Earnings call transcript: EMCOR Group Q3 2025 sees EPS beat amid revenue rise

EMCOR Group reported its Q3 2025 earnings with a slight beat on expectations, posting an EPS of $6.57 against the forecast of $6.54. Revenues reached $4.3 billion, surpassing the forecast of $4.28 billion. Despite the positive earnings report, EMCOR’s stock fell sharply, dropping 16.9% to $697 in pre-market trading, reflecting investor concerns over broader market trends or other factors not immediately clear from the earnings release.

Key Takeaways

• EMCOR’s Q3 EPS exceeded expectations by $0.03.
• Revenue increased by 16.4% year-over-year, reaching $4.3 billion.
• Stock price dropped 16.9% in pre-market trading despite earnings beat.
• The company expanded its data center and prefabrication capabilities.
• EMCOR plans to sell its UK business for $255 million.

Company Performance

EMCOR Group demonstrated strong financial performance in Q3 2025, with revenues rising by 16.4% compared to the same quarter last year. The company’s strategic focus on expanding its data center capabilities and prefabrication facilities has contributed to this growth. Additionally, EMCOR’s restructuring of site-based businesses and improvements in mechanical services efficiency have bolstered its operational performance.

Financial Highlights

• Revenue: $4.3 billion, up 16.4% year-over-year
• Earnings per share: $6.57, up 13.3% year-over-year
• Operating margin: 9.4%
• Operating cash flow: $475.5 million
• Year-to-date revenue growth: 15.5%

Earnings vs. Forecast

EMCOR’s actual EPS of $6.57 slightly beat the forecast of $6.54, resulting in a surprise of 0.46%. The revenue also exceeded expectations, coming in at $4.3 billion versus the forecast of $4.28 billion. This marks a positive performance compared to previous quarters, where the company has consistently met or slightly exceeded market expectations.

Market Reaction

Despite the earnings beat, EMCOR’s stock experienced a significant decline, dropping 16.9% in pre-market trading to $697. This movement contrasts with the stock’s 52-week high of $778.64 and suggests investor concerns that may extend beyond the earnings figures, possibly related to broader market conditions or specific company challenges.

Outlook & Guidance

For the full year 2025, EMCOR has projected revenue guidance between $16.7 billion and $16.8 billion and EPS guidance ranging from $25.00 to $25.75. The company anticipates organic growth of 8-10% and plans to expand into 1-2 additional mechanical and electrical markets.

Executive Commentary

CEO Tony Guzzi emphasized the company’s strategic positioning in the data center market, stating, "We are a large data center builder that our customers value." He also highlighted EMCOR’s resources in virtual design and prefabrication capabilities, which are expected to drive future growth.

Risks and Challenges

• Potential macroeconomic pressures affecting market demand.
• Challenges in maintaining growth amid competitive pressures.
• Risks associated with the divestiture of the UK business.
• Supply chain disruptions impacting operational efficiency.
• Market saturation in certain sectors could limit growth opportunities.

Q&A

During the earnings call, analysts inquired about the company’s margin investments in new geographic markets and the rationale behind selling the UK business. EMCOR’s management highlighted strong customer relationships with hyperscalers as a key competitive advantage moving forward.

Full transcript - EMCOR Group Inc (EME) Q3 2025:

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Good morning.

Chris, Conference Operator: My name is Chris and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group third quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ prepared remarks today, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. At this time, I would like to turn the call over to Lucas Sullivan, Director of Financial Planning and Analysis. Mr. Sullivan, you may proceed.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: Thank you, Chris. Good morning everyone and welcome to EMCOR’s third quarter 2025 earnings conference call. For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the Investor Relations section of our website at emcorgroup.com. With me today are Tony Guzzi, our Chairman, President and Chief Executive Officer, Jason Nalbandian, Senior Vice President and EMCOR’s Chief Financial Officer, and Maxine Mauricio, Executive Vice President, Chief Administrative Officer and General Counsel. For today’s call, Tony will provide comments on our third quarter and discuss our RPOs. Jason will then review the third quarter and numbers, then turn it back to Tony to discuss our guidance before we open it up for Q&A.

Before we begin, a quick reminder that this presentation and discussion contain certain forward-looking statements and may contain certain non-GAAP financial information. Slide 2 of our presentation describes in detail these forward-looking statements and the non-GAAP financial information disclosures. I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides. Finally, as a reminder, all financial information discussed during this morning’s call is included in our consolidated financial statements within both our earnings press release issued this morning and in our Form 10-Q filed with the Securities and Exchange Commission. With that, let me turn the call over to Tony.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Thanks Lucas and welcome to the call. I’m going to be on pages four through five of our presentation. Good morning and welcome to our third quarter 2025 earnings call. I’m going to cover the financial highlights for the third quarter and then provide commentary on what has gone well through the first three quarters of this year, which has been a lot. Jason will cover the quarterly financial results in detail. We had another strong quarter at EMCOR. We earned $6.57 in diluted EPS and generated revenues of $4.3 billion, which represents a 16.4% increase from the prior year period. We achieved an exceptional operating margin of 9.4% and had strong operating cash flow of $475.5 million.

For the third quarter, we had a book to bill of 1.16 with RPOs at a record $12.6 billion, which represents an increase of $2.8 billion year over year and $2.5 billion from December of 2004. We continue to allocate capital with discipline. For the first nine months of 2025, we allocated just over $430 million on share repurchases and utilized $900 million for acquisitions. Our balance sheet remains strong and liquid, providing the fuel to support our growth and capital allocation strategy. What’s driving this outstanding performance in the first three quarters of 2025? Our electrical and mechanical construction segments continue to earn impressive operating margins and generate growth in their base of business as demonstrated by increasing both revenue and RPOs across a number of key sectors.

We execute well for our customers in these segments by using VDC, BIM, and prefabrication, coupled with strong planning, excellent labor sourcing and management, and disciplined contract negotiation and oversight. We have managed our project mix well and continue to gain the confidence of our customers across geographies and diverse market sectors. With respect to data centers, we continue to improve our capabilities to serve an increasing number of data center sites with multiple trades and across a diverse set of customers. As I have said before, we are known for having the best field leadership in the business and they operate with focus, discipline, humility, and grit. Our mechanical services business in our U.S. Building Services segment continues to execute well with revenue growth of nearly 6% in the quarter and 7% year to date and an operating margin in the high single digits.

The impact of the successful restructuring in our site-based businesses is reflected in this segment’s third quarter operating margin expansion. Our Industrial Services segment had some demand headwinds during the year as some large turnarounds were moved into the fourth quarter or further into 2026. Lastly, we had a successful third quarter in our UK Building Services segment. In September, we announced the sale of our UK business and believe that we will complete this transaction by year end as we await UK regulatory approval. EMCOR UK has a very talented management team and they will serve their new owners well and we will miss them. Overall, we had another strong quarter and a robust performance year to date in 2025. Now I’m going to turn to the RPO section. As I previously mentioned, we leave the quarter with a diverse and strong set of RPOs at $12.6 billion.

Due to the growth in the majority of the sectors we serve, our RPOs have increased 29% year over year and 25% when compared to December of 2024. On a sequential basis, RPOs have increased 6% from June to September. Long-term secular trends across key sectors continue to support this growth, driven by robust data center demand. RPOs within network and communications totaled a record $4.3 billion at the end of September, almost double that of the year-ago period. While acquisitions have added to our data center capabilities and allow us to serve our customers in additional geographies, over 80% of our RPO growth we have seen in this space during 2025 has been organic. Healthcare RPOs totaled $1.3 billion.

While the healthcare sector has always been core to EMCOR, the acquisition of Miller Electric has expanded our opportunities in this sector, contributing to the nearly 7% RPO growth we experienced year over year. Manufacturing and industrial RPOs total $1.1 billion. In addition to demand driven by customers’ onshoring and reshoring initiatives, recent growth in this sector has also benefited from the award of certain food process projects within our mechanical construction segment as well as a renewable energy project within our Industrial Services segment and led by our mechanical construction segment. Water and wastewater RPOs increased by over $300 million during the quarter and now total $1 billion as we continue to win projects throughout Florida.

Although RPOs within high tech manufacturing have decreased from September of last year, we continue to believe in the long term fundamentals of this sector, while acknowledging that award of these projects can be episodic in nature or impacted by our resource allocation decisions as we seek to deploy our workforce in a manner that achieves optimal outcomes for EMCOR and our shareholders. With that, I will gladly turn the presentation over to Jason to cover our financial results in detail.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Thank you, Tony, and good morning, everyone. As Tony mentioned, over the next several slides I will review the operating performance for each of our segments as well as some of the key financial data for the third quarter of 2025 as compared to the third quarter of 2024. I’ll start on Slide 6, which is revenues with growth of 16.4%. Revenues of $4.3 billion set a new company record for a third quarter. Acquisitions contributed $306.6 million, with the largest incremental revenue coming from Miller Electric. On an organic basis, revenues grew by 8.1%. We experienced growth within all of our reportable segments, and demand for our services continues to be strong across most of the sectors that we serve.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: If we look at each of our.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Segments, revenues of U.S. electrical construction were $1.29 billion, increasing 52.1% due to a combination of strong organic growth and the acquisition of Miller Electric. Consistent with our commentary over the last several quarters, while we continue to experience greater data center demand, growth within this segment remains broad based as increased revenues were generated from nearly all market sectors. In addition to network and communications, where revenues grew by nearly 70% year over year, electrical construction saw notable growth in commercial, healthcare, institutional, and transportation. This once again demonstrates the broad offerings of this segment. Revenues in electrical construction also benefited from higher levels of short duration projects and service work due in part to the capabilities we’ve added through the Miller Electric acquisition. Revenues of U.S.

mechanical construction were a record $1.78 billion, up 7% almost entirely through organic growth due to greater demand for data center construction projects. This segment saw the largest increase from the network and communications market sector where quarterly revenues nearly doubled year over year. Beyond data centers, greater revenues were generated from several other market sectors with the most notable increase within manufacturing and industrial led by food processing construction projects. Partially offsetting the revenue growth of the mechanical construction were decreases within high tech manufacturing as we completed certain semiconductor construction projects and commercial due to less warehousing and distribution project revenue. While we are starting to see some resumption in demand from our e-commerce customers, we are just beginning to ramp up on these projects. On a combined basis, our construction segments generated revenues of $3.1 billion, an increase of 22.2%. Looking next at U.S.

building services, revenues of $813.9 million reflect a 2.1% increase year over year. This marks the second quarter of revenue growth since the loss of site-based contracts that we’ve previously referenced. Similar to the second quarter, the growth in mechanical services exceeded the revenue decline within site-based and driven by each of its service lines. Our mechanical services division generated revenue growth of 5.8% in the quarter, all of which was organic. Turning to our industrial services segment, revenues of $286.9 million are in line with that of the year ago period. Decreased field services revenues as a result of the completion of a large renewable fuel project were offset by an increase in shop service revenues, primarily due to greater new build heat exchanger sales. Lastly, UK building services generated revenues of $136.2 million, which represents an increase of $29.8 million or 28.1%.

Favorable exchange rate movements did positively impact the segment’s revenues by $4.8 million. Growth was largely driven by the award of recent facilities maintenance contracts by new customers and increased project activity with existing customers. If we turn to Slide 7 for operating income, we generated a record third quarter operating income of $405.7 million and earned a very impressive 9.4% operating margin. Looking at each of our segments, U.S. Electrical Construction had operating income of $145.2 million, which represents a nearly 22% increase. As a result of the revenue growth I referenced, this segment experienced greater gross profit across the majority of the market sectors in which we operate, resulting in the increase in operating income. While down from the unprecedented 14.1% earned in last year’s third quarter, the segment’s operating margin of 11.3% remains strong, reflecting the overall performance and execution by our companies.

In addition to incremental intangible asset amortization, which reduced operating margin by 90 basis points, operating margin in the quarter was impacted by lower profitability on certain projects in new geographies where we encountered reduced labor productivity while investing in the development of a workforce. Operating income from U.S. Mechanical Construction of $229.3 million increased by 6.7% in line with the growth in segment revenues, while operating margin of 12.9% is comparable year over year as we continue to execute well across our project portfolio. Together, our construction segments grew operating income by 12.1% and earned a combined operating margin of 12.2%. U.S. Building Services generated operating income of $59.4 million, an increase of 6.9%, and expanded operating margin by 30 basis points to 7.3%.

In addition to the increase in revenue, the operating performance of the segment benefited from a reduction in SGA margin as we are beginning to see the impact of the restructuring we recently completed within our site-based business. Moving to Industrial Services. Despite revenues which were relatively consistent year over year, operating income of this segment nearly doubled due in part to a more favorable mix given a greater percentage of higher margin shop services work. Lastly, UK Building Services earned operating income of $7.6 million or 5.6% of revenues. The increased profitability of the UK business was due to greater gross profit stemming from increased revenues, a more favorable project mix, and effective cost management which resulted from the leveraging of their overhead during a period of growth. If we move to slide 8, I’ll cover a few highlights not included on the previous slides.

Gross profit of $835.3 million has increased by 13.7% and our gross profit margin for the quarter was 19.4%. SG&A of $429.6 million increased by $58.4 million, while our SG&A margin remained consistent year over year at 10% of revenues. Accounting for nearly two thirds of the increase in SG&A was $32.2 million of incremental expenses from acquired companies and $5.7 million of incremental intangible asset amortization expense. Excluding these items, SG&A grew by $20.5 million largely due to employment costs as we continue to invest in headcount to support our organic growth and we experienced some increased incentive compensation within certain of our segments given higher projected operating results. Finally, on this page, diluted earnings per share was $6.57 compared to $5.80, an increase of 13.3%.

If we look briefly at slide 9, this slide summarizes our results for the first nine months of 2025 with year to date revenue growth of 15.5% and operating margin expansion of 20 basis points or 30 basis points when you exclude the impact of the transaction costs incurred earlier this year. Our performance for the first three quarters set a number of new company records. In a later slide, Tony Guzzi will outline our updated earnings guidance for 2025. As I’ve done in the past, I mention that now as this guidance reflects continued strength in our margins.

Specifically, at the low end we have assumed a full year operating margin which is equal to what we have earned year to date, while the high end reflects what we could achieve if we produced an operating margin in the fourth quarter equivalent to the record margin we earned in Q4 of last year. Let’s move to slide 10, which is our balance sheet with cash on hand of $655 million and working capital of $878 million. Our balance sheet as of September 30th remains strong and liquid, positioning us well to continue to deliver for our customers and shareholders. Although not shown on the slide, during the quarter we had operating cash flow of $475.5 million and have generated $778 million year to date.

For the full year, we continue to estimate that operating cash flow will be at least equal to net income and approximately up to 80% of operating income. Given our strong operating cash flow during the quarter, we repaid the $250 million that was previously outstanding under our revolving credit facility. Before I turn the call back over to Tony, I just want to quickly look at Slide 11, which summarizes the pending divestiture of our UK business. As Tony mentioned and we previously announced, we have entered into an agreement to sell EMCOR UK for approximately $255 million. This transaction, which we anticipate will close prior to the end of the year, sharpens our focus on core end markets throughout the U.S. while supporting our balanced capital allocation strategy.

Proceeds will be used to pursue further organic growth and strategic M&A with a focus on electrical and mechanical construction as well as mechanical services, while also returning capital to our shareholders. Due to the size of the UK business, this transaction will not be treated as discontinued operations and as a result we will retain the revenue and earnings that have been generated by the business through the close of the transaction. Therefore, while EMCOR UK currently provides us with approximately $500 million of annual revenue and $0.45 of diluted EPS, the impact in the current year will be limited to the portion of 2025 that we no longer own the business.

This has been reflected in the updated earnings guidance which Tony will share with you and when providing our Q4 results, we will adjust for transaction expenses and any gain from sale as those items are excluded from our guidance. With that, I will turn the call back over to Tony.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Thanks, Jason. We’ve been executing very well, and as a result, we will tighten our 2025 revenue and earnings per share guidance. Specifically, we’re updating our full year 2025 revenue guidance to a range of $16.7 to $16.8 billion from a previous range of $16.4 to $16.9 billion. This reflects the momentum we have seen in the business while adjusting for the anticipated sale of the UK segment. We are also narrowing our guidance for non-GAAP diluted earnings per share to a range of $25 to $25.75, reflecting an increase of $0.50 at the low end and $0.25 at the midpoint. In order to continue to earn strong operating margins, we will need to continue to execute with discipline and efficiency for our customers.

I always remind our investors that this is not a quarter-to-quarter business with respect to operating margins, and the past four to eight quarters on average reflect the underlying margins. In our business, there remains momentum and demand in key sectors, especially in data centers, traditional and high tech, manufacturing, health care, water and wastewater, HVAC service, building controls, and retrofit projects. Macroeconomic uncertainty always exists, especially around tariffs, trade, and now we have the government shutdown again. We believe our guidance reflects the potential impact of such uncertainty as we view it today. We will remain disciplined capital and resource allocators. Our strong balance sheet bolsters our ability to execute a healthy pipeline of acquisitions and also robust opportunities to invest in our organic growth and return of cash to shareholders through dividends and share repurchases.

When we talk about resource allocation, we work to maximize our opportunities across the right sectors, customer service, customers, contracts, and geographies. Our resources, that is, our supervision, our virtual design and construction or VDC capability, prefabrication, and as important as anything, our subsidiary and segment leadership’s time, attention, and focus, as they are ultimately the quarterbacks that direct this allocation. We think about that across all those sectors, customers, contracts, and geographies. Last night, we signed an agreement to acquire the John W. Danforth Company based in Buffalo, New York, with operations across upstate New York and Ohio. Danforth is a mechanical construction company with expertise in data centers, health care, industrial manufacturing, and commercial. They also have excellent VDC and prefabrication capabilities. Danforth should add about $350 million to $400 million in revenues with solid steady state margins.

However, in the first year those margins will be reduced due to backlog amortization. The transaction is expected to close in the fourth quarter, subject to customary closing conditions. They are a great team, they have a great cultural fit with us, and we have worked together successfully in the past. We do look forward to much success together and we look forward to soon welcoming the Danforth team to our EMCOR team. I’m going to close with what’s probably the most important statement that I make at every call. I want to thank my EMCOR teammates. Thank you for your dedication to EMCOR and our customers. Thank you for living our values every day. Thank you for taking care of one another and keeping each other safe. Thank you for the outstanding results you continue to produce for our shareholders. With that I will take questions.

Chris, Conference Operator: Thank you. We will now begin the question and answer session. As a reminder, to ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If you would like to withdraw your question, please press the pound key at this time. We will pause momentarily to assemble our roster, and today’s first question comes from Brent Thielman with DA Davidson. Please proceed. Hey, thanks.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: Good morning.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Morning, Brent. Hey, Tony.

Chris, Conference Operator: Maybe just to build upon some of your comments and the concluding statement there.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Obviously, I think maybe somewhat.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: Folks somewhat surprised by the margin profile this quarter. I think to your point, this is a construction business. You have impacts from mix and other.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Factors in any quarter. Maybe Tony, could you build on the.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: Margins that you’re seeing on new work, are they attractive relative to what we see reported here? Just an opportunity to address those concerns here.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: This is some of the strongest overall operating margins we’ve had in a quarter. We knew we were going to have amortization headwind in the electrical segment. Without the amortization headwind or the investment in new markets, reality is we’re 14% plus in electrical. Mechanical margins are very strong. Building services margins are strong. Jason, I think year to date, these are the best margins we’ve ever had on a year to date basis.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: I think the thing that I go back to, Tony, is we’ve said over time, right, a rolling 12 to 24 month average is where we expect our margins to be. Those margins would be somewhere between 9.1% and 9.4%. On a consolidated basis, we delivered 9.4% in the quarter. When you look at where we were as we exited Q2, we said for full year our margins would be between 9% and 9.4%. We delivered at 9.4% in the quarter. I think we’re delivering the margins that we anticipated.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Yes, what the business does, I mean, yes, it bounces around a little bit, but you don’t buy something the size of Miller with the amount of backlog amortization we’re going to go through, RPO amortization we’re going to go through, and be able to keep margins at the levels they were. I mean, it’s just that’s not. We did that when we gave our guidance for the year. I’m a little befuddled about some of the margin reaction, to be straight with you.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: Yes, understood.

Chris, Conference Operator: Separate question. Nearly a double, if not more in data center RPOs.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: I think folks understand that’s a pretty good market. Maybe if you could just touch on.

Chris, Conference Operator: Maybe some of the other sectors.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Maybe what areas are surprising you.

Chris, Conference Operator: terms of relative strength or maybe even getting stronger that you point out outside of data centers.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Yeah, I think you hit on a really important question, Brent. I mean, you know, we have a broad base of business outside of data centers that’s pretty successful and I think a really good marker, and I always think about this in our business broadly, is what goes on in the mechanical service business, which grew mid single digits, has strong operating margins, and almost has no data center exposure. I think I have this right. Seven of our ten mechanical segments had growth and ten of our eleven electrical market sectors had growth. We’re seeing strong growth on the mechanical side in water and wastewater. We continue to see strong demand in healthcare in both sectors, really. The addition of Miller really bolsters our healthcare exposure on the electrical side in some of the fastest growing healthcare markets in the country, which they’re exposed to.

We continue to see good opportunities in traditional manufacturing, especially for us in food processing. It’s one of the few things we do on a large scale EPC and we do it very well out of our Shambaugh subsidiary in Fort Wayne, Indiana. We continue to see pretty good demand in traditional retrofit commercial. It’s a strong market for us, especially with an eye towards energy efficiency and the restocking of buildings that continues to go on. I think high tech manufacturing, that’s a choice. We have very strong demand in parts of the country and we’re executing very well. In other parts of the country, it’s a little lumpier or we may rededicate those resources, quite frankly, to more data center work versus slog through another semiconductor plant in parts of the country. We did very well on it.

It’s just a very difficult customer set and application in one particular case. When you put it all together, demand is broad based, it’s strong. We like having diverse demand. We’re going to continue to pursue diverse demand and I think that’s good news for our shareholders for the long term. We’re not giving up anything on the data center side by doing that, as you said, with the size and good. Next question.

Chris, Conference Operator: Comes from Adam Thalheimer with Thompson Davis. Please proceed. Thanks.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Good morning, guys.

Chris, Conference Operator: Thanks for.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Morning.

Chris, Conference Operator: Thanks for taking the questions. The organic expansions you talked about that impacted the electrical segment, Tony, can you just talk about the investments you’re making.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: How long that headwind?

Chris, Conference Operator: Might persist, and what the benefit?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: I think typically, Adam, it’s a one or two quarter headwind as we start up the job. It’s a margin investment is what it is. It’s not really a capital investment upfront. It’s a margin investment as we have to go through the learning curve of building a labor force. Sometimes that takes a little longer. Sometimes we get it right at the beginning of a new market and sometimes it takes us further into the job to get it right. We do that all the time and we only call that out, I think, to make investors aware that it’s not a linear line. When you expand from what was six to eight, three or four data center markets in 2019 serving to over 16 today electrically and from one or two mechanically to over six today mechanically, that’s not a linear straight line.

We have yet to not do it successfully. It’s just more of a pointing out that, hey, that’s part of how we grow the business and it’s part of what we almost look at as R&D to go into a new market.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: I think there’s a combination of things that we expect to happen as we move forward. We’ll build that labor force, we’ll get that efficiency, we’ll inherently become more productive as we do the next phases of these contracts, and we’ll learn some lessons here. We’ll price our jobs to that market. It’s a number of things that we think kind of improve as you go from the first set of jobs to those next couple.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: It’s an ongoing headwind, always in the numbers. This was a little more because it was a little bigger site.

Chris, Conference Operator: Ok, I think, I mean you left the prospect of flat Q4 margins in the guidance, which I thought was interesting. Just curious how you might get to.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: The high end of the Q4 margin guide.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: I think it’s just project timing. At this point, there’s really nothing new. We’ll have, depending on when Danforth closed, it’s not going to really add anything, but we’ll have revenue coming in without a lot of margin because of the headwind of the backlog amortization. We’re still running off the Miller backlog amortization. I think those are the kinds of things operating wise, we expect to operate pretty well in the field. I’ll turn it over.

Chris, Conference Operator: Thanks guys.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Yep.

Chris, Conference Operator: The next question comes from Brian Brophy with Stifel. Please proceed. Yeah, thanks.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Thanks. Good morning, everybody.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: Just wanted to follow up on the geographic investments.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Just wanted to see if you could help us quantify the impact.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: I think some of the numbers you gave, my back of the math suggests.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: 200, maybe 250 basis point impact.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Margin in the quarter. Am I in the ballpark there? Yeah, I think I’ll give you dollars and we can work that into margins. I mean, if we look at the jobs that drove it, it’s probably about $13 million or so.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Okay, that’s helpful.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: I appreciate all the commentary on the UK business.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Curious how you guys are feeling about the business portfolio after this transaction closes.

Lucas Sullivan, Director of Financial Planning and Analysis, EMCOR Group: Is there anything else you guys would consider non-core or how are you?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Thinking about the portfolio at this point, we look at our portfolio all the time and portfolio actions to the size of the UK portfolio. Look, we’re making portfolio adjustments all the time in our mechanical and electrical construction business and even mechanical services. One of those portfolio adjustments we just talked about, we invested in a series of projects in a geographic market or two to gain scale in that market as a $13 million investment. You all don’t think about that as a portfolio action. It was a little larger in this quarter, but it’s major metro areas in this country. We have no interest participating on the electrical side in the traffic market anymore. We’ve been slowly winding that down across a number of markets.

Those kind of things I would call routine course of business, the ins and outs, opening a couple new branch offices in the mechanical service business, either through a small asset purchase, some guys’ tools and trucks, which there’s one move in one way that we announced and there’s one moving the other way. The UK is out. John W. Danforth Company is in. The UK, really, it’s a success story for people that have followed us over a long period of time know that.

Chris, Conference Operator: Wow.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: We turned something into something very successful with a great team, and it was the right time to exit for our shareholders. For that team and for that business, it wasn’t going to be a place that we, because of all the other opportunities we have, it wasn’t going to be a place that we were going to allocate a lot of capital to grow. For example, we weren’t going to take the UK platform and grow through the rest of Europe to build a facility services business. That’s not something we were going to do. It’s probably something that needed to happen to continue the growth in that business. John W. Danforth is another decision.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Right.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Someone we knew, someone we’ve known very well in a market that’s steady, in a market where they have a leadership position with a group of people that we have worked with before. They got some interesting capabilities in BIM, VDC, prefabrication and those capabilities. They work in the data center space, they work in the heavy industrial space, they work in the healthcare space and execute those projects very well. Not a one for one as far as exchange, but it’s the kind of thing, midsize mechanical construction acquisition in, and we have balance sheet capability to do both without selling the UK. It was the right time. You look at other parts of our portfolio, we examine it all the time and we are probably headed towards how do we think about the rest of our site-based business, which is pretty integrated into our building services business?

It’s on the improvement trend. We have the industrial services business, which has had a tough couple of years. That being said, some of the things we do there, some of the prospects we have, we think we can improve it. I’ll always say these things this way. Deals happen both ways when they happen and there’s a timing that’s right. Right now we think we have a good portfolio that we’re executing on. This still has upside across all the businesses that we’re operating in.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Appreciate all the color. I’ll pass it on.

Chris, Conference Operator: The next question is from Justin Hawk with Baird. Please proceed.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Oh great.

Chris, Conference Operator: Yeah, I guess maybe I was going to build on that last question just about the capital allocation and obviously you did the Danforth after the quarter on a good cash flow quarter, and you’ve got the proceeds coming in from the UK, but should there be any read or do you want to make any comments about just the lack of buybacks in the quarter? Is that signaling that there’s other kind of pending transactions that are out there that maybe are closer to coming than not or anything about just usually your buybacks are pretty predictable.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Quarter to quarter?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Yes and no. We did a greater amount than we typically would do in the first part of the year, and most of that executed off of a 10b5-1. We’re not really traders in our stock. There was a bit of a dislocation, and the 10b5-1 picked it up in the second quarter. That being said, we’re not capital constrained. We’ll be balanced capital allocators over a long period of time. If you go to the end of my remarks, we look at all uses of capital from organic investment, and it’s interesting, we were thinking about what we’ve added this year or we’ll add by the end of the year. We’ll add about 400,000 square feet, give or take, of prefabrication space and our ability to prefabricate. Some call it modular construction. Maybe it’s the next step down, which for the most part we do for our jobs.

We do that across our fire life safety business, our electrical business, and our mechanical business. John W. Danforth Company adds to that capability. They have a very well run, very modern shop, and it’s one of the attractions they had with us in a pretty good labor market. We don’t have capital constraints. There’s not a lot of timing going on unless there’s a big dislocation. I wouldn’t consider today a big dislocation. We ran up in a week and we came right back to where we were.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Were.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: We think we’re performing well. Our cash flow is good. We’re going to keep a strong and liquid balance sheet. I think what you see on the last page of our presentation, you take a six year trend, I think this next six years will look very similar to the last six years. Yep, yep, got it.

Chris, Conference Operator: Okay, that’s it for me. Thank you.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Thank you.

Chris, Conference Operator: The next question comes from Avi Jaroslavic with UBS. Please proceed.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Hey, good morning guys.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Thanks for taking the question. I notice that organic growth has been running around mid to upper single digits the last few quarters. Are you thinking that should be picking up at all in the near term just based on some of the backlog growth that you’re seeing, or does this seem like a more comfortable rate for the foreseeable future?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Look, I think high single digits, low double digits is probably a comfortable rate. I mean, the reality, right, we’re a big company and the law of large numbers starts to take over. You think about what we have to add from an organic to say we’re growing 10% organically. You take our guidance, that means we added between $1.5 billion and $2 billion of revenue organically in a year. That’s pretty darn good. We still maintain the cash flow characteristics we have and the margin profile we have. Jason, I think that’s probably not a bad way to look at it.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: I agree with that, Tony, especially when you look, I would look at the RPO growth sequentially. We’re growing 5% to 6% sequentially. I think that gives you a little bit more of a tell for the future. The other thing too is if you look at our RPO and you look at how much of it will burn in excess of 12 months, right now I think it’s about 20% or so will burn greater than a year. If you look historically, that number was typically about 15%. Some of the work we’re booking now is a little bit longer term, which I think impacts just the turn of that RPO.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Yeah, if you think about it, we had some really good growth markets. I think if you look at our data center business, that’s going to grow high teens to mid-20s for a while. If you look at any forecast out there, cloud storage data centers are going to grow high single digits to low teens and AI grow depending on who you look at, and we’ve looked at many and we’ve, remember we’re actually connected all the way back through our customers and their capital spending plan. AI data centers are going to grow 20% plus and that’s going to become an increasing part of our business. That’ll be by design, but we’re not going to neglect our traditional business. If you look long term, right, we’ve grown in excess of non res in our construction businesses. 500 basis points over a five year period.

Over a five year period, that’s probably a pretty good marker and it may go a little more than that because of the data center concentration, but maybe that picks up another 100 basis points. I mean these are long term projections but I think, you know, high single digits organic, maybe pick a couple more points up through acquisition is how we think about the business over a long term and how we have thought about it over a long period of time in our planning. Okay, appreciate that perspective.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Could I just ask a follow up in terms of some of the cost of growth that you’ve been seeing, just with growth having been relatively steady on the organic side? Can you share some more color as to what made this maybe more unique than past situations? Been growing at a pretty nice clip over the last couple of years. Similarly, have we had any periods where there’ve been a similar type of level of these startup inefficiencies in the mechanical construction segment?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: They show up. Yes. The only reason we called it out this quarter is a little more than usual. This happens just about every quarter, and you can see it in our one disclosure in the Q. That’s where most of that rests. This was a little more, a little tougher market, a little tougher job building the labor force, and really it’s still a profitable job. I mean, I want everybody to think that we invested into a lost job. That’s not what happened here. This is classic revenue recognition thing.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Right.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: The margin came down versus what we expected. Like Jason said, we probably were a little more optimistic than we needed to be as we entered that new market. Quite frankly, if you looked at the customer and what we thought we were going to be doing and the speed at which it was going to happen, we’d worked from other markets before and we had different experience and we had a more experienced workforce. Okay, got it.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Appreciate the time. Thank you.

Chris, Conference Operator: Our next question is from Sam Cusworm with William Blair. Please proceed.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Hey Tony.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Hey Jason.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Thanks for taking our questions here. I guess to start, you know, looking at your network and communications end market. It looks like revenue was flat sequentially for total U.S. construction. You know, just given the rapid sequential.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Growth we’ve seen in the last few.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Quarters, I think some investors may have found that surprising. Can you talk about what caused that pacing to slow? I think you just mentioned that you think we’re going to market.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Can you repeat that question for me? Because we’re not seeing that same data point. I just want to make sure I understand the question. You’re saying revenue in Networking Communications is flat for construction? For total U.S. construction, sequentially, yeah. Year over year was growing sequentially. I think it’s just project timing. I mean, I think year over year we’re up tremendously. Right. We’re probably up almost 80%. I think electrical is up 70%. Mechanical is nearly double. I think it’s up 90% or so sequentially. I wouldn’t really look at this business one quarter to the next and look for.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: RPOs are up almost double, right.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: In the quarter, at least 50% of our RPO growth came from Networking Communications.

Chris, Conference Operator: Yeah.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: We’re not seeing any slowing in the market. There’s a lot of project timing. You can tell by our surprise. We think it’s an area of great strength for us and it’s going to continue to grow. Got it. Okay, that’s helpful. Maybe just sticking with the data center theme, though. Maybe you could just update us on the footprint, your mechanical business.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: I think last we spoke you had been in about five markets today.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: You were thinking of maybe taking that up to kind of the electrical business.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: 15 markets.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: How should we think about that? As you think about the next year, we will add one to two mechanical markets over the next year. The difference between mechanical and electrical is the mechanical. I would say it takes a little more to build the workforce that you’re going to put in that market. You really, really have to think about your prefab plan as you go into that mechanical market. There’s a level of investment you have to make on prefabrication and VDC that’s a little more mechanical to support the next market you move into. I think we’ll grow by another two markets or so over the next year, maybe one more than that with the acquisition of John W. Danforth Company. I think we’ll electrically, we’ll probably add one or two markets also, at least maybe more. Got it.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Thanks.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: We’ll leave it there. Appreciate it. When you talk about markets, it’s also important to think about. Once you get on some of these sites, that can be a five year build. We’re doing the first building on some of these places, it’d be a five year build. A lot of times you can have 1, 2 or 3 EMCOR companies on those sites. The thing that gets lost in this, I can’t even count the number of fire protection sites we’re on. In our fire life safety business, we’re probably serving 70% of the data center sites in one way or another around the country. Got it. It was very helpful. Congress, thank you. You bet.

Chris, Conference Operator: Thank you so much for taking my question. I appreciate the color on the RPOs in Network and communications. Can you just elaborate if you’re seeing potentially larger individual bookings in this segment or if there’s any change in terms of how these contracts are coming through?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: The answer is yes and yes, with a caveat. Some of the contracts also will be larger, but they’ll be in a contract type called GMP where we only book a portion of that work over time because they let out the next phase. Even though we know we have the whole thing, which may distinguish us from other people. Again, at EMCOR in RPOs is only contracted work. That includes places where we may have $30 million in RPOs, but we know we’re going to do $100 million of work. We’ve been relatively consistent with that. In general they’re getting larger, I think is a fair comment. The project size is getting larger and that’s a combination of larger cloud storage sites and larger AI sites, for sure, with more content, especially mechanically.

Chris, Conference Operator: Are you booking further and further, like earlier and earlier for projects that may not start, let’s say, for a few quarters?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: No, we know we’re probably going to get those projects. Again, what differentiates EMCOR from some other people in our sector, our space is even though we’re pretty sure we’re going to get the next five buildings, until that next data center is let, it’s not in our RPOs, even though it’s like an 80% to 90% probability we’re going to get it.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: If you’re looking at the growth in RPOs greater than a year, it’s not data centers that’s driving that. It’s some of the other work we do, particularly in the water, wastewater.

Chris, Conference Operator: Okay, that’s helpful. Is there anything in your 2025 guide for the acquisition that you just referenced?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: No. That’ll be any impact they have for 2025 will be immaterial. Maybe a little bit on the revenue side, but we don’t know exactly when we’ll close. You have to offset that versus when the UK will close. We think we called it about right. If the UK closes later and this one closes earlier, maybe we go towards the top or the higher, the top end of that guide more comfortably.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Yeah. On the bottom line, right, if you just think EPS just because of the backlog amortization, and we typically say this, the impact is negligible in that first, let’s say, 12 months or so just because of the backlog amortization. Certainly for the fourth quarter, impact on EPS of the acquisition should be minimal.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: The minimum, yeah.

Chris, Conference Operator: Okay, great. Thank you so much. Appreciate it. The next question is from Adam Boops with Goldman Sachs. Please proceed.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Hi, good morning.

Chris, Conference Operator: I think your hours per employee has.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Moved up steadily higher over the last few years. Can you just talk about how much?

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: More runway you have to increase utilization both from an hour per employee and then in terms of just productivity?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: I think we’re going to continue to drive productivity again because of project mix and, you know, like we do with more water, wastewater coming in, that is even more different because of some of the subcontractor work we do. I think in general, right, if you look at it at a minimum, I think we’re going to continue to drive at least 3% to 5% better because we got to a pretty good place productivity. I think it will be higher than that. Go back to that discussion we just had about our shop investments. You know, we’re doing our man hours are growing less than our revenues, and we expect that, you know, man hours to continue to grow a third to half as much as what revenues will grow.

In most of our revenues, this is what’s interesting, right, at one time, if you go back five or six years, we would have had much more equipment in those revenue numbers. If you take most of this data center work or high tech manufacturing work we’re doing, even some healthcare work, we’re not really buying the major components. Most of that was driven by supply chain, the difficulties around supply chain post Covid and extended lead times. The owners or the owners through the CMS general contracts, but mainly the owners are buying that equipment now and then sending it to us for a handling fee.

The revenue growth would even be more, and the productivity we’re getting and the ability to grow hours at a third to half the rate of revenues is even more impressive if you look over the last three to five years versus if you took a ten year view. Jason, do you have anything to add?

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Yeah, we’ve talked about it before. If you look over a five-year period, revenue is growing basically three times what our headcount’s growing. I think Tony touched on the productivity tools and the investments in prefabrication. I think the other thing impacting that too is project sizes. Right. As project sizes scale up, you inherently get more utilization and more benefit.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Especially if you’re indirects.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Yes.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Got it. Your data center business has grown at a really impressive high double-digit rate. The backlog would support sort of continued double-digit growth.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: Can you just take us under the hood and help us think how you’re

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Able to allocate resources so efficiently.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: How quickly you’ll be able to move.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Labor around from here.

Jason Nalbandian, Senior Vice President and Chief Financial Officer, EMCOR Group: What’s sort of the sustainable rate of growth that we should be underwriting in that business?

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Look, I think if you heard what I just said earlier and I think you’re probably, Adam, looking at the same market forecast we are and compiling them all and trying to get a view. Cloud storage is going to go 9, 10% is what most people think over the next five years. And AI, depending on which ones you look at, are in excess of 20, 25%. If you blend that out, we’re doing both. There’s no reason for us not to believe it’s not a quarter to quarter business. We continue to look annually, year over year. I don’t know, mid teens, low 20s, depending on the year or the quarter. Eventually you get into the law of large numbers there too, but sustainably. I think the good news is we’re penetrated with the right customer.

I’ll just share an anecdote with all of you because I think it’s really constructive. We are a large data center builder that our customers value and we just pulled together our 80 top people or so in the data center business and we actually did it down at Miller and they hosted it. First of all, it was a really impressive group of people that really know the business and know the customers. What we talked about on our side were means and methods and how to drive productivity and contract terms and the things we’re seeing that can lead to better outcomes for not only EMCOR, our shareholders, but also the customer.

What was different about this meeting, and you know, I’ve been doing this for a little while, is I’m not going to get into names of three of the top four actual end use, the actual end resulting capital. The other two wanted to come in but the schedules wouldn’t allow and they’ve since done conference calls on these where the direct owners wanted to come in and make sure that we understood what they had planned and how much they wanted us to be part of those plans going forward. This is looking right through the general contractors and construction managers who are ultimately who write our checks and are very important customers for ours and partners. The end user, you know, the big hyperscalers, wanted us to know how important and share their plans with us on a proprietary basis.

I’m not going to share all those plans obviously because it was on a confidential proprietary basis. To be able to pull our team together like that, to be able to talk about how we get better, to be able to talk very specifically around means and methods and labor productivity and couple that with our customers sharing their outlook of their capital spending, that led me obviously more positive than negative by a long shot on what data center build looks like over the next five years. Terrific in that data center build.

Chris, Conference Operator: At this time, we are showing no further questionnaires in the queue. This does conclude today’s question and answer session. I would now like to turn the conference back over to Tony Guzzi for any closing remarks.

Tony Guzzi, Chairman, President and Chief Executive Officer, EMCOR Group: Look, we’ll see a couple of you and we’ll see some of the more investors as we’re out and about with conferences here in November and December. For the rest of you, this will be the premature Happy Thanksgiving and have a great end of the year and happy holidays and all those things. For those of you that enjoy Halloween, enjoy Halloween tomorrow. Mostly that should be people with little kids. After that it’s not that much fun. That’s my view. Thank you all and to my EMCOR colleagues, stay safe and we look forward to seeing you out and about.

Chris, Conference Operator: Today’s conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect your lines.

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