Q2 2025 Comfort Systems USA Inc Earnings Call

July 25, 2025

Operator: Good day. Thank you for standing by. Welcome to the Q2 2025 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 will need to press star one one on your telephone. You will hear an automated message advising that your hand is raised. To withdraw your question, please press star one 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 S. Shaeff, Chief Accounting Officer. Your line is open.

Good day, and thank you for standing by, welcome to the Q2 2025 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 will need to press star 1, 1 on your telephone. You will then hear an automated message. Advising that your hand is raised to withdraw your question. Please press star 1 1 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.

Julie S. Shaeff: Thanks, Latonia. Good morning. Welcome to Comfort Systems USA's Q2 2025 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 upon 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. A slide presentation is provided as a companion to our remarks and is posted on the investor relations section of the company's website found at comfortsystemsusa.com.

Julie Shaeff: Thanks, Latonia. Good morning. Welcome to Comfort Systems USA's Q2 2025 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 upon 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. A slide presentation is provided as a companion to our remarks and is posted on the investor relations section of the company's website found at comfortsystemsusa.com.

Shape Chief account officer. Your line is open.

Thanks platonia. Good morning, welcome to Comfort Systems, USA's second quarter, 2025 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 upon 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, 10K and form 10 Q as well as in our press release covering these earnings.

Julie S. Shaeff: 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.

Julie Shaeff: 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.

the slide presentation is provided as a companion, to our remarks and is posted on the investor relations section of the company's website found at Comfort Systems, usa.com

Brian E. Lane: Okay, thanks, Julie. Good morning, and thank you for joining us on the call today. We had a fantastic quarter with amazing execution by our teams. This is the first time that our quarterly revenue has exceeded $2 billion. We earned an unprecedented $6.53 per share this quarter, which is an increase of 75% compared to a year ago. Our mechanical business had a sharp increase in profitability, and our electrical segment was higher as well. Service revenue and profits also increased by double-digit percentages. Our bookings were strong, and our backlog at the end of the quarter grew to a new high of $8.1 billion. Demand remains strong, especially in technology, and we continue to book work with good margins and good working conditions for our valuable people.

Brian Lane: Okay, thanks, Julie. Good morning, and thank you for joining us on the call today. We had a fantastic quarter with amazing execution by our teams. This is the first time that our quarterly revenue has exceeded $2 billion. We earned an unprecedented $6.53 per share this quarter, which is an increase of 75% compared to a year ago. Our mechanical business had a sharp increase in profitability, and our electrical segment was higher as well. Service revenue and profits also increased by double-digit percentages. Our bookings were strong, and our backlog at the end of the quarter grew to a new high of $8.1 billion. Demand remains strong, especially in technology, and we continue to book work with good margins and good working conditions for our valuable people.

Speaker Change: 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.

Okay. Thanks Julie.

Good morning, and thank you for joining us on the call today.

Speaker Change: We had a fantastic quarter with amazing execution by our teams.

Speaker Change: This is the first time that our quarterly Revenue has exceeded 2 billion dollars.

Speaker Change: We earned in unprecedented, 653 cents, per share this quarter.

Which is an, which is an increase of 75%.

Speaker Change: Compared to a year ago.

Speaker Change: I'm mechanical business had a shop increase in profitability and our electrical segment was higher as well.

Speaker Change: Service Revenue.

And profits also increased by double digit percentages.

Speaker Change: Uh, bookings were strong and our backlog. At the end of the quarter, grew to a new high of 8.1 billion dollars.

Demand remains strong, especially in technology.

Brian E. Lane: We are going into the second half of 2025 with significant same-store growth in both sequential and year-over-year backlog. I am happy to announce the acquisition and welcome Rightway Plumbing, a great plumbing business based in Florida that we expect will earn $60 to $70 million per year in revenue. We also increased our quarterly dividend by $0.05 to $0.50 per share, and we actively purchased shares during the first half of 2025. Despite a backdrop of tariff ambiguity and economic uncertainty, we feel fortunate to have good demand, especially for large and complex projects. Thanks to our amazing people, we expect continuing strong results in 2025.

Brian Lane: We are going into the second half of 2025 with significant same-store growth in both sequential and year-over-year backlog. I am happy to announce the acquisition and welcome Rightway Plumbing, a great plumbing business based in Florida that we expect will earn $60 to $70 million per year in revenue. We also increased our quarterly dividend by $0.05 to $0.50 per share, and we actively purchased shares during the first half of 2025. Despite a backdrop of tariff ambiguity and economic uncertainty, we feel fortunate to have good demand, especially for large and complex projects. Thanks to our amazing people, we expect continuing strong results in 2025.

And we continue to book work with good margins and good working conditions for our valuable people.

We are going in into the second half of 2025, with significant. Same store growth in both sequential and year-over-year. Backlog.

I am happy to announce the acquisition and welcome RightWay Plumbing. A great Plumbing business based in Florida that we expect we're in 60 to 70 million dollars per year in Revenue.

We also increased our quarterly dividend by 5 cents to 50 cents per share.

And we actively purchased shares during the first half of 2025.

Despite a d, a backdrop of tariff, ambiguity and economic uncertainty.

Speaker Change: We feel fortunate to have good demand, especially for large and complex projects.

Trent T. McKenna: Continuing success into 2026. Trent will discuss our operations and outlook in a few minutes, and I will make a few closing comments after our Q&A. First, I will turn the call over to Bill to review our financial performance. Bill?

Brian Lane: Continuing success into 2026. Trent will discuss our operations and outlook in a few minutes, and I will make a few closing comments after our Q&A. First, I will turn the call over to Bill to review our financial performance. Bill?

Speaker Change: Thanks to our. Thanks to our amazing people. We expect continuing strong results in 2025.

Speaker Change: And continuing success into 2026.

Speaker Change: Trent will discuss our operations and Outlook in a few minutes.

William George: Thanks, Brian. Yeah, our Q2 results are remarkable. With 19% same-store revenue growth, sharply higher margins, and over $220 million of free cash flow. We also achieved more than $300 million in quarterly EBITDA for the first time ever, that's a 50% increase over the same Q2 1 year ago. Revenue for Q2 2025 was $2.2 billion, an increase of $363 million or 20% compared to last year. Electric segment revenue grew by 49%, while mechanical segment revenue increased by 13%. Through 6 months, same-store revenue has grown by 17%. Currently, our best estimate is that for full year 2025, our same-store revenue increase will remain in that mid-teen range.

Speaker Change: But first, I will turn the call over to Bill to review our financial performance. Bill

Speaker Change: Thanks Brian. It's all right. Yeah, our second quarter results are remarkable with 19%. Same store, Revenue, growth sharply, higher margins and over 200 and 20 million dollars of free cash flow.

Speaker Change: We also achieved more than 300 million in quarterly ebitda for the first time ever. And that's a 50% increase over the same quarter 1 year ago.

Speaker Change: Revenue for the second quarter of 2025 was 2.2 billion an increase of 363 million or 20% compared to last year.

Electric segment, Revenue grew by 49% while mechanical segment Revenue increased by 13%.

Speaker Change: Through 6 months, same store Revenue has grown by 17%.

William George: Gross profit was $510 million for Q2 2025, $146 million higher than one year ago. Our gross profit percentage grew to a remarkable 23.5% this quarter compared to 20.1% for Q2 2024. Quarterly gross profit percentage in our mechanical segment jumped to 22.9% this year compared to 19.2% last year. Margins in our electrical segment also increased significantly to 25.3% as compared to 23.6% in Q2 2024. We currently expect that gross profit margins will continue in the strong ranges that we have averaged over recent quarters.

Speaker Change: I currently our best estimate is that for full year, 2025 our same store Revenue increase will remain in that mid te range.

Gross profit was 510 million for the second quarter of 2025.

146 million higher than 1 year ago.

Speaker Change: Our gross profit percentage grew to a remarkable 23.5% this quarter compared to 20.1% for the second quarter of 2024.

Quarterly gross profit percentage in our mechanical segment. Jumped to 22.9% this year compared to 19.2% last year.

Speaker Change: Margins in our electric SE electrical segment also increased significantly to 25.3% as compared to 23.6% in the second quarter of 2024.

William George: SG&A expense for the quarter was $210 million or 9.7% of revenue, compared to $180 million or 9.9% of revenue in Q2 2024. SG&A increased mainly from ongoing investments in people to support our higher activity levels. Our operating income increased by just over 60% from last year, from $185 million in Q2 2024 to $300 million for Q2 2025. With improved gross profit margins, our operating income percentage surged to 13.8% this quarter from 10.2% in the prior year. Our year-to-date tax rate was 20.7%.

Speaker Change: We currently expect the gross profit margins will continue in the strong ranges that we have averaged over recent quarters.

Speaker Change: Sg&a expense for the quarter, was 210 million or 9.7% of Revenue, compared to 180 million or 9.9% of Revenue in the second quarter of 2024.

Sgna increased mainly from ongoing investments in people to support our higher activity levels.

Speaker Change: Our operating income increased by just over 60% from last year from 195 million in the second quarter of 2024 to 300 million for the second quarter of 2025.

Speaker Change: With improved gross profit. Margins, are operating income percentage surged to 13.8% this quarter?

Speaker Change: From 10.2 percent in the prior year.

William George: Our effective tax rate in Q1 was lower due to interest we received on a delayed refund by the IRS that was associated with our 2022 federal tax return. We received that $118 million refund in April 2025, which included $11 million of interest. Excluding this item, our effective tax rate would have been approximately 23% year-to-date, and we expect our tax rate for the second half of 2025 to continue to be in that 23% range, with our full year effective rate a bit lower due to the discrete benefit recorded in Q1. In July 2025, the federal government enacted major tax reform legislation. We currently do not expect that the new and amended provisions will have any significant impact on our operating results or cash flows.

Speaker Change: Our year to-day tax rate was 20.7% our effective tax rate in the first quarter was lower due to interest. We received on a delayed refund by the IRS that was associated with our 2022, federal tax return.

Speaker Change: We received that 118 million refund in April 2025, which included 11 million of Interest.

Excluding this item, our effective tax rate would have been approximately 23% year to date.

Speaker Change: And we expect our tax rate for the second half of 2025 to continue to be in that 23% range.

With our full year effective rate of bit lower due to the discrete benefit recorded in the first quarter.

William George: After considering all these factors, net income for Q2 2025 was $231 million or $6.53 per share. That compares to net income for Q2 2024 of $134 million or $3.74 per share. This is an over 70% improvement from last year's already very strong showing. EBITDA increased to $334 million this quarter from a strong $223 million in Q2 2024. This 50% increase reflects great execution by our workforce and strong demand in our markets. As of 30 June, our 12-month trailing EBITDA exceeds $1 billion for the first time ever. Free cash flow for Q2 2025 was $222 million.

Speaker Change: In July 2025, the federal government enacted, major tax reform legislation. However, we currently do not expect that the new and amended Provisions will have any significant impact on our operating results or cash flows.

Speaker Change: After considering all these factors net income for the second quarter of 2025 was 231 million or 6.53 cents per share and that compares to net income for the second quarter of 2024 of 134 million or 3 dollars per share and this is an over 70% Improvement.

Speaker Change: From last year's already very strong showing.

Speaker Change: IBA increased to 334 million this quarter from a strong 223 million in the second quarter of 2024.

Speaker Change: This 50% increase reflects great, execution by our Workforce and strong demand in our markets.

Speaker Change: As of June 30th, our 12-month trailing ibida exceeds, 1 billion dollars for the first time ever.

William George: This quarter's cash flow includes two discrete cash flow items that largely offset each other. As previously discussed, we received a $118 million tax refund in April 2025 that was related to our 2022 federal tax return. In addition, the remaining impact of our long-awaited cash flow turnaround of the advanced customer payments from our modular operations completed this quarter. As expected, the advanced payment position that we enjoyed for several quarters has now roughly normalized, and we expect that starting now and over time, our cash flow should once again approximate our after-tax earnings subject to the quarter-to-quarter and seasonal variances that are typical in our industry. We purchased additional shares this quarter, and year-to-date, we have spent $111 million buying approximately 326,000 shares.

Speaker Change: Free cash flow for the second quarter of 2025 was 22022 Million.

Speaker Change: This quarter's cash flow includes 2. Discrete cash flow items that largely offset each other as previously. Discussed, we received a $118 million tax refund in April 2025, that was related to our 2022 federal tax return.

As expected the advanced payment position that we enjoyed for several quarters has now roughly normalized and we expect that starting now. And over time our cash flow should once again approximate our after tax earnings subject, to the quarter to quarter and seasonal of variances that are typical in our industry.

William George: Even after funding share repurchases and our RightWay acquisition, we are in a net cash position of more than $250 million. Considering our strong cash prospects, we remain in a great position to reward our shareholders and fund additional growth. That's all I've got on financial information. Trent, take it away.

Speaker Change: We purchased additional shares this quarter and year to date. We have spent 111 million buying approximately, 326,000 shares.

Trent T. McKenna: Thanks, Bill. I'm going to discuss our operations and outlook. Our backlog at the end of Q2 was a record $8.1 billion, a large sequential and year-over-year increase.

Trent McKenna: Thanks, Bill. I'm going to discuss our operations and outlook. Our backlog at the end of Q2 was a record $8.1 billion, a large sequential and year-over-year increase.

Speaker Change: Even after funding share repurchases and our RightWay acquisition, we are in a net cash position of more than 250 million and considering our strong cash prospects. We remain in a great position to reward our shareholders and fund additional growth and that's all I've got on financial information. So try, thanks Bill.

Speaker Change: I'm going to discuss our operations.

Trent T. McKenna: Since last year, our backlog has increased by $2.4 billion or 41%. $2.2 billion of the increase was same store. On a sequential basis, backlog increased by $1.2 billion or 18%, of which $1.1 billion was same store. Q2 bookings were especially strong in the technology sector, both in our traditional construction business as well as the modular part of our business. We are entering the second half of 2025 with same store backlog 37% higher than at this time last year. Our project pipelines remain at historically high levels. Industrial customers accounted for 63% of total revenue in the first half of 2025. They are major drivers of pipeline and backlog.

Trent McKenna: Since last year, our backlog has increased by $2.4 billion or 41%. $2.2 billion of the increase was same store. On a sequential basis, backlog increased by $1.2 billion or 18%, of which $1.1 billion was same store. Q2 bookings were especially strong in the technology sector, both in our traditional construction business as well as the modular part of our business. We are entering the second half of 2025 with same store backlog 37% higher than at this time last year. Our project pipelines remain at historically high levels. Industrial customers accounted for 63% of total revenue in the first half of 2025. They are major drivers of pipeline and backlog.

Our backlog at the end of the second quarter was a record 8.1 billion dollars a large sequential and year-over-year increase since last year. Our backlog has increased by 2.4 billion dollars or 41% and 2.2 billion dollars of the increase was same store.

On a sequential basis. Backlog, increased by 1.2 billion dollars or 18% of which 1.1 billion dollars was same store.

Absolutely strong in the technology sector both in our traditional construction business as well as the modular part of our business. We are entering the second half of 2025 with same store backlog 37% higher than at this time last year and our project pipelines. Remain at historically, high levels.

Trent T. McKenna: Technology, which is included in industrial, was 40% of our revenue, a substantial increase from 31% in the prior year. Manufacturing revenues were strong but declined modestly as our businesses chose to book a higher proportion of technology-related projects, particularly data center construction. Institutional markets, which include education, healthcare, and government, remain strong and represent 24% of our revenue. The commercial sector, which is a smaller part of our business, provided about 13% of revenue. Most of our service revenue is for commercial customers. Construction accounted for 85% of our revenue, with projects for new buildings representing 58% and existing building construction 27%. We include modular in new building construction, year to date, modular was 18% of our revenue.

Trent McKenna: Technology, which is included in industrial, was 40% of our revenue, a substantial increase from 31% in the prior year. Manufacturing revenues were strong but declined modestly as our businesses chose to book a higher proportion of technology-related projects, particularly data center construction. Institutional markets, which include education, healthcare, and government, remain strong and represent 24% of our revenue. The commercial sector, which is a smaller part of our business, provided about 13% of revenue. Most of our service revenue is for commercial customers. Construction accounted for 85% of our revenue, with projects for new buildings representing 58% and existing building construction 27%. We include modular in new building construction, year to date, modular was 18% of our revenue.

Speaker Change: Industrial customers accounted for 63% of total revenue in the first half of 2025 and they are major drivers of Pipeline and backlog.

Speaker Change: Technology which is included in industrial was 40% of our Revenue, a substantial increase from 31% in the prior year.

Speaker Change: Manufacturing revenues were strong but declined modestly as our businesses chose to book a higher proportion of technology related projects, particularly data center Construction.

Speaker Change: Institutional markets, which include education Healthcare and government remains strong and represent 24% of our Revenue.

Speaker Change: The commercial sector, which is a smaller part of our business provided about 13% of Revenue. Most of our service revenue is for commercial customers.

construction accounted for 85% of our Revenue with projects for new buildings representing 58% and existing building construction 27%

Trent T. McKenna: We currently have over 2.7 million sq ft of building capacity dedicated to our modular business. We expect to have around 3 million sq ft by early next year. Service revenue was up 10% and is 15% of total revenue. Service profitability was strong this quarter. Service continues to be a growing and reliable source of profit and cash flow. As mentioned before, we are entering the second half of 2025 with a backlog that is 37% higher on a same store basis than we had at this time last year. We have superb teams working hard for our customers every single day. Thanks to the dedication and hard work of our employees across the country, we are optimistic about our future.

Trent McKenna: We currently have over 2.7 million sq ft of building capacity dedicated to our modular business. We expect to have around 3 million sq ft by early next year. Service revenue was up 10% and is 15% of total revenue. Service profitability was strong this quarter. Service continues to be a growing and reliable source of profit and cash flow. As mentioned before, we are entering the second half of 2025 with a backlog that is 37% higher on a same store basis than we had at this time last year. We have superb teams working hard for our customers every single day. Thanks to the dedication and hard work of our employees across the country, we are optimistic about our future.

We include modular in new building construction and year-to-date modular was 18% of our Revenue.

Speaker Change: We currently have over 2.7 million square feet of building capacity dedicated to our modular business and we expect to have around 3 million square feet by early next year.

Speaker Change: Service Revenue was up 10% and is 15% of total revenue.

Speaker Change: Service profitability was strong this quarter and service continues to be a growing and reliable source of profit and cash flow.

Speaker Change: As mentioned before, we are entering the second half of 2025 with a backlog. That is 37% higher on the same store basis than we had at this time last year and we have superb teams working hard for our customers every single day.

Trent T. McKenna: I want to close by joining Brian and Bill in thanking our over 20,000 employees for their hard work and dedication. I will now turn it back over to Latonia for questions. Thank you.

Trent McKenna: I want to close by joining Brian and Bill in thanking our over 20,000 employees for their hard work and dedication. I will now turn it back over to Latonia for questions. Thank you.

Speaker Change: Thanks to the dedication and hard work of our employees across the country. We are optimistic about our future.

Brian: I want to close by joining Brian and Bill, and thanking our over 20,000 employees for their hard work and dedication.

Operator: Certainly. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile our Q&A roster. Our first question will be coming from Sangita Jain of KeyBanc Capital Markets. Your line is open.

Brian: I will now turn it back over to Laton, Laton, Latonia for questions. Thank you, certainly. As a reminder to ask a question, please press star 1, 1 on your telephone and wait for your name, to be announced to withdraw your question. Please, press star 1 1, again, please stand by. When we compile our Q&A roster.

Sangita Jain: Good morning. Thank you for taking my questions. Appreciate the update on the modular square footage. Can you tell us how you're thinking about the extent of expansion in your modular capabilities and your thoughts on possibly adding a third location?

Speaker Change: And our first question will be coming from sanjida Jane of keybanc. Capital markets, your line is open.

Sanjida Jane: Um, good morning, thank you for taking my questions. Um so appreciate the

Trent T. McKenna: Sangita, I would say that we like what we've been doing, which is adding incremental capacity, as, you know, in a way that's measured and really spending even a bigger focus or at least as much focus on improving productivity and automation in our existing spaces. I think, you know, the kind of growth you've seen as long as the market supports it and as long as the amazing people who run these two businesses for us are convinced that they have the bandwidth to implement it, as long as that, as things hold true, we'll probably continue the same kind of incremental build out. It feels as if that demand is there, to say the least, actually. I don't know. I hope that answers your question.

William George: Sangita, I would say that we like what we've been doing, which is adding incremental capacity, as, you know, in a way that's measured and really spending even a bigger focus or at least as much focus on improving productivity and automation in our existing spaces. I think, you know, the kind of growth you've seen as long as the market supports it and as long as the amazing people who run these two businesses for us are convinced that they have the bandwidth to implement it, as long as that, as things hold true, we'll probably continue the same kind of incremental build out. It feels as if that demand is there, to say the least, actually. I don't know. I hope that answers your question.

Update on the modular square footage. Um can you tell us how you're thinking about the extent of expansion in your modular capabilities and your thoughts on possibly adding a third location?

Sanjida Jane: sauna I I would say that we like what we've been doing, which is

Adding.

Incremental capacity, as you know, in a way that's measured and really spinning, even a bigger Focus or at least as much Focus.

On improving productivity and Automation in our existing spaces. Um, so I think, you know, the kind of growth you've seen as long as the market supports it and, as long as

Trent T. McKenna: As far as the third location, you know, that's something we think about on a long-term basis. We have two pretty great locations, right? We're right in the middle of the Mid-Atlantic. Houston is pretty well located, especially for the, you know, for the markets that these things need to go to. Even considering the states you have to drive through, because that's a consideration because different states have different load requirements. I'm not sure that's a high priority for us right now, but we're very open-minded to it.

William George: As far as the third location, you know, that's something we think about on a long-term basis. We have two pretty great locations, right? We're right in the middle of the Mid-Atlantic. Houston is pretty well located, especially for the, you know, for the markets that these things need to go to. Even considering the states you have to drive through, because that's a consideration because different states have different load requirements. I'm not sure that's a high priority for us right now, but we're very open-minded to it.

Sangita Jain: Got it. If I can follow up, I know you said that the reconciliation bill does not, maybe does not necessarily directly apply to what you do, but the bonus depreciation does help many of your customers, as probably the Trump executive order on AI. Can you talk a little bit about if you've had any initial conversations with your customers around that?

William George: Got it. If I can follow up, I know you said that the reconciliation bill does not, maybe does not necessarily directly apply to what you do, but the bonus depreciation does help many of your customers, as probably the Trump executive order on AI. Can you talk a little bit about if you've had any initial conversations with your customers around that?

Sanjida Jane: The amazing people who run these 2 businesses for us are convinced that they have the bandwidth to implement it. Um, as long as that is things, hold true. We'll probably continue the same kind of incremental, build out. It feels as if that demand is there. Um, if to say the least actually. And so, I don't know. I hope that I hope that answers your question as far as a third location. You know, that's something we think about, on a long term basis. We have 2 pretty great locations, right? We're right in the middle of the Mid-Atlantic Houston is pretty well located, especially for the, you know, for the markets that these things need to go to and even considering the states, you have to drive through because that's a consideration because different states have different load requirements. So I'm not sure that's a high priority for us right now, but we're very open-minded to it.

Trent T. McKenna: Yeah. The bonus depreciation helps them and us some. I would say that I would not view that as an important driver for us at a time when we're already experiencing demand that far outstrips what we could possibly do. You know, anything that makes people a little hungrier is good, right? I wouldn't consider that an important consideration.

William George: Yeah. The bonus depreciation helps them and us some. I would say that I would not view that as an important driver for us at a time when we're already experiencing demand that far outstrips what we could possibly do. You know, anything that makes people a little hungrier is good, right? I wouldn't consider that an important consideration.

Speaker Change: Got it and if I can follow up um I know you said that the reconciliation Bill does not maybe does not necessarily directly apply to what you do but the bonus depreciation does help. Many of your customers as probably the Trump executive order on AI. Can you talk a little bit about if you've had any initial conversations with your customers around that?

Speaker Change: Yeah, the bonus depreciation helps them and us.

Some.

I would not view that as an important driver for us at a time when we're already experiencing demand of our outstrips, what we could possibly do

but, you know, anything that

Makes.

Sangita Jain: Got it. Appreciate your thoughts, Bill.

People, a little hungrier is good, right? But I, I wouldn't consider that an important consideration.

Operator: Thank you. one moment for our next question. Our next question will be coming from Akash Singh. Your line is open. Again, our next question will be coming from Akash Singh. Your line is open. Moving forward, our next question will be coming from Julio Romero of Sidoti & Company. Your line is open.

I would appreciate your thoughts, bill.

Bill: Thank you. And 1 moment for our next question.

Our next question will be coming from.

A cash thing. Your line is open.

Bill: Again, our next question will be coming from a cash thing. Your line is open.

Moving forward. Our next question will be coming from Julio.

[Analyst] (Sidoti & Company): Yes. Hello, good morning. This is Alex on for Julio. Congrats on the quarter.

Julio Romero: Yes. Hello, good morning. This is Alex on for Julio. Congrats on the quarter.

Julio Romero: Romero of sidonian company, your line is open.

Trent T. McKenna: All right, thank you.

Trent McKenna: All right, thank you.

William George: Good morning.

Speaker Change: Yes, hello, good morning. This is Alex on for Julio. Congrats on the quarter.

[Analyst] (Sidoti & Company): My first question, you know, maybe we could start with, just some color on growth for the remainder of 2025. I know backlog, you know, and revenues have grown meaningfully even over, you know, the historical comps that you've mentioned that were a little tougher. How's your confidence that this sort of continues positively, into 2025 and 2026 and, you know, maybe some of the conversations that have led to that?

Julio Romero: My first question, you know, maybe we could start with, just some color on growth for the remainder of 2025. I know backlog, you know, and revenues have grown meaningfully even over, you know, the historical comps that you've mentioned that were a little tougher. How's your confidence that this sort of continues positively, into 2025 and 2026 and, you know, maybe some of the conversations that have led to that?

All right. Thank you morning.

Speaker Change: My first question, you know, maybe we could start with, uh, just some color on growth for the remainder of 25.

Trent T. McKenna: You know, Alex, you know how our backlog is always very lumpy, right? We don't spend a lot of time thinking about that and when jobs land kind of at a, on a time, on a timescale. What we're really looking at is kind of our future pipelines. What we see right now is very robust pipelines. They continue to be robust even with all the bookings we had in Q2. Yeah, things are still very bullish with regard to future work. Hey, Alex, this is Brian. I'm just gonna jump in also service, right, as, you know, Bill and Trent mentioned, we're getting good growth in service. It's about a $1.2 billion business for us now, growing about 10% this last quarter.

Trent McKenna: You know, Alex, you know how our backlog is always very lumpy, right? We don't spend a lot of time thinking about that and when jobs land kind of at a, on a time, on a timescale. What we're really looking at is kind of our future pipelines. What we see right now is very robust pipelines. They continue to be robust even with all the bookings we had in Q2. Yeah, things are still very bullish with regard to future work. Hey, Alex, this is Brian. I'm just gonna jump in also service, right, as, you know, Bill and Trent mentioned, we're getting good growth in service. It's about a $1.2 billion business for us now, growing about 10% this last quarter.

Speaker Change: I know backlog, you know, in revenues have grown meaningfully even over, you know, the, the historical comps that you've mentioned. That were, were a little tougher. So, you know, how's your confidence at this sort of continued positively, uh, into 25 and 26, and, you know, maybe some of the conversations that have led to that,

Speaker Change: You know, Alex you know how our our backlogs always very um lumpy, right? So we we don't

Speaker Change: We don't spend a lot of time.

Speaker Change: Thinking about that and where when jobs land kind of that on a time on a time scale, what we're really looking at is kind of our future pipelines and what we see right now is very robust pipelines. Um, they continue to be robust even with all the bookings we had uh in the second quarter.

Speaker Change: Um so yeah things are still very bullish with regard to uh future work. Hey Alex I'm just this is Brian I'm just going to jump in also service right.

Trent T. McKenna: That's been nice, consistent growth both from a revenue and profitability standpoint, add on to the construction growth.

Trent McKenna: That's been nice, consistent growth both from a revenue and profitability standpoint, add on to the construction growth.

[Analyst] (Sidoti & Company): Very helpful color. Thank you. I think, you know, kind of rising above consistent growth, you had a very nice, you know, earnings performance. I think you know, you wrote about anticipating solid earnings for the remainder of 25 and into 26. Could we get a little color there? You know, is solid sort of a statement of continuing where we are now or, you know, is that a little bit more from historicals? Just a little color would be helpful.

Julio Romero: Very helpful color. Thank you. I think, you know, kind of rising above consistent growth, you had a very nice, you know, earnings performance. I think you know, you wrote about anticipating solid earnings for the remainder of 25 and into 26. Could we get a little color there? You know, is solid sort of a statement of continuing where we are now or, you know, is that a little bit more from historicals? Just a little color would be helpful.

Speaker Change: Is, you know, Bill and Trent mentioned. We're getting good growth in service. It's about a being 2 business first. Now growing about 10% this last quarter, so that's been nice, consistent growth both from a revenue and profitability standpoint uh, head on to the construction growth.

Very helpful College. Thank you. And I think, you know, kind of rising above consistent growth. You had a very nice, you know, earnings performance. Um and I think you you know you wrote about anticipating solid earnings for the remainder of 25 and into 26.

So could we get a little color there? You know, it's solid sort of a statement of continuing where we are now or, you know, is that a little bit more from historicals, just a little color would be helpful.

William George: Well, we have a lot of work to do. We think our guys are the best in the world at doing it. Our customers want it. They're willing to pay for it. I think we just feel pretty great about at least the foreseeable demand and our ability to profitably meet it. We don't really have additional guidance on margins and stuff. These margins are pretty eye-popping and we're still digesting them. We feel pretty darn bullish about our prospects going forward.

Speaker Change: Uh, we have a lot of work to do.

Speaker Change: We think our guys are the best in the world at doing it. Our customers want it, they're willing to pay for it.

Speaker Change: Um,

Speaker Change: so I think we just feel pretty great about at least the foreseeable.

Um, demand and our ability to profitably meet it, we don't really have additional guidance on margins and stuff. These margins are pretty eye-popping and uh we're still digesting them. But um,

Trent T. McKenna: Yeah. You know, Alex, if you look at these, you know, our gross margin is 23.5%, which is strong. Again, a good combination of, you know, pricing, which is out there as well as the execution has been just terrific. I think we're pretty optimistic about our results over the end of this year into next year for sure.

Trent McKenna: Yeah. You know, Alex, if you look at these, you know, our gross margin is 23.5%, which is strong. Again, a good combination of, you know, pricing, which is out there as well as the execution has been just terrific. I think we're pretty optimistic about our results over the end of this year into next year for sure.

We still pretty darn bullish about about our prospects going forward? Yeah, you know, Alex if you if you look at these, you know, gross margins 23 and a half percent which is

Strong. So again you a good combination of you know, pricing.

Speaker Change: Uh, which is out there as well as the execution has been just terrific. So,

[Analyst] (Sidoti & Company): Great. Well, very exciting results again and, you know, a lot more questions, but we'll jump back in the queue. Thank you.

Julio Romero: Great. Well, very exciting results again and, you know, a lot more questions, but we'll jump back in the queue. Thank you.

Speaker Change: Uh I think we're pretty optimistic about our results over the end of this year next year for sure.

Trent T. McKenna: All right. Thank you.

William George: All right. Thank you.

Great. Well, very exciting results again and you know a lot more questions but we'll we'll jump back in the queue. Thank you.

Operator: Our next question will be coming from Brent Thielman of D.A. Davidson & Co. Your line is open.

Speaker Change: All right. Thank you.

Brent Thielman: Thanks. Good morning. Great, great quarter, guys. I guess the first question, just Trent, you commented on the manufacturing kind of customer side and that you ultimately were focusing maybe a bit more on the data center tech customers where you know, may get the best opportunity out of it. I guess the question is, has that market or pipeline of opportunities on that side subsided or it's just simply your workers are fungible when you're going to best opportunities?

Brent: And our next question will be coming from Brent. The man of Da Davidson & Company, your line is open.

Brent: Hey, thanks. Good morning, great. Uh, great quarter guys. Um, I guess um, the first question just um,

Trent T. McKenna: No, it hasn't subsided. It's still strong. What really is happening is the best opportunities right now are presenting themselves more often than not on the technology side. Companies are choosing to, you know, put their, put their skilled workforce in the best possible circumstances to be successful. That's with the technology customers right now. Hey, you know, Brent, just to follow why. I mean, our operating companies, I think, are doing a superb job with project selection. Stuff that we're really, you know, good at doing in places where we're strong. You gotta really tip your hat to them about the work they're bringing in here and how they're doing it.

Trent McKenna: No, it hasn't subsided. It's still strong. What really is happening is the best opportunities right now are presenting themselves more often than not on the technology side. Companies are choosing to, you know, put their, put their skilled workforce in the best possible circumstances to be successful. That's with the technology customers right now. Hey, you know, Brent, just to follow why. I mean, our operating companies, I think, are doing a superb job with project selection. Stuff that we're really, you know, good at doing in places where we're strong. You gotta really tip your hat to them about the work they're bringing in here and how they're doing it.

Brent: You'd commented on the manufacturing kind of customer side and that you ultimately were focusing. Maybe a bit more on the data center, Tech customers where you, you know, make it the best opportunity out of it. I guess. The question is is that has that market or pipeline of opportunities on that side subsided or it's just simply you, your workers are fungible when you're going to best opportunities.

It has a subsided, it's still a strong. Um, so what really is happening is the best opportunities right now, are presenting themselves more more.

Brent: On the technology side. And so companies are choosing to, you know, put their put their skilled, uh, Workforce in the best possible circumstances to be successful. And that's what the technology customers right now.

Speaker Change: Hey, you know, Brett just to follow up. I mean our operating companies, I think are doing a superb job with project selection.

Speaker Change: um, stuff that we're really, you know, good at doing

Brent Thielman: Yeah. On modular, I heard you say 18% of revenue year to date. Could you possibly comment maybe on, you know, the proportion modular represents in backlog today? Also, just from a customer standpoint, you know, is there an opportunity to add another hyperscaler to what you already have, just with the incremental capacity you're adding? Is that capacity add really to serve, you know, the customers, existing customers you have today?

Uh, in places where we're strong. So you got to really tip your head to all of them about the work, they're bringing in here and how they're doing it.

Speaker Change: Um, and then on modular, I heard you say 18% of Revenue year to date, could you possibly comment maybe on

Speaker Change: you know, the proportion modular represents and backlog today and then also um, just from a customer standpoint,

William George: Your second question, the opportunity is there. There are people who would buy our product. Our two main customers really are our best option to sell to right now. You know, across our businesses right now, there's a general tendency of our guys, of our leaders, of our, you know, the people who interact with our customers, to choose to do business with the customers who realize that we're trying to do something together as opposed to trying to do something that is, you know, a fight. We're really choosing who we give our unbelievable and scarce resources to by the people who really wanna go out there, build a good project, build it right, build it quick, work together, understand that everybody has to be paid for the risk they take.

Speaker Change: Um, you know, is there an opportunity to add another hyperscaler to what you already have? Um, just with the incremental capacity you're adding or is that capacity? Add related to serve, you know, the customers existing customers you have today.

Speaker Change: So,

Speaker Change: Just your first, your second question. The opportunity is there. There are people who would

Speaker Change: Who would buy our product. The people that our 2, main customers really are are, are, are best option to sell to right now, you know, across our businesses right now. There's a general tendency of our guys, of our leaders of our, you know, the people who interact with our customers to choose to do business with the customers who realize that we're trying to do something together.

Speaker Change: as opposed to trying to do something that is um

You know.

Speaker Change: A fight. So we're really really choosing who we?

William George: I think ultimately, that's the experience we're having with those customers, and that's really valuable to us.

Give our unbelievable and scarce resources to buy. The people who really want to go out there. Build a good project, build it, right. Build it quick. Work together. Understand that everybody has to be paid for the risk. They take and

so, I think ultimately, um,

Speaker Change: That's the experience we're having with those customers. And that's really, really valuable to us.

Brent Thielman: Okay. Sorry, just the question around modular proportion of backlog, is that something you could comment on or how we might think about-

William George: You know.

Brent Thielman: You know, what's in the book of business.

William George: Modular is going to continue to grow, right? We're investing in new space. We're improving our productivity. There's a range of how fast it could grow. If you made me pick an over-under, I'd say now that we think that the business overall is gonna grow mid-teens, I think modular should stay near that percentage.

Okay. And and sorry, just the the question around modular proportion of backlog. Is that something you could call in on or, or how we how we might think about, you know, you know, what's in the book of business.

Brent Thielman: Yeah.

William George: Now, having said that, I fully recognize it's grown from, you know, 4 to 6 to 8 to 10 to 12. You know what I mean? You know, we have such good demand and opportunity in all of our businesses that Everybody's great at getting bigger and better. It's a pretty tough chore to become a bigger percentage of our company right now.

but um you know, we have such good demand and opportunity in all of our businesses but it's a pretty

Speaker Change: it's a, it's

Brent Thielman: Okay. If I could sneak one more in, just maybe another approach to kind of the visibility question. Could you talk about the funnel or pipeline and what that looks like today as you look into 2026 and possibly into 2027--, I mean, I'm sure you're having conversations about next year at this point, but is the dialogue with customers becoming much more active about, you know, opportunities into 2027 at this point?

Speaker Change: Everybody's great at getting bigger and better, it's a pretty tough, uh, chore to get become a bigger percentage of our company right now.

Speaker Change: Okay, if I could just think 1 more end, just maybe another approach to kind of visibility question, could, could you talk about the funnel or Pipeline and what what that looks like today is you look into 26.

And possibly into 27. I mean, I'm sure you're having conversations about next year at this point, but is the dialogue with customers becoming much more active

Brian E. Lane: Yeah. Yeah, Brent, absolutely. I mean, you know, 2025 is we're full, right? You're looking at 2026, 2027 for sure, looking at opportunities longer out. As you know, we got bigger projects that run longer, take longer to get them done on the front end to get them signed, sealed, and delivered. Yeah, you know, customers are looking out 2026, 2027. It's a great time to be in the construction business, buddy.

Brian Lane: Yeah. Yeah, Brent, absolutely. I mean, you know, 2025 is we're full, right? You're looking at 2026, 2027 for sure, looking at opportunities longer out. As you know, we got bigger projects that run longer, take longer to get them done on the front end to get them signed, sealed, and delivered. Yeah, you know, customers are looking out 2026, 2027. It's a great time to be in the construction business, buddy.

Speaker Change: About, you know, opportunities into 2027 at this point.

Uh, yeah, yeah, Brian, absolutely. I mean, you know, 25 is were full, right? You're looking at a 26.27 for sure, looking at opportunities.

Speaker Change: Longer route. As you as you know, we got bigger projects that run longer.

Speaker Change: Take longer to get them done in the front end, to get them to get them um, signed sealed and delivered. But yeah, you know, customers are looking out 2627 it's it's a great time to be in the construction business, buddy.

Brent Thielman: Very good. I'll pass it on. Thank you.

Brian E. Lane: Yeah.

Brian Lane: Yeah.

Operator: One moment for our next question. Our next question will be coming from Adam Thalhimer of Thompson Davis & Co. Your line is open, Adam.

Speaker Change: Very good. I'll pass it on. Thank you.

1 moment for our next question.

Speaker Change: Our next question.

Adam Thalhimer: Hey. Good morning, guys. Congrats on the record quarter. Basically wanted to pick up with where Brent left off and rephrase the question. Within the current backlog, how much of that work would be scheduled for 2027+?

Speaker Change: From Adam Thor of Thompson Davis. Your line is open, atom.

Adam Thor: Hey, good morning guys, congrats on the record quarter. Uh basically wanted to pick up with where Brent left off.

Speaker Change: And, uh, rephrase the question within the current backlog.

Speaker Change: How much of that work would be scheduled for 2027 Plus?

William George: A lot.

Brian E. Lane: I don't think we have a-

Brian Lane: I don't think we have a-

Adam Thalhimer: Okay

Brian E. Lane: a precise number for that.

Brian Lane: a precise number for that.

William George: Yeah.

Brian E. Lane: Yeah.

Brian Lane: Yeah.

William George: A lot.

Brian E. Lane: Yeah.

Brian Lane: Yeah.

William George: We would-

Brian E. Lane: Yeah. The statement we made, Adam, about with feeling good going out is because we're seeing both in backlog and what we're looking at is healthy.

Trent McKenna: Yeah. The statement we made, Adam, about with feeling good going out is because we're seeing both in backlog and what we're looking at is healthy.

I think we have a, a precise number. Yeah, yeah, a lot.

William George: If you do a little math, you have to realize that if we're telling you we're gonna grow mid-teens, the backlog's pushing farther out.

Speaker Change: But yeah, the state will be made Adam about with feeling. Good going up is um is because we're seeing both in backlog and what we're looking at is healthy, you do a little math. You you have to realize that

Speaker Change: If?

Brian E. Lane: Yeah. Yeah.

Brian Lane: Yeah. Yeah.

William George: It will be a higher percentage than that.

Speaker Change: If we're telling you, we're going to grow mid teens. The backlog is pushing farther out. Yeah.

Adam Thalhimer: Understood. The growth that you've seen at Walker Electrical, how much of that is occurring in their traditional North Texas market versus work in other areas of Texas?

Understood, uh, the growth that you've seen at Walker electrical.

Brian E. Lane: Yeah

Brian Lane: Yeah

Adam Thalhimer: or even outside of Texas?

Brian E. Lane: Right now, all their work is in Texas, and it's in the, you know, the four what I call major markets, Dallas, Houston, Austin, and San Antonio. Though they're very strong, North Texas, Dallas, et cetera, the other three markets are strong. It's probably if you talk to them, well, the few times since they've been in business, that all four of their major markets have been strong, Adam.

Brian Lane: Right now, all their work is in Texas, and it's in the, you know, the four what I call major markets, Dallas, Houston, Austin, and San Antonio. Though they're very strong, North Texas, Dallas, et cetera, the other three markets are strong. It's probably if you talk to them, well, the few times since they've been in business, that all four of their major markets have been strong, Adam.

Speaker Change: How much of that is occurring in their traditional North Texas Market versus work in other areas of Texas or even outside of Texas?

so,

Is in Texas. And it's in the, you know, the 4 I call major Markets Dallas Houston, Austin, in San Antonio so though.

Speaker Change: The very strong North Texas Dallas, Etc. The other 3 markets are strong. Its

William George: I wanna, you know, Walker is killing it. It's amazing what they're doing. All of our other electricals are just killing it as well. It's important to understand. One of the nice things for us is that because we bought all of our electricals in the last five years or so, five or six years, we bought them at a time when we already had developed a big conviction around buying companies that had exposure to the super cycle, had exposure to certain states, certain complex capabilities. If you look across Comfort Systems USA, our electricals just have a higher proportion of the companies that are tuned towards the good things that are happening right now. They are doing an amazing job taking advantage of it, as are our mechanical companies, obviously, and our service.

Speaker Change: Probably 1 of the probably if you talk to them. Well, a few times since they've been in business that all 4 of their major markets have been strong, Adam

Speaker Change: And I want to, you know, Walker is is killing it. It's amazing what they're doing, but all of our other electricals are just killing it as well. So it's important to understand, we 1 of the nice things for us, is that

William George: You know, everybody except corporate's doing great.

Brian E. Lane: We're doing our bit on this call to help out.

Brian Lane: We're doing our bit on this call to help out.

Because we bought all of our electricals in the last 5 years or so 5. Or 6 years, we bought them at a time when we already had developed a big conviction around buying companies that had exposure to the super cycle. Had exposure to certain States, certain complex capabilities. So if you look across Comfort Systems USA, our electricals just have a higher proportion of the companies that are tuned towards the good things that are happening right now. And, and they are doing an amazing job, taking advantage of it. As are our mechanical companies, obviously, and our service, you know, everybody, except corporates doing great.

Adam Thalhimer: Lastly, anything more you can say high level on pricing, just as your technology customers are taking up more and more of your capacity, to what extent are they paying up for that?

Speaker Change: But we're doing a bit on this call to help out.

Speaker Change: Uh, lastly, anything more, you can say high level on pricing. Um,

This is your technology. Customers are taking up more.

Brian E. Lane: Well, you know, if you look at our gross margins, our pricing's obviously very good, right? You know, you can read them in the income statement. You know, pricing's good, and we're getting paid for the risk and services, that we're delivering.

Brian Lane: Well, you know, if you look at our gross margins, our pricing's obviously very good, right? You know, you can read them in the income statement. You know, pricing's good, and we're getting paid for the risk and services, that we're delivering.

And more of your capacity, to what extent are they paying up for that?

Speaker Change: You know if you look at our gross margins, our pricing is obviously very good, right?

Speaker Change: Um,

you know, you you can you can read them in the

Trent T. McKenna: You know, Adam, our project teams are really delivering efficiency effectively. We've really pushed a lot of innovations out that are helping them manage projects even more efficiently than they had previously. That's also driving, you know, that margin. You know, to some extent our technology customers are very good partners with regard to those endeavors when it comes to innovation.

Trent McKenna: You know, Adam, our project teams are really delivering efficiency effectively. We've really pushed a lot of innovations out that are helping them manage projects even more efficiently than they had previously. That's also driving, you know, that margin. You know, to some extent our technology customers are very good partners with regard to those endeavors when it comes to innovation.

Speaker Change: Income statement but you know pricing is good and we're getting paid for the risk and services. Um that would deliver.

William George: It's been a long time since we've cried about a bad job. Great work.

Speaker Change: Technology, customers are very good partners with regard to those Endeavors uh when it comes to innovation.

Trent T. McKenna: Yeah. I'm knocking on wood on that one, Adam.

Trent McKenna: Yeah. I'm knocking on wood on that one, Adam.

Speaker Change: It's been a long time since we've cried about a bad job, so great work.

William George: Me too. Thanks, guys.

Adam Thalhimer: Me too. Thanks, guys.

Speaker Change: Yeah, I'm knocking on wood on that 1 atom.

Trent T. McKenna: Thanks.

Trent McKenna: Thanks.

Operator: Thank you. Our next question will be coming from Joshua Chan of UBS. Josh, your line is open.

Speaker Change: Me too. Thanks guys. Thanks.

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

Speaker Change: Thank you. And our next question will be coming from Josh Chan of UBS? Josh, your line is open.

Trent T. McKenna: Thank you.

Trent McKenna: Thank you.

Joshua Chan: Yeah, it's clear that your demand environment is really strong. Could you just talk about kind of your workforce, you know, their willingness to continue to work more, make more, but kind of keep working hard then, you know, what you're seeing on the recruiting front?

Josh Chan: Hey, good morning, guys. Congrats on a really good quarter.

Speaker Change: um, I guess it's

Trent T. McKenna: Yeah, that's a great question, Josh, 'cause that's what really is the secret to, you know, Comfort Systems USA's long-term success, is making sure that it continues to be the best place for a craft, you know, professional to work. You know, I think our companies do a really great job of being the employer of choice in their markets. Then, you know, We've talked about this previously, but what, you know, what we've done with our staffing company that's internal to the organization has really helped us be able to flex up and down and take care of our, you know, our core workforce as we've, you know, moved through, especially these larger projects.

Trent McKenna: Yeah, that's a great question, Josh, 'cause that's what really is the secret to, you know, Comfort Systems USA's long-term success, is making sure that it continues to be the best place for a craft, you know, professional to work. You know, I think our companies do a really great job of being the employer of choice in their markets. Then, you know, We've talked about this previously, but what, you know, what we've done with our staffing company that's internal to the organization has really helped us be able to flex up and down and take care of our, you know, our core workforce as we've, you know, moved through, especially these larger projects.

Speaker Change: Yeah, it's clear that you demand environments really strong. So could you just talk about kind of the, your Workforce and, you know, their willingness to continue to work more, make more. But, but kind of keep working hard. And then, you know what? You're seeing on the recruit recruiting front.

Speaker Change: Yeah, it's a great question Josh because that's what really is the secret to, you know, conference systems. Long term success is making sure that it continues to be the best place for a craft, you know, professional to work.

Trent T. McKenna: Additionally, we get a lot of collaboration on jobs, so we have more than one of our operating companies on projects, and they're able to share labor in ways that has also been able to help us. Yeah, it's certainly an all of the above approach when it comes to talent right now because everybody's constrained as far as being able to recruit and find. I think we're getting our fair share, if not more, of the talented craft professionals in America right now.

Trent McKenna: Additionally, we get a lot of collaboration on jobs, so we have more than one of our operating companies on projects, and they're able to share labor in ways that has also been able to help us. Yeah, it's certainly an all of the above approach when it comes to talent right now because everybody's constrained as far as being able to recruit and find. I think we're getting our fair share, if not more, of the talented craft professionals in America right now.

Speaker Change: Um and you know, I think our our companies do a really great job of being the employer of choice in their markets. And then, you know what, we've and we've talked about this previously but what, you know what, we've done with our our staffing company, that's internal to the to the organization, has really helped us be able to flex up and down and take care of our, you know, our core Workforce. As we've, you know, moved through the species of these larger projects. Additionally, we get a lot of collab.

Joshua Chan: That makes sense. Thank you, Trent. I guess, like, in terms of project selection, you know, how do you think about the approach to choose projects, you know, between the different verticals? Obviously, you know, technology is chosen more and more frequently. You know, are you okay with that? You know, how are you talking to your, you know, your operations about choosing types of projects that you want exposure to?

Speaker Change: Collaboration on jobs. So we have more than 1 of our operating companies on on projects and they're able to share labor in ways that it has also been able to help us. But yeah, it's a it's certainly in all of the above approach when it comes to Talent right now because everybody's constrained as far as being able to recruit and find but I think we're getting um our our fair share, if not more uh of the of The Talented craft uh Professionals in America. Right now.

Trent T. McKenna: You know, you know, that's a good question. I think they're doing a great job, you know, selecting what's available in their markets. We're still pretty diverse, as you can tell by the pie chart of the different industries we serve. We've kept good balance. Obviously, tech is, you know, red hot right now, we're trying to service those customers the best we can. We are keeping our, you know, our fingers in all the pies. Everything but commercial, right? Office buildings is slow. Everything else has got good activity. I think they're selecting, I think as Bill said in his script, where, you know, the best working conditions for our people are gonna pay for the risk and the service that we provide.

Trent McKenna: You know, you know, that's a good question. I think they're doing a great job, you know, selecting what's available in their markets. We're still pretty diverse, as you can tell by the pie chart of the different industries we serve. We've kept good balance. Obviously, tech is, you know, red hot right now, we're trying to service those customers the best we can. We are keeping our, you know, our fingers in all the pies. Everything but commercial, right? Office buildings is slow. Everything else has got good activity. I think they're selecting, I think as Bill said in his script, where, you know, the best working conditions for our people are gonna pay for the risk and the service that we provide.

Speaker Change: That makes it. Awesome. Thank you Trent. And then I guess like in terms of project selection, um, you know, how do you think about the approach to choose projects, you know, between the different verticals because obviously you know technology is is chosen more and more frequently so you know, are you are you okay with that? You know, how how are you talking to your you know operations about choosing types of projects that you want to expose you to?

Speaker Change: Yeah.

That's a good question. I think they're doing a great job.

Speaker Change: You know, selecting what's available in the markets? We're still pretty diverse as you can tell by the pot shot at a different Industries. We serve,

So we've kept good balance obviously Tech.

William George: I mean, one of the best operators in the world who works for us made the point recently that we don't decide what needs to be built. We just make sure we're the best people to build it. This guy also said, I'll take any job you have as long as it rhymes with Addison. The second part, he was kidding. First part, he was dead-

Is, you know, red hot right now. So, we're trying to service those customers the best we can. But we are keeping a pre our, you know, our fingers in all the pies everything by commercial right Office. Buildings is slow. Everything else has got good activity and I think they're selecting I think as Bill said in the script where you know the best working conditions for our people, they're going to pay for the risk and the services we provide

Speaker Change: I mean, 1 of the best operators in the world who works for us.

Speaker Change: Made the point recently that we don't decide what needs to be built. We just make sure we're the best people.

So this guy also said, I'll take any job you have as long as it rhymes with at a center.

Trent T. McKenna: That's right. Yeah.

Trent McKenna: That's right. Yeah.

William George: Exactly serious.

Trent T. McKenna: Absolutely.

Trent McKenna: Absolutely.

William George: We have to just do the work that's there for us and be the best people to do it.

Trent T. McKenna: Yeah. That's right.

Trent McKenna: Yeah. That's right.

William George: That's why, you know, Josh, you know, if you think about the bigger picture, training is crucial in here at all levels of this organization, from the field up to project management leadership. Make sure our folks throughout the organization are well prepared to address the market.

Trent McKenna: That's why, you know, Josh, you know, if you think about the bigger picture, training is crucial in here at all levels of this organization, from the field up to project management leadership. Make sure our folks throughout the organization are well prepared to address the market.

The second part is getting third party was, that's right. Absolutely. We have to just do do the work that's there for us and be the best people to do it.

Yeah that's why you know Josh you know if you think about the bigger picture training is crucial in here, at all levels of this organization from the field up through project management leadership.

Make sure our folks throughout the organization are well prepared.

Joshua Chan: Yeah. I appreciate the color, guys. Congrats again on a really strong quarter.

Speaker Change: Um, to address the market.

Trent T. McKenna: All right. Thank you.

Trent McKenna: All right. Thank you.

Speaker Change: Yeah, I appreciate the color guys. And congrats again on a really strong quarter.

Operator: Our next question will be coming from Brian Brophy of Stifel. Your line is open, Brian.

Speaker Change: All right. Thank you.

Brian Brophy: Thanks. Good morning, everybody. Congrats on the nice quarter. Appreciate the update on the modular capacity expansion plans. Can you provide an update on what you're seeing on modular from a competitive standpoint? Are you seeing any new entrants in the space? Curious your latest thoughts on how you're feeling about your leadership position there. To what extent are any changes in the competitive environment driving some of this leaning into more capacity? Thanks.

Speaker Change: And our next question will be coming from Brian Brophy of stifel your line is open. Brian.

William George: I will say our customers continue to encourage people to develop competitive capacity for us. They've had some of the best companies in the world work on that with mixed results. We don't think that we're, you know, what we do is can't be done by someone else. We just, our goal is to just be so good at it that you'd be crazy to buy it from somebody else. I hope that answers your question.

Thanks, uh, good morning everybody. Congrats on the nice quarter. Um appreciate the update on the modular capacity. Expansion plans, can you provide an update on what you're seeing on modular from a competitive standpoint? Are you seeing any new entrance in the space? Curious your latest thoughts on how you're feeling about your leadership position there and I guess to what extent, any changes in the competitive environment, um, driving, I guess some of this leaning into more capacity. Thanks.

Speaker Change: So, I will say our customers continue to encourage people to develop competitive capacity for us.

Speaker Change: we don't think that we're you know what we do is

Can't be done by someone else. Um we just our goal is just be so good at it. That you'd be crazy to buy it from somebody else. Um,

so,

Brian Brophy: Okay. That's helpful. I guess anything to call out on the healthcare end market? It looks like that was really the only other end market that grew meaningfully outside of tech this quarter.

Speaker Change: I I hope that answers your question.

Trent T. McKenna: Yeah. I mean, we're seeing, I think we've mentioned it in the last few quarters, Brian, that we're seeing some, you know, new build hospitals get built. Heavy in the South for sure, Florida. We are seeing a number of opportunities both on expansion of hospitals, new build, and Surgical centers are, you know, the smaller outpatient type facilities you see. Yeah, we are seeing some strength in healthcare, been pretty consistent for a little over a year now.

Trent McKenna: Yeah. I mean, we're seeing, I think we've mentioned it in the last few quarters, Brian, that we're seeing some, you know, new build hospitals get built. Heavy in the South for sure, Florida. We are seeing a number of opportunities both on expansion of hospitals, new build, and Surgical centers are, you know, the smaller outpatient type facilities you see. Yeah, we are seeing some strength in healthcare, been pretty consistent for a little over a year now.

Speaker Change: Okay and then um that's helpful and then I guess anything to call out on the healthcare and Market. It looks like that was really the only other end Market that grew meaningfully outside of Texas quarter.

Speaker Change: Yeah, I mean we're seeing I think we've mentioned it in the last few quarters. Brian. That was seeing some you know, new build hospitals, get built.

Speaker Change: Heavy in the South for sure. Florida.

Speaker Change: So, we asked you a number of opportunities, both on expansion of hospitals, new build, and also surgical centers are, you know, the smaller outpatient, um, type facilities. You see. So yeah, we have seen some strength in healthcare.

William George: Thanks. I appreciate it. I'll pass it on.

Brian Brophy: Thanks. I appreciate it. I'll pass it on.

Speaker Change: Been pretty consistent for a little over a year now.

Trent T. McKenna: Thank you.

Trent McKenna: Thank you.

Thanks. I I appreciate it. I'll pass it on.

Operator: Yeah. Our next question will be coming from Sam Snyder of Northcoast Research. Your line is open.

Speaker Change: Thank you.

Speaker Change: And our next question will be coming from a Sam Snider.

Samuel Snyder: Hey, guys. Great job, obviously. Just had a question on modular like everybody else, it seems like. I was wondering, you know, what has sort of changed or what could change going forward, that has made modular respectively a bigger part of the business? Is there anything that you see down the road that, you know, maybe that changes? 10% good. I'm kind of surprised it's not more, but, just curious your thoughts there. Why 10, and is there anything you see down the line where that might change?

Of North Coast research, your line is open.

Sam Snider: Hey guys. Um great job obviously. Uh I just had uh

Sam Snider: Had a question on modular like everybody else. Uh, seems like, I was wondering, you know, what has sort of changed or what could change going forward? Uh, that has made modular respectively.

William George: One thing people misunderstand about modular, it's very easy to think about it as a separate product line. It is a different way of doing something. Anything that we do modularly, and we've done not just tech, we did pharma. Pharma was our main customer for modular for many years. Is something that is also being done that day in 1,000 locations in a stick-built way. Modular is a way of delivering a product that, a building that is being built in, you know, in the traditional ways as well. It has certain really unique advantages relating to speed and flexibility. We think that there...

Sam Snider: A bigger part of the business. And then, is there anything that you see down the road that, you know, maybe that maybe that changes. Uh, 10% is good. I mean, it comes to surprised. It's not more, but, um, just curious your thoughts there. Why 10? And is there anything you see down the down the line, where that might change 1 thing? People misunderstand about modular. It it's very easy to think about it as a separate product line. And it is a, it is a, it is a different way of doing something. So anything that we do modularly and we've done, not just check. We did Farm out. Pharma was our main Pro. Our main customer for modular for many years.

Sam Snider: Is something that is also being done that day in a thousand locations in the, in a stick build way. So modular is a way of delivering a product that, um, that a building that

Sam Snider: Is being built in, you know, in the traditional ways, as well. It has certain really unique advantages relating to, um,

Sam Snider: Speed and, um, flexibility.

William George: As the years pass, if you look forward in time, modular will become a more and more important modality for delivering especially complex projects in the United States. As far as what percentage it takes, I just think it's for now at least for tech, where it's, we're being pretty much bought out, is it is a vector that allows them to do even more than they could have done if they ignored this opportunity. I don't... You know, I think people-- There may be a day when people are trying to decide, well, who's which way of doing this is gonna win. I think that will not be in my lifetime. I think it's a really great modality for accomplishing things.

and we think that,

Sam Snider: There, as the years pass. If you look forward in time modular will become a more and more important modality for delivering, especially complex projects in the United States.

but um, as far as what percentage it takes, I I just think

Sam Snider: It's a for, for now, at least for Tech where it we're being pretty much bought out. Is it is a vector that allows them to do even more than they could have done. If they ignored this opportunity

William George: There are projects that have certain characteristics for which it's really has almost irresistible advantages. I do think people. It's really important that people understand it's a way of doing something, not a different thing that's being done. A building is a building is a building is a building.

But I don't, you know, so I think people there may be a day when people are trying to decide well who's going to which, which way of doing this is going to win. I think that will not be in my lifetime. I think it's it's a it's a really great modality for accomplishing things. There are projects that have certain characteristics for which it's really has under almost irresistible um advantages.

Samuel Snyder: Yeah, that's really helpful. Thank you. I had kind of switching gears. Looking at price cost, do you see, you know, your suppliers trying to pass on costs that, you know, really aren't there? You know, they're probably not getting that by you know, as a larger contractor. Just kind of curious on, you know, are you able to get some concessions from customers based on, based on the sort of the tariff, you know, scaries right now? Is it really just passing through? To the extent that it does or it doesn't, it just passes through equally.

But I do think people, it's really important that people understand. It's a way of doing something, not a, a different thing that's being done. A building is a building, is a building is a building

Sam Snider: That that's really helpful. Thank you. And then I, I had a

Speaker Change: I'm Switching gears uh looking at Price cost. Um, do you see you know,

Speaker Change: Your uh, your suppliers trying to pass on costs that, you know, really aren't there. And, you know, I, I they're probably not getting that by you, uh, as a larger contractor. But just kind of curious on, you know, are you able to

Get some concessions from.

Customers based on, uh, based on that sort of the Tariff. Uh, you know, scaries right now or uh, is

William George: What kind of people do you think we are?

Speaker Change: Are, is it really just passing through and if it to the extent that it does, or doesn't it just passes through equally?

Samuel Snyder: Business, business people.

William George: We are indeed business people. This is the real world. People wanna be compensated for what they do. They use talking points to justify getting the best price that they can. I believe there are for sure people who are using these conversations to justify price increases. I also believe there is a lot of people absorbing stuff. I just think it's just like when things happened during COVID, people would say, Are you seeing delays from COVID? It was. That's a hard question to answer because we always see delays. I don't think I've ever seen a building built. Well, I virtually have never seen a building built that was finished on the goal day to finish it from, in the first conversation. We always see delays, we always see price negotiations and bouncing around.

What kind of people do you think we are? This is this is the people. Yeah, there you go. This is the real world. People want to be compensated for what they do. They use talking points to justify.

William George: You know, It's a complex situation with lots of factors. I guess the answer is yes and no.

Absorbing stuff. Um, so I just think it's just like when things happen Dior during Co people would say, are you seeing delays from Koh? And it was, that's a hard question to answer, because we always see delays, I don't think I've ever seen a building built. Well, there I virtually, I've never seen a building built that was finished on the goal day to finish it from in the first conversation. So we always see delays, we always see price negotiations and bouncing around and

Samuel Snyder: Got it. Thank you.

The I, you know, and people are all of their it's a it's a complex situation with lots of factors. So I guess the answer is yes and no.

William George: Sorry to not give you a very helpful answer.

Speaker Change: Um,

Samuel Snyder: No. That's okay. I think it's just the gross margins are so good, I'm just looking for any reason why that might not continue.

William George: Yeah. We don't have some clever trick right now that's kind of sneaking some money out the, out the side. It's just that our guys are really, they're valuable, they're hardworking. They can provide you with something that's hard to get your hands on. Great customers are willing to pay for it.

Trent T. McKenna: Sam, if we had a clever trick, we wouldn't tell you.

Trent McKenna: Sam, if we had a clever trick, we wouldn't tell you.

Samuel Snyder: That's fair. That's fair. All right. I'll pass along. Thank you.

sorry, sorry. Sorry. Did I give you a very helpful? Oh, that. That that, that, that that's okay. I think it's just the gross margins are so good, uh, just looking for any reason why that might not. That is not. We're not. We don't have some clever trick. Right now. That's, that's kind of sneaking some money out, the out, the side. It's just that our guys are really, they're valuable. They're hardworking. They, they can, they can provide you with something that's hard to get your hands on and great. Customers are willing to pay for it and Sam. If we had a clever trick we wouldn't tell you. Yeah.

Trent T. McKenna: All right. Thank you.

Trent McKenna: All right. Thank you.

Operator: Yeah. Our next question will be a follow-up from Brent Thielman of D.A. Davidson & Co. Your line is open, Brent.

Speaker Change: That's fair. That's fair. All right. I'll pass along. Thank you.

All right. Thank you.

Brent Thielman: Hey, thanks. I guess a quick question on the semi-fab market and anything that may be coming down the pipeline there, and maybe you could comment on pharma as well. There's been a number of announcements out there and, you know, how real of an opportunity that can be down the line for you?

And our next question will be a follow-up from Barrett thielman of Da Davidson & Company. Your line is open, Brent.

Speaker Change: Hey thanks. Um just a um I guess a quick question on the semi Fab market and anything that may be coming down the pipeline there and maybe you can comment on Pharma as well. It's been a number of announcements out there and

Trent T. McKenna: Yeah. Those are all very strong in pipeline right now. We've got a lot of prospects that are out there. I mean, nothing that, you know, is that I'd comment on, but it's. You know, that's all larger stuff, and it's very lumpy. Like, you get it or you don't. Sometimes you get it at a small contract, and then the remainder of the value of the contract is done in change orders over time. It's, you know, one of those things.

Trent McKenna: Yeah. Those are all very strong in pipeline right now. We've got a lot of prospects that are out there. I mean, nothing that, you know, is that I'd comment on, but it's. You know, that's all larger stuff, and it's very lumpy. Like, you get it or you don't. Sometimes you get it at a small contract, and then the remainder of the value of the contract is done in change orders over time. It's, you know, one of those things.

How real of an opportunity that can can be down the line for you?

[Company Representative] (Comfort Systems USA): It's hard to see it going through, in and out of backlog. At the same time, our pipeline is showing very strong opportunities in both pharma and fab, and chip fab.

Trent McKenna: It's hard to see it going through, in and out of backlog. At the same time, our pipeline is showing very strong opportunities in both pharma and fab, and chip fab.

Brent Thielman: Okay. Maybe just more of a nuanced question, but, you know, when I look at revenue by activity type, existing building construction's actually been outgrowing new construction for the past four quarters. I guess I think about data centers being largely greenfield. I just was curious why that is in the results.

Yeah, those are. Those are all very strong in in pipeline right now. We've got a lot of prospects that are out there. I mean, nothing that, you know, is that I comment on, but it's, you know, that's all larger stuff. And it's very lumpy like, you get it or you don't, sometimes you get it at a small contract and then the remainder of the value of the contract is done and change orders over time. So it's, you know, 1 of those things. It's hard to see it going through, uh, in and out of backlog. But at the same time, our pipeline is showing very strong opportunities in both Pharma and and and sob and chips Saab.

Speaker Change: Okay. And then maybe just more of a nuanced question. But you know, when I look about that Revenue by activity type,

William George: You know, so much of our work is industrial now. In the United States, an awful lot of industrial is adding on to existing capacity as opposed to greenfield, even in the tech area. That's been a trend actually for a long time as we've become more and more industrial. 'Cause the reality is, if you're building phase 3 of something, for us, that's an existing sort of thing.

Existing building constructions. Actually been outgrowing new construction for the past 4 quarters and I guess I think about data centers being largely Greenfield. I just was curious. Why? That is? And the results.

Brent Thielman: Yeah.

William George: some of that's just like, it's a little bit definitional, and it's also just.

Brent Thielman: Yeah

William George: the nature of the industrial world.

Speaker Change: You know so much of our work is industrial now and in the United States an awful lot of industrial is adding on to existing capacity as opposed to Green Field even in the tech area. So that's been a trend actually, for a long time as we become more and more industrial um, because the reality is if you're building phase 3, if something for us, that's an existing sort of thing. So some of that's just like it's a little bit definitional, and it's also just

Brent Thielman: Okay. In that regard, the margins wouldn't really be different. I've always thought of existing as having higher margins to it. If you're doing phase 3 of something, it's in some way still a greenfield.

The nature of the industrial world.

William George: Yeah. It would still have a. The big differentiator there is what percentage of the project is materials and subcontracts, and that would perform more like a traditional new building if it's an extension. You know what I mean? I guess I would agree with that. Right now, margins are so good across the board that those distinctions are a little hard to even make.

Speaker Change: Okay? But and so in that regard, the margins wouldn't really be different. I've always thought of existing as I mean higher margins to it, but if you're doing phase 3 of something, it's

Brent Thielman: Fair enough. Thanks for taking the extra one. Thanks, guys.

In some way, still, it would still have a, the big, the big differentiator there is what percentage of the project is materials and subcontracts and that would perform more like a traditional new building. If it's a if it's an extension, you know what I mean? So I I guess I would agree with that right now. Margins are so good across the board that those distinctions are a little hard to even make

[Company Representative] (Comfort Systems USA): Take care.

Trent McKenna: Take care.

William George: Thanks.

fair enough. Thanks for taking the extra ones. Thanks guys.

Operator: I would now like to turn the conference back to Brian Lane for closing remarks.

Speaker Change: Take care, thanks.

Brian E. Lane: Right. Thank you. In closing, I wanna reiterate my gratitude for the amazing dedication and excellence of the teams we have across our nation, serving our customers every day. Demand is strong, and our people are rising to the challenges of addressing the robust need for their unique skills. As Trent mentioned, we feel that conditions are good for us to continue to perform. As Bill indicated, we have the resources and the commitment to lean to delivering for our employees, our customers, and you, our shareholders. Thank you for your confidence, and have a great rest of the summer. Thank you.

Brian Lane: Right. Thank you. In closing, I wanna reiterate my gratitude for the amazing dedication and excellence of the teams we have across our nation, serving our customers every day. Demand is strong, and our people are rising to the challenges of addressing the robust need for their unique skills. As Trent mentioned, we feel that conditions are good for us to continue to perform. As Bill indicated, we have the resources and the commitment to lean to delivering for our employees, our customers, and you, our shareholders. Thank you for your confidence, and have a great rest of the summer. Thank you.

And I would now like to turn the conference back to Brian Lane for closing remarks.

Hey, thank you in closing. I want to reiterate

my gratitude for the amazing dedication and Excellence of the teams we have across our nation.

Speaker Change: Serving our customers every day.

Speaker Change: Demand is strong and our people are rising to the challenges of addressing the robust need for their unique skills.

Trent: As Trent mentioned.

we feel that conditions are good for us to continue to perform

Speaker Change: And as Bill indicated, we have the resources in the commitment.

Speaker Change: Thank you for your confidence.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: And have a great rest of this rest of the summer. Thank you.

And this concludes today's conference call, thank you for participating. You may now disconnect

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