POOLCORP's Q3 2025 Earnings Call: Contradictions Emerge on Pool Construction Trends, Inflation Act Impact, Trichlor Pricing, and Gross Margin Stability

Date of Call: October 23, 2025

Financials Results

• Revenue: $1.5B net sales, up 1% YOY
• EPS: $3.40 diluted EPS, up 4% YOY (prior year $3.27)
• Gross Margin: 29.6%, up 50 bps YOY

Guidance:

• Full-year sales expected to be relatively flat to up slightly; Q4 expected flat to slightly up.
• Confirmed full-year diluted EPS guidance of $10.81 to $11.31 (includes $0.11 ASU benefits year-to-date).
• Full-year gross margin rate forecasted to be similar to prior year with expected Q4 margin improvement.
• Full-year operating expenses expected to increase ~3% (Q4 SG&A growth ~3%–4%); continued targeted technology and greenfield investment.
• Share repurchases: $164M completed YTD; $493M remaining; Q4 outcome weather-dependent.

Business Commentary:

• Gross Margin Improvement:
• The company's gross margin improved by 50 basis points to 29.6% for the third quarter, reflecting strategic and efficient supply chain choices, disciplined buying, and successful price realization.

• This improvement was despite the persistent pressure from macroeconomic challenges and lower consumer discretionary spending.

• Chemical Sales Dynamics:

• Total chemical sales declined by 4% in Q3, with some deflation observed in sanitizer products like trichlor.

• This trend is attributed to discretionary spending impacts, though demand for chemicals in service professionals and retail remains stable.

• Building Materials and Private Label Growth:

• Building materials sales increased by 4%, driven by the company's expansive private label offerings and elevated customer experience.

• The growth was supported by the rebranding of NPT to National Pool Trends, enhancing clarity in product offerings and customer experience.

• Regional Market Variations:

• Florida produced 1% sales growth, while Texas remained flat and California and Arizona each showed declines of 3%.
• The regional performance was influenced by consumer spending patterns, weather, and wildfire impacts, affecting new pool builds and maintenance activities.

Sentiment Analysis:

Overall Tone: Positive

• "top line sales up 1% and gross margin expansion of 50 basis points"; "gross margin in third quarter was 29.6%, representing a 50 basis point improvement over prior year"; "diluted earnings per share of $3.40, up 4%"; management confirmed full-year EPS range of "$10.81 to $11.31."

Q&A:

• Question from Susan Maklari (Goldman Sachs): Can you talk about what's driving early signs of stabilization and how you're thinking about trends as we exit this year into early 2026? Response: Activity appears firming geographically with building-materials growth and share gains; however, further interest-rate cuts are likely needed to drive entry-level pool demand.

• Question from Susan Maklari (Goldman Sachs): Can you discuss the accelerated innovation spend and what trends to expect into year-end and how that supports outgrowth versus the market? Response: Investments—primarily technology (POOL360, water-test app, counter tablet)—are focused on improving customer productivity and are expected to drive adoption, private-label growth and long-term outperformance.

• Question from David S. MacGregor (Longbow Research): On customer consolidation/mix, what are the longer-term margin implications and levers to offset adverse mix? Response: Consolidation creates opportunity: our integrated technology suite increases efficiency and stickiness, lowering cost-to-serve and offsetting mix pressure.

• Question from David S. MacGregor (Longbow Research): Of the 4% equipment growth, how much was replacement/maintenance versus new/remodel equipment? Response: The vast majority of equipment sales are replacement of failed components (pumps, heaters, filters), not new-build equipment sets.

• Question from David Manthey (Baird): What's driving recent chemical weakness and how should we view inflation/deflation across chemicals, building materials and equipment? Response: Chemical deflation is concentrated in sanitizers (trichlor); overall chemical demand is stable, balancers and specialty held up; building materials and equipment pricing are relatively modest and consistent with recent years.

• Question from David Manthey (Baird): When growth returns (mid-single-digit), how should we expect SG&A to leverage—60%–80% of top-line growth or higher in year 1? Response: Model remains intact but expect some upfront expense recovery (incentive comp and limited volume-related labor additions) before leverage normalizes over time.

• Question from Ryan Merkel (William Blair): How much is trichlor down YOY and are you seeing PVC deflation as well? Response: Trichlor pricing is down mid- to high-single-digits versus prior peaks (still above pre-COVID levels); PVC is improving quarter-over-quarter but remained down in the quarter.

• Question from Trey Grooms (Stephens): Is Q4 still expected to be up YOY and what would drive reaching the high end of the EPS guide? Response: Q4 expected flat to slightly up with margin improvement; achieving the high end of EPS range is weather-dependent (no hurricane benefit expected this year).

• Question from Scott Schneeberger (Oppenheimer): On the Q3 gross-margin improvement, how sustainable is pricing and what supply-chain fixes are structural? Response: Pricing mid‑season increases have largely fully flowed through with no adverse competitive reaction; supply-chain improvements (better procurement, vendor partnerships, AI tools) are structural and expected to sustain gains.

• Question from Garik Shmois (Loop Capital): Are early-buy programs for equipment changing and is your approach different this season? Response: Early-buy programs are largely unchanged from historic norms and POOLCORP is participating strategically as usual.

• Question from Garik Shmois (Loop Capital): You forecasted ~3% SG&A growth for the year—was Q3's 5% uptick the cause and what to expect for Q4? Response: Q3 SG&A rose 5% due to accelerated tech investments; expect Q4 SG&A growth in the ~3%–4% range.

• Question from Jeffrey Hammond (KeyBanc Capital Markets): What are you hearing on pricing for next year across categories and customer fatigue? Response: Equipment pricing appears higher than other suppliers (early-buy increases plus tariffs); broader supplier pricing cadence is normal and innovation helps justify price increases to customers.

• Question from Jeffrey Hammond (KeyBanc Capital Markets): What is your target adoption for POOL360 in a few years and why do some customers resist? Response: Management believes company-wide adoption could reach 25%–30% (or higher) over time; resistance is mainly educational—customers need to see clear value and training to adopt.

• Question from Steven Forbes (Guggenheim): How does customer spend/wallet share evolve 6–12 months after POOL360 adoption? Response: Customers with strong digital integration tend to grow faster and show increased stickiness—water-test and private-label integration drive recurring private-label chemical sales and higher wallet share.

• Question from Steven Forbes (Guggenheim): What product/tech requests are builders making to further capture share? Response: Builders and retailers use digital catalogs and design centers, but primary near-term focus is on maintenance/repair ops—tools that speed quoting, ordering and replenishment.

• Question from Unknown Analyst (Sam Reid, Wells Fargo): What is the typical lag between lower HELOC rates and discretionary spend on remodels/new pools? Response: No precise quantified lag; lower HELOC rates and greater liquidity generally support more large renovation and new-build projects, encouraging sidelined homeowners to proceed.

• Question from Unknown Analyst (Sam Reid, Wells Fargo): Any high-level thoughts on next year's Analyst Day content or potential algorithm updates? Response: No details yet—management plans a substantive Analyst/Investor Day to showcase strategy and differentiation; specifics will be presented at the event.

• Question from Collin Verron (Deutsche Bank): How material is current technology spend and how much SG&A investment remains to drive these initiatives? Response: Technology spend is modest relative to company size, not a large capital outlay; additional targeted investment will continue but not at a scale that is materially burdensome.

• Question from Collin Verron (Deutsche Bank): How large was the weather benefit last year that you don't expect to repeat? Response: The weather benefit in last year's Q4 amounted to ~1% of top-line sales.