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    WSO
    Earnings call· Mar 2026(Q1 FY26)

    WATSCO Q1 FY26 earnings call WSO

    Apr 28, 2026 Source

    Executive summary

    Watsco Q1 FY26 — Stability Returns, Jackson Supply Acquisition, and E-commerce Growth

    Watsco reported a Q1 FY26 marked by improving stability following the A2L product transition, with U.S. sales up 2% despite lower unit volumes that stabilized by quarter-end. The company announced the strategic acquisition of Jackson Supply, expanding its Sunbelt presence. Significant investments in technology, particularly e-commerce and OnCall Air, continue to drive growth and efficiency, with management expressing optimism for a more normalized operating environment ahead.

    Highlights

    5

    • Sales increased 2% in the U.S. markets in Q1 FY26.

    • E-commerce sales increased 16% during the quarter, outpacing overall growth rates.

    • OnCall Air customer sales increased 20%, with gross merchandise value expected to exceed $2 billion this year.

    • The acquisition of Jackson Supply adds $230 million in annual sales and 25 locations, expanding Sunbelt presence.

    • The company maintains a strong, debt-free balance sheet.

    Concerns

    2

    • Unit sales were lower in Q1 FY26, though stabilizing as the quarter progressed.

    • The market is not yet fully healed, with management expressing caution despite positive momentum in March and April.

    Guidance & targets

    5
    CategoryTargetConfidence
    OnCall Air gross merchandise value
    exceed $2 billion
    medium materiality
    High
    Gross profit margin
    achieving 30%
    high materiality
    Medium
    Inventory investment
    reduce
    medium materiality
    High
    Inventory turns
    increase
    medium materiality
    High
    OEM price increases
    believe they will raise their prices
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    U.S. markets
    Reflecting a mature mix of A2L products and improved mix of high-efficiency systems, offset by lower unit sales.
    		—2%——
    Florida
    Revenue for one of our subsidiaries, with almost 70% of its sales processed through e-commerce tools.
    		$800M———

    Operational metrics

    11
    E-commerce sales growth
    16%YoY
    Q1 FY26

    Outpacing overall growth rates.

    OnCall Air customer sales growth
    20%YoY
    Q1 FY26

    Reflecting a rich sales mix of high visit systems.

    SG&A expense
    flatYoY
    Q1 FY26

    Improved operational efficiency offset incremental technology investments and new locations.

    Parts and supply segment market share
    almost 50%
    current

    New initiative launched to compete in gross sales in this highly fragmented segment.

    A2L product mix
    about 25%
    Q1 last year

    Mix of A2L products in the first quarter of last year.

    A2L product mix
    about 60%
    Q2 last year

    Mix of A2L products in the second quarter of last year.

    Parts sales as % of Watsco revenue
    less than 10%
    current

    Analytically stated to provide context for non-equipment sales.

    Non-equipment sales as % of Watsco revenue
    30%
    current

    Analytically stated, with parts sales being a minority of this category.

    Non-equipment sales growth
    broad-based growth
    Q1 FY26

    Includes supplies, plumbing business, and commercial refrigeration.

    Inventory units
    less unitsYoY
    end of March

    Despite an increase in dollar value of inventory, the actual number of units held was lower due to higher A2L product pricing.

    E-commerce line items per invoice
    more line itemsvs off-line
    current

    Indicates a winning formula to sell more products online.

    Industry KPIs

    2
    MetricValueDetails
    Daily sales ratehigh single-digit growth%
    Digital vending managed inventory penetration16%%

    Deals & partnerships

    1
    Jackson SupplyMarket-leading Sunbelt distributor$230 million in annual sales

    The owner and talented leadership team will remain with the company. Relationship with Jackson dates back over 20 years.

    Risks & headwinds

    4
    Lower unit sales volumeQ1 FY26

    Lower in Q1 FY26

    Mitigation: Unit volumes stabilized as the quarter progressed, with high single-digit growth in March and April.

    Market not fully healedNear-term

    Market not yet fully healed

    Mitigation: Management expects a more simplified business environment and is seeing incrementally more stability.

    Tariff-driven OEM price increasesNear-term (Q2 FY26)

    Expected price increases

    Mitigation: Watsco's advanced pricing optimization tools and ability to consolidate purchases help manage gross margins.

    Past regulatory changes causing market disruptionPast 5 years

    Almost 100% of equipment sold twice due to regulatory changes

    Mitigation: Most regulatory-driven changes are now behind the company, leading to a more normalized environment.

    What to watch in Q2 FY26

    5

    Unit Volume Growth

    Q2 FY26
    Currenthigh single-digit growth (March/April)
    TargetSustained positive growth, market fully healed

    Why it matters

    Indicates true demand recovery and normalization of the market post-A2L transition.

    And so far, 3 weeks into April, I can tell you that, that momentum has sustained itself, and we are seeing incrementally more stability in April than we did to start the year.

    Q&A highlights

    5

    Can you elaborate on the improved stability heading into summer and confirm if April is showing positive year-over-year growth?

    Management confirmed that March exited with high single-digit growth on a same-day basis, and this momentum has sustained into April, indicating incrementally more stability. They noted that the A2L product transition has matured, leading to a less complex environment.

    “And so far, 3 weeks into April, I can tell you that, that momentum has sustained itself, and we are seeing incrementally more stability in April than we did to start the year.”

    asked by Ryan Merkel · answered by Rick Gomez

    2 min read5 chapters

    Detailed Narrative

    01

    A2L Transition and Market Stability

    The first quarter of FY26 marked the full maturity of the A2L product transition, contributing to improved market stability. While unit volumes were initially lower, they showed incremental improvement as the quarter progressed, with March exiting at high single-digit growth on a same-day basis. This momentum continued into April, signaling a less complex operating environment compared to the past five years, which saw extreme demand, supply chain challenges🌐, and regulatory changes impacting almost 100% of equipment sold twice.

    02

    Strategic Acquisition of Jackson Supply

    Watsco announced an agreement to acquire Jackson Supply, a market-leading Sunbelt distributor with $230 million in annual sales. This acquisition will expand Watsco's Sunbelt presence by 25 locations and diversify its brand and product offerings, particularly in parts and supplies. The entrepreneurial leadership team of Jackson Supply will remain with the company, and the transaction is expected to close in the second quarter of FY26.

    03

    Technology and Digital Platform Expansion

    The company continues to build and expand its technology platforms, which are seen as immense long-term competitive advantages. E-commerce sales increased 16% during the quarter, outpacing overall growth. OnCall Air, a digital platform assisting contractors, saw customer sales grow 20%, with its gross merchandise value projected to exceed $2 billion in FY26. These tools enhance customer experience, improve operating efficiency, and drive data-driven growth strategies.

    04

    Gross Margin and Operating Efficiency Initiatives

    Watsco maintained gross margins in Q1 FY26 and is actively pursuing initiatives to achieve a long-term target of 30%. SG&A remained flat due to improved operational efficiency offsetting investments in technology and new locations. The company is accelerating the use of pricing optimization tools and has launched a new initiative to increase sales in the highly fragmented parts and supply segment, which comprises almost 50% of the market share.

    05

    Balance Sheet Strength and Capital Allocation

    Watsco emphasized its strong, debt-free balance sheet, which provides flexibility for continued investment in innovation, technology, and strategic acquisitions. Management expects to reduce inventory investment and improve inventory turns throughout the year, contributing to cash flow. The supply chain is noted to be more stable, allowing for better inventory management and product availability.

    AI-generated summary of the company’s earnings call. Not investment advice.