Forward-Looking Statements This Quarterly Report on Form 10-Q contains or incorporates by reference statements that are not historical in nature and that are intended to be, and are hereby identified as, “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Statements which are not historical in nature, including the words “anticipate,” “estimate,” “could,” “should,” “may,” “plan,” “seek,” “expect,” “believe,” “intend,” “target,” “will,” “project,” “focused,” “outlook,” “goal,” “designed,” and variations of these words and negatives thereof and similar expressions are intended to identify forward-looking statements, including statements regarding, among other things, (i) economic conditions, (ii) business and acquisition strategies, (iii) potential acquisitions and/or joint ventures and investments in unconsolidated entities, (iv) financing plans, and (v) industry, demographic, regulatory, and other trends affecting our financial condition or results of operations. These forward-looking statements are based on management’s current expectations, are not guarantees of future performance and are subject to a number of risks, uncertainties, and changes in circumstances, certain of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of several factors, including, but not limited to: •general economic conditions, both in the United States and in the international markets we serve; •competitive factors within the HVAC/R industry; •effects of supplier concentration, including conditions that impact the supply chain; •the impact of trade policies and tariffs both in the United States and in the international markets we serve; •fluctuations in certain commodity costs; •consumer spending; •consumer debt levels; •new housing starts and completions; •capital spending in the commercial construction market; •access to liquidity needed for operations; •seasonal nature of product sales; •weather patterns and conditions; •insurance coverage risks; •federal, state, and local regulations impacting our industry and products; •prevailing interest rates; •the effect of inflation; •foreign currency exchange rate fluctuations; •international risk, including related to changes in trade policies and tariffs; •cybersecurity risk; and •the continued viability of our business strategy. We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements, which are based on current expectations. For additional information regarding important factors that may affect our operations and could cause actual results to vary materially from those anticipated in the forward-looking statements, please see Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as the other documents and reports that we file with the SEC. Forward-looking statements speak only as of the date the statements were made. We assume no obligation to update forward-looking information or the discussion of such risks and uncertainties to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except as required by applicable law. We qualify any and all of our forward-looking statements by these cautionary factors. 16 of 28 Table of Contents The following information should be read in conjunction with the condensed consolidated unaudited financial statements, including the notes thereto, included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our audited consolidated financial statements and notes thereto, and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025. Company Overview Watsco, Inc. was incorporated in Florida in 1956, and, together with its subsidiaries (collectively, “Watsco,” the “Company,” or “we,” “us,” or “our”) is the largest distributor of air conditioning, heating, and refrigeration equipment, and related parts and supplies (“HVAC/R”) in the HVAC/R distribution industry in North America. At June 30, 2026, we operated from 723 locations in 43 U.S. States, Canada, Mexico, and Puerto Rico with additional market coverage on an export basis to portions of Latin America and the Caribbean. Revenues primarily consist of sales of air conditioning, heating, and refrigeration equipment, and related parts and supplies. Selling, general and administrative expenses primarily consist of selling expenses, the largest components of which are salaries, commissions, and marketing expenses that are variable and correlate to changes in sales. Other significant selling, general and administrative expenses relate to the operation of warehouse and distribution facilities, including a fleet of trucks and forklifts, and facility rent, a majority of which we operate under non-cancelable operating leases. Sales of residential central air conditioners, heating equipment, and parts and supplies are seasonal. Furthermore, profitability can be impacted favorably or unfavorably based on weather patterns, particularly during the Summer and Winter selling seasons. Demand related to the residential central air conditioning replacement market is typically highest in the second and third quarters, and demand for heating equipment is usually highest in the first and fourth quarters. Demand related to the new construction sectors throughout most of the markets we serve tends to be fairly evenly distributed throughout the year and depends largely on housing completions and related weather and economic conditions. Tariffs We continue to monitor macroeconomic conditions and developments in U.S. trade policy, which have implications for the various OEMs and vendors that comprise our supply chain. Many HVAC equipment and component manufacturers, including Carrier Global Corporation (“Carrier”) and Rheem Manufacturing Company, source component parts from China and Mexico or assemble significant portions of residential and light-commercial products in Mexico, exposing them to tariffs and inflationary pressures. In February 2026, the U.S. Supreme Court issued a decision invalidating the broad-based tariffs imposed under the International Emergency Economic Powers Act, providing potential relief from certain tariffs. In April 2026, the Trump Administration modified the Section 232 tariff framework so that tariffs on many imported aluminum, steel, and copper products are calculated on the full customs value of covered products rather than on only the value of the underlying metal content, which in some cases increased the amount of tariffs incurred by OEMs. The Trump Administration further modified the Section 232 tariff regime in June 2026 by temporarily reducing the tariff rate applicable to certain residential HVAC systems and components that qualify as covered derivative products from 25% to 15%, while also making other changes to product coverage and eligibility requirements. Although these changes may provide targeted relief for certain HVAC products, the broader tariff environment remains dynamic and may continue to contribute to cost pressures across portions of our supply chain. Our OEM partners and suppliers continue to evaluate and implement various pricing actions that impact the cost of the products we procure. To mitigate these effects, we have implemented pricing actions where appropriate to respond to changes in the cost of the products we procure and continue to leverage our technology platforms and operating capabilities to respond efficiently to changing market conditions; however, it may not be possible to pass all of our OEM’s pricing actions through to our customers. While the long-term impact of tariffs and related trade measures remains uncertain, we believe our focus on the HVAC replacement market remains a stabilizing factor, given the essential nature of these products in providing comfort and healthy environments for homeowners and businesses. However, if additional tariffs, trade restrictions, amendments to existing trade agreements, such as the United States-Mexico-Canada Agreement, or further tariff increases on goods sourced from or assembled in Mexico and China, significantly raise our product costs, then we may need to increase our prices further, which could lead to reduced sales, customer loss, and potential harm to our business. We will continue to actively monitor these developments and their implications for our supply chain, product costs, pricing strategy, and overall operations. Climate Change and Reductions in CO2e Emissions We believe that our business plays an important and significant role in the drive to lower CO2e emissions. According to the U.S. Department of Energy (“DOE”), heating and air conditioning accounts for roughly half of household energy consumption in the U.S. As such, replacing older, less efficient HVAC systems with higher efficiency systems is one of the most meaningful steps homeowners can take to reduce their electricity costs and carbon footprints. 17 of 28 Table of Contents The overwhelming majority of new HVAC systems that we sell replace systems that likely operate below current minimum efficiency standards in the U.S. and may use more harmful refrigerants that have been, or are being, phased out. As consumers replace HVAC systems with new, higher-efficiency systems, homeowners will consume less energy, save costs, and reduce their carbon footprints. The sale of high-efficiency systems has long been a focus of ours, and we have invested in tools and technology intended to capture an increasingly richer sales mix over time. In addition, regulatory mandates will likely periodically increase the required minimum Seasonal Energy Efficiency Ratio rating, referred to as SEER, thus providing a catalyst for increased sales of higher-efficiency systems. The Company expects these regulations to reduce the carbon footprint of end-users and increase average selling prices over time, subject to customary risks of quality, availability, and performance of new HVAC systems. The American Innovation and Manufacturing Act of 2020 granted the U.S. Environmental Protection Agency (the “EPA”) the authority to regulate hydrofluorocarbon (“HFC”) refrigerants. Although HFCs were introduced as alternatives to ozone-depleting substances like chlorofluorocarbons and hydrochlorofluorocarbons, they are now recognized greenhouse gases that impact climate change due to their high global warming potential (“GWP”). Consequently, a required 85% phasedown of HFC production and consumption over a 15-year period commenced on January 1, 2022 (40% of which was completed in 2024). Further regulations were implemented that (1) restricted the use of high-GWP refrigerants in HVAC systems manufactured after December 31, 2024 (the “410A Systems”) and (2) established a timeline governing the sale and installation of 410A Systems by distributors and contractors. Beginning in late 2024, the Company, in collaboration with its OEMs and in anticipation of these regulatory changes, began transitioning its inventory to the new lower-GWP HVAC systems (the “A2L Systems”) while phasing out its inventory of 410A Systems. The regulations permitted the sale and installation of matching 410A HVAC Systems (i.e., outdoor and indoor components that are installed together) through December 31, 2025, after which the outdoor and indoor components could be separately sold and installed thereafter without limitation or expiration. On October 3, 2025, the EPA proposed changes to this regulation that would eliminate or extend the December 31, 2025 sale and installation deadline of matching 410A Systems beyond that date, thus allowing the continued sale of such matching systems. On May 26, 2026, the EPA issued the final rule which eliminated the prior deadline for the sale and installation of matching 410A Systems effective July 26, 2026, thereby permitting the continued sale and installation of such systems. As of the date of this filing, the Company continues to sell matching 410A Systems and related components. We offer a broad variety of systems that operate above the minimum SEER standards, ranging from base-level efficiency to systems that exceed 20 SEER. Based on estimates validated by independent sources, we averted an estimated 27.7 million metric tons of CO2e emissions from January 1, 2020 to June 30, 2026 through the sale of replacement residential HVAC systems at higher-efficiency standards. Gree Agreement Since 2009, we have been a party to an agreement (the “Agreement”) with Gree Electric Appliances, Inc. of Zhuhai, China (“Gree”) that, among other things, provides us with exclusive distribution rights for certain Gree-branded products in the United States. A dispute has arisen between Gree and Watsco as to whether the automatic renewal provisions of the Agreement extended the term of the Agreement for an additional 10 years before the prior term was to end in January 2026. In March 2026, Gree filed a complaint for declaratory judgment in Florida’s Circuit Court for Miami-Dade County, seeking a judicial determination that the Agreement did not renew for a successive term and has in fact been terminated. In April 2026, we filed our answer and affirmative defenses to Gree’s complaint, and we interposed counterclaims against Gree to enforce our rights under the Agreement, including seeking a judicial determination that the Agreement renewed for an additional 10-year period and remains in full force and effect, and an award for any damages resulting from Gree’s improper purported termination or non-renewal of the Agreement and Gree’s other related acts. We intend to vigorously prosecute our counterclaims and affirm our position that the Agreement automatically renewed for an additional 10-year period, and to vigorously defend against Gree’s assertion that the Agreement was not renewed. Any material interruption of the business arrangement with Gree under the Agreement could temporarily affect certain of our subsidiaries and may have an adverse impact on our consolidated financial results. For the 12-month period ended June 30, 2026, less than 3% of our consolidated revenues were from the sale of Gree-branded products. Critical Accounting Estimates Management’s discussion and analysis of financial condition and results of operations is based upon the condensed consolidated unaudited financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles. The preparation of these condensed consolidated unaudited financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated unaudited financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. At least quarterly, management reevaluates its judgments and estimates, which are based on historical experience, current trends, and various other assumptions that are believed to be reasonable under the circumstances. 18 of 28 Table of Contents Our critical accounting estimates are included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 27, 2026. We believe that there have been no significant changes during the quarter ended June 30, 2026 to the critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. New Accounting Standards Refer to Note 1 to our condensed consolidated unaudited financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted, and to be adopted, accounting standards. Results of Operations The following table summarizes information derived from our condensed consolidated unaudited statements of income, expressed as a percentage of revenues, for the quarters and six months ended June 30, 2026 and 2025: Quarters Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenues 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 72.5 70.7 72.3 71.3 Gross profit 27.5 29.3 27.7 28.7 Selling, general and administrative expenses 16.6 16.4 18.5 18.4 Other income 0.4 0.4 0.4 0.3 Operating income 11.3 13.2 9.6 10.7 Interest income, net 0.2 0.1 0.3 0.2 Income before income taxes 11.5 13.3 9.9 10.9 Income taxes 2.4 2.8 2.0 2.2 Net income 9.1 10.5 7.8 8.7 Less: net income attributable to non-controlling interest 1.3 1.6 1.1 1.3 Net income attributable to Watsco, Inc. 7.8 % 8.9 % 6.7 % 7.3 % Note: Due to rounding, percentages may not total 100. The following narratives reflect our acquisitions of Jackson Supply Company (“Jackson”) in June 2026, Southern Ice Equipment Distributors, Inc. (“SIE”) in May 2025, Hawkins HVAC Distributors, Inc. (“Hawkins”) in April 2025, and W.L. Lashley & Associates, Inc. (“Lashley”) in January 2025. In the following narratives, computations and other information referring to “same-store basis” exclude the effects of locations closed, acquired, or opened, in each case during the immediately preceding 12 months, unless such locations are within close geographical proximity to existing locations. At June 30, 2026 and 2025, five and two locations, respectively, that we opened during the immediately preceding 12 months were near existing locations and were therefore included in “same-store basis” information. The table below summarizes the changes in our locations for the 12 months ended June 30, 2026: Number of Locations June 30, 2025 701 Opened 2 Closed (8 ) December 31, 2025 695 Opened 5 Acquired 25 Closed (2 ) June 30, 2026 723 Second Quarter of 2026 Compared to Second Quarter of 2025 Revenues Quarters Ended June 30, (in millions) 2026 2025 Change Revenues $ 2,104.9 $ 2,062.4 $ 42.5 2 % 19 of 28 Table of Contents The increase in revenues for the second quarter of 2026 included $29.7 million attributable to new locations acquired and $0.7 million from other locations opened during the preceding 12 months, offset by $2.5 million from locations closed. Quarters Ended June 30, (in millions) 2026 2025 Change Same-store sales $ 2,074.6 $ 2,060.0 $ 14.6 1 % The following table presents our revenues (excluding acquisitions) for the second quarter of 2026, as a percentage of sales by major product lines, and the related percentage change in revenues from the prior period: % of Sales Quarters Ended June 30, 2026 2025 Change HVAC equipment 68 % 68 % 3 % Other HVAC products 28 % 28 % (1 )% Commercial refrigeration products 4 % 4 % 19 % HVAC equipment sales comprise various products including, but not limited to, residential ducted and ductless systems, furnaces, and other indoor components, as well as commercial HVAC systems. Within HVAC equipment, sales of residential products increased 5% (reflecting a 5% increase in U.S. markets and a 1% increase in international markets) and sales of commercial products decreased 8% (reflecting an 8% decrease in U.S. markets and a 7% decrease in international markets). Domestic sales of residential compressor-bearing systems (ducted and ductless) reflect a 2% increase in units and a 2% increase in average selling price. The increase in unit volume was primarily due to stabilization of the HVAC equipment market after A2L product transition-related impacts experienced during 2025. Gross Profit Quarters Ended June 30, (in millions) 2026 2025 Change Gross profit $ 578.9 $ 603.5 $ (24.6 ) (4 )% Gross margin 27.5 % 29.3 % Gross profit margin declined 180 basis-points primarily due to the pass through of significant inflationary pricing actions by our OEMs in 2025. Pricing actions in 2026 were more consistent with historical levels. Selling, General and Administrative Expenses Quarters Ended June 30, (in millions) 2026 2025 Change Selling, general and administrative expenses $ 349.0 $ 339.0 $ 10.0 3 % Selling, general and administrative expenses as a percentage of revenues 16.6 % 16.4 % On a same-store basis, selling, general and administrative expenses increased 2% as compared to 2025 primarily due to higher facilities and transportation costs, partially offset by lower salaries. Other Income Other income of $8.4 million and $7.4 million for the second quarters of 2026 and 2025, respectively, represented our share of the net income of Russell Sigler, Inc. (“RSI”), in which Carrier Enterprise I has a 38.4% equity interest. Carrier Enterprise I is one of our joint ventures with Carrier, in which we have an 80% controlling interest. Interest Income, Net Interest income, net for the second quarter of 2026 increased $1.2 million, or 50%, primarily due to higher cash and short-term cash investment balances on hand partially offset by lower interest rates earned on the balances for the 2026 period as compared to the same period in 2025. 20 of 28 Table of Contents Income Taxes Quarters Ended June 30, (in millions) 2026 2025 Change Income taxes $ 50.6 $ 57.4 $ (6.8 ) (12 )% Effective income tax rate 23.5 % 23.7 % Income taxes represent a composite of the income taxes attributable to our wholly owned operations and income taxes attributable to our joint ventures with Carrier, which are primarily taxed as partnerships for income tax purposes; therefore, Carrier is responsible for its proportionate share of income taxes attributable to its share of earnings from these joint ventures. The decrease in the effective income tax rate was primarily due to higher proportional earnings in lower tax jurisdictions in 2026 as compared to 2025. Net Income Attributable to Watsco, Inc. Net income attributable to Watsco, Inc. for the quarter ended June 30, 2026 decreased $20.3 million, or 11%, compared to the same period in 2025, primarily due to lower gross profit and higher selling, general and administrative expenses, partially offset by lower income taxes and a decrease in the net income attributable to the non-controlling interest. First Half of 2026 Compared to First Half of 2025 Revenues Six Months Ended June 30, (in millions) 2026 2025 Change Revenues $ 3,637.9 $ 3,593.5 $ 44.4 1 % The increase in revenues for the first half of 2026 included $38.3 million attributable to new locations acquired and $1.6 million from other locations opened during the preceding 12 months, partially offset by $6.7 million from locations closed. Six Months Ended June 30, (in millions) 2026 2025 Change Same-store sales $ 3,598.0 $ 3,586.8 $ 11.2 0 % The following table presents our revenues (excluding acquisitions) for the six months ended June 30, 2026 as a percentage of sales by major product lines, and the related percentage change in revenues from the prior period: % of Sales Six Months Ended June 30, 2026 2025 Change HVAC equipment 67 % 68 % 1 % Other HVAC products 29 % 28 % 1 % Commercial refrigeration products 4 % 4 % 16 % HVAC equipment sales comprise various products including, but not limited to, residential ducted and ductless systems, furnaces, and other indoor components, as well as commercial HVAC systems. Within HVAC equipment, sales of residential products increased 2% (reflecting a 4% increase in U.S. markets and a 13% decrease in international markets) and sales of commercial products decreased 4% (reflecting a 5% decrease in U.S. markets and a 1% decrease in international markets). Domestic sales of residential compressor-bearing systems (ducted and ductless) reflect a 2% decrease in units and a 4% increase in average selling price. The increase in average selling price was primarily due to the higher proportionate mix of A2L products in 2026 as compared to the same period in 2025. Gross Profit Six Months Ended June 30, (in millions) 2026 2025 Change Gross profit $ 1,006.5 $ 1,033.1 $ (26.6 ) (3 )% Gross margin 27.7 % 28.7 % Gross profit margin declined 100 basis-points primarily due to the impact of the timing and magnitude of OEM pricing actions as well as the sales mix for HVAC equipment in 2026 as compared to the same period in 2025. 21 of 28 Table of Contents Selling, General and Administrative Expenses Six Months Ended June 30, (in millions) 2026 2025 Change Selling, general and administrative expenses $ 671.8 $ 661.6 $ 10.2 2 % Selling, general and administrative expenses as a percentage of revenues 18.5 % 18.4 % On a same-store basis, selling, general and administrative expenses increased 1% as compared to the same period in 2025 primarily due to higher facilities costs, partially offset by lower salaries. Other Income Other income of $13.9 million and $12.5 million for the first half of 2026 and 2025, respectively, represented our share of the net income of RSI, in which Carrier Enterprise I has a 38.4% equity interest. Interest Income, Net Interest income, net for the first half of 2026 increased $2.2 million, or 29%, primarily due to higher cash and short-term cash investment balances on hand partially offset by lower interest rates earned on the balances for the 2026 period as compared to the same period in 2025. Income Taxes Six Months Ended June 30, (in millions) 2026 2025 Change Income taxes $ 74.3 $ 80.5 $ (6.2 ) (8 )% Effective income tax rate 23.3 % 23.2 % Income taxes represent a composite of the income taxes attributable to our wholly owned operations and income taxes attributable to our joint ventures with Carrier, which are primarily taxed as partnerships for income tax purposes; therefore, Carrier is responsible for its proportionate share of income taxes attributable to its share of earnings from these joint ventures. The increase in the effective income tax rate was primarily due to lower share-based compensation deductions and reduced tax credits, including purchased tax credits, combined with lower earnings in 2026 as compared to 2025. Net Income Attributable to Watsco, Inc. Net income attributable to Watsco, Inc. for the first half of 2026 decreased $21.3 million, or 8%, compared to the same period in 2025, primarily due to lower gross profit and higher selling, general and administrative expenses, partially offset by lower income taxes and a decrease in the net income attributable to the non-controlling interest. Liquidity and Capital Resources We assess our liquidity in terms of our ability to generate cash to execute our business strategy and fund operating and investing activities, taking into consideration the seasonal demand for HVAC/R products, which peaks in the months of May through August. Significant factors that could affect our liquidity include the following: •cash needed to fund our business (primarily working capital requirements); •borrowing capacity under our revolving credit facility; •the timing and extent of sales of Common stock under our at-the-market offering program; •the ability to attract long-term capital with satisfactory terms; •acquisitions, including joint ventures and investments in unconsolidated entities; •dividend payments; •capital expenditures; and •the timing and extent of Common and Class B common stock (collectively “common stock”) repurchases. 22 of 28 Table of Contents Sources and Uses of Cash We rely on cash flows from operations and borrowing capacity under our revolving credit agreement to fund seasonal working capital needs and for other general corporate purposes in the short-term and the long-term, including dividend payments (if and as declared by our Board of Directors), capital expenditures, business acquisitions, and development of our long-term operating and technology strategies. Additionally, we may also generate cash through the issuance and sale of our Common stock. We believe that the combination of our operating cash flows, cash on hand, short-term cash investments, available borrowings under our revolving credit agreement, and funds available from sales of our Common stock under our 2024 ATM Program, each of which is described below, will be sufficient to meet our liquidity needs for the foreseeable future. However, there can be no assurance that our current sources of available funds will be sufficient to meet our cash requirements. As of June 30, 2026, we had $364.2 million of cash and cash equivalents, of which $108.8 million was held by foreign subsidiaries. The repatriation of cash balances from our foreign subsidiaries could have adverse tax impacts or be subject to capital controls; however, these balances are generally available to fund the ordinary business operations of our foreign subsidiaries without legal restrictions. We also had $100.0 million of short-term cash investments as of June 30, 2026, which consisted of a certificate of deposit that matures in September 2026. Our access to funds under our revolving credit agreement depends on the ability of the syndicate banks to meet their respective funding commitments. Disruptions in the credit and capital markets could adversely affect our ability to draw on our revolving credit agreement and may also adversely affect the determination of interest rates, particularly rates based on the Secured Overnight Financing Rate, which is one of the base rates under our revolving credit agreement. Additionally, disruptions in the credit and capital markets could also result in increased borrowing costs or reduced borrowing capacity under our revolving credit agreement. Working Capital Working capital increased to $2,374.3 million at June 30, 2026 from $2,236.8 million at December 31, 2025, reflecting 25 new locations added by the acquisition of Jackson on June 1, 2026, which added $63.8 million of working capital. Excluding these new locations, working capital increased to $2,310.5 million due to: (i) higher inventory driven by the seasonal ramp-up in inventories in connection with our selling season; and (ii) higher accounts receivable, partially offset by lower cash and short-term cash investments. Cash Flows The following table summarizes our cash flow activity for the six months ended June 30, 2026 and 2025 (in millions): 2026 2025 Change Cash flows used in operating activities $ (21.4 ) $ (185.1 ) $ 163.7 Cash flows provided by investing activities $ 191.8 $ 222.3 $ (30.5 ) Cash flows used in financing activities $ (237.4 ) $ (274.2 ) $ 36.8 The individual items contributing to cash flow changes for the periods presented are detailed in the condensed consolidated unaudited statements of cash flows contained in this Quarterly Report on Form 10-Q. Operating Activities Net cash used in operating activities was lower primarily due to the timing of vendor payments and a lower increase in inventory, which were partially offset by an increase in accounts receivable due to higher sales in 2026 as compared to 2025 . Investing Activities Net cash provided by investing activities decreased primarily due to lower net proceeds from certificates of deposit that matured in 2026 as compared to 2025. Financing Activities Net cash used in financing activities decreased primarily due to the timing of distributions to the non-controlling interest offset by increased dividends in 2026. Revolving Credit Agreement We maintain an unsecured, five-year $600.0 million syndicated multicurrency revolving credit agreement, which may be used for, among other things, funding seasonal working capital needs and for other general corporate purposes, including acquisitions, dividends (if and as declared by our Board of Directors), capital expenditures, stock repurchases, and issuances of letters of credit. The revolving credit facility has a seasonal component from October 1 to March 31, during which the borrowing capacity may be reduced to $500.0 23 of 28 Table of Contents million at our discretion (which effectively reduces fees payable in respect of the unused portion of the commitment). Included in the revolving credit facility are a $125.0 million swing line loan sublimit, a $10.0 million letter of credit sublimit, a $75.0 million alternative currency borrowing sublimit, and a $10.0 million Mexican borrowing subfacility. The revolving credit agreement matures on March 16, 2028. At June 30, 2026 and December 31, 2025, there was no outstanding balance under the revolving credit agreement. The revolving credit agreement contains customary affirmative and negative covenants, including financial covenants with respect to consolidated leverage and interest coverage ratios, and other customary restrictions. We believe we were in compliance with all covenants at June 30, 2026. At-the-Market Offering Program In May 2024, we entered into an amended and restated sales agreement with Robert W. Baird & Co. Inc. (the “2024 ATM Program”), which enables the issuance and sale of Common stock for a maximum aggregate offering amount of up to $400.0 million. At June 30, 2026, $400.0 million was available for sale under the 2024 ATM Program. The offer and sale of shares under the 2024 ATM Program have been registered under the Securities Act pursuant to our automatically effective shelf registration statement on Form S-3 (File No. 333-282975). Investment in Unconsolidated Entity Carrier Enterprise I has a 38.4% ownership interest in RSI, an HVAC distributor operating from 36 locations in the Western U.S. Our proportionate share of the net income of RSI is included in other income in our condensed consolidated unaudited statements of income. Carrier Enterprise I is a party to a shareholders’ agreement with RSI and its shareholders (the “RSI Shareholders’ Agreement”), consisting of five Sigler second generation family siblings and their affiliates, who collectively own 55.4% of RSI (the “RSI Majority Holders”) and certain next-generation Sigler family members and a RSI employee, who collectively own 6.2% of RSI (the “RSI Minority Holders” and, together with the RSI Majority Holders, the “RSI Shareholders”). Pursuant to the RSI Shareholders’ Agreement, the RSI Shareholders have the right to sell, and Carrier Enterprise I has the obligation to purchase, their respective shares of RSI for a purchase price determined based on the higher of book value or a multiple of EBIT, the latter of which Carrier Enterprise I used to calculate the price for its 38.4% investment held in RSI. The RSI Shareholders may transfer their respective shares of RSI common stock only to members of the Sigler family or to Carrier Enterprise I, and, at any time from and after the date on which Carrier Enterprise I owns 85% or more of RSI’s outstanding common stock, it has the right, but not the obligation, to purchase from the RSI Shareholders the remaining outstanding shares of RSI common stock. At June 30, 2026, using the criteria set forth in the RSI Shareholders’ Agreement, the valuation of the RSI Shareholders’ RSI common stock was approximately $472.0 million. On July 28, 2023, Watsco, Carrier Enterprise I, and the RSI Majority Holders entered into an agreement that (1) provides Carrier Enterprise I the discretion, but not the obligation, to fund up to 80% of any purchase from the RSI Majority Holders of their RSI common stock, as required under the RSI Shareholders’ Agreement, using Watsco Common stock (the “Offered Shares”), (2) provides that any Offered Shares actually issued would be valued based on the average volume-weighted average price of Watsco’s Common stock for the 10 trading days immediately preceding the payment date for the applicable RSI shares, and (3) limits the amount of RSI shares that may be collectively sold by the RSI Majority Holders to Carrier Enterprise I under the RSI Shareholders’ Agreement to $125.0 million during any rolling 12-month period. We have not issued or sold any Offered Shares, and there is no assurance that we will issue and sell any Offered Shares, nor is the number of Offered Shares that may be issued and sold currently determinable. We believe that our operating cash flows, cash on hand, short-term cash investments, funds available for borrowing under our revolving credit agreement, or proceeds from the sale of Common stock under the 2024 ATM Program would be sufficient should the purchase of any additional ownership interests in RSI be made in cash pursuant to the agreement described in the preceding paragraph. Acquisitions Jackson Supply Company On June 1, 2026, we acquired substantially all the assets and assumed certain of the liabilities of Jackson, a distributor of residential HVAC equipment and supplies with annual sales for the year ended December 31, 2025 of approximately $230.0 million, operating from 25 locations across Sunbelt markets in Texas, Louisiana, Tennessee, Alabama, Mississippi, Oklahoma, and Arizona. We formed a new, wholly owned subsidiary, Jackson Supply, LLC, that operates this business. Consideration for the net purchase price consisted of 517,884 shares of Common stock having a fair value of $186.2 million, net of cash acquired of $7.7 million. 24 of 28 Table of Contents Southern Ice Equipment Distributors, Inc. On May 1, 2025, one of our wholly owned subsidiaries acquired SIE, a distributor of food service and ice machine equipment, parts and supplies, operating from seven locations in Arizona, Arkansas, Louisiana, Mississippi, New Mexico, and Texas. Consideration for the purchase consisted of $14.2 million in cash, net of cash acquired of $0.7 million, and 7,400 shares of Common stock having a fair value of $3.1 million, net of a discount for lack of marketability. Hawkins HVAC Distributors, Inc. On April 1, 2025, one of our wholly owned subsidiaries acquired Hawkins, a distributor of residential HVAC equipment and supplies, operating from two locations in North Carolina and South Carolina. Consideration for the purchase consisted of $2.5 million in cash, net of cash acquired of $0.4 million. W.L. Lashley & Associates, Inc. On January 3, 2025, Carrier Enterprise I acquired Lashley, a distributor of commercial HVAC supplies, operating from one location in Houston, Texas. Consideration for the purchase consisted of $3.7 million in cash, net of cash acquired of $0.8 million, 1,036 shares of Common stock having a fair value of $0.5 million, and $0.8 million for repayment of indebtedness. Carrier contributed $1.0 million cash to Carrier Enterprise I in connection with the acquisition of Lashley. We continually evaluate potential acquisitions and/or joint ventures and investments in unconsolidated entities. We routinely hold discussions with several acquisition candidates. Should suitable acquisition opportunities arise that would require additional financing, we believe our financial position and earnings history provide a sufficient basis for us to either obtain additional debt financing at competitive rates and on reasonable terms or raise capital through the issuance of equity securities. Common Stock Dividends We paid cash dividends of $6.30 and $5.70 per share on common stock during the six months ended June 30, 2026 and 2025, respectively. On July 1, 2026, our Board of Directors declared a regular quarterly cash dividend of $3.30 per share on common stock that was paid on July 31, 2026 to shareholders of record as of July 16, 2026. Future dividends and/or changes in dividend rates are at the sole discretion of the Board of Directors and depend upon factors including, but not limited to, cash flow generated by operations, profitability, financial condition, cash requirements, prospects, and other factors deemed relevant by our Board of Directors. Dividend Reinvestment Plan In March 2024, we implemented the Watsco, Inc. Dividend Reinvestment Plan (the “DRIP”), under which existing shareholders may, in accordance with the DRIP, acquire up to an aggregate of 300,000 shares of each of Common and Class B common stock, as applicable, by reinvesting all or a portion of the cash dividends paid on such shareholders’ shares of common stock. The DRIP has been registered under the Securities Act pursuant to our automatically effective shelf registration statement on Form S-3 (File No. 333-282975). During the quarters ended June 30, 2026 and 2025, 9,456 and 16,553 shares of our common stock, respectively, were issued under the DRIP. During the six months ended June 30, 2026 and 2025, 19,346 and 30,495 shares of our common stock, respectively, were issued under the DRIP. Company Share Repurchase Program In September 1999, our Board of Directors authorized the repurchase, at management’s discretion, of up to 7,500,000 shares of common stock in the open market or via private transactions. Shares repurchased under the program are accounted for using the cost method and result in a reduction of shareholders’ equity. We last repurchased shares under this plan in 2008. In aggregate, 6,370,913 shares of common stock have been repurchased at a cost of $114.4 million since the inception of the program. At June 30, 2026, there were 1,129,087 shares remaining authorized for repurchase under the program.