Table of Contents

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

Business Description

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

•United States electrical construction and facilities services;

•United States mechanical construction and facilities services;

•United States building services;

•United States industrial services; and

•United Kingdom building services.

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

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

Overview

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

For the three months ended

June 30,

20242023

Revenues$3,666,897 $3,045,622

Revenues increase from prior year20.4 %12.5 %

Gross profit$684,001 $490,060

Gross profit as a percentage of revenues18.7 %16.1 %

Operating income$332,808 $196,667

Operating income as a percentage of revenues9.1 %6.5 %

Net income

$247,572 $140,595

Diluted earnings per common share$5.25 $2.95

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

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

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

Impact of Acquisitions

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

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

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

Results of Operations

Revenues

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

For the three months ended June 30,

2024% ofTotal2023% ofTotal

Revenues:

United States electrical construction and facilities services$799,994 22 %$678,167 22 %

United States mechanical construction and facilities services1,655,181 45 %1,194,113 39 %

United States building services781,108 21 %775,012 26 %

United States industrial services324,047 9 %292,283 10 %

Total United States operations3,560,330 97 %2,939,575 97 %

United Kingdom building services106,567 3 %106,047 3 %

Total operations$3,666,897 100 %$3,045,622 100 %

For the six months ended June 30,

2024% ofTotal2023% ofTotal

Revenues:

United States electrical construction and facilities services$1,564,705 22 %$1,322,913 22 %

United States mechanical construction and facilities services3,082,846 43 %2,272,671 38 %

United States building services1,562,268 22 %1,500,387 25 %

United States industrial services678,100 10 %623,166 11 %

Total United States operations6,887,919 97 %5,719,137 96 %

United Kingdom building services211,254 3 %216,917 4 %

Total operations$7,099,173 100 %$5,936,054 100 %

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

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

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

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

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

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

Cost of sales and gross profit

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

For the three months ended

June 30,

For the six months ended

June 30,

2024202320242023

Cost of sales$2,982,896 $2,555,562 $5,825,863 $5,009,932

Gross profit$684,001 $490,060 $1,273,310 $926,122

Gross profit margin18.7 %16.1 %17.9 %15.6 %

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

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

Selling, general and administrative expenses

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

For the three months ended

June 30,

For the six months ended

June 30,

2024202320242023

Selling, general and administrative expenses$351,193 $293,393 $680,549 $574,545

SG&A margin9.6 %9.6 %9.6 %9.7 %

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

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

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Operating income (loss)

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

For the three months ended June 30,

2024% ofSegmentRevenues2023% ofSegmentRevenues

Operating income (loss):

United States electrical construction and facilities services$88,577 11.1 %$50,722 7.5 %

United States mechanical construction and facilities services213,440 12.9 %119,847 10.0 %

United States building services46,839 6.0 %46,137 6.0 %

United States industrial services12,746 3.9 %7,887 2.7 %

Total United States operations361,602 10.2 %224,593 7.6 %

United Kingdom building services5,777 5.4 %5,927 5.6 %

Corporate administration(34,571)- (33,853)-

Total operations332,808 9.1 %196,667 6.5 %

Other items:

Net periodic pension income (cost)

221 (282)

Interest income (expense), net

6,106 (2,692)

Income before income taxes$339,135 $193,693

For the six months ended June 30,

2024% ofSegmentRevenues2023% ofSegmentRevenues

Operating income (loss):

United States electrical construction and facilities services$180,166 11.5 %$91,238 6.9 %

United States mechanical construction and facilities services364,160 11.8 %206,074 9.1 %

United States building services80,298 5.1 %83,787 5.6 %

United States industrial services30,712 4.5 %22,907 3.7 %

Total United States operations655,336 9.5 %404,006 7.1 %

United Kingdom building services11,154 5.3 %11,351 5.2 %

Corporate administration(73,729)- (63,780)-

Total operations592,761 8.3 %351,577 5.9 %

Other items:

Net periodic pension income (cost)

443 (556)

Interest income (expense), net

13,647 (4,524)

Income before income taxes$606,851 $346,497

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

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

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

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

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

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

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

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

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Other items

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

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

Remaining Unsatisfied Performance Obligations

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

June 30,

2024

% of TotalDecember 31, 2023% of TotalJune 30,

2023

% of Total

Remaining performance obligations:

United States electrical construction and facilities services$2,632,120 29 %$2,387,844 27 %$2,180,133 26 %

United States mechanical construction and facilities services4,758,744 53 %4,940,519 56 %4,552,211 55 %

United States building services1,345,089 15 %1,264,818 14 %1,255,165 15 %

United States industrial services99,022 1 %113,291 1 %144,731 2 %

Total United States operations8,834,975 98 %8,706,472 98 %8,132,240 98 %

United Kingdom building services164,248 2 %140,949 2 %153,919 2 %

Total operations$8,999,223 100 %$8,847,421 100 %$8,286,159 100 %

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

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

Liquidity and Capital Resources

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

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

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

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

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

Cash Flows

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

For the six months ended

June 30,

20242023

Net cash provided by operating activities

$411,958 $214,932

Net cash used in investing activities$(211,139)$(48,434)

Net cash used in financing activities

$(181,444)$(126,370)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash$(927)$5,856

Increase in cash, cash equivalents, and restricted cash

$18,448 $45,984

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

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

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

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

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

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

Material Cash Requirements from Contractual and Other Obligations

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

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

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

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

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

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

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

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

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

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Off-Balance Sheet Arrangements and Other Commercial Commitments

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

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

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

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

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

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

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

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

New Accounting Pronouncements

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

Critical Accounting Policies and Estimates

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