Watsco, Inc.

Today, and welcome to the WASCO first quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Albert Nahmad, CEO. Please go ahead.

Morning, everyone. Welcome to the first quarter earnings call. This is Al Nahmad, Chairman and CEO. With me is AJ Nahmad, President, Paul Johnston, Executive Vice President, and Barry Logan, Executive Vice President. Now, before we start 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 statements. Once again, good morning. I hope you and your families are healthy and getting through this period safely. Today especially speaks to Wattsco's strength and innovative spirit. These are attributes that we believe will bring comfort and confidence to our employees, our customers, OEM partners, and our shareholders. As we highlight in our press release, Wattsco's financial strength is our most important attribute. Our philosophy of maintaining a strong balance sheet, low debt levels, and ongoing access to capital is a significant advantage for us as we work through the impact of the pandemic. We are well positioned to support our customers, employees, and OEM partners while actively looking to invest in expanded product offerings, new locations, and acquisitions to benefit our long-term. Our ability to generate consistent cash flow also represents an important strength. Next week's scheduled dividends predict which reflects an 11% increase signals our confidence in our business. We also operate in a great industry as HVAC products are fundamental necessities in homes and businesses. Local authorities in our markets have deemed our industry as essential. Our branches are open, providing needed products and services to our contractor customers. Watsco's technology team has also accomplished a lot in recent weeks, and adoption of our tech platforms is rapidly expanding. In terms of day-to-day activities, our leaders took immediate actions in response to the pandemic, in many cases in less than 48 hours. For example, branch locations were quickly transformed from retail walk-in showrooms to no-touch e-commerce curbside pickup centers. These changes have been well received and our customers are asking us to sustain these services going forward. As to growth and investment, we remain in touch with great companies, knowing it's an opportune time for them to join the Watsco family. Our resources can help them grow and develop scale and we can provide access to our great technology platforms. In terms of results for the first quarter, sales growth was driven by strength in U.S. markets for residential HVAC equipment, which grew 5%. Sales and earnings in international markets declined due to softer market conditions and strong comparable results. Results also reflect 35 new locations, mostly from acquisitions completed in 2019. including Pierce Phelps, Dasco Supply, and NNS Supply. These companies come with great leaders who are now part of our culture and team and are responding to current events in their respective markets. Further analysis of our financial results are provided in our press release. I will not recite these details in my prepared remarks, but we will be happy to provide more color during the Q&A. With that, AJ, Barry, Paul, and I are happy to answer your questions.

We'll now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. The first question today comes from Josh Pokrowinski of Morgan Stanley. Please go ahead.