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Watsco(WSO) - 2025 Q1 - Quarterly Results
WSOWatsco(WSO)2025-04-23 11:30
Transcript

Financial Performance - Revenues decreased 2% to 1.53billioncomparedto1.53 billion compared to 1.56 billion in the prior year[15] - Net income for Q1 2025 decreased to 94,540from94,540 from 104,262 in Q1 2024, representing a decline of approximately 10.5%[30] - Net cash used in operating activities was (177,644)inQ12025,comparedto(177,644) in Q1 2025, compared to 103,706 in Q1 2024, indicating a significant negative shift[30] Profitability and Margins - Gross profit margin improved by 60 basis points to 28.1% from 27.5% in the previous year[15] Cash Flow and Investments - Operating cash flow was a use of cash totaling 178million,reflectinginventoryinvestmentsinnewA2Lproducts[12]−Cashflowsfrominvestingactivitiesshowedanetinflowof178 million, reflecting inventory investments in new A2L products[12] - Cash flows from investing activities showed a net inflow of 244,556 in Q1 2025, contrasting with a net outflow of (210,965)inQ12024[30]−Thecompanyhadcapitalexpendituresof(210,965) in Q1 2024[30] - The company had capital expenditures of (7,443) in Q1 2025, up from (5,787)inQ12024,indicatingincreasedinvestmentinassets[30]DividendsandShareholderReturns−Watscoraiseditsannualdividendby11(5,787) in Q1 2024, indicating increased investment in assets[30] Dividends and Shareholder Returns - Watsco raised its annual dividend by 11% to 12.00 per share effective April 2025[3] - Dividends on Common and Class B Common stock increased to (109,037)inQ12025from(109,037) in Q1 2025 from (96,765) in Q1 2024, reflecting a rise of approximately 12.5%[30] Assets and Equity - Total assets as of March 31, 2025, were 4.45billion,withshareholders′equityat4.45 billion, with shareholders' equity at 3.09 billion[28] - Watsco's strong balance sheet includes 432millionincashandnooutstandingdebt[3]InventoryandWorkingCapital−Accountsreceivableincreasedsignificantlyto432 million in cash and no outstanding debt[3] Inventory and Working Capital - Accounts receivable increased significantly to 83,864 in Q1 2025 from (33,502)inQ12024,indicatingasubstantialchangeinworkingcapital[30]−Inventoriesnetincreasedto(33,502) in Q1 2024, indicating a substantial change in working capital[30] - Inventories net increased to (389,990) in Q1 2025 from (307,219)inQ12024,showingariseininventorylevels[30]MarketandSalesGrowth−CoreU.S.marketforresidentialreplacementsalesincreasedby10(307,219) in Q1 2024, showing a rise in inventory levels[30] Market and Sales Growth - Core U.S. market for residential replacement sales increased by 10% (12% on a same-day basis) due to new customer acquisition and improved product mix[6] - Watsco's digital user-community consists of approximately 67,000 contractors and technicians, leading to higher sales growth rates among digital users[4] - The company has acquired 11 companies since 2019, contributing to 1.6 billion in annualized sales[16] Foreign Exchange Impact - The effect of foreign exchange rate changes on cash and cash equivalents resulted in a positive impact of 319inQ12025,comparedtoanegativeimpactof319 in Q1 2025, compared to a negative impact of (2,390) in Q1 2024[30] Provisions and Doubtful Accounts - The company reported a provision for doubtful accounts of 840inQ12025,slightlydownfrom840 in Q1 2025, slightly down from 862 in Q1 2024[30] Transition to New Products - The transition to new A2L products affects approximately 55% of Watsco's sales and will convert nearly $1 billion of inventory over the year[5]