Watsco Reports Revenue Decline to $1.53 Billion in Q1 2025

Watsco, Inc. reported a decline in financial performance for the first quarter of 2025, with revenues totaling $1.53 billion, down from $1.56 billion in the same period last year. The company's net income attributable to Watsco decreased by 8% to $80.1 million, compared to $87.0 million in the first quarter of 2024. The earnings per share for the quarter were $1.93, down from $2.17 in the prior year. The decrease in revenue was attributed to a combination of factors, including a reduction in same-store sales and the impact of closed locations, which outweighed gains from new acquisitions.

In terms of operational metrics, Watsco's gross profit remained relatively stable at $429.6 million, with a slight increase in gross margin to 28.1% from 27.5% in the previous year. However, selling, general, and administrative expenses rose to $322.6 million, up from $309.5 million, reflecting increased facility costs. The company also reported a significant increase in interest income, which rose to $5.4 million from $2.5 million, primarily due to higher cash balances and lower borrowings.

Strategically, Watsco has been active in expanding its market presence through acquisitions. In January 2025, the company acquired W.L. Lashley & Associates, a distributor of commercial HVAC supplies, for approximately $3.7 million. Additionally, Watsco's subsidiary acquired Hawkins HVAC Distributors in April 2025 and Southern Ice Equipment Distributors in May 2025, further enhancing its distribution capabilities in the HVAC sector. These acquisitions are expected to contribute positively to future revenues, although their immediate impact was not deemed significant in the current quarter.

Watsco's operational footprint has also expanded, with a total of 693 locations across the U.S., Canada, Mexico, and Puerto Rico as of March 31, 2025. The company continues to focus on the HVAC replacement market, which is expected to stabilize demand despite potential economic uncertainties. The company’s management remains optimistic about future growth, particularly in light of regulatory changes promoting higher-efficiency HVAC systems and the potential for increased demand driven by federal tax credits and state incentives.

Looking ahead, Watsco anticipates that ongoing investments in technology and product offerings will support its growth strategy. However, the company acknowledges potential risks related to economic conditions, supply chain disruptions, and the impact of tariffs on its operations. Management emphasizes the importance of maintaining liquidity and operational flexibility to navigate these challenges while continuing to pursue strategic acquisitions and market expansion.