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].
Watsco(WSO_B) - 2023 Q1 - Quarterly Report