Good day, and welcome to the POOLCORP Third Quarter 2025 Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Melanie Hart, Senior Vice President and Chief Financial Officer. Please go ahead.

Welcome, everyone, to our third quarter 2025 earnings conference call. During today's call, our discussion, comments and responses to questions may include forward-looking statements including management's outlook for 2025 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ from projected results are discussed in our 10-K. In addition, we may make references to non-GAAP financial measures in our comments. A description and reconciliation of any non-GAAP financial measures included in our press release will be posted to our corporate website in the Investor Relations section. Additionally, we have provided a presentation summarizing key points from our press release and today's call, which can also be found on our Investor Relations website. We will begin today's call with comments from Peter Arvan, our President and CEO.

Thank you, Melanie, and good morning, everyone. I am excited to share that our teams have maintained the momentum we established in the second quarter, delivering another solid performance in Q3. Thanks to their hard work and dedication, we continue to drive growth with top line sales up 1% and gross margin expansion of 50 basis points. This was fueled by consistent maintenance activity and encouraging signs of stabilization in both new pool construction and remodel. I'm also pleased to see that we achieved year-over-year growth in building materials for the first time since Q3 of 2022 driven by improvements in remodel activity and share gain. As you know, we have continued innovating and investing in our POOL360 applications. I'm pleased to say that our adoption rate of these industry-leading tools continues to grow as our customers realize their full potential. Building on these successes, we recently shared our strategic road map for the next year and beyond with the entire management team at our international sales conference, and their excitement was palpable. The innovative products and ambitious growth plans we unveiled are already gathering a buzz, and our teams are ready to hit the ground running as new initiatives start rolling out immediately. We're focused on key areas of our business where we know we can win. This forward-looking approach not only positions us to close 2025 with momentum but also lays a strong foundation for an even more dynamic 2026. Looking at the macroeconomic environment, uncertainty around tariffs and elevated borrowing rates continue to weigh on consumer sentiment and limit discretionary demand, particularly for pool projects that require financing. While we observed overall permit data down mid-single digits year-over-year through August with considerable variability across the country, the recent easing of interest rate policy offers a promising path forward towards relief. For clarity, we believe it will take further reductions to bring borrowing rates to a level that will motivate potential entry-level pool owners to build. Despite these challenges, our new pool construction sales have outperformed industry permit data, indicating continuous share expansion. On the remodel side, consumers remain focused on essential repairs and targeted improvements rather than large-scale upgrades. In response, our teams are leveraging our robust product portfolio, strong private label offerings, and enhanced technology while partnering with vendors to deliver innovative solutions and drive future growth. Overall, I am more than confident in our team's ability to adapt, execute, and position us for long-term success. Now I will walk through our third quarter results. We reported $1.5 billion in net sales, up 1%, building on the growth we generated during peak season. Maintenance product sales performed well, particularly parts and private label chemical volumes. As mentioned, we saw growth in building materials used in new construction and remodel projects. Mid-season price increases created a slight lift on top line, but were diluted somewhat by chemical deflation. Related to our geographic markets, Florida produced 1% growth with Texas flat and California and Arizona each down 3%. Florida remained steady across our product categories and leads the country with new pools being built in 2025. While flat, Texas showed sequential improvement compared to recent quarters. New pool builds in Texas remain pressured but continued to improve throughout the year, and maintenance-related product sales showed resilience. In California, we see continued pressure on new pool builds, particularly in areas affected by recent wildfires. Arizona showed some deceleration in permits compared to earlier this year, but we believe this may be related to timing versus reversion, while maintenance held up for both California and Arizona during the quarter. In Europe, net sales decreased 1% for the quarter in local currency and increased 6% in U.S. dollars. Similar to last quarter, we saw growth in the southern countries while impacts from political strain and related consumer uncertainty pressured sales in France. For Horizon, net sales increased 3% in the quarter, supported by solid maintenance growth and improvement in sales for outdoor living products like landscape lighting, hardscapes, and synthetic turf. Shifting to product categories, total chemical sales declined 4% this quarter, reflecting some additional deflation. Overall, I consider the demand for chemicals and our performance to be stable. Our private label offerings generated volume growth during the quarter, showing that our teams are successful in demonstrating the power of our brands and the innovative products and systems that we offer. With our new product showroom displays and marketing support, our customers continue to see the strength of our value proposition, and this bodes well for the upcoming selling season. Building materials sales increased 4%, again driven by our expansive private label offering and elevated customer experience. We recently rebranded NPT to National Pool Trends to align our brand name and marketing efforts to highlight our many offerings. The new name brings greater clarity to our value proposition, showing NPT as our customers' partner for complete backyard transformations. Our premier product offering, product sales specialists, and consumer showrooms offer a one-of-a-kind customer experience, and it is shown in our results. Equipment sales, which excludes cleaners, increased 4% during the quarter, mostly reflecting benefits from price and steady replacement volume for critical components. Turning to end markets, our commercial sales increased 2% in the third quarter, showing steady momentum from a strategic focus area. We continue to make investments in our team during the quarter and created greater connections to key designers and builders to better support commercial aquatic projects. Sales to our independent retail customers declined 3%. Chemical deflation created mild headwinds here, while DIY consumers continue to be hesitant with discretionary purchases. For our Pinch A Penny franchise group, franchisee sales to their end customers declined 1% during the quarter. Also of note, we have not seen any meaningful shift between do-it-for-me and do-it-yourself customers. Before covering progress on our initiatives, I want to briefly highlight gross margin ahead of Melanie's prepared remarks. I'm extremely pleased with the team's effort to expand gross margin by 50 basis points this quarter. Although the operating environment remains challenging, our teams continue to deliver by making strategic and efficient supply chain choices, refining our network and applying disciplined buying and sales strategies, all while providing an unparalleled customer experience. A key investment area and differentiator for POOLCORP is our technology suite. POOL360 is the largest and most comprehensive set of customer-facing tools in the industry, and our adoption rate continues to grow. For the quarter, sales through the tool represented an all-time high of 17% of our total sales for the third quarter, demonstrating the customer's desire for technology that creates value. While still in the early stages, this growth shows the output of our technology investments over the past few years. Our targeted spend in our digital ecosystem is driving technology adoption and fueling growth in private label chemicals as well as service and traditional B2B offerings. Our deliberate investments in innovation and enhancements of our tools have been key drivers of POOL360's impressive sales results. These advancements empower us to support higher sales efficiently while creating capacity for future growth. Increased POOL360 transaction adoption delivers significant benefits, not only strengthening our margins but also elevating the customer experience, accelerating private label and exclusive product growth, and enhancing our long-term competitive advantage. We completed one acquisition during the quarter, adding two locations in key markets. Additionally, we opened one greenfield bringing our year-to-date opening to six sales centers and we remain on track for additional openings in the fourth quarter to reach eight to ten new sales centers for the full year. Our Pinch A Penny franchise network added one new store in the quarter, increasing our presence in Arizona and bringing the total Pinch A Penny locations to 303 franchise stores. Touching on guidance, as we exit the pool season and enter the fourth quarter, we expect full year sales performance to be relatively flat to up slightly. We are confirming our diluted EPS guidance for the year to a range of $10.81 to $11.31, updated to reflect the $0.11 in realized ASU benefits year-to-date. At POOLCORP, our relentless pursuit of continuous improvement is driving us to lead the way on innovation across products and processes. Recognizing the industry's need for fresh ideas and solutions, we are making a new and intentional push to discover, shape, and bring new innovation to market for our customers. As the strongest channel to market for our supplier partners, we are identifying emerging opportunities and thoughtfully guiding them from concept to market, helping to expand the total addressable market while delivering unique value. Our team's product expertise is unmatched, backed by superior inventory availability, a robust operating system, and customer relationships that span decades in nearly every market we serve. Even as the macroeconomic environment presents challenges, the underlying strength of our industry and POOLCORP's distinctive capabilities remain clear. Our long-term growth trajectory is secure. Pools continue to be highly desirable, and no company is better positioned than POOLCORP to help build and maintain the growing installed base. We have a strong competitive advantage, and we are continually strengthening it through strategic investments in our people, facilities, acquisitions, digital platforms, innovative private label and exclusive products, retail support systems, advanced chemical repackaging capabilities, and consumer-facing marketing tools. Our commitment is focused, and our path forward is clear. As we mark our 30th anniversary as a public company, I want to thank our entire team for their exceptional dedication, which has driven our long-term success and positions us for the future. Over the past three decades, our growth and sustained success have been driven by the talent and commitment of our field leadership and support teams, all united by a focus on delivering the best customer experience and cultivating a go-to-market relationship with our valued suppliers. Looking ahead, I am confident that this foundation and our continued investment will equip us to enhance the differentiated value we provide to the pool and outdoor living industry while growing sales, expanding margin, generating strong cash flows, and delivering exceptional returns for our shareholders. I will now turn the call over to Melanie Hart, our Senior Vice President and Chief Financial Officer, for her detailed commentary.

Thank you, Pete. For the third quarter, we saw year-over-year improvement in sales driven by increased maintenance on the installed base, favorable pricing and market share gains, while noting that the impact from lower discretionary spend levels was less of a drag on a comparable basis compared to the third quarter of the prior year. During the quarter, we realized a 3% benefit from pricing, reflecting the full quarter impact of price realization on the mid-season vendor price increases implemented in April and May. Trichlor selling prices continue to be impacted by the lower level of spend in the industry and somewhat offset our positive price realization in the quarter. Throughout the quarter, in certain markets, we saw some positive months where there were permit increases year-over-year from the prior period. However, in total, year-to-date permits remained below last year's level. Our estimate of new pool construction remains flat to slightly down, consistent with our expectations included in last quarter. Overall, the lower level of discretionary spend had a 2% impact on our sales for the quarter, similar to the impact we saw in the second quarter, with both Horizon and Europe having positive sales growth in the quarter. As Pete mentioned, we added 2 new sales centers through acquisition during the quarter, as well as one newly acquired location in October. These additions did not have a significant impact on our base business results, so we have not reported base business performance separately for the quarter. Our gross margin in third quarter was 29.6%, representing a 50 basis point improvement over prior year. This improvement was driven by favorable pricing, successful supply chain initiatives and an increase in sales of our expanded private label offering. All areas that we continue to focus on and excel in despite the persistent impact of the macro environment and lower levels of consumer discretionary spend. The sequential change from the second quarter margin is consistent with our typical seasonal trends. Operating expenses increased 5%, slightly ahead of the quarter-over-quarter changes we reported during the first half of the year. This increase includes the impact for our cumulative new greenfield locations that were not open in both periods. Also, as Steve described, the positive results we have seen with our expanded POOL360 initiatives, we accelerated some incremental technology costs during the quarter because we believe that this further differentiates us from our competition and will yield better sales and operating leverage in the future. Operating income improved $2 million over prior year and was $178 million for the quarter. Interest expense of $12 million continues to compare favorably to prior year. Our effective tax rate was 23.5% for the quarter compared to 23.4% in prior year. ASU benefits contributed $0.01 in both periods presented. We generated diluted earnings per share of $3.40, up 4% from the $3.27 we realized in the third quarter of last year. Next, I'll discuss our balance sheet, cash flows and capital allocation. We finished September with inventory balances of $1.2 billion, up 4%, our lowest level of inventory we expect during the year as we exit the season. The increase includes product inflation and also includes stocking for our 9 new locations, including both our greenfields and the acquisition completed during the quarter. Total debt of $1.1 billion resulted in a leverage of 1.58x remaining at the low end of our stated target range of 1.5 to 2x. We generated $286 million in cash flow from operations year-to-date, compared to $487 million in the prior year. The decrease was primarily due to higher tax payments and investments in working capital. We expect to achieve our current year target of converting 90% to 100% of net income into cash flow from operations, which includes a deferred tax payment from prior year. We continue to execute on our share repurchases opportunistically under the authorization provided by the Board. We have completed $164 million of share repurchases through the third quarter with an additional $20 million through our earnings call ahead of $159 million through the third quarter of last year. We have $493 million remaining under our share repurchase authorization. Looking at the year, we continue to expect full year sales to be relatively flat compared to the prior year, with 1 fewer selling day. This outlook reflects a modest decline in discretionary spending compared to last year, offset by positive impact from maintenance growth and pricing realization. In the prior year, we baked 1% in the fourth quarter from weather-related hurricane activity, which at this time is not expected to reoccur in the fourth quarter. Our full year gross margin rate is forecasted to be similar to the prior year, which, on an ongoing basis reflects improvement as the prior year rate included a nonrecurring import tax benefit recorded in the first quarter of the prior year. This would include some improvement on a year-over-year basis in gross margins in the fourth quarter. While customer mix remains less favorable, these impacts are being offset by growth in private label sales, ongoing supply chain improvements and pricing benefits. Our estimate for full year operating expenses remains in line with last quarter, with an expected annual increase over the prior year of approximately 3%. This reflects productivity improvements, offsetting inflationary cost pressures with increases attributable to our investments in greenfield locations and our focus on technology initiatives. Forecast for interest expense, estimated tax rate, and share count for the full year are included in our quarterly earnings presentation posted on our website. There have been no significant changes to these estimates since last quarter, with interest expense updated to include share repurchase activity. As we typically see, our third quarter tax rate is lower than the annual rate due to discrete timing differences, and we expect our fourth quarter rate to be in line with the first and second quarter rate. We are confirming our diluted EPS range of $10.81 to $11.31 including $0.11 in ASU tax benefits realized year-to-date, of which we reported an additional $0.01 in third quarter that is now included in the range. I am pleased with our team's ability to perform and remain focused on our internal strategic initiatives, which have delivered tangible results year-to-date. This highlights the strength of our team and the significant value that industry-specific talent contributes across the outdoor living value chain. While we continue to manage the business effectively, we are also investing in our key strategic growth areas to create long-term value for our shareholders. I will now turn the call over to the operator to begin our Q&A session.

The first question comes from Susan Maklari with Goldman Sachs.

My first question is diving in a bit on the comments you made around seeing some early signs of stabilization which is encouraging, given what we've seen in housing in the consumer as we think about this summer and into the fall. Can you talk a bit more about what is driving that and how you're thinking about the trends that you're seeing on the ground as we exit this year and maybe even into early 2026?

Yes. As I mentioned, the permit data, when you look at that, which again only represents a portion of the market, is very sporadic. And so there isn't a consistent theme. But when you look at them from geography to geography, but I guess when we look at them in totality and then combine that with our comments that we're getting from our builder customers and remodel customers, I would tell you that the activity level seems to have firmed up, and we are encouraged as evidenced by our growth in building material sales in the quarter, which it's been a long time since we've seen that. So I would say that overall, the comments tend to be more positive now I think it's going to take further interest rate cuts to really drive the entry-level pool buyer to jump in. But I think that overall, the consumer sentiment on new construction and large renovation projects seems to be fairly consistent and more optimistic than it was.

Okay. That's good to hear. And then my second question is on innovation side, you mentioned that you accelerated some spend in the summer. It sounds like you've got some really good initiatives that are coming through the business. Can you talk about how you're thinking of the investments and the trends that we should expect into the fall and year-end? And then what that can mean for your ability to outgrow the market, even if things do stay relatively more challenging for next year or the next several years?

Certainly. I'm going to discuss technology in two main areas: first, how it relates to POOLCORP's own technology and second, how it pertains to the broader market. Our investments in technology at POOLCORP are focused on improving the customer experience, providing increased access, convenience, and productivity. For instance, our POOL360 service enables service customers to manage their operations, including invoicing, marketing, and scheduling, all in one platform, enhancing their productivity. Customers have access to our product catalog, can schedule product pickups, and enjoy the entirety of our network. Moreover, we offer advanced water testing technology for independent retailers selling our proprietary chemicals, which has received outstanding reviews from homeowners. We even have an at-home app that allows customers to test their water either by bringing it to the store or using our Regal and E-Z Clor test strips at home, guiding them on how to correct any water chemistry imbalances. We also continually evaluate our main B2B tool, which handles the majority of our traffic, striving to enhance the customer experience and simplify its use. Our team has been dedicated to this improvement, delivering increased convenience, information, and access for our dealers. Recently, we launched an app for our counter staff to use outside the branches, enabling customers to make transactions without having to go inside. Whether they need products that are outside or wish to pay via tablet or card swipe, this innovation allows them to get back to work quickly. I'm very optimistic about our evolving technology suite, which not only enhances customer convenience and experiences but also supports their business growth. These tools also tie into our marketing initiatives aimed at helping customers expand. The adoption rate is rising, which is very encouraging. Additionally, I believe our industry is in need of innovation and new product technologies to drive growth. Customers are seeking technology that brings convenience and value to enhance their swimming pool ownership experience, whether through managing water chemistry or equipment effectively, all at accessible price points. We are excited about how technology will continue to shape this business and POOLCORP's role in leading that charge.

The next question comes from David MacGregor with Longbow Research.

I wanted to refer back to the graphic in your presentation where you mentioned customer risk or customer mix. I assume we're discussing larger consolidated contractors and their increasing involvement in remodel work. I'm curious about the long-term margin implications and what strategies you have to mitigate that impact.

I think this indicates that we are observing consolidation among our customers. When customers consolidate, they seek more tools and convenience to enhance their effectiveness. This presents a significant opportunity for us since no other company has the technology suite we have to integrate with them. Our systems are highly flexible, allowing for seamless integration. Some customers are opting to utilize our software for their operations, while others are simply integrating with us. This situation creates a competitive advantage, as it makes interactions smoother; we receive advance notice, which increases our productivity in managing their orders. Additionally, it provides them with access to information on a self-service basis, reducing their need to make inquiries and thus lowering our cost to serve. I feel very confident in our ability to leverage our technology suite to help larger companies operate more efficiently and grow their businesses.

That makes sense. And just as a follow-up, I want to go back to the 4% growth on equipment and how much of that would have been just kind of parts going into maintenance and repair versus equipment sales in the remodel segment?

I think most of it right now is that every new pool comes with a set of equipment, and part of the renovation and remodel will involve new equipment. However, most of the products we sell are related to replacing critical components of pools that have failed, such as pumps, heaters, or filters. The majority of our equipment sales have always been geared toward the replacement business for these failed components.

The next question comes from David Manthey with Baird.

First question on chemicals. I was surprised at the weakness there, I think it's been recently flat to moderate growth. And could you talk about inflation, deflation broken down by chemicals, building materials, equipment? And I'm just wondering, is that chemicals? Is that something that happened recently? It seems like a slight change in trend versus what we've been seeing lately.

Yes, I'll address that. I've been thinking about chemicals, and I don't see any significant trends. We mentioned in previous calls that there has been some deflation in trichlor. We categorize chemicals into three groups: sanitizers, balancers, and specialty products. The most noticeable deflation has been in the sanitizer category, but I wouldn’t describe it as significant or alarming. In fact, I believe our overall chemical sales are fairly normal, as they support both our service professionals and retail stores. A few percentage points variation doesn't raise any concerns for me because it can be influenced by inventory levels on trucks or in stores. So, while there is slight pressure in sanitizers and shock, the balancers and specialty products are performing well. Overall, nothing alarming there. Regarding building materials, the inflation is also slight, and on the equipment side, prices are consistent with what we've seen in the past couple of years.

Okay. That's helpful. Looking out to next year, I'm not asking for guidance. I'm just thinking about how the model works here. And I think typically, you talk about if you're growing normal kind of 6% to 9% in that growth algorithm, you often have talked about keeping SG&A growth to 60% to 80% of the top line growth rate and I know there's also some costs that creep back in when you start reinstating bonuses, incentive comp and that sort of thing. So I just want to know how the model works mathematically, when we think about year 1 of mid-single-digit growth, let's say, do we see that kind of normal 60% to 80% growth rate in SG&A leverage? Or is it slightly higher than that in year 1 and then we start to hit that leverage as we go forward?

Yes. So the model stays intact. We will see some upfront kind of recovery of expenses. So incentive compensation, as you mentioned, would be the one area. But of course, that would only track as far as our growth track. And then outside of that, what we've talked about from an expense-based standpoint, is we've managed variable expenses. And so when you think about kind of volume increases coming back, we will have some add backs as it relates to drivers and warehouse personnel, but that will be kind of limited from that standpoint because we've maintained all of our professional staffing, our sales center managers and our BDRs so initially, there will be those volume-related expenses as well as the incentive compensation that would come back in with the sales growth.

So Dave, this is Pete. There's really nothing new to report in that area; it's consistent with what we've always done. However, it's important to note that we are continuously investing in the business for the long term. We are increasing the number of sales centers in markets that are currently at capacity or have potential for growth and opportunity. Additionally, we are investing in technology because we believe it's something that customers desire and value. This area helps us differentiate POOLCORP, and customers have been pleased with our investments. These investments are not short-term; they are long-term commitments that we believe will become foundational and integrate into our operating system as well as our customers' systems. The benefits of these investments will continue to increase over time.

The next question comes from Ryan Merkel with William Blair.

I want to start with the commodity pricing down 1% in the chart. How much is trichlor down year-over-year? And then are you also seeing deflation in PVC? Just what else is in there?

Yes. So we still are not seeing PVC stabilize. So it's getting better when you look at the quarter-over-quarter rates on the PVC, but it is still within the quarter a decline. And then when you look at trichlor, the overall impact of the pricing is, one, but the chemical pricing is down more than that since it's just a portion of about 12% of the sales overall. So it varies. Right now, it's somewhere kind of in the mid- to high single digits down from a pricing standpoint of where it was last quarter.

Yes. It's pretty interesting to see this persistent chemical deflation. I mean, usually, that commodity is kind of up 1 to 2 points pretty consistently every year just because more of a maintenance item. Like what is different today about trichlor? Why do we continue to see this persistent deflation?

Yes, Ryan, trichlor prices rose significantly during COVID. Comparing the current price to pre-COVID levels, it remains much higher. While it peaked at what I considered unsustainable levels, it has decreased somewhat yet still exceeds the prices during the COVID period. So, what has changed? In terms of demand, not much. Demand tends to fluctuate based on various factors like pool usage and weather conditions, but overall, I don’t see significant movement in the price. A sharp change in either direction would be more concerning. Currently, the price changes are minor and unlikely to affect long-term trends. Import regulations could influence the situation based on government decisions since some of the chemical is made domestically and some is imported. However, I’m not overly concerned about the current price because it isn’t changing drastically. During COVID, the steep rise was alarming, but now, while it's slightly lower, it could easily return to its previous level in six months. I can't predict if it will rise or fall by 4% in either direction. Overall, it accounts for a small percentage of our chemical mix, and while trichlor is closely monitored, it plays a minor role in the grand scheme.

The next question comes from Trey Grooms with Stephens.

I want to clarify something from earlier. Sales are still expected to remain relatively flat, and I believe Pete mentioned they might be slightly down for the year. However, we still anticipate that the fourth quarter will show an increase compared to last year. Is that correct? Regarding the EPS range, you confirmed it clearly, but considering we’re at this late stage with the pool season mostly over, what factors might lead us to reach the higher end of the guidance versus the lower end, especially in light of the sales expectations? Additionally, you indicated that gross margin will likely remain flat year-over-year for the entire year, so any further details on that would be appreciated.

Sure. So for sales, fourth quarter, we would expect that to be kind of flat to slightly up. And what we're seeing there is we'll see incremental benefit from a pricing standpoint in fourth quarter, that's really offsetting the weather-related hurricane benefits that we got in the fourth quarter of last year. And then from a margin standpoint for fourth quarter, we are also expecting margin there to be up. So we would expect to continue to see all of the benefits of the things that we've been working on all year long. And we'll see that it should be kind of up slightly from where we are in the third quarter with some benefits from product mix.

The other thing I would to mention, which is always the case, our fourth quarter a portion of what happens in the fourth quarter is construction and remodel. And again, that is going to be dictated largely by weather in the seasonal markets is what I'm referring to. So right now, weather up North is still pretty good, pretty warm. And the folks that have contracts to build are still building, which is encouraging. So the longer the weather stays warm, that bodes well for the fourth quarter for us.

In order to reach the higher end of the range, it really depends on the weather. At this point, we do not foresee any near-term hurricanes or significant weather impacts. If we experience similar benefits as last year, that would influence where we fall within the range.

The next question comes from Scott Schneeberger with Oppenheimer.

I would like to start with you, Melanie, but Pete, feel free to jump in if you have anything to add. Regarding the gross margin improvement in the third quarter, it seems that pricing and supply chain factors contributed equally. This is a two-part question. First, can you provide more detail on the impact of the tariff increase now that we have complete data from the third quarter? How have competitors reacted, and what should we consider for the future? There's some uncertainty as we approach November 1, so how should we assess the sustainability moving forward? The second part of my question pertains to the supply chain. Can you explain how structural the changes are and how permanent the solutions might be? Any examples of the improvements being made would be helpful.

Okay. Yes. So sure. On the pricing front, we are seeing that we did have a full quarter of the price increases that went into effect kind of mid-season. And those are at this point I would say, fully flushed through the cycle. And so when we're looking at the acceptance of that pricing overall within the market, we that is through the pricing channel, and we're not seeing any impact on what we're doing versus our competitors doing as it relates to pricing.

And I'll take the second part of the question as it relates to supply chain activity. We have become more and more sophisticated with supply chain over the last couple of years. Very happy with the team's effort in that regard. I think we have better technology. They have embraced the AI tools that we have available to us. So I look at the actions that the supply chain team, which has to do with what we buy, when we buy, whom we buy, how we buy and making sure that we are partnering with our vendors to maximize our opportunities and benefits and say that we are as good in that area, if not better than we've ever been. So I would look for the gains that we see in that area to be sustaining.

The next question comes from Garik Shmois with Loop Capital.

You spoke to equipment price increases that have been announced for the next season. I'm just curious if you can speak to the early buy programs and if your approach for the coming season is taking any different shape than usual.

Yes. There is really nothing new to report on that front. The vendors only modified their traditional early buy program during one year at the peak of COVID. The early buy programs remain very similar to what they have always been. We are definitely participating in those in a very strategic manner as we always have. So there isn't much new to share on that topic.

Okay. And then just a follow-up question, just on SG&A and the guide for the year, a little bit of a nitpicky question, but I think, Melanie, you mentioned in your remarks and outlook for 3% SG&A growth this year. I think last quarter, it was maybe 2% to 3%. I just want to confirm that. Is that different? And if so, is it just related to the expenses that you saw primarily in the third quarter.

Yes. We had the 5% increase for the third quarter. So that increased slightly because we did accelerate some of these technology investments. When we look forward to fourth quarter, we'll expect to see that rate higher than what we saw earlier in the year. I would say in the range of a 3% to 4% increase for the fourth quarter.

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

Regarding pricing for the upcoming year, it seems that the equipment suppliers are implementing price increases of about 2 to 3 percentage points above the norm due to tariffs. I would like to know what you are observing in your other categories concerning pricing for next year and how you perceive the ongoing trend of above-average price increases.

Yes. I think as it relates to the rest of the suppliers, I would say fairly normal cadence. I think the equipment guys are above where most of the rest of our suppliers are. Your comment on that level of fatigue from our customers that is certainly something that we hear. Quite frankly, all of that is solved with innovation, right? So new products, new innovation make those price increases far more palatable for the customers because it gives them something new to go sell and grow their business and to help address the concerns of the homeowners and pool owners.

Okay. The next question comes from the John M. Garrison with SunTrust Robinson Humphrey.

Okay. Thanks. I just wanted to dig into the dynamics of the contractor base in a little more detail. How favorable or unfavorable are labor and material costs, in particular labor costs, to both new builds as well as remodels as we think about tailwinds or headwinds mathematically?

I think in regards to what I see in that area, I think both labor and material costs are presenting some headwinds. Labor continues to be a challenge given scarcity in the market. Material costs, we’ve observed some stabilization but remain elevated compared to pre-pandemic levels. While we anticipate slight easing in both fronts, the exact timing and extent is uncertain, making it imperative for us to continue to enhance our operational efficiencies to navigate these challenges.

The next question comes from Collin Verron with Deutsche Bank.

The technology sounds really exciting, and sounds like you've already done quite a bit of investment behind it already. So I was hoping you can just help us think about the magnitude of the spend that you're doing there and how much more SG&A investment is there left to drive these initiatives? Or are those pretty much behind you and you're starting to reap the benefits as we move out to '26 and '27?

Yes. When it comes to technology spending, I don't find it to be concerning or excessive for a company our size. When I weigh it against the benefits we're experiencing and will likely see in the future, it’s minimal. In the tech world, relevant updates require ongoing investment; it's not a one-and-done expense. Technology evolves quickly, and we must adapt. AI will definitely influence how we develop and implement technology, which I believe will be beneficial. I'm not looking at our expenditures and thinking that we're spending an extraordinary amount on an ERP system; rather, we're investing as part of our regular operations to ensure we have up-to-date tools that provide value to our customers. This value encourages customer adoption and enhances transaction loyalty. To summarize, I don't see our current spending as high, but we are not finished investing. As with everything at POOLCORP, we aim to maximize efficiency with our resources, and AI is assisting us in that effort.

Great. That's really helpful color. And then maybe a more near-term question here. Melanie, you mentioned a few times the weather benefit that you guys saw last quarter. Any way you can help quantify just the magnitude of what you don't expect to repeat this year?

It was a 1% benefit in fourth quarter of last year. That was the top line sales number.

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

I just want to thank you all for joining us today. We look forward to hosting our year-end call on February 19, when we will release our fourth quarter 2025 results and full-year results. Thank you for your interest and support in POOLCORP, and I hope you all have a happy and safe holiday season and New Year.

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