Comfort Systems USA

“For instance, unanticipated technical problems may arise, we could have difficulty obtaining permits or approvals, local laws, labor costs or labor conditions could change, bad weather could delay construction, raw materials prices could increase, our suppliers or subcontractors may fail to perform as expected or site conditions may be different than we expected.”

Annual report 2025A · The company itself

“Recent labor shortages may also lead to higher wages for employees and higher costs to purchase the services of third parties. Increases in labor costs, such as increases in minimum wage requirements, wage inflation and/or increased overtime, reduce our profitability and that of our customers.”

Annual report 2025A · The company itself

“Our business is labor intensive, and many of our operations experience a high rate of employee turnover. At times of low unemployment rates in the United States, it is typically more difficult for us to find qualified personnel at low cost in some geographic areas where we operate.”

Annual report 2025A · The company itself

“Human Capital Resources Employees—As of December 31, 2025, we had approximately 22,700 employees as compared to approximately 18,300 employees as of December 31, 2024.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“A failure to comply with such laws and regulations could result in penalties or fines, legal liabilities or reputational harm.”

Annual report 2025A · The company itself

“Diverging and varied governmental and societal attention to ESG and sustainability matters, including expanding mandatory and voluntary reporting, diligence and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. If we are unable to adequately address such ESG and sustainability matters or fail to comply with all laws, regulations, policies and related interpretations, it could negatively impact our reputation and our business results.”

Annual report 2025A · The company itself

“In 2025, we continued our efforts to adhere to voluntary reporting standards by (i) submitting to CDP (formerly the Carbon Disclosure Project), wherein, among other things, we disclosed the results of our annual greenhouse gas emissions inventory, and (ii) publishing our 2024 sustainability report, which followed the Task Force on Climate-related Financial Disclosures and the Sustainability Accounting Standard Board’s standards for the Engineering and Construction Services industry and the Global Reporting Initiative Standards: Core option.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“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 modern systems.”

Annual report 2025A · The company itself

“Table of Contents Seek Growth through Acquisitions—We believe that we can further increase our cash flow and operating income by continuing to opportunistically enter new markets or service lines through acquisition. We have dedicated a significant portion of our cash flow on an ongoing basis to seeking opportunities to acquire businesses that have strong assembled workforces, excellent historical safety performance, leading design and energy efficiency capabilities, attractive market positions, a record of consistent positive cash flow, and desirable market locations.”

Annual report 2025A · The company itself

“We expect to continue to pursue selective acquisitions of businesses.”

Annual report 2025A · The company itself

“Technology ​ 45.0 % Manufacturing ​ ​ ​ 22.1 % Healthcare 8.9 % Education 7.3 % Government 5.0 % Office Buildings 5.0 % Retail, Restaurants and Entertainment 3.7 % Multi-Family and Residential 1.4 % Other 1.6 % Total 100.0 % ​ Approximately 92.7% of our revenue is earned on a project basis for installation of systems in newly constructed or existing facilities.”

Annual report 2025A · The company itself

“Our government clients may face budget deficits that prohibit them from funding proposed and existing projects.”

Annual report 2025A · The company itself

“Excel at Modular and Off-Site Construction—We believe that modular and off-site construction – the ability to build superior quality plants and systems away from the construction site – has become increasingly important in complex construction projects. Accordingly, we have invested in that capability through acquisitions, and after acquisition we have further invested in improving and growing that service offering.”

Annual report 2025A · The company itself

“Technology ​ 45.0 % Manufacturing ​ ​ ​ 22.1 % Healthcare 8.9 % Education 7.3 % Government 5.0 % Office Buildings 5.0 % Retail, Restaurants and Entertainment 3.7 % Multi-Family and Residential 1.4 % Other 1.6 % Total 100.0 % ​ Approximately 92.7% of our revenue is earned on a project basis for installation of systems in newly constructed or existing facilities.”

Annual report 2025A · The company itself

“Technology ​ 45.0 % Manufacturing ​ ​ ​ 22.1 % Healthcare 8.9 % Education 7.3 % Government 5.0 % Office Buildings 5.0 % Retail, Restaurants and Entertainment 3.7 % Multi-Family and Residential 1.4 % Other 1.6 % Total 100.0 % ​ Approximately 92.7% of our revenue is earned on a project basis for installation of systems in newly constructed or existing facilities.”

Annual report 2025A · The company itself

“Technology ​ 45.0 % Manufacturing ​ ​ ​ 22.1 % Healthcare 8.9 % Education 7.3 % Government 5.0 % Office Buildings 5.0 % Retail, Restaurants and Entertainment 3.7 % Multi-Family and Residential 1.4 % Other 1.6 % Total 100.0 % ​ Approximately 92.7% of our revenue is earned on a project basis for installation of systems in newly constructed or existing facilities.”

Annual report 2025A · The company itself

“Technology ​ 45.0 % Manufacturing ​ ​ ​ 22.1 % Healthcare 8.9 % Education 7.3 % Government 5.0 % Office Buildings 5.0 % Retail, Restaurants and Entertainment 3.7 % Multi-Family and Residential 1.4 % Other 1.6 % Total 100.0 % ​ Approximately 92.7% of our revenue is earned on a project basis for installation of systems in newly constructed or existing facilities.”

Annual report 2025A · The company itself

“Technology ​ 45.0 % Manufacturing ​ ​ ​ 22.1 % Healthcare 8.9 % Education 7.3 % Government 5.0 % Office Buildings 5.0 % Retail, Restaurants and Entertainment 3.7 % Multi-Family and Residential 1.4 % Other 1.6 % Total 100.0 % ​ Approximately 92.7% of our revenue is earned on a project basis for installation of systems in newly constructed or existing facilities.”

Annual report 2025A · The company itself

“Technology ​ 45.0 % Manufacturing ​ ​ ​ 22.1 % Healthcare 8.9 % Education 7.3 % Government 5.0 % Office Buildings 5.0 % Retail, Restaurants and Entertainment 3.7 % Multi-Family and Residential 1.4 % Other 1.6 % Total 100.0 % ​ Approximately 92.7% of our revenue is earned on a project basis for installation of systems in newly constructed or existing facilities.”

Annual report 2025A · The company itself

“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. If our estimates or assumptions prove to be inaccurate, circumstances change in a way that renders our assumptions and estimates inaccurate or we fail to successfully execute the work, cost overruns may occur, and we could experience reduced profits or a loss for affected projects.”

Annual report 2025A · The company itself

“Table of Contents 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.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“There is some market risk from fluctuations in the prices of certain commodities and materials due to tariffs or other macroeconomic factors. In many cases, these increased costs are recoverable, and we do not expect these potential cost increases to have a material impact on our results of operations.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“Cyclicality and Seasonality The construction industry is subject to business cycle fluctuation. As a result, our volume of business, particularly in new construction projects and renovation, may be adversely affected by declines in new installation and replacement projects in various geographic regions of the United States during periods of economic weakness.”

Annual report 2025A · The company itself

“Risks Related to Our Business Economic downturns in the markets in which we operate may materially and adversely affect our business because our business is dependent on levels of construction activity. The demand for our services is dependent upon the existence of construction projects and service requirements within the markets in which we operate.”

Annual report 2025A · The company itself

“Further, there are concerns that the United States economy could experience a recession.”

Annual report 2025A · The company itself

“Information technology system failures, network disruptions or cybersecurity breaches could adversely affect our business. We use and rely significantly on sophisticated information technology systems and infrastructure, including computer systems, hardware, software, technology and online sites and networks (collectively, “IT Systems”), in conducting our day-to-day operations, providing services to certain customers and protecting sensitive Company information.”

Annual report 2025A · The company itself

“We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), malfeasance by insiders, human or technological error (including the misuse of artificial intelligence tools by our employees), and as a result of malicious code embedded in open-source software, or misconfigurations, bugs or other vulnerabilities in commercial software that is integrated into our (or our suppliers’ or service providers’) IT Systems, products or services.”

Annual report 2025A · The company itself

“Historically, insurance market conditions become more difficult for insurance consumers during periods when insurance companies suffer significant investment losses as well as casualty losses. Consequently, it is possible that insurance markets will become more expensive and restrictive.”

Annual report 2025A · The company itself

“A significant portion of our business depends on our ability to provide surety bonds.”

Annual report 2025A · The company itself

“Information technology system failures, network disruptions or cybersecurity breaches could adversely affect our business. We use and rely significantly on sophisticated information technology systems and infrastructure, including computer systems, hardware, software, technology and online sites and networks (collectively, “IT Systems”), in conducting our day-to-day operations, providing services to certain customers and protecting sensitive Company information.”

Annual report 2025A · The company itself

“The implementation of new IT Systems and information technology could adversely impact our operations by requiring substantial capital expenditures, diverting management’s attention, or causing delays or difficulties in transitioning to new IT Systems. In addition, our IT Systems implementations may not result in productivity improvements at the levels anticipated.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“Third parties contribute significantly to our completion of many projects and labor shortages or increased labor costs from third parties could adversely impact our results of operations. We hire third-party subcontractors to perform work and depend on third-party suppliers to provide equipment and materials necessary to complete our projects.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“The demand for new installation and replacement is generally lower during the winter months (the first quarter of the year) due to reduced construction activity during inclement weather and less use of air conditioning during the colder months. Demand for our services is generally higher in the second and third calendar quarters due to increased construction activity and increased use of air conditioning during the warmer months. Accordingly, we expect our revenue and operating results will generally be lower in the first calendar quarter.”

Annual report 2025A · The company itself

“Climate change may create physical and financial risk to our business. Physical risks from climate change could, among other things, include an increase in extreme weather events (such as wildfires, floods and hurricanes), rising sea levels and limitations on water availability and quality. Such extreme weather conditions may limit the availability of resources, increasing the costs of our projects, or may cause projects to be delayed or cancelled.”

Annual report 2025A · The company itself

“Economic factors, including inflation and interest rate volatility, may have a negative impact on our business. For instance, we have exposure to changes in interest rates under our revolving credit facility, and as interest rates increase, our debt service obligations on our variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, may correspondingly decrease.”

Annual report 2025A · The company itself

“Failure to remain in compliance with covenants under our credit agreement, service our indebtedness, or fund our other liquidity needs could adversely impact our business.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“We seek to 9 Table of Contents ensure that, where possible, we have two employees who hold any such permits or licenses that may be material to our operations in a particular geographic region. Our operations are subject to the federal Clean Air Act, as amended, which governs air emissions and imposes specific requirements on the use and handling of ozone-depleting refrigerants generally classified as chlorofluorocarbons (“CFCs”) or hydrochlorofluorocarbons (“HCFCs”). Clean Air Act regulations promulgated by the United States Environmental Protection Agency (“USEPA”) require the certification of service technicians involved in the service or repair of equipment containing these refrigerants and also regulate the containment and recycling of these refrigerants.”

Annual report 2025A · The company itself

“Our focus on environmental stewardship and improving productivity drives not only our efforts to become more energy efficient but also improvements in our customers' impact on climate change. Replacing an aging building’s existing systems with modern, energy-efficient systems significantly reduces a building’s energy consumption and carbon footprint while improving cost, air quality, and overall system effectiveness.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself

“HVAC systems are subject to various environmental statutes and regulations, including the federal Clean Air Act and those regulating the production, servicing and disposal of certain ozone-depleting refrigerants used in HVAC systems.”

Annual report 2025A · The company itself

“We are also exposed to increases in energy prices, particularly as they relate to gasoline prices.”

Annual report 2025A · The company itself

“Governmental Regulation and Environmental Matters Our operations are subject to various federal, state and local laws and regulations, including: (i) licensing requirements applicable to engineering, construction and service technicians, (ii) building and MEP codes and zoning ordinances, (iii) regulations relating to consumer protection, including those governing residential service agreements, (iv) special bidding and procurement requirements on government projects, (v) wage and hour regulations, and (vi) regulations relating to worker safety and protection of the environment.”

Annual report 2025A · The company itself

“Orders for manufactured commercial HVAC equipment, electrical switch gear, and large application power generators have experienced the longest lead-times, and it is not uncommon for lead-times to be greater than six months.”

Annual report 2025A · The company itself

“We have procedures to reduce commodity cost exposure, including costs due to tariffs, such as purchasing commodities early for projects, as well as selectively including time or market-based escalation and escape provisions in bids and contracts.”

Annual report 2025A · The company itself

“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.”

Annual report 2025A · The company itself