01—Abstract
Summary
Summary of the 10-K filed February 26, 2020. Cited figures are marked; the original filing is the authoritative source.
Comfort Systems USA, Inc. (FIX) reported robust performance for the fiscal year 2019, demonstrating significant revenue growth and increased operating income.
The company's strategy of focusing on core competencies, operational efficiencies, and strategic acquisitions, particularly in its electrical segment with the acquisition of Walker TX Holding Company, LLC, appears to be yielding positive results. Revenue increased by 19.8%a year-over-year, driven by both acquisitions and same-store growth, indicating strong demand for its mechanical and electrical contracting services across various sectors including industrial, healthcare, and education. Financially, the company maintained a strong liquidity position, evidenced by significant free cash flow generation.
Management's focus on execution and cost control for 2020, coupled with optimistic industry outlooks, suggests continued favorable performance. Investors should note the company's strategic emphasis on expanding its service business and modular/off-site construction capabilities as key growth drivers. Despite the positive operational and financial trends, investors should remain aware of the inherent risks in the cyclical construction industry, including potential impacts from economic downturns and labor market conditions.
02—Key points
Key Highlights
- Revenue grew by 19.8% to $2.62 billion in 2019, driven by acquisitions and same-store activity.
- Operating income increased to $163.6 million, reflecting improved execution and growth.
- Free cash flow remained strong at $112.4 million in 2019.
- Acquisitions, notably Walker TX Holding Company, significantly boosted the electrical services segment's revenue.
- The company generated substantial positive cash flow from operations, amounting to $142.0 million.
- Backlog increased by 37.4% year-over-year to $1.60 billion, indicating strong future demand.
- The company maintained a strong balance sheet with a Total Leverage Ratio of 1.0.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Comfort Systems USA kept $0.04.
- Revenue$2.62B100.0%
- Cost of revenue−$2.11B80.8%
- Gross profit$501.9M19.2%
- Operating costs−$338.3M12.9%
- Operating income$163.6M6.3%
- Interest, other & tax−$49.3M1.9%
- Net income$114.3M4.4%
Where FY2019 revenue went
$2.62B- Cost of revenue: $2.11B, 81% of revenue
- SG&A: $340.0M, 13% of revenue
- Net income: $114.3M, 4.4% of revenue
- Interest, other & tax: $49.3M, 1.9% of revenue
Kept 4.4% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 26, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $2.62B$2.18B | +19.8% |
| Cost of Revenue | $2.11B$1.74B | +21.7% |
| Gross Profit | $501.94M$446.28M | +12.5% |
| SG&A Expenses | $340.00M$296.99M | +14.5% |
| Operating Income | $163.64M$150.24M | +8.9% |
| Interest Expense | $9.32M$3.71M | +151.1% |
| Net Income | $114.32M$112.90M | +1.3% |
| EPS (Basic) | $3.10$3.03 | +2.3% |
| EPS (Diluted) | $3.08$3.00 | +2.7% |
| Shares Outstanding (Basic) | 36.85M37.20M | −0.9% |
| Shares Outstanding (Diluted) | 37.13M37.59M | −1.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in 2019?
Revenue growth in 2019 was primarily driven by the acquisition of Walker TX Holding Company, LLC, which significantly contributed to the electrical services segment, and by same-store activity reflecting increased demand for mechanical and electrical services.
How is the company managing its debt?
Comfort Systems USA, Inc. has a $600 million senior credit facility. The company maintained a strong financial position with a Total Leverage Ratio of 1.0 as of December 31, 2019, indicating effective debt management relative to its earnings.
What is the outlook for the company in 2020?
The company is optimistic about 2020, expecting industry conditions to remain strong. Management's focus will be on productivity, efficient project performance, labor force development, and investing in growth areas like modular construction and services.
What are the main risks identified by the company?
Key risks include economic downturns affecting construction activity, potential cost overruns on contracts, intense industry competition, inability to attract and retain qualified personnel, and risks associated with future acquisitions and information technology system failures.
06—Continue