FIX - Earnings call transcript Q2 2019 | Comfort Systems USA, Inc.

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Operator

Good day, everyone, and welcome to the Quarter 2 2019 Comfort Systems USA Earnings Conference Call. [Operator Instructions]. I'd like to advise all parties this conference is being recorded for replay purposes. I'd now like to hand over to Julie Shaeff. Please go ahead.

Julie Shaeff

Sheila. Thanks, morning. Good Systems Comfort quarter call. earnings Welcome USA's to second

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

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

call George, me Officer. today Bill and are the President open Executive Officer; Lane, Brian our remarks. Chief Joining on and Financial will Brian Chief

Brian Lane

Good Okay. call. and earnings our quarter second everyone, Thanks, morning, welcome to Julie.

thanking start USA and Let employees performance. by continued hard me Comfort work the for strong all their Systems

strong also in and quarter. and with $X.XX to performance, backlog compared I'll overview an substantial of financial our quarter last good the same We cash per in $X.XX to operating a and we This detail. will start a cover year. increase the performance, results was share this with compared results more earned Bill had quarter in last quarter

of XXXX, our confident didn't truly in much second Although ongoing quarter a in earn we did remain as we prospects. as we exceptional

the am flow was after $XX with million remarkable quarter XXXX. Year-to-date, free in of of a pleased free flow which $XX million, I cash fourth cash

since XXXX. March backlog Our basis grew a $X.X on XX, billion and same-store XX% is

We million addition million backlog. revenue Walker pleased $XX of with of and of approximately very quarter the Engineering. added Walker this $XXX are

amortization to share any and did net not due expected, earnings contribute they purchase As per adjustments.

into our me minutes. discuss this detail of review over in performance. a call will that, details Bill? let and backlog outlook to more in get turn the Bill financial our few I I before But to

William George

Brian. Thanks,

So results. of through X I and financial please our Slides X provide some details explanations refer to as

in Second quarter million $XXX Engineering mentioned Walker quarter on the revenue or Indiana increase XXXX. $XXX first basis on compared third that essentially a of Brian acquired is the company XXXX. X% million, acquisition an This flat quarter was same-store we of revenue Revenue was of basis current the and second a XX% up increase same-store a for of and quarter, due to of the the quarter was at months. the beginning that in for to six

fell Without reported $X.XX we was last We Net which XXXX is the $X.XX that, lower or year, in solid we gain than for year had the of we same settlement. a the second or from earnings unfortunately, per the $XX income a short when year. earned the the per $X.XX XXXX. $X.XX Of prior of quarter million prior a $XX per we share that period reflected share. the legal quarter, earned in results of million quarter in of second $X.XX extraordinary but same share,

of duplicate. During experienced to our XXXX, the at is them for we performance extremely second quarters certain subsidiaries of hard larger that

fantastic over This and second earned year, large quarter over our million XX% this North they $X year. Carolina subsidiary operating income. example, For at a had

strong including and they However, true in earned operating our other Virginia. Wisconsin in locations at very was for This XXXX, more. even locations,

our that believe underlying performance trends are and strong. We

compared increase a we quarter, the face of quarter by margin the Walker's comparable adjustments million quarter compared a XXXX, decline X.X% Gross However, of second of for in to of for in to we percentage second the quarter percentage, second could profit change. quarter not our present XX.X% tough largest the of $XXX or XXXX. profit match element together Gross the together the our second of in in gross XXXX. for an and with far, XXXX XQ performance was $X similar XXXX. the the was purchase-related million revenue lower X.X% of were, XX.X% average of second quarter of as gross margins, accounting XXXX, the

been So without Walker, our than last to lower year. but margins similar would have somewhat

for XX% the of tax expense of of also growth second for the $XX XXXX. acquisitions, including years. of was to even reflects increase of the the quarter compared $X was for experienced XXXX The tax a million $XX as expense percentage the due an quarter amortization rate $XX due to as second revenue people effective XXXX. in in for million additional have XXXX. investments expense decreased those quarter the we of to acquisitions, quarter of expense and tax SG&A of recent to rate XX.X% second and from SG&A second Income effective with second XXXX compared XX.X% million to quarter tax of for an was XX.X% million in

we discrete benefited from quarter, items. This

the free had We good cash flow quarter. trends during

flow quarter, million, compares and the to cash was For that year a $XX $XX free ago. million our

million for months Our six of first which XXXX. flow six to is cash the $XX free compares million, months $XX

foundation provide the cash our worked and after flow summer. strong the has cash our achieved the more confident. working a remain beginning which extraordinary our of busy $XX pace our the flow solid the than by prospects the somewhat because to work flow Although encouraged rest we of way increased quarter through as in cash we really the behind XXXX million catch free about up since XXXX, year we for in capital, fourth We're that from we of should for especially we which of year are

attack we discussed, in As suffered cyber April this previously of a have we year.

$X.XX. approximately fully back out-of-the-pocket of quarter The to our are of this cost event, $X.XX net impacted insurance, we direct results that However, online. negatively operating by

performed distraction to employees the and efforts our cause incident of financial impacts April, not event the inefficiencies is and adversely not many the these for we quantifiable. did did customers, during While extra work of this that impact our

April closed cash contribute earlier, Walker million basis. Engineering this the revenues we expect ongoing mentioned and As we flow X they on Walker quarter, $XXX contributed EBITDA annual to quarter. this acquisition and an on million Brian of future will $XXX that of

However, as will expense due expected, purchase-related they amortization first were not expect be months for accretive they quarter, not the XX accretive this we other to to and adjustments. continue materially XX to and

income pretax compared new quarter contribution XXXX, EBITDA thanks held Walker. to second our to our While members at from the up, declined team

Brian. stock we purchased price X.X at have had have shares program of That's During average $XX.XX. began price XXXX, we back repurchase shares in at $XX.XX. of our our XXXX, an on an of million bought we I And XXX,XXX since all financials, average

Brian Lane

I'm X. comment Slides Thank covered prospects Okay. the I few minutes activity then X spend going discussing for and backlog Bill. a of will and on our in through various you, on to These are markets. rest sectors our year. this

of of Backlog of the of an million Our second at $X.X significantly XXXX. quarter end the was XXXX backlog increase billion, first increased quarter. to the quarter this $XXX compared

This million Excluding the sequential XX%. have increased reported. that we is $XXX sequential backlog increases of the acquisition, same-store same-store Walker one ever our largest or

also is backlog year-over-year million X%. Our by up or same-store $XX

XXXX. Institutional have XX% our across revenue end-use made industrial strong The various include XX%. In up remarkable of addition our remaining improvement, represented education, revenue, we was our sectors. backlog balance commercial for of XX% the which care government, markets, to sector and and health

Please Slide turn for our revenue current to X mix.

existing XX% For of buildings. from and buildings revenue, is projects XXXX, in projects construction our construction XX% construction from with XX% total new for

from benefiting is business trends the good construction Our market. nonresidential in fundamentals construction and

Geographically, have markets for are We including Wisconsin. experienced strength with we Carolina, of booking Virginia year. in Florida, good projects, most in and results strong next many North particular our

our with our in is revenue including service projects XX% investments XX% business. of pure hourly of revenue. make work, to and revenue, of providing service continue We providing service, Service our X%

total acquisitions, service in the XXXX volume percentage Although -- business a and well on than is basis, service higher absolute profits. as a is quarter service of result lower was volume it's second our our of of in and doing an our

outlook. our Finally,

are ongoing Our backlog and are our good. strong, pricing and prospects environments

half XXXX the growth on during same-store revenue mid-single-digit a expect second We of basis.

not XXXX did third believe in that we strong year we will we XXXX period much another in to the year. same of as the for do expect Systems, last While quarter as Comfort be earn

level comparable tough quarter not also fourth and but is second the third. the of to Our

same So feel good gives We and. we in as are last improved trends optimistic the Overall, for XXXX. opportunity that markets range backlog. year. we a we are believe be We like the our results fourth that earnings quarter us our will in that in see positive, our

your again, Sheila you, for now our over Thank XX,XXX work it Thank you. questions. dedication. hard to employees to back will once for turn I and

Operator

line of D.A. the And of Instructions]. question first [Operator Davidson. Brent from the Thielman comes

Brent Thielman

meaningful guess, I that country, in weather any Texas, Brian, for way have just the in impact the the curious, Midwest erratic in quarter? the any and did across you particularly

Brian Lane

always every weather I don't year. meaningful. think We it have was

Someplace, it helps.

hurts. But think it it's neutral. relatively the Someplace, I aggregate, in

Brent Thielman

in Okay. just but quarter what sectors more out feel got XX% it, it's view new months XX any backlog, know you various based out working the coming? on or of call any and given a kind sales, you've stand like can growth break you are, plus really those And where I customer solid did it the of types, of around by swing guys even in if you're those not on, business of kind that

Brian Lane

traditional optimistic strong. about business sector you that's for Walker. the to is It's is again, and one -- pick including Brian is really care health Yes. want good, and are good, Also improving. It's education the very us, our and Brent. backlog industrial good if prospects I'm particularly

William George

all of... of of we the Yes. trends that. and in some I good pharma kinds There's certain with agree do would investor like type

Brian Lane

And data centers strong. still are

Brent Thielman

well. rate one like to going if can aspect But that I business around kind that don't it's that's of the Last an RPO. we maintenance think service like It about of continuing a looks forward? practical I think for looks The grow could. growth is year-to-date. piece X% really Okay.

Brian Lane

Yes.

committed now. on doing X it We've got still average, service. We're fully think for or team We years a it X business. in love We've really I service to investing the been is. it. good

number a that's use. to think I So good average

Operator

from question line next of Adam Thalhimer from Davis. Thompson, the And comes the

Adam Thalhimer

So you in $X.XX QX shaping EPS see declined how that Is roughly year-over-year QX. up?

William George

Yes.

earnings, won't by that. range big So -- our like different as going would than will about But year year what $X.XX year be just you I And to this And the before. same of strong But quarter 'XX was second around amount. make quarter seems Brian Adam, if They're XQ were third happen XXXX year. as at than be There's today strong best put standards, strong about to out year a 'XX them to 'XX said, they're to look things by there our of people really be about 'XX. same the but you say extremely I'd that to sort earlier, going lower pick operations, what took in different similar strong. quarter, difference prior third sort as they trend for that back of last -- the like, they're so us estimate and talked historical to were if our a $X.XX we ago. you the say lower is XQ as the can that of

Adam Thalhimer

decelerated drove So QX, revenue in that? in It was It What X% Okay. QX. organic And what's QX. your XX% plus was view? minus right? in

William George

it's in the year, came earnings last just earnings. year, that just had Last we Well, thing. way extraordinary the -- revenue. same from Those we same

year, third -- XXs. Last of in this of But way that, had OI which the same the companies biggest the revenue-ing year the -- year. revenues. month. had this year, higher the like that. They're in we up. They per So and our backlog's revenue-ing Having bit quarter, little percentage we the -- one -- high-teens had cover high we companies high a had earnings second we last revenue just in said a in their XXs was

revenue make So we months, we a mid-single improvement third I probably And shadings mid-single will a about have the the think, to are digits. last probably digits, good but opportunity in six pretty for struggle the revenue, overall, good bakes mid-single-digit range, Through X%, that maybe we're little a higher in that got we the somewhere on that we feel much first be out quarter, six the to from months. quarter to which like over have probably just five, little fourth year. and will up do -- down

Brian Lane

do So not one on thing. In work. right We're we our busy extremely I just want problem add results, to now. have

is gross Our profit still very strong.

work executing still we're the well. So

Adam Thalhimer

have And us maybe flavor can for you re-acceleration I some in give a July. you mean, July? seen

William George

but I in. locations, numbers think be seen don't probably -- they're jobs I starting, haven't that'll certain come I our July at know not also, some in July so. starting

Adam Thalhimer

hop you long in. to get But Last it'll how I'll margins to do more Walker HVAC? you All of back to similar think kind take then right. one, and

William George

lot different don't margins it's very never because their the they'll lumpy, to That's We quarter construction know. be that they're averaging business someday, that ever margins. sit it have to it's predict be they'll that over an a right? electrical the question don't to of different this a have they money. company. great gets the far There interesting hard where I get here sort all know improve when room the by makes they're think future on where so because right, point mix, think just and service are exactly they where going in of margins, the I way, But their higher, mixes an to of in as and to. but for basis, a We get and is to there's cycle also in as It stuff the And, same.

Brian Lane

The good news is about very do them good work. they

Operator

line And from the next Sidoti. the of comes question Mondillo Joe from

Joseph Mondillo

I'm you sorry. hear Can me?

Brian Lane

Yes. you, Joe. hear We

Joseph Mondillo

Sorry about that.

I'm sorry. I'm -- sorry. biggest the So

about that. Sorry

margins that good, question going Walker, but these I brings that be that it the core if It probably if off, just gross or at consistent sorry to asked you the looks already are Walker. you at business. should get some first the like addressed, was was margins regarding already was I'm or so -- see Or pretty I'm of sense a trying going it Walker if And and to asked, the So to business forward? of first seeing business improvement? be able was it have, sort to me you're whether the gross

William George

to say would they'll do operating the my what the that I well. going margins same, are at best be future. of level second that continue are quarter the So the field did they in gross the guess reported They to in

bit. several quarters, trends that, that -- could it purchase past -- that little develop in think next there's noticeable bit that. a Actually, in that a down. that's in I pulled There is also the right? amount a Their adjustments little not

of X.X% than roughly math. gross in Comfort, that So eliminate you more lowered in by numbers if A And Walker our being the straight our down, adjustments. gross -- of A simple if it you margin total. was in X% less averaging effect simple, little little was really margin X.X% at math, XX%. than then look purchase various Walker at the if you look without was

I But we're best about with down down. year not is -- best last So have quarter develop. down about from new because that's answer [indiscernible] trends you question. them, but my they're watch us, to learning how big We're first hugely We'll and give learning that's to a a that this can right the now acquisition. but

Joseph Mondillo

then that next at flat or does centralized -- terms how couple of the sort just that trend well. sort of sense noncash that a the several of of Walker? that 'XX, that And then the purchase give the of does of margins so as improve of a And does fiscal second by overall I cost any half down? accounting is me sort maybe to for calendar can And start line amortization, 'XX quarters? Or of mean, follow-ups. two, number there you help sort one, in Number

William George

want bit on self-contained. to a offset in But That's first be really insurance that's changes on We we're great cost demanding money keep organization. what question the very acquisitions have to make them a they're we the pretty by to to from We line don't opportunities answer we're the because do or some like them do a doing on company. So is these going going going an counting to no. may to It's that probably synergies save or something little financial something. few do. We something. make

buy years companies. do But believe actually not we first after no that. So we've revenue there proven to we the is over we many synergy improvement -- and We maybe question. think that

amortization. question, Second

second look value it we $X months is especially than and in will mainly that rest or Indiana last quarter. three for is slightly in combination the of It's over XX amortization earnings. the our That's hides year. us but those expense acquisition, stay next most quarter a the GAAP billing the the still this million sort Walker's you of -- year. was X-point at of it, higher high, have Walker. what paid If our first amortization the of, amortization, -- relief XX go to noncomparable for that -- Slight that first that of fact to months we requires

up flow. right? just we're in not show The cash is what get it's is the actually We that Comfort still out for allowed door. EBITDA. They money pay we unfortunate to them still show And making,

of the of a but goods anybody that line we've us that's you're these know, have yes, the -- shareholder net income But some that guys way, we say amounts and five a are run as different sort you cost acquisitions what for If of we through of to it's today. own it's but Comfort, ordinary today no cost last done else. money -- sold simple you you amortization company, bought little years, for you, that for over all than to in and

takeout, that's year. that cash essentially, for much the that flow. And But real different make this do basis $X which million, how on the to the they're if more. there's roughly continue get and get much, So $X.X we'll neutral. rest to investment. earnings, than any we'll adjustments -- plus really It's million the purchase not we they'll And continue of

Joseph Mondillo

little it second maybe. broad flow, in and But this was one, Number two, looking accretive Walker. accretive guess the regarding from have just than dilutive follow-up I slightly was at if ago. And year flow would number cash I have last actually, cash flow question just is or a EPS, I quarter? or then a all to thought at it a was better, cash been would And Okay. think, and dilutive weaker

have So deal, better. been with maybe I you related would the that to that would But it have well? noncash all thought address could as

William George

Yes.

they that fairest or ways it dilutive. at think look but different to the look there's $X.XX to is $X.XX I So way at accretiveness, were

$X.XX we really If these going -- of the said, by just any $X.XX-minus. you or roughly you they're at $X.XX-plus bought, okay, all but, what $X.XX I'm at or companies They're sort neutral. to way, if just look look of or

So as we're last so right? and of flow. is -- had million a lot, we fourth from goes, cash a As cash share with we're $XX year, right? We're knew flow quarter $XX X. $X.X the We're had next million pretty we last a -- earlier, working we by our far positive. billion -- flow, only mentioned down can't over year, January twice, our the of We since and which collected million company, is $XX $X last quarter capital the happy of on collect just money that for in over year, quarters, and you of as couple cash we we not up fourth

So get we about our like once summer, past busy the we -- feel fine we chances.

Brian Lane

Cash fine. will be flow

William George

good We'll We as our flow bring be we will debt some feel Cash just fine. down about it. expected.

Joseph Mondillo

a jump year, in do Walker? And especially half anticipate with good the flow free cash in the pretty back of you

William George

If Absolutely, back the the anywhere knocking free year's that year, half that, close of a was to of be the we answer out carefully. flow last first park. half it come monster. to me we'll let So compared cash

Joseph Mondillo

so Walker, like sort And in first service skews off, terms question these just of with all actually, seems new me -- for versus construction Okay. numbers. it of -- it last

you service sort just But sort a take take like? service if the Walker, margins. gross about maybe especially on little affects would of new out mix So I sort does of basis versus guess how look mix if construction that, was you -- wondering how that of light.

William George

the that's years When construction of right, -- above the XX%. up did, of an long it not recession, the So It's was service, of independent any roughly sure. XX%, year, down before few the picked last acquisitions over absolute it over our basis and had Walker on into couple the bought single grew we revenue. total every back last we trended mid-XXs. -- of for And

every even maybe think quarter. single I

Brian Lane

It did.

William George

construction It's United not building lot is is build helping more more the Comfort's it -- and So States, we're way And case. money doing construction that Service suddenly, those. a was the just making fine. buildings nowhere. got in

on on of more. it right more. it. sort even So now We're basis and our changed by -- usual a constantly to goes, I maintenance We up is quarter on the construction amount. on And as absolute is far agreement renewal improve It hope focusing and revenue as improve. profit it to continues focus margin. the say same-store was would by

We is of have story. a our leadership good recession's back. when to it's service and And part area, again coming matter going in someday, that is great

Brian Lane

it. be we'll have And glad we

William George

to invest And continue and it company fantastic. us to will term. It for be will continue allow run long the this to

Joseph Mondillo

mix to versus new of construction fairly service the compared was it last second So year's similar? quarter,

William George

same-store basis. a On

Brian Lane

same. It'd about be

William George

not worse It's of construction It's there... the same. because

Operator

And next the of comes Tahira line of question KeyBanc. Afzal from the

Tahira Afzal

if So a shares. a of great would ago, difficult look you had to I I guess here, and this couple Systems time buy been comps Comfort have years it back

get And momentum perhaps But we help can can nonres So year? market forever. comfortable me the can't you next I at around backlog. know have start

that be head be the into comfortable more Backlog to see the we year? prior cycle look backlog a of have little you can But maybe seem growing lumpy. as you than as you out. this You end visibility do net-net,

Brian Lane

Yes.

our we're Tahira, backlog. close So year. And back Probably think looking continues it's this good grow. a optimism next that's of lot for at year next year. going into opportunities, Service you about good of still and why see of we really feel half the I to to

William George

in is good backlog, the Pricing too.

Tahira Afzal

Right.

Is could you some possibly? trickle you and again And start have nicely. to worker again you amortization. organic see on pretty down mean level of year, if I -- see I something like So some could revenues you you have sounds year. two, look next an next Number that growing at closeouts know it

we see well? year bounce back as up margins next could So

William George

said underlying do to I those It's a had of some We pointed script just us really it's his out. We've it's in Brian pattern, go XXXX. But and of think we in give think think we -- have -- better to backlog coincidence. away. trends do I it's the months got great one this -- it. think X things interesting the you and I opportunity

year Some of every we've it we is over and then may the going consolidation really pay while that step take for off had investments X don't I good a we in a year of have the the last we've a I think years, in or the we're a really And have where think sort good X had but other kind improvement to of for changes then good had XXXX year, and year. to opportunity XXXX. we past, a

Tahira Afzal

margins could XX% got... mean go we I I know conceivably still? gross back you've to

William George

Walker? Including

Brian Lane

I Walker, under short the probably bit without XX% think absolutely. term. least With be at it'll a Walker, in little always

Tahira Afzal

model could financial sensitive... Because under is what? your little so a be And

William George

quarter, Walker experiencing first one XX.X. but made we just time We're for for the

you small So That way can gives But $X a money, Now argue -- over little better there. us pretty a under, is have. a get it's we Comfort opportunities so right? distance, it's right? didn't is lot now It's billion. of from XX.X

years us X were that knew You size. half ago, or X we

And Look, could for we us At proven we've point, these game pushed I take for harder. we're have is to long of some term. us. a long while think that's company what a do. little investments, going run this to But to get. the And need shareholders our some this they

Tahira Afzal

Got it.

me Okay. question I'll and hop Last back in the for queue.

progressively repurchases. move beyond -- versus big how outlook, upbeat guys a an you can quarter. third quickly quarter And been have you you in stock you and act? up repurchases? be shaping have pretty you can in of Given down Do have how see obviously, you proactive stock terms proactive How the

William George

buying So for our a get has more do than Directors. Chairman it down, our if input we who little as knows Comfort. get stock, a And We'll regularly to lot you anything we debt watches stock a very don't good crazy opportunity of but been a years watch Board trades from I now. our as doing want anybody We of first, is in Walker. say for guys regularly. go our will stock have -- after believe we way, shares had we've We our --

we bought a that'll factor so. we some be and buy So we might they're or our backed more X up money when years years, million when borrows there really year. were than in somebody but -- not X truck is to we a when ago, portion That record, who at on up. -- flow our this the dedicate X shares that stock, cash down our dedicate -- a call to free but shares of buying certainly larger people makes I do than probably will that some track they're nervous, we're And look know

Operator

Joe Mondillo, question line Sidoti. from comes the of next the And

Joseph Mondillo

few you. Just ask to wanted that I a

the acquisitions, cost of roughly margin includes a I'm up or Walker Indiana If the $X amortization I -- out counter -- and getting guess back to to if which back about I Just the if which about math purchase for follow amortization cost on Walker. I the out, doing gross are acquisition. I'm around million, correctly the or

around margins gross terms the in the of acquisitions the So that XX%. for quarter Is correct?

William George

don't adjustment it over that. XX. is right? lower -- something know. a ordinary low. there than purchase other -- WIP obviously adjustments that that through stuff averaging income. not no, but So said where runs But something But down off is don't far number's would be slightly SG&A, that it's they much drawing $XXX something in million I having higher would billion, is There's I $X have of -- forget called there's the that, we have have pretty if thought that's

-- about earnouts that had also were biggest a bigger just factor was We earn-outs accounting And our in had they valuation very changes to bunch the be the tell firm, separated random. they company in national this discount rate, quarter. why in a out Those our decided valuation our they usual you That's that big firm, than changes imputed interest. them. we've adjustments, of use them purchase different can a and so and

of what's that's some there. in So

to pro bought used so the then is adjustments way The in on we that the formas -- our 'XX. we while year under year, the it other rules have people forma, And be the last need you subject, there. are that two happen forma, amortization had not rules the The in was 'XX that actually thing for pro we careful to about. very that we that we amortization I'm those will there the purchase did in a pro when do pretend

So to -- it And are be am can is tell usable take do me. of what's with so lot these. anybody segment the out -- a -- because for The to I first if have those, adjustments. out really -- careful get very than reporting and there's there's by they're smarter worthless they or very, We segment we information the way, reporting, purchase time. not under happening, we of you the try GAAP allowed to

craziness of So see you're going in some that. to some

saying moving rules get just me. that trust me lot wooden, very are stuff pieces. and oh, a the So just I'm I'm don't trust don't wrong. of saying not because there's

Joseph Mondillo

trust also right. time. All we at too, I can the hope same there, Well,

William George

-- the is -- just saying to trying most this you my I'm not say... not me -- But -- my Can. get I'm I'm get point. not to important trying you point.

Joseph Mondillo

I understand. understand. I

William George

what you we think tell know. Yes. We we

Joseph Mondillo

very follow briefly. point prior up and you on made So about the I questioner pricing asked, a wanted to

wanted with just follow up to I So that.

pricing the the you in Is any backlog was good. color provide more can there? there environment It the that like pretty sounds has... said You

William George

we're If you getting backlog, in company your the ask pricing they're like, pricing." presidents how's "Oh, our good

Brian Lane

in And that the hanging our that's Joe. is I Yes. think pricing what's given us there. Absolutely, optimism,

sign. good a that's So

William George

is backlog the that good And really companies.

Brian Lane

Yes. Yes.

William George

It good. feels just It right. feels

Joseph Mondillo

it up were orders new fourth follow that, your trends, then like, first And were of core to at in quarter. like quarter. So quarter, with about is company the order were looks looks looking earnings. in X%. this they They up sort like it in mean, second the flat down I the

still So improvement in sort the growth. of second quarter low but here,

on grow your with Where based get at? to you've having in personnel, is been and So to the know the of is capacity. and capacity labor and issues? you pricing really issues I'm the at personnel you of market. amount running in situation, have and labor that capacity trying to shortage to is capacity the What relative And labor shortages relative I ability terms and of mainly are kind what

Brian Lane

labor Well, a going shortage have I been for while. on the mean,

think Everybody's things. we're busy, using whole through We're prefabrication a now, as between But companies moving it dealing about host been of full. I probably we're I've more technology. handling talked needed. it. we're people Right working.

just is. we're with think situation I it the labor way So dealing the

Joseph Mondillo

on where go to in terms are of seen guess new to in on work -- -- you take main to I then, to more back question go capacity my take to you've than not bumping the Or it against that? to past is pricing? to you so and relative capacity, that, with that's related XX Are that? months? up is you're And pricing like much why dealing

William George

is it we uniformly don't slack that So almost true have anywhere.

can take do done you benefit can more can years. core -- means to more few So just got is -- us workers aren't waiting more, as the understanding last will a your lot we on charging people also bringing over work more some by from up that as can't inefficiency. now that by charge for We cover take we good that can work we we've that taking workforce what is work. year. using but additional because help What We're we by new the next that training on we guys

job You pull and can site. your of spend more on more prefabrication off the

I've are, more thing now trying many times. So this succeeding workers. a I frankly, out we our say stage are in will we're where we one at -- though. head say getting where Brian right to of

there the going run Last into We our the first for year big ground. are this and workers, to doing women out was not year. our us, men that are

issue. is There a sustainability also

apart So but a lot strike what could our really from you long time to what what you of we're work going do, for money And should people the like going by overtime, a to -- try make right balance. we're to is to do there's do.

continues that and to you asset better us checks checks. long-term a get guys send send -- have we that So

Joseph Mondillo

terms XXXX. of to your the great. using wondering down asked mostly to down, cash improve, into I of it's going especially I'm was mean flow. in we to free then how terms Okay, quarters? go to going thinking question in I be as And had free last just to this, It's cash I in about that here -- and already you the few you pay going try a balance debt how Or pay that. about to be going little you're flow? Are sheet are bit aggressive next

William George

our be free not XXX%. flow going be -- There not we've think still it's use that a to stock are large year. XX%. much standard free out capital price little going already that, possible it it's a going are The more as on of a We're gearing prioritize bit do portion I for going we we're we be cash spend get shares, the could we're to to area. going spend be think what acquisitions flow, at. capital. that. It's far acquisitions? lot at to sensitive acquisitions have our probably to trades So a we commented on much sure. to think of do going And also but there. of That would that two how as that are sort we'll for And any a going only next doing on XXX%, pieces going moving very cash is to that -- high much not not are our answer what because are that user that or be to going are we're we to our least also on to how back? the We but XX% in It's down for as how somewhat debt good of then -- implies going that is might buy also to

Brian Lane

Joe, And we'll $X.XX a quarter per that maintain. per share also pay we dividend

Operator

question next the of And comes from the Davis. Thalhimer from Thompson, line Adam

Adam Thalhimer

more Okay. electrical I because XX% they at the take margins quarter. just were crack the wanted in to one

there you number? I You that mean normal QX? improves do in -- is from think it a

William George

but Walker is what is the -- amortization we're through running the XX% is problem you're problem incremental which all when can that that think do. and those of what don't do half the looking we're incremental quarter, look do running at amortization is do gross we're But the the in margins you the I looking margins at, you're at showing you. margins,

to in relating guarantees other adjustments seller each to process about and make we is how We going work the that have the purchase to go.

WIP So called runs line. that if I them money a what's owe adjustment, through right that on

work not the how I spend they it. human then doing getting you'll So beings and they much paid. much paid for doing see work got on think -- XX% it's How and based

Brian Lane

It's than higher that.

William George

might XX%. it It's not the to a other subtract no, if you XX%. XX%, problem. To got But that it and be would by it's direction, get way, go the that big. so really not we'll -- to look And quarter, amortization. next might the And was, earnout

Brian Lane

Yes. Yes.

Adam Thalhimer

-- Well, line All items, right. we that's fine. so model won't that as using at that

is So tax then a just for forward point. one last good going rate, estimate is on me the this at what

William George

year. put XX. now, basis a the had the don't -- full XX. going we that's The So range and I had are quarters, discretes, is if more what it's we of in probably, some hard to XX think a -- first probably these we one we because discretes to the of have they sort we Right couple said affect in to

not we're average to that. up at likely be just be hard to think to I it'd because XX

the in full is for these ranges discrete We No could say It to level you to past a obviously, sure. just about for good telling up. today. hope the have than usually will average all same of to lower XX; what XX some best at had that But because get I give year, and doubt that this happen, that, we're we've XX are to we the kind you pick the but midpoint because higher So XX yes, it. for for in full to questions second year, to years, know. you the more items. But half,

So.

Operator

further turn now closing to the I for call We have back would Brian no questions. remarks. like to Lane

Brian Lane

hope all have All the call, very the to to and you good Thank call shape, Systems for benefit right. our We're and the great we for you future. joining will stakeholders. you, make Comfort decisions all the weekend. continue excited of long-term today. about everyone, Thank joining benefit in a is

William George

Thanks.

Operator

Thank you so much.

conference and call, may that you everyone, for now Thank you So joining. disconnect. concludes your now

Comfort Systems USA (FIX) 26 Jul 192019 Q2 Earnings call transcript