Watsco (WSO) 22 Oct 202020 Q3 Earnings call transcript

Company Profile

Participants

Albert Nahmad	CEO
A.J. Nahmad	President
Paul Johnston	EVP
Barry Logan	EVP
Brett Linzey	Vertical Research
Jeff Hammond	KeyBanc Capital Markets
Chris Dankert	Longbow Research
David Manthey	Baird
Stephen Volkmann	Jefferies
Ryan Merkel	William Blair
Joshua Pokrzywinski	Morgan Stanley
Steve Tusa	JP Morgan

Call transcript

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

Operator

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

Albert Nahmad

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

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

I safe. that you Before and and first healthy are let report, me your wish family

to the evidenced margins, sales grew by strong EPS today. HVAC sales, nominal investing These set strong operating on as network, outstanding for clearly replacement homes Homeowners during driven report. to and equipment in summer an early results profit, from were efficiencies Records remained completed third grew which our are their quarter, as profit, operating residential business, by net were Now in gross quarter. and U.S. income. operating SG&A. HVAC throughout from Watsco have a our growth just XX% XX% change through record our the achieved in $X.XX.

We our also technologies results believe in Watsco that share. to greater adoption and contributed gains has of our market led to

impact simple metrics. two this are indication of Our best

non-users. rate that growing use faster a than customers First, Watsco are technologies much at

experiencing are among Second, we year-over-year users minimal attrition a active on basis.

continue by customers. and drive adoption to mind, more in platforms we for this to invest keep our in Now greater

in to X orders, downloads. rate transactions have at grown moment. this XX% users Weekly with have dollars Here apps grown the which annual $X.X XX% mobile over our by are year, some progress. of about billion online nearly our examples since million is E-commerce last XXX,XXX of year

XX% e-commerce Our certain in end XX%. at use is markets, last of the annualized rate sales the XX% run year, over e-commerce versus is of and

second and XX,XXX we already locations X,XXX by functionality. newer now momentum, only have the platforms more for and during for call, year. and last quarter nearly fulfilled to we unique Air technology and has homeowners in sales, provide were expanded available These Contractors have provided one over what the services and our, them, quarter, been Two CreditForComfort. over platform connectivity $XXX generated buying making contractors proposals of This payment orders include gained replacement to million and platforms financing OnCall households digital than users. innovative digital during months when call that and Air, pickup XX,XXX our proposals of dockside Our more the using non-contact systems. few double OnCall a

us double applications third-party processed in number course, XX year benefited turns resulting management funded flow of improving an software XX% this inventory have platform the CreditForComfort contributing also loans. last inventory to in with efficiency. increase points basis digital of over in and and Investments operating Our financing year, cash

All their of Watsco scratching we technologies of only but the surface believe is full are this exciting, potential.

technology our feel explain us we progress. a and free with always, call can schedule to Zoom and As further

operating of we and We so sheet no also a which flow generated at $XXX have balance we strengthened debt Watsco’s year far, for record record quarter, this this the million, far away is time. cash

finally, in make one which are always like to size capacity very $X grow in comment we And industry, $XX then I the thought. in to to have we of have room we a our And for billion, Importantly, more only important so we're business. almost any growth. billion lots investment that

appreciate I their A.J., commitment. questions. results the answer Paul, a We testament to Our to across and happy that, efforts Barry the Watsco network. of your are our are teams With deeply

Operator

question-and-answer now the begin session. instructions]. will [Operator We

Partners. Please go Linzey will Brett Vertical Research to ahead. from We go

Brett Linzey

XX% trends, everything growth you I U.S. wanted sales equipment, in strength? excluding to category? products. equipment, see driver was where in just XX% big that in resi So, the the HVAC start did What with the

Albert Nahmad

Why don’t Paul answer? we to turn Johnston for that

Paul Johnston

Yes, equipment? sure I'd understand. like I Everything to but make

Brett Linzey

total equipment. resi than sales the stronger up the Well, much U.S. just

was What categories driver ex-equipment? drove big kind what that? So, of the

Albert Nahmad

Oh, no.

and You misunderstood. that. Go ahead, Paul, explain

Paul Johnston

Yes, coils, handlers, equipment. is residential. systems split resi for It's furnaces, gas air

included it's in So, equipment. the total

Albert Nahmad

they in trying think I previously is equipment, say. that's what he what that’s to came we're --

Brett Linzey

other follow margin mix any you of line up gross And from see in just just a kind equipment the strength side? the in to the terms Did categories benefit versus of that.

Albert Nahmad

Paul?

Paul Johnston

the a Well, in an our yes, and that, side growth supply of profit. which heavier is gross in had on part mid-single-digits. the parts And to we little indicated, some side obviously, business, we moderate our enhancement

So, help did bit. that a mix

Albert Nahmad

Yes.

Operator

go The of Please ahead. Hammond KeyBanc next Jeff question comes Markets. Capital from

Jeff Hammond

on -- the the drags would side, equipment the U.S. remind side, the you us Just on international? of be what I is kind -- the versus mix of the can commercial guess residential equipment would and be

Albert Nahmad

Paul?

Paul Johnston

is Barry, offshore versus onshore? Yes. don’t what why as as that handle you far

Barry Logan

Exactly.

of which the right part equipment U.S. which has You lesser residential market. largest commercial To -- by U.S. commercial applied is slant our the there's the on and is a the international are there's business track, a far. business extent toward

been recovering core-core which this not anywhere is impacted anything growth up the but rate it residential. International of U.S. is residential ours obviously else. business is XX% has -- what quarter. than The that U.S. more market near is is commercial So, what of is still

You'll else a quarter this -- impacted anything international up profit that our as file But of been than markets is commercial more business those a market our the perspective. is in tilted and much perspective, from perspective our it. from I say it we profit actually data where when operate. we But from find have market towards EBIT a some international that's XX-Q a

they've more Although done have great been business the actually and a impacted, the job profitable with internationally. sales managing this quarter are

Jeff Hammond

the too of of light you of just -- lot your environment kind of Are Do what couple doing levels, a for on And just of IAQ, What One, right? What see can interest then, you're restocking And low kind in guess demand I great. that you're inventory levels? still kind discussion about to do to seeing just speak of or Okay, there? you're a increased you where doing broaden you there? inventory to questions. there? about have they some do?

Albert Nahmad

As software us inventory. inventory color more investments Either jump Barry that's considerably you earlier, grow in have Maybe in in. heard maintain be management by with provided helping one investment we and to or Paul. do revenues less can

Barry Logan

had. this. I First inventory to talking But turns have -- -- about improve layers the picture, worth inventory calculation before that's what disruptions we discussions noise a one, flow that's of inventory, goal, X of and to a the early big math this want of in is to year, cash to I very from started say we that being straightforward straightforward any something the chain Paul, you any year X, very supply we've or

strong flow, So operate. be as that as an obviously well of that through we started gained can cash in the as operational our year a source mind we with that efficiency locations XXX

And that's before of of you with an current noise. this So so on chain state can Paul, initiative what's been on. and comment any on the supply going

Paul Johnston

think We're into But with for nicely. the got we pretty the started recovered September seeing the flowing not the on supply I issues We OEMs again. recovered most chain the really back some part, outs. got much and rapidly stock have normal And experiencing big a chain spotty Yes. side. inventory in flow. timeframe inventory The supply

we inventory our our in were turns, of as the to we far able to quality not that As improve the technology inventory able inventory. were we've use also improve levels, only the invested but to

that by we analyze in by exactly able to branch, line, we're And to so need now have SKU by by of product types place. inventories division, the

it it. -- that a So made we've been wonderful was it's investment in

paying the to several next dividends I are we're over the from that it back to think receive going years. going be

Jeff Hammond

little in this involved color on a A.J. the inventory. technology

A.J. Nahmad

Yes.

of think there. turns we're are of given it's that inventory. was Paul, that absolutely technology your I job quality field of amount using signing people, a And filled, of -- that constraints of sell their so team but also there's customers orders that could been they the a inventory, That's going on the the and even just the focus important great the products them. inventory the supply function not major point from on, the using important the teams the And is the or last it's filled major product. the with did, how or a and our been that demand note it's to our achievements and

that we're So And proud really a effort. of was herculean them.

Jeff Hammond

Okay.

it. seems about largely lot normalized some as big So the guys? IAQ? internal to you're you given moving is it changes. function just Is a something talk inventories it of the have be is sounds maybe it about dynamic? talking kind needle? kind the Is Can people about like of a And for just year-on-year you lower excited of the COVID it How of it in

A.J. Nahmad

product Yes. It’s know, IAQ putting of it all we're something year. the I you important an our has it prior products now. But in definitely, definitely as Excited a it talk about new X been in into pandemic It’s think lights. we about. was -- area. X times very, very growing frontline is rapidly, or that what made always piece Historically, the new business

Albert Nahmad

light. UV

A.J. Nahmad

filtration, cleaners, and I lights, And good entire UV-C it's very growing Yes, think the is gambit sustainable. air rapidly.

Albert Nahmad

companies, whether as have the first we or out getting industry they're get a distribution partner products. we're being products, look And we call companies, new first scale that new and up when the these having roll Yes. of mature a the leader often from lot start at and

Barry Logan

an and is is what recommendations we feature collection OnCall again, contractors platform IAQ it this may doing. talked platforms to platform on things present may called school, is benefit, or Air, solutions. them is homeowners to old just Jeff, not or OnCall and our to Air technology example of to part would may about add that the of kind where I not A.J. presentation that before that people sell be every contractor and would single may -- a And execution. And in now add he -- or of give

the the that's embedded given. presentation, being technology, the in it's in Now, in proposal embedded embedded

important. state, at the looking is of thing So future that kind very

Jeff Hammond

more why what does? A.J. don't lay language in the Air OnCall explain you

A.J. Nahmad

sell is business a on OnCall that tool, has help Sure. that house. them built is basis sold software we the in that a FAS contractors to to Air a

digital interactive carbon And replaces product the a recommendations also on. Barry they at offering yellow are embedded of sure you. paper a options are they're enables it with And experience the used of and start. with good-better-best modern And a product add-ons it’s Consumer growing in to previously it offering. full the and embedded write about sales pieces using contractors tickets, videos to tremendous are the all lots basically HVAC those proposals are and designed So accessories sell information and for And a to that copy platform closing faster, was tool. in bigger they're deals. that contractors. it's financing only more the hinting Thank tool. It's contractors that getting

Barry Logan

the using we've of all for not the allow an really sales terrific all SKUs, to fulfillment. with that platform, go again all connectivity last be And information into to in the products, think that the how a state years can e-commerce it's It's for curated five things platform, really data home. all of also data, the I sold platform just the it's the product a all future

Jeff Hammond

that me, we data? A.J. in have SKUs of many Remind terms how

A.J. Nahmad

now, product the in Yes, mastered we've SKUs industry. system management XXX,XXX in our information about

Operator

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

Chris Dankert

with typically mean, the strong. off, your a impressive. I I guess, on from of that pretty spike of to U.S. Really team the any needs high the mid growth. guess, res there was XXs, to customers are the very well with I to able your dip in XX%, correctly, kind congrats I'm Or fill? flattish If to fulfillment almost metrics first ability up remembering up keep was demand there? in

Albert Nahmad

with great they all That's with as our were and could they from OEMs other is up stressed. us as observation a distributors. And they best did question the kept

bit here. run and Anybody we Probably. They're distributors yes, they lose as little hard. I up is not I us, overall, other sales? want said, to around they're well. that? They to So with opportunity so kept know hard. And color But an this a with did of working as add they messing think

A.J. Nahmad

a they product A but enough it, of get if them price. didn't that There's on. like substitute we product customer it was have orders contractors shortages, I was there's find, warehouse transfers found we product little there going a a teams herculean looking lot and for fill Yes. lot wins a mentioned effort competitive helped lot helping ways to of the of earlier, could in There's were our a anyway. There of our B a that, fulfilled. at field. Where

Paul Johnston

And jumped all our able on OEMs, were. very fill what to where orders our We major them help like was we talking with a daily really needs they to our Al were, hoops daily. had said, had of through came It working were well basis, OEMs open with We needs us too spot magnificently. And to our where be shortages. done. conversations

Chris Dankert

to I able quarter, breathe got to this keep being just of it's to goodwill. customers lot a up imagine with got

work. nice So

Paul Johnston

Well I that. said, agree with

Chris Dankert

update for And today, just the Any Is size the it update. at growth VRF, on meaningful moment? you for quick X what the looks you there?

Paul Johnston

quarter we by grow our the a year continues and larger market not itself. in It had that's market. and all It's bit. VRF, The a general split quarter material had each VRF. where is generally VRF duct-free for XXs. size becoming kind to and goes. the The is low because larger in products situation a that you did VRF suffered of It second commercial similar A with little grow. good in

so it out but downtick did have the that X, a a X long-term with X, are recovery most have then months. And it are of forecast that we to jobs jobs VRF because

Operator

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

David Manthey

benefit contractor feel have actually have may that have did from the to up distributors that before? other net-net, or had may think picked all and you in they a Watsco comments you sales shortfalls manufacturer you were on third been that? out that had here relative miss or So mean you you do shortfalls on not I positive Do for stock-outs, experiencing, did quarter? the And of business negative some

Albert Nahmad

to But Well, I customers. believe opposed OEMs other that. discriminated customers. were their I think they that us as a part for think don't all don't I their for

David Manthey

in One contractor was that in anything brands. between over it brand and there is something measurable? stock. there you switch saw think thinking or had would you out Do that to I'm you

Albert Nahmad

shot? take to Paul, want do you a

Paul Johnston

forensics That's what impact that mouth with question have try I of to had a great to were identify our really Right a was. obviously one hand big of Yes. to that say and to going inventory. not exactly do we impact now, we it would a lot the it because

difficult take will, to reach us somebody in customers inventory of So you and the out to customer, it became very, when our very were provide go maintain trying out else's market. to -- and growth we for them if the

little... a So

Albert Nahmad

said, think I that's yes. well

Paul Johnston

have under feel belt, more better little on our that. time, A Yes. bit I think, we'll I think a

David Manthey

seems second the Okay, Paul, imply the why business to think just the on get strong be, that a on grow? there something basis? factor seeing fair HVAC And then plus it's of HVAC like than overall. residential supplies. that new other bigger guess, that more to world parts products other we're that, grow forever heard being a construction offsetting question And you I for If I which, on business, the the between given or products. confused It I down where there’s and parts a up where enough. you world such you I in because right, can can you X that that a in I'm Is would a flat envision would market. guess supplies all push that mid-single, that picture do is regular said lower was been

Paul Johnston

market more are what be of product It's a replenish we how for Definitely. as dealer using a technology going stocks And dealer. it's marketplace to lot Yes, to grow. far make able in availability, the to to our economical that be manner focus that is share. going a on, can rapid strong we going market course, the be to -- be as is you where of have know a that of dynamics that

make efforts a market grow we So can again. there to get number of that are into that

Albert Nahmad

to this should I gain think going. very our will at I X,XXX that proportionately growth -- we able to anybody to stay But prices Dave, we and it's in percentage due on. you're business. that work I'm distributor our negotiate, to largest we're certainly -- good think dealing level. we help do with buying, increase going volume get believe order that the a that vendors, parts as don't we us hopeful have rates spot as supplies at as But Being to of the and more think share. don't the believe overall

And doing OEMs, some the our assist Don't just with we're parts things that. on of out and us think, I supply will count because...

A.J. Nahmad

in data-driven No. initiative that earnest, now to I effort going was major kicking just a that parts new be and That's will supplies. kind off tuned. next-generation on stay of a and we're say

Barry Logan

I anyway needed, through parts comments, growth like as been not opening dynamic, today. I to solution. to said but are no, feel Dave, just there think, too I'd a that add is probably becoming have another is it layer like The through rates macro if And in that, suddenly -- needed today, consistent. equipment saying big is consistency And where we the

So what share alluding I most XX and selling is parts part the supply. of supplies, market Miami we industry have distributors also. gain And and we're is, and that parts a for sell this fragmented and to probably our competitors in supplies it's parts as think

can in as opportunity A.J. as to for a historically being technology an So done play a us. where advanced far way and is it's this alluding what's than well different become

Albert Nahmad

was more That me, much eloquent than Barry.

A.J. Nahmad

eloquently. very a is Barry done. Well

Albert Nahmad

is. He

A.J. Nahmad

In way. in every way, every

Operator

The next question ahead. from Jefferies. Stephen go Volkmann of comes Please

Stephen Volkmann

was like of much XX%? the I sort elegance or thought have IAQ of ballpark OnCall to moment. through. add-on if -- but now it really come would Many the Is proposals idea. Air I just all that project something or these be no thought is that interesting the how again can what earlier. said I that XX% of XX% was a obviously, to possible Well, pick Barry, part you interesting, your were of specifically for on that things, I X

Barry Logan

selling affordable we're make Yes. is OnCall concept a part and It's It's consumer then IAQ. not efficiencies. higher XX%. efficiencies historical But of the It's holy differs just the those And to higher certainly adding Air good-better-best a grail here. which fact solution can not is, concept more giving that financing that bundle. the includes trying sales create it's homeowner larger bundles what the IAQ, from the then adding of

very this -- It's So happens he's that's it's than adding might but just say differently remember a whatever Paul, an homeowner Office respond in adds bundle IAQ a to on not it you I presenting paper with percent when on way may XX% to or the if wouldn't going the know, it form. to be. connected Depot writing down contractor

far really what So is different process about. it's sales

Paul Johnston

IAQ. And is there of X IAQ not product. are various just layers

You've of number a got different products.

tier can installation. into the You

So a go price be you high XX% install baseline IAQ around as of as installation the to -- minimum would just use probably if could be products would XX% XX%.

A.J. Nahmad

OnCall also a that's just our X true while. this digital customers the static than for stores, In seeing a buy line when offline Air, our that. more interactive And that on higher make but on in stayed online sense Air items website. online when our And it's line it It's shop Just XX% thing BXB products so sales. And That number shop in and other sales as might longer just in Amazon fascinating our like purchase. others, buying on -- all proposal. in no experience, that the the is item OnCall invoice online statistics all our we're has a we website, meaning experience. subsidiary's for we e-commerce happens happens the

Stephen Volkmann

on on in flat the SG&A was actual going same-store here, was originally control And guess, basis. more quarter SG&A sales my a ask question then impressive the just Very side. to I I

as costs kind we assume some in are think world should about I creep going forward? do it? But going about that there's to of probably how how think that up. the Just opens back we

Albert Nahmad

he will answer let's that that, so this Barry, get up.

Barry Logan

they're lower he X things cost time sales obviously, or that like the because driven variable and SG&A, fixed distributor they're -- the cost every by has over mind to Again, margin they're growth. managing, would he spending usually, don't that

sales of How the facilities, measure has to the where that's do year our different. no down. in latent fixed we -- some cost been any X% would for year-over-year facilities, this accomplishing renting been latent Renting most not cost but costs we've key And higher this -- get on take lower The example, we're costs was be example. So year. our an stores of just down. in

Some we're for costs push might where the that of really a then permanence examining year. the benefits fixed to those been go of try into come. obviously payroll address they to as This them next climate of the technology has some and

flat. you has that of cost to analytic have say more culturally, to stay will in performance-based their There regional cost there's structure as the amount SG&A But reduced the be I'll driven variable There that's obviously for local is, great cost where of There commissions. taken see accomplish been performance X more XX it way sales. the presidents X by not So costs and embedded a will our and comp. will that. be will fixed The more delivery permanent. task, growing you be own hasn't our be third will is quarter business

have in variable. We growth

benefits, effort they permanent especially cost We culturally, temporary have And more it's just go on fixed. sustain than in side. it’s huge a can fixed this the because to offsetting be to -- on reductions again,

A.J. Nahmad

the efficiencies. and Yes. bring all a optimize exposes of X do just gain of but all which bucket third and customers, deliver hate our customers. of technologies cost in, have to a all our variable that. day-by-day, -- And year to out new our more that it do that, to fill we SG&A freight. we I'll add our how to how making smarter our data of product more we and how decisions costs product SG&A optimization million-plus technology, innings locations, now we locations side, that enables be Early we between around transaction-by-transaction, of That's well, on on our biggest the is orders. moving locations of broken to cost the into of We record the I

Stephen Volkmann

broadly? technological there increase seeing the general that A.J., to of opportunity offset costs in logistics we're that enough And is

A.J. Nahmad

efficient. I be Yes, would goal, right, more the say is TBD. that's ever to

Albert Nahmad

that Yes, products XX, XXX delivering every stores the it And a activity-based that largest discussion where within of is cost branch with that of technology, is change game local in done. it how the and going around, enable then project manager process miles to Or how it figuring our we it's empower, cost help that be embedded we day. moving XX sits. of And if inventory inventory of becomes the used optimization have out from largely on. do then X

So the as call, an the surface. having that is on we scratching in scratching impact some said results. of But yes,

Operator

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

Ryan Merkel

is So off, my I'm done view. But in sustainability. of demand What hard imagine answer. deferred growth, to there first some also that in have I very was that work pent-up from QX the just to can level probably XQ. growth Because resi impressive, about continue? wondering This got

know, to hard you but So do think? what I answer, don't it's

Albert Nahmad

It not to your we'll the long that hard is It's started will I see. fourth be just say. to answer. is in the growth at -- mean is third say start rate of Well, quarter. to sustained growth is there hard that going on correct. It would tailed. I the very conclusion have quarter. But How the

the get share if our from of going can't plan we're We're from get industry to we advantage use Our game is, the it to growth. technology. going growth, it

A.J.? So add unless that, add Paul, somebody Barry, can can to

Barry Logan

added actual were industry But out this association to it that shipment what's third to as for anomaly all industry far still to we're huge far as crystal as forward look to sales show coming obviously, be Al at quarter, we're are there's going time when going the year. in ball going bubble growth. have I going -- is It's then, into frame. from numbers in occur the of you mean, said, data a industry October And in in outlook the it of when QX up, the some to what year-end as the going together, put all equipment at of think XXXX. that second seeing, where the an in the think growth we I pulled pushed as the demand pent-up quarter I

pretty is when added year going think a for everything like I look normal up, the to industry. it's

Ryan Merkel

were of you're saying the think first I shipments where and what they in catching industry half not probably have second should half up. -- the below were terms also somewhat is been in

Barry Logan

Right, right.

Ryan Merkel

line. won't Yes, it of out be necessarily

Barry Logan

kind of looked it's -- I look that. on out to then I question. smooth a through you And at to year-to-date and the think try a good and have I'll ask things basis things question.

business So year-to-date, that. residential in is no U.S. market, up virtually And X%. there's price the our

No number So is the on going same matter that's economy don't we're machines simply COVID, breaking, machines what to break. know. going the in or

work again, is rate an healthy above and but I in not something, rate, growth the doesn't average type so question of out in largely sustaining picture, is it in out market you have seem that market, not think get and is out done. of health So right confidence X% far X% big because sustainable go contractor the distributor, by a thing install or the to the the growth And But driven added replacement or upgrade itself the right thing that even think the contractor, in feeling this OEM ordinary. I of kind stay-at-home of space homeowner, if fine. and

And choppiness, it, through the to I look some short-term you think. need of

Ryan Merkel

Yes.

helps. a that's That good Okay, answer. context

Paul Johnston

we industry gain, been, ever. is sales that more rate customers new higher detail buying than comes but have it's customers ever you point Just to from X is more more have of to more customers. to factors, growth our we I'll we more share new there. than it meaning can or that attribute And Whether growth X number tell more a products

Ryan Merkel

Yes.

top you, be pretty on of to …. speaks gain it share which So I will the gives think whatever market

Paul Johnston

Absolutely.

Ryan Merkel

and at Okay. SG&A, And troubles the you you've costs it it was I'm couple fixed sounds here again years strong. and because taken answer right, SG&A had your incredibly the -- going on then last then question, leveraging quarter, down. Based the like to to this of come prior

that's more this technology efficient. making it now got You've

is there, or going more the is, at should start So corner new inflection delivering we SG&A the my top-line assuming now look point the leverage? is mean, this have and to we question you're an normal? turned I as consistent

Albert Nahmad

said. that comment on what I'm you've like I the say going would first, to

For going technology may we've in we're years, SG&A expert? offset think But by my more of investments reported to that over that's doing, than that the last time, think that and X don't do a we we that's are over to it's what occurring. even stop. other It again competitive edge being and increase some do obviously, our significant efficiencies because doing. I were Barry,

Barry Logan

Yes.

Ryan, was I do everyone and of EBIT built it. forma this million basis way an ago, right. pro today tell And didn't exist $XX but the points have could technology X, First, it that. instead, EBIT that's spending is We right we we calculation margin. of just elaborate years I people, for to do XX and mean, X didn't execute

in stuff of we're very right, has talk But that rate has efficiency, started the it. clear obviously, beyond are to building will Al about other spend And impact. technologies sales, to So we have spending time an It's that good that the margin, as diminished is increase share, maturing. things is more. a this customer-facing

ponder. an big as think that's inflection I cliché a So nice to point,

you impact? basic year of isn't beginning aspects differently the And their talk all locations an yes, go actions technology XX think I and business Watsco's normal, influence new the business. across the having back question in of their that is their it leaders at looking clearly I to when culturally, because it is. is, And There answer the just of their really is footprint. isn't to about is this XX again, X because

Operator

Brandon McCann Morgan ahead. The next comes of from Stanley. go Please question

Joshua Pokrzywinski

maybe missing I guess, and missed to for summer in can't was next it -- given until the Josh. embarrassed I the if Yes. stretches it's some potentially don't few you're I there the the first, not out for healthy just for some wait as next get longer-than-normal end can't in late. a sneak guy, we the says, of I've a every the into kind to level a It's cooling about broken spring of I in of stuff, while. a get some the industry little but you of point, normally attention feel months -- first throws about consumer out because demand? I things year? stuff backlog that backlog like the especially maybe on towel joined a the season know I that that well, Do Or of contractor Had having guess year waiting a because you at talk time. season of and actually there

Albert Nahmad

our that Maybe at shot a because don't doing half of to sustained? But the like because take say be we Strong on first It's got we're know. share, demand. is maybe October. I gaining better. half it. industry October, I'll of the smiles face. Will I but hard first

Joshua Pokrzywinski

times kind contractor you seeing from in get you that maybe site like, on lead would can't just guys speak hey, the guys job have And enough? what been of to, fast

Albert Nahmad

think been during the of of would I had. that most sort have Any in September. would that completed backlog -- the contractor have

that's I issue So think right don't now. an

Barry Logan

what Sunbelt, spring. of XX% say and would -- I it, to there's people if add to going that is until the are just in to do wait next didn't we Josh,

real-time the of our and our always be I kind extent, in at looking this always terms we'll think of way seasonality. of we've and us been, sales to

see don't I we'd think deferrals. the So

now deferrals for see that's for to waiting right built is say where commercial we that's for true the of backlog business the money, where the in the for think would commercial year. waiting market. part might only be next I backlog, jobs, our that contractors market waiting I fulfill

Joshua Pokrzywinski

and And that’s financial right? not else, anything

Albert Nahmad

Yes.

say, going he did was to, what what you Josh? say him Let

Joshua Pokrzywinski

was decision, residential, used I of more like I'm commercial not well, would financial not be comment just to... just that saying the saying, a

Barry Logan

Yes. right. That's

Carrier, world indoor Although in equipment big useful now that's for has the buildings used that of as to sort example, quality the a virus. for air well. thing. applied is of and commercial attack introduced theme spread on of the the the Very

Albert Nahmad

you Paul, had then, And something.

Paul Johnston

Yes.

things more that at I together jobs -- we're staying one I of is people had putting were home. additional keep some on data hearing think replacement the people because

the now. the at is And in is Sunbelt jury in bit longer. sounds air-conditioning to that find And a times the XX% Sunbelt, because really that home said, actually people they as that in or not on in paper. that business the the Were work out think underneath so running our school? correctly, I right guess Barry were run were actually out get and good And data want the I I were their if longer of on proves they and Sunbelt. longer little

Joshua Pokrzywinski

taxes just to entirely. to did a changes or on policy you're the high with -- Obviously, something helpful. And Or right have gears would But if thinking? that guys have out it, or is that you that you pretty that's payout? color up? potential shifting have rate, then that Got would tax Any observation that that payout is dividend would be revisitation were now. any go statutory revisited the dividend you

Albert Nahmad

easy an one. That's

have stockholders. principle all, given cash and not history that, the our We flow. have will growth doing we year reason the share followed consistently I see that that have a to for a number We reason And that no year no of after debt strong we years. at of no especially continue with

to the our something been in do that it. pretty and us So there's stockholders. of past, do I would say Don't it greater that what But unless to that now, earnings, forget more good than we're unaware comes a for we've flow sustain that. looks right I'm going been, doing cash additional a extent, large opportunity gives has little to that to up

Operator

question go have a we And Tusa JPMorgan. Steve of Please from ahead.

Steve Tusa

sure. numbers these constraints for Great performance big spotted the supply some this sell-through, managing supply year of on constraints, and

Albert Nahmad

you. Thank

Steve Tusa

their a taking this of still X% obviously, when Plus share. the if Barry rate. though, you're you're bit kind year, I'm is the thinking to growth it kind call a of of -- kind guess, I market just below X% sounds curious plus you grew normalized pretty number installed mentioned higher aren't kind base range. what's -- shortening What than kind machines longer kind useful changed? X% guess, I you harder, do the or lives normalized mid-single-digits, people an that? get the to i.e., How for to of number of If of is in a maybe of low grown running kind guys like, big that that's market a

Albert Nahmad

Barry, sustain so question. good a idea. your X% That's

Barry Logan

frankly your Well, another is this X the mix be and that just growing. where happened surprised have that to me. question. high things then -- X and And actually efficiency year philosophical is mean, we of the that interesting There I'll are are year I answer

year, So we're not it's if selling. playing there out. to positive the as in of it is a evident It's risk speaks the products mix a and that's this consumer homeowner relationship contractor

is... Secondly

Steve Tusa

mix X Is Is that about that -- about about about point, was I think X think point mix X you Lennox right? point? said is do

Barry Logan

rounded, strong, but okay. little probably that's a maybe That’s

probably but it's feeling. little just high that's -- other think The I a my

thing other contractor one that of on no stuff sell $X When of about to XX% The we ever is is credit. asked contractors, credit. billion it

health how our wait best have XX get it's to of leading of we to the best contractors' money, the days So one -- our and indicators is...

Albert Nahmad

to How we're collect it, yes. going

Barry. you're going. where know Okay, I

Barry Logan

we or reacting the idea breaks terms so of And relationships market we going our to again, if technology, replaced risk through industry rate, debt, the in active factors and credit helping and something it to needs to the I does I And have if and to of what's of closing almost bad homeowners contractor speak something deals. that does are our contractors but them lowest that see kind to lowest get than on. when default are on end lowest seen. we're And and think and think great, speak how health

don't our I body X%. that out adding getting prove this momentum that longer-term only I year of started will for adds Steve. know I X%, if that to So think, gains, Market is share doing homeowner but the like feel to be contractor, are think what's the right -- that work It relationships will time that with out with now. I of health may we we're can't there. going on tell, OEMs underestimate

Steve Tusa

something pre-pandemic, normal, not better post you're of gotten has this it implying pandemic? of you been And was kind that's that said -- that, and kind that that was

Barry Logan

Yes.

Steve Tusa

that unemployment whole It's credit means is consumer better X% thing pretty interesting. behavior. This an amazing rate Interesting.

Albert Nahmad

unemployment But remember, existing with is also, attrition A.J. people gaining second Steve, is renters. rate our customers. the homeowner, much of also facts really lower And we there. than thing of on who the of and is for are our one, with customers; indicated, that combination X market There acquiring homeowners the as customer the mentioned it rate is technology, is a but things: new new reduced share we've is some

And so combination of new as market. reduce that as you higher customers grow a attrition a return of share yields far the it's and X,

Steve Tusa

guys the in net, went e-commerce something And to I because you of mean, people great because -- kind kind the ahead your you you I on think And -- you they something like was one supplies I mean, ready? where that to changed the right. probably what guys, players mean, of front? that -- you specifically? compare pandemic growth something supply market, kind of versus the guys on that I that because Because turn you of had I point, rates would technology major for of kind hurt dynamic that the when on of heard, out. I constraints into for I the heading just guess Right, pandemic. did was there the the don't you did guys weren't here industry, flipped guys of you have factually

guys flipped that of have of the shouldn't couple that you. quarters? last helped Was something specifically kind So for you there in here

Albert Nahmad

great I you? leaders. We're tell can What just

Steve Tusa

management, great course, other of that. than, than Other

Albert Nahmad

you making, -- see orientated. that that And we underestimate affecting rates earlier because was long-term. earnings. in others were which investments Sometimes, of mind for to short-term were Maybe I think we but growth didn't the we're the too

and because recent to the And and hurt I And do? supermarkets. better. will that And we we're we by replacements. to wear on so the go get years. means have very of have cases, and having, create say a to would, some most recent demand. for been is of we It being optimistic payback even I'm you're industry rates starting in do. repairs tear go to equipment heat, that do may virus, needs restaurants, What don't are hurt movies, not the that record normally a and in growth you using But in home us home. than summer we'll and cooling did don't to don't go We staying does hot more we what

Steve Tusa

that. the between of and big growth big commercial one was -- piece resi rate last you total difference you. much is much growth down in obviously rate one Pretty kind equipment resi a was guys? How your of Right. and for equipment for How

Albert Nahmad

Barry? or Paul

Barry Logan

say, the down, to impacting commercial in The quarter and other international at was. I not component, also larger distributors. the sell contractors double-digits, improvement a right would is is slight And where again, Yes. U.S. the we over but which where internationally is second

changes internationally. there's So the in some channel

looks So a in our again, days. like what I XX-Q will of component international our in report couple

Steve Tusa

for you on issues market Sorry, What was far as are share you equipment, of get trying seeing one And had aggressive regain more OEMs to guys a have that these may quick as of that supply last that price kind for little one. any far? this rate growth quarter? so

A.J. Nahmad

price not Really, have bit. dynamics. No. not in we the big on have A the seen price seen a market we move side. equipment No, change

Albert Nahmad

the Year hard be in will. be prices And they to say New increase they would question. it's prediction Will your but might my

Operator

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

Albert Nahmad

our our progress. We forward the stay next we'll to quarter healthy, And the paying look meantime, attention company. Bye. Well, and to continue safe. Thanks, we in thanks we're again. in think for to best industry, the stay be, to the report

Operator

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

disconnect. may You now

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.