10-QPeriod: Q3 FY2021

COMFORT SYSTEMS USA INC Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 27, 2021For Securities:FIX

Summary

Comfort Systems USA, Inc. (FIX) reported solid revenue growth in the third quarter of 2021, with total revenue reaching $833.9 million, a 16.8% increase year-over-year. This growth was driven by both organic (same-store) increases and strategic acquisitions, notably TEC and Amteck. The company also saw a significant increase in its backlog, reaching $1.94 billion, indicating strong future revenue potential. Despite revenue growth, gross profit margins slightly compressed in the quarter to 19.1% from 20.6% in the prior year, primarily due to lower margins in certain segments and operations. However, selling, general, and administrative (SG&A) expenses as a percentage of revenue decreased, reflecting improved operational efficiencies and a decrease in bad debt expense. Net income for the quarter was $46.3 million, a slight decrease from $50.1 million in the prior year, impacted by factors including changes in the fair value of contingent earn-out obligations and higher income tax provision.

Financial Highlights

52 data points
Beta

Revenue

$833.90M

19.1% Gross Margin

Net Income

$46.30M

5.6% Net Margin

EPS (Diluted)

$1.27

Total Assets

$1.95B

Cash & Equivalents

$67.72M

Free Cash Flow

$37.48M

Financial Statements
Beta
Revenue$833.90M
Cost of Revenue$674.68M
Gross Profit$159.21M
SG&A Expenses$95.29M
Operating Income$64.11M
Interest Expense$1.59M
Net Income$46.30M
EPS (Basic)$1.28
EPS (Diluted)$1.27
Shares Outstanding (Basic)36.30M
Shares Outstanding (Diluted)36.43M

Key Highlights

  • 1Revenue increased by 16.8% to $833.9 million in Q3 2021 compared to Q3 2020, driven by same-store growth and recent acquisitions.
  • 2Backlog grew significantly to $1.94 billion as of September 30, 2021, up 35.9% year-over-year, signaling strong future business prospects.
  • 3Gross profit margin declined slightly to 19.1% in Q3 2021 from 20.6% in Q3 2020, attributed to variations in project execution and lower margins in specific segments.
  • 4SG&A expenses decreased as a percentage of revenue to 11.4% in Q3 2021, down from 12.7% in Q3 2020, demonstrating effective cost management and reduced bad debt provisions.
  • 5Net income for Q3 2021 was $46.3 million, a decrease from $50.1 million in Q3 2020, influenced by changes in fair value of contingent earn-out obligations and a higher effective tax rate.
  • 6The company reported strong free cash flow of $138.6 million for the nine months ended September 30, 2021, demonstrating robust operational cash generation.
  • 7Acquisitions, including Amteck and TEC, contributed significantly to revenue growth in the electrical services segment.

Frequently Asked Questions

Comfort Systems USA reported a strong increase in revenue for the third quarter of 2021, reaching $833.9 million, up 16.8% year-over-year. While net income saw a slight decrease to $46.3 million compared to $50.1 million in the prior year, this was influenced by factors like changes in contingent earn-out obligations and tax provisions. The company also experienced a slight compression in gross profit margins but improved its SG&A expense ratio.

Recent acquisitions, such as TEC and Amteck, are contributing positively to revenue, particularly in the electrical services segment. The Amteck acquisition, completed in August 2021, added $34.6 million in revenue in the third quarter, and TEC added $22.4 million. These acquisitions, along with others, have also increased the company's overall backlog and goodwill.

Despite ongoing challenges related to COVID-19, such as material availability and potential impacts from vaccine mandates, Comfort Systems USA anticipates solid earnings and cash flow for the remainder of 2021 and feels it has good prospects for 2022. The company expects supportive industry conditions to continue into the next year.

The company's backlog grew to $1.94 billion as of September 30, 2021, a 35.9% increase year-over-year. This substantial growth, driven by both acquisitions and organic bookings, indicates strong future demand for the company's services and provides good visibility for future revenue recognition over the next six to twelve months.