Pool Corporation Q2 FY2025 earnings call

• Positive sales growth in Q2 with stable gross and operating margins despite macro challenges.
• Regionally, Florida and Arizona had solid sales growth; Texas and California faced new construction challenges but resilient in maintenance. Europe saw net sales growth, especially southern counties.
• POOL360 platform transactions now represent 17% of net sales, up from 14.5% last year.
• Opened 450th branch, 2 new locations in Q2, and Pinch A Penny franchise network added 5 stores, including first in North Carolina.

Net sales for the second quarter were $1.8 billion, up 1%. Chemical sales grew 1% despite price deflation and weather headwinds. Building Materials sales declined 1% but showed sequential improvement. Equipment sales (including cleaners) increased 1%. Regionally, Florida and Arizona had 2% sales growth, while Texas and California faced challenges in new construction but had resilient maintenance sales. Europe net sales increased 2% in local currency and 7% in U.S. dollar. Horizon net sales declined 2% due to weakness in larger development-related construction projects. Chemical sales contributed to growth despite headwinds, building materials showed improvement from prior quarters, and equipment sales mitigated new construction declines.

• Updated diluted earnings per share guidance for 2025 to $10.80 to $11.30, including a $0.10 realized benefit from ASU year-to-date.
• Full-year sales expected to be relatively flat. Gross margin rate expected to be in line with prior year.
• No significant change in discretionary spending from current levels for the rest of the year, with new pool construction not expected to rebound materially without interest rate cuts.

• Macro uncertainty and interest rate pressure affecting new pool construction and larger renovation projects.
• Weather conditions impacting demand in certain markets.
• Competition and pricing dynamics in the industry.

Q: Better sense of full year thinking?

A: Maintenance and repair business is resilient. Renovation projects are broken into phases. Investments in NPT centers and private label chemicals are paying off. Technology adoption is increasing. Locations are opened in growth markets like Texas despite short-term construction pressure.

Q: Why lowered EPS guidance?

A: No interest rate cut, which is expected to impact new pool construction rebound. The adjustment is minor but reflects outlook on new construction without rate relief.

Q: Gross margin and price competition?

A: Price competition was more pronounced in Q1 due to timing, but abated as the season progressed. Gross margins remained strong at 30% for Q2.

Q: Inventory benefits to margin?

A: Supply chain initiatives, private label growth, and effective pricing helped maintain margins. Some margin benefit from price increases late in the quarter and moderation in building materials year-over-year trends.

Q: New construction and dealer capacity?

A: Depends on the dealer. Some are trying to make pools more affordable. Average pool price is affected by mix and financing costs. Mid to high single-digit construction possible but depends on dealer strategies.

Q: Chemical pricing and competition?

A: Chemical pricing is negative but not deteriorating. No significant deterioration in competitive backdrop. Demand is good in the season, but no further deflation expected.

Q: Gross margin bridge for back half?

A: Pricing expected to be more favorable, product mix trending more positive, leading to improved gross margin in the second half.

Q: Private label chemicals growth?

A: Strong growth due to refreshed brand portfolio, POOL360 WaterTest platform, and best-in-class value proposition. Private label sales are a growing portion of total chemical sales.