Good morning. My name is Laura, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group first quarter 2020 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Ms. Jamie Baird with FTI Consulting, you may begin.
Thank you, Laura, and good morning everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2020 first quarter 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.
Thank you, Jamie, and good morning everyone. Thank you for your interest in EMCOR. As we start, let me simply and briefly say, I hope you and your families are well and staying safe as we move through this unprecedented time. For those of you who are accessing the call via our internet and our website, welcome, and we hope 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 disclosures. I encourage everyone to review both disclosures in conjunction with our discussion and accompanying slides. Slide three depicts the executives who are with me to discuss the quarter's results.
They are Tony Guzzi, our Chairman, President, and Chief Executive Officer, Mark Pompa, Executive Vice President, Chief Financial Officer, and Treasurer, and our Senior 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?
Yeah. Thanks, Kevin. I'm going to be on pages four through six. As we have already released preliminary results, I am not going to speak that much to the first quarter of 2020. Mark will. I will cover some of the highlights, and Mark will speak to the detailed results. I will end with an overview of what we are seeing in the marketplace today. Even when faced with significant obstacles, we had a record quarter. We set first quarter records for revenues, gross profit, gross margin, operating income, and diluted earnings per share from continuing operation. The entire EMCOR organization has responded well to this COVID-19 crisis. I thank our leadership and all of our employees for focusing first on our employees' health and safety, and I also thank them for keeping focused on our business during these challenging times.
We have company values of mission first, people always. We train those values, we hire on those values, and we promote our team on those values. It serves us well in these challenging times. I will quickly summarize some highlights from the quarter. Our mechanical and electrical construction segments had a very strong quarter, led by our work in data centers, healthcare, and food processing. We had a particularly strong booking quarter in these segments. Our building services segment had the most disruption in the first quarter from COVID-19, as our owner customers started to limit access for our HVAC technicians and our commercial site-based businesses. However, we executed very well until mid-March, and our project execution was very strong, and we booked some very nice retrofit and energy savings projects. Our industrial services segment had a very good quarter despite a challenging end market.
We had strength in our field operation and executed several large turnarounds. Some of our work was pushed from mid-March until later in the second quarter, or the results would have even been better. Our U.K. segment had a terrific quarter. We leave the quarter with a strong and liquid balance sheet, record Remaining Performance Obligations or RPOs. A business that still has opportunities to operate in this unprecedented environment. We are well positioned to continue serving our markets and our customers in an expanded way when normalized operations resume. With that, I will turn it over to Mark to discuss the quarter in more detail.
Thank you, Tony. Good morning to everyone 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 augment Tony's opening commentary and review each of our reportable segments' first quarter operating performance, as well as other key financial data derived from our consolidated financial statements included in both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier today. Let's expand our review of EMCOR's first quarter performance. Consolidated revenues of $2.3 billion are up $141.1 million or 6.5% over Q1 2019. Our first quarter results include $82.5 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 first quarter.
Acquisition revenues positively impacted each of our United States electrical construction, United States mechanical construction, and United States building services segments. Excluding the impact of businesses acquired, first quarter consolidated revenues increased approximately $58.6 million or 2.7%. All of EMCOR's reportable segments, other than our United States electrical construction segment, reported revenue growth during the first quarter of 2020. United States electrical construction revenues of $525.2 million decreased to $2.8 million, or approximately one-half of a percent from 2019's first quarter.
Excluding acquisition revenues of $25.4 million, this segment's quarterly revenues declined 5.3% organically quarter-over-quarter. Revenue declines within the commercial, transportation, water, and hospitality market sectors, due to the completion of certain projects during 2019, were partially offset by increased project revenues within the manufacturing, institutional, and healthcare market sectors. United States mechanical construction revenues of $834.1 million increased $81.7 million or 10.9% from quarter one 2019.
Excluding acquisition revenues of $55.5 million, this segment's revenues grew organically 3.5% quarter-over-quarter. Revenue growth was primarily attributable to an increase in revenues from manufacturing, healthcare, transportation, and institutional projects. These revenue gains were partially offset by contractions in project activity within the commercial, hospitality, and water market sectors. First quarter revenues for EMCOR's total domestic construction business of $1.36 billion increased $78.9 million or 6.2%. As Tony will cover later during this presentation, our combined United States construction business has experienced growth both sequentially and year-over-year in the remaining performance obligations through March 31st. United States building services quarterly revenues of $518.1 million increased $6 million or just over 1%, the majority of which was attributable to organic activities.
Revenue gains within the segment's mechanical services division were substantially offset by quarter-over-quarter revenue declines within each of their commercial site-based energy and government services divisions. U.S. industrial services revenues of $310 million increased $51.4 million or 19.9% as a result of higher field services activities, as we executed a fairly strong spring turnaround schedule when compared to the prior year. Offsetting the quarter-over-quarter revenue growth was a decline in this segment's shop services revenues due to a reduction in new build heat exchanger sales. U.K. building services revenues of $112.4 million increased $4.8 million or 4.5% due to incremental revenues from new maintenance contracts, as well as continued project and repair activity across their customer portfolio. Quarterly revenue growth was hindered by $2.2 million of foreign exchange headwinds. Please turn to slide eight.
Selling, general, and administrative expenses of $227 million represent 9.9% of first quarter revenues and reflect an increase of $20.8 million from quarter one 2019. SG&A for the first quarter of 2020 includes approximately $9 million of incremental expenses from businesses acquired, inclusive of intangible asset amortization, resulting in an organic quarter-over-quarter increase of approximately $11.8 million. This organic increase was primarily due to higher employment costs as a result of increased headcount to support our pre-COVID-19 revenue growth expectations, as well as incremental expense for credit losses within the quarter. This incremental expense compares unfavorably to 2019's first quarter, which included a recovery of credit losses or bad debts that had been previously written off. In addition, the first quarter of 2019 benefited from a favorable legal settlement within our industrial services segment, which was recorded as a reduction to selling general administrative expenses.
The current year increases were partially offset by a reduction in incentive compensation expense year-over-year. Reported operating income for the quarter of 106 million represents 4.6% of revenues and compares to 102.3 million or 4.7% of revenues in 2019's first quarter. This performance represents a $3.7 million increase or 3.6% period-over-period. Our U.S. electrical construction services segment operating income of 43.9 million increased approximately one million dollars from the comparable 2019 period. Reported operating margin of 8.4% represents a 30-basis point improvement over last year's first quarter. The increase in this segment's operating income is primarily due to incremental contribution from a business acquired in 2019. The improvement in operating margin, however, is due to favorable project execution, inclusive of project closeouts within the quarter. First quarter operating income of our U.S. mechanical construction services segment of 45.2 million represents a 4.2 million increase from 2019.
Operating margin of 5.4% is consistent year-over-year. The increase in this segment's operating income is partially attributable to the incremental contribution from businesses acquired, as well as increased gross profit from organic activities within the manufacturing market sector. Our total U.S. construction business is reporting $89.1 million of operating income and a 6.6% operating margin. This performance has improved by $5.1 million or 6.1% from 2019's first quarter. Operating income for U.S. building services of $20.8 million represents 4% of revenues and is a $6.6 million reduction from last year's first quarter. Operating margin decreased by 140 basis points.
The quarter-over-quarter reduction in operating income is due to lower gross profit from this segment's commercial site-based services division as a result of the reduction in snow removal revenues, as well as a decline in gross profit within their energy services division due to a decrease in large project activity given the substantial completion of certain projects in 2019. Additionally, the reduction in operating margin quarter-over-quarter is due to the under absorption of certain overhead costs in those divisions that experienced revenue declines, as well as an increase in the provision for credit losses within the segment as compared to 2019's first quarter, which benefited from the recovery of certain receivables which had been previously written off. Our U.S. Industrial Services segment is reporting operating income of $12.3 million or 4% of revenues.
The previously referenced quarter-over-quarter growth in field services activities resulted in an improvement in both operating income and operating margin when compared to 2019's corresponding period. UK Building Services operating income of $5.8 million represents 5.1% of revenues, which is an improvement of $1.6 million and 120 basis points of operating margin expansion over 2019's first quarter. Our EMCOR UK team continues to do an excellent job of fostering new maintenance customer relationships and executing follow-on repair and project services while maintaining a disciplined cost structure. We are now on slide nine. Additional financial items of significance for the quarter not addressed on my previous slides are as follows: Quarter one gross profit of $333.1 million represents 14.5% of revenues, which has improved from the comparable 2019 quarter by $24.3 million and 20 basis points of gross margin.
The increase in consolidated gross profit is a result of increases across all our reportable segments other than U.S. building services, while the gross margin improvement is due to continued excellence in project execution, primarily within our United States construction segments. Diluted earnings per common share is $1.35 as compared to $1.28 per diluted share for the quarter ended March 31, 2019. This represents a 5.5% improvement quarter-over-quarter. We are now on slide 10. I will address EMCOR's liquidity profile directly a little later in this morning's call, but as you can see on this slide, our balance sheet continues to maintain its strength. Cash on hand is slightly down from year-end 2019 as a result of cash used in operations, primarily due to the funding of 2019's company-wide incentive compensation awards.
Additionally, with respect to cash used in financing activities, we repurchased approximately $99 million of our common stock pursuant to our share repurchase program. These uses of cash were offset by incremental borrowings of $192.5 million under our amended and extended credit facility during the quarter. Working capital levels have increased due to our organic revenue growth, as well as an increase in accounts receivable and a corresponding decrease in net contract liabilities related to certain delays in customer billings resulting from the Ryuk ransomware attack we disclosed in connection with our 2019 year-end earnings call and Form 10-K filing. We are currently caught up with our transaction processing. However, that does not necessarily translate to quicker turnaround when it comes to payment from our customers. The increase in goodwill is due to the business acquired during the first quarter within our U.S. building services segment.
Net identifiable intangible assets decreased as a result of $14.7 million of intangible asset amortization, partially offset by the impact of additional intangible assets recognized in connection with the previously referenced 2020 acquisition. Total debt, excluding operating lease liabilities, is approximately $505 million and represents an increase of $192.3 million from year-end 2019. As a result of our outstanding borrowings, we had a debt to capitalization ratio of 19.9% as compared to 13.2% at December 31st, 2019. As I mentioned earlier, I will cover EMCOR's liquidity in greater depth later in this morning's presentation after I turn the call back to Tony. Tony?
Thanks, Mark. I'm on page 11, which I will cover remaining performance obligations by segment and market sector. As stated earlier, we had a strong bookings quarter. Total RPOs at the end of the first quarter were $4.42 billion, up $267 million, or 6.4% when compared to the March 2019 level of $4.16 billion. In fact, this RPO total is the highest quarterly total reported since we initiated RPO reporting in March 2018 and higher than any backlog level we reported prior to that. Domestic RPOs have increased $284 million or 7.1% since the year ago period, driven mainly by our mechanical construction segment. We did close a few strategic mechanical construction acquisitions in 2019, which helped support that growth. Book-to-bill, measuring first quarter 2020 RPO activity over year-end 2019 activity, was close to 1.2, which is fairly strong performance considering the strong first quarter revenues of $2.3 billion.
From the end of 2019, total RPOs increased $388 million or 9.6%. On the right side of the page, we show RPOs by market sector. $1.8 billion of this is classified as projects in the commercial sector. We view this sector broadly and beyond office and financial facilities. This sector also includes high tech and data center projects that we continue to bid and construct. We are building these highly complex, fast-paced data center projects for the largest internet and data storage providers. While there are certain dense geographies for data center construction, like the Mid-Atlantic and the Pacific Northwest, where we have industry-leading expertise in our Dynalectric Washington, D.C., Pullman Kent North, and Dynalectric Oregon companies, we are also seeing other areas of the country where data center construction is building up for the large providers.
EMCOR companies are uniquely suited to do this work in other parts of the country as well. Two such areas are in Dallas and Iowa, where in the last 18 months or so, we have made electrical construction and service acquisitions investments to address growth in these geographic areas. Also last November, we announced the acquisition of Batchelor & Kimball, or BKI. This terrific Atlanta-based full-service mechanical contractor is a nationwide leader in constructing large, complex construction projects, including data centers, with a strong performance record for data centers in the broader Southeast and Oklahoma. Additionally, BKI also is a leading provider of healthcare facilities, another market sector that saw RPO growth in the year-over-year and first three months of 2020. Before I leave here, because I know you're going to ask, I want to address a certain question.
Yes, we have performed several projects across the country either to support the Corps of Engineers, municipalities, or our healthcare provider customers. What we're doing is expanding or retrofitting facilities to allow for the better treatment of COVID-19 patients. This work was, for the most part, being executed on a time and material basis. Therefore, it's, for the most part, not included in RPOs. In the aggregate, while this work is incredibly important to support our customers, this work has not substantially impacted our results. In summary, all I can say is that the current bidding environment is still active in most areas of the country, and I'll speak to that in a moment.
While it is very rare that projects that we are working on get canceled, there is going to be a certain degree of uncertainty with respect to the rollout of this work in this fluid environment that we are operating in at this time. Now I'm going to go to pages 12 and 13, and I'm going to talk about what the external environment looks like and what the internal environment that we're dealing with looks like. As I think about our business, I again rely on what has always been our operating philosophy at EMCOR. You only can control what you can control, and you have to react to the macro disruptions and problems in a disciplined and process-oriented manner. We will keep our focus on our core values of mission first, people always.
We know that we create long-term sustainable value for our shareholders by focusing on our task at hand and maintaining the discipline that has served us so well in good and bad markets. In markets like the one in which we are currently operating that have changed very abruptly. We must keep executing our mission for our customers, but we must also keep our employees safe, which is one of our core values. Fortunately, it is in our DNA to have robust contingency plans that focus not only on opportunity capture in any market, but also resiliency to react to markets and job site conditions that change for better or worse. As contracts, markets, job sites, and the overall environment changes, we are used to adjusting to changes in those conditions and know how to pivot responsibly and appropriately on very short notice.
First, let's discuss the external operating environment that we are operating in. In many cases, we are still operating full force as we are deemed an essential business in many states and cities. However, this changes to the plus or minus every day. Boston, New York City, New Jersey, parts of the San Francisco Bay Area, and Pennsylvania all are under work stoppage where EMCOR's project and service work are not deemed essential. However, even in those places, we are still operating at 25%-30% of capacity as that work is deemed essential. Our small project work and technician-based businesses have been the most impacted of our United States businesses. Customers have shut much of this down, but I do not expect this shutdown will continue, as a lot of this work is needed service for summer startup and required maintenance, replacement, and repair work.
Always keep in mind that we do not determine whether a project is stopped or a service site is closed. Our owner, general contractor, construction manager, and EPC contractor customers determine that, and we respond accordingly. The oil war and now the oil glut emanating from significantly reduced demand is ongoing and having an impact on our oil and gas customers. This affects both our more limited upstream business where the impact has been most significant to our much larger downstream business where there has been less of an impact to date. When you talk about how we get supplies to do our job, supply disruption may also happen as manufacturers and/or distributors are forced to close plants in certain states and/or countries as those plant personnel are quarantined or facilities are closed for cleaning or the government decides that facility is not essential.
To date, we have not had any significant disruptions that have not allowed us to do our work where we are deemed essential. Here is what we do control in this crisis to some extent. We can control some of our costs. Unfortunately, this means we must lay off or furlough skilled tradespeople when we have no work for them. We have had a growing workforce over the last five years, and unfortunately, in many cases, the work has abruptly stopped over the last six weeks. We have reduced our hourly workforce by 20%-25% overall in line with those projects that are active.
About 40% of our salaried workforce is either furloughed or working with reduced hours or reduced pay of up to 25% on a temporary basis. For example, as early as March 18th, we announced and temporarily reduced most of the headquarter staff pay and/or hours by 25%. This includes me and all the named executive officers. Our board of directors have reduced their compensation by about 22%. Our segment leadership also implemented similar cost reductions for their segment staff and leadership teams. However, about 40% of our company is still working at pre-COVID salary and hourly levels. In those cases, we have not significantly reduced our SG&A or cost, as we need to have them have the resources they need to continue to perform for our customers. We are taking measures to protect our employees.
We have been very proactive with employee safety, implementing appropriate precautionary protocols, and providing the necessary PPE and training. We started social distancing practices and other safety protocols in many of our locations in the first week of March. We banned all overseas travel by the third week of February and discouraged all domestic air travel by March 16th. This will impact productivity in the near term, but safety and health come first. In this crisis, we still must protect our contractual rights. We were required under contract to provide notice on jobs that are shut down, and we have also outlined for our customers how work practices have changed and possible productivity issues we may have. Our customers know we need to do this.
I firmly believe that we are all working together well now, but in the end, everything will depend on the contractual language when this crisis abates, and we must protect our rights. We are communicating frequently and consistently with our field leadership about the many areas that we are working, but have had to lead our response while navigating the myriad of government orders from the trade-off between reduced hours or furloughs, shutdown directives, essential versus non-essential businesses, and that's just to name a few. We are proactive, working with our suppliers to keep project supplies moving, but also to stay ahead of the game on providing the best personal protective equipment that we can. However, we need to balance what we control against what we do not control. In this case, the things we do not control outweigh the areas we do control.
Our mechanical and electrical construction segments are operating at about 75%-80% of capacity right now because in many markets, we are essential, and we are still working on our most significant projects. Our building services segment has been the most impacted by the macro factors described above and is operating at about 65%-70% of capacity. Our industrial services segment had a good first quarter and has the potential to continue in the second quarter based on several large turnarounds that are currently scheduled to be executed in the latter part of the second quarter and the early part of the third quarter. The fall schedule is neither set nor firm at this time. EIS today is operating at about 75%-80% of capacity. The U.K. business is less impacted by nature of our customer base and is operating at 80%-85% of capacity.
You put all that together, we think we are deploying at about 70%-80% of our operating capacity as of today. However, as noted above, this is a fluid situation as circumstances change day-to-day, both for the positive and the negative. The next area, and I believe the most important area in these challenging and uncertain times, is the condition of and how we have managed our balance sheet. Our balance sheet is solid. Our liquidity is strong. Prior to the Q&A today, Mark will provide a liquidity update under our credit facilities. Times like these are why we adhere to the fundamentals of a strong balance sheet. We've always done that, and we always will. Through these business changes and cycles, it is fundamental to who we are and how we run the business. As far as capital allocation, we see no risk to the dividend currently.
We do not plan any more share buybacks until we return to more normal operating conditions. We did have a strong acquisition pipeline and still do, but that will wait until some normalcy returns. We have several acquisitions, much like we did last year, between the $40 and $60 million purchase price range, that would either help us increase our geographic market presence, and they are attractive, and they are great companies, and they will increase our end market exposure to attractive end markets like healthcare, data centers, infrastructure that have long-term secular growth. Again, that will wait until some more normalcy returns. Finally, we are developing a plan to bring our company back to 100% capacity. Really, that's something we know how to do.
We mobilize large job sites, significant service opportunities, and large, multifaceted, multi-trade customers contracts all the time. We know how to ramp up with speed and discipline. We have terrific prospects, have strong RPOs, and even in this disrupted market, we have market sectors that are robust, such as water and wastewater, healthcare, and within commercial, data centers. We are still bidding and booking work through this changing and evolving environment. What we know is we are well-positioned as a company in very attractive long-term markets, and we know we have some of the best operators in the industry, in our subsidiary companies and at our segment level. We know we have a company whose people are resilient and tough. We know that we attract great talent, and that talent acquisition may accelerate in these challenging times.
We know we have one of the best long-term reputations in our industry for our employees, as we have a long-term record of taking care of our employees' safety, and we develop them over a long-term career with us. What we do not know is what will be the pace and timing for this recovery. We do know that we will not be caught flat-footed in that recovery. Taking everything into consideration and the uncertainty created by this COVID-19 pandemic, we withdrew our 2020 guidance on April 21st. We hope that when we come back to you with our Q2 earnings announcement, we'll have some guideposts for 2020. We should know more by then. Before we take questions, though, I'm going to ask our CFO, Mark, to cover our line of credit and our liquidity. Mark?
Tony, thanks again. For everybody on the call, we are now on slide 13. Subsequent to our fourth quarter 2019 earnings call, we amended and extended our prior credit facility, which had been entered into in August of 2016. With this refinancing transaction, we refreshed the term loan component of the credit facility, increasing the amount of our term loan to $300 million from the approximately $254 million that was outstanding as of the end of December 2019. Additionally, we upsized the revolving credit line from the previous $900 million of capacity to $1.3 billion of available revolving credit. Under the existing terms and conditions, if necessary, this revolving credit line could be further increased by $600 million to $1.9 billion of capacity at EMCOR's discretion. This would be subject to incremental commitments from either existing or additional lenders.
A result of this transaction, which has a maturity date of March 2nd, 2025, EMCOR's historically strong liquidity is even more robust. At the bottom of slide 13, you can see the amount of our outstanding borrowings at the end of the first quarter, which includes the $300 million under our term loan, which I just mentioned, which has an annual amortization requirement of 2.5% beginning in March 2021, and a 5% per annum amortization requirement in each of the succeeding three years. Additionally, we have utilized approximately $279 million of available capacity under our revolving credit line, with $200 million in direct borrowings and approximately $79 million of letters of credit issued. This activity leaves EMCOR with approximately $1.021 billion of available credit at March 31st.
Such liquidity is additive to our cash on hand and the operating cash flow the company expects to generate in calendar 2020, resulting from the monetization of our accounts receivable and contract assets during the ordinary course of business. Despite any concern we have regarding the impact of the COVID-19 pandemic on the markets and customers we serve, we expect to continue our long trend of generating positive operating cash flow in 2020. On a trailing 12-month basis, our debt to EBITDA is less than one times through March 31st, and albeit higher than at any point in time during the last three years, remains low. To reiterate, EMCOR's liquidity remains strong, and we continue to be well-positioned to capitalize on all opportunities. With that, once again, I will turn the call back to Tony. Tony?
Yeah, thanks, Mark. Look, Laura, with that, we'll take questions.
Absolutely. Your first question will come from the line of Mr. Brent Thielman from D.A. Davidson. Sir, please proceed. Your line is now live.
All right. Hey, Brent.
Great. Thank you. Good morning.
Good morning. How are you?
I'm doing well. Thank you. Hey, Tony, heard from a couple of others in the contracting world about seeing more of a preference to only allow more of the established contractors that might be taking kind of safety precautions a little more seriously to come and bid. Are you seeing that at all in any of your markets?
I think the kind of customers that are attracted to us and the kind of general contractors and construction managers, one of the reasons they're picking us, amongst many reasons, is not just the precautions we would take with respect to COVID safety practices and health and welfare practices. It's how we run jobs to begin with. We have industry-leading safety. In fact, we just finished one of our best quarters ever in the first quarter. We would be in the top 1% or 2% of the industry on any safety metric.
Yeah, I think that could be the case, but I think the kind of people that choose us anyway, one of the reasons they're choosing us is, one, because of our safety record and the care we have for our employees. Because of our strong financial position, we tend to attract not only the best supervision and leadership in the field, we tend to attract some of the best tradespeople that there are.
Okay. Appreciate that. On building services, I'm curious, do all these delays and kind of challenges getting into the buildings, does that create some pent-up demand to the extent that when you can get back into these facilities, we might anticipate seeing some spikes in work?
It should, but I've never managed a company through a pandemic and what that startup will look like. I venture to say I wouldn't speculate, but at normal times, you usually don't get rewarded for not doing or completing your pre-summer maintenance before it becomes 90 degrees with 95% humidity in parts of the country.
Right. Okay. I guess my last question's on mechanical, the big jump in RPOs, and even from last quarter, and I think you had BKI in that last quarter. Is there a large job or something that's an outlier, or is this just truly reflective of a strong market?
Well, look, BKI booked work just like we thought they would. We knew we bought a market leader. We knew they had terrific positions in some key Southwest markets, not only with respect to data centers, but also with respect to healthcare and larger institutional work with some higher education facilities. they were part of the story, but the story is much bigger than those. We also booked some pharma work, which really only one job had anything to do with COVID, and that is one of the treatments, and I'll just leave it at that maybe someone might be gearing up for. other than that, we had a strong booking quarter because we're in sectors that we think have long-term secular growth.
Okay. Thank you. I'll get back in queue.
Thank you. Your next question will come from the line of Noelle Dilts from Stifel. Please go ahead. Your line is now live.
Thanks so much. I just kind of wanted to ask you guys, if you could expand upon how you're thinking about the non-resi market, longer term. In some of the conversations we've had with construction economists, they've kind of suggested that there was less overbuild in the cycle, and so they think, in 2021, as things normalize, spending might be pretty close to 2019 levels. I'm just curious, one, how you're thinking about that, and second, how you're thinking about the opportunity around more of the renovation work, if there may be some work around airflow management and even spacing, given social distancing, sort of how you're thinking about those opportunities.
Yeah. Look, I think that trying to draw any conclusions off of what's happening today for the non-res market can be tough. Look, I think there's some underlying fundamentals that are pretty strong on the non-res side. I think the data infrastructure, I'm not even sure we're halfway where we're going to be in the next five years. I do think some repurposing of buildings will happen, some renovations will happen. I think people will continue to upgrade their HVAC systems. You not only get better airflow, especially with some of the new control technology, but you also get a substantial energy savings. Now, one of the things that are going to happen here, with the operations of buildings, I think over this next five months, and I don't think COVID's going to be forever. I don't think anybody does.
We sort of fast-forward a year, I think we're in a much better place. I think one of the things that are going to happen is, the demand for energy is going to go up because you're going to be bringing more outside air. As you bring in more outside air, it's untreated, but it's certainly good to dilute the space. You have to treat it, and then you have to control for humidity more, which then creates more demand on the HVAC system. I think there's also things we can do to help with employees' mindset. Even before this, we were putting in UV lights and things like that on the coils and some of the fan sections. You can go to an improved filter.
There's things you can do that could, I'm certainly not saying this for sure, but it would be common sense that it would help with air quality. these are all things we can do in the retrofit of buildings. Now, as space gets reconfigured, a lot of people went to open office plans. What will happen in the near term with those? They could be back to open office plans in a year. They may temporarily change those open office plans. they'll certainly need companies like ours to help them think about what airflow looks like and temperature management looks like in those short-term changed office plans. Now, what I think is going to happen here, I do think our technicians are already starting to trickle back into buildings. We've had net hirings up.
What I mean by that is we went down big in building services. We're starting to hire back some of those technicians now. As buildings start to say, "Hey, we're going to reopen. We need to be prepared, and some of this work is better off to let you come in and do now versus when the building reoccupies." I don't really sense that there was a lot of overbuilding. if you think about EMCOR, yes, we do residential high-rise, but it's a very small part of what we do in the overall aggregate of EMCOR. It's probably less than 1.5%- 2% of what we do. that fluctuates. We really had one big hospitality project in the last three years, and it was a very successful one, both for the owner and us.
you look at where we are, we're still a company that does a lot of small projects, but we also can do some of the most complicated infrastructure work. That's both transportation infrastructure work, which is mainly a electrical job for us. also on data infrastructure. We're terrific builders of these hyperscale data centers in some of the most important markets, and we really made some smart acquisitions over the last two or three years to build out that capability. I've always said, if the non-res market stays flat to just down a little bit, it's really not the end of the world. There's going to be a correction here because of what's going on with COVID. I don't expect that correction to be long-lived.
If it goes back to where it was in 2019 and stays there for a while, I think my three colleagues around the table would say, "Hey, that's good." We certainly have plenty of room to operate. I do think, echoing the comment earlier, look, I think people go to quality in an environment like this, especially for the most complicated jobs, but also the smaller jobs that require real technical capability to make sure you're achieving what you wanted to out of that renovation.
Great. Thanks so much.
Thank you. Your next question will come from the line of Adam Thalhimer from Thompson Davis. Your line is now live. Please proceed.
Hey, good morning, guys.
Morning, Adam.
Morning, Adam.
Do you feel like you know enough today to put some guideposts around Q2 EPS?
No.
Does what Comfort said, could that loosely hold up for you guys?
I think we gave you the building blocks, Adam. We said we're working 70%-80% of capacity. That starts to frame the revenue side. How long that will last, we could be back up to 90% of capacity by the 1st of June. They're starting to put plans together in some of these major markets with the unions, who I think in these major metropolitan areas with the governor, will determine whether the people come back to work, because ultimately it's about when the men and women on the trades feel comfortable about coming back to work.
Okay.
Does that happen May 15th? Does that happen June 1st? We could go from 70% to 80%. We could go to 90% by the middle of May to early June. That could be June 15th. We don't know that. We don't control that. for me to sit here and tell you I know that, would presume that I know things that only the trade unions know and really the governor's office knows, and that's all based on epidemiology, and their models, and I can't even speculate about that. I also know that I expect that we'll make money in the second quarter, Mark, right?
Yeah.
Maybe I'll let Mark talk about that a little more. I expect that second quarter is going to be tough for everybody. Third quarter, we should start to come back. Whether this is a U or a V in our industry, I don't know. I would think there's a potential it would be somewhere in between because we have jobs that will come back. I think third quarter will get stronger based on what we know today. Fourth quarter could even be stronger, but then there could be an outbreak again in the fourth quarter, of which I have no knowledge or experience with. I do expect things to normalize by like everybody else by first quarter of next year. Certainly second quarter next year should be a good comp versus second quarter this year. I would think so.
You got to say, "Okay, what's going on with productivity?" For people to think that there's not going to be a productivity impact as we become accustomed to these new work rules and wearing masks and wearing shields and sanitizing tools, all the things we absolutely need to do to keep our workforce safe, you'd be kidding yourself. Now, we will learn, but we're also doing things to mitigate those. People have been fairly responsible about split shifts, disaggregating the work site. The scheduling's been better than ever in a lot of our places with our construction manager customers as they try to get density down on the jobs. The good news about being a contractor and having the kind of people that we have working for us is we're used to dealing with change and ambiguity. our folks approach this just like any other problem. Mark?
Yeah, the only thing, I'll state the obvious, Adam. This company has never provided quarterly earnings guidance, and we're obviously not going to start that in 2020. To echo Tony's comments, as we continue to refine our internal forecasting, we don't see any interim periods that will not be profitable. I will put a caveat on that, though, that to the extent that market conditions don't improve, there's clearly going to be some pressure on impairment analysis relative to those parts of our business that have high levels of goodwill or in intangible assets. Putting that to the side, if you look at the underlying core operations of all of our subsidiaries, despite the headwinds that we're all collectively facing, and at the reduced capacities, we're still anticipating being a profitable business for all of our interim reporting periods for 2020.
Here's what has been positive. I think it, again, go to the position of our companies in the markets. We're bidding and winning work right now. I think one of the things everybody's going to have to think about, we're going to pop out a second quarter and say backlog's likely to be up, right? RPOs are likely to be up. Because we don't usually get cancellations, and we sort of have a pretty good idea what's in there, obviously, of size, and we think there are projects that will go. Part of it's going to be up, and we're going to do our darn best to figure out what part of it we didn't revenue like we should have in the second quarter or aren't revenue like we should in normal times. There's going to be a little bit of a false positive there.
I think the other thing you've got to sort of think about is decision-making has slowed. for those larger projects, maybe outside of some of the faster-paced work like data centers and those kind of works, I think there's going to be a lot more planning that's going to go on that's going to say, "Okay, we would have let that project maybe in June or July to start up in October, November, December." That planning might all push out, and you could be in a position where there's a little bit of gap in revenue, not overall revenue, but revenue that might have been maybe three to six months out from here.
Yeah. That was one of my key questions. In certain sectors like retail, education, office buildings, where the assumption is that there's significant disruption, is the bidding really slow there, or is it kind of still just not that bad?
Well, again, we don't play other than on the maintenance side, and even that is not a huge part of our business, on the retail side. We're just not competitive in that market except for replacement work. For the well-capitalized retailers, which for the most part is where we are, those retailers have replacement work that they had scheduled. Some of them pushed it out a month, but they're already talking to us about what that schedule will look like instead of April, May, what it looks like in June, and then what it looks like in September, October, and what would be our repair contingency plans around some of that work that was supposed to be replacement. These are people that have prospered through this pandemic.
As far as education, we mainly play in the retrofit side there, and it's geared towards although we don't make a lot of guarantees, almost none, it's geared towards energy savings type work and equipment change-out and control system upgrades. We're starting to see people talk to us about starting that work early because they don't plan on bringing students back to school. As far as the commercial work, we still see decent opportunity in the retrofit side. As of today, we don't have significant commercial exposure on high-rise office building construction. There wasn't that much of it going on. We do have some on residential high-rise, but I said before, that's less than 1.5% or 2% of what we do, and that would be embedded within commercial.
Okay. Last one for me. When you talk about a productivity impact, how do we think about having to set a model? If you're in electrical, you're operating within a range of, call it 6%-8%, usually mechanical is 5%-7%, usually. Can you stay in that range even with revenue declines, you're saying? Yeah. Okay.
I think as of today, yes, the answer would be because we've been at the higher end of that range.
Okay.
If we were at the lower end of the range, I'd be a lot less confident.
Okay. Well, this was great color. Thank you guys very much.
Thank you.
Thank you. For presenters, your next question will come from the line of Joe Mondillo from Sidoti & Company. Please proceed. Your line is now live.
Hi, guys. Good morning.
Morning.
You doing well?
Morning. Yeah.
Just a question on competition. What are you seeing there? Do you think any competition is at risk in this downturn, and you may benefit from it on the other side? Just wondering what you're seeing with competition.
Yeah. Joe, look, competition, we always have competitors, and we have some really good competitors. I think there does tend to be more of a flight to quality, in a downturn for significant projects. I think competition was at risk before this started, some of them, because they overextend their balance sheet as they grow. a smaller contractor going from being $30 to $60 million many times does not work out well for them. I think there will be a, like there always is in a change, and this is an abrupt change, I think some people may say, "You know what? This is a good time to pack it in.
I can take my working capital off the table, and maybe I can go join one of these competitors I had in a local market." These tend to be the $20 million or $30 million company where the principal's really good at what they do. They tend to run that one or two large jobs themselves. In the past, we've had some of those folks come to work for us, and I expect that to happen again. They'll come work for us for five or eight years and run big work for us, and they're great people. I never spend a lot of time worrying about what our competitors do. Again, I always go to the things I control, and more appropriately, what our subsidiary leadership controls.
First of all, we make sure that we have the people and resources to execute that work. That's where we start. Do we have the people or resources to execute that work? Do we have the experience at an EMCOR or specifically in that subsidiary in a lot of cases, to do a really good job on that work technically? Also, we balance that, again, can we make money at it? Are we working for people that we actually want to work for on that job? That's both on the service side and the construction side. We put all that together, and that's how we decide what are the best opportunities. We think about the competition. I certainly, quite frankly, wish our competitors the best in this crisis. This is a terrible crisis and pandemic, and I hope they all come through it fine.
Okay. Understand. Second question was related to the electrical RPOs. What do you make out of the RPOs there declining in the last several quarters, and what your thoughts are on that specific part of the business?
Yeah, I think that's like a flywheel at EMCOR that just does great, has great margins, has great cash conversion, has terrific prospects. I don't read too much into that. That's the ebb and flow of work, and I know we have a very active bid log, and we've booked some really great work in the electrical segment over the last five or six weeks.
Okay. Last question. You provided a lot of information this morning, and there's a lot going on, a lot of moving pieces with the economy in general and whatnot. What are your biggest sort of challenges managing the company from the executive level, in this specific time period, and what are you looking at or maybe most concerned of regarding the situation?
I think you start with, you've got to do everything you can as a leader and set the climate that you expected as a leader, and this leadership team that's with me here. I would say that we believe our primary responsibility right now is to make sure that we can execute the work safely and with the well-being of our employees in mind. We have to be able to accomplish that work to the technical specifications that our customers expect. This pandemic would not be excuse for us not delivering a quality product to our customers. I think then all the operating practices we've had at EMCOR take over, right? We have very strong values-oriented company. We have a culture of focusing on the most important things, whether it be operationally or financially.
Based on, as you see with our balance sheet, Mark could take you through what is, and we're not going to do that right now, a very detailed cash planning that goes on and cash forecasting, whether the markets are good, bad, mediocre. It's just part of our DNA. That DNA serves us well when times are good, and it serves us well when times are a little tougher. One thing I don't lie awake worrying about is I'm really sure that EMCOR will come through this fine. EMCOR will come through this stronger than our competitors, and that our people will do the right thing in the field to protect the well-being of our employees. One of the things we have to do as a leadership team, all the way down through to subsidiary leadership is, we've got to communicate.
We have to be consistent in that communication, and we have to provide people good information. The work that our legal team, our human resources teams, and our safety teams, and our financial teams have done through this crisis to get our operating teams the right information they need to be able to implement this myriad of things that have come out on these different relief packages and what it means for our employees, what it means for us, and how we make sure that we not only comply with federal law, that we do right by our employees and our shareholders while we're doing that, and our customers. Also, how do we make sure that we can distill that information into things that people can understand? That goes to what is really an essential business versus a non-essential business.
It goes to how do we work with our supply chain. We were out in front of this in relatively short order of thinking about PPE needs for our employees. That goes all the way from the top down. That goes from me all the way down through the organization worried about that. We anticipate that we're gonna be wearing masks in different environments for a long time, and we acted appropriately. We have all kind of protocols around tool sanitation and job site safety, and we have a structure that allows us to communicate effectively.
We have contingency plans that we develop for crises, although we didn't quite think it would be this crisis when we developed them. Our guys know how to ramp up and ramp down and focus on what's important. I think it's just the nature of who we are. We're conservative, right, Mark? We've been in more than one meeting when we've had a lot of people tell us the beauty of leverage, and I guess we never quite believed that, did we?
No, we did not.
Right. I think that shows right now. We'll run the business like we always do, and we'll get to the other side of this.
Okay, thanks. Well, I hope you're all safe and well, and good luck with everything.
Thank you, Joe.
Thank you.
Thank you. There are no further questions on the queue. Presenters, you may please continue.
Hey, look, we're clearly in an unprecedented times, and for anybody that's listening, I know there's a lot of EMCOR employees listening. We'll all get through this. We'll come out strong. Unfortunately, everybody's making a lot of tough decisions right now. We hope to see everybody back to work, and we'll do that the right way, too. We'll have everybody's safety in mind when we do that. Let's always remember, we also got to accomplish the mission we have for our customers and our shareholders, and we will do that, too. We couldn't be more proud of how everybody's responded. We'll come out of the other side of this stronger. With that, thank you all very much, and everybody be safe.
Again, thank you everyone for participating. This concludes today's conference. You may now disconnect. Stay safe and have a lovely day.