Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Perhaps we can start with a quick introduction from your side as well. Maybe you could share your background, how you got to East Coast Metal Distributors back in the days, and why you left then.

I graduated with an accounting degree and had done an internship with Ferguson during my junior year. At that point, I decided I wanted to go into the business side and joined Ferguson Enterprises. I spent 20 years there, growing through operational roles. Then I got a chance to run a couple of markets, Columbia, South Carolina, and Raleigh, North Carolina.

On the plumbing side or the HVAC side?

We handled plumbing and HVAC. Back when I was there, it was more general. We dealt with waterworks, HVAC, plumbing, mechanical, and industrial sectors. Over time, those businesses were separated to better focus on the needs of the contractor. Then, I got an opportunity at Ferguson, which owned Stock Building Supply. I was in Raleigh and moved from Ferguson to Stock. Initially, it was a difficult move because I had spent 20 years with Ferguson and envisioned a long-term career there. However, looking back, it was probably the best move because I entered a different management level, came in at a senior level, and had to earn my way in. I realized that all the credibility I built at Ferguson didn't matter at Stock; I had to prove myself and earn my way in.

Both Ferguson and Stock were British-owned, so there was a lot of sibling rivalry, a bit of a green team versus blue team scenario. It took about six months, but I eventually earned my way in and became a valued member of the leadership team at Stock, also establishing myself in a new industry. In hindsight, it was a great move.

Then, during the 2008-2009 housing crisis, Stock went through a restructuring process and was ultimately sold by Wolseley. I wasn't part of the go-forward plan, and that's how I ended up at East Coast. I was recruited by a headhunter, interviewed with them, and came in as Executive Vice President of East Coast Metal Distributors. After nine months, I took over as President and COO of East Coast. The person I was working with took a larger role in a different division within Watsco.

So were you then responsible for the entire East Coast business?

Yes, the entire East Coast Metal business.

Was it still around 27 branches, or did they consolidate that down after acquiring the business?

Actually, it grew. They acquired a company called Three States Supply, which was a division of Baker, and then it got consolidated into East Coast. One of my main focuses as EVP, and later as President, was consolidating the two businesses. Three States was more of a metal fabrication company, so HVAC equipment was somewhat foreign to them. We had to go through training and education to get them comfortable and become a value-add partner across the Mid-South. Three States was actually in about five or six states, but they were a good company, and after a couple of years of transition, they became a very strong player in the East Coast Metals business model.

How did you end up leaving?

After about five years, one of the things I learned at Ferguson was to ignore recruiter calls, viewing them as a nuisance. However, after my exit from Stock, I realized I probably should have taken those calls to understand the landscape better. Then, I received a call from a private equity-backed company in the restaurant equipment distribution space, which intrigued me. Despite private equity's bad reputation, which I often refer to as vulture capital rather than private equity, I became comfortable. I brought in a couple of guys, specifically one I worked with at Ferguson, who was part of my succession plan. They were ready and it was a good opportunity for them. I found the private equity side intriguing, so despite my initial reluctance and turning down the offer the first time, stating that I was not unhappy and liked what I was doing, they came back and I eventually made the jump. There were no issues, problems, or frustrations; it was simply a good opportunity. The company was based in North Carolina and we grew it quite significantly.

Since we are on that topic, as president of East Coast, I assume you were eligible for this unique structured equity incentive plan of Watsco. If I'm not mistaken, your RSUs must have essentially been worthless after you left the company, or am I wrong there?

Yes. Because I left, there were some options that I still have, but most of the restricted shares I had, grants and so forth, I couldn't take with me. So they stayed with the company.

On that topic, how do you view those unique equity incentive plans today? Would you say it's bad that they structured it in such a unique way, or would you say it's okay?

I think it rewards loyalty. I could say I wish I could have taken it with me because it has performed very well. But I understood that, and it was part of the exit process.

You were not upset about it?

No, I knew what I was getting into as I went through it. It wasn't a case of them taking it away from me; I was aware when I made the decision.

So, you were knowledgeable about what to expect when you signed up for it. It wasn't a surprise.


To get back to your role at East Coast, who were you reporting to as president of East Coast?

I reported to the Chief Operating Officer at Watsco. The structure was very lean at the corporate office, so there were about five key people, the CFO, the president, Paul was the operations/marketing guy and then an investment guy. I interacted with all of the key leaders up there. I reported directly to the COO for Watsco. There was some transition and in the end, I reported to the president. So some of those structures reporting lines changed a little bit over the couple of years.

Could you point out any circumstances at East Coast Metal Distributors that were very different compared to other subsidiaries of Watsco? Or would you say that each subsidiary is managed differently, but at the end of the day, their book of business is pretty comparable?

Yes, I'd say they are very similar. Obviously, our OEM brand was different than the other subsidiaries.

Goodman, right, like Daikin Industries, Goodman, and so on.

Yes, Daikin, Goodman, Amana. But overall, I would say the structure has evolved. When I was with East Coast, we were very balanced between equipment and the supply side, maintaining a 55-45 ratio. It was always critical to be a one-stop shop for the contractor. That way, if the contractor had an allegiance to another OEM brand, I could still capture some of their business on the supply side. The advantage with Goodman was that every contractor installed Goodman. From a value competitive landscape, Goodman was always that brand that offered good value, a good product, and a better price than the other OEMs in many cases.

If I look at the different branches, how large would a typical top 1-5-10 contractor be for a single branch? Is it a very concentrated customer base in each branch because some contractors are so large in their markets, or is it pretty diverse?

It's very diverse and fragmented from a contractor standpoint. You have big national companies like Comfort USA and other multi-territory companies that have expanded into various geographies. Then you have what I call 'Chuck in a truck', a one-truck guy who doesn’t have a brand like Trane or Carrier on the side of his truck and does a lot of service work. Many contractors are focused on new construction, but during the recession, many had to transition to more service work to better balance their businesses.

However, there are still many who are very good at new construction. A lot of contractors don't like going back into someone's house because their technicians are not geared for that. For a service contractor, they have to be more mindful of entering a finished home with carpets, furniture, and such, and they have to treat that a lot differently than new construction where they might track mud and not really care.

So, yes, I'm building myself right now. I know what you're talking about. It's a different kind of construction site if you are rebuilding compared to having a new construction site. But if you have those multinational or multi-territory companies, would that be a big chunk of your book of business? I'm just trying to understand how much power or how much bargaining power a single, large client can have on a single branch.

The private equity side has consolidated, particularly favoring the service side, such as plumbing and HVAC, with significant consolidation in the private equity-backed HVAC service sector. There is some strength in price negotiation, but ultimately, they must perform effectively. They need access to production, installation capabilities, and job completion. They are highly dependent on local market branches and distributors to supply the necessary materials, especially in the service sector, which involves numerous nuances compared to the more straightforward new construction.

So, the support side, like identifying and fixing issues, is significantly more challenging?

Yes. Additionally, as technology advances, many contractors rely on their distributors and OEMs to keep up with new SEER ratings and electronic Internet thermostats. The introduction of Wi-Fi thermostats faced resistance since the average technician did not understand them. Brands like Nest had to bypass contractors and market directly to homeowners, who then needed contractors to install their Wi-Fi thermostats. However, the connected home is now a reality, integrating not just HVAC systems but also home security and other Wi-Fi-enabled products.

Could you provide a rough estimate of the average revenue a contractor might generate with a branch?

The average revenue is probably between $200,000 and $500,000 annually.

You mean the revenue from both equipment and other products they purchase from your branch?

Yes, that's correct.

And a really large contractor?

A really large one could generate up to $5 million.

And you mentioned a ratio of 55 to 45, equipment to supply, roughly. If I'm getting that right, it sounds very different to Watsco’s book of businesses. Their ratio is something like 70:30?

Yes, that's correct.

Why do you think other business units have a heavier focus on equipment?

It varies, likely due to the commercial sector, where equipment is a bigger ticket item. In aggregate, considering East Coast, we were primarily residential. In commercial settings, fewer supplies are purchased, and the units have higher dollar values.

When you consider ductless and mini-split systems, they require fewer supplies than the unitary systems did. This likely skewed the numbers to some extent.

Could you give me a ballpark estimate of how much you sold into residential compared to commercial? It's generally more light commercial, right?

Yes, it's predominantly light commercial. From an East Coast standpoint, we were at 90% to 95% because, when I was running East Coast Metal Distributors, Daikin and Goodman didn't have the commercial units that Carrier or Trane had. We were dealing with five to ten-ton units and rooftops, and we just didn't have the product breadth to offer to commercial contractors at that time.

On a rough scale, can you say what's going into residential and commercial? Do you have any estimate?

I probably wouldn't have a credible number that I could provide. I think they're still predominantly residential, though. Across the country, a large percentage of their business is residential.

Yes, that's fair. It fits at least what they say, and I have no further number on it.

Yes, and I think the replacement side is 75% to 80%. Replacement is still the bigger part of the market.

Okay. Yes.

With Covid and what happened there, the business really performed well. A lot of people were staying home and didn't want their units to break down. There were a lot of technology and efficiency gains. I upgraded my system back in 2020 and saw a significant drop in my energy cost with a higher efficiency system.

When you talk about supply, like other HVAC products, not the equipment sales, would that be mostly repair parts? Or would it also include complementary products like ductwork, piping fittings, and specific parts of a unitary or split system on the replacement side?

Yes, that varies a lot. When I replaced my system, I just replaced the units and not the ductwork. However, with issues like mold, a lot depends on the contractor. If they're good at selling value, they usually do a good job of assessing the home's requirements. Your average contractor is focused on replacing the unit and may not consider what's inside.

Yes, probably it's an upgrade for you as a homeowner anyway because you're saving on energy. In the end, it's a significant part of the cost.

Yes, they're making a decision at the kitchen table on, you know, a significant expense, probably the most expensive thing they'll put into a home. If you don't replace ductwork, there are efficiency gains with the new microbial ductwork, and that kind of stuff does make for a healthier home. A lot of technology that's come on, like UV lights.

UV lights were difficult to get a homeowner to invest in until Covid. Once they understood the benefits of UV lights, then all of a sudden, I know I put UV lights in and had no problem getting replacement bulbs. Covid hits, and I was on a six to eight week delay. The manufacturers just couldn't keep up with the demand that was going on. Home health is very important.

Switching gears a little bit, how many OEMs does a typical contractor work with?

A lot.

I mean, they may be focused on one, but they sell basically all of them, right?

They do. Years ago, the OEM would frown upon that if they got caught selling another piece of equipment, but that has transitioned. The average contractor, probably at the end of the day, installs almost every OEM based on what the homeowner is looking for. If they're looking for a direct replacement, then they might go for it. But if they can sell them on a different piece of technology, the OEMs have even transitioned there. They give a lot of marketing funds. To be a Trane or Carrier dealer in the market, they have to, I think today, as I understand, have a high percentage of Carrier product that they sell, but they're not as restricted on selling other products, other brands, OEM brands.

For replacement, and again, that's the differentiator. If it's new construction, they're probably out front sticking with their OEM brand.

Is it?

Yes, I think because a lot of large builders have rebate programs with OEM, and I think they have to stick to compliance so that they can get their co-op funds or rebate funds.

But the average contractor, would he have a preference for any reason for a specific, like, I don't know, house OEM he's selling because he's used to it or for whatever reason?

I think there are monies, advertising monies they get that drives some loyalty and compliance.

There are some that are loyal to a brand from a technology standpoint. They're techs and servicing a said product, but there's less loyalty today than there was ten years ago, 15 years ago.

If you had to make an estimate, how many contractors would sell only one single brand?

That's very low. Probably 10%.

Could you explain what a typical manufacturer's warranty looks like and what warranty aspects the contractor, the distributor, and the OEM are each responsible for? It seems quite complex, and no contractor really wants to be part of it, but ultimately, they all are.

Yes, I can provide an example with Goodman. Goodman offers a five-year warranty, which doubles to ten years if you register the product. They also offer a labor warranty, which is less than two years or one year, during which they reimburse for labor. Additionally, a contractor can sell an extended labor warranty to the homeowner. The process involves the contractor receiving a phone call, going out to assess, calling Goodman for approval, and then getting paid by Goodman to perform the repair under that labor warranty.

And that labor cost is also reimbursed by Goodman, then?

By the OEM? Yes. Once it's outside of the labor warranty, the parts are still covered under warranty, but the homeowner pays for the labor unless the contractor has added an extended labor warranty. Some contractors use this as a marketing tool because it gives them access to the home and potential for additional revenue. However, most OEMs are fairly consistent in how they reimburse for warranty claims on their products.

Does the distributor get involved at any point in the warranty process?

No, we might act in good faith if we see something that the OEM should cover but doesn't, but that is all discretionary. The distributor does not get involved in the labor side.

But in terms of parts, if something is broken, the contractor still has to get the parts from the distributor, right? He manages all that with the OEM and gets reimbursed by the OEM, correct?

Yes, they get reimbursed for both labor and parts. We sell them the part so they can go out and perform the repair, and they receive their labor or part credit back.

Did you have any tools from Watsco that you used at East Coast? It's a significant player, always at the forefront of technology in the industry.

Yes, they are true to what they say. They are definitely advanced in technology, including BI tools, e-commerce, and mobile app technologies. For example, a contractor could scan the barcode on a piece of equipment, get a parts explosion, identify the part, and then order it directly from their phone thanks to the technology that Watsco had created. OnCall is another network-based service that gives contractors access to service calls. This is based on the homeowner registering and it feeds them leads for jobs and so forth in the marketplace. E-commerce is definitely an area where Watsco made significant investments.

Let's quickly return to the warranty aspect. Let's consider a practical example. Suppose I have a three-year-old air conditioning unit and I call my contractor, with whom I have a service agreement. What happens then? Who pays for what in that process?

Depending on the OEM brand and its warranty, if it's under warranty, the contractor informs the homeowner that they need to contact the OEM. They get confirmation from the OEM that it's under warranty and that they will be reimbursed. Then, they repair the equipment and submit the service claim via technology to get reimbursed.

Does this technology come from Watsco or the OEM, or elsewhere?

It comes from the OEM. Depending on the situation, some of them have 800 numbers that they call, and they have a service desk that confirms the unit is under warranty. The OEM just wants to ensure that it was installed by a licensed contractor and that the warranty was applied for, and that it's a registered piece of equipment.

When you were at East Coast, was there a specific type of contractor you targeted, either very small or large contractors for any reason? Or would you say there was a specific, very attractive group of contractors you were after?

No, we targeted both big and small contractors. We aimed to have a relationship with as many contractors in the market as possible. We were very relationship-driven. The more tools you have to offer the contractor, the better. I believe that some of the technologies Watsco invested in and developed are differentiators in the market. They allow you to distinguish yourself differently than just having a piece of equipment or ductwork. You have something else that makes it easier for the contractor to do business.

Today, contractors are bringing in younger technicians. I referenced the Wi-Fi pushback earlier; a lot of it was from older techs who weren't comfortable with the new technology. Initially, there was a lot of resistance because the technicians wouldn't use it. Today, acceptance is much higher.

Would you say it's a competitive advantage compared to other independent distributors to have that technology, considering others might not have the scale to invest in such technologies? Or would you say it's not that significant of an edge?

I think it is an advantage. I probably couldn't wait. Even my old cohorts at Ferguson made reference to Watsco's technology investments and how Ferguson spreads their technology over eight different business units. It was tough to really get them to invest in some of the stuff that Watsco was singularly focused on the HVAC side. I think it brought a lot of advantages to Watsco to build and focus their technology development on HVAC as opposed to trying to spread it across multiple business units.

And what levers were you able to pull as a president to grow the business with certain contractors? Did you have any strategies or tools you focused on to grow with a particularly successful customer? What did you do about it?

Most of the levers were related to service relationships. To some extent, some credit terms, maybe extended billing terms. But most of it, at the end of the day, was the basics of distribution, product availability, location, and access.

A contractor could have convenient locations to access product delivery, and express will-calls, so that a contractor could place his order via e-commerce. Then his order could be pulled and staged so that he doesn’t spend an hour at the counter waiting for it. The big contractors liked bypassing the traditional walk up because they were able to leverage the technologies and skip the slow counter. I figure it was supply chain efficiency and availability, having the products that they need when they need it.

Any volume rebates you could offer them?

Yes, there were some things we worked out based on growth and hitting volumes and so forth, where they would earn rebates.

And would you get reimbursed for those rebates by the OEM? Or would that be on your book of business? Like, would your gross margin shrink, but you had better revenue, so a bigger chunk of business in the end anyway? Or would it be reimbursed by the OEM?

The relationship we had with the OEM allowed us to get reimbursed for some of it, maybe not all of it, depending on how aggressive, but they were very supportive in growth opportunities and co-op rebate programs to help offset it. As long as the OEM saw the growth and we could lay it out and show them the report card on what we were doing. That was the other thing, again with the BI tool that Watsco invested in, we could measure things very effectively and that meant a lot to the OEMs. They had trust in our data.

Can we switch topics a little bit and get to the competitive positioning of the OEMs. If we look at the residential HVAC market, can you name the key relevant players? I think it's just a few. And can you give me any indication of what your estimate of market share would be?

Yes, so Carrier, Trane, Rheem, Lennox, Daikin/Goodman, and I'm sure I've left a couple out, but I know for a long time Goodman had the largest market share. I think they were in that mid-23% to 25% market share. But as for the other OEMs, that has shifted because of consolidation and technologies and so forth. So I wouldn't have a stab at that.

Are you aware of any shifts in market shares over time among the OEMs in that market? For example, has anyone obviously grown their share or suffered competitively?

Not really. Lennox was one of them. They publicly reported growing market share over a number of years. Daikin has also done very well, especially with their consolidation of U.S. manufacturing. I think they have grown, but I probably couldn't speak to that in detail. I know they have all benefited from the growth of the HVAC side over the past five years.

Yes, definitely.

That was one industry that really saw a boon from the impacts of Covid.

From a distance, it appears that, in the end, it's a pretty stable industry. There are some shifts here and there, but over the long run, there isn't much movement. It's still the same players. Maybe Daikin made its way in a few decades ago, but generally, there isn't much movement, like any outsider getting into the market.

Right, that's fair. I see a very stable and resilient industry, especially from the replacement market. The drivers there will keep HVAC healthy with an 80/20 mix, 80% replacement if new construction slows. It just doesn't have a dramatic impact.

Are there any disruptive technologies that you see could disrupt the market at some point?

No, I think the OEMs, as the government and EPA come out with new standards, are given time to ramp up and develop. I don't see anything there. Trane kind of went through a transition when they were bought and then settled back down again. I saw them probably being the one that got disrupted. But in the last ten years, they've come back extremely strong. Once they settled their management and focused on what they were keeping up with. The ductless side of things has picked up steam in the U.S. What is standard everywhere else is sometimes slow to adopt. But even the ductless side of things in the U.S. has picked up steam pretty quickly.

What would you say is the key reason why no low-cost Asian OEM has been successful in entering the HVAC market in the U.S.? Is it just trust in brands or something else?

Yes, I think the OEMs have done a good job. A lot of what Carrier makes is manufactured in Mexico. But I think the bulkiness of the unit makes importing and the technology of the unitary product unique to the North American market. On the ductless side, there are a lot of Chinese manufacturers that are bringing products efficiently into the U.S. market. Gree and Midea make a significant amount of product, but they private label a lot of it for domestic manufacturers. So, I think the ductless side probably had the biggest impact, but it was slow to adopt with the North American consumer.

Do you expect anything to change in the long run with regards to unitary products versus ductless or anything like that?

No, I think the unitary market is well-established, and the technologies and efficiency gains are evident. However, the ductless side is becoming very creative. It's no longer just a box on a wall. I have a house in Virginia where I've installed a ductless system about ten years ago. Growing up, we didn't have any HVAC or air conditioning. Back then, they were large boxes hanging on the wall, but today, you can have ceiling trays, and they've become very creative in how the product looks and feels in a home.

Regarding the distribution model, Lennox's distribution is almost 100% company-owned. Trane seems to be roughly 50-50. Carrier is almost entirely independent, right, with a significant chunk of business with Watsco. But generally, aside from Carrier, company-owned distribution seems to be somewhat at the forefront. Can you elaborate on why that is, or discuss the pros and cons?

Yes, I understand. When I was running East Coast, Goodman had a company-owned model and primarily stayed in the big MSAs, like Atlanta. The Carrier model demonstrated that they weren't good at distribution, which led to the transition of their distribution side, making them a better OEM.

However, OEMs like Daikin have continued to invest and consolidate that piece. In my opinion, Goodman was good at the equipment side, but it became about supply. At East Coast, we were a full-stop shop, and a lot of the company-owned distribution was just equipment. It's been interesting to watch. I agree that it seems like everyone else continues to develop that model. Watsco, in particular, has done a great job with technology investments, making themselves a value-add different from the traditional distribution model.

So, the basic assumption would be that Watsco might be gaining share from other independent distributors because they excel at what they do and are a good partner to Carrier. But Carrier wouldn't go direct to challenge that again because their past experiences haven't been favorable.


And they're somewhat restricted by their joint ventures, I guess.

Yes, never say never, right? But I do think that memory is still in their minds. However, the fact that everyone else continues to develop that model suggests that at some point, they may have to reevaluate that strategy.

Are you aware of any historical precedents where an OEM went direct to contractors without acquiring the independent distributor who previously handled that business?

I'm not aware, no.

No, I'm not aware of that either. Okay, moving topics once again, let's discuss the organizational structure. How would you describe the organizational structure of East Coast when you were leading that business?

What aspect are you referring to?

Was it more centralized or decentralized? For instance, Watsco describes its structure as decentralized to the business unit level. How was it managed at East Coast?

I understand. From an East Coast standpoint, we had centralized IT, HR, and many administrative functions. Credit was centralized in the corporate office, but customer delivery and interfacing services were very decentralized. We had a regional management structure with eight regionals managing eight territories, each with a unique number of units and salespeople. We aimed to centralize non-value-added functions that a branch shouldn't have to worry about, such as credit extension and HR. We wanted all administrative functions related to human resources to be centralized and managed from the corporate office.

When you say "corporate office," you mean the Watsco office, not specifically the East Coast corporate office?

No, because East Coast had its own corporate office.

I just wanted to clarify that. Thank you.

Yes, that was part of the decentralization that Watsco talks about. They allowed East Coast, Gemaire, and Baker to operate independently from each other. They let us run our businesses while providing some corporate functions like finance. However, most day-to-day interactions with the field and our customers occurred within the East Coast brand.

What were the key performance indicators (KPIs) that were most important to you in determining the variable pay for you and the people at East Coast?

The KPIs for any distributor include top-line sales growth, gross profit margin, and the ability to differentiate between equipment and supply side. We managed these components very efficiently on a day-to-day basis, focusing on sales per head, gross profit per head, and EBITDA per head. We evaluated each independent location based on these simple criteria. We also looked at overhead to ensure we didn't have a business unit that was unnecessarily too high or too low. We had a few very lean operations where we always worked with the business leader to ensure we weren't one person short of being unable to service the marketplace efficiently.

Did the Watsco corporate office get involved in any aspect of the organization at East Coast?

Yes, they were involved, particularly in assisting with vendor relationships. We published our monthly performance, and they would have questions about margins, top-line growth, CapEx, and other aspects from a budget and strategic plan review. There was probably more sharing among the business units today. However, they were very respectful of the different OEMs because we competed in the market against Gemaire, Baker, and other Watsco brands. Part of the uniqueness that Watsco has, with multiple OEMs in a market, was ensuring the OEM trusted that we weren't sharing cost or any competitive intelligence that would disadvantage the OEM. They were very diligent in making sure that didn't happen.

Where do you see, or have you seen, room for improvement regarding the organizational structure of East Coast or Watsco?

I like their model. I mean, I appreciate the decentralized approach. Often, corporate companies absorb a lot of the day-to-day for strategic benefits. However, I really like Watsco's model of allowing tactical plans to be managed at the local level and their investment in technology. Technology can overlay all the companies very efficiently. The BI tool they developed uses the same platform. Instead of all the businesses trying to get on the same ERP, which would be very costly and disruptive, they just set the BI tool on top of that. They got the data structures right so that the BI tool could pull the data, and now you can do comparables very efficiently.

From that standpoint, Watsco has kept their structure very nimble and efficient. I've always said their corporate office was very lean. They didn't have large corporate structures and all that kind of stuff. Chiefs telling chiefs what to do. They're very efficient at how they structure.

Who would you consider to be the key decision-maker? It's Albert Nahmad, right?

Yes, I think Albert, and AJ Nahmad has taken on a bigger role within the company, but Paul, Barry Logan, and Ana Lopez-Blazquez are all a part of that. But the key decision-maker is Albert for sure.

And AJ is probably set to be his successor?

I think that's a fair assessment. Yes, he's done a great job. He has come in and evolved the culture in a very positive manner as it has evolved. He's definitely put his mark there.

How would you characterize each of their two leadership styles if you are able to express your opinion?

That's a good question. I'd say Albert is a driver, if you will. He wants performance and sets pretty high expectations, then he's very supportive with it. I think AJ is more collaborative. That's a piece he's brought to it. But both have high expectations for the company and performance, maintaining that market or industry-leading position. Embracing the technologies as they invested in a lot of that stuff, acceptance, and making sure we were out in the marketplace driving it, was key. It wasn't just a tool that sat on the shelf.

Maybe just two closing questions then, regarding time. The first one would be a little mind game. Let's assume it's 2027, and while the economy is doing great, Watsco has suffered a decline in sales over the years. Say their sales are, I don't know, 20% below today's levels. Let's say that's a given fact. What would you consider to be the reason for that substantial decline?

The market.

The economy, the market is doing well. It's just Watsco who has declined.

I just can't fathom that, considering whether it was an existential issue with working capital or something that caused the company to shift its focus. The only aspect, as you mentioned earlier, would be if the OEMs ramped up and there was some change in dynamics there. But I just can't see that happening. I couldn't imagine that being the case in 2027.

My last question is quite simple. What would you consider important that we haven't discussed? Is there anything you would point out for us to look at?

No, I think you've done a good job covering the entirety of the industry. However, I believe the continued advancement in technology, driven by EPA and government regulations, is crucial for the efficiency standards. We're still looking at a seven-year lifespan for equipment. Another point is the acceptance and adoption of technology, like ductless systems, which are gaining strength. But the acceptance and adoption of technology takes time. I think many people still don't utilize the technology that's available. For instance, my wife gets frustrated with me because I'm focused on ensuring we're efficient in what we're doing. As an example, we invested in a high-technology piece of equipment, so let's use it properly. It's like buying a car and not using the automatic temperature control.