Pool Corporation

Good day and welcome to the Poole Core Third 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 a touch-tone phone. To adjourn 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.

Welcome, everyone, to our third quarter 2025 earnings conference call. During today's call, our discussion, comments, and responses to questions 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 any non-GAAP financial measures included in our press release will be posted to our corporate website in the investor relations section. Additionally, we have provided a presentation summarizing key points from our press release and today's call, which can also be found on our investor relations website. We will begin today's call with comments from Peter Arvan, our president and CEO.

Thank you, Melanie, and good morning, everyone. I'm excited to share that our teams have maintained the momentum we established in the second quarter, delivering another solid performance in Q3. Thanks to their hard work and dedication, we continue to drive growth with top-line sales up 1% and gross margin expansion of 50 basis points. This was fueled by consistent maintenance activity and encouraging signs of stabilization in both new pool construction and remodel. I'm also pleased to see that we achieved year-over-year growth in building materials for the first time since Q3 of 2022, driven by improvements in remodel activity and share gains. As you know, we have continued innovating and investing in our Pool 360 applications, and I'm pleased to say that our adoption rate of these industry-leading tools continues to grow as our customers realize their full potential. Building on these successes, we recently shared our strategic roadmap for the next year and beyond with the entire management team at our International Sales Conference, and their excitement was palpable. The innovative products and ambitious growth plans we unveiled are already gathering a buzz, and our teams are ready to hit the ground running as new initiatives start rolling out immediately. We're focused on key areas of our business where we know we can win. This forward-looking approach not only positions us to close 2025 with momentum, but also lays a strong foundation for an even more dynamic 2026. Looking at the macroeconomic environment, uncertainty around tariffs and elevated borrowing rates continue to weigh on consumer sentiment and limit discretionary demand, particularly for pool projects that require financing. While we observed overall permit data down mid-single digits year-over-year through August with considerable variability across the country, recent easing of interest rates policy offers a promising path forward towards relief. For clarity here, we believe it will take further reductions to bring borrowing rates to a level that will motivate potential entry-level pool owners to build. Despite these challenges, however, our new pool construction sales have outperformed industry permit data indicating continuous share expansion. On the remodel side, consumers remain focused on essential repairs and targeted improvements rather than large-scale upgrades. In response, our teams are leveraging our robust product portfolio, our strong private label offerings, and enhanced technology while partnering with vendors to deliver innovative solutions and drive future growth. Overall, I am more than confident in our team's ability to adapt, execute, and position us for long-term success. Now I will walk through our third quarter results. We reported $1.5 billion in net sales, up 1%, building on the growth we generated during peak season. Maintenance product sales performed well, particularly parts and private label chemical volumes. As mentioned, we saw growth in building materials used in new construction and remodel projects. Mid-season price increases created a slight lift on top line, but were diluted some by chemical deflation. Related to our geographic markets, Florida produced 1% growth with Texas flat, and California and Arizona each downed 3%. Florida remains steady across our product categories and leads the country with new pools being built in 2025. While flat, Texas showed sequential improvement compared to recent quarters. New pool builds in Texas remain pressured but continue to improve throughout the year, and maintenance-related product sales showed resilience. In California, we see continued pressure on new pool builds, particularly in areas affected by recent wildfires. Arizona showed some deceleration in permits compared to earlier this year, but we believe this may be related to timing versus reversion while maintenance held up for both California and Arizona during the quarter. In Europe, net sales decreased 1% for the quarter in local currency and increased 6% in U.S. dollar. Similar to last quarter, we saw growth in the southern countries, while impacts from political strain and related consumer uncertainty pressured sales in France. For Horizon, net sales increased 3% in the quarter, supported by solid maintenance growth and improvement in sales for outdoor living products like landscape lighting, hardscapes, and synthetic turf. Shifting to product categories, total chemical sales declined 4% this quarter, reflecting some additional deflation. Overall, I consider the demand for chemicals and our performance to be stable. Our private label offerings generated volume growth during the quarter, showing that our teams are being successful in showing the power of our brands and the innovative products and systems that we offer. With our new product showroom displays and marketing support, our customers continue to see strength of our value proposition, and this bodes well for the upcoming selling season. Building material sales increased 4%, again, driven by our expansive private label offering and elevated customer experience. We recently rebranded NPT, formerly National Pool Tile, to National Pool Trends to align our brand name and marketing efforts to highlight our many offerings. The new name brings greater clarity to our value proposition, showing NPT as our customer's partner for complete backyard transformations using our tile, pool finish, decking, to name a few. Our premier product offering, product sales specialists, and consumer showrooms offer a one-of-a-kind customer experience, and it is shown in our results. Equipment sales, which exclude cleaners, increased 4% during the quarter, mostly reflecting benefit from price and steady replacement volume for critical components. Turning to end markets, our commercial sales increased 2% in the third quarter, showing steady momentum from a strategic focus area. We continue to make investments in our team during the quarter and created greater connections to key designers and builders to better support commercial aquatic projects. Sales to our independent retail customers declined 3%. Chemical deflation created mild headwinds here, while DIY consumers continue to be hesitant with discretionary purchases like cleaners and above-ground pools, spas, and some equipment. For our pinch-a-penny franchise group, sales represented our franchisees' sales to their end customers declined 1% during the quarter. Also of note, we have not seen any meaningful shifts between Do It For Me and Do It Yourself customers. Before covering progress on our initiatives, I want to briefly highlight gross margin ahead of Melanie's prepared remarks. I am extremely pleased with the team's effort to expand gross margin by 50 basis points this quarter. Although the operating environment remains challenging, our teams continue to deliver by making strategic and efficient supply chain choices refining our network and applying disciplined buying and sales strategies all while providing an unparalleled customer experience. A key investment area and differentiator for PoolCorp is our technology suite. Pool360 is the largest and most comprehensive set of customer-facing tools in the industry and our adoption rate continues to grow. For the quarter, sales through the tool represented an all-time high of 17% of our total sales for the third quarter, which demonstrate the customer's desire for technology that creates value. While still in the early stages, this growth shows the output of our technology investments over the past few years. Our targeted spend in our digital ecosystem is driving technology adoption and fueling not only growth in private-level chemicals, but also service and traditional B2B offerings. Our delivered investments in innovation and enhancements of our tools have been key drivers of Pool 360's impressive sales results. These advancements empower us to support higher sales efficiently while creating capacity for future growth. Increased Pool 360 transaction adoption delivers significant benefits, not only strengthening our margins, but also elevating the customer experience, accelerating private label and exclusive product growth, and enhancing our long-term competitive advantage. We completed one acquisition during the quarter, adding two locations in key markets. Additionally, we opened one greenfield, bringing our year-to-date opening to six sales centers. We remain on track for additional openings in the fourth quarter to reach eight to ten new sales centers for the full year. Our Pinch-a-Penny franchise network added one new store in the quarter, adding to our Arizona presence and bringing the Pinch-a-Penny locations to 303 franchise stores. Touching on guidance, as we exit the pool season and enter the fourth quarter, we expect full-year sales performance to be relatively flat to up slightly. We are confirming our diluted EPS guidance for the year to a range of $10.81 to $11.31, updated to reflect the 11 cents in realized ASU benefits year-to-date. At Pool Corp, our relentless pursuit of continuous improvement is driving us to lead the way on innovation across products and processes. Recognizing the industry's need for fresh ideas and solutions, we are making a new and intentional push to discover, shape, and bring new innovation to market for our customers and as the strongest channel to market for our supplier partners. By identifying emerging opportunities and thoughtfully guiding them from concept to market, we are helping to expand the total addressable market while delivering value unique to PoolCorp. Our team's product expertise is unmatched, backed by superior inventory availability, robust operating system, and customer relationships that span decades in nearly every market we serve. Even as the macroeconomic environment presents challenges, the underlying strength of our industry and Pool Corp's distinctive capabilities remain clear. Our long-term growth trajectory is secure, pools continue to be highly desirable, and no company is better positioned than Pool Corp to help build and maintain the growing installed base. We have a strong competitive advantage, and we are continually strengthening it through strategic investments in our people, facilities, acquisitions, digital platforms, innovative private label and exclusive products, retail support systems, advanced chemical repackaging capabilities, and consumer-facing marketing tools. Our commitment is focused and our path forward is clear. We mark our 30th anniversary as a public company. I want to thank our entire team for their exceptional dedication, which has driven our long-term success and positions us for the future. Over the past three decades, our growth and sustained success have been driven by the talent and commitment of our field leadership and support teams, all united by a focus on delivering the best customer experience and cultivating a go to market relationship with our valued suppliers. Looking ahead, I am confident that this foundation and our continued investment will equip us to enhance the differentiated value we provide to the pool and outdoor living industry while growing sales, expanding margin, and generating strong cash flows and delivering exceptional returns for our shareholders. I will now turn the call over to Melanie Hart, our Senior Vice President and Chief Financial Officer, for her detailed commentary. Melanie?