00:00 Speaker A
Cory, great to see you. You bring us a great stock story today, Cory, which I love.
00:04 Cory
Yeah.
00:04 Speaker A
Um, for the uninitiated, maybe just explain this to us. Comfort systems. Let’s just start at a high level. Not everyone may know the story. Tell us the story, Cory, the history, the mission.
00:13 Cory
It’s it’s probably the most boring company you could imagine. They do HVC repair and installation and electrical. And yet they found themselves in the world of AI uh as a key beneficiary here because we’ve moved from this industry, you were asking us talking about. We’ve moved from a place where projects are being imagined and permitted and maybe there’s semiconductors getting purchased and things, but to put these things together to build these data centers, you need guys with wrenches and tool belts and you need comfort systems.
00:46 Speaker A
So, are are we actually, we’re talking about the pipefitters, the welders actually installing and maintaining the heating and cooling systems. That’s what we mean, Cory?
00:58 Cory
Yeah, absolutely. And and this is a it’s a company that I’ve followed for a long time, but I’m not giving stock advice, but I would want to talk about this company. It’s been one of my real home runs in my lifetime for this company. It’s actually outperformed in video over the last five years and over many different time periods. It is a company that is unique in its ability to do acquisition successfully, right? Roll-ups like this just tend to not work. And yet this company has been very successful. It’s got a terrific culture of of bringing in these groups of contractors into under their tent and and helping them sort of find the right work, bid on the right projects. And, you know, three years ago, four years ago when I owned this company, I looked at it and it was doing great business doing uh new office systems in response to COVID when when uh uh companies wanted to have a better ventilation system for better uh safety for the workers during the pandemic, that was a big part of their business. But technology, what they call technology has really ramped in their business to at a point at which
02:11 Cory
five years ago was less than 5% of their business. Now, it’s really approaching, it’s about 50% of the revenues right now and growing at a fantastic clip, uh growing at almost doubling on a year over year basis, crushing Wall Street’s estimates, joining the S&P 500. But it really tells us where we are in the world of AI right now. It really shows us that that the the build out of AI is absolutely happening and there’s questions about what the value of the AI companies is going to be. There’s questions about the companies that are borrowing money to do the build out, but there is no question that the money is being spent uh on the build out right now and it’s it’s it’s to the beneficiary of of uh comfort systems, uh the great with the great ticker fix.
03:00 Speaker A
And comfort systems, Cory, who would you consider their kind of primary rivals? And what do they bring to the table that’s different?
03:08 Cory
I think what we see with comfort systems is they really are focused on this specific area. So we’ve got other companies that are doing broader uh construction of um, what’s happening in the data center of all the things going to the data center. You get companies focusing specifically on liquid cooling and sort of more cutting edge things uh that may or may not be implemented in all these data centers. Of course, we’ve got the companies we talk about all the time, the Nvidias and the the sexy chips and is AMD going to take some of that share, is Taiwan Semiconductor going to make these chips? But these guys are focused on the kind of boring part of this business that’s doing so well and growing so quickly. not just in the number of jobs they’re getting and this the way they’re able to bid these jobs. They’ve also seen uh expanding margins every single quarter for the last few years. And it shows they’re able to charge just a little bit more for these deals. What’s also interesting for comfort systems is they get in and out of these projects quickly. Um, I was going back over their 10Ks. They’re they’re what I love it when a company actually files their Q or their K with the results like every company probably should and doesn’t. These guys actually file their results, they do it after the close, then they do the conference call the next morning so people have a chance, people like me have a chance to actually go through it, work on your models, read the 10K or the 10Q, understand the right kind of questions to ask of management. What we see is, uh some things haven’t changed. Their projects tend to be completed in six to nine months. So this isn’t some mystery about whether or not the projects will be there a few years down the line, whether the backlog is real, they get in and out of these projects, they complete them and they’re throwing up some nice profits and free cash flow. It’s a sight to behold.