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    POOL (POOL)

    Q1 2025 Earnings Summary

    Reported on Apr 29, 2025 (Before Market Open)
    Pre-Earnings Price$309.31Last close (Apr 23, 2025)
    Post-Earnings Price$312.88Open (Apr 24, 2025)
    Price Change
    $3.57(+1.15%)
    • Strong operational leverage: The company confirmed that the high end of its EPS guidance ($11.10–$11.60) is achievable at a flat gross margin, demonstrating effective cost management and a proven ability to pass through vendor price increases in a challenging market.
    • Robust private label growth: The executives highlighted significant runway in private label chemical sales, emphasizing that these margin accretive and exclusive products combined with advanced technology are key drivers for long-term competitive advantage.
    • Resilient maintenance business: With maintenance and repair comprising over 60% of sales, the solid performance of its growing installed base supports stable recurring revenue, providing a strong foundation even if discretionary areas face headwinds.
    • Weak Demand for Discretionary Projects: Continued softness in new pool construction and remodel activity—especially in Texas—driven by macroeconomic uncertainty, adverse weather, and lower discretionary spending could limit revenue growth.
    • Margin Pressure from Unfavorable Product Mix: A shift toward products such as declining building materials and competitive pricing pressure has already begun to weigh on margins, suggesting that sustained lower‐margin product mix could negatively impact profitability.
    • Competitive Pricing and Tariff Risks: Aggressive competitor pricing and the need to pass through vendor price increases (including tariff-related rises) may not fully offset cost pressures, creating potential headwinds for overall margins.
    MetricYoY ChangeReason

    Total Revenue

    –4.5% (from $1,120.8M to $1,071.5M)

    Total revenue declined by about 4.5% in Q1 2025 compared to Q1 2024. This drop is primarily driven by softer discretionary product sales—mirroring concerns in previous periods related to macroeconomic pressures—and was compounded by structural factors such as one less selling day in Q1 2025.

    Operating Income

    –29% (from $108,720K to $77,538K)

    Operating income fell by 29% YoY in Q1 2025. This steep decline reflects a combination of a 4% drop in net sales, an 8% decrease in gross profit, and rising operating expenses, which pushed the operating margin down from 9.7% in Q1 2024 to 7.2% in Q1 2025. The absence of non-recurring benefits seen in the prior period further exacerbated the decline.

    Net Income

    Declined from $78,885K to $53,545K

    Net income experienced a significant drop from $78,885K in Q1 2024 to $53,545K in Q1 2025. This change is largely the outcome of reduced operating income, lower net sales, and increased cost pressures—continuing the trend seen in previous periods where adverse market conditions and expense increases eroded profitability.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Diluted EPS

    FY 2025

    "$11.08 to $11.58, including an estimated $0.08 ASU tax benefit "

    "$11.10 to $11.60, which includes a $0.10 ASU tax benefit "

    raised

    Gross Margin

    FY 2025

    "Expected to be flat to up "

    "29.7% to 30% "

    no change

    Sales

    FY 2025

    no prior guidance

    "Flat to low single-digit growth with 1% to 2% net pricing volume growth on maintenance products "

    no prior guidance

    Pricing Impact

    FY 2025

    no prior guidance

    "2% pricing benefit for the full year driven by tariff-related price increases "

    no prior guidance

    Expenses

    FY 2025

    no prior guidance

    "Expected to increase modestly, including investments in new sales centers and incremental compensation expenses "

    no prior guidance

    CapEx

    FY 2025

    no prior guidance

    "$50 million to $60 million for the existing business including new sales center openings "

    no prior guidance

    Acquisitions

    FY 2025

    "$25 million to $50 million planned for acquisitions "

    "$20 million allocated for acquisitions "

    lowered

    Dividends

    FY 2025

    "$200 million expected to be utilized for dividends "

    "$200 million for the year "

    no change

    Share Repurchases

    FY 2025

    no prior guidance

    "$291 million remaining under current authorization "

    no prior guidance

    Tax Rate

    FY 2025

    "25% (annual), excluding ASU "

    "25% excluding ASU "

    no change

    Cash Flow

    FY 2025

    "90% to 100% of net income; impacted by a $68.5 million deferred tax payment in Q1 2025 related to 2024 "

    "90% to 100% of net income; impacted by a deferred tax payment made in Q1 2025 related to 2024 "

    no change

    Weighted Average Shares Outstanding

    FY 2025

    "38.1 million shares for the remaining quarters "

    "Approximately 37.8 million weighted average shares outstanding for the remainder of the year "

    lowered

    MetricPeriodGuidanceActualPerformance
    Gross Margin
    Q1 2025
    "Flat to up" versus prior-year (~30.2%)
    29.1% (calculated from Net Sales of 1,071,526 and Cost of Sales of 759,157)
    Missed
    Tax Rate
    Q1 2025
    ~25.5% in Q1 (annual tax rate ~25%)
    19.4% (Provision for Income Taxes of 12,883 on Income Before Taxes of 66,374)
    Beat
    TopicPrevious MentionsCurrent PeriodTrend

    Private Label Growth and Expansion

    Emphasized in Q2, Q3, and Q4 2024 with detailed mentions of double‐digit private label chemical growth, new category launches, and the strategic role of margin‐accretive private label products

    In Q1 2025, the company reiterated strong double‐digit growth in private label chemicals, highlighted the product’s competitive advantage and potential for further expansion

    Consistent positive emphasis with enhanced strategic positioning and continued margin benefits.

    Maintenance Business Strength and Recurring Revenue

    Across Q2–Q4 2024, maintenance products were portrayed as resilient with steady sales, recurring revenue due to installed base growth, and support from private label initiatives

    Q1 2025 continued to stress the durability of maintenance sales, noting stable recurring demand and above‐market growth driven by strategic initiatives

    Steady and resilient performance with continued reliance as a core revenue driver.

    Decline in New Pool Construction and Discretionary Spending

    Q2–Q4 2024 discussions centered on a decline in new pool construction (15–20% lower) and reduced discretionary spending due to economic headwinds and higher interest rates

    Q1 2025 reaffirmed the ongoing decline, citing macroeconomic challenges, protracted contracting cycles, and differentiated geographic impacts (e.g. weaker Texas, stronger Florida)

    Persistent headwinds with cautious optimism in select markets but overall continued pressure.

    Gross Margin Pressure and Product Mix Challenges

    Q2–Q4 2024 earnings consistently mentioned pressures from lower higher‐margin product mixes, competitive pricing, and commodity deflation, partially offset by private label growth and pricing initiatives

    Q1 2025 descriptions highlighted similar margin pressures, noting competitive pricing trends and a lower mix of higher-margin products, with some offset achieved via pricing optimization and supply chain actions

    Ongoing challenges with similar themes; slight improvements noted through targeted initiatives.

    Competitive Landscape and Pricing Pressures, Including Tariff Risks

    In Q2–Q4 2024, competitive pressures were noted with price undercutting and commodity pricing declines; tariff risks were mentioned in Q4 2024 regarding equipment and vendor cost increases

    Q1 2025 saw reinforced concerns about competitive pricing dynamics and highlighted tariff-related cost adjustments in equipment, emphasizing market-by-market pricing strategies

    Consistent caution with intensified competitive pricing and a sharper focus on tariff impacts.

    Macroeconomic Impacts and Interest Rate/Housing Market Effects

    Q2–Q4 2024 discussions focused on high interest rates affecting discretionary spending and new construction, housing market constraints, and the expectation of future easing

    Q1 2025 continued to underscore the uncertain macro environment with persistently high rates, soft permit data, and regional variations, particularly impacting large discretionary projects

    Persistent macro headwinds with continuous uncertainty and regional differentiation.

    Acquisition Strategy and M&A Initiatives

    In Q2–Q4 2024, acquisitions were mentioned as part of capital allocation (with modest contributions) and integration of new sales centers, highlighting a balanced mix of organic versus acquisition growth

    Q1 2025 did not provide specific new details on acquisitions, focusing instead on operational performance and organic initiatives

    De-emphasis in the current period, with a shift toward organic growth over M&A.

    Technological Innovation and Digital Transformation (e.g., POOL360)

    Q2, Q3, and Q4 2024 extensively discussed the rollout and adoption of the POOL360 ecosystem—including water test and service tools—demonstrating robust investments and growing customer adoption

    In Q1 2025, similar themes persisted with an emphasis on advanced POOL360 offerings, supporting customer experience and private label growth

    Consistent commitment to digital transformation with evolving, value-driven enhancements.

    Premium Pool Offerings and Advanced Technology Adoption

    Q2–Q4 2024 highlighted a trend toward premium, feature-rich pools with advanced digital and automation features, underpinned by modern design and technology enhancements

    Q1 2025 continued to focus on premium offerings and the adoption of advanced technology solutions, reiterating the value of innovative POOL360 tools and high-end market focus

    Steady focus on premium, high-tech offerings, with continued industry-wide technology adoption.

    Market Share Expansion and Organic Growth

    Q2–Q4 2024 stressed organic growth achieved through enhanced customer experience, network expansion, and private label strength, along with market share gains amid consolidation

    Q1 2025 maintained a narrative of capturing market share with strategic initiatives, noting organic sales trends and improved share in new construction-related sectors

    Consistent organic growth with a sustained strategic push to expand market share despite headwinds.

    Operational Efficiency and Leverage

    Q2–Q4 2024 reports emphasized improvements in inventory management, expense control, dealer rationalization, and targeted efficiency initiatives, along with reductions in leverage or stable debt metrics

    In Q1 2025, improvements in DSO, inventory days, and stable leverage ratios were highlighted, showing continuing discipline in operational execution

    Ongoing operational improvements with disciplined cost management and steady leverage control.

    Financial Strength and Cash Flow Generation

    Across Q2–Q4 2024, strong operating cash flows, effective working capital management, debt reductions, and significant shareholder returns were emphasized

    Q1 2025 reported robust cash flow generation, disciplined balance sheet management, improved DSO/inventory metrics, active share repurchases, and stable leverage despite seasonal inventory buildup

    Consistently robust financials with continued focus on cash flow, balance sheet strength, and shareholder returns.

    Underperforming Business Segments (e.g., Irrigation/Horizon Closures)

    Q2, Q3, and Q4 2024 discussed challenges in Horizon and irrigation—with location closures in Q2, persistent sales declines in Q3, and declining residential construction impacts in Q4, partly offset by maintenance strength

    Q1 2025 noted continued underperformance in Horizon and irrigation segments due to soft construction markets and discretionary spending, though maintenance business partially offset these issues

    Persistent challenges in vulnerable segments with ongoing underperformance and cautious strategic management.

    1. EPS Guidance
      Q: Is high-end EPS achievable with flat margins?
      A: Management confirmed that the high‐end guidance is attainable with a flat gross margin, supporting the $11.60 EPS target.

    2. Macro Risk
      Q: What if the macroeconomic environment worsens?
      A: They noted that a downturn would primarily hit discretionary new construction while the robust maintenance segment and flexible expense management help cushion margins.

    3. Price Increase Timing
      Q: Do prices rise immediately when announced?
      A: Management stated that price increases are implemented as soon as their effective date, ensuring prompt pass‐through to dealers.

    4. Tariff Demand Impact
      Q: Could tariffs severely lower pool demand?
      A: They believe that modest tariff-induced price rises, especially in maintenance products, won’t significantly hurt new pool construction, as overall market conditions are more influential.

    5. New Construction
      Q: How is new pool construction trending regionally?
      A: Management observed strong activity in Florida while Texas remains soft, driven by local weather factors and permit dynamics.

    6. Full Year Outlook
      Q: Any changes to full-year volume or margin expectations?
      A: They expect a mix of modest volume recovery in the back half of the year with continued flat margins overall due to competitive and mix pressures.

    7. Gross Margin Pressure
      Q: Will lower building materials prices pressure margins?
      A: Management warned that declines in building materials, which carry higher margins, may exert some pressure on overall gross margins.

    8. Pricing Clarity
      Q: Are recent price increases already in guidance?
      A: Yes, the April adjustments and the one vendor’s June increase have been incorporated into guidance as part of their pricing strategy.

    9. Competitive Pricing Impact
      Q: How are competitor pricing tactics affecting you?
      A: They acknowledged that rivals remain aggressive on pricing, but their strong value proposition and long-term focus help maintain market leadership.

    10. Inflation Impact on GM
      Q: Why isn’t inflation boosting gross margins as before?
      A: Management explained that a mixed product mix and rapid inventory turnover have muted the inflation-related benefits on margins compared to previous cycles.

    11. Quarter Sales
      Q: Are you expecting low single-digit top-line growth?
      A: They indicated that second-quarter revenue should grow in the low single digits, with most pricing benefits materializing later in the year.

    12. Private Label
      Q: What is the private label growth outlook?
      A: Management sees significant, margin-positive opportunities in private label chemicals that will add to long-term sales strength.

    13. Future Initiatives
      Q: How will tech and chemical initiatives shape future growth?
      A: Investments in advanced technology and chemical lines are expected to drive sustainable, long-term growth, though benefits will unfold gradually.

    14. Remodel Price Risk
      Q: Could remodel projects being split up dent sales?
      A: They noted that while remodel projects may be executed in phases, overall demand in the market remains resilient.

    15. DIY Trends
      Q: Is there a shift toward DIY versus full-service?
      A: Management observed no significant switch; both DIY and do-it-for-me channels continue to perform steadily.

    16. Operating Expense
      Q: Will your expense cadence change this year?
      A: They expect operating expenses to follow a stable cadence, with variable costs flexing in line with top-line performance.

    17. Tariff Supplier Impact
      Q: Are additional supplier tariff hikes expected?
      A: Currently, no significant new tariff increases beyond those already communicated are anticipated.

    18. New Pool ASP
      Q: How are new pool average selling prices trending?
      A: Despite some deferrals in remodels, the high-end segment remains strong, likely pushing average selling prices slightly upward.

    19. Sales Recovery
      Q: What drove the recovery in April sales?
      A: Improved weather conditions and a later Easter helped boost April’s sales after a challenging start to the quarter.

    Research analysts covering POOL.