# First Choice Plus Plumbing & Air — Acquisition Review
## Prepared for Ambient Home Services | Preliminary buyer-side review

**Source documents reviewed:** 2025 P&L; July 9, 2025–July 9, 2026 P&L; August 2025–July 2026 seller CIM / monthly-statement summary; August 27, 2026 balance sheet; ServiceTitan metrics and invoice summary as presented in the CIM; real-estate pricing memorandum.

> **Important:** Financials are cash-basis and unaudited. This is a preliminary underwriting review, not a quality-of-earnings report, appraisal, tax opinion, or financing approval.

## Executive conclusion

This is a potentially attractive plumbing-led residential service platform with meaningful revenue, a sizable customer history, ServiceTitan infrastructure, fleet/equipment, and an included commercial property. The core business appears profitable on the seller’s books.

However, the pricing case is not yet reliable. The older P&L shows **$878.5k operating income**, while the newer completed trailing-year statements show only **$628.6k**—a **$250.0k / 28% difference**. The seller’s preliminary SDE of **$772.9k** is not finalized and still requires owner-replacement, occupancy, payroll, debt, and general-ledger reconciliation.

**Preliminary buyer posture: proceed with diligence, but do not underwrite to the $4.39m business reference or $7.0m package ask until earnings and real-estate value are independently validated.**

## Financial snapshot

- **2025 revenue:** $2.687m; gross profit $1.960m; operating income $437k; net income $280k.
- **Newer TTM revenue (Aug. 2025–Jul. 2026):** $2.972m; gross profit $2.209m; operating income $629k; net income $543k.
- TTM revenue grew approximately **10.6%** versus calendar 2025; reported operating income grew approximately **43.7%**, implying significant margin expansion that needs validation.
- Newer TTM reported margins: **74.3% gross**, **21.2% operating**, **18.3% net**.
- Preliminary seller SDE: **$772.9k**, or **26.0% of revenue**.
- Older pricing reference: **$878.5k x 5 = $4.393m**. That 5.0x multiple is applied to operating income, not finalized SDE.
- $4.393m equals approximately **5.68x preliminary SDE** and **6.99x newer TTM operating income**, before further adjustments.
- The $7.0m combined ask equals approximately **9.06x preliminary SDE**, before property debt, working capital, capex, and buyer replacement costs.

## The good 🟢

- Established since 2007 with approximately **18,000 lifetime customer records**.
- ServiceTitan and QuickBooks provide a workable operating and data foundation.
- Reported revenue is meaningful and growing; the newer TTM period shows improved gross and operating margins versus 2025.
- Plumbing-led mix can provide recurring repair demand and cross-sell potential into HVAC, maintenance memberships, and replacement work.
- ServiceTitan invoice report showed approximately **$3.05m across 4,160 invoices**, with reported dashboard indicators of 92% booking, 65% conversion, $1,465 average closed sale, and 4.9 customer satisfaction. These metrics are promising but unverified and use a different period/definition than the P&Ls.
- Water heaters and repipes represented substantial invoiced activity; these categories may support higher-ticket growth.
- Existing fleet, specialized equipment, office/field team, and a second Northern Tampa Bay / Land O’ Lakes operation offer a platform for strategic expansion.
- Balance sheet showed approximately **$436k bank cash** and **$656k net fixed assets** as of Aug. 27, 2026, subject to verification, liens, condition, and closing treatment.
- Property could provide strategic occupancy control and potentially additional third-party rental income if leases and economics are real.

## The bad 🟡

- **Earnings inconsistency:** older operating income is $878.5k versus newer TTM operating income of $628.6k. Dates, bookkeeping revisions, and classifications must be reconciled.
- **Cash-basis accounting:** revenue timing, collections, payables, deferred revenue, inventory, warranty costs, and working capital are not visible from the supplied statements.
- **Payroll does not tie:** exact-period register shows $559.9k gross pay and $43.6k employer taxes versus monthly P&Ls showing $548.1k wages and $42.7k payroll taxes. Differences total approximately $12.7k.
- **Owner dependence:** owner is active in operations and holds qualifying-license responsibilities. Buyer must price replacement management/licensing coverage.
- **High customer discounts:** discounts were $160k in the newer TTM and $171k in 2025—roughly 5%–6% of reported revenue. Determine whether this is normal promotional activity, price leakage, or owner discretion.
- **Revenue-definition mismatch:** ServiceTitan completed revenue and invoice totals do not exactly reconcile, and the dashboard includes 1,208 zero-dollar invoices.
- Membership income is only $34k in the newer TTM, and “membership conversions” are not confirmed active recurring memberships.
- Balance sheet records **materials on hand at zero**, despite a field-service operation; inventory and truck stock need a physical count and valuation.
- Credit cards and other current liabilities are material. The balance sheet shows approximately **$482k current liabilities**, including about **$231k SBA debt**, vehicle notes, a line of credit, and credit-card balances. Debt payoff and excluded-asset allocation are unresolved.
- Large shareholder distributions (approximately $2.206m on the supplied balance sheet) reinforce the need to distinguish historical cash extraction from sustainable operating cash flow.
- The CIM says $42k of annual rent, while seller correspondence cited $39k. Location allocation and related-party treatment are unresolved.

## The ugly 🔴

- **$160k uncollectible note loss** was recorded. Although the seller says it is nonrecurring, the underlying note, counterparty, authorization, and any related-party exposure must be investigated.
- The newer TTM SDE bridge adds back interest, owner compensation, and owner-specific life insurance, but does **not** include a final replacement-cost adjustment. Illustrative $100k–$200k replacement costs reduce earnings to approximately **$673k–$573k** before rent normalization and other adjustments.
- A limited rent scenario in the CIM indicates that market occupancy could reduce SDE by approximately **$62.4k** if 3,600 SF were occupied at $29/SF versus historical rent. Actual footprint and market rent are unconfirmed.
- Property value of **$2.97m** is a conditional model—not an appraisal or current NOI valuation. It assumes full 6,975 SF leased at **$29/SF NNN**, 5% vacancy, recoverable expenses, and a 6% cap rate.
- The $29/SF rent is at or above selected asking evidence and above cited $20–$24/SF achieved/asking evidence. The 6% cap rate is aggressive relative to broader cited evidence.
- Property identity is inconsistent across materials: different address formats appear in the underwriting report, draft lease, and file naming. Legal parcel, rentable area, occupancy, zoning, leases, and title must be confirmed.
- At a 7.5%–8.0% cap rate, the same modeled NOI supports only approximately **$2.37m–$2.23m**, a potential $0.59m–$0.74m reduction versus the seller’s $2.97m scenario before condition/lease-up costs.
- The combined package may not be an economic discount: the business and property assumptions use different periods and occupancy treatments. Related-party rent cannot create consolidated cash flow.
- The business appears heavily plumbing-weighted—approximately **83.5% plumbing / 16.5% HVAC**—so it is not yet a balanced HVAC platform for Ambient Home Services.

## Preliminary underwriting view

Use at least three cases:

1. **Seller case:** $772.9k preliminary SDE, but only after validating every bridge item.
2. **Management-adjusted case:** deduct $100k–$200k for owner replacement, then deduct market occupancy normalization and any recurring costs currently treated as add-backs.
3. **Downside case:** lower revenue conversion/collection, normalized payroll, warranty/callback costs, realistic property rent/cap rate, required fleet replacement, and working-capital funding.

The $4.393m business reference is not supported by the newer operating-income figure without a substantial reconciliation. A strategic buyer may justify a premium only if customer reactivation, HVAC cross-sell, purchasing leverage, dispatch improvements, or overhead synergies are separately quantified—not embedded in seller projections.

## Priority diligence requests

- CPA-prepared QoE bridge for 2025 and Aug. 2025–Jul. 2026; monthly bank statements; tax returns; general ledger; AR/AP aging; cash-to-accrual bridge.
- Reconciliation of all P&L versions, including the $250k operating-income variance and incomplete August 2026 period.
- Payroll register to GL, owner/family compensation, benefits, bonuses, related-party payments, and replacement staffing plan.
- ServiceTitan exports by branch, technician, lead source, job type, sold/completed/collected status, cancellations, callbacks, warranties, discounts, and memberships.
- Customer concentration, repeat rate, active-customer count, membership retention, marketing CAC, and booked backlog.
- Full debt schedule, lien/UCC searches, SBA payoff/release requirements, vehicle titles, excluded personal vehicles, and debt allocation.
- Physical inventory count; fleet/equipment schedule with age, condition, maintenance, liens, and replacement capex.
- Licensing and qualifying-agent transition plan; employee roster, tenure, wages, benefits, workers’ comp claims, and retention risk.
- Property appraisal/BPO, title/survey, environmental/building inspections, roof/HVAC condition, zoning, rentable-area measurement, tenant estoppels, executed leases, tax bills, insurance, repairs, and capital needs.
- Definitive purchase-price allocation, assumed/excluded liabilities, normalized working capital, escrow/indemnity, seller note or rollover, and transition support.

## Bottom line

**Good business potential; weak current proof of earnings; aggressive property assumptions.** Ambient should advance this only through a disciplined QoE and real-estate diligence process. The key negotiation point is the seller’s reliance on an older $878.5k operating-income figure despite newer statements showing $628.6k. Until that gap is resolved, the opportunity should be valued from independently verified, management-adjusted cash flow—not the seller’s headline multiple.