Q1 2024 Comfort Systems USA Inc Earnings Call

Okay.

Good day, and thank you for standing by.

Operator: Good day, and thank you for standing by. And welcome to the Q1 2024 Comfort Systems USA earnings conference call. At this time, all participants are in a listen-only mode.

Speaker Change: And welcome to the Q1 2024 comfort systems USA earnings Conference call. At this time, all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Julie Shaeff, Chief Accounting Officer. Please go ahead.

Speaker Change: After the Speakers' presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone.

Speaker Change: You didn't hear in the automated message of buys in your hand is raised to withdraw. Your question. Please press star. One again, please be advised that today's conference is being recorded would not like to hand, the conference over to your speaker today, Julie <unk> Chief Accounting Officer. Please go ahead.

Julie S. Shaeff: Thanks, Justin. Good morning. Welcome to Comfort Systems USA's first quarter 2024 earnings call. Our comments today, as well as our press releases, contain forward-looking statements within the meaning of the applicable securities laws and regulations. What we will say today is based on the 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 our operations to be materially different from those set forth in our comments. You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K and Form 10-Q, as well as in our press release covering these earnings.

Julie: Thanks, Justin Good morning, welcome to comfort systems, Usa's first quarter 2024 earnings call our comments today as well as our press releases contain forward looking statements within the meaning of the applicable securities laws and regulation, what we will say today is based on our current plans and expectations of comfort systems USA.

Julie: Those plans and expectations include risks and uncertainties that might cause actual future activities and results of our operations to be materially different from those set forth in our comments.

Julie: You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K and Form 10-Q as well as in our press release covering these earnings.

Julie S. Shaeff: A slide presentation has been provided as a companion to our remarks. This presentation is posted on the Investor Relations section of the company's website, found at ComfortSystemsUSA.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. Thanks, Julie.

Julie: Slide presentation has been provided as a companion to our remark.

Julie: This presentation is posted on the Investor Relations section of the company's website found at comfort systems USA Dot com.

Julie: Joining me on the call today are Brian Lane, President and Chief Executive Officer Trenton Mckenna.

Brian E. Lane: Operating officer, and Bill George Chief Financial Officer, Brian will open our remarks.

Brian E. Lane: Thanks Julie.

Brian E. Lane: Good morning, everyone, and thank you for joining us on the call today. 2024 is off to an outstanding start, with strong revenue, fantastic margins, and continuing strong cash flow. Our dedicated teams across the country achieved superb execution, and I am deeply grateful for their hard work and commitment. We earned $2.69 per share this quarter compared to $1.59 a year ago.

Brian E. Lane: Good morning, everyone and thank you for joining us on the call today.

Brian E. Lane: 2024 is off to an outstanding start.

Brian E. Lane: With strong revenue fantastic margins and continuing strong cash flows.

Brian E. Lane: Our dedicated teams across the country achieved superb execution.

Brian E. Lane: I am deeply grateful for their hard work and commitment.

Brian E. Lane: We earned $2 69 per share this quarter.

Brian E. Lane: <unk> to $1 59, a year ago.

Brian E. Lane: Our revenue was $1.5 billion, with same store growth of 23%. Our mechanical business exceeded last year, while our electrical segment achieved unprecedented marks. Backlog is $5.9 billion, up both year over year and sequentially on the same store basis. Instruction continues to thrive amid strong ongoing demand, and service is performing at a high level. In February, we closed two substantial acquisitions, Summit Industrial and J&F Mechanical, and they, too, are off to a great start. Both of these companies are included in our mechanical segment. We have also increased our dividend by 20%, adding $0.05 to reach $0.30 per share.

Brian E. Lane: Our revenue was $1 $5 billion.

Brian E. Lane: With same store growth of 23%.

Brian E. Lane: Our mechanical business exceeded last year.

Brian E. Lane: Our electrical segment achieved unprecedented market.

Brian E. Lane: Backlog is $5 $9 billion.

Brian E. Lane: Both year over year and sequentially on a same store basis.

Brian E. Lane: Construction continues to thrive amid strong ongoing demand and service is performing at high levels.

Brian E. Lane: In February we closed two substantial acquisitions.

Brian E. Lane: Industrial and Jane is mechanical.

Brian E. Lane: And they too are off to a great start.

Brian E. Lane: Both of these companies are included mechanical segments.

Brian E. Lane: We also increased our dividend by 20%, adding five to reach 30 per share.

Brian E. Lane: This increase reflects our continuing strong cash flow and our commitment to reward our shareholders. 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?

Brian E. Lane: This increase reflects our COO.

Brian E. Lane: Continuing strong cash flow.

Brian E. Lane: And to reward our shareholders.

Brian E. Lane: I will discuss our business and outlook a few minutes, but first I will turn this call over to Bill to review our financial performance built thanks, Brian.

William George: Thanks, Brian. You know, I can't help but also express my gratitude to the people who are working every day to create these amazing results. So, as Brian noted, revenue for the first quarter of 2024 was $1.5 billion, and that is an increase of $362 million, or 31% compared to last year. Same store revenue increased by 23%, or $266 million, with the remaining $96 million increase resulting from acquisition.

William George: I can't help but also express my gratitude to the.

The people who are working everyday to create these amazing results.

William George: So as Brian noted.

William George: Revenue for the first quarter of 2024 was one 5 billion and that is an increase of 362 million or 31% compared to last year.

William George: Same store revenue increased by 23% or $266 million with the remaining $96 million increase resulting from acquisitions.

William George: Our mechanical segment revenue increased by 29%, and our electrical segment revenue increased by 37%. We did not experience as much seasonality this quarter as we have in the past, as an increasing proportion of our work is being performed in warmer climates. Additionally, weather in our colder climates was favorable for construction this quarter, and with the strong growth in modular, more of our work is being performed under the roof inside our modular plant.

William George: Our mechanical segment revenue increased by 29% and our electrical segment revenue increased by 37%.

William George: We did not experience as much seasonality this fourth quarter as we have in the past as an increasing proportion of our work is being performed and warmer climates.

Additionally, weather in our colder climates was favorable for construction this quarter.

William George: And with the strong growth in modular more of our work is being performed under roof inside our modular plan.

William George: We are also face a tougher prior year comparable results for the remainder of this year. However, our best estimate is that we will achieve same store percentage revenue increases and at least the mid teens and more likely in the high teens.

William George: We are also facing tougher prior-year comparable results for the remainder of this year. However, our best estimate is that we will achieve same-store percentage revenue increases in at least the mid-teens and, more likely, in the high-teens, for the whole year. Gross profit was $297 million for the first quarter of 2024, a $92 million improvement compared to a year ago. Our gross profit percentage improved to 19.3% this quarter, compared to 17.5% for the first quarter of 2023.

William George: For the full year.

William George: Gross profit was $297 million for the first quarter of 2024.

William George: $92 million improvement compared to a year ago.

William George: Our gross profit percentage improved to 19, 3% this quarter compared to 17, 5% for the first quarter of 2023.

William George: The quarterly gross profit percentage in our electrical segment improved to 22.6% this year, as compared to 16.1% last year. Margins in our mechanical segment also increased in the quarter to 18.4% as compared to 17.9% in the first quarter of 2023. Our mechanical segment includes our modular business, which operates at lower margins than our remaining segments.

William George: The quarterly gross profit percentage in our electrical segment improved to 22, 6% this year as compared to 16, 1% last year.

William George: Margins in our mechanical segment also increased in the quarter to 18, 4% as compared to 17, 9% in the first quarter of 2023.

William George: Our mechanical segment includes our modular business, which operates at lower margins in our remaining businesses.

William George: EBITDA improved markedly to $170 million this quarter from an already strong 90 million in the first quarter of 2023.

William George: EBITDA improved markedly to $170 million this quarter from an already strong $90 million in the first quarter of 2023. Same story, but increased by over 70%. Although the first quarter benefited from the favorable factors I mentioned earlier, and our underlying trends are strong, we expect that for 2024, EBITDA margins will continue to trend in the strong ranges that we have achieved over the last several quarters, and we are optimistic that full-year EBITDA margins in 2024 will match or exceed our high 2023 results.

William George: Same store EBIT increased by over 70%.

Although the first quarter benefited from the favorable factors I mentioned earlier, our underlying trend our underlying trends are strong we.

William George: We expect that for 2024 EBITDA margins will continue to trend in the strong ranges that we have achieved over the last several quarters and we are optimistic that full year EBITDA margins in 2024 will match or exceed our high 2023 results.

William George: Gross margins should also remain strong, but gross margin percentage may be more variable in 2024 in light of the effect of amortization and certain purchase related adjustments.

William George: SG&A expense for the quarter was $163 million or 10, 6% of revenue compared to $135 million or 11, 5% of revenue in the first quarter of 2023.

William George: Gross margins should also remain strong, but gross margin percentage may be more variable in 2024 in light of the effect of amortization and certain purchase-related adjustments. SG&A expense for the quarter was $163 million, or 10.6% of revenue, compared to $135 million, or 11.5% of revenue, in the first quarter of 2023.

William George: On a same store basis, SG&A spend was $19 million higher due to ongoing investments to support our higher activity level.

William George: Our operating income increased by 91% from last year.

William George: From $71 million in the first quarter of 2023.

William George: $135 million for the first quarter of 2024.

William George: With improved gross profit margins and favorable SG&A leverage our operating income percentage increased to eight 8% this quarter from 6.0% in the prior year.

William George: On a same-store basis, SG&A spins with $19 million higher due to ongoing investments to support our higher activity level. Our operating income increased by 91% from last year, from $71 million in the first quarter of 2023 to $135 million for the first quarter of 2024. With improved gross profit margins and favorable FG&A leverage, our operating income percentage increased to 8.8% this quarter from 6.0% in the prior year. However, changes in the fair value of our earn-out obligations this quarter reduced our income by $12 million.

William George: Changes in the fair value of our earn out obligations this quarter reduced our income by $12 million.

William George: And that was caused by the variability noted earlier and it was triggered by strong early performance at our recent acquisitions.

William George: We always have purchase related adjustments in the periods. Following an acquisition. However, they will likely be much larger over the next several quarters because of the size of the <unk> acquisition and the significant contingent consideration opportunities that were included in those transactions.

William George: Our first quarter tax rate was 21, 7%. We currently estimate that the full year 2024 tax rate will likely be in the 21% to 22% range.

William George: After considering all these factors net income for the first quarter of 2024 was $96 million or $2 69 per share.

William George: And that was caused by the variability noted earlier, and it was triggered by strong early performance at our recent acquisition. We always have purchase-related adjustments in the periods following an acquisition. However, they will likely be much larger over the next several quarters because of the size of the Summit and JNS acquisitions and the significant contingent consideration opportunities that were included in those transactions. Our first quarter tax rate was 21.7%. We currently estimate that the full-year 2024 tax rate will likely be in the 21 to 22% range.

This compares to net income for the first quarter of 2023 of $57 million or $1 59 per share.

William George: Free cash flow for the first quarter of 2024 was $123 million.

William George: We continue to benefit from advanced payments for work that we will find a complete in upcoming quarters and operating cash flow continues to exceed our earnings by about $300 million.

William George: On a trailing 12 month basis.

William George: Over the coming quarters, we expect that eventually pre bookings and equipment advances will normalize creating some cash flow headwind in the meantime. These collections have allowed us to invest in growth and fund acquisitions from current cash flows while lowering interest cost.

William George: Our total debt as of March 31, 2024 was $90 million with no funded debt from our banks and that was despite large cash payments for the summit and <unk> acquisitions in February.

William George: After considering all these factors, net income for the first quarter of 2024 was $96 million, or $2.69 per share. This compares to net income for the first quarter of 2023 of $57 million, or $1.59 per share; free cash flow for the first quarter of 2024 was $123 million. We continue to benefit from advance payments for work that we will fund and complete in upcoming quarters, and Operating Cash Flow continues to exceed our earnings by about $300 million on a trailing 12-month basis.

As Brian noted, we also increased our dividend.

William George: Before I close out what I've mentioned, one additional item, which is not directly relevant to our financial results, but I wanted to flag for awareness.

William George: Last night, Texas jury returned a jury verdict against one of our subsidiaries relating to our 2019 safety and to do.

William George: The jury verdict was over $70 million.

William George: It pencils out to about $48 million per hour.

William George: Assuming this jury's verdict has entered by the judge we will pursue a number of strong appeal.

William George: Even if the appeals are unsuccessful. This is not expected to have an impact on us financially.

William George: Over the coming quarters, we expect that eventually pre-booking and equipment advances will normalize, creating some cash flow difficulties. In the meantime, these collections have allowed us to invest in growth and fund acquisitions from current cash flows while lowering interest costs. Our total debt as of March 31, 2024, was $90 million, with no funded debt from our banks, and that was despite large cash payments for the Summit and JNS acquisitions in February.

William George: That's all I have Brian Alright.

Brian E. Lane: Alright, Thanks Bill.

Speaker Change: I am going to discuss our business and outlook.

Speaker Change: Our backlog at the end of the first quarter was a record $5 9 billion.

Brian E. Lane: Since last year, our backlog has increased by $1 5 billion.

Brian E. Lane: 33%.

Speaker Change: And about half of that increase was same store growth and the other half.

Speaker Change: New backlog from companies we acquired.

Speaker Change: Our sequential backlog increased by $754 million.

With $612 million related to acquisitions.

Speaker Change: Our same store sequential backlog increased by $142 million and pipelines remained strong.

Speaker Change: Our revenue mix continues to trend towards data centers chip.

William George: As Brian noted, we also increased our, Before I close, I want to mention one additional item, which is not directly relevant to our financial results but that I wanted to flag for awareness. Last night, a Texas jury returned a jury verdict against one of our subsidiaries relating to a 2019 safety. The jury verdict was over $7 million. That pencils out to about $48 million for us. Assuming this jury's verdict is entered by the judge, we will pursue a number of strong appeals. Even if the appeals are unsuccessful, this event is not expected to have an impact on us.

Speaker Change: Chip fabrication battery plants life science and food.

Speaker Change: Industrial customers accounted for 60% of total revenue in the first quarter.

Speaker Change: And there.

Speaker Change: Major drivers of pipeline and backlog.

Speaker Change: Technology, which is included in industrial was 30% of our revenue is.

Speaker Change: A substantial increase with 19% in the prior year.

Speaker Change: Institutional markets.

Speaker Change: Which include education healthcare and government are also strong and represent 23% of our revenue.

Speaker Change: The commercial sector remains reasonably active in the regions that we serve.

But it is not part a smaller part of our business at about 17% of revenue.

Brian E. Lane: That's all I have, Brian. All right. Thanks, Bill. I am going to discuss our business outlook. Our backlog at the end of the first quarter was a record $5.9 billion. Since last year, our backlog has increased by 1.5 billion, or 33%. And about half of that increase was same store growth, and the other half was new backlog from companies we acquired. Our sequential backlog increased by $754 million, of which 612 men were related to acquisitions.

Speaker Change: The majority of our service revenue is for commercial customers.

Speaker Change: So the share of our overall construction revenue from commercial.

Speaker Change: Has become relatively small.

Speaker Change: Construction grew quickly and drove great results.

Speaker Change: For us this quarter.

Speaker Change: Overall construction accounted for 84% of our revenue with projects for new buildings, representing 59%.

Speaker Change: An existing building construction, 25%.

Speaker Change: We include modular and new building construction and.

Speaker Change: And module this quarter with 16% of our revenue.

Brian E. Lane: Our same store, sequential backlog increased by $142 million, and pipelines remain strong. Our revenue mix continues to trend toward data center, chip fabrication, battery plants, life science, and food. Industrial customers accounted for 60% of total revenue in the first quarter, and they are major drivers of pipeline and backlog. Technology, which is included in industrial, was 30% of our revenue, a substantial increase from 19% the prior year. Institutional markets, which include education, healthcare, and government, are also strong and represent 23% of our revenue.

Speaker Change: Service revenue increased this quarter, but because of the growth in construction.

Speaker Change: Even with our service revenue increase service fell to 16% of total revenue.

Speaker Change: Service, which remains seasonal continues to be a great source of profit and cash flow for us.

Speaker Change: Comfort systems USA is thriving.

Speaker Change: Team members across the country.

Speaker Change: Delivering exceptional results.

Speaker Change: Thanks to their excellence.

Speaker Change: And in light of the strong ongoing demand.

Speaker Change: Our optimistic that we will continue to achieve strong results in 2024.

Speaker Change: Safety <unk>.

Speaker Change: Execution and innovation remain at the forefront of our operations.

Speaker Change: We believe that our commitment to our employees.

Speaker Change: To building legacy is the foundation of our success.

Brian E. Lane: The commercial sector remains reasonably active in the regions that we serve, but it is now a smaller part of our business at about 17% of revenue. The majority of our service revenue is for commercial companies. So the share of our overall construction revenue from commercial has become relatively small. However, construction grew quickly and drove great results for us this quarter. Overall, construction accounted for 84% of our revenue, with projects for new buildings representing 59% and existing building construction, 25%.

Speaker Change: Our number one priority is to preserve and grow the best workforce in our industry.

Speaker Change: And so as always I want to I want to thank I want to close by thanking our over 16500 employees for their hard work and dedication.

Speaker Change: I will now turn it back over to Justin for questions. Thank you.

Justin: And thank you.

Justin: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Justin: And one moment for our first question.

Justin: And our first question comes from Alex Dwyer from Keybanc capital markets. Your line is now open.

Brian E. Lane: We include modular in new building construction, and modular this quarter with 16% of our revenue. The service revenue increased this quarter, but because of the growth in construction, Even with a service revenue increase, service fell to 16% of total revenue. Our service, which remains seasonal, continues to be a great source of profit and cash flow for us. Comfort Systems USA is thriving, and our team members across the country are delivering exceptional results. Thanks to the Rechelins.

Alexander David Dwyer: Hi team congrats on a strong start to the year.

Alexander David Dwyer: Alex Thank you.

Alexander David Dwyer: Yep.

Alexander David Dwyer: So the EBITDA margin was very strong this quarter and the guide for this year continues to call for similar to last year.

Alexander David Dwyer: Can you just talk about the potential for margin expansion over the rest of the year is it just that the comps get tougher in the back half or is there something in the recent performance.

Alexander David Dwyer: Isn't sustainable as we progress through this year.

Brian E. Lane: In light of the strong ongoing demand, we are optimistic that we will continue to achieve strong results in 2024. Safety, execution, and innovation remain at the forefront of our operations. We believe that our commitment to our employees and to building legacies is the foundation of our success. Our number one priority is to preserve and grow the best workforce in our industry. And so, as always, I want to close by thanking our over 16,500 employees for their hard work and dedication. I will now turn it back over to Justin for questions.

Brad: This is Brad.

Brad: I'll go first and then bill can follow up I mean, we're really pleased with the margins that we have right now.

Brad: If you are in that gross margin, 18% to 20% range.

Brad: You are executing at a high level of over 19% for the quarter.

William George: So I think we're going to continue to be in that range throughout the year. We will have broad based excellent performance across all operating companies. So might have a little fluctuation up and down as we go but in general.

William George: Performance has been excellent.

William George: As we noted in our in the opening comments, we're definitely anticipating expecting alright.

William George: Alright.

William George: Margins for the full year to stay out there.

William George: Last year and the recent amazing results, we have and we're optimistic we can do a little better I will say as you pointed out.

Operator: Thank you. And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

William George: Later this year, we hit some very tough comparables right, we had extraordinary.

William George: Growth in increases really progressively throughout the year and especially in the second half of the year last year. So one of the things Youre, saying is even though last year. The first quarter seemed like an extraordinary quarter and it was at.

Operator: Please stand by while we compile the Q&A roster and one moment for our first question. And our first question comes from Alex Dwyer from KeyBank Capital Markets. Your line is now open.

William George: It got so much better later in the year that were just facing tougher tougher comparables were extremely optimistic but.

Alexander David Dwyer: Hi, team. Congratulations on a strong start to the year. Hi, Alex.

William George: They are tough comparables.

William George: That's why we're giving that guidance.

Alexander David Dwyer: Hey Alex, thank you. Yep. So the EBITDA margin was very strong this quarter, and the guide for this year continues to call for a similar level to last year. Can you just talk about the potential for margin expansion over the rest of the year? Is it just that the comps get tougher in the back half, or is there something in the recent performance that isn't sustainable as we progress through this year? Well, you know, this is Brian. I'll go first, and then Bill can follow up.

Speaker Change: Thank you and then.

Speaker Change: The organic backlog growth was very strong this quarter.

Speaker Change: Can you talk about what end markets drove that strength and if there was any larger modular orders in there and do you think it's fair to assume like backlog can continue to increase sequentially through this year.

Speaker Change: Well I mean in term in terms of the backlog it's broad based.

Speaker Change: Wow.

Speaker Change: We didn't get one surge from any particular segment.

Speaker Change: It's really reassuring to us here.

Speaker Change: C multi sector is particularly if you're talking about.

Speaker Change: The tech sector manufacturing edge.

Brian E. Lane: I mean, we're really pleased with the margins that we have right now. You know, if you're in that gross margin 18 to 20% range, I think you're executing at a high level, at 19% for the quarter. So I think we're going to continue to be in that range throughout the year.

Speaker Change: Patient stay at the University level strong in health care.

Speaker Change: Outpatient on hospitals, so we are seeing good balance.

Speaker Change: Across the board.

Speaker Change: As far as what might happen in the coming quarters I would actually surprised me.

Speaker Change: At some point not to see some sequential declines right you can't, especially as we get into the summer and the revenues get really big historically, we have always had sequential declines in the middle of the year, except for lately. So I've been I guess that it wouldn't surprise me, but to be fair I have been surprised.

Brian E. Lane: You know, we'll have broad-based excellent performance across our operating companies. So I mean, we might have a little fluctuation up or down as we go, but in general, you know, our performance has just been excellent. As we noted in the opening comments, we're definitely anticipating, expecting our EBITDA margins for the full year to stay up near last year and the recent amazing results we have, and we're optimistic we could do a little better. I will say, as you pointed out, later this year, we hit some very tough comparables, right?

Speaker Change: After quarter for the last several quarters the demand is.

Speaker Change: Is unmatched there has never been more demand for our services.

Speaker Change: And our guys are turning away, but at some point you can only take so much work and so I.

Speaker Change: I think youll see backlog stay at extremely high levels, but I don't think you should say Oh, yes for sure every sequential comparator will be up in the field.

That's really not historically what happens.

Speaker Change: And then last one from me.

Speaker Change: The summit in China, China acquisitions are off to a.

Brian E. Lane: We had extraordinary growth and increased, really progressively throughout the year and especially in the second half of the year last year. So one of the things you're seeing is even though last year the first quarter seemed like an extraordinary quarter, and it was, it got so much better later in the year that we're just facing tougher comparables. We're extremely optimistic, but they are tough comparables, and that's why we're giving that guy. Thank you, and then...

Speaker Change: Strong start this year.

Speaker Change: Is there anything different about the integration of them into your business given there given these are so large.

Speaker Change: And then can you talk about the appetite for more deals through the year.

Speaker Change: I'll just I'll just start on the integration.

Speaker Change: One a little bit of advantage you have in their lives, where they get a little bit more horsepower.

Speaker Change: <unk> office.

Speaker Change: I'll handle the public company requirements. These are both very sophisticated companies.

Speaker Change: Excellent workforce great leadership.

Brian E. Lane: The organic backlog growth was very strong this quarter. Can you talk about what end markets drove that strength and if there were any larger modular orders in there? And do you think it's fair to assume backlog can continue to increase sequentially through this year? But I mean, in terms of the backlog, it's broad-based. [inaudible] We didn't get, you know, one surge from any particular segment.

So we're working pretty closely with them to make this as smooth as possible, but no.

Speaker Change: Plus they got a great attitude.

Speaker Change: Great themselves, which is which is a huge help itself.

Speaker Change: So far we're off to a great start, yes, I couldnt agree more.

Speaker Change: The integration of the biggest thing we try to do an integration is keep what's great about our company and keep it going and keep it.

Speaker Change: That local.

Speaker Change: Excellent continuing and so that's an advantage we have since we're not trying to change things.

Brian E. Lane: It's really reassuring to us here to see the multi-sectors, particularly if you're talking about... You know, the tech sector, manufacturing, you know, education at the university level, strong and health care, outpatient and hospitals. So we've seen a good balance, you know, across the board. And, you know, as far as what might happen in the coming quarters, it would actually surprise me.

Speaker Change: That makes integration a little easier here.

Speaker Change: Thank you I'll turn it over alright. Thanks. Thank you.

Speaker Change: And thank you.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Adam <unk> from Thompson Davis. Your line is now open.

Adam: Hey, good morning, guys great quarter.

Adam: Thanks, Adam good morning.

Adam: I wanted to stick on summit, and just see kind of what youre.

You are seeing so far specifically from chip plants kind of the timing of those projects.

Adam: Yeah.

Adam: They have.

Adam: Great work going on and great prospects. They also have a big.

Adam: Solar fab and they have these guys can do.

Adam: Perfect to do the big hard work that the country needs right now Thats why we want we were so excited to buy them, but right now.

Brian E. Lane: At some point, not to see some sequential declines, right? You can't, especially as we get into the summer and revenues get really big. Historically, we've always had sequential declines in the middle of the year, except for lately. So I've been, like I said, it would surprise me, but to be fair, I have been surprised.

Adam: It's full speed ahead.

Speaker Change: No Adam in terms of their skill set.

Speaker Change: Looking at a lot of opportunities in pharmaceuticals et cetera. So.

His skills are applicable to a whole bunch of industries.

Speaker Change: Oh, okay. Okay.

Speaker Change: Kind of what kind of capacity growth potential today has as you start to get them more end markets.

So.

Brian E. Lane: Quarter after quarter for the last several quarters, the demand is unmatched. There's never been more demand for our services, and our guys are turning away work. But at some point, you can only take so much work, and so. I think you'll see backlog stay at extremely high levels, but I don't. So yeah, for sure, every sequential compare will be up. That's really not historically black.

Speaker Change: When we buy a company, we don't push them to grow.

We basically pushed them to do it well, we push them to grow their workforce to really really put their arms around and grow their workforce, which leads to growth in almost every case.

But I would not say for us that's a growth story I think likely almost any company, we buy they will grow over time, but for US. It's just an excellence story.

Speaker Change: Keep your okay.

Speaker Change: If your workforce busy.

Speaker Change: And then I wanted to ask about specialty contractor capacity is it still do.

Brian E. Lane: And then a last one from me, the Summit and JNS acquisitions are off to a strong start this year. Is there anything different about the integration of them into your business, given they're given are so large? And can you talk about the appetite for more deals through the year? You know, I'll just start on integration, you know, the allies, what a little bit of an advantage you have when they're larger; they get a little bit more horsepower, they're in the back office, they handle public company requirements. These are both very sophisticated companies.

Speaker Change: Do you think as tight now as it was kind of a year or two ago and are you still booking work further out.

Speaker Change: Yes, Adam for sure.

Speaker Change: Still tight.

We've been we've been very fortunate.

Speaker Change: To recruit some outstanding people.

Speaker Change: On the human resource side, we're attracting some some great talent, but it is still tight but we are yes.

Speaker Change: We're a good place to work.

Speaker Change: We offer great compensation package <unk> opportunity to develop we'd.

Speaker Change: We'd like to promote from within.

Speaker Change: So I think that'll be a struggle for a while but we have good work people like working here.

Speaker Change: So I'm very optimistic about the future.

Speaker Change: And Bill just a quick modeling thing.

Brian E. Lane: Excellent workforce, great leadership. So we're working pretty closely with them to make this as smooth as possible. But plus, they've got a great attitude to integrate themselves, which is a huge help. So, you know, so far, they're off to a great start. Yeah, I couldn't agree more.

William George: What do you have for DNA in Q2, since we only had the acquisitions for part of Q1.

William George: So we had two months of those guys I think it is.

William George: We put a if you look at the footnotes, we actually have a table, where we tell you exactly.

William George: Exactly what we think is going to be so you can go get the actual numbers.

William George: From one of the footnotes.

Speaker Change: Being lazy okay.

Speaker Change: Yes.

Speaker Change: Ron.

Brian E. Lane: For us, integration, the biggest thing we try to do in integration is keep what's great about a company and keep it going and keep it... you know, the local. Excellent. Continuing. And so that's an advantage we have since we're not trying to change things. That makes integration a little easier. Thank you. I'll turn it over to you.

Speaker Change: <unk>.

Speaker Change: Because I'd have to go look it up myself, it's big it's like you saw the pop right and that was only two months of those guys.

Speaker Change: Got you.

Speaker Change: You are only required to publish that schedule once a year, but we publish it we certainly publish it every quarter. After we do an acquisition.

Speaker Change: Because those noncash charges.

Speaker Change: So.

Speaker Change: They really it's crazy that we're.

Speaker Change: We reduced our earnings by that right.

Speaker Change: People want to know what the asset they own is doing but GAAP is GAAP and so thats what we do.

Speaker Change: Sounds good thank you bill.

Operator: All right. Thank you, and thank you. And one moment for our next question. And our next question comes from Adam Thalhimer from Thompson Davis. Your line is now open.

Speaker Change: And thank you.

Speaker Change: Okay.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Josh Chan from UBS. Your line is now open.

Adam Robert Thalhimer: Hey, good morning, guys. Great quarter. Hey, thanks, Adam. Good morning.

Joshua K. Chan: Hey, good morning, guys congrats on a really good quarter.

Joshua K. Chan: Thanks, Josh.

Joshua K. Chan: Could you talk about the bidding environment for four potential project debt.

Adam Robert Thalhimer: I wanted to stick on Summit and just see kind of what you're seeing so far, specifically from chip plants, kind of the timing of those projects. You know, they have great work going on and great prospects. They also have a big... SolarFab, and they have, you know, these guys can do it. They're perfect to do the big, hard work that the country needs right now. That's why we were so excited to buy them. But right now...

Joshua K. Chan: Our before backlogs anything changing there and how is pricing on those those bids that you are putting together.

Yes, so in terms of the.

Joshua K. Chan: The pipeline pre order.

Speaker Change: Still very robust robust, it's so broad based.

Speaker Change: Pricing is still reasonable for sure.

Speaker Change: <unk>.

Speaker Change: It's a great opportunity for us.

Speaker Change: They want to work for us.

Speaker Change: A really good customers be very selective in the acquisition process, we don't chase revenue.

Speaker Change: Chase new opportunities and the work that we have.

Brian E. Lane: It's full speed ahead. Yeah, you know, Adam, in terms of their skill set, they're looking at a lot of opportunities in pharmaceuticals, etc. So, you know, their skills are applicable to a whole bunch of industries.

Speaker Change: But in terms of the sectors that I hit on the floor.

Speaker Change: The operations the opportunities are very consistent.

Speaker Change: Still today.

Speaker Change: No letup no let up.

Speaker Change: Okay.

Speaker Change: Great to hear.

Speaker Change: On the data center side could you just talk about how your conversations are like with your data center customers than any kind of update in terms of your thinking on when you might be able to expand modular capacity again.

Brian E. Lane: What kind of capacity growth potential do they have as you start to get more into the market? So, you know, when we buy a company, we don't push them to grow. You know, we basically push them to do, well, we push them to grow their workforce, to really, really put their arms around and grow their workforce, which leads to growth in almost every case. But I would not say, for us, that's a growth story.

Speaker Change: These are these are big organizations, so youre not just talking to one part of the organization right Youre talking to the people who desperately need.

Speaker Change: The capacity and who understand.

Brian E. Lane: I think like almost any company we buy, they will grow over time. But for us, it's just an excellence story. Keep your workforce busy. And then, um, I wanted to ask about specialty contractor capacity. Is it still... Do you think it's as tight now as it was kind of a year or two ago, and are you still booking work further out? Yeah, you know, Adam, for sure, it's still tight.

Speaker Change: How to partner with Us and Youre also talking to parts of the organizations, whose job it is to purchase things and to try to get the lowest price I would say that.

Speaker Change: Things are.

Speaker Change: As expected in.

Speaker Change: What we tried to do is just be a great partner for people and if really we do our best work and get the best value for people, who reciprocate that.

Speaker Change: But I don't I don't know that anything has changed essentially we they are all paths to market.

Brian E. Lane: We've been, you know, we've been very fortunate to recruit some outstanding people. On the human resources side, we're tracking some great talent, but it is still tight. But we're a good place to work. We offer great compensation, PAG, and an opportunity to develop. We like to promote from within, so I think that'll be a struggle for a while, but we have good work, people like working here, you know, so I'm very optimistic about the future.

Speaker Change: Mindset, so they love getting this done built modular Lee, thereby hiring are contractors, who build it in the traditional way.

Speaker Change: I think that the demand is so great that there.

Speaker Change: They're just looking for people, who can help them do what they need to do and we love to do that for people who want to partner up.

Speaker Change: Josh rigorous add on a little bit to the to the opportunities one of our strengths is the size of this company.

Speaker Change: And the geographic spread we have.

Joshua K. Chan: Opportunity to shift labor, it's really an advantage.

Joshua K. Chan: A few of.

Brian E. Lane: All right, Bill, just a quick modeling thing. What do you have for DNA in Q2, since we only have acquisitions for part of Q1? So we had two months of those guys. I think it's in. We put in a, if you look in the footnotes, we actually have a table where we tell you exactly, well, almost exactly what we think it's gonna be. So just you can go get the actual numbers from one of them.

Joshua K. Chan: Colleagues throughout the country have.

Joshua K. Chan: We get some of these larger opportunities that we can handle both financially and from a resource basis.

Joshua K. Chan: Including when you think about.

Joshua K. Chan: Supply is well good companies do business with so.

Joshua K. Chan: <unk> right now is really has really helped us.

Joshua K. Chan: And we use that site to be a partner to people not we don't try to use it against people right.

Joshua K. Chan: Yes.

Joshua K. Chan: And any thoughts on.

William George: I was being lazy. Okay, thanks. Yeah, well, I'm being lazy, too, because I have to go look it up myself.

Joshua K. Chan: Whether you could expand capacity at sometime later this year or into next year.

William George: It's big. It's like you saw the pop, right? And that was only two months of those guys. But, you know, you're only required to publish that schedule once a year, but we publish it anyway. We certainly publish it every quarter after we do an acquisition because, you know, those non-cash charges. They're so crazy that we're that we reduce our earnings by that, right? It's people who want to know what the asset they own is doing.

Speaker Change: So if you are talking about modular I would say that that is not something that we are currently making plans around but we are evaluating.

Speaker Change: Okay.

Alright, and then just a modeling question.

So EBITDA margins usually go up from Q1 to Q2 I know Bill you mentioned the lack of seasonality in Q1, but I was just wondering your thoughts about.

Speaker Change: Whether you can see a typical sequential margin expansion into next quarters.

William George: But the gap is wide, and so that's what we do. Sounds good.

Speaker Change: So EBITDA margins do typically go up from the first quarter to the second quarter, but first quarter or have never been all time highs by extraordinary amounts.

Operator: Thank you, Bill, and thank you. And one moment for our next question, and our next question comes from Josh Chan from UBS. Your line is now open.

Speaker Change: It's a very.

Joshua K. Chan: Hey, good morning guys. Congrats on a really good quarter. Thanks, George. Could you talk about the bidding environment for potential projects that are even before backlogs? Anything changing there, and how is pricing for those bids that you're putting together? Yeah, so, in terms of the pipeline, pre-order, it's still very robust, robust, it's still broad based. The price is still reasonable, for sure.

Speaker Change: <unk>.

William George: Insecure time for us to start saying, if it's going to we're going to have sequential uptick in margin only because of how high they are in the first quarter.

William George: I'm more comfortable talking about doing better this year than last year right. Okay. One quarter. This is the quarter, where our EBITDA was up 70% on a same store basis.

William George: We need to adjust to that brand.

William George: We stick around margins will be happy folks.

Speaker Change: Yeah Yeah.

Speaker Change: Definitely understood. That's a good problem to have and congrats guys.

Brian E. Lane: It's a great opportunity for us. You know, to work for a really good customer is to be very selective in the acquisition process. We don't chase revenue, chasing the opportunities and the work that we're good at, but in terms of the sectors that I hit on before, the operations, the opportunities are very consistent today. No let up. No let up.

Speaker Change: Thank you.

Speaker Change: And thank you.

Speaker Change: Okay.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Julio Romero from Sidoti <unk> Company. Your line is now open.

Julio Alberto Romero: Thanks, Hey, good morning, guys.

Julio Alberto Romero: Good morning Julio.

Julio Alberto Romero: Hey.

Julio Alberto Romero: Can you maybe talk about the margins youre seeing in construction.

Julio Alberto Romero: Are they trending upward and are you seeing any fixed cost leverage as Pat modular business continues to grow.

Brian E. Lane: That's great to hear. And then on the data center side, could you just talk about how your conversations are going with your data center customers and any kind of update in terms of your thinking on when you might be able to expand module capacity again? You know, these are big organizations. So you're not just talking to one part of the organization, right? You're talking to people who desperately need the capacity and who understand, you know, how to partner with us. And you're also talking to parts of the organization whose job it is to purchase things and to try to get the lowest price.

Julio Alberto Romero: But sure construction margins.

Julio Alberto Romero: Increase the back half of this year into this year.

Speaker Change: There's a lot of multiple reasons for it but but the crux of it is.

Speaker Change: Good job selection of a good customers, but I'm not going to tell you we're executing in the field.

As always run the rubber meets the road for me.

Speaker Change: Very high level.

Speaker Change: Really a very grateful to the folks that go out to these jobs everyday and the work we are doing so.

Speaker Change: <unk> Zara.

Speaker Change: To me a lot of it's about the execution that we're getting.

Speaker Change: Got it great execution I'm, just curious if theres any kind of fixed cost leverage that you see there as that grows well.

Brian E. Lane: I would say that things are as expected. And our, you know, what we try to do is just be a great partner for people. And if really we do our best work and get the best value for people, who reciprocate that. But I don't, I don't know that anything's changed. You know, essentially, we they are in an all paths to market mindset. So they love getting this stuff built modularly.

Speaker Change: Our SG&A, obviously dropped from 11, 5% to 10.6.

Speaker Change: I would say we.

Speaker Change: We are definitely making investment to accommodate our growth and every from all sorts of back office sales.

Brian E. Lane: They're hiring our contractors who build them in the traditional way. I just think that the demand is so great that they're, You know, they're just looking for people who can help them do what they need to do. And we love to do that for people who want to partner up. You know, George? I guess I'll add on a little bit to the opportunities. You know, one of our strengths is the size of the company and the geographic spread we have. The opportunity to share labor is really an advantage that us and a few of our... We have a lot of great colleagues throughout the country have given us some of these larger opportunities that we can handle both financially and from a resource point of view.

Speaker Change: But with revenue increasing the way it is.

Speaker Change: Certainly things like our.

Speaker Change: SG&A can't go up as fast as that so I don't think you will see.

Speaker Change: I don't think Youll see worse.

Speaker Change: SG&A leverage.

Over the course of the rest of this year.

Speaker Change: Now revenue increases with Wheaton.

Speaker Change: You were going to be started in the mid teens or more likely in the high teens in revenue increase and we were in the <unk>. This quarter that means it's going to average down some so so.

Speaker Change: So I would say, maybe we don't get additional leverage.

So I don't think you'd see additional leverage sequentially, but I think year over year youre going to see a ton of leverage.

Brian E. Lane: Including when you think about our suppliers, we're a good company to do business with, so our size right now is really helpful. And you know, we use that side to be a partner to people, not we don't try to use it against people, right?

And I don't even know that's just a gas rate.

Speaker Change: It will the most important part is year over year as far as.

Speaker Change: How that math is the math comes down into what we're doing.

Speaker Change: I Hope you followed that I think I wasn't very clear in that answer.

Brian E. Lane: Yeah. Any thoughts on whether you could expand capacity sometime later this year or into next year? If you're talking about modular, I would say that that is not something that we are currently making plans around, but we are evaluating.

Speaker Change: No that was that was good commentary.

Speaker Change: And whats.

Speaker Change: What's your best guess as to when you see some of this cash flow reversal.

Speaker Change: As expected.

Speaker Change: So our history of getting that right is poor.

Brian E. Lane: Okay. All right, and then just a modeling question: so EBITDA margins usually go up from Q1 to Q2. I know, Bill, you mentioned the lack of seasonality in Q1, but I was just wondering your thoughts about whether you can see a typical sequential margin expansion into the next quarter? Yeah, so even though margins do typically go up from the first quarter to the second quarter, first quarters have never been all-time highs by extraordinary amounts.

Speaker Change: It keeps waiting it keeps happening later I'd say late this year, probably at some point.

Speaker Change: There is a sense in which it.

Speaker Change: It did.

Speaker Change: Latin because.

Speaker Change: We're going to show you a slide in our Investor presentation last quarter, we had a slide in our investor presentation that showed that we had.

Speaker Change: Earned.

Speaker Change: While we had cash flow $300 million more than we had earned in 2023 youre going to see at the end of the first quarter that on a trailing 12 month basis, we will have cash flowed more than we have earned by $300 million Here's the thing so the $300 million didn't go up it didn't go down but we didn't.

Brian E. Lane: So it's a it's a it's a very, insecure time for us to start saying it's, it's going to, we're going to have a sequential uptick in margins only because of how high they are in the first quarter, which I'm more comfortable talking about doing better this year than last year. Right. But one quarter, this is a quarter where our EBITDA was up 70% on a same-score basis. We need to adjust to that in our brains, you know.

Get in our same store businesses, we know we did inherit some advanced cash from our acquisition, especially at summit, but in our same store businesses, we didn't get farther out. So I think before you start to give some of it back. The first thing that happens is you start getting more of it and there was certainly signed in the first quarter that we stopped getting more of it having said that we are.

William George: If we stick around these margins, we'll be happy folks. Yeah. Yeah. Yeah. That's definitely understood. That's a good problem to have, and congrats.

Speaker Change: Earnings.

Speaker Change: So much money.

Speaker Change: Cash flow a bit.

Speaker Change: I looked at why our cash flow was still so big in the first quarter.

William George: Thank you. And, thank you. And one moment for our next question. And our next question comes from Julio Romero from Sidotian Company. Your line is now open.

Speaker Change: In the past quarters, it's been a lot of earnings and advance cash this quarter. It was just a lot of earnings and not giving back advance cash so.

Operator: Thanks. Hey, good morning, guys. Morning Julio.

Speaker Change: There was.

Speaker Change: There is signs of.

Julio Alberto Romero: Hey, um, can you maybe talk about the margins you're seeing in construction? Are they trending upward? And are you seeing any fixed cost leverage as that modular business continues to grow? You know, for sure, our construction margins, um, you know, increased back half of this year into this year. We, um... There's a lot of reasons for it, but the crux of it is... You know, good job selection with good customers, but I got to tell you, we're executing in the field, which has always been a rubber meets the road for me at a very high level, and we're really very grateful to the folks that go out to these jobs every day and the work they're doing. So, minds are up. To me, a lot of it's about the execution that we're getting. Got it.

Speaker Change: Flat that flattening out as it literally has too right.

Speaker Change: If somebody pays you to do a bunch of welding in electrical work.

Speaker Change: Sooner or later you got to go do that welding and electrical work and the welders and the electricians youre going to pay them, you're going to have to pay them. It's a fantastic problem to have.

Speaker Change: Not really a problem, but it will look like a problem at some point because at some point in the future our cash flow will be less than our Ernie by the amount that it was more than our earnings.

It's a high class problem.

Speaker Change: Certainly thanks for the color guys I appreciate it thanks Leo.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Brent Thielman from D. A Davidson your line is now open.

Brent Edward Thielman: Hey, Thanks, Good morning, guys, Hey, good morning, Greg.

I'm going to ask about margin sorry.

Julio Alberto Romero: Now, great execution. I'm just curious if there's any kind of fixed cost leverage that you see there as that grows. Well, you know, we saw our SG&A obviously dropped from 11.5 to 10.6. I would say

Brent Edward Thielman: Yeah.

Brent Edward Thielman: When you look at this quarter I mean, just take a step back is the margin performance because you get paid more generally for what you do or that you have the perfect mix of projects, where you get paid more or you are just that much more.

William George: We are definitely making investments to accommodate our growth and every sort of back office sales, but with revenue increasing the way it is, it certainly seems like our SG&A can't go up as fast as that, so I don't think you'll see a worse FG&A Lab over the course of the rest of this year.

Brent Edward Thielman: Reductive in the field.

Speaker Change: I would say all three.

Speaker Change: But the thing that we really can control everyday basis.

Speaker Change: Is how we're doing in the field then break it hurts us from a lot of times different version of pre fabrication face. It the more work we can do so.

Speaker Change: Inside.

William George: Now revenue increases, you know, if we tell you we're going to be sort of in the mid-teens and, more likely, in the high-teens. In revenue increase, and we were in the 20s this quarter, that means it's going to average down some, so I would say maybe we don't get additional leverage, but I don't think you'd see additional leverage sequentially, but I think year over year, you're going to see a ton of leverage, and I don't even know, that's just a guess, right?

Speaker Change: <unk> and ship it to the field the more productive safe during the higher quality of the work is and we're doing more and more prefabrication everyday so.

Speaker Change: But it's a combination of all three for sure, but we really cannot minimize.

Speaker Change: Well, we our execution on a per person basis at these job sites, including service and we've talked a lot of our construction, but our service folks are doing a doing a hell of a job as well and the other thing you got to mention.

William George: And it will; the important part is year over year as far as how that math comes down into what we're doing. I hope you apologize; I think I wasn't very clear in that answer. No, that was good commentary.

As electrical like our electrical margins popped by 600 basis points this quarter and what was amazing about that we had something like that a year and a half ago, where we had an extraordinary gain in the quarter. This was just.

William George: What's your best guess as to when you will see some of this cash flow reversal? That's expected. Well, so our history of getting that right is poor because it keeps waiting, it keeps happening later. I'd say late this year, probably at some point, there is a sense in which, you know, it did flatten. Because we're going to show you a slide in our investor presentation. Last quarter, we had a slide in our investor presentation that showed that we had earned.

Speaker Change: A mixture of everything good that can happen to our business because they're doing a great job and our customers really value.

Speaker Change: The ability we have to go out and.

Speaker Change: Breaking the manpower that's needed to do big jobs.

Speaker Change: They are allowing us to really hopefully reward the people. So that we can keep doing that so electricals mine Glen really amazing quarter, and you can say well is that a onetime blip and the answer is.

Speaker Change: I wouldn't bet against them.

Speaker Change: It's pretty hard to stay at this percentage, but I think they're just going to they've got a long runway ahead of them doing well.

William George: Well, we had cash flowed $300 million more than we earned in 2023. You're going to see at the end of the first quarter that on a trailing 12-month basis, we will have cash flowed more than we earned by $300 million. Here's the thing, so the $300 million didn't go up, right? It didn't go down, but we didn't get in our same store businesses.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Looking back I don't think you guys ever had a year.

When EBITDA margin through the rest of the year, we're at the low.

Speaker Change: First quarter.

Speaker Change: And I know I know the company and the mix has evolved quite a bit in the last 10 years I heard your comment kind of perfect storm of weather.

Speaker Change: Syed.

William George: Now, we did inherit some advance cash from our acquisition, especially at Summit, but in our same store businesses, we didn't get farther out. So I think before you start to give some of it back, the first thing that happens is you stop getting more of it, and there were certainly signs in the first quarter that we stopped getting more of it. Having said that, we're earning so much money that our cash flow, when I looked at why our cash flow was still so big in the first quarter, you know, in the past quarters, it's been a lot of earnings and advance cash.

Syed: I'm just trying to unpack the reason why we should be careful in thinking.

Syed: Tough to repeat.

Syed: And there is one reason that we are.

Syed: Our EBITDA and <unk>.

Syed: <unk> store basis.

Syed: <unk> was up 70% in the first quarter.

Syed: It's pretty hard to.

Syed: See that happen and say Oh, yes, there is a new baseline.

Speaker Change: So, yes, I understand we don't know whats going to happen.

Speaker Change: But the margins are for our first quarter. They are extraordinary now do I think we've got extraordinary margins in our future I do but on a comparable basis.

William George: This quarter, it was just a lot of earnings and not giving back advance cash. So there were, you know, signs of, you know, that flattening out as it literally has to, right? If you, if somebody pays you to do a bunch of welding and electrical work.

Speaker Change: It's a tough comparable and we're about to hit tough comparables from the prior year and our first quarter was at a comparable for the ages.

Speaker Change: But we're about to make a lot of money.

Speaker Change: We will go for it yes, we will make as much money as we can and you can figure out what that means.

Yeah.

Speaker Change: Again the idea.

William George: Sooner or later, you've got to go do the welding and electrical work. And the welders and the electricians, you're going to pay them. You'll have to pay them.

Speaker Change: Okay.

Speaker Change: Hi.

Just wanted to come back to modular.

Speaker Change: You are essentially booked in 2024.

Speaker Change: To what degree do you still have available.

William George: It's a fantastic problem to have. Not really a problem, but it will look like a problem at some point, because at some point in the future, our cash flow will be less than our earnings by the amount that it was more than our earnings. You know, it's a high-class program. Certainly is. Thanks for the call, guys. Appreciate it.

Speaker Change: Capacity in 2025 to fill in our conversations.

Speaker Change: <unk> at all for 2026.

Speaker Change:

Speaker Change: I would say.

We believe that if we had more capacity, we could sell more than we have capacity for in 'twenty five.

Speaker Change: We have more of our capacity at 25 sold.

Operator: All right. Thanks, Julio. And thank you. And one moment for our next question, and our next question comes from Brent Thielman from DA Davidson. Your line is now open.

Speaker Change: Then we would have thought was possible.

Speaker Change: And we don't think people are going to we don't think.

Speaker Change: All of these factors.

Speaker Change: Are going to end by 26.

Speaker Change: But 26, a lot we don't we don't have bookings we don't have we don't have the floor planned for the middle of 2026, you know what I mean.

Brent Edward Thielman: Hey, thanks. Good morning, guys. Um, I'm gonna ask about margins. Sorry. Uh, I guess the, uh... You look at this quarter, I mean, just take a step back. Is the margin performance because you're getting paid more generally for what you do, or they have the perfect mix of projects where you get paid more, or you're just that much more productive in the field? I would say all three

Speaker Change: Nobody's nobody doing manpower loading schedules right now.

Speaker Change: Four.

Speaker Change: No.

Speaker Change: For the Winter Olympics.

Speaker Change: Got it that's a long time.

Speaker Change: And then maybe if you could just talk about the progression with new customers and modular I know you don't want to talk about names specifics for obvious reasons.

Speaker Change: How are you being able to diversify the customer base in that business.

Speaker Change: So things are going great with our second large customer.

Brent Edward Thielman: But, you know, the thing that we, you know, really can control on an everyday basis. You know, it's how we're doing in the field, and, you know, Brent, you heard this a lot of times. You know, different versions of prefabrication.

Speaker Change: We like them they like us.

Speaker Change: Dave design, we think is very very clever.

Speaker Change: Going to do a great job for them, we've sold as much as we would've hoped we could sell by now as far as diversifying the thing that keeps us from diversifying is fantastic customers.

Brian E. Lane: The more work we can do... Sort of inside, you know, building and shipping to the field, the more productive, safer, and higher quality the work is, and we're doing more, you know, more prefabrication every day. But, you know, it's a combination of all three for sure, but we really cannot minimize it.

Speaker Change: Are willing to buy all of our capacity like we reserve a little bit of that capacity for a lot of long time pharma customers, who really rely on us to do certain things that other people would have a hard time doing we have to do that right because we owe it to them but in general.

Brian E. Lane: How well we are executing on a per person basis at these job sites, including service. We're talking a lot about construction, but our service folks are doing a hell of a job as well. And the other thing you got to mention is electrical. Our electrical margins popped by 600 basis points this quarter. And what was amazing about that, we had something like that a year and a half ago, where we had an extraordinary gain in the quarter. This was just a mixture of everything good that can happen to a business because they're doing a great job.

Speaker Change: So far those two customers one all we can do and.

Speaker Change: They've earned the de burned first really frankly, they've earned for at last look they've earned first look and last look theyre, great partners, absolutely and so as long as they are good partners with.

Speaker Change: We take we take what the market we do the work the skills. We have are applicable to all kinds of things right, it's not like but in our market, it's always lumpy and it's always the case.

Speaker Change: Theres, some theres more of something in any given year right now.

We're sticking with guys that need what we can do and we they've been great partners and they've earned our loyalty.

Speaker Change: They have asked US why do we need to do to have all of your capacity and we've said while this would be what you need to do and they've done it and Dave assets last year. They said what do you need in order to expand your capacity and we said look for to be fair to our shareholders and the risks that we taken the costs, we would incur we need these kind of commitments and they made them.

William George: And our customers really value the ability we have to go out and bring the manpower that's needed to do big jobs. And they're allowing us to really help, you know, reward the people so that we can keep doing that. So Electrical is a mindblowing, really amazing quarter. And you can say, well, is that a one-time blip?

Speaker Change: And so we're keeping our commitments to them.

Speaker Change: Yes.

William George: And the answer is, I wouldn't bet against them. I mean, it's pretty hard to say at this percentage, but I think they've got a long runway ahead of them doing well. OK. And just looking back, I don't think you guys have ever had a year when EBITDA margins for the rest of the year were below the first quarter. And I know, I know the company in the mix has evolved quite a bit in the last 10 years.

Speaker Change: One last one guys I mean, I think it's obvious.

Speaker Change: The opportunity in data centers has brought a lot of attention to the company and the stock investors and clearly I think it's getting a lot of growth for you.

Speaker Change: Maybe just your perspective is that overemphasized relative to some.

Speaker Change: Some of the other things moving the needle for your business right now you can talk about manufacturing industrial capacity.

William George: I heard you comment, storm and weather on both sides, but I'm I'm just trying to unpack the read, why we should care. And there's one reason that we are, it's our EBITDA on the same store base was up 70% in the first quarter. It's pretty hard to see that happen and say, oh yeah, there's our new baseline. Right, so yeah, I understand we don't know what's going to happen, but these margins are for the first quarter. They're extraordinary. Now do I think we've got extraordinary margins in our future? I do, but on a comparable basis. It's a tough comparable.

Speaker Change: Curious to your thoughts to that.

Speaker Change: Well I mean I think it is.

It's logical that people focus on data centers.

Speaker Change: You and I would touring a couple of weeks ago everybody's favorite topic, but if.

Speaker Change: If you look at the other stuff we've got going on.

Speaker Change: Just take Indianapolis for example, how much pharma is going on.

Speaker Change: Food.

Speaker Change: A lot of sectors that are very busy.

Speaker Change: Work that we're good at what are you talking about battery plants food.

Speaker Change: Hospital hospitals.

Speaker Change: Education University work is still very strong so.

William George: They were about to hit tough comparables from the prior year, and our first quarter was a comparable for the age. But, we're about to make a lot of money. We'll go for it. Yeah, we'll make as much money as we can, and you can figure out what that means. I've got an idea. Okay. I, I guess I wanted to come back to modular.

Speaker Change: I think we're seeing multi sector activity I think data centers is going to get a lot of attention for a while but those other sectors, we love them.

Speaker Change: Winning a lot of work in them and that work is going well.

Speaker Change: Okay. Thanks for taking the questions guys.

Speaker Change: Thanks Brent.

Speaker Change: And thank you.

Speaker Change: And I'm showing no further questions I would now like to turn the call back over to Brian Lane for closing remarks.

Brian E. Lane: I mean, I think you're essentially booked in 2024. To what degree do you still have available... capacity in 2025 to fill, and our conversation at all start at all for 2020? Um, I would say... We believe that if we had more capacity, we could sell more than we have capacity for in 25. We have more of our capacity at 25 sold than we would have thought was possible. And, you know, we don't think people are going to, we don't think, all of these factors are going to end by 26.

Brian E. Lane: Okay, Justin so in closing I really want to thank our amazing employees. Once again, we are really grateful for their daily efforts.

Speaker Change: We do appreciate everyone's interest on the call.

Speaker Change: We're not a business it's great to talk about it in thank you.

Speaker Change: Are you optimistic about 2024.

Speaker Change: We've got great customers, we've got great people.

Speaker Change: Really looking forward to how the how the year pans out as well as seeing most of you on the road.

Probably hearing pretty sure pretty soon so thanks for that too and hope everyone has a great spring thanks and enjoy your weekend. Thanks folks.

Brian E. Lane: But 26 is a long time, we don't, we don't have bookings, you know, we don't have, we don't have the floor planned for the middle of 2026. You know what I mean? Nobody's, nobody's doing manpower loading schedules right now for the Winter Olympics. Yeah, that took a long time.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.

Speaker Change: Sure.

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Brian E. Lane: Could, and then maybe if you could just talk about the progression with new customers and modular, I know you don't want to talk about name specifics for obvious reasons, but how are you being able to diversify the customer base? So, things are going great with our second large customer. We like them.

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Brian E. Lane: They like the product they've designed; we think it is very, very clever and is going to do a great job for them. You know, we've sold as much as we would have hoped we could sell by now. As far as diversifying, the thing that keeps us from diversifying is that fantastic customers are willing to buy all of our capacity. For example, we reserve a little bit of that capacity for a lot of long-term pharma customers who really rely on us to do certain things that any other people would have a hard time doing.

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Brian E. Lane: We have to do that, right, because we owe it to them. But in general, those two customers want all we can do, and they've earned first, really, frankly, they've earned last look.

Speaker Change: Okay.

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Brian E. Lane: They're great partners. Absolutely. And so, as long as they're good partners. We take, you know, we take what the market we do the work, the skills we have are applicable to all kinds of things, right? It's not like, but in our market, it's always lumpy.

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Brian E. Lane: And it's always the case that whatever there is, there's some there's more of something in any given year. And right now, you know, we're sticking with guys that need what we can do, and they've been great partners, and they've earned our loyalty. They asked us, what do we need to do to have all of our capacity? And we said, well, this would be what you need to do. And they did it.

Speaker Change: Yes.

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Brian E. Lane: And they asked us last year, they said, what do you need in order to expand your capacity? And we said, look, for to be fair to our shareholders and the risks that we take and the costs we incur, we need these kind of commitments, and they made them. And so we're keeping our commitments to them. Yeah, maybe just one last one, guys.

Speaker Change: Okay.

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Brent Edward Thielman: I mean, I think it's, you know, obvious that the opportunities in data centers have brought a lot of attention to the company and the stock from investors and, you know, clearly, I think it's driving a lot of growth for you. Maybe just your perspective, is that overemphasized relative to, you know, some of the other things moving the needle for your business right now? You talk about manufacturing and industrial capacity. I'd just be curious about your thoughts on that.

Speaker Change: Yes.

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Brian E. Lane: Well, I mean, I think it's good. You know, it's logical that people focus on data centers, as you know, you and I were touring a couple of weeks ago, and it was everybody's favorite topic. But, you know, if you look at the other stuff we've got going on, you know, just take Indianapolis, for example, how much farming is going on, food, you know there's a lot of sectors that are very busy and work that we're good at. What are you talking about battery plants food, Pharma, Hospitals. You know, education, university work is still very strong.

Speaker Change: Okay.

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Brian E. Lane: So I think we're seeing multi-sector activity. I think data centers are going to get a lot of attention for a while. But those other sectors, we love them. We win a lot of work in them, and it works well. Thanks for taking the question. All right. Thanks, Brent, and thank you. And I'm showing no further questions. I would now like to turn the call back over to Brian Lane for closing remarks. Okay, Justin.

Speaker Change: Okay.

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Operator: So in closing, I really want to thank our amazing employees. Once again, we're really grateful for their daily efforts. We do appreciate everyone's interest on the call, you know, in our business. It's great to talk about it. And thank you.

Yes.

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Speaker Change: Thanks.

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Brian E. Lane: We've got great customers, we've got great people. And, you know, really looking forward to how the year pans out. And, as well as seeing most of you on the road, probably here pretty soon. So thanks for that too. And I hope everyone has a great spring. Thanks, and enjoy your weekend.

Speaker Change: Yes.

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Operator: Thanks, folks. This concludes today's conference call. Thank you for participating and you may now disconnect. Thanks for watching! ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by.

Operator: And welcome to the Q1 2024 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. To ask a question during the session, you'll need to press * 11 on your telephone.

Julie S. Shaeff: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Julie Shaeff, Chief Accounting Officer.

Julie S. Shaeff: Thanks, Justin. Good morning. Welcome to Comfort Systems USA's first quarter 2024 earnings call. Our comments today, as well as our press releases, contain four forward-looking statements within the meaning of the applicable securities laws and regulations. What we will say today is based on the 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 our operations to be materially different from those set forth in our comments. You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K and Form 10-Q, as well as in our press release covering these earnings.

Okay.

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Julie S. Shaeff: A slide presentation has been provided as a companion to our remarks. This presentation is posted on the Investor Relations section of the company's website, found at ComfortSystemsUSA.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. Thanks, Julie.

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Brian E. Lane: Good morning, everyone, and thank you for joining us on the call today. 2024 is off to an outstanding start, with strong revenue, fantastic margins, and continuing strong cash flow. Our dedicated teams across the country achieved superb execution, and I am deeply grateful for their hard work and commitment. We earned $2.69 per share this quarter compared to $1.59 a year ago.

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Brian E. Lane: Our revenue was $1.5 billion, with same store growth of 23%. Our mechanical business exceeded last year, while our electrical segment achieved unprecedented marks. Backlog is $5.9 billion, up both year over year and sequentially on the same store basis, construction continues to thrive amid strong ongoing demand, and service is performing at a high level. In February, we closed two substantial acquisitions. Summit Industrial and J&S Mechanical, and they, too, are off to a great start. Both of these companies are included in our mechanical segment. We also increased our dividend by 20%, adding $0.05 to reach $0.30 per share.

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Brian E. Lane: This increase reflects our continuing strong cash flow and our commitment to reward our shareholders. 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?

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William George: Thanks, Brian. You know, I can't help but also express my gratitude to the people who are working every day to create these amazing results. So, as Brian noted, revenue for the first quarter of 2024 was $1.5 billion, and that is an increase of $362 million, or 31% compared to last year. Same store revenue increased by 23%, or $266 million, with the remaining $96 million increase resulting from acquisition.

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William George: Our mechanical segment revenue increased by 29%, and our electrical segment revenue increased by 37%. We did not experience as much seasonality this quarter as we have in the past, as an increasing proportion of our work is being performed in warmer climates. Additionally, weather in our colder climates was favorable for construction this quarter, and with the strong growth in modular, more of our work is being performed under the roof inside our modular plant. We are also facing tougher prior-year Copper Bowl results for the remainder of this year.

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Speaker Change: Good day, and thank you for standing by.

William George: However, our best estimate is that we will achieve same-store percentage revenue increases in at least the mid-teens and, more likely, in the high-teens for the whole year. Gross profit was $297 million for the first quarter of 2024, a $92 million improvement compared to a year ago. Our gross profit percentage improved to 19.3% this quarter, compared to 17.5% for the first quarter of 2023. The quarterly gross profit percentage in our electrical segment improved to 22.6% this year, as compared to 16.1% last month.

Speaker Change: And welcome to the Q1 2020 for comfort systems USA earnings Conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Speaker Change: He will then hear an automated message advising your hand is race to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Julie <unk> Chief Accounting Officer. Please go ahead.

Julie: Thanks, Jeff and good morning.

Julie: Welcome to comfort systems, Usa's first quarter 2024 earnings call our comments today as well as our press releases contain forward looking statements within the meaning of the applicable securities laws and regulation.

William George: Margins in our mechanical segment also increased in the quarter to 18.4% as compared to 17.9% in the first quarter of 2023. Our mechanical segment includes our modular business, which operates at lower margins than our remaining... EBITDA improved markedly to $170 million this quarter from an already strong $90 million in the first quarter of 2023. Same store EBIT increased by over 70%. Although the first quarter benefited from the favorable factors I mentioned earlier, and our underlying trends are strong, we expect that in 2024, EBITDA margins will continue to trend in the strong ranges that we have achieved over the last several quarters.

Julie: We'll 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 our operations to be materially different from those set forth in our comments.

Julie: You can read a detailed listing and commentary concerning our specific risk factors.

Julie: In our most recent Form 10-K and Form 10-Q as well as in our press release covering these earnings.

Julie: Slide presentation has been provided as a companion to our remark.

Julie: This presentation is posted on the Investor Relations section of the company's website found at comfort systems USA Dot com.

Julie: 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.

William George: And we are optimistic that full-year EBITDA margins in 2024 will match or exceed our high 2023 results. Gross margins should also remain strong, but gross margin percentage may be more variable in 2024 in light of the effect of amortization and certain purchase-related adjustments. SG&A expense for the quarter was $163 million, or 10.6% of revenue, compared to $135 million, or 11.5% of revenue, in the first quarter of 2023.

Brian E. Lane: Thanks Julie.

Brian E. Lane: Good morning, everyone and thank you for joining us on the call today.

Brian E. Lane: 2024 is off to an outstanding start.

Brian E. Lane: With strong revenue fantastic margins and continuing strong cash flow.

Brian E. Lane: Our dedicated teams across the country achieved superb execution and I am deeply grateful for their hard work and commitment.

Brian E. Lane: We earned $2 69 per share this quarter.

Brian E. Lane: <unk> to $1 59, a year ago.

Our revenue was $1 $5 billion.

Brian E. Lane: With same store growth of two 3%.

William George: On a same-store basis, SG&A spins with $19 million higher due to ongoing investments to support our higher activity level. Our operating income increased by 91% from last year, from $71 million in the first quarter of 2023 to $135 million for the first quarter of 2024. With improved gross profit margins and favorable FG&A leverage, our operating income percentage increased to 8.8% this quarter from 6.0% in the prior year. However, changes in the fair value of our earn-out obligations this quarter reduced our income by $12 million.

Brian E. Lane: Our mechanical business exceeded last year.

Brian E. Lane: Our electrical segment achieved unprecedented.

Brian E. Lane: Backlog is $5 $9 billion.

Brian E. Lane: Both year over year and sequentially on a same store basis.

Brian E. Lane: Construction continues to thrive amid strong ongoing demand and service is performing at high levels.

Brian E. Lane: In February we closed two substantial acquisitions.

Brian E. Lane: Industrial and Jane is mechanical.

And they too are off to a great start.

Brian E. Lane: Both of these companies are included mechanical segments.

Brian E. Lane: We also increased our dividend by 20%, adding five to reach <unk> 30 per share.

Brian E. Lane: This increase reflects our.

Brian E. Lane: Our continuing strong cash flow and our commitment to reward our shareholders.

William George: And that was caused by the variability noted earlier, and it was triggered by strong early performance at our recent acquisition. We always have purchase-related adjustments in the periods following an acquisition. However, they will likely be much larger over the next several quarters because of the size of the Summit and JNS acquisitions and the significant contingent consideration opportunities that were included in those transactions. Our first quarter tax rate was 21.7%. We currently estimate that the full-year 2024 tax rate will likely be in the 21 to 22% range.

Brian E. Lane: 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 built thanks, Brian.

William George: I can't help but also express my gratitude to the.

William George: The people who are working everyday to create these amazing results.

William George: So as Brian noted.

William George: Revenue for the first quarter of 2024 was $1 5 billion and that is an increase of 362 million or 31% compared to last year.

William George: Same store revenue increased by 23% or $266 million with the remaining $96 million increase resulting from acquisitions.

William George: Our mechanical segment revenue increased by 29% and our electrical segment revenue increased by 37%.

William George: We did not experience as much seasonality this fourth quarter as we have in the past as an increasing proportion of our work is being performed and warmer climates.

William George: After considering all these factors, net income for the first quarter of 2024 was $96 million, or $2.69 per share. This compares to net income for the first quarter of 2023 of $57 million, or $1.59 per share; free cash flow for the first quarter of 2024 was $123 million. We continue to benefit from advance payments for work that we will fund and complete in upcoming quarters, and Operating Cash Flow continues to exceed our earnings by about $300 million on a trailing 12-month basis.

William George: Additionally, weather in our colder climates was favorable for construction this quarter.

William George: And with the strong growth in modular more of our work is being performed under roof inside our modular plan.

William George: We are also facing tougher prior year comparable results for the remainder of this year. However, our best estimate is that we will achieve same store percentage revenue increases in at least the mid teens and more likely in the high teens.

William George: For the full year.

William George: Gross profit was $297 million for the first quarter of 2024.

William George: $92 million improvement compared to a year ago our.

William George: Over the coming quarters, we expect that eventually pre-booking and equipment advances will normalize, creating some cash flow difficulties. In the meantime, these collections have allowed us to invest in growth and fund acquisitions from current cash flows while lowering interest costs. Our total debt as of March 31, 2024, was $90 million, with no funded debt from our banks, and that was despite large cash payments for the Summit and JNS acquisitions in February.

William George: Our gross profit percentage improved to 19, 3% this quarter compared to 17, 5% for the first quarter of 2023.

William George: The quarterly gross profit percentage in our electrical segment improved to 22, 6% this year as compared to 16, 1% last year.

William George: Margins in our mechanical segment also increased in the quarter to 18, 4% as compared to 17, 9% in the first quarter of 2023.

William George: Our mechanical segment includes our modular business, which operates at lower margins than our remaining business.

William George: As Brian noted, we also increased our, Before I close, I want to mention one additional item, which is not directly relevant to our financial results, but that I wanted to flag for awareness. Last night, a Texas jury returned a jury verdict against one of our subsidiaries relating to a 2019 safety. The jury verdict was over $70 million. That cancels out to about 48 million per hour, assuming this jury's verdict is entered by the judge. We will pursue a number of strong appeals. Even if the appeals are unsuccessful, this event is not expected to have an impact on us.

William George: EBITDA improved markedly to $170 million this quarter from an already strong $90 million in the first quarter of 2023.

William George: Same store EBIT.

William George: <unk> increased by over 70%.

William George: Although the first quarter benefited from the favorable factors I mentioned earlier, our underlying trend in our underlying trends are strong and we.

William George: We expect that for 2024 EBITDA margins will continue to trend in the strong ranges that we have achieved over the last several quarters and we are optimistic that full year EBITDA margins in 2024 will match or exceed our high 2023 results.

William George: Gross margins should also remain strong, but gross margin percentage may be more variable in 2024 in light of the effect of amortization and certain purchase related adjustments.

Brian E. Lane: That's all I have, Brian. All right. Thanks, Bill. I am going to discuss our business and our outlook. Our backlog at the end of the first quarter was a record $5.9 billion. Since last year, our backlog has increased by 1.5 billion, or 33%. And about half of that increase was same store growth, and the other half... with new backlog from companies we acquired. A sequential backlog increased by $754 million, of which 612 men were related to acquisitions.

William George: SG&A expense for the quarter was $163 million or 10, 6% of revenue compared to $135 million or 11, 5% of revenue in the first quarter of 2023.

William George: On a same store basis, SG&A spend with 19 million higher due to ongoing investments to support our higher activity level.

William George: Our operating income increased by 91% from last year.

William George: From $71 million in the first quarter of 2023.

$135 million for the first quarter of 2024.

Brian E. Lane: Our same store, sequential backlog increased by $142 million, and pipelines remain strong. Our revenue mix continues to trend toward data center, chip fabrication, battery plants, life science, and food. Industrial customers accounted for 60% of total revenue in the first quarter, and they are major drivers of pipeline and backlog. Technology, which is included in industrial, was 30% of our revenue, a substantial increase from 19% the prior year. Institutional markets, which include education, healthcare, and government, are also strong and represent 23% of our revenue.

William George: With improved gross profit margins and favorable SG&A leverage our operating income percentage increased to eight 8% this quarter from 6.0% in the prior year.

William George: Changes in the fair value of our earn out obligations this quarter reduced our income by $12 million.

William George: And that was caused by the variability noted earlier and it was triggered by strong early performance at our recent acquisitions.

William George: We always have purchase related adjustments in the periods. Following an acquisition. However, they will likely be much larger over the next several quarters because of the size of the <unk> acquisition and the significant contingent consideration opportunities that were included in those transactions.

Brian E. Lane: The commercial sector remains reasonably active in the regions that we serve, but it is now a smaller part of our business at about 17% of revenue. The majority of our service revenue is for commercial customers.

William George: Our first quarter tax rate was 21, 7%. We currently estimate that the full year 2024 tax rate will likely be in the 21% to 22% range.

Brian E. Lane: So the share of our overall construction revenue from commercial has become relatively small. However, construction grew quickly and drove great results for us this quarter. Overall, construction accounted for 84% of our revenue, with projects for new buildings representing 59%, and Existing Building Construction, 25%.

William George: After considering all these factors net income for the first quarter of 2024 with $96 million or $2 69 per share.

William George: This compares to net income for the first quarter of 2023 of $57 million or $1 59 per share.

William George: Free cash flow for the first quarter of 2024 was $123 million.

Brian E. Lane: We include modular in new building construction, and modular this quarter with 16% of our revenue. Service revenue increased this quarter, but because of the growth in construction, even with a service revenue increase, service fell to 16% of total revenue.

William George: We continue to benefit from advanced payments for work that we will find a complete in upcoming quarters and operating cash flow continues to exceed our earnings by about $300 million.

William George: On a trailing 12 month basis.

William George: Over the coming quarters, we expect that eventually pre bookings and equipment advances will normalize creating some cash flow headwind in the meantime. These collections have allowed us to invest in growth and fund acquisitions from current cash flows while lowering interest cost.

Brian E. Lane: Our service, which remains seasonal, continues to be a great source of profit and cash flow for us. Comfort Systems USA is thriving, and our team members across the country are delivering exceptional results. Thanks for their excellence. In the light of the strong ongoing demand, we are optimistic that we will continue to achieve strong results in 2024. Safety, execution, and innovation remain at the forefront of our operation.

William George: Our total debt as of March 31, 2024 was $90 million with no funded debt from our banks and that was despite large cash payments for the summit and <unk> acquisitions in February.

Brian E. Lane: We believe that our commitment to our employees and to building legacies is the foundation of our success. Our number one priority is to preserve and grow the best workforce in our industry. And so, as always, I want to close by thanking our over 16,500 employees for their hard work and dedication. I will now turn it back over to Justin for questions.

William George: As Brian noted, we also increased our dividend.

William George: Before I close I want I mentioned, one additional item, which is not directly relevant to our financial results, but I wanted to flag for awareness.

William George: Last night of Texas jury returned a jury verdict against one of our subsidiaries relating to our 2019 safety end of it at that.

William George: The jury verdict was over $70 million.

William George: And that pencils out to about $48 million per ads.

William George: Assuming this jury's verdict has entered by the judge.

Operator: Thank you. And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

William George: We'll pursue a number of strong appeal.

Even if the appeals are unsuccessful.

It is not expected to have an impact on us financially.

Speaker Change: That's all I have Brian.

Brian E. Lane: Alright, Thanks Bill.

Operator: Please stand by while we compile the Q&A roster and one moment for our first question. And our first question comes from Alex Dwyer from KeyBank Capital Markets. Your line is now open.

Speaker Change: I am going to discuss our business outlook.

Brian E. Lane: Our backlog at the end of the first quarter was a record $5 9 billion.

Brian E. Lane: Since last year, our backlog it increased by $1 5 billion.

33%.

Alexander David Dwyer: Hi, team. Congratulations on a strong start to the year. Hi, Alex.

Speaker Change: And about half of that increase was same store growth and the other half.

Speaker Change: New backlog from companies we acquired.

Alexander David Dwyer: Hey Alex, thank you. Yep. So the EBITDA margin was very strong this quarter, and the guide for this year continues to call for a similar year. Can you just talk about the potential for margin expansion over the rest of the year? Is it just that the comps get tougher in the back half, or is there something in the recent performance that isn't sustainable as we progress through this year? Well, you know, this is Brian. I'll go first, and then Bill can follow up.

Speaker Change: Our sequential backlog increased by $754 million.

Speaker Change: $612 million related to acquisition.

Speaker Change: Our same store sequential backlog increased by $142 million and pipelines remained strong.

Speaker Change: Our revenue mix continues to trend towards data center.

Speaker Change: Chip fabrication battery plants.

Speaker Change: Life Science and food.

Speaker Change: Industrial customers accounted for 60% of total revenue in the first quarter.

Brian E. Lane: I mean, we're really pleased with the margins that we have right now. You know, if you're in that gross margin 18 to 20% range, I think you're executing at a high level over 19% for the quarter. So I think we're going to continue to be in that range throughout the year.

Speaker Change: In there and they are major drivers of pipeline and backlog.

Speaker Change: Technology, which is included in industrial was 30% of our revenue.

Speaker Change: A substantial increase from 19% in the prior year.

Institutional markets.

Brian E. Lane: You know, we'll have broad-based, excellent performance across our operating companies. So I mean, we might have a little fluctuation up and down as we go, but in general, you know, our performance has just been excellent. That's like, as we noted in our opening comments, we're definitely expecting our margins for the full year to stay up near last year and the recent amazing results we have, and we're optimistic we could do a little better. I will say, as you pointed out, later this year, we hit some very tough comparables, right?

Speaker Change: Which include education healthcare and government.

Speaker Change: Were also strong and represent 23% of our revenue.

Speaker Change: The commercial sector remains reasonably active in the regions that we serve.

Speaker Change: It is now part a smaller part of our business at about 17% of revenue.

Speaker Change: The majority of our service revenue is for commercial customers.

Speaker Change: So the share of our overall construction revenue from commercial.

Speaker Change: Has become relatively small.

Speaker Change: Construction grew quickly and drove great results.

Speaker Change: For us this quarter.

Speaker Change: Overall construction accounted for 84% of our revenue with projects for new buildings, representing 59%.

Speaker Change: An existing building construction, 25%.

Speaker Change: We include modular and new building construction and.

Brian E. Lane: We had extraordinary growth and increased, really progressively throughout the year and especially in the second half of the year last year. So one of the things you're seeing is even though last year the first quarter seemed like an extraordinary quarter, and it was, it got so much better later in the year that we're just facing tougher comparables. We're extremely optimistic, but they are tough comparables, and that's why we're giving that guy. Thank you, and then... The organic backlog growth was very strong this quarter.

Speaker Change: And module of this quarter with 16% of our revenue.

Speaker Change: Service revenue increased this quarter, but because of the growth in construction.

Speaker Change: Even with the service revenue increase service fell to 16% of total revenue.

Speaker Change: Service, which remains seasonal continues to be a great source of profit and cash flow for us.

Speaker Change: Comfort systems USA is thriving.

Speaker Change: Team members across the country.

Speaker Change: Delivering exceptional results.

Brian E. Lane: Can you talk about what end markets drove that strength and if there were any larger modular orders in there? And do you think it's fair to assume backlog can continue to increase sequentially through this year? But I mean, in terms of the backlog, it's broad-based. [inaudible] We didn't get, you know, one surge from any particular segment.

Speaker Change: Thanks to their excellence.

And in light of the strong ongoing demand.

Speaker Change: We're optimistic that we will continue to achieve strong results in 2024.

Speaker Change: Safety <unk>.

Speaker Change: Execution and innovation remain at the forefront of our operations.

Speaker Change: We believe that our commitment to our employees.

Speaker Change: And to building legacy is the foundation of our success.

Brian E. Lane: It's, you know, it's really reassuring to us here, to see multi-sectors, particularly if you're talking about... You know, the tech sector, manufacturing, education at the university level, strong, and health care, both outpatient and hospital. So we've seen a good balance, you know, across the board. And, you know, as far as what might happen in the coming quarters, it would actually surprise me. At some point, we might not see some sequential declines, right? You can't, especially as we get into the summer and the revenues get really big.

Speaker Change: Our number one priority is to preserve and grow the best workforce in our industry.

Speaker Change: And so as always I want to.

Speaker Change: I want to thank I want to close by thanking our over 16500 employees for their hard work and dedication.

I'll now turn it back over to Justin for questions. Thank you.

Justin: And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will be compile the Q&A roster.

Justin: And one moment for our first question.

Justin: And our first question comes from Alex Dwyer from Keybanc capital markets. Your line is now open.

Alexander David Dwyer: Hi team congrats on a strong start to the year Hi, Alex Alex. Thank you yes.

Brian E. Lane: Historically, we've always had sequential declines in the middle of the year, except for lately. So I've been, like I said, it would surprise me, but to be fair, I have been surprised quarter after quarter for the last several quarters. The demand is unmatched. There's never been more demand for our services. I think you'll see backlogs stay at extremely high levels, but I don't... So yeah, for sure, every sequential compare will be up. That's really not historically black.

Alex Dwyer: Yep.

Alexander David Dwyer: So the EBITDA margin was very strong this quarter and the guide for this year continues to call for similar to last year.

Alexander David Dwyer: Can you just talk about the potential for margin expansion over the rest of the year is it just that the comps get tougher in the back half or is there something in the recent performance.

Alexander David Dwyer: Isn't sustainable as we progress through this year.

This is Brad.

I'll go first and then bill can follow up I mean, we're really pleased with the margins that we have right now.

Brad: If you are in that gross margin to 18% to 20% range.

Brad: You are executing at a high level over and 19% for the quarter.

William George: So I think we're going to continue to be in that range throughout the year.

William George: Broad based excellent performance across all operating companies. So I mean might have a little fluctuation up and down as we go but in general.

Brian E. Lane: And then a last one from me, the Summit and JNS acquisitions are off to a strong start this year. Is there anything different about the integration of them into your business, given these are so large? And can you talk about the appetite for more deals through the year? You know, I'll just start on the integration, you know, the allies. What a little bit of an advantage you have with the allies is they get a little bit more horsepower, they're in the back office, they handle the public company requirements. These are both very sophisticated companies.

William George: Performance has been excellent.

William George: As we noted in our in the opening comments.

William George: We're definitely anticipating expecting.

William George: EBIT margins for the full year to stay up near.

William George: Last year and the recent amazing results, we have and we're optimistic we can do a little better I will say as you pointed out.

William George: Later this year, we hit some very tough comparables right, we had extraordinary.

William George: Both in increases really progressively throughout the year, especially in the second half of the year last year. So one of the things Youre, saying is even though last year. The first quarter seemed like an extraordinary quarter and it was.

Brian E. Lane: Excellent workforce, great leadership. So we're working pretty closely with them to make this as smooth as possible. But plus, they've got a great attitude to integrate themselves, which is a huge help. So, you know, so far, they're off to a great start. Yeah, I couldn't agree more.

William George: It got so much better later in the year that we're just facing tolerable tougher comparables were extremely optimistic but.

William George: Our tough comparables.

William George: That's why we're giving that guidance.

Speaker Change: Thank you and then the.

Speaker Change: Organic backlog growth was very strong this quarter.

Speaker Change: Can you talk about what end markets drove that strength and if there was any like larger modular orders in there and do you think it's fair to assume like backlog can continue to increase sequentially through this year.

Brian E. Lane: For us, integration, the biggest thing we try to do in integration is keep what's great about a company and keep it going and keep it... you know, the local. Excellent. Continuing. And so that's an advantage we have since we're not trying to change things. That makes integration a little easier. Thank you. I'll turn it over to you.

Speaker Change: Well I mean in.

Speaker Change: In terms of the backlog is broad based.

Speaker Change: We didn't get one search from any particular segment.

Speaker Change: It's really reassuring to us here.

Operator: All right. Thank you, and thank you. And one moment for our next question. And our next question comes from Adam Thalhimer from Thompson Davis. Your line is now open.

Speaker Change: We see multi sector is particularly if you're talking about.

Speaker Change: Tech sector manufacturing.

Speaker Change: <unk> stay at the University level strong in health care.

Adam Robert Thalhimer: Hey, good morning, guys. Great quarter. Hey, thanks, Adam. Good morning.

Outpatient on hospitals, so we're seeing good balance.

Speaker Change: Across the board.

Adam Robert Thalhimer: I wanted to stick on Summit and just see kind of what you're seeing so far, specifically from chip plants, kind of the timing of those projects. You know, they have great work going on and great prospects. I also have a big... SolarFab, and they have what these guys can do.

Speaker Change: As far as what might happen in the coming quarters.

Speaker Change: Actually surprised me.

Speaker Change: At some point not to see some sequential declines right you can't, especially as we get into the summer and the revenues get really big historically, we've always had sequential declines in the middle of the year, except for lately. So I've been I guess that it wouldn't surprise me, but to be fair I have been surprised.

Speaker Change: After quarter for the last several quarters the demand is.

Brian E. Lane: They're perfect to do the big, hard work that the country needs right now. That's why we were so excited to buy them. But right now...

Speaker Change: Is unmatched there has never been more demand for our services.

Speaker Change: And our guys are turning away, but at some point you can only take so much work and so I.

Brian E. Lane: It's full speed ahead. Yeah, you know what, Adam, in terms of their skill set, they're looking at a lot of opportunities in pharmaceuticals, etc. So, you know, their skills are applicable to a whole bunch of industries. Huh, okay. What kind of capacity growth potential do they have as you start to get more into the market? So, you know, when we buy a company, we don't push them to grow.

Speaker Change: I think you'll see backlog stay at extremely high levels, but I don't think you should say Oh, yes for sure every sequential comparable will be up in the field.

Speaker Change: That's really not historically what happened.

Speaker Change: And then last one from me.

The summit in China, China acquisitions are off to a.

Speaker Change: Strong start this year.

Speaker Change: Is there anything different about the integration of them into your business given there given these are so large and.

Speaker Change: And then can you talk about the appetite for more deals through the year.

Brian E. Lane: You know, we basically push them to do, well, we push them to grow their workforce, to really, really put their arms around and grow their workforce, which leads to growth in almost every case. But I would not say, for us, that's a growth story. I think, like almost any company we buy, they will grow over time. But for us, it's just an excellence story.

Speaker Change: I'll just I'll just start on the integration.

Speaker Change: It's a little bit of advantage you have in their lives, where they get a little bit more horsepower.

Speaker Change: <unk> office.

Speaker Change: I'll handle the public company requirements. These are both very sophisticated companies.

Speaker Change: Excellent workforce great leadership.

Speaker Change: So we're working pretty closely with them to make this as smooth as possible, but no.

Speaker Change: Plus they got a great attitude.

Brian E. Lane: Keep your workforce busy. And then I wanted to ask about specialty contractor capacity. Is it still there?

Speaker Change: Great themselves, which is which is a huge help itself.

Speaker Change: So far we're off to a great start I couldn't agree more.

Brian E. Lane: Do you think it's as tight now as it was kind of a year or two ago, and are you still booking work further out? Yeah, you know, Adam, for sure, you know, it's still tight. We've been, you know, we've been very fortunate to recruit some outstanding people. On the human resources side, we're tracking some great talent, but it is still tight. But we're a good place to work. We offer great compensation, PAG, and an opportunity to develop.

Speaker Change: The integration of the biggest thing we try to do it and integration is keep what's great about our company and keep it going and keep it.

Speaker Change: That local.

Excellent continuing and so that's an advantage we have since we're not trying to change things.

Speaker Change: That makes the integration a little easier here.

Speaker Change: Thank you I'll turn it over alright. Thanks. Thank you.

And thank you.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Adam <unk> from Thompson Davis. Your line is now open.

Brian E. Lane: We like to promote from within, so I think that'll be a struggle for a while, but we have good work, people like working here, you know, so I'm very optimistic about the future. All right, Bill, just a quick modeling thing. What do you have for DNA in Q2, since we only have acquisitions for part of Q1? So we had two months of those guys. I think it's in. We put in a, if you look in the footnotes, we actually have a table where we tell you exactly, well, almost exactly what we think it's going to be. So just you can go get the actual numbers from one of them.

Adam: Hey, good morning, guys great quarter.

Adam: Thanks, Adam good morning.

Adam: I wanted to stick on summit, and just see kind of what youre.

Adam: You are seeing so far specifically from chip plants kind of the timing of those projects.

Adam: Yes.

Adam: They have.

Adam: Great work going on and great prospects. They also have a big.

Adam: Solar fab and they have these guys can do.

Perfect to do the big hard work that the country needs right now Thats why we want we were so excited to buy them, but right now.

Adam: It's full speed ahead.

Speaker Change: No Adam in terms of their skill set.

Speaker Change: Looking at a lot of opportunities in pharmaceuticals et cetera. So.

William George: I was being lazy. Okay. Yeah, well, I'm being lazy, too, because I have to go look it up myself.

Speaker Change: His skills are applicable to a whole bunch of industries.

Speaker Change: Oh, okay, Okay, what kind of what kind of capacity growth potential today half as you start to get them more end markets.

William George: It's big. Like you saw the pop, right? And that was only two months ago.

Speaker Change: So.

Speaker Change: When we buy a company, we don't push them to grow.

William George: But you know, you're only required to publish that schedule once a year, but we publish it. We certainly publish it every quarter after we do an acquisition, because, you know, those non-cash charges. They're so crazy that we reduce our earnings by that, right? People want to know what the asset they own is doing, but gap is gap, and so that's what we do. Sounds good.

Speaker Change: We basically pushed them to do it well, we push them to grow their workforce.

Speaker Change: Really really put their arms around and grow their workforce, which leads to growth in almost every case.

But I would not say for us that's a growth story I think likely almost any company, we buy they will grow over time, but for US. It's just an excellence story.

Speaker Change: Now keep your okay.

Speaker Change: Workforce busy.

Speaker Change: And then I wanted to ask about specialty contractor capacity is it still.

William George: Thank you, Bill, and thank you. And one moment for our next question, and our next question comes from Josh Chan from UBS. Your line is now open.

Speaker Change: Do you think as tight now as it was kind of a year or two ago and are you still booking work further out.

Operator: Hey, good morning, guys. Congrats on a really good quarter. Thanks, George.

Speaker Change: Yes, Adam for sure.

Still tight.

Joshua K. Chan: Could you talk about the bidding environment for potential projects that are even before backlogs? Anything changing there, and how is pricing on those bids that you're putting together? Yeah, so, in terms of the pipeline, pre-order is still very robust, robust, it's still broad-based, and pricing is still reasonable, for sure.

Speaker Change: We've been we've been very fortunate.

Speaker Change: To recruit some outstanding people.

Speaker Change: On the human resource side, we're attracting some some great talent, but it is still tight but we are yes.

Speaker Change: We are a good place to work.

Speaker Change: We offer great compensation package opportunity to develop we'd.

Speaker Change: We'd like to promote from within.

Brian E. Lane: It's a great opportunity for us. You know, to work for a really good customer is to be very selective in the acquisition process. You know, we don't chase revenue, chasing the opportunities and the work that we're good at, but in terms of the sectors that I hit on before, the operations, the opportunities are very consistent today. No let up. No let up.

Speaker Change: So I think that'll be a struggle for a while but we have good work people like working here, so I'm very optimistic about the future.

Speaker Change: And Bill just a quick modeling thing.

William George: What do you have for DNA in Q2, since we only had the acquisitions for part of Q1.

William George: So we had two months of those guys I think.

William George: We put a if you look at the footnotes, we actually have a table, where we tell you exactly.

William George: Exactly what we think it is going to be so you can go get the actual numbers.

William George: From one of the footnotes.

Brian E. Lane: That's great to hear. And then on the data center side, could you just talk about how your conversations are going with your data center customers and any kind of update in terms of your thinking on when you might be able to expand module capacity again? You know, these are big organizations. So you're not just talking to one part of the organization, right? You're talking to people who desperately need the capacity and who understand, you know, how to partner with us. And you're also talking to parts of the organization whose job it is to purchase things and to try to get the lowest price.

Speaker Change: Being lazy okay.

Speaker Change: Yes.

Speaker Change: Ron.

Speaker Change: <unk> yeah.

Speaker Change: Because I'd have to go looking at myself.

Speaker Change: It looks like you saw the pop right and that was only two months of those guys.

Speaker Change: But you are only required.

Speaker Change: Wired to publish that schedule once a year, but we publish it we certainly publish it every quarter after we do an acquisition.

Speaker Change: Because of that.

Speaker Change: Those noncash charges.

Speaker Change: So.

Speaker Change: They really it's crazy that we're there.

Speaker Change: We reduced our earnings by that rate.

Speaker Change: People want to know what the asset they own is doing but GAAP is GAAP and so thats what we do.

Speaker Change: Sounds good thank you Doug.

Speaker Change: And thank you.

Okay.

Speaker Change: And one moment our next question.

Okay.

Speaker Change: And our next question comes from Josh Chan from UBS. Your line is now open.

Joshua K. Chan: Hey, good morning, guys congrats on a really good quarter.

Brian E. Lane: I would say that things are, as expected, and our, you know, what we try to do is just be a great partner for people. And if we really do our best work and get the best value for people, who reciprocate that. But I don't, I don't know that anything's changed, you know, essentially, we are in an all paths to market mindset of the Compact-Flexible Mindset. So they love getting this stuff built modularly.

Joshua K. Chan: Thanks, Josh.

Joshua K. Chan: Could you talk about the bidding environment for four potential projects that even our before backlogs anything changing there and how is pricing on those those bids that you are putting together.

Joshua K. Chan: Yes.

Joshua K. Chan: In terms of the.

Joshua K. Chan: Pipeline pre order is still very robust robust, it's so broad based.

Brian E. Lane: They're hiring our contractors, who build them in the traditional way. I just think that the demand is so great that they're... You know, they're just looking for people who can help them do what they need to do, and we love to do that for people who want to partner up. You know, George, I guess I'll add a little bit to the opportunities. You know, one of our strengths is the size of the company and the geographic spread we have. The opportunity to share labor is really an advantage that us and a few of our... and my colleagues throughout the country have to get some of these larger opportunities that we can handle both financially and from a resource basis.

Speaker Change: Pricing is still reasonable for sure.

Speaker Change: It's a great opportunity for us.

Speaker Change: The work for us.

Speaker Change: Really good customers will be very selective in the acquisition process, we don't chase revenue.

Speaker Change: Chase new opportunities in the work.

Speaker Change: We're good at but in terms of the sectors that I hit on the floor.

Speaker Change: The operations the opportunities are very consistent.

Speaker Change: Still today.

No letup no let up.

Speaker Change #100: Okay. That's.

Speaker Change #101: That's great to hear.

Speaker Change #101: And then on the datacenter side could you just talk about how your conversations are like with your data center customer then.

Speaker Change #101: Any kind of update in terms of your thinking on when you might be able to expand modular capacity again.

Speaker Change #101: These are these are big organizations, so youre not just talking to one part of the organization right Youre talking to the people who desperately need.

The capacity and who understand.

Brian E. Lane: Including, when you think about our suppliers, we're a good company to do business with, so our size right now is really helpful. And, you know, we use that size to be a partner to people, not, we don't try to use it against people. Any thoughts on whether you could expand capacity sometime later this year or into next year? So, if you're talking about modular, I would say that that is not something that we are currently making plans around, but we are evaluating. Okay. All right, and then just a modeling question.

Speaker Change #101: How to partner with Us and Youre also talking to parts of the organization, whose job it is to purchase things and to try to get the lowest price I would say that things are.

Speaker Change #101: As expected in <unk>.

Speaker Change #101: What we tried to do is just be a great partner for people and if really we do our best work and get the best value for people, who reciprocate that.

Speaker Change #101: But I don't I don't know that anything has changed essentially we they are in all past market.

Speaker Change #101: Mindset, so they love getting this stuff built modular Lee, thereby hiring are contractors, who build it in the traditional way.

Speaker Change #101: I think that the demand is so great that there.

Brian E. Lane: So EBITDA margins usually go up from Q1 to Q2. I know, Bill, you mentioned the lack of seasonality in Q1, but I was just wondering your thoughts about whether you can see a typical sequential margin expansion into the next quarter? Yeah, so even though margins do typically go up from the first quarter to the second quarter, first quarters have never been all-time highs by extraordinary amounts. So it's a it's a it's a very, insecure time for us to start saying it's, it's going to, we're going to have a sequential uptick in margins, only because of how high they are in the first quarter, which Right. But this quarter, this is a quarter where our EBITDA was up 70% on a same-score basis. We need to adjust to that in our brains, you know?

Speaker Change #101: They're just looking for people, who can help them do what they need to do and we love to do that for people who want to partner out.

Speaker Change #101: John.

Speaker Change #101: A little bit to the opportunities one of our strengths as a sizes comfort.

Speaker Change #101: And the geographic spread we have.

Speaker Change #101: Opportunity to shift labor, it's really an advantage.

Speaker Change #101: The last and a few of.

Speaker Change #101: Colleagues throughout the country have.

Speaker Change #101: To give some of these larger opportunities that we can handle both financially and from a resource basis.

Speaker Change #101: Including when you think about.

Speaker Change #101: Our suppliers, we're good companies do business with so our size right. Now is really has really helped us.

Speaker Change #101: And we use that site to be a partner to people not we don't try to use it against people right.

Speaker Change #101: Yes.

Speaker Change #102: And any thoughts on it.

Speaker Change #102: Whether you could expand capacity at.

Speaker Change #102: Sometime later this year or into next year.

William George: If we stick around these margins, we'll be happy folks. Yeah. Yeah. Yeah. That's definitely understood. That's a good problem to have, and congrats.

So if youre talking about modular I would say that that is not something that we are currently making plans around but we are evaluating.

Speaker Change #102: Okay.

Alright, and then just a modeling question. So so EBITDA margins usually go up from Q1 to Q2 I know Bill you mentioned the lack of seasonality in Q1, but I was just wondering your thoughts about what.

William George: Thank you. And, thank you. And one moment for our next question. And our next question comes from Julio Romero from Sudotian Company. Your line is now open.

Operator: Thanks. Hey, good morning, guys. Good morning, Julio.

Julio Alberto Romero: Hey, um, can you maybe talk about the margins you're seeing in construction? Are they trending upward? And are you seeing any fixed cost leverage as that modular business continues to grow? You know, for sure, our construction margins, um, you know, increased in the back half of this year into this year. There's a lot of reasons for it, but the crux of it is... You know, good job selection with good customers, but I got to tell you, we're executing in the field, which has always been a rubber meets the road for me at a very high level, and we're really very grateful to the folks that go out to these jobs every day and the work they're doing. So, minds are up. To me, a lot of it's about the execution that we're getting. Got it.

Speaker Change #102: Although you can see a typical sequential margin expansion into next quarters, yes. So EBITDA margins do typically go up from the first quarter to the second quarter, but first quarter have never been.

Speaker Change #102: <unk> highs by extraordinary amounts.

Speaker Change #102: It is a very.

Speaker Change #102: Insecure time for us to start saying.

Speaker Change #102: It's going to we're going to have sequential upticks in margins at the only because of how high they are in the first quarter.

I'm more comfortable talking about doing better this year than last year right, but one quarter. This is the quarter, where our EBITDA was up 70% on a same store basis.

Speaker Change #102: We need to adjust to that.

Speaker Change #102: <unk>.

Speaker Change #102: We stick around yes margins will be happy folks.

Speaker Change #103: Yeah Yeah.

Speaker Change #104: Definitely understood. That's a good problem to have and congrats guys.

Speaker Change #105: Thank you.

Julio Alberto Romero: Now, great execution. I'm just curious if there's any kind of fixed cost leverage that you see there as that grows. Well, you know, we saw our SG&A obviously dropped from 11.5 to 10.6. I would say

Speaker Change #106: And thank you.

Speaker Change #106: Okay.

Speaker Change #107: And one moment for our next question.

Speaker Change #107: And our next question comes from Julio Romero from Sidoti <unk> Company. Your line is now open.

Julio Alberto Romero: Hey, good morning, guys.

Julio Alberto Romero: Good morning, Julio Hey.

Julio Alberto Romero: Hey.

William George: We are definitely making investments to accommodate our growth and every sort of back office sales. But with revenue increasing the way it is, it certainly seems like our SG&A can't go up as fast as that, so I don't think you'll see a worse FG&A Lab over the course of the rest of this year.

Julio Alberto Romero: Can you maybe talk about the margins youre seeing in construction.

Are they trending upward and are you seeing any fixed cost leverage that modular business continues to grow.

But sure construction margins.

Julio Alberto Romero: Increase the back half of this year into this year.

Julio Alberto Romero: There's a lot of multiple reasons for it but the crux of it is.

William George: Now, revenue increases, you know, if we tell you we're going to be sort of in the mid-teens and more likely in the high-teens. In revenue increases, and we were in the 20s this quarter, that means it's going to average down some, so. So I would say maybe we don't get additional leverage, but I don't think you'd see additional leverage sequentially, but I think year over year, you're going to see a ton of leverage. And I don't even know that's just a guess.

Julio Alberto Romero: Good job selection of a good customers but.

Julio Alberto Romero: Tayo, we're executing in the field.

Julio Alberto Romero: Which is always where the rubber meets the road for me.

Julio Alberto Romero: Very high level.

Julio Alberto Romero: Really a very grateful to the folks that go out to these jobs everyday and the work we are doing so minus <unk>.

Julio Alberto Romero: To me a lot of it's about the execution that we're getting.

Tayo: Got it great execution I'm, just curious if theres any kind of fixed cost leverage that you see there as that grows.

Tayo: Yes.

Speaker Change #109: Our SG&A, obviously dropped from 11, 5% to 10.6.

William George: Right. And it is. And it will.

Speaker Change #109: I would say.

William George: The important part is year over year, as far as how that math comes down into what we're doing. I hope you apologize; I think I wasn't very clear on that. No, that was good commentary.

Speaker Change #109: We are we are definitely making investment to accommodate our growth and every from all sorts of back office sales.

But with revenue increasing the way it is.

Certainly things like.

SG&A can't go up as fast as that so I don't think you will see.

William George: What's your best guess as to when you will see some of this cash flow reversal? This has been a presentation by the U.S. Department of Labor. Well, our history of getting that right is poor because it keeps waiting, it keeps happening later. I'd say late this year, probably at some point, there is a sense in which, you know, it did flatten. Because we're going to show you a slide in our investor presentation.

Speaker Change #109: I don't think Youll see worse.

Speaker Change #109: SG&A leverage.

Speaker Change #109: Over the course of the rest of this year.

Speaker Change #109: Now revenue increases if we tell you we're going to be started in the mid teens or more likely in the high teens in revenue increase and we were in the <unk>. This quarter that means it's going to average down some so so.

Speaker Change #109: So I would say, maybe we don't get additional leverage.

Speaker Change #109: So I don't think you'd see additional leverage sequentially, but I think year over year youre going to see a ton of leverage.

William George: Last quarter, we had a slide in our investor presentation that showed that we had earned. Well, we cash flowed $300 million more than we earned in 2023. You're going to see at the end of the first quarter that on a trailing 12-month basis, we will have cash flowed more than we earned by $300 million. Here's the thing. So, the $300 million didn't go up, right? It didn't go down, but we didn't get it in our same store businesses.

Speaker Change #109: And I don't even know Thats, just the gas rate.

Speaker Change #109: It will the important part is year over year as far as.

Speaker Change #109: How that math is the math comes down into what we're doing.

Speaker Change #110: I Hope you followed that I think I wasn't very clear in that answer.

Speaker Change #111: No that was that was good commentary.

Speaker Change #111: And whats.

Speaker Change #111: What's your best guess as to when you see some of this cash flow reversal.

Speaker Change #112: As expected.

So our history of getting that right is poor.

Speaker Change #112: And keep waiting it keeps happening later I'd say late this year, probably at some point.

William George: Now, we did inherit some advance cash from our acquisition, especially at Summit, but in our same store businesses, we didn't get farther out. So, I think before you start to give some of it back, the first thing that happens is you stop getting more of it. And there were certainly signs in the first quarter that we stopped getting more of it.

Speaker Change #112: There is a sense in which it.

Speaker Change #112: It did.

Speaker Change #112: Latin because.

Speaker Change #112: We're going to show you a slide in our Investor presentation last quarter, we had a slide in our investor presentation that showed that we had.

Speaker Change #112: Earned.

Speaker Change #112: While we had cash flow $300 million more than we had earned in 2023 youre going to see at the end of the first quarter that on a trailing 12 month basis, we will have cash flowed more than we have earned by $300 million Here's the thing so the $300 million didn't go up it.

William George: Having said that, we're earning so much money that our cash flow, when I looked at why our cash flow was still so big in the first quarter, you know, in this past quarters, it's been a lot of earnings and advance cash. This quarter, it was just a lot of earnings and not giving back advance cash. So there was the, you know, there are signs of, you know, that flattening out as it literally has to, right? If you if somebody pays you to do a bunch of welding and electrical work.

Speaker Change #112: It didn't go down, but we didn't get in our same store businesses. We know we did inherit some advanced cash from our acquisition, especially at summit, but in our same store businesses, we didn't get farther out. So I think before you start to give some of it back. The first thing that happens is you start getting more of it and there was certainly signed in the first quarter that we stopped getting more.

Speaker Change #112: Of it having said that we're earning.

Speaker Change #112: So much money.

Speaker Change #112: Net cash flow a bit.

Speaker Change #112: I looked at why our cash flow was still so big in the first quarter.

William George: Sooner or later, you've got to do the welding and electrical work, and the welders and the electricians, you're going to pay them. You're going to have to pay them. It's a fantastic problem to have. Not really a problem, but it will look like a problem at some point because, at some point in the future, our cash flow will be less than our earnings by the amount that it was more than our earnings.

Speaker Change #112: In the past quarters, it's been a lot of earnings and advance cash this quarter. It was just a lot of earnings and not giving back advance cash.

Speaker Change #112: No.

Speaker Change #112: There was.

Speaker Change #112: There is signs of.

Speaker Change #112: Flat that flattening out as it literally has too right.

Speaker Change #112: If somebody pays you to do a bunch of welding in electrical work.

Speaker Change #112: Sooner or later you got to go do that welding and electrical work and the welders and the electrician youre going to pay them youre going to have to pay them. It's a fantastic problem to have.

William George: You know, it's a high-class program. It certainly is. Thanks for the call, guys. I appreciate it.

Operator: All right. Thanks, Julio. And thank you. And one moment for our next question, and our next question comes from Brent Thielman from DA Davidson. Your line is now open.

Speaker Change #112: Not really a problem, but it will look like a problem at some point because at some point in the future our cash flow will be less than our Ernie by the amount that it was more than our earnings.

Speaker Change #112: It's a high class problem.

Brent Edward Thielman: Hey, thanks. Good morning, guys. I'm going to ask about margins. Sorry. When you look at this quarter, I mean, just take a step back. Is the margin performance because you're getting paid more generally for what you do, or do you have the perfect mix of projects where you get paid more, or are you just that much more productive in the field? I would say all three.

Certainly thanks for the color guys I appreciate it thanks Leo.

Speaker Change #113: Thank you.

Speaker Change #113: Okay.

Speaker Change #114: And one moment our next question.

Speaker Change #114: And our next question comes from Brent Thielman from D. A Davidson your line is now open.

Brent Edward Thielman: Hey, Thanks, Good morning, guys, Hey, good morning, Greg.

Brent Edward Thielman: Going to ask about margin sorry.

Brent Edward Thielman: Yeah.

Brent Edward Thielman: When you look at this quarter I mean, just take a step back is the margin performance because you'll get paid more generally for what you do or that you have the perfect mix of projects, where you get paid more or you're just that much more.

Brent Edward Thielman: But, you know, the thing that we can really control on an everyday basis is how we're doing in the field. And, you know, Brent, you've heard this a lot of times, a different version of prefabrication takes it to more work we can do. Sort of inside, you know, a building and ship it to the field. The more productive, safer, the higher quality the work is, and we're doing more, you know, more prefabrication, you know, every day.

Brent Edward Thielman: Reductive in the field.

Speaker Change #115: I would say all three.

Speaker Change #115: But the thing that we really can control everyday basis.

Speaker Change #115: Is how we're doing it in the field then break it hurts us from a lot of times different version of pre fabrication face. It the more work we can do so.

Speaker Change #115: Inside.

Speaker Change #115: <unk> and ship it to the field, the more productive safety or the higher quality of the work as they.

Brian E. Lane: But, you know, it's a combination of all three, for sure, but we really cannot minimize how well we are at execution on a per person basis at these job sites, including service. We're talking a lot about construction, but our service folks are doing a hell of a job as well. And the other thing you've got to mention is electrical.

Speaker Change #115: And we're doing more and more prefabrication everyday so.

Speaker Change #115: But it's a combination of all three for sure, but we did we really cannot minimize.

Speaker Change #115: Well, we our execution on a per person basis at these job sites, including service and we've had a lot of our construction, but our service folks are doing a doing a hell of a job as well and the other thing you got to mention.

Speaker Change #115: As electrical like our electrical margins popped by 600 basis points this quarter and what was amazing about that we had something like that a year and a half ago, where we had an extraordinary gain in the quarter. This was just a.

Brian E. Lane: Like our electrical margins popped by 600 basis points this quarter. And what was amazing about that, we had something like that a year and a half ago, where we had an extraordinary gain in the quarter. This was just a mixture of everything good that can happen to a business because they're doing a great job, and our customers really value the ability we have to go out and bring in the manpower that's needed to do big jobs.

Speaker Change #115: A mixture of everything good that can happen to our business because they're doing a great job and our customers really value.

Speaker Change #115: The ability we have to go out and.

Speaker Change #115: Breaking the manpower that's needed to do big jobs.

Brian E. Lane: And they're allowing us to really help, you know, reward the people so that we can keep doing that. So Electrical is a mind-blown, really amazing quarter. And you know, you can say, well, is that a one-time blip? And the answer is, I wouldn't bet against them. I mean, they might, it's pretty hard to stay at this percentage, but I think they're just going to, they have a long runway ahead of them to do well.

They are allowing us to really reward the people. So that we can keep doing that so electricals mine Glen really amazing quarter, and you can say well is that a onetime blip and the answer is.

Speaker Change #115: I wouldn't bet against them.

Speaker Change #115: It's pretty hard to stay at this percentage, but I think they're just going to they've got a long runway ahead of them doing well.

William George: Okay. And just looking back, I don't think you guys have ever had a year when EBITDA margins for the rest of the year were below the first quarter. And I know the company in the mix has evolved quite a bit in the last 10 years. I heard you comment on why we should care. And there's one reason that we are. It's our EBITDA on the same store base, which was up 70% in the first quarter.

Speaker Change #115: Okay.

Speaker Change #115: And just looking back I don't think you guys ever had a year.

Speaker Change #115: When EBITDA margin through the rest of the year were below.

Speaker Change #115: First quarter.

Speaker Change #115: And I know I know the company and the mix has evolved quite a bit in the last 10 years I heard your comment kind of perfect storm of weather.

Speaker Change #115: Syed.

Speaker Change #115: I'm just trying to unpack the reasons why we should be careful in thinking.

Speaker Change #115: Yes.

Speaker Change #115: And there is one reason that we are.

Speaker Change #115: Our EBITDA and <unk>.

Speaker Change #115: <unk> store basis.

Speaker Change #115: <unk> was up 70% in the first quarter.

William George: It's pretty hard to see that happen and say, oh yeah, that's our new baseline. Right, so yeah, I understand we don't know what's going to happen. But these margins are for a first quarter. They're extraordinary. Now do I think we've got extraordinary margins in our future? I do. But on a comparable basis, it's a tough comparable.

Speaker Change #115: It's pretty hard to.

Speaker Change #115: See that happen and say Oh, yes, there is a new baseline.

Speaker Change #116: So, yes, I understand we don't know whats going to happen.

Speaker Change #116: But the margins are for our first quarter. They are extraordinary now do I think we've got extraordinary margins in our future I do but on a comparable basis.

Speaker Change #116: It's a tough comparable and we're about to hit tough comparables from the prior year and our first quarter was at a comparable for the ages.

William George: They were about to hit tough comparables from the prior year, and our first quarter was a comparable for the age. But we're about to make a lot of money. We'll go for it.

Speaker Change #116: But we're about to make a lot of money.

Brian E. Lane: Yeah, we'll make as much money as we can, and you can figure out what that means. I got an idea. Okay. I, I guess I wanted to come back to modular.

Speaker Change #117: We will go for it yes, we will make as much money as we can and you can figure out what that means.

Speaker Change #117: Yeah.

Speaker Change #117: And again the idea.

Speaker Change #117: Okay.

Speaker Change #117: Hi.

Speaker Change #117: Just wanted to come back to modular I mean, I think youre essentially booked in 2024.

Brian E. Lane: I mean, I think you're essentially booked in 2024. To what degree do you still have available... Capacity in 2025 to fill, and our conversation at all start in 2025? Um, I would say... We believe that if we had more capacity, we could sell more than we have capacity for in 25. We have more of our capacity at 25 sold than we would have thought was possible. And, you know, we don't think people are going to, we don't think, all of these factors are going to end by 26. But 26 alone, we don't, we don't have bookings.

Speaker Change #117: To what degree do you still have available.

Speaker Change #117: Capacity in 2025 to fill in our conversations.

<unk> at all for 2026.

Speaker Change #118: I would say.

Speaker Change #118: We believe that if we had more capacity, we could sell more than we have capacity for in 'twenty five.

Speaker Change #118: We have more of our capacity at 25 sold.

Speaker Change #118: Then we would have thought was possible.

Speaker Change #118: And we don't think people are going to we don't think.

Speaker Change #118: All of these factors.

Speaker Change #118: Are going to end by 26.

Speaker Change #118: But 26, a lot we don't really have bookings, we don't have we don't have the floor plan for the middle of 2026.

Brian E. Lane: You know, we don't have the floor planned for the middle of 2026. You know what I mean? Nobody's, nobody's doing manpower loading schedules right now for the Winter Olympics. Yeah, that took a long time.

Speaker Change #118: Nobody's nobody doing manpower loading schedules right now for.

Speaker Change #118: Yeah.

Speaker Change #118: For the Winter Olympics.

Speaker Change #118: Got it has a long time.

Brian E. Lane: And then maybe if you could just talk about the progression with new customers and modular. I know you don't want to talk about name specifics for obvious reasons, but how are you being able to diversify the customer base? So things are going great with our second large customer. We like them. They like us.

And then maybe if you could just talk about the progression with new customers and modular I know you don't want to talk about names specifics for obvious reasons.

Speaker Change #118: How are you being able to diversify the customer base in that business.

Speaker Change #118: So things are going great with our second large customer.

Speaker Change #118: Sure.

Speaker Change #118: We like them they like the product design, we think is very very clever.

Brian E. Lane: The product they've designed is very, very clever and is going to do a great job for them. You know, we've sold as much as we would have hoped we could sell by now. As far as diversifying, the thing that keeps us from diversifying is that fantastic customers are willing to buy all of our capacity. For example, we reserve a little bit of that capacity for a lot of long-term pharma customers who really rely on us to do certain things that any other people would have a hard time doing.

Speaker Change #118: Going to do a great job for them.

Speaker Change #118: Hold as much as we would've hoped we could sell by now as far as diversifying the thing that keeps us from diversifying is fantastic customers.

Speaker Change #118: Are willing to buy all of our capacity like we reserve a little bit of that capacity for a lot of long time pharma customers, who really rely on us to do certain things that other people would have a hard time doing we have to do that right because we owe it to them, but in general so.

Brian E. Lane: We have to do that right because we owe it to them. But in general, those two customers want all we can do, and... They've earned first, really, frankly, they've earned last look.

Speaker Change #118: So far those two customers one all we can do and.

Speaker Change #118: They've earned the de burned first really frankly, they've earned for at last look they've earned first look and last look theyre, great partners, absolutely and so as long as Theyre good partners we.

Brian E. Lane: They're great partners. Absolutely. And so, as long as they're good partners. We take, you know, we take what the market we do the work, the skills we have are applicable to all kinds of things, right? It's not like, but in our market, it's always lumpy.

Speaker Change #118: We take we take what the market we do the work.

Speaker Change #118: <unk>, we have are applicable to all kinds of things right, it's not like but in our market, it's always lumpy and it's always the case.

Brian E. Lane: And it's always the case that whatever there is, there's some there is more of something in any given year. And right now, you know, we're sticking with guys that need what we can do, and they've been great partners, and they've earned our loyalty. They asked us, "What do we need to do to have all of your capacity?", and we said, "Well, this would be what you need to do. And they did

Speaker Change #118: Theres, some theres more of something in any given year right now.

Speaker Change #118: We're sticking with guys that need what we can do and we they have been great partners and they've earned our loyalty.

Speaker Change #118: Yes, Dave asked US why do we need to do to have all of your capacity and we've said while this would be what you need to do and they've done it and Dave assets last year. They said what do you need in order to expand your capacity and we said look for it to be fair to our shareholders and the risks that we take and the costs. We would incur we need these kind of commitments and they made them.

Brian E. Lane: And they asked us, last year, what we needed in order to expand our capacity? And we said, look, to be fair to our shareholders and the risks that we take and the costs that we incur, we need these kind of commitments. And they made them.

Brian E. Lane: And so we're keeping our commitments to them. Yeah, just one last one, guys. I mean, I think it's, you know, obvious that the opportunities in data centers have brought a lot of attention to the company and the stock from investors and, you know, clearly, I think it's driving a lot of growth for you. Maybe just your perspective, is that overemphasized relative to, you know, some of the other things moving the needle for your business right now? You talk about manufacturing, industrial capacity, and I'd just be curious about your thoughts on that. Well, I mean, I think it's good.

Speaker Change #118: And so we're keeping our commitments to them.

Speaker Change #118: Yes.

Speaker Change #119: One last one guys I mean, I think it's <unk>.

Speaker Change #119: We estimate.

Speaker Change #119: The opportunity in data centers has brought a lot of attention to the company and the stock from investors.

Speaker Change #119: I think it's getting a lot of growth for you.

Speaker Change #119: Maybe just your perspective is that overemphasized relative to.

Speaker Change #119: Some of the other things moving the needle for your business right now you can talk about manufacturing industrial capacity.

Speaker Change #120: Curious to your thoughts to that.

Speaker Change #121: I think it is.

Brian E. Lane: You know, it's logical that people focus on data centers. As you know, where you and I were touring a couple of weeks ago was everybody's favorite topic. But, you know, if you look at the other stuff we've got going on, just take Indianapolis, for example, how much farming is going on, food, you know, there's a lot of sectors, you know, that are very busy and work that we're good at, whether you're talking about battery plants or food. Pharma, and Hospitals.

Speaker Change #121: It's logical that people focus on data centers.

Speaker Change #121: You and I was touring a couple of weeks ago was February favorite topic, but if.

Speaker Change #121: If you look at the other stuff we've got going on.

Speaker Change #121: Just take Indianapolis for example, how much pharma is going on.

Food.

Speaker Change #121: A lot of sectors that are very busy.

Speaker Change #121: Work that we're good at whether you're talking about battery plant food.

Speaker Change #121: <unk>.

Hospitals.

Brian E. Lane: You know, education and university work is still very strong, so I think we're seeing multi-sector activity. I think data centers are going to get a lot of attention for a while. But those other sectors, we love them.

Speaker Change #121: Advocation University work is still very strong so.

Speaker Change #121: I think we're seeing multi sector activity I think data centers is going to get a lot of attention for a while but those other sectors, we love them.

Brian E. Lane: We're doing a lot of work in them, and the work's going well. Thanks for taking the question. All right. Thanks, Brent, and thank you. And I'm showing no further questions. I would now like to turn the call back over to Brian Lane for closing remarks. Okay, Justin.

Speaker Change #121: Winning a lot of working on them and it works going well.

Speaker Change #122: Okay. Thanks for taking the questions guys alright, thanks Brent.

Speaker Change #123: Thank you.

Speaker Change #123: And I'm showing no further questions I would now like to turn the call back over to Brian Lane for closing remarks.

Brian E. Lane: So in closing, I really want to thank our amazing employees once again. We're really grateful for their daily efforts. We do appreciate everyone's interest in the call. You know, in our business, it's great to talk about it. And thank you. Yeah, I'm very optimistic about 2024.

Brian E. Lane: Okay, Justin so in closing I really want to thank our amazing employees. Once again, we are really grateful for their daily efforts.

Speaker Change #124: We do appreciate everyone's interest on the call.

Speaker Change #125: We're not a business it's great to talk about it in thank you.

Speaker Change #125: Are you optimistic about 2024.

Brian E. Lane: We've got great customers, we've got great people, and, you know, really looking forward to how the year pans out. And as well as seeing most of you on the road, probably here pretty soon, too. So thanks for that, too. And I hope everyone has a great spring. Thanks and enjoy your weekend. Thanks, folks. This concludes today's conference call. Thank you for participating, and you may now disconnect.

Speaker Change #126: We've got great customers, we've got great people.

Speaker Change #126: Really looking forward to how the how the year pans out and them as well as seeing most of you on the road.

Speaker Change #126: Probably hearing pretty sure pretty soon so thanks for that too and hope everyone has a great spring thanks and enjoy your weekend. Thanks folks.

Speaker Change #127: This concludes today's conference call. Thank you for participating and you may now disconnect.