EMCOR Reports Record Quarterly Revenues
Operating income for the third quarter of 2018 was $111.8 million, or 5.5% of revenues, compared to $106.0 million, or 5.6% of revenues, in the prior year period. Selling, general and administrative expenses for the third quarter of 2018 totaled $197.3 million, or 9.6% of revenues, compared to $189.0 million, or 10.0% of revenues, in the year ago period. The Company's income tax rate in the third quarter of 2018 was 27.1%, compared to an income tax rate of 37.3% in the year ago period. Remaining performance obligations as of September 30, 2018 were $3.97 billion, compared to $3.67 billion at June 30, 2018. Domestic remaining performance obligations increased $300.1 million from the second quarter of 2018, while remaining performance obligations in the U.K. Building Services segment fell $3.6 million.
Tony Guzzi, Chairman, President and Chief Executive Officer of EMCOR, commented, “The Company had another excellent quarter, achieving record quarterly revenues, operating income and diluted earnings per share. We delivered an 8.5% increase in revenues, 7.5% of which was organic, driven by year-over-year growth in each of our segments. With this increase in revenues, operating income grew 5.4% year-over-year. Additionally, we continue to capitalize on the broad-based strength that we are seeing across our end markets, as demonstrated by our 8.1% sequential increase in remaining performance obligations.” Mr. Guzzi added, “Our U.S. Electrical and Mechanical Construction segments delivered revenue growth of 6.1% and 1.6% year-over-year, respectively. Their combined operating margin of 7.4% reflects strong execution that continues to drive impressive results. In our U.S. Building Services segment, we saw sustained momentum with the business generating 6.4% organic revenue growth and 12.6% operating income growth year-over-year led by solid performance in the mechanical, energy and government sitebased services businesses. While the positive comparison in our U.S. Industrial Services segment resulted from the impact of Hurricane Harvey in the year-ago period, we are pleased to report that we have begun to see a resumption in normal demand and anticipate further improvement in the seasonally strong fourth quarter. Finally, we remain pleased by our strength in the U.K. Building Services segment as we continue to capitalize on increased project activity which drove revenue growth of 17.1% and operating margin expansion of 40 basis points.”
Revenues for the first nine months of 2018 totaled $5.90 billion, an increase of 4.0%, compared to $5.67 billion for the first nine months of 2017. Net income from continuing operations attributable to EMCOR for the first nine months of 2018 was $206.6 million, or $3.52 per diluted share, compared to $174.7 million, or $2.93 per diluted share, for the first nine months of 2017. Excluding an impairment charge recorded in the second quarter of 2018, non-GAAP net income from continuing operations attributable to EMCOR for the first nine months of 2018 was $207.5 million, or $3.54 per diluted share. Operating income for the first nine months of 2018 was $289.4 million, or 4.9% of revenues, compared to $280.8 million, or 4.9% of revenues, for the first nine months of 2017. Included in operating income for the first nine months of 2018 was a $0.9 million impairment charge. Excluding this charge, non-GAAP operating income for the first nine months of 2018 was $290.3 million, or 4.9% of revenues. SG&A totaled $578.3 million, or 9.8% of revenues, for the first nine months of 2018 compared to $554.1 million, or 9.8% of revenues, for the first nine months of 2017. Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures. Based on favorable project mix and market conditions, EMCOR is raising its full year 2018 revenue guidance to approximately $7.9 billion, an increase from the prior guidance of approximately $7.8 billion. The Company now also expects its full year 2018 diluted earnings per share from continuing operations to be in the range of $4.75 to $4.90, an increase from the prior range of $4.40 to $4.80.
Mr. Guzzi concluded, “We have had exceptional performance thus far in 2018 and are optimistic about continued growth opportunities across our business. Our updated guidance reflects our record year-to-date results and our expectation for continued solid execution in the fourth quarter. Our confidence in the business is underscored by today’s announcement that the Board has authorized an additional share repurchase program. Our solid balance sheet and recurring operating cash flow allows us to optimize shareholder value through organic investments, acquisition opportunities and capital returns.” Additional Share Repurchase Program The Company announced today that its Board of Directors has authorized a new share repurchase program for the Company to repurchase up to an additional $200 million of its outstanding common stock. As of September 30, 2018, the Company had repurchased $20.9 million of its outstanding common stock under its current $100 million share repurchase program launched in October 2017. The new share repurchase program will be funded by the Company’s operations. The shares will be repurchased from time to time on 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 has no expiration date and 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 Group's third quarter conference call will be available live via internet broadcast today, Thursday, October 25, at 10:30 AM Eastern Daylight Savings 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 within the meaning of the Private Securities Reform Act of 1995. Any such comments speak only as of this date and EMCOR assumes no obligation to update any such forward looking statements. These forward-looking statements may include statements regarding anticipated future operating and financial performance, the nature and impact of our backlog, our ability to pursue acquisitions, our ability to return capital to shareholders, market opportunities, and market growth. 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 risk 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 and mix of business. Certain of the risk factors associated with EMCOR’s business are also discussed in Part I, Item 1A “Risk Factors,” of the Company’s 2017 Form 10-K 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.
This release also includes certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (GAAP). 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 historical 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.