Hayward (HAYW) FY Conference Summary Company Overview - Hayward is a leading pool equipment OEM specializing in pumps, filters, heaters, and control systems, with approximately 75% of sales tied to the aftermarket [2][4] - The company generates about 95% of its net sales from the pool industry, primarily residential, with 5% from commercial and industrial flow control [4] - North America accounts for about 85% of revenue, while Europe and the rest of the world contribute 15% [5] Financial Performance - Hayward's revenue is just over $1 billion, with a five-year CAGR of 7.5% [5][6] - Gross margins exceeded 50% last year, with an adjusted EBITDA CAGR of 10% over the same period [6] - The company has seen a shift towards 85% of net sales derived from existing pools due to a decline in new construction [7] Market Dynamics - The pool market is characterized by a large installed base, with 5.5 million in-ground pools in the U.S. and nearly 25 million globally, which continues to grow annually [10][11] - The average age of pools is approximately 23 years, indicating a strong aftermarket opportunity for upgrades and modernization [11] - Hayward has pricing power, as equipment costs represent only 10-15% of overall construction costs, allowing for annual price increases to offset inflation [12][13] Strategic Focus - The company emphasizes organic growth, margin expansion, and disciplined capital deployment as key strategic themes [15] - Gross margins have expanded by 600 basis points over the last five years, reaching 50.5% by the end of 2024 [16] - Hayward's strategy includes investing in innovation and technology, with a focus on smart connected products and automation [9][15] Product Innovation - Hayward is focusing on digital conversion, chemical conversion, and energy conversion as pivotal areas for growth [27] - The company has launched several new products, including a heat pump with cooling capabilities, an automation app for consumers, and a new lighting platform [32][33] - The OmniX system allows for retrofitting existing equipment with automation controls, creating a significant revenue opportunity [35] Distribution and Market Strategy - Approximately 75% of Hayward's products are sold through distribution channels, with the remaining 25% through direct sales [37] - The company has initiated "Hayward hubs" in high-volume markets to provide training and support for trade professionals [38] Competitive Advantages - Hayward's competitive advantages include strong brand recognition, a large installed base, and a commitment to sustainability with energy-efficient products [41] - The company has a proven ability to maintain gross margins over 50% due to innovative products and effective supply chain management [42][44] Conclusion - Hayward is well-positioned in the pool equipment industry, leveraging its strong aftermarket model, pricing power, and innovative product offerings to drive growth and shareholder value [41]

Financial Data and Key Metrics Changes - Net sales increased by 8% to $229 million, driven by a 3% increase in both price and organic volume, along with a 3% contribution from the Core King acquisition [8][19] - Gross profit margins rose to 49.5%, an increase of 30 basis points year-over-year, marking the ninth consecutive quarter of gross margin expansion [6][10] - Adjusted EBITDA increased by 9% to $49 million, with adjusted EBITDA margins also increasing by 30 basis points to 21.5% [10][19] - Adjusted diluted EPS increased by 25% to $0.10 [11][19] Business Line Data and Key Metrics Changes - North American net sales increased by 8% to $187 million, driven by 3% net price realization and 2% higher volume [20] - In Europe and Rest of World, net sales increased by 7% to $42 million, benefiting from 1% favorable net pricing and 8% higher volume [22] Market Data and Key Metrics Changes - Sales growth was consistent across both segments, with North America seeing an 8% increase and Europe and Rest of World experiencing a 7% increase [8][19] - The commercial pool business continues to grow organically, benefiting from the integration of the Core King acquisition [9] Company Strategy and Development Direction - The company is focused on mitigating the impact of tariffs and supporting margins while positioning for continued growth [7][12] - The recent launch of the Omni X automation platform aims to unlock the addressable aftermarket of millions of non-automated pools [6][15] - The company confirmed its guidance for full-year 2025, expecting net sales to increase approximately 1% to 5% and adjusted EBITDA of $280 million to $290 million [8][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainty, highlighting the resilience of the business model with over 80% of sales aligned with aftermarket needs [7][29] - The company anticipates pressure on discretionary elements of the market, such as new construction and remodels, due to economic conditions and higher interest rates [9][28] - Management remains optimistic about the long-term growth outlook for the pool industry, particularly in the aftermarket segment [29] Other Important Information - The company is strategically reinvesting in sales and marketing, customer service, and engineering to drive future growth [20] - Total liquidity at the end of the first quarter was $398 million, with no near-term debt maturities [23][24] Q&A Session Summary Question: Can you clarify the impact of tariffs and mitigation actions? - Management indicated an annualized tariff impact of approximately $85 million, primarily from China-based products, and discussed proactive measures to mitigate this impact [33][34][37] Question: How is channel inventory managed? - Management expressed confidence in current inventory levels, stating that they are appropriate for the season and have been recalibrated in prior periods [48][50] Question: What are the trends in consumer behavior post price increases? - Management noted that while there may be some deferral in discretionary spending, the maintenance side of the business remains resilient [70][71] Question: How will increased manufacturing in the U.S. affect margins? - Management stated that bringing more manufacturing to the U.S. will increase utilization rates and potentially enhance margins through automation and variable cost structures [78][81]

Financial Data and Key Metrics Changes - Net sales increased by 8% to $229 million, driven by a 3% increase in both price and organic volume, along with a 3% contribution from the Core King acquisition [7][19] - Gross profit margins rose to 49.5%, an increase of 30 basis points, marking the ninth consecutive quarter of year-over-year gross margin expansion [5][10] - Adjusted EBITDA increased by 9% to $49 million, with adjusted EBITDA margins also increasing by 30 basis points to 21.5% [10][19] - Adjusted diluted EPS increased by 25% to $0.10 [11] Business Line Data and Key Metrics Changes - North American net sales increased by 8% to $187 million, driven by 3% net price realization and 2% higher volume [20] - In Europe and Rest of World, net sales increased by 7% to $42 million, benefiting from 1% favorable net pricing and 8% higher volume [22] Market Data and Key Metrics Changes - Sales growth was consistent across both segments, with North America net sales increasing by 8% and Europe and Rest of World by 7% [8] - Trends improved in March, aligning with normal seasonal demand as the peak pool season approached [9] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts while supporting margins and positioning for growth, with over 80% of sales aligned with aftermarket needs [6] - The recent launch of the Omni X platform aims to provide wireless IoT connectivity and control for non-automated pools, representing a significant growth opportunity [5][16] - The company confirmed its guidance for 2025, expecting net sales to increase approximately 1% to 5% and adjusted EBITDA of $280 million to $290 million [7][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the increasing economic uncertainty but expressed confidence in the resilience of the business model, particularly in the aftermarket segment [9][28] - The company anticipates pressure on discretionary elements of the market, such as new construction and remodels, due to economic conditions and higher interest rates [9][28] - Management remains optimistic about long-term growth in the pool industry, especially in the aftermarket segment [29] Other Important Information - The company is taking proactive measures to reduce reliance on China for sourcing, aiming to decrease direct sourcing from approximately 10% to 3% by year-end [12][13] - Total liquidity at the end of the first quarter was $398 million, with no near-term debt maturities [23] Q&A Session Summary Question: Clarification on tariffs and mitigation actions - Management discussed the estimated annualized tariff impact of approximately $85 million, primarily from China, and outlined steps to increase domestic manufacturing to mitigate this impact [34][35] Question: Channel inventory levels and demand impact - Management expressed confidence in current channel inventory levels, stating they are appropriate for the season and have been recalibrated in prior periods [49][51] Question: Trends in consumer behavior and pricing actions - Management noted that while there has been some deferral in discretionary spending, the maintenance side of the business remains resilient [53][72] Question: Insights on OmniX sales and automation adoption - Early trends with OmniX have been encouraging, and the platform is expected to provide a cost-effective solution for homeowners looking to automate their pools [75][76] Question: Manufacturing utilization and cost levers - Management indicated that bringing more manufacturing to the U.S. will increase utilization rates and provide opportunities for margin improvement through automation [80][83]