WSO-B · Watsco, Inc.

Operating income decreased 1.8% to $110.2 million, preserving a 7.2% operating margin through disciplined cost management despite margin pressures. Net income fell 1.2% to $79.1 million, or diluted EPS of $1.87, primarily due to an increased effective income tax rate from lower share-based compensation deductions, reduced tax credits including purchased credits, and lower overall earnings compared to the prior year.

Net cash used in operating activities improved significantly to $18.9 million from $177.6 million, attributable to the timing of vendor payments despite an increase in accounts receivable. After $7.0 million in capital expenditures, free cash flow was -$25.9 million. Management assesses liquidity based on cash generation to fund operations and investments, considering the seasonal nature of HVAC/R demand that peaks from May through August, when cash dynamics typically reverse.