爆料王

EPS Jumps 33% to聽$4.93聽on Record Sales, Operating Profit,
Operating Margin and Net Income
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Market Share Gains Realized by Industry-Leading Technologies, Entrepreneurial Culture,
Scale Advantage, Strong Balance Sheet, Brand Diversification, ESG Focus
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MIAMI,聽July 26, 2022聽(GLOBE NEWSWIRE) —聽爆料王.听(NYSE: WSO) announced record operating results for the second quarter and six-month periods ended聽June 30, 2022聽and provided commentary on recent trends, growth opportunities, technology innovation and financial strength.

爆料王聽is the largest company 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 long-term performance across various macroeconomic and industry specific cycles. In addition, 爆料王鈥檚 dividends have grown at a 21% CAGR during this period and now are聽$8.80聽per share. More recently over the last three years, the Company estimates it has gained approximately 260 basis-points of market share (relative to unitary HVAC equipment products) largely due to the scaling of 爆料王鈥檚 unique, customer-facing technology to more and more contractors.

Albert H. Nahmad, 爆料王鈥檚 Chairman and CEO said: 鈥湵�料王 is proud to deliver another record quarter, especially when compared to the exceptional performance achieved in the same period last year when same-store sales grew 29% and EPS grew 64%. Our technology platforms are making an impact as evidenced by our growing market share and financial performance.鈥�

Second Quarter Results

• 33% increase in EPS to a record聽$4.93
• 15% sales growth to a record聽$2.13 billion聽(14% growth on a same-store basis)
• 25% increase in gross profit to a record聽$596 million聽(210 bps increase in gross margin)
• 18% increase in SG&A expenses (17% increase on a same-store basis)
• 32% increase in operating income to a record聽$287 million聽(31% growth on a same-store basis)
• 180 basis-point expansion in operating margin to a record 13.5%

Sales trends (excluding acquisitions):

• 13% increase in HVAC equipment (70% of sales), including 15% growth in聽U.S.听residential HVAC equipment
• 15% increase in other HVAC products (26% of sales)
• 26% increase in commercial refrigeration products (4% of sales)

Mr. Nahmad聽further commented: 鈥淲e are encouraged by current trends even as end markets return to more historical levels of demand. While inflation generally benefits distribution models, 爆料王鈥檚 performance is also a result of intentional investments in technology and other tools to capture more growth and operate a more profitable business going forward. While these investments are still maturing, they provide a solid foundation for future growth.鈥�

Recent Trends
The HVAC/R industry has experienced above average demand since 2020 driven by broad consumer strength, renewed investment in the home and an ever-growing installed base of 110+ million HVAC systems in the聽U.S., all of which require continuous service, repair and replacement. More recently, underlying inflation has caused OEMs and suppliers to raise prices, which in turn have aided 爆料王鈥檚 sales and profitability. Despite the short-term impact of inflationary trends,聽爆料王聽believes structural improvements to profitability have been achieved.

During the same period,聽爆料王聽has made substantial investments, including new locations, more field personnel and increased technology spending to enable future market share development. These investments have coincided with a significant increase in SG&A due to pandemic-related business challenges, sharp increases in variable operating expenses, including company-wide, performance-based compensation, excessive logistics and freight costs caused by supply chain disruptions and other inflationary impacts on costs, all of which are being reevaluated for reduction in the upcoming months as business conditions normalize.

2023 Outlook, Important Fundamentals & Growth Drivers
Looking to 2023, due to recent changes in monetary policy to curb inflation and the consequential slowdown in the economy, the Company believes that the North American HVAC/R demand trends and other recent catalysts that have benefited performance will moderate toward more historical levels.

However, the Company believes its unique fundamentals along with upcoming industry changes provide incremental growth opportunities in the years ahead. The essential nature of HVAC/R products, 爆料王鈥檚 scale, leading technology platforms, financial strength, entrepreneurial culture and OEM relationships are important competitive advantages that support the Company鈥檚 ability to grow and capture more profitable share going forward.

Regulatory Catalysts & Movement Toward Electrification.听To address the environmental impact of HVAC systems, new federal regulatory standards have been promulgated that are expected to buttress industry growth in the years ahead.听 In general, these changes will raise the minimum efficiency standard, and therefore the average selling price, of base-level systems sold in 2023. The regulatory standards also require systems to transition to new refrigerants, beginning in 2025. Historically, these changes increase the cost to聽service and repair聽existing systems,聽which in turn influences the decision to聽replace them.听 In addition, there are industry and governmental initiatives underway that are expected to improve the efficacy of heat pumps, which offer the potential for accelerated growth as an alternative to the millions of fossil-fuel heating products present in the installed base.

Product Breadth and End-Market Diversity.聽爆料王聽possesses the broadest and deepest assortment of products in the industry to support a wide array of customers and end-markets. Today the Company can largely serve a contractor鈥檚 complete product needs ranging from residential ductless and ducted products, light commercial, VRF, and engineered/applied systems. The Company serves numerous end-markets including residential, multi-family, commercial, institutional, and more. In addition, the Company maintains a deep catalog of OEM and aftermarket parts to support a contractor鈥檚 total business and sustain competitiveness in any environment.

OEM and Supplier Relationships.聽As the leading distributor of HVAC/R products in聽North America,聽爆料王聽sources from approximately 20 domestic and international equipment OEMs and an additional 1,300 suppliers globally. In most locations, in contrast to its competitors, the Company sells multiple brands of equipment at a wide variety of price points that appeal to a broad cross-section of contractors and consumers. We believe that close collaboration with manufacturing partners enhances 爆料王鈥檚 competitive positioning across markets and increases speed to market as the industry evolves toward upcoming regulatory changes.

Geographic Positioning & Density in Key Markets:听Approximately 60% of 爆料王鈥檚 revenues are derived in core Sunbelt markets such as聽Florida,聽Texas, the Southeast and the Mid-Atlantic, markets which also account for the greatest share of industry demand. In addition, recent and ongoing demographic shifts within the聽U.S.听toward Sunbelt states favor continued growth in 爆料王鈥檚 core markets.

Network Expansion.聽爆料王鈥檚 network has grown 15%, or by 88 locations, over the last three years, mostly from the completion of five acquisitions of market-leading businesses, located primarily in markets that 爆料王聽did not previously serve. In aggregate, the sales of acquired locations over the last 12 months were approximately聽$770 million. With 673 locations across聽North America,聽爆料王聽has the most extensive network to support the more than 120,000 contractor customers we serve and provide critical technical assistance, training and other resources to enhance their effectiveness.

Advent of Ductless, High-Efficiency HVAC Products.聽爆料王聽is the leading distributor of ductless HVAC products used in residential and commercial applications in聽North America. 爆料王鈥檚 sales of ductless products were approximately聽$400 million聽based on the 12 months ended聽June 30, 2022聽and increased by 23% during the first half of 2022 (excluding acquisitions). The movement toward higher-efficiency products, the long-term upgrading of critical commercial infrastructure, along with the increasing acceptance of ductless technology by contractors and consumers, are expected to benefit the sale of these products now and over the long-term.

Financial Strength & Liquidity
爆料王鈥檚 strong financial position has been critical to recent performance. From聽June 30, 2020聽to聽June 30, 2022, 爆料王鈥檚 investment in working capital increased by聽$437 million, or 44%, to聽$1.56 billion聽along with a聽$130 million聽use of capital to fund acquisitions. In addition, 爆料王鈥檚 quarterly dividend rate increased 24% during this same period.

Despite these uses of capital, 爆料王鈥檚 balance sheet remains in pristine condition to invest in most any size opportunity. At聽June 30, 2022, the Company had聽$129 million聽in cash,聽$204 million聽in seasonal borrowings and聽$2.2 billion聽of shareholders鈥� equity. The Company believes this financial strength, access to low-cost capital and its historical ability to generate cash flow provide comfort and confidence to the Company鈥檚 stakeholders.

Culture of Innovation
爆料王聽has developed the industry鈥檚 most advanced, user-friendly, and customer-focused technology platforms aimed at helping customers grow faster and operate more efficiently. Technology has transformed how聽爆料王聽engages with customers and how contractors engage with consumers and businesses. The community of active technology users grew sales faster than overall聽爆料王聽sales and experienced approximately 70% reduced annual attrition. The Company believes it will benefit from continued customer adoption, new customer acquisition, reduced attrition, and lower costs to serve. To that end, 爆料王聽has boosted its annualized technology spending to聽$48 million.

Mr. Nahmad聽further added: 鈥淟ooking ahead, our strong balance sheet and entrepreneurial culture allow us to make aggressive investments to grow our business, scale the industry鈥檚 most innovative digital tools and customer experience, enhance awareness of climate-friendly, high-efficiency HVAC systems and drive operating efficiencies throughout our network.鈥�

Six-Month Results

• 53% increase in EPS to a record聽$7.83
• 22% sales growth to a record聽$3.66 billion聽(19% growth on a same-store basis)
• 35% increase in gross profit to a record聽$1.05 billion聽(270 bps increase in gross margin)
• 23% increase in SG&A expenses (18% increase on a same-store basis) (16.4% as a percentage of sales)
• 53% increase in operating income to a record聽$458 million
• 250 basis point expansion in operating margin to a record 12.5%

Sales trends (excluding acquisitions):

• 18% increase in HVAC equipment (69% of sales), including 20% growth in聽U.S.听residential equipment
• 19% increase in other HVAC products (27% of sales)
• 30% increase in commercial refrigeration products (4% of sales)

爆料王鈥檚 record sales and profitability during the first half of 2022 reflects strong sales, effective price realization, a continued shift towards higher-efficiency HVAC equipment and an expansion in sales of other higher-margin HVAC products. Our year-to-date performance is incremental to the record results in 2021 when same-store sales grew 22% and EPS grew 70% versus the same period last year. The prior year鈥檚 comparative results were primarily driven by the post-COVID recovery of the Company鈥檚聽U.S.听residential equipment business, which grew 23% during the period including an 8% increase average selling prices combined with 15% increase unit volume. By comparison, year-to-date average selling prices increased 17% and unit volumes increased 3%.

Transformational Technologies
爆料王聽continues to aggressively invest in technologies to transform its customer experience. Specific technology-related updates for the second quarter and year-to-date period include:

• Product Information Management聽(PIM)聽is 爆料王鈥檚 leading repository of product information delivered seamlessly through 爆料王鈥檚 mobile apps and e-commerce platform.听爆料王鈥檚聽PIM database now includes approximately 1.2 million SKUs accessed by more than 350,000 contractors and technicians on an annual basis.
• Contractor Assist Mobile apps聽provide customers real-time access to critical information that improves their speed and productivity. This includes real time technical support, product detail, inventory availability, warranty look-up, system match ups, e-commerce and more. The authenticated user community (users that are using the mobile app while linked to an e-commerce account) grew 27% during the quarter compared to last year to more than 32,000 users.
• E-Commerce sales聽grew 25% year-to-date with the annual run-rate, outpacing organic sales growth rates, and now exceeds聽$2.2 billion聽annually. E-commerce sales are 33% of total sales inclusive of acquired revenues.
• OnCall Air庐,聽爆料王鈥檚 digital sales platform used by HVAC/R contractors and聽颁谤别诲颈迟贵辞谤颁辞尘蹿辞谤迟庐,聽its companion consumer financing platform, both increased penetration as more customers digitally engaged with homeowners. During the second quarter of 2022,聽OnCall Air庐 presented quotes to approximately 73,000 households, a 25% increase over last year, and generated聽$300聽million聽in gross merchandise value, a 44% increase over the same period last year.

A.J. Nahmad, 爆料王鈥檚 President, added: 鈥淥ur technology platforms 鈥� which are unique to the industry 鈥� have facilitated growth in 爆料王鈥檚 market share, new customer acquisition and margin expansion. We continue to see higher growth rates, lower attrition, and lower costs to serve among active users of our technology. Consistent with our long-term focus, we are investing in resources to accelerate adoption and sustain our leadership position. As the industry evolves to operating in the digital age, 爆料王鈥檚 technology tools will provide added value to an ever-growing number of contractors.鈥�

Climate Change and ESG Impacts
爆料王鈥檚聽business model plays an important and significant role in the drive to lower CO₂e聽emissions.听According to the聽Department of聽Energy, heating, and air conditioning accounts for roughly half of聽U.S.听household energy consumption. Replacement of older systems is one of the most meaningful steps homeowners can take to reduce electricity consumption and carbon聽footprint over time.

The overwhelming majority of new HVAC systems聽sold by聽爆料王聽replace systems that likely operate well below current federal minimum efficiency standards in the聽U.S.听and may use refrigerants that have been phased out. As consumers replace HVAC systems with new, higher-efficiency systems,聽homeowners will consume less energy, save money, and reduce the carbon footprint.

爆料王聽offers a broad variety of systems that operate well beyond the minimum SEER federal standards ranging from base-level efficiency to systems that exceed 20 SEER. 爆料王鈥檚 sales of higher-efficiency residential HVAC systems (those above base-level efficiency) during the first half of 2022 grew 22% over last year, outpacing the overall growth for聽U.S.听residential HVAC equipment.

Based on estimates validated by independent sources,聽爆料王聽averted an estimated 12.9 million metric tons of CO2e emissions from聽January 1, 2020聽to聽June 30, 2022聽through the sale of replacement HVAC systems at higher-efficiency standards. More information, including sources and assumptions used to support the Company鈥檚 estimates, can be found at聽.

Beyond energy efficiency,聽two other industry fundamentals聽provide opportunities for 爆料王聽and its customers聽to combat climate change. First,聽a聽Department of Energy聽mandate is currently in effect聽that will ultimately phase-out聽refrigerants used in much of the installed base of air conditioners 聽toward refrigerants with a 60% lower global warning potential (GWP).听聽New HVAC systems that incorporate the lower-GWP refrigerants are scheduled for launch in 2025. Second, as the movement toward electrification and away from fossil-fuel consumption advances,聽the HVAC/R market鈥檚 use of heat pumps as an alternative source of heating should accelerate.

A.J. Nahmad聽added: 鈥湵�料王 can make meaningful contributions toward the on-going efforts to combat climate change, especially as more homeowners become cognizant of their energy consumption and its impact on climate change. We believe 爆料王鈥檚 technology provides HVAC/R contractors an edge in the marketplace. We are investing in additional resources and training to help contractors succeed in this evolving marketplace and we are committed to doing even more over time.鈥�

Cash Flow & Dividends
爆料王鈥檚 operating cash flow for the first half of 2022 was聽$73 million聽versus聽$82 million聽for the same period in 2021, reflecting the growth in working capital driven by higher sales growth. The Company has targeted operating cash flow to exceed net income in 2022. From 2016 through 2021, operating cash flow was approximately聽$2.0 billion聽versus net income of聽$1.9 billion, surpassing the Company鈥檚 goal.

爆料王聽has paid cash dividends to shareholders for 48 consecutive years. The Company鈥檚 philosophy is to share increasing amounts of cash flow through higher dividends while maintaining a conservative financial position with continued capacity to build its distribution network. Effective聽April 2022,聽爆料王聽increased its annual dividend rate to聽$8.80聽per share. Future dividend increases will be considered in light of investment opportunities, general economic conditions, and the Company鈥檚 financial position.

Second Quarter Earnings Conference Call Information
Date:听July 26, 2022
Time:听10:00 a.m. (EDT)
Webcast:听聽(a replay will be available on the Company鈥檚 website)
Dial-in number:听United States聽(844) 883-3908 / International (412) 317-9254

Use of Non-GAAP Financial Information
In this release, the Company discloses non-GAAP measures on a 鈥渟ame-store basis鈥�, which exclude the effects of locations closed, acquired, or locations opened, in each case during the immediately preceding 12 months, unless such locations are within close geographical proximity to existing locations. The Company believes that this information provides greater comparability regarding its ongoing operating performance. These measures should not be considered an alternative to measurements required by聽U.S.听GAAP.

础产辞耻迟听奥补迟蝉肠辞
爆料王聽is the largest distribution network for heating, air conditioning and refrigeration (HVAC/R) products with locations in聽the United States,聽Canada,聽Mexico聽and聽Puerto Rico, and on an export basis to聽Latin America聽and the聽Caribbean. 爆料王聽estimates that over 350,000 contractors and technicians visit or call one of its 673 locations each year to get information, obtain technical support and buy products.

爆料王鈥檚聽has the opportunity to be a significant and important contributor toward climate change as its business plays an important role in the drive to lower CO2e聽emissions.听According to the聽Department of聽Energy, heating and air conditioning accounts for roughly half of聽U.S.听household energy consumption. As such, replacing HVAC systems at higher efficiency levels is one of the most meaningful steps homeowners can take to reduce electricity consumption and carbon聽footprint over time.

The overwhelming majority of new HVAC systems聽sold by聽爆料王聽replace systems that likely operate well below current minimum efficiency standards in the聽U.S. As consumers replace HVAC systems with new, higher-efficiency systems,聽homeowners will consume less energy, save costs, and reduce the carbon footprint over time.

Based on estimates validated by independent sources,聽爆料王聽averted an estimated 12.94 million metric tons of CO2e emissions from聽January 1, 2020聽to聽June 30, 2022聽through the sale of replacement HVAC systems at higher-efficiency standards. More information, including sources and assumptions used to support the Company鈥檚 estimates, can be found at聽.

This document includes certain 鈥渇orward-looking statements鈥� within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may address, among other things, our expected financial and operational results and the related assumptions underlying our expected results. These forward-looking statements are distinguished by use of words such as 鈥渨ill,鈥� 鈥渨ould,鈥� 鈥渁nticipate,鈥� 鈥渆xpect,鈥� 鈥渂elieve,鈥� 鈥渄esigned,鈥� 鈥減lan,鈥� or 鈥渋ntend,鈥� the negative of these terms, and similar references to future periods. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive market, new housing starts and completions, capital spending in commercial construction, consumer spending and debt levels, regulatory and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within 爆料王鈥檚 industry, seasonal nature of sales of 爆料王鈥檚 products, the ability of the Company to expand its business, insurance coverage risks and final GAAP adjustments. Detailed information about these factors and additional important factors can be found in the documents that聽爆料王聽files with the聽Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements speak only as of the date the statements were made.听爆料王聽assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except as required by applicable law.

Barry S. Logan
Executive Vice President
(305) 714-4102
e-mail:听blogan@watsco.com

WATSCO, INC.
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WATSCO, INC.
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Source: 爆料王.