Hayward Holdings Reports Growth Despite Market Challenges

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Hayward Holdings Reports Growth Despite Market Challenges

Well-known pool equipment manufacturer Hayward Holdings showcased robust financial performance during its conference call revealing the financial results for the third quarter of 2024. The company reported a 3% increase in net sales, reaching $228 million. This growth was significantly aided by the acquisition of ChlorKing and innovative product launches.

Adjusted EBITDA rose by 8% to $51 million, while gross profit margin expanded to 49.7%. Despite declines in European and other global markets, sales in North America increased by 5%. The full-year forecast was raised, expecting net sales growth of 3% to 5%, and adjusted EBITDA growth between 5% and 9%. The company’s focus on the after-sales segment and efforts to enhance customer experience, combined with effective capital allocation strategies, position it advantageously for sustained growth in a challenging economic environment.

Key Points:

  • Net sales increased by 3% year-over-year to reach $228 million.
  • Gross profit margin expanded to 49.7%, marking growth for the seventh consecutive quarter.
  • Adjusted EBITDA climbed to $51 million, with a margin of 22.5%.
  • Full-year guidance was raised, expecting net sales growth of 3% to 5% and adjusted EBITDA growth of 5% to 9%.
  • North American sales grew by 5%, while a 7% decline was observed in Europe and other global markets.
  • The company reduced its net debt/adjusted EBITDA ratio from 3.9x to 2.8x.
  • Total liquidity was reported at $388 million, with a 27% increase in cash flow from operating activities year-to-date.
  • Projected free cash flow for 2024 is approximately $160 million.
  • The after-sales segment is performing well, contributing over 50% of total revenue.

Company Outlook:

  • The sales forecast for 2024 has been raised, targeting net sales of $1.02 billion to $1.04 billion.
  • Adjusted EBITDA is expected to reach between $260 million and $270 million, representing a growth of 5% to 9%.
  • The focus remains on organic and inorganic growth, including potential strategic acquisitions and share buybacks.
  • While the after-sales segment continues to be a strong focus, challenges are being faced in new construction and renovation segments, particularly internationally.

Negative Aspects:

  • Discretionary markets are expected to contract by approximately 15% in North America and 25% internationally.
  • New construction and large renovation segments continue to encounter challenges.
  • A cautious approach is being adopted regarding orders in Europe and other international regions.

Positive Aspects:

  • Strong participation in early purchase programs is expected to lead to higher shipments in Q4.
  • Gross margins have improved significantly since 2022 and are expected to be sustainable.
  • Management is confident in navigating challenges and continuing to deliver value to stakeholders.

Shortcomings:

  • Construction trends indicate that the number of new pools is expected to decline to approximately 60,000 in 2024 compared to previous years.

Q&A Highlights:

  • The company prioritizes disaster relief orders and maintains a positive outlook for 2025.
  • 85% of produced goods are manufactured in North America and Western Europe, reducing tariff risks.
  • The company is confident in its strategies and ability to address market challenges.

Hayward Holdings (ticker not specified) is navigating through a complex market environment, continuing to grow by leveraging its strong position in North America and strategic initiatives. The company’s solid financial metrics and proactive approach to market challenges underscore its resilience and commitment to creating shareholder value in a volatile economic climate.

InvestingPro Forecasts: The recent financial performance of Hayward Holdings (HAYW) aligns with several key metrics and forecasts from InvestingPro. The impressive gross profit margin of 49.7% highlighted in the company's conference call is corroborated by InvestingPro data showing a gross profit margin of 49.43% for the trailing twelve months as of the second quarter of 2024. This consistent performance in margin expansion supports the company's ability to maintain profitability even in challenging market conditions.

InvestingPro insights indicate that Hayward is trading near its 52-week high, reflecting positive market response to the company’s upgraded outlook and strong performance in North America. The stock's total return of 36.26% over the past year further emphasizes investor confidence in Hayward's strategic direction and financial health.

Additionally, the company’s focus on effective capital allocation and debt reduction is clearly highlighted in InvestingPro insights, indicating that Hayward operates with moderate debt levels. This is particularly significant given that the company reduced its net debt/adjusted EBITDA ratio from 3.9x to 2.8x as mentioned in the conference call.

While Hayward displays strong performance, it is important to note that it trades at a high P/E ratio of 37.65, indicating that investors are pricing in expectations for future growth. This valuation metric aligns with InvestingPro insights that highlight Hayward is being valued at a high earnings multiple.

For investors seeking a more comprehensive analysis, InvestingPro offers additional insights and forecasts beyond those mentioned here. In fact, there are ten more InvestingPro insights available for Hayward Holdings, providing a deeper understanding of the company’s financial position and market outlook.