Good morning, everyone, and welcome to our third quarter 2026 earnings conference call. During today's call, our discussion, comments, and responses to questions may include forward-looking statements, including management's outlook for 2026 and future periods.

Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results are discussed in our 10-K.

In addition, we have provided a presentation on our Investor Relations website that summarizes key points from our press release and today's call. We may make references to non-GAAP financial measures in our discussions today.

A description and reconciliation of non-GAAP financial measures are included in our press release or on our Investor Relations website. I will now turn the call over to John Watwood, our President and CEO.

Thank you, Kristin, and good morning, everyone. I want to start by recognizing the people who support our industry.

Earlier this month, I had the chance to spend time with about 1,500 employees, suppliers, and industry partners at our International Sales Conference, and it was one of the most energizing experiences of my first year at Poolcorp. Standing in a room with that many people who care about this industry, our customers, and each other reinforced what makes this company different: scale built on local relationships.

It was a powerful reminder that it truly runs deep here, and I want to thank our employees for everything they do for our customers and for each other every day. I left our conference more convinced that our direction is the right one.

Our strategy is an evolution, not a reinvention, of what has made Poolcorp successful for more than 45 years. During my first pool season as CEO, I deeply engaged with our employees, customers, and suppliers to understand where we win and where we can improve.

Our leadership team also spent time in the field and with customers, where we identified specific points of friction we are working to remove. The next step is to translate that feedback into an enhanced customer experience, stronger share capture, and even better operational performance next season and for years to come.

On that note, after I briefly touch on our third quarter results, I will discuss our key strategic initiatives and the actions underway, and Melanie will take you through the financials in more detail during her prepared remarks. Net sales grew 4% in the third quarter, reflecting price realization, volume growth in maintenance and building materials, and share gains.

Building materials delivered its fifth consecutive quarter of growth despite a muted discretionary environment, and that growth was driven by our differentiated National Pool Trends resources and new product introductions. Chemicals grew 4%, primarily on volume.

In both areas of the business, our focus on branding, private label, and customer support through education and lead generation is showing up in our results. Equipment grew 5%, reflecting price and healthy volumes in replacement activity, as seen in products including pumps and filters.

Pool360 accounted for just over 17% of sales, up from the same quarter last year. Usage is seasonal and typically peaks in Q2, we measure progress against the same quarter in the prior year rather than sequentially.

By geography, results improved from last quarter. Florida, Arizona, and Texas were each up low to mid-single digits.

In those markets, our pool business continued to outperform permit data and irrigation and landscape, which is more closely tied to the housing market. California performed similarly to last quarter, while Horizon in California also had growth this quarter.

Europe continued its positive trends with 8% sales growth in local currency. Sales to retail customers moved from a 1% decline last quarter to growth of 3% in the third quarter.

Pinch A Penny franchise sales to end users went from flat last quarter to up 3%. These results reflect resilient end-market demand, our expanded retail support team and customer offerings, and provide clear proof points of our investments translating into growth.

Although our sales activity is running ahead of permit data, new pool construction across the industry remains below last year's levels. The irrigation and landscape business remains tied to housing, which is a challenging end market at the moment.

We're operating in a market that isn't giving us much for free. Housing turnover and discretionary spending remains cautious, and larger projects are still being delayed.

However, our plan doesn't depend on relief from macro pressures; we're focused on controlling what we can control. Gross margin declined year-over-year, with higher inbound freight and customer mix remaining the primary pressures, as they were in the second quarter, along with the third quarter's comparison against last year's mid-season price increases.

We have increased prices on freight-intensive products, including building materials in August, to offset rising costs. Those increases are holding and have begun to recover some of the higher freight costs.

We expect to recover more as those increases work their way through the channel and our pricing actions on vendor cost changes take effect at the beginning of next year. On expenses, SG&A grew ahead of sales.

We chose to protect those investments because they support next season's performance. At the same time, we are actively managing the cost base.

We are also taking a disciplined approach to our network. During the quarter, we opened one location in Florida and consolidated two locations into existing sales centers, using the density of our network to continue serving local demand at a lower cost to serve.

Our goal is to invest where additional presence strengthens our position and to use our existing footprint more efficiently where we can. Based on our steady performance to date and our visibility for the rest of the year, we are reaffirming our 2026 adjusted diluted EPS guidance.

Melanie will cover the fourth quarter outlook, which reflects a smaller pricing benefit and a challenging gross margin comparison. We believe the combination of price discipline, private label expansion, and productivity gains gives us a clear path to restoring operating leverage, even in a flat volume environment, with additional upside as volumes recover.

As we exit the peak season and look toward 2027, we are focused on executing against our four priorities: sales excellence, pricing and supply chain discipline, operational execution, programmatic M&A. Our maintenance-driven recurring revenue base provides resilience, and we see opportunities to grow share with our customers, build density in our network, and execute more consistently across every market we serve.

These are areas where we can take action regardless of the broader market environment, and they are supporting our performance today while positioning us for what's next. I will provide a brief update on each.

Our first priority is sales excellence. We are introducing new processes, training, and tools because in our industry, business is won locally.

We are implementing Centers of Excellence to put more of Poolcorp's scale behind our sales centers, providing better information, better tools, and more authority for the people closest to the customer. That is how scale wins in local markets.

Over time, we expect these efforts to support top-line growth, share gains, and gross margin improvement. During the quarter, we also moved ownership of our business development initiatives under field leadership and hired a new leader of national accounts and commercial.

We are connecting our sales and marketing programs more closely through better targeting tools and more proactive reporting. Over time, we expect these actions to support market share growth and improve national accounts profitability.

Within sales excellence, we are seeing early signs of progress and looking at our sales trends versus permit data, larger customer sales growth, and growth in new customer accounts. Additionally, the 7% growth in sales to commercial customers reflects the customer-centered focus of our team and the resources we have put behind the commercial growth opportunity.

Our second priority is pricing and supply chain discipline. We are continuing to sharpen our pricing approach, with decisions informed based on detailed analysis across our product lines and regions, not a one-size-fits-all approach.

During the quarter, we tied pricing decisions within our organization more directly to cost and vendor inputs, aligning the cost side of the business with the sales side and creating data-driven decisions. We are also concentrating our focus on private label expansion on chemicals and building materials, where differentiated products offer opportunities for greater growth and margin benefit over time.

Through the strategic efforts of our supply chain team and coordination with the field, we generated a healthy operating cash flow benefit from disciplined inventory management, with inventory down 3% from last year on 4% sales growth. Our third priority is operational execution.

We are driving higher standards of service for employees across all of our sales centers. Our teams are dedicated to increasing revenues in our recently opened greenfield sites to deliver performance in line with our broader network, while also increasing productivity as these operations mature.

We continue to invest in Pool360 water testing, e-commerce, and integrations with our customers, and we prioritize partnering over building where that's the better path. Above all, we are managing to the customer experience, not simply a metric.

Our goal is to be the easiest distributor in the industry to do business with. That means addressing the identified points of friction to further improve the service and product reliability our customers count on.

Our fourth priority is programmatic M&A. We remain selective.

We look for operational and financial fits, strong culture and talent, and opportunities to strengthen our existing markets or add capabilities that extend our value proposition. M&A is a lever that accelerates our organic growth; it is not a substitute for it.

We have the balance sheet and operating experience to be the acquirer of choice in our industry. Our capital allocation priorities remain unchanged.

We invest in the business to drive profitable growth, pursue disciplined targeted M&A that aligns with our strategy, support the dividend, and use excess cash for share repurchases, all while maintaining a conservative leverage ratio. Looking ahead, we are focused on finishing 2026 on course and positioning the business for an even stronger future performance.

We believe in our ability to win in our markets and generate above-market growth. We will continue refining our network and operations to improve efficiency and strengthen the customer experience.

This is how we extend our competitive advantage and create long-term value for our shareholders. As always, I want to thank all of our industry partners for your commitment to growing the outdoor living industry as one and trusting Poolcorp as your partner.

I'll now turn the call over to Melanie Hart, our Senior Vice President and Chief Financial Officer, to review our third quarter results in more detail.

Thanks, John, and good morning, everyone. We delivered solid sales growth in the quarter while focusing on our people and our long-term priorities.

Sales of $1.5 billion were up 4% compared to prior year, an acceleration from the 2% increase we saw in the second quarter, resulting in a 4% year-to-date improvement. Pricing contributed 3% of the 4% growth, while volumes adding the additional 1%, supported by growth in maintenance, stable renovation activity, and new construction outperforming the permit trends.

Gross profit dollars grew $7 million on higher sales. Gross margin of 29% was down 60 basis points from prior year, reflecting higher inbound freight costs, customer mix, and the comparison against last year's mid-season price increases, partially offset by continued supply chain benefits.

On mix, our larger customers are growing faster than the rest of the customer base, which adds gross profit dollars, but compresses margin percentage. Our August price increase on the building materials, about 11% of third quarter sales, made headway in recovering some of the higher freight costs.

Consistent with our pricing and supply chain discipline, we continue to work toward additional actions, both during the fourth quarter and as we plan for next season. Operating expenses grew 5%, or $13 million.

The increase includes higher incentive compensation from higher sales, including special incentives for our sales teams, increased employee insurance costs, and outside fees related to our focus on programmatic M&A and other strategic initiatives. Headcount is lower than last year, and so this is not a structural step-up in our cost basis.

As a result, operating income decreased 3% to $172 million, and operating margin was 11.4%. Interest and other expenses decreased $2.5 million from the second quarter as we moved into our seasonally stronger cash flow generation period and reduced debt outstanding.

Interest expense for the third quarter was $11.8 million, a year-over-year decrease of over $200,000. Share repurchases, which reduced diluted earnings per share about 3.5% year-over-year, offset lower operating income and lifted adjusted diluted earnings per share to $3.40 compared to $3.39 in the third quarter of last year.

Moving into our discussion of our balance sheet and capital allocation. Inventory of $1.2 billion was down $39 million, or 3%, from the prior year compared to a 4% year-over-year sales increase.

Inventory decreased $194 million sequentially as we sold through our peak-season stocking levels and early-buy and opportunistic purchases we discussed last quarter. Net cash from operations was $420 million year-to-date, up 47% from $286 million last year, and equal to 115% of net income.

We expect full-year cash flow from operations to exceed net income. We have $468 million remaining under our share repurchase authorization and significant capacity available under our current debt agreements.

Total debt of $1.2 billion was down from second quarter and carries an average interest rate of 4.2%. Our interest rate swaps are on track to reduce interest expense by approximately $9 million in 2026.

They expire in February of 2027. Following their expiration, our debt will still carry favorable market rates, priced at SOFR plus 1 and 1/4, or approximately 5.2% based on current rates.

We intend to offset a portion of interest rate headwind with lower inventory carrying costs. We remain within our target leverage ratio of 1.5 to 2 times, finishing the quarter at 1.8.

As we wrap up the third quarter, we are confirming our adjusted earnings guidance as we move into our seasonally slowest fourth quarter. We now expect slightly better top-line growth for the full year, between 3% and 4%, with a 3% contribution from pricing.

October sales to date were up around 2%, in line with our fourth quarter outlook. That outlook reflects a smaller pricing benefit and is more heavily weighted to discretionary versus maintenance spend.

Full-year new pool builds are expected to be slightly below prior year, consistent with current activity and permit trends. Year-to-date gross margin was 29.3%, reflecting freight pressure, customer mix, and the price increase comparison.

Last year's fourth quarter margin benefited from pricing and supply chain improvements, the comparison will remain difficult in the fourth quarter. Year-to-date adjusted operating expenses grew 3.7%, in line with sales.

For the full year, we expect adjusted operating expenses to grow less than sales growth, with fourth quarter expense growth below the third, as we lap last year's incremental IT costs. We expect full-year interest expense of about $50 million and a full-year adjusted tax rate near 25%, with no additional benefit from ASU for the remainder of the year.

Weighted average shares outstanding should be about 36 million for the fourth quarter and 36.2 million for the full year. Our adjusted earnings guidance is unchanged at $10.87 to $11.17, which at the midpoint implies growth of almost 3% over prior year.

Including the 21 cents of one-time CEO transition expenses reported in the second quarter, our GAAP diluted EPS range remains $10.66 to $10.96. Looking ahead to 2027, we will have one less selling day for the full year, which will impact the fourth quarter.

In summary, our teams delivered 4% sales growth and added gross profit dollars while we continued to strengthen our processes. The actions we are taking and the targeted investments we are making are to support the four priorities John outlined.

We continued to generate strong cash flow, returned significant capital to shareholders, and invest in our network for the long term. We are now ready to take your questions.

Thank you. Good morning, everyone.

My first question is thinking about how you want to position the business as you look to '27. It feels as if you've had some really nice initial success on the initiatives that you outlined for us last quarter.

As you think about coming into the fourth quarter and the off-season, what are the areas that you're most focused on? How do you want to position the business as we think about the spring of '27?

What could that mean for the future in terms of growth relative to margin?

Good morning, Susan. Great question.

The things that we've been working on, I would say in-season, I've been pretty open and honest on the record about you don't disrupt the business. We'll continue to double down in the areas that we're starting to see improvements on.

With the restructure we have with sales excellence, with our new VP of national accounts and commercial, those things need to take a little time to work in, I would say. We're excited about what we've built.

We'll continue on our pricing journey and some of the investments there to set us up for a good 2027 season. I'd say overall, the things that we've put in place in-season, we can move a little faster on in some areas as we get out of season.

The freight piece is still a little bit of a concern right now as far as what's happening in the macro that's outside of our control, but there's a lot we can control. I've been on record, too, saying that as we go into 2027, we're going to simplify our incentive plans, so that's well underway.

Then we've brought in some help to look at certain parts of the business to help us benchmark where we can improve. We'll continue to work in those areas.

As we look in 2027, I don't think 2027 materially from a macro level is going to be much different than 2026, it's really going to be about what you can do internally to continue to improve, continue to execute. We've got a lot of energy in the company right now.

We've got some wins coming through. We're excited about that.

We're not taking a victory lap by any means, but I think the foundation is there. As we again move into 2027, I'm pretty excited about what we can achieve.

That's great to hear. Maybe building on that, can you talk a bit about just the competitive landscape that you're seeing out there?

Has anything changed as the macro further weakened during the quarter? What does that imply as you think about '27?

I haven't seen much change in it. It's always been a competitive industry, and I realize some of the narratives around that have changed over the past couple of years.

As I've said, we respect our competitors. We know that we have to take care of our own business, and when we do that, we'll win more times than we don't.

Our focus remains the same about how we view our business. No material change in competition.

I don't expect to see a material change next year in competition. I think it's always going to be around, and it makes us better, and we embrace it.

Yeah. Thank you for the color, and good luck with the quarter.

Thank you.

Thank you. Good morning, everyone.

Thanks for the information on slide nine. I'm wondering, were you giving us any quantitative framework about how you're thinking about those items: sales, price, operations, M&A?

I think the market is becoming accustomed to sort of a secular growth algorithm, and there's questions around that. Any kind of specific quantifiable margin levers, M&A target ranges, any quantitative information forthcoming here between now and next May?

Between now and next May, yes. We're working through our budgeting and our plans now.

We, again, put a lot of work in. We're excited about what we're seeing.

We're building our bottoms-up approach as we work through the remainder of the year. As we come into next year and we announce our fourth quarter, then we'll break this down a little more granularly about where we see, as you said, the elements of the entire plan.

Short answer is yes.

Okay. Maybe with fourth quarter reporting, we'll have some numbers around these?

Yes, sir. That's the plan.

We've worked hard to have the best season possible, and I think we've achieved that. Again, as we work through these strategic initiatives and set ourselves up, I don't think there's going to be much change in how we view 2027 from a macro right now, that's what we'll put in the confidence around each one of our actions here and display that in our plan.

That's great. Thank you.

Then next question is on sort of the bonus compensation levels. Melanie, I think you referenced this quarter incentive comp, sales special incentives.

I know this has sort of been out there for a while, but is the low single-digit growth you're seeing this year enough to sort of trip those gates and reset us to normal levels, or if we see additional, even moderate growth next year, should we expect another maybe outsized step-up in SG&A?

We still have some investments to make as we continue our growth path. As we talked about, in this quarter we did have some incremental sales incentives that we put forth.

When you think about our traditional plans, they are based primarily on operating income, but we did implement some incremental incentives as part of our sales excellence culture this quarter, which did add some expense. Certainly we saw the positive top line first that created that expense.

As we continue to work toward simplifying those plans, they will be aligned with our overall results and shareholder expectations. As we continue to grow into next year, we will have some more investments that we'll need to make that will align with the growth that we see.

Okay. Do you think even at moderate top line you'd be able to sort of get back to that 60% to 80% of top-line growth, or because these investments will be a little above that, maybe on the high end?

We still have some rebuilding to do on that, we will have to absorb that as we kind of grow through some of the capacity in the network as well. I think what you'll see there is you'll see higher incentive compensation, more leverage in the capacity in the network.

Okay. All right, thank you very much.

Thanks.

Hey, everyone. Thanks for the question.

I was hoping to start with gross margin. Melanie, can you put a finer point on gross margin expectations in the fourth quarter?

It sounds like it might be down 60 basis points year-over-year just given the mix and the freight headwinds.

We put a little bit wider range on the full-year expectations for gross margin coming out of what we saw in the third quarter. Freight rates did continue to climb.

We put some actions in place that accounted for some of those increases overall. As we look at the fourth quarter, our expectations for freight rates as a percentage of sales would be consistent with what we saw in third quarter.

We also saw, when you look at fourth quarter last year, we had a really healthy fourth quarter margin rate, and so the comp gets more difficult. With that being said, what we are looking at kind of in our forecast would be that you'll see over the last couple of years we saw a step-up in our gross margin from third quarter to fourth quarter, and so we would expect a similar higher rate in the fourth quarter than what we finished the third quarter, but it will still be lower than what we reported last year.

Got it. Thanks for that.

Then a question on inventory. It looks like you took it down a little bit here in the quarter.

What are your plans for inventory heading into '27, and are there any targets on inventory days that you can share with us? Yep.

At this point in time, we're still working with our vendors to get the full picture on early-buy activity and orders and opportunities there. When we looked at our balances in March of this year, we did have a higher inventory that we brought into the season, and that was with good reason as we stated at that point in time.

It certainly will depend on our discussions with our vendors and what opportunities lie as part of those early buys.

Understood. All right, thanks.

Pass it on.

Hey, good morning. It's Daniel on for Scott.

Thank you for taking our question. I also want to follow up on the gross margin question.

It sounds like your pricing well to offset those freight costs. How should we think about the cadence for that to be fully offset?

Just broader picture, the gross margin headwinds you have this year including the large customer mix, to what degree should we think about those as we head into next year, and what can you do internally to offset it? Thank you.

From a pricing timing, generally what happens is that we're setting pricing at the beginning of a season, so that's early in the year. That's most prevalent when you think about our equipment purchases.

We were able to do a mid-season price increase for our building materials, and those particular items are generally priced by the job, we were able to pass through some of that to offset those higher inbound freight costs there in the third quarter into the fourth quarter. As we look ahead for pricing, the majority of kind of the remainder of our pricing actions, we would expect to take place at the beginning of next season.

Thank you. On discretionary sales, it was flat this quarter, continued strength in building materials, it's been declining previously.

Could you please address expectations for the fourth quarter when it comes to discretionary sales, and also discuss the sustainability into next year? Thank you.

Yeah. We've actually had five quarters of increases in building materials overall, the trend there has been really very good.

When you look at the percentage of fourth quarter sales, in second and third quarter, we typically will have more sales generated from our maintenance business, and then first and fourth quarter will generate more of those discretionary sales. Anything that's happening in those quarter typically are not a trend overall.

When you also look at the permit data, we have been outperforming the permit data. Our sales has come in ahead of that.

We see no change in that. We would continue to expect that for fourth quarter.

Based on kind of the preliminary data, year-to-date the permit data is lower than last year, and so we don't have any reason to expect that that wouldn't continue into the fourth quarter. Overall, we would expect permit data down, our sales to come in better than the permit data.

Got it. Thank you.

Hi, good morning, everybody. I think both of you guys called out mix as a little bit of a headwind this quarter, and I guess you're doing more business with larger customers.

That's probably good for growth, but I'm curious, I don't know, just order of magnitude, how much of your business is actually with those large customers these days? That seems likely to just kind of continue in perpetuity as that part of the market consolidates.

How do you think about that playing out going forward?

There's a lot of different classifications for large customers. I'll say in the context of what we're discussing here, we're still about mid-single digits overall, I would say in what we would classify as a large customer.

They are growing, and that's a good thing. We focused on that, and we've had the ELT in front of these large customers.

We do believe over time there's profitability to be had there. That's on us to find ways to be, I would say, more efficient in how we operate with certain customers, and they're looking for that as well.

Now, I would say as you look to the future, we saw good growth in the medium and small accounts as well, and we've got a couple of things we're working on between now and the end of the year so that we understand that segment and service that segment better. I wouldn't necessarily try to trend this out over the next 12 to 18 months.

It's just a construct of what we have right now. As far as consolidations and things like that, haven't seen much noise or news on that in the past quarter.

Can't really predict what's going to happen there. I think one thing we've done throughout the season is we've really set the foundation to understand how we deal with each customer segment.

We definitely don't look at growth at any level as a bad thing. We've also got our eyes on kind of that medium and small account and how do we make that a little more sticky.

Good. That's helpful.

Then maybe the follow-up. I'm curious, I guess this feels like a difficult operating environment for some of your smaller competitors, and I'm curious if you think you're starting to see any type of real stress in that sort of smaller group of competitors, which might add to some shutdowns or maybe they'd even sell the business, or just how do you think those guys are faring here?

I always try to stay away from speculating on things like that. It's a tough operating environment, but you've got some smart people running those businesses as well.

I get to be the one and only, that being Pool, that gets to display I know that we've done a really good job in some markets where we've got some good regional competitors. That's probably as deep as I could go with it.

We've not heard any rumors or any chatter in the market, nor would we share that if we did, about certain shutdowns or anything like that right now outside of what's been out there in the market about Leslie's. No, short answer is, I don't really have any insight into it.

Fair enough. I'll pass it on.

Thanks.

Hey, good morning, everyone. I guess for me, just kind of thinking about the pricing, you guys had mentioned mid-season price increases on building materials.

You guys usually increase at the beginning of the season. Taking that and then maybe what you're hearing from your suppliers, etc., as we kind of look into next year and what's needed to recoup freight on your end.

Any high-level thoughts on how we should be thinking about kind of overall inflation and its impact on the top line for next year for you guys?

I would like to tell you we have the complete picture on that right now. We don't.

We do have some of our suppliers' price increases and their expectations of next year, but we don't have enough to really put a pin on the map quite yet. Again, short answer there is to be determined probably over the next 30 to 45 days.

The freight situation we found ourselves in, and I think I touched on this maybe in some conferences and things, we really haven't seen freight increases quite like what we've experienced the past year since COVID, but the thing about COVID was obviously you had a whole lot of top line coming in, it kind of absorbed it. As we move into the rest of the season and we prepare for next year, obviously we want to work very hard to mitigate as much of that as we can, what we at least can control, and we're certainly focused on that.

The price increases that we put through, very targeted in very specific product groups, were really just to try to kind of recoup some of those expenses. We also chose deliberately to absorb some of those expenses, which shows up in the margin and a little bit in the SG&A.

Look, it's a high-cost environment. We want to be the best partner to our customers, and we know a lot of those jobs were already bid and already costed, we took some hits on that as well because it's the right thing to do.

Now, as we move into next year, as we get the clearer picture, then we can talk more about what that inflationary environment will look like.

Yep. Understood.

Fair enough. Then I've got one for Melanie just to make sure that I'm understanding some of the comments around gross margin and SG&A in the 4Q.

It sounded like just on the gross margin side of things, should be less bad, I guess, versus 3Q's down 58 bips, or down less maybe than what we saw in 3Q. Just make sure I heard that right.

I don't know that we're ready to say that it'll be down less, because we're carrying some of that freight pressure.

Or will be below the 3Q? Any more color or granularity around that would be super helpful.

Oh yeah, I'm sorry. I think we must have had a glitch, because I missed part of your question, I was starting to answer, but then I think you kept going.

Oh.

I'm

so sorry about that. Do I need to repeat, or you good?

I'll answer the first part and then you can tell me if I missed anything. From a trend standpoint, the increase in the freight expense as a percentage of sales will be, we're projecting that to be consistent with where we are in third quarter.

That'll continue to be a drag into the fourth quarter. We also had a good fourth quarter.

We could expect that if you're looking at the year-over-year, the comparison could get worse, but the margin reported for fourth quarter will be slightly better than the third quarter.

Got it. Thanks for that clarity.

Then the second part of my question was just around the 4Q SG&A. You had mentioned that the rate of growth will be below 3Q.

Just any more color you could give us around that as we're thinking about kind of tying up our model here?

We came in at 5% expense growth in 3Q. We would expect to do better than that in 4Q if we ultimately do see some incremental incentive compensation that will be tied directly to sales overall from that standpoint.

Then the other thing that we do expect to see in fourth quarter is some continued investments on some of our strategic initiatives that we're working toward to prepare us ahead of next year. We will still expect to see expense growth in the fourth quarter.

When you look at the full year adjusted, backing out the incremental cost, CEO transition cost in the second quarter, we would expect that expense growth for the full year will come in less than sales growth.

Got it. That's very helpful.

Thank you so much.

Yes, good morning, everyone. I wanted to ask you, I guess you talked about Pinch being up 3%, I just wanted to ask you if you're seeing any indications of shift by pool owners from do-it-for-me to DIY?

No, I wouldn't say anything's material yet. We kind of dug into that a little bit once we saw the numbers.

I think that's more the Pinch performance, just like we've seen with the independent retailers as well, is really more of an outcome of just providing a good customer experience and I think it's not any more complicated than that. Because our service business has remained very strong as well.

If we would have seen a degradation maybe on the maintenance and service side and then maybe a significant increase on that side, maybe can correlate the two. We're just not seeing that shift right now.

Good to hear. The second question, just with respect to the high-impact actions and investments that you outlined them, that slide nine was very helpful, thanks for that.

Can you just talk about the progress you may be making or intend to make at least on leveraging the technology investments of the past few years? I realize this focus is just getting underway here, it's still fairly new, but how impactful do you think that could be to '27 margins and how do you build that leverage?

The technology path that we're on right now is really kind of evaluating where we're at, and we've been doing that for the past couple of months. We're not just starting that by any means.

It's really looking at our internal technology and our customer-facing technology: where we need to play, where we don't need to play. I've talked about this before in sort of conferences where we've brought in some third parties really help evaluate kind of where we're at and where we need to go, and we're getting the outputs of those now and we're putting the plans together.

Look, I'll talk more about that as we kind of build the elements, as a previous question asked, we build the elements into what our strategic actions are going to get us. Certainly it is a big piece of what we're focused on right now and how we prioritize, how we invest, how we expect the returns of those.

Look, we've got some third-party integrations we're working through right now that we've announced. We're super excited about those.

We think they drive not just efficiencies, but they drive top line, they drive Pool360 adoption in some areas as well. It's not something we're just sitting and waiting on, but more to come.

Thanks, John. Good luck.

Thanks, appreciate it.

Thank you for taking my questions. I just want to dive into the SG&A a little bit further and those higher employee insurance and outside fees.

I guess any colors to how much of a headwind or how much of an impact those incremental costs had in the third quarter, and how we should think about those going forward, and how long they should linger? Then if you could just give any more color sort of the outside fees related to strategic initiatives.

Is it more on the sales initiatives and pricing initiatives, or are you looking at acquisitions or divestitures? Just any color you could put around that would be helpful.

I would say that our focus in the quarter has been on really all of the priorities. We have work streams that are occurring in each of those areas that we're making really strong progress toward to set us up for next season.

Understood. I guess just on overall margin and how you guys are thinking about this going forward, if the backdrop continues to play out as it is into 2027, are your self-help levers large enough to drive margin expansion, that either gross margin or EBIT margin, or do you really need a sales growth to accelerate to start seeing margin expansion?

Any color would be helpful.

Look, as I said earlier and as you've heard from others not just in this industry, but in the consumer discretionary space no matter what it is, I don't think anybody's looking at 2027 right now and saying it's going to be materially different than 2026. I think we're all focused internally on what we need to do.

We think we've got a lot of self-help initiatives that'll put us in a good spot next year. We think we're seeing some of the green shoots of that right now.

Obviously it's one quarter. We're not taking a victory lap; we still have a lot of work to do.

Things can change between now and the first of the year. Short answer is, we're expecting it to be kill everything you can and that's all you're going to get.

The market's not going to give you anything for free next year, and we're positioning the company to go take what we can get.

Great. Appreciate the color.

Thank you.

Awesome. Thanks so much.

Was hoping if we could just quickly unpack the 2% sales growth in October. It sounds like pricing moderated, but does it also imply that volumes perhaps inflected negative?

Just want to maybe understand that 2% a little bit more.

From a pricing standpoint, we would expect the comparison to be more difficult in the fourth quarter because we did have better pricing in the fourth quarter of last year, no negative trends on the volume side.

That's helpful. Then maybe a bigger picture question.

Just thinking to next year, perhaps Analyst Day, perhaps the fourth quarter earnings call, are we going to get any updates on your algorithm? I just want to make sure I understand kind of what we could potentially look out for there.

I know you're going to get some more quantification on that slide nine, which is very helpful, but would that also include perhaps some tweaks to the algo? Thanks.

We've talked about this a good bit about what the long-term algorithm is and what the market gives us now and what the market should normalize in, we would hope to normalize in in the future. Short answer there is yes, we'll have a deeper discussion in that.

I've been very clear and on the record, if we could get back to a normalized environment, 80,000 roughly 80,000, new pools and some other things, I think the long-term algorithm as it's been in the past is fine. It's really what we're all challenged with, I would say, is trying to figure out when that's going to happen.

Super helpful. I'll pass it on.

Hi guys. Thank you for taking my questions.

Just a couple follow-ups on the pricing to start. Can you quantify how much the benefit was from the building materials price increase?

Then have you been able to pass along any of the surcharges you're seeing on the remainder of products, or should we think that creates easier comps as those flow through next year?

Related to the building materials, a couple of fine points, I did call out that it's about 11% of sales for the quarter, it's just a portion of the sales. Then that price increase also did start kind of mid-quarter, we did get some incremental benefit.

We did report a slightly higher pricing benefit for the quarter than what we had talked about and included in our forecast discussion last quarter, so that helps to quantify the kind of the scoping on the building materials overall. Then as it relates to the pricing on the rest of it, again, we would look toward those pricing actions in early season for 2027.

Then we did talk about earlier in second quarter that we did put a freight surcharge in for the products that we deliver, which, again, is just relates to a portion of our business overall.

Great. Then the other one I had was on the higher incentive comp.

Is this a permanent shift to have the sales team focus more on top-line growth, or are these kind of one-time specialized incentives for that team?

Some of it was one-time specialized for the team. Obviously, as we go into next year, something else we've talked about a good bit is making sure the incentive plans are aligned correctly and really kind of pay for themselves as we grow.

I wouldn't look at it as any sort of structural change or any sort of long-term negative impact. Thank you.

Great, thanks. I was wondering if you can go into a little more detail as to what drove the recovery in sales across your main geographies in 3Q certainly compared to the second quarter, and also how did some of the more seasonal markets perform?

I think overall we were pleased with all markets, all things considered. To get in a little bit more detail there, we had some structural changes in the beginning of the year that put us in a position to be a little more customer-focused, a little more emphasis on the customer.

Obviously we've been out, talking to our employees, talking to customers, removing friction points, that's really going a long way. Also, a little bit of connectivity throughout the organization, right?

We've got a lot of scale that we can utilize as we talk about to win locally, and I think we're seeing some benefits of that. We just had our International Sales Conference I discussed in my opening remarks.

Part of that was we got to celebrate some really nice wins where we talked about how we understood the specific needs of the individual customer and kind of rallied the troops around how we offered a differentiated, I would say, program, process to help them grow their business. That varies.

There's just no one answer to all that. The key is being able to operate and execute locally on whatever your market requires.

A piece of that's product mix, a piece of that's service-related. I think we're very good in some of those areas.

I think there were some things we just needed to adjust as we go, and we certainly have. Just don't underestimate the impact of getting back to basics, and it all starts with listening: listening to the customers, listening to the employees.

I wanted to call this out, too. We worked very closely with our strategic suppliers throughout this quarter on programs, and these programs are usually in place year-over-year, but I felt like we did a little bit better job this year really trying to executing on the programs as they came in the various parts of the season, particularly in Q3.

I think that really drove a top-line benefit for us, so as we move forward, it needs to be more of the same. Last thing I'll touch on is national accounts.

Obviously we've brought in a new leader there, we've got some new talent within that organization. We've seen some really good benefit there, some really good growth.

Again, it starts with listening. I think the difference there is you're talking about kind of bigger organizations, we really work to connect our organization with their organization, and that's all the departments.

I will tell you just a few conversations we've had with some of these large customers, many more to come, have uncovered some pain points and some opportunities, and we're executing on those. Very early innings.

Look, really happy about the quarter, very positive. We got a long way to go here, but excited to see kind of the foundation get put in place.

Understood. Thanks.

Wanted to follow up on just sales center capacity. You consolidated four locations, but added two this year, you're down net two.

Hoping you could speak to just how you're thinking balancing maintaining density versus additional consolidation as you head into '27.

For us it's pretty simple: you go where the market goes. Sometimes the market moves, and sometimes we have opportunities to be more efficient in some areas, we've got a big network, and we can utilize that network in a lot of different ways.

If a market's moving in a certain area and we understand the needs of the customer there, and proximity is key here: proximity, product, amount of drive times you have with service and things like that, then we'll grow accordingly there. That's really where our focus remains.

Because our network is really big, too, especially in these larger markets, we can do some things differently than some of our competition. We can stage some products in some areas that can be shipped, and then of course we can be more service-focused in others.

That's really kind of the basis of the way we look at it. As we look to the future, we'll also be open to different ways of serving our customers, right?

It doesn't always have to be a 30,000 or 40,000 square foot building. I think, again, the key here is that we have the agility and the flexibility to do what we need to do.

In some cases, the market moves away from a particular area or we see benefit for consolidation and efficiencies, there's no reason not to take advantage of that as well.

Thank you.

Good morning, John, Melanie. John, maybe just a clarification around the special incentive payments.

It sort of sounds like that might have been more retention-focused, maybe curious of your thoughts there. Then more importantly, as we think about sort of reinstilling a sales excellence culture back into the team, any thoughts on how much increased flexibility they're sort of needed at the local level to make sure you're driving on your growth initiatives within those small and medium customers?

What's the higher level sort of need here as we think about 2027 to get the business sort of performing at a higher level, noting obviously the third quarter performance was solid?

On the first one, no, it wasn't retention-based. It was more about those that are in the field executing day in and day out, working 10, 12 hours a day.

We wanted to incentivize their hard work, and they definitely came through and we appreciate that, and we appreciate the efforts of all of our employees. It wasn't retention-based at all.

Now, as we move forward to more about the sales excellence, the medium and small customers, what we do in a local market, there's a balance, and I've said this from my time in my previous role as well, distribution works best when it's balanced, when you're utilizing your scale to win locally, and I know that's not just a tagline. It's really listening to those individual service center managers, regional managers, and the GMs about what they need locally to win, and that's a different conversation by the branch.

Obviously it starts with having the right product mix, the right depth, all that, we're pretty good at that. The technology even that we utilize branch to branch can change a little bit depending on what the customer segmentation is, right?

Is it more service? Is it more builder?

Whatever it is. Therefore the service, I'd say, component of that changes as well.

It's never just a one-size-fits-all, and I'm not sitting here saying we were using a one-size-fits-all. I just, when I came into the organization very early on, I felt like we could be a little more flexible in the field to empower our people to go win.

We could listen to the customer and figure out kind of what those friction points are and address accordingly. Because as I said earlier, there's no one-size-fits-all approach to this.

You listen to your people that are closest to the customer, you certainly listen to the customer, you certainly partner up with your strategic suppliers, and out of that comes some pretty good ideas because we've got some pretty smart people in all those areas, and then you execute on it. It's, again, distribution 101, and that's why we really harp on getting back to basics.

Then

maybe a follow-up on that, with the new VP of national commercial accounts, how should we sort of think about the evolution of the potential initiatives, right, you have that individual leaning into? Should we expect field, whether it's reduced span of control, right, additional field sort of support, where is your mindset on sort of what the needs are for the national account business as it pertains to sort of expense-oriented pressures, or investments?

I wouldn't view national accounts as just expense-oriented pressures. It just operates a different way.

Now, good news is, in my previous company we were very big at this, but make no doubt about it, it happens at the local level. What this individual has is, one, a lot of experience working with national accounts.

As I touched on in an earlier question, it's really about the connectivity throughout the organization: you're connecting with their supply chain, you're connecting with their IT, you're connecting with their marketing, you're figuring out how you integrate better. Also a big piece of this is consistency across the organization.

These are multi-site, multi-state organizations. They want to operate, sometimes they want to consolidate around a particular product or product group.

Hey, sometimes they want to get into new product groups; how can we help them with that? You need a central point of contact to have that consistency and to help the field execute, not execute on behalf of the field.

I think that's the biggest piece here. This is to support the field efforts in a consolidated manner.

Many of these customers, like I said, they're looking at their spend, they want certain chemical programs, they want certain equipment programs, they want certain deliveries, they want certain connectivity. You just can't do that trying to get seven or eight or nine leaders or maybe 10 or 15 in a room and figure it out.

That's really where this national accounts team does an excellent job.

Thank you.

Thanks.

Hey, morning everyone. This is David Tarantino on for Jeff.

John, I know you highlighted selective M&A when it comes to capital allocation, but would you consider leaning more into buybacks, particularly with the stronger free cash flow beginning to show through here and the recent pullback in the stock?

I would say we have. I know this is more Melanie's realm, I'm going to ask her to tie in here in a minute.

Look, there's some opportunities out there on M&A. We've got a much more healthy pipeline now than we did just a few months ago, I'm excited about our prospects.

Obviously nothing to announce today. As we talked about in our capital allocation strategy, not much has changed.

Buybacks are a part of that, and there is certainly plenty of authorization left to buy back shares at the lower valuation that we've seen. Melanie, anything you want to add?

You'll see that we did do a nice step-up in our buybacks during the quarter. A lot of that has to do with the cycle of the way that our cash flow comes in.

Typically in the beginning of the year, we are using cash because we're investing in inventory. In first quarter, we are paying our early buys in second quarter, and so third and fourth quarter is when we generate the bulk of the cash flow for the year.

Our share buyback process really just kind of follows that excess cash flow timing.

Great. Then just a quick follow-up.

Just on chemicals, could you kind of level set us on what you're seeing there from a pricing perspective? It seems like it's leveling out, but just with the bankruptcy of one of your competitors there, just any color there would be helpful.

I would just say overall in the chemical space, this has been a really good bright spot for us. There has been some price deflation year-to-date.

I would say it's moderating a little bit, our growth there has been volume, and a lot of volume. We put some investments in that as well going in the last year that I think have paid off as we've worked through 2026, and should continue in '27 and '28.

Look, overall we're very bullish. Chemicals is what gets a lot of people in the door, I'm really excited about where we're at and what we're seeing in that product group now and in the future.

I wouldn't say any sort of bankruptcy has impacted that one way or the other. That's a little too early to tell.

Thanks. As I close, I want to share what drives my confidence about where Poolcorp is headed.

We operate in an industry with a durable foundation and customers who rely on us season after season. On top of that foundation, we have something no one else in our industry can easily replicate: a network of local sales centers backed by the scale of the largest distributor in the industry.

When we put more of that scale behind our people closest to the customer, we win in local markets. This is the heart of our strategy.

We're building stronger sales capabilities, sharper pricing and supply chain discipline, and a more connected network. We're investing in the tools to ensure we're the easiest distributor in the industry to do business with, and we're doing it from a position of financial strength, with the flexibility to invest in our business, pursue strategic M&A that expands our network, and return capital to shareholders.

We look forward to sharing more about these opportunities at our Investor Day in the first half of next year, and when we report full year and fourth quarter results on February 18th, 2027. Thank you for your time today and your interest in Poolcorp.