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HH

Hayward Holdings, Inc. (HAYW)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was ahead of expectations: revenue $228.8M (+8% y/y), adjusted EBITDA $49.1M (+9% y/y), and adjusted diluted EPS $0.10 (+25% y/y) on gross margin of 49.5% (+30 bps y/y). Management confirmed FY25 guidance. The aftermarket (≈80% of sales) remained resilient, while new/remodel stayed pressured by macro and tariffs .
  • Significant beats vs S&P consensus: revenue beat by ~$15.5M; Primary EPS beat; EBITDA beat. Strong execution, pricing, and ChlorKing integration drove the upside. Net leverage held at 2.8x in Q1, supported by working capital initiatives (AR sale) and cash discipline *.
  • Tariffs are a key narrative: management quantified a partial-year 2025 impact of ~$30M (annualized ~$85M at prior rates) and outlined mitigation via price (+3% late April, +4% mid-June initially), supply chain re-sourcing (China direct COGS from ~10% to ~3% by year-end), and productivity—catalysts for margin defense and stock sentiment around execution certainty .
  • Product innovation is a positive catalyst: the launch of OmniX (IoT automation for the installed base) supports aftermarket content per pad and technology adoption, while commercial growth benefits from ChlorKing; both pillars fuel medium-term mix and margin trajectory .

What Went Well and What Went Wrong

  • What Went Well
    • Broad-based top-line strength: North America net sales +8% to $187.1M; Europe & Rest of World +7% to $41.8M, with positive price and volume in both segments .
    • Profitability and margin expansion: gross margin 49.5% (+30 bps y/y), adjusted EBITDA margin 21.5% (+30 bps y/y), driven by pricing and operational improvements; adjusted diluted EPS up 25% to $0.10 .
    • Strategic innovation: “OmniX” platform launched to cost-effectively automate non-automated pools, enabling stepwise ecosystem build and aftermarket monetization. “OmniX embeds control in key products” and “provides a far more cost-effective, simpler path to automation” .
  • What Went Wrong
    • Macro/new & remodel softness: discretionary demand remained tempered; management expects continued pressure in discretionary elements even as nondiscretionary maintenance holds. Q&A flagged rising parts mix (repair vs replace) .
    • Tariff headwinds: management quantified a sizable annualized tariff exposure, requiring out-of-cycle pricing and re-sourcing; effective mitigation is in progress but introduces execution risk and near-term gross margin percentage moderation .
    • Europe & Rest of World margin mix: despite volume growth, ERW gross margin lagged NA; sequential improvement was noted, but structural and geopolitical factors remain headwinds .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$212.6 $327.0 $228.8
Diluted EPS (GAAP) ($)$0.04 —$0.06
Adjusted Diluted EPS ($)$0.08 $0.27 $0.10
Gross Margin %49.2% 51.4% 49.5%
Adjusted EBITDA ($USD Millions)$45.0 $99.0 $49.1
Adjusted EBITDA Margin %21.2% 30.2% 21.5%

Segment performance (Q1 2025 only):

MetricNorth AmericaEurope & Rest of World
Net Sales ($USD Millions)$187.1 $41.8
Segment Income ($USD Millions)$43.5 $6.5
Adjusted Segment Income ($USD Millions)$50.7 $7.0
Adjusted Segment Income Margin %27.1% 16.6%

KPIs (Q1 2025):

KPIQ1 2025
Cash and Equivalents ($USD Millions)$181.3
Cash from Operations ($USD Millions)$(5.9)
Net Leverage (Net Debt/Adj EBITDA)2.8x
Inventories ($USD Millions)$233.2
Total Liquidity ($USD Millions) (Cash + ABL availability)~$398
Effective Tax Rate23.3%

Q1 2025 vs S&P Global consensus (beats in bold):

MetricS&P Consensus (Q1 2025)Actual Q1 2025
Revenue ($USD Millions)$213.4*$228.8
Primary EPS ($)$0.085*$0.10
EBITDA ($USD Millions)$42.7*$47.1 (EBITDA) / $49.1 (Adj. EBITDA)

Values with asterisk were retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
Net Sales ($USD Billions)FY 2025$1.060 – $1.100 $1.060 – $1.100 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$280 – $290 $280 – $290 Maintained
Net Price ContributionFY 2025~2%–3% (pre-tariff) ~5%–6% (with out-of-cycle +3% late April; +4% mid-June initially) Raised
Free Cash Flow ($USD Millions)FY 2025~$160 ~$150 (≥100% NI conversion) Lowered

Additional context: Management confirmed guidance despite tariff uncertainty and detailed mitigation actions (pricing, sourcing shift, productivity) to protect margins .

Earnings Call Themes & Trends

TopicQ-2 (Q3 2024)Q-1 (Q4 2024)Current (Q1 2025)Trend
Tariffs/MacroImport exposure ~10–15% of COGS; price discipline; NA +5%, ERW -7% New tariff headlines (China/Mexico/Canada); assessment underway Estimated ~$85M annualized tariff; ~$30M partial-year; mitigation via price and re-sourcing Intensifying headwinds with structured mitigations
Supply Chain/OperationsLean/automation; Spain footprint consolidation; margin gains Strong operational performance; capacity leverage potential Re-sourcing from China to U.S.; China direct COGS from ~10%→~3% by YE; utilization uplift Active reshoring and productivity focus
Technology/IoTOmniPro app adoption; microchannel temperature control unit New product innovation; OmniPro app; awards for innovation/operations OmniX launch to automate installed base cost-effectively Accelerating IoT-led aftermarket monetization
Product CategoriesCore categories strength; ERW mix headwinds Volume/price driving margins; commercial build Pumps, lighting, automation, sanitization strong; commercial growth Core aftermarket + commercial momentum
Regional TrendsNA +5%; ERW -7% NA +20%; ERW +2% NA +8%; ERW +7% ERW improving; NA robust
Regulatory/Legal——Securities class action amended; derivative suit stayed pending motion; wrongful death settlement funded by insurance Legal overhang being managed
R&D/EngineeringValue-based pricing; SKU rationalization initiatives RD&E +5% in FY24 to $26M; pipeline healthy RD&E $6.0M in Q1 (3% of sales); advanced engineering team Sustained investment
Commercial ExpansionChlorKing first full quarter; synergy plans ChlorKing acquisition accretive; commercial build-out Commercial sales doubling y/y in NA; strong profitability Structural growth leg

Management Commentary

  • “I’m pleased to report first quarter results exceeded expectations… Net sales increased 8% with growth across both segments… gross profit margins increasing to 49.5% and adjusted EBITDA margins increasing to 21.5%.” — Kevin Holleran, CEO .
  • “We are aggressively executing our plans to mitigate the impact of tariffs… We expect our direct sourcing from China into the U.S. as a percentage of cost of goods sold to decline from approximately 10% to 3% by year-end.” — Kevin Holleran .
  • “OmniX… is a decentralized wireless platform, eliminating the need for a stand-alone control unit… provides a far more cost-effective, simpler path to automation.” — Kevin Holleran .
  • “Net debt to adjusted EBITDA improved significantly… Total liquidity at the end of the first quarter was $398 million… We have no near-term maturities on our debt.” — Eifion Jones, CFO .

Q&A Highlights

  • Tariff mitigation specifics: Annualized ~$85M exposure (mostly China); actions include re-sourcing tooling and assembly to U.S., supplier renegotiations, inventory prebuy, and out-of-cycle pricing. Expect China direct COGS to fall from ~10% to ~3% by YE .
  • Pricing breadth and inventory discipline: Increases applied broadly (not just tariff-impacted SKUs) to preserve full-line competitiveness; tighter caps on pre-buys to avoid destock risk later .
  • Channel inventory and sell-through: Days on hand appropriate; Q1 typical seasonality; March sell-out strong after slow start; April/June trends contemplated in guidance .
  • Margin levers and utilization: U.S. plants ~60% utilized; tariff-driven reshoring lifts utilization to high-60s while automation supports BOM reductions and structural margin gains .
  • Repair vs replace mix: Parts revenue up; some consumers repairing motors/wet ends instead of full replacements amid pricing/tariff environment .

Estimates Context

  • Q1 2025 actuals beat S&P consensus across revenue, Primary EPS, and EBITDA. Management outperformance was driven by pricing realization, volume timing (March strength), and ChlorKing integration synergies *.
  • With out-of-cycle pricing and mitigations, Street models likely need to reflect higher net price contribution (~5–6%) and resilient aftermarket maintenance, partially offset by continued discretionary softness and tariff-driven gross margin percentage moderation near term *.

Values with asterisk were retrieved from S&P Global.

Key Takeaways for Investors

  • Execution under uncertainty: The company delivered a clean beat and confirmed FY25 guidance while transparently quantifying tariff headwinds and articulating credible mitigations (pricing, re-sourcing, productivity)—supporting confidence in near-term margin defense .
  • Aftermarket-driven resilience: With ~80% of sales tied to nondiscretionary maintenance and early OmniX adoption, Hayward’s installed base monetization and tech content per pad are structurally supportive of medium-term revenue/margin .
  • Commercial growth leg: ChlorKing integration is scaling commercial exposure, with NA commercial sales roughly doubling y/y and strong profitability—an underappreciated driver of mix and returns .
  • Near-term watch items: Parts mix (repair vs replace), ERW margin progression, and gross margin percentage moderation from tariff price mechanics (price lifts gross but GP$ protected)—monitor cadence through Q2/Q3 updates .
  • Capital discipline: Liquidity is ample, net leverage 2.8x, and cash conversion improved via AR sales; minimal near-term maturities reduce balance sheet risk as capex funds automation and re-sourcing .
  • Trading setup: Narrative catalysts include demonstrated tariff mitigation, OmniX momentum, and any incremental guidance refinement (net sales low-end raise occurred later in Q2). Evidence of discretionary improvement (permits/existing home turnover) would be a notable upside signal .