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Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Second Quarter 2022 Earnings Call.
[Operator Instructions]
Note this event is being recorded.
Mr. Brad Newman with FTI Consulting, you may begin.
Thank you, Andrea, and good morning, everyone. Welcome to the EMCOR Group Conference Call. We are here today to discuss the company's 2022 second quarter results, which were reported this morning. I would like to turn the call over to Kevin Matz, Executive Vice President of Shared Services, who will introduce management. Kevin, please go ahead.
Thanks, Brad, and good morning, everyone. As always, thanks for your interest in EMCOR, and welcome to our earnings [indiscernible] for the second quarter. For those of you who are accessing the call via the Internet and our website, welcome as well, and we hope you arrived at the beginning of our slide presentation that we'll [indiscernible] our remarks today.
We [indiscernible] Slide 2. This presentation and discussion contains forward-looking statements and may contain certain non-GAAP financial information. Page 2 of our presentation describes in detail the 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.
On Slide 3, we have the executives who are with me to discuss the quarter and 6 months results. They are Tony Guzzi, our Chairman, President and Chief Executive Officer; Mark Pompa, Executive Vice President and Chief Financial Officer; and our Vice President and General Counsel, Maxine Mauricio. For call participants not accessing the conference call via the Internet, this presentation slides will be archived in the Investor Relations section of our website under Presentations, and you can always find us at emcorgroup.com.
With that out of the way, please let me turn the call over to Tony. Tony?
Yes. Thanks. Good morning to everybody, and thanks for your interest in EMCOR. My initial comments will focus on Pages 4 through 6 of the presentation. We had a strong second quarter at EMCOR with revenues of $2.7 billion and diluted earnings per share of $1.99. We delivered overall quarterly revenue growth of 11.1%, with organic revenue growth of 9.7%. We had operating income margins of 5.1% which is especially strong when considering the headwinds we faced with supply chain issues.
We generated quarterly operating cash flow of $77 million and exited the quarter with very strong remaining performance obligations or RPOs of $6.5 billion, which represent nearly 27% growth from the year ago period and 15% from year-end 2021.
We remain committed to our capital allocation strategy, returning a record $458 million in cash to our shareholders through June 30, 2020, in a volatile operating environment. Our team has resilience and flexibility as we continue to drive successful results for our customers and our business.
Our forward momentum this quarter was driven by these key factors. We are seeing strong demand for our specialty Contracting and Construction Services across a variety of sectors where we can differentiate ourselves, which is health care, water and waste, commercial and industrial/manufacturing. We also continue to see strong forward demand for our data center and high-tech manufacturing construction services.
Our Construction segments reported a combined operating income margin of 6.9% in the quarter. Our Mechanical Construction segment operating income margins were a strong 7.2% and Electrical Construction segment operating income margins rebounded to a much improved 6.2% versus first quarter performance. Performance in both segments continues to be impacted by ongoing supply chain issues related to equipment lead times and deliveries. And most of these issues that impacted our margins were from projects we booked over 2 to 3 years ago prior to the emergence of inflationary and supply chain challenges. Every day, we are making improvements to our planning and [indiscernible] and workforce scheduling to better position us to navigate volatile supply chain environment, which remains as difficult as it was in the first quarter.
Our [indiscernible] is now proving useful as we work with our suppliers to keep moving and obtain the most comprehensive delivery [indiscernible] possible.
In the United States Building Services segment, we faced the ongoing supply chain issues as in the [indiscernible] segment with respect to our project work, where we have record RPOs, [indiscernible] projects and where the growths in RPOs is more than 20% on a year-over-year basis.
Our results are being driven to a large extent, very strong growth for our HVAC repair service, our highest-margin product line in the U.S. Building Services segment. This strong repair service growth makes sense as we are not able to execute some equipment replacement work because of very extended lead times for the HVAC equipment. If our customers cannot replace agent and efficient equipment, they [indiscernible] fix it for them.
We also performed very well in our commercial site-based business, which continues to provide stable performance through excellent execution and smart account selection.
Industrial Services segment is performing about how we expected on a year-to-date basis. We execute turnaround services as anticipated and continue to see opportunities to improve operating margins. Demand is [indiscernible] but our customers are under considerable pressure to keep their facilities operating at what is extraordinarily high utilization.
Our United Kingdom Building Services segment continues to deliver steady performance and continues to serve some of the most important and sophisticated customers and sectors in the U.K.
Before I turn the [indiscernible] over to Mark, I just want to emphasize that following a record return of cash to shareholders. We left the second quarter with a strong balance sheet. This strong balance sheet serves an important catalyst to win work from some of our most sophisticated customers, executing large and complex projects. Record RPOs of $6.5 billion is a testament to not only our execution, but also our financial strength.
With that, I will now turn the presentation over to Mark for a detailed discussion of our financial results.
Thank you, Tony, and good morning to everyone participating in the call today. For those accessing this presentation on webcast, now on Slide 7. As Tony indicated, over the next several slides, I will supplement Tony's opening commentary on EMCOR's second quarter performance as well as provide a brief update on our year-to-date results through [indiscernible]. All financial information referenced this morning is derived from our consolidated financial statements in both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier this morning.
So let's revisit and expand our review of EMCOR's second quarter performance. Consolidated revenues of $2.71 billion are up $269.7 million or 11.1% over quarter 2 2021. Our second quarter results include $33.7 million of revenues attributable to businesses acquired, pertaining to [indiscernible] such businesses were not owned by EMCOR in last year's second quarter. Acquisition revenues positively impacted our United States Construction segment within the second quarter.
Before reviewing the operating results of our individual segments, I would like to highlight that our $2.71 billion of quarterly revenues represents a new all-time quarterly revenue record for the company despite the [indiscernible] in the United Kingdom Building Services segment revenues which was largely due to unfavorable foreign exchange rate movements.
The specifics to each of our reportable segments are as follows: United States Electrical Construction segment revenues of $564.1 million increased $72 million or 14.6% from 2021's comparable quarter. Excluding incremental acquisition revenues, this segment's revenues grew organically [indiscernible] quarter-over-quarter. Increased project activity within the commercial market sector, inclusive of the telecommunication and high-tech submarket sectors as well as growth in each of the health care, manufacturing, water and wastewater market sectors were the primary drivers of the period-over-period improvement.
Partially offsetting these increases was a decline in revenues from the institutional market sector due to the completion or substantial completion of certain projects performed in the corresponding 2021 period.
United States Mechanical Construction segment revenues of $1.066 billion increased $97.7 million or 10.1% from quarter 2 2021. The Revenue growth during the quarter was derived strictly from organic activities within the majority of the market sectors we serve, the manufacturing, water and wastewater and institutional market sector is experiencing the most significant period-over-period increases.
We also continue to see revenue growth within the commercial market sector, driven by demand from customers within the semiconductor and life sciences industries.
Second, revenues for EMCOR's combined United States construction businesses of $1.63 billion increased $169.7 million or 11.6% from quarter 2 2021.
United States Services quarterly revenues of $677.8 million increased $66 million or 10.8%. Revenue growth was generated within the segment's commercial site-based and Mechanical Services divisions. With respect to commercial site-based activity, [indiscernible] additions and scope or site expansion with existing customers were the drivers of the quarterly increase in revenues.
Within Mechanical Services, we have seen a continuation of the trends that existed in quarter 1. Notably, we have experienced an increase in service repair and maintenance volumes partially as supply chain delays have resulted in the need to extend the useful lives of HVAC equipment in instances when new equipment is not readily available. In addition, there continues to be a high demand for building one in [indiscernible], with an emphasis on improving building efficiency, energy consumption and indoor air quality.
Industrial Services segment revenues of $284.5 million increased $49.3 million or 21%. Revenue in the segment have grown in comparison for the comparable prior year period for each of the last 4 quarters as we are expecting some stabilization in demand for our downstream focused services. This has led to an increase in field services with some [indiscernible] spring turnarounds as well as greater maintenance and capital project activity.
This growth is despite the headwinds within the upstream and midstream energy sectors, which is impacting certain of our service lines. We have also seen an increase in shop services revenue to new equipment, as well as pull-through repair projects resulting from ongoing turnarounds. With refinery utilization levels in excess of 90%, we remain hopeful that the last 6 months of 2022 will provide market condition that can perpetuate this segment's recent trend of improved results.
United Kingdom Building Services revenues of $114.6 million decreased $15.3 million. This revenue contraction was predominantly attributable to unfavorable exchange movements of $12.5 million in the quarter. Excluding the impact of foreign exchange, the growth in project activity within the segment was more than offset by a reduction in service contract revenues due to the loss of certain contracts not successfully obtained at rebid.
Please turn to Slide 8. Selling, general and administrative expenses of $245.4 million represent 9.1% of increase of $2.4 million from quarter 2 2021. For incremental expenses attributable to companies acquired of $3.1 million, inclusive of intangible asset amortization, EMCOR's SG&A expenses for the quarter declined slightly on an organic basis. As a reminder, 2021 second quarter [indiscernible] a $4.1 million provision for credit loss within our U.S. Industrial Services segment related to a customer bankruptcy. Our credit loss activity in the current year second quarter is substantially less, contributing to the period-over-period organic SG&A decline.
Despite adding personnel to support strong organic revenue growth and travel and entertainment expenses continuing to trend higher as business travel resumes a [indiscernible]. We have been successfully leverage our cost structure, resulting in a reduction in our SG&A margin. We can main disciplined with overhead investment and we'll seek efficiencies and economies of scale as we drive future revenue growth.
Reported operating income for the quarter of $137.6 million favorably compares to $133.4 million operating income [indiscernible] second quarter. Quarter 2 operating margins of 5.1% is down [indiscernible] basis points from 2021 second quarter and is largely due to a less favorable revenue mix within our U.S. construction operations, which I will cover in my segment commentary.
As a reminder, our second quarter 2021 consolidated operating margin of 5.5% represented a quarter 2 record. Specific quarterly operating performance by reporting segment is as follows: operating income of our U.S. Electrical Construction Services segment of $35.1 million decreased $7.9 million from the comparable 2021 period. Reported operation of 6.2% represents a reduction from the 8.7% in last year's second quarter. The decrease in both operating income and operating margin is due to a less favorable project mix within the commercial, institutional and transportation market sectors when compared to the prior year period.
In addition, we did experience certain discrete project write-downs this quarter that reduced this segment's operating income by [indiscernible]. These losses negatively Electrical Construction quarter 2 operating margin by 140 basis points. Further, [indiscernible] from quarter 1, we continue to experience labor productivity and efficiency challenges due to supply chain difficulties resulting in equipment delivery delays, which has impacted project timelines. Although this segment continues to lag 2022 performance, we are reporting substantial sequential improvement in both margin and operating income dollars when compared to the first quarter of this year.
Second, operating income of our U.S. Mechanical Construction segment of $76.9 million was essentially flat with the comparable 2021 period. Reported operating margin of 7.2% represents a 70 basis point reduction from the 7.9% earned a year ago. As referenced during the last 2 quarters, our Mechanical Construction segment has a larger number of active projects within the manufacturing and water and wastewater market sectors where we are either acting as a construction manager or general contractor in the [indiscernible], the percentage of our self-performed labor is less than a typical mechanical construction project, thereby resulting in our gross margin profile. This segment additionally experienced certain project write-downs during the quarter, which negatively impacted operating margin by 40 basis points.
Consistent with our Electrical Construction quarterly performance, U.S. Mechanical Construction sequentially improved, both reported operating margin and operating income dollars from quarter 1 of this year. Operating [indiscernible] Building Services is $38.2 or 5.6% of revenues, which represents a $5.6 million increase in operating income and a [indiscernible] basis point improvement in operating margin.
Operating performance within the segment's Mechanical Services division, both favorable project execution as well as the impact of certain price adjustments aimed at better aligning our billing rates with the increased costs we have experienced were the key drivers of this segment's increases in operating income and operating income margin.
Our U.S. Industrial Services segment operating $6.5 million represents a $6.7 million improvement from the [indiscernible] operating loss reported in 2021 second quarter. This is our Industrial segment's third consecutive operating profit since reporting periods prior to the pandemic, albeit at operating margin remained lower than historical levels as we continue to battle a competitive pricing environment and higher cost inflationary headwinds. On a positive note, anticipated projects are either occurring or scheduled [indiscernible] during the remainder of 2022, in line with our initial planning expectations.
U.K. Building Services operating income of $6.4 million or 5.6% of revenues represents a slight decrease from the quarter of 2021 due to the unfavorable exchange rates for the pound sterling versus the United States dollar. We continue to experience strong project demand within this segment as our customer base advance capital investment programs, which is contributing to the 20 basis points of operating margin expansion per year.
We are now on Slide 9. Additional financial items of significance for the quarter [indiscernible] in the previous slides are as follows: quarter 2 gross profit of $383 million is higher than the comparable 2021 by $6.7 million or just under 2%, however, gross margin of 14.1% is lower than last year's second quarter due to the reasons covered during my operating expense commentary, including project mix, supply chain difficulties and construction project write-downs.
Incremental revenues helped us achieve a new second quarter gross profit record, but prevailing macroeconomic headwinds are hindering our ability to maximize profit conversion. Diluted earnings per common share in the second quarter of 2022 is $1.99 as compared to $1.78 per diluted share for the prior year period. This second quarter EPS performance represents quarterly earnings per share record due to a combination of greater net income and a reduction in our weighted average shares [indiscernible] given the new share activity.
Please turn to Slide 10. With the quarterly commentary complete, I will touch on the highlights with respect to EMCOR's results for the first 6 months of 2022. Revenues of $5.3 billion represent an increase of $558 million or 11.8% [indiscernible] was generated organically. Operating income of $237.6 million or 4.5% of revenues represents a 5.1% reduction from the results for the first 6 months of 2021 as our improved second quarter 2022 performance was not enough to offset slow start in quarter 1. With our increased share repurchase activity and corresponding reduction in shares outstanding, today, diluted earnings per share of $3.36 equips is that of the prior year to $3.32.
Turning to Slide 11. Headed by the strength of our balance sheet, EMCOR remains a vision to invest in our business, return capital to shareholders and against our strategic objectives. Our cash on hand has declined from year-end 2021 levels as we have allocated $454.3 million towards the repurchase of our common stock during the first months of calendar 2022. Approximately $272.5 million of this amount was [indiscernible] during the second quarter as equity market volatility continued due to inflationary and interest rate [indiscernible].
The midpoint of this year then doubled our previous high for share repurchases, [indiscernible] cash to shareholders our quarterly dividend, which amounted to $13.6 million during the year-to-date period has been [indiscernible] when evaluating the working capital investment necessary to sustain our strong organic revenue growth as well as our future opportunities in addition to our [indiscernible] for both capital and strategic investments. In addition to our share repurchase and dividend activity, additional factors for the period-over-period decline in our reported cash balance include $26.6 million in payments for acquisitions and $27.7 million in capital expenditures.
In addition to cash, other movements in our balance sheet of note are as follows: Working capital has decreased by nearly $307 million. The decrease in cash just referenced coupled with an increase in our net contract liability position was partially offset by an increase in accounts receivable given the revenue growth during the period. Goodwill has increased marginally since December of last year, given the acquisitions completed by us thus far in 2022. Net identifiable intangible assets have decreased by approximately $12 million during 2022 as amortization expense has more than offset the additional intangible assets recognized in connection with our year-to-date acquisition activity.
Total debt, exclusive of operating liabilities remains fairly consistent with that as of December, and EMCOR's debt to capitalization ratio has increased from 10.4% at year-end 2021 to 11.8% at June 30, 2022, given the reduction in our shareholders' equity resulting from our share repurchase activity during the 6 months.
To pick up from both Tony and my earlier comments, EMCOR remains committed to our capital allocation strategy, [indiscernible] by both our share repurchase activity to date as well as today's announcement that our Board of Directors has approved an additional $500 million authorization under our share repurchase program, an increase in dividend of approximately 15%.
With my portion of this morning's slide presentation is complete, I will now return the call back to Tony. Tony?
Thanks, Mark. And I'm going to be on Page 12, remaining performance obligations by segment and market sector. Much like the last quarter, the second quarter was another strong project bookings quarter for the company. We continue to experience core demand across all our segments and many of our market sectors. Total company RPOs at the end of the second quarter was $6.4 million, [indiscernible] or [indiscernible] over June 30, 2021, total of $5.1 billion. Measuring from the end of 2021, RPO [indiscernible] $862 million thus far this year or a strong 15.4%. Additionally, second quarter project bookings were likely strong by an increase of RPOs of $508 million from this year's first quarter. Almost all of the RPO increase this quarter was organic.
Growth was broad-based, with each of the 5 segments growing RPO totals from both the year ago and 2021 periods. We are positioned in active nonresidential market sectors and continue to see velocity in our business.
The 1-2 punch we highlighted in our first quarter call continued this quarter, where we experienced both strong revenue growth and total RPO growth. While some RPO growth thus far could be attributable costs due to outside factors, we continue to see an active bidding environment despite current supply disruptions and inflation challenges. Together, our domestic construction segments experienced strong project growth year-over-year, RPOs increasing over $1 billion or 25% from June 2021. The Mechanical Construction segments or RPOs increased by [indiscernible] or 23% while the Electrical Construction segment saw an increase of $350 million or nearly 30%. Since September '21, our domestic [indiscernible] segment RPOs have increased over $600 million.
U.S. Building Services RPO levels increased $328 million or 44% from the year ago quarter and now is over $1 billion in quality projects and service [indiscernible]. As I mentioned earlier, extended lead times for HVAC equipment, combined with a continued push for energy efficiency and improving building wellness is resulting in our customers asking us to retrofit and repair their equipment. Additionally, strained equipment availability is driving our repair service, which is [indiscernible] grow margin work that we do at EMCOR.
Moving to the right side of the page, we show RPOs broken down by market segment. Continuing to trend, RPO growth was based in the second quarter across market sectors with RPOs increasing almost $1.1 billion. $700 million of which was booked in the first half of 2022. Also, moving to this $1.1 billion increase for projects in the hyperscale data center, high-tech semiconductor arena as well as projects within [indiscernible] sciences and the pharma businesses. All of this shows the diversity and strength of EMCOR's end markets.
Finishing our sector RPO growth year-over-year, health care RPOs are up 10%, institutional [indiscernible] and short-duration projects, which includes much of the HVAC retrofit project work are up 26%. Partially offsetting this was a reduction in transportation RPOs and as well as minor decreases in water and wastewater and industrial and manufacturing. From both a business segment and market perspective, I continue to like the balance and breadth of our RPOs.
We get to go to my -- one of my favorite slides, which is Page 13. And I'd like you to turn there now, and we can talk about why we remain optimistic about EMCOR for the future. On this page, you see well positioned in growing nonresidential market interest. And I'm going to talk about each of these in turn. Data centers and semiconductor fabrication. And we have big news today in the semiconductor front and EMCOR will benefit from that because we are working with all those customers that will benefit. We'll see strong electrical, mechanical and fire protection demand across all those opportunities in semiconductors. And EMCOR is positioned well in Arizona, specifically mechanically. We are positioned well across the entire geography where there'll be some projects done with fire protection and capability in Arizona and burgeoning [indiscernible] Ohio on the [indiscernible] sector front.
Data centers, it's tried to say, I believe there are none better at mechanical and electrical construction within data centers than our own companies. We have leading positions in some core geographical markets, and we can build from an enterprise level [indiscernible] to a high-tail data center using 50 megawatts hour. Our folks are terrific. And those teams in Portland and Salt Lake, Dine D.C., Gibson, Forest. These people are except data center builders on the electrical side. On the mechanical side, Bachelor & Kimball, Pool and Kent, F&G, our exceptional data center builders. They know their work. We're trusted by both our general contract customers and our owner customers. They come to us because we have great technical skill and they know that we have the financial strength to complete and finish those projects.
In the industrial and manufacturing side, we are very well positioned. Mark talked about some of the ability to bring together a prime project across a number of trades, especially for plant relocations. We also are market leaders in food fabrication. If you go to that trade business, there are none better than Southern industrial contractors down in the Southeast. And they also move up into the lower Midwest. And we not only help people fix their existing facilities. We help them upgrade where they are [indiscernible] in moving and relocating equipment and building and manufacturing capacity.
Our food processing expertise is [indiscernible] through our Shambaugh & Son. And we also, across a fleet of things are -- we can do as much as electrical charging station work [indiscernible], we need to be at the higher end of that, and we do that exceptionally well.
Health care, that's always been a core market for EMCOR. We were integral and a lot of the things that had to happen within the pandemic to build extra capacity within the ecosystem. And we are now part of the retrofit and expansion of not only hospital systems, but medical buildings and outpatient surgery centers.
Water and wastewater our market really for that for the most part. We do electrical work at different parts around the country. The bigger part of that work is mechanical. The team down at pool and Ken South and to some extent, Harry Pepper are very good at that work. And the [indiscernible] team has had a leading position in both the East and West Florida and helping with the population in the consent decrees that have happened there.
Mechanical Services, if we are leading, we are within the top 3 of people that can provide mechanical services solutions. And those solutions that we provide not only provide efficiency, they provide building and resiliency, and they also now, with the pandemic, wellness has even become more important. The building efficiency is one of the major ways that you can drive carbon reduction. [indiscernible] happening across our footprint, right? Because as you increase the building wellness and increase outside air coming in, you have to even seek more efficiency within the building because outside actually at the detriment of building efficiency. It's a wonderful [indiscernible] for our people to meet our customers and for us to meet our carbon reduction goals that people -- that are client set. And we do that also through control solutions.
Fire protection, there are none better then the teams of Shambaugh & Son and [indiscernible] to bring a solutions to some of the most complex service and construction jobs. And I'd be remiss not to say [indiscernible] also are going to be big participants across the portfolio of projects, not only renewables, but carbon reduction and capture project. We like our position that work, for the most part, is happening in segment. A lot of it's been delayed. And in our Industrial segment, where [indiscernible] will participate in solar projects, and they also help within wind projects on the transmission side as does Wasatch out in the Intermountain area.
[indiscernible] participate a lot of robust market go up and down a little bit. But the general trend of these markets that I just went through are up into the right -- we spent a lot of time putting the assets in place, and we've got some of the best teams in the market executing against these opportunities.
I'm going to go to Page 14 and 15 now. and I'm going to close off this discussion, and we'll take your questions. Entering this year, we knew that we would face some margin challenges. We were all the way back in February 2021, talking about supply chain with our year-end '21 call. And we also knew that because of our product and project mix, and you couple that with what we thought was happening with supply chain and COVID disruptions. I think our teams have done a great job in [indiscernible] these challenges in this operating environment. and we are pleased with our current position. We talked about demand for our services remain strong across most of our most important market sectors and in all of our reporting segments.
As a result, we're going to update our guidance range. We now believe that we will achieve $7.30 to $7.80 in earnings per diluted share, and we expect at least $10.8 billion in revenue. Where we end up in that range, and I always sort of provide a road map of what could give you the ups or down. Where we end up in that range will depend not only on our execution, but also equipment and material [indiscernible]. We anticipate that we will continue to experience supply chain challenges. We do expect to convert operating income margins of 5% for the remainder of 2022, similar to what we achieved in the first half of the year. If we approve from margins due to better supply chain execution and improved productivity, we could see even stronger results in the back half of the year.
How do you get there? And what are the backers that drive that? We expect to continue to achieve favorable SG&A leverage as compared to 2021. We expect to see strong project demand across key market sectors like industrial, manufacturing, health care and commercial, which includes both data center and semiconductor projects. We expect demand to be strong across a range of project sizes and scopes. We believe we'll continue to see very strong HVAC repair service demand as trends we observed this quarter continue through the third quarter. The summer heat we are seeing helps us.
[indiscernible] a more normalized fall turnaround season in our Industrial Services segment with our oil and gas customers and our refining and petrochemical customers. We should start executing some renewable energy projects that are delayed because of material availability.
While we are pleased with our current trajectory and optimistic about the balance of the year, we are also aware that we will continue to face headwinds in the near term. COVID is still here. And while we believe we have the systems in place to navigate and mitigate its challenges and keep our workforce safe, we expect that some project sites will be disrupted. Further supply chain issues exist with availability, delivery and pricing all [indiscernible] challenges. This will continue in my estimation through the balance of 2022 into 2023.
Finally, with respect to challenges, we cannot ignore certain [indiscernible] in our macro environment. Rising interest rates, [indiscernible] lending and energy scarcity, exacerated by the conflict in Ukraine and other policy matters will cause issues. To date, as evidenced by our strong growth in RPOs, we believe we have the resilient market to operate in. However, when the leaders of major financial institutions cost projected market conditions, we [indiscernible] and we realize that it will likely [indiscernible]. We believe the outlook is strong despite all that, as evidenced by our year-to-date performance and our record RPOs of $6.5 billion.
Our confidence in our business is reflected capital allocation strategy as we have returned a record amount of cash to shareholders, up $468 million through June 30, 2022. We announced an increase in our dividend by approximately 15% or $0.08 per share per annum, and our Board has provided, as Mark talked to our announcement today, an additional $500 million in authorization for share repurchases. We will continue to take a balanced approach to cash management, considering all the implications for maintaining and deploying funds, including maintaining cash and a strong balance sheet for our sureties, our investment in our organic growth, which has been quite strong, our acquisitions and our customer expectations for our financial strength. This approach to capital allocation has historically served us well. especially in periods of economic uncertainty. We [indiscernible] support our organic growth, and we have a decent pipeline of acquisitions to invest in across our segments.
As always, I'd like to thank you for your interest in EMCOR. And I would like to especially thank all the members of our EMCOR team for their continued dedication, hard work and execution for our customers. And with that, I will ask Andrea to open the floor for your questions.
[Operator Instructions]
And our first question will come from Sean Eastman of KeyBanc Capital Markets.
Hi, Tim. [indiscernible] update here. Great update. First one, kind of more of a clarification question. So you mentioned how you really like the diversity in RPOs. But of course, per the disclosures, it shows over 45% of the mix is commercial. None of the end markets we're talking about are what I would sort of think of as commercial and that piece is rapidly growing and is a lot bigger than it was in, say, 2007, 2008. So can we just get some clarity on what that piece really is?
It's growing, and I think we pointed it out in the commentary. What's driving that growth is -- you have to go back historically why it ended up there, right? Many, many years ago, it wasn't a major part of our business, and it was light manufacturing [indiscernible] enterprise data systems. Now, it's a bigger part of the business, but it's now data centers is driving the growth, high-tech manufacturing in general and more of what we were doing just build-out work, but now we're doing bigger work, life sciences, pharma and other types of that kind of manufacturing. And we still have pretty strong demand driving that growth, as we talked about in building services, there is all commercial for the most part. And that demand drives along HVAC retrofit projects, and most of those are in typical commercial.
But Sean, you're pointing out something, it's growing as a bigger business. It's what's driving that commercial backlog increase, and that's why we took the time in our RPO section to talk about that. Mark?
Yes. I mean just to reamplify what Tony just said. For -- not to go for the reasons again, that Tony just mentioned, but included in our commercial RPO disclosure or all those things that Tony just highlighted as major growth areas and have been major contributors to our profitability over the last several years, we're reticent to change how we're categorizing that at a midpoint in a year, but it's something that we need to evaluate internally as we go forward to provide the analytical community, I guess, more written transparency than transparency we're already providing forward with regards to what those actually represent.
Okay. I think that's really important. So I appreciate that. And then on the margins, also just to clarify, I think, Tony, I think you said you guys have built in a 5% operating margin for the second half. I'm kind of struggling to get to the midpoint of the guidance with that number. So maybe, I'm -- maybe I heard that wrong.
And also just broadly in terms of thinking about the progression of margins, we saw this really nice sequential improvement from 1Q to 2Q. Maybe talk about that bridge and I would have thought that into the second half, there would have been a lot of opportunity to continue to improve just in terms of some of the new construction work getting to later stages, driving a tailwind even if we're assuming the supply chain remains sort of [indiscernible].
Yes. So I'm going to kick this to Mark in a minute. But broadly, I said of around and 10 or 20 basis points, your right can move that. But Sean, the -- most of our caution of saying that number is around the macro environment and supply chain. It's hard for me today to tell you that the supply chain is all fixed and it's clear selling. Lead times are terrible. OEMs are routinely missing those terrible lead times. And that has implications for us. And so for us, to sort of sit here and not caution that would be irresponsible, I think.
And then secondarily, we have work that's now going to be starting that's favorable to our mix. that should be further along than it is. And we're not exactly sure. A month means a lot when you start up a large project on equipment deliveries. And most of those larger projects, we're in concert with our customers ordering that equipment. They're actually buying it ahead of time. And we will start up when that equipment is there and that could be delayed. It can start 2 weeks from now, they can start 4 weeks from now, it can start 6 weeks from now. And Mark, I think that's where our caution is.
Yes. And obviously, Tony is around 5% as it is indicated. Can mean something in the low 5% range. So clearly, as you did the math, I'm sure you came out with operating margins of 5.2% or 5.3% in the back half of the year. So clearly, no worse than they were in the second quarter and significantly higher than they were in quarter 1 and at the 6-month point on a cumulative basis. So the variable there, once again, is the revenue number. So of that $10.8 billion of guided revenues ends up creeping up. It's quite possible we get at the same point at a 5% or 5.1% margin level for the last 6 months.
Okay. Good stuff, guys. All really helpful. I'll turn it over there.
The next question comes from Adam Thalhimer of Thompson Davis.
Congrats on the strong quarter and a well-timed buyback.
Thanks, Adam.
I'm going to talk about RPOs. Are they -- because they're so strong, are they at a level where, Tony, they're starting to give you some confidence in 2023?
We don't give forward-looking guidance. But the reality is I go back to longer-term trends. And I go back to Page 13 in our presentation and talk about those sectors and most of them will be up into the right. Do I specifically know what will happen in 3 of the small project work? No, I don't. Do I know on what new awards -- No, I don't. But clearly, our average project length is somewhere 9 to 12 months. Some of these are longer term. And we'll see when they start up and then they finish. Again, we don't give forward guidance into '23.
And then can we talk a little bit more about the electrical write-downs and those specific projects? Is there any risk to those in the back half? Or does that margin hit that you took in Q1 and Q2 just slip and go away for the back half?
I mean in our business, we're always cautious to say write-downs go away. We've had a hell of a run without any significant losses. But our folks are working in unprecedented times, especially with respect to supply chain. And most of the write-downs we had in the first half of the year were on projects we took prior to the supply chain and inflation cycle. But that being said, there's a lot of moving pieces. So we actually -- I would just refer you back to the previous question on the 5 -- around 5% margin. we don't see anything or absolutely we would have taken it, right? That's how this business works. But we don't expect it, we would have taken it. And our electrical business has a good mix of work. And a lot of that margin progression to be dependent on our ability to start some of that favorable mix work will all be related to supply chain.
Adam, I'm going to just interject quickly. So Tony's point, obviously, to the extent that we've identified, the necessity to take a write-down. We've taken 100% of it in the second quarter, but we can't defer to later periods as I'm sure everyone in the call well knows. The only additional thing I'll add to Tony's commentary is that these projects are still active projects, so they create a little bit of margin headwind in that segment because we're going to be recognizing profit on the remaining revenues at a margin profile lower than what the segment traditionally [indiscernible]. That's the negative aspect of it. The fast fact is with regard to the projects that were written down, both in electric production and mechanical construction. They're all over -- they're well over 50% complete, some of them are even closer to 100% complete. So they are clearly not going to be the preponderance of revenues that are recognized in these segments as we work through the last 6 months of 2022.
I almost led with that, too, because it's been 8 years since -- I think 2014 was the last time we talked about a problem project. So -- alternative.
Adam, I mean, in all fairness, right, these aren't big giant project write-downs. This is more -- like Mark said, we're getting to the end of the project. Two of them were specifically stopped and started not only through the pandemic, but because of the supply chain. That's never good for a contractor, right? As you reassemble the team and get going again.
And look, what we're known for EMCOR is we will finish the work. But then what we're also known for is not reflected in these write-downs, is our ability to go win what we think will have partial entitlement. Because customer hasn't made an offer back the other way, we're putting together the case, our guys are pretty [indiscernible], and we'll see what happens. But I wouldn't term these on the same magnitude as what we had 8 years ago on a specific job.
I mean, these are -- in some ways, what happens in business when you get to a period of a very choppy environment where you have either on a disruption in the job site. One of them specifically [indiscernible] carry on -- further carry on from the first quarter, we thought we had it all, but one of them specifically was workforce-related, right? And it was related to our ability to get the right workforce on and at COVID disruption, we're working more over time. We finished the job. We have a great reputation. Life goes on.
And I will tie that back to the earlier point. One of the reasons that we win this big work, this complex technical work is, hey, we got the best people in the field to execute this work. And we can assemble and put on fill the best people. And also, people know that we are thoughtful in [indiscernible] our balance sheet. So the work will get done and that we understand that we manage this business through cycles. And look, I think we're -- with the RPOs we have lined up, we feel pretty good about managing through this cycle. But again, we will see, right? I mean there was a negative GDP growth print today. I don't know what that means for our business. I just feel really good about where we are on Page 12 and 13 right now, which are RPOs and markets we have to work in.
I agree. Great color.
The next question comes from Brent Thielman of D.A. Davidson.
Tony, on the data center work, it seems like it's keeping you really active. We hear some rumblings out there that things might pull back in that market vertical. I mean, any the commentary in terms of what you're seeing out there in that market would be great.
We don't see that. Could there be a short-term disruption? We don't see that. But anything we study, anything we talk to these major builders, we don't see a pullback. I think anything you're hearing around pullback is their frustration around the supply chain. I mean just for amplification on that. All these data centers, for the most part, are backed up by either natural gas generators or diesel generators. That's now up to 52 weeks. So as they try to think through how they're going to sequence these data center to come on, they have to take that in their planning.
The [indiscernible] come in, these are 50-megawatt facilities. There's a substation build outside almost every one of them a substation two for one. Just to put in perspective, what 50 megawatts is, 50 megawatts of power about 1,500 to 2,000 [indiscernible]. Let us put this in perspective, what's happening here. Which gear to do that is 42 weeks right now. So [indiscernible], I think that people are feeling is, can we get the supply chain to make delivery?
And then you get to the UPS system. It can take anywhere a square footage-wise, imagine a commercial 2 floors of a typical commercial office building, 60,000 square feet. That's the battery room to run that data center somewhere between 1 minute and 1.5 minutes until the generator kicks on. So these are the kind of systems that are more difficult to acquire right now. And I think that's what's causing -- and that's what caused the delay in our electrical business. So what's good news for us is those deliveries are going to start coming. We had pretty good performance without that in our mix. And then as we get through the back half of the year and into next year, that should be a favorable mix for us.
Okay. Really helpful, Tony. Appreciate that.
And then the -- I mean, it sounds like on the building services side, sort of the delays in getting big equipment, maybe some seasonal factors? Or it sounds like you guys think that's going to drive a pretty -- maybe unusually stronger second half for that segment. Is that a fair characterization just maybe everything you're seeing out there?
It should, coupled with repair service demand. Mike [indiscernible] team right now sleep with one eye open and equipment deliveries. Not 100% sure that all of these manufacturers are going to meet their commitments. Me, look, I'll be blunt. I was in this game 18, 20 years ago. They are all terrible at deliveries right now. They are not performing and they are communicating terribly. I am very fortunate to work with the team that stay on top of this every day and are very good and understanding the language back from those OEMs with respect to their equipment deliveries and the fulfillment of those deliveries.
We got the best team in the business, interpreting those results. But all 4 of them are terrible right now.
Okay. Appreciate it, Tony. Thank you.
Next question from Noelle Dilts of Stifel.
Congrats on the quarter. So maybe in a little bit on how you're thinking about M&A with the share repurchase announcement you discussed [indiscernible] in terms of priorities, what you're seeing in the market, how you're [indiscernible] about the potential for M&A?
In general, nothing [indiscernible] in our philosophy. We've been balanced capital allocators for a while here at EMCOR. And I think in any given situation, you tell us Tony invest like crazy in organic growth when you have. And quite frankly, we have. We spent a little more on capital. Mark talked about the growth in AR. One of the big considerations we think about on a large project is what is cash flow characteristics of that project. And we know that sometimes an investment somewhere in the middle of the project. And one of the reasons we win some of those large projects. I mean, first is always technical capability, but also people look at it and said, you guys run a contract or the way you should run a contractor.
And that's for the conservative balance sheet that we can figure it done. The second thing is we're very conscious with our authorities and talk about the relationship with them. We have great relationships with leading surety companies, and they appreciate how we run that and keep that balance sheet. Mark has done this for a long period of time with them to the point where the trust-based relationship we have there allows our people with confidence to go out and look at jobs and not worry about surety.
And Mark, I think we have about $1.5 billion of that out there right now?
A little bit more.
And alongside Surety Credit says the conversations we have with these large projects people, whether they be in hyperscale data centers, semiconductor work, health care facilities, where they'll work with our people, our General Counsel, and they'll say -- and us and say, we get it, but can we put a corporate care around that. And that all ties back to that thoughtfulness that we have around capital allocation and a strong balance sheet. So organic growth would always come first.
And then I think after that, then we have the dividend which we think is a commitment over time. And we just increased it, and we feel good about that. And then we balance the capital allocation between share repurchases and acquisitions. The reality is, we've been fairly returning cash to shareholders since 2017, '18, especially, I think $1.1 billion, $1.2 billion has now been returned to shareholders through share repurchases. I give our CFO a ton of credit for how he thinks through that with his team and how they execute it.
And then we clearly were exiting the year last year with a big cash position. Now, we built that big cash position because we're one of the best cash generators in the business over time from continuing from our operations. But we also had a dislocation, right, going from '19 to '20 with the pandemic. And in this business, the revenue shrunk and we threw up a lot of -- we knew we had this onetime mark [indiscernible] of excess cash. What was either going to get put to work [indiscernible] positions were going to get put to work with buyback. And then when we saw the dislocation, I would not just say in our stock, but in the market through the first 6 months of the year, we thought it was a comp on us to step in and repurchase shares because reality is versus any [indiscernible] acquisition we could have made for EMCOR, the best company we could buy at that multiple was EMCOR in the first 6 months of this year.
So think about all this, we think about it over time. And all in [indiscernible] we've been acquirers a good place order somewhere between $150 million and $300 million a year. And the best deals that happen with us are people that are selling their life's work going to be part of the future.
And recently, we did Quibi Holdings. Dennis Quibi and Buck Ross out there in Ohio, terrific company, great reputation. We feel really good about our future together. Several years ago, the team down in Atlanta and B&K that have a great presence in the Southeast and are probably some of the best leading edge people in BIM and prefabrication in the industry. And we worked together. They taught us a lot. We've taught them a lot. It's been a great group of people to have on our team. And then the whole fire protection build-out, going all the way back to Comunale and the organic at Shambaugh and Comunale, coupled with acquisitions, to build out that portfolio around the Shambaugh platform.
And then the fabrication shops, investments we made on top of that, not only in Akron, Ohio, with Comunale but Fort Wayne, Indiana, and in Alabama, right by one of the big pipe producers [indiscernible] in Arizona. These are all thoughtful expansions of capacity to allow us to serve our customers after an acquisition strategy that helped us gain access to not only new capabilities in that market, but also geographic presence.
And then you go to mechanical services where we -- within a geography, maybe buy a platform and then build it out much like we've done in Florida and in California. The Mesa team -- I mean, it's a remarkable story over a long period of time of the application of capital, acquisition capital and organic capital to go from a small, pretty good capability, Orange County-focused HVAC contractor with Bob Lake and Charlie Fletcher and the team out there to a -- I would say, the leading controls and HVAC service company across basically, 4 states in the West. And [indiscernible] a terrific job, and it's pushing on $200-plus million now. And that's been mostly organic, but it's been the application of capital to buy small contractors in the market and geographically fit it out.
And we see those opportunities in front of us. And I think you know me, we always have said deals happen when they happen. We're always in the market. And we haven't been that successful over the last 4 years, 5 years, in competition with private equity on [indiscernible]. Part of that is our choice. I've never been a [indiscernible]. We got good visibility down through the organization on buying somebody else's consolidation or roll up -- they're roll ups. We're not -- we are operators. And I've never been a big fan of that unless we can really get down in the organization to understand who's running the local operations. And so we've sort of stayed away from it.
And look, at the end of the day, we're going to buy what we're good at. We are good at trade contracting. We are a service and we are with highly technical people, and we are very -- and that's really the theme that unites all those segments. And we are very good at taking something that's very -- that's well run, helping us make it a little better run and then growing it once we buy it.
So nothing's really changed, and I think we'll just keep executing the way we've been executing.
Thank you.
Yes. Again, I spent a little time on that because it's always important to reiterate, which made us really good over a long period of time. We don't react to FADs and we just continue to execute. And I think that's the nature of the work we do.
Anybody else, operator?
This concludes our question-and-answer session. I would like to turn the conference back over to Tony Guzzi for any closing remarks.
Yes. So I'm just going to finish the way I started. I'd like to thank all the folks that continue to support us and have listened to and supported our growth story over a long period of time. And I would really like to thank our segment and field leadership and our corporate staff. It's been -- really, great execution over a long period of time. And these last 3 years, they've been tough, right? But [indiscernible] to be big excuse makers, and we're going to continue that.
And I think what's made us successful is we think through everything carefully, and we very rarely go off that track. And with that, we run by a set of values of mission first people always and our people love to execute for their customers and take care of their people, and we'll continue to do that.
We'll talk to you in the third quarter. Be careful in the heat, and if you have it, you can't get your air conditioner fixed, look for your local [indiscernible] on our website. And with that, I'll let you go.
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.