Okay. Is this thing on? Are the mics on? There we go. Okay. Thank you everyone for joining. Thanks for your patience. My name's Tim Mulrooney. I'm the research analyst here who covers EMCOR at William Blair. I'm required to inform you that for a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com. I usually do a little intro for every company. This company probably requires no introduction. This is quite a full room. Seems like there's lots of interest here. The stock price is any indication of a lot of interest these days. I was very excited. I've been following EMCOR for years, and we started speaking with them about two and a half years ago. Finally got coverage out the door, because these things take forever, last year.
We've only been covering EMCOR for a year, but have been following you guys from afar with a lot of interest for a long, long time. I'm very excited for you guys to be here. We have CEO Tony Guzzi, who's been CEO now for how many years, Tony?
A long time.
Long time. A long time is the technical term.
Six years.
Jason Nalbandian, CFO. Thank you both for being here.
Glad to be here.
I'm going to pass it over to you guys for a couple brief intro remarks, and then we'll dive into more of a fireside chat and maybe open it up for questions for those that have them.
Sure. I'm Tony Guzzi, I'm the CEO, and Jason Nalbandian, the CFO. We've both been with EMCOR a while. I joined in 2004 as the President and Chief Operating Officer. Did a lot of the stuff then. Officially became CEO in 2011. Been a heck of a ride. Jason, CFO two years ago?
Yeah, two years ago.
Two years ago. Before that, he was our chief accounting officer and controller. We've had the privilege of working together a long time. I think this first slide is sort of we're mission ready, right? Things just don't happen. I'll give you a sort of an overview of the company. We're a company of people that actually do real work. Plumbers, pipe fitters, electricians, millwrights, HVAC technicians. We've been that same company this whole time. I'd like to tell you, we're contractors at the end of the day. By nature and being good at what we do over a long period of time, we also happen to be opportunistic. We still be opportunistic to keep diversity of demand and get ahead of some of your questions.
We're not managing to any number on what percentage we want to be data centers, what percentage we want to be aftermarket. We're just trying to make as much money as we can every day and as many sectors as we can that make sense, but then be able to deliver excellent results for our customers by not outrunning what our capabilities are. The capabilities have to do how much great field supervision and leadership we can build to be a force expander. We've grown organically exceptionally well over the last long period of time, but especially the last six years, and we've done that by really two things, right? Project size has gotten bigger, and onto some of the fastest-growing markets, we've added more geography through organic growth.
Having our companies do some of that work in those fast-growing sectors where they were doing other things or acquisition and then growing those acquisitions. As Jason Nalbandian, you'll hear us talk about, we're a balanced capital allocator. We tend to be pretty good acquirers. For me, that means we're a good B+ student. No one's an A student in acquisitions. It's just hard, right? You have to do them right, and you have to have cultural alignment and great execution in the field. I think over time, we've been a compounder of success. We don't chase fads. We execute well and do what we say we're going to do for our customers. I was telling somebody today, when you think of all these large jobs, we've never not finished a job. Sometimes it's not great at the end, but we've never not finished one.
We've finished other people's work more than once. I think that's a great sign of our customers' confidence. I'll get into a couple slides here. This will be real quick. We'll leave some time. Our new guidance is out there at $18.5 billion-$19.25 billion. That's up from what we started the year. Why is it up? Because we've surprised ourselves on the revenue side. We had the margins about right. We had record RPO growth. These are record level RPOs, which means for us, Remaining Performance Obligation, it's a measure of backlog. That is actually the accounting measure of backlog, Remaining Performance Obligations. This is work that's contracted in hand or the non-cancelable portion of our service agreements, which means if we have a five-year service agreement, they can cancel in 60 days. Only 60 days worth of RPOs are in there.
We're not taking guesses on what we're going to do for a customer or any of that. Our guidance has also increased to $28.25-$29.75. We expect to do greater than 80% cash flow conversion this year, and we have about 47,000 employees. About 70% or so, or a little more, are in the field doing real work, turning wrenches or working foreman supervising. Look, we're mechanical, electrical, fire protection contractor, and a maintenance contractor on top of that, and we apply it in different sectors, right? Mechanical, the full range of piping from small bore piping to the biggest pipe you can imagine. Air conditioning, we'll do the service on a 20-ton rooftop as well as a 5,000-ton chiller plant. We'll replace a 20-ton rooftop, or we'll design, build, replace a chiller plant for a large hospital complex like down the street here.
Fire protection for us typically means sprinkler for the majority of it. We also do alarm and detection. We do electrical work. We are mainly a medium voltage contractor, which means inside the wire, outside the substation. We do substation work, and we have a small T&D business, and we have a nice sized low voltage business. Security and power generation. We're not doing EPC power generation work. We're typically doing balance-of-plant work. We're a non-res construction company. We typically grow in our construction businesses. Jason, we can talk about this in question and answer, 600 basis points, 700 basis points, 800 basis points above non-res. In our building services, where the mechanical services business is 75% of what we do. In that business, we're doing 300 or 400 basis points. In that business, that's the best proxy for what's going on in the other market besides high-tech manufacturing and data centers.
We're getting 72% of our revenue in electrical mechanical construction, 21% in building services. Again, 70%+ of that building services revenue is in mechanical services, which is a high single-digit ROS business. Then the balance is industrial services. Important here, we do a lot of industrial service work or construction work up in construction services. This is the oil and gas business, and a little bit of our renewable energy or intermittent energy business. That's 7% of what we do. You can see I talked about it there. In the interest of time, I'll move on. We're geographically diverse. We still have some white space we fill in. We also can do platform enhancing and acquisitions, which means build more mass in a market.
We'll do everything on the acquisition side from a couple million-dollar asset deal to Miller you saw us do last year at $865 million. We operate through 100 operating subsidiaries. We have some very large ones in there, and then some smaller service companies. 450 locations in the U.S. Fire life safety, we can cover the whole country. Our bottom line is representative of some of our subsidiaries, our larger subsidiaries. With that, Jason, I'll turn it over to you.
Yeah, thanks, Tony. I think this page here really highlights what Tony just discussed about our diversity. There's a number of ways you can look at it. You can look at it by just service line or service offering, which is really represented in the pie chart on this page. You can look at it from an end market exposure perspective, which you can see in the bar charts. Either way you look at it, EMCOR's demand does remain very broad-based. I think if we quickly look at service lines, and Tony touched on some of this a little bit.
At a high level and just using round numbers, we're about 40% mechanical construction, about a 1/3 electrical construction, about 20% building services, and as Tony said, that's predominantly mechanical services and maintenance, and then less than 10% industrial services, which again, as Tony mentioned, is really our exposure to the oil and gas sector. Again, that right-hand side, those bar charts, you can really see how we're positioned across a number of markets in the broader non-residential construction space. It's our positioning in these markets that have really led to some of our growth over the last several years. I kind of bifurcate these sectors into two groups. One is what I call the high-growth sector.
Think what we call network and communications, which is really data centers, and then high-tech manufacturing, which is really led by semiconductor, biotech, and life sciences. Outside of those sectors, we have a number of core sectors that we've been in for decades that are really staples of EMCOR. Traditional manufacturing and industrial, healthcare, water and wastewater, and even institutional. Like I said, it's really our positioning here that's allowed us to grow the way we have. If you take just a five-year look at the business, our revenue CAGR is just over 14%, and that's really including acquisitions, really growing 2x the broader non-residential construction market. I do think that's just a testament to where we've positioned ourselves and where our operating companies are located, both geographically as well as in these sectors.
If you look at this next page here, supporting our growth really is our commitment to balanced capital allocation. Tony touched on this as well. If you look over time, we have a near 50/50 split between business reinvestment, so think M&A and CapEx, as well as shareholder return. For us, that's both through dividends and share repurchases. We remain committed to this philosophy as we move forward. Our approach always starts with organic investment. Really, how can we make sure that our existing, our 100 operating companies, can perform as best as they can and be as productive as they can, be as efficient as they can? It's making sure they have the right tools and the right resources. You can see that in some of the investments we've made recently in prefabrication, Virtual Design and Construction tools, and other digital technologies.
Also, in recent years, some of our organic growth has come from geographic expansion. Looking at adjacent or new geographies and saying, "How can we position some of our best operators in those geographies to capitalize on demand?" Besides organic growth, we do look towards M&A. We're really looking to bolster our core capabilities and our existing trades. We're looking for geographic expansion. For us, M&A can be standalone strategic acquisitions, or they can be smaller tuck-in deals, which really bolster existing capability. If you just look 2025, for example, we did 10 acquisitions. Two of those, being Miller and Danforth, were standalone businesses, while the other eight were really tuck-ins that enhanced our existing presence in some of our geographies. Acquisitions will continue to be a part of our growth strategy. I think we have a fairly robust pipeline where we sit here today.
As Tony says, deals happen when they happen, our guidance today is really just based on organic growth. Beyond M&A, if we have excess cash, our last priority, or one of our priorities, is to return capital to our shareholders. As I mentioned, we're doing that through both dividends and share repurchases. We recently increased our dividend by 60%. It's now $0.40 per quarter. On the share repurchase side, we've remained very active over the last several years. In the last two years alone, we repurchased $1.1 billion worth of our shares, and there's $593 million remaining on our current authorization on the program.
Okay, how we win. I think the top left, people, talent, developing that talent. I think our core product is actually great field leadership. I would take our development programs, our sense of purpose, the way we run the company on Mission First, People Always, and the operating model it has. I think that's the one part we may be superior to everybody else. I think technology differentiation, we're never on the bleeding edge of technology, but I would say we stay on the cutting edge, that's the VDC tools, the design-assist tools, the ability that flows out into our prefabrication/modular. The difference there is we're typically doing that for EMCOR and our companies. I've always been a believer in a strong balance sheet. It's one of the ways we compete. We have a fair amount of bonded work out there, about $2 billion.
Think of the customers we're actually working for. They value that to a great deal. Finally, you got to hang in there. We've been doing this a long time with great success. We didn't become a data center builder in 2019. We became a data center builder in the early 2000s. We didn't become a semiconductor builder, a fab plant builder when the CHIPS Act and TSMC and other people came. We were doing that work well back in 2005, 2007. We have long track records, and because of how we work together as a team, we can expand that track record across the country when we have the capability to do that. With Tim, I'll turn it over to you.
All right, thanks. Here, I actually wanted to go back a slide. How do you go back?
It's red.
Look at that share repurchase year to date in 2026. You did that heavy share repurchase in 2022 right before the stock price shot up a lot. Is it fair to say you think shares are undervalued here?
I wish we were that smart. Part of it's just balanced capital allocation. We're trying not to buy at a peak, so there's some of that. It's just a balanced way of doing it. You're only early in the year. We have a good pipeline in acquisitions. We'll see how the year turns out.
Okay.
Yeah.
Yeah. To that, I was going to ask, maybe I'll ask about the M&A now. You've got a lot of cash.
Yep
on the balance sheet.
Yep.
You've got no debt.
Yep.
Danforth closed.
Yep.
Miller's integrated.
Yep.
What is your appetite for M&A as we move further into 2026?
We've always had a strong appetite for M&A. We're also very disciplined. We don't tend to just want to make deals to make deals. We have to believe it's compelling. Look, we do a lot of the tuck-in stuff. That's extraordinary value for all our shareholders. When you're doing something like a Miller or even a Danforth that's larger, big footprint, you really got to make sure that the culture and the values they run their company are the same as yours, because you're taking a big thing into your company, organization-wise. We always start with all our acquisitions, they got to be able to execute in the field. The reality is we can't fix that reputation.
Right.
We're not going to burden ourselves with somebody else's bad reputation. Our appetite is, we used to say that we'd be willing to leverage up our balance sheet by two and a half times EBITDA to do a deal.
Good luck.
Yeah, right. We're not going to. There's not a $3 billion, $4 billion deal out there, likely. There could be a series of deals that are sort of $100 million-$500 million, give or take. The reality of good companies, they sell in good markets. It's been my experience over a long period of time. Bad companies or financially challenged companies sell in bad markets. Anybody that has a good company is not selling it into a bad market. They'll just wait.
Right.
I expect there'll be a lot of activity. We're very careful. We usually don't participate in the broad-based, every private equity firm can come with a staple, and their main value enhancer is they can put debt on a company. We don't try to compete with that, nor do we want to. We're usually, or never, I should say, going to buy a company that's on its fifth PE buyer, and now they want to find a strategic chump. We're not that guy either.
Do you see that in this market?
Oh, of course you do.
Yeah.
There's other people that are the strategic chump. What we like to do is a Miller. Great company. Danforth, great reputation. People we've talked to over a long period of time. The timing is right, either through something was going on with their succession, their ownership structure, or they want to get to the next level of growth, and they're thinking about the capital structure and what it will take to do that, and they said, "Time to look for the right partner." I think in those cases, both of them, we were the destination, and it's our job to get to a fair deal so that we can make us the destination. I think there's more than a few companies out there that that's true for.
The last three significant size companies we've done, Batchelor & Kimball, Danforth, and Miller, you could throw Quibi in there, too. They all had that criteria. We want to be with you. We got to make a fair deal. Look, I'm not looking for a bargain, to be honest with you. It may turn to look out like one because of how they perform when we team up, but we're not looking for them not to make a good deal for their current shareowner base, because ultimately, that's not a good thing either.
Right.
You want them to feel great about the deal. When we do a deal, what's interesting about us, a lot of people have all these great acquisition plans. You're going to come in there and you're going to get them so excited to be part of EMCOR. I could do that till I'm blue in my face. The person that's going to get them excited to be part of EMCOR is Henry Brown, the guy that they worked for forever at Miller. It's going to be Robert Beck, right? The folks at Danforth and Pat McParlane. That ownership team, or that leadership team, in the case of an ESOP, have to believe every bit of their fiber that this is the right thing for their organization, and then the integration becomes really successful.
If Jason or I are the ones selling that deal to the people that we just acquired, that's a lousy deal for us. We will come in and do that later. The first initial tranche of that just tells you how we think about things, is that management team has to be excited about what we can do together to grow the company.
Okay. That's helpful. Thank you. Maybe now we'll pivot away from capital allocation and M&A, and we can go to organic growth, which I think is where there's a lot of questions. What's your guide for this year? 12%-13%? What's your guide for that?
We started out 9%-10% .
Percentage increase, you're saying?
Yeah, percentage increase.
Round number's 9%- 13%.
9%-1 3%. Okay. All right. I had 10%. All right. 9%- 13% round numbers for organic growth. If I'm going to break that down in between volume and price, I'm curious about that. The reason I'm curious about that is because one of the big questions we get from a lot of people are the constraints on growth of the business.
How many people you can add, as I think about that as a proxy for your volume.
I also know that maybe you have some more price inelastic customers right now, that are just more focused on getting the infrastructure built. Would be curious on how to think about, yeah, this year, but also going forward, how we think about that breakdown between price and volume.
I think this year is very much volume driven, and you see that when you look at our guidance where our margins are relatively consistent year-over-year with what we did in 2025 in terms of our guidance.
A lot of that's mix driven, and so when you say what is really driving then our growth, it's volume.
That's interesting. I would've actually guessed it was a little bit more price-
Well, the reason it may not show up as much price, we're getting prices from markets.
It comes back to the mix.
It comes back to the mix of contract structure. We're still heavily weighted towards fixed-price, but in our construction business, specifically mechanically, we'll be more heavily structured, even some of the electrical markets because of the designs, we're more structured towards GMP, which by its nature has less margin upside because of a full cost disclosure. The reason there's certain owners that only go that way, especially on the mechanical side, coupled with, I think the reason that's driving part of that is the AI buildup. There's a little more unknowns there on how that construction's going to fade out and what changes are going to come versus the cloud, which for us is very much a fixed-price market. Even there, one of the big builders still does the mechanical systems.
GMP
GMP.
Yeah. The other mix element we have this year, and we talked about this a little bit on our first quarter earnings call, is some of our other sectors are starting to grow stronger than they have in the last several years. Water and wastewater is a great example. The food processing work we do within the manufacturing and industrial sector is another example. Both of those opportunities for us are a little bit unique in that there's more equipment content, there's a little bit more subcontract components to it, so our markups are just inherently less on some of that work. That mix as well is driving demand, but it's diluting margins a little bit.
Yeah. I think it's always important to remember who we work for in all those cases. We're in the water and wastewater market, it's public bid. We either got it right or we didn't, and other than capability requirement, which may narrow the competitive field, we're not in there negotiating price. In the food processing, we are, but we're going against the capital budget over a number of years. Some of these owners, we've done all their build for five, six years. We really don't want to let them think that we're not treating them the right way, and we sort of know what we have to hit based on what their capital budget is. When you get to the high tech and the semiconductor and the data center space, or in the pharma space, these are really sophisticated buyers.
I sometimes chuckle when I hear some of my competitor CEOs talk about this great price leverage they have. I'm not sure that's 100% accurate because in contracting it's very difficult to separate price. Price is maybe not as important as good contract terms. Price is maybe not important as being able to release your contingency at the end of the job. When you release your contingency at the end of the job, it comes back and looks like price. The contingency was there for a reason. You thought that job was going to be fairly tough, and at the end you did a little better. Maybe your prefab plan was better, maybe your labor productivity was much better. It cuts the other way, too. Sometimes you're on a fixed-price job and you don't have enough contingency.
We certainly saw that on a job we had last year. It's our job to figure out the mix between contract structure with the owner, which is the more risk you take, fixed-price, the more you have the margin opportunity versus what we're building, versus the scope of that work, versus the change order mechanisms if we think it's going to change a lot, versus our ability to get in early and help complete the design through design-assist. The reason Jason says a volume game here for us this year is it also within that allows us to grow in new markets, and with new customers if we're willing to sort of do a little more GMP work this year. I think we're at the point now where margin dollars are more important than margin percentages.
In going back to the growth point, the organic growth point, I've been using this example and some of you have heard it. Stick with me here for a minute. Miller Electric, a hugely successful company, one of the flagship electrical companies in the country. We bought it, I'd say give or take, it was on track to do $1 billion. Took them 77 years to do that. Great contractor. Danforth, leader, Upstate New York, goes down to Ohio a little bit, done some of the biggest work from sort of Albany down over and even into the northern tier of Pennsylvania. 133 years to get to $410 million. We're out at 9%-13% organic growth. Let's just give or take the midpoint on that versus last year. We're going to grow in excess of what took people 210 years to do.
Every year we're doing that, we're creating another ENR Top 10 contractor.
Right.
You get to the resources on that. Our constraint really is not skilled labor in the field. We do a pretty good job finding that where I think, of course, everybody up and down a hall, I'm a destination employer, whatever that means. What we have to be is the destination employer or the destination for people that want careers, that we can develop the best foremen, project managers, superintendents, estimating chiefs. I think if we can do that, which I think we have a pretty good track record, and we can get retention there, which we have great retention there, then that allows us, because the amount of work we're doing in the larger jobs, it allows us to expand that workforce, which allows us to take more work.
Which allows us to make sure we are the contractor that's going to finish the work we started and do repeat work with them versus be the contractor that also finishes that work for other people. That supervision is what we're trying to grow, because if that supervision is as good as I know it is, they will attract the best tradespeople in the market, and there'll be more people that want to build a career for us versus come and do a project for us. We'll always have both. A meaningless number is what's your turnover for your field labor. It's high. Everybody's is high. What we're trying to do is build that core workforce under that turnover that allows us to build that supervision, the journeymen, and all the things we need to do to be successful for the long term.
I hear you guys talk about how the bottleneck is more on the field leadership, which is interesting because if you listen to almost all of your other competitors, the bottleneck is on the workers themselves, the electricians, plumbers, HVAC folk, welders. It's the core tradespeople. Why is that not a bottleneck for you? Why do you think it's less of a bottleneck for you than others?
We don't have self-directed workforces. If you can't get the right leadership in place, if you can hire all the tradespeople when you want, it doesn't matter. You have to have people that actually know the means and methods and can keep them safe. We have good competitors and good publicly traded competitors. On the union side, our job is to work with the union to grow that local workforce, and then have the classifications we need to be able to convert non-union to union and be able to take people from other trades and up-skill to our trade. It's a non-union business, which we run a little bit of one, we're not in the labor broker business. We're not hiring somebody else to hire people for us. We're hiring people to work for us.
I just think long term, like most things, I can have an idea how I can develop the leadership. Developing that workforce under the leadership becomes a much more difficult thing if I don't have the right leadership.
That's right.
I think that leadership and that supervision is where you get your productivity, your efficiency, and some of the margin gains we've seen over the last several years.
It's also how we can share across the company. It's how we can take our great industrial contractor here that we had in Gary, Indiana, and get them to move to South Bend to do data centers and have the guys from Chicago train them because the leadership trusts each other that they're going to execute for our core customer base. You could say it's a chicken or an egg thing. The reason I don't talk about finding the skilled trade is as difficult, because if I don't have the skilled leadership, I'm going to have people out there that are clueless on how to get productivity means and methods and everything else and keep them safe. We are much more focused on the foreman and up.
Got you. Okay, just in the last minute or so here, I did want to ask about data center. It's an important growth market for you.
Absolutely.
I'm just curious how that has changed. I know you're still entering new markets, but is the way that you are going to market, is the way that your contractors are interacting with the customers, or the way that you're interacting with the customers, is that changing? Has it changed?
I think it's changed a lot in the last five years. The owners have always been very involved in any hospital, data center project, high-tech manufacturing, and manufacturing job. The difference is the breadth that they know our people. These big builders and the 20 or 30 people in each one of those big builders really know the depth of our leadership at the lower level.
The hyperscalers.
The hyperscalers. That's different. What they want from us is different. Now, we're very careful not to overcommit or tell them, "Hey, we're exclusively with you," because at the end of the day, who are we? We're contractors.
Yeah.
We have to manage our capacity with the best opportunity for margin long term and the best ability to get the job done so that we can keep doing it for other people. How you really make money in contracting is not to lose money or disappoint your customers.
Right.
That's how you really make money in contracting, on the long term.
That's a perfect way to end. I hope to see you all at the Maher breakout room. Thank you, Tony and Jason.
Thank you.
All right. Thank you.