POOL

Good day, and welcome to the Pool Corporation First Quarter 2026 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.

Welcome to our first quarter 2026 earnings conference call. During today's call, our discussion, comments, and responses to questions may include forward-looking statements, including management's outlook for 2026 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. Pete?

Good morning, everyone, and thank you for joining us. As we begin the 2026 season, the industry continues to work through a period of stabilization. Consumer discretionary demand remains measured while the installed base continues to drive steady maintenance activity. Q1 is our smallest and most weather sensitive quarter, and our focus entering it was on executing cleanly through the shoulder period to position us for the core season ahead. Our team delivered a solid start with sales growth of 6%, operating income growth of 7%, and a 10 basis point of operating margin expansion, exceeding our expectations for the quarter. Execution was steady across our geographic footprint, with strong maintenance volumes and improving trends in several discretionary categories. A solid start like this reinforces rather than changes our full year view.

We are confirming our full year diluted earnings per share range of $10.87-$11.17, which includes the $0.02 of ASU benefit realized in the first quarter. Reviewing sales by geography, California grew 10% and Texas 7%, supported by constructive weather and strong maintenance demand. Arizona grew 1% and Florida declined 1%, reflecting steady maintenance activities offset by weather and some softness on the irrigation side in Florida. Across the markets, our teams adapt quickly to local conditions and our differentiated product portfolio, proprietary brands, technology platforms, and supplier partnerships built and refined over many years continue to widen the structural advantage that define our position in this industry. These are not advantages that can simply be replicated by adding locations. In our other key businesses, Horizon net sales declined 2%, consistent with the broader discretionary environment we've seen persist.

In Europe, sales grew 5% in local currency, building on the improved trends which we exited in 2025. By product category, we saw broad-based growth. Chemicals grew 8% on strong volume, with standout contributions from our proprietary and private label lines, which carry structurally higher margins and are gaining traction across the enterprise. Building materials grew 5%, continuing to build on our National Pool Tile offering. This, we believe, builds upon our growing share in this category, given the backdrop of muted new construction market. Equipment grew 7% on price and solid volume, and commercial was flat for the quarter, largely due to project timing, but exited the quarter with slight growth. Turning to our two strategic aftermarket channels, independent retail and the Pinch A Penny franchise network. Sales to independent retail customers grew 3%, a solid setup as we prepare for the core season.

Pinch A Penny franchisee sales to their end customers grew 4%, and our franchisees opened 7 new independently owned franchise locations in the quarter. On the digital side, Pool360 increased to 13% of net sales in the first quarter, up from 12.5% a year ago. Our teams continued to make steady progress engaging customers through enhanced offerings and most recently, Pool360 Unlocked. Between our digital investments and our distribution network, we are well positioned to continue deepening customer engagement across both professional and DIY end markets. Consistent with what we have discussed last quarter, we remain disciplined on our sales center expansion or capacity expansion and are focusing on driving more value from our existing footprint. We consolidate one sales center into its existing market in the quarter, bringing our total to 455 sales centers.

We still expect to open 5 new sales centers for the full year. This is a measured productivity first posture, the right stance given the current environment. We have made several investments in our network, our technology, and our people over the past several years, and our focus now is on leveraging those investments rather than adding to them. You should expect our expense growth rate to moderate as we grow into the capacity that we have already built. As we look at the rest of the year, the macro backdrop has not changed materially from what we described entering 2026. New pool units for 2025 came in at 58,000. While we expect 2026 will be close to that level, it is important to remember that the center of gravity of our business is the 5.5 million in-ground pools already installed.

We serve that installed base with a combination of product innovation, customer experience, and go-to-market capabilities that no one else in the industry can match. Our growth thesis does not require a recovery in new pool units. It is anchored in maintenance, remodel, and share capture across product categories for the existing installed base. Our teams remain focused on executing the plan we had set out entering the year, maximizing share across product categories, and investing deliberately in technology, private label, and partnerships that extend our reach. Over nearly four decades, we've built something that goes well beyond distribution, an integrated platform of supplier relationships, proprietary products, technology, franchise networks, and field expertise that no one can replicate.

We have deliberately invested in that platform so that we perform in the environment we are in today, and so that we are in a fundamentally stronger position whenever the cycle turns. The depth, the reach, and the relationships that we have built are unmatched, and we are getting stronger, not standing still. We look forward to sharing more about our strategic priorities and capital allocation discipline at our investor day on May 12th. I want to thank our team, our vendor partners, and our customers for the work and the trust that underpins what we do. Our people are the reason we start each season ready to win, and their efforts in Q1 set us up for the season ahead. I will now turn the call over to Melanie Hart, our Senior Vice President and Chief Financial Officer, for her commentary. Melanie?

Thank you, Pete, and good morning, everyone. We are happy to share a solid first quarter, with net sales increasing 6% compared to the prior year period. The 6% increase reflects approximately 3% from pricing, 2% from volume in our maintenance and discretionary categories, and 1% from customer early buys and foreign currency translation. Pricing contributed approximately 3% to sales growth in the first quarter. This reflects an estimated 1%-2% full-year price realization from current year increases, supplemented by an approximately 1% incremental benefit from mid-season pricing actions that were implemented at the end of April of the prior year. We expect this pricing contribution to normalize in subsequent quarters when fully reflected in our year-over-year comparison.

Within our chemical product lines, we have observed some moderation in pricing from levels seen at the beginning of the quarter, but at this time, we are not realizing a significant impact on consolidated net sales. We will continue to monitor market conditions. Volume growth was a meaningful contributor to our top-line performance, with our maintenance and discretionary product categories delivering a combined 2% increase, driven by improved demand across equipment, parts, and chemical volumes. The positive momentum we experienced in building materials during the back half of 2025 carried into the first quarter, providing support to overall sales growth. Building material sales for the quarter increased 5%, and we are encouraged that our results continue to track ahead of permit data. Permit data remains lower than prior year levels through the end of the first quarter.

Finally, the benefits we saw from early buys and foreign currency translation provided an approximately 1% tailwind to reported sales in the first quarter. We do not anticipate currency to be a material contributor to full year results, as the favorable translation impact is expected to diminish in the seasonally stronger second and third quarters as the sales base increases. Gross margin for the quarter was 29%, a decrease of approximately 20 basis points compared to the prior year period. Primary drivers of the year-over-year change during the quarter were product mix, inbound freight associated with stocking levels for the season, and increased early buy activity. Product mix was the most significant driver of the year-over-year variance. Equipment sales grew 7% in the quarter, and given the lower relative margins of this category, the strong volume performance diluted consolidated gross margin. We view this growth as strategically positive.

Customer early buy activity also increased in the quarter. As is typical with early buy programs, these sales reflect modest discounts from regular season pricing, and therefore, carry somewhat lower margins than our in-season business. The increase in early buy volume is consistent with our go-to-market strategy and positions us well for the selling season ahead. Customer mix and chemical margins were also modestly below prior year levels, though neither represented a material individual driver of the variance. Partially offsetting these headwinds, we continue to realize benefits from our pricing initiatives and ongoing supply chain actions. First quarter growth margins are in line with our historical seasonal patterns and should not be viewed as sequential from fourth quarter levels. Operating expenses for the first quarter were $247 million, or a 5% increase over the same quarter in prior year.

The increase was driven by the addition of 6 greenfields opened after March of last year, technology cost, and overall inflationary increases. As discussed on our year-end call, our 2026 operating plan is focused on unlocking efficiency across the 50+ greenfield locations opened over the past 5 years, combined with process improvements resulting from our ongoing investments in Pool360 and its expanded capabilities. First quarter results are tracking in line with that plan. Operating income of $83 million increased $5 million, or 7% compared to the prior year. We realized a 10 basis point operating margin improvement. Interest expense of $12 million reflects the incremental borrowings associated with share repurchase activity during the quarter. Diluted earnings per share of $1.45 increased $0.03 compared to the prior year. Prior year included a $0.10 ASU benefit versus $0.02 in the current quarter.

Excluding the impact of ASU in both periods, diluted EPS increased $0.11 or 8% for the first quarter, reflecting our ability to generate earnings growth with top-line expansion. Moving to our balance sheet and capital allocation. Consistent with our normal seasonal pattern, we executed our vendor early buy programs to ensure appropriate inventory coverage heading into the season. Inventory at March quarter end was $1.7 billion, 14% higher than first quarter last year, and an increase of approximately $200 million from year-end as product was received and positioned across our network. Our current inventory includes stocking for new locations and acquisitions added to the network, new product introductions resulting in a broader product range, and cost inflation relative to the same period last year, with some opportunistic purchases made ahead of current season price increases.

Inventory investment is concentrated in our fastest-moving product lines, and we would expect a normal seasonal reduction in inventory levels as we move through the peak selling season. We ended the first quarter with total debt of approximately $1.2 billion and a leverage ratio of 1.7 times, which is within our stated range. As is typical, debt levels will increase through the first half of the year as seasonal inventory builds and early buy payments come due before declining in the back half of the year as receivables are collected. Net cash provided by operations was $25.7 million for the first quarter, compared to $27.2 million in the prior year period, with the year-over-year change primarily driven by higher inventory purchases in support of the upcoming selling season.

During the quarter, we repurchased approximately $64 million in shares, an increase of $8 million over the prior year period, with $271 million remaining under our current repurchase authorization. We will continue to execute share repurchases in an opportunistic and disciplined manner consistent with our capital allocation framework. Even with our first quarter trends tracking ahead of our expectations, full year guidance remains unchanged. We continue to expect a 1%-2% pricing benefit for the full year of 2026 from vendor cost increases and related price pass-throughs. Combined with growth from the installed base of pools and the absence of any meaningful recovery in discretionary spending, we expect top-line performance to be a low single-digit growth on a same selling day basis.

Gross margin for 2026 is expected to remain consistent with 2025, supported by continued supply chain efficiencies, pricing strategies, and higher private label sales offsetting the prior year margin benefit from mid-season price increases. As indicated at year-end, first quarter reflected the highest year-over-year expense comparison. We expect expense growth to moderate on a quarter-over-quarter basis throughout 2026 as we focus on capacity absorption and lack prior year new sales center openings. Incremental incentive-based compensation, if earned, will be recorded in proportion to estimated operating income growth, and the cost associated with new sales center openings in 2026 are expected to be weighted toward the back half of the year. With the share repurchases during the quarter, our projected interest expense is now a range of $49 million-$51 million.

We would expect second quarter to have the highest interest expense of the year following the payment of early buys. Our estimated full year tax rate remains approximately 25%, with the second quarter rate to be approximately 25.5%. Our guidance does not include ASU benefits beyond the $0.02 recognized year to date as we continue to expect the full year impact to be less than prior year. We are expecting approximately 36.6 million weighted average shares outstanding for the rest of the quarters and the full year, updated for our first quarter share repurchase activity. Guidance remains unchanged with our diluted EPS range of $10.87-$11.17, including the $0.02 ASU tax benefit recognized in the first quarter. The midpoint reflects a 2%-3% growth over prior year.

PoolCorp's first quarter results demonstrates the earnings power of our model, even in a market that has not yet seen a full recovery in discretionary activity. Pricing discipline, supply chain execution, and the growing contributions of Pool360 are working as intended, and our network continues to expand in a way that strengthens our competitive position for the long term. We enter the peak season with confidence in our team, our inventory position, and our ability to deliver. I will now turn the call over to the operator to begin our question and answer session.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up the 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 asking only one question and one follow-up. At this time, we'll pause momentarily to assemble our roster. The first question comes from Susan Maklari with Goldman Sachs. Please go ahead.

Thank you. Good morning, everyone.

Good morning.

Good morning, Pete. My first question is on your ability to realize the return on investments that you talked about coming into this year. As the pool season starts to come together, can you talk about your competitive positioning, what you're hearing from the sales centers and your customers in there, and just how you're thinking about that overall positioning as we move into the spring/summer?

Sure. When we think about getting ready for the season, we think about making sure that we have all of the sales centers ready for the surge of business that happens during the second and third quarter. That means that having the right inventory in the right location, having a staff that is fully trained and frankly excited about the season, having all of our new products ready to be introduced to customers, working really hard on early buys to make sure that we have the product out in the field at our customers' locations, ready to sell. Making sure that we have explained all of the new product offerings that are available to our customers so that they can help grow their business, and that our marketing programs are finely tuned to kick off the demand creation efforts that we do that are very unique in the industry.

It's a matter of making sure that in the sales centers, that our teams are ready for the surge of business, and that we've taken advantage of the investments that we've made in capacity creation so that we get better every year. We have a performance-based culture, and every year, there is a drive to make sure that whatever we did last year, that we do better this year. Whether it is our productivity levels in the sales centers, whether it is our efficiency in serving customers and how quickly we get them in and out the door, all of those things are part of the overall customer experience that we focus on.

Especially with the newer locations that we opened up in the last couple of years, the newer ones are the ones that we pay the most attention to make sure that they're ready to start without missing a beat.

Okay. That's helpful. I guess, given the geopolitical environment and the moves that we're hearing in consumer sentiment, what are you hearing from your customers on the ground? Has there been any change in how they're thinking about their backlogs or consumers' willingness, and what are you seeing on the discretionary side of the business?

I think that we continue to watch the health of the consumer. We watch housing turnover. Frankly, the age of the install base all matter. It's early in the year to look at permit data and try and draw any conclusion for where we'll end up, because first quarter is just so small relative to that. First quarter is really kind of selling season, and now the builders are trying to lock down contracts. I can tell you that I've heard everything from very optimistic, and I'm sold out to other areas where they're still trying to pursue contracts to make sure that they can lock up the season. On balance, I would say, relatively unchanged with some green shoots, I would say.

Okay. All right. That's encouraging. Thank you. Good luck with the quarter.

Thanks.

The next question comes from David Manthey with Baird. Please go ahead.

Yeah. Thank you. Good morning. Pete, as you mentioned, I realize the first quarter is seasonally volatile, but we saw a couple of decent size changes in some of the supplementary information you provided. Chemicals staged quite a turnaround here. Florida, I guess it had been growing a little bit, now it's down 1%, and California and Texas are booming. I'm just wondering if you can talk about those to the extent there's any signal there versus noise in the first quarter.

Yeah. I'd be careful about drawing huge conclusions on first quarter, but I'll give you just a couple of things to think through. In terms of chemicals, first quarter is actually one of the quarters. When you're trying to sell a program to a dealer, dealers typically don't convert during the season. They convert after the season, and then they would load their inventory into the stores for the upcoming season. As you know, with our private label chemicals, our REGAL and EZ Clor lines, which we believe are best in class, especially when paired with the technology tools and the water testing apps that we have and water testing strips, everything for the integrated systems. I think we saw good traction from the dealers, and specifically on the retail side, that has helped our traction that we're seeing on the chemical side.

Frankly, the teams are out hunting that business because I think we've got a great value proposition. When I look at California and Texas, California, I think, benefited a little bit from weather. California was pretty hot earlier in the first quarter, which is atypical. That weather pattern helped, and I think the same was true for a bit of Texas. Again, it's so small and relative to the grand scheme of things that I don't know that I would draw a whole lot of conclusions from that. I can tell you the team did a very good job of explaining the value proposition and winning share at the dealers in the first quarter, and I think that's just a result of conveying a very strong message of the best value proposition in the industry.

Yeah. Second, you've talked about growth in OpEx expected to slow through the remainder of the year, and Melanie mentioned that. Could you tell us, does that still kind of anticipate that full year OpEx will be in that 60%-80% range relative to gross margin or sales dollar growth? I know that's a target, but based on your guidance ranges and how you're looking at the business, is that still the target for 2026?

That is the long-term target. You should remember, for 2026, we do also have that incentive comp reload. Where we do expect to get some leverage for the year, some of that natural leverage will be offset by that rebuild on the compensation side. It'll be a little bit lower than our normal long-term algorithm.

That comp reset was, I think you talked about $15 million. Is that still the case?

Yes. At the low single-digit growth.

Got it.

What we're counting on, Dave, though, is the absorption, as the new sales centers that we've opened last year and the year before, as they continue to gain traction, then the absorption rate on that cost improves. When you couple that with slowing of adding new investments to the business, because I think we're adequately invested in most areas right now. I think the results for the back half of the year are encouraging.

Perfect. Thank you.

The next question comes from Ryan Merkel with William Blair. Please go ahead.

Hey, everyone. Thanks for the question. I wanted to start with gross margin. Peter, Melanie, can you quantify the impact to gross margin from the customer pre-buy and then also the higher equipment mix? The reason I ask is, I think last quarter, you guided gross margin slightly up year-over-year in the first quarter. Curious what was different versus what you thought.

Yeah. We're not going to provide a kind of detailed quantification of that. If you think about what we have talked in kind of relative margins, we generally will talk about kind of building materials having the best margin, and then after that would be chemicals, and then after that would be equipment. With the equipment being the higher portion of the first quarter sales and really kind of outgrowing our expectations, that's really where we saw some dilution of the consolidated margins.

Got it. In my own words, it sounds like the equipment growth surprised you in one Q versus what you thought.

It was a very pleasant surprise.

Okay. Got it. All right, that's good to hear. Second question is, can you just comment on what you're seeing so far in April, and how does that compare to March? I'm just curious if March had a weather boost and trying to figure out if that's continuing into the second quarter.

Yeah, I think we're, I don't know, most of the way through April, and I guess I would characterize April as expected. For what we have contemplated within our guidance and with the plan, April is going as expected.

Okay, thanks. Pass it on.

Thank you.

The next question comes from David MacGregor with Longbow Research. Please go ahead.

Yeah, good morning, and thanks for taking my question. I guess I wanted to just ask about pricing and inflation and demand elasticity. I guess in the past, where within the mix have you seen this sort of first appear, and do you feel your private label offering has sufficient breadth to maybe offset by capturing the downmarket shift? Would that downshift be margin accretive?

Yeah, I'll take that one, David. I wouldn't want anybody to position our private label as a downprice offering. We look at our private label and have intentionally focused on making sure that it is very high-quality product. We're not actually selling it saying, "Hey, we're trying to have a cheaper offering." We're trying to have an offering that has tremendous value and is very high quality. I think, when it comes to the inflation, where we have seen it, and I've commented on this before, obviously inflation drives the. It's most prevalent in discretionary when you get into the cost of a new pool. When you get into, on the maintenance side, there's some parts of maintenance that we would call semi-discretionary. A pump and a filter, non-discretionary.

If those need to be replaced or repaired, they have to be replaced or repaired. You get into heaters and/or lights something like that. If somebody doesn't want to fix that, if there's one that needs to be replaced, you don't actually have to have that to continue to safely operate the pool. In some areas, that's where we have seen some decline in demand. I would tell you that that's already in and baked in. We're not seeing that either change materially from what we've seen over the last couple of years.

Okay. Got it. Thanks for the clarification on the private label. I guess second question is just on equipment sales, which obviously look encouraging, I guess, at this point, what you saw this quarter. Any sense of how much deferred investment there may be in the market there? Just, I guess, given the rate of catch-up following prior downturns, what could that contribute to growth over the next year or two?

Can you clarify your question. I just want to make sure I answer the right question on your comment on deferred. What do you-

Well, I'm getting the sense that equipment sales, there's been some deferral with the downturn, and so now it looks like we're starting to see people spending money on equipment again. I'm just trying to get a sense of how much deferred spending may have occurred there.

Yeah, I think there is, as a couple pieces of equipment transition to longer life items. Like, when the industry moved from single speed pumps to variable speed pumps, by their very nature, variable speed pumps last longer, and sometimes up to two times longer than a single speed pump. If you go back to 2018 when that regulation went into effect, and you extend out the life of a variable speed versus single speed, those variable speed pumps that were installed very early on in the transition, that would have gone well past the normal life of a single speed pump. Those will now start coming into the replacement cycle. We believe that.

The same thing as it relates to incandescent lights, which were much shorter life than the LEDs that replaced them. Those two, as we work through that cycle, you'll start to see more replacement for that. That's all encouraging for us for the future.

Great. Thanks, Pete.

Yep.

The next question comes from Scott Schneeberger with Oppenheimer. Please go ahead.

Thanks very much. I'm going to focus a bit on pricing. I guess, Melanie, for you discussed that we're going to be lapping the tariff pricing that started in April last year. I'm just curious how we should think about that. Did that ramp much in the second quarter? Will we see that as a comp in the second quarter, or not really until we get to the back half? Just curious how we should think about the cadence and the impact of that since it's a full point in the guidance calculation. Thanks.

Yeah. When you look at full year pricing, we are at the 1%-2%, which is based on the current year increases. In the first quarter, we had that incremental 1%, that was really the tariff price increases that we saw last year. In second quarter of last year, we did have some benefit from those price increases, so we will be lapping that. At this point, for the remainder of the year, we would expect pricing to be more in that 1%-2%, just reflecting the current year cost increases.

Thanks. With this really solid move in the first quarter in chemical, I think one of you mentioned that there was some good private label, which is higher margin activity there. Could we see upside this year? Just a little bit behind the strength there and the possibility for persistence in it, and also the margin element of the private label with the chemical impact. Thanks.

Yeah. We're very encouraged by chemicals in the first quarter because that's the non-discretionary part of the business. It really goes in two channels, right? It goes to the pro channel, which that's your day in, day out foot traffic into the branches, which is very encouraging. That's driven by the value proposition that we have. That's the 40-year relationships. That's the expertise in the branch, that's the footprint, that's the customer experience they get there, the tech platform, and frankly, the quality of the private label product that we're selling. The other side of that is going to be the independent retail, taking that product on and putting it on their shelves, and that being their go-to brand for the season. We're encouraged by the results in the first quarter.

We think that as the season progresses, that will be just good tailwind for us.

Great. Thanks.

The next question comes from Garik Shmois with Loop Capital. Please go ahead.

Oh, hi. Thank you. Just on the expectation that you have for operating expense growth to moderate. You mentioned improved operating leverage on recent greenfields. I'm wondering if there's anything else besides that in the calculation. Are you expecting certain cost actions in addition to better operating leverage?

Yeah. We are focused on ensuring that the greenfields that we put into place, that we're continuing to get those up to fleet average. There's a concentrated effort on that, which does drive operating leverage at those locations. Along with that, we are constantly kind of evaluating, from both a seasonal standpoint and a market standpoint, ensuring that we're operating effectively within our capacity creation efforts. We've talked about utilizing the benefits of Pool360. Looking at, as we continue to increase our sales through Pool360 at each location, that gives us the opportunity to evaluate our operating model in those locations.

Okay. Thank you. A follow-up question just on chemical prices. There's a comment, I think in the prepared remarks, they moderated in the quarter, but you're not seeing an impact to sales. Just wondering if you can assess if there's going to be a risk that it becomes a bigger headwind in future quarters at all?

Yeah, I don't know. From where we sit right now our view is that chemical prices are fairly stable. I mean, that could change, but from where we sit right now, I don't see that in any meaningful way. I mean, it could happen market to market. A competitor could do something in a market, I don't see anything structural where there's a setup for that to change.

Okay. Thank you very much.

The next question comes from Sam Reid with Wells Fargo. Please go ahead.

Awesome. Thanks so much. Just wanted to quickly dive into the inventory comment around new product introductions. Specific examples, but also are you doing any more, say, around white label China import product? I just want to better understand some of the nuances there on the inventory line.

Yeah. Our job as a distributor is to make sure that we have the best product offering for our customers, no matter where it comes from. I wouldn't say that there is a. If you look at our private label products. Much of that product is domestically produced, and there are some of it that comes in from import, and that's frankly always been the case. Our view on new products is not new products lower cost for the sake of lower cost. What we look for is new products that have new technology that help us expand the market. We look for highest quality features and benefits that our customers and their customers would want to drive demand.

In no way, shape, or form do we go out and look for, "Hey, I just want to find the cheapest pump, the cheapest filter." If that was our goal, our product mix would be very different than it is today. We focus on having the best product, highest quality professional grade products that will help our customers grow their business.

All helpful, Pete. Maybe just a quick one on the pre-buy activity during the quarter. You did break out the pre-buy contribution in your bridge. I'm just curious, though, roughly, what is the gross margin for a customer that pre-buys a product versus, say, a non-pre-bought product? Would just love maybe that split on your gross margin line just so we could better understand the impact to gross margins in that first quarter from pre-buys.

Yeah. We typically don't break that out because there is no one answer. It varies, right? It varies by customer, it varies by the products that they buy, so the overall mix. Unfortunately, I can't give you an answer that says, "Hey, it's this many basis points for that type of customer versus a customer that buys normally," because it depends on when they buy, how much they buy, and what they buy, and how large of a customer they are for us.

Absolutely. All helpful, Pete. Thanks so much.

Yep, thanks.

The next question comes from Colin Barrow with Deutsche Bank. Please go ahead.

Good morning. Thank you for taking my question. I just wanted to follow up on the equipment and the replacement cycle. Can you just put some numbers around what the useful life of the equipment is now? Just given that useful life, do you see a replacement cycle in the next couple of years just because we're coming up to five or six years post-COVID when there was a lot of demand?

Yeah. Let me characterize it like this. The expected life of equipment varies tremendously based on what the product is and the operating conditions that it's used, whether it's in a seasonal market or whether it's in a year-round market, and whether the product is properly maintained or not, and with weather events. In general, part of the value proposition of a variable speed pump is that it runs instead of at full rate under full load all the time. It runs at a lower load, which extends the life. It could extend the life by 30%, 40%, 50%. It really depends on many other factors. In general, it has extended the lifespan of pumps. Doesn't really have much of an impact on filters or anything like that. Heaters, it's really a function of water quality more than anything else.

If you maintain great water chemistry, that can extend the life. You could have a brand-new product with lousy water chemistry and destroy it very quickly. In general, we look at two categories for life expectancy changes that were by design, if you will. One is the variable speed pump. Certainly lasts longer than the single speed pump in the range of what I just discussed. If you look at LED light bulbs for the pool, those certainly on an apples-to-apples basis are going to outlast an incandescent. Since the time that both of those products were introduced, we see that there should be opportunity for that replacement market coming up.

The next question comes from Jeff Hammond with KeyBanc Capital Markets. Please go ahead.

Hi. Good morning.

Morning.

Hey, just want to come back on inventories, 14% growth. I think you mentioned that the broader product range and service levels, but just maybe how would you characterize inventories where you want them to be? Then just back on that, broadening the product range, can you give us some examples about the new tech or expanding the market type products that you mentioned in the prior comments?

Yeah. In terms of the inventory, certainly the level of inventory is up. If I look at the profile, the profile is what I would characterize as extremely healthy. We're actually very astute buyers when it comes to buying inventory. If I look at the dollars and where those are, they're not sitting in a significant amount in a bunch of new products that don't have any sales history. They're sitting in very high moving items. From an inventory perspective, I spend very little time worrying about the inventory levels because I think the team does an amazing job controlling inventory, and we generally do what we say every time. When I think about new products, I'll give you an example.

In our private label line, we have a regular chlorine tablet, which has been around forever in the pool industry, and now we also have a proprietary product, which is an Xtreme Tab. The Xtreme Tabs has additives in the tablet that distinguish it from a standard tablet. It has more additives in it that produce a better quality pool. It has stain inhibitors. It has algicides in it. It has clarifiers and other products that distinctly differentiate that product, and our customers and their customers see a big benefit from that. That tab, or that product is growing nicely. Another example would be something in our filter cartridges. We have a proprietary vanless antimicrobial cartridge filter, which is much faster to service and has a very low micron filtration rate, which again, helps produce a clearer pool.

That's especially important when you think about LED lights, which are getting brighter and brighter. Anytime somebody upgrades their lights, if the water quality isn't really good, you'll start to see those suspended particles. Great filtration to complement lights matters a lot, and we're right there for the customers to provide those products.

Okay, thanks. Those are great examples. Just on pricing, I think you mentioned you expect it to moderate. I'm just wondering if you're hearing of any potential follow-on price increases, whether it's freight inflation from higher gas or oil-based products. I think we heard about some pricing actions in salt chlorinators, Section 232 kind of tariff update. Any chatter of any follow-ons coming?

Yeah, there has been some chatter. I would tell you when we look across our product category from where we kind of stood this time last year. Last year when we talked about the impact from the tariff, we did have an incremental 1% that we added to pricing for the forecast for the year. At this point, some of it's noise. We've gotten some notices from vendors, but I would say it's not as widespread. As we were at about 30% of our cost of products this time last year, where we had announced price increases, per se, and we're just not at that level at this point. We don't have as much of an impact expected. We're still kind of waiting to hear if other vendors have reactions to what's going on in the market.

Okay, thank you.

The next question comes from Steven Forbes with Guggenheim. Please go ahead.

Hey, guys. Good morning. This is Jake Nivasch on for Steve. Just one for me. I wanted to dig into Pool360 a little bit. It's nice to see that penetration levels continue to increase as seen from this quarter from the prior year period. Just curious what the expectation is for the year for this platform, I guess, from a penetration standpoint. I guess as a follow-up, curious about what the customer retention looks like utilizing this platform. Where are you seeing when perhaps some of the newer branches, perhaps they're utilizing that a little bit more than some of the older vintages, or is it the dynamic not really related to that? Just any sort of update here would be great.

Yeah, we're actually very encouraged by Pool360. We think it is a structural differentiator for PoolCorp, both in customer experience and certainly from a cost to serve perspective, which is why we've had so much focus on it. What's interesting is that there are some regional differences in the adoption rate. We have some branches that have very high utilization, some well over 30% in the tool, and we have some that are lower. Some of that is just which seem to be regional differences. Some of it is just opportunity on our part. We continue to focus on improving the quality of the tool. Every day, people wake up and say, "How do we make it better? What new features do we have to add?

How do we communicate those, and how do we train the customers and our branch teams on those features?" There's a range. I don't think we're anywhere near, as a company, near entitlement of our penetration. As last year, we ended for the total year at 17%. As I mentioned, we have some branches that are well over 30%. For me, I don't see any reason why the company couldn't ultimately exceed 25% target and maybe higher in the future. It all depends. It's important that we remain flexible with our customers, though, and not try and force them into using it. We do business with our customers the way they want to do business with us. Some of them embrace the digital tools. Some people like the face-to-face.

Got it. Thank you very much.

The next question comes from Shaun Calnan with Bank of America. Please go ahead.

Hi, guys. Thank you for taking my questions. Just first, can you talk about what you think drove the better early buy this year? Do you think customers are more worried about potential price increases, or do you think this is like a view that they're more optimistic on 2026?

Yeah, I don't know that it was a fear of price increase. I think it's a couple things. I think that early on in the year, there is always a fair amount of optimism because customers don't know what they don't know, and by nature, our customers tend to be fairly optimistic. That's a portion of it. I think to scale it, when you look at some of these early buys, I don't know that there's any risk for any of the customers with an early buy. It's not like they're buying a year's worth of inventory. They're buying some inventory to start the season. I don't know that anybody is betting the farm on what they buy. I would say it's a function of our sales efforts, the quality of our products, and how well we serve the customer more than anything.

Okay, got it. Just as a follow-up, you had mentioned being able to get some discounted equipment last quarter. Did you pass that discount along to your customers? Was there any change in the structure of your early buy discounts?

I assume you're referring to early buys, and early buys are just part of the normal course of business, and I think we had a question earlier about pricing on early buys, and again, the answer is it just depends on the customer or the product mix they're buying, how much they're buying, and things like that. There is no formula that says this means that as it relates to the price increases.

Okay, thank you.

This concludes our question and answer session. I would like to turn the conference back over to Peter Arvan, President and CEO, for closing remarks.

Yes. Thank you all for attending today's call. We look forward to you joining us or joining our Investor Day webcast on May 12th, when our executive leadership team covers strategic initiatives and our long-term financial outlook in more detail. On July 23rd, when we announce our second quarter 2026 results. Have a wonderful day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.