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Comfort Systems USA Inc (NYSE:FIX)
Q4 2019 Earnings Call
Feb 27, 2020, 11:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day everybody and welcome to the Q4 2019 Comfort Systems USA Earnings Conference Call hosted by Julie Shaeff, Chief Accounting Officer. [Operator Instructions].

I'd now like to hand over to Julie. Please go ahead.

Julie Shaeff -- Senior Vice President & Chief Accounting Officer

Thanks George. Good morning. Welcome to Comfort Systems USA's Fourth Quarter and Full Year 2019 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, as well as in our press release, covering these earnings. A slide presentation will accompany our remarks. The slides are 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.

Brian E. Lane -- Chief Executive Officer, President & Director

All right, thanks, Julie. Good morning everyone and thank you for joining us on the call today. Let me start by thanking all the Comfort Systems USA employees for their hard work and great results. 2019 was a record year for Comfort Systems USA. We finished the year with strong fourth quarter earnings per share of $0.92 and for the full year we earned $3.08 per share. Revenue for the full year 2019 was $2.6 billion, and we generated strong full year free cash flow of $112 million. Our backlog is robust at $1.6 billion, an increase of $195 million or 17% over the prior year on a same store basis.

In December, we amended our credit facility and increased our financing capacity to $600 million from $400 million. This new capacity reflects our strong financial position and gives us additional financial strength to make strategic investments and opportunistic acquisitions. Earlier this month, we announced the acquisition of Star Electric headquartered in Greensboro, North Carolina. We have worked with Star for decades, and are very happy to have Star as part of the Comfort Systems USA family. This investment adds the finest electrical contractor in North Carolina to our electrical segment, and allows us to grow and expand our capabilities in our modular and offsite construction business offering. We believe that offsite construction is growing in importance to our customers, and provides a great way to maximize the productivity and safety of our highly skilled workforce. We plan to keep investing in modular and offsite construction.

Walker Engineering, which we acquired at the beginning of the second quarter of 2019, continues to perform at or above our expectations. Although we did not expect them to be initially accretive, Walker contributed approximately $0.05 of earnings per share during the last nine months of 2019. I will discuss our 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. Bill?

William George -- Executive Vice President & Chief Financial Officer

Thanks Brian. Please refer to slides 2 through 6 as I provide some explanations and details of our financial results. Fourth quarter revenue was $720 million, an increase of $131 million or 22% compared to the fourth quarter of 2018. This increase is due to the acquisition of Walker, which is reported in our Electrical segment. Same-store revenue was off slightly, declining 1% for the fourth quarter. Revenue for full year 2019 was $2.6 billion, an increase of $432 million or 20% compared to 2018, and most of that increase was related to the Walker acquisition. On a same-store basis, revenue in 2019 was 2% higher than in 2018.

Gross profit was $133 million for the fourth quarter of 2019, an increase of $14 million or 12% compared to the fourth quarter of 2018. Gross profit as a percentage of revenue was 18.4% in the fourth quarter of 2019, compared to 20.1% in the fourth quarter of 2018. For the full year of 2019. Gross profit increased $56 million and the gross profit margin was 19.2% in 2019, compared to 20.4% in 2018. Of the $56 million increase in gross profit that we reported this year,$35 million was earned in our Electrical segment. Our Electrical segment business mix is weighted to large and complex projects with significant amounts of material and equipment pass through costs, and therefore tend to have lower average gross profit margins. Our Electrical segment also had less service revenue, and that also correlates with lower gross profit margins and lower SG&A percentages.

Additionally, because our Electrical segment in 2019 was created by a single large acquisition that occurred within the year, acquisition related adjustments for the transaction lowered the gross margin reported for our Electrical segment. For the fourth quarter of 2019, electrical segment gross margin would have been over 3% higher without those adjustments. And for the full year 2019, Electrical segment gross margins would have been over 2% higher on an annual basis without the acquisition related adjustments.

Without our Electrical segment, our full-year gross profit percentage would have been 20.7%, a difference of 1.5% that arises from a combination of the lower gross margins and their business mix and certain purchase adjustments that I just mentioned and that impact our gross margins. With these larger projects and less service, Walker has lowered our SG&A percentage.

Net income for the fourth quarter of 2019 was $34 million or $0.92 per share as compared to $25 million or $0.67 per share in 2018. We recorded a gain of $0.08 per share in the fourth quarter of 2019, due to insurance proceeds we received to reimburse us for lost productivity and other hard and soft costs incurred earlier this year, as a result of the cyber incident we suffered in April 2019. Approximately $1.6 million of the gain was recorded as a reduction of SG&A, and the remainder was recorded as a reduction to cost of services. We do not expect any additional insurance proceeds or other recoveries related to that incident. Our full year earnings per share was $3.08 per share in 2019 compared to $3 per share in the prior year, and so we had another record year.

For the full year, EBITDA was $214 million compared to $192 million for the prior year. The increase in EBITDA, is primarily due to the Walker acquisition and our new Electrical segment. Our overall SG&A expense was $87 million for the fourth quarter of 2019, compared to $80 million for the fourth quarter of 2018. The dollar increase in SG&A was a result of our Walker acquisition, including additional amortization expense. We had good SG&A leverage in the fourth quarter, as SG&A had a percentage of revenue for the fourth quarter of 2019 that declined to 12% compared to 13.7% for the fourth quarter last year. SG&A in the fourth quarter was helped by the insurance recovery we mentioned, and we also had lower incentive compensation expense.

For the full year, SG&A as a percentage of revenue was 13% compared to 13.6% in the prior full year. The overall improvement in the SG&A percentage was as explained earlier, largely due to the electrical segment, which as larger projects required proportionately lower levels of SG&A.

Our 2019 tax rate was 24.7% compared to 24.1% in 2018. The 2018 tax rate benefited from a discrete tax item, while the 2019 tax rate benefited from discrete benefits from the energy efficient commercial building production, also known as a 179D deduction. We currently estimate our future effective tax rates will be between 25% and 30%. However, our effective tax rate in 2020 could tend toward the lower end of this range due to the recent extension of that same 179D deduction, that's now been extended through the end of calendar 2020.

Cash flow for 2019 was strong and our full year free cash flow flow was $112 million compared to $122 million in 2018. This strong cash flow has allowed us to pay down our debt by over $70 million between the Walker acquisition on April 1 at the end of 2019. We feel great about our cash flow prospects for 2020, and we're also happy to announce another dividend increase this quarter. This makes the seventh consecutive year that we have increased our dividend. As Brian mentioned, we amended our credit facility in December to increase the amount available by $200 million to a total of $600 million. We're happy to have been able to lock in favorable pricing, as well as financial covenants that recognize our strength and reward our conservative long-held approach to balance sheet management. We also procured even more flexibility to complete transactions and return capital to our stockholders. Above all, our amended agreement now expires in January 2025 and thus gives us good visibility and stability, as we continue our strategic investments.

During the fourth quarter, we purchased 84,000 of our shares at an average price of $50.27. In 2019, overall, we purchased 429,000 shares over the course of the full year. Since we began our stock repurchase program in 2017 and bought back 8.6 million shares at an average price of $17.70, directly returning over $150 million to our shareholders.

That's all I have on financials, Brian.

Brian E. Lane -- Chief Executive Officer, President & Director

All right. Thanks Bill. I'm going to spend a few minutes discussing our backlog and activity in various sectors and markets. These are covered in slides 7 through 9. I will also comment on our prospects for the rest of this year.

Backlog at the end of the fourth quarter of 2019 was $1.6 billion, a same store increase of $195 million or 17% compared to the end of 2018, primarily due to continued market strength and the strong reputations and performance of our many locations. Sequentially, our backlog was essentially flat, down $7 million. As expected, our Electrical segment backlog retreated, declining by $43 million compared to the end of the third quarter of 2019. As we mentioned last quarter, walker booked a very large project in the third quarter, that burned heavily during the final months of 2019. Our mechanical segment backlog increased sequentially by $36 million or 3%.

In addition to our strong backlog improvement, we have a good balance across our various end user sectors. Institutional markets, which include government, healthcare and education was 36% of our revenue for 2019. The commercial sector was 30% of our revenue and industrial provided the remaining 34%. With our new Electrical segment, which will include the Star acquisition in 2020, the industrial market will continue to be a very important sector for us.

Please turn to slide 9 for our current revenue mix. For 2019, construction is 76% of our total revenue, with 46% from construction projects for new buildings, and 30% from construction projects in existing buildings. We are being helped by good fundamentals and trends in non-residential construction, and we continue to book projects with good market pricing and a broad distribution across end-use sectors. Geographically, we experienced strong results in most of our markets, with particular strength in North Carolina, Virginia and Florida.

We continue to make investments in our service business. For 2019, service was 24% of our revenue, with service projects providing 9% of our revenue, and pure service, including hourly work providing 15% of our revenue. Our service business is doing very well. On an absolute and same store basis, our 2019 service results were higher in both volume and profitability than 2018. Our service maintenance base of annually contracted revenue is $128 million at the end of the year, which is a record for us, and an impressive 4% increase since the end of 2018. These service maintenance contracts are not included in our reported backlog numbers.

For 2020, we remain focused on one, generating and wisely investing free cash flow. Two, protecting the margins in our Mechanical segment. Three, improving the margins of our Electrical segment. And four, continuing to partner with the best MEP contractors, via prudent acquisitions.

Finally, our outlook. Our backlog is solid. Our markets are active. We have strong a project pipelines, and we are experiencing good service project demand. We expect mid-single digit revenue growth in our Mechanical segments on a same store basis during 2020 and our best estimate is that our Electrical segment will be flat or down just slightly, as we pursue opportunities with discipline and planning. Overall, we expect our combined revenues will be up by low to mid single digits.

We see good trends in our business. The pricing environment remains good, and we are optimistic that market conditions for 2020 will continue at the strong levels that we have experienced since the start of 2018. Our sense is that the markets will remain very supportive, and we believe the Comfort Systems team is well positioned to capitalize on these opportunities. We are stronger than ever.

Thank you once again to our 12,000 employees for their hard work and dedication. I will now turn it back over to George for questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from the line of Sean Eastman. You are live on the call. Please go ahead.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Hi, gentlemen.

Brian E. Lane -- Chief Executive Officer, President & Director

Good morning, Sean.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

First one for me is -- and nice finish to the year by the way. Compliments. I'm curious, with the acquisition of Star here talking on to the Electrical presence, I'm just curious, what can you tell us about your major customer response to Comfort Systems entering the Electrical space and adding that vertical?

William George -- Executive Vice President & Chief Financial Officer

You know, we have a huge advantage there, which is both of the markets that these companies were based in, already contain one of our very best of our many great companies. And so customers really we're very comfortable with it, because -- for example in Dallas, they saw us acquire DynaTen many, many years ago and they have seen DynaTen continue to be just a fantastic partner for them, and by the same token, half the jobs that Star is on, on any given day, our subsidiary Environmental Air Systems with on those jobs with them. So the level of -- these two acquisitions were really our two -- our largest market by revenue and one of our top 3 or 4 markets by revenue.

Brian E. Lane -- Chief Executive Officer, President & Director

Hey Sean, I visited the project in Dallas, with both the mechanical and electrical team with the customer, and he was very favorable and positive that we had both of these specialty contractors under our roof.

William George -- Executive Vice President & Chief Financial Officer

And what great markets, right, Texas and North Carolina.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Absolutely right. That's great. That's excellent and. And then the outlook commentary in the K does fold in modular construction on the list of focus items for investment. I know there is a bit of an angle there with Star in partnership with EAS. Maybe you guys could just talk a little bit about what you're embarking on there, and what we might see here in 2020?

William George -- Executive Vice President & Chief Financial Officer

Just to let everybody know what modular and offsite construction is right. In our case, when we talk about modular construction, we were talking about building very sophisticated systems in a plant, that are exactly what you would have felt on the bill of job site as a practical matter, from the point of view of content, and then transporting it there, may be on 10 semis and in some cases on over 100 semis, and putting it together on the spot. And we've done that for many years. When we bought Environmental Air Systems, they had $30 million to $40 million of that work. Last couple of years they've been in the $100 million range of that work, and their margins have gone up over the time we've owned them. So we really like that business, we've been investing in them.

Star Electric meanwhile has been a great partner for us in construction in North Carolina, but we've been a customer of theirs for many years. So last year, Star electricians did about $10 million worth of work for EAS' business, mostly in offsite construction and mostly inside the walls of our plants. So by teaming up with this company we've had a relationship with for so long, we're able to internalize that capability, and up until now, if a customer wanted us to build an electrical room for them when we were building, let's say a chiller plant for them, we would only do that if needed, to get the order for the chiller plant, because we were going to put somebody else's workforce to work. Now with Star being part of the family, we can go add that product to a product that we are, you know -- that's just as good for us, and that we're just as excited to sell as our mechanical offsite construction. So that's a long answer, but hopefully that helps people understand.

This is already happening. We're just internalizing it and we have not been pushing to market that, because it wasn't our labor that was doing the work, and the reality is Comfort makes its money on labor. So now we'll be able to -- that really adds a product for us, a service offering for us.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Really interesting stuff. Last quick one from me, just margin progression on the electrical piece of the business, considering that's a big initiative this year. Just curious, maybe some rough guideline around what we can expect in '20 versus maybe what 2021 looks like?

Brian E. Lane -- Chief Executive Officer, President & Director

You know Sean, this is been a typical acquisition for us at the beginning. Over time, the gross margins always improve. I can't give you metrics today, but we'll start with the blocking and tackling and the move forward training, working with just the company, sharing best practices. Over time they will improve, how long it takes -- its impossible to call, but they're working on it and they are eager to improve that as well.

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Excellent. I appreciate the time. Thanks, gents.

Brian E. Lane -- Chief Executive Officer, President & Director

All right. You too.

Operator

Our next question comes from the line of Brent Thielman. You are live in the call. Please go ahead.

Brent Thielman -- DA Davidson -- Analyst

Hey, thanks. Good morning.

Brian E. Lane -- Chief Executive Officer, President & Director

Good morning Brent.

Brent Thielman -- DA Davidson -- Analyst

Hey, I guess first on Walker; you've talked about managing that growth this year, 2020. How do you see them kind of rebuilding that book of business through this year, as they burn off some of this larger work. Does that backlog for them to start to pick up in the second half, and can you talk a little more specifically about the initiatives you have for that business this year?

William George -- Executive Vice President & Chief Financial Officer

The first thing I would say is, as far as their backlog, it will be lumpy, right. When they -- as you know, we talked about, they booked a very large job in the last -- in the third quarter of this year. It revenued heavily, you know, like $20 million a month for a couple of months at one point. Since then, they are still on that job by the way in the first quarter. Well, that burns backlog heavily and then it gets booked in big lumps. On that very site, they will probably get the next phases. But having said that, it's going to be lumpy and people are just going to have to understand that's how it has to be. As far as margins go, when they have a big job like that, that is a cost plus -- fee-based with a guaranteed maximum price. It has a very large amount of materials that are delivered. So during the quarters and months where they revenue heavily on a job like that, they will have even lower gross margin, but extraordinary absorption, of overhead. So they do -- that will develop over the course of this year.

So there is a combination of the lumpiness of it, and then also, they have a couple of their markets where they are just without peer, without rival and a couple of markets where we think they can -- then they believe, they can be a little pickier. So that will also -- Comfort is not a company that really chases revenue, and we don't like to do work for practice. So there is a lot of moving pieces. But the underlying trend should be very good. And I don't know...

Brian E. Lane -- Chief Executive Officer, President & Director

Brent also, we have a number of tools to help them go through this. They are very receptive. They've been terrific corporate citizens since they've joined us.

Brent Thielman -- DA Davidson -- Analyst

Yeah, OK. And then can you talk about that development of that same-store backlog? I think it's up 16% year-on-year. Is that spread pretty evenly across your geographies?

Brian E. Lane -- Chief Executive Officer, President & Director

Yeah. And across-end users, which I said in my commentary, I think that's the the biggest pleasure that we're seeing in these numbers that it's broad based, across the country, we're not really seeing any weaknesses Brent, and across end users. So that's leading to our optimism for this year. And also, we don't have a customer over 5% of our business. So we get a good diversified customer base as well. So it's really where we want to be.

Brent Thielman -- DA Davidson -- Analyst

Yeah. And then Bill, should we be thinking about free cash conversion this year any differently than in the past, just with the inclusion of Walker and now Star? I mean any -- or any shift in the business mix or typical to what you've seen historically?

William George -- Executive Vice President & Chief Financial Officer

So we will continue to cash flow our after-tax earnings plus a little bit for non-cash items like stock expense. Having said that, we got ahead of ourselves in 2018 a little bit. We had a fantastic plus $70 million fouth quarter cash flow conversion. Third quarter of this year, we were over $70 million, which by the way is one of the reasons why those incentive accruals in the third quarter made the SG&A look a little bigger than the fourth quarter just proportionately, not as big, if you compare the two years. We incentivize cash flows, so when we have a lot of cash flow, we have a lot of comp expense. We think we're very well positioned for cash flow this year, because we come into the year, as you can see on the face of our of our financials with really big receivables. These big projects that we're talking about, they are good payers, but when you're revenuing that much, you can't keep up. So as those begin to ramp down, we'll see cash roll in from those and then in every other way across our service business, which is very well positioned for cash flow for this year.

Brent Thielman -- DA Davidson -- Analyst

Yeah. Last one for me, I guess just since it's topical in the news these days, are you seeing or foresee any supply chain issues with respect to any activities right now? Is that a concern from your folks in the field?

Brian E. Lane -- Chief Executive Officer, President & Director

Brent, thanks for asking. We've gone out to all our suppliers and as we sit here right now, we see no issues with them supplying what we need today.

Brent Thielman -- DA Davidson -- Analyst

Yeah. Okay, great. Congrats on the year, and best of luck.

Brian E. Lane -- Chief Executive Officer, President & Director

Thank you.

Operator

Our next question comes from the line of Adam Thalimer -- you are live on the call. Please go ahead. Sorry, Thalhimer.

Adam Thalhimer -- Thompson Davis -- Analyst

Good morning, guys.

Brian E. Lane -- Chief Executive Officer, President & Director

Good morning, Adam.

Adam Thalhimer -- Thompson Davis -- Analyst

Brian, you said low to mid single digit total revenue growth this year, does that -- that's organic?

William George -- Executive Vice President & Chief Financial Officer

Yes.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay. And have you closed Star?

William George -- Executive Vice President & Chief Financial Officer

Yes, that was closed.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay. And what's the revenue contribution from Star?

William George -- Executive Vice President & Chief Financial Officer

I would say, I think in our press release we said we expect annualized revenues of about $90 million and EBITDA $5 million to $6 million initially, and we think there is definite opportunities to improve both of those numbers over time as these two companies work together.

Adam Thalhimer -- Thompson Davis -- Analyst

Got it. And then are there -- well, I guess you just answered the question, but their margin profile versus Walker's isn't high level?

William George -- Executive Vice President & Chief Financial Officer

It's very similar. Actually, it's very similar but -- Walker had a couple -- has had a couple of super high revenue quarters I just mentioned. But I think they're very similar margin profiles initially.

Brian E. Lane -- Chief Executive Officer, President & Director

What's interesting about Walker, Adam is that, yeah, I mean the gross margin is lower,. but their overhead is lower. So their operating income isn't that far off, from what non-mechanical people do.

Adam Thalhimer -- Thompson Davis -- Analyst

Right. No, I get that. And then one more on modular just, is it a margin benefit Bill, over time?

William George -- Executive Vice President & Chief Financial Officer

I would say it's more of a volume benefit, and here is why; for two reasons, one, more product to sell. Two, it addresses the labor issues, right. So we get very good margins in that business, but I don't expect them to necessarily shoot up precipitously. But we are more constrained with the amount of volume that we can do on a job site with stainless steel welders and pipe fitters. You can you can expand production more readily in these hundreds of thousands of square foot of space, because people are in a controlled environment, they can learn a more discrete task and do it over and over, and then they can train one up and one down on that test. So it's really a way -- the reason we think it's very important to the future, is its a way to actually maintain or even increase the quality and sophistication of the product you're delivering, but do it with an ability to sort of cope with the fact that the skilled, many years experience labor force is less available than it has been.

Adam Thalhimer -- Thompson Davis -- Analyst

Okay, that makes a lot of sense. Great, thanks guys.

Brian E. Lane -- Chief Executive Officer, President & Director

Thank you.

Operator

Our next question comes from the line of Joe Mondillo. You are live on the call. Please go ahead.

Joseph Mondillo -- Sidoti & Company -- Analyst

Hi guys, good morning.

Brian E. Lane -- Chief Executive Officer, President & Director

Hey, good morning, Joe.

Joseph Mondillo -- Sidoti & Company -- Analyst

So your competitor who we were just on their call, sort of stating similar dynamics between mechanical and electrical being at a little more growth in mechanical versus electrical. Could you explain what you're seeing and why the growth is a little stronger in mechanical versus electrical?

William George -- Executive Vice President & Chief Financial Officer

So I think that the two markets are going to have an opportunity to grow, based on what buildings are being built. So they have a great -- they both have the same opportunity from my point of view. But I would also say that, we are just being a little pickier with Electrical. So that's one reason. I'm sorry, I just want to also say, we have a lot of support for the competitor, you're referring to Emcor, they're going through a little thing with their computer systems that we've been through and it's awful, and they're going to get past it, it's not going to matter. I have bought Emcor stock this week. So it's not a -- that's not going to be something that matters to the long-term value of Emcor.

Brian E. Lane -- Chief Executive Officer, President & Director

And Joe, just to finish up on Bill. We feel good about the electrical market now from an opportunity basis. I think we talked about some discipline and planning there, but we're very confident with that market.

Joseph Mondillo -- Sidoti & Company -- Analyst

Okay. And then, just in general, maybe anecdotally, have you sensed any difference of confidence or tone when you talk to your businesses or your customers regarding just the overall environment? And I mean it seems like just over, if you take a high level approach and look at the market overall, it seems like you look over the course of the last couple of years that things may be slowing a little bit, but certainly we obviously have not seen that in your business, just given the orders and backlog that you posted this quarter. Any color around that?

Brian E. Lane -- Chief Executive Officer, President & Director

Yeah. Joe this is Brian, I will go first, as you figured, we've been in touch with everyone in the last couple of weeks and what we are hearing is steady and stable for 2020. We're really not seeing any kind of downturn, as you can imagine, right. We're very sensitive to it, and make sure we're in front of it. But as I sit here today, we are not hearing that. Bill, do you want to add on to that?

William George -- Executive Vice President & Chief Financial Officer

Yeah, it seems like it's staying at a high level.

Joseph Mondillo -- Sidoti & Company -- Analyst

Okay, and then we've seen interest rates for quite a bit. It has been in a pretty severe quick manner. So I don't know if that changes much, maybe it needs to fall a little more, over a course of time and not so severely relative to economic scare. But when you guys see interest rates fall like this, does that tell you anything? Does it provide any customers or projects going forward faster, than maybe if it rates were a little higher. Is that anything that you look at?

William George -- Executive Vice President & Chief Financial Officer

Yeah, one of the interesting things that's happened over the last decade for us, is Comfort has really gotten from doing like -- we used to do multi-family and there is a lot more developed work. Now we do virtually none of that, or almost very low percentage of that, and we do a lot more industrial. The reality is, our customers have -- they have money they don't know what to do with, in general, right. So I think, and the good and bad of that is, they have the funds they need to invest, a little changes in the interest rate really I think only affects us, as it -- whatever the feedback effects it has on the economy. I don't see -- compared to any time in the past, the concept of something 'being financed,' it just never comes up nowadays.

Joseph Mondillo -- Sidoti & Company -- Analyst

Okay. And then, I'm wondering if you could talk about, I don't know if you mentioned this earlier, I apologize if you did, but in terms of the type of buildings that you are seeing new construction work, I know a lot of your business is sort of in Middle America and we've seen the farming sector and a lot of manufacturing areas in the country that are sort of seeing some pressure and sort of downturn, and I don't know if that leads into the construction works, next two or right in those regions where you play in. Anything that you're hearing regarding that being a factor affecting new projects?

William George -- Executive Vice President & Chief Financial Officer

I'll go first. I would say that our positioning is really good right now. Data, pharma, food, even hospitals, eyes are peeking open a little bit. The verticals we're in, seem like they have very level headed strength.

Brian E. Lane -- Chief Executive Officer, President & Director

I would just add on, one place that is hanging in here is education, which you know for us is more the university level. Still seeing plenty of opportunities there.

Joseph Mondillo -- Sidoti & Company -- Analyst

Yeah. A lot of money is still in that sector for sure.

Brian E. Lane -- Chief Executive Officer, President & Director

Absolutely.

Joseph Mondillo -- Sidoti & Company -- Analyst

All right. Well, thanks a lot guys. And have a great day.

Brian E. Lane -- Chief Executive Officer, President & Director

You too Joe. Thank you.

Operator

We have no further calls now. If we could hand over to Brian Lane.

Brian E. Lane -- Chief Executive Officer, President & Director

Okay, everybody. Thanks for joining the call today. We appreciate it. I just want to give a hearty welcome to the folks at the project management Academy training session at Dallas that are listening in. Hope you enjoyed the call. 2019 was a great year for Comfort Systems, and we are optimistic that 2020 will be a continuation of these outstanding results, and based on my confidence on the elite labor force that we have here at all levels of this organization, both in the office and out in the field, I really appreciate the yeoman's effort for everyone to close out the year. It's very much appreciated. Once again, thank you all and we'll see you on the road soon. Have a great day.

William George -- Executive Vice President & Chief Financial Officer

Thanks.

Operator

[Operator Closing Remarks].

Duration: 39 minutes

Call participants:

Julie Shaeff -- Senior Vice President & Chief Accounting Officer

Brian E. Lane -- Chief Executive Officer, President & Director

William George -- Executive Vice President & Chief Financial Officer

Sean Eastman -- KeyBanc Capital Markets -- Analyst

Brent Thielman -- DA Davidson -- Analyst

Adam Thalhimer -- Thompson Davis -- Analyst

Joseph Mondillo -- Sidoti & Company -- Analyst

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