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spk01: and welcome everyone to the quarter three 2020 Comfort Systems USA earnings conference call hosted by Comfort Systems USA. My name's Sheila. I'm the operator for today. During the presentation, your lines will remain on listen only. If you require assistance at any time, just key star zero on your telephone and a coordinator will be happy to help 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 Schafer Chief Accounting Officer, please proceed.
spk00: Thanks, Sheila. Good morning. Welcome to Comfort Systems USA's third 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. This 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.
spk03: Okay. Thanks, Julie. Good morning, everyone. Thank you for joining us on the call today. We are all facing unique challenges now from the global pandemic. And in the midst of that, we appreciate our good performance and solid prospects. More than anything, I am grateful for our employees, and I want to thank all of them for their commitment and resilience during this difficult time. Our employees continue to rise to the occasion. I feel gratitude and admiration for them every day. We are working hard. to keep our workforce and our community safe and healthy during COVID-19. Despite adversity, Comfort Systems USA achieved a record earnings and impressive cash flow. We earned $1.36 per share this quarter, compared to $0.98 per share in the same quarter of last year. This quarter included a $0.17 benefit from a discrete tax item. This marks the highest quarterly EPS in the history of our company with or without the tax benefit. Revenues were $714 million for the quarter, and our year-to-date revenues exceed $2.1 billion. Through nine months, we had $199 million of free cash flow, more than double the good results we achieved in the same timeframe last year. Our backlog has trended downwards some this quarter, but we feel good about our prospects, and as you can see, we continue to increase our dividend. In a few minutes, I will spend some time on how that might affect us next year. Before I review our operation results and prospects, I want to ask Bill to review the details of our financial performance. Bill?
spk07: Thanks, Brian. As Brian said, we once again achieved record positive results. Revenue in the third quarter was $714 million, an increase of $7 million compared to the same quarter last year. This increase is due to the current year acquisitions of TAS and STAR, both of which contributed to our expanding modular construction offerings. This increase was offset by a decrease in same-store revenue of 6%. Our mechanical segment was up slightly on a same store basis, so the decrease resulted from lower volume in our electrical services segment due to a combination of very high revenue comparisons in the prior year, combined with deferred starts and other delays this year. Last year we experienced very high revenues in electrical as we were mobilized on certain exceptionally large jobs from the second half of 2019 until the middle of this year. As a result of these factors, we will continue to face tough revenue comparisons in electrical through the first half of next year. And combined with the air pockets and delays that we are currently experiencing, we expect continuing same-store revenue headwinds through the second quarter of next year, especially in our two largest Texas markets. Gross profit was $147 million for the third quarter of 2020, a 3% increase compared to last year. Gross profit as a percentage of revenue rose to 20.6% in the third quarter of 2020, compared to 20.2% for the third quarter of 2019. SG&A expense was $91 million for the third quarter of 2020, compared to $90 million for the third quarter of 2019. SG&A as a percentage of revenue remained steady at 12.7% for both quarters. On a same-store basis, SG&A declined $4 million. This decrease is primarily due to cost control measures, such as reductions in travel-related expenses. During the third quarter of 2020, we had an increase in tax planning and consulting fees of approximately $2 million, which partially offset other declines. Our quarter-to-date effective rate was 14.2% for tax and benefited from R&D credits, and energy-efficient commercial building deductions that were previously reserved. During the third quarter, we finalized settlements with the IRS from their examination of our amended federal tax returns for 2014 and 2015. We currently estimate our effective tax rate for full year 2020 will be between 22% and 25%, which reflects these settlements. Starting in 2021, we expect our effective tax rate will be between 25 and 30%. And if you eliminate the benefits of the settlement, our quarterly tax rate this quarter would have been slightly over 28%. Although 2014 and 2015 are now settled, we have open processes ongoing for the 2016, 2017, and 2018 tax years. And while future benefits are possible, We believe any benefits that arise from those years would most likely be recognizable in 2022 or beyond. Net income for the third quarter of 2020 was $50 million or $1.36 per share, as compared to $36 million or $0.98 per share in 2019. Earnings per share for the current quarter included $0.17 related to the tax benefit that I previously discussed, and that benefit is net of related tax consulting fees of $2.8 million that were incurred during the quarter. Even if you completely exclude the tax benefit, we had a 21% increase in earnings per share. For the third quarter EBITDA was $72 million, an increase of 8% compared to the $66 million of EBITDA that we reported in the third quarter of last year. Our trailing 12-month EBITDA is a record $246 million. Coming off an extraordinary cash flow in the last quarter, our free cash flow continues to be strong and was $48 million in the current quarter. On a year-to-date basis, our free cash flow was $199 million compared to $79 million in 2019. Our nine-month cash flow includes roughly $20 million of benefits that is a direct result of the federal stimulus bill which allowed us to defer certain payroll tax payments in the second and third quarter. Our best estimate is that these discrete tax provisions will benefit fourth quarter cash flow by approximately 10 million. This estimated 30 million of full year 2020 cash flow benefit from these tax provisions will be repaid to the federal government in two equal installments in the fourth quarters of 2021 and 2022. The phenomenal cash flow this year has resulted in two important balance sheet accomplishments. First, we were able to reduce our leverage to less than one turn of trailing 12-month EBITDA about a year sooner than we had anticipated. Second, during the second quarter of 2020, we funded our second largest acquisition ever. However, we were able to fund that acquisition entirely from free cash flow during the quarter, and we still managed to reduce our debt levels. Our trailing 12-month free cash flow is $233 million. Since the beginning of this year, we have purchased 448,000 of our shares at an average price of $41.90. Since we began our repurchase program in 2007, we have bought back over 9 million shares at an average price of $18.89. That's what I've got for financing price.
spk03: Okay, thanks, Bill. I am going to spend a few minutes discussing our backlog and markets. I will also comment on our outlook for full year 2020 and 2021. Our backlog level at the end of the third quarter of 2020 was $1.43 billion. Sequentially, our backlog decreased by $103 million. Same-store backlog compared to one year ago has decreased by $271 million, of which 145 remain related to our electrical segment. Our changes in backlog include the effects of the third quarter seasonality and an expected decline in our electrical segment. But we are also experiencing delays in bookings and in project starts at certain of our large project companies. 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 the first nine months of 2020, compared to 31% a year ago. Institutional markets, which include education, healthcare, and government, with 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 is 79% of our total revenue, with 48% from construction projects for new buildings and 31% from construction projects in existing buildings. Both of our construction and service businesses achieved record operating income margins. Service is 21% of our revenue year-to-date, 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 or decisions by customers to limit building access. However, during this quarter, we saw our service operations at or very near pre-pandemic levels with improved profitability. Fortunately, our construction activities continue to be classified as essential services in most markets. 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. Finally, I'm going to take a few minutes and comment on our outlook. I have never experienced a more uncertain environment, and frankly, a broad range of outcomes are possible in the intermediate one- to two-year time frame. It is not currently possible to predict with any confidence how the pandemic and related government decisions will unfold, nor how the pandemic may impact the decisions of our customers. With that in mind, we are currently seeing both delays and high levels of pipeline activity at the same time, which is unusual. We expect our full year 2020 results will significantly surpass our record results in 2019. Although, as Bill mentioned, we also currently expect that same-store revenue headwinds, especially in our electrical segment, will lead to same-store revenue declines in the fourth quarter and through the first half of next year. Nevertheless, given the range of conditions that we foresee, We feel confident of solid profitability and cash flow in 2021, although we expect that 2021 earnings will not match our extraordinary 2020 earnings. Given uncertainties related to the ongoing pandemic and the evidence of delays in bookings and project starts, we expect incremental challenges during the first half of 2021, including air pockets in some markets. and we are preparing for a broad range of possible economic and capital investment environments in 2021 and in 2022. Our growth in the industrial segments of technology, medical, and pharmaceutical give us a good opportunity to cope with any challenges successfully. We believe that whatever the puts and takes are over the next several quarters, We have an unmatched workforce and a great and necessary business, and that we are very well positioned in geographic markets and industry verticals with solid ongoing prospects. We plan to continue to invest to make the most of these advantages and opportunities. Thank you once again to our employees for your hard work and dedication. I'll now turn it back over to Sheila for questions. Thank you.
spk01: Thank you so much. So to ask a question, just key star then 1 on your telephone. If you then decide to withdraw your question, simply key star 2. And the first question comes from the line of Brent Billman of DA Davidson. Please proceed.
spk06: Hey, thank you. Good morning.
spk07: Good morning, Brent. How are you?
spk06: I'm doing well, thanks. Hey, Brian or Bill, I guess on the mechanical margins, I mean, they've been really extraordinarily strong this year, chalk it up to really good execution. I know you've had that kind of a service headwind, which I know is usually pretty good for margins. I guess, how do you feel about sustaining these sorts of levels? I guess I'm thinking TAS is in there too, but sort of sustaining these levels with potentially some top line pullback.
spk03: Yeah, I mean, I'll go first. If you look at, you know, service made a tremendous recovery in the third quarter, which produced, you know, the highest margins we've ever received out of our service business since Comfort started. And, you know, on the construction front, it's what you said. We just had, you know, really exceptional execution. I think we will continue to execute at a high level. The service business is still there. You know, we did over 20% gross margins in it. I still see us in a 19% to 20% range, Brent, as we go forward, even with a revenue decline. I couldn't agree more.
spk06: Okay. I mean, and that's structurally higher than where you've been in the past. So, I mean, that's what I was trying to get to.
spk07: It's kind of where the normal might be. It's higher than where we've been except for the recent past, yeah. Right.
spk03: You know, if you look at the last five years, we've been pretty consistently in that 19 to 20, 21 range, Brent, pretty consistent.
spk07: We do have a lot more industrial right now, so some of that is just mixed. And with service coming back, and, you know, we're talking about mechanical margins, we feel good about those gross profit margins for mechanical holding up.
spk06: Yep. Okay, and then on the electrical side, it sounds like part of the backlog creep lower is maybe one part market and one part deliberate. I know you guys are kind of out looking to pursue maybe higher value work. How quickly do you think you can push these margins back up within that segment? You made a little bit of progress here this quarter. I'm just wondering if you think you can continue that.
spk07: So, you know, one thing, although it's unfortunate in a sense that our revenue is going down, some of that was certainly planned and expected, and some of it was simply expected because we had a big bulge on some of the biggest work we ever had performed from the third quarter of last year until about, you know, middle of the second quarter this year. They had just some giant jobs. Having said that, the other side of that, the margin side of that, even though we'll have lower revenue, that was fee-based work, and it had very low gross margins sort of as far as an averaging effect goes. So actually we'll get help on the electrical margins just by the change in mix. So we'll give a lot up on volume, but we'll get some back on rate in electrical.
spk03: And also the service part of electrical went basically to zero in March last but has made, particularly in the low-voltage side, a terrific comeback in the third quarter and continues to gain momentum. So that's clearly – I mean, the margins are a lot higher on the electrical service side as well.
spk06: Okay. Maybe one last one. I have a bigger picture question. You guys are all across the country. Where are you seeing some of the particular air pockets that you talk about? Where are areas where – The pipeline still looks pretty robust, and you're still seeing pretty good award activity. I'm curious what you're seeing across the country.
spk03: Brent, it's Brian. I'll give you some pretty broad strokes. I think you're seeing most of it up in the north in general. I think in the south, we're still seeing probably a little bit more activity than we're seeing up there. Awesome delays, but I'm getting a little bit more positive feedback that down here where we are that some of this work's going to go. Maybe a little soon that is up north. Whatever the reasons are, I think there's a little bit different view between the northeast and the south for sure. Bill, do you have anything on that?
spk07: There's no doubt that there's simply more stuff just shut down in the northeast, right? To get work started, it doesn't just take somebody willing to do it. There's things that have to happen. You have to have drainage plans approved and permits, and you have to have all sorts of engineering done and soil. So when things have been shut down, delayed, government offices, it doesn't take much to create these delays. Because there's a critical path, and a lot of things are on a critical path if you're going to build something as complex as a big building. So in the Northeast, there's a lot more of that. The South, it's more business as usual from the point of view of at least support.
spk06: Got it.
spk01: Okay. Thanks, guys. I'll pass it on.
spk03: All right. Take care, Brett.
spk01: Thank you. And the next question comes from the line of Sean Eastman of QPAC Capital Markets. Hi, gents.
spk04: Thanks for taking my questions. Hey, good morning, Sean. Good morning, guys. Just going back to sort of this delayed bookings and starts dynamic, you know, we kind of covered the geographic perspective. But, you know, just curious from an end market perspective, And project size, just how broad-based is this dynamic, I guess, across end markets?
spk07: So there's at least one example of a big data center that's delayed. But in general, I'd say it's broad-based, Brian.
spk03: I think it's pretty broad-based. Projects over 10, for sure, we're seeing delays. The smaller projects... I'm still pretty much going, Sean, and the geography.
spk07: You've got to go back to the geography.
spk04: Yeah.
spk07: Yep.
spk04: Gotcha. Okay. You know, I hate to belabor the point on margins. You know, we went through that in detail already. But, you know, I just wonder about this sort of unusual dynamic, to use your words, where you've got this really healthy prospect pipeline going, but not totally sure on, you know, when the work is going again. You know, how do you manage through that dynamic? And, you know, do we expect sort of immediate term margin drag as you sort of stay positioned around, you know, what seems to be, you know, still a really healthy amount of work coming out imminently?
spk03: Yeah, Sean, that's a really good question. And I've checked on that in the last few days. And in a general statement, most of the stuff we're looking at, we are holding our margins, and we haven't had conversations about a big decrease in that at all. How you manage it going forward is the same way you manage any construction activity. When the work slows down, you have to reduce your costs. Hopefully it's temporary, but you don't have to manage the labor according to what the workload is. You know, these guys have all done it before. We don't have any rookies out there. They've all, you know, this is the first time I've seen this much bidding activity with delays like this. But in terms of the fluctuations, the cyclicality of it, you know, we've all been through this before.
spk07: So with the bidding activity, there is no sense that we should, we don't have a sense that we should be capitulating on price to get work. Something else is going to have to happen for that to start.
spk04: Okay, got it. All right, that's helpful. And last one from me is, you know, the cash flow, clearly a bright spot in 2020. You know, the balance sheet looks like it's ready for another acquisition. You know, how should we be thinking about capital deployment in the coming quarters?
spk07: So I would say absolutely. We've paid off a year's worth of EBITDA a year sooner than we thought we would. So that has to make you more open-minded to acquisitions. Having said that, anything we do will be done with a ton of conviction because of all the uncertainty. When Brian Lane says this is the most uncertainty he's ever seen, as you might imagine, that also plays into timing for acquisitions. But As you know, we talk to companies for years and sometimes a decade, and if the company we have conviction about is ready to sell, we're ready to buy it, I think. We don't really do quotas at Comfort Systems, right? We buy companies we think will make us better for decades, forever.
spk03: But if we do find good companies, we will do them, Sean.
spk04: Okay, gotcha. All right, guys, I appreciate the insights. Thanks very much. And, you know, compliments to the team on this year-to-date execution. Very impressive. Thanks, Sean. Appreciate it.
spk01: Thank you. And the next question is from the line of Adam Salmaimer of Thompson Davis. Go ahead.
spk05: Hey, good morning, guys. Congrats on a record quarter.
spk03: Hey, Adam. Thanks a lot. Appreciate it.
spk05: Brian, I'm trying to parse through your comments on the bidding because you said that the I think you said the bidding is still strongest at industrial. What are you seeing within the institutional and commercial markets?
spk03: I mean, so I'll run through them in specifics. Obviously, hotels are pretty quiet at the moment. Commercial buildings, for the most part, right, people are going back to use them. They're pretty slow. Our backlog in education is still pretty good, actually. Still looking at, you know, some work. And, of course, you know, air quality doesn't go into backlog, but, you know, we're doing some work in schools on that front. So, you know, we're not expecting to see, you know, any hotels or office buildings in here in the near future. Bill, do you want to?
spk07: Yeah, you know, meanwhile, the intermediate term prospects for pharma are very good, like in the mid-Atlantic area. And then food processing is food processing. It's always good. Under manufacturing, there's really good indications, but, you know, they're just not signing a piece of paper and starting. You know, if you think about it, we're facing a lot of uncertainty over the next several weeks and months, right? So why would anybody – you kind of have to understand why somebody would – they keep doing work on it. But whether they – delay in signing a contract just can't be too surprising to anybody right now. You know, if you're a hospital, for example, you'll find out who's going to run health and human services in the next few weeks. That matters. If you're a pharma, you're going to find out who's running the FDA one way or another in the next couple months. And there's just – why would – I don't know. I think it's understandable.
spk05: Okay. Okay. I'm not even sure it's a fair question, but do you think it's more the virus or the election right now?
spk07: I'll let Bill answer that one. I'm not kidding. I think it's a general level of uncertainty, but I would say it's in equal parts. It's definitely both.
spk05: Okay. Not looking for specific guidance, but what are the ranges of expectations for how the backlog might trend?
spk07: So as far as how the backlog might trend, that is really lumpy. Like, I think it's going to be hard to be signing. We have a very high standard before we will put something into backlog. And it's going to be hard for us to get to firm signatures by now and the end of the year. I think the real tell will be if by the time the winter is over, by the time we report the first quarter, will we – you know, where we see our backlog stabilize and start to pick up. By year end, not so much. And as far as revenue goes, you know, so these big jobs we had in electrical, the biggest revenue quarter for the jobs we had in electrical was the fourth quarter of last year. So electrical, you may know, if you look, it was up like $30 million, I think, from the third quarter to the fourth quarter of last year. So we have a really big electrical backlog comparison exacerbated by these delays for the fourth quarter. So that's going to make same-store revenue overall down for sure in the fourth quarter and then with a bias towards down in the first and second quarter just because that big work isn't there. And some of that was planned and some of it has come to pass. So I don't know if that's helpful, but that's what I know.
spk05: No, that's very helpful. And then the last one for me, Bill, I wanted to ask on DNA, because it came in almost $3 million sequentially. Just curious what the puts and takes are for the next few quarters.
spk07: So there's several different kinds of, really, I think we're talking about amortization, right? There's several different kinds of amortization. There's the stuff that goes through SG&A, and that is coming down. And then there's the backlog. The backlog amortization is, for our TAS acquisition is the fastest we've ever had it. So with Walker, you had amortization coming down over about an 18 to 24 month period for their backlog. TAS is because the stuff's built in a plant, their backlog, whatever they have on a given day, it all burns in the next three, four, five months. So that's why you're seeing a big drop. The good news is you don't have to wonder about this. If you go to page, I think around page 18, We put a table in that shows amortization for the coming years. So we show you the amortization for the last quarter of this year, and then we show you the amortization for the next four years. And that's something you're required by the rules to put in once a year. We put it in each quarter when there's craziness going on. So you can just go look that up and put it right in your model. Now, what could change if we do another acquisition? there'll be amortization for that acquisition. But if we didn't do another acquisition, absent an unlikely impairment, these kind of assets are very hard to impair, even if you want to, that's math. You can just, you got it, page 18. Okay.
spk05: Perfect. I'll turn it over. Thanks, guys. All right. Take care, Adam.
spk01: Thank you. And the next questions from the line are Cesare Naddacki of Schroders. Please go ahead.
spk02: Good morning, Brian, Phil, and Julie. Can you guys hear me?
spk07: Yeah, absolutely.
spk02: Ah, fantastic. I'm glad you took the calls. Just following up, I mean, it seems like your core operations on the mechanical side, you've done really well and kudos to you for doing it. Looking at the acquisitions, I think you walked us through a little bit Walker, kind of the air pocket and inability to maybe fill in the pipeline the way they expected it. But if I look at TAS, it seems like sequential we're down 50%. and here in Star Electric, I think around 20. So maybe first question, you can kind of talk a little bit about not the nature of the business, because I thought you talked about it, but maybe specifically on that modular business, is there something specific about the type of the business they're doing, or is there something about the end markets that really created the pockets, air pockets for those two?
spk07: So for TAS, that's the one that Matt, like we've already really told you everything we have about Walker. For TAS, they had a very, very big second quarter revenue-wise with like 50-plus million, and they had more like 29 or 30 million in the third quarter. The 50-plus million, so they manufactured things in a plant, and they had a gigantic order going out, and they had big equipment deliveries in the second quarter. Here's the thing. And then in the third quarter, they didn't have those equipment deliveries. And I think that they'll probably have another similar quarter in the fourth quarter, and it'll pick up next year just based on their order book. It'll pick up actually – there's a good chance it'll pick up a lot next year. But at the end of the day, none of that is really impacting our numbers very much because we have what's called a whip adjustment, and we have where things that are ongoing on the day we buy them, we do a make hole. So – One of the reasons we don't talk about it a lot in the script is it's not huge in the quarter. You may have seen, for example, that we picked up money through the earn-out line, a significant $3 million or $4 million, I think, through the earn-out line this quarter. We gave back a similar amount in the last little while through what's called the WIP adjustment line. So that's why we don't mention it because it kind of washes out. But as far as their prospects, we think – We like their prospects for next year. Absolutely. Compared to Walker, right, where we definitely have an air pocket, we don't really foresee that with TAS. And we'll start to get more benefit from TAS next year because, as I said, their amortization was very, very heavy early on for the backlog amortization because of how fast their backlog burns.
spk02: Okay. So then keeping that in mind, and I'm assuming similar commentary about Star Electric would play in – If I look at your kind of the broad guidance you gave us, the same store sales in December 2020 and first half of 2021, I think it's a fair question to ask, what does the core mechanical look like? So if I was to take the TAS and you were looking forward for that core mechanical business, kind of what are your expectations there?
spk07: Before COVID, we were looking at low to mid single digit improvement. With COVID, you know, they were flat. This quarter mechanical was flat. I actually was I thought it might be down slightly. And I think there's a bias towards mechanical being a little bit down to the next two or three quarters for the same. Now, star, I'm sorry, electrical will be down a lot because it's comparing to these gigantic quarters a year ago. But as far as mechanical, you know, I'd say it will round to zero. They won't get the growth we were hoping for, but I don't see signs of less shrinkage or anything. It's electrical. The reason we put in our script that we have same store revenue declines is electrical.
spk02: I'm really glad to hear this because it sounds like the core business with the HVAC heating and plumbing, it's doing well and it should give you some confidence in going forward. My thought was here and going maybe to the board as well, if the core business is doing well and acquisitions are really in adjacencies, we should say, maybe these recent acquisitions that are somewhat adjacent to your core business, maybe there is a different way to look at them going forward and then really compare them to the cost of your own shares and maybe being more aggressive in stock buybacks. Because it seems to me that your bar should be a little bit higher for the businesses that are in adjacencies than making acquisitions in your core business. And if that's the case, maybe there's better use of capital, uh, looking at your best business, you know, best, you know, your own business and your own shares.
spk07: So we're pretty aggressive at buying back shares, but we also, when we do these acquisitions, we have a lot of conviction about them. So for example, when we bought EAS five or six years ago, um, We had the exact same people say, you know, the exact same argument. Wow, you should have been buying shares. You're only getting $5 or $10 million a year from them. But that was a quarter. We've gotten $10 million a quarter from them. So we believe these acquisitions are going to be very happy to have 1,000 licensed electricians. We might be wrong about that. But the other thing is when we buy our shares, when we think the share price is good – we tend to only buy our shares until we start to affect the price. We're not a company that wants to bid up our stock. So we, you know, that's just the conviction we have. We buy our shares. I don't know. We bought back 9 million shares and we'll continue to buy shares.
spk02: I understand, Bill. I think I agree with you. I think the acquisitions in your core business, they've done better and you've done better. I just question if the bar shouldn't be higher for these adjacent businesses. And if that is the case, I think your perspective changes a little bit. Obviously, barring seeing more acquisitions in your HVAC business, I should put it that way. Because like you said, your leverage has been lowered substantially, and it's going to come to the question of what do you do with that capital. And if there is a lot of acquisitions in a core business, I think it's obviously an easier decision to make.
spk03: Gotcha. All righty.
spk02: All right. But thank you. Thank you for the results. And I know our difficult times out there. And I agree with you. I think in the next few weeks we may know more and actually business may look quite interesting.
spk07: Yeah. Fingers crossed. All righty. Thank you. All right.
spk01: Thank you so much. We have no more questions. And I would like to turn the call over to Brian Lane for closing remarks.
spk03: All right. In closing, I want once again to thank all of our wonderful employees. The results our teams accomplished this quarter were truly amazing. I have never felt better about this company and its future. We are looking forward to seeing many of you again in person, but in the meanwhile, please be safe. Thanks and take care.
spk01: Thank you so much. And everyone, that now concludes the call. You may now disconnect. Thank you for joining.
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