COMFORT SYSTEMS USA INC

Previous wording

Approximately 94.5% 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 94.4% 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.

Previous wording

As of March 31, 2026, we had 8,048 projects in process. Our average project takes six to nine months to complete, with an average contract price of approximately $3.3 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.

Current wording

As of June 30, 2026, we had 8,941 projects in process. Our average project takes six to nine months to complete, with an average contract price of approximately $3.3 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 $24.73 billion of aggregate contract value as of March 31, 2026, or approximately 94% of a total contract value for all projects in progress, totaling $26.39 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 $28.06 billion of aggregate contract price as of June 30, 2026, or approximately 94% of a total aggregate contract price for all projects in progress, totaling $29.88 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

A stratification of projects in progress as of March 31, 2026, by contract price, is as follows:

Current wording

A stratification of projects in progress as of June 30, 2026, by aggregate contract price, is as follows:

Previous wording

In addition to project work, approximately 5.5% 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 30 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.

Current wording

In addition to project work, approximately 5.6% 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 30 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 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.

Current wording

We manage our 51 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

We have experienced increasing demand since 2022, culminating in an unprecedented overall demand environment in 2025 and through the first quarter of 2026. 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.

Current wording

We have experienced increasing demand since 2022, culminating in an unprecedented overall demand environment in 2025 and through the second quarter of 2026. 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 October 2030. As of March 31, 2026, we had $1.02 billion 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.

Current wording

We have a credit facility in place with terms we believe are favorable that does not expire until October 2030. As of June 30, 2026, we had $1.01 billion 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

We had 50 operating locations as of December 31, 2025 and March 31, 2026. We did not make any changes to operating locations during the first quarter of 2026. Acquisitions are included in our results of operations from the respective acquisition date. The same-store comparison from 2026 to 2025, as described below, excludes Feyen-Zylstra Holdings, LLC (“Feyen Zylstra”), which was acquired on October 1, 2025, Meisner Electric, Inc. (“Meisner”), which was acquired on October 1, 2025, and Right Way Plumbing & Mechanical LLC (“Right Way”), which was acquired on May 1, 2025. 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 50 operating locations as of December 31, 2025. In the second quarter of 2026, we completed the acquisition of R.C. Hunt Electric, LLC (“Hunt”), which reports as a separate operating location. We had 51 operating locations as of June 30, 2026. Acquisitions are included in our results of operations from the respective acquisition date. The same-store comparison from 2026 to 2025, as described below, excludes Hunt, which was acquired on May 1, 2026, Feyen-Zylstra Holdings, LLC (“Feyen Zylstra”), which was acquired on October 1, 2025, Meisner Electric, Inc. (“Meisner”), which was acquired on October 1, 2025, and four months of results for Right Way Plumbing & Mechanical LLC (“Right Way”), which was acquired on May 1, 2025. 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 for the first quarter of 2026 increased $1.03 billion, or 56.5%, to $2.87 billion compared to the same period in 2025. The increase included a 5.0% increase related to the Feyen Zylstra, Meisner, and Right Way acquisitions, as well as a 51.5% increase in revenue related to same-store activity. Thesame-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.

Current wording

Revenue—Revenue for the second quarter of 2026 increased $1.09 billion, or 50.3%, to $3.27 billion compared to the same period in 2025. The increase included a 6.5% increase primarily related to the Hunt, Feyen Zylstra, and Meisner acquisitions, as well as a 43.8% increase in revenue related to same-store activity. Thesame-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 $658.4 million, or 47.0%, to $2.06 billion for the first quarter of 2026 compared to the same period in 2025. Of this increase, $20.8 million resulted from the acquisition of Right Way and $637.6 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 Texas operations ($181.4 million), one of our Indiana operations ($137.7 million), and one of our North Carolina operations ($133.1 million).

Current wording

Revenue for our mechanical segment increased $658.0 million, or 40.2%, to $2.30 billion for the second quarter of 2026 compared to the same period in 2025. Of this increase, $8.4 million resulted from the acquisition of Right Way and $649.6 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 Texas operations ($219.4 million), one of our Indiana operations ($123.6 million), and one of our North Carolina operations ($115.5 million).

Previous wording

Revenue for our electrical segment increased $375.6 million, or 87.5%, to $804.7 million for the first quarter of 2026 compared to the same period in 2025. Of this increase, $70.0 million resulted from the acquisition of Feyen Zylstra and Meisner and $305.6 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 ($200.9 million).

Current wording

Revenue for our electrical segment increased $434.3 million, or 81.2%, to $969.0 million for the second quarter of 2026 compared to the same period in 2025. Of this increase, $132.6 million resulted from the acquisition of Hunt, Feyen Zylstra, and Meisner and $301.7 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 ($186.6 million).

Previous wording

duration projects, which are generally billed as performed, do not flow through backlog. Accordingly, backlog represents only a portion of our revenue for any given future period, and it represents revenue that is likely to be reflected in our operating results over the next six to 12 months. As a result, we believe the predictive value of backlog information is limited to indications of general revenue direction over the near term, and should not be interpreted as indicative of ongoing revenue performance over several quarters.

Current wording

Backlog reflects revenue still to be recognized under contracted or committed installation and replacement project work. Project work generally lasts less than one year. Service agreement revenue, service work, and short duration projects, which are generally billed as performed, do not flow through backlog. Accordingly, backlog represents only a portion of our revenue for any given future period, and it represents revenue that is likely to be reflected in our operating results over the next six to 12 months. As a result, we believe the predictive value of backlog information is limited to indications of general revenue direction over the near term, and should not be interpreted as indicative of ongoing revenue performance over several quarters.

Previous wording

Backlog as of March 31, 2026 was $12.45 billion, a 4.3% increase from December 31, 2025 backlog of $11.94 billion, and an 80.8% increase from March 31, 2025 backlog of $6.89 billion. The sequential backlogwas primarily a result of increased project bookings in the technology sector at one of our North Carolina operations ($255.5 million) and one of our Virginia operations ($214.5 million). The sequential backlog increase was partially offset by completion of project work in the technology sector at one of our Indiana operations ($120.1 million). The year-over-year backlog increase included the acquisitions of Right Way ($96.0 million), Feyen Zylstra ($88.3 million), and Meisner ($61.0 million), and, as well as a same-store increase of $5.32 billion, or 77.2%. Same-store year-over-year backlog growth was primarily attributable to increased project bookings in the technology sector at our Texas modular operation ($1.50 billion), one of our North Carolina operations ($1.20 billion), one of our Texas operations ($899.3 million), one of our Indiana operations ($669.5 million), and our Texas electrical operation ($663.8 million).

Current wording

Backlog as of June 30, 2026 was $14.06 billion, a 12.9% increase from March 31, 2026 backlog of $12.45 billion, and a 73.1% increase from June 30, 2025 backlog of $8.12 billion. The sequential backlog increase included the acquisition of Hunt ($217.4 million), as well as a same-store increase of $1.39 billion, or 11.2%. Same-store sequential backlog growthwas primarily a result of increased project bookings in the technology sector at our Texas electrical operation ($1.00 billion) and our Texas modular operation ($510.2 million). The sequential backlog increase was partially offset by completion of project work in the technology sector at one of our North Carolina operations ($118.5 million). The year-over-year backlog increase included the acquisitions of Hunt ($217.4 million), Feyen Zylstra ($86.6 million), and Meisner ($54.5 million), as well as a same-store increase of $5.58 billion, or 68.7%. Same-store year-over-year backlog growth was primarily attributable to increased project bookings in the technology sector at our Texas modular operation ($1.87 billion), our Texas electrical operation ($1.13 billion), one of our Texas operations ($860.0 million), one of our North Carolina operations ($671.9 million), and one of our Indiana operations ($540.3 million).

Previous wording

Gross Profit—Gross profit increased $351.0 million, or 87.0%, to $754.4 million for the first quarter of 2026 as compared to the same period in 2025. The increase included a $17.5 million, or 4.3%, increase related to the Feyen Zylstra, Meisner, and Right Way acquisitions, as well as a $333.5 million, or 82.7%, increase on a same-store basis. The same-store increase in gross profit was driven by a 51.5% increase in same store revenues in the current year, as well as improved execution in our operations across numerous operating locations. During the first quarter of 2026, we benefited from favorable developments on projects nearing completion, including change orders received on certain jobs during the quarter, of approximately $43.1 million. These favorable developments impacted both our mechanical and electrical segments, with the largest portion benefiting the mechanical segment. As a percentage of revenue, gross profit for the first quarter increased from 22.0% in 2025 to 26.3% in 2026, primarily due to the factors discussed above and improvements in our mechanical segment gross profit margin.

Current wording

Gross profit increased $685.3 million, or 75.0%, to $1.60 billion for the first six months of 2026 as compared to the same period in 2025. The increase included a $38.5 million, or 4.2%, increase related to the Hunt, Feyen Zylstra, Meisner, and Right Way acquisitions, as well as a $646.8 million, or 70.8%, increase on a same-store basis. The same-store increase in gross profit was driven by a 47.3% increase in same-store revenues in the current year, as well as improved execution in our operations across numerous operating locations. During the first quarter of 2026, we benefited from favorable developments on projects nearing completion, including change orders received on certain jobs during the quarter, of approximately $43.1 million. These favorable developments impacted both our mechanical and electrical segments, with the largest portion benefiting the mechanical segment. As a percentage of revenue, gross profit for the six-month period increased from 22.8% in 2025 to 26.1% in 2026, 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 $74.1 million, or 38.0%, to $269.0 million for the first quarter of 2026 as compared to 2025. On a same-store basis, excluding amortization expense, SG&A increased $62.1 million, or 34.4%. The same-store increase was primarily due to higher revenue and increased compensation costs ($54.0 million), largely attributable to increased headcount and increased cost of labor. Amortization expense increased $1.8 million during the period, primarily as a result of the Feyen Zylstra, Meisner, and Right Wayacquisitions. As a percentage of revenue, SG&A for the first quarter decreased from 10.6% in 2025 to 9.4% in 2026 due to leverage resulting from the increase in revenue.

Current wording

Selling, General and Administrative Expenses (“SG&A”)—SG&A increased $76.6 million, or 36.4%, to $287.0 million for the second quarter of 2026 as compared to 2025. On a same-store basis, excluding amortization expense, SG&A increased $57.9 million, or 29.6%. The same-store increase was primarily due to higher same-store revenue and increased compensation costs ($49.1 million), largely attributable to increased headcount and increased cost of labor. Amortization expense increased $2.7 million during the period, primarily as a result of the Hunt, Feyen Zylstra, and Meisner acquisitions. As a percentage of revenue, SG&A for the second quarter decreased from 9.7% in 2025 to 8.8% in 2026 due to leverage resulting from the increase in revenue.

Previous wording

Interest Income—Interest income increased $4.2 million, or 99.5%, to $8.5 million for the first quarter of 2026 as compared to the same period in 2025. The increase in interest income for the first quarter of 2026 was primarily due to an increase in our average cash balance compared to the prior year.

Current wording

Interest Income—Interest income increased $8.2 million, or 292.0%, to $11.1 million for the second quarter of 2026 as compared to the same period in 2025. Interest income increased $12.5 million, or 176.1%, to $19.6 million for the first six months of 2026 compared to the same period in 2025. The increase in interest income for the second quarter and first six months of 2026 was primarily due to an increase in our average cash balance compared to the prior year.

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 for the first quarter of 2026 increased $6.6 million, or 175.9%, as compared to the same period in 2025. The increase in earn-out expense was primarily driven by higher actual and projected earnings at Feyen Zylstra. The increase in earn-out expense was partially offset by lower expenses at one of our Texas operations, as a result of them achieving their maximum cumulative earn-out target in the prior year.

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 for the second quarter of 2026 decreased $2.0 million, or 49.8%, as compared to the same period in 2025. The decrease in earn-out expense for the second quarter was primarily due to lower expense at one of our Texas operations, as a result of them achieving their maximum cumulative earn-out target in the prior year. The decrease in earn-out expense was offset by higher expense at one of our North Carolina operations due to higher actual and projected earnings. Expense from changes in the fair value of contingent earn-out obligations for the first six months of 2026 increased $4.6 million, or 58.5%, as compared to the same period in 2025. The increase in earn-out expense for the first six months of 2026 was primarily driven by higher actual and projected earnings at Feyen Zylstra. The increase in earn-out expense was partially offset by lower expenses at one of our Texas operations, as a result of them achieving their maximum cumulative earn-out target in the prior year.

Previous wording

Provision for Income Taxes—Our provision for income taxes for the three months ended March 31, 2026 was $111.8 million with an effective tax rate of 23.2% as compared to a provision for income taxes of $38.7 million with an effective tax rate of 18.6% for the same period in 2025. The effective tax rate for 2026 was higher than the 21% federal statutory rate primarily due to $12.7 million of net state income taxes (2.6%) and $4.2 million of nontaxable or nondeductible items (0.9%), partially offset by a $7.2 million credit for increasing research activities (“R&D tax credit”) (1.5%). The effective tax rate for 2025 was lower than the 21% federal statutory rate primarily due torecognizing $8.9 million of net interest income on our 2022 federal overpayment (4.3%) and a $6.3 million R&D tax credit (3.0%), partially offset by $7.0 million of net state income taxes (3.3%) and $2.5 million of nontaxable or nondeductible items (1.2%).

Current wording

Provision for Income Taxes—Our provision for income taxes for the six months ended June 30, 2026 was $236.4 million with an effective tax rate of 22.5% as compared to a provision for income taxes of $104.4 million with an effective tax rate of 20.7% for the same period in 2025. The effective tax rate for 2026 was higher than the 21% federal statutory rate primarily due to $26.9 million of net state income taxes (2.6%) and $6.8 million of nontaxable or nondeductible items (0.7%), partially offset by a $12.8 million credit for increasing research activities (“R&D tax credit”) (1.2%) and a $6.5 million reduction in net unrecognized tax benefits including net interest income from settlement with the Internal Revenue Service (“IRS”) for the 2019 and 2020 tax years (0.6%). The effective tax rate for 2025 was slightly lower than the 21% federal statutory rate primarily due to an $11.8 million R&D tax credit (2.3%) and recognizing $8.9 million of net interest income on our 2022 federal overpayment (1.8%), partially offset by $15.5 million of net state income taxes (3.1%) and $2.3 million of nontaxable or nondeductible items (0.5%).

Previous wording

We experienced an unprecedented demand environment in 2025 and through the first quarter of 2026, 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.

Current wording

We experienced an unprecedented demand environment in 2025 and through the first six months of 2026, 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

Net Cash Provided by (Used in) 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

Net cash provided by operating activities was $388.8 million during the first three months of 2026 compared to $88.0 million net cash used in operating activities during the same period in 2025. The $476.8 million increase in net 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 $317.4 million benefit from increases in accounts payable and other current liabilities driven by the size and timing of payments, including 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 that did not recur in the current year. We also had a $122.0 million benefit from changes in billings in excess of costs and estimated earnings and deferred revenue driven by timing of customer billings and payments. These increases in cash were partially offset by a $263.0 million increase in receivables, net.

Current wording

Net cash provided by operating activities was $1.53 billion during the first six months of 2026 compared to $164.5 million during the same period in 2025. The $1.36 billion increase in net 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 $684.7 million benefit from changes in billings in excess of costs and estimated earnings and deferred revenue driven by timing of customer billings and payments, including more net advance payments received in the current year as compared to the prior year. We also had a $535.6 million benefit from increases in accounts payable and other current liabilities driven by the size and timing of payments, including 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 IRS due to Hurricane Beryl that did not recur in the current year. These increases in cash were partially offset by a $393.5 million increase in receivables, net. 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 the second quarter of 2025 cashflow, which did not recur in 2026. 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

Net Cash Used in Investing Activities—During the first three months of 2026, net cash used in investing activities was $184.0 million compared to $96.8 million during the same period in 2025. The $87.2 million increase in net cash used in investing activities was primarily attributable to a $103.0 million building purchase during the first quarter of 2026 to support growth in our modular business. We expect capital expenditures for the full year of 2026 to be higher than our recent average as we continue to invest in the growth of our business. The increase in capital expenditures was partially offset by a decrease in cash paid (net of cash acquired) for acquisitions in the current year compared to the same period in 2025.

Current wording

Net Cash Used in Investing Activities—During the first six months of 2026, net cash used in investing activities was $467.5 million compared to $183.0 million during the same period in 2025. The $284.5 million increase in net cash used in investing activities was primarily attributable to $188.9 million of building purchases during the first six months of 2026 to support growth in our modular business. We expect capital expenditures for the full year of 2026 to be higher than our recent average as we continue to invest in the growth of our business.

Previous wording

Net Cash Used in Financing Activities—Net cash used in financing activities was $136.6 million for the first three months of 2026 compared to $160.4 million during the same period in 2025. The $23.9 million decrease in net cash used in financing activities was primarily due to a decrease in share repurchases of $88.8 million and a decrease in payments for contingent consideration related to acquisitions of $45.8 million in the current year compared to the same period in 2025. These decreases were partially offset by an increase in debt payments in the current year compared to the same period in 2025.

Current wording

Net Cash Used in Financing Activities—Net cash used in financing activities was $187.9 million for the first six months of 2026 compared to $199.8 million during the same period in 2025. The $11.9 million decrease in net cash used in financing activities was primarily due to a decrease in share repurchases of $103.1 million in the current year compared to the same period in 2025. This decrease was partially offset by an increase in debt payments in the current year compared to the same period in 2025.

Previous wording

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 March 31, 2026, we have repurchased a cumulative total of 10.9 million shares at an average price of $50.37 per share under the repurchase program.

Current wording

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 June 30, 2026, we have repurchased a cumulative total of 10.9 million shares at an average price of $50.88 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, 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 three months ended March 31, 2026, we repurchased less than 0.1 million shares for approximately $2.5 million, inclusive of the applicable excise tax, at an average price of $998.27 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 six months ended June 30, 2026, we repurchased less than 0.1 million shares for approximately $8.2 million, inclusive of the applicable excise tax, at an average price of $1,438.19 per share.

Previous 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 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 in the Facility), 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 March 31, 2026, we had no outstanding borrowings on the revolving credit facility, $82.8 million in letters of credit outstanding, and $1.02 billion 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 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 in the Facility), 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 June 30, 2026, we had no outstanding borrowings on the revolving credit facility, $87.8 million in letters of credit outstanding, and $1.01 billion of credit available.

Previous wording

As of March 31, 2026, we have $82.8 million in letter of credit commitments, of which $64.1 million will expire in 2026 and $18.7 million will expire in 2027. The substantial majority of these letters of credit are posted with insurers who disburse funds on our behalf in connection with our workers’ compensation, auto liability and general liability insurance program. These letters of credit provide additional security to the insurers that sufficient financial resources will be available to fund claims on our behalf, many of which develop over long periods of time, should we ever encounter financial duress. Posting of letters of credit for this purpose is a common practice for entities that manage their self-insurance programs through third-party insurers as we do. While some of these letter of credit commitments expire in the next 12 months, we expect nearly all of them, particularly those supporting our insurance programs, will be renewed annually.

Current wording

As of June 30, 2026, we have $87.8 million in letter of credit commitments, of which $69.1 million will expire in 2026 and $18.7 million will expire in 2027. The substantial majority of these letters of credit are posted with insurers who disburse funds on our behalf in connection with our workers’ compensation, auto liability, and general liability insurance program. These letters of credit provide additional security to the insurers that sufficient financial resources will be available to fund claims on our behalf, many of which develop over long periods of time, should we ever encounter financial duress. Posting of letters of credit for this purpose is a common practice for entities that manage their self-insurance programs through third-party insurers as we do. While some of these letter of credit commitments expire in the next 12 months, we expect nearly all of them, particularly those supporting our insurance programs, will be renewed annually.

Previous wording

We have outstanding notes to the former owners of our acquired companies. Together, these notes had an outstanding balance of $38.5 million as of March 31, 2026. On March 31, 2026, future principal payments of notes to former owners by maturity year were as follows (dollars in thousands):

Current wording

We have outstanding notes to the former owners of our acquired companies. Together, these notes had an outstanding balance of $53.5 million as of June 30, 2026. On June 30, 2026, future principal payments of notes to former owners by maturity year were as follows (dollars in thousands):