Continued Customer Adoption of Industry-Leading Technologies Helps Drive Share Gains; Debt-Free Balance Sheet Supports Long-Term Investment and Growth MIAMI, July 30, 2024 (GLOBE NEWSWIRE) -- Watsco, Inc. (NYSE: WSO) announced its operating results for the second quarter and six-month period ended June 30, 2024. Commentary was also provided on business trends, growth opportunities, technology innovation and its financial position. Watsco is the largest distributor in the highly fragmented $64 billion North ...

While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise. Estimate Revisions Trend The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on July 30. On the other hand, if they miss, the stock may move lower. This heating and cooling company is e ...

Company Overview - Watsco, Inc. operates the largest distribution network for heating, air conditioning, and refrigeration (HVAC/R) products across the United States, Canada, Mexico, and Puerto Rico, with additional export operations to Latin America and the Caribbean [5] - The company has 691 locations that serve over 375,000 owner-operators, technicians, and installers annually, providing information, technical support, and product sales [5] Market Focus - Watsco focuses on the replacement market, which is growing due to the aging of installed HVAC systems, the introduction of more energy-efficient models, and the essential nature of HVAC products in residential and commercial settings [6] - Approximately 102 million HVAC systems in the U.S. are over 10 years old and operate below current efficiency standards, indicating a significant opportunity for replacement [6] Environmental Impact - Watsco plays a crucial role in addressing climate change by contributing to the reduction of CO2e emissions through the sale of higher-efficiency HVAC systems [7] - HVAC systems account for about half of U.S. household energy consumption, making the replacement of older systems a vital strategy for reducing electricity use and carbon footprints [7] - From January 1, 2020, to June 30, 2024, Watsco is estimated to have averted 20.9 million metric tons of CO2e emissions, equivalent to removing 5 million gas-powered vehicles from the road annually [8]

Company Overview - Watsco, Inc. operates the largest distribution network for heating, air conditioning, and refrigeration (HVAC/R) products across the United States, Canada, Mexico, and Puerto Rico, with additional exports to Latin America and the Caribbean [4] - The company has 691 locations that serve over 375,000 owner-operators, technicians, and installers annually, providing information, technical support, and product sales [4] Market Insights - The replacement market for HVAC systems is growing due to the aging of installed systems, the introduction of more energy-efficient models, and the essential nature of HVAC products in residential and commercial settings [2] - Approximately 102 million HVAC systems in the U.S. have been in service for over 10 years, many of which operate below current minimum efficiency standards [2] Environmental Impact - Watsco has contributed to a significant reduction in CO2e emissions, averting an estimated 20.9 million metric tons from January 1, 2020, to June 30, 2024, through the sale of higher-efficiency replacement HVAC systems [5] - This reduction is equivalent to removing 5.0 million gas-powered vehicles from the road annually [5] - HVAC systems account for roughly half of U.S. household energy consumption, making the replacement of older systems with higher efficiency models critical for reducing electricity consumption and carbon footprints [8] Upcoming Events - Watsco will host a conference call on July 30, 2024, at 10:00 a.m. (EDT) to discuss its second-quarter results, with prepared remarks followed by a Q&A session [1][6] - Investors and analysts are encouraged to pre-register for the call to receive a unique PIN for immediate access [3]

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 s ...

MIAMI, July 01, 2024 (GLOBE NEWSWIRE) -- Watsco, Inc.'s (NYSE: WSO) Board of Directors has declared a regular quarterly cash dividend of $2.70 on each outstanding share of its Common and Class B common stock payable on July 31, 2024 to shareholders of record at the close of business on July 16, 2024. Watsco has paid dividends to shareholders for 50 consecutive years. The Company's philosophy is to share cash flow through dividends while maintaining a conservative balance sheet with continued capacity to bui ...

Financial Performance - Revenues for Q1 2024 were $1,565.0 million, a 1% increase from $1,550.6 million in Q1 2023, with $51.4 million attributed to new locations acquired[83] - Same-store sales decreased by 2%, from $1,549.8 million in Q1 2023 to $1,512.5 million in Q1 2024[84] - Gross profit for Q1 2024 was $430.6 million, down 4% from $448.2 million in Q1 2023, resulting in a gross margin decline to 27.5% from 28.9%[85] - Selling, general and administrative expenses increased by 8% to $309.5 million in Q1 2024, with expenses as a percentage of revenues rising to 19.8% from 18.5%[86] - Operating income for Q1 2024 was $126.5 million, a decrease from $164.0 million in Q1 2023, leading to an operating margin of 8.1% compared to 10.6%[78] - Net income attributable to Watsco, Inc. for Q1 2024 was $87.6 million, or 5.6% of revenues, down from $109.0 million, or 7.1% of revenues in Q1 2023[78] - Net income attributable to Watsco for Q1 2024 decreased by $23.1 million, or 21%, compared to Q1 2023, primarily due to lower gross profit and higher selling, general, and administrative expenses[90] Cash Flow and Working Capital - Cash flows provided by operating activities increased by $151.1 million, from $(47.4) million in Q1 2023 to $103.7 million in Q1 2024[97] - Working capital increased to $1,972.2 million as of March 31, 2024, up from $1,679.9 million at December 31, 2023, driven by higher inventory and accounts receivable[96] - The company had $278.9 million in cash and cash equivalents as of March 31, 2024, with $176.1 million held by foreign subsidiaries[94] Investments and Acquisitions - The company acquired 16 locations in the past year, bringing the total number of locations to 691 as of March 31, 2024[82] - The company acquired CSI, a distributor of HVAC products, for a total consideration of $6.0 million in cash and stock, and GWS, a plumbing and HVAC distributor, for a net purchase price of $4.0 million in cash and stock[109][110] - Cash flows used in investing activities increased by $200.5 million, primarily due to the purchase of $200.0 million in short-term cash investments in 2024[99] Tax and Dividends - The effective income tax rate decreased from 23.3% in Q1 2023 to 21.8% in Q1 2024, attributed to higher share-based compensation deductions[89] - The company paid cash dividends of $2.45 per share during both Q1 2024 and Q1 2023, with a new dividend of $2.70 declared for April 2024[113] Interest and Environmental Impact - Interest income for Q1 2024 increased by 502% to $3.1 million, primarily due to higher interest earned on cash and short-term investments[88] - The company averted an estimated 20.1 million metric tons of CO2e emissions from January 1, 2020, to March 31, 2024, through the sale of higher-efficiency HVAC systems[72] - The U.S. Inflation Reduction Act of 2022 is expected to increase demand for high-efficiency products, with $4.3 billion allocated for state-administered consumer rebate programs[73] Stock and Credit Facilities - The company issued and sold 712,000 shares of Common stock under the ATM Program for net proceeds of $281.8 million during Q1 2024[104] - The company maintains a $600.0 million revolving credit agreement, with no outstanding balance as of March 31, 2024[102]

Exhibit 99.1 Watsco Reports Record First Quarter Sales, Record Cash Flow and Improving Business Trends Ahead of Summer Selling Season Continued Customer Adoption of Industry-Leading Technologies Drives Share Gains; Company Strengthens Balance Sheet for Long-Term Investment and Growth MIAMI, FLORIDA – (GLOBENEWSWIRE), April 24, 2024 – Watsco, Inc. (NYSE: WSO) announced its operating results for the first quarter ended March 31, 2024 and provided commentary on business trends, growth opportunities, technology ...

Financial Performance and Growth - Watsco's revenues in HVAC/R distribution increased from $64.1 million in 1989 to $7.3 billion in 2023, reflecting a significant growth strategy through acquisitions and product introductions[16] - The HVAC/R distribution industry in the U.S. has an estimated annual market size of $64.0 billion, with residential HVAC/R products valued at approximately $126.0 billion[18] - The company has acquired 69 HVAC/R distribution businesses since 1989, enhancing its market presence and operational capabilities[31] - HVAC equipment sales accounted for 69% of revenues in 2023, a slight increase from 68% in 2022[45] - The joint ventures with Carrier represented 55% of total revenues in 2023[54] - The replacement market for residential air conditioning equipment is estimated to be 85%-90% of industry unit sales in the U.S., expected to increase as older units are replaced[58] Operations and Workforce - As of December 31, 2023, Watsco operated from 690 locations across 42 U.S. States, Canada, Mexico, and Puerto Rico, serving over 125,000 active contractors and dealers[16] - Watsco employed approximately 7,425 employees as of December 31, 2023, with a voluntary turnover rate of about 19%[35][36] - The company has approximately 1,200 salespeople with an average of 11 years of experience in the HVAC/R distribution industry[46] - The company operated 690 warehousing and distribution facilities across 42 U.S. states, Canada, Mexico, and Puerto Rico, totaling approximately 16.4 million square feet, with 16.2 million square feet leased[113] - The company has 821 ground transport vehicles, of which 596 are leased, indicating a significant investment in logistics[114] Innovation and Technology - The company has invested in approximately 300 technology employees to modernize and digitize its business operations[25] - The company maintains a culture of innovation, focusing on customer service, product expansion, and technology implementation to enhance service capabilities[27] - Watsco's strategy includes expanding product lines and introducing private-label products to capture market share and grow revenues[29] - The company completed the transition of its inventory to higher SEER products in 2023, with new minimum efficiency levels established[69] - The company plans to transition its inventory to comply with new refrigerant standards, anticipating higher sales prices for environmentally friendly units[70] Environmental and Regulatory Compliance - The AIM Act mandates an 85% phasedown of HFC production and consumption over 15 years starting January 1, 2022, with HVAC equipment required to use refrigerants with less than 750 GWP by January 1, 2025[70] - The company estimates it has averted approximately 19.2 million metric tons of CO2e emissions from January 1, 2020, to December 31, 2023, equivalent to nearly 4.3 million gas-powered vehicles driven for one year[74] - The U.S. Inflation Reduction Act of 2022 is expected to increase demand for high-efficiency products, with $4.3 billion allocated for state-administered consumer rebate programs for energy savings[75] Supplier and Customer Relations - The top ten suppliers accounted for 86% of purchases, with 65% from Carrier and 8% from Rheem[59] - The company maintains trade name and distribution agreements with major manufacturers, including Carrier, Rheem, and Mitsubishi, providing exclusive distribution rights in specified territories[60] - The company serves over 125,000 active contractors and dealers, with no single customer representing more than 2% of consolidated revenues[56] Financial Management and Shareholder Information - Directors and executive officers own 1% of the outstanding shares of Common stock and 89% of Class B common stock, representing 55% of the combined voting power[102] - The company repurchased 505 shares of Class B common stock during November 2023 to satisfy tax withholding obligations[125] - Cumulative total shareholder return for Watsco, Inc. Class B common stock increased from 100.00 in 2018 to 369.56 by December 31, 2023[124] - The company has repurchased a total of 6,370,913 shares of Common and Class B common stock at a cost of $114.4 million since the inception of the repurchase plan[126] - The company’s Class B common stock is entitled to ten votes per share, compared to one vote for Common stock, providing significant control to Class B shareholders[103] - The company’s ability to pay dividends is subject to cash flow, profitability, and legal restrictions under Florida law[106] - The market price of the company’s common stock may be highly volatile, influenced by various unpredictable factors[105] Internal Controls and Compliance - There were no changes in internal controls over financial reporting during the quarter ended December 31, 2023, that materially affected internal control[134] - The company's management, including the CEO, EVP, and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of the end of the reporting period[132] - The report was signed by the Chief Executive Officer and Chief Financial Officer on February 23, 2024, indicating compliance with SEC requirements[151] - The report includes consents from independent registered public accounting firms, Deloitte & Touche LLP and KPMG LLP[149] - The report includes various exhibits and documents filed with the SEC, ensuring transparency and compliance[149]

Financial Data and Key Metrics Changes - Watsco achieved a gross margin of 27.4% for the year, which is an improvement compared to previous years, but the fourth quarter gross margin was slightly below long-term aspirations [18][20][65] - The company generated record cash flow in the fourth quarter and announced a meaningful dividend increase for 2024, marking the 50th consecutive year of dividend payments [5][6] Business Line Data and Key Metrics Changes - Residential unit volumes stabilized in the second half of 2023, although they were still down overall [8] - Sales of ductless systems grew in double digits, offsetting declines in conventional residential business [9] - The commercial business continued to grow at a healthy rate, with a backlog extending well into the next year [8][59] Market Data and Key Metrics Changes - The HVAC market is experiencing a transition to new A2L products with lower GWP refrigerants, which is expected to positively impact the industry [7] - The company noted that commercial HVAC sales were up in the teens year-over-year, while residential sales were down [59] Company Strategy and Development Direction - Watsco is focused on long-term growth, leveraging its technology advantage and market-leading scale to pursue acquisitions in a fragmented industry [12][13] - The company aims to improve productivity and overall efficiencies, with a focus on maintaining a strong balance sheet [10][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, viewing industry weakness as an opportunity for acquisitions [28] - The transition to A2L products is expected to drive price increases and improve margins, although the timing of these changes is uncertain [26][66] Other Important Information - The company reduced inventory by $208 million, aiming for higher inventory turns and better cash flow [40][41] - Watsco's accounts receivable and bad debt levels remain stable, indicating a healthy credit environment [44] Q&A Session Summary Question: Can you unpack the factors affecting gross margins in the fourth quarter? - Management explained that the fourth quarter's gross margin was impacted by prior year pricing benefits and a mix difference between equipment and non-equipment products [20][21] Question: What are the expectations for unitary HVAC systems in 2024? - Management noted that while there was a significant drop in unit volumes, they expect a more stable environment moving forward [25][29] Question: What is the outlook for pricing in 2024? - Price increases of 4% to 6% have already been announced, with additional increases expected from the introduction of A2L products [30][31] Question: How is the company managing SG&A expenses? - Management indicated that they are focused on improving productivity and reducing variable expenses, with expectations for single-digit declines in SG&A [33] Question: What is the impact of the EPA ruling on the AIM Act? - The ruling does not change the transition dates but allows for a one-year sell-through of 410A products [56][58] Question: What is the outlook for commercial HVAC sales? - Commercial sales were strong, with a backlog indicating continued strength in the market [59][60]