Q4 2021 Comfort Systems USA Inc Earnings Call
Pardon me this is Jeff.
Today's conference will begin.
Thank you for your patience and please continue to standby.
[music].
Thank you for standing by and welcome to the fourth quarter 2021 comfort systems USA earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
During that session you will need to press star one on your telephone please be advised that today's conference maybe recorded if you require any further assistance. Please press star zero.
Now like to hand, the conference over to your host Julie <unk> Chief Accounting Officer. Please go ahead.
Thank you Carmen good morning, welcome to comfort systems, Usa's fourth quarter and full year 2021 earnings call. Our comments today and our press releases contain forward looking statements within the meaning of the applicable securities laws and regulation.
We will say today is based on our current plans and expectations of comfort systems USA.
Those plans and expectations include risks and uncertainties that might cause actual future activities and results of operations to be materially different from those set forth in our comments.
Can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K as well as in our press release covering these earnings.
A slide presentation has been provided as a companion to our remark.
The presentation is posted on the Investor Relations section of the company's website found at comfort systems USA Dot com.
Joining me on the call today are Brian Lane, President and Chief Executive Officer, Trent Mckenna, Chief Operating Officer, and Bill George Chief Financial Officer, Brian will open our remarks.
Alright, Thanks, Julie good.
Morning, everyone and thank you for joining us on the call today.
We have more information than usual to cover.
But considering the events in Ukraine in Europe , we will try to be as efficient as possible and our thoughts are with those who are affected.
We are pleased to report a strong finish to 2021.
Our team has delivered excellent execution across our segments.
And we are grateful for their hard work.
For the fourth quarter, we earned a dollar $1 <unk> per share on revenue of $856 million.
Same store revenue grew by 8%.
<unk> to the fourth quarter of 2020.
As overall nonresidential building construction and service.
To show broad based strength.
For the first time ever.
We are reporting more than $3 billion in full year revenues.
We have good cash flow and our backlog has registered.
Unprecedented increase.
In addition in January of 2022, we received approvals our previously filed tax refund claim for the past year.
That will meaningfully impact our first quarter results.
And Bill will review those in detail during his remarks.
We had an active quarter for acquisitions.
At the beginning of December we acquired Ivy mechanical.
Which services customers across the southeastern United States.
We have known <unk> for 25 years.
In the mechanical construction and service expertise as well positioned for collaboration and mutual benefit.
On the last day of December we acquired Edwards, electrical and mechanical based in Indiana.
Edwards brings us a solid full service presence in Indianapolis.
And provides new capabilities in clean room solutions that will complement our off site construction and pre fabrication.
On December 31, we also have quite a strong service and controls business in Kentucky.
Thermal solutions.
And on that same day, we acquired Kodiak Labor solutions.
Temporary staffing agency that we have worked with on an ongoing basis.
And which will help us recruit and deploy skilled construction labor and many of our markets.
We are happy to have these strong teams is a great new part of comfort systems USA.
And we are confident that we have added some wonderful people and strong capabilities.
I will discuss our business and outlook in a few minutes, but first I will turn this call over to Bill to review our financial performance Bill. Thanks.
Thanks, Brian Good morning, everyone and good afternoon for those on the East Coast.
So revenue for the fourth quarter of 2021 was $856 million, an increase of $157 million or 22% compared to last year.
Same store revenue increased by a strong 8% with the remaining increase resulting from our acquisitions of <unk> and amtech and one month of owning IV.
Revenue for the full year 2021 was $3 1 billion, an increase of 8% compared to 2020 and the annual increase was a result of our 'twenty 2020 one acquisition.
As you know, we and our industry are experiencing delays in the receipt of materials and equipment.
Which modestly reduced our revenue in the fourth quarter.
It is impossible to precisely measure that effect because there are always variances in timing issues relating to materials and equipment. However, we roughly estimate that our revenue would have been higher without these issues and our best estimate is that the effect on the fourth quarter revenue was a reduction of perhaps 2% to 4%.
And we expect to continue to experience these effects for at least the first half of 2022 and we currently expect high single digit same store revenue growth for the upcoming year.
Gross profit was 154 million for the fourth quarter of 2021, a $17 million improvement compared to a year ago.
Our gross profit percentage was 18% this quarter compared to 19, 6% for the fourth quarter of 2020.
Our gross profit percentage in our mechanical segment declined to 18, 9%.
While margins in the electrical segment have increased significantly compared to last year from 10, 7% in 2020 to 14, 5% in 2021.
The decrease in the gross profit percentage resulted from several factors, including cost pressure and changes in revenue mix of new construction increased in proportion to our revenues and the fact that we are.
In the early stages on a disproportionate amount of our project work.
For the full year 2021, gross profit increased by $16 million and our gross profit margin was 18, 3% in 2021 as compared to 19, 1% in 2020.
SG&A expense for the quarter was $105 million or 12, 3% of revenue.
Impaired to $89 million or 12, 7% of revenue for the fourth quarter of 2020.
On a same store basis, SG&A was up approximately $5 million, primarily due to compensation related items.
For the full year SG&A expense as a percentage of revenue was 12, 2% for 2021 down from 12, 5% for 2020.
On a same store basis for the full year SG&A declined $7 million, primarily due to a reduction in bad debt expense.
Our operating income in the fourth quarter of 2021 was $49 3 million slightly higher than the same quarter of the prior year.
Last year in our fourth quarter, we got a benefit from earn out changes that was 11% higher than we reported this year.
Each quarter and we examine our estimates related to our earn out liabilities as a result this quarter. We reported an overall gain of 3 million or seven cents per share in 2021, as compared to $7 million or <unk> 18 per share in the prior year.
Our 2021 tax rate within the expected range at 24, 7%.
After considering all of the factors above.
Net income for the fourth quarter of 2021 was 38 million or $1 <unk> per share. This compares to net income for the fourth quarter of 2020 or $43 million or $1 17.
Our full year earnings per share was $3 93.
Per share compared to $4 a night.
Prior year.
For our fourth quarter, EBITDA increased by 8% to $68 million and our full year 2021, EBITDA increased to $256 million.
Full year 2021 free cash flow was $161 million compared to $265 million in 2020.
Our prior year free cash flow was increased by this investment in working capital from Covid and federal legislation that allowed us to defer $32 million in 2020 payroll taxes.
'twenty one cash was the decreased by $18 million as we paid back a portion of the deferral, thus, creating a $50 million timing issue just from that tax issue.
Despite these factors 2021 was a great cash flow year for us and although we will deploy working capital in the early stages of the various projects. We are starting we believe that we have strong cash prospects for 2022.
Brian mentioned that we closed four acquisitions in the fourth quarter.
<unk> was acquired on December one and as reported in our mechanical segment.
It is expected to contribute annualized revenues of approximately $150 million to $160 million and EBITDA of 7% to $9 million.
The other three acquisitions closed on December 31, and their results will only be included in our financial results. Beginning January one however, their balance sheets and backlog are included as of December 31.
We expect Edwards to contribute annualized revenues of approximately 85% to $95 million and EBITDA of $6 million to $8 million.
Thermals should contribute approximately $20 million in revenue at consistent margins and finally, Kodiak, which is a staffing company that was acquired to augment labor resources is not expected to materially contribute to revenue or EBIT on a standalone basis.
Because of the amortization expense related to intangibles and other acquisition costs. These acquisitions are not expected to contribute to EPS in 2022.
After incurring approximately $130 million to fund these acquisitions our debt at the end of the year was $388 million.
We are continuing to opportunistically repurchase our shares in 2021, we purchased 360.
363000 shares at an average price of $74 57.
And we have been active in share repurchases over the last few weeks.
Since we began our repurchase program in 2007, we have bought back nine 7 million shares at an average price of $21 69.
Before I pass the time back to Brian I wanted to describe the tax events that he alluded to that were mentioned in the press release.
In January 2022.
We received approval from the IRS for our previously filed refund claims for the 2016 2017 and 2018 years.
The refunds were primarily due to claiming the credit for increasing research activities that we referred to as the R&D tax credit.
As a result, we expect that the first quarter of 2022 will have an incremental benefit of approximately $30 million in after tax net income or approximately <unk> 80 per diluted share.
We expect to receive approximately $30 million of operating cash during the first quarter of 2022.
In addition to the immediate gains from these IRS approvals, we will be reassessing. The judgment that we have made regarding our taxes for the intervening years of 2019 2020, and the recently concluded 2021.
Since we expect to assert the credit for those years as well we are assessing the amount and likelihood of benefit that will result from those credits and will also include that benefit when we report our first quarter.
These changes and assessment are ongoing but we expect that we will reduce our provision for income taxes with respect to these years and we estimate that we will record additional first quarter income that we currently approximate at $22 million or 66 per diluted share.
Finally.
Our successful assertion of the R&D tax credit.
We will be likely to reduce our effective tax rate in future years, beginning immediately in 2022.
The tax benefit will vary based on our qualifying expenses each year, but should lower our tax rate by approximately 4% to five percentage points in 2022 and in future years.
Until and unless the landscape for these credits which have been made permanent by the Congress change.
I'm very appreciative of the hard work done by our tax department of by numerous of our subsidiaries and seeking to documenting these credits.
That's all I have on financials, Brian Okay. Thank you Bill.
I am going to spend a few minutes discussing our backlog in markets.
I will also comment on our outlook for 2022 and on inflation and supply chain considerations.
Our backlog at the end of 2021 was $2.31 billion and this is the first time that our backlog has exceeded $2 billion.
Sequentially, our same store backlog increased $224 million.
With strength.
Modular work and our electrical operations in Texas.
Year over year same store backlog is up by over $578 million or.
38%.
A broadly based increase.
Industrial customers were 44% of our total revenue in 2021.
We think this sector, which includes technology life Sciences and food processing.
Will remain strong for us.
Is industrial is heavily represented in new backlog as well as in our recent larger acquisitions.
Institutional markets, which include education health care and government are also strong and represented 32% of our revenue.
The commercial sector is also doing well.
But without changing mix. It is now a smaller part of our business at about 24% of revenue.
Year to date construction was 78% of our revenue with.
With 46% from construction projects for new buildings and 32%.
Structuring projects in existing buildings.
Service was strong this year and are increasing service revenue was 22% of year to date revenue.
With service projects, providing 9% of revenue and pure service, including hourly work, providing 13% of revenue.
2021 service revenue is up by 12%.
And with our continuing strong margins.
Service earnings were up by a similar amount.
Overall service continues to be a great source of profit for us.
As 2022 begins we believe that we are returning to good ongoing market conditions.
And that we have largely recovered from negative impacts to our business due to business disrupt disruption caused by COVID-19.
At the same time, we are experiencing inflation and some delays in materials and equipment.
As we mentioned supply chain inflation with factors in 2021, especially in the fourth quarter.
And we currently expect that those effects will continue through at least the first half of 2022.
We are recognizing these challenges and our job planning and pricing and we are working with our customers to share the risk and mitigate the effects of these challenges.
In addition, during the first six weeks of 2022, we experienced temporary reductions in available labor.
<unk> peaked.
And that will also add some headwind to what we nevertheless, we nevertheless expect will be a solid and profitable first quarter of 2022.
We believe the good trends outweigh the challenges.
And we remain optimistic about our prospects for 2022.
The headwinds described above will likely be pronounced during the first half of 2022. However, our current belief and expectation is that in 2022, our full year earnings and margins.
Likely to be comparable to 2021.
With an opportunity for improvement as we get farther into our backlog as the year progresses.
As we continued to emerge from the various effects of the pandemic, we believe that future demand in our key markets is strong.
And we continue to invest in our workforce technology execution capabilities.
And in our service businesses.
Underlying demand for our capabilities, especially in.
In our key segments, including industrial and institutional buildings continues to be very robust.
Our fundamental outlook for the next several quarters is very positive.
Especially with a strong backlog and pipeline.
We are happy with our investments to date and we are keen to continue to invest grow and improve in our essential industry.
Our skilled workforce is the heart and soul of comfort systems USA.
And we will continue to develop and reward our unmatched team members.
As they strive each day to work safely.
Improve our communities and provide the built infrastructure to serve our many markets.
I'll now turn it back to Carlin for questions. Thank you.
Yeah.
To ask a question simply press star one on your telephone to withdraw your question press the pound or hash key.
Your first question is from Sean Eastman with Keybanc capital markets. Your question. Please.
Yes.
Hi, gentlemen, thanks for taking my questions.
Good morning, Sean.
Good morning, good morning.
I wanted to start on the margins I think you said at the end, Brian that margins are going to be comparable to 2021.
Look a little soft in the fourth quarter I think theres some mix elements going on your you mentioned COVID-19 and supply chain. So maybe just some color on what's happening under the Hood, how margins should progress over the next 12 months.
The moving pieces in there would be great, yes, I'll start and see if bill wants to follow up but what gives us.
Optimism is that.
The work and your opportunities are good the margins are good and the work that we're winning.
We're still executing.
In January and as the year goes on.
So I think we'll hit our average and margins will reflect 2022.
I think we're managing as best we can the supply chain and inflation with our customers.
Doing everything to satisfy them and be successful.
I mean, so if you if you compare our margins for 2021 with our peak years, especially the really high margins that we had during COVID-19 .
It's not a good comparison, because our mix was so much different we were doing far less new construction, which has a lot more material pass through we had not bought a bunch of electrical companies, which even though their revenue their margins are up they do average lower margins.
And lower SG&A than mechanical companies and were.
For the next several months, we're going to be towards the beginning of a lot of jobs that were just not going to be pulling a bunch of prop it out until we see how much it rains until we see how other people on the job do it until we see startup some systems and put liquid and some pipes and so I think that what we're trying to say is we liked our margins last year.
We could have executed a few places, especially where COVID-19 affected us.
But we think what you saw last year is what youll see through the beginning of this year as we get deeper into these jobs, there's certainly an opportunity to do better.
But we're not popping back up to the 2021 range, we just have a different mix right now.
Okay. That's helpful and I think you also said at the end Brian that earnings will be comparable to last year I just wanted to clarify that particularly considering we've got.
High single digit topline outlook and these big tax benefits coming early in the year.
Yes, so there is.
The range of earnings.
Is what we made last year or more.
One of the things that we experienced last year with people overreacting to like the supply chain. Some of these issues and getting very pessimistic for what we were just really trying to say is look we're going to make a lot of money again, we're going to flow a lot of cash again, we certainly hope to have improvement this year over last year, but we do have early in the year, we do have a law.
Little bit of revenue headwind, we had omicron create absenteeism in January we do have we said we thought our revenue was affected 2% to 4% in the fourth quarter. We will continue to have you know chiller show up a little later than we expected and things like that.
Less buyout in our jobs right pretty hard right now to call and ask a supplier for a discount you actually are just falling and begging them to make sure you get your stuff. So you know.
That's why we that's why we are predicting what we're predicting.
Okay got it and just sneaking one more in.
Just on the tax benefit stuff so.
What what what is the sort of the tax.
What how is the tax provision going to look in the first quarter and then you know as we advance through the rest of the year you know, what's what's the normal tax rate now and for how many years into the future do you expect to have this four to five point reduction in the tax rate.
You can hold off for a minute Brian is getting out a slide rule.
I'll, let bill add to it.
John So essentially we've been saying, we're at 25% to 27% tax rate now we're going to be four 5% below that and that's cushioning that right because we're not making the.
Assumption that we'll do as well in the ongoing textures as we were able to do for those five consecutive years.
We just settled up but whatever else is true after five years now of getting this benefit.
Frankly, we have to bake in that benefit as we look at our tax rates for the next several years and we think it's going to lower our tax rate four 5%.
And so few higher future cash flow.
<unk>.
There are some changes.
Okay got it alright, I'll turn it over there. Thanks, so much alright take care Sean.
Your next question comes from Brent Thielman with D. A.
David Your line is open.
Hey, Thank you.
Hey, Brian or Bill there are a few particularly large projects in the backlog right now.
It kind of hit certain thresholds for.
For margins to move a lot higher or is this kind of more of a broader statement across the business in terms of new construction work you've taken on yeah.
It's a combination of both we do have some larger projects that were very optimistic about but it's also broad based in terms of the ranges of the size as it is typical mix.
Brent as we go through.
Smaller work mid level work and a few larger projects and the larger projects are with companies that we know they can handle the larger projects. So I think the mix is pretty typical of what we usually have.
Okay and then.
Service service growth has been a great story here, maybe you just talk about some of the initiatives you're undertaking to continue to grow that business in 2022 can we go and.
See another year of double digit growth, how do you think about that.
Yes.
Still very optimistic about service, we continue to make.
You know the investments we've made over the last 10 years.
Our goal is to achieve <unk>.
<unk> digit growth as we go along so far we've done it.
We will continue to invest in training.
Improving our sales process and we're executing really well in service, particularly on the small project front.
So I expect.
That trend to continue Brent there is nothing that tells me it will be different.
Yeah.
Okay, and then just that the uptick again in backlog, particularly same store backlog is great story, there how much of that.
Do you do you attribute to sort of this industrial vertical versus.
I guess more traditional non resi markets education office retail smaller pieces of the pie or are those markets starting to become more impactful to the growth in bookings you've seen.
Yeah really both on an acquired basis and on a same store basis. If you look at the biggest.
City areas, we mentioned I think in the script that we had big increases in modular and then electrical both of those the new projects that were booked.
Are disproportionately industrial complex.
Jack.
Pharma some battery for sure is waking up.
We've only booked a little bit of battery, but there's a ton of battery and the pipeline for electric cars. So yeah, 100%.
A trend yes, so Brent if you look at the mix and you know about over 40% of its industrial.
But it's a capability we have is sort of not a new a new capability that we're starting it's the companies that we brought in here that already had a long history of doing it so.
We're very comfortable with the resources, we have to address that market.
Okay. Thanks for taking my questions best of luck.
Alright. Thanks.
Your next question comes from Julio Romero with Sidoti and company. Your line is helping.
Hey, good afternoon, thanks for taking the question.
Hey, how are you.
I'm good thanks, so to your point earlier the.
The electrical segment margins are inherently lower than mechanical and it's going to pull down the consolidated margin, but if I look at the last few quarters I think you are.
Our electrical gross margins are trending upward.
I want to say when you look at the increments.
Incrementals on the electrical segment seem to be trending nicely. So can you maybe speak to what's going right in electrical.
And what Youre doing there to improve the margins.
So electrical and thank you for noticing has improved I think we you know the companies have worked really hard we've got back to some of the basics I think they've benefited some of the training.
<unk> provides it on new acquisitions.
We went back to focusing on the work that we're that we're really good at data centers for example, food processing.
And I think you know.
One thing about the margins might be a little lower but their overheads lower so if you look at the operating level are about the same but I just think it's just improvement on the fundamentals that these companies have done they are doing a great job a great job as you can tell from the results.
Okay, that's helpful and.
Can you speak to what.
<unk>.
Equipment, you're seeing delays on I think you mentioned chillers earlier, and and do you think it's fair to assume that the go forward impact of those delays to be in the same range you saw in the fourth quarter.
So.
So the things that switch gear and generators can be have really long lead times chillers have long lead times some of the commodity stuff has gotten better lately. It's like some stuff is getting better well other stuff gets a little worse.
It's very.
Essentially you were having to order much earlier like in our bids we're telling people you have to let US buy this stuff now and you have to pay us to store it or we can't commit to your schedule.
<unk>.
But so far you know generally speaking we get this stuff.
So it's really hard to predict anybody who tells you. They know how this is going to enroll over the next year is fooling themselves.
But we think we're really good at managing it and we think that we do.
On any given construction job frequently.
Not everything is on the critical path. There's always work you can generally speaking there's work you can keep doing.
So I think we just think our guys are really great at managing it but it's definitely a factor Brian Yeah, and if you look at.
We have good partners and we try to be a good partner with that's really paying off.
So I think the advantage of our size versus maybe more of a mom and pop type contract that we can buy this equipment.
Earlier and put the orders in I think Susan advantage, because we at the end of the day do not want to disappoint our customers.
So we're doing everything we can make sure we get the equipment equipment did to install.
Yeah.
Got it and then just last one for me would be can you maybe speak to the Ivy acquisition and the rationale there and.
How it complements your existing portfolio and maybe touch on the market sector breakout you know, whether it's weighted to industrial institutional et cetera.
I'll start.
<unk> is a fantastic company. We you may have noticed in the press release, we said we've talked to them for 25 years.
The Senate as I put in that press release was taken from a letter that there the guy who runs it wrote to his employees when we bought it as a company we've known for a long time, they have really good standing workforces in some very attractive markets like Nashville in Kentucky, and North Carolina and of course, Memphis That'd be Atlanta. They also have a.
Group of workers that travel and has been very expert for many many years at health care in particular hospitals.
Hospital jobs have gotten bigger and bigger and I think.
After this long period of knowing each other I think we and I looked at each other and realize just how much benefit it could be to get together because they're traveling guys can augment us as we need the new jobs that are bigger than what they used to travel to do they can split with our guy with you know with our existing companies. We think it is just a wonderful fit right.
They think of the market as I, just said and then think of where our comfort is and where we make lots of money and they're really good there are really good fit from the point of view of our.
Of our culture right. They just fit in with our people everybody who is interacting with them. So far has just been very very happy as a company I'll set up and the second is a company that's shown discipline.
Over many many years at time, it's shown discipline, we should have shown so we just we just think it's a really good fit in a really good opportunity to make each other better and they really have some fun Julio what's really interesting they've only been here two months and we're already working on some joint projects with them. So this just started off really well.
Great sounds exciting thanks, very much and best of luck in 'twenty two alright. Thank you.
Our next question is.
Adam Thalheimer with comes from Davis Your line is open.
Hey, good morning, guys so anything.
Adam.
Can we start just on some of the.
Income statement items.
Obviously, maybe for bill.
Just thoughts on SG&A DNA and interest expense cause I'm, just I'm still trying to square that comparable EPS comments. So maybe the secret is somewhere around those lines.
The secret is we don't know what's going to happen next year.
But I think I think you'll see interest expense tick up some it will pick up some because our debt is a little higher it will pick up a little more probably because as we we were paying one 3% on our.
On our borrowing that's going to be some at least tens of basis points higher. It already has started that SG&A you know if revenue picks up we'll get SG&A leverage so that kind of cuts in the direction of what youre pushing toward.
Yes, we will get very good absorption what was the other line you brought you mentioned DNA and it's probably the toughest wanted to know with the acquisitions.
Well.
Although in the 10-K, you can go right back to the footnote in there at the table and it'll tell you exactly what the amortization is going to be every quarter that will be.
Our amortization would have been a source of lift for us. This year, when we did a whole bunch of acquisitions late in the year.
They're not the amortization up but we haven't what is a very very close estimate of that in our footnotes.
To hide a lot of that income so what youre going to see is very good incremental.
Increases to EBITDA.
That's good.
<unk> filter down to EPS as quickly as it should I should also say.
Everything we've set up till now about earnings being.
Sort of similar with upside later in the year kind of an update and stuff.
It reflects the uncertainty it has baked into it the uncertainty that we're talking about because of the supply chain and other issues. It also does not count the change in tax rates.
The rules are very clear with this tax stuff that if you get an approval you can't go back and push it into the prior year. So when we report the first quarter like when I said, we will be looking at are intervening years, and we expect $22 million of income.
I'll be doing a lot more work between now and when we report our first quarter that number should be at least that big if not bigger by then we'll be able to start baking into that forward stuff.
The new lower tax rates. So so there is some things that it's really important that people understand.
That takes care of it yeah and then.
Brian can you take us a little bit.
The country and what Youre seeing in the in the bidding environment.
Yes.
But we will do so in general Adam the bidding is very good.
In all parts of the country.
In the northeast.
Still very strong if you take a look at Syracuse, New York were probably full up this year.
For next year, a lot of plumbing doing a lot of.
No apartment buildings and in health care, if you come down south as where you're seeing a lot of manufacturing and industrial.
Prospects were really strong in the southeast thanks.
So the companies that build is brought in.
So I'm seeing a lot of medical work.
Data Center work.
I'm really enthused and upbeat southeast down to Texas, Texas is very strong for us.
Texas is doing very well Dallas Houston has now picked up.
Pretty considerably in the last six months.
Boston is.
Extremely busy and San Antonio City, that's growing considerably has a lot of data set of work going on.
So we're very optimistic about what's going on in Texas.
West is.
It's probably but we see a mixed bag for us Denver Phoenix is good.
We're a little bit smaller out there, but in general the bidding opportunities are strong if you look at when we look up the.
The larger jobs.
I'm, probably looking at more than I've looked at it in a long time, so we're pretty optimistic across the board.
I mean, if you look at where things are and you say Gee what would be happening if we didn't have.
Things like the supply chain and the inflation.
Inflation is pretty stout.
You know is the fact that we can have this much confidence in our go forward with all of the uncertainty, which we are really our baking and suggest that a little bit of good news would go a long way.
We're really pleased with the workforce, even with the absenteeism due to do the illness that would keep it on schedule. So the folks out there doing the work of doing a yeoman's effort to keep our customers happy.
Do you see them as Covid now I mean, he said he said it impacted you in January .
Yeah, it's come down, but it's coming down fast I mean, I don't know of anybody saying that if you. If you talk to our company President mid February .
That was all.
A lot of people were talking about it mid and late January and virtually it's really quite a dump it disappeared I mean disappeared street strong, but it's really the same.
I hope it does yes.
Okay. Thanks, guys good color alright, thanks, Adam.
Thank you.
Last question is from Sean Eastman from Keybanc capital markets. Please go ahead.
Hey, guys.
Hi, My clarification question got answered, but I'm, just going to hit you with one anyway.
How should we think about sort of the capacity of the business. You know we have a strong high single digit organic growth outlook in place for 2022 could you feasibly flex to a number.
Higher than that.
And how would you characterize the labor situation I guess the army chron.
Variant kind of muddies that up but but just underneath that is it loosening up is it getting worse, how would you characterize that.
You look at the Labor I think it's the same.
<unk> tight I mean, everything we have going for us is that were really good employer.
If you have the infrastructure, we have people or all of the local market and all those markets really well.
Whether or not we're hitting the military community colleges folks in high school.
Opportunities, maybe some lower income neighborhoods is that helping with some training and getting those folks involved in the business. So latest tight kodiak is going to help us.
Some of the traveling folks they've got a lot of good tradespeople. So we can we can flex it up but you gotta manager labor everyday.
And at the end of the day you have to be a good place to work training. Your people you know.
Net of all of the things that we are.
Proud of what we do so.
I can see that continuing on Sean So we'll just keep at it.
Got it alright, well, let you guys get back to business. Thanks for the time, Alright take care take care.
Alright, ladies and gentlemen, this concludes our Q&A session I would like to turn the call back.
To Brian for his final remarks.
Alright.
Closing I want to again, thank our hard working employees.
We are glad we will be seeing many of you on the road again hopefully.
But in the Meanwhile, thanks for your interest in the company, we really do appreciate it today, please be safe and healthy and we'll see you soon thank you.
Thank you ladies and gentlemen.
Today's conference you May now disconnect have a wonderful day.
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