Comfort Systems USA, Inc.

Good day everyone and welcome to the Q2 2020 Conference Systems USA earnings conference call hosted by Julie Sheaf, Chief Accounting Officer. My name is Steve and I'm your event manager. During the presentation, your lines will remain 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'd like to advise all parties this conference is being recorded for replay purposes. And now I'd like to hand over to Julie.

Thanks, Steve. Good morning. Welcome to Comfort Systems USA's second quarter 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 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 more 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 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. All right.

Thanks, Julie. Good morning, everyone, and thank you for joining us on the call today. More than ever... I want to start this call by sincerely thanking all of our Comfort Systems USA employees for their work and commitment, and especially their courage and resilience during this global pandemic. As all of you know, these are challenging times, but our employees are rising to the occasion, and I feel gratitude and admiration for them every day. We continue to focus on keeping our employees and our communities safe. We employ CDC and OSHA guidelines to ensure our workforce and our community is kept safe and healthy during COVID-19. And we are taking many other actions. In local markets, we have implemented the measures we feel are best suited to local circumstances, such as segmented work zones, staggered start times, temperature and symptom screening, disinfecting equipment and work areas, distancing, and the wearing of protective face and nose personal protective equipment. We operate in numerous markets in dozens of states, and our leadership in each location is conforming to the measures that are required locally and seeking the path that will work best to keep our people safe and well. That is a true strength of Comfort Systems. In the midst of these challenges, Comfort Systems USA achieved great earnings and extraordinary cash flow this quarter. We earned $1.08 per share this quarter compared to 65 cents per share in the same quarter of last year. The $1.08 of earnings per share this quarter is the highest quarterly EPS in the history of our company. Revenues were $743 million compared to $650 million in the prior year. Despite revenue headwinds in service, we grew 2% on the same store basis. Our cash flow was truly unprecedented. as we had over $135 million of free cash flow this quarter, and through six months, we are more than $130 million ahead of the same period in 2019. COVID-19 began impacting our business in the second half of March. Our service business experienced the first and most pronounced negative impact, largely because of building closures and decisions by customers to limit building access. As of the end of the second quarter, the majority of our service operations have returned to normal activity and functioning. Meanwhile, our construction activities overall continued unabated, although individual jobs have experienced temporary closures and curtailment from time to time as a result of positive tests for COVID-19 of workers at various sites. Despite these productivity challenges, our local leadership, project management, and especially our field workers have been extraordinarily effective, exceeding our highest expectations. Our backlog as of June 30, 2020, was 1.53 billion. We maintained a very strong backlog despite a sequential same store decrease of 133 million or 8% since March 31st, 2020. This decrease is primarily composed of seasonal variation plus approximately 60 million of projects that we removed from backlog as a result of adverse effects relating to the pandemic. The majority of the projects we removed from backlog will likely be completed. However, we chose to remove any project that has been paused or is expected to be paused if there is no specified resumption date. TAS Energy, which we acquired on April 1st, is off to a great start. With TAS now a part of Comfort Systems USA, And when considered in connection with our existing capabilities at EAS in North Carolina, we now have unmatched capability to complete complex modular and offsite construction of MEP assemblies in the growing modular construction industry. A modular construction offering is particularly strong in the technology, medical, and pharmaceutical industries. This combination allows us to cross-sell our capabilities to our existing customer base at all of our locations and augments our already strong industrial segment, which has increased to 40% of total revenue so far this year. I will discuss our business outlook in more detail in a few minutes, but first let me turn this call over to Bill to review the details of our financial performance.