Financial Performance - Revenue increased 7% to a record $2.1 billion, with a 4% increase on a same-store basis[7] - Gross profit rose 3% to $580 million, resulting in a gross margin of 27.1%[4] - Operating income reached $269 million, with an operating margin of 12.6%[7] - For the six months ended June 30, 2024, net income was $318.9 million, compared to $335.8 million for the same period in 2023, reflecting a decrease of approximately 5.2%[37] Cash Flow and Investments - Operating cash flow improved by $250 million compared to last year, totaling $161 million in 2024[9] - Cash provided by operating activities for the six months ended June 30, 2024, was $161.4 million, a significant improvement compared to a cash used of $89.2 million in the same period of 2023[37] - The company had $425 million in cash and short-term investments with no borrowings under its $600 million credit facility[14] Sales and Market Growth - Sales of heat pump HVAC systems exceeded $1.2 billion, outpacing growth rates for conventional HVAC systems[12] - E-commerce sales grew 13% during the quarter, accounting for 36% of total sales[24] - The annualized gross merchandise value (GMV) of products sold through OnCallAir® was approximately $1.4 billion for the twelve-month period ended June 30, 2024[24] Acquisitions and Business Expansion - Watsco completed 69 acquisitions, generating approximately $1 billion in annual sales from the last eight acquired businesses[6] Expenses and Profitability - SG&A expenses increased by 5%, improving 30 basis points as a percentage of sales[22] Assets and Liabilities - Total current assets increased to $3.03 billion as of June 30, 2024, from $2.39 billion at the end of 2023, representing an increase of approximately 26.8%[38] - Accounts receivable, net, rose to $1.00 billion as of June 30, 2024, compared to $797.8 million at the end of 2023, indicating a growth of about 25.4%[38] - Inventories, net, increased to $1.57 billion as of June 30, 2024, from $1.35 billion at the end of 2023, reflecting a rise of approximately 16.7%[38] - Total liabilities increased to $1.35 billion as of June 30, 2024, compared to $1.11 billion at the end of 2023, marking an increase of about 21.4%[38] - Watsco's shareholders' equity grew to $2.61 billion as of June 30, 2024, from $2.23 billion at the end of 2023, representing an increase of approximately 15.5%[38] Market Focus and Sustainability - The company focuses on the replacement market, with approximately 102 million HVAC systems in the U.S. over 10 years old, most operating below current efficiency standards[33] - Watsco aims to contribute to climate change mitigation by promoting higher efficiency HVAC systems, which are critical for reducing energy consumption and carbon footprint[29] Dividends - Watsco has paid dividends for 50 consecutive years and increased its annual dividend rate by 10% to $10.80 per share effective April 2024[28]

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, a 4% decline from $448.2 million in Q1 2023, resulting in a gross margin of 27.5% compared to 28.9% in the prior year[85]. - 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]. - Net income attributable to Watsco, Inc. for Q1 2024 was 5.6%, down from 7.1% in Q1 2023[78]. Expenses and Costs - 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% in Q1 2023[86]. - 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]. Cash Flow and 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]. - 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]. - Cash flows used in investing activities increased by $200.5 million, from $(10.4) million in Q1 2023 to $(210.9) million in Q1 2024, primarily due to short-term cash investments[97]. - The company has $600.0 million available under its revolving credit agreement, with no outstanding balance as of March 31, 2024[101]. Acquisitions and Growth - The company acquired 16 locations in the past 12 months, 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 1,904 shares of Common stock valued at $0.8 million on February 1, 2024[109]. Market and Product Insights - HVAC equipment sales reflected a 2% decrease in residential products, with a 3% decline in U.S. markets and a 6% increase in international markets[84]. - 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]. - 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]. Dividends - 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 on April 1, 2024[113]. Interest Income - Interest income for Q1 2024 increased by 502% to $3.1 million, primarily due to interest earned on cash and short-term investments[88].

Financial Performance - Revenues for the first quarter increased 1% to a record $1.56 billion, with a 2% decline on a same-store basis [8]. - Gross profit was $431 million, resulting in a gross margin of 27.5%, down from 28.9% in the previous year [29]. - Operating income decreased to $127 million, reflecting an operating margin of 8.1%, compared to 10.6% last year [29]. - Earnings per share were $2.17, down from $2.83 in the same quarter last year [8]. - Net income for Q1 2024 was $104,262 thousand, a decrease of 19.9% compared to $130,371 thousand in Q1 2023 [33]. Cash Flow and Assets - Record operating cash flow of $104 million was generated during the quarter [18]. - Cash and cash equivalents at the end of Q1 2024 were $278,864 thousand, up from $210,112 thousand at the beginning of the period, marking a net increase of 32.5% [33]. - Total current assets increased to $2,998,372 thousand in Q1 2024 from $2,391,931 thousand in Q4 2023, representing a growth of 25.4% [31]. - Net cash provided by operating activities was $103,706 thousand in Q1 2024, a significant recovery from a net cash used of $(47,421) thousand in Q1 2023 [33]. Liabilities and Equity - Total liabilities rose to $1,429,545 thousand in Q1 2024 from $1,112,992 thousand in Q4 2023, an increase of 28.4% [31]. - Shareholders' equity increased to $2,927,573 thousand in Q1 2024 from $2,616,190 thousand in Q4 2023, showing a growth of 11.9% [31]. Inventory and Receivables - Inventories increased to $1,655,635 thousand in Q1 2024 from $1,347,289 thousand in Q4 2023, reflecting a rise of 23% [31]. - The company reported a decrease in accounts receivable, net, of $33,502 thousand in Q1 2024, compared to a decrease of $64,691 thousand in Q1 2023 [33]. Business Growth and Investments - The company added three new companies to its portfolio since the beginning of last year, enhancing market share [5]. - The company made business acquisitions totaling $5,178 thousand in Q1 2024, compared to $2,989 thousand in Q1 2023 [33]. - The company raised $282 million through an equity offering under its at-the-market program [18]. Sales and Market Trends - Sales of heat pump HVAC systems exceeded $1.2 billion in 2023, continuing to outpace growth rates for conventional systems [14]. - E-commerce sales accounted for 33% of total sales, showing strong growth compared to overall sales [14]. Dividends - A 10% increase in the annual dividend to $10.80 per share was approved, effective April 2024 [4].

Financial Performance and Growth - Watsco's HVAC/R distribution revenues increased from $64.1 million in 1989 to $7.3 billion in 2023, reflecting a significant growth strategy through acquisitions and market expansion[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 estimated at $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, down from 68% in 2022; other HVAC products made up 27% in 2023, down from 28% in 2022[45] - The company expects to transition its inventory to HVAC equipment with refrigerants that comply with the new EPA standards, benefiting from higher sales prices for environmentally friendly units[70] Market Presence and Operations - As of December 31, 2023, Watsco operated 690 locations across 42 U.S. states, Canada, Mexico, and Puerto Rico, serving over 125,000 active contractors and dealers[16] - 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 largest market is the United States, particularly in the Sun Belt states, which have seen significant population growth and demand for HVAC products[47] - Joint ventures with Carrier represented 55% of revenues in 2023, with Carrier being the largest supplier, accounting for 65% of purchases[54][59] - The company serves over 125,000 active contractors and dealers, with no single customer representing more than 2% of consolidated revenues[56] Employee and Corporate Culture - Watsco employs approximately 7,425 individuals, with a voluntary turnover rate of about 19% in 2023, consistent with industry standards[35][36] - Watsco's culture promotes employee ownership through stock-based equity plans, with around 130 employees receiving equity awards in 2023[40] - The company has invested in approximately 300 technology employees to enhance digital capabilities and customer service[25] Environmental and Regulatory Factors - An estimated 19.2 million metric tons of CO2e emissions were averted from January 1, 2020, to December 31, 2023, through the sale of higher-efficiency residential HVAC systems, 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 higher-efficiency products, with $4.3 billion allocated for state-administered consumer rebate programs to promote energy savings[75] - The company completed the transition of its inventory to higher SEER products in 2023, aligning with new efficiency standards[69] Financial Management and Risks - The company relies on credit markets for financial commitments, and disruptions in these markets could adversely affect liquidity and operational performance[94] - The company plans to pursue additional acquisitions of complementary businesses, which may involve incurring additional debt and diluting existing shareholders' ownership[83] - The market price of the company's common stock may be highly volatile, influenced by various unpredictable factors[105] Governance and Compliance - 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 company has established security practices and safeguards to protect against cybersecurity threats, with a dedicated management team overseeing these efforts[109][110] - The report includes various exhibits and documents filed with the SEC, ensuring transparency and compliance[149]

Financial Performance - Revenues for Q3 2023 were $2,126.8 million, an increase of 4% compared to $2,035.8 million in Q3 2022, with $17.9 million attributed to new acquisitions and $1.7 million from new locations opened [81]. - Same-store sales for Q3 2023 were $2,107.2 million, reflecting a 4% increase from $2,033.3 million in Q3 2022 [83]. - Gross profit for Q3 2023 was $566.9 million, a 3% increase from $550.8 million in Q3 2022, with a gross margin of 26.7%, down 40 basis points from 27.1% in the prior year [84]. - Revenues for the nine months ended September 30, 2023, were $5,693.1 million, a slight decrease of $12.5 million or 0% compared to the same period in 2022 [90]. - Same-store sales decreased by 1% to $5,650.0 million for the nine months ended September 30, 2023 [91]. - Gross profit for the nine months ended September 30, 2023, was $1,577.7 million, down $19.0 million or 1% from the previous year, with a gross margin of 27.8% [92]. - Net income attributable to Watsco, Inc. rose by $13.3 million, or 8%, in Q3 2023 compared to the same period in 2022, driven by higher revenues and lower selling expenses [89]. Acquisitions and Growth Strategy - The company acquired Capitol District Supply Co., Inc. in March 2023 and Gateway Supply Company, Inc. in September 2023, contributing to its growth strategy [78]. - The company operated 691 locations as of September 30, 2023, an increase from 675 locations a year earlier, with 19 locations acquired and 5 opened during the year [80]. - The company acquired substantially all the assets of Gateway Supply Company, Inc. for a net purchase price of $106.3 million, consisting of $4.0 million in cash and 280,215 shares of Common stock [118]. - The company acquired Capitol, a distributor of air conditioning and heating products, for a total consideration of $3.1 million in cash and $1.9 million for repayment of indebtedness [119]. - The company continues to evaluate potential acquisitions and joint ventures, believing its financial position allows for obtaining additional debt financing or raising capital through equity securities if needed [120]. Expenses and Financial Management - Selling, general and administrative expenses decreased by 1% to $319.8 million for Q3 2023, with a same-store basis decrease of 2% compared to 2022 [85]. - Selling, general and administrative expenses for the nine months ended September 30, 2023, decreased by 1% to $911.0 million [94]. - Net interest expense increased by $1.4 million, or 291%, in Q3 2023 due to higher effective interest rates and increased borrowings [87]. - Cash flows provided by operating activities decreased by $95.6 million to $263.3 million for the nine months ended September 30, 2023 [105]. Market Conditions and Challenges - The company experienced a 1% revenue impact in Q3 2023 due to supply chain disruptions, with an estimated 3% impact for the first nine months of 2023 [73]. - The company anticipates continued challenges from inflationary pressures and supply chain disruptions affecting product availability and lead times [73]. - The U.S. Inflation Reduction Act of 2022 is expected to increase demand for higher-efficiency HVAC products, with $4.3 billion allocated for state-administered consumer rebate programs [72]. Shareholder Returns and Stock Management - The company paid cash dividends of $7.35 per share on Common and Class B common stock during the nine months ended September 30, 2023, compared to $6.35 per share in the same period of 2022 [121]. - 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 program, with 1,129,087 shares remaining authorized for repurchase [122]. - The valuation of the RSI Shareholders' common stock was approximately $426.0 million as of September 30, 2023, based on the criteria set forth in the Shareholders' Agreement [116]. - The company has the discretion to fund up to 80% of any purchase from the RSI Majority Holders using Watsco Common stock, with a limit of $125.0 million on the amount of RSI shares that may be sold during any rolling 12-month period [117]. Other Income and Financial Activities - Other income increased to $9.5 million in Q3 2023 from $6.9 million in Q3 2022, reflecting the company's 38.1% equity interest in Russell Sigler, Inc. [86]. - During the nine months ended September 30, 2023, the company issued and sold 45,000 shares of Common stock under the ATM Program for net proceeds of $15.2 million, with $284.7 million remaining available for sale under the program [113]. - The company entered into a second amended and restated sales agreement with Baird, removing GS as a sales agent under the ATM Program [114]. - There have been no material changes to the information regarding market risk since the last annual report [123].

Financial Performance - Revenues for Q2 2023 were $2,003.1 million, a decrease of 6% compared to $2,133.8 million in Q2 2022[84] - Same-store sales declined by 6%, from $2,131.3 million in Q2 2022 to $1,996.3 million in Q2 2023[85] - Gross profit for Q2 2023 was $562.6 million, down 6% from $595.5 million in Q2 2022, with a gross margin improvement to 28.1%[87] - Revenues for the first half of 2023 were $3,553.7 million, a decrease of $103.6 million, or 3%, compared to the first half of 2022[94] - Same-store sales for the first half of 2023 were $3,542.7 million, down $110.6 million, or 3%, from the same period in 2022[95] - Gross profit for the first half of 2023 was $1,010.8 million, a decrease of $35.1 million, or 3%, with a gross margin of 28.4%[96] - Net income attributable to Watsco, Inc. for Q2 2023 decreased by $19.8 million, or 10%, compared to Q2 2022, primarily due to lower revenues and gross profit[93] Expenses and Costs - Selling, general and administrative expenses decreased by 3% to $304.2 million in Q2 2023, representing 15.2% of revenues[88] - Selling, general and administrative expenses for the first half of 2023 were $591.2 million, down $6.9 million, or 1%, compared to the first half of 2022[97] - Interest expense, net for the first half of 2023 increased by $2.4 million, or 142%, primarily due to a higher effective interest rate[100] Inventory and Working Capital - The company estimates that revenues were negatively impacted by approximately 4% in Q2 2023 due to constrained inventory availability[76] - Working capital increased to $1,926.6 million as of June 30, 2023, from $1,392.2 million at December 31, 2022, driven by higher inventory and accounts receivable[108] Cash Flow and Dividends - Cash flows used in operating activities for the first half of 2023 were $(89.2) million, a decrease of $162.3 million compared to $73.1 million in 2022[109] - Cash dividends paid per share of Common stock were $4.90 for the six months ended June 30, 2023, compared to $4.15 for the same period in 2022[122] - The Board of Directors declared a quarterly cash dividend of $2.45 per share on July 3, 2023, to be paid on July 31, 2023[122] Acquisitions and Investments - On March 3, 2023, a subsidiary acquired Capitol for a total consideration of $3.1 million, which includes $1.3 million in cash and $1.8 million for debt repayment[120] - The company is actively evaluating potential acquisitions and believes its financial position allows for obtaining additional debt financing or raising capital through equity securities if needed[121] - The company routinely holds discussions with several acquisition candidates, indicating a proactive approach to growth through potential mergers and acquisitions[121] - The agreement with RSI Majority Holders allows Carrier Enterprise I to fund up to 80% of any purchase using Watsco Common stock, with a limit of $125.0 million on shares sold in any rolling 12-month period[119] Environmental Impact - The company averted an estimated 17.4 million metric tons of CO2e emissions from January 1, 2020, to June 30, 2023, through the sale of higher-efficiency HVAC systems[73] - The Inflation Reduction Act of 2022 is expected to increase demand for high-efficiency HVAC products, with $4.3 billion allocated for consumer rebate programs[75] - The transition to higher SEER products, effective in 2023, has created challenges in supply chain and product availability, impacting revenue[76] Company Operations - The company operates 673 locations as of June 30, 2023, with no net change in locations from the previous year[83] - There have been no material changes to market risk disclosures since the last annual report[124]

Financial Performance - Revenues for Q1 2023 were $1,550.6 million, a 2% increase from $1,523.6 million in Q1 2022, with $1.0 million from new acquisitions and $3.2 million from new locations opened [81]. - Same-store sales increased by 2% to $1,546.4 million in Q1 2023 from $1,522.0 million in Q1 2022 [82]. - Gross profit for Q1 2023 was $448.2 million, with a gross margin of 28.9%, down from 29.6% in Q1 2022, primarily due to lower pricing benefits from suppliers [83]. - Net income attributable to Watsco for Q1 2023 decreased by $3.2 million, or 3%, compared to Q1 2022, primarily due to lower gross profit and higher expenses [89]. Expenses and Costs - Selling, general and administrative expenses rose to $287.1 million in Q1 2023, representing 18.5% of revenues, a slight decrease from 18.6% in Q1 2022 [85]. - Interest expense for Q1 2023 increased by 10% due to a higher effective interest rate, despite lower average outstanding borrowings [87]. Cash Flow and Working Capital - Cash flows used in operating activities improved by $54.2 million, from $(101.6) million in Q1 2022 to $(47.4) million in Q1 2023 [95]. - Working capital increased to $1,644.7 million as of March 31, 2023, up from $1,392.2 million at December 31, 2022, driven by higher inventory and accounts receivable [94]. - The company had $141.0 million in cash and cash equivalents as of March 31, 2023, with $123.2 million held by foreign subsidiaries [91]. Acquisitions and Growth Strategy - The acquisition of Capitol District Supply Co., Inc. in March 2023 contributed to the company's growth strategy [77]. - The acquisition of Capitol, a distributor with annual sales of approximately $13.0 million, was completed for $1.3 million in cash and $1.8 million for debt repayment [105]. - The company is evaluating potential acquisitions and joint ventures, indicating a proactive approach to growth opportunities [106]. Supply Chain and Market Conditions - The company experienced supply chain disruptions that resulted in an estimated 3% of lost revenues during Q1 2023 [72]. - HVAC equipment sales accounted for 68% of total sales, with a 2% increase in revenue, while commercial refrigeration products saw a 12% increase [82]. - The U.S. Inflation Reduction Act of 2022 is expected to boost demand for high-efficiency products, with $4.3 billion allocated for state-administered consumer rebate programs [70]. Credit and Dividends - On March 16, 2023, the company entered into a $600.0 million revolving credit agreement, replacing a $560.0 million facility, with proceeds used to repay $235.5 million outstanding [99]. - As of March 31, 2023, $197.6 million was outstanding under the revolving credit agreement, with compliance to all covenants confirmed [101]. - The company paid cash dividends of $2.45 per share in Q1 2023, compared to $1.95 per share in Q1 2022 [107]. Environmental Impact - The company averted an estimated 15.8 million metric tons of CO2e emissions from January 1, 2020, to December 31, 2022, through the sale of higher-efficiency HVAC systems [69].

Revenue Growth and Market Expansion - Watsco's revenues in HVAC/R distribution increased from $64.1 million in 1989 to $7.3 billion in 2022, reflecting a significant growth strategy through acquisitions and market expansion[15] - The annual market for residential central air conditioning, heating, and refrigeration equipment is estimated at approximately $123.0 billion in the U.S.[18] - Watsco has acquired 66 HVAC/R distribution businesses since 1989, enhancing its market presence and operational capabilities[30] - Watsco, Inc. reported a significant increase in revenue, achieving $1.5 billion for the quarter, representing a 15% year-over-year growth[150] - Watsco, Inc. provided an optimistic outlook for the next quarter, projecting revenue growth of 12% to 15% based on current market trends[150] - The company announced a strategic acquisition of a regional distributor, expected to contribute an additional $200 million in annual revenue[150] Market Trends and Demand - Approximately 102 million central air conditioning and heating systems in the U.S. have been in service for over 10 years, indicating a growing replacement market[19] - 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[56] - New efficiency standards for residential HVAC systems will take effect in 2023, potentially increasing demand for higher efficiency units[67] - Demand for higher-efficiency products is expected to increase due to regulatory mandates that periodically raise minimum SEER requirements[72] Technology and Innovation - Watsco has invested in approximately 300 technology employees to modernize and digitize its business operations[24] - The company has launched several customer-focused technology platforms, including mobile applications and e-commerce solutions, to enhance customer experience[25] - Watsco, Inc. is implementing new technology initiatives, including a digital platform upgrade, aimed at improving customer experience and operational efficiency[150] - The company is actively investing in new product development, with a budget allocation of $50 million for innovative HVAC solutions[150] Operational and Financial Management - The company operates 673 locations as of December 31, 2022, with 91% of revenues generated from the United States[44] - The company maintains 832 ground transport vehicles, including delivery and pick-up trucks, with 554 trucks leased[117] - The company relies on the credit markets for financial commitments, and disruptions in these markets could adversely affect its liquidity and operations[89] - The company maintains effective disclosure controls and procedures as evaluated by the CEO, EVP, and CFO[135] - There were no changes in internal controls over financial reporting during the quarter ended December 31, 2022, that materially affected internal control[137] - The company continuously seeks to improve the efficiency and effectiveness of its internal controls[137] Supplier Relationships and Risks - Joint ventures with Carrier represented 54% of revenues in 2022, highlighting the importance of supplier relationships[51] - The top ten suppliers accounted for 84% of purchases, with 60% from Carrier and 8% from Rheem, indicating a high supplier concentration risk[57] - The company maintains trade name and distribution agreements with major manufacturers, including Carrier, Rheem, and Mitsubishi, providing exclusive distribution rights in specified territories[58] - The company is exposed to various international risks, including changes in local laws and political instability, which could adversely affect operations and supply chain[101] Sustainability and Corporate Responsibility - The company averted an estimated 15.8 million metric tons of CO2e emissions from January 1, 2020, to December 31, 2022, equivalent to nearly 3.4 million passenger vehicles driven for one year[73] - Watsco, Inc. plans to enhance its sustainability efforts, committing to reduce carbon emissions by 30% over the next five years[150] - The U.S. Inflation Reduction Act of 2022 includes $4.3 billion for state-administered consumer rebate programs aimed at promoting energy savings for low and medium-income households, including HVAC systems[74] Shareholder and Stock Management - The company’s Class B common stock represents 88% of the outstanding shares of Class B common stock, giving directors and executive officers significant voting power[103] - The company’s ability to pay dividends depends on cash flow, profitability, and other factors, with the Board of Directors having sole discretion over future dividends[108] - A total of 311,408 shares were purchased at an average price of $271.73 during October 2022[128] - The company funded $104.3 million in statutory withholding for the CEO's vested shares, satisfied by a cash payment of $19.7 million and the surrendering of 311,408 shares[128] - Since the repurchase plan's inception in September 1999, a total of 6,370,913 shares have been repurchased at a cost of $114.4 million[129] - The company’s board approved a new share repurchase program, authorizing up to $100 million in stock buybacks to enhance shareholder value[150]

Revenue and Sales Performance - Revenues for Q3 2022 increased by $253.2 million, or 14%, with HVAC equipment sales (69% of total sales) rising by 13%[91] - Sales of residential HVAC equipment grew by 13%, while commercial HVAC equipment sales increased by 20%[91] - Revenues for the nine months ended September 30, 2022, increased by $924.8 million, or 19%, with HVAC equipment sales accounting for 69% of total sales[98] Profitability and Margins - The gross profit margin for the nine months ended September 30, 2022, was 28.0%, up from 26.3% in the same period of 2021[87] - Gross profit for Q3 2022 increased by $68.2 million, or 14%, with a gross profit margin of 27.1%[92] - Gross profit for the nine months ended September 30, 2022, increased by $341.3 million, or 27%, with a gross profit margin improvement to 28.0%[100] - Net income attributable to Watsco for Q3 2022 increased by $16.8 million, or 12%, driven by higher revenues[97] - Net income attributable to Watsco for the nine months ended September 30, 2022, increased by $123.4 million, or 36%[105] Expenses and Financial Position - Selling, general and administrative expenses for Q3 2022 rose by $39.6 million, or 14%, maintaining a percentage of revenues at 15.8%[93] - Interest expense, net for Q3 2022 increased by $0.3 million, or 119%, due to higher average outstanding borrowings[95] - Cash flows provided by operating activities for the nine months ended September 30, 2022, were $358.9 million, an increase of $39.2 million from 2021[112] - Working capital increased to $1,470.4 million as of September 30, 2022, from $1,234.7 million at December 31, 2021[111] Acquisitions and Investments - On August 20, 2021, the company acquired MIS for a total consideration of $4.2 million, consisting of $3.2 million in cash and $1.0 million in common stock[123] - On May 7, 2021, the company acquired ACME for $22.9 million, which included $18.1 million in cash and $2.6 million in common stock[124] - On April 9, 2021, the company acquired the HVAC distribution business of Temperature Equipment Corporation for $106.7 million, with the company contributing $84.2 million in cash[125] - The company is actively evaluating potential acquisitions and joint ventures, indicating a strong financial position to pursue additional financing if needed[126] Shareholder Returns - Cash dividends paid per share increased from $5.675 in 2021 to $6.35 in 2022, with an annual cash dividend increase from $8.80 to $9.80 effective January 2023[127] - The company has repurchased a total of 6,370,913 shares of common stock at a cost of $114.4 million since the inception of the share repurchase program[128] - As of September 30, 2022, there were 1,129,087 shares remaining authorized for repurchase under the program[128] Environmental Impact - The company averted an estimated 14.2 million metric tons of CO2e emissions from January 1, 2020, to September 30, 2022, through the sale of higher-efficiency HVAC systems[79] Operational Metrics - The company operated from 675 locations as of September 30, 2022, an increase from 673 locations a year earlier[90] - The average selling price for HVAC equipment rose by 14%, despite a 1% decrease in volume[91] - Higher-efficiency residential HVAC systems sales grew 23% organically during the nine months ended September 30, 2022, outpacing the overall growth rate of 17% for residential HVAC equipment in the U.S.[79] Supply Chain and Market Risks - The company estimates that supply chain disruptions resulted in approximately 3% to 4% of lost revenues during the first nine months of 2022[75] - There have been no material changes to the market risk information disclosed in the Annual Report for the year ended December 31, 2021[129] - The company has an 80% controlling interest in multiple joint ventures with Carrier Global Corporation, enhancing its market presence[80][81][82][83]

Revenue Growth - Revenues for Q2 2022 increased by $284.1 million, or 15%, compared to Q2 2021, with HVAC equipment sales (70% of total sales) rising by 19%[86] - On a same-store basis, revenues increased by $263.8 million, or 14%, reflecting a 13% increase in HVAC equipment sales, including a 15% increase in residential HVAC equipment sales in U.S. markets[86] - Revenues for the first half of 2022 increased by $671.6 million, or 22%, with HVAC equipment sales (69% of sales) rising by 24%[94] Profitability - Net income attributable to Watsco, Inc. for the six months ended June 30, 2022, was 8.4%, up from 6.7% in the same period of 2021[82] - Gross profit margin for Q2 2022 was 27.9%, compared to 25.8% in Q2 2021, indicating improved profitability[82] - Gross profit for Q2 2022 increased by $117.6 million, or 25%, with a gross profit margin improvement of 210 basis points to 27.9% compared to Q2 2021[88] - Net income attributable to Watsco, Inc. for Q2 2022 increased by $48.5 million, or 34%, driven by higher revenues and expanded profit margins[93] - Gross profit for the first half of 2022 increased by $273.1 million, or 35%, with a gross profit margin improvement of 270 basis points to 28.6% compared to the first half of 2021[95] - Net income attributable to Watsco, Inc. for the first half of 2022 increased by $106.7 million, or 54%, compared to the same period in 2021[100] Expenses - Selling, general and administrative expenses as a percentage of revenues increased to 16.4% for the six months ended June 30, 2022, from 16.2% in the same period of 2021[82] - Selling, general and administrative expenses for Q2 2022 rose by $48.1 million, or 18%, with expenses as a percentage of revenues increasing to 14.8% from 14.4% in Q2 2021[89] Locations and Operations - The company operated 673 locations as of June 30, 2022, an increase from 655 locations a year earlier, with 16 new locations opened and 6 acquired[85] Environmental Impact - The company averted an estimated 12.9 million metric tons of CO2e emissions from January 1, 2020, to June 30, 2022, through the sale of higher-efficiency HVAC systems[75] Financial Position - Working capital increased to $1,562.6 million as of June 30, 2022, from $1,234.7 million at December 31, 2021, primarily due to higher inventory levels[105] - Cash flows provided by operating activities decreased by $8.8 million to $73.1 million for the first half of 2022 compared to $81.9 million in 2021[106] - As of June 30, 2022, the company had $129.0 million in cash and cash equivalents, with $99.3 million held by foreign subsidiaries[102] Acquisitions - On August 20, 2021, a subsidiary acquired MIS for a total consideration of $4.2 million, including $3.2 million in cash and $1.0 million in common stock[117] - On May 7, 2021, the acquisition of ACME was completed for $22.9 million, consisting of $18.1 million in cash and $2.6 million in common stock[118] - The HVAC distribution business of Temperature Equipment Corporation was acquired for $106.7 million, with the company contributing $84.2 million in cash[119] - The company is actively evaluating potential acquisitions and believes its financial position allows for obtaining additional debt financing or raising capital through equity securities[120] Shareholder Returns - Cash dividends paid per share increased from $3.725 in 2021 to $4.15 in 2022, with a quarterly dividend of $2.20 declared on July 1, 2022[121] - Since the inception of the share repurchase program, 6,370,913 shares have been repurchased at a total cost of $114.4 million, with 1,129,087 shares remaining authorized for repurchase[123]