HAYW - Earnings call transcript Q3 2021

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Operator

Welcome to Hayward Holdings Third Quarter 2021 Earnings Call. My name is Patricia and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the Planning to and turn President, Baker, now Strategic Global Business will call Stuart over Vice I Development. Mr. Baker, you may begin.

Stuart Baker

morning release the Thank XXXX our Good everyone. our investor.hayward.com. issued you. third website earnings at press Relations this Investor to morning portion of We quarter

call. and Vice also this Chief Officer. and Jones, an Senior Executive and reference find by Chief today can slide presentation Officer; joined You we'll Kevin President Financial that earnings during I'm Holleran, President Eifion

provided risks, actual set earnings to about results within plans statements. remind will could company from and such that materially and such for Securities undertake like that of of we during These statements other statements the to would Such Before begin, cause Private call quarter Act duty filed everyone anticipation, of update may website that this the beliefs, XXXX as risks other subject indicated does statements. and our the in future The by implied and and forth any I our XX-Q include those Securities uncertainties be prospects. the estimates, Reform Litigation constitute or forecast, fiscal with remarks factors the certain not make to forward-looking are posted Exchange statements to third on differ factors the are XXXX. variety Such Commission. Form forward-looking expectations, release in company's Company's a meaning

for accordance considered income in over Reconciliations our or the GAAP. believe now net additional The well fiscal as XX-Q earnings to calculated a this non-GAAP during reconciliations in in be our third Additionally, presentation can to company EBITDA release the evaluating be prepared found be of on measures turn for discuss results as should which today's quarter call, call discussed performance. like adjusted isolation Holleran. our XXXX. other will Form and not the in I'd substitute on the included information of can measures, this call be with will useful to for in Kevin non-GAAP GAAP we as of

Kevin Holleran

year-over-year. Thank welcome all Hayward's some quarter you Slide earnings We our strong call. presentation third $XXX million, year-over-year of sales you, of basis pleasure and earnings million, increase I'll throughout we $XX third Stuart It's points XX inflation as and nearly sharp net of my XX% X to had chain in on quarter highlights another expansion are start of margin good with delivered headwinds everyone. XX% and that to our industry. of creating morning adjusted of increases of We an from quarter growth an supply results. increase challenges EBITDA achieved very of despite the

integrated the during invest favorable a growth of levels more quarter as delever of pronounced and supply to to and capital part our and of initiatives cash position as healthy disruptions capabilities generation very our on operational These are vertically impact strategic results. actions us the dampened along pool strategic and In across to this adverse not footprint our of transportation capabilities with output environment, allowed key rapidly remains rising a material strategy. are but only manufacturing pricing continue resulting We inflation have cost result differentiators. strengths allocation increase in growth chain and also our industry. Strong

align additional the with As to we increases warranted believe inflationary look forward, we are current price environment.

guidance Slide on our Now X. moving to

historical into the pool year construction and end products of driven demand expect SmartPad and upgrades to XXXX, remodels, averages. the new returning the trends We through current pool by to

to now fiscal growth to and date net outlook year to of previously to performance net our compared execute levers, growth on strong XX%. XXXX. sales XX% XX% XX% provided for our year-over-year the ability expect We to guidance sales we the are of our full Given raising

rapid inflationary with Given managing growth, the production backlog price have improving cost pressure, demand been and levels. proactive our reductions in we coupled implementing levels and

about during quarter year leading acceleration and to runway inflation for of see an the anticipated. higher I'd chain the the XXXX the XX% spend the this headwinds, positive our the industry of also costs expect strategic about and dynamic we full cost supply we We've $XXX little to saw a and to pool taken reaffirm year-over-year. of on term the term. the addressing of very to both to action continue be $XXX over outlook the pricing slides, of However, range longer than positively. the million to XX% term. are few our for fiscal like and EBITDA next in challenges, near in these lot actions industry, we to health We growth volatile the for these benefiting time million, range feel adjusted But a why the previously guidance pleased year price the near environment questions Despite we

with strong the secular for is appreciation to affinity which a here driving is we Turning living Slide backyard X, trends stay for believe pool the to centerpiece. new outdoor of

in see dynamic, potential In pool outdoor from deurbanization, levels an and embraced as National favorable key for a factors these experience. home According living to also remodeling the homebuyers to among to we're demand. of home work addition of confidence backdrop Collectively, and seeing they the improvement becoming solid Homebuilders, increased strong the from Sunbelt pool the we a industry. have component millennials new and Association force migration create interest rich homebuyers year-over-year and

existing estimated about XX% homeowner smart right conversions home built Hayward to of directly penetration some the and key it greater XX% user. adoption believe slide, XX% this upgrade strong pools. compared $XX the adoption There affords metrics market rising less opportunity on today. of the from also technology ease with functionality in we innings. On smart of digital with of Awareness rapid we pool pool provides referenced by to IoT smart new in the capture which to million smart be home. homes with of the of very the We're early trend seeing controls of IoT driving interface This than control the the features, not only conversion XXXX increased the side the pool XX% will and is we're is an operating

Turning to addition treatment just the chemical to Slide swimming similar pumps. I pools and variable see natural moving digital conversion opportunities conversion opportunity high with you addressed, to speed X, in efficiency can energy to

market is and as is around professionals frankly homeowners Our onto for gateway and products for to to the controls use simplicity trade leading include barrier pool. of more more mainstream, omni and as in moving app while the a well become we're technology pad, the automation

addition SmartPad to legacy three and what delivers to content we times of lower providing of four homeowners Our ambience desire be sustainable and use, product in pools technology see opportunity on compared elements ownership environmentally SmartPad cost rich truly pools. can solutions. ease to in enjoyment the the

pool Importantly, the the equipment small portion still total cost. only of represents a

environment broader remodeling on poised X, the Finally growing. industry remains positive remains supporting macro activity and strong very housing Slide and to continue

rich pool than record a more remodel growth. in industry, construction. age, that of we pool aftermarket is average, now and have Looking new greater that XX trend installed ground a XXXX upgrade of pools future levels of just The volume opportunity. a the in source specifically is runway the projected strengthening with old, our median for providing at years on plenty XX-year

now results technology turn about and wrap to by we term. penetration we the accelerating on with Lastly, the call the in feel approximately With XXXX, around the we like Eifion XX% who home see more new enabled the continue on near in industry the statistic to pool IoT confident the smart over health pools. trend industry, to that up which see the will a in Jones, I'd our longer of detail. financial in term discuss and over To

Eifion Jones

comparisons be I'll made and on X. Slide All Kevin start will basis. the Thank from you, good morning. year-over-year

earlier, net in XX% adoption that equipment constraint. the higher ability residential increase demand pleased quarter increased we channel was demand production with $XXX.X primarily increase despite Net our our with mentioned have our we XXXX Kevin a up pool million. sales or leverage global the and fiscal the to $XXX.X challenging quarter throughout to of results keep The products third mainly along in for million capacity with As volumes, result in seen to sales third supply operational ongoing our environment. for are and our continued very and pool

a disruptions portfolio cost as upgrades dampening XX.X%, impact higher robust. levels The remaining as quarter, the of in the due was of freight. repairs across to net increased the materials Net period for million demand in demand foreign in saw increase costs seeing global $XXX.X the pool result profit rapidly decline of prior to and quarter, addition chain raw XX Gross currency bottlenecks favorable margin products the the Gross of during impact cost as quarter previously we to these growth well through product more our The from margin healthy cycles the with market same extended gross decrease price pool construction. rising effects to efficient The of During to basis the accelerate pool of $XX.X benefited is increase on compared environmentally XX%. price inflation an or increases. as the profit automated of announced million, supply of year. friendly new point. and due X.X% a sales

the in effect in on the As March orders announced took price May. a reminder, increase return X%

July was announcement, diluted September the due those which to raised prices realizing started XXth. by although an shipped took we The to not quarter, accelerated on orders the During effect trends. impact X% additional new X%, inflation prices, net

in price expected fourth an of more So quarter the benefiting cost of dynamic. terms impact

leveraging increased manufacturing XX% administrative distribution footprint $XX.X profit a proactively of million by by higher result cost to increased these $XX.X expenses primarily not million, to general price managing continue inflationary Selling, agile address or and our in expenses variable driven as and only We volumes. but discipline through compensation and management.

higher at ongoing million these Most to a taken were taken quarter. expenses, the of notable the settlement of charges being charge to addition legal during litigation. In one-time number there $X.X

operating a period to of leverage, to repayment Operating technology million million. and $XX.X by increased X% XXX% million amendment offset credit a growth As driven sales prior net the engineering net as increase or This compared just in or decreased, and partially facilities. or primarily to of to of SG&A by XX% to the XX.X% million percentage million, sales and with or rates expenses XXX $XX the was under year into development interest products to $X.X interest by Net Research XXXX basis improved X% continue cost expense result a net second and quarter in shipping as features. materials by driven investment decrease $XX.X leverage. and points, operating sales, decreased debt costs. we income $X support million of increased as higher operating new in $XX.X lower to income due our

income tax period. to compared to an incurred the This from primarily for we was million expense of prior During year income $XX.X operations. quarter, the million $X.X due increased

Our XXX% XX tax in the XX% million, increased EBITDA points Net income effective period. of costs. margin million representing or partially for operating $XX.X offset as million. to rate increased prior was million Adjusted higher Adjusted to volumes to income EBITDA $XX.X but leverage, $XX.X increase compared XX.X% increased and an by $XX.X spike year XX%. or to XX.X% basis improved the

Now turning beginning Slide segment on to our XX. results,

to as more was inflation supply by and to contraction elevated segment by increased As $XX.X XX.X% and is and manufacturing leverage America higher XX.X%. offset expense. million its income cost from XX% and chain offset was XXX million, management points North in sales price Segment became increased sales, pricing. the In pronounced, and driven higher Europe to $XXX.X increase The by aligned pool World. geographies driven the XX% segment partially North a adjusted reminder income $XXX.X income by resulting Hayward's margin freight in savings. strategy, higher third segments raw increased net increased equipment profit operational mainly Gross from bottlenecks sales improved North margin go-to-market million. Gross structure Rest America million. increased America quarter. SG&A Gross contracted of basis two increased additional to net partially and materials to of key driven increase, reportable $XX.X to residential XX.X%

income shipping. and the was period. $X.X prior in and gross Rest to by expanded year favorable for offset net materials currency Slide demand of segment by the and in to Rest $XX.X XX% increased cost. XX, impact segment mix profit, market driven inflation $X.X adjusted World, on and Europe World, foreign primarily increased spread incentive leverage, due by $XX.X $XX.X gross partially due basis to Europe profit XXX increase favorable points The million, to million $XX.X income the million. The segment XX.X% the increased million, Gross product offset XX.X% increase million Turning increased and increased to to sales XX% from margin income part volume of million by effects. higher was to to sustained

to December well XXst, facilitated as adjusted Xnd, by net continue of as as We down XXXX LTM to we strengthen flow X.X to position X.X compared our as to a of times in delivered of leverage our XXXX. as cash financial strong EBITDA. growth times that was generation This robust October pay

end prior ended For prior the to a of October year cash of the from compared in period. the million, year credit cash third the of a availability $XXX was year cash use $XXX.X of inclusive million on in A during nine million was hand is $XXX unrestricted capital Total investing was $XX cash months XXXX, and at million source working $XXX for $XXX.X on million revolving flows million $XX.X Xnd, the $XXX million activities cash compared million $XX.X quarter our liquidity period. in the prior period. to operations used There million facility. compared to

strong below target our Given range liquidity of available flow net reduction consequential cash three to in and times. profile, leverage the two our

that, organic have to initiatives, to back capital to M&A With pursue return call and growth fund the turn We our Kevin the shareholders. flexibility I'll

Kevin Holleran

to back are stakeholders I'll remain driven the Slide We committed business pick values. our of core Eifion. our up ESG, Thanks, and by XX. on our and importance

XXXX a our and operations ENERGY and energy which employee ourselves for workplace been continued global and of We Excellence promote have our to review. recently the the design. safe engagement completed have strive and inclusive capabilities throughout pride Award to We awarded diverse our product company our on STAR focus culture we efficiency products in in for we strong

We and Vice diversity members Board of independents the the have President and improved as well level management new at with as our the two executive team diversity our team above. of and

since have the improvements becoming company. work about we We to feel good public more made be done, but a

stakeholders pure to enhancing ESG access Swim opportunities. Lastly, create be priority. normally a sponsor The our material more remains to a Hot swimming as realizing call. to highlight and position who these children mission to Into Association. our play And the platinum organized define the conscious The space. innovative ESG of We approach on we to to wrap underprivileged our look and environmentally uses pools competitive our in lessons its by charity this Hayward wouldn't driving excited products provide to association Haywards became topics. resources us commitment Hayward's Hayward million a market. SmartPad living most and forward has to have charities community swimmers addressable to are market advantages helped one to and of share engaging up our a Step I'll & recently grow leading Slide XX conversion Pool expanding technology outdoor Tub we're and and is growing part to the

financial for now large open recurring our we're ready attractive to questions. are results Finally, and the With business. that, aftermarket an line operator, superior backed by

Operator

[Operator the Merkel from Instructions] from William line Your Blair. question comes of Ryan first

Ryan Merkel

XXXX? expecting was XQ I impressed this I make we price So about margins talk in Can we should to early and cost the with margins how really sequentially. quarter quarter. into in then you have the progression gross and the think gross you progress, up wasn't about

Eifion Jones

Its Eifion. Ryan. morning, good Yes,

which XXXX, than As onwards, XXXX which of then inflation is increased we more effective July orders, agile, we believe price the of I through QX. think I'd the to saw become two announcement of through May increases. month which more all of step you September would as QX, some quarters. We know I Xst, earlier action given terms we is March environment, $X.X benefit in bps critical there increase Europe. price in the XX. seven, the aggregate come primarily was include as Ryan I of curve. in million backlog on price more by this more more step I became and in earlier normal, year that by we margin. gross this you in gross I'd increases orders seasonal we were instituted the Clearly sequential size price you'll QX, is we margin that and It discount of to range say benefit two price Xst, the X% would current combined America, the became along just do In in say see - pronounced not that the out-of-cycle will XX-Q projected on months inflation about announced of will five the found in the the in cost was shipped But step increase the inflationary say XX% price next XX% in of necessary and there North QX of in see disclosures, if backwards that our in about you a that XX the about was realignment XX bps, which was effective

QX a than to on little So, is close do expect a continue announcements, like taking We bit had our we it we as to challenge. price execute was but expected. longer price

Ryan Merkel

Okay, well than same curious that's managed if not of then do over helpful. you far. or you And too the supply was I think And you more the expect chain I'm thinking. is worst in the very so XQ? what different

Kevin Holleran

seeing I world getting Ryan. abatement. I an think the I see some material still than and size, a difficulty line shortages many, but we're think really that. don't it's - better industrial managing struggle is seeing mean still struggle some We that I a are whole

growing of historic levels meeting backlog, to our and order capacity for its team say this us. supply production with that's chain us, job team incredible operations doing file So but ready not this absolutely a behind I'm are that and

Ryan Merkel

to XQ what's in say conservatism there? is it there a just more just a little guide, out fair quick And going on that follow-up, is given

Eifion Jones

where I adjusted were kept correct. range Yes, we that's the topline did guidance the before. raise think absolutely is. over EBITDA it mean, modestly We've I Ryan. we where

We these supply constraints. are through managing

I up our little think plus been probably, in more XX% we've year-over-year bit challenged give the sales profile. a

out up I upper to So echelons the difficult it's to get material, as after to do these get the we look days right you to and about call it's but the of available comparable that. and year on growth, get remind the thing do in think would increasingly source it in to four less QX, last is quarter days at there when which that I capacity. than quarter a X% reduction the everybody there trading is fourth three less trading

is little bit it absolute So, days. with of does lower underlying volume though it the level midpoint a represent - conservative, our of the it growth given the guidance, trading

Operator

Your line from question Research. next Coe Wolfe Nigel of comes the from

Your line is open.

Nigel Coe

because So I'm just you into is the volume is and revenue could back I and mix, take look mix here. to if and trying be but volume. X%, actually sell think impactful a might step really But a wondering is the I'm guess it rest my growth the at just that price assumption price is

if you how benefit quantify So a right seeing much trying mix wondering, that's I'm to take just you stab now?

Eifion Jones

realization I'll we cycle lower you're the price did speed will leave more We quarter, price North our that step North take did off pronounced great the a real in movement they mean, America. mix are the the price we that's line that variable here. quarter. given of consequence referring but the had as than product a also taken that in you Europe through America, In Yes, will in comparatively to. terms enhancement, see off come that of in adoption backlog really forward, earlier see the you saw I of which have see

reality are in very real adoption, control seen so that through. We're segment. step the have that significant are will into in queue it controls of the North particular us dampened with QX was America mix. forward in We price More a also coming those progressively But control and pleased the the for the year-over-year. products in size coming become a of in our and these QX absolute more by backlog the

Kevin Holleran

this upgraded through whether of ways remodels whole replacing variable or I on price in product on is just we're white the LED the install they're seeing some than speed many think richer new or coordination that products that of in Eifion replacing quarter higher a a is to pad, construction, thing, convention. that Nigel pads or replace content being another progression mentioned, so the the the that's mix our whole or single lights speed points color new

was content you go product PoolPad. richer across So points proof another the as in you across full can of the line that quarter this mix, and and that say a

Nigel Coe

the biggest growth? the is that you like part as for of to of actually say biggest the component units Would like mix revenue the growth - opposed

Eifion Jones

line, I than would North been America they at say mix we have the greater revenue you the look a quarter when seeing saw in of cumulatively.

the down about think actually was and QX up movements. America to you North was Europe QX sequential X%. XX% So

mix into the So there was coming a topline. positive bit mix product effect of positive was line. Geographically, it

topline And mix topline. it the of is because onto benefit volume mix. more of consequence but Unit was there of was so, a is the yes, steady, actually more

Nigel Coe

And then we con my channel inventories. still heard a to significant on and but question is they it week more. from Obviously, inventories, pool they've want sounds seen in uptick last like bath get the follow-on just

distributors more in asking in you're seeing levels color if of you give for? your of a terms bit So inventory and us the what just what terms just I'm curious in are channel

Kevin Holleran

were, Yes, industry I quarter they the Peter's would mean I position week or as a two comments a whole. are last a than represent healthier ago. say in Inventories

any by us you may products there some in in is still be shorter it like it's that too of from much it, means. still position, an on the mix would that inventory in at are Admittedly, If its improving as ideal certainly look any but hand days standpoint, supply. not as a of - not

but to taking working now. extra in we're feverishly space total, shelf So right that, I some we're think address

inventory levels our really some space through look we looking share lenses what then gains. additional accounting at through for are like, also it in So shelf two absolute the but terms,

mean we it. close So keep on tabs I yes,

from can large with that improve our so backyard. to more and We distributor understanding we use push insight in have its to in - partners trying these the product conversations that are or ultimate them more we what they have need and good out mix that

Operator

the Brian from Goldman And your from of line next Lee comes question Sachs.

open. is line Your

Brian Lee

taking just the a prepared kind during for you questions. now it's algorithm response mentioned Kevin growth talked remarks, the so. just quantify It you're part clearly your again I mentioned year. of what one again Thanks guys the quick estimating you that's share share last helped under-appreciated sort to you in of a of right of it's like and as Is seems Maybe the what on a you question follow-up gains, internally there and in to for any think way tailwinds or sort seeing pretty gains. been meaningful you're the

growth year from much of the Just coming this is how that.

also then If help can most, XXXX. think product you're whether in that will quantify maybe seeing seeing you any wise and are trends that it geographically where you you market system, and

Kevin Holleran

question, Yes, Brian. great

XXXX. a I excited automation things is largest that a XXXX. is our is because going digitization generic part this the it for a product of I be we've like may trying gas chlorination we've SmartPad or a improvements, around gain, identify but story standpoint, shortly like be we bit directionally what in of in the conversion, we're frankly things said, the at are to share frequently not and growth, here a the controls accurate. products us it as perfect, but share in product salt seen then about think to a time, think frankly, heater same I our think I'm salt talk the line we've of here has more big variable we even chlorination, or the data has of the our very been that From it's think thereafter share little a And speed gain a some seen that pump tricore meaningful strong come result for years. been situation

these So backyard. into as lot progression around look in really is are more volume And that on then market a into we're timeline. its multi-year lights seeing color beyond LED more their get the that homeowners in

kind Hayward in we've nice market be the for Southwest. that's that So that frankly the product wise, I progress, or on underserved wise, think some Coast seen West markets of some

So big been combination. has I sure. of it XXXX Well, success piece for a think been here a in I by think it has our

regional SmartPad a of products that I this very improvements into think some conversion there certainly adopted the has out to period. part number are are with of early introduction that product playing well new and then of has it better nicely been been their some launches

Brian Lee

in the about to XXXX in some then XX% that into helpful percentage that is getting of to the in If enter XXXX sort digit out range, price low range, fair lot as it's further that I of come. - know to be expect far great, we or Kevin, but environment way it that algorithm you to could that into actions And mentioned, XX%, type we I here talking about two to you pass if next I actions follow-on price as right read take was And price this Around the timing. assume think my That's then all mid-teens maybe piece focus it know we this that is you probably you've and just we're thus I'll you on. in, is price sort articulated Eifion there that a another XXXX context. one given to same more growth of just won't read assume out year year? early the inflationary think mid-single think or the head of your given

Kevin Holleran

price said action remarks. further as be, what are will increase announce not I've at we're XXXX but the the Yes, to ready looking prepared we in

going as what's thus Brian, a XX%-XX%, that it's far been be think calculation, is quarter, or XXXX, the give the take, here I in to baseline really only realized. that's of announced

into will So roll of next the XXXX three of actions. round that before quarters

to going actions that better So forthcoming our low. here pricing we've the that I'm at XXXX, the to filling not are costs need confirm kind and announced just align in with already time we're in single-digits, orders. actions are of high the we on those But what but that further invoice production our we're

a spending we'll announcements next we're the and to So the be on lot very that shortly industry what channel to of making time is. round

Operator

Your next Halloran from line question is Baird. Mike from of the

open. is line Your

Mike Halloran

still thinking So fashion up first and but you're change still what other about to with mechanisms you or focused obviously how I some leverage focus a couple all you is this down are M&A organic side? center. dividends going the on are Return Does and for targeted front there, very of remain know pay questions two. the investments buybacks debt here, and at

Kevin Holleran

Yes, so I focused, changed. mean, really We priorities haven't remain Mike. our

we've On organic American got then and to of several policy to footprint in would geographies. programs that do vigorously focused and give throughout, range like. below return got us regard. improving initiatives, European is the those the now in on the healthy organic footprint, automation we're M&A, which America two our both North outlined North priority more our But here, communicated next second years, pursuing our we over think distribution which But and are pointed does at really have improving larger pipeline target We growth is to come previously given we've that about in the it sub-X shareholder. least say the out, what too to early formalize look that flexibility we we the as to a

Mike Halloran

side on you on the repair-replace at new to and you factors time lead its and building build, confidence backlog, lead your growth then next talked drive about the you year? gives the maybe in what and visibility that And when how some components are the the the whatever, what see going XXXX volume the you various stretching confidence into for thoughts look

Kevin Holleran

elevated XXXX. the despite our capacity mean, production at I improvements. into still It's levels some those of certainly backlog stretch Yes,

I to more increase the of of look - crews in I know level add XXXX be some able have this, others in ground builders they they're feverishly even XXXX. market, is labor think segment working beyond. remodeling get The in pools another right their and to to opportunity. to levers the high As confidence be are know well about Certainly out at continue quoting you I growth, the think them. into talked construction, very the we I have new

remodel, more homeowners our than upgrade and an looking As there is prepared I with the more on they're a to water the ever take ambiance and control the in interest to piece automation a or said with become pad digitized looking their to in or to both just pools two natural are to that aged increase remarks, treatment. more now the or pools full-scale or over

from. So that to certainly continue the in there but XXXX we fuel early right backlog the XXXX have growth confidence a now angles to in that supports are of number and is a that start months of volume different our

Operator

coming the have from line we of the from Rob Research. Melius Wertheimer next And question

Your line open. is

Rob Wertheimer

prices keeps you're raise that is is something channel there just is the response or end I whether pushback. whether I receiving go And see got me but increasing to no can't just with faster we general. much to whether shift please think the tell gains, on of to sort talked but price doing. this quarter last curious partners if offers, the goes And can little pricing channel share the if curiosity into how a any in detail it, a about I at you you're I through, margin of bit

Thanks. is So that's and changing mechanism how in the pricing through just on general, it. that going

Kevin Holleran

they you're price shipped what increase our announced Yes, second that I earlier, July in would that was was the the to sooner the there orders by Xst, mentioned increase end that practice and which after of change think Eifion referring really to increase. a third price is we received if say take seasonal really it quarter weren't

I increases now. manufacturers that think understands right cost our feeling the the channel input

now able capacity well continue was costs to need actually by to and announcements the getting the suppliers the placed received end into that the offset be to or a longer very these channel quarter product actually expanding understanding that's the ago of So channel.

I maybe our channel partners. was think part understanding second of question unclear your think… question, So or and in it collaboration I was second on between the great us I

Rob Wertheimer

inadequately. entered actually That

So, that's much. That fine. you you. Thank look, very thank

Kevin Holleran

Thanks.

Operator

KeyBanc. question line from from Jeff Hammond next comes Your the of

open. is line Your

Jeff Hammond

sequential Europe, typical is on that is decline, else something vacations on there there? seasonality or just Just the with going

Kevin Holleran

is then little But of a they the were year of This XX%. the typical more think you're quarter-over-quarter, a had see to strong what is date I mean, seasonality, you still up up bit No, a year. right. and XX%, they start I just a quicker seasonality, But the it so North in back America. summer segment reversion it's more bit a that hiatus returns and as no, mean normality Europe as I work over period there, a seasonality normal versus to the activity. little far in

Jeff Hammond

Okay. constraints. XXXX in and And data labor pool increase how they that's new maybe XXXX. that and back and you small I thinking then Yes, on pool a about industry on just think builds think But versus show data? contractor are I you have industry the the just builds

Kevin Holleran

referencing data XXXX. modest there, it data fairly you're the is the know the kind the I that's pre-eminent I industry source which data. for for forecast Yes, And sources that of think PK that

to hear interest that there We is and that Oasis. continue tailwinds and backyard in building feel out folks to

some pool start to know strong in We believe So what into here we as constructions around in I there - looking that XXXX. think some we October continue be new XXXX. is late growth

Jeff Hammond

Okay. And then last one price cost.

up. we a if hard I catches a take the price bit in. commodities maybe to start long as even see it negative think But But how neutral positive? stabilization, get or you're started you cost running to to to believe little yes, would is in to which pricing

Kevin Holleran

you're right. Yes,

inflation We still that indices commodity that world of inflation. this just is don't time. to yet inflation, continue the of versus I We determined. to see transitory I be think some here rising inflation based much of look is through But quarters is of we how think the couple that another us some believe at, structurally for yet. with quite build on

how is size proactively the more lag. a cost that of on closed backlog. We're In lag lag to price of given addressing the there the terms

the and inflation profile, the of the feeling that size deliver brunt here for more the of that really what to pricing not it's we're mentioned and attached significant understand which we our which to up order, Kevin are manufacture is the sales the in that others, do doing be more think marketplace we're to placement the in that as of others original representative believe given is these than important to pricing need channel we're costs the industry. is agile I potentially we the to it invoice those incurring products maybe more than so

unit in component material So incremental trying marketplace. or that to but raw we're procure the

more need growth year-on-year gap believe more it cost maybe to proportionally than So some that close agile hit price levels these XX% others, but we costing to us, is going that pursue XX%, we pricing, we're

Operator

question Joshua next the is Your line Pokrzywinski from Stanley. Morgan from of

is line Your open.

Joshua Pokrzywinski

in here. commodity have something a ask inflation that you presumably down is like expediting maybe question, terms to you're sort things more hoping was based Yes, how maybe kind shortages like could if of your the in like stick something we're near not few situation of this that it as may a freight for versus quarters and looking with back future rates be saying might base or at which where I bit differently inflation is, material, of you buckets break little maybe kind a us quickly. dial a would Jeff's costs, of better of labor seeing while,

Kevin Holleran

personal the see multiple you IPEX coming challenged. watch materials primary as The are resin plastic an structurally In nearly terms performing that so on so belief year-on-year Yes. materials that you that change in components XX% comprised high table the see profile industry the about support index materials, raw the well could raw in as as housing, labor now that next industry. because area is our in needs and The we will raw remain reinvestment the is elevated. raw metals all that in base my our our can metals let's index are material chemical in pressures current demand are to big the and we economics order elevated the of that probably from let's think material put resins. about to But buckets in commodity freight well. raw tariffs, broad talk and inflationary

then my were is is a talk pricing to XX% it XX commentary may of step-up of over that's expect months, is is, next wage over always levels in and of in that side, a sector course backwards. structural remains industrial materials good some we've into specialty You're the to But last know metal type the shift next look in one and transitory demand following going in microprocessors we're to seen the difficult finally, which to high The has our product some at see which consequential the we and inflation supply the you've of transitory deemed metals. be possibly step-up dynamics, inflation raw off the level, will of marketplace see expecting mentioned are raw would think double-digit in We've improve early year. next specialty a we're of minimum you heard others started gone stick say, necessarily in is couple micro-processor firm the there you that about and also in the recovery sector and labor entry example. the lines, as of copper is bit in I car the We the production then got seeing bill And accordingly. where little are not the belief go and come that a tightness at the to that America. not months. that sector, labor we've and inflation materials a metals and reelevated and in you our and when where a steel And North is that seen materials,

freight In back ocean terms heard really seen complicated, the port coming of about environment, freights freight labor congestion we've you've a to issue. labor to impact that's

longer need here see we're and back but to [indiscernible] assuming lots style of time guess whether expected. going to And I'm So there's tariffs not originally the then control. go, things it's pricing normalize China the being, XX% tariffs, under freight for than before for instituted we at term a U.S. in that come me from

of taking yes, are supply pricing say the business. before side would double-digit years actions I all the number a to we So of the protect to inflation for is we make and up aggregate stay that and us catches sure with

Joshua Pokrzywinski

season the pool not extend that what Nigel of folks the over or bit a I some I doing structural a just all but categories bit those at share. structural, home. about some to one stuck mix cleanup is the been for then the more, you little quarter? And think, I maybe and want curious a elements, how question, was think past that that the maybe that asked have that of earlier a here you of anything could on would about imagine

Kevin Holleran

that or gas the very pad. of stock is gas on Add well, out to have is became whether Josh, of units, that heaters to the it's doing control add in early temperature for well that maybe kind the and later. pads one one as and the backlogged separate experience heaters to pool elevated for spa the onto of first portfolio. most it they're to COVID folks XX%. many multiple opportunity looking There or pumps of fact extend - it call keep plenty the point, open the run it's or heat whether most, a in is season Still your which Based were still was demand our heaters in upon of products not. There what is one heat the pool still products the pumps, plenty base of earlier, it at installed the open around extend, still then

Operator

the line Tiss comes Your from of from Joel last question BMO.

open. is line Your

Joel Tiss

and And have has people to a about kind feel lot through us looked or just or all do and structurally talk PoolPad can can asked how more like wondered, their I'm through is a to answered. builders or lot, that direct a payback the of that. you you bit need to I a think educating and any want and that little been you consumers lead do better I to online it. do It that sales So to upgrade the distributors

Kevin Holleran

standpoint a I natural able that be to this or servicer rely the payback as or eyeballs Yes, we able homeowner. it still there the efficiency think SmartPad to the you're be opportunities upon digital that do that it's water and energy understand increase has those and comfortable industry I to installing to it. the if largely But that is opportunities, an there, do can and there builder treatment. selling We know you capabilities that lot more digitization educate on whether the the a to from I certainly think is think

sound replacing, they of majority have of fact do priced well, higher they believe homeowners responsible All the very the in are than these, those case, a our I'd backyard say sustain would also that be fashion. want business I but mention all operate their to not everything, always all a to products

of So I case a still but the and OEMs would direct we making do as that largely reliant the industry better trade to say job as the are upon looking to homeowner.

Joel Tiss

end out squeeze one you. And out you great. manufacturing kind too your there hear flexibility about usually of mentioned can of and I Okay, incremental last that your I'm cleanup factories then, capacity of you lot you little towards your to didn’t much running productivity pull manufacturing And more lot capabilities the of top your a or there side. a - Thank done. is and

Kevin Holleran

we a manufacturing step look, the distribution I our establish to recent capacity We've sales. Yes, can just in got we still you. would unlock most taken new Thank say, that facilities. center Yes.

facility of for add meaningful floor of capability theme facility the underlying that's going production American Clemmons primary move. manufacturing more manufacturing up amount All in and was to that our space free to our a North particular that

as sign and expansion investment look got automation have We to Europe, in we're programs taking of to expansion we a and continue to several have capability. steps there opportunities underway further build

including converting our some we things product floor got really, the quarter, we yes, more line. to multi-product discrete to over product that. innovative We've expansion, at So capability have capacity really of look continue the lines manufacturing last on several

It's adding as only well. production. agile our the So also of unit flexibility size it's and enough manufacturing for not capabilities

capacity. It next investments underway. next that's some is terms step it's the require over that all to of but take years, of going couple to in news So good

Operator

further are for call sir. the to There to like Holleran go Please no ahead, back questions. turn Kevin would remarks. I closing now

Kevin Holleran

interest Thank thank their you, for like I just to everyone Patricia. in Hayward.

work service strong and on our deliver I'm see levels business financial team highest who dedication hard is our to can such providing and As you allows Hayward results. operational of of results. our very focus continues customers proud phenomenal from to the the and to producing

nearly of Thank guidance highlighted year, managing to the annual positioned raised stakeholders to last talking raise We during sales for are the out soon. look you We questions, you margin growth growth our any well to continue supply XX% results points again chain the topline our and to XXXX we and reach all environment. an to that QX in challenging XX we Please guidance very and while if ahead. able our follow-up were expansion. inflationary course this net again continue execute We're generate years forward you. to and to of by including have of very increasingly to strong and team quarter quarter, basis

Operator

call. And this concludes today's conference

You may disconnect. now

Hayward (HAYW) 27 Oct 212021 Q3 Earnings call transcript