The Pool Corporation had a successful fourth quarter and year end in 2023, with over $5.5 billion in revenue and $747 million in operating income. These results demonstrate the company's ability to serve its customers and make wise investments for future growth. The company's President and CEO, Peter Arvan, will discuss the details of their performance.

Despite facing difficult comparisons and challenges such as poor weather conditions and macroeconomic constraints, our team worked hard to deliver solid results. We adapted to the changing market and focused on customer needs and opportunities, leading to continued growth and outperformance of the industry. Our disciplined execution also resulted in a company record of $888 million in operating cash flow and successful management of working capital and investments.

Total sales for the year 2023 were $5.5 billion, a 10% decrease from the previous year. Sales in California, Texas, and Arizona were down, while Florida saw a slight improvement for the full year but declined in the fourth quarter. Sales in year round markets also declined, but showed improvement as the year progressed. Chemical sales were down 1.5% for the year, but up 1% in the fourth quarter due to trichlor deflation and excess inventory in the channel. The company expects price volatility to subside in 2024.

In 2023, the company made significant progress in expanding their usage of a chemical packaging facility, resulting in a tripled amount of chemicals produced and sourced from the facility compared to the previous year. Building material sales declined, but the company remains pleased with their performance in this profitable product group. Their NPT branded products, expanded offerings, and nationwide sales and design centers continue to be a go-to source for pool owners and dealers. Equipment sales also decreased, but the company remains confident in future growth opportunities due to the increasing number of pools and the trend towards modernizing equipment and creating connected backyards. The commercial business saw growth in both the full year and fourth quarter.

In 2023, the company saw a growth of 27% in both the full year and fourth quarter, with a focus on expanding their reach in the commercial pool market. They acquired a commercial products wholesale distribution company and continue to gain market share in this area. However, sales to independent retail customers declined due to unfavorable weather and supply normalization. Pinch A Penny retail stores, which are concentrated in Florida and Texas, saw a 3% increase in retail sales for the full year but a 4% decline in the fourth quarter. In Europe, sales declined by 15% in 2022 due to the war in Eastern Europe and economic slowdown.

In 2023, European sales declined for the year and fourth quarter, but there were signs of improvement towards the end of the swimming pool season. The company remains optimistic about long term growth opportunities in Europe, which makes up 4% of their total revenue. Sales in horizon net also declined, but stronger sales from commercial irrigation projects helped offset weaker residential market sales. The company's focus is on expanding in the Sunbelt and leveraging their distribution operating model to support growth in the irrigation landscape and equipment needs. Gross margins for the year were consistent with expectations, and there was improvement in the fourth quarter. Operating expenses increased in line with previous guidance, but the company continued to invest in talent, employer initiatives, and expanding their locations. In 2023, they opened 14 new locations and acquired five more, bringing their total to almost 440 sales centers.

In 2023, we expanded our distribution capabilities for Pinch A Penny franchise stores, adding 15 new stores and serving the Texas stores through our localized network. We also focused on controlling expenses while maintaining customer experience. Our B2B POOL360 platform saw a 3% increase in total lines and a 1% increase in revenue, showing faster growth than overall net sales. We improved the user experience and added new features, transforming POOL360 into a complete customer-facing digital ecosystem. This includes a new ordering platform, water solution software, and service platform. These tools will continue to benefit our customers for years to come.

POOL360 Water offers water analysis and solutions for private label chemical products, improving brand awareness and providing consistent and accurate advice to pool owners. The tool also includes a CRM for an enhanced customer experience. POOL360 Service is designed for service customers, offering a CRM and applications for managing their business and integrating with their POOL360 account. The company plans to add more phases to this digital ecosystem to increase productivity and help customers grow their business. The company has seen a decline in operating income from 2022 but an increase from 2019. In the fourth quarter, operating income was three times higher than in 2019.

In 2023, POOLCORP's operating margins decreased from the previous year but still showed growth from 2019. The company remains confident in the long term growth potential of the industry and will continue to focus on serving the non-discretionary maintenance needs of the growing and aging pool market. They also plan to expand their offerings for the DIY market and expect inflationary increases to benefit their business in 2024. New pool construction is expected to decrease by 10% but could vary by market and geography.

The interest rate hikes and potential future cuts have uncertain effects on the outdoor living products market, but the long term outlook is positive. Budget-conscious consumers may delay purchasing pools, while affluent consumers will drive the demand for high-end pools. The increase in millennial homebuyers and new construction will create more opportunities for pool installations, but at a slower rate. Automation and connected products are a priority, and renovation and remodel activity is expected to be stable. However, if interest rates remain high, larger sales in this market may decrease. Overall, renovation is considered a necessary market in the pool industry.

The company is estimating an EPS range for 2024 and plans to use their cash flow to invest in operations, growth, and expansion. They will also consider strategic acquisitions and continue paying dividends and potentially repurchasing shares. The company's competitive position is strong and they are focused on execution and innovation to gain market share. There may be changes in demand due to economic factors, but the company is well-positioned to weather these cycles. The speaker is proud of the company's progress.

The speaker expresses pride in their company's progress and thanks their team, suppliers, and customers for their contributions. The Vice President of Finance and Chief Financial Officer then discusses the company's fourth quarter results, noting a modest improvement in sales and inflation, as well as an increase in operating expenses. However, operating income decreased compared to the previous year.

The diluted earnings per share for the fourth quarter of 2023 was $1.32, compared to $1.82 in the same quarter of 2022. The full year of 2023 showed a strong performance, despite the challenges of the pandemic, inflation, and supply chain disruptions. The company successfully managed inventory, invested in growth, and reduced expenses. They generated over $820 million in free cash flow, reduced outstanding borrowings, and returned money to shareholders. Net sales for 2023 decreased by 10.3%, mainly due to a decrease in new pool construction and unfavorable weather. The company also experienced lower customer early buys and higher chemical and commodity pricing.

In 2023, 2% of the decline in sales was attributed to decreases in discretionary products and lower sales activity in Europe. New pool construction sales decreased, with renovation and maintenance product sales increasing. The company's gross margin met its long-term target of 30%. Operating expenses increased by $6 million, mainly due to new sales centers and acquisitions, wage inflation, and investments in technology. However, this was partially offset by lower incentive-based compensation and sales expenses.

The company has made investments in new sales center development and digital transformation, which are expected to generate additional sales growth and capacity. The operating margin has decreased compared to the previous year, but is still higher than pre-pandemic levels. The company received a tax benefit and the earnings per share for 2023 decreased compared to the previous year. Cash flow from operating activities has increased and the company has reduced its inventory. The company's accounts receivable and days sales outstanding remain consistent with the previous year. The company has also made progress in reducing its inventory.

The company has seen a reduction in inventory and debt, as well as an increase in stock repurchases and dividends for shareholders. They expect to outperform the market in 2024 and are forecasting flat to low single-digit sales increases, with potential benefits from pricing and weather. They also anticipate a rise in maintenance and continued pressure on discretionary product sales until economic conditions stabilize.

The guidance for the renovation and construction markets is expected to remain stable in 2024, with a potential decrease of up to 10%. There will be an increase in selling days, but it will have a minimal impact on gross margin. The carryover from lower cost inventory sold in 2023 and normalized vendor early buys will benefit margins in 2024. However, there will not be a corresponding impact from lower customer early buys in 2023. The impact of lower selling prices of chemicals and commodities will be minimal in the second quarter. Operating costs will increase slightly, but productivity improvements and technology initiatives will help offset this. These investments are intended for long-term growth and efficiency.

In this paragraph, the company outlines their projected SG&A costs for 2024, including expenses for performance-based compensation, new locations, and technology initiatives. They also provide estimates for interest expense, depreciation and amortization, and tax rates. The company expects to have a diluted EPS of $13.10 to $14.10 for 2024, with a 2.4% improvement from the previous year. They plan to use their cash for organic growth, strategic acquisitions, dividends, and share buybacks. The company also mentions their cash flow from operating activities and their increased sales since 2019.

The paragraph discusses the expected gains from inflation and market share over the next few years, as well as the impact of acquisitions and cost stability. The company plans to continue investing in long-term growth and improving operations, which will benefit shareholders. The first quarter is expected to have lower margins compared to 2023, but return to pre-COVID seasonality. EPS is expected to be in the range of 12-13% of sales for the first quarter and contribute to overall EPS for the year.

The speaker, Peter Arvan, is discussing the company's guidance for the year. He explains that last year's guidance was impacted by unexpected interest rate increases, but this year they are being more conservative. He breaks down the business into different segments and discusses the potential impact of weather on their maintenance and repair business. He mentions that the first six to seven weeks of the year have seen better weather compared to last year, but they still want to be cautious in their outlook due to uncertainties with weather.

The author discusses the current state of the maintenance and repair business, specifically in regards to new pool construction and renovations. They believe that economic conditions will not change significantly until after the election cycle and that a small interest rate reduction would not greatly impact demand for new pools. The renovation market is seeing a trend towards staged renovations due to high borrowing costs. However, the market for maintenance products remains strong and the company is investing in improving their value proposition and customer experience.

The speaker discusses the competitive dynamics and operating environment for their company in the upcoming year. They mention that the demand environment will play a role in the level of competition, but they are confident in their efficiency and cost position. They also note that some competitors may resort to desperate tactics, but they do not view them as sustainable.

The company prioritizes being the best provider in the market and focuses on their customers' needs rather than just making sales. They invest in technology to help their customers grow and are confident they gained market share in 2023. They compete every day and have a strong team dedicated to being the best partner for their customers. They are not worried about losing market share, but rather focused on continuing to be the best provider in the market.

The speaker is discussing the demand for semi-discretionary products like pool heaters and cleaners. They believe that there was a pull forward in demand during the pandemic, but as time goes on, there will be a return to the normal replacement cycle for these products. They also mention that technology improvements may make these products more desirable.

The speaker discusses the current state of the market and the company's growth. They mention that there has been an increase in demand and a stop in shrinking demand, leading to overall growth. However, this growth is not universal and may take some time to fully realize. They also mention a pull forward in the market and the potential for growth in the future. The speaker then answers a question about base business volume and price for Blue, Green, and international, stating that pricing was around 1-2% and base business was relatively the same as consolidated. They also mention a 4% decrease in green and a relatively flat impact from international.

Melanie and Pete discuss their expectations for growing SG&A in relation to sales growth and gross profit dollar growth. They mention that their formula for achieving this has been consistent over time and that they expect to continue investing in technology, which will lead to higher SG&A growth in the near term. However, they also anticipate seeing benefits from these investments in the outer years.

During a conference call, Peter Arvan and Melanie Hart discussed the impact of weather on the company's performance. They estimated a 1-2% benefit from weather recovery, but also noted that California had started the year with tough weather. The company is aiming for a 14% reduction in inventory by 2023, with the first quarter on pace to meet expectations.

The speaker discusses the company's ability to manage inventory and improve efficiency in their sales centers. They also mention their commitment to bringing new products to market and their confidence in maintaining 15% operating margins in a weak environment.

Peter Arvan discusses the changes in investment requirements and the divergence from their initial expectations. He explains that the technology platforms have changed and they are investing more in productivity and capacity creation initiatives. However, there have been significant increases in rent and labor costs, which the company is managing through capacity creation. Arvan emphasizes the company's long-term view and commitment to the industry's growth.

The speaker discusses their long-term investment strategy and explains why they are not concerned about their increased spending this year. They believe their investments will lead to higher returns in the future and that sticking to a strict spending ratio could hinder their growth. They also mention the potential for increased operating margins if new pool construction picks up. The investments in technology are focused on building their POOL360 service.

The speaker discussed the water test and service software, and mentioned that they will provide more information at their upcoming Investor Day. They also provided an update on backlogs and stated that while dealers are optimistic, they are cautious due to economic factors. The speaker does not anticipate a significant increase in new pool demand until monetary policy and lending improve. In terms of guidance, the speaker did not mention any elevated levels of deferrals and does not see a risk of a reversal in the trend of trade-up in equipment.

Peter Arvan discusses the cautious approach to deferred maintenance and the desirability of new products in the pool industry. He notes that technology is still important and gaining share, but does not expect a significant increase this year. Melanie Hart adds that weather was favorable in the fourth quarter, with no significant changes from the previous year.

The first quarter is heavily influenced by March weather and typically accounts for 18-20% of annual revenues. The company expects lower margins in the first quarter compared to last year, which will impact overall EPS. Q4 results were down 8%, which is below the mid- to high single-digit decline guidance.

The speaker discusses the factors that contributed to the low end of the company's fourth quarter range, including the impact of weather and seasonal business. They also provide details on the expected cadence of SG&A investments for the year and the performance of seasonal versus year-round markets in 2024.

The speaker discusses the performance of specific markets, such as Florida, California, Texas, and Arizona, in the first quarter of 2022. They mention tough comps in Florida and stable demand in California, Texas, and Arizona. They also mention the impact of weather on sales, with a potential decrease of high single to low double digits in the first quarter. The speaker notes that it is still early to make a definite prediction and more information will be available in March.

Peter Arvan, CEO of a company, is discussing the company's performance in the first quarter with Joe Ahlersmeyer, an analyst. Arvan mentions that the weather has caused uncertainty and may have affected the company's performance, but overall demand is still solid. Ahlersmeyer asks for clarification on the company's margin comment, and Arvan explains that it will be approximately within 50 basis points of 30%. The call ends with Arvan announcing an upcoming Investor Day on March 19.

This summary was generated with AI and may contain some inaccuracies.