Pool Corp. (NASDAQ:POOL) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 19, 2018 • 11:00 am ET


Pool Corp. (NASDAQ:POOL) Q1 2018 Earnings Conference Call - Preliminary Transcript


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Good morning, and welcome to the POOL Corporation First Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note today's event is being recorded.

I would now like to turn the conference over to Mark Joslin, Senior Vice President and Chief Financial Officer. Please go ahead Sir.

Mark Joslin

Thank you, Rocko. Good morning, everyone, and welcome to our first quarter 2018 earnings call. I would like to remind our listeners that our discussion, comments and responses to questions today may include forward-looking statements, including management's outlook for 2018 and future periods. Actual results may differ materially from those discussed today.

Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. In addition, we may make references to non-GAAP financial measures in our comments. A description and reconciliation of our non-GAAP financial measure is posted to our corporate website in our Investor Relations section.

Now I'll turn the call over to our President and CEO, Manny Perez de la Mesa. Manny?

Manuel Perez de la Mesa

Thank you, Mark, and good morning to everyone on the call. In the first two months of 2018, we were off to a very strong start, only to be hit by a multiple storms in March, which reduced our customer's ability to get work done, as well as delayed pool openings in seasonal markets.

This weather headwind has carried over into April, although fortunately we should be able to recover most of the sales over the balance of the year. Despite this headwind, we still realized 5.4% base business sales growth, 6.2% base business profit growth and an 11.2% increase in base business operating income, all of which are solid.

Our base business sales growth in our four largest markets; California, Florida, Texas, and Arizona was 6.4%, while the growth in the rest of the markets that we serve was 3.7%, as these markets were the most affected by the weather.

These base business sales results include our green business, which had a 10% base business sales increase in the quarter, as our network is largely in the sunbelt and less impacted by the weather.

On the product side of sales, building materials continued its strong performance with 9% growth while commercial had 15% growth. In addition, pool equipment growth was 7%. The growth in these product categories reflect both the ongoing recovery in the remodel and replacement sectors of our business, as well as consistent market share gains and are especially noteworthy, given the inclement weather.

The retail product side of our business decreased by 3% in the quarter, which is where the impact of delayed pool openings is most apparent. There should be some catch up here in the second quarter when pools are opened.

Our gross margins were up modestly due to minor product and customer mix differences. These differences in mix should largely work themselves out during