Comfort Systems USA Reports Fourth Quarter and Full Year 2022 Results; Announces Acquisition

Comfort Systems USA, Inc. (NYSE: FIX) (the “Company”) today reported results for the quarter and annual period ended December 31, 2022.

For the quarter ended December 31, 2022, net income was $55.4 million, or $1.54 per diluted share, as compared to $37.6 million, or $1.04 per diluted share, for the quarter ended December 31, 2021. Revenue for the fourth quarter of 2022 was $1,117.2 million compared to $856.1 million in 2021. The Company reported operating cash flow of $132.0 million in the current quarter compared to $27.5 million in 2021.

Backlog as of December 31, 2022 was $4.06 billion as compared to $3.25 billion as of September 30, 2022 and $2.31 billion as of December 31, 2021. On a same-store basis, backlog increased from $2.31 billion as of December 31, 2021 to $4.03 billion as of December 31, 2022.

The Company reported net income of $245.9 million, or $6.82 per diluted share, for the twelve months ended December 31, 2022, as compared to $143.3 million, or $3.93 per diluted share, in 2021. The first quarter of 2022 included a diluted per share net gain of $1.49 related to the resolution of tax refund claims from years 2016 through 2018 as well as estimated tax benefits from years 2019 through 2021. The third quarter of 2022 included a diluted per share net gain of $0.04 related to estimated tax benefits from years 2019 through 2021. Without those tax gains related to prior years, our diluted per share earnings for the twelve months ended December 31, 2022 would have been $5.29. The Company also reported revenue of $4.14 billion for the twelve months ended December 31, 2022, as compared to $3.07 billion in 2021. Operating cash flow for the twelve months ended December 31, 2022 was $301.5 million, as compared to $180.2 million in 2021.

The Company also announced today that it has acquired Eldeco, Inc. (“Eldeco”), headquartered in South Carolina. Eldeco was founded in 1972 and performs electrical design and construction services in the Southeastern region of the United States. Initially, Eldeco is expected to contribute annualized revenue of approximately $130 million to $140 million, and earnings before interest, taxes, depreciation, and amortization of $8 million to $9 million. Considering the required amortization expense related to intangibles and other costs associated with the transaction, the acquisition is expected to make a neutral to slightly accretive contribution to earnings per share in 2023 and 2024.

Brian Lane, Comfort Systems USA’s President and Chief Executive Officer, said, “We finished 2022 with increased revenue, record earnings, great cash flow, and a notable surge of backlog, again surpassing the extraordinary results that we achieved in recent years.”

“We are also happy to report that we recently welcomed the team from Eldeco, which we believe is South Carolina’s premier industrial electrical company. Eldeco will further strengthen our electrical segment, and thanks to its complementary capabilities both in and adjacent to some of our strongest markets, we feel confident that this combination will allow us to achieve important synergies over the coming years.”

“Revenue benefitted from increasing activity levels and was also lifted by increases in the pricing of the materials and labor that we provide to our customers. Earnings rose as our mechanical operations continued to perform at high levels and due to further strengthening in the performance of our electrical segment. Our backlog shows robust same-store increases from a year ago. Backlog received an especially strong lift in our modular off-site construction operations, as future customer purchases were committed to in advance to support our ability to invest in modular construction capacity. Additionally, cash flow was extraordinary in the fourth quarter, and for the full year our cash flow exceeded our earnings by a substantial amount, helped by our tax settlement refund and by advance payments received in connection with modular backlog commitments.”

Mr. Lane concluded, “In 2022, our world-class teams achieved record earnings per share and proved themselves indispensable to their customers and their communities. We continue to experience high levels of demand, and we believe that the outlook for Comfort Systems is continued growth and strong ongoing profitability in 2023.”

The Company will host a webcast and conference call to discuss its financial results and position on Thursday, February 23, 2023 at 11:00 a.m. Central Time. To register for the call, please visit https://register.vevent.com/register/BI38d5d5d8831949a9b198a9eab09e9f16. 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 128 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

 

Twelve Months Ended

 

 

December 31,

 

December 31,

 

 

(Unaudited)

 

 

 

 

2022

 

%

 

2021

 

%

 

2022

 

%

 

2021

 

%

Revenue

 

$

1,117,188

 

 

100.0

%

 

$

856,084

 

 

100.0

%

 

$

4,140,364

 

 

100.0

%

 

$

3,073,636

 

 

100.0

%

Cost of services

 

 

905,940

 

 

81.1

%

 

 

702,013

 

 

82.0

%

 

 

3,398,756

 

 

82.1

%

 

 

2,510,429

 

 

81.7

%

Gross profit

 

 

211,248

 

 

18.9

%

 

 

154,071

 

 

18.0

%

 

 

741,608

 

 

17.9

%

 

 

563,207

 

 

18.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

 

131,650

 

 

11.8

%

 

 

105,259

 

 

12.3

%

 

 

489,344

 

 

11.8

%

 

 

376,309

 

 

12.2

%

Gain on sale of assets

 

 

(473

)

 

 

 

 

(519

)

 

(0.1

)%

 

 

(1,585

)

 

 

 

 

(1,540

)

 

(0.1

)%

Operating income

 

 

80,071

 

 

7.2

%

 

 

49,331

 

 

5.8

%

 

 

253,849

 

 

6.1

%

 

 

188,438

 

 

6.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(4,556

)

 

(0.4

)%

 

 

(1,736

)

 

(0.2

)%

 

 

(13,306

)

 

(0.3

)%

 

 

(6,172

)

 

(0.2

)%

Changes in the fair value of contingent earn-out obligations

 

 

(5,349

)

 

(0.5

)%

 

 

3,297

 

 

0.4

%

 

 

(4,819

)

 

(0.1

)%

 

 

7,820

 

 

0.3

%

Other income (expense)

 

 

33

 

 

 

 

 

76

 

 

 

 

 

134

 

 

 

 

 

188

 

 

 

Income before income taxes

 

 

70,199

 

 

6.3

%

 

 

50,968

 

 

6.0

%

 

 

235,858

 

 

5.7

%

 

 

190,274

 

 

6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

14,775

 

 

 

 

 

13,373

 

 

 

 

 

(10,089

)

 

 

 

 

46,926

 

 

 

Net income

 

$

55,424

 

 

5.0

%

 

$

37,595

 

 

4.4

%

 

$

245,947

 

 

5.9

%

 

$

143,348

 

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.55

 

 

 

 

$

1.04

 

 

 

 

$

6.84

 

 

 

 

$

3.95

 

 

 

Diluted

 

$

1.54

 

 

 

 

$

1.04

 

 

 

 

$

6.82

 

 

 

 

$

3.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,828

 

 

 

 

 

36,155

 

 

 

 

 

35,932

 

 

 

 

 

36,285

 

 

 

Diluted

 

 

35,948

 

 

 

 

 

36,301

 

 

 

 

 

36,046

 

 

 

 

 

36,450

 

 

 

Dividends per share

 

$

0.150

 

 

 

 

$

0.130

 

 

 

 

$

0.560

 

 

 

 

$

0.480

 

 

 

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

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

55,424

 

$

37,595

 

$

245,947

 

 

$

143,348

 

Tax gains

 

 

 

 

 

 

(58,933

)

 

 

 

Tax-related SG&A costs, net of tax

 

 

 

 

 

 

3,685

 

 

 

 

Net income excluding tax gains

 

$

55,424

 

$

37,595

 

$

190,699

 

 

$

143,348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per share

 

$

1.54

 

$

1.04

 

$

6.82

 

 

$

3.93

 

Tax gains

 

 

 

 

 

 

(1.64

)

 

 

 

Tax-related SG&A costs, net of tax

 

 

 

 

 

 

0.11

 

 

 

 

Diluted income per share excluding tax gains

 

$

1.54

 

$

1.04

 

$

5.29

 

 

$

3.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2022

 

%

 

2021

 

%

 

 

2022

 

%

 

2021

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

55,424

 

 

 

 

$

37,595

 

 

 

 

 

$

245,947

 

 

 

 

$

143,348

 

 

 

 

Provision (benefit) for income taxes

 

 

14,775

 

 

 

 

 

13,373

 

 

 

 

 

 

(10,089

)

 

 

 

 

46,926

 

 

 

 

Other expense (income), net

 

 

(33

)

 

 

 

 

(76

)

 

 

 

 

 

(134

)

 

 

 

 

(188

)

 

 

 

Changes in the fair value of contingent earn-out obligations

 

 

5,349

 

 

 

 

 

(3,297

)

 

 

 

 

 

4,819

 

 

 

 

 

(7,820

)

 

 

 

Interest expense, net

 

 

4,556

 

 

 

 

 

1,736

 

 

 

 

 

 

13,306

 

 

 

 

 

6,172

 

 

 

 

Gain on sale of assets

 

 

(473

)

 

 

 

 

(519

)

 

 

 

 

 

(1,585

)

 

 

 

 

(1,540

)

 

 

 

Tax-related SG&A costs

 

 

 

 

 

 

 

 

 

 

 

 

 

4,665

 

 

 

 

 

 

 

 

 

Amortization

 

 

11,193

 

 

 

 

 

11,571

 

 

 

 

 

 

47,795

 

 

 

 

 

40,505

 

 

 

 

Depreciation

 

 

8,909

 

 

 

 

 

7,373

 

 

 

 

 

 

33,552

 

 

 

 

 

28,439

 

 

 

 

Adjusted EBITDA

 

$

99,700

 

 

8.9

%

$

67,756

 

 

7.9

%

 

$

338,276

 

 

8.2

%

$

255,842

 

 

8.3

%

 

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)

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

2022

 

2021

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,214

 

$

58,776

 

Billed accounts receivable, net

 

 

1,024,082

 

 

773,716

 

Unbilled accounts receivable, net

 

 

77,030

 

 

61,881

 

Costs and estimated earnings in excess of billings, net

 

 

27,211

 

 

29,900

 

Other current assets, net

 

 

122,134

 

 

103,048

 

Total current assets

 

 

1,307,671

 

 

1,027,321

 

Property and equipment, net

 

 

143,949

 

 

128,554

 

Goodwill

 

 

611,789

 

 

592,114

 

Identifiable intangible assets, net

 

 

273,901

 

 

304,781

 

Other noncurrent assets

 

 

260,168

 

 

156,344

 

Total assets

 

$

2,597,478

 

$

2,209,114

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

9,000

 

$

2,788

 

Accounts payable

 

 

337,385

 

 

254,788

 

Billings in excess of costs and estimated earnings

 

 

461,781

 

 

307,380

 

Other current liabilities

 

 

362,636

 

 

271,598

 

Total current liabilities

 

 

1,170,802

 

 

836,554

 

Long-term debt, net

 

 

247,245

 

 

385,242

 

Other long-term liabilities

 

 

179,508

 

 

181,652

 

Total liabilities

 

 

1,597,555

 

 

1,403,448

 

Total stockholders’ equity

 

 

999,923

 

 

805,666

 

Total liabilities and stockholders’ equity

 

$

2,597,478

 

$

2,209,114

 

Selected Cash Flow Data (Unaudited) (In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

132,007

 

 

$

27,497

 

 

$

301,531

 

 

$

180,151

 

 

Investing activities

 

$

(14,419

)

 

$

(127,117

)

 

$

(97,178

)

 

$

(246,722

)

 

Financing activities

 

$

(131,513

)

 

$

90,675

 

 

$

(205,915

)

 

$

70,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free cash flow:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash from operating activities

 

$

132,007

 

 

$

27,497

 

 

$

301,531

 

 

$

180,151

 

 

Purchases of property and equipment

 

 

(13,566

)

 

 

(6,466

)

 

 

(48,359

)

 

 

(22,330

)

 

Proceeds from sales of property and equipment

 

 

707

 

 

 

1,299

 

 

 

2,858

 

 

 

3,101

 

 

Free cash flow

 

$

119,148

 

 

$

22,330

 

 

$

256,030

 

 

$

160,922

 

 

 

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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