Pool Corp(US:POOL)2025-07-24 13:44Executive Summary & Highlights 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 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 success34 Annual Earnings Guidance Update 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 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 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 | $0.18 | 3.6% | - Second quarter sales benefited from continued strength in maintenance products, including private-label chemical products, and year-over-year improvement in sales of discretionary products such as building materials4 - Selling and administrative expenses increased by only 1%, reflecting a disciplined approach to cost management, with proactive control of variable expenses largely offsetting inflationary pressures on wages and investments in the sales center network6 Six Months Ended June 30, 2025 Results Over the first six months of 2025, net sales declined 1%, and gross margin decreased by 40 basis points, with operating income and net income both seeing an 8-9% decrease, resulting in a 7% decline in diluted EPS H1 2025 vs H1 2024 Financial Performance | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change ($) | 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 points9 - 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 20241112 Financial Position & Liquidity This section analyzes the company's balance sheet and cash flow, detailing changes in inventory, debt, and operating cash activities Balance Sheet Overview 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 202513 Cash Flow Activities 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 inventory14 Outlook & Strategic Commentary 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 mindset15 Company Overview This section provides an overview of Pool Corporation's business, its market position, and a disclaimer regarding forward-looking statements About Pool Corporation 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 products17 Sales Center Network Statistics | Period | Count | | :----- | :---- | | December 31, 2024 | 448 | | New locations | 4 | | Closed location | (1) | | June 30, 2025 | 451 | Forward-Looking Statements 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 materially18 Detailed Financial Statements This section provides the complete consolidated financial statements, including income, balance sheet, and cash flow data for the reported periods Consolidated Statements of Income 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 | $2.30 | Condensed Consolidated Balance Sheets This statement presents the company's financial position as of June 30, 2025 and 2024, detailing assets, liabilities, and stockholders' equity, including changes in key accounts like inventory and total debt Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2025 | June 30, 2024 | Change ($) | 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 | $31,042 | 1% | Condensed Consolidated Statements of Cash Flows This statement outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024, highlighting the shift to net cash used in operations Condensed Consolidated Statements of Cash Flows (in thousands) | | Six Months Ended June 30, | | | :---------------------------------------------------------------- | :---------- | :---------- | :---------- | | | 2025 | 2024 | Change ($) | | 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 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 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 percentage2627 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 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 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 expenditures323334 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 | $411,818 | Adjusted Diluted EPS Adjusted diluted EPS is a non-GAAP measure used to demonstrate the impact of tax benefits from ASU 2016-09 on diluted EPS, providing additional information about potential future operating performance - Adjusted diluted EPS is a non-GAAP financial measure used to demonstrate the impact of tax benefits from ASU 2016-09 on diluted EPS, providing supplemental information for assessing period-to-period operating performance and potential future operating performance3839 Reconciliation of Diluted EPS to Adjusted Diluted EPS | | Three Months Ended June 30, | | Six Months Ended June 30, | | | :---------------------- | :---------- | :---------- | :---------- | :---------- | | | 2025 ($) | 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 |