Comfort Systems USA FIX · USD

16. Segment InformationWe have two reportable segments: (a) our mechanical segment, which includes HVAC, plumbing, piping, and controls, as well as off-site construction, monitoring and fire protection; and (b) our electrical segment, which includes installation and servicing of electrical systems. We consider these two lines of business to be separate segments because they require different skill sets, and the business models for providing services have some differences, as a mechanical system requires ongoing maintenance and monitoring and an electrical system generally does not. However, the business model for installation of new systems or retrofitting existing systems is very similar between the two segments. 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 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. 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. Substantially all of our revenue is generated, and all of our assets are located, in the United States, our country of domicile.

3. Revenue from Contracts with CustomersRevenue 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. 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. For fixed price agreements, we use the cost-to-cost input method of accounting under which contract revenue recognizable at any time during the life of a contract is determined by multiplying expected total contract revenue by the percentage of contract costs incurred at any time to total estimated contract costs. More specifically, as part of the negotiation and bidding process to obtain installation contracts, we estimate our contract costs, which include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. These contract costs are included in our results of operations under the caption “Cost of Services.” Then, as we perform under those contracts, we measure costs incurred, compare them to total estimated costs to complete the contract and recognize a corresponding proportion of contract revenue. Labor costs are considered to be incurred as the work is performed. Subcontractor labor is recognized as the work is performed. Non‑labor project costs consist of purchased equipment, prefabricated materials and other materials. Purchased equipment on our projects is substantially produced to job specifications, normally installed shortly after receipt and is a value-added element to our work. Prefabricated materials, such as ductwork and piping, are generally made at our shops and recognized as contract costs when fabricated for the unique specifications of the job.

13. Commitments and ContingenciesClaims and LawsuitsWe 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.In 2023, we recorded a pre-tax gain of $6.8 million from legal developments and settlements that primarily relate to disputes with customers regarding the outcome of completed projects as well as an obligation to perform subcontract work under two executed letters of intent for subsequent projects that we believed were not enforceable. The pre-tax gain of $6.8 million was recorded as an increase in gross profit of $6.6 million, a reduction in SG&A of $0.7 million, an increase in interest income of $1.3 million and an increase in the change in fair value of contingent earn-out obligations expense of $1.8 million in our Consolidated Statement of Operations.As of December 31, 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.SuretyMany 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. Current market conditions for surety markets and bonding capacity are adequate, with acceptable terms and conditions.

9. Debt ObligationsDebt obligations consist of the following (in thousands):​​​​​​​​​​December 31, ​​ 2025 ​ ​ ​2024 Revolving credit facility​$ 100,000​$ —​Notes to former owners​​ 44,575​ 67,593​Other debt​​ 651​​ 742​Total debt​​ 145,226​​ 68,335​Less—current portion​​ (6,163)​ (6,042)​Total long-term portion of debt​$ 139,063​$ 62,293​​At December 31, 2025, future principal payments of debt are as follows (in thousands):​​​​​Year ending December 31— ​ ​ ​​ ​ ​ ​​2026 ​ ​ ​$ 6,163 2027​ 24,246​2028​ 14,272​2029​ 545​2030​ 100,000​​​$ 145,226​​Interest expense included the following primary elements (in thousands):​​​​​​​​​​​​​Year Ended December 31, ​ ​ ​ ​2025 ​ ​ ​2024 ​ ​ ​2023 Interest expense on notes to former owners​$ 3,149​$ 3,616​$ 1,365​Interest expense on borrowings and unused commitment fees​ 3,832​ 1,434​ 7,507​Letter of credit fees​ 1,010​ 911​ 724​Amortization of debt financing costs​ 1,018​ 687​ 685​Total​$ 9,009​$ 6,648​$ 10,281​​Revolving Credit FacilityOn 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 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.

​11. Income Taxes ​Provision for Income Taxes​Our provision for income taxes relating to continuing operations consists of the following (in thousands):​​​​​​​​​​​​​​December 31, ​ ​ ​ ​2025 ​ ​ ​2024 ​ ​ ​2023 Current tax provision (benefit)—​​​​​​​​​​Federal​$ 235,686​$ 170,844​$ (34,722)​State​ 40,486​ 39,897​ 4,222​Total current​ 276,172​ 210,741​ (30,500)​Deferred tax provision (benefit)—​​​​​​​​​​Federal​ (3,116)​ (54,119)​ 81,119​State​ (2,161)​ (12,494)​ 14,177​Total deferred​ (5,277)​ (66,613)​ 95,296​Provision for income taxes​$ 270,895​$ 144,128​$ 64,796​​​Rate Reconciliation​The provision for income taxes for the years ended December 31, 2025, 2024 and 2023 resulted in effective tax rates on continuing operations of 20.9%, 21.6% and 16.7%, respectively. The reasons for the differences between these effective tax rates and the federal statutory tax rates are as follows (in thousands, except percentages):​​​​​​​​​​​​​​​​​​​​​December 31, ​​2025​2024​2023​​​Amount​Percent​​​Amount​Percent​​​Amount​Percent​Federal statutory tax rate​$ 271,625​ 21.0%​$ 139,978​ 21.0%​$ 81,521​ 21.0%State and local income taxes, net of federal effect (a)​​ 30,277​ 2.3%​​ 21,648​ 3.2%​​ 14,537​ 3.7%Tax credits—​ ​​​​​ ​​​​​ ​​​​R&D tax credit​ (30,509)​ (2.4)%​ (23,226)​ (3.5)%​ (35,033)​ (9.0)%Other​ (19)​ —​​ —​ —​​ —​ —​Nontaxable or nondeductible items​ 8,186​ 0.6%​ 5,328​ 0.8%​ 4,489​ 1.2%Other adjustments​ (8,665)​ (0.6)%​ 400​ 0.1%​ (718)​ (0.2)%Effective tax rate​$ 270,895​ 20.9%​$ 144,128​ 21.6%​$ 64,796​ 16.7%​(a) State taxes in Virginia, North Carolina, Arizona, New York, Alabama, Tennessee and Utah made up the majority (greater than 50%) of the tax effect of this category in 2025.In February 2023, we filed amended federal tax returns for 2019 and 2020 requesting refunds primarily from claiming the credit for increasing research activities (the “R&D tax credit”). We previously recorded benefits of $18.9 million for such refund claims in the year 2022. Our refund claims are currently under examination by the Internal Revenue Service (the “IRS”) which, if allowed, would require review and approval by the Joint Committee on Taxation (the “JCT”). We do not expect the conclusion of the IRS examination and JCT review to have a material impact on our financial statements.

15. Stock-Based CompensationGrants of restricted stock and restricted stock units and performance share units have been determined and administered by the compensation committee of the Board of Directors. Total stock-based compensation expense was $21.8 million, $16.6 million and $12.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. Stock-based compensation expense is recognized using the straight-line method over the vesting period and generally vests over a three-year vesting period. Certain awards provide for accelerated vesting when the sum of an employee's age and years of service is at least 75. We recognize forfeitures as they occur. Total income tax benefit recognized for stock-based compensation arrangements was $4.6 million, $3.5 million and $2.7 million for each of the years ended December 31, 2025, 2024 and 2023. We generally issue treasury shares for stock options and restricted stock, unless treasury shares are not available. Upon the vesting of restricted shares, we have allowed the holder to elect to surrender an amount of shares to meet their statutory tax withholding requirements. These shares are accounted for as treasury stock based upon the value of the stock on the date of vesting.Restricted Stock and Restricted Stock UnitsThe following table summarizes activity under our restricted stock plans (shares in thousands):​​​​​​​​​Year Ended ​​​December 31, 2025​​​​​Weighted-​​​​​Average Grant​Restricted Stock and Restricted Stock Units ​ ​ ​Shares ​ ​ ​Date Fair Value Unvested at beginning of year 79​$ 187.33​Granted 24​$ 378.49​Vested (45)​$ 185.65​Forfeited —​$ —​Unvested at end of year 58​$ 269.97​​Approximately $4.8 million of compensation expense related to restricted stock and restricted stock units will be recognized over a weighted-average period of 1.4 years. We determine the fair value of restricted stock and restricted stock units based on the quoted price of our stock at the date of grant. The weighted-average grant date fair value per share of restricted stock shares and units awarded during 2025, 2024 and 2023 was $378.49, $315.04 and $164.47, respectively. The fair value of restricted stock vested during the years ended December 31, 2025, 2024 and 2023 was $20.9 million, $19.8 million and $9.3 million, respectively.

10. LeasesWe 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 for the year ended December 31, 2025, 2024 and 2023 aggregated to $138.8 million, $94.3 million and $53.7 million, 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 December 31, 2025 and 2024 was 6.0% and 6.1%, respectively. 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 years ended December 31, 2025, 2024 and 2023 was $187.5 million, $136.9 million and $86.1 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 11.7 years and 10.9 years at December 31, 2025 and 2024, respectively.​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 years ended December 31, 2025, 2024 and 2023 was approximately $10.1 million, $9.8 million and $7.6 million, respectively.

5. AcquisitionsOn October 1, 2025, we acquired all of the issued and outstanding membership interests of Feyen-Zylstra Holdings, LLC (“Feyen Zylstra”), headquartered in Michigan, for a total preliminary purchase price of $109.8 million, which included $99.0 million of cash paid on the closing date, $4.3 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. Feyen Zylstra operates in the Midwest and Southern United States and provides electrical design, installation, and maintenance services primarily to the industrial, technology and healthcare sectors. As a result of the acquisition, Feyen Zylstra is a wholly owned subsidiary of the Company reported in our electrical segment. The goodwill recognized as a result of the Feyen Zylstra acquisition is deductible for tax purposes.On October 1, 2025, we acquired all of the issued and outstanding shares of capital stock of Meisner Electric, Inc. (“Meisner”), headquartered in Florida, for a total preliminary purchase price of $74.9 million, which included $64.5 million of cash paid on the closing date, $5.0 million in notes payable to the former owners and a working capital adjustment. Meisner operates in Florida and provides greenfield construction services and electrical design, installation, and renovation services primarily to the healthcare, commercial and government sectors. As a result of the acquisition, Meisner is a wholly owned subsidiary of the Company reported in our electrical segment. The goodwill recognized as a result of the Meisner acquisition is not deductible for tax purposes.​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. The goodwill recognized as a result of this acquisition is deductible for tax purposes.​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 $64.9 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.