Listened to the Pool Corp (#POOL) Investor Day earlier. Been an owner of $POOL since 2014 and still tear up a bit on every call, such a beautiful business, the type you will tell your grandkids about. Here are some notes.
2/#POOL reiterated '22 guidance for 17%-19% revenue growth (9-10% price, 3-4% volume, 5% M&A) and 15-17% EPS growth. Demand still strong with customers remaining booked through '22 and often into '23 with large backlogs. Sees post '22 revenue growth back to the 6-9% LT model.
3/#POOL noted they are a natural population migration beneficiary. 1,000 people/day moving to FL and TX. Often from NE and NW states where pool ownership was not attractive. Down in FL and TX these folks are adding pools and upgrading existing pools which is helping drive demand
4/#POOL continues to benefit from a large, ageing, and growing (1-3%/yr) installed base of ~5.4mln pools. Each is a vessel of consumption requiring recurring maintenance and upgrade/rehab spend as equiptment (i.e pumps) needs replaced and interior/exterior features need upgraded
5/ $POOL superior economies of scale and value add to both sides of a fragmented market (suppliers ~2,200 buyers ~120,000) continue to allow POOL to outperform small, local players and take market share. POOL is now at ~40% US wholesale market share across all US markets.
6/#POOL saw 7-8% price inflation in '21 and sees 9-10% in '22 vs. LT avg of 1-2%/yr. $POOL can easily pass through price in excess of supplier hikes as material costs are often ~25% of project costs, dwarfed 3-5x by labor. Maintenance items are also mandatory to keep a pool open
7/#POOL discussed recent PE acquisitions, providing its first real competitive headwind as the industry has been absent any large peer. Noted PE is buying existing operators, not adding greenfield capacity. $POOL is competing against new owners of the same locations.
8/ $POOL's recent acquisition of Porpoise Pool grants access to the $3bln DIY market via a franchise model of 265 stores in key states (FL/TX) and a strategic chemical packaging DC which improves $POOL chemical sourcing. Creates supply chain synergies for both $POOL and Porpoise
9/ $POOL reiterated it's LT algorithm for 6-9% organic growth augmented by M&A ('15-'19 +1-2%) and 20-40bps of EBIT leverage. Foots to ~11%/yr. EBIT growth. $POOL usually buys 1-2% of shares back and pays a ~1% dividend yield bringing est. LT TSR to ~14-15%/yr at a flat multiple
10/ overall the $POOL investment thesis appears intact. $POOL shares are down -25% off Nov/'21 highs and now trade at ~19x '22 EBITDA (~31x in Nov/'21) and ~25x EPS (~44x in Nov/'21) with multiples back to pre-covid levels and those not seen since '18-'19.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
1/#MaytronicsMTRN.IT
During my $POOL Q1 review I came across a terrific company, #Maytronics, the leading manufacturer of pool cleaning robots. https://t.co/XHiinEMbVR 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
1/Pool Corp $POOL Earnings
$POOL had another impressive, blow out qtr. While shares were up as much as 9% on 4/21 they closed down -1% and were down again today despite solid results and a continued strong outlook. Key issue is '23. This thread reviews $POOL results and key notes
2/Results
Revenue was up +33% (street +20%) on a tough comp (Q1’21 +57%) with $POOL gross profit up +49% (street +25%) and op income up +83% (+32%). Big margin expansion – gross margin +327bps to 31.7% (street 29.7%, +135bps), op income +452bps to 16.7% (street 13.4%, +128bps)
3/Guidance
$POOL 2022 sales growth now seen at the high end of prior 17-19% range (street +18%) Expects at least 10% from pricing (prior 9-10%, YTD 10-12%) 5% via M&A (prior 5%) Gross margin still to be flat to 2022 – 30.5% (street 30.5%) EPS growth seen at 20-25% (prior 15-17%)
1/Floor & Décor Investor Day
$FND's investor day was yesterday. Continue to be impressed by this early-stage category killer. Strong execution and one of the better names in my portfolio.
2/Retail Conversion Rate
Homeowner customers that shop at $FND ultimately purchase over >80% of the time. Professional customers that shop at $FND purchase over >90% of the time. Pretty impressive. Average brick and mortar retail conversion rates are 20%-40% for most retailers
3/Sq/Ft
$FND has more flooring dedicated sq/ft coverage than any other operator. Has 12.6mln sq/ft vs. $HD's ~8.0mln and $LOW's ~6.9mln flooring dept sq/ft (est @ 4k sq/ft store). Almost exceeds both combined and dwarfs all others on a total sq/ft basis and on a box vs. box basis
1/ SiteOne Landscape Supply $SITE Thread
$SITE is a high-quality boring business, very similar to $POOL and other distributors. With shares off -31% from recent highs I wanted to provide a quick walk through of the business. If you like $POOL $WSO $FND etc. you will like $SITE
2/Intro
$SITE is the largest and only national scale distributor of landscaping supplies in the US. Sells irrigation, hardscape, nursery, and other items via a 590-branch network in 45 states and 6 CA provinces. Had ’21 revenue of $3.5bln with $415mln in EBITDA (11.9%/sales).
3/Market Share [1]
$SITE operates in the highly fragmented $23bln wholesale landscape supply market. Has ~15% market share with the balance (~85%) primarily held by small/local players. $SITE is 5x larger than its nearest competitor (Ewing) and multiples of the remaining top 8
1/ Floor & Décor (FND)
Looking forward to the $FND analyst day on Wed 3/16. $FND, is a high-quality business compounding LT over 20%/yr. Shares are off -36% from 11/21 and I’m currently re-underwriting $FND for my portfolio. This thread discusses key items around the $FND model.
2/Overview
$FND is a specialty retailer that operates 160 large (~75k sq/ft) warehouse stores across 33 states selling tile, stone, wood, laminate, vinyl and other flooring products. Generated $3.4bln in ’21 revenue, $485mln in EBITDA (14.1% margin) and has a ~$10bln mkt cap
3/Comp Advantage [1]
$FND primarily competes vs. home improvement centers ( $HD, $LOW, #Menards), specialty flooring ( $TTS), and local independents/mom & pops.
$FND has: (1) larger box at ~75k sq/ft vs. $HD/ $LOW 3k-5k sq/ft flooring dept. and specialty/indep <20k avg. box
$SKX shares have been torpedoed (-22% since mid Feb) along with other international/retail names on the Russia/Ukraine conflict and consumer spending concerns. $SKX just presented at a UBS conference. Below are some quick notes:
2/Exposure
Announced today a suspension of all shipments to Russia, less than 1% of sales are derived from Russia and Ukraine each. Operations in both are distributor businesses with no co. owned stores. $SKX has just 50 distributor stores in each vs. a co. total of 4,306.
3/Consumer Impact
So far, $SKX has seen "no evidence of issues or an impact" on total consumer demand. Noted consumers remain "very healthy", spending remains "incredibly robust", and demand characteristics continue to be "consistent" across markets.