Peter Arvan: Sure. We saw the – obviously, we saw the announcement last month on our – I guess but earlier this month on the Home Depot attending to acquire SRS. I don’t know that much really changes. They have – they’ve made a point both SRS and Home Depot have made a point to say that they’re going to run the business separate. And when I think about the impact on our business I think there’s going to be a change. So there’s going to be some folks perhaps that are in that business that are affected by the sale that may cause may cause them to consider what they’re doing. But as far as the impact on us if I’m pragmatic about it and I step back I say well there’s no new competition. It’s not like that this brings a lot more distributors into the market because there at this point we don’t see the channel to market changing.
We’ll see a long-term player owning it versus private equity which tends to be shorter-term focused which I think is a positive thing. So overall, we’re basically going to take Home Depot and SRS at their comments at face value and say, I don’t think really much is going to change. So time will tell the deal has to be reviewed, the deal has to close. But when we saw the announcement I guess it didn’t cause us to say wow we need to do this or we need to do that because I don’t think it really changes the competitive landscape much at all. And as I said the comment on labor, one of our four operating principles has always been to be the employer of choice. So we focus very hard on making sure that we’re the best place to work and that people that join us, stay with us and want to grow their career with us.
And we don’t see that changing. And we think we’re pretty good at it. We do a great job of retaining talent in the field. We are focused on the swim pool industry. That’s what we do. We’re not going anywhere. And I think people that want a career in this industry look at POOLCORP exceptionally favorable in that fashion. The second part of your question that I mentioned consolidation amongst the builders. Again, nothing new in a cycle like this, you would expect the kind of the late to the party folks that decided hey, I’ll get in the building because there’s so much demand that when the demand wanes, that things become very tough for them. And we’re — I think we’re seeing that play out. So the bigger stronger players, when the markets get tough, tend to outperform newer and perhaps, weaker players.
So, as the demand for new pool construction and remodel has come off of its highs, people have decided that they’re maybe going to go focus just on service or just on cleaning or exit the business altogether. So whatever demand they would have had, by definition is going to end up with one of the remaining players in the market. So I don’t think it really changes the industry output, because I think that there’s still plenty of capacity in the industry to address the need. So I don’t — I can’t look at it and say, well that means less pools you put in the ground. It means some of the larger customers are going to see a benefit from perhaps, a little bit less competition.
Scott Schneeberger: Great. Thanks. I appreciate that. And Melanie, just one quick one on SG&A. Just curious, how much of you’ve been targeting $20 million tech initiative this year, $15 million on performance-based comp, $12 million new greenfield locations. Is that going to be ratably through the year? Did you do what you expected to do in the first quarter? Any cadence mix shift to that versus what you’ve been saying just a quarter ago. Thanks.
Melanie Hart: Yes. So, our original guidance on that is that the performance-based compensation would be recorded basically pro rata over the year, based on our actual operating results. So that’s really the only one. We did record a slightly less performance-based compensation than we would have if we had better results in the first quarter. So that’s really the only one that changed. As far as the costs related to the new sales centers and the opening sales centers, with — the three that we’ve opened so far to date and the five that we’re intending to get open before the season. Cumulatively, we will have about eight open pre-season with a target of 10 for the year. So we are seeing a significant amount of those costs in first and early second quarter.
And then as it relates to the tech initiative, we have started to ramp that. So we’re pretty much right on target with what we’ve spent so far, in the year. That — we’ll have some spend in the first quarter and then it will ramp up slightly through the rest of the year, as we continue to onboard some of those resources that we need for those projects.
Scott Schneeberger: Great. Thanks very much.
Operator: The next question comes from Garik Shmois with Loop Capital. Please go ahead.
Q – Garik Shmois: Hi. Thanks. So just a clarification question. The 1% to 2% benefit from normalized weather that I think you had in your prior guide. Now you’re saying, you might not see that. I just wanted to be clear, if that’s what you’re seeing?
Melanie Hart: Yes, that is what we’re saying. So our original guide was for flat to kind of low single-digit sales growth. Embedded in that low single-digit sales growth, did include some of that weather recovery. And so at this point, we’ll really kind of look to see really, how quickly the season ramps and then more importantly, does the late start to the season cause it to extend over into late into the third and fourth quarter. And so if we see any of that recovery, it would be later in the year at this point.
Q – Garik Shmois: Got it. And then just on some of the share gains and the initiatives there, and some of the opportunities that you had in the first quarter. Any way to size, what that opportunity could be in just the stickiness of those share gains?
Peter Arvan: What I would tell you is, it really it kind of goes by market. So you’ve seen that we have — we’ve leaned very heavily into the aftermarket and the maintenance business. And I think our POOL360 ecosystem is kind of leading the way there for us and the software that makes the service providers more efficient. And I think our expanded footprint makes us more convenient. So, we always look at from a long-term growth perspective share gain, as part of our model. And we never really give it back. Now, when I say, that the thing you have to remember is, that in any given market I’m certain, I mean, we’re practical in that, I’m certain in any given market. We may lose a customer here and there. But by and large, share gain has been part of our long-term growth model.
And it will remain as part of our long-term growth model. So, if we look at it, it’s about 1%. In some markets could be more. In some markets, it could be a little bit less. But we find that when people move over to us, that generally they stay with us. And we’ve kind of triangulated on that with the supplier information and how the suppliers are doing and we know for those same products, how we’re doing and it is apparent — very apparent to us, that the share gains that we got all through the pandemic, for the most part, we’ve maintained and we continue to gain share through today. So in any given market, might we give back a customer here and there, we might but we try like hell to get that customer back. But by and large, we think it’s part of our long-term growth algorithm and it’s in the 1% range.
Garik Shmois: Great. Thank you for that.
Operator: The next question comes from David MacGregor with Longbow Research. Please go ahead.
David MacGregor: Yes, good morning. Thanks for taking my question. I guess, I just wanted to look at the balance sheet for a moment. You’re at 1.4 times debt-to-EBITDA. I think earlier to a question on consolidation amongst dealers, you offered some color. I guess, I’m thinking about consolidation to be, ultimately unfold amongst some of your competitors and some of the distributors. And I’m just wondering, how far you’d be prepared to take the balance sheet in terms of leverage, if something on a larger scale were to come along?
Peter Arvan: Yeah. I mean, I would tell you, we’re always very mindful of the balance sheet and making sure that we are responsible allocators of capital. We look at — when we look at acquisitions, we look for a strategic fit and we also look for a cultural fit. And then we also look for an economic equation that makes sense. So the good news about POOLCORP is we have a tremendously strong balance sheet. And we also have a very strong leadership team, both of which are required, not only to execute an acquisition but to execute and integrate an acquisition and realize the savings. But with that, very talented management team and a very strong balance sheet, it also gives us the ability to look at deals and say, if they make sense financially, then we would do them.
But if not, we also have the ability and frankly, a superior value proposition in almost all cases to say, if we need additional capacity that we can do it from a greenfield perspective. So, we are — have always been very disciplined allocators of capital. We’ll pay a fair price when we buy businesses. We bought a lot of businesses over the years. We continue to do acquisitions. But I wouldn’t look for us to say, well, we’re going to go out and do acquisitions at any cost, because, frankly, we don’t have to and that would probably be dilutive to the company if we went on and made lousy deals. So we look at deals if we can — if it’s a good strategic fit for us, if we believe that there is a good cultural fit, then we certainly have more than enough dry powder to go out and execute really any deal that would potentially exist in our industry.
Melanie Hart: And I’m just going to add to that. So the 1.5 to 2 times is really our conservative philosophy, but we have up to 3.25 times, under our debt arrangements. So we consider that we have substantial capacity.
David MacGregor: Got it. Thanks for the color — late in the call you were there. Thanks, Pete. Thanks, Melanie.
Peter Arvan: Thanks.
Operator: Next question comes from Steve Volkmann with Jefferies. Please go ahead.
Steve Volkmann: Great. Good morning, folks. Thanks for fitting me in. Most of my questions have been answered. But Pete, I’m curious, are you hearing anything or drawing any conclusions around kind of the average cost of a pool build project or a pool remodel contract project. Do you think that’s changed much?
Peter Arvan: We don’t. It’s interesting, Steve. It’s actually a very good question, because we’ve seen the price of the pool escalate to all-time highs. And then, at a certain point that matriculates through to the size of market because at a certain point, just because of the monthly payment for those pools that are financed and the elevated rates, it can close out some customers. And what we’ve seen is that some of our builders have just steady as they go, because they’ve got a good book of business and they build the high-end pools and they’re very happy to continue to do that. We have other builders that are trying to figure out how they can lower their ASP by — to make sure that they can perhaps bring more people into the market.
