Watsco Inc. (NYSE:WSO) Q4 2019 Earnings Conference Call - Final Transcript

Feb 13, 2020 • 10:00 am ET


Watsco Inc. (NYSE:WSO) Q4 2019 Earnings Conference Call - Final Transcript


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Good morning and welcome to the Watsco Incorporated Fourth Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Albert Nahmad, Chief Executive Officer and Chairman of the Board. Please go ahead.

Albert H. Nahmad

Good morning. This is Al Nahmad, Chairman and CEO; and with me is A.J. Nahmad, President; Paul Johnston, Executive Vice President; and Barry Logan, Executive Vice President as well.

Now before we start, our cautionary statement as usual. The conference call has forward-looking statements as defined by SEC laws and regulations that are more pursuant to the safe harbor provisions of these various laws. Ultimate results may differ materially from the forward-looking statements.

On to the report. Watsco produced another record year with sales, net income and earnings per share reaching record levels. We also produced record cash flow of $336 million, representing a 114% of net income. Reflecting our confidence in our business and is supported by our strong cash flow and conservative balance sheet, we announced this morning an 11% dividend raise to $7.10 per share, starting with our next regular quarterly payment in April of 2020.

We continue to -- we continued to invest last year in our industry-leading technology platforms. Interestingly, today we have nearly 20,000 customers that have embraced our technology. For our most active users, annual sales growth rates are higher with considerably less attrition over the year. We have intensified our efforts to drive greater use and widespread adoption and to develop new features and functionality that our customers are asking for.

Technologies to improve operational excellence and to drive efficiency are now implemented across all our legacy US locations. These internal-facing platforms were built to increase the speed and efficiency of fulfilling over 7 million customer orders per year and to optimize our inventory and supply chains. To that end, we improved operating efficiency during 2019 as evidenced by same-store SG&A performance.

Our long-term goal remains the same, to develop the industry's most attractive and customer obsessed technology platforms, which revolutionize and transform, our business is done. We again invite each of you to Utica and the Miami, spend the day with us and learn more from our team.

2019 was also an active year, with increased M&A activity. That is summarized in our press release that we published also today. We added three new operating companies to our family, Dasco Supply in New Jersey, Peirce-Phelps in Philadelphia, and N&S in New York. These are wonderful companies and we are honored they choose to become part of Watsco. It is Watsco's culture to empower each of these companies to operate under their historical leadership, same team and name with a deep respect for their entrepreneurial culture from us. What we ask for in return is growth. We provide the resources they request, including capital, technology, equity incentives, and access to our vendor relationships. These companies contributed to 2019 performance and