Watsco(US:WSO)2021-04-22 18:59Financial Data and Key Metrics Changes - Watsco achieved record first quarter results with earnings per share growing 93% to a record $1.39 per share [5] - Records were set for sales, gross profits, gross margin, operating income, operating margin, net income, and earnings per share [5] - The balance sheet remains in pristine condition with only a small amount of debt [8] Business Line Data and Key Metrics Changes - Double-digit sales growth was achieved in equipment, non-equipment, and commercial refrigeration [5] - Residential equipment sales increased 18% in the quarter, while commercial equipment sales stabilized and are trending positively [6] - Over the last 12 months, residential equipment sales in U.S. markets have increased 15% [6] Market Data and Key Metrics Changes - Growth rates during the quarter were similar for U.S. markets and international markets as a whole [5] - Active technology users continue to outpace growth rates of non-users, with lower customer attrition among active technology users [7] Company Strategy and Development Direction - Watsco is focused on technology adoption to gain new customer acquisition and increase market share [6] - The company is actively seeking acquisitions like Temperature Equipment Corporation (TEC) to expand its presence, particularly in the Midwest [8] - A 10% dividend increase was announced, marking the 47th consecutive year of paying dividends [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong business performance for 2021, expecting it to be another record year [6] - The company noted that the contractor's confidence is critical for driving sales, and the current credit environment is favorable [35] - Management emphasized a long-term focus on separating from competition through technology investments [16] Other Important Information - The acquisition of TEC adds 32 locations and approximately $300 million in revenue [8] - The company is seeing a shift in consumer behavior towards energy-efficient products, with a growing appetite for high-efficiency systems [31][35] Q&A Session Summary Question: What should be focused on this selling season? - Management highlighted that Watsco has seen double-digit growth in equipment sales over the last 12 months, indicating continuity in performance [14][15] Question: What drove the increase in gross margins? - The gross margin improvement is attributed to a progression over the last year, with increased performance-based pay for salespeople contributing to the margin [22][23] Question: What is the status of inventory and pricing? - Management noted that while there has been an increase in inventory among distributors, their own inventory management has been effective, and they do not see significant issues with supply [19][85] Question: What is the outlook for the commercial market? - There is a definite uptick in demand for commercial rooftop units, influenced by government incentives for retrofitting HVAC systems in schools [62][66] Question: What is the penetration of the OnCall Air technology? - The penetration of the OnCall Air technology is still in single digits, but growth rates are almost triple digits, indicating significant potential for expansion [48][51] Question: What is the strategy behind the TEC acquisition? - The acquisition was driven by a long-standing relationship and a shared interest in technology, with plans for further growth in the Midwest [69][71]