Thread by @EquiCompound

1/#Maytronics MTRN.IT
During my $POOL Q1 review I came across a terrific company, #Maytronics, the leading manufacturer of pool cleaning robots. MTRN.IT has 50% market share, 25% ROIC, 20% margins, and grew sales 10x over ‘04-‘21. Some key notes...

2/Intro
Headquartered in Israel, #Maytronics manufacturers a lineup of pool cleaning robots under the Dolphin brand name. In '21, generated USD $437mln in revenue (1.4bln ILS) and $110mln in EBITDA (334mln ILS) (24% margin). Has a USD $2bln mkt cap with $62mln in net debt (0.6x)

3/Products
MTRN.IT makes an array of pool cleaning robots for private/public pools. Private pool robot ASP’s range $600-$1700. Price leader, generally gets premium pricing due to strong brand reputation, superior product and a superior distribution/service network

4/Product Innovation
#Maytronics is a product innovation/vitality story. Constant cadence of new products released with better and better features drives share gains, improves brand strength and sustains MTRN.IT lead vs. less R&D competent competitors

5/Competition
MTRN.IT has 10 main peer manufacturers of robots, only 3 have material mkt share – Fluidra, BWT, and Hayward. These firms are super manufacturers of a wide range of pool products with pool robots not being a key focus and very small business for them

6/Low Robot Penetration
#Maytronics estimates only 16% of the 26mln global pools are cleaned by a robot with the rest served by suction/pressure and manual cleaning. While MTRN.IT dominates with 50% robotic share it has just 8% share of the overall cleaning space

7/Cleaning
Pools must be cleaned constantly, usually 1-2/week but often more depending on #pool/area. Cleanliness impacts water quality, amount of chemicals needed and the useful life of pool equipment like filters, pumps, coatings, tile, and veneer. $MTRN.IT

8/Traditional Methods
Traditional methods (suction/pressure) are labor intensive, requiring #pool owners or contractors to spend many hours each season cleaning. Quality of cleaning also highly dependent on the operator being thorough and comprehensive with equipment. $MTRN.IT

9/Value Prop [1]
Robots are more expensive upfront, but gains in tech have made them superior vs. other methods. Have exclusive ability to scan surfaces and scrub #pool veneer w/precision, removing bacteria, algae, etc. On board filters also continuously clean pool water as well

10/ Value Prop [2]
Robot value prop to a pool owner appears high. Reduces/eliminates the need for manual owner/contractor cleaning by running themselves, saving owners time/money. Better cleaning also reduces the volume of chemicals and improves life of #pool equipment/surfaces

11/Value Prop [3]
#Maytronics has noted use of robots can save pool owners “hundreds per year” and improve the useful life of the pools surfaces/equipment. Noted a pool with a robot needs to change its filter at 1/3 the rate of a non-robotically cleaned pool.

12/Barriers to Entry [1]
Manufacturing pool cleaning robots at #Maytronics level requires a high degree of specific technical experience. Product is also sold through distributors (i.e., $POOL) who also provide a service network to repair robots.

13/Barriers to Entry [2]
High distributor loyalty, a fragmented distributor base and costs/time to spin up a service network make it difficult for new entrants to create a channel to market. e-commerce is a path, but still lack a service network and product quality is often lower

14/Comp Advantage
MTRN.IT product innovation competency appears to garner it superior brand reputation in its niche as the best-in-class player. Awarded with high share and premium pricing. Also has a very hard to replicate distribution/service network and IP

15/ $POOL partnership
#Maytronics entered a strategic distribution relationship with $POOL in 2012 and is a $POOL VIP vendor, earning multiple “SCP outstanding supplier” awards. $MTRN.IT revenue growth accelerated meaningfully post 2012.

16/Growth
While $MTRN.IT has 50% share, robots are still only used on 16% of pools. Increased penetration could provide multiples of upside even if #Maytronics simply sustains share. $MTRN.IT share has also been increasing over time (’10 32% ’19 48%) and could increase further

17/TAM
$MTRN.IT estimates there are 26.2mln global pools. 3.9mln have robotic cleaners (16%). 7.3mln are considered non-addressable leaving 15mln pools addressable for robots. On an ARPU range of $600-$1700 this equates to a $9-26bln gross revenue opportunity.

18/Replacement
$MTRN.IT has noted that the avg replacement cycle of an electric cleaner/robot is 4-5yrs. On an installed base of 3.9mln this provides a 0.8-1mln units/yr. sales opportunity. On an ARPU range of $600-$1700 this equates to a $0.5-$1.7bln annual sales opportunity.

19/US Go To Market
#Maytronics recently restructured its US sales structure from a west/east layout to a snowbelt/sunbelt structure to better align with different dynamics between the two regions. Sunbelt is disproportionally over indexed to manual cleaning.

20/US Opportunity [1]
#Maytronics estimates that despite the sunbelt having the highest quantity of pools with the longest seasons, it has <1% robotics penetration vs. the snowbelt. Only 18% of MTRN.IT US business revenues are from the sunbelt (snowbelt at 82%)

21/US Opportunity [2]
#Maytronics replicating its higher snowbelt penetration in the much larger sunbelt could provide significant upside as there are around ~4.5mln US total in ground pools cleaned with non-robotic methods. The bulk of these not captured are in the sunbelt.

22/ $MTRN.IT Guidance
#Maytronics in their Q4’21 report guided for >17% revenue growth for 2022. LT revenue guidance is for 2.5bln ILS by 2025 (2021 1.4bln ILS), implying a 15%/yr. CAGR. Also targets 17-20% operating margins in 2025 (vs. 2021 19.7%).

23/Valuation
$MTRN.IT lacks sell side coverage. Using the 17% topline guide for '22 and stable margins $MTRN.IT appears to be trading at around 17x EBITDA and 20x EBIT. Multiples have compressed from Nov/21 peaks of 23x/28x EBITDA/EBIT via a -29% decline in shares from Nov highs

24/Conclusion
Overall, the above is a quick and dirty idea generation vetting process I go through on new research candidates. #Maytronics graded out well and will be going on @EquiCompound's list to potentially research in future projects. $MTRN.IT $POOL