01—Abstract
Summary
Summary of the 10-K filed February 23, 2017. Cited figures are marked; the original filing is the authoritative source.
Comfort Systems USA, Inc. (FIX) reported solid performance for the fiscal year ending December 31, 2016.
The company provides comprehensive mechanical contracting services, primarily HVAC, plumbing, and controls, serving commercial, industrial, and institutional clients across the United States. Revenue saw a modest increase, driven by acquisitions and an overall improvement in industry conditions. The company's strategy focuses on operational excellence, efficiency, and employee development.
A significant portion of revenue (60%a) is derived from renovation, expansion, maintenance, repair, and replacement services in existing buildings, highlighting a strong recurring revenue base alongside new construction installations. Comfort Systems USA demonstrates a commitment to financial health, maintaining a strong balance sheet and generating consistent free cash flow, underscoring its ability to navigate industry cycles.
02—Key points
Key Highlights
- Revenue increased by 3.4% to $1.63 billion in 2016, driven by acquisitions and same-store growth.
- Gross profit margin improved to 21.0% in 2016 from 20.1% in 2015, reflecting better project execution and increased volume.
- The company maintained a strong financial position with no outstanding borrowings on its revolving credit facility as of December 31, 2016.
- Operating income increased by 12.8% to $101.6 million, indicating improved profitability from core operations.
- Comfort Systems USA completed two acquisitions in 2016, expanding its service offerings and geographic reach.
- 60% of revenue was generated from renovation, expansion, maintenance, repair, and replacement services, demonstrating a stable service-based business model.
- The company maintained effective internal controls over financial reporting, as attested by independent auditors.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Comfort Systems USA kept $0.04.
- Revenue$1.63B100.0%
- Cost of revenue−$1.29B79.0%
- Gross profit$344.0M21.0%
- Operating costs−$242.4M14.8%
- Operating income$101.6M6.2%
- Interest, other & tax−$36.7M2.2%
- Net income$64.9M4.0%
Where FY2016 revenue went
$1.63B- Cost of revenue: $1.29B, 79% of revenue
- SG&A: $243.2M, 15% of revenue
- Net income: $64.9M, 4.0% of revenue
- Interest, other & tax: $36.7M, 2.2% of revenue
Kept 4.0% as net incomeNet income $64.9M · 4.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 23, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $1.63B$1.58B | +3.4% |
| Cost of Revenue | $1.29B$1.26B | +2.2% |
| Gross Profit | $344.01M$318.13M | +8.1% |
| SG&A Expenses | $243.20M$228.97M | +6.2% |
| Operating Income | $101.57M$90.04M | +12.8% |
| Interest Expense | $2.35M$1.75M | +33.8% |
| Net Income | $64.90M$49.36M | +31.5% |
| EPS (Basic) | $1.74$1.32 | +31.8% |
| EPS (Diluted) | $1.72$1.30 | +32.3% |
| Shares Outstanding (Basic) | 37.34M37.44M | −0.3% |
| Shares Outstanding (Diluted) | 37.81M37.87M | −0.2% |
05—Questions
Frequently Asked Questions
What is Comfort Systems USA's primary business and revenue model?
Comfort Systems USA provides comprehensive mechanical contracting services, including HVAC, plumbing, piping, and controls. Their revenue model is diversified, with approximately 40% from new construction installations and 60% from renovation, expansion, maintenance, repair, and replacement services in existing buildings. This split indicates a strong focus on both project-based work and recurring service revenue.
How did Comfort Systems USA perform financially in 2016 compared to 2015?
In 2016, Comfort Systems USA saw a 3.4% increase in revenue to $1.63 billion. Gross profit improved by 8.1% to $344.0 million, with a higher gross profit margin of 21.0% compared to 20.1% in 2015. Operating income also saw a significant increase of 12.8% to $101.6 million, indicating strong operational performance. The company ended the year with no outstanding borrowings on its credit facility and generated substantial free cash flow.
What are the key risks facing Comfort Systems USA, as highlighted in the filing?
Key risks include the cyclical nature of the construction industry, which can lead to reduced demand and increased price competition during economic downturns. The company also faces risks related to cost overruns on fixed-price contracts, intense industry competition, potential failure of acquisitions to be successful, and reliance on third-party subcontractors and suppliers. Furthermore, IT system failures and cybersecurity breaches are identified as potential risks.
What is the company's strategy for growth and profitability?
Comfort Systems USA's strategy involves strengthening core competencies, achieving operating efficiencies through best practices and purchasing economies, and investing in its employees through training and career development. The company also focuses on key markets (commercial, industrial, institutional), leveraging resources across its operating locations, and pursuing opportunistic growth through acquisitions. A strategic initiative also targets expanding its service and maintenance revenue.
06—Continue