POOL - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Pool Corporation Second Quarter 2019 Earnings 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]. is event this note being recorded. Please

now Chief Financial would like go to to over conference the Officer, turn ahead. I Mark Please Joslin.

Mark Joslin

second Good welcome Thank everyone, quarter our Ben. call. XXXX you, earnings morning, to and

could today. like in and results responses questions actual management's may projected from and cause outlook differ would discussion, statements, and variables XXXX discussed include to to that is materially today listeners results I differ our our Information our to future factors comments, materially for forward-looking that may XX-K. regarding the including remind results periods. those Actual from discussed

In posted addition, financial may references our our in to non-GAAP our section. measures description A measures to non-GAAP in we corporate our website comments. in our Relations make reconciliation Investor is and of release and included financial press

Now over I'll and Arvan. our CEO, Peter President turn call to the

Peter Arvan

good you, Mark, everyone Thank call. and on the morning to

delivered billion sales $X.XX to currency and remained Pool X%, a results report to impact financial for negative solid pleased the were X% quarter. quarter, Despite business strong. outdoor quarter the challenging the the grew and of a for effects Pool weather I'm very conditions, for up including demand X% our record living Corp by the exchange total sales while our base for products

affecting listeners the factor Before our significant often our of weather short-term. our is largest four the weather statement most important discussing repeated our affected how to in markets, we remind industry is it that sales think in

the various our and effect I'll that with and weather have our season conditions my builders, what quantifying in retailers, by on homeowners business. parts the has So remodelers, contended it of start comments XXXX

both remodel as saturated factors pool business temperature, significant and and because two as and of from and decking equipment impact finish, and contractors different the which can don't construction being such Wetter-than- projects on delay new coping, earth that affects and ways. process inclement Pool is materials precipitation, completed. sales during weather work affect weather, excavation major delayed weather remodels for normal unsuitable our building projects This and generally are work are stalls prevents the and in of timing projects. our There they deferring unstable

limited make because finding the ability extremely in any irrigation and delays repairs. their lost economy. days and crews Consider add crews well as exacerbated up challenging equipment to supply, so much rain there labor further to Extensive projects is a this in only this is season new also as is capacity tight landscaping associated have additional so purchases that by typically labor in

year-round later and projects extend in more is true important In to role shorter. markets, hope season weather but times new in as fall areas lead is by season plays the an the working days contractors make as the weather same and permits. simply up markets in in The builders lost swimming for these and seasonal spring and earlier even

year, the maintain retail water is fewer supplies we other pools of hampered California need we chemicals and this Pool May maintenance in saw The and used weather mentioned Arizona temperature. in markets less and are sales is it component as in unseasonably to cool chemistry. When of are year-round for Chemicals as as

the In and need opened seasonal used and repairs. equipment later not the markets, pools minimizing chemical are associated for supplies

compared make it last challenging weather the health drier last if -- can of weather was ago. a the of than contemplating effects year's when weather the weather how was year with period the consideration but If not for reflect same comps normal, is warmer overall Another this year's year’s industry. or important

posted in in wetter curtailing year-to-date Continental first in April, was and were demand demand. strong of products markets to June good favorable cooler the most for second U.S. weather May of year year, the with encouraged May as May see U.S. experienced wettest business and our this of turn the quarter second the we half on the was being weather XXXX results the and and record only In in wettest June the the years. XXX

Temperatures markets for in short-term combination of below is the it most but makes also in second were The not normal the of environment challenging quarter. indicative health the again a industry.

we detailed the we than significance past of likely in we're is the or share specific future. will feel the results understand In to markets, the how to reviewing in quarter. affected important helping have for the information in weather going typically some But share the weather our it more

sales, where the product has like swimming the of the products been in for pool has an not by strong encouraged Turning demand the sales been the as performance to remodel Southeast have weather sales as we have strong, construction been products. areas maintenance U.S. and the issue

sales fact the XX% entire In in Southeast increased the for quarter.

pools California up rain once Memorial Southern in sales encouraging in contrast, May unseasonable Day for only California, particularly the and demand region degrees cooler In solid showed construction temperatures curtailed temperatures were quarter. the is What quickly strong for were approximately California temperatures, with traditionally building in construction XX is for of when the X% the the our material growth stopped even and that as in use activities holiday. though recovered wetter off quarter and

supplies. both increased and cooler need precipitation curtailed construction temperatures in the the activity sales and chemicals for as Similarly, and Texas X% quarter higher

Arizona material X% that normal in for in more and with products prevailed remodel strong sales pools building quarter new in reflecting sales area. weather as demand increased the good growth

experienced with remaining Northeast and the in conditions business consistent regions, the quarter. out the U.S. struggled wet record regions Midwest base with and cool Rounding and growth

as this is will industry the indicative our tight into are key XXXX, in the up year demand sold builders remodelers try for late markets, weather builder we and continuing underlying challenge year-round allows. growth especially like and to a weather in us a weather the pools construction the strong translate but catch as our will markets, labor make and ground. already permitting see The market that year get healthy backlogs In which into in

North Now end retail looking X% by quarter the markets, were sales up for only American poor clearly affected at weather.

will the what the Building open, as up most showing which was the sales sales Commercial this that strength the at materials business and as not for up also the X%. now the that projects quarter season. in pool sales were but on and strong X% are improve retail will are were quarter. up occur category resilience were typically of sales new early lost remained up expect Equipment pools catch in X% latter for end in quarter. renovation We

flat Texas achieved contended sales increase reported favorable quarter again unfavorable story is in strong California weather for additional more X% Florida double-digit sales up revenues for here are and the lower Weather the the business business. Conversely, Now, and compared Horizon color weather our I for year-to-date. execution. with but reflecting to provide like quarter lead year. would Base on some Arizona quarter to and last were the but and

in Our focus are business we on seeing. the and continues we execution this remain by encouraged progress

latter the Europe in after start X% local saw local the June. unfavorable year, currency, reflection as Switching sales of team's until currency experience is from we to Europe, for the in up to weather up April of great a XX% quarter and Year-to-date, parts strategy. they focus a the too

the solid execution. weather once previously strong market June improved levels towards Our sales to favorable turned and the of end showing rate healthy a

XX at to points basis Moving gross was rate margins, XX.X%. quarter margin gross on up the for ending the

impacted at last to previous business gone mentioned profit X% increase be effects. down expected inventory delivering should As and increase the fourth as late The up gross the gross a activity the of gross second the in third with base as remaining In for slightly quarter the decline rates this the increased call, year. about expected but last was profit all X% we quarter currency on both the profit to we compared X% increase quarter total, with the X% from year. quarter margins by on with X% margin pre-priced in to revenue sold a purchased increase in benefit a revenue exchange in adversely for end

base and and like expenses growth Mark expenses been have X% to you see describe But operating will capacity impact Now would of a operating that operating of locations acquisitions. X%. few the increased to creation add investing color let's where turn new total we approximately and expenses in. on increased areas the I our will some

where app are coming area the continued sales to XX% value adds one this for up total through sales in we is are have and POOLXXX invest now for on orders Year-to-date results. our are In portal. our capacity XX% good convenience our which and seeing of customers. and team

capacity for and We are in our showing driving process incremental customers showrooms and sales are and counter and and picking speed service which implementing customer the areas re-merchandising process in positive sales of more results to creating redesigning at and enhancements initial order centers. our our the

moving and trucks. our curtailed begun success drivers by have see to the has we to which market-based in Additionally, utilization more need transportation for truck

Looking at income team's is XX.X% XX.X% see operating basis over in On X% an an the increase operating above a a focus of price weather margin, points last quarter, a operating resulting the the a margin of The improved you X% year. our business focus for improvement on income seven execution for will quarter, base operating delivered X% on ways in and basis, while in managing challenging points. period. operating reflecting expenses year-to-date finding was grow resulting up to very a income what increase basis XX

XX operating period, points is profit X% year-to-date XX.X%. basis operating business Looking by to at the up our margins base improving

to million increase XXXX. strong same Turning from of cash $XX we activities another period million, very flow operating at cash generation over the an cash with delivered flow, period in $XXX

focused cash area. generation. to support remains provide has inventory on increased new Although solid color locations acquisition Mark on and team will our this additional

value to ability our and Lastly, to for team's customers suppliers. we the to than the be confident X,XXX best in our to channel XXX,XXX unparalleled more over provide market remain

our confident is weather and underlying a industry new season the books. likely country, on and builds will the With start Additionally, builders little in some from of pool the this is help cleared good we that is already XXXX now with and with discussion it the several health and are year-end, throughout that solid. particularly markets, between the of backlog many in backlog remodels will year-round of get the the projects

In the year confidence $X.XX results, are to our from our to in for $X.XX. EPS the first we to guidance half half and second of narrowing view the $X.XX $X.XX opportunity,

financial over to I will now the turn his for Mark commentary. call

Mark Joslin

Pete. you, Thank

I related the by year for in revisiting our start the comments, to year. going to expectations made gross I'm margin earlier

margin relatively giving the carryover on flat year As should and a in gross in in from then with inventories strong and headwind QX I expectations. a expected to based QX moderate our QX we line due increase results XXXX pre-price QX the gains XXXX us our for margin meaningful become had said our and QX margins of gain substantially long-term

have push we to of expectations to increase these in second this tougher slower behind in a you will back margin is as QX our our This improvement we QX in XXXX. to I because points expected than basis up as of XX start much expected results. that Now product Those of the primarily largely QX margin as in against is XXXX QX quarter the how QX of with basis the now had work basis year, gains gross which Where change is out. turned points points XXX pre-price well in half can as evolved. increase the where remaining out we of better expect us, over expectations lower inventories. XX the than moderated for sales likely seen some year was through the update about margin QX as be

for The forecast expectations the impact half and for the that the previous line for has first margins sales this expect is our second purchase we gains. with vendor half year offsetting to to the our The of back half full-year results gross remainder the that incentives than of lower year. our based relatively the first for reduced our and flat be margin half here bottom purchase declines is on volume-based reason full-year for the due on gross

in Garden W.W. was added $XX our from expense quarter adversely margin quarter million We year by XXXX in Turf Adcock acquisitions. in while million operating growth Moving to down combined expenses the the which expenses, to added results. QX acquired impacted this two in expenses contributing X% QX for $X and & our operating

with of in over typical these as integrated improve our line into of is business, parts performance gradually are As acquisitions time business. should other our

currency was expense year-to-date for X% these, business and a more base X% the only growth Excluding quarter modest X% our a including benefit.

to In staff impact when includes X.X% acquired in we modest needed terms the employees over out year growing a had growth X.X% employees new count, of new of last you X.X% businesses. employee This growth total employees back locations. growth from

As Pete new of mentioned, business. months XX our We of did are the last business these over seven including one in in growth of locations. the making for the nine future investments Blue opening we U.S. is

we in we As these contribute like our they new where In and markets these our in are both expense to are time. already acquisitions line the results participating, they year-to-date, business expected grow locations new second until base approximately our and base business X% to with expansions dilutive are in results contributed and growth. include are quarter locations them over able

The on our business investment both of believe we the level bottom support line growth as making opportunities. we're expenses future existing to and right

modest a XXXX of mentioned. operating very initiatives growth Moving for our capacity margin base of operating over our to income, given top-line has reflection XX improvement the our XX points good more us the basis operating margin for down a basis is improved year points QX business Pete creation quarter as result which and getting to

still With the the is on year of a operating get the base as operating gross business I've XX some year margin the year as improvement end mentioned, annual for target our margin we finish points said this by likely margin to the the the of but of good of is improvement in to for it basis XX past which expect remainder challenges we'll previously back us. with

share. the exercises in $X.X in line, ASU which the expense the increase stock $X.XX price earnings reduced share On XXXX-XX resulted employee level tax by of quarter per a or our tax in under our million higher in option

for our rate was effective the this, tax previous line our XX.X% guidance. with in quarter and Excluding

additional our guidance the tax of We from have the any for benefit XXXX-XX included not ASU in remainder year.

over be we a the year ASU for just lower Excluding in rate the quarter past. benefit, the still third with our in to as expect rate tax the XX% slightly

cash and our sheet to balance on statement. Moving flow

opportunity during over grew the while a corresponding our participated to we couple inventory increase partially increase total X% quarter, inventory inventories This June accounts compared increased last payable. of million added net buys year, year-over-year cost of in modest XX% of acquisitions. inflation XX% receivables a by the and from combination was $XX Our to due a in last offset modest growth, sales slower that

of of $XXX $XXX an XXXX net For the management, million purchases is year largely good June. cash from for increase XXXX pre-price as the XXXX through a result the over made of our and million capital results discipline in operations over $XX working improvement million

revolving our us we had $XXX At of EBITDA which million XX the $XXX over for with -- our of million quarter, of months outstanding I'm the end share gives of share combination in of plenty gives of trailing debt the X.XX our trailing us sorry coming of in leverage million months. repurchase and which capacity of authorization $XXX in existing given capacity This our credit facility. repurchases

turn Now, operator our will over back our I the session. question-and-answer to call to begin

Operator

very much. you Thank

[Operator session. question-and-answer the begin now will Instructions]. We

first My go from David ahead. question of is Please Baird. Manthey

David Manthey

guys. morning good Hi,

and price blue green the give could I components the off, you us businesses. and base hoping volume First was both of

Mark Joslin

year an an year inflation Yes, roughly was speaking, David, from unusual well this standpoint.

not and the the that on some green, Don't more price certainly blue be specific half little want is and general the on saw more modest price related a that in like little of was figure and price green blue the significant growth but but more real blue side to volume. on looks higher impacted inflation more as the gave that's well in We I'll that inflation -- little side. side. than So what than us green as as volume than on had

David Manthey

the pretty the but points you're well a as I tough, makes sense. statement? last us seeing extra your and great growth if velocity, third given sounds based thank the as of price, exit guess you half seems gave is you're high-single-digits it reasonable; way fair the you the coming you like detail couple in that are of have out your in the comparisons quarter, the selling then year on weather, second normal day, quarter things, of And Okay. That outlook

Mark Joslin

first we're think so entire of do a that's can included. hopefully is on kind growth roughly just to weather we based statement. I our bit friend and depends on better. growth and And weather lower the year, fair a X% normal Yes, end little X% half for largely, at weather looking that

Peter Arvan

of beginning seems July, the most we're weather issues for so so Weather, of that the it have finally abated, encouraged.

David Manthey

SG&A expectations Yes, growth. if and here reported question that the you would of for of I margin side. think then By just harder the variable the have one hit have profit, on Street any been cost gross math, would kind even increased costs you about without assuming XX% my gross

flag I'm trends of formula? as more think target to we just are to with this ask that year SG&A wanted look So you the that see half -- in growth favorable do trend more trends, that should terms second we you and just I of assuming consistently XX%

Mark Joslin

a true. That's and that quick challenge. good, It certainly math is a more is of Dave

when weather expect for Going modest, SG&A and season, difficult. that more sales we're are expecting leverage getting we into and we staff that, makes normal more and then the it

second year more normal points again XX% operating margin which to for where more XX the improvement look of half is So, up. we as is of I XX end in to expect that said the and basis

Peter Arvan

those we in didn't first of half Dave, consider and seven the year, online opened locations, the late come into the many that up until of quarter.

But remember half were more to, be start mature half certainly, over the first will the productive in will year. in the those than of those much they time. the second those So, year, of

Operator

is go of Blair. Please William Merkel Our from Ryan ahead. next question

Ryan Merkel

Hey thanks all great again and for details. the thanks everyone

how explicit from an the question can estimate are you the second is half? the deferred for making first for my of you up and sales think So year, much you make half

Mark Joslin

Ryan, mean exited I on up. we think exact -- $XX we when $XX that we to make thought we can not remember quarter; was number, don't what million the first It's have an million. we it

to like of builders permitting. Second we million. as call quarter and to million we've is able said How $XX year going work the much that before really late more remodelers up the looks how in of be to a weather $XX it make function are

So to to this tough say what make be at we'll very up. point able

we better make quarter. can view a the of to now, at right we'll I it's think But think much I of little how premature end have a number that third a that on we call think much up. of

What I is is good. can say that is Everybody working. demand

as away, then right and it's So, sun on now. we're out I what's with rain the But the calling number think happened a in encouraged. given the stays I half stays as be year weather, think premature I would -- long of first

Ryan Merkel

that All to secondly a half dig I bit Yes, That's right. little want just commentary, sense. the Then margin more. second makes helpful. on gross in

quarter, a margins being we third range just kind in of to about XX think seeing point bigger then XX gross The down comparisons. the to due and XQ decline should basis the

how Just in should to about exactly on hone trying think that? we modeling

Mark Joslin

as well, year. the be I would for flat guess bottom margins Yes, relatively line that the was

So it, way smaller is at one a think half quarter fourth quarter of volume year. less than a looking the the smaller little inverse And than first first quarter. to second quarter, of third relative of is quarter, a

fourth have get flat in -- look for get for at you you get back the of how to to from and year. as that a how quarter kind standpoint, relatively back So third you and the down to modeling flat to factor year, to

Ryan Merkel

down than year-over-year to But the quarter; statement? is be fourth you third would expect quarter more that guess fair I

Mark Joslin

so will basis a year. of fourth on inventory be generally in had XXX down lot we down, of Yes, fourth basis more gains more. the will quarter relative Yes, be third quarter a the last quarter because points

Peter Arvan

smaller quarter revenue. But in remember a it's

Ryan Merkel

Right, right, right.

the a pool we potential question lastly And and today of in-ground ask longer-term revisit longer-term Could I market just in pool penetration. the stand Okay. to do size on terms growth rate and is? us? you do what just for that wanted in-ground you then Where think of market

Mark Joslin

pools, season I number XX,XXX X.X the it be pools look this year of with we year-end. the like about you between slow and the the we'll the the XX,XXX we tell that thinking in be year XX,XXX for we up more now would slightly XX,XXX season neighborhood somewhere on somewhere we pools. year I the is inclement and pools happens added to remember today given depending So Last above and in-ground would that thought would on we think million XXXX pools in start were weather, weather what the between XX,XXX said

We see back continuing grow that to to normal levels. more

out it we called rate. could run think that could followed biggest back a we've information the the be in have what up. -- we normal assuming housing economy more on pool come by healthy think again think a) is construction stays to holds the new labor. XXXs construction weather, I pool and But We normal investor low our So limiting factor would more is b) that

so the their losing hasn't news them. gaining supply is labor not but they're good that changing for really So labor not builders, also our they're

get So may it's function to ground. pools being be going to and but the weather be I for able them, think in of a demand a) b) better

a there factors of here. so play Now are lot

So we spikes I think any better to have been and rate. is rate number the on pressurized a a to, just and calling about get right kind now. where the like at industry the I'd that supply take in would for on is we don't than demand could growth significant being that think look of look it growth out

we'll to So over build continue time.

Operator

question of from Our Jefferies. Volkmann is Steve ahead. next go Please

Steve Volkmann

Hi, good guys. morning

clarification, quick lead-off. to one Mark, Just

is further but $X.XX go guidance in your Just of the ASU forward, we benefit as correct? nothing

Mark Joslin

correct, Steve. That's

Steve Volkmann

how sort just from curious bit assume just price great. little costs of can seeing just we be you'll to obviously respect you price the try little I'm of manifesting guys. helpful. things. discussion We've over I any suppliers? time to of would are Okay had with a cost that's then sort you What for bit just but tariff a that side. about And certain in ramp-up your And more talk for a

Peter Arvan

see doesn't last little we we're had going thankfully to increases Sure. because now year we're midseason It's a year. this like bit like look early

normal be timing. to year on more looks it a So

are what for this year when suppliers our the is be strategy time year. going is So pricing major of to next their formulating

don't tell slightly normal what and it increase a perhaps I'm year sentiment general have that but but that we you tell that will be you for but of numbers above anybody really hearing the not that firm XXXX from would I is we I -- would what like price in from had terms the more season.

Steve Volkmann

you've great. weaker sort as we then gross the we're flat think there sort said. reason trajectory Is I of to than any And of bit not going kind overall? started kind there hope. but year about reason long-term that's overall? Okay, of we little as about margin the flattish know end to XXXX think obviously to of that sort wouldn't that overall your of flat any Is think be

Mark Joslin

XXXX ahead Steve, it's mid-XXXX. Looking to just already

Steve Volkmann

fleeting get here. to want don't I caught

Mark Joslin

would you're that's standpoint. gross I but my be third a margin I a quarter tell steal from XXXX, going say first challenge can to I going think from half commentary you this to

early in we've okay opportunities the gains be first given half pricing gains last without, that the as the said, had it's buying we'll discussions year. on had unlikely that we the but kind we had have in inventory of inventory we're certainly should half the Pete first Second year and but

of tough half of going first the that year. this think in year, to I first it's so So half be next

Steve Volkmann

of fade about think kind to of one the stores is the can to to of normal get stores? run sneak more words rate of that the more. this should sense. some make If sort the benefits just in time Are bringing improvement? of open continue that Definitely store going to then I great. are we In we you take and kind Okay other going ramp numbers on in or start to actual openings the new

Peter Arvan

going to we're think I continue.

we're pace So on. we'll the on continue that

balance the to year, for plan open. four more of we So this have

rate year this think normal typical that. reverts for I But X a to will be the above So range year after that. slightly us back to a that and in is X more

But many we remember when in when because are that typically already. are not opening there markets we're we opening are

of for we the when it's need capacity. out So open

So and current tapped grow take as become the larger further the they grow if and you markets our they suburbs, into facilities out.

said, some as first a work at And have fact because able that in for I money our expense and we're on the are Mark we're we our my the doing. if said comments Now, improving the and the locations and is walls. you the half existing to of achieve the spending as we within growth capacity new effort reason creation four in of look including of that year, lot

So the as well. slow little facilities tools we're on but I out also internal the may think to pace those of we're doing need new but the bit capacity of add working a

Operator

with Go Our next question Stephens is from Blake Incorporated. Hirschman ahead.

Blake Hirschman

First one clarification some outlook just on top-line the commentary.

the through that kind I expectation the rest half. think know or base what's the a the for top-line expectation now drag built X% overall of the that X% of first you for What FX, was year? in to growth a and said the through is year is business I the been it’s of bit

Mark Joslin

X% overall, acquisitions. to including X% so is Yes,

an have half, a In of through looking if we headwind terms year. Euro, which But of the is for year of FX, out where it's are headwind exchange the would much not from the primarily to now second obviously us first about been half there. end we we a the

Blake Hirschman

wanted some on how year then the as in update And with the inventory busy there just the I channel, Yes. to just else everything the seen into noise know tell? far an weather channel as we've and can in was up get you inventories part and coming the stack of on

Mark Joslin

I were I guess in in middle standpoint. the the -- of say from we're a you mean when we Well distribution the channel channel,

some up did over last which because before mid-year So over were we are kind inventory up year. in year of of last of well-positioned are terms where also the year we purchases we they're

of good the at are terms how vendors the out of look there in pricing opportunities we're third and quarter. through with and shape pretty season. weather we what We'll for demand So kind us the plays their getting see in when XXXX

So I in third guess the we'll give you quarter. an update on that

Operator

Lebiedzinski ahead. Our is Please from of Sidoti question & go next Company. Anthony

Anthony Lebiedzinski

regards in questions. you for for guys. taking the providing details morning good the to the Yes, thanks And Thank weather impact. all

as So so you've any too new wanted new your is on I as assumption? just cannibalization as opening sales probably the assume of the question to of that effect much a market, previous centers wondering in haven't seen in safe and follow-up centers markets; existing opened just far you sales

Peter Arvan

when Yes, these areas. remember open new are we not so happens because again what we

we part pro bring So we are if our and is growing as what capacity to of then and when location, these find that more the to seeds we for have areas market in take a business And approval donor forma from location. a the up new need we model a really that is of will, seen the chunk location, you we has typically continue past as the grow. and whole we open

recovery we are new capacity. to will We we the that a model location. we of now So location that that a But includes to with the need continues the a we a from of terms eventually been historically many locations the these found operate location location. shipped done grow for anticipating We our pro has center. from Greenfields where many, take in what business But the new that's add sales that forma removed grow donor been portion of And the the facility. have new market, how started new years. and we of back the in entire the out old adjacent then is market historically to and for

Anthony Lebiedzinski

understood. okay, it, Got

X%. you up was And retail that mentioned Okay. before around

of were chemicals X% imply well? up around does your that sales as So that

Peter Arvan

up Chemicals were X%.

Anthony Lebiedzinski

better. Okay, little a bit so

when quarter. okay Okay. be were that it, in buybacks to in or that you market? Anything then timing there share to no I just and noticed that is read into the the second expect of Got

Mark Joslin

of we the can future have plenty is read for into capacity you share repurchases. guess I thing it only

Operator

question Research. go Shmois ahead. next Garik Please is with from Our Longbow

Garik Shmois

I in you. the half margins just year. wanted on gross follow-up Thank second to the of

wanted -- Just in that's fourth in us and those it clear, Is of outlook can be throughout? only to the just tend to them discounts. thing usually the or quarter the advantage do timing really you take the vendor the discounts, of see remind you changed you really your do when in

Mark Joslin

coming Obviously, we're be. out timing. question their those Yes, vendors talking a what there then our year to the be not year, with year forecasting what well programs we're We go it's as to every make our our and that ahead vendors of we're out anticipate much what that it's saying forecast. our various looking we And and we really will putting they're for out. good expectations will adjustments and the and and discounts through so purchases then

based And what so for it's year. we the to along do the but on entire there's way some adjustments expect

of that's us. process So works kind the for how

Garik Shmois

the first commercial, I tracking step-up think you to wanted X% the quarter; on I a had you quarter. in in ask were about nice

in X%. at catch-up much of deferrals XQ overall up market you're that share and versus was the Now strength gains? from How versus

Peter Arvan

think I the strength it's reflective in overall more market. of

second the catch-up because first goes it were projects there's capacity, again were weather, look crews much the are quarter of of if So really the there to to busiest. back capacity in is the the only year quarters, so several amount with the because and of quarter -- you the capacity quarter But impacted. the that at capacity least the

more up. think I we catching opportunity of it's that of the So space and health have that the versus indicative

Garik Shmois

for previously see on had then where at you that's confirm And much still normal. points you're lastly just if thanks. you about that? inflation running like two just want I talked to pretty sounds inflation about the above year. Okay, can It

Mark Joslin

remember fourth really of quarter to fourth increases and Well, yes. the the our quarter, when price the we for through. hold is in XXXX we were took able push It had inflation year is but

that year it call of this been you or Pete and but over inflation quarter inflation. -- X% let's probably normal, has So was year. forward, historic we very when early more the still get going as the X% like And fourth last to lacks said, saw back then

overall. was but would of looking year that is maybe X% X% this say at like which what more X% is then for top on modest back to And historic X% I guess XXXX levels early. to plus this still I So point we're going more so very

Operator

Zener question KeyBanc. ahead. Our Ken is from next with Go

KenZener

clearly. me Hopefully you hear can

leadership at demand there you're your you're you're the what about about you've weather Can obviously and is your -- have you coming of guess your in that is And environment kind well described or plus thinking there going what demand industry you last your you question this Analyst is you at talk for you've sales have that's changed different volatility been two perspective two How September. perhaps pressurized, years it's it? that Corp. up very it you Analyst effectively Day. and you given prior about taken so -- when is the the how probably is guys described at the I saying. Pool whether is Day Pete guys about good to that the how Pool handle So were just of really the weather in years thinking of

Peter Arvan

less everybody puts at can working is and are expand it though we remodel we job. is capacity everybody What the them very Corp the people demand, industry lifestyle different contractors high is when amount customers time making to bad, in is pools, we're and ourselves them and time giving is industry. The here people is that is Yes, only our but are and want very not between allow consistent on and more that hard is and and to here. the And sure behind. was on with by the finite a pools, I when extend it's of capacity working very the remodeling outdoor where procuring the healthy everything whole in There time weather and tools living doing is spend less weather previously. good, Demand here demand. the healthy, us material retailer Pool of what's

monitoring more of, if we're processes that at of of be our and productive. times spend many and part we changed to facility and customers them mentioned in remember, now actually picking So our our down looking actually in driving you of showrooms the and we that allowing that hopes remodeled we amount

So they're more productive.

And we think for rewarded will with we also share that. be doing

said, pools to means are it. industry than do there that, and means there's is and perspective what for demand and people from more is So pressurized I I that my remodel what that mean, the as

be the that. when So allow we're by is then create and to to the weather And to working make capacity when is things some weather good, going to more bad things doing back-up. it's contractors I -- good are effective on said, like the to but

Ken Zener

is the there. weather in sales in where I efficient. more out you took up actually guidance. Are wet, in apologize those people the that seeing obviously not view asking there and extended back of XXXX kind a and be volatility your weather, it is -- ask later guys very balance reason because but, it two breaking of there But does I'm actually Mark, guys flat obviously it labor really could revenue terms up customers was was is and I volume if you demand you your like of you I you're part XXXX the wet, you make you of had and preceded What mean actually there mean more Texas were Right, believe down California I is is I'm the seeing of the perhaps or trying are I guidance? and it came was this was there? guidance quarter beating in productivity happened ended change fact you in very to

Mark Joslin

season, based to consistent of growth happen of we Ken, a the finishes balance the weather remember conditions. of demand sales the or as mild on going mild said, growth, when the I have Pete and the contribution -- had it's to and year growth whether really five pretty very profitability or last Yes. margins And winter years quarters year, if very our starts what of year operating is four best fall start have we've some look or the of on year. the the over from good or correctly, mean strong. a we back winters season we back if And that season start I mild we seen XXXX, the can of the end

And our comes extend ability their their so really and that that the contractors to weather demand the meet them. work allows mild to to

your the So season. that's to conditions question, to the see seen on what with really that of continue weather milder expect answers we've and shoulders

Operator

Instructions]. [Operator

Maroccia Our Please next question comes from go ahead. of Berenberg. Alex

Alex Maroccia

Good morning guys. taking for my and thanks Hi questions.

from outlined you revenue $XX terms million on to wet a sales. million On just weather. and $XX cold quantification from of the do in this quarter million for $XX to Easter quarters million previous deferred and the wondering similar the I could call, then the you if was $XX impact

Mark Joslin

covered of us the our $XX to $XX impact of $XX for I the estimate the second really million. mentioned million get to that on And the Pete Yes. then was quarter million and Alex earlier because is think briefly. we for quarter really million. to weather What second didn't first quarter part to expect didn't capacity $XX And We builders. the

as more to So of million that you characterize much half the million as revenue, know don't we $XX if revenue expected in didn't kind get that of $XX I I year that get as total deferred the we deferred is the will the revenue in range. and first had to

Alex Maroccia

clarification is because opportunities next Okay, inventory early limited you second year. that got said point then That's the pre-buying great. one little a just might it. be And a

confident the relatively now? years? remain to past levels to points over basis the higher the than expect you do So average about three Looks me they're XXX

Mark Joslin

levels or talking talking you're about I'm about you inventory sorry; --

Alex Maroccia

sales? as Inventory of right. percentage a You're

Mark Joslin

Yes, come down. I mean certainly should that

pricing, we of Assuming that strategic our advantage when feel purchasing we of we course process for and beneficial very no significant that's can that in us. buying and take opportunities, we're do

it's into mean certainly a in say but sales, going which expect the should to So next of hard had be the year to we be we would the lower. to year kind last don't similar percent of environment as inventory one

Alex Maroccia

it. Got

Peter Arvan

sell. them with inventory And start we when consider that gain from the that And from opened. one the we load part obviously and of first then inventory number two to and locations new acquisitions was

Operator

to to turn session. like remarks. This closing conference I over would Peter question-and-answer back concludes Arvan any for the our

Peter Arvan

for you. Thank Thank today. joining Great. us all you

a next Have quarter will will Our discuss our XXXX, third great results. call be XXth, where October we day.

Operator

attending for presentation. conference now Thank today's you The is concluded.

may disconnect. You now

Pool (POOL) 18 Jul 192019 Q2 Earnings call transcript