Comfort Systems USA, Inc. (NYSE:FIX) Q3 2023 Earnings Call Transcript

But so far, as you can see from our numbers, so good, right? We’re in both of those spaces. One, we’re doing substantial work in that space. And the other, we’re just beginning to build basis. The first thing we’re going to do when we really get deployed into the new spaces and get the robotics and stuff in is bring people over from other facilities and let them work during the day. Right now, we’re running in some places, 2.5 shifts, and it’s not sustainable. So what you can’t do is say, well, you’re doubling your square footage, so you’re going to double your revenue. Some of that — a big part of that increase has already happened because we had to meet our customers’ needs, and we’re working those extra shifts. But over time, we hope to just keep getting better, keep finding new ways to automate things.

We think there’s a really bright future, but what we will not do is get ahead of ourselves.

Operator: Our next question comes from the line of Julio Romero of Sidoti.

Julio Romero: Just — maybe thinking about the mechanical segment, I want to kind of dig into a little bit more about what’s driving that step up in margins because both sequentially and year-over-year, it’s really impressive. So maybe if you could just dig into op leverage, pricing execution, if there’s maybe 1 factor that’s kind of leaving the others in terms of the mechanical segment?

Brian Lane: Yes. So as you can imagine, you’re over 20%, it’s all of the above, right? Good mix of work. It’s work we’re really good at doing. Margins are good in the work, and we’re planning and executing. But at the end of the day, it’s going to come down to how well we perform in the field, and they’re just performing at a very high level. We don’t have — if you’ve known us a long time, we don’t have a — we have an absence of significant bad news, and that really does help you. But also, we had a really strong 40% increase in service revenue. We had a very strong service third quarter. As you know, the heat was tremendous. Folks will work night and day to satisfy our customers’ needs, both on call-out work, small project, et cetera. the margins are higher in service. That really helps us as well. So we’ve got good balance, good execution, good work mix and the work that we’re good at.

Bill George: Another interesting factor. You may recall a year ago, we were saying we’re very early in a lot of our work because we were coming out of COVID, so there was more work starting. Now we really have a nice like cadence of business. We have — if we look at — look at our top 100 or 200 jobs out of our 10,000 or so that live are currently on our POC, the big ones. There’s lots of 80% complete in there and 65 and 90 whereas a year ago, you were seeing a lot of sub-50 and really low actually the jobs beginning. When you get up to 70, 80, 90, if you’re really performing well, you start to get comfortable in releasing contingency. And so part of it is just we’re getting to a more normalized book of work. And which just is exactly what we were hoping for, for us in our [indiscernible] stores. These guys are doing it.

Julio Romero: Really helpful. And then my second question is just on the revenue. You mentioned the same same-store sales growth for the fourth quarter expected in the mid-teens. So I guess that implies like a full year same-store sales around 22% or so. Just — considering that, I guess, how do we think about — how should we think about revenue comps for 2024, considering the backlog and growth momentum, but also some of the pass-through costs that may moderate.