Pool Corporation

Q4 2025 Earnings Call — February 19, 2026

Analyst David Manthe (Baird): Thank you. Good morning, everyone. First question on SG&A. Melanie, you pointed out that the low single-digit growth rate that you were guiding to is enough to trigger the incentive comp reset. So I assume that that, whatever that is, 25 or 30 basis points of a drag is factored into your earnings guidance. The question is, if revenue were to come in flat, let's say, unexpectedly, would that imply that you would not trigger the incentive comp reset? I'm trying to get an idea. Is this a sliding scale? Is it binary? How should we think about how that layers in or doesn't layer in, given various ranges of revenues?

Management: It's definitely a sliding scale. So, you know, within kind of that range of low single digits, we would expect different points of recovery. You know, with flat sales, the way that our incentive programs are structured, we would not see any change to the overall incentive compensation from 25 to 26. And good morning, Dave. And what I would say is that, additionally, if sales, if the market lags, even more, and sales do come in flat, then frankly, from a cost perspective, we would do other things to be in line with the market.

Analyst David Manthe (Baird): Yeah. Thanks, Pete. And then on gross margin, you're guiding that flat. As you're going through scenario planning and setting your budgets, what are some factors that you think about where that could come in above or below flat with 2025, some of the key things that you're considering?

Management: That's a good question. It's a broad topic, as you know. So, when I think about, you know, the drivers of gross margin, certainly customer mix and product mix are part of that. Our work in pricing optimization, which continues to improve factors into that, I was particularly encouraged with the fourth quarter gross margin expansion. I think that was driven by a couple of things. It was driven by a great effort by our supply chain teams. I think it was partially driven by the pricing work that the field is doing. I look at a product mix. Now, on one hand, I would say if renovation and remodel, which continues to outpace new pool construction, frankly, if that continues on the same path that it's on, that will create some lift for us from a product mix perspective. And then I look at the proprietary or exclusive brands that we have been building over the years and our continued work in those areas as I would say tailwinds that would help drive the number. The other side of that is that in a market like we are in, there's always competitive pressures, which, again, I don't really get too concerned about because we have them.

I don't expect the competitive pressures to be, frankly, any different in 2026 as they were in 2025. And as you can see by the numbers, you know, I think the business did a very good job of more than offsetting that. So, yes, they're there, but does it really drive our behavior? No. I mean, we did see some deflation on chemicals, but again, in my comment I mentioned, You know, that's why we're kind of focused on the chemical side, that we have some products that are exclusive and proprietary, you know, where we don't see that type of headwind that we are also leaning into. So, you know, overall, when I look at gross margin, you know, I think the team did a very good job in 25, and I also think we have the same levers plus more to pull in 2026, which will help us out in that area.

Analyst Ryan Merkel (William Blair): Hey, everyone. Thanks for all the thoughts on 26. I also wanted to ask on SG&A, when I plug in some of the parameters that you gave, I'm coming up with like one and a half percent SG&A growth for 26. Just given some of the things you talked about with the employer rewards and new sales centers, is that, am I in the right ballpark there?

Management: So, I would say if you're thinking about, you know, sales growth and expense growth and trying to match those, we would expect that the expense growth would come in, you know, slightly less than the sales growth to give us, you know, a similar operating income margin, maybe slight leverage for next year. So, we're going to, you know, be looking to offset some of that incentive comp recovery overall by looking at utilizing the capacity that we have put into the market. So the term that you may hear for 2026 will be capacity absorption. As we've talked about the investments that we've made in technology and the investments that we've made in building out our footprint on the greenfield side, we feel very well positioned with what we've done to date.

Management: Hey, Ryan, good morning. I'll give you a couple of thoughts in this area. So I think we are particularly focused on the SG&A of the business because I think in the last couple of years, rightfully so, we invested in order to make sure that we maintained our market leadership position in terms of capabilities, customer experience. At the same time, we also have opportunities from, as Melanie mentioned now, from a capacity absorption perspective. We made some investments. We're starting to see positive traction on those investments, and I believe that the new facilities, as they continue to mature with a great degree of focus from the management team, that our operating leverage on those facilities, you know, will continue to improve. I mean, if you look at our operating margins across the fleet, if you will, we have, you know, most of our facilities, frankly, are in fantastic shape. They're doing well. We added new, which mixes us down, but it's the same formula that propelled, you know, the fleet to a high average is now being applied to the 50-some-odd new facilities that we've added over the years.

And a focus on our lower performing locations, which you've been covering us for a long time, implies our focus list. They're getting a particularly high level of attention right now. So when I look at SG&A and I say, well, you know, will we be in line with the market from the top line perspective if the market improves, then SG&A will be easier to deal with from a percentage basis. If the market doesn't improve, then we're going to have to do other things to make sure that we stay in line. But we're okay with that because we believe that the investments that we've made over the last couple of years don't need to be repeated, and we should start to harvest the benefit.

Analyst Ryan Merkel (William Blair): Got it. Okay. That's very helpful. My second question is just on 1Q. Are you assuming the first quarter is also up low single digits like the full year? Just want to see if there's any cadence things we should be thinking of. And there is a bit of weather in 1Q. I'm not sure if that had an impact or not. And then could you also comment on chemical prices? Will those be down in the first quarter?

Management: So I'll take the first one on how 1Q is performing. I think the, So as you know, 1Q is our least significant quarter. That's not to diminish the contribution to the business. I mean, when I look at first quarter, we're basically halfway through it. But March is bigger than January, obviously. So at this point, I would tell you that I am encouraged with what we've seen. Too soon for me to tell you that, hey, we're going to blow the doors off of first quarter. But what I will say is that if we have a normal weather pattern for March and the rest of this month, then I think our expectations for the first quarter will be in line. And then your second question about chemicals, a little too soon to tell, because remember, first quarter, this is when there's some noise in the system with chemical pricing. I can tell you I'm not particularly concerned about deflation at this point on chemicals. I think things are fairly steady. So I'm not at this point spending a lot of time thinking that chem prices are going to get worse. But what we are focused on is getting customers introduced to and using the proprietary chemicals where we have a differentiated value proposition, which makes us less susceptible to swings in the market on anything but pure commodities.

Analyst David McGregor (Longbow Research): Yeah, good morning, and thanks for taking my questions. I guess just a question on store ops, and, you know, what's the opportunity? You made passing reference a moment ago to the focus list, but, you know, just what is the opportunity to improve the profitability at the bottom performing quintile stores, and what are some of the actions that you're taking there? Maybe you could talk about that, and I guess related to that, just given the near-term market outlook, does it make sense to begin consolidating some of these locations and just achieve better four-wall economics?

Management: Yeah, I'll take that, and then Melanie can chime in. So, you know, part of our work at the focus list level, which is our bottom performing branches – And this is nothing new for PoolCorp, but the branches that fall into the focus list, which I would argue what is a focus list branch for us would be considered by most others to be a very well-performing branch because our standard is pretty high on what we consider a focus branch. I mean, the levers that you have there are a couple. One, you know, obviously the biggest lever that you have is sales growth. Are we growing sales? Are we becoming more important, more relevant to the customers? And that's done with creating a best-in-class customer experience. And frankly, customer engagement. So from a lever perspective, the biggest one we have for the focus branches is just that. Then there's the operational execution side of that. So the teams are focused on exactly what we do, how we do it, how efficient we are in doing that, and making sure that we're utilizing all of the competitive advantages that we have to give us the most efficient cost to serve those customers.

Your last comment as it relates to, you know, is there some opportunity for consolidation? And the answer is maybe. So when we look at each individual market, we look at our footprint, and there are a couple markets where I would say, you know, as we have expanded our capabilities in some areas, we may have opportunities to consolidate some of those if we don't see the market, an individual particular market, continuing to grow and expand, those would be ones where we look at, all right, how else can we most efficiently serve the market without letting down our customers and ceding any share? So, I mean, you've known us for a while, so this is nothing new. This is what we do. We've been focused the last couple of years on continuing to build out the network and making sure we were where the pools were going to be built and where our customers were needed us to be. We've added capabilities as it relates to technology and supply chain, which allow us to be, frankly, more efficient.

And now we're starting to see the gains from that. To put an opportunity to size it, if you will, I mean, when I look at our focus list branches, I would just say that when I look at the overall operating margin improvement, I think there's plenty of opportunity to work there to achieve our goals, really kind of independent of the market improving. So when I look at our operating margin, you know, improvement and expansion, yes, would the industry growing make that easier? Yes, but it still wouldn't mean that we wouldn't do what we're doing on focus list branches to make them more profitable and contribute more to the business.

Analyst David McGregor (Longbow Research): Got it. Thank you for that detailed answer. My second question really just with respect to kind of the longer-term growth algorithm, and, you know, you've included within that growth of 2% to 3% above the market, mostly through store openings and private label, I guess a little bit of acquisitions. I guess how are you thinking about your ability to achieve that above-market growth in 2026?

Management: Yeah, I think part of it is there is still plenty of opportunity when I look at our market share across the fleets. You know, we have plenty of markets that are still below the median. So I think, you know, just improving our customer engagement, frankly, our customer experience and our operational efficiency helps. I also think that, you know, there is an opportunity from a demand creation perspective because, you know, pragmatically when I look at the market overall and the products that are still being sold into the market, there is still a more than significant opportunity to expand the TAM, if you will, by selling the more technologically advanced products, which are ultimately very, very good for the homeowner. And I think our job is to help expand the adoption of those.

So you're going to see at the Investor Day presentation something we call the ProZone, which is designed to do just that. to teach the builders and the service professionals when they come into the branch to be able to see the full range of products, to be able to see the benefits from the more innovative and technologically advanced products that have more full feature automation and are frankly more efficient for the homeowner. So rather than take a more passive approach on that, we're going to take a much more active approach on that in the showrooms to make sure that our customers understand all of those new products and what benefits they provide either them as a servicer or for hopefully or so that they can explain to the homeowner, I should say.

Analyst Susan McCleary (Goldman Sachs): Thank you. Good morning, everyone. My first question is on the gross margin. You're thinking about the path for that as we look over the year. Can you talk about what that inventory bill that you made in the fourth quarter will mean for profitability and how we should be thinking about that relative to the guide for the pricing to be up one to two points this year?

Management: Yep. So one thing, so we do expect that we will see some continued pricing benefits from the investments that we've made in inventory. We would expect that certainly we would see that in first quarter.

As a reminder, when you look back from a comparable standpoint for 2025, we did have that mid-season price increase in 2025.

So starting kind of May forward, you know, there were some benefits from that mid-season price increase, which at this point in time, you know, we wouldn't anticipate would occur again in 2026. So I would say that we would see, you know, slightly better margins in first quarter, The remaining of the quarters would be, you know, relatively comparable, you know, with fourth quarter because it's so, it's a smaller portion of the year. We may not see as many benefits. The only thing that we've seen to date is we have seen a second wave of price increases on certain products for salt cells, but when we look at it kind of consolidated-wise, we don't think that will have a significant impact on margins overall.

Management: Hey, Susan, good morning. This is Pete. Let me add just a little bit to that, if I could. I think the team did a very good job of exercising good financial judgment with the investment in inventory. And I think they were very surgical about it. So, you know, when we allocate capital to something, one of the things that is a hallmark of the company is that we have been very judicious allocators of capital, whether that is investment in long term or whether that is investment in working capital. So I think the team did a very good job and was very surgical about making investments in areas that will help us through the 2026 season. Now, obviously, given the amount of inventory that we have and what our cogs are on a full-year basis, you know, that, you know, we will burn through most of that benefit, you know, by mid-season, and then, you know, of course, we will be reordering. But I think we feel very good about realizing benefits, but they'll be more weighted to the beginning of the year than the end of the year, subject to what happens in the industry from a pricing perspective.

Analyst Susan McCleary (Goldman Sachs): Yes. Okay. Thank you for that. And then I want to go back to thinking about the growth for the business over time. Can you talk about how you're thinking of organic growth given the investments that you've made in the last several years relative to the inorganic growth opportunity that's out there? Are we really sort of shifting now through this period where it's going to be driven by your initiative, a lot of these efforts that you've implemented in the business, whereas the inorganic piece will just inherently become just a smaller and smaller part of that algorithm? Any thoughts around that and what that would mean for capital allocation?

Management: Sure. You know, I would tell you that from an organic growth perspective and what gives us confidence in the long-term growth algorithm for the business is that We believe that the product that the industry that we serve and the product that we primarily, you know, sell either, you know, through new pool construction or remodel and renovation is still highly desirable. And, you know, we've been talking about, you know, we're kind of bumping along the bottom. There was a slight drop in new pool construction in 2025. I can't tell you that I think that that was driven by any wild change in consumer sentiment. I think it's more a function of certain geographies and the housing market per se. So when I look at our opportunity to grow and I look at our market share and I look at that on a market by market basis, I would tell you that we have opportunity to continue to grow even if the market continues to stay towards the bottom. I would also tell you that there's a couple of things that are going to, we're going to start to see benefit from as it relates to equipment.

So, you know, when the industry switched to from single speed motors to variable speed motors they inherently lasted longer but now we're starting to get close to the period where from when we started selling a lot of single speed motors or single speed pumps to variable speed pumps that they will start coming into their replacement cycle, number one. Number two, I still believe that there is a significant opportunity to modernize the pad. You know, if I looked across the – you know, we talk to many, many customers. We talk about what they're seeing in the backyards when they go into these backyards and they look. You know, if what we were seeing over and over again was, you know, ultra-modern pads, fully adopted, everything that is available to the consumer, I would say, okay, so now we're more in a replacement cycle. But today, what I would say is there is still an outsized opportunity to modernize the pads with the new equipment.

Now, part of this demand creation is incumbent upon us, I believe, in order to teach the servicers and get word out, so to speak, through marketing programs and demand creation in conjunction with our OEMs that says, hey, you can improve your customer experience in the backyard if you adopt and use these new products versus just replacing what's there. So I think there is still an opportunity. The install base is going to continue to grow. I think that, you know, there is pent-up demand on renovation and remodeling. We're starting to see some of that realized as evidenced by the building material sales increasing and the fact that we have, I believe we've taken share in the new construction area for those as well. And then lastly, your question on inorganic growth. I think that there are still opportunities for inorganic growth out there. I think the team is very focused in that area as well as just one of our long-term growth levers. And I don't know that anybody in the industry is any better positioned to do that than PoolCorp.

Analyst Scott Schneeberger (Oppenheimer): Hi, guys. It's Daniel for Scott. Thank you for taking our question. Could you please discuss the key factors that would put you at the low end versus the high end of the EPS guidance range? Thank you.

Management: Yeah, the range is primarily going to vary depending upon overall market conditions and the resulting sales growth from that standpoint.

Analyst Daniel (Oppenheimer): Got it. And as far as the assumptions on new pool to be flat year-on-year as well as renovation and remodel slightly up, could you speak to what you're hearing from your customers regarding backlog and how confident you are in those projections? Thank you.

Management: Yeah, I'll take that. We've just come out of our show season, so January, there's a lot of shows, so we spend a lot of time with dealers in January and, frankly, early February, even as recent as this week. So I will tell you that the level of optimism from the customers right now is pretty good. I don't know that – I've talked to many customers that say, we're going to build just as many pools as we built last year, and the phones are ringing, so we feel comfortable in that assessment. Is that as many pools as they built during the peak? Absolutely not. But I would tell you that the general sentiment on new pool construction is that, you know, based on the dealers we have spoken to, which is a sample size of the total – is actually pretty good. So it's not a doom and gloom. The phone's not ringing. It's basically, yeah, I think we'll build at least as many pools as we built last year with many dealers saying that, hey, you know what, we're actually optimistic.

But saying that they're optimistic in February and actually having those contracts come to realization is during the season are two different things, but I will tell you it feels much better to me that the dealers are saying, hey, I'm going to build at least as many pools as I built last year, and there's many of them that are optimistic. And then, like every sample, right, you have opposite ends of the spectrum. You have people at the high end that they would tell you, hey, business is great. You know, I'm turning customers away. I'm going to build as many pools as I can this year, and I'm taking orders into next year. And at the low end, you have people that would be struggling. But by and large, I would say the industry confidence level is more encouraging than not.

Analyst Trey Grooms (Stevens): Yeah. Hi, Peter and Melanie. This is Ethan on for Trey. Thanks for taking the question. I wanted to dive deeper, maybe in digging into more of a market-by-market look. So directionally, what are you seeing on the new pool or broader discretionary side? From a market-by-market standpoint, some of these more challenged markets on the new residential construction side, like Florida and Texas, may be starting to show signs of a potential trend improvement. I know you called out in the prepared remarks, improving trends in Texas in the back half of 2025. Obviously, these are important markets on the new pool side, so any more color on market specifics would be really helpful. Thanks.

Management: Sure. The information coming out of Florida right now is still encouraging. As I mentioned, even with the storm issues that we had in Florida and, you know, we're housing prices and insurance and costs and everything else in Florida. If you do a two-year stack on Florida, in the fourth quarter, they were still up 2%. So, again, very encouraging for me. Builders in Florida, I really think it depends on where you are. So, for instance, if you're in, you know, there's a lot of people moving into South Florida, into Miami. Miami is a, that market is very good. you know, but it runs the spectrum, if you will. But overall, Florida is a cornerstone market for us. I think very soon will be the largest market that we have in terms of the installed base, and it's still a destination for homeowners. So, you know, I'm encouraged with that. Texas is the one that was, I think, surprising for a lot of people. The slowdown that we saw in Texas but it's also a bit bifurcated too, because it didn't, it wasn't universal in, you know, let's call it DFW and Austin, San Antonio and Houston. They all moved kind of at different rates.

We're starting to see, you know, the Dallas market, the Dallas market improved, the Austin market improved. Houston lags a little bit, but the near-term commentary out of Houston is that, you know, that there's some optimism on the new build side. Arizona and California, Arizona was encouraging. And if you remember, when pools really started to die off, Arizona was one of the first ones to drop. They seem to have firmed up. And California is okay. I don't look for a big change in California. In my mind, California is much more of a renovation market than it is going to be a new pool construction market.

Analyst Trey Grooms (Stevens): Got it. That's super helpful, Culler. So thank you for that. And second question, just putting a finer point on an earlier question on the top line cadence. It sounds like 1Q training pretty well, but it's still early. But just wanted to clarify, was hurricane repair activity still a major contributor to the 1Q25, perhaps to a lesser degree than the 4Q, but perhaps still enough to call out? Because if 1Q is training well in spite of this comp dynamic, obviously that would be a positive. And then maybe any thoughts on a first half or second half weighted top line profile relative to, you know, broader new res expectations, which at this point appear to be skewed more towards a modest second half uptick.

Management: Yeah, you're correct in your assumption that fourth quarter was a bigger, was a bigger lift fourth quarter of 24 storm related. They were still working. They were still working into first. So there was still some work that, most of which has been finished. The only exception to that would be the areas where, you know, the houses were completely destroyed and they had to get permitted to build a new house and the pools come last. So, you know, there's still some of that. But by and large, I would say the storm work or anything but complete destruction, you know, is certainly done by now. Most of it was done in the fourth quarter and some lagging. So when I look at, you know, when I look at first quarter, it's not like we had a huge comp to overcome. There are some, but again, that makes our results even more encouraging from a firmness of the market perspective. And then, you know, your comment on second half, first half, second half, it's really, frankly, it's just too early to say. There's so many, you know, there's so many factors in there that can affect the discretionary. So I'm talking about new pool construction and renovation and remodel, but rest assured that the majority of our business is driven from the maintenance and repair, and I think that there is more than ample opportunity, and quite frankly, I think the business performs well in that area, and we've also added capabilities which should allow us to continue to take share.

Analyst Garik Shamoy (Loop Capital): Thanks for taking my question. I'm wondering if you could update us on what you're assuming for new sales center openings in 2026, and just given the more muted demand environment, have your expectations on the ROI on the new sales centers changed at all versus more normalized demand periods?

Management: Yeah. So when I look at the number of locations, I mean, Melanie gave a range of five to eight. You know, I would tell you, I don't know that it'll be more than eight. I mean, there could be a scenario, I guess, where it could be, but it's highly unlikely at this point based on the capacity investments that we have already made and the footprint that we have. I think our focus is more about execution this year and driving growth in the facilities that we have. As you know, we have a very disciplined process that goes with every new facility open. There is a pro forma, there's a budget. That pro forma and budget are carried forward. So the facility that we've opened in the last couple of years, the operating expectations and budgets associated with them were not adjusted. You know, I looked at some of the facilities that we would have opened in 2022 when things were, when there was a lot more new pool construction. You know, if I look at some of those, we had to go back and say, well, maybe our expectation on new pool construction growth was a little bit too aggressive.

But basically anything in the last couple of years, you know, the number, you know, the number is the number. So I think the team is really focused on execution and realizing what the commitments were in the pro formas that were submitted to fund those. And when I look at new ones, so I look at anything that we may do this year, I mean, we, as I mentioned in my comments, I think we've kind of sharpened our expectations on return on investment and making sure that when we go out and do a branch, I mean, we're going to open new branches again in 2026, without a doubt. Are we going to open as many? No, we're not going to open as many. Will there be a lot of attention paid to the ones that we opened, you know, for the last couple of years to make sure that we're realizing benefit on those? Absolutely. So the amount of attention and scrutiny on new locations right now is and should be pretty high.

Q3 2025 Earnings Call — October 23, 2025

Analyst Susan McCleary (Goldman Sachs): Thank you. Good morning, everyone. My first question is diving in a bit on the comments you made around seeing some early signs of stabilization, which is encouraging given what we've seen in housing and the consumer as we think about this summer and into the fall. Can you talk a bit more about what is driving that and how you're thinking about the trends that you're seeing on the ground as we exit this year and maybe even into early 2026?

Executive Pete (Title): Yeah. As I mentioned, the permit data, when you look at that, which again, only represents a portion of the market, is very sporadic. And so it's, there isn't a consistent theme, but when you look at them, you know, from geography to geography. But I guess when we look at them in totality and then combine that with our comments that we're getting from our builder customers and remodel customers, I would tell you that the activity level seems to have firmed up. And we are encouraged, as evidenced by our growth in building material sales in the quarter, which has been a long time since we've seen that. So I would say that overall, the comments tend to be more positive now. I think, you know, it's going to take further interest rate cuts to really drive the entry-level pool buyer to jump in. But I think that overall, the consumer sentiment on new construction and large renovation projects seems to be fairly consistent and more optimistic than it was.

Analyst Susan McCleary (Goldman Sachs): Okay, that's good to hear. And then my second question is on the innovation side. You mentioned that you accelerated some spend in the summer. It sounds like you've got some really good initiatives that are coming through the business. Can you talk about how you're thinking of the investments and the trends that we should expect into the fall and year end, and then what that can mean for your ability to outgrow the market, even if things do stay relatively more challenging for next year or the next, you know, several years?

Executive Pete (Title): Sure. So I'm going to break this down into a couple areas. I'll talk about, you know, technology as it relates to Pool Corp's technology, and then I'll talk about technology related to the market. You know, all of our investments in technology from a Pool Corp perspective are really designed to enhance the customer experience, to give them greater access, greater convenience, and allow them to be more productive. I look at our suite of tools, whether it's the Pool360 service, which allows our service customers to essentially operate their business, invoice, market, schedule, do everything with the tool, which allows them to be more productive. It allows them access to their catalog of products in Pool360, allows them to schedule pickups for products, have them delivered, and frankly, have access to the entire network.

Or whether you're talking about our industry-leading water test technology that we provide for our independent retailers that are selling our proprietary pool chemicals. Again, great product, very good reviews for the homeowners, and we've also extended that into an at-home app, so you can either bring your water to the store for testing, or you can buy – you know, our proprietary Regal and Easy Chlor test strips, take them home, and then use our, again, our proprietary app, test the water, and get the same recipe, if you will, for correcting any water chemistry imbalances. So we look at our standard B2B tool, which is where the preponderance of our traffic is, and said, what can we do in order to enhance the customer experience to make that tool easier to use? And the team has been relentless on that, which, again, provides more convenience, more information, more access for our dealers.

And then the last thing that we have recently started launching is an app that our counter people can use in our branches outside in the yard so that our customers don't even have to come inside. So if they're just getting product that is outside, they'll be met outside with a tablet and they can tap to pay. If they don't have an account, they can tap to pay or swipe a credit card out in the yard, which again gets them back to work. So feel really, really good about the technology suite that we were rolling out for our customers. And I think that allows us to provide more convenience to our customers, a better experience, and allows them to grow their business faster. And those all feed into our marketing tools too, which are consumer facing marketing tools are designed to help our customers grow. So just a plethora of tools available and the adoption rate continues to grow. So very, very pleased with that.

You know, the other side of technology that I mentioned has to do with product technology for the industry. I think our industry needs innovation and new product technology in order to grow. I think customers are craving technology, convenience, and value as it relates to those new products, which will give them reasons to invest in their backyard, in their swimming pool, to make the ownership of a pool, whether you're talking about managing the water chemistry or managing your equipment pad, easier, more convenient, and at a price point that is available for everybody. We're very excited about how technology will continue to impact this business and Pool Corp's role in driving that.

Analyst David McGregor (Longbow Research): Good morning. I wanted to start by just going back to the graphic in your deck where you referenced customer risk or customer mix, I guess. I presume we're talking about larger consolidated contractors and the kind of growing presence in the remodel work, but just thinking about longer-term margin implications here and what are the levers that you have available to offset against that impact?

Executive Pete (Title): I think what it means is that we continue to see consolidation at the customer level. And when you have consolidation at the customer level, they're looking for more tools and more convenience in order to help them be more effective. So for us, I actually think it's a big opportunity because nobody has the technology suite that we have today in order to integrate with them. So our systems are very flexible. It allows us to integrate with them. It allows some of the customers are choosing to use our software to operate their businesses. And some of them are just choosing to integrate with us. So I actually think that it creates a competitive advantage for us on one hand. It actually makes, it makes them easier to deal with because we get more advanced notice, which allows us to be more productive when we're handling their orders. And it also gives them access to information on a self-service basis versus having to call and make inquiries, which again, you know, just drives our cost to serve. So very comfortable with our ability to leverage our technology suite in order to help the larger companies be more efficient and grow their business.

Analyst David McGregor (Longbow Research): That makes sense. Thank you for that. And just to follow up, I want to go back to the 4% growth on equipment and how much of that would have been just kind of parts going into maintenance and repair versus equipment sales in the remodel segment?

Executive Pete (Title): You know, I think most of it right now is, I mean, of course, every new pool gets a set of equipment. A portion of the renovation and remodel, you know, will get new equipment. But the vast majority of the products that we sell are related to one of the critical components on the pool failed and had to be replaced, whether it was a pump or whether it was a heater, filter, lights, the vast majority of our equipment sales, and it's, frankly, it's always been this way, are for the replacement business for failed components.

Analyst David Manthe (Baird): Thank you. Good morning, everyone. The first question on chemicals, I was surprised at the weakness there. I think it's been recently flat to moderate growth. And could you talk about inflation, deflation broken down by chemicals, building materials, equipment? And I'm just wondering, is that chemicals, is that something that happened recently? It seems like a slight change in trend versus what we've been seeing lately.

Executive Pete (Title): Yeah, I'll take that. Dave, I think the way, here's the way I think about chemicals. I don't know that there's been any trend. I think we've mentioned on the last couple of calls that there's been some deflation on trichlor. Now, remember, we break chemicals down into three buckets, right? There's the sanitizer, then there's balancers, and then there's specialty. So the most deflation that we have seen, and again, I wouldn't put it in the category of significant. I would just say that there has been some deflation is really in the sanitizer category. I don't think it should be – I don't look at that in alarm. In fact, in my comments, I looked at our overall chemical business, and I said, you know what, our sales out the door on chemicals – I would consider are fairly normal because you have to remember that it's, you know, our sales of chemicals goes into our service professionals and into our retail stores. So when you're within, you know, a few percent of the total, I don't really look at that as an alarming trend one way or the other, because that could be absorbed in just inventory on people's trucks when they actually bought an inventory in the store.

So overall, I would say, you know, there's been slight pressure in sanitizers, right, and sanitizers in shock. But I would say that the rest of the business balancers and the rest of the specialty products are actually holding up just fine. So nothing really alarming or noteworthy there. The rest of the inflation that you mentioned, building materials, I would say not a tremendous amount of inflation there. I would call that slight. And then on the equipment side, you know, the equipment guys are all out with their pricing for the upcoming season. And I would say that that's fairly consistent to what we have seen over the last couple of years.

Analyst David Manthe (Baird): Okay, thank you. That's helpful. Looking out to next year, I'm not asking for guidance. I'm just thinking about how the model works here. And I think typically you talk about if you're growing normal, kind of six to nine in that growth algorithm, you often have talked about keeping SG&A growth to 60% to 80% of the top-line growth rate. And I know there's also some costs that creep back in when you start reinstating bonuses instead of comp and that sort of thing. So I just want to – just how the model works mathematically when we think about year one of mid-single-digit growth, let's say. Do we see that kind of normal 60% to 80% growth rate and SG&A leverage, or is it slightly higher than that in year one, and then we start to get that leverage as we go forward?

Executive Pete (Title): Yeah, so the model stays intact. We will see some upfront kind of recovery of expenses. So, incentive compensation, as you mentioned, would be the one area, but of course, that would only track as far as our growth track. And then outside of that, what we've talked about from an expense-based standpoint, is we've managed variable expenses. And so when you think about kind of volume increases coming back, you know, we will have some add-backs as it relates to, you know, drivers and warehouse personnel. But that will be, you know, kind of limited from that standpoint because we've maintained all of our professional staffing, our sales center managers, and our BDRs.

So, you know, initially there will be those volume-related expenses as well as the incentive compensation that would come back in with the sales growth. So, Dave, this is Pete. Really nothing new to report in that area. It's the same as we always have done. I guess what is noteworthy, though, is we continue to invest in the business for the long term. So we continue to increase the number of sales centers that we have in the markets that we believe are either at capacity now or poised for additional growth and opportunity. And we also continue to invest in technology because we are convinced that is something that customers really want and value. It is an area that allows us to differentiate PoolCorp and an area that customers have been very happy with the investments that we've made. Again, those investments are, none of those are short-term. Those are all long-term investments that we believe we make. They become foundational and become part of our operating system, become part of the customer's operating system. And, you know, the leverage on those will continue to climb in the out years.

Analyst Ryan Merkle (William Blair): Hey, everyone. Thanks for the question. I want to start with the commodity pricing, you know, down one in the chart. How much is trichlor down year over year? And then are you also seeing deflation in PVC? Just what else is in there?

Executive Pete (Title): Yeah, so we still are not seeing PVC stabilize. So it's getting better when you look at the quarter over quarter rates on the PVC, but it is still within the quarter a decline. And then when you look at trichlor down, you know, the overall impact of the pricing is one, but the chemical pricing is down more than that, since it's just a portion that's about 12% of the sales overall. So, it varies. You know, right now, it's somewhere kind of in the mid to high single digits down from a pricing standpoint of where it was last quarter.

Analyst Ryan Merkle (William Blair): Okay. Yeah, it's pretty interesting to see this persistent chemical deflation. I mean, usually that commodity is kind of up, you know, one to two points pretty consistently every year just because more of a maintenance item. Like, what is different today about trichlor? Why do we continue to see this persistent deflation?

Executive Pete (Title): Yeah, I think, Ryan, that trichlor, as you know, went up dramatically during COVID. It went from, you know, for, you know, when I look at the price of trichlor today compared to what it was pre-COVID, it is significantly higher than it was. It was a crazy high number. It has come down from what I thought was an unsustainable number at the time. But it is still up significantly over what it was during the COVID era. So, again, what's changed? Really nothing has changed from a demand perspective. I think in any given year, you're going to see ebbs and flows in demand that's tied to overall demand, which is weather when the pools open, how hot the weather is, how wet the weather is. But, you know, honestly, when I look at it, it's not a number that I think is moving. What would concern me is if it was moving sharply, you know, one way or the other. I think the movement is muted, and I don't know that it is affecting anybody's long-term trend.

I think that, you know, import regulation can have an impact on that, depending on what the administration decides on that, because some of the chemical is domestically produced. Some of it is sourced from imports. But overall, I don't get too excited about that number because, again, it's not moving sharply. During COVID, when it skyrocketed and, like, a lot of things, it was moving sharply. That was much more of a concern. But I look at the movement today and say, yeah, it's down slightly. You know, in six months, it could be back where it was, too. And I don't know that I could explain, you know, why it would be up 4% or down 4% one way or the other. Overall, though, it's a portion of our chemical mix. And I think trichlor just happens to be the product that everybody pays very close attention to. But when we look at it in total, it's a much smaller part of the total.

Analyst Trade Grooms (Stevens): Hey, good morning. So just from one comment earlier, I want to make sure I have this right. So sales still expected to be kind of flat, and I think, Pete, you said flat to slightly down for the year, but we're still thinking 4Q overall should be up year over year. Is that still the right way to think about it? And then... You know, I guess with the EPS range, you know, you reiterated clearly. But, you know, given where we are, you know, this kind of late stage with the pool season pretty well behind us, I guess what would, you know, maybe get us to the higher end versus the lower end of the guide range here, given the expectation for, you know, sales? And then I think you mentioned – gross margin to be roughly flat year over year for the year. So any color on that would be great.

Executive Pete (Title): Sure. So for sales, fourth quarter, we would expect that to be kind of flat to slightly up. And what we're seeing there is we'll see incremental benefit from a pricing standpoint in fourth quarter. That's really offsetting the weather-related hurricane benefits that we got in fourth quarter of last year. And then from a margin standpoint for fourth quarter, we are also expecting margin there to be up. So we would expect to continue to see, you know, all of the benefits of the things that we've been working on all year long. And, you know, we'll see that it should be, you know, kind of up slightly from where we are in third quarter with some benefits from product mix.

The other thing I would too mention, which is always the case, you know, our fourth quarter, a portion of what happens in the fourth quarter is construction and remodel. And again, that is going to be dictated largely by weather in the seasonal markets is what I'm referring to. So right now, weather up north is still pretty good, pretty warm. And the folks that have contracts to build are still building, which is encouraging. So the longer the weather stays warm, that bodes well for the fourth quarter for us. And in order to get to that, to the higher end of the range, that would really be, you know, weather dependent. So, you know, at this point, thankfully, we don't have any, we don't have any near-term hurricane or weather impacts, significant weather impacts that we're seeing. But, you know, that would, that benefit from last year would, you know, if we saw that similar benefit, that would be where it would fall in the range.

Analyst Scott Schneeberger (Oppenheimer): Thanks very much. Good morning. I guess, Melanie, I'll start with you, but Pete, if you have anything to add, I'd love to hear it. In the third quarter gross margin improvement, it looks like pricing and supply chain were about equal. It's a two-part question. In pricing, could you just delve into a little bit, now that we have the full impact of the tariff increase in the third quarter, a level or two deeper, Melanie, on what you're seeing, how have competitors reacted, how we should think about that going forward? You know, there's some uncertainty, obviously, November 1st as well, but just how we should think about the sustainability of that trickling forward.

And then the second half of the question is, on the supply chain piece, could you just take us into what, how structural is that? How permanent are the fixes? Maybe some anecdotes of the improvements you're conducting there.

Executive Melanie (Title): Okay. Yeah. So, sure. On the pricing front, you know, we are seeing that the, you know, we did have a full quarter of the price increases that went into effect kind of mid-season. And, you know, those are at this point, I would say, fully flush through the cycle. And so when we're looking at the acceptance of that pricing overall within the market, that is through the pricing channel, and we're not seeing any impact on what we're doing versus our competitors doing as it relates to pricing.

And I'll take the second part of the question as it relates to supply chain activity. You know, we have become more and more sophisticated with supply chain over the last couple of years, very happy with the team's effort in that regard. I think we have better technology. They've embraced the AI tools that we have available to us. So I look at the actions that the supply chain team, which has to do with what we buy, when we buy, whom we buy, how we buy, and making sure that we are partnering with our vendors to maximize our opportunities and benefits and say that we are as good in that area, if not better than we've ever been. So I would look for the gains that we see in that area to be sustaining.

Analyst Garrick Chamois (Loop Capital): Oh, hi. Thanks. You spoke to equipment price increases that have been announced for the next season. I'm just curious. So you can speak to the early buy programs and, you know, if your approach for the coming season is taking any different shape than usual.

Executive Pete (Title): Yeah, really nothing new to report there. You know, the vendors have – there was only, I think, one year during the peak of COVID when the vendors modified their traditional early buy programs. So the early buy programs are very, very similar to what they've always been. And we are certainly participating in those in a very strategic way, you know, as we always have. So there's really not much new to report on there.

Analyst Garrick Chamois (Loop Capital): Okay. And then just a follow-up question, just on SG&A and the guide for the year, a little bit of a nitpicky question, but I think, Melanie, you mentioned in your remarks and outlook for 3% SG&A growth this year, I think the last quarter, it was maybe 2% to 3%. I just want to confirm that. Is that different? And if so, is it just related to the expenses that you saw primarily in the third quarter?

Executive Melanie (Title): Yeah, we had the 5% increase for a third quarter, so that increased slightly because we did accelerate some of the technology investments. When we look forward to fourth quarter, you know, we'll expect to see that rate higher than, you know, what we saw earlier in the year. I would say, you know, in the range of a 3% to 4% increase for the fourth quarter.

Analyst Jeff Hammond (KeyBank Capital Markets): Hey, good morning. Just on pricing in the next year, I guess we've gotten the price lists from some of the equipment guys ahead of the early buy. It seems like they're putting kind of normal plus two to three points with tariff. And I'm just wondering, one, what are you hearing from kind of the rest of your other categories of around pricing in the next year and just kind of the level of fatigue as we, you know, it looks like we're seeing kind of another year of above average price increases.

Executive Pete (Title): Yeah, I think as it relates to the rest of the suppliers, I would say, you know, fairly normal cadence. I think the equipment guys are above where most of the rest of our suppliers are. Your comment on that level of fatigue from our customers, that is certainly something that we hear. Quite frankly, all of that is solved with innovation, right? So new products, new innovation make those price increases far more palatable for the customers because it gives them something new to go sell and grow their business and to help address concerns of the homeowners and pool owners.

Analyst Jeff Hammond (KeyBank Capital Markets): Okay, great. And then just on Pool 360, you know, continue to see good adoption there. I'm just wondering if you have a target or the way to think about what you think, you know, that percentage of adoption is, you know, a couple years out and, you know, the what the pushback or feedback is on people that are maybe more reticent to adopt?

Executive Pete (Title): Hey, that's actually a really good question. I would tell you that, you know, when I look at the range, what gives me good comfort on this number as well as many others as I look across the expanse of our quantitative metrics at Pool Corp is the range so whenever I see a very tight range on something I look at it and say okay if the range is very tight it tells me that okay this is really kind of you know what what you know process capability is for the particular thing that we're talking about in the case of pool 360 I can tell you that our range is pretty broad, which again I have people that are well above I mentioned that we were at 17, you know, for the for the quarter which is an all-time high for us. We have people that are nearly double that. In fact, there's a few that are actually above that. So I look at that and say that there is still significant room to improve the adoption of the tool.

What we hear consistently from customers, it's an education thing, right? So first of all, we have to have something that is worth using. And I think we have that. I think the teams work very, very hard to make sure that we have a relevant set of tools that is best in class, that exists primarily for the benefit of the customer. So this is not, hey, how can I operate PoolCorp cheaper? It's about how can we help our customers be more productive and improve the overall customer experience? And I think the teams have worked very hard to do that. So I look at the adoption rate in some areas. It is significantly higher than what it is for the total. So, you know, what's my target? I guess my target is still significantly higher than where we are. Do I think we could be, you know, as a company, 25%, 30%? Yeah, I think we absolutely could do that. Could it be higher? And the answer to that is probably yes. But we don't have quite enough experience with it, and we need to spend more time with our customers to say, okay, what would it take in order to have this be your go-to every time?

Analyst Steve Forbes (Guggenheim): Good morning, Pete. Melanie, thanks for taking my question. Maybe just a follow-up on Jeff's there around Pool 360. Is there a way to help frame to us sort of how a customer spend or wallet share evolves sort of six months, 12 months after initial adoption as we sort of build support right around that achievement of target that you just laid out?

Executive Pete (Title): Yep. I think the way I think about it is this. Customers that have a very strong digital connection with their supplier tend to be we tend to grow faster with those companies. In particular, when you look at our digital tools related to water test, obviously the water test was developed to support our private label chemicals, whether that's our regal or easy core brand. So every dealer that that uses the software every homeowner that buys the test strips and tests their water using either the test strips or the in-store experience, they're going to get a recipe, if you will, or a prescription of chemicals to add to their water, which are all private label products.

So the more, the faster we drive adoption in that area, the faster we'll be able to grow our chemical business. And it becomes less about, well, I could buy, you know, this bottle of algaecide for, you know, a dollar cheaper from someplace else, it becomes, well, wait a minute, this is part of the recipe and the program that I'm using to manage my pool water that produces these great, you know, results and crystal clear. So, you know, whether it's that or whether it's the service tech that is using, you know, Pool 360 service, because every time that person needs something, he's drawing the quote from his Pool 360, his or her Pool 360 account rather than shopping around. So we see much greater stickiness for customers that use that. And frankly, every time we integrate with our customer software, again, that drives stickiness. So we love the potential of growing the business through closer technological connections with our customers.

And as those connections grow, we believe our sales will grow faster than the average, if you will.