Watsco (WSO) 22 Jul 212021 Q2 Earnings call transcript

Company Profile

Participants

Albert Nahmad	Chairman and CEO
Aaron Nahmad	President
Ana Menendez	CFO
Paul Johnston	EVP
Barry Logan	EVP
Jeff Hammond	KeyBanc Capital Markets
Jeff Sprague	Vertical Research
Nigel Coe	Wolfe Research
Tommy Moll	Stephens
David Manthey	Baird
Steve Volkmann	Jefferies
Steve Tusa	JPMorgan
Ryan Merkel	William Blair & Company
Josh Pokrzywinski	Morgan Stanley

Call transcript

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Operator

Good day and welcome to the Watsco Second Quarter 2021 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I’d now like to turn the conference over to Mr. Nahmad. ahead. go Please

Albert Nahmad

Watsco. I who and everyone. and earnings everyone having two me Presidents, was is and and Vice Nahmad, Good and Executive our CEO; day. hope Logan. President; Welcome Barry safe with for it quarter good an A.J. quarter Johnston is to a Al what Chairman Nahmad, morning, is incredible that This is our Paul call our second and

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

XX% million the XXX Gross Operating million, increased points or $X.XXX with am jumped to every to a record to to expanded basis this Sales delivered far, one, ever. basis new our Watsco XX% has quarter, XXX I was, quarter This share margin incredible XX.X%. virtually and $X.XX or $XX to our is quarter. records XX% grew in share gross in margins, a on by most expanding to income margins profits per operating that sales in increased nearly XX% report, points. million a big an operating successful billion $XXX for record Earnings XX% share second increase $XXX achieving on net a record a income. per metric. pleased performance Now

slowdowns and -- we and history, we of and important part family; had quarter rich will an way we in companies They an cannot they help well, of can. and from any very against all have have last Now, impact two be successful when a we TEC them second now Watsco. Now, that positive part new are COVID-related modest happier perform a are considered They these results the only Acme. which the more our year's

in Again, ahead, to Watsco’s growth continue a hope Looking billion traction, fragmented The American very market. North us join they this is in technologies companies industry North American are capital more to fund Also, and we priorities. scale us. engaged are $XX this gain great And for we provides market a our industry-leading to we find $XX billion to gain us greater believe more helping share. market.

Here a highlights to are mention. important few

continues rates growth First, using technologies our to active nonusers. growth faster. of of rates among the technology Customers users our growing simply outpace are

technology stickier in nonusers. our lower us platform The Also, to called digital to selling modernize CreditForComfort. solutions and homeowners. are are are HV more our They presented enables help using using to customers that meaningfully is among our compared that attrition Air technology create Next, customer OnCall relationships. customers

is number discussion. success efficiency the during consumers digital contributor by made of of higher benefited climate of also helped sales CreditForComfort, sale sales and quarter. have evidence of XX% important think As to presentations end our by the which an the of close increased Air $XXX OnCall systems, tools million the contractor we over These change the to and customers

As owner can solutions. in systems energy more play are efficient replaced, helping consumers an important choose our role technology

reaching encouraging. the terms still we in it very our early But technology is believe progress Our potential is of investments. full of

in focus Our long term. the remains

say me heard you've think and that over I over again.

Zoom in can impact. players we us schedule to a with further Please and long-term the call We feel explain its technology our and are free industry.

amount only very a important pristine in of small condition but with our remains balance Finally, debt. sheet

answer I A.J., happy Paul Barry and are and plenty more With to of questions. your have We company capacity ambitions to through acquisitions. grow organically even our both and that,

Operator

go the begin question-and-answer Please ahead. from question KeyBanc comes first Our from now Jeff Capital Hammond Markets. session. will We Instructions] [Operator

Jeff Hammond

Hey, morning, Al. Morning, guys.

margins, of to gross how the just So, exceptional sustainability. It kind couple to up what's the and I quarters. been the understand last here been it we're about like close want kind and hit of just to feel driving now I to on They’ve And XX.X% you you've XX%. just that of to seems the in in XX% seven last years, five want

Albert Nahmad

Barry?

Barry Logan

Again, always of decent all regional Good is for. component a for morning, specific. pay primary and what Jeff. decentralized do products And customer products we and and it's gross and what local margin very we sell --

with know, price at pricing markets. you And lot flow to culturally, to we've some optimize means a if pricing the marketplace and price. pricing of doesn't and one necessarily it it pricing mean there done price rate. answer Also increases technology through we plays they our greater working raise margin, of the gross optimize how OEMs. if about out are year. your data, there's being isn't answers That your sold each with software systems Clearly, flow as price, And all to so will. a question, closely at to you efficiency Clearly, as also systems XX,XXX in question benefit high through

about we and decide have through their have we going Paul, inflation. know, pricing know, as manufacturers. on it. pricing business. market. We own actions you future our you question and But hold. work does to the dynamic future, with the mechanism flow work expect you was, continue with maybe your on want in them, benefits the next that there’s OEMs XXX on What of what And facing, know, They to would still into customers that and to some occur. you They're to total those through does the markets continued comment Well,

Paul Johnston

more you I can with agree Barry.

can our future I we've in think a we we daily, managing improve. pricing a rate still are where think gross can improving with now the and looking at been working in moment who by and we've think the And I on -- moderate our profit in XX maybe positions people We've past basis. with months. I hire But done OEMs, they’re continue more continuing than got vendors able discipline. to actually of moment amount the right in

Jeff Hammond

then increases you Can channel our on just mix between were And just increases how Thanks. or of of much talk kind if checks about high through. seeing on price non-equipment. up single-digit versus variation traction coming pricing price picking price, much the and and price you're with kind equipment Okay. there's multiple

Albert Nahmad

Paul.

Paul Johnston

of do them of frame recent an from the September, genuinely they’re equipment costs. that time price And them the increase the manufacturers all X% in increase, I there has increases. their need price each August real one The been third We a [indiscernible] X%. to one because the increases. each announced of going. price They have Yeah. anywhere of got exception one they've of And have with right price now increase announced think year

of excess on the that increases And So, to in parts side. this year. price administering, been the supply multiple, been three most yeah, pretty When and of we've OEM side, increases we've the well get XXX non-equipment a continuous of increases, seen price piece you of the it's price stream obviously. roughly it, times them

the industry upward know, seen pricing. you in has an turn definitely So,

Aaron Nahmad

A.J. that. is I'll to just This add

margin. it total inherently and relates focused our supplies, profit to on more gross to higher aspire As gross which selling profit sell margins, have are and parts we

So, that also contributes.

Jeff Hammond

quarter? quantify what in price or are was you to price guys And the able mix

Albert Nahmad

haven't. we No,

You know, to it. a not regular it's a -- cadence there’s

so priority once it's, we're you do the And, sure coming us, reconciliation and customers’ what progresses. one. at the the have you know, yes, us know, as increases as been find fast, the you price been that They out at is year a getting far point hands into some making measurement, know? So, a for has exactly we'll that at,

Jeff Hammond

guys. Thanks, Okay.

Operator

from Sprague comes question Please next The Jeff Vertical from go ahead. Research.

Jeff Sprague

doesn't me, for here Hey. like multiple up bumping the everyone. questions. any It price know, any just morning, more pricing. Good Thanks efficiency taking you're -- Two high against It interesting, first, Barry systems. is the increases. for mentioned elasticity on you feel on

you until bit? You know, what you breaks that little tilt a sign understand out. back know, towards the there's unit any that, cost But stuff doesn't at generally they mixing all the find know know, a down a I and, consumer

Albert Nahmad

question? sign what? was of Any What the

Jeff Sprague

response wondering you erosion price. you see mix It just like did... I'm the if escalating Well, in doesn’t any in to

Albert Nahmad

No.

Jeff Sprague

if just see edges signs around we but starting I quarter, are like, the of, ...in the any demand disruption. wonder to

Albert Nahmad

we also more consumer, cost and the are the that of Well, is, our --that and financing burden of for through of so we program say financing less for equipment. aware provide the and whatever more increase presenting of our is now that let particularly of a we terms homeowners are one of me renewals the end because platforms

ahead. And somebody to say else something. want Go

Aaron Nahmad

Yeah. the at much pushback I consumer all. there's don't think been from

what head. for purchase frequent the is. on doesn't a right consumer. not It's it The consumer the -- price know hit what the a You

indoor air able And lot home based of and so, not the control. on humidity customers’ A comfort, for lot a of have we has been just it need being seen to satisfy to-date, availability, quality pushback.

Albert Nahmad

is So, would add just two to -- I what that things.

is sell cost. component a It the cost. isn't we of the consumer's what First, consumer's

prices a job, a completes seen So job finance and job, sells any can how relatively ultimately the contractor and how as type we mentioned haven't deterioration. them layered and transaction. Al it's help we And of a the

the rates growth at efficiency in equipment you fact, are XX%. In growth or high overall that see beyond the well release rate press

software technology Second different is to on have the paper will contractors. help these that and of recommend part we when say to options thing They is really they presentation and homeowners. present the I'd be push

software in about doubling OnCall efficiency high and in size is That's the in so, know, of you And release, the day read the that press piece quarter. Air, environment. that you ruling in

Jeff Sprague

interesting. That’s Okay.

Albert Nahmad

to And knows rates everybody financing. low. I get want are to Interest back

our then, advantage help their distributor. our taking homeowners consumer distributors and helping the we're so, help end And which the lower And interest customers financing. we're And with rates helping with to we're financing. the of customers are

Jeff Sprague

sheet? or more you're on or you’re sheet And third-party to less balance on doing list your bringing your balance that

Albert Nahmad

we combination extended and of it it's that But Well, several a third of with goes terms when party do our using out sometimes years. own.

Jeff Sprague

question the and And all appreciate I on you. second one. my Thank first the detail

the on issue of Just availability.

in the inventories, little your of things demand? pace might as caught than we Or are given Would a kind guessed channel? of lower getting characterize mean looking I you up demand. Just still at you’re within the here have

Albert Nahmad

have have say sometimes we sold more we demand. with we deal Well, equipment. to doing on it's we’re overwhelmed. Their could They're that some it. they're equipment meantime, demand on can particularly particular, with And items because of up mean don't show. got particular -- catch in of manufacturing I the we a of every control first, one particular other let they getting believe in the everybody’s matter are -- time, number suppliers do second it. more supply. But had best short letting has that OEM down with me hard doing they're at the items quarter had or But two the number OEMs best meet the them they're can. the worked believe that But or better sometimes really will as we We they hand the the

Aaron Nahmad

just I'll their our say And a have moved add tirelessly appreciate that the work we're and expectations. and have working teams customer’s hard demands in meet to They've that household. their and of I around lot grateful product been too. to field

Jeff Sprague

Great. you. Thank

Operator

Research. Coe ahead. from comes Nigel question from next The Wolfe Please go

Nigel Coe

Good it I'm your to obviously that are shortages. sort want very of just strong. Morning, long since you're talk sounds been Al. any a and port the managed wondering been And on competitors. prevalent. and sort manage of form some on to good I've a up all maybe chain your OEMs you It's get tools All availability. seeing these just of time ability I a got It's a I'm wondering supply Obviously, just pressures. you've everyone. pick if helping because Good quarter, share question. than how Watsco. to some It's about better of Jeff’s as morning from to pretty question shifts of share on have result that gain perhaps you mitigate great product

Albert Nahmad

that wants Who question?

Aaron Nahmad

we're easier we've at well on to think key the make have the wise, what it's -- our wouldn't we stab working visibility who what and one our our platforms got as business but goods that our of are, with would And constant it. and inventory. them take don't certainly order are, lot OEMs of each done our with update it's with us reliability meetings I forecasts technology is say I closer, our what us nation, sure manage from needs best a with it's a available I'll them some it do the as been. of we We finished brought most And made OEMs favorite what what communication than making what us, a to our is have inventory. channel. complete And suppliers of manage make has to one

management So, I because of market inventory helped share lost systems. market Have us. think we has our gained I think it share? we've

Nigel Coe

Great.

Okay. on drive extreme the the then the in mean heat share June. lot I regional up That's Coast, And on to gain. there’s Northwest variations, Pacific have and a -- turn we just West

if know, relative you wondering Just areas the in outsized saw, those we growth X%. to

Albert Nahmad

Barry?

Barry Logan

at the a materially. Hi, Nigel, to relatively as where Coast contribution markets at in didn't look zero. Northwest the well in from is Well, morning. actually And West quarter the not Pacific at Good for all here. our for us Barry if view, it marketplace in the results small branch the overall us point Western but of a again contribute filings count did you we're

terms, not want do In very So, material. it's much out there. we actually to relative be bigger

Nigel Coe

Okay. Thanks, guys.

Operator

ahead. next comes Tommy question Moll The go Stephens. Please from from

Tommy Moll

multiyear back, we and potentially you let's net even say or net for think benefit, a cycle. Just price smooth just a through you In gross on little through If inflationary step is mind, bit. about all your is as and it as distributor? that that about neutral, talked an net a in a out. You’ve basis costs margins headwind

Barry Logan

to inflation things it, given we'll don’t that. in to way can to best generally something we his the keep business. be or inflationary sometimes, do. else the the or adjust things providing like it other distributor can. the rates or for consumer something offset is, the by I But the the think want to that's we we or anyone and especially good happen, the environment is it’s an in I share we Barry But And I we the opportunistic way think gaining assist other. don’t Well, else wherever by like chain. And referring of Paul we're to and speaking, customer do one A.J.? to some financing add distribution lower Anybody that any

Barry Logan

Yeah.

I I XXX locations the and... think thing only business is with we do add would operate a

Albert Nahmad

It's different Yeah. areas.

Barry Logan

to And environment of as if inflationary are terms we -- fixed of ...X,XXX, are growing element X,XXX cost, fixed people. well. not or as an and in inflationary the extent do benefit those there profitability costs

overall opportunity always And say for the So, some just It's always material proportionate cost pressure -- an to this inflationary on not an amount. But, if I and have it's wouldn't there's in opportunity profitability us. environment. to again, huge rate, some growth. it's a

Tommy Moll

time And, about of a the remarks. even is now it's could continued technology, helpful. in That's on adoption when Great. -- lean more highlighted momentum -- think that as as a key platforms, just I and on the the increase If the follow up macro momentum addition adoption for good to to you lot release you a with you and the environment? in see in your given path forward, investment in

Barry Logan

President the the That's the of question company. favorite

Aaron Nahmad

air -- know, using grow investments. that when a heating we culture, help Yeah. to I that's term a find, and our is I'm not continuous technology was say sell of that improvement, And, we're the that's we their conditioning. going just is, define to which sure ways end a continuous at are happens to technology, in find -- constrained really our consider umbrella day, say, the really, ways and This our a we to businesses technology company continuous ourselves mission. broad learning big is to which customers don't you

them help and bring We we help grow. entrepreneurial-led medium-sized technology small- better grow. can are make Our tools to customers businesses, and ourselves them to and could them to

really short, the we'll our and in technology invest, is continue yes. of know? business to for we So, we're you ethos, call but that's that what So, that doing

Tommy Moll

back. it turn I'll you. Thank

Operator

next Please go David Baird. comes ahead. Manthey from the from And question

David Manthey

some to gross do being was question overage I averages, mix forward? first My the back points. transitory at basis XX-year portion rebates is if points Good to Hey. about you versus Al. sound the quarter it XXX some gross -- basis whatever kind quarter, those And was look of about close this margin margin, I see you and structurally understand above that the And, XXX morning, as that. Could and it dynamics talk going there. of pricing or in

Albert Nahmad

of sort declining terms in mean, gross You thing? of or flattening profit increases a that and margin or the

David Manthey

gross -- the the Well, margin yeah, If… percentage.

Albert Nahmad

Yeah.

David Manthey

of …you've moving… been sort

Albert Nahmad

know what mean. I you Yeah.

David Manthey

and range I’m this just and can quarter. points a you back that you XXX in range just step …along popped basis above see.

Albert Nahmad

understand. I think I

David Manthey

Yeah.

Albert Nahmad

That's gross improve to going stop. percent. we’re to we're focused margin our number -- know a But what technology bought whether that's I other And on continue we're to of And But we will don't effects. not very be. ways. to pricing we’ve with mentioned that. we to mentioned achieve that trying in seek the end some where in going ways

goal equipment. ongoing second in it are in higher trying with business And successes than as the half change first the you an forget, supplies that's that focus terms and the to and going margins don't on we're they that continue of in So, we're year. generally had the And we've the half. parts this ours to of say of of to supplies

we're sales emphasizing branches to those So, our of goods.

could something the of and our that's supplies the mix of that products the increase parts so, more And mix overall in sales continue to picture.

Somebody to to something that? want add

David Manthey

Yeah.

As which well too, again… equipment is efficiency as high

Albert Nahmad

[indiscernible] climate So, we having we're high to the change equipment issue on there. not contributes efficiency believe that's because

cooling. electricity a of which a or You release COX and the power homeowners heating homeowners’ turn less to that going minimizes efficiency of have cooling going Half and bills you’re premise the production due in system it gases. due to of and start you which is half have And bill cooling heating if use less electrical to in higher to you’re turn electrical uses. with in heating and to

But we high that as equipment corporation. also and change figure many make help and only helps in it climate do issue. have we a does is easier encourage connected can well with different financing and a issue eye we're which which what not efficiency trying to how adoption help help it So, it very because about it’s the ways very the it particular out to us clear

David Manthey

Okay. perspective. working sort accelerate to of hinted you're this And and regarding growth from couple The from on at willing time able initiatives you've more growth there. thinking anything the and I'm at share you supplies you the last a of calls how Are on to forward? parts supplies, be in some parts here may

Albert Nahmad

this? tell mean You doing to us we’re how the you want competition

David Manthey

they sure an I’m idea. have

Albert Nahmad

better it have to Well, is effort. how maybe you the been productive in data we give a

rates parts supplies, and share Paul we I think and can Barry, growth

Aaron Nahmad

it David, equipment year. Parts in XX% those rate generally, anyone to that lost Yeah. numbers, is it up because -- even XX% for half, up quarter and grows, example and as supplies let's closer looking lost shouldn't some second accelerated shouldn’t for on there’s Growth or the rate replacing same first the of inversion parts products residential the quarter a in be at half to maybe systems. better. and even of and yeah, supplies. XX% in at be the look people half parts because at is you're Historically, we’ll grow the supplies, two are

change bring last technology it's e-commerce it is six one things. and things. not and So, systems, is a And this the data it's, again, two is months. XX energy is to a force, system, incentive a simply it it things, it or culture, It's and many is sales and

Albert Nahmad

interruption. ahead. so major I'm because the Go sorry a for it's contributor is efficient. E-commerce

Barry Logan

fine. That's

last there in that And year and it of change. in fact, So, something energy gross should the And higher flowing [indiscernible]. margin business. terms over the margin part is, for clearly, raw this that gross in benefit our into all are this, considerably of there's -- benefits it's because time started started

David Manthey

right. All Great.

Albert Nahmad

our what’s half, first for e-commerce the platform And Yeah. sales Barry?

Barry Logan

is XX about $X.X last for the rate months. run billion Our

$X close billion, So, think, I period. six-month for it’d a to be

Albert Nahmad

a now... third That's of about our business

Barry Logan

Yeah.

Albert Nahmad

revenues. ...of our

David Manthey

for Thank Yeah. details. Okay. I the it. appreciate you

Operator

comes question from next from The ahead. go Volkmann Steve Jefferies. Please

Steve Volkmann

don't you you'd Serious, long-term Good you, you've big manage that's know, like big morning, I ultimately How you percentage questions financing taking how a I sell do as however of them… heard do for Hey. -- Thanks my times. could I think question. guys. think financing you several be mentioned for how the a or stuff have couple you company. of because

Albert Nahmad

because a question that's that to got very haven't Well, good an we answer yet.

For increase we somebody there interest our tweak and the out the customers, Should how business? advantage example, always homeowners, financial assistance. something one rate yet. I go partner the financing be should take we the know, the other that to the issues the support provide like will to But with or resolved not You figure we that feel any our way I we to in financing don't back of business? that. rates ways that see these to reason their when big extend we haven't how and even like And can up, are distributors be customers. help to particularly why in

So, we like financing we like -- the thing.

all it figured haven't out. We

by It you've happy we If pillar But of We'd very development a accelerates terms big part to somebody not talk and know, thing. of that of probably somebody it’s that company, sort or good in of the a picture it. fast become going you to buy can [ph] out run be we is same financing, them. or the got until to growth, of more our figure

Steve Volkmann

Okay.

Albert Nahmad

headline or level at $XX for billion. resold for we at you're retail the get $XX our if in competitors a though, stuff billion wholesale the products level sell number that looking

And and some finance. portion of be that will is

Steve Volkmann

like a big opportunity. sounds It

the And market more environment M&A type more to doing are because kind you direction continue? environment Second guys unrelated sell well their it so type I don't have to it's go the of different think question they see can lots sell everything feels it the guys to from I'm of this environments. want to seen is businesses tougher where willing just kind that one is Is of so back, trying and where that only on like this these her? the Or good of you end independents know front. of of are

Albert Nahmad

an engaged great always engaged the part is I companies. that's Look, with Well, we I culture, you be have of go think distributors, our maybe to do a them, don't with should time that. so. tell think are and to answer we and to this out

gains example, example, going These But, two own their to concerned you know? I is and we companies think end, names connect that preserve a they for capital that's bought, what they at the especially, up. engaged at or there'll what family in, do, may so and that's because equity for culture do TEC, with recently you to they We're that going their we the culture, be be That's level, want the reason. about want; company tax, is businesses specialize not whatever we to to we in -- our we're of strong. executives, get a capital support feed technology. and act with All people them -- want know? going for that their key that style

In Barry, terms -- going the one trend do their, any way that, you I see and taxes or know, the atmosphere you up the of other? all that, in about of

Barry Logan

but I fourth matters emotional an an at process. times, it's What wish is I just all time well. matters really families you, of financial But entirely, helps I that confidence that process, mindset they're for it that are owned things helps, the it mean, and have third businesses none matter, of that. of are and Yeah. I XX was generation, it valuation process. and and you sellers’ going -- confidence was something helps would say, what It just of doing not something, XX, emotional too. know, doing have what -- years, optimizing the it’s or our quantitatively, really wish it ahead and like a when it These is taxes the feeling always

successful the XX of TEC and moving owning So, forward. two, us a years that's where to why or it business it’s year another their talk emotion part like and generation [indiscernible], and completed we've XX with after as dealing going feel before, been I only forward that years, it's and for we

So, I doesn’t these to an emotional still It necessarily helps completion the for one process the well. discussion do guys. help because that you’re right. think It

Albert Nahmad

really than their family anything else. That's It’s an more emotional right? family, joining decision Yeah. our

Steve Volkmann

on. I'll pass family. it happy big you. one So, Thank

Albert Nahmad

That's right.

Operator

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

Steve Tusa

I use like the the press the blowout release. term of in

Albert Nahmad

releases? better getting Are we in press those

Steve Tusa

Yeah. Yeah. Yeah.

I feel results. more you think you to clear on be how the about need

Albert Nahmad

to put ask Well, I did Barry color. more in

Steve Tusa

I’m I price good we’re to not in you year-over-year? this quarter I much but say a allowed the booked That have in sure result. guys -- might was you strong a a here. very obviously, the just bit beginning, compliance little say one. But, didn’t not can around caught how that

Albert Nahmad

Barry?

Barry Logan

answered going we we to is positive were was not -- There with, much asked obviously know, we’re you booked the sales exactly quarter. didn't XX% and growth. how that tell you in same-store again price price

imagine of prices we it's of something unit growth components, that But entirely can You -- is most reported. Steve. not we've

Stephen Tusa

that? Got the it. and And strong, equipment? gross on the any basis. think the then, the there it when parts a you difference improvement, up I big between very same-store XX% obviously is profit which in on year-over-year a difference think about was there Was was like or something

Barry Logan

in margin. Difference

Stephen Tusa

there mean Difference want margin improvement I gross I you gross -- mean in to performance. profit talk fine, was it. about yeah, however

Barry Logan

gross higher The supplies, and corporate be. more parts mix profit the to goes margin will

Stephen Tusa

way. parts the than performance if Was just up gross this the better was for like-for-like put year-over-year year-over-year it you saw the for of you guess What the business? meaningfully I performance the the But profit performance think let's total Right. simply XX% it company? about

Albert Nahmad

Oh, if tell. I can

You’ll deal with that Barry.

Barry Logan

There's kind you're bubble a product asking. one product That's across and the that’s the what no of distinction I not like things and bias the consistent pocket there. There's pretty performance. at or or pretty markets it's across Steve. one groups really one company. if much categories in It’s much look If Yeah, of that board.

Stephen Tusa

assume. suppliers dynamics you Yeah. would there's some around pricing I I'm your just it trying to and guys what discern the to timing comes like when like

of the side. part so, And side discern I'm kind is trying to on the much that of versus how equipment

Barry Logan

that inventory that talking turns which algebra about would matter Well, you're in is…

Stephen Tusa

Yeah.

Barry Logan

products. ….consistent across

Stephen Tusa

Okay.

Barry Logan

kind So, across concept. products and same again related margins markets. there's Again, of the behave much that distinction in no pretty

Stephen Tusa

we of the a it I it. as increase that's do you or, through I year, a shouldn't maybe usually like and price I numbers the price and The real mean, going industry, the think you X% at of guess, in then and, coming guys, final he you big that heavily including Al. annual that after. one, capture? of you -- price price we kind in of know, have said price or was may assume they're that, like, means I of that one this as And, for guess Got kind that fall too we kind past. kind discount for normally Those it the big players is of in least, And is to number as are like the Paul know, was mentioned was Paul too some

Paul Johnston

this Wow, and earlier, because, increases you seeing said stick real, we you seeing price now are But really going we're know, the you cost up, and -- mean, like to… the calculated we're that, the real. know? price And, know, I Steve you holding is through haven't they’re Paul increases know, actually has gone and by I right -- that actually

Stephen Tusa

Right.

Paul Johnston

so… …the an component is that and that to product got certainly supply there and side it on you've indicate availability would issue a the

Stephen Tusa

advantage your Right. the And your leveraging have of you to across of are all, the at industry, over kind guys power competition… an buying kind

Albert Nahmad

Well…

Stephen Tusa

and what buying comes you’re it to buying? …when

Albert Nahmad

Let's put it this way.

Paul? to the Every try now, largest going sure, one is it, X,XXX We best price. the and, vendors -- to of are we're what get

Paul Johnston

Right.

Albert Nahmad

Of the course, better legislate same business should your can amount they questions, when they And, just so us that We leverage we also, helps. manufacture or pricing. we're the that them give helps figuring up manufacturer, buying. they business of do. also But give sister answer are subsidiaries so their that what with, one we a the of to two start going to vendor among particular decide sometimes that than they out buy I us. And, to to that business the markets that don’t succeed? like our stuff units, from to or themselves, the know three buy have come units that, and collaboration because we four, their the Do vendors better buy try instead again, can we companies increases and let’s whether size. they guess,

Stephen Tusa

sense. Right. Makes Yeah.

Albert Nahmad

Those you are get with things scale.

Stephen Tusa

lot, sense. a of guys. ton Makes Thanks a it. Appreciate Cool.

Operator

William Blair from Please Merkel Ryan & from go comes Company. question next Our ahead. Instructions] [Operator

Ryan Merkel

bit, talk So, why surprised guess so in everyone by trying understand the I strong. to back is stepping channel, When the the market HVAC strength. people I'm is a to just I little

prices, home conditioning people low from think weather, rates, running But you obviously, all right, home air high that's Now, work interest and do more... helpful.

Albert Nahmad

Sure.

Ryan Merkel

demand? boosting ...is

Albert Nahmad

Sure. have best for you Sure. Paul, the that? sense do

Paul Johnston

Yeah.

We're increased. is existing pump twelve first a growth, is demand which heat some It's around consumers. it. changes. creating CR increases the purchase. XX, does, and I taking out during into I they the as lot existing -- North don't impacting lot carbon North. West, certain and greening refrigerant buying existing XX air prices among months in up environment the just seeing replacing a conditioner some at of the home an end technology of seeing a especially We're have force more that it, homes. they South, but we're where up think they people markets, think think it's an in When in buy But plan becoming the it in I price some point getting better Obviously, the home, perhaps,

dealer. availability their the I consumers I they think further think I that's when to issue the demand demand. And contractor, some think talk driven from creates

I have to So, things different probably XX and there's running people -- XX or [indiscernible]. probably their beyond more, think at know. then conditioning That’s we And you just sitting air have a created that home here. use a

Ryan Merkel

Yeah.

Albert Nahmad

to -- add I that. just to think

is means think sales. contractors, and the the credit some with their one high, But help conditioning. means to to all-time them that, stuff an that. the engagement know, we our see at more OEMs doing and level higher I not efficiency confidence of And It that I've in effectiveness. contractor their a having about advising air making said It it’s homeowner engage is do to to do process do not process mentioned A one if customer times sell sell realities sell the their think it many air digital means And they're sell earlier the high. conditioning. A.J. real you We desire is their is I design stuff well. thing.

thing that it's been The today, a to we've seen we've one see if that best And what's for seen last credit. years. not in And will, that's leading you our two two it. nicest the so It's indicator, quarter the really just years, thing.

Ryan Merkel

Maybe not SG&A follow-up. Okay. top if out And why quarter. second put explain was just you'll quickly I'm that you sure you yet given was line, this And then my you didn't That's asked just helpful. this it? the leverage think just but blow if half do SG&A? leverage

Albert Nahmad

Well, with get how detailed -- want to Barry, you is?

Barry Logan

No.

Albert Nahmad

not certain sort we’ve shorthanded constructive. thing is, not in that not circumstances? the now, of in people a And, in of labor. hope it's and from cases, but, knows? quarters just it's because we I lot that having we having we to whatever mean, We what do. sufficient did met Is challenge, it I places, to of working same met Who that -- fact that a not. have continue a The only going had we're product overtime sufficient some

Albert Nahmad

you that I force. As have a sales know, of it a and part commissioned add is, to we

a have do We up who branch they well. managers bonus can if make

We performance-based of all have difference performance. say, to can year, And cost comparative Ryan, chunk a which, year you this the last is a is structure that, to year-to-date of and a leadership you is see know, throughout the earned. and the company in needless of good part the important is being that obviously, compensation, earned

So, in there is it well-earned. and numbers for good accounts and, this chunk of compensation performance-based a that the year some well-deserved and again, of

Operator

Stanley. Pokrzywinski Please Our next Josh ahead. from comes go Morgan question from

Josh Pokrzywinski

morning, Al. Good Hey.

think non-equipment, know, anomaly is strong between of was been of but growth the you equipment or in -- kind you I about, and have you it it kind think I was this the you're trade-off talking it tandem. know, Paul might seeing Barry, not So, where, know,

is to surprise has a faster room is than So, how to your year average also and folks you new lower? or high, then maybe that mix a your expected. be the about know, own the feel Maybe to may and last maybe or little do back has bigger Would those that’s of whatever's one sort than is the rate like would has long-term you so mix be kind expectation the over volume happening, out is in of think and stuff what normalize get room of to more have consumer also breaking high, the so confidence it step rolls down. results. that which Like,

Albert Nahmad

with Who wants Paul, it. one? luck And good that Barry, A.J.?

Barry Logan

even don’t understand I it.

Albert Nahmad

Yeah.

Barry Logan

And, I efficiency And equipment. first can’t it's XX nuances improved. I that if -- where has high mix technology don't And straight think long-term shot. in far even still there’s doing. XX reason level business there's of so platform, ago. what been tell is XX we're a market the that lot think our sales or changes. back than it a years, platform and mix there's is not, to on, any it's our on that another XX% average but And quarters Well, is than think witnessing, years goes give again, our I that from of I'll a at more just and

in mandate And, those there's ability So, something customers to to some is efficiency that the that with great regulatory deal I'll it can increasing fundamentals things mean continue. continues. that take continue. our to investing we're obviously, the sell a that And help it will horizon

more vendors, is different a supplies, where of of probably lines a So, about and There energy, again, are comment over conversation. -- of see a would my I lot earlier feel that’s lot how lot a it. products. if -- necessarily the that for data against know in XXX business XXX that I salesmanship, culturally what a lot And the that's marketplace. nuanced. product think us is growth, we Parts than the market. part And of I parts I I is technology, that’s pushing don’t and in market those think are growing analyze our internal replacement I enjoy of think doing. is And so not and don’t to

Paul Johnston

mean… I Yeah.

Josh Pokrzywinski

it. Got

Albert Nahmad

that one think sometimes to kind buy have should And to and HVCA/R for customers competitive our that one to products price the focus to can is our and think go available to a we way that's that products. can of We easy an bring. competitors -- easy of of those customers. have …the our that products, at effort

Barry Logan

like… A market

Josh Pokrzywinski

on. Okay. And then just

Albert Nahmad

Yeah.

in X for XX quick. or XX Miami. Just major parts X might or supplies some to like distribution Miami color where have real market A equipment and add competitors, may we we have

game business. And where so, we're ground that's think some making the and I growing our progress

Josh Pokrzywinski

it. Got

then on… And Okay.

Albert Nahmad

business -- the out rates what far that normal up And we’re on has rates making looking penetration, identify coming at looking be if cycles, to systems, attachment against with working at industry [ph] we're better equipment, okay. as looking and better there. a able warranty Josh We're population actually as measurement at warranty

to be on analytic to that grow So, work we're doing lot measure an area. able of and how we to determine continue in can this awful

Josh Pokrzywinski

Okay. Understood.

wider sourcing know, aren't chain and gorilla just practice, stock of you more kind you starts kind competitive XXX-pound availability having Sorry. I perspective sure Watsco that boost someone step that maybe chance. a aperture a issues better of know, you guys your issues in internal environment I of more make and customer if on than had seems or maybe between, a some many giving the of false little a folks. smaller of wants lot bit to more a guys probably know, rather out side? you pricing industry had of guys from when you supply If can give or availability like wanted an sort customer a the as can being and On it the sort everyone that's else that's pricing as think you Do mercenary-type right you, you Is giving dedicated, you a product. on now?

Albert Nahmad

-- we've survive. that plans our their to compared that, been data required way, the build distributors together in I the that felt they don't those be together, that to any I way benefited take think other to we I'll OEMs Okay. We're any with are special Yes, that. at order provide their far able to But it. in able plans OEM big. Josh. don't effective put cut being as I'll as believe very to

Josh Pokrzywinski

to mean customers. to No. your I --

price the or else the you know, purchasing that extent that, a things can just they someone from of bit a better only customer maybe process to you. regardless of little rigor So, you get because it not to that whether you're cheaper kind can have doesn't

Albert Nahmad

Yeah.

Josh Pokrzywinski

know. ahead. that, seen haven’t I you Go

Albert Nahmad

share. taking an believe advantage of approach we're That's I customer way. I think dollars is to part get we dynamic that the we're customers don't we I extra why take opportunistically our think few that base. and how would an not using along say,

about company. know, [indiscernible] You the we talk

is long-term term. Our This also help consumer grow our relationships with business. relationships is business. a are This their customers not transactional our long a BXB customers and

Paul Johnston

with agree totally on you, I that. A.J.

Josh Pokrzywinski

you. Thank Okay.

Operator

The from next JPMorgan. Tusa follow question from is Steve up a

Steve Tusa

Hey, guys. I’m not sure anybody ask.

kind best So, July kind you for I’ll are view to of you of at growth? ball on? of and color. give this stage. if seeing kind do just to some anything here see the Just want trying second get see crystal guys comment in what I can half you try mean you'd And that

Albert Nahmad

Barry?

Barry Logan

the Yes, think rather XX Steve. than, you first last July. business of the year the I about half of know, speak I'll days

Steve Tusa

Sure.

Barry Logan

morning equipment this in how because I expect that's No, And went, just you moderation sense. right? residential mean common can

next some the You moderation. know, strength right? There there grow into several be. strength and outlook next here in into can about which of with the it having to next And price international be to additions how were year more we've there's share community acquisition Arlington So, growth There'll rates our it's forward. margin we've At absolute commercial, you talked made on, same moderation time, going for has versus conversation about in add looking going and XX% our over then, from season going that in months. the growth And about imagine a plays markets talked We've ago. will not be the absolute know, forward. year. and out to year a in beyond same already to [indiscernible] a you

-- is. because to things and We because grow, something. record its I the than we’ve we would a internally of been some this a manage you in cases, always do you answer rate know, and we’ve to of few what for the years, always higher is of industry better is it done... sometimes at several So, can others. at we look a But most how the manage, way what pieces. is that's the there. some at see Year-over-year, doing moving And it But internally, is approach it growth

Steve Tusa

X% to in moderating, same-store be resi -- be sales Can said you XX% equipment? up the obviously. sales same-store Can for half second

Barry Logan

said moderating? not. We're Who they’re

Steve Tusa

resi for going you're then, up XX% so, to the second Well, equipment? in be half

Barry Logan

just we said who was moderating. No. I were curious

Steve Tusa

said that [indiscernible]. just will moderate guys see Barry you

Albert Nahmad

Okay.

You can Barry. say that

Steve Tusa

there was said evidence. He

Albert Nahmad

changed say I’m can’t barometer. was XX% point going that at forever. grow Barry’s to things the Barry that

Steve Tusa

Right.

Albert Nahmad

teasing. just was I No.

Barry Logan

some that leaders, well, conversation they our grow are them which is, grow point at XX% put can't forever. and to challenge we the with how for themselves have We to while going inevitably that on slow, things

So, industry now continue conditions. to and need they are grow to of what creating regardless they programs, do to they're doing

Steve Tusa

any Got be it. And I guess last, to that, do the down industry in time will one at think the more is ask second you half?

Barry Logan

this. No. I you better on don’t a have think handle so. Paul,

Paul Johnston

will. probably We'll But know I Yeah. It probably if... shipment. don’t

Barry Logan

no, Yeah. I yes. and said you said

Paul Johnston

it. I don't about know

Barry Logan

The Who is knows? answer who knows?

Paul Johnston

You a and demand. think, down my now shipment a is supply asked a I are be And, because will -- and difference between of the the of movement and guess there's for orders. maybe there's what issues the may OEMs not -- a of that having. that bit, little going movement the It other some may slow to guess, be see some what remain because and demand there's my probably right be you'll would maybe strong shipments

Steve Tusa

Right.

could know, know, certain at you which sell-through be you that at points, rate is, to than sense the slower a a AHRI continues XX%, way… is, your down but the So, common and Is it comment. good grow

Barry Logan

Yeah.

Steve Tusa

guys. Thanks, Awesome. Okay.

Operator

And this to back in questions the would more concludes any like closing for no I turn Nahmad our are to remarks. over there question-and-answer Albert session. And conference the queue.

Albert Nahmad

that disappoint Well, you forward. in I going our in you past, ever, our the don't much we company. I for record And continued thanks hope interested. hope very keeps your interest

and to in next you, interest for the look to your Bye thank you So, we now. again, quarter. talking forward

Operator

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

now disconnect. may You

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