Aaron J. Nahmad
WATSCOAbout Aaron J. Nahmad
Aaron J. (A.J.) Nahmad, 43, is President of Watsco (since 2016), Co‑Vice Chairman of the Board, and a Class B director (since 2011). He joined Watsco in 2005 and holds a B.A. from the University of Pennsylvania and an M.B.A. from NYU Stern . Under his leadership, Watsco built a 300‑person technology organization and scaled industry‑leading digital platforms that improved customer experience and operating efficiency . Company performance in 2024: record sales of $7.62B, EPS $13.30, operating cash flow $773M, and one‑year TSR of 13%; long‑term TSR outperformance vs the S&P 500 across 5–30 year horizons underscores the company’s shareholder‑value focus .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Watsco | President | 2016–present | Leads operations and technology/digital transformation; scaled ~300 technologists and modernized customer/operational processes . |
| Watsco | Director (Class B) | 2011–present (term expires 2027) | Board leadership; succession planning; Co‑Vice Chairman and Strategy Committee member . |
| Watsco | Various roles | 2005–2016 | Progressive leadership culminating in presidency; contributed to digital platforms and market share gains . |
External Roles
| Organization | Role | Years | Strategic Impact / Notes |
|---|---|---|---|
| Albert H. & Jane D. Nahmad Foundation | Board member (shares voting power) | Ongoing | Family foundation; holds WSO shares; A.J. shares voting power on the foundation’s holdings . |
Board Governance & Director Service
- Status and roles: Co‑Vice Chairman of the Board; Class B director since 2011; member, Strategy Committee .
- Independence: Not independent; Watsco is a NYSE “controlled company” with the Chairman/CEO, President, and a family director controlling 53.6% of combined voting power as of the 2025 record date .
- Independent oversight: Board maintains a majority of independent directors and fully independent Compensation and Nominating & Governance Committees; Lead Independent Director is J. Michael Custer .
- Attendance: In 2024, directors attended 100% of Board and committee meetings .
- Director pay: Management directors receive no compensation for Board service .
Dual‑role implications: A.J. Nahmad’s dual capacity (President + Co‑Vice Chairman) and family control may raise independence concerns. Mitigants include a majority‑independent Board, independent key committees, and a designated Lead Independent Director overseeing agendas, executive sessions, and shareholder communications .
Fixed Compensation
| Year | Base Salary ($) | Change vs Prior Year |
|---|---|---|
| 2024 | 600,000 | — |
| 2023 | 600,000 | — |
| 2022 | 600,000 | — |
Notes: No traditional annual cash bonus program disclosed for the President; “Non‑Equity Incentive Plan Compensation” reflects cash paid in lieu of fractional shares (e.g., $756 in 2024) rather than a cash bonus .
Performance Compensation
Watsco concentrates NEO incentives in long‑dated restricted Class B stock with retirement‑age cliff‑vesting, augmented by formulaic annual and three‑year share‑price/EPS tests; RSUs convert into restricted stock upon multi‑year stock price targets and then vest at retirement date (2043 for the President) .
2024 Incentive Design (President)
| Component | Metric | Target/Threshold | Actual | Payout | Vesting |
|---|---|---|---|---|---|
| Long‑Term Incentive – EPS Growth | EPS YoY change | No award if 2024 EPS ≤ $13.67; $43,500 value per $0.01 EPS growth if EPS < $14.35; $65,000 per $0.01 if ≥ $14.35 | $13.30 EPS | $0 from EPS factor | n/a (factored into total) |
| Long‑Term Incentive – Stock Price Growth | Dec 31 share price vs prior year | No award if ≤ $428.47; $1,200 value per $0.01 increase if < $514.16; $1,800 per $0.01 if ≥ $514.16 | $473.89 | Contributed to ~$5.5M gross value for 2024 award | See split below |
| Current‑Year Performance Award | Formula above | As above | As above | $4.1M; 8,698 restricted Class B shares; $175 cash for fractional share | Cliff‑vest Oct 17, 2043 |
| Three‑Year Performance Award (2024 RSUs) | Avg annual share‑price increase (2024–2026) | 0%→0% convert; 10%→100%; 20%→200% | In progress | ~$1.4M RSUs at grant (potentially 0–200% convert) | Converted shares vest Oct 17, 2043 |
| Operating Performance Award (2024) | 5 operational criteria | Max $450,000 across: inventory turns >4.0x; organic growth >0%; parts & supplies growth >0%; freight % down; cash flow > net income | Met 3 of 5: inventory 3.5x; organic +3%; parts & supplies −2%; freight improved; CFO>NI | $269,621; 569 restricted Class B shares; $379 cash for fractional share | Cliff‑vest Oct 17, 2043 |
Additional RSU conversion: 2022 Three‑Year Performance Award converted at 200% based on 21% 3‑yr average stock‑price growth, issuing 10,639 restricted Class B shares in 2024 (vesting Oct 17, 2043) .
Summary of 2024 Awards
| Item | Amount ($) |
|---|---|
| 2024 Current‑Year Performance Award (shares) | 4,087,625 |
| 2024 Operating Performance Award (shares) | 269,621 |
| Total related to 2024 performance | 4,357,246 |
| 2022 Three‑Year Performance Award (converted in 2024) | 4,999,798 |
| Total cumulative awards recognized in 2024 | 9,357,044 |
Multi‑Year Compensation (Summary Compensation Table – A.J. Nahmad)
| Year | Salary ($) | Restricted Stock Awards ($) | Non‑Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) |
|---|---|---|---|---|---|
| 2024 | 600,000 | 9,357,044 | 756 | 15,125 | 9,972,925 |
| 2023 | 600,000 | 12,499,848 | 152 | 14,750 | 13,114,750 |
| 2022 | 600,000 | 9,999,752 | 248 | 7,625 | 10,807,625 |
Notes: Restricted stock awards are shown at grant‑date fair value per GAAP; actual economic value depends on long‑dated vesting and future performance/stock price; vesting for President’s awards is October 17, 2043 absent death, disability, or change in control acceleration .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership (Common) | 4,553 shares; includes 1,494 shares owned by the family foundation (shared voting power), 1,408 direct, 1,150 spouse, 501 via 401(k) . |
| Beneficial ownership (Class B) | 530,635 shares (9.5% of Class B); includes 292,038 restricted shares, 174,360 via the family foundation, 64,237 direct . |
| Combined voting power | 5.8% (across matters voted on a combined basis) . |
| Unvested restricted stock outstanding | 272,132 shares; market value $145,590,620 at 12/31/2024 . |
| RSUs at maximum (unearned) | $10,000,000 potential from 2023 & 2024 Three‑Year Performance Awards (subject to stock price tests) . |
| Options | None outstanding for NEOs; equity is in restricted stock/RSUs . |
| Ownership guidelines | NEOs must hold stock ≥ 5x base salary; all NEOs and directors were in compliance as of 12/31/2024 . |
| Hedging/pledging | Prohibited for directors and NEOs (reduces alignment and collateralization risk) . |
Employment Terms
- Employment agreement: None for the President; only the Chairman & CEO has an employment agreement .
- Severance: No severance agreements for NEOs (other than CEO’s termination provisions) .
- Change‑of‑control: Restricted stock vests upon change in control, death, or disability; estimated acceleration value for A.J. Nahmad at 12/31/2024 was $156,240,330, with $55,987,275 of unrecognized share‑based expense recognized upon acceleration (values based on WSO $473.89 and WSOB $535.00) .
- Clawback: Executive clawback policy applies to incentive/equity compensation in the event of material restatement or misconduct .
- Perquisites/Pensions: No significant perquisites, no defined benefit/SERP programs; standard employee benefits apply .
- Say‑on‑pay: In 2024, 49% of Common shareholders and 91% of combined votes cast supported NEO pay; next advisory vote is June 2, 2025 .
Performance & Track Record
- Strategic impact: A.J. led Watsco’s technology push (apps, ecommerce, analytics) with ~300 technologists, driving market share gains and process modernization .
- 2024 operating results: Record sales $7.62B, EPS $13.30, operating cash flow $773M, dividends +11%, debt‑free with >$700M cash/short‑term investments, one‑year TSR 13% .
- Long‑term performance context: Watsco’s compounded annual TSR has exceeded the S&P 500 across 5‑, 10‑, 15‑, 20‑, 25‑, and 30‑year periods (e.g., 5‑yr: 25.0% vs 14.5%) .
Company Financials (context for pay‑for‑performance)
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Revenues ($) | 7,274,344,000* | 7,283,767,000* | 7,618,317,000* |
| Operating Income ($) | 809,824,000* | 771,424,000* | 748,042,000* |
| EBITDA ($) | 841,507,000* | 806,514,000* | 788,864,000* |
| Net Income ($) | 601,167,000* | 536,337,000* | 536,286,000* |
| Cash from Operations ($) | 571,964,000* | 561,954,000* | 773,102,000* |
*Values retrieved from S&P Global.
Compensation Committee & Benchmarking
- Committee composition: Independent directors Denise Dickins (Chair), Ana Lopez‑Blazquez, Gary L. Tapella .
- Independent advisor: Pearl Meyer provides market data and comparator analyses; independence assessed annually .
- Design features: Majority of compensation as long‑dated restricted stock (President’s 2024 vest in 2043), no options or short‑term cash plans; no backdating/repricing; ownership requirements; risk assessment conducted annually .
Related Party & Governance Notes
- Controlled company: Nahmad family collectively controls voting power; Board nonetheless maintains majority independence and independent committees .
- Related party transactions: Audit Committee pre‑approved ~$279,000 paid to Greenberg Traurig in 2024 (director Cesar Alvarez is Senior Chairman); Alvarez had no material interest in the payments .
- Policies: Formal insider trading policy; hedging/pledging prohibited; minimum director ownership ≥$100k; NEO ownership ≥5x salary .
Investment Implications
- Alignment and retention: Extremely long‑dated vesting (2043) and significant unvested holdings (272k+ shares) tightly align A.J. with long‑term TSR and reduce near‑term selling pressure; hedging/pledging prohibitions further support alignment .
- Incentive sensitivity: Annual awards are formulaically tied to EPS and stock price; 2024 EPS shortfall zeroed that factor, but stock price growth funded ~$5.5M gross award, emphasizing share‑price momentum’s role in realized grant size .
- Supply overhang risk: Change‑of‑control triggers immediate vesting, with ~$156M of value for A.J. at 12/31/2024, implying a potential liquidity event in a transaction scenario; otherwise, long cliffs defer supply until 2043 .
- Governance watch‑items: Dual family leadership and controlled structure present independence optics; 2024 say‑on‑pay approval among Common shareholders was 49% (though 91% combined), signaling possible discontent among one share class despite overall support .
- Operating execution: Digital initiatives and disciplined cash generation underpin record cash flow and sustained TSR outperformance; monitoring organic growth, mix (parts & supplies), and inventory turns ties directly to A.J.’s operating awards and future RSU conversions .