Comfort Systems USA (FIX) Q2 2025: Backlog Surges 41% as Tech and Modular Drive Record Margins
FIX posted a record quarter, with backlog up 41% and margins at all-time highs, driven by surging tech-sector demand and disciplined project selection. The company’s modular and electrical segments are scaling rapidly, while service continues to deliver reliable profit growth. Management signals robust demand visibility into 2026 and beyond, underpinned by a strong pipeline and strategic labor allocation.
Summary
- Backlog Expansion Outpaces Industry: Same-store backlog jumped 37%, reflecting sustained demand in tech and industrial verticals.
- Modular and Electrical Scale Drives Margin: Modular now 18% of revenue, while electrical revenue grew 49%, both supporting all-time high gross profit percentages.
- Visibility Extends Into 2027: Customer dialogues and project pipelines indicate robust multi-year growth runway beyond near-term guidance.
Performance Analysis
FIX delivered a standout Q2 with revenue exceeding $2 billion for the first time, driven by broad-based strength across its mechanical, electrical, and service segments. Gross profit margin reached 23.5%, up sharply from 20.1% a year ago, as both pricing discipline and operational efficiency converged. Electrical segment revenue surged 49%, while mechanical grew 13%, and service revenue climbed double digits, now representing 15% of total revenue. Operating income rose over 60%, reflecting strong execution and favorable project mix.
Free cash flow reached $222 million, aided by a $118 million tax refund and normalization of modular customer advances. Share repurchases and the acquisition of Rightway Plumbing were funded without eroding a net cash position above $250 million, underscoring capital strength. SG&A leverage improved as investments in people supported higher activity, with expense as a percentage of revenue falling year-over-year.
- Tech-Driven Mix Shift: Technology-related projects now comprise 40% of revenue, up from 31% last year, fueling backlog and margin expansion.
- Service Delivers Consistency: Service revenue grew 10%, providing stable cash flow and offsetting commercial softness.
- Modular Productivity Gains: Modular operations contributed 18% of year-to-date revenue, with ongoing capacity and automation investments supporting growth.
FIX’s performance reflects a deliberate focus on high-value opportunities, with project selection and execution discipline driving both top-line and margin outperformance. The balance of new and existing building work, combined with a rising share of complex tech and industrial projects, is supporting the company’s record profitability and backlog levels.
Executive Commentary
"This is the first time that our quarterly revenue has exceeded $2 billion. We earned an unprecedented $6.53 per share this quarter, which is an increase of 75% compared to a year ago. Our mechanical business had a sharp increase in profitability and our electrical segment was higher as well. Service revenue and profits also increased by double digit percentages. Our bookings were strong and our backlog at the end of the quarter grew to a new high of $8.1 billion. Demand remained strong, especially in technology. we continue to book work with good margins and good working conditions for our valuable people."
Brian Lane, President and Chief Executive Officer
"Our second quarter results are remarkable, with 19% same-store revenue growth, sharply higher margins, and over $220 million of free cash flow. We also achieved more than $300 million in quarterly EBITDA for the first time ever, and that's a 50% increase over the same quarter one year ago. As of June 30th, our 12-month trailing EBITDA exceeds $1 billion for the first time ever."
Bill George, Chief Financial Officer
Strategic Positioning
1. Technology and Industrial Supercycle
FIX is capitalizing on a supercycle in technology and industrial construction, with technology now driving 40% of revenue and industrial customers representing 63% of the business. Data center and advanced manufacturing projects are prioritized, with management allocating scarce skilled labor to the highest-return opportunities. This focus is reflected in both the record backlog and above-average gross margins.
2. Modular Delivery Model Expansion
Modular construction, a method of offsite building fabrication, continues to scale, now at 18% of revenue and growing in both capacity and productivity. Management is incrementally expanding modular square footage, targeting 3 million square feet by early next year. Automation and process improvements are as much a focus as physical expansion, with leadership emphasizing measured growth to match demand and maintain quality.
3. Disciplined Project Selection and Customer Partnerships
FIX’s operators are deliberately selecting projects and customers that offer collaborative working conditions and fair compensation for risk, particularly in the technology sector. Management repeatedly highlighted a willingness to walk away from less attractive work, supporting both pricing power and labor retention. This approach underpins the company’s margin gains and backlog quality.
4. Service Growth and Diversification
Service work, primarily for commercial customers, is growing at a steady 10% pace and now provides 15% of total revenue. This segment offers recurring profit and cash flow, balancing the cyclical nature of construction and supporting overall business resilience.
5. Talent Management and Internal Staffing Solutions
Labor availability remains a gating factor for growth, but FIX’s internal staffing company and cross-company collaboration are enabling flexible deployment of skilled craft professionals. This “all of the above” approach to talent allows the company to capture outsized share of high-value projects and maintain execution quality amid tight labor markets.
Key Considerations
FIX’s Q2 reflects a business at the intersection of secular growth in technology infrastructure and disciplined operational management. The company’s strategy is to allocate capital and labor to the most attractive segments, while expanding modular capabilities and maintaining service growth.
Key Considerations:
- Backlog Quality and Duration: Record backlog includes multi-year projects, with visibility extending into 2027, supporting long-term revenue stability.
- Modular as a Delivery Modality: Management views modular not as a separate product line but as a scalable method to deliver complex projects faster and more flexibly.
- Pricing Power and Margin Sustainability: High gross margins are driven by both favorable pricing and operational innovation, with customers willing to pay premiums for risk and speed.
- Capital Allocation Discipline: Share repurchases, dividend increases, and targeted M&A (e.g., Rightway Plumbing) are funded from strong cash flow, without leveraging the balance sheet.
- Labor Flexibility as a Core Asset: Internal staffing solutions and cross-company labor sharing are key to maintaining execution capacity in a constrained labor market.
Risks
FIX’s rapid growth and margin expansion are contingent on sustained demand in technology and industrial end markets, which could be vulnerable to macroeconomic or sector-specific slowdowns. Labor scarcity remains a persistent risk, and while internal solutions have helped, any material tightening could constrain project execution. Tariff and supply chain volatility introduces cost unpredictability, though management claims most risks are passed through or absorbed via pricing.
Forward Outlook
For Q3 2025, FIX expects:
- Continued mid-teen same-store revenue growth
- Gross profit margins to remain in the strong recent range
For full-year 2025, management maintained guidance:
- Mid-teen same-store revenue growth
- Gross margin and profitability to remain elevated versus historical averages
Management cited several drivers of confidence:
- Robust project pipelines and backlog extending into 2027
- Strong customer demand, particularly in technology and industrial sectors
Takeaways
FIX is executing on a strategy of selective growth, margin discipline, and capital strength, with secular tailwinds in technology and modular construction supporting multi-year visibility.
- Record Backlog and Margins: Backlog quality and project mix are driving all-time high profitability and extending growth runway.
- Strategic Focus on High-Value Segments: Prioritizing technology, modular, and service segments positions FIX to outperform through cycles.
- Labor and Execution Remain Watchpoints: Talent management and operational discipline will be critical to sustaining growth and margins as the cycle matures.
Conclusion
Comfort Systems USA’s Q2 2025 results underscore the power of disciplined project selection and strategic capital allocation in a booming technology-driven construction cycle. With backlog and margins at record levels, the company is well-positioned to sustain growth and profitability into 2026 and beyond, provided it can navigate labor constraints and maintain pricing power.
Industry Read-Through
FIX’s performance signals a durable supercycle in technology infrastructure and industrial construction, with modular delivery models gaining traction as a preferred approach for complex projects. Labor availability and project selection discipline are emerging as key differentiators across the sector, with pricing power favoring those able to deliver speed and reliability. For peers in mechanical, electrical, and specialty contracting, the quarter highlights the value of service diversification, modular investment, and customer partnership strategies in capturing secular demand and sustaining margins.