Item 1. FINANCIAL STATEMENTS.

EMCOR Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

			(Unaudited) June 30, 2024						December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents			$	807,318					$	789,750
Accounts receivable, less allowance for credit losses of $33,251 and $22,502, respectively			3,459,270						3,203,490
Contract assets			293,677						269,885
Inventories			103,896						110,774
Prepaid expenses and other			76,628						73,072
Total current assets			4,740,789						4,446,971
Property, plant, and equipment, net			201,168						179,378
Operating lease right-of-use assets			331,313						310,498
Goodwill			998,571						956,549
Identifiable intangible assets, net			661,920						586,032
Other assets			138,788						130,293
Total assets			$	7,072,549					$	6,609,721
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable			$	922,002					$	935,967
Contract liabilities			1,783,909						1,595,109
Accrued payroll and benefits			584,113						596,936
Other accrued expenses and liabilities			304,482						315,107
Operating lease liabilities, current			78,726						75,236
Total current liabilities			3,673,232						3,518,355
Operating lease liabilities, long-term			279,465						259,430
Other long-term obligations			374,255						361,121
Total liabilities			4,326,952						4,138,906
Equity:
EMCOR Group, Inc. stockholders’ equity:
Preferred stock, $0.10 par value, 1,000,000 shares authorized, zero issued and outstanding			—						—
Common stock, $0.01 par value, 200,000,000 shares authorized, 61,174,621 and 61,094,042 shares issued, respectively			612						611
Capital surplus			92,434						91,813
Accumulated other comprehensive loss			(85,709)						(85,704)
Retained earnings			4,238,867						3,814,439
Treasury stock, at cost 14,462,271 and 14,046,777 shares, respectively			(1,501,644)						(1,351,381)
Total EMCOR Group, Inc. stockholders’ equity			2,744,560						2,469,778
Noncontrolling interests			1,037						1,037
Total equity			2,745,597						2,470,815
Total liabilities and equity			$	7,072,549					$	6,609,721

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)(Unaudited)

			Three months ended June 30,												Six months ended June 30,
			2024						2023						2024						2023
Revenues			$	3,666,897					$	3,045,622					$	7,099,173					$	5,936,054
Cost of sales			2,982,896						2,555,562						5,825,863						5,009,932
Gross profit			684,001						490,060						1,273,310						926,122
Selling, general and administrative expenses			351,193						293,393						680,549						574,545
Operating income			332,808						196,667						592,761						351,577
Net periodic pension income (cost)			221						(282)						443						(556)
Interest income (expense), net			6,106						(2,692)						13,647						(4,524)
Income before income taxes			339,135						193,693						606,851						346,497
Income tax provision			91,563						53,098						162,130						94,429
Net income			$	247,572					$	140,595					$	444,721					$	252,068
Basic earnings per common share			$	5.27					$	2.97					$	9.45					$	5.30
Diluted earnings per common share			$	5.25					$	2.95					$	9.41					$	5.28
Dividends declared per common share			$	0.25					$	0.18					$	0.43					$	0.33

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)(Unaudited)

			Three months ended June 30,												Six months ended June 30,
			2024						2023						2024						2023
Net income			$	247,572					$	140,595					$	444,721					$	252,068
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			245						3,614						(971)						5,871
Post-retirement plans, amortization of actuarial loss included in net income (1)			482						534						966						1,053
Other comprehensive income (loss)			727						4,148						(5)						6,924
Comprehensive income			$	248,299					$	144,743					444,716						258,992

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(1)Net of tax of $0.2 million for each of the three months ended June 30, 2024 and 2023, and net of tax of $0.3 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)(Unaudited)

			Six months ended June 30,
			2024						2023
Cash flows - operating activities:
Net income			$	444,721					$	252,068
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			27,408						25,393
Amortization of identifiable intangible assets			36,412						32,100
Provision for credit losses			12,251						3,115
Non-cash share-based compensation expense			11,371						7,535
Other reconciling items			(5,240)						(6,800)
Changes in operating assets and liabilities, excluding the effect of businesses acquired			(114,965)						(98,479)
Net cash provided by operating activities			411,958						214,932
Cash flows - investing activities:
Payments for acquisitions of businesses, net of cash acquired			(173,265)						(22,384)
Proceeds from sale or disposal of property, plant, and equipment			1,655						10,514
Purchases of property, plant, and equipment			(39,529)						(36,564)
Net cash used in investing activities			(211,139)						(48,434)
Cash flows - financing activities:
Proceeds from revolving credit facility			—						100,000
Repayments of revolving credit facility			—						(100,000)
Repayments of finance lease liabilities			(1,393)						(1,477)
Dividends paid to stockholders			(20,219)						(15,714)
Repurchases of common stock			(149,009)						(105,299)
Taxes paid related to net share settlements of equity awards			(11,766)						(5,295)
Issuances of common stock under employee stock purchase plan			943						4,441
Payments for contingent consideration arrangements			—						(3,026)
Net cash used in financing activities			(181,444)						(126,370)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(927)						5,856
Increase in cash, cash equivalents, and restricted cash			18,448						45,984
Cash, cash equivalents, and restricted cash at beginning of year (1)			789,750						457,068
Cash, cash equivalents, and restricted cash at end of period (2)			$	808,198					$	503,052

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(1)Includes $0.6 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2022.

(2)Includes $0.9 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of June 30, 2024.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the three months ended June 30, 2023 and 2024

(In thousands)(Unaudited)

									EMCOR Group, Inc. Stockholders
			Total						Common stock						Capital surplus						Accumulated other comprehensive loss (1)						Retained earnings						Treasury stock						Noncontrolling interests
Balance, March 31, 2023			$	2,066,325					$	610					$	75,850					$	(90,675)					$	3,318,560					$	(1,238,722)					$	702
Net income			140,595						—						—						—						140,595						—						—
Other comprehensive income			4,148						—						—						4,148						—						—						—
Common stock issued under share-based compensation plans			—						1						(1)						—						—						—						—
Tax withholding for common stock issued under share-based compensation plans			(53)						—						(53)						—						—						—						—
Common stock issued under employee stock purchase plan			2,273						—						2,273						—						—						—						—
Common stock dividends			(8,563)						—						39						—						(8,602)						—						—
Repurchases of common stock			(90,086)						—						—						—						—						(90,086)						—
Share-based compensation expense			3,448						—						3,448						—						—						—						—
Balance, June 30, 2023			$	2,118,087					$	611					$	81,556					$	(86,527)					$	3,450,553					$	(1,328,808)					$	702
Balance, March 31, 2024			$	2,615,382					$	612					$	87,673					$	(86,436)					$	4,003,079					$	(1,390,583)					$	1,037
Net income			247,572						—						—						—						247,572						—						—
Other comprehensive income			727						—						—						727						—						—						—
Tax withholding for common stock issued under share-based compensation plans			(118)						—						(118)						—						—						—						—
Common stock dividends			(11,749)						—						35						—						(11,784)						—						—
Repurchases of common stock			(111,061)						—						—						—						—						(111,061)						—
Share-based compensation expense			4,844						—						4,844						—						—						—						—
Balance, June 30, 2024			$	2,745,597					$	612					$	92,434					$	(85,709)					$	4,238,867					$	(1,501,644)					$	1,037

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(1)Represents cumulative foreign currency translation adjustments and post-retirement liability adjustments.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the six months ended June 30, 2023 and 2024

(In thousands)(Unaudited)

									EMCOR Group, Inc. Stockholders
			Total						Common stock						Capital surplus						Accumulated other comprehensive loss (1)						Retained earnings						Treasury stock						Noncontrolling interests
Balance, December 31, 2022			$	1,974,291					$	609					$	74,795					$	(93,451)					$	3,214,281					$	(1,222,645)					$	702
Net income			252,068						—						—						—						252,068						—						—
Other comprehensive income			6,924						—						—						6,924						—						—						—
Common stock issued under share-based compensation plans			—						2						(2)						—						—						—						—
Tax withholding for common stock issued under share-based compensation plans			(5,295)						—						(5,295)						—						—						—						—
Common stock issued under employee stock purchase plan			4,441						—						4,441						—						—						—						—
Common stock dividends			(15,714)						—						82						—						(15,796)						—						—
Repurchases of common stock			(106,163)						—						—						—						—						(106,163)						—
Share-based compensation expense			7,535						—						7,535						—						—						—						—
Balance, June 30, 2023			$	2,118,087					$	611					$	81,556					$	(86,527)					$	3,450,553					$	(1,328,808)					$	702
Balance, December 31, 2023			$	2,470,815					$	611					$	91,813					$	(85,704)					$	3,814,439					$	(1,351,381)					$	1,037
Net income			444,721						—						—						—						444,721						—						—
Other comprehensive loss			(5)						—						—						(5)						—						—						—
Common stock issued under share-based compensation plans			—						1						(1)						—						—						—						—
Tax withholding for common stock issued under share-based compensation plans			(11,766)						—						(11,766)						—						—						—						—
Common stock issued under employee stock purchase plan			943						—						943						—						—						—						—
Common stock dividends			(20,219)						—						74						—						(20,293)						—						—
Repurchases of common stock			(150,263)						—						—						—						—						(150,263)						—
Share-based compensation expense			11,371						—						11,371						—						—						—						—
Balance, June 30, 2024			$	2,745,597					$	612					$	92,434					$	(85,709)					$	4,238,867					$	(1,501,644)					$	1,037

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(1)Represents cumulative foreign currency translation adjustments and post-retirement liability adjustments.

See Notes to Consolidated Financial Statements.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. References to the “Company,” “EMCOR,” “we,” “us,” “our,” and similar words refer to EMCOR Group, Inc. and its consolidated subsidiaries unless the context indicates otherwise. Readers of this report should refer to the consolidated financial statements and the notes thereto included in our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission.

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of those of a normal recurring nature) necessary to present fairly our financial position and the results of our operations.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024.

NOTE 2 - New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”), which expands the required disclosure for reportable segments. This guidance requires entities to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all segment disclosures which are currently required annually. This ASU additionally requires entities to disclose the title and position of the individual or the name of the group or committee identified as its chief operating decision-maker. Such guidance, which is required to be applied retrospectively, is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, although early adoption is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact to our segment disclosures.

In December 2023, the FASB issued an ASU intended to enhance the transparency and decision-usefulness of income tax disclosures. Such guidance requires entities to provide additional information within their income tax rate reconciliation, including further disclosure of federal, state, and foreign income taxes and to provide more details about these reconciling items if a quantitative threshold is met. This guidance additionally requires expanded disclosure of income taxes paid, including amounts paid for federal, state, and foreign taxes. This ASU, which is required to be applied prospectively, is effective for fiscal years beginning after December 15, 2024, although early adoption and retrospective application is permitted. While the adoption of this ASU will not have an impact on our financial position and/or results of operations, we are currently evaluating the impact on our income tax disclosures, including the processes and controls around the collection of this information.

NOTE 3 - Revenue from Contracts with Customers

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services by applying the following five step model:

(1) Identify the contract with a customer

A contract with a customer exists when: (a) the parties have approved the contract and are committed to perform their respective obligations, (b) the rights of the parties can be identified, (c) payment terms can be identified, (d) the arrangement has commercial substance, and (e) collectability of consideration is probable. Judgment is required when determining if the contractual criteria are met, specifically in the earlier stages of a project when a formally executed contract may not yet exist. In these situations, the Company evaluates all relevant facts and circumstances, including the existence of other forms of documentation or historical experience with our customers that may indicate a contractual agreement is in place and revenue should be recognized. In determining if the collectability of consideration is probable, the Company considers the customer’s ability and intention to pay such consideration through an evaluation of several factors, including an assessment of the creditworthiness of the customer and our prior collection history with such customer.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

(2) Identify the performance obligations in the contract

At contract inception, the Company assesses the goods or services promised in a contract and identifies, as a separate performance obligation, each distinct promise to transfer goods or services to the customer. The identified performance obligations represent the “unit of account” for purposes of determining revenue recognition. In order to properly identify separate performance obligations, the Company applies judgment in determining whether each good or service provided is: (a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract.

In addition, when assessing performance obligations within a contract, the Company considers the warranty provisions included within such contract. To the extent the warranty terms provide the customer with an additional service, other than assurance that the promised good or service complies with agreed upon specifications, such warranty is accounted for as a separate performance obligation. In determining whether a warranty provides an additional service, the Company considers each warranty provision in comparison to warranty terms which are standard in the industry.

Our contracts are often modified through change orders to account for changes in the scope and price of the goods or services we are providing. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of our change orders are for goods or services that are not distinct within the context of our original contract and, therefore, are not treated as separate performance obligations.

(3) Determine the transaction price

The transaction price represents the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to our customers. The consideration promised within a contract may include fixed amounts, variable amounts, or both. To the extent the performance obligation includes variable consideration, including contract bonuses and penalties that can either increase or decrease the transaction price, the Company estimates the amount of variable consideration to be included in the transaction price utilizing one of two prescribed methods, depending on which method better predicts the amount of consideration to which the entity will be entitled. Such methods include: (a) the expected value method, whereby the amount of variable consideration to be recognized represents the sum of probability-weighted amounts in a range of possible consideration amounts, and (b) the most likely amount method, whereby the amount of variable consideration to be recognized represents the single most likely amount in a range of possible consideration amounts. When applying these methods, the Company considers all information that is reasonably available, including historical, current, and estimates of future performance. The expected value method is typically utilized in situations where a contract contains a large number of possible outcomes while the most likely amount method is typically utilized in situations where a contract has only two possible outcomes.

Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved. This threshold is referred to as the variable consideration constraint. In assessing whether to apply the variable consideration constraint, the Company considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue, including, but not limited to, whether: (a) the amount of consideration is highly susceptible to factors outside of the Company’s influence, such as the actions of third parties, (b) the uncertainty surrounding the amount of consideration is not expected to be resolved for a long period of time, (c) the Company’s experience with similar types of contracts is limited or that experience has limited predictive value, (d) the Company has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances, and (e) the contract has a large number and broad range of possible consideration amounts.

Pending change orders represent one of the most common forms of variable consideration included within contract value and typically represent contract modifications for which a change in scope has been authorized or acknowledged by our customer but the final adjustment to contract price is yet to be negotiated. In estimating the transaction price for pending change orders, the Company considers all relevant facts, including documented correspondence with the customer regarding acknowledgment of and/or agreement with the modification, as well as historical experience with the customer or similar contractual circumstances. Based upon this assessment, the Company estimates the transaction price, including whether the variable consideration constraint should be applied.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Contract claims are another form of variable consideration which is common within our industry. Claim amounts represent revenue that has been recognized for contract modifications that are not submitted or are in dispute as to both scope and price. In estimating the transaction price for claims, the Company considers all relevant facts available. However, given the uncertainty surrounding claims, including the potential long-term nature of dispute resolution and the broad range of possible consideration amounts, there is an increased likelihood that any additional contract revenue associated with contract claims is constrained. The resolution of claims involves negotiations and, in certain cases, litigation. In the event litigation costs are incurred by us in connection with claims, such litigation costs are expensed as incurred, although we may seek to recover these costs.

For some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer. For such contracts, the Company evaluates whether this timing difference represents a financing arrangement within the contract. Although rare, if a contract is determined to contain a significant financing component, the Company adjusts the promised amount of consideration for the effects of the time value of money when determining the transaction price of such contract. Although our customers may retain a portion of the contract price until completion of the project and final contract settlement, these retainage amounts are not considered a significant financing component as the intent of the withheld amounts is to provide the customer with assurance that we will complete our obligations under the contract rather than to provide financing to the customer. In addition, although we may be entitled to advanced payments from our customers on certain contracts, these advanced payments generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract.

Changes in the estimates of transaction prices are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate.

(4) Allocate the transaction price to the performance obligations in the contract

For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price. The Company determines the standalone selling price based on the price at which the performance obligation would have been sold separately in similar circumstances to similar customers. If the standalone selling price is not observable, the Company estimates the standalone selling price taking into account all available information such as market conditions and internal pricing guidelines. In certain circumstances, the standalone selling price is determined using an expected profit margin on anticipated costs related to the performance obligation.

(5) Recognize revenue as performance obligations are satisfied

The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to its customers. A good or service is considered to be transferred when the customer obtains control. The Company can transfer control of a good or service and satisfy its performance obligations either over time or at a point in time. The Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following three criteria are met: (a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as we perform, (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the Company’s performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date.

For our performance obligations satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of that performance obligation. The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

For our construction contracts, revenue is generally recognized over time as our performance creates or enhances an asset that the customer controls as it is created or enhanced. Our fixed price construction projects generally use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the number of units produced or delivered, when our performance does not produce significant amounts of work in process or finished goods prior to complete satisfaction of such performance obligations.

For our services contracts, revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service. For our fixed price service contracts with specified service periods, revenue is generally recognized on a straight-line basis over such service period when our inputs are expended evenly and the customer receives and consumes the benefits of our performance throughout the contract term.

The timing of revenue recognition for the manufacturing of new build heat exchangers within our United States industrial services segment depends on the payment terms of the contract, as our performance does not create an asset with an alternative use to us. For those contracts for which we have a right to payment for performance completed to date at all times throughout our performance, inclusive of a cancellation, we recognize revenue over time. For these performance obligations, we use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date, we recognize revenue at the point in time when control is transferred to the customer. For bill-and-hold arrangements, revenue is recognized when the customer obtains control of the heat exchanger, which may be prior to shipping if certain recognition criteria are met.

For certain of our revenue streams, such as call-out repair and service work, outage services, refinery turnarounds, and specialty welding services that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an output method as the customer receives and consumes the benefits of our performance completed to date.

Changes in Estimates

Due to uncertainties inherent in the estimation process, as well as the significant judgment involved in determining variable consideration, it is possible that estimates of costs to complete a performance obligation, and/or our estimates of transaction prices, will be revised in the near term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, or changes in the estimate of transaction prices, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

Based on an evaluation of individual projects that were substantially complete in prior periods but had revisions to total estimated cost or anticipated contract value that resulted in an increase to profitability in excess of $1.0 million, we recognized revenue during the three and six months ended June 30, 2024 and 2023, as summarized in the following table (in thousands):

			For the three months ended June 30,												For the six months ended June 30,
			2024						2023						2024						2023
United States electrical construction and facilities services			$	3,076					$	—					$	8,413					$	—
United States mechanical construction and facilities services			9,540						8,036						8,461						8,999
Total impact			$	12,616					$	8,036					$	16,874					$	8,999

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

During the three months ended June 30, 2024, we recognized $12.3 million of gross profit on two contracts, which are currently in process, as a result of favorable developments on certain outstanding claims. Of this amount, $8.4 million was reported within our United States electrical construction and facilities services segment and $3.9 million was reported within our United States mechanical construction and facilities services segment.

Based on an evaluation of individual projects that had revisions to total estimated costs or anticipated contract value that resulted in a reduction of profitability in excess of $1.0 million, our operating results were negatively impacted during the three and six months ended June 30, 2024 and 2023, as summarized in the following table (in thousands):

			For the three months ended June 30,												For the six months ended June 30,
			2024						2023						2024						2023
United States electrical construction and facilities services			$	12,292					$	2,616					$	16,485					$	8,345
United States mechanical construction and facilities services			7,886						—						14,620						2,686
United States building services			—						1,084						—						1,544
Total impact			$	20,178					$	3,700					$	31,105					$	12,575

Disaggregation of Revenues

Our revenues are principally derived from contracts to provide construction services relating to electrical and mechanical systems, as well as to provide a number of building services and industrial services to our customers. Our contracts are with many different customers in numerous industries.

The following tables provide further disaggregation of our revenues, by categories we use to evaluate our financial performance within each of our reportable segments, for the three and six months ended June 30, 2024 and 2023 (in thousands, except for percentages). Refer to Note 14 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment.

			For the three months ended June 30,
			2024						% of Total						2023						% of Total
United States electrical construction and facilities services:
Network and communications market sector			$	325,021					40		%				$	215,288					32		%
Commercial market sector			69,551						9		%				93,820						14		%
Manufacturing and industrial market sector			103,375						13		%				95,883						14		%
Healthcare market sector			61,577						8		%				64,813						9		%
High-tech manufacturing market sector			53,103						7		%				38,039						6		%
Institutional market sector			38,501						5		%				37,250						5		%
Transportation market sector			56,357						7		%				41,247						6		%
Water and wastewater market sector			11,092						1		%				4,603						1		%
Hospitality and entertainment market sector			16,353						2		%				19,750						3		%
Short-duration projects (1)			51,224						6		%				50,740						7		%
Service work			15,433						2		%				17,276						3		%
			801,587												678,709
Less intersegment revenues			(1,593)												(542)
Total segment revenues			$	799,994											$	678,167

---

(1)Represents those projects which generally are completed within three months or less.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

			For the three months ended June 30,
			2024						% of Total						2023						% of Total
United States mechanical construction and facilities services:
Network and communications market sector			$	174,623					11		%				$	87,034					7		%
Commercial market sector			272,368						16		%				289,304						24		%
Manufacturing and industrial market sector			204,649						12		%				166,051						14		%
Healthcare market sector			156,171						9		%				117,842						10		%
High-tech manufacturing market sector			376,876						23		%				177,653						15		%
Institutional market sector			126,030						8		%				71,626						6		%
Transportation market sector			15,650						1		%				9,229						1		%
Water and wastewater market sector			87,009						5		%				67,286						6		%
Hospitality and entertainment market sector			16,775						1		%				13,531						1		%
Short-duration projects (1)			77,615						5		%				73,978						6		%
Service work			149,165						9		%				122,278						10		%
			1,656,931												1,195,812
Less intersegment revenues			(1,750)												(1,699)
Total segment revenues			$	1,655,181											$	1,194,113

---

(1)Represents those projects which generally are completed within three months or less.

			For the three months ended June 30,
			2024						% of Total						2023						% of Total
United States building services:
Mechanical services			$	581,735					75		%				$	514,505					66		%
Commercial site-based services			151,872						19		%				207,323						27		%
Government site-based services			47,501						6		%				53,184						7		%
Total segment revenues			$	781,108											$	775,012

			For the three months ended June 30,
			2024						% of Total						2023						% of Total
United States industrial services:
Field services			$	275,871					85		%				$	250,877					86		%
Shop services			48,176						15		%				41,406						14		%
Total segment revenues			$	324,047											$	292,283
Total United States operations			$	3,560,330											$	2,939,575

			For the three months ended June 30,
			2024						% of Total						2023						% of Total
United Kingdom building services:
Service work			$	51,160					48		%				$	51,682					49		%
Project work			55,407						52		%				54,365						51		%
Total segment revenues			$	106,567											$	106,047
Total operations			$	3,666,897											$	3,045,622

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

			For the six months ended June 30,
			2024						% of Total						2023						% of Total
United States electrical construction and facilities services:
Network and communications market sector			$	634,561					41		%				$	429,039					32		%
Commercial market sector			162,999						10		%				190,918						14		%
Manufacturing and industrial market sector			203,926						13		%				181,124						14		%
Healthcare market sector			114,957						7		%				120,316						9		%
High-tech manufacturing market sector			88,346						6		%				68,593						5		%
Institutional market sector			76,571						5		%				74,661						6		%
Transportation market sector			99,981						6		%				75,149						6		%
Water and wastewater market sector			15,299						1		%				12,061						1		%
Hospitality and entertainment market sector			38,308						2		%				39,802						3		%
Short-duration projects (1)			102,283						7		%				98,420						7		%
Service work			29,558						2		%				34,153						3		%
			1,566,789												1,324,236
Less intersegment revenues			(2,084)												(1,323)
Total segment revenues			$	1,564,705											$	1,322,913

---

(1)Represents those projects which generally are completed within three months or less.

			For the six months ended June 30,
			2024						% of Total						2023						% of Total
United States mechanical construction and facilities services:
Network and communications market sector			$	305,704					10		%				$	186,455					8		%
Commercial market sector			532,138						17		%				545,150						24		%
Manufacturing and industrial market sector			392,375						13		%				307,686						13		%
Healthcare market sector			273,424						9		%				230,570						10		%
High-tech manufacturing market sector			687,806						22		%				294,449						13		%
Institutional market sector			224,384						7		%				135,674						6		%
Transportation market sector			29,662						1		%				21,447						1		%
Water and wastewater market sector			150,443						5		%				135,948						6		%
Hospitality and entertainment market sector			29,630						1		%				23,608						1		%
Short-duration projects (1)			182,831						6		%				155,395						7		%
Service work			277,515						9		%				239,466						11		%
			3,085,912												2,275,848
Less intersegment revenues			(3,066)												(3,177)
Total segment revenues			$	3,082,846											$	2,272,671

---

(1)Represents those projects which generally are completed within three months or less.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

			For the six months ended June 30,
			2024						% of Total						2023						% of Total
United States building services:
Mechanical services			$	1,095,883					70		%				$	977,039					65		%
Commercial site-based services			370,501						24		%				416,694						28		%
Government site-based services			95,884						6		%				106,654						7		%
Total segment revenues			$	1,562,268											$	1,500,387

			For the six months ended June 30,
			2024						% of Total						2023						% of Total
United States industrial services:
Field services			$	585,672					86		%				$	536,721					86		%
Shop services			92,428						14		%				86,445						14		%
Total segment revenues			$	678,100											$	623,166
Total United States operations			$	6,887,919											$	5,719,137

			For the six months ended June 30,
			2024						% of Total						2023						% of Total
United Kingdom building services:
Service work			$	101,004					48		%				$	103,345					48		%
Project work			110,250						52		%				113,572						52		%
Total segment revenues			$	211,254											$	216,917
Total operations			$	7,099,173											$	5,936,054

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recognized in the period we deliver goods and services to our customers or when our right to consideration is unconditional. The Company maintains an allowance for credit losses to reduce outstanding receivables to their net realizable value. Judgment is required when determining expected credit losses. Estimates of such losses are recorded when we believe a customer, or group of customers, may not be able to meet their financial obligations due to deterioration in financial condition or credit rating. Factors relevant to our assessment include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends in credit quality indicators or past events, and forecasts of future economic conditions. In addition to monitoring delinquent accounts, management reviews the credit quality of its receivables by, among other things, obtaining credit ratings of significant customers, assessing economic and market conditions, and evaluating material changes to a customer’s business, cash flows, and financial condition.

At June 30, 2024 and December 31, 2023, our allowance for credit losses was $33.3 million and $22.5 million, respectively. The increase in our allowance for credit losses was primarily due to a reserve taken in the first quarter of 2024 for a specific customer bankruptcy within the commercial site-based services division of our United States building services segment. Allowances for credit losses are based on the best facts available and are reassessed and adjusted on a regular basis as additional information is received. Should anticipated collections fail to materialize, or if future economic conditions compare unfavorably to our forecasts, we could experience an increase in our credit losses.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

The change in the allowance for credit losses for the six months ended June 30, 2024 was as follows (in thousands):

Balance at December 31, 2023			$	22,502
Provision for credit losses			12,251
Amounts written off against the allowance, net of recoveries			(1,502)
Balance at June 30, 2024			$	33,251

Contract Assets and Contract Liabilities

The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts are not yet billable under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. In addition, many of our time and materials arrangements, as well as our contracts to perform turnaround services within the United States industrial services segment, are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded as revenue is recognized in advance of billings.

Also included in contract assets are amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to scope and/or price, or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders). Our contract assets do not include capitalized costs to obtain and fulfill a contract. Contract assets are generally classified as current within the Consolidated Balance Sheets.

Contract liabilities from our construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when we expect to recognize such revenue. The long-term portion of contract liabilities is included in “Other long-term obligations” in the Consolidated Balance Sheets.

Net contract liabilities in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2024 and December 31, 2023 (in thousands):

			June 30, 2024						December 31, 2023
Contract assets, current			$	293,677					$	269,885
Contract assets, non-current			—						—
Contract liabilities, current			(1,783,909)						(1,595,109)
Contract liabilities, non-current			(1,667)						(1,812)
Net contract liabilities			$	(1,491,899)					$	(1,327,036)

Contract assets and contract liabilities increased by approximately $1.0 million and $29.6 million, respectively, as a result of acquisitions made by us in 2024. Excluding the impact of acquisitions, net contract liabilities increased by approximately $136.3 million during the six months ended June 30, 2024, primarily due to an increase in net contract liabilities on our uncompleted construction projects, partially as a result of the timing of invoicing to our customers as we continue to effectively manage our working capital. There was no significant impairment of contract assets recognized during the periods presented.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Transaction Price Allocated to Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of June 30, 2024 (in thousands, except for percentages):

			June 30, 2024						% of Total
Remaining performance obligations:
United States electrical construction and facilities services			$	2,632,120					29		%
United States mechanical construction and facilities services			4,758,744						53		%
United States building services			1,345,089						15		%
United States industrial services			99,022						1		%
Total United States operations			8,834,975						98		%
United Kingdom building services			164,248						2		%
Total operations			$	8,999,223					100		%

Our remaining performance obligations at June 30, 2024 were approximately $9.0 billion. Remaining performance obligations increase with awards of new contracts and decrease as we perform work and recognize revenue on existing contracts. We include a project within our remaining performance obligations at such time the project is awarded and agreement on contract terms has been reached. Our remaining performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of the total transaction price can be made.

Remaining performance obligations include unrecognized revenues to be realized from uncompleted construction contracts. Although many of our construction contracts are subject to cancellation at the election of our customers, in accordance with industry practice, we do not limit the amount of unrecognized revenue included within remaining performance obligations for these contracts as the risk of cancellation is very low due to the inherent substantial economic penalty that our customers would incur upon cancellation or termination. We believe our reported remaining performance obligations for our construction contracts are firm and contract cancellations have not had a material adverse effect on us.

Remaining performance obligations also include unrecognized revenues expected to be realized over the remaining term of service contracts. However, to the extent a service contract includes a cancellation clause which allows for the termination of such contract by either party without a substantive penalty, the remaining contract term, and therefore, the amount of unrecognized revenues included within remaining performance obligations, is limited to the notice period required for the termination.

Our remaining performance obligations are comprised of: (a) original contract amounts, (b) change orders for which we have received written confirmations from our customers, (c) pending change orders for which we expect to receive confirmations in the ordinary course of business, (d) claim amounts that we have made against customers for which we have determined we have a legal basis under existing contractual arrangements and as to which the variable consideration constraint does not apply, and (e) other forms of variable consideration to the extent that such variable consideration has been included within the transaction price of our contracts. Such claim and other variable consideration amounts were immaterial for all periods presented.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 3 - Revenue from Contracts with Customers (Continued)

Refer to the table below for additional information regarding our remaining performance obligations, including an estimate of when we expect to recognize such remaining performance obligations as revenue (in thousands):

			Within one year						Greater than one year
Remaining performance obligations:
United States electrical construction and facilities services			$	2,161,670					$	470,450
United States mechanical construction and facilities services			4,131,577						627,167
United States building services			1,218,420						126,669
United States industrial services			99,022						—
Total United States operations			7,610,689						1,224,286
United Kingdom building services			125,105						39,143
Total operations			$	7,735,794					$	1,263,429

NOTE 4 - Acquisitions of Businesses

Acquisitions are accounted for utilizing the acquisition method of accounting and the prices paid for them are allocated to their respective assets and liabilities based upon the estimated fair value of such assets and liabilities at the dates of their respective acquisition by us.

During the first half of 2024, we acquired four companies for upfront consideration of $181.8 million, inclusive of our estimates of customary working capital adjustments. These acquisitions are comprised of: (a) two companies that have been included within our United States mechanical construction and facilities services segment, including: (i) a leading plumbing services provider in the Southeast region of the United States and (ii) a full service provider of mechanical construction and maintenance services in Central Texas, (b) a company, that has been included in our United States building services segment, which provides building automation and controls solutions in the Northeast region of the United States, and (c) an instrumentation and electrical contractor, that has been included in our United States industrial services segment, which provides electrical, automation, digital integration, and fabrication services to various energy sector and process equipment customers. In connection with these acquisitions, we acquired working capital of $26.8 million and other net assets of $0.7 million, and have preliminarily ascribed $42.0 million to goodwill and $112.3 million to identifiable intangible assets. We expect that all of the goodwill and identifiable intangible assets acquired in connection with these 2024 acquisitions will be deductible for tax purposes.

During calendar year 2023, we acquired eight companies for total consideration of $99.6 million. Such acquisitions include: (a) a national energy efficiency specialty services firm, the results of operations of which have been included in our United States building services segment, and (b) seven companies, the results of operations of which were de minimis, consisting of: (i) three companies that have been included within our United States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services in the Midwestern region of the United States, and two of which add capabilities to our national fire protection services, and (ii) four mechanical services companies in the Western and Midwestern regions of the United States that have been included within our United States building services segment and enhance our presence in geographies where we have existing operations. In connection with these acquisitions, we acquired working capital of $9.1 million and other net liabilities of $6.1 million, including certain deferred tax liabilities, and have preliminarily ascribed $37.4 million to goodwill and $59.2 million to identifiable intangible assets. We expect that $29.6 million of the goodwill and identifiable intangible assets acquired in connection with these 2023 acquisitions will be deductible for tax purposes.

The purchase price allocations for the businesses acquired in 2024 are preliminary and subject to change during their respective measurement periods. As we finalize such purchase price allocations, adjustments may be recorded relating to finalization of intangible asset valuations, tax matters, or other items. Although not expected to be significant, such adjustments may result in changes in the valuation of assets and liabilities acquired. The purchase price allocations for the businesses acquired in 2023 have been finalized during their respective measurement periods with an insignificant impact.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 5 - Earnings Per Share

Calculation of Basic and Diluted Earnings per Common Share

The following tables summarize our calculation of Basic and Diluted Earnings per Common Share (“EPS”) for the three and six months ended June 30, 2024 and 2023 (in thousands, except share and per share data):

			For the three months ended June 30,
			2024						2023
Numerator:
Net income			$	247,572					$	140,595
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share			46,972,032						47,393,493
Effect of dilutive securities—Share-based awards			187,628						195,176
Shares used to compute diluted earnings per common share			47,159,660						47,588,669
Basic earnings per common share			$	5.27					$	2.97
Diluted earnings per common share			$	5.25					$	2.95

			For the six months ended June 30,
			2024						2023
Numerator:
Net income			$	444,721					$	252,068
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share			47,053,768						47,584,656
Effect of dilutive securities—Share-based awards			182,970						182,586
Shares used to compute diluted earnings per common share			47,236,738						47,767,242
Basic earnings per common share			$	9.45					$	5.30
Diluted earnings per common share			$	9.41					$	5.28

The number of share-based awards excluded from the computation of diluted EPS for the three and six months ended June 30, 2024 because they would be anti-dilutive were 5,200 and 9,399, respectively. The number of share-based awards excluded from the computation of diluted EPS for the three and six months ended June 30, 2023 because they would be anti-dilutive were 8,726 and 9,026, respectively.

NOTE 6 - Inventories

Inventories in the accompanying Consolidated Balance Sheets consisted of the following amounts as of June 30, 2024 and December 31, 2023 (in thousands):

			June 30, 2024						December 31, 2023
Raw materials and construction materials			$	92,574					$	94,447
Work in process			11,322						16,327
Inventories			$	103,896					$	110,774

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 7 - Debt

Excluding finance lease liabilities of $6.7 million at June 30, 2024 and $5.3 million at December 31, 2023, we had no outstanding debt as of June 30, 2024 and December 31, 2023. The current portion of our finance lease liabilities of $2.5 million at June 30, 2024 and December 31, 2023 was included in “Other accrued expenses and liabilities” and the non-current portion of our finance lease liabilities of $4.2 million and $2.8 million at June 30, 2024 and December 31, 2023, respectively, were included in “Other long-term obligations” in the accompanying Consolidated Balance Sheets.

Credit Agreement

We have a credit agreement dated December 20, 2023 (the “2023 Credit Agreement”), which provides for a $1.3 billion revolving credit facility (the “2023 Revolving Credit Facility”) expiring December 20, 2028. If additional lenders are identified and/or existing lenders are willing to increase their current commitments, we may increase the 2023 Revolving Credit Facility by an amount equal to the greater of: (a) $900 million or (b) the Company’s Adjusted EBITDA (as such term is defined in the 2023 Credit Agreement) for the twelve-month period ending immediately prior to the increase in commitment. We may allocate up to $600.0 million of available capacity under the 2023 Revolving Credit Facility to letters of credit for our account or for the account of any of our subsidiaries.

There were no direct borrowings outstanding under the 2023 Revolving Credit Facility as of June 30, 2024 and December 31, 2023. However, outstanding letters of credit reduce the available capacity under this facility, and as of June 30, 2024 and December 31, 2023, we had $75.0 million and $116.7 million of letters of credit outstanding, respectively.

At the Company’s election, borrowings under the 2023 Revolving Credit Facility bear interest at either: (1) a base rate plus a margin of 0.125% to 0.875%, depending on the Company’s Leverage Ratio (as such term is defined in the 2023 Credit Agreement), or (2) a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York for the applicable tenor plus 0.10% (“Adjusted Term SOFR”) plus a margin of 1.125% to 1.875%, depending on the Company’s Leverage Ratio. The base rate is determined by the greater of: (a) the prime commercial lending rate announced by Bank of Montreal from time to time, (b) the federal funds effective rate, plus ½ of 1.00%, (c) Adjusted Term SOFR for a one-month tenor, plus 1.00%, or (d) 0.00%.

A commitment fee is payable on the average daily unused amount of the 2023 Revolving Credit Facility, which ranges from 0.125% to 0.25%, depending on the Company’s Leverage Ratio. The fee was 0.125% of the unused amount as of June 30, 2024 and December 31, 2023. Fees for letters of credit issued under the 2023 Revolving Credit Facility range from 0.85% to 1.875% of the respective face amounts of outstanding letters of credit, depending on the nature of the letter of credit, and are computed depending on the Company’s Leverage Ratio.

Obligations under the 2023 Credit Agreement are guaranteed by most of our direct and indirect subsidiaries and are secured by substantially all of our assets. The 2023 Credit Agreement contains customary covenants providing for, among other things, the maintenance of certain financial ratios and certain limitations on the payment of dividends, common stock repurchases, investments, acquisitions, indebtedness, and capital expenditures. We were in compliance with all such covenants as of June 30, 2024 and December 31, 2023.

NOTE 8 - Fair Value Measurements

For disclosure purposes, we utilize a fair value hierarchy to categorize qualifying assets and liabilities into three broad levels based on the priority of the inputs used to determine their fair values. The hierarchy, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs, is comprised of the following three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 – Observable inputs, other than Level 1 inputs, that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Significant unobservable inputs that reflect the reporting entity’s own assumptions.

Table of Contents

EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 - Fair Value Measurements (Continued)

Recurring Fair Value Measurements

The following tables summarize the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):

			Assets at Fair Value as of June 30, 2024
Asset Category			Level 1						Level 2						Level 3						Total
Cash and cash equivalents (1)			$	807,318					$	—					$	—					$	807,318
Deferred compensation plan assets (2)			57,066						—						—						57,066
Restricted cash (3)			880						—						—						880
Total			$	865,264					$	—					$	—					$	865,264

---

(1)Cash and cash equivalents consist of deposit accounts and money market funds with original maturity dates of three months or less, which are Level 1 assets. At June 30, 2024, we had $564.9 million in money market funds. From time to time, we have cash balances in certain of our domestic bank accounts that exceed federally insured limits.

(2)Deferred compensation plan assets are classified as “Other assets” in the Consolidated Balance Sheets.

(3)Restricted cash is classified as “Prepaid expenses and other” in the Consolidated Balance Sheets. Restricted cash represents cash held in account for use on customer contracts.

			Assets at Fair Value as of December 31, 2023
Asset Category			Level 1						Level 2						Level 3						Total
Cash and cash equivalents (1)			$	789,750					$	—					$	—					$	789,750
Deferred compensation plan assets (2)			47,315						—						—						47,315
Total			$	837,065					$	—					$	—					$	837,065

---

(1)Cash and cash equivalents consist of deposit accounts and money market funds with original maturity dates of three months or less, which are Level 1 assets. At December 31, 2023, we had $497.3 million in money market funds. From time to time, we have cash balances in certain of our domestic bank accounts that exceed federally insured limits.

(2)Deferred compensation plan assets are classified as “Other assets” in the Consolidated Balance Sheets.

Nonrecurring Fair Value Measurements

We have recorded goodwill and identifiable intangible assets in connection with our business acquisitions. Such assets are measured at fair value at the time of acquisition based on valuation techniques that appropriately represent the methods which would be used by other market participants in determining fair value. In addition, goodwill, intangible assets, and certain other long-lived assets are tested for impairment using similar valuation methodologies to determine the fair value of such assets. Periodically, we engage an independent third-party valuation specialist to assist with the valuation process, including the selection of appropriate methodologies and the development of market-based assumptions. The inputs used for these nonrecurring fair value measurements represent Level 3 inputs.

Fair Value of Financial Instruments

We believe that the carrying values of our financial instruments, which include accounts receivable and other financing commitments, approximate their fair values due primarily to their short-term maturities and low risk of counterparty default. Although there were no outstanding borrowings under our 2023 Credit Agreement as of June 30, 2024 and December 31, 2023, the carrying value of any debt associated with this agreement would approximate its fair value due to the variable rate on such debt.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 9 - Income Taxes

The following table presents our income tax provision and our income tax rate for the three and six months ended June 30, 2024 and 2023 (in thousands, except percentages):

			For the three months ended June 30,												For the six months ended June 30,
			2024						2023						2024						2023
Income tax provision			$	91,563					$	53,098					$	162,130					$	94,429
Income tax rate			27.0		%				27.4		%				26.7		%				27.3		%

The difference between the U.S. statutory tax rate of 21% and our effective income tax rate for both the three and six months ended June 30, 2024 and 2023 was primarily a result of state and local income taxes and other permanent book-to-tax differences.

The increase in our income tax provision for the three and six months ended June 30, 2024, when compared to the three and six months ended June 30, 2023, was predominantly due to greater income before income taxes. The decrease in our effective income tax rate for the three and six months ended June 30, 2024, when compared to the three and six months ended June 30, 2023, was attributable to the impact of favorable discrete tax items during the first half of 2024.

As of June 30, 2024 and December 31, 2023, we had no unrecognized income tax benefits.

We file a consolidated federal income tax return including all of our U.S. subsidiaries with the Internal Revenue Service. We additionally file income tax returns with various state, local, and foreign tax agencies. Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years 2019 through 2021.

NOTE 10 - Common Stock

As of June 30, 2024 and December 31, 2023, there were 46,712,350 and 47,047,265 shares of our common stock outstanding, respectively.

During the three months ended June 30, 2024 and 2023, we issued 12,506 and 42,578 shares of common stock, respectively. During the six months ended June 30, 2024 and 2023, we issued 80,579 and 114,654 shares of common stock, respectively. These shares were issued upon either the satisfaction of required conditions under our share-based compensation plans or the purchase of common stock pursuant to our employee stock purchase plan, prior to the discontinuation of such employee stock purchase plan at the end of 2023.

We have paid quarterly dividends since October 25, 2011. We currently pay a regular quarterly dividend of $0.25 per share.

In September 2011, our Board of Directors (the “Board”) authorized a share repurchase program allowing us to begin repurchasing shares of our outstanding common stock. Subsequently, the Board has from time to time increased the amount authorized for repurchases under such program. In June 2024, our Board increased such amount by $500 million. Since the inception of the repurchase program, the Board has authorized us to repurchase up to $2.65 billion of our outstanding common stock. During the six months ended June 30, 2024, we repurchased approximately 0.4 million shares of our common stock for approximately $150.3 million, inclusive of the applicable excise tax. Since the inception of the repurchase program through June 30, 2024, we have repurchased approximately 26.2 million shares of our common stock for approximately $2.04 billion. As of June 30, 2024, there remained authorization for us to repurchase approximately $610.8 million of our shares. The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of common stock, and may be suspended, recommenced, or discontinued at any time or from time to time without prior notice. We may repurchase our shares from time to time to the extent permitted by securities laws and other legal requirements, including provisions in our 2023 Credit Agreement placing limitations on such repurchases.

NOTE 11 - Retirement Plans

The funded status of our defined benefit plans, which represents the difference between the fair value of plan assets and the projected benefit obligations, is recognized in the Consolidated Balance Sheets with a corresponding adjustment to accumulated other comprehensive income (loss). Gains and losses for the differences between actuarial assumptions and actual results are recognized through accumulated other comprehensive income (loss). These amounts will be subsequently recognized as net periodic pension cost (income) within the Consolidated Statements of Operations.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11 - Retirement Plans (Continued)

Our United Kingdom subsidiary has a defined benefit pension plan covering all eligible employees (the “UK Plan”); however, no individual joining the company after October 31, 2001 may participate in the UK Plan. On May 31, 2010, we curtailed the future accrual of benefits for active employees under such plan.

We also sponsor three domestic retirement plans in which participation by new individuals is frozen. Amounts related to these domestic retirement plans were de minimis for all periods presented.

Components of Net Periodic Pension Cost

The components of net periodic pension (income) cost of the UK Plan for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

			For the three months ended June 30,												For the six months ended June 30,
			2024						2023						2024						2023
Interest cost			$	2,362					$	2,451					$	4,738					$	4,827
Expected return on plan assets			(3,213)						(2,878)						(6,445)						(5,669)
Amortization of unrecognized loss			648						658						1,301						1,297
Net periodic pension (income) cost			$	(203)					$	231					$	(406)					$	455

NOTE 12 - Commitments and Contingencies

Severance Agreements

We have agreements with our executive officers and certain other key management personnel providing for severance benefits for such employees upon termination of their employment under certain circumstances.

Guarantees

In the ordinary course of business, we, at times, guarantee obligations of our subsidiaries under certain contracts. Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract. Historically, we have not incurred any substantial liabilities as a consequence of these guarantees.

Surety Bonds

The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. As of June 30, 2024, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $2.1 billion, which represents approximately 23% of our total remaining performance obligations.

Surety bonds are sometimes provided to secure obligations for wages and benefits payable to or for certain of our employees, at the request of labor unions representing such employees. In addition, surety bonds may be issued as collateral for certain insurance obligations. As of June 30, 2024, we satisfied approximately $48.1 million of the collateral requirements of our insurance programs by utilizing surety bonds.

We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.

Hazardous Materials

We are subject to regulation with respect to the handling or disposal of certain materials used in the performance of our services, which are classified as hazardous or toxic by federal, state, and local agencies. Our practice is to avoid participation in projects principally involving the remediation or removal of such materials. However, when remediation is required as part of our contract performance, we believe we comply with all applicable regulations governing the discharge of hazardous materials into the environment or otherwise relating to the protection of the environment.

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12 - Commitments and Contingencies (Continued)

Government Contracts

When we perform work as a federal government contractor/subcontractor or when we perform work on a project that has received federal government funding, we are subject to U.S. government audits and investigations relating to our operations, which such audits may result in fines, penalties and compensatory and treble damages, and possible suspension or debarment from doing business with the government. Based on currently available information, we believe the outcome of ongoing government disputes and investigations will not have a material impact on our financial position, results of operations, or liquidity.

Legal Proceedings

We are involved in several legal proceedings in which damages and claims have been asserted against us. We believe that we have a number of valid defenses to such proceedings and claims and intend to vigorously defend ourselves. We do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity. We record a loss contingency if the potential loss from a proceeding or claim is considered probable and the amount can be reasonably estimated or a range of loss can be determined. We provide disclosure when it is reasonably possible that a loss will be incurred in excess of any recorded provision. Significant judgment is required in these determinations. As additional information becomes available, we reassess prior determinations and may change our estimates. Additional claims may be asserted against us in the future. Litigation is subject to many uncertainties, and the outcome of litigation is not predictable with assurance. It is possible that a litigation matter for which liabilities have not been recorded could be decided unfavorably to us, and that any such unfavorable decision could have a material adverse effect on our financial position, results of operations, or liquidity.

Insurance Liabilities

We have loss payment deductibles for certain workers’ compensation, automobile liability, general liability, and property claims, have self-insured retentions for certain other casualty claims, and are self-insured for employee-related healthcare claims. In addition, we maintain a wholly-owned captive insurance subsidiary to manage certain of our insurance liabilities. Losses are recorded based upon estimates of our liability for claims incurred and for claims incurred but not reported. The liabilities are derived from known facts, historical trends, and industry averages, utilizing the assistance of an independent third-party actuary to determine the best estimate for the majority of these obligations. As of June 30, 2024 and December 31, 2023, the estimated current portion of such undiscounted insurance liabilities, included in “Other accrued expenses and liabilities” in the accompanying Consolidated Balance Sheets, were $53.6 million and $51.0 million, respectively. The estimated non-current portion of such undiscounted insurance liabilities included in “Other long-term obligations” as of June 30, 2024 and December 31, 2023 were $233.5 million and $229.8 million, respectively. The current portion of anticipated insurance recoveries of $12.2 million and $11.9 million as of June 30, 2024 and December 31, 2023, respectively, were included in “Prepaid expenses and other” and the non-current portion of anticipated insurance recoveries of $47.5 million and $48.8 million as of June 30, 2024 and December 31, 2023, respectively, were included in “Other assets” in the accompanying Consolidated Balance Sheets.

NOTE 13 - Additional Cash Flow Information

The following table presents additional cash flow information for the six months ended June 30, 2024 and 2023 (in thousands):

			For the six months ended June 30,
			2024						2023
Cash paid for:
Interest			$	856					$	9,678
Income taxes			$	191,694					$	98,626
Right-of-use assets obtained in exchange for new operating lease liabilities			$	65,180					$	70,059
Right-of-use assets obtained in exchange for new finance lease liabilities			$	2,566					$	457

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information

We are one of the largest specialty contractors in the United States and a leading provider of electrical and mechanical construction and facilities services, building services, and industrial services. Our services are provided to a broad range of commercial, technology, manufacturing, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries. Such operating subsidiaries are organized into the following reportable segments:

• United States electrical construction and facilities services;

• United States mechanical construction and facilities services;

• United States building services;

• United States industrial services; and

• United Kingdom building services.

The following tables present financial information for each of our reportable segments for the three and six months ended June 30, 2024 and 2023 (in thousands):

			For the three months ended June 30,
			2024						2023
Revenues from unrelated entities:
United States electrical construction and facilities services			$	799,994					$	678,167
United States mechanical construction and facilities services			1,655,181						1,194,113
United States building services			781,108						775,012
United States industrial services			324,047						292,283
Total United States operations			3,560,330						2,939,575
United Kingdom building services			106,567						106,047
Total operations			$	3,666,897					$	3,045,622
Total revenues:
United States electrical construction and facilities services			$	802,884					$	679,006
United States mechanical construction and facilities services			1,669,887						1,209,242
United States building services			792,277						802,934
United States industrial services			326,312						293,057
Less intersegment revenues			(31,030)						(44,664)
Total United States operations			3,560,330						2,939,575
United Kingdom building services			106,567						106,047
Total operations			$	3,666,897					$	3,045,622

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (Continued)

			For the six months ended June 30,
			2024						2023
Revenues from unrelated entities:
United States electrical construction and facilities services			$	1,564,705					$	1,322,913
United States mechanical construction and facilities services			3,082,846						2,272,671
United States building services			1,562,268						1,500,387
United States industrial services			678,100						623,166
Total United States operations			6,887,919						5,719,137
United Kingdom building services			211,254						216,917
Total operations			$	7,099,173					$	5,936,054
Total revenues:
United States electrical construction and facilities services			$	1,569,623					$	1,324,660
United States mechanical construction and facilities services			3,106,715						2,308,726
United States building services			1,596,150						1,551,544
United States industrial services			684,487						631,564
Less intersegment revenues			(69,056)						(97,357)
Total United States operations			6,887,919						5,719,137
United Kingdom building services			211,254						216,917
Total operations			$	7,099,173					$	5,936,054

			For the three months ended June 30,
			2024						2023
Operating income (loss):
United States electrical construction and facilities services			$	88,577					$	50,722
United States mechanical construction and facilities services			213,440						119,847
United States building services			46,839						46,137
United States industrial services			12,746						7,887
Total United States operations			361,602						224,593
United Kingdom building services			5,777						5,927
Corporate administration			(34,571)						(33,853)
Total operations			332,808						196,667
Other items:
Net periodic pension income (cost)			221						(282)
Interest income (expense), net			6,106						(2,692)
Income before income taxes			$	339,135					$	193,693

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EMCOR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14 - Segment Information (Continued)

			For the six months ended June 30,
			2024						2023
Operating income (loss):
United States electrical construction and facilities services			$	180,166					$	91,238
United States mechanical construction and facilities services			364,160						206,074
United States building services			80,298						83,787
United States industrial services			30,712						22,907
Total United States operations			655,336						404,006
United Kingdom building services			11,154						11,351
Corporate administration			(73,729)						(63,780)
Total operations			592,761						351,577
Other items:
Net periodic pension income (cost)			443						(556)
Interest income (expense), net			13,647						(4,524)
Income before income taxes			$	606,851					$	346,497

			June 30, 2024						December 31, 2023
Total assets:
United States electrical construction and facilities services			$	1,242,145					$	1,243,707
United States mechanical construction and facilities services			2,599,846						2,242,833
United States building services			1,424,862						1,382,664
United States industrial services			637,802						571,658
Total United States operations			5,904,655						5,440,862
United Kingdom building services			275,714						277,066
Corporate administration			892,180						891,793
Total operations			$	7,072,549					$	6,609,721

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ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Business Description

We are one of the largest specialty contractors in the United States and a leading provider of electrical and mechanical construction and facilities services, building services, and industrial services. Our services are provided to a broad range of commercial, technology, manufacturing, industrial, healthcare, utility, and institutional customers through approximately 100 operating subsidiaries. Such operating subsidiaries are organized into the following reportable segments:

• United States electrical construction and facilities services;

• United States mechanical construction and facilities services;

• United States building services;

• United States industrial services; and

• United Kingdom building services.

We refer to our United States electrical construction and facilities services segment and our United States mechanical construction and facilities services segment together as our United States construction segments.

For a more complete description of our operations, refer to Item 1. Business of our Form 10-K for the year ended December 31, 2023.

Overview

The following table presents selected financial data for the three months ended June 30, 2024 and 2023 (in thousands, except percentages and per share data):

			For the three months ended June 30,
			2024						2023
Revenues			$	3,666,897					$	3,045,622
Revenues increase from prior year			20.4		%				12.5		%
Gross profit			$	684,001					$	490,060
Gross profit as a percentage of revenues			18.7		%				16.1		%
Operating income			$	332,808					$	196,667
Operating income as a percentage of revenues			9.1		%				6.5		%
Net income			$	247,572					$	140,595
Diluted earnings per common share			$	5.25					$	2.95

Revenues of $3.67 billion for the quarter ended June 30, 2024 set a new quarterly record for the Company and represent an increase of 20.4% from revenues of $3.05 billion for the quarter ended June 30, 2023. Demand for our services continues to be strong across the majority of the market sectors we serve and, as described in further detail below, we experienced revenue growth within all of our reportable segments. Revenues for the second quarter of 2024 included incremental acquisition contribution of approximately $80.9 million.

Operating income for the quarter ended June 30, 2024 was $332.8 million, or 9.1% of revenues, establishing new quarterly records for the Company with respect to both operating income and operating margin. This compares to operating income of $196.7 million, or 6.5% of revenues, for the quarter ended June 30, 2023. The $136.1 million increase in operating income, and corresponding 260 basis point expansion in operating margin, were predominantly a result of improved operating performance within our United States construction segments, as described in further detail below. Operating income for the quarter ended June 30, 2024 included incremental acquisition contribution of $4.6 million, net of amortization expense attributable to identifiable intangible assets of $5.0 million.

Net income of $247.6 million, or $5.25 per diluted share, for the quarter ended June 30, 2024 compares favorably to net income of $140.6 million, or $2.95 per diluted share, for the quarter ended June 30, 2023. While the majority of the increase in our diluted earnings per share was a result of the increased operating income referenced above, diluted earnings per share for the quarter ended June 30, 2024 additionally benefited from a reduced weighted average share count given the impact of common stock repurchases made by us throughout 2023 and the first half of 2024.

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Impact of Acquisitions

In order to provide a more meaningful period-over-period discussion of our operating results, we may discuss amounts generated or incurred (revenues, gross profit, selling, general and administrative expenses, and operating income) from companies acquired. The amounts discussed reflect the acquired companies’ operating results in the current reported period only for the time period these entities were not owned by EMCOR in the comparable prior reported period. For further discussion regarding our acquisitions, refer to Note 4 - Acquisitions of Businesses of the notes to consolidated financial statements.

We acquired four companies during the first half of 2024 for upfront consideration of $181.8 million, inclusive of our estimates of customary working capital adjustments. These acquisitions are comprised of: (a) two companies that have been included within our United States mechanical construction and facilities services segment, including: (i) a leading plumbing services provider in the Southeast region of the United States and (ii) a full service provider of mechanical construction and maintenance services in Central Texas, (b) a company, that has been included in our United States building services segment, which provides building automation and controls solutions in the Northeast region of the United States, and (c) an instrumentation and electrical contractor, that has been included in our United States industrial services segment, which provides electrical, automation, digital integration, and fabrication services to various energy sector and process equipment customers.

We acquired eight companies during calendar year 2023 for total consideration of $99.6 million. Such acquisitions include: (a) a national energy efficiency specialty services firm, the results of operations of which have been included in our United States building services segment, and (b) seven companies, the results of operations of which were de minimis, consisting of: (i) three companies that have been included within our United States mechanical construction and facilities services segment, one of which provides mechanical and pipe fabrication services in the Midwestern region of the United States, and two of which add capabilities to our national fire protection services, and (ii) four mechanical services companies in the Western and Midwestern regions of the United States that have been included within our United States building services segment and enhance our presence in geographies where we have existing operations.

Results of Operations

Revenues

The following tables present our operating segment revenues from unrelated entities and their respective percentages of total revenues (in thousands, except for percentages):

			For the three months ended June 30,
			2024						% of Total						2023						% of Total
Revenues:
United States electrical construction and facilities services			$	799,994					22		%				$	678,167					22		%
United States mechanical construction and facilities services			1,655,181						45		%				1,194,113						39		%
United States building services			781,108						21		%				775,012						26		%
United States industrial services			324,047						9		%				292,283						10		%
Total United States operations			3,560,330						97		%				2,939,575						97		%
United Kingdom building services			106,567						3		%				106,047						3		%
Total operations			$	3,666,897					100		%				$	3,045,622					100		%

			For the six months ended June 30,
			2024						% of Total						2023						% of Total
Revenues:
United States electrical construction and facilities services			$	1,564,705					22		%				$	1,322,913					22		%
United States mechanical construction and facilities services			3,082,846						43		%				2,272,671						38		%
United States building services			1,562,268						22		%				1,500,387						25		%
United States industrial services			678,100						10		%				623,166						11		%
Total United States operations			6,887,919						97		%				5,719,137						96		%
United Kingdom building services			211,254						3		%				216,917						4		%
Total operations			$	7,099,173					100		%				$	5,936,054					100		%

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As described below in more detail, our consolidated revenues for the three months ended June 30, 2024 increased to $3.67 billion compared to $3.05 billion for the three months ended June 30, 2023, and our consolidated revenues for the six months ended June 30, 2024 increased to $7.10 billion compared to $5.94 billion for the six months ended June 30, 2023.

Revenues of our United States electrical construction and facilities services segment were $800.0 million and $1,564.7 million for the three and six months ended June 30, 2024, respectively, compared to revenues of $678.2 million and $1,322.9 million for the three and six months ended June 30, 2023, respectively. The increase in this segment’s revenues for both 2024 periods was primarily a result of growth within the network and communications market sector, predominantly due to our data center projects. Increased demand for cloud computing and data storage, driven in part by the emergence of artificial intelligence, has resulted in a greater number of construction project opportunities for us in several of the geographies in which we operate. In addition, this segment benefited from revenue growth within: (a) the transportation market sector, due to certain infrastructure projects currently underway, (b) the high-tech manufacturing market sector, inclusive of construction projects for customers engaged in the design and manufacturing of semiconductors, and (c) the manufacturing and industrial market sector, driven by increased activity with various energy sector customers. These increases were partially offset by a reduction in revenues within the commercial market sector due in part to reduced demand across the commercial real estate industry.

Our United States mechanical construction and facilities services segment revenues for the three months ended June 30, 2024 were $1,655.2 million, a $461.1 million increase compared to revenues of $1,194.1 million for the three months ended June 30, 2023. Revenues of this segment for the six months ended June 30, 2024 were $3,082.8 million, an $810.2 million increase compared to revenues of $2,272.7 million for the six months ended June 30, 2023. This segment’s results for both 2024 periods included $56.2 million of incremental acquisition revenues. Excluding the impact of acquisitions, the increases in this segment’s revenues were attributable to revenue growth within the majority of the market sectors in which we operate, as well as greater levels of short-duration projects and service work. From a market sector perspective, we experienced notable increases within: (a) the high-tech manufacturing market sector, as a result of stronger demand for our mechanical construction and/or fire protection services by certain customers: (i) engaged in either the design and manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries and (ii) within the biotech, life-sciences, and pharmaceutical industries, (b) the network and communications market sector, due to increased data center project activity as this segment benefited from the same market demand described above within our United States electrical construction and facilities services segment, (c) the institutional market sector, given several public sector projects which were active during the first half of 2024, (d) the manufacturing and industrial market sector, due to continued re-shoring of critical supply chain by certain of our customers as well as an increase in food processing project revenue, (e) the healthcare market sector, given an increase in projects throughout several of the regions in which we operate, and (f) the water and wastewater market sector, driven by construction activity on several projects within the Southeast region of the United States. Partially offsetting these increases was a reduction in revenues within the commercial market sector, largely as a result of the completion of various warehouse and distribution projects, which were active in 2023.

Revenues of our United States building services segment for the three months ended June 30, 2024 were $781.1 million compared to revenues of $775.0 million for the three months ended June 30, 2023. Excluding incremental revenues from acquired companies of $13.0 million, this segment’s revenues for the three months ended June 30, 2024 decreased modestly by $6.9 million, as revenue growth from its mechanical services division was more than offset by revenue declines within its commercial site-based services and government site-based services divisions due to the loss of certain facilities maintenance contracts not renewed pursuant to rebid. Revenues of this segment for the six months ended June 30, 2024 were $1,562.3 million compared to revenues of $1,500.4 million for the six months ended June 30, 2023. Excluding incremental revenues from acquired companies of $20.9 million, this segment’s revenues for the six months ended June 30, 2024 increased by $41.0 million as the revenue growth within its mechanical services division more than offset the aforementioned contract losses within the commercial site-based services and government site-based services divisions. Within both 2024 periods, this segment’s mechanical services division benefited from increased: (a) HVAC project and retrofit work, as a result of greater: (i) project execution stemming from the increased availability of materials and equipment when compared to the prior year period, which experienced greater supply chain disruptions and delays, and (ii) demand for system upgrades and replacements, partially as our customers continue to seek ways to improve the energy efficiency or indoor air quality of their facilities, (b) service repair and maintenance volumes, given growth in our service contract base, and (c) building automation and controls projects, as we continue to expand our service offerings in this area.

Revenues of our United States industrial services segment for the three months ended June 30, 2024 were $324.0 million, compared to revenues of $292.3 million for the three months ended June 30, 2023. Revenues of this segment for the six months ended June 30, 2024 were $678.1 million, compared to revenues of $623.2 million for the six months ended June 30, 2023. This segment’s results for the three and six months ended June 30, 2024 included $11.7 million of incremental revenues from an acquired company. Excluding such acquisition contribution, the increase in this segment’s revenues for both 2024 periods resulted from: (a) its field services division due to greater turnaround project demand, including scope growth on certain projects, and (b) its shop services division due to greater new build heat exchanger sales.

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Our United Kingdom building services segment revenues were $106.6 million and $211.3 million for the three and six months ended June 30, 2024, respectively, compared to revenues of $106.0 million and $216.9 million for the three and six months ended June 30, 2023, respectively. The decrease in this segment’s revenues for the six months ended June 30, 2024 was a result of: (a) a reduction in project activity, notably within the network and communications market sector, and (b) the loss of certain facilities maintenance contracts not renewed pursuant to rebid. Revenues of this segment for the three and six months ended June 30, 2024 were positively impacted by $0.9 million and $5.2 million, respectively, as a result of favorable exchange rate movements for the British pound versus the United States dollar.

Cost of sales and gross profit

The following table presents our cost of sales, gross profit (revenues less cost of sales), and gross profit as a percentage of revenues (“gross profit margin”) (in thousands, except for percentages):

			For the three months ended June 30,												For the six months ended June 30,
			2024						2023						2024						2023
Cost of sales			$	2,982,896					$	2,555,562					$	5,825,863					$	5,009,932
Gross profit			$	684,001					$	490,060					$	1,273,310					$	926,122
Gross profit margin			18.7		%				16.1		%				17.9		%				15.6		%

Our gross profit for the three months ended June 30, 2024 was $684.0 million, or 18.7% of revenues, compared to gross profit of $490.1 million, or 16.1% of revenues, for the three months ended June 30, 2023. Gross profit for the six months ended June 30, 2024 was $1,273.3 million, or 17.9% of revenues, compared to gross profit of $926.1 million, or 15.6% of revenues, for the six months ended June 30, 2023. The increase in gross profit and the expansion in gross profit margin for both 2024 periods were the result of stronger operating performance across each of our domestic reportable segments due to an improved revenue mix, excellent project execution, and/or favorable pricing. Our gross profit for the three and six months ended June 30, 2024 included incremental acquisition contribution of $14.8 million and $16.5 million, respectively, net of amortization expense attributable to identifiable intangible assets of $3.0 million in each period.

Refer to the operating income section below for further discussion regarding the operating performance of each of our reportable segments.

Selling, general and administrative expenses

The following table presents our selling, general and administrative expenses (“SG&A”) and selling, general and administrative expenses as a percentage of revenues (“SG&A margin”) (in thousands, except for percentages):

			For the three months ended June 30,												For the six months ended June 30,
			2024						2023						2024						2023
Selling, general and administrative expenses			$	351,193					$	293,393					$	680,549					$	574,545
SG&A margin			9.6		%				9.6		%				9.6		%				9.7		%

Our selling, general and administrative expenses for the three months ended June 30, 2024 were $351.2 million, or 9.6% of revenues, compared to selling, general and administrative expenses of $293.4 million, or 9.6% of revenues, for the three months ended June 30, 2023. Selling, general and administrative expenses for the six months ended June 30, 2024 were $680.5 million, or 9.6% of revenues, compared to selling, general and administrative expenses of $574.5 million, or 9.7% of revenues, for the six months ended June 30, 2023. Selling, general and administrative expenses for the three and six months ended June 30, 2024 included $10.2 million and $13.1 million, respectively, of incremental expenses directly related to companies acquired in 2024 and 2023, including amortization expense attributable to identifiable intangible assets of $2.0 million and $3.1 million, respectively.

Excluding incremental expenses from businesses acquired, the increase in selling, general and administrative expenses for both 2024 periods was predominantly attributable to greater: (a) salaries and related employment expenses, largely as a result of additional headcount to support our organic revenue growth as well as annual cost of living adjustments, and (b) incentive compensation expense across the majority of our reportable segments, due to higher projected annual operating results. In addition, the increase in selling, general and administrative expenses for the six months ended June 30, 2024 was partially a result of an increase in the provision for credit losses, primarily due to a reserve taken in the first quarter of 2024 for a specific customer bankruptcy within our United States building services segment.

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Operating income (loss)

The following tables present our operating income (loss) and operating income (loss) as a percentage of segment revenues (“operating margin”) (in thousands, except for percentages):

			For the three months ended June 30,
			2024						% of Segment Revenues						2023						% of Segment Revenues
Operating income (loss):
United States electrical construction and facilities services			$	88,577					11.1		%				$	50,722					7.5		%
United States mechanical construction and facilities services			213,440						12.9		%				119,847						10.0		%
United States building services			46,839						6.0		%				46,137						6.0		%
United States industrial services			12,746						3.9		%				7,887						2.7		%
Total United States operations			361,602						10.2		%				224,593						7.6		%
United Kingdom building services			5,777						5.4		%				5,927						5.6		%
Corporate administration			(34,571)						—						(33,853)						—
Total operations			332,808						9.1		%				196,667						6.5		%
Other items:
Net periodic pension income (cost)			221												(282)
Interest income (expense), net			6,106												(2,692)
Income before income taxes			$	339,135											$	193,693

			For the six months ended June 30,
			2024						% of Segment Revenues						2023						% of Segment Revenues
Operating income (loss):
United States electrical construction and facilities services			$	180,166					11.5		%				$	91,238					6.9		%
United States mechanical construction and facilities services			364,160						11.8		%				206,074						9.1		%
United States building services			80,298						5.1		%				83,787						5.6		%
United States industrial services			30,712						4.5		%				22,907						3.7		%
Total United States operations			655,336						9.5		%				404,006						7.1		%
United Kingdom building services			11,154						5.3		%				11,351						5.2		%
Corporate administration			(73,729)						—						(63,780)						—
Total operations			592,761						8.3		%				351,577						5.9		%
Other items:
Net periodic pension income (cost)			443												(556)
Interest income (expense), net			13,647												(4,524)
Income before income taxes			$	606,851											$	346,497

Operating income for the three months ended June 30, 2024 was $332.8 million, an increase of $136.1 million compared to operating income of $196.7 million for the three months ended June 30, 2023. Operating margin for the three months ended June 30, 2024 was 9.1% compared to an operating margin of 6.5% for the three months ended June 30, 2023. For the six months ended June 30, 2024, operating income was $592.8 million, an increase of $241.2 million compared to operating income of $351.6 million for the six months ended June 30, 2023. Operating margin for the six months ended June 30, 2024 was 8.3% compared to an operating margin of 5.9% for the six months ended June 30, 2023. As described in more detail below, these increases in profitability were predominantly a result of improved operating performance within our United States construction segments, due to a more favorable mix of work and better project execution, including enhanced productivity, due in part to investments in virtual design and construction, prefabrication, and automation.

Operating income for the three and six months ended June 30, 2024 included incremental acquisition contribution of $4.6 million and $3.4 million, respectively, net of amortization expense attributable to identifiable intangible assets of $5.0 million and $6.1 million, respectively.

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Operating income of our United States electrical construction and facilities services segment was $88.6 million, or 11.1% of revenues, for the three months ended June 30, 2024, compared to $50.7 million, or 7.5% of revenues, for the three months ended June 30, 2023. Operating income of this segment for the six months ended June 30, 2024 was $180.2 million, or 11.5% of revenues, compared to $91.2 million, or 6.9% of revenues, for the six months ended June 30, 2023. The increases in operating income and operating margin of this segment for both 2024 periods were a result of greater gross profit and gross profit margin from projects within the majority of the market sectors in which we operate, due to both an increase in revenues as well as a more favorable mix of work. While the most significant increase in gross profit was experienced within the network and communications market sector, this segment additionally benefited from greater gross profit recognized on projects within the transportation, institutional, high-tech manufacturing, and manufacturing and industrial market sectors.

Our United States mechanical construction and facilities services segment’s operating income for the three months ended June 30, 2024 was $213.4 million, or 12.9% of revenues, compared to operating income of $119.8 million, or 10.0% of revenues, for the three months ended June 30, 2023. Operating income of this segment for the six months ended June 30, 2024 was $364.2 million, or 11.8% of revenues, compared to $206.1 million, or 9.1% of revenues, for the six months ended June 30, 2023. This segment’s operating income for the three and six months ended June 30, 2024 included incremental acquisition contribution of $4.8 million, net of amortization expense attributable to identifiable intangible assets of $3.4 million. Excluding the impact of acquisitions, the increases in operating income and operating margin of this segment for both 2024 periods were primarily a result of contribution from projects within: (a) the high-tech manufacturing market sector, including certain mechanical construction or fire protection projects for customers engaged in either the design or manufacturing of semiconductors or the production and development of electric vehicles and/or lithium batteries, (b) the network and communications market sector, and (c) the commercial market sector, including various fire protection projects. While the most significant increases in gross profit were seen within the above referenced market sectors, this segment also experienced increases in gross profit within the majority of the other market sectors in which we operate. In addition to the increases in gross profit margin referenced above, operating margin of our United States mechanical construction and facilities services segment for both 2024 periods benefited from a reduction in the ratio of selling, general and administrative expenses to revenues given an increase in revenues without a commensurate increase in certain overhead costs.

Operating income of our United States building services segment was $46.8 million, or 6.0% of revenues, for the three months ended June 30, 2024 compared to $46.1 million, or 6.0% of revenues, for the three months ended June 30, 2023. Operating income of this segment for the six months ended June 30, 2024 was $80.3 million, or 5.1% of revenues, compared to $83.8 million, or 5.6% of revenues, for the six months ended June 30, 2023. For both 2024 periods, increased gross profit and gross profit margin from this segment’s mechanical services division, due to greater profitability across the majority if its service lines, was partially offset by reductions in gross profit and gross profit margin from its commercial site-based services and government site-based services divisions, given the loss of certain facilities maintenance contracts not renewed pursuant to rebid. Operating income and operating margin for the six months ended June 30, 2024 were negatively impacted by an $11.0 million reserve recorded during the first quarter of 2024 for a specific customer bankruptcy within this segment’s commercial site-based services division. Such reserve negatively impacted the operating margin of this segment for the first half of 2024 by 70 basis points.

Our United States industrial services segment reported operating income of $12.7 million, or 3.9% of revenues, for the three months ended June 30, 2024, compared to operating income of $7.9 million, or 2.7% of revenues, for the three months ended June 30, 2023. For the six months ended June 30, 2024, this segment reported operating income of $30.7 million, or 4.5% of revenues, compared to operating income of $22.9 million, or 3.7% of revenues, for the six months ended June 30, 2023. Operating income and operating margin of this segment for both 2024 periods benefited from an improvement in gross profit margin, primarily within the shop services division, largely due to favorable pricing and greater indirect cost absorption.

Operating income of our United Kingdom building services segment was $5.8 million, or 5.4% of revenues, for the three months ended June 30, 2024, compared to $5.9 million, or 5.6% of revenues, for the three months ended June 30, 2023. Operating income for the six months ended June 30, 2024 was $11.2 million, or 5.3% of revenues, compared to $11.4 million, or 5.2% of revenues, for the six months ended June 30, 2023. Despite a difficult operating environment within the United Kingdom, we continue to optimize our project and service mix while seeking to effectively leverage the overhead cost structure of this segment, resulting in operating performance which is relatively consistent with that of the prior year period.

Our corporate administration expenses for the three months ended June 30, 2024 of $34.6 million were generally consistent with the $33.9 million reported for the three months ended June 30, 2023. For the six months ended June 30, 2024, our corporate administrative expenses were $73.7 million, compared to $63.8 million for the six months ended June 30, 2023. The increase in corporate expenses for the first six months of 2024 was primarily due to greater employment compensation costs, including certain severance expenses recorded during the first quarter of 2024 as well as an increase in share-based compensation expense. In addition, we experienced an increase in computer hardware and software costs, due to various information technology and cybersecurity initiatives currently in process.

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Other items

As a result of an increase in our average daily invested cash balance, coupled with the repayment, in December of 2023, of all previously outstanding borrowings under our credit facility, we generated net interest income for the three and six months ended June 30, 2024 of $6.1 million and $13.6 million, respectively, compared to net interest expense of $2.7 million and $4.5 million for the three and six months ended June 30, 2023, respectively.

For the three and six months ended June 30, 2024, our income tax provision was $91.6 million and $162.1 million, respectively, compared to an income tax provision of $53.1 million and $94.4 million for the three and six months ended June 30, 2023, respectively. Our effective income tax rate for the three and six months ended June 30, 2024 was 27.0% and 26.7%, respectively, compared to an effective income tax rate for the three and six months ended June 30, 2023 of 27.4% and 27.3%, respectively. Refer to Note 9 - Income Taxes of the notes to consolidated financial statements for further discussion regarding our income tax provision and effective income tax rate.

Remaining Unsatisfied Performance Obligations

The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentage of total remaining performance obligations (in thousands, except for percentages):

			June 30, 2024						% of Total						December 31, 2023						% of Total						June 30, 2023						% of Total
Remaining performance obligations:
United States electrical construction and facilities services			$	2,632,120					29		%				$	2,387,844					27		%				$	2,180,133					26		%
United States mechanical construction and facilities services			4,758,744						53		%				4,940,519						56		%				4,552,211						55		%
United States building services			1,345,089						15		%				1,264,818						14		%				1,255,165						15		%
United States industrial services			99,022						1		%				113,291						1		%				144,731						2		%
Total United States operations			8,834,975						98		%				8,706,472						98		%				8,132,240						98		%
United Kingdom building services			164,248						2		%				140,949						2		%				153,919						2		%
Total operations			$	8,999,223					100		%				$	8,847,421					100		%				$	8,286,159					100		%

Our remaining performance obligations at June 30, 2024 were approximately $9.0 billion compared to approximately $8.8 billion at December 31, 2023 and approximately $8.3 billion at June 30, 2023. The increase in remaining performance obligations at June 30, 2024, when compared to December 31, 2023, was attributable to an increase in remaining performance obligations within: (a) our United States electrical construction and facilities services segment, largely as a result of the award of several construction contracts within the institutional and healthcare market sectors, (b) our United States building services segment, primarily due to increased project opportunities across its mechanical services division, and (c) our United Kingdom building services segment given an increase in maintenance and project work within the manufacturing and industrial market sector. These increases in remaining performance obligations were partially offset by decreases within: (x) our United States mechanical construction and facilities services segment due to the significant organic revenue growth experienced during the first half of 2024,particularly within the high-tech manufacturing market sector, as well as the timing of the release of certain projects which are currently being pursued, and (y) our United States industrial services segment due to the completion and/or shipment of several new build heat exchangers at the end of the second quarter of 2024. Remaining performance obligations increased by $221.0 million as a result of acquisitions made by us during 2024.

See Note 3 - Revenue from Contracts with Customers of the notes to consolidated financial statements for further disclosure regarding our remaining performance obligations.

Liquidity and Capital Resources

The following section discusses our principal liquidity and capital resources, as well as our primary liquidity requirements and sources and uses of cash.

We are focused on the efficient conversion of operating income into cash to provide for the Company’s material cash requirements, including working capital needs, investment in our growth strategies through business acquisitions and capital expenditures, satisfaction of contractual commitments, including principal and interest payments on any outstanding indebtedness, and shareholder return through dividend payments and share repurchases. We strive to maintain a balanced approach to capital allocation in order to achieve growth, deliver value, and minimize risk.

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Management monitors financial markets and overall economic conditions for factors that may affect our liquidity and capital resources and adjusts our capital allocation strategy as necessary. Negative macroeconomic trends could have an adverse effect on future liquidity if we experience delays in the payment of outstanding receivables beyond normal payment terms, an increase in credit losses, or significant increases in the price of commodities or the materials and equipment utilized for our project and service work, beyond those experienced to date. In addition, during economic downturns, there have typically been fewer small discretionary projects from the private sector and our competitors have aggressively bid larger long-term infrastructure and public sector contracts. Our liquidity is also impacted by: (a) the type and length of construction contracts in place, as performance of long duration contracts typically requires greater amounts of working capital, (b) the level of turnaround activities within our United States industrial services segment, as such projects are billed in arrears pursuant to contractual terms that are standard within the industry, and (c) the billing terms of our maintenance contracts, including those within our United States and United Kingdom building services segments. While we strive to negotiate favorable billing terms, which allow us to invoice in advance of costs incurred on certain of our contracts, there can be no assurance that such terms will be agreed to by our customers.

As of June 30, 2024, we had cash and cash equivalents, excluding restricted cash, of $807.3 million, which are maintained in depository accounts and highly liquid investments with original maturity dates of three months or less. Both our short-term and long-term liquidity requirements are expected to be met through our cash and cash equivalent balances, cash generated from our operations, and, as necessary, the borrowing capacity under our revolving credit facility. Our credit agreement provides for a $1.30 billion revolving credit facility, for which there was $1.23 billion of available capacity as of June 30, 2024.

Refer to Note 7 - Debt of the notes to consolidated financial statements for further information regarding our credit agreement. Based upon our current credit rating and financial position, we can also reasonably expect to be able to secure long-term debt financing if required to achieve our strategic objectives; however, no assurances can be made that such debt financing will be available on favorable terms. We believe that we have sufficient financial resources available to meet our short-term and foreseeable long-term liquidity requirements.

Cash Flows

The following table presents a summary of our operating, investing, and financing cash flows (in thousands):

			For the six months ended June 30,
			2024						2023
Net cash provided by operating activities			$	411,958					$	214,932
Net cash used in investing activities			$	(211,139)					$	(48,434)
Net cash used in financing activities			$	(181,444)					$	(126,370)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			$	(927)					$	5,856
Increase in cash, cash equivalents, and restricted cash			$	18,448					$	45,984

During the six months ended June 30, 2024, our cash balance, including cash equivalents and restricted cash, increased by approximately $18.4 million from $789.8 million at December 31, 2023 to $808.2 million at June 30, 2024. Changes in our cash position from December 31, 2023 to June 30, 2024 are described in further detail below.

Operating Activities – Operating cash flows generally represent our net income as adjusted for certain non-cash items and changes in assets and liabilities. Net cash provided by operating activities for the six months ended June 30, 2024 was approximately $412.0 million compared to approximately $214.9 million for the six months ended June 30, 2023. The favorable operating cash flow performance period-over-period was almost entirely a result of our improved operating performance and the corresponding increase in our net income.

Investing Activities – Investing cash flows consist primarily of payments for acquisition of businesses, capital expenditures, and proceeds from the sale or disposal of property, plant, and equipment. Net cash used in investing activities for the six months ended June 30, 2024 increased by approximately $162.7 million compared to the six months ended June 30, 2023, primarily due to an increase in payments for acquisitions.

Financing Activities – Financing cash flows consist primarily of the issuance and repayment of short-term and long-term debt, repurchases of common stock, payments of dividends to stockholders, and the issuance of common stock through certain equity plans. Net cash used in financing activities for the six months ended June 30, 2024 was $181.4 million compared to net cash used in financing activities for the six months ended June 30, 2023 of $126.4 million. The $55.1 million variance was primarily due to an increase in common stock repurchases made by us during the first half of 2024. The timing of common stock repurchases is at management’s discretion subject to securities laws and other legal requirements and depends upon several factors, including market and business conditions, current and anticipated future liquidity, share price, and share availability, among others. For additional detail regarding our share repurchase program, refer to Note 10 - Common Stock of the notes to consolidated financial statements.

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We currently pay a regular quarterly dividend of $0.25 per share. For the six months ended June 30, 2024 and 2023, cash payments related to dividends were $20.2 million and $15.7 million, respectively. Our credit agreement places limitations on the payment of dividends on our common stock. However, we do not believe that the terms of such agreement currently materially limit our ability to pay such quarterly dividends for the foreseeable future.

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash – We are exposed to fluctuations in foreign currency exchange rates, almost entirely with respect to the British pound. Therefore, the $6.8 million variance between the six months ended June 30, 2024 and 2023 was a direct result of exchange rate movements for the British pound versus the United States dollar.

Material Cash Requirements from Contractual and Other Obligations

As of June 30, 2024, our short-term and long-term material cash requirements for known contractual and other obligations were as follows:

Outstanding Debt and Interest Payments – As of June 30, 2024, there were no direct borrowings outstanding under our revolving credit facility. Interest payments on any future borrowings will be determined based on prevailing interest rates at that time. Refer to Note 7 - Debt of the notes to consolidated financial statements for further detail of our debt obligations, including our revolving credit facility.

Operating and Finance Leases – In the normal course of business, we lease real estate, vehicles, and equipment under various arrangements which are classified as either operating or finance leases. Future payments for such leases, excluding leases with initial terms of one year or less, were $410.4 million at June 30, 2024, with $94.7 million payable within the next 12 months.

Open Purchase Obligations – As of June 30, 2024, we had $2.32 billion of open purchase obligations, of which payments totaling approximately $1.93 billion are expected to become due within the next 12 months. These obligations represent open purchase orders to suppliers and subcontractors related to our construction and services contracts. These purchase orders are not reflected in the Consolidated Balance Sheets and are not expected to impact future liquidity as amounts should be recovered through customer billings.

Insurance Obligations – As described in further detail in Note 12 - Commitments and Contingencies of the notes to consolidated financial statements, we have loss payment deductibles and/or self-insured retentions for certain insurance matters. As of June 30, 2024, our insurance liabilities, net of estimated recoveries, were $227.4 million. Of this net amount, approximately $41.4 million is estimated to be payable within the next 12 months. Due to many uncertainties inherent in resolving these matters, it is not practical to estimate these payments beyond such period. To the extent that the amount required to settle claims covered by insurance continues to increase, the cost of our insurance coverage, including premiums and deductibles, is likely to increase.

Contingent Consideration Liabilities – We have incurred liabilities related to contingent consideration arrangements associated with certain acquisitions, payable in the event discrete performance objectives are achieved by the acquired businesses during designated post-acquisition periods. The aggregate amount of these liabilities can change due to additional business acquisitions, settlement of outstanding liabilities, changes in the fair value of amounts owed based on performance during such post-acquisition periods, and accretion in present value. As of June 30, 2024, the present value of expected future payments relating to these contingent consideration arrangements was $27.2 million. Of this amount, $15.5 million is estimated as being payable within the next 12 months, with the remainder due pursuant to the terms of our contractual agreements, some of which extend into 2027.

In addition, material cash requirements for other potential obligations, for which we cannot reasonably estimate future payments, include the following:

Legal Proceedings – We are involved in several legal proceedings in which damages and claims have been asserted against us. While litigation is subject to many uncertainties and the outcome of litigation is not predictable with assurance, we do not believe that any such matters will have a material adverse effect on our financial position, results of operations, or liquidity. Refer to Note 12 - Commitments and Contingencies of the notes to consolidated financial statements for more information regarding legal proceedings.

Multiemployer Benefit Plans – In addition to our Company sponsored benefit plans, we participate in certain multiemployer pension and other post-retirement plans. The cost of these plans is equal to the annual required contributions determined in accordance with the provisions of negotiated collective bargaining agreements. Our future contributions to the multiemployer plans are dependent upon a number of factors. Amounts of future contributions that we would be contractually obligated to make pursuant to these plans cannot be reasonably estimated.

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Off-Balance Sheet Arrangements and Other Commercial Commitments

The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. As of June 30, 2024, based on the percentage-of-completion of our projects covered by surety bonds, our aggregate estimated exposure, assuming defaults on all our then existing contractual obligations, was approximately $2.1 billion, which represents approximately 23% of our total remaining performance obligations.

Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances. Such amounts can also fluctuate from period to period based upon the mix and level of our bonded operating activity. For example, public sector contracts require surety bonds more frequently than private sector contracts and, accordingly, our bonding requirements typically increase as the amount of our public sector work increases. Our estimated maximum exposure as it relates to the value of the surety bonds outstanding is lowered on each bonded project as the cost to complete is reduced, and each commitment under a surety bond generally extinguishes concurrently with the expiration of its related contractual obligation.

Surety bonds are sometimes provided to secure obligations for wages and benefits payable to or for certain of our employees, at the request of labor unions representing such employees. In addition, surety bonds or letters of credit may be issued as collateral for certain insurance obligations. As of June 30, 2024, we satisfied approximately $48.1 million and $71.1 million of the collateral requirements of our insurance programs by utilizing surety bonds and letters of credit, respectively. All such letters of credit were issued under our revolving credit facility, therefore reducing the available capacity of such facility.

We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.

From time to time, we discuss with our current and other surety bond providers the amounts of surety bonds that may be available to us based on our financial strength and the absence of any default by us on any surety bond issued on our behalf and believe those amounts are currently adequate for our needs. However, if we experience changes in our bonding relationships or if there are adverse changes in the surety industry, we may: (a) seek to satisfy certain customer requests for surety bonds by posting other forms of collateral in lieu of surety bonds, such as letters of credit, parent company guarantees, or cash, in order to convince customers to forego the requirement for surety bonds, (b) increase our activities in our businesses that rarely require surety bonds, and/or (c) refrain from bidding for certain projects that require surety bonds.

There can be no assurance that we would be able to effectuate alternatives to providing surety bonds to our customers or to obtain, on favorable terms, sufficient additional work that does not require surety bonds. Accordingly, a reduction in the availability of surety bonds could have a material adverse effect on our financial position, results of operations, and/or cash flows.

In the ordinary course of business, we, at times, guarantee obligations of our subsidiaries under certain contracts. Generally, we are liable under such an arrangement only if our subsidiary fails to perform its obligations under the contract. Historically, we have not incurred any substantial liabilities as a consequence of these guarantees.

We do not have any other material financial guarantees or off-balance sheet arrangements other than those disclosed herein.

New Accounting Pronouncements

We review new accounting standards to determine the expected impact, if any, that the adoption of such standards will have on our financial position and/or results of operations. See Note 2 - New Accounting Pronouncements of the notes to consolidated financial statements for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations, or liquidity.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements is based on the application of significant accounting policies, which require management to make estimates and assumptions. Our significant accounting policies are described further in Note 2 - Summary of Significant Accounting Policies of the notes to consolidated financial statements included in Item 8 of our Form 10-K for the year ended December 31, 2023. We base our estimates on historical experience, known or expected trends, third-party valuations, and various other assumptions that we believe to be reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. There have been no significant changes to our critical accounting policies or methods during the six months ended June 30, 2024.

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