Pool Corporation (POOL) Earnings

Management highlights

Industry in stabilization, consumer discretionary demand measured but installed base drives steady maintenance activity. Q1 is smallest and weather-sensitive. Team delivered solid start with sales growth 6%, operating income growth 7%, operating margin expansion 10 basis points. Reviewing sales by geography: California grew 10%, Texas 7%, Arizona 1%, Florida -1%. Other key businesses: Horizon net sales declined 2%, Europe local currency sales grew 5%. Teams adapted to local conditions. Disciplined on sales center expansion, focusing on leveraging existing investments. Pool360 increased net sales share. Full-year diluted earnings per share range 1087 to 1117 including 2 cents of ASU benefit in Q1.

Guidance

Confirming full-year diluted earnings per share range of 1087 to 1117. Expect 1 to 2% pricing benefit for full year 2026. Top-line performance expected to be low single-digit growth on same selling day basis. Expense growth to moderate on quarter-over-quarter basis in 2026. Projected interest expense range $49 million to $51 million. Estimated full-year tax rate approximately 25%, second quarter rate approximately 25.5%. Guidance includes $0.02 ASU tax benefit recognized in first quarter.

Segment performance

Chemicals grew 8% on strong volume with standout contributions from proprietary and private label lines. Building material grew 5%. Equipment grew 7%. Commercial was flat for the quarter but exited with slight growth. Sales to independent retail customers grew 3%, and Pinch-a-Penny franchisee sales to their end customers grew 4% with seven new independently owned franchise locations opened in the quarter. Pool360 increased to 13% of net sales in the first quarter, up from 12.5% a year ago.

Analyst Q&A

• Q: Good morning, everyone. Good morning. Good morning, Pete. My first question is on your ability to realize the return on investments that you talked about coming into this year. As the pool season starts to come together, can you talk about your competitive positioning, what you're hearing from the sales centers and your customers in there, and just how you're thinking about that overall positioning as we move into the spring-summer?

  A: Sure. You know, when we think about getting ready for the season, we think about making sure that we have all of the sales centers ready for the surge of business that happens during the second and third quarter. That means that having the right inventory in the right location, having a staff that is fully trained and frankly excited about the season, having all of our new products ready to be introduced to customers, working really hard to on early buys to make sure that we have the product out in the field at our customers' locations, ready to sell, making sure that we have explained all of the new product offerings that are available to our customers so that they can help grow their business, and that our marketing programs are finely tuned to kick off the demand creation efforts that we do that are very unique in the industry. And then it's a matter of making sure that in the sales centers that our teams are ready for the surge of business and that we've taken advantage of the investments that we've made in capacity creation so that we get better every year. We have a performance-based culture, and every year there is a drive to make sure that whatever we did last year that we do better this year, whether it is our productivity levels in the sales centers, whether it is our efficiency in serving customers and how quickly we get them in and out the door. All of those things are part of the overall customer experience that we focus on. And especially with the newer locations that we opened up in the last couple of years, the newer ones are the ones that we pay the most attention to to make sure that they're ready to start without missing a beat.

• Q: Good morning. Pete, as you mentioned, I realize the first quarter is seasonally volatile, but we saw a couple of decent sized changes in some of the supplementary information you provided. So, chemicals staged quite a turnaround here. Florida, I guess it had been growing a little bit. Now it's down 1%, and California and Texas are booming. I'm just wondering if you can talk about those to the extent there's any signal there versus noise in the first quarter.

  A: Yeah, I'd be careful about drawing huge conclusions on first quarter, but I'll give you just a couple of things to think through. In terms of chemicals, first quarter is actually one of the quarters that So when you're trying to sell a program to a dealer, dealers typically don't convert during the season. They convert after the season, and then they would load their inventory into the stores for the upcoming season. So as you know, with our private label chemicals, our Regal and Easy Chlor lines, which we believe are best in class, especially when paired with the technology tools and the water testing apps that we have and water testing strips, everything for the integrated systems, I think we saw good traction from the dealers and specifically on the retail side that has helped our traction that we're seeing on the chemical side. And frankly, the teams are out hunting that business because I think we've got a great value proposition. When I look at California and Texas, California, I think, benefited a little bit from weather. California was pretty hot. in earlier in the first quarter, which is atypical. So that weather pattern helped. And I think the same was true for a bit of Texas. But again, it's so small and relative to the grand scheme of things that I don't know that I would draw a whole lot of conclusions from that. But I can tell you the team did a very good job of explaining the value proposition and winning share. at the dealers in the first quarter. And I think that's just a result of conveying a very strong message of the best value proposition in the industry.

• Q: Hey, everyone. Thanks for the question. Wanted to start with gross margin. Peter, Melanie, can you quantify the impact to gross margin from the customer pre-buy and then also the higher equipment mix? And the reason I ask is I think last quarter you guided gross margin slightly up year over year in the first quarter. So curious what was different versus what you thought.

  A: Yeah, so, you know, we're not going to provide a kind of detailed quantification of that. But if you think about, you know, what we have talked in kind of relative margins, so we generally will talk about kind of building materials, having the best margin, and then after that would be chemicals, and then after that would be equipment. So with the equipment being the higher portion of the first quarter sales and really kind of outgrowing our expectation, that's really where we saw some dilution of the consolidated margins.

• Q: Good morning. Thanks for taking my question. I guess I wanted to just ask about pricing and inflation and demand elasticity. And I guess in the past, where within the mix have you seen this sort of first appear? And do you feel your private label offering is sufficient breadth to maybe offset by capturing the down market shift? And would that downshift be margin accretive?

  A: Yeah, I'll take that one, David. It's the way我 wouldn't want anybody to position our private label as a down price offering. You know, we look at our private label and have intentionally focused on making sure that it is a very high quality product. So we're not actually selling it saying, hey, we're trying to make, you know, we're trying to have a cheaper offering. We're trying to have an offering that has tremendous value and is very high quality. I think, you know, when it comes to the inflation, where we have seen it, and I've commented on this before, obviously inflation drives the most prevalent in discretionary when you get into the cost of a new pool. And then when you get into on the maintenance side, there's some parts of maintenance that we would call semi-discretionary. You know, a pump and a filter, non-discretionary. If those need to be replaced or repaired, they have to be replaced or repaired. But you get into, you know, heaters and or lights, something like that. If somebody doesn't want to fix that, if there's one that needs to be replaced, you don't actually have to have that to continue to safely operate the pool. So in some areas, that's where we have seen some changes. decline in demand. But I would tell you that that's already in and baked in. So we're not seeing that either change materially from what we've seen over the last couple of years.

• Q: Thanks very much. I'm going to focus a bit on pricing. I guess, Melanie, for you, you know, you discussed that we're going to be lapping the tariff pricing that started in April last year. I'm just curious how we should think about that. Did that ramp much in the second quarter? Will we see that as a comp in the second quarter? Not really until we get to the back half. Just curious how we should think about the cadence and the impact of that since it's a full point in the guidance calculation.

  A: Yeah, so when you look at full year pricing, we are at the one to two, which is based on the current year increases. And so in the first quarter, we had that incremental one that was really the tariff price increases that we saw last year. In second quarter of last year, we did have some benefit from those price increases, so we will be lapping that. So at this point, for the remainder of the year, we would expect pricing to be more in that one to two, just reflecting the current year cost increases.

• Q: Oh, hi. Thank you. Just on the expectation that you have for operating expense growth to moderate, you mentioned improved operating leverage on recent green fields. I'm wondering if there's anything else besides that in the calculation. Are you expecting certain cost actions in addition to better operating leverage?

  A: Yeah, so, you know, we are focused on ensuring that the greenfields that we put into place, that we're continuing to get those up to fleet average. So there's our concentrated effort on that, which does drive operating leverage at those locations. And then along with that, you know, we are, you know, constantly kind of evaluating, you know, from both a seasonal standpoint and a market standpoint, you know, ensuring that we're operating, you know, effectively within our capacity creation efforts. So, you know, we've talked about utilizing the benefits of Pool 360. So, you know, looking at as we continue to increase our sales through Pool 360 at each location, you know, that gives us the opportunity to evaluate our operating model in those locations.

• Q: Awesome. Thanks so much. Just wanted to quickly dive into the inventory comment around new product introductions. Specific examples, but also, you know, are you doing any more say around like white label China import product? I just want to better understand some of the nuances there on the inventory line.

  A: Yeah, you know, our job as a distributor is to make sure that we have the best product offering for our customers, no matter where it comes from. So I wouldn't say that there is a – if you look at our private label products, much of that product is domestically produced, and there's some of it that comes in from import, and that's frankly always been the case. But our view on new products is not new products for the sake of lower cost, what we look for is new products that have new technology that help us expand the market. So we look for highest quality features and benefits that our customers and their customers would want to drive demand. So, I mean, in no way, shape, or form do we go out and look for, hey, I just want to find the cheapest pump, the cheapest filter. You know, if that was our goal, our product mix would be very different than it is today. We focus on having best product, highest quality, professional grade products that will help our customers grow their business.

• Q: Good morning. Thank you for taking my question. I just want to follow up on the equipment and the replacement cycle. Can you just put some numbers around what the useful life of the equipment is now? And just given that useful life, do you see a replacement cycle in the next couple of years just because we're coming up to five or six years post-COVID when there was a lot of demand?

  A: Yeah, let me characterize it like this. The life of, expected life of equipment varies tremendously. based on what the product is and the operating conditions that it's used, whether it's in a seasonal market or whether it's in a year-round market and whether the product is properly maintained or not and with weather events. In general, you know, part of the value proposition of a variable speed pump is that it runs instead of at full rate under full load all the time, it runs at a lower load, which extends the life. You know, it could extend the life by 30%, 40%, 50%. It really depends on many, many other factors. But in general, it has extended the lifespan of pumps. It doesn't really have much of an impact on, you know, on filters or anything like that. Heaters, you know, it's really a function of water quality more than anything else. If you maintain great water chemistry, that can extend the life. You could have a brand-new product with lousy water chemistry and destroy it very quickly. So, but in general, you know, we look at two categories for life expectancy changes that were by design, if you will. One is the variable speed pump. Certainly lasts longer than the single speed pump in the range of what I just discussed. And then if you look at LED light bulbs for the pool, you know, those certainly on an apples to apples basis are going to outlast an incandescent. So, since the time that both of those products were introduced, we see that they should be opportunity for that replacement market coming up.

• Q: Hi, guys. Thank you for taking my questions. Just first, can you talk about what you think drove the better early buy this year? Do you think customers are more worried about potential price increases, or do you think this is like a view that they're more optimistic on 2026?

  A: Yeah, I don't know that it was a fear of price increase. I think it's I think it's a couple of things. I think that early on in the year, there is always a fair amount of optimism because customers don't know what they don't know. And by nature, our customers tend to be fairly optimistic. So that's a portion of it. I think to scale it, when you look at some of these early buys, I don't know that there's any risk for any of the customers with an early buy. It's not like they're buying a year's worth of inventory. So they're buying some inventory to start the season. So I don't know that anybody is betting the farm on what they buy. So I would say it's a function of our sales efforts, the quality of our products, and how well we serve the customer more than anything.

• Q: This concludes our question and answer session. I would like to turn the conference back over to Peter Arvin, President and CEO, for closing remarks.

  A: Thank you all for attending today's call. We look forward to you joining us or joining our Investor Day webcast on May 12th. when our executive leadership team covers strategic initiatives and our long-term financial outlook in more detail, and on July 23rd, when we announce our second quarter 2026 results. Have a wonderful day. The conference is now concluded. Thank you for attending today's presentation.