Damian Karas: So I’d say really encouraging to hear about the pickup in demand you’re seeing in April. You mentioned, I think mid-single-digit same-store sales growth. Do you have an — have the comparable for last year in April, like what the same-store sales growth was in April 2023? And could you just remind us kind of like in the second quarter, what the — like, what the seasonal shaping looks like April, May, June?
Al Nahmad: That’s a lot of forecasting and which we don’t like to engage with because of the nature of the industry. I don’t know if anybody wants to take a shot from Watsco side.
Paul Johnston: I don’t think if we can break out months. Yeah, I don’t think we break out months.
Al Nahmad: We’re not going to do that.
Damian Karas: Okay. The comp from last year for April, you don’t happen to have that?
Al Nahmad: That what?
Paul Johnston: We have it, but it’s not something we’d like to talk about.
Al Nahmad: Yeah, we’re just not going to give you a monthly.
Damian Karas: Okay, fair enough. Totally understand. Well, maybe I could just ask you about, so you guys have put your pricing through, I think, from your OEMs, March and April. One thing that we’ve heard is that maybe some of the contractors are struggling to pass on some of the price increases. I just wanted to hear your thoughts on like whether you agree with that, you’ve kind of experienced that in your customer base? And if so, is that pretty much just kind of a short-term demand-related issue right now and the summer is going to end up resolving that? Or is that maybe a kind of a cumulative by product of just like all of the inflation that you’d be — there’s been in equipment and wages over the last few years?
Al Nahmad: I mean that is an enormous question looking into the future, and I don’t think we have even a need to respond to that because things will have to happen as they happen. So we’re going to pass on the question.
Damian Karas: Okay. Thanks for your time, guys.
Operator: [Operator Instructions] The next question is a follow-up from Jeff Sprague with Vertical Research. Please go ahead.
Al Nahmad: Hi, Jeff.
Jeff Sprague: Hey, just sort of a follow-up. I don’t know, maybe it rhymes with Damian’s question there. But Al, you said a couple of times, you hope not to see any more price increases this year. So I’m wondering if that is an indication that you’re seeing some stress out there in terms of the ability to just handle this stuff. You noted that the repair versus replace dynamics have not eroded, but is this something that’s just kind of on your radar screen as a watch item or are you seeing some maybe early signs that, maybe that is happening?
Al Nahmad: No. I mean it’s — the market does what the market does. I mean what’s happening is the market — the market pricing has gone up. And now we’re waiting for the A2L pricing to come in. That was the only insinuation that we had there.
Barry Logan: Yeah. I mean, I’ve got to chime in on this because it’s an important, like, backbone to what we’ve talked about already and I want to emphasize it. First, if we said earlier that the higher-priced heat pumps are outperforming everything else, that’s a statement about what’s going on in the market with contractors installing higher-priced systems, right? Secondly, if I’ve said in the call that the mix of higher efficiency is also increasing remarkably, that too is an early-stage — at least an early-stage indicator of what’s going on in the market. And again, I’d rather be October and report on how it went. But I like the early signs of what’s going on. And third of all, we — no one ever asks ever about credit quality, about what’s going on with our contractor.
It’s never a question. It’s remarkable to me. And so I feel like I have to talk about it or bring it up. If you look at the bad debt expense for the quarter versus a year ago, it’s less. And overall credit quality and how our contractors are behaving with us when they pay us $7 billion or more a year is very healthy. So that’s an April view, it’s not an October view. But I really — I don’t look at this as like a binary thing of on or off. It’s the subtlety of what’s going on in the market, obviously and the contractors at the end of the day are going to do the best job they can to get the job if they have to discount their services or go to a lower brand or go to a product that they need. I know we’re going to have it. There’s not a location in Watsco that doesn’t have multiple brands in it to serve that local market.
And we have very few competitors who do have the same variety of brands across markets. So in a softer market or a trickier market, I like our competitive position even more if I kind of round out the conversation.
Jeff Sprague: That’s a great additional perspective. I appreciate it. Thanks a lot, guys.
Paul Johnston: I just have to — I love your answer there, Barry, and I’ll build on it. I love our competitive position on the whole. And we talked about, we have high-quality inventory deployed in the field. We’ve got best-in-class technology that our competitors can’t match. We’ve got a balance sheet that’s strong and ready to invest in any size opportunity. We’ve got — like Barry said, we’ve got every product that a contractor could need. I just think that we’re very well-positioned here in the market and expect a good year and expect a good tenure.
Operator: The next question is from Nigel Coe with Wolfe Research. Please go ahead.
Nigel Coe: Thanks. Good morning, guys.
Al Nahmad: Good morning, Nigel.
Nigel Coe: Okay. Good morning. Sorry, I was late joining. So I apologize if you’ve addressed this already, but I think on the ATM drawdown, I’d be really curious on the timing of that. Al, you obviously got the cash on the balance sheet, got a lot of optionality, et cetera. But why do that in March unless you got a line of sight on kind of options out there, but I’d just be curious on the timing and I’ve got a follow-up question as well, please.
Al Nahmad: I’m sorry, why do what in March?
Nigel Coe: The ATM draw, the [indiscernible] issue.
Al Nahmad: As I said earlier, we didn’t do it, somebody wanted it and the opportunity came up and we took it because of the — who we believe the holder is would be if we supplied him the shares and we believe he is a high-quality holder, long-term holder and we wanted to meet what he wanted at that time. We did decide that.
Nigel Coe: Okay. Okay. That’s fair. And then on the opportunity set out there to deploy the capital, I’m sure you’re not in a rush or anything, but I’d be curious, the [line of sight] (ph) you have to take in full control of Russell Sigler or maybe taking up some of the equity within the carrier enterprises. I mean, are there any sort of big opportunities out there you see to deploy that capital?
Al Nahmad: If we did, we would tell you.
Nigel Coe: Okay. So you just keep the cash in the balance sheet.
Al Nahmad: Sorry.
Nigel Coe: So you just keep the cash?
Al Nahmad: What would you like for us to do? Of course, we’re going to keep the cash. What would you like for me to do? I don’t understand the question. We told you we do — we took it because we had an opportunity to bring in a significant important investor. We do not — we have a long term goal of expansion in this program so the cap will be very useful.
Nigel Coe: Great. Thank you very much for your time.
Operator: The next question is from Steve Tusa with JPMorgan. Please go ahead.
Al Nahmad: Hey, Steve.
Steve Tusa: Hey guys, good morning. Sorry. I just wanted to follow-up on Pat’s question and I was another call. So wanted to join and say hi, first and foremost.
Al Nahmad: Hi.
Steve Tusa: So just on this — these pricing dynamics and mix, I mean, would you — so you would expect pricing to obviously accelerate over the course of the year given the timing of the increase? I mean, I thought the carrier increase was like early March, not exactly April 1st. So maybe just some color on how you would expect that to play out?
Barry Logan: The March increase we had from Carrier was on the 410A equipment. And then subsequent to that, we’ve also received pricing on what they’re going to be — what we’re going to see on the on the new A2L products. But we have not received any of the A2L products yet. No.
Steve Tusa: Got it. And you will be taking those like — at what point do you expect to be kind of filling those products in the warehouses.
Barry Logan: We are probably — excuse me, depending on what the operating units will do, it would probably be third quarter, fourth quarter before we see any significant amount of A2L product?
Steve Tusa: Got it. Okay. And then just on this inventory question, I mean, I guess there’s a bunch of ways you can really cut it. I mean, do you think your inventories are now normal or you took on a little bit of extra ahead of the pre-buy, they’re lean. How would you kind of characterize your inventories now relative to demand?
Paul Johnston: I think we’re a little bit ahead, don’t you?
Steve Tusa: Yeah.
Paul Johnston: I think we’re a little bit ahead of inventory right now. We’ve got some pre-buys that came in on the 410A products and we also had some additional products that we purchased.
