Hayward (US:HAYW)2022-05-01 12:19Financial Data and Key Metrics Changes - Net sales for Q1 2022 increased by 23% year-over-year to a record $410 million, following a 96% growth in Q1 2021 over Q1 2020 [10][21] - Adjusted EBITDA grew 18% year-over-year to a record $126 million, yielding a 31% margin [10][29] - Gross profit increased to $190.4 million, a 19% increase year-over-year, with a gross profit margin of 46.4%, down 144 basis points due to inflationary pressures [23][29] Business Line Data and Key Metrics Changes - North America net sales increased approximately 28% to $346.3 million, driven by a 19% favorable price impact and 8% higher sales volumes [31] - Europe and Rest of World net sales increased 2% to $64.2 million, benefiting from an 8% net price increase but impacted by a 6% unfavorable foreign currency effect [33] Market Data and Key Metrics Changes - Sales volume growth was driven by demand for pool equipment in North America, while Europe and Rest of World experienced muted growth due to geopolitical circumstances [22] - The company reported a significant increase in dealer participation in its loyalty program, indicating strong market engagement [15] Company Strategy and Development Direction - The company focuses on digital leadership, dealer conversions, new products, operational excellence, broad channel access, and environmental sustainability as core growth drivers [11] - A new facility in Europe was opened to enhance automation and sanitization technologies, doubling production capacity in these product lines [13] - The M&A strategy includes core pool product tuck-ins and backyard adjacencies, with three strategic acquisitions closed at the beginning of the quarter [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating inflationary pressures and supply chain challenges, implementing price surcharges to mitigate impacts [24][46] - The company anticipates net sales growth of 9% to 12% for the full fiscal year 2022, despite macroeconomic uncertainties [46][47] - Management highlighted strong demand in the aftermarket, which constituted 80% of total sales in 2021, as a key growth driver [44][76] Other Important Information - Cash flow from operations was a use of $56.9 million, an improvement from $131.6 million in the prior year [35] - Total liquidity at the end of Q1 was $443 million, including $118 million in unrestricted cash [37] Q&A Session Summary Question: Clarification on surcharges and guidance - Management indicated that surcharges may be rolled into structural price lists if inflationary pressures persist [52][53] Question: Signs of consumer spending slowing down - Management reported no cancellations and strong demand, with a robust order file [63][64] Question: Gross margin expectations for Q2 - Management expects gross margin expansion in Q2 due to pricing actions rolling off fixed price arrangements [65] Question: Pool builder backlog trends - Builders are quoting into 2023, indicating strong demand despite labor constraints [74] Question: Sensitivity to rising interest rates - Management believes the aftermarket will remain stable despite increased interest rates, as maintenance is often a non-discretionary decision [81][84] Question: Balance sheet usage and M&A opportunities - The company is actively engaged in M&A and has a robust pipeline for potential acquisitions [89] Question: Channel inventory expectations - Management noted that channel partners are in a better inventory position compared to previous years, with expectations for greater sell-out during the 2022 season [90][94] Question: Normal seasonality and Q2 expectations - Management indicated that Q2 is likely to be higher than Q1, reflecting normal seasonal trends [100] Question: Concerns for the second half of the year - Management expressed caution regarding supply chain and inflationary pressures, while remaining optimistic about strong consumer demand [103][104] Question: Dealer conversions and growth rates - Management confirmed ongoing dealer conversions contributing to growth rates in North America [106]