HAYW Hayward Holdings Inc

THIRD QUARTER FISCAL 2024 SUMMARY

• Net Sales increased 3% year-over-year to $227.6 million
• Net Income increased 40% year-over-year to $16.5 million
• Adjusted EBITDA* increased 8% year-over-year to $51.1 million
• Diluted EPS increased 40% year-over-year to $0.07 and adjusted diluted EPS* increased 22% year-over-year to $0.11
• Year-to-date cash flow from operations increased 27% year-over-year to $275.8 million

Hayward Holdings, Inc. (NYSE: HAYW) (“Hayward” or the “Company”), a global designer, manufacturer and marketer of a broad portfolio of pool and outdoor living technology, today announced financial results for the third quarter ended September 28, 2024 of its fiscal year 2024. Comparisons are to financial results for the prior-year third fiscal quarter.

CEO COMMENTS

“I am pleased to report third quarter results consistent with expectations,” said Kevin Holleran, Hayward’s President and Chief Executive Officer. “We delivered sales and earnings growth, strong gross profit margin expansion, and increased cash flow. This performance enabled us to reduce net leverage into our targeted range. ChlorKing performed well in the first full quarter of ownership, and we are already seeing the synergies of the integration with Hayward’s existing commercial pool business. The early buy program is progressing in line with our expected participation. We continue to execute our growth strategy by advancing our technology leadership position with innovative connected pool solutions, leveraging our culture of continuous improvement and operational excellence, and expanding customer relationships. We are updating our 2024 outlook to reflect modestly improved sales and profitability.”

THIRD QUARTER FISCAL 2024 CONSOLIDATED RESULTS

Net sales increased by 3% to $227.6 million for the third quarter of fiscal 2024. The increase in net sales during the quarter was the result of positive net price impact including normalized allowances and discounts and the positive impact from acquisitions, partially offset by reduced volumes. The decrease in volume resulted from market declines in the Middle East and Asia and lower new construction and remodel activity in the U.S.

Gross profit increased by 7% to $113.1 million for the third quarter of fiscal 2024. Gross profit margin increased 190 basis points to 49.7%. The increase in gross profit margin was primarily due to operational efficiencies in our manufacturing facilities and net price increases, including normalized allowances and discounts, partially offset by a non-cash increase to cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business.

Selling, general, and administrative expense (“SG&A”) increased by 9% to $64.5 million for the third quarter of fiscal 2024. The increase in SG&A was primarily due to higher salary costs driven by wage inflation and investments in our customer care and selling teams, discrete legal expenses and increased professional service costs. As a percentage of net sales, SG&A increased 130 basis points to 28.3%, compared to the prior-year period of 27.0%, driven by the factors discussed above. Research, development, and engineering expenses were $6.4 million for the third quarter of fiscal 2024, or 3% of net sales, as compared to $6.2 million for the prior-year period, or 3% of net sales.

Operating income increased by 16% to $33.4 million for the third quarter of fiscal 2024, due to the aggregated effects of the items described above. Operating income as a percentage of net sales (“operating margin”) was 14.7% for the third quarter of fiscal 2024, a 160 basis point increase from the 13.1% operating margin in the prior-year period.

Interest expense, net, decreased by 24% to $13.2 million for the third quarter of fiscal 2024 primarily due to the repayment of the Incremental Term Loan B principal balance in April 2024 and higher interest income on cash investment balances.

Income tax expense for the third quarter of fiscal 2024 was $4.4 million, for an effective tax rate of 21.1%, compared to an income tax benefit of $2.3 million, for an effective tax rate of (23.7)%, for the prior-year period. The change in the effective tax rate was primarily due to the exercise of stock options, the release of the valuation allowance against foreign tax credit carryovers and return-to-provision adjustments during the prior-year period.

Net income increased by 40% to $16.5 million for the third quarter of fiscal 2024. Net income margin expanded 190 basis points to 7.3%.

Adjusted EBITDA* increased by 8% to $51.1 million for the third quarter of fiscal 2024 from $47.2 million in the prior-year period. Adjusted EBITDA margin* expanded 110 basis points to 22.5%.

Diluted EPS increased by 40% to $0.07 for the third quarter of fiscal 2024. Adjusted diluted EPS* increased by 22% to $0.11 for the third quarter of fiscal 2024.

THIRD QUARTER FISCAL 2024 SEGMENT RESULTS

North America

Net sales increased by 5% to $195.0 million for the third quarter of fiscal 2024. The increase was driven by positive net price impact including normalized allowances and discounts, the positive impact from acquisitions and volume growth in Canada, partially offset by a decline in volume in the US due to lower new construction and remodels.

Segment income increased by 29% to $51.6 million for the third quarter of fiscal 2024. Adjusted segment income* increased by 29% to $59.5 million.

Europe & Rest of World

Net sales decreased by 7% to $32.6 million for the third quarter of fiscal 2024. The decline was primarily due to a decline in volume, partially offset by the favorable impact of net price. The decline in volume is driven primarily by market declines in the Middle East and Asia.

Segment income decreased by 61% to $2.5 million for the third quarter of fiscal 2024. Adjusted segment income* decreased by 59% to $2.7 million.

BALANCE SHEET AND CASH FLOW

As of September 28, 2024, Hayward had cash and cash equivalents of $274.2 million and approximately $114.3 million available for future borrowings under its revolving credit facilities. Cash flow provided by operations for the nine months ended September 28, 2024 of $275.8 million was an increase of $58.8 million from the prior-year period. The increase in cash provided was primarily driven by greater cash generated by working capital compared to the prior-year period and due to an increase in net income.

OUTLOOK

Hayward is refining its full-year 2024 guidance ranges to reflect continued strong execution resulting in modestly improved sales and profitability. For fiscal year 2024, Hayward now expects net sales of $1.020 billion to $1.040 billion, or an increase of approximately 3% to 5% from fiscal year 2023, compared to our prior guidance of $1.010 billion to $1.040 billion. We now expect Adjusted EBITDA* of $260 million to $270 million, or an increase of approximately 5% to 9% from fiscal year 2023, compared to our prior guidance of $255 million to $270 million.

The pool industry remains attractive and benefits from sustainable secular demand trends in outdoor living. Hayward continues to leverage its competitive advantages and drive increasing adoption of its leading SmartPad™ pool equipment products both in new construction and the aftermarket, which has historically represented approximately 80% of net sales. Hayward is confident in its long-term outlook for profitable growth and robust cash flow generation, driven by its technology leadership, operational excellence, strong brand and installed base, and multi-channel capabilities.

Please see the Forward-Looking Statements section of this release for a discussion of certain risks relevant to Hayward’s outlook.

CONFERENCE CALL INFORMATION

Hayward will hold a conference call to discuss the results today, October 29, 2024 at 9:00 a.m. (ET).

Interested investors and other parties can listen to a webcast of the live conference call by logging onto the Investor Relations section of the Company’s website at https://investor.hayward.com/events-and-presentations/default.aspx. An earnings presentation will be posted to the Investor Relations section of the company’s website prior to the conference call.

The conference call can also be accessed by dialing (877) 423-9813 or (201) 689-8573.

For those unable to listen to the live conference call, a replay will be available approximately three hours after the call through the archived webcast on the Hayward website or by dialing (844) 512-2921 or (412) 317-6671. The access code for the replay is 13749102. The replay will be available until 11:59 p.m. Eastern Time on November 12, 2024.

ABOUT HAYWARD HOLDINGS, INC.

Hayward Holdings, Inc. (NYSE: HAYW) is a leading global designer and manufacturer of pool and outdoor living technology. With a mission to deliver exceptional products, outstanding service and innovative solutions to transform the experience of water, Hayward offers a full line of energy-efficient and sustainable residential and commercial pool equipment including pumps, heaters, sanitizers, filters, LED lighting, water features, and cleaners all digitally connected through Hayward’s intuitive IoT-enabled SmartPad™.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains certain statements that are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”) and releases issued by the Securities and Exchange Commission (the “SEC”). Such forward-looking statements relating to Hayward are based on the beliefs of Hayward’s management as well as assumptions made by, and information currently available to it. These forward-looking statements include, but are not limited to, statements about Hayward’s strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements contained in or incorporated by reference in this earnings release that are not historical facts. When used in this document, words such as “guidance,” “outlook,” “may,” “will,” “should,” “could,” “intend,” “potential,” “continue,” “anticipate,” “believe,” “estimate,” “expect,” “plan,” “target,” “predict,” “project,” “seek” and similar expressions as they relate to Hayward are intended to identify forward-looking statements. Hayward believes that it is important to communicate its future expectations to its stockholders, and it therefore makes forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that Hayward is not able to accurately predict or control, and actual results may differ materially from the expectations it describes in its forward-looking statements.

Examples of forward-looking statements include, among others, statements Hayward makes regarding: Hayward’s 2024 guidance and outlook; business plans and objectives; general economic and industry trends; business prospects; future product development and acquisition strategies; future channel stocking levels; and growth and expansion opportunities. The forward-looking statements in this earnings release are only predictions. Hayward may not achieve the plans, intentions or expectations disclosed in Hayward’s forward-looking statements, and you should not place significant reliance on its forward-looking statements. Hayward has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its business, financial condition and results of operations. Moreover, neither Hayward nor any other person assumes responsibility for the accuracy and completeness of forward-looking statements taken from third-party industry and market reports.

Important factors that could affect Hayward’s future results and could cause those results or other outcomes to differ materially from those indicated in its forward-looking statements include the following: its relationships with and the performance of distributors, builders, buying groups, retailers and servicers who sell Hayward’s products to pool owners; impacts on Hayward’s business from the sensitivity of its business to seasonality and unfavorable economic business and weather conditions; competition from national and global companies, as well as lower-cost manufacturers; Hayward’s ability to develop, manufacture and effectively and profitably market and sell its new planned and future products; its ability to execute on its growth strategies and expansion opportunities; Hayward’s exposure to credit risk on its accounts receivable, impacts on Hayward’s business from political, regulatory, economic, trade, and other risks associated with operating foreign businesses, including risks associated with geopolitical conflict; its ability to maintain favorable relationships with suppliers and manage disruptions to its global supply chain and the availability of raw materials; Hayward’s ability to identify emerging technological and other trends in its target end markets; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; its reliance on information technology systems and susceptibility to threats to those systems, including cybersecurity threats, and risks arising from its collection and use of personal information data; regulatory changes and developments affecting Hayward’s current and future products; volatility in currency exchange rates and interest rates; Hayward’s ability to service its existing indebtedness and obtain additional capital to finance operations and its growth opportunities; Hayward’s ability to establish, maintain and effectively enforce intellectual property protection for its products, as well as its ability to operate its business without infringing, misappropriating or otherwise violating the intellectual property rights of others; the impact of material cost and other inflation; Hayward’s ability to attract and retain senior management and other qualified personnel; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits, impact trade agreements and tariffs, or address the impacts of climate change; the outcome of litigation and governmental proceedings; impacts on Hayward’s product manufacturing disruptions, including as a result of catastrophic and other events beyond its control; uncertainties related to distribution channel inventory practices and the impact on net sales volumes; Hayward’s ability to realize cost savings from restructuring activities; Hayward’s and its customers’ ability to manage product inventory in an effective and efficient manner; and other factors set forth in Hayward’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

Many of these factors are macroeconomic in nature and are, therefore, beyond Hayward’s control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, Hayward’s actual results, performance or achievements may vary materially from those described in this earnings release as anticipated, believed, estimated, expected, intended, planned or projected. The forward-looking statements included in this earnings release are made only as of the date of this earnings release. Unless required by United States federal securities laws, Hayward neither intends nor assumes any obligation to update these forward-looking statements for any reason after the date of this earnings release to conform these statements to actual results or to changes in Hayward’s expectations.

*NON-GAAP FINANCIAL MEASURES

This earnings release includes certain financial measures not presented in accordance with the generally accepted accounting principles in the United States (“GAAP”) including adjusted net income, adjusted basic EPS, adjusted diluted EPS, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income and adjusted segment income margin. These financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results. Hayward believes these non-GAAP measures provide analysts, investors and other interested parties with additional insight into the underlying trends of its business and assist these parties in analyzing the Company’s performance across reporting periods on a consistent basis by excluding items that it does not believe are indicative of its core operating performance, which allows for a better comparison against historical results and expectations for future performance. Management uses these non-GAAP measures to understand and compare operating results across reporting periods for various purposes including internal budgeting and forecasting, short and long-term operating planning, employee incentive compensation, and debt compliance. Therefore, these measures should not be considered in isolation or as an alternative to net income, segment income or other measures of profitability, performance or financial condition under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly titled measures used by other companies, which may be defined and calculated differently. See the appendix for a reconciliation of historical non-GAAP measures to the most directly comparable GAAP measures.

Reconciliation of full fiscal year 2024 adjusted EBITDA outlook to the comparable GAAP measure is not being provided, as Hayward does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation. Adjusted EBITDA outlook for full year 2024 is calculated in a manner consistent with the historical presentation of this measure in the appendix.

Hayward Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

September 28, 2024

 

December 31, 2023

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

274,184

 

 

$

178,097

 

Short-term investments

 

 

—

 

 

 

25,000

 

Accounts receivable, net of allowances of $2,881 and $2,870, respectively

 

 

99,932

 

 

 

270,875

 

Inventories, net

 

 

229,363

 

 

 

215,180

 

Prepaid expenses

 

 

15,541

 

 

 

14,331

 

Income tax receivable

 

 

11,634

 

 

 

9,994

 

Other current assets

 

 

18,898

 

 

 

11,264

 

Total current assets

 

 

649,552

 

 

 

724,741

 

Property, plant, and equipment, net of accumulated depreciation of $108,726 and $95,917, respectively

 

 

164,654

 

 

 

158,979

 

Goodwill

 

 

953,175

 

 

 

935,013

 

Trademark

 

 

736,000

 

 

 

736,000

 

Customer relationships, net

 

 

209,836

 

 

 

206,308

 

Other intangibles, net

 

 

92,479

 

 

 

94,082

 

Other non-current assets

 

 

84,168

 

 

 

91,161

 

Total assets

 

$

2,889,864

 

 

$

2,946,284

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities

 

 

 

 

Current portion of long-term debt

 

$

14,079

 

 

$

15,088

 

Accounts payable

 

 

73,562

 

 

 

68,943

 

Accrued expenses and other liabilities

 

 

159,709

 

 

 

155,543

 

Income taxes payable

 

 

825

 

 

 

109

 

Total current liabilities

 

 

248,175

 

 

 

239,683

 

Long-term debt, net

 

 

959,906

 

 

 

1,079,280

 

Deferred tax liabilities, net

 

 

239,362

 

 

 

248,967

 

Other non-current liabilities

 

 

69,266

 

 

 

66,896

 

Total liabilities

 

 

1,516,709

 

 

 

1,634,826

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

Preferred stock, $0.001 par value, 100,000,000 authorized, no shares issued or outstanding as of September 28, 2024 and December 31, 2023

 

 

—

 

 

 

—

 

Common stock $0.001 par value, 750,000,000 authorized; 244,078,929 issued and 215,412,560 outstanding at September 28, 2024; 242,832,045 issued and 214,165,676 outstanding at December 31, 2023

 

 

244

 

 

 

243

 

Additional paid-in capital

 

 

1,089,782

 

 

 

1,080,894

 

Common stock in treasury; 28,666,369 and 28,666,369 at September 28, 2024 and December 31, 2023, respectively

 

 

(358,125

)

 

 

(357,755

)

Retained earnings

 

 

644,831

 

 

 

580,909

 

Accumulated other comprehensive income

 

 

(3,577

)

 

 

7,167

 

Total stockholders’ equity

 

 

1,373,155

 

 

 

1,311,458

 

Total liabilities, redeemable stock, and stockholders’ equity

 

$

2,889,864

 

 

$

2,946,284

 

Hayward Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

September 28, 2024

 

September 30, 2023

Net sales

 

$

227,569

 

 

$

220,304

 

 

$

724,531

 

 

$

713,983

 

Cost of sales

 

 

114,474

 

 

 

114,893

 

 

 

361,770

 

 

 

374,171

 

Gross profit

 

 

113,095

 

 

 

105,411

 

 

 

362,761

 

 

 

339,812

 

Selling, general and administrative expense

 

 

64,509

 

 

 

59,454

 

 

 

187,678

 

 

 

172,057

 

Research, development and engineering expense

 

 

6,449

 

 

 

6,177

 

 

 

18,870

 

 

 

19,027

 

Acquisition and restructuring related expense

 

 

1,145

 

 

 

3,348

 

 

 

2,488

 

 

 

6,220

Amortization of intangible assets

 

 

7,576

 

 

 

7,523

 

 

 

21,425

 

 

 

22,777

 

Operating income

 

 

33,416

 

 

 

28,909

 

 

 

132,300

 

 

 

119,731

 

Interest expense, net

 

 

13,209

 

 

 

17,448

 

 

 

48,600

 

 

 

55,939

 

Loss on debt extinguishment

 

 

—

 

 

 

—

 

 

 

4,926

 

 

 

—

 

Other (income) expense, net

 

 

(705

)

 

 

1,932

 

 

 

(1,989

)

 

 

1,798

 

Total other expense

 

 

12,504

 

 

 

19,380

 

 

 

51,537

 

 

 

57,737

 

Income from operations before income taxes

 

 

20,912

 

 

 

9,529

 

 

 

80,763

 

 

 

61,994

 

Provision (benefit) for income taxes

 

 

4,411

 

 

 

(2,259

)

 

 

16,841

 

 

 

12,343

 

Net income

 

$

16,501

 

 

$

11,788

 

 

$

63,922

 

 

$

49,651

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.06

 

 

$

0.30

 

 

$

0.23

 

Diluted

 

$

0.07

 

 

$

0.05

 

 

$

0.29

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

215,231,886

 

 

 

213,416,502

 

 

 

214,836,643

 

 

 

212,933,763

 

Diluted

 

 

221,436,206

 

 

 

220,863,228

 

 

 

221,251,355

 

 

 

220,634,232

 

Hayward Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

 

Nine Months Ended

 

September 28, 2024

 

September 30, 2023

Cash flows from operating activities

 

 

 

 

Net income

 

$

63,922

 

 

$

49,651

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

Depreciation

 

 

13,929

 

 

 

13,018

 

Amortization of intangible assets

 

 

26,299

 

 

 

27,803

 

Amortization of deferred debt issuance fees

 

 

3,248

 

 

 

3,458

 

Stock-based compensation

 

 

7,299

 

 

 

6,701

 

Deferred income taxes

 

 

(8,344

)

 

 

(5,965

)

Allowance for bad debts

 

 

(62

)

 

 

(906

)

Loss on debt extinguishment

 

 

4,926

 

 

 

—

 

(Gain) loss on sale of property, plant and equipment

 

 

(451

)

 

 

945

 

Changes in operating assets and liabilities

 

 

 

 

Accounts receivable

 

 

173,400

 

 

 

85,216

 

Inventories

 

 

(4,204

)

 

 

61,715

 

Other current and non-current assets

 

 

(6,203

)

 

 

9,500

 

Accounts payable

 

 

2,871

 

 

 

(6,265

)

Accrued expenses and other liabilities

 

 

(868

)

 

 

(27,934

)

Net cash provided by operating activities

 

 

275,762

 

 

 

216,937

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchases of property, plant, and equipment

 

 

(17,552

)

 

 

(22,623

)

Acquisitions, net of cash acquired

 

 

(61,636

)

 

 

—

 

Proceeds from sale of property, plant, and equipment

 

 

311

 

 

 

13

 

Proceeds from short-term investments

 

 

25,000

 

 

 

—

 

Net cash used in investing activities

 

 

(53,877

)

 

 

(22,610

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from revolving credit facility

 

 

—

 

 

 

144,100

 

Payments on revolving credit facility

 

 

—

 

 

 

(144,100

)

Proceeds from issuance of long-term debt

 

 

2,886

 

 

 

3,320

 

Payments of long-term debt

 

 

(129,971

)

 

 

(9,325

)

Proceeds from issuance of short-term notes payable

 

 

6,340

 

 

 

6,130

 

Payments of short-term notes payable

 

 

(4,676

)

 

 

(5,174

)

Other, net

 

 

(427

)

 

 

(149

)

Net cash used in financing activities

 

 

(125,848

)

 

 

(5,198

)

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

50

 

 

 

(1,061

)

Change in cash and cash equivalents

 

 

96,087

 

 

 

188,068

 

Cash and cash equivalents, beginning of period

 

 

178,097

 

 

 

56,177

 

Cash and cash equivalents, end of period

 

$

274,184

 

 

$

244,245

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

Cash paid-interest

 

$

47,965

 

 

$

56,438

 

Cash paid-income taxes

 

 

26,853

 

 

 

14,913

 

Equipment financed under finance leases

 

 

843

 

 

 

—

 

Reconciliations

Consolidated Reconciliations

Adjusted EBITDA and Adjusted EBITDA Margin Reconciliations (Non-GAAP)

Following is a reconciliation from net income to adjusted EBITDA:

(Dollars in thousands)

 

Three Months Ended

 

Nine Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

September 28, 2024

 

September 30, 2023

Net income

 

$

16,501

 

 

$

11,788

 

 

$

63,922

 

 

$

49,651

 

Depreciation

 

 

4,862

 

 

 

4,428

 

 

 

13,929

 

 

 

13,018

 

Amortization

 

 

9,253

 

 

 

9,260

 

 

 

26,299

 

 

 

27,803

Interest expense

 

 

13,209

 

 

 

17,448

 

 

 

48,600

 

 

 

55,939

 

Income taxes

 

 

4,411

 

 

 

(2,259

)

 

 

16,841

 

 

 

12,343

 

Loss on debt extinguishment

 

 

—

 

 

 

—

 

 

 

4,926

 

 

 

—

 

EBITDA

 

 

48,236

 

 

 

40,665

 

 

 

174,517

 

 

 

158,754

 

Stock-based compensation (a)

 

 

136

 

 

 

269

 

 

 

556

 

 

 

1,001

 

Currency exchange items (b)

 

 

(344

)

 

 

145

 

 

 

(470

)

 

 

1,276

 

Acquisition and restructuring related expense, net (c)

 

 

1,145

 

 

 

3,348

 

 

 

2,488

 

 

 

6,220

 

Other (d)

 

 

1,920

 

 

 

2,784

 

 

 

1,657

 

 

 

4,367

 

Total Adjustments

 

 

2,857

 

 

 

6,546

 

 

 

4,231

 

 

 

12,864

 

Adjusted EBITDA

 

$

51,093

 

 

$

47,211

 

 

$

178,748

 

 

$

171,618

 

 

 

 

 

 

 

 

 

 

Net income margin

 

 

7.3

%

 

 

5.4

%

 

 

8.8

%

 

 

7.0

%

Adjusted EBITDA margin

 

 

22.5

%

 

 

21.4

%

 

 

24.7

%

 

 

24.0

%

(a)

 

Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. The adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of Hayward’s initial public offering (the “IPO”).

 

(b)

 

Represents unrealized non-cash (gains) losses on foreign denominated monetary assets and liabilities and foreign currency contracts.

 

(c)

 

Adjustments in the three months ended September 28, 2024 are primarily driven by $0.7 million of transaction and integration costs associated with the acquisition of the ChlorKing business and $0.4 million of costs to finalize actions initiated in prior years. Adjustments in the three months ended September 30, 2023 are primarily driven by $1.9 million of separation costs associated with the centralization and consolidation of operations in Europe and $1.5 million of costs associated with the relocation of the corporate headquarters.

 

Adjustments in the nine months ended September 28, 2024 are primarily driven by $1.3 million of transaction and integration costs associated with the acquisition of ChlorKing, $0.7 million of separation and other costs associated with the centralization and consolidation of operations in Europe and $0.4 million of costs to finalize actions initiated in prior years. Adjustments in the nine months ended September 30, 2023 are primarily driven by $2.1 million of costs associated with the relocation of the corporate headquarters, $1.9 million of separation costs associated with the centralization and consolidation of operations in Europe, $1.3 million of separation costs associated with the enterprise cost-reduction program initiated in 2022 and $0.8 million of integration costs from prior acquisitions.

 

(d)

 

Adjustments in the three months ended September 28, 2024 are primarily driven by a $1.6 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business and $0.3 million of costs incurred related to litigation. Adjustments in the three months ended September 30, 2023 primarily include $1.9 million of costs related to inventory and fixed assets as part of the centralization and consolidation of operations in Europe and $0.8 million of costs incurred related to the selling stockholder offerings of shares during 2023, which are reported in SG&A in the unaudited condensed consolidated statement of operations

 

Adjustments in the nine months ended September 28, 2024 are primarily driven by a $1.6 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business and $0.5 million of costs incurred related to litigation, partially offset by $0.5 million of gains on the sale of assets. Adjustments in the nine months ended September 30, 2023 primarily includes $1.9 million of costs related to inventory and fixed assets as part of the centralization of operations in Europe, $1.5 million of costs associated with follow-on equity offerings, $0.4 million of transitional expenses incurred to enable go-forward public company regulatory compliance and other miscellaneous items the Company believes are not representative of its ongoing business operations.

Following is a reconciliation from net income to adjusted EBITDA for the last twelve months:

(Dollars in thousands)

 

Last Twelve Months(e)

 

Fiscal Year

 

 

September 28, 2024

 

December 31, 2023

Net income

 

$

94,958

 

 

$

80,687

 

Depreciation

 

 

16,894

 

 

 

15,983

 

Amortization

 

 

35,575

 

 

 

37,079

 

Interest expense

 

 

66,245

 

 

 

73,584

 

Income taxes

 

 

24,898

 

 

 

20,400

 

Loss on debt extinguishment

 

 

4,926

 

 

 

—

 

EBITDA

 

 

243,496

 

 

 

227,733

 

Stock-based compensation (a)

 

 

825

 

 

 

1,270

 

Currency exchange items (b)

 

 

(960

)

 

 

786

 

Acquisition and restructuring related expense, net (c)

 

 

9,481

 

 

 

13,213

 

Other (d)

 

 

1,561

 

 

 

4,271

 

Total Adjustments

 

 

10,907

 

 

 

19,540

 

Adjusted EBITDA

 

$

254,403

 

 

$

247,273

 

 

 

 

 

 

Net income margin

 

 

9.5

%

 

 

8.1

%

Adjusted EBITDA margin

 

 

25.4

%

 

 

24.9

%

(a)

 

Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. The adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO.

 

(b)

 

Represents unrealized non-cash (gains) losses on foreign denominated monetary assets and liabilities and foreign currency contracts.

 

(c)

 

Adjustments in the last twelve months ended September 28, 2024 primarily include $6.7 million of costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, $1.3 million of transaction and integration costs associated with the acquisition of ChlorKing, $1.2 million related to programs to centralize and consolidate operations and professional services in Europe and $0.3 million of costs to finalize actions initiated in prior years.

 

Adjustments in the year ended December 31, 2023 primarily include $6.7 million of costs related to the discontinuation of a product line leading to an impairment of the associated fixed assets, inventory and intangible assets, $2.4 million related to programs to centralize and consolidate operations and professional services in Europe, $1.9 million of costs associated with the relocation of the corporate headquarters, $1.2 million separation costs associated with the 2022 cost reduction program and $0.8 million of costs associated with integration costs from prior acquisitions.

 

(d)

 

Adjustments in the last twelve months ended September 28, 2024 are primarily driven by a $1.6 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business, $0.5 million of costs incurred related to litigation, partially offset by $0.5 million of gains on the sale of assets.

 

Adjustments in the year ended December 31, 2023 primarily include $1.8 million related to inventory and fixed asset write-offs in Europe and $1.5 million of costs incurred related to the selling stockholder offerings of shares in March, May and August 2023, which are reported in SG&A in our consolidated statements of operations.

 

(e)

 

Items for the last twelve months ended September 28, 2024 are calculated by adding the items for the nine months ended September 28, 2024 plus fiscal year ended December 31, 2023 and subtracting the items for the nine months ended September 30, 2023.

Adjusted Net Income and Adjusted EPS Reconciliation (Non-GAAP)

Following is a reconciliation of net income to adjusted net income and earnings per share to adjusted earnings per share:

(Dollars in thousands)

 

Three Months Ended

 

Nine Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

September 28, 2024

 

September 30, 2023

Net income

 

$

16,501

 

 

$

11,788

 

 

$

63,922

 

 

$

49,651

 

Tax adjustments (a)

 

 

(451

)

 

 

(4,401

)

 

 

(2,203

)

 

 

(2,905

)

Other adjustments and amortization:

 

 

 

 

 

 

 

 

Stock-based compensation (b)

 

 

136

 

 

 

269

 

 

 

556

 

 

 

1,001

 

Currency exchange items (c)

 

 

(344

)

 

 

145

 

 

 

(470

)

 

 

1,276

 

Acquisition and restructuring related expense, net (d)

 

 

1,145

 

 

 

3,348

 

 

 

2,488

 

 

 

6,220

 

Other (e)

 

 

1,920

 

 

 

2,784

 

 

 

1,657

 

 

 

4,367

 

Total other adjustments

 

 

2,857

 

 

 

6,546

 

 

 

4,231

 

 

 

12,864

 

Loss on debt extinguishment

 

 

—

 

 

 

—

 

 

 

4,926

 

 

 

—

 

Amortization

 

 

9,253

 

 

 

9,260

 

 

 

26,299

 

 

 

27,803

 

Tax effect (f)

 

 

(2,815

)

 

 

(3,554

)

 

 

(8,360

)

 

 

(9,838

)

Adjusted net income

 

$

25,345

 

 

$

19,639

 

 

$

88,815

 

 

$

77,575

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic

 

 

215,231,886

 

 

 

213,416,502

 

 

 

214,836,643

 

 

 

212,933,763

 

Weighted average number of common shares outstanding, diluted

 

 

221,436,206

 

 

 

220,863,228

 

 

 

221,251,355

 

 

 

220,634,232

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.08

 

 

$

0.06

 

 

$

0.30

 

 

$

0.23

 

Diluted EPS

 

$

0.07

 

 

$

0.05

 

 

$

0.29

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

Adjusted basic EPS

 

$

0.12

 

 

$

0.09

 

 

$

0.41

 

 

$

0.36

 

Adjusted diluted EPS

 

$

0.11

 

 

$

0.09

 

 

$

0.40

 

 

$

0.35

 

(a)

 

Tax adjustments for the three and nine months ended September 28, 2024 reflect a normalized tax rate of 23.2% and 22.5%, respectively, compared to the Company’s effective tax rate of 21.1% and 20.9%, respectively. The Company’s effective tax rate for the three months ended September 28, 2024 primarily includes the tax benefits resulting from stock compensation and the nine months ended September 28, 2024 additionally includes a tax benefit resulting from a return-to-provision adjustment. Tax adjustments for the three and nine months ended September 30, 2023 reflect a normalized tax rate of 22.5% and 24.2%, respectively, compared to the Company's effective tax rate of (23.7)% and 19.9%, respectively. The Company’s effective tax rate for the three months ended September 30, 2023 includes the tax benefits resulting from the exercise of stock options, the release of the valuation allowance against foreign tax credit carryovers and prior-period return-to-provision adjustments, while the nine months ended rate includes the aforementioned items, partially offset by the impact of a discrete tax expense related to a change in the indefinite reinvestment assertion for one jurisdiction.

 

(b)

 

Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. The adjustment includes only expense related to awards issued under the 2017 Equity Incentive Plan, which were awards granted prior to the effective date of the IPO.

 

(c)

 

Represents unrealized non-cash (gains) losses on foreign denominated monetary assets and liabilities and foreign currency contracts.

 

(d)

 

Adjustments in the three months ended September 28, 2024 are primarily driven by $0.7 million of transaction and integration costs associated with the acquisition of the ChlorKing business and $0.4 million of costs to finalize actions initiated in prior years. Adjustments in the three months ended September 30, 2023 are primarily driven by $1.9 million of separation costs associated with the centralization and consolidation of operations in Europe and $1.5 million of costs associated with the relocation of the corporate headquarters.

 

Adjustments in the nine months ended September 28, 2024 are primarily driven by $1.3 million of transaction and integration costs associated with the acquisition of ChlorKing, $0.7 million of separation and other costs associated with the centralization and consolidation of operations in Europe and $0.4 million of costs to finalize actions initiated in prior years. Adjustments in the nine months ended September 30, 2023 are primarily driven by $2.1 million of costs associated with the relocation of the corporate headquarters, $1.9 million of separation costs associated with the centralization and consolidation of operations in Europe, $1.3 million of separation costs associated with the enterprise cost-reduction program initiated in 2022 and $0.8 million of integration costs from prior acquisitions.

 

(e)

 

Adjustments in the three months ended September 28, 2024 are primarily driven by a $1.6 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business and $0.3 million of costs incurred related to litigation. Adjustments in the three months ended September 30, 2023 primarily include $1.9 million of costs related to inventory and fixed assets as part of the centralization and consolidation of operations in Europe and $0.8 million of costs incurred related to the selling stockholder offerings of shares during 2023, which are reported in SG&A in the unaudited condensed consolidated statement of operations

 

Adjustments in the nine months ended September 28, 2024 are primarily driven by a $1.6 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business and $0.5 million of costs incurred related to litigation, partially offset by $0.5 million of gains on the sale of assets. Adjustments in the nine months ended September 30, 2023 primarily includes $1.9 million of costs related to inventory and fixed assets as part of the centralization of operations in Europe, $1.5 million of costs associated with follow-on equity offerings, $0.4 million of transitional expenses incurred to enable go-forward public company regulatory compliance and other miscellaneous items the Company believes are not representative of its ongoing business operations.

 

(f)

 

The tax effect represents the immediately preceding adjustments at the normalized tax rates as discussed in footnote (a) above.

Segment Reconciliations

Following is a reconciliation from segment income to adjusted segment income for the North America (“NAM”) and Europe & Rest of World (“E&RW”) segments:

(Dollars in thousands)

 

Three Months Ended

 

Three Months Ended

 

 

September 28, 2024

 

September 30, 2023

 

 

NAM

 

E&RW

 

NAM

 

E&RW

Net sales

 

$

194,968

 

 

$

32,601

 

 

$

185,070

 

 

$

35,234

 

Gross profit

 

$

101,877

 

 

$

11,218

 

 

$

91,456

 

 

$

13,955

 

Gross profit margin %

 

 

52.3

%

 

 

34.4

%

 

 

49.4

%

 

 

39.6

%

 

 

 

 

 

 

 

 

 

Segment income

 

$

51,569

 

 

$

2,475

 

 

$

40,108

 

 

$

6,413

 

Depreciation

 

$

4,404

 

 

$

271

 

 

$

4,027

 

 

$

246

 

Amortization

 

 

1,677

 

 

 

—

 

 

 

1,738

 

 

 

—

 

Stock-based compensation

 

 

107

 

 

 

—

 

 

 

75

 

 

 

11

 

Other (a)

 

 

1,704

 

 

 

—

 

 

 

115

 

 

 

—

 

Total adjustments

 

 

7,892

 

 

 

271

 

 

 

5,955

 

 

 

257

 

Adjusted segment income

 

$

59,461

 

 

$

2,746

 

 

$

46,063

 

 

$

6,670

 

 

 

 

 

 

 

 

 

 

Segment income margin %

 

 

26.4

%

 

 

7.6

%

 

 

21.7

%

 

 

18.2

%

Adjusted segment income margin %

 

 

30.5

%

 

 

8.4

%

 

 

24.9

%

 

 

18.9

%

(a)

 

The three months ended September 28, 2024 primarily includes a $1.6 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business. The three months ended September 30, 2023 includes miscellaneous items the Company believes are not representative of its ongoing business operations.

(Dollars in thousands)

Nine Months Ended

 

Nine Months Ended

 

September 28, 2024

 

September 30, 2023

 

 

NAM

 

E&RW

 

NAM

 

E&RW

Net sales

 

$

609,510

 

 

$

115,021

 

 

$

585,126

 

 

$

128,857

 

Gross profit

 

$

319,184

 

 

$

43,577

 

 

$

288,911

 

 

$

50,901

 

Gross profit margin %

 

 

52.4

%

 

 

37.9

%

 

 

49.4

%

 

 

39.5

%

 

 

 

 

 

 

 

 

 

Segment income

 

$

166,646

 

 

$

16,800

 

 

$

144,346

 

 

$

25,647

 

Depreciation

 

$

12,619

 

 

$

791

 

 

$

11,952

 

 

$

694

 

Amortization

 

 

4,874

 

 

 

—

 

 

 

5,026

 

 

 

—

 

Stock-based compensation

 

 

176

 

 

 

10

 

 

 

417

 

 

 

34

 

Other (a)

 

 

1,723

 

 

 

—

 

 

 

503

 

 

 

—

 

Total adjustments

 

 

19,392

 

 

 

801

 

 

 

17,898

 

 

 

728

 

Adjusted segment income

 

$

186,038

 

 

$

17,601

 

 

$

162,244

 

 

$

26,375

 

 

 

 

 

 

 

 

 

 

Segment income margin %

 

 

27.3

%

 

 

14.6

%

 

 

24.7

%

 

 

19.9

%

Adjusted segment income margin %

 

 

30.5

%

 

 

15.3

%

 

 

27.7

%

 

 

20.5

%

(a)

 

The nine months ended September 28, 2024 primarily includes a $1.6 million non-cash increase in cost of goods sold resulting from the fair value inventory step-up adjustment recognized as part of the purchase accounting for the acquisition of the ChlorKing business. The nine months ended September 30, 2023 includes miscellaneous items the Company believes are not representative of its ongoing business operations.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241029460170/en/

Investor Relations: Kevin Maczka investor.relations@hayward.com

Media Relations: Stephanie Knight sknight@soleburystrat.com