Good afternoon, everyone, and thank you for joining Sidoti & Company's June 2026 Small Cap Conference. My name is Julio Romero, and I cover industrials and engineering construction names at Sidoti & Company. Really pleased to be able to host Comfort Systems USA. Their ticker is FIX. With us today is Trent McKenna, President and Chief Operating Officer, and Chrissy Nelson, Director of Investor Relations. We'll start with management giving us a brief overview of the company, and then we'll go right into some Q&A. If you have any questions, feel free to type them into the Q&A section at the bottom of your screen. Happy to ask on your behalf if time permits. With that, Trent and Chrissy, thank you so much for being here.
Thanks, Julio.
Thanks, Julio. I'm going to just dive in and give a quick overview of the company. To understand what we are, we're a leading national mechanical, electrical and plumbing installation service provider. Little over $10 billion yearly in revenue, 75% of our mix is industrial. Over 23,000 employees currently. We've had a history of profitable growth, cash flow. We have unmatched modular capabilities, which I'm sure everyone will find of interest as we talk about those and answer questions with regard to that. We've maintained a lot of financial stability over the history of the company with a very strong balance sheet. We're only in the 48 states, about 197 locations, 143 cities. Right now, as everyone on this listening would probably anticipate, we're seeing very strong demand in technology with data centers and chip manufacturing.
We also continue to see strong demand with life sciences and pharmaceuticals as well as food processing, both human and pet. Manufacturing continues to be a good end market for us, as well as healthcare and energy storage. The trends that we feel very strongly about over the next several quarters, technology, onshoring, modular, and of course, we continue to grow our service business. One way to understand what we do, just at a very high level, is any building that needs any type of mechanical, plumbing, and/or electrical, we can do both the construction and the service, and we can take it all the way from the very early stages of development all the way to the life cycle of the building. At any stage, we can play a very important part in the value proposition.
Additionally, our modular business continues to grow. Just to understand that, we have offsite fabrication at every one of our businesses, but we don't consider that part of our modular. Our modular business is a volumetric modular business. It's housed in Houston at a company we call TAS, then in Greensboro at EAS. Those two companies represent our modular revenue. In total, year to date for 2026, our modular revenue represents about 17% of total revenue. It continues to grow, but the rest of our business also continues to grow alongside it. Technology breaks out to about 56%, manufacturing 19%. The rest is divided amongst a few other end markets. As you think about our modular business, we are working with two of the hyperscalers on programs that they have. We have programmatic approaches with them.
Those we continue to work with them to expand and also at the same time meet the needs they have. By the end of this year, we'll be up to 4 million square feet of modular capacity, that's 4 million square feet of space for our modular facilities. That is something we continue to look at, whether we would continue to expand that or not. That would follow along with whether we get advance purchase commitments from customers that we continue to talk to. In addition to those two hyperscalers, obviously we talk to others as well. Is there anything that you would add to what I just put into the whole summary, Chrissy?
From a capital allocation perspective, after reinvesting in the business, which is our first and best use of capital, we're increasing our modular capacity this year. After that, we spend about 70% of our cash flow in acquisitions, which we think is our best path to true growth. Our headcount, we can grow in mid to high single digits over a long period of time. We are getting some outsized success in growing that headcount right now, but over a long period of time, I think that's about how we can grow, the remainder gets split between dividends and share buybacks.
Thank you. With that, we'll turn it over to questions.
Excellent. Great rundown. Thanks so much. Maybe to start it off, you had a tremendous first quarter, same-store revenue growth of 51%, record backlog, $12.5 billion. You talked about technology being one of the key end markets driving the growth. Maybe you could speak to what is driving the growth in the backlog as well, and the visibility beyond reported backlog, and what kind of end markets are driving the growth there as well.
Right now, across all of our businesses, we have as good a visibility as ever with regard to future work. Technology is driving a lot of that visibility. We also see in manufacturing and healthcare, we also see some pretty good visibility. What I would kind of classify in government and education, it's sort of the normal level of visibility we would have. Well out into the future, we can see projects that are being proposed and brought online. From our perspective, a lot of what we're already working on is multi-phased projects, and we anticipate being able to have really good opportunities as the next phases start to break ground. All in, our pipeline is very robust, very strong going into the future.
Excellent. You talked about as good as visibility as ever and the multi-phase projects that you see. Does that kind of give you the confidence that this current demand is multi-year and longer than one would expect? What else would give you that confidence that demand is pretty durable here?
The confidence comes from our conversations with our customers. Really anyone who is building data centers right now for any reason, and that includes hyperscalers, includes colo, includes the frontier labs, the whole swath of data center builders. They all are projecting build well into the future. That gives us a pretty high degree of confidence. When you just look at trends, right, you look at onshoring trends, you look at the pharmaceutical trends that are occurring, that also gives us a great amount of confidence. In healthcare, I think we still are seeing a need to, especially in certain parts of the country, you're seeing a need to build out healthcare infrastructure for an aging population, then a changing demographic. I think because of that, you also have some long-term visibility into the future.
Got it. I guess, on the technology front, how should investors think about the breadth of the data center opportunity across mechanical, electrical, plumbing, service, and modular over the next several years?
At this point right now, it's more about the work, the opportunities that we have to pass on than it is the opportunities we're taking, right? There are so many opportunities at this time, it's really a matter of allocating resources to the right opportunities, to where we have the best chance of success and the best chance of favorable outcomes for our shareholders, for our stakeholders. From my perspective, when I think about it, I've never seen a demand curve quite like what we're seeing, right? Just logically, I think to myself, "Well, okay, at some point it has to change," but at this point, we see no change of it at all. It just continues to go out into the future.
To provide some context to the size of the opportunity, like you hear all of the announcements from the hyperscalers of what their CapEx plans are. About 80% of that is going to be spent on the actual chips and servers, then the remaining 20% is what is actually being built in the data center. Then our scope of work is about 50%-60% of that 20%.
That's correct, 40.
Got it. Very helpful there. Obviously you're passing on a lot of work, right? But you're also bringing on increased capacity to take on more work. One of the biggest takeaways from the first quarter was the step-up in the expected 2026 CapEx to about 5% of sales.
Right.
I think for context, I don't believe it's ever surpassed 2% of sales in any given year since you guys have gone public in 1997. On the first quarter call, you talked about buying a building in Houston. You talked about other building investments potentially later in the year. If you could go a little bit more into what you're investing in specifically this year.
That's back to what I said during the opening, right? We intend to be at 4 million square feet in capacity by the end of the year, and some of that CapEx expenditure is buying out leases and buying the buildings that we already occupy. It's not a one-to-one expansion. It's really using some capital to be able to invest in those buildings. Then what that gives us the ability to do is bring in the modernized robotics and different automation equipment that help us be even more efficient with our build-out in modular. That's the focus of a lot of that additional capital expenditures that we're going to be doing by the end of the year.
To get from 2%-5%, it's the modular build-out, the 1.5%-2% that we've normally spent on CapEx, largely vehicles, then some incremental investments in our shops.
Got it. It's interesting that some of the CapEx is spent towards buying out existing leases, some of them that you already are operating in. Good context about the primary driver for that step-up being operational, right? Having control over the building. You can configure the building however you'd like. You probably are more likely to invest in the building, going forward. To what extent does fixing the buildings also create some financial flexibility for you, whether it's through asset value or collateral support or just greater optionality? Does that factor into the capital allocation framework at all or?
I think at the end of the day, we're talking max 5% of revenue. From like a total perspective, I think it is still fairly insignificant of a spend. I think your opportunity comes where Trent mentioned on the operations side of us being able to optimize to the way our teams think they need to be able to execute
Can you give us maybe an example, if I could push you for an example or two of what you can do to optimize the facility, some ideas you might have. Are those pilots, or are those kind of you're ready to roll them out as soon as you-
Those are all things that we're either using or Yeah, they wouldn't even be pilot. They're all things that we're using already in existing facilities that we would then be expanding out to additional facilities.
Like, for example, we bought a line cutter in one of our modular facilities recently that allowed them to cut the sheet metal at a certain specification. It took 10 guys out of the operation that were able to be redeployed somewhere else in the facility.
Understood. Maybe the buildings you're buying that you're not currently leasing now, like, kind of the new buildings that you're buying, is there a timeline that investors can expect from when you deploy the spend to those new buildings or those new factories to maybe when they'll begin to directly generate revenue?
Well, they'll start directly generating revenue fairly quickly. For them to be fully up to speed and running at the capacity and the efficiency that we'd want to see, it's a one to two-quarter type of build-out that is required to get it right. To be honest, it's more like a two to three to get it really finely tuned and humming the way you want it to be, because there's a lot of just kind of learning curve and ability to kind of fix the way that you're doing the line over time. It's just like any other manufacturing process. It gets better and better the more you're producing the thing. It's a little tough to put an exact timeline, but I think that's a good rule of thumb.
It's more weighted towards the back half of the year, for sure.
Yeah.
One thing I do like to remind investors too is, when we bring on capacity, it's not all exactly operating, so you can't do a linear growth to revenue. You have to remember that sometimes we're building out storage and those types of things too. The math should loosely follow, but it's not going to be a direct correlation.
I think even on the last call, you said something about areas to paint.
Yeah
The modular units.
Exactly. Like, or lay down and load up skids. There's a lot that goes into it.
Yeah. Last call, you talked about trialing some new customers as well. How much of the new capacity you're bringing on is for kind of existing, for potential new, and then kind of how much is TBD and kind of to be determined going forward?
No, all the capacity we're bringing on right now is for existing commitments that we have-
Okay
already.
On the call, we were talking about a new customer that we're doing some hyperscale data center work for. It wasn't really a trial for a new hyperscaler. We're always doing some development work with customers out there, I think there's always a little bit of capacity that's reserved for that. It wasn't a trial for a new third hyperscaler.
Got you. You guys have obviously very long-standing relationships with your existing customers and you prioritize those extremely well. What would a new customer need to do, or what needs to happen for a new customer to kind of get on your list, right, to build a longer term, as you called it, a programmatic relationship, similar to what you have with your existing customer base?
If you're talking about a brand new customer, what ends up happening is that they're already building a certain way. They tend to then say, "Okay, are there ways that we can get these buildings online faster, more dependably, more reliably, with better track record?" That's when the customer starts talking to us. To be completely candid, practically speaking, the way that usually occurs is someone has left an organization that already has seen the value of modular, has come to a new organization and brought that knowledge with them, is inviting us in to kind of very early talks about, "This is the way we currently deliver.
Can we use a modular delivery in part to deliver more dependably and faster?" Depending on what they exactly want to do with their program, it could be a very long period of time where we're talking to them about, "Look, okay," trying to help them understand the value proposition, or it could be a really quick startup. It really depends on what their appetite is and where they're coming from already on the curve of understanding how you can make this happen.
Got it. I guess, curious from Sorry, I'll try to rephrase the question. It's still a conversation about modular. It's not you're competing against other modular competitors. It's, "Hey, should we go traditional stick-built construction versus modular?" That's when kind of the conversation goes with you guys.
Yes. With regard to us, if someone's talking to us early stages and trying to figure it, they're not talking to three other modular providers. They're talking to us because they believe we have the expertise to deliver on what they need, we're helping design and figure out a program for them that would make sense for them to be successful for their delivery systems that they want to make sure that they maintain. It's a constant conversation with a lot of these groups. You understand from their perspective, they're looking at it like, "This is how we're doing it." There's always risk with change, so it takes time to get them comfortable with this is a better way to deliver what you're trying to make happen.
Is there a certain top three or four items on a checklist that they're looking for you guys to hit on the modular side?
Yeah. It's speed, dependable cost, safety. I think those would be the top four that you're talking about.
Super helpful there. I'm curious how meaningful the maintenance and service opportunity can be to the install base that's being created across some of the data centers and the projects you're currently working on now. How much of an advantage is it for Comfort to capture that wallet share by nature of you guys constructing the data center, constructing the modular units, versus not being the ones to construct the units?
Yeah. The service opportunity for us is just going to be broad. It won't be tied to the modular units, it'll just be tied to the data centers in general. The data centers are going to be, over time, they're going to represent a very attractive market for us in service. We have some agreements in data centers currently. We continue to sell into that end market and will continue to do it. I will say this, in the early stages of a data center coming online, the OEMs tend to have a better foothold inside that data center than we can.
Over time, I believe that those, especially where they're being located in such rural and remote locations, I think we'll be able to have a very good opportunity to be a service provider to the data centers that are currently being constructed.
Yeah. I'm curious why that would be, a little bit, if you could expand on why the OEMs would be.
They are packaging warranty obligations with their machinery, with their equipment, and so that's obligating the data center owner to then use them in warranty.
Got it. You mentioned the remote locations that they're being built. That's obviously a big kind of topical factor. You talked about strength in West Texas, but you're also seeing strength in other areas. Can you speak to that a little bit? In areas that aren't.
Yeah. We're building data centers right now in Mississippi, in small towns in Mississippi. West Texas is what we've already talked about. We have some proposed data centers that we're looking at in, of all places, Florida. They've always said they didn't want to build data centers in Florida because of the hurricane risk, but they are going to be building data centers in Florida. They're really all over at this point, and it's a real opportunity for us because of our acquisition of Kodiak several years ago, providing us that traveling workforce that's been able to really help us flex into some of these locations that require a lot of people in a remote area.
Additionally, we have a lot of companies that are really just really great at traveling inside of Comfort, and so that's really helped us as well, to attack those opportunities.
About 20% of our headcount will travel.
Got you. As they're expanding to different geographies, right? There's different complexities and different obstacles that arise in each one. Just talk about how your current kind of suite of services is positioned to handle that, and maybe what the portfolio may need in the future.
I'll start with what we're doing. I think your question was specifically focused on remote.
Absolutely. Yeah.
Those are often done collaboratively, so we'll have more than one Comfort company coming together to make that work. It's just logically it makes sense, right? You can have companies partnering to be able to meet the needs of the customer. Then, we'll supplement that with a traveling workforce. That might be a company's own traveling workforce. It might be Kodiak, our labor provider. What we're doing and what we bring to the table is the expertise of being able to, from start to finish on the project, bring the best craft professionals, the best project managers, the best design professionals to really help the customer understand what it's going to take to get this thing done, and then at the same time, be able to execute on it.
That's what our customers are valuing right now, and that's why our backlog continues to grow, because they see that as dependable delivery. There are a lot of companies out right now that are probably getting a little over their skis and trying to chase the data center work, I think a lot of our customers rely on us because they know that we are focused on what we can actually perform and do successfully for them.
Yeah. Absolutely. You talked about the base of skilled labor that you have, but as kind of the opportunity set continues to grow and expand, talk about what you guys are doing to expand your base of skilled labor or project managers to kind of stay ahead of it, or at least in sync with it.
We've been investing heavily in our talent teams to make sure that we have the right kind of apprenticeship programs and we have the right sort of training internal in Comfort Systems . It's one of our benefits, right? We have the ability to scale training and programs across a much larger footprint with 23,000 + employees. That makes it so that our investments in that scale out at a level that it's really differentiated us from most of our competition. Most of our competition is more local, regionalized, and unable to scale at the level that we can. That is something that craft professionals really want. They want the ability to go from an apprentice all the way up to a journeyman and beyond.
That is what we can provide them is that path, that really nice career path to their time with us. That is something that has been able to attract a level of craft professional that's just better. Right? That's our goal, right? We just want to have the best craft professionals in the markets that we serve and in the end markets that we serve because that's the whole game. If we have the right people doing the work and delivering the construction or service that we're providing, then we're successful.
We've invested heavily in our recruiting platforms, too. We're doing a lot more recruiting through avenues like BlueRecruit and ESPN and TikTok and some ad posts.
I'm going to look out for one of those ads now that you mention it. Kodiak and Pivot, right? Those are the two platforms that I remember that have been crucial to you guys managing the labor pool and helping to expand that. Would the portfolio, would you be looking to add more things like a Kodiak, like a Pivot to the portfolio? Are there more of those out there even?
Yeah. There are a lot out there. Our ad is going to be a mix of just, we've organically grown Kodiak significantly since we acquired it. Pivot was more of a, just to understand it, Pivot was more about the technology that was housed inside of it and the small recruiting group that was part of it. It was really a talent plus technology acquisition so that we could put that on top of Kodiak. Kodiak is the bulk of the traveling craft professionals that we've been able to then utilize as we've expanded out and built to what we've become. As we look into the future, there are a handful of these types of companies that we would be interested, and we talk to them, but a lot of times it's just as easy for us to greenfield and organically grow.
This is not a big CapEx type business. It's just people, and frankly, really, a lot of times it boils down to just the technology and Rolodex type of an approach, right? We are continuing to grow that and grow the capacity that it has and the expertise that it has, and we've just been able to do that organically.
I don't think if you acquired another contract labor, their Rolodex plus our Rolodex through Kodiak would equal two. It'd maybe be one and a half, but I bet there's a lot of overlap between those.
That makes sense. I guess talking about technology a little bit and usage of it, where are you guys seeing the biggest opportunity for innovation internally? Is it for robotics used in some of the modular facilities? Is it on the digital tools or on labor productivity? Just speak to that and how that changes the value you bring to your customers.
Yeah, it's all of the above, what you just mentioned. We're seeing a lot of automation in our modular. I want to be clear, it's also in our offsite fabrication, too, because every one of our companies has offsite fabrication, and a lot of them are using automated innovation to be able to deliver more efficiently to projects. Digital tools on site. 10 years ago, you'd walk a job site, and no one would have an iPad. Now you walk a job site, everybody has an iPad. There's a lot of things that we've introduced into the work stream to make sure that we're taking errors out of the work. That's the biggest productivity killer is people thinking that it should be built one way when it was supposed to be built a different way.
Making sure that the people on the ground understand exactly how we want it built, conveying that all the way from the engineer and architect, all the way down to the person who's actually doing the install. Digital tools have made that far more productive and far more efficient. We have to scale them, so that scale has really provided us a unique advantage, from where we sit, vis-a-vis our competitors. That is something our craft professionals also benefit from. Once they see the benefit of these tools, that also has a stickiness where they know that if they were to go to another competing contractor, they wouldn't have access to these tools that they've become really, really comfortable with and that they have a high degree of trust in at this point.
Excellent. Great answer. What haven't we covered? What haven't we talked about that you think is worth highlighting here?
Yeah.
We acquired a really great electrical company in Utah that closed on May 1st. We still think acquisitions are the best path to growth. Scale is getting harder, as you might imagine, there's still a lot of really great companies out there, our approach to acquiring, I think, is going to stay the same. We're going to get to know them and take our time, do some good deals.
Excellent. Well, thank you so much for joining us. Much appreciated, thank you to the whole Comfort Systems team.
Thanks, Julio.
Thanks for having us, Julio.
Thanks.