Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1] Group 1 - The investment strategy is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1]

Financial Data and Key Metrics Changes - The company reported net sales of $1.8 billion for the second quarter, reflecting a 1% increase year-over-year [9] - Gross margin remained stable at 30%, consistent with the same period last year [18] - Operating income improved to $273 million compared to $271 million in the prior year [26] - Diluted earnings per share increased by 4% to $5.17 from $4.99 in the second quarter of the previous year [27] Business Line Data and Key Metrics Changes - Maintenance products showed strong performance, particularly in private label chemical products, contributing to overall sales growth [9] - Sales related to new construction and renovation activities improved, creating less drag on sales than in previous quarters [10] - Chemical sales grew by 1%, despite price deflation and weather challenges [14] - Equipment sales, including cleaners, increased by 1%, reflecting stable replacement volumes [15] Market Data and Key Metrics Changes - Florida and Arizona experienced solid sales growth of 2%, outperforming national averages due to population growth and favorable weather [11] - Texas and California faced challenges with new pool construction, with sales down 23% in both states [11] - European net sales increased by 2% in local currency and 7% in U.S. dollars, with growth particularly in southern countries [12][13] Company Strategy and Development Direction - The company is focused on maintaining its leadership position through strategic investments in digital innovation and expanding its footprint with new locations [19] - The strategy includes enhancing customer experience and expanding private label offerings to capture market share [20] - The company anticipates modest sales growth in the second half of the year, with a full-year performance expected to be relatively flat [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the industry, driven by demographic trends and the desirability of at-home leisure [20] - The company remains cautious about new pool construction due to macroeconomic headwinds and lack of interest rate cuts [52] - Management noted that while maintenance and repair business remains resilient, larger renovation projects are being phased to manage consumer spending [38] Other Important Information - The company opened two new locations during the quarter, contributing to its growth strategy [19] - Inventory levels increased by 3% year-over-year, reflecting new product offerings and seasonal stocking [27] - The company completed $104 million in share repurchases during the quarter, exceeding prior year repurchases [29] Q&A Session Summary Question: How should the company think about the full year given the dynamics with tariffs and pricing? - Management highlighted the resilience of the maintenance and repair business and noted that larger renovation projects are being broken into phases to manage costs [38] Question: Why was the EPS guidance lowered for the year? - The adjustment was due to the lack of anticipated interest rate cuts, which are crucial for stimulating new pool construction [52] Question: Are there any inventory benefits to margins in the second quarter? - Management indicated that supply chain improvements and price increases contributed positively to margins, with expectations for continued benefits in the second half [68] Question: What is the outlook for new construction and discretionary spending? - Management expressed skepticism about significant improvements in new construction due to ongoing economic pressures, but noted strong performance in maintenance [63] Question: Is there any product shortage or labor issue affecting the company? - Management reported no significant product shortages or labor issues, indicating that supply chains are generally in good shape [81]

Financial Data and Key Metrics Changes - The company reported net sales of $1.8 billion for the second quarter, reflecting a 1% increase year-over-year, indicating solid execution in strategic areas despite macroeconomic challenges [7][19][27] - Gross margin remained stable at 30%, consistent with the same period last year, showcasing effective management in a challenging environment [16][24] - Diluted earnings per share increased to $5.17, up 4% from $4.99 in the second quarter of the previous year [26] Business Line Data and Key Metrics Changes - Maintenance products showed strong performance, particularly in private label chemical products, contributing positively to sales [7][13] - Sales related to new construction and renovation activities improved during the quarter, creating less drag on overall sales compared to previous quarters [8][10] - Equipment sales, including cleaners, increased by 1%, reflecting stable replacement volumes despite a decrease in new construction units [14] Market Data and Key Metrics Changes - Florida and Arizona experienced solid sales growth of 2%, driven by population growth and favorable weather, outperforming national averages [9][10] - Texas and California faced challenges with new pool construction, with sales down 23%, attributed to macroeconomic headwinds and reduced consumer confidence [10][11] - European net sales increased by 2% in local currency and 7% in U.S. dollars, with growth particularly noted in southern European countries [11][12] Company Strategy and Development Direction - The company continues to focus on digital innovation, with the POOL360 platform transactions now representing 17% of net sales, indicating strong customer adoption [17] - Strategic openings in markets with higher pool densities are aimed at expanding market share and enhancing long-term success [18] - The company anticipates modest sales growth in the second half of the year, with full-year performance expected to be relatively flat [19][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the industry, supported by demographic trends and the desirability of at-home leisure [19][32] - The company remains cautious about new pool construction due to macroeconomic conditions and the absence of interest rate cuts, which are critical for housing turnover [52][62] - Management highlighted the resilience of the maintenance and repair business, which continues to perform well despite economic uncertainties [37][52] Other Important Information - The company opened two new locations during the quarter, contributing to its growth strategy [18][29] - Inventory levels increased by 3% year-over-year, reflecting new product offerings and supply chain actions [27][28] - Share repurchases totaled $104 million during the quarter, indicating a commitment to returning value to shareholders [29] Q&A Session Summary Question: Full year outlook considering tariffs and pricing dynamics - Management noted that the maintenance and repair business remains resilient, and larger renovation projects are being phased to make them more manageable for consumers [38][39] Question: Impact of interest rates on new pool construction - Management indicated that without interest rate cuts, new pool construction is unlikely to rebound significantly this year, affecting overall demand [52][62] Question: Gross margin outlook and competitive pricing - Management confirmed that competitive activity has normalized, and gross margins are expected to remain stable despite some pricing pressures [54][56] Question: Inventory management and product shortages - Management reassured that inventory levels are well-managed and there are no significant product shortages affecting operations [87][82] Question: Chemical pricing dynamics - Management acknowledged ongoing pricing pressures in chemicals but noted that the competitive landscape has not worsened significantly [95][96]

Q2 2025 Financial Performance - Net sales reached $1,784.5 million, a 1% increase compared to Q2 2024[6] - Operating income was $272.7 million, a $1.2 million increase from Q2 2024[6] - Diluted EPS (GAAP and ex-ASU) was $5.17, a 4% increase compared to Q2 2024[6] - Gross profit was $535.2 million, a $5.0 million increase from Q2 2024[6] - Gross margin remained in line with Q2 2024 at 30.0%[6] Sales Performance by Geography and Segment - Florida (FL) and Arizona (AZ) saw net sales increases of 2% each[8] - California (CA) and Texas (TX) experienced net sales decreases of 3% and 2% respectively[8] - Horizon net sales decreased by 2%[8] - Europe net sales increased by 7%[8] - Commercial end market sales increased by 5%, while retail sales decreased by 3%[12] Product Category Performance - Chemicals and Equipment sales each increased by 1%, while Building Materials sales decreased by 1%[11] Strategic Initiatives and Capital Allocation - The company returned $253 million to shareholders, including a $76 million year-over-year increase in share repurchases[24] - Capital expenditures amounted to $27.4 million[23] - Share repurchases totaled $160.6 million[23] - Dividends paid were $92.2 million[23] 2025 Guidance - The company anticipates net sales to be approximately flat for the full year 2025[25] - Inflation/pricing is expected to contribute approximately 2%, including 1% from tariffs beginning in Q2[25] - GAAP diluted earnings per share are projected to be in the range of $10.80 to $11.30[25]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Pool Corporation reported solid Q2 2025 performance with increased net sales and EPS, leading to an updated full-year earnings guidance [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Pool Corporation reported a 1% increase in net sales for Q2 2025, driven by maintenance products and improving discretionary spending, sustaining gross margin at 30.0% and growing diluted EPS by 4% to $5.17 Q2 2025 Key Financial Highlights | Metric | Q2 2025 ($) | Q2 2024 ($) | Change (%) | | :----- | :---------- | :---------- | :--------- | | Net Sales | $1.8 billion | $1.77 billion | 1% | | Gross Margin | 30.0% | 30.0% | 0 bps | | Operating Income | $272.7 million | $271.5 million | 0.4% | | Operating Margin | 15.3% | 15.3% | 0 bps | | Diluted EPS | $5.17 | $4.99 | 4% | - **Sales expansion** in Q2 2025 reflected **continued growth** in maintenance products and **improving trends** in discretionary spending. The company is focused on prioritizing strategic initiatives, providing outstanding customer experience, and advancing technology investments for sustained success[3](index=3&type=chunk)[4](index=4&type=chunk) [Annual Earnings Guidance Update](index=1&type=section&id=Annual%20Earnings%20Guidance%20Update) The company updated its full-year earnings guidance range to $10.80 - $11.30 per diluted share, reflecting solid Q2 performance and confidence in the outdoor living industry Updated Annual Earnings Guidance | Metric | Previous Guidance ($) | Updated Guidance ($) | | :----- | :-------------------- | :------------------- | | Full-Year Diluted EPS | N/A | $10.80 - $11.30 | [Financial Performance Analysis](index=1&type=section&id=Financial%20Performance%20Analysis) This section details the company's financial results for Q2 and the first half of 2025, highlighting sales, margins, and earnings performance [Second Quarter Ended June 30, 2025 Results](index=1&type=section&id=Second%20Quarter%20Ended%20June%2030%2C%202025%20Results) For Q2 2025, Pool Corporation achieved a 1% increase in net sales, maintaining a 30.0% gross margin, with operating income rising slightly and net income increasing by $1.9 million, leading to a 4% rise in diluted EPS Q2 2025 vs Q2 2024 Financial Performance | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Net sales | $1,784,530 | $1,769,784 | $14,746 | 1% | | Gross profit | $535,161 | $530,141 | $5,020 | 0.9% | | Gross margin | 30.0% | 30.0% | 0 bps | 0% | | Selling and administrative expenses | $262,491 | $258,660 | $3,831 | 1% | | Operating income | $272,670 | $271,481 | $1,189 | 0.4% | | Operating margin | 15.3% | 15.3% | 0 bps | 0% | | Net income | $194,258 | $192,439 | $1,819 | 0.9% | | Diluted EPS | $5.17 | $4.99 | $0.18 | 3.6% | - Second quarter sales benefited from **continued strength** in maintenance products, including private-label chemical products, and **year-over-year improvement** in sales of discretionary products such as building materials[4](index=4&type=chunk) - Selling and administrative expenses **increased by only 1%**, reflecting a **disciplined approach to cost management**, with **proactive control** of variable expenses largely **offsetting inflationary pressures** on wages and investments in the sales center network[6](index=6&type=chunk) [Six Months Ended June 30, 2025 Results](index=2&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Results) Over the first six months of 2025, net sales declined 1%, and gross margin decreased by 40 basis points, with operating income and net income both seeing an 8-9% decrease, resulting in a 7% decline in diluted EPS H1 2025 vs H1 2024 Financial Performance | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Net sales | $2,856,056 | $2,890,594 | $(34,538) | (1)% | | Gross profit | $847,530 | $868,700 | $(21,170) | (2.4)% | | Gross margin | 29.7% | 30.1% | (40) bps | (1.3)% | | Selling and administrative expenses | $497,323 | $488,499 | $8,824 | 1.8% | | Operating income | $350,207 | $380,201 | $(29,994) | (7.9)% | | Operating margin | 12.3% | 13.2% | (90) bps | (6.8)% | | Net income | $247,803 | $271,324 | $(23,521) | (8.7)% | | Diluted EPS | $6.57 | $7.03 | $(0.46) | (6.5)% | - The **40 basis point decline** in gross margin for the first six months of 2025 was partly due to a **non-recurring reversal of $12.6 million** for estimated import taxes in the first six months of 2024, which had **benefited the prior year's gross margin by 40 basis points**[9](index=9&type=chunk) - **Net income decreased 9% to $247.8 million**. The company recorded a **$3.9 million ($0.10 per diluted share)** tax benefit from ASU 2016-09 in H1 2025, compared to **$7.8 million ($0.20 per diluted share)** in H1 2024[11](index=11&type=chunk)[12](index=12&type=chunk) [Financial Position & Liquidity](index=2&type=section&id=Financial%20Position%20%26%20Liquidity) This section analyzes the company's balance sheet and cash flow, detailing changes in inventory, debt, and operating cash activities [Balance Sheet Overview](index=2&type=section&id=Balance%20Sheet%20Overview) As of June 30, 2025, inventory increased by 3% to $1.3 billion, and total debt rose by $113.4 million to $1.2 billion, primarily funding share repurchases Key Balance Sheet Items (YoY Change) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Inventory balance | $1,330,221 | $1,295,600 | $34,621 | 3% | | Total debt outstanding | $1,229,919 | $1,116,553 | $113,366 | 10.1% | - Total debt outstanding **increased $113.4 million to $1.2 billion** at June 30, 2025, primarily to fund open market **share repurchases of $156.4 million** in the first six months of 2025[13](index=13&type=chunk) [Cash Flow Activities](index=2&type=section&id=Cash%20Flow%20Activities) Net cash used in operations was $1.5 million in the first six months of 2025, a significant shift from the prior year's cash generation, partly due to a deferred federal tax payment and inventory investment Net Cash Flow from Operations (H1 YoY) | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change ($) | | :----------------------------- | :--------------------- | :--------------------- | :--------- | | Net cash (used in) provided by operating activities | $(1,544) | $172,102 | $(173,646) | - **Net cash used in operations was $1.5 million** in the first six months of 2025, a **significant change from $172.1 million** provided by operations in the prior year, attributed to a **$68.5 million** federal tax payment deferred from 2024 and a **$29.4 million** investment in inventory[14](index=14&type=chunk) [Outlook & Strategic Commentary](index=2&type=section&id=Outlook%20%26%20Strategic%20Commentary) The company reaffirmed its confidence in the outdoor living industry and its strategic positioning, updating its full-year earnings guidance to $10.80 - $11.30 per diluted share, including a $0.10 ASU 2016-09 tax benefit Updated Full-Year Diluted EPS Guidance | Metric | Guidance Range ($) | Includes ASU 2016-09 Tax Benefit ($) | | :----- | :----------------- | :--------------------------------- | | Full-Year Diluted EPS | $10.80 - $11.30 | $0.10 | - The CEO highlighted **solid Q2 results** through **disciplined execution** despite a **constrained market**, expressing **confidence in the strength** of the outdoor living industry and the company's position to **deliver long-term shareholder value** through its scale, disciplined approach, and customer-first mindset[15](index=15&type=chunk) [Company Overview](index=2&type=section&id=Company%20Overview) This section provides an overview of Pool Corporation's business, its market position, and a disclaimer regarding forward-looking statements [About Pool Corporation](index=2&type=section&id=About%20Pool%20Corporation) POOLCORP is the world's largest wholesale distributor of swimming pool and related backyard products, operating 451 sales centers globally and distributing over 200,000 products to approximately 125,000 wholesale customers - POOLCORP is the **world's largest wholesale distributor** of swimming pool and related backyard products, serving approximately **125,000** wholesale customers with over **200,000** products[17](index=17&type=chunk) Sales Center Network Statistics | Period | Count | | :----- | :---- | | December 31, 2024 | 448 | | New locations | 4 | | Closed location | (1) | | June 30, 2025 | 451 | [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines the inherent risks and uncertainties associated with forward-looking statements, including factors like weather, economic conditions, consumer spending, and regulatory changes, which could cause actual results to differ materially - This section contains forward-looking statements subject to **risks and uncertainties**, including weather, economic conditions, consumer spending, housing market, inflation, interest rates, supplier relationships, competition, regulatory changes, and tax impacts, which could cause **actual results to differ materially**[18](index=18&type=chunk) [Detailed Financial Statements](index=4&type=section&id=Detailed%20Financial%20Statements) This section provides the complete consolidated financial statements, including income, balance sheet, and cash flow data for the reported periods [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) This statement provides detailed income figures for the three and six months ended June 30, 2025 and 2024, showing net sales, cost of sales, gross profit, operating expenses, operating income, net income, and earnings per share Consolidated Statements of Income (in thousands) | | Three Months Ended June 30, | | Six Months Ended June 30, | | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | | 2025 | 2024 | 2025 | 2024 | | Net sales | $1,784,530 | $1,769,784 | $2,856,056 | $2,890,594 | | Cost of sales | 1,249,369 | 1,239,643 | 2,008,526 | 2,021,894 | | Gross profit | 535,161 | 530,141 | 847,530 | 868,700 | | Percent | 30.0 % | 30.0 % | 29.7 % | 30.1 % | | Selling and administrative expenses | 262,491 | 258,660 | 497,323 | 488,499 | | Operating income | 272,670 | 271,481 | 350,207 | 380,201 | | Percent | 15.3 % | 15.3 % | 12.3 % | 13.2 % | | Interest and other non-operating expenses, net | 12,219 | 14,044 | 23,381 | 27,463 | | Income before income taxes and equity in earnings | 260,451 | 257,437 | 326,826 | 352,738 | | Provision for income taxes | 66,180 | 65,058 | 79,064 | 81,531 | | Equity in earnings of unconsolidated investments, net | (13) | 60 | 41 | 117 | | Net income | $194,258 | $192,439 | $247,803 | $271,324 | | Earnings per share attributable to common stockholders: | | | | | | Basic | $5.19 | $5.02 | $6.60 | $7.07 | | Diluted | $5.17 | $4.99 | $6.57 | $7.03 | | Weighted average common shares outstanding: | | | | | | Basic | 37,271 | 38,124 | 37,365 | 38,164 | | Diluted | 37,407 | 38,325 | 37,520 | 38,399 | | Cash dividends declared per common share | $1.25 | $1.20 | $2.45 | $2.30 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's financial position as of June 30, 2025 and 2024, detailing assets, liabilities, and stockholders' equity, including changes in key accounts like inventory and total debt Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | :--------- | | **Assets** | | | | | | Cash and cash equivalents | $83,669 | $96,894 | $(13,225) | (14)% | | Receivables, net | 172,028 | 169,849 | 2,179 | 1% | | Receivables pledged under receivables facility | 404,776 | 407,680 | (2,904) | (1)% | | Product inventories, net | 1,330,221 | 1,295,600 | 34,621 | 3% | | Prepaid expenses and other current assets | 42,281 | 35,789 | 6,492 | 18% | | Total current assets | 2,032,975 | 2,005,812 | 27,163 | 1% | | Property and equipment, net | 258,188 | 241,871 | 16,317 | 7% | | Goodwill | 700,476 | 699,686 | 790 | —% | | Other intangible assets, net | 286,810 | 294,684 | (7,874) | (3)% | | Equity interest investments | 1,494 | 1,399 | 95 | 7% | | Operating lease assets | 315,434 | 313,840 | 1,594 | 1% | | Other assets | 76,579 | 83,622 | (7,043) | (8)% | | **Total assets** | **$3,671,956** | **$3,640,914** | **$31,042** | **1%** | | **Liabilities and stockholders' equity** | | | | | | Accounts payable | $529,316 | $515,645 | $13,671 | 3% | | Accrued expenses and other current liabilities | 160,833 | 152,978 | 7,855 | 5% | | Short-term borrowings and current portion of long-term debt | 17,386 | 44,726 | (27,340) | (61)% | | Current operating lease liabilities | 100,439 | 94,024 | 6,415 | 7% | | Total current liabilities | 807,974 | 807,373 | 601 | —% | | Deferred income taxes | 79,138 | 67,595 | 11,543 | 17% | | Long-term debt, net | 1,212,533 | 1,071,827 | 140,706 | 13% | | Other long-term liabilities | 50,177 | 44,135 | 6,042 | 14% | | Non-current operating lease liabilities | 223,016 | 226,315 | (3,299) | (1)% | | **Total liabilities** | **2,372,838** | **2,217,245** | **155,593** | **7%** | | **Total stockholders' equity** | **1,299,118** | **1,423,669** | **(124,551)** | **(9)%** | | **Total liabilities and stockholders' equity** | **$3,671,956** | **$3,640,914** | **$31,042** | **1%** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024, highlighting the shift to net cash used in operations Condensed Consolidated Statements of Cash Flows (in thousands) | | Six Months Ended June 30, | | | :---------------------------------------------------------------- | :---------- | :---------- | :---------- | | | 2025 | 2024 | Change ($) | | **Operating activities** | | | | | Net income | $247,803 | $271,324 | $(23,521) | | Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | | | Depreciation | 19,804 | 17,591 | 2,213 | | Amortization | 4,312 | 4,201 | 111 | | Share-based compensation | 12,950 | 10,344 | 2,606 | | Equity in earnings of unconsolidated investments, net | (41) | (117) | 76 | | Other | (942) | (1,246) | 304 | | Changes in operating assets and liabilities, net of effects of acquisitions: | | | | | Receivables | (254,322) | (232,647) | (21,675) | | Product inventories | (29,375) | 66,975 | (96,350) | | Prepaid expenses and other assets | 53,440 | 38,231 | 15,209 | | Accounts payable | 315 | 6,166 | (5,851) | | Accrued expenses and other liabilities | (55,488) | (8,720) | (46,768) | | Net cash (used in) provided by operating activities | $(1,544) | $172,102 | $(173,646) | | **Investing activities** | | | | | Acquisition of businesses, net of cash acquired | — | (4,435) | 4,435 | | Purchases of property and equipment, net of sale proceeds | (27,390) | (34,928) | 7,538 | | Other investments, net | (1,073) | 1,018 | (2,091) | | Net cash used in investing activities | $(28,463) | $(38,345) | $9,882 | | **Financing activities** | | | | | Proceeds from revolving line of credit | 1,117,100 | 756,300 | 360,800 | | Payments on revolving line of credit | (956,900) | (830,400) | (126,500) | | Payments on term loan under credit facility | (12,500) | (12,500) | — | | Proceeds from asset-backed financing | 323,200 | 467,000 | (143,800) | | Payments on asset-backed financing | (177,200) | (324,000) | 146,800 | | Payments on term facility | (19,937) | — | (19,937) | | Proceeds from short-term borrowings and current portion of long-term debt | 17,112 | 8,085 | 9,027 | | Payments on short-term borrowings and current portion of long-term debt | (11,699) | (1,562) | (10,137) | | Proceeds from stock issued under share-based compensation plans | 6,780 | 9,826 | (3,046) | | Payments of cash dividends | (92,163) | (88,287) | (3,876) | | Repurchases of common stock | (160,648) | (84,496) | (76,152) | | Net cash provided by (used in) financing activities | $33,145 | $(100,034) | $133,179 | | Effect of exchange rate changes on cash and cash equivalents | 2,669 | (3,369) | 6,038 | | Change in cash and cash equivalents | 5,807 | 30,354 | (24,547) | | Cash and cash equivalents at beginning of period | 77,862 | 66,540 | 11,322 | | Cash and cash equivalents at end of period | $83,669 | $96,894 | $(13,225) | [Non-GAAP Financial Measures & Addendum](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Addendum) This section clarifies the company's base business calculation and provides reconciliations for non-GAAP financial measures like Adjusted EBITDA and Adjusted Diluted EPS [Base Business Information](index=7&type=section&id=Base%20Business%20Information) The base business calculation excludes newly acquired, opened, or closed sales centers for 15 months. For the periods reported, base business results closely approximated consolidated results, with excluded sales centers contributing less than 1% to net sales change - Base business results **exclude sales centers acquired, opened in new markets, or closed for a period of 15 months**. Corporate overhead expenses are allocated to excluded sales centers based on their net sales percentage[26](index=26&type=chunk)[27](index=27&type=chunk) Sales Center Count Changes | Period | Count | | :----- | :---- | | December 31, 2024 | 448 | | New locations | 4 | | Closed location | (1) | | June 30, 2025 | 451 | [Reconciliation of Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides definitions and reconciliations for non-GAAP measures, Adjusted EBITDA and Adjusted Diluted EPS, which management uses to monitor performance and provide supplemental insights to investors [Adjusted EBITDA](index=8&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is defined as net income plus interest, taxes, depreciation, amortization, share-based compensation, impairments, and equity in unconsolidated investments. It is used by management and investors as a supplemental performance measure to monitor debt servicing, tax payments, and capital expenditures - Adjusted EBITDA is a **non-GAAP measure** defined as net income plus interest and other non-operating expenses, income taxes, depreciation, amortization, share-based compensation, goodwill and other impairments, and equity in earnings or loss of unconsolidated investments. Management uses it to monitor performance, and it is considered useful by investors and analysts as a **supplemental measure** for assessing debt servicing, tax payments, and capital expenditures[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) Reconciliation of Net Income to Adjusted EBITDA (In thousands) | | Three Months Ended June 30, | | Six Months Ended June 30, | | | :------------------------------------------ | :---------- | :---------- | :---------- | :---------- | | | 2025 | 2024 | 2025 | 2024 | | Net income | $194,258 | $192,439 | $247,803 | $271,324 | | Adjustments to increase (decrease) net income: | | | | | | Interest and other non-operating expenses | 12,803 | 13,996 | 24,009 | 27,254 | | Provision for income taxes | 66,180 | 65,058 | 79,064 | 81,531 | | Share-based compensation | 6,895 | 5,016 | 12,950 | 10,344 | | Equity in earnings of unconsolidated investments, net | 13 | (60) | (41) | (117) | | Depreciation | 9,964 | 8,931 | 19,804 | 17,591 | | Amortization | 1,963 | 1,958 | 3,925 | 3,891 | | Adjusted EBITDA | $292,076 | $287,338 | $387,514 | $411,818 | [Adjusted Diluted EPS](index=9&type=section&id=Adjusted%20Diluted%20EPS) Adjusted diluted EPS is a non-GAAP measure used to demonstrate the impact of tax benefits from ASU 2016-09 on diluted EPS, providing additional information about potential future operating performance - Adjusted diluted EPS is a **non-GAAP financial measure** used to demonstrate the impact of tax benefits from ASU 2016-09 on diluted EPS, providing **supplemental information** for assessing period-to-period operating performance and potential future operating performance[38](index=38&type=chunk)[39](index=39&type=chunk) Reconciliation of Diluted EPS to Adjusted Diluted EPS | | Three Months Ended June 30, | | Six Months Ended June 30, | | | :---------------------- | :---------- | :---------- | :---------- | :---------- | | | 2025 ($) | 2024 ($) | 2025 ($) | 2024 ($) | | Diluted EPS | $5.17 | $4.99 | $6.57 | $7.03 | | ASU 2016-09 tax benefit | — | (0.01) | (0.10) | (0.20) | | Adjusted diluted EPS | $5.17 | $4.98 | $6.47 | $6.83 |

分组1 - Pool Corp. reported quarterly earnings of $5.17 per share, exceeding the Zacks Consensus Estimate of $5.12 per share, and showing an increase from $4.98 per share a year ago, resulting in an earnings surprise of +0.98% [1] - The company posted revenues of $1.78 billion for the quarter ended June 2025, slightly missing the Zacks Consensus Estimate by 0.21%, and showing a year-over-year increase from $1.77 billion [2] - Over the last four quarters, Pool Corp. has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] 分组2 - The stock has underperformed the market, losing about 7.1% since the beginning of the year, while the S&P 500 has gained 8.1% [3] - The current consensus EPS estimate for the coming quarter is $3.42 on revenues of $1.45 billion, and for the current fiscal year, it is $10.95 on revenues of $5.31 billion [7] - The Leisure and Recreation Products industry, to which Pool Corp. belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Core Insights - Pool Corporation reported a 1% increase in net sales for Q2 2025, driven by growth in maintenance products and improved discretionary spending trends [4][11] - The company celebrated the opening of its 450th sales center, emphasizing its commitment to enhancing customer experience and technology investments [3][11] - Annual earnings guidance has been updated to a range of $10.80 to $11.30 per diluted share [11][15] Financial Performance - For Q2 2025, net sales reached $1.78 billion, with gross profit increasing by $5 million and maintaining a gross margin of 30% [7][11] - Operating income rose by $1.2 million, with an operating margin of 15.3% [7][11] - Net income for Q2 2025 was $194.3 million, a slight increase from $192.4 million in Q2 2024, resulting in diluted earnings per share of $5.17, up 4% from $4.99 [7][11] Year-to-Date Performance - For the first six months of 2025, net sales declined by 1% to $2.86 billion compared to $2.89 billion in the same period of 2024 [8][9] - Gross margin decreased by 40 basis points to 29.7% due to a non-recurring reversal of estimated import taxes in the previous year [8] - Operating income decreased by 8% to $350.2 million, with a corresponding decline in operating margin to 12.3% [9] Balance Sheet and Liquidity - As of June 30, 2025, inventory increased by 3% to $1.3 billion, while total debt rose by $113.4 million to $1.2 billion, primarily for share repurchases [13] - Net cash used in operations was $1.5 million for the first half of 2025, a significant decline from $172.1 million in the same period of 2024 [14] Strategic Outlook - The company remains optimistic about the outdoor living industry and believes its scale and customer-first approach will drive long-term shareholder value [15]

Core Viewpoint - Pool Corporation will release its second quarter 2025 earnings results on July 24, 2025, before market opens, followed by a conference call to discuss the results [1] Group 1: Earnings Announcement - The earnings release will be available on the Company's website [1] - A live webcast and replay of the conference call will also be accessible online [1] - The conference call is scheduled for 10:00 a.m. Central Time (11:00 a.m. Eastern Time) on the same day [1] Group 2: Company Overview - Pool Corporation is the world's largest wholesale distributor of swimming pool and related backyard products [2] - The company operates approximately 445 sales centers across North America, Europe, and Australia [2] - Pool Corporation distributes over 200,000 products to around 125,000 wholesale customers [2]

Group 1: Investment Opportunities - The article highlights three dividend growth stocks that are currently undervalued, with share prices down between 19% and 26% from their highs, presenting a buying opportunity for investors [2][3] Group 2: Zoetis - Zoetis is a leading company in the animal healthcare industry, offering a variety of products including medicines and vaccines, and has outperformed the S&P 500 since its IPO in 2013 [3][4] - The company's valuation peaked at an average of 47 times free cash flow (FCF) over the last decade, but has now adjusted to a more reasonable 31 times FCF, with a dividend yield of 1.2% [4][5] - Zoetis has a return on invested capital (ROIC) of 22%, indicating strong growth potential through new product introductions and lifecycle innovations [7] - The company has achieved a 28% growth in FCF and an 18% increase in dividend payments annually over the last decade, making it a strong compounder [8] - Recent sales growth in parasiticides, dermatology, and pain products exceeding 10% suggests continued rewards for dividend investors [9] Group 3: Pool Corp. - Pool Corp. is the largest distributor of pool products globally and has seen significant growth since its IPO in 1995, but its share price has stagnated recently due to economic factors [11] - The company generates 64% of its sales from non-discretionary maintenance and repair, providing stability amid cyclical downturns [12] - Despite challenges, Pool Corp. generated nearly $500 million in FCF last year and has utilized this to repurchase shares, with its stock down 23% from year-long highs [13] - The company has an average ROIC of 18%, demonstrating its ability to navigate economic cycles profitably [14] - Pool Corp. currently offers a 1.6% dividend yield, the highest since 2012, with only 38% of FCF used for dividends, indicating potential for future growth [15] Group 4: Old Dominion Freight Line - Old Dominion Freight Line specializes in less-than-truckload (LTL) hauling and has been a strong performer since its IPO in 1991, though it is also subject to cyclical fluctuations [16][18] - The company has experienced a 26% drop in stock price due to a freight industry recession and weak industrial shipments [18] - Old Dominion boasts a leading ROIC, allowing it to gain market share and repurchase shares during economic downturns [20] - The company has reduced its share count by more than one-sixth over the last decade, and while its dividend yield is currently 0.6%, it has grown by 33% over the past five years, utilizing only 27% of FCF [21]

Core Insights - Pool Corporation has released its 2024 Corporate Responsibility Report, highlighting its commitment to employee support, environmental protection, and community engagement [1][2] Employee Care and Safety - Safety is prioritized with a goal of zero employee injuries and preventable vehicle accidents; initiatives include the Safety Challenge Coin and Safe Driver of the Year programs [6] - Investment in employee development through leadership programs and wellness initiatives is emphasized [6] Environmental Stewardship - The company is focused on sustainability, achieving a 22% reduction in landfill waste, which equates to nearly 11,000 tons diverted [6] - Initiatives include waste diversion, returnable packaging, and vinyl pool liner recycling programs aimed at minimizing environmental impact [6] Community Engagement - Pool Corporation supports local communities through outreach initiatives and disaster relief efforts [6] - The SWiMPACT! program has provided free swim lessons to over 42,000 children and training for 3,000 lifeguards in partnership with YMCAs nationwide [6] Company Overview - Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products, operating approximately 445 sales centers across North America, Europe, and Australia [4] - The company distributes over 200,000 products to around 125,000 wholesale customers [4]