Comfort Systems USA, Inc. 2026 Q3 Earnings Call

Good morning. Welcome to Comfort Systems USA's third quarter 2026 earnings call. Our comments today, as well as our press releases, contain forward-looking statements within the meaning of the applicable securities laws and regulations. What we will say today is based upon the current plans and expectations of Comfort Systems USA. Those plans and expectations include risks and uncertainties that might cause actual future activities and results of our operations to be materially different from those set forth in our comments. You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K and Form 10-Q, as well as in our press release covering these earnings. A slide presentation is provided as a companion to our remarks and is posted on the investor relations section of the company's website, found at comfortsystemsusa.com.

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

All right. Thanks, Julie. Good morning, and thank you for joining us on the call today. Our amazing teams across the country continue to deliver excellent results for our customers, and they have delivered results that exceed even our recent record results. We earned $13.91 per share this quarter, which is $5.66 more than we earned in the same quarter last year. Our mechanical business had an extraordinary increase in activity levels and profitability, and our electrical segment once again achieved spectacular organic revenue growth at very high margins. Construction is driving most of our results, but service revenue and profit also grew by double-digit percentages. Our bookings were strong, and our backlog at the end of the quarter grew to a new high of $17.8 billion. As a result of continuing strong demand, we achieved an eighth consecutive sequential backlog increase.

We continue to book work with good margins and good working conditions for our valuable people, and we enter the fourth quarter of 2026 with $8.4 billion more in backlog than last year at this time. I am happy to announce the acquisition of two companies on August 1st: Boys Electrical, located in Melbourne, Florida, and NeoPod, a modular company for the healthcare industry based in New Braunfels, Texas. We are thrilled to have these two companies join the Comfort Systems USA family of companies and expect that they will contribute over $100 million in annual revenue at good margins. Today, we increased our quarterly dividend by $0.10 to $1 per share, and we actively purchased shares during the quarter. With solid bookings and great demand, we expect continuing growth and strong results for the remainder of 2026 and 2027.

In a moment, Trent and Bill will discuss our results and outlook, but I want to first discuss another announcement that we made yesterday. Last night, we announced Bill's decision to retire from the company after 30 years of amazing service. Bill helped found the company in 1997 and has led the financial strategy of the company since 2005. As importantly, since 2008, Bill has led the extraordinarily successful acquisition efforts of the company. Since 2011, Bill has also worked with many of our companies in an operational leadership role. I am deeply grateful to Bill for his steady leadership, thoughtful advice, and the integrity that he has brought to Comfort Systems USA every day. He has been a great partner to me. I, along with the rest of the leadership team, wish Bill the absolute best in his well-deserved retirement.

Bill will be transitioning from the CFO role shortly after we report our 2026 results, and then will continue with the company for a period to transition his other roles. We also announced that Julie will be promoted to CFO as Bill's successor, and I also want to congratulate her. Julie has been an integral member of our finance and accounting team for many years, and I have the utmost confidence that she is the perfect person to lead the organization through Bill's transition. Before Bill discusses our results, I have asked him to also give his thoughts about the upcoming changes.

Bill? Thanks, Brian. It is a poignant day for me, and I do want to take just a few minutes and explain why I am utterly confident that Comfort Systems USA will continue to have the best management team in our industry long after I am gone.

Over 30 years, I have done a lot of things at Comfort: legal, financial, acquisitions, operations. The main three things I do today are financial, operational, and acquisitions. The great news is that in the financial area, our depth is extraordinary. Frankly, it is amazing. Right down the line, starting with Julie, we are stacked with unbelievable talent in our financial area. Honestly, the day after I leave this role, Comfort Systems will still have the best CFO in construction and the best finance department in construction. You guys know Julie. I've been hearing from people for the last 24 hours, how happy and relieved, both internal and external, how happy and relieved they are that Julie will be our next CFO.

Operations is the part that I'll miss the most. But the good news is that our business isn't run in Houston. It's not even close to being run in Houston. It's run in the field, and as long as we maintain our culture and stay out of the way of the great companies we have, we'll always be fine. I want to spend just a little bit more time commenting on acquisitions. Every acquisition we've ever done at Comfort Systems USA was done by a team of people, and every company we've ever bought, we pick companies. We certainly qualify companies, but we don't pick companies. They pick us. We give them unlimited time and unlimited access to do due diligence on us.

And the reason that we continually win in the acquisition area, frequently buying companies at lower prices than other people are offering them, is because we have worked so hard to make Comfort Systems the best place on planet Earth for somebody who has made their life's work building a great contractor, a home for their legacy. And if we continue doing that, we'll continue winning, because that's why we win in acquisitions. And after I leave, we'll continue to have a great team. We have a Vice President of Acquisitions who was carefully selected as a person with the right judgment and temperament to sit in the middle of the team and facilitate things. He's somebody who won't get in the way of Comfort's message, which is all I've ever tried to do.

The people who do our acquisitions include Brian Lane. They include our CEO, our President, our Chief Operating Officer, our regional leaders. Our head of innovation is very important in acquisitions, a guy named Briston Blair. But most important, the thing that makes us win in acquisitions is our field leadership. They are always involved in the acquisitions that we do. When we buy companies where there's overlap, we face that and solve that before we buy a company. We don't have mysteries, and we'll figure things out later, and I think we'll continue to do that. I think Comfort Systems acquisitions is on a great roll. I think that will continue. I think we'll continue to be a trustworthy, disciplined company that does acquisitions with conviction. Above all, we'll be patient. I would say the key to our acquisition program is that we refuse to be hurried.

We're fast, actually, and when we are ready to go, we go. But we never have to hurry. I'm very confident about the future of acquisitions at Comfort Systems. And I just want to say one more thing about Comfort, which is how great Comfort is and why I believe it will stay great, and that's our people and our culture. This company is filled from top to bottom with amazing people, and I don't think there's anybody who understands that as well as I do, and there's a lot of people who really understand it. In Houston, every one of our crucial functions is led by a great leader. Tax, internal audit, risk management, treasury, insurance, every one of them.

People on this call will never meet the great people we have, people with names like Adam and Amy and Anna and Barbara and Byron and Elvira and George, Ela, Jay, Jordan, Julie, Judy, Michael, Wayne, and more. I couldn't possibly name them all. The unbelievable group of people with very long tenures at the company, very dedicated to our company and very dedicated to its culture. Then we have, perhaps even surpassing that, at our subsidiaries, at our companies in all of these states, Texas, North Carolina, New York, Florida, South Carolina, Kentucky. Did I mention Texas? We have unbelievable groups of people who have pooled together to create something that's unmatched in their markets, and that culture has led to the staying power that we have in all our markets.