Comfort Systems at Sidoti’s Conference: Strategic Growth Insights

On Thursday, 12 June 2025, Comfort Systems USA (NYSE:FIX) took the stage at Sidoti’s Small-Cap Virtual Conference to discuss its strategic initiatives and market outlook. The company, represented by Chief Accounting Officer Julie Shafe and COO Trent McKenna, highlighted strong growth prospects in data centers and healthcare, while addressing challenges in talent acquisition and project complexity.

Key Takeaways

• Comfort Systems USA is experiencing strong demand in the data center market, driven by both modular and traditional construction projects.
• The company is expanding its modular construction capacity to meet high demand, especially from hyperscalers.
• There is increasing demand in the healthcare sector, particularly in hospitals and urgent care facilities.
• Comfort Systems is investing in technology and partnerships with educational institutions to attract skilled talent.
• The company is actively pursuing acquisitions, with a focus on expanding its electrical sector capabilities.

Operational Updates

Comfort Systems USA is leveraging its assembled workforce to focus on complex projects that require collaboration across multiple companies. The company is expanding its modular construction capacity to 2.5 million square feet by the end of 2024, up from 2 million square feet. This expansion is driven by robust demand from data centers and hyperscalers, while maintaining relationships in the pharmaceutical sector.

Market Trends

The company sees no slowdown in data center demand, with a strong pipeline for both modular and traditional construction. In the industrial sector, Comfort Systems is involved in technology, pharmaceutical builds, food production, and battery facilities. The healthcare sector also shows strong demand, with a focus on hospitals and urgent care facilities.

Investments in Technology and Talent

Comfort Systems is investing in Building Information Modeling (BIM) and digital project management tools to enhance project execution. The company emphasizes partnerships with community colleges and technical trade schools to cultivate a pipeline of skilled talent. Additionally, Comfort Systems is benefiting from reshoring trends, particularly in right-to-work states.

Acquisitions and Expansion

Comfort Systems acquired Century Contractors, an industrial piping company, to enhance its capabilities. The company is focusing on expanding through acquisitions in the electrical sector, as only a small portion of its existing companies are electrical.

Future Outlook

Comfort Systems USA is optimistic about its growth prospects, particularly in the industrial and healthcare sectors. The company is focusing on both organic and inorganic growth, with an emphasis on maintaining a strong company culture to attract and retain skilled professionals.

For a detailed understanding of Comfort Systems USA’s strategic initiatives, refer to the full transcript below.

Full transcript - Sidoti’s Small-Cap Virtual Conference:

Julio Romero, Analyst, Sidoti: Okay. Morning, everybody, and thank you for joining the Sidoti June twenty twenty five small cap conference. My name is Julio Romero, and I’m the build industrials building products and engineering construction analyst at Sidoti that covers the name. Really pleased to be able to host Comfort Systems USA. Their ticker is f I x.

With us today is Julie Shafe, chief accounting officer and senior vice president, and Trent McKenna, chief chief operating officer. So we’re gonna do a quick overview of the company, and then we’ll hop into q and a. If you have any questions for the company, feel free to type them into the q and a section at the bottom of your screen, and I’m more than happy to ask on your behalf. With that, Julie Trent, thanks so much for being here.

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Good morning, everybody. Happy to be part of the conference. I’ll just give some opening remarks just to level set everyone as far as what comfort system is and and what we are is really an assembled workforce. We have about 19,000 employees. About 85% of them have tools in their hands.

They’re pipe fitters, welders, electricians. They’re they’re skilled craft professionals that do, you know, work on, on on complex projects throughout The United States. So we’re primarily in the mechanical and electrical sector. We do construction where we’ll construct the building, the new buildings or existing buildings, and we’ll also service buildings for their HVAC and electrical needs. So, you know, we are we’re nonunion, so we’re largely in some tier cities.

We’re in places like Birmingham and Little Rock and Syracuse, New York. We’re also in some larger cities in the South such as Houston, Dallas, Orlando, Phoenix, performing these these construction projects. So we have about 48 operating companies throughout The US. Know, most of I would say 40 of those companies do work within about a 100 to a 150 mile radius of their core office, and the remaining six companies do a lot of traveling. They’ll travel to remote locations to build.

In lot of cases, some of these larger projects that are not being built right in metropolitan areas, they’re building we’re building things outside of large cities, outside of Phoenix, outside of Dallas, maybe in Sherman, Texas, in Lubbock, Texas, and different geographies. So we’re about 62% industrial now. A little more than half of that is technology where we do work on data centers and chip manufacturing facilities. The rest of our industrial is doing things like pharmaceutical builds. We’re doing a very large pharmaceutical build outside of in Indianapolis right now.

We’re also do food production. We’ll do, you know, batteries. All those things are, again, in that industrial sector. We’re also very strong in institutional. We do work in healthcare, which for us is largely hospitals and some urgent care facilities.

We’re seeing strong demand in that sector. We’ll do a lot of university work for for for different universities, you know, whether it be, you know, you know, labs. We can do we’ll do, you know, dorms, stuff of that nature. And then we have about about 15% of our revenues is in commercial, but we don’t do a lot of commercial construction. It’s primarily on the commercial side.

We’re doing service work where we have, about a $175,000,000 worth of maintenance contracts where we’ll go in on an annualized basis where we’ll go in and and and service the the equipment for our for our customers and as a result, get some some pull through work. So, so that’s really, really who we are. And, so with that, I’ll just turn it back over to Julio for some some q and a.

Julio Romero, Analyst, Sidoti: Excellent. Well, Julie, thank you so much for the rundown. I guess I’ll kind of stay on, the topic you mentioned about your end markets and just thinking just asking about customer demand, what you’re seeing on that front across the end markets, maybe just start maybe with the data center CapEx, which is, you know, obviously the the favorite topic of the day. You know, on the first quarter call, you mentioned no slowdown on the demand front from data center CapEx. Can you just talk to what you’re seeing there?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. So we’re so, Julio, we’re continuing to see kinda that same that same level of demand. Right? Like, where we just don’t see much slowdown, if any, and none, really, I should say. Our pipelines continue to be very robust with data center, and that’s both, you know because it’s important to know.

It’s both our modular data center business, and it’s also just our traditional construction data center business. Both both sides of the business are are still very, very robust, and the pipeline continues to be robust, well into the future. So, yeah, I mean, that’s no no changes from what we talked about on the call.

Julio Romero, Analyst, Sidoti: Any evolution as to what you’re seeing as to, like, the the skill set that customers are asking to bring, from installing, liquid cooling versus airside cooling HVAC solutions?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: They, you know, they’re kinda from my perspective, they’re using the same they they’re using the same contractors, frankly, on that. But what they’re really interested in is an owner. They they’re they’re very you know, data center owners are very demanding owner. Right? They they wanna make sure that their project is is done the way they want it and and on time and and schedule is important to them.

They’re also a very, they’re very understanding owner, though, about the fact that that that’s not free. Right? And so that’s from my perspective, you know, it it re the the reason why I’m phrasing it that way is because it requires that you have a team that’s skilled, that you have a team that’s good, that that that can deliver, on the project because they don’t have patience for teams that fall short. So they’re really interested in quality in their contractors. So that really provides us, you know, a nice entree into what they’re looking for because we have a lot of especially when our companies collaborate, you know, and and work together to provide the customers, you know, needs, that really helps us kind of, you know, really set ourselves apart as really high value into the market.

Right? And so they they’re recognizing that, and that’s why I think our pipelines continue to be so robust.

Julio Romero, Analyst, Sidoti: Excellent. Super helpful there. And and you mentioned that the data center owners are are very demanding, don’t have a lot of patients. You know, are are they going to directly to you to enlist you, with your services? Do they go through the GC?

Just talk about kinda how that that dynamic works.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: So in the mod the modular side of the business, 100%, they’re going directly to us. Right? So that that whole piece of that that business, that all is direct to the data center customer. Then on the traditional construction side, it’s generally, they’re going through a general contractor, and then that general contractor has team that we’re part of. Right?

Sometimes we’re there are projects where we’re being we’re being the general contractor’s being told, like, you’re gonna use this use this comfort company for the electrical. You’re use this comfort company for the mechanical. There are relationships that are that good with some of these data center builders. But, you know, a lot of times, we’re just working with a general contractor and putting together a team and then and then proposing on the project.

Julio Romero, Analyst, Sidoti: Excellent. Maybe focusing on the modular portion of the data center demand for a little bit. Can can you talk a bit about, you know, the customer base that you have in in modular, you know, how that has evolved, do you see that mix changing at all in terms of potentially, you know, adding more hyperscalers, potentially adding more colocation customers, and how you see that kind of shaping up over time.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Well, if you think about it, like, historically, our modular business, right, it wasn’t data centers. It was pharma, it was other, you know, like, logistically challenged projects and things like that. And then now we’ve we still continue to have a pharma business inside of our modular, you know, construction business. We we continue to hold capacity for that so that we so that we maintain our relationships in those end markets. And then it’s just the data center customers have become so much more you know, they just they just want more and more of our of our modular output.

Right? And so we have two hyperscalers that we have we have very you know, we have one that has very deep relationship with us, and then we have one that we continue to deepen the relationship with. And then, you know, we continue to talk to all of the hyperscalers, continue to talk to all of the big builders of data centers. You know, it’s these these projects, they these programs, because they have to become programs, they they take a long time to develop. And they’re not the kind of thing that, you know, you start talking about it and you and you have a contract in hand a month later.

It’s it’s it’s a long process to get the owner comfortable with this type of delivery. It’s not the way that construction generally, is done in The US. And so it’s, you know, becoming more and more accepted, but, you know, it’s a it’s a slow process. But we continue to focus on all avenues around where we think we can add value with the modular delivery. And it’s just a matter of, you know, getting, you know, people who are very used to doing it a certain way to start to buy into, like, this is the way, you know, it can be done.

So

Julio Romero, Analyst, Sidoti: Yeah. Construction people are are famously known for, you know, being being to adopt a new technology.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. Well, there there’s a reason that they’re so risk averse. Right? There’s a lot you know, you get it wrong. You only get to build the building once.

Right? And if you get it wrong, you you can’t fix it. So that’s that’s part of the problem. Right? So

Julio Romero, Analyst, Sidoti: That that’s that’s right and totally fair. So you mentioned modular, you know, kinda didn’t start out as data center oriented. It just eventually was where the mix went over time. If I was a potential modular customer of Comfort Systems, regardless of what market I was in, you know, how do I go about winning your services? Yeah.

How did data centers kind of win your services? Was it through, you know, bidding better price? Was it for, you know, things they did to, make your employees happy? Just talk a little bit about, you know, how these customers are going about trying to win your services.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Julie, do you wanna take a little bit of that?

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Or you can Sure. Sure. Yeah. So, you know, I think, you know, it’s it’s definitely price is part of it. Commitment.

You know, these hyperscalers that we’re working with have made some pretty significant commitments to us. Hence is why we doubled our capacity back at the in in in in 2023 and saw the result of of having, you know, over just about 2,000,000 square feet of capacity starting in 2023. They also one thing I think that’s been really helpful for us is that historically when we were doing it for pharma, each individual unit was very customized. It was individual, a lot of design went into building a certain particular modular for one or two instances where with the way the hyperscalers are working, it’s much more programmatically, which has been good for us and good for them too is that now every couple of years, they’ll change the program, but they’ll want units built the same way, for a for a period of time, you know, to do, whether it’s a in some back when we started doing work with some of the hyperscalers, it was a combination of both doing the of having the mechanical within the building, but also having some of the use for the servers were in the the the in the same rooms.

Now they’re much more denser. In most cases, it’s like a central utility plant where we’re building, you know, the the same central utility plant over and over again that they ship to to different locations throughout The US. So I think it’s a combination of of commitment, pricing, and then this programmatic system has been, I think, good for both of us. So, Trent, I don’t know if you have anything to add as far as you know?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: No. Yeah. That’s I think yeah. No. That covered the that covered the the end.

Julio Romero, Analyst, Sidoti: Very helpful. And then does the does the programmatic kind of, I don’t wanna say repetitive, but kind kind of repetitive nature of of doing that over and over. I imagine that, you know, naturally, you gain efficiencies if you get better at doing that over time, and that’s has been part of the margin uplift Is that fair?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. I think there’s some there’s some fairness there. I mean, obviously, though, at the end of the day, the customer is very, very, very aware of what our costs are and that we’re getting and that we’re getting efficiencies. Right? And they and they’re, demanding that.

They want us we’re being more efficient on the version of that module than the Right? And so so there’s only, you know, so much margin uplift that’s available to us in that in that respect.

Julio Romero, Analyst, Sidoti: For sure. Where where are you guys on the capacity front as as of today? In the Modular perspective.

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Modular. Yeah. Yeah. So, you know, we had at at the end of twenty twenty four, we had 2,000,000 or sorry. End of twenty twenty three, we had 2,000,000 square feet.

We announced during the last quarter call that we are up to about 2,500,000 square feet of capacity, a little bit of that is storage. So we’re continuing, just like we said, we’re making incremental capacity increases. You know, we’ll add a 100,000 square feet at, you know, the location in in North Carolina and then location in Houston, and we’ll continue to do that as it makes sense. And so we’re up like I said, right now, we’re about 2,500,000 square feet.

Julio Romero, Analyst, Sidoti: Gotcha. Can we talk about project complexity a little bit? So, you know, regardless of what end market is kind of driving demand, data centers is obviously, you know, continuing to be strong. But these projects are becoming larger, and they’re becoming more complex, and there are more intricacies and more things demanded of you as they become more complex. You know, is that is that the common thread that ties the fabric of where your project mix is going kind of regardless of in market?

If you could speak to that.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. That’s definitely what we’re focused on because, you know, we wanna be we wanna be one of, you know, maybe two or at most three contractors looking at a project. And for us to do that, it’s all about complexity. That’s what that’s what kinda windows the field down to to just one of, you know, a few contractors that can do it. And the way we’ve been approaching that at Comfort is, you know, a lot of it’s through collaboration.

So, you know, there’s multiple projects inside of our inside of our current work that more than one comfort company is working on together. Right? And so that that really helps us because that that provides an ability to deliver for a customer that, you know, a regional competitor or a local competitor just doesn’t have that doesn’t have that scale or capacity. And then the other ways, you know, that we’re doing that complexity is through training and through technology, making sure that we scale that across our company, and then, you know, finding the best talent. Right?

It’s it’s really all about having the best, you know, skilled trades people in the in the markets that we serve. We serve. And that’s, you know, kind of an all of the above approach. You’ve heard me say that before a million times, Julio. We we try every single way we can to penetrate our markets to get the best people to wanna work for us.

And part of that’s just driving a culture that skilled trades people wanna be part of. Right? You know, because craft professionals, they have desire you know, they have desires to work on certain types of projects and with certain types of teams, and we have to make sure that we keep, our culture aligned with what they want because they’re the most important part of, driving the business to success.

Julio Romero, Analyst, Sidoti: That’s that’s pretty fascinating. Do you guys partner with with any any universities or anything of that nature?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. In most of our in most of our, if not almost all of our markets, we have some sort of relationship with either, like, a community college or a technical trade school. And what what that usually ends up looking like is we usually provide an instructor over to one of their courses. And then that’s, you know, someone from our group that has, you know, years and years in the trade. They’ll they’ll teach the class, and then it’s a nice way for us to pull in the best candidates into the company.

And so that’s that’s how we continue to, like, you know, revitalize that pipe. And we do other things as well, but that’s a really, really effective tool for us is those partnerships.

Julio Romero, Analyst, Sidoti: Understood. And then you talked about technology as well as something you continuously invest in. Can you maybe talk about any investments you’ve made in terms of, terms of BIM, in terms of digital project management tools, and and where you are there?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. I I gotta be careful because if if Brian Lane finds out how many people we have in the BIM team, he’ll, he’ll make me cut it. No. I’m just kidding. Like, we we’ve we’ve we’ve grown a lot on our BIM side.

We really we have we believe that, like, anything technology related on a project, it requires BIM to be really effective. Right? So the better you are at at building information modeling, the better you’re going to be at any kind of technology that’s being introduced into the into the construction industry. And you alluded to it earlier. The construction industry is a slow adopter.

Right? And so we, you know, we never wanna be we’re never on the cutting edge, but we always wanna be ahead of our competition. And the way we we become confident in the fact that we’re, you know, staying out in front of our competition is we partner with, you know, venture capital in in the Bay Area, and we make sure that we’re partnered with them in a way that we’re getting, the ability to see a lot of these early stage, you know, construction focused, technology companies. And that really helps us, you know, make sure we stay out in front of any anybody who we’re competing with on technology.

Julio Romero, Analyst, Sidoti: That’s really interesting. Very, very interesting. Maybe just back to the the end markets a little bit. Health care is something, I think, that you guys mentioned on the last call as something that might be evolving from an end market perspective. If you could talk to that a little bit.

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Yeah. I’ll start with that one, Trent. So, you know, back with Obamacare, there was some uncertainty as far as what, you know, what is the health care industry gonna look like? And as a result, there was really a a slowdown as far as new construction of hospitals at that time. So, there was still some retrofit going on to existing facilities, but really not new capital going into the build of of of hospitals.

So and then you fast forward through COVID, and, you know, I think after COVID, people realize, man, we need to have more more hospitals. We have baby boomers that are continuing to age. And, as a result, we’re just seeing a a fair number of hospitals being built throughout The United States, and that we enjoy we like doing that kind of work. We have a number of subsidiaries that are are really good at building hospitals. So, and and the other piece of it’s urgent care facilities.

We’re seeing more and more urgent care facilities being built and we’re we’re part of that that build also. Now pharma, I get the question a lot. Pharma is actually sitting in manufacturing for us. Right. So so health care really is that sector is is focused on on hospitals and urgent care.

Julio Romero, Analyst, Sidoti: Got it. And I I have a question here on the webcast, from the audience here. It’s just in the opening remarks, you you mentioned, Julie, a large pharma project. Can you talk to that a little bit more?

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Yeah. Yeah. So semi industrial, you know, primarily focused on on on chip manufacturing in twenty twenty manufacturing in twenty twenty four. Their largest project they’re working on right now is the, the GLP one drug, outside of Indianapolis. So, there is a there are a number of firms working on that, but but we’re doing a lot of the the the the underground and the piping associated with that project.

Julio Romero, Analyst, Sidoti: Got it. Maybe if you guys could talk to reshoring a little bit, you know, how that’s benefiting, what you classify as industrial, what, you know, your your end markets as a whole, and and how you see that as a multiyear growth driver.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. I mean, I I think it’s it my my take on that is that, you know, we spent thirty years offshoring, US industry, and we’re we’re now really beginning to engage in reshoring. And that started before, you know, I think it started coming out of COVID. And then I think, you know, the Biden administration, you know, poured a little bit of fuel onto it with some of the with some of the legislation that was passed. And then I think the tariffs, if anything, are just continuing to, you know, make people understand this is the right this is the right direction for at least part of their supply chain.

Right? And so I think you’re just gonna continue to see more and more reshoring, which is, you know, really good for us. It it fits our it fits our geography really well because most people are reshoring to right to work states, and that’s where we have a large part of our of our workforce. And so that’s helping us a lot from that perspective.

Julio Romero, Analyst, Sidoti: Very helpful. Thinking about, you know, your your new construction services both on a modular and and and and non modular side, you know, what what stage are you guys in the in the project? You know, are there any adjacencies either before or after your portion of the project that could, potentially be be an adjacency, not near term, but over time, either on an organic or inorganic basis?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Julie, do you wanna

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Yeah. I’ll I’ll let you do that. Yeah. Yeah.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Right. I mean

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Yeah.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. They I think there’s you know, there always are. Right? There’s there’s a lot of things that go into a building. Right?

And there’s always adjacencies here there. And we we look at them, but we’re really we’re really confident in our, you know, approach to the mechanical, electrical, plumbing side of the business. And we continue to see really good opportunities in m and a there. Right? So, you know, as far as adjacencies go, we’re focused on our strategy of being, you know, really great at mechanical, electrical, and plumbing.

Yeah. We continue to march forward with that strategy.

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Yeah. And and I will say on the electrical side, you know, we have, again, about 48 companies. Only, like, five or six of them are electrical companies. So there’s a there’s a there’s a lot of opportunities to continue to grow, you know, acquisitions in in that electrical sector.

Julio Romero, Analyst, Sidoti: Got it. Understood. Can you talk a little bit about Century Contractors, what you did in January?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Yeah. So really great, industrial, piping company outside of Charlotte that we that we acquired, and they have already started to, you know, integrate with our companies that are in that footprint. They’d already done to to be frank, they were already well known to all those companies because they’ve been on projects together. Really great team team that we’ve known for a while. Finally, just, you know, the right time to sell and, great transaction.

Really excited about having them on board, and and they’ll they’ll they’ll really, I think from where they’ll be, though, it’ll be a helpful thing. Yeah. One thing to one thing to understand about our the businesses we acquire is that, you know, our industry is very fragmented and it’s very siloed. So it’s very hard for these individuals who run these companies when they’re private to know exactly what their markets look like, what other people are doing in their markets, etcetera, etcetera. And when they come on board at Comfort and they get the the benefit of all the information that we can provide them, it immediately makes them better business leaders from the standpoint of just having the information.

Because a lot of times construction is what you don’t know. Right? You just don’t know what you don’t know. And so all these people then come into Comfort, and then they go, oh my goodness. All this information helps them understand how they can they can maximize the value of their business.

And so I think Century’s, you know, early stages, but that’s very much in the process of of of of that integration. So it’s exciting to see.

Julio Romero, Analyst, Sidoti: Got it. Really helpful there. I’ll I’ll take a couple more from the from the webcast here. You know, are you seeing any challenges with hiring and retaining, in the field talent, and how often are you increasing wages?

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Yeah. I mean yeah. Go ahead, Trin.

Trent McKenna, Chief Operating Officer, Comfort Systems USA: No. You go ahead. Yeah.

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: I mean, that’s something that that’s probably the most important thing we’re doing every single day is retaining and trying to hire people. So, you know, we are you know, since probably 2015, we’ve been giving really good raises to the to the to the field folks, you know, in some cases, you know, you have to give them twice a year just to, you know, make sure we’re competitive and and and having really good, you know, medical benefits and four zero one k benefits and stuff of that nature. You know, another way to retain people is just to continue to give them challenging work to work on, continue to train them, continue to invest in technology to make their work even more productive. So, I mean, at the end of the day, you know, what what comfort systems is is an assembled workforce, and that’s our most important asset. And every single day, every one of our companies is working to you know, we pick projects based upon trying to find the best projects for our employees.

You know? When we’re picking projects, I would say we’re looking at three things. We’re looking at projects that are really good for our employees that they will enjoy working on, that are good safe projects, that, that are, you know, easy to get to. And I think we’re also looking for projects working with really good owners and really good general contractors that value what we do, that, that run good projects, good safe projects that, are run efficiently. And then we’re also, of course, looking at price and trying to get the best, you know, gross profit per per man hour, but we’re really looking all three of those things, when we’re making a project selection.

So

Julio Romero, Analyst, Sidoti: Very helpful. You know, as we head into the summer months, I imagine the the calls for, service and, you know, maintenance and repair kind of, rev up a little bit. Can you talk about a little bit about the service business? Maybe how sometimes in the summer there’s, you know, changes from seasonality standpoint and and just overall where you are with the service business?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: Daniel, you hit the nail on the head. The service business starts to ramp up, you know, when it gets to be 90 degrees in cities and things, and then it continues through to that. There’s a lot of demand service that occurs during that time. You know, we we’re really focused on, like, you know, growing that business sustainably, which is growing that maintenance space. They they may they we we we really wanna see that grow and continue to grow.

And then, you know, continue to just be able to work with the type of of owners that we wanna work with, find the type of, you know, buildings that our people like and want to service. So at the end of the day, you know, it’s a multipoint But if you look at our service business, it’s been performing really, really well. It’s just been outstripped by the the speed with which construction is growing. And, also, that’s a little bit m and a as well because in the last several, know, acquisitions didn’t have service. And so that’s also driving a little bit of that when you see the delta between the rates of growth.

But we feel really good about our service business. It continues to grow. We continue to invest in it. We still you know, one of the things we think sets us apart in the service business is that we have a, you know, we have a centralized kind of, you know I I don’t wanna call it a help desk because it’s much more than that. It’s the ability to help a service technician who’s on-site virtually diagnose the the failed condition and fix it without having to leave the site.

And and that’s a huge advantage that we have because we have the ability to to pull all that data up from all of these service calls that we perform. And, you know, really across any manufacturer, any piece of equipment, we’re able to then, you know, build a a triage approach to how to fix that device. And that really helps a a service technician who, you know, see, it’s a challenging job to be a service technician on top of a roof or in a in a utility, you know, in a central utility plant and looking to try to figure out how to fix the thing. You know, he’s got a customer who’s probably yelling at him. He’s hot.

He needs to get it fixed. He’s in there trying to figure it out, it might be the time he’s looking at that piece of equipment. So it’s nice that we have this database and technology platform for them that then helps them, you know, really, diagnose the fail state and then fix it while they’re there on-site. So it’s, it’s a huge success. We’ve been investing in that for years now.

Continues to be successful. Continue to invest in it. And it’ll, you know, continue to set our service business apart from our competitors.

Julio Romero, Analyst, Sidoti: Excellent. I I have I wanna squeeze two more questions in the last, ninety seconds that we have here. So number one is just, you know, you’ve talked in the past about the business maybe becoming less seasonal as a result of doing more work indoors. How does that affect, like, when when investors think about your traditional seasonality versus what it’s looking like going forward? And does that affect kind of the way your backlog ramps from a seasonality perspective at all as well?

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Yeah. Yeah. I mean, I just think like like you said, we’re we’re less seasonal. You know, 19% of our work is modular. We’re also doing so much more work.

So so much of our company and our activities are from, you know, Richmond down through Texas, so there’s just less winter, associated with those. We’re working on a lot more, you know, longer projects, you know, larger projects that are, you know, going through the whole cycle, not just you know, when I started at Comfort Ears, you know, decades ago, twenty five years ago, you know, really a lot of our work started in in in in in the first quarter. We really ramped up in the second and third quarter and and closed out in the fourth quarter. Now we’re really seeing projects really closing out ratably through the year because of the size of them. So, there’s definitely less seasonality, you know, both at the revenue line as well as the, you know, as well as the the gross profit margins that we see because of that.

Now, you know, there is gonna be higher activity levels to some degree in the second and third quarter. And as Trent mentioned, know, services, it is a it’s it’s a growing part of our business from a dollar standpoint. Now percentage wise, it’s been smaller only because construction has been so strong, but we definitely are less seasonal. As far as backlog, backlog is lumpy and it’s hard to predict, but I will say in general, it was much more exasperated historically, but we generally do still see a lot more bookings and orders in the fourth and first quarter. Then much more revenue activity you know, and and a little bit less order and activity during the the second and third quarter.

So I think the seasonality is still there, but just not as pronounced.

Julio Romero, Analyst, Sidoti: Understood. And then just last one that I’ll squeeze in here is just, you know, it’s it’s conference season, so I’m sure you’ve you’ve been in front of a lot of folks lately. You know, what are you surprised you don’t get asked often? Because you probably hear the same questions from us all the time. So what doesn’t get asked that you think folks should be asking about you guys?

Trent McKenna, Chief Operating Officer, Comfort Systems USA: No. I think people I I I would say, Julio, I think people understand this pretty well and they ask the question, but I definitely ask if I was in their shoes. Right? I mean, I think some of these intangibles that, you know, people don’t ask about is, you know, the culture that we’re able to drive. You know?

I get it. Like, that’s not measurable. You can’t put it in a spreadsheet, etcetera, etcetera. But it is a big differentiator, you know, because our ours the the craft professionals that work for us, they they care about that. They deeply care about the culture that we’re driving towards.

And so, you know, that’s something that yeah. We don’t get asked that a lot, but I understand why. Right? So Mhmm.

Julio Romero, Analyst, Sidoti: Excellent. Well, I’ll leave it there. Julie, Trent, thanks so much for taking the time.

Julie Shafe, Chief Accounting Officer and Senior Vice President, Comfort Systems USA: Great. Thank you.

Julio Romero, Analyst, Sidoti: Thanks.

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