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DATE

Thursday, April 23, 2026 at 11 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Peter D. Arvan
  • Senior Vice President and Chief Financial Officer — Melanie M. Hart

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TAKEAWAYS

  • Sales Growth -- Net sales increased 6%, with contributions of approximately 3% from pricing, 2% from volume in maintenance and discretionary categories, and 1% from early buys and foreign currency translation.
  • Operating Income -- Operating income rose 7% to $83 million, with a 10 basis point operating margin expansion.
  • Gross Margin -- Gross margin was 29%, down 20 basis points year over year, primarily due to product mix and higher equipment sales volume with lower relative margins.
  • Diluted EPS -- Diluted earnings per share reached $1.45, up $0.03, including a $0.02 ASU benefit; excluding ASU effects, diluted EPS increased $0.11, or 8%.
  • Geographic Performance -- California sales grew 10%, Texas increased 7%, Arizona was up 1%, and Florida decreased 1%, reflecting regional weather impacts and irrigation demand.
  • Product Categories -- Chemicals sales grew 8%, building materials increased 5%, equipment rose 7%, and commercial sales were flat due to project timing.
  • Aftermarket Channels -- Independent retail customer sales grew 3%, and Pinch A Penny franchisee sales increased 4%, with seven new franchise locations opened.
  • Digital Penetration -- Pool360 platform contributed 13% of net sales, up from 12.5% a year prior.
  • Horizon Segment -- Horizon net sales decreased 2% in line with ongoing discretionary softness.
  • Sales Center Footprint -- Total sales centers increased to 455 after consolidating one and adding greenfield openings, with five new centers expected for the full year.
  • Inventory Position -- Inventory ended at $1.7 billion, 14% higher year over year, reflecting new locations, product introductions, and cost inflation.
  • Debt and Leverage -- Total debt was approximately $1.2 billion with a leverage ratio of 1.7x within the company’s stated range.
  • Share Repurchases -- Approximately $64 million in shares were repurchased in the quarter; $271 million remains under authorization.
  • Capital Expenditures -- Net cash from operations was $25.7 million, down slightly from $27.2 million, attributed to higher inventory investments.
  • Full-Year Guidance -- Diluted EPS guidance reaffirmed at $10.87 to $11.17, with low single-digit sales growth expected and a full-year tax rate near 25%.

SUMMARY

Pool Corporation (POOL 1.64%) reported revenue and operating income growth driven by a balanced mix of pricing and volume, supported by regional strength in California and Texas. Margins came under modest pressure due to strong equipment sales diluting the overall mix, but strategic growth in proprietary chemical lines and expanded digital platform penetration provided margin resilience. Stable maintenance demand and uptake within the installed base remain the growth foundation, with management emphasizing execution on technology and network leverage over further rapid expansion. The company maintained guidance, reflecting confidence in cost control, inventory positioning, and market discipline as the core season begins.

  • Management stated, "Execution was steady across our geographic footprint with strong maintenance volumes and improving trends in several discretionary categories," pointing to stabilization with pockets of demand growth.
  • Melanie M. Hart noted, "Equipment sales grew 7% in the quarter, and given the lower relative margins of this category, the strong volume performance diluted consolidated gross margin," highlighting mix-related margin movement and strategic implications.
  • Peter D. Arvan said, "Our growth thesis does not require a recovery in new pool units. It is anchored in maintenance, remodel, and share capture across product categories for the existing installed base."
  • Early buy programs and inventory investments are positioned to support seasonal peaks, while continued share repurchases underline capital allocation focus without changes to full-year targets.

INDUSTRY GLOSSARY

  • Greenfield: Newly built or opened sales locations that expand the company's geographic coverage and operational footprint.
  • Pinch A Penny: Franchise retail network specializing in swimming pool supplies and maintenance services, supplied by Pool Corporation.
  • Pool360: Pool Corporation’s digital sales and customer engagement platform for both professional and do-it-yourself markets.
  • Horizon: Pool Corporation's division focused on irrigation, landscape, and related outdoor living products, distinct from core pool supply operations.
  • ASU Benefit: Accounting Standards Update benefit, referring to favorable tax adjustments recognized in earnings per share calculations as a result of U.S. GAAP rule changes.

Full Conference Call Transcript

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

A solid start like this reinforces rather than changes our full-year view. We are confirming our full-year diluted earnings per share range of $10.87 to $11.17, which includes the $0.02 of ASU benefit realized in the first quarter. Reviewing sales by geography, California grew 10% and Texas 7%, supported by constructive weather and strong maintenance demand. Arizona grew 1%, and Florida declined 1%, reflecting steady maintenance activities offset by weather and some softness on the irrigation side in Florida. Across the markets, our teams adapt quickly to local conditions, and our differentiated product portfolio, proprietary brands, technology platforms, and supplier partnerships built and refined over many years continue to widen the structural advantages that define our position in this industry.

These are not advantages that can simply be replicated by adding locations. In our other key businesses, Horizon net sales declined 2%, consistent with the broader discretionary environment we have seen persist. In Europe, sales grew 5% in local currency, building on the improved trends with which we exited 2025. By product category, we saw broad-based growth. Chemicals grew 8% on strong volume with standout contributions from our proprietary and private label lines, which carry structurally higher margins and are gaining traction across the enterprise. Building materials grew 5%, continuing to build on our national pool trend offering. This, we believe, builds upon our growing share in this category given the backdrop of a muted new construction market.

Equipment grew 7% on price and solid volume, and commercial was flat for the quarter largely due to project timing but exited the quarter with slight growth. Turning to our two strategic aftermarket channels, Independent Retail and the Pinch A Penny franchise network, sales to independent retail customers grew 3%, a solid setup as we prepare for the core season. And Pinch A Penny franchisee sales to their end customers grew 4%, and our franchisees opened seven new independently owned franchise locations in the quarter. On the digital side, Pool360 increased to 13% of net sales in the first quarter, up from 12.5% a year ago.

Our teams continue to make steady progress engaging customers through enhanced offerings and, most recently, Pool360 Unlocked. Between our digital investments and our distribution network, we are well positioned to continue deepening customer engagement across both professional and DIY end markets. Consistent with what we discussed last quarter, we remain disciplined on our sales center expansion or capacity expansion and are focusing on driving more value from our existing footprint. We consolidated one sales center into its existing market in the quarter, bringing our total to 455 sales centers. We still expect to open five new sales centers for the full year. This is a measured, productivity-first posture, the right stance given the current environment.

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

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

We have deliberately invested in that platform so that we perform in the environment we are in today, and so that we are in a fundamentally stronger position whenever the cycle turns. The depth, the reach, and the relationships that we have built are unmatched, and we are getting stronger, not standing still. We look forward to sharing more about our strategic priorities and capital allocation discipline at our Investor Day on May 12, 2026. I want to thank our team, our vendor partners, and our customers for the work and the trust that underpins what we do.

Our people are the reason we start each season ready to win, and their efforts in Q1 set us up for the season ahead. I will now turn the call over to Melanie M. Hart, our Senior Vice President and Chief Financial Officer, for her commentary.

Operator: Melanie?

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

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

Permit data remains lower than prior-year levels through the end of the first quarter. Finally, the benefits we saw from early buys and foreign currency translation provided an approximately 1% tailwind to reported sales in the first quarter. We do not anticipate currency to be a material contributor to full-year results as the favorable translation impact is expected to diminish in the seasonally stronger second and third quarters as the sales base increases. Gross margin for the quarter was 29%, a decrease of approximately 20 basis points compared to the prior-year period. Primary drivers of the year-over-year change during the quarter were product mix, inbound freight associated with stocking levels for the season, and increased early buy activity.

Product mix was the most significant driver of the year-over-year variance. Equipment sales grew 7% in the quarter, and given the lower relative margins of this category, the strong volume performance diluted consolidated gross margin. We view this growth as strategically positive. Customer early buy activity also increased in the quarter. As is typical with early buy programs, these sales reflect modest discounts from regular season pricing and therefore carry somewhat lower margins than our in-season business. The increase in early buy volume is consistent with our go-to-market strategy and positions us well for the selling season ahead. Customer mix and chemical margins were also modestly below prior-year levels, though neither represented a material individual driver of the variance.

Partially offsetting these headwinds, we continue to realize benefit from our pricing initiatives and ongoing supply chain actions. First quarter gross margins are in line with our historical seasonal patterns and should not be viewed as sequential from fourth quarter levels. Operating expenses for the first quarter were $247 million, or a 5% increase over the same quarter in the prior year. The increase was driven by the addition of six greenfields opened after March, technology costs, and overall inflationary increases.

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

Excluding the impact of ASU in both periods, diluted EPS increased $0.11, or 8%, for the first quarter, reflecting our ability to generate earnings growth with top-line expansion. Moving to our balance sheet and capital allocation, consistent with our normal seasonal pattern, we executed our vendor early buy program to ensure appropriate inventory coverage heading into the season. Inventory at March end was $1.7 billion, 14% higher than first quarter last year, and an increase of approximately $200 million from year end as product was received and positioned across our network.

Our current inventory includes stocking for new locations and acquisitions added to the network, new product introductions resulting in a broader product range, and cost inflation relative to the same period last year, with some opportunistic purchases made ahead of current season price increases. Inventory investment is concentrated in our fastest-moving product lines, and we would expect a normal seasonal reduction in inventory levels as we move through the peak selling season. We ended the first quarter with total debt of approximately $1.2 billion and a leverage ratio of 1.7 times, which is within our stated range.

As is typical, debt levels will increase through the first half of the year as seasonal inventory builds and early buy payments come due, before declining in the back half of the year as receivables are collected. Net cash provided by operations was $25.7 million for the first quarter, compared to $27.2 million in the prior-year period, with the year-over-year change primarily driven by higher inventory purchases in support of the upcoming selling season. During the quarter, we repurchased approximately $64 million in shares, an increase of $8 million over the prior-year period, with $271 million remaining under our current repurchase authorization.

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

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

With the share repurchases during the quarter, our projected interest expense is now a range of $49 million to $51 million. We would expect second quarter to have the highest interest expense of the year following the payment of early buys. Our estimated full-year tax rate remains approximately 25%, with the second quarter rate to be approximately 25.5%. Our guidance does not include ASU benefits beyond the $0.02 recognized year to date as we continue to expect the full-year impact to be less than prior year. We are expecting approximately 36.6 million weighted average shares outstanding for the rest of the quarters and the full year, updated for our first quarter share repurchase activity.

Guidance remains unchanged with our diluted EPS range of $10.87 to $11.17, including the $0.02 ASU tax benefit recognized in the first quarter. The midpoint reflects a 2% to 3% growth over prior year. Pool Corporation's first quarter results demonstrate the earnings power of our model, even in a market that has not yet seen a full recovery in discretionary activity. Pricing discipline, supply chain execution, and the growing contributions of Pool360 are working as intended, and our network continues to expand in a way that strengthens our competitive position for the long term. We entered the peak season with confidence in our team, our inventory position, and our ability to deliver. We will now open the call for questions.

Operator: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit yourself to the queue.

Operator: The first question comes from Susan Maklari with Goldman Sachs. Please go ahead.

Susan Maklari: Thank you. Good morning, everyone. Good morning, Pete. My first question is on your ability to realize the return on investments that you talked about coming into this year. As the pool season starts to come together, can you talk about your competitive positioning, what you are hearing from the sales centers and your customers in there, and how you are thinking about that overall positioning as we move into the spring and summer? Okay. That is helpful. And then, given the geopolitical environment and the moves that we are hearing in consumer sentiment, what are you hearing from your customers on the ground? Has there been any change in how they are thinking about their backlogs or consumers' willingness?

And what are you seeing on the discretionary side of the business?

Peter D. Arvan: Sure. When we think about getting ready for the season, we think about making sure that we have all of the sales centers ready for the surge of business that happens during the second and third quarter.

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

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

And especially with the newer locations that we opened up in the last couple of years, the newer ones are the ones that we pay the most attention to, to make sure that they are ready to start without missing a beat. I think that we continue to watch the health of the consumer. We watch housing turnover and, frankly, the age of the installed base all matter. It is early in the year to look at permit data and try to draw any conclusion for where we will end up because first quarter is just so small relative to that.

So there is a lot of first quarter that is really selling season, and now the builders are trying to lock down contracts. I can tell you that I have heard everything from “very optimistic and I am sold out” to other areas where they are still trying to pursue contracts to make sure that they can lock up the season. So on balance, I would say relatively unchanged with some green shoots.

Susan Maklari: Okay. Alright. That is encouraging. Thank you. Good luck with the quarter.

Peter D. Arvan: Thanks.

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

David Manthey: Thank you. Good morning. Pete, as you mentioned, I realize the first quarter is seasonally volatile, but we saw a couple of decent-sized changes in some of the supplementary information you provided. So chemicals staged quite a turnaround here. Florida had been growing a little bit; now it is down 1%. And California and Texas are booming. I am just wondering if you can talk about those to the extent there is any signal there versus noise in the first quarter.

Peter D. Arvan: I would be careful about drawing huge conclusions on first quarter, but I will give you a couple of things to think through. In terms of chemicals, first quarter is actually one of the quarters that—when you are trying to sell a program to a dealer, dealers typically do not convert during the season. They convert after the season, and then they would load their inventory into the stores for the upcoming season.

As you know, with our private label chemicals, our Regal and EZ Fluor lines, which we believe are best in class—especially when paired with the technology tools and the water testing apps that we have, water testing strips, everything for the integrated systems—I think we saw good traction from the dealers and specifically on the retail side that has helped our traction on the chemical side. And, frankly, the teams are out hunting that business because I think we have a great value proposition. When I look at California and Texas, California, I think, benefited a little bit from weather. California was pretty hot earlier in the first quarter, which is atypical.

So that weather pattern helped, and I think the same was true for a bit of Texas. But again, it is so small relative to the grand scheme of things that I do not know that I would draw a whole lot of conclusions from that. But I can tell you the team did a very good job of explaining the value proposition and winning share at the dealers in the first quarter, and I think that is just a result of conveying a very strong message of the best value proposition in the industry.

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

Melanie M. Hart: That is the long-term target, but you should remember for 2026 we do also have that incentive comp reload. So where we do expect to get some leverage for the year, some of that natural leverage will be offset by that rebuild on the compensation side. So it will be a little bit lower than our normal long-term algorithm.

David Manthey: And that comp reset was—I think you talked about $15 million. Is that still the case?

Melanie M. Hart: Yes, at the low single-digit growth.

David Manthey: Got it.

Peter D. Arvan: What we are counting on, Dave, though, is the absorption. As the new sales centers that we opened last year and the year before continue to gain traction, then the absorption rate on that cost improves. And when you couple that with slowing of adding new investments to the business—because I think we are adequately invested in most areas right now—I think the results for the back half of the year are encouraging.

David Manthey: Perfect. Thank you.

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

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

Melanie M. Hart: We are not going to provide a detailed quantification of that. But if you think about what we have talked in relative margins, we generally will talk about building materials having the best margin, and then after that would be chemicals, and then after that would be equipment. So with equipment being the higher portion of the first quarter sales, and really outgrowing our expectation, that is where we saw some dilution of the consolidated margins.

Ryan Merkel: Got it. So in my own words, it sounds like the equipment growth surprised you in 1Q versus what you thought.

Melanie M. Hart: It was a very pleasant surprise.

Ryan Merkel: Okay. Got it. That is good to hear. And then second question is, can you just comment on what you are seeing so far in April and how does that compare to March? I am just curious if March had a weather boost and trying to figure out if that is continuing into the second quarter.

Peter D. Arvan: I think we are most of the way through April, and I would characterize April as expected. So for what we have contemplated within our guidance and with the plan, April is going as expected.

Ryan Merkel: Okay. Thanks. Pass it on.

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

David MacGregor: I want to just ask about pricing and inflation and demand elasticity. In the past, where within the mix have you seen this first appear? And do you feel your private label offering is of sufficient breadth to maybe offset by capturing the down-market shift, and would that downshift be margin accretive?

Peter D. Arvan: I would not want anybody to position our private label as a down-price offering. We look at our private label and have been intentional about making sure that it is very high-quality product. So we are not actually selling it saying we are trying to have a cheaper offering. We are trying to have an offering that has tremendous value and is very high quality. When it comes to inflation, where we have seen it—and I have commented on this before—obviously it is most prevalent in discretionary when you get into the cost of a new pool. And then when you get into, on the maintenance side, there are some parts of maintenance that we would call semi-discretionary.

A pump and a filter are nondiscretionary; if those need to be replaced or repaired, they have to be replaced or repaired. But you get into heaters and lights, something like that—if somebody does not want to fix that if there is one that needs to be replaced, you do not actually have to have that to continue to safely operate the pool. In some areas, that is where we have seen some decline in demand, but I would tell you that is already in and baked in. So we are not seeing that change materially from what we have seen over the last couple of years.

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

Peter D. Arvan: Clarify your question. I just want to make sure I answer the right question on your comment on deferred. What do you—

David MacGregor: I am getting a sense that in equipment sales there has been some deferral with the downturn, and now it looks like we are starting to see people spending money on equipment again. I am just trying to get a sense of which deferred spending may have occurred there.

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

And the same thing as it relates to incandescent lights, which were much shorter life than the LEDs that replaced them. As we work through that cycle, you will start to see more replacement for that. So that is all encouraging for us for the future.

David MacGregor: Great. Thanks, Pete.

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

Scott Schneeberger: Thanks very much. I am going to focus a bit on pricing. Melanie, you discussed that we are going to be lapping the tariff pricing that started in April. I am just curious how we should think about that. Did that ramp much in the second quarter? Will we see that in the second quarter or not really until we get to the back half? Just curious how we should think about the cadence and the impact of that since it is a full point in the guidance calculation.

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

Scott Schneeberger: Thanks. And then with this really solid move in the first quarter in chemicals—and I think one of you mentioned that there was some good private label, which is higher margin activity there—could we see upside this year behind the strength there and the possibility for persistence in it, and also the margin element of the private label with the chemical impact? Thanks.

Peter D. Arvan: We are very encouraged by chemicals in the first quarter because that is the nondiscretionary part of the business, and it really goes in two channels. It goes to the pro channel, which is your day-in, day-out foot traffic into the branches, which is very encouraging. That is driven by the value proposition that we have—that is the 40-year relationships, the expertise in the branch, the footprint, the customer experience they get there, the tech platform, and, frankly, the quality of the private label product that we are selling. Then the other side of that is the independent retail taking that product on and putting it on their shelves and that being their go-to brand for the season.

We are encouraged by the results in the first quarter, and we think that as the season progresses, that will be a good tailwind for us.

Scott Schneeberger: Great. Thanks.

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

Garik Shmois: Hi, thank you. Just on the expectation that you have for operating expense growth to moderate, you mentioned improved operating leverage on recent greenfields. I am wondering if there is anything else besides that in the calculation. Are you expecting certain cost actions in addition to better operating leverage?

Melanie M. Hart: We are focused on ensuring that the greenfields we put into place continue to get up to fleet average. So there is a concentrated effort on that, which does drive leverage at those locations. Along with that, we are constantly evaluating from both a seasonal standpoint and a market standpoint, ensuring that we are operating effectively within our capacity creation efforts.