Andrew Carter: Hi, thanks. Good morning. I wanted to ask if, in your guidance, are you kind of contemplating any kind of elevated level of deferrals? Or could you say with definitive conclusion that any kind of deferrals was kind of completely done in 2023? Also within kind of the equipment and the mix, there’s been an ongoing story of trade up, replacing lower value analogs with higher value, recognizing variable speed pumps can’t go backwards. Anything you’re seeing that’s saying that’s a risk of that going backwards this year as a headwind to guidance? Thanks.
Peter Arvan: So let me try and answer the first part, I think I got it right. If not, come back, I mean, I didn’t answer your question. On deferrals, I would tell you, nothing really new. I don’t expect people to say, “Oh, I’m more cautious this year than I was last year.” I think people are still appropriately cautious. So I don’t expect anything to change really from a deferred maintenance perspective. And on the desirability of the new products, I spend a lot of time, as you can imagine, talking to our customers and also to our manufacturers, suppliers, partners who also spend a lot of time talking to the dealers and technology is still very important. If you talk to the dealers that are building pools today, very few pools are being built without any technology.
Almost everybody is opting for some level of automation, sometimes more than others. But if I look in general compared to what it was several years ago, it’s significantly better. Do I think that’s going to materially jump this year? No. I think those products are still very desirable and they’ll continue to gain share. But I don’t – Andrew, I wouldn’t look for a step function change in the – if I look at 10 pieces of equipment that were sold or 100 pieces of equipment that are sold to say that this year, a huge percentage more will be going to the higher end. I think that will continue to slowly gain share.
Andrew Carter: Sure. And then kind of final question, just kind of wrap a bow – my final question, wrap a bow around weather. I mean, quarter-to-date, can you give you trends, but a reminder how much of March kind of dictates 1Q? Is the kind of swing this year versus last year really determined in March versus April? And was there any weather – would you call out any weather benefits in the fourth quarter? Thanks.
Melanie Hart: Yes. So weather overall for the fourth quarter was fairly favorable, so not a significant change over last year. The first quarter is definitely determined by the weather in March as we saw last year. So certainly, we’ll look for that to see how the – how we fall within the range for the quarter.
Peter Arvan: Obviously, you know, March is a much more important month for us than January, and it grows sequentially through April, May and June. So it would be great if March was – March had fantastic weather, right? Because I had a choice of getting – having great weather in March or great weather in January, I’d take it in March.
Andrew Carter: Great. I will pass it on. Thank you.
Peter Arvan: Thank you.
Operator: The next question comes from Sam Reid from Wells Fargo. Please go ahead.
Sam Reid: Thanks so much guys for taking my question. This is actually a follow-up to an earlier question. You guys gave some helpful color around Q1 topline contribution to the full year. I believe it was around kind of 18% to 20% of total annual revenues is what you’re anticipating. So first, I just want to make sure that’s the correct way to think about that? And then can we talk through the flow-through on the P&L in a little bit more detail. The reason why I asked is because I think it would imply a pretty meaningful pullback in year-over-year EPS. Thanks.
Melanie Hart: Yes. So when you look at the first quarter, if you look kind of historically, you’ll kind of see our contribution – revenue contribution within a relative range is fairly consistent. So I would probably exclude from that 2020 just because there was kind of a lean towards the later portion of the year. And so with that, we’ve talked about margins for first quarter being less than last year. So that will have an impact on the overall ultimate EPS for the quarter.
Sam Reid: Got you. And then maybe one more follow-up, and this ties back into your Q4 results. So I want to maybe bridge the down 8% that you ultimately printed kind of versus the mid- to high single-digit down guide. And what I want to understand specifically sort of what transpired intra-quarter that got you to the low end of that range, especially when you consider weather was perhaps a moderate tailwind?
Melanie Hart: Yes. So overall, when you look at the fourth quarter, it was kind of relatively consistent in contribution to the third quarter when you look at the components with a little bit less on the inflation side and Horizon because of the seasonal nature of their business, it had a slightly higher negative impact on the fourth quarter than it did in the third quarter.
Sam Reid: Got you. Thanks so much. I will pass it on.
Operator: The next question comes from Garik Shmois from Loop Capital. Please go ahead.
Garik Shmois: Hi, thank you. I was wondering if you could go over in a little bit more detail just for modeling the cadence of the SG&A investments this year with the increases, follow normal seasonality? Or should we expect any lumpiness?
Melanie Hart: Yes. So the component as it relates to the performance compensation, we record that as a percentage of operating income. So that will follow our overall normal seasonality. As it relates to the new sales center investments, you would see really a good bulk of that will happen preseason with the remaining amount happening in the season. So we typically try to focus on opening these new sales centers either in the first or the fourth quarter generally. And as it relates to the technology investments, we are continuing to add resources. So you’ll see some investments in the first quarter and then that will ramp up through the rest of the year.
Garik Shmois: Got it. Follow-up question is, I wonder if you could speak to just the expectations for seasonal versus year-round markets in 2024. It looks like year-round actually performed a little bit better last year. Just curious if you’re expecting that to be the case as well.
Peter Arvan: Yes. I think you really – you have to go deeper than just seasonal and year-round. Garik, I think you got to look at specific markets, like – so Florida had a very strong quarter and year in 2022. So the comps in Florida are going to be very tough in the beginning of the year, and then we’ll more even out. So if I look at California, California’s issue was weather early in the year. But from a new construction perspective, I don’t see much changing out there compared to what we saw this year, given the general economic environment, the demand curve is going to be fairly stable. I don’t look for a big improvement there. If I look at Texas and Arizona, they’ll be fairly stable. Seasonal markets, I think all things considered weather included, we’ll probably do okay this year. I think that they had a bigger correction sooner, but it’s still very early to tell.
Garik Shmois: Understood. Thanks for that. Best of luck.
Operator: The next question comes from Joe Ahlersmeyer from Deutsche Bank. Please go ahead.
Joe Ahlersmeyer: Hi, good morning – well, good afternoon everybody. I’ll keep it quick since we’re a little over here. I just want to be very clear about what I’m hearing on the 1Q maybe with some numbers around it, I’m getting to something like down 5% to down 17% on 1Q sales. Is that right? Or is there something wrong with my math here?
Melanie Hart: Yes, ’17 seems a little bit high to me. That was – even with the worst weather in March, that would seem, say, a little bit on the high end. So I don’t know if quite have that broader range.
Joe Ahlersmeyer: Okay. But maybe at the midpoint, it is something like high single to low doubles down year-over-year?
Melanie Hart: Yes. I think probably towards your high end of the range to kind of midpoint depending upon what the weather looks like in March would be a reasonable expectation. And again, we’ll know more once we get to March.
Peter Arvan: Joe, it’s just so hard to say given the – if you look at the relative size of March compared to like – compared to January, and the uncertainty that we’ve seen on weather, I think your minus 17 is very much at the high end. But I think that the overall demand environment is still solid. It’s just a question of when does the season open. So I don’t know that I would overcorrect on anything.
Joe Ahlersmeyer: Okay. Got it. I just – I think with expectations looking at growth in the first quarter because of the weather lapping, I just want to make sure I wasn’t that far off. The other question I have was clarity around the full year margin comment. You said near 30%. Is that the same as saying less than 30%? Or is near another way to just say approximately within maybe 50 basis points or so?
Melanie Hart: Certainly, approximately within 50 basis points.
Joe Ahlersmeyer: Understood. Alright. Thanks.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Peter Arvan, President and CEO for closing remarks.
Peter Arvan: Yes. Thank you all for joining us today. We look forward to our next call, which will be on April 25, when we will release our first quarter 2024 results. We also look forward to hosting our Investor Day on March 19, where we will dive deeper into our long-term strategies and financial growth initiatives. Additional details for this event will be announced later today. Thanks, and have a great day.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
