COMFORT SYSTEMS USA INC (FIX) Q4 2024 Earnings Summary

Executive Summary

• Record quarter: Revenue $1.87B (+38% YoY), gross margin 23.2% (+260 bps YoY), and diluted EPS $4.09; FY24 revenue $7.03B and EPS $14.60, both at all-time highs . Backlog hit $5.99B at year-end, up from $5.68B in Q3 and $5.16B a year ago .
• Margins surprised to the upside and were “broad-based,” with Electrical at 26.1% and Mechanical at 22.4% in Q4; management expects 2025 gross margins to remain in the strong ranges achieved in 2024 .
• Outlook: 2025 same-store revenue growth “most likely” high single-digits on a larger base; tax rate guided to ~22–23%; Q1 cash flow to be temporarily reduced by an ~$80M deferred tax catch-up and higher earn-out payments flowing through operating cash flow .
• Capital return/catalysts: Quarterly dividend raised to $0.40 (from $0.35), payable Mar 21, 2025; persistent, “no let up” demand from data center customers and record, broadly based backlog remain key stock drivers .

What Went Well and What Went Wrong

• What Went Well

  • Broad-based margin strength: Q4 gross margin rose to 23.2% (from 20.6% YoY); management emphasized no unusual closeouts and strong execution across projects. “It was really broad-based strength… revenue running through at great margins.”
  • Record backlog and secular demand: Backlog reached $5.99B (+$0.31B seq; +$0.83B YoY), with technology data centers/advanced tech now the largest component of revenue (33% of FY24) and robust industrial pipelines .
  • Cash generation and returns: FY24 free cash flow $743.5M; Q4 FCF $171.7M. Dividend per quarter increased to $0.40, reflecting strong cash flow .

• What Went Wrong

  • Near-term cash flow headwind: ~$80M of deferred 2024 tax payments shifted into Q1’25 and certain acquisition earn-out payouts will pass through operating cash flow, reducing Q1 reported operating cash flow (timing only) .
  • Mega modular order cadence normalized: Q4 lacked the “gigantic” modular orders seen in Dec ’22/’23; plants remain full, but step-up bookings were not repeated .
  • Growth optics vs base effect: 2025 same-store revenue growth outlook “high single-digit %,” lower than the implicit tone prior, driven by a much larger Q4’24 revenue base rather than weaker demand .

Financial Results

Quarterly P&L (oldest → newest)

• Management highlighted revenue +38% YoY in Q4 and an 88% YoY jump in operating income to $226M, driven by gross margin gains and SG&A leverage .

Backlog Progression (oldest → newest)

EBITDA and Free Cash Flow (oldest → newest)

Note: Adjusted EBITDA as defined by the company; see reconciliation and definition in releases .

Segment/Business Mix KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are reporting record annual and fourth quarter earnings… Per share earnings in 2024 were over 60% higher… and our strong quarterly results were also without precedent.” — Brian Lane, CEO .
• “We earned $4.09 per share this quarter, up 60% from last year… Backlog at the end of the year grew to a new all-time high of $6 billion.” — Brian Lane, CEO .
• “Our gross profit percentage grew to 23.2% this quarter… Electrical improved to 26.1%… Mechanical to 22.4%… [We are] optimistic that gross profit margins will continue to be in the strong ranges… in 2025.” — Bill George, CFO .
• On margin sustainability: “There really wasn’t any… handful of special closeouts… This was just broad-based strength and revenue running through at great margins.” — Bill George, CFO .
• On demand: “There’s been no let up on [data centers]… if they’re going to slow down, they don’t know it yet.” — Management .

Q&A Highlights

• Margin durability: Management confident margins can be maintained given selective project intake and execution quality; would not rule out further upside but stops short of guiding expansion after an exceptional 2024 .
• Modular: Growth to continue with focus on capacity/productivity; margin outlook supportive, growth faster than corporate average; Q4 bookings good but without outsized mega-awards seen in late 2022/2023 .
• Data centers/visibility: Persistent strong demand with unprecedented 2026 visibility; true AI data centers still early; all data centers becoming denser with higher power requirements .
• Backlog cadence: Typical seasonality (net bookings in Q1/Q4), with burn constraints at high activity levels; ample work and ability to be selective .
• Cash flow timing: ~$80M deferred tax payment shifted into Q1’25; strong full-year cash flow still expected, but Q1 optics pressured; certain earn-outs move through operating CF as performance exceeds estimates .

Estimates Context

• Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to data access limits at the time of analysis; as a result, we cannot provide “vs. estimates” comparisons for this quarter. We attempted to fetch S&P Global consensus for Q4’24 and Q1’25, but the request limit was exceeded. [Values retrieved from S&P Global were unavailable due to rate limits.]

Key Takeaways for Investors

• Broad-based margin strength and mix shift (Electrical/Mechanical) underpinned a quality beat narrative; management expects 2025 margins to remain at strong 2024 ranges, a potential positive for estimate revisions on profitability .
• Record backlog and persistent data center/advanced tech demand provide multi-year visibility; 2026 book visibility is the highest ever for the company .
• 2025 growth optics (high single-digit same-store) reflect base effects after a very strong Q4’24, not demand deterioration; pipelines remain “unprecedented” .
• Near-term cash flow optics will be noisy in Q1 due to an ~$80M deferred tax catch-up and earn-out payments, but underlying cash generation remains robust (FY24 FCF $743.5M) .
• Dividend increase to $0.40/quarter signals confidence in cash flow and offers incremental yield support amid secular industrial/onshoring demand .
• Execution discipline and selective project intake (favorable terms, strong counterparties) remain key to sustaining margins and FCF conversion in a tight labor environment .

Appendix: Additional Data Points

• Q4 revenue +38% YoY; operating income +88% YoY; FY24 EBITDA margin 12.7% and Q4 Adjusted EBITDA margin 14.0% .
• FY24 mix: Construction 84% / Service 16%; Modular 17% of revenue; Advanced Technology 33% of revenue (largest component), with data centers constituting a significant share .