Watsco Reports Record Third Quarter Sales, Strong Cash Flow and Improving Demand

Residential equipment volumes returned to growth, but quarterly gross margin narrowed and earnings per share declined 5%.

Rhea-AI Summary

Watsco (WSO) reported record third-quarter revenue of $2.22 billion, while earnings and margins declined from the prior year. Revenue rose 7%, including 4% growth on a same-store basis, which excludes certain location changes. Earnings per share fell 5% to $3.77, and operating income declined 4% to $225 million. Gross margin fell to 26.4% from 27.5%.

Residential equipment sales excluding acquisitions increased 7%, with unit growth of 5%. Nine-month revenue rose 3% to $5.86 billion, while earnings per share fell 7% to $9.72. Nine-month operating cash flow increased 79% to $304 million. Watsco acquired Jackson Supply in June and The Granite Group in October; it expects the businesses to bolster annual revenue by approximately 10%. In October, it signed a five-year $750 million unsecured senior revolving credit facility. Its annual cash dividend increased 10% to $13.20 per share in April.

20 points · 0 major

MixediHow this balance works

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Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.

It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

How the balance worksHow Sentiment works

0 major · 12 points

Hollow bars mark forward-looking points. How the balance works

Positive

• Moderate pointThird-quarter revenue increased 7% to a record $2.22 billion; same-store revenue increased 4%.
• Moderate point. Forward-looking: it has not happened yet and may not happen.Jackson Supply and The Granite Group, acquired in June and October 2026, are expected to bolster annual revenue approximately 10%.
• Moderate pointThird-quarter gross profit increased 3% to a record $586 million.
• Moderate pointNine-month operating cash flow increased 79% to $304 million.
• Moderate pointFive-year $750 million unsecured revolving credit facility signed in October provides increased borrowing capacity and covenant flexibility. 5.9% of market cap

15 minor points

• Minor pointThird-quarter residential equipment sales excluding acquisitions rose 7%, including 5% unit growth and 2% higher average selling prices.
• Minor pointThird-quarter HVAC equipment sales excluding acquisitions increased 5%.
• Minor pointThird-quarter other HVAC product sales excluding acquisitions increased 2%.
• Minor pointThird-quarter commercial refrigeration sales excluding acquisitions increased 10%.
• Minor pointJackson Supply third-quarter sales reached $78 million, up 16% over the comparable prior-year period.
• Minor pointNine-month revenue increased 3% to $5.86 billion.
• Minor pointNine-month HVAC equipment sales excluding acquisitions increased 2%, including 4% residential product growth.
• Minor pointNine-month other HVAC product sales excluding acquisitions increased 1%.
• Minor pointNine-month commercial refrigeration sales excluding acquisitions increased 14%.
• Minor pointAnnual cash dividend increased 10% to $13.20 per share in April 2026.
• Minor pointE-commerce sales increased 10% in the third quarter and 12% in the nine-month period.
• Minor pointTrailing-12-month e-commerce sales reached $2.75 billion, representing 37% of revenue.
• Minor pointOnCallAir nine-month gross merchandise value, the value of products sold through the platform, rose 14% to $1.6 billion.
• Minor pointOnCallAir trailing-12-month gross merchandise value increased 14% to $2.0 billion.
• Minor point. Forward-looking: it has not happened yet and may not happen.Non-equipment initiatives launched in 2026 aim to enhance sales and gross margins through sourcing and logistics investments.

Negative

• Moderate pointThird-quarter earnings per share decreased 5% to $3.77.
• Moderate pointThird-quarter operating income decreased 4% to $225 million; operating margin fell to 10.1% from 11.4%.
• Moderate pointDigital platform investment totaled approximately $280 million over five years, with a current annual run rate of approximately $64 million.
• Minor pointThird-quarter gross margin fell to 26.4% from 27.5%; same-store gross margin was 26.5%.
• Minor pointThird-quarter selling, general and administrative expenses increased 8%, including 30 new and acquired locations; same-store expenses rose 5%.

7 minor points

• Minor pointThird-quarter commercial HVAC equipment sales excluding acquisitions declined 5%.
• Minor pointThird-quarter operating cash flow was $325 million versus $355 million last year.
• Minor pointNine-month earnings per share decreased 7% to $9.72.
• Minor pointNine-month operating income decreased 7% to $574 million; operating margin fell to 9.8% from 10.9%.
• Minor pointNine-month gross profit decreased 1% to $1.59 billion; gross margin fell to 27.2% from 28.3%.
• Minor pointNine-month selling, general and administrative expenses increased 4%, including a 2% same-store increase.
• Minor pointNine-month commercial HVAC equipment sales excluding acquisitions declined 4%.

Argus 15 min delay 4 alerts

-7.31% vs previous close $283.00 last price 11.9x rel. volume Open Argus

Details

Market move: WSO -7.31% vs previous close. 3Q26 earnings report

$280.00 – $305.35 Day Range

$11.78B Mkt Cap at Last Price

On Oct 27, the day this news came out, the latest delayed price for WSO is 7.31% below the previous close. Our momentum scanner has recorded 4 alerts for this stock so far that day. The latest delayed price is $283.00. Relative volume is exceptionally heavy at 11.9x the average.

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Key Figures

Third-quarter revenue: Up 7% to a record $2.22 billion Gross profit margin: 26.4% versus 27.5% last year Operating income: Down 4% to $225 million +4 more

Third-quarter revenue

Up 7% to a record $2.22 billion

Third quarter 2026

Gross profit margin

26.4% versus 27.5% last year

Third quarter 2026

Operating income

Down 4% to $225 million

Third quarter 2026

Earnings per share

Down 5% to $3.77

Third quarter 2026

Operating cash flow

Up 79% to $304 million

Nine months ended September 30, 2026

Jackson Supply sales

$78 million, up 16%

Third quarter sales from acquired locations versus the comparable prior-year period

Acquisition scale

107 locations and $730 million in annualized revenue

Jackson Supply and The Granite Group

Historical Context

2 past events · Latest: Oct 22

2 events

1. Oct 22

   Credit facility

   24h Move

   +7.2%

   Five-year $750 million unsecured revolving facility terms were reiterated in the quarterly release.

2. Oct 12

   Acquisition completion

   24h Move

   +2.3%

   Granite acquisition added an 82-location Northeast HVAC and plumbing distributor.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Key Terms

same-store basis, gross merchandise value, non-gaap, hvac/r

4 terms

same-store basis financial

"4% increase on a same-store basis"

A measure of revenue or sales growth that compares performance only for locations or operations that were open in both the current and prior reporting periods, excluding new or closed outlets. It matters to investors because it isolates organic, like-for-like performance from gains driven by opening or buying new locations, giving a clearer view of whether the core business is improving—like comparing how the same set of stores did this year versus last year.

gross merchandise value financial

"The gross merchandise value (GMV) of products sold through OnCallAir"

Total dollar value of all goods and services sold through a marketplace or e-commerce platform during a set period, before deducting fees, returns or costs. Think of it as the total amount rung up at the register across an entire shopping mall: it shows the platform’s sales volume and user activity. Investors watch it to gauge growth and marketplace traction, but must pair it with metrics like revenue share and margins to assess profitability.

non-gaap financial

"Use of Non-GAAP Financial Information"

Non-GAAP refers to financial measures that companies use to show their earnings or performance without including certain expenses or income that are often added back to give a different picture. It matters because it can make a company's results look better or more favorable, but it may also hide important costs, so investors need to look at both GAAP (official rules) and non-GAAP numbers to get a full understanding.

View in glossary

hvac/r technical

"the highly fragmented $74 billion HVAC/R distribution landscape"

HVAC/R stands for Heating, Ventilation, Air Conditioning and Refrigeration — the systems and equipment that control indoor temperature, airflow, humidity and cold storage in buildings and vehicles. For investors, HVAC/R matters because these systems drive predictable revenue and operating costs across construction, real estate, manufacturing and retail: they affect energy bills, maintenance spending, regulatory compliance and the lifespan and value of assets, much like a building’s plumbing or a store’s walk-in fridge.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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Recent Acquisitions, Entrepreneurial Culture, Strong Balance Sheet and Technology Advantage Position Company for Growth

MIAMI, Oct. 27, 2026 (GLOBE NEWSWIRE) -- Watsco, Inc. (NYSE: WSO) announced its operating results for the quarter and nine months ended September 30, 2026.

Watsco is the largest distributor in the highly fragmented North American HVAC/R market. Since entering distribution in 1989, Watsco has achieved a 17% compounded annual total shareholder return through a combination of organic growth, driven by the Company’s industry-leading technology platforms, and the acquisition of 74 market-leading businesses that have expanded scale, density, OEM relationships and customers.

Watsco recently welcomed Jackson Supply Company and The Granite Group to the Watsco family. These legendary companies are expected to bolster annual revenue by approximately 10% and broaden Watsco’s geographic reach, product mix, as well as end-market and customer mix. The Company’s philosophy is to build upon the success and legacies of successful businesses through investments in growth, continuity of leadership and culture, and through Watsco’s equity culture to align and reward long-term growth. As importantly, Jackson Supply and Granite Group expand Watsco’s community of talented leaders and provide future scale benefits to Watsco’s technology platforms. Highlights of the Company’s recent acquisitions include:

• Jackson Supply Company, founded in 1972 with annual sales of approximately $230 million, was acquired in June 2026. Jackson is a diversified HVAC distributor providing HVAC equipment, parts and supplies to approximately 5,000 customers from 25 locations in high-growth Sunbelt markets.
• The Granite Group, founded in 1971 with annual sales of approximately $500 million, was acquired in October 2026. The Granite Group is a large and growing distributor of HVAC and plumbing products serving approximately 11,000 customers from 82 locations in the Northeast. The Granite Group marks the fourth business acquired by Watsco that serves dual-trade HVAC/plumbing contractors (currently 112 locations out of Watsco’s 804 locations offer both HVAC and plumbing products).

Watsco’s balance sheet remains solid, enabling incremental investments in growth and the Company’s industry-leading technology platforms. Today, more than 73,000 contractors and technicians engage with the Company digitally, empowering them to integrate Watsco’s innovations into their daily operations. The Company is also introducing AI-driven initiatives to leverage Watsco’s extensive data assets and enrich the customer experience. The Company believes its technology ecosystem offers a durable and widening competitive advantage. Importantly, digitally-enabled customers continue to outperform broader industry and customer metrics, strengthening Watsco’s leadership position in the highly fragmented $74 billion HVAC/R distribution landscape.

Third Quarter Operating Performance

• Revenues increased 7% to a record $2.22 billion (4% increase on a same-store basis)
• Gross profit increased 3% to a record $586 million
• Gross profit margin of 26.4% (26.5% on a same-store basis) versus 27.5% last year
• SG&A increased 8%, including 30 new and acquired locations (5% increase on a same-store basis)
• Operating income decreased 4% to $225 million (operating margin of 10.1% versus 11.4% last year)
• Earnings per share decreased 5% to $3.77

Third Quarter Sales Trends (excluding acquisitions)

• 5% increase in HVAC equipment sales (67% of sales), reflecting a 7% increase in residential products and a 5% decline in commercial products
• 2% increase in sales of other HVAC products (29% of sales)
• 10% increase in commercial refrigeration products (4% of sales)
  
  

Third quarter sales performance reflects continued stabilization of residential end-markets following the prior year transition to new A2L products. Residential equipment sales grew 7%, including 5% unit growth and a 2% increase in average selling price. Same-store sales growth rates have steadily improved throughout the selling season with further momentum thus far in the fourth quarter. Third quarter sales also reflect $78 million in sales from the acquired locations of Jackson Supply, a 16% increase over the comparable prior-year period.

Third quarter gross margin was impacted by customer mix (larger versus smaller customers), end-market mix (replacement versus residential new construction), the timing and lower magnitude OEM pricing actions in 2026 versus 2025 and the differing growth rate of equipment versus non-equipment products. The Company believes third quarter 2026 gross margin is also more in-line with historical seasonality and year to date gross margin levels are reflective of current market conditions (including more conventional OEM pricing actions). The Company further believes that its ongoing investments in technology, pricing optimization and non-equipment growth are supportive of long-term margin objectives.

Albert H. Nahmad, Chairman and CEO said: “Third quarter results and early fourth quarter sales trends are indicative of continued improvement in end-market demand. We are encouraged to see residential unit volumes return to growth and steadily improve throughout the season. Our technology-enabled customers also continue to outperform the broader contractor community. Looking ahead, Watsco today is a meaningfully larger company, having added 107 locations and $730 million in annualized revenue to our network through the acquisitions of Jackson and Granite. Our long-range objectives for sales, margin and cash flow generation remain fully intact.”

Mr. Nahmad added: “We welcome Jackson Supply and The Granite Group to the Watsco family, both high-performing distributors in their respective markets. Jackson Supply had a terrific quarter as part of Watsco, and we are excited that The Granite Group offers extended opportunities for us to expand into the growing community of HVAC and plumbing contractors. Both are wonderful companies that diversify our product mix, extend our reach and broaden our technology advantage. We look forward to supporting their ambitious growth plans.”

Nine-Month Operating Performance

• Revenues increased 3% to $5.86 billion
• Gross profit decreased 1% to $1.59 billion (gross profit margin of 27.2% versus 28.3% last year)
• SG&A increased 4% (2% increase on a same-store basis)
• Operating income decreased 7% to $574 million (operating margin of 9.8% versus 10.9% last year)
• Earnings per share decreased 7% to $9.72
• Operating cash flow increased 79% to $304 million

Year to Date Sales Trends (excluding acquisitions)

• 2% increase in HVAC equipment sales (67% of sales), reflecting a 4% increase in residential products and a 4% decline in commercial products
• 1% increase in sales of other HVAC products (29% of sales)
• 14% increase in commercial refrigeration products (4% of sales)
  
  

Cash Flow, Dividends, Financial Strength and Liquidity
Operating cash flow increased 79% to $304 million for the nine-month period ended September 30, 2026 ($325 million during the third quarter versus $355 million last year). Watsco’s objective is to maintain a healthy balance sheet and ample liquidity to fund virtually any strategic investment. The Company’s strong financial position has been key to delivering sustained long-term returns and enabling growth investments regardless of macroeconomic or industry conditions. Watsco’s stated goal is to generate annual operating cash flow in excess of net income.

In April 2026, the Company increased its annual cash dividend by 10% to $13.20 per share. Watsco has paid dividends to shareholders for 52 consecutive years. The Company’s philosophy is to share cash flow through dividends while maintaining a conservative balance sheet with continued capacity to build its distribution network. Future changes in dividends are considered in light of investment opportunities, cash flow, general economic conditions and Watsco’s overall financial condition.

In October 2026, Watsco announced that it signed a five-year $750 million unsecured senior revolving credit facility. The terms of the new agreement include increased borrowing capacity, covenant flexibility and greater sensitivity to the seasonal nature of our working capital requirements.

Innovation and Strategic Technology Initiatives
The Company’s continued investment in technology reflects a long-term strategic commitment to building capabilities that strengthen customer relationships, extend the Company’s competitive advantage, improve operating efficiency and support sustainable growth. Watsco has invested approximately $280 million in its digital platforms over the last five years (a current annual run rate of approximately $64 million). The breadth of those investments spans across customer-engagement and internal platforms to increase the speed and efficiency of our locations and emerging AI capabilities that help customers grow and deliver technical know-how quicker.

• Watsco’s HVAC Pro+ Mobile Apps and E-Commerce platform have transformed the customer-experience by providing contractors with a seamless digital experience, including sourcing products, accessing technical help, real-time inventory, pricing, product information and more. These tools empower 24/7 self-service that benefit from advanced analytics, AI, technical knowledge and product recommendations. The result is a frictionless buying experience, increased convenience and higher customer satisfaction, which drives greater loyalty and repeat business with lower costs to serve. E-commerce sales increased 12% during the nine-month period ended September 30, 2026 (10% increase during the third quarter), outpacing overall revenue growth, and reached $2.75 billion for the 12-months ended September 30, 2026 (37% of revenues).
• OnCallAir® is Watsco’s digital sales platform enabling contractors to engage, present and quote solutions to homeowners. The gross merchandise value (GMV) of products sold through OnCallAir® reached $1.6 billion for the nine-months ended September 30, 2026, a 14% increase over the same period last year. For the 12-months ended September 30, 2026, contractors presented approximately 351,000 quotes and generated $2.0 billion GMV, a 14% increase versus the prior comparable 12-month period.
• Watsco’s pricing optimization platform has contributed to the Company’s gross margin performance since its launch in 2020. The platform is designed to manage and optimize the vast number of pricing records across our business. Examples include the sophisticated pricing rules and strategies for specific products, across various geographic markets and for a variety of customer segments. This data-driven approach also enables Watsco to react swiftly to changing market conditions and efficiently administer the multitude of vendor cost changes to sustain market pricing and underlying gross margins.
• Artificial Intelligence (AI) tools are gaining traction to further enhance the customer-experience, drive efficiency and extend our competitive advantage. These tools leverage Watsco’s industry leading data sets around customers, products and vendors that have been curated over the last 15 years. Highlights include:
  • Watsco’s AI platform is anchored by “Ask.Watsco”, an internally focused AI engine designed to enhance productivity, decision-making and customer service. The platform integrates robust HVAC knowledge and streamlines processes for more than 2,700 current internal users. The platform’s rapid adoption and consistent engagement highlight its potential, providing opportunities to achieve efficiency gains and further enhance customer satisfaction at scale.
  • Complementing its internal platform, Watsco has developed “AL.watsco”, a customer-facing AI model that delivers HVAC expertise directly to customers and partners. AL.watsco is trained on Watsco’s extensive pools of data, enabling it to provide accurate, real-time answers and recommendations on a vast array of HVAC products and solutions. The potential is to deliver highly customized, data driven customer service at scale, enhance customer loyalty and engagement and attract new customers to Watsco’s ecosystem.

• SupplySync is an innovative platform targeting the institutional channel for HVAC/R products. In recent years, large institutional customers have emerged, offering an incremental growth opportunity by further leveraging our market-leading scale, product depth, customer-facing technologies and financial strength. Watsco has launched a pilot program for SupplySync, which offers enterprise-wide solutions to institutional customers designed to deliver a seamless experience across sales, marketing, pricing, product assortment and order management. SupplySync is designed to provide a new level of service and expertise to institutional customers in a single platform across multiple markets and product categories.
  
  
• Initiatives to enhance sales of non-equipment products and enhance gross margins were launched in 2026. The Company estimates that 40% of the products sold in the HVAC/R marketplace represent non-equipment products. For the 12 months ended September 30, 2026, Watsco’s non-equipment purchases were approximately $1.7 billion from more than 1,500 vendors (30% of total purchases). Watsco is leveraging its product and pricing data to optimize and streamline sourcing across its supplier network. The Company is also investing in advanced logistics and distribution capabilities designed to improve inventory service levels, improve attachment rates, drive operating efficiency, enhance margins and increase inventory turns.
  
  

A.J. Nahmad, Watsco’s President, added: “We believe that the growth in e-commerce, OnCallAir® and overall digital engagement across our network reflects the value these tools deliver to our customers. We have also progressed nicely with the various initiatives introduced at last year’s investor day, including the formal launch of SupplySync and the early scaling of the other initiatives. Our focus remains on advancing these unique capabilities – with AI enabling better and faster speed to market – in ways that help our customers grow.”

Use of Non-GAAP Financial Information and References to “Unit” Data
In this release, the Company discloses non-GAAP measures on a “same-store basis”, which exclude the effects of locations closed, acquired, or locations opened, in each case during the immediately preceding 12 months, unless such locations are within close geographical proximity to existing locations. The Company believes that this information provides greater comparability regarding its ongoing operating performance. These measures should not be considered an alternative to measurements presented in accordance with U.S. GAAP.

In addition, the Company references “unit” data, a key performance measure, in analyzing its results. For purposes of this analysis, a “unit” is a compressor-bearing air conditioning unit or heat pump (also generally referred to as “outdoor units”), a standard industry convention consistent with data published by the Air-Conditioning Heating and Refrigeration Institute (AHRI). More information is available at www.ahri.org.

Third Quarter Earnings Conference Call Information
Date and time: October 27, 2026 at 10:00 a.m. (EDT)
Webcast: http://investors.watsco.com (a replay will be available on the Company’s website)
Dial-in number: United States (844) 883-3908 / International (412) 317-9254

About Watsco
Watsco is the largest distributor in the highly fragmented North American HVAC/R market. Watsco’s solid financial position and culture of innovation has enabled investments in long-term growth, including the Company’s industry-leading technology platforms. Today, more than 73,000 contractors, installers and technicians engage digitally with the Company, resulting in improved growth and lower attrition. The Company is now advancing AI-driven initiatives to leverage its extensive data assets to enhance the customer experience and improve efficiencies. These investments position Watsco to capture market share as contractors increasingly adopt digital tools and incorporate data-driven solutions in their businesses.

This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may address, among other things, our expected financial and operational results and the related assumptions underlying our expected results. These forward-looking statements are distinguished by use of words such as “will,” “would,” “anticipate,” “expect,” “believe,” “designed,” “plan,” or “intend,” the negative of these terms, and similar references to future periods. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive market, new housing starts and completions, capital spending in commercial construction, consumer spending and debt levels, regulatory and other factors, including, without limitation, the effects of supplier concentration, competitive conditions within Watsco’s industry, the seasonal nature of sales of Watsco’s products, the ability of the Company to expand its business, insurance coverage risks and final GAAP adjustments. Detailed information about these factors and additional important factors can be found in the documents that Watsco files with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements speak only as of the date the statements were made. Watsco assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except as required by applicable law.

WATSCO, INC.
Condensed Consolidated Results of Operations
(In thousands, except share and per share data)
(Unaudited)
		Quarters Ended September 30,						Nine Months Ended September 30,
		2026			2025			2026			2025
Revenues		$	2,220,358		$	2,067,005		$	5,858,227		$	5,660,533
Cost of sales			1,634,071			1,498,090			4,265,456			4,058,507
Gross profit			586,287			568,915			1,592,771			1,602,026
Gross profit margin			26.4%			27.5%			27.2%			28.3%
Selling, general and administrative expenses			370,746			343,655			1,042,583			1,005,237
Other income			9,667			9,502			23,576			22,030
Operating income			225,208			234,762			573,764			618,819
Operating margin			10.1%			11.4%			9.8%			10.9%
Interest income, net			4,596			3,733			14,552			11,479
Income before income taxes			229,804			238,495			588,316			630,298
Income taxes			46,961			49,265			121,230			129,760
Net income			182,843			189,230			467,086			500,538
Less: net income attributable to non-controlling interest			27,474			27,655			69,307			75,289
Net income attributable to Watsco, Inc.		$	155,369		$	161,575		$	397,779		$	425,249
Diluted earnings per share:
Net income attributable to Watsco, Inc. shareholders		$	155,369		$	161,575		$	397,779		$	425,249
Less: distributed and undistributed earnings allocated to restricted common stock			10,197			10,703			26,166			28,109
Earnings allocated to Watsco, Inc. shareholders		$	145,172		$	150,872		$	371,613		$	397,140
Weighted-average Common and Class B common shares and equivalent shares used to calculate diluted earnings per share			38,558,158			37,918,392			38,240,651			37,890,597
Diluted earnings per share for Common and Class B common stock			$3.77			$3.98			$9.72			$10.48

WATSCO, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
	September 30, 2026			December 31, 2025
Cash and cash equivalents	$	498,698		$	433,283
Short-term cash investments		150,000			300,000
Accounts receivable, net		1,008,554			796,181
Inventories, net		1,841,814			1,386,317
Other current assets		51,895			38,725
Total current assets		3,550,961			2,954,506
Property and equipment, net		148,709			136,012
Operating lease right-of-use assets		533,536			452,547
Goodwill, intangibles, net and other		1,000,606			871,740
Total assets	$	5,233,812		$	4,414,805
Accounts payable and accrued expenses	$	1,002,091		$	600,589
Current portion of lease liabilities		124,449			117,153
Total current liabilities		1,126,540			717,742
Operating lease liabilities, net of current portion		429,269			350,616
Deferred income taxes and other liabilities		142,522			124,386
Total liabilities		1,698,331			1,192,744
Watsco, Inc. shareholders' equity		3,029,082			2,781,376
Non-controlling interest		506,399			440,685
Total shareholders' equity		3,535,481			3,222,061
Total liabilities and shareholders' equity	$	5,233,812		$	4,414,805

WATSCO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
	Nine Months Ended September 30,
		2026			2025
Cash flows from operating activities:
Net income	$	467,086		$	500,538
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		33,973			32,680
Non-cash contribution to 401(k) plan		9,267			8,743
Share-based compensation		25,826			26,683
Provision for doubtful accounts		5,274			2,550
Other income from investment in unconsolidated entity		(23,576)			(22,030)
Other, net		5,270			5,639
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(195,892)			(60,234)
Inventories, net		(396,782)			(204,479)
Accounts payable and other liabilities		382,700			(108,318)
Other, net		(9,487)			(11,925)
Net cash provided by operating activities		303,659			169,847
Cash flows from investing activities:
Net proceeds from short-term cash investments		150,000			55,669
Business acquisitions, net of cash acquired		7,663			(19,303)
Capital expenditures, net		(25,616)			(22,887)
Net cash provided by investing activities		132,047			13,479
Cash flows from financing activities:
Dividends on common stock		(392,013)			(352,085)
Distributions to non-controlling interest		-			(69,829)
Proceeds from dividend reinvestment plan		11,388			21,661
Other, net		11,865			12,450
Net cash used in financing activities		(368,760)			(387,803)
Effect of foreign exchange rate changes on cash and cash equivalents		(1,531)			2,554
Net increase (decrease) in cash and cash equivalents		65,415			(201,923)
Cash and cash equivalents at beginning of period		433,283			526,271
Cash and cash equivalents at end of period	$	498,698		$	324,348

Barry S. Logan
Executive Vice President
(305) 714-4102
e-mail: blogan@watsco.com

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were Watsco's third-quarter 2026 revenue and earnings per share?

Watsco reported $2.22 billion in revenue, up 7%, and $3.77 in earnings per share, down 5%. Operating income decreased 4% to $225 million, while gross margin fell to 26.4% from 27.5% last year.

How much revenue are Watsco's Jackson Supply and Granite Group acquisitions expected to add?

Watsco expects Jackson Supply and The Granite Group to bolster annual revenue by approximately 10%. Jackson Supply, acquired in June 2026, has annual sales of approximately $230 million. The Granite Group, acquired in October 2026, has annual sales of approximately $500 million.

Why did Watsco's third-quarter 2026 gross margin decline?

Watsco's gross margin was affected by customer and end-market mix, the timing and lower magnitude of manufacturer pricing actions, and differing equipment and non-equipment growth rates. The company believes the quarter's margin was more consistent with historical seasonality and year-to-date margins reflect current market conditions.