Cash conversion efficiency remains highly sensitive to seasonality, evidenced by operating cash flow to net income ratios swinging from -0.24 in 2026Q1 to 5.57 in 2025Q4.
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 | Dec'22 | Dec'21 | Dec'20 | Dec'19 | Dec'18 | Dec'17 | Dec'16 | Dec'15 | Dec'14 | Dec'13 | Dec'12 | Dec'11 | Dec'10 | Dec'09 | Dec'08 | Dec'07 | Dec'06 | Dec'05 | Dec'04 | Dec'03 | Dec'02 | Dec'01 | Dec'00 | Dec'99 | Dec'98 | Dec'97 | Dec'96 |
|---|
| Cash from Operations | 728.35M | 569.61M | 773.1M | 561.95M | 571.96M | 349.57M | 534.38M | 335.77M | 170.56M | 301.85M | 277.76M | 221.38M | 144.98M | 150.27M | 173.34M | 61.45M | 152.8M | 88.29M | 113.47M | 108M | 68.54M | 35.78M | 56.66M | 60.25M | 66.86M | 52.57M | 49.06M | 41.9M | 4.7M | -21.4M | -8.9M |
| Operating CF Margin % | - | 7.87% | 10.15% | 7.72% | 7.86% | 5.57% | 10.57% | 7.04% | 3.75% | 6.95% | 6.58% | 5.38% | 3.68% | 4.01% | 5.05% | 2.06% | 5.37% | 4.41% | 6.67% | 6.14% | 3.81% | 2.13% | 4.31% | 4.89% | 5.66% | 4.24% | 3.75% | 3.36% | 0.47% | -3.37% | -2.09% |
| Operating CF Growth % | 34.46% | -26.32% | 37.57% | -1.75% | 63.62% | -34.58% | 59.15% | 96.87% | -43.5% | 8.67% | 25.46% | 52.7% | -3.52% | -13.31% | 182.08% | -59.78% | 73.07% | -22.2% | 5.07% | 57.57% | 91.55% | -36.85% | -5.96% | -9.88% | 27.18% | 7.16% | 17.09% | 791.49% | 121.96% | -140.45% | -180.91% |
| Net Income | 496.01M | 464.18M | 635.74M | 634.14M | 703.7M | 498.74M | 323.17M | 295.77M | 296.53M | 257.29M | 235.98M | 226.52M | 208.7M | 187.72M | 157.6M | 137.74M | 111.72M | 51.57M | 60.37M | 67.49M | 82.23M | 70.53M | 48.1M | 34.9M | 28.54M | 24.44M | 19.11M | 29.5M | 25.2M | 18.4M | 13M |
| Depreciation & Amortization | 43.99M | 43.75M | 40.82M | 35.09M | 31.68M | 28.13M | 25.91M | 24.51M | 22.09M | 22.03M | 20.07M | 19.12M | 17.93M | 17.71M | 15.91M | 11.72M | 10.77M | 8.53M | 7.07M | 6.42M | 5.91M | 8.72M | 7.77M | 7.42M | 8.11M | 12.08M | 12.26M | 11.2M | 8.4M | 4.8M | 4.2M |
| Stock-Based Compensation | 25.96M | 0 | 35.02M | 30M | 28.82M | 25.36M | 22.13M | 17.03M | 15.51M | 13.29M | 12.32M | 12.6M | 11.47M | 9.97M | 7.94M | 6.66M | 5.17M | 5.26M | 6.45M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Deferred Taxes | 12.85M | 18.44M | 229K | -7.18M | 13.47M | 5.94M | 40K | 1.28M | 8.29M | -10.73M | 2.72M | 4.69M | 289K | 8.59M | 6.72M | 8.31M | 12.72M | 1.97M | 447K | 4.12M | -659K | 135K | 3.88M | 1.82M | 1.35M | -1.84M | 1.24M | 1.1M | -300K | -700K | -400K |
| Other Non-Cash Items | -348.95M | 145.33M | -16.95M | -10.3M | -9.01M | -6.91M | -4.02M | -2.62M | -3.69M | 648K | 5.65M | 1.74M | 1.16M | -35K | 2.62M | 3.4M | 211K | -2.4M | 137K | 6.78M | 1.28M | 11.76M | 6.44M | 6.42M | 14.29M | 10.32M | 11.59M | 3.4M | 4.5M | -1.4M | -1.9M |
| Working Capital Changes | 442.38M | -102.09M | 78.23M | -119.8M | -196.69M | -201.69M | 167.15M | -207K | -168.17M | 19.32M | 1.02M | -43.28M | -94.66M | -74.69M | -17.45M | -106.39M | 12.2M | 23.35M | 38.99M | 23.19M | -20.25M | -52.27M | -11.77M | 3.15M | 14.58M | 7.56M | 4.86M | -3.3M | -30.4M | -40.9M | -25.9M |
| Change in Receivables | -45.95M | 83.42M | -85.56M | -36.03M | -60.15M | -130.41M | -3.56M | 8.46M | -28.83M | -1.68M | -26.94M | -26.12M | -41.07M | -25.85M | -5.75M | 11.99M | -41.25M | 67.24M | 23.42M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Change in Inventory | 71.52M | 11.96M | -41.68M | 64.62M | -259.86M | -243.66M | 139.93M | -15.53M | -78.95M | -73.4M | -9.73M | -3.65M | -98.74M | -40.58M | -26.65M | -22.49M | 21.45M | 1.2M | 37.15M | 46.42M | -18.03M | -33.27M | -23.41M | -9.55M | 10.21M | 19.53M | 12.97M | -11.4M | -12.3M | -30.4M | -16M |
| Change in Payables | 22.77M | -203.05M | 197.76M | -162.04M | 121.99M | 182.82M | 33.94M | 12.73M | -57.4M | 95.28M | -2.07M | -285K | 45.24M | -7.26M | 11.87M | -98.61M | 28.09M | -46.39M | -23.02M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Cash from Investing | -249.54M | -98.12M | -290.67M | -41.34M | -33.84M | -148.58M | -16.34M | -81.04M | -26.31M | -81.31M | -42.83M | -22.94M | -19.12M | -14.26M | -92.29M | -56.64M | -10.13M | -15.5M | -3.67M | -108M | -22.28M | -54.73M | -3.3M | -22.51M | -4.07M | -3.3M | -10.1M | -11.9M | -33.7M | -126.7M | -20.7M |
| Capital Expenditures | -26.18M | -34.55M | -30.09M | -35.48M | -35.65M | -25.46M | -16.44M | -17.8M | -17.15M | -17.88M | -43.58M | -23.7M | -21.51M | -14.58M | -12.32M | -13.93M | -8.42M | -5.91M | -3.97M | -6.07M | -9.88M | -7.23M | -4.85M | -3.07M | -4.54M | -4.62M | -7.03M | -32.6M | -34.9M | -127.3M | -15.9M |
| CapEx % of Revenue | 0.36% | 0.48% | 0.4% | 0.49% | 0.49% | 0.41% | 0.33% | 0.37% | 0.38% | 0.41% | 1.03% | 0.58% | 0.55% | 0.39% | 0.36% | 0.47% | 0.3% | 0.3% | 0.23% | 0.35% | 0.55% | 0.43% | 0.37% | 0.25% | 0.38% | 0.37% | 0.54% | 2.62% | 3.46% | 20.04% | 3.74% |
| Acquisitions | -15.53M | -18.74M | -5.17M | -6.67M | -47K | -129.46M | 0 | -64.61M | -9.39M | -63.6M | 0 | 0 | 0 | 0 | -80.48M | -43.45M | -3.82M | -9.84M | 76K | -108.97M | -9.89M | -49.48M | -3.4M | -18.42M | -1.86M | 0 | -896K | 0 | 0 | 0 | 0 |
| Investments | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - |
| Other Investing | -163M | 0 | 262K | 1.31M | 1.86M | 1.36M | 94K | 1.38M | 228K | 168K | 744K | 760K | 2.39M | 323K | 504K | 737K | 2.11M | 249K | 226K | 3.73M | 339K | 1.82M | 4.95M | -1.02M | 2.34M | 1.32M | -2.17M | 4.1M | -400K | -2.7M | 0 |
| Cash from Financing | -520.41M | -568.12M | -158.53M | -460.08M | -503.96M | -228.6M | -448.49M | -264.02M | -139.6M | -202.15M | -217.89M | -187.78M | -120.21M | -189.05M | -23.08M | -115.63M | -74.26M | -56.13M | -77.76M | -24.93M | -39.57M | -38.55M | -4.63M | -27.28M | -46.05M | -44.92M | -41.66M | -29.8M | 27.7M | 153.1M | 31M |
| Debt Issued (Net) | 9.23M | -5.97M | -21.43M | -45.05M | -35.64M | 86.96M | -157.14M | 19.26M | 113.67M | -213.51M | -10.16M | -56.41M | 74.58M | -83.42M | 294.63M | 9.89M | 0 | -7.47M | -34.27M | 13.61M | -10.06M | -9.94M | -460K | -20.18M | -21.82M | -39.9M | -22.57M | -14.1M | 26.9M | 72.9M | -2.4M |
| Equity Issued (Net) | -80.58M | 42.82M | 242.11M | 12.35M | -87.11M | 19.92M | 16.96M | 11.81M | 2.81M | 248.31M | 1.68M | 4.49M | 4.25M | 2.19M | 5.31M | 5.36M | 6.04M | 10.34M | 1.1M | -5.25M | -11.51M | -11.63M | 5.93M | -1.9M | -20.43M | -2.38M | -16.36M | -12.8M | 3.4M | 82.6M | 35.2M |
| Dividends Paid | -486.5M | -473.76M | -423.52M | -382.65M | -332.45M | -294.52M | -265.71M | -241.41M | -209.22M | -164.15M | -127.6M | -98.53M | -69.87M | -39.84M | -256.22M | -73.28M | -66.03M | -57.09M | -49.35M | -36.74M | -26.37M | -16.98M | -10.1M | -5.2M | -3.02M | -2.64M | -2.74M | -2.9M | -2.6M | -2.4M | -1.9M |
| Share Repurchases | 0 | -3.66M | -39.67M | -2.83M | -87.11M | -1.09M | -2.3M | -1.53M | -3.78M | -4.67M | -3.98M | -1.47M | 0 | 0 | 0 | 0 | 0 | 0 | -4.82M | -9.39M | -15.33M | -17.72M | -836K | -6.73M | -24.46M | -3.22M | -17.6M | -14.3M | 0 | -4.4M | 0 |
| Other Financing | 37.44M | -131.2M | 44.31M | -44.74M | -48.76M | -40.96M | -42.6M | -53.68M | -46.86M | -72.8M | -81.81M | -37.33M | -129.55M | -68.44M | -68.92M | -57.65M | -10.78M | 4.55M | -29.24M | 2.99M | 8.37M | 0 | -346K | 0 | -775K | 0 | 0 | 0 | 0 | 0 | 100K |
| Net Change in Cash | -39.14M | -92.99M | 316.16M | 62.61M | 29.24M | -27.8M | 71.61M | -8.44M | 2.4M | 24.49M | 20.78M | 10.78M | 4.97M | -54.29M | 58.1M | -110.83M | 68.41M | 16.65M | 32.04M | -15.11M | -3.09M | 27.61M | 0 | 10.46M | 16.75M | 4.35M | -2.7M | 300K | -1.2M | 5M | 1.3M |
| Free Cash Flow | 702.17M | 535.52M | 743.01M | 526.48M | 536.31M | 324.1M | 517.94M | 317.97M | 153.4M | 288.64M | 238.15M | 199.15M | 123.47M | 135.69M | 161.03M | 47.53M | 144.38M | 82.38M | 109.5M | 101.93M | 58.66M | 28.56M | 51.89M | 57.18M | 62.32M | 47.95M | 42.03M | 9.3M | -28.2M | -148.1M | -29.7M |
| FCF Margin % | 9.7% | 7.4% | 9.75% | 7.23% | 7.37% | 5.16% | 10.25% | 6.67% | 3.37% | 6.65% | 5.64% | 4.84% | 3.13% | 3.62% | 4.69% | 1.6% | 5.08% | 4.12% | 6.44% | 5.8% | 3.26% | 1.7% | 3.95% | 4.64% | 5.28% | 3.87% | 3.22% | 0.75% | -2.8% | -23.32% | -6.98% |
| FCF Growth % | 52.66% | -27.93% | 41.13% | -1.83% | 65.48% | -37.43% | 62.89% | 107.27% | -46.85% | 21.2% | 19.59% | 61.3% | -9.01% | -15.73% | 238.81% | -67.08% | 75.27% | -24.77% | 7.43% | 73.76% | 105.41% | -44.97% | -9.25% | -8.25% | 29.98% | 14.09% | 351.91% | 132.98% | 80.96% | -398.65% | -301.35% |
| FCF per Share | 18.50 | 14.13 | 19.81 | 14.41 | 15.03 | 9.15 | 14.73 | 9.17 | 4.09 | 7.75 | 6.70 | 5.64 | 3.53 | 3.91 | 4.66 | 1.44 | 4.45 | 2.89 | 3.95 | 3.66 | 2.11 | 1.03 | 1.93 | 2.20 | 2.34 | 1.76 | 1.51 | 0.31 | -1.00 | -5.50 | -1.39 |
| FCF Conversion (FCF/Net Income) | 1.42x | 1.15x | 1.44x | 1.05x | 0.95x | 0.83x | 1.98x | 1.37x | 0.70x | 1.45x | 1.52x | 1.28x | 0.96x | 1.18x | 1.68x | 0.68x | 1.89x | 2.04x | 1.88x | 1.65x | 0.83x | 0.51x | 1.18x | 1.73x | 2.34x | 2.15x | 2.57x | 1.42x | 0.19x | -1.16x | -0.68x |
| Interest Paid | 0 | 0 | 969K | 10.12M | 3.5M | 913K | 1.84M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Taxes Paid | 0 | 0 | 124.6M | 188.44M | 105.74M | 124.98M | 70.89M | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Working Capital Volatility
As reported in recent financial statements, Watsco's operating cash flow to net income ratio exhibits extreme volatility, swinging from a high of 5.57 in 2025Q4 to a negative 0.24 in 2026Q1, reflecting the significant impact of seasonal inventory build-ups on reported cash generation.
The wide divergence between net income and operating cash flow suggests that earnings are heavily influenced by non-cash accruals and the timing of inventory procurement. Investors should monitor whether this volatility represents a structural shift in working capital requirements or merely the expected seasonal rhythm of the HVAC distribution business.
Based on quarterly data, Watsco's working capital changes are the primary determinant of cash flow, with a massive $535.9 million inflow in 2025Q3 contrasting sharply with a $297.0 million outflow in 2025Q1, highlighting the company's aggressive inventory management strategy ahead of peak cooling seasons.
The significant swings in working capital suggest that Watsco utilizes its balance sheet to buffer against supply chain disruptions and regulatory-driven inventory transitions. This strategy appears to prioritize product availability over cash flow stability, which may create temporary liquidity pressure during off-peak periods.
According to historical cash flow data, Watsco's free cash flow margins have fluctuated wildly between -12.1% and 24.6% over the last ten quarters, indicating that the company's ability to generate surplus cash is highly sensitive to the timing of seasonal inventory investments.
The inconsistent free cash flow trajectory suggests that while the underlying business model is profitable, it is not yet optimized for consistent cash conversion. Analysts should interpret these fluctuations as a byproduct of the company's commitment to maintaining high service levels through substantial inventory holdings.
As evidenced by recent filings, Watsco consistently prioritizes dividend payments, which totaled over $120 million in several recent quarters, while share repurchases remain sporadic and minimal, suggesting a capital allocation strategy focused on rewarding shareholders through income rather than aggressive equity retirement.
The company's preference for dividends over buybacks appears to reflect a mature capital allocation philosophy that values consistent returns to shareholders. Given the low debt levels, this approach seems sustainable, though it may limit the potential for share price support during periods of market volatility.
Quick answers to the most common questions about buying WSO stock.
Watsco, Inc. (WSO) generated $569.6M in net cash from operating activities in 2025. This reflects the cash generated directly from core business operations.
Watsco, Inc. (WSO) generated $535.5M in free cash flow in 2025. Free cash flow is the cash left over after capital expenditures, which can be used to pay dividends, repurchase shares, or pay down debt.
Watsco, Inc. (WSO) spent $34.5M on capital expenditures in 2025. CapEx represents the cash invested in physical assets like property, plant, and equipment to maintain or grow the business.
In 2025, Watsco, Inc. (WSO) returned $473.8M to shareholders via cash dividends and spent $3.7M on share repurchases. This shows the company's commitment to returning capital to its equity investors.