Comfort Systems USA Q1 Earnings Call Highlights

Key Points

• Sharp quarter — Revenue rose 56% year-over-year to $2.9 billion and EPS more than doubled to $10.51, with gross margin expanding to 26.3% and EBITDA up 116%, while free cash flow was +$242 million.
• Record backlog and tech demand — Backlog reached a record $12.5 billion led by strong data-center/technology work, with construction accounting for 90% of revenue and modular solutions growing (17% of revenue) as the company targets 4 million sq ft of modular capacity by year-end.
• Disciplined growth and shareholder returns — Management expects full-year same-store growth in the mid- to high‑20% range, raised the quarterly dividend to $0.80, and is closing an acquisition expected to add roughly $250 million of annualized revenue while keeping a focus on profitable, capacity-constrained project selection.

Comfort Systems USA NYSE: FIX reported a strong start to 2026, driven by what management described as persistent demand—particularly from technology customers—and execution by its field teams. On the company’s first-quarter 2026 earnings call, executives highlighted record backlog, sharply higher revenue and profitability, and continued investment in modular capacity and potential acquisitions.

First-quarter results: revenue up 56%, EPS more than doubles

Chief Executive Officer Brian Lane said the company “had a fantastic quarter and a strong start to 2026,” citing a 51% increase in same-store revenue, record quarterly gross margins, and earnings of $10.51 per share.

Chief Financial Officer Bill George said first-quarter revenue rose 56% year over year to $2.9 billion, with same-store revenue up 51%, or $943 million. Revenue increased in both operating segments, led by an 88% rise in the electrical segment and a 47% increase in the mechanical segment.

Gross profit totaled $754 million, up $351 million from the prior-year quarter. Gross margin expanded to 26.3% from 22.0% a year ago. George noted that results included $43 million of “favorable developments on late-stage projects, including change orders,” particularly in the mechanical segment.

“There really were a few unique things that we don't believe are just business as usual,” George said, adding that these items are not expected to recur every quarter, though they can happen from time to time. He also quantified the impact, saying the $43 million item was “almost $1 a share” and that backing it out would place quarterly gross margin “at 25.2%,” which he said was still high but closer to typical seasonal expectations.

Mechanical gross margin improved to 26.9% from 21.7%, while electrical gross margin rose to 24.9% from 23.0%.

SG&A expense increased to $269 million from $195 million, which George attributed to expanding headcount and rewarding teams. However, SG&A as a percentage of revenue improved to 9.4% from 10.6% due to operating leverage.

Operating income rose 132% to $486 million, and operating margin expanded to 17.0% from 11.4%. Net income was $370 million, or $10.51 per share, compared with $169 million, or $4.75 per share, in the first quarter of 2025. EBITDA increased 116% to $524 million, with trailing 12-month EBITDA of $1.74 billion at the end of March 2026.

George said free cash flow was positive $242 million in the quarter. The effective tax rate was 23.2% versus 18.6% last year, with the prior-year rate benefiting from interest received on a tax refund. He said the company expects a full-year effective tax rate “around 23%.”

Record backlog and technology demand drive outlook

Lane said Comfort Systems ended the quarter with record backlog of $12.5 billion, reflecting “persistent demand, including strong demand from our tech customers.” He added that total backlog entering the second quarter was $5 billion higher than a year earlier.

President and Chief Operating Officer Trent McKenna said backlog was a record $12.5 billion, with a same-store sequential increase of just over $500 million and a same-store year-over-year increase of $5.3 billion. He said first-quarter bookings were “especially strong in the technology sector.”

McKenna outlined the quarter’s revenue mix, noting that industrial end markets accounted for 75% of volume and “advanced technology, dominated by data center work,” rose to 56% of revenue. Institutional markets—including education, health care, and government—comprised 17% of revenue, while commercial markets represented about 8%, largely through service activity.

Construction accounted for 90% of revenue, with new-building projects at 75% and existing building construction at 15%. Service revenue increased 8%, but as construction grew faster, service represented 10% of total revenue. McKenna said service profitability was strong and remains “a growing and reliable source of profit and cash flow.”

Guidance: mid- to high-20% same-store growth; discipline on project selection

George said that despite tougher comparisons expected in the second half of 2026, the company believes same-store revenue for full-year 2026 is likely to be higher than 2025 by “percentage growth in the mid- to high-20% range.”

In response to analyst questions about implied moderation, George said the company’s guidance process is built from field projections and committed work, and that management aims to provide levels it views as “extremely achievable.” He also emphasized that “revenue is never our goal. Our goal is profit.”

Lane, addressing questions about book-to-bill cadence and pipelines, said the “pipelines are still very full, very strong, coast to coast,” and added that the company is maintaining discipline in selecting work and avoiding over-commitment. “The work we've taken is in our wheelhouse, and it's evident in the margins we're delivering,” he said.

George added that, in his view, current industry constraints are more supply-driven than demand-driven. “There is plenty more work we could take if we could possibly do it,” he said, characterizing the environment as limited by how much construction capacity exists rather than a lack of projects.

On constraints, George told analysts that labor remains the primary pinch point. He said headcount is 3,000 to 4,000 higher than in the first quarter of 2025 depending on how travelers and temporary workers are counted, and he pointed to a “great spring hiring season” last year as context for the current guidance stance.

Capital spending rises as modular capacity expands

Capital expenditures were $147 million in the quarter, up from $22 million in the first quarter of 2025. George said the increase included the purchase of “a large modular assembly building” in Texas and other investments in modular capabilities. CapEx was 5.1% of revenue in the quarter compared with 1.2% a year ago, and George said the company estimates full-year CapEx will be in the range of 5% of revenue.

McKenna said modular revenue represented 17% of total revenue in the quarter and that Comfort Systems is “on track to have 4 million sq ft of modular capacity by the end of 2026,” while actively evaluating additional capacity investments.

Asked for more detail, George said modular-related investments span both current demand and future readiness, including equipping owned facilities with automation such as cranes and robotics. He said purchasing facilities makes sense given the scale of automation investments. He also said Comfort Systems seeks multi-year volume commitments from customers when committing capacity, describing those commitments as supporting better pricing and closer customer relationships.

Acquisition activity and shareholder returns

Lane said the company increased its quarterly dividend by $0.10 per share to $0.80 and reiterated its commitment to rewarding shareholders while maintaining a strong balance sheet.

George said the company entered into a definitive agreement in March—subject mainly to regulatory approval—to acquire “another highly skilled electrical contractor.” The transaction is expected to close in early May, and George said the new partner is expected to initially contribute annualized revenue of roughly $250 million with EBITDA margins in the 8% to 10% range. McKenna described the target as a strong electrical contractor “in the West” that fits Comfort Systems’ “sweet spot,” though he said the company could not provide more specifics prior to an announcement.

During the Q&A, executives also discussed where data center demand is strongest. George cited Texas as a major epicenter and also pointed to activity in the Mid-Atlantic, the Carolinas, and Virginia, among other regions. McKenna added that Comfort Systems can serve a broad range of locations due to a “significant traveling workforce.” On concerns about potential state restrictions on data centers, McKenna said the company was not currently tracking proposals that would materially impact its geographies and that demand for data “still exceeds the supply.”

In closing remarks, Lane thanked the company’s more than 23,000 employees and said the company is looking forward to “a really strong 2026.”

About Comfort Systems USA NYSE: FIX

Comfort Systems USA, Inc is a U.S.-based mechanical contracting company that provides a range of heating, ventilation and air conditioning (HVAC) services to commercial, industrial and institutional customers. The company focuses on the design, installation, maintenance and repair of HVAC systems, and it supports projects from initial engineering and system selection through long-term service agreements and upgrades.

Its service offerings include new construction and retrofit installations, preventive and corrective maintenance, emergency repair, energy management and building automation systems.

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