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]
Watsco(WSO_B) - 2023 Q2 - Quarterly Report