HAYW - Earnings call 4 2023 | Hayward Holdings, Inc.

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Operator

Greetings, and welcome to the Hayward Holdings Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Maczka, Vice President of Investor Relations. Thank you, sir.

You may begin.

Kevin Maczka

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

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

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

Kevin Holleran

volume the points and Net and points positive year-over-year sales expanding gross and delivered everyone. gross during fourth cash to full and contributions of and We expectations. our Kevin, earnings flow. for pleased and I'll in welcome quarter you, margins for you well X profit with through Slide messages. I'm sales fourth year. my basis net of results margins record to key X% report basis growth, all price presentation XXX Thank Hayward's quarter XXX good line It's the morning, executed the from on to pleasure today's call. quarter start both quarter earnings earnings with increased with solid

flow free channel the proud with exceeding increasing are cash accomplishments, was chains, We extremely seasonally team. XXXX a to seasonal inventory patterns. soft for range. Hayward period normalization a return These year also generated and by full a buying destocking of our better-than-expected guidance entire cash cash collections tremendous XX% I'm established characterized supply of flow during and and

business our improvement to culture included This will and additional strengthen expanding connected commercial and operational solutions our on to executed our enter as cost hand various to distribution the channel U.S. important partners sales strategic are normalized pool excellence earnings continuous on initiatives enter channel leadership with but in year strategic our a inventory outlook the the moment. us. We on comments inventory demand a drive profitable behind encouraged post-pandemic positions accomplishments the full with many and like sales reported with innovative expecting We XXXX level advancing year basis. reset more inputs capital, for and make end and is primary leveraging growth. We The to relationships XXXX, throughout near-term across technology continuously return recalibrates our channels. I position by of of align of in growth largely a

the to positive digits By fourth focused year. commercial now and growth of net commercial and For I'm market year. XXXX, for increasing and by volume Europe Slide in flat. year to increased to X% driving the largest Net X% the approximately North million, X% highlighting solid the sales pleased increased X, net and the in increased Europe. double and increase on I'm price. expect World report segment results both quarter and quarter the trends in growth $XXX by United full approximately with the our X%. -- declined the Rest turning America the encouraged XX%. Europe full execution we market, sales pool the the fourth driven XX% of in to U.S. with sales quarter We're States, quarter. and of sales the year-over-year to sales in segment,

margins I XXX fourth As sequentially profit XX.X%. expanded basis basis points XXX EPS mentioned, and gross margin in adjusted $X.XX. the Adjusted points fourth and was year-over-year was we achieved record in Gross to the quarter. EBITDA a margin XX.X%, quarter

basis volume, see XX.X% margin points healthy particularly was expansion the for full full was sales sales guidance. year EBITDA $XXX I'm For to We with and Adjusted the to margin despite gross $X.XX. reduced strong million reduced XXXX, each XX.X%. XX% most EBITDA $XXX to a and XXX adjusted recent pleased of delivered year consistent million, EPS profitability of net with our adjusted

a Turning rates. U.S. and now the demand the performing near-term for with been economic current interest remodel X uncertain. Nondiscretionary is overall the solidly, aftermarket our demand conditions upgrade by remains construction, consistent and was products Slide environment Hayward in but for for quarter, but resilient, has with demand to discretionary business End update. rising new impacted expectations

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also consolidations We during North year in footprint America Europe. the completed and both

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inventory XX% contributing in to in inventory to management declined working positive and flow peak We reductions. continue prioritize cash performance XXXX. XX% the XXXX, Total and capital since

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Eifion Jones

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

expectations are We in fourth free gross for flow. margin quarter. performance. and generated better-than-expected we pleased our line with financial Net expansion sales stated, Kevin quarter increased cash outstanding the with delivered As

volume fourth profit the driven more was million. to margin with to Gross basis million. a X% $XX the in net the X% fourth XXX $XXX at million and our year-over-year positive and and X% points EBITDA basis basis was quarter was expectations XXX This sales in for a XX.X%. Adjusted record consistent price adjusted to margin Looking sequentially increased increased profit XX.X%. XXX detail. Gross quarter, EBITDA and in by points a increased in quarter fourth realization. increase results $XXX the points Net

The timing compared change prior to was rate primarily period. the tax was $X.XX. discrete was quarter due the to in EPS the the in quarter effective items. of year XX.X% Adjusted XX.X% fourth Our in

amid Slide annualized XX% X% XXXX, $XX a sales development SG&A as driven million, review program. guidance This support for decreased to fiscal XX% full year XXXX enterprise full innovation. SG&A we Net net and our Turning margin recent year in of engineering by performance business. realization profit million a with growth Strong of XX million. reduction approximately in to $XXX XX.X%. Adjusted offset points our full in was and was most increased a XXX In the primarily investments expected expenses. very by year On and and full $XXX our a $XXX XX% expenses research year million and EBITDA XX.X%, commitment to savings We lower year line the enable driven by was XX% a XX.X%. basis, volumes. with for an to full delivered a sales now Gross volume, for acquisitions. Gross partially lower basis the X% us million. by reinvest and to to cost profit reduction declined percentage volume-based our $XXX discretionary a results. increased million, adjusted X% strong price a of $XX to EBITDA positive contribution under for from margin of to was year margins

was Our compared effective XXXX. tax Adjusted in in EPS XXXX. year XX.X% XX.X% $X.XX XXXX was full for to rate

results our margin impacted Gross North XXX in million, favorable more price on impact. more and market segment $XXX driven Canada by X% Sales a income the points discuss increased XX.X%, XX.X%. quarter X% to the sharp costs. profit volumes basis segment increase increased conditions and been XX% increased higher XX, fourth financing the sales XX%. adjusted to in net The detail. U.S. a I'll America Now economic quarter reportable in Slide XX% has was Canadian by margin declined and for in significantly net robust and Beginning

currency Gross decreased X% Turning profit of quarter pricing sales adversely X% and from favorable approximately with million. foreign and sales of world, XX.X%, Net translation, were volumes. benefited to X% but $XX flat, was sales and fourth Europe World. Rest XX.X%. the Net net from to impacted in decline Net the for X% the Europe by X%. was in income segment rest were declining a margin adjusted a

sales margin and the declined lower offset for declined results for year. impact volumes, a to favorable Sales acquisitions. America price North segment X% profit reportable reduced $XXX margin and XX%. Gross to XX% a a of rest net sales XX.X% and margin driven Canada XX% was Europe Turning X% contribution in was our and for XX% of Europe World, XX% XX%. X%, Slide year benefiting by the from XX income by review Gross XX% from Sales declined partially of of net XX% full adjusted adjusted U.S. segment by the and and income segment profit lower approximately reduced volumes XX.X%. Rest full declined offset million, was In to pricing was world XX.X%. net margin XX.X%, in million, $XXX increase

Net at cash Turning a sheet the to balance for EBITDA of XX year. flow to and highlights. end review the Slide our X.Xx was of debt adjusted

$XXX of of was including plus in our $XXX cash credit and Xx. the end of range facilities Xx prioritize and liquidity continue the cash short-term We investments targeted our under to availability at million, to year Total million $XXX deleveraging equivalents million. to

debt financial we no flexibility have debt as $X.X agreements, in on strategic maturities our XXXX. This billion and XXXX execute ABR in interest matures schedule near-term of term We swap plans. provides our rate undrawn the maturity attractive matures or

swap term the Our XXXX, on million fixed facilities through our to to to the debt rate XXXX rate of tied interest XXXX cash in currently $XXX benefit borrowing maturing rate X.X%. from limiting in interest continues agreements

Full flow cash has XX% earnings, by X.X%. Overall, operations quarter XX% the Cash $XXX $XX for in cash declined to XX% quality with and working in to or our consistent Our average characteristics effective was the XXXX. the the deposits which pleased nearly growth we from balance The Free driven sheet. $XXX for $XX earned cash in million inventories year. by interest increased business levels. Total are of support investments. of $XXX generation CapEx on the XXXX, reduced free capital million XXXX management, increased million high-quality quarter due full third peak of rate primarily inventory our from the prior million year year with million declined strong flow global flow was XXXX. to

Turning now on Slide capital allocation XX. to

within shareholder of leverage. a before, financial and are investments CapEx, investments As we policy growth targeted and the disciplined a maintain near and returns strategic approach, term, net growth financial to our maintaining highlighted prioritizing emphasizing Xx. balanced we've we In while range Xx take prudent leverage reducing

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

execution Turning that positive sales XX coupled also XXXX conditions, contemplates spending around current levels. range inventory The now in continued outlook. to continued for our adoption. growth, we've guidance done Slide and introducing earnings price by We're expectations consumer and guidance to organization, channel the global solid reflects uncertainty our macro a realization driven with across technology return

the aftermarket upgrade Hayward discretionary interest This more and economic American expect the the increase by For construction markets. billion. XXXX, fiscal and to year net X% $X.XX full impacted X% the market, with rate North particularly remodel the environment, continued to non-U.S. nondiscretionary in new to in and of resiliency $X.XX outlook sales approximately billion reflects or elements

expect of price We net positive approximately a contribution X%.

expect seasonal, strength adjusted $XXX and Our the and first sales $XXX year the in We full business million quarter with seasonal second of representing we fourth of for the million. XXXX quarters the anticipate to year. is EBITDA lowest quarter normal

XXXX. in income XXX% in cash than of free cash also conversion flow free with of approximately greater flow solid million. again This net flow generation We expect should $XXX cash result of

particularly the confident the to turn that, We Kevin. [indiscernible] now I'll to in our back of pool success aftermarket. And industry, ability are the it with strength

Kevin Holleran

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

volumes, execution expectations, strategy pool throughout margins the in We reiterate allowing our is impressive innovative customers our solutions for fund and channel flow the let presentation. return today's we sales strong to we normalized, growth industry the excited the from to gross growth We're out improving our creation. Hayward place a with closed quarter. for cash strategies. and year, Consistent the the earnings our shareholder that better with open and fourth I'm and the are leading. in market ready largely Momentum delivering bringing we supporting us ownership despite line results pool Before performance. for experience. With drive lower growth. and right is With new sales prospects confident to well the and about to close, the have XXXX compelling to growth value we're key takeaways that, me and inventories talent questions. we building I'm positioned now financial demonstrated

Operator

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

Ryan Merkel

guide How off you're first the full expect I'd confirm or margins about for at what year? to love for then for And expecting thinking the you gross to that do sales us the for about tell can we bat. you up? be Can be start the with XX% quarter, much should you the year?

Eifion Jones

of XX.X% margins gross terms increase points. to in the North in Ryan, see calling of year, is over growth an a great actually is basis We'll for good for business, just Full of full XXX over XX% which QX, trend the year, gross America expecting margin, which will the exited good in we're XX%. XXXX in the continue outcome. we North out over we're that America be

of the we're more the XXXX. bit world, out challenged but same a we of terms exited fundamentally little looking Europe and there, In at the level whole at of rest that margins

Ryan Merkel

XX% just sure then full it about of want the the have for make that first And we I to quarter, year. right,

roughly flattish year-over-year. So at sales looking

Eifion Jones

around seasonal the to being period expecting trend, QX in normal QX, year, the we're QX, the is very mean -- This of terms of to that sell-in for largest XX% year, early similar XX% for typically as to I by a we've previously, XX%. coming X selling. QX. around us, full And talked Yes. QX. we're seasonal QX mark back to seasonal

Ryan Merkel

it. Got

then guide, question, my to of And you assuming what Okay. sort think the sell-through year for be last would in just demand? given retail for are helpful second . underlying destock the at about

Eifion Jones

mean the in lower guidance and contraction of North is I bit contemplated. macro in about assumes market. Yes. X% the and approximately America, that a little a It rest world Europe

really expecting with we side of So the the remaining the are very contraction aftermarket resilient. discretionary at market

Kevin Holleran

Yes.

aspects, which X% -- down seeing we'd FX off, the would include at difference global here. The international, remain XX% the pivoting upwards to the volume at we the describing expectation you our And through market. I new is upgraded resilient flat discretionary about international overall. in prepared see a headwind positive about it more as XX% the potentially, remodel break-fix be flow So U.S., work those, Brian, X% maybe modest, that U.S. on the for in which volume, potentially flow remodel aside volume overall, the would know aftermarket region remarks, And for between of XX% as we're price, obviously, new aspects through another we heard which the could expecting price in that -- we XXXX. X% upgrade, through of contribution there, from to then the again, Canada discretionary it I'm off, the range. some would

Operator

Our next with from Saree of question comes line Boroditsky the Jefferies.

Saree Boroditsky

levels you remain cautious. normalized but levels they're about to lower inventory hear So that did from this X inventory looking being year. talked We

you're how maybe quantify little potentially year tailwind So given this bit more inventory about reductions a just go? to destocking maybe thinking

Kevin Holleran

Yes. Yes.

hand really we look work through to to quarter that point back back days days we hand. level kind destock, in that of third this of And the was at the we channel. historical as this to we a from destock getting historical So until up on the year, standpoint, way got believe on

channel a more given of look outs, are the none desires improvement our management. their guide, As continuous interest for efficiency at rate efficient Obviously, environment. with XXXX us but to we the also we inventory stock there's some be with desire want closely partners aware, around higher and we work gains

we So work right inventory and time. with with in contemplates right we'll the at partners, right incremental to places we them to reductions believe got channel closely in in -- ensure what we've continue achievable our our guide the XXXX the is

Saree Boroditsky

I color. appreciate the

the that Could just pandemic. demand about you we heard we discretionary we've saw being one on the those should normalized? as when heaters So products thing of during items impact pull-forward about type about talk is think such for

Kevin Holleran

there's categories then been early we heaters I more on product we nature. slowing that some mentioned. some maybe in certainly have -- saw I in discretionary Yes. say demand those And some and mean of would the increased are pandemic

I think category would there. cleaners be another

you can put the product think probably I category. same above-ground in

with we're So we those is product even we be to statement categories that getting little whether are where even as some believe into in of in might doing believe sell-through some light geographies, lights LED destock or we're still complete, bit a good much overarching the there's come inventory work but to few we're positions a healthier to seeing products. there our that areas do. But the is marketplace. also that well. some controls mind

of the excess as XXXX. a in QX think as we're of to Any we the into all XXXX. able through we going So address part that markets. work early product be season to opens here category, across particular

Operator

Our of next KeyBanc. comes the Jeff question from with Hammond line

Jeffrey Hammond

-- guess learn but more It destock Just the wrap to up cautious destock. customers confidence a Just as But a bit. levels the or tie trying did out just bring are inventory up. maybe with thought, their early just on to that like inventory being from you to little you buy, -- what up sounds around to I back played et that cetera? the little just levels respect levels,

Kevin Holleran

Yes.

the looked by know, really early year, maybe as the published, of we QX. as So gets second you half at late

on a we start So read getting that.

opportunities close into as we market XXXX. a some destock expectations. down of working with early by earnings we also earnings and this last our met positive order from As saw our sell-through on was little kind really the QX early both call, calls, slow which we an standpoint, very be sign, with prior low would would channel some buy. I amongst anticipation It I of a year-over-year that maybe bit mentioned orders. around in-season know expectation a for inventory increased say saw end in that mentioned from the that exiting in

early pleased. in expectations, look we Jeff. on we just came concluded, that's as our and we So the year-over-year, increase buy, to It were saw

Jeffrey Hammond

around shifts. And kind normalization. market if then market around guys I'm more share COVID of go during expecting Obviously, share that settling? played out a normalization share lot we're there's has then just you or just to won of wondering Okay. and if some that

Kevin Holleran

Here as we at experience created settled XXXX, that, Hayward, for of share that the some supply some challenges We occurred chain pickups pickup and the period opportunity or COVID believe the extraordinary opportunistic that dust on curtain know the that it upon the through or that. has closed on it an based availability was some challenges.

As we've been you've upfront. heard, very

First some but and from who on from as focused always be market of on And us, -- to also we're shipment for our going settled who sell-through. that Hayward. believe maybe to would work future would committed and capabilities share be is indicated -- what it be. for to we product it's introductions gains maybe expect relationships, that dust partners going was. We all, is we And channel to really the very supplier and supply in as to there we're back here some service upfront isn't back of on to customer the drive buying that There's where at what's here, chain data with share that's habitual in, share would of that supply normalized, we perfect do go to saying chains that wholesale data, gains expect kind us.

Operator

Melius comes Rob line with of the Wertheimer question Research. next from Our

Robert Wertheimer

kind will from a see on that remodels real get . upgrades of your you about June and see then talk pools. and just when is when bit looking little consumer see new is out kind demand market and of how how question year you forward? and front it. My on year where the sell on do end Or demand progresses we're is what to on on you real I the based mean is you view you that or

Eifion Jones

sellout back Yes, a extent, is see comes seasonal Eifion. get sellout as in a channel close, We're most us year, which year. But earlier, QX to as it's regular then get be in and higher this to normalized the to And for slower the in a the of year season mentioned this QX, the QX we're periods just going calling be QX to to I reduced tend quarters. normally sell-in very QX, cadence being type to QX expect to. a to We And year. QX normal lesser back the QX. in we guidance being great Rob, the occur that for to quarters with

historically, QX X this historically, patterns after So as looking similar see years much to of be used the very the it we to sellout where sellout business this did with being largest period.

Robert Wertheimer

but Okay. helpful. we spending it pressing you and what No, actually reasonably. baking kind on a just understand of is if of was a people where and just know, reasonably to know consumer, it. that's trying currents I I many not. or cross about of when view economy I'm I that spend. I'm healthy predict thinking discretionary kind conservative are had kind And know direction. That's don't not for of measured the that's lot you're in a I don't for.

Eifion Jones

Yes.

seasonal economy we understand. in XXXX. new the of how macro we mean to upgrade construction in want us more the here is on the that period uncertain considers let's But remodel consequential to permitting economy view the takes as compression QX, the the it, macro the in pool say defined see is as for step condition, side, where on be place it's second considers It we're front the today. this while to the remains going I the sets up I and how guidance impacted given going equipment this, develops and pad. We into call our Okay. upgrade, which then season year, half this for discretionary 'XX. additions half that look, to have

Operator

Baird. the comes question next from with Mike line Our Halloran of

Michael Halloran

couple a just here. So

cadencing see just relative months sequentials point seen could know year-over-year that's the back of you through X, the -- there you and I trend sellout than to I last don't the few at X, seeing a we a the within been the the over normal? the we here. I there pressure X look you've where here? mean First, base you remodel, the build number basically, lot pick more that when has talk distribution are on a you the at there, are as bit stability know, stable work. new think or But volatility Or months your type North last in trend America that more over large-scale remodel, in little

Kevin Holleran

we year-over-year But saw it, as QX, call year point look full around more would reduction look if say, number. was that the year high I you was actually data actually single-digit recent QX, overall that at sellout reduction against improvement we like that year-on-year. at

So celebrated year-over-year while on not in it But QX it it comp go. we a as certainly indication QX on still standpoint. way positive to a has we saw because a saw long a we're standpoint, year-over-year

we data QX most by recent the to prior activity year. out So versus encouraged were with actually in point, sell someone

Michael Halloran

And normal sequentially, pretty though, is it seasonally?

Eifion Jones

QX, with reduced bit Yes. 'XX lower this higher in QX. QX being performer little I lower we're again seasonality QX, reversion throughout a mean what is seeing and sell-out

done particularly performance look in at now, So in seem we've curve the right recently. we well ahead markets which that and the seen business regions, the have in that seen. When like regions, we've normal Sunbelt Florida, really to we're strong seeing actually most develop super

Michael Halloran

what doing levels in but where put versus what kind thinking look in meaning, like normalized today maybe was comfortable does context, How inventory more they're their what you inventory you period? just could about compared being know factor, would distribution cautious on there very a that they're today your holding. and of some what partners weather a are years compare about historical doing then they're there's to normal bringing And a pre-COVID? I how the commentary

Eifion Jones

pre-pandemic, periods. mean year if dealing times, months the as depending what back with go all time they X.X into at up the I on entered you channel the particularly health, seasonal way peak inventory X of Yes. you're or of to

to days back define to improvements largely So global stock at the partners data as of happened historical on from the cost back that have further into think lot focus I'll take at we next in on to of right we're level. And continuous hand. But right I and would about the what the those the think, given basis. in and as hand. on heard of we given they that and that back years. the like come make That points, the working on working movement those a as historical working of the be both inventory time sure that of end days very when and reduction lead to a step reduce days in Kevin at right retail you that will to distributor distribution And channel have a that, initiate about analytics, through capital been XXXX capital, second. There's time does certainly thousands largely improvements means the our we've current level we That's capital. over capital And management, mean? QX some they getting that of accommodates believe the progressive to we guidance SKU the location, will at thoughtful said, to realize, got hand. several system

we're that the clear chain time capital. for particular of outcome. we the is relation great an looking investing in product our healthier investing as sector, much to area. But analytics, are in supply It's all, how we debt inventory end it's that industry, think get to position. in to our I see everybody moves that years. the a to in tech capabilities reduce be visibility all reduce to demand. working across as improving to And a course data And entire industrial to over several

Operator

Our line next from of Andrew Stifel. comes the with question Carter

W. Andrew Carter

levels ask is for that America October pre-pandemic back in any in that a wasn't versus rebate Or North accomplished last incentive kind to realization last I'm assuming exactly kind the rebates, factored there what went a contemplated a assuming And you think higher is First to October still you in in in assuming you're year to a question the is into Have to effect understand that catch-up? to you want this year, last for with of have plus kind already this net Europe? Is I'm there guidance? that price that is have also, you go quarter. I X%. year rebates vendor last incentive it the kept hoping one an of more done? year the in the increase levels. year price took lowered that year? XX%? And or kind the then this you as happened issue increase is the there? does about X at X of I X, are wanted anomaly vendor cadence I normal promotional vendor return same of

Kevin Holleran

I all -- see, through want if redirect get to it us didn't get we down, we'll we'll don't but that the that Let's questions, get all.

the at QX. that price with as net of terms the that rebates, saw we X-quarter We a indicated last quarter, as that repeat point, in would performance in itself vendor not phenomenon. we So indicated

in the there. I results think through showed that

terms which In to end channel then the should I is say rebates that September on calendar. partner XX of seasonal from more what transitioned year, is of the we a

the XXXX good depending in might against targets bad, either QX So or catch year upon be where there be financial will some results up, the what indicate.

consistent programs offered, based some alongside our say expectations they're set I obviously, would upon they've of in with terms volume we partners. with In what past, our channel the that with been

I meaningfully to anything wouldn't change for really there. look So year-on-year

I'd expecting and the promotional expectation such I promotional terms since answering a have some I through missed environment we Andrew. was post-pandemic to as demand with know say, on that market I see commercial to I there. the pre-XXXX back when experienced period In had some our this or the share, we're for pandemic indicated where activities, what pandemic. I working into that's channel here more really need end question normalized there again, we're say, activity, pre-pandemic that and would team, normal was you there'll of dismissed some I'm of more creation through the be the looking in the couple that things promotional the really industry

Eifion Jones

a me Andrew. let go quickly just few points, through Yes,

price of rest just rebate QX Yes, America anomaly world. The QX. positive think off. us. does slightly price contribution and return X% to North than we in When realization a close price is Europe in behind XXXX in the net assume net I higher it to apparent of that was

approximately year, X% For XXXX. the full we're at for

us. that behind anomaly is So

the overall to 'XX. inflation increase year. And the inflation get expectations guide, on forward X% of for QX haven't, we're better up as of we'll price going when it year, we that our make in closer for determination matches get that any we contemplated terms in visibility guiding further next against In our get we

W. Andrew Carter

every I questions got many asking and of single You've I have too with point, habit bad that, a one. apologize

one. -- because in simple. with ask COGS or FX kind I've X.X%. your guess are the That's there of anything X%. I the matching just on to kind implied real that is got of of down assuming X.X% you just got what I've guess essentially costs materials underlying I'll it volume are X.X%, outlook second material implies down So that to kind your of at X.X% minus on inflation that outlook, in neutral I year-over-year. outlook

Eifion Jones

lean really back a I a there of last sure. we months, to the great done to underlying things going we're to job footprint. manufacturing have got locations. in We've mean, we're to we've but inflation manufacturing, haven't doing over and be good Yes, manufacturing drive the a across legacy our through XX number assumed X%, manufacturing continue efficiencies -- before come principles

manufacturing a our through some We consolidation that of gone Spain and benefits. one, we've Europe. yield will facilities in program in consolidated X into Additionally,

fully facility. once So that we commission

development we're to neutrality. cost to price a lot maintaining despite realize So doing continue positive gross margin

Operator

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

Nigel Coe

here. kind of a Just couple clarifications of

about So Kevin, U.S. comments between your on international. expectations based and

just -- to down, sorry, inventory the year bets prior single from sure here. It want the X, seems units mid-single-digit like we're the this correct. the discretionary maybe -- with points there talk math looking digit make is at in of that therefore, X about sort zone of mid-single sell-through down guidance discretionary and down So in benefit drawdown. I

is -- mentioned you the question prepared remarks. really the about first your control slides throughout my cost in But

Just recovery. or as kind margins investment to costs comp think up exact we in, Do might we that wondering, from of think about back other here? coming discretionary ramping increm about or need spending any

Kevin Holleran

the specifically that answered half. I I time a Again, a I'll hand first first you're just I'll Nigel, XXXX, it we walk the off the is guess, think headwind in I'll then this, in of Eifion I take address Yes, become didn't what it tailwind our the how to the on. doing guide. I think of second question, a through, spot what on may bit math part was

XXXX X% high XX% single-digit, at So from could in reversing it or you then down the X% range again, again, see when global negative potentially on tailwind and X range. look maybe points volume We Overall, deep of the price. to the that X% FX. decline. the in see stock We

you think tie when Nigel. should were you all backing what into question, I ask that So out the to

after then, and Nigel? can repeat you and sorry, So the Nigel. you Yes, fading second out, in

Nigel Coe

Yes.

discretionary cost So it's about the control.

the X You recovery, But which investment margins obviously cetera, of to there just need way comp, have a the control, spending cost that we consider is you exec as anything incremental natural mentioned might on as things are. when terms in discretionary et much you about back expand thinking are up.

Eifion Jones

Yes.

contemplates to So in adjusted million compensation. planning -- research, of the includes base over we that. over X go is It with very the given. to to platform the across $XXX personnel, the point also the that I about it there, $XXX we has within where also we're contemplated the been think fully in reinvest than make the growth some we're that do at that in EBITDA mean cost XXXX, and next line. not and to we've the for around invested line our to kept But to the year-over-year, that yet level year forward have technology given million increase in all XX% the G&A that I sales continuing generic. In years guidance put we've We're costs invest do drive plans product a sure and we thematic need going here guidance at to line. investing to in expenditures the into top as G&A. We continue be greater development we the was will including methodical in on

Nigel Coe

then reduction And priority debt follow-on. of The cash million. is assuming a $XXX free flow in the XXXX. Great. quick I'm

your in that million embedded guide interest guidance? debt $XXX is in deployed expense So reduction, that the does the

Eifion Jones

generation the So obviously which flow free in considers debt the the reduction operations, business. cash in from aggressive flow net cash an contemplates position

will primarily to continue at that debt. business degree, end day, invested demonstrated of you the cash also modest tax inventory determination over once tackle at conversion flow we of take interest capital CapEx, million of considered gross the the be a reflects we the accumulated cash earn $XXX improvement, before. But earnings how certainly, We make and very and and on the will free a in course EBITDA the working XXXX. But to the as a out

Operator

question comes with Jadrosich the of next Rafe America. line of from Our Bank

Rafe Jadrosich

growth longer really up over following have forward in think going And think here, 'XX. decrementals if do we a do last term, about from into been impressive the the does year? and incrementals margin on volume just how Nigel's gross year or How kind then question, improve half the First, second of either EBITDA perspective? we the of

Eifion Jones

Most comes recently, is high to incrementals incremental XXs. achieve the through better, what the mean say we've and we've Yes. have least at the it strive be discipline better both if would SG&A cost to the investments. done historically, and in in back what manufacturing than incremental side moved used not I decrementals, historically, that. I all business on purposeful we to we as

be And to so firm the a bit a certainly to look hesitant figure, give you we historicals. but

Rafe Jadrosich

estimated was And you think you sellout can the talk quarter, you've Did then sort in -- that destock for come number, the given just the expecting? think, of initially last XXXX what of a sell-in? full year what about on I I $XXX. were about versus

Eifion Jones

Yes.

get globe. So sell-out information don't across perfect we the

that we what that period. Again, XXXX, guidance really globe we is what is million given type brought over we'd now, in we've back was across or days are destock in the we've right hand, that triangulate the now business. XXXX. of us. But know U.S. those do there out to historical just destock the And achieved that our Kevin have $XXX uncertainty of repeating of the number do not entirety meaningful with what report XXXX XX% we approximately of to So which to that, through. information and largely upon into comfortable is the say feel macro based Yes, of destock, got that some time that's we what kind of was on put the in coming

Rafe Jadrosich

for one, on or the and the just deleverage the bridge to just maybe where slight takes you on just are of Can flattish it like are like what you guiding very what SG&A, -- puts And -- year-over-year? us quickly leverage, last you're looks sort getting SG&A?

Eifion Jones

Yes.

So built we general up team have and years. over the progressively administrative team, our last our X G&A

that. on leverage to continue we'll so And

We some made we out business out couple inflation. slightly have discrete exited And into investments over 'XX, but an over specifically team regard. maybe G&A, we intelligence where given the that have do that around opportunity on recently in investment a really look years. to next now our that built but of just for capabilities. We've we of G&A great hold leverage base

we manufacturing go And opportunity that we as of a continuing well cost. leverage we as as capacity to on latent margin continue a manufacturing reduce strategies good so base, have then amount great for to obviously, be cost in forward. And will tap can to into that lean the execute

Operator

over floor back for to Holleran, the comments. at time. closing would have I further Mr. like no we to turn you questions

Kevin Holleran

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

team work, you any dedication to of deliver if the around stakeholders forward may very talking questions, employees you be the Our and without hard call. world. now on the our is in you we Thanks, navigate look our quarter our possible to business partners earnings positioned end contact years well Please first value Christine, and follow-up call. the again have the near-term for our resilience to challenges This and wouldn't the ahead. and

Operator

and Ladies teleconference. gentlemen, does this conclude today's

disconnect this your time. Thank at and may day. wonderful lines a your you participation, for have You

Hayward (HAYW) 29 Feb 242023 Q4 Earnings call transcript