Pool Corporation (POOL) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals mixed signals: declining EPS and operating income, increased debt, and flat revenue expectations suggest caution. However, optimistic guidance, strategic investments, and potential gross margin improvements offer a counterbalance. The Q&A section highlights management's confidence in maintaining margins and growth, though uncertainties remain. Overall, the sentiment is neutral, with no strong catalysts to drive significant stock price movement.
Key Financial Performance
Annual Revenue $5.3 billion, holding steady year-over-year. Stability supported by steady maintenance demand and early improvements in discretionary categories despite lower new pool starts.
Fourth Quarter Sales $982 million, 1% below last year's level. Decline attributed to tough comparison due to significant hurricane-related repairs in Florida in the prior year.
Gross Margin (Annual) 29.7%, up 20 basis points year-over-year when adjusted for one-time items. Improvement due to market leadership, disciplined pricing strategies, and supply chain operational excellence.
Gross Margin (Fourth Quarter) 30.1%, an improvement of 70 basis points year-over-year. Driven by pricing, supply chain benefits, expanded private label sales, and favorable product mix.
Shareholder Returns $530 million in cash distributed, a 10% increase over last year. Includes $341 million in share repurchases and a 4% increase in quarterly dividend.
Florida Sales Declined 2% for the year and 9% in the fourth quarter. Decline due to last year's post-storm activity. On a 2-year basis, fourth quarter sales in Florida were up 2%.
Texas Sales Grew 1% in the fourth quarter, offsetting a 3% decline for the full year. Recovery signs observed late in the year.
California Sales Declined 3% for the full year and 4% in the fourth quarter.
Arizona Sales Flat for the full year and down slightly in the fourth quarter.
Horizon Sales Declined 2% for the year.
Europe Sales Posted local currency growth for the first time in 3 years, including a 4% increase in the fourth quarter.
Chemical Sales Down 1% for the year, mostly due to price, and 3% in the fourth quarter driven by tough comparisons with post-hurricane cleanup.
Building Materials Sales Flat for the year and up 4% in the fourth quarter. Growth driven by demand for national pool trend products and differentiated customer experience.
Equipment Sales (Excluding Cleaners) Flat year-over-year and down 3% in the fourth quarter. Decline due to prior year hurricane recovery comparisons.
Commercial Pool Products Sales Rose 3% for the year.
Independent Retail Sales Decreased 3% for the year and 4% in the fourth quarter. Decline due to softer retail demand and high benchmark from hurricane-driven surge in late 2024.
Pinch A Penny Franchise Sales Declined 2% for the full year and 9% in the fourth quarter. Decline attributed to last year's hurricane activity in Florida.
Digital Sales Reached 13.5% of total revenue in the fourth quarter, up from 12.5% last year. Full year digital sales at 15%, an all-time high.
Operating Expenses (Fourth Quarter) Increased by $14 million or 6% year-over-year. Increase due to technology investments, new sales center openings, and rising self-insured medical costs.
Operating Income (Fourth Quarter) $52 million compared to $61 million in the prior year. Decline due to higher operating expenses.
Diluted Earnings Per Share (Fourth Quarter) $0.85 compared to $0.98 in the prior year.
Operating Income (Annual) $580 million compared to $617 million in the previous year. Decline due to increased operating expenses.
Diluted Earnings Per Share (Annual) $10.85 compared to $11.30 in the previous year. Includes ASU benefit of $0.12 per share versus $0.23 in 2024.
Inventory $1.45 billion at year-end, a 13% increase from last year. Increase due to strategic pre-price increase purchases.
Total Debt Increased by $249 million to $1.2 billion at year-end. Debt used for incremental working capital and share repurchases.
Cash Flow from Operating Activities $366 million, representing 90% of net income. Reduced by $69 million in deferred tax payments related to 2024 hurricanes.
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Operating Highlights
POOL360 digital platform: Launched new artificial intelligence features, expanded customer access, and improved customer experience. Digital sales reached 15% of total revenue for the year, an all-time high.
Exclusive brands and OEM relationships: Focused on expanding exclusive brands and deepening OEM relationships to offer innovative and differentiated products.
Geographic expansion: Opened 8 new locations and acquired 3, bringing the total to 456 sales centers. Added 10 new Pinch A Penny franchise stores, including 5 in Texas and 1 each in Arizona and North Carolina.
European market: Posted local currency growth for the first time in 3 years, including a 4% increase in the fourth quarter.
Operational efficiency: Slowed facility expansion and focused on driving value from the existing network. Achieved increased efficiency from technology upgrades and enhanced profitability from supply chain initiatives.
Gross margin improvement: Gross margin reached 29.7% for the year, up 20 basis points year-over-year, and 30.1% in the fourth quarter, up 70 basis points year-over-year.
Customer experience: Prioritized exceptional service, tailored solutions, and reliability to reinforce market leadership.
Technology and network investments: Leveraged investments in POOL360 and distribution platforms to drive efficiency, reach, and agility.
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Risk or Challenges
Decline in New Pool Construction: The ongoing decline in general construction activity, including new pool construction, is a significant challenge. In 2025, new pool construction in the U.S. declined by a mid-single-digit percentage, which is about half of what was seen during the pandemic and 40% lower than in 2022. This trend negatively impacts revenue from new pool-related products and services.
Discretionary Spending Weakness: Lower discretionary spending continues to drag on sales, particularly in remodels and upgrades. This trend has been exacerbated by higher interest rates and inflation, which have reduced consumer confidence and spending on non-essential items.
Hurricane-Related Comparisons: The prior year's hurricane-related repairs in Florida created a high benchmark for year-over-year comparisons, leading to a decline in sales in affected regions. This has particularly impacted sales in Florida and the Pinch A Penny franchise network.
Rising Operating Expenses: Operating expenses increased by 6% in the fourth quarter of 2025, driven by technology investments, new sales center openings, and rising self-insured medical costs. These rising costs could pressure margins if not offset by revenue growth.
Inventory and Debt Management: Inventory levels increased by 13% year-over-year due to pre-price increase purchases, which ties up capital and increases carrying costs. Additionally, total debt increased by $249 million, raising the leverage ratio to 1.67, which could pose risks if market conditions worsen.
Pressure on Chemical Pricing: Chemical sales declined by 1% for the year, driven by price pressures. This has been a challenge for the company, particularly in the independent retail channel.
Macroeconomic Uncertainty: Higher-than-historical interest rates, inflation, and tariff impacts create a challenging macroeconomic environment. These factors contribute to uncertainty in consumer spending and discretionary markets, making it difficult to predict recovery timelines.
Employee Compensation Costs: Projected increases in incentive-based compensation expenses for 2026, estimated at $10 million to $15 million, could add to operating costs, especially if revenue growth does not meet expectations.
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Guidance & Outlook
Net Sales Growth: Anticipated to grow in the low single-digit range for 2026, assuming new pool construction remains at approximately 60,000 units as in 2025. Maintenance revenues are expected to remain resilient.
Diluted EPS: Projected range for 2026 is $10.85 to $11.15, reflecting a 2% to 3% improvement at the midpoint.
Gross Margin: Expected to remain consistent with 2025 levels, supported by effective supply chain management, pricing strategies, and increased private label sales.
Capital Allocation: Plans to reinvest 1% to 1.5% of net sales back into the business, allocate $25 million to $50 million for acquisitions, and continue opportunistic share repurchases. Dividend payments are expected to use around $200 million in cash.
Operating Margin: Projected to improve in 2026, driven by low single-digit sales growth and operational efficiencies, though partially offset by increased incentive compensation expenses.
New Sales Centers: Plans to open 5 to 8 new sales centers in 2026, incurring approximately $5 million in additional costs.
Interest Expense: Estimated at approximately $50 million for 2026, with higher expenses expected in the first and second quarters due to inventory buildup.
Depreciation and Amortization: Projected to range between $55 million and $57 million for 2026.
Tax Rate: Estimated at approximately 25% for 2026, with no significant ASU tax benefit expected.
Cash Flow: Projected to align with the goal of achieving 100% of net income for 2026.
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Shareholder Return Plan
Dividend Increase: The company increased its quarterly dividend by 4% in 2025.
Share Repurchases: The company repurchased $341 million worth of shares in 2025.
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Key Q&A
Q:What is the structure of the incentive compensation reset if revenue comes in flat?
A:The incentive compensation reset operates on a sliding scale. If revenue comes in flat, there would be no change to the overall incentive compensation from 2025 to 2026. Additionally, if sales lag further, cost adjustments would be made to align with the market.
Q:What factors could influence gross margin to come in above or below flat for 2025?
A:Factors include customer and product mix, pricing optimization, proprietary/exclusive brands, and competitive pressures. Renovation and remodel trends, as well as deflation on chemicals, also play a role. The company believes it has sufficient levers to maintain or improve gross margin in 2026.
Q:What is the expected SG&A growth for 2026?
A:SG&A growth is expected to be slightly less than sales growth, aiming for a similar operating income margin with slight leverage. The company plans to focus on capacity absorption and enhancing returns on past investments.
Q:What are the expectations for the first quarter of 2026?
A:The first quarter is expected to be up low single digits, similar to the full year. Weather patterns and chemical pricing are factors, but the company is not overly concerned about chemical deflation. Proprietary chemicals are being emphasized to mitigate market swings.
Q:What is the opportunity to improve profitability in the bottom-performing quintile stores?
A:The focus is on sales growth, operational execution, and customer engagement. Consolidation of locations may be considered in specific markets to improve efficiency. The company believes there is significant opportunity to improve operating margins in these stores.
Q:How does the company plan to achieve 2-3% growth above the market in 2026?
A:The company plans to improve market share in underperforming areas, expand the total addressable market (TAM) through innovative products, and enhance customer engagement. Initiatives like the 'Prozone' aim to educate customers on advanced products.
Q:What is the impact of the inventory build in Q4 2025 on gross margin for 2026?
A:The inventory build is expected to provide pricing benefits, particularly in the first quarter of 2026. However, these benefits will diminish mid-season as inventory is replenished. The company exercised financial judgment in making these investments.
Q:What is the balance between organic and inorganic growth for the company?
A:The company sees significant opportunities for organic growth through market share gains, modernization of equipment, and demand creation. Inorganic growth remains a focus, but the emphasis is shifting towards leveraging past investments and organic initiatives.
Q:What are the key factors influencing the EPS guidance range for 2026?
A:The EPS guidance range primarily depends on overall market conditions and resulting sales growth.
Q:What are the assumptions for new pool construction and renovation/remodel for 2026?
A:New pool construction is expected to be flat year-on-year, while renovation and remodel are expected to be flat to slightly up. Customer sentiment is generally optimistic, with some variability across regions.
Q:What are the expectations for new sales center openings in 2026?
A:The company plans to open 5-8 new sales centers, focusing on execution and driving growth in existing facilities. Attention will be given to ensuring returns on past investments.
Q:What is the outlook for the Horizon business?
A:The Horizon business, tied to new construction, faces challenges but has opportunities in the maintenance segment. The company is focusing on execution and return on capital for this segment.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the cadence of first-half versus second-half top-line growth, citing uncertainty. Additionally, they did not provide precise figures for the ROI expectations on new sales centers or the exact impact of chemical pricing on margins.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Arizona Horizon
Arizona North
CFO VP
Carolina franchisees
DIY end
Day people
Europe currency
Feedback product
Florida comparison
Florida jump
Florida sale
Inventory past
Investor Day
Maintenance revenue
OEM relationship
POOL distribution
POOL intelligence
Penny network
Penny sale
Pinch Penny
Sales decline
Sales demand
Texas Arizona
Texas sign
Welcome end
access product
activity basis
activity end
activity pool
agility
approach
basis point
commitment
demand pool
detail
distribution platform
efficiency
end Pinch
excellence
hurricane
position
progress
upgrade
POOL Transcript
Pool Corporation (POOL) Q4 2025 Earnings Call Transcript
Unknown2-19
The earnings call reveals mixed signals: declining EPS and operating income, increased debt, and flat revenue expectations suggest caution. However, optimistic guidance, strategic investments, and potential gross margin improvements offer a counterbalance. The Q&A section highlights management's confidence in maintaining margins and growth, though uncertainties remain. Overall, the sentiment is neutral, with no strong catalysts to drive significant stock price movement.
Pool Corporation (POOL) Q3 2025 Earnings Call Transcript
Unknown10-23
The earnings call summary indicates stable financial performance with no significant growth, flat revenue expectations, and a slight increase in SG&A expenses. Q&A insights highlight sporadic housing market stabilization and ongoing technology investments, but management's reluctance to provide specific details on key issues like HELOC impacts and technology investment magnitude raises concerns. Despite some positive elements, such as regional growth and sustainable supply chain efficiencies, the overall sentiment is tempered by flat revenue and EPS guidance, leading to a neutral stock price prediction.
Pool Corporation (POOL) Q2 2025 Earnings Call Transcript
Unknown7-24
The earnings call summary and Q&A section reveal mixed signals. Financial performance and guidance are cautious, with no material improvement in new pool construction and ongoing challenges in discretionary sales. However, positive aspects include stable supply chains, no significant product shortages, and optimistic trends in Europe. The lack of significant pull-forward demand and stable chemical pricing further contribute to a neutral sentiment. The company's cautious guidance and the absence of strong catalysts indicate a neutral stock price movement over the next two weeks.
Earnings call transcript: Pool Corporation Q1 2025 misses EPS forecast
Unknown4-24
The earnings call reveals several challenges: declining discretionary spending, lower sales due to weather, and reduced gross margins. While share repurchases and dividends are positive, they are overshadowed by weak financial performance and cautious guidance. The Q&A section highlights uncertainties in consumer confidence and construction volumes, adding to the negative sentiment. Without strong guidance or new partnerships, the overall outlook remains negative.
POOL Slides
POOL Report
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