Good day and welcome to the quarter four 2020 Comfort Systems USA earnings conference call. During your presentation, your lines may be on listen only. If you require assistance at any time, please key star zero on your telephone, and a coordinator will be happy to assist you. I would like to advise all parties that this call is being recorded for replay purposes. Now, I'd like to turn to your host for today, Julie Shaeff, Chief Accounting Officer. Please proceed. Thanks, Sunny. Good morning. Welcome to Comfort Systems USA's fourth quarter and full year 2020 earnings call. Our comments this morning, as well as our press releases, contain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. What we will say today is based on the current plans and expectations of Comfort Systems U.S.A.. 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 more detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K, as well as in our press release covering these earnings. A slide presentation has been provided as a companion to our remarks. The presentation 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, and Bill George, Chief Financial Officer. Brian will open our remarks. Okay. Thanks, Julie. Good morning, everyone, and thank you for joining us on the call today. Due to the commitment and resilience of our people, we were able to overcome unprecedented challenges during 2020 to achieve record earnings and cash flow. In addition to the ongoing challenges from the pandemic, our people and organizations also experienced and overcame significant adversity in Texas just last week. In 2020, we earned more than 20% of our revenue in Texas, where we have multiple strong mechanical capabilities in many markets, and Texas is also the home to our largest electrical team. Virtually all of our operations were closed for at least three full days, with lots of productivity throughout last week. We are now back to full capacity. I am deeply grateful for the courage and perseverance that our field employees demonstrated last week in Texas and in many other markets that experienced terrible weather. I am in awe of our field workforce's grit and perseverance through COVID, as every day our essential workers overcame the challenges they faced. We continue to work hard to keep our workforce and our community safe and healthy every day. 2020 was a record year for Comfort Systems U.S.A.. We finished the year with strong fourth quarter earnings per share of $1.17, and for the full year, we earned $4.09. This marks the highest annual EPS in the history of our company, even without our tax and valuation gains. Revenue for full year 2020 was also a record at $2.9 billion. Our backlog is up slightly since September, and we have very good ongoing bidding activity as we start 2021. Our 2020 free cash flow was an unprecedented $265 million, and yesterday we again announced an increase in our dividend. At the end of 2020, we acquired Tennessee Electric Company, headquartered in Kingsport, Tennessee, and we expect they will contribute $90 million-$100 million of revenues in 2021. This acquisition was closed on December 31, 2020, so their balance sheet and backlog are included as of the last day of December. TEC is a strong electrical and mechanical contractor, but TEC also brings unique industrial construction and plant service expertise and relationships with complex industrial clients. Their results will be reported in our electrical segment starting in 2021. In December, we promoted Trent McKenna to Chief Operating Officer. Trent has been with Comfort Systems U.S.A. for 16 years, and I believe he will be a valuable leader as we continue to grow and improve our operations. By the way, I am not going anywhere, but this added depth will provide much-needed bandwidth to our senior team. Before I review our operating results and prospects, I want to ask Bill to review our financial performance. Bill? Thanks, Brian. Yeah, as Brian said, our results were again very strong. I'm going to just briefly point out some things for most of the line items of our P&L. Fourth quarter revenue was $699 million, a decrease of $21 million compared to the same quarter last year. Our same-store revenue declined by a larger $68 million. However, our recent acquisitions of TAS and STAR offset that decline somewhat, as they added $48 million in revenue this quarter. You may recall that last year at this time, we had large data center work in Texas that created very high revenue in the comparable period. We will continue to face tough revenue comparisons through the first half of this year, especially in electrical, as a result of last year's big deployments. Revenue for the full year was $2.9 billion, an increase of $241 million, or 9% compared to 2019. Full year same-store revenue in 2020 was 2% lower than in 2019 due to the factors I just mentioned. Gross profit was $137 million for the fourth quarter of 2020, an increase of $4 million. Gross profit as a percentage of revenue rose to 19.6% in the fourth quarter of 2020, compared to 18.4% for the fourth quarter of 2019. For the full year, gross profit increased $45 million, and our gross profit margin was approximately flat at 19.1%. SG&A expense was $89 million, or 12.7% of revenue for the fourth quarter of 2020, compared to $87 million, or 12% of revenue for the fourth quarter of 2019. The prior year fourth quarter benefited from insurance proceeds associated with the cyber incident of approximately $1.6 million, and that reduced SG&A last year. For the full year, SG&A as a percentage of revenue was 12.5% for 2020, compared to 13.0% for 2019. On a same-store basis for the full year, SG&A declined $6 million, and that decrease was primarily due to austerity relating to COVID, such as reductions in travel-related expenses. During the fourth quarter of 2020, we revalued estimates relating to our earn-out liabilities, and as a result, we reported an overall gain of $7 million, or $0.18 per share. For the full year, the gain associated with acquisition earn-out valuation changes was $0.20 per share. These gains were due to lower than forecasted earnings associated with our recent acquisitions, especially at Walker, which was more affected by COVID than our other operations. Our 2020 tax rate was 21.6% compared to 24.7% in 2019. During the third quarter of 2020, we finalized advantageous settlements with the IRS from their examination of our amended federal tax returns for 2014 and 2015. On a go-forward basis, we now expect our normalized effective tax rate will be between 25-30%. Although 2014 and 2015 are now settled, we have open audits relating to refunds we are claiming for the 2016, 2017, and 2018 tax years, but we believe that any benefits that arise from those years would most likely be recognized in 2022 or beyond. After giving effect to all these items, we achieved record net income. Specifically, net income for the fourth quarter of 2020 was $43 million, or $1.17 per share, as compared to $34 million, or $0.92 per share in 2019. Earnings per share for the current quarter included that $0.18 gain associated with earn-out revaluations. Our full year earnings per share was $4.09 per share, compared to $3.08 per share in the prior year. The current year also included a tax benefit of $0.17 that we reported in the third quarter of 2020 from a discrete tax item. The gains associated with earn-out revaluations, which for the full year was $0.20. For the fourth quarter, EBITDA was $63 million, which is 6% higher than the fourth quarter of last year. Our annual 2020 EBITDA was a milestone achievement for us, as our full year EBITDA was $250 million. Cash flow for 2020 was extraordinary. Our full year free cash flow was $265 million, compared to $112 million in 2019. Our 2020 cash flow includes roughly $32 million of benefit that's a direct result of the federal stimulus bill, which allowed us to defer payroll tax payments in the last nine months of 2020. These tax deferrals will be repaid in two equal installments in the fourth quarters of 2021 and 2022. Even with our acquisition expenditures, we were able to reduce our debt to less than one turn of trailing 12-month EBITDA. 2020 was our largest year for share repurchases in quite some time, as we reduced our overall shares outstanding by repurchasing 685,000 of our shares at an average price of $43.99. Since we began our repurchase program in 2007, we've bought back over 9.3 million shares at an average price under $20. That's all I have, Brian. Okay. Thanks, Bill. I'm going to spend a few minutes discussing our backlog and markets. I will also comment on our outlook for 2021. Our backlog level at the end of the fourth quarter of 2020 was $1.51 billion. Sequentially, our same-store backlog increased by $10 million, with particular strength in our modular backlog. Same-store backlog compared to one year ago has decreased by $375 million, of which approximately one-third related to an expected decline in our electrical segment. We are also experiencing delays in bookings and in project starts at certain of our large project companies. Overall, we are very comfortable with the backlog we have across our operating locations. As our booked work at the end of 2019 included some large data projects, and that comparison represented an unusually high level of backlog. Most of our sectors continue to have strong quotation activity, even the sectors where bookings have been delayed. That is particularly true in our industrial business, which includes technology, manufacturing, pharmaceuticals, and food processing. Our industrial revenue has grown to 39% of total revenue in 2020, compared to 34% a year ago. We expect this sector to continue to be strong, and the majority of TAS and TEC revenues are industrial. Institutional markets, which include education, healthcare, and government, were 36% of our revenue, and that is roughly consistent with what we saw in 2019. The commercial sector was 25% of our revenue. For 2020, construction was 79% of our revenue, with 47% from construction projects for new buildings and 32% from construction projects in existing buildings. Both of our construction and service businesses achieved record operating income margins. Service was 21% of our 2020 revenue, with service projects providing 8% of revenue, and pure service, including hourly work, providing 13% of revenue. Beginning in late March, our service business experienced the first and most pronounced negative impacts associated with COVID-19, largely as a result of building closures and decisions by customers to limit facility access. We are seeing good opportunities in internal air quality, which has helped many of our service departments return to pre-pandemic volumes. The most important element of IAQ is this is not just the immediate revenue, but also the opportunity to use our unmatched expertise to create new relationships. This really plays to our strength of solving problems for our customers, and it is not just a service story. As air quality considerations really add to our ability to differentiate and add value in construction, and at times will increase the size and complexity of even large projects. Overall, our service operations ended the year with improved profitability, and thus today they are back to prior volumes. Despite pandemic-related challenges, our mechanical segment performed incredibly well during the quarter. We are grateful for our performance this year, and our prospects are much better than we would have expected this past spring. Our electrical segment had a tougher 2020 than we would have liked, but we currently expect good margin improvement in electrical in 2021. Finally, our outlook. Our backlog strengthened this quarter, but our near-term business continues to reflect some delays in bookings and starts that will result in same-store revenue headwinds in the first half of 2021. At the same time, we have really strong project development and planning activity with our customers. We are increasingly optimistic about 2021 and beyond because of that strong pipeline. We currently expect full year 2021 results that are similar to, but lower than, the record results that we achieved in 2020. We continue to prepare for a wide range of potential circumstances in non-residential construction in the coming quarters. However, we perceive strong trends, especially in industrial, technology, and manufacturing, and we think our geographic markets are favorably positioned with comparatively strong prospects. We look forward to good profits and cash flow in 2021. We have an unmatched workforce and a great and essential business, and we will continue to invest our reliable cash flows to make the most of these advantages and opportunities. Thank you once again to our employees for your hard work and dedication. I will now turn it back over to Sunny for questions. Thank you. Thank you. Your question and answer session will now begin. If you wish to ask a question on the audio, please key star then one on your telephone. Just to remind you, to ask a question on the audio, please key star then one on your telephone. Thank you. We have a question on the audio. It comes from the line of Sean Eastman from KeyBanc Capital Markets. Please proceed, Sean. You're live on the call. Hi, team. Strong finish. Morning, Sean. Morning. Thank you. I just wanted to start on the bookings. I mean, is it fair to say the bookings were better than expected in the fourth quarter? The commentary is that you're still seeing some delays in the near term, but if I'm hearing you right, the bid pipeline's quite strong. Maybe you could expand on that, maybe comment on what's improved, maybe where the bid pipeline is relative to, say, this time last year. Do you think we're going to see some larger projects get awarded in 2021? Hey, Sean, that's a great question. The fourth quarter trend, our book to burn was over one for probably the first time in a year and a half. We're seeing plenty of good opportunities. A lot of it's timing. You get the right paperwork to put into backlog. We're relatively optimistic throughout the country with the opportunities we're seeing in the sectors we talked about. There's a lot of stuff we're working on, getting good feedback from customers that they're ready to go. It's more of a timing issue. I think the first half, you'll see us booking this stuff. I was really pleasantly surprised in the fourth quarter, particularly in the modular sector, where we received a lot of really strong opportunities. I'm really confident that's going to continue on as we go through 2021. Okay. Great. Excellent. I'm just trying to think through the puts and takes on margins. I guess the question really is, where are margins trending directionally in 2021? Service is back at 2019 volumes entering 2021. Electrical should be contributing at higher margins. Is there anything else we need to think about there? This is Bill. I think that the margins we achieved in mechanical are pretty sustainable. It might be hard to quite crush it the way they just did, but especially as we get to the second half of the year, I like our margins there. I think we have improvement in electrical. One, we have a—frankly, we have a manageable comparable in electrical. By the way, electrical did pretty well for us. It had our best cash flow for the year. It was a nice EPS contributor. It's not that electrical did bad, but they definitely have room in the coming year for improvement. I do think SG&A may SG&A will creep back just a little, maybe a couple of basis points because travel will wake up a little bit. People really, really got after their costs in the middle of this past year. We kept training, but we'll probably do more of that. There'll be a little bit more of that, but it looks good. Sean, just to add on on the margins, I mean, the execution was just stellar, in my opinion. And we're still the same folks out there that's still going to do good work for us. I agree with everything Bill said. Okay. Great. Last one for me. I mean, you guys talked about the indoor air quality. Sounds like a developing opportunity set there. If you read through this new administration's platform, I mean, there's a lot of talk on retrofitting buildings and reducing building emissions. I mean, is that something that you're seeing develop in the pipeline? Do you think that's interesting, a potential positive for Comfort Systems U.S.A.? Yeah. Sean, it's Brian again. Absolutely. We're seeing a lot of opportunities already. We've had a lot of work booked and completed, a whole range of solutions for a building. A lot of it's right now focused, I think, on the service side of it to get people back in the building in small projects. I think if you look at the next 12- 24 months, I think you're going to see it be a significantly larger portion of new-build construction where they're going to expect it's going into engineering already, whether it's bigger chillers, bigger ducts, etc., etc. I think it's going to be a very good opportunity for Comfort Systems U.S.A. for a long time. Okay. Very interesting. Thanks for the help, guys. Thank you, Sean. Thank you. Your next question comes from the line of Adam Thalhimer from Thomson Davis. Please see Adam, you're live in the call. Hey. Good morning, guys. Nice quarter. Hey. Hey, Adam. Thanks. Hey, Brian. Can you walk us around the country a little bit, just geographically, what you're seeing? Yep. Absolutely, Adam. Up in the Northeast, we're seeing a lot of outstanding, really outstanding opportunities: Maine, New Hampshire, New York, Central New York. We're almost sold out, really. As you come down the coast, the Mid-Atlantic, we got exceptional companies there. Whether you're in Richmond, Virginia, the Shenandoah Valley, those folks have a lot of opportunities. In the pharmaceutical business and that neck of the woods with our folks in Greensboro in that area, I think there's plenty of opportunities. I mean, where you live, Adam, you know it, you see it. There's a lot of stuff going on down there. The Southeast, you'll probably hear this from everyone, is really strong. Florida is very strong. Healthcare is very good in Florida. We see a significant amount of opportunities. Georgia, whether you have industrial battery plants or whatever going through. Texas probably had a little bit of a lull, but I believe that's going to pick up. There's still a lot of companies moving here. Dallas is very strong. San Antonio, extremely strong. Austin's very good. Houston's probably the slowest in the markets, but Texas is Texas. Out west, we're not as big out west as we are east of the Mississippi. Denver's very good. Phoenix is good. We're not in California. Up north, we're relatively small. We added our capabilities in the Utah market with a very good company there that has a lot of strength. We're really optimistic about Utah. Of course, up in the middle of the country, we have some of our strongest companies that we had. I think you'll see them maybe a little soft in the first quarter, but their opportunities are good. We see pretty good balance throughout the country and opportunities. Southeast, Mid-Atlantic probably being the strongest, if I had to give you my view right now. The upper Midwest is going to keep. Yeah. The Upper Midwest. Striking along. We've got a couple of companies there that have multi-decade histories of performance. Yeah. Does that help, Adam? That helps. Do you see aggressive bidding anywhere, or is that pretty much just unchanged? Yeah. I think there's a little bit, but we got probably a little bit of margin pressure. Got some of the PPP money that's maybe running around on some of these projects. In general, it's not 2008, 2009, 2010 where people were just bottom-dolling it. Just for our philosophy, Adam, to repeat, we're very prudent risk managers about the type of work, very selective on the type of work we make. We're not going to go dive in to take work. Bill, do you want to add on to that? Yeah. I think on jobs $10 million and below, there's a handful of markets where there's contractors giving away the labor they got paid for by the federal government with the PPP loans. The good news is that's not really the work we want. And really, part of our little bit of delay here is what Brian just alluded to. Our guys are very demanding and disciplined. We're going to be good. I hear you loud and clear on the modular. My assumption would be on modular, I don't know, do you face any competitive issues? Yeah. Modular, we had some really great technology bookings in the fourth quarter on some programs we've been working on for a long time. It is nice to see those programs really get purchase orders and get going. For us, I agree. I mean, I think the modular solutions we offer people, our biggest problem is having people figure out how good it is, honestly. More and more are. I'll tell you, I don't think we could be happier with the performance of the companies that do modular and Comfort Systems U.S.A.. Cool. Okay. Thanks, guys. All right, Adam. Take care. Thank you. Your next question comes from the line of Brent Thielman from D.A. Davidson. Please see Brent, you're live in the call. Can you hear me? Hello? Hey, there you are. Hey, Brent. How you doing? Hey. Sorry. Hey, I want to come back to Texas, just wondering if some of the disruptions down there and the commentary around that, whether that's a net headwind in the first quarter. For Texas in the first quarter, we lost three to five days of work. A lot of it was made up on the weekend in our modular plants here. We have about two-thirds of a million sq ft, 600,000 sq ft of modular space. They lost three production days, but they made up at least two of them over the weekend. I do not think it is—I think it is a rounding error. I do not think it is something that there would be slightly less revenue. Plus, Brent, the service business, we had every person that even thought of doing service busy, particularly on the plumbing side, as you can imagine, still going on, quite frankly, throughout the state. We have a real uptick in service business over the last two weeks in Texas. It's not a terrible time to be good at fixing any kind of pipe. Yeah. I'm just saying in Texas. If you can fix pipe in Texas, you're somewhere. Actually, our electrical company was able to pull a rabbit out of the hat for some of their customers to keep their generators going and stuff. We really—that's just a little bit of money now, but we really think we might have created some good momentum with some customers by doing that. I think in the aggregate, it's not going to be a big issue between the weekend work and the service work. Okay. Okay. Brian or Bill, some of the first half holes that you talked about, can those still potentially be filled with short-duration-related work, just depending on how the next few months go? I just want to get your thoughts around that. Yeah. The first thing I would say is it's not really empty, right? It's just not as good as it was last year. So our guys have plenty of work to do. There's no I don't know of any shortened work weeks anywhere. Last year was off the charts. It is a relative air pocket. The other really interesting thing when you talk about the first half is keep in mind we had an odd well, we had a when we say that we are going to have a little bit of relative slowness in the first half, we're talking about compared to a normal pattern. We're not necessarily talking about compared to last year. Keep in mind last year, the first quarter was the COVID quarter. We were probably—we came in much below what a normalized quarter would have been, even though we did better than we expected. The second quarter really will be a tough, tough comparable for us because, frankly, some of the money came right back in the second quarter last year. We just had an off-the-chart second quarter last year in the midst of what was going on. We have, as you just saw, tough comparables in the third and fourth quarter. A big part of this is not Comfort saying, "Oh, we have a problem next year." We're going to make a ton of money and blow a lot of cash. It's just that we're coming off of tough comparables. We still have $1.5 billion worth of construction work to do, so we got to do that well. A year ago, we had some $100 million-plus jobs, which is unheard of for us. They were hot and heavy. And that's the only time that's ever happened, actually. Right. Okay. And then. I do want to say one other thing. I know I should. Even if we have a revenue headwind, our margins will be better, right? A lot of that work was fee work at low gross margin with a lot of material passed through. So our mix of work from the point of view of margins is much better for this year. Okay. The latest acquisition, excuse me, the margins attached to that, how do they compare to the core electrical business for Comfort? They will average up the margins of our overall electrical business because they're so heavily industrial. They do a ton of stainless steel and stuff like that. They. They got just about every kind of welding capability you can think of, Brent. They're in there doing it for the hardest customers in the world. Yeah. They're really doing it well. Their margins are more like our mechanical margins. So that'll only help. Are there some things they're doing that you think you can take away to your own business there? Over a long period of time, you don't just cross the street and start doing what they're doing. What's interesting, Brent, they already work with a bunch of our sister companies around them for sheet metal, hull, for some of the fabrication. We think that's just going to be enhanced, that they can do more work in the area they're in of Kingsport, Tennessee. Okay. Okay. Lastly, with Trent moving into the COO role, and Brian, glad to hear you're still sticking around, but just wondering if we can take from that that you're going to be even more focused on business development, M&A opportunities going forward. Just curious about that transition. Bill George is unique and as good as they get on M&A that I've ever seen. I'll probably do a lot more work on development and probably on the electrical side of the business and some of these other businesses. It is going to be Trent will be rolling into the day-to-day operations. We will see how that goes for O'Brien. Yeah. Let's just say we have a bit overstaffed in the past. Yeah. We have a bit overstaffed. Yeah. It's exciting for him, and it's exciting for the company long term. Yep. Okay. Congrats on a strong year. Thanks for taking the questions. All right. Thanks, Brent. Thank you. Just to remind everybody to ask a question on the audio, please keep star one on your telephone. Thank you. Your next question comes from the line of Julio Romeo from Sidoti Company. Please proceed, Julio. You're live on the call. Hey. Good morning. Thanks for taking the questions. Good morning. Welcome. Hey. You spoke to the margins of the Tennessee Electric Company acquisition. Could you speak to the cadence of revenue and earnings? Is that going to be kind of in line with the electrical? They'll make about a—we expect them to contribute about $100 million of revenue for this year at margins really equivalent to Comfort overall, really, which are very good, obviously. More like the average margins of Comfort than the average margins you've seen in electrical. Okay. I wanted to peel back your commentary about IAQ and creating new relationships. Can you give us a little more color on that? Are you alluding to some share gains there? We're in multiple markets throughout the country. We're picking up more schoolwork than we probably have done in the past, a little bit more industrial work. We have a pretty developed capability in pretty much all the aspects of IAQ solution options. We've just been presenting to a lot of customers and customers maybe we hadn't called on typically before in the construction sector. It's a really good opportunity for us with something that we're very good at. Got it. That's all I have for now. I'll pass it off. All right. Thank you. Thanks. Thank you. There are no current questions, and I'll hand back over to Brian Lane for closing remarks. Thank you. Thank you. In closing, I want to again thank our wonderful employees. The results our teams accomplished this year were truly amazing. I have never felt better about the company and its future. We are looking forward to seeing you again in person soon. In the meanwhile, please be safe. Thank you. Thank you to all speakers. That concludes your conference call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.