Q4 2020 EMCOR Group Inc Earnings Call
[music].
Good morning, My name is Laura and I will be a conference operator today at the.
This time I would like to welcome everyone to the Amcor group fourth quarter and full year, 'twenty and 'twenty earnings call I.
All lines have been placed on mute to prevent any background noise and.
And so to speak with you and while there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad, if he would like to withdraw your question and perhaps the pound key.
Jamie bag the STI consulting you may begin.
Thank you Laura and good morning, everyone. Welcome to the Encore Group Conference call. We are here today to discuss the company's 2024th quarter and full year results, which were reported this morning, I would now like to turn the call over to Kevin Matz Executive Vice President of shared services, who will introduce management.
Kevin. Please go ahead.
Thanks, Jamie and good morning, everyone and as always thank you for your interest and the EMCORE and we welcome you to our earnings conference call for the fourth quarter and full year of 2020, what are your expense.
For those of you who are accessing the call via the Internet and our website welcome to you as well hopefully you have arrived at the beginning of our slide presentation that will accompany our remarks today, we are on slide two.
This presentation and discussion contains certain forward looking statements and certain non-GAAP financial information page two describes in detail. The forward looking statements and the non-GAAP financial information disclosures I encourage everyone to review both disclosures in conjunction with the discussion and accompanying slides.
The next slide depicts the executives true with me to discuss the quarter and full year 2000, and 'twenty results. They are Tony Guzzi, Chairman, President and Chief Executive Officer, Mark Pompa, Our executive Vice President and Chief Financial Officer, and our Executive Vice President and General Counsel Maxine Mauricio for.
For call participants not accessing the conference call via the Internet. This presentation, including the slides will be archived and the Investor Relations section of our website under presentations you can find us at M cord group dotcom with that being said, please let me turn the call over to Tony Tony Yeah. Let me start the call. This morning by congratulating vaccine on her promotion and.
And also welcoming Ron Johnson as our newest and of course director.
Maxine congratulations and Ron.
Brian and welcome to <unk> Board.
I'm gonna be covering pages four through right here in my opening comments.
First I'd like to welcome all of you and thank you for your interest <unk> investment and EMCORE.
And 2020, we had a terrific year, despite an extremely challenging operating environment.
We delivered extraordinary results through disciplined.
<unk> and.
And resilience.
I am extremely proud of our EMCORE team.
I don't think any of us could have imagined this high level of performance when we started to understand the impact of COVID-19.
And our operations and March of 'twenty and 'twenty.
In 2020, we had $8 8 billion and revenues.
And set records on an adjusted basis for earnings per diluted share of $6 and 40.
Operating income of $490 million.
And operating income margin of 5.6%.
We also had record operating cash flow of $806 million.
Mark is going to cover all of the financials and much more detail and especially the key components of our cash flow performance and his financial commentary inclusive of the fourth quarter and full year 'twenty and 'twenty performance.
We delivered the stellar results because we of diversity and demand for our services and we are and markets that have proved resilient and have provided us with opportunities to execute well for our customers.
These results are a testament to our skilled employees and.
And our subsidiary segment and corporate leadership, who kept focused and resolute through the ever changing environment in 2020.
Across our company, we worked hard to keep our employees safe.
And it was our number one priority throughout the year.
We innovated and found ways to maintain and even improve our productivity.
We became leaner and even more expeditious and our decision, making and we're able to leverage technology to connect our leadership effectively to the frontlines. Despite COVID-19 protocols.
And we did not let the obstacles become excuses instead, we overcame obstacles and we delivered exceptional results.
I now want to highlight some of our segment performance.
Our electrical construction segment performed well with eight 4% operating income margins.
Despite the disruptions and some of our operations from COVID-19 induced shutdowns and we still posted outstanding results.
And these results were driven by excellent execution and the commercial sector, driven by data center, and telecommunications and it really excellent execution across all market sectors.
We performed the work well and really innovated on the means the methods and the scheduling so that we can not only keep our employees safe, but enhance our productivity.
Our mechanical construction segment had an exceptional year by any measure. We also had eight 4% operating income margins with exceptional performance across the commercial sector again, driven by telecommunications and data centers and we also had strength and warehousing manufacturing water and wastewater and the health.
And markets.
We showed great and innovation through.
Increased use of bim or building information modeling and pre fabrication and worked hard to keep our employees safe and productive.
We believe and both of our construction segments that we not only met but we exceeded our customers' expectations.
The United States building services segment team showed grit and resilience as they face the COVID-19 disruption in late March April and May with many of our customer sites not acceptable bookings off as much as 40% and some of our subsidiary companies and in some of our product line and a very cautious resumption of decision making.
By our customers to allow us to resume service and projects.
We did rebound robustly for mid June forward, and we're well prepared to execute project work for our customers that optimize their equipment and control systems and improve the wellness of their facilities through indoor air quality or <unk> solutions and sought to help our customers return to work safely and productively.
We also served as the boots on the ground for our customers to keep lightly occupied buildings campuses and schools operational functioning and safe over the past 10 months.
We are well positioned to keep serving our customers as they reopen and seek to meet their building safe.
Efficient and productive for their employees.
Our U K building services segment mirrored the performance of our U S building services segment, we navigated the severe lockdown actions and the U K and continue to keep our customers productive operational and able to conduct their businesses.
We also made organizational changes and that enhanced our leaders responsiveness by making our organization, even flatter more aligned and leaner, which has led to a crisper and more efficient decision, making our U K team continues to win and the market as we have a culture of innovation and execution.
As you all know our industrial services segment, mostly serves the downstream oil and gas for refining and petrochemical markets.
These end markets had a severe dislocation of the demand as plain stopped flying and people stopped driving and this segment was also impacted at the beginning of the year with the disruption and the global oil and gas markets, we cut costs aggressively and main profit maintained profitability on an EBITDA basis, we are.
And well positioned with demand for our services returns, which is not likely to happen until the fourth quarter of this year, we expect the larger more sophisticated well capitalized service providers to emerge stronger and yes, we are clearly one of them.
And we exit 2020, with our remaining performance obligations or RPE OS at an all time high of $4 $6 billion 13, 8% higher than the year ago period.
We have very strong rps on are continuing to benefit from the very strong demand for data center construction.
Logistics and supply chain support, especially with our fire protection and trade healthcare water and wastewater and we expect manufacturing to be a strong also as 2021 progresses.
We expect to benefit from increasing demand for IQ, that's indoor air quality and ability and efficiency projects and solutions.
We the part 2020 with an exceptional balance sheet that allows us the room to grow and build for the future while continuing to return cash to our shareholders through dividends and share repurchases.
2020 was an extraordinary year and we performed exceptionally well, which is a real testament to our people our subsidiary of leaders our segment staff and leadership and our corporate staff and leadership and really I'd just like to thank all of them I will now turn the discussion over to Mark.
Thank you Tony and good morning to everyone participating on the call today for those accessing this presentation via the webcast. We are now on slide seven.
Over the next several slides I will provide a detailed discussion of our fourth quarter results before moving to our full year performance some of which Tony outlined during his opening commentary.
And as a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements within both of our earnings release announcement and form 10-K filed with the Securities and Exchange Commission earlier today, So, let's discuss and of course fourth quarter performance.
Consolidated revenues of $2 3 billion and quarter four are down $122 4 million of our five 1% from 2019.
Our fourth quarter results include $55 4 million of revenues attributable to businesses acquired pertaining to the period of time that such businesses were not owned by Amcor and last year's fourth quarter acquisition revenues positively impacted both of our United States and mechanical construction and the United States building services segments, excluding the impact of.
The businesses acquired fourth quarter of 2020 consolidated revenues decreased to $177 9 million or seven 4% organically or.
Our segment performance was mixed within the quarter with most of our reportable segments experiencing quarter over quarter organic revenue declines and general we have seen reductions in revenues and those geographies and market sectors, which are continuing to be most significantly impacted by the COVID-19 pandemic. However, when we consider the incremental revenue generated.
From our acquisitions, we were successful and generating fourth quarter revenue growth from three of our five reportable segments specific segment revenue performance for the quarter is as follows the United States Electrical construction segment revenues of $493 5 million decreased $71 million of 12, 6% from quarter for $2000.
<unk> revenues declined across multiple market sectors due to the continuing impact of the COVID-19 pandemic, including the associated of containment and mitigation measures as well as the curtailment of capital spending by some of our customers consistent with my third quarter commentary. This segment experienced the significant reduction in revenues from industrial.
And that work within the manufacturing market sector, where certain of our electrical businesses perform services for both midstream and upstream oil and gas customers. Additionally, the segment's operations that serve the Metropolitan New York, and California markets continue to face revenue headwinds as these geographies remain some of the most restrictive with regard.
The Covid protocols.
And the United States and mechanical construction segment revenues of $969 4 million increased $73 8 million or eight 2% from quarter for 2019, excluding acquisition revenues of $24 2 million. The segment's revenues increased $49 6 million of five 5% organically revenue.
Growth within the quarter was broad based across most market sectors with convert with commercial and health care, representing the most significant period over period of increases. These revenue gains were partially offset by a quarterly revenue decline and manufacturing market sector activity due to the completion or substantial completion of certain large projects during the early part.
And of 2020. This revenue performance represents an all time quarterly record for our United States and mechanical construction segment and surpasses the previous record set in 2019 fourth quarter.
And of course total domestic construction business fourth quarter revenues of $1 46 billion increased $2 $7 million are less and <unk>, 5%.
The United States building services revenues of $568 1 million increased $29 $1 million of five 4%. However, when excluding acquisition revenues of $31 2 million. This segment's quarterly revenues decreased $2 1 million or 40 basis points revenue gains within their mobile mechanical services.
Vision, resulting from incremental contribution from acquired companies and their commercial site based services division due to new contract awards or scope expansion and certain existing contracts were partially offset by a quarter over quarter revenue decline within the segments Energy services division due to reduced large project activity.
Compared to 2019 fourth quarter.
Consistent with the United States and mechanical construction services segment revenue performance within our United States of building services segment represents an all time quarterly record.
And the United States Industrial services revenues of $135 5 million decreased by $163 $7 million of 54, 7%. As this segment continues to be impacted by the negative macroeconomic conditions and uncertainty within the markets in which it operates cost control and cash preservation actions.
<unk> taken by customers of this segment have resulted and the suspension of capital spending programs and the curtailment of maintenance activity, which has severely impacted demand for our industrial service offerings with the rise and telecommuting and the various restrictions on travel and response to COVID-19, there has been significant reductions in both the.
Nicole miles driven and airline miles traveled which is further prolonging the weakened demand in the segment has been experiencing since late quarter one of 2020.
The United Kingdom building services segment revenues of 115 million increased $9 4 million or eight 9% from last year's quarter revenue gains for the quarter resulted from strong project activity as well as incremental revenue from new contract Awards. Additionally, fourth quarter 2020 revenues were positively impacted by $2 $9 million.
As a result of favorable foreign exchange rate movement and the period, Please turn to slide eight.
Selling general and administrative expenses of $244 6 million reflect an increase of $3 $7 million from quarter for 2019. The current period includes approximately $4 $4 million of incremental expenses from businesses acquired inclusive of intangible asset amortization, resulting in an organic quarter over quarter decrease.
Of approximately $700000.
And the reduction in salaries expense due to a decrease and head count necessitated by lower organic revenue as well as reduced travel and entertainment expenses due to a combination of cost avoidance measures as well as restrict the company travel for the primary reasons for the organic decline and SG&A.
These decreases were largely offset by an increase in quarterly incentive compensation expense due to the <unk> actual operating performance exceeding its previously forecasted 2020 full year results.
As a percentage of revenues selling general and administrative expenses totaled 10, 7% and quarter, four 2020 versus 10% and the year ago period, the quarter over quarter increase can be attributed to the reduction and our consolidated quarterly revenues without a commensurate decrease and certain of our fixed overhead costs, including those of our industrial services.
And as we do not deem the current operating environment to be permanent or assessment continues to be based on our evaluation of future market opportunities and we expect to see some return to normalcy and industrial maintenance and capital spending when we ultimately move beyond the depressed demand caused by the COVID-19 pandemic reported operating income for the.
Quarter of $137 6 million represents a $14 $7 million of our 12% increase when compared to operating income of $122 9 million and last year's fourth quarter. This operating income performance eclipses. Our previously established all time quarterly record, which was achieved in 2023rd quarter are for.
Fourth quarter operating margin was 6%, which compares favorably for the five 1% of operating margin reported in 2019 fourth quarter, we experienced the operating margin expansion within each of our reportable segments, although than our U S. Industrial services segment, which is reporting an operating loss for the fourth quarter and our UK building services.
Segment, which achieved a consistent margin and each year's quarterly period.
Specific quarterly performance by reportable segment and is as follows our United States of electrical construction segment had operating income of $43 4 million, which increased by $2 $1 million from the comparable 2019 period reported quarterly operating margin of eight 8% and represents a 150 basis point improvement over 2019.
The fourth quarter. This increase in both operating income dollars and operating margin is largely attributable to increased gross profit contribution from commercial market sector activities inclusive of numerous telecommunications construction projects. These gross profit gains were partially offset by reduced gross profit contribution from the transportation and <unk>.
Manufacturing market sectors due to both of the closeout of projects and prior periods as well as the continued headwinds attributable to the COVID-19 pandemic.
The fourth quarter operating income of the United States of mechanical construction services segment of $104 million represents a $31 $5 million increase from last year's quarter, while operating margin and the quarter of 10, 4% represents a 270 basis point improvement over 2019. This segment has.
The continued to experience strength and the majority of the market sectors. We serve most notably demonstrated by increased gross profit contribution from project activity and the commercial healthcare and institutional market sectors. In addition, our mechanical construction segment experienced a more favorable mix of work and in the prior year and benefited from it.
<unk> benefited from strong performance by our fire protection operations, our combined U S. Construction business is reporting of nine 8% operating margin and of $143 7 million of operating income, which has increased from 2019 fourth quarter by $33 5 million of 34%.
Operating income for the United States building services of $28 million represents a $3 $8 million increase from last year's fourth quarter and operating margin of four 9% represents an improvement of 40 basis points when compared to the prior year. The segment experienced improved gross profit performance from its mobile mechanical services division inclusive of incremental contribution from acquired.
Companies. In addition, the segment continues to benefit from reduced levels of selling general and administrative expenses due to cost mitigation actions implemented in response to the COVID-19 pandemic.
Our United States Industrial services segment operating loss of $8 2 million represents a decline of $21 3 million, which compares to operating income of $13 1 million and last year's fourth quarter as mentioned earlier on today's call as well as during my commentary on each of our last two quarterly conference calls our industrial services.
Segment has been significantly impacted by the adverse macroeconomic conditions within the oil and gas industry, including the dramatic decline of demand for refined oil products, resulting from travel restrictions and other containment and mitigation measures imposed in response to COVID-19. These conditions have resulted in considerable reductions in capital spending.
By certain of our customers, which has led to a decrease and demand for this segments of service offerings. This environment was further exasperated by and active hurricane season, which resulted in the suspension of planned maintenance activities that would have occurred during both quarters three and four of 2020, Tony will speak to our 2020.
And one expectations overall as well as our expectations for this segment later in this morning's call United Kingdom building services operating income of $4 2 million represents an increase of approximately $300000 over quarter for of 2019 operating margin was three 7% for both quarter periods.
We are now on slide nine.
Additional financial items of significance for the quarter not previously addressed are as follows quarter for gross profit of $383 9 million or 16, 8% of revenues is improved over last year's quarter by $19 1 million and 160 basis points of gross margin restructuring expenses and 2024th quarter retained for.
For the realignment of management resources within our combined U S. Construction operations diluted earnings per common share of $1 45.
Compares to $1 54 per diluted share and last year's fourth quarter and.
Adjusting our 2020 quarterly performance for the negative impact on our income tax rate, resulting from the non deductible portion of the noncash impairment charges recording recorded during the second quarter of 2020 non-GAAP diluted earnings per share for the quarter ended December 31, 2020 is $1 86.
Which favorably compares to last year's fourth quarter by 32 cents for nearly 21 per se.
Our tax rate for quarter four of 2020 is 41, 8%, which is significantly higher than the tax rate for the corresponding 2019 period due to the non deductibility of the majority of the impairment charges just referenced my last comment on slide nine as with respect to our $259 5 million of operating cash flow and the quarter.
And which favorably compares to $178 8 million of operating cash flow and the year ago period and reflects the continued effective management of working capital by our subsidiary and leadership teams are operating cash flow was aided by the organic decline in revenues, which resulted in a contraction and accounts receivable. Additionally, the deferral of the <unk>.
Florida is portion of social security taxes, and the United States benefited our cash flow by approximately $35 $2 million during the fourth quarter of 2020 on a full year basis, the social security tax deferrals, coupled with the deferral of value added tax and the United Kingdom has favorably impacted our 12 month operating cash flow.
And by approximately $117 3 million. These amounts will be repaid in 2021, and 2022 and obviously, we will have the opposite effect on our operating cash flow and such future periods. Please turn to slide 10.
With the fourth quarter commentary complete I will now augment tonys introductory remarks on <unk> annual performance consolidated revenues of $8 8 billion, representing a decrease of $377 $6 million of four 1% when compared to our record annual revenues in 2019 of $9 $1 7 billion.
Our year to date results include 269 6 million of revenues attributable to businesses acquired pertaining to the period. Upon the such businesses were not owned by <unk> and the 2019 period acquisitions positively impacted each of and the United States electrical construction and United States and mechanical construction, United States building services segments.
Excluding the impact of the businesses acquired year to date revenues decreased organically seven 1%, primarily as a result of the significant revenue contraction experienced during quarter two as the majority of our operations were most significantly impacted by the COVID-19 pandemic during such period. In addition, our annual revenue.
Revenues were negatively impacted by a decrease and demand for certain of our service offerings within the United States of electrical construction services.
And the United States Industrial services segments as a result of the adverse conditions experienced within the oil and gas industry.
<unk> segment revenue performance for full year 2020 is as follows the United States of electrical construction segment revenues of $1 97 billion decreased $243 2 million or 11% from 2019 to two 2 billion of revenues acquisitions contributed $25 4 million of incremental revenues, resulting in an organic.
The decline of $268 5 million of 12, 1% revenue contraction within the majority of the market sectors, and which we operate most notably the commercial and manufacturing market sectors for the primary drivers of this year as of year over year decrease as I mentioned and my commentary on our fourth quarter results. Although this segment has the diversity.
Geographic footprint of number of its operating companies within within both the Metropolitan New York, and California markets were severely impacted by Covid protocols, which resulted in a decrease and the number of short duration project opportunities as well as various project delays. These impacts coupled with the completion of our substantial completion of certain large project.
And 2019 contributed to the decline and organic annual revenues and addition, and as previously referenced certain of our operations and the segment, which are exposed to the upstream and midstream oil and gas sector experienced the significant decline in demand in 2020, partially offsetting these revenue reductions were increased revenues from project.
Activities within the institutional and hospitality market sectors during for the year.
The United States and mechanical construction revenues of $3 49 billion increased $145 $2 million of four 3% compared to 2019 and.
Acquisitions contributed $188 8 million of incremental revenues for the segment, which when excluded results and an organic revenue decline of $43 $7 million or one 3% from 2020.
This organic decrease can be largely attributed to reduced project volume within the manufacturing and market sector with the heavy concentration and the food processing Submarket sector. As a result of the completion of our substantial completion of certain large projects and 2019 similar to our United States Electrical construction segment. The segment. Additionally experienced.
And the negative effects of the COVID-19, pandemic, which resulted in a reduced number of short duration of project opportunities during calendar 2020, and United States building services segment revenues of $2 1 billion increased $3 $2 million or less and one half of the percent acquisitions contributed $55 4 million.
The revenues, resulting in an organic revenue decline of two 5% when compared to full year 2019, the decrease in project and building controls activities within the segments mobile mechanical services Division largely as a result of the impact of the COVID-19, pandemic, which resulted in the temporary closure of certain customers facilities couple.
Of the decrease of large project activity within the segments Energy services Division for the primary contributors to such organic revenue reduction. In addition, the segment experienced a decrease in revenues from its government services Division as a result of the loss of certain contracts not renewed pursuant to rebid. These revenue contractions were partially offset by income.
And just customer demand for certain services aimed at improving the indoor air quality within their facilities as well as an increase in revenues within the segments commercial site based services Division as the result of new contract awards and scope expansion on certain of existing contracts and the United States Industrial services segment revenues of the 797.
$5 million decreased $290 1 million of 26, 7% from 2019 as one of $9 billion of revenues at the risk of sounding repetitive for most of 2020. The segment has been severely impacted by negative conditions and uncertainty within the markets and when should operates due to the dislocation.
And crude oil supply and demand, resulting from COVID-19, and geopolitical tensions within OPEC and addition, during the back half of 2020, the segment experienced suspension and deferral of maintenance and capital projects by its customers as a result of hurricane and tropical storm activity and the United States Gulf Coast region.
As of the United Kingdom building services segment for 2020 increased one 7% to $436 million, primarily as a result of new maintenance contract awards within the commercial and institutional market sectors revenues were also favorably impacted by $2 $3 million as a result of exchange rate and movement and the pound sterling year over year.
Please turn to slide 11.
Selling general and administrative expenses of $903 6 million represent 10, 3% of revenues as compared to $893 5 million of nine 7% of revenues in 2019 full year 2020, SG&A includes $29 $6 million of incremental expenses inclusive of intangible asset amortization pertaining to businesses.
Wired, excluding such incremental amounts our SG&A has decreased $19 $4 million on an organic basis, primarily as a result of certain cost reductions, resulting from our actions taken in response to the COVID-19 pandemic as referenced during and my quarter commentary the increase in SG&A as a percentage of revenues as a result of the organization.
Ganic decrease and our revenue without a commensurate decrease and certain of our fixed overhead costs as we do not be and the current operating environment to be permanent 2000, Twenty's year to date operating income of $256 8 million adjusted and this amount to exclude the noncash impairment loss on debt well identifiable intangible assets and other long lived assets Ricky.
And the second quarter, our non-GAAP operating income for the year was $489 6 million. This compares to operating income of $460 9 million for full year of 2019 and represents a $28 $7 million of six 2% improvement year over year.
Fight the headwinds experienced in 2023 of our five reportable segments achieved higher operating income and higher operating margins and that of the prior year of the two segments, which did not the United States building services is reporting a modest decline of just over 1%, while our United States Industrial services segment suffered a significant year over year.
The reduction, resulting in an operating loss for 2020 with regard to each segment's discrete performance I will start with our electrical and the United States of electrical construction segment for 2020 operating income of $166 5 million represents an all time segment record and is an increase of $4 $8 million of 3% compared to the prior year.
Operating margin for 2020 is eight 4%, which is of 110 basis points higher than 2019. This year over year improvement and operating income dollars was due to a reduction in selling general and administrative expenses due to cost control measures enacted during the course of 2020 the increase in operating margin for the year. It was the result of and increase in gross profit.
The margin given favorable project execution and a more profitable mix of work within the segment. These improvements and gross profit margin were partially offset by an increase and the ratio of selling general and administrative expenses to revenues as a result of the year over year revenue contraction within the electrical construction segment.
United States and canopy construction operating income of 290 to $2 5 million increased $67 5 million of 30% over 2019 levels and operating margin reached eight 4% versus six 7% and the prior year acquired companies contributed incremental operating income of $9 3 million inclusive of <unk>.
$7 million of amortization expense associated with identifiable and tangible assets. The increase in operating income for 2020 was primarily due to strong project performance throughout the year and the majority of the market sector of served by the segment, resulting in an increase in annual gross profit of 170 basis point improvement and operating margin was also a result of our <unk>.
All of our project execution and improved gross profit margin, most notably within the manufacturing and commercial market sectors. These increases in gross profit and gross profit margin for partially offset by an increase and selling general and administrative expenses, primarily as a result of an increase and incentive compensation expense due to the improved year over year operating performance.
For the segment.
And the United States building services operating income for 2020 of the $113 4 million declined by $1 $3 million or one 2% due to a reduction and year over year of large project activity within the segments Energy services Division as well as decreased project and building control opportunities within the mechanical services division due to both temporary closure.
And restricted access to certain customers facilities impacted by the COVID-19 pandemic. These reductions were partially offset by incremental operating income contribution from companies acquired which totaled $4 $5 million inclusive.
Inclusive of $3 2 million of amortization expense associated with identifiable intangible assets. In addition, the segment experienced increased gross profit, resulting from greater demand for certain services aimed at improving indoor air quality as various customers made changes to the HVAC systems and advance of their employees return.
Turning to work as recommended by the center for disease control operating margin of five 4% was consistent with the prior year as the reduction in gross profit gross profit margin was offset by a decrease and the ratio of selling general and administrative expenses to revenues due to certain cost reduction measures taken during 2020.
And the United States Industrial services segment incurred an operating loss of $2 8 million for 2020 as compared to operating income of $44 $3 million and 2019 as referenced numerous times. During this morning's call. The segment was the most severely impacted by the pandemic as well as the other macroeconomic factors affecting in the oil and gas industry. This segment of.
<unk> and significant cost reductions during the year and in an effort to mute the year over year decline. However, as previously discussed the segment's overhead structure includes a significant investment and fixed infrastructure, including plant and equipment as we view of current market conditions as to be temporary that infrastructure is needed to respond to changes and <unk>.
Man patterns once they ultimately recover.
Operating income of our United Kingdom building services segment of $20 7 million of four 8% of revenues compares to operating income of $18 3 million of our for 3% of revenues and the prior year to $2 $3 million of improvement is largely due to an increase in gross profit from the maintenance contract awards, while the 50 basis point expansion of operating <unk>.
<unk> is attributable to both of the increase in gross profit margin as well as the reduction in the ratio of selling and general and administrative expenses to revenues SG&A of the segment benefited from various cost control initiatives implemented by our UK team.
We are now on slide 12 the.
Additional key financial data on slide 12, not addressed during my folio of commentary is as follows the year to day gross profit of $1 4 billion was greater in 2019 gross profit by $39 5 million, while gross margin of 15, 9% is higher than last year's 14, 8% by 110 basis points total restructuring costs of two.
$2 million increase from 2019 due to actions taken during 2020 for both realign certain management functions as well as rightsize our cost structure in light of the revenue headwinds we faced.
Diluted earnings per common share was $2 40, compared to $5 75 per diluted share a year ago. When adjusting this amount for the impact of the noncash impairment charges recorded in 2022nd quarter non-GAAP diluted earnings per share of $6 40.
As compared to the same $5 75, and last year's annual period. This represents a 65 or 11, 3% improvement year over year.
Now on slide 13.
Outlined on this slide and of course liquidity profile remained strong despite the headwinds we faced during the course of 2020, our cash balance has increased from $358 8 million at December 31, 2019 to $902 9 million at the end of 2020 operating cash flow of $806 4 million aided by the <unk>.
And of that cash tax deferrals previously referenced was the primary driver of this increase operating cash flow was partially offset by cash used in investing activities of nearly $95 million.
Imminently, representing payments for acquisitions of businesses and capital expenditures as well as cash use and financing activities, which totaled $172 million and consisted of the repurchase of our common stock net repayments under our credit facility and dividends paid to our stockholders working capital has increased by over 236.
As a result of the increase and our cash balance partially offset by a reduction in accounts receivable given the lower organic revenue during the period as well as an increase and contract liabilities due to advanced billing on certain long term construction projects.
Other changes and key balance sheet positions of know are as follows goodwill has decreased since December 31, 2019, and as a result of and the noncash impairment charge recognized during the second quarter of 2020, partially offset by an increase and goodwill resulting from businesses acquired of purchase price adjustments made during the year are identifiable and cans.
The asset balance has decreased since the end of last year, largely due to a $260 million of amortization expense recorded during 2020, which was partially offset by incremental intangible assets recognized as a result of the acquisition of three businesses. During calendar 2020 total debt has decreased by $35 7 million.
Since the end of 2019, reflecting our net net financing activity during the year and of course debt to capitalization ratio has decreased to 11, 9% from 13, 2% and the year ago period Lastly, our stockholders equity has decreased slightly since December 2019, as our net income was offset by share repurchases.
Dividend payments and post retirement plan liability adjustments made during 2020.
Our balance sheet and conjunction with the credit available to US continues to put us in a position to invest and our business and achieve our strategic objectives. As we look forward to 2021 and years beyond that with my portion of the formal slide presentation concluded and I would like your debt of drink of water and we turn the call back to Tony Tony.
First of all of them.
Water.
So we've been moving.
Good day.
Thanks, Mark and are on page 14 remaining performance obligations.
With the market share.
Our hosted a number of the briefly the bogie for insulin.
The market share.
And as David.
The total ARPA.
And we were shade under for 46 billion of 500.
For a 13, 8% when compared to the year.
For.
Point of view.
The strength of our.
Okay and bidding activity surprises of it given the uncertainty.
And.
And disruption for the year.
And as we've said of the past.
And uncertain and challenging time.
And we've often seen acquired the quality.
The construction and services.
Riders.
Yes.
And our clients.
And now into 'twenty, one 'twenty one.
And one of those sites.
Oh I'm sorry.
And I should probably repeat my.
My Mic wasn't on.
So I'm going to go on to page 14 remaining performance obligations by segment and market sector book, they're up $559 million or of 13, 8% for those the inherit and really there is a flight to quality and a lot of times. When you move from 2020 into 'twenty and 'twenty, one and this certainly looks like one of those types of our.
And construction segments experienced strong project growth and 2020 with <unk>, increasing $495 million or 15, 2% since the end of 2019 as we continued and continue to see demand for electrical and mechanical systems, both the new construction and retrofit projects are United States building serves.
The segment <unk> increased for the quarter as this segment of small project repair service work.
<unk> to rebound from its abrupt almost hard stop at the beginning and the height of COVID-19.
Some of this resumption as a return of regularly scheduled maintenance and mechanical systems and then the return of small project work and some of his focus as you would imagine around modifications and improvements and IQ indoor air quality, and which I will discuss in detail and a few slides. It was quite a recovery from the March April and May timeframe. When the segment was.
And especially hard and described earlier with bookings down 40% in many cases.
Over on the right side of the page we show <unk> by market sector throughout 2020, we experienced strong year over year growth and the commercial healthcare and water and wastewater sectors commercial projects, which make up 41% of that total <unk> increased $297 million or close to 19% for the year as we stated last quarter and.
<unk> experienced in the fourth quarter of this year demand for hyper data scale data center construction has high demand as is high tech manufacturing and warehousing and logistics also remains strong we are nationwide leader in this section of the commercial market sector and quite frankly, I don't see any let up and this activity anytime soon.
We are also in part one design discussion on several large design build of food process opportunities.
For the year healthcare project, <unk> increased $207 million or 56% and water and wastewater project are for areas grew similar by 57% to $173 million as one might surmise given the impact of the pandemic health care at a sector of the nonresidential construction market is expected to be slightly higher and <unk>.
And in 'twenty, one and likely better than that for us as our customers build new facilities and retrofit existing facilities.
By the way <unk> and these three market sectors are at all time high for us since we transitioned to <unk> reported from backlog reporting and the March of 2018.
The nonresidential market as measured by the U S census Bureau for put in place activity remains a very large market. There was roughly $800 billion at the end of December 31, 2020 is down 5% from 2020. However, it is not a uniform market given the size and breadth and opportunities still exist on the next page I will discuss how.
Well thought and patient capital allocation strategy has all of this growth and our Rps base and growth to occur despite choppy and uncertain overall markets and nonresidential market the decreased 5% and now on page 15 capital allocation.
We have long had a major market presence and mechanical and electrical construction services and have continued to allocate capital to fill and the white space, either geographically or by adding capability and these important segments. Further we have used our capital build leading capabilities and HVAC service building controls and mechanical system retrofit.
We have built that capability and capacity through organic growth and acquisition and the sustained manner over many years. We are also one of the country's leading life safety contractors and this activity, mostly resides and our mechanical and that is the sprinkler fitters and electrical fire alarm and security installation and upgrades and low voltage systems construction segue.
<unk>.
Again these capabilities were built over a long period of time through acquisition and organic investment and these are concrete examples worry of the successful platforms that allow us to have the capability to serve a broad spectrum of customers with the right products and specialty trade capabilities, our investment decisions and patients have allowed us to build of.
And maintain capability through cycles and serve a diverse set of customer opportunities, we have not only investing in over 20, and the acquisitions and we spent around $555 million on those acquisitions since 2017 until today, but we also have returned significant cash to our shareholders through share repurchase.
And dividends and I'm now on page 16, titled Resilient markets.
<unk> discussed on the previous two pages, we have shown that we have very good diversity of demand and EMCORE and we have used that capital to grow organically and through acquisition to allow us to build upon such diversity of demand and resiliency and our business. This is not an accident, but it is a part of our long term capital allocation strategy as discussed on the <unk>.
<unk> page for example, <unk> datacenter capabilities were built and enhanced over a very long period of time.
We started building the largest data centers and the country for financial institutions and the original hosting providers almost 20 years ago. Today, we build data centers that are five times larger to seven times larger than the previous quote large data centers. We have continued to grow that capability over the last five years and expanded through.
<unk> investment or acquisition or a combination of book, we are one of the leaders and the specialty complex attracting for these complex facilities and Thats all of the electrical trades mechanical trades and sprinkler freighters day.
The center construction is a good market for us and we expect it to be for the foreseeable future. It is also a growing part of our maintenance activities.
We have for <unk>, we are fortunate to have other markets that have shown resiliency. We continue to support our customers' e-commerce growth, primarily through our life safety services and the construction of large cold storage and other warehouse facilities as our customers transform their warehouse networks to allow for more fast paced growth. We continue to believe that we are very.
Well positioned to support our customers as they build more resiliency into their supply chains by reassuring projects. We also continue to see a significant opportunity for large and small design and build food processing clients health care is also a good market for us and has been for a very long period of time. These are complex facilities that are <unk>.
Seeking to become more flexible and the.
Delivery of their care and the long term water and wastewater is a market that we believe will have significant opportunity for us and has significant opportunity for us today and also and the next three to five years, especially in Florida and finally as I've discussed previously previously is our position as a leading HVAC.
Services contractor.
We are and a compelling position to provide indoor air quality solutions of the services, we see very strong demand currently and expect this to continue over many years, we have experienced and our continued to experience strong demand for upgrading enhancing HV AC and building control systems for both energy efficiency and flexibility of demand and use.
This has always been a good market for amcor for many years and it spans all market sectors as discussed serving these resilient markets is not by chance. We built this capability over many years and we have some of the best field leadership trade supervision and skilled tradespeople and the industry to execute and these markets.
And I'm now going to wrap this up on page 17, and 18 as.
As we enter 2021, we are still in the world of COVID-19, mitigation and restriction the oil and gas markets are still depressed and the non residential market is expected to decline by another 3% to 5% despite that less and Cherry backdrop, we expect to continue to perform well and 2020, we expect revenues.
<unk> of $9 2 million to $9 4 billion and expect to earn $6 20 to $6 70.
And earnings per diluted share 2021 should be another year of outstanding performance, we will have the execute very well to maintain the 2020 record levels of operating income margins of eight 4% and our electrical and mechanical construction segments. We do expect to increase revenues, which may.
Help us mitigate this challenge.
Underlying this range are the following assumptions our industrial services segment does not materially improve until the fourth quarter, but gained strong momentum headed into 2020 as demand for refined products will continue to be challenge during 2021, especially through the end of the <unk>.
Quarter.
The non residential construction market will decline modestly.
We will continue to execute well and are more resilient rock market sectors to include manufacturing commercial driven by data centers, and logistics and warehousing water and wastewater energy retrofits and healthcare our end market diversity has been and continues to be a real strength of EMCORE.
We do not expect of more restrictive COVID-19 environment than what we are operating in today, we do expect a more normal pre COVID-19 operating environment to emerge as the year progresses, we are operating near 100% capability on our jobs with no meaningful COVID-19.
19 induced issues.
Our leadership and trades people have learned how to work and even prosper under the Covid precautions, we have learned a plan and execute but always have the mindset that our employee safety comes first which is nothing new or novel for us as it is one of our core values.
We expect to continue to help our customers improve their facilities air quality with indoor air quality solutions improve energy efficiency through replacement projects and optimizing their systems and we are going to help them bring back their employees back to work with improved peace of mind through our efforts our ability to move to the upper range of.
The <unk> of our earnings guidance range will depend on the following the.
The non residential market, especially are more resilient markets are stronger than projected because of the bounce back as faster as the U S and the UK normalizes from COVID-19 restrictions are refining and petrochemical customers begin to gain more comfort with improved demand for refined products and increase their scope for this year as we work for.
And by US our momentum and indoor air quality and efficiency of projects continues to not only increase but accelerates further and our productivity stay strong as we transitioned to more normal operating conditions I'm going to talk a little bit about what happened in Texas last week as we have a significant business and Texas clearly the power.
And disruption and Texas last week effect of not only of <unk> business operations customer sites, but also more importantly, our employees and their families and.
Many of our customers want the skeleton staff for three to five days and many shutdown of operations almost completely we have mostly resumed operations and our industrial services and also our construction services and building services customer sites, we will be there to help our customers complete their planned turnarounds and execute on planned maintenance and repairs related to the storm.
And to resume project work already underway or the was ready to start and the last few weeks. We have we may have work that was planned for the first quarter and that will now extend into the second quarter net and.
And it may have had more activity and the first quarter. Then it will now have we have discuss capital allocation earlier and the presentation in detail. We expect to continue to be balanced capital allocators as we have shown on the previous pages, we have more capital to allocate and balanced, but we know how to do that and however, our guidance.
Contemplates that we will continue to be disciplined allocators between organic growth investments acquisitions share repurchases and dividends and without Laura and I will take questions.
Thank you Sir at this time I would like to remind everyone and I'll just ask a question. Please press Star then the number one on the telephone keypad. If you would like to withdraw your question and you can pass the pack.
For your first question will come from the line of Mr. Dan Donlan from da Davidson for your line is now the lines go ahead. Please.
Hey, Thank you good morning, congrats on a great quarter great year. Thank you.
Tony.
And from sort of of temporary lull in demand.
Feels like some real urgency and the market to secure the specialty services providers like yourself I guess I'm wondering and is this an environment now where you feel like you can beat and more selective and that what youre after and versus three or six months ago and then.
And the overall pressure on the non res market.
Happens and 21 does that still leave some loose capacity out there and more competitive net even on the more technical jobs.
No we didn't flinch.
We don't operate in an environment, where we just try to fill capacity.
A couple of things, we don't pay attention to is market share.
Try to figure out the best opportunities for our market and we really don't pay attention to.
<unk>.
And chasing low bids to just fill up our <unk>.
Companies.
So yes somewhere back in May there was non sense floating around the market where people came back the one that of Covid discount.
And we respect of flea said no.
We are disciplined bidding we of discipline on capital allocation that doesn't change, whether it's good markets or bad markets.
Okay and margins continued to be exceptional and the construction business is I guess I'm wondering did the upticks and.
Health care.
Water wastewater and some of the other technical areas and the business.
Assume that offers.
The more margin tailwind as we work our way through 2021 and Thats fair.
Look.
Business is always a mix and the mix of not only of end market served but also contract structure. We pay attention at this point, where we're at right now I think Mark would concur with me. We're a lot more focused on our margin dollars and we our margin percentages. We like these margin percentages, but we've always said that our businesses operate and a band.
We're up there for and of that ban the midpoint of those bands fine with more <unk>.
Volume and I feel really good about how we're executing and the field right now Mark.
Yes.
And clearly the.
And our performance and the last two calendar years has been quite exceptional from a margin contribution basis.
But certainly distorts distorts the averages if you look at them for certainly over the short period and.
I think.
And.
Tony mentioned, the discipline with regards to bidding and ultimately project and customer selection earlier to your first question that Hasnt changed and it's not going to change.
And ultimately if it makes sense for us the participate we're going to do whatever we need to participate and.
And we know we know what our track record is and we don't see any reason why that's going to change as we go forward and Todd.
It ties a little bit into the capital allocation.
We're not big capital organic capital users of fixed investment and our business, but we do know hottest price smartly and I think some of the the margin structure is saying in fact I know some of the margin improvement. We're seeing is because of our means and methods have gotten better.
We have gotten the implementation of technology, not only from a point siting and job siting.
As we lay out of job and think about how thats going to construct on the site are pre fabrication and both are.
Mechanical and electrical business continues to get stronger.
It kind of put more full time resources against that to make sure of best practices spread throughout the company.
And then debt that is enabled by what I would say is as good as anybody or maybe better than anybody use of building information modeling.
Our subsidiary leadership, and our segment leadership really understand this technology and how the implemented to drive efficiencies for our customers and for our employees of not only built faster and smarter, but safer and Thats really helped us and this COVID-19 environment.
Our means and methods and planning.
Louis has been good but it really became exceptional over the past year.
And I would tie and another point here.
And I agree with you on the point that.
These more technically complicated systems for the contract structures change, so typically of water and wastewater job.
Very good work and we have a terrific team that does that work is not going to be as profitable as a quick turn commercial job doing energy efficiency work.
And that's just not how it works and.
Just something.
I'd caution everybody on.
The contract structure and type of work matters and again like I said earlier margin dollars actually matter too.
Yep.
Helpful Color My last one is just on the indoor and.
And our quality opportunity we've been talking about this for the last few quarters.
Seems to be perking up at one of the questions I had Tony.
And.
Is there anything about that type of work that might require additional investment and your platform.
Capabilities things to address that opportunity it feels like the platform set to address that as we go forward it set training matters.
And we have great training platform set and we have some people that drive that training for us and thats and underlying stress the strength of EMCORE and it's only gotten better.
Through this COVID-19 period, we're using our technological tools to drive our training faster and to a broader group of people as are we leveraging our peer groups of better from data centers low voltage bem pre fabrication and just our standard electrical and mechanical construction and our guys are really share and means and methods and.
And how to service different customer demands and.
And Thats one of the benefits of being EMCORE.
The amount of learning that can go on across our organization. It sounds like a soft benefit, but when youre dealing with technical people and technical supervision and trades and matters a lot. Because these are highly skilled people that know how to take the information tailored to their local market and their customers and drive a more effective solution for those customers that is not easily.
Replicated by a mom and pop contractor.
Understood. Thank you.
Thank you Sir your next question will come from the line of mix of add on Mcdowell from comes from David Sir Your line is now line.
Good morning, Adam Hey, good morning, guys, great quarter good outlook.
Tony it's been a long time since I've been taking.
Up my revenue forecast to try to match consensus.
Pretty healthy revenue guide for this year, just curious how does that slow down at a segment level the revenues for 2021.
<unk>.
We don't give segment guidance, but I mean, you have to look at the <unk> and that will give you an indication of the segment right.
Clearly, our electrical and mechanical segments of our biggest segments and their <unk> are up healthy and building services has momentum building and we're going to take a pass on having any discussion on while we see revenues flowing out for the year and industrial services and you can see our commentary we're not expecting anything.
Broke there until we get into 2022, and we think the market will recover.
And then the minus 3% to 5%.
So the kind of general non res and does that basically in line with.
And what <unk> been talking for the last three to six months of the changed at all.
No that has not changed and and Adam I think the wildcard that I can't really.
And prognosticate on these are the consensus.
From every source of that comes out of the more guys are looking at the and gallons are looking at the same thing you are looking at.
To get there.
And it really hasnt changed and we didn't try to make an estimate.
Back and the height of Covid restrictions back in April May and June last year, and we thought that was sort of a silly event to try to project 2021 at that time things.
Things have really sort of solidified here and the last five months, both from our external sources and the way we view the market for.
From a compilation of those external sources I think the one thing none of us quite understand yet.
Is on especially on the smaller project side and the delay of <unk>.
Award on the large project side, there for a couple of months.
What does this disruption that we all experienced in March April may of last year, how does that manifest itself and the nonresidential and mark.
The market that has less restriction this year.
Is that baked into the forecast is it not I don't think anybody can figure that out and I certainly can't either.
Okay.
Last one for me the is it geographically.
The focus Tony I mean, you through and a little comment about week, New York and.
Weaker California.
Well the way Marc said that is California, and New York were weak in 2020 of weaker because of Covid and do shutdowns and where you really see that as some of the quicker turn construction work and then also not being able to revenue on sites.
Because some of the sites were shut down in 2020, and so we're catching back up.
And here's what I would say, California, I think should be okay. We do some very good energy savings work, there and control systems work on the building services side and on the construction side, we see our customers getting busy again and booking work and New York city's of different animal for a lot of people right I think the commercial part of New York City will be fine for us.
Out through third quarter, when it should start rebounding as people come back to work and the city becomes busy again.
The part that will remain challenged for us and it's part of what we do it right. We did the Tappan Zee Bridge, we did Brooklyn battery tunnel, where good electrical infrastructure providers of electrical services to those infrastructure projects, and New York City and Metro area.
And clearly.
Those agencies the control that work are trying to figure out what their fiscal outlook. It looks like part of which rest with this stimulus plan with its aid to state and local governments.
Ever happens there and we'll see and then that will take a lot of trickle down and figure out how to rebuild these folks budgets to allow them to work on some actually maintenance infrastructure projects for our capital projects and the future and New York City Metro area, that's a very specific comment for us.
Yes that should be of strength for you.
Given enough time.
Okay, I'll turn it over thanks guys.
Thank you Sir your line.
Next question will come from the line of moving around of death from Stifel. Your line is now line for Hudson.
Hi, guys and again congrats on the strong quarter.
Hi, My first question was just looking at.
And the strength and data centers and so looking at the growth and Rps, you've obviously seen a lot of growth on the mechanical side services. Just curious when you look at some of the data center opportunities could you speak to the extent to which youre doing kind of both electric and mechanical work is there still some opportunity to sort of cross sell of those services.
And.
Are there any services you might look to add true acquisition that might kind of strength in your offering or expand your offering and that market. Thanks, yes. Good question of Wow.
And we don't necessarily bundle of the services together electric and mechanically.
But we work with the same customers. They know the EMCORE companies are there when we have both capabilities and the market.
And they're both can execute well so yeah I mean, it's something we look to do I think we've made acquisitions to strengthen our.
Our market presence and example of that is what we did with the company, we bought and Central Iowa, which was a terrific company and and it's really.
But aid Theyre good of what they do and I think they would agree that they've been aided by <unk> strength and data center construction and I would say the <unk> acquisition all of many things of that terrific team can do.
The data centers being one of the end markets, we werent in and Oklahoma, Alabama, Georgia, and South Carolina.
And then we built organically and through acquisition over the last couple of years, our capability to service.
Not only datacenters, but warehousing logistics and the fire protection, which for us means sprinkler fitter.
<unk>.
I would say, we probably are one of the leaders or have a very strong technical position to serve those very complex structures. So I don't think we're looking to get into the concrete business the curtain wall business.
The landscaping business around data centers, but we will continue to look to strengthen our electrical and mechanical building controls and life safety offerings into those facilities and also the other facilities that are supporting e-commerce.
Okay.
And then on U S industrial circumstance, obviously the market.
And is very challenged but you do have some competitors that have either announced that theyre looking to kind of exit or sell some of those operations are at least streamlined permanently streamline some of that.
The operations do you think of the market comes back that range kind of strength in your competitive position and potentially allow you to gain some share it's even the forward.
Look we've got very good management team, we've got good operators and our local product lines and companies there.
And we're one of the leading providers, we think we can help.
Those facilities continue to become more efficient stronger help them as they look to do things that they've worked on for of wildlife introduce renewable diesel and we look to be there to help them.
And I certainly don't think that this would be the time to exit of market on the bottom that I think will come back.
Because I'm pretty sure we're going to be using refined products for.
And for quite some time and and we have the ability to continue to strengthen pipeline networks and the midstream so.
Yes, I like being one of leading providers and I'd just point out here.
You know.
It's less than 8% or so what we do we achieved what we did in 'twenty and 'twenty with no significant contribution they were profitable on an EBITDA basis and from where we look at it now going into the back half of this year and into 2022, it should be upside from there.
Okay great.
And then last question there are some.
Sir.
And some reported shortages of things like copper cabling and other equipment and obviously hearing a lot about construction input costs, increasing raw material costs.
Are you is that something you're concerned about or watching or kind of impacting how you're thinking about the timing of projects at all no.
The way, we think about that is we will get supply.
I've been here a long time.
I can count on one hand, the number of times, we've been supply constrained and why is that so.
We have very strong national relationships with some of the best distributors and suppliers and the business and our guys can look all the way back through the distributor to secure supply of critical things like copper sprinkler pipe.
The corrugated by all of the things that we use.
And look where they're in good times and bad times with those distributor partners and.
And because of that we get rewarded and times of shortages and the other thing is on the smaller jobs and of those jobs are constantly repricing right because they have quick turns on the larger jobs again, because we've been good customers because we are thoughtful and the way we approach supply chain, we typically can lock in.
What we need on those longer term jobs, and where we can't.
The relatively successful and the time of escalating commodity prices and making sure that's built into the contract.
Okay very helpful. Thank you.
Thanks Bill.
Thank you.
Next question will come from the line of Mr. Sean Eastman from Keybanc. Sir Your line is now allows go ahead.
Hi team. So you beat the top end of the pre Covid earnings guidance, so not a bad not about outcome there congrats on that.
I just wanted to level set.
And the guidance for 'twenty, one so clearly the.
The top line growth is pretty solid and the mid single digits, but we're not getting the same flow through on the earnings growth guidance. So I just wanted to understand the moving pieces. There is the biggest kind of a chunk of that sort of just and assumes normalization and the construction and segment margins and 21 or am I not thinking about that correctly.
Yeah.
And I think it's saying we could operate within the bands that we operate in and we're executing well and some of that has to do with mix and timing of projects. We can sit here and March and know exactly how our significant work.
Rollout how much will be finished this year how much of won't be finished this year, how things will accelerate through the year.
We take a tempered view when you get to the bottom and which are still very strong margin performance and also I think we are.
Working to understand better.
The become the.
The progression and industrial services, and Thats sort of a hedge against that progression and industrial services Mark.
Yes, Sean.
And really kind of and.
Amplify the Tony's comment.
And.
And I harken back to kind of commentary we had in 2019.
101, it was an unusual year for for a whole host of reasons that are have been on this call.
Very aware of but we had we had more significant work complete.
And 2020 and.
And that leads to an uptick in margins as we close out projects as those projects mature.
And as we look at how the revenues are going to develop for 2021, we don't see of the same level of significant project completion and <unk>.
And the calendar year, that's not to say that we're not going to get the same level of performance but.
Certainly and leads itself to an environment that would lead you to believe that at least and the electrical and mechanical side.
You might see margins flat to slightly back up towards more of historical averages.
And we're clearly well ahead of the five year and 10 year average for both of those segments.
Not to say that.
Not striving to reset the bar.
These new levels, but it's clearly mixed dependent and more so it's clearly it's dependent on on project lifecycle and.
Too early and the year to make that call exactly and book.
Book, we're talking.
10% of 30 basis points on either side of this and we're not we don't foresee a margin big margin decrement and we also don't see big margin pickup either.
No.
We're talking like Mark. So this could be a couple of projects finish or start and we're certainly not going to say hey, we don't want to start that project because we're worried about we don't take that big work for the worried about margin dilution on of 10 or 15 basis points, you would agree that would be silly.
Yes, no that makes sense really helpful and.
And.
Obviously, another sort of strange year ahead for industrial services, but it would be helpful. If you could just remind us where that segment should be running from a from a margin perspective and the.
The normalized environment, because even though the.
The recovery of the pace of the recovery and it's hard to determine here. It still seems like that would be a nice little tailwind and and the out year, assuming rates getting back to normal.
Slowly through the year right yes.
Our goal is to strive to get back to consistently.
For five to six 5% first.
And after that if mix helps us and we can do better but that margin and that business needs to be rebuilt right and it needs to.
Demand needs to resume resumption of capacity needs to resume all of those things need to happen and if we get into that band. First then we can worry about margin uptick from there.
It's not going to be the immediate snapback I don't think it will come in through time as customers get more comfortable with scope increase and Thats really how you perform here.
You get to the site the scope increases on the site you have the overhead already dedicated to that site and we can do better and also customers are willing to spend on the ancillary services and it's mixed dependent to the.
More we can do cleaning and shop operations as a percentage of our mix the better we're going to do.
Because of it absorbed overhead and it also is.
What we're doing there is a little more proprietary versus just standard turnaround field services.
Got it okay. Great. Thanks, guys very helpful. Thank you Youre welcome.
Thank you, Sam and the presenters and now and not seeing any more of a further question from the line.
And the call over the back to you for any closing remarks.
Thank you all very much for listening and long haul. It always is at the end of the year call.
I think I heard.
And four times or five times debt.
And that our execution was good but also that we have a very positive outlook on our view of 2021 with what we know today.
And of course, I'd always like to thank all of our employees.
It's been a heck of a year and for.
We're performing.
And we've learned how to work with the diversity.
And where contractors, we and know how to adapt and overcome thank you all very much.
Thank you Sam Thank you so much for <unk> and again and thank you everyone for participating. This concludes today's conference you may now disconnect.
And we have 11 states.
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