POOL CORP Q1 FY2025 earnings call

Key Points

• Started Q1 with challenging weather in key markets but March showed improvement. Easter holiday fell in the second quarter this year vs. first last year. Maintenance product sales have durable demand.
• New pool construction and renovation affected by macroeconomic uncertainty and high interest rates, with dealers reporting wait-and-see pattern in large discretionary purchases.
• Exposure to tariffs is relatively small, less than 1% of revenue. Equipment area has biggest tariff impact.
• Implemented vendor price increases, with recent Pentair 4% increase effective June 2nd.
• Controlled operating expenses despite inflation and network expansion, with operating expenses increasing 2% in Q1.
• Strong balance sheet, improved day sales outstanding, and inventory balances increased.

Net sales were $1.1 billion. Maintenance product sales performed well, with chemicals showing volume and revenue growth including double-digit private label. New construction and remodel had continued effects of tight discretion but less drag. Geographic markets: Arizona saw a 2% increase in sales, California was flat, Florida declined 1%, and Texas had an 11% increase. Europe net sales declined 4% in local currency and 6% in US dollars. Horizon net sales declined 4% in the quarter due to deflation in PVC. Chemical sales were up 1% for the quarter. Building material sales declined 5%, while equipment sales (excluding cleaners) declined 4%. Commercial business sales increased 7%, independent retail customers declined 1%, and Pinch A Penny franchisees sales were flat. Pool 360 orders processed were close to 13% of total sales for the first quarter.

Affirmed full-year EPS guidance of $11.10 to $11.60. Expect in-season price increases to help offset slower start. Forecasted gross margin range 29.7% to 30%, considering internal initiatives. Sales forecast includes impact of tariff pricing and discretionary spend. Expenses expected to increase ~3% over prior year. Interest expense estimated $40-$45 million. Cash flow expected 90%-100% of net income, impacted by deferred tax payment in Q1 2025.

Challenging macroeconomic environment affecting new pool construction and renovation. Persistent high interest rates causing wait-and-see pattern in demand for large discretionary purchases. Competitive pricing pressure on margins. Potential negative impact from lower discretionary spend. Tariff impacts on equipment costs, though exposure is small.

Q: Ryan Merkel asked about second quarter top line and price impact.

A: Peter Arvan said it's a fair way to look at it, Melanie Hart noted price more in second half due to latest increase effective June 2nd.

Q: Quinn Fredericksen inquired about new pool ASP and remodel.

A: Peter Arvan said higher-end consumer business is good, remodel projects are broken into smaller phases.

Q: Susan McClary asked about remodel work breakdown and price elasticity.

A: Peter Arvan said competitive dynamics are typical, labor is bigger portion of job.

Q: David MacGregor asked about pullback in consumer confidence and Pinch business.

A: Peter Arvan said no major shift seen in DIY vs do it for me.

Q: Stephen Volkmann asked about price competitiveness types.

A: Peter Arvan said competitiveness is typical, competitors may lure business but Pool supports pre-quoted jobs.

Q: Scott Schneeberger asked about tariff impact timing and new pool construction volumes.

A: Melanie Hart said price increases will pass through, Peter Arvan discussed permits and weather factors in new construction.

Q: Andrew Carter asked about gross margin and price increase timing.

A: Melanie Hart said high end of EPS guidance is achievable at flat gross margin, Peter Arvan said prices are taken up on effective date.

Q: Sam Reid asked about 2026 outlook.

A: Peter Arvan said maintenance business is growing, but macro uncertainty affects new construction.

Q: Ethan asked about tariff demand destruction and R&R vs new build.

A: Peter Arvan said price increases will pass through, macro factors more impactful on new construction.

Q: Garik Shmois asked about pricing outlook and sales growth in April.

A: Melanie Hart said June increase is included in guidance, Peter Arvan said Easter and weather helped April growth.

Q: Colin Varon asked about Texas underperformance and private label growth.

A: Peter Arvan discussed Texas weather and market factors, said private label has significant growth runway.