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COMFORT SYSTEMS USA INC (FIX) Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record results: revenue $2.45B, diluted EPS $8.25, gross margin 24.8%, operating margin 15.5%, Adjusted EBITDA $413.9M, and free cash flow $519.0M .
  • Results were a significant beat versus Wall Street: EPS +31% above consensus ($8.25 vs $6.29*) and revenue +13.6% ($2.451B vs $2.158B*); EBITDA beat by ~28% ($413.9M vs $323.7M*) — driven by strong execution and favorable late-stage project developments, including recognition of $16M previously deferred revenue as a customer emerged from bankruptcy .
  • Backlog reached an all-time high: $9.38B total, with same-store backlog at $9.20B; sequential backlog rose ~15% despite significant Q3 burn, supported by strong technology/data center demand and modular bookings .
  • Capital returns and balance sheet: Quarterly dividend increased 20% to $0.60 (payable Nov 24, 2025), and management emphasized ongoing buybacks and M&A; net cash was ~$725M at September-end, and credit facility expanded to $1.1B with maturity Oct 2030 .
  • Management tone: Confident on near-term and 2026 trajectory; expects Q4 2025 same-store revenue growth in the high teens and 2026 low-to-mid teens, with margins remaining in recent strong ranges .

Values retrieved from S&P Global for consensus estimates (*).

What Went Well and What Went Wrong

What Went Well

  • Record financials: revenue $2.45B (+35% YoY), EPS $8.25 (+102% YoY), gross margin 24.8% (+370 bps YoY), operating margin 15.5% (+430 bps YoY), Adjusted EBITDA $413.9M (+74% YoY), free cash flow $519.0M (+84% YoY) .
  • Backlog strength: total backlog $9.38B; same-store backlog $9.20B; sequential increase of ~$1.26B driven by robust technology sector demand and modular capacity expansion .
  • Positive project developments: “recognizing $16,000,000 of previously deferred revenue on a project as a customer emerged from bankruptcy,” plus other strong closeouts in both segments, contributing to higher margins .
  • Management quote: “Great ongoing execution and favorable developments in certain late-stage projects delivered third quarter EPS that doubles our same quarter last year” .

What Went Wrong

  • Non-operating headwinds: negative fair value changes on contingent earn-outs (-$12.1M) weighed on other income lines; similar headwinds were present in the prior year (-$17.3M) .
  • SG&A increased to support growth: $229.6M (9.4% of revenue) vs $180.2M (9.9%) last year; while leveraged, investment intensity remains elevated to sustain capacity and automation initiatives .
  • Ongoing macro/tariff uncertainty and supply chain risk: management continues to flag tariff/macro exposure and potential cost/availability pressures, though they view current demand as robust .

Financial Results

Key Metrics vs Prior Periods

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Billions)$1.812 $2.200 $2.451
Diluted EPS ($USD)$4.09 $6.53 $8.25
Gross Margin (%)21.1% 23.5% 24.8%
Operating Margin (%)11.2% 13.8% 15.5%
Adjusted EBITDA ($USD Millions)$238.3 $334.0 $413.9
Operating Cash Flow ($USD Millions)$302.2 —$553.3
Free Cash Flow ($USD Millions)$281.9 $222.0 $519.0

Q3 2025 Actual vs Wall Street Consensus (S&P Global)

MetricConsensus*ActualSurprise
Revenue ($USD Billions)$2.158*$2.451 +$0.293B*
EPS (Primary/Diluted, $USD)$6.29*$8.25 +$1.96*
EBITDA ($USD Millions)$323.7*$413.9 +$90.2M*

Values retrieved from S&P Global (*).

Segment Performance and Mix

Segment MetricQ3 2024Q2 2025Q3 2025
Electrical revenue growth YoY—+49% +71%
Mechanical revenue growth YoY—+13% +26%
Electrical gross margin (%)23.9% 25.3% 26.2%
Mechanical gross margin (%)20.3% 22.9% 24.3%

KPIs and Business Mix

KPI / MixQ1 2025Q2 2025Q3 2025
Backlog ($USD Billions)~6.9 8.12 9.38
Same-store backlog ($USD Billions)——9.20
Industrial % of revenue62% 63% 65%
Technology % of revenue37% 40% 42%
Institutional % of revenue24% 24% 22%
Commercial % of revenue14% 13% 13%
Construction % of revenue85% 85% 86%
New building construction %58% 58% 61%
Existing building construction %27% 27% 25%
Modular % of revenue19% 18% 17%
Service % of revenue15% 15% 14%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Same-store revenue growthQ4 2025—High teens Introduced
Same-store revenue growthFY 2026—Low-to-mid teens; more weighted to H1 Introduced
Gross profit marginsOngoing“Continue in strong ranges” “Likely to continue in strong ranges” Maintained
Effective tax rateRest of 2025 & 2026~23% ~23% Maintained
Modular capacityEarly 2026~2.7M sq ft by early next year ~3.0M sq ft by early 2026 Raised/clarified
Quarterly dividendNov 2025$0.50 (Q2 2025) $0.60 (payable Nov 24, 2025) Raised (+20%)
Credit facilityCurrent$850M capacity; prior maturity earlier $1.1B capacity; maturity Oct 2030 Raised / Extended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
AI/Data centers & modularTech demand robust; modular 19% Q1, 18% Q2 of revenue; incremental capacity; preference for known hyperscalers Tech 42% of revenue; backlog step-ups; modular at 17%; 3.0M sq ft capacity by early 2026; automation investments (robots, welding software) Accelerating
Supply chain/tariffsTariffs uncertain; teams actively manage contracts/pricing; limited detectable impact to-date Continued macro/tariff caution; scale and relationships mitigate risk Stable/managed
Labor/recruiting/capacityEmployer-of-choice; internal staffing to flex; collaboration across opcos >21K employees; travel labor; sharing workforce across companies Improving
Backlog visibilitySeasonal patterns; strong pipelines into 2026/27 $9.38B backlog; majority is work already started; bookings generally begin within 12 months (ex modular) Strengthening
Capital allocationBuybacks at attractive multiples; dividend increases; acquisitions (Century, Right Way Plumbing) Dividend to $0.60; ~$125M YTD buybacks (~345K shares); two electrical acquisitions closed Oct 1 Active
Regulatory/taxJuly tax reform not expected to impact materially Tax rate ~23% ongoing Stable
End-marketsManufacturing mixed as resources tilt to tech; healthcare strengthening (new build/outpatient) Industrial 65% of revenue; healthcare strong in the South; commercial smaller but service profitable Mixed; tech-led

Management Commentary

  • Brian Lane: “Great ongoing execution and favorable developments in certain late-stage projects delivered third quarter EPS that doubles our same quarter last year… remarkable quarterly cash flow of over $550 million” .
  • Bill George: “Our largest single discrete project development was recognizing $16,000,000 of previously deferred revenue on a project as a customer emerged from bankruptcy” and EBITDA “more than $400,000,000” for the first time ever .
  • Trent McKenna: “Industrial customers accounted for 65% of total revenue… Technology… was 42% of our revenue… We remain on track to have 3,000,000 square feet of space in our modular businesses by early twenty twenty six” .

Q&A Highlights

  • Backlog timing and composition: Majority of backlog reflects work already started; new bookings generally start within 12 months (ex modular), supporting visibility into 2026 .
  • Capital allocation: Prioritize acquisitions and opportunistic buybacks; deployed ~$125M YTD; will reward shareholders if cash build outpaces acquisition capacity .
  • Cash flow dynamics: Expect cash flow to approximate net income over time; Q3 was a “catch up” quarter with strong payment terms .
  • Margins and closeouts: Both segments benefited from favorable late-stage closeouts; discrete items were larger than usual this quarter but not required for a record outcome .
  • Technical scope (DC vs AC): Shift does not materially affect Comfort Systems’ scope; scale of projects (copper, switchgear, cooling density) is the more notable factor .

Estimates Context

  • Q3 2025 beat: EPS $8.25 vs $6.29*; revenue $2.451B vs $2.158B*; EBITDA $413.9M vs $323.7M* — driven by strong execution, data center demand, and notable project closeouts .
  • Forward consensus: Q4 2025 EPS $6.73*, revenue $2.333B*, EBITDA $345.2M*; Q1 2026 EPS $5.85*, revenue $2.218B*, EBITDA $300.5M* — with management guiding Q4 same-store revenue growth high teens and 2026 low-to-mid teens, implying room for upward estimate revisions if margins sustain .

Values retrieved from S&P Global (*).

Forward Consensus Snapshot (S&P Global)

MetricQ3 2025Q4 2025Q1 2026
Primary EPS Consensus Mean ($)6.29*6.73*5.85*
Revenue Consensus Mean ($USD Billions)2.158*2.333*2.218*
EBITDA Consensus Mean ($USD Millions)323.7*345.2*300.5*
Primary EPS - # of Estimates8*8*7*
Revenue - # of Estimates8*8*7*

Key Takeaways for Investors

  • Comfort Systems executed a broad-based beat with record revenue, EPS, margins, EBITDA, and free cash flow; the beat was aided by some discrete items but supported by underlying strength across segments .
  • Backlog quality and visibility improved; majority of backlog is work underway, and new bookings typically start within 12 months (ex modular), anchoring 2026 confidence .
  • Technology/data center demand remains the primary growth vector, with modular as an accelerant; automation investments suggest continued productivity gains .
  • Balance sheet flexibility increased: net cash ~$725M, $1.1B credit facility (Oct 2030), and active buybacks support optionality around acquisitions and shareholder returns .
  • Dividend hike to $0.60 is a tangible return and potential stock catalyst; management continues signaling confidence via capital deployment .
  • Near-term trading: Strong beats and backlog narrative are positive; monitor any normalization of discrete closeout benefits and OI&E earn-out swings .
  • Medium-term thesis: Sustained margins, industrial/data center mix, modular capacity expansion to 3.0M sq ft by early 2026, and disciplined M&A underpin multi-year growth .

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