Good day, and welcome to the Pool Corporation First Quarter 2022 Conference Call. All participants will be in a 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 will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Melanie Hart, Vice President and Chief Financial Officer. Please go ahead, ma'am. Welcome, everyone, to our First Quarter 2022 Earnings Conference Call. Our discussion, comments and responses to questions today may include forward-looking statements, including management's outlook for 2022 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 from projected results are discussed in our 10-K. In addition, we may make references to non-GAAP financial measures in our comments. A description and reconciliation of any non-GAAP financial measures will be included in our press release and posted to our corporate website in our investor relations section. I'll now turn the call over to our President and CEO, Peter Arvan. Pete. Thank you, Melanie, and good morning to everyone on the call. Earlier today, we released our first quarter 2022 results, and they were nothing short of spectacular. Revenue grew by 33% in the quarter, ending at $1.4 billion. This marks our 5th consecutive quarter with sales over $1 billion and is the second biggest quarter ever for Pool Corp. Making this even more notable is that this tremendous growth compares to a very strong first quarter in 2021, when we posted growth of 57%. Outdoor living remains a priority with homeowners across North America, which continues to keep demand for our products strong. New pool construction backlogs are solid and will keep builders busy for much of this year. Families continue to invest in their backyards and enjoy the benefits of a healthy outdoor living lifestyle. Pent-up demand for renovation continues on the installed base of pools and hardscapes, fueled by a tight housing market and rising home values. The maintenance and repair business is strong, with most maintenance companies commenting that the tight labor market isn't allowing them to expand as fast as the market opportunities will allow. Fortunately, we have seen some improvement in the supply chain issues that plagued the industry last year. Our investment in inventory, infrastructure and relentless focus on execution, when combined with our vendors' capacity investments, have eased some shortages and allowed us to provide a better customer experience than a year ago. Geographically, we continue to see strength in our four major Sun Belt markets as well as our seasonal markets, despite some adverse weather in the Midwest and Northeast markets during this quarter. Arizona showed the strongest growth rate, with base business sales increasing 33%, followed by California, where we saw base business increase 31%. Florida was also very strong, with 30% base business increase growth. Texas, which had an extremely tough comp due to the freeze event last year, posted a 7% gain in base business. As a reminder, we believe this event last year added approximately $20 million of revenue to our first quarter in 2021. With that in mind, we are quite pleased with the Texas results. Demand was also robust in our seasonal markets as we saw base business grow by 28%. Overall, we view the weather in the first quarter of 2022 as much less favorable than we saw in the same period of last year. When we reported full year 2021 results, we said that we believed new pool construction in 2021 was approximately 120,000 units. P.K. Data has released their final number for 2021 and confirmed the number of in-ground pools constructed was 117,000 units, which equates to a 22% growth rate over 2020. With nine months left in the year, we think it is a bit premature to call the 2022 number, given the many unknowns which include weather, labor availability, and other economic indicators, but we remain very encouraged by what we are seeing so far this year. Most of our builder and remodel customers are reporting strong backlogs for new pools and a growing backlog of remodel projects created by builders focusing on new construction, more on new construction than remodel during the last couple of years. Clearly, the southern migration, where the attachment rate of swimming pools is much higher, de-urbanization, the continuation of the work from home trend, and a tight housing market are all combining to fuel the industry's growth. It is important to remind you that new pool construction, albeit very important to us and the industry, represents the smallest portion of our business at less than 20%, with maintenance and repair, renovation and remodel representing approximately 60% and 20% respectively. We believe this is a very healthy balance and continue to invest in the margin accretive maintenance and repair portion of our business that provides consistent growth with attractive margins. Porpoise Pool & Patio represents the latest and most significant investment in this area. Turning to end markets, commercial pool revenues were also very healthy as we saw sales increase 34% in the quarter. This compares with the 26% growth that we saw in the fourth quarter and 24% growth that we saw for the full year of 2021. This market is healthy, with maintenance and repair demand growing and a healthy backlog of construction and renovation projects in the pipeline. Our base business sales to independent retailers, buoyed by strong demand in the year-end markets and strong early buy activity, grew by 28% in the quarter. Results from Pinch A Penny were very similar and quite encouraging. As we close the first quarter, we crossed the first 100-day mark of our ownership of this strategic acquisition. Store traffic is brisk and demand is solid across the platform. Pinch A Penny added two new franchise locations in the quarter and have a robust development pipeline. We have combined resources on chemical sourcing and product management and have begun packaging some products for our independent pool stores under the proprietary POOLCORP brands. The operations teams have begun prioritizing the many synergies that we have identified. We are quite pleased with this investment as we believe it significantly strengthens our value proposition and extends our reach in the non-discretionary part of the market, serving the DIY pool owner, an estimated $3 billion market opportunity. Next up, let me provide some context on our base business product sales. Equipment, which includes heaters, pumps, filters, lighting, and automation, grew by 18%. Considering the impact of the Texas freeze, we are very pleased with these results. By and large, the supply chain issues that continue to improve for these products, with some exceptions that I will comment on shortly. Chemicals grew by 58%, which was driven by much better supply coupled with solid demand. Finally, building material sales, which is being fueled by strong demand in new construction and renovation activity, grew by 29%. This follows 20% growth in the fourth quarter and 28% growth for the full year in 2021, further supporting the theme that demand remains strong. Looking across all products, it is easy to see the strength in our business and how our unique value proposition allows us to leverage growth opportunities by providing unparalleled service to our customers while being the best channel to market for our supplier partners. Switching continents now, I'd like to provide some comments on our European business. For the quarter, Europe grew by 5%, which compares to a very strong first quarter in 2021, where we saw sales increase by 115%. The weather situation in Europe when compared to last year's same period, was clearly a challenge, and product availability was also impacted by logistical slowdowns in Southern Europe. The war in Eastern Europe is also having an effect as consumers are grappling with higher energy costs and the overall uncertainty in the east. We expect that as the weather warms, demand will increase. However, our seasoned team remains focused on execution and vigilant of market conditions. As a reminder, in 2021, this business represented approximately 5% of our overall revenue and 4% of our profit, so the impact is small and is contemplated in our guidance. Horizon continues to perform very well. Overall, the base business in Horizon grew by 32% for the quarter, which compares to 22% growth in the fourth quarter and 24% growth for the same quarter in 2021. We are very pleased with our sustained progress on this growth platform and continue to invest in expanding the business. Overall, demand for housing, commercial construction, and renovation of outdoor living spaces continues to grow and remain strong across all geographies and all products. Working down the income statement, I'll discuss gross margins. For the quarter, we reported gross margins of 31.7%, a 330 basis point improvement over the same period last year. Our supply chain initiatives, pricing, the Porpoise Pool & Patio acquisition, all combined to drive the increase. Melanie will add more color on this topic in her prepared remarks. Operating expenses as a percent of sales came in at an impressive 15% as compared to 16.2% for the same period last year. Our relentless focus on capacity creation and execution continue to pay dividends for us and help offset the inflation that we are seeing on operating costs. POOL360 utilization, which is a cornerstone of our capacity creation activity, grew by 28%, which shows how much customers value the convenience and time saving and functionality that it provides. Completing my comments on the income statement, we proudly reported operating income of $236 million, an 83% improvement over the first quarter of 2021. Not only is this another record first quarter profit, it is also the second most profitable quarter in our company's history. To do that in the first quarter of the year makes it even more impressive. Operating margins came in at 16.7%, a 450 basis point improvement over the first quarter of 2021. Diluted earnings per share for the quarter totaled $4.41, an 82% increase over the same period last year. Moving to the balance sheet, we significantly expanded our inventories during the quarter compared to the first quarter last year as supply chain issues eased and we bought ahead to ensure adequate supplies to meet the strong demand of the early buy season. We are in a very strong inventory position heading into our peak selling season to include chemicals where supply has been extremely tight in 2021. We expect that this will enable us to continue to gain market share utilizing our capital strength and sales center network leverage to meet the continued strong customer demand. Melanie will give more specific details on the balance sheet and cash flow in her comments. Before I provide comments around our updated guidance, I'd like to add some color on a few topics that I am sure are on everyone's mind: inflation, material availability, and the near-term outlook. When we discussed the full year 2021 results, we mentioned that we believed inflation would be in the 9%-10% range for the 2022 season, and that we would expect that to pass through the channel as is normally the case. So far this year, this has generally played out as we expected on both accounts. Inflation is higher in the first part of the year, but because of the timing of increases, we expect that it will end the year between 10%-11%. Because this inflation traditionally passes through the channel, we made a strategic decision last year to invest incremental capital and inventory to address supply chain uncertainties and improve our ability to fulfill elevated demand. In addition, in some cases, it provided us an opportunity to buy ahead of some anticipated price increases. This has and continues to provide benefit to our customers and our suppliers by bringing valuable inventory into the most expansive network of sales centers in the industry. As of now, we have 414 locations, up from 410 at the end of the year, with an additional 6-8 planned for the balance of the year. To date, this inflation has yet to dampen demand, as many of the current projects are part of a robust backlog that the industry carried into 2022. At this point, very few cancellations or customer-driven delays are being reported, so we expect 2022 to be a very solid year. As you would expect, this inflation, along with the rising cost of labor and other costs, have increased the average price of an in-ground pool. P.K. Data, a well-known source for information on the swimming pool industry, just released their 2021 report, and they show that the average price of an in-ground swimming pool in 2021 to be approximately $56,000, a 17% increase over 2020. Given this year's inflation, we would expect that to climb again in 2022. Many of our builders report that $100,000-plus pools are becoming more and more common and a focus area for many of our customers. Our customers tell us that they remain focused on the bigger projects, planning to catch up on smaller opportunities as time and labor allow. The pool remodel market continues to have strong demand and a growing backlog, with many builders and remodelers focusing on new construction for the last couple of years as demand grew. Most builders are reporting that they have sufficient demand to carry them through the 2022 season. Those same customers are reporting that the backlog for renovation and remodel is healthy and will provide growth opportunities going forward, especially when you consider the aging installed base and the new construction focus that we have seen for the last two seasons. As it relates to maintenance and the repair part of our business, which let me remind you, is the largest portion of our business, making up approximately 60% of our revenues and is essentially nondiscretionary and continues to grow with the installed base growth. New products also are helping this category grow as many customers or consumers are opting for smart and energy-efficient technology when repair or replacements are needed. Material availability continues to improve. Capacity investments by our manufacturing partners, when combined with the increased investment in inventory, are allowing us to provide better service to our customers when compared to a year ago. Our chemical inventory, trichlor in particular, is in much better shape than a year ago. This is driven by strategic sourcing activities along with the Porpoise Pool & Patio chemical packaging operation capabilities of Suncoast Chemicals. Equipment inventories are also much improved this year, enabling us to start the season in a much better position than we did a year ago and not having to contend with the shock demand that the weather event of the Texas freeze triggered last year. Lighting, automation, and some variable speed pumps and motors are still suffering from the global chip shortage, but other products like heaters and valves are improved. We have seen some signs that products like above ground pools and even spas may have peaked and are showing some weakness when compared to the elevated COVID demand. In total, these products represent less than 2% of our revenue. Over time, POOLCORP has consistently demonstrated that our execution and strategic investments have enabled us to deliver solid results in a variety of economic environments. We expect to continue building upon our stellar track record. Considering all of this information and reflecting our confidence in the remainder of the year, we are pleased to update and raise our guidance for the full year 2022 to $18.34-$19.09 per share, including the 18-cent ASU tax benefit in the first quarter. From the previous $17.19-$17.94, which included $0.19 ASU tax benefit. Before I turn the call over to Melanie for her comments, we would like to thank the team here at POOLCORP, our customers and our supplier partners for their collective and tireless effort to help bring outdoor living to life. We could not be prouder of the team, more thankful for our customers, and more appreciative of the partnerships with our manufacturers. I will now turn the call over to Melanie Hart, our Chief Financial Officer, for her commentary. Thank you, Pete, and good morning, everyone. First quarter of 2022 continued with record sales and earnings results. We remain focused on having the right products in the right locations to provide for the best possible customer experience as we all collectively continue to navigate supply chain challenges. Sales activity in the first quarter benefited from inflation between 10%-12% compared to the first quarter of 2021, as our vendors had multiple price increases throughout the year in 2021. We also realized a 7%-8% increase from acquisitions and an estimated 5% growth in the quarter from an additional selling day and increased early buy activity from our customers. Total gross margins increased 330 basis points to 31.7%. Base business gross margins increased 270 basis points to 31.1%, resulting in an increase in base business gross profit dollars of 38%. Higher inventory levels reflecting some quantities on hand received prior to the most recent vendor price increases provided some margin benefits during the quarter. However, there are other key components to our margin changes year-over-year. Our recent Porpoise Pool & Patio acquisition increased our consolidated margins. We also had favorable product mix during the quarter. As Pete mentioned, chemical sales were up more than 50% for the quarter, and we have more access to supply than we did a year ago. We also saw sales increases in construction materials and plumbing at a higher rate than overall growth for the quarter. In addition, we noted continued positive impacts to our gross margins from our ongoing pricing efforts. The purchasing and supply chain improvements we've implemented in 2020 and 2021 will continue to provide benefits as we go forward. As we have seen historically, our margins and margin improvements will vary from quarter to quarter as a result of product and customer mix. Operating expenses grew 23% during the quarter and includes approximately $18 million in additional expenses from recent acquisitions. Higher compensation and employee-related expenses are the most significant growth contributor. We increased headcount to support our recent acquisitions and our ongoing sales growth, and we aligned our employee reward programs with company performance and market rates. Higher expenses for building rent, freight, and other operating costs reflect recent increases in rental rate renewals and inflation. Continued investments in our ongoing digital transformation activities generated higher technology-related expenses in the quarter, and the 4 greenfields we opened also added to our operating expenses in Q1. Operating income increased 83% from first quarter 2020. Our continued ability to manage higher volumes of sales activity through our existing infrastructure and locations while adding greenfields and strategic acquisitions in the highest growth markets has generated significant operating margin leverage. Our capacity creation efforts to improve customer experience, reduce customer wait times, and provide efficient technology solutions has also contributed to strong operating margin growth. Our scale and operating processes has positioned us to be able to continue to provide significant operating leverage in the future. We continue to maintain a conservative leverage of 1.06 times. Our average interest rate was 1.5% for the quarter, based on average outstanding debt of $1.3 billion, compared to $397 million at the end of first quarter 2021. We expect to see higher interest expense throughout the year as our average debt levels will remain higher than in 2021, and we will see higher borrowing costs in today's increasing rate environment. We recorded an ASU benefit of $7.3 million or $0.18 per diluted share. This was slightly less than the $0.19 included in our guidance for first quarter as the stock price in effect at the time of restricted stock vesting and option exercises impacts the tax benefits realized. Consistent with prior periods, our updated guidance range only reflects the amounts we have realized to date. Moving to our balance sheet and cash flows, we made increased investments in working capital to support our robust sales growth of 33%. Net receivables increased 39% related to our sales growth, including sales from recent acquisitions. Day sales outstanding improved to 26.4 days from 26.6 days in 2021, highlighting our continued strong collections and positive aging trends. The investments in inventory we began in the second half of 2021 and discussed at year-end supported our higher sales growth during a time characterized by significant supply chain challenges, and we are now well prepared with the appropriate inventory levels for the upcoming pool season. Our inventory dollars of $1.6 billion at March 31 are up 68% from Q1 2021 on a consolidated basis and are up 62% excluding inventory from acquisitions. Seasonal inventory increases from year-end levels are consistent with our prior practices as we built $302 million in first quarter 2022 compared to $196 million in 2021. Our inventory turn days of 116 are consistent with historical norms at the start of the season. The additional inventory that we have strategically placed throughout our 414 locations will allow us to meet customer needs and continue to gain share. We believe this level of inventory is appropriate from a current business standpoint and would not expect to continue to further build inventory levels. We are beginning to see some lead time improvement on certain products, which is a positive sign that some of the supply chain challenges we have effectively managed over the last 12 months may be easing. In prior years, we have seen significant uses of cash in the second and third quarters when amounts became due on vendor-sponsored early buy programs. As these programs were not offered in a similar manner in 2021, we have paid for our inventory purchases on current terms, which negatively impacted our Q1 cash flows but will provide a positive influence later in the year. Compared to 2021, our cash return to shareholders through dividends increased $8.8 million to $32 million, reflecting the 38% quarterly dividend rate increase that our board of directors authorized last year. During the quarter, we spent $62 million of the $495 million available to us at the beginning of the year under our authorized share repurchase program, in total, returning $95 million to shareholders to start off the year. Reflecting a stellar first quarter, we have increased our EPS guidance for the full year 2022. Our new range is $18.34-$19.09, including the $0.18 ASU tax benefit realized to date. This represents an additional 7% expected increase in earnings for the year on top of the 12%-17% growth we projected coming to the year, for a total estimated growth of 20%-25%. This increased full year performance estimate reflects the positive results of the first quarter and continued confidence in our expectations for the remainder of the year. We now anticipate for the full year, we would realize sales growth more in line with the high end of our previous net sales guidance range of 17%-19%. We expected to have strong growth in Q1, and results came in favorable but largely in line with our expectations. Our revenue growth outlook for the rest of the year remains strong. We did realize 10%-12% inflation in the first quarter and expect full year inflation to be at least 10%. Contributions from acquisitions for the full year are still expected to provide approximately 5% growth. We had 1 additional selling day in first quarter that will be offset with 1 less selling day in third quarter, resulting in the same number of days for the year. We have also begun to see some impacts from currency during the quarter, which could negatively impact sales growth by 1%-2% for the year. We continue to forecast gross profit margins for the full year in line with a record 30.5% we achieved in 2021. As we discussed, these will come in higher in the first half of the year and then moderate in third and fourth quarters. No significant changes were made in our updated range as it relates to operating expenses. We expect that our operating expense growth will come in higher than our historical levels, but still lower than the gross profit growth rate. Inflationary pressures on operating costs will be partially offset by our continued efforts in capacity creation initiatives generating operating leverage, and so we expect improvements off of the record 15.7% operating margin realized in 2021. For the year, we are expecting to generate significant cash and our debt levels are projected to decrease by the time we reach December. There have been interest rate increases that have occurred so far in 2022, which pushes our interest expense estimates closer to the higher end of the range previously provided at $28 million. We are now projecting that our weighted average shares outstanding for 2022 will be approximately 40.6 million shares. In conjunction with our annual report, we introduced our ESG framework, highlighting the areas we are focused on to ensure a safe and sustainable environment for our employees, customers, vendors, and the communities we live and work in. Commitment to our sustainability efforts comes from the top of the organization with our board of directors providing oversight as we continue to establish our baseline processes and metrics and incorporate these actions into our everyday practices. We are excited to share with you where we are on our journey. First quarter 2022 has started off the year strong. Our proven ability to continue to effectively serve our customers provides us an amazing opportunity to grow earnings in 2022 and into the future. I'll now turn the call back over to the operator 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 touch-tone 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. We ask that you please limit yourself to one question and one follow-up. If you have further questions, you may reenter the question queue. At this time, we'll pause momentarily to assemble our roster. The first question will come from Ryan Merkel with William Blair. Please go ahead. Hey, everyone. Good morning and congrats on the quarter. Good morning. Thank you. Thank you. I wanted to start off with a high-level question, Pete. You hit on this a little bit about sustainability of demand. You know, it sounds like with backlogs and, you know, what we're seeing out there today, 2022 is gonna be a great year. You know, everyone's worried about 2023, and I'm hoping you can sort of just speak to why you think demand can sustain in 2023. Why is pull-forward not a big risk, you know, like everyone thinks? Thanks, Ryan. That's a good question, and here's the way we think about it. You have to look at kind of the underlying factors that are driving demand. Things like the Southern migration. If you look at the number of people that are moving to Florida, Texas, Arizona, and the rest of the Southern year-round market states, it is significant. We don't see that changing. I don't think that the work from home shift that happened in the workforce is going to change either. When I look at the fact that people are enjoying, you know, the outdoor living lifestyle, you know, from years ago when on Saturday nights it was a lot of people gathered around the TV inside, now everybody wants, you know, the outdoor, whether it's a patio, whether it's an outdoor kitchen, or whether it's a swimming pool event. I don't think those macro drivers are going to change. Now when I look at the growth that we have seen over the last couple of years, I think that new pool construction certainly is elevated. It grew a lot in 2020, and it grew a lot in 2021. We're seeing sustained demand into 2022. What I think we're bumping up against is a couple of things, and that is capacity. There's only so much capacity in the industry to continue to install new pools. However, what I would remind everybody is that new pool construction, as I mentioned in my comments, is very important to the industry and certainly very important to us. For perspective, about 80% of our revenue comes from pools already in the ground. When I think about the market opportunity that we have and I look at where we have invested to grow, where we are, where we are putting our capital and where we are strategically focused, I think the sustainability of the growth is very likely. Too soon for me to call as evidenced by my comments, you know, the 2022 season, let alone the 2023 season because of there's frankly so many unknowns with weather probably being at the top of the list for everything. I think unemployment remains very low. The housing market is tight. You know, demand for new houses and housing, especially with the millennials entering the housing market, is going to continue to keep the housing market tight, and I think that's good for home values. When I put all of that together, I don't foresee a shift that says, "Wow, pools are gonna fall out of favor." Rather, I see us just continuing to grow, albeit at maybe not quite as fast a rate in the latter years. I think we mentioned during our investor day a month or so ago that we see that in the future, we'll return back to our normal, you know, 6%-9% growth for the company. That's very helpful. You know, if I guess I put it into my own words, it sounds like even though we've had supercharged growth the last two years, you think there's a tail to this demand. While more people invested in the pool and want a pool, you think that continues. Yeah. You're more of an aftermarket business. Yeah. The other thing I would mention too that I should have mentioned upfront with your question is the new technology I also think is playing a part in the renovation and remodel and frankly expanding the market opportunity. Remember, you know, I haven't seen an updated number, but let's say a year and a half ago, over 60% of the pools were running on a mechanical time clock. Now the percentage of automation has certainly improved, but albeit at a very slow rate because the major driver of that improvement is on you know, we see more automation adoption on new pool construction. The remaining installed base still offers a tremendous benefit. Every time a homeowner is replacing a piece of equipment rather than replacing. You know, the one is that that was mandated by DOE was the simple one is a variable speed pump, right? So that's now legislated, and it has to happen. But then when you look at the rest of the automation and control that is available, the smart pool that everybody wants versus the pool that you had to go around the corner and hit switches and valves versus being able to do everything from your phone, I think that alone continues to provide an increased market opportunity and expand our ability to grow the business for many years going forward. Got it. Well, Pete, you convinced me. Same question on gross margin. I'm curious. Well, I just wanna make sure everyone's on the same page. How should we think about the second quarter? Can you hold on to the extremely strong rate that we saw in 1Q, or should we think about that as the peak, and we bleed down gross margin as we go through the year? Yeah. No. Consistent with our earlier expectations, we did expect that our margin for first quarter, if you're looking at it kind of on a year-over-year comparable, we will expect to have higher growth in the first quarter. If you look at kind of absolute margins, we do typically see a little bit higher margins in second quarter just from the seasonal pricing aspect of it. The growth we would expect to moderate starting in the second quarter. Okay. Nothing's changed with midyear price increases you've seen from some of the OEMs about the second half and being able to hold on to price cost in a bigger way? Yeah, we're still working through. You know, there was a little bit. There was a few announcements that we saw just kinda late last week, and you know, we're still evaluating those and you know, there's many others that we haven't heard from. Our current guidance, you know, really doesn't project out any future increases that may come through in the rest of the year. I mean, Ryan, the way to think about it, said another way is that, inflation in this industry, has traditionally always passed through the channel. As Melanie mentioned, you know, we've seen a couple of notices, late last week that, you know, we are still working through. You know, the gross margin performance of the business, we continue to see is strong. Perfect. Thanks so much. Passing on. The next question will come from David Manthey with Baird. Please go ahead. Yeah. Good morning, everyone. Good morning. Good morning. Do you know the mix of your revenues that would be in the Sun Belt today versus, say, 10 or 15 years ago? You've seen outsized growth in the South, and I would imagine that's tipped the scales a bit. Could you give us any estimates as far as what you think that mix is today? You know, that's a really good question, but I don't know that I have that answer off the top of my head. What I can tell you is logically with the growth that we have seen in the Sun Belt and the southern migration, I would expect it to be higher, but I don't wanna quote a number on the phone with you right now 'cause I'd rather get back to you with the actual. Just logically, given the southern migration and the fact that pool construction in the year-round markets is going to be higher than in the seasonal markets, I would expect it to be bigger. I just don't wanna quote the number off the top of my head to you. Yeah. Yeah. Okay. Yeah, we can follow up. As it relates to your renovation and remodel business, how much of that do you think is nondiscretionary, meaning the consumer has some structural issues that require work versus a homeowner just saying, "Hey, I'm gonna choose to upgrade my outdoor living space." Do you have any thoughts on that? Yeah, I think that's actually a really good question. The way we characterize the renovation and remodel business is semi-discretionary because a portion of it is: You know what? I just don't like that color of tile anymore, and I wanna go from a brick coping to a travertine coping 'cause I wanna modernize the pool, and I wanna add more decking around the outside of the pool versus, you know, the foot and a half of concrete that was there, or I wanna cover the concrete deck. A portion of it, though, is necessary because if you think about the pool, all of the elements, you have the equipment which, you know, has a life, a useful life, assuming that you keep your water balanced, right? Because unbalanced water can wreck even a brand-new set of equipment in months, not years. If you assume that, you know, if you adequately take care of your water chemistry and you keep it balanced, equipment could last, you know, let's call it in the, depending on the type and how much you use it, you know, 7-10 years. The surfaces on the inside of a pool are very similar to the surfaces on the outside of your house. That is, they're exposed generally to the sun and the water chemistry, and that will degrade the surface over time. Some of it is, as you mentioned, I just don't like the color and I just bought the house. It's got a pool, which I've always wanted, but it looks dated, so I wanna update it. That's, you know, could be as simple as a tile and a replastering, because I don't like the color. There'll be a portion of that and probably a really, rather significant portion of it that is, I have to do this because the tile is falling off or the finish is bad, the finish is stained, or in the case of the equipment, the equipment is starting to fail and not performing, as desired. A portion of that too is going to be the search for a more energy efficient pool. Going to high efficiency equipment and LED lighting versus halogen lighting, you know, high efficiency heaters versus standard gas heaters or heat pumps or adding things like UV, which has become very popular of late and the ozone for another way to sanitize the water. There's just a lot of new products that come by way of renovation and remodel that are desired. You know, a portion of it is, a large portion of it is, hey, you really need to do this just like you need to maintain the outside of your house. Yep, that all makes sense. Thanks a lot, Pete. Yep, thank you. The next question will come from Susan Maklari with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. Good morning. Good morning. My first question is, you know, you mentioned in your commentary that chemicals were up about 58% in the quarter. Can you give us some sense there of how much of that was price versus volume? You know, assuming a lot of that was the chlorine situation coming through. Then how are you thinking about that going forward? Yeah, on the chemical side, I think it was about 40% price and 20% in volume. Our chemical supply on the key chemical that everybody was focused in on a year ago from a shortage perspective, the trichlor tablet, we were very tight a year ago. I would tell you that through a lot of hard work from our supply chain team and manufacturers stepping up and with the addition of Pinch A Penny, I think we're in a much better position. If you look from a price perspective, it's not all that different than it was towards the end of the year, but certainly there was a big on a year-over-year basis, it was significantly higher. Yeah. Okay, that's helpful. My next question is, you know, you mentioned that you are seeing some improvement in the lead times in some of your products. As we look out and we think about the potential for a more normalized situation in terms of volume as well as price, can you talk to, one, the stickiness of the pricing that you're seeing today, the ability to sustain a lot of this as some of these pressures do ease? And then on the volume side as well, I think if we kind of parse out the quarter, it seems like volumes were up maybe about 4%, 5% or so. I guess one, is that correct? Two, do you think that as you do get these improvements in the supply chain, there's the potential that volumes could improve and maybe come in a bit ahead of where you had been thinking? Sure. First, I would tell you from a volume perspective, we look at the first quarter closer to 10%. As in regard to your question on pricing sustainability, historically in the industry, and if I think about major categories like equipment and such, I don't really think that there's gonna be a reduction. I don't think those prices are going to roll back. I think there are certain areas where there is a much higher commodity element to the product, whether you're talking about PVC or even chemicals to some degree, where I think there could be some elasticity in price. You know, remember there was a big run-up on the chemical pricing last year when the chemical plant fire happened in the end of 2020. That brought on a lot of import material, and the import material comes with a tariff and also elevated transportation cost. Demand is still very strong for that product. There is a new plant that will be coming online. I think they're rebuilding, and we would expect to see some contribution from that plant to the industry next year. How much? We don't know. I think when it does come online, I suspect that the price for chemicals will come back a little bit, or it could, I should say. I also don't think it's gonna go back to anywhere near what it was because I think the input cost on manufacturing those chemicals has also come up, and I don't see it returning back to the, let's call it the, you know, 2019 levels. Okay. That's very helpful color. Thank you, and good luck with everything. Thank you. The next question will come from Andrew Carter with Stifel. Please go ahead. Good morning. First question I wanted to ask, kind of returning to the gross margin kind of question. If I've got my math right here, your trailing twelve is 31.2%. Your guidance would imply the full year's 30.5%. First part of that is you've got another nine months of Porpoise, which came in at 40%. Any reason that comes in at a much lower level? Just help us understand, you know, why you're not kinda holding on to some of the gross margin gains, and anything we should be looking at that were unique tailwinds and emerging headwinds over the next nine months. Thanks. On the margin side, you know, it does vary quarter-over-quarter. If you're looking at it, you know, just on the trailing twelve, you'll see that the contribution that we experienced in the first quarter for the Porpoise acquisition, when you look at our guidance for the year, it's probably similar for the full year guidance as what we expect to pick up from that. The current expectations, you know, does not include any additional future inflationary increases from the vendor side. That could evolve as we move through the rest of the year. Okay. The second question I ask, and I don't know if you have the great data to quantify this 'cause it's a question we're getting all the time. In terms of like the new construction and remodel activity in the pool industry, how much is kinda cash buy and how much is kinda refinancings with kinda rates going higher, pressure on kinda refinancing applications? Any color you can give is just that other kind of demand indicator we're looking at right now. Thanks. Yeah. That's a great question. I will tell you, we've had that discussion with our builders and pool dealers for quite some time. It's probably in the neighborhood of, I would say. It really depends on the area. It's probably in the neighborhood of 50/50, maybe 60/40 in some areas. I was just talking to one of our very large dealers this week, as a matter of fact, and I asked if there has been any change in how people are paying for or financing the projects, and he said there isn't. I said, "Has there been any difficulty in financing from their perspective?" They said there's been essentially none. All good in that vein. Thanks. I'll pass it on. Thank you. The next question will come from Trey Grooms with Stephens. Please go ahead. Hey, good morning. Yeah, congrats on the great performance here this quarter. Thank you. Thank you. Pete, you mentioned you expect to continue to gain market share. As we're looking through, you know, this year, would this be more in line with your historical pace, or do you think that, you know, you could continue to see market share gains at a more elevated level like we've seen over the last few years? I can tell you, that's a great question, and thank you for it. We work very hard on market share, and we do that by focusing on the customer experience. I can tell you, and I think you've seen it over the last several years, we have been hyper-focused on that and making sure that we are providing the best level of service. You know, the P.K. Data report just came out, so we haven't updated our share. I can tell you that there is no less focus on gaining customer share. If you look at the investments that we made, whether it's in an inventory or whether it's in, you know, new sales centers or whether it's in the Pinch A Penny or Porpoise Pool & Patio acquisition and all of the capabilities that come with that, I would tell you that we are relentlessly focused on share. All right. Thanks, Pete. This one is for Melanie, and it's more kind of housekeeping, make sure I have it right. I'm going back to your top line bridge for this year. Top line higher end of the 17%-19%. It sounds like really the only thing that's changed there versus the prior guide was that you bumped up the inflation expectation, you know, to at least 10%, I think is what I heard. I think you said you had acquisitions 5%, and then you mentioned some headwinds of a few basis points or a few hundred basis points as well. Is it right in trying to back into kind of a 5%- 6% kinda underlying growth rate this year based on what you gave us? I think that would be a reasonable estimate at this point. Okay, perfect. Thank you. The next question will come from David MacGregor with Longbow Research. Please go ahead. Yeah, good morning, everyone. Good morning. Pete, congratulations on a great quarter. Thank you. Thanks. I guess, going back to maybe Ryan's question at the beginning of the call and just thinking about kind of that longer term view out to 2023, just given the trajectories that you're seeing right now in the maintenance and repair business and the renovation business, how much of a decline do you think you could incur in new pool construction and still withstand earnings per share from going negative year-over-year? A number that probably you wouldn't see happen in terms of a decline. Because remember, if you look at new pool construction, you know, we say it's under 20% of our revenue. So if you take our normal contribution margins and you say even if new pool construction was an apocalypse and fell by half, which, you know, nobody sees happening. The impact on the business is, I wouldn't tell you it's insignificant, but I would tell you that it is minimal when you consider that, you know, 80% of our business is derived from the installed base of pools. Got it. I guess just what you're hearing would be helpful from your construction customers, your new construction customers regarding their forward visibility and downstream labor availability. How much visibility do you think they have to 2023 right now? If so, what kind of color are you getting back from them on that? You know, they don't really have a lot of visibility into 2023. I think, you know, they have a very good look of what's in the pipeline and how 2022 is going to play out. But from a 2023 perspective, I don't think they have a lot of visibility with the exception of the remodel and renovation business, right? Because they know that they have been focused on that, or they've been focused on new pool construction. They realize that with that focus on new pool construction, it has meant that the queue, if you will, and the pent-up demand for renovation and remodel is significant. I don't know that they're forecasting, you know, less work, or they're looking at 2023 and say, "I'm gonna have a lot less work or any less work." I think it's gonna be a function of the work may be different. They may be building, you know, new pool construction may not grow at the same rate that it grew in 2020 and 2021, 2022. The amount of pent-up demand that there is surrounding, you know, the the install base of pools is significant, and I think that's how they're viewing the world. Got it. Thanks, and congrats on the progress. Thank you. The next question will come from Ken Zener with KeyBanc. Please go ahead. Good morning, everybody. Morning. Good morning. Well, you guys obviously held on to a lot of information at the time of your Analyst Day. I wonder, you're obviously well-positioned from, you know, an industry market structure, and I think that's the most important thing, notwithstanding, you know, anyone's uncertainty about the growth rate. Because there's so much inflation in the system right now, of the 300 basis point gross margin gain, and I know, you know, gross margin, SG&A can kind of move around, but can you give us a sense of, was half of that pre-buy? I'm sorry if I missed your description of this if you've done that. How much was I know you talked about the Porpoise being a benefit, but how much of that is, you know, LIFO, FIFO, pre-buy benefit, et cetera? Just so we can have a sense of how much this inflationary tailwind is helping you all. Yeah, we haven't gone through in that much detail and quantified it because it's, you know, it's. Well, we actually value our inventory at average cost. Even when we're getting products in at the new higher inflationary cost, that's averaging out with the lower. You know, you'll see that tail may take a little bit longer to move through the channel. It's also changing, Ken, as you know, it has to do with what's going to happen with future price increases too. For us to kind of forecast what the benefit is, benefit changes with new announced inflation, right, for the inventory that we have in stock. We are, I think, wisely invested in inventory. I think that will be a benefit in the environment that we're in. Yep. I'm looking at a slide that you guys have, market trends, increased pool content. I'm not sure of the date. I think it is this year. Where you basically had product category 21 growth versus 2019. I'm sure you're familiar with this. Automation controls, heaters, robotic cleaners, stone pavers, all up 100%. This just goes to the question I think that we all have and you guys feel, but I wonder if you could just perhaps answer it differently. It seems hard to imagine that down volume is not out there somewhere, considering, you know, we've doubled sales. I know there's recurring revenue in the majority of your business, and I still have a non, you know, internet-based pool system myself. How. I mean, is it just so busy right now? It seems to me the factor that's separating you from, let's say, home builders or other building product companies is that you're gaining so much share, that's really enabling you to increase, you know, your served market. If you could just explore that. I know you said you don't have the numbers yet, but, I mean, could you give us some sense of why that market share is gonna be sustainable versus, you know, in 2007 when you expanded your branches, that actually led to a lot of operating leverage on the downside. You obviously haven't done that now, but it seems to me what really separates your story from everybody else is that you're dramatically gaining share that's sustainable. Comment please. please. Thank you. Yeah. That's a lot to that question, so let me see if I can dissect it a little bit. If you go back to 2007 and you look at the percentage of our business that was tied to new construction of pools, it was actually much higher on a much smaller base. If I look at our business model today, it's very different. If I look at the process that we use to open branches, it has been refined, you know, for almost 20 years from when it was started. I think we've gotten better at strategically placing branches. I think we've gotten better with our opening process and where to open and how to open so that the locations don't become a drag on the business. I think when we add branches today, it's because we're adding capacity needed capacity and capabilities because, you know, the markets are growing. When I think about the other additions that we have made strategically and where we have invested in as recently as the Pinch A Penny acquisition or Porpoise Pool & Patio acquisition, that adds significant capabilities that we think will add to our ability to provide value to our independent pool customer independent pool store customer with tools and product offerings that we couldn't do before. When I look at our focus on the customer, I don't think anybody is more focused on the customer than we are. When I look at our investments in systems and process, I don't think anybody is doing what we are doing. When I look at our ability to add value to the customer, whether it's the maintenance and repair customer that's using POOL360 or some of our other products, or just the vast number of branches that we have, which is now, you know, 414. Whether it's our technology tools like BlueStreak, which allows them to get in and out of those branches much faster than they could have before. When I look at our focus at speed at the counter, which, you know, we have essentially a time clock that starts every time a customer walks in, so we know exactly how long it takes to get them in and out. I think that we have lots of opportunity to continue to grow share because we're focused. We're investing in the right areas. There is a tremendous sense of accountability. As always in POOLCORP, the focus around execution is unlike anything I've ever seen. I think we're very comfortable that our ability to keep growing share, and I think the market too continues to expand because, you know, as I keep pointing out, 80% of our revenue is derived from the pools that are already in the ground. If you look at the technology, as you mentioned a minute ago, on your own pool, if you look at the technology on most of those pools, it is either nonexistent in terms of technology or it is in the very early stages of what is possible. If you look at the millennials that are becoming part of the homeowner population and what their expectation is around smart technology in a connected pool and a connected backyard, it's very different than it was 10 years ago. I think when you look at all of that together, it gives us great comfort that, hey, our focus on the customer is going to allow us to continue to grow share because we're adding value, and I hope that we earn it. I think the market continues to get larger in terms of the new products that can be used and retrofitted into the installed base. I think the simple fact that the installed base continues to grow and the majority of our business is nondiscretionary, I think gives us great comfort that the future is bright. Thank you very much. You're welcome. Again, if you have a question, please press star then one. Our next question will come from Garik Shmois with Loop Capital. Please go ahead. Hey, this is Jeffrey Stevenson on for Garik. Thanks for taking my questions today. Sure. I just had two questions on pricing. First, obviously, inflation came in stronger than expected in the first quarter. I was wondering if you could call out any product categories that saw pricing above your prior expectations coming into the year? No, I don't think we saw it as above what we said. We said inflation just because of the nature of how the price increases rolled out last year was gonna show as higher at the beginning of the year and taper off as prices came up throughout last year. Okay. Got it. If I missed this, I apologize, but just on the new at least 10% pricing assumption in your guidance, can you talk about how much of this has kind of already been secured versus how much you intend to pass along in the future? Yeah, I mean, everything that has been previously announced is out in the market today. What I can't account for is what hasn't been announced yet. Okay. Got it. Thank you. You're welcome. This concludes our question and answer session. I would like to turn the conference back over to Mr. Peter Arvan for any closing remarks. Please go ahead, sir. Thank you. Hey, listen, I just wanted to thank everyone for joining us today. We look forward to speaking with you again on July 21st when we will discuss our second quarter results. We hope you all have an amazing day, and thanks again for joining us. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.