Sign in

You're signed outSign in or to get full access.

PC

POOL CORP (POOL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 came in soft on adjusted profitability and top line versus consensus: adjusted diluted EPS $1.32 missed S&P Global consensus $1.48, and revenue $1.072B missed $1.100B; EBITDA missed as well. Maintenance categories were resilient (chemicals +1%), while discretionary demand and weather headwinds weighed on volumes and margin mix *.
  • Management confirmed FY2025 diluted EPS guidance to $11.10–$11.60 (including $0.10 ASU benefit recognized YTD), modestly raising both ends vs February ($11.08–$11.58) and outlined a 29.7%–30.0% gross margin framework amid tariff-driven vendor price increases and continued competitive pricing pressure .
  • Regions: AZ +2%, CA flat, FL -1%, TX -11%; product mix: chemicals +1% (private label double-digit growth), building materials -5%, equipment -4%; Europe -6% (USD) and Horizon -4% on PVC deflation .
  • Near-term stock reaction catalysts: Q2 trajectory (management seeing low-single-digit topline, price tailwinds skewed to 2H), tariff pass-through durability, Texas construction stabilization, and margin cadence versus competitive pricing pressure .

What Went Well and What Went Wrong

  • What Went Well

    • “Execution of our long-term strategic initiatives and organic growth investments contributed positively… our team generated over $1.0 billion in net sales” — CEO Peter Arvan; maintenance categories anchored performance, with chemicals volume up and private-label chemicals growing double-digits .
    • POOL360 adoption expanded to ~13% of Q1 sales, supporting private-label conversion and productivity for dealers; commercial sales grew 7% .
    • FY2025 EPS guidance reaffirmed and slightly raised vs February; pricing initiatives and supply chain optimization helped offset mix headwinds, with gross margin at 29.2% versus 29.1% underlying prior-year (excluding import-tax accrual reversal) .

  • What Went Wrong

    • Adjusted earnings and revenue missed consensus; operating income fell 29% YoY and operating margin compressed to 7.2% (from 9.7%) given lower discretionary mix and competitive pricing in a soft demand backdrop *.
    • Weather headwinds in January–February and a later Easter dampened early-quarter sell-through; Texas construction notably weak (-11%), Horizon down 4% and Europe down 6% (USD) .
    • Cash from operations declined to $27.2M vs $145.4M, driven by deferred 2024 tax payments ($68.5M) and working capital timing related to early inventory purchases .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$1.433 $0.987 $1.072
Diluted EPS (GAAP) ($)$3.27 $0.98 $1.42
Adjusted Diluted EPS ($)$3.26 $0.97 $1.32
Gross Margin (%)29.1% 29.4% 29.2%
Operating Margin (%)12.3% 6.1% 7.2%
Consensus vs ActualQ3 2024Q4 2024Q1 2025
Revenue Consensus ($USD Billions)$1.403*$0.961*$1.100*
Revenue Actual ($USD Billions)$1.433 $0.987 $1.072
EPS Consensus (Primary) ($)$3.145*$0.906*$1.481*
EPS Actual (Adjusted/Primary) ($)$3.26 $0.97 $1.32
EBITDA Consensus ($USD Millions)$187.35*$72.27*$100.79*
EBITDA Actual ($USD Millions)$187.92 $71.87 $95.44

Values marked with * retrieved from S&P Global.

Segment and Geography (Q1 2025 YoY):

  • Product Categories: Chemicals +1% (private-label double-digit), Building Materials -5%, Equipment (ex-cleaners) -4% .
  • Geographies: AZ +2%, CA flat, FL -1%, TX -11%; Europe -4% local, -6% USD; Horizon -4% on PVC deflation .

Key KPIs (Q1 2025):

  • Inventory: $1.461B; Total Debt: $1.0B; Cash from Ops: $27.2M; DSO: 25.9 days; POOL360 orders ~13% of sales .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Diluted EPSFY 2025$11.08–$11.58 (incl. $0.08 ASU) $11.10–$11.60 (incl. $0.10 ASU YTD) Raised (~+$0.02 both ends)
Gross MarginFY 2025Not disclosed29.7%–30.0% (mix/competition caveats) New framework
Pricing Benefit to SalesFY 20251% net (early-year vendor increases) ~2% net (incl. in-season vendor increases; June 2 Pentair +4%) Raised
Interest ExpenseFY 2025~Lower vs 2024 trend (not quantified)~$40–$45M; higher in Q2, lower in 2H New detail
Tax Rate (ex-ASU)FY 2025~25%~25%; ~25.5% in Q2/Q4, lower in Q3 Maintained
CapexFY 2025~$50–$60M ~$50–$60M Maintained
AcquisitionsFY 2025~$20M (company commentary) ~$20M (company commentary) Maintained
Weighted Avg SharesFY 2025Not disclosed~37.8M New detail
Share RepurchasesFY 2025Authorization in placeWill request authorization increase; $291M remaining Expanded capacity intent

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Macro & Discretionary DemandDiscretionary remained soft; guidance maintained Continued soft demand; Texas notably weak; improving March/April Mixed
Tariffs & PricingNot a focus in Q3/Q4 releasesIn-season vendor price increases +3–4%; Pentair +4% June 2; pass-through expected Price tailwinds emerging
Gross Margin OutlookMaintained margins; mix headwinds 29.7–30.0% FY range; competitive pricing pressure; mix drag Cautious
Maintenance/Private LabelPrivate-label growth highlighted; POOL360 rollouts Chemicals +1% and private-label double-digit growth; POOL360 ~13% sales Improving
Regional TrendsStrong FL; inventory/DSO progress AZ +2%, CA flat, FL -1%, TX -11%; Europe -6% USD; Horizon -4% Mixed; TX weak
Competitive LandscapeNot emphasizedMore pronounced competitive pricing in soft demand Pressure
Cash Flow & LeverageStrong FY2024 cash flow; lower debt CFO explains cash flow decline from deferred taxes and WC timing; leverage ~1.47 Seasonal/Timing

Management Commentary

  • CEO: “Execution of our long-term strategic initiatives and organic growth investments contributed positively… Combined with further integration of our digital platform, these initiatives position us to capture available demand that allows us to outperform the market…” .
  • CEO on tariffs/pricing: “Our largest equipment vendors announced… 3% to 4%… took effect in April… an additional 4% increase was announced by Pentair… June 2… We will… raise our prices accordingly” .
  • CFO: “Our gross margin… 29.2% or 10 basis points higher than prior year when considering the 110 basis points positive impact recognized in first quarter 2024 related to import taxes” .
  • CFO: “Operating expenses… $235 million, an increase of only 2% over prior year… demonstrates leverage gains from our ongoing capacity creation efforts and disciplined variable cost management” .
  • CEO on competitive dynamics: “Sometimes, we have to be a little more aggressive on pricing… We are in it for the long term… our operators know [unsustainable pricing] and they don’t chase things into the ground” .

Q&A Highlights

  • Q2 setup: Management expects low-single-digit revenue; pricing benefit skewed to 2H given June effective date of increases .
  • Gross margin: Flat at the high end of FY range is achievable; mix and competitive pricing the key swing factors; high end of EPS guidance achievable at flat gross margin .
  • Regional and construction: Texas remains the outlier weakness; Florida performing well; permits are a piece of the puzzle but weather and macro matter more; ASPs likely up slightly on mix (higher-end projects) .
  • Tariffs and demand: Tariff pass-through expected to stick; limited demand destruction in R&R; price increases raise annual pricing benefit to ~2% .
  • Opex/capital allocation: Variable expense flexing with topline; plan to request increased buyback authorization; capex $50–$60M; interest $40–$45M; tax rate ~25% ex-ASU .

Estimates Context

  • Q1 2025: Adjusted EPS $1.32 vs $1.48 consensus; revenue $1.072B vs $1.100B; EBITDA $95.4M vs $100.8M — broad miss across metrics as discretionary softness and competitive pricing diluted margin benefits from initiatives and early-year vendor price increases *.
  • Prior quarters showed beats: Q3 2024 adjusted EPS $3.26 vs $3.15; revenue $1.433B vs $1.403B; Q4 2024 adjusted EPS $0.97 vs $0.91; revenue $0.987B vs $0.961B — indicating Q1’s shortfall is not a persistent pattern but linked to seasonal/weather and mix *.
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Maintenance demand remains durable; private-label chemicals and POOL360 adoption are structural positives, but discretionary weakness and competitive pricing will dictate margin trajectory near term .
  • FY2025 EPS guidance modestly raised and reaffirmed; expect price tailwinds to build in 2H as vendor increases fully cycle through; monitor gross margin range vs competitive intensity .
  • Watch Texas construction recovery and weather normalization; management cites improving dealer sentiment vs 30–60 days ago, but visibility still limited .
  • Working capital and deferred tax timing drove Q1 cash flow compression; leverage remains conservative (~1.47), supporting opportunistic repurchases and organic investment .
  • Near-term trading setup: Q2 print likely hinges on low-single-digit topline with partial pricing benefit, mix headwinds vs maintenance resilience; any signs of discretionary improvement or easing competitive pricing could be a catalyst .
  • Medium-term thesis: As macro stabilizes and tariff-driven pricing sticks, POOL’s scale, private-label portfolio, and digital ecosystem should enable share gains and margin normalization within the 29.7%–30.0% framework .
  • Risk monitor: Prolonged competitive pricing pressure, persistent Texas weakness, and further macro/tariff shocks could cap margin recovery despite internal initiatives .