Comfort Systems USA(US:FIX)2023-02-23 20:07Financial 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]