Hayward (US:HAYW)2022-11-01 17:16Financial Data and Key Metrics Changes - Net sales for Q3 2022 decreased by 30% year-over-year to $245 million, primarily due to channel inventory correction and softer conditions in certain markets [9][17] - Adjusted EBITDA for Q3 was $60 million, yielding a margin of 24.6%, with decremental EBITDA margins at 36% [9][20] - Full year 2022 net sales are now expected to decline approximately 6%, with adjusted EBITDA projected between $365 million and $370 million [8][27] Business Line Data and Key Metrics Changes - North America net sales declined 32% to $203.7 million, driven by a 47% reduction in volume, partially offset by a 12% price increase [21] - Europe and Rest of World net sales decreased 21% to $41.6 million, impacted by a 23% decline in volumes and geopolitical circumstances [22] Market Data and Key Metrics Changes - The US Sunbelt market showed strength, growing 36% faster than seasonal markets, while the Northeast US and Canada experienced softer trends [9][10] - Hayward captured approximately $130 million in market share since 2019, with further gains noted in the third quarter [9][10] Company Strategy and Development Direction - The company is focusing on realigning its cost structure to current conditions while prioritizing strategic growth investments, targeting a structural SG&A reduction of approximately 10% annually [8][12] - Continued emphasis on new product development, particularly in IoT-enabled controls and energy-efficient products, is expected to drive future growth [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term health of the pool industry, particularly in the aftermarket, despite current uncertainties in Europe and persistent inflation [27][28] - The company anticipates a decrease in consolidated net sales for 2022 but remains optimistic about market share gains and price realization [27][28] Other Important Information - The company has made significant progress in its ESG initiatives, completing its first Scope 1 and 2 emissions inventories [8] - Cash flow from operations was a source of $80 million in Q3, indicating strong free cash flow generation characteristics [24] Q&A Session All Questions and Answers Question: Thoughts on SG&A cuts and consumer weakness into 2023 - Management began cost actions in Q3, focusing on rightsizing factories and reducing SG&A by approximately $25 million to $30 million [31] Question: Expectations around demand environment - Retail pull-through remains high, with continued share gains in the marketplace, although new construction may soften [32] Question: Guidance for Q4 and inventory destocking - Q4 sales are expected to be in the range of high $250s to low $260s million, with continued focus on destocking [33] Question: Update on channel destocking - The company expects to largely complete channel destocking by the end of 2022, with an estimated reduction of $130 million to $135 million [36] Question: Pricing contributions in 2023 - A recent price increase of 4% to 5% will take effect in January, contributing to pricing benefits in 2023 [39] Question: Changes in revenue growth guidance - The updated guidance reflects higher channel correction and lower expectations in Europe, with a total decrement of around $70 million [42] Question: Supply chain and cost outlook - Sourcing has improved, but electronic components remain constrained; costs are still elevated due to a lag in price recognition [46] Question: Inventory management and cash flow - The company expects to generate cash from inventory reductions in Q4, aiming to normalize inventory levels into 2023 [51]