Watsco, Inc.

Good day and welcome to the Wattsco Second Quarter 2024 Earnings Call. All participants will be in the lesson-only mode. Should you need assistance, please signal a conference specialist by pressing start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press start then one on your touch phone. To withdraw your questions, please press star, then choose. Please note the event is being recorded. I would now like to turn the conference over to Albert Namath, CEO and Chairman. Please go ahead.

Albert Namath Good morning, everyone. Welcome to the second quarter earnings call. This is Al Namath, Chairman and CEO. And with me is AJ Namath, President, and Paul Johnson, Barry Logan, and Rick Gomez. In this call, I've asked these executives to chime in any time they wish with their thoughts so that all of you can get views from multiple people in the company. Before we start, I will state our cautionary statement. This conference call is 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 call. Watsco delivered another strong quarter. We achieved record sales, reflecting strengths in both residential and commercial markets. Operating efficiency improved during the quarter, as evidenced by lower SG&A as a percentage of sales. We generated strong cash flow, and our balance sheet remains in pristine condition to enable most any size investment to grow our business. Simply put, Wattsco's entrepreneurial culture, which empowers local leaders to make local decisions, continue to perform well. Technology continues to have an impact, and we are fortunate to serve such a large and growing number of contractors with the industry's most innovative technologies. Greater adoption and use of our platforms by a growing number of contractors has produced growth and market share gains. Annualized e-commerce sales now exceeds $2.5 billion, and our active users continue to grow faster than non-users. On-call air, Wattsco's consumer-facing sales platform that helps contractors do business continues to grow and expand. Thus far, in 2024, contractors presented quotes to approximately 160,000 households, an 18% increase, and generated $743 million of sales for our contractors, a 27% increase over last year. We are actively updating our technology platforms to optimize the launch of new low GWP A2L systems. This presents another important federal regulatory change providing the opportunity for growth in the coming years. Other federal regulatory changes continue to influence growth. Energy efficiency mandates. went into effect last year, providing contractors the ability to upgrade older systems with higher efficiency systems. The trend towards electrification of fossil fuel heating has driven increased sales of heat pumps, contributing to growth. We are fortunate to be in such a great industry and believe our proven culture, customer-focused technologies, scale, and access to capital provide unique advantages and opportunities. Finally, as always, if you have interest in earning more, please come to Miami and see us. We are transforming an industry and we've enjoyed telling you about it. With that, let's go on to Q&A. Hello. Hello? Is this the operator?

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