Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group second quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, number two. Please note this event is being recorded. Mr. Brad Newman with FTI Consulting, you may begin.
Thank you, Andrea, and good morning, everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2022 second quarter results, which were reported this morning. I would like to turn the call over to Kevin Matz, Executive Vice President of Shared Services, who will introduce management. Kevin, please go ahead.
Thanks, Brad, and good morning, everyone. As always, thanks for your interest in EMCOR, and welcome to our earnings call for the second quarter. For those of you who are accessing the call via the internet and our website, welcome as well. We hope you arrived at the beginning of our slide presentation that will accompany our remarks today. We are on slide two. This presentation and discussion contains forward-looking statements and may contain certain non-GAAP financial information. Page two of our presentation describes in detail the forward-looking statements and the non-GAAP financial information disclosures. I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides. On slide three, we have the executives who are with me to discuss the quarter and six-month results.
They are Tony Guzzi, our Chairman, President, and Chief Executive Officer, Mark Pompa, Executive Vice President and Chief Financial Officer, and our General Vice President and General Counsel, Maxine Mauricio. For call participants not accessing the conference call via the internet, this presentation and the slides will be archived in the investor relations section of our website under presentations. You can always find us at emcorgroup.com. With that out of the way, please let me turn the call over to Tony. Tony?
Yeah. Thanks, Kevin. Good morning to everybody, and thanks for your interest in EMCOR. My initial comments will focus on pages four through six of the presentation. We had a strong second quarter at EMCOR, with revenues of $2.7 billion and diluted earnings per share of $1.99. We delivered overall quarterly revenue growth of 11.1%, with organic revenue growth of 9.1%. We had operating income margins of 5.1%, which is especially strong when considering the headwinds we faced with supply chain issues. We generated quarterly operating cash flow of $77 million and exited the quarter with very strong remaining performance obligations or RPOs of $6.5 billion, which represent nearly 27% growth from the year ago period and 15% from year-end 2021.
We remain committed to our capital allocation strategy, returning a record $458 million in cash to our shareholders through June 30, 2020, in a volatile operating environment. Our team has shown resilience and flexibility as we continue to drive successful results for our customers and our business. Our positive forward momentum this quarter was driven by a few key factors. We are seeing strong demand for our specialty contracting construction services across a variety of sectors where we can differentiate ourselves, such as healthcare, water and wastewater, commercial, and industrial/manufacturing. We also continue to see strong forward demand for our data center and high-tech manufacturing construction services. Our construction segments reported a combined operating income margin of 6.9% in the quarter.
Our mechanical construction segment operating income margins were a strong 7.2%, and electrical construction segment operating income margins rebounded to a much improved 6.2% versus our first quarter performance. Performance in both segments continues to be impacted by ongoing supply chain issues related to equipment lead times and deliveries. Most of these issues that impacted our margin were from projects we booked over 2-3 years ago prior to the emergence of inflationary and supply chain challenges. Every day, we are making improvements to our planning and execution and workforce scheduling that better position us to navigate the volatile supply chain environment, which remains as difficult as it was in the first quarter. Our model is proving useful as we work with our suppliers to keep jobs moving and obtain the most comprehensive delivery information possible.
In the United States Building Services segment, we face the same ongoing supply chain issues as in the construction segments with respect to our project work, where we have record RPOs, HVAC, and commercial projects, and where the growth in RPOs is more than 20% on a year-over-year basis. Our results are being driven to a large extent by very strong growth for our HVAC repair service, our highest margin product line in the U.S. Building Services segment. This strong repair service growth makes sense as we are not able to execute some equipment replacement work because of very extended lead times for the HVAC equipment. If our customers cannot replace aging, inefficient equipment, they need us to fix it for them. We also perform very well in our commercial site-based business, which continues to provide stable performance through excellent execution and smart account selection.
Industrial Services segment is performing about how we expected on a year-to-date basis. We execute turnaround services as anticipated and continue to see opportunities to improve operating margins. Demand is strong, but our customers are under considerable pressure to keep their facilities operating at what is extraordinarily high utilization. Our United Kingdom Building Services segment continues to deliver steady performance and continues to serve some of the most important and sophisticated customers and sectors in the U.K. Before I turn the presentation over to Mark, I just want to emphasize that following a record return of cash to shareholders, we left the second quarter with a strong balance sheet. This strong balance sheet serves an important catalyst to win work from some of our most sophisticated customers executing large and complex projects.
Record RPOs of $6.5 billion is a testament to not only our execution, but also our financial strength. With that, I will now turn the presentation over to Mark for a detailed discussion of our financial results.
Thank you, Tony. Good morning to everyone participating on the call today. For those accessing this presentation via webcast, we are now on slide seven. As Tony indicated, over the next several slides, I will supplement Tony's opening commentary on EMCOR's second quarter performance, as well as provide a brief update on our year-to-date results through June 30th. All financial information referenced this morning is derived from our consolidated financial statements, appearing in both our earnings release announcement and Form 10-Q, filed with the Securities and Exchange Commission earlier this morning. Let's revisit and expand our review of EMCOR's second quarter performance. Consolidated revenues of $2.71 billion are up $269.7 million or 11.1% over quarter 2 2021.
Our second quarter results include $33.7 million of revenues attributable to businesses acquired as such businesses were not owned by EMCOR in last year's second quarter. Acquisition revenues positively impacted our United States Electrical Construction segment within the second quarter. Before reviewing the operating results of our individual reportable segments, I would like to highlight that our $2.71 billion of quarterly revenues represents a new all-time quarterly revenue record for the company, despite the contraction in United Kingdom Building Services segment revenues, which was largely due to unfavorable foreign exchange rate movements. The specifics to each of our reportable segments are as follows: United States Electrical Construction segment revenues of $564.1 million increased $72 million or 14.6% from 2021's comparable quarter.
Excluding incremental acquisition revenues, this segment's revenues grew organically 7.8% quarter-over-quarter. Increased project activity within the commercial market sector, inclusive of the telecommunication and high-tech submarket sectors, as well as growth in each of the healthcare manufacturing, water, and wastewater market sectors were the primary drivers of the period-over-period improvement. Partially offsetting these increases was the decline in revenues from the institutional market sector due to the completion or substantial completion of certain projects performed in the corresponding 2021 period. United States Mechanical Construction segment revenues of $1.066 billion increased $97.2 million or 10.1% from quarter 2 2021.
Revenue growth during the quarter was derived strictly from organic activities within the majority of the market sectors we serve, the manufacturing water and wastewater and institutional market sectors experiencing the most significant period-over-period increases. We also continue to see revenue growth within the commercial market sector, driven by demand from customers within the semiconductor and life sciences industries. Second, revenues for EMCOR's combined United States construction businesses of $1.63 billion increased $169.7 million or 11.6% from quarter two 2021. United States Services quarterly revenues of $677.8 million increased $66 million or 10.8%. Revenue growth was generated within the segment's commercial site-based and mechanical services divisions.
With respect to commercial site-based activity, new customer additions and scope or site expansion with existing customers were the drivers of the quarterly increase in revenues. Within mechanical services, we have seen a continuation of the trends that existed in quarter one. Notably, we have experienced an increase in service repair and maintenance volumes, partially as supply chain delays have resulted in the need to extend the useful lives of HVAC equipment in instances when new equipment is not readily available. In addition, there continues to be a high demand for building automation and control services, with an emphasis on improving building efficiency, energy consumption, and indoor air quality. Industrial Services segment revenues of $284.5 million increased $49.3 million or 0.1%.
Revenues in this segment have grown in comparison to the comparable prior period for each of the last four quarters as we are experiencing some stabilization and demand for our downstream-focused services. This has led to an increase in field services with some elimination of spring turnarounds, as well as greater maintenance and capital project activity. This growth is despite the headwinds within the upstream and midstream energy sectors, which is impacting certain of our service lines. We have also seen an increase in shop services revenue due to new equipment orders as well as pull-through repair projects resulting from ongoing turnarounds. With refinery utilization levels in excess of 90%, we remain hopeful that the last six months of 2022 will provide market conditions that can perpetuate this segment's recent trend of improving results.
United Kingdom Building Services revenues of $114.8 million decreased $15.3 million. This revenue contraction was predominantly attributable to unfavorable exchange rate movements of $12.5 million in the quarter. Excluding the impact of foreign exchange, the continued growth and project activity within this segment was more than offset by a reduction in service contract revenues due to the loss of certain contracts not successfully retained at rebid. Please turn to slide eight. Selling general administrative expenses of $245.4 million represent 9.1% of revenues, and represent an increase of $2.4 million from quarter 2, 2021. Adjusting for incremental expenses attributable to companies acquired of $3.1 million, inclusive of intangible asset amortization, EMCOR's SG&A expenses for the quarter declined slightly on an organic basis.
As a reminder, 2021 second quarter included a $4.1 million provision for credit loss within our U.S. Industrial Services segment related to a customer bankruptcy. Our credit loss activity in the current year's second quarter is substantially less, contributing to the period-over-period organic SG&A decline. Despite adding personnel to support our strong organic revenue growth and travel and entertainment expenses continuing to trend higher as business travel resumes at increased cadence, we have been able to successfully leverage our cost structure, resulting in a reduction in our SG&A margin. We continue to remain disciplined with overhead investment, and we'll seek efficiencies and economies of scale as we drive future revenue growth. Reported operating income for the quarter of $137.6 million favorably compares to $133.4 million operating income last year's second quarter.
quarter operating margins of 5.1% is down 40 basis points from 2021's second quarter and is largely due to a less favorable revenue mix within our U.S. construction operations, which I will cover in my segment commentary. Our second quarter 2021 consolidated operating margin of 5.5% represented a quarter-to-year record. Specific quarterly operating performance by reporting segment is as follows. Operating income of our U.S. Electrical Construction Services segment of $35.1 million decreased $7.9 million from the comparable 2021 period. Reported operating income of 6.2% represents a reduction from the 8.7% in last year's second quarter.
The decrease in both operating income and operating margin is due to a less favorable project mix within the commercial, institutional, and transportation market sectors when compared to the prior year period. In addition, we did experience certain industry project write-downs this quarter that reduced this segment's operating income by $7.7 million. These losses negatively impacted electrical construction quarter two operating margin by 140 basis points. Further, while up from quarter one, we continue to experience labor productivity and efficiency challenges due to supply chain difficulties resulting in equipment delivery delays, which has impacted project timelines. Although this segment continues to lag 2021 performance, we are reporting substantial sequential improvement in both revenue margin and operating income dollars when compared to the first quarter of this year.
Second, operating income of our U.S. Mechanical Construction segment of $26.9 million was essentially flat with the comparable 2021 period. Reported operating margin of 7.2% represents a 70 basis point reduction from the 7.9% earned a year ago. As referenced during the last two quarters, our Mechanical Construction segment has a larger number of active projects within the manufacturing and water and wastewater market sectors, where we are either acting as a construction manager or general contractor. In these cases, the percentage of our self-performed labor is less than a typical mechanical construction project, thereby resulting in a lower gross margin profile. This segment additionally experienced certain project write-downs during the quarter, which negatively impacted quarterly operating margin by 40 basis points.
Consistent with our electrical construction's quarterly performance, U.S. Mechanical Construction sequentially improved both reported operating margin and operating income dollars from quarter one of this year. Operating income for U.S. Building Services of $38.8 million or 5.6% of revenues, which represents a $5.6 million increase in operating income and a 30 basis point improvement in operating margin. The operating performance within the segment's mechanical services division, both favorable project execution, as well as the impact of certain price adjustments aimed at better aligning our billing rates with the increased costs we have experienced, were the key drivers of this segment's increases in operating income and operating income margin.
Our U.S. Industrial Services segment's operating income of $6.5 million represents a $7.7 million improvement from the $200,000 operating loss reported in 2021 second quarter. This is our industrial segment's third consecutive quarter of operating profit since reporting periods prior to the pandemic, albeit at operating margins that remain lower than historical levels as we continue to battle a competitive pricing environment and higher commodity costs amid inflationary headwinds. On a positive note, anticipated projects are either occurring or scheduled to commence during the remainder of 2022, in line with our initial planning expectations.
U.K. Building Services operating income of $6.4 million or 5.6% of revenues represents a slight decrease from the second quarter of 2021 due to the unfavorable exchange rates for the pound sterling versus the United States dollar. We continue to experience strong project demand within this segment as our customer base advances their capital investment programs, which is contributing to the 20 basis points of operating margin expansion year over year. We are now on slide nine. Additional financial items of significance for the quarter not addressed on the previous slides are as follows. Quarter two gross profit of $383 million is higher than the comparable 2021 quarter by $6.7 million or just under 2%.
However, gross margin of 14.5% is lower than last year's second quarter due to the reasons covered during my operating commentary, including project mix, supply chain difficulties, and construction project write-downs. Incremental revenues helped us achieve a new second quarter gross profit record, but prevailing macroeconomic headwinds are hindering our ability to maximize profit conversion. Diluted earnings per common share in the second quarter of 2022 is $1.99, as compared to $1.78 per diluted share for the prior year period. This second quarter EPS performance represents a new quarterly earnings per share record due to a combination of greater net income and a reduction in our weighted average shares outstanding, given our continued share repurchase activity. Please turn to slide 10.
With the quarterly commentary complete, I will touch on some highlights with respect to EMCOR's results for the first six months of 2022. Revenues of $5.3 billion represent an increase of $558 million or 11.8%, where 10% was generated organically. Operating income of $237.6 million or 4.5% of revenues represent a 5.1% reduction from the results for the first six months of 2021, as our improved second quarter 2022 performance was not enough to offset our slow start in quarter one. With our increased share repurchase activity and corresponding reduction in shares outstanding, our year-to-date diluted earnings per share of $3.36 eclipses that of the prior year's at $3.32. Please turn to slide 11.
Aided by the strength of our balance sheet, EMCOR remains in a position to invest in our business, return capital to shareholders, and execute against our strategic objectives. Our cash on hand has declined from year-end 2021 levels, as we have allocated $454.5 million towards the repurchase of our common stock during the first six months of calendar 2022. Approximately $272.5 million of this amount was allocated during the second quarter, as equity market volatility continued due to inflationary and interest rate concerns. At the midpoint of this year, we have more than doubled our previous high for annual share repurchases.
This method of cash to shareholders, along with our quarterly dividend, which amounted to $13.3 million during the year-to-date period, has been balanced when evaluating the working capital investment necessary to sustain our strong organic revenue growth as well as our future opportunities, in addition to appetite for both capital and strategic investments. In addition to our share repurchase and dividend activity, additional factors for the period-over-period decline in our reported cash balance include $26.6 million in payments for acquisitions and $27.7 million in capital expenditures. In addition to cash, other movements in our balance sheet of note are as follows. Working capital has decreased by nearly $307 million.
The decrease in cash just referenced, coupled with an increase in our net contract liability position, was partially offset by an increase in accounts receivable given the revenue growth during the period. Goodwill has increased marginally since December of last year, given the acquisitions completed by us thus far in 2022. Net identifiable and tangible assets have decreased by approximately $12 million during 2022, as amortization expense has more than offset the additional intangible assets recognized in connection with our year-to-date acquisition activity.
Total debt exclusive of operating lease liabilities remains fairly consistent with that as of December, and EMCOR's debt to capitalization ratio has increased from 10.4% at year-end 2021 to 11.8% at June 30, 2022, given the reduction in our shareholders' equity resulting from our share repurchase activity during the six months. To pick up from both Tony and my earlier comments, EMCOR remains committed to our capital allocation strategy, as evidenced by both our share repurchase activity to date, as well as today's announcement that our board of directors has approved an additional $500 million authorization under our share repurchase program, which represents an increase in our annual dividend of approximately 15%. With my proportion of this morning's slide presentation complete, I will now return the call back to Tony. Tony?
Thanks, Mark. I'm going to be on page 12, remaining performance obligations by segment and market sector. Much like the last quarter, the second quarter was another strong project bookings quarter for the company. We continue to experience core demand across all our segments and many of our market sectors. Total company RPOs at the end of the second quarter were $6.8 billion, up $0.34 billion or 26.5% over June 30, 2021 total of $5.1 billion. Measuring from the end of 2021, RPOs are up $862 million thus far this year or a strong 15.4%. Additionally, second quarter project bookings were likewise strong by an increase of RPOs of $508 million from this year's first quarter. Almost all of the RPO increase this quarter was organic.
Growth was broad-based, with each of the five segments growing RPO totals from both the year-ago and year-end 2021 periods. We are positioned in active non-residential market sectors and continue to see velocity in our business. The 1/2 punch we highlighted in our first quarter call continued this quarter, where we experienced both strong top-line revenue growth and total RPO growth. While some of our RPO growth thus far could be attributed to rising costs due to outside factors, we continue to see an active bidding environment despite current supply chain disruptions and inflation challenges.
Together, our domestic construction segments experienced strong construction project growth year-over-year with RPOs increasing over $1 billion or 25% from June 2021. The mechanical construction segments or RPOs increased by $660 million, excuse me, or 23%, while the electrical construction segment saw an increase of $350 million or nearly 30%. Since December 2021, our domestic construction segment RPOs have increased over $600 million. U.S. building services RPO levels increased $328 million, or 44% from the year-ago quarter, and now is over $1 billion in quality project and service work. As I mentioned earlier, extended lead times for HVAC equipment, combined with a continued push for energy efficiency and improving building wellness, is resulting in our customers asking us to retrofit and repair their equipment.
Additionally, strained equipment availability is driving our repair service work, which is some of the highest gross margin work that we do at EMCOR. Moving to the right side of the page, we show RPOs broken down by market sector. Continuing a trend, RPO growth was widespread in the second quarter across most market sectors, with commercial RPOs increasing almost $1.1 billion, $700 million of which was booked in the first half of 2022. Also contributing to this $1.1 billion increase were project awards in the hyperscale data center, high-tech semiconductor arena, as well as projects within biotech, life sciences, and the pharma businesses. All this shows the diversity and strength of EMCOR's end markets.
Finishing our market sector RPO growth year over year, healthcare RPOs are up 10%, institutional up 14%, and short duration projects, which includes much of the HVAC retrofit project work, are up 26%. Partially offsetting this was a reduction in transportation RPOs, as well as minor decreases in water and wastewater and industrial and manufacturing RPOs. From both a business segment and market perspective, I continue to like the balance and breadth of our RPOs. Now we get to go to one of my favorite slides, which is page 13, and I'd like you to turn there now, and we can talk about why we remain optimistic about EMCOR for the future. On this page, you see well-positioned and growing non-residential market interest. I'm gonna talk about each of these in turn. Data centers and semiconductor fabrication.
Now we had big news today in the semiconductor front, and EMCOR will benefit from that because we are working with all those customers that will benefit. We'll see strong electrical, mechanical, and fire protection demand across all those opportunities in semiconductors. We are positioned well in Arizona, specifically mechanically, and we are positioned well across the entire geography where there'll be semiconductor projects done, with fire protection and with capability in Arizona and burgeoning capability in Ohio on the semiconductor front. Data centers, you know, it's trite to say, I believe there are none better at mechanical and electrical construction within data centers than our EMCOR companies. We have leading positions in some core geographical markets, and we can build from an enterprise level retrofit to a hyperscale data center using 50 MW of power. Our folks are terrific.
Those teams in Dynalectric Portland, Dynalectric Salt Lake, Dynalectric DC, Gibson Electric, Forest Electric, these people are exceptional data center builders on the electrical side. On the mechanical side, Batchelor & Kimball, Poole & Kent, F&G are exceptional data center builders. They know their work. We're trusted by both our general contractor customers and our owner customers. They come to us because we have great technical skill and they know that we have the financial strength to complete and finish those projects. In the industrial manufacturing side, we are very well-positioned. Mark talked about some of the ability to bring together a prime project across a number of trades, especially for plant relocations. We also are market leaders in food fabrication. If you go to that trade business, there are none better than Southern Industrial Constructors down in the southeast.
They also move up into the lower Midwest, and we not only help people fix their existing facilities, we help them upgrade where they are, and they are expert in moving and relocating equipment and building and manufacturing capacity. Our food processing expertise is well-known through our Shambaugh & Son. We also, across a fleet of things, We can do as much as electrical charging station work as anyone. We need to be at the higher end of that, and we do that exceptionally well. Healthcare, that's always been a core market for EMCOR. We were integral in a lot of the things that had to happen within the pandemic to build extra capacity within a hospital system, and we are now part of the retrofit and expansion of not only hospital systems, but medical office buildings and outpatient surgery centers.
Water and wastewater, our market really for that is sewer for the most part. We do electrical work at different parts around the country. The bigger part of that work's mechanical. The team down at Poole & Kent South, and to some extent, Harry Pepper, are very good at that work. The Poole & Kent South team has had a leading position in both the East and West Coast of Florida and helping with the population increase and the consent decrees that have happened there. Mechanical services, if we are not the leading, we are within the top three of people that can provide mechanical services solutions.
Those solutions that we provide not only provide building efficiency, they provide building resiliency, and they also, now with the pandemic, wellness has even become more important. The building efficiency is one of the major ways that you can drive carbon reduction. You can see that happening across our footprint, right? Because as you increase the building wellness and increase the outside air coming in, you have to even seek more efficiency within the building, because outside actually adds to the detriment of building efficiency. It's a wonderful way for our people to meet our customers and for us to meet our carbon reduction goals that our clients set. We do that also through control solutions.
Fire protection, there are none better than the teams of Shambaugh & Son and Eldeco, and their ability to bring nationwide solutions to some of the most complex service and construction jobs. I'd be remiss not to say they also are gonna be big participants across a portfolio of projects, not only renewables, but carbon reduction and capture projects. We like our position. That work, for the most part, is happening in our Commercial segment, a lot of it's been delayed, and in our Industrial segment, where they will participate in solar projects, and they also help within wind projects on the transmission side, as does Wasatch out in the Intermountain area.
Of course, participating in a lot of robust markets can go up and down a little bit, but the general trend of these markets that I just went through are up and to the right. We spent a lot of time putting the assets in place, and we've got some of the best teams in the market executing against these opportunities. You know, I'm gonna go to page 14 and 15 now, and I'm gonna close out this discussion, and we'll take your questions. Entering this year, we knew that we would face some margin challenges. You know, we were all the way back in February 2021 talking about supply chain challenges with our year-end 2020 call. We also knew that because of our product and project mix, and you couple that with what we thought was happening with supply chain and COVID disruptions.
I think our teams have done a great job navigating these challenges in this operating environment, and we are pleased with our current position. As we talked about, demand for our services remained strong across most of our most important market sectors and in all of our reporting segments. As a result, we're gonna update our guidance range. We now believe that we will achieve $7.30-$7.80 in earnings per diluted share, and we expect at least $10.8 billion in revenue. You know, where we end up in that range, and I always sort of provide a roadmap of what could give you the ups or downs, where we end up in that range will depend not only on our execution, but also equipment and material delays.
We anticipate that we will continue to experience supply chain challenges. We do expect to convert at operating income margins around 5% for the remainder of 2022. Similar to what we achieved in the first half of the year. If we improve from those margins due to better supply chain execution and improved productivity, we could see even stronger results in the back half of the year. How do you get there, and what are the factors that drive that? We expect to continue to achieve favorable SG&A leverage as compared to 2021. We expect to see strong project demand across key market sectors like industrial, manufacturing, healthcare, and commercial, which includes both data center and semi projects. We expect demand to be strong across a range of project sizes and scopes.
We believe we will continue to see very strong HVAC repair service demand as trends we observe this quarter continue through the third quarter. The summer heat we are seeing helps us. We expect a more normalized fall turnaround season in our industrial services segment with our oil and gas customers and our refining and petrochemical customers. We should start executing some renewable energy projects that have been delayed because of limited material availability. While we are pleased with our current trajectory and optimistic about the balance of the year, we are also aware that we will continue to face headwinds in the near term. COVID is still here, and while we believe we have the systems in place to navigate and mitigate its challenges and keep our workforce safe, we expect that some project sites will be disrupted.
Further supply chain issues will persist with availability, delivery, and pricing all presenting challenges. This will continue, in my estimation, through the balance of 2022 into 2023. Finally, with respect to challenges, we cannot ignore the uncertainties in our macro environment. Rising interest rates, tightening lending, and energy scarcity exacerbated by the conflict in Ukraine and other policy matters will cause issues. To date, as evidenced by our strong growth in RPOs, we believe we have the resilient market to operate in. However, when the leaders of major financial institutions caution on projected market conditions, we take notice, and we realize that it will likely impact us. We believe our outlook is strong despite all that, as evidenced by our year-to-date performance and our record RPOs of $6.5 billion.
Our confidence in our business is reflected in our capital allocation strategy, as we have returned a record amount of cash to shareholders of $468 million through June 30, 2022. We announced an increase in our dividend by approximately 15% or 8 cents per share per annum, and our board has provided, as Mark documented our announcement today, an additional $500 million in authorization for share repurchases. We will continue to take a balanced approach to cash management, considering all the implications for maintaining and deploying funds, including maintaining cash and a strong balance sheet for our sureties, our investment in our organic growth, which has been quite strong, our acquisitions, and our customer expectations for our financial strength. This approach to capital allocation has historically served us well, especially in periods of economic uncertainty.
We aim to support our organic growth, and we have a decent pipeline of acquisitions to invest in across our segments. As always, I'd like to thank you for your interest in EMCOR, and I would like to especially thank all the members of our EMCOR team for their continued dedication, hard work, and execution for our customers. With that, I will ask Andrea to open the floor for your questions.
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, pick up your handset before pressing the keys. To withdraw your question, please press star two. At this time, we will pause momentarily to assemble the roster. Our first question will come from Sean Eastman of KeyBanc Capital Markets. Please go ahead.
Hi, team. Update here.
Good morning.
Good morning. Great update and thanks for taking my questions.
Absolutely.
First one, kind of more of a clarification question. You mentioned how you really like the diversity in RPOs, but of course, per the disclosures, you know, it shows over 45% of the mix is commercial. None of the end markets we're talking about are, you know, what I would sort of intuitively think of as commercial, and that piece is rapidly growing and is a lot bigger than it was in, say, 2007, 2008. Can we just get some clarity on what that piece really is?
What's growing. I think we pointed it out in the commentary, what's driving that growth is, you know, you have to go back historically on why it ended up there, right? You know, many, many years ago, it wasn't a major part of our business, and it was light manufacturing, enterprise data systems. Now it's a bigger part of the business, but it's now data centers is driving the growth, high-tech manufacturing in general, and more of what we've, over time, we're doing just build-out work, but now we're doing bigger work, life sciences, pharma, and other types of that kind of manufacturing. We still have pretty strong demand driving that growth.
As we talked about in building services, theirs is all commercial for the most part, and that demand drives along, HVAC retrofit projects, and most of those are in typical commercial. Sean, you're pointing out something, it's grown as a bigger part of the business, it's what's driving that commercial backlog increase, and that's why we took the time in our RPO section to talk about that. Mark?
Yeah. I mean, just to re-amplify what Tony just said, you know, not to go over the reasons again that Tony just mentioned, but, you know, included in our commercial RPO disclosure are all those things that Tony just highlighted as major growth areas and have been major contributors to our profitability over the last several years. You know, we're reticent to change how we're categorizing that, you know, at a midpoint in a year, but it's something that we need to evaluate internally as we go forward to provide, you know, the analytical community, I guess, more written transparency than the transparency we're already providing going forward with regards to, you know, what those actually represent.
Okay. I think that's really important, so I appreciate that. On the margins also, just to clarify, I think Tony, I think you said you guys have built in a 5% operating margin for the second half. I'm kinda struggling to get to the midpoint of the guidance with that number, so maybe I'm you know, maybe I heard that wrong. Also just broadly, in terms of thinking about the progression of margins, we saw this really nice sequential improvement from 1Q to 2Q.
Maybe talk about that bridge and you know, I would have thought that into the second half, there would have been a lot of opportunity to continue to improve just in terms of, you know, some of the new construction work getting to later stages, you know, driving a tailwind, you know, even if we're assuming the supply chain remains, you know, sort of status quo.
Yeah. I'm gonna kick this to Mark in a minute, but, you know, broadly, I said of around 5%.
Got it.
10 or 20 basis points, you're right, can move that. Sean, you know, most of our caution in saying that number is around the macro environment-
Yep.
Supply chain. It's hard for me today to tell you that, you know, the supply chain is all fixed and it's clear sailing. Lead times are terrible. OEMs are routinely missing those terrible lead times, and that has implications for us. For us to sorta sit here and not caution that would be irresponsible, I think. We have work that's now gonna be starting that's favorable to our mix that should be further along than it is, and we're not exactly sure. You know, a month means a lot when you start up a large project on equipment deliveries. Most of those larger projects, we're in concert with our customers ordering that equipment. They're actually buying it ahead of time. We will start up when that equipment's there, and that could be delayed.
It could start two weeks from now, it could start four weeks from now, it could start six weeks from now. Mark, I think that's where our caution is.
Obviously, you know, Tony's around 5%, as you just indicated, you know, could mean something in the low 5%.
Yeah
range. Clearly, as you did the math, I'm sure you came out with operating margins of 5.2% or 5.3% in the back half of the year. Clearly no worse than they were in second quarter and significantly higher than they were in quarter one and at the six-month point on a cumulative basis. You know, the variable there, once again, is the revenue number. If that $10.8 billion of guided revenues ends up creeping up, you know, it's quite possible we can same point, you know, at a 5% or 5.1% margin level for the last six months.
Okay. Good stuff, guys. All really helpful. I'll turn it over there.
The next question comes from Adam Thalhimer of Thompson Davis. Please go ahead.
Hey, good morning, guys. Congrats on a strong quarter and a well-timed buyback.
Thanks, Adam.
Hey, I want to talk about RPOs 'cause they're so strong. Are they at a level where, Tony, they're starting to give you some confidence in 2023?
Well, you know, we don't give forward-looking guidance, but, you know, the reality is, I go back to even, you know, longer-term trends, and I go back to page 13 in our presentation and talk about those sectors, and most of them will be up into the right. Do I specifically know what will happen in 2023 on the small project work? No, I don't. Do I know what new awards will? No, I don't. Clearly, our average project length is somewhere 9-12 months. Some of these are longer term, and we'll see when they start up and then they finish. Again, we don't give forward guidance into 2023.
Can we talk a little bit more about the electrical write-downs and those specific projects? Is there any risk to those in the back half, or does that margin hit that you took in Q1 and Q2 just flip and go away for the back half?
Well, I mean, you know, in our business, we're always cautious to say write-downs go away. We've had a hell of a run without any significant losses. You know, our folks are working in unprecedented times, especially with respect to supply chain. Most of the write-downs we had in the first half of the year were on projects we took prior to this supply chain and inflation cycle. That being said, you know, there's a lot of moving parts. You know, I would just refer you back to the previous question on around 5% margin. We don't see anything or absolutely would have taken it, right? That's how this business works. We don't expect it or we would have taken it.
Our electrical business has a good mix of work, and a lot of that margin progression will be dependent on our ability to start some of that favorable mix work, will all be related to supply chain.
Adam, I'm gonna just interject quickly. You know, Tony's point, obviously, to the extent that we've identified the necessity to take a write-down, we've taken 100% of it in the second quarter, right? We can't defer to later periods, as I'm sure everybody on the call well knows. The only additional thing I'll add to Tony's commentary is that, you know, these projects are still active projects, so they create a little bit of margin headwind in that segment, because we're gonna be recognizing profit on the remaining revenues at a margin profile lower than what this segment traditionally has done. That's the negative aspect of it. The aspect is that with regard to projects that were written down, both in electrical construction and mechanical construction, they're well over 50% complete.
Some of them are even closer to 100% complete. They are clearly not going to be the preponderance of revenues that are recognized in these segments, as we work through the last six months of 2022.
I almost led with that, too, 'cause it's been eight years since I think it was 2014 was the last time we talked about a problem project. Great work. I'll turn it over.
Adam, I mean, in all fairness, right? These aren't big, giant project write-downs. This is more, like Mark said, we're getting to the end of the project. Two of them were specifically stopped and started, not only through the pandemic, but because of the supply chain. That's never good for a contractor, right? As you reassemble the team and get going again. And, you know, look, what we're known for, EMCOR, is we will finish the work. But then what we're also known for is not reflected in these write-downs is our ability to go win what we think will have partial entitlement because customer hasn't made an offer back the other way. We're putting together the case. Our guys are pretty good initiators, and we'll see what happens.
I wouldn't term these on the same magnitude as what we had eight years ago on a specific job. I mean, these are, in some ways, what happens in business when you get a period of a very choppy environment where you have either a disruption in the job site. You know, one of them specifically was a carryover, a further carryover from the first quarter. We thought we had it all, but one of them specifically was workforce related, right? And it was related to our ability to get the right workforce on, and had COVID disruptions. We were working more overtime. We finished the job. We have a great reputation. Life goes on. I will tie that back to the earlier point.
One of the reasons that we win this big work, this complex technical work is, A, we got the best people in the field to execute this work, and we can assemble and put in the field the best people. Also, people know that we are thoughtful managing our balance sheet so that the work will get done and that we understand that we manage this business through cycles. Look, I think we're with the RPOs we have lined up, we feel pretty good about managing through this cycle. Again, we will see, right? I mean, there was a negative GDP growth print today. I don't know what that means for our business. I just feel really good about where we are on page 12 and 13 right now, which are RPOs and markets we have to work in.
I agree. Great color. Thanks, guys.
You're welcome.
The next question comes from Brent Thielman of D.A. Davidson. Please go ahead.
Hey, great. Thanks. Hey, Tony, Mark. Tony, on the data center work seems like it's keeping you really active. You know, we hear some rumblings and concerns out there that things might pull back in that market vertical. I mean, any other commentary in terms of what you're seeing out there in that market would be great.
We don't see that. Could there be a short-term disruption? We don't see that. But anything we study, anything we talk to these major builders, we don't see a pullback. I think anything you're hearing around pullback is their frustration around the supply chain. I mean, just for amplification on that, all these data centers, for the most part, are backed up by either natural gas generators or diesel generators. That's now out to 52 weeks. So as they try to think through how they're gonna sequence these data centers to come on, they have to take that into their planning. The major switch gear that come in, these are 50 MW facilities. There's a substation built outside almost every one of them, or maybe two, a substation, two for one.
Just to put in perspective what 50 MW is, 50 MW would power about 1,500 homes-2,000 homes. Just put this in perspective, what's happening here. Switchgear to do that is 42 weeks right now. The reticence I think that people are feeling is, can we get this supply chain to make delivery? Then you get to the UPS system. It can take anywhere, you know, to square footage-wise, you know, imagine a commercial, two floors of a typical commercial office building, 60,000 sq ft. That's the battery room to run that data center for somewhere between a minute and a minute and a half until the generator kicks on. These are the kind of systems that are more difficult to acquire right now, and I think that's what's causing.
That's what's caused the delay in our electrical business. What's good news for us is those deliveries are gonna start coming. We had pretty good performance without that in our mix. Then as we get through the back half of the year and into next year, that should be a favorable mix for us.
Okay. Really helpful, Tony. Appreciate that. I mean, it sounds like on the building services side, sort of these delays in getting big equipment, maybe some seasonal factors or it sounds like you guys think that's gonna drive a pretty, maybe an unusually stronger second half for that segment. Is that a fair characterization?
It should.
Just based on everything you're seeing out there?
It should, coupled with repair service demand. You know, Michael Bordes and his team right now sleep with one eye open on equipment deliveries. Not 100% sure that all these manufacturers are gonna meet their commitments. I mean, look, I'll be blunt. I was in this game 18, 20 years ago. They are all terrible at deliveries right now. They are not performing, and they are communicating terribly. I am very fortunate to work with a team of people that stay on top of this every day and are very good at understanding the language back from those OEMs with respect to their equipment deliveries and their fulfillment of those deliveries. We got the best team in the business interpreting those results, but all four of them are terrible right now.
Okay. Appreciate it, Tony. Thank you. Pass it on.
The next question from Noelle Dilts of Stifel. Please go ahead.
Hi, guys. Congrats on the quarter.
Thank you.
Yep. Maybe infer a little bit on how you're thinking about M&A with the share repurchase announcement, but you discuss where it stands in terms of priorities, what you're seeing in the market, you know, how you're generally thinking about the potential for M&A.
You know, in general, nothing's changed in our philosophy. We've been balanced capital allocators for a while here at EMCOR, and I think in any given situation, you tell us, "Tony, invest like crazy in organic growth when you have to." And quite frankly, we have. We've spent a little more on capital. Mark talked about the growth in AR. You know, one of the big considerations we think about on a large project is what is cash flow characteristics of that project. We know there's sometimes an investment somewhere in the middle of the project.
One of the reasons we win some of those large projects, I mean, first is always technical capability, but also people look at it and said, "You guys run a contractor the way you should run a contractor." That's with a conservative balance sheet that we can get it done. The second thing is, you know, we're very conscious with our sureties, and how about the relationship with them. We have great relationships with leading surety companies, and they appreciate how we run that and keep that balance sheet. You know, Mark's done this for a long period of time with them, to the point where the trust-based relationship we have there allows our people, with confidence, to go out and look at jobs and not worry about surety.
Mark, I think we have about $1.5 billion of that out there right now?
A little bit more. $1.8 billion.
$1.8 billion. Alongside surety credits sets the conversations we have with these large project people, whether they be in hyperscale data centers, semiconductor work, healthcare facilities, where they'll work with our people, our general counsel, and they'll say and say, "You know, we get it, but, you know, can we put a corporate guarantee around that?" That all ties back to that thoughtfulness that we have around capital allocation and a strong balance sheet. Organic growth would always come first. Then I think after that, you know, we have the dividend, which we think is a commitment over time. You know, we just increased it, and we feel good about that. Then we balance the capital allocation between share repurchases and acquisitions.
You know, the reality is, we've been fairly returning cash to shareholders since 2017, 2018 especially. I think $1.1 billion, $1.2 billion has now been returned to shareholders through share repurchases. I give our CFO a ton of credit for how he thinks through that with his team and how they execute it. Then we clearly were exiting the year last year with a big cash position. Now, we built that big cash position because we're one of the best cash generators in the business over time from our continuing operations. But we also had a dislocation, right? Going from 2019 to 2020 with the pandemic. In this business, the revenue shrunk, and we threw off a lot of cash.
We knew we had this one-time mark, $300 million-$400 million of excess cash. That was either gonna get put to work on acquisitions or was gonna get put to work with buyback. When we saw the dislocation, I would not just say in our stock, but in the market through the first six months of the year, we thought it was incumbent upon us to step in and repurchase shares because reality is versus any $450 million+ acquisition we could have made for EMCOR, the best company we could buy at that multiple was EMCOR in the first six months of this year. We think about all this, we think about it over time, and then acquisitions, and we've been acquirers.
You know, a good placeholder is somewhere between $150 million and $300 million a year. The best deals that happen with us are people that are selling their life's work and wanna be part of the future. You know, recently we did Quebe Holdings , Dennis F. Quebe and Gregory Ross out there in Ohio, terrific company, great reputation. We feel really good about our future together. Several years ago, the team down in Atlanta in B&K, they have a great presence in the Southeast, and are probably some of the best leading-edge people in BIM and prefabrication in the industry. We've worked together, they've taught us a lot, we've taught them a lot. It's been a great group of people to have on our team.
Then the whole fire protection build out, going all the way back with Comunale and the organic at Shambaugh and Comunale, coupled with acquisitions to build out that portfolio around the Shambaugh platform. Then the fabrication shops investments we made on top of that, not only in Akron, Ohio, with Comunale, but Fort Wayne, Indiana, and in Alabama, right by one of the big pipe producers in Arizona. These are all thoughtful expansions of capacity to allow us to serve our customers. After an acquisition strategy that helped us gain access to not only new capabilities in that market, but also geographic presence. Then you go to mechanical services where we will within a geography, maybe buy a platform and then build it out, much like we've done in Florida and in California.
You know, the Mesa team, I mean, it's been a remarkable story over a long period of time of the application of capital, acquisition capital and organic capital to go from a small, pretty good capability, Orange County-focused, HVAC contractor with Bob Lake and Charlie Fletcher and the team out there to a, I would say, the leading controls and HVAC service company across the basically four states in the West. It's done a terrific job, and it's, you know, pushing on $200+ million now. That's been mostly organic, but it's been the application of capital to buy, you know, small contractors in the market and geographically fit it out. We see those opportunities in front of us, and I think you know me well enough. We always have said deals happen when they happen. We're always in the market.
You know, we haven't been that successful over the last four years, five years in competition with private equity on a deal. Part of that is our choice. You know, I've never been a fan. We got good visibility down through the organization on buying somebody else's consolidation or roll-up, their roll-ups. We are operators, and I've never been a big fan of that unless we can really get down in the organization and understand who's running the local operations. Look, at the end of the day, we're gonna buy what we're good at. We are good at trade contracting. We are good at service, and we are with highly technical people, and we are very. That's really the theme that unites all those segments.
We are very good at taking something that's well run, helping us make it a little better run, and then growing it once we buy it. Nothing's really changed, and I think we'll just keep executing the way we've been executing.
Thanks so much.
Noelle?
Yep, thank you. I'll leave, just in the interest of time. Thank you.
Yeah. Again, I spent a little time on that because it's always important to reiterate what's made us really good over a long period of time.
Yep. Yep, absolutely.
We don't react to fads, and we just continue to execute, and I think that's the nature of the work we do.
Yep. Thanks.
Okay. Anybody else, operator?
This concludes our question and answer session. I would like to turn the conference back over to Tony Guzzi for any closing remarks.
I'm just gonna finish the way I started. I'd like to thank all the folks that continue to support us and have listened to and supported our growth and story over a long period of time. I'd really like to thank our segment and field leadership and our corporate staff. It's been really great execution over a long period of time. These last three years, they've been tough, right? We're known to be big excuse makers, and we're gonna continue that. I think what's made us successful is we think through everything carefully, and we very rarely go off that track. With that, we run by a set of values of mission first, people always.
Our people love to execute for their customers and take care of their people, and we'll continue to do that. We'll talk to you in third quarter. Be careful in the heat, and if you haven't, you can't get your air conditioner fixed. Look for your local air EMCOR company on our website. With that, I'll let you go.
The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.