HAYW - Earnings call 1 2023 | Hayward Holdings, Inc.

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Operator

Welcome to Hayward Holdings First Quarter 2023 Earnings Call. My name is Jordan, and I will be the operator for today's call. [Operator Instructions] Please note this conference is being recorded. I will now turn the call over to Kevin Maczka, Vice President, Investor Relations. Mr. ahead. go please Maczka,

Kevin Maczka

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

those variety Before that The management's recent cause we and undertake does are company certain remind XX-Q and subject begin, Exchange I discussed of including and Form would a Securities Such most that materially. for with outlook like could may risks any Commission during to that to such everyone in periods. considered differ statements nature, are XX-K company future the our this filings in XXXX to forward-looking forward-looking Form call, the statements. statements and make to update not duty results uncertainties, actual including

the release Additionally, Kevin GAAP found the during company will to historical non-GAAP to Holleran. now the can discuss measures the slide and earnings like measures the discussed would today's appendix in over this presentation. I call measures. our Reconciliations be on turn call non-GAAP call, of comparable to to

Kevin Holleran

favorable, adverse with certain markets in to of gains. Sales were quarter results of market presentation I'm strong the X than and the reducing We messages. reduce Kevin, commitment our control that maintained and the on partners communicated first a we align Price with Slide with current in hand. market weather report you line structural expansion all remains volumes. environment, you, execution reflecting costs. points good earnings Thank on margins channel in offset resulted over conditions of level into efforts Hayward's to including first key with sales expectations, margin by disciplined net despite share gross XXX robust stronger delivered to lower production key excellent welcome we lower recalibrating channel as out successfully I'm SG&A basis realization challenging in levels progress These profitability call. especially conditions my sequential morning, pleased offsetting with cost delivering today's operating of inventory as pleased It's earnings previously start to quarter everyone. made our of inflation. to on at I'll a sales. our pleasure further

the manage to some highlight to continue to new service costs, support in proactively that To innovative products, and solutions moment. exciting new launch customers continue future we business invest examples and we with we end, superior As drive growth. a I'll in and

unique of response forward. Overall, engagements demand during products our was increase expect Nashville and going drive performance the Phoenix. events, We loyalty brand and services and we training The exceptional, Hayward large in and event events in Partner X leadership builder dealer hosted showcased significant Summit These first-ever also provided our I'm value-added opportunities. technology to these for quarter. our customer proud a customer and

guidance. we maintaining year full Finally, are

we million $XXX the sales to XX% net $XXX adjusted continue For year XXXX, to EBITDA XX% full reduce to and of to million. approximately expect

of out digits. resuming of historical single beyond we every have XXXX, expectation mid- trajectory high Looking to a growth solid

quarter XXXX. economic quarter. first largely in of XX% uncertainty. compares first million, Net a XX% softer quarter and Slide sales the year-over-year to market This global conditions to to $XXX due XXXX in movements the XX% reduced to the of results extremely in X, and quarter growth the to period related inventory channel strong now Turning of highlighting the of first

sales. a to are be for net low the expected total QX We with point seeing normal seasonality more return to

and our the inflation are We innovative to solutions. new encouraged continued success by realization of offset positive price

I points net basis basis reduced expanded and sales, As margin profit points XX XXX gross the the gross margins Despite robust in year-over-year XX.X%. exceptional. performance was sequentially quarter mentioned, to a

Our cost million production in year lower a first Adjusted by expected base, strong are gross quarter cost was the this manufacturing done savings much in the EBITDA to volumes. Adjusted to -- ability with teams XX.X%. under EPS a the $X.XX. SG&A was outstanding margins quarter we and start job rightsized We the have $XX margin of with operations realized maintain program. our encouraged an and gross reduction

in U.S. like years. IoT Turning notable sanitization and captured for Slide that in lighting. market speed controls, business a was LED strategically the We X to Hayward This and X important variable pumps, Sunbelt update. estimate now over last the most significant products share critical water

North targeted the historically to the expectations performance clear. realized is unfavorable share the products growth area to of our our position Sunbelt America Hayward Western the and with quarter, in was further and leadership Asian and traction we very we've digital gains Underlying moderate in market loyalty relative IoT ecosystem, the where market continue World and The favorably Southeast. Overall, to in of to pleased this additions pleased is we year-over-year. exceeded I'm an West automation within the demand trends gain dealer in and responding with our continue consumer particularly Our Europe new with strength. the were markets, team, program. offset omni in Rest totally markets Weather with our end connected in of

trend of to believe historical for over normalized Our outlook, appropriately the to we on a of hand the days the as inventory level quarter ranges higher course year. to first global softer channel the partners of positioned generally to cost economic of end the This in be inventory. will channel carrying low times continue expected and towards out relative the lead as inventory recalibrate played continue

versus Turning maintain of neutrality, to beginning X% the We the to dynamic. we increase this X% cost implemented of realizing as January pricing price expected. price are a to price at and cost

basis. support proactive a included variable recent base and reduction as well of cost in cost optimize actions a quarters margins. to number structure This to XXs. to organization, maintain the of million our mid- we took a adjusted on manufacturing These margin costs as As million full with you XXs intended chain year $XX structural profile full EBITDA streamline to know, SG&A the the in in are of high in high supply savings margins and a the healthy and actions gross year $XX

We are these delivering on commitments.

for great received Sustainalytics, by we to progress Hayward ratings our pleased a performance Top-Rated I'm Morningstar firm. to leading ESG that and ESG make Finally, XXXX continue ESG journey. on a Award Regional research, report data

companies and Canada. ratings journey, be to we While the proud still with the for one in in U.S. all very recognized of are our best early ESG

industry. SmartPower I quarter, pool, to strategy is costs the spa, product and would dramatically recent the use now This innovations backyard, to Last lighting. detailed highlight increasing first-to-market technology the new technology, product launches. homeowner. while in of labor I Today, the some features encompassing X. new Turning of our leadership our development revolutionizes for Slide and reduces ease and the X landscape like shared reliability which lighting in water multi-zone the component and driving

Cleaner. ability surface of it superior Next, This obstacles pool handle cleaner and to and its outperforms peers new encounters. any coverage, cleaning speed the TracVac Suction

new with of our and to the competitive continue products development customers to and We positioning industry-leading investments like further products support in prioritize these technologies. strengthen

Turning of year a fundamentals Hayward. and X. the XXXX of pool the Slide is industry like now long-term to I'd normalization. reemphasize attractive to

for uncertainty, as reductions an the characterized global strong the of pools highest IoT-enabled and enhance in-ground revisit of pool with channel to in like significant base growth, of of record. solid sales comparisons the are of them. the as are every and and ease ownership. to to outlook. by the industry, here results. would and industry living, conditions connected sustainable of this X consistent average aftermarket. I driven globally pools home is of new appeal year This a age pool million each the XX technologies installed the technologies on and a pools we beneficiary outdoor Softer new economic and market built to inventory over is migration, Sunbelt industry growth million A More smart to maintain to cost stay, provides number their are related temporary use dynamic environmentally and ever-growing and and long-term impacting specific growth including by modernize owners in of opportunity U.S. enjoyment, tailwinds, each as near-term fundamentals increases products periods pools view large secular a aftermarket resilient

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in trusted controlling from proactively types. all comes that excellence company product and the strong growth Proven a can what over term. Hayward. one incredibly for position To strength a the this multichannel installed and largest an brand, nearly to the meaningful year profitability pool making operational normalization, across line of complete summarize, managing century have for are and leadership, through having technology are bases of control the we and robust long differentiators we We

As who more Jones, our Eifion? that, in I'm will about results attractive discuss turn to growth Eifion like very a detail. leader outlook. With optimistic I'd this long-term call Hayward's the industry, over financial in to

Eifion Jones

Thank year-over-year pick up you, I'll Kevin, on Slide basis. on make and good morning. X. I'll be a made will All comparisons

SG&A high gross financial into seasonality, with the We with results. we're rightsizing We reflected plan. cost XXs, in return of sequential with normal channel realizing were a progressive expectations first exceptional in inventory. and reductions pleased quarter our Net with our are and sales back coupled line to the delivered line margin

of Our now with the balance cash balance as seasonal is sheet revolving of year. flow of credit our strong fully facility expected strong quarter repaid first use today for with the

points the new $XXX CAGR understand reduction quarter. quarter distribution X%. margin in reduced we've movements the the of points to realization that the channel by Gross and our increased in the discretionary approximately realization line Specifically, in price XX and decreased namely quarter volume, driven quarter, of driven inventory volumes. input growth primarily in first by year-over-year addition $XX sales cost first decline first positive inflation Disciplined control, than quarter more basis the demand XX% XXXX, offset partially strong continued during expectations was price manufacturing our That's profit production the X-year a pre-COVID and million. sales in elements the XX% a offset to X-year Gross XX.X%. moderating remodels. Despite XXX million. by volume basis reduction net important when of markets, the to to of impact compared It's sequentially This for and in of was stack quarter X% of in in the to cost moderating profit larger trends construction was a a XX%. delivered with last

beyond. and our the sets for business margin It general We to administrative up have this XX% deliver remainder to neutrality performance. of to million the the achieve cost year gross year-over-year in robust cost manufacturing $XX base recalibrate well quarter. hard the Selling, profitability price to and worked deliver and declined expenses strong first

last pleased adjusted drive cost in to to a took rate compared and and was positioned of first during organization the these streamline expansion EBITDA for million first margin net X%, at the to growth $XX X% reminder, the X-year million savings We're we're proactive adjusted volume volume we're when EBITDA XX% respectively, more delivered targeted and million quarter, we XXXX. As and $XX structure, delivering EBITDA sales adjusted EBITDA margin quarter reduced actions reduction on we Despite and year run to in $XX fourth quarter as of solid the the was maintain of optimize the year-over-year to margin annually. Adjusted CAGR, quarter SG&A returns. levels, and the the XX.X%.

tax of approximately the quarter to tax due X% count primarily in effective shares. X% in share EPS on the activity was the The timing count year Adjusted first the rate in year. year-over-year share Our discrete decreased the fully change benefit. diluted share approximately year-over-year XX% of to million of shares a $X.XX quarter period. consequence compared as the was a in Diluted prior XX of XXX repurchase million prior or

volumes, market a the America results. team XX.X%. performance margin volume to we Let's declined favorable partially and margin segment anticipated success was driven The turn end was lower offset sales now margin of achievement. impact. largely by a rightsizing million, price first the sequential in with for XX% in was to North Slide cost manufacturing frankly, base, the adjusted that reduction of pleased profit XXX quarter basis and recalibrating reportable segment a a our review by very the net XX and $XXX moderation XX.X%, tremendous quarter improvement operations due of of points proud the Again, in income Gross are our trends. channel to in for again a X% XX% inventories

now Net quarter favorable to XX% but reductions X%, geopolitical impacted benefited currency XX.X%. first from to and Net from approximately XX.X%, sales Gross pricing increase were we and X% adversely impact adjusted and Turning Europe Rest was sales of million. volumes XX% of a Europe, in a channel for was World. due margin as Northern a of the the $XX decline by well inventory to segment translation. circumstances unfavorable as profit headwind in foreign decreased margin income

of collections Turning part to balance million. Net sheet liquidity in by The and of our be and reflects availability of debt terms receivable on credit a review a XXXX. first collected Total our extended quarter reduced of was a at million $XXX QX at and is at EBITDA $XXX under soft A our cash end flow to period of for including the $XX was the seasonally Slide first XX accounts end balance quarter. and cash million, to cash the QX. cash equivalent adjusted EBITDA highlights. X.Xx to large for of the in sold early business compared increase X.Xx year-end facilities

expect closer be by Xx leverage We to the end year. to the of net

undrawn. ABL As is of today, our

to any materially permit Term deductions will This the credit LIBOR impact to given plan in CapEx, for share during B Additionally, complete from flow not our borrowers on SOFR make and payment excess XXXX, quarter. we position. not repurchases transition agreements the cash second financial change will Loan our M&A. We

XXXX was in early interest a tied the swap first free year tenants. $XX use by flow consistent consequently, rate receivable $XX million of prior quarter, a is million the increase was of Cash the operations then. from Inventory first accounts quarter cash of decline And peaking million. borrowing reflecting driven million to order was and of sequentially after continues the Our from in the fixed quarter, the debt benefit the use to agreements. $XXX in quarter the currently since down was $X in CapEx third in $XX period. rate with flow by million

cash We driven but have strong cash generation flows characteristics flow are earnings, seasonal. free high-quality by

the return of company cash first With typically in year. generate to quarter will seasonality, the the in use and cash normal the balance the

flow XXX% of than of cash We with $XXX exceeding in conversion free XXXX. expect million income flow greater cash net free

Turning on now XX. Slide to capital allocation

approach, shareholder emphasizing a while maintaining a As strategic highlighted financial maintain we prudent we've before, growth, disciplined investments and policy leverage. take and returns balanced financial

our opportunistic consider share tuck-in to continue We complement geographic offering, footprint, acquisition and commercial opportunities relationships repurchases. to product

in leverage we're reducing However, near growth the to of organic range prioritizing term, X and investments net within our targeted Xx.

outlook. long-term Slide aftermarket. Turning the of particularly now remain very for about pool industry, the our growth strength positive to and XX health of We the the profile

region, although anticipate the and XXXX X% by sentiment circumstances outlook this Rest XX% These reductions as reflects decreases decrease approximately we of and sales year. X% Europe to in is in will the contribution net aftermarket offset a increases expect net nondiscretionary we Our American that continue segment. at in geopolitical of price remodeling This resiliency we upgrade. In be to from for consumer unchanged North outlook construction initiated a new World, XX%. green consolidated in and shoots negatively in of of partially beginning to the are XX% impact reductions sales as seeing discretionary

on lean higher contemplates Channel cost days end of in these they're to a lower and normal reduced of and XXXX channel Our consequence of demand, a desired target. the consumer unchanged supply inventory inventory moving chains additional adopting given as partners hand to guidance reduction a dynamics their are reversion of the a capital. position

We're $XXX gross expect million. adjusted balance $XXX increase full over year holding range profit anticipated in to XXXX of margin to XXXX. our million the continue the EBITDA We to of

also free we XXXX strong we flow discussed, improvement inventory levels as our in free million. flow expect in cash reduce As own $XXX a with cash exceeding

our the interest also of million. I'll to year, $XX rate approximately $XX current forecast unchanged, I CapEx environment and a remains remains I unchanged reflecting The rate at the and in the cost recalibrate, on XXs, expectation close effective XX% line Our million tax remainder in am savings point ability started. spending same borrowing that expense $XX the levels. normal turn in interest approximately the forecast with million, remains Kevin. seasonality. And plan with cash now back team's net the rapidly and I'll significant to back margin Hayward the to the line with flow managing in into of and expectations improvement delivering proud high gross a that, SG&A sales line with realizing for call

Kevin Holleran

XX. pick up Eifion. Thanks, Slide I'll on back

We the the close, today's our outlook first takeaways from Before presentation. quarter we consistent key results let for reiterate with me and year. expectations delivered reaffirmed

and share demonstrating quarter. a agile the performance well in environment, with capabilities in offsetting very strong control, maintaining our disciplined with pleased We're challenging margin weather-related Our team manufacturing executed headwinds gross gains. cost the

to actions are company taking attractive today our to continue as premier We we and a the believe business future the in our invest position strengthening are drive industry. growth in pool

the we Finally, to financial line creation. With results the we're drive to and for talent ready value have compelling that, questions. open in confident now strategy I'm place shareholder right and

Operator

[Operator Instructions] Our Hammond from with Jeff first question Markets. comes Capital KeyBanc

Jeffrey Hammond

Really, dig the impressive pieces to then the unpack come I about it margin, really drop. sustainable, gross I mean, to to line. drive want sequential really talk what's in maybe gross to just here on that. maybe given And margin sounds improvement And the moving just this on just sales

Kevin Holleran

no modest great that versus were chain seeing XXX chains, We're by teams price Yes, are great. quarter would moderation. we no a and Yes, significantly price or venture over improvement deflation, requiring again, Xst took to us and the large, of to in say effect when first year-over-year into different neutrality. volumes I say normal, sequentially operations by mean, is to and point a improvement saw moderation that more year I freighting the longer January, from over great this year, a spot see supply by accomplishment. market air back inflation but our time. basis working obviously, increase delivered I would execution supply means cost If a last of

So standpoint. we face margin all of gross that obviously from those no longer a are headwinds

Jeff, no as modest So I we've fuel saying with by have the X think close, capacity future last can installed I just to would we very growth that over years, CapEx. shown

driving think that business. through can I positioned the continue gross margins well we improve, as we're So volumes higher

Jeffrey Hammond

the the you us level think on And business, then destock on Okay. thought it versus America maybe how the Great. kind the maybe just you is is of XQ? kind set be a for then where Or in just guide North of just weaker progress kind And broad would is exiting of function more there weather? North of something than that? America, the that early

Kevin Holleran

sell-out channel in the retail is expected that And decrease to our channel our to mid-teen our reflect expectations. us which out destock largely and reflected and QX. consistent side. really it coming take back we I'd year-over-year, The sort -- partners It I'll Yes. QX, And played high-teen really was data for then the balance I channel destock. to say called industry-wide. would is in guidance. of think channel

made channel the first sooner. Jeff. so call good a here to normalized levels we progress Yes, in for by accomplished be of back was to latest, So great the season we not We would progress. end the if the feel quarter,

Eifion Jones

Eifion. it's Jeff,

have launched It a have we parts exit current taken us guidance indicator has decrement the range quarter down enabled up here. little new of bit but totality environment in decrement net the North as QX America, construction terms I balancing Hayward business, bit. keep say XX% little other We're In construction leveled at would seeing that's off the new maybe construction permit the for into some we new first a QX, as level. in that an declines the XX% for up attributes we XX% year-over-year guidance the to in move to that terms year-over-year. to of minus need in sales of we to we and

Operator

Merkel Ryan from Blair. comes question next Our William with

Ryan Merkel

me. questions for Two

quarter, the could thinking. And better I'm quantify did you in off, because the was areas just the where if the sell-through? First than your curious I weather impact you better see quarter then in mentioned you sales you better were in weather. saw

Kevin Holleran

say points. would weather impacted probably The Yes. -- a couple I of

it the occurred had what probably impact quarter. an think have could I on in first

and certainly California, think heard Coast, We both on cold. quarter. you've rely very was first region, in which that others impacted in I As us, from some Arizona West wet the very some sellouts before

both the those if that standpoint, I was and temperature could Conversely, very been us weather it sellout the impact than the a of may a really those from strong the precipitation in of where regions, into that had and Southeast regions, in the regions country. we Southeast, think less East sort the look the particularly and there U.S. little and more we Texas, normal of on in strong Florida, of is reorders at some maybe those warm. minimal have and you timing impact Florida is Southeast, And QX on precipitation particularly had saw patterns, the really precipitation a and performance in in case very back

weather we maybe performance line yes, initially the would expected. more was that say to headwind not than we in was better So much where even a that

Ryan Merkel

down. know helpful, Got it's are might of that small fears well. fears question part business be up trade part a you quarter, I the replacement. There that, follow that there some then but could part Kevin. a business. I seeing that Or not some your as That's wanted it's equipment that, is the the first to the repair There's on as it. be expected? hold could with worse? versus of People any season, of up tracking there might out nondiscretionary And

Kevin Holleran

think our mean, I maybe down that the guide, initial upgrade and Yes. renovation around or new construction from specifically the I as ticked we points Eifion some X the activity. of range, said,

that's this close of up decision well. an XX%, call nature, XX-plus busy tabs that it. way the few close the in that the very policy extremely a quite not that builders as certainly keeping they that effect nondiscretionary That's new But tabs our as And large is is past take as from very percent, the consumer keeping renovators initially out on our pool aftermarket. our in playing known again, generally and guided. just I Ryan. for and it's it, pool that's off-line certainly, holding input some we We're more that's mean, were say percent resilient, would years. build I business So we're an now, is a they're to in whether here XXXX on or to of monetary having discretion XX-plus discretionary renovate on, right industry

Operator

Our next question with comes Boroditsky Saree Jefferies. from

Saree Boroditsky

Just on quantify you Obviously, you demand the piece construction for you're remodels through outlook business? of how new went following updated and aftermarket up that thinking question. more that. you resilient But could that the about

Eifion Jones

it's Saree, Yes. Eifion.

of calling that though basically We're even see gain. very In region, performed flat market beginning that weather had results out that targeted, we're we in it terms We're the markets aftermarket, momentum the good the share seeing positive we've of Coast, in some coming year-on-year. West some against comparably still some impacts expectations. to well

of coming And we're of beginning we're hunkered has in on shoots side, export the Europe remarks, the in out new last some earlier great mentioned In We're some as in then the Asia. as Europe. markets warm year. to weather And Northern see the saw season momentum beginning see, we been which which I aftermarket. great prepared positivity particularly targeting there see those maybe for some that to in terms markets is an Southeast again, in and aftermarket to that's in green predominantly and the down the kind U.S., to markets the Florida my the start in enabled of there,

feeling right say we're about aftermarket. now, positive So the I'd

the seeing where results As in come that it's the out Kevin with We're said, through our resilient. sales channel pleased we're very resiliency QX in QX. of

Saree Boroditsky

color. the appreciate I

lasting mentioned of potentially through end the season. You the destocking

XQ sales have would comp because turn mean So positive to into that easier you do head XQ. expect until this you potentially not

just cadence the color growth of sales on So the any year. for

Eifion Jones

Yes.

QX. we will how year, that's where in year. exactly to This it over QX We of be return position QX sequential So to QX, comparison the seasonality even probably normal to see were this each normal will an within an but go we and mean last that's cadence tough early be period the comp kind will guidance then positive a time see elevated we We'll of year. be don't specific kind buy start in the which see but on give year-over-year. the quarter, will in given the

Operator

comes Wertheimer question with Research. next Rob Melius from Our

Robert Wertheimer

I think get in as the sits of guide best your the missed you as we just the it, channel guess explicitly. inventory if is how but event, where kind through days touched prepared where in much versus comments, destock to your embedded revenue on this year? on then normal clarify, exit what's I we And destock

Eifion Jones

Okay.

of in it reduction the progress that believe of a we given end we great this But do recovery XX% the associated take of will months specifically decrement at in year-over-year of inventory X% bit point, little with be a complete decrement it believe more be out season year-over-year out specific we been the peers, on to of of and traditionally the to we channel in We of the approximately but complete the X% there'll So end the of that that down has season. question, channel. channel. hand. the back channel in it's the we to sell-through, the started where by will destock. sooner, first fully of or recalibration every the associated remind it's we don't time by is a to pull-through number, earlier see into in channel QX believe to be XX% but on maybe do I'll answer the end our lower call the be And We you expect channel than made reduction. vice to your see year-over-year part little sellout, versa, with start when some the a inventory channel pool decrement we we bit inventory approximately

and some the between channel, X.X somewhere lower. higher months in hand some So to on distributors X

Kevin Holleran

really referencing mentioned. we're is as Eifion metrics [indiscernible] call last, those the it, just XXXX, -- pre-pandemic normal And that which there's was for benchmark year our

times, lead or carrying upon cost dynamics. it's based these having of normal factors, OEMs whether coupled the So with of the more some market inventory couple much

pressing those think X XXXX by slightly down normal maybe I below to standards. are forces

we So really what that's against. measure

Operator

from comes Andrew Carter with question next Our Stifel.

W. Andrew Carter

wanted to thing I First double-click on.

it I is -- pricing by that price And World? does think cost increase that Is are is the that through the the would suspect Has line. that America benefit from improved -- of -- you I and ahead remainder tailwind region, first Europe, North of you said year? different i.e., XQ? material through if cost? off, And Rest is of has,

Eifion Jones

QX of year. the the Yes. year, we QX acquired would last margin compressed because was cost materials last say, raw in in of

little behind We in will dynamics more we believe the of covered the into combat discipline We effect, the better region. believe a in the that were Jan QX year. any there's within actions That years off. to back bit like elements by a the X%, went we last year. the brought we're be don't for very inflation, to price neutrality. to much the some taking come spot have business. elevated X% that price/cost announced buying, curve of So that inflation prior upon inflation X, expedited then the increase depending We there's will price/cost it X current of freight, and us the residual If

the level we're the the the that, gone into neutrality. we given last margin. point be We've That to marketplace. to now, agile price/cost we're is we're years, over the see back be market that's inflation the move X return price right the important But protect cautious believe back prepared got then to we will if of price So a and into to do continue. about business, prepared but

W. Andrew Carter

any the terms seeing of Are would market, be? end? On anything not just exactly note, you sure pricing what demands it? any of really at by risk out holding is I'm demands Yes. -- anything of gone kind any down distributors, incremental see so promotions on level? or their risks the you the that in your that's channel that Or in pricing the it there of the level to do environment

Kevin Holleran

a say much a very a it's is normalcy I price a over know, X mean, that return what into necessity to where marketplace. of seeing years. wasn't you for been I'd -- environment maybe industry. there put disciplined the of as need traditional in lot this around Andrew, the out that we're prior currently more has activities, promotion There

a very the And what obviously, project, construction. more really nondiscretionary is the infrequency good of equipment based demand it's a return. which very the at that is pricing I the of gives costs. a And for environment, strong We I'd really us confidence Overall, still look equipment on what that's payback value-based inelastic there's opportunities purchase, is, think say Given the or replacement. it. equipment a very low new with a renovation gives there of percentage a and whether

market. confident So will all we the that those of really able industry factors, the very put pricing into maintain for feel be to been that's and us

Operator

from comes Research. next Our Coe Wolfe with Nigel question

Nigel Coe

North So high-teens to I think the mid- decline in of you said America. in sell-through sort

So obviously, that would include price.

units like down looks it So maybe XX%. XX%,

So between the that's we think when inventory. the XX%, gap XX%, down down about the all and XX%

be of similar inventory that took out of start we headwind So here the Or from to it Would does on? magnitude narrow expect you to XQ? here in a lot XQ. in inventory

Eifion Jones

Yes.

So going in majority the we I be headwind QX. be mean of comp is to severe decrement as expect don't in the the to QX.

we're through we that the pleased QX. channel in bit more with little a see It's channel as the the season. So service sellout period natural period QX in distribution come we'll in a QX, destock saw the

to QX, end by the hand. I inventory to to hand in of overall but sell We'll channel period. to during be days up keep the obviously, downwards be expect terms this mentioned, months on channel you heel on a of time in, inventory. in reduced fully see back And demand, will we then the do that season with moderation So normal expect as of

Nigel Coe

shadow there's held contractors point? and this by about at And inventory dealers concerns no Okay.

Kevin Holleran

some. Concern, ago There mean, which it better good a think of We there's there was no. is the some of carryover, deal know I XX%, is that in off a overall be of I last was stating would some our is considered through working it way Nigel. XX% burned think of I that, the system. But is that its few related year. -- a way is moments shadow. There figure of a channel. portion that Eifion to year-over-year a reduction Part the gave

in that burned accounted of off our of guidance percent think we couple So a has dealer that's that, the base. from for

Nigel Coe

heard maybe really their some week mid-teens. in And around Pentair then dynamics pool question we last I sales of my competitive and is follow-on from market. Great. Obviously, think, the were, the down

And yourself some that differences great. that on supply understand between and a they to I would there's So difference share chain market be there any prior Are managing sense approach competitors? year But different is any and channel them. behavior in inventories? with taking

Kevin Holleran

if don't market channel softening. Nigel. on started I I much exactly when terms their in sure position of was stock have demand that, what Not know the

in early know, say ability surge I'd quickly. order not quickly, you were file as pretty to demand, solving speaking the fairly wanted, fast in as As to respond production and ramping anybody relatively our but really we pretty the

So that much think the burning discretionary facing market as bigger piece that, off. our large but QX obviously decrement on the recalibration of this the is what and slowdown a of I that's some it side, part is a restocking is we're channel

Operator

comes Our Morgan Stanley. from next with Pokrzywinski question Josh

Joshua Pokrzywinski

But a with the little to homogenous. maybe morning. which mix Just see. us changes. this down through maybe give a apologies, good channel, on on But not bit jumped in I coming you inventory of is category could late all lot totally or walking mind the Obviously, calls

and mix would any of where were on overall surprised So categories by results helpful. you be kind comment

Eifion Jones

Yes.

into generally than some But was channel. back a shift the see the complement sold of products probably the as selling you is it's ago, Clearly, heat We we a being haven't mix seen tremendous going there into speaking, full if what year channel into a in there go we're channel. more currently. today,

a little still But high reinforces bit positive. Index a we've programs is new time, for very year that's into new complement a that QX. controls. full mentioned this There's program, Vitality was product maybe in put from and with product a It QX place. the sequentially than We've IoT demand at our it's XX%, saw we which up introduction So heat ago. less

we're capabilities demand. sure We to in facility Rhode make particular production continue Island our our to expand keeping up with that

in very the the a expecting in a World that's So QX. more mix, adoption indicator we and than controls. Regionally, Rest of bit positive Europe of in were little rate

a of bit a regional effect. mix there's So

bit World in channel reflects seasonal in as in QX. improvement So positively North up, America a about well see markets need were from We actually Europe little the That's our as we well. guidance sales than less a -- elsewhere more robust and as We QX bullish year. in a right? as to coming into that next a we that destock bit of to Rest expected the positive, percolating opening QX and start sequential

Kevin Holleran

or controls I Eifion add, would that recently. think chlorine, products. very to lights of were we few more, hand more mentioned whether where Josh, the products, just a until mouth there salt much some LED are automation and electronic has I up it's

weren't overstock to channel in just really wasn't So there. a we in position the to or overstock a position really

we more that are get be hand. products up the more product working the down So that on categories normal we would to of collectively caught hard to on sooner days

Joshua Pokrzywinski

mean kind interest just too then it. far cost of working if they just through on capital inventory. higher Got what we throw wondering switch usual a is the low guess side, of is be the of seasonal That's maybe and helpful. lot just is the harder this, to get I lines rates high. distributors credit we than I And around will I causing destock carrying a And sensitivity potentially covered when the because little but ground, on

Kevin Holleran

carrying partners rate on are inventory. think certainly some interest I costs decisions that channel the impacting

times the normal lead decision I given are the back a is OEMs to perhaps levels. think that fact that easier from made little

So here. be our markets resized mean, service keeping we've factories tabs some some maybe respond. while everything channel a heading as to into really possible by levels product pool are, yes, based the the what are what open regions have want. lower upon the demand we on we're inventory chance lowered levels close in than all I inventory understanding If environment, us or the we able And as season we categories to will do

Operator

Our with next Brian Lee comes Goldman Sachs. from question

Miguel De Jesus

on Miguel for is This Brian.

of but our all our think -- one, could. I been asked, I I just had if most have questions

about the you You And of of World exceeding in out called expectations. green then in slides, guys shoots the talked Rest World. is Rest

what's markets, that? and more or So underlying regions or that's on give color just better just you What notable? those wondering, demand share could driving market maybe whether anything gain

Eifion Jones

to seen short positive yes. teams answer certain QX. in We've the got the put World. we've length, regions. into region, them Rest but always We've markets in market. the And new targeted in some regions. So Hayward in call at now particularly brand personnel, very been yes of them is We'll We sales those and arm's Asian and we've great that response a it's serviced

in Northern there. to have it's is a Europe, we've than controls Middle is also some better of some a off, market, started see Australia, terms to see. beginning other we're we the good percolation more and to into where get compensated which key Europe, The expectations, Continental but that's bit see In market they green pool the particularly big East German than regions. attachment again, And and shoots, another by to technology, when little high

Kevin Holleran

pool early performed in but the market that more in well of strength the commercial the been U.S. domestically, add would it's impacted Miguel. days I Obviously, since has extremely of been area COVID, relative strong. That's an was then,

Operator

Kevin remarks. back the to closing question-and-answer like would the I concludes to session. Holleran This over for conference turn

Kevin Holleran

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

very navigate our in and work, business near-term Our stakeholders resilience challenges the This for around years the well hard would is and be the the deliver of possible ahead. positioned and dedication not to partners value world. all employees without

our please contact So team.

If we call. Thanks, Jordan. talking on any follow-up you have you earnings the second look and to questions, to forward again quarter

the You end now may call.

Operator

for presentation. has concluded. attending you conference Thank now today's The

disconnect. now may You

Hayward (HAYW) 4 May 232023 Q1 Earnings call transcript