Good morning. My name is Megan and I will be your conference operator today. I would like to welcome everyone to the EMCOR Group Second Quarter 2023 Earnings Call. All lines have been muted to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. Mr. Blake Mueller with FTI Consulting, you may begin.

Thank you, Megan, and good morning, everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2023 second quarter results, which were reported this morning. I would like to turn the call over to Kevin Matz, Executive Vice President of Shared Services, who will introduce management. Kevin, please go ahead.

Thanks, Blake. Good morning, everyone. Thank you for your interest in EMCOR, as always, and welcome to our earnings conference call for the second quarter of 2023. For those of you who are accessing the call via the Internet and the website, please welcome as well. We are at the beginning of our slide presentation, and we are on slide two. This presentation and discussion contains forward-looking statements and may contain certain non-GAAP financial information. Page two describes in detail the forward-looking statements and the non-GAAP financial information disclosures. I encourage everyone to review both the disclosures, in conjunction with our discussion and accompanying slides. Slide three has the executives who are with me to discuss our results for the quarter and six months. With me are Tony Guzzi, Chairman, President and Chief Executive Officer; Mark Pompa, our Executive Vice President and Chief Financial Officer; and Executive Vice President and General Counsel, Maxine Mauricio. For participants not accessing the conference call via the Internet, this presentation, including the slides, will be archived in the Investor Relations section of our website under presentations. You can always find us at emcorgroup.com. With that said, please let me turn the call over to Tony. Tony?

Thanks, Kevin, and good morning, and thanks for joining our call. I will be speaking to the second quarter results in my opening commentary. Mark is going to cover both the second quarter and year-to-date results. I will be speaking to pages four through six in my opening comments. We had an extraordinarily strong second quarter, by any measure, at EMCOR. We had revenues of $3.05 billion, which represents 12.5% revenue growth and 11% organic revenue growth. We earned $196.7 million in operating income, and our operating income margin was a strong 6.5%. Diluted earnings per share totaled $2.95. This performance represents an all-time quarterly record for revenues, operating income, operating income margin and diluted earnings per share. We generated strong operating cash flow of $300 million in the quarter and grew our remaining performance obligations or RPO sequentially from Q1 by $413 million or 5.2%, and from the year ago period by $1.8 billion or just over 28%. Our business is performing well across nearly all segments and end markets. Our Electrical and Mechanical Construction segments continue to perform well as evidenced by the strong revenue growth of 20.2% and 12.9%, respectively. With Mechanical Construction operating income margin of 10% and Electrical Construction operating income margin of 7.5%, the conversion to operating income by these segments, especially Mechanical, are towards the high end of our expectations. Across the country, we are executing well on some of the most sophisticated projects and markets, such as high-tech manufacturing, which includes semiconductors, the electric vehicle or EV value chain, biotech, life sciences and pharmaceuticals. The network and communications sector, which encompasses our data center work and the healthcare sector, are also performing well. We have industry-leading capabilities in BIM or Building Information Modeling, prefabrication, project planning, labor sourcing, management and training. We offer a breadth of mechanical capabilities from HVAC, process piping, plumbing, and we're also a leading fire protection and life safety contractor, and our customers look to us to perform complex installation in the markets I just referenced. Our segment and subsidiary management teams are leading in an exceptional manner and allocating resources in a thoughtful and pragmatic way, while working towards outstanding outcomes for our customers. We continue to strive to optimize our project mix to produce great financial results. Our US Building Services segment continues to perform well, and it has a strong mix of work across its service lines. Revenue of this segment grew 12.9% in the quarter, with an operating income margin of 6%. Demand continues to be strong and persists for our mechanical services, with excellent execution across retrofit projects, building controls and maintenance and repairs. We are working across a variety of end markets, including traditional commercial markets, but also high-tech manufacturing, institutional and healthcare customers who remain focused on energy efficiency in indoor air quality or IAQ upgrades. We expect to have a strong repair service season because of the heat that has blanketed most parts of the country as well as extended lead times for applied equipment. This segment continues to enter into facility maintenance contracts, and there is strong demand for our site-based and robotic technician services. We're also excited about our pending acquisition of ECM. ECM is a bolt-on acquisition that adds capability. ECM will enhance our energy efficiency service offerings and will allow us to offer such services in a more programmatic way to owners looking for multisite and multiyear programs. Welcome to EMCOR, the ECM folks soon. Our Industrial Services segment continues to improve at a modest pace. We executed a more normal spring turnaround season, and demand for our niche services is robust. Within our shop services, we are beginning to see increased levels of capital spending in the form of greater new build heat exchanger orders. We continue to wait for the resumption of demand for utility scale solar and are well positioned when the supply chain issues subside. Our UK business performed in a manner consistent with the available market opportunities. While we saw a reduction in quarterly revenues, the team remains focused on profitability, as evidenced by the consistent year-over-year second quarter operating income margin. Building on its normal base of facility services contract, EMCOR UK continues to perform various project work for its customers, much of which is aimed at helping develop and implement multiyear energy reduction programs. Overall, EMCOR continues to have a strong balance sheet that supports our organic growth and the capital investment needed for that growth. We also have the firepower to add bolt-on acquisitions, like ECM, which we hope to close soon, that help us expand our capabilities in support of our customers. With that, Mark, I'm going to turn it over to you.

Thank you, Tony, and good morning to everyone participating on the call today. For those accessing this presentation via the webcast, we are now on slide three. Over the next several slides, I will supplement Tony's opening commentary on EMCOR's second quarter performance as well as provide a brief snapshot of our year-to-date results through June 30. All financial information referenced this morning is derived from our consolidated financial statements, included in both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier this morning. So let's revisit and expand our review of EMCOR's second quarter performance. Consolidated revenues of $3.05 billion are up $338.2 million or 12.5% over quarter two 2022. Our second quarter results include $40.6 million of revenues attributable to businesses acquired, pertaining to the time that such businesses were not owned by EMCOR in last year's second quarter. Acquisition revenues positively impacted our United States Electrical Construction segment within the quarter. Excluding the impact of acquisitions, second quarter consolidated revenues increased approximately $297.6 million or 11% quarter-over-quarter. Before reviewing the operating results of our individual reporting segments, I would like to reiterate what Tony highlighted earlier, that our $3.05 billion of quarterly revenues represents a new all-time quarterly revenue record for the company. The specifics to each of our reportable segments' second quarter revenue performance is as follows. United States Electrical Construction segment revenues of $678.2 million increased $114 million or 20.2% from 2022's comparable quarter. Excluding incremental acquisition revenues, the segment's revenues grew a strong 13% organically period-over-period. Increased project activity within the majority of the market sectors served by this segment led to the quarterly revenue improvement. Such growth was most prevalent within the network and communications, manufacturing and industrial, healthcare and hospitality market sectors. Revenue of this segment was also positively impacted by slightly improved supply chain environment with regards to equipment procurement. Revenues of our United States Mechanical Construction segment of $1.19 billion increased $136.5 million or 12.9% from the year ago period. Revenue growth during the quarter was largely driven from increased activity within the high-tech manufacturing, network and communications and commercial market sectors. Consistent with this segment's first quarter performance, we are experiencing growth in both fire protection as well as traditional mechanical construction services. This increased demand is stemming from customer projects supporting the design and manufacture of semiconductors, as well as electric vehicles and/or related battery technologies. There additionally continues to be greater demand from our data center customers. With these results, both our Electrical and Mechanical Construction segments established new second quarter revenue records. Additionally, our combined U.S. construction revenues as well as that of our U.S. Mechanical Construction segment surpassed the previous all-time quarterly revenue records. United States Building Services segment revenues of $775 million increased $88.5 million or 12.9%, representing an all-time quarterly record for this segment. Revenue growth was experienced across each of the divisions, with the majority generated from mechanical services. Contributing to this performance was increased HVAC project and retrofit revenues due to slightly improved equipment availability that facilitated greater project execution when compared to 2022. In addition, as commented during prior quarters, this segment continues to experience strong demand for certain of its service offerings as our customers seek ways to improve energy efficiency and/or indoor air quality of their facilities. EMCOR's Industrial Services segment revenues of $292.3 million increased $7.7 million or 2.7% as we continue to experience a resumption in demand for our field services and are starting to see increased levels of capital spending within this segment's shop services. United Kingdom Building Services segment revenues of $106 million represent a reduction of $8.5 million or 7.4% from last year's second quarter. In addition to a minor degradation in the exchange rate between the British pound and the United States dollar, the period-over-period revenue decline is a result of the loss of certain facilities maintenance contracts due to nonrenewal. Further contributing to this decrease in revenues is a reduction in project activity, as certain of the segment's customers are re-evaluating their capital spending programs in light of the macroeconomic headwinds within the UK. Please turn to slide eight. Reported operating income for the quarter was $196.7 million or 6.5% of revenues and favorably compares to $137.6 million of operating income or 5.1% of revenues a year ago. Consistent with my revenue commentary and Tony's opening remarks, the current quarter's consolidated operating income and operating margin each represent new all-time quarterly records for EMCOR. Specific operating performance by segment is as follows: our US Electrical Construction segment earned operating income of $50.7 million, an increase of $15.6 million from the comparable 2022 period. Reported operating margin of 7.5% represents an improvement from 6.2%. And last year's second quarter, consistent with the segment's first quarter performance, we experienced better project execution as well as a more favorable revenue mix year-over-year. Such execution, coupled with a steady improvement within the supply chain and our ability to adapt to the current operating environment, resulted in a reduced level of discrete project write-downs quarter-over-quarter. Second quarter operating income of our US Mechanical Construction segment of $119.8 million represents a $43.2 million increase from last year's quarter, and operating margin of 10% represents a substantial improvement from an already strong 7.2% in the second quarter of 2022. Growth in both gross profit and gross profit margin, due to a more favorable revenue mix, including a higher percentage of self-perform projects, were the most significant contributors to this improved operating performance. In addition, the segment benefited from a lack of significant project write-downs when compared to last year, as well as the favorable closeout of several projects during the current year quarter. Operating income for US Building Services was $46.1 million or 6% of revenues and compares to $38.5 million or 5.6% of revenues in 2022 second quarter. Improved operating performance within the segment's Mechanical Services division, as a result of both favorable project execution as well as the impact of contract price adjustments in response to inflation were the primary drivers of the period-over-period increases. Our US Industrial Services segment's operating income was $7.9 million, or 2.7% of revenues, represents a slight increase in terms of both dollars and margin from the comparable prior year period. We are seeing incremental demand across the segment's scope of services, which has led to a better mix of revenues and resulted in higher gross profit and gross profit margin. Resulting from the reduction in revenues previously referenced, UK Building Services operating income of $5.9 million represents a modest decrease from Q2 of 2022. However, operating margin of 5.6% remains consistent with that of the prior year, reflecting greater gross profit contribution from this segment's current portfolio of work. We are now on slide 9. Additional financial items of significance for the quarter not addressed in the previous slides are as follows. Quarter two gross profit of $490.1 million is higher than the comparable 2022 quarter by $107.1 million or 28%, and gross margin of 16.1% has improved 200 basis points quarter-over-quarter. Selling, general and administrative expenses of approximately $293.4 million represent 9.6% of revenues and reflect an increase of $48 million from quarter two 2022 SG&A for the current year's quarter includes approximately $5.1 million of incremental expenses from businesses acquired, inclusive of intangible asset amortization, resulting in an organic SG&A increase of $42.9 million. EMCORE's continued double-digit revenue growth has necessitated investments in human capital in the form of additional personnel and training to support our back-office and contract administration functions. This, coupled with annual cost of living increases for our existing workforce, has resulted in a quarter-over-quarter increase in salaries and benefits. Also impacting our second quarter overhead was incremental expense pertaining to incentive compensation programs across the majority of our reportable segments. This is due to our higher operating results to date as well as our revised profitability projections for full year 2023, which has necessitated our second upward revision in our annual earnings guidance. Tony will speak to our guidance range in detail later in this morning's presentation. Diluted earnings per common share was $2.95, as compared to $1.99 in the year ago quarter. Our second quarter performance establishes a new quarterly earnings per share record due to the combination of our strong net income and our share repurchase activity, which has reduced our actual and weighted average shares outstanding. Please turn to slide 10. With the quarter commentary complete, I will touch on some highlights with respect to EMCOR's results for the first six months of 2023. Revenues of $5.94 billion represent an increase of $636.1 million or 12%, of which 10.6% was generated organically. Operating income of $351.6 million or 5.9% of revenues represents a 48% increase from the results of the first six months of 2022, as we have experienced improved operating income and operating margin in each of our domestic reporting segments. Our year-to-date diluted earnings per share was $5.28, which represents an approximate 57% increase over the $3.36 reported in 2022 as corresponding six-month period. With substantial growth in our net income, coupled with an almost 8% reduction in our weighted average shares outstanding due to our share repurchases throughout 2022 and 2023, we have been able to drive significant EPS growth on a year-to-date basis. My last comment on our results for the first half of 2023, and Tony commented specifically on the quarter, is that our operating cash flow of $214.9 million on a year-to-date basis represents a significant improvement over the cash used in operations of $18.9 million in 2022 six-month period. Despite our significant organic revenue growth and the resulting demands on working capital investment, our subsidiary management teams have done an excellent job of generating cash flow conversion, something we have been doing consistently over a long period of time. We are now on slide 11. EMCOR's balance sheet remains strong and liquid, and we continue to be in a position to invest in our business, return capital to shareholders and pursue strategic M&A investments. Fluctuations when compared to December of 2022 are as follows: Cash on hand was just over $503 million, which represents an increase of $46.6 million. Our exceptional operating cash flow was partially offset by cash used for financing activities of $126.4 million, inclusive of just over $105 million for the repurchase of our common stock. In addition, we've utilized $48.4 million for investing activities in the form of capital expenditures and acquisitions. Resulting primarily from our organic growth during the period, our working capital balance has increased by nearly $152 million. The $8.3 million increase in goodwill is entirely a result of the five acquisitions completed by us thus far in 2023, while net identified intangible assets have decreased by $19.5 million as the additional intangible assets recognized in connection with such acquisitions were more than offset by $32 million of amortization expense in the first half of the year. Total debt has remained substantially consistent our stockholders' equity balance has increased by $143.8 million as our net income for the period exceeded our share repurchases and dividend payments. As a result of our consistent debt balance, coupled with the increase in stockholders' equity, EMCOR's debt to capitalization ratio has reduced to 10.4% from 11.1% at year-end 2022. EMCOR was anticipating a strong 2023 after a record 2022, and our performance to date as well as revised expectations for full year 2023 are validating such expectations. With my portion of this morning's slide presentation complete, I will now return the call back to Tony.

Thanks, Mark. I'm going to be on page 12. Before we dive into the absolute levels of our remaining performance obligations, I want to take a moment to discuss the factors driving our impressive organic and RPO growth over the past two years, as well as the sources of our profitable organic growth. If you examine this page, you'll notice that the trends we’re highlighting are prominently featured in the news daily. These trends are not only capturing the attention of customers making investments but are also the focus of government policy aimed at strengthening these sectors for the long term. Each of these sectors requires a highly skilled workforce, including expert supervision, project managers, and engineers who are among the best in the industry. Moreover, government incentives are supporting these efforts by ensuring that skilled labor is present on these projects, as it leads to increased productivity, safety, and training. Let’s discuss these sectors one by one, noting how a couple of them are interconnected. The first sector is electrification, particularly the electric vehicle value chain, which in many ways represents a new industry being established around plants and suppliers. We’re seeing substantial activity in battery plants, especially in the Midwest, Southeast, and to some extent, the Southwest. We are actively engaged in many of these initiatives and expect more to come. Although the pace of actual delivery has been somewhat slow, we are optimistic about the sector and continue to secure contracts across all our trades, including electrical, mechanical, and fire life safety. Our fire life safety products are particularly sought after, providing comprehensive solutions in terms of sprinkler systems and fire alarms, giving clients confidence in our ability to deliver complex systems. We’re also involved in EV charging stations at scale, supplying significant megawatts for fleet charging or centralized hubs. While we participate in local installations, we focus mainly on large-scale, megawatt-driven charging stations rather than individual passenger vehicle rollouts. We believe that electrification signifies an energy transition, but at EMCOR, we see it more as an energy expansion. Consider all the activities on this page that require substantial energy; the solutions needed to make that energy cleaner will involve a mix of various energy sources. We’re only in the early stages of this trend, and government incentives introduced through various acts will help maintain this momentum. Next, let’s look at the semiconductor manufacturing sector, which is on the rise due in part to the CHIPS Act. We're involved in various capacities, including mechanical work, high-purity piping, and HVAC process cooling. Our participation varies by market and takes advantage of our subsidiaries’ capabilities. We are also active electrically, particularly in low-voltage communication, and we provide fire life safety across numerous plants. Turning to the pharma and biotech sectors, we are witnessing a trend toward reshoring in response to the need for supply chain resilience. As demand for new drugs, such as Ozempic, increases, facilities in key areas like Research Triangle Park and Southern New Jersey, as well as Southern California, are expanding. In life sciences R&D, we see developments in commercial conversions and in incubator companies, where we help build out the necessary facilities. Regarding data centers and connectivity, we've received questions about potential slowdowns in data center construction, and we remain confident that this segment will continue robustly. Major data center owners have recognized the growing demand for capacity driven by cloud computing and AI, leading them to secure land and begin new construction projects. Today’s hyperscale data centers, which we’re constructing, require between 75 and 125 megawatts of power, far exceeding previous benchmarks. In healthcare, we maintain a positive outlook as healthcare facilities are very intricate and require comprehensive systems for operations, including advanced outpatient clinics. The pandemic has underscored the importance of flexibility in hospitals, prompting an increase in patient power and sophisticated facilities. On the topic of reshoring and nearshoring, we previously anticipated this trend, particularly in the Southeast, and it’s gaining traction due to supply chain consolidation concerns highlighted by the pandemic and geopolitical tensions. Now, companies are focused on resilience and automation across industries. Lastly, energy efficiency and sustainability represent long-term commitments for us. Advances in HVAC technology have significantly improved energy efficiency, and customers are increasingly interested in waste reduction and alternative energy solutions. The integration of utility and governmental incentives is further fuelling this trend. As for our RPO growth, by the end of the second quarter, we reached nearly $8.3 billion, reflecting a 28% increase from the second quarter of 2022. We saw strong bookings in the second quarter, up $827 million from the end of 2022 and $413 million from the end of the first quarter. Specific segments include a 33% rise in domestic construction RPO, 14.5% in Building Services, and a 52% increase in Network & Communications. The high-tech manufacturing sector has grown 160%, while healthcare RPO has risen by 50%. Our bid log remains robust, and we see substantial opportunities across multiple sectors, with some exceptions in transportation and water. Despite these challenges, we have strong market participation and technical expertise, enabling us to deliver uniquely tailored solutions. Now, addressing our earnings guidance, we are raising our diluted EPS estimate from a prior range of $9.25 to $10 to a new range of $10.75 to $11.25, while keeping our revenue guidance at $12 billion to $12.5 billion. We are executing efficiently in key sectors, reflected in our record operating income margin. Although we face some challenges, we believe our strong balance sheet positions us well for upcoming projects, and we remain dedicated to our workforce development and addressing market disruptions. Thank you to our team for their hard work, and I’ll now turn it over to Megan for questions.

Thank you. We will now begin the question-and-answer session. The first question comes from Adam Thalhimer with Thompson, Davis. Please go ahead.

Hey, good morning. Congrats on a good quarter and thanks for all the commentary on slide 12, Tony. I guess the biggest question is, how does that all wrap up into your thoughts on the prospect for continued sequential backlog growth?

Yes, I've mentioned this many times before. We have a strong level of RPOs, and there are opportunities ahead of us. Large projects and awards are coming in. Just because something is booked a couple of weeks after the end of the quarter doesn’t indicate a loss of business momentum. Additionally, as sites develop, such as new semiconductor or EV sites, the initial awards can be substantial, followed by additional work over roughly 18 months, which can be just as significant, even if it's phased out. What I know is that our business momentum is solid, and we are focused on broad trends that are not only propelling our business but also influencing the sector and the economy. We possess a valuable asset: highly skilled technical labor capable of executing challenging tasks and providing services in tough environments. Throughout my 19 years in this field, I've never concentrated on sequential RPO or backlog growth metrics. I have noted that we've maintained a book-to-bill ratio of over 1 for about 8 or 10 consecutive quarters. While I don’t foresee a slowdown, I also think that if it were to drop to 0.98, it wouldn't concern me greatly.

Great. And then I hate to ask for guidance within the guidance, but can you give us any help on how you guys see the back half playing out between Q3 and Q4?

We have. You know what? This is all project timing-related. When a turnaround starts and ends, we've never provided quarterly guidance, and I don't think we're going to start now. Are we Mark?

No, we're not.

And then lastly, fire protection. Can you give us a sense for how accretive that is to mechanical margins?

Well, it operates at better margins than the base business. Some of that has to do with the material component of those jobs. It has a higher labor component, but it's helping. It's providing a nice cap on it. But you know, it's a tough job, so we've got to execute.

Okay, I'll turn it over. Might hop back in. Thanks so much.

Can you give us a sense for how accretive fire protection is to mechanical margins? It operates at better margins than the base business. Some of that has to do with the material component of those jobs. It has a higher labor component, but it's helping and providing a nice cap on it. However, it's a tough job, so we need to execute.

Hey, Adam. Hop back in if you want.

Okay. Sorry I did want to ask about the shop business. When was the last time the shop business was strong? I can't even remember.

2018, '17, '18.

And how meaningful could that be to that segment?

It's not nonmeaningful.

And also on my list, I had solar. When you thought that might gain traction?

There's probably people better qualified than me to talk about that because of where we are in the chain to deliver those projects. There's a lot of things on the drawing board. There's a lot of land bought. There's a lot of contracts. Purchase power agreement is out there. We had a full book of business. I expected to do 10%, 12% revenue of that segment. But the reality is, there's not a lot happening there right now. Now the smaller ones are happening. So when we're on a hospital site or a campus site where we're doing the car ports, actually, one of our suppliers is doing that as part of our overall energy program for some of our bigger customers. We can get them there. When you're talking utility scale solar, and again, I think there's probably people that are better qualified than me to talk about that. We're just not seeing the activity we expected to see this year.

Okay. All right. Thanks guys.

Hi, Team. Many compliments. Really fantastic update here. So I wanted to talk a little bit more about the margins, which is really the big upside toggle and the outlook for the year. Obviously, we had a really strong start on margins in the first quarter, but you guys kind of held back from flowing through that really strong start to the year. And then here we are in 2Q, kind of blowing out margin expectation, and you guys are releasing more of that kind of elevated margin and a juicier guidance update. So I just wanted to get a sense for what changed in your view? And what's kind of come through stronger to give you more confidence to just guide margins up from here versus last quarter?

I'll provide a general overview and then hand it over to Mark. We have increased confidence in three areas. First, we have clear visibility on our upcoming projects and their completion timelines. Second, our mix of trades is favorable. There is strong demand in fire life safety, our electrical division is performing well, and all our core mechanical services are succeeding. Additionally, we anticipate a typical fall turnaround season. Overall, these factors contribute to our improved outlook, and I will allow Mark to elaborate on the specifics.

Yes, I think it's clear that the first quarter is typically one of our weaker periods of the year, even though our Industrial Services segment is active during the early spring turnaround season. Looking back to where we were at the end of last year, the revenue mix was decent, though we had some projects that were only marginally successful or resulted in losses. The concept of avoiding negative outcomes is particularly relevant for the 2023 period, and aside from one project, we've addressed all issues. In terms of supply chain, while it isn't perfect, it has normalized compared to the middle of last year. We're seeing a good flow of equipment from OEMs, allowing us to use our labor efficiently, which is improving margins. In the US Mechanical Construction segment, we also achieved some positive project closeouts. We can only control project timelines based on our customers' needs, but when we manage fixed-price projects effectively, we see the results in our performance. This trend was evident in the second quarter, and as we look ahead to the remainder of 2023, we don't anticipate major problems, although we have numerous active projects and a large workforce that must maintain high performance levels. In summary, our business outlook is strong, we are satisfied with our labor resources on jobs, and while external factors still pose challenges, we've observed some stabilization that gives us positive momentum for the business outlook.

Right. Bottom line is, we called revenue about right at the beginning of the year, but our margins are 100 basis points higher than 125 basis points higher than we thought they were going to be.

Okay. Got it. That's helpful. And do you think that we're setting tough margin comps here in 2023? Or do you feel like in light of the mix of work in the pipeline, the complexity of projects driving RPOs and the bid pipeline, that there's some differentiation in the marketplace that perhaps we haven't seen before? And we could view this performance we're seeing here as sustainable?

Sean, I want to clarify my thoughts on backlog and margins. One quarter alone doesn't establish a trend; we need to look at four to five quarters to understand the direction. Margins can fluctuate due to factors like job types and contract varieties. I mentioned last year, after the first quarter, that we faced some challenging projects taken on before the pandemic, and we didn't initiate the expected data center work in the Electrical segment. We're focusing on underlying productivity and the strategies we're implementing to enhance it. Unlike a manufacturing plant, contractors can't retain productivity benefits, but we can adopt the ideas to drive that productivity. So, fluctuations from quarter to quarter are possible. However, we believe that we will see strong margin performance for the remainder of the year. We are currently at record levels for RPOs and are pleased with the working mix, but we need to execute effectively and maintain customer relationships.

Okay. Got it. And then just kind of going back to your end market drivers commentary, Tony. I mean we look at the RPO disclosure as kind of a leading indicator of demand. And I wondered if you would say that perhaps there's greater visibility in the model, then we can even really observe in the RPO disclosure, just in light of there being more programmatic and larger multiyear programs. Just kind of more complex infrastructure challenges driving the business that would suggest perhaps you have more of a multiyear type of visibility that isn't fully captured in what we see in RPO? What would you say there?

Yes. While discussing page 12, I noted that as a contractor, we don't usually draw broad conclusions about five-year forecasts. However, I believe I mentioned that while I wasn't certain how everything would unfold, the six factors currently influencing our RPOs seem likely to continue driving our business for the next two to three years. The specifics of how that plays out could vary from quarter to quarter. What I do know is that we're positioned well in essential infrastructure sectors, not the large infrastructure but the smaller ones, and we feel confident about that. However, we need to execute daily, as our performance is evaluated by our customers every day. Although a site might be secured for five years, it could pause for six months unexpectedly, which is beyond our control. We experienced this last year in the data center business. Our electrical business has a strong position in the data center market across all key geographic areas, but competition is always present. Additionally, we do not control when projects begin. Last year, we anticipated starting several projects in the first quarter, but that did not happen. There were various delays, primarily because of owner-procured materials, such as switchgear and smart panels. As a result, we shifted our start dates from February 1 to May 1, absorbing the costs of supervision during the wait because we want to retain our key personnel for the long term. The trend is positive, and I've faced questions regarding whether the data center build's completion would limit us, but here we are with $1.2 billion in network and communications RPOs. The RPO situation is complex, not just a quarterly narrative.

Yes. I think it's notable for you to be talking 2 to 3 years. If you just look at the long-term history of the business for you to be out kind of seeing robust trends out over multiple years, I think in itself is notable.

Yes. Well, I think it's — you can't run from success that you've had where you've entrenched yourself into really good positions. But again, our customers can make a decision not to build in a certain way. I think we'll perform. I don't think that's going to be an issue, but they can delay things by a year. They can delay things by six months. We see none of that today, but we can be talking very different in the first quarter of next year. It doesn't mean it's not a long good term trend. It just means, hey, they took a pause.

Got it. I really appreciate all the insights. I'm going to go see what Brian Lane has to say now.

All right. Thank you. Okay. I think that's it. Thank you all and have a safe rest of summer. Pay attention to the heat and drink a lot of water. Be well. Bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.