Watsco, Inc. (WSO) Q3 2022 Earnings Call Transcript

For the period ending September 30, 2022

October 20, 2022 10:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Watsco Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Albert Nahmad, Chairman and CEO. Please go ahead.

Albert Nahmad

Good morning, everyone. Welcome to our third quarter earnings call. This is Al Nahmad, Chairman and CEO, and with me is A.J. Nahmad, President of the company; Paul Johnston, Barry Logan and Rick Gomez. Before we start our usual cautionary statement, this conference call has forward-looking statements as defined by SEC laws and regulations that are made pursuant to the Safe Harbor provisions of these various laws. Ultimate results may differ materially from the forward-looking statements.

Now on to the quarter. We delivered another record quarter. Sales grew 14% to a record $2.04 billion and operating income increased 14% to a record $236 million. This third quarter performance builds on what we believe will be a record year for our business. So far nine month sales increased 19% to a record $5.7 billion and nine months operating profits increased 37% to a record $694 million. Year-to-date cash flow also improved increasing 12% to $359 million.

Now, given our earnings growth, cash flow expectations and our confidence in the business, we announced today at 11% increase in our annual dividend to $9.80 per share effective in January of 2023. Thought I might comment that we believe the last two years have been among the most challenging and also the most gratifying periods in our history. Our growth and stability speaks for the fundamental necessities of the products we sell and to the value that our industry provides homeowners and businesses. Given our long-term focus, Watsco has also invested over the past two years in people, technology and infrastructure and we do these things to build market share in our $50 billion market.

As industry demand and supply chains normalized, it is the right time to expect more productivity and we have challenged our leadership to improve operation efficiencies across our network. We're also working closely with our OEM partners to develop forward-looking growth initiatives. Watsco does maintain good relationships with virtually every domestic and international industry manufacturer. We believe collaboration with the manufacturer is all the more important given the industry changes taking place in the coming years. Many views of our company fundamentals are in this morning's press release. I really do urge investors to read that release and understand why we believe we have an exciting future.