This is the 41st year for our annual Fastest-Growing Companies list, which ranks companies based on growth in revenue, profits, and stock returns.

100 Fastest-Growing Companies

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

This is the 40th year for our annual Fastest-Growing Companies list, which ranks companies based on growth in revenue, profits, and stock returns.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Energy sector dominated this year for the first time since 2008, with 28 companies featured on the list.

Industries included in the sector are construction and engineering services and homebuilders.

Fortune Sector Leaders: Engineering and Construction

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

This year's Fortune 500 marks the 66th running of the list.

Collectively, the ranked companies produced a three-year average shareholder return of 19%, vs. 11% for the S&P 500.

This year's Fortune 500 marks the 65th running of the list.

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Fastest-growing Companies

Revenue 3 Yr Growth Rank

Revenue 3 Yr Annual Growth Rate

EPS 3 Yr Growth Rank

EPS 3 Yr Annual Growth Rate

Total Return 3 Yr Rank

Total Return 3 Yr Annual Rate

Beat S&P 500 3 Yr Return

Current Streak

Years on List

Sector

Comfort Systems USA was founded in 1996 and went public in June 1997. Headquartered in Houston, the company is a leading provider of mechanical, electrical, and plumbing (MEP) building systems, including HVAC installation, service, process piping, modular construction, and building automation controls. Comfort Systems has grown from 12 operating companies at its IPO to more than 50 operating companies in 190 locations in 142 cities throughout the  across the U.S.

Q3 2026

Q2 2026

Q1 2026

Comfort Systems USA (FIX): Company Profile, Stock Price, News, Rankings

legacy

Comfort Systems USA

comfort systems usa

Good day, and thank you for standing by. Welcome to the Comfort Systems USA third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Julie Shaeff, Chief Accounting Officer. Ma'am, please go ahead.

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

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

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

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

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

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

Thanks, Brian. It is a poignant day for me, and I do want to take just a few minutes and explain why I am utterly confident that Comfort Systems USA will continue to have the best management team in our industry long after I am gone. Over 30 years, I have done a lot of things at Comfort: legal, financial, acquisitions, operations. The main three things I do today are financial, operational, and acquisitions. The great news is that in the financial area, our depth is extraordinary. Frankly, it's amazing. Right down the line, starting with Julie, we are stacked with unbelievable talent in our financial area. Honestly, the day after I leave this role, Comfort Systems will still have the best CFO in construction and the best finance department in construction. You guys know Julie.

I've been hearing from people for the last 24 hours, how happy and relieved, both internal and external, how happy and relieved they are that Julie will be our next CFO. Operations is the part that I'll miss the most. But the good news is that our business isn't run in Houston. It's not even close to being run in Houston. It's run in the field, and as long as we maintain our culture and stay out of the way of the great companies we have, we'll always be fine. I want to spend just a little bit more time commenting on acquisitions. Every acquisition we've ever done at Comfort Systems USA was done by a team of people, and every company we've ever bought, we pick companies. We certainly qualify companies, but we don't pick companies. They pick us.

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

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

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

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

It's led to us making money every year of our existence, to us having free cash flow every year of our existence, to us being the best positioned when markets became great to really take advantage of it. Everything I've just described is what created the great results that I'm going to review right now. With that, revenue for the third quarter of 2026 was $3.8 billion, an increase of $1.3 billion or 54% compared to last year. Electrical segment revenue grew by 85%, and mechanical revenue grew by 43%. Through nine months, our same-store revenue increased 47%, and we expect full-year same-store revenue will also be in the mid 40% range. We estimate that our same-store full-year 2027 revenue will grow in the mid 20% range. Gross profit was $934 million for the third quarter of 2026, $327 million higher than one year ago.

Our gross profit percentage remained consistent at a strong 24.8% this quarter. Quarterly gross profit percentage in our mechanical segment increased to 25.1% this quarter, compared to 24.3% last year. Despite electrical segment revenue growth of over 80%, margins in our electrical segment slipped to 24.3% this quarter as compared to 26.2% in the third quarter of 2025. Last year, we noted that our electrical results were positively impacted in the third quarter by discrete gains, including when a customer emerged from bankruptcy. Those gains improved electrical segment margins last year by approximately 1.8%, and without that effect, electrical margins were roughly flat. We currently expect that 2027 gross profit margins are likely to continue in the strong ranges that we've achieved on average over recent quarters.

SG&A expense for the quarter was $314 million, or 8.3% of revenue, compared to $230 million, or 9.4% of revenue in the third quarter of 2025, and we continue to invest to support our extraordinary growth. Our operating income increased by 65% from last year, from $379 million in the third quarter of 2025 to $625 million for the third quarter of 2026. Our operating income percentage increased to 16.6% this quarter from 15.5% in the prior year. Our year-to-date tax rate was 23%, and we expect our tax rate to continue to be around 23% for the rest of 2026 and in 2027. After considering all these factors, net income for the third quarter of 2026 was $489 million, or $13.91 per share, as compared to net income for the third quarter of 2025 of $292 million or $8.25 per share.

Thanks to great execution by our people, EBITDA increased by 61% to $668 million this quarter from a strong $414 million in the third quarter of 2025. Our trailing 12-month EBITDA is now approximately $2.3 billion. Free cash flow for the third quarter of 2026 was $806 million, and year to date, our cash flow is roughly $2 billion. In addition to strong earnings, we benefited from advantageous payment terms and favorable collections from large technology customers. Our cash flow this quarter was also higher due to $166 million in income tax payments that we were able to defer until the fourth quarter of this year. In addition to the modular expansions that are underway, we invested over $100 million in CapEx to expand pre-fabrication facilities for our traditional construction business.

We estimate that full-year CapEx will be 4%-5% of revenue, and we are likely to continue to incur CapEx at elevated levels during the first half of 2027. We actively purchased our shares this quarter. Year to date, we have returned $349 million to our shareholders, and we have retired approximately 212,000 shares. Once again, expressing my gratitude to the people I mentioned earlier and to the people on this call who have supported us for so long, I am going to turn the time over to Trent. Trent?

Thanks, Bill, and before I start, I just want to thank you for the time I have been able to work with you over the last 22 years, and for taking the chance and hiring me back 22 years ago. I appreciate it, Bill. I am going to discuss our operations and outlook. Our backlog at the end of the third quarter jumped to a record $17.8 billion. Since last year at this time, our backlog has increased by $8.4 billion or 90%. On a sequential basis, backlog increased by $3.8 billion or 27%. Third quarter bookings were especially strong in the technology sector, both in our traditional construction business as well as the modular part of our business. Industrial customers accounted for 76% of total revenue in the first nine months of 2026, and they are major drivers of pipeline and backlog.

Technology, which is included in industrial, was 59% of our revenue, a strong increase from 42% in the prior year. Our modular operations continue to grow with our established customers, and we are building products for new customers, including a Frontier Lab and colo providers. Although we have not yet entered new arrangements that we would consider programmatic, we continue to explore deeper partnerships with these and other potential strategic partners. Institutional markets, which include education, healthcare, and government, remain strong and represent 16% of our revenue, and the commercial sector provided about 8% of revenue. Most of our service revenue is for commercial customers. Overall, our companies continue to execute at high margins. However, this quarter we experienced a higher proportion of equipment and materials in our cost mix that augmented our sequential revenue growth but dampened sequential margins. Construction accounted for 90% of our revenue.

With projects for new buildings representing 75% and existing building construction 15%. We include modular in new building construction and year to date, modular was 17% of our revenue. We remain on track to have over 4 million square feet of space in our modular businesses by the end of 2026, and with ongoing orders and investments to meet that demand, we expect to have approximately 6 million square feet of capacity by the end of 2027. We also continue to evaluate further investments based on continuing strong demand and customer needs. Service revenue was higher by 13% this quarter, but with faster growth in construction, service represents 10% of total revenue. Service profitability was stronger than ever this quarter, and service remains a growing and reliable source of profit and cash flow.

I cannot say enough about the amazing team of craft professionals that we have working hard for our customers every single day. Thanks to the teams that are working across the country, we are optimistic about our future. I want to close by joining Brian and Bill in thanking our over 25,000 employees for their hard work and dedication, and I will now turn it back over to Michelle for questions. Thank you.

Thank you. As a reminder to ask a question at this time, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Adam Thalhimer with Thompson Davis. Your line is open. Please go ahead.

Hey, good morning, guys. Congrats on another great quarter. Julie, congrats on your promotion. And Bill, congrats to you on your retirement. You'll be missed, Bill. Hey, Trent, I wanted to start with you on the sequential margin decline. Can you give a little bit more color on that, and how should we think about that as we look ahead to margins in the next few quarters?

I will jump in, and then I am sure Bill will want to add a little bit too. Sequentially, we carried a higher proportion of equipment and materials in our cost mix this quarter. That is going to add revenue, but equipment does not carry the margin our labor does. The percentage comes down even as the dollars go up. Anyway, the way I think about it, I would be careful about focusing on one quarter. Some of this is a little bit lumpy, depending on what the mix is, and that's what we experienced in the prior quarter.

There are other things that contributed to the slight decline. One of the things that happens is after we do acquisitions, we have purchase adjustments, and certain of those purchase adjustments relate to the changes in the WIP schedule for jobs that were ongoing at the time we closed. Because of that, those purchase adjustments roll through our costs. Those adjustments were like $12 million higher in the third quarter than they were in the second quarter, so that was a straight hit to margins. We have one large company in electrical. It's over half of our electrical segment. That company had gross margins in the 30s in the second quarter, and their gross margins were still unfathomably high in the third quarter, and above average for our company, but they were not in the 30s. There are discrete things that happened.

I think the business has never been better. The other thing is, when you see this kind of a jump in revenue, like 80% organic revenue growth in the electrical, you know a couple of things. One, you know you have a big denominator for your fraction, but you also know that we are early in a lot of jobs, and we do not pull out high margins early in jobs, right? We wait and we keep contingency. We wait and see how they go. I don't think there is anything but good news in this quarter, Adam.

Bill, just to pull on that thread a little bit, when you say we are early in jobs, when should we think about the portfolio maturing a little bit?

We've reached a point today where it's really hard to answer that question because some of these jobs are multi-year. I will say you begin to see profit changes when you're 40%, 60%, 70% complete. These big jobs, the way that you recognize revenue in our industry is you estimate the remaining cost it's going to take you to finish a contractual obligation. Early in a job, you don't know what's going to happen.

You don't know how much it's going to rain. You don't know what the people who are working next to you as other subcontractors are going to do. So companies that stay in business, they keep money in the job for the things they don't know. As you get deeper and deeper into those jobs, you begin to get a better view. For us, historically, we've had net gain on jobs every year of our existence, and they've been bigger than ever lately. So I would say this quarter, definitely early in jobs.

I'd say next quarter will be on average early in jobs, although there's always closeouts in fourth quarters to some extent, just because of the nature of years ending and what customers want you to do. So I guess it's hard to say. I think we'll get back to average first half of next year.

Okay. Obviously unbelievable awards in the quarter. In terms of what's driving that, would you say that's your traditional data center customers, or there are some new customers starting to creep in?

Yeah, I think there are definitely new customers creeping in and demand is just very strong. I think part of it's our customers are committing earlier and for larger scopes because they know that capacity like ours is scarce right now. We continue to be really selective in what we're looking at. So yeah, it's kind of all of the above. It's a market right now where the governor isn't demand, the governor's really just labor, the ability to be able to get the labor to the work. Our customers realize that, so they're wanting to lock up our capacity. That's why you see what the backlog's doing.

You know what, Adam? It's a real tribute to the folks out there working, the quality of work they're doing that we're getting this much repeat business from very sophisticated customers. Really tip your hat to the folks and what they're producing.

Thank you. Our next question is going to come from the line of Adam Bubes with Goldman Sachs. Your line is open. Please go ahead.

Hi, good morning. You talked about building some modular products for new customers, including Frontier Lab and colo providers. Can you just clarify, the 6 million square feet of capacity you expect by 2027, is the incremental 1 million square feet versus what you targeted by mid-year? Is that related to Frontier Labs or new colos, or is that primarily your two hyperscaler customers? Then can you just expand on the engagement, those conversations with the Frontier Lab and colos? What are they asking from you in terms of scope of work, potential output?

Yeah. So the answer to this, the build-out that we just talked about to 6 million is based on our current programmatic build-outs with the customers that we already have. On the new customer front, yes, we're building product for Frontier Lab and colocation providers. That's real work, and we're proud of it. But we haven't yet entered arrangements with them that we would call programmatic, and we're not going to call them that until we believe they are programmatic. The build-out that we've announced is all for existing capacity that is with our current customer base in modular.

If you're living in the paradigm of the last 30 years, like I sometimes do, you might say, "Oh, they haven't yet sold business to these people." The reality is, we haven't yet reached terms where we're willing to accept business from these people. Right now, one of the things that's front and center for us is the ability to pay. We do something [inaudible]. Typically, our programmatic people have made five-year volume commitments to us, and then we have gone out and spent large amounts of CapEx to build space that's going to primarily build their product. I think not just in modular, but across our business, we have a long history and a long set of experience that really, really takes into account the financial strength of our counterparties.

Not that these people don't have financial strength, because they do, but we think there are various considerations as you compare the customers that we do work for.

Yeah. One other thing too, I'm sure I'm not telling you anything you haven't already realized, but modular is 17% of our revenue. It's growing, but staying 17% because the rest of our business is also seeing really great demand as well.

Got it. All super clear. Bill, you referenced the projects in sort of earlier stages of completion. If you look at catch-up adjustments, the impact on revenues this quarter, I think it stepped down to 4.5% from closer to 8% of revenues in the first half of the year. Am I thinking about this right? Because if you kind of strip those impacts out, it looks like underlying gross margins actually continue to increase sequentially. Is that the right way to think about core execution? Does that give you confidence baseline margins can continue to expand as new projects mature?

Well, I was with you all the way to the last sentence because we do not represent that margins will go up in the future. We do know that things that have been driving them up are still apparent for us, and if anything, they're at least as strong as ever. I will say, what you said plus things I can see that nobody could see unless they were sitting in Julie's or Michael's seat, such as this point about the mix in our cost that Trent mentioned of, by a couple percentage points, our cost of goods sold has more material and equipment passing through it. There's nobody who runs a business for us who worries about their return on wire. They worry about their return on electricians and plumbers. Our gross profit per hour worked continues to get better. So I agree, and more.

Great. Thanks so much, and congrats, Bill and Julie.

Thank you. One moment for our next question. Our next question will come from the line of Sangita Jain with KeyBanc. Your line is open. Please go ahead.

Great. Thank you. Good morning. Congratulations, Bill, and congratulations, Julie. I just want to ask on the mechanical backlog, which saw a more meaningful jump than the electrical backlog, and I was wondering if you could break down the makeup of that, whether it may be modular and the traditional business.

Backlog's really lumpy. I don't think there's any different trend between the two. I just think in any given quarter, one might book more, one might book less. One might book vastly more, and the other might book even more vastly more, the way things are going. At some point, I don't think there's any differential there. Let's say we have 40 businesses, 20 are highly exposed to the super cycle. Those people have more work than they can do. They're choosing how much they take. It's really astonishing that our backlog went up this much in summer months.

Think about the burn. Look at our revenue. That's a really, really crazy amount of bookings. I will say, what's also crazy about it is that Brian Lane approved it. Brian Lane, Trent, get on calls for the biggest jobs, and they talk through what are we doing to make sure we're safe. We have a whole program for large projects where we monitor them even more closely. By the way, we're not kidding ourselves that anybody in Houston is performing anything, but we do really try to stay on top of it, and our backlog's the best it's ever been, Brian.

Best I've ever seen it, Bill, and the activity level out there is as strong as I've ever seen it.

All right. Can I ask a follow-up on this, on backlog? Given that you're booking, it seems, larger projects, how should we think about the duration of that backlog? I know historically it's been under a year, but can you tell us how that has changed in recent quarters?

Yeah. I think if you look at the backlog we're winning now, we're obviously winning larger projects, and I think the timeframe is probably pushed out to 18-24 months as opposed to 10 years ago, nine months was the best look-see we had for sure. But the size of these jobs, the duration of them, where they are, has extended the backlog to roughly 18-24 months, I think, Sangita, would be a good framework.

No, I was just going to say, Sangita, one way to look at it is just that when I look at the backlog right now, what it did in the quarter, is demand is just, for what our people do, remains well in excess of what the industry can actually deliver, and we're being able to do and we're being asked to do and deliver more of it than ever before. So that's what I really take away from how strong the backlog was in this quarter.

Thank you, and one moment for our next question. Our next question will come from the line of Brent Thielman with Oppenheimer & Co. Your line is open. Please go ahead.

Hey, thank you. Bill, Julie, of course, congrats to both. Great career here, Bill. I guess, you want to pick up maybe, Bill, where you were talking a little bit on Comfort's focus on quality of customers, so to speak. Obviously data center, balance sheets, financing, big topic in the market. Maybe if you could talk us through how you look at that, your operations look at that, how corporate looks at it and scrutinizes those customers, and I guess especially with regard to the pipeline of new potential projects, it sounds very healthy. I'm assuming that includes companies with available financing to push this through. If you could just talk to that.

It's very textured. You have the ultimate customer. But outside of modular, and I know this came up in the context of modular, but outside of modular, the payment obligation is actually typically coming from a large national GC, right? And then in modular, we do get mobilization payments, and then we have payments upon delivery. At this point, we're vastly ahead with our programmatic customers, and based on very open with each other negotiations. The other thing that you look at is the labor that you're doing, whatever you're building, are you building something that other people would want, right? Because we have lien rights in our business where we get to, they go back to the English common law, right, 1,000 years ago, where we have the right to seize the building if we don't get paid.

One of the things that we learned to look at over the years is this a building that there would be many, many people who would want? Or is this a building like, we were involved in a wafer construction, a construction of a plant that made wafer using a certain technology, where we knew that that large and very expensive building would be pretty useless to anybody but the person building it. We, in that case, asked for very special terms where we were paid every two weeks, and we had the right to leave on very short notice. There are many, many things that you take into account when you try to figure this out.

By the way, there are people rolling into modular now who are taking large books of business who we think are agreeing to payment terms where they are banking on some people. If we lose work on that basis, we don't mind it.

Okay. Maybe another point of concern out there, just with the technology or data center project opportunities that are out there that you're looking at, that aren't reflected in huge backlog today, presumably over the next few years. I guess, any sense for how many of those you're looking at already have power connections figured out?

It pretty much, the things we're looking at as prospects, the power connection is usually already solved.

If anybody stroked a check for us to do design work, to make our engineers-

Because of where we sit in the cycle, right? We're a pretty late cycle player in the design of a building. For our traditional construction business, I'm not aware of a lot of things in that we're looking at prospect pipeline-wise where the power hasn't already been solved.

I got to tell you, it really hasn't delayed anything we're seeing, Brent. A lot of these data centers is generating their own power anyway. So these folks are going to solve their problem one way or another.

Okay. Just a quick technical question. The operating margins in the mechanical segment have come up a lot this year, including the third quarter. Is that primarily due to better profit margins in modular compared to last year, at least on an operating basis? Essentially, are you getting better fixed cost leverage there, and that's the big deal there?

In the mix, that's the single largest driver in the mix. There is actually higher margins out for the nine months, for sure, in pretty much all parts of that work. Modular has really closed the gap with the rest of the business to come really up to parity with our average margins. Of course, mathematically, that changes the mix.

I am just going to throw props to one company that is doing an unbelievable job on piping, really throughout the country, and their margins have improved significantly and is just doing a heck of a job.

Yeah. Very good. Okay. Thanks y'all. Appreciate it.

Thank you, and one moment for our next question. Our next question will come from the line of Josh Chan with UBS. Your line is open. Please go ahead.

Hi, good morning, and congrats, Bill and Julie, both truly very well deserved. Congrats. My first question, could you talk about the magnitude of the orders that you took in in the quarter? It's billions of dollars more than you're taking in any other quarter. Maybe, I know that the demand is obviously really strong, but just what drove that decision, the confidence around being able to phase it out and things of that nature?

Yeah. Well, Josh, so the first part of that is that the timing of the work, we can handle, we have the personnel to do it. The locations are working in our favor. The most important thing is you match your labor availability over when it's got to go. So as Bill said earlier, when we work with our operating companies looking at these opportunities, where they are, we're very confident we can handle all the work we have right now with the forces we have. We're also very fortunate, the company of this size, that the companies collaborate, work together, add that on to have a good traveling workforce. So when you add all that up, we're very confident executing the level of backlog we have today.

Sure. Yeah, that's great to hear and, obviously great backlog. I guess my follow-up, could I ask about the margin comment about the mix of materials? Because obviously I understand the mathematical reason for that, but over the years, it's very rare for you to call out that mix as a driver, so I was wondering if anything large specifically happened this quarter where that mix was more impactful than usual.

So material and equipment was about 2% higher than it had averaged in the first six months. The only other time we brought that up, was during COVID because there was so much inflation in materials and equipment. I think that the dollars of them just became such a bigger part of our cost mix. I think in this case, a big part of it is the earliness of the job. So a lot of stuff gets delivered. Earlier in a job, you're doing very, very long pipe runs and things like that. I think some of that actually comes back to the earliness of the job. Some of it's just, it's lumpy, and that's just the way it is. Chief, Trent, what are you doing?

Yeah, everything you just said, Bill is correct. It's really where the large projects are in their life cycle and where we are in ordering that equipment.

Okay, great. Yeah, thanks for the color and congrats on the quarter.

One moment for our next question. Our next question will come from the line of Tim Mulrooney with William Blair. Your line is open. Please go ahead.

Yeah, thanks for taking my questions. Good morning. The first question I wanted to ask about is, on the backlog, obviously very strong result. But we don't have insight into the individual conversations that you're having. I am wondering, with all the political rhetoric around data center moratoriums heading into the election, other regulations that governors are proposing around data center construction. Just curious if you've seen any change in any project schedules or push out in the pipeline in any of the states.

I would say, and having talked to one of our biggest companies in the last day or two, the answer is generally no. I haven't literally, I don't know of a project where one of these considerations has changed its trajectory. I will say, I think on a more macro level, I have a sense, and I've talked with people who have given me this sense, this may push more of the work nationally into more friendly jurisdictions. So if you were a large hyperscaler and you were laying your bets on which states you wanted to do work in, I think where you place your bets, where you go do your work and make your commitments is going to be influenced by your perception of whether the governor in that state wants people in that state to have jobs. Right?

I do think it. I'm not saying it has no effect, but I don't know, I don't think at a micro level we've seen any effect whatsoever.

Well, Tim, I can tell you, for the work we have today, what we're seeing here at Comfort Systems, we have not been delayed by any moratorium.

You know, one thing more to think about too is that modular is even less exposed because it ships to wherever the customer site is. So that's also something to keep in mind for that 17% of our business.

Okay, that is really helpful color. Thank you. And just on the modular business, by the way, just my last question here. I am curious why you have not added any more programmatic customers in your modular business. I know you touched on this earlier, but the demand is clearly there. Could you just walk me through that decision matrix around that in a little bit more? Thank you.

I will start. This happens in the real world, right? We are talking about 250,000, 600,000, 700,000 sq ft buildings that are being built out with rows of robots and automated paint booths and turntables and have to be staffed with thousands, ultimately, of people. We think we have grown unbelievably fast. This is not scalable the way you can just print another copy of software. Honestly, we have tended to stick with our two big customers who have kept us happy together for, in one case, for 20 years because we know them. It works. They want more than we can buy. They can't buy enough from us to the point where they are looking at other sources of supply. Another way of asking the other side of that question is, why would we divert from a sure thing to sort of a mystery, right?

Yeah. Yep. Makes total sense. Thanks for the color, guys.

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

Thanks. Hey, good morning. Again, Bill, congrats on your retirement. Julie, congrats on the CFO role. Well deserved. Hey, Trent, you mentioned earlier that your customers understand that labor is the governor. I guess if that's the case, what lever would expand that fastest? Would it be training? Would it be modular automation or digital field tools? What kind of growth in your headcount does mid-20s growth in 2027 require?

It's going to require growth. I mean, we're over 25,000 today, right? We've grown that kind of the way we've always done it, right? Our companies strive to be the best place for craft professionals to work. We pay well, we train relentlessly, and we are always trying to keep people busy on good projects with good conditions. That's what a craft professional is interested in. Obviously, our traveling workforce has helped a lot in this, and our contract craft operations at Kodiak and Pivot have helped as well. Acquisitions like Hunt and Boys have already let us put people where the work is, right? There's a lot of ways we're doing it. Our companies, we have planned. The one key thing about us is that if we've taken work, it means labor planned against every dollar in that backlog.

That's one thing about us. When we look at something, to Bill's point earlier, where he talked about Trent and Brian looking at work, the question's always, "Well, do we have the labor to do it?" Then it's labor planned before we ever agree to it. As we look into the future in that mid-20s, we will have to add people, but we'll just do it the way we've always done it. That's really the easiest way to kind of sum that up is we want to be the best place for a craft professional to build their career. We'll continue to try to be that place. There's a lot of things that go into that, but that's the easiest way to understand it.

I've been doing construction a long time, probably more than I want to remember, but we really do treat people with respect and fairly here, and I think that really matters when you bring people in and they stay with us. I think it's really important what the culture of this company is and how we get people to go work where they go work.

Yeah, and I want to, if it's okay, Brian, I want to add to that because if you look at what our people, the 25,000+ just did over the last three months, they were working in the hottest months of the year.

Many of them were on the road away from their families, and they still delivered safely, on schedule, with great quality for our customers. That's I just want to take my hat off to them and commend them on the work that they performed and how grateful I am for what they've done.

Comfort Systems USA (FIX) Q3 2026 Earnings Call Transcript

Company Participants