Pool Corporation

Good day and welcome to the Pool Corporation Second Quarter 2025 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 telephone keypad. 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, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you and welcome to our Second Quarter 2025 Earnings Conference Call. Our discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2025 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. We have included a presentation on our investor website to summarize key points from our press release and call comments. Peter Arvan, our President and CEO, will begin today's call with his comments.

Thank you, Melanie, and good morning, everyone. We were very pleased to see positive sales growth in the Second Quarter, along with stable gross margins and steady operating margins versus the prior year. Given all the challenges affecting the broader economy and industry dynamics, I consider these results to be very solid. They are a testament to the team and reflect our ability to deliver outstanding value and exceptional service to our customers, further reinforcing Pool Corps' leadership position in the industry. The Second Quarter started off similar to how we exited the First Quarter. We saw encouraging trends in most areas of the business through April and early May, unfavorable weather conditions in certain markets through mid-June, tempered demand but turned more favorable towards the end of the quarter, helping us post a modest sales gain. The macro uncertainty and constantly developing policy decisions combined with no signs of interest rate easing continue to pressure new pool construction and larger renovation projects. Despite this, our construction-related sales fared better than the permit data would have suggested. As you all know, permit data indicates that new pool construction is down, high single digit, but it's still too early to call the year. It is worth noting that the Second Quarter trends improved from the First Quarter but still represent a headwind on a -over-year basis. The remodel activity, we expect, will be modestly better than the new construction activity for the balance of the year. The aging install base necessitates certain remodel and renovation projects each year, creating ongoing demand. We believe that larger renovation projects in the most recent quarters have been split into phases, allowing consumers to reduce their spend per project or spread out the spend over a longer timeframe. For the Second Quarter results, we reported $1.8 billion in net sales, up 1 percent, reflecting our team's effort in executing on strategic areas of our business. Maintenance products performed well, including strong growth in our private label chemical products. On sales related to new construction and renovation activities, we saw improving trends during the quarter, creating less of a drag on sales than in recent quarters. Airf driven price increases had a modest impact on the quarter due to timing and was somewhat offset by deflation in our commodity categories. Regionally, we saw distinct trends across our four major U.S. markets. Florida and Arizona each delivered solid 2 percent sales growth for the quarter, outperforming national averages. In both states, ongoing population growth in migration and favorable weather patterns fueled continued demand across the maintenance, renovation, and new construction categories. Our strong local presence, robust distribution network, and targeted marketing initiatives have kept us top of mind with pool professionals allowing us to expand our customer base and capture additional market share. Additionally, franchise growth and emerging builder partnerships in the states further strengthens our positions for long-term success. Texas and California continue to experience this challenge in new pool construction, with sales down 2 and 3 percent respectively, reflecting macroeconomic headwinds and tempered consumer confidence. However, maintenance and aftermarket sales in these markets remain resilient, highlighting the value of our established installed base and trusted service partnerships. Our teams in Texas and California are focused on supporting remodel activity and enhancing customer support to ensure we are well positioned for recovery as local economies and construction activities rebound in the future. We remain confident that our disciplined investment and regionally tailored strategies will enable us to continue outperforming the broader market across all our core geographies. Additionally, we were encouraged by the sequential improvement in permit data for Texas as the quarter developed, although it is still negative. In Europe, net sales increased 2 percent for the quarter in local currency and 7 percent in U.S. dollar. We saw sales growth in most European economies, particularly in the southern counties while France dealt with colder temperatures but showed some improvement in June. We are encouraged that this trend for Europe continued into July. For Horizon, net sales declined 2 percent in the quarter. Maintenance product sales were solid, however, weakness in larger development-related construction projects muted those gains. Pricing for the most part has stabilized in the market and we are encouraged with the -to-date July sales trends. Looking to our product sales mix, chemical sales grew 1 percent despite price deflation and weather headwinds in certain markets, highlighting the power of our brands and expanding offering for our customers. When combined with our Pool360 Water Test platform, it is a very strong chemical offering that will continue to take share as our brands grow. Customer feedback is excellent and our confidence in this area and our entire retail support offering is strong. Building material sales declined 1 percent, a sequential improvement from what we saw in the first quarter and much of last year and better than the underlying trends would suggest. The results highlight the value of our NPT branded offering, including improved trends in our proprietary pool finish and the effectiveness of our consumer-facing showrooms and refreshed dealer showrooms that support our customers and enhance the pool owner's design experience. Equipment sales, which include cleaners, increased 1 percent during the quarter, reflecting modest price realization and stable replacement volumes, mitigating the -over-year decrease in new construction units. For context, the most recent price increase went into effect late in the quarter. Looking at our end markets, our commercial sales increased 5 percent in the second quarter, supported by the investments we have made in developing our commercial team, designating commercial warehouses and expanding -to-finish project capabilities. Sales to our independent retail customers declined 3 percent in the quarter, showing a similar cadence during the quarter on what we saw in overall sales, but with greater headwinds on our DIY maintenance in May and early June, considering our retailers' heavy concentration in northern markets. We saw much improved retail sales in these markets in the latter half of June. For our -a-penny franchise group, representing our franchisees' sales to their end customers, sales increased 1 percent for the quarter, reflecting their -in-class offering and while also noting their Sunbelt concentration with less weather headwinds this quarter. Now let me comment on gross margin results. As you saw, the business posted a solid 30 percent gross margin for the quarter, consistent with the same period last year. I am pleased with our team's collective effort and focus in this critical area. We have seen historically downward cycles place additional pressure on winning business and through collaborating with our supply chain teams and pricing specialists and making smart decisions on the ground, we have been able to maintain gross margins in line with prior year in a very challenging and dynamic environment. Melanie will cover this in more detail in her prepared remarks. Our continued investment in digital innovation are paying off with Pool360 platform transactions now represent 17 percent of net sales, up from 14.5 percent last year, reflecting enthusiastic customer adoption and creating durable competitive advantages that are hard to replicate. We celebrated the opening of our 450th branch during the quarter. Strategic openings in the market with higher pool densities continue to be the driver in further building out our footprint and positioning ourselves for further share expansion. We opened two new locations during the quarter and four year to date. Our Pinch of Penny franchise network added five new stores in the quarter, including the first new store in North Carolina and increasing the Pinch of Penny locations to 302 franchise stores. As we move through the peak season, we expect sales in the back half of the year to be modestly up with a full year performance anticipated to be relatively flat. In the absence of an interest rate cut or external catalyst, we are updating our diluted earnings per share guidance for the year to a range of 10.80 to 11.30, which includes a 10 cents realized benefit from the ASU year to date. We remain highly confident in the long-term fundamentals of our industry with the demographic trends, desirability of at-home leisure, and continued need for maintenance and renovation supporting ongoing demand. We believe that when the macro backdrop improves and the housing turnover resumes, new pool construction and renovation activity will accelerate and Pool Corp will be uniquely positioned to capitalize on that growth. Finally, I want to thank the entire Pool Corp team for your dedication and adaptability. Your commitment enables us to deliver exceptional value and reliability to our customers and partners and, importantly, drive success for our shareholders. We look forward to the opportunities ahead. I will now turn the call over to Melanie Hart, our Senior Vice President and Chief Financial Officer for her detailed commentary.