FIX - Earnings call transcript Q1 2022 | Comfort Systems USA, Inc.

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Operator

Good day. And thank you for standing by and welcome to Q1 2022 Comfort Systems USA Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. this being that advised be call recorded. is Please Instructions]. [Operator hand over Chief to I Officer. would host conference to like Shaeff, now your the today, Accounting Julie Please go ahead.

Julie Shaeff

Justin. USA's Comfort call. Thanks, Welcome XXXX quarter earnings Systems morning. Good first to

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

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

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

Brian Lane

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

We fantastic are pleased start to report a to XXXX.

busier are Our incredibly and them. grateful than we are ever, and work teams thank for their we hard

this to that discuss compared a earned in share gains per few will tax Bill we the a quarter year Excluding $X.XX $X.XX ago. minutes,

working shortly, a We capabilities Yesterday, strong to and Carolina Bookings the services. call various to Atlantic to growth. had and we well On headquartered This we partnership again, performs work contracting turn XX% markets, to ago. new in April airfields compared South will review brings quarterly all southeast. dividend. our to USA. increase work discuss first climbed Comfort South over despite in X, cash our Carolina. Bill? acquired financial Systems also Atlantic New business flow, support by is is I on in demand a across electrical our Bill our announced our I deploying but specialized good Electric same-store increased $X.XX performance. outlook markets capital will revenue new to commencing as year markets as Charleston, as our this for

William George

Brian. is Good Thanks, tax first I've the this I'm events started of with and time with good recent is affect reason The doing start morning, tax. a I've because ever everyone. very our I'm numbers. since call going been And it's to this so morning this many for reason. taxes happy XXXX our

refund Joint XXXX as activities primarily to approved benefit discussed, tax or last to R&D for So, refund and of our for claim Taxation year, for XXXX, the previously increasing not claims. previously recorded in XXXX any tax filed claims Up the we the on credit credit. January, end research years, Committee the the those had

first net non-cash a quarter $X.XX an reevaluated to related for years. XXXX the XXXX benefit was to tax and with a XXXX also gains additional of for expenses of the that So approval have tax for credits for result, recorded in realizability negative recognition triggered to per credit a benefit quarter the judgments Because the years $XX XXXX those earnings quarter. this were the our intervening past years, made approved these $XX of R&D tax share effective a we million result for regards XXXX. tax this After million those the SG&A of XXXX, year. current is in And as the subtracting XXX%. now, for we rate those we Consequently, tax credits,

that consideration taxes we our of our lowered we rate included this tax of quarter. credit, also first and quarter when year, the for tax the for evaluated the Additionally, R&D

Excluding rate was quarter in ongoing be XX% prior we and the our similar tax expect normalized year our first the will the for future. rate benefit,

$XXX relating same-store So, Gross million quarter increased with XX% we year. starting, the with we increase first well that was was had first background, that XX%, from as of an quarter currently $XXX profit the or new remainder I'll million $XX that of year, strong ago. by XXXX, now expect discuss increase last a million, year fact or broad-based our COVID. for compared Revenue to digit remaining compared Overall, to the high-single last to million $XXX lot Same-store of results revenue year increase XXXX growth. as air the of for digit performance. revenue a a for conditions of the a work pockets low-double

profit gross the percentage to compared was XX.X% Our quarter this XXXX. first XX.X% quarter of for

gross from The resulted declined profit profit decreases segment the gross in electrical percentage XXXX. in period. the our Our mechanical from XX.X% XX.X% percentage from XXXX to several XX.X% to in over XX% segment margins And same in in factors. decreased also

significantly construction new up revenue. First, as proportion of a our is

Second, is margins much generally their our due when lower revenue of we lifecycle uncertainty. jobs to in that early are report on

Third, we naturally work. with we complete cost the when to are estimate the concerns cautious surrounding about trends ongoing supply chain being cost and labor,

materials, for equipment proportion of sold or expense profit increase and of revenue of the Finally, of XXXX. XX% increases. quarter SG&A compared due even million up as the was quarter on On costs strong. this price so revenue a trending importantly, $XX million in and margin per goods XX.X% our $XX labor of half approximately basis, material in were million. second as markup lowers materials in first to new equipment in the cost SG&A than our goods to equipment our on and most one higher of quarter do compared and several is labor did same-store of are year XX% costs we quarter We dollar XXXX, ago. higher Since cost XX.X% acquisitions of to more or the of companies. our of as our proportion sold Material $XXX the we a of for costs hour stays put gross our overall was

related consulting tax this to credits and million to tax of quarter. recorded expenses R&D other However, that fees were that prior-year relates increase the $X.X

costs, these increase revenue The from resulted decreased to as Excluding this costs, percentage training headcount, factors year SG&A last quarter. from travel compensation including remaining expenses. XX.X% XX.X% same-store of a and and

done, Our and earnings quarter. we earnout variability ongoing each year liabilities. we which examine currently in we ongoing, changes this the reestimate related to from acquisitions with this for several outcomes benefited quarter quarter, our every that calculation large our Each our source earnouts likely have earnout have of liabilities, as estimates we are a is all the

net million per we in in flow XXXX revenue quarters. uncertainty related significant and But in to we million. of factors cash first prior $XX per work SG&A income $X expenses After which share net or a the $X.XX EBITDA gain of last tax valuations quarter. which believe quarter, last next for was tax per of starts year sharply This as share, gain million IRS of $X cash a including last from share. the the of the year from volatility. R&D the we of the considering to few interest quarter or significant good $X.XX above, working net all of quarter share gain movement net R&D of rate our related benefit, The included to these $X.XX $XX if that reported million, to year $XX Ongoing $X.XX net a This we million XXXX and credits significantly credits, this of interest received again unpredictability this income share, $XX increased those incurred rates comparison, EBITDA considering increased per this the first of And million to year, making as up affect the per or calculation, $XX is for credits, million. income of By normalize tax by the gain. as XXXX for first of by external and our the or compares earnout some quarter, in we variables flow was or tax Free $XX quarter capital $X.XX gain. for and cash includes $X.XX was excluding credit. same new compared to year that $X.XX the the XXXX flow $XX especially XXXX current million XX% the especially adds quarter the million the we investment light cash had are was of includes and in growth. earnout organic first was the this for even the

year, pocket. from recall, payments As received and benefiting the last from projects, we working air was you our large some on advanced temporarily revenue lower capital COVID may

funded borrowings March Our was debt earlier. and acquisition Brian that million the Atlantic X part the of Electric of end mentioned $XXX April at of the

our Brian. quarter repurchase Finally, with we're I program, since of actively what our first $XX.XX. cash on we we back XXX,XXX shares. of shares an XXXX, And That's X.X bought of we repurchased a million flow. repurchase began continuing our at have shares average portion price In to the got financials,

Brian Lane

Bill. for and few minutes of to I Okay. our going the discussing will I'm Thanks, spend rest considerations. our backlog a on on chain and XXXX supply outlook inflation comment also and markets.

XX%, by Year-over-year, with Sequentially, or is increased the March our increase Carolina. $XXX that billion. strength operations XX%, North at million of and backlog end an backlog increases across same-store or backlog based. most just our $XXX and with broad million Texas $X.XX in Our up notable over was our is of same-store

consistent in sector, for changing include represented Year-to-date, larger technology, in business it revenue, well, was XX% smaller buildings in health our sector saw strong and government, a doing backlog, XX% what and part our but of with as XX% as also recent of industrial XXXX. our new Our well new about XX% revenue construction our existing total sciences, commercial XX% and for construction without revenue. Institutional as now with was also of This projects which and industrial revenue, in which care projects life are with of from is quarter. is at which markets, is acquisitions. The will first full-year of we is from XX% includes food heavily remain construction strong education, mix, processing, in buildings. us the revenue

construction was XX% full-year business. new our For of XXXX,

revenue increase increase hourly seeing service with last an projects Service that a quarter pure X% and of increased is our XX%. service, same-store XX% XX% including our are in including service sector. compared revenue, by of year-to-date XX% work, Service providing to providing this revenue. revenue, of of year, we So,

on by flow and doing, Our at a the sustainability also that source can governance website. sustainability of maintenance Comfort are Systems. are million. you profit we first help of as continually to how both and growing the to the progress Investors consistent website service to it they service increased continues construction, tab and pleased base you of In buildings service on the see we X% $XXX announce of and published encourage main to report top improve as their an cash our Overall, quarter all-time high our the we and section well what to recently in customers uniquely operations. XXXX their make all as and of page the including customers towards sustainability our to am our corporate our positioned will and That support and or find efficiency report goals. help seek at we I our be activities,

diversity to and and raise in standards and policies, We governance. have transparency, upgrade sustainability, areas increase the our our continued of actions

XXXX in invest We reward force. we labor demand our are experiencing continue strong and and to

we As materials of and equipment. availability, in also constraints experiencing are the delays economy, with of reduced delivery cost supply frequent increases, other various and sectors and

pricing, to we recognizing We share challenges and mitigate and order challenges. and materials and to to usual risks seeking are these to with working earlier in job customers these are than planning supply our collaborate

We good of have pipeline a opportunities.

maintaining have productivity in we levels chain activity and generally so supply despite far, challenges. And been successful

We are events world also of Fed mindful tightening. and

record our trends that the strong now our although However, good and our our outweigh EPS we business. same-store growth expect continued our upward, we challenges will optimistic considering same at about current and considering for trend beyond. believe that and prospects mix as the remain expect We of the also demand backlog, pace not we XXXX revenue, XXXX in and

in businesses. our backlog capabilities of technology, Systems our in we service will continue the to USA, highest execution the workforce, With Comfort and history invest

to we back Our members and the soul to and to for Comfort they build heart our communities. continue will will strive it Justin skilled their questions. serve unmatched develop is reward I USA workforce over and you. team to Systems safely, Thank of now as work turn and

Operator

Eastman Sean [Operator from comes KeyBanc Instructions]. And Capital Markets. question our from first

Sean Eastman

The you you. explain putting would this backlog just level you remarkable. that high how sustainable numbers relative just is investors strokes to trend to been and growth for is? strength you've Brian, one in broad the How organic think up

Brian Lane

known I you've long think, Sean, a time. us

of force we We really customers. the are have the and proud labor good able We're really that project to planning do.

have are working there. out with are We that to terrific that through challenges the vendors us all

So, them. backlog everyone them. them, with are We when all care Everybody's in execute Well, of you and vendors best combine serve our we to There customers, and our that we'll communicate talking and efficiently about just work able challenges. that know productively. can the all we'll I and think and to to we're shape. get doing to be reasonable our take thing people our with

William George

a is There's we no lot do. know demand the of underlying happen. trend, on we moment, curtailing work as the don't of any at what will demand. As sign there But far this

Brian Lane

we're opportunities is good, seeing very still The Sean.

Sean Eastman

of that a of ramping new of release projects part that contingency. start of year-over-year kind this also maybe curious from end earlier does I'm and of on kind can and dynamic contingency to and element work some light perspective, timing we complete. the of When construction sort bridge in just that there. evolve? do pressure the of margin estimating this being back How around the get caution up Just to you cost and stage,

William George

and I'll add start he can Brian wants. anything

a are a the they're and resources makes that real. good maybe about than the the improvement time, problems be of There's on for more that why that supply So, guys today we of ourselves basis challenges all ever we've are in cost reason to have jobs. The with gives they're that. and deal fact cost the fact are leaving because us opportunity real. had are to very jobs chain Right? doing concerns So, late pricing we same positioning facing. that able the challenges At challenges

of to this do And summer. execution so, there's lot a

we get when start be far answered, As question that will it as the summer. – to after the see

scrub of the guys quarter, way, starting of hard jobs. right this our fourth be So, will this with won't done very we year, the stuff now. a take work, that's by Most

guess, mixed bag. they'll be might If a for get think hard I it'll very you it. I had and fact, little to take of really In start you'll But a to think – that. scrub – that's get when flavor to I good a

and have I customer think we'll to have really people a think spending make some sure I some good in we'll home But runs they're jobs some money gets overall. where and scrambling are be place we'll the what they need.

Sean Eastman

think as – for up year. the predictor just Lastly, the on I as backlog growth a walk about this outlook and I appreciate of organic revenue

the in down make of shift the seen Just on years we've come in business, that of Does kind sense? five should light in past, backlog that big over the what on versus say, the burn average. mix

William George

there's factors. Yeah, Yeah. two

have But example, very speaking, burn. And than like the has projects the probably are lock big, a industrial some astounding, So up of does industrial for earlier, moving which the to we're they're ever, committing healthcare, burn, industrial. backlog are which stuff longest right? – of earlier, people the quicker and which – They're more mix rest earlier, is trying us has committing ordering new right, than just been really pushes up. towards to generally

Thank together, two were I Right? to has than think So, a bake those if goodness. backlog longer burn I usual. the

Brian Lane

Sean, thank I it's was model. But going goodness. to range, say the within that, Yeah. your though,

Operator

And comes Julio from Romero our next Sidoti. from question

Julio Romero

new electrical And well building versus about of mechanical? are coming as maybe the new of the mix versus you construction? in Can of talk terms the mix bookings in of maybe mix existing talk construction about that

Brian Lane

I'll then go Bill. first,

in trend. seeing on. in the lot the pretty going we're construction backlog, of range, a is XX% There's a terms of So, new XX%, today. consistent heavily construction projects new

We work, electrical are Texas. a seeing particularly of lot in

our a business you'll up, percentage strong, So, mechanical increasing but as of will pick is electrical I think see although forward. be staying going electricals

William George

would agree with Yeah, I that.

Julio Romero

to two the months the you've what's I operating guess February the seen biggest over call? environment change past the since

William George

of I the no is of surprising high of in to the in interest. Like, last months think still sort is seems last two wanting change that to onshore. Pharma, letup thing be the lack most the the very levels there still months change. two biggest in people

So is the we a know look. economy everybody taking across hard

that our far, no with of customers. sign So there's

So, I'd they're say but the now. right the most changes thing there I'm is surprised notable may most about, apparent be thing but that's not coming,

Brian Lane

hanging broad is agree. I The too, think, still of there. it, I Julio, strength in base

much not change. So,

William George

they You may when are and of were would we'd couple And seeing maybe things In this don't – everybody well, we getting recall past, any the see we were that we're hoping we're case, of sign but not famous world's in coming recessions say, usually say the about but it. really of end, of out we do, kind any for we're it. sign a to better right. of

Julio Romero

on? one And rates the pipeline. industry you starting change see me. you more Interesting had for talk M&A candidates any And that maybe potential the could some of if dynamic maybe may interest some there. have about the are and It's for challenges eye rising valuations acquisition to maybe in players, given other your just you for last

Brian Lane

The the same. for our on, deals answer the eye relationship ones we've are is, no, had

interested expectations. broker, that of stuff a confirmable. I've higher instances pricing. a get that be to But pricing higher wouldn't stuff are It we hiring to expecting they people certainly For seen seems in see. there there's that's be seems lot are where that we like

long-term just that were deals based we're So, these really happy on had we did relationships. we

is year. sooner have Pricing just That We'll probably we we're there of of going got year, that think this to a timing Two gains last happened last turned lot integrate of pretty do the But there's this work to deals some to would two high. rates conviction do This us good get up. They take the and people of was we of continue to because for good that do period for right. make a deals us. late to lot year, capital a sure time breath. why the we've a good going I probably had did happened reasons tuck-ins. year. were bigger done it was out deals for

this think, of into isn't uncertainty time there's – in the I midst pile year, necessarily the to also acquisition.

this calm think we'll So, pretty be I year.

the pipeline, think developing good. keep I really it's we'll and still

Operator

Davidson. And our from comes Thielman Brent question from next D.A.

Brent Thielman

billion that capable on, then, going we of and you're and I have Brian, do did try business? at of even have when $X.X think burn larger a is, part And of second guess, kind a work. of backlog workforce look capacity the address to an sort you smaller supporting book you to book of that execute how you incremental that about

Brian Lane

good Brent. really mentioned, So, And broad luckily, questions, based. is Bill as it

companies largest larger So, work. share have the to

in lot known also called that we're standpoint, company spend last we out right with you've end which Kodiak labor did year, make and sure of planning, We're a this long fortunate very acquisition know, with We of labor resources. shape. us capacity the the Bill the work, at good time, you labor throughout have a from an supplies a as country. So, timing a time, us

multiple our we sources to So, have capacity. do increase

good can take, it. I are But looking we're going and how do as have we with much to it's now, and take right at we'll the and really backlog when in our their continue good at guys think, win shape I work to with sit they it. So, you, here workforces,

can we that very can do. our fortunate sure making folks and we're running the that organizations they we take So, work with have

William George

to the equipment, way in revenues is mind, don't same our from that you consideration, in XX%, of materials I'll our and goods of proportionately way bigger, cost same one makes going sold the our it labor specific more amount which backlog made that smaller. If XX% add that, the

got jobs that So, end. big very on the we've are

people. XXX we're of number are we same We you on at the workers top have that to XXX have jobs the people, size going highest of where jobs have that where the ago, out a size, job site couple years might certain with you're of a

as more make makes happens if start the smart and definitely what is, for for a is on then come line. materials the them we'll paying back suddenly But and trend to it'll backlog Right? more the that towards backlog sluggish well. little So, bigger materials, margin down, now, look the

Brian Lane

But reasonable we're in Brent. right now, shape

William George

Yeah.

Brian Lane

lot Brian. saying, right there capacity. are of do you a the okay. come it, Not out spare sure now, and we're I'm But guys

Brent Thielman

of in just two inflection projects? The a expect – the was once a of would mature more which electrical, second you segments and of one mechanical these get stages you between more to larger the towards margins kind see positive

Brian Lane

gross margin in the to at electricals the up for look year. closer at we You last quarter, XX% XX% were

a year this goes So, I early, Brent, lot in We're by. optimistic electrical I'm really the as of work.

watching to year. if I will guess, the go bigger So in as see we margins early that bump that expecting really am had we're electrical throughout next closely. year, a But I

William George

Amen, brother.

Brent Thielman

And to kind more. to too. out as it's looks a continued retail, in the But Is tighter coming on others favoring going emphasizing perspective in stuff I industry, of as the looking guys. of and you're to just associate might for work? at the one you, these from at that be in capacity it But and light pricing revenue for be of for quarter. work. noticed, environment Industrial I – around also in the imagine Q, leading you bids general kind Just seems least maybe restaurant work, getting realize a you're better that not we new I've first what like of necessarily commercial the kind a huge driver some

William George

of lot for that Demand deals service by say they the I They December detected Couple very deals you're of of stuff that past, do And right, of We've our heavily capabilities. a wrong. acquisitions have we've broader complex in in although in doing us. a in the more traditional for those brought more December. were did work. did would industrial. probably we you've done way, done the mix they is also, good we pricing, little bit were things unless a

penetration. that have. nice deals point customer didn't today them from the margins to revenue bought But of service in own businesses, the service quite didn't have very, in service them. especially we have of of view have and very had when those honest, we the Some companies we margins that They those be

there's hopefully, opportunity an So, there.

Operator

question from And comes from Davis. our Adam Thompson Thalhimer next

Adam Thalhimer

else strong. Brian, Carolina out at there other some call anything of Is you mentioned the Texas to and North geographies?

Brian Lane

I I very it's southeast It's in with would around, Florida, everything say, documented is too. think strong. everywhere but honest [indiscernible] you. is be – very to the you strong, strong Texas obviously read, well across in particular. Florida is

William George

get You everywhere can't numbers like though, being… with this,

Brian Lane

good. strong. pickups, no, with being very Everywhere Texas, North But, Florida, Carolina,

Adam Thalhimer

What data are you seeing in centers?

William George

Steady.

Brian Lane

Yeah.

William George

levels. Steady at high

Brian Lane

Steady good consistent Very and and work. volumes of good.

Adam Thalhimer

And modular, then high level?

William George

good a from up to We're actively square now be the about we demand six or adding production of modular. year space very very, that's footage. significantly more square Modular, is going demand in because have feet Today, months very And in million a modular. good.

Adam Thalhimer

terms just others I'm how think your of that your struggling companies sure variability you it? a see front? guess larger how trying like, sailing chain. supply question issues and you through, really are to in And supply that subsidiaries? with not on out Like, there do subsidiaries are some it's really much in I to really there How on variability chain But seeing I'm ask much question. through this are are

William George

is who can nobody it's get we pretty prediction very the geographically ends not – switch and variable us. their this lot not, suddenly, company weren't month, it's variable. struggling more PVC. company know, going. of It's to occasionally, or variability And very It's gear that necessarily I expecting. in. out get type One lot variability ship called seem of we don't with get is about month more predictions is But of to people just nobody hard often longer. that unfortunately, company. get it's to stuff versus don't is going to off something ton I our this And this a the figure. very how a and good it's like thematic. like they just variables are next But, a There's the coast think then, some And try can but figure to clear themselves setting are make the hard suppliers to – than being up It's variable, is when that's get

Brian Lane

want just bit add on to I little a that. to Yeah,

the Everybody them very they're situation knows you whole getting chain your it. We being and rational in. at the from and with customers, transparent. are stuff our If look communicate vendors about we're how people

time be management. So, good we have we're it's lucky folks, through at to good really that and We important we're with and this. help them project these do to trying really And are get vendors. us working appreciate really we really

Operator

would further questions. to I remarks. And am to closing showing no call I now Brian like turn the for Lane over back

Brian Lane

really thank terrific again everybody. Thanks, working right. employees. do great spring I everyone a doing customers. job diligent once and talking hope taking interest we'll USA. appreciate to soon. you All has of safely, really want we Also, a our to all thank They're Comfort efficiently Thank in productively and wonderful care our it. of day. Systems And you. and We your for a be you Have

William George

Thanks, everybody.

Operator

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

You may now disconnect.

Comfort Systems USA (FIX) 29 Apr 222022 Q1 Earnings call transcript