Good morning. My name is Cindy, and I will be your conference operator today. At this time, I would like to welcome everyone to the MCOR Group First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. I will now turn the call over to Lucas Sullivan, Director, Financial Planning and Analysis. Mr. Sullivan, you may begin.

Thank you, Cindy. Good morning, everyone, and welcome to MCOR's first quarter, 2026. 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 mcoregroup.com. With me today are Tony Guzzi, our Chairman, President, and Chief Executive Officer, Jason Nalbandian, Senior Vice President and 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 first quarter 2026 and discuss our RPOs. Jason will then review the first quarter 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 two 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. And 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. And with that, let me turn the call over to Tony. Tony?

Yeah, thanks, Lucas. And I'm going to start my discussion on pages three and four. Good morning, and thanks for joining us today. I'm pleased to report another outstanding quarter for MCORP. Our first quarter 2026 results demonstrate the sustained momentum we have built over many years, with strong execution across our business segments and continued growth in our core market sectors and geographies. In the first quarter, we generated revenues of $4.63 billion, representing year-over-year growth of 19.7% and organic growth of 16.8% when adjusting for incremental acquisition contribution and the sale of MCOR UK. Operating income reached $404 million with an 8.7% operating margin, while diluting the earnings per share of $6.84 represents an increase of 30% versus the first quarter of 2025. This reflects our strategic positioning in high-growth markets and operational excellence across our construction and services platforms. These results demonstrate our customers' continued confidence in MCOR as one of their partners of choice for complex, mission-critical projects. Our construction segments once again performed extremely well in the quarter. The electrical construction segment generated a year-over-year revenue growth of 33.1% with a 12.1% operating margin, while the mechanical construction segment achieved 28.9% revenue growth with a 10.9% operating margin. This performance reflects the range of our capabilities across both trades and geographies. It also takes into account increased customer scope and our reputation as one of the premier specialty contractors for complex, fast-paced projects. Our construction segment's growth was driven primarily by increased activity in networking and communications, which is where our data center business rests. Institutional, manufacturing and industrial, health care, and water and wastewater market sectors. Within our mechanical construction segment, we also benefited from increased commercial market sector revenues driven primarily by the resumption of demand for warehousing, distribution, and logistics projects. Our teams continue to leverage our prefabrication and our virtual design and construction capabilities, excellence in labor management and planning, large project coordination and execution, and a disciplined focus on contract negotiation, administration, and the adherence to those terms. The U.S. building services segment delivered solid results, led by impressive performance in our mechanical services division. While we still face slight revenue headwinds within our site-based business, we've begun to see the benefits of the restructuring on the cost side, which reduced overhead costs, and we have a more profitable contract portfolio mix. Our industrial services segment generated revenue growth of 6.4%, and that was driven by our field services division. Now I'm going to turn to page five. Our remaining performance obligation position strengthened significantly during the quarter, providing excellent visibility for sustained growth. Our RPOs totaled $15.62 billion at the end of the quarter versus $11.75 billion in the year-ago period and $13.25 billion as of December 31, 2025. This represents year-over-year growth of 32.9% and sequential growth of 17.9%. These diverse RPOs reflect continued strong demand across many market sectors, with particularly robust activity in network accumulations or data centers, where we continue to expand our geographic footprint and scope of services to better serve our customers. We see no sign of slowing demand in this vertical, where customer investments in AI infrastructure, cloud infrastructure, and overall digital transformation are driving unprecedented levels of activity. We are pleased with the quality and diversity of our work booked outside of the data center space, including notable awards within water and wastewater, as we continue to win new projects in Florida. institutional, driven by demand for upgraded lab space by certain colleges and universities, and healthcare, as our customers continue to monitor their facilities while seeking to make them more flexible and responsive. The strong operational and financial performance I've outlined demonstrate the effectiveness of our strategic initiatives and the depth of our execution capabilities. Our teams continue to deliver exceptional results for our customers while maintaining disciplined financial management and operational excellence and continued good contract negotiation and adherence to the contract terms we negotiate. With that context, I will turn it over to Jason, who will provide a detailed review of our first quarter financial results.

Thank you, Tony, and good morning, everyone. Starting with slide six, which shows revenues, I'm going to cover the operating performance for each of our segments as well as some of the key financial data for the first quarter of 2026 as compared to the first quarter of 2025. As Tony mentioned, revenues of $4.63 billion established a quarterly record for MCOR, increasing 19.7% or 16.8% on an organic basis when excluding acquisitions and adjusting for the sale of MCOR-UK. Revenues of electrical construction were $1.45 billion, increasing just over 33%. This segment generated increased revenues from the majority of the market sectors we serve, with the most significant growth coming from network and communications, where revenues increased by nearly 50%, driven by strong demand for data centers. While this accounted for two thirds of the segment's growth, we did experience notable revenue increases across a number of other sectors, including hospitality and entertainment, due in part to progress made on a stadium project, and institutional as a result of certain public sector projects. In the quarter, our electrical construction segment also benefited from greater levels of short-duration projects and service work. Mechanical construction revenues of $2.03 billion are up nearly 29%. Similar to electrical, this segment once again experienced the greatest growth from the network and communications market sector, where revenues increased by 86%. Increased cooling requirements and advancements in liquid cooling, particularly for AI data centers, continue to drive opportunities for this segment. Beyond data centers, mechanical generated quarterly revenue growth from the majority of the other sectors in which we operate. Notably, institutional revenues doubled year over year. Manufacturing and industrial, including food processing, was up 34%, and commercial increased by 33%, driven by warehousing, distribution, and logistics projects, largely within fire protection. During the quarter, the segment also benefited from increased service revenues as we continued to expand our maintenance and inspection base, both within traditional mechanical services as well as our fire life safety offerings. On a combined basis, our construction segments generated revenues of $3.47 billion, an increase of 30.6%. I should note that this performance established new quarterly revenue records for each of these segments. moving to building services revenues of seven hundred and seventy two point six million grew by four percent driven by our mechanical services division which generated a six percent increase in revenues from a service line perspective the most significant growth was seen in repair service service maintenance and building automation and controls revenues of our industrial services segment were $381.8 million, an increase of 6.4%. Greater contribution from our field services operations, due primarily to progress made on a large solar project, was partially offset by a reduction in revenues within our shop services division due to lower heat exchanger sales and related services. I'll turn to slide 7 for operating income. We generated operating income of $403.8 million, or 8.7% of revenues, both of which are records for MCOR for a first quarter. This represents an increase in operating income of 26.7%, and operating margin expansion of 50 basis points versus the prior year. When adjusting for the acquisition transaction costs, which were incurred in Q1 of 2025, operating income grew by 23.1%, and operating margin increased by 25 basis points. Once again, if we look at each of our segments, due to the growth in revenues, operating income for electrical construction increased by 28.2 percent to a quarterly record of $174.5 million. Operating margin of 12.1 percent compares to 12.5 percent a year ago. With consistent gross profit margins, this segment continues to execute well across its project portfolio, with the year-over-year decrease in operating margin, primarily resulting from an increase in intangible asset amortization given the one month of incremental expense from the Miller acquisition. Mechanical construction had operating income of $221.6 million, an 18.7% increase. From an end market standpoint, this segment generated greater gross profit across many of the sectors in which we operate, with the largest increases generally tracking in line with the growth in its revenues. Operating margin of 10.9% compares to 11.9% in last year's first quarter. As we anticipated when we exited 2025, operating margin of this segment decreased due to a shift in mix that included a greater percentage of revenues from projects where we're acting as either a construction manager or prime contractor, and which inherently carry lower than average gross profit margins due to reduced markups on materials, equipment, and subcontractor costs. In addition, we had an increase in the number of GMP or cost-plus projects, particularly in newer geographies or on projects where scope or design are still evolving. Together, our construction segments grew operating income by nearly 23% and earned a combined operating margin of 11.4%. Building services generated operating income of $40.4 million, which represents an 11.1% increase, and operating margin of 5.2%, expanded by 30 basis points. This segment benefited from strong performance within its mechanical services division, which experienced a favorable mix given the greater volume of higher margin service and controls projects. Also, as Tony mentioned, while we do face some headwinds within our site-based business, the restructuring we did last year has proven to be successful, resulting in both reduced overhead costs and a more profitable contract portfolio. And lastly, operating income for industrial services was $12.8 million, an increase of 89.1%, an operating margin of 3.3%, expanded by 140 basis points. As a reminder, and contributing to the favorable year-over-year comparison, the results for this segment in last year's first quarter were negatively impacted by a $4 million increase in the allowance for credit losses, which negatively impacted operating margin for Q1 of 25 by 110 basis points. Excluding this impact, the remaining increase in operating income and operating margin was primarily a result of greater gross profit and greater gross profit margin within its field services division. If we quickly turn to page 8, I'll cover a few items not included on the previous slides. This profit of $864 million increased by 19.5% and our gross profit margin of 18.7% remained consistent with that of the prior year, which represents a record level of performance for a first quarter. SG&A was $460.1 million, or 9.9% of revenues, compared to $404 million or 10.4% of revenues a year ago. With the top-line growth we experienced during the quarter, we are pleased with the operating leverage we attained, as evidenced by the decrease in our SG&A margin. And finally, on this page, diluted earnings per share was $6.84, which represents an increase of 30% or 26.4% when excluding the transaction costs in last year's first quarter. And finally, for me, let's turn to slide 9, which covers our balance sheet. Our balance sheet, including $916 million of cash on hand and $1.25 billion of working capital, remains strong and liquid and enables us to continue to fund organic growth, pursue strategic M&A, and return capital to shareholders. During the quarter, we returned $105 million of cash to our shareholders through stock repurchases and our quarterly dividend. Although not shown on this page, due to an increase in accounts receivable, given our strong organic revenue growth, and coupled with the payment of the prior year's incentive compensation awards, cash flows from operations in the first quarter were essentially neutral. However, for the full year, we remained confident in our ability to generate operating cash flow at least equivalent to net income or up to 80% to 85% of operating income consistent with previous years. With that, I'll turn the call back over to Tony.

Yeah, thanks, Jason. And I'm going to be on pages 10 and 11. Given our strong start to the year and the strength of our remaining performance obligations, we are raising our full year 2026 guidance. We are increasing our revenue and diluted earnings per share guidance to a range that reflects our confidence in the sustained operational excellence that we have exhibited and strong market momentum. Such guidance reflects the demand that we are seeing and our success in winning and executing large-scale projects across many geographies and market sectors. We now expect to earn revenues of between $18.5 and $19.25 billion and dilute its earnings per share of between $28.25 and $29.75. As a reminder, MCOR's business is characterized by project cycles and timing then can create quarterly variability. However, our guidance reflects our current expectation of continued strong operating margins throughout 2026, supported by disciplined project selection and execution. We are focused on maintaining pricing discipline while delivering exceptional value to our customers. Our sustained success is built on focused execution across a number of key priorities that differentiate MCOR and position us for continued growth. I'm now going to highlight four of them. The first one is our training, peer learning, and our productivity initiatives. We continue to leverage our training programs, our virtual design and construction capabilities, and prefabrication facilities and capabilities, and advanced project planning and delivery methodologies. We are committed to improving our means and methods every day, sharing knowledge across our organization, and investing in workforce training, retention, and expansion. The second item is contract management discipline and negotiation. We deliver exceptional results for our customers. However, we do protect our rights and interests through careful contract management, negotiation, particularly on complex, fast-paced projects. Third, we're known for field service, field leadership excellence. One could argue that is our core product. Our field leadership excellence from frontline foremen and superintendents to project managers and executives and subsidiary and segment leaders make MCOR and employer a choice in our industry. And finally, supporting all that is our commitment to invest with discipline and for the long We maintain a disciplined approach for how we grow organically and through acquisition. This, coupled with the return of cash to shareholders through dividends and share repurchases, has provided the foundation for our compounding record of success over the past decade and provides balance to our approach to capital allocation. These interconnected priorities create a sustainable competitive advantage that drives superior, durable performance across many diverse geographies and market sectors. The fundamentals of our business remain strong, with sustained demand across several key market sectors. We will continue to always face macroeconomic challenges. In fact, I can't remember a time when we haven't had them, such as geopolitical events, rising commodity prices. but our team has consistently demonstrated the ability to navigate complexity and continue to deliver results. Our success is a direct result of their dedication, their resilience, expertise, which results in executional excellence from our teammates across the organization. I want to thank every member of the MCOR team for their contributions to our outstanding first quarter performance and over the long term. and for everything you do to serve our customers, keep each other safe, and drive our success every day. Thank you for your time this morning. We will now open the line for questions, and Cindy, I will turn the call over to you.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. First question comes from Adam Salheimer of Thompson Davis. Go ahead, please.

Hey, good morning, guys. Congrats on the strong Q1 and the record orders. um i guess i wanted to start on the book to bill and orders i mean i think at 1.5 times that was a record book to bill for you guys and tony you you broadly talked about the the pipeline but i'm just curious if you can give more detail on the pipeline and what the expectation should be for orders for the rest of the year well i think i think i go back to something i said in our book right orders come when they come, projects come when they come, there's variability quarter to quarter both on bookings and when projects start, when they close, and what the pace of contracts are.

So you know I'm not going to tell you what I see for orders for the rest of the year other than to say this. We continue to see, and I said it in my script, we continue to see no slowing of demand, especially in data centers, and really across other key market sectors. I don't think we're surprised by the demand we're seeing in water and wastewater in Florida, and we're winning a little more maybe than we thought we would. I don't think we're surprised by the demand, continued demand over multi-years in healthcare. We continue to see a strong manufacturing and industrial business. I mean, projects can come in there a little lumpy, and then it can also come in smaller task orders thereafter. I think the market that surprised us the most over the last six to nine months or two to three quarters has been the institutional market. That has shown more resiliency than we would have thought, but I think that's a result of the market positioning we have in some key markets with some universities that are spending money. I also think that we weren't surprised by the resumption in warehousing and logistics and the transportation network that we're seeing and return in the commercial market sector of that, because we could foresee that based on the customer spending patterns. I would say right now we will continue to grow in excess of non-res like we have historically pretty significantly and we will continue to win important new projects in penetrating current geographies we are and investing in new geographies even if they may seem adjacent across the data center space. One area I'd always remind people because I know the question is coming about high-tech manufacturing. I think that's a market of choice for us. We are well positioned in several key markets, especially in the Mountain West and in Arizona. And we're positioned there specifically across the trades of fire life safety, mechanical, and some electrical. And we have the ability in other markets to serve, especially fire life safety, in just about every high-tech market that exists. We look at that as a flex market. They can be very difficult customers to work for in some cases, especially in the semi-market. And sometimes we're making a mixed management issue within the geographic market to maybe serve a larger data center campus that maybe go after the next semiconductor fab. But again, we feel good about demand right now. Spending patterns remain and uh things are pretty much unraveling for the year much like we expected uh we're not we're not chasing margin percentages right now we're much more focused on growing margin dollars which is what you actually spend and invest for the long term uh that doesn't set me up well for my next question which is on margin percentages but um so high level and thank you for that tiny That was great color.

But high level, I did want to see if I can get at the margin potential in the back half. And maybe a way to do it is just, Jason, I mean, you ran through a bunch of issues that impacted you in Q1 in terms of markups and mix. And maybe you can just talk about how those issues play out as the year unfolds.

Yeah. I think we said this exiting last year, and I think it still holds today, right? If you look at that guidance range we provided, we do have some lower margin scenarios in there which anticipate a changing mix. I think we believe execution is going to remain strong throughout the back half of the year, which gives us the opportunity to replicate last year's record margins at 9-4. But I think some of these mix dynamics will remain with us throughout the rest of the year. I also believe what we've said kind of over the last several quarters that looking at kind of a rolling 12- to 24-month average, I think that holds true, just understanding it's going to fluctuate quarter to quarter just based on that mix, as you kind of saw in mechanical this quarter. But I think the fundamentals still hold, and I think really no significant change from what we said at year end.

Yeah, and I think I'm always careful of false precision. We give a range for a reason. Could we be on top of that range a little bit, but we don't think substantially at this point. They would take something, an execution that we're not seeing right now, or we'd take a booking that happened in a year that had to be done very fast at superior margins. So we have a pretty good handle on what our mix looks like. And I think that's one of the things that's a little bit different than us and some other folks. Some of these companies are becoming one-market companies. We are diverse by nature because of the geographies we serve and some of the companies we have that are earning very good returns that have nothing to do with data centers. and we yeah do we do a little better in the data center market we do on a margin percentage but we should these are fast-paced jobs they require a a very strong dedication of some of our resources and look they come with risk right I mean at the end of the day we're always balancing contract risk versus execution versus type and sometimes that leads us to take a contract structure that may have inherently lower gross margins, but on a risk-adjusted basis. And then it could lead to follow-on work that comes in a fixed-price way, which will then allow us the opportunity to grow margins over time. But we feel good about where the margins are on a year-to-date basis. I think the year started out pretty much like we thought, with, quite frankly, just stronger revenue than we expected. And we're winning in markets right now, and that feels really good.

All right. Thank you guys so much. I'll turn it over.

The next question comes from Brian Brophy of Stiefel. Go ahead, please.

Yeah, thanks. Good morning, everybody. Nice quarter. Tony, you touched on my question at the end of your last answer in terms of potentially shifting some of this mix away from GMP and cost plus to fixed price over time, I guess, help me understand, is that kind of a deliberate decision on your guys' part to start off with maybe some lower risk structures in these new geographies? And I guess, what's the needle mover, what needs to happen for you guys to potentially move these to more fixed price and increase the opportunity for higher margin over time? Is it just you guys need to get comfortable in the new geography or is there something else?

No, look, first of all, it's not only our decision, right? Some of our customers prefer to operate in a GMP mode because they anticipate they're going to have a fair number of change orders and they want to get started on the job. So it's not only our decision. When it is our decision, I think you outlined it right. We have to get comfortable that we know the pace of build and the cost. I mean, I'll just remind folks of last year, right? We had a, I hate to always bring up bad news, but this is why we're in the how we have to think about the business we're in we were in a market to check three of the four blocks other than it was relatively new for the size we were trying to build and at the end of the day we took a fixed price we didn't get the acceleration change order quite what we thought we should price to write and therefore we ate it so that didn't make us shy away from fixed price work but it shows you when you don't get it right you own it and so contract structure is not only our decision it also comes from our owner and and we typically work together now i think most owners if they think we have a good handle on what it looks like and they can get a fixed price that looks like can fit their budget and it takes away all the auditing and contract stuff that goes with a gmp contract they're more than happy to move away the other variation on that is we can get 50 into or 60 into a gmp job we both feel comfortable will be locked in cost and scope, and therefore we will change it to a fixed-price contract. So I'd like to tell you there's four or five variables here. The variables could be up to six to 12 of contract administration and structure. And ours is always towards the best outcome for us and our owner and also the best risk-adjusted outcome. Jason, you got anything to add on that?

Yeah, I don't think anything's changed overall in terms of our appetite for fixed-price work or what we see in terms of the market and our customers. I think it's very much specific geographies, specific opportunities, and specific customers in the quarter, which drove the revenue mix to skew more towards GMP.

Especially in mechanical, which makes sense, because you're doing more of these AI data centers now, and unless we're doing fabricated structures for those AI data centers, you could argue modular structures that have really, as part of our build or somebody else's build, They do start those things up more with GMP, and we would prefer they do that as they work out their designs.

Yeah, and that's the comment I tried to make about the designs evolving and the scopes still evolving.

Understood. That's very helpful. And then just as a follow-up, any update on access to craft labor, labor tightness, any notable changes you guys have seen there over the last few months?

No, no notable changes. We're continuing to recruit heavily with the unions, especially in the southeast, Texas, Oklahoma, through the Midwest. We're working in a very cooperative fashion. One of the things that have benefited us is some of the programs, and that's one of the appeals of Miller. They are excellent at this. They have a pro-trade program that allows a quick training program of two to four weeks, gets people functional, allows us to bring them in at the right classification and get them functioning safely and productively on a job site. And that's something we're continuing to expand and grow across other M Corps subsidiaries to grow our craft labor force. I will say that our, and I've talked about this before, our real bottleneck, and it really hasn't been a bottleneck because we have this great amount of work to work on, is supervision. We have to create more foremen. We have to create more general foremen. We have to get project engineers to be able to move to project managers, project managers to be able to move to project executives. That's how we really grow. You know, our constraint on growth, yes, we have to build fabrication shops, whether they're, you know, on-site in tents or whether they're off-site in our fixed facilities. We always have to be thinking about that curve. We don't like to get too far ahead of that curve because there may be other ways to skin that cap on fabrication. like, you know, on-site fabrication and other things, but we always have an eye towards developing that supervision level. I said it in my remarks. Our core product is really filled labor supervision and leadership, and we just apply it in these trades, and we do that very well. And, therefore, if you're doing that well, you become an employer of choice because trade craft people typically like four or five things, right? First, they like to know they're going to get paid every week and their benefits are going to get paid, and in no particular order, that you're going to give them the safety equipment and tools that they need to be safe, that you have a good safety program, that the supervision they're working for actually knows what they're doing and can really share means and methods and are plugged into our network to gain more knowledge on means and methods, that they're working for people up through the chain of command that understand the work they're doing, and finally that if they do a good job and so choose to want to be part of one of our core teams, that we have ongoing work, and that if they want promoted, that they have an opportunity to be promoted. MCOR emphatically checks all those blocks in our subsidiary companies, and I think that's why it's difficult. Our guys are slogging away at it every day on mixed management, but I think we've been able to meet the moment as far as recruitment and retention of trade, excellent craft personnel.

Yeah, understood. Very helpful caller. I appreciate it. I'll pass it on.

The next question comes from Justin Hockey of Robert W. Baird. Go ahead, please.

Great. Good morning, everybody. I guess, so, you know, we already talked about, obviously, the first quarter, really strong revenue trend. The RPO is up, you know, 18% quarter to quarter. I think that's an organic record for you. But, you know, the revenue guidance only tweaked a little bit higher. You're looking for kind of 9% to 13% growth for the year, and you just did 20%. So I guess I'm just trying to understand. I know you've got some tough comps, but, you know, what's the conservatism in that outlook that would, you know, have the trends decelerate to kind of the more mid-single digits from what you put up, you know, to start the year, especially with those bookings?

I think you just said it in your last sentence. We just started the year. We're sitting here in the first quarter. We have three quarters in front of us. I think we'll know a heck of a lot more on the revenue trend as we exit second quarter based on what we see at the end of the year. And it's still, I mean, even sitting here with these high-fifth RPOs, Jason, and I still think we have to book 40% of our work.

For the remainder of the year, if you're taking – let's just use the midpoint of our revenue guidance range. If you're taking into consideration what's in RPOs that we believe will burn through the rest of the year and what we earned in the first quarter, we still need to go out and book about 30% of our work.

And we think we can do that. And if we can book more of that and execute it within the year, that's how the revenue guidance will creep up and we'll have much better visibility. is going to... Said simply, we feel good about the revenue trend in the business. We feel good about our RPO bookings. We feel good about the margin in the RPOs. But we're sitting here in first quarter, April, and we'll have a much better view of that when we talk to you again in late July.

I think in the quarter, we made significant progress on a few jobs, some that accelerated maybe a little bit more than we expected. When we look at the rest of the year, I think where we land in that guidance is really going to depend on how quickly we mobilize on some of the new work we just booked, right? We had a lot – we had strong bookings in the first quarter, so how quickly do those jobs mobilize, how quickly do we assemble a labor force, and how quickly do they start burning? That's what's really going to dictate where we land.

Okay. All right. And just to clarify, so previously it was 40% to 45% of kind of new work you had to book, and you're saying it's 30%. I just want to make sure.

For the amazing year, right, given we have one quarter behind our belt and the strong bookings we had in the year.

Yeah, okay. And then I guess going back to the GMP contracts versus fixed price, can you give us – I'd just be curious to know kind of what's the mix in the RPOs today of, you know, what your contracts look like today versus a year ago or maybe five years ago in terms of, you know, how you're going to more fixed price.

I don't think we could do that analysis from five years ago with any precision because things change halfway through a lot of times and it ends up something different. I think versus a year ago, I think incrementally it's moved a little more to GMP. And I would say this is, you know, not analytically precise, but I think that's mainly a mechanical and it's mainly driven by, I think, the larger scope of work, which we're guessing. I mean, do we know that emphatically? We have a pretty good idea because of the power requirements and the interact cooling we're doing, which is driven primarily, which we think, by AI data centers. These are some of the large model data centers, and we think that's the case because of where some of them are being built. And a lot of this, we can tie all that together because of access to power and proximity and all that. So I think that's really the difference. Where that will land later, we'll see. And not all GMP contracts are built the same way. But at the end of the day, there has been a little bit of a mix shift to there. And it only takes a couple points to change 10 BIPs or 15 or 20 BIPs of margin. I would offer, though, that we wouldn't take these things if we weren't driving more margin dollars by doing it versus other opportunities.

Okay. So that's helpful. That's it for me. Thank you.

The next question comes from Avi Jero-Lewswitz from UBS. Go ahead, please.

Hey, good morning, guys. Thanks for taking the question. So I just want to discuss this acceleration and organic growth that we saw here in Q1. It sounds like some of it was due to increased mix of prime contracting, pass-through revenues that you called out. Just when we think of that relative to the high single-digit to low double-digit organic growth that you've discussed previously within the construction business, Is that kind of upper single to low double-digit framing around your self-perform work, or was that including the prime contracting?

It was all in. Yeah, it was all in. I mean, I think the preponderance of what we do is self-perform, but there's two places where it's more pass-through. One is, I wouldn't even call it pass-through. We don't pass anything through without a markup in the construction business, But it would be primarily in our water and wastewater business, which we have a great team executing very well down in Florida. And it would be in our – the one thing we do at MCOR on an EPC basis at scale. Yes, we do chiller plants that way. We do other things. But the one place we do it at scale is in the food processing business. It's a very good business. It's a multi-trade package. But we have more of that revenue passing through right now in our manufacturing and industrial market sector. And that comes at a little over margin. But if you look at it on a return on capital basis, it's very, very good work. And, you know, when we look at projects, Avi, we look at it both ways. We look at a project like that as almost the same way we look at an acquisition. What's the cash flows look on that project versus what we've invested to do it? uh what does it allow us to do from a further with a customer both from an aftermarket basis and also follow on work we have customers that we've been on site doing large projects every three to five years we make continuous presence at those sites doing small fixed price projects and maintenance projects you want to say for nothing's ever forever but we've been there 20 years almost now so you know that's a part of the business that those are the two places where that pass-through revenue is the most significant and that can affect margins you know 10 or 15 bips in a quarter uh to the negative but again i'll go back they generate really good margin dollars and really good return on capital on those projects and in in this quarter it was the food processing right we still have the water wastewater in our backlog i think that that's what you could see as the year progresses and this quarter is very much coming from food processing though okay got it makes sense yeah I was uh in part looking at the water and wastewater growth in the quarter and so just trying to piece it all together I'll get ahead of one of the other questions and somebody can maybe drop out of the queue we're not foregoing any data center work to do this work that's either a different team that does this kind of work or a different market sector I mean different geography we're not forego and

different skills and capabilities we're not forgoing any projects in the data center or high-tech world because we're doing water and wastewater food processing so really is incremental growth at the end of the day okay that makes sense and then just also when we last spoke a big framed productivity and pricing together contributing about five percentage points to construction and revenue growth this year. What do you have embedded for that in the updated guidance? Is it still about 5% or has that ticked up?

I think the way we termed it is less than half, right, at the lower end. So about 30% to 40% of our growth comes from pricing and productivity. But then you have to tie that also into mix, right, Jason, to get to that answer. I don't think there's anything different than what we've done historically.

Appreciate it. Thank you.

Next question comes from Sanjita Jain of KeyBank Capital Markets. Go ahead, please.

Good morning. So if I can ask a follow-up on the mechanical margins discussion, will these projects later on have incremental phases that you will then take on as fixed price, or is the nature of these projects such that even the follow-on phases will be GMT?

Well, the margin headwind in mechanical, some of it's GMP, others mix because of the food processing work. We hope to have follow-on phases over a number of years.

They won't be as large. I think it's to be determined what that contracting mechanism is, right? They could be fixed price in the future on some of these jobs if we get more comfortable with our labor force, we get more comfortable with the design. They may stay GMP because we do have a couple customers who just prefer GMP work. So I think it's going to be dependent on the individual jobs, and I think we'll know more as the year progresses.

Yeah, I think we're beating this a little too hard right now collectively on the phone. We contract lots of different ways, and sometimes our fixed-price work on something like food processing, because we're surveying as more as a prime, is a fixed-price contract. It doesn't have the same market characteristics and margin opportunity that a fixed-price contract can be on a single-trade contract doing a data center or a manufacturing plant or a hospital. Other parts, we're doing GMP work on data centers because a customer can't nail down scope or renew a geography, or that's their preferred way of doing the business. And they do that that way across their whole portfolio. I think we always think about operating in bands and margins, and as long as we're sort of within that 12- to 24-month look on bands and margins, we're performing pretty well. And then we take it a separate step further. At the part we're in a business, I think anybody that knows this, MCOR is a return on invested capital type mentality. And if we can generate more margin dollars and balance that against the margins, we're happy. I know we're all trying to nail down this number of 9 point whatever percent for the year. A, we're not that good. That's why you have a range. And B, we have 12,000 projects going on right now of all kind of different contract structures. Is it a little bit on the incremental towards GMP? I look at that as a positive because maybe we should come bricks off the table where we shouldn't have been taking the risk on a fixed-price contract and allows us to penetrate a customer further. So I think we're trying to put too fine a point on something that you can't put a fine point on.

Yeah, and I just go back to those 12- to 24-month averages to Tony's point. If you look at mechanical prior to this quarter and you look at those eight quarters, margin for mechanical was as low as 10.6 and as high as 13.6. So we're still right, you know, we're bouncing around those eight-quarter averages, and so I don't see anything here that's fundamentally different.

Yeah, we grew mechanical operating income 18.7%, and we grew electrical operating income 28.2%. I'd say on any given day, sign me up for that.

Understood. That's very helpful. Can I follow up on the 1.5 book to build, And can you give us a little bit of a look as to, are you being able to book a longer dated backlog? I know that the space has traditionally been more of a short-term booking cadence business, but can you tell us that some of these large projects give you a longer look into your performance maybe next year?

I don't think in a significant way. I mean, I think if you look at the end of last year, we would have said at the end of 25, 82% of that RPO is going to burn within 12 months. Where we sit today, we say 78% is going to burn within 12 months. So a little bit longer, a little bit more extending beyond the 12 months, but not in a significant way. If you look at our total RPO, I'd be surprised if $6 to $6.5 billion goes even into 27. And that'll increase as the year goes on. Yeah, of course.

Got it. Thank you very much.

Yeah, thank you.

Next question comes from Tim Mulroney of William Blair. Go ahead, please.

Jason, thanks for taking my questions. Just a couple quick ones here. So I heard you say that productivity and pricing is contributing, I don't know, which said like 30%, 40% of total growth this year. And you're growing, call it 10% to 12% organically, if you exclude contribution from acquisitions. So this implies pricing is maybe adding three to four points to growth, which I'm just wanting to confirm is directionally correct. And the reason I want to is because that surprises me a little bit. Like, we're hearing about pricing being very strong, particularly around AI infrastructure, where you, MCOR, are critical to the whole process. But you're not the largest cost bucket for a long shot. So it seems to me that pricing would be a lot higher than three to four points, but maybe I'm missing something.

I think in general when contractors talk about strong pricing, a lot of times they've got to execute the work. And so we're saying our expectation going into the year on pricing is we're working with really smart customers. We never assume our customers don't have alternatives. I've never assumed that any time in my career. and that we want to be with these contractors, these customers long-term. I think when you look at our gross margins and you look at our execution over a long period of time and our ability to retain customers and at times we replace other contractors on sites when I don't remember us ever being replaced on a site, I think we get the price, productivity, execution just about right. Right. I've never been the guy that's going to sit here, there's people throwing work at us, and we just catch it in buckets. And some of my peers that say that, I'm not sure they have the long-term view of the market that we have, what pricing really means in contracting. Price in our business comes in a lot of different ways. It's the assumptions you're making on the productivity of your labor, especially as you move further down the labor curve, and there's more of a mix of people you're less familiar with or more untrained. Pricing also can cover what you expect on unforeseen job conditions. You know, you don't get in an adversarial relationship with customers you're going to work with a long time if there's small changes on a job. So maybe you're giving up some of that in the execution of the job to retain the customer. I think the pricing environment's good, and I think we're almost getting paid for what we're worth. But I would take probably better contract terms, better change order administration, and give up some price any day as you execute these large, fast-paced jobs for what are some of the most sophisticated customers in the world. Jason, do you have something to add on that?

No, I just think when you look at the number of jobs we're executing today versus the number of jobs a year ago, and you kind of back into the growth rate in jobs or even average contract values I think it supports what we're saying which is that really volume demand and productivity are the core drivers of our revenue growth okay that's very clear thank you our next question comes from Manish Salmanaya of Cantor go ahead please good morning and congrats again to the team a couple of questions

Maybe, Tony, for you first, when I think about the contracts that you're being awarded, especially the mission-critical projects, are you seeing both electrical and mechanical scopes? Or is that?

I mean, we don't. I think underneath your question, are we combining electrical and mechanical scopes and bidding the jobs that way? Absolutely not. But are we on some sites, both electrically and mechanically? Yes. But do we make decisions contingent on that? Absolutely not. These are separate scopes of work. These are separate teams. Now, if we're fortunate enough that we have two MCOR companies on that site, or even three when you include fire life safety, does the job tend to go better for the owner in those cases? Probably. Yeah. Our guys know each other. They know how to work together. They're working with the same VDC tools. The integration becomes better on the drawings. You know, they can talk to each other and get coordination better on the job sites to prevent trade stacking. But do we specifically bundle the two things together and bid it as a package? No, we don't do that. Almost never. I don't want to say never. Nothing's never. But we almost try not to do that.

But if you look at our bookings and you say, okay, there's a significant increase in data center bookings or networking, communications, RPOs, that's coming from both mechanical and electrical. When you look at the revenue growth within each segment, let's just, again, look at networking, communications, round numbers, electrical is up $240 million and mechanical is up $280 million. So we're seeing that growth in both and we're seeing the bookings from both.

Okay, that's super helpful. And then Jason, on the cash flow aspect, how should we think about the cash flow use reversing over the course of the year? Is that second half weighted typically or some of that come?

I think if you look at the pattern we've had over the last two years or so, we think that pattern will hold true through the remainder of the year. Q4 tends to be the strongest for us. From a cash flow generation perspective, Q1 tends to be the weakest. But if you look really over 24 and 25, we expect those patterns to be about the same.

Okay. And then just, Tony, back to you, maybe if you can just talk about the M&A pipeline, what you're seeing out there, what are still the missing pieces within MCOR geographically or product-wise, and then maybe if you can also just give us a sense as to what you're seeing so far in the second quarter.

Well, I won't answer that.

In terms of demand.

I won't answer that question. We're reporting on the first quarter today. Look, our acquisition pipeline is good. Deals happen when they happen. Our primary area of interest is electrical construction. We're a medium-voltage company or a line-voltage company. We're not really looking to grow the high-voltage market or the T&D market. We do have a position there, but it's mainly in the Mountain West, and it's a very good company. But we're not looking to become quanta in the T&D business. We're going to continue to do low to mid-voltage acquisitions in electrical. We still have places where we can expand geography or strengthen geography in a lot of cases now. I think what we've had great success with is either buying an acquisition at scale, which is a Miller. That's a great example of that. But we also have many examples in MCOR, which is, I think, where you create the most value, is when we take an electrical contractor that was just a good industrial or healthcare contractor, could do really sophisticated work. We know that there's customers that want us to do data centers in that market. We were able to come in and take that group of folks and take their core business, have them continue to do that through our peer learning and help. We can then have them expand into data centers. And that comes at much better valuation than the folks that are doing 80% of their work and data centers that everybody's frothy over and wants to spend 12 or 15 times earnings. We're not going to do that for a one-market company and a one-sector company. Secondarily, we'll buy mechanical, mechanical construction. We've tended to do that more by and then take a larger platform like Bachelor and Kimball and grow organically. And the reason that sets up they can do that well is because the amount of prefabrication on a mechanical job, they can take more labor hours off the job, and therefore they feel much more comfortable. And that's sort of the fire protection story too, which is the other part mechanical that we would grow through acquisition and organically. And with the fire protection, we're both growing the construction capability and the aftermarket capability. The other area of interest for us is, of course, the mechanical service space. We do both, they're not large compared to the construction acquisitions, but we'll do larger acquisitions there. There we're buying, you know, footprint. We're buying technician capability, and sometimes those acquisitions are as small as a couple million dollar asset deal to open up a market or strengthen our market, whether it's a certain type of equipment, a certain kind of capability. And then we also love to continue to support our customers through building controls and automation in mechanical services acquisitions where, you know, we're one of the more significant independent building controls, and we have a number of different brands we're a dealer for, and we have good capability, and that's both on the front end of the business and the design, the development of the user interfaces, and, of course, the installation and the commissioning to make sure it works. Those are our primary interests as we grow through acquisition. I would also argue that we also are not immune to doing the right kind of fabrication acquisition. We haven't done a lot of that to date, but we would do that if we thought we could add, we have ongoing work that we could take some of that capacity and then also kit up or some part modular more than we're doing today. It's not something we've done, but it's something we look at all the time. Jason, did I miss anything? I think that's a good summary.

Yes, indeed. Well, thank you so much, guys, and best of luck.

Thank you.

Our next question comes from Adam Bubis of Goldman Sachs. Go ahead, please.

Hi. Good morning. This is Anuj on behalf of Adam. So I wanted to understand what is your prefabrication capacity today and how much capacity do you plan to add this year? And additionally, if you can discuss the puts and takes of internalizing fabrication versus leveraging fabrication for third-party sales.

Look, I think the best way to think about how we think about it is to look at our CapEx spending. We don't necessarily look at it as we're destined to add this much square footage, because I think you've got to take the fabrication that we do and break it into two or three pieces. One is the traditional fab we do just about every contract that we have, which they're doing some pipe fabrication, a little bit of fittings on the sheet metal side, and they do that to support the aftermarket and the smaller projects in their market. We do a lot of that. The second fabrication is more dedicated fabrication, especially in our larger mechanical and electrical contractors, and that breaks into two pieces too. Especially electrically, there's almost a catalog we can do that says we're taking all these different parts from distributors and OEMs putting them together so it almost kits out to the site. And then there's job-specific where we're making conduit racks and different bends that we're doing specific to that job that looks more like what we do in the mechanical side. Where there we can have pretty significant pipe shops, pipe rack shops that do a variety of sizes from small bore to large bore. And then we also have sheet metal shops where we're hoping to generate off those coil lines somewhere between 800,000 and 1,200,000 pounds a year. Now, again, and then there's the third part of that is part of that fabrication, if we can do on-job site in a tent and bring equipment in and not have to move it as much, we do that too. So we're much more adaptable maybe than some others at fabrication. And I think that distinguishes us from other people is, for the most part, you never say everything's every, but for the most part, MCOR is fabricating for MCOR and doing it as part of our job design. We do have cases where people want us to build that other people installed, but that's a small minority of our fabrication versus others. And I think part of that is because we tend to have our trades focused on it. We're not a multi-craft workforce, maybe like a non-union workforce can be in some markets. Hence my discussion about if we did fabrication and looked at it that way, that would be a fabricator we'd buy that we think we could bring more value to by looking at more multi-trade work.

Jason? No, just if you look, Tony made the point about our CapEx over the last several years, and we've said it before. If you take even just a three-year look, our CapEx, if you're looking at a CAGR, is growing twice what our revenue is, and that's those investments we're making in prefab. If you look at 26, I think we'll spend somewhere between $115 million and $125 million on CapEx, and I think a significant part of that will be fitting out fabrication facilities or upgrading the ones we have today.

Thank you. That helps. and just one more follow-up. So demand remains particularly in your data center business. So what if anything sets the ceiling on level of growth you can achieve from a capacity standpoint? Is it labor, equipment procurement, et cetera?

Well, it's emphatically not equipment procurement because on data centers, most of the major equipment is being bought by the owners or the owners through the GCs because they're deciding which sites they want to do it. So we really have nothing to do with what they're doing on the major end product equipment in data centers. In small cases, we still do, but for the most part, the owner is buying the equipment. I think I've addressed where the bottleneck could be. We've been great at producing leaders. Our bottleneck is build leadership, and it gets to the frontline leaders, foreman, general foreman, and project managers and project executives. No one can grow, you know, without that constraint. We feel pretty good about our being, our growth targets we have out there. We wouldn't have taken the work. And so, therefore, we feel pretty good that in this quarter that year over year, you know, it's up plus 30%, up plus 17% sequentially. We feel we can fill the teams either through increased scope or the teams that we've built to service that demand. And, you know, and the law of large numbers eventually tells you that your growth rate is going to slow, but the dollars stay up. And I'd say the same thing about, that's my whole margin point. We're in a search for margin dollars right now, more than margin percentages.

Thanks, that is, I'll pass it on.

All right, thank you all. We'll see you again at the end of July. And thanks for your interest in everything.