COMFORT SYSTEMS USA INC

Previous wording

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,

Current wording

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.

Previous wording

In our mechanical business segment, customers hire us to ensure 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.

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

Approximately 91.1% 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.

Current wording

Approximately 92.7% 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.

Previous wording

As of December 31, 2024, we had 7,935 projects in process. Our average project takes six to nine months to complete, with an average contract price of approximately $1.8 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

Current wording

As of December 31, 2025, we had 8,427 projects in process. Our average project takes six to nine months to complete, with an average contract price of approximately $2.9 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.

Previous wording

We also perform larger projects. Taken together, projects with contract prices of $2 million or more totaled $12.78 billion of aggregate contract value as of December 31, 2024, or approximately 89%, out of a total contract value for all projects in progress of $14.35 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.

Current wording

We also perform larger projects. Taken together, projects with contract prices of $2 million or more totaled $22.44 billion of aggregate contract value as of December 31, 2025, or approximately 93%, out of a total contract value for all projects in progress of $24.17 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.

Previous wording

In addition to project work, approximately 8.9% 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 thirty- to sixty-day cancellation notice periods.

Current wording

In addition to project work, approximately 7.3% 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 services 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.

Previous wording

We manage our 47 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.

Current wording

We manage our 50 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.

Previous wording

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.

Current wording

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,

Previous wording

In 2020, the advent of a global pandemic led to some delays in service and construction, including delayed project starts and air pockets or pauses during 2020 and 2021. We experienced increasing demand in 2022, 2023 and 2024 and we expect that the demand environment, especially for manufacturing and technology customers, will remain at high levels leading into 2025. 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 expect that constraints and delays in our supply chain will continue to abate in the near term; however, we anticipate that pressure on cost and availability, especially for skilled labor, will continue in 2025.

Current wording

We have experienced increasing demand since 2022, culminating in an unprecedented overall demand environment in 2025. We currently expect that the demand environment, especially for manufacturing and technology customers, will remain at high levels during 2026. Over the last several years, we have also experienced increases in labor costs and delays in delivery of certain materials and equipment. We anticipate that cost pressures and intermittent delays in our supply chain will persist over the next several quarters.

Previous wording

We have a credit facility in place with terms we believe are favorable that does not expire until July 2027. As of December 31, 2024, we had $770.0 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 twenty-six 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.

Current wording

We have a credit facility in place with terms we believe are favorable that does not expire until October 2030. As of December 31, 2025, we had $921.0 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 27 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.

Previous wording

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.

Current wording

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.

Previous wording

We had 44 operating locations as of December 31, 2023. In the first quarter of 2024, we split one of our operating locations into two separate operating locations. Additionally, we completed the acquisitions of Summit Industrial Construction, LLC (“Summit”) and J & S Mechanical Contractors, Inc. (“J&S”), which both report as separate operating locations. We had 47 operating locations as of December 31, 2024. Acquisitions are included in our results of operations from the respective acquisition date. The same-store comparison from 2024 to 2023, as described below, excludes Summit, which was acquired on February 1, 2024, J&S, which was acquired on February 1, 2024, nine months of results for DECCO, Inc. (“DECCO”), which was acquired on October 2, 2023, and one month of results for Eldeco, Inc (“Eldeco”), which was acquired on February 1, 2023. 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.

Current wording

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 operating location. Additionally, we completed the acquisition of Right Way Plumbing & Mechanical LLC (“Right Way”), which reports as a separate operating location. In the fourth quarter of 2025, we completed the acquisitions of Feyen-Zylstra Holdings, LLC (“Feyen Zylstra”) and Meisner Electric, Inc. (“Meisner”), which both report as separate operating locations. We had 50 operating locations as of December 31, 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 Feyen Zylstra, which was acquired on October 1, 2025, Meisner, which was acquired on October 1, 2025, 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.

Previous wording

Revenue—Revenue increased $1.82 billion, or 35.0%, to $7.03 billion in 2024 compared to 2023. The increase included a 12.1% increase related to the Summit, J&S, DECCO, and Eldeco acquisitions, as well as a 22.9% increase in revenue related to same-store activity. The same-store revenue growth was largely driven by strong market conditions, including the increase in our backlog. The increase in demand has been particularly strong in the technology sector such as data centers and chip plants.

Current wording

Revenue—Revenue increased $2.07 billion, or 29.5%, to $9.10 billion in 2025 compared to 2024. The increase included a 3.4% increase related to the Feyen Zylstra, Meisner, Right Way, Century, Summit and J&S acquisitions, as well as a 26.1% increase in revenue related to same-store activity. 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.

Previous wording

Revenue for our mechanical segment increased $1.58 billion, or 40.1%, to $5.53 billion in 2024 compared to 2023. Of this increase, $619.8 million resulted from the acquisition of Summit, J&S, and DECCO, and $961.8 million was attributable to same-store activity. The same-store revenue increase primarily resulted from an increase in activity in the technology sector at two of our Texas operations ($321.2 million), our North Carolina operation ($147.5 million) and one of our Virginia operations ($129.4 million).

Current wording

Revenue for our mechanical segment increased $1.15 billion, or 20.7%, to $6.67 billion in 2025 compared to 2024. Of this increase, $169.3 million resulted from the acquisition of Right Way, Century, Summit and J&S, and $976.8 million was attributable to same-store activity. The same-store revenue increase primarily resulted from an increase in activity in the technology sector at one of our North Carolina operations ($267.5 million), our Texas modular operation ($206.5 million), one of our Indiana operations ($137.2 million) and one of our Virginia operations ($109.7 million).

Previous wording

Revenue for our electrical segment increased $239.1 million, or 19.0%, to $1.50 billion in 2024 compared to 2023. The increase primarily resulted from an increase in activity in the technology sector at our Texas electrical operation ($158.0 million) and in the manufacturing sector at one of our South Carolina operations ($41.4 million).

Current wording

Revenue for our electrical segment increased $928.0 million, or 61.9%, to $2.43 billion in 2025 compared to 2024. Of this increase, $66.8 million resulted from the acquisition of Feyen Zylstra and Meisner, and $861.2 million was attributable to same-store activity. The same-store revenue increase primarily resulted from an increase in activity in the technology sector at our Texas electrical operation ($649.3 million).

Previous wording

Backlog as of December 31, 2024 was $5.99 billion, a 5.5% increase from September 30, 2024 backlog of $5.68 billion and a 16.2% increase from December 31, 2023 backlog of $5.16 billion. Thesequential backlog increase was primarily a result of increased project bookings and strong market conditions in the technology sector at one of our Texas operations ($345.8 million). The sequential backlog increase was partially offset by the completion of project work in the technology sector at our Texas electrical operation ($52.6 million). The year-over-year backlog increase included the acquisitions of Summit ($297.9 million) and J&S ($97.0 million) as well as a same-store increase of $441.6 million, or 8.6%. Same-store year-over-year backlog increased primarily due to increased project bookings in the technology sector at our Texas electrical operation ($206.3 million) and at one of our Texas operations ($183.2 million), in the healthcare sector at our Mississippi operation ($76.6 million) and in the education sector at one of our Florida operations ($74.0 million). The year-over-year backlog increase was partially offset by the completion of project work in the manufacturing sector at our North Carolina operations ($68.9 million) and in the manufacturing and technology sectors at one of our Indiana operations ($67.1 million).

Current wording

Backlog as of December 31, 2025 was $11.94 billion, a 27.4% increase from September 30, 2025 backlog of $9.38 billion and a 99.3% increase from December 31, 2024 backlog of $5.99 billion. The sequential backlog increase included the acquisitions of Feyen Zylstra ($90.9 million) and Meisner ($72.5 million), as well as a same-store increase of $2.40 billion, or 25.6%. Same-store sequential backlog increased primarily due to increased project bookings and strong market conditions in the technology sector at our Texas modular operation ($1.20 billion) and one of our Texas operations ($539.9 million) and in the manufacturing sector at one of our North Carolina operations ($372.2 million). The year-over-year backlog increase included the acquisitions of Right Way ($106.2 million), Century ($91.6 million), Feyen Zylstra ($90.9 million) and Meisner ($72.5 million), as well as a same-store increase of $5.59 billion, or 93.2%. Same-store year-over-year backlog increased primarily due to increased project bookings and strong market conditions in the technology sector at our Texas modular operation ($1.48 billion), one of our North Carolina operations ($1.26 billion), one of our Indiana operations ($901.1 million), one of our Texas operations ($850.2 million) and at our Texas electrical operation ($803.4 million).

Previous wording

Gross Profit—Gross profit increased $485.9 million, or 49.1%, to $1.48 billion in 2024 as compared to 2023. The increase included a $86.8 million, or 8.8%, increase related to the Summit, J&S, DECCO, and Eldeco acquisitions, as well as a $399.1 million, or 40.3%, increase on a same-store basis. The same-store increase in gross profit was primarily driven by both higher revenues in the current year as well as improved execution in our operations, including improvements in project execution at our Texas electrical operation ($90.8 million) and one of our South Carolina operations ($19.9 million). Two of our Texas operations achieved both higher volumes and improvements in project execution ($131.7 million). Additionally, we achieved increased volumes at one of our Virginia operations ($28.0 million), one of our Tennessee operations ($22.6 million) and our North Carolina operation ($19.8 million). As a percentage of revenue, gross profit increased from 19.0% in 2023 to 21.0% in 2024, primarily due to the factors discussed above and improvements in our electrical segment gross profit margin.

Current wording

Gross Profit—Gross profit increased $719.5 million, or 48.7%, to $2.20 billion in 2025 as compared to 2024. The increase included a $44.8 million, or 3.0%, increase related to the Feyen Zylstra, Meisner, Right Way, Century, Summit and J&S acquisitions, as well as a $674.6 million, or 45.7%, increase on a same-store basis. The same-store increase in gross profit was primarily driven by both higher revenues in the current year as well as improved execution in our operations, including increased volumes at our Texas electrical operation ($161.5 million), one of our North Carolina operations ($71.6 million) and one of our Indiana operations ($76.0 million). Additionally, we achieved improvements in project execution at our Texas modular operation ($124.3 million). As a percentage of revenue, gross profit increased from 21.0% in 2024 to 24.1% in 2025, primarily due to the factors discussed above and improvements in our mechanical segment gross profit margin.

Previous wording

Selling, General and Administrative Expenses (“SG&A”)—SG&A increased $155.6 million, or 27.1%, to $730.1 million for 2024 as compared to 2023. On a same-store basis, excluding amortization expense, SG&A increased $116.6 million, or 21.7%. The same-store increase is primarily due to higher same-store revenue and increased compensation costs ($90.7 million), largely attributable to increased headcount and increased cost of labor. Amortization expense increased $17.1 million during the period primarily as a result of the Summit, J&S and DECCO acquisitions. As a percentage of revenue, SG&A decreased from 11.0% in 2023 to 10.4% in 2024 due to leverage resulting from the increase in revenue.

Current wording

Selling, General and Administrative Expenses (“SG&A”)—SG&A increased $153.2 million, or 21.0%, to $883.3 million for 2025 as compared to 2024. On a same-store basis, excluding amortization expense, SG&A increased $124.9 million, or 18.5%. The same-store increase is primarily due to higher same-store revenue and increased compensation costs ($96.6 million), largely attributable to increased headcount and increased cost of labor. Amortization expense for intangible assets increased $5.5 million during the period primarily as a result of the Right Way, Century and Summit acquisitions. As a percentage of revenue, SG&A decreased from 10.4% in 2024 to 9.7% in 2025 due to leverage resulting from the increase in revenue.

Previous wording

Interest Income—Interest income increased $8.1 million, or 230.9%, in 2024 as compared to 2023. The increase in interest income is due to both an increase in our average cash balance and higher interest rates compared to the prior year.

Current wording

Interest Income—Interest income increased $10.1 million, or 87.0%, in 2025 as compared to 2024. The increase in interest income is due to an increase in our average cash balance compared to the prior year.

Previous wording

Interest Expense—Interest expense decreased $3.6 million, or 35.3%, in 2024 as compared to 2023. The decrease in interest expense is primarily due to a decrease in our average outstanding debt balance compared to the prior year.

Current wording

Interest Expense—Interest expense increased $2.4 million, or 35.5%, in 2025 as compared to 2024. The increase in interest expense is primarily due to an increase in our average outstanding debt balance compared to the prior year. Additionally, we expensed $0.3 million in 2025 related to unamortized debt issuance costs for lenders who exited the credit facility when we amended our senior credit facility in August of 2025.

Previous wording

Changes in the Fair Value of Contingent Earn-out Obligations—The contingent earn-out obligations are measured at fair value each reporting period, and changes in estimates of fair value are recognized in earnings. Expense from changes in the fair value of contingent earn-out obligations increased $64.5 million, or 273.4%, in 2024 compared to 2023. This increase was primarily caused by higher expenses at Summit, driven by stronger actual current earnings and forecasted results. Expense or income from changes in earn-out valuations may be more volatile in future periods due to large earn-out agreements for acquisitions that closed in 2024.

Current wording

Changes in the Fair Value of Contingent Earn-out Obligations—The contingent earn-out obligations are measured at fair value each reporting period, and changes in estimates of fair value are recognized in earnings. Expense from changes in the fair value of contingent earn-out obligations decreased $54.7 million, or 62.0%, in 2025 compared to 2024. This decrease was primarily caused by lower earn-out expenses for Summit, driven by larger changes in their forecasted results in the prior year and as a result of them reaching their maximum cumulative earn-out target.

Previous wording

Our provision for income taxes for 2024 was $144.1 million with an effective tax rate of 21.6%, as compared to the provision for income taxes of $64.8 million with an effective tax rate of 16.7% for 2023. The effective rate for 2024 was slightly higher than the 21% federal statutory rate primarily due to net state income taxes (3.9%) and nondeductible expenses (1.5%), partially offset by the credit for increasing research activities (the “R&D tax credit”) (4.1%). The effective rate for 2023 was lower than the 21% federal statutory rate due to the R&D tax credit (6.3%) and an increase in the R&D tax credit for the 2022 tax year (2.8%). These R&D tax credit benefits were partially offset by net state income taxes (3.7%) and nondeductible expenses (1.5%). Refer to Note 11 in the Consolidated Financial Statements for a reconciliation of the federal statutory rate to the effective tax rates reflected in our financial statements.

Current wording

Our provision for income taxes for 2025 was $270.9 million with an effective tax rate of 20.9%, as compared to the provision for income taxes of $144.1 million with an effective tax rate of 21.6% for 2024. The effective rate for 2025 was slightly lower than the 21% federal statutory rate primarily due to a $30.5 million credit for increasing research activities (“R&D tax credit”) (2.4%) partially offset by $30.3 million of net state income taxes (2.3%). The effective rate for 2024 was slightly higher than the 21% federal statutory rate primarily due to $21.6 million of net state income taxes (3.2%) partially offset by a $23.2 million R&D tax credit (3.5%). Refer to Note 11 in the Consolidated Financial Statements for a reconciliation of the federal statutory rates to the effective tax rates reflected in our financial statements.

Previous wording

We experienced strong ongoing demand in 2024, although we continue to experience increased labor costs and impacts from supply chain shortages, including delays in delivery of certain materials and equipment. We are recognizing these challenges in our job planning and pricing, and we are ordering materials on an earlier timeline and seeking to collaborate with customers to share supply risks and to mitigate the effects of these challenges. We have been generally successful in maintaining productivity and in procuring needed materials despite ongoing challenges.

Current wording

We experienced an unprecedented demand environment in 2025, and we continue to experience increased labor costs and intermittent supply chain shortages, including delays in delivery of certain materials and equipment. We are recognizing these challenges in our job planning and pricing, and we are ordering materials on an earlier timeline and seeking to collaborate with customers to share supply risks and to mitigate the effects of these challenges. We have been generally successful in maintaining productivity and in procuring needed materials despite ongoing challenges.

Previous wording

We have a good pipeline of opportunities and potential backlog. Considering our substantial advance bookings, we currently anticipate solid earnings in 2025. Although we are preparing for a wide range of future challenges and economic circumstances, including a potential recession, we currently expect that supportive conditions for our industry, especially for our industrial and technology customers, are likely to continue in 2025.

Current wording

We have a good pipeline of opportunities and potential backlog. Considering our substantial advance bookings, we anticipate high ongoing demand leading to solid earnings in 2026. Although we are preparing for a wide range of future challenges and economic circumstances, including a potential recession, we currently expect that supportive conditions for our industry, especially for our industrial and technology customers, are likely to continue in 2026.

Previous wording

Our business does not require significant amounts of investment in long-term fixed assets. The substantial majority of the capital used in our business is working capital that funds our costs of labor and installed equipment deployed in project work until our customer pays us. Customary terms in our industry allow customers to withhold a small portion of the contract price until after we have completed the work, typically for six months. Amounts withheld under this practice are known as retention or retainage. Our average project duration, together with typical retention terms, generally allow us to complete the realization of revenue and earnings in cash within one year.

Current wording

Our business does not require significant amounts of investment in long-term fixed assets. The substantial majority of the capital used in our business is working capital that funds our costs of labor and installed equipment deployed in project work until our customer pays us. Customary terms in our industry allow customers to withhold a small portion of the contract price until after we have completed the work, typically for six months. Amounts withheld under this practice are known as retention or retainage. Our average project duration, together with typical retention terms, generally allows us to complete the realization of revenue and earnings in cash within one year.

Previous wording

Cash Provided by Operating Activities—Cash flow from operations is primarily influenced by demand for our services and operating margins but can also be influenced by working capital needs associated with the various types of services that we provide. In particular, working capital needs may increase when we commence large volumes of work under circumstances where project costs, primarily associated with labor, equipment and subcontractors, are required to be paid before the receivables resulting from the work performed are billed and collected. Working capital needs are generally higher during the late winter and spring months as we prepare and plan for the increased project demand when favorable weather conditions exist in the summer and fall months. Conversely, working capital assets are typically converted to cash during the late summer and fall months as project completion is underway. These seasonal trends are sometimes offset by changes in the timing of major projects, which can be impacted by the weather, project delays or accelerations and other economic factors that may affect customer spending.

Current wording

Net Cash Provided by Operating Activities—Cash flow from operations is primarily influenced by demand for our services and operating margins but can also be influenced by working capital needs associated with the various types of services that we provide. In particular, working capital needs may increase when we commence large volumes of work under circumstances where project costs, primarily associated with labor, equipment and subcontractors, are required to be paid before the receivables resulting from the work performed are billed and collected. Working capital needs are generally higher during the late winter and spring months as we prepare and plan for the increased project demand when favorable weather conditions exist in the summer and fall months. Conversely, working capital assets are typically converted to cash during the late summer and fall months as project completion is underway. These seasonal trends are sometimes offset by changes in the timing of major projects, which can be impacted by the weather, project delays or accelerations and other economic factors that may affect customer spending.

Previous wording

We generated $849.1 million of cash flow from operating activities during 2024 compared to $639.6 million during 2023. The $209.5 million increase in cash provided by operating activities was primarily driven by higher earnings before non-cash expenses such as amortization of intangible assets in the current year and a $366.4 million benefit from increases in accounts payable and accrued liabilities driven by the size and timing of payments, including postponement of federal tax payments. On July 22, 2024, due to Hurricane Beryl, the Internal Revenue Service announced tax relief that extended the due dates for our federal tax payments until February 3, 2025. We thus made an $80.0 million federal tax payment in the first quarter of 2025 that otherwise would have been paid in the second half of 2024. These increases were partially offset by a $317.0 million change in billings in excess of costs and deferred revenue due to more advance payments received in the prior year. We have received large advance payments in the current and prior years that will reverse when project costs are incurred, except to the extent that additional advance payments are received.

Current wording

We generated $1.19 billion of net cash flow from operating activities during 2025 compared to $849.1 million during 2024. The $337.3 million increase in cash provided by operating activities was primarily driven by higher earnings before non-cash expenses such as amortization of intangible assets in the current year and an $877.9 million benefit from changes in billings in excess of costs and estimated earnings and deferred revenue driven by the timing of customer billings and payments. These increases were partially offset by a $778.9 million decrease in accounts payable and other current liabilities driven by the size and timing of payments. We made an $80.0 million federal tax payment in the first quarter of 2025 that otherwise would have been paid in the second half of 2024, as a result of tax relief from the Internal Revenue Service due to Hurricane Beryl. In 2023, we filed our 2022 federal tax return requesting a refund of our $107.1 million overpayment, which was received in April 2025 and positively impacted our second quarter cashflows. 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.

Previous wording

Cash Used in Investing Activities—Cash used in investing activities was $343.5 million for 2024 compared to $193.0 million during 2023. The $150.5 million increase in cash used primarily relates to an increase in cash paid (net of cash acquired) for acquisitions in the current year compared to 2023.

Current wording

Net Cash Used in Investing Activities—Cash used in investing activities was $467.3 million for 2025 compared to $343.5 million during 2024. The $123.8 million increase in cash used primarily relates to an increase in cash paid (net of cash acquired) for acquisitions and purchases of property and equipment in the current year compared to 2024.

Previous wording

Cash Used in Financing Activities—Cash used in financing activities was $160.8 million for 2024 compared to $298.6 million during 2023. The $137.8 million decrease in cash used is primarily due to higher net repayments of debt

Current wording

Net Cash Used in Financing Activities—Cash used in financing activities was $287.1 million for 2025 compared to $160.8 million during 2024. The $126.3 million increase in cash used is primarily due to an increase in share repurchases of $158.1 million and an increase in payments of dividends to stockholders of $26.1 million in the current year. These increases were partially offset by higher net borrowings of debt in the current year compared to 2024.

Previous wording

On March 29, 2007, our Board of Directors 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 August 7, 2024, 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 11.4 million shares to be repurchased. As of December 31, 2024, we have repurchased a cumulative total of 10.4 million shares at an average price of $31.41 per share under the repurchase program.

Current wording

On March 29, 2007, our 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 December 31, 2025, we have repurchased a cumulative total of 10.9 million shares at an average price of $50.15 per share under the repurchase program.

Previous wording

The share repurchases will be made from time to time at our discretion in the open market or privately negotiated transactions 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 year ended December 31, 2024, we repurchased 0.2 million shares for approximately $58.3 million at an average price of $329.14 per share.

Current wording

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 year ended December 31, 2025, we repurchased 0.4 million shares for approximately $217.9 million, inclusive of the applicable excise tax, at an average price of $489.40 per share.

Previous wording

We have an $850.0 million senior credit facility (the “Facility”) provided by a syndicate of banks, which is composed of a revolving credit line guaranteed by certain of our subsidiaries. The Facility also provides for an accordion or increase option not to exceed the greater of (a) $250 million and (b) 1.0x Credit Facility Adjusted EBITDA (as defined below), as well as a sublimit of up to $175.0 million issuable in the form of letters of credit. The Facility expires in July 2027 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 of December 31, 2024, we had no outstanding borrowings on the revolving credit facility, $80.0 million in letters of credit outstanding and $770.0 million of credit available.

Current wording

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 Facilityis 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. In 2025, we incurred approximately $3.7 million in

Previous wording

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.

Current wording

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:

Previous wording

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.

Current wording

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.

Previous wording

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. Credit Facility Adjusted EBITDA and consolidated interest expense are calculated for purposes of this covenant for the four fiscal quarters ending as of any given quarterly covenant compliance measurement date.

Current wording

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.

Previous wording

Other Restrictions—The Facility (a) permits unlimited acquisitions when the Company’s Net Leverage Ratio is less than or equal to 3.25 to 1.00, (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.

Current wording

Other Restrictions—The Facility (a) permits unlimited acquisitions when the Company’s 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.

Previous wording

As part of the consideration used to acquire eight companies, we have outstanding notes to the former owners of the acquired companies. Together, these notes had an outstanding balance of $67.6 million as of December 31, 2024.

Current wording

We have outstanding notes to the former owners of acquired companies. Together, these notes had an outstanding balance of $44.6 million as of December 31, 2025. At December 31, 2025, future principal payments of notes to former owners by maturity year were as follows (dollars in thousands):

Previous wording

We have generated positive net free cash flow for the last twenty-six calendar years, much of which occurred during challenging economic and industry conditions. We also continue to have significant borrowing capacity under our credit facility, and we maintain what we feel are reasonable cash balances. We believe these factors will provide us with sufficient liquidity to fund our operations for the foreseeable future.

Current wording

We have generated positive net free cash flow for the last 27 calendar years, much of which occurred during challenging economic and industry conditions. We also continue to have significant borrowing capacity under our credit facility, and we maintain what we feel are reasonable cash balances. We believe these factors will provide us with sufficient liquidity to fund our operations for the foreseeable future.

Previous wording

Under standard terms in the surety market, sureties issue bonds on a project-by-project basis, and can decline to issue bonds at any time. 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 our sureties’ assessment of our operating and financial risk could cause our sureties to decline to issue bonds for our work. If that were to occur, our 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.

Current wording

Under standard terms in the surety market, sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time. 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 our sureties to decline to issue bonds for our work. If that were to occur, our 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.