Q1 2025 Pool Corp Earnings Call
Transcription & Synchronization by QУertS Consultants Counselor Mary O'Donohue Characters � Michael Frank Tracy
Speaker Change: Good day, and welcome to the Pool Corporation first quarter 2025 conference call. All participants will be in lesson only more. Should you need assistance? Please sign out the conference specialist by pressing the star key followed by zero.
Speaker Change: A description and reconciliation of our non-GAAP financial measures is included in our press release and posted to our corporate website in the Investor Relations section. We have also included a presentation on our Investor website to summarize key point from our press release and call comments.
Peter Van: We will begin today with comments from Peter our van our President and CEO.
Peter: Thank you Melanie and good morning to everyone on the call.
Earlier. This morning, we reported our first quarter results and affirmed our full year guidance for 2025, while the first quarter started off with some challenging weather in key markets. We began to see some improvement in conditions in March although meeting also meaningful this year. The Easter holiday occurred three weeks later than last year.
Peter: Falling into the second quarter versus the first.
Peter: As expected our maintenance product sales performed well during the quarter and so far into the season.
Peter: The recurring non discretionary demand of these products is durable in all economic cycles, and we believe we can continue to achieve above market growth based on our strategic initiatives around customer experience private label products called 360, and our expanded footprint.
Peter: At the time of our last call there appeared to be some signs of macro stability approaching but we have seen the challenging economic environment continued to weigh on new pool construction and to a lesser degree renovation activities.
Peter: Our dealers are reporting that the uncertainty of the macroeconomic environment and persistently high interest rates is causing a wait and see pattern in demand for large discretionary purchases by enlarge their reporting that inquiries are steady.
Peter: Time to contract is still protracted and aggregate the permit data in the first quarter was softer than 2024, which is somewhat surprising given the more optimistic outlook prior to the recent tariff actions.
Peter: We are hopeful that as things settle consumer confidence will help stabilize that.
Peter: When we compare our new pool construction related sales to the permit data almost without exception, we are outperforming the market, which gives us confidence that our overall, our overall value proposition to our customers continues to help us gain share in this area.
Peter: Remodel activity will continue but there may be some deferrals of discretionary remodel and replacement or reconfiguration of plans to complete projects in phases.
Peter: Despite these persistent conditions, we are encouraged by improving trends in our top line performance and we expect our initiatives will allow us to perform better than the market in all areas of our business as we pushed through the transition to a more normal industry environment.
Peter: Another topic, we would like to add some color on prior to discussing the quarter is our exposure to tariffs and how they are affecting the business as of the latest information that we have.
Peter: Our exposure to direct imports in total is relatively small and would amount to less than 1% of revenue for clarification.
Peter: <unk>. This includes some building material and maintenance products chemical.
Peter: Chemicals as a category have little exposure because of domestic supply arrangements for exemptions.
Peter: The biggest tariff impact in our business is being felt in the equipment area, where the manufacturers have exposure for our whole goods or components that are impacting their costs.
Peter: Since our last earnings call, our largest equipment vendors announced and implemented and in season price increase that range from 3% to 4% that took effect in April to address the March tariff announcements and we increased our selling prices accordingly.
Peter: We observed similar patterns during the pandemic years and those increases pass through the channel with no reversals.
Peter: Our current thinking is this will be the case at this time as well.
Peter: In addition to that on Tuesday of this week, an additional 4% increase was announced by Pentair that will take effect on June 2nd of this year, we will in the normal course raise our prices accordingly, as these and future increases are announced and come into effect Melanie.
Peter: Melanie will add additional color in her remarks, how we and how we see these impacting our results no doubt we are living in a dynamic.
Speaker Change: Market condition.
Peter: But the team is focused on execution and is very experienced.
Peter: Next let me turn to our first quarter results, we reported $1 $1 billion of net sales as our teams continued to execute on our strategic priorities first quarter sales were down 4% versus last year, but down 2% on a same selling day basis, a similar improving trend to what we saw in the end of 'twenty 'twenty four.
Peter: After a challenging January and February with tougher weather comps, we saw overall top line growth in March.
Peter: Maintenance product sales performed well with chemical showing volume and revenue growth, including double digit growth in our private label chemical products.
Peter: On new construction and remodel we saw the continued effects of tight discretionary spending under the current macro backdrop, but this area provided less of a drag on top line than we have seen in recent quarters.
Peter: Next I will recap the P&L gross margins came in at 29, 2% versus the 32% in the first quarter of 2024 recall that last year, we realized 110 basis point benefit from an import tax accrual reversal without that benefit our prior year gross margin was closer to 29.
Peter: One, reflecting some year over year improvement largely driven by our pricing optimization and supply chain initiatives.
Peter: Additive pricing became more prevalent in the first quarter similar to what we observed at this time last year and typical for this time of year. However, using price appears to be more a more pronounced tactic by our competitors of late.
Peter: We evaluate these circumstances on a market by market basis, and respond as we feel appropriate on a market by market basis, both our field and support team managed controllable expenses and even with inflationary increases and investments in our network expansion operating expenses increased only 2% during the first.
Peter: Quarter.
Peter: We generated operating income operating income of 77, and a half million dollars in operating margin of seven 2%, reflecting structural improvements in the first quarter operating margin as compared to our pre pandemic first quarter operating margins that range from $5 seven to six 5% we.
Peter: We generated diluted earnings per share of 1.4.
Peter: $1.42, including a 10 cent ASU tax benefit.
Peter: Covering sales in more detail by major geographic markets sales increased 2% in Arizona came in flat for California, and declined 1% in Florida and 11% in Texas.
Peter: Mentioned on our year end call, we saw challenging weather in January and February in varying markets, which notably impacted sales in Texas and to a lesser extent some areas in Florida again, we did see improvement in March as total company revenues turned positive in.
Peter: In contrast to January and February and continues in April.
Peter: In Europe net sales declined 4% in local currency and 6% in U S dollars as it continues to work through the macro uncertainties, but it's mostly holding the improved trends we began to see in the back half of 2020 for.
Peter: While France, our largest presence in Europe sees pressure from tough market conditions on new construction, we see positive trends in Spain, and Portugal signaling a solid set up for the season in those markets.
Peter: For Horizon net sales declined 4% in the quarter.
Peter: While commodity pricing has shown signs of stabilization deflation impacted horizon results by 4% on a year over year basis, most notably in P. D C.
Peter: Volumes came in flat overall for the period tempered by weather and the soft macro maintenance related sales are helping offset pressure on both commercial and residential irrigation, but our team remains encouraged by our pipeline of projects heading into the second quarter.
Peter: Related to our product sales mix chemical sales were up 1% for the quarter with volume increasing.
Peter: As well as total sales our a dessert we observed last year market prices declined during the first quarter compared to year end, but we believe pricing will rationalize further as the industry enters the busier selling season, we remain focused on gaining shelf space and dealer stores with our best in class.
Peter: Chemical programs converting dealers chemical lines is a strategic focus area for our business, but it is a longer than normal selling process.
Peter: Our success so far in this area is encouraging.
Peter: Yes.
Peter: Building materials sales declined 5% a sequential improvement from what we saw in the fourth quarter and much of last year.
Peter: The improvement in our N P. T branded product finished pool finish and tayo, particularly in a tight environment highlights the power of our offering and the unmatched value as seen by our customers.
Peter: Whitman sales, which excludes cleaners declined 4% during the quarter following spikes from repair activities and much of Florida during the first quarter of 'twenty 'twenty four.
Peter: Our inventory is well positioned for the season as our early buy terms allow for delivery from our vendors in the fourth quarter or the first quarter of each year based on manufacturers.
Peter: <unk>.
Peter: Aftermarket demand remains healthy automation and innovation remain top priorities for homeowners and our ability to partner with our vendors and utilize our expansive network to effectively bring those products to market highlighting the strength and value of our team.
Peter: Looking at our end markets, our commercial business sales increased 7% in the first quarter. We are pleased with the continued progress in this area as we leverage knowledge gained from recent acquisitions to align with our sales force leverage brand names and expand our warehouse distribution capabilities and enhanced our expertise.
Peter: Serving this robust market sales.
Peter: Sales to our independent retail customers declined 1% in the first quarter showing some improvement trends ahead of the peak season for.
We're pinchpenny franchise for the pinch of any franchisees group, representing our franchisee sales to their end customers sales came in flat for the quarter, showing some impacts from varying Texas, and Florida weather patterns and the normalization after hurricane repairs in the fourth quarter collectively.
Peter: Collectively these results show the stability of the maintenance market and our progress to expand our capabilities to serve the key do it yourself and markets.
Peter: For a full 360 orders processed continued to expand at close to or continue to expand and were close to 13% of total sales for the first quarter of 2020 for the first quarter.
Peter: Growing from 11% in the first quarter of last year.
Peter: Utilize the opportunities that first quarter offers through industry shows and retail events to educate our consumers and potential customers on these value added tools along with growth in orders process, we observed double digit growth in our private label chemical sales further highlighting our progress from the streamlined abilities of the pool 360 wall.
Peter: <unk> says that both 360 service to direct our customers to our private label solutions driving growth and productivity for our dealers and for pool Corp.
Peter: We continue to expand our wholesale distribution network opening two new locations in the first quarter, bringing our total locations to just shy of 450, our Pinchpenny franchise network added its first store in Arizona positioning us to expand into this key do it yourself market with three stores opening this quarter, we are now coming.
Peter: Close to 300 Pinchpenny franchisees.
Peter: As we enter the industry's seasonally most significant time of year, we confirm our full year EPS guidance range of $11.10 to $11 60, including the 10%, including an updated Tencent estimated benefit from ASU.
Peter: Through our thoughtful and innovative investments, we believe we have positioned ourselves to capture.
Peter: More available demand than anyone else in the industry. During the most critical part of the season, our teams will focus on providing the best customer experience, while leaning into advanced full 360 offerings to help our customers grow their business.
Peter: We remain highly sought after with continued concentration towards the higher end remodeling activity will continue despite some projects being spaced out over multiple projects or longer time spans who.
Peter: Through our robust distribution network, we will continue to focus on best serving both the professional contractors and servicers as well as the retailers to also reach the do it yourself pool owner.
Peter: We will utilize our four domestic central shipping locations to create supply chain efficiencies and fulfill demand need did.
Peter: Needs better than anyone in the industry.
Peter: Benefited by our ample cash flows and disciplined capital allocation practices, we will invest in strategic growth and shareholder returns, while maintaining a strong balance sheet.
Peter: With the seasonally significant second quarter underway, our teams will be relentless in providing an industry, leading customer experience and improving on capacity creation through utilizing of our innovative technology solutions best in class team unmatched value proposition and continued investment in the industry that builds upon itself. Unlike a year ago. This.
Peter: Year, we have additional additions.
Peter: Additional in season price increases that will help offset the slower start to the year on discretionary spending.
Peter: I would like to thank our pool Corp team.
Peter: I can always count on to operate on our to operate on our initiatives, particularly well.
Peter: In this key time of year, they continue to battle and win in a challenging and market count in a challenging market and through our team.
Peter: Through our teaming with supply partners, creating value for our customers.
I look forward to seeing what they will accomplish during the season I will now turn the call over to Melanie Hart, Our senior Vice President and Chief Financial Officer for more detailed commentary Melanie.
Melanie Hart: Exiting the quarter, we saw improved momentum and mark sale, finishing them on a same day basis at 2% over prior year. The improvement we saw in March were not enough to cover for the tough weather. We saw early in the quarter and January and February resulting in a 2% decrease on a same store.
Peter: <unk> day basis compared to the prior year for the whole quarter.
Peter: We were successful in the quarter and passing through the vendor price increases that were put in place at the beginning of the year. These previously announced increases were expected to benefit sales by one to two per cent.
Peter: Overall product, but with continued negative 1% impact for chemicals and commodities netting to an overall plus 1% for pricing in the quarter we.
Peter: We continue to be encouraged by our progress on our chemical business, which is a good proxy for the over 60% of our sales that are derived from the maintenance.
Peter: Base volumes increased for these products and benefited total sales for the quarter by an estimated 1%.
Peter: Discretionary spend in the new construction and remodel areas has still not seeing a recovery, resulting in an estimated 3% drag on sales activity we.
Peter: We did see negative comparable impairment across most of our large state. However, the trend continues to improve and some of our key markets.
Peter: Summing up the sales impact for the quarter, we saw at plus 1% on maintenance volumes, plus 2% unrealized vendor price increases offset by a negative 1% on pricing impact from chemicals that come out of D. A.
Peter: A 2% loss on one less selling day, a decline of 3% on volume sales of discretionary product for Naples, and remodel activity and a 1% impact on sales for declines in horizon and Europe combined.
Peter: The first quarter included one less selling day than prior year for a total of one less selling day for the full year 2025 compared to 2024.
Peter: Our gross margin for the quarter finished at 29, 2% or 10 basis points higher than prior here when considering the 110 basis points positive impact recognized in first quarter 2024 related to import taxes.
Peter: We realized benefits during the quarter from our pricing initiatives and supply chain, including higher level of private label chemical sale with off that from less favorable customer mix.
Peter: In the current period with lower discretionary demand our larger customers are still winning a higher proportion of the business in the market.
Peter: Well this may put some pressure on margins the stickiness as these larger customers is evidenced in our ability to capture sales in periods, where demand for discretionary product is slower and we are best at serving their broader needs.
Peter: <unk> sales were similar in both period and they did not have a meaningful impact on margin.
Peter: Mix was a slight drag with lower building materials and start runs in commercial sale, which also had a slight negative margin impact.
Peter: We saw some instances of aggressive competitive pricing for certain orders that appears to be in response to continued softness in the market on the margin side. This is the main difference from our initial forecast and I alluded some of the benefits we have seen on our internal initiatives.
Peter: Operating expenses for the first quarter were 235 million, an increase of only 2% over prior year.
Peter: First quarter includes the impact of our annual Merit increases continued investments in our technology offering as well as increased spend for the stake sale centers operating second quarter of last year.
Peter: Modest expense increase demonstrate leverage gains from our ongoing capacity creation effort and disciplined variable cost management.
Peter: Operating income of 78 million it was a decrease of $31 million compared to prior year, including the $13 million import tax impact that benefited first quarter of 2024.
Peter: We reduced interest expense by $2 3 million compared to the first quarter of 2024 and reported diluted earnings per share of $1 42 compared to $2 four in prior year, which included an additional nine set from ASU and 24 cents from import taxes.
Peter: Recently, the resulting change in EPS would have been 29.
Peter: Similarly, driven by topline activity.
Peter: Overall for the quarter, we realized continuing improvement in sales trends.
Peter: That's their performance and maintenance product categories, and strong volume growth in private label chemicals, driven in part by our poultry 60 applications. We also continued to grow with both our wholesale distribution Center network and franchisee store network, while executing with strong expense discipline.
Peter: We continued to benefit from a strong balance sheet position our days sales outstanding of $25 nine days reflects an improvement compared to $26 nine days in prior year, reflecting our continued strong credit management process and collections disciplines.
Peter: If you have market conditions, we thoughtfully executed early by ordering to ensure the right inventory with on hand inventory balances increased $171 million from year end as we receive products across our vast footprint to position for sale.
Peter: The balance at the end of March at 146 billion reflects less than the prior year of $1 5 billion for the inventory stocking improvements we have made inventory days on hand improved three days from prior year first quarter.
Peter: We ended the quarter with total debt of $1 billion debt and interest expense typically increases from parts of the second quarter as we built inventory for the season and it's early by payments are due during the second quarter, even early in the season as we increased our inventory position, we have been able to maintain our leverage ratio of 147 at the lower <unk>.
Peter: End of our target.
Peter: We recorded $27 million in cash flow from operating activities during the quarter. This year higher inventory purchases and timing of related payment use incremental cash of $70 million. We also made the payment of the 2020 for deferred tax amounts, which reflected 68 and a half million less in cash flow during the quarter unrelated.
Peter: To the current year activity.
Peter: During the quarter, we completed a total share repurchases at $56 million, an increase of $40 million over prior year.
Peter: And have $291 million remaining under our share repurchase authorization.
Peter: Our upcoming board meeting, we will present, a request of the board to increase our authorization. So that we have plenty of capacity to continue our opportunistic share repurchase activity within the parameters of our disciplined capital allocation approach.
Peter: Moving into our expectations for the current year I'll start with the expected impacts to our business of tariff.
Peter: We primarily source our products domestically and so expect that announced parents will have a minimal impact on our direct import exam.
Peter: Examples of which would be in the tile and maintenance product categories and represent less than 1% of our total annual purchasing activities.
Peter: Recently announced tariffs we have received an incremental 3% to 4% price increase from around 20, or so of our vendors as we have historically, we would expect that those cost increases will be passed on to our dealer customers.
Peter: We communicate as these increases are announced by our vendors and adjust pricing as quickly as the market circumstances allow.
Peter: The impact.
Peter: For the year.
Peter: For the full year.
Peter: This will increase our pricing benefit to 2% for the annual period.
Peter: Our initial sales guidance of flat to a low single digit incorrectly included 1% to 2% net oil pricing volume growth on maintenance and flat discretionary spending permit data a reasonable approximation of new construction activity remains lower than the prior year levels through the end of the first quarter.
Peter: There has also been a new level of uncertainty in the macro environment since February including sustained higher interest rate increased terror, a volatile stock market, which we believe could be more impactful to our traditional headliner demographic.
Peter: Where our larger customers are confident and a similar number of builds as last year. Other dealers in the market are still trying to fill.
Speaker Change: You bet.
Peter: The gain more visibility in May and June our largest month of the year. However at this point, we have considered in our range. The possibility that we may still see some negative impact in the current year from lower discretionary spend.
Peter: Our forecasted gross margin range of $29, 7% to 30% included are evident that internal initiatives related to supply chain pricing and increased private label would make up for the 20th of nonrecurring positive import tax benefit included in 2024.
Peter: At this point in the year, we are not anticipating any significant gross margin benefit recovery from new pool, construction and remodel activity, which is a significant component to reach the top end of our 30% gross margin target and now believe that product mix could be a slight drag for the year I.
Peter: Additionally, we have considered that the current market environment May result, in a competitive pricing environment, putting pressure on margins outside of just the first quarter.
Peter: Our forecast for sales considered at the low end similar discretionary sales levels as first quarter offset by the additional 1% tariff pricing.
Peter: At the midpoint continued improving trends on discretionary as we have seen late in 2024 and into early 2025, and the additional 1% tariff pricing.
Peter: Our forecast for margins considered at the low end midpoint lower sales of higher margin discretionary product customer mix skewed to larger customers and ongoing market pricing pressure and at the top end a more traditional seasonal recovery of the market pricing.
Peter: Expenses will continue to be very well managed and in accordance with the topline trends.
Peter: The investments in the new sales centers and some incremental compensation expense, we expect expenses for the year to increase around 3% over prior year.
Peter: Our estimate for interest expense are still expected to be around 40 to 45 million with higher interest expense in the second quarter. After payment of early by turning lower during third and fourth quarter as we collect on receivables from seasonal sales activity.
Peter: Cash flow in 2025 is expected to be between 90, and 100% of net income and will be impacted by the deferred tax payment made in the first quarter of 2025 related to 2024.
Peter: Our consistent capital allocation strategy consider spend of approximately $50 million to $60 million on capex for the existing business, including new sales center openings.
Peter: An estimated $25 million to $50 million on acquisition.
Peter: Dividends of around $200 million with the remainder of the cash to be used for debt pay down and to repurchase shares opportunistically.
Peter: Our annual tax rate is expected to be approximately 25%. Excluding ASU. This rate is estimated to be 25, 5% during the second and fourth quarters and lower in the third quarter.
Peter: We are expecting approximately $37 8 million weighted average shares outstanding that will be applied to the net income attributable to common shareholders for the rest of the call.
Peter: Our guidance remains unchanged at a diluted EPS range of $11 10 to $11 60, including the 10th at ASU tax benefit recognized in the first quarter.
We have proven our ability to manage the business in a profitable way during various market conditions and XR.
Peter: Our cohort team provides value to the pool industry, our customers and our vendor that has a unique ability to outperform the market.
Peter: The strategic actions, we have taken in pricing supply chain technology and network expansion are all showing positive results and position us for strong future performance and industry conditions ultimately normalize.
Peter: The remainder of 2025, we'll continue along that positive path as we build upon our capabilities.
Peter: Thanks to everyone for participating in today's call I will now turn the call over to the operator to begin our question and answer session.
Peter: Thank you very much.
Peter: We will now begin the question and answer session.
Peter: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: Okay are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: In fact anytime your question has been addressed and to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Our first question comes from the line of Ryan Merkel from William Blair. Please go ahead.
Speaker Change: Good morning. Thanks for the question I wanted to start with the second quarter just wanted to get everyone. On the same page where are you expecting low single digit top line in the second quarter, which would be consistent with the full year and is that what youre seeing in April so far.
Speaker Change: Yes, I think Thats, a fair way to look at it Brian.
Speaker Change: Okay.
Speaker Change: And would you be seeing about two points of price in the second quarter or is that price more second half.
Speaker Change: I think it's probably going to be more second half because of the latest increase won't take effect until the beginning of June.
Speaker Change: So we will see some in the second quarter, but the majority will come after that after second quarter.
Speaker Change: Okay, and then I just wanted to go over the full year guidance again, and we'll just talk to midpoint.
Speaker Change: Want to make sure I heard everything correctly, so it sounds like two points of price.
Speaker Change: Gross margin is still flat and then you think new pools, you could still see some growth in the second half of the year as we sit here today.
Speaker Change: Yeah. So as we as we if you look at the trend all the way throughout 2024 and even into the first quarter of 2025, although we're still comping negatively.
We're continuing to improve with the exception of Texas. So really the improvement we're seeing is in the Florida market in California, and in Arizona, and so if that continues to improve.
Speaker Change: But see expected in the back half.
Speaker Change: The hurricane comp, we could start to see some volume improvement.
Speaker Change: When you're looking at kind of the midpoint of the range on the low end of the range would be take a little bit more pessimistic view of that and would suggest that you know because of what's going on just in the macro environment that we may continue to see some pressures from discretionary spend throughout the full year the outlier Ryan for.
Speaker Change: It's really in terms of construction activity. So far this year is Texas.
Speaker Change: Texas is definitely softer than the than the other key markets.
Speaker Change: What we're hearing from dealers is that was a very tough start to the year.
Speaker Change: And honestly there is there is there is a lot of there's a lot of reasons why and I talked to several dealers myself and I can't give a lot of difference.
Speaker Change: Assumptions, but.
Speaker Change: Summer weather related some are the <unk>.
Speaker Change: Macro some our interest rates.
Speaker Change: Of late things have improved so the latest calls that we have with those dealers as they are feeling better than they were.
Speaker Change: 30, 60 days ago, but still that that's the that's the one that is harder to predict right. Now is how Texas is going to end up in terms of construction.
Speaker Change: Okay got it and then just on gross margins as flat still the right outlook, there that that would assume a little lift in the second half I ask just because you mentioned product mix might be a little more of a hurt now and then you mentioned competitive market conditions.
Speaker Change: Yeah, So I would say the in the modeling flat would be now flat again, recognizing that flat is actually an improvement of 20 basis points. So flat would recognize that we are getting some benefits from our internal initiatives.
Speaker Change: But it would also continue to see some of that.
Speaker Change: The margin and product mix and customer mix.
Could impact that so when you look at kind of the range.
Speaker Change: Have.
Speaker Change: The flat and at the high end with some kind of modest impacts from some of the other external factors at the lower end.
Speaker Change: Okay. That's.
Speaker Change: That's helpful. Thank you I'll pass it on.
Speaker Change: Thanks, Brian.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Quinn Fredrickson from Baird. Please go ahead.
Quinn Fredrickson: Yeah, Hey, thanks, good morning.
Speaker Change: Good morning.
Speaker Change: Curious what your expectation is for new pool Asps.
Speaker Change: The bigger ticket Remodels this year and if that's changed at all.
Speaker Change: A typical pool owners affluent consumer, but there seems to be some signs that you have an affluent consumers are being a bit pressured right now so I'm wondering if you're contemplating any trade down in terms of features automation or lower asp's.
Speaker Change: So that's a good question, we've gotten a lot of feedback from dealers that.
Speaker Change: What we've seen in the past is still true that the higher end higher end consumer or hiring pool buyer. If you will that business is good was good and will be good in fact, most dealers would tell you that work in that part of the market.
Speaker Change: That their asps. So I can't tell you that those pools are getting more fancy I think theyre pretty much staying the same but given the continued softness at the entry level pool point. If you did just an average on the ASP of the pool I would tell you that it is solid to up a little bit and that's purely based on mix.
Speaker Change: Not hearing a lot of at the construction side a lot of trade Downs I did mentioned on the remodel side I mean, the remodel market is interesting because it's a very big market.
Speaker Change: And there is a.
Speaker Change: There is a lot going on in that that that has to be unpack large remodel projects. What we are seeing with dealers are telling us is that whereas in the past and we started to see this frankly, a couple of years ago. You just do the whole thing, they're breaking those up right to say, okay. Let's do the pool finished let's do the interior, let's do the decking or let's do the equipment, but.
Speaker Change: Let's break it up over time in order to get that done. So in total the job is getting done is being more spaced out but the asps.
Speaker Change: To answer your original question is probably up a little bit, but that's purely based on mix.
Speaker Change: Okay. Thank you that's that's helpful and then.
Tony a question about gross margin.
Speaker Change: At the low end.
Speaker Change: The guidance.
Speaker Change: Building materials do remain in the range of declines that you saw on <unk> like you mentioned, how should we be thinking about gross margin in that scenario are there enough tailwind from private label supply chain and pricing still to be approximately stable or we see some pressure in that scenario.
Speaker Change: Yeah, no we might see some pressure in that scenario because of the lower mix of that is higher higher margin products.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from Susan Mcclary from Goldman Sachs. Please go ahead.
Susan Mcclary: Thank you good morning, everyone.
Good morning, My first question. Good morning, Pete My first question is you know I'm, adding to your comments on consumers breaking down some of that remodel work and just smaller projects.
Susan Mcclary: Do you see any risk to the industry, perhaps testing some of the price elasticity that we've seen and any thoughts on how that could impact perhaps certain areas of the business relative to others, such as equipment, where there was more maintenance and and unnecessary replacement nature to them.
Susan Mcclary: No not really I honestly I think that.
Susan Mcclary: There is some competitive.
Susan Mcclary: Situations, where homeowners are so dealers are slower so there is some competitive situations.
Susan Mcclary: But honestly that that's typical for the industry. The only time that that really didn't happen was during the height of the pandemic when people were saying.
Susan Mcclary: <unk> Com I will pay you.
Susan Mcclary: But right now I would tell you the competitive dynamics are.
Susan Mcclary: Our.
Susan Mcclary: There is always going to be some.
Susan Mcclary: Work, that's done to try and win a contract it could be.
Susan Mcclary: I'll be a little more competitive here or I will I will defer parts of the project, but remember.
Susan Mcclary: The material is the smallest part of the job right. The labor piece is far bigger than the material piece. So even if you even if you shaved a little bit on material if a dealer wanted to be a little more aggressive.
The bigger portion of the job is going to be the labor and the profit.
Speaker Change: Okay. That's helpful. And then it's encouraging to hear that you continue to see a path to pool outperforming the industry, even with all these headwinds that are coming through it sounds like you're gaining some good traction on some of these initiatives that you've got in place can you just talk a bit more on how you're thinking about those coming together as we enter the <unk>.
Speaker Change: Core of the season, this year and anything Thats incremental there as youre looking out to perhaps later this year or even 2026.
Speaker Change: Yeah, I think the investments that we've made in our chemical line for instance is and as I mentioned.
Speaker Change: For a dealer to want to switch the chemical line. That's in the store. Those are that's not you just don't walk in today and say Hey, Please buy my chemicals in ne.
Speaker Change: Take everything off the shelf and put yours on a shelf that's a longer selling cycle, because that's part of the identity of the retail store.
Speaker Change: So we have a we have a great chemical line and we have great technology to go with it.
Speaker Change: And it's that's.
Speaker Change: That's going to be something that will carry us for for many years.
Speaker Change: In the future. So it's nothing that Hey, we go in we gobble up all the market share and then we and then we said this is going to be a just a continued.
Speaker Change: The process to gain share we have great product, we have great technology, we have great marketing that goes with it.
Speaker Change: I think thats something that will be.
Speaker Change: Longer term.
Speaker Change: Growth Avenue for US technology is another area to the technology continues to get better adoption continues to.
Speaker Change: Increase and the our.
Speaker Change: Our customers our dealers continue to see value in that so that's good and again in the pool industry nothing changes fast.
Speaker Change: The thing is everything takes time to do so we are working on that so.
Speaker Change: In terms of technology, we have.
Speaker Change: Always mentioned that at work, even chemical brands too.
Speaker Change: Once you get into the season Nobody's going to do that so we're really at the end of the selling season for that will start to see benefits for the cell for the sales that we made in conversions that we made and then we'll go right back to the.
Speaker Change: Conversion selling at the end of the season, because right now the dealers are going to run with what they have because the stores are busy and everybody is trying to open pools and getting somebody to switch right now is just.
Speaker Change: Not a not how the industry works.
Speaker Change: Yeah. Okay. Thank you for the color good luck with everything.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: The next question comes from David Macgregor from Longbow Research. Please go ahead.
Speaker Change: Yes.
David Macgregor: Hello, everybody.
Speaker Change: My first question was really with regard to what happens if the macro should take a turn for the worse here.
Speaker Change: And where do you have the greatest opportunity to flex the model in order to protect margins.
Speaker Change: Yes.
Speaker Change: That's a good question so if the if the macro takes.
Speaker Change: It takes a turn for the worse, it's really going to affect us on the discretionary spending which is on new pool construction and to a lesser degree on remodel. The good news is is that even as the macro has gone up and down the maintenance and repair a portion of our business, which is the largest portion of our business and it's also we're in the most important part of the year. This is when people are getting.
Speaker Change: Ready to swim want to swim so that business is that business is good we continue to have a great value proposition, we always staff up.
Speaker Change: This time of year.
Speaker Change: In anticipation.
Speaker Change: The anticipation of the full season being in swing and Theres full season and swing your major construction season, and the maintenance and repair I would tell you that we are very judicious in terms of.
Speaker Change: Staffing up and adding expenses many of our expenses as you can imagine are variable as it relates to transportation.
Speaker Change: Transportation and labor, we take we keep a great.
Speaker Change: Hi on inventory, so we pay very close attention to the demand trends and what we're going to do from an inventory perspective. So I think pool Corp has demonstrated over the years that we're very good at flexing from a from a cost perspective.
Speaker Change: There is if you look at our you know we're a performance based company. So compensation expenses is directly tied to performance of the company. So you have the variable portion of compensation that would flex too but again. This is this is nothing new for pool I think we are a team of very skilled operators.
Speaker Change: And this is not something that we haven't seen before.
Speaker Change: Okay. Thanks for that second question is just on pinch.
Speaker Change: A pullback in consumer confidence translates to growth in DIY versus do it for me and if so how is the pension business positioning for us.
Speaker Change: Interestingly enough there, but there hasnt been that pullback.
Speaker Change: <unk>.
Speaker Change: You would think that if the macro softens that it turns to a do it for me or DIY versus do it for me, but we really haven't seen a major shift in that area.
Speaker Change: I would tell you that most of our dealers and pitch a penny as well not only are they do they have great stores for people for the DIY or to come in and do their do their own thing.
Speaker Change: But they also do cleaning and service and maintenance.
Speaker Change: So I think both of our channel partners here, which is obviously the the India.
Speaker Change: Tenders, which vastly outnumbers da Vinci Penney stores.
Speaker Change: A very big channel for us they do they do a great job in terms of value proposition and catering to both and I think pinchpenny does that as well, but we have yet to see a shift too.
DIY versus do it for me those trends remain relatively intact.
Speaker Change: Okay. Thanks, Pete Good luck.
Thanks.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Steven Walkman from Jefferies. Please go ahead.
Steven Walkman: Hi, Good morning, guys. Thanks for taking the question.
Steven Walkman: I wanted to follow up Pete on your comments about certain areas of our price.
Steven Walkman: <unk> Mis is there any more detail relative to the types of products or perhaps the types of competitors, where you're seeing this.
Steven Walkman:
Steven Walkman: So.
Steven Walkman: As I've mentioned on almost every call. So the competitiveness from a price perspective is nothing new.
Steven Walkman: Most of our competitors that we have whether it's the.
Steven Walkman: The newer folks that have entered the market or the traditional players in terms of their value proposition to the market don't have what we do so the way that we they compete with pool Corp. As they walk in and say whatever pool Corp is selling you for.
Steven Walkman: We will sell it to you for less we also have in most cases the majority.
Steven Walkman: We have a significant market share so we would be a target again nothing new.
Steven Walkman: You have a quarter like the first quarter, where demand was I would say nothing to get excited about right in terms of the discretionary and somebody a discretionary portion of the business. It basically means that people are going to push.
Steven Walkman: Pushed harder and do things that in my opinion are unsustainable and as I mentioned in the comments, we compete head to head in these markets. We are in it for the long term, we've always been a value provider.
We always focus on being the easiest company to do business with and providing the best customer experience, sometimes we have to be a little more aggressive on pricing, we're not going to lose share Theres other times, where we see things that I know.
Steven Walkman: And more and more importantly, our operators know are not sustainable and they don't they.
Steven Walkman: They don't chase things into the ground.
Steven Walkman: Great. That's helpful. Thank you.
Speaker Change: And then maybe related to this but maybe this is for Melanie but last time, we went through a period of inflation that had a very nice positive impact on your gross margin and you don't seem to be really baking much of that in this time. So I'm curious is it just not widespread enough yet or is the fact that this.
Speaker Change: Is happening against perhaps a weaker end market environment in the last out if inflation does that sort of cap the opportunity here relative to gross margin.
Speaker Change: So it's really a little bit of all of the above.
Speaker Change: When we look at the the number of vendors that we've heard from to date kind of caveat that that represents around 30% of our cost of product, which is how we get to the 1% benefit.
Speaker Change: On the pricing for the rest of the year when you look at kind of our current inventory balances.
Speaker Change: As many of that is made up of our larger vendors that was going to be the big vendors on the pool side, the big vendors on the irrigation side.
Speaker Change: Then we actually have probably a little bit less of a proportion of inventory on hand, because we have the ability to turn that inventory quicker.
Speaker Change: With that being said as we did last time with the price increases.
Speaker Change: We certainly have the capital and the balance sheet to be able to kind of strategically take advantage of opportunities.
Speaker Change: They come through the market.
Speaker Change: So we are positioned to do that but do not have that kind of built into our current guidance at that point in time.
Speaker Change: You bet.
Speaker Change: Steve I think you made an astute.
Speaker Change: Observation that.
Speaker Change: We are.
Speaker Change: What is similar to last time is the is the price increases.
Speaker Change: You've been covering us for a long time. So you know that in season price increases are very atypical.
Speaker Change: So the last time, we had him was during the pandemic and it was a crazy demand environment. This time, we have increases that are coming from many of the large vendors, we expect them to.
Speaker Change: To flow through to the market on the announced days, we will take we take those prices up.
Speaker Change: The vendor have opportunity vendors have offered us opportunities to participate in in some pre buys however, given the difference in the overall demand environment. We look at those on a case by case basis. So we're there where they are financially attractive to us.
Speaker Change: We certainly have the have the capital and the infrastructure to take advantage of that where we view it as maybe not as attractive.
Speaker Change: Given the demand environment, we may be a little more tempered.
Speaker Change: That's great color I appreciate it.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question comes from Scott Schneeberger from Oppenheimer. Please go ahead.
Scott Schneeberger: Thanks, very much good morning, I'll follow on that last one tariff pricing specifically Melanie. It's you mentioned, 30% of the cost of product is it's been what's been put to you by suppliers. Thus far what do you anticipate from other suppliers I know, it's a very fluid environment.
Speaker Change: Just curious and then Pete answered a question earlier, saying, hey, probably more back half weighted rate weighted.
Speaker Change: Because of this incremental price increase from suppliers are a primary supplier in June but you have the the lower priced.
Speaker Change: Inventory from from from early buy in in the second quarter. So could you just kind of walk us through the impact the timing impacts here second.
Speaker Change: Quarter and back half thanks.
Speaker Change: Yes, so as it relates to kind of forecasted impacts from other suppliers and we have not considered any at this point in time.
Speaker Change: So if we do get additional price increases from other suppliers.
Speaker Change: Updates as they come through.
Speaker Change: When you think about the timing of the increases the the bulk of that pricing went into effect really on Monday. So most most of the vendors had an after Easter as the effective date for those price increases with the most recently announced one coming through in without gene effect that start date.
Speaker Change: And the answer as far as kind of the overall impact on the sell through.
Speaker Change: Same thing is that we would expect that.
Speaker Change: The opportunity for some benefits.
Speaker Change: In margin for that sell through but when you think about kind of overall pricing sensitivity in the market how quickly the customers are willing to accept those price increases.
It's going to depend on the demand environment, so a little bit different from kind of that where they.
Speaker Change: They know the price increase of about being able to pass through.
Speaker Change: The consumers were beating down the door to in order to get those pools and golf.
Speaker Change: Understood. Thanks, and then as a follow up.
Speaker Change: For you and it's been somewhat of a common theme, but on your confidence in in new pool construction volumes going forward.
Speaker Change: Yeah, I heard you on Texas It looked like permits in the first quarter in Florida look, particularly strong though.
Speaker Change: With that weather related perhaps or is that truly organic and how much are you factoring permits into your.
Speaker Change: Guidance expectation.
Speaker Change: And that includes not only permits but just feedback you're hearing it's it's it's a thematic question of how your level of confidence in and in the volume of new new construction. Thanks.
Speaker Change: Yeah permits are pieces of puzzle. So we have we look at that we certainly look at the permit data and permit data can also be.
Speaker Change: A bit misleading just because of timing.
Speaker Change: And the timing that it takes to turn a permit in some areas and then you have the weather component on okay. Yes, I pulled the permit but then the weather is cooperating in order to execute on that permit.
Speaker Change: So it's a piece of it so we look at the permit data we look at weather and then we also talked to our.
Speaker Change: Talk to our dealers everyday frankly about the.
Speaker Change: The demand environment, but again that's a.
Speaker Change: You mentioned, it's a portion of our business, it's not the largest.
Speaker Change: It's not the largest portion it's not even the second largest portion of the business right. It's the of the three maintenance and repair renovation remodel and new construction. It's the smallest part of the three so it's something that we watch.
Speaker Change: As I mentioned, Texas is an area that we are paying particular attention to just because of the of the decline in permits Florida.
Speaker Change: Florida is performing well Florida's an amazing market for us and Florida is performing well. So I guess I would tell you that I don't really have any new color to add on my confidence in new construction. There is just so many factors at play everything we discussed and then lay on top of that the macro.
Speaker Change: Zero.
Speaker Change: And how people are feeling about.
Speaker Change: Their disposable income discretionary income 401K value.
Speaker Change: And then of course interest rates on those pools that will require some <unk>.
Speaker Change: Financing I think if the fed were to ease rates.
Speaker Change: It would certainly help encourage people I think it would loosen up the housing market, which would also be a nice catalyst for Newport construction.
Speaker Change: Thanks for that and thanks, Tony cause.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Andrew Carter from Stifel. Please go ahead.
Andrew Carter: Hey, Thank you very much our first question I wanted to ask I, just want to be crystal clear about the gross margin you're now assuming flat the previous guidance was flat to up slightly which you said in the script do you have does does that incorporate a week new construction remodel environment, Therefore building materials and just to be clear.
Speaker Change: Like is the high end of EPS guidance achievable at the flat gross margin. That's my first question.
Speaker Change: Yeah, Hi, and I think guidance is achievable at a flat gross margin.
Andrew Carter: Okay.
Andrew Carter: Yeah. That's that's the second question I guess I would ask and just to drill down as I think you said it is we get the price communicated to us we take it as soon as possible and obviously that was that was the Covid story.
Speaker Change: Are you able to in this environment have you taken the price increases immediately when they were announced and kind of how is your comp competition.
Speaker Change: Proceed proceeding here or is there a longer delay are you waiting et cetera.
Speaker Change: So no we're not waiting so as them isn't a normal course of business for full court when they're with the effective date of the price increase that's when we we elevate the prices to our dealers we notify the dealers when we are when we get the receipt of the price increases.
Speaker Change: The manufacturing notify them too and then on the effective date, we take we take the price up which is something that is just.
Speaker Change: What we always do.
Speaker Change: Your question on what competitors do.
Speaker Change: There is by and large the competitors do as well I can tell you that.
Speaker Change: We'd have to go market by market and there are some cases, where somebody might say, hey, I'm going to hold the price for you in the attempt to lower business. The other thing somebody may do and we do too which is if our dealers come to us and said Hey, we have got 10 pools sold and we used your quote which was pre price increase.
Speaker Change: These pools are going to start imminently can we count on support on that and of course those are things that are there.
Speaker Change: That we would support as well so it's not like on Monday, the price increase and therefore everything goes up the majority of the price moves on Monday, and then we would make exceptions to support dealers for pre quoted jobs and to address.
Speaker Change: Competitive situations, but as a rule of thumb by and large when the price goes up the data that goes into effect, we take the prices up too.
Speaker Change: Thanks ill pass it on.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from Sam Reed from Wells Fargo. Please go ahead.
Sam Reed: Awesome. Thanks, so much.
Speaker Change: Noticing a pretty big swing at equipment spend between Q4 and Q1.
Speaker Change: Up 6% to down 4%. It does sound like most of the impact was from demand shifts in Florida around storm recovery, which makes total sense.
Speaker Change: That said you know kind of is a piece of the negative inflection also a function of discretionary pullback maybe trade down from let's call it better.
Speaker Change: Two good and then more broadly we all know equipment accounts for 30% of your mix, but how much of that is pure maintenance versus perhaps discretionary.
Speaker Change: Yes, I think your assumption on the difference between fourth quarter and first quarter is essentially Florida, and the hurricanes and the amount of equipment that got replaced in many cases twice for the back to back storms. So.
Speaker Change: That's a.
Speaker Change: That's a fair assessment.
Speaker Change: Trade down I don't really see a lot of I don't really see a lot of trade downs, just looking through our product dataset.
Speaker Change: Earlier this week and.
Speaker Change: Was thinking that we might see it and I havent seen it people are still very tech.
Speaker Change: <unk> for tech for new pool equipment, especially if somebody is going to spend that kind of money to replace.
Speaker Change: Replace something that should have a 10 year lifespan theyre not looking to go backwards and say Hey give me.
Speaker Change: Give me old technology, and mechanical time clock and no automation I think the the tree.
Speaker Change: <unk> is.
Speaker Change: Is solidly in place there.
Speaker Change: Youre, Alaska the last part.
Speaker Change: Part of the question that I think is related to equipment demand how much is maintenance and how much is new construction is certainly in the first quarter with.
Speaker Change: New construction not being not being robust that certainly plays a bigger portion of plays a bigger part in the maintenance and equipment now remember think about the market. So in your seasonal markets. The equipment that you saw in the seasonal markets is usually early buys that the dealers are.
Speaker Change: Are taking because theyre not installing equipment. So they would have started to do some repairs and the seasonal markets in March timeframe. So most of that is stocking their shelves for the upcoming season, when you get into the year round markets than the percentages don't really change as a rule of thumb, we look at.
Speaker Change: And say for every pump, we would sell for a new pool, we probably sell it for or repair and maintenance.
Speaker Change: Yeah that helps Pete and.
Speaker Change: Follow up here I think I asked something similar on the last call, but maybe just to revisit where one quarter down in 'twenty five.
Speaker Change: L. A topically how should we be thinking about 2006, recognizing you're not providing guidance.
Speaker Change: Youre, starting the year off arguably with an easy comp, but then on the other hand, we might not get a big lift in new pool in 'twenty, five which really means the base isn't going to be moving up all that much into next year. So I guess the question is adding those dynamics up kind of how are you thinking about 2026 as it stands today.
Speaker Change: Especially in the context of your I'll go.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: I wish I had a great answer for you on 2026 quite frankly, we're trying to figure out what the what's going to what's going to transpire in 2025, because there seems to be no shortage of surprises.
Speaker Change: Overall, what gives me it gives me great confidence in the business and the industry is that most of our business comes from the maintenance and repair of a growing installed base. The installed base next year is going to be bigger than it is this year.
Speaker Change: So there'll be more pools to serve it.
Speaker Change: The demand for newer.
Speaker Change: Product with automation and connected pools. If you will is going to continue to grow and there is still an extremely large number of schools that are in place that have that have old technology.
Speaker Change: I assume that the macro.
Speaker Change: The macro improves a little bit, which is which is really kind of my assumption is that the macro will improve a little bit and I think we should see some recovery in demand for new product if for some reason.
Speaker Change: The economy takes a turn for some unknown reason at this point, then I think where you see the effect, most notably would be a new construction. However.
Speaker Change: In terms of new construction were down so much from the peak so we're down about 50% from the peak in terms of how much more it can fall I mean, we're basically slightly above the GSC number right now so I don't see that that taking.
Speaker Change: Step down significantly more because most of the pools being built today are for the more affluent buyer that aren't really affected as much by the interest rate sensitivity, but I think took out.
Speaker Change: Many of the entry level buyers.
Speaker Change: That's helpful I'll pass it on.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Trey Grooms from Stephens. Please go ahead.
Speaker Change: Hey, good morning, everyone. This is ethan on for Trey. Thanks for taking the question maybe first off just higher level, the tariff impacts given where things stand today, you mentioned you feel confident.
Speaker Change: Your ability to pass through these increases, particularly on the equipment side given that the majority of those products are sold through R&R.
Speaker Change: That has a non discretionary component. So my question being to what extent do you believe tariffs could potentially drive any demand destruction via higher prices or at the very least the trade down and with that in mind given that the new construction backdrop has been so difficult for several years now if that were to happen would it be more on the discretionary.
Speaker Change: R&R side or the Newbuild side. Thanks.
Speaker Change: Yeah.
Speaker Change: I think that the price increases as I mentioned before I think they're going to pass through the market because again the vast majority of that product is sold or maintenance and repair non discretionary to pump stop working the filters leaking. The here I have to replace that I can't operate the pool without it.
Speaker Change: That's.
Speaker Change: That's one way to think about it and then in terms of an overall pool project.
Given the given the escalating cost of a pool.
Speaker Change: In ground pools 80 to $100000, depending on where you are now on the type of pool that you build if you told me that the equipment and equipment pad is let's call. It $15000. If you told me that it was going to be 3% higher I don't know that thats going to cause people to say, okay, 3% of the $15000 is up.
Speaker Change: I'm out so I don't really think it's going to have a material demand destruction impact on the.
Speaker Change: New pool construction, what I do think people look at is the overall market. So if tariffs were to continue where tariffs were to get worse in <unk> and equity values continue to drop I think that's far more meaningful to new pool construction and then a 3% increase.
Melanie Hart: No yeah. That's that's fair enough. That's very helpful. And then last one maybe one for Melanie any changes to the operating expense cadence for the year.
Speaker Change: You previously mentioned that Youre going to do some investments into the retail centers and theres going to be some incentive comp to think about.
Speaker Change: And then maybe how you might flex the opex given.
Speaker Change: Various possibilities on where gross margin could end up for the year, depending on what new buildings up doing thanks.
Speaker Change: Yeah, No no real change on the cadence so timing isn't investments should be relatively consistent.
Speaker Change: Well, depending upon where the top line.
Speaker Change: We will be managing the variable expenses as it relates to that particularly around our ads for.
Speaker Change: Incremental warehouses and drivers, particularly freight expense and then ultimately at the lower end of the range. We've latency the incremental add for the incentive compensation that we talked about earlier.
Speaker Change: Alright makes sense. Thanks.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Garik <unk> from loop capital. Please go ahead.
Speaker Change: Oh, Hi, Thanks, two quick clarification questions for me just the first one just to simplify the pricing outlook is it fair to assume that the April price increases are in your guidance, but the.
Speaker Change: June one.
Speaker Change: Look I think additional support is.
Speaker Change: Yeah, just wanted to be clear on what exactly is in the guide and what's not.
Speaker Change: Yes, so we do have.
Speaker Change: June one at this point in time, we've only heard from one vendor and because we know about that ahead of the call that is included in the 1% that we provided.
Speaker Change: Okay. Thanks for that and then.
Speaker Change: Secondly, just on the sales piece coming back showing growth in March and it sounds like that's continued here in April.
Speaker Change: There anything kind of unusual.
Speaker Change: That occurred.
Speaker Change: Drove the growth any kind of one time items were markets I.
Speaker Change: Thank you cited maybe Florida or.
Speaker Change: Maybe the delay in Easter this year, maybe that helps.
Speaker Change: Here in April, but just wondering kind of anything unusual that help support the growth in <unk>.
Speaker Change: The level of confidence that's sustainable.
Speaker Change: Yes, I think the Easter holiday was certainly a certainly part of it too I also.
Speaker Change: Call that last April from a weather perspective.
Speaker Change: Great. So I think I think that's probably helping out at least earlier.
Speaker Change: Earlier in the month, but that's that's really it there would be nothing else of any significant.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thanks.
Speaker Change: Thank you.
Your next question comes from Colin went on from Deutsche Bank. Please go ahead.
Speaker Change: Thank you for taking my question I guess I was just curious on your thoughts on why Texas is underperforming your other large markets just since the macro environment and interest rate environment is pretty nationwide and just why you're comfortable in thinking that those headwinds might not bleed into your other large states.
Speaker Change: Because it's a it's an interesting question and I've spoken to a lot of builders in Texas and.
Speaker Change: I think that.
Speaker Change: There is still.
Speaker Change: I look at Texas weather and I look at the southern part of Texas, and Southern Texas market I would say that the weather in the first quarter of the year was pretty wet pretty miserable whats interesting about Texas is the new construction market in Texas.
Speaker Change: Ben if you look at the permit data. It shows that's been it's been very tough, but the maintenance business in Texas has been very good as a result of the as a result of the weather. So I think that in talking to the dealers who are obviously much closer to it and they're looking at their lead flow.
Speaker Change: Phone calls if the dealers were telling me that hey.
Speaker Change: I just think this is.
Speaker Change: This is.
Speaker Change: We can't explain it and it's going to be really bad then I would pass on that same information, but right now they are saying that phones are still ringing first quarter was tough from a from a contract conversion perspective, whether its weather didn't help macro uncertainty it didn't help but we also talk to dealers and all of the other markets and they seemed.
Speaker Change: B they seem to be holding up better so I can't point to anything specifically that would lead me to think it is going to bleed over into the other markets because they're frankly aside from the weather isn't anything unique about Texas.
Speaker Change: That's helpful color and then I guess just wanted to touch real quick on the private label growth you called out.
Speaker Change: In chemicals being up double digits can you just talk about the opportunity for private label in this macro backdrop and the puts and takes from a topline and gross margin perspective that that could have.
Speaker Change: Yeah, I think that there is still significant room to grow the private label products I think our suite of products frankly has never been better.
Speaker Change: But again these are products that are part of the brand associated with our with our dealers. If you will I'm talking on the retail side. So those are longer cycle sales, we recognize that we know that.
Speaker Change: And we've been we've been working very diligently toward that I've been very pleased with the results. So I think that there is still significant runway on the on the private label sales.
Speaker Change: And I think that's it's margin accretive to us and it also from a competitive perspective is great because they can only get those products from US you combine that with the technology the value proposition that dealer has.
Speaker Change: Is is very very good and puts them in a very very competitive situations in their local markets.
Speaker Change: Great. Thank you I appreciate the color and good luck with the rest of the year.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would now like to turn the conference back over to Peter Hartman, President and CEO for any closing remarks.
Speaker Change: Thank you all for joining US today, we look forward to our next call, which will be on July 24th when we released our second quarter 2025 results have a wonderful day. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].