Pool Corporation

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with the accompanying interim Consolidated Financial Statements and notes, the Consolidated Financial Statements and accompanying notes in our 2025 Annual Report on Form 10-K and Management’s Discussion and Analysis in our 2025 Annual Report on Form 10-K.

Forward-Looking Statements

This report contains forward-looking information that involves risks and uncertainties. Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of earnings and other financial performance measures, statements of management’s expectations regarding our strategic, operational and capital allocation plans and objectives, management’s views on economic, industry, competitive, technological and regulatory conditions and other forecasts of trends and other matters. Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to publicly update or revise such statements to reflect new circumstances or unanticipated events as they occur. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as “anticipate,” “estimate,” “expect,” “intend,” “believe,” “will,” “outlook,” “project,” “may,” “can,” “plan,” “target,” “potential,” “should” and other words and expressions of similar meaning.

No assurance can be given that the expected results in any forward-looking statement will be achieved, and actual results may differ materially due to one or more factors, including the sensitivity of our business to weather conditions; changes in economic conditions, consumer discretionary spending, the housing market, inflation or interest rates; our ability to maintain favorable relationships with suppliers and manufacturers; competition from other leisure product alternatives or mass merchants; our ability to continue to execute our growth strategies; changes in the regulatory environment; new or additional taxes, duties or tariffs; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in our 2025 Annual Report on Form 10-K, as updated by our subsequent filings with the U.S. Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

OVERVIEW

Financial Results

First quarter ended March 31, 2026 compared to the first quarter ended March 31, 2025

Net sales increased 6% to $1.1 billion in the first quarter of 2026. Our growth during the quarter was driven by solid demand for maintenance products, strong equipment sales and some continued improvement in discretionary categories, including building materials. Year-over-year sales growth benefited from price increases enacted last year and a combined contribution of approximately 1% from a higher concentration of customer early buys and favorable currency exchange rates.

Gross profit increased $17.5 million. Gross margin decreased 20 basis points to 29.0% from 29.2% in the same period of 2025, driven by product mix with a higher proportion of equipment sales in the first quarter of 2026. Additionally, consistent with normal seasonal patterns in the first quarter, gross margin in the first quarter of 2026 was impacted by a higher proportion of customer early buy purchases, which typically yield lower margins relative to our overall sales mix. Benefits from our ongoing pricing and supply chain optimization initiatives helped offset this activity.

Selling and administrative expenses (operating expenses) increased 5% to $247.3 million compared to $234.8 million in the same period in 2025, reflecting increased facility costs and wages for greenfield locations opened after the first quarter of last year, technology spend and inflationary cost increases. We expect that our year-over-year expense growth rate will moderate as we focus on operational efficiencies and lap prior year business investments.

Operating income increased 7% to $82.6 million compared to $77.5 million in the same period last year, and operating margin expanded 10 basis points to 7.3%.

Net income was $53.2 million, reflecting higher interest expense from borrowings to fund increased share repurchases and a smaller tax benefit from ASU 2016-09 (discussed below), compared to $53.5 million in the first quarter of 2025.

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Earnings per diluted share increased 3% to $1.45 compared to $1.42 in the same period of 2025. We recorded a $0.8 million, or $0.02 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in 2026 compared to a $3.8 million, or $0.10 per diluted share, tax benefit in 2025. Adjusting for the impact from ASU 2016-09 in both periods, earnings per diluted share increased 8% to $1.43 compared to $1.32 in 2025. See “Results of Operations” below for definitions of our non-GAAP measures and reconciliations of our non-GAAP measures to GAAP measures.

References to product line and product category data throughout this report generally reflect data related to the North American swimming pool market, as this data is more readily available for analysis and represents the largest component of our operations.

In this Form 10-Q and other of our public disclosures, we estimate the impact that favorable or unfavorable weather had on our operating results. In connection with these estimates, we make several assumptions and rely on various third-party sources. It is possible that others assessing the same data could reach conclusions that differ from ours.

Financial Position and Liquidity

As of March 31, 2026, total net receivables, including pledged receivables, increased 13% compared to March 31, 2025, primarily due to higher sales in March 2026. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was 26.9 days at March 31, 2026 and 25.9 days at March 31, 2025. Our allowance for doubtful accounts balance was $8.2 million at March 31, 2026 and $8.5 million at March 31, 2025.

Our inventory balance was $1.7 billion at March 31, 2026, an increase of $200.1 million, or 14%, from March 31, 2025, reflecting higher purchases to support service levels and a broader product range to better serve our customers ahead of the swimming pool season. Our inventory balance also reflects inflationary increases and the addition of inventory from new and acquired sales centers over the past twelve months. Our inventory reserve was $25.0 million at March 31, 2026 and $27.1 million at March 31, 2025. Our inventory turns, as calculated on a trailing four quarters basis, was 2.6 times at March 31, 2026 and 2.8 times at March 31, 2025.

Total debt outstanding increased $222.6 million to $1.2 billion at March 31, 2026, which helped to fund open market share repurchases of $349.0 million over the past twelve months.

For additional information, see “Liquidity and Capital Resources” below.

Current Trends and Outlook

For a detailed discussion of trends impacting us through 2025, see the “Current Trends and Outlook” section of Management’s Discussion and Analysis included in Part II, Item 7 of our 2025 Annual Report on Form 10-K.

We expect sales for the full year of 2026 to increase by a low single-digit percentage compared to 2025.

We project gross margin for the full year of 2026 to be similar to our 2025 gross margin of 29.7%. We expect our gross margin to benefit from effective supply chain management, advantageous pricing strategies and increased private label sales. Our actual gross margin will depend on changes in product and customer mix and on amounts and timing of sales and inflationary price increases.

We expect to leverage our existing infrastructure and strategically manage discretionary spending while continuing to invest in our sales center network and consumer-facing technology initiatives. We project that our operating expenses for 2026 will increase around 3% compared to 2025.

In 2026, we expect our effective tax rate will approximate 25.0% without the impact of ASU 2016-09. Due to ASU 2016-09, we expect our effective tax rate will fluctuate from quarter to quarter, particularly in periods when employees elect to exercise their vested stock options or when restrictions on share-based awards lapse. We recorded a $0.8 million, or $0.02 per diluted share, tax benefit from ASU 2016-09 for the three months ended March 31, 2026.

We project 2026 diluted EPS in the range of $10.87 to $11.17, including the impact of year-to-date tax benefits of $0.02. We may recognize additional tax benefits related to stock option exercises in 2026 from grants that expire in future years. We have not included any expected tax benefits in our full year guidance beyond what we have recognized as of March 31, 2026.

During 2026, we expect to continue to use cash for the payment of cash dividends as and when declared by our Board of Directors (Board) and to fund opportunistic share repurchases at our discretion.

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The forward-looking statements in the foregoing section and elsewhere in this report are based on current market conditions and our current business plans, speak only as of the filing date of this report, are based on several assumptions and are subject to significant risks and uncertainties, including the risks detailed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 within the “Forward-Looking Statements” section.

RESULTS OF OPERATIONS

As of March 31, 2026, we conducted operations through 455 sales centers in North America, Europe and Australia. For the three months ended March 31, 2026, approximately 95% of our net sales were from our operations in North America.

The following table presents information derived from the Consolidated Statements of Income expressed as a percentage of net sales:

Note: Due to rounding, percentages presented in the table above may not add to Operating income or Income before income taxes and equity in earnings.

We have included the results of operations from acquisitions in 2025 in our consolidated results since the acquisition dates.

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Base Business

When calculating our base business results, we exclude for a period of 15 months sales centers that are acquired, opened in new markets or closed. We also exclude consolidated sales centers when we do not expect to maintain the majority of the existing business and existing sales centers that are consolidated with acquired sales centers.

We generally allocate corporate overhead expenses to excluded sales centers on the basis of their net sales as a percentage of total net sales. After 15 months, we include acquired, consolidated and new market sales centers in the base business calculation including the comparative prior year period.

We have not provided separate base business income statements within this Form 10-Q as our base business results for the three months ended March 31, 2026 closely approximated consolidated results. Excluded sales centers contributed less than 1% to the change in our reported net sales.

The table below summarizes the changes in our sales center count during the first three months of 2026:

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Net Sales

Net sales of $1.1 billion in the first quarter of 2026 increased 6% compared to the first quarter of 2025. This growth was driven by solid demand for maintenance products and increased demand for our discretionary products.

The following factors impacted our sales growth during the quarter and are listed in order of estimated magnitude:

In the first quarter of 2026, sales of equipment for maintenance, renovation and new construction activities, including swimming pool heaters, pumps, lights, filters and automation devices, increased 7% versus the same period last year, and collectively represented approximately 34% of net sales for the period. Sales of building materials, which are primarily used in new pool construction and remodeling, increased 5% compared to the same period in 2025 and represented approximately 13% of net sales in the first quarter of 2026.

Gross Profit

Gross profit increased 6% in the first quarter of 2026 compared to the first quarter of 2025. Gross margin decreased 20 basis points to 29.0% from 29.2% in the first quarter of 2025, primarily due to changes in product mix from a higher proportion of equipment sales in the first quarter of 2026. Additionally, consistent with normal seasonal patterns in the first quarter, our gross margin in the first quarter of 2026 was impacted by a higher proportion of customer early buy purchases, which typically yield lower margins relative to our overall sales mix. Benefits from our ongoing pricing and supply chain optimization initiatives helped offset this activity.

Operating Expenses

Selling and administrative expenses in the first quarter of 2026 increased 5% compared to the first quarter of 2025, reflecting increased facility costs and wages for greenfield locations opened after the first quarter of last year, technology spend and inflationary cost increases.

Interest and Other Non-Operating Expenses, Net

Interest and other non-operating expenses, net for the first quarter of 2026 increased $1.2 million compared to the first quarter of 2025, primarily due to an increase in average outstanding debt between periods. Our weighted average effective interest rate decreased to 4.2% in the first quarter of 2026 compared to 4.5% in the first quarter of 2025 on average outstanding debt of $1.2 billion and $962.4 million for the respective periods.

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Income Taxes

Our effective income tax rate was 24.2% for the three months ended March 31, 2026 compared to 19.4% for the three months ended March 31, 2025. We recorded a $0.8 million tax benefit from ASU 2016-09 in the quarter ended March 31, 2026 compared to a tax benefit of $3.8 million in the same period last year. Without the benefit from ASU 2016-09 in both periods, our effective tax rate was 25.3% in the first quarter of 2026 and 25.2% in the first quarter of 2025.

Net Income and Earnings Per Share

Net income decreased to $53.2 million in the first quarter of 2026 compared to $53.5 million in the first quarter of 2025. Earnings per diluted share increased 2% to $1.45 in the first quarter of 2026 compared to $1.42 in the same period of 2025. Adjusting for the impact from ASU 2016-09 in both periods, earnings per diluted share increased 8% to $1.43 compared to $1.32 in the first quarter of 2025.

See the reconciliation of GAAP to non-GAAP measures below.

Reconciliation of Non-GAAP Financial Measures

The non-GAAP measure described below should be considered in the context of all of our other disclosures in this Form 10-Q.

Adjusted Diluted EPS

We have included in this report adjusted diluted EPS, a non-GAAP financial measure, as a supplemental disclosure, because we believe this measure is useful to management, investors and others in assessing our period-to-period operating performance.

Adjusted diluted EPS is a key measure used by management to demonstrate the impact of tax benefits from ASU 2016-09 on our diluted EPS and to provide investors and others with additional information about our potential future operating performance to supplement GAAP measures.

We believe this measure should be considered in addition to, not as a substitute for, diluted EPS presented in accordance with GAAP, and in the context of our other disclosures in this Form 10-Q. Other companies may calculate this non-GAAP financial measure differently than we do, which may limit its usefulness as a comparative measure.

The table below presents a reconciliation of diluted EPS to adjusted diluted EPS.

Seasonality and Quarterly Fluctuations

Our business is seasonal. In general, sales and operating income are highest during the second and third quarters, which represent the peak months of both swimming pool use and installation and irrigation and landscape installations and maintenance. Sales are lower during the first and fourth quarters. In 2025, we generated approximately 61% of our net sales and 78% of our operating income in the second and third quarters of the year.

We typically experience a build-up of product inventories and accounts payable during the winter months in anticipation of the peak selling season. Excluding borrowings to finance acquisitions, dividend payments and share repurchases, our peak borrowing usually occurs during the second quarter, primarily because extended payment terms offered by certain of our suppliers are typically payable in April, May and June, while our peak accounts receivable collections typically occur in June, July and August.

The following table presents certain unaudited quarterly income statement and balance sheet data for the most recent eight quarters to illustrate seasonal fluctuations in these amounts. We believe this information reflects all normal and recurring adjustments considered necessary for a fair presentation of this data. The results of any one or more quarters are not necessarily a good indication of results for an entire fiscal year or of continuing future trends for a variety of reasons, including the seasonal nature of our business and the impact of new and acquired sales centers.

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