PoolCorp (POOL) Q4 2020 earnings summary

Executive summary

• Record 2020 sales of $3.94B, up 23% YoY; base-business sales grew 22% amid elevated home-centered demand and favorable weather.

• Record operating income reached $464.0M, up 36%; net income rose 40% to $366.7M and diluted EPS rose 40% to $8.97.

• Operating cash flow hit a record $397.6M; ROIC was 39.2%.

• 2021 outlook calls for 8%-12% sales growth and diluted EPS of $9.12-$9.62, including an estimated $0.11 ASU 2016-09 benefit in Q1.

Financial highlights

• Net sales rose 23% to $3,936.6M; gross profit increased 22% to $1,130.9M.

• Operating income rose 36% to $464.0M; operating expenses increased 14% to $666.9M, including $6.9M impairment and higher incentive compensation.

• Net income was $366.7M vs. $261.6M; diluted EPS was $8.97 vs. $6.40. Adjusted diluted EPS, excluding after-tax impairments and ASU 2016-09 benefits in both periods, grew 44% to $8.42 from $5.83.

• Cash from operations was $397.6M vs. $298.8M; net cash used in investing was $146.3M, including $124.6M for acquisitions.

• 2020 capital expenditures were $21.7M, ~65% of 2019 spending, following pandemic-related cost controls.

Outlook and guidance

• 2021 sales growth expected at 8%-12%, assuming normal weather, continued elevated residential demand, market-share gains, 2%-3% product-cost inflation, ~2% installed-base growth and 4%-5% acquisition contribution.

• Gross margin expected to decline 20-40 bps for FY21 vs. FY20; first-half trends expected to be flat-to-positive, followed by declines in H2.

• Operating expenses expected to grow at 60%-70% of gross-profit growth; performance-based compensation expected to decrease ~$30M vs. FY20.

• FY21 diluted EPS projected at $9.12-$9.62; cash from operations expected to approximate net income. Effective tax rate expected at 25.5%, excluding ASU 2016-09.

• Plans include 8-10 new sales centers in 2021 and selective acquisitions; longer-term annual sales growth expectation is 6%-8% over five years.