$

460,892

$

403,990

$

56,902

14.1%

Non-GAAP Diluted Earnings per Common Share from Continuing

Operations Excluding:

- Impairment Loss on Identifiable Intangible Assets

$

5.75

$

4.91

$

0.84

17.1%

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Fourth Quarter 2019 Financial Results

Key Financial Data - Balance Sheet

($ Thousands)

12/31/19

12/31/18

Cash

$

358,818

$

363,907

Working Capital

$

721,273

$

651,809

Goodwill

$

1,063,911

$

990,887

Identifiable Intangible Assets, Net

$

611,444

$

488,286

Total Debt (excludes operating leases)

$

312,231

$

295,777

Stockholders' Equity

$

2,057,780

$

1,741,441

Total Debt / Total Capitalization

13.2%

14.5%

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Fourth Quarter 2019 Financial Results

2019 Remaining Performance Obligations

  • Diverse RPO of $4.04 billion

$5,000

$4,000

$3,000

$2,000

$1,000

$0

By Segment ($ Millions)

By Market Sector ($ Millions) (Unaudited)

$5,000

$5,000

$3,964

$4,036

$4,04,000

$3,964

$4,036

$3,000,

$2,000,0

$1,000,

$0

2018

2019

2018

2019

2018

2019

Mechanical

Electrical

Building Services

Commercial

Hospitality

Industrial / Manufacturing

Healthcare

Industrial Services

EMCOR UK

Institutional

Transportation

Water & Wastewater

Short Duration Projects

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Fourth Quarter 2019 Financial Results

2020 Outlook

  • Non-residentialconstruction market expected to grow low- single digits
    • Expect continued strength in large data infrastructure projects
  • Building Services benefiting from continued growth in retrofit and energy savings projects, as well as favorable mix of work
  • Industrial Services:
    • Expect good spring turnaround work
  • U.K. will continue to respond to customers' maintenance and project needs
  • Strong and liquid balance sheet
  • The financial impact of the ransomware attack has been contemplated in the Company's full-year 2020 guidance

15

Fourth Quarter 2019 Financial Results

2020 Guidance

Revenues

$9.5 Billion ̶ $9.7 Billion

Diluted EPS from

$5.60 ̶ $6.30

Continuing Operations *

  • Assumes 28% effective tax rate

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EMCOR Group Inc. published this content on 27 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 February 2020 15:16:02 UTC