2020 PoolCorp Investor Presentation - 2019 update …/ v o µ ] v P ] À ] v ] v À u v Z ] v P Æ ]...
Transcript of 2020 PoolCorp Investor Presentation - 2019 update …/ v o µ ] v P ] À ] v ] v À u v Z ] v P Æ ]...
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
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
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%
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
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
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’
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
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
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)
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
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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%
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%
U.S. ‘Blue’ Distribution Channels
‘Over 65,000 customers purchasing an average of $35,000 per year’
US Blue
NASDAQ/GSM: POOL15
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 -------
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
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
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
Irrigation & Landscape Distribution
9% of Total POOLCORP Revenue
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’
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
POOL InternationalEurope/Australia
6% of Total POOLCORP Revenue
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
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
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
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.