•Net Sales of $283.5 million

•Net Income of $29.5 million

•Adjusted EBITDA* of $79.5 million

•Diluted EPS of $0.13 and adjusted diluted EPS* of $0.19

•Strong year-to-date cash flow from operations of $166.5 million

CHARLOTTE, N.C. -- (BUSINESS WIRE) -- Hayward Holdings, Inc. (NYSE: HAYW) (“Hayward” or the “Company”), a global designer, manufacturer and marketer of a broad portfolio of pool equipment and outdoor living technology, today announced financial results for the second quarter ended July 1, 2023 of its fiscal year 2023. Comparisons are to financial results for the prior-year second fiscal quarter.

“I am pleased to report another quarter of strong execution, margin expansion, and cash flow generation,” said Kevin Holleran, Hayward’s President and Chief Executive Officer. “Our team is performing remarkably well and driving structural improvements in the business during a challenging operating environment. Channel sell through exceeded our sales into the channel as expected, resulting in further normalization of distributor inventory. We achieved record gross profit margins and solid cash flow growth in the quarter through operational excellence, necessary pricing to offset inflation, and effective working capital management. With progressively leaner channel inventory positions, we are well positioned for growth. We continue to invest in the business to advance our technology leadership, support our customers and drive shareholder value.”

Net sales decreased by 29% to $283.5 million for the second quarter of fiscal 2023. The decline in net sales during the quarter was the result of lower volumes, partially offset by favorable pricing and acquisitions. The decline in volume was primarily the result of distribution channel destocking and the moderation of end-market demand due to macroeconomic factors.

Gross profit decreased by 28% to $136.5 million for the second quarter of fiscal 2023. Gross profit margin increased 70 basis points to 48.1%. The increase in gross margin was principally due to net price increases to offset inflation and the reduction in spending, specifically in freight and overhead, as the prior-year period experienced increased costs resulting from escalated and expedited production activity.

Selling, general, and administrative expenses (“SG&A”) decreased by 16% to $57.7 million for the second quarter of fiscal 2023. The decrease in SG&A was driven by cost reductions and lower compensation-related expenses associated with the reduction in headcount from the enterprise cost-reduction program implemented during 2022 and the absence of a non-recurring one-time expense in the prior-year period. As a percentage of net sales, SG&A increased 310 basis points to 20.4%, compared to the prior-year period of 17.3%. Research, development, and engineering expenses were $6.9 million for the second quarter of fiscal 2023, or 2% of net sales, as compared to $5.0 million for the prior-year period, or 1% of net sales.

Operating income decreased by 39% to $63.0 million for the second quarter of fiscal 2023. The decrease in operating income was driven by lower sales. Operating income as a percentage of net sales (“operating margin”) was 22.2% for the second quarter of fiscal 2023, a 350 basis point reduction from the 25.7% operating margin in the second quarter of fiscal 2022.

Interest expense, net, increased by approximately 65% to $19.1 million for the second quarter of fiscal 2023 primarily as a result of variable rate increases on the term loan, partially offset by net interest income on the Company’s interest rate swaps.

Income tax expense for the second quarter of fiscal 2023 was $13.8 million for an effective tax rate of 31.9%, compared to $21.1 million at an effective tax rate of 24.1% for the prior-year period. The decrease in income tax expense was primarily due to the decrease in income from operations. The increase in the effective tax rate was driven by a discrete tax expense related to a change in the indefinite reinvestment assertion for one jurisdiction.

Net income decreased by 56% to $29.5 million for the second quarter of fiscal 2023.

Adjusted EBITDA* decreased by 38% to $79.5 million for the second quarter of fiscal 2023. Adjusted EBITDA margin* decreased 400 basis points to 28.0%.

Diluted EPS decreased by 54% to $0.13 for the second quarter of fiscal 2023. Adjusted diluted EPS* decreased by 48% to $0.19 for the second quarter of fiscal 2023.

Net sales decreased by 31% to $237.4 million for the second quarter of fiscal 2023. The decrease was primarily the result of a decline in volume, partially offset by increases in price and the favorable impact of acquisitions. The decline in volume was primarily the result of distribution channel destocking and the moderation of end-market demand due to macroeconomic factors.

Segment income decreased by 36% to $71.0 million for the second quarter of fiscal 2023. Adjusted segment income* decreased by 37% to $76.9 million.

Net sales decreased by 19% to $46.2 million for the second quarter of fiscal 2023. The decrease was primarily due to a decline in volume as a result of distribution channel destocking, geopolitical factors, and macroeconomic uncertainty, partially offset by net price increases and the favorable impact of foreign currency translation.

Segment income decreased by 29% to $9.4 million for the second quarter of fiscal 2023. Adjusted segment income* decreased by 26% to $9.6 million.

As of July 1, 2023, Hayward had cash and cash equivalents of $205.0 million and approximately $231.7 million available for future borrowings under its revolving credit facilities. Cash flow provided by operations for the six months ended July 1, 2023 of approximately $167 million was an increase of approximately $103 million from the prior-year period primarily as a result of cash generated by working capital compared to cash used for working capital during the prior-year period, partially offset by a decrease in net income.

Our outlook for channel sell through is unchanged. Hayward is refining its full year 2023 guidance to reflect incremental reductions in channel inventory levels and better than expected margins. For the full fiscal year 2023, Hayward expects net sales to decrease 20% to 23% and Adjusted EBITDA* of $265 million to $280 million.

We remain positive about the health of the pool industry, particularly the strength of the ever-increasing aftermarket, representing approximately 80% of the business. The industry continues to benefit from secular demand tailwinds, including outdoor living, sunbelt migration, smart home technology adoption, and environmentally sustainable products. Hayward is confident in its ability to successfully execute in an evolving environment in the near-term and its long-term outlook for robust growth and cash flow generation, driven by new product innovation, expanding commercial relationships, and operational excellence.

Please see the Forward-Looking Statements section of this release for a discussion of certain risks relevant to Hayward’s outlook.

Hayward will hold a conference call to discuss the results today, August 2, 2023 at 9:00 a.m. (ET).

Interested investors and other parties can listen to a webcast of the live conference call by logging onto the Investor Relations section of the company’s website at https://investor.hayward.com/events-and-presentations/default.aspx. An earnings presentation will be posted to the Investor Relations section of the company’s website prior to the conference call.

The conference call can also be accessed by dialing (888) 886-7786 or (416) 764-8658.

For those unable to listen to the live conference call, a replay will be available approximately two hours after the call through the archived webcast on the Hayward website or by dialing (844) 512-2921 or (412) 317-6671. The access code for the replay is 63731594. The replay will be available until 11:59 p.m. Eastern Time on August 16, 2023.

Hayward Holdings, Inc. (NYSE: HAYW) is a leading global designer and manufacturer of pool and outdoor living technology. With a mission to deliver exceptional products, outstanding service and innovative solutions to transform the experience of water, Hayward offers a full line of energy-efficient and sustainable residential and commercial pool equipment including pumps, filters, heaters, cleaners, sanitizers, LED lighting, and water features all digitally connected through Hayward’s intuitive IoT-enabled SmartPad™.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains certain statements that are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”) and releases issued by the Securities and Exchange Commission (the “SEC”). Such forward-looking statements relating to Hayward are based on the beliefs of Hayward’s management as well as assumptions made by, and information currently available to it. These forward-looking statements include, but are not limited to, statements about Hayward’s strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements contained in or incorporated by reference in this earnings release that are not historical facts. When used in this document, words such as “guidance,” “may,” “will,” “should,” “could,” “intend,” “potential,” “continue,” “anticipate,” “believe,” “estimate,” “expect,” “plan,” “target,” “predict,” “project,” “seek” and similar expressions as they relate to Hayward are intended to identify forward-looking statements. Hayward believes that it is important to communicate its future expectations to its stockholders, and it therefore makes forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that Hayward is not able to accurately predict or control, and actual results may differ materially from the expectations it describes in its forward-looking statements.

Examples of forward-looking statements include, among others, statements Hayward makes regarding: Hayward’s 2023 guidance; business plans and objectives; general economic and industry trends; business prospects; future product development and acquisition strategies; future channel stocking levels; and growth and expansion opportunities. The forward-looking statements in this earnings release are only predictions. Hayward may not achieve the plans, intentions or expectations disclosed in Hayward’s forward-looking statements, and you should not place significant reliance on its forward-looking statements. Hayward has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. Moreover, neither Hayward nor any other person assumes responsibility for the accuracy and completeness of forward-looking statements taken from third-party industry and market reports.

Important factors that could affect Hayward’s future results and could cause those results or other outcomes to differ materially from those indicated in its forward-looking statements include the following: its relationships with and the performance of distributors, builders, buying groups, retailers and servicers who sell Hayward’s products to pool owners; impacts on Hayward’s business from the sensitivity of its business to seasonality and unfavorable economic business and weather conditions; competition from national and global companies, as well as lower-cost manufacturers; Hayward’s ability to develop, manufacture and effectively and profitably market and sell its new planned and future products; its ability to execute on its growth strategies and expansion opportunities; impacts on Hayward’s business from political, regulatory, economic, trade, and other risks associated with operating foreign businesses, including risks associated with geopolitical conflict; its ability to maintain favorable relationships with suppliers and manage disruptions to its global supply chain and the availability of raw materials; Hayward’s ability to identify emerging technological and other trends in its target end markets; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; its reliance on information technology systems and susceptibility to threats to those systems, including cybersecurity threats, and risks arising from its collection and use of personal information data; regulatory changes and developments affecting Hayward’s current and future products; volatility in currency exchange rates and interest rates; Hayward’s ability to service its existing indebtedness and obtain additional capital to finance operations and its growth opportunities; Hayward’s ability to establish and maintain intellectual property protection for its products, as well as its ability to operate its business without infringing, misappropriating or otherwise violating the intellectual property rights of others; the impact of material cost and other inflation; Hayward’s ability to attract and retain senior management and other qualified personnel; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits, impact trade agreements and tariffs, or address the impacts of climate change; the outcome of litigation and governmental proceedings; impacts on Hayward’s product manufacturing disruptions, including as a result of catastrophic and other events beyond its control, including risks associated with geopolitical conflict; uncertainties affecting the pace of distribution channel destocking and its impact on sales volumes; Hayward’s ability to realize cost savings from restructuring activities; Hayward’s and its customers’ ability to manage product inventory in an effective and efficient manner; and other factors set forth in “Risk Factors” in Hayward’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

Many of these factors are macroeconomic in nature and are, therefore, beyond Hayward’s control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, Hayward’s actual results, performance or achievements may vary materially from those described in this earnings release as anticipated, believed, estimated, expected, intended, planned or projected. The forward-looking statements included in this earnings release are made only as of the date of this earnings release. Unless required by United States federal securities laws, Hayward neither intends nor assumes any obligation to update these forward-looking statements for any reason after the date of this earnings release to conform these statements to actual results or to changes in Hayward’s expectations.

This earnings release includes certain financial measures not presented in accordance with the generally accepted accounting principles in the United States (“GAAP”) including adjusted net income, adjusted basic EPS, adjusted diluted EPS, EBITDA, adjusted EBITDA, adjusted EBITDA margin, total segment income, adjusted total segment income, adjusted total segment income margin, adjusted segment income and adjusted segment income margin. These financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results. Hayward believes these non-GAAP measures provide analysts, investors and other interested parties with additional insight into the underlying trends of its business and assist these parties in analyzing the company’s performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of its core operating performance, which allows for a better comparison against historical results and expectations for future performance. Management uses these non-GAAP measures to understand and compare operating results across reporting periods for various purposes including internal budgeting and forecasting, short and long-term operating planning, employee incentive compensation, and debt compliance. Therefore, these measures should not be considered in isolation or as an alternative to net income (loss), segment income or other measures of profitability, performance or financial condition under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly titled measures used by other companies, which may be defined and calculated differently. See the appendix for a reconciliation of historical non-GAAP measures to the most directly comparable GAAP measures.

Reconciliation of full fiscal year 2023 adjusted EBITDA outlook to the comparable GAAP measure is not being provided, as Hayward does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation.

(Dollars in thousands, except per share data)

						July 1, 2023						December 31, 2022
Assets
Current assets
Cash and cash equivalents						$	205,002					$	56,177
Accounts receivable, net of allowances of $3,082 and $3,937, respectively						147,353						209,109
Inventories, net						234,478						283,658
Prepaid expenses						12,491						14,981
Income tax receivable						17,056						27,173
Other current assets						17,330						21,186
Total current assets						633,710						612,284
Property, plant, and equipment, net of accumulated depreciation of $92,420 and $84,119, respectively						155,869						149,828
Goodwill						934,404						932,396
Trademark						736,000						736,000
Customer relationships, net						218,580						230,503
Other intangibles, net						100,682						106,673
Other non-current assets						104,409						107,329
Total assets						$	2,883,654					$	2,875,013
Liabilities and Stockholders’ Equity
Current liabilities
Current portion of the long-term debt						$	14,695					$	14,531
Accounts payable						53,683						54,022
Accrued expenses and other liabilities						133,660						163,283
Income taxes payable						—						574
Total current liabilities						202,038						232,410
Long-term debt, net						1,081,444						1,085,055
Deferred tax liabilities, net						262,655						264,111
Other non-current liabilities						67,696						70,403
Total liabilities						1,613,833						1,651,979
Stockholders’ equity
Preferred stock, $0.001 par value, 100,000,000 authorized, no shares issued or outstanding as of July 1, 2023 and December 31, 2022						—						—
Common stock $0.001 par value, 750,000,000 authorized; 241,672,792 issued and 213,006,423 outstanding at July 1, 2023; 240,529,150 issued and 211,862,781 outstanding at December 31, 2022						242						241
Additional paid-in capital						1,074,749						1,069,878
Common stock in treasury; 28,666,369 and 28,666,369 at July 1, 2023 and December 31, 2022, respectively						(357,424)						(357,415)
Retained earnings						538,085						500,222
Accumulated other comprehensive income						14,169						10,108
Total stockholders’ equity						1,269,821						1,223,034
Total liabilities, redeemable stock, and stockholders’ equity						$	2,883,654					$	2,875,013

(Dollars in thousands, except per share data)

Following is a reconciliation from net income to adjusted EBITDA:

Following is a reconciliation from net income to adjusted EBITDA for the last twelve months:

Following is a reconciliation of net income to adjusted net income and earnings per share to adjusted earnings per share:

Following is a reconciliation from segment income to adjusted segment income for the North America (“NAM”) and Europe & Rest of World (“E&RW”) segments:

Investor Relations:

Kevin Maczka

investor.relations@hayward.com

Media Relations:

Tanya McNabb

tmcnabb@hayward.com

Source: Hayward Holdings, Inc.