Steve Toussaint

Steve Toussaint asked about the activity and volumes seen by Watsco's contractor customers, including the potential for contractors holding inventory. He also inquired about the size and growth of the institutional channel (mega contractors/consolidators) and any observed OEM discounting or rebate activity.

Answer

Aaron J. Nahmad (President, Watsco Inc) noted varied contractor performance across regions, while Paul Johnston (EVP, Watsco Inc) stated that significant contractor inventory is unlikely for most. Barry Logan (Senior VP, Watsco Inc) estimated the institutional channel is under 10% of the market but growing, with Watsco developing a single solution for their fragmented buying. Albert Nahmad (Chairman and CEO, Watsco Inc) stated that any OEM discounting or rebate activity observed is not material.

Steve Toussaint asked about contractor sentiment regarding their volumes and if there was significant contractor inventory. He also inquired about the size and growth of the institutional channel (large contractors/consolidators) as a percentage of the market. He asked if Watsco was observing any late-season rebate activity or discounting from OEMs. In a follow-up, he asked if this year's abnormally low demand would likely bounce back next year, or if visibility was too low to call.

Answer

Paul Johnston (EVP, Watsco Inc) noted that only very large contractors might have meaningful inventory, and contractor experiences are 'all over the map.' Aaron J. Nahmad (President, Watsco Inc) confirmed there's no single story across Watsco's 100,000 customers. Barry Logan (Senior VP, Watsco Inc) highlighted that contractor credit quality (accounts receivable over 90 days past due) is very high at 1.2%, indicating financial health. Barry Logan (Senior VP, Watsco Inc) estimated the institutional channel (mega contractors) is under 10% of the market but growing, and Watsco is developing a single solution for their fragmented buying. Albert Nahmad (Chairman and CEO, Watsco Inc) and Paul Johnston (EVP, Watsco Inc) stated any OEM discounting is 'not material.' Albert Nahmad (Chairman and CEO, Watsco Inc) acknowledged this year's demand is 'unusual' and hopes for 'normal' next year but emphasized Watsco's focus on getting stronger, innovating technology, and increasing cash for M&A regardless of demand.