FIX

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How FIX rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

31%

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Added

104

new sentences

Dropped

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Length

−5,338

words, now 9,315

New in FY2025

Our business, financial condition, results of operations and cash flows could be adversely affected by the occurrence of any of these events, which could cause actual results to differ materially from expected and historical results, and the trading price of our common stock could decline.
The industries and markets in which we operate have been and will continue to be vulnerable to macroeconomic downturns because they are cyclical in nature.
Further, to the extent some of our vendors, subcontractors, developers, or general contractors seek bankruptcy protection, we will likely incur additional attorneys’ fees and other professional consultant fees and expenses in connection with pursuing payment in such bankruptcy proceedings, and such increased expenses will likely result in decreased revenue and profit.
Additionally, because 5.0% of our revenue for the year ended December 31, 2025 was attributable to projects in the government sector, a reduction in federal, state, or local government spending in our industries and markets could have an adverse effect on our business, financial condition, results of operations and cash flows.
Our contract prices are established largely based on estimates and assumptions regarding our projected costs, including assumptions about: future economic conditions; prices, including commodity prices and inflation; availability of labor, including the costs of providing labor, equipment, and materials; and other factors outside our control.
Our backlog as of December 31, 2025 was $11.94 billion.
Such changes could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The loss of one or a few customers could adversely affect our business, financial condition, results of operations and cash flows.
A limited number of customers have in the past and may in the future account for a significant portion of our revenue.
For example, in 2025, one customer represented approximately 12.8% of our consolidated revenue.
Although we have long - standing relationships with many of our significant customers and believe that our portfolio of customers is reasonably diverse, one or more of our significant customers may reduce, fail to renew, or terminate their contracts with us in the future.
Rising inflation, interest rate volatility and an economic recession or downturn may have an adverse effect on our business, financial condition, results of operations, and cash flows.
The global economy has recently experienced high rates of inflation, which increased our costs for labor, materials, utilities and other goods and services.
Federal Reserve raised interest rates multiple times in recent years and may do so again in 2026 (or may slow any rate reductions from what the market currently anticipates).
Economic factors, including inflation and interest rate volatility, may have a negative impact on our business.
The cost of our materials, labor, utilities and other goods and services may continue to rise as a result of inflation and interest rate hikes, and we may not be able to offset such higher costs through price increases.
Further, there are concerns that the United States economy could experience a recession.
As a result, these conditions have, and they or any similar future conditions may continue to have, an adverse effect on our business, financial condition, results of operations and cash flows.
While we believe our customers consider a number of these factors in awarding contracts, a large portion of our work is awarded through a bid process.
Moreover, if we do not employ new technologies as quickly or efficiently as our competitors, or if our competitors develop or utilize more cost-effective or customer-preferred technologies (such as data analytics, artificial intelligence and other new and emerging technologies) that give them a competitive advantage in the proposal bidding and selection process, it could have a material adverse effect on our ability to win and retain business from customers.
We expect to continue to pursue selective acquisitions of businesses.
To the extent we make acquisitions, a number of risks will result, including: ● the assumption of material liabilities (including for environmental-related costs); ● failure of due diligence to uncover situations that could result in legal exposure or to quantify the true liability exposure from known risks; ● the diversion of management’s attention from the management of daily operations to the integration of operations; ● difficulties in the assimilation and retention of employees, in the assimilation of different cultures and practices, in the assimilation of broad and geographically dispersed personnel and operations, and the retention of employees generally; ● the risk of additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls; and ● we may not be able to realize the cost savings, other financial benefits or synergies we anticipated prior to the acquisition. The failure to successfully integrate acquisitions could have an adverse effect on our business, financial condition, results of operations, and cash flows.
Increases in such labor costs for a prolonged period of time could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We have determined in the past and may again determine in the future that a significant impairment has occurred in the value of our unamortized intangible assets, which could require us to write off a portion of our assets and could have an adverse effect on our financial condition and results of operations.
In the past we have been required to increase, and it is possible we will in the future be required to increase, the number and percentage of total contract dollars for which we utilize an underlying surety bond.
Historically, surety market conditions have experienced times of volatility as a result of significant losses incurred by many surety companies and the results of macroeconomic trends outside of our control, such as volatility in the capital markets and the possibility of an extended economic downturn or recession.
If we are unable to maintain a sufficient level of bonding capacity in the future, it could preclude our ability to bid for certain contracts or successfully contract with some customers.
If a customer defaults in making their payments on a project to which we have devoted resources, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Extreme weather conditions (such as storms, droughts, extreme heat or cold, wildfires and floods) may limit the availability of resources, increase our costs, or may cause projects to be delayed or cancelled.
If we are unable to manage the conditions required for certain of our jobs, including the availability of sufficient labor, adherence to environmental, health and safety or other standards, and adequately addressing harsh or hazardous conditions, our business, financial condition, results of operations, and cash flows could be materially and adversely affected. We are susceptible to adverse weather conditions, which may harm our business and financial results.
Moreover, our business may be adversely affected by severe weather in areas where we have significant operations, which could have a material adverse effect on our financial condition, results of operations, and cash flows.
Evolving legislation, foreign and domestic policy, regulation or other restrictions related to climate change could negatively impact our operations or our customers’ operations.
Diverging concerns about climate change and other environmental issues may result in varying environmental regulations and restrictions on our operations.
Operating in a number of jurisdictions could make our compliance with laws relating to climate change rules more complex and expensive and potentially expose us to greater levels of legal risks associated with our compliance.
Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the federal, state, or local regulatory agencies, could increase the costs of projects for our customers or, in some cases, prevent a project from going forward, which could in turn have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our failure to comply with any applicable laws could lead to penalties and adversely impact our reputation, customer attraction and retention, access to capital and employee retention.
Continuing worldwide political and economic uncertainties may adversely affect our business, financial condition, results of operations, and cash flows. The last several years have been marked by worldwide political and economic uncertainty resulting from a number of factors, including decreased consumer confidence, the effects of international conflicts such as the wars between Russia and Ukraine and unrest in the Middle East, supply chain disruptions, tariffs, rising energy costs and inflation.
This uncertainty has made (and may continue to make) it extremely difficult for our customers, vendors and us to accurately forecast and plan future business activities, and could lead to constrained spending on our services, delays and a lengthening of our business development efforts, the demand for more favorable pricing or other terms, and/or difficulty in collection of our accounts receivable.
Further, ongoing political and economic instability has caused (and could continue to cause) supply chain disruptions and volatility in the capital markets, which may increase our costs of capital and limit our ability to access the capital markets at a time when we would like, or need, to raise capital.
These conditions could have a material adverse effect on our business, financial conditions, results of operation and cash flows. Risks Related to Our Operations If we are unable to attract and retain qualified managers and employees, we will be unable to operate efficiently, which could reduce our profitability.

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Gone since FY2024

Risk Factors.” Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise. PART I The terms “Comfort Systems,” “we,” “us,” or “the Company” refer to Comfort Systems USA, Inc. or Comfort Systems USA, Inc. and its consolidated subsidiaries, as appropriate in the context.
Business Comfort Systems USA, Inc., a Delaware corporation, was established in 1997.
We provide mechanical and electrical contracting services.
Our mechanical segment principally includes heating, ventilation and air conditioning (“HVAC”), plumbing, piping and controls, as well as off-site construction, monitoring and fire protection.
Our electrical segment includes installation and servicing of electrical systems.
We build, install, maintain, repair and replace mechanical, electrical and plumbing (“MEP”) systems throughout our 47 operating units with 178 locations in 136 cities throughout the United States.
We operate primarily in the commercial, industrial and institutional MEP markets and perform most of our services in manufacturing, healthcare, education, office, technology, retail and government facilities.
Substantially all of our consolidated 2024 revenue was derived from commercial, industrial and institutional customers and multi-family residential projects.
Approximately 56.7% of our revenue was attributable to installation services in newly constructed facilities and 43.3% was attributable to renovation, expansion, maintenance, repair and replacement services in existing buildings.
Our consolidated 2024 revenue was derived from the following service industries: Percentage of Service Activity Revenue Mechanical Services 78.7 % Electrical Services 21.3 % Total 100.0 % Industry Overview We believe that commercial, industrial, and institutional mechanical and electrical contracting generate annual revenue in the United States of approximately $550 billion.
Mechanical and electrical systems are necessary to virtually all commercial, industrial and institutional buildings.
Because most buildings are sealed, HVAC systems provide the primary method of circulating fresh air in such buildings.
Replacing an aging building’s existing systems with modern, energy-efficient systems significantly reduces a building’s energy consumption, carbon footprint, and operating costs while improving air quality and overall system effectiveness.
Older commercial, industrial and institutional facilities frequently have poor air quality and provide less comfortable environments, and older HVAC systems result in significantly higher energy consumption than do modern systems.
As electrical systems age, they require service and replacement, and changing building configurations and technological power load requirements lead to the need to reconfigure and improve electrical systems in buildings on a regular basis.
Many factors affect mechanical and electrical services industry growth, including but not limited to, (i) population growth, which increases the need for commercial, industrial and institutional space, (ii) an aging installed base of buildings and equipment, (iii) increasing sophistication, complexity and efficiency of mechanical and electrical systems, and (iv) growing emphasis on internal air quality, environmental sustainability and energy efficiency.
Our industry can be broadly divided into two categories: ● construction of and installation in new buildings, which provided approximately 56.7% of our revenue in 2024, and ● renovation, expansion, maintenance, repair and replacement in existing buildings, which provided the remaining 43.3% of our 2024 revenue.
Construction, Installation, Expansion and Renovation Services —Construction, installation, expansion and renovation services consist of “design and build” and “plan and spec” projects.
In “design and build” projects, the commercial MEP company is responsible for designing, engineering and installing a cost-effective, energy-efficient system customized to the specific needs of the building owner.
Costs and other project terms are normally negotiated between the building owner or its representative and the contracting company.
Companies that specialize in “design and build” projects use a consultative approach with customers and tend to develop long-term relationships with building owners and developers, general contractors, architects, consulting engineers and property managers.
“Plan and spec” installation refers to projects in which a third-party architect or consulting engineer designs the MEP systems, and the installation project is “put out for bid.” We believe that “plan and spec” projects usually take longer to complete and frequently result in less efficient outcomes than “design and build” projects because the system design and installation process are not integrated, thus resulting in more frequent adjustments to project specifications, work requirements and schedules.
Our investments in design and building information modeling enable us to collaborate with our customers to achieve reliable and energy efficient construction outcomes and to eliminate unnecessary waste.
Maintenance, Repair and Replacement Services —The Company’s services further include maintaining, repairing, replacing, reconfiguring and monitoring previously installed systems and building automation controls.
The growth and aging of the installed base of MEP and related systems, changing requirements due to increasing technology deployment and the demand for more efficient systems and more capable building automation controls have fueled growth in these services.
The increasing complexity of these systems leads many commercial, industrial and institutional building owners and property managers to outsource maintenance and repair, often through service agreements with service providers.
State-of-the-art control and monitoring systems feature electronic sensors and microprocessors that are crucial to energy efficient operations.
These systems require specialized training to install, maintain and repair.
We believe that the work we perform to optimize and upgrade systems and controls helps Comfort Systems USA to optimize energy use and fundamentally reduce our nation’s carbon footprint.
Strategy At Comfort Systems USA, Inc., our core purpose is to “Build Legacies” with our people, customers, and the companies who join us.
To accomplish this purpose, we strive every day to be the best organization in the world (i) for a craft worker to build a successful career, (ii) for construction, service and administrative professionals to grow and thrive, (iii) for customers to meet their crucial building and service needs, and (iv) for any company in our industry to join with the assurance that their people will be respected and nurtured and that their legacy will be perpetuated and built upon.
We focus on strengthening core operating competencies, on leading in sustainability, efficiency, and technological improvement, and on being fairly compensated for the work we do and the risks we manage on behalf of our customers.
The key objectives of our strategy are to improve profitability and generate growth in our operations, to enable sustainable and efficient building environments, to improve the productivity of our workforce, and to acquire complementary businesses.
Specifically, we are currently focused on the following elements: Achieve Excellence in Core Competencies —We have identified seven core competencies that we believe are critical to attracting and retaining customers, increasing operating income and cash flow, and maximizing the productivity of our skilled labor force.
The seven core competencies are: (i) safety, (ii) customer service, (iii) design and build expertise, (iv) effective pre-construction processes, (v) job and cost tracking, (vi) leadership in energy efficient and sustainable design, and (vii) best-in-class servicing of existing building systems.
Attract, Retain and Invest in our Employees —We seek to attract and retain quality employees by providing an enhanced career path that offers a stable income, attractive benefits, and excellent growth opportunities.
We continually invest in training, including programs for project managers, field superintendents, service managers, service technicians, sales managers, estimators, and leadership and development of key managers and leaders.
We believe that skilled labor forces in the building and services trades have become increasingly scarce and valuable, and we are increasingly focused on growing and improving our skilled labor force, including through recruitment, development, and skills training for our hourly workers.
Achieve Operating Efficiencies —We think we can achieve operating efficiencies and cost savings through purchasing economies, adopting “best practices,” and focusing on efficient job management.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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