Good day, welcome to the Pool Corporation fourth quarter 2022 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 will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I'd now like to turn the conference over to Melanie Hart, Vice President and Chief Financial Officer. Please go ahead. Welcome to our fourth quarter and year-end 2022 earnings conference call. Our discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2023 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 our non-GAAP financial measures is included in our press release and posted to our corporate website in the 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, and thank you for joining us. 2022 was another extraordinary year for POOLCORP. We achieved record results in revenue and earnings. We grew our market share. Our focus on the customer experience and execution has never been stronger, and we continue to enhance our capabilities as we integrated Porpoise Pool & Patio. For the first time ever, we exceeded $6 billion in net revenue, ending the year at $6.2 billion and generated just over $1 billion of operating income. When compared to 2019, the last pre-pandemic year, our revenue has almost doubled and our operating income has tripled. We now operate over 420 sales centers, and we are continuing to expand our footprint and capabilities. In 2022, we opened 10 new locations and Pinch A Penny added seven new stores to the franchise network. The industry has grown substantially, and POOLCORP has significantly outpaced the industry by providing best in class service to our customers and helping them grow their business and being the best channel to market for our suppliers. Let me now recap the full year and quarterly results. As I previously mentioned, total sales for the year came in at $6.2 billion, which represents a 17% increase over 2021, where we saw sales grow an incredible 35%. In the fourth quarter of 2022, we grew revenue 6%, and this is on top of the 23% growth that we saw in 2021. From a base business perspective, fourth quarter revenue grew by 7% in our year-round markets and fell by 6% in the seasonal markets. Certainly, the less favorable weather impacted the business in both markets, contributing to fewer pools being built and lower usage in the quarter as compared to last year. For the full year, our base business grew by 15% in our year-round markets and 8% in the seasonal markets. Our growth was driven by the resilience of the industry and the larger installed base, inflation, greater adoption of higher end features and technology, share gains, and expansion of our powerful sales center network, both organically and by acquisitions. POOLCORP has built a tremendous team and a footprint that is not only focused on execution, but also providing an unmatched customer experience, which enables us to be the preferred supplier to the swimming pool industry trade. Our execution focused and unmatched capabilities have allowed us and will continue to enable us to outperform the industry. Our culture and people are performance- driven. Our investments in capabilities and new facilities drive revenue growth and incremental profitability, and our track record is unmatched. Simply put, we could not be prouder of our team. Now let me provide some details on base business sales in our four largest markets. For the total year, California grew by 14%. Florida grew by 24%. In Arizona, we saw 18% growth, and our Texas business grew by 8%. It is worth noting that Texas in 2021 had the benefit of the freeze, which made the comps much more difficult for 2022. For the fourth quarter, California grew by 5%. Florida continued to show significant growth with sales up 22%. Arizona sales were largely flat for the quarter, Texas saw sales decline 5%. Turning to end markets, our commercial business continues to gain momentum with the fourth quarter and full year growth coming in at 27%. This is on top of 26% growth in the fourth quarter of 2021 and 24% growth for the full year. We continue to gain share and capture the demand in growing municipal-, leisure-, and travel- related spending. Shipments to our base business retail customers in the fourth quarter were up 1% and for the full year up 9%. This is on top of the 18% fourth quarter 2021 growth and the 20% increase that we posted for the full year of 2021. We believe that weather and some change in buying habits as the supply chain returns to normal affected the fourth quarter. We feel that with the supply chain issues in 2021, many dealers placed larger orders in the fourth quarter of 2021 to make sure they had product available when the 2022 season began. With product availability almost back to normal level, most dealers reverted to more normal ordering patterns by the end of 2022. Pinch A Penny retail sales, unlike our shipments to dealers and contractor customers, represents sales through to the end customer, saw sales increase 17% for the quarter and year. Keep in mind that the footprint where the Pinch A Penny franchise store network is highly concentrated in Florida, with an expanding presence in Texas and a small number of stores in Gulf states. We continue to gain synergies where significant value is being derived for both the franchise and wholesale business. With one year of ownership now under our belt, we remain confident and on track with our initial expectations. Let me add some commentary on specific product sales in the quarter and year. Equipment, which represents about 1/3 of our sales, increased 9% for the year and 2% for the quarter. With lead time and availability of equipment mostly back to the historic levels, our dealers changed their buying habits back to a more normal practice of purchasing equipment as needed during the construction and repair process, as most availability concerns have abated. Demand in units for equipment, which surged last year and early this year, has retracted some but remains higher than pre-pandemic levels. Pricing has held with no weakness, the overall impact on our revenue was positive for the quarter and for the year. Base business chemical sales for the quarter were up 19% and 32% for the year, reflecting share gains, installed base growth, and inflation. Product availability has improved dramatically over the previous year, and we are now well-stocked for the upcoming season. We have refreshed our brands and will begin launching our Pool360 Water Solutions software in 2023 for our independent retail dealers, which we believe will be a best-in-class growth tool for our retailers. This will allow us to continue to take share in the very important maintenance and repair market. This is our next generation offering in our software solutions for the trade. Pool360 usage continues to grow and now makes up about 11% of our total lines. Building materials, which are used in both new construction and renovations, were flat in the quarter as compared to the 20% growth of this category in the same quarter of 2021 and 42% in the fourth quarter of 2020. For the full year, building material sales were up 18% on top of the 28% growth that we saw for the full year in this category in 2021 and 23% growth in 2020. Clearly, the reduction in new pool construction in 2022, these results illustrate that a solid remodel market and our share gain are fueling our growth. It is particularly obvious in the fourth quarter, when we believe that new construction was the slowest in 2022 and compares to a much stronger build level in the fourth quarter of 2021. I'd like to provide some insight on Europe. As we have seen all year, the market in Europe has been affected not only by less favorable weather, but the Russia-Ukraine war, elevated energy costs, inflation, and a slower economy. Europe's fourth quarter 2022 net sales were down 22.5%. For reference, the same quarter in 2021 was up 18% and 48% in 2020. For the full year, we saw sales decline 15% in U.S. dollars. Net sales in Europe for the full year of 2021 were up 39%. Looking across the continent, the eastern and northern countries were affected much more by the factors that I listed above. We believe in the longer term growth opportunities in Europe and our team's ability to manage the business while providing best-in-class service in a very dynamic environment. Let me now provide some comments on Horizon's performance for the quarter and for the full year. In the fourth quarter, net sales increased 5%, and for the full year, net sales increased 15%. In 2022, we opened five new locations, one in the first quarter and four in the fourth quarter. Our strategy for this business remains unchanged. We are investing in areas where we need additional capacity and expanding our footprint further into the Sunb elt, primarily through new sales center development activities. Our operating model is solid. The team continues to execute at a high level, and we are encouraged by the long-term growth opportunities of this business. Although this business is more tied to residential construction than the blue business, we also have a large commercial business that is holding up quite well and is also benefiting from inflation. As you saw in this morning's release, for the full year, our gross margins increased 80 basis points to 31.3%. This follows the 180 basis point increase that we realized in 2021 over 2020. For the fourth quarter and in line with our previous guidance, our gross margins declined 230 basis points, ending at 28.8%. Given the seasonality of our business, with margins fluctuating quarter-over-quarter, we believe that the full year number is far more indicative of where we are for this metric. Melanie will provide some more detail on our gross margins in her comments. Moving on to operating expenses. We continue to show that we can improve our operating leverage through our relentless focus on capacity creation and execution. Base business operating expenses decreased by 1% for the quarter and increased by 6% for the full year. In both cases, we continue to show that our expense growth is about half of our revenue growth, contributing to our improved operating leverage. Wrapping up the income statement, we were very proud to post operating income of just over $1 billion. This compares with $833 million that we recorded in 2021 and $464 million that we recorded in 2020. For the quarter, we recorded $107 million in operating income, a 16% decline, most of which is driven by the seasonality of our business and magnified by the relative size of the quarter. Here again, I would point you to full year results as a better indicator of performance on which Melanie will provide additional comments. Operating margin for the full year of 2022 was 16.6%, which is 90 basis points better than our previous record high that was posted in 2021. Looking ahead, I'd like to provide some color and context on how we expect to see 2023 taking shape. There is no doubt that our industry and POOLCORP have benefited from several factors over the last few years that will have a lasting impact on our industry. Desire for swimming pool and outdoor living has increased, with both viewed more favorably and desirable for homeowners today versus the past. This is especially true as more people are migrating to the Sunb elt in search of a comfortable year-round climate and a healthy outdoor living lifestyle. New connected product adoption rates are increasing. The value of the goods and services related to the maintenance, renovation, and construction of swimming pools and outdoor living has increased, propelled by unprecedented inflation that is now embedded in the industry. We are continuing to expand our footprint and leverage our capacity- creation activities to anticipate and improve the customer experience. We remain closely aligned and partnered with our key suppliers working together to improve the industry and homeowners' ability to enjoy their pool and outdoor living spaces. At the same time, underpinning our results is a growing and aging installed base that will need to be maintained and remodeled. As new construction levels will likely decline in 2023, the wholesale value of the pools built should in fact be at least 4% higher on a per unit basis, driven by inflation alone. Add to this the specific competitive advantages unique to POOLCORP, it gives us the confidence that 2023 will be a solid year. Our people and network are second to none. Our balance sheet is strong, giving us flexibility to take advantage of dynamic market conditions and investing in the future. Our CSLs, vertically- integrated chemical facility, PLEX programs, technology applications for the customer, and our proven team will enable us to get the most out of whatever market conditions present themselves. Our seasoned leadership team has seen many cycles and is quite skilled at managing the business in line with volume realities. As of right now, we expect that new pool construction in units could be down approximately 15%-20%, although this number will likely vary broadly by market and geography. Higher end markets will be stronger, while lower end and entry-level pools will continue to see headwinds. Renovation and remodel should be solid in most markets, as we believe renovation activities may see only a modest decline in 2023. These considerations are baked into our guidance. Inflation at this point looks to be in the 4%-5% range for the year. We see little to no risk of deflation except for trichlor, but movement in that chemical will likely be offset by others. Overall, we expect the chemical sales in line with the installed base growth and of course, weather, which is the largest driver of chemical needs, particularly in the seasonal markets. With supply chains returning to normal, we expect that customers' buying habits largely have and will continue to return to normal. With all of this in mind, we would expect that our EPS range for 2023 will be $16.03-$17.03 on a per share basis, including an estimated $0.03 benefit from ASU. Again, for context, I'd like to remind our listeners that the bottom of our range is in fact over 2.5x our full year 2019 results. From a cash generation perspective, we would expect that free cash flow will exceed net income as inventories return to a more normal level and our capital allocation model remains unchanged. As is typical, we will use our cash flow to invest in our operations, growth, and expansion. We will, with the approval of our board, continue to pay dividends in accordance with our policy, fund acquisitions, and continue to buy back our shares to provide returns to our shareholders. In closing, I would like to thank the POOLCORP team, our incredible customers, and our invaluable supplier partners for their unyielding support. I will now turn the call over to Melanie Hart, our Vice President and Chief Financial Officer, for her detailed commentary. Melanie? Thank you, Pete. Good morning, everyone. I'll start off highlighting a few items for the quarter, recapping the year, and then move into our expectations for 2023. As we finished out the year, fourth quarter sales exceeded $1 billion, marking the second year in a row where we have hit the billion-dollar mark in our seasonally slowest quarter. Our gross profit percentage was 28.8% in the quarter, or 230 basis points less than the fourth quarter of 2021. It was still 30 basis points higher than the 2020 fourth quarter margin. During the quarter, we recorded an additional $13 million in cost of sales, resulting in a 120 basis points decrease in gross margin for fourth quarter and 20 basis points for the full year. This amount relates primarily to import duties and taxes on purchases throughout 2022 of certain imported chemical products. Without the impact of the increase in duties, gross margins would have been 30%, which is 110 basis points less than prior year and slightly better than the decrease of 150 basis points we were expecting at the end of second quarter, as benefits from inventory investments remained strong. As mentioned in the press release, we have seen the supply chain in this area stabilize. Thus we are not expecting to import a significant portion of our chemical supply in 2023. Operating expenses grew 7% to $208 million, and as a percentage of sales were roughly comparable with prior year fourth quarter. Operating income declined by $21 million, primarily due to lower gross profit generated in the fourth quarter. During the quarter, interest and other expense came in at $15 million, which was lower than our projected $18 million at third quarter as we began reducing inventory purchases earlier during the quarter. 2022 finished off another dynamic year in POOLCORP history. Sales reached $6 billion, representing growth over the prior year of 17% top line and 21% EPS growth excluding the ASU. Revenue growth has expanded since 2019 by 93%, driven by approximately 30%-35% from inflation, 17% from acquisitions, 9% from new pool construction, 7% from the growth in the install base of pools, and 25%-30% from market share and new product growth. Market share growth includes 23 new greenfields opened since the beginning of 2020, and an increase in consumer interest in automating their pools, higher price point product spending, and expanded features in the backyard. 2022 demonstrated the resilience of the POOLCORP operating model. With the new pool construction expected to be approximately 98,000 new pools, down 16% from prior year, we estimate that our 2022 domestic pool distribution revenue was comprised of slightly more than 60% from maintenance. This includes increases in the portion of our business related to specialty retail customers whose business primarily serves the maintenance portion of the industry, added with our 2021 acquisition of Porpoise Pool & Patio. Sales of retail products in 2022 represented approximately 14%, up from 12% in 2021, as we added these new customers in this channel. We also saw a decrease in the portion of our business related to new pool construction to more historical levels of 17%-18%. For remodel, we estimate this comprised 21%-23% of our 2022 sales. Gross profit increased 20% and reached $1.9 billion. The gross margin improvement of 80 basis points reflects benefit from acquired sales, representing approximately 50 basis points, and inventory-related gains from multiple vendor price increases throughout the year. The related benefits from our inventory investments in response to supply chain disruptions as well as benefits from product mix. These benefits were offset by lower amounts earned under vendor incentive programs and higher costs related to the import duties and taxes. Operating expenses increased $123 million to $908 million, a 16% increase over 2021. $77 million was attributable to acquisitions. Base business expenses rose only 6% compared to the 12% increase in gross profit. These increases were related to volume-related sales, occupancy costs, employer of choice initiatives, marketing costs, and continued investments in digital transformation and technology. They were partially offset by lower incentive-based compensation of $13 million. We achieved operating income of $1 billion and increased our operating margin to a record 16.6% of net sales. Operating margin benefited from higher sales and gross margin, enhanced by the capacity creation efforts we began several years ago, enabling increased operating efficiencies and productivity, producing a significant step-up in our operating margin. Our full-year tax rate, excluding ASU, was 25.2%. We received an ASU benefit of $10.8 million or $0.27 per diluted share for the full year, of which $1.2 million or $0.03 was added in the fourth quarter and not included in our prior guidance. Earnings per share increased 17% to a record $18.70. Without the impact of the ASU in both periods, our EPS increased 21%. We estimate that Porpoise Pool & Patio accounted for approximately 3% of the increase, right in line with our expectations at the time of acquisition. Despite our higher working capital investment throughout the year and an $80 million deferred tax payment in 2022, cash flow from operating activities increased to a record $485 million, an increase of $171 million over 2021. Moving next to highlight a few key items from our balance sheet. Receivables continue to represent excellent credit management, finishing at a DSO of 26.9 days in 2022. As discussed on our third quarter call, we expected inventory growth to moderate in the fourth quarter as lead times have come down on most products. We finished the third quarter with year-over-year base business inventory growth of 43% and reduced that to 19% at year-end. The 19% increase includes approximately 10% from inflation and approximately $30 million of inventory added for the new locations opened during the year. Looking at days in inventory, we have 136 days on hand compared to 2019 year-end of 113 days on hand. This difference from historical normal levels represents additional inventory value of around $260 million. Due to the seasonal nature of the business, our days in inventory fluctuate quarter-over-quarter. We would expect some natural growth in first quarter in anticipation of peak selling season requirements. Our expectation is that by the end of second and third quarters, we would see our days of inventory on hand return to levels consistent with historical turnover rates of approximately 3.5x on a trailing four-quarter basis while still providing the high in-stock performance and broad product selections that our customers have come to expect and are key competitive advantages. This forecast is not considering any additional strategic M&A or new product investments. Total debt finished the year at $1.4 billion, up $204 million from prior year. Debt balances remain below our targeted leverage ratio of 1.5x-2x, with a conservative leverage ratio of 1.37 at year-end. During 2022, we repurchased 1.2 million shares for a total of $461 million, and increased our quarterly dividend per share by 25%, returning $611 million, or almost 82% of net income to shareholders. Our return on invested capital was 28.8%, continuing our leadership position in ROIC achievement among our distribution industry peers. Looking ahead into 2023, we have developed our guidance range based on flattish organic net sales to a decrease of 3% compared to 2022 as we have lapped our larger acquisitions. With a more uncertain economic climate, we approach 2023 cautiously. For the roughly 60% of our business that serves the maintenance of the existing base of pools, we expect to see growth in line with manufacturer inflationary increases of around 4%. We continue to expect a 1% benefit from install base growth from 2022. Renovation and remodeling activity, which grew in 2022 as labor began shifting from new pool construction, may experience deferrals or reduced spending in view of economic uncertainties and could be down 10%-15% from 2022. New pool construction could be down 15%-20%, resulting in approximately 80,000 pools being built, roughly equivalent to the 2019 levels. Horizon sales, more affected by new home construction, may be 5%-10% lower than in 2022. Europe's larger concentration of aftermarket versus maintenance could result in a 10%-20% decrease from 2022 levels. Comparing expected 2023 sales cadence to 2022, we will have tougher comps at the beginning of the year due to the higher base business growth in 2022. We are likely to see low- to mid-single-digit decreases in the first half, with greater declines in Q1 and somewhat less in Q2, and then modest growth in the second half of the year. 2023, there will be one less selling day in the third quarter and for the full year compared to 2022. Gross profit margin in 2023 is expected to be in line with our longer-term guidance of around 30% compared to the 31.3% gross margin we reported in 2022. We will realize some benefit on the existing inventory we carry into 2023 during the first half of the year. As we have stated previously, this represents an increase compared to more historical levels of approximately 29%, with the improvement comprised of around 50 basis points from acquisitions and additional benefits from a combination of supply chain enhancements, product mix changes, increases in private label, and customer pricing. In particular, on the product mix, building materials is growing faster than the rest of our business and carries a higher gross margin percentage. Operating expenses will continue to be challenged by inflation affecting wages, transportation, and real estate. We will continue to invest in our industry-leading talent within the organization with both market level and performance-based compensation. Inflationary wage increases will be partially offset by aggressive management of overtime and temporary labor costs, supplemented by our continued capacity creation investments. Looking at our SG&A, we have around 50% that is partially variable, which includes our incentive compensation. We have significant variability with the portions of our business we serve with third-party freight. Other variable costs include warehouse supplies and facilities and vehicle fleet maintenance. Without a doubt, our experienced management team will actively evaluate expenses at every level to ensure that we offset inflationary expense increases with appropriate capacity benefits and manage in line with sales activity. Even with expected weaknesses in economic conditions, we anticipate exceptionally strong cash flows from operating activities in 2023 as normalization of inventory investments combined with solid earnings will likely produce operating cash flows exceeding $800 million for the year. Our capital allocation priorities remain unchanged as we continue to focus on funding the ongoing business, expanding our sales center network, and investing in enabling technology projects. We continue to look for accretive, appropriately priced acquisition opportunities to further grow and complement our businesses both domestically and internationally. Dividends subject to board approval will increase, and opportunistic share buybacks will provide additional return opportunities, increasing shareholder value. We currently have $230 million available under our existing share repurchase authorization. In view of the potential for flat to slightly lower sales, gross margin compression, and inflationary pressures on expenses, we would anticipate operating margin to decline as much as 100 basis points to 150 basis points compared to 2022 full-year results. We believe we can achieve a 15% operating margin even under these reduced sales expectations by continuing an intense focus on expense management and the crisp operating execution we have demonstrated consistently over time. Interest expense for the year may vary depending upon our capital allocation opportunities. However, assuming outstanding debt balances remain relatively consistent with our current leverage ratio and higher borrowing costs, interest expense could range from $50 million-$60 million. With strong cash flows and 20% of our debt at fixed rates, we are well positioned to manage these costs during times of rising rates. Our annual tax rate is expected to be between 25.3% and 25.5%, excluding the ASU. Currently, we are estimating a $0.03 benefit from ASU in the first quarter for stock options expiring in 2023 and the expected impact of restricted share vesting. In 2022, we reduced shares outstanding by 1.1 million, primarily as a result of our robust share buyback activity. Our estimated weighted average shares outstanding that will be applied to the net income attributable to common shareholders will be approximately 39.6 million shares without giving effect to share repurchase activity that may occur in 2023. As we do with ASU, if we complete significant buybacks during the year, we will include the expected impact in our updated guidance quarterly. Our 2022 diluted EPS guidance range of $16.03-$17.03 includes an estimated $0.03 ASU tax benefit. I'm sure we will all agree that 2023 is poised to bring on many new challenges. I believe that this experienced, proven management team operating in a growing industry supported by significant non-discretionary recurring revenue will produce strong financial results for many years into the future. I'll now turn the call back over to the operator to begin our Q&A session. Thank you. 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 from the question queue, please press star, then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Ryan Merkel with William Blair. Please go ahead. Hey, good morning, everyone. Thanks for taking the question. My first question is just you ran through a lot of the guidance stuff, and I was trying to write it down as fast as I could. Could you just talk about what the volume assumption is? I think it was down 5% to down 8%. Just walk through the rationale just from a high level again, just so we all understand it. Yeah. Top line volume is gonna be flat sales to -3%, and it's comprised of, you know, when we look at the maintenance business, we would expect volume to be relatively flat. You know, we with the benefit coming there from the inflationary price increases from vendors. We would expect about a 4% pickup at the maintenance side of the business primarily from inflation. Then for the new construction side of the business, we would, you know, we're expecting that to be down 15%-20%. So that could range, you know, down to about -3% on the top line. For the remodel activity, that is 10%-15%. You know, we would expect that that could be, you know, around, you know, probably less 1%-3%, if you will, on the top line. You know, we are expecting the, both Horizon and the international operations to be a drag. For the Horizon, you know, we would expect that to be, you know, possibly up to a 1% drag, and then Europe could also be a 1% as well. Okay, that's helpful. I think you said gross margins 30% in 2023. Correct me if I'm wrong on that. What's the reason for the decline about, I guess, 100 basis points? Is that all just the price cost give- back, or is there anything else in there? Yeah. No, the bulk of that is gonna be the price cost give- back. You'll see that historically our margins have been, you know, we picked up more than 100 basis points. The portions that were related to the things that we've been doing internally as it relates to supply chain, you know, and pricing, we would expect that those would continue into 2023. The 100 basis point give- back is primarily due to the inflation benefits we got on pricing. I got it. Just one last one quickly. In the first quarter, did you say that you expected low- to mid-single digit organic declines on that very tough compare? Did I hear that right? Yeah, that's correct. Coming off of a 26% base business increase for 2022, you know, we would expect that tough comp to kind of in line with our overall guidance for the year, that we could see some negative to that tough comparable. Okay, great. I'll pass it on. Our next question comes from David Manthey with Baird. Please go ahead. Hi. Good morning, everyone. Would you say that the level of pre-buy that you had this year was higher or lower than normal, not what we've seen the past couple of years, but relative to, let's say, the past decade? Yes, Dave. What I would say is, as I mentioned in my comments, in the end of 2022, people were still buying in anticipation of supply chain disruptions. That kind of returned back to normal at the end of the fourth quarter. I guess we're expecting in the first quarter early buys to be at a more normal level. Okay. Just to baseline us, do you have updated data on new pool installs and average price per pool in 2022? Related to that, when you say that new pool construction could be down 15%-20% for you, is that units, or do you have an assumption for the average value of a pool that's incorporated in that? Yeah. The, the initial number that the industry tracks is that 2022 will turn out at ±, you know, 98,000 pools. It'll be firmed up in the next couple of months. That's the, that's the initial look, and that would compare with the 117 from 2021. That represents about a 16% decline. Our new pool construction numbers, because we track it for, you know, what we are selling in terms of, you know, concrete pools, fiberglass pools, and kits. While the industry was down about 16%, give or take, it will be as I mentioned, the final number is not final yet. While the industry was down about 16%, we believe that our new pool construction in units was down somewhere between 12% and 13%. We think we actually picked up share from that perspective, and that's supported by the growth numbers that we have. The other part I would tell you to think about and in answer to your question, is in terms of the value per pool, because of the inflation that went through the system, which we've talked about many times, it is the value of a pool, depending on where you are, has also increased. You know, to do an average really is not gonna do anybody any service because it really depends on where you build that pool. I can tell you that an average pool now is probably in the $70,000 range, but if you pick a different geography, I'll probably give you a different number. Based on, you know, the number of pool builds, you know, as we mentioned, the business in the seasonal markets was much slower than it was in the Sunb elt. The Sunb elt markets held up much better. The new pool construction numbers in the Sunb elt are not nearly off as much as they are, you know, in the seasonal markets. Okay. The 15-20 for you, that includes both units and value of new pools, correct? Yeah. That's a conservative range. Right. That's a revenue number. Okay. All right. Thanks very much. Thank you. Our next question comes from Susan Maklari with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. My first question is around the competitive dynamics. As you think about supply chains that have normalized and order rates that also seem to be following that path, how are you thinking about the ability to gain share in this kind of an environment, and how does it perhaps compare to the levels that we've seen in the last few years? Yeah. Susan, as you know, thank you for the question. As you know, we are, we are very focused on the customer experience and provided best-in-class service and investing in things that enhance our customers' business and allow them to grow. You know, when I look at the market in 2022, I would say that certainly in the back half of the year, supply chains had returned back to almost normal. I mean, in any given year, there's gonna be a shortage on something, but, you know, most of the manufacturers would say that for most products, availability was not an issue for the back half of the year, and it got better as the year progressed. We, and even with, I would say, a relatively normal supply chain, we continue to take share. We take share because it's not just an availability, it's the service we provide, it's the location, it's the tools that we offer our dealers and our builders. We think those are the things that separate us and are the reasons that we are being afforded and awarded the incremental share. Those things don't stop in 2023. We have more things coming. Our focus on the customer has never been sharper. We would continue that, you know, even in if so new pool construction is off, you know, for the industry, we would expect that we think we would outperform that simply based on the services that we provide to our customers. Okay. That's very helpful. As a follow-up, can you talk about what your suppliers are telling you as it relates to their inflation? What are the key sources of that pricing that you're expecting for this year, and how are you thinking about how that may trend through the year? I guess similarly, what are you hearing from your customers on the ability to continue to get that price through and how that may work itself through the supply chains? You know, we obviously spend a lot of time with both sides of that question. I'll start with the manufacturers. Traditionally in our industry, the manufacturers raised price once a year. It was done at early buy time in the beginning of the fourth quarter, and that price would hold throughout the whole next year and be adjusted again at the end of, or at the beginning of the fourth quarter of the following year for the next season. Over the last couple of years, we had to deal with multiple price increases as our manufacturers' prices were increasing at a very rapid rate, and they had to pass those prices on. Those costs are embedded in the product. Essentially, most of that cost is embedded in their operating cost, so we don't really see any risk that those prices are going to, are going to retreat. The increase that we got this year. Now remember, for our industry, you know, for years on this call, we talked about inflation for the year and in our market assumptions was 1%-2%. For the last couple of years, obviously much higher than that. For this upcoming season or the season that we're about to begin right now or in beginning, depending on where you are, you know, we said the number is going to be, is going to be 4%-5%. Based on my conversations with the manufacturers, you know, there are certainly some outliers on products which are more commodity-based, which could see, you know, more rapid movement. By and large, I think the industry doesn't expect to see wild pricing fluctuations this year. At this point, I have no visibility to any additional, significant price increases for the 2023 season. You know, as it relates to our, to our dealers, and we've now had three shows, since the beginning of the year where we spent considerable amount of time with a cross-section of our dealers, you know, from across the country. Actually, there's been four. I can tell you that the dealers remain very optimistic. You know, I wasn't sure what I was going to see when I, when I spent time with the dealers, and the dealers are actually very optimistic for the upcoming season. The price seems to have been accepted, you know, by the end market. It isn't causing big pushback on most projects. As we mentioned, the headwind that we see in the industry on new construction is mostly at the lower end, right? It's the kind of the entry-level pool. It's the one where there may be a significant, you know, a personal loan or a HELOC that is gonna finance that. With the elevated rates, those are the ones the families that may have tapped the brakes and say, "I'm going to defer." For, you know, average pool homeowner is usually in a more affluent place, and if they want a pool, they're going to have a pool. Our conversations with the dealers about, you know, all right, what are the customers asking for? Are they trying to reduce the cost of the pool? Are they saying, "Hey, let's take features out"? I can tell you that our conversations with dealers wouldn't suggest that that's the case, that it's fairly consistent. The adoption of the new technology products hasn't slowed. Additional features really, you know, hasn't slowed. We did hear a couple of comments that people would say, "Well, maybe, you know, I'll do the pool now." Given that, you know, these additional features, when you put them in a pool, the only time to do it is during construction, or else it becomes very expensive for reconstruction to add these features. They're, you know, the structure itself is being outfitted with those same high-end features that the market has taken a greater adoption rate to. Perhaps some of the other features, like a pergola, you know, or an outdoor kitchen, those are the things that that maybe people could be more cautious on. Okay. That's very helpful color, Pete. Thank you and good luck. Thank you. Our next question comes from Andrew Carter with Stifel. Please go ahead. Hey, thank you. Good morning. I wanted to ask about the tariffs, the $13 million, because I'm confused about that, about that being such a big headwind in the quarter. First off, was that included in kind of the more pronounced pressure for the fourth quarter gross margin guidance you kind of outlined last quarter? The second thing I would ask about that is why is it all hitting in one quarter, and are you pricing to that? Is that— I know you said that supply chains are normalizing. You don't expect that as much next year, but are you pricing that, or is that something that you don't feel like you can price for this incremental kind of source of product inflation? Thanks. First part of the question, that was not considered in the guidance that we gave for third quarter. Kind of excluding the $13 million, we did actually achieve better gross margins for the fourth quarter because of some additional values that we were able to get from our inventory investments and our overall pricing. The $13 million, it did, the $0.25 impact from that did actually relate to purchases that were brought in throughout the entire year. If we would have, you know, assessed that and paid the higher rate throughout the year, you know, would have impacted some of the other quarters kind of $0.05-$0.10 throughout each of the other quarters. As it stands right now, we did achieve market pricing, and, you know, very, very high levels of margins on those chemicals from a sell-through standpoint. When we look forward to 2023, we do not expect to have any further impacts, as the products that we'll be selling in 2023 will be sourced domestic. Thank you. Second question I would ask is kind of looking at your guidance, and apologize if my math's wrong here, but, I'm getting your SG&A absolute dollars down $15 million-$18 million year-over-year. I think you've said incentive comp just from regression is $30 million. Of course, your initial cut here is also below long term. Help us understand kind of the flex there if, there's additional room if you consider your network, if managers are able to quickly adjust or, and actually required to adjust. I guess one more piece in there, you do mention wage inflation. We see that on warehouse employees. Are you seeing any increased competition, or increased turnover for managers out there as you kind of consider other platforms? Is that kind of an extra source of investment you have to consider? Thanks. Yeah. As it relates to the incentive compensation, we did see a $13 million decrease in the 2022 results. That was, you know, primarily driven when we looked at kind of our earlier guidance throughout the year. We were expecting a 17%-19% top line growth, we did come in at the 17%. Thus did do some decreases as it relates to that incentive compensation in 2022. As we look at our plans for 2023, I would suggest that the incentive compensation flux there would be, you know, ranging from $10 million-$15 million, with $15 million kind of at the bottom end. You take the $15 million plus the $13 million, that kind of gets you roughly in line with the $30 million that we've talked about previously. It's a little bit less than that because, you know, as we look forward to 2023, we've put in some new incentive guidelines for the field management. We wanna make sure that we kind of retain that motivation for them to perform as they go into next year, kind of considering the overall market conditions, but still feel like that, you know, slightly less decline in overall incentive compensation will be in the best interest of the shareholders. Thanks. I'll pass it on. Our next question comes from Joe Ahlersmeyer with Deutsche Bank. Please go ahead. Yeah, thanks, guys, and congrats on the quarter and the outlook. Thank you. Thank you. I just wanna make sure I'm really clear on the sales and gross margins for 1Q. If I'm using a normal type seasonality number, even on the flattish outlook, it seems like sales in the first quarter could be down in the range of mid-teens for the base business. First of all, is that right? Yeah, I don't see mid-teens. you know, I do think that we'll have sharper declines in first quarter, but I would say, you know, more of, you know, mid- to high- single digits, when you're looking at the comps, you know, year-over-year. We will have that benefit from the inflation on the maintenance portion of the business. Okay. Got it. Then just remind us about the seasonality of gross margin in the first quarter. If we adjust that fourth quarter again to the 30%, should we see them sequentially down in the first quarter? Then I have one more follow-up. Yeah. First quarter, I would expect that we probably see, you know, about 100 basis points off of, you know, where we reported first quarter of last year, just kind of in line with what the estimate would be for the full year. Okay, great. Just my final one here. Bigger picture, what's your level of confidence that this outlook, if you execute upon it, represents the reasonable baseline to return to the growth formula you've detailed in the past? I guess, in other words, does 2023 largely reflect a return to trend line growth and demand, stable share, normalized cost structure, all those things? I think that, I think 2023 is gonna be a solid year. Certainly, as we mentioned, there'll be, it looks like there'll be a decline in new pool construction. Obviously, many factors will drive that, and it's very early in the year. At this point, we have to be very conservative with the guide. You know, renovations, we think, are gonna hold up better than new pool construction. We saw renovations holding up better, in particular, in the fourth quarter of last year. If you remember from my comments, I said that, you know, in the fourth quarter, our building material sales were actually flat. In a quarter where new pool construction, it was the slowest quarter of the year for new pool construction for building material sales to be flat in that quarter implies that the renovation market, which is the one of the only two places that building materials are used, it implies that the renovation market is actually holding up pretty well. Again, you know, we're conservative at this point of the year in terms of what we believe the year will shape up as. I think the renovation market remains a very important part of our business going forward. To answer your question in a roundabout or long-winded way, I think 2023 is a year that as we transition into 2024, we turn back to our normal model of 1%, you know, install base growth. You know, the rent, maintenance, and renovation business will be— should be solid. Remember, the average age of the swimming pool isn't getting any younger, so the average age of the swimming pool is approaching 25 years. The install base is continuing to grow. Inflation is in the industry. You know, there's a lot of other factors, weather, economy. Yes, we remain very confident in the long-term outlook for the business. Very encouraging. Thanks a lot. Our next question comes from Trey Grooms with Stephens Inc. Please go ahead. Good morning. This is actually Noah Merkousko on for Trey, and thanks for taking my questions. Good morning. First, I wanted to touch on the maintenance piece of your business. I know it's the largest part, and historically, it's been highly non-discretionary. You know, nobody wants a green pool. In this more uncertain backdrop, have you begun to see any pool owners potentially delay or push off any maintenance spending? Could that kind of show up later in the year? Then along the same line of thinking, you know, I know there was a lot of tough weather in the, in the 4Q. It's got especially cold in Texas. Should we expect that to be a benefit to maintenance sales later in the year? Yeah. One of the ways that we look at the maintenance spend and when you look at, you know, deferred maintenance and such and, you know, are people fixing versus replacing. You know, we track our parts sales, if you will, along with whole goods sales. What we have not seen is a major shift in the parts business as related to whole goods. That's encouraging. It's not like people are saying, "Well, can you just fix it?", versus replace it. You know that the upgrade, normal replacement upgrade behavior, is still going on. You know, we feel good about that. When I look at your comment about Texas, I don't think there was any... The weather in Texas was cold, but it was nothing like unique. What happened in Texas in the previous year was cold and power failure. If it gets cold in Texas, you know, it just means that there's people that may not go out and work because it's really cold. As long as there is electricity, the pool is running and it's designed, all pools are designed with some level of freeze protection. As long as the equipment is running, nothing is gonna freeze. We didn't get word of any significant damage as a result of that. The maintenance business really is a function of, you know, usage, and the installed base, the aging of the installed base, right? If, in particular, as I mentioned in the comments, you know, if it's hot, if a season opens up earlier and the seasonal markets open up earlier, then people will have to treat those pools sooner, and the operating season on that pool will be longer, and the maintenance spend will be higher. If it's a very cool spring and, it doesn't get warm until, late April or early May, then certainly that's gonna take, you know, a few weeks off of, or perhaps a month off the season, depending on weather. We haven't really seen any trends, and my conversations with our dealers has confirmed that we haven't really seen any trends where people are saying, "Well, can I, can I defer, and can I repair versus replace?" You know, the replacement market is behaving as it normally has. Got it. Thank you. That all makes sense. For my follow-up, appreciate all the color on the guide and the, and the moving pieces between the end markets. Just a point of clarification, when you're looking... and I think total sales, you're looking to be flat to maybe slightly down for 2023. When you're walking through that math, does that include any, you know, new branches that you might add or continued market share gains? Yeah. Not anything significant. We do intend to open up a minimum of 10 new branches as we get into next year. You know, the impact on the first year, you know, it'll be somewhat accretive, but it probably wouldn't get to the 1% level just because the lower dollar value of the sales in the first year. Got it. That makes sense. Thanks for taking my questions, and good luck with the rest of the year. Thank you. Our next question comes from David MacGregor with Longbow Research. Please go ahead. Hey, good morning. This is Joe Nolan on for David. Morning. Morning. Morning. I apologize if this was already addressed on the call, but I had a little choppy connection earlier. What are you guys assuming for free cash flow conversion in your 2023 guidance? Our guidance is that we would have, at least, $800 million. Our typical realization of cash flow from net income is between 90% and 100%. Then we would expect some additional amounts from the turn on the additional inventory that we had at the end of the year. Great. Okay, thanks. Just as a follow-up, say demand ends up being a little bit weaker than you guys initially expected, where do you guys have the ability to flex your model in 2023 if you see that occur? It's primarily gonna be in our SG&A expenses at that point. You know, we're well equipped because of the seasonal nature of our business to actually, you know, staff up based on the sales activity in each individual market. There's, you know, flexibility in deferred hiring, certainly in our overtime and temporary labor, as well as just kind of the natural expenses that we talked about as it relates to third-party delivery freight, maintenance on, you know, our vehicles and, you know, warehouse maintenance and those types of things that really do get accelerated at higher volume levels. Great. Thank you. I'll pass it on. Thanks. The next question comes from Shaun Calnan with Bank of America. Please go ahead. Hi, guys. Thank you for taking my questions. Just going back to market share gains. It's been a significant driver of growth since 2019, and some of our recent channel checks indicate that over the last two years or so, dealers were unable to purchase equipment directly from manufacturers, so they turned to distribution to make these purchases. I'm just curious, do you have an estimate of the impact of those purchases? Are you assuming any market share reversals there, or do you expect to hold those gains? You know, I think your question about whether dealers were buying direct in distribution, most dealers buy a blend. Very few dealers buy. I don't frankly, I don't know any dealers that buy exclusively from manufacturing. Most of them buy a blend. You know, our ability to provide product to the dealers when they need it without them having to store it, without them having to have capital tied up in inventory, is part of the reason that we continue to grow our business and to gain share. I would say that most of the share gain that I believe that we had over the last couple of years was driven by service. It was driven by, you know, unique capabilities that POOLCORP has that our competitors simply don't have. I think that we have been rewarded by the market for those, or with that share gain and for that service. At this point, we haven't seen any of the, you know, quote-unquote, share gain reversing. In fact, you know, we think that will continue. Got it. Thanks. Then, just on spending for more discretionary products like heaters, hot tubs, above ground pools, lighting, just things in that category, what are you forecasting for those products, and which bucket does that fall under? Is it part of the maintenance or renovation or remodeling if they're just adding a heater or buying a hot tub? You know, heaters go in, basically it's all parts of the business. For instance, you know, when you're building a pool, almost all pools are adding a heater at the time of construction. During renovation and remodel, and if they're upgrading the equipment set and there's an older heater on there and they're upgrading everything, then, you know, during the renovation and remodel, that too will get a heater. There is the normal break fix that says, "You know, I have a heater, it's 10 years old, it's been repaired five times, and now it's about time to change it." It really would function very much like the HVAC system in your house. You can fix it for so long and then you're going to replace it. You know, a hot tub is really, you know, you're talking about a discrete unit. A hot tub that is not attached to the swimming pool, you know, that is a, that's a discrete purchase. It's not part of usually any renovation model or anything like that. You know, those are those are just done. Automation is done at the time of renovation and remodel, and also a repair. If the time clock that is running the pool fails, then there's a very high likelihood that the dealer is gonna tell the homeowner, you know, "Would you like to replace the time clock or is now the time to upgrade to automation?" From a unit perspective, part of that is gonna track new pool construction. If I look at the number of units in, on almost every product out there, the number of units we sell as compared to new pool construction, the number of units which we sell, which includes maintenance and renovation and remodel, far exceeds the number of units that we would sell for new pool construction. Okay. Thank you. Okay. I think we're about out of time. We have time for one more question. Our next question comes from Garik Shmois with Loop Capital. Please go ahead. Hey, this is Jeffrey Stevenson on for Garik. Thanks for squeezing me in here. Sure. You mentioned trichlor supply has improved and there could be some downside risk to pricing. Have you seen any change in trichlor pricing yet? If not, when would you expect to have more visibility on the stability of current price levels? Yeah, that's a very good question. I would tell you the answer lies in it depends, right? We have seen and we will always see markets act individually. You know, in a particular market, if a distributor or a dealer or retailer, whatever, wants to run a special, they can do it. You know, when I look at the overall price of trichlor, you know, I would say they're largely steady. My belief is that it will probably come down some, and when I'm some, I'm talking slight and meaning that I think the way I look at chemicals on the overall basis, because remember, sanitizers are going to be, you know, cal- hypo or liquid shock and a tablet. You can use a tablet, you can use a tablet for, you know, daily sanitization. You can also use chlorine or cal- hypo with a stabilizer to essentially do the same thing. The trade, I think, moved back and forth. I think when the price of trichlor moved up last for the last couple of years, we saw more people move over to cal- hypo and liquid shock. The price of those products has come up and continues to rise. I think if there is a movement and on the trichlor side down slightly, I think it's gonna be offset by prices on the other side. By and large, I think, chemical pricing is going to be fairly stable. Maybe some downside, but at this point I wouldn't say anything significant. Okay, that's very helpful. Just one quick follow-up. Peter, you talked about new pool declines will likely vary by geography. Is there any more color that you would talk about as far as kind of the regional SKU of kind of where new pool construction declines are expected this year? You know what, I think what we saw this year or for the 2022 year, I don't know any reason that it would be any different, but for weather. I think the beginning of the 2022 season, you know, started off cooler, so the builders weren't quite as active early on in the seasonal markets. I would also tell you that, you know, the Sunb elt markets, they're being fueled by the southern migration and year-round. If I had to place a bet on the markets that were gonna fare better in this next coming year, I think the economies are generally stronger in the Sunb elt and year-round markets than they are in the seasonal markets in many cases. I would expect that the Sunb elt markets are gonna fare better than the seasonal markets for the upcoming season as well. Great. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Peter Arvan for any closing remarks. Thank you all for joining us today. We look forward to our next call, which will be on April 20th, when we will be releasing our first quarter results of 2023. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.