COMFORT SYSTEMS USA INC

Previous wording

Approximately 91.0% 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 91.6% 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

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

Current wording

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

Previous wording

As of September 30, 2024, we had 8,811 projects in process. Our average project takes six to nine months to complete, with an average contract price of approximately $1.7 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 March 31, 2025, we had 8,750 projects in process. Our average project takes six to nine months to complete, with an average contract price of approximately $1.9 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 $13.16 billion of aggregate contract value as of September 30, 2024, or approximately 89% of a total contract value for all projects in progress, totaling $14.72 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 $14.74 billion of aggregate contract value as of March 31, 2025, or approximately 90% of a total contract value for all projects in progress, totaling $16.43 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 9.0% 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 8.4% 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.

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

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 and 2023, and we expect that the demand environment, especially for manufacturing and technology customers, will remain at high levels for the rest of 2024 and 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 for the rest of 2024 and leading into 2025.

Current 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 in 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 anticipate that constraints and delays in our supply chain will persist in the near term, and that pressure on cost and availability, especially for skilled labor, will continue throughout 2025.

Previous wording

We have a credit facility in place with terms we believe are favorable that does not expire until July 2027. As of September 30, 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-five 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 July 2027. As of March 31, 2025, we had $766.8 million of credit available to borrow under our credit facility. We have strong surety relationships to support our bonding needs, and we believe our relationships with the surety markets are strong and benefit from our operating history and financial position. We have generated positive free cash flow in each of the last 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.

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 September 30, 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, 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. We had 48 operating locations as of March 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 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 for the third quarter of 2024 increased $434.2 million, or 31.5%, to $1.81 billion compared to the same period in 2023. The increase included a 17.5% increase in revenue related to same-store activity and a 14.0% increase related to the Summit, J&S, and DECCO acquisitions. The same-store revenue growth was largely driven by strong market conditions, including the increase in our backlog. The increase in demand has been strong in the technology sector, particularly for data centers and chip plants.

Current wording

Revenue—Revenue for the first quarter of 2025 increased $294.3 million, or 19.1%, to $1.83 billion compared to the same period in 2024. The increase included a 15.4% increase in revenue related to same-store activity and a 3.7% increase related to the Century, Summit and J&S acquisitions. The same-store revenue growth was largely driven by strong market conditions, including the increase in our backlog. The increase in demand has been strong in the technology sector, particularly for data centers.

Previous wording

Revenue for our mechanical segment increased $1.15 billion, or 39.3%, to $4.08 billion for the first nine months of 2024 compared to the same period in 2023. Of this increase, $412.2 million resulted from the acquisitions of Summit, J&S, and DECCO, and $737.3 million was attributable to same-store activity. The same-store increase primarily resulted from an increase in activity in the technology sector at two of our Texas operations ($244.6 million), at our North Carolina operation ($109.5 million) and at one of our Virginia operations ($93.0 million).

Current wording

Revenue for our mechanical segment increased $217.2 million, or 18.3%, to $1.40 billion for the first quarter of 2025 compared to the same period in 2024. Of this increase, $56.7 million resulted from the acquisitions of Century, Summit and J&S, and $160.5 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 North Carolina operation ($58.9 million) and one of our Texas operations ($49.9 million) and in the office building and technology sectors at one of our Virgina operations ($45.3 million). The same-store revenue increase was partially offset by a decrease in activity in the technology sector at one of our Texas operations ($26.7 million).

Previous wording

Revenue for our electrical segment increased $26.9 million, or 7.8%, to $373.7 million for the third quarter of 2024 compared to the same period in 2023. The increase primarily resulted from an increase in activity in the technology sector at our Texas electrical operation ($23.6 million).

Current wording

Revenue for our electrical segment increased $77.1 million, or 21.9%, to $429.1 million for the first quarter of 2025 compared to the same period in 2024. The increase primarily resulted from an increase in activity in the technology sector at our Texas electrical operation ($77.1 million). The revenue increase was partially offset by a decrease in activity in the manufacturing sector at our North Carolina electrical operation ($26.8 million).

Previous wording

Gross Profit—Gross profit increased $104.2 million, or 37.6%, to $381.7 million for the third quarter of 2024 as compared to the same period in 2023. The increase included a $24.7 million, or 8.9%, increase related to the Summit, J&S, and DECCO acquisitions, as well as a 28.7% increase in same-store activity. The same-store increase in gross profit was driven by both higher revenues in the current year as well as improved execution in our operations, including improvements in project execution at two of our Texas operations ($31.3 million) and our Texas electrical operation ($26.1 million). Additionally, we had increased volumes at one of our Virginia operations ($7.9 million). As a percentage of revenue, gross profit for the third quarter increased from 20.1% in 2023 to 21.1% 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 $106.1 million, or 35.7%, to $403.4 million for the first quarter of 2025 as compared to the same period in 2024. The increase included an $11.1 million, or 3.7%, increase related to the Century, Summit, and J&S acquisitions, as well as a 32.0% increase in same-store activity. The same-store increase in gross profit was driven by both higher revenues in the current year as well as improved execution in our operations, including improvements in project execution at two of our Texas operations ($38.8 million) and one of our South Carolina operations ($10.8 million). Additionally, we had increased volumes at our Texas electrical operation ($13.9 million). As a percentage of revenue, gross profit for the first quarter increased from 19.3% in 2024 to 22.0% 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 $37.2 million, or 26.1%, to $180.2 million for the third quarter of 2024 as compared to 2023. On a same-store basis, excluding amortization expense, SG&A increased $26.5 million, or 19.9%. The same-store increase is primarily due to higher same-store revenue and increased compensation costs ($19.0 million), largely attributable to increased headcount. Amortization expense increased $4.8 million during the period, primarily as a result of the Summit, J&S, and DECCO acquisitions. As a percentage of revenue, SG&A for the third quarter decreased from 10.4% in 2023 to 9.9% in 2024 due to leverage resulting from the increase in revenue.

Current wording

Selling, General and Administrative Expenses (“SG&A”)—SG&A increased $32.2 million, or 19.8%, to $194.9 million for the first quarter of 2025 as compared to 2024. On a same-store basis, excluding amortization expense, SG&A increased $26.9 million, or 17.9%. The same-store increase is primarily due to higher same-store revenue and increased compensation costs ($20.7 million), largely attributable to increased headcount. Amortization expense increased $2.0 million during the period, primarily as a result of the Century, Summit, and J&S acquisitions. As a percentage of revenue, SG&A for the first quarter remained steady at 10.6% in both 2024 and 2025.

Previous wording

Interest Income—Interest income increased $2.9 million to $3.8 million for the third quarter of 2024 as compared to the same period in 2023. Interest income increased $4.3 million to $6.7 million for the first nine months of 2024 compared to the same period in 2023. The increase in interest income for the third quarter of 2024 and first nine months of 2024 is due to an increase in our average cash balance and higher interest rates compared to the prior year.

Current wording

Interest Income—Interest income increased $2.7 million, or 166.2%, to $4.3 million for the first quarter of 2025 as compared to the same period in 2024. The increase in interest income for the first quarter of 2025 is 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 third quarter of 2024 increased $8.5 million as compared to the same period in 2023. The increase in earn-out expense was primarily driven by higher actual and projected earnings at Summit. Expense from changes in the fair value of contingent earn-out obligations for the first nine months of 2024 increased $30.2 million as compared to the same period in 2023. The increase in earn-out expense was primarily driven by higher actual and projected earnings at Summit and J&S. 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 for the first quarter of 2025 decreased $8.7 million, or 69.9%, as compared to the same period in 2024. The decrease in earn-out expense was primarily caused by lower expenses at J&S, as a result of them achieving their maximum cumulative earn-out target in the prior year and one of our South Carolina operations, as a result of their earn-out period ending in the prior year. Additionally, we had lower expenses at Summit, driven by larger changes in their forecasted results in the prior year. 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.

Previous wording

Provision for Income Taxes—Our provision for income taxes for the nine months ended September 30, 2024 was $104.0 million with an effective tax rate of 21.6% as compared to a provision for income taxes of $44.6 million with an effective tax rate of 16.1% for the same period in 2023. The effective tax rate for 2024 is slightly higher than the 21% federal statutory rate primarily due to net state income taxes (3.6%) and net nondeductible expenses (0.6%), partially offset by the credit for increasing research activities (the “R&D tax credit”) (3.6%). The effective tax rate for 2023 was lower than the 21% federal statutory rate primarily due to the R&D tax credit (5.6%) and an increase in the R&D tax credit for the 2022 tax year (3.9%). These R&D tax credit benefits were partially offset by net state income taxes (3.7%) and net nondeductible expenses (1.4%).

Current wording

Provision for Income Taxes—Our provision for income taxes for the three months ended March 31, 2025 was $38.7 million with an effective tax rate of 18.6% as compared to a provision for income taxes of $26.7 million with an effective tax rate of 21.7% for the same period in 2024. The effective tax rate for 2025 was lower than the 21% federal statutory rate primarily due to recognizing $8.9 million of net interest income on our 2022 federal overpayment (4.3%) and a $6.3 million credit for increasing research activities (“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%). The effective tax rate for 2024 was slightly higher than the 21% federal statutory rate primarily due to $4.5 million of net state income taxes (3.7%) and $1.9 million of nontaxable or nondeductible items (1.6%) partially offset by a $5.4 million R&D tax credit (4.4%).

Previous wording

We experienced strong ongoing demand in the first nine months of 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 strong ongoing demand in the first quarter of 2025, 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.

Previous wording

We have a good pipeline of opportunities and potential backlog. Considering our substantial advance bookings, we currently anticipate solid earnings for the remainder of 2024 and in 2025. Although we are preparing for a wide range of challenges and economic circumstances, including a potential recession, we currently expect that supportive conditions for our industry, especially for our manufacturing and technology customers, are likely to continue for the rest of 2024 and leading into 2025.

Current wording

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

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

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.

Previous wording

Cash Used in Investing Activities—During the first nine months of 2024, cash used in investing activities was $304.0 million compared to $119.1 million during the same period in 2023. The $184.9 million increase in cash used primarily related to an increase in cash paid (net of cash acquired) for acquisitions in the current year compared to the same period in 2023.

Current wording

Cash Used in Investing Activities—During the first three months of 2025, cash used in investing activities was $96.8 million compared to $221.6 million during the same period in 2024. The $124.9 million decrease in cash used primarily related to a decrease in cash paid (net of cash acquired) for acquisitions in the current year compared to the same period in 2024.

Previous wording

Cash Used in Financing Activities—Cash used in financing activities was $124.1 million for the first nine months of 2024 compared to $267.0 million during the same period in 2023. The $142.9 million decrease in cash used was primarily due to higher net repayments of debt in the prior year as operating cash flows were used to pay down outstanding debt partially offset by increased share repurchases of $33.5 million in the current year.

Current wording

Cash Used in Financing Activities—Cash used in financing activities was $160.4 million for the first three months of 2025 compared to $29.3 million during the same period in 2024. The $131.2 million increase in cash used was primarily due to an increase in share repurchases of $91.1 million in the current year compared to the same period in 2024.

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 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 September 30, 2024, we have repurchased a cumulative total of 10.4 million shares at an average price of $29.99 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 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 March 31, 2025, we have repurchased a cumulative total of 10.7 million shares at an average price of $39.26 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 nine months ended September 30, 2024, we repurchased 0.1 million shares for approximately $42.3 million at an average price of $310.02 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, 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, 2025, we repurchased 0.3 million shares for approximately $92.2 million, inclusive of the applicable excise tax, at an average price of $349.34 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 September 30, 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

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 March 31,

Previous wording

As of September 30, 2024, we have $80.0 million in letter of credit commitments, of which $55.0 million will expire in 2024, $24.8 million will expire in 2025 and $0.2 million will expire in 2026. 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 twelve months, we expect nearly all of them, particularly those supporting our insurance programs, will be renewed annually.

Current wording

As of March 31, 2025, we have $83.2 million in letter of credit commitments, of which $61.2 million will expire in 2025 and $22.0 million will expire in 2026. 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 twelve months, we expect nearly all of them, particularly those supporting our insurance programs, will be renewed annually.

Previous wording

As part of the consideration used to acquire eight companies, we have outstanding notes to the former owners. Together, these notes had an outstanding balance of $67.6 million as of September 30, 2024. At September 30, 2024, future principal payments of notes to former owners by maturity year are as follows (dollars in thousands):

Current wording

As part of the consideration used to acquire seven companies, we have outstanding notes to the former owners of the acquired companies. Together, these notes had an outstanding balance of $67.1 million as of March 31, 2025. At March 31, 2025, future principal payments of notes to former owners by maturity year are as follows (dollars in thousands):

Previous wording

We have generated positive net free cash flow for the last twenty-five 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 twenty-six calendar years, much of which occurred during challenging economic and industry conditions. We also continue to have significant borrowing capacity under our

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

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 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.