Hayward Holdings, Inc. (HAYW) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with a 15% growth in adjusted EBITDA and a 30% increase in EPS. Net leverage reduction and positive sales growth in North America further indicate financial health. Despite challenges like inflation and tariffs, management's actions to maintain margins are positive. The Q&A shows optimism in market share gains and pricing, with no significant elasticity impacts. The positive guidance update and strong product adoption also support a positive sentiment. Given the company's market cap, the stock price is likely to react positively, within the 2% to 8% range.
Key Financial Performance
Net Sales Net sales increased 12% to $255 million, driven by strong pricing execution, positive volume, and a favorable contribution from foreign exchange. North America and Europe and Rest of World increased 12% and 9%, respectively. Reasons for the increase include resilient demand across the installed base aftermarket and outperformance of discretionary products like automation and heaters.
Gross Margin Gross margin increased 50 basis points to 46.5%. This was attributed to disciplined cost management and operational leverage, despite incremental inflation and tariff pressures.
Adjusted EBITDA Adjusted EBITDA grew 15% to $56 million, with margin expanding 60 basis points to 22.1%. This growth was driven by cost management and operating leverage.
Adjusted Diluted EPS Adjusted diluted EPS increased 30% to $0.13. This reflects strong top-line growth and disciplined cost management.
Net Leverage Net leverage reduced from 2.8x to 2.4x year-over-year, reflecting ongoing balance sheet improvement. This reduction occurred despite seasonal cash flow challenges tied to the Early Buy program.
North America Net Sales North America net sales were up 12% to $210 million, driven by positive pricing and volume. U.S. sales increased 11%, and Canada sales increased 26%. Operating leverage offset incremental tariff and inflationary pressures.
Europe and Rest of World Net Sales Sales in Europe and Rest of World increased 9% to $45 million, largely due to favorable FX gains and relatively stable price and volume. Europe sales increased 14%, while Rest of World sales decreased 1% due to geopolitical disruptions in the Middle East.
Cash Flow Used in Operations Cash flow used in operations was $151 million in Q1 2026 compared to $6 million in the prior year. The prior year benefited from $99 million in net proceeds from the sale of accounts receivable, which was not recognized in 2026.
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Operating Highlights
OmniX: Introduced as a new aftermarket innovation, providing pool owners a low-cost path to a connected pool pad and an improved overall experience.
North America and Europe: Net sales increased by 12% and 9% respectively, driven by strong pricing execution, positive volume, and favorable foreign exchange contributions.
Commercial pool and flow control: Expanded presence in this segment, leveraging durable secular tailwinds.
Operational efficiency: Consolidated manufacturing and distribution footprint to improve efficiency and derisk supply chain amid geopolitical uncertainty.
AI integration: Increasingly leveraging AI across the organization to enhance decision-making, sharpen execution, and improve productivity.
Financial management: Strengthened balance sheet by reducing net leverage from 2.8x to 2.4x year-over-year, providing flexibility for investments.
Guidance update: Increased full-year guidance for 2026, expecting net sales to grow approximately 5% and adjusted diluted EPS to increase by 9% to 13%.
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Risk or Challenges
Geopolitical disruptions: Geopolitical disruptions, particularly in the Middle East related to the ongoing conflict in Iran, have impacted sales in the Rest of World segment, reducing them by 1%.
Rising costs for specialty metals, freight, and resins: These rising costs are applying downward pressure on gross margins, with some year-over-year compression expected in Q2 before mitigation efforts are fully realized.
Seasonal cash flow challenges: The company experiences seasonal cash flow challenges tied to the Early Buy program, with significant cash usage in Q1 and reliance on Q2 cash inflows to normalize leverage.
Tariffs and inflationary pressures: Incremental tariffs and inflationary pressures are impacting gross margins, although operational leverage has offset some of these effects.
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Guidance & Outlook
Full Year 2026 Guidance: Net sales are expected to increase approximately 5%, up from prior guidance of approximately 4%. Adjusted diluted EPS is projected to increase approximately 9% to 13%, reaching a range of $0.84 to $0.87.
Gross Margin Outlook: Geopolitical disruptions and rising costs for specialty metals, freight, and resins are applying modest downward pressure on gross margin. Some year-over-year compression is expected in Q2, but margins are anticipated to normalize during the second half of the year as mitigation efforts are implemented. Full-year gross margin is expected to remain in line with last year.
Free Cash Flow: Free cash flow is projected to be approximately $200 million, exceeding 100% of net income. This includes modest working capital improvement, net interest expense of approximately $45 million, a normalized effective tax rate of around 24%, and increased CapEx of approximately $40 million.
Operational Investments: Increased capital expenditures of approximately $40 million are planned to upgrade operational capabilities.
Market and Industry Outlook: The company remains positive on pool industry growth, supported by the strength and resilience of the aftermarket. Momentum is supported by an aging installed base requiring continuous maintenance, repair, and upgrades.
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Shareholder Return Plan
Share Repurchase: In the first quarter, the company made a modest anti-dilutive repurchase of approximately $6 million.
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Key Q&A
Q:What surprised the management in the first quarter, and how do they feel about channel inventories and sell-in versus sell-through?
A:Management was surprised by favorable weather conditions, which were generally warm and dry, aiding the industry. Sales across most regions and end markets showed strong double-digit growth, except for the Rest of World region, which saw some softness. They managed Early Buy shipments effectively, ensuring balanced inventory levels. They are comfortable with current inventory levels and expect normal inventory levels to be maintained throughout the year.
Q:What is the impact of inflation and tariffs on the business, and what actions has the company taken?
A:The company is experiencing higher energy-based costs and specialty metal costs. They implemented two price increases: one in Q1 for the alternative salt sanitization line and a 2.5% surcharge in Q2. Despite these challenges, they expect full-year gross margins to remain comparable to last year. Tariffs, including Section 232, have no additional impact beyond initial expectations.
Q:What is the updated pricing guidance for North America, and how does it affect the overall outlook?
A:Pricing guidance for North America has been updated to mid-single digits, with an overall average of 4% for the year. The Q1 price increase for specialty metals had a small positive impact, while the 2.5% surcharge in Q2 is not included in guidance as it is temporary. The company expects pricing to develop similarly to initial expectations.
Q:Is there any elasticity impact from price increases, and are there signs of customers shifting to lower-cost competitors?
A:Management has not observed significant elasticity impacts or shifts to lower-cost competitors. They were encouraged by positive volume growth in Q1 and strong sales of discretionary products like LED lights and salt chlorine generators. They remain cautious but optimistic about market acceptance of pricing.
Q:How does the company view its market share and what are the key drivers of any gains?
A:The company believes it is gaining modest market share due to new product launches, increased field sales and service resources, and targeted regional growth strategies. Products like OmniX and efforts in underpenetrated regions have contributed to this growth.
Q:What is driving the guidance increase for the full year?
A:The guidance increase is driven by better-than-expected pricing performance in Q1 and leverage across the SG&A base. Top-line growth guidance increased from 4% to 5%, and EPS guidance was raised due to improved SG&A leverage.
Q:What is the outlook for demand and market conditions for the rest of the year?
A:Management remains cautious about demand, expecting the aftermarket to remain resilient, remodel activity to show pockets of optimism, and new construction to remain flat. They are optimistic but not yet confident enough to revise guidance based on market demand.
Q:What is the status of new product vitality and its contribution to growth?
A:Management is pleased with the adoption of new products like OmniX and discretionary items such as lights and control systems. They plan to provide more detailed vitality statistics after Q2 when sell-out data is clearer.
Q:Review of Unclear Management Responses
A:Management avoided providing specific vitality statistics for new products, stating they would share this information after Q2. Additionally, they did not provide detailed data on market share gains, instead offering general observations about contributing factors.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Buy program
Early Buy
Europe
Slide
World
aftermarket product
anniversary
balance sheet
base
basis point
cash flow
cash usage
conversion Hayward
cost
disruption
exchange
improvement
increase
inflation
investment
leverage
line
margin basis
measure
model
pool
price
pricing
productivity
resilience
sale comparison
specialty metal
volume
HAYW Transcript
Hayward Holdings, Inc. (HAYW) Q1 2026 Earnings Call Transcript
Positive4-29
The earnings call reveals strong financial performance with a 15% growth in adjusted EBITDA and a 30% increase in EPS. Net leverage reduction and positive sales growth in North America further indicate financial health. Despite challenges like inflation and tariffs, management's actions to maintain margins are positive. The Q&A shows optimism in market share gains and pricing, with no significant elasticity impacts. The positive guidance update and strong product adoption also support a positive sentiment. Given the company's market cap, the stock price is likely to react positively, within the 2% to 8% range.
Hayward Holdings, Inc. (HAYW) Q4 2025 Earnings Call Transcript
Positive2-25
The earnings call summary indicates strong financial performance with a 5% revenue increase, improved gross margin, and a 10% rise in net income. The upward revision of guidance for 2025 net sales and adjusted EBITDA further boosts confidence. The strategic plan includes positive pricing strategies, tariff mitigation, and product innovation, all contributing to a favorable outlook. The market cap suggests moderate sensitivity, leading to a positive sentiment expectation of 2% to 8% stock price increase.
Hayward Holdings, Inc. (HAYW) Q3 2025 Earnings Call Transcript
Positive10-29
The earnings call indicates strong financial performance, with increased EPS and reduced net leverage. Product innovation and strategic investments are driving growth, particularly in the OmniX ecosystem. The company is effectively managing tariff impacts and supply chain realignment. Despite inflation concerns, pricing strategies are in place to maintain margins. The Q&A session reflects management's confidence and analysts' positive reception, with strong international growth and successful ChlorKing integration. Overall, the sentiment is positive, suggesting a potential stock price increase of 2% to 8%.
Hayward Holdings, Inc. (HAYW) Q2 2025 Earnings Call Transcript
Positive7-30
The earnings call summary indicates positive developments such as improved volume outlook, strategic cost mitigation, and a strong order profile. The Q&A section supports this with insights on effective inventory management and a solid M&A pipeline. The raised revenue guidance and $450 million share repurchase further enhance the positive sentiment. Despite some uncertainties in management responses, the overall outlook, especially with strong financial metrics and optimistic guidance, suggests a likely positive stock price movement in the short term.
HAYW Report
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