Watsco (WSO) The 44th Annual William Blair Growth Stock Conference summary

Market position and industry overview

• Holds 12% market share in a $60 billion, highly fragmented North American HVAC distribution market, operating over 670 locations and serving 350,000 contractors.

• Achieved $7.5 billion in annual revenue, with significant presence in the Sun Belt and Southeast, especially Florida.

• Growth strategy includes entering new markets, such as Chicago, and targeting family-owned businesses for acquisitions.

• Completed 65-70 acquisitions over 30 years, maintaining acquired brands and cultures.

• Industry barriers include contractor licensing and OEM approval for distribution rights, limiting disruptability.

Technology and innovation

• Invested heavily in proprietary technology, building a unique product information database with over 1 million SKUs.

• About one-third of business now flows through digital platforms, with 55,000 customers using e-commerce and 28% of gross value via the OnCall Air platform.

• Technology investments have driven a 300 basis point increase in gross margin over the past 4-5 years.

• Attrition rate for technology-driven business is under 2%, compared to 10% for traditional channels.

• Annual technology spend is $50-$60 million, outpacing most competitors.

Customer and contractor focus

• Contractors are central to the business model, with technology designed to support their efficiency and profitability.

• Mobile apps and digital tools help contractors manage jobs, pricing, and customer experience.

• Commercial segment is growing, with some acquisitions being 50/50 residential and commercial.

• Residential replacement market accounts for 65%-70% of sales and 75%-80% of earnings.

• High customer retention and low credit risk, with $800 million in receivables performing well.