Watsco(US:WSO)2025-11-07 21:00Financial Performance - Revenues for the third quarter of 2025 were $2,067.0 million, a decrease of 4% compared to $2,160.0 million in the third quarter of 2024[87]. - Same-store sales for the third quarter of 2025 were $2,048.0 million, down 5% from $2,154.9 million in the same quarter of 2024[88]. - Gross profit for Q3 2025 was $568.9 million, a slight increase of $2.7 million or 0% compared to Q3 2024, with a gross margin improvement of 130 basis points to 27.5%[90]. - Revenues for the nine months ended September 30, 2025, were $5,660.5 million, a decrease of $203.9 million or 3% from $5,864.4 million in the same period of 2024[97]. - Same-store sales for the nine months ended September 30, 2025, were $5,615.3 million, down $231.5 million or 4% from $5,846.8 million in 2024[98]. - Gross profit for the nine months ended September 30, 2025, was $1,602.0 million, an increase of $25.4 million or 2% from $1,576.6 million in 2024, with a gross margin of 28.3%[99]. - Net income attributable to Watsco, Inc. was 7.8% of revenues in the third quarter of 2025, slightly down from 7.9% in the same quarter of 2024[83]. - Net income attributable to Watsco, Inc. decreased by $9.5 million or 6% in Q3 2025 compared to Q3 2024, primarily due to higher expenses and lower interest income[96]. Expenses and Costs - Cost of sales decreased to 72.5% of revenues in the third quarter of 2025, compared to 73.8% in the same quarter of 2024[83]. - Selling, general and administrative expenses rose to 16.6% of revenues in the third quarter of 2025, up from 15.1% in the same quarter of 2024[83]. - Selling, general and administrative expenses rose to $343.7 million in Q3 2025, a 5% increase from $326.4 million in Q3 2024, representing 16.6% of revenues[91]. - Interest income, net for Q3 2025 decreased by $3.0 million or 45% compared to Q3 2024, primarily due to lower cash and short-term investment balances[93]. Company Operations - The company operated 698 locations as of September 30, 2025, an increase from 689 locations a year earlier[86]. - The company acquired four businesses in 2025, including Southern Ice Equipment Distributors, Inc. and Hawkins HVAC Distributors, Inc.[84]. - HVAC equipment sales accounted for 67% of total sales in Q3 2025, down from 70% in Q3 2024, reflecting a 7% decrease[89]. Cash Flow and Working Capital - Net cash provided by operating activities decreased by $224.4 million to $169.8 million for the nine months ended September 30, 2025, compared to $394.2 million in 2024[113]. - Working capital increased to $2,303.8 million as of September 30, 2025, from $2,096.1 million at December 31, 2024, driven by higher inventory and accounts receivable[112]. Financing and Stock Activity - The company maintains an unsecured, five-year $600.0 million revolving credit agreement, with a seasonal borrowing capacity reduced to $500.0 million from October 1 to March 31[117][118]. - As of September 30, 2025, there was no outstanding balance under the revolving credit agreement, and the company was in compliance with all covenants[119]. - During Q1 2024, the company issued and sold 712,000 shares of Common stock under the 2021 ATM Program for net proceeds of $281.8 million, totaling $298.5 million issued under the program[121]. - The company entered into a new ATM Program on May 3, 2024, allowing for an additional $400.0 million in Common stock sales, with the full amount available as of September 30, 2025[122]. - Cash dividends paid per share increased from $7.85 in 2024 to $8.70 in 2025, with a quarterly dividend of $3.00 declared on October 1, 2025[132]. - 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 repurchase program, with 1,129,087 shares remaining authorized for repurchase[135]. Acquisitions - The company acquired Southern Ice Equipment Distributors, Inc. for $14.3 million in cash and 7,400 shares of Common stock, recognizing $7.8 million in goodwill[127]. - The acquisition of Hawkins HVAC Distributors, Inc. was completed for $2.5 million in cash, resulting in $0.3 million in goodwill[128]. - The company acquired W.L. Lashley & Associates, Inc. for $3.7 million in cash and 1,036 shares of Common stock, recognizing $3.1 million in goodwill[129]. Strategic Focus - The company has a focus on high-efficiency HVAC systems, which are expected to reduce CO2e emissions significantly[77]. - The U.S. Inflation Reduction Act of 2022 aimed to promote high-efficiency heat pump systems, but tax credits for HVAC systems will be unavailable after December 31, 2025[78]. - The company continues to evaluate potential acquisitions and joint ventures, indicating a strong financial position to pursue additional financing if needed[131].