Financial Data and Key Metrics Changes - Sales declined by 4% despite double-digit pricing gains for new equipment, offset by lower volumes [6][7] - Gross profit margins reached record levels, leading to an increase in EBIT and expanded EBIT margins [7][8] - SG&A expenses increased by 6% due to transition costs and the addition of 10 new locations from recent acquisitions [8][9] - The company maintains a strong cash position with no debt [9] Business Line Data and Key Metrics Changes - Residential new construction and international markets remain subdued, with residential new construction down by 15% to 20% [19] - E-commerce sales grew to $2.5 billion, representing 34% of total sales, with mobile app users increasing by 17% year-over-year [9][10] - The annual volume of products sold through OnCallAir increased by 19% to $1.6 billion [10] Market Data and Key Metrics Changes - International sales, particularly in Mexico, were volatile and negatively impacted earnings by approximately $0.10 per share in the quarter [22] - The company expects improvements in July and August, indicating a better market outlook [23] Company Strategy and Development Direction - The company is focused on transitioning to next-generation equipment with A2L refrigerants, affecting about 55% of historical product sales [5][6] - A new technology-driven sales platform is being developed to capture larger national customers, expected to launch in 2026 [10][11] - The company aims to grow the parts and supply segment, which currently represents about 30% of sales [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a soft market but remains optimistic about future growth and market share development [25][26] - The company is focused on improving gross margins and inventory turns, with a goal of reaching 30% gross profit margin [11][84] - Management emphasizes the importance of innovation and technology in maintaining competitive advantage [12][93] Other Important Information - The company is actively pursuing M&A opportunities, leveraging its strong balance sheet [55][56] - Management is committed to improving inventory management and reducing excess inventory levels [50][53] Q&A Session Summary Question: What happened to volumes in the quarter? - Management noted that volumes were weaker than expected due to weather patterns and a decline in residential new construction, but saw improvements in July [19][20] Question: How sustainable are the gross margins? - Management indicated that while the current gross margin of 29% is strong, it may not be sustainable in the second half of the year due to the absence of pricing benefits seen in the first half [27][28] Question: What is the impact of the canister shortage? - Management stated that the canister shortage was less of a concern now and that they expect to be off allocation by August [40][41] Question: How is the inventory investment trending? - The company reported a significant inventory investment due to the transition, but is focused on improving inventory turns moving forward [50][52] Question: What are the thoughts on consumer preferences during the product transition? - Management observed that the market remains focused on minimum efficiency products, with no significant shift towards high-efficiency systems [61][62] Question: Are there any incentives being requested by contractors? - Management indicated that contractors are not pushing for lower prices, as there is no elasticity in the market [146]

Business Overview - Watsco is a market leader in a highly fragmented HVAC/R industry[4, 13] - The company operates 690 strategic locations across the United States, Canada, Latin America, and the Caribbean[12] - The company's business model involves contractors purchasing equipment, parts, and supplies from Watsco to repair or replace homeowner's systems[10] Market and Products - The United States accounts for 90% of Watsco's revenues, with Canada and Latin America contributing 5% each[19] - Residential HVAC equipment makes up 55% of revenues, commercial HVAC equipment 15%, other HVAC products 26%, and refrigeration 4%[19] - The installed base of HVAC units in the U S has been increasing, with over 120 million units installed[24] Technology and Digital Transformation - Watsco is focused on transforming the customer experience through enhanced technology, including a robust e-commerce platform[4, 31] - Annualized e-commerce revenue in 2024 reached $2.6 billion, an 8% increase[35] - E-commerce users experience approximately 60% less attrition compared to traditional customers[35] Financial Performance and Shareholder Value - From 1989 to 2024, Watsco's revenues grew from $64 million to $7.6 billion, representing a 14% compound annual growth rate (CAGR)[46] - Over the same period, EBIT increased from $2 million to $782 million, an 18% CAGR, and the share price rose from $2.70 to $473.89, a 16% CAGR[46] - The company's market capitalization grew from $22 million to $19.2 billion over the same period, a 21% CAGR[46] - In 2024, Watsco's dividend payments totaled $423 million[46] - As of December 31, 2024, Watsco had $782 million in cash and investments and no total borrowings[50]

Business Overview - Watsco is a market leader in a highly fragmented industry, focusing on transforming customer experience with technology and value creation[4] - The company operates 693 strategic locations across the United States, Canada, and Latin America & Caribbean[12] - Watsco's business model involves contractors purchasing equipment, parts, and supplies to repair or replace homeowner's systems[10] Market and Products - The company estimates its market share to be 18-20%[46] - Watsco's revenue is primarily generated in the United States (90%), with Canada and Latin America contributing 5% each[19] - Residential HVAC equipment accounts for 55% of revenue, followed by other HVAC products (26%), commercial HVAC equipment (15%), and refrigeration (4%)[19] - The installed base of HVAC units in the U S continues to grow, with approximately 96 million units shipped in 2024, and only ~12% of industry shipments tied to Residential New Construction[24] Technology and ESG - Watsco is focused on using technology to transform the HVAC industry, with $2.6B in annualized e-commerce revenue in 2024, an 8% increase[25, 35] - The company has over 930k product SKUs digitized and accessible in its mobile app[32, 36] - Watsco's ESG efforts have resulted in averting 23.7 million metric tons of CO2e from the sale of high-efficiency equipment from January 2020 – March 2025[38] Financial Performance - From 1989 to LTM 3/31/25, Watsco's revenues grew from $64 million to $7.6 billion, representing a 14% CAGR[46] - EBIT increased from $2 million to $767 million during the same period, a 17% CAGR[46] - The company's market capitalization has grown from $22 million to $20 billion, a 21% CAGR[46]

Core Insights - Berkshire Hathaway has recently filed its 13F report, revealing its stock positions and recent buying and selling activities [1][2] Constellation Brands - Berkshire increased its position in Constellation Brands by 114% in the last quarter, now owning over 12 million shares, though this represents less than 1% of its total portfolio [4][5] - The company has strong consumer brands like Corona and Modelo, providing a competitive advantage, and has shown steady revenue growth with an operating income of $3.4 billion on $10.2 billion in revenue, resulting in a 33% margin [5] - The stock hit a 52-week low in mid-February, prompting Berkshire to increase its holdings as a bargain investment [6] - Constellation Brands pays a dividend of 2.2%, which is higher than the S&P 500 average of 1.3% [8] Pool Corp - Berkshire's position in Pool Corp increased by 145%, totaling around 1.5 million shares, but this only constitutes 0.2% of its overall portfolio [9] - Pool Corp is a leading wholesale distributor of swimming pool equipment and has a strong global presence [10] - The company's sales have declined from $6.2 billion in 2022 to $5.3 billion in the most recent year, with an operating income of $617 million, representing a 12% margin [11] - Similar to Constellation, Pool Corp's stock has also been falling, which may have influenced Berkshire's decision to add to its holdings [12]