COMFORT SYSTEMS USA INC Q1 FY2025 earnings call

• Strong first quarter results: EPS $4.75, up over 75% y/y. Same-store revenue growth 15%, margins strong. Backlog at end of quarter was $7B, a new high.
• Added Century Contractors in January, expected to earn ~$90M revenue this year. Increased quarterly dividend by $0.05 to $0.45 per share.
• Financial performance: Revenue $1.8B, gross profit $403M (up $106M y/y), gross profit percentage 22% (up from 19.3% y/y). SG&A $195M, operating income $209M (up 54% y/y). Net income $169M or $4.75 per share. EBITDA $243M, up 43% y/y.
• Segment mix: Industrial (including tech) drives volume, modular 19% of revenue, service up 10% absolute, 15% of total revenue with strong profitability.

For the first quarter, revenue was $1.8 billion, up 19% y/y. Same-store revenue increased 15% ($237 million) with acquisitions contributing $57 million. Electrical segment revenue increased 22%, Mechanical segment 18%. Revenue mix: Industrial (including technology) was 62% of volume, technology (in industrial) 37% of total revenue, institutional 24%, commercial 14%, construction 85% (58% new buildings, 27% existing), modular 19% of total revenue, service 15% of total revenue.

• Expect same-store revenue growth for full year 2025 to be high-single-digit.
• Gross profit margins to continue in strong ranges achieved in recent quarters.
• Effective tax rate for last three quarters of 2025 expected in 23% range, full year effective rate lower due to discrete benefit in Q1.
• Optimistic for continuing strong results in 2025 and optimistic for 2026 based on record backlog.

• Tariffs and other policy changes could hurt the economy or make construction more expensive, impacting customers and thus Comfort Systems.
• Uncertainty in trade and tariff impacts on business operations and customer demand.

Q: Alex Dwyer asked about revenue and margin guidance, especially deceleration through the rest of the year.

A: Bill George said prospects unchanged, but higher comparables later in year mean same-store revenue growth for full year 2025 is high-single-digit. Brian Lane added good pricing and execution help maintain margins.

Q: Julio Romero asked to rank order uncertainties like trade, tariff, data center CapEx.

A: Bill George said during COVID margins performed well, no sign of let up in demand for tech-related services. Brian Lane added no sign of demand destruction in tech sectors yet.

Q: Josh Chan asked about project bidding pipeline and backlog trajectory.

A: Trent McKenna said backlog growth in Q1 was due to broad-based bookings across companies, driven by advanced tech industrial bookings. Brian Lane mentioned historical backlog pattern with more build in Q4 and Q1, net burn in Q2 and Q3, but pipeline is strong.

Q: Brent Thielman asked about impact of HVAC refrigerant transition on Mechanical segment.

A: Brian Lane said no impact yet, as it mainly affects OEMs and not much equipment with that refrigerant is serviced by them.

Q: Adam Thalhimer asked about impact of tariffs on prices.

A: Bill George said impact not detectable in general, as pricing is based on labor and management of costs, with long-term customer relationships helping navigate changes.