Thank you for standing by and welcome to the Fourth Quarter 2021 Comfort Systems USA Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference may be recorded. [Operator Instructions].

I would now like to hand the conference over to your host, Julie Shaeff, Chief Accounting Officer. Please go ahead..

Thanks, Carmen. Good morning. Welcome to Comfort Systems USA's Fourth Quarter and full-year 2021 Earnings call. Our comments today [Indiscernible] press releases contain forward-looking statements within the meaning of the applicable securities laws and regulations.

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 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 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, Trent McKenna, Chief Operating 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. We have more information than usual to cover, but considering the events in Ukraine and Europe, we will try to be as efficient as possible and our thoughts are with those who are affected. We are pleased to report a strong finish to 2021.

Our team has delivered excellent execution across our segments and we are grateful for their hard work. For the fourth quarter, we earned $1.4 per share on Revenue of $856 million. same-store Revenue grew by 8% compared to the fourth quarter of 2020 as overall non-residential building construction and service continue to show broad-based strength.

For the first time ever, we are reporting more than $3 billion in full-year revenues. We have good cash flow and our backlog has registered an unprecedented increase. In addition, in January of 2022, we received approvals of previously filed tax refund claims for the past years. That will meaningfully impact our first quarter results.

And Bill will review those in detail during his remarks. We had an active fourth-quarter for acquisitions. At the beginning of December, we acquired IV Mechanical, which services customers across the Southeast and United States.

We have known IV for 25 years and their Mechanical Construction and service expertise is well-positioned for collaboration and mutual benefits. On the last day of December, we acquired EDWARDS ELECTRICAL AND MECHANICAL based in Indiana.

Edwards brings us a solid full-service presence in Indianapolis, and provides new capabilities in clean room solutions that will complement our off-site construction and pre -fabrication. On December 31, we also acquired a strong servicing controls business in Kentucky thermal solutions.

And on that same day, we acquired Kodiak labor solutions, a temporary staffing agency that we have worked with on an ongoing basis and which will help us recruit and deploy skilled construction labor in many of our markets. We are happy to have these strong teams as a great new part of Comfort Systems USA.

And we are confident that we have added some wonderful people and strong capabilities. I will discuss our business and outlook in a few minutes. But first I will turn this call over to Bill to review our financial performance. Bill..

Thanks, Brian. Good morning everyone and good afternoon for those on the East Coast. Revenue for the fourth quarter of 2021 was $856 million, an increase of $157 million or 22% compared to last year. Same-store revenue increased by a strong 8% with the remaining increase resulting from our acquisitions of TEC and Amteck, and one month of owning IB.

Revenue for the full year 2021 was $3.1 billion, an increase of 8% compared to 2020 and the annual increase was a result of our 2020 and '21 acquisitions. As you know, we and our industry are experiencing delays in the receipt of materials and equipment, which modestly reduced our revenue in the fourth quarter.

It is impossible to precisely measure that effect because there are always variances and timing issues relating to merit -- materials and equipment. However, we roughly estimate that our revenue would have been higher without these issues and our best estimate is that the effect on the fourth-quarter revenue was a reduction of perhaps 2% to 4%.

And we expect to continue to experience these effects for at least the first half of 2022, and we currently expect high single-digit same-store revenue growth for the upcoming year. Gross profit was $154 million for the Fourth Quarter of 2021 at $17 million improvement compared to a year ago.

Our gross profit percentage was 18% this quarter compared to 19.6% for the Fourth Quarter of 2020. Our gross profit percentage in our Mechanical segment declined to 18.9%, while margins in the Electrical segment have increased significantly compared to last year from 10.7% in 2020 to 14.5% in 2021.

The decrease in the gross profit percentage resulted from several factors, including cost pressure and changes in revenue mix as new construction increased in proportion to our revenues, and the fact that we are in the early stages on a disproportionate amount of our project work.

For the full year 2021, gross profit increased by $16 million and our gross profit margin was 18.3% in 2021 that’s compared to 19.1% in 2020. SG&A expense for the quarter was $105 million or 12.3% of revenue compared to $89 million or 12.7% of revenue for the Fourth Quarter of 2020.

On a same-store basis, SG&A was up approximately $5 million, primarily due to compensation-related items. For the full year, SG&A expense as a percentage of revenue was 12.2% for 2021, down from 12.5% for 2020. On a same-store basis for the full-year SG&A declined $7 million primarily due to a reduction in bad debt expense.

Our operating income in the fourth quarter of 2021 was $49.3 million, slightly higher than the same quarter of the prior year. Last year in our fourth quarter, we got a benefit from earn-out changes. That was 11% higher than we reported this year. Each quarter end, we examine our estimates related to our earn-out liabilities.

As a result, this quarter we reported an overall gain of $3 million or $0.07 per share in 2021 as compared to $7 million or $0.18 per share in the prior year. Our 2021 tax rate was in the expected range at 24.7%. After considering all of the factors above, net income for the fourth quarter of 2021 was $38 million or $1.04 per share.

This compares to net income for the fourth quarter of 2020 of $43 million or $1.17. Our full-year earnings per share was $3.93 per share compared to $4.9 in the prior year. For our fourth quarter EBITDA increased by 8% to $68 million, and our full-year 2021 EBITDA increased just $256 million.

Full year 2021 free cash flow was $161 million compared to $265 million in 2020. Our prior year free cash flow was increased by disinvestment in working capital from COVID, and federal legislation that allowed us to defer $32 million in 2020 payroll taxes.

2021 cash was decreased by $18 million as we paid back a portion of the deferral, thus creating a $50 million timing issue just from that tax issue. Despite these factors, 2021 was a great cash flow year for us. And although we will deploy working capital in the early stages of the various projects we're starting.

We believe that we have strong cash prospects for 2022. Brian mentioned that we closed four acquisitions in the fourth quarter. IV was acquired on December 1st and is reported in our Mechanical segment. It is expected to contribute annualized revenues of approximately $150 million to $160 million and EBITDA of $7 million to $9 million.

The other three acquisitions closed on December 31st and their results will only be included in our financial results beginning January 1st. However, their balance sheet and backlog are included as of December 31st. We expect Edwards to contribute annualized revenues of approximately $85 million to $95 million, and EBITDA of $6 million to $8 million.

Thermal should contribute approximately $20 million in revenue and consistent margins and finally Kodiak, which is a staffing company that was acquired to augment labor resources, is not expected materially contribute to revenue or EBITDA on a standalone basis.

Because of the amortization expense related to intangibles and other acquisition costs, these acquisitions are not expected to contribute to EPS in 2022. After incurring approximately $130 million to fund these acquisitions, our debt at the end of the year was $388 million. We're continuing to opportunistically repurchase our shares.

In 2021, we purchased 363,000 shares at an average price of $74.57 and we have been active in share repurchases over the last few weeks. Since we began our repurchase program in 2007, we have bought back 9.7 million shares at an average price of $21.69.

Before I pass the time back to Brian, I want to describe the tax events that he alluded to and that were mentioned in the press release. In January 2022, we received approval from the IRS for our previously filed refund claims for the 2016, 2017, and 2018 years.

The refunds were primarily due to claiming the credit for increasing research activities that we refer to as the R&D tax credit. As a result, we expect that the first quarter of 2022 will have an incremental benefit of approximately $30 million in after-tax net income or approximately $0.80 per diluted share.

And we expect to receive approximately $30 million of operating cash during the first quarter of 2022.

In addition to the immediate gains from these IRS approvals, we will be reassessing the judgments that we have been made regarding our taxes for the intervening years of 2019, 2020, and the recently concluded 2021, since we expect to assert the credit for those years as well, we're assessing the amounts and likelihood of benefit that will result from those credits and will also include that benefit when we report our first quarter.

The changes in assessment are ongoing, but we expect that we will reduce our provision for income taxes with respect to these years, and we estimate that we will record additional first-quarter income that we currently approximate at $22 million or $0.60 per diluted share.

Finally, our successful assertion of the R&D tax credit will be likely to reduce our effective tax rate in future years, beginning immediately in 2022.

The tax benefit will vary based on our qualifying expenses each year, but should lower our tax rate by approximately four to five percentage points in 2022 and in future years until and unless the landscape for these credits which have been made permanent by Congress, change.

I'm very appreciative of the hard work done by our tax department and by numerous of our subsidiaries in seeking and documenting these credits. That's all I have on financial trend..

Thank you, Bill. I am going to spend a few minutes discussing our backlog and markets. I will also comment on our outlook for 2022 and on inflation and supply chain considerations. Our backlog at the end of 2021 was $2.31 billion. And this is the first time that our backlog has exceeded $2 billion.

Sequentially, our same-store backlog increased $224 million with strength in our modular work and in our electrical operations in Texas. Year-over-year, our same-store backlog is up by over $578 million or at 38%, a broadly-based increase. Industrial customers were 44% of our total revenue in 2021.

We think this sector, which includes technology, life sciences, and food processing, will remain strong for us as industrial has heavily represented a new backlog, as well as in our recent larger acquisitions. Institutional markets, which include education, health care, and government, are also strong and represented 32% of our revenue.

The commercial sector is also doing well. But with our changing mix, it is now a smaller part of our business at about 24% of revenue. Year-to-date construction was 78% of our revenue, with 46% from construction projects for new buildings, and 32% from construction projects in existing buildings. Service was strong this year.

And our increasing service revenue was 22% of year-to-date revenue, with service projects providing 9% of revenue, and pure service, including hourly work, providing 13% of revenue. 2021 service revenue is up by 12%. And with our continuing strong margins, our service earnings were up by a similar amount.

Overall, service continues to be a great source of profit for us. As 2022 begins, we believe that we are returning to good ongoing market conditions and that we have largely recovered from negative impacts to our business due to business disruption caused by COVID-19.

At the same time, we are experiencing inflation and some delays in materials and equipment. As we mentioned, supply chain and inflation were factors in 2021, especially in the fourth quarter. And we currently expect that those effects will continue through at least the first half of 2022.

We are recognizing these challenges in our job planning and pricing, and we are working with our customers to share the risks and mitigate the effects of these challenges. In addition, during the first six weeks of 2022, we experienced temporary reductions and available labor as Omicron peaked.

And that will also add some headwind to what we nevertheless expect will be a solid and profitable first quarter of 2022. We believe the good trends outweigh the challenges, and we remain optimistic about our prospects for 2022. The headwinds described above will likely be pronounced during the first half of 2022.

However, our current belief and expectation is that in 2022 our full-year earnings in margins are likely to be comparable to 2021, with an opportunity for improvement as we get farther into our backlog as the year progresses.

As we continue to emerge from the various effects of the pandemic, we believe that future demand in our key markets is strong, and we continue to invest in our workforce, technology, execution capabilities and in our service businesses.

Underlying demand for our capabilities, especially in our key segments, including industrial and institutional buildings, continues to be very robust. Our fundamental outlook for the next several quarters is very positive, especially with our strong backlog and pipeline.

We are happy with our investments today, and we are keen to continue to invest, grow and improve in our essential industry. Our skilled workforce is the heart and soul of Comfort Systems USA.

And we will continue to develop and reward our unmatched team members as they strive each day to work safely, improve our communities, and provide the built infrastructure to serve our many markets. I will now turn it back to comments for questions. Thank you. .

Thank you. [Operator Instructions]. Your first question is from Sean Eastman with KeyBanc Capital Markets. Your question please..

Hi gentlemen. Thanks for taking my questions..

Hi, good morning Sean..

Good morning. So I wanted to start on the margins. I think you said at the end, Brian, that margins are going to be comparable to 2021. They did look a little soft in the fourth quarter. I think there is some mix elements going on.

You mentioned COVID and, and supply chain, so maybe just some color on what's happening under the hood, how margins should progress over the next 12 months. Just the moving pieces in there would be great..

I'll start and [Indiscernible] is Bill wants to follow up, but what gives us optimism is that the work and the opportunities is good, the margins are good in the work that we're winning. We're still executing in January. And as the year goes on. So I think we'll hit our average and margins will reflect 2022.

I think we're managing as best we can the supply chain and inflation with our customers, and we are doing everything to satisfy them and be successful..

Yeah. So if you compare our margins for 2021 with our peak years, especially the really high margins that we had during COVID, it's not a good comparison because our mix was so much different. We were doing far less new construction, which has a lot more material pass-through.

We had not bought a bunch of electrical companies which even though their revenue -- their margins are up, they do average lower margins and lower SG&A than mechanical companies.

For the next several months, we're going to be towards the beginning of a lot of jobs that we're just not going to be pulling a bunch of profit out till we see how much it rains, until we see how other people on the job do, and until we see startup some systems and put liquid in some pipes.

And so I think that what we're trying to say is we liked our margins last year. Yeah.

We could have executed a few places, especially where COVID affected us but we think what you saw last year is what you'll see through the beginning of this year as we get deeper into these jobs, there's certainly an opportunity to do better, but we're not popping back up to the 2021 range. We just have a different mix right now..

Okay. That's helpful. And I think you also said at the end, Brian, that earnings will be comparable for last year. I just wanted to clarify that, particularly considering we've got high single-digit top-line outlook and these big tax benefits coming early in the year..

Yes, so with the range of earnings is what we made last year or more. One of the things that we experienced last year, was people overreacting to the supply chain, some of these issues and getting very pessimistic. So what we were just really trying to say is, look, we're going to make a lot of money again, we're going to flow a lot of cash again.

We certainly hope to have improvement this year over last year, but we do have -- early in the year, we do have a little bit of revenue headwind. We had Omicron create absenteeism in January. We do have -- we said we thought our revenue was affected 2% to 4% in the fourth quarter.

We'll continue to have chillers show up a little later than we expected and things like that. Less buyout in our jobs, right? Pretty hard right now to call and ask a supplier for a discount. You actually are just probably calling and begging them to make sure you get your stuff. So, that's why we are predicting what we're predicting..

Okay. Got it. Just sneaking one more in.

Just on the tax benefit stuff, what's the tax -- how is the tax provision going to look in the first quarter? And then as we advance through the rest of the year, what's the normal tax rate now? And for how many years into the future do you expect to have this four to five point reduction in the tax rate?.

Okay, hold on for a minute, Brian, getting out of slide rule..

I'll let Julie [Indiscernible] Sean..

So essentially, we've been saying we're at 25% to 27% tax rate. Now, we're going to be 4% or 5% below that. And that's cushioning that some right, because we're not making the assumption that we'll do as well in the ongoing [Indiscernible] as we were able to do for those five consecutive years that we just settled up. But whatever else it's true.

After five-years now of getting this benefit. Frankly, we have to bake in that benefit as we look at our tax rates for the next several years, and we think it's going to lower our tax rate for 5%. And so if you hire future cash flow and saw some changes..

Okay. Got it. All right. I'll turn it over there. Thanks so much..

All right. Take care, Sean..

All right. Your next question comes from Brent Thielman with DA Davidson. Your line is open..

Hey, thank you.

Hey, Brian or Bill, are there a few particularly large projects in the backlog right now that need to kind of hit certain thresholds for margins to move a lot higher, or is this kind of more of a broader statement across the business in terms of the new construction work you've taken on?.

Yeah, it's a combination of both. We do have some larger projects that we're very optimistic about. But it's also broad based in terms of the ranges of the sizes. It's that typical mix.

Brent, as we go through smaller work, mid-level work, and a few larger projects, and the larger projects with companies -- now that we know they can handle the larger projects. So I think the mix is pretty typical of what we usually have..

And then service growth has been a great story here. Maybe you just talk about some of the initiatives you're undertaking that continue to grow that business in 2022.

Can we see another year of double-digit growth? How do you think about that?.

I'm still very optimistic about service, we continue to make the investments we've made over the last ten years. Our goal is to achieve double-digit growth as we go along. So far, we've done it. We'll continue to invest in training, improve in our sales process, and we're executing really well in service, particularly on the small project front.

So I expect that trend to continue, Brent. There is nothing that tells me it will be different..

Okay. And then just the uptick again in backlog, particularly same-store backlog is great story there.

How much of that be attributed to sort of this industrial vertical versus these, I guess more traditional non ready market, education office retail, smaller pieces of the pie, are those markets starting to become more impactful to the growth in bookings you think?.

Yeah, really both on an acquired basis and on a same-store basis. If you look at the biggest -- the subsidiaries, we mentioned, I think in the script that we had big increases in modular and in electrical. Both of those, the new projects that were booked are disproportionately industrial complex, TEC, Pharma, some battery for sure is waking up.

Haven't -- we've only booked a little bit of battery, but there's a ton of battery in the pipeline for electric cars. So, yeah 100% it's a trend..

Yes. So Brent, if you look at the mix and about over 40% of its industrial -- but it's a capability we have, it's not a new capability that we're starting. It's the companies that we brought in here that already had a long history of doing it. So we're very comfortable with the resources we have to address that market..

Okay. Thanks for taking the questions and best of luck..

Thanks..

Your next question comes from Julio Romero with Sidoti & Company. Your line is open..

Hey, good afternoon and thanks for taking the questions..

Hey, how are you?.

I'm good. Thanks. So to your point earlier, the electrical segment margins are inherently lower than mechanical and it's going to pull down the consolidated margins. But if I look at the last few quarters, I think your electrical gross margins are trending upward and I want to say the incremental on the electrical segment seem to be trending nicely.

So can you maybe speak to what's going right in electrical and what you're doing there to improve the margins?.

Yeah. So electrical, and thank you for noticing, has improved. I think we -- the companies have worked really hard. We've got back to some of the basics. I think they've benefited some of the training that Comfort provides in our new acquisitions as we were back to focusing on work that we're really good at, data centers, for example, food processing.

And I think the one thing about the margins might be a little lower, but they are overheads lower. So you look at the operating level are about the same. But I just think it's just improving on the fundamentals that these companies have done. They doing a great job, a great job as it -- as you can tell from their results..

Okay, that's helpful. And can you speak to what [Indiscernible], what equipment you're seeing delays on? I think you mentioned chillers earlier.

And do you think it's fair to assume the go-forward impact of those delays to be in the same range you saw in the fourth-quarter?.

So the things -- switchgear and generators can be -- have really long lead time. Chillers have long lead times. Some of the commodity stuff has gotten better lately. It's like some stuff is getting better while other stuff gets a little worse. It's very -- essentially you're -- we’re having to order much earlier, like in our bids.

We’re telling people you have to let us by this stuff now and you have to pay us to store it or we can't commit to your schedule. But so far, generally speaking, we get the stuff. It's really hard to predict. Anybody who tells you they know how this is going to enroll over the next year, is fooling themselves.

But we think we're really good at managing it. And we think that we -- on any given construction job frequently, not everything's on the critical path. There's always work you can -- generally speaking, there's work you can keep doing. So, I think we just think our guys are really great at managing it but, it's definitely a factor Brian..

Yeah, and if you look at -- we have good partners and we try to be a good partner. I think that's really paying off. Also, I think the advantage of our size versus maybe more of a mom-and-pop type contract that we can bite us equipment. Early air and put the orders.

And I think that's an advantage because we at the end of the day do not want to disappoint our customers. So we're doing everything we can to make sure we get the equipment yet to install..

Alright. And then just last one for me would be can you maybe speak to the IV acquisition and the rationale there and how it complements here. Because I think portfolio and maybe touch on market sector breakout, whether it's weighted to industrial, institutional, et cetera..

I'll start. So IB is a fantastic company. We -- you may have noticed in the press release, we said we've talked to them for 25 years. The statements I put in that press release was taken from a letter that they're -- the guy who runs it rotated the employees when we bought it. This a company we've known for a long time.

They have really good standing workforces and some very attractive markets like Nashville and Kentucky in North Carolina and of course Mississippi, Atlanta. They also have a group of workers that travel and has been very expert for many, many years at healthcare, in particular hospitals.

Hospital jobs have gotten bigger and bigger and I think after this long period of knowing each other, I think we and IV look at each other, and realize just how much benefit it could be to get together, because their traveling guys can augment us as we need the new jobs that are bigger than what they used to the travel to do.

They can split with our guy, with our existing companies. We think it's just a wonderful fit, right? Think of the markets I just said, and then think of where Comfort is and where we make lots of money, and there are really good -- they're a really good fit from the point of view of our culture. They just fit in with our people.

Everybody has interacted with them so far, has just been very, very happy. Is the company. I will set up in the second. It’s a company that's shown discipline over many, many years. At times it's shown discipline we should have shown. So we just think it's a really good fit, a really good opportunity to make each other better and really have some fun..

Julio, what's really interesting they've only been here two months and we're already working on some joint projects with them. So this has started off really well..

Great, sounds exciting. Thanks very much and best of luck in 2022..

Thank you..

Our next question is from Adam Thalhimer with Thompson Davis. Your line is open..

Hey, good morning, guys..

Good morning Adam..

Can we start just on some of the income statement items, obviously, maybe for Bill. Just thoughts on SG&A and D&A and interest expense, because I'm just -- I still trying to square the comparable EPS comments and maybe the secret is somewhere on those lines..

Well, the secret is we don't know what's going to happen next year. But I think you'll see interest expense tick up some. Will tick up some because our debts a little higher, it will tick up a little more probably because as we -- we were paying 1.3% on our borrowing. That's going to be some at least 10s of basis points higher and RDS started that.

SG&A, you know, if revenue picks up, we'll get SG&A leverage. So that kind of cut them the direction of what you're pushing towards..

Yes..

We'll get very good absorption.

What was the other line you brought -- you mentioned?.

Well, G&A is probably the toughest one to know with the acquisitions..

Well, yeah, although in a 10-K, you can go right back to the footnote and there's a table, and it'll tell you exactly what the amortization is going to be every quarter.

That will be -- our amortization would've been a source of lifts for us this year, when we did a whole bunch of acquisitions late in the year, if not the amortization up but we haven't what is a very, very close estimate of that in our foot notes. That's going to hide a lot of that income.

So what you're going to see is very good incremental increases to EBITDA and that's going to not filter down the EPS as quickly as it should. I should also say everything we've set up till now about earnings being similar with upside later in the year, kind of update stuff reflects the uncertainty it has baked into it.

The uncertainty that we're talking about vis -a - vis supply chain and other issues. It also does not count the change in tax rates. The rules are very clear with this tax stuff that if you get an approval, you can't go back and push it into the prior year.

So when we report the first quarter, like when I said we will be looking at our intervening years and we expect $22 million of income, we'll be doing a lot more work between now and when we report our first quarter. That number should be at least that big if not bigger.

By then we will be able to start baking in to the forward stuff, the new lower tax rates. So there is some things that it's really important that people understand..

Okay. That takes care of it..

Yeah..

And then, Brian, can you take us a little bit around the country and what you're seeing in the bidding environment..

Yeah, we will do. So in general, Adam, the bidding is very good in all parts of the country. In the Northeast, still very strong. If you take a look at Syracuse, New York, we're probably full up this year and it’ll happen next year. A lot of plumbing, doing a lot of apartment buildings and healthcare.

If you come down south as have seen a lot of manufacturing industrial prospects, we're really strong in the Southeast thanks to the companies that Bill has brought in. So see a lot of medical work, datacenter work. So I'm really enthused and upbeat Southeast down to Texas. Texas is very strong for us. Texas is doing very well.

Dallas, Houston has now picked up pretty considerably in the last six months. Austin is extremely busy. And San Antonio, city that's growing considerably has a lot of data center work going on. So we're very optimistic about what's going on in Texas. West is -- it's probably where you will see a mixed bag for us. Denver, Phoenix is good.

And we're a little bit smaller out there. But in general, the bidding opportunities is strong. If you look at where you look up here, this -- the larger jobs that will $5 million. I'm probably looking at more than I've looked at it in a long time. So we're pretty optimistic across the board..

If you look at where things are and you say Gee, what would be operating if we didn't have things like the supply chain and inflation, it's pretty it's -- the fact that we can have this much confidence in our go-forward with all of the uncertainty which we're really are baking in, suggests that a little bit of good news would go a long way..

Yeah. We're really pleased with the workforce, even with the [Indiscernible] isn't due to do the illness that would keep it on schedule. So the folks out there doing the work of doing a Yeoman's effort to keep our customers happy..

What are you seeing with COVID now? I mean, you said it impacted you in January..

Yes. It's come down fast..

It's coming down fast..

I mean, I don't know if anybody saying that. If you talk to our company president mid-February, there was a lot of people were talking about it mid and late January and we're actually --.

--It's really quite a down.

It's disappeared. I mean, disappeared is too strong, but it's really [Indiscernible].

I hope it does. That's good color..

Alright, thanks, Adam..

Thank you. And your last question is from Sean Eastman from KeyBanc Capital Markets. Please go ahead..

Hey guys. My clarification question got answered, but I'm just going to hit you with one anyway. How should we think about the capacity of the business. We have a strong high-single-digit organic growth outlook in place for 2022.

Could you feasibly flex to a number higher than that? And how would you characterize the labor situation? I guess the Omicron variant kind of muddies that up, but just underneath that, is it loosening up? Is it getting worse? How would you characterize that?.

If you look at the labor, I think it's the same, it's tight. Another thing I think we have going for us, is that we're really good employer. And in the structure we have our people on all the local markets, know those markets really well. With that we're hitting the military, community colleges, folks in high school.

We got some opportunities, maybe some lower income neighborhoods that's helping with some training and getting those folks involved in the business. So labor is tight. Kodiak is going to help us with some of the traveling folks. They've got a lot of good tradespeople, so we can flex it up, but you've got to manage your labor every day.

And at the end of the day, you have to be a good place to work, training new people, etc. all of things that we are proud of what we do. So I can see that continuing on, Sean, so we'll just keep at it..

Got it. All right. Well, let you guys get back to business. Thanks for the time..

All right. Take care..

Take care..

All right, ladies and gentlemen, this concludes our Q&A session. I would like to turn the call back to Brian for his final remarks..

All right. In closing, I want to again thank our hard working employees. We are glad we will be seeing many of you on the road again, hopefully. But in the meanwhile, thanks for your interest in the company. We really do appreciate it today. Please be safe and healthy and we will see you soon. Thank you..

Thank you ladies and gentlemen. This concludes today's conference. You may now disconnect. Have a wonderful day..