Pool Corporation Q4 FY2025 earnings call

• 2025 was a year of industry developments, with new pool construction down but maintenance spending resilient. • Took a disciplined approach, slowed facility expansion, focused on existing network, saw benefits from strategic investments like technology upgrades, digital platforms, and supply chain initiatives. • Priorities for 2026: delivering unmatched customer experience, expanding exclusive brands and deepening OEM relationships, fully leveraging technology and network investments. • Invested in people, attracting, developing, and retaining top talent.

Annual revenue was $5.3 billion, holding steady year-over-year. Fourth quarter sales totaled $982 million, 1% below last year's level. Gross margin in 2025 was 29.7%, up 20 basis points from prior year. Fourth quarter gross margin was 30.1%, up 70 basis points year-over-year. Florida sales declined 2% for the year and 9% in the fourth quarter; Texas sales grew 1% in the fourth quarter; California declined 3% for the full year and 4% for the fourth quarter; Arizona was flat for the full year and down slightly in the fourth quarter; Horizon sales declined 2% for the year; Europe posted local currency growth for the first time in 3 years, including 4% increase in the fourth quarter. Chemicals were down 1% for the year, 3% in the fourth quarter; building materials finished flat for the year and up 4% in the fourth quarter; equipment sales, excluding cleaners, were flat year-over-year and down 3% in the fourth quarter; commercial pool products rose 3% for the year. Sales to independent retail customers decreased 3% for the year and 4% in the fourth quarter; Pinch A Penny sales from franchisees to their end customers declined 2% for the full year and 9% in the fourth quarter; digital sales reached 13.5% of total revenue in the fourth quarter, up from 12.5% last year and 15% for the full year, an all-time high.

• Anticipates net sales will grow in the low single-digit range in 2026, assuming new pool construction stays close to 60,000 units. • Diluted EPS range for 2026 is $10.85 to $11.15. • Expect maintenance business to remain resilient, vendor cost increases and corresponding pricing pass-throughs to result in 1% to 2% pricing benefit. • Estimates $5 million in additional costs to open 5 to 8 new sales centers, and incentive-based compensation expenses projected to rise by $10 million to $15 million with low single-digit sales growth. • Interest expense expected to approximate $50 million in 2026; depreciation and amortization estimates $55 million to $57 million. • Plan to reinvest roughly 1% to 1.5% of net sales back into the business, allocate between $25 million and $50 million toward acquisitions, use around $200 million in cash for dividend payments, and continue share repurchases opportunistically.

Q: On SG&A, if revenue were to come in flat, would that imply no incentive comp reset?

A: It's a sliding scale; with flat sales, no change to overall incentive compensation from '25 to '26.

Q: On gross margin guidance, what factors affect it above or below flat?

A: Customer mix, product mix, pricing optimization, renovation and remodel trends, proprietary/exclusive brands, and competitive pressures.

Q: On 1Q, are we assuming low single-digit growth like the full year?

A: Too soon to tell, but encouraged with what's seen so far; weather and chem prices impact need to be monitored.

Q: On store ops, what's the opportunity to improve bottom-performing stores?

A: Focus on sales growth, customer experience, operational execution; may consider consolidation in some markets.

Q: On growth algorithm, how to achieve above market growth in 2026?

A: Improve customer engagement, experience, operational efficiency; expand TAM with technologically advanced products; focus on organic growth and inorganic opportunities.

Q: On gross margin path, what about inventory build and pricing?

A: Expect pricing benefits from inventory investments, first quarter may have slightly better margins, remaining quarters relatively comparable; chem prices fairly steady, focused on proprietary chemicals.

Q: On EPS guidance range, what factors affect low end vs high end?

A: Vary depending on overall market conditions and sales growth.

Q: On new pool and renovation/remodel projections, what's customer backlog and confidence?

A: Customers are optimistic, general sentiment on new pool construction is good, but not at peak levels; confident in projections based on dealer conversations.

Q: On market-by-market new pool, what's seen in Florida, Texas, etc.?

A: Florida still encouraging, Texas improving in some areas, Arizona firmed up, California more renovation-focused.

Q: On new sales center openings in 2026, ROI expectations?

A: Focus on execution, less on number of openings, high attention paid to realizing benefits on recent openings.