Comfort Systems USA, Inc. Price & Performance (FIX)

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 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 in our comments. You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10 ks 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 Bill George, Chief Financial Officer Trent McKenna, Chief Operating Officer. Brian will open our remarks.

Okay. Thanks, Julie. Good morning, and thank you for joining our call today. We are reporting earnings per share that exceed every past quarter. A remarkable accomplishment given that the first quarter is historically our seasonally weakest period. These results reflect a promising start to 2025. Same store revenue growth for the first quarter was 15% and our margins are strong. We earned $4.75 per share this quarter, up more than 75% from last year. Backlog at the end of the quarter grew to a new high of nearly $7,000,000,000 We continue to experience broad based strength including persistent strong demand from our tech customers. Thanks to strong first quarter bookings, we have going into the second quarter of twenty twenty five with same store growth in both sequential and year over year backlog. We continue to be disciplined with our capital allocation strategy. As previously announced, we added Century Contractors as our newest partner company in January of this year. Century is an excellent mechanical contractor based in Charlotte, North Carolina. And we expect they will earn about $90,000,000 of revenue this year. We also announced another increase to our quarterly dividend by $05 to $0.45 per share and we continue to purchase our shares.

These actions reflect our commitment to reward our shareholders while maintaining a strong balance sheet. Against the backdrop of these strong results, we are of course deeply aware of what is happening with tariffs in our economy. We are preparing for a wide range of possible conditions. If tariffs and other policy changes hurt the economy, or make construction more expensive, that will impact our customers and that would in turn impact us. Most of these things we cannot control. So we are focused on project execution recruiting and retaining the best labor force in the industry, and selecting the best projects our valuable workforce. We feel fortunate to have the markets [indiscernible] customers, and geographies that we are in. Although events are developing quickly, demand for large and complex complex projects is ongoing. With record broad based backlog persistent demand in advanced technology, onshoring trends, and especially thanks to our amazing people We expect continuing strong results in 2025 and we are optimistic for continuing success into 2026. Trent 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.

This quarter was a really great start.

To 2025. So revenue for the first quarter was 1,800,000,000.0 an increase of 19% compared to last year. Same store revenue increased by 15 or $237,000,000 with the remaining $57,000,000 increase resulting from acquisitions. Our revenue increased in both segments with an increase of 22% in our Electrical segment while our Mechanical segment revenue increased by 18%. Both segments benefited from strong demand, particularly in the technology sector. We face high comparables for the remainder of 2025, and our estimate is that same store revenue will increase for full year 2025 by high single digit percentage growth. Gross profit was $4.00 $3,000,000 for the first quarter twenty twenty five, a $106,000,000 improvement compared to a year ago. Our gross profit percentage grew to 22% this quarter compared to 19.3% for the first quarter of twenty twenty four. The quarterly gross profit percentage in our Electrical segment improved to 23% this year compared to 22.6% last year. Margins in our Mechanical segment grew by over 3% to 21.7% compared to 18.4% in the first quarter of twenty twenty four. We currently expect that gross profit margins will continue in the strong ranges that we have achieved in the last several quarters.

SG and A expense for the quarter was $195,000,000 compared to $163,000,000 in the same quarter of twenty twenty four. SG and A expense as a percentage of revenue was consistent at 10.6% for both periods. We continue to invest in training and technology to provide our workforce with the best tools to meet the demands of complex projects needed by our customers. Our operating income increased by 54% from last year, from $135,000,000 in the first quarter of twenty twenty four to $2.00 $9,000,000 for the first quarter of twenty twenty five. With improved gross profit margins, our operating income percentage increased from 8.8% to 11.4% a truly remarkable performance in the first quarter. Our quarter to date effective tax rate was 18.6%, compared to 21.7% in 2024. Our effective tax rate this quarter was lower due to interest we received on a delayed refund by the IRS associated with our 2022 federal tax return. We received the $118,000,000 refund in April 2025, including $11,000,000 of interest. Excluding this item, our effective tax rate would have been approximately 23% in the current quarter, and we expect our tax rate for the last three quarters of twenty twenty five to continue in the 23% range, with the full year effective rate a bit lower due to the discrete benefit recorded this quarter.

After considering all these factors, net income for the first quarter of twenty twenty five was 169,000,000 or $4.75 per share and that compares net income for the first quarter of twenty twenty four of $96,000,000 or $2.69 per share. Per share earnings include a benefit of $0.25 per share related to the interest on our tax refund, which was previously discussed. EBITDA increased by 43% to $243,000,000 this quarter from $170,000,000 in the first quarter of twenty twenty four, reflecting great execution by our teams and strong demand in our markets. And our EBITDA for the twelve months ending with the first quarter is $965,000,000 Our free cash flow was negative 109,000,000 in the first quarter. Free cash flow has two large discrete impacts this quarter from a major turnaround of advanced customer payments and a catch up tax payment that we had deferred from last year. As Brian mentioned, quarter we experienced much of the long awaited cash flow turnaround. As we have been discussing for several quarters, our operating cash flow has benefited from advanced payments from customers in our modular operations. Much of that effect abated this quarter. In addition to the turnaround of most of our advanced customer payments in the first quarter, we made a federal tax payment of approximately $80,000,000 this quarter that would normally have been paid in the second half of last year.

That was because we were able to defer that payment due to hurricane barrel, which was a federally declared disaster in Houston during 2024. We also funded significant earn out payments for acquisitions. Approximately $80,000,000 in the first quarter of twenty twenty five, and $34,000,000 of those payments were required to be reflected as a reduction to operating cash flow. Given the magnitude of these three reductions to cash flow, that is the turnaround for advanced purchases, our hurricane deferred payments and earn out funding, the fact that our cash flow netted to only 109,000,000 negative signifies remarkably strong underlying cash flow this quarter. We also purchased more shares than usual in the first quarter and although it did not affect our cash flow, share repurchase this quarter were also a notable use of cash as we returned $92,000,000 to shareholders by buying over $264,000 shares. Finally, this quarter we funded the Century acquisition that Brian talked about. So with all of these uses of cash, and other factors affecting our cash, we believe that ending the quarter with net cash of over 130,000,000 together with our strong prospects for ongoing cash flow, places us in a remarkably strong position.

To continue to invest in our business to grow and continue to reward our shareholders. And this quarter's balance sheet performance strengthens our optimism about our ongoing prospects. That's what I got. Trent.

Thanks, Bill.

Brian has asked me to comment on our business operations and provide an assessment of our outlook. Backlog at the end of the first quarter was a record 6,900,000,000.0 a same store increase in both sequential and year over year backlog. Same store sequential backlog was up $848,000,000 or 14% while same store year over year backlog was up $930,000,000 or 16%. First quarter bookings were especially strong in the technology sector.

Our companies are collaborating more than ever before to deliver superior mechanical and electrical solutions for our customers. Our revenue mix continues to trend towards the industrial sector with this sector accounting for 62% of our volume in the first quarter. Industrial continues to be a major driver of pipeline and backlog. Technology, which we report in industrial and which includes data centers and chip fab, was 37% of our total revenue a substantial increase from 30% in the prior year. Advanced technology is currently the largest component of our overall revenue. Institutional markets including education, healthcare, and government are also strong and represent 24% of our revenue.

The commercial sector now accounts for about 14% of revenue and most of our commercial sector revenue flows through our service activities. Construction accounted for 85% of our revenue with projects for new buildings representing 58% and existing building construction 27%. Overall modular revenue in the first quarter was [indiscernible] Of our total revenue. And we now have over 2,500,000 square feet of production and storage space for our modular operations. We include modular in new building construction because we consider it off-site construction. Our modular projects average well over 20,000,000. Service revenue was up 10% this year on an absolute basis but with faster growth in construction, service is now 15% of total revenue. Service profitability was strong this quarter and service continues to be a growing and reliable source of profit and cash flow. Before I turn the call over for questions, I want to join Brian and Bill in thanking our over 19,000 employees for their hard work and dedication. Comfort Systems success is a direct result of the people that serve our customers every single day. We're now going to turn this call back to Latif for questions Thank you.

Thank you. 11 on your telephone. To remove yourself from the queue, you may press 11 again. Our first question comes from the line of Alex Dwyer of KeyBanc Capital Your question please, Alex.

Hey, Brian, Bill, Trent and Julie, for taking my questions here.

Thank you. [indiscernible] So I just wanted to start and ask about the the Intact revenue and margin guidance, especially in light of the stronger start to the year and the backlog growth kind of reaccelerated this quarter.

The impact guidance implies a deceleration through the rest of the year. And know you guys tend to be conservative with your guidance. And and you you did mention the additional macro uncertainty here. So I just wanted to learn a little bit more about the thought process and guidance and if you can talk a little bit about that.

If you don't mind, I don't think anything has changed from the point of view of our prospects, the way we're experiencing our prospects. The way that we're seeing [indiscernible] Develop in our markets. However, we had already mentioned that last year we had an increasingly tough comp as the year progressed, especially in the third and fourth quarters. So the reason that we stuck with the high single digit growth for revenue was just because we have some much higher comparables that will be facing year over year later this year. As far as margins go, we've been at very high margins and we really believe we'll stay at those high margins. We just printed sort of all time high margins, so we can't say, that's the new minimum, but we're we feel very, very good about our ability to [indiscernible] perform and make good margins.

Yes. So, you know, Alex, we we are we're getting you know, we're getting good pricing and really superior execution in the field. So I think those bills right, we can keep those margins. I think we'll sign up for them.

Yeah. Okay. Got it. Thank you. And I guess staying on the margins, can you just talk a little bit about how your contracts are structured in the event of potential cost inflation or supply chain challenges, how well protected you are and how quickly you can pass these on to customers? Because I think last time in COVID, there was was some margin pressure in the business. And just wondering what we should expect this time around, how manageable you think this could be? And what lessons were learned last time?

Yeah, so I'll take that, Alex. So we're pricing and supply chain. It's a day to day hand to hand combat thing for our teams. They are very good at it though. This is what they do. This is their experience and our project managers and teams are very, very good at extracting the most possible value out of what the supply chain gives it, right? Obviously with tariffs, we're in an uncertain time. And our teams are having to manage to that. I like our chances We're very good with regard to our contractual risk. And what getting proactively involved at the local level with our suppliers with our customer. Making sure that we're really distinguishing ourselves from our competition Also, when you think about most of our competition, they don't have the scale or heft that we have. With regard to these issues. They certainly don't have the ability to collaborate across companies to provide information about supply chain changes. So all in tariffs are uncertain, right? It's a hard It's a environment to predict. But I like the chances for our teams to be successful. In any environment. And Alex, you mentioned we've been through this before.

We do have a lot of experiences that we went through. COVID in particular. So we get paid to manage the challenges in the business and we'll do that.

Thank you, guys. I'll turn it over here.

Thank you. Our next question comes from the line of Julio Romero. Of Sidoti and Company. Please go ahead, Julio.

Thanks. Hey, good morning, everybody. Just staying on the the last question here and thinking about all the uncertainties. We have trade uncertainty, tariff uncertainty, but we also touched last quarter on the data center CapEx uncertainty. So maybe if you guys could maybe rank order the uncertainties out there for us in terms of order of magnitude and how you're viewing them internally? Alright. So, so is We'll let Bill do that one.

Yeah.

So as far as, you know, as far as the the the the cost pressure, that during COVID, we didn't really experience any cost pressure. We had a quarter or two that were was down. Was mostly down because things being shut down, like the city of Austin shut down. The state of Michigan shut everything down for a period of time. You couldn't even go fix hospitals. But in general, our margins performed extraordinarily well. Service if anything, had a little bit of margin compression in about the first nine to twelve months after you know, after COVID really hit. Construction was killing it, and then the next year, they were both killing it. So, we really feel good about our history of facing what we think were tougher concerns at that point. I don't know if it's gonna get tougher a lot tougher from here, but that was a much more dire situation. Sure.

As far as tariff uncertainty and demand in demand for technology, I would say that we, you know, in the week before a call like this, we talked to the people who do the most work in our company with our customers who buy services in those areas. There is no sign of a let up in demand for electricians and pipe fitters and plumbers to help build data centers and frankly lots of other things. That doesn't mean it's not going to happen, and I know we'll get asked about this over and over. But there is no sign of it. And if you'd ask the the smartest people in our business, you know, about the demand for compute, [indiscernible] for data, lakes, capacity. You know, there was a a level of demand that couldn't possibly be met. Before the tariffs were announced and we don't really think that that's changed. It might change, hasn't changed.

Okay, great. That is helpful. So, it sounds like your experience during the COVID years helps you be more comfortable with inflationary impacts and then also you're not seeing a level of demand destruction as of this moment Maybe if you could speak to what you're hearing from your customers and your suppliers as to what their biggest uncertainties are and how that could affect Comfort Systems. I'll talk about our suppliers for a minute, and then maybe Trent and Brian can talk about our customers because I kinda just did. But from our suppliers, there are you know, you'll see, like, a four or 6% increase from this or that, you know, supplier. We have thousands. Right? But we are we, you we have hundreds that are very important. Of them have done some price increases. The truth is they do 46% price increases all the time. So, you know, it's hard to tease out what's tariff related. Certainly, in business today, tariff is a great excuse to raise your prices. I don't I don't I don't think we're detecting a whole lot of change there. We are buying you know, one of the things that happened coming out of COVID is our guys got way, way more aggressive about locking in stuff a year or two in advance, mostly because of availability.

Right? Not just price. I will say that there is a general feeling right now that we are going ahead and purchasing stuff that we're go we know we're going to need. Maybe not trying to negotiate for as long. But I I don't know that there's anything happening now that you know, would it, is there gonna be places where we pay a little more for something than we would have? Yes. Will that be detectable in our numbers? Not so far.

You know, Julio, one one thing that we really have going for us at Comfort Systems is, we're a large specialty contractor Some of these are larger projects, the customers need someone with a strong balance sheet a workforce that's deep in which we have that. There's only a few of us in the country that can handle these larger jobs. So we're really in good shape to satisfy our customers requirements of some of this larger, more complex work as we said in the script. So, we're really good positioned. And if you look at this arm sharing opportunity that might be coming forward, We are in a great geographic location to handle that. And we have the depth of the skill set to do it as well. So I really like our position right now. It's what the work that's out there.

Great. To sum it up, it sounds like your scale and your experience in prior periods are the key differentiators this time around? Is that fair?

Absolutely. Yeah. Absolutely, Julio.

Yep.

Okay. Great. Thanks for all the color, guys. I'll pass it on. [indiscernible] Thanks.

Thank you. Our next question comes from the line of Josh Chan of UBS. Your line is open, Josh.

Hi. Good morning, Brian, Dolce, and Julia. Congrats on a good quarter. Thanks, Josh.

Hi.

I I guess could you talk about the the project bidding pipeline say that demand continues to be strong? Maybe talk about what helped add to your backlog this quarter? And then also, how have you been continuing to add to the backlog and orders since the tariff announcement? Thank you.

Yeah. So Josh, contributed to our backlog this quarter was just broad based bookings across the majority of our companies. So we had just strength across the entire business in bookings. And that was driven largely by what we talked about on the script, which was advanced tech industrial bookings. In our pipeline, we continue to see really, really good visibility out into the a lot of these projects are large, the things that are in our pipeline are large projects being planned They have long timelines We find out about them well before the ground gets broken on the site. So a lot of that is in our pipeline right now. We can see it. There's visibility wise. So we're comfortable in saying that we continue, as Bill said earlier, we continue to see strength with our customers They are continuing to move forward with their plans. So that's what we're seeing. I just wanna add on one sec that manufacturing and the industrial gets a lot of attention. But health care has picked up. It's now up to 10% of our business, but the actual dollars have increased. So I'm really optimistic, look at the aging population we have.

Think healthcare is gonna be a pretty consistently growing opportunity for us.

Great, thank you, Brian and Trent. I guess maybe a question on your backlog trajectory, just to kind of clarify the typical pattern here. So obviously, you had a good sequential ramp in backlog in Q1. So how do you expect backlog to trend through the year? Through the summer quarters? So if you were to go back and look at Comfort Systems over ten or twenty years, you would see that we are more likely to build backlog in the fourth and first quarter and more likely to net burn backlog in the second and third quarter. And there's one reason for that is revenues, there's more revenue, you're burning more of the backlog in the second and third quarter. But also, for whatever reason, tend to commit to bookings and just get the paperwork done over the winter. In our industry historically. And that's actually I would have expected that to be true in modular. At least for the last three or four years. It's been more true in modular than in the other parts of the business. So we I don't know whether our backlog will be up at the end of the second or third quarter.

I know our pipeline is really strong and I don't think it would change my view of Comfort You know? Unless we're start to tell you something different than that, got all the work we can do, and we expect to continue to have all the work we can possibly do. And I don't you know, there just don't I it's it earlier. We just don't really see a lot of a lot of free time for electricians who want to work in the near term.

Yeah, yeah, that makes a lot of sense. Maybe I can ask a quick follow-up.

So I think, Bill, you mentioned that comps are tougher in the second half. But I think last year, Q2 was also a really strong quarter. So I guess how are you thinking about the relative toughness of all the comps that you're going to face the rest of the year? Thank you. So we're comfortable with the margin comps. Revenue is pretty lumpy for us. Even at the scale, it's gotten less lumpy over the years because we just have so many more projects, you know. But revenue is a real is a hard call. We're feel much more careful much more comfortable predicting that for the rest of the year. Than we do for any individual quarter. But you know, I think that sort of high single digit is very achievable. I I will say this. We full. We have plenty of work to do and there's no shortage of opportunities. So we'll be busy.

Great. Yeah, thanks for the color guys and good luck in the rest of the year.

Alright. Thank you.

Thank you. Our next question comes from the line of Brent Thielman of D. A. Davidson and Company. Please go ahead, Brent.

Hey, thanks. Good morning, guys.

Good morning. I guess, yes, just on the disaggregation of the different end markets, the manufacturing sector was down in the first quarter. Is that more a consequence of just focusing your resources to these other end markets? Why would you see that just given the strength you've been seeing there?

The reality is you know, and I don't blame people. They think of these different markets as sort of these independent things, and we sell what's available. But realistically, our guys are picking the work that they choose to take they're picking it based on what's gonna be good for their people. You know, where they have a history with customers that have treated them well over time. And based on the gross margin gross profit per hour, gross profit dollars that they can get per hour that they go dedicate to that work. So when you see movement between sectors, especially at a time like this, it's almost always just our guys pick different where like, probably, they got lured more into the tech stuff because that's where they had the best opportunities. I don't think there's any concern right now about demand in manufacturing.

And Brent, as you know, when you get these bigger jobs, they're gonna be lumpier. So you could win a manufacturing job tomorrow, and it will be lumpy in the second quarter. So some of that's that, but the new bookings, especially the bookings actually going into the end of this year, the fourth quarter of last year were in manufacturing? Yes, for sure. [indiscernible] Got it to you. The manufacturing side is likely to ramp up. Moving forward.

Yeah. Well, it's gonna on an absolute dollar basis, it it we have the opportunity to do more whether our guys will choose to do more. Yeah. Yeah. What I said, make sure to do something else. I do think the opportunity is there, and I also really think really think really think we will actually. It's gonna, once some of the bookings we did in the fourth quarter of last year start to revenue for real, Later in this year, you'll see a little more of that.

Yes. We're not concerned about the manufacturing opportunities, Brent. Yeah. Good. Yeah. That's what I was looking for. There's been a lot, you've had some of the public OEMs on the HVAC side out recently. I guess I want to ask you guys on mechanical. Have you seen any impact early this year just related to the whole HVAC refrigerant transition? Did it have any impact on your activity or bookings positive or negative? I know it's temporary, but trying to understand how that implicates your business. Yeah.

No. We're not we haven't been impacted at all, Brent. I think you're right It's mostly for the OEMs at this point. There's not much of that equipment with that refrigerant in it that we'd be servicing. Has it impacted us? I don't think it's gonna Okay. Would it would it help you going forward, Brian?

No. I don't think it'll be, you know, neutral. I don't think so.

Okay.

Okay.

And then just last one was just on the balance sheet. I mean, sounds like you're going to be building cash back up here pretty quickly in the coming quarters, Bill.

But when you think about just the scale of the backlog, the overall pipeline, it sounds pretty good. Is there a minimum level of cash you want to keep on the balance sheet as we go forward?

So if I had my choice, I would have no cash on the balance sheet. I would have no debt, and I would have no cash. If I'm just if I'm just being honest, so there absolutely, there is no minimum. Having said that, probably are gonna build cash. Later as this year progresses. We have you know, we're certainly in conversations about acquisitions, but we're think we've mentioned this before, kind of we're kind of a broken record on this. We are in a mindset right now of only doing deals where we have a very high level of conviction. Because we've done so much lately, so many big ones that we're really, it's going great. But but we never pass up Really, these companies we buy we buy them when they're ready to sell. They're people we know. They're great companies. It's hard to it's hard to predict, but yeah, I if you had if you made me guess, I guess cash will build a little bit as we go through this year. I also you know, you'll have to tell me how our stock price trends. We just spent $92,000,000 in the first quarter on shares because we thought we were able to buy our shares at 12 times trailing EBITDA.

And we thought that is fantastic. Use of our capital because we get more of our modular and we get more of our manufacture. You know what I mean? So a lot of that loss are we are we are very open minded to buying shares if people want want to value Comfort at prices that we do acquisitions at. We love our own [indiscernible] Yes. I'm sure. We love our business. We think we have an amazing business.

Rightfully so. Thanks, guys. I'll pass it on.

Thanks Brent.

Thank you.

Our next question comes from the line of Brian Brophy of Stifel. Please go ahead, Brian.

Thanks. Good morning, everybody. Congrats on a very nice quarter. Thank you. Yes, I wanted to ask on SG and A leverage. Historically, it's been kind of course of margin expansion for you guys that slowed a little bit this quarter Just curious how you're thinking about SG and A leverage for this year? So I'm I'm super happy about this because it was 10.6% last year, and it was 10.6% this year. So we were exactly right for once in what we told you guys. I think we're I think we I think SG and A leverage has run its course at least from this point of view. We were getting point three, point five every couple quarters really big SG and A leverage. It's certainly possible we can continue to get SG and A leverage, but it's not going to be we're not going be moving whole percentage points. Most likely, mean, I hope I'm wrong. You know, but at the end of the day, I would not look to SG and A leverage as a big source of incremental sort of net income. Because we've gotten so much already, and the reality is there's only you know, the [indiscernible] we're we're investing in s g and a because we want this is a great business, and we wanna grow.

Right?

So I would say yeah. Understood. Yeah. That's helpful. And then just one more on the working capital unwind that you guys saw in the quarter with that large customer. Was that the full 300,000,000 that you guys have talked about in the past that got unwound here? Or is there more to point down the road? And I guess, there any other large cash items we should be thinking about for the rest of the year?

That's a I'm glad you asked. So we had we had some mid 200 and something million that went to one customer. And that was two thirds, three quarters of the out of balance we had with them. And it you know, is it gonna to zero? I don't know this, so I think it will go to zero. So we think that that is substantially passed. If there's more, and there probably is, we'll probably another hundred million more to go to that customer, maybe a little more. And and one or two other customers, but it's mainly one customer. However, we happen to get you may have noticed we happen to get a hundred and $7,000,000 tax payment. During April. I mentioned it in my script, or maybe I didn't, but it's in the k q. I think I mentioned in the script. But at the end of the day, that is cash flow in the second quarter. We think that will just offset the additional payments we'll make. So I don't think you'll see it in our numbers You certainly won't you know, we've been publishing for over two years this slide we call advanced cash to make sure that people wouldn't be surprised by this.

That slide's done. You won't see that slide anymore. We're pretty much especially given the the the puts and takes in the second quarter, It's it's it's a thing of the past. So now we we should go back to just cash flowing our net income. Understood. Very helpful. I'll pass it on.

Alright.

Thanks, Brian.

Thank you. Our next question comes from the line of Adam Thalhimer of Thompson Davis. Please go ahead, Adam.

Good morning, guys.

Hey, Adam. Hey, Sorry if I'm if I missed this or you already said it, but when you think about the impact that tariffs have had in April, if any, I mean, you help quantify the actual impact on the prices that you're giving to customers?

On the prices? Well, okay. So so I would say that it's not detectable in general. Right? So people I'm not saying it won't be, but I would say we basically price our work based on our labor. We figure out how much we're gonna spend for the other elements of our costs. If we're doing a subcontract, we make sure we make some money on because we have to manage them and we take a little risk. Figure out to the best of our knowledge what we're gonna have to pay for the equipment and materials that we put in. We go lock as much of that Most of the big equipment we get, we have a quote for it before we quote it to somebody else. Because it's highly specced. Right? It's highly configured. It's not like it's bought. In a commodity basis. And typically on sort of commodities and materials, we buy it as soon as we have the job. We commit to it. We commit to some of it before we have jobs opportunistically. And on top of that, we have a history of our customers helping us know, if something changes. And by the way, we have a history of giving it back to them.

When good things happen. Know, get taking it into account and Because these are long term relationships for us. So we don't know what's gonna happen with tariffs. We don't know what's really gonna happen with sort of the bigger picture of the economy. I would say if you wanna think about that vis a Comfort Systems, we have customers. And if it affects our customers and however it affects our it affects us. If people, want to build buildings, we're here. We're the best people to build them. If they stop wanting to build buildings, we won't build them without them. And honestly, there is an awful lot of demand, and we do feel like Brian's said, we do feel like we are in really good markets really good verticals, like we just happen to be in the right place at the right time. To feel better than we might. Given some of the trends that are out there. Got it. And that's what I'm really trying to get at is to what extent customers are getting sticker shock you know, in April versus March if that's happening at all?

Not not yet. No.

Too soon to tell Adam, really. The question [indiscernible] And then to what extent does your q one twenty five backlog give you visibility into '26?

I mean, if you look at, so we're strong this year. We looking at opportunities going to 2026. I think we have more back for 2026 at this point in the year than we've ever had. So, that's why we said in the script that we're very optimistic about 2026. You're also looking at opportunities on some of the longer term stuff in '27 and '28, but I think we're feeling good about '26 knowing what we've already seen come our way.

Great.

Thanks, guys.

Alright. Take care, Adam.

Thank you. I would now like to turn the conference back to Brian Lane for closing remarks. Sir?

All right, thank you.

I want to thank thank everyone for being on the call with us today. As we have mentioned, our first quarters have always been seasonally lower for us. However, as certain parts of our business such as Modular have grown, and within an increasing portion of our revenues and markets, that do not get as cold such as Texas, Florida and The Carolinas, seasonality has become less pronounced over the last several years. Even with those trends, this was an especially strong quarter. And I am frankly in awe of what our amazing teams across the country continue to accomplish. I am grateful for their hard work and we will continue to work hard for our people, our customers and those who have chosen to invest with us. Thank you again. We look forward to seeing many of you in the coming months. Have a great weekend. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.