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Visual31 Oct 2025
Three decades of Rolls-Royce
Watsco (WSO) investor relations material
Watsco Q3 2025 earnings summary
Complete event summary combining all related documents: earnings call transcript, report, and slide presentation.Q3 2025 earnings summary29 Oct, 2025
Executive summary
Achieved record gross profit, gross margin, and operating cash flow despite challenging market conditions, regulatory transitions, and a significant product transition to A2L refrigerants impacting 55% of products sold.
Transition to next-generation equipment is largely complete, with expectations for a simpler business and improved efficiency in 2026.
Continued investments in technology, AI-driven initiatives, and digital platforms to enhance customer experience and operational efficiency.
Three acquisitions completed in 2025, expanding presence in key Sun Belt markets.
Leadership remains optimistic about long-term industry fundamentals and the company's competitive position.
Financial highlights
Third quarter revenues decreased 4% year-over-year to $2.07 billion; U.S. sales declined 3% in Q3.
Gross margin expanded 130 basis points to a record 27.5% in Q3; gross profit flat at $569 million.
Operating income for the quarter down 6% to $235 million; operating margin at 11.4%.
Operating expenses increased 5%, reflecting inefficiencies from the product transition and new locations.
Generated record third quarter cash flow of $355 million; cash and investments exceeded $640 million at quarter-end, with no debt.
Outlook and guidance
Expect SG&A performance to improve and operating efficiency to increase as product transition concludes and non-recurring costs subside.
Fourth quarter revenue is expected to decline in the mid-single digit range (5–10%) year-over-year, with volatility expected to ease and business to normalize in 2026.
Inventory levels targeted to be near historical norms by year-end, with further improvements and more conventional working capital trends expected.
What 2026 margin impact from A2L cost removal?
How will AL.watsco drive new customer acquisition?
What Q4 inventory reduction is targeted?
Strategy to improve inventory turns?
Why prioritize M&A over share repurchases?
How does OnCallAir impact sales mix?
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Frequently asked questions
Watsco, Inc., distributes air conditioning, heating, and refrigeration equipment, and related parts and supplies in the United States, Canada, Mexico, and Puerto Rico. The company offers residential ducted and ductless air conditioners; gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also distributes thermostats, insulation materials, refrigerants, ductwork products, tools and supplies, thermostat wire and cable products, installation materials, grills and registers, registers steel products, adapters/couplings/manifolds core removal tools/accessories line sets cables portable soda machines gas conversion kits condenser pads line sets portable soda machines gas conversion kits grainger condenser pads. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.
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