Miami-based Watsco — North America’s largest HVACR products distributor — reported its 2025 first quarter financial results on April 23, showing a slight decrease in year-over-year sales amid a large-scale product mix transition spurred by regulatory changes, while margin performance improved.

Watsco posted total 1Q sales of $1.53 billion that were down 2% year-over-year.

The company’s 1Q gross margin of 28.1% improved 60 basis points year-over-year and jumped 140 bps sequentially. 1Q25 operating margin likewise improved 80 bps year-over-year to 8.1%.

Net profit decreased by 0.2% year-over-year to $429 million and sequentially trailed 4Q24’s $468 million.

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By Watsco product line during 1Q (excluding acquisitions)

• HVAC equipment (67% of sales) decreased 1% year-over-year
• Other HVAC products (29% of sales) decreased 3% year-over-year
• Commercial refrigeration products (4% of sales) decreased 5% year-over-year

Watsco noted the context that the first and fourth quarters of the year are highly seasonal as demand for replacement HVAC systems is typically highest in the second and third calendar quarters. Accordingly, the company’s 1Q results are disproportionally affected by seasonality.

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“Our results reflect the early stages of a large-scale product transition from regulatory changes that went into effect Jan. 1, which affects approximately 55% of Watsco’s sales and will ultimately convert nearly $1 billion of inventory over the course of the year,” Watsco  said in the company’s financial release. “The new products represent HVAC systems used in the U.S. for residential and light-commercial applications that contain refrigerants (termed A2L refrigerants) that offer considerably lower global warming properties (GWP), a measurement of environmental impact. Regulatory changes have historically been good for our business, and we see the same opportunity as this transition influences more than half of the products we sell and offers most every customer we serve the opportunity to benefit their business.”