Business Wire | Feb 25, 2021 04:27PM EST

Comfort Systems USA Reports Fourth Quarter and Full Year 2020 Results

Feb. 25, 2021

HOUSTON--(BUSINESS WIRE)--Feb. 25, 2021--Comfort Systems USA, Inc. (NYSE: FIX) today reported results for the fourth quarter and annual period ended December 31, 2020.

For the quarter ended December 31, 2020, net income was $42.8 million, or $1.17 per diluted share, as compared to $34.1 million, or $0.92 per diluted share, for the quarter ended December 31, 2019. Earnings per diluted share for the fourth quarter of 2020 included an $0.18 benefit from changes in value of earnout accruals. Revenue for the fourth quarter of 2020 was $699.0 million compared to $719.6 million in 2019. The Company reported operating cash flow of $70.1 million in the current quarter compared to $42.3 million in 2019.

Backlog as of December 31, 2020 was $1.51 billion as compared to $1.43 billion as of September 30, 2020 and $1.60 billion as of December 31, 2019. On a sequential basis, our same-store backlog increased from $1.43 billion as of September 30, 2020 to $1.44 billion as of December 31, 2020. On a same-store basis, backlog decreased from $1.60 billion as of December 31, 2019 to $1.23 billion as of December 31, 2020.

The Company reported net income of $150.1 million, or $4.09 per diluted share, for the twelve months ended December 31, 2020, as compared to $114.3 million, or $3.08 per diluted share, in 2019. Earnings per diluted share for the third quarter of 2020 included a $0.17 benefit from a discrete tax item. The Company also reported revenue of $2.86 billion for the twelve months ended December 31, 2020, as compared to $2.62 billion in 2019. Operating cash flow for the twelve months ended December 31, 2020 was $286.5 million, as compared to $142.0 million in 2019.

Brian Lane, Comfort Systems USA's President and Chief Executive Officer, said, "Thanks to the commitment and resilience of our people, we were able to overcome unprecedented challenges during 2020, and we are delighted to report record earnings and cash flow. We are deeply grateful for the courage and perseverance that our field employees continue to demonstrate as essential workers during the pandemic."

Mr. Lane continued, "Our backlog strengthened slightly this quarter, but it continues to reflect some delays in bookings that are likely to result in modest headwinds in same-store revenue in 2021, particularly during the first half of the year. We are encouraged to report good ongoing bidding activity, and we currently foresee that our service operations will enter 2021 with pre-pandemic volumes and profitability."

Mr. Lane concluded, "Although we continue to expect sporadic air pockets resulting from delays in project bookings and starts, we are increasingly optimistic about 2021. We currently anticipate our full-year 2021 results are likely to be similar to, but somewhat lower than, the record results that we achieved in 2020. We continue to prepare for a wide range of potential circumstances in nonresidential construction in the coming quarters; however, we now expect good overall trends, especially in our industrial, technology and manufacturing markets, and we also feel that we are geographically concentrated in markets with comparatively strong prospects. We look forward to 2021, and we are confident that we can achieve solid profitability and cash flow during the coming year."

The Company will host a webcast and conference call to discuss its financial results and position on Friday, February 26, 2021 at 10:00 a.m. Central Time. The call-in number for this conference call is 1-888-713-4218, and the passcode is 47939960. The call and the slide presentation to accompany the remarks can be accessed on the Company's website at www.comfortsystemsusa.com under the Investor tab. A replay of the entire call will be available on the Company's website on the next business day following the call.

Comfort Systems USA(r) is a leading provider of commercial, industrial and institutional heating, ventilation, air conditioning and electrical contracting services, with 139 locations in 114 cities around the nation. For more information, visit the Company's website at www.comfortsystemsusa.com.

Certain statements and information in this press release may constitute forward-looking statements regarding our future business expectations, which are subject to applicable securities laws and regulations. The words "believe," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could," or other similar expressions are intended to identify forward-looking statements, which are generally not historic in nature. These forward-looking statements are based on the current expectations and beliefs of Comfort Systems USA, Inc. and its subsidiaries (collectively, the "Company") concerning future developments and their effect on the Company. While the Company's management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting the Company will be those that it anticipates. All comments concerning the Company's expectations for future revenue and operating results are based on the Company's forecasts for its existing operations and do not include the potential impact of any future acquisitions. The Company's forward-looking statements involve significant risks and uncertainties (some of which are beyond the Company's control) and assumptions that could cause actual future results to differ materially from the Company's historical experience and its present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the use of incorrect estimates for bidding a fixed-price contract; undertaking contractual commitments that exceed the Company's labor resources; failing to perform contractual obligations efficiently enough to maintain profitability; national or regional weakness in construction activity and economic conditions; the Company's business being negatively affected by health crises or outbreaks of disease, such as epidemics or pandemics; financial difficulties affecting projects, vendors, customers, or subcontractors; the Company's backlog failing to translate into actual revenue or profits; failure of third party subcontractors and suppliers to complete work as anticipated; difficulty in obtaining or increased costs associated with bonding and insurance; impairment to goodwill; errors in the Company's percentage-of-completion method of accounting; the result of competition in the Company's markets; the Company's decentralized management structure; material failure to comply with varying state and local laws, regulations or requirements; debarment from bidding on or performing government contracts; shortages of labor and specialty building materials or material increases to the cost thereof; retention of key management; seasonal fluctuations in the demand for mechanical and electrical systems; the imposition of past and future liability from environmental, safety, and health regulations including the inherent risk associated with self-insurance; adverse litigation results; an increase in our effective tax rate; a material information technology failure or a material cyber security breach; risks associated with acquisitions; our ability to manage growth and geographically-dispersed operations; our ability to obtain financing on acceptable terms; and other risks detailed in our reports filed with the Securities and Exchange Commission.

For additional information regarding known material factors that could cause the Company's results to differ from its projected results, please see its filings with the SEC, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise.

- Financial tables follow -

Comfort Systems USA, Inc.

Consolidated Statements of Operations

(In Thousands, Except per Share Amounts)



Three Months Ended Twelve Months Ended

December 31, December 31,

(Unaudited)

2020 % 2019 % 2020 % 2019 %

Revenue $ 698,961 100.0 % $ 719,584 100.0 % $ 2,856,659 100.0 % $ 2,615,277 100.0 %

Cost of 561,962 80.4 % 587,024 81.6 % 2,309,676 80.9 % 2,113,334 80.8 %services

Gross profit 136,999 19.6 % 132,560 18.4 % 546,983 19.1 % 501,943 19.2 %



SG&A 88,920 12.7 % 86,588 12.0 % 357,777 12.5 % 340,005 13.0 %

Gain on sale (202 ) - (582 ) (0.1 ) % (1,445 ) (0.1 ) % (1,701 ) (0.1 ) %of assets

Operating 48,281 6.9 % 46,554 6.5 % 190,651 6.7 % 163,639 6.3 %income



Interest (1,477 ) (0.2 ) % (2,376 ) (0.3 ) % (8,282 ) (0.3 ) % (9,093 ) (0.3 ) %expense, net

Changes in thefair value ofcontingent 7,295 1.0 % 933 0.1 % 9,119 0.3 % (2,991 ) (0.1 ) %earn-outobligations

Other income 42 - 20 - 52 - 187 -

Income before 54,141 7.7 % 45,131 6.3 % 191,540 6.7 % 151,742 5.8 %income taxes



Provision for 11,301 11,079 41,401 37,418 income taxes

Net income $ 42,840 6.1 % $ 34,052 4.7 % $ 150,139 5.3 % $ 114,324 4.4 %



Income per share

Basic $ 1.18 $ 0.93 $ 4.11 $ 3.10

Diluted $ 1.17 $ 0.92 $ 4.09 $ 3.08



Shares used incomputing income pershare:

Basic 36,358 36,743 36,542 36,854

Diluted 36,561 37,015 36,738 37,131

Supplemental Non-GAAP Information - Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") - (Unaudited) (In Thousands)



Three Months Ended Twelve Months Ended

December 31, December 31,

2020 % 2019 % 2020 % 2019 %



Net income $ 42,840 $ 34,052 $ 150,139 $ 114,324

Provisionfor income 11,301 11,079 41,401 37,418 taxes

Other (42 ) (20 ) (52 ) (187 ) income, net

Changes inthe fairvalue of (7,295 ) (933 ) (9,119 ) 2,991 contingentearn-outobligations

Interest 1,477 2,376 8,282 9,093 expense, net

Gain on sale (202 ) (582 ) (1,445 ) (1,701 ) of assets

Depreciationand 14,505 13,129 60,629 51,572 amortization

Adjusted $ 62,584 9.0 % $ 59,101 8.2 % $ 249,835 8.7 % $ 213,510 8.2 %EBITDA

Note: The Company defines adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") as net income, provision for income taxes, other expense (income), net, changes in the fair value of contingent earn-out obligations, interest expense, net, gain on sale of assets, goodwill impairment and depreciation and amortization. Other companies may define Adjusted EBITDA differently. Adjusted EBITDA is presented because it is a financial measure that is frequently requested by third parties. However, Adjusted EBITDA is not considered under generally accepted accounting principles as a primary measure of an entity's financial results, and accordingly, Adjusted EBITDA should not be considered an alternative to operating income, net income, or cash flows as determined under generally accepted accounting principles and as reported by the Company.

Comfort Systems USA, Inc.

Condensed Consolidated Balance Sheets

(In Thousands)



December December 31, 31,

2020 2019





Cash and cash equivalents $ 54,896 $ 50,788

Billed accounts receivable, net 619,544 619,037

Unbilled accounts receivable, net 45,596 55,542

Costs and estimated earnings in excess of 18,622 2,736 billings, net

Other current assets, net 73,194 62,081

Total current assets 811,852 790,184

Property and equipment, net 117,206 109,796

Goodwill 464,392 332,447

Identifiable intangible assets, net 231,807 159,974

Other noncurrent assets 132,098 112,611

Total assets $ 1,757,355 $ 1,505,012



Current maturities of long-term debt $ - $ 20,817

Accounts payable 204,145 196,195

Billings in excess of costs and estimated 226,237 166,918 earnings

Other current liabilities 262,522 224,067

Total current liabilities 692,904 607,997

Long-term debt, net 235,733 205,318

Other long-term liabilities 132,289 106,393

Total liabilities 1,060,926 919,708

Total stockholders' equity 696,429 585,304

Total liabilities and stockholders' equity $ 1,757,355 $ 1,505,012

Selected Cash Flow Data (Unaudited) (In Thousands)

Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Cash provided by (used in):

Operating $ 70,110 $ 42,313 $ 286,510 $ 142,028 activities

Investing $ (77,288 ) $ (8,397 ) $ (207,802 ) $ (224,450 ) activities

Financing $ (8,466 ) $ (23,491 ) $ (74,600 ) $ 87,590 activities



Free cash flow:

Cash from operating $ 70,110 $ 42,313 $ 286,510 $ 142,028 activities

Purchases of property and (4,672 ) (9,109 ) (24,131 ) (31,750 ) equipment

Proceeds from sales of property 380 712 2,270 2,159 and equipment

Free cash flow $ 65,818 $ 33,916 $ 264,649 $ 112,437

Note: Free cash flow is defined as cash flow from operating activities less customary capital expenditures, plus the proceeds from asset sales. Other companies may define free cash flow differently. Free cash flow is presented because it is a financial measure that is frequently requested by third parties. However, free cash flow is not considered under generally accepted accounting principles as a primary measure of an entity's financial results, and accordingly, free cash flow should not be considered an alternative to operating income, net income, or cash flows as determined under generally accepted accounting principles and as reported by the Company.

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CONTACT: William George, CFO (713-830-9650) Julie Shaeff, CAO (713-830-9687) ir@comfortsystemsusa.com