Q4 2025 Watsco Inc Earnings Call Transcript
Key Points
- Watsco Inc (WSO) achieved double-digit pricing gains on new A2L products, raising gross margins by 40 basis points to 27.1%.
- The company successfully completed 12 business acquisitions, adding over $1.6 billion in sales.
- Watsco Inc (WSO) increased its annual dividend by 10% to $13.20, marking the 52nd consecutive year of paying dividends.
- E-commerce sales continue to grow, accounting for 35% of total sales and exceeding 60% in certain US markets.
- The company generated record fourth-quarter cash flow of $400 million and remained debt-free throughout 2025.
- Unit volumes declined during the quarter, attributed to a strong 20% comparison growth rate from the previous year.
- The transition to new A2L equipment caused some hesitancy among contractors, impacting sales dynamics.
- Watsco Inc (WSO) experienced a 17% decline in unit volumes for 2025, influenced by new construction impacts and channel disruptions.
- The company faces challenges in achieving its long-term gross margin target of 30%, despite ongoing initiatives.
- January and February sales were down in the mid-single-digit range, partly due to severe weather conditions affecting store operations.
Good day, and welcome to the Watsco fourth-quarter 2025 earnings conference call. (Operator Instructions) Please note this event is being recorded.
I would now like to turn the call over to Albert Nahmad. Please go ahead.
Good morning, everyone. Welcome to our fourth-quarter earnings call. This is Al Nahmad, Chairman and CEO, and with me today is AJ Nahmad, President; Paul Johnston, Barry Logan, and Rick Gomez.
Before we start, a cautionary statement as always. This conference call includes forward-looking statements as defined by SEC laws and regulations that are made pursuant to the Safe Harbor provisions of these various laws. Ultimate results may differ materially from the forward-looking statements.
As we all know, 2025 marked a year of significant regulatory change to next-generation equipment containing A2L refrigerants. This transition followed several busy, volatile years beginning after 2019. We navigated through the COVID supply chain disruptions,
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