POOL 10-K & 10-Q changes, risk factors and insider trading

This report contains forward-looking information that involves risks and uncertainties. Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of earnings and other financial performance measures, statements of management’s expectations regarding our strategic, operational and capital allocation plans and objectives, management’s views on economic, industry, economic, competitive, technological and regulatory conditions and other forecasts of trends and other matters. Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to publicly update or revise such statements to reflect new circumstances or unanticipated events as they occur. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as “anticipate,” “estimate,” “expect,” “intend,” “believe,” “will,” “outlook,” “project,” “may,” “can,” “plan,” “target,” “potential,” “should” and other words and expressions of similar meaning.

No assurance can be given that the expected results in any forward-looking statement will be achieved, and actual results may differ materially from those anticipated due to one or more factors, including the risks described below in this Item 1A, below in Item 7 of this Form 10-K and elsewhere in this Form 10-K. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.

Investing in our securities involves multiple risks and uncertainties. Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statement are described below. Investors should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K. If any of the events described below were to occur, our business, prospects, financial condition or results of operations could be materially adversely affected and the price of our common stock could decline. The risks discussed below are not the only risks we face. Other risks or uncertainties not presently known to us, or that we currently believe are immaterial, may emerge or materially affect our business if they occur. Further, our business may also be affected by additional factors that generally apply to all companies operating in the U.S. and globally, which we have not included below.

The demand for our products may be adversely affected by unfavorable economic conditions and changes in discretionary consumer discretionary spending.

Demand for our products is subject to fluctuations and is difficult to predict, often due to factors outside of our control. ConsumerDiscretionary discretionaryconsumer spending significantly affects our sales and is impacted by a variety of factors, including changes in general economic conditions, the housing market, unemployment rates, wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit. Any material decline in discretionary consumer spending could reduce our sales and harm our business. In times of economic uncertainty, the demand for swimming pool, irrigation, landscape and related outdoor living products typically declines, often corresponding with declines in discretionary consumer spending. Currently, we estimate that approximately 64% of our net sales are derived from maintenance and minor repair products, while approximately 22% of our sales are derived from products used in theto remodel, renovation,renovate, and upgrade of pools. However, the growth in these portions of our business depends on the expansion of the installed pool base, which has been and could in the future be adversely affected by decreases in construction activities, similar to the trends experienced insince 2023the andlatter 2024.half Aof weak2022. economyEconomic weakness or uncertainty may also cause consumers to defer discretionary replacementreplacement, renovation and renovationupgrade activity. Even in generally favorable economic conditions, severe or prolonged downturns in the housing market could have a material adverse impact on our financial performance. Such downturns expose us to certain additional risks, including but not limited to the risk of customer closures or bankruptcies, which could shrink our potential customer base and inhibit our ability to collect on those customers’ receivables.

Discretionary spending is often adversely affected during times of economic, social or political uncertainty, whether caused by health threats, man-made or natural disasters, technological change or other similar events discussed below in this itemItem 1A. Likewise, new pool construction and major remodeling projects over the past few years have decreased, impacted by higher interest rates and inflation, increased economic uncertainties, tightened consumer credit and fewer new housing developments. These events could create uncertainties that negatively impact our business in ways that we cannot presently predict.

Other catastrophicCatastrophic events or societal unrest could adversely impact our operations.

TerrorismAn outbreak of disease or similar public health threat, terrorism and other acts of violence, wars, rioting, labor strife, civil disturbances, societal unrest, geopolitical tensions or political instability could negatively impact us directly by interfering with our ability to operate due to adverse impacts on our workforce, supply chain or operations or indirectly by depressing macroeconomic conditions. Our customers could also encounter hardships that negatively impact their ability to make timely payments to us or to continue doing business with us.

Given the nature of our business, weather is one of the principal external factors affecting our business and the effect of seasonality has a significant impact on our results. In 2024,2025, we generated 60%61% of our net sales and 73%78% of our operating income in the second and third quarters of the year. These quarters represent the peak months of swimming pool use, pool and irrigation installation and maintenance activities. Unfavorable weather during these quarters in our largest geographic regions can significantly affect our results, as further described in “Seasonality and Weather” in Item 1 of this Form 10-K. While warmer weather conditions generally impact our sales favorably, naturalNatural disasters and other significant weather events can create more variability in our reported results in the short term or otherwise adversely impact our sales or operations. Drought conditions or water management initiatives may lead to government-imposed water use restrictions.restrictions or an increase in the number of homeowners unwilling to construct or maintain a pool. Such restrictions could result in decreased pool and irrigation system installations which could negatively impact our sales.

Certain extreme weather events and natural disasters, such as hurricanes, tornadoes, earthquakes, tropical storms, floods, intense storms, droughtdrought, wildfires and wildfires,extreme heat, may adversely impact us in several ways, including interfering with our ability to deliver our products and services, interfering with our receipt of supplies from our vendors, reducing demand for our products and services, and damaging our facilities. WeIn the past, we have experienced short-term impacts on our sales due to closures from weather events such as Hurricane Ian in 2022 and Hurricanes Helene,Francine, FrancineHelene and Milton in 2024. Although theseSimilar events have not had any material lasting impacts on our business or resulted in any material permanent operational challenges, similar events could adversely affect our business in the future.future could result in similar short-term impacts or potentially result in more severe damage to our business. The areas in which we operate, including Florida, California, Texas and other coastal areas, have experienced, and are expected to continue to experience, natural disasters and extreme weather events. The physical effects of changing climate patterns may increase the frequency or severity of natural disasters and extreme weather events in the future, which would increase our exposure to these risks.

Our largest suppliers are Pentair plc, Zodiac Pool Systems, Inc.,Inc. and Hayward Pool Products,Holdings, Inc., which accounted for 20%, 12% and 11%, respectively, of the costs of products we sold in 2024.2025. A decision by our largest suppliers, acting individually or in concert, to sell their products directly to retailers or other end users, bypassing distribution companies like ours, would have an adverse effect on our business. Additionally, if our suppliers experience difficulties or disruptions in their operations, if there is any material interruption in our supply chain or if we lose any significant supplier due to financial failure or any other reason, we may experience increased supply costs or delays in establishing replacement supply sources that meet our quality and control standards, which may affect our profitability.

We rely on a global network of manufacturers and other suppliers to provide us with the products we distribute. To succeed, we must continue to maintain effective business relationships with qualified suppliers who can timely and efficiently supply us with high quality products. As we increase the number ofOur proprietary and exclusive brand products we distribute,distribute ouralso exposureexpose us to potential liability claims may increase.claims. Product and service quality issues could negatively impact customer confidence in our brands and our business. If our product and service offerings do not meet applicable safety standards or our customers’ expectations regarding safety or quality, we could experience lost sales, increased costs and be exposed to legal, financial and reputational risks, including litigation, governmental enforcement actions and costly product recalls. Similar concerns impacting our competitors could damage the reputation of our industry and indirectly have an unfavorable impact on our operations.

Within our industry, we directly compete against national, regional and local distributors for the business of pool owners and other end-use customers. We indirectly compete against store-based mass market retailers and large pool or irrigation supply retailers as they purchase the great majority of their supplies directly from manufacturers. We compete to a lesser extent with internet retailers, as they purchase the majority of their supplies from distributors. Outside of our industry, we compete indirectly with alternative suppliers of big-ticket consumerdiscretionary discretionaryleisure or homeowner products, such as boat and motor home distributors,distributors and with other companieshome whoand rely on discretionary homeowner expenditures, such as homebackyard remodelers. We may not be able to compete effectively against our competitors and other leisure and homeowner product alternatives, which could have an adverse impact on our business.

New competitors may emerge as there are low barriers to entry in our industry, which has led to highly competitive markets consisting of various-sized entities, ranging from small or local operators to large regional businesses. If our customers are attracted by the alternatives afforded by any of our competitors, they may be less inclined to purchase products or services from us, impacting our results of operations. Given the density and demand for pool products, some geographic markets that we serve also tend to have a higher concentration of competitors than others, particularly California, Florida, California, Texas and Arizona. These states encompass our four largest markets and represented approximately 54%53% of our net sales in 2024.2025. The entry of significant new competitors into these markets could negatively impact our sales.

MassWe face competition from both store-based and internet-based mass market retailers, which have greater scale and bargaining power than us. Today these retailers today carry a limited range of, and devote a limited amount of shelf space to, merchandise and products targeted to our industry. Historically, mass market retailers have generally expanded by adding new stores and products, but their offering of pool and irrigation related products has remained relatively constant. Should store‑ and internet-based mass market retailers increase their focus on the pool or irrigation industries or increase the breadth of their pool and irrigation and related product offerings, they maywould likely become a more significant competitor for our direct customers and end-use consumers, which could have an adverse impact on our business. Additionally, because the internet facilitates competitive entry, online ordering, price transparency and comparison shopping, increased internet salestransactions by us or our customers or competitors could increase the level of competition we faceface, reduce our margins or reduce our margin.customers’ reliance on us. Further, we may face additional competitive pressures if large pool or irrigation supply retailers look to expand their customer base to compete more directly withinwith the distribution channel.us.

•penetrate new markets;

•generate sufficient cash flows to support expansion plans and general operating activities;

•obtain financing;

•identify appropriate acquisition candidates and successfully integrate acquired businesses;

•identify appropriate locations for new sales centers and successfully integrate them into our network;

•maintain favorable supplier arrangements and relationships; and identify and close or consolidate locations or divest assets which no longer meet our objectives.

We strive to balance the need to maintain inventory levels that are sufficient to maximize operational efficiencies and minimize potential supply chain constraints against the risk of inventory obsolescence due to changing consumer preferences and fluctuating commodity prices. In order toTo successfully manage our inventories, we must estimate demand from our customers and purchase products that substantially correspond to consumer demand.demand, which depends in part on our ability to identify and respond to evolving trends in demographics and consumer preferences. If we overestimate demand and purchase too much of a particular product, we face a risk that the price of that product will fall, leaving us with inventory that we cannot sell at optimal profit margins. In addition, we may have to write down such inventory if we are unable to sell it for its recorded value. If we underestimate demand and purchase insufficient quantities of products, inventory shortages could result in delayed revenue or loss of sales opportunities altogether as potential customers turn to competitors’ products that are readily available. If we maintain insufficient inventory levels and prices rise for these products, we could be forced to purchase products at higher prices and forego profitability in order to meet customer demand. Our business, financial condition and results of operations could be negatively impacted if we fail to (i) timely identify or effectively respond to changing consumer tastes, preferences, spending patterns and swimming pool, irrigation, landscape and related outdoor living products needs, (ii) accurately forecast demand for ourthese products or (iii) successfully manage our inventories.

Risks Relating to Technology, CybersecurityCybersecurity, Artificial Intelligence and Data Privacy

We are making, and expect to continue to make, investments in technology to maintain and update our computer systems and to expand our ability to engage in e-commerce with our customers. We may experience delays in making these updates and may not implement these changes as quickly or successfully as our customers expect, or as quickly or successfully as changes implemented by our competitors. In addition, implementing significant system changes increases the risk of computer system disruption. The potential problems and interruptions associated with implementing technology initiatives or conversions, as well as providing training and support for those initiatives, could disrupt or reduce our operational efficiency. Advances in computer and software capabilities, encryption technology and other discoveries increase the complexity of our technological environment, including how each interact with our various software platforms. Such advances could delay or hinder our ability to process transactions or could compromise the integrity of our data, resulting in a material adverse impact on our financial condition and results of operations. We also may experience occasional system interruptions and delays that make our information systems unavailable or slow to respond, including the interaction of our information systems with those of third parties or the failure of software of services provided by third parties that we do not control. A lack of sophistication or reliability of our information systems could adversely impact our operations and customer service and could require major repairs or replacements, resulting in significant costs and foregone revenue. Increasing complexity of technology could increase our cost of doing business.

We devote significant resources to protect our systems and data from cyber-attacks. Refer to Item 1C.1C, “Cybersecurity” of this Form 10-K for further information on our cybersecurity risk management andmanagement, strategy and governance. In recent years we have faced, and expect to continue to face, various attempted cyber-attacks of increasing sophistication. To date, we are not aware of any cybersecurity incident or threat that materially impacted or could reasonably be anticipated to materially affect our business, results of operations or financial condition. However, we cannot guarantee that we will not experience such an incident in the future. The risk of breaches is likely to continue to increase due to several factors, including (i) the increasing use of machine learning, artificial intelligence (AI) and other sophisticated techniques to initiate cyber attacks and social engineering threats, such as phishing attacks,or deepfake schemes, (ii) the wider accessibility of cyber-attack tools that can circumvent security controls and evade detection, (iii) the expanded size, scope, use and complexity of our systems, and (iv) our increased reliance on e-commerce, open source software, cloud computercomputing services and work-from-home staffing. Consequently, we may not be able to implement security barriers or other preventative measures that repel all future cyber-attacks or detect such attacks in a timely manner, which may result in significant expenses from system downtime, lower sales, increases in insurance costs, fines and fees, lost business relationships, managerial distractions, litigation, increases to regulatory oversight, expenditures for additional threat prevention technologies or reputational harm, any of which could materially impact us. We also participate in a broader ecosystem of supply chain partners, both digital and physical, who face similar risks. Cyber-attacks on our partners could negatively impact our business.

A variety of state, national, foreign and international laws and regulations apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal and other data. The European Union and other international regulators, as well as state governments, have recently enacted or enhanced data privacy regulations, such as the California Consumer Privacy Rights Act, and other governments are considering establishing similar or stronger protections. These regulations impose certain obligations for handling specified personal information in our systems and for apprising individuals of the information we have collected about them. Many of these laws are complex and change frequently and often conflict with the laws in other jurisdictions. Despite our best efforts to comply, any noncompliance could result in incurring potential substantial penalties and reputational damage.

The nature of our business subjects us to compliancepotential non-compliance with employment, environmental, health, transportation, safety and other governmental regulations. Changes in, expanded enforcement of, or adoption of new federal, state, local or international laws and regulations could increase our costs of doing business.

We sell algaecides and pest control products that are regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide Act and various state pesticide laws. These laws primarily relate to labeling, annual registration and licensing. Management has processes in place to facilitate and support our compliance with these requirements. However, failure to comply with these laws and regulations may result in investigations, the assessment of administrative, civil and criminal fines, damages, seizures, disgorgements, penalties or the imposition of injunctive relief. Although we presently do not expect to incur any capital or other expenditures relating to regulatory matters in amounts that may be material to us, we may be required to make such expenditures in the future. These laws and regulations have changed substantially and rapidly over the years, and we anticipate that there will be continuing changes. It is possible that the costs of compliance with increasingly prescriptive laws and regulations will continue to increase. We might not be able to successfully anticipate and remain in compliance with evolving future regulatory requirements, which could adversely impact our results of operations.

Governmental actions designed to address changing climate patterns or the failure to meetcomply environmentalwith socialclimate-related and governanceother (ESG)sustainability expectations or standards or achieve our ESG commitmentsrequirements could adversely affect our business and increase our costs of doing business.

Concerns over changing climate patterns have led to, and may in the future continue to lead to, new or increased legal and regulatory requirements designed to reduce or mitigate the effects of changing climate patterns, which could increase our compliance obligations. In particular, advocates of change are continuing to explore ways to reduce greenhouse gas emissions. These changes over time could affect the availability and cost of certain consumer products, commodities and energy, which in turn may impact our ability to procure certain products or services required for the operation of our business at the quantities and levels we require. The regulation of greenhouse gas emissions could result in additional taxes or other costs to us or require us to modify our facilities or vehicle fleet. Changes in customers’ attitudes toward the environmental impact of a pool’s energy consumption or pool chemical products could reduce demand for our products.

Our initiatives aimed at reducing our impact on the environmentClimate-related and climateother changesustainability disclosures we make reflect our current plans and aspirations, and it is possible that we may not be able to achieve our desired impact, which may cause us to suffer from legal claims, reputational damage or a loss of demand for our products. Investors or other stakeholders could react negatively to ourdisclosures targetswe ormake on climate-related and other positions we take on ESGsustainability matters, which could negatively impact our relationships with such stakeholders or result in claims that our initiativesdisclosures harmed them or us.

Various governmental bodies in Europe and the United States, particularly in the state of California, have adopted or proposed laws or regulations increasing the obligations of companies to disclose information about their emissionsclimate-related and other similarsustainability data.matters. We expect that these initiatives will expose us to additional risk.compliance costs and potential risks.

We handle and store chemicals, fertilizers and other combustible materials that involve fire, safety and casualty risks.

We handle and store chemicals and fertilizers, including certain combustibles and oxidizing compounds, at our sales centers.centers and at our chemical re-packaging plant. In addition to training our employees on safety protocols and procedures, we follow local fire marshal regulations at our facilities, which vary by jurisdiction and are subject to change, and assess the need for sprinklers and chemical storage vaults. A fire, explosion or flood affecting one of our facilities could give rise to safety and casualty losses and related liability claims. We also maintain what we believe is prudent insurance protection. However, we cannot guarantee that our insurance coverage will be adequate to cover future claims that may arise or that we will be able to maintain adequate insurance in the future at rates we consider reasonable. Successful claims for which we are not fully insured may adversely affect our working capital and profitability. In addition, changes in the insurance industry have generally led to higher insurance costs and decreased availability of coverage.

•difficulty in staffing international subsidiary operations;

•different political, economic and regulatory conditions;

•local laws and customs;

•currency fluctuations (including changes in the currentrelative strength of the U.S. dollar compared to foreign currencies), exchange controls and repatriation restrictions;

•adverse tax consequences; and adverse consequences for violating anti-corruption, anti-competition, economic sanctions, immigration and other laws governing international commerce.

We do not have operations in the Middle East, RussiaRussia, Ukraine or Ukraine.South America. However, the contributory effects of the geopolitical conflicts in these and other areas globally may result in higher inflation, labor costs, energy and commodity prices and costs of materials and services (together with shortages or inconsistent availability of materials and services), which could negatively affect our business (particularly our European operations), results of operations and financial condition.

Because we source certain products from outside the United States, major changes in tax policy, import or export regulations, other trade restrictions or trade relations, such as the imposition of additional tariffs or duties on imported products, could adversely affect our business, results of operations, effective income tax rate, liquidity and net income. Additionally, following annual administrative reviews, final duty rates determined by the U.S. Department of Commerce may be higher or lower than rates paid at import. As a result, we may receive refunds or owe additional duties on imported product. The outcome can vary by year and by product.

The variability and complexity of tariffs and duties exposes us to the risk of higher costs and inadvertent noncompliance associated with our imported products. Moreover, in recent yearsyears, the United States has generally increased its tariff rates andor indicatedimposed thatnew additionaltariffs increasesor couldtrade be forthcoming.restrictions. Changes in laws, court rulings,rulings or differences in interpretation on product classification could lead to changes in duty and tariff rates on these or other imported products.

In 2017, we adopted Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting. Our projections of financial statement impacts related to ASU 2016-09 are subject to several assumptions which can vary significantly,assumptions, including our estimated share price and the period that our employees will exercise vested stock options. Our actual results may vary significantly from our projected results. Excess tax benefits or deficiencies recognized under ASU 2016-09 vary from quarter to quarter and past results may not be indicative of future results.

The cost of servicing our debt could reduce our profitability if interest rates increase or remain at elevated levels.

Our unsecured syndicated senior credit facility, term facility and receivables securitization facility bear interest at variable rates. We have entered into interest rate swap contracts and a forward-starting interest rate swap contract to reduce our exposure to fluctuations in variable interest rates on current and future interest payments that we owe on a portion of our variable rate borrowings. While the Federal Reserve beganhas been cutting interest rates insince the latter partparts of 2024, interest rates remain relatively high.high compared to the recent past. If interest rates remain elevated or increase, the cost of servicing our variable rate debt not covered by our interest rate swaps could materially reduce our profitability and cash flows. For additional information regarding our interest rate risk, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K.

Selling and administrative expenses (operating expenses) increased 5%,4% orto $44.7$992.3 million,million in 2025 compared to $958.1 million in 2024. AsThe agrowth percentage of net sales, operatingin expenses increasedwas 150primarily basisdriven pointsby toincremental 18.0%investments in 2024 compared to 16.5% in 2023. Expense growth drivers included higher costs associated with the expansion of our network and our technology initiatives and sales center network expansion, as well as inflationary rent,impacts, wageparticularly on base wages and insurance increases. These increases were partially mitigated by close management of variablefacility costs.

Net income declined 17% to $434.3 million in 2024 compared to $523.2 million in 2023. Earnings per share decreased 15% to $11.30 per diluted share declined 4% to $10.85 in 2025 compared to $13.35$11.30 in 2024, which included a $0.25 benefit from the import tax reversal discussed above. We recorded a $4.6 million, or $0.12 per diluted shareshare, tax benefit from Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, in 2023.2025 Withoutcompared to an $8.8 million, or $0.23 per diluted share, tax benefit in 2024. Adjusting for the impact from ASU 2016-09 in both periods,years, earnings per diluted share decreased 16%3% to $10.73 in 2025 compared to $11.07 per diluted share compared to $13.18 per diluted share in 2023.2024. See RESULTS OF OPERATIONS below for definitions of our non-GAAP measures and reconciliations of our non-GAAP measures to GAAP measures.

Total net receivables, including pledged receivables, decreasedincreased 8%10% compared to December 31, 2023,2024, primarily due to lowerhigher sales in 2024.December 2025. Our allowance for doubtful accounts was $8.0 million at December 31, 2025 and $8.6 million at December 31, 2024 and $11.7 million at December 31, 2023.2024. Our days sales outstanding ratio, as calculated on a trailing four quarters basis, was 26.3 days at December 31, 20242025 and 26.8 days at December 31, 2023.2024.

Our inventory managementbalance effortsincreased reduced our inventory levels by 6%13% to $1.3 billion, compared to $1.4$1.5 billion at December 31, 2023,2025 outpacingcompared to $1.3 billion at December 31, 2024. This growth was primarily driven by increased purchasing ahead of price increases. Our inventory balance also reflects increases from inflation (including mid-season vendor price increases) and the 4%addition declineof innew netand sales.acquired sales centers. Our reserve for inventory obsolescence was $23.9 million at December 31, 2025 compared to $26.7 million at December 31, 2024 compared to $23.5 million at December 31, 2023.2024. Our inventory turns, as calculated on a trailing four quarters basis, were 2.7 times at December 31, 2025 and 2.8 times at December 31, 2024 and 2.7 times at December 31, 2023.2024.

Total debt outstanding of $950.4$1.2 millionbillion at December 31, 20242025 decreasedincreased $103.0$249.1 million compared to December 31, 20232024, as we have used operating cash flowsprimarily to reducefund ouropen debt.market share repurchases of $341.1 million in 2025 and working capital needs.

Consumers’ investments in their homes, including backyard renovations, continue to be favorable. In recent years, steady increases in home values, lack of affordable new homes and increased mortgage rates have positioned homeowners to stay in their homes longer and upgrade their home environments, including their backyards. During the COVID-19 pandemic (generally 2020 through 2022), we experienced unprecedented demand as families spent more time at home and sought opportunities to create or expand home-based outdoor living and entertainment spaces. This trend had a positive impact on our financial performance during 2020 through 2022. Beginning in the latter half of 2022 through 2024,2022, these trends moderated resulting in lagging new pool construction and remodeling activities. AsBased aon result,industry in 2024,data, we estimate that new in-ground pool construction units decreased 15%3% to 5% from 72,00062,000 units in 20232024 to 61,000just units,below impacted60,000 byunits lowerin discretionary activities and further pressured by the macroeconomic environment.2025.

MarketAs in 2024, market conditions induring 2024the majority of 2025 were challenged by generally higher than normal interest rates than the recent past, and product cost and labor inflation, which led to consumer hesitancy on discretionary spending and some cyclical suppression of demand. While theseThese market conditions impacted new pool construction and remodeling projects, ourparticularly in the first half of the year. Throughout the year, non-discretionary maintenance product sales in 2024 were not significantly impacted.stable. As lower housing turnover encouragesand market conditions encourage consumers to renovatestay in their existinghomes homes,longer, we expect that consumers will continue to invest in outdoor living spaces as they consider backyards an extension of their home space. We believe that we are well positioned to benefit from the inherent long-term growth opportunities in our industry fueled by favorable population migration trends, positive housing demand dynamics, and product developments and technological advancements as consumers focus on more sustainable and energy-efficient products.

In view of current trends, we established our outlook for 20252026 based on reasonable expectations for industry demand, pricing and inflationary conditions, continued capacity creation to have a positive impact on variable expenses,expense continuedreductions, investmentrealization inof our digital transformation initiatives and ongoing leverage of existing investments in our business and continuous process improvements.business. We also plan to broaden our geographic presence by opening 85 to 108 new sales centers in 20252026 and by making selective acquisitions if and when appropriate opportunities arise.

•We expect sales to be flat to a low single digit increase compared to 2024,2025, impacted by the following factors and assumptions:

◦normal weather patterns for 20252026;

◦sustainedslight demandgrowth forin sales of pool maintenance products;

◦inflationary product cost increases, which generally pass through to customerscustomers, of approximately 1% to 2%; and ◦onethe lesssame number of selling daydays in the firsteach quarter and for the full year of 2025 compared to 2024.2025.

•We project gross margin for the full year of 20252026 to be insimilar the range ofto our 20242025 gross margin at 29.7% and our long-term target of 30.0%, with our highest margin in the second quarter of the year.29.7%. We expect that our long-term gross margin targetto willbenefit befrom moreeffective achievablesupply aschain constructionmanagement, trendsadvantageous improve.pricing strategies and increased private label sales. Our actual gross margin will depend on changes in product and customer mix and on amounts and timing of sales and inflationary price increases.

•We expect to leverage our existing infrastructure and strategically manage discretionary spending. We project that our operating expenses in 20252026 will be impacted by the following factors:

◦an increase of approximately $10.0 million to $15.0 million inas performance-based compensation to incentivize and reward our employeesnormalizes;

◦$10.0$5.0 million of spend forto newadd salesgreenfields centers as we further expandto our sales center network;

◦continued investment in technological solutions to enhance our customer service; and ◦inflationary increases in areas such as labor and occupancy costs with some offsets from our efficiency initiatives.initiatives; and leverage from enhanced profitability efforts at our recent greenfield locations.

In 2025,2026, we expect our effective tax rate will be around 25% without the impact of ASU 2016-09. Our effective tax rate is dependent upon our results of operations and may change if actual results are different from our current expectations. Due to ASU 2016-09 requirements,2016-09, we expect our effective tax rate will fluctuate from quarter to quarter, particularly in periods when employees elect to exercise their vested stock options or when restrictions on share-based awards lapse. We estimate that we have approximately $3.2 million in unrealized excess tax benefits related to stock options that expire and restricted awards that vest in the first quarter of 2025. We may recognize additional tax benefits related to stock option exercises in 2025 from grants that expire in years after 2025, for which we have not included any expected benefits in our guidance. The estimated impact related to ASU 2016-09 is subject to several assumptions which can vary significantly, including our estimated share price and the period that our employees will exercise vested stock options. We recorded ana $8.8$4.6 million benefit in our provision for income taxes for the year ended December 31, 20242025 related to ASU 2016-09.

We project that 20252026 earnings will be in the range of $11.08$10.85 to $11.58$11.15 per diluted share,share. includingOur an2026 guidance does not include any estimated $0.08unrealized benefittax frombenefits ASUrelated 2016-09to duringstock theoption firstexercises, quarterstock ofoption 2025.expirations or restricted stock awards vesting in 2026. We expect to continue to use cash for the payment of cash dividends as and when declared by our Board and to fund opportunistic share repurchases at our discretion over the next year.

The forward-looking statements in this Current Trends and Outlook section and elsewhere in this documentreport are based on current market conditions and our current business plans, speak only as of the filing date of this report, are based on several assumptions and are subject to significant risks and uncertainties, including the sensitivity of our business to weather conditions; changes in the economy, consumer discretionary spending, the housing market, inflation, or interest rates; our ability to maintain favorable relationships with suppliers and manufacturers; the extent to which favorable consumer spending trends over the past several years will continue; competition from other leisure product alternatives or mass merchants; our ability to continue to execute our growth strategies; changes in the regulatory environment; new or additional taxes, duties or tariffs; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in Item 1A of this Form 10-K. Also see “Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995” prior to the heading “Risk Factors” in Item 1A.

At the end of each quarter, we perform a reserve analysis of all accounts with balances greater than $20,000 and more than 60 days past due. Additionally, we perform a separate reserve analysis on the balance of our accounts receivables with emphasis on past due accounts. We estimate future losses based upon historical bad debts, customer receivable balances, age of customer receivable balances, customers’ financial conditions and current and forecasted economic trends, including certain trends in the housing market, the availability of consumer credit and general economic conditions (as commonly measured by Gross Domestic Product or GDP). We monitor housing market trends through review of the House Price Index as published by the Federal Housing Finance Agency, which measures the movement of single-family home prices.

During the year, we write off account balances when we have exhausted reasonable collection efforts and determined that the likelihood of collection is remote. These write-offs are charged against our allowance for doubtful accounts. In the past five years, write-offs have averaged approximately 0.10% of net sales annually. Write-offs as a percentage of net sales approximated 0.10% in 2025, 0.16% in 2024,2024 and 0.12% in 2023 and 0.08% in 2022.2023. We expect that write-offs will range from 0.05% toapproximate 0.10% of net sales in 2025.2026.

If the balanceallowance offor thedoubtful accounts receivable reserve increased or decreased by 20% at December 31, 2024,2025, pretax income would change by approximately $1.7$1.6 million and earnings per share would change by approximately $0.03 per diluted share (based on the number of weighted average diluted shares outstanding for the year ended December 31, 20242025).

Product inventories represent the largest asset on our balance sheet. Our goal is to manage our inventory such that we minimize stock-outs to provide the highest level of service to our customers. To do this, we maintain at each sales center an adequate inventory of stock keeping units (SKUs) with the highest sales volumes. At the same time, we continuously strive to better manage our slower moving classes of inventory, which are not as critical to our customers and thus, inherently turn at slower rates.

•the level of inventory in relation to historical sales by product, including inventory usage based on product sales at both the sales center level and on a company-wide basis;

•changes in customer preferences or regulatory requirements;

•seasonal fluctuations in inventory levels;

•geographic location; and superseded products and new product offerings.

If the balancereserve of ourfor inventory reserveobsolescence increased or decreased by 20% at December 31, 2024,2025, pretax income would change by approximately $5.3$4.8 million and earnings per share would change by approximately $0.10 per diluted share (based on the number of weighted average diluted shares outstanding for the year ended December 31, 20242025).

Many of our vendor arrangements provide for us to receive specified amounts of consideration when we achieve any of a number ofcertain measures. These measures generally relate to the volume level of purchases from our vendors, or our net cost of products sold, and may include negotiated pricing arrangements. We account for consideration under vendor programs as a reduction of the prices of the vendor’s products and therefore a reduction of inventoryproduct inventories until we sell the product, at which time we recognize such consideration as a reduction of cost of sales in our income statement.

Throughout the year, we estimate the amount earned based on our expectation of total purchases for the fiscal year relative to the purchase levels that mark our progress toward theearning attainmentconsideration ofunder variouseach levels within certain vendor programs.program. We accrue vendor program benefits on a monthly basis using these estimates provided that we determine they are probable and reasonably estimable. Our estimates for annual purchases, future inventory levels and sales of qualifying products are driven by our sales projections, which can be significantly impacted by a number of external factors including changes in economic conditions and weather. Changes in our purchasing mix also impact our estimates, as certain program rates can vary depending on our volume of purchases from specific vendors.

We record Global Intangible Low Tax Income (GILTI) on foreign earnings as period costs if and when incurred,incurred. although weWe have not realized any impacts since the December 2017 enactment of U.S. tax reform.

The Compensation and Human Capital Management Committee of our Board (Compensation Committee) and our management have designed compensation programs intended to create a performance culture. The primary objectives of our compensation programs are to attract, motivate, reward and retain our employees without leading to unnecessary risk taking. Our compensation packages include bonus plans that are specific to groups of eligible participants and their levels and areas of responsibility. The majority of our bonus plans consist of annual cash payments that are based primarily on objective performance criteria. We calculate bonuses based on the achievement of certain key measurable financial and operational results, including operating income.

We record annual performance-based compensation accruals based on operating income achieved in a quarter as a percentage of total expected operating income for the year. WeOur estimate totalof expectedfull-year operating income for the current plan year usingincorporates management’s estimateassessment of theexpected totalincentive overallpayouts incentives earned perunder the stated bonus plan objectives. Starting in June, and continuing each quarter through our fiscal year end, we adjust our estimated performance-based compensation accrual based on our detailed analysis of each bonus plan, the participants’ progress toward achievement of their specific objectives and management’sis estimatesregularly relatedupdated tothroughout the discretionary components of the bonus plans, if any.year.

To the extent our qualitative test indicates it is more likely than not that the fair value of a reporting unit is less than the carrying amount or for any reporting unit where we only perform a quantitative test, we perform a discounted cash flow analysis at the reporting unit level to furtherestimate evaluate our initialits fair value estimate.value. If the carrying value of the reporting unit exceeds the fair value, we record a goodwill impairment charge for the difference, up to the carrying value of the goodwill. The fair value estimates used in our impairment test are determined using discounted cash flow models, which require the use of significant unobservable inputs, representative of a Level 3 fair value measurement. Since we define an operating segment as an individual sales center and we do not have operations below the sales center level, we define a reporting unit as an individual sales center.

To test the reasonableness of our fair value estimate, we compared our company-wide estimated fair value to our market capitalization as of the date of our annual impairment test. In 2024,2025, our company-wide estimated fair value was in line with our market capitalization. To facilitate a sensitivity analysis, we reduced our consolidated fair value estimate to reflect more conservative discounted cash flow assumptions, the sensitivity of a 15050 basis point increase in our estimated weighted average cost of capital or a 50 basis point decrease in the estimated perpetuity growth rate. Our sensitivity analysis resulted in a fair value modestly lower than our market capitalization and did not result in the identification of additional at-risklocations locations.for which it is more likely than not that the fair value is less than the carrying amount.

In October 2024, we performed our annual goodwill impairment test and did not record any goodwill impairment at the reporting unit level. As of October 1, 2024,2025, we had 251253 reporting units with allocated goodwill balances. Our most significant goodwill balance of $401.6 million was related to our Porpoise Pool & Patio reporting unit and the next largest goodwill balance for a reporting unit was $12.1 million.unit. The average goodwill balance perof our remaining reporting unitunits was $2.8$1.2 million.

You should read the following discussion in conjunction with the accompanying interim Consolidated Financial Statements and notes, the Consolidated Financial Statements and accompanying notes in our 2025 Annual Report on Form 10-K and Management’s Discussion and Analysis in our 2025 Annual Report on Form 10-K.

No assurance can be given that theour expected results in any forward-looking statement will be achieved, and our actual results may differ materially due to one or more factors, including the sensitivity of our business to weather conditions; changes in economic conditions, consumer discretionary spending, the housing market, inflation or interest rates; our ability to maintain favorable relationships with suppliers and manufacturers; competition from other leisure product alternatives or mass merchants; our ability to continue to execute our growth strategies; changes in the regulatory environment; new or additional taxes, duties or tariffs; excess tax benefits or deficiencies recognized under ASU 2016-09 and other risks detailed in our 2025 Annual Report on Form 10-K, as updated by our subsequent filings with the U.S. Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

FirstSecond quarter ended MarchJune 31,30, 2026 compared to the firstsecond quarter ended MarchJune 31,30, 2025

Operating income increaseddecreased 7%2% to $82.6$267.7 million compared to $77.5$272.7 million in the same period last year,year. andAdjusted operating marginincome expandedincreased 10 basis points1% to 7.3%.$275.9 million.

As of MarchJune 31,30, 2026, total net receivables, including pledged receivables, increased 13%11% compared to MarchJune 31,30, 2025, primarily due to higher sales in MarchJune 2026. Our days sales outstanding (DSO), as calculated on a trailing four quarters basis, was 26.927.6 days at MarchJune 31,30, 2026 and 25.925.8 days at MarchJune 31,30, 2025. Our allowance for doubtful accounts balance was $8.2 million at March 31, 2026 and $8.5 million at MarchJune 31,30, 2026 and $8.3 million at June 30, 2025.

Our inventory balance was $1.7$1.4 billion at MarchJune 31,30, 2026, an increase of $200.1$48.5 million, or 14%,4%, from MarchJune 31,30, 2025,2025. reflectingThe higher4% purchasesyear-over-year toincrease supportin serviceinventory levelsis anddown afrom broaderthe product14% rangeincrease toreported betterin servethe first quarter of 2026, as we sell through our customerspeak-season aheadstocking of the swimming pool season.levels. Our inventory balancelevels alsoreflect reflectsthe inflationaryimpact increasesof inflation and the addition of inventory from new and acquired sales centers over the past twelve months. Our inventory reserve was $25.0$24.1 million at MarchJune 31,30, 2026 and $27.1$27.7 million at MarchJune 31,30, 2025. Our inventory turns, as calculated on a trailing four quarters basis, was 2.6 times at MarchJune 31,30, 2026 and 2.8 times at MarchJune 31,30, 2025.

Total debt outstanding increased $222.6$110.8 million to $1.2$1.3 billion at MarchJune 31,30, 2026, which helped to fund $266.7 million of open market share repurchases of $349.0 million over the past twelve months.

We project gross margin for the full year of 2026 to be similarapproximately to30 basis points below our 2025 gross margin of 29.7%. We expect our gross margin to benefitbe negatively impacted by higher inbound freight cost in the current year, partially offset by benefits from effective supply chain management, advantageous pricing strategies and increased private label sales. The prior year comparison is also impacted by margin benefit from mid-season price increases in the prior year. Our actual gross margin will depend on changes in product and customer mix and on amounts and timing of sales and inflationary price increases.

We expect to leverage our existing infrastructure and strategically manage discretionary spending while continuingproviding for a modest recovery in incentive compensation compared to investthe inprior our sales center network and consumer-facing technology initiatives.year. We project that our operating expenses for 2026 will increase aroundapproximately 3% compared to 2025.2025, or 2% to 3% without the $8.3 million of CEO transition costs.

In 2026, we expect our effective tax rate will approximate 25.0% without the impact of Accounting Standards Update ASU 2016-09.2016-09, DueImprovements to Employee Share-Based Payment Accounting. Under ASU 2016-09, we expect our effective tax rate will fluctuate from quarter to quarter, particularly in periods when employees elect to exercise their vested stock options or when restrictions on share-based awards lapse. We recorded a $0.8$0.7 million, or $0.02 per diluted share, tax benefit from ASU 2016-09 for the threesix months ended MarchJune 31,30, 2026.

WeFor 2026, we project 2026 diluted EPS in the range of $10.66 to $10.96, or $10.87 to $11.17, excluding the impact of CEO transition costs and including the impact of year-to-date tax GAAP benefits of $0.02. We may recognize additional tax benefits related to stock option exercises in 2026 from grants that expire in future years. We have not included any expected tax benefits in our full year guidance beyond what we have recognized as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, we conducted operations through 455 sales centers in North America, Europe and Australia. For the three and six months ended MarchJune 31,30, 2026, approximately 95% of our net sales were from our operations in North America.

We have included the results of operations from acquisitions in 20252025, as further discussed in Note 3, in our consolidated results since the acquisition dates.

We have not provided separate base business income statements within this Form 10-Q as our base business results for the three and six months ended MarchJune 31,30, 2026 closely approximated consolidated results. Excluded sales centers contributed less than 1% to the change in our reported net sales.

The table below summarizes the changes in our sales center count during the first threesix months of 2026:

Net sales of $1.1$1.8 billion in the firstsecond quarter of 2026 increased 6%2% compared to the firstsecond quarter of 2025. This growth was drivensupported by solidinflationary demandprice forincreases, steady maintenance productsvolumes and increasedimproved demandsales forof ourbuilding discretionary products.materials.

In the firstsecond quarter of 2026, sales of equipment for maintenance, renovation and new construction activities, including swimming pool heaters, pumps, lights, filters and automation devices, increased 7%3% versus the same period last year, and collectively represented approximately 34%29% of net sales for the period. Sales of building materials, which are primarily used in new pool construction and remodeling, increased 5%4% compared to the same period in 2025 and represented approximately 13%12% of net sales in the firstsecond quarter of 2026.

Interest and other non-operating expenses, net for the firstsecond quarter of 2026 increased $1.2$2.1 million compared to the firstsecond quarter of 2025, primarily due to an increase in average outstanding debt between periods. Our weighted average effective interest rate decreased to 4.2% in the firstsecond quarter of 2026 compared to 4.5%4.6% in the firstsecond quarter of 2025 on average outstanding debt of $1.2$1.3 billion and $962.4$1.1 millionbillion for the respective periods.