Company Overview - Comfort Systems USA, Inc. maintains a disciplined approach to acquisitions in 2025, supported by a strong balance sheet and a focus on long-term growth [1][4] - The company ended Q1 2025 with over $130 million in net cash, despite returning $92 million to shareholders and funding $80 million in acquisition-related earn-outs [3][10] Recent Acquisitions - In Q1 2025, Comfort Systems acquired Century Contractors, a mechanical contractor expected to contribute approximately $90 million in annual revenues [2][10] - The company emphasizes that acquisitions are a key part of its strategy, particularly in strengthening end-market capabilities and regional presence [2][4] Financial Performance - Comfort Systems has a record backlog of $6.9 billion as of March 31, 2025, which supports its long-term growth focus [3][10] - The earnings estimates for 2025 and 2026 have trended upward to $19.28 and $20.41 per share, indicating year-over-year growth of 32.1% and 5.8%, respectively [15] Market Position - Comfort Systems' stock has gained 56.4% in the past three months, outperforming the industry and the S&P 500, which rose by 18% and 18.1%, respectively [11] - The stock is currently trading at a forward 12-month price-to-earnings ratio of 26.55X, which is a discount compared to industry peers [13] Strategic Focus - The company continues to evaluate additional acquisition opportunities, indicating that M&A remains a meaningful priority in its capital allocation framework [2][4] - Management's focus on quality targets over deal volume suggests a measured approach to long-term value creation [4]

Financial Data and Key Metrics Changes - The company reported revenues of $3,870,000,000, reflecting a year-over-year growth of 12.7% [4][14] - Operating income was $318,800,000 with an operating margin of 8.2%, and diluted earnings per share increased by 26% to $5.26 [5][19] - Non-GAAP adjusted operating income was $328,100,000, or 8.5% of revenues, with non-GAAP adjusted diluted earnings per share of $5.41, representing a 29.7% increase [5][27] - Remaining performance obligations (RPOs) grew to $11,800,000,000, a 17.1% organic increase year-over-year, and a 28.1% increase including Miller Electric [10][11] Business Line Data and Key Metrics Changes - Electrical Construction segment revenues increased by 42% year-over-year, while Mechanical Construction segment revenues grew by 10.2% [5][15] - The Electrical Construction segment generated $1,090,000,000 in revenues, driven by data center projects and healthcare [15][20] - The Mechanical Construction segment reported revenues of $1,570,000,000, with significant growth in data centers and healthcare [15][16] - U.S. Building Services revenues decreased by 4.9% to $742,600,000, primarily due to reduced site-based revenues [17][18] - Industrial Services revenues increased by 1.4% to $359,000,000, impacted by a slower start to the turnaround season [18][24] Market Data and Key Metrics Changes - RPOs in networking communications (data centers) reached $3,600,000,000, up 112% year-over-year [11] - Healthcare RPOs increased by 38% year-over-year to $1,500,000,000, with Miller Electric contributing significantly [12] - Manufacturing and industrial RPOs grew by 31% year-over-year to $1,100,000,000 [12] - Hospitality and entertainment RPOs more than doubled year-over-year to $437,000,000 [12] Company Strategy and Development Direction - The company plans to continue focusing on mechanical services within the Building Services segment, aiming for an 80/20 split between mechanical and site-based services [58] - The integration of Miller Electric is on track, enhancing capabilities and expanding market opportunities [6][10] - The company is optimistic about managing tariff uncertainties and expects to pass on price increases to protect margins [30][31] - The company emphasizes continuous training and sharing best practices to navigate a volatile environment [33][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for services, as reflected in the growth of RPOs [31] - The company anticipates that the normalization of trade barriers will positively impact operations in the long term [31] - Management highlighted the importance of maintaining operating margins and managing costs effectively throughout the year [34] Other Important Information - The company reported a cash balance of just under $577,000,000, with $250,000,000 borrowed for working capital needs [28] - Operating cash flow was $108,500,000, down from $132,300,000 in the previous year, but still considered strong for Q1 [28][64] Q&A Session Summary Question: What are the operational risks related to tariffs or supply chain noise? - Management indicated that the guidance was more related to macroeconomic uncertainties rather than growth-related issues [40][42] Question: What is the outlook for high-tech manufacturing opportunities? - Management expressed optimism about growth in the pharma and semiconductor sectors, driven by reshoring trends [46][48] Question: How is Miller Electric impacting the Electrical segment margin? - Miller Electric is currently dilutive to the margin due to intangible asset amortization, but margins are expected to normalize over time [52] Question: What are the growth prospects for the data center business? - The company has seen increased demand for power and is expanding into more markets, with a balanced growth approach between existing and new markets [97][98] Question: How does the RPO growth compare to revenue growth guidance? - The RPO growth includes a higher percentage of long-term projects, with a mix of construction and mechanical services driving the growth [90][92]

Financial Data and Key Metrics Changes - The company reported revenues of $3,870,000,000, reflecting a year-over-year growth of 12.7% [5][15] - Operating income was $318,800,000 with an operating margin of 8.2%, and diluted earnings per share were $5.26, representing a 26% increase from the first quarter of 2024 [6][20] - Non-GAAP adjusted operating income was $328,100,000 or 8.5% of revenues, with non-GAAP adjusted diluted earnings per share of $5.41, an increase of 29.7% [6][27] Business Line Data and Key Metrics Changes - Electrical Construction segment revenues increased by 42% year-over-year, while Mechanical Construction segment revenues grew by 10.2% [6][16] - The Electrical Construction segment generated $1,090,000,000 in revenues, driven by data center projects and healthcare [16][21] - Mechanical Construction revenues were $1,570,000,000, with significant growth in data centers and healthcare [17][21] Market Data and Key Metrics Changes - Remaining Performance Obligations (RPOs) grew to $11,800,000,000, a 17.1% organic increase year-over-year, and a 28.1% increase including Miller Electric [11][12] - RPOs in networking communications (data centers) reached $3,600,000,000, up nearly 112% year-over-year [12][13] - Healthcare RPOs increased by 38% year-over-year to $1,500,000,000, with Miller contributing significantly [13] Company Strategy and Development Direction - The company plans to continue focusing on mechanical services, shifting the revenue mix from site-based services to mechanical services [62] - The integration of Miller Electric is on track, enhancing capabilities in key market sectors [8][11] - The company aims to manage tariff uncertainties and supply chain disruptions proactively while maintaining strong operating margins [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's growth prospects despite macroeconomic uncertainties, emphasizing strong demand reflected in RPOs [32][34] - The company anticipates continued growth in high-tech manufacturing, particularly in pharmaceuticals and semiconductors, driven by reshoring trends [47][51] - Management highlighted the importance of maintaining operational discipline and cost management to navigate potential challenges [34][65] Other Important Information - The company reported a cash balance of just under $577,000,000 after the Miller Electric acquisition and share repurchases [28] - Operating cash flow was $108,500,000, down from $132,300,000 in the previous year, but still strong for the first quarter [28][66] Q&A Session Summary Question: Clarification on guidance range and operational risks - Management indicated that the guidance range reflects macroeconomic uncertainties rather than growth-related concerns, with confidence in maintaining margins [41][44] Question: Opportunities in high-tech manufacturing - Management expressed optimism about growth in pharmaceuticals and semiconductors, anticipating increased spending in the coming years [47][51] Question: Impact of Miller Electric on Electrical segment margins - It was noted that Miller Electric is currently dilutive to margins due to intangible asset amortization, but strong margins are expected once this is excluded [53] Question: Future direction of Building Services segment - The focus will be on mechanical services, with a shift in revenue mix expected to favor this area significantly [61][62] Question: Data center business growth sources - Growth has primarily been organic, with a balanced contribution from existing and new markets [102] Question: EPS guidance and contributing factors - Guidance considers the impact of Miller and transaction expenses, with a wide range due to macroeconomic uncertainties [75][76]