COMFORT SYSTEMS USA INC (FIX) Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered record results: revenue $2.17B, diluted EPS $6.53, gross margin 23.5%, operating margin 13.8%; backlog reached $8.12B, up $1.23B sequentially and $2.35B YoY .
• Against Wall Street consensus, FIX significantly beat: revenue by ~$0.20B, EPS by ~$1.70, and EBITDA by ~$77M; estimate coverage was robust (7 estimates for Q2) [Values retrieved from S&P Global]*.
• Management raised full-year same‑store revenue growth outlook from high single-digit (Q1) to mid‑teens (Q2) and guided 2H25 tax rate ~23%; quarterly dividend increased to $0.50 (from $0.45) .
• Demand led by technology/data centers and strong execution in mechanical and electrical; service revenue up 10% and modular capacity targeted at ~3M sq ft by early next year, supporting continued strength into 2026 .

What Went Well and What Went Wrong

What Went Well

• “First time that our quarterly revenue has exceeded $2 billion… earned an unprecedented $6.53 per share… backlog… grew to a new high of $8.1 billion” .
• Margins expanded sharply: gross margin 23.5% (vs 20.1% LY), operating margin 13.8% (vs 10.2% LY); both mechanical (22.9%) and electrical (25.3%) segment margins improved YoY .
• Strong cash generation and capital returns: free cash flow $222M in Q2; dividend raised to $0.50; active buybacks year-to-date; net cash >$250M even after repurchases and acquisition .

What Went Wrong

• Discrete working capital normalization from advanced modular customer payments completed, removing a transient tailwind to cash conversion going forward (cash flow to approximate after-tax earnings) .
• SG&A rising with growth (to $210M, 9.7% of revenue) reflecting necessary investment in people and capabilities; leverage moderated vs prior periods .
• Macro/tariff ambiguity persists; management notes pricing/supply-chain is “day-to-day hand-to-hand combat,” though teams are handling well; no formal margin guidance beyond “strong ranges” .

Financial Results

Quarterly progression

Q2 YoY comparison

Actual vs Wall Street consensus (Q2 2025)

Segment and mix

KPIs and backlog

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We had a fantastic quarter… quarterly revenue exceeded $2 billion… earned $6.53 per share… backlog… grew to a new high of $8.1 billion… Demand remained strong, especially in technology” — Brian Lane, CEO .
• “Gross profit percentage grew to a remarkable 23.5%… mechanical jumped to 22.9%… electrical increased to 25.3%… expect gross profit margins will continue in the strong ranges” — Bill George, CFO .
• “We are entering the second half of 2025 with same-store backlog 37% higher than at this time last year, and our project pipelines remain at historically high levels” — Trent McKenna, COO .

Q&A Highlights

• Modular strategy and capacity: pursuing incremental capacity with focus on productivity/automation; third site considered long-term, not near-term priority .
• Pricing and margins: customers “paying for risk” amid strong execution; margins supported by efficiency and innovation; no discrete “tricks” behind margin strength .
• Backlog visibility: meaningful work scheduled into 2026–2027; lumpiness acknowledged; pipeline strong across tech, pharma, and industrial .
• Competitive landscape in modular: customers encouraging competition; FIX aims to be “so good at it” that buying elsewhere makes little sense .
• Regional electrical strength: Walker Electrical executing strongly across TX’s major markets .

Estimates Context

• Q2 2025 actuals versus consensus: revenue $2.173B vs $1.970B*; EPS $6.53 vs $4.84*; EBITDA $334.1M vs $257.1M*; estimate count 7 (EPS/Revenue)* — broad-based beat .
• Implication: Street models likely to reset higher on revenue run-rate, margin durability, and backlog conversion; tax rate assumptions should reflect ~23% in 2H25 .
  Note: Consensus values marked with * are from S&P Global. Values retrieved from S&P Global.

Key Takeaways for Investors

• The quarter delivered significant beats and multi-quarter margin resilience; strong demand in data centers and advanced tech plus disciplined project selection are sustaining elevated profitability .
• Backlog inflected to $8.12B and same‑store backlog rose 37% YoY entering 2H, underpinning visibility into 2026–2027; narrative supports upward estimate revisions and medium-term confidence .
• Modular capacity expansion toward ~3M sq ft and YTD modular mix near 18–19% strengthens throughput and cycle time for complex projects, supporting sustained growth .
• Capital returns accelerating: dividend increased to $0.50 and buyback program “topped off”; balance sheet remains net cash despite repurchases and acquisitions — a constructive setup for TSR .
• Risks: tariff/supply chain pricing dynamics and seasonal backlog burn; however, contractual discipline, scale, and customer selection mitigate pressure; margins expected to remain in “strong ranges” .
• Tactical: stock likely reacts positively to beat magnitude and raised growth outlook; watch subsequent consensus revisions and any updates on 2026 data center starts and modular footprint.
• Strategic: thesis supported by multi-year industrial/onshoring trends, densifying compute needs, and FIX’s mechanical/electrical execution advantages; service’s steady growth adds cash flow resilience .