Watsco, Inc. ($WSO)

Good day, and welcome to the Watsco First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Albert Nahmad. Thank you, and over to you.

Welcome to our first quarter earnings call. This is Al Nahmad, Chairman and CEO, and with me is A.J. Nahmad, the President; Paul Johnston, 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 going to improving stability now that the transition to A2L products have matured. We expect a more simplified business environment this year but it is still early in our summer season, but so far so good. We're also excited to announce our agreed 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 Durette ], [ Jackson ] owner and his talented group of leaders, all of whom will be remain with the company, certainly meet the definition of great entrepreneurial. Our relationship with Jackson bakes back more than 20 years, and we are grateful to Jim for entrusting us for this company's next chapter. [ Jackson ] will expand our Sunbelt presence by [ 25 low cases ] and provide diversification of brands and products given their strong presence in parts and supplies. As I mentioned and as our culture [ Jackson ] team will continue to operate and grow the company with our full support. In addition, our community of leaders, along with [ Jackson ], we 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. OnCall Air, our digital platform that helps contractors present and sell solutions to homeowners increased customer sales by 20%, reflecting a rich sales mix of high visit systems. We expect the gross merchandise value for OnCall Air to exceed $2 billion this year. Let me say that again. We expect sales of OnCall Air to exceed $2 billion this year. We feel like this is a good start, and we expect more progress as adoption by contractors gained momentum in years ahead. Turning now to our first quarter results. Sales increased 2% in the U.S. 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 for our leadership team to sustain price and competitiveness. We continue to execute on several ongoing initiatives to enhance gross margins with a long-term goal of achieving 30%. SG&A remained flat as improved operational efficiency offset incremental technology investments and new locations. We expect overall operating efficiency to further improve and our technology 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 the large institutional customers, which has set the large during the second quarter. We are accelerating the use of our pricing optimization tools to make further progress towards our long-term target. We have launched a new initiative to compete in [ gross ] sales in the highly fragmented parts of supply segment, which comprised 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 our operating efficiency and create new data-driven growth strategy. These investments are long read scale entrepreneurial culture and a capacity to invest are unmatched in our industry. With that, let's turn to Q&A.

[Operator Instructions] We have the first question from the line of Ryan Merkel from William Blair.

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

But let me turn to our experts and to being the Barry Logan.

[indiscernible] anything he dropped off the call, please let the operator know. Rick, do you want to jump in there?

Sure. I'll take a stab, and then Barry can backfill and enhance it. Ryan. Yes, look, I think what we -- first, if we just look at the first quarter in isolation and then I'll turn to April. 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 a same-day basis. And so far, 3 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 bit 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.

I'll take out that too, if that's all right, which is if you zoom out even further looked 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 lose over the last 5 years, we had extreme demand as people are investing in 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 we've had constraints or limitations on refrigerant canisters. It's just been kind of one thing after the other for the next 5 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 at least most of the way there. Obviously, there's still some things changing the tariffs and some dynamics. But we're looking forward to a more normalized environment and getting back to business and hit the street and taking care of our customers and growing the business. And I think that's materializing. Go ahead, Barry.

I was going to say, I think it's interesting, too, 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 mentioned 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.

We have a next question from the line of David Manthey from Baird.

David. 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 [ Gemaire ] 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?

This is a relationship be back 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 that they can continue to expand and if they need more capital, we'll provide that if they need more technology, we provide that, they need more equity and their leadership will provide that. So it's just a wonderful business to become part of Watsco. And we respect Texas is where they are mostly. And that's always a very good [ ODSC ] market. So I mean, there resonates on all the points that are important.

Yes, sounds good. And then as it relates to the 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 because I know you guys aren't going to do that. But 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 we grow, whereas price would sort of tail off towards the end of the year. Is that how you're thinking about it?

Well, we certainly are hopeful that we're going to grow and it seems like we will. But it's too difficult, too early, I should say, is a better way to say it, that we're going to have the going 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 we're on the right path but let's wait to see. Regardless of what the markets do, we're going to do well, and we have a competitive edge over other distributors that we've told you about over and over again.

We have the next question from the line of Tommy Moll from Stephens.

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 your resi equipment volumes are now flat or maybe even a little bit better than flat in those 2 months? And how long has it been since that was the case.

All yours Rick.

Yes, Tommy, we're not going to slice it that idle for 3 weeks in April here. Again, we're not yet in the full selling season. I think the prior question got out a little bit, which is we -- 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 price, obviously, we have pricing actions that took effect last year. And I'll remind everyone that our mix of H2L products in the first quarter of last year was about 25%. And so like-for-like, the new equipment is that 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 the ultimate comparison here is what did it look like versus 2 years ago versus 3 years ago, and we'll be in a smarter position to answer that question after the second quarter so far, so good as high would describe the start in April.

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?

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 could only get better at to get worse. So we expect our inventory turns to increase and contribute to cash flow for the rest of the year.

Plus, we've got -- our supply chain is a lot more solid than it was in the past. A.J. mentioned that we had, COVID, 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.

We have the next question from the line of Jeff Hammond from KeyBanc Capital Markets.

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 OEM near term outside of like normal course that would suggest more pricing -- upward move in pricing?

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 manufacture and they -- I believe they will raise their prices.

And we've had a number of a number of price increases to date from several of the manufacturers which have already become public. So 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 probably in the second quarter, we'll know for sure exactly what those price increases look like.

Okay. Great. And then just on that, there's been kind of increasing questions about price elasticity and the unit costs are getting up and there was this debate last year about repair replace, was that this A2L transition? Or was that the consumer kind of being tight? So I noticed your non-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?

I think we're happy with -- yes, we're happy with both. We're seeing a definite uptick in our compressor sales, which aren't going to offset any -- 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.

Yes, 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. The part 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 and including commercial refrigeration, of course, which we report separately. So there's broad-based growth there, and it's not necessarily read on repair versus replace all the time.

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 an analytical point of view.

[Operator Instructions] We have the next question from the line of Nigel Coe from Wolfe Research.

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, look, actually look quite normal. So my initial reaction was that the destocking is behind us. It doesn't sound like that's the case. So I just wanted to clarify that comment. And I'm wondering if the inventory build is getting ahead of price increases, slightly better demand. Just wondering anything more there?

Well, there's been a shift in the product innovation. So when product in base, we have to carry the existing inventory to support what's been out there. And then we have to take inventory into the new changes in the product. And that does inflate inventory. But that doesn't bother us. It's just part of a 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 but in our competition can.

Okay. I'll take a step of that, too. I mean I would not call our expected inventory turns and enhancement and burn through 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 product 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.

Yes, another way to ask it would be, do you expect sell-in and sell-through to equalized now going forward? Just so 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. I'm wondering if you expect that still -- that to happen this year with the price increases come through.

Let me refresh 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. But 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 everything outside the market. That will 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.

I 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 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 have been for many years before all these changes.

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. Do you move to the next question?

No, sir, you're connected to be more to the next question. We have the next question from the line of Stephen Volkmann from Jefferies.

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

We reserve the right to change our mind, Stephen.

Yes, feel free. So 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 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 the demand environment is still not great. And so I'm just curious how you think that plays out as the year progresses.

If I can make a stab at that. One thing 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 to some of 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 the announced price increase is.

Yes. 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 to the right customers. It's also about administrating those price increases. I mean if you think about every time there's a price increase from an OEM, it's touching thousands of SKUs and we 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. I mean it 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 customers for all the SKUs that have new pricing, 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 since I missed making changes that needed to be made, if that make sense?

That's interesting. I appreciate that. And then maybe almost a segue there, A.J., 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, 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?

Yes. Well, all of the above, we do realize the higher gross margin with our online sales and our off-line sales and e-commerce sales are increasing. We expect that trend to continue. And also, our cost to serve is lower with our online sales and customers are using that flowing 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 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 markets. And when I say markets, I mean the state of Florida for which is 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.

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 3, 5, 7 years.

And while we are on the subject, we also sell more line items for invoice when we saw online versus off-line. So it's a winning formula to sell more products online, and we're focused on it.

We have the next question from the line of Chris Snyder from Morgan Stanley.

I wanted to ask about Q1 inventory. So it was up about 25% quarter-on-quarter, which matches what we saw in the last 5, 6 years. But the last 5, 6 years, OEM inventory was tight, lead times were long. This year, it feels like the opposite. So 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 well-appreciated April price increases coming even before the 232 and there was some building to get ahead of that.

Yes. Let me answer. First, remember that the composite inventory today is all A2L 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 a product. So that gets simpler and easier to identify as we get into 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.

I guess on that, like sequentially, it's kind of the same. Like sequentially, like the 25% up Q1 versus Q4, presumably is almost all volume or units. So I guess, just like that kind of more like it feel like you guys were building in Q1, the same way you built the last 5 years. But 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 anticipated price increases.

I think if you look at our March inventory versus our margin inventory the year before, you see that the dollars are down. Also, when you sell an A2L product today, you've got to sell an indoor unit and an outdoor unit. So we've 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.

Interesting. I appreciate that. And then just maybe following up on the inventory point, over the last year, it seemed like it was very difficult for the industry, both the distributors and the OEMs to have a sense of how much product their customer is holding. So I guess just now, 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 anything that the company has done versus a year ago to just have better visibility or confidence in how much inventory the customers are holding.

I mean I'll take it at that and you guys keep me honest, which is that we, Watsco 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 -- and maybe Paul or somebody can hold me on us, 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 in the end, and what I mean at the end, I mean, the end of the quarter, the end of the season will just be noise because it will smooth out by the end of the quarter, by the end of the season. Mostly are not substantial enough. Not substantial enough to really [ jolt ] the picture.

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 that's why we deal with a completely, yes.

Then we have inventory, the reason we have all the convenient locations with as much product variety as the 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 for that building.

And I would say I appreciate that. And I know it's hard to pinpoint, but it did feel like last year, there were some unexpected downstream inventories that's why I wanted to ask.

If I say it this way, it's not one size fits all for any brand that's out there. I mean 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. We have -- 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 our -- 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 is in.

We have the next question from the line of Patrick Baumann from JPMorgan.

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

That isn't in last year, yes.

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

Yes. No. I mean we're obviously shy to answer that question.

Yes. 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. The other equations of the answer, existing home sales, new home sales, consumer spending, consumer confidence and contractor confidence ultimately is who actually sells the product in someone's home. I would say, again, it seems like a better situation, but time will tell.

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?

Yes. I would say in the northern market, you had severe -- some severe winter, you had a bunch of closed locations, a bunch of lost business. We really either blame or complement the weather in our discussion, but the northern markets had a bit of disruption in the quarter that would resolve itself as time goes on, too. So the Sunbelt because of what I just said, the Sunbelt has outperformed the North, I think, for those reasons. But that's just the first quarter and not something to draw an inference from over the longer term.

Is it to be geographically diverse, so that all that just again becomes normalized over time.

Yes, of course. And then my final question is, I was wondering if you could opine on Home Depot's acquisition of [ Mingeldors ] 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.

Always 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.

Yes. I mean I'd say, we've done the [ Manglar ] family for a long time. We wish them well in that business well. But it takes two to tango, especially in our business model 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 and 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.

We have the next question from the line of Jeff Hammond from KeyBanc Capital Markets.

Just a couple follow-ups. Just on gross margins, 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 had a particularly tough comp in 2Q. So just wondering how you think gross margins trend? And then also just separately, can you give us what commercial HVAC equipment was in the quarter? I'm not sure if I missed that.

I can take a stab at it, Jeff. 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 resi and 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 is 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 R&C 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 supply since is now launching, for example, and so we expect that to be helpful as it scales. And A.J. mentioned [ Hydros ] and [ VCR ] its companion initiative around purchasing in non-equipment. That is gaining momentum and scaling. So there's some puts and takes to it. 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.

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

Thanks for listening attacks for your interest in our business. We're very excited about the future. As I said, we're uniquely takable on investing in the industry through acquisitions and post acquisitions and that sort of thing. So in for the long term, and we're happy you're with us. Bye-bye.

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