Comfort Systems USA Inc (FIX) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2018 Comfort Systems USA Earnings Conference Call. My name is Lauren, and I will be your operator for today. (Operator Instructions)

I would now like to hand the conference over to Julie Shaeff, Chief Accounting Officer. Please proceed.

Thanks, Lauren. Good morning. Welcome to Comfort Systems USA's First 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 upon 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 releases 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.

All right. Thank you, Julie. And good morning, everyone, and welcome to our first quarter earnings call.

Let me start by thanking all the Comfort Systems USA employees for their continued hard work and fantastic performance. I'll start with the highlights in the quarter, and Bill will cover the financial results in more detail.

We are pleased to report very strong first quarter revenue and profits and a terrific start to 2018. Building on solid execution over the last several quarters, we had our strongest ever first quarter performance. Revenues are 22% higher than the first quarter of 2017.

We had another quarter of solid execution by our operating companies. As a result, earnings improved substantially, with earnings per share up $0.44 this quarter compared to $0.20 per share a year ago.

Our backlog continues to build, with strong new construction activity in many of our markets. Backlog is 14% higher sequentially, and for the first time in our history, backlog has exceeded $1 billion.

Our booking trends continue to indicate a strengthening of our construction prospects. Our service results also improved this quarter compared to last year. We were also happy to be able to reward our shareholders with a dividend increase. Overall, I am optimistic about our prospects this year.

I will discuss our backlog and outlook in more detail in a few minutes. But before I get into that, let me turn this call over to Bill to review the details of our financial performance. Bill?

Thanks, Brian. Since most of you probably accessed this call through our Internet link, Slides 2 through 4 may be helpful as I provide some explanations and details of our financial results.

First quarter revenue was $465 million. That was an increase of $84 million or 22% compared to the first quarter of 2017. Same-store revenue increased by 15% or $59 million compared to last year, with the remaining increase coming from the BCH acquisition in April of 2017. Our same-store growth is primarily due to project activity as construction activity increased for our businesseses this quarter.

As you will recall, we had particularly light revenue in the first quarter of 2017. However, as 2018 begins, it has become clear that recent project bookings are now moving into the execution stage.

Net income for the quarter was $16.7 million or $0.44 per share compared to $7.5 million or $0.20 per share for the first quarter of 2017. Of the $0.44 of earnings per share that we're reporting, $0.07 results from a tax accounting method change. And without that, we would have earned $0.37 this quarter. That incremental $0.07 is a discrete onetime benefit.

Separate and distinct from that discrete item, we of course also benefited from tax reform this quarter, as the new lower rates, offset by the loss of some deductions, meant that our after-tax income was somewhat higher. We estimate that if we had reported the first quarter under prior year tax law, the $0.37 earnings would have been $0.04 or $0.05 lower but still, historically, very, very strong.

Gross profit was $89.1 million for the first quarter of 2018, an increase of $13 million or 17.2% compared to the first quarter of 2017. Gross profit as a percentage of revenue was 19.2% for the first quarter of 2018 compared to 20% in the first quarter of 2017.

SG&A expense was $70 million for the first quarter of 2017 (sic) [2018] compared to $63.2 million for the first quarter of 2017. Most of the dollar increase is due to the BCH acquisition. SG&A as a percentage of revenue was 15.1% in the current quarter, and that compares to 16.6% in the first quarter of 2017.

Pretax income was $18.7 million for the first quarter of 2018, an increase of $7.4 million or 65% compared to the first quarter of 2017. Income tax expense was $2.1 million with an effective tax rate of 11.1% as compared to income tax expense of $3.9 million with an effective tax rate of 34.2% for the same period in 2017.

The low effective tax rate for 2018 was primarily due to the discrete event I mentioned above, which was a decrease in unrecognized tax benefits from a federal income tax accounting method change. Excluding just this discrete benefit, our tax rate would have been approximately 26%, and we believe our go forward tax rate will be in the, really, the 25% to 30% range. There are a lot of moving pieces right now.

Free cash flow was negative $1.4 million compared to positive free cash flow of $5.3 million for the first quarter of 2017. We almost always have negative cash flow earlier -- early in the year, and our results this year reflect very good cash performance, especially considering the working capital that we've allocated to support our growth. We feel good about our cash prospects for the remainder of this year.

We returned capital to our shareholders this quarter by repurchasing 150,000 shares. And as Brian noted, we increased our dividend earlier in the year than usual, and we will consider incremental increases to our dividends if conditions warrant.

Overall, very pleased with our results for the quarter and optimistic that improved activity levels will continue in 2018. And that's all I have on financials, Brian.

All right. Thank you, Bill. I am going to spend a few minutes discussing our backlog and activity in various sectors and markets. These are covered in Slides 5 through 7. I will then comment on our prospects for the rest of this year.

Our improving backlog trends continued this quarter, as the underlying demand for our services strengthens. Backlog at the end of the first quarter of 2018 exceeded $1 billion, an increase of $130 million or 14% compared to the fourth quarter of 2017.

Our year-over-year backlog comparison is even stronger. Compared to a year ago, on a same-store basis, our backlog has increased by $164 million, which is a 19% increase. The increase is distributed over most of our companies.

We have a good balance in our various end user sectors. Institutional markets, which include government, health care and education, made up 41% of our revenue for 2018. The commercial sector was 37% of our revenue, and industrial and distribution represented the remaining 22%.

Please turn to Slide 7 for our current revenue mix. For 2018, construction is 72% of our total revenue, with 39% from construction projects for new buildings and 33% from construction projects in existing buildings. Our construction business is benefiting from good fundamentals and trends in the nonresidential construction market. We continue to book good projects with some companies booking into next year already.

We have made and continue to make investments in our service business. Service is 28% of our revenue, with service projects providing 9% of revenue, and pure service, including hourly work, providing 19% of revenue. Our service business is doing well and exceeded the first quarter of 2017, both in volume and profits. It is a good investments that we've made and we will continue to make.

Finally, our outlook. Our backlog and pricing environment is strong, and our ongoing prospects are good. We believe that our prospects for revenue growth have improved, and we currently expect mid- to upper single-digit full company revenue growth for the full year. We feel well positioned to execute on these opportunities, and we intend to continue to invest and return capital to our shareholders.

For several years, we have been investing in our service business and expanding our construction capabilities and execution. Those investments have begun to realize their potential. With our backlog at an all-time high, with strength in most of our markets and with good opportunities to invest, we are optimistic about our future.

Thank you, once again, to our 8,900 employees for their hard work and dedication. I will now turn it back over to Lauren for questions. Thank you.

(Operator Instructions) Our first question comes from the line of Tahir (sic) [Tahira].

This is Sean on for Tahira. Congratulations to your team on a great start to the year. Firstly from us, the bookings this quarter were quite a bit stronger than we had expected, and it sounds like you're locking in some work for 2019, perhaps a bit earlier than would be normal. So I'm wondering what's driving that and how you're thinking about pricing and inflation as you decide to commit those resources for the out-year.

Okay, Sean. Great question. And I think what's driving people booking work into 2019 is the labor situation we've talked about for years and is well documented at this point. I think you're seeing good customers, whether or not they be end users or general contractors, seeing work that they are winning now and next year, want to make sure they lock us up. We have the resources and the capability to do that. So you're seeing good customers commit to work early and have us doing that. And in terms of pricing, we think [for] our pricing is pretty stable. It's improved, particularly from the recession over the last few years. So we feel quite good about the work that we're looking, we're taking today. It's work we know. It's work we're comfortable with. It's in our wheelhouse. So I think the rest of this year and the work we've [got] so far next year is good work. Bill, do you have anything to add to that?

No. That's exactly right.

That's great. And then on the service side, it sounds like they really had a great quarter. I'm just wondering if you could speak to the growth profile you're seeing there, generally. I know this has been sort of a share gain story on the service side. And I'm wondering, as that business has gained more and more critical mass, if it's become difficult to maintain the growth rates there and how you're working around that.

First of all, we think the service business is a great business. We have felt that way a long time. The thing you see about service, it's a longer, what I'd call, steady-state growth. The business is stickier. It's a lot more of a sales force. So in terms of the growth rates that we've had, we're still seeing some strong growth rates. I think we've improved our sales capability tremendously. We're hiring in Texas. It's a good place to work, so we are able to attract technicians. And we're going to continue to focus on that, both in training and on bringing on -- continue to bring on new customers. So Sean, I don't think you will ever see a huge spike in growth in service. I think you'll see a nice and steady state, which is what our goal is and what we would like to see. So we are huge fans of the service business, and we are fully committed to it.

All right, great. And then, lastly from me. This one might be a bit more for Bill. We had a big service quarter, but then we also had some early-stage construction work ramping up. So kind of a lot of moving parts on the margin mix. And so, I'm just wondering how we should be thinking about the progression as we move through the year, how we should be building this gross margin and maybe how big of an impact some closeouts on the back end of some of this construction work could be towards the latter part of the year or next year.

So we feel -- 19.2% is higher than we generally experience in a first quarter. Last year, we had 20%, but it was a very light revenue quarter. So we're very happy to see 19.2% when we have a bunch of work starting. We think that bodes well. We think there's no reason to think we wouldn't exceed 20% for the year, which historically is stratospheric for us, although we're all getting used to it now. As far as the way that it will progress through the year, it will be choppy. I mean, when we start work -- when we're in the first 25% of building something, we're not pulling a lot of profit out of these projects. So I think you'll see -- I think you will not see big leaps beyond the 20% mark.

And as far as closeouts late in the year, that's a really perceptive question. I think this year is too early for there to be a whole lot of that. I hope I'm wrong. But at the end of the day, an awful lot of this work just won't be finishing by the fourth quarter. So I think we'll get -- we'll always get -- we always get help in the fourth quarter. But as far as this new -- these new -- this new surge in bookings, I think the closeouts will more be next year on those.

Our next question comes from the line of Adam.

Good morning, guys. Congrats on a great quarter. Brian, is there a little conservatism -- you talked about the top line up mid- to high single digits for the full year. In light of the 15% organic growth in Q1, just curious how much conservatism there might be in that outlook.

What do you think, Bill?

Well, so mid- seems to be pretty easy, right, if you do the math. So here's one thing. We're a little slow to raise that to double-digit just because we're comparing to a light revenue first quarter last year. But obviously, a 15% first quarter comparable is a real head start towards the high single-digits part of that mid- to high single digits. We thought about giving more guidance around that and just given the comparable and given that it's -- it really still is the first quarter...

I think, Adam, if you use high single digits for your model, that's probably -- I think there's probably some conservatism. But for your model, I think that's a good number.

Okay, understood. And then, 2 more. Firstly, just -- you guys didn't do an acquisition this winter. Usually, you do. Can you talk a little bit about the M&A environment?

Yes. So we did, last year, do our biggest acquisition ever. We have a pipeline that's as good as it's ever been. And we probably -- we don't generally do -- close deals in the summer. But we feel great. I mean, right now, I would say our pipeline is -- of people we've talked to for a long time, is very good. So I think I'd say, generally, as optimistic as ever, but that doesn't mean we're about to make an announcement.

And Adam, I'd just like to jump in on the recent one in Tampa. We couldn't be happier with those folks joining Comfort Systems. They've been a terrific performer from a financial standpoint but also just being good citizens and great to have within our company. It's great to have them with us.

Okay. And then lastly, Brian, maybe you can just walk us around the country a little bit, what you're seeing in terms of the bidding environment.

Yes. Yes, okay. So if -- well, if we look at the Northeast for us, which you know goes pretty broad, all the way out to Madison, they just had an unbelievably solid, terrific first quarter. And the bidding activity is still very good. We just got a note from our folks in upper middle New York last night that a bunch of opportunities came our way. So very strong. I think it's going to be good this year and next year up there.

Southeast, the Mid-Atlantic, right, where you live right now, Adam, the activity in that area is just outstanding. And we've seen that with our friends in Greensboro and around the Mid-Atlantic, a lot of good opportunities, very strong bid activity. The Southeast in general is very good. If you're talking about Florida, Tampa, maybe specifically, has more opportunities than probably the industry can do over the next few years. So we're just seeing very strong bid activity east of the Mississippi, very good. And Texas is good, very solid.

West may be a little bit up and down. Denver, terrific performance from our company there, and the bid activity is still very solid. Arizona has picked up considerably coming out of recession. I was there a couple of weeks ago, and we're just seeing a lot of varied markets there, Arizona, New Mexico. California, up and down a little bit, but I think we're seeing good opportunities in service and the small project business there for us. And the Seattle market's pretty good. So I think if you look at that across the country, Adam, we're very happy with the activity and the type of work we're selecting. I think that's the key discipline right now is what work you're taking, make sure it's work you can do and it's at a good price that we want to execute at. So I am probably as -- feeling good about the opportunities out there as I've felt since I've been here.

Our next question comes from the line of Joe.

So my first question, I wanted to ask -- you put this slide in every presentation regarding sort of the breakout new construction, retrofits. And it looks like the new construction as a percentage of revenue really hasn't changed a whole lot. And one of the concerns has been new construction becoming sort of a bigger piece, and that's why the gross margins are falling year-over-year. But I'm just wondering, why is new construction not becoming a bigger piece of revenue if the reason why gross margins are falling?

I'd say give it time. It went from 38% to 39%, but that was a full year it was comparing to. And obviously, we're in a first quarter, not our heaviest construction quarter, right? A lot of it didn't pick up until March. I'd just say give it time. But construction was up 2% on the whole number; 1% of that rounds out of existing project work, but just give it time. Construction -- and 1% is a lot, by the way. 1% of $2 billion is not inconsequential.

And like we say, Joe, we're -- as Bill has said a couple times, we're just starting some of this work. Plus, work in existing buildings, I know it sounds like it's small, but you can have a significant project in existing buildings, add on to a hospital or something, it's bigger than one sometimes thinks. So, I think we're in the early days of that.

One other thing, I would say, is Comfort -- people like you and a lot of people on this call who have been around us for a long time, one of the things that's changed since the last time we were in very robust markets is that the acquisitions that we've done have skewed us more into industrial and heavier work as a proportion of our revenue. A higher proportion of that work at all times is in existing plants, right? They tend to add to their plants. They tend to build -- it's only new construction when you're building it straight out of the ground. But a lot of those guys, they plan for multiple additions when they -- so some of that work looks kind of like new construction. But I don't think we're headed back towards the levels of new construction you saw in the past because our business has changed.

Okay. And in your Qs, you break out your projects based on the amount of revenue per project. It looks like it hasn't changed a whole lot in terms of the breakout, but it does look like the one, the most -- your most projects are less than $1 million. The next category, $1 million to $5 million, that looks like has -- is the one sort of category that sort of picked up. So could you talk about that and the margin breakout of those kind of -- what kind of projects they are, margin, pricing, that's -- anything?

But Joe, if you look at the projects over $5 million for us, it's increased probably 10% by number and 20% by revenues. So we're up a little bit. They also -- the other thing -- and I -- as I mentioned a few minutes ago, we are trying to remain disciplined on what work we're taking. For example, we've talked a lot about a job up on the east coast that had $67 million worth of mechanical, but it's a job we know how to do. So on larger work, we are being very disciplined about the type of work it is, who is the customer, where it is and what's our capability. So that number could be bigger, but we are not falling for that. We are really trying to hold to our principles and what we believe in -- that we can execute. So Bill, do you want...

Yes. As far as margins go, we get great margins on work between $1 million and $5 million. So it doesn't hurt our feelings if that's a lot of what we're doing.

Yes. We'll do that all day long.

Okay. I guess, what I'm -- I guess I'll ask another question. Could you talk about if there's -- in the backlog and the orders that you received in the first quarter, even going back to the fourth quarter, are you seeing any higher-margin type projects, whether it's hospitals or whatever other work that you might see? I'm just wondering, outside of the breakout between new construction and retrofit, which I know that sort of dynamic in terms of type of projects. Are you seeing any fluctuation in different kinds of margin-type projects? Or has it been sort of consistent?

Joe, by the way, while you were talking, I took a look at our project numbers and stuff. Part of the reason you're not seeing an upturn in the big end of our projects is a lot closed out over the winter. So that they replace. So in the new bookings, we have a few bigger projects than we've had in a while. So one project can be pretty big. As far as whether we're seeing higher-margin stuff, I mean, we -- Brian said we're getting pricing. We have the opportunity for a higher margin. Now we've got to go execute. But we -- we've done pretty well at that. So we feel...

It's one thing, [bid] margin, Joe. It's what the fiddler pays us when we're all done.

Right, right. Also, the weather in the Northeast and even up until a week or 2 ago in sort of the Northwest, it was pretty bad, historically bad. Did that -- do you think that affected any work or anything in the first quarter?

Thanks for asking it because we don't like to talk about the weather. But having said that, we will. We -- if you looked at the Northeast, in particular, New England and where you're located, our service business really benefited from that extreme cold, particularly over the holidays through January. We saw a lot of equipment breakage, particularly newer equipment. So we really were very busy. And usually, construction gets hampered significantly by bad weather, particularly snow. But we had a lot of our construction work up there that was already -- in the ground was done and we're inside the building. So we were able to work through it. So I think it helped a little bit it. It slows you down, of course, when you lose some time with weather that was that bad. But our service business was very good, and construction hung in there, Joe. More so than it normally would considering the weather that we had.

Great. And just last question from me. Bill, the -- usually when you make an acquisition, you bring on a good amount of amortization related to the backlog, but then it usually falls off within 12 to 18 months. So I'm just wondering with this record BCH acquisition and with the fact that you really haven't made any acquisitions this past winter, what is the amortization expense going to look like over the next few quarters? Are we expecting that to fall off at all?

Actual amortization in '17 was $17.4 million. You can pull that out of our financials. Once a year in the 10-K, we are required to publish sort of a future look forward of amortization based on what we know. And if you look at that, we were projecting $13.8 million of amortization for this year. It's right in the 10-K. So that is obviously a couple million bucks of improvement if we didn't do something else.

I will say, we also do some tuck-ins. So there are some number of hundreds of thousands. When you see that, even if we don't do an announced deal, we still buy companies that are immaterial for financing statement purposes that -- so they're not announced. If we didn't do anything else that's announced, you'd see probably amortization this year come in, in the mid-14s or the high 14s is my guess. So hopefully that helps you.

Okay, okay. So we were actually at a run rate of $3.8 million in the first quarter, which gets you to over $15 million if you annualize that. So essentially, if you're at $14 million to $14.5 million or so, you may see that expense come down a little bit throughout the year if you don't make any...

Yes, come down or flat -- come down or materially flat. It won't go -- unless we do a big deal, it won't go up because it is a sinking pool. Every quarter, the amount you amortize is lower than the quarter before, except for some reason for the second quarter with a couple of the categories that you have to do with crazy math. So you -- yes, it just slowly comes down. It's built in. It's a nice built-in improvement. Of course, you pay for that upfront with -- because you do these acquisitions and you don't get much from them at first. By the way, BCH was accretive for us this quarter, but just like $0.01 because they're still -- they still have this amortization between them and the final net income line.

Our next question comes from the line of Brent.

Hey, guys, great quarter again. Brian or Bill, I want to get your thoughts around the backlog. Obviously, a tremendous book of business right now. I guess with the operations and the people you have in place today, do you have the ability or capacity to take it up to, I don't know, $1.2 billion or $1.3 billion or even higher without having to make a big investment in people and equipment?

So that's a good question. Right now, we're in good shape. And a lot of it is not so much the actual number that it is, it's when it's coming, right? So right now, we have a pretty good percentage into 2019. We could take on, depending on where we are, a little bit more work this year. We probably could go up to the numbers you're talking about if it was spread out. But if someone brought that and said I've got to do it over the summertime, that would not be doable today. But back half of the year, leading into next year, we could hit the numbers that you mentioned.

And let me take advantage of your question to just point something out. So we frequently, subject to the trends in the market, in a steady-state, we are going to book more over the winter most of the time -- and net book more over the winter most of the time. It's our lower revenue quarter, so we're burning less. And then even a flat backlog number in the 2 summer quarters is bullish, right, because you're burning so much in busy times that if you're replacing that, that's bullish. So I just want to remind people of our cyclicality on that.

And I also want to say, this was a big backlog increase, $130 million in a quarter, after a big jump in the fourth quarter of last year. I mean, that's -- our backlog is lumpy, and those are 2 gigantic increases. We thought we might go above $1 billion this quarter. We didn't think we'd be $80 million above $1 billion. So this is -- good news is, it doesn't matter what you get -- when you get it, it's that you get it. Well, we got it and then lets you flow a bunch of cash from it and you don't waste the cash, and that's what we plan to do.

Okay. I mean, it sounds like both the business, I mean, could support it and it sounds like the market's strong enough to potentially support that level of backlog. I mean, is that -- am I hearing that right?

Yes, yes.

I mean, we could. Yes.

I'm saying that sitting here. I bet you some guys out on the field are going, "You come and do it, Brian." But yes, absolutely. Absolutely, yes. I know it can -- could.

Brian still has a toolbelt.

Yes. It might help us.

I'm sure you'd do just fine. Maybe just a follow-up, you talked about some of the work going out into '19. I want to get your thoughts in terms of cost inflation in steel and other things, not necessarily labor out there. Are you -- I mean, do you view yourselves as kind of agnostic to that in some of these larger projects?

So most of the things we buy and provide to our customers, we have very little risk (inaudible). Like the equipment, we get a price for that before we quote somebody. And they -- so we really almost take no risk on that. There are a few areas where we take just a little bit of risk, and that's the commodity items, and steel is one of those. I will say that many of our companies that had projects pre-brought, pre-committed to a bunch of steel to lock their pricing in, in the first quarter, I had to approve a few things that was outside of our ordinary parameters, where you'd have to go and get an approval.

I think we are planning well for that. But the reality is, steel can hurt us. But it's in the -- it's not material, right? If you just look at it as a percentage of our cost of goods sold, even if we miss it by 7.5% or 10% or something, it's in the hundreds of thousands, not the millions. So we feel every $0.01 counts and our guys are all over it. And obviously, when inputs go up, that's not a good thing. But as you know, we live or die -- what we sell is skilled labor.

And also, by the way, many of our contracts have price escalation clauses. We take advantage of this kind of a market to say to people, "you need to pay us to pre-buy it and we need to store it." And guess what? When the headlines are what they are, sometimes you can make money on that conversation and rightfully so. People want to protect themselves, and it's not right for them to ask us to take that risk. And they understand we want to be either compensated for the risk or we want to be protected from the risk. So this isn't our first rodeo, right?

Yes. Yes, understood. Maybe a follow-up on the M&A question. I know you guys are, for lack of a better word, serial acquirers over time. But look, the core business looks great, organic growth looks really strong. I mean, are you more inclined to walk away from deals right now just given the strength of the core business?

We do not buy acquisitions on a quota. We buy a company when we have conviction that they will be a fantastic partner for our other companies. And we do it when we get a price that we think will give a fair return to our shareholders. So I think we've proven over the years that it doesn't -- we don't sweat if we go 1 year, 1.5 years without a deal. And we don't mind doing 2 deals in a year, and that's exactly what we're going to keep doing. And -- but I will say, there are companies that are at a time when it's logical for them to sell. Many of them view us as a fantastic partner for -- really, the best destination for their people. And I'm generally optimistic about the prospects that are out there for us, for us to really continue to bring good partners into our business that help us get better.

Yes, okay. And then, maybe one on SG&A. It looks like it was flat on an absolute basis (inaudible) 4Q. With the growth you're alluding to this year, the mid- to high single digits, presumably can you sustain that in kind of that $70 million to $75 million range through the year? At least on a quarterly basis, or does it [break out] from here?

I think that the dollar amount will go up a little as the year goes on. We'll be accruing for hopefully some big bonuses for everybody from project managers to presidents. I think we'll continue to get most of the kind of the leverage you saw in the first quarter for most of the year. And then us, yes. We do have -- we will now have -- after April 1, we've owned BCH for 1 year, so we'll have true comparables on SG&A. But we are happy to invest. I mean, you go from 300 -- if your revenues go up $65 million, $85 million in a quarter, there's some money that's got to be spent. There are people who have got to build for that and manage it, truthfully, make filings and get permits and do all sorts of things, right?

And it's good money to spend.

Okay. If I could just sneak one more in, just back on kind of the pipeline and the larger construction jobs. Given you guys are kind of later in the project cycle of what you do. How many of these jobs, by the time you book it, have already broken ground?

So 1 year or 2 ago, all of them. By the time they actually meet our definition of backlog. Maybe a few haven't now. Because people really are -- they reach a point where people realize, hey, 2000 -- summer of 2018, not everybody who wants a building gets one. But I -- most likely, the summer of 2019 there will be people who say -- who go to the GC and say, "Hey, okay, build me a building, I'm ready to go." And the GC will be explaining a year later why there's not a building because frankly...

I would say, yes, most of the stuff for next year hasn't yet -- but pretty much, it's going to go.

In some form, it's broken ground by the time it meets our definition of backlog. Keep in mind, they've already given us a notice to proceed, we might have been out there putting in underground. Sometimes, we just can't get to our definition of backlog because their plans aren't final enough for us to have a number that it can be put into a contract and understood. But we have great relationships with our customers, and they say, "Hey, go get started." So we frequently have significant revenue before we actually put something in our backlog. In fact, we almost always have revenue before it goes into our backlog on construction projects.

At this point, I'd like to turn the call over to Brian Lane for closing remarks.

Okay, thank you. And thank you all for participating in today's call and your interest in our company. We are pleased with our start to the year, and we look forward to continuing the momentum for the rest of the year. We look forward to seeing everybody on the road shortly and hope you all have a great weekend. Thank you.

Thanks.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect, and have a great day.