- Earnings call transcript Q3 2022

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Operator

Welcome to Hayward Holdings Third Quarter 2022 Earnings Call. My name is Adam, and I will be your operator today [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Kevin Maczka, Vice President of Investor Relations. Mr. begin. may you Maczka,

Kevin Maczka

site good press We has release Investor an Officer; that we earnings our Chief to Senior and you quarter been President and our call. Eifion during will President Holleran, Financial presentation XXXX the Web by and of today Jones, portion earnings this Relations joined investor.hayward.com. morning, Kevin you, slide There, issued Officer. and can find everyone. third reference posted at Thank morning this also I'm Chief Executive Vice which

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

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

Kevin Holleran

Thank all Hayward's It's quarter welcome to and everyone. to earnings you you, call. good morning, third Kevin, pleasure my of

we that States in impacted Australia, our everyone in say ongoing natural was the with and by that by Before United the Europe Ukraine. disasters and like I'd thoughts Southeastern war impacted begin, to are those in

time. doing We on can Slide to are presentation what of today's during I'll our X difficult assist key messages. extremely this we with earnings start

was in First, our line our performance third quarter expectations. with

sustainable our industry. our growth continue partners quarter, advantages, the I on increase trends in for Hayward US core market capitalize pleased competitive market. leverage our am our to the products through channel we sell report During secular to see and in continued share and channel primary

expectations sell-through net with meaningful into our in on communicated channel our response hand to we as reduce partners saw the the However, between and a lead ago, consistent we safety stock a channel times level and divergence requirements. quarter the sales inventory normalized of

a mix significant making level in the of XXXX necessary are channel. product recalibration normalized with support progress We this and to on

winning we're marketplace. in the Second,

our to of share market in products, are target during innovative programs. converting best actively Hayward third gains adoption and We positive quarter. the accounts result further in encouraged continue am to see this see I class to loyalty we

strategic steps current proactive our Third, we and prioritizing cost investments while are growth taking to our structure initiatives. to conditions realign productivity

structural consequence result on in year to are our we of Europe. details plans savings of on XX% of events inventory refining expected channel and reflect in a higher normalization reduction an to provide variable full Fourth, actions a XXXX SG&A impacting QX, moment. these the inflation than substantial guidance continued in and geopolitical our annual additional I'll basis. approximately expect cost We cost

expect now XXXX $XXX to be million. additional EBITDA approximately addressed have quarter net to adjusted with million to announcements sales in price of We XXXX. realized We the year fourth $XXX full X% inflation in decline fully and

and important our is to very ESG shareholders. Finally, Hayward

report So to progress our I'm pleased on continued journey.

forward metrics to to Following are on completed you during the encourage to ESG Scope products, and planet our sheet, development people, earlier results framework, first Hayward our expert. aligns review accomplishments strategy going These reporting on in other X SASB first standalone with which I ESG and we forward. we our these and would third included third data in disclosures, published I year stakeholders of which the website the principles, this X quarter. partnership and our emissions disclosure, and inventories our look party aligned a updating

X declined and sales to correction softer our Turning markets certain results Canada. to Slide now Europe in the of XX% $XXX year-over-year million, to channel inventory as conditions Net discuss to due such third and quarter. largely

are price share by market. realization, We encouraged and core capture of our market continued resiliency US

third reduction in increased for the demand As EBITDA the Decremental US continued I mentioned, during margin. quarter cost sales in XX% initiated plans quarter a XX.X% compensation million, the $XX and and EBITDA as and costs Adjusted realized rebates. lower incentive was manufacturing through sell yielding with in quarter, were the market. margins SG&A the reflecting underlying we associated

to now X update. a Turning Slide for business

area season. the in variable varies Within pool speed on notably moment. strength, Sunbelt trends the and the most strategically in to than more in important third and earlier Our million Hayward speak Sunbelt in that controls, in US structural seasonal unfavorable since than the consumer and which on Year-to-date, of more share points Northeast the is $XXX Within believe demand Southeast transitory. following sanitization. weather evidence approximately continue basis saw Sunbelt see gains detail quarter, Canada solid of further in US We North in continues region. Australia. with by we this region to especially Asia and in an and the estimate the America, we of Europe, Europe XX% XXXX, in conditions grown US We whereas pad or significantly be markets. like pumps Middle East, have faster growth in water critical I'll World, are a markets products challenging softer captured Rest economic XXX

total our key adoption in partner in believe base products. Hayward We growth total XXXX. in team overweighted business Hayward in strong see our and of with to sales and larger of $XX their the sales over to annual Hayward evidence the products full new of these X,XXX approximately advocacy September, with X,XXX being Sunbelt markets. dealer of Further, additions share gain. another approximately value long stickiness our million is This continue months US past are year new and accounts through after dedication new XX% innovative We growth XX We signed conversions. added account year-to-date partners of term through the

growth Our our strengthening development ecosystem, new products within vitality index. of IoT our product digital leadership position is automation in driving XX% omni resulting the in connected

protect the to cost last versus and combat the to inflation profile over business. few series structural Turning of A of dynamic. out price required the years were margin cycle of increases the price

While cost continues we increase. ease, goods our to freight sold to total have seen some costs commodity of and start

been a to on we we The fourth quarter additional has to X% increase expect XXXX. disciplined historically, an hold. the As industry pool effect price the announced X% and to at price increases result, of take recent very beginning price in the

period year-over-year. the occurred through XXXX prior our Hayward approximately our As noted disruption, are supply stocks channel the of of period. demand $XX level and safety the by we earlier, adjusting held on meaningful channel chain a during significant we're partners. strong inventory sales built reducing channel million reduction changes estimate Distributors for progress inventory in compared of build inventory quarter in the and year in a recalibrating After making increased third to these levels, the up

We are our channel partners working entering to be XXXX. appropriately with positioned

in we a structure reduction specific support proactive organization and attention to of to the maintain attractive This eliminating inefficiencies our high manufacturing base gross and variable cost includes reducing our and Finally, streamline are to supply variable responsible costs the XXs. taking the margins. margins to cost optimize cost chain mid in to in actions with labor

of of In million million approximately to realized or we in basis targeting $XX XXXX. be annual $X realized XXXX fully a with to SG&A an XX% addition, on reduction approximately savings initial million are $XX when in structural

taking a are We EBITDA profile. adjusted to maintain high actions XXs

the to for XXX%, and respectively, our and guidance, last perspective This grown financial on Slide XXXX net to I'd to XX% on strong and X. Based transformation now sales performance from for years. have three will EBITDA. the Turning XXXX. approximately like we and over XX% company's XX% operating by adjusted share of and XXXX some CAGRs net EBITDA adjusted sales represents

across period characterized under was are product additional of the demand We outperformed initiatives. product strong substantially industry, detail class growth slide. new and by successful that these and following transformation I categories. in the included in following provide We best and accelerated team introduced the experienced leadership will a some several a innovative we accomplishments. new industry's top on proud products This development extremely

growth. to acquisition. result We also the pool development and new builders, solely revamped drive on has sales force customer This focused remodelers business servicers. model and an introducing our been teams dedicated signing The of included go to impressive market restructuring

we also a in and approach improvement multichannel the We existing introduced lean a footprint. chain substantially capabilities, within unique a and of across and retail resulting distribution, enterprise true to and manufacturing resulted supply in has our online. e-commerce a continuous commitment that longstanding production capabilities doubling improved manufacturing Hayward

to automation US We centers drive in also and where established the appropriate two new distribution in productivity. invested

robust growth expansion, we a and result, profitable a As term. strong outpaced delivering and transformation margin laid industry, for has longer growth the far this foundation

like additional detail strategies. new X. product provide Slide to I'd to development some our Turning on

upgrades highlight opportunity we of in the for Here, rich Africa technology the US market. source

priorities X.X the significantly compared the segments being experience. XXXX. compared opportunity new product speed new products years. are deliver a convenience on IP three existing swimming for $X.X opportunity industry a of a development to these the in provide gap As presents technology opportunity, building million approach which existing consumers slide to the installed to different. more to attracting energy pool, to products, when professionals installed a potential These of focused alone, these discussed an exciting of salt deliver and runway enjoyable affordable controls, three have for rich this past, of significantly we've in ease we trade our consumers product have The pools technologies pools educated In rate efficient use in-ground segments have in for age as technology installed industry of and as the IoT-enabled see built approximately The when a recognition upgrade compelling revenue well we and penetration take the is growth. opportunity variable This to corinators In base. pumps. XX pool billion. a these pools of and new the less highlights benefits key average When

new years three is these success in resulting categories Our last evidenced growth blue system products strong IoT gains. our pumps supplier omni SX the several highlights compliant which chlorination of high control as product Hayward's new over ultra to column, growth the released share choice. our industry support line extending position DOE to and equipment in XC efficiency Recent in critical enabled very start Hayward's salt products, new impact product introductions, of are low the just being the of relative

XC XL SX SX new our operate XXX to in able opens salinity required Environmental limited. TriStar ranges recently AquaRite was where Texas quarter of States chlorine work million fact, been Further, per in pump adoption Protection examples available share are has critically In in uniquely at leadership, variable product the of category. with resulting important multispeed salt great pump generators United Omni recognized a industry southern more salt, commercially speed by Agency detail. certain as our This ENERGY the XXXX most our over markets parts significant With and are turn like in such its STAR more that, new call salt results by and to roughly the Eifion who just a Award. receiving financial of will systems. chlorine Hayward the Year generators the high I'd This Jones, of up of Partner efficiency to leading discuss states gains

Eifion Jones

and quarter This volume announced realization net decline offset to full price sales morning. inflationary in start I'll was anticipated channel primarily reflected cost million. acquisitions. Slide partially foreign comparisons quarter from The realization by destocking, escalating X% decrease a previously the X. contribution will year-over-year our for by exchange All and XX% unfavorable impact, third on mitigate of impact reduction XX% the was Net Thank price volume by XX% with $XXX.X The driven into a driven increases the to decreased our made the you, good be quarter. a line the on expectations in X% cumulative distribution primarily basis. price and which and Kevin, we stepping during pressures.

reductions constraints specific hold to that times and lead gives chain eased our pulled need are important market, Our based have improvement It's as safety relieve positive channel times in now primary destocked the of volume communicate excess channel us shortages. have to their movements. compared outside channel due entirely quarter, This comparable we we million. to channel to normalized supply material Kevin confidence channel year the this whereas lead electronic the experienced some understand $XX quarter, have US approximately through to and in last the inventory, normalized the mentioned, stock. inventory most the sell to In

European In geopolitical on addition, weigh and uncertainty markets. certain events global to continue

we pumps products, continue speed good strong the continue new inflation in open Our the those other pandemic. segment particularly points profit Gross efficient on energy declined of this margin basis operating dynamic, and continued as experience in profit lower controls, Gross to million. unfavorable Despite by markets realization up quarter was well to volumes. channel World post to and markets third as sanitization, XXX adoption lighting. leverage $XXX.X Rest variable XX.X% of offset was performed price reduced

enabled have us the offset inflation. majority of initiatives pricing successfully Our to

lower business of In accounting related over lighting the entry, third compensation primarily in quarter. gross quarter. third purchase performance basis was the adverse general for onetime of XX% this for by two XXX and third the $XX.X the and addition, gross by decreased related the Adjusting acquisition impacted to accounting margins profit purchase impact margin warranty Halco million, quarter profit expenses XX.X% during the driven in points to period expenses. in administrative the specialty quarter Selling,

from As limited percentage We in manufacturing as modestly significant margin sales, $XX.X initial net to during EBITDA lower XX%. incentive rebates. actions cost support an the quarter. million quarter Adjusted structural margins of profit in to down XX.X% quarter benefited margin decremental lower cost gross well SG&A. a increased compensation SG&A XX%. The and EBITDA Adjusted and savings with third third to the was as was also sales implemented the

rate the the quarter. resulting and repurchase tax million the X.X state was tax during options. XX.X% changes as of effective EPS in compared discrete was $X.XX, year deployed stock shares in the prior from from Our third and period from benefit the Adjusted we million certain to to XX.X% legislation benefited exercise third quarter we items $XX resulting

XX% share the resulted count Our XX million in shares cumulative share repurchase activity of year-over-year of outstanding. approximately reduction or shares in

to Now Slide year-over-year sales a the I'll Beginning volumes, reportable last by for reduction our segment results lower to third impact price quarter channel the partially discuss driven quarter. the change declined volume due the for on to net quarter The from million. favorable acquisitions. comparable XX% in XX, pull during compared The and in XX% North was quarter the X% $XXX.X XX% was by offset channel year. in inventory destocking contribution America

inventory margin the $XX.X fourth in yielding As was Gross normalization of million, destock profit I for entry quarter do we segment quarter adjusted channel of XX.X%. was XX.X% the purchase I the quarter. segment expected continued mentioned, Adjusting XX.X%. project gross third in gross profit quarter. was the in this a the and the margin margin million was accounting in $XX.X profit of mentioned, Adjusted income an with third income for

to $XX.X of for impacted World volumes. were on million. in XX% third decreased benefited price quarter from to Turning approximately of sales by Rest Slide sales but XX. increase the and XX% a Net Europe decline adversely Net XX%

in consumer channel weighed In circumstances on Europe in Europe. addition destocking, have sentiment, particularly geopolitical Northern to negatively

XX.X%. a third in was Gross quarter below primarily X% segment of dollar million parity which a $XX.X XX.X%. yielding an segment income profit from Adjusted margin euro, was the to gross profit the translation, headwind quarter. of unfavorable adjusted income experienced also for million, related We dropped currency foreign the on $X.X margin

Turning to of our flow balance sheet cash Slide XX a for and highlights. review

company. characteristics pleased of with are of We and balance the sheet flow quality generation cash strong the the our

cash the of and cash $XXX the quarter Our million $XX total end liquidity million. was and was balance third equivalent at

ago has the $XXX ourselves peaked and million we safety was period. of comparably compared quarter reduce investments. share financial matures end and moving safety to used at we for in in second this free X.X net modest ago Free $XX $XX The sequential This as growth our year-to-date quarter, positions. The the X.X year-to-date. flow a deployment and in million quarter, business $X in of in the year-to-date. quarter source million At months a the and Net was characteristics, third loan the capital XXXX high Cash schedule million the XX% our the was $XX reflects raw $XXX million adjusted XXXX. the and represents operations the XX indicating Inventories was stock we took been our third debt second in million the compared quarter was income repurchases. our has quarter in a included the million from Working flexibility leverage to provides XXX to cash year strategic end supporting period quality year-to-date. materials XXX% times cash source the attractive the flow which quarter of ABL down of million execute in year matures CapEx in shares outstanding in $XX earnings goods. positions million in shares. and to finished times capital higher in $X maturity diluted last third certain increase flow Our conversion stock XXXX term strong the as EBITDA and compared in plans. generation of are and as quarter

intend going financial We maintain XX. capital policy to a on now forward. Slide to Turning allocation disciplined

and investing We to prudent in commercial initiatives balanced productivity and development, operational business. will to emphasizing returns shareholder excellence, in financial allocation new strategic intend while Our the capital growth continue maintaining product growth initiatives drive be priorities programs leverage.

growth an offering, We enhance that our and geographic product acquisitive also company footprint tuck-in remain to augment organic opportunities commercial relationships. seek with and

building M&A X% controls, track are in water, after which a in successful months lighting, quarter. collectively features contributed the companies integrating sales XX in We record the last four and growth

cash Finally, market third We shares cash of the to continued $XXX million the million the to strong shareholders. and X.X deployed repurchase year-to-date. return million generation flow in quarter open supports in $XX shares million to opportunistic XX repurchase free

adjusted million EPS is repurchase $XXX quarter, the back had year-to-date year I'll And to existing Kevin. the on the remaining Our turn to share $XXX million At XX%. three call activity repurchase by the approximately end we third that, accretive with authorization. of share now

Kevin Holleran

Eifion. remain I'll strength We every and opportunity Thanks, the The as space the new the health the pick of of long supporting significant upgrade there It aftermarket. technologies. up across and continues this has trends backyard numerous been Slide favorable a addition of to back very as increase XX the economic to consequence grow to to for the remodel base with year We aftermarket appreciation has main a pool on address provides cycles. age positive industry, believe firmly about the rich a outlook. our particularly and in the new proven and adopt installed pools term the trends. resilient of continues be secular

to persistent and With the current that increasingly which through channel reduction Europe. programs. by and gains remain Inflation the working We price reset of uncertain, realization, market we operating share are continued said, especially while environment is the encouraged our deliver inventories. our cost implementing solid also remains of very teams execution in

approximately million in decrease very positive confident for anticipates in EBITDA term consolidated and execute million. ability sales XXXX, $XXX the net am long a successfully X% outlook. $XXX environment adjusted of remain about to of our this the and dynamic company in a to year result, the growth now As full I

Turning XX. now to Slide

we close, the me presentation. from takeaways key Before today's let reiterate

expectations. Our our third quarter results were consistent with

accounts We our continue and to marketplace target increase the to in as introduce we win market products, new convert share. Hayward

creation. drive our can ready positioning for line that our efforts financial compelling realign steps manufacturing With while base I will and have taking shareholder value what questions. current proactive to conditions these controlling that, and results we're every are now to future We optimizing cost we the to structure growth. open for control, confidence

Operator

Instructions] today question [Operator KeyCorp. our at first from And comes Hammond Jeff

Jeff Hammond

cuts, weakness So to starting or I just guess how consumer some you're the maybe about lingering into frame on SG&A just destruction demand XXXX? of these think

Eifion Jones

in start cost part Kevin your it me to on through think to across just full the to actions, with actions affect began the then have I primarily started latter SG&A taken talk turn actions a let the QX there address off in to primarily our that with question. QX cost about manufacturing base. effect cost We and we will our specific the start Later initial actions XXXX. of Jeff, in quarter, and

forward both to prepared is and and million. We as SG&A focused We'll you across XXs rightsizing EBITDA XXs. base, as about we our we really at step go further today, mean we continue the that $XX our of these base to a actions on and gross rate. the and production in become fulsome manufacturing our support have actions, announced And high adjusted high update remarks the which across see. update day, We're end cost our current approximately protect we protect XXXX. in as as are our mid reduced $XX million the of our I mentioned SG&A and margin levels to to XX% release, accustomed of there in we've you as factories the give into to

Kevin Holleran

what's through that a quite out construction. As the channel, data, of permit for marketplace, new several this high that the of digit demand retail environment, has based a running. around the There's gain still pull some But really last earnings of been is there net level technology single there's into that priority construction closes very higher that We're really the is off side the entry I the driving values season still continued optimistic. the year We retail that's fix, this and agree the And pad. top our last through during on repair data for the encouraged some really softer out data into that the that the aftermarket. replace positive the pull be from XXXX. share it's coming still really discussion is industry there's And will high part retail marketplace. and the break offset we're the comps still across indicates out when seeing coming bit great incredibly upgrading again, years impacted year. likely obviously level been shows which new Jeff, guess upon

close. just through lot I'll the of We pricing. to into spoke hold a is been a market inflationary Obviously, The the it headwinds, XXXX. about year lot of of So of there's to latter expect accepting it and into in half There's we marketplace our remarks. and been prepared prices. those continue that this because put

Jeff Hammond

So are And were decrementals, just buy, guide, early quarter the there? quite a quarter. just pretty of pieces kind Any quarter. thought implied big fourth fourth It any if I what seems in quarter like the kind then in of you guide? down fourth take any, expectations the good moving into third on the around step the

Eifion Jones

that latter lead low Sales range midpoint call pool, quarter and are let the the in chime guidance of to of in XXXs that be it's volume. based pretty upon the mean Kevin full off XXX. we've to given. expected XXXs I'll I on again fourth high the year in clear

between million million. We expect to EBITDA to be $XX $XX

margins our fourth Gross point the the focusing, We're in the quarter really by on absorption. EBITDA the sheet. structurally, balance fourth out, adjusted will you impacted XX% Jeff, in margins be As the lower around quarter destocking margin. at on midpoint

work obviously, continue addition, the with In channel to destock. on their to

the fourth quarter So be production will in limited.

sequentially We production to are but rightsize won't continuing down QX. cost the be manufacturing in base,

continued we have, We inflation. as about, will talked

expected. cost in effective will put in than another of It increase acquisition was us Our price QX January increase. price necessitate be to That did higher in 'XX.

bit pinch in still in So QX. have we'll inflation also a of

Kevin Holleran

and pre-pandemic out put run buy, back kind of October, this a given it as channel by we're I by the we end. remains stock closed a say that position, program hit market in end more early Admittedly, Jeff, we of to which channel to expectation going level, a the and demand year month get year. expectation, would days I confident on that slightly As on here sign it's lower we to encouraging the but that early that the correct in correct for hand did find the inventories normalized down expectations. it's expectation a great

channel the working that So on getting we're shift. with

As also right sure to XXXX. that the as position to off the the make kicks is we in want we the deplete, inventory into we and season mix continue got right

Operator

Blair. question next The comes Merkel Ryan of from William

Ryan Merkel

So be by destock is picking million? us can you last like the think on I Kevin, channel prior total much assuming going the made, destock for up on comment the end how it you you sounds think update to now? done that 'XX. estimate the of And then you're was $XXX

Kevin Holleran

destock we more as as be inventory say in assumption the a saw some with in marketplace. we as So largely there be of as XXXX. year, And expected. QX. my build, balance out said that say, I trends I nice remarks we would to But I prepared right turn the would QX, our through in say was work think compare into in We as done continue, demand it's I'd will inventory XXXX. the on reversal nice expectation the quarter, into had we you year-over-year, share this the have of year hit -- grow what last continued we and discussed that playing current on to done

we in that the So prepared by or in $XX it some that where remarks. had build last so depleted million actually QX we've there inventory year, was

kind back we through out QX. pull of like expected and would I and largely say So as in range retail that terms and coming of $XXX about put be channel, of the our said, of on we into it. to expect a now of overall, based And $XXX balanced million million we done to QX reset upon shift

Ryan Merkel

contribute And helpful. then XXXX, much would I carryover. on talked in some will pricing, be just increase recent price you given That And the be how there'll about? think

Kevin Holleran

the of in is which more be give took announcement, to will effect. some then, an I'll it, And will start ask impact from Eifion in recent midyear detail. shipments. to There mark this most some carryover call here QX, course, when it There QX carryover. announcement,

our get probably formal to in we're with a come So until or we XXXX going range in now guidance.

Eifion Jones

the Obviously, price QX. mentioned I now we're we as point. not giving increase, would definitive consequential is say guidance announced what earlier, I in which price a is, take through recently January. carry in saw effect this on have But coming X% to to we will That X% at inflation

X%. year did year's this full as past benefit well. X% a midyear in get we’ll approximately to announce of of And know, that X% additionally, to increase ‘XX we price you X% So a then as

that take of can half on. that we So and layer a year

somewhere be carried So next year. the range in X% into will

Operator

question next comes Brian from Sachs. Lee Goldman The at

Miguel De Jesus

could This Miguel maybe Was just guidance. one that all you back going much guess growth guidance. just talk I the you in could the guidance to just a Brian. just headwind prior. is things. for through change bit maybe on updated assuming channel price maybe other And expectations an perhaps revenue offset was headwind could related But if wondering a remained I'm maybe going you on then to and lower or My inventory, in is first decompose more the maybe change a Europe how those of the color on was that versus versus of -- the on volumes regions? give remain to

Eifion Jones

guidance at to around original just $XXX coming about Last talk of revised me let time our from million out midpoint we sales. the So guidance talked QX.

as up it think midrange said right And the channel at trending expect from to we $XXX would around the $XXX identified We to million. to the around original themes. be is We of now, our mentioned, correction We're got end three guidance earlier. million, that stepping -- $XXX $XXX got about million be million the the is, were takedown $XXX We central One, 'XX. correction. earlier. million into channel Kevin we really year. $XXX done kind in centric is we through of million it acted to Now

that correction a good now in position end 'XX. we're by think we of So through go to channel the

Europe on we I World and terms world, the market had the Rest by Europe think complicated. you're remains, our down taken rest aware of of view say, of In and let's Originally, $XX million. that

of million we're guidance. $XX terms then And markets, a got now they've think our seasonal start. I in slow the in at

and is out they coming expect markets that market We've slower improvement out better no year, had terms those essentially summer things debt. in year. season, throughout previous is of year. for But Northeastern our next of this Canada, upper this the decrement the expectations this of were and we a So Midwest, around $XX seen closed the the $XX are to start million million only the seasonal QX

of bit recognition slightly period. So rest centric the the correction, the including a higher really, soft had consequence Europe in markets it's channel and FX a of little and now that world, 'XX deterioration around seasonal have

Kevin Holleran

Miguel. of headwind, said the at pricing see mentioned also through believe, benefit you of there, -- actually I we question pricing, the as several a periods. think end You kind working I would We the tailwind next

Miguel De Jesus

all I tailwind that additional meant I that yes, color. it. that. I said all when I I appreciate reversed had But appreciate great

then talk costs how a spot timing start maybe on we're the the supply on two, in more others about about of you've one, there we then around those just of from prices challenging? supply that data Maybe have the bit hearing and and terms you in sort translate and noted maybe in in of number the think on. what's should easier on can more still the remarks specifically, gotten what's and it prices potentially down to this pass margins? then still come upside market when of be chain all state general? and And constraints, and electronics. And on challenges of I'll some But in just and the looking question, bit metal, your at those general, prepared freight Second might

Eifion Jones

it Let reverse in order. me come at

here. I sets response up think correctly the it

in So in commodity raw microprocessors. of sourcing, only items, terms improvement we really and When a we materials I sourcing namely have other and sourcing. nice constrained from look are perspective component a now components main electronics, PCBA key at our seen in

else those get red that from quantity perspective only, has let's We materials. the light on to a to Everything supply continue remains our with dashboard. But call traffic it, our commodity work improved. suppliers

costs, remain of our terms In in cost still purchase costs. elevated

to we operate a on lag. have that You recognize

are raw on based sales any three of upon quarter really in the obviously quarter's any that acquisition. then the sell materials month and a given purchased in we cost prior So that lag queue we

six So the anywhere in of our we from three recognized with of price lag that commodity between can months sales. of market be to being a a through dealing cost

when at to the price. so see still year resins commodities, you look And we date inflation in in purchase elevated our

into abatement did and will do higher. contractual specialist some a to which metals, purchase little accordingly and high To hedging we further We've reacted But off costs. are provide to possibly with we've copper we to year. a or increase. too seen expect where be some cool start upon definitively in a based tailwind and call terms in bit got our is that cost these of here, have on We start price some in XXXX, next inflation still we'll me, steel now it's

Operator

Research. comes question Coe of Nigel next The Wolfe from

Nigel Coe

think I work is to the plan benefit your to you how XQ, much flow different, assuming expect for think sort you just got cash thinking inventories to question about you. within within I'm well. normally, achieve? Eifion, as down will for this the you is one talk How sort time flow do what you've long kind And maybe do I you And in this margin to it adjacent I'm of can take of but XQ? level? cash of guide, that inventory if just burn right about guess,

Eifion Jones

sheet we say balance about of inventory, to, talked terms want Nigel, you just In here? -- Hayward

Nigel Coe

Exactly, yes.

Eifion Jones

year. to now inventory will modestly, come but be at beginning in peaks the of end So down QX. lower the It's it

finished XXXX. production that inventory to get and into actually allow mentioned, that are us continue expect through to As we more reducing good I to to we quickly,

has We reduction the generate also cash you the sales inventory quarter. as in on a some But are fourth quarter will fourth in terms. which extended know, from early in buy

And don't will from on days material you from working we position So reductions. the around net the end hand, raw weeks about but of capital the a half inventory end months When about expect about think than we to year, of period, and of be months cash about materials quarter expect some half get inventory the we a the flow four six goods, I QX, have somewhere By normal. and higher of finished that's of from two and three at about be weeks our sheets supply and and goods about the suppliers than own normalization taken. inventory only normal. our we material to provided we two respectively. that raw to continue that will three our see and takes everybody then and material balance in to continued destock higher months, to our three aiming strategic that back down has which raw XXX to now cycles cash We're conversion days, XX finished get relieve

Nigel Coe

maybe view just is crisper just of the on slightly My here. how really outlook we view a follow-on sort question

So will -- be rate a the demand the What very in to the that solid almost view do X% the pick run of consumer into kind How remains XX%, 'XX? a even new recession. about down, remains replacement seem of remodel? we number. probably XX% other builds going

Kevin Holleran

I I think on construction potential think that's a side. a offset it's the potential,

to new years. to know prioritized the you XX three years. We the As for last dealers, know, two approaching to remodeling. been age right, has also that continues push construction do Nigel, Average builders our the

could a for be about the think quarters, to construction. offset of an we that that talking been we've new some help opportunity few as So

way really the our the what's we around of installed as view into there is it frankly, the aftermarket. expectation at as That our new XX% expectations. base looking business with remodel remodel out are we you're XXXX, which, So pricing that and we're the of serving looking part

that will and those again fourth quarter. factors lead weighing our to we're through all when So ultimately guidance first in the quarter here we the are talk

Operator

of The next Merrill America question Bank from of Calnan comes Shaun Lynch.

Shaun Calnan

heading the you couple in relief activity commodity freight X% a into expect in with and back competition you XXXX. balanced last the surcharge Are a second next year? a place you guys and and still some then some more that pricing, months. guys couple the any I And Is had with commodity expecting do price on normalized one that prices more first promotional of And chain, in We supply easing believe is, had to on place? channel inflation? pull inventory

Eifion Jones

the So part. second answer I'll

institutionalized So surcharge become structures. X% in the pricing there has our

expectation forward list be And rest that price we've will structural giveback so go that given four where and the remains costs there in last seen months terms here. now is over the in the no that freight of

Kevin Holleran

standard demand promotion of XXXX with in levels industry maybe promotion, has given years, As sales to to the last is two What the would for industry. is the into profile. hasn't existed really I the of activity promote a product long had the expect return normalcy that sort

to bit last, we up we historical incremental be little so. it's So two the don't trends, it step or call Sean, would a that the years think it, very a expect fact to but of maybe over from was there

Shaun Calnan

increase. . the a that clarify, is increase to Is or price guys surcharge Just into to just addition? the X% X% that you permanent turning in

Eifion Jones

That's the in most QX, a further is the increase. institutionalized and became over addition, essentially, surcharge recent price announcement

LTL/FTL, XX freight now there some ago. coming in were inland in costs, of higher is months reality out We've transportation, the the structurally container I the but are normalized diesel than mentioned, out. seen consequential freight reduction business costs they gas Asia, costs costs have costs, As to

Shaun Calnan

price the was year-over-year. of I of then growth sell Do think high single through a grew digits And that you versus have breakout that volume? how mentioned much you

Eifion Jones

question again? repeat the you Can just

Kevin Holleran

sell-through, single-digit high the price between and the factors On other? what was

Eifion Jones

single don't we It the exactly mid price let's offset includes, know position year-over-year. So high channel pricing… say, single by volume digit low probably to negative digit

Kevin Holleran

would of in bit and a have off low component, positive Sean. big digit, volume then bit mix, they a digit some But Maybe single there, percentage single contribution. little little a the probably considerable mix Sean, be price

Operator

from comes Stanley. next from Josh question The Morgan Pokrzywinski

Josh Pokrzywinski

have in think down bit is a what some performance. sell the any to the sounds talk a But that about destock that you're trying like categories sell of difference the about through bit. more were maybe of that volumes terms of actively drove it If kind little been or trying what third channel resilient just between through little of I categories to or could destock quarter, the categories here. you some versus in If

Kevin Holleran

more what guess where think that I Josh, we've I inventory. would particular has I is increased channel the categories say are there, highly inventory, done

said, out products able really now still There on some electronic that's that still there we've some several the of of product products There's nice getting require been are as been I included, full that out. ourselves quarters. get to for think in Eifion of, supply industry, the have we've some shorter namely back made not as to just supply. that categories talking componentry progress some

the I speed variable the So automation addressing and did of of job would heaters, a pumps, some of think channel the of I say, in some we're short some net-net still supply, controls. nice across but the

Josh Pokrzywinski

inventory channel want approached On million of of to and I'm $XXX I total in that clear know that Hayward targeting And this of that facing? is I we've if put just total on that? maybe does that kind kind then include million, be the it because inventory, here, $XXX number of that kind all crystal maybe facing, smart. or this destock you you're what's just question guess is, ways, channel And not I many different would

Eifion Jones

referencing. that be is talking the to you're products million in clear, $XXX channel, just the that Hayward Josh, about we're

be over our -- second that channel QX. expect of reduced million substantial to $XXX with in we the inventory on So Hayward distributors’ progress this year half

Josh Pokrzywinski

down we about -- work think number should balance your Then what inventory, you trying own is you're have that? sheet for also to

Eifion Jones

raw hand events further down two consequential any finished no assumptions materials or on quarter now, months about or September, chain $XXX to Difficulty] the or XX year. days $XXX And goods and let's on right it, the to when again, macro on to call our for that's preface mid $XXX [Technical of three we, Again, to third and million at to to million. you days next up around hand to returning that million year, about down end XX look end the balance rounded that be days months. sheet, expect disruptions next So supply the by of months

Josh Pokrzywinski

industry your I dealers comments know but term, for far, just remodel these you could Is times really be little about I cancellations? between share I kind because more Is would what stretching industry out a year? a pretty in starting Any know that next to on, anything queued than of way that one if imagine longer Mostly you then they're new And have better pools bit backlog, sneak that out normalize? not in. booked lead would it's the usual. for and any could would it I make of with helpful. and farther up the still lack that guess, works, anecdotal,

Kevin Holleran

very I negligible hearing little we're would say cancellation.

construction, So conversations say more we permitting but it the like don't industry a dealer think the talk this I a that's by Josh. that did frankly, feels returning profile. is with on driven have new aftermarket. our much dealers too to the the it's would I about our new council, contributor, and normal attention, construction We gets

outlook in backlog, finish been remodel -- that the fix think much likely future have terms net-net, is we adds channel. a the this is fulfill solve 'XX as So calling year, a job I driving their the what's really the that inventories kind and at that the more in a more that I of take availability new down of XXXX permits, season. and to say, And think position as anything. upgrade and up new prepare inventory would in better and than has able we're that I to most and XXXX. being state be books, nice break all returning But we'll done the OEMs to the for harder construction, look normal to of it's then new a

Operator

from Halloran Baird. Michael The next comes from question

Michael Halloran

at things the adjust we But I kind what's given we artificial quarter right should happening of talking you’re on the normalized Just some be those one you're of given margins, next about there's look range. lot implementing like? year, the downside about, plus think, for side, for to fourth of me. should think as when what in look quarter, some XXs, thinking to When the containment that I what's the rate How inventory the pieces? low some is margin the you levels implied run Obviously, obviously, programs. about we inflationary look a cost try

Nigel Coe

under going is by QX be absorption. impacted some mentioned, we As to

won't up contribute January to XXX that, XXX quantify couple around the will to bps, about in pricing be think it's that bps. As that initiatives bps. possibly another of We to effect XXX XXX until

move that of the which margin SG&A gross our cost tough of actions the We've to into get into once will that cost those eliminate aggregate we've our to high base. actions, the allow to return to back completed got so business instituted XXs. the will margins the in start there EBITDA back XX% some And through rightsize adjusted that high But the costs, to XXs.

Operator

Holleran back no questions, Kevin to concluding have remarks. further we As hand for I'll

Kevin Holleran

in Thank for their closing, I'd to Hayward. interest like you, Adam. thank everyone In

without for of hard navigate ahead. talking to around partners all Please Our dedication employees we contact near have term to not and be business positioned you challenges well and the Thank deliver This growth very work, in would call. the stakeholders years and you, any possible questions, quarter you follow fourth and the earnings again our is team on look world. if to the Adam. our forward the resilience up

You the may end call. now

Operator

for Thank you. This does indeed conclude today's call. Thank all you very much attendance. your

your disconnect lines. now may You

Hayward (HAYW) 1 Nov 222022 Q3 Earnings call transcript