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Here are 1-3 brief analogies for Watsco (WSO):

• Think of Watsco as the Home Depot for HVAC/R contractors.
• It's like Sysco, but for heating, ventilation, and air conditioning equipment and parts.
• It's the Grainger of the HVAC/R industry.

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• HVAC Equipment: Watsco distributes a wide range of residential and commercial heating, ventilation, and air conditioning systems.
• Refrigeration Products: The company provides various commercial refrigeration equipment and related components.
• HVAC/R Parts & Supplies: Watsco offers an extensive inventory of parts, supplies, and accessories essential for HVAC/R system installation, maintenance, and repair.
• Logistics and Contractor Support: Watsco provides value-added services such as inventory management, technical training, and delivery solutions for HVAC/R contractors.

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Watsco (WSO) operates as the largest distributor of air conditioning, heating, and refrigeration (HVAC/R) equipment and supplies in the United States and Canada.

The company sells primarily to other companies (B2B). Its major customers are the professional businesses that purchase HVAC/R equipment and parts for installation, maintenance, and repair services. These customer categories include:

• HVAC/R Contractors: Companies specializing in the installation, service, and repair of heating, ventilation, air conditioning, and refrigeration systems for residential and commercial properties.
• Independent Dealers: Small to medium-sized businesses that purchase equipment and supplies to sell and install for their end-user clients.
• Service Technicians and Installation Companies: Professionals and firms focused on the technical aspects of installing and maintaining HVAC/R units.

Watsco's customer base is highly fragmented, consisting of tens of thousands of individual contractors, dealers, and service companies across North America. Due to this extensive and diverse customer base, no single customer accounts for a material portion (typically 10% or more) of Watsco's total revenues. Therefore, there are no specific public or private customer companies that need to be listed by name or symbol as "major customers" in the context of typical financial disclosure requirements.

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• Carrier Global Corporation (CARR)
• Trane Technologies plc (TT)
• Johnson Controls International plc (JCI)
• Daikin Industries, Ltd. (DKILY)

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Albert H. Nahmad, Chief Executive Officer

Mr. Albert H. Nahmad has served as the Chairman and Chief Executive Officer of Watsco since 1972. Born in Panama, he emigrated to the United States to study engineering at the University of New Mexico and Purdue University. He previously worked for W.R. Grace, a chemical and packaging conglomerate, and the accounting firm Arthur Young & Co. In 1973, Mr. Nahmad acquired a controlling interest in Watsco, then a small publicly traded manufacturing company. He has been instrumental in growing Watsco through an acquisitive strategy, completing 58 acquisitions of HVAC distribution businesses and expanding its market capitalization from $22 million in 1989 to $7.3 billion by the end of 2023.

Ana M. Menendez, Chief Financial Officer & Treasurer

Ms. Ana M. Menendez has served as Watsco's Chief Financial Officer and Treasurer since 2003. She joined the company in 1998, having previously held roles as Vice President and Treasurer of Watsco (1998-2003) and Assistant Secretary (1999). Before joining Watsco, she served as Chief Financial Officer and Secretary of Ezcony Interamerica Inc. from 1997 to 1998. Ms. Menendez is a Certified Public Accountant, holding a BBA from Florida International University and an MBA from the University of Miami. She has also served as the Chairman of the Miami branch of the Federal Reserve Bank.

Aaron (A.J.) Nahmad, President

Mr. Aaron J. (A.J.) Nahmad has been the President of Watsco since 2016 and a director since 2011. He joined the company in 2005 and served as Director of Global Business Development and Vice President of Strategy & Innovation. A.J. Nahmad, son of CEO Albert H. Nahmad, is noted for fostering innovation and leading the development of advanced technology platforms within the company. He holds a B.A. from the University of Pennsylvania and an M.B.A. from New York University's Leonard N. Stern School of Business.

Barry S. Logan, Executive Vice President & Secretary

Mr. Barry S. Logan has served as Watsco's Executive Vice President & Secretary since 2019 and joined the company in 1992. He previously held the position of Chief Financial Officer from 1997 to 2003. His earlier roles at Watsco include Treasurer (1996-1998) and Controller (1992-1996). Mr. Logan is a Certified Public Accountant and has been an integral participant in the company's business development initiatives and strategic activities, serving as Watsco's fourth corporate employee. He is also the principal contact for engagement with shareholders.

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Key Risks to Watsco (WSO) Business

Watsco (WSO), a leading distributor of heating, air conditioning, and refrigeration (HVAC/R) products, faces several key risks, with the most significant revolving around regulatory changes, supply chain dependencies, and market demand fluctuations.

1. Regulatory Shift and A2L Refrigerant Transition: A primary and complex operational risk for Watsco is the ongoing regulatory-driven transition to A2L refrigerant systems. This shift has led to a substantial inventory build-up and has temporarily impacted sales and earnings expectations. The CEO has even referred to 2025 as "the noisiest year in HVAC ever" due to this transition, which affects approximately 55% of Watsco's historical product sales. The company's ability to navigate this change effectively is critical.
2. Supplier Concentration and Supply Chain Risks: Watsco exhibits significant reliance on a concentrated group of suppliers. In 2023, the top ten suppliers accounted for 86% of its total purchases, with Carrier alone comprising 65% and Rheem 8%. In 2022, the top ten suppliers represented 84% of purchases, including 60% from Carrier and 8% from Rheem. This concentration creates a vulnerability to potential supply chain disruptions, changes in supplier relationships, or adverse terms from these key partners.
3. Softer Market Conditions and Weak Demand: The company is susceptible to broader economic and political conditions, which can lead to softer market demand. Evidence of this includes flat same-store sales over the last two years, declining earnings per share (EPS) despite revenue growth, and revenue misses in recent quarters. Factors such as general economic conditions, consumer spending, new housing starts, and capital spending in the commercial construction market directly influence demand for Watsco's products.

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• North America HVAC Distribution Market: The market size for HVAC distribution in North America was estimated at approximately USD 65.93 billion in 2024 and is projected to reach USD 69.12 billion in 2025. This market is expected to grow at a Compound Annual Growth Rate (CAGR) of 6.2% from 2025 to 2030, reaching an estimated USD 93.50 billion by 2030. Watsco is noted as a leading distributor in the highly fragmented USD 50 billion North American HVAC/R distribution market.
• United States HVAC Market (overall, including services and manufacturing, with distribution being a significant component): The U.S. HVAC market was valued at USD 31.26 billion in 2024 and is anticipated to reach USD 38.45 billion by 2030, demonstrating a CAGR of 7.87%. Another estimate for the U.S. HVAC market size in 2024 was USD 31.20 billion, projected to grow to USD 53.80 billion by 2034 with a 5.60% CAGR. The U.S. HVAC systems market was valued at USD 52.36 billion in 2023 and is predicted to grow to USD 79.85 billion by 2030 at a CAGR of 5.7%. The HVAC distribution industry specifically in the U.S. is expected to grow at a CAGR of 6.3% from 2025 to 2030.
• United States Refrigeration Equipment Wholesaling Market: The market size for refrigeration equipment wholesaling in the United States is approximately USD 10.5 billion in 2025.
• United States Commercial Refrigeration Equipment Market: This market generated a revenue of USD 11,635.3 million in 2024 and is expected to reach USD 16,681.0 million by 2033, with a CAGR of 4% from 2025 to 2033. Another projection indicates growth from USD 8.3 billion in 2025 to approximately USD 12.2 billion by 2035.
• United States Industrial Refrigeration Systems Market: The market size was USD 5.95 billion in 2023 and is projected to reach around USD 7.18 billion by 2033, growing at a CAGR of 1.9% between 2024 and 2033.

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Watsco (WSO) is poised for future revenue growth over the next 2-3 years, driven by several strategic initiatives and market dynamics:

1. Transition to Next-Generation A2L Refrigerant Products and High-Efficiency Systems: A significant industry-wide regulatory-driven product transition to A2L refrigerants and higher-efficiency HVAC systems is expected to stabilize the market in 2026. This shift, which impacts approximately 55% of Watsco's historical product sales, is anticipated to drive a richer product mix, thereby enhancing both sales and long-term profitability.
2. Digital Transformation and Technology Investments: Watsco is continuously investing in innovation and technology to strengthen its competitive position. This includes expanding e-commerce penetration, which already accounts for 34% of sales, and growing its digital selling platform for contractors, OnCallAir, which saw a 19% increase in gross merchandise value to $1.7 billion over the past year. The company is also developing new technology to capture more sales from institutional customers and leveraging AI and digital tools to improve operational efficiency and customer experience.
3. Strategic Acquisitions and Market Expansion: Watsco employs a "buy-and-build" strategy, having partnered with over 70 independent distributors and acquired 11 companies since 2019. With a strong balance sheet and no debt, the company has the capacity to pursue further acquisitions and co-invest with OEM partners, expanding its market presence and scale.
4. Growth in Non-Equipment, Parts & Supplies, and Commercial/Institutional Segments: Watsco is strategically focused on expanding sales in higher-margin non-equipment categories, parts and supplies, and targeting large institutional customers. The company has already seen growth in non-equipment and commercial refrigeration products, and these segments offer opportunities for diversified revenue growth.
5. Sustained Pricing Power and Gross Margin Expansion: Watsco has demonstrated its ability to implement double-digit pricing gains on new products, supported by OEM pricing actions and its proprietary pricing technology platform, Pricefx. The company aims to achieve long-term gross margins exceeding 30%, which is expected to be a key contributor to revenue growth through enhanced profitability and potential market share gains.

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Share Repurchases

• Watsco has an ongoing stock repurchase program. The dollar amount of shares repurchased varies quarterly, with recent examples including $36.83 million in December 2024 and $1.64 million in September 2024.
• Historically, the company has utilized share repurchases to enhance shareholder value and capitalize on perceived undervalued stock prices.

Share Issuance

• In the first quarter of 2024, Watsco raised $282 million by selling 712,000 shares of common stock through its At-The-Market (ATM) program.
• The total number of shares outstanding for Watsco increased by 2.68% in 2024 compared to 2023, and by 2.37% in 2023 compared to 2022, indicating ongoing share issuance.

Outbound Investments

• Over the last five years, Watsco has acquired nine distribution businesses, representing an investment of approximately $350 million.
• Since August 2019, Watsco has acquired eight businesses that collectively generate about $1 billion in annual sales.
• In 2025 alone, Watsco completed three acquisitions (Southern Ice Equipment Distributors, Lashley & Associates, and Hawkins HVAC Distributors), adding 10 new locations and approximately $47 million in annualized sales.

Capital Expenditures

• Watsco's net capital expenditures were approximately $29.8 million in 2024 and $34.2 million in 2023.
• The company actively invests in enhancing its technology advantage in the HVAC/R distribution industry, including AI-driven initiatives.
• Significant capital and inventory investments are also being made for the ongoing regulatory transition to new A2L refrigerant products in HVAC systems.