FIX Comfort Systems USA Inc

Comfort Systems USA, Inc. (NYSE: FIX) (the “Company”) today reported results for the quarter ended September 30, 2023.

For the quarter ended September 30, 2023, net income was $105.1 million, or $2.93 per diluted share, as compared to $61.5 million, or $1.71 per diluted share, for the quarter ended September 30, 2022. The third quarter of 2023 included a diluted per share net tax gain of $0.19 related to prior years. The third quarter of 2022 included a diluted per share net gain of $0.10 related to legal matters and $0.04 from estimated tax benefits related to prior years. Revenue for the third quarter of 2023 was $1,378.1 million compared to $1,120.0 million in 2022. The Company reported operating cash flow of $214.2 million in the current quarter compared to $61.2 million in 2022.

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “Our amazing teams across the country accomplished truly exceptional results this quarter. Their discipline and execution resulted in unprecedented growth, earnings, and cash flow. Our mechanical operations again achieved outstanding performance, and our electrical segment continues to achieve extraordinary activity levels and margins. Revenue was higher across our operations, with particularly notable increases in our modular business, where execution was superb while managing extraordinary growth. Service also continued to grow and improve, thanks in large part to our past and ongoing investments. Finally, quarterly cash flow surged this quarter, as our customers continue to recognize our value and performance with favorable payment terms and punctual payments.”

Backlog as of September 30, 2023 was $4.29 billion as compared to $4.19 billion as of June 30, 2023 and $3.25 billion as of September 30, 2022. On a same-store basis, backlog increased from $3.25 billion as of September 30, 2022 to $4.12 billion as of September 30, 2023.

Mr. Lane continued, “Year over year backlog increased 32%, by $1.0 billion, and sequential backlog also increased even though this is our seasonally most active quarter. Our pipeline of future work remains strong.”

The Company reported net income of $231.8 million, or $6.46 per diluted share, for the nine months ended September 30, 2023, as compared to $190.5 million, or $5.28 per diluted share, in 2022. The first nine months of 2023 included a diluted per share net tax gain of $0.08 related to the current year impact of a tax change, $0.27 related to prior tax years, and $0.15 from the favorable resolution of certain litigation matters in the first quarter of 2023. The first nine months of 2022 included a diluted per share net tax gain of $1.53 related to prior years. The Company also reported revenue of $3.85 billion for the nine months ended September 30, 2023, as compared to $3.02 billion in 2022. Operating cash flow for the nine months ended September 30, 2023 was $466.6 million, as compared to $169.5 million in 2022.

Mr. Lane concluded, “With persistent demand, and given the confidence we feel in our skilled workers and their leaders, we continue to expect strong results for the fourth quarter and in 2024.”

The Company will host a webcast and conference call to discuss its financial results and position on Friday, October 27, 2023 at 10:00 a.m. Central Time. To register for the call, please visit https://register.vevent.com/register/BI864d4a63acea4bf7b043b151f54eb62e. Upon registering, participants will receive dial-in information and a unique PIN to join the call. The call and the slide presentation to accompany the remarks can be accessed on the Company’s website at www.comfortsystemsusa.com under the “Investor” tab. A replay of the entire call will be available on the Company’s website on the next business day following the call.

Comfort Systems USA® is a leading provider of commercial, industrial and institutional heating, ventilation, air conditioning and electrical contracting services, with 169 locations in 129 cities across the nation. For more information, visit the Company’s website at www.comfortsystemsusa.com.

Certain statements and information in this press release may constitute forward-looking statements regarding our future business expectations, which are subject to applicable securities laws and regulations. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements, which are generally not historic in nature. These forward-looking statements are based on the current expectations and beliefs of Comfort Systems USA, Inc. and its subsidiaries (collectively, the “Company”) concerning future developments and their effect on the Company. While the Company’s management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting the Company will be those that it anticipates, and the Company’s actual results of operations, financial condition and liquidity, and the development of the industry in which the Company operates, may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of our results or developments in subsequent periods. All comments concerning the Company’s expectations for future revenue and operating results are based on the Company’s forecasts for its existing operations and its acquisition of Decco, Inc. and do not include the potential impact of any future acquisitions. The Company’s forward-looking statements involve significant risks and uncertainties (some of which are beyond the Company’s control) and assumptions that could cause actual future results to differ materially from the Company’s historical experience and its present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the use of incorrect estimates for bidding a fixed-price contract; undertaking contractual commitments that exceed the Company’s labor resources; failing to perform contractual obligations efficiently enough to maintain profitability; national or regional weakness in construction activity and economic conditions; rising inflation and fluctuations in interest rates; shortages of labor and specialty building materials or material increases to the cost thereof; the Company’s business being negatively affected by health crises or outbreaks of disease, such as epidemics or pandemics (and related impacts, such as supply chain disruptions); financial difficulties affecting projects, vendors, customers, or subcontractors; the Company’s backlog failing to translate into actual revenue or profits; failure of third party subcontractors and suppliers to complete work as anticipated; difficulty in obtaining, or increased costs associated with, bonding and insurance; impairment to goodwill; errors in the Company’s cost-to-cost input method of accounting; the result of competition in the Company’s markets; the Company’s decentralized management structure; material failure to comply with varying state and local laws, regulations or requirements; debarment from bidding on or performing government contracts; retention of key management; seasonal fluctuations in the demand for mechanical and electrical systems; the imposition of past and future liability from environmental, safety, and health regulations including the inherent risk associated with self-insurance; adverse litigation results; an increase in our effective tax rate; a material information technology failure or a material cyber security breach; risks associated with acquisitions, such as challenges to our ability to integrate those companies into our internal control environment; our ability to manage growth and geographically-dispersed operations; our ability to obtain financing on acceptable terms; extreme weather conditions (such as storms, droughts, extreme heat or cold, wildfires and floods), including as a result of climate change, and any resulting regulations or restrictions related thereto; and other risks detailed in our reports filed with the Securities and Exchange Commission (the “SEC”).

For additional information regarding known material factors that could cause the Company’s results to differ from its projected results, please see its filings with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether because of new information, future events, or otherwise.

— Financial tables follow —

Comfort Systems USA, Inc.

Consolidated Statements of Operations

(In Thousands, Except per Share Amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

2023

 

%

 

 

2022

 

%

 

 

2023

 

%

 

 

2022

 

%

 

Revenue

 

$

1,378,124

 

 

100.0

 

%

 

$

1,120,012

 

 

100.0

 

%

 

$

3,849,194

 

 

100.0

 

%

 

$

3,023,176

 

 

100.0

 

%

Cost of services

 

 

1,100,625

 

 

79.9

 

%

 

 

917,788

 

 

81.9

 

%

 

 

3,138,370

 

 

81.5

 

%

 

 

2,492,816

 

 

82.5

 

%

Gross profit

 

 

277,499

 

 

20.1

 

%

 

 

202,224

 

 

18.1

 

%

 

 

710,824

 

 

18.5

 

%

 

 

530,360

 

 

17.5

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

 

142,935

 

 

10.4

 

%

 

 

121,194

 

 

10.8

 

%

 

 

414,397

 

 

10.8

 

%

 

 

357,694

 

 

11.8

 

%

Gain on sale of assets

 

 

(579

)

 

—

 

 

 

 

(406

)

 

—

 

 

 

 

(1,683

)

 

—

 

 

 

 

(1,112

)

 

—

 

 

Operating income

 

 

135,143

 

 

9.8

 

%

 

 

81,436

 

 

7.3

 

%

 

 

298,110

 

 

7.7

 

%

 

 

173,778

 

 

5.7

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(934

)

 

(0.1

)

%

 

 

(3,604

)

 

(0.3

)

%

 

 

(7,439

)

 

(0.2

)

%

 

 

(8,750

)

 

(0.3

)

%

Changes in the fair value of contingent earn-out obligations

 

 

(8,727

)

 

(0.6

)

%

 

 

(3,443

)

 

(0.3

)

%

 

 

(14,207

)

 

(0.4

)

%

 

 

530

 

 

—

 

 

Other income (expense)

 

 

(44

)

 

—

 

 

 

 

46

 

 

—

 

 

 

 

1

 

 

—

 

 

 

 

101

 

 

—

 

 

Income before income taxes

 

 

125,438

 

 

9.1

 

%

 

 

74,435

 

 

6.6

 

%

 

 

276,465

 

 

7.2

 

%

 

 

165,659

 

 

5.5

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

20,313

 

 

 

 

 

 

12,920

 

 

 

 

 

 

44,648

 

 

 

 

 

 

(24,864

)

 

 

 

Net income

 

$

105,125

 

 

7.6

 

%

 

$

61,515

 

 

5.5

 

%

 

$

231,817

 

 

6.0

 

%

 

$

190,523

 

 

6.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.93

 

 

 

 

 

$

1.72

 

 

 

 

 

$

6.47

 

 

 

 

 

$

5.30

 

 

 

 

Diluted

 

$

2.93

 

 

 

 

 

$

1.71

 

 

 

 

 

$

6.46

 

 

 

 

 

$

5.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,820

 

 

 

 

 

 

35,853

 

 

 

 

 

 

35,819

 

 

 

 

 

 

35,966

 

 

 

 

Diluted

 

 

35,917

 

 

 

 

 

 

35,972

 

 

 

 

 

 

35,910

 

 

 

 

 

 

36,078

 

 

 

 

Dividends per share

 

$

0.225

 

 

 

 

 

$

0.140

 

 

 

 

 

$

0.600

 

 

 

 

 

$

0.410

 

 

 

 

Supplemental Non-GAAP Information — (Unaudited) (In Thousands, Except per Share Amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

105,125

 

 

$

61,515

 

 

$

231,817

 

 

$

190,523

 

 

Tax gains related to prior years

 

 

(7,393

)

 

 

(1,678

)

 

 

(10,761

)

 

 

(58,933

)

 

Tax-related SG&A costs, net of tax

 

 

730

 

 

 

166

 

 

 

1,063

 

 

 

3,685

 

 

Net income excluding tax gains

 

$

98,462

 

 

$

60,003

 

 

$

222,119

 

 

$

135,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per share

 

$

2.93

 

 

$

1.71

 

 

$

6.46

 

 

$

5.28

 

 

Tax gains related to prior years

 

 

(0.21

)

 

 

(0.05

)

 

 

(0.30

)

 

 

(1.64

)

 

Tax-related SG&A costs, net of tax

 

 

0.02

 

 

 

0.01

 

 

 

0.03

 

 

 

0.11

 

 

Diluted income per share excluding tax gains

 

$

2.74

 

 

$

1.67

 

 

$

6.19

 

 

$

3.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: Net income excluding tax gains and diluted income per share excluding tax gains are presented because the Company believes they reflect the results of the core ongoing operations of the Company, and we believe they are responsive to frequent questions we receive from third parties. These amounts, however, are not considered primary measures of an entity’s financial results under generally accepted accounting principles, and accordingly, they should not be considered an alternative to operating results as determined under generally accepted accounting principles and as reported by the Company.

Supplemental Non-GAAP Information — Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) — (Unaudited) (In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

%

 

 

2022

 

%

 

 

2023

 

%

 

 

2022

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

105,125

 

 

 

 

 

$

61,515

 

 

 

 

 

$

231,817

 

 

 

 

 

$

190,523

 

 

 

 

Provision (benefit) for income taxes

 

 

20,313

 

 

 

 

 

 

12,920

 

 

 

 

 

 

44,648

 

 

 

 

 

 

(24,864

)

 

 

 

Other expense (income), net

 

 

44

 

 

 

 

 

 

(46

)

 

 

 

 

 

(1

)

 

 

 

 

 

(101

)

 

 

 

Changes in the fair value of contingent earn-out obligations

 

 

8,727

 

 

 

 

 

 

3,443

 

 

 

 

 

 

14,207

 

 

 

 

 

 

(530

)

 

 

 

Interest expense, net

 

 

934

 

 

 

 

 

 

3,604

 

 

 

 

 

 

7,439

 

 

 

 

 

 

8,750

 

 

 

 

Gain on sale of assets

 

 

(579

)

 

 

 

 

 

(406

)

 

 

 

 

 

(1,683

)

 

 

 

 

 

(1,112

)

 

 

 

Tax-related SG&A costs

 

 

924

 

 

 

 

 

 

210

 

 

 

 

 

 

1,345

 

 

 

 

 

 

4,665

 

 

 

 

Amortization

 

 

10,929

 

 

 

 

 

 

11,444

 

 

 

 

 

 

32,273

 

 

 

 

 

 

36,602

 

 

 

 

Depreciation

 

 

9,457

 

 

 

 

 

 

8,348

 

 

 

 

 

 

27,717

 

 

 

 

 

 

24,643

 

 

 

 

Adjusted EBITDA

 

$

155,874

 

 

11.3

%

 

$

101,032

 

 

9.0

%

 

$

357,762

 

 

9.3

%

 

$

238,576

 

 

7.9

%

Note: The Company defines adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) as net income, provision for income taxes, other expense (income), net, changes in the fair value of contingent earn-out obligations, interest expense, net, gain on sale of assets, goodwill impairment, other one-time expenses or gains and depreciation and amortization. Other companies may define Adjusted EBITDA differently. Adjusted EBITDA is presented because it is a financial measure that is frequently requested by third parties. However, Adjusted EBITDA is not considered under generally accepted accounting principles as a primary measure of an entity’s financial results, and accordingly, Adjusted EBITDA should not be considered an alternative to operating income, net income, or cash flows as determined under generally accepted accounting principles and as reported by the Company.

Comfort Systems USA, Inc.

Condensed Consolidated Balance Sheets

(In Thousands)

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

2023

 

2022

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

137,623

 

$

57,214

 

Billed accounts receivable, net

 

 

1,254,798

 

 

1,024,082

 

Unbilled accounts receivable, net

 

 

78,566

 

 

77,030

 

Costs and estimated earnings in excess of billings, net

 

 

32,554

 

 

27,211

 

Other current assets, net

 

 

308,691

 

 

122,134

 

Total current assets

 

 

1,812,232

 

 

1,307,671

 

Property and equipment, net

 

 

186,864

 

 

143,949

 

Goodwill

 

 

637,487

 

 

611,789

 

Identifiable intangible assets, net

 

 

274,128

 

 

273,901

 

Other noncurrent assets

 

 

229,908

 

 

260,168

 

Total assets

 

$

3,140,619

 

$

2,597,478

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

13,333

 

$

9,000

 

Accounts payable

 

 

441,128

 

 

337,385

 

Billings in excess of costs and estimated earnings and deferred revenue

 

 

775,302

 

 

548,293

 

Other current liabilities

 

 

399,224

 

 

276,124

 

Total current liabilities

 

 

1,628,987

 

 

1,170,802

 

Long-term debt

 

 

33,932

 

 

247,245

 

Other long-term liabilities

 

 

270,538

 

 

179,508

 

Total liabilities

 

 

1,933,457

 

 

1,597,555

 

Total stockholders’ equity

 

 

1,207,162

 

 

999,923

 

Total liabilities and stockholders’ equity

 

$

3,140,619

 

$

2,597,478

 

Selected Cash Flow Data (Unaudited) (In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

214,241

 

 

$

61,232

 

 

$

466,560

 

 

$

169,524

 

 

Investing activities

 

$

(25,497

)

 

$

(23,494

)

 

$

(119,125

)

 

$

(82,759

)

 

Financing activities

 

$

(111,128

)

 

$

(35,728

)

 

$

(267,026

)

 

$

(74,402

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash from operating activities

 

$

214,241

 

 

$

61,232

 

 

$

466,560

 

 

$

169,524

 

 

Purchases of property and equipment

 

 

(28,444

)

 

 

(14,578

)

 

 

(69,574

)

 

 

(34,793

)

 

Proceeds from sales of property and equipment

 

 

3,007

 

 

 

592

 

 

 

5,093

 

 

 

2,151

 

 

Free cash flow

 

$

188,804

 

 

$

47,246

 

 

$

402,079

 

 

$

136,882

 

 

Note: Free cash flow is defined as cash flow from operating activities less customary capital expenditures, plus the proceeds from asset sales. Other companies may define free cash flow differently. Free cash flow is presented because it is a financial measure that is frequently requested by third parties. However, free cash flow is not considered under generally accepted accounting principles as a primary measure of an entity’s financial results, and accordingly, free cash flow should not be considered an alternative to operating income, net income, or cash flows as determined under generally accepted accounting principles and as reported by the Company.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231026429895/en/

Julie Shaeff, Chief Accounting Officer ir@comfortsystemsusa.com; 713-830-9687