Watsco Reports Record Sales, Enhanced Operating Efficiency, Strong Cash Flow and Improving Business Trends
Watsco (NYSE: WSO) reported record Q3 2024 results with sales increasing 2% to $2.16 billion and flat net income of $171 million. Operating cash flow improved 50% to $394 million for the nine months ended September 30, 2024. The company maintains a strong financial position with $550 million in cash and no borrowings. Business trends strengthened in October 2024 with mid-single digit sales growth. Unit sales of residential HVAC equipment stabilized during the 2024 selling season, complemented by solid growth in commercial HVAC systems. The company continues investing in technology platforms, with e-commerce sales growing 5% and representing 35% of total sales.
Watsco (NYSE: WSO) ha riportato risultati record per il terzo trimestre del 2024, con vendite in aumento del 2% a $2,16 miliardi e un utile netto piatto di $171 milioni. Il flusso di cassa operativo è migliorato del 50% a $394 milioni per i nove mesi terminati il 30 settembre 2024. L'azienda mantiene una posizione finanziaria solida con $550 milioni in contante e senza indebitamenti. Le tendenze commerciali si sono rafforzate a ottobre 2024, con una crescita delle vendite a cifra singola intermedia. Le vendite di unità di attrezzature HVAC residenziali si sono stabilizzate durante la stagione di vendita 2024, completate da una solida crescita dei sistemi HVAC commerciali. L'azienda continua a investire nelle piattaforme tecnologiche, con vendite di e-commerce in aumento del 5% e che rappresentano il 35% delle vendite totali.
Watsco (NYSE: WSO) reportó resultados récord para el tercer trimestre de 2024, con ventas que aumentaron un 2% a $2.16 mil millones y utilidades netas estables de $171 millones. El flujo de caja operativo mejoró un 50% a $394 millones durante los nueve meses que terminaron el 30 de septiembre de 2024. La empresa mantiene una sólida posición financiera con $550 millones en efectivo y sin deudas. Las tendencias comerciales se reforzaron en octubre de 2024, con un crecimiento de ventas de dígitos simples medios. Las ventas de unidades de equipos HVAC residenciales se estabilizaron durante la temporada de ventas de 2024, complementadas por un sólido crecimiento en sistemas HVAC comerciales. La empresa sigue invirtiendo en plataformas tecnológicas, con ventas de comercio electrónico que crecieron un 5% y representan el 35% de las ventas totales.
Watsco (NYSE: WSO)는 2024년 3분기 실적을 보고하며, 매출이 2% 증가한 21억 6천만 달러, 순이익은 1억 7,100만 달러로 변동이 없었습니다. 운영 현금 흐름은 2024년 9월 30일까지의 9개월 동안 50% 개선되어 3억 9천4백만 달러에 달했습니다. 회사는 5억5천만 달러의 현금을 보유하고 있으며 차입금이 없는 강력한 재무 상태를 유지하고 있습니다. 2024년 10월, 사업 트렌드는 강화되어 중간 단위 성장률을 기록하였습니다. 주거용 HVAC 장비의 판매량은 안정세를 보였습니다 2024 판매 시즌 동안, 상업용 HVAC 시스템의 견고한 성장과 함께했습니다. 회사는 기술 플랫폼에 계속 투자하고 있으며, 전자상거래 매출은 5% 성장하여 총 매출의 35%를 차지하고 있습니다.
Watsco (NYSE: WSO) a annoncé des résultats record pour le troisième trimestre 2024, avec des ventes en hausse de 2% à 2,16 milliards de dollars et un bénéfice net stable de 171 millions de dollars. Le flux de trésorerie d'exploitation a augmenté de 50% pour atteindre 394 millions de dollars pour les neuf mois se terminant le 30 septembre 2024. L'entreprise maintient une solide position financière avec 550 millions de dollars en liquidités et aucune dette. Les tendances commerciales se sont renforcées en octobre 2024, avec une croissance des ventes à un chiffre intermédiaire. Les ventes d'unités d'équipements HVAC résidentielles se sont stabilisées pendant la saison de vente 2024, complétées par une solide croissance des systèmes HVAC commerciaux. L'entreprise continue d'investir dans des plateformes technologiques, les ventes en ligne augmentant de 5% et représentant 35% des ventes totales.
Watsco (NYSE: WSO) hat für das dritte Quartal 2024 Rekordergebnisse gemeldet, mit einem Umsatzanstieg von 2% auf 2,16 Milliarden Dollar und einem stabilen Nettogewinn von 171 Millionen Dollar. Der operative Cashflow verbesserte sich um 50% auf 394 Millionen Dollar in den neun Monaten bis zum 30. September 2024. Das Unternehmen hält eine starke finanzielle Position mit 550 Millionen Dollar in Bar und keinen Schulden. Die Geschäftstrends stärkten sich im Oktober 2024 mit einem Wachstum der Verkäufe im mittleren einstelligen Bereich. Die Verkaufszahlen von Wohn-HVAC-Geräten stabilisierten sich während der Verkaufssaison 2024, ergänzt durch ein solides Wachstum bei gewerblichen HVAC-Systemen. Das Unternehmen investiert weiterhin in Technologieplattformen, wobei der Umsatz im E-Commerce um 5% wuchs und 35% des Gesamtumsatzes ausmachte.
- Record Q3 sales of $2.16 billion, up 2%
- Operating cash flow increased 50% to $394 million
- Strong financial position with $550 million in cash and no debt
- E-commerce sales grew 5%, now representing 35% of total sales
- Mid-single digit sales growth trend in October 2024
- Operating income decreased 2% to $250 million in Q3
- EPS declined 3% to $4.22 in Q3
- 2% decline in other HVAC products sales
- 4% decline in commercial refrigeration products
- Gross margin dilution of 30 basis points due to OEM-related investments
Insights
Watsco's Q3 2024 results show resilient performance with
- Robust balance sheet with
$550 million cash, zero debt and untapped$600 million credit facility - Digital transformation driving growth with
5% increase in e-commerce sales - Market share recovery efforts with key OEM partner showing positive momentum
- Stabilizing unit sales and improving October trends with mid-single digit growth
The
The HVAC market dynamics present compelling opportunities for Watsco. With 102 million aging HVAC systems in the U.S. operating below current efficiency standards, the replacement market potential is substantial. Strategic advantages include:
- Market leadership in fragmented
$64 billion North American HVAC/R sector - Digital platform reaching 61,000 contractors with
14% user growth - OnCallAir platform showing strong traction with
$1.4 billion annualized GMV - Environmental impact through efficiency upgrades, averting 21.8 million metric tons of CO2e emissions
The combination of regulatory changes, aging infrastructure and digital transformation positions Watsco for sustained growth in the evolving HVAC market.
Entrepreneurial Culture, Debt-Free Balance Sheet, Leading Technologies and Upcoming Regulatory Change Support Long-Term Investment and Growth
MIAMI, Oct. 23, 2024 (GLOBE NEWSWIRE) -- Watsco, Inc. (NYSE: WSO) announced its results for the third quarter and nine-month period ended September 30, 2024 and provided commentary on business trends, growth opportunities, technology innovation and its financial strength.
Watsco is the largest distributor in the highly fragmented
A cornerstone of Watsco’s growth strategy is the acquisition of long-standing, family-owned businesses. Since 1989, Watsco has acquired 69 companies, while preserving their unique culture and legacies. Since August 2019, Watsco has acquired eight businesses that today generate approximately
Watsco has also developed industry-leading technologies to enhance the customer experience, gain operating efficiencies and drive growth. Today, approximately 61,000 contractor businesses and technicians engage with Watsco digitally, complemented by modern, state-of-the-art technologies at each of our nearly 700 locations. Since the launch of its technology ecosystem, Watsco has generated higher sales growth rates among digital customers, added new customers and reduced customer attrition. The Company believes this technology advantage will continue to provide unique opportunities for long-term growth.
Highlights Related to 2024 Performance
Watsco’s unit sales of residential HVAC equipment stabilized during the 2024 selling season (i.e. growth rates for 2024’s second and third quarter on a combined basis) complemented by solid growth in sales of commercial HVAC systems. Business trends in October 2024 have strengthened, reflecting meaningful unit growth and an overall mid-single digit growth rate in sales.
2024 results also reflect ongoing efforts to regain sales and market share related to one of the Company’s primary OEMs after product and supply chain disruptions impacted customer relationships in 2023. Watsco and its OEM partner have made co-investments that are yielding positive results to both regain lost customers and attract new customers. The Company estimates these investments have been dilutive to gross margins by approximately 30 basis-points for the nine-month period ended September 30, 2024. Watsco is actively collaborating and investing alongside the OEM to reestablish market share and drive long-term growth.
Watsco has further strengthened its financial position in 2024 and is well-positioned to invest in growth. Operating cash flow increased
Third Quarter Results
- Sales increased
2% to a record$2.16 billion (flat on a same-store basis) - Gross profit of
$566 million with gross margin of26.2% - SG&A expenses increased
2% (flat on a same-store basis) - Operating income decreased
2% to$250 million (11.6% operating margin) - Net income attributable to Watsco of
$171 million , flat versus last year - Earnings per share declined
3% to$4.22
Sales trends (excludes acquisitions)
1% increase in HVAC equipment (71% of sales)2% decline in other HVAC products (25% of sales)4% decline in commercial refrigeration products (4% of sales)
Albert H. Nahmad, Chairman and CEO commented: “During the third quarter, Watsco achieved record sales and net income, produced strong cash flow and made further strides to improve operating efficiency across its network. We believe the market environment for HVAC products stabilized this year, and we look forward to helping our customers navigate next year’s regulatory transition toward the new A2L systems. This regulatory change will ultimately impact approximately
Nine-Month Results
- Sales increased
3% to a record$5.9 billion (1% increase on a same-store basis) - Gross profit of
$1.58 billion , flat versus the last year (gross margin of26.9% ) - SG&A expenses increased
5% to$955 million (2% increase on a same-store basis) - Operating income decreased
6% to$646 million (11.0% operating margin) - EPS of
$10.92 compared to$11.60 in the same period last year - Operating cash flow improved
50% to a record$394 million versus the same period last year
Sales trends (excludes acquisitions)
3% increase in HVAC equipment (70% of sales)3% decrease in other HVAC products (26% of sales)- Flat sales of commercial refrigeration products (
4% of sales)
Mr. Nahmad added: “Overall, we believe that our 2024 performance reflects market share gains and represents solid performance relative to trends in the market and the economy. We see the potential for further improving productivity and are gratified that our focus on the balance sheet has produced record cash flow. Our teams continue to lead and innovate, and I am optimistic that our industry-leading scale, entrepreneurial culture, technology advantage and strong balance sheet position us to capture growth and share.”
Culture of Innovation
Watsco remains committed to scaling the industry’s most robust, user-friendly technology platforms for HVAC/R contractors, which make it easier for customers to interact with the Company and, as a further step, modernize how contractors engage with consumers and businesses. Active technology users continue to grow sales at faster rates than non-users and, overall, we experience
Specific technology-related updates include:
- Product Information Management (PIM), Watsco’s repository of rich product information, is delivered seamlessly through its mobile apps and e-commerce platform. Watsco’s PIM database provides contractors digital access to more than 900,000 SKUs.
- HVAC Pro+ Mobile Apps provide contractors real-time access to critical information that improves speed to market and enhances efficiency for the customer. This includes real-time technical support, product specifications, inventory availability, warranty look-up and processing, system matchups, e-commerce, and much more. The community of authenticated users (those linked to an e-commerce account) over the 12-month period ended September 30, 2024 expanded
14% to approximately 61,000 users. - E-commerce sales continue to outpace overall sales growth rates, growing
5% during the nine-month period ended September 30, 2024 and accounting for35% of total sales (inclusive of revenues from recently acquired businesses), and in some regions, exceed60% of total sales. - OnCallAir®, Watsco’s digital sales platform, has increased penetration among HVAC contractors as digital engagement with homeowners expands. The annualized gross merchandise value (GMV) of products sold by customers through OnCallAir® was approximately
$1.4 billion for the 12-month period ended September 30, 2024. From January 1 to September 30, 2024, OnCallAir® presented quotes to approximately 258,000 households, a17% increase, and generated$1.2 billion GMV, a22% increase, versus the same period last year.
A.J. Nahmad, Watsco’s President, added: “Our contractor customers are the backbone of our business, and we are committed to empowering them with the best technology platforms available. Our ongoing investments in advanced digital tools and innovative solutions are designed to streamline their operations, enhance efficiency, and drive their success. We are proud to support our customers and their ambitions with the technology resources they need to thrive in a competitive landscape, and we expect to invest more over time to provide a distinct, long-term competitive advantage.”
Dividend Policy
Watsco’s philosophy is to share increasing amounts of cash flow through higher dividends while maintaining a conservative financial position with continued capacity to build its network. Watsco’s annual dividend rate was increased
Third Quarter Earnings Conference Call Information
Date and time: October 23, 2024 at 10:00 a.m. (EDT)
Webcast: http://investors.watsco.com (a replay will be available on the Company’s website)
Dial-in number: United States (844) 883-3908 / International (412) 317-9254
Use of Non-GAAP Financial Information
This release discloses certain performance measures on a “same-store basis”, which are non-GAAP and exclude the effects of locations closed, acquired or locations opened, in each case during the immediately preceding 12 months, unless such locations are within close geographical proximity to existing locations. The Company believes this information provides greater comparability regarding its ongoing operating performance. These measures should not be considered an alternative to measurements presented in accordance with U.S. GAAP.
About Watsco
Watsco is the largest distributor of heating, air conditioning and refrigeration (HVAC/R) products with locations in the United States, Canada, Mexico, and Puerto Rico, and on an export basis to Latin America and the Caribbean.
We focus on the replacement market, which has increased in size and importance as a result of the aging of installed systems, the introduction of higher energy efficient models and the necessity of HVAC products in homes and businesses. According to data published in March 2023 by the Energy Information Administration, there are approximately 102 million HVAC systems installed in the United States that have been in service for more than 10 years, most of which operate well below current minimum efficiency standards.
Accordingly, Watsco has the opportunity to be a significant and important contributor toward climate change as it plays an important role to lower CO2e emissions. According to the Department of Energy, HVAC systems account for roughly half of U.S. household energy consumption. As such, replacing older systems at higher efficiency levels is a critical means for homeowners to reduce electricity consumption and their carbon footprint.
Based on estimates validated by independent sources, Watsco averted an estimated 21.8 million metric tons of CO2e emissions from January 1, 2020 to September 30, 2024 through the sale of replacement HVAC systems at higher-efficiency standards, an equivalent of eliminating 5.2 million gas powered vehicles off the road annually. More information, including sources and assumptions used to support the Company’s estimates, can be found at www.watsco.com.
This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may address, among other things, our expected financial and operational results and the related assumptions underlying our expected results. These forward-looking statements are distinguished by use of words such as “will,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” or “intend,” the negative of these terms, and similar references to future periods. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive market, new housing starts and completions, capital spending in commercial construction, consumer spending and debt levels, regulatory and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within Watsco’s industry, the seasonal nature of sales of Watsco’s products, the ability of the Company to expand its business, insurance coverage risks and final GAAP adjustments.
Detailed information about these factors and additional important factors can be found in the documents that Watsco files with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements speak only as of the date the statements were made. Watsco assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except as required by applicable law.
| WATSCO, INC. Condensed Consolidated Results of Operations (In thousands, except share and per share data) (Unaudited) | ||||||||||||||||
| Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | 2,160,036 | $ | 2,126,845 | $ | 5,864,355 | $ | 5,680,570 | ||||||||
| Cost of sales | 1,593,792 | 1,559,900 | 4,287,726 | 4,102,846 | ||||||||||||
| Gross profit | 566,244 | 566,945 | 1,576,629 | 1,577,724 | ||||||||||||
| Gross profit margin | 26.2 | % | 26.7 | % | 26.9 | % | 27.8 | % | ||||||||
| SG&A expenses | 326,373 | 319,834 | 954,950 | 911,046 | ||||||||||||
| Other income | 10,376 | 9,506 | 23,908 | 20,384 | ||||||||||||
| Operating income | 250,247 | 256,617 | 645,587 | 687,062 | ||||||||||||
| Operating margin | 11.6 | % | 12.1 | % | 11.0 | % | 12.1 | % | ||||||||
| Interest (income) expense, net | (6,773 | ) | 1,890 | (14,156 | ) | 5,920 | ||||||||||
| Income before income taxes | 257,020 | 254,727 | 659,743 | 681,142 | ||||||||||||
| Income taxes | 55,373 | 54,103 | 139,183 | 144,744 | ||||||||||||
| Net income | 201,647 | 200,624 | 520,560 | 536,398 | ||||||||||||
| Less: net income attributable to non-controlling interest | 30,616 | 29,671 | 81,115 | 82,608 | ||||||||||||
| Net income attributable to Watsco | $ | 171,031 | $ | 170,953 | $ | 439,445 | $ | 453,790 | ||||||||
| Diluted earnings per share: | ||||||||||||||||
| Net income attributable to Watsco shareholders | $ | 171,031 | $ | 170,953 | $ | 439,445 | $ | 453,790 | ||||||||
| Less: distributed and undistributed earnings allocated to restricted common stock | 11,886 | 11,903 | 30,682 | 31,211 | ||||||||||||
| Earnings allocated to Watsco shareholders | $ | 159,145 | $ | 159,050 | $ | 408,763 | $ | 422,579 | ||||||||
| Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share | 37,671,752 | 36,579,408 | 37,433,850 | 36,438,075 | ||||||||||||
| Diluted earnings per share for Common and Class B common stock | $ | 4.22 | $ | 4.35 | $ | 10.92 | $ | 11.60 | ||||||||
| WATSCO, INC. Condensed Consolidated Balance Sheets (Unaudited, in thousands) | ||||||
| September 30, | December 31, | |||||
| 2024 | 2023 | |||||
| Cash and cash equivalents | $ | 294,354 | $ | 210,112 | ||
| Short-term cash investments | 255,669 | - | ||||
| Accounts receivable, net | 944,501 | 797,832 | ||||
| Inventories, net | 1,596,795 | 1,347,289 | ||||
| Other | 41,673 | 36,698 | ||||
| Total current assets | 3,132,992 | 2,391,931 | ||||
| Property and equipment, net | 140,317 | 136,230 | ||||
| Operating lease right-of-use assets | 401,000 | 368,748 | ||||
| Goodwill, intangibles, net and other | 843,167 | 832,273 | ||||
| Total assets | $ | 4,517,476 | $ | 3,729,182 | ||
| Accounts payable and accrued expenses | $ | 825,780 | $ | 611,747 | ||
| Current portion of lease liabilities | 107,369 | 100,265 | ||||
| Total current liabilities | 933,149 | 712,012 | ||||
| Borrowings under revolving credit agreement | - | 15,400 | ||||
| Operating lease liabilities, net of current portion | 305,412 | 276,913 | ||||
| Deferred income taxes and other liabilities | 117,044 | 108,667 | ||||
| Total liabilities | 1,355,605 | 1,112,992 | ||||
| Watsco's shareholders’ equity | 2,696,375 | 2,229,839 | ||||
| Non-controlling interest | 465,496 | 386,351 | ||||
| Shareholders’ equity | 3,161,871 | 2,616,190 | ||||
| Total liabilities and shareholders’ equity | $ | 4,517,476 | $ | 3,729,182 | ||
| WATSCO, INC. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 520,560 | $ | 536,398 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 30,331 | 25,406 | ||||||
| Share-based compensation | 25,063 | 20,791 | ||||||
| Non-cash contribution to 401(k) plan | 8,735 | 8,862 | ||||||
| Provision for doubtful accounts | 608 | 3,185 | ||||||
| Other income from investment in unconsolidated entity | (23,908 | ) | (20,384 | ) | ||||
| Other, net | 6,553 | 5,548 | ||||||
| Changes in working capital, net of effects of acquisitions | ||||||||
| Accounts receivable, net | (145,071 | ) | (184,106 | ) | ||||
| Inventories, net | (248,202 | ) | (143,746 | ) | ||||
| Accounts payable and other liabilities | 218,882 | 17,608 | ||||||
| Other, net | 654 | (6,222 | ) | |||||
| Net cash provided by operating activities | 394,205 | 263,340 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of short-term cash investments | (255,669 | ) | - | |||||
| Capital expenditures, net | (21,877 | ) | (24,223 | ) | ||||
| Business acquisitions, net of cash acquired | (5,173 | ) | (3,827 | ) | ||||
| Net cash used in investing activities | (282,719 | ) | (28,050 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net proceeds from the sale of Common stock | 281,784 | 15,179 | ||||||
| Net (repayments) proceeds under revolving credit agreement | (15,400 | ) | 49,200 | |||||
| Dividends on Common and Class B Common stock | (314,486 | ) | (286,122 | ) | ||||
| Other, net | 23,041 | 14,103 | ||||||
| Net cash used in financing activities | (25,061 | ) | (207,640 | ) | ||||
| Effect of foreign exchange rate changes on cash and cash equivalents | (2,183 | ) | (133 | ) | ||||
| Net increase in cash and cash equivalents | 84,242 | 27,517 | ||||||
| Cash and cash equivalents at beginning of period | 210,112 | 147,505 | ||||||
| Cash and cash equivalents at end of period | $ | 294,354 | $ | 175,022 | ||||
Barry S. Logan
Executive Vice President
(305) 714-4102
e-mail: blogan@watsco.com
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