Comfort Systems USA, Inc. (FIX) successfully completed the acquisition of Summit Industrial Construction, LLC. Summit, a specialized industrial mechanical contractor, enhances Comfort Systems' capabilities in engineering, design-assist, and turnkey construction services for modular systems.Shares of Comfort Systems have gained 3.5% during the trading session on Feb 1 and 0.9% in the after-hour trading session on the same day.Serving advanced technology, power, and industrial sectors, Summit brings a stellar ...

LITTLE ROCK, Ark.--(BUSINESS WIRE)--The Stephens Group, LLC (“The Stephens Group”) today announced that it has closed its previously announced sale of Summit Industrial Construction, LLC (“Summit”) headquartered in Houston, Texas, to Comfort Systems USA, Inc. (NYSE: FIX) (“Comfort Systems”). Summit is a specialty industrial mechanical contractor offering engineering, design-assist and turnkey, direct hire construction services of modular systems serving the advanced technology, power, and industrial sect ...

SALT LAKE CITY--(BUSINESS WIRE)--Crewe Capital (Crewe), one of the nation’s leading boutique investment banks, has successfully orchestrated a pivotal transaction for J & S Mechanical Contractors, Inc. (J & S), securing a strategic acquisition by Comfort Systems USA Inc. (NYSE: FIX). Crewe served as the exclusive transactional advisor to J & S, a West Jordan, Utah-headquartered mechanical construction services firm, to deliver on the owners’ desires to source a partner to continue the company’s long hist ...

HOUSTON--(BUSINESS WIRE)--Comfort Systems USA, Inc. (NYSE: FIX) (the “Company”) today announced that it has closed its previously announced transaction to acquire Summit Industrial Construction, LLC (“Summit”) headquartered in Houston, Texas. As previously disclosed, Summit is a specialty industrial mechanical contractor offering engineering, design-assist and turnkey, direct hire construction services of modular systems serving the advanced technology, power, and industrial sectors. Summit’s capabilities ...

Revenue and Profitability - Revenue for Q3 2023 increased by $258.1 million, or 23.0%, to $1.38 billion compared to Q3 2022, driven by a 20.0% increase in same-store activity and a 3.0% contribution from the Eldeco acquisition [160]. - Gross profit for Q3 2023 was $277.5 million, representing a gross margin of 20.1%, compared to $202.2 million and 18.1% in Q3 2022 [159]. - Net income for Q3 2023 was $105.1 million, a 7.6% increase from $61.5 million in Q3 2022 [159]. - Revenue for the third quarter of 2023 reached $1.38 billion, a 23% increase from $1.12 billion in the same quarter of 2022 [204]. - Gross profit for the third quarter of 2023 was $277.5 million, compared to $202.2 million in the third quarter of 2022, reflecting a significant increase [204]. Backlog and Projects - The backlog as of September 30, 2023, was $4.29 billion, up from $4.06 billion at December 31, 2022, with the mechanical segment accounting for 72.7% and the electrical segment for 27.3% [165]. - The company had 10,412 projects in process as of September 30, 2023, with an average contract price of approximately $1.0 million [166]. Segment Performance - The electrical segment revenue for Q3 2023 increased by $85.6 million, or 32.8%, to $346.8 million, primarily due to the Eldeco acquisition and increased activity in the technology sector [162]. - The acquisition of DECCO, Inc. is expected to contribute annualized revenues of approximately $55 to $65 million, enhancing the mechanical segment [204]. Operating Leases and Expenses - The weighted average discount rate for operating leases as of September 30, 2023, was 5.8%, compared to 4.3% at December 31, 2022 [171]. - Operating lease expense for Q3 2023 was $25.7 million, up from $13.1 million in Q3 2022 [174]. - Total lease payments amount to $301.49 million, with a present value of operating lease liabilities at $214.8 million as of September 30, 2023 [179]. - Operating lease right-of-use assets increased to $209.1 million as of September 30, 2023, up from $130.7 million at the end of 2022 [193]. - Rent paid to related parties for the three months ended September 30, 2023, was approximately $1.9 million, compared to $1.7 million in the same period of 2022 [192]. Compliance and Financial Health - The company was in compliance with all financial covenants as of September 30, 2023 [189]. - Future principal payments of notes to former owners total $47.1 million as of September 30, 2023 [190]. Share Repurchase and Gains - The company repurchased 0.1 million shares for approximately $8.6 million at an average price of $134.53 per share during the nine months ended September 30, 2023 [202]. - The company recorded a pre-tax gain of $6.8 million in Q1 2023 from legal settlements, impacting gross profit positively by $6.6 million [196]. Maintenance and Repair Services - Approximately 11.2% of revenue comes from maintenance and repair services on installed systems, which typically take a few hours to a few days to complete [168].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-13011 COMFORT SYSTEMS USA, INC. (Exact name of registrant as specified in its charter) Delaware (State or other ...

Financial Performance - Revenue for the first quarter of 2023 was $1.2 billion, an increase of $289 million or 33% compared to last year [45] - Gross profit was $205 million for the first quarter, a $52 million improvement compared to a year ago [24] - Free cash flow for the first quarter was $111 million, driven by advanced billings and deferred revenue [10] - Net income for the first quarter was $57 million or $1.59 per share, with a quarterly EPS increase of 66% [50][51] Business Line Performance - Mechanical services segment revenue increased by 35% to $236 million, while electrical services segment revenue increased by 26% [45] - Service revenue grew rapidly, increasing by 21% compared to last year, with service projects providing 9% and pure service providing 11% of total revenue [35][57] - Margins in the electrical segment rose to 16.1% from 13.0% in 2022 [25] Market Performance - Industrial customers accounted for 51% of total revenue, marking the first time this sector surpassed 50% of volume [11] - Institutional markets, including education, healthcare, and government, represented 28% of revenue [34] - The backlog at the end of the first quarter was a record $4.4 billion, with a same-store increase of $1.6 billion or 58% from a year ago [22][55] Company Strategy and Industry Competition - The company remains optimistic about continued growth and strong profitability in 2023, driven by strong demand and execution [36] - The company is focusing on expanding its modular construction capacity and investing in new technology [56][53] - The competitive landscape is evolving, with a focus on maintaining a skilled workforce and adapting to market changes [71][102] Management Commentary on Operating Environment and Future Outlook - Management noted that the demand environment is expected to remain strong due to government funding and advanced bookings [5][36] - There is uncertainty regarding the impact of tax changes on cash flow and potential M&A opportunities [73][99] - Management emphasized the importance of backlog as a key indicator of future performance, with no current signs of demand weakness [77] Other Important Information - The company increased its dividend by $0.025 per share to $0.20 per share, reflecting strong cash flow [44] - Capital expenditures for the quarter were $17 million, an 80% increase compared to the prior year [31] - The company is facing a cash flow headwind due to changes in the deductibility of research expenditures [52] Q&A Session Summary Question: How is the company managing cash flow uncertainty? - Management indicated that strong cash flow allows for flexibility in capital expenditures and M&A activities [62] Question: What are the expectations for backlog dynamics? - Management noted that while backlog may decline as inflation moderates, underlying demand remains strong [68] Question: How is the service business continuing to grow? - The company has made significant commitments to training and expanding its service capabilities, contributing to growth [79] Question: What is the outlook for modular construction capacity? - Management confirmed that capacity additions are on schedule and they are evaluating opportunities for further expansion [87] Question: How does the company view the M&A landscape? - The company is taking a patient approach to M&A, focusing on high conviction opportunities [89]

Free Cash Flow—We define free cash flow as cash provided by operating activities, less customary capital expenditures, plus the proceeds from asset sales. We believe free cash flow, by encompassing both profit margins and the use of working capital over our approximately one year working capital cycle, is an effective measure of operating effectiveness and efficiency. We have included free cash flow information here for this reason, and because we are often asked about it by third parties evaluating us. How ...

Financial Data and Key Metrics Changes - The company reported a revenue of $1.1 billion for Q4 2022, an increase of $261 million or 30% compared to the previous year [10] - Full year revenue surpassed $4 billion, reflecting a growth of over 35% compared to 2021 [38] - Net income for Q4 2022 increased by over 40% to $55 million or $1.54 per share, compared to $38 million or $1.04 in Q4 2021 [16] - EBITDA for Q4 increased by 47% to $100 million, while full year EBITDA rose by 32% to $338 million [17] - Full year gross profit margin was 17.9% in 2022, down from 18.3% in 2021 [13] Business Line Data and Key Metrics Changes - Mechanical Services segment revenue increased by $636 million or 25%, while Electrical Services segment revenue surged by 81% to $431 million [12] - Same-store revenue increased by 22% or $669 million in 2022, driven by strong market conditions and inflation in equipment and materials [12] - Gross profit for Q4 2022 was $211 million, a $57 million improvement compared to the previous year, with a gross profit percentage of 18.9% [6] Market Data and Key Metrics Changes - Industrial customers accounted for 48% of total revenue in 2022, with strong representation in new backlog [23] - Institutional markets, including education, healthcare, and government, represented 31% of revenue [23] - Construction made up 78% of full year 2022 revenue, with service revenue exceeding $900 million, constituting 22% of total revenues [24] Company Strategy and Development Direction - The company plans to continue investing in workforce, technology, and execution capabilities to maintain its competitive edge [26] - The acquisition of Eldeco is expected to strengthen the Electrical segment and contribute annualized revenue of approximately $130 million to $140 million [45] - The company aims to double its modular production capacity to over 2 million square feet by mid-2023 [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for continued profitability and strong gross margins in 2023, despite potential pressures from inflation and cost increases [14] - The company anticipates same-store revenue growth in the low to mid-teens for 2023, with larger percentage increases likely to occur earlier in the year [39] - Management highlighted ongoing demand and a record backlog as indicators of expected growth and profitability in 2023 [25] Other Important Information - The company repurchased 442,000 shares at an average price of $86.45 in 2022, totaling 10.1 million shares repurchased since 2007 [20] - Interest expense in 2022 was higher due to increased interest rates, with an average interest rate of 5.7% on the credit facility [42] - The company expects capital expenditures for 2023 to be between $55 million and $70 million, driven by investments in production facilities [45] Q&A Session Summary Question: What percentage of sales does modular construction currently make up, and what is the outlook for the next five years? - Management indicated that modular currently accounts for about 10% of revenue and is expected to grow to around 15% as new capacity comes online [29][56] Question: How far out is the backlog booked, and are there signs of slowing? - Management confirmed that they are in good shape for 2024 and have capacity to take on more work [58] Question: What is the outlook for gross margins in 2023 and 2024? - Management expects gross profit margins for 2023 to be similar to those achieved in 2022, despite potential pressures from new construction and early project stages [71] Question: Can you discuss the Eldeco acquisition and the M&A pipeline? - The acquisition of Eldeco is seen as a strategic move to enhance capabilities in the Electrical segment, with a cautious approach to future acquisitions due to existing backlog [107][111] Question: What factors could influence margin performance this year? - Management noted that deflation could be a tailwind if it materializes, but emphasized a long-term perspective on margin management [112][113]

We plan to continue to maintain and strengthen internal controls and procedures to enhance the effectiveness of our disclosure controls and internal controls over financial reporting. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Any failure of our disclosure controls and procedures or internal controls over financial reporting could harm our financia ...