POOL - Earnings call 3 2023 | Pool Corporation

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Operator

Good day, and welcome to the Pool Corporation Third Quarter 2023 Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Melanie Hart, Vice President and Chief Financial Officer. Please go ahead.

Melanie M. Hart

Thank you, and welcome, everyone, to our third quarter 2023 earnings conference call.

responses outlook today periods. for and statements, include comments management's including XXXX discussion, to may questions forward-looking Our and future results from materially may today. Actual those discussed differ results and in discussed XX-K. could Information results our variables the from projected factors cause regarding actual to differ are that

Investor comments. financial and we addition, the measures website in press release our is to references and our reconciliation in financial measures to included section. In description non-GAAP of posted corporate make in may A Relations our non-GAAP our

We will with call comments from and CEO. Peter President begin today's Arvan, Pete? our

Peter Arvan

Thank the you, Melanie, and good morning to everyone call. on

third Our in as expected. quarter came results largely

been swimming As in. stand-alone XXXX results particularly to down, solid pool the have we basis, consider dynamic our operating season winds the when a on considering be we conditions

typical quarter a weather to the carried allowing us and with our on industry environment third overall, on evaluate basis. conditions performance in weather-neutral summer mostly The

$X.X to exceeded one a XXXX Our is X% billion quarter quarter third XXXX selling compared decline million, less by sales sales or third $XX X%. with and day, of XXXX but

quarter, sales third moderate first saw the of and declines to improvement and sequential declines in XXXX. continued in second the the we quarter expected, XX% versus As XX% showing

with during the Florida compared across to view the weather consistent. finishing for quarter Texas in quarter, year-round X%, X% Arizona the down year, neutral down XX% In and major markets, our the sales the of quarter trends markets with third conditions California our Starting XX%. relatively were sales down last declined third

saw X%, quarter versus XXXX. that California was the was period, business and year in up were seasonal same for This XX% the of base Florida business declined difficult declined and up Year-round same were XX%, our markets of base simply from seasonal base Arizona year-round year, of X% against up the XX%, second sequential while highlights was in improvement Texas the in the last business Again, our markets. up comparison, growth slight this business XX%, decline last XX% in third we quarter, context, the XX%, respectively, we XX% a markets in quarter base comps For year. and up X% sales XXXX.

product mostly in by Chemical increased increased X% on volume driven sales to our pricing quarter, relatively came flat third as the results. category chemical Moving collective offering. for in

an strong Our proposition us and products proprietary growth. technology to gives unmatched our contributed footprint, enhanced tools leading and share value

demand category suggest in pool offering MPT and material construction and Building new material category. for that includes were to and stable both sales renovation down quarter. This new outperform trend necessary and remodel is continues outperforming construction renovation this the building the The to product us projects. X% pool quarter declined industry in for the sales our footprint XX%. Equipment and products enables remodel and

for solid can renovation you demand and see, construction As demand pool implies despite repair maintenance and and the new softer this for remodel.

from the product were independent saw Looking and and the this sales quarter, of remained for an down we XX% commercial with markets, decline quarters quarter, decline our X% the the improvement in third in Sales to at end XX%. retail strong pool first up year. customers third XX% demand second

of are in for growth X% sales for their quarter. Penny X% franchisees notable local sales of collectively decline and solid a in distribution sales showed a with currency, improvement our generated and in products, quarters third line Europe's XXXX. Pinch decline what from first items discretionary the the XX% the franchisees X% of The A across seeing second reported business. quarter weaker sales but maintenance we

more are favorable by to months, this XX challenging encouraged we has for been XX Europe the trend. past and

declined X% during residential. projects quarters, remained sales prior with activities For for stronger commercial than the Horizon, sales Consistent quarter.

our with ended guidance of we where XX.X%. long-term will full Consistent believe gross our thinking, year approximately past will the margins, gross to range. -- an for on be be third at approximate we XX% Moving the margins the quarter

in typical, fourth more is margins the Melanie comments. As will provide her details expect to what gross quarter on in

has continuing acquisitions compared the that during locations, team leading and to XX.X% offset technology Thankfully, job expenses light by managing a year. reduced in we operating expense demand last capacity environment. invest inflationary percentage. in operating season helps our us and headwinds the creation to expenses, while for on softer and during up Even of good that did new to X% ramp team the typically The expenses a quarter, been years, many the leverages focused fixed

capacity while productivity increase also customer view sales than and tool, benefits best-in-class, a adding teams. demonstrates to growth local both customers. growth year, and our improving value saw providing and creation effort, period and business experience as multiple X% for the the our customers was tool's volume line this higher the and prior our sales operating to We tool our POOLXXX, for same activity. our X% The over rate contribution the BXB overall our the

Operating represents improvement This, down XX% income last over for of XXXX however, an compared year. third was XXXX. the million, to million $XXX quarter $XX

XX.X% Our expansion fixed third from leverage of a is expansion sustainability reported initiatives. showing XXXX, quarter XXXX cost and XX-basis-point our operating XX-basis-point from the margin of

greenfield and for strong new third further testament locations bent process. we expansion the new XXXX refined During This quarter, a XX the added puts locations. greenfield at season, our to two us

openings, we to year. addition added organic four our new locations through this In acquisitions

count two franchise the our expanded the Penny in bringing network this adding quarter, new Pinch store we year. franchise customers Additionally, XX A for new by to franchise

our but our not We and highlight prioritize the the Melanie continue sheet did like significant business, the future service I work customer inventory. balance items, offerings but would only rightsizing that organic to existing be additional will as expands capacity investment at one most that locations. on growth on the to products which for reach, also work creates the accomplishment team is the commenting of that our of is

flow reduction our reduction footprint, vendor the partners, of inventory September done while last through maintaining $XXX This surpassed availability. acquisitions was record our conjunction tremendous a nearly our operating expanding over year. time This integrating inventory company in million year-to-date. generate a that with of and the in effort team, XX, helped Because this delivered of and us X.Xx team our cash $XXX best-in-class of achievement and million goal

final the move proposition, and outperform into share. team industry experienced have conditions, year, value that to the difficult our we quarter proven an us we the of unmatched As our the in even expand operating most which enables delivers

largest, fully that network proven locations delivers We are sales centers process industry, in with and have ROI. solid new of the a built than a anyone, adding we the integrated faster

own and proprietary over of locations pool and from We tile material four building that compete consolidation, have shipping and best-in-class industry-leading support Perhaps selection centralized know a finish, the vertically our to development most and to integrated customers chemical our products in operations. for a retail we how have importantly, importing performance-based NPT operation operate and showrooms that use franchise XXX and employees broadest centers, technology culture over solutions for X,XXX packaging win. design

even swimming construction is pools No XX% stronger, their the per outdoor products our finish pools will While value grown. living about enhance XXXX, doubt, share has and XX,XXX homeowners not and that down with with XX% macroeconomic know pool the likely of new environment tough, expanding derive a -- continue being of will installed renovation fewer activity we do pool on backyard to and in changing. down units believe has we see services oasis. base both never been additional our of of that and our we built, firmly We that as pools over basis We be ever-growing where to revenue. the pool upgrade is desirability pools but current still expect technology

characteristics our professional the to that and that focus better cater support strength relentless of our the pool the owner. the of believe the in industry, long-term delivering the short, believe experience a and us second-to-none we the We specialty in positions anyone than to serve DIY on believe company we in In our industry team. customer retailers growth

has as and back is I our none. team proud deliver innovation, look focused to I'm said, to a partnerships very customer second on of I As pool the remained that, experience on that season, collaborative execution

Lastly, with the benefits of $XX.XX $X.XX. of earnings impact including year in of and the share expect we of annual per earnings behind narrowed guidance tax the over to $XX.XX, us, range our X year-to-date quarters now have diluted

our Melanie provide commentary. in additional will details Melanie? financial now

Melanie M. Hart

decrease Pete. Net is decline you, the Thank prior year quarter. sales show at X% expected, decline sales of $X.X as likely trending to from year. for construction, record for We in XX% which sales the third a in range billion, new with X% the year-over-year pool quarter finished quarterly a related to units the a estimate

of range at with previously a in pool top our decrease from construction, XX%. prior and the year comparative activity, roughly on to X% line, down new estimated outperforming is still year-over-year effect levels lower but Remodel XX% our

an other also areas, X% net approximately decline represented We in several sales. saw each which

we quarter had to selling last First, one compared the in less day year.

prices on including prices year. selling trichlor during of showing is were Pricing XX% recent Secondly, commodities, stabilizing. of lower on last approximately selling third quarter, But the signs quarter than trichlor.

as suggesting discretionary certain these consumer and weakness, such on more hesitation products, volumes reflected Third, discretionary heaters pools, above-ground on items. cleaners,

approximately on release Net new base sales Outside quarter. resulting an benefit contributed of broken the overall therefore, or less from these a X% than activities provide quarter. of in we the insignificant in in products, maintenance have for impact advantage, as from the had quarter. financial Inflation X% the openings information stable. spend the press not And remains an they continued relatively to market to for these X% out separately business acquisitions

the less year, quarter. expected construction seeing that items resulting resulted higher in a prices XX.X% inventory products. mix, other gains ahead and in on Gross building remodel second product increases. trichlor reflecting in a lower decrease in was from investments from year-over-year quarter, price third and decrease from selling multiple quarter, margin points materials, XXXX of prior in inflationary XXX margins realized than impacting typical new than the the in margin Other our inventory benefit was Gross decrease including activity, basis the the sequential which

to proportion Customer of causing mix, wrapping negative modest quarter. to larger demand a inventory on some sales environment, pressure also a pricing rationalization more competitive a channel margins contributed during XXXX. higher the impact up customers, when Weaker to industry gross had as such margins and of on comparing additional

a than quarters well decrease a purchasing expenses. from after the in to also reductions with year reflecting have lower X% X% second quarter expenses be of year-over-year a larger SG&A seeing to these continue plan. the very two as decrease managed, inventory ability normal most volume-related We reduction saw seasonally conjunction benefit incentives in our

Operating expenses since last compared and year. third of the of new sales to quarter prior year acquisitions four from XX impact locations added also center includes openings

$XXX,XXX third Additionally, quarter for goodwill the include a impairments. expenses

XX.X% reported year, points effects third prior We margin of impact the Operating operating XXX margin top quarter in gross less XXX basis margin and reflecting of XXXX. XX.X% points than line lower was basis from revenue.

we in been our able benefits to have operating So margin. maintain

Interest basis as on expense in in reduction resulted comparative in a million a offsetting of a third rates, quarter result expense a significant for outstanding. higher debt increase $X.X the

As our is slightly rate rate, higher and is years, the with consistent our all third quarter other quarterly quarters rate. averaging being year to with lowest tax full prior generally

quarter are highlight the our ability $X.XX third higher $X.XX excluding our QX XXXX. to to significant XX% as decline the throughout the compares results, the period than Third from higher 'XX ASU to XXXX. third XXXX of in results retain of EPS, earnings record of XXXX majority quarter growth quarter -- seen XXXX Despite the these

of XX.X management year. collections days a of Our and quarter, of remains comparable the receivables credit trade to end prior DSO process advantage, business at the and with

stated goal million. down I of at inventory the ability was inventory the year, our I execute our in beginning bring by when to to confident $XXX reduction

even and acquisitions, were able XXXX, to with exceeding goal. inventory million inflation, $XXX locations our current we reduced fact, new from In year December

early we quarter, In for us. we the in make vendor selectively fourth buys strategic participate determine to plan to sense that

season. cash next as before see will will flow we normally in to equipment we will growth There shipments to from look season range build for quarter result impact increases price inventory be vendor on ready done next of early these a dollar we in purchases from pricing XXXX X% third terms. buy on fourth of be to be to as around we XXXX season, based to date. in for no ahead As year-end deferred would received the to are This some inventory X% announcements payment expecting

in from million flow operating year-to-date. $XXX generated activities We cash

market We the leaving our available completed open $XXX quarter, have repurchases million of under during $XXX million also authorization. share

by $XXX debt million XXXX. last We have time reduced and also same from $XXX year-end the from million year

Our remains X.X target at debt leverage at of and ratio end the conservative our X.XX expectations Xx. low to of stated

XXXX for year, negative to the is are the sales range our XX%. finish that we we out confirming As be expectations down of in

in we digits, one high day sales the full not of how and in For to dependent up will see fourth reported the will to the quarter for so long-term finishes level pool selling the the the margin out single we year made down we new mid- less the weather day construction mostly approximate of for our be the one XX%. full have will on selling quarter, The fourth quarter, would year. year. third expect that and guidance less Gross

quarter Fourth to be year expected rate. full is than the less seasonally

inventory. quarter Our fourth vary date from range reduced in for to in last benefited in increase Margins quarter to by the we direction. XX%, the seen as cost margin quarter year-over-year have could fourth compare we year's be lower will fourth average for expected is against that either but around be cost

points will for import quarter impact additional tax a comparative this expense. view, XXX offset in recorded the the fourth From basis negative primarily 'XX

would some saw we margins quarter. from see to mix, expect what pressures on the in to continued similar third Additionally, product we

benefits The gross have structural remain. other we discussed margin all on

target is in not will increase quarter second still in in lower see limit and but decrease the quarter, full operating the year-over-year X%. operating as the saw business will quarter. in growth we high expense expense as not due to Our third expenses growth base the quarter Fourth we be expenses saw volume-related first to to for year-over-year smaller year

expense interest be million. $XX to is year expected Full approximately

year with excluding similar of rate result first rate, second fourth prior will full between Our XX.X%. our our in tax our in expected year quarter is be XX% to to rate expected rate quarter The to rate consistent annual and ASU.

Our on cash and on on million of quarterly expenditures XX% the capital the increase use capital the the for dividends, same second million discussed $XX in the quarter, end with million uses acquisitions, cash $XX guidance are allocation as a those of second of approved at $XXX on reflecting approximately quarter.

and balance year, flow. retire debt cash We repurchase stock remaining the with will opportunistically throughout excess continue to the of the

for from We have be down date, full leaving and last fourth average quarter completed our $XXX also diluted million, to million for outstanding XXX,XXX count year XX.X share shares year. be buybacks the of will share to million shares expected weighted XX.X

in guidance Providing We have is to to year the ASU narrowed quarter a narrower full our our the EPS range of for the third with $XX.XX XXXX $X.XX tax process. our including after $XX.XX, date. for the consistent to realized season benefit range historical completion full

in came our in quarter with very Third expectations. latest much alignment

to focus broadest their continued Our the will on customer customers support and them operational grow experience opportunities our improvements provide selection with allow us to to product continue and business.

We begin Q&A now session. our will

Operator

[Operator Ryan Merkel from Instructions] William comes with question first Blair. Our

Ryan Merkel

into see the just a that be about specific seems start next through over I'm the perhaps for to and takes year? it not the negatives picture wanted for positives walk us heading Pete, off looking declines. might guidance, that you question. think I with you the Can you worst puts just pool as and big 'XX?

Peter Arvan

a Yes, -- for of crazy reasons. a which but year, couple sure. years XXXX of kind crazy was followed no a different doubt

you it a it was And on the bad we interest thought to lower in beginning new we was the year. had to was to rates -- out year weather construction, be I that We -- put what talking think, turning So was actually we is which of when rise. that, ago. crimp a continue pool than had

the And year. initiated the frankly, we guidance beginning when at of

new going pool down think I mentioned, I as construction is be XX%. to year, this

that's look significantly pools if it the down markets, you some it's actually average, on in at and I entry-level think I in right? So more. an depends cases, -- more some think

higher for less end have pools financing affluent that no pools more is that connected that or builders connected that remain side people the the flip the The build solid. good. to, business financing The higher-end is

much economic I steps is you to back we I would So macro tell look the pool drop more. see look going when based think what today, construction and at the at that I don't on environment, new

it talked down. builders next tell season really that I've soon frankly and too their more new expect They builders couple pool It fairly to last starting of than to in their Could everybody the is of But many don't -- because a for year. are today. the just X,XXX together where and selling pricing to Way it it putting thousand? could. drop months, and the this is much year, fall optimistic couple is count plans

require same of The other plays the market would pattern, renovations rates. comment that Renovation is going financing I would the on are on most bit pressure of make because The is that to that renovation. be interest under little a again right?

moderation rates. read not. large jobs paid next a cash, the the construction for year, of interest impact Now renovations. well If and on will both and that most get interest or guys renovations, in you bode that is there those doesn't for pool same really on do Smaller in rates have it are then new I done things for big whether

maintenance very It more of a they being perspective, pools. is would The still high. outdoor desirability the From There living has overall were still People more affordable. if pool, to is happen. maintenance built maintenance. pools frankly want be

So have they're pool, is that then them, when weather in those good, a the like them them. use

the of weather also beginning of look in the year, back of had and the a in the the previous the year very channel. tough we was the I If year, inventory couple the beginning that was hangover had headwinds some at from of we

than be but too I'm the So as guidance, more year, give expectations. also with forward, year about I again, optimistic setting and this but to next early clear to I look you a want

But grow. another I market, and down, year the stability a pool not next that year look of I I -- take confident remain the for faced, down, that think not be to of down. going will construction, to it's going new It's we -- looking not headwinds not the it's I'm off. material at

Ryan Merkel

Got the just being in first That's year? margins buy? you the Appreciate does that about then Would that. call inventory you And hear you helpful. next the was early is gross it to of Can impact aggressive? it. And that Are good half talk rightsized. normal? that how

Peter Arvan

the would buys headroom that say early now created we -- I can our because we're participate buys we've where Ryan, normal in in as the is early to participate. going inventory

certainly as rolling price next effectively does So will the helps. out be that increases, month. And that

-- gross So for our quarter-to-quarter. as year, gross margin said, quarter-to-quarter. are vary mean, first half They I the not Melanie from of our consistent the remember, margins

higher in -- middle they season, the the generally they're towards the peak down. So of then come and

would I I impact say comment draw What gross we to margins attention and the down inventory When also did, drawdown. would are, is made less product incentives. also draw like Melanie and you're buying your you that's we going to like the about inventory volume-related

traditionally. we dropping we volume anticipate what would we with incentives inventories from line are. So significantly would don't more where see be we Therefore, in expect to

early. how P&L very but from can buys, you, initiate tell be you early guidance macro we'll again, perspective, in guidance that when I next we flow But a should through the give year. participating we'll on

Operator

question Susan Sachs. Our Maklari next with Goldman from comes

Susan Maklari

competitive to on talk different the And can thinking bit now about thoughts ability that setup bulk question, you next the the first of of react season? landscape you're to ground, we think a those? the your How as dynamics any My year? the on about we're through pool the sort about

Peter Arvan

is been volumes year similar would are the Meaning really a environment Susan. down that year. -- no Yes. have it is different The in this than competitive in Good question. a today it Thanks, past.

we've So -- this believe year. when that share and that we competitors we have taken

that's existence. every going in we in competitors shape are that continue we we taken virtually new. been do that that to But We'll share probably have than nothing year forward. So are. We've rougher have

when things good news And have have for Now what we times staying when any is There's none things actions? some desperate. react. do pretty competitive we mean that to competitors are that happens, have power. does that that that is, of those really The

that inventory that to liquidate, trying to have they're So somebody has position certain yes. to might we react a

Is there that sustainable? amount No. that any material makes

than that competitive than the of are we environment really competitors dynamics been. terms we -- been. this it's have what no So today ever I in different are would they you in have stronger tell today are do

locations. more have up opening We more We're locations.

it us experience more already. else, to too. relentless down locations our And allows I the think customer more to win. have We than We're focus that anybody really, comes opening on locations

Susan Maklari

we step improvement around Okay. on your That's thoughts and of cash some initiatives buybacks, full and made allocation, the investments the given any the thoughts we then flows any on in of here? the year sort up other the helpful. that capital saw the about as think the And strategic to just there? you And during perhaps inventories willingness quarter

Melanie M. Hart

Yes.

would for continue we we year at allocation, of to looking bulk Certainly, opportunistically. historically, So capital fourth be positive expect cash as we quarter for overall, that flow really year, a mentioned share repurchases quarter. the would be the would this

we would more spend have. even And so we to cash that have currently

on when really, quarter of we significant to -- look And decisions throughout be our new all amount our the acquisitions, capacity of to from fortunate have or a make share buybacks. makes we sense, debt arrangements, what are at continued you very whether capacity a standpoint center related it just so call positioning that total to we openings in ability invest anything the have

Operator

question with comes next David Baird. Manthey Our from

David Manthey

we now any coded minor in the mean lapped Is situation? Thank to pull shortages, or that volume you've it I we say repair variability you. had strangeness fair Good forward. morning. maintenance had and

look wouldn't trying to minor year. Just business next growth a I'm forward. lead puts gauge there just or believe and takes rate for would remaining saying anything any return asking low you to guidance, repair if is past variability as to not of typical maintenance would I'm that that in there's the that we you kind lead to And single-digit

Peter Arvan

fair think I Dave. that's No, question, Yes. a

total the relatively carried fourth started the first an to only perspective impacted perspective. impact into normal. the over that The storm quarter Florida, I you, be tell is maintenance Southwest thing little company we should would the but minor from maintenance from in that see think quarter business a I a in --

highest versus tell and everything, demand has at to you I when business for predictability repair gets an subjective it look upgrade. comes a patterns maintenance when it a and would But Where the is bit the little stability. I repair down normal

and other again, #X. may choice repairs really cases, and on about. market replace be I or that kind some repair really replace of be would But and see -- #X. much by talking choice cases, So In the large, it depends you're don't In -- different.

In there's and that look -- next this say I some have pools things this XX,XXX at comments, in be that fact, are put the be that exist off that I -- it my in ground that likely have that to there's are mentioned as new year to going was year There didn't done. maintained year. to were year next

the know, long the to they a as into owner. you a defer, in things as are some good week, I'd things like so certain have could that defer market there turn pool to there a news must-have. for things when do So are is that I I about swimming can you pool every And only but

in. So part market, confident we that of remain the

David Manthey

Right.

know Yes, Okay. implications at effort second, next for I in your And then don't reduction margin the any and the have the half this back year? prebuy all inventory it. gross year of therefore, Melanie, does

Melanie M. Hart

their clear depending vendor determination a to certainly wanted of allow really to the Yes. us basis, what incentives space vendor what out upon able prebuys and physical were participate by or we in. Well, was to make individual it on

was normal. to it that characterize compared And buying would had you season early we so say XXXX, I would relatively if to say

at in benefit we'll might what first bring buys better year, color early when will for margin have And kind that look either once that at quarter. We fourth look typically or for that what a certainly, we've on we take you received quarter. so of quarter receive first next

that a for have again better February. when sense we talk we'll So in

the did been those be we the in pre-XXXX thing two at looking will of of is one mention typically, that would kind to it that we So price increases historically slightly has one ahead period. be where

X% next And slightly X% at so for those the range. at kind to are looking higher of we being year,

Operator

with from comes Schneeberger Oppenheimer. Scott next Our question

Scott Schneeberger

talked it. an you new curious guidance the handoff your trend updated then a to But and I'm maybe there occurring do Peter, about and heard persisting? from likely from moving where get you past pool see in commentary to and on we've a construction backlog that folks remodel, just you of, was

upside with And enter there be items? in XXXX? in remodel there pursue higher those you propensity that question, purchases what discretionary to seeing tech and -- just offerings as Could the category. you're and

Peter Arvan

Sure.

renovation is or As we holding People with believe And business mentioned, whether of people certainly tend pool that reasons. be remodel better want pool that's a general they that than couple the level. I affluent the than new a and up deciding are to for in more construction. pools not at entry

you our is of are that construction the our few community builders remodel would survey say, that business of very because Most better their builder both, also do new the customers community would So right? business. tell remodel doing builders builder probably I are our people with most remodel. than And think exceptions, there

new. was on bigger renovation people there in ago, year focused think new, that building XX were backlog a I of a months ago remodel because and new,

and worked down. down I has I been think with pool of new backlog the think renovation XX%, remodel construction being

back remember, have you backlog XX% also and might X.X pent-up renovation industry the demand in-ground kind of be the than million XX% been and down have So if remodel the of -- right? But that is about XX% a may pools, in in views there range. today little we more industry,

So -- business is that good.

bit little backlog. a of itself probably was addressing It the ahead

for that's industry. think And Now good, tell that down and to I back I probably healthy normal. more it's you that's the would

with I'm it the a saw said, at I staring home it. the want on "Hey, and want, spending lot big adoption, comes during a I again, no We I technology. request -- were want question I of where [indiscernible] they people I down technology height I technology, to Your guess, technology want. time. on I'm when want, of COVID

new technology still new technology pools the built still is and features new the today higher right? with -- and behind continuing, being trend pool have items People are it. construction, the ticket see We still towards the that are

upgrade. a it there's necessary, for when again, an is Oftentimes, replacement opportunity an

some to phone from the the COVID, forward, this clock like versus but upgrades I'd of works, still to going during out maybe pad. actually do were So my meaning pulled time the

we're is they're The to comes Because, in when there's going it's because When Now efficiency better energy tech they speed we the of just product. of change standard single pumps their and frankly, heaters, they're higher they're still opportunity to of it putting heaters equipment pumps do people that industry variable the recognizing speed exists and and when still a lot in in when variable there versus same to of cost. change experience pump, consumer. DOE see them. fail failures weren't heaters. adoption for speed, working benefit it's the a going the the -- a But them, high-efficiency regulations, significant a

there's product when are And the types trends those that continue. technology. cleaners consumer often looking again, are that efficient. the They for replacing are versus of those are most products people spending cleaners, -- far old more And newer replacing for are money, at

Scott Schneeberger

and into Great. you guidance feeling these seasonal on quarter And activity. third leverage that see are I dependent year, will margin to revenue. But on second -- I year? it's SG&A how sustainable less ahead you fourth the heard on quarter. how next But of less know be in efficiencies you gained? margin you the Melanie, really nice what and on How looking they are some about feeling on very efficiencies next

Melanie M. Hart

Yes.

adjust and on a it's expense of proud to the location. to according really ability their center each good individual the expenses very quality management each at indicator able and of side, been to level sales the volumes of are at what we've We do

continue just upswing next a of So kind significant to whether do not from sales is year, moderating a regardless as we for standpoint. or forward look continued certainly are of we of a where or would we that.

the continue have operational of from and we we so a the and wanted that we training. one our to weren't the and take base the our earlier reinvest of initiatives volume standpoint expenses And we employees our work throughout in because to cutting that -- our things opportunity season on said in

wanted And been we those that to do year. successful for very we have things this in

forward. a as expectation our that us be benefit that, for be so And move would we would

Operator

Merkousko Noah from comes Stephens. question with next Our

Noah Merkousko

there's can here. know discussion I of in squeeze one already, gross lot hopefully, a First, margins but I more been about

I gross think talked term, XX% you've longer margins. about

And as right buy the term, And still higher manufacturers you're benefiting look it? sit at about now -- as way the so think normal is early from than to inflation for you're next here medium today, plus I we we for guess that year.

So could margins medium a bit term? the XX% in gross that influence that higher potentially little target than

Melanie M. Hart

Yes.

margins, you for We've the continuing kind still will margins When long-term XX%. to from thank our up that those we margins -- approximate structural at that are Pinch So the that relates very industry. our Pete things A stating will from acquisition-related it we products. be Corpus kind of our we that comments, in Penny we the benefit consistently did look to acknowledging to made are label are of they within market as well acquisition. retail compared trending benefits private some overall also as mentioned seen the And his traditional from

continuing We've on to as done benefits move more That and locations. we our we've serve procurement is had made as forward. pricing. what in to that great logistics an -- and there to our We're to continues would strides to so expect add provide well capacity area continue been of our as expand we where

pricing done that from the We definitely we're say not would area.

some doing have again it February talk about things and we'll what to We pricing. when we talk that in as new we're relates

particularly year the the building of what will a little be bit seen we've really, to out thing this only it so that of as kind that product is historically relates materials. And mix,

a more the we which significant been little on a some has did on bit us. that of are seeing a the about So sell-through new we products, those growth for opportunity talk drag of of construction

normalizes So then our margins. normalized as a for longer-term incentives also overall did than again, part vendor that would that mention the of this what And would that, they in we be see year. as we be will normalizes, year less

Peter Arvan

mix, margin pool No customer focus mix things be a the product hard -- to overall us. construction, very weather, when all area a can overall doubt, and the market customer right, predict factor have into new for in, you're mix. is playing with important It dynamic you mix those of that

that dynamic effective But label integrated exclusive vertically product that, private chemical a pricing the the into which heavily chain, supply leaning brands. and our very a desirable, focus -- a is assured offering on that our facility. behind packaging rest environment, is customer very drivers very

long-term long-term All of those guide. into plan our things factored help, and and they're all our

-- down the year year drawing a a year different increasing then mentioned, Certainly, year this a incentives and inventory, as inventory. we you're vendor is it's this are where you when

dividends So we continue us. a will to big it is area lot of pay you factors go into focus believe the for that gross and that business, margin. I for a can entire tell

Noah Merkousko

the the result. EPS end helpful. it. press would a $XX.XX just then low my to mean And we the for guidance? of in you're question. language a the that range noted solid The to the of into release that end revised pointing read low follow-on, be guidance clarifying Got Should That's

Melanie M. Hart

that Yes, other. to intended guide way one wasn't or really the

step was ending I where up think a we're of more just year. it back for this taking big and acknowledging

just don't So sales again, here out a we standpoint, that we incremental it's have from reported XXXX are of accomplished taking results. we be but X were the extraordinary lot want sit putting telling of years down you where an we as to and really XX% growth from today, when certainly seeing last we in that context

this And so to presenting we are results be that you the of year. for we will proud

Peter Arvan

quarter least has fourth Yes, most by of the weather. also are that the in quarter things quarters significant affected a quarter. of like seasonally the terms percentage It is the

the it and gets sooner it because early, the season cold, quarter. if itself So down of the of drops size off because magnifies construction shuts

the to So all variability. potential is we I think were pointing

Noah Merkousko

Yes. Yes.

X all makes year inflation Was was or it X What next That just one. other X? I And price from expected Okay. in the increases? sense. one to if could to squeeze quick X

Melanie M. Hart

an equipment X So from we vendor to standpoint. had X

on the will first based We we second on we'll current the run and year-over-year are expecting some have on a -- rate still pricing. lapping trichlor, quarter be that

blend of that. within So it kind could

also on side The less equipment. probably what the blue that, will on get of the is than final on that pricing still seeing kind current be we're something Horizon. waiting to We're look

have we'll So talk a better definitive we again answer February. when for in that

Operator

comes Carter Stifel. with next Our question Andrew from

W. Andrew Carter

you said was steady. assume in to the quarter, this understand the would to had I I wanted Because chemicals. a weather-neutral think of I because pricing kind be volume-related but think more is I jump of

product there was impact weather gross chemicals be any but mix in regarding to know accretive dilutive I there. that? -- you margin as So or stop then And would called overall? a out headwind, that So I'll

Peter Arvan

Yes.

a we chemical I is sales saw, Andrew, couple that the of as growth things. a result of So mentioned,

time it's able say that quarter, to we saying was it's been weren't So long a it weather-neutral quarter, it and we've which neutral weather that a was since a been extraordinary.

Now was every Texas Texas and in it hot was is But hot Texas. in Texas? hot was it hot in -- it lived Yes, I've in frankly, summer.

been and a tell from a focused and weather would on have would we've product been that our offering chemical none more our think them we that technology to I well perspective, on be say you chemicals. neutral, to we that are So business, second customers to, providing tools focused -- we with for frankly, allows bodes is participating. sell with And I and that us,

as evident the our us. ability share within is And is area on the think focus for And take you chemical to basis quarter. I that, so a know,

private label So our chemical exclusive talking margin side, from remember, of the chemicals, different perspective, about brands, and parts three there's a on when right? you're

the part X/X, X/X, business. it's of X/X. You we've trichlor Remember, have about the always said

specialty, have then have have trichlor. and you You you bouncers

the there some on as two inflation did the other trichlor, mentioned, On was Melanie offset but by we see deflation areas. on trichlor, some

for about. is talking So depends chemical it that on margin really trail in general, but you're accretive us, it the

W. Andrew Carter

EPS Got a tepid a year, drivers other gears environment? the a bit in of have you more as far I as know in little a putting of kind it. But you sand. like kind goes little EPS sales Switching talked in and line bit. firm not do next to grow

you about a investment. flex you more lines? year perhaps SG&A? this has SG&A those margin get know world Anything Do where see see Do can you story I increases? a gross more meaningful along maintaining been on

Peter Arvan

early Yes. is you consistently year. too have impact outlook EPS, focus Again, next put an discussed, themes going back the to we've for a we right? on have on if But our to together growth. about that think One are that an relentless

But perspective. a instance, the from certainly no for -- new market Sometimes was with of you helps demand year, that help. construction, this area pool in with it

was like times We lead the and which is areas we in just year, significant it something, of we In didn't into cost. very ramp that, other amounts something our last thing a start adding business without because and did surge capacity we frankly, again, this that didn't was start like increase us in pre year. creation, started it's allowed that coded to the handle good and up quickly activity

business leverage volume. EPS like in a an from to are leverage be biggest points So your obviously, perspective, ours, going

we grow helps. certainly too. So that more, if an Margin -- is we have area then

of capacity an is that that As us. we on. and mentioned, focus margin something creation is course, gross mentioned, we see still as for is work something I It's always a area that leverage we And opportunity area in. SG&A

investment, order the requires best-in-class for customer to us too. technology provide the a in same order tools that to too, But time, some at experience best provide in

money it the one So that that's leverage. you or next on we year the I year sometimes investments we're made, reap tend year rewards the capital operating But on spend back that where if to of after. look be on deliver with to continue very and us and that long-term allowed to investments investing this focused year recognizing historically or has expand POOLCORP things our to the to grow has think continue you the after to

W. Andrew Carter

increased you quickly, just And of pockets script. to were other course finally, something the there kind about any chemicals? significant just beyond that business real Was during talked that you there normal of competitive isolated said Or about? out activity

Peter Arvan

inventory. you that and they cash they have to areas, a lot have are competitors think Yes, in liquidate Andrew, of because When right? is going you a need I to environment react it's to They're going year-over-year, markedly different do demand really need things. that

tell -- it materials. place was can't We equipment. saw in chemicals. We We've pressure chemicals. the saw building we that you was seen I in only it So it competitive in in saw

come Yes. to desperate better positioned of on the impact withstand to that down it is there anybody focus on to react And again, the experience And the so a is attention to Is that? news what really us match they good those we our react? those none sustainable. to short-term are frankly, that? price that a of cause most best we Yes. customer doesn't market. providing Yes. -- when having have Do Is in

Operator

Our Bank. with Joe next question comes Deutsche Ahlersmeyer from

Joseph Ahlersmeyer

Yes.

up the decline in environment. just to I comment Maybe margin, gross around I a about bit looking competitive than sequential little think little decline. typical follow the I it's larger need a from earlier at question the on sequential I'm the If me, typical the prior Forgive first.

wondering And be items, bps other were range some quantification of the those things. XX in of of would implied course, like you down ex to unique listed rest sort the and it of XX sequentially, if you just the maybe I'm out items. those all

Melanie M. Hart

accounted Are and you third looking about out suggesting a that that we second at kind then is? change that to individual listed points? Is for of quarter XX basis what typical the items your from question

Joseph Ahlersmeyer

because basis points sequentially. Yes, right. XXX That's

been around in XXXX the XX and XX I average think the basis did kind time was that last points. to you of had the

Melanie M. Hart

to year, second full from quarter, Yes. a materials of mix, the the margins. The that some as the specifically impact on vary buy upon the see kind will end the it that I get of from individual the be early does because and of you would we the the that. better of items each quantify say to customer quantify -- timing depending we from specifically. or shift Once relates able we'll to of purchases quarter-over-quarter don't building those first -- the

that, impacts think comparison that definitely I quarter-over-quarter. the So

we So those year-over-year. probably quarter-to-quarter, margins of talked we detailed we about -- when internally, things visually fluctuates the level. seeing. that things types through actually hard we're in that are that XX very today, at that when assess when -- there's things look we list at of to go

picture you what's of going give impactful so are to really And better kind on able business. the be of that narrow just trying it we're the to a with to things to more

Joseph Ahlersmeyer

on That not just so take directional can Yes. comment guess call sense. it we and one was curious, offline the I'm -- the magnitude, I Maybe makes much a being but that typical. as I well. out that of

price they to pools related comment there question other I new pointed There were be answer. think more paraphrase. be to the there. thinking first was you're I have built Interest the main the more cost guy would particularly The I'm if if that pool. out frankly, bad as there's rates of affordable, about to was a the and the But just side, certainly, seem calling other what

the And probability now, X% reset. to on we X% wondering say from that assess assess when would what pricing typically to industry probability sort the did gets except Is I'm experience you that you just a years is industry have we just XX chance the gone to of And to there pool would year, the XXXX, have too for far when pricing. that?

Peter Arvan

of Yes. I probability is really would that tell you the low.

Let a me comment expand little upon my the affordability. about

on the where units What pool seeing cools, terms As in is second are construction headwind I the I believe quarter in of we the -- entry-level call. on biggest mentioned, we right? swimming

smaller The deal. kitchen conversation takes the you close place the to that interest table cheaper rates. close Prior to the that which builders run-up tell that at pools, the will to pools, the in

of -- availability lending the driven month, of a interest on as in borrowing were and their a in years, interest previous XX funds that the less to build So XX be deals last for significant payment. area, and to up in $XXX pool. has rates $XXX a were signing that -- cost for it a to could had and, frankly, when homeowners months, that swimming monthly increase low, those of with couple pool very rates of But based the cost

has taken the pools. lower-end out of that a So chunk really

As pools, for, is higher-end mentioned those for in which we have the the those many good. cash, those demand times -- pools paid it are as to relates --

Now strong. telling still me that and outlook it that the was is builders the good before, for are

relates it So to that pools. really is the comment new as affordability of

inflation Now Remember, seeing. we're that the

prices could year. So is X% she that talking up Melanie about, be X% mentioned this to had

the of demand nature, X% nondiscretionary change X% the the on that in curve. something is rest So really on doesn't to industry

set equipment to the the pool an you happen swimming don't we range and in So a all. the are that price if at of not came which and said that's -- is pool, if frankly, $XX,XXX equipment now, I X%, if set suggesting, swimming if going down think for

on X of fact, should change start that, were, chance homeowner's grand think in virtually really of it decision they because In XX% whether isn't up to But I going there's the the of opinion scheme [indiscernible] project. things, my that in the makes if material

items, on factors it if needle. the So the nobody nondiscretionary just for need such of, those it which really indication to zero else purchases really were, as a in. of enough there any decline that items if doesn't nondiscretionary the wouldn't curve manufacturers, time there -- until it them. from buys the everything It's was isn't move they change had demand we've because And

Joseph Ahlersmeyer

If Understood. could squeeze follow-up. just one I in more

Melanie M. Hart

as -- for think back call. want Do follow over with up our you about I'm the to time we're me. you sorry

Joseph Ahlersmeyer

Sure.

good. Sounds

Melanie M. Hart

want Pete, Okay. close Thank did to you. you that?

Peter Arvan

today. on a to talk have you very happy I us don't look Yes. thank February We quarter want If Thank we year to safe you then, discussing you. and XX, for all to forward full joining our holiday XXXX. fourth before results and season.

Melanie M. Hart

Thanks, everyone.

Operator

concluded. you now Thank has conference today's for presentation. The attending

now may disconnect. You

Pool (POOL) 19 Oct 232023 Q3 Earnings call transcript