Watsco Inc. announced its operating results for the first quarter ended March 31, 2023 and provided commentary on business trends, growth opportunities, technology innovation and its financial position.
Through its entrepreneurial and technology-driven culture, Watsco has established itself as the largest participant in the highly fragmented $50+ billion North American HVAC/R distribution market. Since entering distribution in 1989, sales and operating income have grown at compounded annual growth rates (CAGRs) of 15% and 19%, respectively, reflecting strong and consistent performance across various macroeconomic and industry cycles. Over this period, Watsco’s dividends have grown at a 21% CAGR while maintaining a healthy balance sheet and strong cash flow.
Watsco continues to invest in industry-leading technologies that are transforming how contractors operate. The company’s digital ecosystem and suite of mobile apps continue to see growth in contractor adoption and e-commerce usage. In addition, Watsco’s investment in pricing and warehouse management technology has resulted in improved margins and operating efficiencies over time. Taken as a whole, Watsco’s technology investments are transforming contractor engagement, facilitating new customer acquisition, and expanding the company’s leadership position in the industry.
This quarter’s results follow a record-breaking year in 2022 and a particularly strong comparative performance achieved in the first quarter of 2022 when sales grew 34% (25% on a same-store basis) and EPS grew 109%. It is also important to note that the first and fourth quarters are highly seasonal due to the nature and timing of the replacement market for HVAC systems, which drives sequential growth in the second and third calendar quarters. Accordingly, the company’s financial results may be disproportionately affected by this seasonality.
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