Comfort Systems USA Q4 2025 Earnings Call - Record margins, backlog and cash fund aggressive modular buildout and shareholder returns

Lisa, Conference Call Operator: Today, and thank you for standing by. Welcome to the Q4 2025 Comfort Systems USA Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker’s presentation, there’ll be a question-and-answer session. To ask a question during the session, you’ll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today’s conference is being recorded. I would now like to turn the call over to the speaker for today, Julie Shaeff, Chief Accounting Officer. Please go ahead.

Julie Shaeff, Chief Accounting Officer, Comfort Systems USA: Thanks, Lisa. Good morning. Welcome to Comfort Systems USA’s fourth quarter and full year 2025 earnings call. Our comments today, as well as our press releases, contain forward-looking statements within the meaning of the applicable securities laws and regulations. What we will say today is based upon the current plans and expectations of Comfort Systems USA. Those plans and expectations include risks and uncertainties that might cause actual future activities and results of our operations to be materially different from those in our comments. You can read a detailed listing and commentary concerning our specific risk factors in our most recent Form 10-K, as well as in our press release covering these earnings. A slide presentation is provided as a companion to our remarks and is posted on the Investor Relations section of the company’s website, found at comfortsystemsusa.com.

Joining me on the call today are Brian Lane, Chief Executive Officer, Trent McKenna, President and Chief Operating Officer, and Bill George, Chief Financial Officer. Brian will open our remarks.

Brian Lane, Chief Executive Officer, Comfort Systems USA: All right. Thanks, Julie. Good morning, everyone, and thank you for joining us today. Last night, we reported record earnings and backlog and exceptional cash flow, thanks to best-in-class execution by our teams across the United States. Same-store revenue growth for the fourth quarter was 35%, and our quarterly gross margin exceeded 25% for the first time in company history. We are reporting $9.37 per share this quarter, up 129% from last year, and we earned $28.88 per share for the year, compared to $14.60 in 2024. Backlog increased to a new all-time high of $12 billion, thanks to fantastic bookings in the quarter. Backlog growth was especially strong with technology customers, but our bookings and pipelines are strong in practically every sector.

2025 operating cash flow was $1.2 billion, laying a strong foundation for continued investment, and net cash flow demonstrates strong trends in our execution, customer relationships, and prospects. Our modular capacity is currently around 3 million sq ft, and we expect to increase this to approximately 4 million sq ft by the end of 2026, with planned additions in Texas and North Carolina. We continue to explore every opportunity to invest in our businesses. In addition to expanding our modular footprint, we are investing in technology, equipment, and training for our amazing workforce. Also, as announced previously, we acquired 2 great electrical companies during the fourth quarter, FC in Michigan and Meisner in Florida. Both are off to a great start, and I am happy to have them as part of Comfort Systems USA.

We have increased our quarterly dividend by $0.10 to $0.70 per share, and with our share repurchases last year, we are proving our commitment to rewarding our shareholders. Trent will discuss our operations and outlook in a few minutes, and I will make closing comments after our Q&A. But first, I will turn this call over to Bill to review our financial performance. Bill?

Bill George, Chief Financial Officer, Comfort Systems USA: Thanks, Brian. As Brian’s demonstrated, these results are unprecedented. Revenue for the fourth quarter of 2025 increased by 42% compared to last year, to $2.6 billion. Full year revenue for 2025 exceeded $9 billion, an increase of 30% compared to 2024. For the full year, our mechanical segment revenue increased by 21%, benefited by modular expansion and substantial organic construction and service growth. Electrical segment revenue increased by 62%, and overall same-store revenue increased by 26%. Despite tough revenue comparables in 2026, we expect same-store revenue will rise by mid-teens to high-teens % this year, weighed more heavily to the first half of the year. Gross profit was $675 million for the fourth quarter of 2025, a $241 million increase compared to a year ago.

Our gross profit percentage grew to 25.5% this quarter, as compared to 23.2% for the fourth quarter of 2024. This margin improvement was achieved through excellent execution within both of our segments. The quarterly gross profit percentage in our mechanical segment improved to 24.9%, compared to 22.4% last year, and margins in our electrical segment continued to climb to 26.9%. Full year gross profit increased by $719 million, and our annual gross profit margin was 24.1%, as compared to 21.0% in 2024.... Our electrical margin was 26.7% for 2025, while mechanical was 23.6%.

As we look to 2026, we are optimistic that gross profit margins will continue in the strong ranges that we have achieved over the last several quarters, although we expect that, as usual, our margins will be seasonally lower in the first quarter compared to the full year. SG&A expense in the fourth quarter was $248 million, or 9.4% of revenue, compared to $208 million, or 11.1% of revenue, in the same quarter of 2024. For the full year, SG&A expense as a percentage of revenue was 9.7%, down from 10.4% in 2024. In 2025, our SG&A increased by $153 million as we invested to support our much higher activity levels.

Quarterly operating income increased by 89%, from $226 million in the fourth quarter of 2024 to $427 million for the fourth quarter of 2025. Thanks to the jump in gross profit margins and good SG&A leverage, our quarterly operating income percentage increased to 16.1% from 12.1% in the prior year. For the full year, our operating income was $1.3 billion, and we achieved a noteworthy operating income percentage of 14.4%. Our 2025 tax rate was 20.9%. Our effective tax rate was lower last year due to interest we received on a delayed refund for 2022, and we estimate that our tax rate in 2026 will be around 23%.

After considering all these factors, net income for the fourth quarter of 2025 was $331 million, or $9.37 per share, and this is a 129% improvement in quarterly earnings per share from last year. Our full year earnings per share for 2025 were $28.88, as compared to $14.66 per share in the prior year, so our annual EPS grew by 98%. EBITDA increased 78% to $464 million this quarter, from $261 million in the fourth quarter of 2024. Same-store quarterly EBITDA increased by over 70%. Full year 2025 EBITDA was $1.45 billion, and our EBITDA margin was 16%. Full year free cash flow was a record $1 billion.

CapEx in 2025 was $155 million, just over 1.7% of revenues. We continue to invest in our operations, expand our modular capacity, and purchase vehicles to support the growth in our service business. We increased our investment in share repurchases in 2025 and returned more than $200 million to shareholders by purchasing over 440,000 shares at an average price of $489 per share. Since inception, our share purchase program has retired approximately 10.9 million shares at an average price of $50.15, and we have returned more than $546 million to you, our owners. That’s all I’ve got, Trent.

Bill George, Chief Financial Officer, Comfort Systems USA1: Thanks, Bill. I’m now going to discuss our business and outlook. Backlog at the end of the fourth quarter was $11.9 billion, a same-store increase in both sequential and year-over-year backlog. Same-store sequential backlog increased to $0.4 billion, or 26%, driven by bookings within the technology sector in both traditional construction and modular. More than one-half our sequential backlog increase was new modular bookings, and with the continuing increase in modular and larger project backlog, the duration of our backlog continues to extend. Since last year, our backlog has doubled with an increase of $6 billion and on a same-store basis, our backlog is 93% higher than at this time last year. Our revenue mix continues to be led by the industrial sector, which includes technology, and industrial accounted for 67% of our volume in 2025.

Technology, dominated by data center work, was 45% of our revenue, an increase from 33% the prior year. Industrial, and especially technology, is the largest driver of pipeline and backlog. Institutional markets, including education, healthcare, and government, are also strong and represent 21% of our revenue. Commercial service markets are active for us. However, our commercial construction is now a small portion of our overall construction business. Construction accounted for 86% of our revenue, with projects for new buildings representing 63% and existing building construction, 23%. We include modular in new building construction, and year to date, modular was 18% of our revenue.

Service revenue increased by 12% this year, but with faster growth in construction, service is now 14% of our total revenue. Our overall service business achieved a record $1.2 billion in revenue for 2025, and service continues to be a growing and reliable source of profit and cash flow. With unprecedented backlog and strong project pipelines, and given the confidence we feel in our best-in-class workforce, we expect continued strong performance in 2026, and we feel confident in our prospects. I want to take this opportunity to close by thanking our over 22,000 employees for their hard work and dedication. Our success is a direct result of the people that serve our customers every single day. I will now turn it back over to Lisa for questions. Thank you.

Lisa, Conference Call Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. To remove yourself from the queue, press star one one again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question today will be coming from the line of Tim Moroney of William Blair. Your line is open.

Bill George, Chief Financial Officer, Comfort Systems USA0: Yeah. Good morning, Brian, Bill, Trent. Thanks for taking my questions. I wanted to ask a clear-

Bill George, Chief Financial Officer, Comfort Systems USA1: Good morning.

Bill George, Chief Financial Officer, Comfort Systems USA0: Good morning. I wanted to ask a clarification question on the backlog, and then I have, I have one for Trent about labor. But first, on the backlog. You know, I think folks are going to look at your backlog, and they see that growth accelerating there, and they’re curious what that’s really based on. So could you talk a little bit more about how this all really works? Like, is your technology backlog today, is that reflective of the recent spike in CapEx that we’ve seen at the major hyperscalers recently, those announcements the last couple of weeks? Or is your backlog today reflective of hyperscaler spending plans last year or two years ago? In other words, are you early cycle or later cycle on the CapEx announcements that we see?

Bill George, Chief Financial Officer, Comfort Systems USA1: Thanks, Tim. So, yeah, so if you—if we put something into backlog, it means that we have a legal, a binding legal commitment, a price, and a scope. In order for us to meet those three requirements, a building has to have been planned a year or two ago, right? We’re not, you know, we’re not booking backlog for things that are being committed to today. The backlog we book is for stuff that’s already... The holes have been dug, things are being built. So you know, we’ve for a long time, people have thought of construction in a rubric of there’s the early cycle players, that’s mostly engineers and architects. There’s the mid-cycle players, it’s the people who start, you know, dig the hole, start the building. And then we’re what’s called a late-cycle player.

So by the time we are booking backlog, and especially by the time we’re booking revenue, we’re really working on things that came up, you know, 1-2.5 years ago. So for these gigantic projects, you know, I think as you were kind of implying, we’ll see whatever commitments they’re making now, we’ll see that in 2027, 2028 in our revenue.

Bill George, Chief Financial Officer, Comfort Systems USA0: Okay. That’s very clear, Bill. Thank you. That’s exactly what I was asking about. So thank you for clarifying that. And then just shifting gears completely, Trent, I wanted to ask about the labor shortage situation, because I’ve seen, you know, you’ve added more than 7,000 employees over the last 24 months, according to your SEC filings. So it’s a lot. So I guess my question is, are you able to still source enough talent to fulfill all this demand? Or are you seeing more bottlenecks these days? And can you talk about the different things that you’re doing as an organization to build and retain this critical talent pool? Thank you.

Bill George, Chief Financial Officer, Comfort Systems USA1: Yeah, thanks. Thanks, Tim, for that question. You know, first, I think first and foremost, you know, our operating companies are really great places to work. They attract best-in-class craft professionals and leaders in the industry, and that’s, you know, across the board, Comfort Systems companies, you know, all meet that, all meet that description. And then, you know, one of the things that we’ve talked about in the past, and we continue to invest in and grow, is our in-house capacity to provide contract craft professionals on a traveling basis, and that’s in Kodiak and Pivot. And, you know, Pivot brought to us also a technology stack that has really helped us grow that piece of what we’re building to be able to meet the labor needs of our customers.

This, you know, really gives our business leaders at a local level greater flexibility to pursue work, either in remote geographies or work that would otherwise have had too large of a peak staffing requirement for them to have previously, you know, gone after. So when you see those numbers, you know, one, it’s an all-of-the-above approach to hiring, and then two, it’s a novel and new approach for us, with regard to contract craft professionals. And that’s how we’re currently, you know, approaching this demand environment where we have a lot of work to chase.

Bill George, Chief Financial Officer, Comfort Systems USA0: Understood. Thanks for that detail, and congrats on a nice quarter.

Bill George, Chief Financial Officer, Comfort Systems USA1: Thanks.

Lisa, Conference Call Operator: Thanks, Tim. Thank you. One moment for the next question... Our next question will be coming from the line of Alan Valheimer of Thompson Davis. Your line is open.

Alan Valheimer, Analyst, Thompson Davis: Hey, good morning, guys. Congrats on another wave of record results.

Bill George, Chief Financial Officer, Comfort Systems USA: Thanks, Adam.

Alan Valheimer, Analyst, Thompson Davis: Hey, similar question to Tim, but I was hoping you could give us more color on the bookings in Q4. What kind of projects are those, and when will those start construction?

Bill George, Chief Financial Officer, Comfort Systems USA: So if you look at the enormous sequential increase of $2.6 billion in bookings, a little over half of that was new bookings in modular. So, you know, in past years, we’ve sometimes had a lot of year-end purchase orders in modular, and as the business has scaled up, that’s scaled up too. That work is a huge proportion of the work that was actually booked this quarter, is going to perform in 2027. Some of it will be in 2026 in the new buildings that we’ve committed to, and some of it actually goes into 2028.

For the rest of the business, the well over $1 billion of new construction project bookings, that is highly, generally reflective of the most busy sectors, which is by far data centers is the most busy of those sectors. Although there’s really good, there’s really good activity in manufacturing, in pharma, and in other verticals such as food processing. But the projects are really big now, and so, that means that they sit in backlog for a longer period of time. And I think some of what you saw with those bookings was people trying to get us signed up for their project, you know, as soon as possible, because I think there’s a general understanding with the demand right now for construction services in the United States, not everybody who wants a building gets one.

So it’s a busy time, and it’s, you know, it’s a great opportunity for us to really reward the people who are great partners for us.

Alan Valheimer, Analyst, Thompson Davis: Perfect. And then, I wanted to ask about the modular expansion, the 3 million-4 million sq ft. Does all of that come online at the end of 2026, or does that kind of come online throughout 2026? You know, what’s your ability to add, square footage beyond that, and then how does that impact CapEx this year?

Bill George, Chief Financial Officer, Comfort Systems USA: So the single biggest procurement of space will close at the end of February. We’ll be doing something in that space within a month or two, but it won’t be fully productive till the end of the year. So I’d say it’s more, it’s a gradual addition over the course of the year. But I think some of that space will, we will be productive, especially final assembly space. We can be productive in that very, very quickly.

Alan Valheimer, Analyst, Thompson Davis: Do you have a forecast for 2026 CapEx, Bill?

Bill George, Chief Financial Officer, Comfort Systems USA: You know, if I had to. So a lot of it will depend on whether we sign leases or purchase buildings. We are doing one very large building purchase in the first quarter. We are looking at both leasing and purchasing for another very big investment that we’ll probably be making in North Carolina. So I really don’t. If I were forced to, I would say the 1.7% you just saw is kind of a baseline rate for us right now. And then, you know, if you buy a building and it’s $60-$70 million, that’s gonna move the meter, you know, a couple tenths of a percent, you know? So that’s the best I’ve got for you.

Alan Valheimer, Analyst, Thompson Davis: Got it. Okay. Hey, congrats again. Thank you.

Bill George, Chief Financial Officer, Comfort Systems USA: See you. Thanks.

Lisa, Conference Call Operator: Thank you. One moment for the next question. Our next question is coming from the line of Julio Romeo of Sidoti & Company. Your line is open.

Julio Romeo, Analyst, Sidoti & Company: Thanks. Hey, good morning, guys. My first question is on the same-store sales growth expectation of mid- to high-teens year-over-year in 2026, more weighted in the first half. Could you give us a sense of how much of the full year contribution is weighted to that first half? In other words, are we looking at a particularly strong first and second quarter, where the same-store sales growth is similar to what you saw in Q1 2023 and Q2 2024 in that 30% growth range, or how would you have us think about that growth in the first place?

Bill George, Chief Financial Officer, Comfort Systems USA: You know, it’s interesting. It’s not so much that the growth is heavier in the first half as that the comparables last year are steeper in the second half of this year. So I think we’re gonna grow consistently through the year, but you saw, although the extra growth you saw in the third and fourth quarter of last year just makes it a steeper comparable. So essentially, we looked at. We budget, right? We just had our year-end budgeting process. We look really hard at what of the new backlog and of the existing backlog we think will come through. We think about our service business, we think about our modular capacity, and we come up with sort of a full year revenue number.

But then when you just say, okay, well, you know, so that has a percentage, let’s say, in the mid to high teens. But then when you look at that, you have to take into account that last year the pattern was a pretty steep ramp up, and so the first two quarters just, you know, the number you’re gonna compare to is proportionally a little smaller.

Julio Romeo, Analyst, Sidoti & Company: Super helpful there. And then, you know, I had one other one about, you know, as data centers continue to increase in density, you’re obviously seeing increase in scope and in project complexity. Can you maybe dive a little bit into how that improves the project economics for Comfort Systems? In other words, if scope is increasing 3-4x versus 5 years ago, given the scarcity of skilled contractors that can kind of tackle that, fair to assume your project economics are outpacing the increasing density of data centers?

Bill George, Chief Financial Officer, Comfort Systems USA: ... Yeah, well, it certainly has been doing that over the last several quarters, right? As evidenced by the results that we just demonstrated. We definitely have an opportunity to, you know, demand that we be rewarded for the risk and for the commitment of scarce resources to people. At Comfort, we don’t price primarily based on, you know, gross profit per hour worked. We put a very, very heavy emphasis on work that will be good for our people, places where, you know, they can get to it without stressing their family. They can find a place to live, they can get lunch, other contractors on the job who are their friends.

So, you know, when your workforce is as scarce as ours is, if you thought about it, I don’t think it would surprise you to know that being good to your workforce is almost more important than making sure that you optimize something that’s in a spreadsheet, right? Because the spreadsheet’s no good if you, if the people aren’t there.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Hey, and Julio, one more thing. I mean, even when they’re getting bigger, which they are, getting a lot bigger, the work is still the same for us. There’s just more of it. And I really do think it helps with your productivity and your planning, at least the ones I’ve seen. So, it does... I think it does help our economics in terms of how fast we can go as well.

Brian Brophy, Analyst, Stifel: Very helpful. I’ll pass it on. Thank you.

Bill George, Chief Financial Officer, Comfort Systems USA: Thanks. Thanks, Julio.

Lisa, Conference Call Operator: Thank you. One moment for the next question. That question comes from the line of Brent Thoman of D.A. Davidson and Company. Your line is open.

Brent Thoman, Analyst, D.A. Davidson and Company: Hey, all. Great, great quarter. Again, you know, I guess, just a question. I mean, it looks like you saw a measurable increase in modular contribution in the fourth quarter, and you know, happened to see, you know, pretty meaningful operating leverage here as well as G&A as a percentage of revenue. So, I mean, I think it’s the lowest I think you’ve ever seen for a fourth quarter that I can remember. Did the two go hand-in-hand? Anything else that you would say is driving that operating leverage that, you know, ultimately reflecting this benefit of the fixed overhead at modular this quarter?

Bill George, Chief Financial Officer, Comfort Systems USA: So I’ll start with the second one, say something briefly about your first question, and then let me see if anybody else has anything they wanna say. You know, that SG&A leverage, we increased our SG&A expenditures by $155 million. That is a lot of money in the real world. That is a lot of human beings and computers, and it’s just that our revenue is growing so much faster that we’re still getting leverage. And, you know, I think we just talked about pretty strong revenue growth next year. If we were to hit that revenue growth, I don’t think our SG&A would grow quite as fast. So there’s some of that still available to us.

You know, as far as the prior question goes, and you know, if I don’t answer it, I think it’s pretty down-to-earth answer. It’s, you know, it’s execution, it’s getting good pricing. It’s just having an opportunity to go out and, you know, let our people do what they’re great at, and having them have enough money in the job to account for the risks and to take care of, you know, take care of their people. I don’t know. Maybe I didn’t answer your first question, but that’s what I’m thinking.

Brent Thoman, Analyst, D.A. Davidson and Company: Okay. Well, to be continued there, Bill. I guess maybe the other question, just on Modular. You guys have had number of initiatives, I mean, even before talking about this 4 million square footage, and a lot of initiatives in terms of growing physical space, upgrading equipment. I think all were intended to help you kinda debottleneck. Where would you say you are in terms of leveraging the investments you’ve already made there at Modular? And, are there still some of these things coming online through this year before the square footage increase that, you know, maybe you haven’t fully realized the benefits of today?

Bill George, Chief Financial Officer, Comfort Systems USA: I mean, yeah. I mean, we’re on a fantastic journey, right? The one of the interesting things, you heard me talk about how we might be buying more buildings. Well, one of the reasons we’re looking at buying buildings rather than leasing them, you know, we don’t want to be in the real estate business, is because the amount of money we’re putting into these buildings in the form of robotics and, you know, other optimizations using automation, makes it so that you really don’t wanna drop $30 million into a $60 million building you don’t own. I think we’re making great progress. I think that it’s really, it’s extraordinary to see what’s being accomplished by those guys. The last thing I wanna do is just come back to the beginning of your question.

The other thing is, you know, Modular grew precipitously, and if you look in the MD&A, you can see, you know, it grew precipitously on both revenue and the profitability side, but it’s still only 18% of Comfort. The rest of Comfort is growing pretty much the same. It’s Modular is an extraordinary, wonderful ingredient for our success, but it’s one ingredient, and everything else is doing great as well.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Yeah, if I could, I’d like to just commend that team. You know, they, what the Modular teams at Comfort Systems have been able to accomplish is really quite extraordinary, with the expansion and also performance that they’re continuing.

Brent Thoman, Analyst, D.A. Davidson and Company: Yeah, for sure. One more, if I could. Just, I mean, it looks like you saw, like, a $1.6 billion increase in backlog for your, I guess, your non-modular Texas operations, for the year.

Could you just talk about markets outside of data center in Texas, or should we just be talking about data center in Texas for the stick build operations? Just ask a few questions there.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Yeah, no, I mean, if you’re talking about Texas, it’s a combination of modular and stick build. We’re getting a lot of electrical work. As you know, we have the largest electrical contractor here in Texas, for sure. We’re going out more west, they’re building in bigger, so, you know, that has grown considerably. But also the other electricals we have are just doing outstanding as well, throughout the country. So, you know, I know modular, it gets a lot of attention, but the stick build is still a very popular build, how people are building either data centers or other facilities.

Bill George, Chief Financial Officer, Comfort Systems USA: Yeah, and, you know, like, advanced technology, which for us, at least in the last 12 months, is almost, it’s overwhelmingly data center. That went from 33% of our revenue to, like, 45% of our revenue year-over-year. So the reality is, it is a lot. In Texas, data center is just coming and demanding the construction resources that we have. And, you know, they’re good, the good partners are making it worth our while to dedicate the overwhelming majority of our resources to that vertical.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Yeah, I’m just gonna... The Texas situation is really probably unique in the country with the amount of build that they’re going. West Texas, there’s a lot of, obviously, energy, et cetera, that’s out there. But the amount of opportunities we’re looking at, you know, is really outstanding.

Brent Thoman, Analyst, D.A. Davidson and Company: Yeah. All right. Thanks, all. I appreciate it.

Lisa, Conference Call Operator: Thank you. One moment for the next question, please. Our next question is coming from the line of Josh Cheng of UBS. Please go ahead.

Josh Cheng, Analyst, UBS: Hi, good morning, Brian, Trent, Bill, Julie. Congrats on a really strong quarter.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Thank you.

Josh Cheng, Analyst, UBS: Yeah, I guess, I guess, Brian, you have talked for a long time about, you know, not overcommitting to jobs, and so do you feel like your subsidiaries still understand that? Do you, do you feel like there’s any push from, from them to take more jobs than you’re comfortable with? Just, just kind of how, how is that kind of progressing so far?

Brian Lane, Chief Executive Officer, Comfort Systems USA: Yeah.

Josh Cheng, Analyst, UBS: Given the fact-

Brian Lane, Chief Executive Officer, Comfort Systems USA: Hey, Josh, that’s a good question. You know, we’ve talked about this a long time. I think it’s a great question. We remain very disciplined. You know, we go through, on the acquisition side of a job, you know, a detailed process where we lay out our labor projections on our current work and the future work we’re looking at. When’s it going to start? Who’s going to be available? How many are going to be available, and the supervision for that work. So we are right now in a very good position to handle all our backlog and assess what is coming that we can do to make sure we keep our profitability up, productivity up, and keep everybody safe. So, no, we haven’t people out pushing over their skis. The work we have, we can handle.

Josh Cheng, Analyst, UBS: That’s great to hear. Yeah, thanks, Brian. And then I guess on your outlook, you did call out stronger growth in the first half. Obviously, there was an ice storm in a lot of the south and southeast in Q1. Just want to make sure that the operations kind of you know handled that well and that that’s not a concern in the near term, I guess.

Bill George, Chief Financial Officer, Comfort Systems USA: So we did have some of our biggest operations who had jobs shut down for multiple days in January, but that’s why we’re seasonally lower, right?

Brian Lane, Chief Executive Officer, Comfort Systems USA: Yeah.

Bill George, Chief Financial Officer, Comfort Systems USA: That’s why every year we’re seasonally lower. There’s always something like that, so I don’t think it’s anything... You know, there’s ice storms every year. It’s just what you’d normally see.

Brian Lane, Chief Executive Officer, Comfort Systems USA: You know, sorry, and while we’re talking about this, you know, if you look at the weather, particularly up in the north with the temperatures we had, really want to applaud our guys for working through it. They did a heck of a job, you know, in very challenging conditions for sure.

Josh Cheng, Analyst, UBS: Yeah, that’s right. Okay. Yeah, congrats on a good quarter and a strong outlook.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Thanks.

Lisa, Conference Call Operator: One moment for the next question. Our next question is coming from the line of Brian Brophy of Stifel. Your line is open.

Brian Brophy, Analyst, Stifel: Yeah, thanks. Good morning, everybody. Appreciate you taking the question. Congrats on a nice quarter.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Thanks.

Brian Brophy, Analyst, Stifel: Obviously, there was some discussion about a month ago on some potential changes to cooling requirements on next-generation chips. Just any color on how that may impact your business and any notable implications we should be thinking about?

Bill George, Chief Financial Officer, Comfort Systems USA: I would say not at all. You know, the new chip stuff that they said—he said, "Okay, we can use 45-degree water." Still needs pipe, still needs water. 45-degree water is not naturally occurring for 99% of the year and 99% of the places. So I don’t... You know, if you just talk to our smartest people, until they figure out how to run the servers without electricity, they’re gonna have heat. And, yeah, we just think people are gonna need electricians and pipe fitters, honestly.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Far more, far more impactful for the OEMs than for us.

Brian Brophy, Analyst, Stifel: Yeah, noted. That’s helpful. And then just wanted to ask about the M&A pipeline and cash deployment. You guys are obviously generating a lot of cash, have very large cash balance at this point. Seems like your cash generation may be outpacing your ability to deploy into M&A. Maybe that’s true, maybe that’s not. But just big picture, how are you also thinking about other avenues on the capital deployment side? Thanks.

Bill George, Chief Financial Officer, Comfort Systems USA: ... So the pipeline’s good, but the cash flow is relentless. We, you know, we like our pipeline. We’ll get some done. You might have noticed we spent $200 million buying shares this past year. You know, two consecutive 10-cent increases to our dividend is almost a 50% increase to our dividend. I know our stock price keeps running away from it. At the same time, we proportionately, if you look at the cash that we have and at least project to have this year, given the M&A, we, you know, would, you know, the range of M&A we might do, we’re not gonna have an unprecedented amount of cash as compared to the size of Comfort Systems.

There have been times in the past when the financial crisis started, we had more cash proportionately than we think we’re gonna have in the next little while. And that’s why we have some of the great companies we have today. So we’re not. We’re definitely of a mindset to continue to have very, very high demands for conviction when we do acquisitions. We are certainly paying more for companies than we ever have. It’s because they’re worth more. You know, a company with hundreds of electricians that have worked together as a team for years, for decades, is worth more than it was in the past.

But at some point, you know, we do actually think, you know, we’re building for a multi-decade period, and we just wanna have people that come in and that are good peers to the amazing companies we have. You know, one of the reasons Comfort is so successful is we have so many companies that have been building data centers for decades, right? There’s nobody on the planet that has, you know, a better pedigree than us in data building data centers. And, you know, we wanna keep the quality of our group of companies, you know, very high. And so with acquisitions, if we have to choose between, you know, between conviction and sort of making spreadsheets happy, we’re gonna stick with conviction. It’s done well for us in the past.

Brian Lane, Chief Executive Officer, Comfort Systems USA: Understood. That’s helpful, caller. I’ll pass it on.

Lisa, Conference Call Operator: Thank you. The next question is coming from the line of Sangeeta Zing of Key Bank. Your line is open.

Sangeeta Zing, Analyst, Key Bank: Great. Thank you. So, I have a question on the backlog duration becoming longer, which is kind of a little bit different from what has been the case for you guys. Since we still have these supply chain and tariff uncertainties, are you having to contract for this longer duration backlog a little bit differently so that you know you’re protecting your returns when you deliver them, let’s say, in 2028?

Bill George, Chief Financial Officer, Comfort Systems USA: You know, if you look across our costs, like if you look at our cost of goods sold and you look across our costs, there really aren’t. We don’t quote equipment or anything that’s highly spec’d, which, on this scale of work, it’s all highly spec’d without getting a quote from someone else. And so that really hasn’t changed. We’re actually being released, even on these long jobs, to purchase stuff very, very early. Sometimes we’re being released, we’re being given enough of a commitment to purchase stuff before the work itself even goes into our backlog. The rest of our cost and where we take all of our risk is labor. You know, there’s no such thing as, you know, sort of four-year price locks for labor.

So what we rely on there is that we have the best people in the country at knowing that they’re gonna have to take care of their people and making sure that they put the money in the jobs that they’re gonna need to take care of their people.

Bill George, Chief Financial Officer, Comfort Systems USA1: And, Sangeeta, Bill and I. This is Trent. Bill and I, as, recovering attorneys, both appreciate how much our legal team does to make sure that we have the right contract terms to protect us as we go forward with all this work. And they do a, they do a really, really great job of making sure that we’re protected contractually.

Bill George, Chief Financial Officer, Comfort Systems USA: They’re doing better than they did when Trent and I were general counsel.

Bill George, Chief Financial Officer, Comfort Systems USA1: Without a doubt, Bill. Without a doubt.

Brian Lane, Chief Executive Officer, Comfort Systems USA: I’ll certify that.

Bill George, Chief Financial Officer, Comfort Systems USA: It’s possible we have a little more bargaining power.

Sangeeta Zing, Analyst, Key Bank: Got it. Let me ask one more on the modular capacity increase. Can you, kind of walk us through your decision on going from $3 million to $4 million? Is that a function of a specific customer coming in and asking you for additional capacity, or is it more you kind of seeing the runway ahead?

Bill George, Chief Financial Officer, Comfort Systems USA: You know, it’s primarily us taking steps to meet more of the demand from our two largest customers. They would buy more if they could, and we really want to do everything we can. They’ve been great partners for us. We want to be great partners for them. We’ve added a few customers, but none of them are at scale. And if you look at the new buildings and you say, "Okay, what’s going to be built in those buildings?" The floor space right now is planned for those two large hyperscaler customers who have been so good to us.

Sangeeta Zing, Analyst, Key Bank: Got it. Appreciate that. Thank you.

Bill George, Chief Financial Officer, Comfort Systems USA: Thanks.

Lisa, Conference Call Operator: Thank you. I would now like to turn the call back over to Brian Lane for closing remarks. Please go ahead, Brian.

Brian Lane, Chief Executive Officer, Comfort Systems USA: All right, thank you. In closing, I really want to thank our amazing employees again. They’re truly outstanding. We had a great 2025, and we are really excited about 2026. Thanks for your interest in Comfort Systems. We look forward to seeing you on the road soon, and I hope you all have a great weekend.

Lisa, Conference Call Operator: This does conclude today’s conference call. You may all disconnect.