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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 1-13011

COMFORT SYSTEMS USA, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of Incorporation or Organization)	76-0526487 (I.R.S. Employer Identification No.)
675 Bering Drive Suite 400 Houston, Texas 77057 (Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (713) 830-9600

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	FIX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ⌧	Accelerated filer ◻	Non-accelerated filer ◻	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ⌧

The number of shares outstanding of the issuer’s common stock as of October 17, 2025 was 35,271,950 (excluding treasury shares of 5,851,415).

Table of Contents

COMFORT SYSTEMS USA, INC.

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2025


		Page
Part I—Financial Information		2
Item 1—Financial Statements		2
Consolidated Balance Sheets		2
Consolidated Statements of Operations		3
Consolidated Statements of Stockholders’ Equity		4
Consolidated Statements of Cash Flows		6
Condensed Notes to Consolidated Financial Statements		7
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3—Quantitative and Qualitative Disclosures about Market Risk		36
Item 4—Controls and Procedures		37
Part II—Other Information		37
Item 1—Legal Proceedings		37
Item 1A—Risk Factors		37
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 5—Other Information		38
Item 6—Exhibits		39
Signatures		40

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

COMFORT SYSTEMS USA, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)


	September 30,		December 31,
	2025		2024
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	860,523	$	549,939
Billed accounts receivable, less allowance for credit losses of $18,645 and $15,286, respectively		2,306,295		1,861,212
Unbilled accounts receivable, less allowance for credit losses of $2,153 and $1,475, respectively		145,615		95,786
Other receivables, less allowance for credit losses of $435 and $553, respectively		85,755		86,186
Inventories		78,830		59,224
Prepaid expenses and other		63,160		46,213
Costs and estimated earnings in excess of billings, less allowance for credit losses of $470 and $271, respectively		163,350		91,681
Total current assets		3,703,528		2,790,241
PROPERTY AND EQUIPMENT, NET		337,452		277,180
LEASE RIGHT-OF-USE ASSET		274,697		229,106
GOODWILL		928,168		875,270
IDENTIFIABLE INTANGIBLE ASSETS, NET		431,921		434,417
DEFERRED TAX ASSETS		77,904		85,441
OTHER NONCURRENT ASSETS		24,181		19,433
Total assets	$	5,777,851	$	4,711,088
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	4,676	$	6,042
Accounts payable		665,132		654,943
Accrued compensation and benefits		356,397		228,622
Billings in excess of costs and estimated earnings and deferred revenue		1,734,272		1,149,257
Accrued self-insurance		41,990		42,315
Other current liabilities		229,756		501,591
Total current liabilities		3,032,223		2,582,770
LONG-TERM DEBT		131,322		62,293
LEASE LIABILITIES		258,056		212,107
DEFERRED TAX LIABILITIES		2,225		2,225
OTHER LONG-TERM LIABILITIES		120,639		147,017
Total liabilities		3,544,465		3,006,412
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par, 5,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $.01 par, 102,969,912 shares authorized, 41,123,365 and 41,123,365 shares issued, respectively		411		411
Treasury stock, at cost, 5,851,415 and 5,562,453 shares, respectively		(401,121)		(273,799)
Additional paid-in capital		362,688		350,734
Retained earnings		2,271,408		1,627,330
Total stockholders’ equity		2,233,386		1,704,676
Total liabilities and stockholders’ equity	$	5,777,851	$	4,711,088

The accompanying notes are an integral part of these consolidated financial statements.

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COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
REVENUE	$	2,450,969	$	1,812,366	$	6,455,574	$	5,159,672
COST OF SERVICES		1,843,098		1,430,652		4,934,390		4,116,999
Gross profit		607,871		381,714		1,521,184		1,042,673
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		229,579		180,177		634,919		522,437
GAIN ON SALE OF ASSETS		(582)		(1,347)		(1,580)		(2,778)
Operating income		378,874		202,884		887,845		523,014
OTHER INCOME (EXPENSE):
Interest income		6,381		3,825		13,467		6,692
Interest expense		(2,974)		(1,730)		(6,198)		(5,072)
Changes in the fair value of contingent earn-out obligations		(12,103)		(17,254)		(19,934)		(44,434)
Other		280		87		(226)		323
Other income (expense)		(8,416)		(15,072)		(12,891)		(42,491)
INCOME BEFORE INCOME TAXES		370,458		187,812		874,954		480,523
PROVISION FOR INCOME TAXES		78,843		41,577		183,202		103,960
NET INCOME	$	291,615	$	146,235	$	691,752	$	376,563

INCOME PER SHARE:
Basic	$	8.26	$	4.10	$	19.55	$	10.54
Diluted	$	8.25	$	4.09	$	19.52	$	10.52

SHARES USED IN COMPUTING INCOME PER SHARE:
Basic		35,307		35,669		35,379		35,718
Diluted		35,365		35,755		35,445		35,804

The accompanying notes are an integral part of these consolidated financial statements.

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COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share Amounts)

(Unaudited)


	Nine Months Ended
	September 30, 2024
							Additional				Total
	Common Stock			Treasury Stock			Paid-In		Retained		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
BALANCE AT DECEMBER 31, 2023	41,123,365	$	411	(5,438,625)	$	(209,807)	$	339,562	$	1,147,663	$	1,277,829
Net income	—		—	—		—		—		96,319		96,319
Issuance of Stock:
Issuance of shares for options exercised	—		—	1,369		53		(26)		—		27
Issuance of restricted stock & performance stock	—		—	17,018		657		4,696		—		5,353
Shares received in lieu of tax withholding on vested stock	—		—	(6,763)		(2,126)		—		—		(2,126)
Stock-based compensation	—		—	—		—		4,350		—		4,350
Dividends ($0.25 per share)	—		—	—		—		—		(8,921)		(8,921)
Share repurchase	—		—	(1,500)		(295)		—		—		(295)
BALANCE AT MARCH 31, 2024	41,123,365		411	(5,428,501)		(211,518)		348,582		1,235,061		1,372,536
Net income	—		—	—		—		—		134,009		134,009
Issuance of Stock:
Issuance of shares for options exercised	—		—	—		—		—		—		—
Issuance of restricted stock & performance stock	—		—	47,344		1,851		(1,851)		—		—
Shares received in lieu of tax withholding on vested stock	—		—	(15,817)		(5,062)		—		—		(5,062)
Stock-based compensation	—		—	—		—		2,368		—		2,368
Dividends ($0.30 per share)	—		—	—		—		—		(10,713)		(10,713)
Share repurchase	—		—	(34,997)		(10,844)		—		—		(10,844)
BALANCE AT JUNE 30, 2024	41,123,365		411	(5,431,971)		(225,573)		349,099		1,358,357		1,482,294
Net income	—		—	—		—		—		146,235		146,235
Issuance of Stock:
Issuance of shares for options exercised	—		—	—		—		—		—		—
Issuance of restricted stock & performance stock	—		—	1,434		66		(66)		—		—
Shares received in lieu of tax withholding on vested stock	—		—	(309)		(104)		—		—		(104)
Stock-based compensation	—		—	—		—		1,149		—		1,149
Dividends ($0.30 per share)	—		—	—		—		—		(10,688)		(10,688)
Share repurchase	—		—	(99,961)		(31,164)		—		—		(31,164)
BALANCE AT SEPTEMBER 30, 2024	41,123,365	$	411	(5,530,807)	$	(256,775)	$	350,182	$	1,493,904	$	1,587,722

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COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share Amounts)

(Unaudited)


	Nine Months Ended
	September 30, 2025
							Additional				Total
	Common Stock			Treasury Stock			Paid-In		Retained		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Earnings		Equity
BALANCE AT DECEMBER 31, 2024	41,123,365	$	411	(5,562,453)	$	(273,799)	$	350,734	$	1,627,330	$	1,704,676
Net income	—		—	—		—		—		169,289		169,289
Issuance of Stock:
Issuance of shares for options exercised	—		—	—		—		—		—		—
Issuance of restricted stock & performance stock	—		—	18,448		1,156		5,445		—		6,601
Shares received in lieu of tax withholding on vested stock	—		—	(7,330)		(2,622)		—		—		(2,622)
Stock-based compensation	—		—	—		—		5,474		—		5,474
Dividends ($0.40 per share)	—		—	—		—		—		(14,162)		(14,162)
Share repurchase	—		—	(264,054)		(92,243)		—		—		(92,243)
BALANCE AT MARCH 31, 2025	41,123,365		411	(5,815,389)		(367,508)		361,653		1,782,457		1,777,013
Net income	—		—	—		—		—		230,848		230,848
Issuance of Stock:
Issuance of shares for options exercised	—		—	12,500		830		(377)		—		453
Issuance of restricted stock & performance stock	—		—	35,609		2,337		(2,337)		—		—
Shares received in lieu of tax withholding on vested stock	—		—	(12,255)		(3,977)		—		—		(3,977)
Stock-based compensation	—		—	—		—		2,723		—		2,723
Dividends ($0.45 per share)	—		—	—		—		—		(15,871)		(15,871)
Share repurchase	—		—	(62,378)		(19,980)		—		—		(19,980)
BALANCE AT JUNE 30, 2025	41,123,365		411	(5,841,913)		(388,298)		361,662		1,997,434		1,971,209
Net income	—		—	—		—		—		291,615		291,615
Issuance of Stock:
Issuance of shares for options exercised	—		—	8,436		565		(225)		—		340
Issuance of restricted stock & performance stock	—		—	1,424		97		(97)		—		—
Shares received in lieu of tax withholding on vested stock	—		—	(407)		(282)		—		—		(282)
Stock-based compensation	—		—	—		—		1,348		—		1,348
Dividends ($0.50 per share)	—		—	—		—		—		(17,641)		(17,641)
Share repurchase	—		—	(18,955)		(13,203)		—		—		(13,203)
BALANCE AT SEPTEMBER 30, 2025	41,123,365	$	411	(5,851,415)	$	(401,121)	$	362,688	$	2,271,408	$	2,233,386

The accompanying notes are an integral part of these consolidated financial statements.

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COMFORT SYSTEMS USA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)


	Nine Months Ended
	September 30,
	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	691,752	$	376,563
Adjustments to reconcile net income to net cash provided by operating activities—
Amortization of identifiable intangible assets		59,432		75,224
Depreciation expense		44,914		35,377
Change in right-of-use assets		22,535		22,400
Bad debt expense		5,617		5,464
Deferred tax provision (benefit)		7,537		(32,511)
Amortization of debt financing costs		786		514
Gain on sale of assets		(1,580)		(2,778)
Changes in the fair value of contingent earn-out obligations		19,934		44,434
Stock-based compensation		15,746		12,129
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures—
(Increase) decrease in—
Receivables, net		(378,644)		(262,958)
Inventories		(19,518)		10,088
Prepaid expenses and other current assets		(13,228)		15,174
Costs and estimated earnings in excess of billings and unbilled accounts receivable		(119,619)		(58,473)
Other noncurrent assets		(567)		(1,882)
Increase (decrease) in—
Accounts payable and other current liabilities		(194,715)		323,756
Billings in excess of costs and estimated earnings and deferred revenue		564,746		80,448
Other long-term liabilities		12,688		(4,375)
Net cash provided by operating activities		717,816		638,594
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(88,813)		(70,395)
Proceeds from sales of property and equipment		3,152		3,611
Cash paid for acquisitions, net of cash acquired		(128,594)		(235,466)
Payments for investments		(28,999)		(1,770)
Proceeds from investments		7,258		—
Net cash used in investing activities		(235,996)		(304,020)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility		200,000		182,000
Payments on revolving credit facility		(100,000)		(182,000)
Proceeds from other debt		—		640
Payments on other debt		(43,037)		(26,550)
Debt financing costs		(3,709)		—
Payments of dividends to stockholders		(47,674)		(30,322)
Share repurchases		(124,426)		(42,024)
Shares received in lieu of tax withholding		(6,881)		(7,292)
Proceeds from exercise of options		793		27
Deferred acquisition payments		—		(50)
Payments for contingent consideration arrangements		(46,302)		(18,570)
Net cash used in financing activities		(171,236)		(124,141)
NET INCREASE IN CASH AND CASH EQUIVALENTS		310,584		210,433
CASH AND CASH EQUIVALENTS, beginning of period		549,939		205,150
CASH AND CASH EQUIVALENTS, end of period	$	860,523	$	415,583

The accompanying notes are an integral part of these consolidated financial statements.

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COMFORT SYSTEMS USA, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025

(Unaudited)

1. Business and Organization

Comfort Systems USA, Inc., a Delaware corporation, provides comprehensive mechanical and electrical contracting services, which principally includes heating, ventilation and air conditioning (“HVAC”), plumbing, electrical, piping and controls, as well as off-site construction, monitoring and fire protection. We build, install, maintain, repair and replace mechanical, electrical and plumbing (“MEP”) systems throughout the United States. The terms “Comfort Systems,” “we,” “us,” “our,” or the “Company,” refer to Comfort Systems USA, Inc. or Comfort Systems USA, Inc. and its consolidated subsidiaries, as appropriate in the context.

2. Summary of Significant Accounting Policies and Estimates

Basis of Presentation

These interim statements should be read in conjunction with the historical Consolidated Financial Statements and related notes of Comfort Systems included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2024 (the “Form 10-K”).

The accompanying unaudited consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X of the SEC. Accordingly, these financial statements do not include all the footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Form 10-K. We believe all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature. The results of operations for interim periods are not necessarily indicative of the results for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities, revenue and expenses and disclosures regarding contingent assets and liabilities. Actual results could differ from those estimates. The most significant estimates used in our financial statements affect revenue and cost recognition for construction contracts, self-insurance accruals, accounting for income taxes, fair value accounting for acquisitions and the quantification of fair value for reporting units in connection with our goodwill impairment testing.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This standard requires entities to disclose more detailed information in the reconciliation of their statutory tax rate to their effective tax rate. The standard also requires entities to make additional disclosures on income taxes paid as well as on certain income statement-related disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We will adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2025. Entities may apply the standard prospectively or may elect retrospective application. This standard will not have an impact on our consolidated financial position, results of operations or cash flows, but will affect our financial statement disclosures as discussed above.

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In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The standard requires entities to disclose, on an annual and interim basis, disaggregated information about certain income statement expense line items in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. Entities may apply the standard prospectively or may elect retrospective application. We are currently evaluating the impact ASU 2024-03 will have on our disclosures; however, the standard will not have an impact on our consolidated financial position, results of operations or cash flows.

Revenue Recognition

We recognize revenue over time for all of our services as we perform them because (i) control continuously transfers to the customer as work progresses, and (ii) we have the right to bill the customer as costs are incurred. The customer typically controls the work in process, as evidenced either by contractual termination clauses or by our rights to payment for work performed to date, plus a reasonable profit, for delivery of products or services that do not have an alternative use to the Company.

For the reasons listed above, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We generally use a cost-to-cost input method to measure our progress towards satisfaction of the performance obligation for our contracts, as it best depicts the transfer of assets to the customer that occurs as we incur costs on our contracts. Under the cost-to-cost input method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue, including estimated fees or profits, is recorded proportionally as costs are incurred. Costs to fulfill include labor, materials, subcontractors’ costs, other direct costs and an allocation of indirect costs.

For a small portion of our business in which our services are delivered in the form of service maintenance agreements for existing systems to be repaired and maintained, as opposed to constructed, our performance obligation is to maintain the customer’s mechanical system for a specific period of time. As with construction jobs, we recognize revenue over time; however, for service maintenance agreements in which the full cost to provide services may not be known, we generally use an input method to recognize revenue, which is based on the amount of time we have provided our services out of the total time we have been contracted to perform those services. Our revenue recognition policy is further discussed in Note 3 “Revenue from Contracts with Customers.”

Accounts Receivable and Allowance for Credit Losses

We are required to estimate and record the expected credit losses over the contractual life of our financial assets measured at amortized cost, including billed and unbilled accounts receivable, other receivables and contract assets. Accounts receivable include amounts from work completed in which we have billed or have an unconditional right to bill our customers. Our trade receivables are contractually due in less than a year.

We estimate our credit losses using a loss-rate method for each of our identified portfolio segments. Our portfolio segments are construction, service and other. While our construction and service financial assets are often with the same subset of customers and industries, our construction financial assets will generally have a lower loss-rate than service financial assets due to lien rights, which we are more likely to have on construction jobs. These lien rights result in lower credit loss expenses on average compared to receivables that do not have lien rights. Financial assets classified as “other” include receivables that are not related to our core revenue producing activities, such as receivables related to our acquisition activity from former owners, our vendor rebate program or receivables for estimated losses in excess of our insurance deductible, which are accrued with a corresponding accrued insurance liability.

Loss rates for our portfolios are based on numerous factors, including our history of credit loss expense by portfolio, the financial strength of our customers and counterparties in each portfolio, the aging of our receivables, our expectation of likelihood of payment, macroeconomic trends in the U.S. and the current and forecasted nonresidential construction market trends in the U.S.

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In addition to the loss-rate calculations discussed above, we also record allowance for credit losses for specific receivables that are deemed to have a higher risk profile than the rest of the respective pool of receivables (e.g., when we hold concerns about a specific customer going bankrupt and no longer being able to pay the receivables due to us).

Unbilled Accounts Receivable

Unbilled accounts receivable are amounts due to us that we have earned under a contract where our right to payment is unconditional. A right to consideration is unconditional if only the passage of time is required before payment of the consideration is due. These items are expected to be billed and collected in the normal course of business. Other unbilled receivables where payment is subject to factors beyond just the passage of time are included in contract assets.

Income Taxes

We conduct business throughout the United States in virtually all fifty states. Our effective tax rate changes based upon our relative profitability, or lack thereof, in the federal and various state jurisdictions with differing tax rates and rules. In addition, discrete items such as tax law changes, judgments and legal structures, can impact our effective tax rate. These items can also include the tax treatment for impairment of goodwill and other intangible assets, changes in fair value of acquisition-related assets and liabilities, uncertain tax positions, and accounting for losses associated with underperforming operations.

In early September 2023, the Internal Revenue Service issued interim guidance addressing, together with other topics, the treatment of research and experimental (“R&E”) expenditures for taxpayers using the percentage of completion method to account for taxable income from long-term contracts. We relied on such guidance for the 2022 tax year, and the resulting reduction in taxable revenue offsets the deferral of tax deductions for R&E expenditures pursuant to the Tax Cuts and Jobs Act (2017) for the 2022 tax year. We filed our 2022 federal tax return in October 2023 requesting a refund of our $107.1 million overpayment, which was received in April 2025. Along with the refund, we received $11.3 million (or $8.9 million, net of tax) of interest income that reduced our provision for income taxes in the first quarter of 2025.

The One Big Beautiful Bill Act was enacted into law on July 4, 2025. The primary provisions of the law impacting us are the (i) reinstatement of immediate expensing of domestic R&E expenditures, together with conforming amendments to the credit for increasing research activities, (ii) reinstatement of 100% bonus depreciation, and (iii) termination of the energy efficient commercial buildings deduction. However, these provisions did not, and we expect they will not, have a material effect on our operating results, cash flows or financial condition.

Financial Instruments

Our financial instruments consist of cash and cash equivalents, U.S. Treasury bills, accounts receivable, other receivables and accounts payable, for which we deem the carrying values approximate their fair values due to the short-term nature of these instruments, as well as notes to former owners and a revolving credit facility.

Investments

As of September 30, 2025, we had a $20.7 million investment in U.S. Treasury bills with maturities greater than ninety days but less than one year, which is recorded at amortized cost and is included in “Prepaid Expenses and Other” in our Consolidated Balance Sheet.

3. Revenue from Contracts with Customers

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Sales-based taxes are excluded from revenue.

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We provide mechanical and electrical contracting services. Our mechanical segment principally includes HVAC, plumbing, piping and controls, as well as off-site construction, monitoring and fire protection. Our electrical segment includes installation and servicing of electrical systems. We build, install, maintain, repair and replace products and systems throughout the United States. All of our revenue is recognized over time as we deliver goods and services to our customers. Revenue can be earned based on an agreed-upon fixed price or based on actual costs incurred, marked up at an agreed-upon percentage.

We account for a contract when: (i) it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. We consider the start of a project to be when the above criteria have been met and we either have written authorization from the customer to proceed or an executed contract.

We generally do not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project. On rare occasions, when significant pre-contract costs are incurred, they are capitalized and amortized over the life of the contract using a cost-to-cost input method to measure progress towards contract completion. We do not currently have any capitalized obtainment or fulfillment costs in our Consolidated Balance Sheet and have not incurred any impairment loss on such costs in the current year.

Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion (the process described below in more detail) is complex, subject to many variables and requires significant judgment. The consideration to which we are entitled on our long-term contracts may include both fixed and variable amounts. Variable amounts can either increase or decrease the transaction price. A common example of variable amounts that can either increase or decrease contract value are pending change orders that represent contract modifications for which a change in scope has been authorized or acknowledged by our customer, but the final adjustment to contract price is yet to be negotiated. Other examples of positive variable revenue include amounts awarded upon achievement of certain performance metrics, program milestones or cost of completion date targets and can be based upon customer discretion. Variable amounts can result in a deduction from contract revenue if we fail to meet stated performance requirements, such as complying with the construction schedule.

We include estimated amounts of variable consideration in the contract price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the contract price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. We reassess the amount of variable consideration each accounting period until the uncertainty associated with the variable consideration is resolved. Changes in the assessed amount of variable consideration are accounted for prospectively as a cumulative adjustment to revenue recognized in the current period.

Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing performance obligation(s). The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catch-up basis.

We have a Company-wide policy requiring periodic review of the Estimate at Completion in which management reviews the progress and execution of our performance obligations and estimated remaining obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenue and costs. The risks and opportunities include management's judgment about the ability and cost to achieve the schedule (e.g., the number and type of milestone events), technical requirements (e.g., a newly developed product versus a mature product) and other contract requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation (e.g., to estimate increases in wages and prices for materials

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and related support cost allocations), execution by our subcontractors, the availability and timing of funding from our customer, and overhead cost rates, among other variables.

Based on this analysis, any adjustments to revenue, cost of services, and the related impact to operating income are recognized as necessary in the quarter when they become known. These adjustments may result from positive program performance if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities and may result in an increase in operating income during the performance of individual performance obligations. Likewise, if we determine we will not be successful in mitigating these risks or realizing related opportunities, these adjustments may result in a decrease in operating income. Changes in estimates of revenue, cost of services and the related impact to operating income are recognized quarterly on a cumulative catch-up basis, meaning we recognize in the current period the cumulative effect of the changes on current and prior periods based on our progress towards complete satisfaction of a performance obligation. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. For projects in which estimates of total costs to be incurred on a performance obligation exceed total estimates of revenue to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined.

During the three months ended September 30, 2025 and 2024, net revenue recognized from our performance obligations partially satisfied in the previous period positively impacted revenue by 4.0% and 1.7%, respectively, as a result of changes in estimates associated with performance obligations on contracts. During the nine months ended September 30, 2025 and 2024, net revenue recognized from our performance obligations partially satisfied in the previous period positively impacted revenue by 4.6% and 2.7%, respectively, as a result of changes in estimates associated with performance obligations on contracts.

Disaggregation of Revenue

Our consolidated 2025 revenue was derived from contracts to provide service activities in the mechanical and electrical segments we serve. Refer to Note 11 “Segment Information” for additional information on our reportable segments. We disaggregate our revenue from contracts with customers by service provided, customer type and activity type, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the following tables (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
Revenue by Service Provided	2025				2024				2025				2024
Mechanical Segment	$	1,810,462	73.9	%	$	1,438,617	79.4	%	$	4,851,349	75.1	%	$	4,075,305	79.0	%
Electrical Segment		640,507	26.1	%		373,749	20.6	%		1,604,225	24.9	%		1,084,367	21.0	%
Total	$	2,450,969	100.0	%	$	1,812,366	100.0	%	$	6,455,574	100.0	%	$	5,159,672	100.0	%

	Three Months Ended September 30,								Nine Months Ended September 30,
Revenue by Type of Customer	2025				2024				2025				2024
Technology	$	1,122,528	45.8	%	$	615,398	34.0	%	$	2,734,280	42.4	%	$	1,641,525	31.8	%
Manufacturing		543,110	22.2	%		452,157	24.9	%		1,468,936	22.7	%		1,439,772	27.9	%
Healthcare		206,965	8.5	%		149,974	8.3	%		589,848	9.1	%		424,450	8.2	%
Education		171,707	7.0	%		195,737	10.8	%		527,794	8.2	%		523,153	10.1	%
Office Buildings		125,458	5.1	%		109,233	6.0	%		358,445	5.5	%		326,137	6.3	%
Government		122,284	5.0	%		92,555	5.1	%		326,318	5.1	%		271,429	5.3	%
Retail, Restaurants and Entertainment		88,503	3.6	%		114,572	6.3	%		250,619	3.9	%		309,658	6.0	%
Multi-Family and Residential		35,342	1.4	%		33,838	1.9	%		96,909	1.5	%		110,870	2.2	%
Other		35,072	1.4	%		48,902	2.7	%		102,425	1.6	%		112,678	2.2	%
Total	$	2,450,969	100.0	%	$	1,812,366	100.0	%	$	6,455,574	100.0	%	$	5,159,672	100.0	%

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	Three Months Ended September 30,								Nine Months Ended September 30,
Revenue by Activity Type	2025				2024				2025				2024
New Construction	$	1,597,452	65.2	%	$	949,035	52.4	%	$	3,919,402	60.7	%	$	2,930,283	56.8	%
Existing Building Construction		527,139	21.5	%		570,288	31.5	%		1,626,978	25.2	%		1,407,231	27.3	%
Service Projects		150,383	6.1	%		125,249	6.9	%		415,868	6.5	%		355,643	6.9	%
Service Calls, Maintenance and Monitoring		175,995	7.2	%		167,794	9.2	%		493,326	7.6	%		466,515	9.0	%
Total	$	2,450,969	100.0	%	$	1,812,366	100.0	%	$	6,455,574	100.0	%	$	5,159,672	100.0	%

Contract Assets and Liabilities

Contract assets include unbilled amounts typically resulting from sales under long term contracts when the cost-to-cost method of revenue recognition is used, revenue recognized exceeds the amount billed to the customer and right to payment is conditional or subject to completing a milestone, such as a phase of the project. Contract assets are not considered to have a significant financing component, as they are intended to protect the customer in the event that we do not perform our obligations under the contract.

Contract liabilities consist of advance payments and billings in excess of revenue recognized. Advanced payments from customers related to work not yet started are classified as deferred revenue. Contract liabilities are not considered to have a significant financing component, as they are used to meet working capital requirements that are generally higher in the early stages of a contract and are intended to protect us from the other party failing to meet its obligations under the contract. Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

Contract assets and liabilities in the Consolidated Balance Sheet consisted of the following amounts as of September 30, 2025 and December 31, 2024 (in thousands):


	September 30, 2025		December 31, 2024
Contract assets:
Costs and estimated earnings in excess of billings, less allowance for credit losses	$	163,350	$	91,681
Contract liabilities:
Billings in excess of costs and estimated earnings and deferred revenue	$	1,734,272	$	1,149,257

In the first nine months of 2025 and 2024, we recognized revenue of $944.5 million and $767.3 million, respectively, related to our contract liabilities at January 1, 2025 and January 1, 2024, respectively.

We did not have any impairment losses recognized on our receivables or contract assets in the first nine months of 2025 and 2024.

Remaining Performance Obligations

Remaining construction performance obligations represent the remaining transaction price of firm orders for which work has not been performed and exclude unexercised contract options. As of September 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $9.38 billion. The Company expects to recognize revenue on approximately 65-75% of the remaining performance obligations over the next 12 months, with the remaining recognized thereafter. Our service maintenance agreements are generally one-year renewable agreements. We have adopted the practical expedient that allows us to not include service maintenance contracts with a total term of one year or less; therefore, we do not report unfulfilled performance obligations for service maintenance agreements.

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4. Fair Value Measurements

Interest Rate Risk Management and Derivative Instruments

At times, we use derivative instruments to manage exposure to market risk, including interest rate risk. We currently do not have any derivatives that are accounted for as hedges under Accounting Standard Codification (“ASC”) 815.

Fair Value Measurement

We classify and disclose assets and liabilities carried at fair value in one of the following three categories:

●

Level 1—quoted prices in active markets for identical assets and liabilities;

●

Level 2—observable market-based inputs or unobservable inputs that are corroborated by market data; and

●

Level 3—significant unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table summarizes the fair values, and levels within the fair value hierarchy in which the fair value measurements are included, for assets and liabilities measured on a recurring basis as of September 30, 2025 and December 31, 2024 (in thousands):


	Fair Value Measurements at September 30, 2025
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	860,523	$	—	$	—	$	860,523
U.S. Treasury bills	$	—	$	20,661	$	—	$	20,661
Contingent earn-out obligations	$	—	$	—	$	36,446	$	36,446

	Fair Value Measurements at December 31, 2024
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	549,939	$	—	$	—	$	549,939
Contingent earn-out obligations	$	—	$	—	$	140,156	$	140,156

Cash and cash equivalents are held at a variety of well‑known institutions and consist primarily of (i) deposit accounts, (ii) U.S. Treasury bills, and (iii) highly-rated money market funds. Cash equivalents described in (ii) and (iii) above have original maturities of three months or less. The original cost of these assets approximates fair value due to their short-term maturity. We believe the carrying value of our debt associated with our revolving credit facility approximates its fair value due to the variable rate on such debt. We believe the carrying values of our notes to former owners approximate their fair values due to the relatively short remaining terms on these notes.

We own U.S. Treasury bills with maturities greater than 90 days but less than one year, which we classify as held-to-maturity in accordance with ASC 320 “Investments – Debt Securities,” given that the Company has the ability and intent to hold the investments until maturity. These investments are included within “Prepaid Expenses and Other” in the Consolidated Balance Sheet. Due to their short-term maturity, the amortized cost of our U.S. Treasury bills approximates their fair value.

We value contingent earn-out obligations using a probability weighted discounted cash flow method. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. This analysis reflects the contractual terms of the purchase agreements (e.g., minimum and maximum payments, length of earn-out periods, manner of calculating any amounts due, etc.) and utilizes assumptions with regard to future cash flows and operating income, probabilities of achieving such future cash flows and operating income and a weighted-average cost of capital. Significant changes in any of these assumptions could result in a significantly higher or lower potential liability. The contingent earn-out obligations are measured at fair value each reporting period, and changes in estimates of fair value are recognized in earnings.

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The table below presents a reconciliation of the fair value of our contingent earn-out obligations that use significant unobservable inputs (Level 3) (in thousands):


	Nine Months Ended		Year Ended
	September 30, 2025		December 31, 2024
Balance at beginning of period	$	140,156	$	44,222
Issuances		719		51,784
Settlements		(124,363)		(43,996)
Adjustments to fair value		19,934		88,146
Balance at end of period	$	36,446	$	140,156

5. Acquisitions

On May 31, 2025, we acquired all of the issued and outstanding shares of capital stock of a mechanical service provider in New York for a total preliminary purchase price of $2.8 million, which is reported in our mechanical segment.

On May 1, 2025, we acquired all of the issued and outstanding membership interests of Right Way Plumbing & Mechanical LLC (“Right Way”), headquartered in Florida, for a total preliminary purchase price of $65.0 million, which included $49.5 million of cash paid on the closing date, $5.0 million in notes payable to the former owners, an earn-out that will be paid if certain financial targets are met after the acquisition date and a working capital adjustment. Right Way operates in the Southeastern United States and provides plumbing installation and maintenance services. Right Way is included in our mechanical segment.

On January 1, 2025, we acquired all of the issued and outstanding membership interests of Century Contractors, LLC (“Century”), headquartered in Matthews, North Carolina, for a total preliminary purchase price of $84.2 million, which included $73.1 million of cash paid on the closing date, $5.5 million in notes payable to the former owners, an earn-out that will be paid if certain financial targets are met after the acquisition date and a working capital adjustment. Century operates in the Southeastern United States and specializes in self-performing mechanical installation, pipe fabrication and installation, steel erection, equipment setting and concrete installations. As a result of the acquisition, Century is a wholly owned subsidiary of the Company reported in our mechanical segment.

On May 1, 2024, we acquired all of the issued and outstanding membership interests of a plumbing service provider in North Carolina for a total purchase price of $39.9 million, which is reported in our mechanical segment.

On February 1, 2024, we acquired all of the issued and outstanding membership interest of Summit Industrial Construction, LLC (“Summit”), headquartered in Houston, Texas, for a total purchase price of $359.8 million, which included $267.5 million of cash paid on the closing date, $35.0 million in notes payable to the former owners, an earn-out that will be paid if certain financial targets are met after the acquisition date and a working capital adjustment. Summit is a specialty industrial contractor offering engineering, design-assist and turnkey, direct hire construction services of systems serving the advanced technology, power, and industrial sectors. As a result of the acquisition, Summit is a wholly owned subsidiary of the Company reported in our mechanical segment.

On February 1, 2024, we acquired all of the issued and outstanding shares of capital stock of J & S Mechanical Contractors, Inc. (“J&S”), headquartered in West Jordan, Utah, for a total purchase price of $120.6 million, which included $100.0 million of cash paid on the closing date, $10.0 million in notes payable to the former owners, an earn-out that will be paid if certain financial targets are met after the acquisition date and a working capital adjustment. J&S provides mechanical construction services to commercial and industrial sectors, specializing in data center HVAC systems and hospital medical gas systems. As a result of the acquisition, J&S is a wholly owned subsidiary of the Company reported in our mechanical segment.

The results of operations of acquisitions are included in our consolidated financial statements from their respective acquisition dates. Our Consolidated Balance Sheet includes preliminary allocations of the purchase price to the assets acquired and liabilities assumed for the applicable acquisitions pending the completion of the final valuation of intangible assets and accrued liabilities. The acquisitions completed in the current and prior year were not material,

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individually or in the aggregate. Additional contingent purchase price (“earn-out”) has been or will be paid if certain acquisitions achieve predetermined profitability targets. Such earn-outs, when they are not subject to the continued employment of the sellers, are estimated as of the purchase date and included as part of the consideration paid for the acquisition. If we have an earn-out under which continued employment is a condition to receipt of payment, then the earn-out is recorded as compensation expense over the period earned.

6. Goodwill and Identifiable Intangible Assets, Net

Goodwill

The changes in the carrying amount of goodwill are as follows (in thousands):


	Mechanical Segment		Electrical Segment		Total
Balance at December 31, 2023	$	393,276	$	273,558	$	666,834
Acquisitions and purchase price adjustments (See Note 5)		208,236		200		208,436
Balance at December 31, 2024		601,512		273,758		875,270
Acquisitions and purchase price adjustments (See Note 5)		52,898		—		52,898
Balance at September 30, 2025	$	654,410	$	273,758	$	928,168

Identifiable Intangible Assets, Net

At September 30, 2025, future amortization expense of identifiable intangible assets is as follows (in thousands):


Year ending December 31—
2025 (remainder of the year)	$	16,828
2026		63,573
2027		59,706
2028		57,353
2029		51,086
Thereafter		183,375
Total	$	431,921

7. Debt Obligations

Debt obligations consist of the following (in thousands):


	September 30,		December 31,
	2025		2024
Revolving credit facility	$	100,000	$	—
Notes to former owners		35,325		67,593
Other debt		673		742
Total debt		135,998		68,335
Less—current portion		(4,676)		(6,042)
Total long-term portion of debt	$	131,322	$	62,293

At September 30, 2025, future principal payments of debt are as follows (in thousands):


Year ending December 31—
2025 (remainder of the year)	$	22
2026		6,180
2027		24,229
2028		5,022
2029		545
2030		100,000
	$	135,998

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Revolving Credit Facility

On August 27, 2025, we amended our senior credit facility (as amended, the “Facility”) arranged by Wells Fargo Bank, National Association, as administrative agent, and provided by a syndicate of banks, which increases our borrowing capacity from $850.0 million to $1.10 billion. The Facility is composed of a revolving credit line guaranteed by certain of our subsidiaries, in the amount of $1.10 billion. The Facility also provides for an accordion or increase option not to exceed the greater of (a) $500.0 million and (b) 1.0x Credit Facility Adjusted EBITDA (as defined below), in the form of additional revolving commitments or incremental term loans. The line of credit includes a sublimit for up to $200.0 million of letters of credit and a sublimit for up to $75.0 million of swingline loans. The Facility expires on October 1, 2030 and is secured by a first lien on substantially all of our personal property except for assets related to projects subject to surety bonds and the equity of and assets held by certain unrestricted subsidiaries and our wholly owned captive insurance company, and a second lien on our assets related to projects subject to surety bonds. As a result of the amendment, $0.3 million of unamortized costs associated with lenders who exited the Facility were written off to interest expense in the third quarter of 2025. The remaining $1.0 million of unamortized costs from the previous facility will be deferred and amortized over the term of the new Facility. In 2025, we incurred approximately $3.7 million in financing and professional costs in connection with the amendment to the Facility, which, combined with previously unamortized costs of $1.0 million, are being amortized on a straight-line basis as a non-cash charge to interest expense over the remaining term of the Facility. As of September 30, 2025, we had $100.0 million of outstanding borrowings on the revolving credit facility, $83.2 million in letters of credit outstanding and $916.8 million of credit available.

Covenants and Restrictions

The Facility contains financial covenants defining various financial measures and the levels of these measures with which we must comply. Covenant compliance is assessed as of each quarter end for the four fiscal quarters then ended. Credit Facility Adjusted EBITDA is defined under the Facility for financial covenant purposes as consolidated net income for the four fiscal quarters ending as of any given quarterly covenant compliance measurement date, plus the corresponding amounts for (a) interest expense; (b) provision for income taxes; (c) depreciation and amortization; (d) stock or equity compensation; and (e) other non-cash charges, in each case calculated on a pro forma basis for acquisitions or dispositions during such measurement period. The Facility’s principal financial covenants include:

Net Leverage Ratio—The Facility requires that the ratio of (a) our Consolidated Total Indebtedness (as defined in the Facility) minus unrestricted cash and cash equivalents up to $100,000,000, to (b) our Credit Facility Adjusted EBITDA not exceed 3.50 to 1.00 as of the end of each fiscal quarter; provided that, for the first four fiscal quarters ending after a material acquisition, such maximum Net Leverage Ratio steps up to 4.00 to 1.00.

Interest Coverage Ratio—The Facility requires that the ratio of (a) Credit Facility Adjusted EBITDA to (b) consolidated interest expense, defined as all interest paid or accrued on indebtedness during the period excluding amortization of debt incurrence expenses, original issue discount, and mark-to-market interest expense, be at least 3.00 to 1.00.

Other Restrictions—The Facility (a) permits unlimited acquisitions when our Net Leverage Ratio is less than or equal to 3.25 to 1.00; or 3.75 to 1.00 for the first four fiscal quarters ending after a material acquisition, (b) expands certain baskets for permitted indebtedness and liens, and (c) permits unlimited distributions, stock repurchases, and investments when the Net Leverage Ratio is less than or equal to 2.75 to 1.00.

While the Facility’s financial covenants do not specifically govern capacity under the Facility, if our debt level under the Facility at a quarter-end covenant compliance measurement date were to cause us to violate the Facility’s Net Leverage Ratio covenant, our borrowing capacity under the Facility and the favorable terms that we currently have could be negatively impacted.

We were in compliance with all of our financial covenants as of September 30, 2025.

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Interest Rates and Fees

There are two interest rate options for borrowings under the Facility, the Base Rate Loan (as defined in the Facility) option and the Secured Overnight Financing Rate (“SOFR”) Loan option. Under the Base Rate Loan option, the interest rate is determined based on the highest of (a) the Federal Funds Rate (as defined in the Facility) plus 0.50%, (b) the prime lending rate established by Wells Fargo Bank, National Association from time to time, and (c) the one-month Term SOFR (as defined in the Facility) plus 1.00%. Under the SOFR Loan option, the interest rate is determined based on Term SOFR for a one, three, or six-month tenor at our election. Additional margins are then added to these two rates. The additional margins are determined based on our Net Leverage Ratio.

The interest rates under the Facility are floating rates determined by the broad financial markets, meaning they can and do move up and down from time to time. For illustrative purposes, the following are the respective market rates as of September 30, 2025 relating to interest options under the Facility:


Base Rate Loan Option:
Federal Funds Rate plus 0.50%		4.59%
Wells Fargo Bank, National Association Prime Rate		7.25%
One-month SOFR plus 1.00%		5.31%
SOFR Loan Option:
One-month SOFR		4.31%
Three-month SOFR		4.35%
Six-month SOFR		4.37%

Certain of our vendors require letters of credit to ensure reimbursement for amounts they are disbursing on our behalf, such as to beneficiaries under our self-funded insurance programs. We have also occasionally used letters of credit to guarantee performance under our contracts and to ensure payment to our subcontractors and vendors under those contracts. Our lenders issue such letters of credit through the Facility. A letter of credit commits the lenders to pay specified amounts to the holder of the letter of credit if the holder demonstrates that we have failed to perform specified actions. If this were to occur, we would be required to reimburse the lenders for amounts they fund to honor the letter of credit holder’s claim. Absent a claim, there is no payment or reserving of funds by us in connection with a letter of credit. However, because a claim on a letter of credit would require immediate reimbursement by us to our lenders, letters of credit are treated as a use of Facility capacity.

Commitment fees are payable on the portion of the revolving loan capacity not in use for borrowings or letters of credit at any given time. Letter of credit fees and commitment fees are based on the Net Leverage Ratio.


	Net Leverage Ratio
	Less than 1.00		1.00 to less than 1.75		1.75 to less than 2.50		2.50 to less than 3.00		3.00 or greater
Additional Per Annum Interest Margin Added Under:
Base Rate Loan Option	0.00	%	0.25	%	0.50	%	0.75	%	1.00	%
SOFR Loan Option	1.00	%	1.25	%	1.50	%	1.75	%	2.00	%
Letter of credit fees	1.00	%	1.25	%	1.50	%	1.75	%	2.00	%
Commitment fees on any portion of the Revolving Loan capacity not in use for borrowings or letters of credit at any given time	0.15	%	0.175	%	0.20	%	0.225	%	0.25	%

The weighted average interest rate applicable to the borrowings under the revolving credit facility was approximately 5.4% as of September 30, 2025. There were no outstanding borrowings on the revolving credit facility as of December 31, 2024.

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Notes to Former Owners

We have outstanding notes to the former owners of acquired companies. Together, these notes had an outstanding balance of $35.3 million as of September 30, 2025. On September 30, 2025, future principal payments of notes to former owners by maturity year were as follows (dollars in thousands):


	Balance at		Range of Stated
	September 30, 2025		Interest Rates
2026	$	6,125	2.5 - 5.5	%
2027		24,200	4.0 - 5.5	%
2028		5,000	5.5	%
Total	$	35,325

8. Leases

We lease certain facilities, vehicles and equipment primarily under noncancelable operating leases. The most significant portion of these noncancelable operating leases is for the facilities occupied by our corporate office and our operating locations. Leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheet. We do not separate lease components from their associated non-lease components pursuant to lease accounting guidance. We have certain leases with variable payments based on an index as well as short-term leases on equipment and facilities. Variable lease expense and short-term lease expense aggregated to $40.8 million and $26.4 million for the three months ended September 30, 2025 and 2024, respectively. Variable lease expense and short-term lease expense aggregated to $93.9 million and $67.1 million in the first nine months of 2025 and 2024, respectively. These expenses were primarily related to short-term equipment rentals. Lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted-average discount rate for our operating leases as of both September 30, 2025 and December 31, 2024 was 6.1%. We recognize operating lease expense, including escalating lease payments and lease incentives, on a straight-line basis over the lease term. Operating lease expense for the three months ended September 30, 2025 and 2024 was $53.1 million and $37.1 million, respectively. Operating lease expense for the nine months ended September 30, 2025 and 2024 was $128.3 million and $98.6 million, respectively.

The lease terms generally range from 3 to 15 years. Some leases include one or more options to renew, which may be exercised to extend the lease term. We include the exercise of lease renewal options in the lease term when it is reasonably certain that we will exercise the option and such exercise is at our sole discretion. The weighted-average remaining lease term for our operating leases was 11.3 years at September 30, 2025 and 10.9 years at December 31, 2024.

A majority of the Company’s real property leases are with individuals or entities with whom we have no other business relationship. However, in certain instances the Company enters into real property leases with current or former employees. Rent paid to related parties for the three months ended September 30, 2025 and 2024 was approximately $2.5 million and $2.4 million, respectively. Rent paid to related parties for the nine months ended September 30, 2025 and 2024 was approximately $7.5 million and $7.1 million, respectively.

If we decide to cancel or terminate a lease before the end of its term, we would typically owe the lessor the remaining lease payments under the term of the lease. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. On rare occasions, we rent or sublease certain real estate assets that we no longer use to third parties.

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The following table summarizes the operating lease assets and liabilities included in the Consolidated Balance Sheet as follows (in thousands):


	September 30, 2025		December 31, 2024
Operating lease right-of-use assets	$	274,697	$	229,106
Operating lease liabilities:
Other current liabilities	$	29,681	$	28,158
Long-term operating lease liabilities		258,056		212,107
Total operating lease liabilities	$	287,737	$	240,265

The maturities of operating lease liabilities are as follows (in thousands):


Year ending December 31—
2025 (excluding the nine months ended September 30, 2025)	$	12,100
2026		44,830
2027		40,571
2028		36,658
2029		33,013
Thereafter		242,264
Total lease payments		409,436
Less—present value discount		(121,699)
Present value of operating lease liabilities	$	287,737

Supplemental information related to operating leases was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Cash paid for amounts included in the measurement of operating lease liabilities	$	10,658	$	10,061	$	31,960	$	29,377
Operating lease right-of-use assets obtained in exchange for lease liabilities	$	55,834	$	6,657	$	68,126	$	41,989

9. Commitments and Contingencies

Claims and Lawsuits

We are subject to certain legal and regulatory claims, including lawsuits arising in the normal course of business. We maintain various insurance coverages to minimize financial risk associated with these claims. We have estimated and provided accruals for probable losses and related legal fees associated with certain litigation in the accompanying consolidated financial statements. While we cannot predict the outcome of these proceedings, in management’s opinion and based on reports of counsel, any liability arising from these matters individually and in the aggregate will not have a material effect on our operating results, cash flows or financial condition, after giving effect to provisions already recorded.

As of September 30, 2025, we recorded an accrual for unresolved matters, which is not material to our financial statements, based on our analysis of likely outcomes related to the respective matters; however, it is possible that the ultimate outcome and associated costs will deviate from our estimates and that, in the event of an unexpectedly adverse outcome, we may experience additional costs and expenses in future periods.

Surety

Many customers, particularly in connection with new construction, require us to post performance and payment bonds issued by a financial institution known as a surety. If we fail to perform under the terms of a contract or to pay subcontractors and vendors who provided goods or services under a contract, the customer may demand that the surety make payments or provide services under the bond. We must reimburse the surety for any expenses or outlays it incurs.

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Current market conditions for surety markets and bonding capacity are adequate, with acceptable terms and conditions. Historically, approximately 10% to 20% of our business has required bonds. While we currently have strong surety relationships to support our bonding needs, future market conditions or changes in the sureties’ assessments of our operating and financial risk could cause the sureties to decline to issue bonds for our work. If that were to occur, the alternatives include doing more business that does not require bonds, posting other forms of collateral for project performance, such as letters of credit or cash, and seeking bonding capacity from other sureties. We would likely also encounter concerns from customers, suppliers and other market participants as to our creditworthiness. While we believe our general operating and financial characteristics would enable us to ultimately respond effectively to an interruption in the availability of bonding capacity, such an interruption would likely cause our revenue and profits to decline in the near term.

Self-Insurance

We are substantially self-insured for workers’ compensation, employer’s liability, auto liability, general liability and employee group health claims, in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses are estimated and accrued based upon known facts, historical trends and industry averages. Estimated losses in excess of our deductible, which have not already been paid, are included in our accrual with a corresponding receivable from our insurance carrier. Loss estimates associated with the larger and longer-developing risks, such as workers’ compensation, auto liability and general liability, are reviewed by a third-party actuary quarterly.

10. Stockholders’ Equity

Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the year. Diluted EPS is computed considering the dilutive effect of stock options, restricted stock, restricted stock units and performance stock units. The vesting of contingently issuable performance stock units is based on the achievement of certain earnings per share targets and total shareholder return. These shares are considered contingently issuable shares for purposes of calculating diluted earnings per share. These shares are not included in the diluted earnings per share denominator until the performance criteria are met, if it is assumed that the end of the reporting period was the end of the contingency period.

Unvested restricted stock, restricted stock units and performance stock units are included in diluted earnings per share, weighted outstanding until the shares and units vest. Upon vesting, the vested restricted stock, restricted stock units and performance stock units are included in basic earnings per share weighted outstanding from the vesting date.

The number of anti-dilutive stock-based awards excluded from the calculation of diluted EPS was less than 0.1 million for the three and nine months ended September 30, 2025 and 2024.

The following table reconciles the number of shares outstanding with the number of shares used in computing basic and diluted earnings per share for each of the periods presented (in thousands):


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2025	2024	2025	2024
Common shares outstanding, end of period	35,272	35,593	35,272	35,593
Effect of using weighted-average common shares outstanding	35	76	107	125
Shares used in computing earnings per share—basic	35,307	35,669	35,379	35,718
Effect of shares issuable under stock option plans based on the treasury stock method	12	30	20	30
Effect of restricted and contingently issuable shares	46	56	46	56
Shares used in computing earnings per share—diluted	35,365	35,755	35,445	35,804

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Share Repurchase Program

On March 29, 2007, our Board of Directors (the “Board”) approved a stock repurchase program to acquire up to 1.0 million shares of our outstanding common stock. Subsequently, the Board has from time to time increased the number of shares that may be acquired under the program and approved extensions of the program. On May 16, 2025, the Board approved an extension to the program by increasing the shares authorized for repurchase by 0.4 million shares. Since the inception of the repurchase program, the Board has approved 11.8 million shares to be repurchased. As of September 30, 2025, we have repurchased a cumulative total of 10.8 million shares at an average price of $42.04 per share under the repurchase program.

The share repurchases will be made from time to time at our discretion in the open market or privately negotiated transactions, including pursuant to Rule 10b5-1 share repurchase plans, as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. The Board may modify, suspend, extend or terminate the program at any time. During the nine months ended September 30, 2025, we repurchased 0.3 million shares for approximately $125.4 million, inclusive of the applicable excise tax, at an average price of $363.15 per share.

11. Segment Information

Our activities are within the mechanical services industry and the electrical services industry, which represent our two reportable segments. We aggregate our operating segments into two reportable segments, as the operating segments meet all of the aggregation criteria. Segment information is prepared on the same basis that our Chief Operating Decision Maker (“CODM”) reviews financial information for operational decision-making purposes. Our CODM is the President and Chief Executive Officer. Our CODM allocates resources such as employees and capital resources primarily based on historical and potential future revenue, gross profit and operating income. Our CODM also uses segment gross profit and operating income when assessing pricing and performance by management teams in our operating segments. The following tables present information about our reportable segments (in thousands):


	Mechanical Segment		Electrical Segment		Corporate		Consolidated
Total assets at September 30, 2025	$	3,689,895	$	1,184,210	$	903,746	$	5,777,851
Total assets at December 31, 2024	$	3,162,677	$	985,006	$	563,405	$	4,711,088


	Three Months Ended September 30, 2025
	Mechanical Segment		Electrical Segment		Corporate		Consolidated
Revenue	$	1,810,462	$	640,507	$	—	$	2,450,969
Cost of services		1,370,687		472,411		—		1,843,098
Gross profit		439,775		168,096		—		607,871
Selling, general and administrative expenses		152,442		60,021		17,116		229,579
Gain on sale of assets		(418)		(164)		—		(582)
Operating income (loss)	$	287,751	$	108,239	$	(17,116)	$	378,874

Amortization of identifiable intangible assets	$	14,001	$	5,525	$	—	$	19,526
Depreciation expense	$	13,048	$	2,600	$	400	$	16,048
Capital expenditures	$	28,881	$	5,787	$	664	$	35,332

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	Three Months Ended September 30, 2024
	Mechanical Segment		Electrical Segment		Corporate		Consolidated
Revenue	$	1,438,617	$	373,749	$	—	$	1,812,366
Cost of services		1,146,245		284,407		—		1,430,652
Gross profit		292,372		89,342		—		381,714
Selling, general and administrative expenses		127,591		39,612		12,974		180,177
Gain on sale of assets		(675)		(672)		—		(1,347)
Operating income (loss)	$	165,456	$	50,402	$	(12,974)	$	202,884

Amortization of identifiable intangible assets	$	18,896	$	5,525	$	—	$	24,421
Depreciation expense	$	10,170	$	1,877	$	286	$	12,333
Capital expenditures	$	18,234	$	3,506	$	319	$	22,059

	Nine Months Ended September 30, 2025
	Mechanical Segment		Electrical Segment		Corporate		Consolidated
Revenue	$	4,851,349	$	1,604,225	$	—	$	6,455,574
Cost of services		3,732,449		1,201,941		—		4,934,390
Gross profit		1,118,900		402,284		—		1,521,184
Selling, general and administrative expenses		421,786		159,302		53,831		634,919
Gain on sale of assets		(1,141)		(439)		—		(1,580)
Operating income (loss)	$	698,255	$	243,421	$	(53,831)	$	887,845

Amortization of identifiable intangible assets	$	42,857	$	16,575	$	—	$	59,432
Depreciation expense	$	36,545	$	7,361	$	1,008	$	44,914
Capital expenditures	$	72,179	$	15,419	$	1,215	$	88,813

	Nine Months Ended September 30, 2024
	Mechanical Segment		Electrical Segment		Corporate		Consolidated
Revenue	$	4,075,305	$	1,084,367	$	—	$	5,159,672
Cost of services		3,286,249		830,750		—		4,116,999
Gross profit		789,056		253,617		—		1,042,673
Selling, general and administrative expenses		363,201		114,630		44,606		522,437
Gain on sale of assets		(1,605)		(1,173)		—		(2,778)
Operating income (loss)	$	427,460	$	140,160	$	(44,606)	$	523,014

Amortization of identifiable intangible assets	$	58,355	$	16,869	$	—	$	75,224
Depreciation expense	$	29,103	$	5,401	$	873	$	35,377
Capital expenditures	$	56,403	$	11,778	$	2,214	$	70,395

12. Subsequent Events

On October 1, 2025, we acquired all of the issued and outstanding equity of Feyen Zylstra Holdings, LLC (“Feyen Zylstra”). Feyen Zylstra is headquartered in Grand Rapids, Michigan, and is a full-service electrical contractor offering electrical design, installation, and maintenance services primarily to the industrial, technology, and healthcare sectors. Initially, we expect this acquisition to contribute annual revenues of approximately $150 million to $175 million. Feyen Zylstra will be included in our electrical segment.

On October 1, 2025, we acquired all of the issued and outstanding equity of Meisner Electric, Inc. (“Meisner”). Meisner is headquartered in Boca Raton, Florida, and is a full-service commercial electrical contractor offering greenfield construction services and electrical design, installation, and renovation services primarily to the healthcare,

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commercial, and government sectors. Initially, we expect this acquisition to contribute annual revenues of approximately $50 million to $65 million. Meisner will be included in our electrical segment.

Due to the timing of these two acquisitions, the initial accounting for them is not completed yet. As such, we are not able to disclose certain information relating to these acquisitions, including their preliminary purchase price. We expect to complete the initial accounting for these acquisitions during the fourth quarter of 2025.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our historical Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2024 (the “Form 10-K”). This discussion contains “forward-looking statements” regarding our business and industry within the meaning of applicable securities laws and regulations. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause our actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include risks set forth in “Item 1A. Risk Factors” included in our Form 10-K. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The terms “Comfort Systems,” “we,” “us,” “our,” or the “Company,” refer to Comfort Systems USA, Inc. or Comfort Systems USA, Inc. and its consolidated subsidiaries, as appropriate in the context.

Introduction and Overview

We are a national provider of comprehensive mechanical and electrical installation, renovation, maintenance, repair and replacement services within the mechanical and electrical services industries. We operate primarily in the commercial, industrial and institutional markets and perform most of our work in manufacturing, healthcare, education, office, technology, retail and government facilities. We operate our business in two business segments: mechanical and electrical.

Nature and Economics of Our Business

In our mechanical business segment, customers hire us to ensure heating, ventilation and air conditioning (“HVAC”) systems deliver specified or generally expected heating, cooling, conditioning and circulation of air in a facility. This entails installing core system equipment such as packaged heating and air conditioning units, or in the case of larger facilities, separate core components such as chillers, boilers, air handlers, and cooling towers. We also typically install connecting and distribution elements such as piping and ducting.

In our electrical business segment, our principal business activity is electrical construction and engineering in the commercial and industrial field. We also perform electrical logistics services and electrical service work.

In both our mechanical and electrical business segments, our responsibilities usually require conforming the systems to pre-established engineering drawings and equipment and performance specifications, which we frequently participate in establishing. Our project management responsibilities include staging equipment and materials to project sites, deploying labor to perform the work, and coordinating with other service providers on the project, including any subcontractors we might use to deliver our portion of the work.

Approximately 92.4% of our revenue is earned on a project basis for installation services in newly constructed facilities or for replacement of systems in existing facilities. When competing for project business, we usually estimate the costs we will incur on a project, and then propose a bid to the customer that includes a contract price and other performance and payment terms. Our bid price and terms are intended to cover our estimated costs on the project and provide a profit margin to us commensurate with the value of the installed system to the customer, the risk that project costs or duration will vary from estimate, the schedule on which we will be paid, the opportunities for other work that we might forego by committing capacity to this project, and other costs that we incur to support our operations but which are not specific to the project. Typically, customers will seek pricing from competitors for a given project. While the criteria on which customers select a provider vary widely and include factors such as quality, technical expertise, on-time performance, post-project support and service, and company history and financial strength, we believe that price for value is the most influential factor for most customers in choosing a mechanical or electrical installation and service provider.

After a customer accepts our bid, we generally enter into a contract with the customer that specifies what we will deliver on the project, what our related responsibilities are and how much and when we will be paid. Our overall

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price for the project is typically set at a fixed amount in the contract, although changes in project specifications or work conditions that result in unexpected additional work are usually subject to additional payment from the customer via what are commonly known as change orders. Project contracts typically provide for periodic billings to the customer as we meet progress milestones or incur costs on the project. Project contracts in our industry also frequently allow for a small portion of progress billings or contract price to be withheld by the customer until after we have completed the work. Amounts withheld under this practice are known as retention or retainage.

Labor, materials and overhead costs account for the majority of our cost of service. Accordingly, labor management and utilization have the most impact on our project performance. Given the fixed price nature of much of our project work, if our initial estimate of project costs is wrong or we incur cost overruns that cannot be recovered in change orders, we can experience reduced profits or even significant losses on fixed price project work. We also perform some project work on a cost-plus or a time and materials basis, under which we are paid our costs incurred plus an agreed-upon profit margin, and such projects are sometimes subject to a guaranteed maximum cost. These margins are frequently less than fixed-price contract margins because there is less risk of unrecoverable cost overruns in cost-plus or time and materials work.

As of September 30, 2025, we had 8,974 projects in process. Our average project takes six to nine months to complete, with an average contract price of approximately $2.4 million. Our projects generally require working capital funding of equipment and labor costs. Customer payments on periodic billings generally do not recover these costs until late in the job. Our average project duration, together with typical retention terms as discussed above, generally allow us to complete the realization of revenue and earnings in cash within one year. We have what we consider to be a well-diversified distribution of revenue across end-use sectors that we believe reduces our exposure to negative developments in any given sector. Because of the integral nature of our services to most buildings, we have the legal right in almost all cases to attach liens to buildings or related funding sources when we have not been fully paid for installing systems, except with respect to some government buildings. The service work that we do, which is discussed further below, usually does not give rise to lien rights.

We also perform larger projects. Taken together, projects with contract prices of $2 million or more totaled $19.38 billion of aggregate contract value as of September 30, 2025, or approximately 92% of a total contract value for all projects in progress, totaling $21.17 billion. Generally, projects closer in size to $2 million will be completed in one year or less. It is unusual for us to work on a project that exceeds two years in length.

A stratification of projects in progress as of September 30, 2025, by contract price, is as follows:


		Aggregate
		Contract
	No. of	Price Value
Contract Price of Project	Projects	(millions)
Under $2 million	7,427	$	1,788.2
$2 million - $10 million	1,119		4,391.6
$10 million - $20 million	180		2,545.4
$20 million - $40 million	146		4,128.6
Greater than $40 million	102		8,312.4
Total	8,974	$	21,166.2

In addition to project work, approximately 7.6% of our revenue represents maintenance and repair service on already installed HVAC, electrical, and controls systems. This kind of work usually takes from a few hours to a few days to perform. Prices to the customer are based on the equipment and materials used in the service as well as technician labor time. We usually bill the customer for service work when it is complete, typically with payment terms of up to thirty days. We also provide maintenance and repair service under ongoing contracts. Under these contracts, we are paid regular monthly or quarterly amounts and provide specified service based on customer requirements. These agreements typically are for one or more years and frequently contain 30- to 60-day cancellation notice periods.

A relatively small portion of our revenue comes from national and regional account customers. These customers typically have multiple sites and contract with us to perform maintenance and repair service. These contracts may also provide for us to perform new or replacement systems installation. We operate a national call center to dispatch

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technicians to sites requiring service. We perform the majority of this work with our own employees, with the balance being subcontracted to third parties that meet our performance qualifications.

Profile and Management of Our Operations

We manage our 48 operating units based on a variety of factors. Financial measures we emphasize include profitability and use of capital as indicated by cash flow and by other measures of working capital principally involving project cost, billings and receivables. We also monitor selling, general, administrative and indirect project support expense, backlog, workforce size and mix, growth in revenue and profits, variation of actual project cost from original estimate, and overall financial performance in comparison to budget and updated forecasts. Operational factors we emphasize include project selection, estimating, pricing, safety, management and execution practices, labor utilization, training, and the make-up of both existing backlog as well as new business being pursued, in terms of project size, technical application, facility type, end-use customers and industries and location of the work.

Most of our operations compete on a local or regional basis. Attracting and retaining effective operating unit managers is an important factor in our business, particularly in view of the relative uniqueness of each market and operation, the importance of relationships with customers and other market participants, such as architects and consulting engineers, and the high degree of competition and low barriers to entry in most of our markets. Accordingly, we devote considerable attention to operating unit management quality, stability, and contingency planning, including related considerations of compensation and non-competition protection where applicable.

Economic and Industry Factors

As a mechanical and electrical services provider, we operate in the broader nonresidential construction services industry and are affected by trends in this sector. While we do not have operations in all major cities of the United States, we believe our national presence is sufficiently large that we experience trends in demand for and pricing of our services that are consistent with trends in the national nonresidential construction sector. As a result, we monitor the views of major construction sector forecasters along with macroeconomic factors they believe drive the sector, including trends in gross domestic product, interest rates, business investment, employment, demographics and the fiscal condition of federal, state and local governments.

Spending decisions for building construction, renovation and system replacement are generally made on a project basis, usually with some degree of discretion as to when and if projects proceed. With larger amounts of capital, time, and discretion involved, spending decisions are affected to a significant degree by uncertainty, particularly concerns about economic and financial conditions and trends. We have experienced periods of time when economic weakness caused a significant slowdown in decisions to proceed with installation and replacement project work.

Operating Environment and Management Emphasis

Following the impacts of the global pandemic during 2020 and 2021, we experienced increasing demand in 2022, 2023 and 2024. We currently expect that the demand environment, especially for manufacturing and technology customers, will remain at high levels for the remainder of 2025 and for 2026. While the impacts from the supply chain shortages have improved, we continue to experience increased labor costs and delays in delivery of certain materials and equipment. We anticipate that constraints and delays in our supply chain will persist, as well as pressure on cost and availability, especially for skilled labor, will continue over the next several quarters.

We have a credit facility in place with terms we believe are favorable that does not expire until October 2030. As of September 30, 2025, we had $916.8 million of credit available to borrow under our credit facility. We have strong surety relationships to support our bonding needs, and we believe our relationships with the surety markets are strong and benefit from our operating history and financial position. We have generated positive free cash flow in each of the last 26 calendar years and will continue our emphasis in this area. We believe that the relative size and strength of our Balance Sheet and surety relationships, as compared to most companies in our industry, represent competitive advantages for us.

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As discussed at greater length in “Results of Operations” below, we expect price competition to continue as local and regional industry participants compete for customers. We will continue to invest in our service business, to pursue the more active sectors in our markets, and to emphasize our regional and national account business.

Cyclicality and Seasonality

The construction industry is subject to business cycle fluctuation. As a result, our volume of business, particularly in new construction projects and renovation, may be adversely affected by declines in new installation and replacement projects in various geographic regions of the United States during periods of economic weakness.

The mechanical and electrical contracting industries are also subject to seasonal variations. The demand for new installation and replacement is generally lower during the winter months (the first quarter of the year) due to reduced construction activity during inclement weather and less use of air conditioning during the colder months. Demand for our services is generally higher in the second and third calendar quarters due to increased construction activity and increased use of air conditioning during the warmer months. Accordingly, we expect our revenue and operating results generally will be lower in the first calendar quarter.

Critical Accounting Estimates

Management believes that there have been no significant changes during the three months ended September 30, 2025, to the items that we disclosed as our "Critical Accounting Estimates" in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended December 31, 2024. A summary of significant accounting policies and a summary of recent accounting pronouncements applicable to our Consolidated Financial Statements are included in Note 2 “Summary of Significant Accounting Policies and Estimates.”

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Results of Operations (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2025				2024				2025				2024
Revenue	$	2,450,969	100.0	%	$	1,812,366	100.0	%	$	6,455,574	100.0	%	$	5,159,672	100.0	%
Cost of services		1,843,098	75.2	%		1,430,652	78.9	%		4,934,390	76.4	%		4,116,999	79.8	%
Gross profit		607,871	24.8	%		381,714	21.1	%		1,521,184	23.6	%		1,042,673	20.2	%
Selling, general and administrative expenses		229,579	9.4	%		180,177	9.9	%		634,919	9.8	%		522,437	10.1	%
Gain on sale of assets		(582)	—			(1,347)	(0.1)	%		(1,580)	—			(2,778)	(0.1)	%
Operating income		378,874	15.5	%		202,884	11.2	%		887,845	13.8	%		523,014	10.1	%
Interest income		6,381	0.3	%		3,825	0.2	%		13,467	0.2	%		6,692	0.1	%
Interest expense		(2,974)	(0.1)	%		(1,730)	(0.1)	%		(6,198)	(0.1)	%		(5,072)	(0.1)	%
Changes in the fair value of contingent earn-out obligations		(12,103)	(0.5)	%		(17,254)	(1.0)	%		(19,934)	(0.3)	%		(44,434)	(0.9)	%
Other income (expense)		280	—			87	—			(226)	—			323	—
Income before income taxes		370,458	15.1	%		187,812	10.4	%		874,954	13.6	%		480,523	9.3	%
Provision for income taxes		78,843				41,577				183,202				103,960
Net income	$	291,615	11.9	%	$	146,235	8.1	%	$	691,752	10.7	%	$	376,563	7.3	%

We had 47 operating locations as of December 31, 2024. In the first quarter of 2025, we completed the acquisition of Century Contractors, LLC (“Century”), which reports as a separate operating location. In the second quarter of 2025, we combined two operating locations into one. Additionally, we completed the acquisition of Right Way Plumbing & Mechanical LLC (“Right Way”), which reports as a separate operating location. We had 48 operating locations as of September 30, 2025. Acquisitions are included in our results of operations from the respective acquisition date. The same-store comparison from 2025 to 2024, as described below, excludes Right Way, which was acquired May 1, 2025, Century, which was acquired on January 1, 2025, one month of results for Summit Industrial Construction, LLC (“Summit”), which was acquired on February 1, 2024, and one month of results for J & S Mechanical Contractors, Inc. (“J&S”), which was acquired on February 1, 2024. An operating location is included in the same-store comparison on the first day it has comparable prior year operating data, except for immaterial acquisitions that are often absorbed and integrated with existing operations.

Revenue—Revenue for the third quarter of 2025 increased $638.6 million, or 35.2%, to $2.45 billion compared to the same period in 2024. The increase included a 33.3% increase in revenue related to same-store activity and a 1.9% increase related to the Right Way and Century acquisitions. The same-store revenue growth was largely driven by strong market conditions, including the increase in our backlog. The increase in demand has been especially strong in the technology sector, particularly for data centers.

The following table presents our operating segment revenue (in thousands, except percentages):

COMFORT SYSTEMS USA INC 10-Q