Pool Corporation Reports Record Second Quarter Results and Updates 2022 Earnings Guidance

Highlights

• Record net sales of $2.1 billion, up 15% from Q2 2021
• Operating income of $418.9 million, up 24% from Q2 2021 with a 150 bps improvement in operating margin
• Q2 2022 diluted EPS of $7.63, an increase of 20% from Q2 2021
• Increases annual earnings guidance range to $18.38 - $19.13 per diluted share to reflect additional tax benefits

COVINGTON, La., July 21, 2022 (GLOBE NEWSWIRE) -- Pool Corporation (Nasdaq/GSM:POOL) today reported record results for the second quarter of 2022 and updated its 2022 earnings guidance.

“Our net sales for the second quarter of 2022 increased 15%, exceeding $2.0 billion for the first time in our company’s history. This accomplishment is even more impressive after considering our strong performance in the second quarter of 2021 when we achieved net sales of $1.8 billion and 40% growth. While we continue to be limited by supply chain and labor constraints, supply chain dynamics are improving. Our results in the second quarter, while challenged by unfavorable weather in certain markets, reflect the positive impact of growth in the installed base of pools, robust demand and heightened consumer interest in enhanced pool customizations. These favorable trends have benefited our industry, and we believe will continue to do so in the long term,” commented Peter D. Arvan, president and CEO.

Second quarter ended June 30, 2022 compared to the second quarter ended June 30, 2021

Net sales increased 15% in the second quarter of 2022 to a record $2.1 billion compared to $1.8 billion in the second quarter of 2021. Base business sales grew 10%. Our results are indicative of healthy demand for our products as maintenance, replacement, refurbishment and construction activity remained strong. Net sales benefited approximately 10% to 11% from elevated price inflation, but were unfavorably impacted 1% from currency exchange rate fluctuations.

Gross profit increased 21% to a record $666.8 million in the second quarter of 2022 from $551.7 million in the same period of 2021. Base business gross profit improved 14% over the second quarter of 2021. Gross margin increased 150 basis points to 32.4% in the second quarter of 2022 compared to 30.9% in the second quarter of 2021, reflecting benefits from our supply chain initiatives, increased pricing and recent acquisitions. Base business gross margin increased 100 basis points.

Selling and administrative expenses (operating expenses) increased 16% to $247.9 million in the second quarter of 2022 compared to $213.1 million in the second quarter of 2021, including a 1% benefit from currency exchange rate fluctuations. As a percentage of net sales, operating expenses increased to 12.1% in the second quarter of 2022 compared to 11.9% in the same period of 2021. Our operating expenses have increased to support our business growth, including recent acquisitions.

Operating income in the second quarter of 2022 increased 24% to $418.9 million compared to $338.6 million in the same period in 2021. Operating margin was 20.4% in the second quarter of 2022 compared to 18.9% in the second quarter of 2021. Base business operating margin was 20.3%, up 130 basis points from the prior year period.

We recorded a $1.6 million, or $0.04 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in the quarter ended June 30, 2022, compared to a tax benefit of $7.7 million, or $0.19 per diluted share, realized in the same period of 2021.

Net income increased 18% to $307.3 million in the second quarter of 2022 compared to $259.7 million in the second quarter of 2021. Earnings per diluted share increased 20% to $7.63 in the second quarter of 2022 compared to $6.37 in the same period of 2021. Without the impact from ASU 2016-09 in both periods, earnings per diluted share increased 23% to $7.59 in the second quarter of 2022 compared to $6.18 in the second quarter of 2021. See the reconciliation of GAAP to non-GAAP measures in the addendum of this release.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

Net sales for the six months ended June 30, 2022 increased 22% to a record $3.5 billion from $2.8 billion in the six months ended June 30, 2021. Base business sales increased 16% for the period. Gross margin improved 220 basis points to 32.1% from 29.9% in the same period last year. Base business gross margin increased 160 basis points.

Operating expenses for the six months ended June 30, 2022 increased 19% compared to the first six months of 2021. Operating income for the six months ended June 30, 2022 increased 40% to a record $654.6 million compared to $467.6 million in the same period last year.   Operating margin for the six months ended June 30, 2022 was 18.9% compared to 16.4% for the six months ended June 30, 2021, while base business operating margin increased 240 basis points.

We recorded a $8.9 million, or $0.22 per diluted share, tax benefit from ASU 2016-09 in the six months ended June 30, 2022 compared to a $11.7 million, or $0.29 per diluted share, tax benefit in the same period of 2021.

Net income for the six months ended June 30, 2022 increased 36% to a record $486.5 million compared to $358.4 million for the six months ended June 30, 2021. Earnings per diluted share increased 37% to $12.03 in the first six months of 2022 compared to $8.78 in the same period of 2021. Without the impact from ASU 2016-09 in both periods, earnings per diluted share was $11.81 in the first six months of 2022 compared to $8.49 in the same period of 2021.

Balance Sheet and Liquidity

On the balance sheet at June 30, 2022, total net receivables, including pledged receivables, increased 29% compared to June 30, 2021, driven by our sales growth and recent acquisitions. Inventory levels increased 77% to $1.6 billion compared to June 30, 2021. We increased our purchasing beginning in the second half of 2021 to improve our customer experience and minimize the impact of longer lead times from our vendors. Our inventory balance also reflects impacts from inflation and recent acquisitions. Total debt outstanding was $1.6 billion at June 30, 2022. Our debt balance has increased between periods as we have utilized debt proceeds to fund investments in working capital and recent acquisitions.

Net cash provided by operations was $28.7 million in the first six months of 2022 compared to $187.2 million in the first six months of 2021. The decrease in our operating cash flows was driven by federal tax payments of $79.5 million in 2022, which were allowed to be deferred and included in accrued expenses and other liabilities at December 31, 2021. Additional impacts relate to growth-driven working capital outflows, including increased inventory purchases, which were partially offset by an increase in net income. Adjusted EBITDA (as defined in the addendum to this release) increased 39% to $681.5 million for the six months ended June 30, 2022 compared to $489.6 million in the same period of the prior year.

Outlook

“We expect continued growth in the second half of the year, on top of the substantial growth that we experienced last year. We remain confident in the long-term stability of our business as 80% of our net sales activity is driven by the installed base of pools. Utilizing our industry-leading position, focusing on our operating priorities, and leveraging our well-established network will allow us to deliver solid growth for the year. We are updating our annual earnings guidance range to include the $0.04 tax benefit from ASU 2016-09 recognized in the second quarter of 2022. We expect our annual earnings guidance to be in the range of $18.38 to $19.13 per diluted share, including the impact of year-to-date tax benefits of $0.22,” said Arvan.

About Pool Corporation

POOLCORP is the world’s largest wholesale distributor of swimming pool and related backyard products. POOLCORP operates 416 sales centers in North America, Europe and Australia, through which it distributes more than 200,000 national brand and private label products to roughly 120,000 wholesale customers. For more information, please visit www.poolcorp.com.

Forward-Looking Statements

This news release includes “forward-looking” statements that involve risks and uncertainties that are generally identifiable through the use of words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “should” and similar expressions and include projections of earnings. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. Actual results may differ materially due to a variety of factors, including impacts on our business from the COVID-19 pandemic and the extent to which home-centric trends will continue, accelerate or reverse; the sensitivity of our business to weather conditions; changes in the economy, consumer discretionary spending, the housing market or inflation rates; our ability to maintain favorable relationships with suppliers and manufacturers; competition from other leisure product alternatives or mass merchants; our ability to continue to execute our growth strategies; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP’s 2021 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports and filings filed with the Securities and Exchange Commission (SEC) as updated by POOLCORP's subsequent filings with the SEC.

CONTACT:
Curtis J. Scheel
Director of Investor Relations
985.801.5341
curtis.scheel@poolcorp.com 

POOL CORPORATION
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share data)

	Three Months Ended								Six Months Ended
	June 30,								June 30,
		2022				2021				2022				2021
Net sales	$	2,055,818			$	1,787,833			$	3,468,468			$	2,848,579
Cost of sales		1,389,014				1,236,148				2,354,474				1,995,762
Gross profit		666,804				551,685				1,113,994				852,817
Percent		32.4	%			30.9	%			32.1	%			29.9	%
Selling and administrative expenses		247,916				213,099				459,382				385,200
Operating income		418,888				338,586				654,612				467,617
Percent		20.4	%			18.9	%			18.9	%			16.4	%
Interest and other non-operating expenses, net		8,523				1,963				13,722				4,545
Income before income taxes and equity in earnings		410,365				336,623				640,890				463,072
Provision for income taxes		103,160				76,985				154,482				104,854
Equity in earnings of unconsolidated investments, net		78				57				136				132
Net income	$	307,283			$	259,695			$	486,544			$	358,350
Earnings per share attributable to common stockholders:(1)
Basic	$	7.71			$	6.47			$	12.16			$	8.92
Diluted	$	7.63			$	6.37			$	12.03			$	8.78
Weighted average common shares outstanding:
Basic		39,660				40,125				39,795				40,169
Diluted		40,064				40,745				40,231				40,800
Cash dividends declared per common share	$	1.00			$	0.80			$	1.80			$	1.38

⁽¹⁾ Earnings per share under the two-class method is calculated using net income attributable to common stockholders (net income reduced by earnings allocated to participating securities), which was $305.6 million and $483.8 million for the three and six months ended June 30, 2022, respectively. Participating securities excluded from weighted average common shares outstanding were 218 thousand and 229 thousand for the three and six months ended June 30, 2022, respectively.

POOL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

		June 30,			June 30,				Change
		2022			2021				$			%
Assets
Current assets:
	Cash and cash equivalents	$	91,481		$	58,465		$	33,016			56		%
	Receivables, net (1)		239,639			210,318			29,321			14
	Receivables pledged under receivables facility		516,946			375,248			141,698			38
	Product inventories, net (2)		1,579,101			894,654			684,447			77
	Prepaid expenses and other current assets		43,317			18,716			24,601			131
Total current assets			2,470,484			1,557,401			913,083			59
Property and equipment, net			183,480			111,661			71,819			64
Goodwill			692,972			283,284			409,688			145
Other intangible assets, net			309,375			12,350			297,025			2,405
Equity interest investments			1,179			1,293			(114	)		(9	)
Operating lease assets			259,571			221,068			38,503			17
Other assets			45,044			26,978			18,066			67
Total assets		$	3,962,105		$	2,214,035		$	1,748,070			79		%
Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable	$	604,225		$	439,453		$	164,772			37		%
	Accrued expenses and other current liabilities		195,529			184,437			11,092			6
	Short-term borrowings and current portion of long-term debt		19,731			10,058			9,673			96
	Current operating lease liabilities		71,550			63,786			7,764			12
Total current liabilities			891,035			697,734			193,301			28
Deferred income taxes			42,380			30,440			11,940			39
Long-term debt, net			1,575,667			413,058			1,162,609			281
Other long-term liabilities			32,109			38,079			(5,970	)		(16	)
Non-current operating lease liabilities			191,856			159,976			31,880			20
Total liabilities			2,733,047			1,339,287			1,393,760			104
Total stockholders’ equity			1,229,058			874,748			354,310			41
Total liabilities and stockholders’ equity		$	3,962,105		$	2,214,035		$	1,748,070			79		%

⁽¹⁾ The allowance for doubtful accounts was $6.5 million at June 30, 2022 and $5.4 million at June 30, 2021.
⁽²⁾ The inventory reserve was $20.9 million at June 30, 2022 and $15.2 million at June 30, 2021. 

POOL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

			Six Months Ended
			June 30,
			2022				2021				Change
Operating activities
Net income		$	486,544			$	358,350			$	128,194
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation		15,376				13,884				1,492
	Amortization		4,358				723				3,635
	Share-based compensation		7,571				7,549				22
	Equity in earnings of unconsolidated investments, net		(136	)			(132	)			(4	)
	Other		7,185				4,812				2,373
Changes in operating assets and liabilities, net of effects of acquisitions:
	Receivables		(384,245	)			(295,342	)			(88,903	)
	Product inventories		(251,090	)			(114,792	)			(136,298	)
	Prepaid expenses and other assets		(20,573	)			(16,865	)			(3,708	)
	Accounts payable		208,017				170,368				37,649
	Accrued expenses and other current liabilities		(44,276	)			58,673				(102,949	)
Net cash provided by operating activities			28,731				187,228				(158,497	)
Investing activities
Acquisition of businesses, net of cash acquired			(7,629	)			(15,162	)			7,533
Purchases of property and equipment, net of sale proceeds			(19,802	)			(17,333	)			(2,469	)
Net cash used in investing activities			(27,431	)			(32,495	)			5,064
Financing activities
Proceeds from revolving line of credit			1,122,186				549,008				573,178
Payments on revolving line of credit			(1,128,902	)			(505,636	)			(623,266	)
Proceeds from term loan under credit facility			250,000				—				250,000
Proceeds from asset-backed financing			215,000				260,000				(45,000	)
Payments on asset-backed financing			(50,000	)			(290,000	)			240,000
Payments on term facility			(4,625	)			(4,625	)			—
Proceeds from short-term borrowings and current portion of long-term debt			24,767				4,466				20,301
Payments on short-term borrowings and current portion of long-term debt			(16,808	)			(6,277	)			(10,531	)
Payments of deferred and contingent acquisition consideration			(1,374	)			(362	)			(1,012	)
Proceeds from stock issued under share-based compensation plans			5,107				7,918				(2,811	)
Payments of cash dividends			(72,028	)			(55,418	)			(16,610	)
Purchases of treasury stock			(278,680	)			(90,135	)			(188,545	)
Net cash provided by (used in) financing activities			64,643				(131,061	)			195,704
Effect of exchange rate changes on cash and cash equivalents			1,217				665				552
Change in cash and cash equivalents			67,160				24,337				42,823
Cash and cash equivalents at beginning of period			24,321				34,128				(9,807	)
Cash and cash equivalents at end of period		$	91,481			$	58,465			$	33,016

ADDENDUM

Base Business

The following table breaks out our consolidated results into the base business component and the excluded component (sales centers excluded from base business):

(Unaudited)		Base Business								Excluded								Total
(in thousands)		Three Months Ended								Three Months Ended								Three Months Ended
		June 30,								June 30,								June 30,
			2022				2021				2022				2021				2022				2021
Net sales		$	1,963,974			$	1,782,894			$	91,844			$	4,939			$	2,055,818			$	1,787,833
Gross profit			625,843				550,509				40,961				1,176				666,804				551,685
Gross margin			31.9	%			30.9	%			44.6	%			23.8	%			32.4	%			30.9	%
Operating expenses			226,728				212,425				21,188				674				247,916				213,099
Expenses as a % of net sales			11.5	%			11.9	%			23.1	%			13.6	%			12.1	%			11.9	%
Operating income			399,115				338,084				19,773				502				418,888				338,586
Operating margin			20.3	%			19.0	%			21.5	%			10.2	%			20.4	%			18.9	%

(Unaudited)		Base Business								Excluded								Total
(in thousands)		Six Months Ended								Six Months Ended								Six Months Ended
		June 30,								June 30,								June 30,
			2022				2021				2022				2021				2022				2021
Net sales		$	3,292,100			$	2,840,676			$	176,368			$	7,903			$	3,468,468			$	2,848,579
Gross profit			1,039,122				850,948				74,872				1,869				1,113,994				852,817
Gross margin			31.6	%			30.0	%			42.5	%			23.6	%			32.1	%			29.9	%
Operating expenses			420,655				383,710				38,727				1,490				459,382				385,200
Expenses as a % of net sales			12.8	%			13.5	%			22.0	%			18.9	%			13.2	%			13.5	%
Operating income			618,467				467,238				36,145				379				654,612				467,617
Operating margin			18.8	%			16.4	%			20.5	%			4.8	%			18.9	%			16.4	%

We have excluded the following acquisitions from our base business results for the periods identified:

Acquired		Acquisition Date		Net Sales Centers Acquired		Periods Excluded
Tri-State Pool Distributors		April 2022		1		May - June 2022
Porpoise Pool & Patio, Inc.		December 2021		1		January - June 2022
Wingate Supply, Inc.		December 2021		1		January - June 2022
Vak Pak Builders Supply, Inc.		June 2021		1		January - June 2022 and June 2021
Pool Source, LLC		April 2021		1		January - June 2022 and April - June 2021
TWC Distributors, Inc.		December 2020		10		January - February 2022 and January - February 2021

When calculating our base business results, we exclude sales centers that are acquired, closed or opened in new markets for a period of 15 months. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers.

We generally allocate corporate overhead expenses to excluded sales centers on the basis of their net sales as a percentage of total net sales. After 15 months of operations, we include acquired, consolidated and new market sales centers in the base business calculation including the comparative prior year period.

The table below summarizes the changes in our sales center count in the first six months of 2022.

December 31, 2021	410
Acquired locations	1
New locations	5
June 30, 2022	416

Adjusted EBITDA

We define Adjusted EBITDA as net income or net loss plus interest and other non-operating expenses, income taxes, depreciation, amortization, share-based compensation, goodwill and other impairments (recoveries) and equity in earnings or loss in unconsolidated investments.  Other companies may calculate Adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

Adjusted EBITDA is not a measure of performance as determined by generally accepted accounting principles (GAAP). We believe Adjusted EBITDA should be considered in addition to, not as a substitute for, operating income or loss, net income or loss, net cash flows provided by or used in operating, investing and financing activities or other income statement or cash flow statement line items reported in accordance with GAAP.

We have included Adjusted EBITDA as a supplemental disclosure because we believe that it is widely used by our investors, industry analysts and others as a useful supplemental performance measure. We believe that Adjusted EBITDA, when viewed with our GAAP results and the accompanying reconciliations, provides an additional measure that enables management and investors to monitor factors and trends affecting our ability to service debt, pay taxes and fund capital expenditures.
  
The table below presents a reconciliation of net income to Adjusted EBITDA.

(Unaudited)			Three Months Ended								Six Months Ended
(in thousands)			June 30,								June 30,
			2022				2021				2022				2021
Net income		$	307,283			$	259,695			$	486,544			$	358,350
	Add:
	Interest and other non-operating expenses (1)		8,523				1,963				13,722				4,545
	Provision for income taxes		103,160				76,985				154,482				104,854
	Share-based compensation		3,914				3,712				7,571				7,549
	Equity in earnings of unconsolidated investments, net		(78	)			(57	)			(136	)			(132	)
	Depreciation		7,713				7,000				15,376				13,884
	Amortization (2)		1,951				221				3,928				561
Adjusted EBITDA		$	432,466			$	349,519			$	681,487			$	489,611

⁽¹⁾ Shown net of losses (gains) on foreign currency transactions of $190 thousand and $(96) thousand for the three months ended June 30, 2022 and June 30, 2021, respectively, and $114 thousand and $(109) thousand for the six months ended June 30, 2022 and June 30, 2021, respectively, and includes amortization of deferred financing costs as discussed in Note 2 below.

⁽²⁾ Excludes amortization of deferred financing costs of $215 thousand and $81 thousand for the three months ended June 30, 2022 and June 30, 2021, respectively, and $430 thousand and $162 thousand for the six months ended June 30, 2022 and June 30, 2021, respectively. This non-cash expense is included in Interest and other non-operating expenses, net on the Consolidated Statements of Income.

Adjusted Diluted EPS

We have included adjusted diluted EPS, a non-GAAP financial measure, in this press release as a supplemental disclosure, because we believe this measure is useful to investors and others in assessing our period-to-period operating performance.

Adjusted diluted EPS is a key measure used by management to demonstrate the impact of tax benefits from ASU 2016-09 on our diluted EPS and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.

We believe this measure should be considered in addition to, not as a substitute for, diluted EPS presented in accordance with GAAP, and in the context of our other disclosures in this press release. Other companies may calculate this non-GAAP financial measure differently than we do, which may limit its usefulness as a comparative measure.  

The table below presents a reconciliation of diluted EPS to adjusted diluted EPS.

(Unaudited)		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2022				2021				2022				2021
Diluted EPS		$	7.63			$	6.37			$	12.03			$	8.78
ASU 2016-09 tax benefit			(0.04	)			(0.19	)			(0.22	)			(0.29	)
Adjusted diluted EPS		$	7.59			$	6.18			$	11.81			$	8.49