Comfort Systems USA Q1 2025 slides: EPS surges 77% as backlog hits record $6.9B

Introduction & Market Context

Comfort Systems USA (NYSE:FIX) presented its first quarter 2025 earnings results on April 25, 2025, revealing substantial growth across key financial metrics. The mechanical and electrical construction services provider’s stock responded positively, closing up 5.77% during regular trading and surging an additional 9.25% in after-hours trading.

The company’s strong performance continues the momentum seen in previous quarters, with Q1 results significantly exceeding the high-single-digit to low double-digit growth projections mentioned in earlier guidance. This quarter’s results demonstrate Comfort Systems’ continued strength in the industrial and technology sectors, particularly in data centers and manufacturing facilities.

Quarterly Performance Highlights

Comfort Systems USA reported exceptional financial results for the first quarter of 2025, with revenue reaching $1.83 billion, a 19.1% increase compared to $1.54 billion in Q1 2024. The company’s profitability metrics showed even more impressive gains, with diluted earnings per share reaching $4.75, a 76.6% jump from $2.69 in the same period last year.

As shown in the following financial highlights from the presentation:

The company’s gross profit margin expanded significantly to 22.0% from 19.3% in Q1 2024, reflecting improved operational efficiency and potentially more favorable project mix. Net income surged 75.8% to $169.3 million, while adjusted EBITDA increased by 42.9% to $242.7 million compared to the prior year.

Detailed Financial Analysis

A deeper look at Comfort Systems’ income statement reveals the drivers behind the company’s strong performance. Operating income increased by 54.4% to $209.1 million, despite a 19.8% increase in selling, general and administrative expenses to $194.9 million.

The detailed income statement comparison shows the magnitude of improvement across all profitability metrics:

The company’s balance sheet remains solid, with $204.8 million in cash as of March 31, 2025, though this represents a significant decrease from $549.9 million at the end of 2024. Total (EPA:TTEF) debt remained relatively stable at $67.8 million, while equity increased to $1.78 billion from $1.70 billion at year-end 2024.

Backlog and Future Outlook

Perhaps the most encouraging indicator for Comfort Systems’ future performance is the continued growth in its backlog, which reached a record $6.89 billion at the end of Q1 2025. This represents a 15% increase from $5.99 billion at the end of 2024 and a 16.6% increase from $5.91 billion in Q1 2024.

The following chart illustrates the company’s impressive backlog growth trajectory over the past decade:

This substantial backlog provides strong visibility into future revenue and suggests continued robust demand for Comfort Systems’ services, particularly in the technology and manufacturing sectors that have been driving the company’s growth in recent quarters.

Revenue Breakdown by Customer and Activity Type

Comfort Systems’ revenue continues to be heavily weighted toward the technology sector, which accounted for 37.0% of year-to-date revenue. Manufacturing represented the second-largest customer segment at 24.7%, followed by healthcare at 10.0% and education at 8.8%.

The customer segment breakdown provides insight into the company’s exposure to different market sectors:

In terms of activity type, new construction remained the dominant revenue generator at 58.2% of year-to-date revenue, slightly up from 56.7% for the full year 2024. Existing building construction accounted for 26.9% of revenue, while service projects and service calls, maintenance & monitoring represented 6.5% and 8.4%, respectively.

The following chart shows the comparison between YTD 2025 and Annual 2024 revenue by activity type:

Cash Flow Concerns

Despite the strong earnings performance, one area of potential concern is the company’s cash flow. Comfort Systems reported cash used in operations of $88.0 million for Q1 2025, a significant reversal from the $146.6 million in cash provided by operations in Q1 2024.

The reconciliation to free cash flow shows an even more pronounced negative trend:

Free cash flow for Q1 2025 was negative $109.1 million, compared to positive $122.6 million in Q1 2024. This substantial swing may reflect increased working capital requirements to support the company’s growing backlog and ongoing projects, but it bears watching in future quarters to ensure it doesn’t represent a more fundamental issue.

The negative cash flow also helps explain the significant decrease in cash on the balance sheet from $549.9 million at year-end 2024 to $204.8 million at the end of Q1 2025.

Forward-Looking Statements

Based on the record backlog and strong Q1 performance, Comfort Systems appears well-positioned for continued growth throughout 2025. The company’s increasing exposure to the technology sector, particularly data centers, aligns with strong market demand trends that were highlighted in previous earnings calls.

The 19.1% revenue growth in Q1 2025 significantly exceeds the high-single-digit to low double-digit growth projections mentioned in the company’s previous guidance, suggesting that Comfort Systems may be outperforming its own expectations. However, investors should monitor the cash flow situation, as the reversal from positive to negative operating cash flow could impact the company’s ability to maintain its dividend increases and share repurchase programs if the trend continues.

With a record backlog, expanding margins, and strong positioning in high-growth sectors like technology and manufacturing, Comfort Systems USA appears to be executing effectively on its growth strategy, though the cash flow situation bears watching in upcoming quarters.

Full presentation:

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