Transcript
Page 1: 2020 PoolCorp Investor Presentation - 2019 update …/ v o µ ] v P ] À ] v ] v À u v Z ] v P Æ ] } v o À o µ } À Z o } v P r u & ] v v ] o Z µ o î ì í ð î ì í ñ î
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Forward Looking StatementsThis presentation may contain forward-looking statements made pursuant to the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date of thispresentation and are subject to change. The Company undertakes no obligation to update or reviseforward-looking statements to reflect new circumstances or unanticipated events as they occur. Actual results maydiffer materially due to a variety of factors, including the sensitivity of our business to weather conditions,changes in the economy and the housing market, our ability to maintain favorable relationships with suppliers andmanufacturers, competition from other leisure product alternatives and mass merchants, excess tax benefits ordeficiencies recognized under ASU 2016-09 and other risks detailed in POOLCORP’s 2018 Annual Report onForm 10-K filed with the Securities and Exchange Commission.

This presentation may also contain references to certain non-GAAP financial measures as defined by the SEC. Areconciliation of non-GAAP financial measures to their most directly comparable financial measures calculatedand presented in accordance with generally accepted accounting principles can be found in the Appendix at theend of this presentation, if applicable at http://ir.poolcorp.com/NonGAAP_Financial_Measures, or in theCompany’s most recent earnings release, which is furnished in our Current Report on Form 8-K filed with the SEC.

NASDAQ/GSM: POOL2

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POOLCORP Overviewo Undisputed leader in highly fragmented, niche distribution

market with favorable growth dynamics

o High organic growth and recurring revenue (60%+) mitigates risk

o Value-add business model and focus on operating leverage drives high operating margins

o Exceptional performance history – 26.7% Total Shareholder Return CAGR over 24 years

NASDAQ/GSM: POOL3

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POOLCORP Global Network Revenue

Vision: ‘To be the best worldwide distributor of outdoor lifestyle home products’

Overview

NASDAQ/GSM: POOL

Global Network Sales Centers(1)

North America Pool 284

Irrigation & Landscape 67

Europe/Australia 22

Total 373

4

(1)As of December 31, 2019

North America Pool85%

Irrigation9%

Europe/ Australia

6%

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POOLCORP Worldwide

‘Over 370 sales and distribution centers serving major pool and irrigation markets worldwide’

Overview

NASDAQ/GSM: POOL5

Americas

1

1

21

1

1

1

1

21

22

2

23

7

3

3

44 5

47

4

5

45

47

6

6

7

8

8

4

7725

4946

18

2

3

1

Europe/Australia

1

3

1

7

22

11 1

1 1

1

1

10

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Value-Added Distribution

‘Adding value in a fragmented supply chain’

Overview

NASDAQ/GSM: POOL6

Superior ServiceSelection

ConveniencePrice

Exceptional Value

Local availability

Convenient locations

Broad product selection

Same/next day delivery

Credit

Technical support

Field-based sales force

Marketing programs

B2B eCommerce

Retail support services

Local availability

Convenient locations

Broad product selection

Same/next day delivery

Credit

Technical support

Field-based sales force

Marketing programs

B2B eCommerce

Retail support services

120,000 Customers

Pool & Landscape Maintenance &

Service Companies

Construction/ Remodeling Contractors

Specialty Retailers

Online Resellers

National Accounts

120,000 Customers

Pool & Landscape Maintenance &

Service Companies

Construction/ Remodeling Contractors

Specialty Retailers

Online Resellers

National Accounts

180,000 products

Demand creation

Marketing & promotion

Supply & logistics mgmt

Warranty support

Product training

180,000 products

Demand creation

Marketing & promotion

Supply & logistics mgmt

Warranty support

Product training

Over 2,200 Vendors

Mfr

Brands

75%

25%

PLEX

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NASDAQ/GSM: POOL7

0

50

100

150

200

250

300

Inde

xed

Retu

rn

Exceptional Shareholder Returns

YE2019 value of $10,000 invested at POOL IPO in October 1995*

POOL $2,949,659

S&P MidCap 400 $132,182

S&P 500 $82,743 Compound Annual Value

Growth Rate

(1995 – 2019)

POOL26.7%

S&P 5009.2%

S&P MidCap 40011.4%

Overview

Total ReturnCAGR

Source: Standard & Poor’s

* Including dividend reinvestment

‘Creating exceptional value over the long-term’

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Financial Results

2014 2015 2016 2017 2018 2019

$2,247$2,363

$2,571$2,788

$2,998

$3,200

Net Sales(in millions)

2014 2015 2016 2017 2018 2019

$643$676

$741

$805$870

$925

Gross Profit(in millions)

8% CAGR

2014 2015 2016 2017 2018 2019

28.6% 28.6% 28.8% 28.9% 29.0% 28.9%

Gross Profit Margin

‘Consistent revenue and gross profit growth’

7% CAGR

Overview

NASDAQ/GSM: POOL

Source: Company Financial Data

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Financial Results

2014 2015 2016 2017 2018 2019

18.4%20.3%

23.1%24.7%

27.7%

29.3%

Return on Invested Capital(2)

2014 2015 2016 2017 2018 2019

$2.44$2.90

$3.47

$4.51

$5.62

$6.40

Adjusted Diluted EPS(1)

‘Operating leverage generating strong earnings and investment returns’

Overview

19% CAGR

NASDAQ/GSM: POOL

Source: Company Financial Data(1) See Appendix for Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS. CAGR excludes 2017-19 adjustments for accounting changes.(2) See Appendix for ROIC calculation

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$5.26

2014 2015 2016 2017 2018 2019

8.4%9.1%

10.0% 10.2%10.5% 10.7%

Operating Margin

$4.27

$5.83

+230 bps

$3.99

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Capital Allocation Priorities

Capital Deployment

-Maintaining Leverage at 1.5x – 2.0x

Capital Deployment

-Maintaining Leverage at 1.5x – 2.0x

Share Repurchase/ Debt Repayment

Share Repurchase/ Debt Repayment

DividendsDividends

AcquisitionsAcquisitions

Capital ExpendituresCapital Expenditures

$150 to $200 million$150 to $200 million

$85 to $100 million$85 to $100 million

$10 to $25 million$10 to $25 million

$35 to $40 million$35 to $40 million

Overview

‘Capital deployment balancing growth and shareholder returns’

NASDAQ/GSM: POOL10

Expected Near Term RangeExpected Near Term Range

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Returning Excess Cash to Stockholders

$0

$300

$600

$900

$1,200

$1,500

$1,800

$2,100

2007 2009 2011 2013 2015 2017 2019

Share Repurchases

Total Cash Returned to Stockholders

(in millions)

Dividends Paid

‘Over $2 billion in cash returned to shareholders through dividends and share repurchases’

$0.00

$0.45

$0.90

$1.35

$1.80

$2.25

30,000

33,000

36,000

39,000

42,000

45,000

48,000

51,000

2007 2009 2011 2013 2015 2017 2019

Increasing Dividends &Reducing Shares Outstanding

(shares in thousands)

Dividends per Share

Weighted Average Shares Outstanding

Overview

NASDAQ/GSM: POOL

Source: Company Financial Data

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U.S. Pool Market

POOLNorth America

85% of Total POOLCORP Revenue(97% U.S.; 3% Canada, Mexico)

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US Blue

* Includes commercial and adjacent product categories

NASDAQ/GSM: POOL

Pool & Related Outdoor Living Product Vendors$12 Billion Market*

Pool & Related Outdoor Living Product Vendors$12 Billion Market*

Wholesale DistributionLarge & Small Pool Construction Contractors, Pool Maintenance & Repair Companies, Pool

Specialty Retailers

Wholesale DistributionLarge & Small Pool Construction Contractors, Pool Maintenance & Repair Companies, Pool

Specialty Retailers

Pool Owners & Commercial Pool OperatorsPool Owners & Commercial Pool Operators

U.S. POOL Market Overview

‘Wholesale distribution is the primary channel to market in the pool industry’

Source: Company estimates at wholesale values

13

Large Retail & Building Contractors

Mass Merchants, Pool Specialty Retail Chains, Large Online

Retailers

Large Retail & Building Contractors

Mass Merchants, Pool Specialty Retail Chains, Large Online

Retailers

70%70% 30%30%

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U.S. ‘Blue’ Product Sales

‘More than 200,000 industry-leading products from over 2,200 suppliers’

US Blue

Source: Company Financial Data

NASDAQ/GSM: POOL14

Chemicals14%

Pool Construction Mat'ls & Tile

11%Lighting & Electrical

10%

Heaters & Access9%

Filters, Automatic Cleaners & Accessories

9%

Pumps & Accessories9%

Parts7%

Covers, Liners & Deck Equipment

6%

Commercial Pool Products5%

Plumbing & Fittings5%

Above & In-ground Pools5%

Misc Maint & Other4%

Hardscapes & Outdoor Living4%

Chlorinators & Chemical Feeders3%

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U.S. ‘Blue’ Distribution Channels

‘Over 65,000 customers purchasing an average of $35,000 per year’

US Blue

NASDAQ/GSM: POOL15

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U.S. In-Ground Poolso Est. 5.3 million U.S. in-ground

pools in 2018 drives 85%+ of POOL blue sales

o New pool construction units at 1% - 2% per year of installed base

o Aging installed base drives renovation and remodel revenue

o New features increase new pool and remodel spend

o New pool construction returning to ‘normalized’ levels

o New pool construction growth limited by labor availability

‘Installed base grows as new pool construction recovers’

US Blue

NASDAQ/GSM: POOL16

3,000

3,600

4,200

4,800

5,400

6,000 Installed Base

0

50

100

150

200

250

in th

ousa

nds

> 10 years old

----- Forecast ------

New Pool Construction

------ Forecast -------

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Major External Impacts US Blue

NASDAQ/GSM: POOL

Short-Term: Weather

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‘Weather is the biggest external factor affecting short term demand’

Cooler temperatures across the central and western U.S. in 2019 compared to 2018

Wetter conditions for the central and western US in 2019 compared to 2018

Source: NOAA

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Major External Impacts US Blue

NASDAQ/GSM: POOL18

Sources: Census Bureau; Weldon Cooper Center, Demographics Research Group

Long-Term: Housing Market & Population Migration

‘Housing and population trends favor continued growth in outdoor living’

Pop Decrease> 5 million + 0.5 – 1 million+ 1 – 5 million + 0 – 0.5 million Pop Decrease> 5 million + 0.5 – 1 million+ 1 – 5 million + 0 – 0.5 million Pop Decrease> 5 million + 0.5 – 1 million+ 1 – 5 million + 0 – 0.5 million

Projected U.S Population Growth through 2040

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Sustainable Competitive AdvantagesIndustry-specifico Recurring maintenance spend from

growing pool installed baseo Contractor knowledge; professional

installationo On-demand local supply and fulfillment

requirementso Lack of brand awarenesso Favorable demographicso Product innovation and changing

consumer preferences drive growth

POOL-specifico Nationwide network and

reacho Scale & capital strengtho Operating leverage and

superior executiono Performance-based culture

focused on growth and value creation

‘Powerful business model with high recurring revenue, scale and low cyclicality’

NASDAQ/GSM: POOL19

US Blue

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Irrigation & Landscape Distribution

9% of Total POOLCORP Revenue

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Horizon o 3rd largest US irrigation and landscape

maintenance products distributor; multi-regional footprint

o Focused on expansion in higher growth US sunbelt markets

o Highly fragmented market with consolidation opportunity

o Similar dynamics to Blue business though with higher correlation to new home construction

o 15%+ contribution margin with sales growth

US Green

Irrigation products

Outdoor living products

Landscape & Equipment

Target Categories

NASDAQ/GSM: POOL21

‘Green business dynamics similar to Blue business’

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Horizon Revenue & Operating Contribution

‘Organic growth, acquisitions and execution driving improved performance’Source: Company financial information

US Green

NASDAQ/GSM: POOL22

$0

$5

$10

$15

$20

$25

$30

$0

$50

$100

$150

$200

$250

$300

2015 2016 2017 2018 2019

Horizon Net Sales

Operating Income Contribution

In m

illio

ns

(1)

(1) Actual results not disclosed or to scale

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POOL InternationalEurope/Australia

6% of Total POOLCORP Revenue

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Europe/Australiao Presence in largest swimming pool

marketso 2nd largest pool products wholesale

distributor in Europe; largest in Australia

o Smaller installed base than NorthAmerica suggests higher market growth potential

o Focus on improving performance with longer term network expansion strategy

Region # of Sales Centers

Western Europe 16

Australia 6

Europe/Australia

‘High organic international growth with opportunistic acquisitions’

NASDAQ/GSM: POOL24

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POOL Organic Growth Drivers

Growth Contributors2020 - 2024

Annual Revenue Growth Range

Installed Base Growth 1% - 2%

Inflation 1% - 2%

Aging Base Remodel/New Construction Recovery 2% - 3%

Industry Growth Contributors 4% - 6%

Market Share Gains & New Products 2% - 3%

Total POOL Revenue Growth Range 6% - 8%

‘Strong industry and Company growth attributes’

Summary

NASDAQ/GSM: POOL25

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POOL Financial ModelFinancial Measurement 5 Year History 5 Year Outlook

Revenue Growth 5% - 9% 6% - 8%

Gross Profit Margins 28.6% - 29.0% Stable

Contribution Margin(1) 14% - 23% Mid-teens %

Share Repurchases $100 - $185million

$150 - $200 million

Earnings per Share Growth* 11% - 23% Mid-teens %

‘Outlook remains positive’

Summary

NASDAQ/GSM: POOL

(1) Incremental Operating Income Growth/Incremental Sales Growth* Excludes ASU 2016-09 effects

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Summary

oPositive industry dynamics drive above-market growth

oSustainable competitive advantages with highly experienced team

oConsistent, exceptional investment performance

NASDAQ/GSM: POOL27

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Appendix

NASDAQ/GSM: POOL29

Reconciliation of Reported Dilluted EPS to Adjusted Diluted EPS FYE 12/31/19 FYE 12/31/18 FYE 12/31/17

Reported Diluted EPS before adjustments and effects of tax and accounting changes $6.40 $5.62 $4.51

Less:

Per diluted share effect of application of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, standard

(0.57) (0.36) (0.24)

Per diluted share provisional tax benefit recorded for remeasurement of deferred tax liabilities upon enactment of the Tax Cut and Jobs Act

(0.28)

Adjusted Diluted EPS $5.83 $5.26 $3.99

Reconciliation of Net Income to Adjusted EBITDA FYE 12/31/19 FYE 12/31/18 FYE 12/31/17 FYE 12/31/16 FYE 12/31/15 FYE 12/31/14

Net income ($ in thousands) $261,575 $234,461 $191,339 $148,603 $128,224 $111,030

Add:

Interest expense (1) 22,425 20,336 15,360 13,802 7,298 7,208

Provision for income taxes 56,161 58,774 77,982 92,931 80,137 70,559

Share-based compensation 13,472 12,874 12,482 9,902 9,543 9,065

Goodwill impairment - - - 613 - -

Equity (earnings) losses in unconsolidated investments, net of tax (262) (242) (139) (156) (211) (204)

Depreciation 27,885 26,122 24,157 20,338 16,373 14,495

Amortization (2) 956 1,102 976 1,012 398 845

Adjusted EBITDA $382,212 $353,427 $322,157 $287,045 $241,762 $212,998 (1) Shown net of interest income, impact of foreign currency transactions and includes amortization of deferred financing costs(2) Excludes amortization of deferred financing costs

Return on Invested Capital 2019 2018 2017 (1) 2016 (2) 2015 (2) 2014 (2)

Numerator (trailing four quarters total):

Net Income attributable to Pool Corporation $261,575 $234,461 $179,633 $148,955 $128,275 $110,692

Interest and other non-operating expenses, net 23,772 20,896 15,189 14,481 8,072 7,485

Less: taxes on Interest and other non-operating expenses, net at 17.7% for 2019, 20.1% for 2018, 33.4% for 2017 and at respective effective tax rates for previous years

(4,205) (4,200) (5,073) (5,575) (3,108) (2,912)

$281,142 $251,157 $189,749 $157,861 $133,239 $115,265

Denominator (average of trailing four quarters):

Long-term debt, net $595,247 $602,984 $520,950 $441,026 $400,204 $366,407

Short-term borrowings and current portion of long-term debt 17,323 15,190 11,030 3,806 1,732 1,038

Total stockholders’ equity 346,049 289,979 236,901 237,380 254,298 257,502

$958,619 $908,153 $768,881 $682,212 $656,234 $624,947

Return on invested capital 29.3% 27.7% 24.7% 23.1% 20.3% 18.4%

(1) To calculate ROIC for 2017, we reduced Net income attributable to Pool Corporation by $12.0 million, which represents our benefit related to the enactment of the Tax Cuts and Jobs Act. We also adjusted our effective tax rate and our December 31, 2017 retained earnings balance for this benefit. ROIC for 2017 based on reported amounts is 26.2%.

(2) Our 2014-2016 ROIC calculations have been conformed to our 2017-2019 presentation.


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