Comfort Systems USA Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sangita Jain - KeyBanc Capital Markets, Inc. - Analyst : Good morning. Thank you for taking my questions. So appreciate the update on the modular square footage. Can you tell us how you're thinking about the extent of expansion in your modular capabilities and your thoughts on possibly adding a third location?

Question: Sangita Jain - KeyBanc Capital Markets, Inc. - Analyst : Got it. And if I can follow up, I know you said that the reconciliation bill maybe does not necessarily directly apply to what you do, but the bonus depreciation does help many of your customers, as probably the Trump executive order on AI. Can you talk a little bit about if you've had any initial conversations with your customers around that?

Question: Sangita Jain - KeyBanc Capital Markets, Inc. - Analyst : Got it. I appreciate your thoughts, Bill.

Question: Alex Thompson - Sidoti & Co. LLC - Analyst : Yes, so good morning. This is Alex on for Julio. Congrats on the quarter.

Question: Alex Thompson - Sidoti & Co. LLC - Analyst : My first question, maybe we could start with just some color on growth for the remainder of '25. I know backlog and revenues have grown meaningfully even over the historical comps that you've mentioned that were a little tougher. So how's your confidence that this sort of continues positively into '25 and '26, and maybe some of the conversations that have led to that?

Question: Alex Thompson - Sidoti & Co. LLC - Analyst : Very helpful color, thank you. And I think kind of rising above consistent growth, you had very nice earnings performance. And I think you wrote about anticipating solid earnings for the remainder of '25 and into '26. So could we get a little color there? Is solid sort of a statement of continuing where we are now, or is that a little bit more from historicals? Just a little color would be helpful.

Question: Alex Thompson - Sidoti & Co. LLC - Analyst : Great. Well, very exciting results again and a lot more questions, but we'll jump back in the queue. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 3:00PM, FIX.N - Q2 2025 Comfort Systems USA Inc Earnings Call

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Thanks. Good morning. Great quarter, guys. I guess the first question, just -- Trent, you commented on the manufacturing kind of customer side and that you ultimately were focusing maybe a bit more on the data center tech customers where you may get the best opportunity out of it. I guess, the question is, has that market or pipeline of opportunities on that side subsided, or it's just simply your workers are fungible and you're going to best opportunities?

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Yes. And then on modular, I heard you say 18% of revenue year-to-date. Could you possibly comment maybe on the proportion modular represents in backlog today? And then also, just from a customer standpoint, is there an opportunity to add another hyperscaler to what you already have, just with the incremental capacity you're adding? Or is that capacity add really to serve the customers -- existing customers you have today?

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Okay. And sorry, just the question around modular proportion and backlog, is that something you could comment on? Or how we might think about that in the book of business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 3:00PM, FIX.N - Q2 2025 Comfort Systems USA Inc Earnings Call

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Okay. If I could sneak one more in, just maybe another approach to kind of the visibility question, could you talk about the funnel or pipeline and what that looks like today as you look into '26 and possibly into '27? I mean, I'm sure you're having conversations about next year at this point, but is the dialogue with customers becoming much more active about opportunities into 2027 at this point?

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Very good. I'll pass it on. Thank you.

Question: Adam Thalhimer - Thompson, Davis & Company, Inc. - Analyst : Hey, good morning, guys. Congrats on the record quarter. I basically wanted to pick up with where Brent left off and rephrase the question. Within the current backlog, how much of that work would be scheduled for 2027 plus?

Question: Adam Thalhimer - Thompson, Davis & Company, Inc. - Analyst : Understood. The growth that you've seen at Walker Electrical, how much of that is occurring in their traditional North Texas market versus work in other areas of Texas or even outside of Texas?

Question: Adam Thalhimer - Thompson, Davis & Company, Inc. - Analyst : Lastly, anything more you can say high level on pricing? Just as your technology customers are taking up more and more of your capacity, to what extent are they paying up for that?

Question: Adam Thalhimer - Thompson, Davis & Company, Inc. - Analyst : It's been a long time since we've cried about a bad job, so great work.

Question: Adam Thalhimer - Thompson, Davis & Company, Inc. - Analyst : Me too. Thanks, guys.

Question: Josh Chan - UBS Securities LLC - Analyst : Hey, good morning, guys. Congrats on a really good quarter.

Question: Josh Chan - UBS Securities LLC - Analyst : Yes, it's clear that your demand environment is really strong, so could you just talk about kind of your workforce, their willingness to continue to work more, make more, but kind of keep working hard and then what you're seeing on the recruiting front?

Question: Josh Chan - UBS Securities LLC - Analyst : That makes sense. Thank you, Trent. And I guess in terms of project selection, how do you think about the approach to choose projects between the different verticals? Obviously, technology is chosen more and more frequently, so are you okay with that? How are you talking to your operations about choosing types of projects that you want exposure to?

Question: Josh Chan - UBS Securities LLC - Analyst : Yes, absolutely.

Question: Josh Chan - UBS Securities LLC - Analyst : Yes, I appreciate the color, guys, and congrats again on a really strong quarter.

Question: Brian Brophy - Stifel Financial Corp. - Analyst : Thanks. Good morning, everybody. Congrats on the nice quarter. Appreciate the update on the modular capacity expansion plans. Can you provide an update on what you're seeing on modular from a competitive standpoint? Are you seeing any new entrants in the space? Curious your latest thoughts on how you're feeling about your leadership position there. And I guess to what extent are any changes in the competitive environment driving, I guess, some of this leaning into more capacity? Thanks.

Question: Brian Brophy - Stifel Financial Corp. - Analyst : Okay. And then -- that's helpful. And then I guess, anything to call out on the healthcare end market? It looks like that was really the only other end market that grew meaningfully outside the tech this quarter.

Question: Brian Brophy - Stifel Financial Corp. - Analyst : Thanks. I appreciate it. I'll pass it on.

Question: Sam Snyder - Northcoast Research Partners LLC - Analyst : Hey, guys. Great job, obviously. I just had I had a question on modular like everybody else, it seems like. I was wondering what has sort of changed or what could change going forward that has made modular, respectively a bigger part of the business? And then is there anything that you see down the road that -- maybe that changes? 10% is good. I'm kind of surprised it's not more, but just curious your thoughts there. Why 10? And is there anything you see down the line where that might change? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 3:00PM, FIX.N - Q2 2025 Comfort Systems USA Inc Earnings Call

Question: Sam Snyder - Northcoast Research Partners LLC - Analyst : That's really helpful, thank you. And then I had a -- kind of switching gears, looking at price-cost, do you see -- your suppliers are trying to pass on costs that really aren't there. And they're probably not getting that by you as a larger contractor, but just kind of curious on are you able to get some concessions from customers based on the tariff scaries right now, or is it really just passing through? To the extent that it does or it doesn't, it just passes through equally?

Question: Sam Snyder - Northcoast Research Partners LLC - Analyst : No, that's okay. I think it's just the gross margins are so good. I'm just looking for any reason why that might not continue.

Question: Sam Snyder - Northcoast Research Partners LLC - Analyst : That's fair. That's fair, all right. I'll pass it along. Thank you.

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Hey, thanks. Just, I guess, a quick question on the semi-fab market and anything that maybe coming down the pipeline there, and maybe you can comment on pharma as well. It's been a number of announcements out there and how real of an opportunity that can be down the line for you.

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Okay. And then maybe just more of a nuanced question, but when I look about revenue by activity type, existing building constructions actually have been outgrowing new construction for the past four quarters. And I guess I think about data centers being largely greenfield. I just was curious why that is and the results.

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Okay, and so in that regard, the margins wouldn't really be different? I've always thought of existing as having higher margins to it. But if you're doing Phase 3 of something, it's in some ways still a green zone. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 3:00PM, FIX.N - Q2 2025 Comfort Systems USA Inc Earnings Call

Question: Brent Thielman - D. A. Davidson & Co. - Analyst : Very nice. Thanks for taking the extra one. Thanks, guys.