Good morning. Welcome to Pool Corporation's fourth quarter 2020 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mark Joslin, Senior VP and Chief Financial Officer. Please go ahead. Thank you. Good morning, everyone, and welcome to our year-end 2020 earnings call. I'd like to remind our listeners that our discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2021 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. We may make references to non-GAAP financial measures in our comments. A description and reconciliation of our non-GAAP financial measures is included in our press release and posted to our corporate website in our investor relations section. I'll turn the call over to our President and CEO, Peter Arvan. Pete. Thank you, Mark, and good morning to everyone on the call. Never in my wildest imagination could I have envisioned a year like 2020. The impact from the global pandemic created both unprecedented challenges and opportunities. The demand for our products was unparalleled. The challenges to keep up with that demand while remaining safe were extraordinary, but we found innovative ways to get things done and deliver amazing results. I could not be prouder of our employees and all their accomplishments as they proved once again why the PoolCorp team is simply the best. Despite the uncertain times brought on by COVID, thousands of families affirmed that owning a pool, a patio, or an outdoor kitchen is a wonderful way to enjoy the great outdoors in a safe, family-friendly environment. This heightened interest in enjoying existing pools and outdoor living spaces, combined with the insatiable demand for new pools, created an amazing opportunity for our industry. In 2020, our total sales came in at $3.9 billion, a 23% increase over 2019. In the fourth quarter, we saw sales grow an amazing 44%, capping off a phenomenal year by any measure. From a base business perspective, our sales grew 39% in the quarter and 22% on a year-to-date basis. Demand in virtually all of our geographies remained strong, with particular strength noted in our seasonal markets. For context, as I recap the quarter and the year, I think it may be helpful to remind you of how 2020 played out. The year started out strong with revenues up 13% in the first quarter before any real impact of COVID could be felt. The second quarter, which started off with sharp declines as COVID-related shutdowns took effect, quickly rebounded, and we finished up 14%. In the third quarter, the business, fueled by high demand and strong execution, continued to accelerate and ended up with sales up 27%, and as we reported, the fourth quarter was even better, up 44%. 2020 was also a busy year for us on the acquisition front as we completed four acquisitions, three on the blue side of the business and one for Horizon. Master Tile, Northeastern Swimming Pool Distributors, Jet Line Products, and our newest addition, TWC Distributors, all joined the PoolCorp family and are integrating well. Now let me provide a little more color on how the business performed in our four largest markets for the quarter and for the year. As you can imagine, all benefited from strong demand and favorable weather conditions. Florida saw revenue in the quarter up 25%, bringing the year-to-date growth to 16%. Arizona posted a 36% gain in the quarter and 23% for the year, while Texas revenues grew by 47% in the quarter and 23% for the year. California, still the largest market in the country and the last to recover from the shutdowns, grew by 26% in the quarter and 13% for the year. Overall, our year-round markets were up by 32% for the quarter and 18% for the year, while seasonal markets were up 50% in the quarter and 27% for the year. All markets benefited from strong pool construction trends, which we believe grew about 25% for the year from approximately 80,000 new pools in 2019 to approximately 100,000 new pools in 2020. Considering the slow start to the year, this was a big step forward for the industry in 2020, as milder weather late in the year enabled builders to make up for lost time. Looking at our end markets, our commercial pool category was down 8% for the quarter and 10% for the year, comprising 4% of total sales for the company. Continued softness in the public pool and travel industry is behind the slowdown, and we don't see that recovering in 2021. There are some projects starting to bid, but the lack of travel is likely to continue to weigh heavily on this market. Retail sales, on the other hand, were up 34% in the quarter and 24% for the year. A larger installed base, more in-season pool usage, and consumers trying to stretch the season all increased demand for pool supplies and maintenance products. Retail-sized chemicals, automatic pool cleaners, and above-ground pools and spas all had strong growth. At the key product level, the story is much the same. Demand is strong. Equipment sales, which include pumps, filters, heaters, and lights, were up 51% in the quarter and 31% for the year. Due to significant construction backlogs and favorable weather conditions, most of our dealers kept building and remodeling, which helped drive the strong increase in equipment sales. Chemical sales in the fourth quarter were up 16% and 10% for the year. As I mentioned, demand for consumer-sized chemicals was very strong throughout the quarter and the year, but commercial pool chemical demand declined with a COVID-driven diminished use. For the upcoming 2021 season, I'd expect supplies to be tight but manageable for most chemical products, with trichlor, a very popular pool sanitizing product, being a notable exception. In this case, the industry lost significant production when a major plant was destroyed by a fire in August, which accounted for approximately 40% of the industry's capacity of this product. I'd expect to see the supply of trichlor be very tight and prices elevated, depending on how much additional capacity comes online and how much import product can be sourced to supplement the constrained supply. Certainly, weather will play a role in determining how the supply and demand balance works out for chemicals. Building material sales, a great indicator of the health of the construction and remodel segment, are strong. In the fourth quarter, we saw sales grow by 42%, bringing the year-to-date 2020 sales increase to 23%. We are quite happy with this result, given, as I said earlier, the uncertain and delayed start to the construction season in many of our seasonal and some of our year-round markets. When you look at the results of our business across the categories, it's evident that we took significant share in 2020. The contributions from our seasoned and customer-focused teams, utilizing unique tools and resources available to us, allowed us to adapt and thrive in the COVID environment better than anyone in the industry. Turning to Europe, this is a continuation of the same strong story that we discussed during our third quarter update. Europe had a very robust quarter once again, and grew revenues by 48% in the quarter and 24% for the year. Continued strong demand, favorable weather, and excellent execution all contributed to a great year for Europe as well. What makes this result even more impressive is that Europe felt the impact of the virus sooner and experienced more pervasive shutdowns and restrictions than most of the North American markets. Now, I'd like to switch gears and provide some commentary on our green business, Horizon. We're pleased to see this business continue to gain momentum and grow. For the quarter, Horizon base business was up 13% and 9% for the year. Strong demand for residential construction and outdoor living, fueled by growth in the year-round markets that we serve. Additionally, in December, we completed the acquisition of TWC Distributors with 10 locations in the strategically important market of Central and Southwest Florida. We continue to invest and improve in Horizon and remain very optimistic about the future growth opportunities in the green business. Moving to gross margins. We saw our overall gross margins increase to 28.5% in the quarter, a 70 basis point increase from the same period last year. For the full year, we finished at 28.7%, down 20 basis points when compared to a full year of 2019. The slight decline on the year-to-date basis was primarily driven by stronger big-ticket, lower-margin product sales, as we discussed in prior quarters. Turning to operating expenses. We're very proud of our performance in this area, as we saw operating expenses as a percentage of sales improve by over 300 basis points for the total business and over 400 basis points for our base business in the quarter. On a year-to-date basis, we improved by 130 basis points in the total business and 150 basis points in the base business. Contributing to our success was continued strong growth in sales through our Pool360 B2B tool, which became especially useful for customers with the onset of COVID and restricted access to our sales centers for order processing. For the year, we saw Pool360 sales increase 40%, and this is on top of a 30% increase in 2019. Clearly, our focus on capacity creation and the hard work of our team is paying off. Wrapping up the P&L, I'm thrilled to report that our operating income for the quarter was $74.4 million. This is an amazing increase of 188%. For the year, operating income was $464 million, an increase of 36%. Operating margins were 11.8% for the full year of 2020 compared to 10.7% for the full year of 2019. As you can all see, 2020 was an incredible year for the business on every level. Our team's focus on service and value-driven organic growth, combined with stellar concentration on safety, capacity creation, and execution, all while working towards being the employer of choice, was second to none. Our team performed at an amazing level, and we are humbled by their efforts. If that's not impressive enough, we added four strategic acquisitions and opened two greenfields in what had to be the most challenging operating year imaginable. In addition, in October, we celebrated 25 years as a public company, having delivered a remarkable 28% total shareholder return over the time period. We were recognized for our consistent growth by being added to the S&P 500. 2020 is now in the rear view mirror, but the operating environment. Market conditions are largely unchanged. As we turn the page to 2021, builders report large backlogs in virtually every market. That should carry us through the first half of the year and perhaps beyond. Strong housing market with the continuation of the de-urbanization and southern migration trend, and the public's desire to find safe outdoor spaces for family recreation and entertainment are helping position 2021 as another strong year. The work from home trend is likely to continue expanding, which bodes well for investments around the home, particularly in the backyard. Our supply chains, which were certainly stretched to capacity in many areas, held up well in 2020. Our size and scale allowed us to keep product flowing to provide unparalleled service in a challenging year. As we exited the year, we saw our back orders drop and our inventories increase as the manufacturers worked to clear backlog and ship the early buy orders. As the season starts, we are in great shape to provide the products that our customers need. Early indications are new pool construction activity will remain robust. Keep in mind, the weather and labor availability are the two most significant external factors in the industry's ability to satisfy the increased demand that we are seeing. Lastly, we should start to see the benefit of the Department of Energy's regulation on variable speed pump applications in the back half of this year, but most of the benefit will be seen in 2022 as the channel inventory is depleted. In the first half of the year, our comps will be much easier than we will face in the second half, as the industry will no doubt bounce up against labor constraints and potentially less favorable weather than we saw in a very strong second half of 2020. We also realized growth from acquisitions closed in 2020 and expect overall inflation to be in the 2%-3% range in 2021. Taking all of this into consideration, we expect to see revenues grow in the upper single to low double-digit range for the year, with some pressure on gross margins, as Mark will discuss, and operating margins growing in line with our historical 20 to 40 basis point improvement range. From a capital allocation perspective, our approach remains essentially unchanged. We will invest what we need to maintain our business and add growth capacity, provide an increased dividend to our shareholders, and continue to buy back shares opportunistically in line with our authorization from the board of directors. We anticipate opening an additional eight to 10 sales centers in key locations for both the blue and the green business. Expect to make additional acquisitions as we continue to hunt for strategically important businesses to add to our platforms, both here and in Europe. Considering these assumptions, we would expect EPS to be between $9.12 a share and $9.62 per share, which includes an $0.11 benefit from ASU 2016-09. Excluding the ASU benefit in both years, this is an increase of 7% to 13% over our very strong 2020 results. In closing, I would like to thank our customers, suppliers, and especially the PoolCorp team for their support and dedication. I will now turn the call over to Mark Joslin, Senior Vice President and Chief Financial Officer, for his commentary and perspective. Thanks, Pete. I'm going to provide some financial highlights of our results for the quarter and year, and then comment on 2021 and how we see that rolling out at a high level. First, the fourth quarter. In case it wasn't clear from Pete's comments how we felt about our fourth quarter performance, I'll start with my own perspectives. If you were somehow able to hire Michelangelo to paint a picture of the perfect quarter, it would look a lot like our fourth quarter. Phenomenal sales growth, significantly improved gross margin, and low expense growth relative to the level of sales and gross profit growth, resulting in double the operating margin from a year ago, and operating income that was on the cusp of three times last year. Add to that improved working capital management, strong cash generation, very low leverage, year-end ROIC of almost 40%, and execution on two strategic acquisitions, and you end up with the kind of quarter that, for me at least, is a once in a career event. Yes, COVID-inspired home confinement and favorable weather conditions helped supercharge industry demand. The ability of our team to execute through all the challenges and frenzy and stay focused on meeting our customers' needs, as they've done all year long, has been remarkable and, as Pete said, very humbling to us. We truly appreciate all of the efforts in response to adversity our team has demonstrated. A couple of highlights of our financial results, starting with the acquisitions. As I mentioned on our third quarter call, acquisitions added the expected 4% to our top line in Q4 and had a dilutive impact on operating income. This is because these businesses are predominantly northern market-focused and have a lower gross margin profile relative to the rest of our business. I'll discuss how we expect these businesses to impact our results in 2021 in a few minutes. Focusing on our base business results, our gross margin was up 90 basis points in the quarter, which was primarily the result of volume-based incentives earned from manufacturers given our performance for the quarter and year. For the year, these volume incentive gains were offset by lower margins from the sale of the big ticket items, as we've discussed all year, resulting in our 20 basis point decline in gross margin for the year. Moving to expenses, as we've discussed on past calls and in our release, significantly higher performance-based compensation impacted our results for the quarter and year. These costs were up $12 million for the quarter and $44 million for the year compared to last year. Excluding incentive cost increases, our base business expenses were up 5% for both the quarter and year, which is remarkable given our sales growth. As Pete mentioned, this demonstrates the success we've had from expanding the use of our Pool360 B2B platform and other capacity creation initiatives, as well as reduced spending on discretionary items. Incentive-based compensation is an important part of our culture of rewarding our employees for the value they create while keeping our fixed costs trim when times are tough. The merits of this model are apparent in 2020, where both stockholders and employees shared in the company's substantial success proportionately. About 15% of total operating income was earned by employees through these incentive systems in 2020, providing substantial pay for performance for our employees, but leaving the bulk of the gains in the business. Our incentive pay opportunities exist for employees at all levels, and for 2020 included $5.5 million earned by our hourly employees who work on the front lines of our organization, primarily in customer fulfillment and logistics roles, which are very important to our success, and in 2020, carried an unprecedented set of challenges. About half of these employees earned the maximum $2,400 cash award for the year. Moving down to operating income, the leverage we generated from expense management resulted in a more than doubling of our base business operating margin in the quarter from 4.5% last year to 9.7% this year, resulting in a tripling of our operating income from a year ago. On a year-to-date basis, our operating margin climbed 120 basis points to 12%, which is a new high for us. On the tax line, we benefited from option exercises that reduced our tax rate by $6 million or $0.15 per share for the quarter, and $29 million or $0.70 per share for the year. Excluding this, our tax rate for the year was just over 25%, similar to what we've done in the past, and for now at least, what we expect for the future. Moving to our balance sheet and cash flow statement, there are a few things here I'd like to point out. First, growth in our primary operating assets over last year with total net receivables up 28% and inventories up 11%, reflects our business growth, additions from acquisitions, and improved asset management throughout the course of the year. For receivables, we ended the year with DSO or days sales outstanding of 26.5 days, an improvement of 9% from 29 days last year while we improved inventory turns 19% from 3.2 times last year to 3.8 times in 2020. Combined with our exceptional earnings growth, these improvements helped us achieve an all-time high ROIC or return on invested capital of 39% this year compared to 29% last year, and cash flow from operations that was 108% of net income. Other highlights here include our prioritization of cash use for acquisitions on which we spent $125 million in 2020 for the four businesses we've discussed. We've also returned money to shareholders through dividends, which at $92 million were up 10% over last year, and through share repurchases, which were $76 million for the year. Doing that, we still ended up with debt, which was down $95 million year-over-year. Our year-end leverage was virtually half of what it was a year ago at 0.86 times compared to 1.61 times a year ago, giving us tremendous amount of financial flexibility. Despite being below our target leverage range of 1.5 to 2 times, our capital allocation priorities remain unchanged for the foreseeable future. Turning to our expectations for 2021, I'll start with our fully diluted share count estimate by quarter, excluding any potential share repurchases. For each quarter except the 1st, I'll give you two numbers. Our estimate for the quarter, followed by year to date. For Q1, 40,992,000 shares. For Q2, 41,128,000 shares. For year to date, 41,083,000. For Q3, 41,215,000. Year to date, 41,135,000. For Q4, 41,297,000, and year to date of 41,150,000. Now let me give you some added color on our 2021 guidance. You notice that we have a fairly wide EPS guidance range reflecting more uncertainty than usual in the year ahead. First on the list is weather, which given the warm and dry conditions we experienced in most of our markets for much of 2020, will likely be a headwind in 2021. The impact of COVID on stay-at-home trends, including consumer spending on home living and entertainment, was, of course, a very positive influence on our business that started midway through the second quarter and accelerated throughout the balance of the year. Those trends are continuing. We expect to start off 2021 with demand conditions similar to our ending in 2020, and which could carry us well into the year. How those conditions evolve in the back half of the year, where we have strong comps from 2020, remains to be seen. Although we are optimistic about the long-term implications for our business. The heightened demand we are experiencing, as well as COVID impacts to both carriers and suppliers, could disrupt our supply chain. We managed to work through supply issues in 2020 to minimize the impact on our business and are building inventory ahead of the 2021 season to help mitigate some of this risk. Industry capacity is another potential concern, particularly in the peak seasonal second and third quarters. All of these issues create uncertainty in our outlook, particularly in the back half of the year. For sales, we expect the greatest growth in the first half of the year, particularly the first quarter, with less favorable comparisons in the back half of the year, including a likely decline in Q4 if the weather is not as favorable or demand slows. Overall, including acquisitions, which we expect to add 4%-5% to base business growth for the first three quarters, sales growth is projected to be in the upper single-digit range or even low double digits for the entire year. Specific to our 2021 gross margin, there are three issues here which impact our historical normal flat gross margin expectation for the year. Similar to last year, we expect greater sales mix of big-ticket items with lower margins, particularly in the first half of the year. Second, vendor volume incentives that offset lower big-ticket margins in 2020 are likely to be a headwind in 2021, as some tiered vendor incentive programs reset off last year's high volume levels. Finally, our 2020 acquisitions came with substantially lower gross margin than our existing business, which longer term is an opportunity for us. Altogether, we could see gross margins decline 20-40 basis points for the year, with margin gains early, followed by increasing declines as we move through the year. Moving down to our expectation on operating expenses for the year, we have opposing forces at work here. The level of business activity we have experienced and expect, as well as the deferral of hiring needs throughout the 2020 season, has created some greater than normal staff growth needs heading into the 2021 season. At the same time, our expenses should benefit significantly from a decline in incentive-based compensation costs of $30 million-$35 million in 2021, with higher year-over-year costs in the first quarter and declines in the ensuing quarters. As noted in our release, we also anticipate a $4.5 million or $0.11 benefit in the first quarter from vesting of restricted stock and options that will expire if not exercised. We don't attempt to forecast other ASU tax benefits for the year. Finally, after pausing capital spending early last year in response to COVID, we expect to resume new location developments, adding eight to 10 new sales centers in 2021, with capital spending returning to our historical range of approximately 1% of sales. In summary, there are a number of moving parts to our expectations for 2021, but we are confident our team will respond, and we will see solid growth and execution for the year. Operator, I'll turn it back over to you to begin our question and answer session. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question is from David Manthey from Baird. Go ahead. Hi, guys. Good morning. Thank you for taking my questions. I just have three questions, but quick ones here. First off, on the base business growth, I think you said 13 for green. What was the blue base business growth, and could you give us the pricing component for each of those? Sure. For the quarter, the green business was 13%, and for a year it was 9%. Let me give you the answer on pricing on that. I would say pricing in the green business was not that substantial, within the 1% to probably 1.5% range. On the blue business, base business growth was in the 23% range, and pricing last year was fairly normal. Let's say like in the 1% to 2% range. Okay. On your guidance, you mentioned the weather, and I agree with that. Does the high end of the guidance still assume that weather in 2021 isn't as good as it was in 2020? Does it assume that on the high end, that it's the same and on the lower end, that it's much worse? Can you just talk about the weather component relative to the guidance? Yeah, sure, David, good morning. In terms of the guidance and the weather, we didn't, in the high end, anticipate similar weather to 2020, but maybe a little bit more favorable than normal The low end would be a little bit less favorable than normal. We usually start the year on, I would say the midpoint of our guidance range anticipates normal weather for the year. The best way to characterize it. Okay. Just the last one quickly on the early buy, pre-buy, special buy, any thoughts on your inventory coming into the season? Yeah. As I mentioned, the manufacturers were very busy right through the end of the year. Normally they would have started shipping kind of midway through the fourth quarter. They didn't really start to ship in earnest until the very tail end of the fourth quarter and are now in the midst of shipping that. We expect normally we would have it in place complete by January, February. This year it will be towards the end of the first quarter, but we'll begin the season fully stocked. Got it. Thank you. Just to follow up on your question on the Bluestreak business. I think Pete answered you for the year-to-date of 23% growth. For the quarter, it was 42% growth, if you didn't catch that part. Oh, okay. All right. Thanks much, guys. Yep, all righty. Our next question is from Anthony Lebiedzinski from Sidoti & Company. Yes, good morning, and thank you for taking the question. Yeah, I remember six years ago, you guys were still losing money actually in the fourth quarter, so quite a remarkable quarter for sure. Pete, you mentioned that you gained market share. Can you give us a sense as to, can you quantify perhaps how much you think you gained market share either for the quarter or for the year? Yeah. Anthony, good morning. Good question. At this point, it's hard for us to say because we haven't seen a final result on construction for the year. By the end of the first quarter, we should have a much better feel. I wouldn't want to quote a number right now, but I can tell you that we're comfortable in saying that we gained share in the year. It's hard for me to give you the exact number without the final pool count. Got it. Okay. That's fine. You mentioned some supply constraints for. Is there anything else you guys are concerned about as far as just from a supply chain constraint perspective? Yeah, I think everything is gonna be tight, right? Demand is still very robust. All the manufacturers are very busy trying to ship the early buys. Normally with the seasonality of the business, by the time the third quarter comes around, essentially everything is caught up. Everybody places their early buy orders, beginning of fourth quarter, they start shipping. The difference this year is they kept on shipping, and it really is across the board. The chemicals are going to be tight, but on the equipment side, sales were very strong. Everybody is working diligently to get the early buys into our warehouses so that we have them before the season starts. Got it. Okay. Last one from me. You talked about still going forward. Can you give us a sense as to if not you're more focused on the green side of this or blue side, as far as growing through M&A, and is there any particular geographic focus for acquisitions going forward? Anthony, you were breaking up through a lot of that. I'm not sure I got 100% of the question. Could you quickly repeat that? Yeah, sure. Sorry about that. As far as acquisitions going forward, are you focused more on the green side or blue side, and is there any particular geographic focus for acquisitions? Yeah, sure. On acquisitions, we have a very active pipeline for both businesses. As I look at the geographic breakout of that in the green business, as you know, we're basically in year-round markets, and that's where our focus will continue. I don't see us getting into seasonal markets on the green side. On the blue side, I would tell you that we have some targets that are in the seasonal markets, but obviously the sweet spot for us is in the year-round markets. Got it. All right. Well, thank you and best of luck. Yeah, thank you. Our next question is from Ryan Merkel from William Blair. Go ahead. Hey, everyone. Congrats on another strong quarter. Thanks. Good morning. Good morning, Ryan. First off, a high level question. If the world returns to some normalcy in the second half of 2021 with the vaccine, how might this impact your business, if at all? I guess here's what I would say. Hopefully the world does return to some normalcy with the vaccine. I think that if you look at the mega trends, which I called out in my comments, I think they're intact. I think you're gonna see more people continuing to work from home, which I think bodes very well for us with continued demand for backyard and outdoor living. I think the southern migration is going to continue. I think the strong housing market is going to continue, and all of those things are very positive for us. Assuming that there is a vaccine and everybody gets a little bit calmer about what's going on, I really don't see much changing as it affects the business. Again, the two biggest limits, I think backlogs are going to remain good and strong. The two biggest limiting factors we're going to have on the industry is weather and labor. All right. You kind of answered my follow-up because it sort of seems like maybe in the second half of 2021, you're guiding to low single-digit organic growth, something like that. If some of these themes are secular, it's really just weather and labor that's baked into your guidance. There's nothing that happened in 2020 that's one time or won't repeat in 2021. Is that correct? Yeah. We don't see anything that says, wow, okay, that was a cliff that we will fall off. Certainly demand was robust. The season was extended. It opened earlier and went later. Those things are good. In a normal year, pools wouldn't open as soon as they did last year. Right? This year, I think that same pattern is likely going to repeat. What is also different about the future market compared to the past is I think you'll have more people working from home, which again, I think bodes well for investment in the backyard. Yeah. Just one thing I'd add there, Ryan, is that we did four acquisitions last year. Three were done by the fourth quarter. They will all contribute for the first three quarters on a year-over-year basis, that kind of 4%-5% growth. The fourth quarter, we won't get the growth components from those acquisitions as they lap last year. That is a little bit of difference in the fourth quarter versus the other quarters of the year. Got it. Then just lastly, the outlook for the irrigation landscape business in 2021. Did this see the same boost as the PoolCorp business did in 2020? Just what do you think the outlook is? Same themes continuing is my guess. Yeah. Remember, Ryan, that business is more closely tied to new construction, right? It's new construction in the housing market. Both of those things remain strong. In the pandemic environment, grass isn't growing any faster, so there's really no change in that. In the maintenance component out there, but we think that construction for, and demand for renovation and remodel of backyards as the housing market continues to be robust is good. We like the growth prospects for that business in 2021 and beyond. Perfect. Thanks. I'll pass it on. Thanks. Our next question is from Alex Maroccia from Berenberg. Go ahead. Good morning, guys. Thanks for taking my questions. Tacking onto the last one about the guide in the second half of the year, at least from a sales standpoint, it seems like it could be a bit conservative, because if we do see municipal and commercial pools at more normal levels, you would see an incremental benefit. Can you just explain the visibility into that market from a new construction repair and maintenance standpoint? Yeah. Remember, on the commercial side, it's a very small portion of the business, right? It's less than 4% of our total. Even if there's a big increase in commercial, which honestly I don't see at this point, I don't think that we'll see a benefit in that area. The way I think about it is, it's so small that if it did come back, I think the impact would be limited. The biggest impact on the 2021 season that I see will relate to weather. I think demand is good. It all depends on how many working days the teams will have to get those projects done. Okay. Understood. Secondly, based on industry projections for new pool builds in the next five years, should we expect some gross margin headwinds in the medium term as these big-ticket items make up a larger portion of the overall mix? Yeah. Really, when we're talking about big-ticket items, Alex, it's not so much construction related. It's more the spas and some of the equipment sales and above ground pools. We don't see the same kind of big-ticket impact on gross margins after we get through this year. More of the COVID-driven kind of accelerated demand and return to more of a normal type of demand environment going forward. Shouldn't be as much of an impact, so I would anticipate more flattish gross margins on a year-over-year basis after this year. Okay. That's helpful. Thank you both. Sure. Our next question is from Stephen Volkmann from Jefferies. Go ahead. Great. Good morning, guys. Morning. Morning, Stephen. Pete, I think you mentioned that the consumer side of the business was quite strong, and I'm curious if you guys think there's been any change in kind of the end market trends of people sort of taking care of their own pools versus people hiring contractors. Just any color there would be great. Sure. As we talk to dealers, everybody's busy, right? The guys that have their pool routes, they're busy. They're seeing an increase. I really think that the increase in demand that we're seeing on the retail side is just driven by more usage. I don't think there's a big trend that says, "I'm going to do it myself versus having it done for me." I just think that it's an increased usage pattern on the pool that's driving the increase at the retail level. Okay, great. That's helpful. Does blue grow faster than green in 2021? I would say that the blue business is going to grow faster than the green simply because of a couple of factors. I think the backlog that we're seeing in the pool business is stronger than what we're seeing in terms of new construction in the markets, the seasonal and the year-round markets that we play in. I think that contributes to a more robust market. Plus, if you look at our acquisitions, most of our acquisitions were in the blue side of the business. Okay. All right. Understood. Thanks. The final thing quickly, I think, Pete, you said everything is tight this year, and sounds like you're gaining a little bit of share. I'm guessing part of that's because you have better availability than some. Why wouldn't this be the year to sort of push an extra point of price through and kind of move that gross margin? Steve, that's a really good question, but remember, we have to be competitive. In the markets that we play in today, we're not the cheapest in the market, but we have to be competitive. Our service is better. We get a premium for that, we believe, already, as evidenced by every time we do an acquisition, we get to look at what everybody else is doing. I think there is a premium, but at the end of the day, we have to be competitive. Okay. Got it. Thank you. Yep. Our next question is from David MacGregor from Longbow Research. Go ahead. Hey, good morning, everyone. Congratulations on all the execution. Just quite impressive. I guess if we isolate the 2021 consumables and the non-discretionary sales to the expanded install base, what does that contribute to consolidated revenue growth for 2021? Yeah. Consider that the, I think by the end of the year, it'll be 100,000 new pools, right? Okay. The install base was in the 5.4 million to 5.5 million pools. You're talking of a one and a half to almost a 2% increase in the install base growth. I would look at that and inflation as your marker. Got it. Okay. I guess, what's your best guess of what weather contributed to growth in the fourth quarter? The fourth quarter? Yeah. Oh, sorry. Yeah, I would say something like 2%-3% for the year. Fourth quarter, certainly more significant, where normally in seasonal markets particularly, you have freezing weather coming in and shutting the markets down. This year, both because weather was mild and there's a big backlog from builders and the remodel guys, much of the seasonal markets remained open. throughout most of the fourth quarter. It's hard to parse how much specifically was weather, because demand was also very strong, but it was a significant contributor. Is there any way you can look at just isolate those December compares and come to a conclusion from that or the number of workable days? Is there any way to sort of look at metrics like that and help us? Not here on the call. Okay. If we dug down into it, we could probably make some educated guesses to figure that out a little bit more. The weather, you have to look at both this year and last year, and it varies by market. Year-round markets, not so much of a question, but really Midwest, Northeast, Central East. There's a lot of educated guesswork that goes into that. Just can you talk about the extent to which you've baked additional stimulus into your guidance, or maybe have not baked that stimulus into the guidance? Yeah. Stimulus really isn't baked in per se. The customers that are buying our products, by and large, stimulus was not a big part of their spend. Don't think that'll have much impact on what we see in terms of demand to our business this year. You don't think that was a factor in above ground pools? Well, yes, above ground pools are such a small part of our business. Sure, it's great. Yeah. We love to see the demand there and the growth, but it's less than 1%, so not a big impact to us. Last question from me is just on M&A, and we saw some acceleration from you in 2020. What changed in terms of valuations, or were people dealing with turnaround situations just ready to throw in the towel and sell, or what accounted for the acceleration? Pete, go ahead. I think as business peaks and everybody is having a very good year, then they start to explore those strategic options on what they want to do. Certainly, most folks that own a business, when they come to that time. Succession plan, and one of the options is to sell. They look at what's going on right now, and everybody wants to sell at the peak. I would tell you that we are strategic buyers. We look at what's going on now. We look at what's gone on in the past. We've not seen valuations skyrocket. I think we're a disciplined buyer. We look for strategic acquisitions that make sense. If you look at our footprint in most areas, on the blue side in particular, we've got a great footprint, and we've got great market share in most places. It doesn't justify us to pay a huge premium to go buy somebody else. Is there some upward movement? Yeah, but I would tell you, it's nothing that's really notable. Are you still looking for 25% pre-tax ROIC by year four? Yes. Okay. Thank you very much, gentlemen. Yes. Sure. Our next question is from Kenneth Zener from KeyBank. Go ahead. Good morning, everybody. Good morning, Ken. I apologize here. It's going to be more than two questions, if that's okay with you guys. My first question is going to be for Michael Angelo. Could you give us a sense of your first half versus second half earnings per share mix that's in your guidance at the midpoint? Usually, you do about 62%, 60% in the front half. Just to help us walk through your thinking a little bit, I think would help. Yeah. In terms of how we see earnings per share. Yeah, first half. growth by quarter? Exactly. No, not by quarter, but just usually you do about 60% of your earnings in the first half, and I just am interested to see if that's going to be dramatically different given COVID cons, I guess. Well, for sure it'll be different. As we said, first quarter is benefiting from similar trends that we saw in the fourth quarter. Weather had been relatively mild to this point. We don't know what's going to happen for the rest of the quarter, but we expect a very strong first quarter, so higher growth. Second quarter looks very good as well. Less certainty going into the back half of the year. In terms of our year, second quarter is the biggest quarter, third quarter, second, first quarter, third, fourth quarter, fourth. Got it. Okay. I get it. Let me ask you another way. Do you think seasonality, meaning the normal, because your business has a very predictable cadence, right? Does 3Q, 4Q seem to have returned to the normal seasonality versus 2Q is another way to think about it? I'm sorry. Say the last part again. Do. Three Q seasonality versus two Q and four Q versus three Q. Wherever we are, right? Wherever your business is running in June, July. Yeah. Does it make sense that normal seasonality would prevail at that point, wherever those sales are? Is that another way to think about it? Yeah. Normal seasonality. Okay. That's it. COVID extends the season. Yeah. We had benefited in the third and fourth quarter last year from pool owners keeping their pools open longer. We sold a lot of heaters. We know that they were using the pools. That drove chemicals and maintenance, and we expect certainly the same conditions going into the season this year. Earlier openings and probably benefits there to extend the season. Back half of the year, man, not as clear what's going to happen with the seasonality. Kids will go back to school, hopefully. Will the season be extended this year in the third quarter? Not as clear. Right. My sense is there's clearly, despite all the demand, there's still a lot of pent-up demand in the system. If you could, guys, and Peter, maybe just for you, what are some industry innovations that can accelerate or ease demand? Which is, I think labor is obviously a big part about that. Can you talk about how that might be in the service side of the business and perhaps some innovations that are occurring on the new construction side that are mitigating labor intensity? If you could just give us the picture there a little bit. Yeah. On the new construction side, there aren't that many differences. The biggest difference in total as it affects new construction, but it's still such a small percentage, is fiberglass. If I look at our fiberglass pool sales, they're almost double in terms of units, and dollars too, on a year-over-year basis. Wow because it's much faster to install a fiberglass pool than a vinyl pool and certainly a gunite pool. It also makes up a very small percentage of the total. There isn't a whole lot of innovation that goes on. When you build a concrete pool, it still has to set for the same number of days before you can finish it, so you really can't speed up the curing of the product. I don't really see much changing in the amount of time that it takes to build a pool, and I don't see a ton more labor coming into the system. I would say new construction, fairly stable. On the maintenance side, there is more remote monitoring, although the things that can be monitored remotely are still more rudimentary. There's not a complete package out there for remote monitoring, and you still, from a pool cleaning perspective, the professional still have to visit the pool. To physically do the things that they have to do, like clean the strainer baskets and brush the pool and such. Excellent. Then my last question. For an organization like yours to meet this type of demand, while a lot of pool activity is outside, there's obviously warehouses. I think you've gathered a lot of market share, is my sense, because you have better supply chains than other people. You talked about the bonuses that employees got, can you talk a little bit how you negotiated through all of this? Your team is working very well collectively, and I'm sure you want to take all the credit for it, but can you just go into a little more detail about how, like, NPP, since I've had a pool renovated recently, you're just delivering so much. What is it really that's occurring at those local levels? Just give us a little granularity, please. Thank you very much. Yeah. At the local level, we've done a lot of work in the last couple of years for our capacity creation, right? We've changed our processes and some of the equipment that we use to pick orders. We actually measure meeting time to serve our customers at the branch. Everybody is focused on bringing that time down. That's with some warehouse innovation. It's some process innovation that is certainly helping. Pool360 is helping. The remodeled showrooms where we have some of the maintenance items that people use on a day-in, day-out basis, rather than having to put those orders in and wait for somebody to pull them. They can walk in, they grab them, walk to the counter, and sign for them. We have our technology tools. Pool360 has seen a very nice increase in use, so a lot of customers are entering the orders before they come. If they even come, we're delivering them. There are Bluestreak, which is another app we use, which certainly speeds the counter. Our NPT Backyard app, which allows folks to do a lot of the work that they would normally do when they're designing a pool before they get to the NPT design center, even if they come to the NPT design center, because they can envision their pool and basically place it in their backyard with that augmented reality app. It really is a host of things that we've been doing. On the delivery side, our truck utilization and routing improvement software is also helping. Ken, there's not one thing, there probably isn't 10 things, but they all contribute to what we have going on. Frankly, just a whole lot of hard work by our team. Yeah. It's really amazing. Mark, last question was tax rate. Thank you. That's it. Question on the tax rate is what is it going to be, I guess? I think I covered that briefly. Just our tax rate is a little bit over 25.5% or 25%, so close to 25.5% when you back the ASU benefit out of it. That's the base rate that we'd expect for 2021. No change. Just layer in the ASU benefit, $0.11 in the first quarter. Great. Thanks. Yep. Thanks, Ken. Again, if you have a question, please press star, then one. Our next question is from Garik Shmois, from Loop Capital. Go ahead. Hi, this is Jeffrey Stevenson on for Garik. Thanks for taking my questions. My first one is just, have you seen a quicker payback period on new branches turning profitable due to the robust demand environment? I'm just wondering if that's part of the reason you're looking to open eight to 10 greenfields this year. Yeah. Good question. We had planned to open eight to 10 last year as well because the market continues to expand, and our value proposition is creating time for our dealers, and a lot of that has to do with the location of our branches. As the markets grow, as we soak up the capacity that we have, we add new locations. Last year, we paused new locations early on in the season, and you can't open up locations during the season because nobody has time for that. If you're not really set by the time the season opens, the chances of deriving any benefit during the season are muted. When we tapped the brakes, we really took a pause, and we went from the eight to 10 that we would normally add, down to two. Basically, going back on the trail to open, that takes us back to the eight to 10. Certainly, in a very robust market, as you can imagine, the payback on the branches, which is really tied to revenue growth and gross profit growth and expense management, certainly that gets better the faster you grow. Right. No, that makes sense. My second question is on chemical pricing. I'm just wondering if you got any price realization in the back half of the year and if you could provide any color on your expectations for chemical pricing in 2021. In the back half of the year, because by the time the fire happened on trichlor, for instance, which is, let's call it, 20%-25% of our chemical sales is in that product. There was some price realization in the back half of the year, but not much because by the time the supplies were drawn down, there wasn't much in terms of demand left for the season. I think that in the 2021 season, we're going to see inflation, particularly on that item. That item alone could see price increases in the 50%, maybe up to 75% increase in that area for that price. The rest of the chemicals will go up. I think our overall price guidance that we talked about for 2021 is in the 2%-3%, closer to the upper end. On the chemical side, it really runs the gamut. Right. Lastly, you had a great 2020 in Europe, and I'm just wondering if you could provide an update on your growth plans in that region. Yeah. Europe is doing amazingly. They're just having another amazing year. They're off to a great start. We have a great team, and our service in Europe is terrific, and we're being rewarded for that. Our supply chain has held up well. We are challenged like everybody else, but I think we're doing better than most on the supply chain side. We're very happy with the performance and the outlook for Europe. Great. Congrats on the great quarter. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Peter Arvan for closing remarks. Yes. Thank you. Hey, listen. Thank you all for joining us. We look forward to our discussion on April 22nd, when we will be releasing the first quarter of 2021 results. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.