WSO - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Watsco Incorporated Second Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. event recorded. this that note is being Please I to Albert like to conference over turn the Nahmad. would now Please go ahead, sir.

Albert Nahmad

CEO; is Good morning, Executive President. is and This quarter Vice earnings with everyone. Welcome Logan, to Al Watsco’s President; and Nahmad, Executive Paul Nahmad, President; A.J. second Barry call. and Johnston, me Vice Chairman

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

you First themselves. managing your an exceptional and in foremost, say very I protecting hope serve pleased There to I’m effort selling are all Watsco and people protect of are safe summer company experiencing customers heroic while a and busy our healthy, making to and is families well. season. many

them. sincere thanks most Our to

the growth have demand. April, business our to our plus rates it partners driven recovery significantly market gains. We our and platforms across mobile things that Adoption to customers in homes also technology. and replacements recovering. in Homeowners OEM our as industry and on which trends in at a also increased want an vendor of technologies leading are soft to ramp products glad to driving investing commercial of efficiencies are to their share our express more done with call May, in quarter now extraordinary our have was sales to Sales results continues were HVAC apps began e-commerce footprint our in use July. double-digit The XX% use the last of appreciation growth accelerated as up in are refrigeration acceleration June occurred in into our residential HVAC U.S. similar to by which are and in contributing report clearly higher systems I’m occurred experienced accelerating. early who equipment steady our July. react and Since in June growth

of Our last of our impact rapid technology. the progress, are downloads, new provide app XX% grown XX,XXX use with over to sales. best that than non-users e-commerce has our Examples more than mobile growing were users of year is weekly that our processes customers introduced average on-boarding XXX,XXX generally measurement total of technology faster to

the number grown year this XX% transaction e-commerce of far has number So XX%. and users of is up the by

is And in rate XX% kind potential of certain run which XX% June now over XXXX. e-commerce December this markets in sales e-commerce run shows of e-commerce Our in versus XX% rate was our platform.

justified also They platforms financing and connect two OnCall replacement called promotion for two provide proposals products We of support These and Air contractors innovative and digital platforms. systems. and buying CreditForComfort. for homeowners other for are

pickup activities, to and payment which is fulfillment contactless contractors’ point. this it's dockside Our adopting or has to as that early to we functionality. It more curbside soon expanded in locations and early refer terrific days include the been growth -- will

in technology a free can by our provide differentiated experience to these a Zoom schedule us customer and call with us further We in progress. As we always, with explain way. digitally believe every feel capabilities engaging

X% long-term. reducing across costs. has for closings our loss a by will and SG&A efficiency with the of established, us service standard store operating We Also improved been in well also few business we new believe serve which quarter, the Same-store contractor declined network. during

of generated of quarter position strengthened our the evidenced financial in cash our quarter. the any highest flow million, sheet $XXX history. operating by during is Our balance We

And is net and to financial provided of of Dividends time. happy second income release. no Over answer have that, your our questions. Further cash are now the A.J., last analysis I million $XXX increased million. XX Paul, been press Barry this debt with and generated in we've have quarter versus we months, at in $XXX our flow

Operator

Thank you.

[Operator first answer begin now Stanley. and And instructions]. will Morgan our question go question will Josh the Please We ahead. session. Pokrzywinski come with from

Josh Pokrzywinski

clearly a up guess the the there very Paul payments stimulus relative share some any either to you commentary maybe that put quarter up helped performance? help observations can good But regional maybe or that can I broader So, level Watsco from at macro. square industry that

Albert Nahmad

share part like the of we reasons. to But for Paul, second the competitive don't question? But regional

Paul Johnston

Pretty and our Well, obviously we seen customer that we constantly make in trends inventory trying to a other has we side maintain replacement and been hope side battle for the That's Have through obviously. high days, XX satisfy needs. we're last continues has been on the focused demand again picking supply any up on industry? now, sure can it the right is and quarter. much demand to the strong the on the

Josh Pokrzywinski

A.J. on just then technology And the Al initiatives, or

the just want something a are you doing Watsco to bring new just and or with brands, at of kind ones couple not to different and business with or that is sticky with it most more doing however track technology, mean distributor I a already gains do I share contractors, tend but lot. can it think or folks on rotating is fairly causing a are that more guess, least, that the of really bigger, around the use relationship? outgrowth more does customers in to stable

Albert Nahmad

A.J. answer that? you want to

A.J. Nahmad

both. a Yes, mean, sure. of touch lot contractors in North we I It's America.

customers businesses the ours them business for at technology them them of while, see helping of but a some get the action products buy it of is they're getting of to every not products us different are customers, and customers competition in how all, versus tech, with a buy those small once our day, little visibility outreach is it exposure them all companies to whether to that Some from moving every and can bit just the or lots in needle. understand our their what us targets from and doing a of mean

it customers coming the to are there for us, there board technology is time. of business the lot of And say those on guess a I customer conversations. with more doing first small and are driving more succinctly, So ours

Albert Nahmad

discuss it look be, Paul might at to Another here? can you way

Paul Johnston

Yes. I mean had definitely increases. quarter we the for market second share

the you the quarter were for recognize probably were shipments sales XX% As flat. range down our second and the guys industry in residential

the towards mid up in pretty So move And market apply, monumental quarter. an in Watsco we share. the half and the that's given numbers did increase year down, same a the was the basically market front was of what in first slightly single-digits

share numbers. the say Canada. in gaining Those So out Proud come we are gaining than U.S. we're there. to faster share numbers

Canada a becoming we're again. force So in

from happy perspective. a I'm to So very that's see everything happening share

Operator

Volkmann go ahead. Please from come will question with next Stephen Jefferies. Our

Stephen Volkmann

the guys. comment you gross for I'm around if taking question. Hey margin. curious could bit Thanks a little

given was I little thought would be a -- of think a is than shifting were a expecting, I us some think more headwind. that especially your would bit margin towards equipment, mix little which have better I

gross margin? what's just in about sort on going think should How that forward remains going So, of we business as strong?

Albert Nahmad

somebody Paul, in or one. that jump with Barry

Barry Logan

morning. Yes. Stephen, good

You're right.

sell products, that are a competitive XX the day. selling we As market-by-market, busy a efforts XX day rate, in price there's season terms out is and local cost answers. faster profit equipment of one landscape, playing at optically Also algebraically get every the you the statement. margin gross and making variables our of face not there's through and every time as to margin impacted and on see income answer, a much grows what by that and There's

work is So do year a next do this selling trend, looking as margin, last of still lot the on in and of into to some beyond. year to showing of lot there's over year terms get improvement a the we through and but work season

Stephen Volkmann

Okay, we trajectory little thanks, forward? better think quarter about or the there think going Barry. unusually than was do to bit would any it the how be Is reason second a

Barry Logan

about there's quarter be Now, unremarkable that a lead Stephen, the nothing would or remarkable commentary. second

Operator

Manthey Our go will Baird. question with David come next Please from ahead.

David Manthey

were that all you said the June month and were to-date July year-on-year. believe Al, June to-date month July and up XX% in I --

that hear did sales could right? put of daily second, the same-store First, context us? for that, in I you And

Albert Nahmad

that. good. was That enjoyed I Barry?

Barry Logan

Sure. And Yes, trends. Well, you right. comment we did heard Dave. on

average day in Those remarks. for trends days. you're sales adjusting that We are are the selling hearing

David Manthey

And no? on on based That air that based conditioning sales. was wasn’t residential total,

Barry Logan

growth Yes, XX%, And read hearing. that's June. you're what in double-digit residential hear, remarks you the press up release, in Al’s you

David Manthey

it. Got sales. daily same store that's And

Okay.

to seen in we've at looking from quarter, second operating like Watsco’s Probably impressive the expenses first the the the history that. reduction Second, most sequentially was the impressive.

buckets did you that million a decentralized. can basically that's You on cost about sequentially. million there is really company lower OpEx $XXX more and $X the talk in decline. I drop? major unusual any big But And that drove are revenues very know

Albert Nahmad

Barry?

Barry Logan

to constantly what in Zoom Hey, decentralized again, Watsco. to you call is going across what's what I challenges said, our core managers invite If to the with David. Friday you market. could, can't you hear Well, I on react XX

paper and aggressively is cost cut and going They [indiscernible that to it they were it's costs So, prosecuting pen was take have customers, markets of costs untouched important and with that to session, needed employees, care XX impacted. short-term. Watsco revenues in respect. the managers were We markets what where heavily had that structure in more deal believe other a they XX:XX] a very out

all good this drove in the on the is going and local marketplace is so to the a what's news cost. lead that And reaction

company, conversation, all driven in a but the the it's we As certainly have field. parent

A.J. Nahmad

and just all to have they impressive or been A.J. the for have this add, during deserve and period people spirit, it's I just the and X,XXX, leaders unbelievable effort X,XXX is just This XX work that those credit. them, whole tremendously so

David Manthey

it's impressive, guys. Yes, you. Thank really

Albert Nahmad

Watsco, corporate corporate SG&A. is And X% I is of this Al. the under cost of mean expenses

in driven of of on level reductions them. the optically performance any that for So in all is field, reductions seeing going terms any by you're

belongs again, once again the So there. credit

Operator

Incorporated. And with Capital our from Jeff ahead. Please Keybanc will go Hammond come Markets question next

Jeff Hammond

mentioned, Paul So being challenge. inventory a

the going picked Just of And product get door. check, -- demand we than weaker be the of it it some be up expectation was struggling certainly to about out that kind OEMs, is. our was on to talk may

you're just you strong speak kind quickly and about up keep that So to these product, ability normalizes of how with to able of trends? how can your kind demand get

Paul Johnston

not you I And regular the to down complicated just great also orders, of tell they're we off, can't best. get OEMs, they've don't accelerate. and just to OEMs, bless they're I even We've and Well, it can done they're But going the of think but supply support a continue lay continuous good for times their their speak our the It’s pretty May. cadence to They're the doing to God kept in vendors. suppliers job. going doing April they're up and lines demand them. and the to but

cancel continued replenishing We inventory. any the through followed We orders. with We didn't it.

with daily our have discussions primary OEMs. We

are. more sales, on to inventory do on hot we're needs constantly inventory of to lead Watsco with more Friday at orders We're Also are going our new seeing and movement a talking one and are had or problems We're our with their what we've able we're them a other that mentioning but what discussions part weekly inventory -- through inventory our the as have with what of look down one and intra-company, feature and and We we're we've are giving technology doing been senior the A.J. also vendors. and where going moving about the be. a inventory is actually country to gets their and intra-Watsco to managers every talking opportunity cools more able what move amongst issues Barry them companies. the intra-company that time cohesive new

through product to had they proud from to So can have we just very, it's hope We've our tough. our And tough. to-date. do time-to-time. continue OEMs vendors the and But the what I'm all some very provide once able been It's us of substituting season. way again, the still

Albert Nahmad

OEMs our grateful has And they of They're as very to come them. the functioning one Every we're best to party. can.

Jeff Hammond

Hopefully coming that to. in pool those parties Florida aren’t they're

talk trends. just up, Just talked and the the piece of you're about business, commercial the seeing on kind open any stabilization signs -- of there. residential the you about markets Can back as some you

Albert Nahmad

let that but I’ll Well, I go Paul ahead. commented on

Paul Johnston

Yes.

absolutely on was side. commercial brutal obviously quarter the Second

obviously the not back However, remained open in see as refrigeration we're business. zero to yet, upticks, began we've good on seen of even Applied we commercial of side to that our to the some And commercial rooftop started states July…. month up, strong. life but has in

Jeff Hammond

total one. and either that us be the to just in much in then expect how give Okay, the year? year-on-year, for last quarter up you spend tech you the or Can

Albert Nahmad

as time is change the It And we to same. will running time it opportunities. see from

will and invest, some think I that's not to financial some but from end add But it going work it. any we of that's going don't know have to innovation. the and in is, as as means that to we hasn't spending. there that's see been of will question a business an the -- business That's what invest needed. persistent So, the yours. of Watsco we're to going change much we're in, of Anything it. it we're We're recent dramatic innovative

Operator

question And our will ahead. Partners. from Research Brett go come Please Linzey next with Vertical

Brett Linzey

you homeowners, in noticeable just of trends there would just update the mix bit Could by us quarter, the color up it be change be on efficiency down whether or little great? mixed mixed a any

Albert Nahmad

have you Paul, on homeowners. By any that? seen data

Paul Johnston

XX Yes, They entire any we've that. guess unit. remarkable It's change it’s we've amazing most didn't XX a in been outs system just bit SEER material where replacing second the was seen the outdoor a on system. I up, thing the data front. people the this SEER, some not seen the to see change We've on that mix replacing me weren't change. seen were a more I quarter

consumer as never is acting was far historically. seen what have as would fairly the we've guessed normal So,

Albert Nahmad

our is sales and higher the systems. much in early going tickets, process data provide and into the mentioned that it very and feature building And to modern Air modern, homes, higher platform products, in are beautiful Just into on prepared the into an a interesting owners. words experience without point we higher bigger technology, tool, OnCall That efficiency High with efficiency on very provides contractors helping a tool. sell without specific, it’s a is in about it rich too sales sell helping tool margin other remarks. days tool,

Brett Linzey

maybe shifting inter-quarter the to here? from of price, intra, standpoint? then what you are Any July strength market price a seeing increases And just given pricing the

Albert Nahmad

Paul, have you seen any?

Paul Johnston

haven't on supply there's and goods, any normal moves, which really side. commodity equipment time and I finished the of on nothing side some equipment nothing been but are side, the seen on No, price increases season the the part this

Operator

will with next from Research. Chris our question come Please go Dankert And Longbow ahead.

Chris Dankert

had impressive, SG&A back just as I curiosity, next moment. the a guess investing spending mantra is, Kind know does really Again, of turn for for to of XX of just out. some the circling I years. pointed out to we're quick back how that David on,

to So down was the very also to SG&A surprised it again, see I come magnitude did.

on what in kind maintain Just any of seen comments and you've hiring, it level here? to takes on this June growth of July

Albert Nahmad

see it. futurist, the given of so the you see gosh. best Well, you gust Barry, you’re what is Oh,

Barry Logan

that the labor-driven we're mean I Well, company. big picture obviously is a

to If our more to more XX roaring, people the resources, stores, customers. you issue. visited business that helping extent And dealing five find you'd is that have we with will costs

have can or can way much So that's a problem good the tied to of sales our that to where discretionary in labor trends. be a be variable

and terms three in challenged two distribution volume at will model. they determine business So inherent flow rock going to occur look That's a will sacredness, to of spend up we we've last really we mindset how quo. over challenging in company that's an and drives months SG&A and or That's all under XX these react that it. of the as leaders impact. see our that the quo as can being can their a creeping company or the every challenging and part culture also distribution of what or status But It’s the technology really markets. do change status they have parent on, where in

that as a this that's sustain be there it and I we're get temporary I know of into portion company well well. we into material? sort on to going So that cost much the is this that XX, as year. in. we'll to We'll structure you state today. and made wouldn't we that futurist, year. and efficiencies How a get this to much out can that that we've to we of being And find now. would XX just how guess through how want expect try beyond is see once we're right better of improvement days a have I next

Chris Dankert

and little kind specialized, away you having being have or in not a again, impact? meaningful any difficulty And then customers more with Is your availability your again show enticed is labor skilled. labor either up labor of we But seen to certain any both jobs. able for that's issues from being some your force customer force guys or

Albert Nahmad

having been not, We that way tell are that what has customers I our just and don't continue. terrific. you we or our up we're can we're and issues very appreciative know workforce keeping but to that And expect with demand

Operator

go come will Morgan [Operator JP with Our ahead. Securities. Steve from next Instructions] please question Tusa

Steve Tusa

significant Good any pieces execution you performance the resi? trying suppliers guys. Congrats in in here. morning. equipment on Hey Did the and quarter a side just put have of difference of together. your the the kind to I'm on volatile

Albert Nahmad

they're just job. No, customer, what's they're on. can. customer Yes. know their the We're they're them, supportive. partnerships. know supporting they the all about every just the great -- only just they're entire I'm entire And one them. best fit, say not couldn't very work -- -- nothing And doing a True doing of They're all going their base.

Steve Tusa

ton Lennox, And you sell guys of don't a right?

Albert Nahmad

I to. Unless we ideas, any. will don't that know you sell some have continue we

Steve Tusa

don't any a right now, have it bit ideas I sounds confusing. little

like Lennox have I gained if and I the guys brands major So, product of industry are already that kind deliver share. share guess really of kind struggling is reported that's they're outlier don't they're your to -- an mean and sell? in Because claiming there you gaining to

you they than there like others? more just everybody on X. are do kind You see are were struggling to trying am is -- guys I same the flat, are or boat down of that some

Albert Nahmad

produce they be they're all product doing that have well. with us, it. get very equipment the all I all supportive. I and they're couldn't happier well mean that can doing quickly are is, but Well, we say would to how and brands I issue major the

Steve Tusa

where of the situation, inventory then kind that look Right. stand play and year? inventory you out will -- you do how you the half guys How in today the the of back at

Albert Nahmad

the has group know at but very happy about is this. come the tools how come A.J, very because But ahead you to. we've -- I that to and good a with, up go question, inventory we're that much good don't down. has technology That's our want get of Well, that part technology. detail talk

A.J. Nahmad

to of, inventory But some supply So, and a constraint, of it’s better extreme the managing broader is the or point Sure, chain of inventory. but also the because doing lot the -- of non-excessive reduction we are demand.

around. and focus and better call have We daily teams, what and one system, tools on performers, moving low effort inventory, sell better moving that better technologies, in place, we non-performing new don't SKUs our them …. getting say inventory next be And sustained that seen I we've significant would inventory portion And reduction continued a the position over healthier. about is the of should and

Steve Tusa

the so these year, kind year. there's to kind you load of into up with kind inventory half have? back Do comfortable heading lean you're while of feel of big some a for when you to need what tools and using you not Right, of maintain you're position get a delivering next the

A.J. Nahmad

wouldn't time say I lean, the right? say the is To right place healthy, right put at at the I Yes, products would key.

Albert Nahmad

The turns, term our we inventory. effectiveness use is effective inventory is opposed to as inventory how

to be these figure to can in And branches? Before try to you manage math heard. thousands the should SKUs and try hundreds tools, of trying regulate had we of they what is where out XXX imagine or you

Watsco that the systems inventory day just sharing those teams senior made, at meetings inventory with tools sharing their I the been of one that for And When every among we've have companies look have has are new magnificent. gains every our -- invaluable. management people personally, me, and technology the information, we data we so the just for

A.J. Nahmad

it. throughout to we better. just tools We’ve company partially going And haven't through implemented they're yet. the Because get the

Operator

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

Albert Nahmad

what’s stay safe. let everybody’s stay me pandemic. wish mind, truly We Well, on just and of close you to the with all healthy

at and now. Thank possible best as have as Bye attending. just everybody want We terrible to are virus. the here you can staying much outcome we this from for home

Operator

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

may disconnect. now You

Watsco (WSO) 23 Jul 202020 Q2 Earnings call transcript