Good afternoon and welcome to the Second Quarter of Fiscal 2024 Conference Call for Leslie's. [Operator Instructions] As a reminder, this conference call is being recorded and will be available for replay later today on the company's website. I will now turn the call over to Matt Skelly, Vice President of Investor Relations.

Thank you and good afternoon. I would like to remind everyone that comments made today may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations. These statements speak as of today and will not be updated in the future if circumstances change. Please review the cautionary statements and risk factors contained in the company's earnings press release and recent filings with the SEC. During the call today, management will refer to certain non-GAAP financial measures. A reconciliation between the GAAP and non-GAAP financial measures can be found in the company's earnings press release, which was furnished to the SEC today and posted to the Investor Relations section of Leslie's website at ir.lesliespool.com. We have also posted our Q2 2024 earnings presentation to our IR website, and we'll be making references to it in our prepared remarks. On the call today is Mike Egeck, Chief Executive Officer; and Scott Bowman, Chief Financial Officer. With that, I will turn the call over to Mike.

Thanks, Matt, and thank you all for joining us this afternoon. Our bottom line financial performance in the second quarter was largely in line with our expectations. Top line sales were impacted by cool and wet weather in our seasonal and nonseasonal markets, as well as a pool and spa consumer that continues to normalize their post-pandemic spending patterns. I am pleased with the team's performance in the quarter, as we executed well against the factors within our control. We saw improved conversion from healthy in stock levels and competitive price positioning across our channels, and we delivered on our inventory goals while providing superior customer service and disciplined expense management. Since it's been nearly 6 months since we provided our planning assumptions for the year, I want to remind everyone how we are thinking about our annual guidance. At the midpoint, we plan the following for the year: discretionary product sales down 10%; equipment sales down 10%; nondiscretionary product sales up 1.5%; AOV down 4% driven by mix and the cycling of our June 2023 chemical price adjustments; and transactions up 3% driven by normal weather. You will hear from us today that the majority of these factors are performing in line with expectations, with the exception of weather and the associated impact on traffic and transactions. During the quarter, the weather was much cooler across key nonseasonal markets, including Texas, Southern California, Arizona, and Florida. This resulted in significantly fewer consecutive days above the critical 70-degree threshold versus the same period in the prior year and/or the 10-year averages for these markets. Weather was also a factor in our seasonal markets, with pool openings down 19% year over year, driven by a cool and wet spring. Turning to our financial results for the quarter. Total second quarter sales…

Good afternoon, everyone, and thank you, Mike. Our results for the quarter were largely in line with our expectations, while unfavorable weather contributed to lower traffic and a late start to the pool season in our main markets. For the second quarter, we reported total sales of $189 million, a decrease of 11% compared to the second quarter of fiscal 2023. The second quarter this year ended on March 30th versus April 1st last year. Due to this calendar shift, we lost 2 early spring higher-volume selling days and gained 2 lower-volume winter selling days. The negative impact of this shift was approximately $4 million or 180 basis points in the quarter. Comparable sales decreased 12%, driven primarily by transaction count and spending on larger ticket items. Comparable sales decreased 26% on a 2-year stack basis. Non-comparable sales contributed $1.5 million in the quarter, driven by acquisitions and new store growth. With respect to trends by consumer group, comparable sales for residential pool declined 12%, PRO pool declined 9%, and residential hot tub declined 14% compared to the prior year period. Sales declines are driven by unfavorable weather, softer sales in discretionary items, and the June 2023 price actions. In these shoulder seasons, weather and the timing of pool openings can cause significant sales variances due to the smaller sales base. Gross profit was $54 million compared to $71 million in the second quarter of fiscal 2023, and gross margin rate declined 464 basis points to 28.8%, which was slightly below expectations, mainly due to incremental occupancy deleverage from lower-than-expected sales. We continue to expect meaningful back-half margin expansion versus the first half of the fiscal year, most notably in the fourth quarter, as we cycle the June 2023 chemical price decreases and higher inventory adjustments and distribution costs that…

Thank you, Scott. To conclude, results this quarter continue the recent trend of softer sales for Leslie's and the industry, from persistent unfavorable weather and normalizing pool and spa consumer behavior from a period of significant growth. In light of that, we continue to aggressively manage SG&A and inventory while focusing on customer service. We believe we are set up to win in pool season. Our employees are excited and engaged, our stores and DCs are well stocked and ready to go, our omnichannel presence has us positioned to service residential and PRO customers in the way that they choose, and our PRO Partner and Pool Perks loyalty program are leaders in the industry. We have an unmatched set of capabilities to serve our customers, and with AccuBlue Home, a clean, safe, and beautiful pool has never been easier to achieve. With the majority of our sales and all of our profitability still to be achieved in the back half of the year, we are focused on superior execution, and we remain confident in our long-term prospects for growth and profitability. With that, I will hand it back to the operator for Q&A.

[Operator Instructions] Our first question comes from Justin Kleber with Baird.

Just to follow up on near-term trends. Can you give us a sense of just how you are tracking 5 weeks into the quarter relative to the comp that you put up within fiscal 2Q? That's just my first question.

Yes, Justin. I think the best way to characterize the last couple of weeks of the quarter is a material improvement in the trend.

Okay. Got it. And that's just as weather has normalized?

Yes, exactly. We finally are seeing some consistently warm weather in our major markets, and that's making a material difference.

Got it. Good to hear. Secondly, maybe on the SG&A front, Scott, you were previously talking about a slight decline in dollars year-on-year. It seems like you are tracking well ahead of that target, at least in the fiscal first half. So, just wondering if your guidance implicitly is implying a lower SG&A dollar figure, maybe relative to when you gave the initial outlook.

Yes, Justin, I think the whole team is doing a really good job, and I would say that we are probably ahead of the progress that we thought we would be making at this point in time. As the back half goes on, we'll see if anything changes. I do not expect major changes in the back half, but what I do see is that we've improved a little bit faster than I thought, and that's on many different fronts. So naturally merchant fees and things like that come down with sales, but just really good control on labor, but still having a high level of service. And a lot of that is store labor, and what we are doing is we are just taking advantage of this shoulder season where the traffic is very low, and so we've just adjusted our hours according to the customer traffic. Now, as we get into busy season, we'll be more fully staffed, okay? And so you may not see as big of a decline there because we fully intend to be fully staffed. But just other store expenses, everybody in the store is incorporating and just watching expenses and controlling those very well. And then we just have less addbacks, the executive transition costs and strategic projects, things like that, that we had last year. Some of those are more favorable this year as well.

All right. That is good to hear, and if I could just sneak one more in. Just as we enter the pool season, do you guys have a sense as to, I guess, the magnitude of chemical carryover that still needs to be worked through, or is that not really part of the story this year as we enter pool season?

Yes, Justin, good question. We put out another pool owner survey in February, so pretty recent information, and based off the results from that survey, we do not think there is any challenges around consumer stockpiling this season.

Next question, Jonathan Matuszewski with Jefferies.

The first one was on equipment. I wanted to dig in on that category a little bit. So, down 10% this quarter, but can you provide any color on some of the moving pieces there? I think historically, or at least last quarter, heaters and automatic pool cleaners were underperforming. I think variable-speed pumps were relatively more healthy. Has there been any change there that would lead you to believe that maybe the higher end or the lower end of that midpoint you shared for the year could be realized?

Yes, Jonathan, the first thing I'll do is point out, like I did in the prepared remarks, we were really pleased to see the 800 basis improvement from down 18% to down 10%, and we saw improvement across most all the categories. I would say heaters has actually improved materially, and we think that's a really good sign, and more in line with what I would call pre-pandemic seasonality. As the pool season starts to approach, people start thinking about heating their pools. They turn on their pool heater for the first time, and it doesn't work, they either replace it or fix it. So, we consider that a good sign. APCs are still a little challenged, though robotics have been performing better, and salt systems are a little challenged for us. So, a little bit of change in the mix. Heaters a little better, robotics a little better, variable-speed pumps continue to be a nice, stable business.

That is helpful. And then my second question is on pricing. I think heading into this year, the plan was for chemical pricing to be down low-single digits year over year. Equipment pricing, I think, was planned to be in maybe that 3% to 5% range that some of the vendors were talking about. Recognizing the first 6 months are light in terms of contribution for the year. Are the midpoint of those ranges still relevant? And as we're tracking pricing going into pool season, is there anything we should be aware of in terms of the pricing strategy and any volatility, or are the prices we're seeing from a consumer perspective generally where we would expect the pool season to play out?

Yes, Jonathan, I think, we are pleased to see retail, particularly specialty retail pricing, for chemicals to be quite stable. I am going to say stable from when we made our price action adjustments in June 2023. Since that time, it's been quite stable. And even with a slow start to the season and, what I'm going to call, very unfavorable weather, we haven't seen people breaking price in the residential market. I will say there has been a little bit more pressure on the PRO side of the business, but we're still within that low-single-digit range for chemicals overall. So we think we're well within our guide on chemical pricing to be at our midpoint. And similar with equipment. I think, you quoted 3% to 5%. I think we quoted maybe 2% to 5%, but yes, midpoint of that is well within range. The softness we're seeing in chemicals and equipment is really based on volume. And right now, we're tying that volume very much to traffic, and we're tying traffic very much to weather. We just, in the second quarter, hadn't really seen the season kick off. And I'll tell you, it's gratifying to see the last couple of weeks with some consistent warm weather start to move like we would expect it to.

Next question, Shaun Calnan with Bank of America.

Just first, following up on the chemical pricing. So last quarter, you were able to offset the pressure in gross margin. And then this quarter, it was a headwind of about 130 basis points. So are you seeing higher promotional activity, is this what you were just talking about on the PRO side? What's driving the downside year over year in the second quarter versus the first quarter?

Yes, I'll take that one. Basically, what we're seeing is we did have some chemical price impact in the first quarter. The difference was that we were able to offset that with pricing actions in other categories, okay? And so for Q2, we didn't have those additional price actions that we were able to offset. I think the other thing to think about is that our mix has changed as well. And so, with equipment getting better and chemicals off a little bit more than Q1, there's a mix effect there that's a bit unfavorable.

Okay, got it. And then the second one, just on the order book comments you made last quarter, I believe you guys said that orders were flat year over year on hot tubs, and then the hot tub sales came down 14% year over year. Can you just talk about how the orders flow through over time?

Yes, Shaun, the average price of the hot tubs we sell is about $10,000. And they are predominantly custom ordered. So customer places an order, the tub is built, and then it is scheduled for delivery. And the challenge we ran into in second quarter and in first quarter as well is particularly wet weather in our hot tub markets was just keeping people from keeping us from being able to pour pads, install the hot tub, hook up the electricity. We had people pushing out their appointments for reasons, rain and even snow. So, what we consider good news is very low cancellation rates. People still want their tubs. And now that we've seen the weather break, and particularly like we own Valley Pool & Spa in the Pittsburgh area, and we were in Pittsburgh last month, a group of executives, and it was hail storms, tornado warning, 52 degrees, rain, and it was pretty clear why we weren't delivering tubs. Now that we've seen the weather break there, and we've been rather consistently in the 70s or low 80s, we're starting to see that order book come to fruition with deliveries. So, we consider that a positive sign. And I would say that our order book is very supportive of the discretionary business being down no more than 10%.

Okay, got it. So, would you say that there's potential for hot tub sales to be up year over year in the second half?

Yes, look, we have a very good trend. We have a order book that is in better shape than our mid-year guidance, but there's still a lot of volume to be done. So, it's too early to speak to upside.

Next question, Kate McShane with Goldman Sachs.

We wanted to ask about market share. It still seems that you're underperforming the industry based on what you put in the slides for today, and it might be widening. Can you speak to that at all in terms of what happened during the second quarter?

Yes, Kate, we said in the first quarter we were surprised by what the credit card information was saying. I'm going to say we're a little bit surprised this time as well. And, look, we think that's good, and it's important data, and we certainly pay attention to it. On the last call, we had talked about some of the changes in our assortment and value messaging that we had done in the stores to try to drive greater conversion. And we were really pleased this quarter to see that conversion increase materially. But the traffic was really a challenge this quarter, and traffic, we really connect to weather. And it's surprising to us that our performance would be under that of the industry given the weather impact. And then the second thing is I said in the prepared remarks, we've talked to our vendors regularly, we've talked to our store managers, we've talked to our district managers. This last quarter, we did comprehensive exit interviews for non-purchasers to see if we were missing something. And all of that data, in addition to SimilarWeb data, which tracks our proprietary online businesses, that data actually showed that our market share increased 200 basis points online in the quarter. So, seems to be a disconnect between the 2. We're taking it seriously. And if we have given back some share, we'll be focused on winning it back in pool season proper.

Next question, David Bellinger with Mizuho Securities.

Another one on this material improvement in trend over the last couple of weeks. So has that been broad-based across geographies? And just recognizing this is an incredibly short period of time, just 2 weeks, if that trend were to continue through the balance of the quarter, could you potentially see a positive overall comp within the Q3 period?

Yes. Look, we're not going to give Q3 guidance like that. I will say this, it was mostly broad-based in its recovery. One of the things we find positive is we've got material improvement despite, what is it, 50 million people in the U.S. being under severe weather alerts right now and the flooding in Houston. And Houston is our single largest metro market. So, despite those 2 very adverse weather conditions, we saw really nice improvement. And we saw the business respond as we would expect it to with appropriate weather. And that's as much as we're going to say about that.

Fair enough. And this is my second 1 on the inventory being down more than 20% year over year. Maybe just help us unpack that a little. Could you talk about units versus price? And are there certain categories that are down more than others in terms of units?

Yes. I can take one. There is always a bit of a mix effect. But units are actually down a little bit more than dollars. And I think it's the effort that the planning team has put forth using our Blue Yonder tool to really start off on the right foot on the front end with a much better plan and executing that plan very well. And also from our suppliers as well, the lead times are fairly short on most of our items, and so, that helps as well. And so as you look across the categories there's showing some fairly large decreases in some of our chemical categories and equipment, cleaning and maintenance categories, which if you look at the turns profile, there was definitely room to do that. And so, we continue to find more efficiencies, but also, we're really concerned also with in-stocks and service level. And fortunately for us, we've executed to the point where the service levels and in-stocks are much better than they were last year. So, we're really pleased with the performance overall.

Next question, Steven Forbes with Guggenheim Securities.

I was curious maybe if you could take a step back and maybe just talk about the customer file, if there's any green shoots that you're seeing, whether it's your most loyal customers. I think you mentioned loyalty members trends better than the file as a whole. But like, what are you seeing within the file that gives you confidence to reiterate the guide for the back half today? Like, are there any green shoots? And can you help us better understand what you're referencing in terms of file growth expectations for the back half, and what you're implying in terms of improvement in spending trends within the file as well?

Yes. A few questions in there. I think what we're -- well, not I think. What's going on with the file is we added a lot of, I'm going to call them, one-and-done customers during the height of the pandemic, '21 particularly, also into '22. And we identified this cohort of customers that came in and basically bought tabs, and that was it. And we threw a lot of retention and reactivation tactics at those customers, but not nearly the results we would typically see. And the file degradation that we've seen since midpoint of '22 is just those customers working their way out of the file. And with the file down 3%, quarter over quarter at the end of Q2, we feel we're basically through with that cleansing, if you will, of one-and-done customers, which outside of that, the green shoot that we see is outside of those customers peeling off, adjusted, and yes, we're seeing the file stabilize and starting to show some growth. And we're not going to go into what growth we expect in the second half, but we expect the business to be positive in the second half, and we expect a positive customer file to support that.

And maybe just a follow-up on, I think, Shaun's question from before on the chemical pricing, net of the offsets that occurred in the first quarter, because it does seem like there was a more challenging second quarter dynamic here. Any help in framing, like, what you expect the product margin to be in the back half? I think in the reiterated gross margin guidance, are we still looking at stability to expansion in product margin, or is there something within the bridge that's changing?

Scott, you want to take that?

Yes, I can take that one. I think there's potential for gross margin expansion in the back half. And the main reason for that is when the June pricing actions, once we overlap that in June, then that basically eliminates the biggest headwind that we have on our product margins. And so, I think that'll be a big benefit for us. And also rebates should help us more in the back half. We are getting past some timing differences that we had in the first half, but the back half, specifically the fourth quarter, should give us better margin lift from rebates [ in merch margin ].

Steven, I'll add 1 point to that. On the earnings deck on Page 9, we've got the gross margin bridge. I will get a little color on it. There's 91 basis points in their other product rate. More than half of that is some promotional dollars that we invested in the quarter trying to drive increased traffic, right? We just didn't sit here and let weak traffic numbers impact the business without trying some different tactics. But I think what we discovered there is, very clearly, you can't promote your way through tough weather. You can't promote your way through a pool that's not open yet. So, we learned a lot. We're going to implement those learnings in the second half. But that's more than half of what you see there on the other product rate line.

Next question, Ryan Merkel with William Blair.

Mike, I wanted to ask on the nondiscretionary sales down 11% in the quarter. Is that all weather and chemical price deflation? I just ask because the consumer, there's some weakness there. Is that showing up at all?

Yes, we don't think it's consumer weakness per se, Ryan. The volume overall in chemicals was down 4%. trichlor and cal hypol were down 1%. We had some softness in other chemicals. So, pricing was down 7%. And of that down 7%, 575 basis points of that, most of it is tied to the June '23 price actions. The balance, I would characterize as a combination of mix and a little bit more price pressure on the PRO side in chemicals.

Got it. Okay, that's helpful.

We're not seeing a weak consumer, per se. We're not seeing a consumer. With the weather we saw, it was a matter of footsteps through the doors and eyeballs on the sights.

Got it. Okay. Yes, that makes sense. And then I had a question on gross margin too. You answered it with the last one. But should we be expecting gross margins to be higher in the fourth quarter than in the third quarter? That's what I had in my notes. Just wanted to clarify that.

Yes, Scott, you want to take that?

Yes, I have that one. So, yes, it's a good question. And the answer is yes. And the main reason for that is we'll have a full quarter's worth of being beyond the June pricing actions. That will help. Rebates will help a little bit as well as those normalize. But also of note is the inventory adjustments in DC costs that were really heavy last year because of all the outside warehouses and all the movement of goods. We should show significant favorability against those 2 lines as well.

Next question, Simeon Gutman with Morgan Stanley.

Mike, I wanted to ask about pent-up demand and the history of this business when we have tough weather in the beginning. Are there parts of the season we don't catch up? And this goes back to that order book that you mentioned because I would think you'd be well ahead of where you should be tracking now given pent-up demand. And all the companies in our space that have had weather impacts are recovering normally. So, I think it's very valid. But you do sell a higher-priced item or a lot of higher-priced items, maintenance and repair and even some of the discretionary. So, how do you think about that pent-up demand? How do you think about it in the context of where the consumer is? And then I'm trying to get at, is there any way this is a head fake in your industry? How are you contemplating that, just trying to look at both sides?

Yes. In terms of pent-up demand for hot tubs specifically, where we've got a forward order book, yes, I would say definitively we have pent-up demand there, and we feel good about the reduction of that part of the business. In terms of equipment, well, let me answer it this way, because it differs between seasonal and nonseasonal markets. In the seasonal markets, I mentioned that pool openings were down 19%. Now, pool openings themselves generate volume, but what they really are is an indicator of the start to the season. And by our estimation, we're several weeks behind the start of the season. Now, historically, and as we've looked at weather this year, I think we're closer maybe to 2018. And originally, we had thought we were closer to 2022. But as we look at weather, yes, when the pool is open in the Northeast, Long Island in particular, it's a really significant ramp. However, you potentially have fewer pool days. It's all going to depend now on how the pool season ends in the shoulder season. If it ends on its normal cadence, and we started late, yes, we'll lose some days in the seasonal markets just from the pools not being open. In the nonseasonal markets, I think it is more about pent-up demand. People want to use their pools when the weather is correct, and they'll tend to use the pool more when the weather encourages them to do so.

Okay. And then can I ask a follow-up back on the share, market share. And I know you provide a lot of data here, which is not a lot of information, so you're going to get a lot of questions. When you lowered price, the chemical prices a year ago, remind us it was the industry had lowered it before you, meaning why shouldn't that lower price lead to more share gain at this point? And are you seeing that share gain come back in chemicals?

Yes, it's a good question. There were 2 things that spurred us on the chemical price adjustments in June. One was we had gotten outside of our historical price positioning, which is above mass and at or below specialty. We had gotten ourselves up and over specialty. The second thing, and just important to us, was our regular consumer insight work, we were starting to get feedback that we weren't representing a good value, and it was showing up in our NPS scores. So, we adjusted our prices down to where we thought they should be. The third quarter of last year and in the fourth quarter of last year, we feel we did pull back some share versus leaving the prices where they were at. And the last 2 quarters, like we said, we were surprised by the credit card data, but we take it seriously, and we're working to make sure we make the most of the traffic that we're getting. I don't know what to make of the credit card data, actually. It's a little concerning for sure. More importantly to us, it's not really aligning with all of our other channel checks. So, not something we're ignoring, but it doesn't change how we operate. We think we're very competitively priced right now. And this idea of value and our consumers seeing the value not only in our product, but our capabilities, like the AccuBlue water testing in the stores, we think all that's showing up through what was a really nice conversion lift. That's one of the things we feel most positive about the business. When the traffic's there, we're converting at higher levels than we have in the past, and that's a good sign for the pool season.

Thanks. Next question, Garik Shmois with Loop Capital Markets.

Just to follow up on that point. Just go on to see if you could provide a little bit more context on how traffic was in the quarter in nonweather-hit markets and if there was anything to read into trends in places where weather hasn't been an issue.

Yes. That's one of the challenges with this quarter. Typically, we have some regions where we've got normal weather that we can point to as a control group, if you would, and we didn't have that. We didn't have that anywhere. The seasonal markets, as I talked about and as evidenced by the pool openings, just vary, combination of cooler and wet. And when the weather got a little warmer, it was still very wet. And the number of consecutive days over 70 degrees, which we found is highly correlated with traffic in our business, in our major markets, Texas, Florida, Arizona, that was down anywhere from 18% to 64%. And in California, which was our best-performing market, there was 0 consecutive days over 70, but there was also 69% more rainy days than a 10-year average. So, we actually couldn't point to any of our major markets and say we had, based on data, a normal quarter.

Okay. No, that's helpful. Just my follow-up question is on gross margins, just to put a bit of a finer point on the guide. I think, coming into the year, you're expecting about 100 basis points in gross margin improvement this year. Correct me if I'm wrong on that. And if that was the case, do you think that's still reasonable given we're heading into the peak season now? Do you think there's enough opportunities in front of you to reach that prior guide?

I think there is, just because as we gain volume, you get a direct impact on leverage with occupancy. And in our margin miss for this past quarter, that was the biggest contributor, was just the deleverage on occupancy. So, as we add volume, as we get past the chemical price actions, and with some of the promos that we've run, we have learned some things of what's working really well and some things that are not working so well. So, I think, we'll be a little bit more efficient on the use of promos and discounting, both on the types of promos we run, the magnitude of the discounts. And so, I think we've gotten a little sharper there, which would help us out as we get into peak pool season.

Next question, Andrew Carter with Stifel.

The first question I wanted to ask, and just to put a finz`e tune on pricing, first one, just a housekeeping. How much of a headwind is in the comp, because you don't anniversary until June 1st? And then the second point about your ability to take further pricing, how fast can you see it? Last year was a little bit of a waiting game, waiting for people to take pricing. This year, you'd actually be looking for direct action. And then I'd also ask to that question, and I'll finish this one off. How much autonomy do local managers have to do their own pricing and move, or do they have to follow the national?

Yes, Andrew, so couple of questions in there. I'll start, and I may need you to remind me of a couple of them. But first of all, on the impact of the price actions on total sales is 260 basis points. And there's only 1.5 million of non-comp in the quarter. So, it's basically a 260 basis point for comp headwind as well. I think the second question was on when would we decide to do price actions? We look at our competitive pricing report every week. It's a combination of third-party services and regular checking of local competitors by our district managers. We also do web scraping. So, we will react quickly if we see ourselves getting out of our historical and what is also our current price positioning. And in terms of price actions from individual stores, we have national pricing. We also have, and have had for a number of years, a price match guarantee. And the price match guarantee, you go on our website, you can see what the guidelines are around it. But our store managers and store associates have the authority to price match if a consumer can show us a competitive price that's lower for a comparable product.

Second question, just bigger picture. Home Depot obviously signed an agreement to acquire SRS, which owns Heritage, the #2 pool distributor in the category. Could you give any perspective on whether you see that as a threat, particularly Home Depot's ability for a deeper integration between the 2 to go after DIY or cash-carry PRO business as well as just what that can mean, putting those together with online and remind us how much the home centers really compete in the category as it stands today against you specifically?

Yes, thanks for this question. You know what, in our view, we think Home Depot has made it pretty clear that the acquisition of SRS, Heritage it's really about growing their PRO builder business as opposed to a new focus on pool. They said those businesses would run as separate businesses, current management. Heritage is only about 15% of the SRS business. So, that seems clear to us. And we haven't seen any evidence to suggest that Home Depot would increase aisle space to pool SKUs at the expense of existing SKUs. That's a pretty high opportunity cost. So, given those 2 dynamics, we don't really think it changes the competitive landscape for Leslie's. We've competed against the home centers. They do, Andrew, about 15% or 16% of the pool business, have for a number of years. I think that share's held pretty steady. So, current competitors, we definitely keep an eye on them. We don't think this particular acquisition really changes the competitive landscape for us.

Thank you. I would like to turn the floor over to Mike Egeck for closing remarks.

Thanks, Stacy. And thank you all for joining us this afternoon and for your continued interest in Leslie's.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.