Pez Saini

Pez Saini, on behalf of Mike Halloran, asked for an update on Hayward's M&A funnel, focusing on opportunities in residential and commercial pools, and the newly mentioned flow control business. He also sought details on the success of the Clor King acquisition, specifically its expanded reach within distribution channels and the ability to cross-sell legacy Hayward products into the commercial market.

Answer

Kevin Holleran, President and CEO, noted that Hayward's de-leveraged balance sheet positions them well for M&A. He highlighted aspirations for commercial as a growth platform and increased strategic attention on the industrial flow control business. Regarding Clor King, Mr. Holleran reported success in cross-selling across Class A and Class B commercial pools, leveraging relationships with architects, engineering firms, and specialized distribution gained through the acquisition.

Pez Saini, on behalf of Mike Halloran, followed up on capital allocation, specifically asking about the M&A funnel across residential, commercial, and flow control, its actionability, and current valuation trends. He also sought an update on the success of the ChlorKing acquisition in expanding reach and cross-selling, and pushing legacy Hayward products into the commercial market.

Answer

Kevin Holleran, President and CEO, stated that Hayward's de-leveraged position opens new M&A opportunities. He noted the success of the ChlorKing acquisition in bolstering the commercial business and mentioned active diligence for residential and commercial targets. The industrial flow control business is also receiving increased strategic attention for both organic and inorganic growth. Mr. Holleran confirmed cross-selling success with ChlorKing, integrating existing commercial teams and leveraging relationships with architects and engineers to expand into Class A commercial pools, a previous gap for Hayward.

Pez Saini asked for an update on the M&A funnel, including changes in actionability and pricing expectations over the last 12 months, and the mix of hygienic/environmental versus drinking water opportunities. He also inquired about the company's aspirations for residential drinking water beyond the LIV EZ product, considering internal development versus external opportunities.

Answer

CEO Todd Adams indicated the M&A funnel's bottom hasn't changed much, but the top has modestly grown over the last 12 months. He emphasized evaluating M&A through the lens of return on invested capital and synergies, noting the funnel is broad across flow systems, valving, and drinking water. Mr. Adams clarified that the appetite for residential filtration is not high, viewing the LIV EZ product as an extension to a relatively small market for testing and learning, rather than a significant strategic move into residential filtration.

Pez Saini asked for an update on the M&A funnel, specifically how actionability and pricing expectations have evolved over the last 12 months, and the mix of hygienic/environmental versus drinking water opportunities. He also inquired about the company's broader aspirations for residential drinking water applications beyond the LIV EZ product.

Answer

Todd Adams, Chairman and CEO, noted that the M&A funnel hasn't changed much at the bottom, but the top has modestly grown over the last 12 months. He emphasized evaluating M&A through the lens of return on invested capital and synergies, and that the funnel is broad, including flow systems and valving, not just drinking water. Regarding residential drinking water, Mr. Adams clarified that the LIV EZ is an extension to a relatively small market for testing design and technology, and the appetite for wading into residential filtration in a meaningful way is not high.

Pez Saini, on for Mike Halloran, inquired about Mueller's capital allocation priorities, including the M&A pipeline and potential for large organic investments, given the strong balance sheet. He also asked for an update on the residential construction outlook based on recent customer discussions.

Answer

CEO Marietta Zakas confirmed that capital allocation will continue to balance shareholder returns (dividends, buybacks) with strategic investments. She noted that acquisitions remain a key focus, particularly bolt-ons that leverage existing distribution and manufacturing. President and COO Paul McAndrew described the residential construction market as normalized and healthy, with resilient demand and disciplined investment from homebuilders, a view incorporated into the FY25 guidance.