Good day and thank you for standing by. Welcome to the ARC Document Solutions Q1 2021 earnings report. At this time, all participants are in listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that Today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to David Stickney, Vice President, Corp. Communications and Investor Relations. Sir, please go ahead.
ARC ARC Document Solutions
Thank you, Lee. And welcome everyone.
On the call with me today are Suri Suriyakumar, our CEO; our Chief Operating Officer, Dilo Wijesuriya; and Jorge Avalos, our Chief Financial Officer.
Our first quarter results for 2021 were publicized earlier today in a press release. The press release and other company materials are available from our Investor Relations pages on ARC Document Solutions site at ir.e-arc.com. In today's earnings announcement, ARC offered expanded supplemental disclosures to provide shareholders and analysts with additional information in advance of our quarterly conference call. The disclosures are largely historical and will not be read on today's call. Please note that today's call will contain forward-looking statements that fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are only predictions based on information as of today, May 4, 2021, and actual results may differ materially as a result of risks and uncertainties that we highlight in our quarterly and annual SEC filings. This call will also contain references to certain non-GAAP measures, which are reconciled in today's press release and in our Form 8-K filing. I will now turn the call over to our CEO, Suri Suriyakumar. Suri?
Thank you, David. And welcome, everyone. It has been more than a year operating under the pandemic, but the business conditions have ebbed and flowed just as they have in any other year. After exceeding expectations in 2020, we knew we were headed for a rough start to 2021. And we communicated as much to you in our last earnings call. All things considered, I am pleased that the company remained resilient and responsive in the face of the pandemic effects in January, as well as a week of terrible weather in February. Thankfully, March sales came back strongly and reestablished our momentum. Absent the disruptions in January and February, we are confident that our sales and EBITDA would have been consistent with our fourth quarter performance. Sales in March reflected the pent-up demand from our existing customers, as well as from our aggressive marketing efforts throughout the quarter, as Dilo will outline later in the call. Construction activity finally got off the ground and has been increasing ever since as indicated by forecasts and sales data from the AIA and building trade organizations. The push to get students back in school reinvigorated the education market, a new, but well established, customer base for ARC. Retail opportunities are increasing with a steady reopening of the economy and scanning work is on the rise as businesses have recognized how vital it is for work from home or hybrid working arrangements to have 100% digital access to documents. The increase in activity drove a solid March. And as I noted earlier, the momentum has continued into the second quarter.
While the majority of our sales can still be attributed to the construction industry, the majority of our new sales continue to come from outside the AEC market after years of sales reflecting an 80/20 split in sales between customers in architecture, engineering and construction with the other vertical industries. We're now seeing a steady shift to a more diverse mix of business. At the end of the first quarter, our sales ratio was from 70% construction related business and 30% from other industries, and we expect that trend to continue. I would even venture to say that we are continuing to increase our non-AEC business. In the light of this, we are confident that we can meet or exceed our aspiration for a new normal of $10 million plus EBITDA per quarter. In closing, I want to continue emphasizing our long-term commitment to our shareholders via our dividend program and share repurchases, as well as our commitment to a strong capital structure.
As noted in our press release of April 26, we replaced our former credit facility with a similar agreement that features favorable terms and flexibility to continue returning shareholder value via our dividend program and opportunistic share repurchases. The new facility should comfortably see us through for the next five years. With that as a summary, I'll now turn the call over to Dilo to provide further perspective. Dilo?
Thank you, Suri. We weathered the strict shutdowns in the UK, Canada and several states, as well as the harsh weather conditions during the past quarter. We adjusted our operating conditions and focused on the immediate needs of our customers during this period. Throughout the quarter, we continued to strategize and execute on our marketing plan.
As customers work from home, we are connecting with them via our e-marketing programs and social media. Most customers are looking for new and improved ways to manage their print requirement. Technology-enabled print services are key and we continue to pay attention to what our customers need. We were very happy to see the government's stimulus package for the education industry. Many of our educational customers are taking advantage of the funds to get their schools ready to reopen.
Our ability to consult, design and print high quality graphics on short notice has enabled us to secure multiple graphic orders.
Our quest to diversify our customer verticals is continuing. It is clear that every customer vertical has a need for high quality printing, scanning of documents and management services.
Our marketing campaigns are helping us to reach a wider audience and communicate our breadth of services. Product webinars, blog articles, email marketing, and social posts are helping us to reach a larger audience. Retail, manufacturing, advertising, media, health and fitness. Cities and counties are some of the new customer verticals we have successfully engaged with our digital print services.
As Suri mentioned, we have seen nearly 60% of our new business being secured from non-construction verticals. We believe that as companies come out of the lockdown and COVID restrictions ease, ARC is well prepared to secure new markets and grow our sales.
As a specific example, most customers are looking at ways to digitize their paper documents and convert to digital data for easy online access, whether at the office or when working from home.
We have welcomed this need and all of our service centers have been expanded to offer scanning services. The capital requirements for this effort are very low, and cross training keeps labor increases to a minimum. Offerings like this enhance our ability to offer multiple services to the same customer from the same service center and make us unique in the marketplace.
Our sales and production staff are doing a tremendous job in identifying and helping customers with their ever-changing needs. Positive customer service and a can-do attitude is something we are proud of at ARC.
We are maintaining an efficient cost structure and an efficient operation to maintain healthy margins for the company.
We continue to focus on maintaining a healthy, safe work environment at ARC and continue to focus on top notch service levels for our customers.
Our team at ARC is the best in the industry and we will continue to execute on our strategy. With that, I will hand over to Jorge for a financial update. Jorge?
Thank you, Dilo.
While our top line suffered from circumstances we couldn't control, our bottom line results remained strong throughout the quarter. Gross margins stayed above 30% as we leverage the efficiency of our cost structure.
Our EBITDA margin of 14.2%, a 130 basis point increase over the prior year reflects the strength and sustainability of our operations and profitability, even during the quarter when sales were low. Likewise, our earnings per share were in line with prior year's performance at $0.021. And we have demonstrated over the past four quarters, ARC's ability to generate cash flow from operations remained very strong at more than $5 million for the quarter, a $2.5 million increase as compared to Q1 of 2020.
Our cash balance remained at approximately $50 million, despite paying down our debt by $5 million in the quarter. And our leverage ratio, net of cash, is below 1, an all time low despite a year of dealing with the pandemic.
Our performance clearly had a big role in negotiating our new credit facility, which went into effect on April 22 of this year. We were able to maintain the low interest rate and favorable terms we put in place back in 2017. Kept the flexibility that allowed us to pursue returning value to our shareholders. And best of all, the new deal secures the strength of our capital structure for another five years. In the end, preparing for the future was the impetus for the new credit line.
We are not only excited about the momentum we have going into the second quarter, but also at the potential for ARC in the years ahead.
Our market expansion efforts are bearing fruit. The design and construction industry appear poised for a return to growth and demand is building across the board as economic restrictions begin to ease.
We are well positioned to take advantage of all of it. With that, I'll turn the call back to Suri. Suri?
Thank you, Jorge. Operator, we are now available for our listeners' questions.
Thank you, Lee. And thank you, everyone, for your attention this afternoon. We appreciate your continued interest in ARC Document Solutions and we look forward to talking with you next quarter. Take care. Have a good evening. Bye-bye.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
You may now disconnect.