Earnings Call: Q2 2015

Jul 30, 2015

Good morning. My name is Theresa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amcor Group Second Quarter 2015 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. You would like to withdraw your question, press the pound key. Ms. Michelle Bitman with FTI Consulting, you may begin. Thank you, Theresa, and good morning, everyone. Welcome to the Encore Group conference call. We are here today to discuss the company's 2015 second quarter results, which were reported this morning. I would like to turn the call over to Kevin Matt, executive vice president of shared services, who will introduce management. Kevin, please go ahead. Thank you, Michelle, and good morning, everyone. Welcome to EMCOR Group's earnings conference call for the second quarter of 20 15. For those of you who are accessing the our remarks today. We're on slide 2. Slide 2 depicts the executives who are with me to discuss the quarter and 6 months results. They are, Tony Guzzi, President and Chief Executive Officer Mark Pompa, our Executive Vice President and Chief Financial Officer Mava Heffler, Vice President, Marketing Communications and our Executive Vice President And General Counsel, Sheldon conference call via the internet, this presentation, including the slides, will be archived in the Investor Relations section of our website under Presentations. You can find us at EMCOR Group dotcom. Before we begin, I want to remind you that this discussion may contain certain forward looking statements. Any such statements are based upon information available to EMCORD Management's perception as of this date, and EMCOR assumes no obligation to update any such forward looking statements. These forward looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward looking statement. 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 Services, adverse business conditions, increased competition mix are also discussed in the company's 2014 Form 10 K and in other reports filed from time to time with the Securities And Exchange Commission. With that said said, let me turn the call over to Tony. Tony? Thanks Kevin. I'll be on pages 3 and 4. By any measure, we had a terrific second quarter. It was the best in our history. We had strong performance across all our major segments at 6.4percentorganicgrowth We recovered some of the lost revenues we had in our from Q1 in our Electrical Mechanical And Building Service segments. We talked about the weather and it's affecting Q1. Recovered very little of the lost opportunity to reach finding strike in Q1 in this quarter. However, it was not just catch up revenues, we had strong quarter, which for us was a record Q2 performance for any year. And as we expected, puts us back on track for 2015 after that weaker than expected first quarter. Operating margins were strong 4.7% with improvement in our Mechanical Building Services And Industrial segments, with the Electrical segment essentially flat versus the year ago period. Led by Industrial with 40.7 percent operating income growth. And our construction segments had good operating income growth at almost 8%. Let me give you some highlights for each of the segments before I turn the call over to Mark. Electrical, we continue to have strong margin performance It's a great business. We run it well. We had some organic growth. However, we do expect that growth to strengthen as the year progresses. As we work on some large infrastructure projects mechanical. We had good margin rebound and we returned to organic growth. Building Services, we continue to have improvements in commercial site base. We have continued strong performance in mechanical services and our government business is holding own despite losing $15,000,000 in revenue from the year ago period from those 2 large contracts we've talked about over the last four or five quarters. We have had some IDIQ work filling the gaps there and we've had great cost discipline across our business, but especially in our government business. We've had a nice return exiting our from record Strickland on several large time and material projects, especially on a large capital expansion in LP unit revamp. We had very little recovery from the restraining strike, less than a third at this point, with the balance now likely pushed into 2016. The UK, we have 2 large utility contracts we've started up and their startup is going well. The decline the performance year over year was from a one time adjustment in this quarter last year and Mark's going to cover that in detail like he did last year and it was 4.8 And it was nice to see it was actually good to see organic growth return across the board. Backlog is essentially flat and our book to bill was about 0.94 for the quarter and at the half is near 1. To maintain historic high levels of backlog, which is where we are right now, have strong organic growth for the quarter 6.4 percent speaks to the strength of our business and also the underlying strength of the nonresidential market. Our balance sheet is still liquid and strong. So with our strong organic growth, we did not generate as much operating cash flow as compared to this point last year, but we happily invested that cash into working capital Overall, a very strong quarter that provides a good foundation to achieve our objectives for the year. And with that, I'll turn it over to Mark. Thank you, Tony, and good morning to everyone participating on the call today. For those accessing this presentation via the webcast, we are now on Slide 5. As I typically do each quarter, I will provide a detailed discussion of our most recent before moving to year to date key financial data derived from our consolidated financial statements included in both our earnings release announcement Form 10 Q filed with the Securities And Exchange Commission earlier this morning. So let's begin. Consolidated revenues of $1,650,000,000 in quarter 2 are 6.4%. All reportable segments are reporting increased revenues quarter over quarter. Our 2nd quarter revenues include a minimal amount of acquisition revenues within our U. S. Mechanical Construction Services segment. U. S. Electrical Construction Revenues increased 3.2% to $146,200,000. The increased revenue is due to greater project activity within the transportation, healthcare, and commercial market sectors, and on a sequential basis is fairly consistent with our quarter 1 2015 revenue performance. U. S. Mechanical Construction 2nd quarter revenues increased $15,400,000 to $554,000,000 or 2.9 percent. The quarterly increase is due to higher the commercial and institutional market sectors. For those of you who participated on our quarter 1 call, you may recollect that this particular segment experienced lost to work days, in their Northeastern based operating companies due to extreme cold weather conditions. EMCOR's total domestic construction business 2nd quarter revenues increased 26.1 dollars or approximately 3%. U. S. Building Services revenues of $435,600,000 increased 17,500,000 or 4.2% quarter over quarter, despite the headwinds associated with the loss of 2 government contracts completed in 2014, the were not renewed pursuant to rebid due to pricing and non EMCOR's historical performance, which we have referenced in each of the last earnings call's commentaries. This is the 1st revenue growth quarter for this segment since the 3rd quarter 2013. The revenue gains experience were primarily due to increased service volumes and small project activity within their mobile mechanical services division. U. S. Industrial Services revenues increased 27 percent to $225,200,000 due to capital and maintenance project activity from our industrial field services operations. United Kingdom Building Services revenues of $91,600,000 increased $8,100,000 or 9.7 percent despite the headwind of a weakening British pound, resulting in a quarter over quarter unfavorable exchange The increase in UK revenues despite the unfavorable foreign exchange impact is due to both new multi year contract awards as well as expansion of small project activity. Please turn to slide 6. Selling, general and administrative expenses of $161,400,000 represent 9.8 percent of revenues and an increase of $11,000,000 or 10 basis points from quarter 2 2014. The majority of the expectations of higher earnings which necessitates both higher annual and long term incentive compensation accruals and associated expenses. Additionally with the increase in quarterly revenues, our nonunion headcount is up 7.5% over last year's period. With respect to the slight increase in our quarterly SG and A percentage, the basis point increase is due to a higher percentage of our second quarter 2015 revenues being generated by our Industrial Services segment as compared to 2014 second quarter. As I initially commented during our year end 2014 earnings call, Industrial Services segment has a higher fixed cost structure than EMCOR's other businesses. And as a result, their commensurate revenue growth has resulted in a higher SG and A profile for Amcor Group. Specifically within the 2nd quarter, the revenues represented 14% of consolidated revenues as compared to 11% in the corresponding 2014 period. Operating income of $77,700,000 represents 4.7 percent of revenues and favorably compares to $69,700,000 and 4.5 percent of revenues in 2014 second quarter. All reportable segments are reporting increases in operating income other than UK Building Services, which had a discrete favorable item impact last year's second quarter. Our U. S. Electrical Construction Services segment operating income of 25.3 or 7.3 percent of revenues represents a 1.8% increase over 2014 second quarter. Their corresponding operating margin is down 10 basis points period over period, but is up 210 basis points sequentially. U. S. Mechanical Construction Services quarterly operating income of $32,400,000 represents a $3,600,000 or 12 6% increase from last year's quarter. This improvement is due to increased gross profit contributions from projects within the commercial, institutional and water and wastewater market sectors despite finding the headwind of a $3,000,000 favorable claim settlement that benefited 2014 second quarter. Our total U. S. Construction businesses reporting a 6.4% operating margin for the quarter just reported as compared to 6.1% in last 2nd quarter. Operating income for U. S. Building Services increased $4,000,000 or 28.9 percent over 2014 second quarter, which an operating margin of points as a result of strong performance within their mobile mechanical services division due to increased gross profit across all of their service lines as well as a quarter over quarter improvement in the performance of this segment's commercial site based operations. Our Industrial segment is reporting a $5,000,000 improvement in operating income with a corresponding 70 basis point increase in operating margin. The quarter over quarter improvement is due to large capital and maintenance project activity performed within their field services operations us. UK Building Services operating income of $2,800,000 represents 3.1 percent of revenues, which is down from the corresponding quarter of 2014. Last year's quarter included $4,800,000 of income associated with the reduction of certain accrued contract costs that were no longer expected to be incurred. Disclosed this amount during last year's earnings conference call as well as within our management's discussion and analysis included in both our 201420 15 Form 10 Qs. Cash provided by operations for the second quarter is $11,800,000, which is reduced from 20fourteen's activity with a significant increase in revenues during the quarter, there has been a commensurate growth in rec counts receivable, which obviously impacted negatively impacted cash flow in the current period, which should have a positive impact in the back half of the year. We are now on slide 7. Additional key financial data this slide not addressed during my highlights summary are as follows. Quarter 2 gross profit of $239,500,000 represents 14.5 percent of revenues. Which has improved from the comparable 2014 quarter by $19,300,000 and 30 basis points of gross margin. Total restructuring costs were $433,000 as compared to $176,000 in 20 14 second quarter. Diluted earnings per common share continuing operations is $0.74 as compared to $0.61 for the quarter's ending June 30 20152014, respectively. Lastly, as Tony has already mentioned, it is worth noting again that the results of our operations for the second quarter of 2015 set new company records for a second quarter in regards consolidated revenues, operating income and diluted earnings per share from continuing operations. Please turn to slide 8. Now let's turn our attention to our results for the 6 months ended June 30, 2015. Revenues of $3,240,000,000 represent an increase of $98,300,000 or 3.1 percent as compared to $3,140,000,000 in the prior year period. All reportable segments are reporting organic revenue growth year over year as our 2nd quarter revenue performance overcame our slow start in quarter 1. Year to date gross profit of $456,500,000 is greater than the representative of 20 period by $20,000,000 and is 20 basis points higher on a gross margin basis at 14.1 percent of revenues. Selling, general and administrative expenses of 3 $3,000,000 represent 10 percent of revenues compared to $294,300,000 or 9.4 percent of revenues in 2014. On a sequential basis, our SG and A as a percentage of revenues decreased from quarter 1 to quarter 2, and we will continue to see this metric reduce as we advance towards the end of the year. Restructuring activity is relatively efficiencies and achieve further productivity and efficiency gains. Year to date operating income is $133,000,000 or 4.1 percent of revenue and represents an $8,800,000 reduction over 2014's year to date performance. Although we've made significant progress in closing the year segments are still lagging their year to date 2014 performance due to project mix as well as our Industrial Services segment experiencing the continued impact of the nationwide strike of refinery operators that we discussed in detail during our quarter 1 commentary. Diluted earnings per common share from continuing is $1.26 for the 6 months ended June 30, 2015 compared to $1.24 in the corresponding 2014 period which represents a $0.02 or just under 2% increase. Lastly, on this slide, as I had previously benchmarked our second quarter performance, I would also like to point out that the results of our operations for the year to date period set new company records in regards to consolidated revenue diluted earnings per share from continuing operations for the 1st 6 months of every year, very strong performance. We are now on Slide 9. Tony touched upon the strength and liquidity of M4's balance sheet during his commentary as our modest leverage continued to reduce and is approximately 80% at quarter end. Consistent with last quarter's commentary, our cash reduction is primarily due to cash used in financing activities which includes $21,100,000 of share repurchases $800,000 of cash distributions to our joint venture partners pertaining to the 2 government contracts completed in 2014 we previously referenced. Working capital levels have increased since to a reduction in current liabilities as a result of reduced levels of accounts payable and accrued payroll and benefits due to the funding of prior year locations. Changes in our goodwill and identifiable intangible asset balances reflect the minor impact of the acquisition made during the second quarter as well as $19,000,000 of year to date intangible asset amortization expense. The change in our stockholders' equity balance for the 1st 6 months of 2015 is not equivalent to our reported net income for the same period as it was partially offset by common stock repurchases and dividends as well as the cash distributions our minority interest joint venture partners as previously referenced. We are happy with our balance sheet in light of the significant revenue growth during the quarter, remain well positioned to take advantage of all growth opportunities that may present themselves. With my portion of the commentary concluded, I would like to return the presentation to Tony. Thanks, Mark. I'm going to be on page 10 and 11 and I'm going to talk about backlog. Roughly flat versus the year ago period. And it's slightly down from quarter 1, which I guess we would expect was 6.4 percent organic revenue growth in the quarter. I think it's indicative of strong performance and strong end markets that we were able to maintain backlog relatively flat. I think though when you look at this page and I'm on page 10 now, I can give you some commentary about what's going on in the markets and it's over a number of quarters, number of years. What you're seeing is the commercial market has come strong and we're at record levels yet for commercial and we're up again year over year. The commercial market is strong for a number of reasons. 1, we're well positioned in the commercial market and some markets that are doing well. Secondly, there's good occupancy rates and there's a desire great buildings and we will take advantage of that. As you move up the page, hospitality, it it is what it is. We're at the high end of hospitality. You have to have the right properties in the right place and Will we see something build there again? Sure. And will we participate? Absolutely. Our hospitality, when it was very strong, if you'd had this extended back to 2007, It was gaming driven and was primarily Las Vegas driven. You move up to industrial. Industrial for us is a lot of things. It's industrial work we do in the shops at Olmstead, and I'll talk about that more on the next page. But it's also things like power plants, solar plants, manufacturing plants, food processing plants, it's all those things. We think the industrial market will still be strong for us, mainly centered around a couple of areas. It's going to be centered around food processing. And power work will continue to flow through EMCOR. But as you look towards year end, we would expect industrial outside of just the shop work to potentially grow and commercial to maintain its own. Institutional you see there is really for us the exit of those 2 large base operating agreements over the last couple of years. And Mark, when we get to the question and answer, we'll spend some time hopefully for some of you going back to backlog out of this for us. The backlog for us is committed work. It's fixed price work on the construction side and in the service agreements, 1 year of it, and that's about it. We don't take any time and material work guess what it's going to be. We don't take the add on effects of a government contract. We don't took the 5 year value of a government contract to put in. The other thing folks might not realize as a contract expires before it's re signed, it goes out of backlog and as it reaches expiration, as it goes from 12 months to 11 to 10 months to 9 months, we reduce the backlog that amount till it gets to explanation renewed. And for those that want to know, our renewal rates on our tracks unless there's been a major sale of the property, a closure of the property or a sale or something like that are about 90%. So we do pretty well there. Moving up the page, transportation is going to continue to be a strong market for us. And that's all forms of transportation from bus depots to tunnels to bridges to airports. We're going to play in transportation. And for EMCOR, it's a little bit of a mechanical play. It's primarily an electrical play. And water and wastewater that $90,000,000 or so job we announced in South Florida, it's not in backlog yet. It was signed, I think, around July 1st. So it wouldn't have made this report for the year end period. So what do we see? We see a relatively strong non res market for us. We do expect backlog to be a pretty good shape as the year progresses. But we'd like to see the strong organic growth too. So it'll be a balancing act. But the non res market and the sectors we play in are pretty good. I think it's led by commercial, then go to, industrial then to transportation. And we could book a couple of decent healthcare jobs by the end the year. There will be nowhere as strong as it was in 2000 and 9 and 10, but people still work through the effects of the Affordable Care Act. And they might be doing that for quite some time. As you go to page 11, let's talk about which are backlog driven business in EMCOR and what's not. The most backlog driven businesses we have at EMCOR are our Electrical And Mechanical Construction segments. They are backlog driven businesses. You wouldn't expect that because 80% of their work is fixed price. And we continue to see modest growth there and we expect growth to continue there. Industrial for us is the least backlog driven business. And most of that work is in the field or it's in the shops for repair. We do have a portion of that business that's the new OEM heat exchanger build. That part of the business is the part that we think right now is the most affected by what's going on in the oil and gas sector with the major integrated oil companies and others as they look trim capital expenditures. We still have opportunities. There'll still be replacements. These refiners are operating flat out, but it may be more quick turn and some of that stuff will never make its way. A reporting period to missing. But we think right now the most part and part of our business that's most effective for backlog with the oil and gas is that on this page, in industrial. It's down about $16,000,000 year over year. It's a portion of what we do in that business. And that's where we're seeing the most effects right now. And just to make sure everybody understands this page is only referring to the Industrial Services segment, our full participation in the Industrial sector, right, which obviously our construction Ares to participate quite a bit. It's been a growth market for us. Now go to page 1213. So what we're going to do is we're going to leave revenue guidance where it was at $6,600,000,000. That basically implies the same growth for the back half of the year. As the front half of the year at around 3%. And for us, we feel really good about how did in second quarter, but we also know we caught up from the performance in first quarter, and we said we would, and we did. We're going to bring top end of the range down a dime. Now we're gonna make the range now 265 to 285 per diluted share from continuing operations. Such a $6,600,000,000 of revenue $2.65 to $2.85 per diluted share from continuing operations. Emcor, we always try to focus on how do we get to the mid to high point of that range. Well, how do you do that? Well, we need more revenue growth than 3% in the back half of the year. What we've achieved on a year to date basis. Then we got a pretty good shot to get into the midpoint to the high point. We could see some acceleration in our large infrastructure work we're doing in electrical. We continue to see a strong pace recovery across the non res market to include our mechanical service business, not just our construction businesses. As of today, we are still planning for a pretty good fall turnaround season. But to get to the top end of the range, We would need to see some scope increases from what we're expecting today or some of the delayed strike work to come into 2015. Versus 2016 where we expect most of it to land today. We have a pretty good non res market, or at least better than we've seen in a while. And we that could potentially accelerate, which may lead to more quick turn midsize projects that we can get to a reasonable level of completion as the year progresses. On the non res market, we think it's relatively strong And as such, we do expect our backlog to move upward. It won't be a straight line as the year progresses. Our bidding, pace, is good. Our win rates are good. They could accelerate some. And we're waiting for some several contract signing and to secure that contract signing. Again, it doesn't go into our backlog until we have a signed contract, not just a letter of intent or a notice to proceed. We continue to see a strong private market. We continue to see some unique opportunities in the water market and we continue to see strength in the transportation sector broadly defined. Our main caution for the year is with respect to the oil and gas I think most of you on the call and have invested us know that we are primarily a downstream focused company. Now, let's be clear, everybody fill in the effects of rigs being laid down, right? It goes back into the industrial base. It goes back into manufacturing plants. And surely we service some of those customers. It goes into office buildings in Houston. And surely we're going to have a pretty good year in Houston. We were going to have fantastic here in our commercial business than others. Our main caution for the year is what happens with capital spending? We expect maintenance spending to be good. This is a double sword right now with refiners running at near record utilization or record utilization with very good crack spreads to include in California But the issue is going to be when they come down, what's the scope going to be? How does that scope play out? What's the timing going to be? And our as we as contractors, are we all going to be able to marshal the resources if they come down at once and we have a big spring 2016? Nobody's clear on that yet. But our caution is with respect to the capital spending and what the major oil integrated companies will do. We'll see. We do see some slowing and that's what you see in our industrial backlog as it pertains to our industrial services business. And what's going on in the shop business. That's how narrow it is for us. So let's talk about what we actually do control on cash It's our capital allocation. We are starting to see some actionable items. And look, there's a series of companies we watch for a long period of time They're in each one of our major segments and would invest in any one of them because we have good businesses that continue to grow. We have consolidating acquisitions. We can and we have capabilities we can add. But you know, deals happen when they happen and there's a couple of variables that have to happen. Can you get the price right? Is it executable, which means that the sellers actually follow through. They don't always follow through. And when all those variables line up and the timing can we make it happen? Are we the ones that are successful? We're also seeing more of the traditional private market deal, what I call what I mean by private market, you own the business, you're selling it to us after it being in your family or are you starting it over 40 or 50 years? We're seeing some of that. We are that in Q1, but we still have $145,000,000 remaining in our authorization. We continue returning cash as Mark went through to our orders through a dividend. And cash into working capital to fund organic growth. And I think we'd all agree that's the best kind of growth. So with that, I'm going to take your questions and turn the call over to Teresa and thank you all for your interest in You're ready? And your for and your first question comes from the line of Adam Thalhimer with BB And T Capital Markets. Hey, good morning guys. Nice quarter. Good morning, Adam. Thank you. Hey, Tony, on the non res construction outlook, particularly on the commercial side, you said you're more optimistic than you have been in a while. You've seen a better market than you have in a while. How what kind of visibility do you have there? I mean, how do you think that extends into 2016? Yes. Adam, it's hard to run away from the facts, right? The market's up. Our backlog is up two and a half times from where it was at the bottom. And so we're operating over $1,000,000,000 in backlog there now. And we continue to see very strong mechanical service, small project activity, which for us is a pretty good marker on what's going on non res. I mean, the visibility we have into 'sixteen is what we're bidding and most of those projects will happen in the next 6 to 9 months. And what's on the engineers board. I would say through early 2016, we're okay. I don't think we have much visibility beyond that, but we never do. I mean, unless it's a really large project. And that's not what really drives the growth, right? That sets the growth and the growth is driven by the mid size of small projects. So I'd say through the end of the year to early 2016, I think we're in pretty good shape on commercial part of non res. Okay. And then on the industrial side, I'm a little confused because you actually had a good quarter there. I think maybe you referenced one large project. I'm just curious. Mean, you gave a lot of color on that segment. I'm just I'm hoping you can give a little bit more color on how that might trend as the year goes on. I think it's going to trend fine. I think if there's a caution in our numbers, it's not that we don't think we're going to do okay. It's more how do you get to the top end of the rent? And you need that firing even above. It needs to be on all cylinders, not just 7 of 8. Most of that Adam has to do with we're not seeing the work from the refining strike coming back this year. So what you see for the most part in Q2 is work that has nothing to do with the refining strike. It has to do with excellence and execution in our field businesses and really good performance on some unit rebuilds. And we don't see any reason to think that's not going to continue. But you have to have a little bit of caution when oil back goes to $50 And another part of someone's business is getting hit pretty hard and you wonder how that's going to expand to the capital part of the business, which would mainly affect for us the OEM heat exchanger build, which in any given year can be 10% to 14% of that segment. And your next question comes from the line of John Roger with D. A. Davidson. Hi, good morning. Congratulations on the quarter. Tony, In terms of the fall turnaround season, I mean, you made the reference to it as solid but is it up or down from prior year levels from your perspective? So that what I'm seeing is good refinery margins, but also reports that refiners want to keep running through that season, maybe defer some of that work into 2016? Yes, John. I think what we try to pay attention to is man hours. How many man hours do we expect to deploy. And right now, let's say that's flattish to up a little bit, but you really don't know that going in. Because if it extends a week or 2, it can substantially increase the scope on a turnaround. And some of the best work we do is once we get in there and we have to fix more than we thought we were going to with the original scope. So it's really hard for us to sit here and say, what we do know is we full schedule of turnarounds. We know we're going to be very busy. We're going to be busy across all of our companies and our customers are to make sure we get the right resources for them and the mix of resources that's right for the job. What we don't know today is we're on a specific turnaround where we think it might be 6. It could end up being 5. It could end up being 10. It could end up being 12. We'll know that sometime when we get rolling here in September, October. But as of now, people are holding their schedule and going to execute. All that being said, all those turnarounds would have happened in the first quarter and would even be doing better in industrial, right? We would have to so you could have taken the catch up we had and Q2 and that would have all flown through to increased performance year over year because we would have had a very good. If you say we said it was $0.07 or $0.08 a share in the first quarter, That was what we knew about. That's not all these other things I was talking about, spillover impacts. So that would have happened regardless of high utilization, regardless people wanting to run flat out because they were scheduled and they were ready to go. Our planners were in there. Our crews were starting to do some of the work in some cases. So I think that is true to some extent, but we've seen that could be telling you something different on our third quarter call, but I doubt it. But I think people are going to follow through on their schedule for the fall season because everybody's now worried of what manpower is going to look early spring. And again, that could push out and that's too early for us to tell. Okay. And then just in regard to your comments on acquisition opportunities in the market out there, but it sounds you're sensing that there's likely to be more activity over the, I don't know, next couple of quarters or a year? Yes. I know hard to read. But Yes. I believe that because we're seeing more companies that we've had long term interest in positioning themselves to be sold. We also know that there's companies that we've liked for very long period of time that are in markets that we serve and maybe provide additional services than even what we're doing today. That are now near the end of the fund life of the people that have owned them and they're going to have to do something in transact now. They can't delay it anymore. And we follow that closely. And it's more Mark that I'd say? Not necessarily, John. We're still happy to expand not only the geography that we service our construction customers work, we'd like to do more for them. Fee of our mechanical service business. And we would always look to expand our capabilities in the industrial business. You know, any one of those businesses are investable for us, If you go to EMCOR, what are we good at? We're good at the application and technical labor. We're good at managing distributed operations, whether they be branch network. Or companies. We're good at mobilizing for large complicated projects. We're also good at mobilizing across many locations. And so we can handle both variables. For us, we would like to service more that goes on a construction site. We wanted to do that and maybe not necessarily, just mechanical, electrical, trade work, but we'll see. Again, we look at all these different things. And if you look at most of what we do at EMCOR, we learned about it some way, shape or form before we started doing But the core of what we're going to do remains the same as far as we're going to service the U. S. Construction market We're going to service the U. S. Building Services market and we're going to service the U. S. Industrial downstream and petrochemical refining market. And the industrial market more broadly fine as you get into even our other segments. And we're going to do that with very good technical labor, and we're going to do that in distributed operations. We look for opportunities where we can bring our excellence in branch operations, GPS technology and everything else to bear on And, John, this is Mark. The only thing I would add to Tony's commentary, we will also continue to service our customers in the UK Building Services, Mark. Yeah, that's that also, right? The UK Building Services market is a place that we would look to grow too. We're starting to get good traction there and these 2 large contracts wins we had at the beginning of the year is a pretty good bellwether. What can happen when you have business and they don't have to go through the restructuring that they've gone through in the last 2.5, 3 years. Thanks Mark. Okay. And sorry, one last thing and maybe for Mark, but the decline in non controlling interest that we're seeing run through the financials, are there any of the big projects out there where you're not in full control of them? No, no, so that line specifically John is the 2 cover contracts. We keep referring to that we're not rebid. And because of the geography with us in the financial statements, we were the majority. So we were the we consolidated the results. I mean, that's the elimination of the piece that we did not own. Okay. And there's nothing in backlog that's not significant. No. It's gone. Okay. Perfect. Thank you. Your next question comes from the line of Tahira Afzal with KeyBanc Capital Markets. Good morning, gentlemen. This is Sean on for Tahira today. Congrats on a great quarter. I guess my first question is, just when you're looking at the tighter EPS guidance, range. It sort of implies a little bit of a lighter margin outlook in the second half of the year. And it'd be great if you could just help us understand a little bit what's happening on that side? Well, if you go to the this is Mark. If you go to the low point of the range, the guidance, the operating margin that's implied would be greater than it was in the 1st 6 months, roughly 4.4%. At the high end of the range, it would be roughly 5%. But I just mean in terms of the way what you've moved around in guidance, it's sort of implies that in the second half of the year, the margins are expected to be a bit lighter than they were before? We can take that. Mark can take that offline with you and walk through it. We can do it now, but actually we're counting on better margin in the second half of the year than we are now. And we're counting on better EPS from continuing operations in the second half of the year and revenue growth about the same as we had in the first half of the year. So again, if there's a math issue here, call Kevin and Mark and maybe go for it. Yes, you can give me, this is Cabot. But our math has something different there. I'll go through the math with you. So give me a call afterward. Alright. No problem. Yeah. I just kind of meant versus prior expectations rather than the first half versus second half. But, anyway, we'll move on to something a little more fun. You know, just on the civil infrastructure side, there's just two things that'd be great to get some some commentary on. And the first being, you know, we recently saw they find as the design on the LaGuardia Airport expansion. And, you know, I just love to get an idea of what you know, the scope, for EMCOR might be on that project. And secondly, you know, we just we've seen a little bit of movement on the federal highway bill, this week. So we just love to get a sense of, you know, what what kind of national opportunity that might present for EMCOR. If we did see a long long term bill go through, Some color there would be really interesting. Look, let me take the first one first. The New York infrastructure market, the New York Metro infrastructure market is very strong and has been. And where we play in that is the electrical infrastructure side. More than likely, if we were to participate in any substantial way in LaGuardia, would be on the electrical infrastructure side, not necessarily on the commercial building side. As far as the highway Bill. I mean, we'll see the spillover effects from that where we would likely participate if it became a 3 to 5 year program where people could plan a little better. If there's going to be major road upgrades, we would do the lighting and driver information systems for those. Again, it would be an electrical infrastructure or play for EMCOR likely the only place we would play as it pertains to that. All right guys. All right. Thanks for the color. Thank you. There are no further questions management. Did you have any closing remarks? Look, we had a good quarter. We're on track for the year. Continue to perform pretty well. We look forward to talking to you here in October, and thank you for your interest in EMCOR, and hope everybody has a very safe remainder of the summer. Thank you very