POOL - Earnings call transcript Q3 2020

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Operator

Good morning and welcome to the Pool Corporation Third Quarter 2020 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 this event is being recorded. I would now like to turn the conference over to Mark Joslin, Senior Vice President and Chief Financial Officer. ahead. go Please

Mark Joslin

questions discussed Good quarter Gary. remind and to responses welcome listeners including forward-looking Thank outlook management's earnings morning, call. third for to differ results projected the of and comments variables factors XXXX XXXX our to may may that periods. our to discussed from those in I could Actual our include that future remainder from statements, is you, discussion, today. actual differ and results materially the results everyone, cause and today materially would our XX-K. Information like regarding

we to and non-GAAP our financial reconciliation our Arvan. our Investor corporate addition, press I'll is measures description non-GAAP make Peter Pete? our our A measures website the to financial in comments. In now references section. call over of included President Relations may posted in turn CEO, and to and in our release

Peter Arvan

morning quarters quarter Mark, they to our third that accomplishments delivered team. our everyone good call. of incredible. It $X we of released the in on I billion the be could results, the back-to-back our time extraordinary Thanks, history over in prouder and we not first This with and was revenue. truly were morning,

so XXX everything talent POOLCORP plus they S&P to the thankful of the return. we people shareholder anniversary Also we been company. Over the in had Additionally, X,XXX are and quarter, and marked that be our that earlier to total as the this added were the without period, growth compounded an month, XXth would for we a do. team, proud Index. of very in public amazing we XX% None this have dedication possible on

the were coming to of quarter I'm report growth third this all XX% quarter, $X.XX of organically. over increase very revenues third the which year, last substantially is For with a billion, total that excited

year. same over Our per is a increase XX% last which earnings period diluted $X.XX, the share was

release, school-from-home, earnings living strong trend our their to and living Work-from-home, As demand travel been noted for lack many resulted have North and wanting de-urbanization products families the vacation outdoor in retreat. outdoor has own Europe. pool invest in throughout of and in swimming America the

favorable for and which our also repair new markets, items allows weather maintenance to across and pool backyard higher demand experienced and drives have We pace nicely. renovations construction

them builders Our first carry half are customers many backlogs, next should into year of and deep which remodeler reporting markets. in the

we're Texas at Looking California Arizona grew up largest XX% while gained Florida our four respectively, XX%. and markets. and XX%,

that While we construction inspection California lags be restrictions with markets contributed growth and in and Collectively, easing seasonal in revenues quarter all as variance. XX%. markets pent-up weather to in demand progressed. the the to the grew other from earlier favorable XX% these caused We the delays and large saw markets, season, year-round permitting year, while grow combined versus the extended by the renovation appear seasonal permitting as quarter, believe delays saw market stronger the year-round

at quarter remained down down and end commercial soft sales markets, XX% with year-to-date. the XX% Looking demand in

these of travel independent the lack public sales, are pool imagine, hand, the and is and on the the From pool seek as other be in impressive in heavily retailer convenience XX% to can a strong affected sales an usage. market you demand. increased pool XX% in we the As of owners by pumps, continue expertise this Retail extremely high quarter. lighting increase in products filters as retail quarter. the for perspective, saw and aggregate product heaters, Sales

orders demand are as have decline surged, seasonal recedes. back been product on shortages demand as the there While

on operating struggled were Our and market. lodging-related pools or somewhat is remodel sales residential keep very materials Like are commercial curtails to disruption and for offset demand teams usage. sales network did being minimize great quarter Chemical a the strong construction public last job were our to broad X%. chemical lower manufacturers up demand a XX%, utilizing quarter, up. which by healthy up either closed reflecting reduced as hours, facilities Building remain as

demand customers more these easily, of were remodel. products significantly we the get As construction shifted permits our to as increased able progressed, and to resources quarter saw and they

very As earlier, mentioned significant backlogs, which our are reporting I builders is encouraging.

Turning third XX%, The North as which across our Europe to of market most end healthy European of tremendous we the posted locations. driving very sales same new Europe. quarter set we second throughout increased records that a is are continued and team. execution that in of sales same the America. Europe from of trends demand is strong by growth noted in benefiting our demand quarter indicative the the

but Turning to leading to the lag way. projects that office we We quite business saw XX% product markets the happy were saw being. our growth landscape increase equipment with green quarter. base continue Horizon's Almost multifamily for retail and the strong irrigation, sales and construction, with the double-digit in time in and all power residential business. demand for We see

on XX.X% increase basis to XXXX. improvement a over gross We Moving reported healthy point margin which third the the for a is XX quarter, margins. of gross quarter

the customer incentive incentives benefiting with XX% incremental that in some driven mix. quarter, are Operating gain purchase with this We compensation. of mix being the lower-margin by and by being quarter, increase most equipment volume-related an the expenses of heavier of offset from unfavorable increased

business. you execution drive relentless know, a capacity leverage entire focus our is operating around significant and creation, which we have across helping As

all to saw like digital most is platform, as tools, XX%, have swimmingpool.com, the that would of which, POOLXXX, expect, other you in our third One for mention sales Backyard our like app I quarter, and would seen BlueStreak, activity. the bringing BXB overall tools in increases percent of the to of our our sales also growth POOLXXX important XX.X%. significant processed

improvement to point over basis pleased was record report year. period $XXX.X the year. a Turning last over delivered improvement previous operating XX% the XX%, very a a which Operating income. to that million, I'm is is we same which margin XXX

the second quarter of the back build right momentum has As see, that through you started continued third the quarter. can half the we to in

Our have provide better locations teams Jet were and and our job unparalleled York, Pool our serve to team. forward. demand circumstances, professionally, great unforeseen provide Florida increase Texas; part a executed strategic to but Distributors, with we service, POOLCORP Jersey, We customers, to well-known our dealing tremendous us The to of customers closing the relationships going managed has by team two new on allowing and with growth to as locations service the acquisitions: to them New of service in our for part are will Both Northeastern Distributors, customer and both done and many three and Line with locations New plan Swimming products. personally in Eastern acquisitions in even strong valued talented for Canada. them allow nine happy

be the continue both within near-term and to optimistic We future, our five-year about outlook.

head me As we provide few a you XXXX, and progress let through quarter with thoughts. seasonally fourth into less significant this

First, a trends an we the the XXXX, believe beneficiary. of higher that believe inflation with will that around We bit to will some pool a favor industry be to continue X% being to COVID-inspired spending, home compared ongoing the year improvement the from acquired X% in an Strong locations builder us for off contributions first nice and strong newly newly X% to start help of comp in greenfields. easier should we and as XXXX. our to opened half next get see backlogs X%

costs and tailwinds make for by provided share our the transition. of help compensation expanding gains we to growth and to installed term, revenue headwinds coming expect driven prevail. expense the some of higher-than-normal XXXX, have up rate out renovation market incentive this year's the X%, that ease new inflation, historic base, repair, will should organic Longer we While new with X% construction, by combined products,

stable orders XXXX, course, is and happy Of year behind other us in three patterns normal I'm to predicated this labor update successful economy, and and our upon supply weather With very forces. narrow external full a guidance. adequate

the share range to new per noncash diluted $X.XX to $X.XX $X.XX impairment Our or excluding charges. is $X.XX,

to $X.XX Senior Our Officer, the to $X.XX, commentary. was President Mark Chief very much. and Vice Joslin, his $X.XX previous excluding or Thank you now turn I impairments. for over to $X.XX will Financial call guidance

Mark Joslin

Thanks, Pete.

are a QX Our really our remarkable continuation of year. results

dollar we a of almost through financial more view than which XX% than any the XX% in greater of year with before increase with the the had walking growth off was year, XXXX, was or all in quarter, the bad. of all over a million details. start me growth and the highlights wasn't this was single had sales let In we've in Starting about sales sales last for decade, our of So some year, terms, over $XXX X% organic. too the for at last which

the incremental operating XXX a or income XXX QX quarter from operating year million while of our compensation. point which $XXX income incentive in QX basis our sales income margin $XXX our Year-to-date, full of points for increase, basis drag the was margin from than by contributed sales, $XX operating XX% better XXX operating was incremental million our XX% QX Our of ago, up The XXXX. contribution was the excluding the was is which margin more XX.X%. year, than million, better operating points year last our XX% basis from was

All remarkable to for our have of enough these stellar and and job great business, about are truly operating they while and outstanding maintaining I achievements discipline meet field these needs, customers' done the challenging results. our team delivering our can't say

some details. of the Now for

here is the big operating Looking story for our at expenses quarter, the performance-based compensation.

have our in warranted appropriate for in $XX downside this sharp quarter, employee quarter favorable. for cushioning increase both employee providing last This investors, in variability this our performance, year-to-date. and rewards We when employees reported press the compensation. conditions a good up is believe and strong As are expense quarter, for results and reflected performance-based less compensation while release $XX million million results was our as and

performance year to historical costs norms. our should Our plans to expense return we and our management historic tailwind levels as for well this closer given is compensation expense next exceptional elevated year provide expect a above these

the be $XX this year's For level. million million year, than should to lower roughly $XX that

have growth the our team, Excluding management call. Considering savings a been realized we experienced, our on incentive compensation, with in the I up periods. operating would expense our in sales this year-to-date and substantial that in very both detailed expenses reflects year-over-year X% modest of quarter number the last a the increase areas by entire great

debt, addition million also down In million our last $XXX lower the to year-to-date QX pay quarter in time other $X.X we from this reduced generation for the expenses as lower quarter operating cash down our our $X.X and last was and than as X.X% used average we've interest by results, We've to interest million year. rate from year. was benefited which rates in X.X%, expense

line, benefit, line rate. our with the the lower for without $XX.X recorded which down of the tax QX been to tax is usual have tax -- rate our million in we XX.X% P&L would ASU This Moving tax quarter. lower

would we back that Excluding for as ASU rate our expect benefits, we the on first track for on in call mentioned the are February. year, XX.X% I

ASU so tax the expenses With recognize of next of of now utilized then, in estimate benefit $X any between in expect expire options benefit may expire year, option with will we years. for ASU we'll QX far to future along and which that otherwise would I pull-forward that now year, million have this

the net and Moving receivables balance in offset reflects of Growth XX% collections over improved the total sheet our flow. in last growth by to year. cash quarter sales from somewhat our

flow. extended Our days, down customers' DSO as days the cash our the XX.X has quarter of last helped season end from was the at year XX

and vendors Looking some demand. inventory our reflect that were last at with to inventory, year, essentially the sales continuing we up flat levels with with keep pace strong stress to on ended of QX

X.X an Our times improvement this a a inventory from year on were four-quarter times calculated X.X basis trailing ago. turns year,

Our management, earnings combined inventory great with led cash to has receivables and our generation ROIC. growth, and

operations million and in from $XXX flow generated net of As of over income we've last for improvement is million $XXX year-to-date, year. cash, XXX% cash which an

X much leverage cash As which to this end. debt, used in above pay times at resulted mentioned, down quarter of was just

couple price invested in last share that return in small XX,XXX million on high repurchase average shares share, all-time capital also and predominantly $XXX Line northern our from on added a our of recently was their more out substantial a an buying to a last cash. return we decade, exposures of many our bigger Our year, we've just is and $X I Also, quarter, network, comments completed than over acquisitions. of the XX the but on businesses. the market at the of which should per did of equity net Northeastern point new XX.X% we're seasonal, given we're Jet while jumped an to XX.X% made acquisitions locations XX%.

of existing back them to business operating session. operating this expect including their our roughly We that, seasonal sales to our year. Gary? a turn question-and-answer the add months I'll over our revenue over in and to With to next the appropriate X% and call growth weighting seasonal than with at begin our margins XX loss QX lower profitability, operator

Operator

David go Our Please with first Baird. Manthey is from question ahead.

David Manthey

hear Hi, good morning. Can me? you

Peter Arvan

Yes. Good morning. did. I

David Manthey

mean, So, about the been when different on you fourth see make have stronger-than-normal fourth might overall, quarter markets turns thinking do I length in year-round when construction this in quarter it first you the in little this historically, season year? you're looking the seasonal a could trends and is that we're quarter at? markets. the the dependent and weather first And it think the that pool of different your

Peter Arvan

Yes.

what backlog. have, it exceeded being the permits year, as through September, think for plays most entire is you number year the about permits, the September of mean, the builders through their way with would wane you mentioned, out, it backlog worked the I If because a part, through building XXXX. and pulled typical for This would quickly majority

that have to do. year it's think and of see quarter season fair I So, than would will work to stronger normally the -- as builders the fourth first plenty be have in suggest we this will quarter

still going work plenty be of markets there's the there's do. that Seasonal year-round There's done. but that work needs but by weather, plenty to to be needs weather, can marketers are be seasonal by the market, affected be of to work still of Now year-round to still plenty affected markets, done.

David Manthey

the confident increase Do Great building do we've know, which Backlogs year? don't by that I more -- reported since let's average, builders, think on capacity the backdrop think Recession, seen, bit we more you by say, incremental based the pool a probably little industry the that if pools Financial X,XXX than more you can could builders pool it's per new are see today? than themselves feeling pool

Peter Arvan

Yes.

great biggest of in things is of a there. terms weather factor and very with really weather. think that the we've couple been consider capacity, I One to is fortunate

anecdotally, no other that. that build is wait But pools, starting comment I capacity is, your online? building can't for heard several coming about, from pool we've up What additional simply for builders are up. homebuilders So, own are because there their they if, reason, to large the say just to capacity would catch

many for hard heard how represent, to much -- that will the it's that we've it's that So, but time in capacity say capacity also additional many, us first years.

David Manthey

much. very Thanks Okay.

Peter Arvan

Thank you.

Operator

Please Ryan Blair. question next The from William is Merkel with go ahead.

Ryan Merkel

another stellar Hey, guys, Good congrats on morning. quarter.

the organic off, can should into growth piece discuss know you growth think about October? which can quarter I first cadence trying through the to I'm and degree? of So, the quarter, to be in some just we out fourth how sales weather-dependent

Peter Arvan

guess, in it I about two I'll parts. talk Yes.

strong and perspective. again, exited a was So, and say my the permitting from inspection had. rest as would as the I an that I slower started country restrictions have coming of and California is in quarter they they that strong were, strong the And rate. of slower comments, the mentioned at quarter the they out fourth begun very organic

Ryan Merkel

what year-over-year? then should base on quarter sales the for And of expect help in fourth terms growth we any Okay.

Peter Arvan

that busy, would still of on and I say the very going weather. are lot a to is be it we dependent

be there fourth biggest stay-at-home, as and open used know, they'll weather. I longer are predictor you number But where hard -- you can same So, for to that school-from-home, I I can the work going a how you as give strong so we A a mean that to there lot do quarter, result same is more. substantial going be of can thing very can is mentioned, the tell in pools me get much the have of, quarter. that very, to have to is they done. with demand trends because,

So, Upper to the before, if are quickly. if in that mentioned into Midwest move But that's things it were cold, curtail the Northeast and to it strong. snow very would were year-round -- get I markets that as

Ryan Merkel

Okay. Fair enough.

generally XX% question, a base stable I is maintenance is growth business. possible. well business just thought Second what Pool beyond was

why using little is, growth? at Retail strong bit they're such question more maybe pools and and one upgrading the that mentioned my and great know that so, driving strong. color That's remodeling understand Any strongest And trying is would to Why growth up I'm home? a demand, more because their was people really, remember. XX%. but of I can pent-up really can of that weather you growth is you XX% add other rates bit I just stuck a

Peter Arvan

Yes.

I think pent-up the of I really was mentioned most build "Oh, on that there a that underway. would and I mean on, down pools a to because And it." in year, that demand there this markets. significant seasonal a closing lot isn't the of is a guys been it. of silver lot we're the There already restrictions This early those bullet they season, of of end backlog. normally, well was the there their have were had says,

was We great working. dry. kept warm they weather. So, and very had It

huge you market, weather. If look at hot there. been It's California, out Southern they've great had very

lot of year using as waiting backlog And the So, earlier still their were those. they on. people get to upgrades in and with usage. there that Well, started their start to have want remodel." builders to I equipment pools and for people And "Hey, was a said, line in

keep strong, came maintenance customers we has the switched the operational, and renovation now as construction up our we So, just builders can business back start from well. what remodel on in very the -- saw a or been pool was quarter third business strong and and so working as trying but get to

Ryan Merkel

pent-up guess in demand helpful. aspect that that's there. appreciate the Yes, really Okay, kicked I I didn't

on. So that's Thanks. helpful. I'll it pass

Peter Arvan

Thanks.

Operator

Company. Anthony question is The Please with Sidoti go ahead. Lebiedzinski & from next

Anthony Lebiedzinski

Yes, thank question. the for you morning, taking and good

for number chemical I a missed guys quarter? you for have may sales growth So, it. the give sales Did

Peter Arvan

Yes.

chemical quarter the X%. the for was I think growth

Anthony Lebiedzinski

Got it.

that. for you Thank Okay.

Okay.

obviously, previous trends, out as pointed obviously, by very call, on the So, strong. far the people as sales as

the as we should about pull-forward mean is how think these -- how to of any demand? sustainability far of think -- think you should Or as think there we far and of future do as that? trends? as I about anything So

Peter Arvan

backlogs that I in of built. the guess, that when what know is get future that XXXX again, yet, want say. I that us, up essentially at really what's fact mean, significantly, for the consider number there that I but Really, I labor I anecdotally, season. would all and permits when and the for here's builders several out significant fact are the so still changed pools and look to demand hasn't I the the much sold people is

that the you you about cocooning, growth, whatever stay-at-home, trends don't driving it are and think which I it. call to life, travel, the our returning I soon. anytime see can school-from-home, call call normal would I want

that our same drive think, because going So, in don't dynamics things to XXXX, that I the the market business going are drove I see to are shift. XXXX, overall

still So, labor is constrained.

like demand that unlimited Having be So, pool, life, there's pools just it's being said new to can new happens maintained. just That elevated not up, remember, for over for pools a that to with that, bunch a when be for has built. labor is in. pool an it's the us, pool construction another and customer put of not

So, I mean we're very road. coming the encouraged by what we down see

Anthony Lebiedzinski

Got it.

Okay.

far taking as so next account thoughts have you obviously, any for And an of into do where estimate be to the full year? that construction, for constraints? year, And will new labor some pool the as as early

Peter Arvan

demand, to in can I pools, weather seasonal was they're probably the really is they that off XXX,XXX and the last in of they as as work number speaking markets. be year. to new of consistent. XX,XXX of to pools, last depending the of again, up year. holds they are on I because the my the few And remain in can huge, going pools the number backlogs I is ground, will I can that heard hoping between number the they'll XXX,XXX first half don't the as soon their to is and markets those get many the again dealers and pretty XX,XXX the ground the new get can and seasonal before of they in as how I you, whole, flies. mean would start in so coming in to weeks long a in snow tell they're pools I've And weather, tell function you think, next latest continue whatever

Anthony Lebiedzinski

Got it.

guess Okay. for And question. last Thank you that. I

the how quantify increased far the margin Mark, for volume As as was? you much incentives, can impact that

Mark Joslin

a increase. question. That majority Yes. Thanks, though Anthony, for of the the is asking me

at it and with bit product look basis little you actually points, mix as if XX was both more bit And on then, So, offset a said, than Pete little customer. the that. a some

not amount, but helpful. a certainly So, huge

Anthony Lebiedzinski

Got and Good. Thank right. best you, luck. of it. All

Mark Joslin

Thanks.

Operator

with Please go next ahead. from Volkmann is question The Jefferies. Stephen

Stephen Volkmann

a good Hey, Mark, you. If all for question morning. I right? had that's

Mark Joslin

Good.

Stephen Volkmann

if like you backlogs, have then, So, least next than said front-end -- a on actually higher going But in And you price so bit to little perhaps normal. gross an it who's it's half cetera. are fairly there's some based think optimistic, inventory sounds guys you're XXXX? at Mark, impact increase the interested. means of that et wonder for on load first have some I I year anybody opportunity for and or to margins And

Mark Joslin

we're expecting, What is inflation. you mentioned, as Yes. really price

little are to bit So, struggling stay normal. a to X% be next to happens. X% buy that up a And with looks versus bit when try X% more But vendors bit higher the to to typically little X% year, demand. we inflation a

have So, to we'll otherwise, that we from benefit it's much might, as as clear like that. not opportunity

Stephen Volkmann

but Okay. do even looks Pete. visibility, breakdown and you in possible, maybe to All guess, to And upgrade it Good right. what of versus growth? hard Is then terms build think get back point. it's maybe, new I like retrofit

Peter Arvan

much different those very and to I obviously, much more people then the new pools, pool it's time and I just base get or into It's good we there's, going on people given the pool. to installed aging a the I norms, of a trying folks the visibility to a know to have than builders bunch are old of historic the calling tell. think a using you're and of have that lot newbuild you the how more, remodel. and hard it don't it's think is be aging wanting spending in remodel. don't if are And and now, remodel. it

I don't new that tease is construction. So, an we know business to interesting question, apart how much of remodel a have versus it's way that but

Stephen Volkmann

Great. one, and right. All on. then maybe And I'll Okay. pass final my it

stunned how here. Just you well the numbers much of think really maybe But growth of you've this? again, on on Or I there do call share guess, to niches I Europe have -- at just everybody certain guess. out way XX% is I played share? gains overall? it, into another asking mean are where done sort Or was share, Europe up anything

Peter Arvan

Yes.

it clearly, gained think a certainly up we're fair gained be gets some we idea say say think share. provided At It's too this so and in market, not as be saying share comfortable I we what markets. on year. share But function we actually in that I to I that that that's have share end we over. a better year, to think bit I soon picked we the lot think a will bold of the but year we to service we'll product. still tell, a I of based the built. had picked I every up think little wouldn't some very that of the certain is And

Stephen Volkmann

Thank you, guys.

Peter Arvan

Yup.

Stephen Volkmann

Thank you.

Operator

ahead. with KeyBanc. from The Ken Please Zener is next go question

Ken Zener

That's bold. you. I be Peter, Mark, would suggest to what

as demo But So, was March, I'm am out on, California. read getting in delayed so it's concrete pool we you're this fortunate the speak. in and I out for my that here

clearly from your in that different very to supply and as hardscapes going through I perhaps, Could advance And getting you're aren't goes talk as which ask were want largest couple talking share angles one given a MSI, to my competitors, share I a takeaway at that because your competitors' distribution to there's instance, about So, you compared yesterday, first background, you're MPT opportunities and we data perhaps I a internally. that well-managed think a be out what be But your your of you're chain little that ranging. specifically, gains yours? supply because it's getting good you, because, must seeing has Pete, as hardscapes of just distribution for here. That's your apologize question. to, chains

Peter Arvan

Okay.

that. competitors terms try The and many I about answer pool when Let full everything not our are -- mean, building of hardscape, that share I having and builder gains, specifically, me materials remodeler of in needs. line think the in

we Number that, and So, and one. keep manufacturers stretched, very range, we're point, with network much which we have Having this two, of number are up of such in a deep broad unique that than demand have in at said broad allows inventories, the that a all better fashion, to us capacity. others. terms

going can supply if collective you you're you're So, of have have to great struggle. to then is the the a demand outpaces output chain, what but the -- going ultimate plans,

wanted product get. than parts country, we had in So, that most. of sooner country, I would in other we can and better tell you, certain parts the builders large, But of we than did by And great. the

Ken Zener

a which my details regarding trying had you no FY to Okay. do Mark, outlined few XXXX, on math I'm here guidance. just that explicit

giving growth us ladder. the are However, of you beginning a

that's So, say roughly on a I X%, to you inflation, said. X%, basis. M&A heard you XX-month X%

northern, So, said. what believe, you it's is I more

X% growth So, Is accurate? XXXX. of occur XX-month that will the FY that bulk in

Mark Joslin

basically, mean those the saying I Yes. at by I'm are the that acquisitions end made third of quarter.

So, next year. that won't get fourth we quarter

to X% So, a growth QX... expect from QX

Ken Zener

Largely two X, and exactly.

Mark Joslin

September April through the period. growth time Yes. of Greater kind in

Ken Zener

think acquisitions, an not margin, to it's to you you contribution? same at have margins. is EBIT flowing X% reasonable try Or the about an XX% I so is EPS mean, Now, in said But it... if it's

Mark Joslin

I little in would mean, -- a I the say yes, X% to range. X%

Ken Zener

Okay.

that all this Congratulations, year. million, explicitly $XX Being you lower there. well fair? called that else done to million about out $XX is $X.XX year Now next that's comp. mean Because -- accurate? I talk you equal, of is

Mark Joslin

will the was costs given Ken, little probably we our catch-up year Well, year, growth. of have bit have this basically low, of a cost. what I base that on was revenue been extraordinarily operating saying, kind operating next And as

higher the we've largely year. offset comp So, incentive a that will higher be growth than had normal, little by which bit this

$XX costs last over reference on to was costs. higher-than-average let's million several the amount that is $XX That years, call So, incentive million year. it, of, I the the just gave incentive this

offset given that we delayed So, do costs, expect branches have otherwise, I that operating things to of that would hirings higher year. other they've this will in for be and what kind our makeup done some to

Ken Zener

Right.

kind X% what given -- high your X% we So, clearly on mean conservative digit, it's year, base disagree your from is what you're to single seeing to demand, if you. the inflation. -- inflation, guiding that? That's case, assume Would we're I'm I a next core M&A, separate? that's with you and X% what your hearing of M&A

Mark Joslin

We, but wouldn't until October. guidance disagree, specific also we... on our get say I typically, don't this I is

Ken Zener

I understand. speaking, But just because No, it's robust. Yes. generally very

Mark Joslin

Right.

Ken Zener

those Due figuratively. you factors, to isolated

Peter Arvan

Okay.

Ken Zener

your Very much you well. time. very Thank for

Mark Joslin

Right. Thank you.

Operator

next is Please Loop Garik Markets. with question ahead. Capital go from The Shmois

Garik Shmois

thanks. the quarter. on Yes, Congrats

there be mean you is as it Just going just far product back but as beginning do able to next usual, -- feeling mean make you'll normalize, the stock like to want on ordering all next early you into sure everything the I need, buys. you're it back the year on as on sounds of is of the like set season? think be product for to I many sounds get I won't as in incentives inventory position comfortable concerned? order some kind but and that

Peter Arvan

Yes.

year. because of start be the the buy. demand, it I them soon early the a shipping it, early still an the the the are are they'll and as working back manufacturers next we'll manufacturers many allow part, we and catch which XXXX early natural already But season, to most ship door. on basically up, they're get turn there as -- But, wane product. of think, for strength fine buy. obviously, buy. seasonal shipping But the Typically, be going in to we'll the out absolutely is will around There's

So, part, problem there'll a start the material the for don't most think to I warehouse, next be I expect availability to year. speak. with season a so with full

Garik Shmois

of who that of Do pool they're And in follow-up seeing If Are we performed to by restrictions way of some behavior earlier. change work devote time that's market outsource themselves? all? a lot question thanks. you change work maybe that owners? elsewhere? a Or had questions or any to starting whether it's think -- at on I maybe Do previously, maintenance are a think perhaps? the a pool function you're COVID to on just their Okay, a had overthinking somebody came a they you just share the the professionals,

Peter Arvan

Yes.

a think we might little that be I overthinking bit.

I think, up change of professionally, that it that's folks we significant are we've done don't changed, think -- having don't their think versus amount of the in or in taking general, picked on that pool care regard. I any I

Garik Shmois

the construction, around the you've builders Okay. was that of last we're pool bit take pools? pool And the historically, mean, Is themselves. just that something to do that a comments around not, approaching in that task looking of this the normally they the if now up more average, seen construction then below I question, the cycles long-term prior little average. XXX,XXX

so of construction over than a the we activity, years? move take historical activity pool had XX the builders they've on towards more some expect do normal more level of as So, last to to the we should

Peter Arvan

it's there's for and there's builders, right? essentially think pool. supplemental plumbing, a involved certain think the There's masons trades I electrician, right? are same, in capacity the I building

historically, then So, it that, was were doing itself. capacity focused they I there think when and outsourced the to the do and they on that, essentially own their home some homebuilders of

built, limited for over it complete with want turn the they home capacity to Now, the to and get homeowner. pools

them of have we'll done "We've do some it before, it again." So, and said,

Garik Shmois

Great. Helpful. Thank you.

Peter Arvan

you. Thank

Operator

from with is Alex Berenberg. Please ahead. question next The go Maroccia

Alex Maroccia

see lower back we Last quarter, half a had in those tick the towards mentioned First, this due lower-margin that margins. to mix items, I you also similar but margin but some strength have ticket being heavier on product of question up Mark gross higher margins quarter, the for year. products. that we had the we Obviously, in gross we of stable would saw

So, and if but how remains construction strong, offset think mix positive the a in should you from XXXX remodel rebates? impact we about new get

Mark Joslin

have Well, stable. XX Yes. That's business, our by some way, consider going change. quarter-over-quarter. natural a to points fluctuations year, the in basis We're I be every to minor pretty

for see next that's expectations down. time. of of is I product be year, little XX, same the we're growth kind sales either that mix next way. good high ticket, to we're not will basis Relatively of the off XX of flat year year, coming business our for lower-margin in these volumes for or the but looking as points where So, up this continuing down significant, provide bit maybe over think year a And which bigger products,

relatively again, expectation, So, flat change downs big by next be year. from year. and some not ups Could quarter, but this a

Alex Maroccia

flow your hit doing these QX That's on give secondly, in hurricanes and coming and impact then line? are it you All us recently, of some Gulf late quarters? your was have helpful. a in early I And what QX, of been hope well. markets, had And in employees right. will But we've sense sales how then to able the bottom that through the

Peter Arvan

a say these impacted, terrible for but I Yes. it's situation weren't population would centers. major those

our really significance. no standpoint, the of business from on So, impact

Alex Maroccia

Okay. I missed everything. that. I appreciate

Peter Arvan

Thanks Thank Yes. you.

Operator

go The Volkmann, question Stephen open Jefferies. end. is is from your next follow-up ahead. Instructions] with [Operator Please Mr. line on Volkmann a our

Stephen Volkmann

muted. helps if not It Yes. I'm

that. for Thanks about Sorry taking the follow-up.

some discussions to do work. own that -- homebuilders doing do to they're would curious, supplier if multiples, Would their be pool project? they you around other Just starting a of some Or the still options? have maybe

Peter Arvan

rest and I that's and have. fittings to required to pool Yes. that the mean through get mean, specialty is is are inventory I pool? else No. to that going a build typically from buy going can the somebody things they to they everything and That's I mean have still business else? rebar their that PVC not specific we industry. the Can of pipe flow trades No. the equipment us.

Stephen Volkmann

more Got logistics. And around my follow-up actual really it. was

bit you but know have that. a on had in So, focus seeing guys I logistics of quite inflation markets, some managing we're

XXXX? forward Just into about going any thoughts that

Peter Arvan

perspective, transactions mean, I from XX% take place remember, of a Yes. our transaction over-the-counter.

benefit we So, like situations in this.

more seeing all seeing been to, we've the been we and able transportation we've capacity others on, our the such also of of that those working are part better help out bear existing We that to transportation as by getting creation that market-based same our But initiatives, as routing capacity, fleet you and control inflation costs. have things stretching are considered, costs. to it to know bring relates

Stephen Volkmann

get kind benefit? some of you Or stable forward? So, net-net do going

Peter Arvan

percentage saw a would own of is the this I our on unless vast I -- that in That's year. function rates. a remember, -- step transportation slight that, expenses. continue there into we consider of Because of external our our rates that as deliveries think trucks transportation increase year, a majority happen think sales lot a of And I terms mean in improvement -- next would if would well.

Stephen Volkmann

Thank it. Got you.

Peter Arvan

Yes.

Operator

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

Peter Arvan

you. Have day. Thank fourth want look you February great to and forward full reporting and I joining Great. XX, the of on our to on us XXXX. XXXX results year today, a all we for thank call quarter

Operator

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

now disconnect. may You

Pool (POOL) 22 Oct 202020 Q3 Earnings call transcript