Financial 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, with a decline of $106.9 million in same-store sales [87]. - Gross profit margin increased to 27.5% in the third quarter of 2025 from 26.2% in the same quarter of 2024, while operating income was 11.4% compared to 11.6% in the prior year [83]. - The company reported net income attributable to Watsco, Inc. of 7.8% for Q3 2025, slightly down from 7.9% in Q3 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]. - 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]. - Gross profit for the nine months ended September 30, 2025, was $1,602.0 million, an increase of $25.4 million or 2% compared to $1,576.6 million in 2024, with a gross margin of 28.3% [99]. - Selling, general and administrative expenses for the nine months ended September 30, 2025, were $1,005.2 million, a 5% increase from $955.0 million in 2024, representing 17.8% of revenues [101]. Expenses and Costs - Selling, general and administrative expenses as a percentage of revenues increased to 16.6% in Q3 2025 from 15.1% in Q3 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]. - Cash flows 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]. - Interest income, net for Q3 2025 decreased by $3.0 million or 45% compared to the same period in 2024, primarily due to lower cash balances [93]. Operational Metrics - The company operated 698 locations as of September 30, 2025, an increase from 689 locations a year earlier, with 10 locations acquired and 9 closed during the year [86]. - HVAC equipment sales accounted for 67% of total sales in Q3 2025, down from 70% in Q3 2024, reflecting a 7% decrease [89]. - 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]. Strategic Initiatives - The company continues to monitor macroeconomic conditions and trade policies that may impact its supply chain and pricing strategies [71]. - The company has taken pricing actions to mitigate the effects of tariffs and inflationary pressures on its product costs [71]. - The company expects regulatory mandates to periodically increase the required minimum Seasonal Energy Efficiency Ratio (SEER) rating, which could drive sales of higher-efficiency systems [74]. - 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]. Shareholder Actions - The company paid cash dividends of $8.70 per share for the nine months ended September 30, 2025, compared to $7.85 per share for the same period in 2024 [132]. - The Dividend Reinvestment Plan (DRIP) was implemented on March 29, 2024, allowing shareholders to acquire up to 300,000 shares through reinvested dividends [133]. - A total of 47,751 shares were issued under the DRIP during the nine months ended September 30, 2025 [134]. - The company has repurchased 6,370,913 shares at a cost of $114.4 million since the inception of the share repurchase program, with 1,129,087 shares remaining authorized for repurchase [135]. Financing Activities - The company maintains a $600.0 million unsecured revolving credit agreement, which can be reduced to $500.0 million seasonally from October 1 to March 31 [117]. - 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 712,000 shares 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 [122]. 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].
Watsco(WSO_B) - 2025 Q3 - Quarterly Report