Pool Corp - $POOL - Earnings Analysis: Strong focus on maintenance-related product sales provides stability.

Business Model

Pool Corporation generates revenue through the wholesale distribution of swimming pool and related backyard products. They serve roughly 125,000 wholesale customers through 448 sales centers across North America, Europe, and Australia.

Revenue Sources

• Maintenance products (64% of 2024 sales)
• Renovation and remodel products (22% of 2024 sales)
• New pool construction products (14% of 2024 sales)

Income Statement Analysis

• Net sales decreased by 1.55% year-over-year from $1003.05 million to $987.48 million, due to declines in new pool construction and remodel activity being partially offset by stable maintenance related product sales.
• Gross profit decreased by 1.20% year-over-year due to product mix, as higher gross margin construction and remodel related products represented a smaller portion of total revenue.
• Operating expenses increased by 7.08% year-over-year to $229.593 million due to network expansion, technology initiatives, rent increases and wage increases.
• Net income decreased by 27.49% year-over-year to $37.3 million from $51.437 million.
• Basic earnings per share decreased by 26.32% year-over-year to $0.98.
• Diluted earnings per share decreased by 25.76% year-over-year to $0.98.

Balance Sheet Analysis

• Total assets decreased by 1.75% from $3,428.068 million to $3,368.184 million.
• Total stockholders' equity decreased by 2.99% from $1,312.787 million to $1,273.465 million.
• Total liabilities decreased by 0.97% from $2,115.281 million to $2,094.719 million.

Cash Flow Analysis

• Net cash provided by operating activities decreased by 25.78% from $888.229 million to $659.186 million, driven by lower net income and changes in operating assets and liabilities.
• Net cash used in investing activities decreased by 8.67% from $71.597 million to $66.169 million.
• Net cash used in financing activities decreased by 27.76% from $798.132 million to $576.55 million, due to changes in borrowings and repayments.
• Cash and cash equivalents at the end of the period increased by 17.01% from $66.54 million to $77.862 million.

Capital Allocation

In 2024, the company allocated capital towards 10 greenfield sales centers, 2 acquired sales centers, 11 new Pinchapenny Franchisee stores, Pool 360 ecosystem capabilities, $103 million reduction in debt and $483 million returned to shareholders through dividends and share repurchases.

Management Commentary

Strategic execution in our growth initiatives allowed us to achieve net sales of $5.3 billion despite tempered discretionary spending.

This year we enhanced our POOL360 digital ecosystem with technology rollouts and expanded our digital marketing programs, leading to increased sales of our private-label chemical products.

We ended the year with strong operating cash flows of $659.2 million and are proud to have returned $483.4 million to our shareholders through dividends and share repurchases.

Overall Sentiment: Encouraged by stable home values, a resilient consumer, and continuing favorable industry trends. Excited for new products and services available in the marketplace. Expect earnings for 2025 to be in the range of $11.08 to $11.58 per diluted share, including an estimated $0.08 favorable impact from ASU 2016-09.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.