Summary of Comfort Systems USA (FIX) Conference Call - June 12, 2025 Company Overview - Comfort Systems USA operates in the mechanical and electrical construction sector with approximately 19,000 employees, 85% of whom are skilled craft professionals such as pipe fitters, welders, and electricians [3][4] - The company has 48 operating companies across the U.S., primarily serving tier cities and larger southern cities like Houston, Dallas, and Orlando [5][6] - The company’s revenue breakdown includes 62% from industrial projects, with a significant portion in technology, pharmaceuticals, and healthcare [6][8] Core Market Insights - **Data Center Demand**: The company reports robust demand in the data center sector, with no signs of slowdown in capital expenditures. Both modular and traditional construction segments are performing well [10][12] - **Customer Expectations**: Data center owners are described as demanding, requiring high-quality work and timely project completion. Comfort Systems has established strong relationships with these clients, which aids in securing contracts [14][15][17] - **Modular Construction**: The modular business has evolved from pharmaceuticals to data centers, with a focus on programmatic construction that allows for efficiency and repeatability [19][20][26] Financial Performance and Capacity - The company has increased its modular capacity from 2 million square feet at the end of 2023 to 2.5 million square feet [33] - The service business is growing but is outpaced by construction growth. The company has a centralized system to assist service technicians, enhancing efficiency [67][70] Industry Trends - **Reshoring**: The trend of reshoring U.S. industry is seen as a multi-year growth driver, benefiting Comfort Systems due to its workforce being located in right-to-work states [51][52] - **Healthcare Sector**: Post-COVID, there is an increase in hospital construction and urgent care facilities, indicating a recovery and growth in the healthcare sector [46][48] Challenges and Strategies - **Talent Acquisition**: The company emphasizes the importance of hiring and retaining skilled labor, with competitive wages and benefits being crucial [63][64] - **Project Complexity**: Comfort Systems aims to focus on complex projects, collaborating across its companies to leverage scale and capacity [35][36] Technology and Innovation - The company is investing in Building Information Modeling (BIM) and digital project management tools to enhance project efficiency and stay ahead of competitors [41][43] Cultural Aspects - The company highlights the importance of culture in attracting and retaining skilled tradespeople, which is a significant differentiator in the industry [76][77] Conclusion - Comfort Systems USA is positioned well within the mechanical and electrical construction industry, with strong demand in data centers and healthcare, a growing modular capacity, and a focus on talent retention and technological advancement. The company is navigating industry challenges while capitalizing on trends like reshoring and modular construction.

Financial Data and Key Metrics Changes - The company reported revenue of $189 million for the first quarter of 2025, reflecting an increase of over 17% compared to the previous year [16] - Adjusted EBITDA doubled to $8.2 million, with an adjusted EBITDA margin improving by 180 basis points to 4.3% [18][19] - Consolidated gross profit margin increased to $23 million, or 12.2% of revenue, up from 9.7% in the same period last year [16][18] Business Line Data and Key Metrics Changes - Marine revenue increased by over 19%, while concrete revenue rose by 13% [16] - Adjusted EBITDA margin in the Marine segment was 8.6%, compared to 0.9% last year, while the Concrete segment's adjusted EBITDA margin was negative 4.4%, down from positive 5.7% in the prior year [19] Market Data and Key Metrics Changes - The company secured nearly $350 million in new project wins, with $161 million in marine and $188 million in concrete projects [11] - The backlog plus awarded work reached $890 million, with $607 million related to the Marine segment and $232 million to the Concrete segment [21] Company Strategy and Development Direction - The company is focused on building a profitable backlog from a strong pipeline of opportunities, particularly in marine facilities, dredging, bridges, and data centers [11][12] - The management emphasized the importance of the current administration's policies, which are expected to provide tailwinds for the business, particularly in shipbuilding and defense [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong demand in the data center market and a lack of signs of a slowdown [13][14] - The company reiterated its full-year guidance for 2025, expecting revenue between $800 million and $850 million and adjusted EBITDA between $42 million and $46 million [25] Other Important Information - The company is transitioning to new IT systems to enhance operational efficiency and is consolidating its Houston area offices to reduce costs [22][24] - Cash flow from operations was negative $3.4 million, an improvement from negative $22.8 million in the prior year quarter [21][22] Q&A Session Summary Question: Outlook on defense spending and RFPs - Management expects awards related to defense spending to materialize late this year or early next year, with potential project sizes around $500 million [28][30] Question: Concrete business outlook - Management has not seen a slowdown in bidding activity and expects concrete margins to improve as the year progresses [31][33] Question: Input costs and pricing - Management anticipates increased costs for steel and other materials but plans to manage these risks through contingency measures [65] Question: Marine segment margins - The strong margins in the Marine segment are expected to continue, although they may fluctuate due to project mix [40][41] Question: Capital position for future projects - The company has sufficient capital capacity to support upcoming projects and is in discussions with financing partners for potential equipment acquisitions [56][57]