Earnings call transcript Q2 2023

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Operator

Welcome to Hayward Holdings' Second Quarter 2023 Earnings Call. My name is Michelle, and I will be your operator for today's call. [Operator Instructions].

I will now turn the call over to Kevin Maczka, Vice President, Investor Relations. Mr. begin. may you 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 second 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, GAAP found the during company will to historical non-GAAP can discuss measures the slide and earnings measures the discussed today's appendix in this presentation. call measures. our Reconciliations be on non-GAAP call, of comparable to

now I turn Kevin the like to Holleran. would call over to

Kevin Holleran

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

and exceeded generation. pleased resulting with X execution of cash report continued on Slide presentation expansion results today's robust messages. I'll earnings expectations, margin flow in to start with key second quarter our I'm strong

in challenging environment. performing remarkably well improvements the during business a is operating Our and driving team structural

resulting normalization both into the exceeded distributor in our sales inventory. sell-through our and Channel further of expectations channel,

season. sales channel the expect quarter, pool the the sell-through. matching entering of to a positioning at third of by be end with the channel leaner XXXX sets return complete to This up normal levels We channel fundamentally the Hayward to destocking

is accomplishment, We achieved Hayward necessary the I'm tremendous a very realization in operational record team. inflation. proud the to excellence quarter gross through and profit margins and This price offset of

also reduced flow from We effectively on characteristics. our operations working we a generation more doubled basis capital. flow year-to-date as cash demonstrated than Cash strong

proactively and invest to we in we manage our business growth. technology support capital, advance working and our position, As costs drive leadership continue to the customers future

environment, We our pleased operating performance continue execute the challenging and quarter. to with a in during I'm

we Finally, refining our are guidance.

important For maintained and EBITDA margin modestly the XX% It's the last million, of to end full primarily sales as XXXX, reduce QX. million and end channel now early QX with inventory due end buy our of to to in at expect expect is outlook for consequence the adjusted robust participation XX% low a understand of year, high to channel sell-through in positions ahead million, compared to the net $X expected year by leaner of we $XXX XXXX We strong to now $XXX approximately unchanged. reduced performance.

the channel trajectory single mid- into with sell-through products. with we a aligned every forward, expectation historical resuming Looking of our of Hayward to solid channel of high digits growth sales have

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

primary data quarter. on based channel partners, the exceeded sales As from out channel I of the our expectations our mentioned, in

sequentially and as seasonality, season. the typically QX lower with return QX strong We seeing summer a are normal now exit to we more seasonally pool

favorably innovative in suite of pool the to new realization lighting encouraged within also our our increasing is responding controls the success price quarter. IoT sales continued The of the to inflation with of in Omni ecosystem, double We automation digits quarter. the connected and Commercial sales and by offset products market are solutions. increased

growth the on and continued focused are these increasingly in with demand. pleased driving robust markets are We

engineering gross I neutrality, was performance exceptional is savings consolidation record This As while positioning profit points allowed a continue has result Gross gross XX.X% growth. reduced of quarter. expanding continuous in sequentially. margin footprint, XX to margin improvement improvement. our for inefficiencies, realizing the including multiyear operational our points Having mentioned, improvements, year-over-year has us XXX and and sales production at despite of future achieved net the again margin expanded to gross manufacturing basis this removing volumes price-cost driving margins basis lower value the

healthy Adjusted was a margin XX%. $XX.X of quarter EBITDA second in with million, the

We SG&A EPS under savings cost diluted continue expected reduction the program. to our quarter was the in $X.XX. deliver Adjusted

gain Turning to estimate over working update. our share share forward. market significant X for the and now Hayward captured Slide a to teams are business X going We that years, hard last

development in industry. our we innovative product driver is in strategy our recent the in to leadership discussed new as technology products key investments advance As quarters, further increase new a

engagement will This integrating This also our incremental Hayward to of the To number Hayward. Another force of marketing intimacy We're region, and Hayward. to in development customer experience, dealer teams orientation technical business leadership. all establishment training support. for customer restructuring service, customer new of strategic and campaigns converting go-to-market important touches in support acquisition, dedicated resulting solely organizational improve for conversion customer and focused evolution the demand prior trade growth in deliver an training enhancing further enhancing of evolution the are the drive our strategy, structure and to post-sale to sales, the driver from products. common is new aspects new solid on the service important we incentivize sales of dealers the under

higher-growth of a of in Further, leading Middle and success encouraging programs gains we regions, in Early these share reallocating and regions. establishing as Hayward to notably continued is Asia, international and brand Southeast resources markets, East. are these Australia supportive market

Channel sell-through exceeded expectations in the quarter.

to of relative outlook, OEM level expected to of times economic normalized partners carrying recalibrate the higher channel Our lead inventory. and current cost continue inventory as the

season close the anticipate We a to in reductions XXXX position end participate continue prepare to leaner pool program. distributors of further as at as the buy to the early QX out we

the to to pricing the dynamic. the We beginning price/cost of expected. neutrality, increase and as achieve this year X% at a price-versus-cost continue X% realize price of implemented to Turning we to

year a maintain adjusted to structure reminder, in high XXs. with As quarters proactive margins EBITDA margin mid- the the to optimize gross profile, we a XXs in high recent the cost took actions and streamline full in and the margins organization, healthy

commitments. on these We are delivering

quarter. balance performance. sheet inventory improvements year-over-year management, total contributing basis, prioritize Our $XX On a the team working capital delivered working continues the $XXX to significant declined and strong and by flow and respectively, capital cash to million, we during million

to Morningstar MSCI top-rated great XXXX ESG and from Sustainalytics ESG Finally, our quarter, award make journey we rating recognized. pleased progress our to last that regional are performance from is on upgraded continue receiving a Since BBB being our A.

Additionally, products gains, I'm further California. to to the cost energy-efficient, particularly variable of one continue pool brand develop Protection high rated by why achievement now proud demonstrates market the energy U.S. in Agency. by products be U.S. professionals. our to industry's we the pumps markets Hayward This STAR-certified number like suite speed Environmental drive most that full ENERGY is high-performance report is dedicated to share

With will who in results that, discuss further our over detail. financial I'd like to Eifion, turn the to call

Eifion Jones

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

normal with We coupled margin a gross sell-through, cost are channel the delivered with plan. reflected Net for both the results. and record exceeded SG&A realizing We channel outstanding seasonality, line second to pleased channel our to in return sales and financial sales expectations progressive quarter into of the a XX%, rightsizing we're expansion quarter, reductions our with and inventory.

strong, quarter cash for and us enabling reduce to excellent an we EBITDA. is debt had free to flow leverage sheet balance generation, X.Xx net to Our

the rate the second construction. season in of quarter, Despite new start in sales like the in Unfavorable driven was of million. in movements approximately channel weather Looking the U.S. of growth X%. compared sales volume, pool detail. driven XX% demand X-year elements in at to the partially at positive the markets At by higher. channel primarily by a reduction results by a the during the XX%. X% the delivered moderating impact. markets X-year decreased when second growth addition was price to our the we quarter end modest Net realization level, $XXX.X trends stacked the in a more volume That's This had quarter reduction this of quarter XX% sell-through XXXX. was a understand offset the to of even of rate certain important growth discretionary expected to distribution decline inventory in It's for

record a basis our price impact XX Gross profit more deliver XX.X%. margin input and realization control, of cost the XXX We cost basis quarter price-cost reduced production $XXX.X and manufacturing increased margin the in and inflation volumes. sequentially Gross moderating million. points gross to profit recalibrated second points year-over-year Disciplined base continued the achieved was manufacturing performance. strong cost to offset than neutrality has

from long-standing Over and improved rationalization deliver has capacity integration Hayward underutilized a lean and is the to and well utilization of commitment the manufacturing the we the manufacturing forward. with manufacturing the to profitability larger including business acquired robust improvement, last years, facilities. gains X X productivity further have going of footprint, a exit facility continuous and X positioned

and to quarter. We year-over-year XX% organization the actions took administrative we and streamline the cost the Selling, late rate million from to to general proactive SG&A XX%. in expenses $XX.X structure. in million declined XX.X% quarter, now second XXXX Adjusted are and And delivering million increased points EBITDA second optimize annual adjusted $XX in basis of sequentially savings run on XXX the EBITDA margin targeted was $XX million. the $XX to

we're to solid volume in as positioned volume drive XXs returns. report adjusted margins levels, and high at growth these are pleased the reduced expansion to EBITDA margin We

item. XX% due the effective change compared prior in The discrete quarter was XX% period. the tax of a primarily rate year timing Our was in tax to the to

count Adjusted year-over-year or repurchase a the $X.XX on share share share quarter diluted a shares in was million X periods. fully of result count diluted million XXX shares. prior in approximately of X% Diluted as activity decreased EPS

adjusted previously channel margin margin This for Let's moderating our turn rightsizing inventories now results. The tremendous by second net end was in basis driven for a solid XX%, the achievement Gross million, construction And a a of performance sequentially are profit reportable team. and with lower the XXX volumes, XX.X%. quarter. the America X% the pleased XX.X%. to expected the largely of $XXX segment expanded both reduction in very and basis declined review new margin price communicated points we volume points year-over-year by favorable to to XXX a and sales Slide as was impact. for was income in quarter due partially North trends Again, the segment remodel. demand X offset XX%

the the for to net X% sales quarter Net inventory World. decline decreased in favorable of realization a to Rest price second and Europe. impacted Europe sales by impact channel Net million. adversely reductions due and were volumes from geopolitical XX% benefited in to circumstances Northern of Turning $XX XX% of but

pleased solid share We a XX.X%, with segment of are we where position. Overall, adjusted margin gross campaigns our markets established was and profit the was expansion into XX.X%. income segment have results margin Asian the

seasonally Slide generation. highlights. and QX. X adjusted the flow cash as buy of in QX related a quarter as strong sequentially sold the business terms period in to QX strong collections on for receivables Turning a review is cash extended our X.Xx, to Net of result early and sheet cash collected a flow to QX EBITDA in are from for down X.Xx was debt first balance

Additionally, reduction of from position. the our great own QX inventory, progress million decreasing sequentially on ending $XX made we the

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

million, under of second $XXX of was end equivalent and Total and our balance the credit of liquidity million $XXX the the availability included facilities at cash quarter in $XXX million.

swap near-term on agreements. or no debt maturities have our rate interest We

in XXXX, XXXX. ABL Term and in matures matures undrawn debt of the $X.X billion

we on as Loan Term completed our B no from Our borrowing our X.X%. rate SOFR the fixed This on interest strategic material from the on to the of impacts and second deposits quarter, to And rate plans. with flexibility currently average $XXX debt We position. rate quarter during LIBOR cash global was to swap XXXX execute the continues maturity interest schedule earned attractive provides borrowings our XXXX. benefit for financial agreements transition financial tied million in maturing

the quality are balance pleased we our with of Overall, sheet.

inventory. a in the characteristics, have earnings. flow was robust of half collection generation own flow Cash our million XXXX in from a driven seasonal cash but a of by of the and We million half first cash XXXX, $XX early shipments to operations reduction in reflecting high-quality prior $XXX robust strong buy first compared

in $XX successful the is since been managing peaking Inventory XXXX. have declined third quarter has million $XX our million working down We and of in capital levels. inventory now year-to-date

half in $XX half and to quarters. the with typically in the period. seasonality, use million million. the first will cash and of the prior CapEx cash Free the second a tripled more return consistent first the $XXX third company was With than in and generate first quarters normal in flow fourth year cash to

expect For exceeding free income, XXX% $XXX with conversion flow free the flow XXXX, of cash full greater net now year we million. than cash of

Turning now to allocation on XX. capital Slide

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

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

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

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

We outlook inventory are in reflect levels. to refining incremental XXXX our reductions for channel

Our view network of position. Hayward lean underlying consumer a is inventory very channel broad is products adopting but unchanged, demand the for

modest consolidated decrease due now sales XX% XX% levels. in to channel in inventory of reductions net incremental We a anticipate to

of In outlook and new on In expect resilient, sentiment down circumstances as geopolitical North down upgrade is XX%, end to for we XX%. Europe we to construction approximately Northern broad weigh channel consumer the continue in and be approximately aftermarket World, as Europe. unchanged. of XX% nondiscretionary a demand, Our anticipate defined remains sell-through, Rest remodel with but approximately reduction America,

net the These decreases initiated X% offset contribution at by from year. sales price be the partially X% to a of increases will beginning

of to profit XXXX. half We expect gross margin in modestly second increase the

$XXX maintaining performance, of margin adjusted are low our and solid the EBITDA million. $XXX range, end million between expected the be Given to with prior we the

flow cash As also generation $XXX exceeding expect cash strong flow free in discussed, with we XXXX, million.

effective is remains also and the borrowing forecast environment expectation million spending forecast expense to levels. $XX CapEx million, tax the reflecting is interest Our and for year, approximately XX% million. the $XX $XX at of The approximately rate interest current rate remainder our unchanged

gross of this I'm this very strong am reducing industry, to execute pleased market as margins with season. position leverage. the to the flow reduced net the the sheet, the share with the financial over record challenging and for returning With positions, and close and expectations profit target of team's channel structural period reduced adjusted balance of summary. proud the throughout gross for to ability we're XXXX EBITDA Hayward inventory of we in increased ahead I'll the balance generation second XXXX, also cash quarter sales margins levels delivering lean commencement at half sales I our with good volumes. enter pool a and sheet year strong

turn now Kevin. I'll back that, with And it to

Kevin Holleran

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

We delivered let key expectations. close, today's presentation. of XXXX results ahead we Before me summarize from second takeaways the quarter

control margins to and cash achieving maintaining well and future in business challenging record Our disciplined in all drive while strong investing flow, cost the growth. environment, executed team a gross

pool of industry temporary tailwinds, channel and year here We this aftermarket Each beneficiary outdoor growth inventory is normalization global secular the and economic industry characterized as of migration, are environmentally in and to living, industry connected number a these of of view recalibration. and the dynamic smart including home a and products. a as consistent each of resilient of sustainable stay, Sunbelt technologies a is by navigates them. XXXX appeal a ever-growing the uncertainty

to advantages and leader growth about value a in drive I'm and leverage the this excited competitive creation. shareholder industry, Hayward's very opportunities As attractive profitable

to questions. the open we're now line that, ready for With

Operator

Instructions]. [Operator

Andrew Your from first Carter of Stifel. question comes

William Carter

gross expectations. to margin the ask, wanted your First of ahead performance question I

about neutrality, prices see easing know inflation. you actually cost, inventory to the that price think And As know cost you but input well I said would assume increase. of I some to are peak, have I like ahead start days continued real you

gross of on help us can So anything you cadence margins.

Kevin Holleran

Yes. neutral in to I pricing margins. a neutrality you quarters that to quarter, would a here protect has making been Kevin. to of say And Andrew, the I job really this position. as great second know, this the has organization the get implementing those in think achieving done this from price/cost, is many initiatives

of the highly of it's I we've commodities to for terms that we've the seen moderation in inflation, In inflation, that think volatile But in seen future. some say in we're safe deflation. particularly with historically. yet some rate not dealt calling a wholesale we've not immediate Frankly,

heading XXXX. contemplated be this actions pricing inflation we're our into of we're some what into informing certainly more heading of really, really of offset kind not seeing not deflation at which that's moderation. But really will thoughts to guiding. XXXX, in point, We're determining just So again, process

air things longer a Other material performance to margin, gross certainly, buys, do over -- or us our driven facilities supply tailwind is near the demand that having more the presented have of to key recently. certainly satisfy spot of coming freighting a bit normal in raw some helped really elements for all of back what's these no working been margin have the to time and

Eifion Jones

I the box. Andrew, the when got is Yes, that into split just think you ticking price-cost obviously, neutrality. you've about One which an We're to add, the would benefit. improvement, XX%, margin pieces, X margin is

X last that walls being which over been the the the the now been margin, inside has all And were U.S. facilities of all And last still because progressive element acquired since Three end story probably into the all the West X of additive synergized XXXX, inflation to over masked has the the And years margin, our the to second facilities. remaining background on noise. was exited rightsize visible X within we've been manufacturing really One existing of of is that our The years has the facilities. X Coast. facilities.

William Carter

One question. other

gone by $XX cash has higher flow the guidance million. just So free

You your prebuys, $XX the downside more of cash That to with your could generated in $XXX second free flow. a for around the at then half. us? if you've that a got there's I leverage look kind square that target, million. million performance expectations any lot But means stronger that you implies that And year? if also, Could be fundamental

Eifion Jones

you X.X in call greater announcement great achieve inside to $XXX $XXX program. my, cash see it, calling We're $XXX I be year-to-date forecast. done in We've to Sure. will million buy greater flow. conservatism a flow get early let's question. our It's of do free million, the got than cash Obviously, the the and through it believe We've million to closer still than leverage. can

As program, you know, under terms. include it early does buy extended the

our have free to we for continue We and about business But the see today. second get change about good offtake our may to in feel to the cash that we to ability leverage based reduce to that of upon level buy, flow the as current very outlook the outlook year. early Xx down into half the

Operator

comes The next of from question Jeff KeyBanc Capital. Hammond

Jeffrey Hammond

sell-through I the your kind if expectations. better, that's market then dynamics. And bigger interested share I'm in about I comment sell-through what's in was And of guess, a destock? or coming informing is wondering market exceeding if dynamic just

Kevin Holleran

negative. Yes. We're better negative we that I in is something would say expectations. the out that. We're massively in It's of year-over-year. seeing it XX% something here seeing guide, that was not slightly range. second better XX% price, original than but still quarter our net than In better than laid the

data strong our be I really collect our channel continued partners. has we based to think working and Jeff, upon with sell-through,

this really early pool update expect At of end into think levels, with additional we as originally the the be that we around I through work inventory prepared we think in destock. calling said the And season I us what opportunity it the presented remarks, expected lower as here, really that presents we to to -- season. are an really ourselves than we there. also XXXX heading to QX, the buy here position that's my So But I morning. well guide of some prompted pool for

Jeffrey Hammond

visibility about around and robust us word mentioned seasonality. XQ your just And the your magnitude early how set just of XQ, the with terms what's you're thinking of buy. then Like level think level communication buy? of then size And and on I in just partners early Okay. distributor maybe you

Kevin Holleran

kind I'd a a and of to being it, from Yes, low XX%, orders up seen we back from -- to upon first of see seasonality second would half I That being high half in at pretty them standpoint, that those historically QX early it's call similar should we've to with able normal each call kind based kind QX say a trending QX of buy tick it XX%, say, discretion. other, what looking QX collecting historically. our more being ship QX and seasonality

we really more that that So to normalized quarterly I'm see returning seasonality. sorry.

of that part second what was. The forgot the I question,

Jeffrey Hammond

buy the and the Just on early communication distributors. visibility with

Kevin Holleran

Yes.

I think, incrementally have maybe exiting take stakeholders, lower the the as conversations. think here level OEMs to had And We XXXX early to desire for channel as positions really upon an based QX, well buy all lean inventory to partners into I season.

haven't several call We years. I'd early now a buy for what had normal

bit So of been really a the than that we even fact be of healthier expect to inventory it kind more little they I given levels returning with have see buy normal tailwind historically. maybe early a to expectation,

Operator

The next Research. Wertheimer Rob question of comes Melius from

Robert Wertheimer

it just industry wondered destock if background you've share at how sort like you So the you XQ. I completed you that And of in metrics industry to you see around that any can view kind what the are of give the have could done, will your estimate. us channel like in be of others and same investigation seems confident

Eifion Jones

Sure.

want level want progressive we're sheet the the we is And of destocking we've in channel. has we period. buy of what U.S. single year, level information been expectation collecting the of point, to in half occurring as on great it terms What balance some to trading progressive QX seen of the And hearing -- really get this science with perfect XXXX, and a first destock. good a second a that of destocking partners, they not trend place. season, distributors quarter. Since the it's taking but they the of lean data is their QX from retail So continue inventory there end primary at with we QX, every the from the a have a every over accelerated early our get enter that of position as heel into channel side

we're seeing. that's the what numbers So And we're reported that's hearing. what that us, are upon based to being back

Robert Wertheimer

And it. Okay. if then apologize I missed I Perfect.

You do -- end sort sure them I bit lean then impact your quantified I'm up a of I'll ranges you or similar say And of bit on saw for the you little one channel, we of for year. sales the fat levels? quantification year this revenue sort on competitors a a that? when have inventory Do destock of underlying stop or channel little versus And normal lean the there.

Eifion Jones

Sure.

guidance included entirety, both destock effectively million. we've destock full than year of less a level. channel channel the at And in the the the primary on $XXX little a full a little what at channel we're And that. bit within approximately dealer So million, the $XXX really well. within hearing that's our approximately bit as what But guidance year level be embed held associated is with could is our

Operator

of from question Saree next comes The Jefferies. Boroditsky

Unidentified Analyst

And [indiscernible] is I pricing. Saree. on on touch This the wanted for to

So XXXX players are industry as pricing other how higher about than going pricing? normal into are thinking like like pool like the suggesting you

Kevin Holleran

think see, we source, Depending X%. still expectation work say time the -- inflation designing see Yes. or through an we working really year. What that. we mean I I upon we It's through it's developing somewhere that the we're we're same normally next -- the pricing early buy between and X% I'd around still program.

even I works that of continue think in battle own inflation and to we'll wage some components through our the as suppliers.

are it, out X So over we maintain put we that call the potential the or eye an inflation actions But marketplace years been estimates disruption. price much of Obviously, we're are to there, has last, intent neutrality. into at looking price-cost given to XXXX. price continuing how implementing are on with aware additional again, the so demand into

Operator

next of from Bank The Jadrosich comes question of Rafe America.

Rafe Jadrosich

It's Rafe.

expectation early of and in normal on year then expectation buy it up following comment pricing for the the next kind for trends. the the Just line on having with

inventory just to is incentivizes to early buy? expect pull Like return that cadence of their you kind them Or So get they what continue normal. like there orders? the to distributors that and about dealers get of normal potential talking levels forward these pricing kind their in operate to of do You're to working them than hard lower participate inventory? with to lower

Kevin Holleran

will Yes. designed mean really be of in has our buy for early poor But being buy. -- a Again, I still that XXXX both think I participation element there the been early it's industry, season. in more the announcement pricing time, incorporated markets. Sun a has some all some payment along seasonal whether been markets, the terms. that's there that program with Historically, or with buy Belt discounts at into traditionally, early

out our in and the we're the to should we I early the question some are break that smooth was run important, an an you to those into products in of early production factories, ability peaks spring OEMs So start to get And that And great have our there, ready respond if that -- -- as enticements valleys. there's that channel the your staged so to Rafe. obviously, there's benefit the to season.

Rafe Jadrosich

stage? consistent that will industry for get of mid- we going kind of to algorithm as of with like then longer and this And is like When the of -- high prior stepping I helpful. normalization sort you pricing? think normalization to single-digit your get term, do could really really think the to that described sort years. X XXXX growth the we think exceptional thinking That's about back you How hit after when back do growth industry long-term we

Kevin Holleran

to and of high in this well not traditional, growth I'm really sure single-digit rate. industry our yet. participants Yes, as do expect we're the peers as the ready to call industry all back XXXX to on We here mid- get

months over I of down these in the has our inflationary industry. That XX of it, in our industry, to a that's rate I great bit last of the think all think aligned on discretionary or macroeconomic, interest nondiscretionary it around the others attribute so more environment, impact the a really that I environment, the of some the our impact. It's And are aftermarket. more think had comes call an guide. largely reliable aspects having this original was a

But to some the bit remodel there seen aspect, whether have whether even of softness new some construction, aspect there XXXX. in it's or upgrade to technology of the it. discretionary we've an is a a your it's pad decision that And does on

that So year, XXXX. assessments to some we through as that make be forecast half XXXX, into macro get work what the we and the need in or confident second I of budget going more our around for think environment Rafe, to is

Operator

question of The Instructions]. Goldman. Brian from next comes [Operator Lee

Unidentified Analyst

[indiscernible] This question on on execution. gross for Brian. guess, kudos margin, first is I the on

'XX. You And mentioned there's in maintaining out neutrality sounds more and like it you optimization streamlining, can measures squeeze margins. more price-cost

just like gross XX% see next -- here? we long-term couple So a we path in towards how about gross wonder, of like margin path a years? I see Should trajectory the heading think the margin should in

Eifion Jones

so is into the think the maybe inflation that down the inflation to we're continue XXXX start we view actions X.X% And to protect we ground take economic probably will current been is well. as to really the monitor aligned margin forward level, price-cost and back and to normalize Look, step to I if inflation pleased we're there inflation to see to with our circulate for and able we'll now requisite where wrestle we've XXXX the outlook get that this again. But year neutrality. as

years over to continued and improve the continue plans is to our going focus. to bigger benefactor next We've come got of the But lean to ambitions couple facilities. margin from operational growth

facilities. investments to tremendous both terms of track improvements. a as process able in drive improvement path along continue We that our in facilities, process to record those make well going And of improvements requisite as up lean being we're to the CapEx have

great other And attribute I'd win-win terms profiles, introductions the to margin third for. that we've product is products. consumer margin gray a energy years of with have attributes the our for in and looking say it's they're savings had a new X great and that

then time. think of continue to that as do to the accretion margin over So we'll course we as see long consumer, the for I continue

Kevin Holleran

of important lot some that's good in just presentation Yes, gross of little to perspective progress. information there back I an In it's script as organization. on channel there's things obviously I just give bit and of and step work the questions, around where going But sit a was we like kind margin and and a of think all to destock, our add. and today our

Over just we've inflation. production the years, as we've importantly, our then really lean to share. tremendous team our against margins operations match gross work We've of cost last and gained Eifion But facilities due pricing variable realized X to optimize out the our footprint, to more volumes. said, expanded

our provide volume the is rightsizing think hitting it but it enabling We haven't and will million as margins. out cost And EBITDA margin million, around expectations high between are which $XX SG&A tailwind we spoken about XX% really $XX I today much, these adjusted returns.

laser-focused share, as in But employer a an is choice to professionals to and about our worked with gaining XXXX organization for choice. we spoken been hard as pool really what channel on strengthening owner sheet a we healthier on destock. and further through obvious standpoint. an course, Hayward We've to be of our best-in-class are the working and, partner partners the as the get of investment and enter we for trade line. capital well XXXX We've markets underrepresented to XXXX partners there's -- that channel the top historically continue to and head on and channel down particularly the of as enter pool technology move levels great is solutions from supply as season, around delivering balance product That an

working wanted focus forward is of So our as kind give hard some what I been and what an organization. just heading on we've on to perspective

Unidentified Analyst

growth. Just in to prior these be like 'XX. of all tailwind sounds destocking inventory follow-up It could a questions on one a the

just much the I let's if versus you wonder how can that should say, about think the we And growth growth historical, be. rate industry? quantify directionally, of So tailwind X% XXXX could how in also,

Eifion Jones

Yes.

in And half destock of that's destock no head basis, as next mentioned, more annualized half, as pool year, There's start And when we a QX. with X, commences up year. that longer into in expect an than million. which the for headwind tick year season, enter to calculations. progress the a start balance our on -- we that approximately with the now achieve we is So XX% destock as to upon . the we XXXX first the we $XXX be to October seen I substantial based -- this through been first We've to

finite I So we want year. but don't is million to unlikely on get XXXX, think the $XXX here we certainly think next repeat, to obviously,

fully is headwind that So removed.

industry. asked many does have, base couple installed business look longer-term far super times installed we I to addition industries base has when In we're think second of a back look, algorithm got servicing. is, growth the is, of that attribute still pools. question, new what with This it, fundamental think, like so do year, we're about and of that which which terms the tremendous your a the is industry in part the of aftermarket Every grows a that excited get this other been don't I

to base. Over several Coupled years, next that of the serviced over adoption a technologies. continued the pool continue new with the pad in to to And increased of pools is years. the the X amount additive installed adoption that new pool. is tremendous have base with last been attributes Coupled will installed of that that and be

environment. moving positive So we're we into cloud think

we -- little looking at to a gets we're we're But much in as to with longer green to as the we're the going pleased inflation Reserve normalize, I improve do to around excited. we go the destock, fields enter to recession we effort environment the macro work XXXX better so and all the determined. does Federal visibility. Now super will be say far. abate, and noise headwind it channel XXXX. on we But skies And be it green to the algorithm forward, to basically, think no Whether blue exist get then bit, need is

Operator

The Nigel question from Wolfe Research. comes next of Coe

Unidentified Analyst

hear Can me? you

Kevin Holleran

Yes.

Unidentified Analyst

from region in was kind America wanting have how and North by behalf of This sell-through What compare to Nigel. of really weather on kind wanted the of [indiscernible] to to did understand begin Wolfe is overall. I Research did what impact

Kevin Holleran

last of weather? question the Was part the

Unidentified Analyst

Yes.

Kevin Holleran

say, first we QX. say what mean over impact whether, as in in Yes. more QX of an I has you would than had bit overall saw I look but the half, so, a I'd

understood pretty in well I of the some issues on Coast think QX. the it's West

that that's think I improved largely second in quarter.

Hayward quarter. for have regions high-share well performed the more the actually in second of Some

the how impact work finish had mean better I region here. necessarily and much continue pool and here the an cooperative it's levels not out would by summer So the in through end the third we're through season we inventory allow to weather us half. as has right -- work we did hopefully through of now those will bit out to a a It's first hit going as to more channel break we quarter I region. say But of the

Operator

I will call further Kevin back There to no Holleran. are over the questions. turn

Kevin Holleran

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

is and Our in This near-term partners with business well value possible employees of be the very world. would hard around resilience to and for the all positioned and our not challenges stakeholders work, navigate the years ahead. deliver the dedication

third talking we any have you to to on if call. you look and team questions, quarter follow-up our forward again contact the Please Thanks. earnings

now can Michelle, end call. you the

Operator

and disconnect today. you call you Ladies your you. for thank your participation please gentlemen, We conclude conference for this lines. that and Thank ask the does

Hayward (HAYW) 3 Aug 232023 Q2 Earnings call transcript