Good day and welcome to the Pool Corporation Fourth Quarter 2023 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Melanie Hart, Vice President and Chief Financial Officer. Please go ahead..

Welcome to our fourth quarter and year end 2023 earnings conference call. Discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2024 and future periods. Actual results may differ materially from those discussed today.

Information regarding the factors and variables that could cause actual results to differ from projected results are discussed in our 10-K. In addition, we may make references to non-GAAP financial measures in our comments.

A description and reconciliation of any of our non-GAAP financial measures included in our press release are posted to our corporate website in the Investor Relations section. President and CEO, Peter Arvan will begin our call today.

Pete?.

Thank you, Melanie, and good morning to everyone on the call. For the full year 2023, we generated over $5.5 billion in revenue, the second largest in company history, and over $2 billion higher than 2019, a year with a similar number of new pools constructed and the last year and before the pandemic.

We generated $747 million in operating income, more than double our operating income in 2019, an operating margin of 13.5%, a 280 basis point expansion above 2019 operating margin.

These results highlight the larger installed base available for us to serve post pandemic and our ability to fulfill our customers maintenance, remodel, and renovation and new construction product needs.

Even in a challenging environment our customer service outshined our competitors through our powerful distribution network, the largest, most integrated in the pool industry, and we continue to make wise investments to promote our future growth.

We were up against tremendous comps throughout most of the year, yet the team at all levels worked extremely hard to deliver very solid results. The year began with us lapping 33% sales growth in the first quarter of 2022 over 2021.

Sales declined 15% in the first quarter of 2023 compared to 2022 amidst unusually poor weather conditions in key year round markets. Delayed pool openings in many of our seasonal markets followed, and higher than normal inventory levels across the industry contributed to an abnormal selling environment during the first half of the year.

Macroeconomic constraints and uncertainties, primarily in the form of elevated and escalating interest rates and recent inflation, resulted in new pool units declining from 98,000 units in 2022 to an estimated 70,000 to 75,000 units in 2023, or 25% to 30% decline.

These evolving external factors made it extremely difficult to forecast underlying demand at the start of the year. As 2023 progressed, clarity around the market improved and we adapted accordingly.

We focused on specific customer needs and opportunities, particularly those related to maintaining the ever growing 5.4 million swimming pools in the installed base. Given our broad reach, unmatched capabilities, it is in situations like this that our team shines.

We continue to invest in expanding our footprint and in technology tools that improve our customers ability to grow their business and be more productive. We continued our focus on customer experience and being the best channel to market for our suppliers. These efforts combined allowed us to continue growing our share and outperforming the industry.

Our disciplined execution enabled us to generate $888 million in operating cash flow in 2023, a company record. This result positively demonstrates our working capital management capabilities, capital capacity, and insightful and opportune investments in inventory. Now I'd like to recap our full year and fourth quarter results.

Total sales for the year came in at $5.5 billion, which was down 10% from the record of 2022 and in line with our third quarter guidance. For the fourth quarter of 2023, total sales came in at $1 billion, compared to $1.1 billion in the fourth quarter of 2022, or down 8%.

Geographically, the sales declines were fairly consistent in three of our major markets and improved sequentially as the year progressed. For the full year and the fourth quarter, we saw sales in California come in at -12% and 8% respectively. In Texas, sales were consistent and down 10% in both periods.

Arizona experienced similar results as we recorded sales down 9% for the full year and down 8% for the quarter. Florida performed a bit better for the full year at down -5% but declined 12% in the fourth quarter of 2023 against very strong comps of 20% to 22% growth in the fourth quarter of 2022.

For the full year and the fourth quarter, our sales declined 9% and 10% in our year round markets and 13% and 7% in our seasonal markets, showing improvement in the season and most of our year round markets as the year progressed. For perspective, in 2022 our seasonal markets were up 8% for the year and up 15% in our year round markets.

I will now provide some color on our key product category sales compared to the full year and fourth quarter of last year. Chemical sales were down 1.5% for the year but up 1% for the fourth quarter.

Considering the significant trichlor deflation that hit during the 2023 pool season and the softer start to the year in the first quarter, driven by excess inventory in the channel and the challenging weather pattern, we considered the full year results of down only 1.5% a clear indication of us further expanding our share in this critical maintenance category.

We believe the significant price volatility exhibited from 2021 to 2023 will be behind us after we pass the first quarter of 2024 and that excess channel inventory has normalized. As it relates to our chemical supply initiatives.

We made great progress on expanding our usage of SunCoast chemical packaging facility that we acquired as part of the Porpoise acquisition. In 2023, our teams more than tripled the amount of chemicals produced and sourced from this strategic and very capable facility compared to 2022.

These actions not only improve our surety of supply, but also improve our profitability. Building material sales declined 9% for the full year and 8% in the fourth quarter.

Considering that new pool construction was down an estimated 25% to 30% and that renovation and remodel was down around 12%, we are quite pleased with how the team performed in this highly profitable product group.

Our proprietary NPT branded products, expanded building material offering and convenient nationwide sales center and design center network remain the go to source for discerning pool owners and our outstanding dealer base. No one has a more complete product offering or more capable team that caters to the best builders and remodelers in the industry.

We look towards the equipment pad. Equipment sales decreased 9% for both the year and for the fourth quarter, demonstrating the resilience of the maintenance related equipment demand and our best in class customer service despite lower new pool construction activity in 2023.

Demand for heaters and cleaners, the most discretionary product within the equipment category, saw continued headwinds as we cycled through the demand that was pulled forward during the pandemic and cautious consumer spending on more discretionary pool item purchases.

We remain confident that the ever increasing install base of the pools and the need to modernize the older equipment pads and the desire to move towards the connected backyard will present many years of incremental growth opportunities going forward.

Turning to end markets our commercial business continued to grow at 9% for the full year and 5% for the fourth quarter. The growth in 2023 is on top of 27% growth for both the full year and the fourth quarter of 2020. We continue to invest in resources to expand our reach in the commercial pool market.

In 2023 this investment included acquiring a commercial products wholesale distribution company, furthering our competitive efforts to serve the commercial pool market's new construction and install base equipment needs and utilize our expansive distribution infrastructure to service commercial pool operators.

We continue gaining wholesale distribution market share in this growing specialty area of the pool industry. Sales to our independent retail customers declined 11% for the full year and 8% in the fourth quarter.

Unfavorable weather resulting in less chemical and maintenance needs and supply normalization affected our sales to independent retailers in the first half of 2023. We have a high concentration of retailers that operate in seasonal markets that were adversely impacted by the late start to the year.

Additionally, this category is heavily impacted by products like cleaners, above-ground pools, and spas, which are all returning to pre pandemic levels. Keep in mind this represents the sell to the retail channel.

Retail sales by our independent Pinch A Penny retail stores, which are highly concentrated in Florida and Texas and represent sell through the retail channel, increased 3% for the full year in 2023 compared to 2022 and declined 4% in the fourth quarter. We are pleased with this result given the dynamic market and the tough comps we had.

For reference, Pinch A Penny grew 17% in both the fourth quarter and the full year of 2022.

Turning to Europe, as we previously reported, following record results, in 2021, Europe sales declined 15% in 2022 under the backdrop of the war affecting Eastern Europe, resulting in rapidly escalating energy costs and an economic slowdown in customer or consumer caution.

In 2023, European sales declined 11% in local currency for the full year and 7% in the fourth quarter. We began to see some signs of inflection towards the end of the swimming pool season and believe our long term growth opportunity in Europe remained strong. Keep in mind, this market makes up about 4% of our total revenue.

For horizon net sales declined 4% for both the full year and the fourth quarter throughout 2023, stronger sales from commercial irrigation projects buffered weaker residential market sales.

We continue to focus on expanding our reach, primarily through the Sunbelt and through greenfield expansion in growing markets, and on leveraging our distribution operating model to support the long term growth opportunities within the irrigation landscape and equipment needs. Now, let me talk a little about gross margins.

Our gross margins finished at 30% for the full year, consistent with our recent guidance and long term expectations. We are proud of this accomplishment, which highlights our capabilities on supply chain optimization, our growing portfolio of private label products and value-added pricing initiatives.

For the fourth quarter of 2023, our gross margins improved 50 basis points to 29.3% compared to the fourth quarter of 2022. Melanie will provide more details on gross margins in her prepared remarks. Operating expenses reflected a 0.6% increase in 2023 in line with our previous guidance.

Despite the cyclical sales trends, we continued investing in our talent and on our employer of choice initiatives to make sure that we retained the best team in the industry and continued to separate ourselves from the competition.

Additionally, we continued opening new locations, conducting customer facing events and training, and expanded capacity at our chemical packaging facility. In 2023, we opened 14 new locations and added five locations through acquisition, bringing our total count to almost 440 sales centers. We also expanded our Pinch A Penny distribution capabilities.

Our Pinch A Penny franchise network added 15 new stores, over two times the number of stores added to the franchise network last year, which is the most stores that the franchise has ever added in a year. Taking advantage of our synergies, we now serve the Pinch A Penny Texas stores through our localized distribution network.

Our wide footprint and integrated distribution network opened the door for us to expand quickly throughout the Sunbelt. While we continue to invest in growth driven initiatives, we applied intense focus to controllable and variable expenses without compromising customer experience or service.

Orders processed through our B2B POOL360 platform continued to grow in total lines, increasing 3% in 2023, growing from 11% of total lines in 2022% to 14% of total lines in 2023 or a nearly 30% increase in total lines.

We also increased total revenue dollars through the tool by 1% in 2023, showing sales through our digital tool growing faster - growing at a rate faster than our overall net sales. These results demonstrate significant progress, particularly in this year's environment and the customers' benefit it provides.

We have put significant time and effort into improving this critical user feature like products search, product information, and the overall user experience. With a renewed innovative approach to our customer facing solutions, we marched towards transforming POOL360 from a B2B tool to a complete customer facing digital ecosystem.

Last year, we revamped the POOL360 ordering platform in 2023 building on our next generation POOL360 application, we launched our POOL360 water solution software and just last week launched our POOL360 service platform. These are all incredible tools for our customers that will continue to gain traction for years to come.

POOL360 Water provides best in class instore and mobile water analysis and offers solutions that help us grow our private label chemical products and improve brand awareness.

Water testing from a variety of methods from liquid titration to digital are all fed into the tool, delivering a proprietary diagnosis and chemical dosage recommendation that will ensure a safe and healthy swimming pool.

POOL360 Water allows all of our dealers to offer consistent, accurate advice to pool owners and operators while creating demand for our tremendous chemical offering. This tool also has embedded in it a CRM that will help the stores provide an unparalleled customer experience.

POOL360 Service designed for our service customers large and small, includes a CRM and applications to better manage their business through facilitating daily routes, quoting and securing one-time service requests, automating, invoicing and collections, enhancing electronic ordering and integrating procurement with their already established POOL360 account.

Over the next few years, we plan to add more phases to this digital ecosystem to further add productivity and help our customers grow their business more quickly. For all three platforms, customers can leverage our proprietary best in class digital marketing resources that will help them drive profitable growth for their business.

Recognize we are in the early stages of customer adoption, but we see tremendous opportunity to help our retail and service customers expand their offering, provide unique professional services, and connect directly and easily to our products. Moving on, let me comment on our operating income performance.

We recorded $747 million in operating income in 2023, down from a record $1 billion in 2022, but up $405 million from 2019. For the quarter, we recorded $79 million in operating income, a 26% decline from 2022 but over three times the operating income of the fourth quarter of 2019.

Operating margins for the full year of 2023 was 13.5% compared to a record 16.6% in 2022 and expanded 280 basis points from 2019, demonstrating our ability to leverage fixed costs and effectively manage variable expenses, generating enhanced operating margins while making growth oriented investments in our business.

With 2023 behind us, let me comment on the future. I remain excited and very confident in the long term growth potential for our industry and specifically POOLCORP. The growing and aging installed base drives 85% of our revenue through continual maintenance and periodic renovation and upgrading needs.

We will continue to do what we do best in serving the non-discretionary maintenance needs which made up over 60% of our business in 2023. We expect slight growth from our maintenance product components in 2024 assuming normal weather conditions.

Further, no one is better positioned to serve the pool professional considering our scale, industry leading talent, and digital platform and tools.

For the DIY market we have added considerable capabilities to enhance our independent retail products and service offering and will continue to expand Pinch A Penny network to grow share in this important aftermarket and maintenance and repair category.

We expect inflationary increases to benefit our consolidated business again in 2024 with an estimated 2% to 3% added to our overall top line. We believe chemical pricing to have largely stabilized. Equipment pricing remains solid as expected and that we will see some fluctuations on commodities that make up a very small portion of our sales.

New pool construction represented just under 15% of our business in 2023. Currently, we expect that new pool construction in units could be flattened down 10%. Although likely to reflect higher pool values, the number could vary broadly by market and geography.

While the full impact of the interest rate hikes over the past couple of years and timing of future interest rate cuts remain uncertain, the long term outlook for outdoor living products growth remains strong. As higher borrowing rates and recent inflation have increased the cost of building a swimming pool to approximately $80,000.

We expect budget conscious consumers will likely stay on the sidelines and more affluent consumers seeking pools with enhanced features and products content will drive the mix of new pools towards the higher end again in 2024.

Millennials are outpacing other generations seeking homes, and with the slowdown of existing home sales, new construction is making up for the housing shortage, creating new available backyards for swimming pools in the future, but at a slower rate than we have seen for the last several years.

We carefully watch this trend and consider it as part of our expansion strategy to ensure that we are located to effectively serve where the new pools will be.

Automation and connected products remain a high priority for all and particularly for this generation, driving how we work with our vendor partners to provide the most efficient channel to market for introducing new technology enabled products.

Renovation and remodel activity should be stable in most markets, with about 10% of the installed base contemplating a renovation on an annual basis. Surfaces wear out or in need of a more modern look. Equipment gets outdated and becomes uneconomical to operate, maintain, or repair.

As we have discussed, we consider this market to be semi-discretionary, so larger R and R sales could potentially be flat to down 10% if higher interest rates persist, but this too will cycle with the economy and borrowing costs.

We consider this not an if market but a when market as all pools will need renovation periodically during their normal lifecycle. Considering these sales variables, we are estimating an EPS range for 2024 to be $13.10 to $14.10 on a per share basis, including an estimated $0.10 benefit from ASU.

Melanie will provide additional comments on gross margin and expenses in her comments that will help you understand our view. We expect that cash flow from operating activities will be in line with net income and our capital allocation priorities remain unchanged. We will use our robust cash flow to invest in our operations, growth, and expansion.

We will fund strategic acquisitions and with the approval of our board, continue to pay dividends and consider share repurchases while maintaining a prudent debt structure, ultimately providing exceptional returns to our shareholders. Our competitive position has never been stronger.

We remain approximately five times larger than our nearest competitor and have a history of being relentlessly focused on execution. This execution focus is further enhanced by a new spirit of innovation that will allow us to provide unmatched customer value and support which will enable us to continue gaining share.

No doubt the rate of new pool construction has slowed. Consumers are more cautious today than in the last few years, but there is a desirability of pool ownership and outdoor living is strong and will get even stronger.

It is imperative that we continue investing, that we continue our focus on the customer and on investments in the future to ensure we get stronger. The demand environment will change as the economy changes and monetary policy evolves, but that impacts only the smaller portion of our business, which is one of the most unique things about the industry.

Don't lose sight of the fact that this industry continuously grows upon itself and no other company is better positioned to weather the cycles and continuously improve. Like POOLCORP. I am proud of the continued progress.

I am proud of our continued progress as the clear leader of our industry and confident in our superior value proposition of which each of our 6000 plus employees work hard to improve each and every day. In closing, I want to say thank you to the POOLCORP team.

As I reflect on this year, it has been a tough one, but because of you, we are a better and stronger company than ever. I also want to thank our supplier partners and most importantly, our customers for helping millions of people enjoy the benefits of healthy outdoor living and making the memories of lifetime.

I will now turn the call over to Melanie Hart, our Vice President of Finance and Chief Financial Officer for her detailed commentary..

Thank you Pete. Good morning everyone. I'll begin our fourth quarter results, move into how we finished out 2023 and then cover what we are seeing as we start 2024. Net sales for fourth quarter showed a modestly improved trend, down 8.4% versus negative 8.7% for the third quarter 2023 when compared to the prior year.

Inflation moderated as expected and was an approximate 1% benefit for the quarter. We realized a 29.3% gross margin during the quarter, an improvement of 20 basis points from third quarter 2023 and a 50 basis point improvement over fourth quarter 2022.

The year over year change includes a margin decrease from the prior year inventory gain benefits offset by the additional 120 basis points for import taxes recorded in the fourth quarter 2022. During the fourth quarter, operating expenses increased 3% over last year's fourth quarter.

Cost inflation in occupancy, wages, and insurance expenses continued to be largely mitigated by sales center operating efficiency improvements and cost management. Operating income of $79 million for the quarter represents a decrease of 26% from prior year operating income of $107 million.

Operating margin was 7.9% in the quarter compared to 9.8% in Q4 of 2022. Diluted earnings per share for the fourth quarter was a $1.32 compared to a $1.82 in the fourth quarter of 2022, reflecting lower operating income slightly offset by less interest expense. Now I'll move on to a review of our full year 2023 results.

Other than comparing to a record 2022, full year 2023 represented a very strong performance as our industry transitioned from heightened demand of the pandemic period and the effects of inflation and supply chain disruptions we successfully right sized our inventory position, invested for future growth with 14 greenfield sales centers, and five acquired sales centers covering all parts of our business and opened 15 new Pinch A Penny franchise stores, introduced new customer enabling technology, held our operating expenses approximately flat, generated over $820 million in free cash flow, reduced outstanding borrowings by over $330 million and returned almost $475 million to shareholders through dividends and share repurchases.

All in all, we're proud of our performance in 2023 as we demonstrated the resilience in our operating model and positioned ourselves for successful future growth. We finished 2023 with net sales of $5.5 billion, a decrease of 10.3% from prior year record net sales. Within net sales, we realized approximately 3% of product cost inflation benefit.

Lower levels of net sales were driven principally by reduced new pool construction activities expected to be down around 25% in units built and lower pool renovation and remodel activity, which combined represents approximately 7% points of the reduced total sales during the year.

Unfavorable weather during the first half of the year resulted in 2% lower net sales. Lower customer early buys, primarily due to higher customer inventory at the start of the year, and chemical and commodity pricing are estimated to have contributed an additional 2% points of the negative impact on sales in the maintenance portion of the business.

Additional impacts representing the remaining 2% points were attributable to declines in sales of certain discretionary products such as heaters and cleaners and lower horizon and Europe sales activity during the year. Lower levels of new pool construction in 2023 slightly changed our estimate of the composition of our North American net sales.

For 2022 we estimated sales of new construction related products were approximately 17%, renovation and remodel product sales comprised roughly 22%, and maintenance product sales represented the remaining approximately 61%.

In 2023, the lower level of new construction product sales moved that portion of our business closer to 14%, with renovation and remodel product sales estimated at 24% and the remaining 62% coming from maintenance.

Based on our sales activity of certain products specifically used in new pool construction, we appear to have outperformed the market as our decreases for these products were less severe than the total market as indicated by reported new pool permit decreases and preliminary estimates of total new pool units constructed in 2023.

Gross margin finished the full year in line with our long term target of 30%. As we see in a typical year, we expect pluses and minuses each quarter due to seasonality and product sales mix variations.

During the year each of our quarters saw varying fluctuations from normal seasonal patterns as we realized remaining benefits of lower cost inventory impacts from the slow start to the season, product mix changes, and lower vendor incentives resulting from lower purchase levels.

Operating expenses increased $6 million to $913 million only a 0.6% increase over 2022, including $12 million related to greenfield sales centers opened and locations acquired during the year.

Increased wage inflation, occupancy cost, and continued investments in digital transformation and technology were partially offset by lower incentive-based compensation and volume related sales expenses.

The investments in new sales center development and digital transformation are expected to generate additional sales growth and capacity as market conditions stabilize and industry growth returns to normalized levels.

Operating margin of 13.5%, decreased 310 basis points compared to the prior year record operating margin of 16.6%, which represented a significant expansion compared to pre-pandemic operating margin levels as we have leveraged scale benefits even when revenue dollars have normalized over prior year and our gross margin rate came in consistent with our long-term target.

We received an ASU benefit of $7 million or $0.17 per diluted share for the full year, of which $0.02 was added in the fourth quarter and not included in our prior guidance. Full year tax rate, excluding the ASU, was 25%. Earnings per share for 2023 of $13.35, decreased 29% when compared to the record $18.70 we earned in 2022.

Without the impact of the ASU in both periods, our EPS of $13.18 compared to $18.43 was a decrease of 28%. Cash flow from operating activities increased to a record $888 million, an improvement of $403 million over 2022.

This includes cash benefit from our strong operating results and a net benefit from our working capital management, including inventory reduction efforts that contributed $230 million. Moving to comments on our balance sheet.

We ended the year with accounts receivable totaling $343 million, down $9 million from year-end 2022 and days sales outstanding of 26.8 days comparable to prior year. A great job by the team working to meet our customer needs, especially during a tough demand environment.

During the third quarter, we reported on our inventory reduction goals and accomplishments.

Even with higher early buy inventory receipt activity during the fourth quarter, we executed almost $230 million reduction in inventory balances year-over-year, including the impact of higher-than-normal number of new locations opened, acquisitions and current year inflation.

We expect to see a seasonal increase in first quarter ahead of the 2024 season, but plan to maintain inventory balances throughout 2024 that are lower than 2023. We reduced total debt outstanding by $330 million to $1.05 billion compared to year-end 2022.

Total borrowing levels remain below our target leverage ratio of 1.5 to 2x, finishing the year with a leverage ratio of 1.4x. We also repurchased $306 million of our stock, including $119 million in the fourth quarter, reducing our fully diluted weighted average shares outstanding by 800,000 compared to the full year 2023.

Additionally, in May 2023, we increased our quarterly dividend per share by 10% to $1.10 when compared with share repurchases, we returned almost $475 million to our shareholders, the second highest year in our history. Next, I'll comment on our outlook for 2024.

Pete has included in his comments our expectations regarding the market in 2024 and the timing of net sales growth recovery. With that as a backdrop, we expect to continue to outperform the market in 2024.

We are currently expecting flat to low single-digit sales increases in 2024, with a 2% to 3% pricing benefit on a blended product line basis and could potentially see a 1% to 2% benefit from normalized weather, primarily attributable to the first two quarters.

This considers our expectation that maintenance will rise slightly with the increase in installed base of pools and discretionary product sales will still see some pressures until economic conditions stabilize.

Our guidance considers volume expectations on renovation and remodel and new construction markets continuing at similar levels to 2023 at the high end and the potential for a decrease of up to 10% at the low end. Horizon in Europe could also see modest pressure up to a 5% decline at the low end.

During 2024, we will see an increase of two selling days with one in the third quarter and one in the fourth quarter. However, given the timing of extra days, we expect the impact to be less than 1%. Gross margin for the full year is expected to be near our long-term guidance target of 30%.

Margin will vary seasonally over the quarters as it has historically, with second quarter typically reflecting the highest gross margin for the year.

We expect that the carryover from the remainder of the lower cost inventory sold through in first quarter of 2023 will be substantially similar to the benefit we will get in 2024 from the normalized vendor early buys that took place at the end of 2023.

However, the lower level of customer early buys in first quarter 2023 was also a benefit to margins in prior year from which we are not expecting a corresponding impact in 2024.

We will see the remaining effect on margins from the lower selling prices of chemicals and commodities also in the first quarter and at current pricing, there should be minimal impact on second quarter. Wages, rent and other operating costs are still a headwind, resulting in modest expense increases in 2024.

But our ongoing capacity creation projects throughout the company will drive improved productivity. We plan to continue accelerating our technology initiatives that will exert pressure on the short-term operating margin improvement.

However, these additive investments are intended to drive long-term strategic growth, provide increased capacity to grow, and drive continued future operating efficiency.

Specifically, we have considered in our SG&A cost guidance incremental expense of $15 million for normalized performance-based compensation, $12 million for new greenfield locations we will open in 2024 and a $20 million incremental investment in our technology initiatives. Overall, we expect 2024 operating margin to be approximately 13%.

Interest expense should be between $50 million and $53 million based on current rates and excluding any share repurchases. Depreciation and amortization for 2024 is anticipated to be in the range of $44 million.

We are estimating a $0.10 benefit from ASU in the first quarter for the expected impact of restricted shares vesting and stock options expiring in 2024. Our annual tax rate is projected to be approximately 25.3% excluding ASU.

For weighted average shares outstanding that will be applied to the net income attributable to common shareholders, we expect approximately 38.7 million shares at the end of Q1 and 38.8 million shares for the remaining quarters with no additional share buybacks.

This results in guidance for 2024 diluted EPS of $13.10 to $14.10, including the $0.10 ASU benefit. The midpoint of our guidance represents a 2.4% improvement excluding the ASU. After our record cash flows in 2023, we would expect to see 2024 return to normalized levels of around 100% of net income.

Our consistent capital allocation priorities include uses of cash of around 1% to 1.5% of net sales on organic growth, such as ongoing capital expenditures and sales center expansions. We also plan to continue strategic acquisitions, authorized dividends, and share buybacks.

We ended the year with $344 million available under our current share repurchase authorization. In 2023, 58% or the majority of our cash flow from operating activities was generated in the second half of the year as is typical from a seasonal standpoint. Since 2019, we have reported increased sales of 73%.

Gains from inflation and market share over the 2020 to 2022 higher growth period coupled with acquisitions and relative stability of higher levels of inflation and product cost remain. We also continue to realize higher margin from acquired sales and supply chain and pricing initiatives versus our 2019 levels.

Our decision to continue to invest in 2023 and as we move forward to 2024 in areas that have proven can position us for long-term growth while improving our operations and strengthening our leading position in the market will allow us to continue long-term shareholder value. Thank you for joining today's call.

We are now ready to open the line for questions..

[Operator Instructions] The first question comes from Ryan Merkel of William Blair. Please go ahead..

Hi everyone. Thanks for taking the questions..

Good morning..

Thanks for all the details on the guidance. I think what I want to do is just talk about the first quarter because there's a few moving pieces.

For gross margin, should we expect down something in the 50 basis points, 60 basis points neighborhood year-over-year?.

Yes. We would expect that margins in the first quarter would be much more seasonally compared to what we saw in 2023. So I would expect it would be down in the range of that for first quarter..

Okay. Great. And then I think you're going to return to pre-COVID seasonality.

So should we think about EPS in 1Q kind of 12%, 13% of sales for the year - I'm sorry, EPS?.

Yes. So typically, we would expect that the top line would return more to like historical seasonal levels and not compared to what we've seen in the last couple of years.

But generally, kind of that first quarter is within that 18% to 20% range and then with slightly less overall margins and well-controlled operating expenses, I think it will be a reasonable consistent contribution to overall EPS for the year..

Okay. And maybe just one more for Pete. How did you think about guidance this year? It feels conservative, which I expected. It seems like you're investing in a lot of new tools and things.

So just how do you think about the guidance? And then maybe high level, what are you assuming for the discretionary products versus nondiscretionary products? I think that's maybe an easier way for us to think about it..

Yes. Thanks for the question, Ryan. As we were trying to put together our guidance for the year, obviously, the beginning of last year, we came out a bit stronger because we didn't contemplate the number of interest rate increases that we were going to see in the size of those rates and the impact that, that was going to have on construction.

So as I - as we look at guidance for this year. If I step back and I break the business down into the 60% of our business kind of the maintenance and repair, that's going to go. We get a little better with that business every year. We provide better service. We take a little bit of share.

The biggest impact that's going to be felt in that area is the - is what the weather can do to us, right? So if the weather is better, pools open sooner, that business will shine for us. If it's slower for the year or if the weather turns less favorable, then that's going to have a negative impact.

As we look through the first six weeks of the year - I guess, we're seven weeks of the year so far, it's really kind of the inverse of what we saw last year. So last year's first quarter weather was better in the beginning and then March was very tough. I mean California already this year has had over 12 inches of rain.

So I think we're - we wanted to make sure that we were appropriately conservative with our outlook, given the uncertainties on weather.

And as I look at and the impacts on the maintenance and repair business and I would also tell you, as I look at the two semi-discretionary and discretionary parts of the business, with new pool construction being the topic that most people want to talk about is, I don't think the economic conditions are really going to change all that much until probably we get through this year and get through the election cycle.

So I can't really say that I believe that if the Fed cuts interest rates in the third quarter of the year by 0.25 point that the HELOC rate, which is approximately 12% now that - somebody that needed financing for a new pool that 0.5% or 0.25% rate reduction. So 11.75% or 11.5% would say, okay, I'm totally in now, I'm going to build that pool.

So I think we're just looking for the demand environment as it relates to new pool construction to be fairly consistent. The more affluent buyers that are less subject to financing, that business will be good. We think the average price of the pool is going to increase because of the slanting of the business that way.

And on the renovation and remodel, the phenomena that's going on there is, as I mentioned in my comments, every year, the - about 10% of the homeowners are pool owners decide - think about, "Hey, should I be doing a renovation?" Renovations now could be in the $20,000 to $30,000 range depending on what you're doing.

So I think what we're seeing is some of our builders saying - remodeler are saying, okay, maybe we can do this in stages because there is still a big impact of borrowing costs on those larger renovation products. So I think normal maintenance products, pumps, filters, cartridges, chemicals, that business is good.

We are investing in improving our value proposition, making it easier for our customers to do business with us and providing an exceptional focus on customer experience. I think that's good.

If I look at our portfolio of products on building material for the renovation and remodel and I look at our expansive network of design centers and building materials, I think that's going to be good, but we have to play the cards we're dealt in terms of what the demand environment is going to be for new pools.

So overall, I think we viewed the year in context of what we got for the first six weeks of weather and what the ongoing economic environment looks like..

Yes, makes sense. Alright. Best of luck..

Thank you..

The next question comes from Susan Maklari of Goldman Sachs. Please go ahead..

Thank you. Good morning everyone..

Hi, good morning..

My first question, Pete, is, I'd like to talk a little bit about the operating environment as you're coming into this year.

Can you talk a bit to just the competitive dynamics and how you're thinking that may come through for '24? And then I guess, relative to that, any updates on the ability to hold the share gains that you've realized in the last couple of years and perhaps to continue to even gain some share as we move through '24?.

Sure. The competitive environment is interesting in any industry and that depending on the level of overall demand usually dictates how competitive the environment is. So in coming off of the year that we had in 2023 and the beginning of 2024, it is - I would tell you, there's nothing that we see that we haven't seen before.

In the slower months, right, when a demand environment isn't that good, we see competitors doing what some would consider to be desperate things. But there - we view those as short term in nature because nobody is more efficient than we are. Nobody has a better cost position than we do.

So when we see competitors go in and offer ridiculous deals, we know that it's - in many cases, it's out of desperation and it's nothing that is sustainable. And unfortunately, our customers know that, too.

So we tend to focus on, as always, being the best provider in the market, being the easiest to do business with and making sure that we are attentive to our customers' needs instead of worrying about how much product we can sell them.

We try and worry about how they're doing and how we can help them grow their business and how we can help them be more productive, which is driving a lot of the investments we're making certainly on the technology side.

Those tools are designed specifically to make our customers more productive and to help them grow faster and we hope that by doing that, that we'll grow right along with them as opposed to just figuring out if I can get an order today from a customer. So we have a much longer-term view and therefore, invest and act accordingly.

The second part of your question was about share gains, I think. And I would tell you we believe that we gained share again in 2023. We are quite confident of that given the data that we have access to. And we see it every day.

Now we have to compete every day, right? We have to compete every day, and we have to make sure that we provide that unparalleled service.

But I think given that we continue to provide new resources for our customer and that we continue - I've got 6,000 people that wake up every day and want to make sure that we are the best provider, the best partner for our customers and the best channel to market for our suppliers, and that is a tremendous force.

That is a tremendous force and a huge differentiator. So I don't really think about the share gains that we've had with the fear that we may give them back.

Rather, we're focused on deliberately working to be the best provider in the market, so that we continue to get those opportunities to enjoy more business from our existing customers and to make new friends along the way..

Okay. That's very helpful color. And then I wanted to dig a little deeper into the semi discretionary products and the demand there, the heaters and the cleaners, those kinds of things. You've talked about the weakness there for the last several quarters.

As you think about people that had delayed those purchases in the last 12 months or so, coming into the pool season, do you think that they could start to come back into the market that while maybe that does remain a headwind for the full year, as we move through '24, we do start to see some move off of the trough in that.

And then, I guess, with that, do you think that any change in the macro environment, whether it comes late this year or next year could help to drive more of that demand? Is it enough to offset the tough comps and the pull forward that we saw during the pandemic?.

Yes. I think what we have on our hands is and our advantage is time, right? And that is that we're not in it for the short term. And we know that those products will be necessary. So you can only defer - I mean if you have a pool, you need somebody to clean the pool or you need an automatic cleaner or you need both in most cases.

So those semi-discretionary things. And if people - if there's a normal replacement cycle for a heater, right, or there's normal replacement cycle for a cleaner or those more discretionary purchases, there comes a time when they're no longer discretionary and that we have to do it.

So do I think that there was some pull forward in the demand on those products? I absolutely do. Do I think that every month that goes by, we get a little closer to being back to the normal replacement cycle on those products? I absolutely do.

I also think at the same time, there - the technology improvements that the manufacturers are driving on those products also make them more desirable. So I think that - I can't tell you exactly the month of point of inflection where heater split.

I can tell you that we have markets now that are flipping where the demand is higher, we stopped shrinking in demand and we're now starting to grow again. Is that universal across the board? No. Is it going to happen? Yes.

It just takes time for us to cycle through for the consumers to get a little more comfortable with the elevated inflation and their consumer spending that pressures that they see across their entire spend. But I think that this is an area that there was a pull forward.

I think we're starting to lap that, and we'll be back to growth on those products in the not-too-distant future. I just can't tell you exactly what month that's going to have..

Okay, I appreciate those thoughts, and thank you and good luck with everything..

Thank you..

The next question comes from David Manthey of Baird. Please go ahead..

Thanks, good morning.

Just so we have this information on one place, could you give us base business volume and price across Blue, green, and international, please?.

And is that for the full year is that what you're looking for?.

For the quarter..

For the quarter. Yes, so for the quarter, pricing was - we saw about 1% to 2% for price in the quarter. We thought base business was relatively the same as consolidated because there was very little contribution - meaningful from acquisitions. It was less than 1%.

And then on the green side, we did see that it was down 4% in the quarter, so it contributed about negative 1% to revenue in the quarter. And international was - it had - it didn't have a significant impact because it was kind of relatively flat..

And what was price in the green?.

The price in green was closer to the higher end. So it would have been for the quarter closer to 3. And then - I'm sorry, it will be closer to two with one overall..

Okay. All right. And then looking long term, Melanie, you and Pete, you often talk about growing SG&A at a slower rate than revenues or assuming a flat gross margins or gross margin dollar growth.

As you look forward from here, what are your expectations for growing SG&A kind of on a secular basis relative to sales growth or gross profit dollar growth?.

Yes. So when you look at the guide for next year, you will see kind of that similar formula as what we've always consistently achieved over time. And so specifically, I kind of called out the three areas where we would expect those incremental investments as we move into 2024.

As we get kind of out past that, we wouldn't necessarily see those larger fluctuations in the performance-based compensation depending upon how many sales centers we open each year could indicate kind of what that expense burden is in any particular year.

And at this point, we would expect that the - for kind of the near term, we would expect that those continuing dollars that we're spending on IT would be part of the expense base as well..

But long term, it used to be like 60% and then it was a little bit higher than that SG&A growth relative to sales growth?.

Yes. So it's going to be higher than the 60% when you consider the technology investments..

Even beyond 2024?.

Yes. As we said, Dave, we're trying to invest in our capabilities, which will allow us to keep growing for many, many years to come. The technology platforms that we are investing in are real - they're real differentiators for us, but they take investment. So we know that we're going to spend ahead of the benefits on that.

So early on, I would expect that if I looked at that ratio on technology, I'm going to spend more in the beginning that I'm going to get back, but I'm going to get that back in the outer years. And that's really the way investing in technology cycles would work for us..

Okay, will follow up. Thank you..

Thank you..

The next question comes from Scott Schneeberger of Oppenheimer. Please go ahead..

Thanks very much and good morning..

Good morning..

I guess, Melanie, probably more for you than Peter. On weather, it sounds like in the guidance, you said maybe one or two percentage points benefit year-over-year. But then Peter had those comments at the beginning that California has actually started with tough weather this year. So it's very unpredictable.

But just want to get a sense of where - really how you're looking at that versus last year and the opportunity to make up that ground. Thanks..

Yes. So the 1% to 2% weather recovery is really what we're looking at within the high end. And so at the flat revenue base would be consideration of no weather recovery.

So normally, when we guide, we're kind of looking for normalized weather, but know that we do have the comps in first and second quarter, where we were impacted more significantly from weather for the year. So it's really kind of within the range, but very hard to predict kind of quarter-over-quarter. We know what the historical impact will be.

But as we look forward, the timing - if we get that recovery and when we get it, is a little bit out of our hands at this point..

Okay. Thanks for that. And then as a follow-up, inventory is down. I think it was 14% year-over-year in 2023. I believe you quantified it around $230 million. Is - and then I think your guidance was a bit of a challenge in the first quarter, but much lower levels in second, third and fourth.

Do you still have room to reduce inventory overall by a lot? Did you get it all done in '23? Or is there more opportunity with how you're managing that? Thanks..

Yes. So for first quarter, actually, we're very much on pace to what we would expect. The uptick in first quarter is really us to be prepared from a stocking level for the selling season. So - but we would see that the level of increase from the year-end to first quarter would be really kind of consistent with historical levels.

And as we look across the network, we internally as part of our capacity creation initiatives, we do continually strive to reduce overall inventories at our kind of existing sales centers. And then the flip side to that is we also continue to bring in new products to those sales centers as well.

So when you look at kind of our overall target by the end of this year, certainly from a days sales on hand standpoint, we would expect to see a couple of days improvement, and that would really be offset by the mix of additional SKUs that we're carrying and in lower levels because of improved supply chain..

Our inventory management is one of those functions that is we treat like continuous improvement. We look at inventory at the individual sales center. We look at it at the market level. And we're always looking for ways to be more efficient and making sure that we do the best job representing our supplier partners to take those new products to market.

So I think last year, we demonstrated a tremendous ability to deliver on our commitments and manage inventory, and we'll do that this year as well in line with what the volume activity is..

Great. Thank you..

The next question comes from David MacGregor of Longbow Research. Please go ahead..

Good morning everyone. Pete, I want to go back and talk - I want to go back and pick up on the conversation around SG&A, if we could.

And I guess I'm thinking back to a previous analyst meeting where you had expressed a fairly high level of confidence in your ability to hold 15% operating margins in a weak environment, just given the progress that you've made on a number of structural factors.

And presumably, at that point, you taken into consideration whatever the investment requirements would be to achieve that. Now things seem to have changed and 13.5% last year, 13% this year.

Where did you see the greatest divergence from those expectations? Is the level of investment necessary to achieve your goals just gone up fairly substantially from which you had envisioned at that point in time?.

Well, I think we've added more things to the deck in terms of what our contribution is. I think the technology platforms that we are working on today, as I said, the way the cycles work as you - actually you invest ahead of those things.

And if I go back a couple of years and I looked at what we were doing from a technology perspective and where we are today and where we're investing money, the deck is actually very different.

At the same time, as I mentioned in my comments, we are also relentlessly focused on our productivity initiatives across the branches, looking at all of our controllable expenses and also our capacity creation initiatives. But there's a couple of things, too.

If I look at the rent levels today versus what they were a couple of years ago, the rental rate renewals that we are seeing are significant. If I look at the labor costs today that we are seeing as compared to a couple of years ago, they are significant.

But I think the business is doing a very good job digesting those increases by continually focusing on capacity creation. But as I look at operating margin, it's a longer view.

So I don't look at it and say, "Wow, I have to make sure that I get exactly to what we did last year or a little bit better this year because if I did that, then I would probably forego our ability to invest in longer-term programs." Our view is that we're going to be here for the long haul. We're not going anywhere.

We're the biggest industry - or biggest company in this industry, which we believe has very good long-term growth characteristics. So when we invest, we invest for the long term.

So am I concerned that our level of spending this year is up? No, I'm not because I think if you look at where we're investing that money and what the longer-term returns are for the business, I think it's a very wise investment.

And I think we would be shortsighted if we said, okay, we got to stick to that ratio every year because I think we would pigeonhole ourselves and inhibit our ability to grow over the long term..

Right.

And if you think about the returns that you're anticipating on these investments, if you get back into an environment with 115,000 to 120,000 new pools, what's achievable in terms of operating margins?.

I think if you look at our history on operating margins, I mean, if new pool construction was back up to 120,000 units, all things considered, I think we could be back in close to the numbers that we saw at our peak. Obviously, a lot of variables to consider.

But the structural fundamentals of the business are there, the company's ability to execute and history of delivering on those things is there. So obviously, volume is our largest lever in terms of operating margin improvement.

So if the volume comes back because new pool construction goes through the roof and renovation goes through the roof, then I would certainly expect our operating margins to expand at a rapid rate..

Good. That is all I got. Thanks and good luck..

Thank you..

The next question comes from Trey Grooms from Stephens. Please go ahead..

Good morning everyone. This is actually Sid Ramesh on for Trey. Thanks for taking my questions today.

Sorry to go back to more SG&A, but could you give us some more color on what these investments are in the tech and their impact longer term?.

Yes. So the investments in tech are largely the ones that Pete described. So it's continuing to build out our POOL360 suite of service. It's the water test as well as the service software. We're definitely going to go into some more robust discussion on that at our upcoming Investor Day..

Got it.

And then as a follow-up, kind of switching gears, could you give us kind of an updated commentary on backlogs and what you're seeing there in terms of new construction versus remodel?.

Sure. Now just keep in mind that that's the smallest part of our business. So the beginning of the year is always show season, right? So I have spoken to hundreds of customers over the last several weeks since the beginning of the year. I guess, Mike, the way I would describe their sentiment is, by and large, the group is very optimistic, but cautious.

So I didn't meet anybody that said it's doom and gloom. I think your stronger dealers are getting stronger. I think some of the weaker dealers are feeling it worse than others. But if I look at the dealer base as a cohort for new pool construction and renovation and remodel, they're optimistic but cautious.

I don't think anybody believes that there's anything structural in the economy that is going to drive a huge resurgence in new pool demand until the monetary policy changes and access to affordable lending improves..

Got it. Appreciate the color. Thanks a lot..

The next question comes from Andrew Carter from Stifel. Please go ahead..

Hi, thanks. Good morning.

I wanted to ask if, in your guidance, are you kind of contemplating any kind of elevated level of deferrals? Or could you say with definitive conclusion that any kind of deferrals was kind of completely done in 2023? Also within kind of the equipment and the mix, there's been an ongoing story of trade up, replacing lower value analogs with higher value, recognizing variable speed pumps can't go backwards.

Anything you're seeing that's saying that's a risk of that going backwards this year as a headwind to guidance? Thanks..

So let me try and answer the first part, I think I got it right. If not, come back, I mean, I didn't answer your question. On deferrals, I would tell you, nothing really new. I don't expect people to say, "Oh, I'm more cautious this year than I was last year." I think people are still appropriately cautious.

So I don't expect anything to change really from a deferred maintenance perspective. And on the desirability of the new products, I spend a lot of time, as you can imagine, talking to our customers and also to our manufacturers, suppliers, partners who also spend a lot of time talking to the dealers and technology is still very important.

If you talk to the dealers that are building pools today, very few pools are being built without any technology. Almost everybody is opting for some level of automation, sometimes more than others. But if I look in general compared to what it was several years ago, it's significantly better. Do I think that's going to materially jump this year? No.

I think those products are still very desirable and they'll continue to gain share. But I don't - Andrew, I wouldn't look for a step function change in the - if I look at 10 pieces of equipment that were sold or 100 pieces of equipment that are sold to say that this year, a huge percentage more will be going to the higher end.

I think that will continue to slowly gain share..

Sure. And then kind of final question, just kind of wrap a bow - my final question, wrap a bow around weather.

I mean, quarter-to-date, can you give you trends, but a reminder how much of March kind of dictates 1Q? Is the kind of swing this year versus last year really determined in March versus April? And was there any weather - would you call out any weather benefits in the fourth quarter? Thanks..

Yes. So weather overall for the fourth quarter was fairly favorable, so not a significant change over last year. The first quarter is definitely determined by the weather in March as we saw last year. So certainly, we'll look for that to see how the - how we fall within the range for the quarter..

Obviously, you know, March is a much more important month for us than January, and it grows sequentially through April, May and June. So it would be great if March was - March had fantastic weather, right? Because I had a choice of getting - having great weather in March or great weather in January, I'd take it in March..

Great. I will pass it on. Thank you..

Thank you..

The next question comes from Sam Reid from Wells Fargo. Please go ahead..

Thanks so much guys for taking my question. This is actually a follow-up to an earlier question. You guys gave some helpful color around Q1 topline contribution to the full year. I believe it was around kind of 18% to 20% of total annual revenues is what you're anticipating.

So first, I just want to make sure that's the correct way to think about that? And then can we talk through the flow-through on the P&L in a little bit more detail. The reason why I asked is because I think it would imply a pretty meaningful pullback in year-over-year EPS. Thanks..

Yes. So when you look at the first quarter, if you look kind of historically, you'll kind of see our contribution - revenue contribution within a relative range is fairly consistent. So I would probably exclude from that 2020 just because there was kind of a lean towards the later portion of the year.

And so with that, we've talked about margins for first quarter being less than last year. So that will have an impact on the overall ultimate EPS for the quarter..

Got you. And then maybe one more follow-up, and this ties back into your Q4 results. So I want to maybe bridge the down 8% that you ultimately printed kind of versus the mid- to high single-digit down guide.

And what I want to understand specifically sort of what transpired intra-quarter that got you to the low end of that range, especially when you consider weather was perhaps a moderate tailwind?.

Yes.

So overall, when you look at the fourth quarter, it was kind of relatively consistent in contribution to the third quarter when you look at the components with a little bit less on the inflation side and Horizon because of the seasonal nature of their business, it had a slightly higher negative impact on the fourth quarter than it did in the third quarter..

Got you. Thanks so much. I will pass it on..

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

Hi, thank you.

I was wondering if you could go over in a little bit more detail just for modeling the cadence of the SG&A investments this year with the increases, follow normal seasonality? Or should we expect any lumpiness?.

Yes. So the component as it relates to the performance compensation, we record that as a percentage of operating income. So that will follow our overall normal seasonality. As it relates to the new sales center investments, you would see really a good bulk of that will happen preseason with the remaining amount happening in the season.

So we typically try to focus on opening these new sales centers either in the first or the fourth quarter generally. And as it relates to the technology investments, we are continuing to add resources. So you'll see some investments in the first quarter and then that will ramp up through the rest of the year..

Got it. Follow-up question is, I wonder if you could speak to just the expectations for seasonal versus year-round markets in 2024. It looks like year-round actually performed a little bit better last year. Just curious if you're expecting that to be the case as well..

Yes. I think you really - you have to go deeper than just seasonal and year-round. Garik, I think you got to look at specific markets, like - so Florida had a very strong quarter and year in 2022. So the comps in Florida are going to be very tough in the beginning of the year, and then we'll more even out.

So if I look at California, California's issue was weather early in the year. But from a new construction perspective, I don't see much changing out there compared to what we saw this year, given the general economic environment, the demand curve is going to be fairly stable. I don't look for a big improvement there.

If I look at Texas and Arizona, they'll be fairly stable. Seasonal markets, I think all things considered weather included, we'll probably do okay this year. I think that they had a bigger correction sooner, but it's still very early to tell..

Understood. Thanks for that. Best of luck..

The next question comes from Joe Ahlersmeyer from Deutsche Bank. Please go ahead..

Hi, good morning - well, good afternoon everybody. I'll keep it quick since we're a little over here. I just want to be very clear about what I'm hearing on the 1Q maybe with some numbers around it, I'm getting to something like down 5% to down 17% on 1Q sales.

Is that right? Or is there something wrong with my math here?.

Yes, '17 seems a little bit high to me. That was - even with the worst weather in March, that would seem, say, a little bit on the high end. So I don't know if quite have that broader range..

Okay.

But maybe at the midpoint, it is something like high single to low doubles down year-over-year?.

Yes. I think probably towards your high end of the range to kind of midpoint depending upon what the weather looks like in March would be a reasonable expectation. And again, we'll know more once we get to March..

Joe, it's just so hard to say given the - if you look at the relative size of March compared to like - compared to January, and the uncertainty that we've seen on weather, I think your minus 17 is very much at the high end. But I think that the overall demand environment is still solid. It's just a question of when does the season open.

So I don't know that I would overcorrect on anything..

Okay. Got it. I just - I think with expectations looking at growth in the first quarter because of the weather lapping, I just want to make sure I wasn't that far off. The other question I have was clarity around the full year margin comment. You said near 30%.

Is that the same as saying less than 30%? Or is near another way to just say approximately within maybe 50 basis points or so?.

Certainly, approximately within 50 basis points..

Understood. Alright. Thanks..

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

Yes. Thank you all for joining us today. We look forward to our next call, which will be on April 25, when we will release our first quarter 2024 results. We also look forward to hosting our Investor Day on March 19, where we will dive deeper into our long-term strategies and financial growth initiatives.

Additional details for this event will be announced later today. Thanks, and have a great day..

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