Financial News

Comfort Systems USA Reports First Quarter 2023 Results

Comfort Systems USA, Inc. (NYSE: FIX) (the “Company”) today reported results for the quarter ended March 31, 2023.

For the quarter ended March 31, 2023, net income was $57.2 million, or $1.59 per diluted share, as compared to $86.8 million, or $2.40 per diluted share, for the quarter ended March 31, 2022. The first quarter of 2023 included a diluted per share net gain of $0.12, including $0.08 related to prior tax years, due to a tax change and $0.15 from the favorable resolution of certain litigation matters. The first quarter of 2022 included a diluted per share net tax gain of $1.49 related to prior years. Revenue for the first quarter of 2023 was $1,174.6 million compared to $885.2 million in 2022. The Company reported operating cash flow of $126.9 million in the current quarter compared to $63.7 million in 2022.

Backlog as of March 31, 2023 was $4.44 billion as compared to $4.06 billion as of December 31, 2022 and $2.73 billion as of March 31, 2022. On a same-store basis, backlog increased from $2.73 billion as of March 31, 2022 to $4.32 billion as of March 31, 2023.

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “We started 2023 on a very positive note, with remarkable increases in revenue and earnings per share. Our mechanical operations again performed at high levels and our electrical segment continued its trend of improving profitability. Cash flow was unusually strong, especially for a first quarter, and our backlog increased yet again, reflecting good ongoing demand in traditional and modular construction. Our already strong quarterly earnings were further increased by favorable resolution of certain litigation matters.”

Mr. Lane concluded, “Our teams across the country continue to execute. Thanks to their excellence, and in light of the strong ongoing demand that we are experiencing, we remain optimistic about our prospects for continued growth and strong profitability in 2023.”

The Company will host a webcast and conference call to discuss its financial results and position on Thursday, April 27, 2023 at 10:30 a.m. Central Time. To register for the call, please visit https://register.vevent.com/register/BI9b57002f12ed44b78143f9dedccc3592. 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 173 locations in 132 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 Eldeco 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

 

 

 

March 31,

 

 

 

(Unaudited)

 

 

 

2023

 

%

 

 

2022

 

%

 

Revenue

 

$

1,174,640

 

100.0

%

 

$

885,216

 

100.0

%

Cost of services

 

 

969,235

 

82.5

%

 

 

732,072

 

82.7

%

Gross profit

 

 

205,405

 

17.5

%

 

 

153,144

 

17.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

 

135,032

 

11.5

%

 

 

117,776

 

13.3

%

Gain on sale of assets

 

 

(512)

 

 

 

 

(323)

 

 

Operating income

 

 

70,885

 

6.0

%

 

 

35,691

 

4.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(2,679)

 

(0.2)

%

 

 

(2,126)

 

(0.2)

%

Changes in the fair value of contingent earn-out obligations

 

 

(2,382)

 

(0.2)

%

 

 

4,088

 

0.5

%

Other income (expense)

 

 

1

 

 

 

 

56

 

 

Income before income taxes

 

 

65,825

 

5.6

%

 

 

37,709

 

4.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

8,609

 

 

 

 

 

(49,053)

 

 

 

Net income

 

$

57,216

 

4.9

%

 

$

86,762

 

9.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.60

 

 

 

 

$

2.40

 

 

 

Diluted

 

$

1.59

 

 

 

 

$

2.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,812

 

 

 

 

 

36,076

 

 

 

Diluted

 

 

35,907

 

 

 

 

 

36,188

 

 

 

Dividends per share

 

$

0.175

 

 

 

 

$

0.130

 

 

 

 

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

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

 

 

 

 

 

 

Net income

$

57,216

 

$

86,762

 

Tax gains related to prior years

 

(3,368)

 

 

(57,255)

 

Tax-related SG&A costs, net of tax

 

333

 

 

3,519

 

Net income excluding tax gains

$

54,181

 

$

33,026

 

 

 

 

 

 

 

 

Diluted income per share

$

1.59

 

$

2.40

 

Tax gains related to prior years

 

(0.09)

 

 

(1.59)

 

Tax-related SG&A costs, net of tax

 

0.01

 

 

0.10

 

Diluted income per share excluding tax gains

$

1.51

 

$

0.91

 

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

 

 

 

March 31,

 

 

 

2023

 

%

 

2022

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

57,216

 

 

 

$

86,762

 

 

 

Provision (benefit) for income taxes

 

 

8,609

 

 

 

 

(49,053)

 

 

 

Other expense (income), net

 

 

(1)

 

 

 

 

(56)

 

 

 

Changes in the fair value of contingent earn-out obligations

 

 

2,382

 

 

 

 

(4,088)

 

 

 

Interest expense, net

 

 

2,679

 

 

 

 

2,126

 

 

 

Gain on sale of assets

 

 

(512)

 

 

 

 

(323)

 

 

 

Tax-related SG&A costs

 

 

421

 

 

 

 

4,455

 

 

 

Amortization

 

 

10,331

 

 

 

 

12,791

 

 

 

Depreciation

 

 

9,187

 

 

 

 

8,046

 

 

 

Adjusted EBITDA

 

$

90,312

 

7.7

%

$

60,660

 

6.9

%

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)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2023

 

2022

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

48,560

 

$

57,214

 

Billed accounts receivable, net

 

 

1,176,378

 

 

1,024,082

 

Unbilled accounts receivable, net

 

 

81,151

 

 

77,030

 

Costs and estimated earnings in excess of billings, net

 

 

26,820

 

 

27,211

 

Other current assets, net

 

 

126,115

 

 

122,134

 

Total current assets

 

 

1,459,024

 

 

1,307,671

 

Property and equipment, net

 

 

155,021

 

 

143,949

 

Goodwill

 

 

637,434

 

 

611,789

 

Identifiable intangible assets, net

 

 

296,070

 

 

273,901

 

Other noncurrent assets

 

 

291,922

 

 

260,168

 

Total assets

 

$

2,839,471

 

$

2,597,478

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

11,468

 

$

9,000

 

Accounts payable

 

 

351,509

 

 

337,385

 

Billings in excess of costs and estimated earnings and deferred revenue

 

 

717,294

 

 

548,293

 

Other current liabilities

 

 

326,388

 

 

276,124

 

Total current liabilities

 

 

1,406,659

 

 

1,170,802

 

Long-term debt

 

 

197,761

 

 

247,245

 

Other long-term liabilities

 

 

181,561

 

 

179,508

 

Total liabilities

 

 

1,785,981

 

 

1,597,555

 

Total stockholders’ equity

 

 

1,053,490

 

 

999,923

 

Total liabilities and stockholders’ equity

 

$

2,839,471

 

$

2,597,478

 

 

Selected Cash Flow Data (Unaudited) (In Thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

2022

 

 

 

 

 

 

 

 

 

Cash provided by (used in):

 

 

 

 

 

 

 

Operating activities

 

$

126,909

 

$

63,729

 

Investing activities

 

$

(68,945)

 

$

(9,369)

 

Financing activities

 

$

(66,618)

 

$

2,479

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

Cash from operating activities

 

$

126,909

 

$

63,729

 

Purchases of property and equipment

 

 

(16,520)

 

 

(9,192)

 

Proceeds from sales of property and equipment

 

 

622

 

 

1,056

 

Free cash flow

 

$

111,011

 

$

55,593

 

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.

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