Watsco, Inc. (WSO) Q4 2022 Earnings Call Transcript

For the period ending December 31, 2022

February 16, 2023 10:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Watsco Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there’ll 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, CEO and Chairman. Please go ahead.

Albert Nahmad

Good morning, everyone. I do hope everyone is healthy and not struck by the virus. Welcome to our fourth quarter earnings call. And this is Al Nahmad, Chairman and CEO; and with me is A.J. Nahmad, President of Watsco; and Paul Johnston, Barry Logan and Rick Gomez.

Before we start, here is our 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 statement.

Now, Watsco delivered an exceptional quarter to close out a fantastic year. We are especially pleased, because in the fourth quarter of last year, I should say the prior year, sales were up 21% and earnings per share were up 77%. So the results we are reporting today were against that performance in the fourth quarter of the prior year. So how did we do on the fourth quarter of this prior year of 2022? Well, sales grew 5% to a record $1.6 billion. Adjusted operating income increased 14% to $141 million. EBIT margins expanded 80 basis points to a record 8.9%, and adjusted earnings per share increased 16% to a record $2.35.

Now, we’re going to explain what the adjustment as we go through here. So, remember, this fourth quarter results were running against the prior year, where sales were up 21% and earnings per share was up 77%. So we think we did well. Now for the full year, sales grew 16% to a record $7.3 billion. Adjusted operating income increased 33% to $835 million. EBIT margins expanded 150 basis points to a record 11.5%, and adjusted earnings per share increased 32% to a record $14.20.

Now, let me clarify what the adjustment means. These figures – the adjusted figures including $49 million, I should say, once again, the adjusted figures exclude a $49 million net tax benefit from vesting of restricted shares, which added $1.20 earnings per share for the quarter and $1.21 earnings per share for the year. Those were excluded in the numbers that I just gave you.