Leveraging the Company’s data analytics capabilities, Watsco has also recently launched a productivity initiative to surgically target opportunities to reduce costs and improve profitability. This is part of a culture to consistently assess ongoing resource requirements and seek continuous improvement.
Substantial incremental SG&A investments have been made over the last three years as Watsco digitizes its business. This includes a new team of technologists and the addition of over 250 customer-facing employees to enhance capacity and capabilities throughout Watsco’s network. Combined, the incremental annual costs of these investments are approaching $25 million. The Company’s believes that as these initiatives mature, meaningful gains in productivity can be achieved.
A.J. Nahmad, Watsco’s President said: “We are proud to be the industry leader in progressive technologies to help our customers grow their businesses while improving our operations. We have made great progress and are seeing early returns such as reduced customer attrition rates, improved inventory quality and exciting sales growth for customers that are leveraging our technologies.”
Mr. Nahmad added: “We are also so proud to have delivered record results and increasing dividends during such a transformative period. Most importantly, our teams have embraced a culture of innovation and continuous improvement, which we believe positions us well to further scale these technologies and derive value in the years ahead.”
Organizational Investments
Watsco has made incremental investments in its organization during 2018, including a 33% increase in the annual matching contribution to its 401k plan, which is made in Watsco common stock. The Company’s25-year compounded total shareholder return of 19% has benefitted shareholdersat-large but has also proven meaningful to Watsco’s 401k participants who have spent their careers with the Company.
In addition, an enriched wellness program will be launched in 2019, including greater incentives to employees to learn more about their health, identify risks and promote preventive care. The Company considers an active wellness program as an important component of its culture.
Watsco also intends to continue to build on its ownership culture through a variety of unique, equity-based programs.
Alert Labs Acquisition
During the quarter, Watsco completed the acquisition of Alert Labs Inc., a technology company founded in 2015 and based in Kitchener, Ontario, Canada. Alert Labs develops, designs and builds IoT hardware and software aimed at protecting homes and businesses. Alert Labs will continue to be led by its founders.
Alert Labs will support the development and commercialization of Sentree, an IoT device invented by Watsco Ventures that easily attaches to an existing HVAC system. Sentree is designed to stream raw performance data to a proprietary cloud-based software platform where calculations and machine learning algorithms are used to remotely measure, monitor, and perform predictive diagnostics on the HVAC system. In addition to providing data about the health of a system to assist in diagnostics and repairs, this connectivity and datastream offer longevity and value to a contractor’s relationship with its customer. More information can be found atwww.alertlabs.com.
“Alert Labs has an exceptional team of innovators with an entrepreneurial culture that is consistent and complementary to ours,” said A.J. Nahmad. “This acquisition represents the next phase of investing in ground-breaking technologies intended to deliver unique solutions and opportunities to our customers.”
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