Comfort Systems USA Inc Q3 2025 Earnings Call Transcript

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

Question: Adam Thalhimer, CFA - Thompson Davis & Co Inc - Analyst : Hey, good morning guys congrats on another wave of record results.

Question: Adam Thalhimer, CFA - Thompson Davis & Co Inc - Analyst : I wanted to ask high level on the technology side. Does the bidding activity match the bookings and the revenue growth that you saw in Q3?

Question: Adam Thalhimer, CFA - Thompson Davis & Co Inc - Analyst : And then I'm curious on capital allocation. Your free cash flow -- your net cash, I think, broke out to an all-time record in Q3. Just curious how you're thinking about that and if just accumulating cash from here wouldn't be the worst thing in the world?

Question: Adam Thalhimer, CFA - Thompson Davis & Co Inc - Analyst : Sounds good I'll turn it over thank you.

Question: Julio Romero - Sidoti & Company LLC - Analyst : Thanks hey, good morning guys just following up on the last question about the order acceleration. Historically, you guys are very prudent at kind of not taking on additional backlog and not getting out over your skis. I know, Trent, you mentioned a piece of the backlog growth was modular orders that were further out. But just help us think about the step-up in orders here for the last several quarters. Part of it is booking yourselves further out, but some of it is also, I guess, securing enough pricing in your bid margins to compensate for that additional risk of additional orders?

Question: Julio Romero - Sidoti & Company LLC - Analyst : That's very helpful. And then I know a big emphasis is being selective with regards to the specific partners you work with. And I think you guys mentioned earlier, your partners are getting bigger. They're taking on additional work. But just throwing that question back at you guys, has the pool of partners that you work with increased? Or is this just more a function of you doing more with your existing partners?

Question: Julio Romero - Sidoti & Company LLC - Analyst : Yes, and I'm sorry to rephrase my question, I meant when I said has the pool of partners increased, I meant has the pool of kind of the customers that you typically have worked with increased? Or are you doing more with existing customers?

Question: Julio Romero - Sidoti & Company LLC - Analyst : Got you very helpful thanks guys.

Question: Brent Thielman - DA Davidson & Co - Analyst : Hey, thanks, congrats again, another great quarter. I guess, Brian, Trent or Bill, one of the questions that seems to come up often is just your ability to sustain the growth you're seeing outside of modular, just given sort of the industry labor constraints out there. You've grown same-store, call it, 20% or more for what looks to be a fourth year in a row here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2025 / 3:00PM, FIX.N - Q3 2025 Comfort Systems USA Inc Earnings Call And I know there's a lot of factors to the growth over the last few years. But maybe you could talk about just sort of how critical have your sort of internal recruiting, hiring efforts been in recent years in support of that growth versus job values getting bigger? And then also, I guess, is there any sort of slowdown or change you've seen in terms of your ability to bring in people to support the growth, I guess, outside of acquisitions?

Question: Brent Thielman - DA Davidson & Co - Analyst : Okay. All right. And then the 3 million square footage of space in modular that, I guess, becomes available early 2026, I think you said Trent. Is that capacity or space already effectively sold out? Or do you expect it to be soon?

Question: Brent Thielman - DA Davidson & Co - Analyst : Okay. Just one last technicality, if I could. The $15.5 million write-up that you called out, I think, in the filing, is that all reflected in the mechanical segment? Or I'm just trying to level set what kind of normalized margin looks like.

Question: Brent Thielman - DA Davidson & Co - Analyst : Okay. Sorry. And Bill, theoretically, you have these every quarter. It just varies. So even if we compare year-on-year, you might have had them last year?

Question: Brent Thielman - DA Davidson & Co - Analyst : Yeah, okay, understood, thank you.

Question: Josh Chan - UBS Securities LLC - Analyst : Hey, good morning guys congrats on a really great quarter. I wanted to ask about the backlog question, but especially within the last six months because obviously, you've had a strong demand environment, you have labor constraint, you have labor sharing for a while now. But really over the last two quarters, you had these two consecutive $1 billion step-up in the backlog. And I was just wondering if anything is different in this last six months versus the longer period, I guess.

Question: Josh Chan - UBS Securities LLC - Analyst : Yeah, that makes a lot of sense. I appreciate the color there. And then on modular capacity, if you were to expand kind of incrementally from here, would there be a preference to serving existing customer or I guess, demand for that? Or would there be a preference to kind of grow with other types of customers within modular? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2025 / 3:00PM, FIX.N - Q3 2025 Comfort Systems USA Inc Earnings Call

Question: Josh Chan - UBS Securities LLC - Analyst : Sure, absolutely. Yeah, thank you for the color and congrats getting on the quarter.

Question: Brian Brophy - Stifel Financial Corp - Analyst : Yeah, thanks. Good morning, everybody congrats on a nice quarter. Just wanted to follow up on some of this headcount discussion. I think the over 21,000 employees implies a little bit over 15% headcount growth since the end of 2024. It obviously seems to be an important enabler of some of the organic growth we've seen here this quarter. Just could you help us understand how sustainable that pace of hiring could be, assuming demand remains healthy here? thanks

Question: Brian Brophy - Stifel Financial Corp - Analyst : Okay. Yes, that's helpful. And then wondering if you could give an update on some of the automation investments you've made on the modular side. And just to what extent you're seeing some productivity benefits? Any color you can provide there would be interesting.

Question: Brian Brophy - Stifel Financial Corp - Analyst : Yeah, that's really helpful. Last one for me. Pharma was mentioned very briefly. Just would you give us an update on kind of what you're seeing on the project pipeline side, particularly some of the onshoring opportunities that may be coming. Obviously, we've had a little bit more tariff discussion on pharma products. I'm just curious if you've seen any movement in that market? Thanks.

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