WATSCO INC SEC 10-Q Report

Watsco Inc., a leading distributor of heating, ventilation, air conditioning, and refrigeration (HVAC/R) products, has released its Form 10-Q report for the second quarter of 2025. The report provides a comprehensive overview of the company's financial performance and operational highlights, reflecting the challenges and opportunities faced in the HVAC/R industry.

Financial Highlights

Watsco Inc. reported the following key financial metrics for the second quarter of 2025:

• Revenues: $2,062.4 million, a decrease of 4% compared to the second quarter of 2024, primarily due to lower sales in both residential and commercial HVAC equipment.
• Gross Profit: $603.5 million, an increase of 4%, with a gross margin improvement to 29.3% from 27.1% in the prior year, driven by OEM pricing actions and enhanced pricing technologies.
• Operating Income: $271.9 million, reflecting a slight increase from the previous year, with operating margin improving to 13.2% from 12.6%.
• Net Income: $216.8 million, an increase of 1% compared to the same period in 2024, driven by improved gross margins despite a decrease in revenues.
• Net Income Attributable to Watsco, Inc.: $183.6 million, reflecting a marginal increase from the prior year.
• Basic Earnings per Share: $4.53, slightly up from $4.50 in the second quarter of 2024.
• Diluted EPS: $4.52, compared to $4.49 in the same period last year, indicating a stable earnings performance per share.

Business Highlights

Watsco Inc. also provided insights into its business performance for the second quarter of 2025:

• Revenue Segments: The company's revenue is primarily derived from HVAC equipment, which accounted for 68% of sales, down from 71% in the same period of 2024. Other HVAC products contributed 28% of sales, up from 25% in 2024, while commercial refrigeration products remained steady at 4%.
• Geographical Performance: The United States remained the largest market, contributing $1,874.4 million in revenue, followed by Canada with $93.7 million, and Latin America and the Caribbean with $94.4 million. The U.S. market saw a decrease in residential HVAC equipment sales due to temperate weather and lower home building activity.
• Sales Units: Sales of residential unitary compressor-bearing systems decreased by 8%, with a 16% decrease in unit volume offset by an 8% increase in average selling price. Domestic sales of these systems decreased by 8%, reflecting a 17% decrease in units and a 9% increase in average selling price.
• New Product Launches: The company is transitioning its inventory to new lower-GWP HVAC systems (A2L Systems) in response to regulatory changes, phasing out higher GWP systems (410A Systems). This transition is expected to impact sales and inventory management through the end of 2025.
• Future Outlook: The company anticipates continued challenges due to the transition to A2L Systems and the impact of regulatory changes on product sales. However, it remains focused on leveraging its technology platforms to adapt to changing market conditions and maintain its leadership in the HVAC/R distribution industry.

SEC Filing: WATSCO INC [ WSO ] - 10-Q - Aug. 08, 2025