Watsco Posts Record 28% Gross Margin, Debt-Free And Raises Dividend 10%
Watsco reported full-year 2025 revenues of $7.24B, operating income of $720M and record gross margin of 28.0% while generating $570M in operating cash flow and $400M in fourth-quarter cash. The debt-free distributor held $780M cash and investments and boosted its annual dividend 10% to $13.20 per share.
1. Full-Year Financial Highlights
Watsco’s full-year 2025 revenues declined 5% to $7.24 billion and operating income fell 8% to $720 million, yet gross profit margin expanded 120 basis points to a record 28.0% despite regulatory shifts and supply-chain challenges.
2. Cash Flow and Fourth-Quarter Results
Operating cash flow reached $570 million, equivalent to 97% of net income, while fourth-quarter cash flow hit a record $400 million, driven by a 40 basis-point margin improvement to 27.1% and a 2% reduction in SG&A expenses.
3. Strong Balance Sheet and Inventory Management
The company ended the year debt-free with $780 million in cash and investments, converted over $1 billion of A2L refrigerant inventory, and invested $300 million in technology platforms engaging 73,000 contractors digitally.
4. Dividend Increase and Growth Outlook
Watsco raised its annual dividend by 10% to $13.20 per share, marking 52 consecutive years of payouts, and expects more conventional industry conditions and further efficiency and inventory optimization in 2026.