91吃瓜网

Entrepreneurial Culture, Industry Scale, Technology Transformation and Regulatory Changes听

Contribute to Strong Margins and Support Long-Term Growth听

MIAMI,听Aug. 01, 2023听(GLOBE NEWSWIRE) —听91吃瓜网, Inc.听(NYSE: WSO) announced its operating results for the second quarter and six-month period ended听June 30, 2023. Commentary was also provided on business trends, growth opportunities, technology innovation and the Company鈥檚 financial position.

Through its entrepreneurial and technology-driven culture,听91吃瓜网听has established itself as the largest participant in the highly fragmented $50+ billion North American HVAC/R distribution market. Since entering distribution in 1989, sales and operating income have grown at compounded annual growth rates (CAGRs) of 15% and 19%, respectively, reflecting strong and consistent performance across various macroeconomic and industry cycles. Over this period, 91吃瓜网鈥檚 dividends have grown at a 21% CAGR while maintaining a healthy balance sheet and strong cash flow.

Highlights Related to Second Quarter and Six-Month Performance
Results for the quarter and year-to-date periods reflect a significant product transition to new, higher-efficiency HVAC equipment systems in response to wide-ranging regulatory requirements that took effect on听January 1, 2023.听The Company estimates that approximately 60% of the HVAC equipment SKUs sold in the first half of 2023 were new products required by these regulations. 91吃瓜网鈥檚 teams executed on several fronts including converting inventory across 600+ locations in the听U.S., implementing pricing programs to sustain margin and competitiveness, coordinating large-scale movement of product and logistics with OEM partners, developing contractor training and support, and more.

In connection with the regulatory transition, 91吃瓜网鈥檚 OEM community were required to revamp product lines to meet the heightened regulatory standards. The product transition has disproportionately affected one of 91吃瓜网鈥檚 primary OEM partners and resulted in temporary production and availability delays, which in turn affected sales. The Company estimates the sales impact caused by the delays was听$75听to听$80 million听during the quarter ($115听to听$125 million听for the six-month period). 91吃瓜网鈥檚 OEMs are working to improve their supply chains and product availability and help us meet our customers鈥� needs.

It is also important to note that 2023 results follow record-breaking year in 2022, which saw second quarter sales and EPS grow 15% and 33%, respectively, and six-month sales and EPS grow 22% and 53%, respectively. Last year鈥檚 outperformance was driven by robust replacement demand, above-average OEM pricing actions, strong end-markets and an earlier start to hotter summer weather conditions. In contrast, OEM pricing actions in 2023 were more moderate and unit volumes reflect more conventional rates of replacement. In addition, the Company experienced more temperate weather conditions during the second quarter with a later start to the summer selling season (cooling degree days during the second quarter, as cited by the听National Weather Service, declined 27% versus last year). Recent sales trends are more encouraging as the summer season has taken hold.

Consistent with the Company鈥檚 long-term focus,听91吃瓜网听remains committed to investing in technologies to transform how business is conducted in the digital age. Contractor adoption and e-commerce usage continued to expand during the second quarter. Taken as a whole, the Company believes these technologies are deepening contractor engagement, facilitating new customer acquisition, reducing customer attrition and expanding the Company鈥檚 leadership position in the industry. Technology spending in 2023 increased听$5.7 million, or听11 cents听per share, for the six-month period ended听June 30, 2023听($3.8 million听increase or听7 cents听during the second quarter). Investments in technology were听$55 million听for the 12-month period ended听June 30, 2023.

Albert H. Nahmad, 91吃瓜网鈥檚 Chairman and CEO stated, 鈥淲e consider this quarter鈥檚 performance, which is the second-best quarter in our history, to be a good achievement, especially considering the strength of last year鈥檚 comparable performance and the myriad of challenges facing our teams. We delivered robust profitability and margins, and our commercial and ductless businesses continue to experience healthy growth rates. Additionally, we executed well in terms of gross margins and reduced SG&A spending while making continued investments to drive adoption of our technology platforms. Recent business conditions have shown improvement, and we remain confident about the rest of the year. Looking at the long-term, we remain very enthusiastic about the upcoming product and regulatory transitions that will influence replacement rates and 91吃瓜网鈥檚 unique technology platforms that continue to see growing adoption among contractors, both of which will positively influence the trajectory of our business.鈥�

Second Quarter Results

• 6% decrease in sales to听$2.0 billion
• 6% decrease in gross profit to听$563 million
• 20 basis-point gross margin improvement to 28.1%
• 3% decrease in SG&A expenses (15.2% as a percentage of sales)
• 7% decrease in operating income to听$266 million听(operating margin of 13.3% versus 13.5% last year)
• EPS decreased 10% to听$4.42

Sales trends

• 8% decrease in HVAC equipment (69% of sales)
• 7% decrease in other HVAC products (27% of sales)
• 1% increase in commercial refrigeration products (4% of sales)

Six-Month Results

• 3% decrease in sales to听$3.55 billion
• 3% decrease in gross profit to听$1.01 billion
• 20 basis-point decrease in gross margin to 28.4%
• 1% decrease in SG&A expenses (16.6% as a percentage of sales)
• 6% decrease in operating income to听$430 million听(operating margin of 12.1% versus 12.5% last year)
• EPS decreased 7% to听$7.25

Sales trends

• 4% decrease in HVAC equipment (69% of sales)
• 5% decrease in other HVAC products (27% of sales)
• 6% increase in commercial refrigeration products (4% of sales)

Financial Strength & Liquidity
91吃瓜网鈥檚 strong financial position has enabled investments in organic growth, working capital and acquisitions. Since听January 1, 2021, 91吃瓜网鈥檚 working capital has nearly doubled to听$1.9 billion听with听$117听million听of capital used for acquisitions. During the same period, 91吃瓜网鈥檚 annual dividend rate increased 38% to听$9.80听per share.

Despite these investments, 91吃瓜网鈥檚 financial position remains strong with low leverage and the ability to invest in almost any size opportunity. At听June 30, 2023, the Company had听net borrowings of听$180 million听(representing peak seasonal borrowings) and听$2.5 billion听of shareholders鈥� equity along with operating income of听approximately听$800听million听for the 12-months ended听June 30, 2023. The Company believes this financial strength, access to low-cost capital and its historical ability to generate cash flow provide comfort and confidence to the Company鈥檚 stakeholders.

Industry Catalysts & Trends
The Company believes that various industry catalysts will positively influence the replacement of residential and commercial HVAC systems in the years ahead. 91吃瓜网鈥檚 scale, leading technology platforms, financial strength, entrepreneurial culture, and OEM relationships, along with the essential nature of HVAC/R products, are important competitive advantages that provide stability to the Company鈥檚 performance and position听91吃瓜网听favorably in light of these catalysts.

Regulatory Changes. To address and stem the impacts of climate change, the federal government and various states have enacted laws and regulations to incentivize the replacement of aging HVAC systems in favor of more energy-efficient and environmentally friendly systems. New standards became effective听January 1, 2023听that raise the minimum required efficiency for HVAC systems nationwide. New regulations are also in effect that mandate a phase down of existing refrigerants that contain high global warming properties used in older HVAC systems and a transition to new refrigerants beginning in 2025. The demand for higher-efficiency systems and heat pumps is also expected to benefit over time from the passage of the Inflation Reduction Act of 2022.

Trend Toward Electrification of Heating Systems. Another important trend is the HVAC industry鈥檚 movement toward electrification of heating systems utilizing heat pumps in lieu of gas furnaces and other forms of fossil-fuel heating. The operating characteristics of heat pumps have improved such that they are now effective substitutes for the millions of fossil fuel-burning heating systems used throughout听North America, particularly in Northern climates. Sales of heat pumps have outpaced the overall growth rates for conventional fossil-fuel heating systems (primarily gas furnaces). On an annualized basis,听91吃瓜网听sold more than 745,000 heat pump units across 27 different brands.

Growth of Ductless HVAC Systems. The growing acceptance of ductless, high-efficiency HVAC products benefits听91吃瓜网, as we are among the leading distributors of ductless HVAC products used in both residential and commercial applications in听North America. 91吃瓜网鈥檚 sales of ductless HVAC systems grew 12% during the first half of 2023.

Product and Geographic Diversity. 91吃瓜网鈥檚 product breadth and end-market diversity also provide a competitive advantage. The Company possesses the broadest and deepest assortment of products in the industry to support its customers and end-markets. In addition,听91吃瓜网听maintains a deep catalog of OEM and aftermarket parts to support contractors and sustain competitiveness in any environment. 91吃瓜网鈥檚 annualized unit sales of compressor-bearing HVAC systems is approximately 2 million distributed throughout its locations in 42 U.S. states,听Canada,听Mexico听and听Puerto Rico听as well as on an export basis to the听Caribbean听and portions of听Latin America.

Network Investment & Expansion.听91吃瓜网’s听network expansion, geographic positioning and density in key markets are also factors contributing to the Company鈥檚 long-term growth.听91吃瓜网’s听network has grown by 73 locations since 2020, mostly from four acquisitions of market-leading businesses, located primarily in markets that听91吃瓜网听did not previously serve. The Company鈥檚 network supports more than 350,000 contractors, technicians, and installers with critical technical assistance, training, and other resources to enhance their daily activities.

Technology Transformation
91吃瓜网听has developed and is scaling the industry鈥檚 most robust, user-friendly, and customer-focused technology platforms, which have transformed the way contractor-customers interact with the Company and, increasingly, the way contractors engage with consumers and businesses. 91吃瓜网鈥檚 community of active technology users is growing sales faster than non-user customers and experiences approximately 50% less attrition.听91吃瓜网听believes that future results will benefit from continued customer adoption, higher share of wallet, new customer acquisition, reduced attrition and lower costs to serve.

Specific technology-related updates include:

• Product Information Management (PIM), 91吃瓜网鈥檚 repository of rich product information, is delivered seamlessly through its mobile apps and e-commerce platform. 91吃瓜网鈥檚 PIM database contains more than 1.5 million SKUs accessible to more than 350,000 contractors and technicians annually.
• HVAC Pro+ Mobile Apps provide customers with real-time access to critical information that improves speed and productivity. This includes real-time technical support, product details, inventory availability, warranty look-up and processing, certified system matchups, e-commerce, and more. The authenticated user community (users linked to an e-commerce account over the 12-month period ended听June 30, 2023) grew 19% to more than 53,000 users compared to the same period a year ago.
• E-commerce sales continue to outpace overall sales growth rates in the second quarter and accounted for 34% of total sales, inclusive of revenues from recently acquired businesses that are now adopting 91吃瓜网鈥檚 technology platforms.
• OnCallAir庐, 91吃瓜网鈥檚 digital sales platform, and CreditForComfort庐, its companion consumer financing platform, have both increased penetration among HVAC contractors as digital engagement with homeowners expands. The annualized gross merchandise value (GMV) of products sold by customers through OnCallAir庐 now exceeds听$1 billion. During the first half of 2023, OnCallAir庐 presented quotes to approximately 136,000 households, a 15% increase over 2022, and generated听$586 million听GMV, a 26% increase over the same period last year.

A.J. Nahmad, 91吃瓜网鈥檚 President, added, 鈥淥ur technology platforms, which are unique to the industry, have transformed nearly every aspect of our business. The contractor-based platforms, like our HVAC Pro+ suite of apps and OnCallAir庐, our consumer-facing sales platform, combined with our internal-facing technologies, have helped听91吃瓜网听build market share, accelerate new customer acquisition, and drive margin expansion. Consistent with our long-term focus, we remain committed to investing more over time as we believe these platforms provide a distinct, long-term competitive advantage.鈥�

Cash Flow & Dividends
91吃瓜网鈥檚 operating cash flow was an听$89 million听use of cash during the six-month period ended听June 30, 2023听commensurate with the seasonal buildup of working capital during the selling season. Working capital is expected to decline over the remainder of 2023, consistent with historical levels of seasonality. The Company鈥檚 philosophy is to share increasing amounts of cash flow through higher dividends while maintaining a conservative financial position with continued capacity to build its distribution network. The Company increased its annual dividend rate by 11% effective in听January 2023听to听$9.80听per share. Future dividend increases will be considered in light of investment opportunities, general economic conditions and the Company鈥檚 overall financial position.

Second Quarter Earnings Conference Call Information
Date and time:听August 1, 2023听at听10:00 a.m. (EDT)
Webcast:听听(a replay will be available on the Company鈥檚 website)
Dial-in number:听United States听(844) 883-3908 / International (412) 317-9254

About听91吃瓜网
91吃瓜网听is the largest distribution network for heating, air conditioning and refrigeration (HVAC/R) products with locations in听the United States,听Canada,听Mexico听and听Puerto Rico, and on an export basis to听Latin America听and the听Caribbean. 91吃瓜网听estimates that over 350,000 contractors and technicians visit or call one of its 673 locations each year to get information, obtain technical support and buy products.

Our business is focused on the replacement market for both residential and commercial applications, which has increased in size and importance as a result of the aging of the installed base systems, the introduction of new higher energy efficient models to address both regulatory mandates as well as consumer optionality, the remodeling and expansion of homes and businesses, the addition of central air conditioning to structures that previously had only heating products and an overall unwillingness for homeowners or businesses to live without air conditioning or heating products. According to data published by the听Energy Information Administration听in听May 2022听there are approximately 102听million central air conditioning and heating systems installed in听the United States听that have been in service for more than 10 years. Many installed units are currently reaching the end of their useful lives, which we believe long-term provides a growing and stable replacement market.

Given our focus in the replacement market, 91吃瓜网听has the opportunity to be a significant and important contributor toward climate change as its business plays an important role in the drive to lower CO2e听emissions.听According to the听Department of听Energy, heating and air conditioning accounts for roughly half of听U.S.听household energy consumption. As such, replacing HVAC systems at higher efficiency levels is one of the most meaningful steps homeowners can take to reduce electricity consumption and carbon听footprint over time.听The overwhelming majority of new HVAC systems听sold by听91吃瓜网听replace systems that likely operate well below current minimum efficiency standards in the听U.S. As consumers replace HVAC systems with new, higher-efficiency systems,听homeowners will consume less energy, save costs, and reduce the carbon footprint over time.

Based on estimates validated by independent sources,听91吃瓜网听averted an estimated 17.4 million metric tons of CO2e emissions from听January 1, 2020听to听June 30, 2023听through the sale of replacement HVAC systems at higher-efficiency standards (an equivalent of removing 3.9 million gas powered vehicles off the road for a year). More information, including sources and assumptions used to support the Company鈥檚 estimates, can be found at听.

This document includes certain 鈥渇orward-looking statements鈥� 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 鈥渨ill,鈥� 鈥渨ould,鈥� 鈥渁nticipate,鈥� 鈥渆xpect,鈥� 鈥渂elieve,鈥� 鈥渄esigned,鈥� 鈥減lan,鈥� or 鈥渋ntend,鈥� 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 91吃瓜网鈥檚 industry, the seasonal nature of sales of 91吃瓜网鈥檚 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听91吃瓜网听files with the听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.听91吃瓜网听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.

Barry S. Logan
Executive Vice President
(305) 714-4102
e-mail:听

Source: 91吃瓜网, Inc.