Pool Corporation (POOL) Earnings Call Transcript & Summary

Good morning, everybody. And welcome to the 2022 Pool Corp. Investor Day. Thank you very much for joining us today. Today's presentation may contain some forward-looking statements that speak only to the date of this presentation and may be subject to change. Actual results may vary and may vary materially due to a variety of factors that affect our business. Those are spelled out in our 2021 annual report, which has been filed with the SEC. Presentation may also contain references to certain non-GAAP financial measures as defined by the SEC. A reconciliation of non-GAAP financial measures and their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles can be found in the appendix at the end of this presentation. Most of the company's most recent earnings release, which was furnished in our current annual report -- our current Form 8-K report filed with the SEC as well. Just a little administrative note for everybody here in the room. If you need to leave the room for anything, the door is locked. So there is like a pass card out on the table just outside the room that will allow you back in. So just don't want to lock you out if you have a reason to leave. Again, thank you all for being here. And at this point, I'd like to introduce Peter Arvan, President and CEO of Pool Corporation.

Thank you, Curt. I can do this presentation, but I hit my head today on those screens, I'll be very happy. So welcome. We're thrilled to have you in a face-to-face meeting. It's been a very [ long ] time since we've been able to have a face-to-face meeting. I had my first couple in the last couple of weeks. I've had a few of these bigger face-to-face meetings that were the first one post COVID. And I got to tell you, they're pretty refreshing. We'd like to see everybody's smiling face. The Zoom calls are great. We all learned those, how to do those well, but I think having everybody face-to-face is a lot more exciting. So Curt covered the forward-looking statements, so I'm not going to do that. I'm going to do some brief intros. Just so -- I think everybody met everybody, but -- so you have Donna Williams is to my left here. Donna is our Vice President and Chief Marketing Officer. We have Todd Marshall. Todd is our CIO and Vice President. And we have Jeff Clay, who is President of Horizon. We have Jean-Louis Albouy in from Europe. He is our General Manager for all of Europe. And then, of course, you all know, Melanie, who is our Chief Financial Officer and Vice President. You all got to hear Jim as he toured us from around the facility. Jim is President of Porpoise Pool & Patio. Jenn Neil is our Vice President and Chief Legal Counsel. And then Kenny St. Romain was unable to join us today. He has had a family issue. And then, of course, Luther Willems, who is here in the back. He is our Vice President of Human Resources. So now after the intro, I'm going to go over a brief agenda. So I will start the presentation off. I'm going to cover the business outlook, growth initiatives. Donna is going to follow with some information and the discussion about the market. Todd is going to walk you through kind of our technology journey and where we're headed on technology and transformation. Jeff is going to give you a peek inside of Horizon and what's going on and add some color to that exciting business. Jean-Louis is also going to do the same for Europe. We in the past haven't talked very much about Europe, but it's a very exciting part of our business, and we love the results that we see there. And then, of course, Melanie is going to give you a financial recap, and then I'm going to wrap it up. We can do -- if there's something during the presentation you want to ask, that's fine. But we would prefer, I think, to hold the questions to the end so that we make sure we get through everybody's presentation. So with that, I'm happy to start. It's important that we talk about the vision for a quick second, right, because it is central to what we do every day. Our goal is to be the best worldwide distributor for outdoor living products. So it's not just the swimming pool. So years ago, most of our business was really if you think about coping in, now we've expanded beyond the coping, right? We also have Jeff's business for irrigation, then the other products that open up the rest of the backyard. Whether that is outdoor lighting or whether that's other automation systems, our pie is getting bigger, right? And that has changed over time. Years ago, if you looked at our building -- building material for us, which is a very nice, fast-growing category for us, that has changed over time. Years ago, it was a very small category. It's growing very fast. If you look at pools, you're going to -- we're going to show you a couple of pictures of how pools have changed in the last several years. The pool is getting bigger. The backyard is becoming a focal point. It's just not a concrete or [indiscernible] hole in the ground. It's a whole backyard entertainment area. So the POOLCORP overview. Now fortunately, most of you now are very familiar with the company, right? But I think it's important to show you some facts on here that are quite impressive from my perspective. #1 worldwide distributor for pool and related outdoor products. There's $5.3 billion in revenue is what we were able to generate last year. Very proud of that, biggest year in the customer -- in the company's history. Over 400 locations, I think we're about 410 locations today. We operate in 12 countries. Multicategory, multichannel value-add distribution. So we'll talk about those. I'm going to walk you through those, and the things we do and the things that differentiate us, whether it's swimming pool, hardscapes, outdoor living, irrigation, landscape products. So it's a mix of construction. And it's also a mix of the maintenance and repair, again, one of the things that differentiates us as a business. Over 60% of our revenue still is derived from the maintenance and repair of the installed base of swimming pools. 120,000 professional contractors and retail customers, over 2,000 market-based sales and customer service folks. We have a technology-enabled B2B and distribution and retail support services. The retail support services are new as a result of our acquisition into Pinch. We had some capabilities. Now we have much more robust capabilities. And over 200,000 products across 50 categories. And we sit between 2,200 suppliers and 120,000 customers and an installed base of -- in excess of 5.3 million, 5.4 million pools. Very proud of the CAGR on the growth side. You can see, in 2016, we were $2.6 billion. And now after 2021, we were -- we closed the year at double that at $5.3 billion. So we're very excited about the growth prospects of the company. You can see over time, the company continues to grow. And the reason is, is our focus on organic growth. In distribution, there are many companies that focus their growth on acquisitions. Acquisition has always been a part of our company and always been a part of our growth. But fortunately, acquisitions made up the smallest part of our growth, and that will continue. That's one of the hallmarks of POOLCORP. It's one of the differentiators of us as a company, is the fact that we are at our core an organic growth company. So our geographic markets. 90% of our business is still in North America; 5% in Europe; and 5% in Canada and the rest of the international world. Our product application spend, maintenance, again, maintenance and repair of the installed base is still about 60% of our business, right? So 60% of our business really has to do with the installed base of pools. Renovations and upgrades are 20%, and new construction is 20%. The new construction piece has grown. If -- those of you that were here the last time we did this presentation, new construction would have been a slightly smaller piece. So over time, especially with COVID, in the last couple of years, that has grown, but it still makes up only 20% of our revenues. Our customer profile. 80% of our customers is the professional builder and maintenance contractor. 12% of the customer base are retailers. And when you think about pool retailers or backyard retailers, think about -- most of our customers that have a retail store, have a retail store as part of a pool construction business and a pool maintenance business, and they have a retail store as well. Very few -- if I rack and stack all of the customers, the minority portion of the retail customers are, what we would say, pure retail. Almost all of them have a -- have segments that build and also have crews that are doing maintenance. What you see is a far -- in Florida, for instance, you see far more specialization in Florida than you do -- than you see in the seasonal markets. In the seasonal markets, it's necessary just from a pure cash flow perspective that you have to do all things, the further south you come and allows for more specialization. Our channels to market, so our brands that you would see would be SCP. You would see Superior. That's for the North American pools. You would see SCP is the name we trade under or we sell under, I should say, internationally. And then, of course, in North America, our irrigation business is Horizon. And then we are very proud to have added Pinch A Penny to the moniker. But remember, what you saw with Pinch A penny, so Pinch A Penny is the franchisor. Porpoise Pool & Patio is the holding company, if you will. Pinch A Penny is our independently owned and operated, okay? So every time you see a Pinch A Penny store, don't ever lose sight of the fact that with -- we have a couple of company-owned stores that we have to have for franchise reasons. But for the most part, almost every store out there is independently owned and operated. So our operating priorities. Very important part of POOLCORP. And those -- when I came to the company, those I put in place and I've used them for several years in a couple of different companies because for me, it was important to get everybody's rallied around what we were going to do. Keeps everybody on task, keeps us from going off on tangents. And there was times early in my career when I worked for a much larger company where we -- I would find myself doing things and I'm like, "I don't know why we're doing this. What -- how does this fit with what we're supposed to do?" So in order to align everybody's efforts and kind of put the guardrails up to make everybody very clear what our -- what we're going to work on every day, we came up with these 4 operating priorities. And I dare say, if you ask anybody in POOLCORP, what are the priorities? They could tell you. Safety is the #1 thing. It's very important to me, because in our business, we don't run an inherently dangerous business, right? So I've been in some very hazardous work conditions. I've been in steel mills and companies like that, that are very hazardous. We don't have a hazardous business. But you can get hurt in our facility. And it's one of the things that my dad taught me a long ago. He was like, look, money, we can make. Money is great. He's like, can't make another one you, so let's not do anything stupid. So what was very clear when I came to POOLCORP was why I needed to be crystal clear with everybody that, that's how I felt. So there are no exceptions on safety. Every year since I've been with POOLCORP, we've been able to improve our safety rating year-over-year-over-year. And it is embedded in the fiber of the company. And I think aside from the financial performance, I'm probably most proud of the safety culture that we have as a business. So whether it's our own employees, whether it's how we take care of our customers when they're at our facilities and whether it's just the communities that we live in, we want to make sure that we're not putting first responders in harm's way either. Growth. For a distribution business, growth is critical, right? Growth is something that we have to grow. Because if you're not growing, if you have a top line that stops growing, then there's only so many things that you can do to protect your earnings. You can only cut costs for so long. You can work on margins. But if you're not growing, then the business lacks a sense of being a vibrant, exciting place to be. So make no mistake about it, everybody in POOLCORP knows every day that we have to grow. And as good as we did last year, we have to do better in this coming year. And we're not going to buy the growth. It's not like we tell people, hey, look, we're going to grow. But don't worry, the company is going to grow. You don't have to grow because we're going to go out and buy things and we're going to do a bunch of acquisitions. Acquisitions, if you look at our growth model historically, acquisitions have contributed about 1% a year to POOLCORP's growth. So everybody in our business understands that we have to grow, and we have to grow organically. So that's with new locations. That's with taking share. That's with adding new products from the manufacturers, and quite frankly, expanding the backyard. Our -- as we delve into building materials, that opened up a whole new world for us. The amount of natural stone and cement pavers that we sell today is tremendous. It's one of the fastest-growing areas. It's also one of the things -- it's not just that we are focusing on it. If you look at pool projects today, the amount of decking that's going around the pool has increased significantly. If you look at a pool -- a picture of a pool that was built 20 years ago, and some of you may have had those pools when you were younger, it was typically a strip of concrete around the outside of the pool, and that was it. Now big decks, pergolas, pool structures, water features, fire features, that's all part of the global landscape, which makes the pie bigger. Growth is awesome. Okay? Growth is great. But if you're growing for the sake of growth, but you're not able to create the operating leverage to improve your profitability -- every time I go into a branch, and I travel 90 -- probably 98%, 99% of my time. And I visit a lot of branches. And when I go into a branch, and I ask them, how is business going? And then I ask and they say, oh, we're up 8%, 10%, 12%, 20%, whatever the number is. My very next question is how are we doing on operating margin or sales and our profit. Because for me to say, hey, look, we're growing, growing, growing. But if I grow the top line, and I'm not creating that operating leverage and the operating margin expansion, then from my perspective, we're just -- we're working way too hard. So it's not one or the other. It's both. And the good news is that too is embedded in the performance culture of POOLCORP. And again, very proud of that. We're very proud to have consistently been able to expand our operating margin. Why? How? Lots of the ways, right? We work on our gross margins. We work on our capacity creation. It's a term that we introduced to you folks probably about 4 years ago now. And the reason that we build it as capacity creation is because we have a business that grows organically. So it wasn't about, "hey, you know what, there's a bunch of things we could do. We could rip out some costs." It really wasn't about that at all because we have a business that has this organic growth ability and consistently grows over time. Well, you have costs that also creep up, right? Your labor cost typically goes up every year. Rents go up every year. Fuel is crazy now. But basically, everything goes up every year. So you have to be able to offset that. So this focus on capacity creation was an attempt to make sure that we could grow the top line and grow the margin dollars faster than we were growing cost dollars. And the good news is, you need throughput to do that. So we talked about a lot of things about how we were going to do that. We talked about POOL360, right? We talked about the -- our focus on the digital interaction with our customers. We talked about speed at the counter. You're going to see some numbers probably more granular than we've ever showed you before about speed at the counter. But there has been some significant improvement in speed at the counter, which is -- there's 2 parts to that. One is, there's not a single thing you can buy from me that you can't buy from somebody else. Everything you can buy from me, you can buy from somebody else. The question is, how do you provide that product to the customer and at what cost and what part of the value do you bring to the table? So speed is important. 70% of our transactions is due to the nature of our business, right? Because 60% of our business is the maintenance and repair. One of the key parts of that maintenance and repair business is what? It's chemicals. So chemicals are not something that -- we have 120,000 customers. So we have thousands and thousands of thousands of customers that clean and maintain pools. They don't have warehouses. Many of them are working out of their truck and out of their van. They don't have stockpiles of chemicals. Nobody would want stockpiles of chemicals at their house because many of them don't have an office. So what do they do? Well, liquid bleach. Depending on the market that you're in, some people sanitize their pool with liquid bleach. So we had bulk -- in Florida, for instance, we have bulk bleach tanks. They can buy. We have trailers with 15-, 25-gallon jugs on there. They can buy and fill it up. And while they're there, they get other products. So if I'm making a decision on where I'm going to buy product from, it's about convenience, #1. Where are you? Are you convenient to me? Right? Are you in a part where I can get in and get out fast? So our focus on speed at the counter was very important because we needed to show the customer that we were concerned about the experience they had. And it wasn't that, "hey, I'd like you to come and buy my bleach. That's great. I'd like you to come and buy my bleach." But with the bleach comes everything else, with the chemicals comes net, brushes and parts and all the other things that you need to service your customers. But you need to know that you're going to get in and out of our place faster than you're going to get in and out of somebody else's. So we can tell you, we have a dashboard, I have a dashboard in my office. I can tell you in the number of minutes and seconds that it's taking us to transact in any one of our facilities per customer. And that has paid huge dividends, huge dividends for us. You're going to see a slide later on in Donna's deck that we're well below 5 minutes. When we started this, we were close to 6 minutes per customer. When you take that times the thousands of transactions that we do, each real productivity. Many of you have asked over the last couple of years, "wow, how have you been able to grow as fast as you have and create that operating margin expansion? How you've been able to manage the cost increase at a fraction of what the gross margin increase is?" It really has its roots in our focus on capacity creation. And then, of course, employer of choice. Again, as I said, there's nothing that I have that's unique. I'm not Apple. So if you want to buy an iPhone, whether you like Apple or not, you're going to do business with Apple. There's not a single thing you can buy from me that you can't buy from somebody else. Our employees are the heart and soul of our business, literally. Having the best people that feel that this is a place where they can have a career, not just a job, that they're part of a stable, vibrant growing company is important. That we develop them. We have our own education center. We call it the Edge. Some of you may have seen it on other tours in Dallas. So we have a fully staffed education center. We use that for MITs, which are manager and training, which generally are folks that we recruit right out of college to be part of the incoming management development program in our company. We also have what we call [ PV ] MITs, which are people that already work for us. You may be a counterperson or an inside salesperson, and you have expressed the desire to, "look, I'd like to grow my career. I'd like to be a branch manager one day. I'd like to be a sales manager. I'd like to be an operations manager, region operations manager or a district operations manager, right? I want to grow my career " Well, we have an obligation to help. So we have a fully funded team, which rolls up under Luther, that has our -- that staffs that facility in Dallas to develop our team. And then, of course, we think rewarding our folks for the success is critical. So we've had -- if you look at our compensation system and you -- those of you that followed us for quite some time realized that our compensation system is very skewed towards variable comp for bonus if the company does really well, we pay a lot of bonuses. Our bonus compensation, as Melanie reported when we did our first -- our full year 2021 results, our bonus compensation was up millions and millions of dollars. That went to the employees, which we think they view as being rewarded for the hard work. Because $5.3 million worth of business transacted in 2021, we're off to a very good start this year, that doesn't happen by itself. These folks are working really hard. But the important thing is they also get to share in the success of the company. And quite frankly, the money we spend there, that's the highest return investment on anything that we could do is really investing in our people. Think about as a branch manager, right, or sales center manager, if I spend time developing you, if you become a better leader or if you're a region manager and you become a better leader, you affect the day and you affect many people that work for you. You affect their careers. You affect their experience. We can set a culture at the top that says, oh, this is what working like is, this is what working at POOLCORP is like. But if we don't do a good job of training the frontline managers to be able to deliver that same culture at the local level, it doesn't work. So that's why funding our education programs and this whole spirit of employer of choice is really core and central to our success. So let's talk about near-term business environment. Demand is continuing to be very strong. So I was with a bunch of dealers at an industry meeting last week. And I can tell you that they're all reporting to me that business is brisk. You can look at the permit data. Anything you look at would tell you that demand is very strong. I was in Dallas at the end of last week. I met with our region manager in Dallas and he was telling me that the builders in Dallas have tremendous backlogs. And there's still a lot of demand, not only for new pool construction, but renovation, remodel of the existing installed base. Adding on features, right? Whether it's heaters, which were added last year, which extends the season. Whether it's adding automation, which really affects your experience as a pool owner. There is significant demand in the pipeline for 2022. Again, everybody we've spoken to says they're either booked out well into 2022. Some of them are already booked through 2022. So again, very encouraging. Now we also step back and look at, okay, the product that we're selling, outdoor living. From a pure demographic perspective, that's not going to change, right? Healthy outdoor living is something that is here to stay. That's not a fad that says, I don't want to pool, right? And once you have a pool, by the way, you have to take care of that pool. So there is great demand. And then when you couple that -- I'm going to talk a little bit about demographics and the shift to the population and where people are moving. Pools become even more and more desirable. So again, backlogs are good. The other reality is inflation. There's tailwinds and there's headwinds as a result of inflation. Again, those of you that covered our company for many years know that we used to say repeatedly, inflation was maybe 1%. In a crazy year, sometimes 2%, while we've had a couple of years of significant inflation. And I have a slide that we'll give you a little more details on this. So we've seen price increases that have certainly added to our revenue growth. The supplier cost changes have provided a buy-ahead opportunity, which has helped us from a margin perspective, too. That's the good news. On the operating cost, there's headwinds there. Absolutely, no doubt. Warehouse space right now is at a premium, which is crazy because I've been in the warehousing business or distribution business for this is my 34th year. And I remember what lease rates were when I first started in my career compared to what we're paying now, it's just -- it's insane. And every time we renew a lease, somebody thinks that they have Park Avenue property. So it's crazy. Lease rates are going up. So that's a reality of the environment that we're in, and we have to deal with it. Which means that going back to our capacity creation initiative, that's important. We have to make sure that we're getting as much out of every one of those facilities as we possibly can. Why? Because that offsets some of the pressure of having to say, well, I need more space. I need to move. Lease costs are going up. And then, of course, high demand and supply chain backlog. The good news is you all saw that we ended the year with quite a bit more inventory than we had before. And that's very comforting to me. It's also very comforting to our customer base, right? So I would tell you, we're starting the year in a much better position than we started the 2021 season. So that's good. The bad news is, is that there's still some supply chain issues around certain products. Last year, it was a lot of products. This year, it is around a smaller number of products. But there are certainly headwinds and supply chain issues around certain things. And no secret what they are. So chemicals are still going to be tight this year because the plants that burned down in Louisiana a couple of years ago still hasn't come back online. I don't think it's coming back online this year. I think it's going to come back online in the 2023 season. That's the bad news. The good news is, is that we now have products flowing in from Asia to basically backfill that capacity. And again, when the plant burned down, those supply chains hadn't been established. We were right in the heart of -- in the beginning of COVID. Nobody know what to do. Transportation, ports were closed. So even though that we identified some product in Asia, getting it from Asia, getting it made from Asia and getting it to the U.S. took a little bit. The good news is, is that we have product going. So our chemical situation is much better than it was a year ago. But anything with a microchip in it, we're not exempt from anything else that you guys are reading in the paper or seeing on TV, anything with a microchip in it. So some of the automation, some of the variable speed pumps that have a microchip in it, those are the places that we're getting -- we see pressure from a supply chain perspective. But again, this didn't just happen, right? The reality is microchips have been short for a year, right? So they're still not enough. The industry would take more if we could get more. But we're managing. And again, we have more inventory today to start the season than we had -- last year, you guys have seen the dollars. So we feel really good about that. Inflation, the -- as again, we talked about, 1% to 2% was normal. Demand coupled with rising input costs has accelerated price increases. Those of you that may be a little bit newer to the industry don't know that in the past, we basically will get one price increase at early buy season, which was in the fourth quarter of the year. That price would essentially stick, ride all the way through till the next fall when the next price increase would be issued and factored into the market. Now we have seen that the industry has experienced multiple price increases, which is atypical, but we've had it for the last couple of years. I can't tell you that -- if I knew for sure, I would tell you. But frankly, nobody knows for sure. Wouldn't surprise me at all if there's continuing -- based on what's going on with the price of oil and everything else, if there is another around the price increases this year. We haven't been told that. But again, it's one of those things that we have to consider. And if that were to happen, what does that do? It provides some opportunity from an inventory perspective. Also provides some additional revenue. So 2021, we think inflation was in the 7% to 8% range. And our guidance for 2022 was 9% to 10% range, and that assumes that we don't get any other significant price increases for the year. If it does, we'll change that. Chemical inflation in 2021 was 20%. And there was additional price that was put into the chemical space in the first part of this year. So that number is a little bit higher for this year. But again, it's factored into our overall 9% to 10%. Again, one of the beauties of the industry is price inflation has traditionally passed through. It doesn't get trapped in the channel. So it's passing through to us. It's passing through to the consumer. One of the things that -- if you talk about chemicals, because some people say, it's crazy, and chemicals are very expensive. The Trichlor tablets, which were very hard to get, and they're expensive. But when you put it in context of how many of those you use, it's not going to change anybody's behavior. Because if you think about a tablet, they're about 8 ounces. So about 0.5 ounce, right? Or about half a pound. So 2 tablets is about a pound of chemicals. So if pre-COVID, those chemicals were, call it, $1.5, $1.60 a pound, and let's say that today, those products are over $3 a pound, so you're talking about -- if I will use 2 tablets in my pool a week, right? So it went from $1.60 to $3.20. I don't know that, that's going to cause anybody to say, this pool is killing me, because I have another $2 a week in chemicals during the season. And quite frankly, your chemical though, depending on time of year, so that would be at peak, right? During the colder months, it's even less chemical. So again, is it a big number from an inflation perspective? Yes, it's a big number. But does it come -- the reason it passes through the channel is it's not a number that's going to change anybody's behavior. So it works through the channel. The same thing with a pump, right? If you have a pump, our variable speed pumps now more than they were a couple of years ago, you bet. But if the water stops moving in your pool, you don't have a choice to say, well, wow, that pump is an extra $200 now. I don't want to buy it. You have no choice. You have to replace that pump. Because unless you have that water moving, it's going to turn green. And then you're going to end up with mosquitoes and frogs and an unsightly mess in your yard. And let's face it, you're using a pool every day whether you're in it or not, right? Whether you're in it or not, you're using that pool because it's part of your yard. It's part of your landscape. So you have to maintain that pool. You have to maintain that pool. And whether you're talking about -- on the material side, when you consider that on the price of a pool, material makes up 25%. The vast majority of that is labor. So even with the increase on the cost of the material that we would sell, that's not the deterrent that says, "hey, you know what? I'm not going to do that project." So inflation is real. It's real. We all feel it as consumers. We see it as the bridge between the suppliers and our customers and how that falls -- or flows all the way through. However, we've been fortunate that it passes through the channel. So it's not materially affected demand. And quite frankly, it has provided some gross margin tailwinds when you consider the fact that our inventory is significantly higher. So of course, that's going to help from a gross margin perspective this year. The competitive landscape. So what we would say is wholesale distribution is still the most efficient channel to market. When you consider the numbers that I started the presentation with: 2,200 suppliers, 120,000 customers, a couple of hundred thousand different products. The best way for that product to flow through the channel is through wholesale distribution. So from a competitive landscape, the customer base is fragmented. Supplier is fragmented. There have been recent investments from private equity into the space. So private equity has come in, and they bought some distribution businesses. The reality is, there is no new competition. They simply bought the existing businesses that are out there. So there's no new competition. There's new ownership. There's no new capabilities. So people say, has it really changed the competitive landscape? And the answer from our perspective is, no. Because the same people that were running those other companies are now running them now as part of a private equity backed group. And there's many, many, many differences between how a business like that operates and how we operate in terms of tools and resources. There was a thought -- a couple of years ago, some of you said, specialty retailer is going to get into supporting. They're going to go after the professional trade. Again, specialty retailers lack the infrastructure to serve the professional trade. You guys walked into a typical pool retail store today, the Pinch A Penny test -- our training store that we have. That's not unlike almost every pool retail store that you would see. So a fairly small footprint. Our branches would be 15,000 to 20,000 feet. If we can serve a professional out of a 2,000 square foot store, then, boy, am I way overinvested in real estate? So it's just a -- the value proposition is very different. So they lack the infrastructure in order to really cater to. Now, let's not kid ourselves. Last year, when chemicals were really short or if it happens to be a convenience is, if I go to David's pool, and I look in his pool, and I'm like, wow, you need some algecide, and I'm out of algecide on the truck. And there is a pool retail store that is half a mile from where I'm at or a mile from where I'm at, or I could drive 4 miles or 5 miles back to SCP. I don't kid myself to think that, that, that a service tech is going to drive all the way back to SCP if all he needs is a $15 bottle of algecide. He's probably going to go in there and buy it. I get it. It's a convenience thing. But are they going to have the parts? Or they going to have the whole goods? Or they're going to have the commercial-sized chemicals? Because remember, those are not bought in consumer size quantities typically. And they don't buy -- nobody buys algecide a bottle at a time. They're buying a case or cases at a time. So again, specialty retail, it's just -- it's a completely different model. I think it's -- there's a -- certainly, there's a convenient aspect. But when I look at them as -- in terms of competition to what we do for the majority of our business, let alone construction that's just on the maintenance side, I really think it's a -- there's a completely different set of capabilities there. The M&A pipeline is still robust. We remain strategic and disciplined buyers. I think one of the things that you guys have come to know and expect about POOLCORP is that we are very disciplined allocators of capital. So we look at -- you can imagine from where we sit in the market, there aren't many businesses that transact that we don't get to look at. Okay? Most companies that have decided they're going to sell, they want POOLCORP to look at it because we would be -- could be an attractive acquirer. So we look at almost everything that transacts. And I would tell you that we are disciplined and we're strategic. So there are some businesses that we like and we say, hey, look, whether the multiple or the price is up a turn or 2. So I would tell you, price is now versus what they were a few years ago, yes, there might be a couple of turns higher for some. Some want just a crazy multiple. The difference with us is they don't need to buy anybody in terms of a distributor because I'm in almost every market today. We also have the ability to greenfield. So it's not a question of, "wow, if I want to get into that market, I have nothing there. I could try and greenfield and put 3, 4, 5 locations to make it credible " That takes a long time. So probably better if you want to be in the pool business in that market. If there's somebody that you could buy, great. They don't have to buy anybody because I'm already there. So for me, it's a question of capacity. For me, it's a question of capabilities. If there's something unique about that business, are we in a position to fund it and buy it? Absolutely. But what you count on from us is to be disciplined with that capital dollar and say if there's nothing unique, and you can get that same business, you can grow with that same share by opening up a facility, and your investment necessary to buy versus greenfielding, if the return on capital is better for greenfield, and then your expectation for us should be, well, then don't pay anybody a bunch of money. You should greenfield and open up. And that's what we do. But in areas where there's something that's unique, so Pinch A Penny, for instance, we'll talk about in a minute, there was a bunch of unique things about that, that says, could I have built a building just like you saw? Sure. But there's a lot of things that go on inside of that building and capabilities and knowledge that would have taken us years to go get. So that, in my mind, is a very strategic acquisition. Buying another distributor that happens to be across the street from me in town, again, there's a price where it's logical. And we've done that historically for many years. And we look at those. We have a pipeline full of businesses. If it's strategic, and we like the culture -- because culture is a good thing about this business. I don't want to buy a business with a lousy culture because POOLCORP has a great culture. And I don't want to take that problem and -- take a problem child because I don't need to because I already operate in those facilities. If you take markets like Dallas, for instance, in Dallas, I have 12 facilities. In Houston, I have 12 facilities. In Tampa, I have 5 facilities. So for us, it's not a question of, wow, I need to go open 6 businesses or 7 businesses to be credible. It's like, no, if I really need it and if the economics make sense, can we buy it? Certainly. But am I going to pay a crazy multiple for something that I don't need? No. And you wouldn't expect us to nor want us to. So long term, trends and outlook. The housing market, rising home values and increased home investment, those are very common themes that we see today. The favorable U.S. population migration trends. I was reading an article coming down here yesterday, very -- timing was awesome. But it basically says there's a 1,000 people a day moving to the state of Florida. 1,000 people a day moving to the state of Florida. Texas has a very similar number, right? So the number of families that are moving to Texas. So again, you have families that are moving. The migration pattern is -- the joke in our industry is now moving vans go North, right? They go North with oranges, South with furniture. So you have a bunch of people that are moving into year-round markets. Outdoor living, whether it's a pool, whether it's a patio, whether it's a spa, those are all very high on everybody's list of wants and needs, right? If you think you're going to live -- if you're going to live in Florida, so I sell my house up in North. I have -- the markets are good everywhere. So I'm pretty flush with cash. I'm coming to Florida. I'm going to be in a year-round market. So this is the place. Have I thought about having a pool? I lived in Buffalo, New York. It's kind of a stretch. It's kind of a stretch. I'm not going to put a ton of money into a pool in most cases in Buffalo, New York because the season is so short. There's some very nice pools there. But for the most part, the nicer pools are in areas where we're in a year-around market. Well, that happens to be where the population is growing. So that will continue to fuel our growth. The aging installed base. The installed base of pools which we put at about 5.4 million pools now today, the average age on that is 20 years plus. So I look at that and I say, okay, there's 20 years. And those of you that have a pool understand this, and those of you who don't, I'll just give you a quick picture. So when you think about a pool, you got to think about, there's the equipment tab, which is very similar to the HVAC systems and hot water that you have in your house. The useful life on equipment pad, if you take care of your water, now this assumes that you balance your water and that you maintain your pool, it can get 8 to 10 years, again, depending on whether you're in a year round market, depending on whether you've spa and all that other stuff. The interior surface of a pool is like the exterior surfaces of your home. But there's a couple of things that happened. One is, if I take care of my water quality, the interior surfaces of a pool last longer. If I don't take care of the water quality and the water becomes very corrosive, you could take a brand-new pool, and you can wreck it inside of a month. You can wreck the finish on a pool. But then there's also colors and style, right? So there's colors. Those of you that have had the fortune of having multiple houses, I think back -- my wife and I were actually -- last weekend -- I moved my wife 11 times. She's a saint. So we were just looking at pictures at some of our older houses. In the very first house that we built, we looked at the colors that were in the house. And I looked at it and go, what were we thinking? So colors change. I have a pool that was built 10 years ago. It looks very different than a pool that's built today. There's new design features. So I built a pool -- my first pool a couple of years ago. I have a tanning ledge in the pool. If you asked me 10 years ago what a tanning ledge was, I had no idea. But I know that for pools, they're in now. Everybody wants a tanning ledge because they're great for little kids, because the water is going this deep. So they can play and splash in the water, if you want tan, whatever. So it's one of those things that if you look at a pool that was built 20 years ago or even 10 years ago, you don't really see a lot of those. But if you look at pools that are built today, you see a lot of tanning ledges. You look at water features. You look at -- again, we talked about a pool being -- having a strip of land around it or a strip of concrete around it. Now you have acres of decks in some cases. Outdoor lighting, water features, fire features. So the market is getting bigger. So that upgraded pool features, that's what that means, is that pools today are different than they were. And it all starts with that tank that -- the vessel. When we count 5.4 million, it's the vessel in the ground that we're counting. But a remodel and a renovation is simply taking that vessel that holds the water, and you can add the decking to it. You can add the water features. You can add the wire -- the fire features. You can add automation, right, which is the final last bullet. So there are today, of the 5.3 million pools, the vast majority of those have little to no automation on them, yet our homes are all becoming automated. The good news is, is that manufacturers are coming out with more and more connected products. And there is an expectation in the market from people that say, I want a connected pool. So I have one of those connected pools, right? But it allows me to do a couple of things. I can control everything from my phone. Every time I do an investor conference -- we have -- Melanie and I have one coming up in Boston. Every time I sit and we explain this to folks, guaranteed, I sell at least one upgraded automation system. The people that don't know they exist, friends of mine that come to my house for the first time that have a swimming pool and they look at mine, and then they say -- I turn on some features from my phone. They're like, how do you do that? I'm like, my phone. Well, I don't have that. My builder never even told me about it. Maintenance guy doesn't even tell me about that. So again, there's a huge upside and opportunity to modernize the pool pad. So again, this is a little bit about the favorable U.S. population dynamics. So this is the forecast from the Census Bureau that across the South, 18% growth, West, 21% growth. Sorry for the Northeasterners, it looks like the population is not going to grow all that much. But again, you've got a couple of things going on. You have people that are migrating to the year-round markets. That's really good for us. we're in a healthy outdoor living lifestyle, right? Who doesn't want an outdoor kitchen? And even if I can't have a pad, if I can't have a pool, I have a patio. And I have a patio now. I was talking to a builder the other day. I said how many times are you adding an outdoor kitchen to a pool project? And he said, almost every time when I sit down with a homeowner and say, well, you're spending all this money on a pool. Why don't we do an outdoor kitchen? Who doesn't want an outdoor kitchen? Right? And if you make it easy, and what the builder was telling me says, if I make it easy for the customer, they'll do it. But if the customer has to figure out, well, how do I do that? Where do I do that? Can you do that for me? The question is they say, can you do that for me? They're like, yes. All they want is a price. If it's a fair price, they're doing because they're spending a lot of money on other things, too. The work from home flexibility is a big deal. So we went from everybody commuted every day. You were in the office every day to virtually nobody was in the office to now a hybrid. You have a lot of businesses that maybe your own companies are trying to drive people back to the office. I get it. But I think -- and again, I don't know that there is any certainty on what -- how it's going to work out. But I believe that the end state is going to be a hybrid. I don't think we're all going back to work, everybody is going to make that commute every day. I think with technology and being able to work from home that we've proven over the last couple of years, I think the end state is going to be a lot more flexibility in the work from home. And then, of course, with increasing home values, outdoor living, spending in the core markets, and that's where we are most heavily invested. Again, the demographic trends, you have Boomers, you have GenX and you have Millennials. I guess the real takeaway for me on that is look at the right-hand side, the Millennials, with -- the 25- to 40-year olds, and they're just starting household formation. 72 million folks. And then I'd like to draw your attention to the 70 million -- $70 trillion of wealth transfer that is about to happen. All of that sets up a very robust environment, housing market. And you have people that are going to be owning pools for the first time. That's great. They have money, and they want outdoor living. The days of sitting inside in front of your TV -- like when I was a kid, we didn't have a patio. And frankly, none of my friends had patios. Maybe a couple of them had pools, but it was basically an inside. It was -- people spent time inside. People were finishing basements. Now the bigger deal is outdoor living: pools, patios, fireplaces, fire pits, outdoor kitchens. That's our -- if you look at the realtors, if you follow the information as the realtor shared, it would tell you that there was a time when -- like I would tell you this, I'm -- like I said, I moved 11 times. Early on in my career, we never had a pool. This, in fact, the pool I have now is the first time. And the reason is because I always knew I was going to move in about 2 to 3 years. So every time I talk to realtors, I was like, look, don't buy a house with the pool because I won't be able to sell it. What's the most desired feature on a house right now if you ask realtors what they want is a pool or outdoor living. So again, it's come into favor, and we don't see that trend changing. Again, here's the new pool construction. The maps, so you can see that. You can see where it dropped during the great Recession. Dropped to 40,000, 50,000 pools. It's now back -- last year was 120,000 pools. We think 2022 is going to be even larger. But again, the important takeaway on this is really the average age of that installed base. So it provides almost an endless opportunity of people that -- so there's a waiting list for people that want to get pools built. No doubt. There is also a bigger waiting list for people that want to have their pools remodeled. And those aging installed base are pools that would have no automation, no technology. The number of heaters that we sold in the last couple of years is tremendous. Why? Because people are like, if I have the pool, I can heat the water and I can use it longer. So that simply just extends the pool season. Home investment spending, again, home improvement. I think we talked about most of that, so I won't repeat that. And then I look at these product categories. Our automation and control sales growth from 2021 -- or '19 to 2021. Look at all of those numbers. So almost all of them up 100%. Right? So automation, sanitizing systems. Why? Because chemicals is part of it, so there's a chemical shortage. But you also have a younger generation that says, I don't really want harsh chemicals. Is there another way for me to sanitize our pool? So salt systems, UV systems, ozone systems are -- also, we see those growing tremendously. And I don't think that trend is going to change, because, again, you have the Millennials that this whole environmental-friendly thing, that trend isn't going to change. So people are just saying, "if I can have a pool, and I can take -- I can put half of the amount of chemicals in my pool because I have ozone machine or have a UV machine." That's frankly is an easy sell. And that's not going to change. Demand for those products is going to improve. Heaters, heat pumps, we talked about, extend the season. Also, the heat pumps are a far more efficient way to heat a pool. The other thing I would tell you is that a lot of people don't know is a heat pump -- and I keep telling the manufacturers that make this, they have a branding issue, heat pumps also cool, okay? So in the Florida market, right? So here where pools can get very, very, very warm, if you have a pool that's exposed to the sun, most people don't know that, that same heat pump that they have -- there's one model that's usually a few hundred bucks more than what they pay for the heat pump that allows you to cool the pool. So you basically can set a thermostat on your pool water and say, look, I want -- year-round, I want 85-degree pool. Well, you can have that. So I live in North Carolina. My pool -- without the chiller on, my pool is exposed to the sun. My pool will get 93 degrees. I got to be honest with you. I really want to swim in a 93-degree pool. It's just not all that refreshing. But I can turn a chiller on and set my pool to 85 degrees, it feels awesome. And again, with all of these folks moving and the fact that most heat pumps today are just heat pumps, there is a large opportunity to have the marketplace continue to grow, because instead of just a heat pump, now I'm going to get a heat cool. Robotic cleaners, right? There was a time when almost every pool years ago had this, I used to call them a pressure cleaner or a suction cleaner. And the name, at least to [ calm out the kid, I'm going to draw them blank ] right now. But again, those were -- that was the standard. It was a big hose in your pool and the thing just kind of randomly went around your pool. Did an okay job. Didn't climb in the wall. Didn't scrub the wall. Guess what? That same room that you have in your house that vacuums your house effortlessly, that same technology exists in the swimming pool. So you have pools that -- you have robots that climb the wall and scrub the wall. So I have a robot. Why? Because if I didn't have that, I'd have to go out there and scrub the walls, right? And I would also be stuck with that big 2-inch hose in my pool which I don't like. So most new cleaners that are being sold today are robots, Why? Because they're better. Plus, if I see something in the bottom of my pool, again, with my phone, I can drive the robot over to the area that needs to be cleaned up with leaves or debris or something, and I'm done. Before, I'd have to go get the net and the brush and try and get it out. Now I can just steer it over with my robot. Variable speed pumps is, again, we got some help from the DOE. So those are required now. But they're also better for our customers. They're quieter. They're much more energy efficient. And they're better for the environment, too. Natural stone pavers, we talked about. Look at the pictures there, those 2 pools, right? That pool on the right. Funny story, when I saw that picture -- when I lived in Dallas before I joined POOLCORP, I was going to put a pool in, and my backyard was very much like that. And I was going to build that pool, right? And I looked at it, I'm like, wow, this is crazy. It's almost exactly the pool that I was going to build. And again, I didn't know anything about the natural stone, the travertine and all this. This was in 2016. So I look at that pool and I'm like, how the one on the right is so much nicer. There's so many more features. Which pool would you rather have in the backyard? Well, that was how pools used to be built. This is the pools that they're building today. Pool Builders don't want to build the pool on the right. They don't want to build a pool on the right. So our NPT franchise, right, which is the natural stones and the pool tile and the pool finish, are all part of what is benefiting and helping, quite frankly, fuel that growth. And LED lighting is the same thing. Again, those of you that have been around the while know that swimming pools at one time, you had a light, it was a white light. You turned it out at night if you want to swim at night. Great. Now like LED light, you could have multiple colors. You can have it think, you do all kinds of things. It basically changes the theme. And it basically makes the pool a part of your view from the whole time that you're in your house and awake. So my pool is in the backyard. I look -- we look out over the pool. The pool is lit with LED with colors, changing colors. It's gorgeous, it's gorgeous. And the only difference is it's an LED light that you can program versus the old technology which was a white light. And your programming was it's on or it's off. Less than 30% of the existing pools have that automation, right? Majority of new pool construction is getting the automation. Every time a neighbor gets a pool, we always -- we can tell, we talk to builders, they say, look, I put a pool in here, and I deck out that pool, as soon as the neighbor looks over the fence and -- this is our end, say, hey, I can control this new pool. I can do everything with my phone. The first thing they do is call their dealer and say, hey, I want what she has. Can you do that to my pool? Her pump, I don't even hear it. My pump sits down on my bedroom window and its screams. Can you change that? Sure, I can. It's a variable speed pump, newer technology, and it's quieter pump. This is a connected outdoor living, right? Again, just an example of everything -- basically what you're looking at, whether it's the outdoor lighting, the fire, water features and all that is all done through the smartphone. Now have an idea that there's a fair amount of interest in Pinch A Penny. So I'm going to spend a little bit of time on Pinch A Penny. So for perspective, right? And I know that I heard from you guys that most of you have enjoyed the tour. And it's a very, very impressive facility. It's 5% of our revenue. Okay? So today, it represents 5% of our revenue. So just kind of keep that in perspective. It's a very impressive facility, but it's a very small part of our business. We are very proud of the acquisition. We think it has a lot of potential. But it's 5% of our business. So just keep that in context. So what you saw was you got to see the DC, which is 210,000 square feet. There's 265 franchise locations in Florida, Texas, Louisiana, Georgia and Alabama. The vast majority of those locations are in the state of Florida. And then, of course, you got to see SunCoast Chemicals, which is 105,000 square foot. What I would tell you is a state-of-the-art and pristine chemical repackaging facility. I've been to others that I wouldn't touch with a 10-foot pole. My first sense when I walked in that facility was I was expecting the chlorine aroma to knock me off my feet. And I walked in, I looked around, and I'm like, wow, this is cool. This is a state-of-the-art facility. So let's talk about the franchise. So you can see on the map, you can see the red dot, high concentration of dots in the state of Florida. And you can see Texas is a growing market for us. We have some in Georgia and Louisiana. But everything that you saw, all of the -- or the warehouse that you saw ships to every store in the network. So you see the locations down in Houston, Texas. That's a 19-hour drive from where you stand. Every Monday morning, a truck leaves from here, drives 19 hours to Houston, drops off along the way, but drops -- this final drop in the Houston stores and then comes all the way back. On Wednesday, a second truck leaves follows that same route. That's the job, right? So all of those stores are delivered out of Clearwater. Who has a bunch of warehouses in the state of Texas? Me. Who is the in the state of Texas? Me. Do you think that would allow us to be more efficient in how we operate and supply the stores in the state of Texas? Of course. Do we think it will allow us to continue to grow that platform throughout the Sun Belt? Absolutely. Are you going to see us become subway and put 200 dots on a map every year? No. We have no interest in doing that. We have a business that is a very high-quality business with highly desirable franchises that we will continue to scale. But again, for perspective, we are targeting 8 to 12 new franchise locations a year. We think we can help them grow faster because of the warehouse network that we have. No doubt in my mind. We think that the expanded product offering, whether it's the NPT products, the building materials, we think that makes it easier for the franchisees to grow and expand their business and help more pool owners get the work done that they want to get done. We believe that the chemical sourcing and availability and gross margin benefits through SunCoast chemical is significant. There's a lot of potential there. But again, for perspective, we've owned this business for about 75 days. So we don't -- and we're not going to tell you today that, all right, here's exactly what our chemical capacity is. And here's how we're going to -- here's what will be this milestone, that milestone and that milestone. Logically, we will leverage the assets that we have. We will max out the facilities that we have. Why? Because who has the largest appetite for Pool chemicals in the world? Us. So we have a great asset we'll use. The primary purpose of that plant is to service the stores, do they have surplus capacity that we will soak up in Pool Corp.? Absolutely. Can that one facility supply all of Pool Corp.? Absolutely not. We have a massive appetite for chemicals. But is there capacity there for them to do additional product for us that they were doing for independent distribution before? Absolutely. Can we leverage the assets and stretch capacity to do right you saw -- maybe if you saw when you walked by, they were actually running Regal liquids, okay? Regal is the SCP brand of algaecides and balancer. So when you walk past that, if you look closely, you saw Regal on the bottle, that's our brand. So they're now making our brands. So again, we are -- it's brand new. It's brand new. We clearly see the benefits over time. But the key word there is over time, over time, right? So the operating cost synergies through transportation and logistics, absolutely. We import a lot of product, right? We import a lot of product. We have CSLs in the East Coast. We have CSLs in the central area. And we have CSLs in -- out over on the West Coast and up North. There's a lot of products come into the Port of Houston. There's an opportunity just from a backlog perspective that truck that goes today all the way back to Clearwater, which one day we hope it doesn't actually return to Clearwater, that we're serving Texas from Texas. But today, there's an opportunity to put freight on that truck from a backhaul perspective. So there's lots of opportunities from a synergy perspective. Everything you saw in that building that they buy. Everything that they buy, today, I guess is we now, but everything in that building, we buy. So there's cost synergies, same suppliers, right, same suppliers. So we'll end up with better fulfillment and a strategic advantage in terms of our purchasing and then, of course, the retail support systems. So one of the questions that I got have gotten several times is what about the channel conflict, Pete? Is that a big deal? And what I would tell you is that when we first announced the deal, there were some customers that said, "Wait a minute. You supplied my retail store, but now we're competitors. I don't know if I like that." And I'm like, "Okay. Well, let's think about that for a minute. We're actually not competitors because that store is independently owned and operated." So today, we operate 3 stores that are company stores. Eventually, that will likely goes to one because I think I have to have one. I have no desire to any retail stores and won't. We're not going to open Pool Corp. retail stores. I said to the customer outside here that store is independently owned and operated. And guess what? The Pool store that is across the street from you or around the corner on the other side of the town is also your competitor, right? Yes, I sell them, and you know that. When you go into the counter, if the guy in front of you or the lady in front of you, he's also your competitor, right? Yes, and I'm selling them. And I said, here's a dirty little secret. We've also been selling Pinch A Penny. So they're independently owned and operated businesses. So the idea that we are somehow now competitors, once we have explained this, and again, it was one of the risks that we took when we did the acquisition about how big a deal is it going to be. And I can tell you that so far because of how we have operated and will operate, it has not created -- the threat of channel conflict has not materialized. And most of the customers, and I'm with customers all the time have said, "You know what, I think it's a good idea for you." It's a good idea. It's a good acquisition and there are synergies. If you look at those retail support programs, right, let's talk about that for a second. Water chemistry and testing. Jim told you rightfully so that the heart and soul of every Pool retail store is that water chemistry station. Prior to the acquisition, we sold a lot of independent Pool retail stores our chemicals. But here was my sales pitch, I've got a great supply of chemicals with the exception of last year. So I have a great supply of chemicals and you can get pretty much everything you want from me. But what I didn't have was the software that allowed them to become a better retailer, that allowed them to professionally prescribe the recipe that Jim showed you that the computer printout that says, hey, based on the water test, here's what you should put in the store, okay? So we now have that software that we will eventually brand as Regal. It will be offered to the independents so they, too, have a professional system. So one of our other competitors that services the mass and some independent retail stores has a system like that. Leslie's has a system like that. Unfortunately, I didn't have one for my independent retailers that I now have that we will be adding to our toolkit, which will help them sell more product. So water chemistry is a big deal. Point-of-sale system. So we have a B2B tool called POOL360. You guys have been following that for many, many years. Melanie is going to show you the stats on where we are with that. But what we didn't have is a point-of-sale system. So we allowed you as an independent retailer to buy product from us by going into POOL360 and enter the order. You can enter the order, you can do it 24 hours a day, we would deliver it to you. The operative word is you had to enter the order. With the point-of-sale system, we'll be able to say to that same store, "Would you like to run our point-of-sale software. And by the way, it will eventually be linked with POOL360. So that it will do your replenishment order for you." So we think that -- and the same thing in terms of most of our independent retailers also have service routes, right, full cleaning routes. Their software that helps them run their business better. We now have that. So the point is there's a suite of tools that we bring to the independents that will help them run a better business, and we think create tremendous value for them, which makes a stickier transaction. So before we were -- we have a product, and we have a lot of it. We have more of it. We have it in more places than anybody else. But now we have a technology piece that we can match with that, that, frankly, makes our service offering second to none. So with that, I'm going to be done, and I'm going to turn it over to Donna, who's our Vice President and Chief Marketing Officer. She's going to talk. And after her presentation, we're going to take a 2-minute break. Go out and you guys will be able to grab lunch, come back in and we'll continue the presentation and go to Q&A. Thank you.

Thank you, Pete. Okay. Let me say just a few slides. So I'm going to cover the market, the market opportunity the market reach, how we get there and then our sales center network. So starting first, let's talk about the addressable market, $28 billion of the areas we touch. So the wholesale distribution, $10 billion, wholesale meaning the wholesale value; hardscapes, which is shared between the Horizon side of the business and the Pool side at $3 billion; irrigation and landscape at $7 billion, just in the areas where we serve those markets; the DIY is another $3 billion; commercial pool, which is a whole other set of pool, $2 billion; and then the European portion, which you'll hear about a little later is also $3 billion. So $28 billion addressable market. The slide on your left is where we talk about the market at $22 billion. Remember that this portion includes the labor. It includes the installation cost. It's what the consumer pays in the U.S. pool market, again at $22 billion. But if you go on the right side, that is the $10 billion that we just spoke about that is the wholesale value. And as you can see, we play in each of those markets, whether it's in-ground pool construction, remodel, repair or the service side of the business. So let's look at that $10 billion and how we address it. Major markets, medium markets and minor. So Pool share, if you look at that portion, but look at how much other additional share is still available to us. So our market share has increased as those markets have each grown. And again, either from the direct side of the business or through distribution, we have the opportunity to continue to grow. Now this is probably the most important slide, I think, that I'm going to cover with you today. So Pete talked about the opportunity for acquisitions when we strategically look at those and what we can gather from them. What are the capabilities that we can pick up just as you saw with the Pinch A Penny side on the chemical packaging. Well, what's extremely important about this slide, 410 locations. Not just important because we have 410. What is really important, if you look at those acquisitions and the new locations we have opened in '20 and in '21, all of those are completely integrated into our system. So the enterprise system that we run includes all of those new locations. Meaning if you're an employee there, you're in our Workday system. If you are a vendor supplying to those, you are able to see our demand. And if you are a customer, you're again part of that included system. That's how we do the integration into our businesses, and that's how we continue to grow and we will continue to do so in the future. We have a strong market position. On the domestic $10 billion, that's 5.4 million pools of the in-ground install base, plus another 3 million pools that are above ground. 280 of those 410 locations I just discussed are for the pool side of the business. We are growing that at an annual rate of 6% to 8%. So let's talk to other areas of growth. So looking at the commercial pool business, $2 billion, but that's another 300,000 pools in addition to the residential side. We have 75 locations that are stocking the commercial products. When a commercial pool is down, it's extremely important to get it running again. Time is money. It's a resort pool. It's a club pool. They need it up and running. So having those products is a great competitive advantage for us. We also have all of the specialized bid in spec for the new construction of commercial pools. That is growing annual rate 10% to 15%. Again, this is organic growth, opportunity to grow in an expanded market. The hardscapes and outdoor living, as we talked about, everyone now wants that outdoor oasis. $3 billion for that market, just in the outdoor living and hardscapes. We have 120 and growing of our NPT locations. I talked to someone earlier about when we did the presentation in Orlando. We had 12 of them at that time. And we've grown them extensively across the country. It gives the consumer an opportunity to come and touch, feel, look at those products, what do they want to put around their pool bed. That is growing, again, organic growth of 10% to 15%. So you see the difference of looking at the basic pool and then as we grow all of the other categories. Our competitive advantage for our sales center network. We are where the pools bar, and we are going where the pools are going to be. So if you look at this, 70% of our business is done at that sales center counter. That's a lot. This is where we with you today. Our customers are there in that sales center doing business. They expect them to have the products. Those teams have the product knowledge. They know how to help their customers at the local level. We continue to open sales centers as we grow. And we continue to widen our competitive advantage every single day as we open those sales centers. And we have them in the right place and are able to provide the product at the right time. We spoke about some of the other categories where we're growing quickly with the building materials that have faster pace, hardscapes, fiberglass pools, commercial pool. We have the facilities. We have them in stock, whether it is the building part of it, the hardscapes or the commercial pool to continue to grow. Now then we talk about where the pools are. When you flew in yesterday, did you happen to look down? Do you see how many pools are in the Tampa market, right? So that's -- we have more than anyone else in these locations, 5 locations in Tampa. They have a full complement of products. They have 2 of those consumer showrooms in this market. And when we talked about hardscapes and the ability to stock, we have offsite storage for hardscapes. We have all of the equipment to deliver, so we can do own site. But again, let's go back to 70% is done at the counter, especially in a high service market, which you have in Tampa. And a great opportunity for us, 4 more are scheduled for 20 -- this year and next year, 4 more locations in this highly visible market. So that's just giving you an example of the place you sit today. We've already talked a little bit about our consolidated locations, consolidated stocking. When I talked about how all of the sales centers are encompassed in that enterprise, our CSOs are as well. So when someone needs a product, we're able to bring the product in, take advantage of large capacity buys. That's a cost advantage. It's a competitive advantage for us. We have the technology to help our vendors understand the demand. And it also gives us an opportunity to do private label and exclusive products. So we're able to bring them in and distribute them out to other locations. So finally, what we have is a complete enterprise called pool parts. But we distribute and we take care of the customers at that local level. They know who we are. They know they can depend on coming in to get the chemicals, the products they need even on a daily basis. That's where they come. So with that, we're going to take the quick break. And after that, Todd Marshall, Vice President and Chief Information Officer, will present. [Break]

Who's ready to talk technology? So I haven't gotten to meet everyone personally. But I'm Todd Marshall. CIO of Pool, and I'm going to walk you through at a very high level and very quickly some of the exciting things we're working on related to digital transformation and related technology initiatives. And I'm going to walk basically kind of our journey, some of the new tech that we're working on in the future. Digital transformation is one of those. It's an IT buzzword. IT loves buzzwords. And it's really again -- Pete talked about that driven culture inside of Pool Corp. It really focused again on our customer experience, want to deliver the best possible experience for our customers. And really, again, digital transformation really using technology as the enabler to improve that customer experience, which leads to a plan of new investments, new technologies that we're going to use to improve that customer experience. And then I'll touch very briefly on the future we see, right, when we talk about technology and the role it's going to have in the organization and that continued value creation. So when you look at our journey, our transformation journey, it really starts with our best-in-class distribution, right? It's who we are. And from there, really kind of focusing on opportunities to improve that world-class customer experience that our branches deliver day in and day out. And again, we always want to create and add value to our customers. So from a technology perspective, my team and I focus very heavily on agile cloud-based technologies to make sure that we build the foundation that will handle the needs of our customers and ourselves for the right now, but also allow us to rapidly change and adjust and deliver increased value in the future. We focus very heavily on enhancing again, that execution, right, which is key to our business, key for our customers, helping them run their businesses. And then an area that gets a lot of attention when you start talking about digital transformation is that digital sales counter, that interaction point with our customer. Everybody today wants to do everything from their phones, right? We do obviously, we have a POOL360 Pete mentioned before, and we have related mobile applications. But we knew these were areas that with investment, with additional focus, we could transform and provide again a better customer experience. And when you look at our data, again, with our unique position in the industry that Pete talked about, our data is extremely valuable. It's very, very valuable to us as it relates to charting our course forward. And so again, with a greater distinct focus on our data, we want to -- we know we've unlocked some of the potential, but we know there's so much more we can do with it. And so this is -- again, this is not all exhaust but this gives you -- these are some of the areas we identified very quickly as, hey, these are opportunities for us to transform add technology and again, enhance our customer experience and continue to create additional value. So areas that we started to focus on and invest in, new technology to improve execution. Capacity creation is at the top of one of our IT priorities, tied to what Pete was talking about earlier, right, using technology to help us, again, improve that customer experience and become more efficient. Whether that's tied to efficiency related to pricing moving through, pricing increases moving through the chain that Pete talked about, or maybe it's visibility of inventory for our customers or transparency on when orders are ready. These are all areas that, again, that we've identified that we're working to add technology to put better tools in the hands of our employees. Again, improving that customer experience that we've become known for in the industry, helping our customers run their businesses and deal with pool seasons. POOL360 is 10-plus years old. It's been wildly successful, had a great year last year. But we know we can do more, right? So it's been rewritten from top to the bottom. New user experience. New search technology. The underlying technology that supports it and a whole new framework ready to go. And tied to that buckle very heavily, an improved mobile application, right? Because again, we know that B2B customers want to do everything from their phones. One of the things we were very focused on as a team is that if you look at B2B users, right, they're consumers, too. They've become used to that world-class customer service that they get or improved customer experience as they get in mobile applications and websites every day. So we have to keep step with that. They expect that same level of user experience when they're interacting with us digitally. Bluestreak was an application we rolled out to help our employers -- our employees provide -- or kind of break the customer experience we provide in the branches away from the sales counter and make it a little bit more mobile. That has also been rewritten, same framework, same enhanced search technology. Again, the idea really to deliver a better tool to the employees. And then we're taking it one step further and that we've now delivered a mobile application that our employees can take basically that sales counter experience and go anywhere. They can go to the job site. They can go to a customer location. They can basically anywhere they need to and take an order and be able to help the customers at the sales counter. So again -- and underpinning is investments in our development teams and our development technologies, focusing on continuous deployment and development to create a cadence where we're releasing new features on a routine basis, again, to continue to add value to these applications. So substantial investment in progress here. And then data-driven decision-making. Again, this kind of ties to that strategy, hey, we want to do more with our data by making sure that the applications we develop as well as the data we have now can be used to create greater data-driven decisions, make it more useful to our customers and to the industry. And this kind of creates a plan or a framework or a foundation that we're focused on to really kind of move toward the future that we see. And again -- and one of those principles that Pete talked about is creating value for our customers, right? It's one of our core tenets. So one of the things that we see emerging is really using technology to deliver technology to -- I'm sorry, to deliver value to our customers, right, providing software solutions to our customers to help them deal with the challenges they deal with day in and day out, all of which is going to be tied back to our world-class distribution through the POOL360 engine, right? Whether it's -- and as Pete mentioned when we were talking about the Pinch A Penny technology stack, again, integrated to the whether it's replenishment or it's water testing or whatever, we'll be able to provide that solution. And when you look at what that looks like from a picture perspective, right, this is what we kind of think about when we talk about a B2B cloud. And you'll recognize some of the pieces in that cloud, right, service management, supply chain, digital marketing, point-of-sale. These are all things that we plan to bring together. But again, each one being positioned to help one of our customer segments, whether that's independent retail or independent service, commercial. It allows us really to now create this unrivaled value proposition for our customers and evolving as a digital distributor we intend to be. All right. Jeff? Got the clicker? All right. All yours.

All right. Thank you. I appreciate it. So thank you, guys, for giving me a little time. I'm going to cover Horizon distributors. So Horizon, for you guys that don't know, we're kind of 4-leg irrigation landscape business. So our 4 legs are: irrigation, so sprinkler systems at the home; landscape, so that's chemicals, fertilizers; and then equipment, so we sell equipment, mowers, blowers, trimmers, that type of stuff; and then a fourth category, which we -- is kind of all-encompassing outdoor living. And that outdoor living category, as Pete alluded to, is really where we get quite a bit of overlap between our business and the pool business as now pool builders and everyone is getting into, the outdoor kitchens and all that, and that's the area of lighting that we sell. So in terms of me, I started here in March of 2020. And so really at right as COVID was hitting, I started. And so we have talked about that quite a bit. I would say the 1 benefit for me starting at that time was there was a lot of uncertainty. Didn't know which way the business -- the market was going to go, the business was going to go. And so really, what that allowed me to do is go dig into all our costs, right, dig into what we did, what everyone did, right, from a customer-facing, but also a back-office support. And so really allowed us to position ourselves -- and we'll talk a little bit about margin but really position ourselves from a profitability standpoint. We had been a, what I'd characterize as an underinvested business, right, this was acquired and it always kind of run at 6% to 8% of sales of Pool Corp. And so really, in the grand scheme of things, it was not the priority. And if you look on the right-hand side, what is showed there was really the margin profile was pretty anemic as you compare it to the Pool business. So if you thought about investment dollars and where you're going to go put those, historically, it wasn't going into the Horizon business. And so as I step back and said, how are we going to make sure that this is a viable business and going to grow? Really, the first step for me was getting to a point of profitability where this became a viable investment as you look at the entire portfolio. So we did a number of things, and I'd characterize those that got us to that point. So looking on the left-hand side, this really shows our footprint and where we are today. So we're heavy on the West Coast and heavy on the Southern U.S. The history and the origins of Horizon, we're a distributor out of Arizona and a distributor out of Northern California. So they were both market leaders in those markets. Those businesses came together, and that was really what was acquired by Pool Corp. And you'll see since then, there's been bolt-on acquisitions and some greenfields from there. The West Coast franchise in Arizona is a phenomenal business. A great business, had really been a little bit underinvested, a little bit stagnant. But really, as I dug into it and really understood what that business was, my opportunity there was really just to unleash those guys and let them get back to what they did. Let them go grow that business. And so West Coast was that. As you move further East across the U.S., I would say probably the relevance to the overall brand and the profitability diminished significantly, right? So if you look at Texas, you started to fall off. And then when it got to Florida, Virginia, fell off significantly. And so what I did there is we had 2 divisions in the business when I took over, 2 general managers. We had a West and a South. I pieced off and created a third division so really said, where is the opportunity to grow? And as you recall, the graph that Pete had up there, really the West and the South is where the growth is. And so that's where we're focused. And so by piecing off the Florida division, what I was able to do is put a new general management in charge, it was really a turnaround. So Florida, Virginia was a turnaround. Pete spent 8 to 10 months really turning that business around, getting it operational. In the meantime, we've added 12 branches to his location. So if you look at the bottom, you'll see our branch count when I started and our branch count where we expect to end today. So we started, we're about 70 branches. We should end the year at about 93 branches. So in terms of our growth, trying to get 8 to 10 branches a year. And as Pete talked about, I would say our philosophy on acquisitions is pretty similar to what it is on the Pool side, right? We're going to be very disciplined. And what I found as we went out and struggled with some acquisitions in terms of where those multiples were and where -- what we're able to get there to stretch those multiples, what we step back to say is, could we go do this on a greenfield and do this organically ourselves? And what we've proven over the last 2 years, doing 4 greenfields last year, and I have 6 in process now, is that we're pretty good at them, right? And we get them off the ground. And within 12 months and all those first 4 that came on the ground last year will be profitable. And the ones that we're doing now, we expect to be profitable. So again, that's really the makeup of the business. So in terms of when we got here, I would say it was stagnant, underinvested. What I did was really just get people excited and unleash the growth, things that I think inherently were in that business, in the DNA of that business, but it hadn't really had the opportunity to do that. So having a dedicated leader who was really focused on growth has got that going. And you will look on the right-hand side in terms of the economics, the green line, the profitability. And my sense is part of that is market driven, right, where there were some tailwinds in terms of inflation, things that brought that up. A lot of it is what we did in the business and uncovering some opportunities on the profitability side. And then the growth has been significant for us. Next slide, just digging a little bit in the business to show you our market. So what Donna alluded to, she said there was a $7 billion addressable market for us. $7 billion is in the states we're in today. So the whole U.S. market is about a $14 billion market. If you look at if you follow SiteOne, they'll put up a similar chart which has at about $20 billion. What they include in there is nursery. So we don't sell nursery. But they include in their live plants that they sell. So that takes that addressable market to about $20 billion. So how we look at it is pretty similar to how SiteOne looks at it. And so what you'll see here is the different segments, right? Fairly equal of equipment, irrigation, hardscapes and landscape in the market. And what you'll see on the right-hand side is our mix. And so what I'll say about our mix is we're heavily weighted -- heavier weighted on the irrigation side as a percentage. And it's driven by new construction. So irrigation -- and we were talking earlier about a lot of jurisdictions, new homes require irrigation systems to be put in. So there's residential side, the commercial side. And so in times of demand and new construction growth, integration is a great place to be. It's got a great margin profile, and we're very well positioned in that space. So I feel very good about that franchise. That said, there are cycles. And I think where Horizon got sideways in the business historically it was a driven by new construction than the pool side. And when there was a downturn, we weren't very positioned on maintenance and that type of stuff. So what I'm trying to do and what you'll see here is on landscape, equipment, those things that are more recurring revenue, more maintenance categories is where we're making investments, right? So we're very good on irrigation, I would say, probably some of the best in the business in the markets we're in, in terms of irrigation. Where we're not as strong is some of these other areas. And that's been my focus the last 2 years is really focused on what I'd characterize as landscape, which is high margin profile. What it requires is quite a bit of expertise, right? There's a lot of expertise it's similar to the pool side where there's chemistries and there's things you got to understand that are very market-driven. So we've brought in a lot of expertise in that area to grow. And then outdoor living, right? So that's the theme of what we've been talking about today is that growth in outdoor living. So our hardscape categories and our outdoor living -- our outdoor lighting really are the driver behind that. So as I see going forward I highlighted landscape and outdoor living, right, which today makes up probably about 35% of our business combined. The growth rates that we've had the last 2 years, my expectation is that could we get to 40%, 45% of the business. And from a margin profile, it's pretty good. Hardscapes, I'll segment that a little bit because that is some overlap what we have with the pool side. And we have 4 dedicated rock yards in our business, so stone yards that we operate. And then -- and that's about half of that revenue. And the other half is pavers that we sell out of all our distribution locations. So again, irrigation-centric, great margin profile. From what we see from a backlog standpoint, we feel really good about that business. We've been focused on more of that maintenance business to make sure when there is a downturn, we're well positioned for that. And then finally, just to close out, really. I think I have touched on a few of these but I'll highlight a few in terms of current conditions. I would say have significant backlogs. It says here through second half, a lot of them are through the end of the year, right, so our irrigation guys -- and really for us, it's the next bullet is the bigger issue is it's getting supply. So equipment has been tough the last 1.5 years. Very tough in terms of there is chips, there's Asian manufacturing. There's things in that segment of the business that have made that supply constraint. We've been able -- through price increases, we've been able to make that up, right, in terms of that volume loss that we've had. And then irrigation has been one where you've had significant inflation on the pipe side, but we're now running into some shortages on controllers, things that have chips, right? Things that have technology that's manufactured in Asia, other places. Labor constraints, again, ongoing for us. Drivers, being the toughest one, right, where you think about the wage escalation, wage inflation for drivers. We do a lot of delivery in our business. And then in terms of fragmentation, it's still a pretty fragmented business, right? You think there's a few bigger players now in terms of there's been roll-ups over time. But really feel like there's still a significant opportunity for us. So we're still looking for acquisitions. And we'll continue to be opportunistic and do acquisitions in our space. But also feel very confident in our greenfield model, what we can do there. Again, 10% to 15% target growth in terms of organic growth, feel very in our ability to hit that. 6 to 10 new locations. My sense is that will be a mix, right? So before we had 6 in process. Now that we believe all 6 of those will be in before the height of the season. So in, call it that April, May time frame, those things should be operational, and we should see revenue and profit from those. Acquisitions in the targeted areas. And then really to continue to the business improvement, right? There's a couple of things that we did there. Historically, we had migrated our marketing, our product management, all of those support functions under the Pool Corp. side. And what happened was, just given our sheer size, we got lost, right? And then got lost in that. And so what I did when I came in is I brought that stuff back under me into our business. So that anything that's customer-facing or vendor-facing, we've brought back into our business. And I think it's had a significant impact in terms of not only morale and people feel like, "Hey, we're in control of this now. We're not just the stepchild to the bigger pool business." But also from a vendor customer standpoint where the decisions are now made kind of at our level, and there's not anywhere of the chain we need to go to make some big decisions. So again, I know it was quick. But hopefully, we made up -- made back a little time but I'll be around for questions if there's anything on that, so.

Thanks, Jeff. May I introduce myself. My name is Jean Albouy. I'm the General Manager of SCP in Europe. In the company since 20 years. And I'm going to fly you in Europe to have another view about the growth and opportunity in the market. Let's go to Europe now. We have a presence there with [indiscernible] in Paris. We have 18 locations there. We are the second-largest distribution company in Europe, we present just 5% revenue of global group that already present Pete, in the total revenue of the company. We have done a very impressive job this year and 39% growing on the revenue on sales. And it just represents 12% of the market share that Donna mentioned to you, that $3 billion overview of the European market is addressable market of $2.2 billion in Europe. We have a strong leadership team, really new people involved in place in this new industry. And we are focused for the future on organic growth and also on merger and acquisition. I'm going to share with you some information about that. Important point is Europe represents 30% of the worldwide business. It's a simple industry, with 5.2 million in-ground pool, more or less 3 million on above-ground pool. And one key also point is that business is close to 1 million due to the fact that the land are really small and the backyard are really small, people also invest, especially on the north of Europe on the wellness category called the spa, for example. We are really fragmented. That's mean, the distribution is, of course, due to the situation of the augmentation in Europe. We are really fragmented in distribution. And the new construction pool is not only due to the fact that were impressive that part on numbers on new construction since start of the COVID situation, we are more or less 10 years less advanced than the U.S. on new construction. And we have a great opportunity since the 5 years, of course -- past 5 years of growth in new construction. That means the trend is actually 140,000 unit pools are here. And that was stable things now, the 2 or 3 past year, under up to 110,000 a year. That means there's still growth opportunity on new construction. Number of people living in Europe, it's a large space, and we still have a lot of country to try on the market of the new construction. Just have another view about the market size. That's been -- actually the 3 main markets are France, Spain and Portugal, that we call the [indiscernible] areas, south of Europe, and Germany. This is where the main markets are focused. If you go and see how many spaces that we have based on the sales center, we just have some small sales center on some areas. That's mean a greenfield is not enough actually, and this is where we want to go. That's mean definitely, we want to implement some new locations on some key countries where the market is. If you just selected about the 3 main markets in Europe, that represents $1.3 billion possible addressable market on the global revenue. An important point is we just have 12% market share that I already mentioned to you is the price cost for pool in Europe is EUR 25,000. That means it's nothing compared to the U.S. as standard. Of course, up to Europe on the north area of Europe, Germany is already EUR 45,000. When you go to the south, it's close to EUR 15,000 due to the labor cost, due to the price from the labor cost that is less in Europe down to the south. On the wholesale content, that's approximately EUR 5,000 on the sales. We do it here actually in distribution for the new construction. An important point on that is we are really basic compared to the U.S. We have a filter, basic stuff, a single bond pipe, and that's it. No technology. No new things. The good point is on that for the new generation of retrofit market, that will be huge opportunity for us on the remodeling processing and the retrofit market to increase the value of that, especially on water treatment, especially in filtration, especially on all equipment that is going to be in place on the retrofit market. Just to give you an idea on the 5.2 million pool available, actually 3.2 million are older in 10 years. That mean we have absolutely a great opportunity on the retrofit and remodeling market for the future. Retail segment, I have already mentioned to you. We have a great opportunity also due to the fact that retail segment, there is a part also available and is key for the one that's mentioned and services on the spa category, especially on the north of Europe and retail and maintenance and accessory and cleaning, everything. And due to the fact that the installed base is 4.2 million pool that we is a great opportunity for us. And impressive numbers since in the past 3 years. We've got to improve in Europe with the same organization that mean we're operating in the same base. We've done the sales, really impressive this year with 46 million plus on sales. We doubled that 39% increase on sales. But we doubled the operating income, just due to the fact that we have been really, really impressive in discipline and apply on the correct way on the profitability actually in our organization. We have a great team. We focus on discipline, on expenses. We control our margin. We want to be really achievable on return on invest, especially for invest for the future. That's a key key point for that. Competition landscaping, Europe is fragmenting our retail. We just need to know that we are 4 of us on competition, including ourselves. We have 3 main competitors. One of him is also a supplier of us. we got a 50 location all around Europe. And we got 2 other competitors that are more based on profile on water care and manufacturing on water care and distribution. That's been -- Europe is more manufacturing distribution. We have the worldwide master distribution company to provide all the products from all the industries. That's a key opportunity for us because we can serve the market, of course, today on the new construction, but also on the retrofit market. If we have a very huge footprint in the market in the future growth with the new implementation, we can serve the market better than ever and better than other than they're doing manufacturing distribution in the same time. And a good point of opportunity of growth is in each country in Europe, 50% of the revenue is done by local player and distribution. That can be an opportunity of ours in merger and acquisition. That mean growth opportunity. The plan is to have 3 to 5 new locations this year for the next 5 years. To be sure, we have implemented in correct way and to continue to win market share. Merger and acquisition opportunity, if it is an opportunity, of course, in some country with respect of profitability, of course. And we're going to integrate the digital platform to be sure we are really efficient, especially go-to-market strategy, including products, including [indiscernible] including everything on developing the best profitability on return on invest. That means, let me pass the message to Melanie. And I have a special guest for you. Melanie is Women International Day today.

Excellent. All right. Well, thank you for that introduction. I appreciate it. Good afternoon everyone. I am Melanie Hart. I am Vice President and Chief Financial Officer. I'm going to cover just a couple of financial review topics with you today just to kind of wrap up our presentation. So starting off, taking a look at our growth on the net sales. We know that we are a significantly bigger and stronger company than we were just as we came out in 2019. We know that we've seen accelerated sales growth for the last couple of years. But really, the key to our history and the key to our model is that our growth is primarily organic growth. It is by expanding and growing our existing sales centers. With that, over time, we've been able to maintain very relatively stable gross profit margins. And really, the message here is that it's not the gross profit margin, but it increases in the gross profit dollars. And so we to increase gross profit dollars over time. And with that, our operating margin has continued to improve. We certainly reached a record high in 2021 on our operating margin, and we'll look to continue that as we go forward. And we believe that we can do that because of our scale, because of our efficiencies that we've been talking about to you today. Looking at the revenue growth model. I know this is a slide that many of you are familiar with. We wanted to make sure that we talked about it again today because we get a lot of questions on it. we've talked about our growth components, and those are really made up of 2 different things. One is going to be the market organic growth, and that's the growth of the slimming pool industry. And we talked about that in 2 different components. We talked about it as it relates the install base. We did see an accelerated growth in 2021, a 25% increase in the number of the install base and pools, getting us to that 5.4 million installed base and pools. But as we look at that, we know that even there may have been a slight downturn of the number of new pools installed over time. But each year, that number has continued to grow. And so we believe that the market will continue to grow. The installed base will continue to grow. And that really feeds 60% of our sales activity. And so that maintenance is going to continue to grow our business as well as the inflation, which again has been unusual. But as we look to kind of return to more normal levels, that kind of gives us the 1% to 2% we'll target our long-term growth expectations. And then the new pool construction markets, it's been a very significant component of our growth going forward. As that continues to grow and as our overall revenue grows, we would expect that to grow at about 2% level. And then we have the growth that we contribute to that. It's the growth in the new products that Donna talked about. It's the expansions of new sales centers that we've talked about. And it's the market share gains and the expanded market opportunities that we have from some of our acquisitions. So with that, our expectations from a long-term growth perspective, kind of excluding any future acquisitions, would be at 6% to 9%. And as we talk about that 6% to 9%, that may sound like the same old story, although 6% to 9% is a very good story, we all like consistency, but really those numbers are much different as we go forward than what they have been in the past. So what that 6% -- what that amount, 6% to 9%, would have provided to us in previous based on the size and scale of where we were is much different going forward. And so this is just a little bit of an example. This excludes inflation because we certainly can't predict what that's going to be at this point. But our 2019 growth contribution just from the market and our organic growth was about $170 million. Those numbers, as we look forward to long term, is going to be over $300 million. So again, that growth contribution is going to be much more significant as we look forward. Gross margins. So certainly, we've talked about 2021, we also did hit a record high on the gross margin. And so we've talked about a couple of components of that. Certainly, we did see some changes in the pricing more frequently and at higher levels from our vendors than we've seen historically. With that, we did take the opportunity to buy ahead on some inventories, primarily to make sure from a customer service standpoint that we were -- we had the products and stocks that our customers needed. But that did provide some benefits to our margins in 2021. Along with that, so we had some increases in volumes at some of our vendor incentive programs. But outside of that, we've been really working on several different things. We've been working on some structural pricing changes. We've been working on some additional things on the supply chain side. And so those are some of the things that we know are going to continue to benefit us going forward. The efforts that we've put in, in 2021 and forward will continue provide benefit from the margin side. Our guidance that we provided for 2022. We've talked about higher margins in the first half, maybe coming down a little bit in the second half of the year. But relative for the year, we would expect those to be flat with 2021. And so as we look forward to our future margin opportunities, we do expect that the base that we've been able to provide in '20, '21 and in '22 will be consistent going forward. So much -- a little bit different than kind of what we've seen in the past. And the reason we can stand here and talk about those things is because of the actions that we've put into place, because of the strategic initiatives that we've been working on. We certainly will benefit from the acquisition that we've talked about. We've seen some of the incredible opportunities that the Porpoise is going to provide to us as it relates to just a franchising model as well as our chemical operations. But in addition to that, we've been focused on some additional private label expansions, some -- reaching out into different markets and different products. And so all of those things that we've been continuously working on are going to be able to provide us benefits as we look forward to the future. Margins and operating leverage. We've talked about our 2022 outlook, that our gross margins will be comparable to 2021. We also, in our year-end earnings conference call, we talked about some of the cost pressures. So we've seen that inflation certainly has benefited us from the top line. But also we're seeing that in some of our cost structures. So we've seen some wage inflation. We've seen rent inflation. And we've also talked about some of the additional investments that we are going to be making in technology. And so with that, for the [ 2022 ] outlook, our expectation is that, of course, expenses will continue to grow less than gross profit growth. But it would be at a higher rate than we've seen some of our historical levels. And so with that, we would return to our model where we believe that we can provide 20 to 40 basis points in operating margin contribution. So let's talk about the operating margin contribution and how do we get to that. So we've started off, we talked a couple of times about customer experience. So all of the things that we've been working on, when we talk about capacity creation, those things actually take time to implement. And really, we're at a point where we've been focused on this area for about 4 years now, where we can actually, from a financial perspective, actually put numbers to some of those things that we've been able to accomplish. And that is a lot -- a portion of what you've seen in operating margin improvement. So starting with from customer experience, we know that we have more locations than anyone else. We know that we're close to the pools. When customers come in to our sales centers, they're looking to us for product knowledge, for advice on what parts they need, what equipment they need in order to complete their projects. They have 24-hour access to our tools and our inventory availability through our 360 technology. We have dedicated call centers that they can call, and they can get all the answers that they need. And we've done all these things and put this in place really to make sure that we can operate efficiently from a capacity creation standpoint, but more importantly our customers. One of the things that we've talked about a lot is the labor constraints, and what's holding us back from why is that number only at 120,000 that we've been able to build in 2021 because we know that the demand is there. And so this capacity creation really focuses on our profitability but also those of our customers. And so we've highlighted just a couple of service metrics that we've been monitoring that looks at how quickly that we've been able to get our customers in and out of our locations. And so right now, our average transaction time is about 4.5 minutes. And that's very significantly different from when we first started measuring this in 2019, when we were really just at about 6 minutes. And so you look at 18 seconds, we talk about year-over-year. So this is going from third quarter of 2020 to third quarter of 2021. And 18 seconds doesn't really sound like a lot. But when you take that and you multiply that for the 9 million transactions that have occurred in our sales centers, that's about 44,000 man-hours that we've saved and that we've been able to contribute to our time and to that time of our customer. And so that really has expanded the ability for our customers to be able to get into more backyards and build more pools. POOL360 had phenomenal growth there. We're looking forward to a lot more growth as we roll out the new model and it becomes even more user-friendly. But we've really had a 44% sales growth in that. It's relatively -- it's about 10% to 12% of our net sales, so it's -- we have some room to grow from a penetration standpoint. And so we're working from the sales side to get that introduced to more and more customers. And then we also offer priority pickup. So these are the customers that they know what they want. They place their orders using our online tools or they call ahead. And we have those stages ready to go for them, so they're not having to stand in line in our locations, and they're not having to wait and talk to someone at the sales center. It's ready to go when they're ready. And so we've certainly seen some expanded growth there, about 19% growth as well in just the number of transactions, the dollars that have gone through that priority pickup. Another component of operating leverage, we talked about our operating margin improvement. And we know from a consolidated standpoint, we have, of course, a very significant improvement. But really, as you look at our network, we have a lot of very high-performing operating margin locations. We have 300 U.S. locations that operate an operating margin at over 15%, which is really just an exceptional benchmark. And as we look at the data, when we look at acquisitions and other companies in our industry, that 15% operating margin at a sales center level is really just phenomenal. But from our standpoint, we know that we have the opportunity to improve, that if we have the majority of our locations operating at that level, that we need to be able to get the rest of the locations up to that same level. And so we have a program in place that we call Focus Sales Centers. And that's to get the lower profitability of sales centers up to our company averages. So really, I'm very pleased to announce that as part of the -- our overall look at that, we've actually increased the threshold. That target used to be at an 8% operating margin. And now we've raised it up to 10%. And so the locations that were on the focus list in 2021, just those 43 locations alone actually contributed an additional $54 million in operating income. And so that's just a 1-year improvement, which really just shows how powerful it is to get those locations up into the next tier, into the next operating margin tier. Cash flow. We are fortunate that we're a business that generates a lot of cash flow from operations. And so our target has always been that we would expect that we would provide cash flow from operations pretty consistent with net income. And we have a very strong history of being able to do that. You'll see that there's been a couple of years in 2018 and then again in 2021, where we have seen some of those price increases. And we took the opportunity to invest in the inventory, with that, came gross margin benefits. And then also, we were able to convert that inventory into cash in a very short time period. Also, if you look at our overall debt capacity, our debt capacity has remained very similar throughout our operating history even as we've continued to grow our EBITDA, because of the cash flow from operations, we've been able to maintain a very, very conservative debt level. Capital allocation. So our first priority foremost is going to be to invest back in the business. So it's going to be to invest in our existing business to make sure that we can continue to expand those locations to make them more profitable. So it's going to be racking, it's going to be new vehicles, it's going to be technology and all of those things. And so that's captured just in kind of our expectations of right around 1% of net sales. Acquisitions. We do expect to continue to do acquisitions. This is really more of a historical target if you look at what we've done historically. But however, we've shown in 2021 that we have both the ability and certainly the interest in doing bigger acquisitions as it makes sense from a company standpoint. So where we see those growth opportunities, we have the capabilities to continue to expand. Dividends is also something we have -- we increased our dividend. We've increased it 14x since 2004. And in 2021, we increased it 38%, really to correspond to our increases in revenue. And so this is an area for us to continue to reward shareholders. And then share repurchases. This continues to be a focus for our Board of Directors. We increased our share repurchase authorization $450 million in 2021. And we also executed on those share repurchases more in 2021 than we did in the previous 2 years, so have been very active in this space as well. Financial performance. These charts almost speak for themselves. If you take a look at our earnings per share. Certainly, our very long history of 15%-plus in earnings is something that we are very, very proud of and would expect to continue as we go forward to having those double-digit increase in earnings. EBITDA, we had an increase of over $300 million just in 2021 alone. And our return on invested capital reached a high level of 40%, over 40%. With some of the latest investments that we've made, we would expect to see that number come down a little bit in 2022. However, it's still going to be well above our historical level. We will kind of top that around 29%. So we would expect that to be in the 30-pluses going forward. Exceptional shareholder returns. We know that from a historical perspective, we have provided returns well above market and believe that our continued growth and the actions that we've taken and what we've proven what we can do from our operating model, that, that will continue going forward. Returning cash to stockholders is also a very big significant commitment. If you look at cumulative life to date, we have returned to shareholders $2.5 billion in cash. So all of that excess cash, from our highest and best use, we've continued to reward our loyal shareholders. And we plan to continue to do that as we go forward. Next is wrapping up, kind of confirming 2022 expectations. We've talked about certainly inflation is much higher than it has been from a historical perspective. But included in our revenue growth expectations of 17% to 19%, it's going to be higher inflation, but it's also going to be that continued industry growth, which I think is very important. We've gotten a lot of questions and a lot of focus on, "Will you continue to grow on top of where you are?" And the answer to that is yes, we will. So we're confirming today our 2022 guidance. And we will provide our first quarter update on April 21. I will now turn it back over to Pete to make some closing comments.

Thank you. Okay. Let me see if we can get this wrapped up. We have our ESG report. We'll be -- our first ESG report, we'll be issuing shortly, so I'm not going to go into a great deal of detail. But this is just kind of a framework of what you can expect to see. Improving energy efficiency, big part of reducing waste and protecting the natural resources, obviously part of what we strive to do. Under social, employee care and safety. DE&I is certainly a big deal and always -- frankly always has been for us and then giving back to the community. One thing I'll highlight in there, I just want you guys to know you, we put out a release, I think you already know this. But last year, we funded a swimming lesson program to the tune of over $1 million to teach kids across the country. We're working -- we're partnering with YMCA to teach a lot of kids how to swim. So we have a goal that we will continue to fund that program. It will be spelled out in our ESG thing. But it was one of the things that when we announced it, quite frankly, I was very surprised with just the number of e-mails I got back from our employees on how important it was for them that we're actually funding this initiative. And it was a big investment. It was a 7-figure investment for the business and again something we're very proud of and think is important to do. And then under governance, ethics and compliance, aligned compensation, data privacy and security. We are very blessed with a -- we have a great Board. We have a great Board, they're very knowledgeable with business. They're very skilled individuals. And they have really been instrumental in helping the company continue to progress. And that's again all part of our governance program. So we're going to talk about really five things that really kind of sum up what we talked about today. And I hope you can see the level of excitement that I have and that my team has for the future. One of the things that we kept hearing is, "Wow, you had a great year. So is that the tipping point? Is that the tipping point? Is there any gas left in the tank?" And I think you can see that we have deployed some -- we have deployed a significant amount of capital. We've made investments over the years. We're very comfortable and excited about the market and our opportunity. So we don't look at it and say, "Oh, is there -- are we going to go off a cliff?" Rather we look at it and say, "The world has gotten bigger for us." I think you could see the excitement that Jean-Louis and Jeff have for their businesses. So Europe is going to provide some lift. Horizon is going to provide some lift. The market is getting bigger. New products are going to provide a lift. Certainly, Pinch A Penny adds a whole level of capabilities to our business that again excites us. So again, the backlogs are good. Maintenance and repair business, that's going to benefit from the installed base that continues to grow. That's one of the beautiful parts of this business is every time a pool goes in the ground, it's a customer for life. That pool has to be maintained. Most of the pools that are in the ground today need a retrofit. We have an opportunity to retrofit. The younger generations, as they become the pool owners and operators, they are the ones that are going to say, "Hey, I can do everything else on my phone, why am I out in the bushes looking for valves to turn my pool or my hot tub on or off?" Porpoise Pool & Patio or Pinch A Penny, very exciting opportunity. Again, we wanted you to see it because I think you have to see it to really appreciate it. But just consider that in our world today, that's only 5% of what the rest of the company is. Now do I think that offers opportunity and continued growth? Absolutely. That's why we made the investment as part of our disciplined allocation of capital that you guys have come to know and expect. Organic growth focus of the business is complemented by expansion and acquisitions. We don't wake up every day and say, "Gosh, who can we buy? Because if we don't buy somebody, we're not going to grow." We wake up every day and say, "There's plenty of market out there for us to grow. There's new products. There's share that can be gained. And if we -- as the markets grow, we continue to put dots on the map and add facilities." You heard Jeff talk about new facilities. You heard Melanie talked about facilities. You heard Jean-Louis talk about new facilities. And the reality is that we're in a pretty tough real estate environment. So I personally approve as a pro forma process for every new facility, every new facility, the operating team has to come to me with a pro forma, which is a commitment, a 5-year commitment that says, "This is what the -- this is the justification for the branch." And then I would tell you, more importantly, because paper will take anything you put on it in terms of justification, my question is who's going to run it, okay? Who is going to run it? Who's the talent? Who's going to be responsible for this? Who's going to usher this new business into operation and make sure that it's successful? Every one of those new locations that goes on our focus list. Why? Because we know that the new businesses are most vulnerable when they first open up. So they all go in the focus list so that they get attention. There's a 5-year pro forma commitment that we make the operator sign up for. So again, expansion of the footprint is part of how we grow acquisitions, to a lesser extent is part of how we grow. And again, the number -- we have a big appetite for the number of new locations. But the reality is, in some markets, we've been looking for quite some time for real estate. So in many cases, we're actually -- our demand is ahead of what the real estate availability is. So the number is going to fluctuate somewhat by, "Hey, can we find a building that works? Can we find a building that works for us?" Building material and commercial pool focus. Donna talked about that and the opportunity there. That pool has gotten bigger. All the installed base that's there that has essentially no building materials, no hardscape around it, all of those represent an opportunity, makes the market bigger. Capacity and scale driving efficiencies and operating leverage. Melanie talked about our gross margin expansion through supply chain initiatives. And Donna mentioned that a little bit. The things that we have that allow us to expand gross margin, the CSLs, for instance. This is a big differentiator. The fact that we have those, the fact that we have multiple facilities in each market creates a significant opportunity for us. Our capital deployment, our pricing discipline is something I mentioned a couple of times over the last few -- we started talking about it more in 2021. That's an area that we thought we had an opportunity to improve our execution. We're by no means done. It's an area that we will continue to invest in. It's an area we'll continue to manage because we think there's opportunity for us to continue to improve in that area. All of that should help us manage our -- manage and hopefully expand our gross margin. Capacity creation is -- again, it's become part of our culture. Everybody gets it. And again, all the things we measure say that there is still an opportunity. We talked about 4.5 minutes was where we are today. We started this journey at about 6 minutes per customer through the sales centers. But the reality is that I have some locations that are at 3 minutes. So even though that the median is 4.5 minutes, I have some facilities that are in 3 minutes. So what does that tell me? That tells me that we still have an opportunity. So I look at median and I look at standard deviation. And when median -- and when your median is one number and your standard deviation is large, all that says is you still have continued opportunity. Our standard deviation on the service time is still significant enough to tell us there's more gas in the tank for us to get better in that area. Future enhancements through accretive on the Porpoise Pool. So chemicals is part of that. Again, we talked about the buy. Everything you saw in that warehouse, as I mentioned earlier, is the same product that we have in the other warehouses. So of course, there's opportunity and synergies there. Technology investment. Todd talked a little bit about that. There is -- that's actually a very important part of our future because we see the world a little bit differently now. We see the world in terms of the cloud and how we connect and the role that we play. So we've got a world-class distribution business, but we're looking at ways that we can connect with our suppliers. So part of the reason that we had a better year in terms of fulfillment than most people last year, one is scale, we're simply bigger. The fact that we have, in Dallas and Houston, as I mentioned, 12 locations in each of those markets. And in Tampa, for instance, we have 5 locations. So we have more products in each of those markets. That's true. But our connection with the suppliers, we're working very hard to make sure it's not just, "Hey, here's a bunch of purchase orders, ship them where you want and when you want." So we're working to connect via the cloud this data that says, "Here's where I need the product." And I realize that branch A may have put their order in before branch B. But branch B is where I need you to ship that next product. You need connections, you need technology and you need infrastructure to make that happen. We're investing in that area. So that helps us on the supply chain. And of course, the data capture is important, too. Data drives decisions, right? You need to collect the data, you need to have the data so that you can analyze the data in order to make those decisions that will improve the business and ultimately improve the customer experience. And lastly, robust demand for outdoor living products. So I'm thrilled with Jeff and his team and the same with Jean-Louis and his team. Because again, I look at our market share in those two businesses, I look at size of the market, I look at them as a growth opportunity. And more importantly, I look at the performance that those teams have put up, and it's impressive. And as I mentioned, years ago, that probably wasn't the case. They simply -- they showed you the charts on what the profitability levels of those business were. So when it came the time to allocate capital, you're kind of like, "Ooh." But I look at them now, they're great. The market is available. We've got a great leadership team and they're committed to it. So we like that. The M&A pipeline is building in both of those areas. And as I mentioned, we still have an active M&A pipeline in the blue business, great leadership, significant growth potential in both platforms and operating margin profile that is similar to North America. Now we get that question a lot, sometimes, is it, "Where does Horizon compared to the blue business?" Well, I can tell you two things. One, it's improved a lot. Secondly though, there's a bit of scale that comes into play. If I have a branch that is $12 million, $10 million, $15 million on the blue side, from a pure operating margin perspective, just scale says that, that's going to be better. So the good news is that the green business has improved a lot. But as they continue to grow, it will get better. Now are they ever -- for a similar-sized branch, I would tell you the profile is better. But most of the blue branches tend to be larger just because of the market available and our historical focus areas. That will change over time. That will change over time, but we're very happy with the progress that we're making. And I just want to thank you for coming today, and thank you for your support over the years and your interest in the company. I hope you can see that our team is really excited. And we -- frankly, our biggest issue right now is there's not enough hours in a day. We have so much to do and so much opportunity. Our issue is there's simply not enough hours in a day. And I couldn't be prouder of the team and the execution and the focus. And when I look at the results that the team has managed to put together over the last several years, it's remarkable. We have a 5-year strategic plan in this business that we update every year. So basically, you drop a year and ahead a year, which is a 5-year outlook on the business. And we look at how much the business has grown and improved over the last couple of years. And it would be one thing to say, "Okay, we've grown a lot, but I got nothing left up my sleeve. I don't know how else we're going to grow." Then I'd have a tough time standing in front of you saying that the guidance that we have is -- I'd be sitting here going, "Well, if this happens, if that happens, if this, if that." I can tell you that we have a lot of opportunity, and we're excited about it. And I have a team, I'm blessed to have a team that I think can deliver that. So with that, I know we're a little bit past, so I'm not sure what flight arrangements are for you guys, but we're happy to take some questions. And for those of you that have to go because we ran over a little bit, if you have to go and you want to -- you have questions and you're welcome to follow up with me or with Curt or with Melanie, and we're happy to answer any questions you have. But as of now, I'll ask Melanie to come up and we'll take any questions that you might have.

Sir?

All right. Yes. First off, thanks very much for doing this. I know there's a lot of preparation and there's a lot of information here. We really appreciate all the time that went into it. My questions, actually all three are for Jeff Clay, if I could. So first off, you have a mix of product today that is somewhat legacy. The key question is why power equipment and why not nursery?

So am I on? Okay. So yes, so the mix that I inherited is the legacy mix. Nursery, we've shied away from primarily because of the operating -- it's got a great margin, but just the operations that you have to ramp up and scale up in order to successfully run a nursery, we've decided, "Hey, that's not the investment we want to go make."

And our facilities, too, David, you got to remember is that even today, if Jeff pivoted and says, "I want to be in nursery," so today, we have 81 facilities, 81 that we're not set up to operate a nursery business. So does that mean that we'll never be in it? No, I can tell you it's not right around the corner. Why? Because we have other areas that we think we can continue to grow in. But even if we woke up tomorrow and said, "Gosh, a huge strategic mistake, we need to be in nursery," we just don't have the facilities to do that. So we have -- the good news is we have a growth plan today that doesn't include nursery. At some point in the future, might that change? It might, but it's not in the near-term offing.

And you need to -- and then on the equipment side, obviously, it's something that we inherited. It's been tough because of chips, because of the engine supply chain. Engine supply chain, it's been a tough go. That said, what we're seeing is a migration to battery. And so our feeling is, "Hey, we're well positioned to be in front of that migration." We have a couple of partners that are allowing us to get into battery early, get those into customers' hands. And so we like the outlook of that franchise. And it differentiates us from our, call it, our traditional competitors. It allows us to have everything on that landscape truck, the guy that's a landscape guy that -- who's buying the fertilizers, the chemicals and the equipment. We become that one-stop shop minus the nursery and the reasons why we're not in the nursery business.

Okay. And the follow-up here is the trajectory. So if we look out a decade from now, will we see Horizon being a 400-location operation, totally nationwide? Is that what's on the docket today? Because you mentioned yourselves, you're talking about how it's sort of stagnated for the last 10 years. I'm just wondering what the priority level is today and where are we ultimately going there.

Yes. Let me take that. So what I would say is the 400 locations that we have on the blue side, 410 locations, were basically in the Sunbelt and in the seasonal markets. So our plan right now, if you look at our strategic plan for Horizon, it's pretty much to stay in the Sunbelt markets. Does that mean that we get to 400 locations? Probably not. If you look at the map that we showed, it says that the Southeast, which is again the recipient of a lot of population from all over the country, will continue to grow. And that will require a lot of new homes to be built. This is a business that today, irrigation, which is the biggest part of the business today, goes in with new home construction. So we see ample opportunity to grow that business in the -- by filling out the Southeast, by continuing to add branches as Texas continues to sprawl. Jeff has added a branch now on the east side of Dallas. We're all the way out into the Rockwall suburb, which years ago was somewhere way over there. Now there's -- Rockwall is part of DFW. And now we'll have a branch up in Denton on the western side, too. So we'll continue to grow. I don't think you're ever going to wake up one day and say, "Hey, you know what? Horizon is 50% of POOLCORP." Because we precluded ourselves from, "Hey, at this point, we're not going to go into -- I'm not going to go into nursery." Plus we said, "Let's keep it in the Sunbelt." We've got lots to do. So we'll continue to grow it. We think we've got lots of things we can do. We like the financial performance of the business now a lot more than we did. But I don't think you're ever going to wake up and say, "Hey, I want -- it's half the size of the company." Because I think people value the pool franchise different than the irrigation franchise.

Yes. And I think the other thing I'd add is there's a lot of fill-in markets. So as Pete talked about the Southeast, but I'd also say, if you look at that map and where there was significant concentration of dots and where there's not, there's a lot of fill-in that we can go do as well. And that's kind of where our greenfield focus is, that fill-out, fill-in. And then for the white space, we'll look at a combination of acquisition and greenfield.

Sir?

Garik Shmois, Loop Capital. Just looking at the revenue growth algorithm that you have and looking at the component that's pool-specific, about a 2% to 3% growth, very consistent with how you performed in the 2015-2019 time period. So I'm kind of curious, just given everything that you've laid out here today with respect to Pinch A Penny, with the growth in Horizon, with the growth in technology, with the backyard being a lot more inclusive with products that you sell, how should we think about that 2% to 3% pool-specific market growth? Could that end up being conservative?

I mean, I think the answer is it could, yes. But we're going back, so we know we were -- we have a pandemic bubble, right, that certainly supercharged our industry and brought a great deal of interest to it. It also dislodged a lot of people out of the Northeast and out of high-cost living areas in California to move, and that's creating an opportunity. But we also think that there is -- for me to say we're going to continue to grow with the rates we've grown for the last couple of years, I frankly, I think, would be irresponsible. But I think we put together a list that says we're very comfortable saying that the growth engine of our business that we have historically said has been 6% to 8% and now we're 6% to 9%, might that be a little conservative? I guess, the answer is maybe. Do I think we have a lot of stuff we're working on? Yes. The idea of today was to show you everything that we're working on. But one of the things that you've seen from POOLCORP is, historically, we don't overcommit and say, "Hey, sky is the limit, here's what we're going to do and maybe we screw up and come in a little bit light." We're saying, "Look, here is a model that we know we can deliver, but we're always working on trying to improve that."

Yes. And I guess I'm going to add one thing real quick. The slide that I had really kind of after that revenue growth buildup, it really was just to illustrate that the 2% to 3% that we have historically grown, in dollars, that's worth significantly more. And so that was really what we're trying to illustrate in that next slide.

Ryan Merkel, William Blair. So my first question is on gross margins. You went from 29% to 30.5%. And how much of that was inventory profits? And then the second part of the question is, are you saying that you can backfill, that will eventually fall? Are you saying that you can backfill that with new initiatives and then sort of hold gross margins at 30.5%?

Do you want to take that one?

Yes, I'll take that. So from a detailed standpoint, we typically -- because there's so many things that really make up that margin and that margin improvement, we haven't really called out specifically what component of that improvement relates to which piece of it. But we haven't talked about it. Specifically, when we go through those comments, we talk about the things that's kind of in relative order. So certainly, the inventory, the value in the inventory, the volume incentives that we've gotten from our vendors. But as part of that, it's also been the supply chain initiatives, some of the things that we've talked about as it relates to the CSL and making sure that we're positioning our products where they need to be. We've talked about pricing. So those two things really kind of outside of what you might consider just inflation-related. I want to make sure that we're getting credit for the work that we've done in those particular areas. And so as we look at kind of the more long-term margins, we talked about '22 being flat with '21. As we look to from a long-term modeling perspective, getting closer to the 30% mark is probably what I would look to from a reasonable standpoint as we get through the inventory that we've built up and what that will benefit for us for this year and then as we go forward. But we feel comfortable with higher levels than what we've been -- the 29% mark that we've looked at previously.

Okay. So 30% is the new sort of water mark versus the old, which was 29%, for gross margin?

We see a lot of -- we see the ability to be able to get to that level going forward, even without the inflation.

Got it. Okay. And then a follow-up on Pinch. So I guess, two questions. One, I think EBIT margins are near 17% today. Where can you take that with some of the synergies? And then secondly, can you isolate the impact from the chemical packaging business as it relates to POOLCORP? How much can you buy in dollars? And what's the margin difference between what you're doing today and now the repackaging?

So I'll take the back half of that question and Melanie can take the front half. But the back half of the question as it relates to the chemical is, for perspective, remember, we've owned it for about 75 days. And we've got a lot to learn about capacity. Now we know there is a lot of capacity in that plant that is yet untapped. But we also know that our appetite for chemicals is insatiable, right? The amount of facilities that we have and the amount of product that we move is more than that plant can -- even if we said, "Look, I'm running 24/7, 7 days a week," it still couldn't keep up with just the demand from our pool business because the pool business is massive. So we believe that there is a lot of value to be extracted by loading up that plant. But part of it is a question of, well, how much -- so if you take the tablets, for instance, it's not just a question of how fast can you stamp them out. It's a question of how much chlorine can you get. So right now, chlorine supplies are tight. So if you think about how much -- how many tablets that place can make, could it make enough -- just if I ran 3 shifts 7 days a week and I had an unlimited supply of chlorine, they still couldn't make enough, fast enough to serve the rest of the business. So we believe that there is there is accretion there. So there's margin accretion by us doing the packaging. We believe that there is a better surety of supply. And then when you look at the rest of the products that are there, again it's we buy the same things. We buy the same pumps. We buy the same filters. We buy the same heaters, nets, brushes. Everything that goes through Pinch essentially goes through SCP. So we're in the process of layering on those programs to create those synergies. So we don't have an answer for you today that says, "Look, it's x amount." What we're saying is that there is a very nice opportunity for us to improve on the whole goods side, if you will, just with synergies on programs, along with the chemical side. And then quite frankly, there's an opportunity for us to do a better job serving our independent retailers, which we think will be rewarded with even more share from today.

Yes. I'm going to answer this and then -- so from an expense standpoint, I would kind of second that, that we're kind of really early in the game. But you need to think about the way that Pinch is operated currently, it's from one distribution center, I mean, throughout just the expanded reach to their locations. So there's a lot of leverage just from an administrative, from an overhead standpoint and then really a freight capacity standpoint as well. So there's lots of components of that, that we'll be looking to gain going forward but haven't quite quantified that at this point. Okay, I'm sorry. Susan, go ahead.

My first question is on the private label products. Can you talk a little bit about where those sit today and the opportunity set there? And especially when we do think about the operations that we have seen today, the opportunity to really sort of bring that higher and grow it to a bigger part of the pie.

Yes. So if you look at the gross margin dollars from our -- what we would call our traditional private label products, the percentage really hasn't changed all that much. But we think that there is opportunity there. So we look at that area and say, "The good news is the dollars have really grown with the business." But I can't tell you that we've made significant headway with private label and exclusive brands. So we look at that as an area that, quite frankly, is an opportunity. We acquired a lot of talent in that area, which we think will help us grow. What percentage will we eventually get to with that product? A couple of things. One, when you think about equipment, right, because we get this question a lot that says, "Hey, are you guys going to have a private label equipment line like some others I know that have?" Where we sit today is the answer to that is currently no. And the reason is because I value the partnership that we have with our suppliers, number one. Number two, I view those as highly engineered products. We don't have engineers on staff that can specify a pump, a filter and manufacturing quality. We don't employ those folks today. And I look at the money that it takes to develop new products and technology and the connected pool. And that's what our partner suppliers do. I want to be the best channel to market for them. I don't want them to see us as competition. Having said that, there are other areas that we are -- we do have private label products. Chemical would be one of them, right? Because it's a commodity-based product that's blended. That's an area that I think we can grow. And as that grows, I think the margin profile continues to improve for the business. I look at our -- some of our building material products, whether it's our component pool finish or whether it's our tile, there -- some of the natural stones that we port that we -- that we private label, those are all areas that we see as upside. So remember, I told you a little while ago that my biggest issue is there's just not enough hours in a day. It's not lack of opportunity, it's hours in the day to get these things implemented. And at the same time, when we acquired Pinch, right, so we acquired Pinch, we think it's a fabulous business. We think there's tons of opportunity with it. But at the end of the day, in my head, I have to keep that straight with 95% of the business is something other than that, that is growing and operating tremendously. So I don't want to screw that up by pivoting and spending all of my time here. So we have to do both of those things. But the good news is, is that what you're looking at, I think, is a very capable and talented management team with a lot of things on the list that we can do to continue to improve the business. And that was one of the key takeaways we were hoping you all would have is that, "Wow, the runway that exists at Pool, whether it's because of the things that we talked about that aren't related to Pinch or Porpoise versus those things, whether it's Horizon or whether it's Europe, there's a lot of opportunity." And the fundamental backdrop in the market in terms of is the market going to continue to grow? Nobody's going to leave Florida and say, "I'm headed back to New York." That Southern migration is going to continue. People are not going to turn back into, "Hey, we're all going to sit around a TV set and be an indoor society." Healthy outdoor living is what people want. So we look at all of those things as a very sustainable opportunity.

David MacGregor at Longbow Research. A couple of questions. First, on capital allocation, you've got about 410 sites, service centers. You've got 4 RDCs. How are you thinking right now in terms of your capacity on RDCs to support further base store growth? How are you thinking about your investments in RDCs going forward? And I have a follow-up.

So I think we're going to have to expand the footprint of the RDCs that we call them CSLs. So what we're trying to do is, kind of going back to capacity creation, I don't want to expand the four walls and take on more base cost until I've leveraged the facilities to their full capability. So we have opportunity to continue to leverage those. But honestly, given the rate of expansion of the business and our appetite to grow, that's an area that we're going to have to expand. But when I look at the CapEx required for a CSL, quite frankly, in perspective relative to what we spend in total, it's not like if we decide to open 1 or 2 CSLs, there isn't an issue that says, "Wow, we have to make choices. Do I do that? Or do I do something else?" Because the capital intensity of opening a CSL, because they're basically big boxes with racking and forklifts, the bigger issue about expanding the CSL is getting forklifts right now, right? Forklifts and those order pickers and things are in very high demand. So that becomes -- and frankly, that's part of our -- we talked about how many facilities we're going to open this year, how many new branches, I've got to have a forklift to open a branch. If I can't get enough -- if I can only get 20 forklifts, then I can't open 30 locations, right? So it's a question of how many facilities or how can we equip those. But it is a logical conclusion to draw that we will have to expand the CSLs and to include Europe as well. So Europe is a market that I look at. We don't have a CSL in Europe today. It is probably the most logical place to have a CSL, given the global supply chain that serves Europe. But Jean-Louis and his team have identified that need and said, "We need a CSL," and we're with him.

And Horizon as well, I suspect?

Yes.

Second question is really just on supply channel. And just if you could talk about how vendor kind of volume-related incentives may be changing this year versus last year.

Yes, the programs -- this is nothing new, right? The programs reset every year. So it's part of -- this is nothing new. Every year, we have negotiations with all of our key vendors. We put together a program that provides incentive for us to focus and grow. And we are rewarded for that. Nothing really new to report there. It's kind of business as usual in terms of incentives. Because -- we -- what I would tell you, and I mentioned it to you guys as well, first or second time that I was with you, is that our relationships with the suppliers are very important. We are not an 800-pound big-box gorilla that bludgeons the suppliers. That's just not how we operate. We view them as a partner because I don't want to be viewed -- listen, I've had to -- I've had some of those type customers in the past. They're tough customers. And you're always thinking, "Gosh, this is really -- this is not something I want to do." I don't want to really spend a whole lot of time with folks like that because I always feel like it's a one-sided deal. We work very collaboratively with the suppliers because we need them to win and we need to win as well. So we want to be compensated for our size and for our scale and for what we do. But it's certainly not a one-sided transaction. And I think that really helps that spirit kind of permeates the relationship with most of our key suppliers.

This is Noah Merkousko with Stephens. It's encouraging to hear about the consumer interest in outdoor living, automation, new pool designs. And I guess, my question is, are those products -- it looks like a lot of those are higher-priced. Do those come at a higher margin? And is there an opportunity -- as you see those product categories possibly the sales growth outpace the rest of the company, is there an opportunity for margin expansion there?

I would tell you, it depends on the channel and how it's sold, right? So if it's part of a new construction package, our larger customers, larger customers buy more, they tend to have their own special pricing. So the answer is the margin profile, like when we talked -- when we introduced the concept of the DOE variable-speed pump legislation, so the price of the pump is higher than a single-speed pump. That's the good news. The bad news is that if I look at the margin -- the gross margin percentage, it was slightly lower than a single-speed pump, but the margin dollars were significantly more. So I wouldn't look -- just because of that change, I wouldn't look for a significant change in the margin profile. We look at it as an opportunity. So the cost -- my cost to transact a variable-speed pump, which may cost 2x what the old single-speed pump costs, costs me the same to transact that business. Margin rate is a little bit lower, but margin dollars are much more, which creates more operating income for the business. But don't look for, I think, at this point from where I sit, a big shift that says, "Wow, automation is going to carry a higher gross margin ticket."

Yes. One more question I had for Todd relative to the IT. You talked about Bluestreak and about POOL360 and -- but I just -- could you put it in the context of the broader road map at POOLCORP and the ERP consolidated? I mean, I'm not really understanding what you're working on right now in terms of upgrades for 2022. Could you put that in the context of the broader IT road map?

So all the things that I talked about are investments that we are making that again should come into fruition in 2022, right? So the new 360 and the related mobile app and Bluestreak are all -- those are foundational improvements under the covers, right? And all of that again is part of the 2022 plan as it relates to improvements and investments that we're making around IT.

So we shouldn't think about this as a point-of-purchase system or general ledger, anything else that's involved in the ERP? The only things that you're updating are the things that you referred to here, which are sort of bolt-on pieces of IT. Is that...

Well, the way I'll answer it is when you think about transformation, right, these are areas where you're adding around ERP, right, to lift processes out and add value, right? So I mentioned pricing, right? So that's not necessarily replacing pricing, it's enhancing pricing with additional functionality. And that could come in the form of additional software. It could be through AI and machine learning. It could be by combining both. So that's kind of the essence of digital transformation. So it's not so much, "Hey, I'm going to pull general ledger out completely." I'm going to put technology around it to improve functionality and to create better functionality for the employee, which then transcends into a better customer experience, right? So again, that's kind of the way -- so it's not -- I think what you're talking about is more of the overhaul, like replace everything. We're talking about the digital transformation around.

Just when we hear digital and transformation, it makes people think...

The journey is a lot of like it's really around that idea factor, right, taking -- looking for opportunities for improvement, taking those and then focus on the customer experience, focus on the business outcome and then using technology to get to the destination.

Anybody else? Okay. Thanks so much for joining us. We appreciate everything you do, appreciate your support. And I'm always available for questions as is Melanie and the rest of the team. So travel safe, and it was great seeing you in person. Thank you.

Thank you, everyone.