WSO - Earnings call transcript Q4 2017

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Operator

Good morning and welcome to the Watsco, Inc. Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. to Chief conference Executive like Nahmad, to now and Chairman Officer. would turn over the Albert I Please go ahead.

Albert H. Nahmad

quarter call. Good Executive Paul morning, and Nahmad, Florida. Logan, fourth who's South Barry day CEO. Vice here year-end everybody. We're today Vice of Senior having President; Welcome a And with the to and is Nahmad, President is Johnston, Al This great me in and President. Chairman earnings A.J. our company; the

conference with that results start of forward-looking the to me call let forward-looking This SEC regulations has laws. may as statement. and the always, the from are statements. by defined Ultimate As materially these various provisions statements cautionary pursuant differ Safe laws Harbor made

primarily record pleased delivered and that As levels that income. we Watsco and because quarter earnings report record and I XXXX cash we're South generated I'm per a said, to sales another having record great another flow year. day reached income net share Florida exceeded in

$XXX our We the balance need of paid any debt. than that know, as have now million all equity industry. company We to our past, off to going bigger believe almost of also make and we're in ATM our from we size sheet virtually program raised future And under is all shares sale investment our you the so capital.

effective a Given our share performance, to April. increase XX% approved annual confidence, sheet, our to and board healthy per in balance Watsco's dividend $X.XX continued

XX%, XXXX compounded consistent XX-year get shareholder I with Before specific XX%. growth. me rate that results, into that's of annual total say let return was also Watsco's a

income X%. at by a million, including results. quarter equipment Operating fourth margins $XX benefits. the grew on reform of X% sales. EPS X.X% income the XX% quarter. for driven HVAC consistent to increased to net X% turn let's tax Now were increase in increased $X.XX Operating Revenues

$XX million share. during cash reduced at Excluding benefits, to EPS $XXX the debt $XXX million by per flow XX% cents We $X.XX was quarter increased Operating tax to million. year-end.

income the Operating in Now were including to million, share at grew net $XXX X% consistent at increased XX% of income X%. year, full revenues per X%, a tax benefits. Operating margins reform increased Earnings on $X.XX increase looking sales. equipment HVAC including X.X%.

benefits, of Operating $X.XX capabilities. was These X% customer-facing to results well tax $XXX record the further Watsco's platform EPS expand million. $XXX customer income a as service cash industry-leading additional net as on Excluding and sales includes XXX flow investment in employees to technology increased million.

of strategy Now simple. on to theme the central The is our technology technology.

convinced We are win. customers we that win, when our

on to efficient focused is customers business and with to A so more Watsco. do they Watsco only it are our investments helping be want our with examples. making good So do few business that

on constantly For planet. information time are the form solutions HVAC is go, delivering the truly any they on money and on is mobile-enabled technology our contractors, anywhere factor so and

customers not information have and business Our at so for do e-commerce processing of our times hours, order day available platforms night. and are all

HVAC system information apps. contractors our in via are easy-to-use which assistance, delivers speed expertise XXX,XXX over with mobile often a accuracy. mastered are want building transactions not fact, XXXX certainly of not we technology day, order next hours, In improves over e-commerce the were and rates SKUs technical just fill have we in and product conventional examples. few and of that in minutes, Customers so business hours. outside so products deploying require that XX% These

our our great long-term made having internal we mission. we simply, but technicians XXX,XXX XXX $X from We've that In are Said over the be I happy forward and experience of is XX informative Barry, questions. progress. time of It That's constantly are our on working With a stress at to press operations. will to why determine scale, execute to in Day release know a fun sales here day. more morning's providing important transactions we we contractors March This We to Paul, transforming serve progress we a said, our answer many look and are A.J., a your this summarizes and locations and terms customer we're Miami. over further million marketplace. our use truly year. insight and enhance measurements and Investor that

Operator

The first Please Markets, Hammond from question ahead. Jeff Capital comes of go Inc. KeyBanc

Albert H. Nahmad

Good morning, Jeff.

Jeffrey Hammond

of can so you above up ticked Yeah, like you bit my And guys. spending rates there was expectations. deal? in Thanks. XXXX? morning, it investments Good technology think us looks one-time Anything to talk through the equity or expenses just and just a how about top of around little terms Hey. that, SG&A stepped here up in maybe it on run

Albert H. Nahmad

want you to take Barry, that?

Barry S. Logan

Sure. Good morning, Jeff.

Albert H. Nahmad

first At that. of the part least

Barry S. Logan

it thing worth to that's XXX and has of for in of as benefit. Well, a the just XXX in intended a Adding our capacity. first, exact, XXXX, a SG&A. we of slower, is is, gets The in we've terms incremental make obviously business, fourth type reminder, of a one-time capacity being exposed part long-term, the looking that added is at said, cost, quarter. long-term kind smaller that that the terms be this, it the in terms about actually we like in people be quarter to cost spending And a those investments. quarter it's of important But explaining no there to of people, reality

Albert H. Nahmad

to the want part? technology deal you A.J., with

Aaron J. Nahmad

Sure.

technology, of clearly, as forefront for strategy. technology far our and As process improvements are the spending at

ROI to in more And invest. will there So do are material slowdown spending. I expect has if don't great that any potential, we opportunities

Jeffrey Hammond

then shape Other pretty been deals? you Okay, And about for Sigler certainly talk equity the great. pipeline the the piece, in great it's Can than raise, and quiet. sheet just on congrats the now. balance

we something near-term. over get done here the Just and about talk Thanks. pipeline likelihood

Albert H. Nahmad

ball, any have crystal don't we we always No, as say.

companies opportunity are we We We us. believe do active. offer great to join an

can record doing in prepared. is great you a And that. I have we're We all tell

a tell to for expect you them. balance We you there? We great though, Are do make going considerably and Jeff. just make have want sheet we're can't to have it a do I transactions. when. more question I to we you

Jeffrey Hammond

here. I'm

Albert H. Nahmad

reason, out? Tell and me time. the to for rather Why put put that And then, your estimates out. is that why all is put the out that company ignore it others some we you It happens meet that? the you expect estimates than and the we you ones estimates

Jeffrey Hammond

we're Yeah. take trying just we data grow I the at. industry is mean, to to market going and the what And... think

Albert H. Nahmad

just else's data higher-quality a probably way don't you Don't together industry analyst? is the put we you an to or think our And think I get that's look it. at know information when Don't you than else? much we than think better anybody have better yours we estimates, our don't anybody things?

Jeffrey Hammond

mean... Yeah, I

Albert H. Nahmad

ask So don't look future, carefully to mind. more our at estimates in going you to the I'm own if you

Jeffrey Hammond

But just today. you you're guidance giving like – really not

do – So can we you...?

Albert H. Nahmad

we guidance. And did, nobody paid gave No. attention. But we when

I too much to anyhow, don't So into this. want get

move Let's Anybody on. else?

Operator

Okay. go The from next Stephens. of question ahead. comes Please Matt Duncan

Albert H. Nahmad

Matt. Hi,

Matt Duncan

Al. you tailwind much recovery how estimate any sales? morning, storm a well. Do for XXXX that may helped as you have expect good And for guys I would in nice be Hey, have to

do on this how that have may you any year? help much So be much view how helping it and might

Albert H. Nahmad

shot Paul, at you take that? want to a

Paul W. Johnston

I always did that, Watsco, it bump event. I in little the all shot a it's... I'll take bump. it's it. scheme of Yeah, It look And I grand you from of at if guess think give a a get don't us really at material a

Albert H. Nahmad

Paul? you immaterial, material say Did or

Paul W. Johnston

material in saw a Florida Immaterial, saw to is we Texas. and South bump South it It not Watsco. it immaterial. And we in

Matt Duncan

always it; I then on you sounds it deals. And can't the the clean we obviously or question balance have Okay. Should got, stock timing like just you second along? on came really timing control active on thing sheet curious seller the does. you the are guys selling of timing I've you this under wanted just the read front of the guess if equity the larger M&A and a when anything into ATM. it's the Al, Really that the to sold right was

Albert H. Nahmad

at correct. I your it think is look that

was thing very when our late good are We terms balance ATM from until it decided it frankly, a do know do. conservative time. about time We And it, be. And have this always sheet; year. product to been, last we've always to in about didn't again heard even we will I may of

in do balance might or not depending the what technology, not investment. Watsco want escalate we're on Ventures. the of lot might business we back to may because said, They and require technology the and to fund shares of eventually I happens to capital conservative transactions that As like have a buying just sheets. projects R&D We

a So of kind less we it. can do is happen, Didn't it's know thing the more to out about timing. It that an with this find ATM. or had when

Matt Duncan

it. Okay, you. all Thank right. Appreciate

Operator

question Ryan next The from ahead. go William of Blair. Please Merkel comes

Ryan J. Merkel

Thanks.

Albert H. Nahmad

Ryan. morning, Good

Ryan J. Merkel

morning, Good everyone.

XXXX we hires. SG&A I think sales there not you're But think So leverage? point. to leverage operating benefits XXXX better because any in technology going in from for should about would giving get I the just and XXXX guidance at know more wasn't just you're And this conceptually,

that the is So expectation?

Albert H. Nahmad

that Shall over Mr. I turn Logan? to

Barry S. Logan

Ryan. the Good leverage said, of certainly Obviously, out there point. you're what Sure. season expect the None help to. is the point is view, a From environment says that this the what of but of things track should and comes, morning, the I we would of sales, again it tell record one operating us of this that to way be that those your long-term measure did there pricing with year play that's us looks a not to better a Well and expect equation like, can year. factor right. should it pricing spending you

year a productivity or and those this made sales money, and you with investments you return, expect you were that intent. If profitability, expect expect spend you

July But we'll points direction. some getting optimism We'll our tell I our season Ryan. of expectation and you into our how would in point. because that at so, that So in it expect certainly went certainly be

Albert H. Nahmad

But I at I mean, return of compounded XX,XXX look view feet, record. say a total from XX%. years also XX point the would shareholder of

this I the number the with do what on is is business will about change products a the our be when business impact is Sometimes, we short-term with provide very anyhow because is wouldn't will the very that of us that other a for climate business or always cold. a the balance when just hot strong comfort know very and one we're to climate because too necessary, upset seasonality stable But fluctuations stable we basis. or sheet, in get a

shareholder total our of about that, return. So we take long-term a emphasize we and record view

next business not next in sheet or secure, industry. balance best-selling Very the with beyond So is that organization month a very that. a focused we're ours that focused on and quarter. probably created We're something ever on strong stable the

Ryan J. Merkel

trying I XXXX. all understand set right to think I'm the that, I Yeah, just expectation Al. for

Albert H. Nahmad

you, was in wasn't I that I'm sorry. on I general. just No, picking saying

Ryan J. Merkel

just that at. margins from given the of what on, kind sure that's models make to getting flat have want result just gross a we year-over-year I'm was correctly, moving in headwind our mix No, nice equipment. that But

So that in maybe offset talk that mix. about you're then what And XXXX? doing you think to just do is sustainable

Albert H. Nahmad

Paul?

Paul W. Johnston

effort greater last parts Yeah. we the that we increase put XXXX, the into equipment. the a just going not focused Part and in business supplies. are of the into we sales saw and lot a year mix in equipment that obviously increase so have non-equipment great issue of people parts an a and hired not that supply tremendous totally And of was customer-focused on and and

we earlier expectation our which in a margin to about always supply gross lift positive a our and going and that percentage. payback, we make like So business expect our for see said parts been it's has a investments we're

Ryan J. Merkel

Okay, I'll it thanks. pass on.

Operator

Baird. of question next Manthey The David Please go from ahead. comes

Albert H. Nahmad

Good David. morning,

David J. Manthey

everyone. Hi,

pillar Meeting Analyst brand can to going too trends new up, I'm chance that the we're Without industry heard so any haven't expect away, we sure on about giving off, without technology forth. First here, hear about we and hear about and to everything coming new something much, a that previewing before?

Albert H. Nahmad

ask operation, the head A.J. let's that of Nahmad. Well

Aaron J. Nahmad

haven't on some our new We just at might yet. conference. it We unveil things focused

with that got far honest We be haven't you. yet to

Albert H. Nahmad

whose that the you're ask I to also, to that's you're able there. only me wrong, questions so I'm deliver see to correct think some going Connect if the A.J., have leaders what can you the and them. be there but But crowd of is it hopefully some with of going goal not developing is whom with initiatives major

Aaron J. Nahmad

that's right. our off like Yeah, that exactly are smart people building We ideas show to (XX:XX).

David J. Manthey

potential mentioned optionality Watsco I All in you a really that big Ventures know would but consider investment attractive big how there's Watsco be second, you right. And if something Al, investment. Ventures came? there, And

Albert H. Nahmad

it Well back to see – raise just A.J. false the without call Nahmad it. why go we don't don't you way expectations,

Aaron J. Nahmad

we industry Yeah. was had but I a that's much is, day there's tens what is approach this are that hurdles type, I an that some write things we'll these there there and where are And more last market, think one be if Dave. mean, big, not on of our put more is we're speculative. the we'll going, so that's and where impact call, where works, in so a dollars. But things This see startup conversation fit. to potentially I make could a of there's couple we'll new the of millions out check going forth. if And product/market on invest lean reach

much So making steady and a it'll to some opportunistic of as more giant slow be leap. investment opposed

David J. Manthey

it, all Got Thank you. right.

Operator

The ahead. comes Research next Linzey Vertical from Partners. Brett go question of Please

Albert H. Nahmad

Brett. morning, Good

Brett Logan Linzey

Hi. Good morning, all.

the price little versus Maybe bit on comment. Just volume. a want to QX of back price give come to color realization

Albert H. Nahmad

Sure.

Brett Logan Linzey

realization have your in your price what's increases? for then as vendors expectations price And of XXXX lot a

Albert H. Nahmad

Paul?

Paul W. Johnston

quarter the out in quarter. effective, so fourth fourth when side. fuzzier started to we A we'll it had started on price the little parts optimistic bit the of of We supplies, increase get which Most in realize small December-January It out, impact direction we it those see late on call. increase of as We're the out a go. when to became said we rolled Yeah. equipment the pulling we we fourth on increases was are this increases, and the quarter. price what a however, that at the digit a to but price think is going last low-single always probably

Brett Logan Linzey

that? quarters. muscle expect HVAC Okay, quarter XXXX your for around then really parts would what categories the to and to the putting that? are product initiative. maybe then It's great. piece And of maybe around update business? then up into supply terms that Are organizational Are back best that that just percent there of had drove more in maybe And X%. that you of targets And XXXX, an you in just four particular other five you've the products, revenue

Albert H. Nahmad

Good luck with that one, Paul.

Paul W. Johnston

Yeah. Well...

Albert H. Nahmad

going products not that... to we're identify mean, I

Paul W. Johnston

We do can't that.

Albert H. Nahmad

we're Paul. to do ...we're to. up like go competition don't But going We well. ahead, know to what

Paul W. Johnston

who individual Yeah. It's where place disclose, our needs technology programs, we're as than with have XX/X greater people hopefully not at through being just as well what The this about would online are customers talking out to needs in what orders put able customer more much a their for And end what are. I following year. far an what to obviously. is, are, target to there our as emphasis we've already as rather on able result looking with accept

Brett Logan Linzey

guess I from of it focus standpoint more this Yeah. just an incentive is is And a or – and maybe...

Albert H. Nahmad

have that – pursue is work parts I not well. do supplies, we we parts where we time, a look from and business trying have look but do and – we is time very is see time, Paul not design all for opportunity, say We X,XXX complicated. supplies we where way margin, the to we and to program that we we're Paul, I opportunity, look and going we and increase certain do. and opportunity opportunity his and act with What it. It's to goal at an vendors. should now the to it. think And we mean, on

and so think higher opportunity we promotions, And motivate But service hope and parts, we our the see happens. we selling contractor there's organization better produces prepare it we we'll and with to margins. an what plans,

Brett Logan Linzey

a color. the about Okay, guys you great. month. in Appreciate See

Albert H. Nahmad

Sure. you do. Hope

Operator

JPMorgan. of Tusa question comes Steve Please The from next go ahead.

Albert H. Nahmad

Tusa. Mr.

say [Foreign in they Miami, Language] (XX:XX). As

Charles Stephen Tusa

that I'm means, I thanks, not but what sure understand thanks.

Albert H. Nahmad

It Steve. you, means are how

Charles Stephen Tusa

bit Okay, than treat a going you me treated thanks. Jeff. you're Hopefully to little nicer

Albert H. Nahmad

the No, thing. you do same

don't own guidance. listen You our to

is and what own, your then up make happens. this You

Charles Stephen Tusa

Yeah.

the – from think that, I relative first quarter, I three to into I kind first even think we couple to number. a the up, what were the gave round of are third I'm you pennies guidance So you year-to-date on if quarters on mean, all of the backing added

of round the up, you're so... still you If at end low the range,

Albert H. Nahmad

That's our okay. would our we it's said least range. That's what At range. it be. It's

Charles Stephen Tusa

I do of here own our or use mean, your quite to the missed midpoint. want we're our... we're not way, trying what sure the You to I'm kind – just guidance, you if And us what by for

Albert H. Nahmad

attention you I the the more anybody don't I'm guidance about industry say, we to since know industry. saying in pay more than, what would is the No, why

the broadest have We distribution. (XX:XX)

Albert H. Nahmad

get going We're want I felt not do. not do anywhere you this discussion. whatever spoke you to to what with to... going and I'm I

Charles Stephen Tusa

just I No. And of because then think good of we're I – Jeff Jeff and work either think defending I'm does really us, any don't us...

Albert H. Nahmad

Well, divided, the are opinions say. we shall

Charles Stephen Tusa

math. we be digits, this XXXX single and XX% are just kind or Okay. you've has that year your Should that outlook? front, incremental done? what, kind margin is this low of, single-digit in that's in XXXX historically returning we a low incremental still is On number to margin that of that been

Albert H. Nahmad

Barry?

Barry S. Logan

Well, line, the never is investments size right? straight Steve, again, and a of timing

Charles Stephen Tusa

Yes.

Barry S. Logan

Investments people made benefit what today we to long-term, won't should are established. we for two continue track we've a a company have hire years. That's long-term what the record the Maybe future for that a In benefit. do do. that's should

parsing and both your time spending Now of it. job. in quarter-by-quarter the at there's is when that comes size it's realize reality the I the splicing increments same that a scope and in, – of

better out, couple But plays sitting outlook having the our if no than we're to operating generate of is And we here over leverage expect our the about the years. growth next said same leadership. in is it culturally, benchmark intent, higher question asking that How and profitability XX% leaders about certainly the very expect that, you're rate, have So out, it. February. in conservative that the that's plays from our sales we benchmark field in to

Charles Stephen Tusa

and long-term. I'm about quarters. just not about talking thinking the I'm Yeah, over

quarters four doesn't make but thinking So just year. quarters, up definitely not about a

guys Are and can distribution are at? any broken zero kind you looking long to So you And is of out Is kind the acquisition progression. looking guys follow on any this the into of we there know so that. models, can incorporate any we at as appreciate we be independence it's the that investing issues as interesting you that you're have the OEMs there the our that with just of up front? or reloading of still loosening mostly from it

Albert H. Nahmad

the cutting the believe certainly since – largest. as take would take well That's too such because it's level. who guess the success we joint venture a the we guarantee see got constantly feel more a worked joint attracts emphasis we just We to accused and our what digital more on us. wish some manufacturing We in improving more distribution for so do, business, – – the to we're lead Watsco, of that became They we contractor interested grow. products, idea the in not interested buy growth, a speaking, share other of people, because we that's and has we've in acquisitions a of sign to to I as a great big our might such better service share Anybody how growth. loans find us But it joint economy. and cost, who that a and capital. I distributors more some with perhaps more we're away, technology, ventures us. If owner Well about and to what's (XX:XX), with it's why wants venture both had being were of we the in our and private branches, think company, build. at digitize is industry we fund. will OEMs level our believe buy talk we've the we generally such might and we who to occur, how I good asking and the as efficient that Carrier more that face take for persistent to what's and I to turn liability the it's we makes you know, company we're him if the digitizing We going future, which that

any that's to size. opportunity, things that be evolution and I because keep of digital we think why the sheet can strong So balance bring economy will a our more these

tell we know, can they're And better. or always I whether help to the we wish bigger, them are think doing we timing. even more course, that going I just prefer those we're it's about but don't could do so Of well active. you just that happen. smaller I

Charles Stephen Tusa

accept I'll call, the the accept I'll Yes, call.

Thanks. Okay.

Albert H. Nahmad

Okay.

Operator

next The Susquehanna. of from go question Barry Robert Please comes ahead.

Robert D. Barry

Good guys. Hey, morning.

Albert H. Nahmad

Good morning, Robert.

Robert D. Barry

how was or say XQ tracking you? Did could you

Albert H. Nahmad

I'm sorry?

Robert D. Barry

How tracking? line... Good top XQ was

Albert H. Nahmad

try mean, going And I'm can good we – be I happen I month in mean, that getting say time of himself. fooling will then one Every trouble, right? softens. well. you. we quarter, into But rest and I can a very is Anybody just says the is off the then tell started they what this can't business, to that it climate-based without

know. You don't

Robert D. Barry

I enough. Fair also...

Albert H. Nahmad

Although of in product to technology. eventually market, in significantly service of invest our would I the of to ability because offering, our the market in people to in customer, share would say in increasing invest we increase invest think terms of branching, that invest to ability our our share I ability to more ability that our

keep saying oriented. view So our we and it's all that's long-term

Robert D. Barry

on for Yeah. and actually that what for have a more Analyst if is question actually IT mean now up that operating and the a can comment, Al, few be picking for a to also the in your I'm the explicit you you'll years at the link a this Day they between line Day. been and make Analyst on investments position going think about margin. top curious Listen,

Albert H. Nahmad

Why don't we ask A.J.

Aaron J. Nahmad

Yeah.

in of data that we shared that. I with that think points the are starting our release, lot far and the lot organization to there press being the is adopted getting as a and technologies in where to into scale organization, it some inherent the a today, and of in value we as

potential you. that idea. that's try technologies the create, connect value first in much good very maximizing capturing we're a a links on those Investor probably that, should value the for and We these as And concretely to Day, more still the far As inning. bit

Robert D. Barry

Yeah... Right.

Albert H. Nahmad

for And have we to promise you. weather good

Robert D. Barry

the would not parts is be where out was read maybe IT But, the perhaps that good. you in at even so Yeah. more very in business not of last of we've the good least margin. or yeah, these impact much year, it branches on op say mean, but growth advanced, this listen, seen can the adoption may I weather everywhere

that helpful. would think be I

Albert H. Nahmad

doing and think about shareholders. think, we what the remember, engineering that the and that stuff, end are up You us and – like our people That's technicians, not why contractor. a hate – What that. take we'd installing going to are I help if all when and doing of even down got audience a this. Well know we damn along to this, as will while. very Amazons because take that people, who to the about for that to don't like correctly, good on we concerned there pin and to to our causes weren't we ourselves products we they we it's in contractor. persons the in know But products do people that's disrupt would we – our much is XXX,XXX ones happen hands we're harder, that it We're it's come the contract eventually a I huge services to might to think we're and know the interested think to it's new to as how to about repairing. investment best fear

to customer, the on exclusively also us focused is And technology do better. him helps operate of that course, help better. Our

of Some better. helps technology the operate us

Robert D. Barry

does like it it seem Logically, would no, fair be. enough. Yeah,

extent comment rebuild there what you other quick the the To some Just was growth. think? do number on the about HVAC products following one, other hurricane one benefit that up in earlier from

Albert H. Nahmad

Who would know that? Barry?

Barry S. Logan

was the September. a in business Robert. were retrieval of first Hello, closed lost stores At some there of that from

some and, (XX:XX). this as measure So that's into mentioned, that Paul flowed bump business gave just of us quarter

sustained to of to there or a out long about a But and But over it's, kind, happened benefit will think out. it's not year can benefit reason In period because play in, a even in know it measure material a number. and take my it's out this some will time. the of go is will of to of certainly creep say through something we not play but the certain country optimistic not that I a give of safe terms you be it's and in probably overly mind again, all regions it only number

Robert D. Barry

Thanks, right. guys. all it, Got

Operator

Pokrzywinski The of Research. from next question Josh comes Wolfe go Please ahead.

Albert H. Nahmad

Hi, Josh.

Josh Pokrzywinski

guys. morning, Good Hi.

years pinned zooming X% Just take XXXX little and... a been the margins since out at bit It's Barry, to few kind wants a this of low it. level Al, on over question, last whoever

Albert H. Nahmad

X.X%

Josh Pokrzywinski

X.X%.

Okay. I'll give I mean, credit. you

Albert H. Nahmad

we at so When started much pretty X% from the was it we X%, doubled industry. industry the or

Josh Pokrzywinski

taking Sure. syncs when it No, it's ramp started investments I not – of on up of away from the it like kind up. more some seems mean, with progress, the anything really to

Albert H. Nahmad

Yes.

Josh Pokrzywinski

investments And Is comment of that's a being about incremental, least return normal a XXXX these that... of three-year should more earlier I payback? think a kind Barry's at we the – it being ambition, something well to think about then being as

Albert H. Nahmad

hard. it's No,

Josh Pokrzywinski

either you see turn? a when

Albert H. Nahmad

any great essential. It's know produce We it's going to anybody. know question going our double you're feel I think when. that that serious focus We terrific, ask, hope know that's to what that into be Eventually we margins. call in digits eventually contractor, can't but we to we get it's it's supposed to but competition Do going way we'll It's but, want we it'll actually what us. on think good I long-term, try margin record, All very slack block I've expect it's has know help we'll to know. off. can. answer don't openly. that again, that increase; we the we just essential margin? It's a digital don't don't mislead to it's not we essential produce. age, from help been we essential we we and our best don't said I it it to We is as

focus, future our because hopefully, getting contractors we're bigger our that's this contractor. going especially That's with they I past what technology do. help to in the think place these than is make, our

Josh Pokrzywinski

the question I for guess working? do investments is the a the Day. Analyst But if guess maybe that's this are how I when better know mentality, you

Albert H. Nahmad

read release. Well, press the

Josh Pokrzywinski

margin actually. see for little a like, no, us aspirations it. to to it It's harder There's tied

Albert H. Nahmad

be We in – But a there. it give less do because adopted. adopt give difficult it's because But doesn't does what If that numerical field is to being Yeah, but is measure but to that? technology it adopted, margin very moment. at would show XXX,XXX that a actually release give I of good, adopted. being to that to out press a point sense the a read guys you not – release. people something occurring, being of you adopted. not is it not may the the Yes, can should wanted did big it give more and or it's change the sense It it's you a press it, we it's

And so respect for I track on is can track record, our XX-year our this hold say record. all and

Josh Pokrzywinski

Right, right.

Albert H. Nahmad

know I'm have than now, that? our fun this to We're what track doing. than you he that is we mean, Warren think ranked better a record but higher We XX-year with little about know is. I going Buffett's. we're How

Josh Pokrzywinski

He to that. has lot I a work, put capital but to of definitely appreciate

Albert H. Nahmad

mean, years, cap record little whether and XX I cap? than ranked we yeah, a return. that. our been a of lot it's higher Well, total that's guys you shareholder Do or have care

Josh Pokrzywinski

Now just switching gears...

Albert H. Nahmad

How's you offline. predict the doing very specifics some do trying for we're best Barry we we'll us get of your you're things I best. want difficult to. could that models, to some But the our but can. to It's know do that?

Josh Pokrzywinski

have think So industries between more with just tend the the big costs. about project timing to offering. I mean, I pretty as cash and switching of that comments over flow that difference to of in associated at-the-market some

more kind cash something been generators; surprised the mean... are You you often. guess I'm that's to guys case. this always hear look of that could at great is I I

Albert H. Nahmad

Yeah.

Josh Pokrzywinski

made... A.J. think I

Albert H. Nahmad

Well, because...

Josh Pokrzywinski

a ...comments about not bids. of big lot

where... So

Albert H. Nahmad

back bids. big lot We want It culture. come are to We have this that also be have hoping we're have side, do the it. might of will like that think big now. something side be of just leverage. a to we a to want we we comes be technology. of will we a others for field for know the lot of large to we ready the some we believe of But improve Even in along, share. ones not opportunities, and our I to per do when be along, don't I we in – ever there lot big earnings that No, ready on we want ones that and – believe balance want big we deals. to have if leverage. only a We It in don't future. And business. on buying acquisitions and heard not appetite big opposite. hoping that acquisition a sheet to to industry. should just said bids. ready, be have We're very lot shares don't a We're didn't don't through We're whatever but in nobody's won't the going not of breaks certainly the fund run in like We say the That's to R&D our we

Josh Pokrzywinski

Thanks. understood. it, Got

Operator

next of question The comes from Stifel. ahead. McCarthy Please go Robert

Robert Paul McCarthy

I think my questions have guys. been Thanks, answered.

Albert H. Nahmad

Hi, Robert.

Okay.

Paul W. Johnston

Rob. Thanks,

Operator

from of go The Research. Chris ahead. Longbow comes next Please question Dankert

Albert H. Nahmad

Morning, Chris.

Chris Dankert

Yeah. Morning, questions. Thanks Al. for my taking

guys seeing are you the of do looks does here. on any you're is like something guess employee there and to count Just a your of right long-term like lot know heads kind to or of add mean what investment plan XXXX that in finer opportunity. additional proponents what or kind now? I of I a comments that you want point put

Albert H. Nahmad

Paul, operating you're person. the

Paul W. Johnston

level, we very At to If something out very, going opportunity That's see hard to need know those people at they're to our push level, field and they doing. to that our branch customers. that we're talking satisfy has what we Yeah. in operating actually the people, move which We there people field our are that the they presented add that people people the itself and customer individual or to decision-making will who to people predict. micromanaging operating and needs into have an out them, add not process.

Chris Dankert

it, our somewhere reason any guess. zooming neighborhood out, I change that you Got on a And in at growth of the the number historical past the there that number, is have, it. we've dynamics really or is a suspect we of got high to guess phone? other the in give side should seen replacement any level I demand aware be Based take, of it's here, on data in guys X%,

Albert H. Nahmad

Barry?

Barry S. Logan

allows Obviously that the of units So sales. price in at it that dynamic, units, much consumer many It's prices. the then for better and only is number we the what three And higher Chris, our variables the price, that, it of what behind good mix there's how at sell, selling and sell we morning. selling or at mix.

So bigger out again, quarter. plays how the summertime we're going. But there the continuance in be the can some is so would been what that sitting consumer those to here and say fourth how think of far in I given variable. February in is a I were we've positive in seeing all And expect XXXX, signals

Chris Dankert

in it. Well luck guys see Got and you good March.

Albert H. Nahmad

Great. to seeing Look forward you.

Operator

question ahead. The Please Seaport Walter from go next Liptak Global. comes of

Albert H. Nahmad

Good Walter. morning,

Walter Scott Liptak

the a more Hey, get guess where branch Hi. good number productivity at allocating out XX%. Good resources? branch wanted point Is of morning. you look maybe I Thank adds. enough I there can the on you a start e-commerce ask which the to follow-on get you. people e-commerce and at

Albert H. Nahmad

that's help for might spreading We're with. else technical the yet closer Well we in beginning thought think have now. branches, we process. can may high that's that having And and that our thing I like supplies be densities, as more. and out. it. territory minds We We a everything we we the The a think haven't accelerate he executed not the use But to we needs, that and said, think just wonderful we're just the there's thought ready contractor support that.

I time it We think footprint, work time have spreading we didn't out out, accelerating our more. been but may closing branches that from to start

Walter Scott Liptak

What good? mean, sounds That see, look geographic something great. would that? like timing think do What would region you I you

Albert H. Nahmad

question, a but early. a a That's It's it's little little good early.

Walter Scott Liptak

draws working question have I looked fair your...? it than But like receivable inventory enough. right, usually in ask about with All the to cash down a I invested capital. the inflow And And little inventory, looks may you better thought. It wanted bit. a

Albert H. Nahmad

that. Yeah, good a on that's is There Barry? question. a specific

Barry S. Logan

– of to to advantage us want again. allow opportunity. basically But is We would've way. take using the this No, using in We our it that. inventory price did do that The hit some We use been. buying morning that than times put to the with won't and tell well strategy of it let's reflected part balance XXXX advantage do and that's, much We with. that's price how sheet again, or inventory We've higher take of good of our our otherwise and part that's fourth it done what season balance but sheet. who, will you balance quarter. and of the of the sheet

Walter Scott Liptak

Thanks. Okay. Fair enough.

Operator

I would closing concludes back any to the This turn Nahmad over to Albert question-and-answer conference session. like our remarks. for

Albert H. Nahmad

the you Thanks it in for to most listening we'll Bye down into technology. try to of hope bring and Miami loop make you can regarding more March, now. and

Operator

you The for now conference concluded. attending Thank presentation. has today's

disconnect. now may You

Watsco (WSO) 8 Feb 182017 Q4 Earnings call transcript