Good day, and welcome to the Pool Corporation First Quarter 2024 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 touchtone 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 Melanie Hart, Vice President and Chief Financial Officer. Please go ahead. Thank you, and welcome to our first quarter 2024 earnings conference call. Our discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2024 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 included in our press release are posted to our corporate website in the Investor Relations section. In order to assist our investors and analysts in following along with our earnings call comments, we have posted a brief presentation on our investor website. It will summarize key points from our press release and call comments. We are now ready to begin the call with comments from Pete Arvan, our President and CEO. Thank you, Melanie, and good morning to everyone on the call. We released our first quarter results this morning, reporting $1.1 billion in net sales, our fourth consecutive year of achieving the $1 billion mark in a seasonally slower quarter. This was down 7% from the previous year, but up 6% from 2021. Overall demand for pool-related maintenance products in the quarter was solid, with sales ending roughly flat, which is good, which is a good result considering the poor weather that we experienced in Florida for almost the entire quarter. As you can imagine, in the first quarter, Florida is our largest market. We were also pleased with early buy activity, much of which we attribute to share gain, given the return to more normal supply chain conditions. On the new construction side of our business, a continuation of economic uncertainty, combined with elevated interest rates, have further weighed heavily on new pool starts. Our builders are reporting that consumers remain interested in pools, but as we have noted previously, lower-end pools remain a challenge, while demand for higher-end pools is steady, explaining the increased permit value on a per-pool basis. Overall, we saw permits down 15%-20% for the quarter, which is more than we anticipated for the year. We believe that easier comps and signs of the bottom of the trough that we are seeing in some markets will allow the full-year construction level to be more in line with our previously stated full-year expectation of flat to down 10%. We have seen similar results in the first quarter on renovation and remodel, but our builders are telling us that interest from consumers may be starting to rebound in key markets. Normally, we would expect it to take 60 days from the time we see permits improve to any meaningful change in purchase trends from the customer base in the affected areas. Keep in mind that historically, the first quarter has represented just under 1/5 of our total annual sales in a typical year. With the all-important second quarter ahead of us, our teams remain keyed into the start of the swimming pool season, with their ability to fulfill demand needs better than anyone in the industry in any environment. We all remain intensely focused on providing our best-in-class customer experience, expanding our integrated network, and enhancing our industry-leading technology solutions. Looking at our sales by major geographic market, sales declined 9% each in Florida, Arizona, and Texas, while California sales declined 4%, showing overall sequential improvements from the fourth quarter of 2023. As we mentioned on our year-end call, we saw a lot of rain in January and February in key markets. While March weather somewhat improved, it still carried above average rain in many areas. For the first quarter last year, we estimated approximately $60 million-$70 million impact from unfavorable weather, particularly in the Western U.S. We clearly see the weather recovery in California's first quarter results, which outperformed the other areas in the country. Conversely, in markets that experienced unfavorable weather comparisons this year, such as Florida and the Southeast region of the U.S., we observed sales headwinds due to the limited ability for pools and outdoor living activity to jump off to a robust start or continue usage in the year-round markets. Across the company, we participate in numerous trade shows and partner with our suppliers and customers to prepare for the season. From what we are hearing, there has been some consolidation amongst builders. Some newer builders are exiting due to the challenging construction environment. This is resulting in some of our larger builders gaining share, as you would expect. Typically, the newer builders were more heavily focused on entry-level pools, which, as we have said, have been the most pressured. Related to our product sales mix, chemical sales were essentially flat for the quarter, up 1% in volume, with a 2% deflationary impact on price, primarily from trichlor and commodities. This result reinforces our expectation that maintenance volumes will perform well, even with the weather patterns and the industry conditions that were not ideal in many markets. With a slow start, we did see instances of lower selling prices on trichlor, around 5% lower than at the end of the year. At the current cost positions, we see these occurrences as minor top-line pressure for the remainder of the year. Building material sales were down 11% versus prior year, following the declining trend in new pool construction and deflationary impacts across several categories, as freight costs passed down from the manufacturers have decreased. Although the number of new pools is down, our superior value proposition and extensive NPT network allow us to continue to expand our share in this strategic product category. Equipment sales showed an improved trend, decreasing 3% for the quarter versus the 9% decline in the fourth quarter of 2023, and showed some early signs of recovery in discretionary product demand, like heaters and lights. Looking across the major equipment categories, we see that despite a slow start to the pool construction season, our sales transfer equipment seem much healthier than what new construction alone would dictate. Looking at our end markets, our commercial business sales came in flat compared to last year's 12% growth in the first quarter, and better than the overall business as we further integrate our recent investments in our widespread distribution network and enhance our service to commercial pool operators. Sales to our independent retail customers declined 4% in the first quarter, improving from an 8% decline in the fourth quarter of 2023, as we extend our reach and resources available to these customers. For our Pinch A Penny franchisee group, sales came in flat for the quarter. Collectively, these results provide additional indication that maintenance remains stable and that our focused efforts in this critical area of the market support our ability to continue to gain share. In Europe, challenging weather and continued geopolitical uncertainty constrained sales in the first quarter, which declined 17% in local currency and 16% in U.S. dollars. We completed important supply chain projects at the beginning of the year that will position us well in improving our overall product costs and fulfillment as we work to gain scale in Europe. For Horizon, net sales declined 6% in the quarter. Our irrigation business is more impacted by commodity pricing than the swimming pool business, and the growth on our commercial irrigation continued to support our distribution business during the first quarter. Gross margins came in at 30.2% versus the 30.6% in the first quarter of 2023. Going into the quarter, we expected about a 60 basis point headwind compared to last year, primarily related to the sell-through of lower-cost inventory in the first quarter of 2023. Melanie will walk you through the various components impacting margins as part of her financial commentary. Both our field and support teams did a good job managing expenses, as the operating expenses increased just 2.5% in the first quarter. As we discussed on our fourth quarter call, we have several key areas where we continue to invest this year, including our technology initiatives, customer experience enhancements, and continued footprint expansion. At the same time, we continue to work on capacity creation. In mid-February, we launched our POOL360 service platform. At our Investor Day, I was excited for my team to provide a deep dive into this innovative tool and demonstrate the power that our customers will see from using the POOL360 ecosystem. Our technology and sales teams were on the ground doing exactly that during the quarter for both our customers and our field teams in preparation for the season. Orders processed through our traditional B2B POOL360 platform continued to expand at close to 11% of total sales in the first quarter of 2024, growing from 10% in the first quarter of last year. Related to our POOL360 WaterTest, we finished the first quarter with 2.5 times the number of customers on board than at the end of 2023, and this has translated into a similar increase in water tests performed versus the fourth quarter of 2023. Our analysis of customer buying behavior confirms our assumptions of the power of POOL360 WaterTest, with our POOL360 WaterTest customers' private label chemical purchases up significantly versus the rest of the customer base. While in the very early stages, we are already beginning to see the positive impacts of our Pool 360 service tool through volume growth in our private label chemical brands and revenue dollar growth in other products. Our customers are reporting very favorable feedback on the ecosystem and all it provides. Driving adoption of our Pool 360 service application not only provides a meaningful differentiator and deeper relationships with our customers, but also adds capacity for our customers to grow their business, which we believe will drive additional growth for PoolCorp. The progress among these tools reflects the collaborative efforts of our sales, field, and technology teams to roll out the new software and educate our customers and teams on its enhanced abilities. We continue to expand our network, opening three new locations in the first quarter and acquiring one, bringing the total sales center network to 442 locations. Our Pinch A Penny franchise network added five new stores, including two as part of our focus expansion in the Texas market, ending the quarter with a total of 290 franchise locations. Continuing to expand our franchise footprint geographically and our retail edge programs are critical elements of our strategy to reach the attractive do-it-yourself maintenance market. We recorded $108.7 million in operating income in the first quarter of 2024. Operating margins of 9.7% decline when compared to the 12.1% in the first quarter of 2023, but well exceeds the pre-pandemic first quarter operating margins that ranged from 5.7%-6.5%.... Our increase in scale since that time shows the immense leverage attainable from top-line growth, focused cost management, and disciplined execution. With the first quarter behind us, we are reiterating our full-year EPS guidance range of $13.19-$14.19, including an updated $0.19 estimate from the benefit of ASU. Looking forward, we see the primary challenges affecting our industry as being the macroeconomic picture. Without a doubt, the decline in new pool construction creates a complex operating environment, but we are confident that this is just a cycle that will change, just as we have seen in the past. Remember, pools are still highly desirable. The installed base continues to grow, and the aftermarket upgrade opportunities are sizable. Demographic shifts will only help power these important trends for years to come. We are intensely focused on improving the customer experience, capacity creation, and building and launching our industry-leading digital ecosystem. We will continue to expand our network to position us to best serve the pros and support the retailers that cater to the DIY market. Gross margins remain a top priority for the team as well. We have identified comprehensive plans to achieve our goals and enhance our performance in this area. Our teams are committed and focused on supply chain efficiencies, private label product growth, and pricing optimization, along with our proven track record on execution. With our robust cash flow generation, capital capacity, and strong balance sheet, we will continue to be a disciplined capital allocator and a strategic growth investor. Through our team, we collectively work to provide the best service to our customers and exceptional returns to our stakeholders. I would like to wrap up by thanking the PoolCorp team for their continued persistence. Through our collaboration with our supplier partners and our customers, we aim towards executing a successful 2024 swimming pool season. I will now turn the call over to Melanie Hart, our Vice President and Chief Financial Officer, for her detailed commentary. Thank you, Pete. Starting on page three of our presentation, you will see our first quarter 2024 results at a glance, as reported in our press release. I'll begin my comments on slide four, as we discuss the components impacting net sales and gross margin in the quarter. Net sales of $1.1 billion declined 7% over prior year, which shows an improving trend from the 8.4% year-over-year decline in the fourth quarter of 2023. Positive price realization of approximately 2% was offset by continuing, though modestly improving, trends in new pool construction and remodel activity, with estimated volume decreases of 15%-20% on construction and around 10% on remodel. Those translated into a 3% and 2% decline in consolidated sales compared to prior year. We estimate weather impacts, primarily in Florida, negatively impacted sales approximately 2% in the quarter. Chemical and commodity pricing continue to normalize and are estimated to have a 1% negative impact on sales for the quarter. Horizon in Europe sales declines in the quarter together had an approximate 1% effect on total net sales. While the quarter had the same number of selling days, March had two fewer days, which had some impact on the quarter, as we typically see an upward ramp into the season, and March is by far the largest sales month of the first quarter. Gross margin for the quarter was 30.2%, compared to 30.6% in the first quarter of last year. Gross margin in the first quarter of 2024 included a benefit of $12.6 million, or 110 basis points, related to estimated import taxes previously recorded, which was not considered in our latest discussion of expected first quarter margins, as both the timing and the conclusion of this open area were not readily determinable. As referenced on our call discussing fourth quarter 2022 results, with supply chain normalization and a return to our domestic sourcing strategy, we do not expect significant impacts from import tariffs going forward. From a comparative standpoint, net resulting margin of 29.1 was down 150 basis points compared to prior year, including the expected decrease from higher average cost inventory in 2024 compared to 2023. Other impacts include product mix, as lower margin equipment sales outpaced higher margin building materials. Customer mix, reflecting a greater proportion of sales to larger customers who participate in customer rebate programs and have volume-based pricing, and an increase in customer early buys sold at special pricing, including preseason pricing in a number of major markets, resulting from the rainy and sluggish start to the season. These were offset by a higher volume-based vendor incentives as purchasing patterns normalized in 2024. Main areas different from our expected 60 basis points decline, as previously communicated, were the lower building material sales and the higher mix of preseason pricing. On page five, you will see our quarterly financial trends. Due to the seasonal nature of our business, many of these metrics vary sequentially. Operating expenses as a percentage of net sales is typically highest in the fourth and first quarters due to the lower sales volumes. Operating expenses in the quarter were 20.5%, an increase by $6 million, or just under 3% over prior year. We continue to manage variable expenses to offset higher inflationary increases in rent, insurance, and our first quarter merit wage increases. As discussed, we continue making investments in our strategic technology initiatives, such as our Pool360 ecosystem. We added four new sales centers in the first quarter, three organic and one through acquisition, and we are working to add another five new greenfield sales centers prior to the peak season. For the quarter, we reported operating income of $109 million, compared to prior year operating income of $146 million. Lower levels of debt, even with a higher borrowing rate, resulted in a $2.4 million reduction in interest expense versus last year. Net income of $79 million, compared to $101 million in prior year first quarter, reflects lower operating income, partially offset by lower interest expense and a lower effective income tax rate due to an increase in ASU tax benefits this quarter versus Q1 2023. We realized a $0.19 benefit from ASU in the quarter, up from the $0.10 we estimated in our guidance, and compared to a $0.12 benefit in Q1 2023. We also realized a benefit of $0.24 from the reduced import tax amount recorded during the quarter. This resulted in diluted EPS for the quarter of $2.04, compared to $2.58 in the first quarter of 2023, a decrease of 21%. Moving to slide six. Cash flows from operating activities increased to a first quarter record of $145 million, an increase of $42 million over last year's first quarter. We continue to invest capital in technology development initiatives, sales center network expansion and improvements, and acquisitions, closing one during the quarter. Our accounts receivable days outstanding of 26.9 days remain in line with typical preseason activity levels, including customer early buy programs, and are in a good position as we enter the peak selling season and exit the portion of the year where our customers are typically more cash constrained. As we planned, inventory levels continued to normalize, finishing the first quarter at $1.5 billion, $190 million lower than Q1 last year. The increase from year-end of $131 million is intended to prepare for the upcoming season and is fully offset by increased accounts payable. Our inventory days on hand have reduced from 142 to 132, and we expect to continue seeing this trend of lower comparative days as we lap last year's higher inventory levels through third quarter. We reduced outstanding borrowing by $387 million compared to Q1 last year, and $74 million from year-end, while continuing to make investments in the business. Our debt to EBITDA leverage ratio stands at 1.4 as of the end of the quarter, slightly below our 1.5-2 times target, providing significant growth investment capacity. Our current quarterly dividend of $1.10 per share returned $42 million to shareholders. We also completed $10 million of open market share buybacks during the quarter and $50 million through our earnings call, and have $284 million remaining under our share repurchase authorization. With the first quarter behind us and an early view to the start of the 2024 season, we maintain our full year guide of flat to slightly positive growth in 2024. Based on historic pre-pandemic seasonal sales patterns, our first quarter sales as a proportion of full-year sales suggest this is a reasonable expectation. As we move further into second quarter and the beginning of the peak selling season, our visibility improves, and we will have better insight into the full year after our second quarter. The 1%-2% annual benefit we could have achieved from normalized weather in the first two quarters has not been observed to date. Therefore, it is still uncertain that we would see a significant weather recovery for the full year. Our expectations for inflation for the year remain unchanged, as price benefits of approximately 3% on equipment has progressed as expected, slightly less on our remaining categories for an estimated 2% overall. Maintenance activity is tracking as expected, and our volume expectations for renovation and remodel and new construction markets in the range of flat to down 10% remains reasonable at this point in the year. We still anticipate that Horizon Europe could decline 5% for the full year. No significant contribution is expected from the additional selling days, as they are late in the year. We still anticipate full-year gross margin to approximate 30%. We look for the increased activity across the industry to moderate some of the preseason pricing activity, combined with our supply chain and pricing strategic actions underway to realize the favorable seasonal benefits in second quarter. Our expectations for operating expenses remain relatively unchanged. Volume-related expenses will continue to correlate with business activity, while certain inflation-affected expenses, such as rent, insurance, and wages, will increase compared to last year. Performance-based incentive compensation will only increase based on operating income improvements achieved, as it will reflect actual performance relative to performance plans. Strategic growth-oriented expenses, such as investments in sales center network expansion, tuck-in acquisitions, and ongoing technology development, will continue as we gain share and work to improve our service offerings. With flat revenue for the full year, we believe operating margin of around 13% is attainable. Estimated interest expense in the range of $50 million-$53 million is unchanged from our previous guidance, and we would expect it to be highest in Q2, following our early buy payments to vendors. No changes to our expected annual tax rate of 25.3%, excluding ASU benefits. Fully diluted weighted average shares outstanding is expected to be approximately 38.75 million shares, excluding any effects of additional share buybacks.... guidance for 2024 diluted EPS of $13.19-$14.19 now includes $0.19 of ASU benefit, up from $0.10 in our previously provided range. In summary, we are focused on continued discipline in managing our business through this time of economic uncertainty, while investing in areas of strategic long-term growth. We are in a position of strength as we have access to high levels of capital to fund our growth plans. At the same time, we continue to reward our existing shareholders with increasing cash dividends and an ongoing share buyback program. Our capital allocation approach allows us to continue to deliver increasing returns as we improve our operating results from a legacy of disciplined, consistent execution. We are now ready to move into the Q&A portion of our call. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, 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. The first question comes from David Manthey with Baird. Please, go ahead. Thank you. Good morning, everyone. Good morning. I guess gross margin is going to be a major focus of this quarter. It's my understanding the reversal of the import taxes was not contemplated in your prior margin discussion, so it wasn't in prior guidance either. I just wanted to check that that's correct. And then, Melanie, I think you said what the EPS benefit was just for completion here. Could you repeat that for me, please? Sure. The EPS benefit, it was $0.24 in the quarter. And you are correct. So our review of the tariff classification issue has been open and ongoing since December of 2022, when we originally recognized and recorded the potential liability. As we mentioned back on our call, we accrued the additional expense based on uncertainty regarding the classification of certain products that we imported and related to their tariff that would be assessed. We have completed a review and a determination, working with U.S. Customs. So, we did learn of that favorable determination earlier this month, which was after we gave our previous guidance for margins for the quarter. Okay. And, you know, it's very one-time in nature, both the disbenefit and the benefit. But if you exclude both of those from the numbers, and we kind of look at this, what is it? Slide five. In the upper right-hand panel, we clearly, there's seasonality there, but I think if you even normalize the fourth quarter of 2022 and the first quarter of 2024, and smooth out seasonality, it still looks like we're on a downward trajectory, and it really continues somewhat unabated. I'm just wondering if you can give us some confidence in that 30% line in the sand, how you feel that this sort of decline that we're seeing here over the past several years moderates and maybe even reverses. Yeah. So the two things, you know, specifically as it related to the guidance that we gave at, on our year-end call, kind of excluding the impact from the import taxes that were different from our original expectations, were one, the mix on the building materials. So you know, our guide contemplated that new construction would be down in kind of that flat to down 10% range. So it was a little bit worse than that for first quarter. You know, we are seeing some positive trends in permits in a couple of our key states. As Pete mentioned, it typically takes around 60 days from permitting for that to turn into meaningful sales for us. So you know, we are still expecting as part of the full year that we would see those declines on the new construction side moderate. And so, you know, with that, once we get to that kind of down 10, we'll get some improvements in our mix, our product mix. And then the other item that you mentioned was related to kind of some preseason pricing. So there were several of the markets more heavily impacted by weather, where you know, we did see you know, some customers looking for some more competitive pricing in order to start off their projects for the season. We see that as not recurring as we move into the core of the season, primarily because some of those projects won't continue once the maintenance portion of the business kicks up into full swing. Okay. Thank you. I appreciate it. The next question comes from Ryan Merkel with William Blair. Please go ahead. Hey, everyone. Thanks for taking the question. I'll follow up on gross margin. Should we be thinking... You mentioned you expect a lift in the second quarter. Should we be thinking something modest, like 20, 30 basis points lift versus the first quarter? And is the biggest driver just this competitive environment, you think it's better as we get in the season? Yeah. So, second quarter, we are expecting it to be less than last year, because we'll have a little bit of a tail of that lower cost inventory, just kind of early in second quarter. So we would expect it to be less than last year, but, I would say that it would be, you know, pretty close to our, you know, kind of full year guide of around 30%. So, you know, we'll see. I think the biggest change is kind of from first to second quarter, which we would see, you know, in a typical year. A lot of that's going to be the mix of products. So as we start mixing up into the chemicals and the maintenance components that are more heavy in the second quarter, as well as we get some benefits overall from a geographic mix and, and the higher sales that peak within the, like, the snow belt markets. Ryan, one of the things you have to consider, too, is when you have a softer first quarter, and we mentioned that we think building permits were off, so construction was off, more than we believe it will be for the total year. So you have just competitive forces in the market that, you know, you have early buy payments that are gonna be due from the supplier, due from the suppliers, on all the distributors. And oftentimes what we see, and again, nothing new, this happens, every time we happen to be in a cycle like this, there's more competitive pressures, as people are trying to move out product to liquidate inventory so that they can generate enough cash to make those early buy payments. Now, again, according to just normal, industry or normal seasonality, as you move into the second quarter, everybody is busier. The products are, you know, products are flying off the shelf as people are trying to open up pools. So that, you know, that what I would call a seasonal blip in competitive pressure tends to wane pretty quickly. Okay, that makes sense. Then want to follow up on sales. You also mentioned you expect sales to improve in the second quarter. I'm just curious, what does a return to seasonal buying mean for the second quarter sales? And then have you seen April improve with better weather? So what I would say is, you know, with supply chains are essentially, you know, the any COVID effects at this point are essentially out out of the supply chain. There's some, you know, lingering inventory, but really not much. So any idea that, "Hey, I would have to go out and purchase product ahead of time to make sure I had product," is really in the rearview mirror. So what happens is that, people, you know, I think we did pretty good on early buys, really. And I would tell you that I think the early buy wins, as I mentioned in my comments, really were a function of share gain. It wasn't people going out saying, "Hey, I need to, I need to procure product because I won't be able to get it." So I think we did well on share gain. And what I mean by normal seasonality is everybody has product. So the retailers are like, "Well, as long as I know that you have it, then I don't need to, you know, stock the back rooms full of product, so to make sure that I have it, you know, for that first sunny, hot weekend. I can order it, you know, a couple days in advance and have the product shipped." So I think that's what we mean when return to normal seasonality. We have product, you know, the industry and suppliers are in, you know, reasonably good shape, so I don't know that people are having to pull ahead. So there, you know, we expect the demand to increase as the product flows through the market and pools are opened in the seasonal markets. And in the year-round markets, the swimming season officially kicks off. You know, April from a revenue perspective, April is okay. I mean, we're where we've had good weather, which is pretty much, I don't know that we've had a ton of weather headwinds in April. I would say demand in April is close to what we would have expected. So I think at this point, we feel pretty good about it. All right. I'll pass it on. Thanks. Thanks. The next question comes from Susan Maklari with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. Good morning. Maybe just sticking on this gross margin point for a bit longer. You did mention, Pete, that you've identified some initiatives in order to drive that over time. Can you talk a bit more to those efforts and I guess, how you're thinking about them coming through, and especially given the fact that we could see a tougher macro, perhaps, over the next couple of quarters, just the ability to continue to execute on those? Yep. One of the things that I mentioned is our pricing optimization work. So the teams are working very hard around pricing optimization. And you know, when you calculate gross margin, you basically calculate gross margin based on the, obviously, on the cost of goods. But as the cost of goods fluctuates, as you're selling down inventory and it changes, it can create a false signal. So we've been looking at gross margins, selling margins from average cost. And the work that the team has done, you know, has given us a couple of months of positive signs that we're getting better from a gross margin or getting better in gross margin from pricing realization as a result of the team's work. So January is really when they kind of got started in earnest, so not much result in January. But we were encouraged by the results that we saw in February, and they were even better in the month of March. So that gives us confidence. And I'd also tell you that the supply chain has done a very good job of working with our supplier partners and making sure that we are, that we are stocked and that the programs are in place. And I think that that that certainly has an impact on the overall gross margin of the business. I would also tell you that, as I mentioned, our private label programs are front and center on everybody's mind, and you see the push that we have on chemicals as we, that's tied to, you know, the Pool360 ecosystem, which really has been, has allowed us to really make progress on the private label chems. So we're very encouraged by the results there, which obviously come at a, come with a margin premium. And then, you know, maybe the most underappreciated one is just execution, which, you know, PoolCorp has a, has an amazing reputation of being focused on execution and not getting distracted, because you could make progress in other areas and then basically let it slip through your fingers through sloppy execution. I can tell you that in the tight macroeconomic environment, the team is exceptionally focused on execution to make sure that we hold on to every dollar that we have, and we don't let any of it slip through the cracks. Okay, that, that's helpful. And then maybe turning to the new construction in the R&R side. You mentioned that permits in a lot of these key markets came in lower than where you had anticipated in the first quarter. I guess, what are you seeing, or what gives you the confidence that we could see that moderation through the year? And I guess, how are you thinking about both of those, R&R and new construction, if we do see rates continue to move higher? Yeah, you know, we look at, we look at permits, which is, is an indicator, right? It's not the end-all be-all, but it is an indicator of what's going on in the market, because there's always a timing lag with permits. If you talk to any builder, what they'll tell you is that what used to take, you know, a week or a couple of days to get a permit now can take, you know, a couple of months. But you figure that over time, that normalizes, and, and then still the change in permits is the change in permits. So I can't tell you that I think cycle times in the last year have gotten worse. I just know that it takes longer to get a permit. So depending on when a family decides they want a pool, the time to which that permit would be realized and posted will be delayed over what it has been in the past. So when we look at permits by geographic area, you know, Arizona has seen permits turn positive in the month of March, which is encouraging. The same is true for Nevada, and the same is true for Florida. Hasn't happened yet in California, and hasn't happened yet in Texas, although I think Texas is slightly better. So we're encouraged by the signs. And then, you know, obviously, we talk to a lot of builders, and although there's no permits on remodel, you know, we talk to the builders about, right, what are you seeing from a backlog on renovations? You know, as mentioned many times before, renovations are kind of semi-discretionary. Eventually, you have to do it. So you can put it off for a year or two or three, perhaps, but eventually you have to do it. So I think, you know, the headwinds that we've seen on renovations for the last couple of years anyway are starting to catch up. So now the builders are reporting that their phones are ringing for renovations. So the first sign of life that they're seeing in many markets is, although people aren't running through the door saying, "Take my money, build me a pool," the number of people calling and saying that, "Hey, I want to do a renovation," is increased. Now, what I will tell you is that if you, you know, we look at, if you look at internet searches and you look at traffic on people looking for pool remodel, one of the phenomena that we see is that it appears that people, and the builders would tell you this, too, that consumers are shopping those remodels a lot more. So, you know, a few years ago, it would have been, hey, at the peak, if you will, it was, if you can, if you answered the phone, you got the order. Now, consumers have more choices. So the cycle on remodel is, the good news is that the interest in remodel is better than new pool construction. But it also, what we are seeing is that consumers are shopping those projects more, talking to multiple builders to find out, A, who they're comfortable with, and B, who's going to give them the best value. So the end of your question was, you know, what happens if the macroeconomic environment gets worse? You know, I don't know that the environment is going to get meaningfully worse. Excuse me. But, if it does, you know, typically where we would see the offset would be, in new pool construction. But the level of new pool construction today, especially coming off the big decline last year and the 15%-20% decline in permits that we've seen in the first quarter, would indicate that we are nearing the bottom. Plus, we'd have some markets that have inflected and are starting to increase. Now, hard for me to speculate, you know, what the Fed is going to do. I don't know that the Fed is going to raise rates because I believe that, the embedded inflation is not a function of demand, it's a function of SG&A. So I don't know that the Fed reads the higher, more stubborn inflation as an indicator that they should raise rates. I see them more as paused, at this point for the one rate cut, perhaps, that they've indicated later on in the year. Okay. That's, that's very helpful. Thank you, and good luck with everything. Thank you. The next question comes from Scott Schneeberger with Oppenheimer. Please go ahead. Thanks very much. Good morning. Pete, I'm curious to get your comments on number two player in your industry recently acquired by a larger business. Just your thoughts on the competitive dynamic of how that will be impacted, maybe ability to retain labor, other considerations we may not be thinking of. And then as a kind of a part B to this question, you mentioned you're hearing of consolidation, maybe some of the weaker players in the industry in these tough times fading. How does that impact your business? Thanks. Sure. You know, we saw the announcement last month or early this month, excuse me, on The Home Depot intending to acquire SRS. I don't know that much really changes. You know, they've made a point, both SRS and Home Depot have made a point to say that they're going to run the business separate. You know, and when I think about the impact on our business, I think there's going to be a change. So there's going to be some folks, perhaps, that are in that business that are affected by the sale, that may cause them to consider what they're doing. But as far as, you know, the impact on us, if I'm pragmatic about it and I step back, I say, "Well, there's no new competition." You know, it's not like that this brings a lot more distributors into the market because they're at this point, we don't see the channel to market changing. We'll see, you know, a long-term player owning it versus private equity, which tends to be shorter term focused, which I think is, excuse me, a positive thing. So, you know, overall, we're basically gonna take, Home Depot and SRS at, their comments at face value and say, "I don't think really much is, much is going to change." So time will tell. The deal has to be reviewed, the deal has to close. But, you know, when we saw the announcement, I guess it didn't cause us to say, "Wow, we need to do this, or we need to do that," because I don't think it really changes the competitive landscape much at all. And as I said, you know, the comment on labor, you know, one of our four operating principles has always been to be the employer of choice. So we focus very hard on making sure that we're the best place to work, and that people that join us stay with us and wanna grow their career with us, and we don't see that changing. And we think we're pretty good at it. We think we do a great job of retaining talent in the field. We're, you know, focused on the swimming pool industry. That's what we do. We're not going anywhere. And I think people that want a career in this industry, look at PoolCorp exceptionally favorable in that fashion. The second part of your question that I mentioned, consolidation amongst the builders. Again, nothing new. In a cycle like this, you would expect the you know, kind of the late to the party folks that decided, "Hey, I'll get into building," because there's so much demand, that when the demand wins, that things become very, very tough for them. And we're, I think we're seeing that play out. So the bigger, stronger players, when the markets get tough, tend to outperform, you know, newer and perhaps weaker players. So as the demand for new pool construction and remodel has come off of its highs, people have decided that they're maybe gonna go focus just on service or just on cleaning or exit the business altogether. So whatever demand they would have had, by definition, is gonna end up with one of the remaining players in the market. So I don't think it really changes the industry output, because I think that there's still plenty of capacity in the industry to address the needs. So I don't... I can't look at it and say, "Well, that means less pools get put in the ground." It means some of the larger customers are gonna see a benefit from perhaps a little bit less competition. Great, thanks. I appreciate that. And Melanie, just one, a quick one on SG&A. Just curious how much of, you know, you've been targeting $20 million tech initiatives this year, $15 million on performance-based comp, $12 million new greenfield locations. Is that gonna be ratably through the year? Did you do what you expected to do in the first quarter? Any cadence mix shift to that versus what you've been saying just a quarter ago? Thanks. Yeah. So our original guidance on that is that the performance-based compensation would be recorded, basically pro rata over the year, based on our actual operating results. So that's really the only one. You know, we did record a slightly less performance-based compensation, than we would have if we had better results in the first quarter. So that's really the only one that's changed. As far as the cost related to, the new sales centers and the opening sales centers, with the, the three that we've opened so far to date and the five that we're intending to get open before the season, cumulatively, we'll have about eight open preseason, with a target of 10 for the year. So we are seeing, a significant amount of those costs in, you know, first and early second quarter. And then as it relates to the tech initiative, you know, we have started to ramp that, so we're pretty much right on target with what we've spent so far the year. That one will, you know, we'll have some spend in the first quarter, and then it'll ramp up slightly through the rest of the year as we continue to onboard some of those resources that we need for those projects. Great. Thanks very much. The next question comes from Garik Shmois with Loop Capital. Please go ahead. Oh, hi. Hi, thanks. So just had a clarification question. The 1%-2% benefit from normalized weather, that I think you had in your prior guide, now you're saying you might not see that. I just wanted to be clear, if that's what you're saying. Yeah, that is what we're saying. So our original guide was for flat to kind of low single digit sales growth. Embedded in that low single digit sales growth did include some of that weather recovery. And so, you know, at this point, we'll really kind of look to see, you know, really, you know, how quickly the season ramps, and then more importantly, you know, does the late start to the season cause it to, you know, extend over into, you know, late into the third and fourth quarter? And so if we see any of that recovery, it would be, you know, later in the year at this point. Got it. And then just on some of the share gains and the initiatives there, and some of the opportunities that you had in the first quarter, any way to size what that opportunity could be and just the stickiness of those share gains? What I would tell you is it really kind of goes by market. So you've seen that we've leaned very heavily into the aftermarket and the maintenance business. And I think our Pool 360 ecosystem is kind of leading the way there for us, and the software that makes the service providers more efficient, and I think our expanded footprint makes us more convenient. So, you know, we always look at from a long-term growth perspective, share gain is part of our model, and we never really give it back. Now, when I say that, the thing you have to remember is that in any given market, I mean, we're practical in that we're certain in any given market, we may lose a customer here and there, but by and large, you know, share gain has been part of our long-term growth model, and it will remain as part of our long-term growth model. So we look at it, it's about 1%, in some markets could be more, in some markets it could be a little bit less. But we find that when people move over to us, that generally they stay with us. And we kind of triangulate on that with the supplier information and how the suppliers are doing. And we know, you know, for those same products, how we're doing, and it is apparent, very apparent to us that the share gains that we got all through the pandemic, you know, for the most part, you know, we've maintained. And we continue to gain share, you know, through today. So, you know, in any given market, might we give back a customer here and there? We might, but we try like hell to get that customer back. But by and large, you know, we think it's part of our long-term growth algorithm, and it's in the 1% range. Great. Thank you for that. The next question comes from David MacGregor with Longbow Research. Please go ahead. Yes, good morning, and thanks for taking my questions. I guess I just wanted to look at the balance sheet for a moment. You're at 1.4x debt to EBITDA. I think earlier, to a question on consolidation amongst dealers, you, you offered some color. I, I guess I'm thinking about consolidation that may ultimately unfold amongst some of your competitors and some of the distributors. Just wondering how far you'd be prepared to take the balance sheet in terms of leverage, if something on a larger scale were to come along? Yeah, I mean, I would tell you, you know, we're always very mindful of the, of the balance sheet and making sure that we are, we are responsible allocators of capital. We, we look at, when we look at, acquisitions, we look for a strategic fit, and we also look for a cultural fit. And then we also look for an economic, an economic equation, you know, that, that makes sense. But the good news about PoolCorp is we have a tremendously strong balance sheet, and we also have a, very strong, leadership team, both of which are required not only to execute an acquisition, but to execute and integrate an acquisition and realize the savings. But with that, very talented, management team and a very strong balance sheet, it also gives us the ability to look at deals and say, you know, if they make sense financially, then we would do them. But if not, you know, we also have the ability and frankly, a superior value proposition in almost all cases, to say, if we need additional capacity, that we can do it from a greenfield perspective. So we are, have always been very disciplined allocators of capital. We pay a fair price when we buy businesses. We've bought a lot of businesses over the years. We continue to do acquisitions, but I wouldn't look for us to say, wow, you know, we're going to go out and do acquisitions at any cost, because frankly, we don't have to, and that would probably be dilutive to the company if we went out and made lousy deals. So we look at deals, if we can, if it's a good strategic fit for us, if we believe that there is a good cultural fit, then we certainly have more than enough dry powder to go out and execute really any deal that would potentially exist in our industry. I'm just going to add to that. So the one and a half to two times is really our conservative philosophy, but we have up to three and a quarter under our debt arrangement. So, you know, we consider that we have substantial capacity. Got it. Thanks for the color, late in the call. I'll leave it there. Thanks, Pete. Thanks, Melanie. Thanks. The next question comes from Steve Volkmann with Jefferies. Please go ahead. Great. Good morning, folks. Thanks for fitting me in. Most of my questions have been answered. But, Pete, I'm curious, are you hearing anything or drawing any conclusions around kind of the average cost of a pool build project or a pool remodel contract, project? Do you think that's changed much? You know, it's interesting, Steve. It's actually a very good question, because we've seen the price of a pool escalate to all-time highs. And then at a certain point, you know, that matriculates through to the size of market, because at a certain point, just because of the monthly payment for those pools that are financed and the elevated rates, it can close out some customers. And what we've seen is that some of our builders have just, you know, steady as they go because they've got, you know, a good book of business, and they build high-end pools, and they're very happy to continue to do that. We have other builders that are trying to figure out how they can lower their ASP by... To make sure that they can perhaps bring more people into the market.... So, I think overall, I wouldn't look for any major change. But, you know, some dealers have told us that whereas a backyard project was, "Hey, I'd like to do extensive decking around the pool. I want a pool with all these bells and whistles on it, and I want an outdoor kitchen." And their, you know, their eyes may be bigger than their checkbook, and then the dealers sit down with them and say, "Okay, but let's we can do this, but let's make let's break it up into chunks. So let's decide on the size of the pool and what features have to be buried in the cement, so to speak, and we'll put those in. Although you might like a 1,500 sq ft deck around your pool, if it doesn't fit in the budget today, we can build a pool with a very small deck. It would be like the pools that were built 20 years ago with just coping and grass. And then we can come back later and add the decking. And we can come back later and add an outdoor kitchen. So, you know, if you're a more price-sensitive builder, then those folks are working to make sure that they do whatever they can to bring that price down. Now, having said that, you understand that the average is made up of pools that are, you know, $1 million and entry-level pools. So every pool tends to be more expensive, but I think our dealers are trying to be more creative when it comes to bringing as many people into the market as they can. The good news is that when it comes to some of the features like that, we've been talking about, like automation and robotic cleaners and such, you know, robotic cleaners are still outselling the pressure and suction, which is much older technology. Even though they're more expensive, they're outselling them handily. And when people are buying pools and upgrading, they're not really opting for, I'll go back to a time clock. You know, they're still going with automation, but it may be a more entry-level of automation. So it's a good question. I think what you see is our dealers working within the environment to try and be as inclusive as they can with as many customers. Got it. Okay, interesting color. And then maybe just real quick for Melanie. If we're having this conversation in three months, and we haven't seen, you know, some sense of recovery or you know, reasonable volumes on new build and retrofit, how does that impact your gross margin for the second quarter? Yeah, so gross margin for the second quarter, if we continue to see, you know, lesser mix of building materials, that would be, I would say, an added component on top of the normalization in inventory that you would see as the decrease on year-over-year comparative margins. Perfect. Thank you, guys. I think we're probably just at time, so maybe we have opportunity for one last question. All right, our last question comes from Andrew Carter with Stifel. Please go ahead. Hey, thanks. Good morning. First question I wanted to ask, just to make absolutely sure, the weather component that you said for the year that you outlined is a negative. Was that a net negative from last year, in isolation? i.e., I think last year was 60, and forgive me, but this year, I think, was a -2, so therefore a net two-year headwind of 80. Or was it just those select markets? And then with the guidance coming in, just to be clear, coming in lower at the top end of revenue guidance, that's the not in expectations of weather favorability, and it's the maintenance units coming down. Is that chemicals and equipment both, or just one of those? Thanks. Yeah, so the guide for the year just kind of slightly positive would not include the weather recovery as we had mentioned. And then for the first quarter, we did see the positive impacts in the quarter for the normalized weather in California. You'll note in Pete's comments that California outperformed kind of the rest of our big four markets. But where we saw weather for this year in first quarter was primarily in Florida, which for the quarter the proportion of those Florida sales is the highest of those big four states, so it had a larger impact as it relates to that. Well, and one more question to ask here. In terms of kind of the new branches and acquisitions, I know that the base business was kind of right in line with overall sales, but I think over the past 15 months, which I believe is what you exclude from base business, you've added about 5.5% branches. Is the contribution lower than what your expectations would be? Perhaps maybe this is super cycle dynamics. And of course, at the Investor Day, you reiterated two things, the payback period, as well as kind of the bottom kind of the margin goal, bottom tier, 10% or target. So but has anything changed to where just the new branches are just an expense of competing in the category versus being as accretive to revenue? Thanks. Andrew, what I would tell you is that, that, you know, when we open up new branches, as we mentioned during Investor Day, we, we always do a five-year pro forma. And we have to be very comfortable with the reason and the rationale for us opening the branch and the quality of the pro forma. Certainly, if you look at, if you look at the branches and their ramp in a market that is more challenged from a new construction basis, they would be impacted and perhaps see slower growth. But many of the branches that we open are really not for new construction. There could be much more maintenance tied to maintenance, and those tend to perform well. So overall, when I look at the performance of the class, really, nothing is alarming. I'm actually pretty happy with the results on the greenfields, especially given the number of greenfields that we've done. But that really is a testament to the experience of the management team. So you know, with these folks, when we get them or when they open new branches, they're not new folks. They're not trying to figure things out. They're very disciplined. We have a quality management team. We generally see the new location with talent that's ready to be promoted from the existing network. So our ability to leverage the performance of those new branches is still pretty good. So overall, I'm happy. Thanks. I'll pass it on. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Pete Arvan, President and CEO, for any closing remarks. Yes. Thank you all for joining us today. We look forward to our next call, which will be July 25th. Mark your calendars for July 25th, when we'll release our second quarter 2024 results. Have a wonderful day. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.