01—Abstract
Summary
Summary of the 10-K filed February 21, 2019. Cited figures are marked; the original filing is the authoritative source.
Comfort Systems USA, Inc. (FIX) reported strong financial performance for the fiscal year ending December 31, 2018, demonstrating significant growth in revenue and profitability.
The company, a leading provider of comprehensive mechanical and electrical contracting services, saw a substantial increase in revenue, driven by both organic growth and strategic acquisitions. This growth reflects a healthy demand for its services across commercial, industrial, and institutional sectors, with a particular strength in renovation, expansion, maintenance, repair, and replacement services. The company's operational efficiency and focus on core competencies, such as design and build expertise and service excellence, contributed to improved gross margins.
Despite increased selling, general, and administrative (SG&A) expenses, largely due to investments in growth and higher compensation costs, SG&A as a percentage of revenue decreased, indicating effective cost management. Comfort Systems USA, Inc. also maintained a strong liquidity position and generated robust free cash flow, enabling continued investment in its business and shareholder returns through dividends and share repurchases. The company remains optimistic about its growth prospects, anticipating continued favorable industry conditions and planning to focus on execution and cost control in the upcoming year.
02—Key points
Key Highlights
- Revenue increased by 22.1% to $2.18 billion in 2018 compared to 2017, driven by a combination of same-store growth (17.0%) and acquisitions (5.1%).
- Gross profit increased by 21.8% to $446.3 million, with gross margin remaining stable at 20.4% in 2018, reflecting improved project execution.
- Selling, General, and Administrative (SG&A) expenses increased by 11.4% to $297.0 million, but as a percentage of revenue, SG&A decreased from 14.9% in 2017 to 13.6% in 2018.
- Net income attributable to Comfort Systems USA, Inc. significantly increased to $112.9 million in 2018, compared to $55.3 million in 2017.
- The company generated strong free cash flow of $121.6 million in 2018, compared to $80.0 million in 2017, indicating healthy operational cash generation.
- Backlog as of December 31, 2018, was $1.17 billion, a 23.0% increase year-over-year, signaling strong future revenue potential.
- The company repurchased 0.6 million shares for approximately $28.5 million during 2018, demonstrating a commitment to returning capital to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Comfort Systems USA kept $0.05.
- Revenue$2.18B100.0%
- Cost of revenue−$1.74B79.6%
- Gross profit$446.3M20.4%
- Operating costs−$296.0M13.6%
- Operating income$150.2M6.9%
- Interest, other & tax−$37.3M1.7%
- Net income$112.9M5.2%
Where FY2018 revenue went
$2.18B- Cost of revenue: $1.74B, 80% of revenue
- SG&A: $297.0M, 14% of revenue
- Net income: $112.9M, 5.2% of revenue
- Interest, other & tax: $37.3M, 1.7% of revenue
Kept 5.2% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 21, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.18B$1.79B | +22.1% |
| Cost of Revenue | $1.74B$1.42B | +22.2% |
| Gross Profit | $446.28M$366.28M | +21.8% |
| SG&A Expenses | $296.99M$266.59M | +11.4% |
| Operating Income | $150.24M$99.26M | +51.4% |
| Interest Expense | $3.71M$3.16M | +17.6% |
| Net Income | $112.90M$55.27M | +104.3% |
| EPS (Basic) | $3.03$1.48 | +104.7% |
| EPS (Diluted) | $3.00$1.47 | +104.1% |
| Shares Outstanding (Basic) | 37.20M37.24M | −0.1% |
| Shares Outstanding (Diluted) | 37.59M37.67M | −0.2% |
05—Questions
Frequently Asked Questions
What was the overall financial performance of Comfort Systems USA, Inc. in 2018?
In 2018, Comfort Systems USA, Inc. demonstrated strong financial performance with a significant increase in revenue to $2.18 billion, up 22.1% from 2017. Net income attributable to the company also rose substantially to $112.9 million. The company maintained a healthy gross profit margin and improved its SG&A as a percentage of revenue, while generating robust free cash flow.
What are the main drivers of the company's revenue growth?
The primary drivers of revenue growth in 2018 were strong same-store revenue increases, which accounted for 17.0% of the growth, and contributions from acquisitions, which added 5.1%. The company's focus on renovation, expansion, maintenance, repair, and replacement services, alongside new construction installations, across commercial, industrial, and institutional sectors supported this growth.
How is the company managing its expenses and profitability?
Comfort Systems USA, Inc. focuses on operational efficiencies and core competencies to maintain profitability. While SG&A expenses increased in absolute terms due to growth and compensation, they decreased as a percentage of revenue, indicating effective cost management. The company's stable gross profit margin reflects good project execution and volume increases.
What is the company's outlook for 2019?
The company anticipates continued favorable industry conditions and expects revenue and net earnings in 2019 to remain at the favorable levels experienced in 2018. Key focuses for 2019 include cost discipline, efficient project performance, workforce development, and strategic investments in service and small projects.
06—Continue