peter arvan, president & ceo mark joslin, senior …5 0 30 60 90 120 150 180 210 n exceptional...
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Peter Arvan, President & CEOMark Joslin, Senior Vice President & CFO
Forward Looking Statements
This 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: POOL
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POOLCORP Overview
o 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 – 26.0% Total Shareholder Return CAGR over 23 years
NASDAQ/GSM: POOL
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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)
Americas Pool 283
Irrigation & Landscape 67
Europe/Australia 22
Total 372
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(1)As of September 30, 2019
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Exceptional Shareholder Returns
YE2018 value of $10,000 invested at POOL IPO in October 1995*
POOL $2,041,598
S&P MidCap 400 $104,740
S&P 500 $62,931 Compound Annual Value
Growth Rate
(1995 – 2018)
POOL26.0%
S&P 500
8.3%
S&P MidCap 400
10.8%
Overview
Total ReturnCAGR
Source: Standard & Poor’s
* Including dividend reinvestment
‘Creating exceptional value over the long-term’
Financial Results
‘Consistent revenue and gross profit growth’
NASDAQ/GSM: POOL
Source: Company Financial Data
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Financial Results
‘Operating leverage generating strong earnings and investment returns’
NASDAQ/GSM: POOL
Source: Company Financial Data(1) See Appendix for Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS. CAGR excludes 2017-18 adjustments for tax and accounting changes.(2) See Appendix for ROIC calculation.
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Capital Allocation Priorities
‘Capital deployment balancing growth and shareholder returns’
NASDAQ/GSM: POOL
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Capital Deployment
-Maintaining Leverage at 1.5x – 2.0x
Share Repurchase/ Debt Repayment
Dividends
Acquisitions
Capital Expenditures
$150 to $200 million
$70 to $80 million
$5 to $15 million
$35 to $40 million
Expected Near Term Range
* Includes commercial and adjacent product categories
NASDAQ/GSM: POOL
Pool & Related Outdoor Living Product Vendors$12 Billion Market*
Wholesale DistributionLarge & Small Pool Construction Contractors, Pool Maintenance & Repair Companies, Pool
Specialty Retailers
Pool 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
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Large Retail & Building Contractors
Mass Merchants, Pool Specialty Retail Chains, Large Online
Retailers
70% 30%
POOL Organic Growth Drivers
Growth Contributors 5 Year Outlook
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’
NASDAQ/GSM: POOL
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POOL Financial Model
Financial Measurement 5 Year History 5 Year Outlook
Organic Revenue Growth 5% - 7% 6% - 8%
Gross Profit Margins 28.6% - 29.0% Stable
Contribution Margin(1) 14% - 23% Mid-teens %
Share Repurchases $100 - $185 million $150 - $200 million
Earnings per Share Growth(2) 15% - 23% Mid-teens %
Return on Invested Capital(3) 18% - 28% 25+%
‘Outlook remains positive’
NASDAQ/GSM: POOL
(1) Incremental Operating Income Growth/Incremental Sales Growth(2) Excludes ASU 2016-09 effects(3) See calculation at http://ir.poolcorp[.com/NonGAAP_Financial_Measures
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Summary
oPositive industry dynamics drive above-market growth
oSustainable competitive advantages with highly experienced team
oConsistent, exceptional investment performance
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Appendix
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Reconciliation of Reported Dilluted EPS to Adjusted Diluted EPS FYE 12/31/18 FYE 12/31/17
Reported Diluted EPS before adjustments and effects of tax and accounting changes $5.62 $4.51
Less:
Per diluted share effect of application of ASU 2016-09, Improvements to Employee Share-Based Payment
Accounting, standard(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 $5.26 $3.99
Reconciliation of Net Income to Adjusted EBITDA FYE 12/31/18 FYE 12/31/17 FYE 12/31/16 FYE 12/31/15 FYE 12/31/14 FYE 12/31/13
Net income ($ in thousands) $234,461 $191,339 $148,603 $128,224 $111,030 $97,330
Add:
Interest expense (1) 20,336 15,360 13,802 7,298 7,208 6,528
Provision for income taxes 58,774 77,982 92,931 80,137 70,559 61,590
Share-based compensation 12,874 12,482 9,902 9,543 9,065 8,150
Goodwill impairment - - 613 - - -
Equity (earnings) losses in unconsolidated investments, net of tax (242) (139) (156) (211) (204) (182)
Depreciation 26,122 24,157 20,338 16,373 14,495 13,359
Amortization (2) 1,102 976 1,012 398 845 825
Adjusted EBITDA $353,427 $322,157 $287,045 $241,762 $212,998 $187,600
(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 2018 2017 2016 (2) 2015 (2) 2014 (2) 2013 (2)
Numerator (trailing four quarters total):
Net Income attributable to Pool Corporation (1) $234,461 $179,633 $148,955 $128,275 $110,692 $97,330
Interest and other non-operating expenses, net 20,896 15,189 14,481 8,072 7,485 6,748
Less: taxes on Interest and other non-operating expenses, net at 20.1% for 2018,
33.4%(1) for 2017 and at respective effective tax rates for previous years(4,200) (5,073) (5,575) (3,108) (2,912) (2,618)
$251,157 $189,749 $157,861 $133,239 $115,265 $101,460
Denominator (average of trailing four quarters):
Long-term debt, net $602,984 $520,950 $441,026 $400,204 $366,407 $271,455
Short-term borrowings and current portion of long-term debt 15,190 11,030 3,806 1,732 1,038 16
Total stockholders’ equity (1) 286,979 236,901 237,380 254,298 257,502 313,401
$905,153 $768,881 $682,212 $656,234 $624,947 $584,872
Return on invested capital 27.7% 24.7% 23.1% 20.3% 18.4% 17.3%
(1) We reduced Net income attributable for Pool Corporation for 2017 by $12.0 million in calculating ROIC for the year. This amount 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, 2018 and 2017 retained earnings balance for this benefit. ROIC for 2018 and 2017 based on reported amounts is 27.5% and 26.2%
(2) Our 2013-2016 ROIC calculations have been conformed to our 2017-2018 presentation.