Comfort Systems USA (FIX) 26 Jul 242024 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Q2 2024 Comfort Systems USA Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Julie Shaeff, Chief Accounting Officer. Please go ahead.

Daniel. Thanks, morning. Good Systems Comfort Quarter Earnings XXXX Welcome USA's Call. to Second

comments. and as Our of press laws plans will and well the releases based today today the risks forth materially What activities of is say contain of and Comfort securities include expectations meaning our Systems in different might that operations plans our Those uncertainties current USA. the as be from comments results upon set those we cause our expectations to within forward-looking and applicable regulations. and actual future statements

commentary You Relations most our companion to can found is section read Form in a Investor detailed and XX-K these remarks website at Form comfortsystemsusa.com. our release risk listing XX-Q our presentation posted and earnings. in press as well on slide the as concerning of our provided factors a and is company's as specific the recent covering A

McKenna, Executive Officer; the Financial Lane, Officer. Trent Brian on call Bill Chief and Officer; are me Joining today George, and Chief President Chief Operating

will our open remarks. Brian

Okay. morning, and for everyone, thank on call us today. joining Good the Thanks, you Julie.

per had an this quarter a teams $X.XX our superb quarter, for a We our X% earned We which as execution is compared over increase customers. ago. of achieved to fantastic share year

exceeded the in other by this especially quarter XXX% including business electrical segment XXXX. income increased dollars remains customers. achieved sector, and strong, manufacturing mechanical last Our our technology operating compared year EBITDA unprecedented margins. and Both industrial Demand and to

good both same-store this a good for to that minutes. billion, has far for working a valuable in I an outlook Our on backlog $X.X quarter. our business despite the to Backlog high And our select we level up a people. few continue is basis margins and time absolute discuss last revenue at will conditions track than year. continues and our high work strong and

review Bill turn Bill? financial call over our will performance. I first, to this to But

Brian. Thanks,

flow. had We our million higher quarterly compared XX% leverage to than doubled year. remarkable. same last $XXX good really SG&A over were results achieved and quarter and EBITDA first margins, cash growth, $XXX same-store second quarter time, EBITDA So We free more revenue the in for the in million

XXXX that increase Revenue million last billion, year. for was XX% is $X.X an of compared of or and quarter second $XXX the to

Our benefiting organic modular mechanical and and growth, acquisitions expansion. revenue segment increased by from XX%, construction recent service

Electrical from increase the And revenue with of overall, increased same-store XX% million remaining XX%. increased by our acquisitions. revenue resulting by $XXX or $XXX segment million

of year. We to revenue our same-store prior mid-XX% best be the are facing tougher results year full months, been range. in the And will XX%. growth Through same-store that revenue X year growth estimate our the remainder has XXXX, our for comparable for is low currently,

compared $XXX improvement Gross profit was for $XXX to quarter a the of XXXX, second a million year ago. noteworthy million

grew XX.X% as of Quarterly to percentage electrical profit profit percentage year compared to gross year. the this to segment this quarter XXXX. our to gross XX.X% XX.X% for jumped last Our second XX% compared quarter in

EBITDA as several doubled in increased to demand, have acquisitions, strong mechanical million. without last achieved the that million $XXX this strong $XXX the over ranges in of recent margins by quarter XXXX. we EBITDA strong Considering to to XX.X% second we also our our quarters. the in EBITDA will continue Margins over the Same-store even a exceeded significantly XX.X% quarter million XXXX, And the EBITDA of XX%. ongoing from for XXXX. $XXX segment quarter expect that increased second compared in

million, of second $XXX or was to of million XX.X% quarter X.X% the revenue, for or compared quarter $XXX the of revenue expense SG&A in XXXX.

XX.X% X.X% have to gross the and profit of of the quarter second that quarter. in in million This With year $XX for favorable in XXXX. just million by XXXX quarter increased to XXX% Our XX% the the last prior over from operating improved achieved SG&A from $XXX year. the we second quarter margins margins from this leverage, is time OI income surged our percentage first operating income

has results used not look adjusted to Comfort I Since our make numbers better. CFO, became Systems

However, out a results. do notable point I to factor today, our want in

recent Our notably in the have earnings our periods resulting fair an this We than adjustments acquisition. in in have our exceeded stronger. have of value acquisitions Without usual expense. quarter, the high certain earnout larger obligations changes expectations, purchase-related always would the following earnout been

larger will the significant likely the several much next they because consideration recent continue to However, contingent opportunity currently of transactions. quarters over and in are be included

full XX% that second range. net the will is share. quarter tax improvement was the $XXX was rate considering After be or the XXXX last tax year. XX.X%. currently year-to-date rate all in We income for per likely $X.XX This of XXXX Our million of factors, XX% from a year to estimate XX% these

X the was of Free first months XXXX cash flow for $XXX million.

in continue for operating upcoming quarters a by our will and fund $XXX complete to exceed advanced to continues cash XX-month We about million we on from benefit flow trailing and earnings work payments basis. that

our So in notable our with we all we balances of retiring ahead this and acquisitions Even of earnings million $XX with cash bank exceeding as other debt our earlier was XXXX, are June year, cash. well XX, debt collecting of X debt. and succeeded have

this share $XX around repurchases million spent also We quarter. on

all got, I That's Brian.

going I'm our discuss to Thanks, and Okay. outlook. Bill. business

year-over-year the Since $X.X billion by of $X was billion, billion from acquisitions. increase second or billion in was increase our $X.X the new was has sequential year, $X.X end last large increased of the a at XX%. modest and backlog backlog a same-store backlog Our decline. recent quarter

XX% with XXXX organic the time backlog revenue. had year this roughly second entering than surge We same-store are despite last of in we at a XX% more half

revenue, life XX% prior towards in our of is included science substantial to was backlog. XXXX, centers, a chip fab, of and Industrial from accounted trend and revenue plants, XX% year. half are mix increase battery revenue data the drivers first Our the industrial, and of total continues major Technology, for they food. customers pipeline in XX% of which in

of revenue. health Most that it but part customers construction small. XX% about are and remains our government, is which of is strong a represent for sector now and also markets, our serve, include our in of care of The we revenue. Institutional our the commercial smaller active reasonably education, revenue share is service revenue is that though not business XX% relatively the commercial at commercial of regions

XX% to XX% projects continue of our activities new project with our modular be strong, new levels. continue building our and include and of building high modular and revenue. buildings unprecedented and existing Construction extraordinarily Construction year-to-date for construction construction revenue at XX%. was XX% accounted We for representing pipelines

increased profit $X grew by and as a is and quarter. XX% service revenue XX% on by XX% our XXXX. was revenue this reliable revenue and source Service in of for track profit total our billion exceed flow revenue is to cash service Service of

at As basis are on we had than Thanks higher every we and hard second optimistic year, are a have our XX% dedication time to noted the future. country, about entering our working and we half across the of of the hard for above, is team day. we our a same-store single with last that XXXX backlog this customers employees a superb work

to want for employees thanking always, As dedication. hard close XX,XXX and work their I our over by

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

Alex KeyBanc Instructions] Markets. question Dwyer from comes Capital And [Operator first with our

time? to nice these think as about sustainable year. on reason these do for continued Is towards and continue historical averages would ultimately think the over to But basis? this a back see the we you the revert to it's strength margins margins are in longer-term there the So think how this any business guidance more called margins

margins. particularly in Alex, growing And also, the XX%, maintain and and these I see think, term, increase we're good upcoming pretty think pricing we I service you we're getting you profitability forget, execution getting the excellent We're in good shape can't in there. to short are field.

we're maintain margins. in that pretty the near think I we future So optimistic these should

at I margins is would been, as as in factor these stronger. to has continues it continuing cases, get that and creating some strong least say every is

modular time? Got capacity that broadly, centers? it. the activity forward, do to was And the for then for and the over growth gain project algorithm in performance quarter, about And going in then data think of construction additions most we business efficiencies more the how modular ability the

this modular it's it's very -- XX% so -- revenue growing, it's is did it's every And So revenue. our while adding a And growing our really quickly. of great near of like you see, single could business to the up as part quarter. percentage

So that's continued grow. to

-- As have don't we make commitments. far space. that future, to taking are been that we as people the asking lot, going incremental to a new something think is that commitments are I large

much of was We was have configured that we do things to foot months. square took emphasized roofs few when And we recently, that say space added want last the We're higher the do more space X things that million automation. had the we we to much took took that incrementally. of additional and likely much one I within more for space -- incremental

think And the is a productivity deployed production of and newly improve of goal the so I to going be space. our lot to

when Ultimately, business Comfort are businesses we the you're is the -- This amount that And easily. going people scale is in of you execute. doing to can there world. work that take real can things a

for and sure have customers to keep put X of ability are what our promises to the growth stories the we yards XXX respect doing always to and and things And delivering sort will have on complexity You're pushing of make inside long tall you're that you them. above difficulty our incredible topline. our

comes next Our with Thompson, Thalhimer Adam from question Davis.

quarter. right. Great All

on also So modular.

of it see more the curious awards award late future for it like -- was those or think had December potential forward you I'm if the for going I if of XXXX, was one-off? modular? more you program a modular are

So about just constant. one-off. They're I know don't

December, a But Since more XXXX commitment we to keep to in than million square really make least a I really sell. the big backlog year's investment short was right? happen then, there that have know a a been And will if that feet negotiation in achieved that that frame. at of space. of customer we sort additional the completed, of are time it a that part able in programs big it's with as So are there X us levels come of that large the induced was -- don't products the awards redesigns continue. There's in -- in sort at we

that. computing had they data quarter, are. power, winter. January, planning obviously, of say, February, we've certainly December, the But middle the get years, sort of year. in X last in of of right, we having on we months, in for people because burn big modular the -- had the over but think to net good the the a our bookings modular bookings still a it and had But think I are and we this I it's in sort burn more are prospects really net we've if winter which depends tended We will And

my was question, burn it's build That for been winter. Can that years now, couple because over seasonality of next the summer backlog happen the and a over again?

Yes.

strong the year, what's look through we went at, They're So this in. robust. cycle. in been if It's mean Adam, you the what's all demand, probably years. It's same our XX-some I've probably the I you look market last thing pipelines we at, of is we served. markets at the It's look ever been for I've like. look doing sort a best -- the

So to while. see for plenty of pretty we're a optimistic work

comment for what's then business? straight that the on Kind are lastly, electrical, XX%, for Texas just margins again of outlook quarter. you And over the can the third

They're company Bill that Yes. electrical really the Well, like is Texas. the found we X in here that company big a markets in we first is have all, sure. superb for of

electricians else. spot. sweet lot anyone is of And is work, got We booming. in a really We Texas than which have the more mission-critical

think humming it really while. a I for on along business right will that in we're now. So go And

just It's segment to is the electrical also important note, not Texas.

and We have now Kentucky in right North unbelievable results Carolina.

their fantastic make businesses. bear bring they They just do that paid for get they to sure for the what for great customers job the capacity they that they need have and People We do. that can take. a they and electrical risks

-- numbers, an everybody it's pretty to to kind having -- outcome. be those of just much amazing it's had So really hit really

right now, electricians have Adam. It's good to

Chan with UBS. Our comes from next question Josh

stronger you the at pipeline, or look projects difference new the Congrats recent guess, where popping of those on you do rates? versus quarter. any a of Brian, good similar really are past? if And for really up sort I bid see verticals, bidding kind at

we look pipelines you the for years. mentioned been life et XX months in backlog, as X still similar sciences, probably food, consistent cetera. pretty if the We're think script, last centers, to data opportunities, the it's seeing, pharma, the I in at

Josh. And no So let-up, pretty that we're consistent the been seeing the in markets we mix serve. there's

that there -- we that concerned people seem our don't of data centers. comment in is are What expensive happening those they market experiencing you is deploying a continuing They're the to centers. be the I'll center mind, believe on build. with are and hearing data If very, to data delivery People lot bought right of customers very regular chips. basis. just are taking a from on now who They've in something computer

understanding be electricity. sorry, to to into that They'll be Our seeing to put hasn't we deployed to be in servers. heated before. in centers by they're up is places haven't The heated. data going be seen and they're to pop going buildings that I data going -- are need going started need and we're center servers to mean, cooled. but They're need the work states -- yet also, where in

that's it's down. I that see our experience or markets not that's guess, conversations in certainly will with our can if happening, or our we customers. that say I our it's vision So slowing in or possible, anything in But

this environment, any this And hard know That's encouraging. employees how about no everybody a the hard, do I of concerns keep this I time? sustainability for guess relaxed in current working but your long is you working like happy? one

a respect. We it. Thanks them and Josh, from take fair, great really with treat asking Yes. folks for perspective, is our pride them in great we that safety question. a treat protecting health

really a hard have at and do, work to is We the their commitment families. of extremely for for grateful day, end that field the the are them and great in of which very themselves focused way. we'll as but we aim we try proud I'm which work for lot But best really We're of making, really this and company, go to out can. do all we take of, they're

They lot a work. to like like work. they So of

in a we're So as for time good them well.

thanks So but asking. -- for

do data sneak percentage were in. that? kind that think to And what is that? Is If of you ask about maybe would you, I can Or portion? business people you good. one how would the then That's address AI, more how exposed you to your think of center

add by, say, by pipeline. streaming. prepare solid I months, that their last chips demand AI let's been was center opportunities both protect only the say AI heavy by the businesses right? forgotten really already to but... for making a don't driven build Compute hyperscalers power would that out don't behind -- people and year, know decisions not that. incremental construction I at this were think data, by, XX that sure helps, -- very, by for core right? to it's what thing very because data even I getting capacity. -- for the the future an AI left Everybody's AI There's are started Because about I ready building affected if they're to and of is

Romero Julio & Company. from comes question next with Our Sidoti

about year. low back talked half. you about the full the least same-store guys You XX%-ish -- talked growth the sales that growth for mid-XX% guys I in implies at range guess in to

think should we same-store and in how XQ XQ? about about percentages then in thoughts any Just sales growth

through XX%. months, it was So XX

then sort but -- down come have maybe If the would the it below would an XX%, of that's second you not down low, mid teens was be some, So half to if that average XX%, to to XX%. -- right?

this lot we're it's don't happen. -- on know July same-store we year, had I -- a a XX% year. X more little So than on of than are had a stronger to we really -- work -- what's last that. booked going of There's basis we we

going growth So the we year. for believe very have we're to full strong

happen. have be -- to around will say to seemed the range. mid-XX% Our upside we that we a low what best range that of But there's lately. could estimate do surprised And is I

you these are then guys -- creating And helpful. margins. that That's factors about talked it. Got

to than do tide and talk would you able One these is you of project of of rising creating these you're them Can crucial more be more I a you're like to maybe would that just become a selection. selective factor that able on continue of where think opportunities just about margins? in quantity greater sorts kind of see and to projects? that therefore, how and can And is

Yes.

people and have work. were we doing resources a to process like with but up putting valuable We careful good think go, no select. customers we're very go, I most do, good

really work market going go that that this the it's when there's is selecting in to So important you like work in effect what to take lot of Julio. a you're there, a out

Okay.

Okay. quarter. on -- you then hit me And XX% last for and that this be one operating margin would milestone just in that

the it. on be it at time in a margin that least handle X% may quite think SG&A also I a first has while your

be forward? and So thinking leverage maybe going about how should you SG&A touch just we on if could that

It's be get this is have do think SG&A mathematically, should range does much dollar get to to right? we more we're and this to quarter. hard But take because growth, going a continuing money to SG&A did work. just revenue increases great leverage the do question. It's continue this I It we notable in

question, So I I that change think gotten leverage -- were if guess I we've revenue on -- a more pretty until I think modeling were trends count lot here. say don't I guess solid but whole the far a so leverage, wouldn't to would is I

I further would closing no to this showing remarks. it for to Brian I'm now Lane turn back like at questions time.

again. Thank do. I in want Thanks, forward the summer and and I this that the enjoys to soon. road everyone, to thank you. amazing grateful today. in everyone work right. for We're weekend, everybody for listening seeing hope look the employees All really we really our they

Thanks, everybody.

Thank This participating. concludes conference for call. today's you

now disconnect. You may