01—Abstract
Summary
Summary of the 10-K filed February 22, 2023. Cited figures are marked; the original filing is the authoritative source.
Comfort Systems USA, Inc. (FIX) reported strong performance in its 2022 10-K filing, showcasing significant revenue growth driven by both acquisitions and robust same-store activity.
The company experienced a substantial increase in revenue, up 34.7%a year-over-year, fueled by strong demand in its mechanical and electrical services segments. Key acquisitions in 2022, including Atlantic Electric, LLC, contributed significantly to this growth. The company also demonstrated robust backlog growth, increasing by 75.8% year-over-year, indicating a healthy pipeline of future projects.
Despite increased costs related to labor and materials, Comfort Systems managed its expenses effectively, leading to improved operating income and net income. The company highlighted its commitment to operational efficiency, employee development, and strategic growth through acquisitions. Management expressed confidence in continued solid earnings and cash flow for 2023, while also acknowledging potential challenges like supply chain constraints and labor availability.
02—Key points
Key Highlights
- Revenue increased by 34.7% to $4.14 billion in 2022, driven by both acquisitions and strong same-store performance across mechanical and electrical services.
- Backlog grew significantly by 75.8% year-over-year to $4.06 billion as of December 31, 2022, indicating strong future demand for services.
- Gross profit increased by 31.7% to $741.6 million, although the gross profit margin slightly decreased from 18.3% to 17.9% due to a higher proportion of electrical segment revenue and new construction.
- Operating income increased by 34.7% to $253.8 million, while SG&A expenses increased by 30.0%, indicating effective cost management relative to revenue growth.
- Net income saw a substantial increase of 71.6% to $245.9 million.
- The company generated strong free cash flow of $256.0 million in 2022, a significant increase from $160.9 million in 2021, demonstrating effective working capital management.
- Comfort Systems USA successfully amended its senior credit facility in May 2022, increasing borrowing capacity to $850 million, and remained in compliance with all financial covenants.
- The company continued its share repurchase program, repurchasing 0.4 million shares for approximately $38.2 million during 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Comfort Systems USA kept $0.06.
- Revenue$4.14B100.0%
- Cost of revenue−$3.40B82.1%
- Gross profit$741.6M17.9%
- Operating costs−$487.8M11.8%
- Operating income$253.8M6.1%
- Interest, other & tax−$7.9M0.2%
- Net income$245.9M5.9%
Where FY2022 revenue went
$4.14B- Cost of revenue: $3.40B, 82% of revenue
- Net income: $245.9M, 5.9% of revenue
- SG&A: $489.3M, 12% of revenue
Kept 5.9% as net incomeNet income $245.9M · 5.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 22, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $4.14B$3.07B | +34.7% |
| Cost of Revenue | $3.40B$2.51B | +35.4% |
| Gross Profit | $741.61M$563.21M | +31.7% |
| SG&A Expenses | $489.34M$376.31M | +30.0% |
| Operating Income | $253.85M$188.44M | +34.7% |
| Interest Expense | $13.35M$6.20M | +115.5% |
| Net Income | $245.95M$143.35M | +71.6% |
| EPS (Basic) | $6.84$3.95 | +73.2% |
| EPS (Diluted) | $6.82$3.93 | +73.5% |
| Shares Outstanding (Basic) | 35.93M36.28M | −1.0% |
| Shares Outstanding (Diluted) | 36.05M36.45M | −1.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of Comfort Systems USA's revenue growth in 2022?
Comfort Systems USA experienced significant revenue growth in 2022, primarily driven by a combination of strategic acquisitions and robust same-store activity. The company completed several acquisitions, including Atlantic Electric, LLC, which contributed to the overall increase. Additionally, strong demand in its core mechanical and electrical services, particularly in sectors like industrial and healthcare, fueled the growth in existing operations.
How did the company manage its costs and profitability in the face of rising inflation and labor costs?
Comfort Systems USA managed its costs effectively despite inflationary pressures and increased labor expenses. While cost of services as a percentage of revenue slightly increased, the company's ability to increase revenue and gross profit led to a substantial rise in operating income and net income. The company's strategy includes prudent job planning, pricing adjustments, early material ordering, and collaboration with customers to mitigate supply chain and cost challenges.
What is the company's outlook for 2023, and what are the key risks identified?
The company anticipates solid earnings and cash flow for 2023, supported by a strong pipeline of opportunities and backlog. However, key risks identified include continued supply chain constraints, reduced labor availability, potential increases in labor and material costs, and the general economic uncertainty, including the possibility of a recession. Management is actively monitoring these factors and implementing strategies to mitigate their impact.
How has the company's financial position evolved in terms of liquidity and debt?
Comfort Systems USA maintained a strong liquidity position in 2022, with cash flow from operations significantly increasing and substantial borrowing capacity available under its credit facility. The company generated positive free cash flow and has a history of consistent cash flow generation. In May 2022, the company amended its senior credit facility, increasing its borrowing capacity to $850 million. The company remained in compliance with all its financial covenants throughout the year.
06—Continue