Watsco, Inc Q1 2026 Earnings Call Transcript

Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.

Watsco, Inc (NYSE: WSO) Q1 2026 Earnings Call dated Apr. 28, 2026

Presentation

Operator

Welcome to the Watsco first quarter 2026 earnings conference call. All participants will be in the listen only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. After today’s presentation there will be an opportunity to ask questions. To ask a question you press STAR and then one on your touchtone phone. To withdraw your question you may press Star and then two. Please note that this event is being recorded. I would now like to turn the conference over to Mr.

Albert Namid. Thank you. And over to you.

Albert H. Nahmad — Chairman and Chief Executive Officer

Welcome to our first quarter earnings call. This is Al Namid, Chairman and CEO. With me is AJ Namid, the President, Paul Johnson, Barry Logan and Rick Gomez. Before we start our cautionary statement, this conference call has forward looking statements as defined by SEC laws and regulations that are made pursuant to the safe harbor provisions of these various laws. Ultimate results may differ materially from the forward looking statements. First quarter results point to Improving Stability now that the transition to ATL products has matured, we expect a more simplified business environment this year, but it is still early in our selling season but so far so good.

We’re also excited to announce our agreement to acquire Jackson Supply, a legendary market leading Sunbelt distributor with $230 million in annual sales. We are fortunate to know many great entrepreneurs in our industry. Jim Durrett, Jacksonville Owner and his talented group of leaders, all of whom will remain with the company, certainly meet the definition of great entrepreneur. Our relationship to Jackson dates back more than 20 years and we are grateful to Jim for entrusting us with this company’s next chapter.

Jackson will expand their sub bill presence by 25 low cases and provide diversification of brands and products giving their strong presence in parts and supplies. As I mentioned and is our culture, Jackson team will continue to operate and grow the company with our full support. In addition, our community of leading of leaders along with Jackson will collaborate and learn from each other. As is also our culture, we expect to close the transaction sometime in the second quarter. Within our existing business, we continue to build and expand our technology platforms which provide us an immense long term competitive advantage.

E Commerce sales increased 16% during the quarter while outpacing overall growth rates. On Call Air, our digital platform that helps contractors present and sell solutions to homeowners, increase customer sales by 20% reflecting a rich sales mix of high efficiency systems. We expect the gross merchandise value for On Call air to exceed $2 billion this year. Let me say that again, we expect sales of on calder to exceed $2 billion this year. We feel like this is a good start and expect more progress as adoption by contractors gain momentum in years ahead.

Turning now to our first quarter results, sales increased 2% in US markets reflecting a mature mix of A2L products as well as an improved mix of high efficiency systems offset by lower unit sales. Unit volumes stabilized as the first quarter progressed. Gross margins remain largely intact reflecting good execution by our leadership team to sustain price and competitiveness. We continue to execute on several ongoing initiatives to enhance gross margins with the long term goal of achieving 30%. SGA remained flat as improved operations efficiency offset incremental technology investment and new locations.

We expect overall operating efficiency further improve and our technology can now can now show its metal in a simpler operating environment. Our balance sheet continues to be strong and we remain debt free. Let me repeat that, we remain debt free. As I mentioned, we continue to invest in innovation and technology to separate us from our competitors and we are making incremental investments to enhance our competitive position and add to our long term growth and margin profile. For example, we are developing new innovations aimed at capturing more sales to large institutional customers which is set to launch during the second quarter.

We are excelling the use of our pricing optimization tools to make further progress towards our long term target. We have launched a new initiative to compete and grow sales in the highly fragmented parts and supply segment which comprise almost 50% of the interest market share. And we have begun to harness the power of artificial intelligence, offering the potential to further transform our customer experience, improve operating efficiency and create new data driven growth strategy. These investments, along with our scale, entrepreneurial culture and a capacity to invest are unmatched in our industry.

With that, let’s turn to Q N.

Operator

Thank you. We will now begin the question and answer session. To ask a question, we press star and then one on your touchtone telephone. If you’re using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time we will pause momentarily to assemble our roster. We have the first question from the line of Ryan Merkel from William Blair. Please go ahead.

Question & Answers

Unidentified Participant

Morning, Ryan.

Operator

Sharon can hear us.

Ryan Merkel — Analyst, William Blair

Yeah. Can you hear me?

Unidentified Participant

Yes, sir. Now I can. Yes.

Ryan Merkel — Analyst, William Blair

Okay. Hey everyone. Congrats on the deal and a good start to the year. I wanted to start high level. Al, can you just unpack your comments about improved stability as we head into the summer and you know, what’s changing and are you seeing April, you know, positive in terms of year over year growth at this point,

Unidentified Participant

But let me turn to our expert and that sort of thing. Barry Logan.

Chris Snyder — Analyst, Morgan Stanley

Oh, he just. Barry saying he dropped off the call. Please let the operator know. Okay. Rick, do you want to jump in there?

Rick Gomez — Vice President of Corporate Development

Sure, I’ll take a stab and then Barry can bags and enhance it. Ryan, good morning. Yeah, look, I think what we first, if we just look at the first quarter in isolation, and then I’ll turn to April. You know, we saw what was the full maturity really of the A2L product. Transition units still weighing a little bit, and which means that the market is not yet fully healed. There’s no inflection point here, but things did get incrementally better as the quarter progressed. And we exited the quarter nicely with March up high single digits on the same day basis.

And so far, three 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. And so April has begun nicely. All of that said, we’re still not yet in what is the thick of the selling season, and so we’ll be a little cautious in our tone and our optimism. But this is certainly, I think, incrementally more stable, more positive, less complex, and we’ll take that in the first quarter.

Unidentified Participant

Okay,

Aaron Nahmad — President

Yeah, I’ll take that too, if that’s all right. Which is if you zoom out even further, look at the history of this industry for 30, 40, 50 years. It’s been a pretty mature, slow growth, steady as you go industry. And then Covid hit, and it seems like all chaos broke loose over the last five years. We had extreme demand as people were investing their homes. We had extreme supply chain challenges which constrained the products that we could sell. We had multiple regulatory changes that changed the products that we sold.

Almost 100% of the equipment we sold twice in that period. We’ve had tariffs, we’ve had inflation, we’ve had different tariffs. It’s, it’s. We’ve had constraints or limitations on refrigerant canisters. It’s just been kind of one thing after the other for the next five years. And it seems like most coming into 2026, most of that stuff was behind us, certainly the stuff being driven by the industry in terms of regulatory changes and so forth. So we look forward to a more normalized 2026 as we started the year.

And I think we’ve got. Got at least most of the way there. Obviously there’s still some things changing with tariffs and some dynamics, but we’re Looking forward to a quote unquote, more normalized environment and getting back to business and hidden in the streets and taking care of our customers and growing the business. And I think that’s materializing.

Unidentified Participant

Go ahead, Barry.

Barry S. Logan — Executive Vice President & Secretary

No, I was going to say. I was going to say I think it’s interesting too that, that we see E commerce sales kind of bloom this quarter. That tells us the contractor’s daily life is kind of reset into a good place to start this year. I always mention contractor credit as a critical measurement of how the market looks. And again, that is in very good shape. And also now that the product line is the product line, we saw an increase in higher efficiency systems being sold. Again, as Rick said, it’s early, but those are good indicators and it’s kind of what we have been looking for as some indicators.

Unidentified Participant

All right, very helpful. I’ll pass it to others and leave it there. Thanks.

Operator

Thank you. We have a next question from the line of David Mante from. Please go ahead.

David Manthey

Morning, David.

Unidentified Participant

Good morning, Al. Thanks for taking my question. So my question is primarily on the Jackson Supply acquisition. Correct me if I’m wrong. This looks like a Goodman Distributor primarily and as far as I can tell, it looks like a great fit within the ce, gem, Ayr and Baker footprint that you currently have. Is there anything else you can share with us about mix margins growth? What made this an attractive acquisition for Watsco?

Albert H. Nahmad — Chairman and Chief Executive Officer

Well, this. This is a relationship we’ve had for a very long time and we have seen them succeed in our markets over years. So we know that they have the right leadership, we know they have the right strategy and all we want to do is support it so they can continue to expand. And if they need more capital, we’ll provide that. If they need more technology, we’ll provide that. They need more equity for their leadership, we’ll provide that. So it’s just a wonderful business to become part of Watchco in every respect.

Texas is where they are from mostly and that’s always a very good SVSE market. So I mean, it resonates on all the points that are important.

Unidentified Participant

Yes, sounds good. And then as it relates to this stabilization or normalization theme that we’re all kind of looking at right now, when we look at your numbers through the year, the volume comps get easier, the price comps get more difficult. I don’t want to slice this two things. I know you guys aren’t going to do that. But you know, just when we’re thinking about sort of normalization through 2026, would we expect Sort of a natural handoff just based on where those year to year comps are. If we’re going to have sort of a normal stable year that equipment would be, would go the other way, would grow, whereas price would sort of tail off toward the end of the year.

Is that how you’re thinking about it?

Albert H. Nahmad — Chairman and Chief Executive Officer

Well, we certainly are hopeful that we’re going to growth and it seems like we will. But it’s too hard, too difficult, too early I should say is a better way to say it that we’re going to have the garment market conditions that we have experienced for so many years. And so all I can say is what we’ve already said is that we’re seeing improvements, but we’re not. And we’re pretty sure that, that we’re on the right path. But let’s wait and see. Regardless of what the markets do, we’re going to do well and we have a competitive edge over other distributors that we tell you about over and over again.

Unidentified Participant

Sounds good. Thanks a lot, Al.

Albert H. Nahmad — Chairman and Chief Executive Officer

You bet.

Operator

Thank you. We have the next question from the line of Tommy Moore from Stevens. Please go ahead.

Albert H. Nahmad — Chairman and Chief Executive Officer

Morning Tommy. Good

Tommy Moll — Analyst, Stevens

Morning. Good morning, Alan. Thanks for taking my questions.

Albert H. Nahmad — Chairman and Chief Executive Officer

Sure.

Tommy Moll — Analyst, Stevens

To start, I wanted to expand a bit on the year to date comments that Rick made. If March exited the quarter in high single digit growth range and April has continued that momentum, is it fair to infer that you’re resi equipment volumes are now flat or maybe even a little bit better than flat in those two months? And how long has it been since that was the case?

Albert H. Nahmad — Chairman and Chief Executive Officer

All yours, Rick.

Rick Gomez — Vice President of Corporate Development

Yeah, Tommy, we’re not going to spice it that thinly for three weeks in April. Here again, we’re not yet in the full selling season. I think the, the prior question got at it a little bit, which is we, you know, that this time last year is when we saw volumes begin to degrade a little bit. And so just on paper, mathematically it stands to reason that that looks better. And you know, price, obviously we have pricing actions that took effect last year and I’ll remind everyone that our mix of A2L products in the first quarter of last year was about 25%.

And so like for like these, the new equipment is at a double digit price point above where it was last year. But we had some of that in our first quarter of last year and it was about 60% of our mix in the second quarter of last year. So you know, the ultimate comparison here is what did it look like versus two years ago versus three years ago. And we’ll Be in a smarter position to answer that question after the second quarter. So far, so good is how I would describe the start in April.

Tommy Moll — Analyst, Stevens

Fair enough. Al, a question for you on inventory. There have been some big moves in recent quarters and years. As you enter the selling season for 2026, how would you characterize that inventory position?

Albert H. Nahmad — Chairman and Chief Executive Officer

Well, we expect given the market conditions that we will reduce our investment in inventory, which affects our cash flow, of course, because we’ll improve the inventory turn. So many changes were occurring recently that it can only get better, starts to get worse. So we expect our inventory terms to increase and contribute to cash flow for the rest of the year.

Paul Johnston — Vice President

Plus we’ve got our supply chain is a lot more solid than it was in the past. You know, AJ Mentioned that we had Covid and we’ve had all these changes in models and products. And I think finally our manufacturers have an opportunity to make a single line of products continuously throughout the year. And I think that’s going to also help the inventory turn.

Unidentified Participant

Thank you both. I’ll turn it back.

Operator

Thank you. We have the next question from the line of Jeff Hammond from Keybanc Capital Markets. Please go ahead.

Jeffrey Hammond — Analyst, Keybank Capital Markets

Hey, good morning everyone. Maybe just to start, the Section 232 update seemed to bring about questions about follow on pricing and I’m just wondering if you’ve seen any pricing from your OEMs near term outside of like normal course. That would suggest more pricing upward move in pricing.

Albert H. Nahmad — Chairman and Chief Executive Officer

Well, I do expect it because of the duties that are being paid now by some of the manufacturers and I can’t quantify it yet. But yes, the pressure is on the manufacturer and they, I believe they will raise their prices.

Paul Johnston — Vice President

Yeah, we’ve, we’ve, we’ve had a number of, of a number of price increases to date, you know, from several of the manufacturers which have already become public. So they’re, they’re well known and we are going to have a price increase pretty much across the board, I believe. But we’ll just have to wait until, you know, probably in the second quarter we’ll know for sure exactly what those price increases look like.

Jeffrey Hammond — Analyst, Keybank Capital Markets

Okay, great. And then just on that, you know, there’s been kind of increasing questions about price elasticity and you know, the unit costs are getting up and there was this debate last year about, you know, repair, replace. Was that, you know, this A2L transition or was that the consumer kind of being tight? So, you know, and I noticed your not equipment or other products was up. Just wondering what you’re seeing and how you’re Thinking about repair versus replace as we go through into the selling season.

Paul Johnston — Vice President

I think we’re happy with. Go

Albert H. Nahmad — Chairman and Chief Executive Officer

Ahead.

Paul Johnston — Vice President

Yeah, yeah, we’re happy with both. You know, we’re seeing a definite uptick in our compressor sales which aren’t going to offset any, you know, by any material stretch of the imagination, the equipment sales. But we’re also seeing a rebound in equipment sales. So I think it’s going to be kind of a dual market out there for a while where we’re going to have an increase in parts and at the same time we’re going to have an increase, I’m hoping in equipment. I don’t think it’s either or anymore.

Rick Gomez — Vice President of Corporate Development

Yeah, Jeff, just to expand on that for a second. I mean, remember that non equipment for us means a lot of things. It’s a very broad basket of of goods. Parts is actually the minority of what’s in non equipment. Yes, it grew, but so did virtually everything else in non equipment, including supplies, including our small and growing plumbing business, including commercial refrigeration, of course, which we report separately. So there’s broad based growth there. And it’s not necessarily a read on repair versus replace all the time.

Barry S. Logan — Executive Vice President & Secretary

And to say it analytically, I mean parts replacement, parts, parts sales are less than 10% of Watsco. So when we say 30% is non equipment, that means 20% is everything else. Just from analytical point of view.

Unidentified Participant

Thank you.

Operator

Thank you again. If you have a question, please press star. And then one, we have the next question from the line of Nigel Koh from Wolf research. Please go ahead.

Albert H. Nahmad — Chairman and Chief Executive Officer

Thanks.

Nigel Coe — Analyst, Wolf Research

Good morning. Hi Al. I wanted to go back to your comments on inventory turns continuing to increase the 1Q inventory build was a little bit higher than what we expected. Looked, actually looked quite normal. So my initial reaction was that the destocking is behind us. It doesn’t sound like that’s the case. I just wanted to clarify that comment and I’m wondering if you, you know, the inventory build, you know, is getting ahead of price increases, slightly better demand. Just wondering, anything more there?

Albert H. Nahmad — Chairman and Chief Executive Officer

Well, there’s been a shift in the product innovation. So when product innovates, we have to carry the existing inventory to support what’s been out there. And then we have to take inventory in for the new changes in the product and that does inflate inventory. But that doesn’t bother us. It’s just part of the normal thing. And we run a very conservative balance sheet. We have no debt. So we can afford to have the swings in inventory perhaps better than our competition can.

Aaron Nahmad — President

Okay, Nigel, I’ll take a stab at that too. I mean, I would not call our expected inventory turns enhancement and, and burn through of our inventory more structural destocking. That’s not what we’re talking about. We’re just talking, like Paul mentioned, the supply chain and our OEMs and the whole process is more stable, more reliable than it has been. So now we bought inventory for the summer selling season to make sure that we have the right amount of products in the right places to support expected customer demand.

And we expect to turn inventory better than we have been able to because there’s less noise in the system.

Nigel Coe — Analyst, Wolf Research

It’s another way to ask it would be do you expect sell in and sell through to equalize now going forward? Just obviously we’ve seen a big divergence in the past and then maybe just with these price increases, which it doesn’t sound like they’ve been formalized at this point. You had a big uptick in gross margin Last year in 2Q versus 1Q on the price increases. Wondering if you expect that still, you know, that to happen this year with the price increases coming through.

Paul Johnston — Vice President

I think that’ll probably be a second. Yeah, go ahead. Yeah,

Albert H. Nahmad — Chairman and Chief Executive Officer

Let me refresh the conversation about that. We have a target of 30% gross profit margin and a lot of things go into that and we’re not going to get there overnight. We have a plan to get there and that involves pricing technology, which we’re getting really good at. I’m sure that the sophistication pricing system that we have is superior anything else on the market that’ll help gross profit margins and our ability to consolidate purchases across the whole company from vendors, manufacturers will also help improve gross profit margin, if that helps that explanation.

Chris Snyder — Analyst, Morgan Stanley

Okay, thanks, Al. Thank you.

Barry S. Logan — Executive Vice President & Secretary

I want to go back to you. I just want to go back. I’m sorry, to the inventory discussion just to be again, try to be educational about it because I think what Rick said is important. This is not a structural further reduction in inventory. That’s not what this is. That’s not the goal. The goal is to own less inventory on average throughout a given year. That’s the equation of inventory turns. Right cost of sales divided by average inventory. So just have less load in the branches over a period of time in order to keep our customers.

Exactly. Happy every single minute of the day. And as some of the metrics with the manufacturers improve in terms of lead times and on time, you know, on time delivery, things like that, as that improves, it lets us moderate the amount of inventory we carry. So it’s much more subtle than the big stick. We took the inventory last year. This is the subtlety of improving inventory turns over a period of time and frankly, going back to where they should be and where they had been for many years before all these changes.

Aaron Nahmad — President

Right. I’ll add one more note to that, which is that with our new hydro system, which we talked about thoroughly in our investor day, we can also increase product assortment at each branch while still carrying less inventory because we can turn that inventory faster.

Chris Snyder — Analyst, Morgan Stanley

Do we move on to

Operator

The next question?

David Manthey

Seems like we’re disconnected. Are we disconnected?

Operator

No, sir, you’re connected. Do we move on to the next question?

Albert H. Nahmad — Chairman and Chief Executive Officer

Yes, go ahead.

Operator

Sure. Thank you. We have the next question from the line of Stephen Folkman from Jefferies. Please go ahead.

Unidentified Participant

Good morning. I guess he wanted you to think about it before you took my question.

Aaron Nahmad — President

We reserve the right to change our mind, Stephen, you know.

Unidentified Participant

Yeah, feel free.

Aaron Nahmad — President

So

Unidentified Participant

Most of mine have been answered, but I have a kind of a bigger picture one. So back in the before times, which I’ll define as pre Covid, there was often a fairly meaningful difference between announced price increases and what was actually realized in, in the market. And I’m just curious how you’re viewing that these days, because of course, we’ve seen a number of those announced year to date here and some whispers about more coming. And yet, you know, the demand environment is still not great. And so I’m just curious how you think that plays out as the year progresses,

Paul Johnston — Vice President

If I can make a stab at that. You know, one thing that, that I think you realize is that we’ve got a very diverse market out there, both geographically as well as the type of customer. So obviously the announced price increase does not always apply completely to certain segments of the market, you know, to some of the, the people that have longer term contracts with pricing. And so what we end up with is we end up with an announced price increase and then we end up with a realized price increase and it’s generally less than what announced price increase is.

Aaron Nahmad — President

Yeah. I would add to that though, Paul, which is that the software that we’ve brought online to help our businesses, not only with analytics and pricing and making sure we have the right price for the right customer, it’s also about administrating those price increases. I mean, if you think about every time there’s a price increase from OEM, it’s touching thousands of SKUs and we have for thousands of customers, and just the number of permutations and the administrative work associated with that, which Used to be done, essentially call it by hand, was overwhelming.

That was a lot of work for a few hands on keyboards. But now with the tooling, one of the benefits is that we can appropriately adjust the pricing for all the customers for all the SKUs that have new pricing. You know, it’s not actually instantaneously, but I’ll say instantaneously so that we don’t have the risk of a lag of price increase where we otherwise did have that risk and sometimes missed making changes that needed to be made, if that made sense. Yes, good point.

Unidentified Participant

That’s interesting. I appreciate that. And then maybe almost a segue there, AJ is that it feels like you guys are almost talking like there’s an inflection here in your E commerce platform. I don’t want to put words in your mouth, but assuming that growth in that platform is accelerating, does that have an impact on your gross margin target? Is that a tailwind or is it just more sales? Yeah,

Aaron Nahmad — President

It, it. Well, all the above. We do realize a higher gross margin with our online sales and our offline sales and E commerce sales are increasing. We expect that trend to continue. And also our cost of serve is lower with our online sales. And customers are using that tooling because it helps them too. It helps them organize their businesses and how they go to market and how they procure products. So it’s really, it’s a win for, for all of us, including and especially the customers. So we very much expect to invest in our e commerce technologies and our tooling for our customers and we expect the adoption rate to continue.

And just to give you a sense of what’s possible, we have, we have markets. And when I say markets, I mean, you know, the state of Florida for which was like an $800 million business for one of our subsidiaries where they’re almost 70% of their sales go through the e commerce tools. So that’s the possible.

Rick Gomez — Vice President of Corporate Development

Steve, I can, if we look even more long term, this is one of the most underappreciated aspects that we write about it every quarter and tell you guys about it, but it really is meaningful. Inside our four walls is the future attrition benefits that we get when we have active E commerce users. That is an incredible moat and an incredible stickiness to future revenues and those customer relationships that really, really matters. When you look out three, five, seven years

Aaron Nahmad — President

While we’re on the subject, we also sell more line items for invoice when we sell online versus offline. So it’s a good, it’s a winning formula. To sell more products online. And we’re focused on it.

Operator

Thank you all. Thank you. We have the next question from the line of Chris Snyder from Morgan Stanley. Please go ahead.

Chris Snyder — Analyst, Morgan Stanley

Thank

Unidentified Participant

You. Hey, I wanted to ask about Q1 inventory. So it was up about 25% quarter on quarter, which matches what we saw the last five, six years. But the last five, six years, you know, OEM inventory was tight. Lead times were long. This year it feels like the opposite. So, you know, I was surprised at how much your guys inventory came up in that construct. So I guess is this because you guys feel that demand is turning or there’s, you know, well appreciated April price increases coming even before the 232 and there was some building to get it, to get ahead of that.

Thank you.

Barry S. Logan — Executive Vice President & Secretary

Yeah, let me answer first. Remember that the composite inventory today is all a 2L product. A year ago it wasn’t. It was a mixture of old and new product. So if you take the inventory increase for equipment, it’s all in the mix of price. It’s not units. Actually, we own less units at the end of March than we did a year ago. So that element, that sales mix of A2L is still being compared a year ago to a heavy mix of 410A product. So that gets simpler and easier to identify as we get to the second quarter.

But to keep it simple, in my statement, we do own less units at the end of March than we did a year ago.

Unidentified Participant

Yeah, but I guess on that like sequentially it’s kind of the same, like sequentially, like the 25% up, you know, Q1 versus Q4, presumably is, is almost all volume or units. So I guess just like that, kind of more like it felt like you guys were building in Q1 the same way you built the last five years. But you know, you guys, the lead times are a lot shorter. So I would have just thought that you guys would build a little bit more cautiously. So I guess just the question was like, is that a function of demand turning and you’re more optimistic there or there’s just very well anticip price increases.

Thank you.

Paul Johnston — Vice President

I think, I think if you look at our March inventory versus our March inventory the year before, you see that the dollars are down. Also, when you sell an A2L product. Excuse me, today you’ve got to sell an indoor unit and an outdoor unit. So we had to increase our inventory of indoor units to accommodate the new A2L refrigerant. So that could be part of what you’re looking at there. Also

Unidentified Participant

Interesting. I appreciate that. And then just, you know, maybe following up on the inventory point, you know, over the last year, it seemed like it was very difficult for the industry, you know, both the distributors and the OEMs to have a sense of how much product their customer is holding. So I guess just now, you know, it feels like there’s another round of OEM price increases coming. I imagine here in the early part of Q2. Maybe distributors and contractors are all looking to get ahead of that.

I guess, just like, how do you guys think about those channel dynamics? And is there any thing that the company has done versus a year ago to just have better visibility or confidence in how much inventory the customers are holding? Thank you.

Aaron Nahmad — President

I mean, I’ll take a stab at that. And you guys keep me honest, which is that we, we did not buy ahead of the expected price increases coming from the 232 tariffs. That’s point one two is that, yes, some of our customers hold some inventory, and no, we don’t have visibility into what that numbers are. But I, maybe Paul or somebody can hold me honest, I don’t think it’s particularly material. There were some customers, I can tell you that there were some customers that bought ahead of the price increases coming now, the 232 tariff price increases.

But that, that in the end, and when, I mean the end. I mean the end of the quarter, the end of the season will just be noise because it’ll smooth out by the end of the quarter. By the end of the season.

Paul Johnston — Vice President

Not substantial

Aaron Nahmad — President

Enough. Not substantial enough to. To really jolt the, the picture.

Paul Johnston — Vice President

I don’t think most of our contractors are not carrying a lot of inventory. They don’t have mega warehouses where they put inventory in. So,

Aaron Nahmad — President

Yes, I agree with HA

Paul Johnston — Vice President

Completely. Yeah. Yeah. The reason we have inventory,

Aaron Nahmad — President

The reason we have all the convenient locations with, you know, as much product variety as they need is because most customers do not carry inventory because they don’t know what they’re going to sell that day. And so they go to someone’s house and figure out what the problem is and what the solution is, and then they come work with our teams to get the right product out of our stores to go install it in that home or that building.

Barry S. Logan — Executive Vice President & Secretary

Yeah. Thank you. I appreciate that.

Unidentified Participant

And I know it’s hard to. I know it’s hard to pinpoint, but it did feel like last year there was unexpected downstream inventories. That’s why I wanted to ask.

Jeffrey Hammond — Analyst, Keybank Capital Markets

Yeah. If I say it this

Barry S. Logan — Executive Vice President & Secretary

Way, it’s not, it’s not a. It’s not one size fits all for any brand that’s out there. I mean, our business, our business model with our brands and our customers is to carry it for them. And Florida have 100 locations to take the pressure off of them having to stock anything ever. That’s our value in Florida. There are other business models, other OEM models, factory operated models that have under 30 branches in Florida. And to get product into the channel, they need their customers to stock product.

That’s a business model decision. I’m not saying it’s right or wrong. I’m saying it’s a business model. So just and kind of evaluating the answer and listening to your question, it is, there is a different answer if we go across brands and OEMs as well in that equation. That’s a

Unidentified Participant

Good point. Good point, Barry.

Unidentified Participant

Thank you. I appreciate that distinction. Thank you, Barry.

Operator

Thank you. We have the next question from the line of Patrick Borman from JP Morgan. Please go ahead.

Patrick Baumann — Analyst, JP Morgan

Good morning.

Albert H. Nahmad — Chairman and Chief Executive Officer

Morning.

Patrick Baumann — Analyst, JP Morgan

I know it’s early in the season, but wondering if you guys have a view on what you think unit sell through will be this year.

Aaron Nahmad — President

Better than last year? I have no idea.

Patrick Baumann — Analyst, JP Morgan

There wasn’t anyone that was jumping to answer that question.

Aaron Nahmad — President

Yeah, no, I mean, we’re obviously shy to answer that question. Sorry, go ahead.

Barry S. Logan — Executive Vice President & Secretary

Yeah, I mean, Pat, I said this for my career in April. I think the question is, if I ask it back to you, is do I feel better or worse today? I feel better today for sure. You know, the other equations of the answer, existing home sales, new home sales, consumer spending, you know, consumer confidence and contractor confidence ultimately is who actually sells the product in someone’s home. You know, I would say again, it seems like a better situation, but time will tell.

Patrick Baumann — Analyst, JP Morgan

Did you see any regional disparity in performance in March and April? Just asking in context of what seems to have been like a really hot start to the year from a weather perspective in certain areas.

Barry S. Logan — Executive Vice President & Secretary

Yeah, I would say in the northern market you had some severe winter, you had a bunch of closed locations, a bunch of lost business. We really either blame or compliment the weather in our discussion, but the northern markets had a bit of disruption in the quarter that resolves itself as time goes on too. So the sun belt, because of what I just said, the sun belt was outperformed the north, I think for those reasons. But that’s just the first quarter and

Aaron Nahmad — President

Not

Barry S. Logan — Executive Vice President & Secretary

Something to draw an inference from over the longer term

Patrick Baumann — Analyst, JP Morgan

That makes sense. It’s

Aaron Nahmad — President

Meant to be geographically diverse. So that’s, you know, all that just again becomes normalized. Over time.

Patrick Baumann — Analyst, JP Morgan

Yep, of course. And then my final question is if I was wondering if you could opine on Home Depot’s acquisition of Mingledors and kind of how you see that impacting acquisition opportunities for you? Are you seeing valuation multiples go up in the industry at all after that deal or anything else to point out on how it might impact the competitive landscape?

Albert H. Nahmad — Chairman and Chief Executive Officer

We’ve competed with the business they bought for a long time and we’re not threatened by it at all. In fact, I think. I’m not going to say what I really think because it wouldn’t be nice, but no, it’s not something that we worry about at all.

Aaron Nahmad — President

Yeah, I mean, I’ll say we’ve known the Mingledor family for a long time and wish them well and that business well, but, you know, it takes two to tango, especially in our business model and our. On our formula, which our chairman started 50 years ago. Here is the family needs to want to join our family and be here and run their business and use our tools and our technology and our capital and so forth to do what they do and do more of it and continue to grow. And if that’s not in their interest, then it’s not a good fit.

If it is in their interest and there’s mutual trust and respect, then it’s a wonderful fit. So we’ll keep doing what we do and we’ve done it successfully for a long time and I don’t think we’re short of opportunities in the future.

Patrick Baumann — Analyst, JP Morgan

Makes sense. Thanks a lot, guys. Best luck.

Aaron Nahmad — President

Thank you.

Operator

Thank you. We have the next question from the line of Jeff Hammond from Keybank Capital Markets. Please go ahead.

Jeffrey Hammond — Analyst, Keybank Capital Markets

Hey guys, just a couple follow ups. Hey, just on gross margins, you know, you held the line pretty well and I know you got some price benefit in 1Q last year, so that was good to see. Just wondering how you think you got. You had a particularly tough comp in 2Q. So just wondering how, you think, you know, gross margins trend and then also just separately, can you give us what commercial H vac equipment was in the quarter? I’m not sure if I missed that.

Unidentified Participant

That’s a big question. Yeah,

Rick Gomez — Vice President of Corporate Development

I can take a stab at it, Jeff. On the, on the commercial side, really, we didn’t see a whole lot of divergence between what was residential and what was commercial. The biggest divergence is what we mentioned in the press release about domestic versus international. But resident commercial traveled very close together. And on margins, I think, look, if you go back 10 years in time, you can see and if you just take second quarter and third quarter as one thing. You could see that there’s usually some in most years there’s a modest retreat in margins only because historically first quarters are the ones that have some price OEM pricing actions and the cooling season and RNC mix and all of that typically influences the second and third quarter margin versus an off season margin.

So that’s what history would tell you. Last year did not follow that trajectory, of course, because of the price increases. And we’ll see what this year brings, I think in the absence of any new information. And we’ll see what again, what the OEMs begin to talk about here in the next few days. I think that’s what history tells us is that there is a different profile to margin during season versus out of season offsetting, that is we haven’t really talked about this much today is we, you know, Supply Sync is now launching for example and so we expect that to be helpful as it scales.

And AJ mentioned Hydros and vcr, its companion initiative around purchasing and non equipment that is gaining momentum and scaling. So there’s some puts and takes to it. We’ll, we’ll share more when we know more, but historically that’s the there’s always a little bit of difference between seasonal and off season margins.

Jeffrey Hammond — Analyst, Keybank Capital Markets

Okay, thanks.

Operator

Thank you. This concludes our question and answer session. I would like to turn the conference over back to Mr. Albert Nehmed for closing comments.

Albert H. Nahmad — Chairman and Chief Executive Officer

Well, thanks for listening and thanks for your interest in our business. We’re very excited about the future. As I said, we’re uniquely capable of investing in the industry through acquisitions and in post acquisitions and that sort of thing. So win for the long term and we’re happy you’re with us. Bye bye.

Operator

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.