Watsco, Inc. (NYSE: WSO) recently reported fourth quarter and full year 2024 results and provided commentary on current business trends, technology innovation and long-term growth drivers.

The company, which serves over 375,000 contractors in the U.S., Canada, and Latin America, announced an 11% increase to its annual dividend to $12.00 per share effective with its next regular dividend payment in April 2025. Since entering distribution in 1989 through the end of 2024, the compounded annual growth rate (CAGR) of Watsco’s operating profit was 18%, dividends were 21% and total-shareholder-return was 19%, representing strong and consistent performance across most macroeconomic and industry cycles.

According to a news release, the company continues to invest in technologies that enrich the customer experience, drive growth, gain market share and improve operating efficiency. Watsco’s digital user-community consists of approximately 64,000 contractors and technicians that engage with Watsco through digital platforms. Since launch, the news release said, Watsco has generated higher sales growth rates among digital customers, achieved meaningful new customer acquisition and reduced attrition. Watsco has also begun to establish pathways for AI-related initiatives and leverage the substantial data streams curated by the Company.

“Watsco had a terrific fourth quarter, achieving record sales and earnings, improved operating efficiency, expanded margins and record cash flow. Looking ahead, the transition to A2L products is well underway, providing incremental opportunities for growth and share gains as our technology platforms gain more adoption in the marketplace. Our teams continue to lead and innovate, and I am optimistic that our industry-leading scale, entrepreneurial culture, technology advantage and financial strength position us to continue to capture growth and share," Watsco Chairman and CEO Albert H. Nahmad said in a public statement. 

“We are pleased to raise our dividend, marking the 51st consecutive year that Watsco has paid dividends. With $782 million in cash and short-term investments along with a debt-free balance sheet, Watsco remains well-positioned to invest in most any-sized growth opportunity to advance its leadership position within the fragmented $74 billion HVAC/R distribution marketplace.”

The company's fourth quarter results include a 9% sales increase to a record $1.75 billion, 13% gross profit increase to a record $468 million and a 90 basis-point expansion in gross margin to 26.7%. In addition, the company reported 26% growth in operating income to $136 million, a 31% increase in income before income taxes to a record $143 million and a 27% increase in operating cash flow to a record $379 million. 

For sales trends, Watsco reported a 14% increase in HVAC equipment, which accounts for 69% of sales; flat sales for other HVAC products, which make up 27% of sales; and a 4% increase in commercial refrigeration products, about 4% of sales. 

The news release said sales of residential equipment increased 16% during the quarter, reflecting double digit unit growth, new customer acquisition and market share gains, price and mix benefits and accelerated growth in e-commerce sales. Commercial equipment sales also remained resilient and increased 9% during the quarter, while growth rates were consistent throughout the quarter and among the various geographies served. In addition, the company's full-year results include a 5 percent increase in sales to a record $7.62 billion, a 3% increase in gross profit to a record $2.04 billion, and a 38% increase in operating cash flow to a record $773 million.

In terms of sales trends, the company reported a 5% increase in HVAC equipment (70% of sales), 2% decline in other HVAC products (26% of sales) and a 1% increase in commercial refrigeration products (4% of sales). 

The news release added that Watsco has continued to scale its industry-leading technology platforms, both externally to more contractors and internally across its entire network of locations. It said e-commerce sales growth rates outpaced overall sales growth increasing 8% to $2.6 billion for the year, making up 35% of annual sales, and grew 16% during the fourth quarter. In addition, the release noted that the gross merchandise value of products sold through OnCallAir, Watsco’s proprietary digital sales platform for contractors, increased 25% to approximately $1.5 billion in 2024 with quotes to homeowners increasing 22% to approximately 313,000 households.

Nahmad said Watsco's ongoing investments in tech platforms "have been producing terrific results" with clear evidence that "customers are winning with more frequency while becoming more loyal, long-term customers.”

 “We have also opened two pathways for AI-related initiatives to leverage the substantial data streams that we have curated over the years related to products, technical know-how, customer information and a wealth of transactional data," he said in the news release. "The first path is focused on how to bring technical know-how and service to our contractor community faster, more completely and more productively, whether assisted by our technical support staff or through self-service. The second path is internally focused to derive more productive content creation across a variety of disciplines in our business. It is early stage, but we are excited and already witnessing productivity gains and an expansion of our historical capabilities."

Additionally, the news release added that Watsco produced record operating cash flow in 2024, which increased 38% to $773 million, or 122% of net income. Since 2019, Watsco has generated $3.1 billion of net income along with $3.1 billion of operating cash flow. Over this same period, company leaders said Watsco invested $353 million to acquire distributors with annual dividend payments increasing 75% to $423 million.

To read the full report or learn more about Watsco, visit www.watsco.com.