Message from the President, Ryan Rastetter

As summer approaches, I want to take a moment to share some updates on last year, this last quarter and our priorities for the remainder of the year. This last year tested our industry in real ways and the foundation you have helped build is exactly why I am optimistic about what comes next.

The Industry Landscape: Real Headwinds

 A few external forces converged at the same time created a more difficult than anticipated 2025:

• Mild weather. We had only 3 days over 90° (with no consecutive days) and zero days below 32°.  This means fewer emergency replacements and less urgency-driven demand.
• A softening housing market. Pending sales are down 34% from 2021, active listings are up 283% and permits across King and Pierce Counties have dropped 74%; with single-family permits down 53%. Fewer homes changing hands means fewer HVAC systems being replaced.
• Industry and Costco contraction. AHRI shipments are down 23% since 2022, and our Costco channel has contracted by roughly two-thirds over that same period (this is almost entirely associated with lead volume).

 Combined, those forces were impactful in 2025 and the start of 2026.  But here is the important context: this is a deferred-demand cycle, not a lost one. Every home in Western Washington with an aging HVAC system is still a future replacement — and we are positioning ourselves (better than ever) to be the first call when that day comes.

What Is Working Really Well

Even against those headwinds, 2025 gave us a lot to build on:

• Our Comfort Club Membership Program is stronger than ever. We are approaching 6,000 members and growing at roughly 12% per year. Our cancellation rate has fallen from 28% to 10%, and new sales are up 2.5%. That recurring revenue base protects us in any market and demonstrates that Customers see value in our team and what we offer.
• New Construction and Commercial are holding margins and Sales
• Google reviews crossed 1,200 five-star reviews. We are averaging over 100 reviews a month.  This is a direct reflection of the quality of work in the field and the follow-up and communication from the office. In comparing this to 10 other competitors, not one receives more reviews than we do monthly.  Thank you for that.
• Service and Retro held the line. Service grew 5%, and non-Costco Retro is up 2%.  This is significant.  Most companies we hear from were dramatically smaller in 2025 than years prior from the retrofit perspective.  Any growth is an achievement in this department based on the previously mentioned headwinds.

The underlying business is healthier today than it was at the peak of the cycle. That is a credit to all of you.

Our 2026 Focus: Efficiency and Effectiveness

2026 is about efficiency and effectiveness; Doing more with what we already have and making sure diligent about how we spend our time and resources.

Here is what that looks like at the individual level — the places where each of us moves the needle:

• Estimated hours vs. actual hours. This is one of our key measurables for 2026. Knowing where time is going — and closing the gap between what was estimated and what it actually took along with Idle and non-Job time.
• Ask for the review on every job. Our target is 1200 more 5-star reviews. Please ask on every job, in the field and in follow-up calls from the office.
• Ask for the membership. Our path to 6,500 members runs through the conversations you are already having with customers. Don’t forget to bring this up.
• Leverage the systems we have invested in. Standard operating procedures followed by all is the pursuit. Flag what is not working so we can fix it.
• Bring up issues and help resolve them. The survey told us we are good at raising issues but only resolving about 40% of them. That gap is where efficiency lives.

Our Top Priorities for 2026

To keep us pointed in the same direction, here are the priorities we are focused on for the year:

1. Align overhead to market demand — making sure our cost structure matches the realities of today’s market. Reduce our physical footprint by exiting Redmond and finalizing the Everett plan is the main lever we are pulling to align our overhead spend.
2. Optimize the Costco program economics so the channel works for us at today’s volumes.  Introducing Carrier to the channel is already providing benefits.
3. Grow membership and review generation — 6,500 memberships and 1,200 Google 5-star reviews.
4. Strengthen marketing and brand execution – focused on customer acquisition and retention.
5. Build the operational backbone — SOPs, and measurables for every department;

Thank you for the work you put in this year and everything you do to make our customers comfortable.  You are truly what makes us The Comfort People.