00:00 Speaker A
Cory, good to see you. You bring us a great story today Cory that I love.
00:04 Cory
Yes.
00:04 Speaker A
Um, for the uninitiated, maybe explain that to us. Comfort systems. Let’s just start at a high level. Not everyone can know the story. Tell us the story, Cory, the history, the mission.
00:13 Cory
It’s probably the most boring company you can imagine. They do HVC and electrical repairs and installations. And yet they’ve found themselves in the AI world, uh, as a key beneficiary here because we’ve moved out of this industry that you asked us about. We’ve moved from a place where projects are envisioned and enabled and maybe there’s semiconductors purchased and stuff, 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 we’re actually talking about pipe fitters, welders who install and maintain heating and cooling systems. Is that what we mean, Cory?
00:58 Cory
Yes, absolutely. And this is a company that I have been following for a long time, but I do not give stock advice, but I would like to talk about this company. It was one of my real life time runs for this company. In fact, it has outperformed video over the past five years and over many different time periods. It’s a company that’s unique in its ability to make successful acquisitions, right? Roll-ups like this just tend not to work. And yet this company was very successful. It has a great culture of bringing these groups of entrepreneurs under their tent and helping them find the right work, bid on the right projects. And, you know, three years ago, four years ago, when we owned this company, I looked at it and it was doing great business doing new office systems in response to COVID, when, uh, companies wanted to have better ventilation for better worker safety during the pandemic, that was a big part of their business. But technology, what they call technology, has really grown in their businesses to a point where
02:11 Cory
five years ago it was less than 5% of their business. Now, it’s getting really close, it’s about 50% of revenue right now, and it’s growing at a fantastic rate, uh, growing almost doubling year over year, crushing Wall Street estimates, joining the S&P 500. But it really tells us where we are in the AI world right now. It really shows us that building AI is absolutely happening and there are questions about the value of AI companies. There are questions about the companies borrowing money to build, but there is no doubt that the money is being spent on construction right now and that it is the beneficiaries of the comfort systems, uh, great with a great solution.
03:00 Speaker A
And comfort systems, Cory, who would you consider their kind of main rivals? And what do they bring to the table that is different?
03:08 Cory
I think what we’re seeing with comfort systems is that they’re really focused on this specific area. So we have other companies doing a broader build, of what’s going on in the data center of everything that’s going to the data center. You get the companies that focus specifically on liquid cooling and more cutting-edge things that may or may not be implemented in all of these data centers. Of course we have the companies we talk about all the time, the Nvidias and the sexy chips and AMD will take some of that share, will Taiwan Semiconductor 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 fast. not just in the number of jobs they get and how they are able to deliver those jobs. They’ve also seen margins expand every quarter in recent years. And it shows that they can charge just a little more for these deals. What’s also interesting about comfort systems is that they get in and out of these projects quickly. I was coming back over the 10K. They are what I like when a company actually files their Q or K with the results, as any company probably should and shouldn’t. These guys actually record their results, they do it after the close, and then they do the conference call the next morning so that people have a chance, people like me have a chance to go through it, work on your models, read the 10K or 10Q, understand the right kind of questions to ask management. What we see is that some things have not changed. Their projects tend to be completed in six to nine months. So this is not a mystery as to whether or not the projects will be there a few years down the line, if the backlog is real, if they come in and out of these projects, get them done and generate some nice profits and free cash flow. It is a sight to behold.