EMCOR Group, Inc.
Q4 2020 Earnings Call Transcript

Published: 27 Feb 2021

[Operator:]

Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Fourth Quarter and Full Year 2020 Earnings Call. Ms. Jamie Baird with FTI Consulting, you may begin.

[Jamie Baird:]

Thank you, Lara, and good morning, everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2020 fourth 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.

[Kevin Matz:]

Thanks, Jamie, and good morning, everyone. And as always, thank you for your interest in EMCOR. We welcome you to our earnings conference call for the fourth quarter and full year of 2020. What a year it's been. 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 2. This presentation and discussion contains certain forward-looking statements and certain non-GAAP financial information. Page 2 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. The next slide depicts the executives who are with me to discuss the quarter and full year 2020 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 call participants not accessing the conference call via the Internet, this presentation, including the slides, will be archived in the Investor Relations section of our website under Presentations. You can find us at emcorgroup.com. With that being said, please let me turn the call over to Tony. Tony?

[Anthony Guzzi:]

Yes. Let me start the call this morning by congratulating Maxine on her promotion and also welcoming Ron Johnson as our newest EMCOR Director. Maxine, congratulations, and Ron, welcome to EMCOR's Board. I'm going to be covering Pages 4 through 8 here in my opening comments. First, I'd like to welcome all of you, and thank you for your interest and/or investment in EMCOR. In 2020, we had a terrific year despite an extremely challenging operating environment. We delivered extraordinary results through disciplined execution and resilience. I am extremely proud of our EMCOR 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 on our operations in March of 2020. In 2020, we had $8.8 billion in revenues and set records on an adjusted basis for earnings per diluted share of $6.40, operating income of $490 million and operating income margin of 5.6%. We also had record operating cash flow of $806 million. Mark's going to cover all the financials in much more detail and especially the key components of our cash flow performance in his financial commentary, inclusive of the fourth quarter and full year 2020 performance. We delivered these stellar results because we have diversity and demand for our services. And we have end 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 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 #1 priority throughout the year. We innovated and found ways to maintain and even improve our productivity. We became leaner and even more expeditious in our decision-making. And we're able to leverage technology to connect our leadership effectively to the front lines despite COVID-19 protocols. We did not let obstacles become excuses. Instead, we overcame obstacles, and we delivered exceptional results.

[Mark Pompa:]

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 7. 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. As a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements within both our earnings release announcement and Form 10-K filed with the Securities and Exchange Commission earlier today. So let's discuss EMCOR's fourth quarter performance. Consolidated revenues of $2.3 billion in quarter 4 are down $122.4 million or 5.1% 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 EMCOR in last year's fourth quarter. Acquisition revenues positively impacted both our United States Mechanical Construction and United States Building Services segments. Excluding the impact of businesses acquired, fourth quarter 2020 consolidated revenues decreased $177.9 million or 7.4% organically. Our segment performance was mixed within the quarter, with most of our reportable segments experiencing quarter-over-quarter organic revenue declines. In general, we have seen reductions in revenues in those geographies or 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 in generating fourth quarter revenue growth from 3 of our 5 reportable segments. Specific segment revenue performance for the quarter is as follows

[Anthony Guzzi:]

Hey, Mark, that's a well-deserved drink of water. And year-end was always the toughest and we've been doing it a long time together. Thanks, Mark, and I'm on page 14. Remaining performance obligation or RPO by segment and market sector. I'll go through the numbers briefly and then go deeper to the market trends we are seeing. As I stated in my remarks, total RPOs at the end of 2020 were a shade under $4.6 billion, up $559 million or 13.8% when compared to the year-ago level of $4.03 billion. The strength of our RPO and the associated bidding activities surprised us a bit given the uncertainty of the pandemic, economic dislocation and disruptions for the year. However, as we have said in the past, during uncertain and challenging times, we have often seen a flight to quality and fiscally strong construction and service providers prosper. It's still a little too early to tell by 2020 and now into 2021. It sure looked like one of those times. Oh, I'm sorry. I should probably repeat. My mic wasn't on. So I'm going to go on to page 14, remaining performance obligations by segment and market sector. Look, they're up $559 million or 13.8% for those that didn't hear it. And really, there's a flight to quality a lot of times when you move from 2020 into 2021, and this certainly looks like one of those times. Our domestic construction segments experienced strong project growth in 2020 with RPOs increasing $495 million or 15.2% since the end of 2019 as we continue -- and continue to see demand for electrical mechanical systems, both in new construction and retrofit projects. Our United States Building Services segment RPOs increased in the quarter as this segment's small project repair service work continue to rebound from its abrupt, almost hard stop at the beginning and the height of COVID-19. Some of this resumption is a return of regularly scheduled maintenance on mechanical systems and then the return of small project work. And some is focused, as you'd imagine, around modifications and improvements in IAQ, indoor air quality, which I will discuss in detail in a few slides. It was quite a recovery from the March, April and May time frame when the segment was hit especially hard as described earlier, with bookings down 40% in many cases. Over on the right side of the page, we show RPOs by market sector. Throughout 2020, we experienced strong year-over-year growth in the commercial, healthcare and water and wastewater sectors. Commercial projects, which make up 41% of that total RPOs, increased $297 million or close to 19% for the year. As we stated last quarter and continued to experience in the fourth quarter of this year, demand for hyper data -- scale data center construction has high demand, as does high-tech manufacturing, and warehousing and logistics also remain strong. We are a nationwide leader in this section of the commercial market sector, and quite frankly, I don't see any letup in this activity anytime soon. We are also in Part one design discussion on several large design build through process opportunities. For the year, healthcare project RPOs increased $207 million or 56%. And water and wastewater project RPOs grew similar by 57% to $173 million. As one might surmise, given the impact of the pandemic, healthcare as a sector of the nonresidential construction market is expected to be slightly higher in 2021 and likely better than that for us as our customers build new facilities and retrofit existing facilities. By the way, RPOs in these three market sectors are at all-time highs for us since we transitioned to RPO reporting from backlog reporting in March of 2018. The nonresidential market, as measured by the U.S. Census Bureau for put-in-place activity, remains a very large market, and it was roughly $800 billion at the end of December 31, 2020. It's down 5% in 2020. However, it is not a uniform market, given its size and breadth and opportunities still exist. On the next page, I will discuss how well-thought and patient capital allocation strategy has allowed this growth in our RPO base and growth to occur despite choppy and uncertain overall markets. And on nonresidential market, they decreased 5%. I'm now on page 15, capital allocation. We have long had a major market presence in mechanical and electrical construction services and have continued to allocate capital to fill in the white space, either geographically or by adding capability in these important segments. Further, we have used our capital to build leading capabilities in HVAC service, building controls and mechanical system retrofit. We have built that capability and capacity through organic growth and acquisition in a sustained manner over many years. We are also one of the country's leading life safety contractors. And this activity mostly resides in our mechanical, and that is the sprinkler fitters and electrical, fire alarm and security installation and upgrades and low-voltage systems construction segments. Again, these capabilities were built over a long period of time through acquisition and organic investment. These are concrete examples where we have built 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 patience have allowed us to build and maintain capability through cycles and serve a diverse set of customer opportunities. We have not only invested in over 20 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 repurchases and dividends. I'm now on page 16, titled Resilient Markets. As we discussed on the previous two pages, we have shown that we have very good diversity of demand at EMCOR, and we have used that capital to grow organically and through acquisition to allow us to build upon such diversity of demand and resiliency in our business. This is not an accident, but it is a part of our long-term capital allocation strategy as discussed on the previous page. For example, EMCOR's data center capabilities were built enhanced over a very long period of time. We started building the largest data centers in 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 these previous "large data centers." We have continued to grow that capability over the last five years and expanded through organic investment or acquisition or a combination of both. We are one of the leaders in the specialty contracting for these complex facilities. That's all the electrical trades, mechanical trades and sprinkler fitters. Data 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 -- 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 reshoring projects. We also continue to see significant opportunity for large and small design-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 seeking to become more flexible in the delivery of their care in 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 in the next 3 to 5 years, especially in Florida. And finally, as I have discussed previously, is our position as a leading HVAC services contractor. We are in a compelling position to provide indoor air quality solutions and services. We see very strong demand currently and expect this to continue over many years. We have experienced and are continuing to experience strong demand for upgrading, enhancing HVAC and building control systems for both energy efficiency and flexibility of demand and use. This has always been a good market for EMCOR for many years, and it spans all market sectors. As discussed, serving these resilience markets is not by chance. We've built this capability over many years, and we have some of the best field leadership, trade supervision and skilled trades people in the industry to execute in these markets. I'm now going to wrap this up on Page 17 and 18. 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-than-cheery backdrop, we expect to continue to perform well in 2020. We expect revenues of $9.2 billion to $9.4 billion and expect to earn $6.20 to $6.70 in earnings per diluted share. 2021 should be another year of outstanding performance. We will have to execute very well to maintain the 2020 record levels of operating income margins of 8.4% in 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

[Operator:]

So your first question will come from the line of Mr. Brent Thielman from D.A. Davidson.

[Brent Thielman:]

Tony, you've gone from sort of a temporary lull in demand to what feels like some real urgency in the market to secure specialty service providers like yourself. I guess I'm wondering, is this an environment now where you feel like you can be even more selective about what you're after versus 3 or 6 months ago? Does this overall pressure on the non-res market that you think happens in '21, does that still leave some loose capacity out there and more competitiveness even on these more technical jobs?

[Anthony Guzzi:]

No. We didn't flinch. We don't operate in an environment where we just try to fill capacity. A couple things we don't pay attention to is market share. We try to figure out the best opportunities for our market. And we really don't pay attention to chasing low bids to just fill up our companies. So yes, somewhere back in May, there was nonsense floating around the market where people came back and wanted a COVID discount, and we respectfully said no. We are disciplined bidding. We have discipline on capital allocation. That doesn't change whether it's good markets or bad markets.

[Brent Thielman:]

Okay. And margins continue to be exceptional in the construction businesses. I guess I'm wondering these upticks in health care, water, wastewater, some of the other technical areas in the business, I mean, I assume that offers some more margin tailwinds as we work our way through 2021. Is that fair?

[Anthony Guzzi:]

Look, business is always a mix. And this mix is 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 margin dollars than we are margin percentages. We like these margin percentages. But we've always said that our businesses operate in a band. We're up, at the upper end of that band. The midpoint of this band is fine with more volume, and I feel really good about how we're executing in the field right now. Mark?

[Mark Pompa:]

Yes. Thank you. Brent, I can add, clearly, our performance in the last two calendar years has been quite exceptional from a margin contribution basis and would certainly, distorts the averages if you look at them for certainly over the short period. And I think Tony mentioned the discipline with regards to bidding and ultimately project and customer selection earlier to your first question. That hasn't changed and it's not going to change. And ultimately, if it makes sense for us to participate, we're going to do whatever we need to participate. And we know what our track record is, and we don't see any reason why that's going to change as we go forward in time.

[Anthony Guzzi:]

Yes, and I think it ties a little bit into the capital allocation. We're not big capital, organic capital users, a fixed investment in our business. But we do know how to supply it smartly. And I think some of the margin stretch you're seeing, in fact, I know some of the margin improvement we're seeing is because our means and methods have gotten better. We have gotten the implementation of technology, not only from point siting and job siting as we lay out a job and think about how that's going to construct on the site. Our prefabrication in both our mechanical and electrical business continues to get stronger. We can kind of put more full-time resources against that to make sure best practice is spread throughout the company. And then 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 to implement it to drive efficiencies for our customers and for our employees to not only build faster and smarter, but safer. And that's really helped us in this COVID environment because our means and methods and planning has always been good, but it really became exceptional over the past year. And I'd tie in another point here. I agree with you on the point that these more technically complicated systems, but the contract structure has changed. So typically, a water and wastewater job, a very good work and we have a terrific team that does that work, it's not going to be as profitable as a quick-turn commercial job doing energy efficiency work. I mean, that's just not how it works. And just something that I'd caution everybody on. Contract structure and type of work matters. And again, like I said earlier, margin dollars actually matter, too.

[Brent Thielman:]

Yes. That's helpful color. My last one is just on the indoor air quality opportunity. We've been talking about this for the last few quarters, seems to be perking up. One of the questions I had, Tony, is there anything about that type of work that might require additional investment in your platform and capabilities, things to address that opportunity? Do you feel like the platform is set to address that as we go forward?

[Anthony Guzzi:]

It's set. Training matters, and we have great training platform set, and we have some people to drive that training for us. And that's an underlying strength of EMCOR that's only gotten better through this COVID period. We're using our technological tools to drive out training faster and to a broader group of people as are we leveraging our peer groups better from data centers, low voltage, BIM, prefabrication and just our standard electrical, mechanical construction. Our guys are really sharing means and methods and how to service different customer demands. And that's one of the benefits of being EMCOR, the amount of learning that can go on across our organization. That sounds like a soft benefit. But when you're dealing with technical people, technical supervision and trades, it matters a lot because these are highly skilled people that know how to take the information, tailor it to their local market and their customers and drive a more effective solution for those customers. That's not easily replicated by a mom-and-pop contractor.

[Operator:]

Thank you Sir. Your next question will come from the line of Mr. Adam Thalhimer from Thompson, Davis. Sir your line is now live, go ahead please.

[Adam Thalhimer:]

Hey good morning guys. Great quarter, good outlook. Hey, 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 flow down at a segment level, the revenues for 2021?

[Anthony Guzzi:]

Look, we don't give segment guidance, but I mean, you have to look at the RPOs and that will give you an indication in segment, right? Clearly, electrical, mechanical segments are our biggest segments, and their RPOs are up, healthy. And Building Services has momentum building. We're going to take a pass on having any discussion on why we see revenues flowing out for the year in Industrial Services. And you can see our commentary, we're not expecting anything heroic there until we get into 2022 when we think the market will have recovered.

[Adam Thalhimer:]

And then the minus 3% to 5% for kind of general nonres, is that basically in line with what you've been thinking for the last three to six months? Has that changed at all?

[Anthony Guzzi:]

No, that has not changed. And Adam, I think the wildcard that I can't really prognosticate on, these are consensus from every source that comes out of them. More guys are looking at them, the gals are looking at the same thing you're looking at to get there. It really hasn't changed. We didn't try to make an estimate back in the height of COVID restrictions back in April, May, June last year. We thought that was sort of a silly event to try to project 2021 at that time. Things have really sort of solidified here in the last five months, both from our external sources and the way we view the market from a compilation of those external sources. I think the one thing none of us quite understands yet is on especially on the smaller project side and the delay of award on the large project side there for a couple of months. What does this disruption that we all experienced in March, April, May last year, how does that manifest itself in a nonresidential market that has less restriction this year? Is that baked into the forecast? Is it not? I don't think anybody could figure that out, and I certainly can't either.

[Adam Thalhimer:]

Okay. Last one for me. Is it geographically focused, Tony? I mean, you threw in a little comment about weak New York and weaker California.

[Anthony Guzzi:]

The way Mark said that is California, New York were weak in 2020, weaker because of COVID-induced shutdowns. And where you really see that is 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, so we're catching back up. Here's what I would say. California, I think, should be OK. We do some very good energy savings work there, control systems work on the Building Services side. And on the construction side, we see our customers getting busy again and booking work. New York City is a different animal for a lot of people, right? I think the commercial part of New York City will be fine for us going out through third quarter when it should start rebounding as people come back to work and the city becomes busy again. I think the part that will remain challenged for us, and it's part of what we do, right? We did the Tappan Zee Bridge. We did Brooklyn-Battery Tunnel. We are good electrical infrastructure or providers of electrical services to those infrastructure projects in New York City and metro area. Clearly, those agencies that control that work are trying to figure out what their fiscal outlook looks like, part of which rests with this stimulus plan with its aid state and local governments. Whatever happens there, we'll see. And then that will take a lot to trickle down and figure out how to rebuild these folks' budgets to allow them to work on some actually maintenance infrastructure projects or capital projects in the future in New York City metro area. That's a very specific comment for us.

[Adam Thalhimer:]

Yes, that should be a strength for you.

[Anthony Guzzi:]

It is. Given enough time.

[Operator:]

Thank you Sir. Your next question will come from the line of Ms. Noelle Dilts from Stifel. Your line is now live, go ahead please.

[Noelle Dilts:]

Hi guys. Again, congrats on the strong quarter outlook. My first question was just looking at kind of the strength in data centers. And so looking at the growth in RPOs, you're probably facing a lot of growth on the mechanical side. So I was just curious, when you look at some of those data center opportunities, could you speak to the extent to which you're doing kind of both electric and mechanical work? Is there still some opportunity to sort of cross-sell those services? And are there any services you might look to add through acquisition that might kind of strengthen your offering or expand your offering in that market?

[Anthony Guzzi:]

Yes. Good question, Noelle. I mean, we don't necessarily bundle the services together, electrically, mechanically. But we work with the same customers. They know the EMCOR companies are there when we have both capabilities in the market. And there, both can execute well. So yes, I mean, it's something we look to do. I think we've made acquisitions to strengthen our market presence. An example of that is what we did with the company we bought in Central Iowa, which was a terrific company. And it's really been aided, they're good at what they do, and I think they would agree that they've been aided by EMCOR's strength in data center construction. And I would say the BKI acquisition, although many things that terrific team can do, data centers being one of it in markets we weren't in, in Oklahoma, Alabama, Georgia and South Carolina. And then we built, both organically and through acquisition over the last couple of years, our capability to service not only data centers but warehousing logistics and the fire protection, which for us means sprinkler fitter work. 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, landscaping business around data centers. But we will continue to look to strengthen our electrical, mechanical, building controls and life safety offerings into those facilities and also the other facilities that are supporting e-commerce.

[Noelle Dilts:]

Okay. And then on U.S. Industrial Services, obviously, the market remains very challenged, but you do have some competitors that have either announced that they're looking to kind of exit or sell some of those operations or at least streamline, permanently streamline some of their operations. Do you think as the market comes back, that might kind of strengthen your competitive position and potentially allow you to gain some share as you move forward?

[Anthony Guzzi:]

Look, we got a very good management team. We've got good operators in 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 a while like introduce renewable diesel. And we look to be there to help them. I certainly don't think that this would be the time to exit a market on the bottom that I think will come back because I'm pretty sure we're going to be using refined products for quite some time. And then we have the ability to continue to strengthen pipeline networks in the midstream. So yes, I like being one of the leading providers. And I'd just point out here, it's less than 8% or so of what we do. We achieved what we did in 2020 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.

[Noelle Dilts:]

Okay, great. And then last question, there are some -- there have been some reported shortages of things like copper cabling and other equipment. And obviously, was 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?

[Anthony Guzzi:]

No. The way we think about that is we will get supply. Very -- 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 in the business. And our guys can look all the way back through the distributor to secure supply on critical things like copper, sprinkler pipe, corrugated by all the things that we use. And look, we're there in good times and bad times with those distributor partners. And because of that, we get rewarded in times of shortages. The other thing is on the smaller jobs, 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 in the way we approach supply chain, we typically can lock in what we need on those longer-term jobs. And where we can't, we're relatively successful in a time of escalating commodity prices by making sure that's built into the contract.

[Operator:]

Your next question will come from the line of Mr. Sean Eastman from KeyBanc. Sir, your line is now live. Go ahead.

[Sean Eastman:]

So you beat the top end of the pre-COVID earnings guidance, so not a bad outcome there. Congrats on that. I just wanted to level set on the guidance for '21. So clearly, the top line growth is pretty solid in the mid-single digits, but we're not getting the same flow-through on the earnings growth guidance. So just wanted to understand the moving pieces there. Is the biggest kind of chunk of that sort of just an assumed normalization in the construction segment margins in '21? Or am I not thinking about that correctly?

[Anthony Guzzi:]

I think it's saying we could operate within the bands that we operate in when we're executing well. And some of that has to do with mix and timing of projects. We can't sit here in March and know exactly how our significant work will we roll out, how much will be finished this year, how much won't be finished this year, how things will accelerate through the year. So we take a tempered view when you get to the bottom end, which is still very strong margin performance. And also, I think we are working to understand better the progression in Industrial Services, and that's sort of a hedge against that progression in Industrial Services. Mark?

[Mark Pompa:]

Yes, Sean, to really kind of amplify Tony's comment, and I harken back to kind of commentary we had in 2019. 2020 was an unusual year for a whole host of reasons that everybody on this call is very aware of. But we had more significant work complete in 2020, and that leads to an uptick in margins as we close out projects, right, as those projects mature. And as we look at how the revenues are going to develop for 2021, we don't see the same level of significant project completion occurring in the calendar year. That's not to say that we're not going to get the same level of performance but certainly, leaves itself to an environment that would lead you to believe that at least on the electrical and mechanical side, you might see margins flat to slightly back up towards more historical averages. I mean, we're clearly well ahead of the 5-year and 10-year average for both of those segments. That's not to say that we're not striving to reset the bar at these new levels, but it's clearly mix-dependent. And more so, it's clearly, it's dependent on project life cycle. And it's just too early in the year to make that call.

[Anthony Guzzi:]

Right. Exactly. And look, we're talking 10 to 30 basis points on either side of this. I mean, we're not, we don't foresee a margin, big margin decrement. We also don't see big margin pickup either. So we're talking, like Mark, 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 want to take that big work as we're worried about margin dilution of 10 or 15 basis points. I mean, you would agree that would be silly.

[Sean Eastman:]

Yes. No, that makes sense. Really helpful. And obviously, another sort of strange year ahead for Industrial Services. But it'd be helpful if you could just remind us where that segment should be running from a margin perspective in a normalized environment. Because even though the recovery, the pace of the recovery is hard to determine here, it still seems like that will be a nice little tailwind in the out year, assuming life is getting back to normal slowly through the year, right?

[Anthony Guzzi:]

Yes. Our goal is to strive to get back to consistently 4.5% to 6.5% first. And after that, if mix helps us, we can do better. But that margin in that business needs to be rebuilt, right? It needs to, demand needs to resume, resumption of capacity needs to resume. All 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 this immediate snapback, I don't think. It will come in through time as customers get more comfortable with scope increase. I mean, that's 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 mix-dependent, too. The more we can do cleaning and shop operations as a percentage of our mix, the better we're going to do because it absorbs overhead. And it also is, look, what we're doing there is a little more proprietary versus just standard turnaround field services.

[Operator:]

And presenters, I am now, I'm not seeing any more further questions from the line. I'll be turning the call over back to you for any closing remarks.

[Anthony Guzzi:]

Thank you all very much for listening. It's a long call. It always is at the end-of-the-year call. I think I heard four times or five times 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 we're performing, and we've learned how to work with adversity. We know we're contractors. We do know how to adapt and overcome. Thank you all very much.

[Operator:]

Thank you, sir. Thank you so much, presenters. And again, thank you, everyone, for participating. This concludes today's conference. You may now disconnect. Stay safe, and have a lovely day.