FIX - Earnings call transcript Q2 2022 | Comfort Systems USA, Inc.

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Operator

Good morning, and welcome to the Comfort Systems USA Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Julie Shaeff, Chief Accounting Officer. Please go ahead.

Julie Shaeff

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

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

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

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

Brian Lane

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

increases increased inputs. equipment We strong materials, year other I of thank across in combined country challenges, a stakeholders. superb our growth activity strong our our through to planning to per we Thanks our the same-store careful compared results a resulted tough want by of teams and and the and ago. for XX%, including effects markets, and execution, customers conditions so $X.XX customers. employees many achieving heat this in We driven perform cost had with approximately earned Before working record continue amazing market in $X.XX start, share our sincerely for second to quarter Unprecedented to revenue quarter.

growth. flow capital strong. especially New work our pipeline backlog to are since we investing our excellent Cash commencing footprint, across quarter, our also support was remain and and is this

we $XXX and to also our call quarter, our will flexibility to discuss it sheet this facility recognizing to We the Bill shortly. want our flexibility. balance us our amended the of to thank over increase for improved and cost. During turn But million banks credit financial business performance. our and outlook I to additional first, Bill? will review this providing and financial I with strength

William George

Thanks, Brian. This or $X billion quarter Revenue for million a in for quarter of especially. an us, quarter. was billion, was It first last to $X.XX quite a is the revenue exceeded compared we've revenue, second XXXX increase year. of time the for $XXX XX%

of $XXX Our of recent million. same-store contributed acquisitions growth had and revenue a quarterly total $XXX million new revenue of we

in of inflation revenue experienced broad-based new other in with starting, inputs. and and sharp was Our equipment work we a materials and increase lot

in same-store by the revenue XX% mentioned, headcount same XX% As the in increased employee quarter, same-store our while Brian increased our second period.

are $XX During year, year, the revenue range impacted Gross same-store measured close XXXX, XX%, for although increased second by revenues XX% dollars compared in usual. the for in the gross ago. profit than was variables currently very million second the our of were growth quarter probably profit of we there revenue Overall, of our from more Same-store million certainly a $XXX to XX%, the year same-store a to increase increase. double-digit expect by pocket the remainder quarter COVID. negatively to last air

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

million jobs early from The margins profit more XXXX, changes while we're mix Mechanical of profit to doing resulted the in the we're and up XX.X% materials percentage dollar for $XXX proportion percentage of basis, revenue same gross in by in the second new sold. many of the segment declined as in XXXX. million and increases to are new Our in over our from our XX.X% or second our of segment moderately $XX increased SG&A gross from SG&A in growth quarter Most the companies to Electrical the same-store $XX on quarter for the equipment XX.X% million. from XX.X% XX.X% of higher construction, was considering a quarter compared of evolution business of expense cost a or XX.X% XXXX our period. for goods our revenue in and the was

from percentage X.X% income operating to increased X.X%. slightly Our

to to $XX from million, $X.XX the quarter was second finalized from compares the $XX flow Free increase. got for After from refund continue million Our R&D EBITDA we invest quarter. credit tax $XX income the or This cash second million tax was or XX% we million, tax of the quarter. was $X.XX the $XX second the to as factors, of year first last XXXX share. and that a rate credit in this the that in per flow expected first income months good X quarter, million last XXXX of growth. R&D cash quarter of share, is XX.X% EBITDA that for year-over-year net $XX for quarter million considering for net benefit the increased we $XX the XXXX we remarkable the IRS per as for above in quarter including second the

June end debt $XXX Our of the million. was at

includes also our even facility and increased capacity The new As with costs, stock covenants. favorable flexibility buybacks. to acquisitions, facility adds to million. more respect credit greater The dividends Brian improved and mentioned, credit $XXX we amendment

XXXX, repurchase shares in XXXX our repurchasing for bought that's since program $XX.XX. of got financial, in an have average of at X XXX,XXX repurchased shares, first actively shares approximately are price We in XX.X began And And months I have Brad. $XX million million. we we the what back we our

Brian Lane

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

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

This Our remains represented industrial our in in sciences and year. new revenue which of strong government Institutional are XX% represent of care technology, consistent in and half backlog heavily solid processing sector, XXXX. includes total markets, our first is life and last pipeline. including with health and food was XX% revenue and education, the of revenue,

source increase construction the business projects mix, of commercial of and the XX% months, from Inflation we customers. service the of of standards are And revenue. Service our we Finally, changing our projects doing including XX% the XX%, of for XX% Year-to-date revenue, smaller growing and we And with and of profit work, are a is buildings. and was and of is sector XX%. coming widespread. at and from flow But construction service XX% without projects revenue at consistent own operations. both in inputs cost in as is is part same-store sustainability, Comfort to is our revenue a and service expect approximately buildings support and all sustainability to well. to up construction be pure that providing use our availability construction, service, X% improve the and of XX% it uniquely existing our cash areas customers encourage a providing governance. challenges serve continues Year-to-date, we of continued Overall, Systems. in hourly of buildings revenue. XX% In including diversity positioned raising they with our and efficiency revenue our in of the their to service revenue new including year-to-date activities, seek our now about service

these recognizing customers these to we Although than risks to we conditions share with in planning are to to job pricing. project and seeking order are supply in hard are and and near to materials challenges earlier the our working collaborate mitigate challenges. term, And usual

have opportunities. good of We a pipeline

And been to productivity maintain despite so far, supply challenges. have we activity and levels able chain

world of events Fed tightening. watchful are and We

our giving quarters. our formed. in and focus in USA and month the XX sectors, we marks This coming Systems record ongoing the demand, and institutional strong earnings was anticipate industrial Comfort flow in However, continued years cash backlog

and and best our helping communities we in building the grow to priority continue our workforce ahead, repairing achieve industry, As and our of in our we so our maintaining, replacing look growth. preserve sustainable can installing, legacy constructing, nation's is

about optimistic beyond. and are XXXX We

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

heart is the workforce Systems USA. soul skilled of and Our Comfort

thanking We our their their back are XX,XXX our I'll they dedication by for Thank for reward develop want now and questions. for their grateful we committed it and are employees as unmatched and members to end turn over to Kate you. I dedication. work hard communities. to team serve

Operator

first question is Sidoti. from The Julio Instructions] Romero [Operator of

Julio Romero

line. wanted start to I top So the on

that of activity range cost year, for mentioned expect year. the the do You is the for growth much to the How versus to going of the you you sales increased be of same-store of think in XX% remainder pass-throughs? remainder XX%

William George

good really a That's question.

of I One same-store headcount dimensionalize mentioned prepared increase people script because help the was to my reasons that. in our

So in same-store. revenue was second the up quarter, XX% our

And given Our that group of at a workers XX%. have up XX%. time, more a about by we big was same-store up headcount any temp was little than

of doing and without don't work, by estimate growth, just other have is XX% know best more that best -- But chain. half our second the happened craziness my is inflation about in roughly would the driven same-store growth all So my supply of half half the what with was us was of inflation. we that estimate irrespective of -- that

variables For -- a of there's don't moving that. don't better have It's a right I year, a the better the rest now. -- of than have I lot estimate

Julio Romero

variables that's And the out you No, as fair. well. called

-- the gross I of mean I so in profit think you would about year? guess half the percentage So us how maybe second have

Brian Lane

Yes.

on. So Brian. then can for give Bill follow us and Julio, it I'll it's

sure. where So news and I today, relatively of a our happy execution our really we're mean profit we're still jobs. that the look early getting if on good you projects are lot The we're gross for is in at with for right that we

tackling not really was that. particular. blocking driven It's that driving pickups any fundamental good in closeouts that's and So by just of

the as country. with strength, the go I anticipate get really we're We're year, Bill, we maintain of busy will of in busy. our through throughout how will many but rest year. in, the in through anything? heat So service don't this we I think we're extremely the extremely currently we would closeouts the -- -- -- year, range We're the I the end And think seeing service. maintain that we're I I think, particularly know

William George

Yes.

close good, year -- were is XX.X%, a time range. ago, asking to ourselves typically, closeouts out, we that, more gross we of hard that a not predict But that. XX% are we're We think that our half into going driving never that our gross be It's half profit. harder jobs XX.X%. profits -- next it's So proportion jobs were been a range year. the have Typically, our big first really XX% getting to second right? to those higher are the of we been us are slipping than on to larger We've are

So out obviously, that XX% revenues, I -- result. people guidance to is think best can we give pretty and to that XX% same these range, on the kicks a good

Julio Romero

Yes. how changes the increased maybe Maybe the one No, et And to revolver. of uses I is on regards that's just any debt last cetera? me facility with on -- new guess comments anything capital helpful. structure, cash, for the

William George

extremely more we interest we much covenants already were of we -- us friendly, down, it's so business. the instead The we've flexibility we total extraordinary is or to of easy which have -- opportunity. already chose Better leverage and moved really, was -- we're it's opposed ratio, The flexibility if pricing much coverage to our obtained were a mean grid really revolver. really but ratio unprecedented that. things a for it So net as I came good crushed ratio, how acquisitions we leverage run was already to to have low. very unambiguously -- -- fixed already we which meet both we a like buybacks, a to ratio charge pricing, given moved which nice all very, to big our covenants an to pretty give do we -- do that

don't us as We well. We think know we're So are are the to know, really I telling really our clients a timing in renewal. a thrilled. there lot was of all good bankers do about our

it we lucky we to right should think got have. I when do just

Operator

Next question Davidson. D.A. of is Brent from Thielman

Brent Thielman

sounds and conceptualize kind component I to this that's Bill, further just any you to booked burn it is you or first of Brian you've of large how guess, further and with like the is little to burn these the I report. dollars guess, question rate on sort now. and I through of element, inflationary backlog mean in out, it kind touched the a you this expect in right getting of other guess, I on jobs the I'm sort And you're bit, backlog of there help trying terms got? of backlog

Brian Lane

Yes.

think I going our So pretty is be typical. to burn rate

Our average size is still roughly XXX,XXX.

it be of so. winning some we'll months as X XXXX probably to to a chunk XX% in are the about X large obviously So But with out we of usual opportunities. next or X/X these -- to larger work

think I of burning So good, the -- our work. that pace have it's size it's the good mix companies labor it and operating that a we're the is and for the

rate got with So I happy think forecasted as really point, the burn we're at still. this we've it

William George

WIP on right? in be work big schedules for pretty are reasons the things saying we more X that that going are is do So keep have manpower increase we're Right. moment And That's But to number are in that we a usual there's this eye-popping backlog. It's left pretty that gone. that backlog our of have, right? than do why that jobs, very currently. same-store our the -- early we're we it's a at eye-popping to average making of means pretty to accentuating when there average the on work. Because jobs backlog comfortable

size thing since the of accentuated other the is in The the it's that inflation. measured big dollars backlog

it our essentially, and think at exactly they're are and at in what got we'll got guys think is backlog, So right, timing pretty field record. when see. the they workers, track looking their they've I a They've their manpower, their good looking

Brent Thielman

move up strong. backlog are evolve I follow it -- markets you how booking here, you of how the you're to I how think on still of sort rest that. mean mean, billion we the a plus like do Maybe about quarter do as $X your really year? through sounds

Brian Lane

if how probably tell, stay increase pretty at an how are extremely think hold I in the the at you right knowing at see think can I over much least and think burning look Well, I for don't I steady, now, high we're we'll X think opportunities of out I next there. backlog will it. We're the quarters. burning, rate. we'll you as couple that, for burns the Brent, booked quarter many

William George

at very, we dollar and that will We think will we but foreseeably don't when I very, costs material it some But And moment backlog. level, robust, very material know -- happen, honestly. believe. -- our there'll a of be demand obviously, think and moderate amount -- for the is very when really moderate the our labor

as As far is backlog dollar-denominated.

they hour when it, matter sort like that we how revenue matter on right? don't we So make, money per profit in much but -- do. much predicting how that make you're for there -- focus what really variables there to do we of we of they revenue our work, if try gross is are What

Brian Lane

type at. of winning just the is And of follow we're that work the type on we're Brent, work to good

in really wheelhouse. it's our So

executing the a guys doing great and are it it. obviously, managing job So

Brent Thielman

just quarter-over-quarter margins me. to pick quarter-over-quarter, thought for first mechanical just second more But in did terms like of from around that guess quarter. quarter in I they'd Maybe I other the looks that typically guess would decline? It one the absolutely. happen have The up Electrical. Yes, color I any the

William George

there. of now. money it's all we're Very, was think I with a are don't mechanical say people proportion division that perfectly are cost people right really is, making people they healthy? is I company. need it got job had careful know as their recognize very Because they've of I The size how know So variables shift and the I much mechanical to sure phase. healthy. very the a helpful. bigger in job question in higher that what in are our -- higher electrical is really I mechanical work think also work materials being they is already and already are in for out electrical. will you there new what They're than with And very, the with shifting meaningful the not had really, Essentially were dealing profit --

a So there's less for them. of shift

not of I'm of mix. that sorry as always, too... So some that's some that if

Brian Lane

Brent, really mean companies that have the the electrical work at. on a improvement strong, they are And us front, I good the have they're good had is we steady-state and really joined work

As Bill said, they're it doing good doing job now. it tends to just be right bigger. a And really of

William George

being at our became lot XX% we is worked we started in because -- where new would of was look Revenue I we this extra a on Mechanical cost. -- up not -- revenue, ran at and say an quarter, there our right? look service that's construction

Operator

is of Eastman KeyBanc. The Sean question from next

Sean Eastman

the in you round flat half. quite around Great that mean in just wanted about year. the of some the is last on thoughts quarter few full how XX% harder. update guys margin of the a on puzzle second notable. to the I XX% here. obviously, the margin. second range try potentially leverage helpful. good there We be push And got out I I would But operating those to organic for and little SG&A color the pieces just margin to maybe growth Any gross to discussion. in the was wondered think expectations

William George

from XX.X% revenue low went probably of to all-time an of XX.X% SG&A So at revenue.

to have because the and absorption fourth fantastic second it had of we said, think You a can comparable don't like because think honest, a pay comparables how out get my higher of we've coming that started -- hard to I'm I see a to is probably revenue think the ago, you out revenue -- that harder these see But quarter I continue. comparables. little and and keep tougher got. It's much were we guess, best are -- quarter we in the number. we year to third if the we A absorption We'll third [indiscernible] better had being reason really side we I us have of XX.X% on jobs. gets we turning had is come won't no for good COVID, lot people. more more absorption. so got on

Sean Eastman

about Okay. after ability terms to clearly of in sort the just summer Great. of the are of But supply challenges, message And Comfort that conditions. terms I the busier of feeling updated just Great. months, better or some mean, chain worse in Systems' experiencing unscathed? on operating through manage you persisting

Brian Lane

the mean is tremendous bit stuff that that's doing the really running just a challenged of more are that managing your transparent availability, in But are here. equipment. down there a is and I talk about, think staying management now, of has It's it Sean, slowed this sauce terms a you get seeing an a can. meaningful specific, in the if little we process. vendors, day-to-day a and ahead stability right day-to-day something chain, we're Well, vehicle, like don't secret being we've close folks a you fittings, work getting us no supply if this talked there's chip anywhere. way -- electronic I it's [indiscernible] it you event. And to big pricing a in customers It hasn't best job But about know, we as as and

Sean Eastman

it. Got

for those in has now. story then And with has the broader to industrial story of as just capital are mean, the while, characterize growth evolution be going about I hearing about now I How great around you number base seeing we sensitive Okay. any battery through story? segment, there around a been mean, but for semiconductors. there, of the of about evolved your sort discussions at And how couple is food, talking been we're years programs think a industrial customer a that on macro? next this all? years more that just the pharma, this you're would come data growth centers we've and

William George

going there's good right? and they stuff they do they generally you even semiconductors, all a I really don't They types reason unless it data. is, confidence that have think to to problems, happen? financing is So the right? there those question guess so to I I think speaking, got battery be build? about have -- it worry customers, -- need could of so the -- the is Obviously, they're don't far, needed. could. really, mean building But -- And

no food on strong. catching from up there's side, the far, no food pet So from turnaway There's processing data. is turnaway

is it's So to -- far, if happened -- to some going we can't if turn hasn't it going it, yet.

Brian Lane

seeing these still early us a And in very there's no indications Sean. of participating opportunities, we're lot

So -- up. we right now, as let no know as is there far

William George

hasn't even kicked The even in. The There's kicked upside in really in battery hospital. pharma really hasn't yet.

get even and other areas, So if you see weakness really pretty -- good there's look other things in that can can about. some where feel you you

Brian Lane

in to seeing on add And strength that, education. we're good

in up is backlog Our education.

still the seeing in good well others the we're mentioned. level So very addition you to as university at opportunities

Sean Eastman

course, And growth. service then, continues chug healthy to of with along

So lot a a on the of growth is forward? profile maybe go optionality around the

William George

modular pretty too. nice, And booking up is

Operator

Thalhimer from Next with question Thompson, is Adam Davis.

Adam Thalhimer

of revenue outlook? Great you Bill, What the just growth growth percentage there? quarter. are modular? there keep And what's now? the going modular I What is on seeing can

William George

It It's I won't the are at went say pace. XX% up, big astounding matter you shrink don't else of -- business Comfort XX%. as because rest yet. how revenue. growing right? as other at every how because now and that's keeping of is you way, I of fast Right will look But off far a think can a much I've that the the can Comfort, how think of part seen be grow grow can everybody you it by fast proportion is you is that a so

These space. And -- footage. keeping we've they're some orders paid. and in There's tech. really, of the there's stuff square really guys, added coming So good bio out

modular Carolina We're North capacity. we as we've in in actively and both So added Tennessee, capacity space, the speak. adding

that's amazing. and pretty pace, keeping they're So

Adam Thalhimer

next your back The revenue this year, growth Okay. year? that to on guess organic moderates the do what's of XX% in XX% half best what

William George

drop to out, it inflation, only to digits what's the it have can we moderates because inflation going flattens guess to You're start to important to prices with assume so I mid-single -- for think by very my our the keep There to stuff. moderates -- grow items. certain if but buying as not -- and workforce chain forever, floor going right? cost doesn't out, mean supply -- the happen drops way, to are don't let's China fast, reasons come our is especially me honestly, is gummed Now prices up but down, tell much

You'll see come backlog down.

You'll we We're come then we as much of can geniuses, make look don't like -- revenue. see of revenue a make, money down. course, never But care we'll as we about tell. really margin how we money right? far think We we and care lot can about

Adam Thalhimer

Great. is Last acquisition to which I the really But guess you in million, revenue? had number, had $XXX a to me. model trying had there, one the $XXX too. for where be million strong QX, to back does that that go Because record. I electrical half? a was I in

William George

that me let If you know. figure out,

when eight seven the five time you look if year when two. there's they a our sometimes years, little seventh they period acquisition seven a the more gigantic biggest for of last to company of Texas years. few buy But We've or profitable. They first and we on. have like in in shrunk -- to historically, dynamic wonderful here's bought some very a owned at what back really we They're more a little. first, growth, growth. serious electrical bit shrunk going a profitable And a So company, become at we the or have

today by higher bigger lot day profit with are bought them them than we the a of margins. All

We we've over. predict. big coming mix now. hard It's take [indiscernible], to things got So I'd a is there's for so got on on. company us. X right interesting strong But Electrical really the going one new

Brian Lane

We're get to [indiscernible]. going growth

William George

is over, but I'd a tell the new going things happen There's what really you that A will company growing could lot [indiscernible] I'll And win. are out. that's higher make But happen. unless margins the take it's good. to hard to of

Brian Lane

focused and improving on in margin business, that And the Adam. electrical we're really

we've been steady hopefully, far, we'll that. keep but goes, as doing So she

William George

somewhat would It's predict than good well comfortable I to more improving margins revenue. predicting predicting Their margins to revenue. positioned. electrical their be I'd their are hard

Brian Lane

Yes.

Adam Thalhimer

parity to get you think point? You some at

William George

the construction are on much parity. there. We're at pretty think I we business,

jobs of If the jobs, size you take of size and whatever.

electrical has a to taken to because whole, got to as have mind, in better with more mechanical whole doing mechanical taken be as for on service. have electrical electrical -- But a keep business transactions the For you operating the Their I of line, notably salesmen and is and service because SG&A and at has know parity. billing factors, mean. departments thousands I income that what commissions, less [indiscernible] think we're parity

Brian Lane

mechanical our bigger electrical And always will than service be service.

William George

So what I just parts moving here's hope side. because further that's Yes, know out don't not were electrical where parts -- on I hope gross even out, because I moving right? gone mechanical to that -- mechanical but I today, has hope. the gets profit is

Adam Thalhimer

chain concerns? they're you mechanical how and have work? so Are you pulling then from because And less your the supply does profit accounting just the -- like large early jobs mechanical

William George

question, No. it for Brian. to leave I'm going Accounting

what early job-- job margins. a at you a gross job So bid happens bigger really any a on, is certain

that a know job at that, the take costs it when the job the have agrees start -- and but margin load going meeting to are. going leave on early job, at because a they guys handover to where everybody margin how straight you are They they do to a reasonable ownership in perform the rain. is much up contingency don't You it's who the job what of the

There's the whether can't go. things need people going -- to guy be to go, when many ready control. know there, don't to you drywall other will when whether is you You you're ready be

usual. people being more across never And tight. a Labor a don't undoubtedly right are we average, have, Therefore, history, have on we the beginning and on year. job, more early their net comfort, being jobs lower had more now, is about But So you where since no job average, as there's gain than supply contingency. carry of in might average, they're chain. didn't margins have you our -- a for imagine, We've careful course the in They whole the over our the year at the reason exceptions beginning gain jobs. careful. with know on

is didn't gone. bought out a only never of So -- because didn't would carry once a went A the then jobs when early have construction pickup I have who yes. out they and answer good we've year don't, net think have jobs to that you that on go at carefully business. more we a their a jobs have company you're if business We you -- because carry in anybody of

it's but very yes. So of long a answer, course,

Adam Thalhimer

when later QX, talked large of jobs but in lot And you stages? when because a the starting do jobs then -- do to large the get the about those

Brian Lane

a see, will fourth some the I early think think, quarter you'll but quarter. second this in mostly I be year, first

William George

next to year. throughout work. back normal a next Really mix and younger We'll closeouts of Throughout get year.

Operator

This question-and-answer like remarks. session. for I to Brian Lane our back closing over turn conference concludes would to the

Brian Lane

Okay. closing, I the joining you everyone diligent do. really call our We appreciate hard the to Thanks I for thank really again. this to and all morning. all employees want work want thank

As you summer. and I opportunities, are their everybody very the of are can Thank hope and beyond. this the year of our you. rest excited we about tell, enjoys we both optimistic half second

William George

Thanks, Yes. everybody.

Operator

has today's conference now presentation. concluded. The attending for Thank you

may disconnect. now You

Comfort Systems USA (FIX) 30 Jul 222022 Q2 Earnings call transcript