10-QPeriod: Q1 FY2019

COMFORT SYSTEMS USA INC Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 25, 2019For Securities:FIX

Summary

Comfort Systems USA, Inc. (FIX) reported a strong first quarter for 2019, demonstrating significant revenue and profit growth compared to the prior year. Revenue increased by 15.8% to $538.5 million, driven by a combination of organic growth and contributions from acquisitions. Gross profit saw a notable increase of 19.8% to $106.7 million, leading to an expansion in gross profit margin. This improved operational performance translated to a 49.4% increase in operating income to $28.0 million. Despite a slight increase in Selling, General, and Administrative (SG&A) expenses, the company managed to improve its SG&A as a percentage of revenue, indicating improved operational efficiency. Net income rose to $19.9 million, a 19.3% increase from the prior year, with diluted EPS growing to $0.53. The company's balance sheet remains robust, supported by a strong credit facility, and management expresses confidence in continued favorable industry conditions and profitability for the full year 2019.

Financial Highlights

52 data points
Beta

Revenue

$538.47M

19.8% Gross Margin

Net Income

$19.87M

3.7% Net Margin

EPS (Diluted)

$0.53

Total Assets

$1.08B

Cash & Equivalents

$29.13M

Free Cash Flow

-$7.85M

Financial Statements
Beta
Revenue$538.47M
Cost of Revenue$431.81M
Gross Profit$106.67M
SG&A Expenses$78.91M
Operating Income$27.98M
Interest Expense$1.06M
Net Income$19.87M
EPS (Basic)$0.54
EPS (Diluted)$0.53
Shares Outstanding (Basic)36.92M
Shares Outstanding (Diluted)37.23M

Key Highlights

  • 1Revenue increased by 15.8% to $538.5 million in Q1 2019 compared to Q1 2018.
  • 2Gross profit increased by 19.8% to $106.7 million, with gross margin improving from 19.2% to 19.8%.
  • 3Operating income grew significantly by 45.4% to $28.0 million.
  • 4Net income rose by 19.3% to $19.9 million.
  • 5Diluted earnings per share (EPS) increased to $0.53 from $0.44 in the prior year.
  • 6The company maintained compliance with all financial covenants under its revolving credit facility.
  • 7A significant acquisition of Walker TX Holding Company, LLC for $178 million in cash and a $25 million note closed shortly after the quarter end, indicating continued growth strategy.

Frequently Asked Questions

Revenue growth was driven by a combination of organic growth (9.8% increase in same-store activity) and contributions from acquisitions, notably the Indiana acquisition which contributed a 6.0% increase.

Profitability improved significantly. Gross profit increased by 19.8%, and operating income grew by 45.4%. This led to a 19.3% increase in net income and a 20.5% increase in diluted EPS.

Management expects continued favorable industry conditions and anticipates that revenue and net earnings in 2019 will remain at the favorable levels experienced in 2018, with an emphasis on cost discipline and efficient project performance.

Subsequent to the quarter end, on April 1, 2019, the company acquired Walker TX Holding Company, LLC for approximately $178 million in cash plus a promissory note and an earn-out. Additionally, the company experienced a ransomware attack in mid-April 2019, which impacted IT infrastructure but is not expected to have a long-term material adverse impact.