Thanks, Michelle. Good morning. Welcome to Comfort Systems USA's third quarter 2024 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 or 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, President and Chief Executive Officer; Trent McKenna, Chief Operating Officer; and Bill George, Chief Financial Officer. Brian will open our remarks.

Okay. Thanks, Julie. Good morning, everyone, and thank you for joining our call. Today, we are reporting record earnings and extraordinary cash flow as our teams continued great execution for our customers. We earned $4.09 per share this quarter, up 40% from last year. Our Electrical segment achieved unprecedented margins and Mechanical margins continued to be strong. Operating income is 50% higher than even our strong third quarter last year. Backlog continues far above last year as bookings were strong even though we burned through work at a record pace. Same-store quarterly revenue was higher by 18% and revenue was up 23% year-to-date. Entering the fourth quarter, same-store backlog is 21% higher than it was at this time last year and we are experiencing exceptional strength in our pipelines. We are in a fortunate position of being able to choose the work we take. Given these strong conditions and the confidence we have in our unmatched workforce, we expect continued strong results in the fourth quarter and in 2025. Cash flow surpassed any previous quarter and that extraordinary cash flow is both a great base for continued investment and a clear indicator of strong underlying trends in our execution, customer relationships and prospects. We also increased our quarterly dividend by $0.05 to $0.35 per share. This increase reflects our continuing strong cash flow and our commitment to reward our shareholders. I will discuss our business and outlook in a few minutes, but first I will turn this call over to Bill to review our financial performance. Bill?

Thanks, Brian. Good morning, everyone. Our third quarter results are remarkable with quarterly EPS exceeding $4 per share for the first time ever. Margins continue to improve and we had further SG&A leverage and we enjoyed over $300 million in operating cash flow. This quarter, we also achieved $238 million in quarterly EBITDA, a 53% increase over this quarter last year. Our newest companies continue to exceed expectations. Third-quarter revenue was $1.8 billion, an increase of $434 million or 32% compared to last year. Our Mechanical segment revenue increased by 39%, benefiting from recent acquisitions, modular expansion and substantial organic construction and service growth. Electrical segment revenue increased by 8% and overall same-store revenue increased by 18% or $241 million with the remaining $193 million increase resulting from acquisitions. Through nine months, our same-store revenue has grown by 23% from the same period last year. We are facing tougher revenue comparables in the next few quarters and currently we estimate that our fourth quarter of 2024 revenue increase will be comparable to this quarter. We also expect revenue will continue to rise in 2025, most likely by high single or low double-digit percentage growth. Gross profit was $382 million for the third quarter of 2024, a $104 million improvement compared to a year ago. Our gross profit percentage grew to 21.1% this quarter compared to 20.1% for the third quarter of 2023. Quarterly gross profit percentage in our Electrical segment increased to 23.9% this year compared to 19.4% last year and margins in our Mechanical segment were roughly flat at 20.3%. EBITDA increased by over 50% to $238 million this quarter from a strong $156 million in the third quarter of 2023. Same-store EBITDA increased by over 30%. And even without recent acquisitions, our EBITDA exceeded $200 million. EBITDA margin for the first nine months is 12.2%, a result of excellent execution by our workforce and strong demand in the markets we serve. Trailing 12-month EBITDA exceeds $770 million. Margins are at all-time high levels and given ongoing strong demand, we expect that our EBITDA margins for the remainder of 2024 and into 2025 will continue in the strong ranges we have achieved over the last several quarters. SG&A expense for the quarter was $180 million or 9.9% of revenue compared to $143 million or 10.4% of revenue in the third quarter of 2023. The investments that we have made, including investments through SG&A, are paying off. Our operating income increased from $135 million in the third quarter of 2023 to $203 million for the third quarter of 2024, an increase of 50%. With improved gross profit margins and favorable SG&A leverage, our operating income percentage increased to 11.2% this quarter from 9.8% in the prior year. Through nine months, we achieved a noteworthy operating income percentage of 10.1%. Our year-to-date tax rate was 21.6%. We estimate that the full-year 2024 tax rate will be in the 21% to 22% range. After considering all these factors, net income for the third quarter of 2024 was $146 million or $4.09 per share and that's a 39% improvement from last year. Free cash flow for the first nine months of 2024 was $572 million. We continue to benefit from advanced payments as operating cash flow continues to exceed our earnings by about $340 million on a trailing 12-month basis, so we are well ahead of earnings and collecting our cash. We increased the pace of our share repurchases in the third quarter and have now returned $42 million to shareholders in 2024 by retiring over 130,000 shares. As we began the year, our cash balances exceeded our total debt by $161 million. With our remarkable cash flow and even after our share repurchases and funding hundreds of millions of dollars to purchase two great new companies, our cash now exceeds debt by $347 million. That's what I've got, Brian.

Thank you, Bill. I will discuss our business and outlook. Our backlog at the end of the third quarter was $5.7 billion, showing a significant year-over-year increase and a slight sequential decrease. Compared to last year, our backlog has risen by $1.4 billion, or 32%. On a same-store basis, our backlog is now $900 million higher than it was at this time last year. As we move into the fourth quarter of 2024, we have 21% more same-store backlog despite strong revenue growth. Our revenue mix is continuing to shift towards data centers, kit fabrication, battery plants, life sciences, and food. Industrial customers comprised 60% of our total revenue in the first nine months of 2024, and they are major contributors to our pipeline and backlog. The technology segment, which is part of industrial, accounted for 32% of our revenue, up from 21% last year. Institutional markets, including education, healthcare, and government, have also performed strongly, making up 23% of our revenue. While the commercial sector remains active, it represents a smaller portion of our business at about 17% of revenue. Most of our service revenue comes from commercial customers, making the construction revenue from commercial sources relatively small. Construction represented 84% of our revenue, with new building projects accounting for 57% and existing building construction at 27%. Our project pipelines are at historically high levels. We encompass modular and new building construction, and modular contributed 17% of our revenue year-to-date. Service revenue grew 7% this quarter and constituted 16% of total revenue. This segment remains a dependable source of profit and cash flow, and we expect it to surpass $1 billion in revenue for 2024. As mentioned earlier, we are entering the fourth quarter with a backlog that is 21% higher on a same-store basis compared to last year, and we have an outstanding team working diligently for our customers every day. I want to express my gratitude to our more than 18,000 employees for their dedication and hard work. Now, I will hand it back to Michelle for questions. Thank you.

Our first question is from Adam Thalhimer with Thompson Davis. Your line is open. Please go ahead.

Hi, good morning, guys. Congrats on another strong quarter.

All right, Adam, thanks. Good morning.

So you guys typically burn backlog in the summer, build it in the winter. I'm curious if you think we could hit a new record backlog over the next couple of quarters?

I'd be surprised if we don't achieve that in one of the next two quarters. The demand is certainly there; we could secure a lot more work if we were prepared to pursue it. So right now, our main challenge is making disciplined choices in project selection.

Yes, Adam, the follow up on that, it's coast to coast. So we're seeing a lot of good opportunities still with no let-up in sight. So, we're pretty confident going forward into 2025.

Okay. Brian, I wanted to ask you about your comment on Electrical margins, which you mentioned are unprecedented. I'm curious where you see them settling in the long term. Is there a specific project driving the exceptionally high margins this year, or do you believe that this is just the level they can achieve consistently over time?

Our electrical companies are doing an excellent job, finding good work in favorable markets. As always, execution is key, and we are executing at a very high level. We feel fortunate to have our companies and the markets they operate in. The margins we are seeing are unprecedented, and I believe that for the time being, the conditions will allow those margins to remain strong. Overall, they are performing impressively across the board. Thank you for recognizing that.

Great. Okay. I'll turn it over. Thanks, guys.

All right. Thanks, Adam.

Thank you. Our next question is going to come from the line of Alex Dwyer with KeyBanc Capital Markets. Your line is open. Please go ahead.

Good morning, Brian, Bill, Trent and Julie. Thanks for taking my questions.

Good morning, Alex.

Good morning. So I guess first question on modular, I know the last expansion kind of came with more automation and higher roofs and I think this is a big focus for the team to drive efficiencies. Can you just kind of expand on what exactly you're working on in these efficiency initiatives next year for modular? Is this mainly happening in Houston or is it in Greensboro or is it kind of spread across both?

It's entirely occurring in both Texas and North Carolina. We are significantly expanding our fleet of robots. They are effectively reconfiguring new spaces with larger cranes, transforming workflows in beneficial ways that the new environments enable. Additionally, we have a new customer in modular who is beginning to order a substantial amount of product, which has provided us the chance to design new manufacturing processes based on the lessons we've learned. We are also collaborating with our existing customers to implement similar improvements. Our objective is to continuously improve, and I have confidence in our team's capabilities.

Got it. That's very interesting. There's a lot of discussion about liquid cooling in the industry, which seems necessary alongside air-cooling for the new data centers being built. I know you have extensive experience with liquid cooling systems already. Is there anything that will change in the future as we move to these new AI data center constructions with the increasing use of liquid cooling in these projects? Any insights would be appreciated.

The density of the new systems is remarkable. When you examine the large pipe welds in the workshop, you notice significantly more connections along the pipe since we're installing more chillers per building per square foot. It's all about density. Designs are increasingly focused on minimizing distances because copper is quite expensive. In the past, you might have accepted a 90-foot distance between components, but now the aim is to bring them down to 15 feet as you could end up needing ten times more copper between the two points. This has led to a shift. Liquid cooling, which primarily involves heat transfer through liquids, has always been our expertise. We have not ventured much into air-cooled rooftop data centers since our specialization lies in pipe fittings. However, it seems that no new data centers being constructed for hyperscalers or those interested in AI are relying on air cooling. Within liquid cooling, the goal now is to have heat transfer as close as possible to where the chip generates heat. We're using an all-encompassing approach. It was once exciting to bring liquid cooling underneath the racks, then into the racks, and now it’s moving into the boxes themselves. The designs are incorporating chips that allow for the cool liquid to be in near contact with them. Other than immersion cooling, which still has some challenges, most methods are leveraging this comprehensive strategy. The positive aspect for us is that regardless of the method, cooling is essential, which means there will always be a need for pipes, chillers, and electrical switchgear. This trend is very favorable for us. The demand for data center solutions is now more than just talk; we are seeing data centers being established in areas we never imagined would host them, indicating extraordinary demand.

Thank you. I'll turn it over here.

All right. Thanks.

Thank you. One moment for our next question. Our next question comes from the line of Julio Romero with Sidoti & Company. Your line is open. Please go ahead.

Thanks. Hi, good morning, everyone. Hi, good morning.

Good morning.

So, appreciate you guys providing preliminary sales thoughts for 2025 of the high-single-digit to low double-digit percentage growth. Just wanted to get your thoughts on what it would take for margins to continue to expand with the conditions that are allowing you to execute and achieve these high margins have to kind of sustain, would they have to get better? Just any thoughts there.

Well, if you look at the margins, I probably have said this every quarter for the last few, they were record levels for us. It's a combination of pricing as always and executing and we're executing really at a high level, but it's a long process to get these margins, right. It starts with developing the workforce we have, applying technology and innovation that works for us and we got a great team that trends leading on those efforts and using things such as BIM prefabrication, et cetera. And then managing the risk we have in our projects, which we spend a lot of time training our people on. So the results is, one number we talk about here, but it's a lot of work that goes into it. And we will probably stay around this ballpark as long as the market stays as good and we continue to stay focused on our execution.

Okay. And you mentioned mitigating risk and project selection is a big part of that. You're in a position where you can kind of afford to be picky. Just if you could speak to what factors within projects help them rise to the top of your selection list?

Well, if you look at any contract, we have too much work is when you get in trouble, not too little. So no, we're really looking at work in locations around the offices that we have, usually for a customer who worked at for a long time, we know them. It's work we've done for a while and we're good at. And like you stay in those key metrics is others. But if you keep yourself in that wheelhouse, you usually work out pretty well on a long-term basis.

Yes, an important consideration for our business development team and leadership at the field level is identifying suitable jobs for our employees. Factors like the job's location, the quality of the general contractor, and whether it makes life difficult for our workers are crucial. We also consider the availability of parking, dining options, and the presence of familiar contractors that our team interacts with regularly, as familiarity can enhance their work environment. Additionally, we focus on existing customers who have been reliable partners in the past and with whom we can build successful outcomes based on our history together. It's also essential to evaluate the gross profit relative to the labor commitment we must make. Previously, we discussed gross profit per hour worked, but the perspective has shifted towards gross profit per $100 of labor. Ultimately, our approach prioritizes people first, partnerships second, and profit third, recognizing that these elements are interrelated and that what benefits one aspect is likely beneficial to the others as well. And wholly on top of all this, you got to make sure we can do it safely and protect the health and welfare of our folks that are doing the job. So, we spend a lot of time focused on obviously projects, acquire them and execute them.

Understood. I appreciate the color. I'll pass it on.

All right. Thanks.

And one moment. Our next question is going to come from the line of Josh Chan with UBS. Your line is open. Please go ahead.

Hi, good morning, Brian, Trent, Bill, Julie. Maybe sticking with a question on the field...

Good morning.

Hi, good morning. Hi, Brian. In the last couple of years, you've done a great job kind of driving productivity gains in the field. I know that everybody has been really busy. So could you just talk to your ability to kind of further drive your field productivity and how you feel about that going forward?

I believe a significant factor for us is technology. One key way technology aids us is that as your drawings improve, your performance also enhances. This increases your capacity to prefabricate and possibly modularize at different levels. Importantly, high-quality drawings help minimize rework. Additionally, what’s rewarding at Comfort is our ability to ensure that our team members remain engaged and productive. Utilization is crucial for our financial success, and having our people on tasks where they can be effective is essential, particularly when jobs are well-managed. Moreover, our capacity to balance workloads effectively is supported by our company’s collaboration. If a job faces delays or presents new opportunities, our company can share resources, which assists in maintaining optimal utilization. When we are busy, the chances for achieving high effectiveness per hour worked greatly improve.

You know, Josh, one thing I mentioned about Trent and his team earlier is their significant help in navigating the many technologies emerging in construction. Their skill in filtering these technologies and identifying which can enhance our efficiency, productivity, and safety in the field has been invaluable. They have consistently performed exceptionally well in assisting our teams on job sites and during service calls, especially. I want to acknowledge their outstanding contributions.

Yes, thank you. That's really great color. Bill, you mentioned the balance sheet and obviously you guys have done really good with M&A over time. Could you just talk to the uses of cash from here, especially when free cash flow generation has been stronger than historical? Thank you.

We increased our share repurchases in the third quarter due to strong cash flow and a lot of confidence in our future prospects. Our priority for cash will always be to invest in great companies, but we will do so in a disciplined manner. Whenever we have cash available, we've been able to find excellent opportunities to enhance our workforce, acquire businesses, and build customer relationships, which positions Comfort Systems very well in the contracting space.

Hi, thanks. Good morning. Brian or Bill, I guess when I go through the different end-markets, the manufacturing vertical was sort of the one I guess of real size that had taken a step back relative to last year and maybe even next to the second quarter. And what are you seeing in that area in particular? Is it your view of this is just sort of timing-related? Anything to say around the opportunity pipeline in that vertical?

The opportunity remains very strong, particularly in the food and pharma sectors. I want to point out that the trend observed this year was a shift towards data center projects by some of our largest industrial subsidiaries because it represented the best available work and allowed them to provide their teams with valuable projects that would maximize their earnings. Our teams currently have the flexibility to choose their projects. Therefore, when you observe shifts between major segments, it reflects the decisions being made and the favorable terms offered by customers.

Okay. And I think you guys have sort of a level of visibility, especially on some of these larger kind of multi-phase projects where maybe you don't have a signed award, but you're sort of in the seat for future phases. Can you talk around that? Is that partially what's given you the confidence to say this demand environment isn't really fading? Is it something else?

Yes, Brent, absolutely right on the money. And even before that, right, in terms of us assisting general contractors and customers when they're looking at jobs in the early phase down to award and a lot of these projects get rewarded in phases now, right, maybe 5%, 10%, 20% that goes into backlog at that pace. So you're right on the money and that's why we're really upbeat about next year because we know it's in our pipeline, quote-unquote it's in our soft backlog. And we're in good shape right now.

We are currently in budget meetings, and the proportion of our work that we negotiate is at an all-time high. This has always been significant, but now it's even more pronounced. There is a lead-time where we are allowed to begin a certain amount of work early since we are collaborating directly with another company without many external factors. This means that there may not be a traditional award moment; instead, it's about reaching a point where the project scope aligns and signing an agreement that meets our financial accounting definition of backlog. Nonetheless, there is certainly plenty of work ahead.

Yes, that's helpful. I guess just on the cash flow, I mean, obviously extraordinary here. Are the terms that you're getting, I guess, under these new contracts confined to a particular group of customers? Or are you really able to negotiate some favorable terms across the board? I'd just be curious around that.

Without it, there are certainly instances where in modular projects, we sometimes receive upfront payments for work that won't occur until 2026. This is significant. However, I would say in nearly all of our businesses, we have the ability to select projects based on pricing and other factors related to our workforce. Payment terms are crucial. Each contract outlines a schedule of values, and occasionally, some large customers prefer to offer better payment terms rather than increasing profit margins. There are trade-offs involved. This has always been true in the construction industry; when you have bargaining power, your cash flow improves because you secure better schedules and values, as everything is negotiable.

The other thing, Bill, I know you by the way - yes, go ahead.

Customers are more willing to pay when they're interested not just in having the current job completed, but also in engaging you for future work. You’d be surprised at the significant impact this can have.

And Bill, I know you're adamant that this can't continue on forever, but if you looked at the contracts you're signing today, I mean, are those terms as favorable as they were 12 months ago such that you could still continue to see this sort of free cash conversion?

Yes. We're not taking on any new work that is less favorable than what we signed last year. As for the future, there are two aspects to consider. First, in terms of immediate visibility, our current projects are in great shape, and we are seeing more clarity than ever before. For the first time, we are discussing projects slated for 2026 while being in October 2024, which is unprecedented for us. Additionally, it's very likely that ongoing projects, such as chip fabrication facilities, data centers, and new pharmaceutical facilities, will have a long runway ahead. Much of this new business simply adds to our existing workloads. Even with the emphasis on chip fabrication in the U.S., the work Comfort Systems USA was previously engaged in continues, and there remains steady demand for essentials like food and healthcare—especially as the baby boomer population ages. Thus, these factors represent incremental sources of demand. After years of offshoring challenges, having the U.S. be an attractive destination for capital is beneficial for those of us involved in capital deployment.

Excellent. Sorry, just one last question. I know you've wanted to take some time to absorb the Summit transaction, and it seems to be going really well along with the other deals you've made. While you can't predict when transactions will occur, I’d like to ask about the current state of the industry and your business. Have the multiples for potential transactions significantly changed from what you’ve discussed previously?

People often discuss multiples, but a far more significant factor when considering what you're paying for something is what you're multiplying by. It's important to understand the reliable source of cash flow and the earnings of what you're acquiring. Multiples can appear strong when compared to historical trends, as some are willing to pay high multiples based on multi-year averages. However, the sellers we want to work with truly grasp the essence of our business. So far, we've managed to secure deals at what we believe are very reasonable multiples reflecting the future prospects of these businesses. This is why we are effective at acquisitions; we possess deep insights into the companies we buy and their true value. This understanding is one of the reasons we've shifted focus towards industrial complex companies, as we believe they possess valuable embedded advantages at this time. I realize this might not align perfectly with your question, but I think it addresses what is crucial. Pricing seems very reasonable, especially considering that many overlook the fact that corporate tax rates were recently lowered. When purchasing these companies, we have access to a significantly higher amount of free cash flow compared to previous years. In the past, if we acquired a company, we retained $0.60 of every dollar earned because we benefited from tax-deductible goodwill. Now, our acquired companies operate at a lower effective tax rate than our existing business, allowing us to retain well over $0.80 of every dollar. Taking all this into account, I believe pricing is quite favorable, and you are witnessing the value creation that these exceptional companies have achieved for us.

All right. I appreciate all the context. Best of luck. Thanks, guys. In closing, I really want to thank all our employees again. Our folks continue to deliver for our customers with a good-quality product that we do safely and efficiently. As you can tell, we're very excited closing out the year and optimistic about 2025. Thanks, everyone, for joining our call. Hope you all have a wonderful weekend. I look forward to seeing you soon. Thank you.

This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone, have a great day.