Hayward (HAYW) 31 Oct 232023 Q3 Earnings call transcript

Welcome to Hayward Holdings' Third Quarter 2023 Earnings Call. My name is Svangel and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Kevin Maczka, Vice President, Investor Relations. Mr. Maczka, you may begin.

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

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

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

like call Kevin over turn would Holleran. to to I now the

third solid flow in expectations. with cash consistent to The highlighted results to Kevin, start profitability pleased Quarter morning, It's operating you, challenging a execution quarter today's welcome of environment with by Hayward's key Slide everyone. Thank our was to all I'm continued report with X Earnings my messages. good generation. you on pleasure and of I'll quarter and Third Call. earnings presentation strong

higher focus costs on basis products. XXX nearly freight through mix management a of manufacturing of technology expanded laser a and margins profit Gross points

effectively this flow Hayward flow by working approximately our reduced the accomplishment generation operations We we entire capital. year-to-date a characteristics cash increased also basis is This tremendous quarter. as robust a Cash again XX% on team. from demonstrated

resulting exceeded channel the our End met of distributor inventory. and expectations as our channel, sales in demand for further Hayward into sell-through products normalization defined

our to partners matching with XXXX the Hayward this and are by U.S., channel of pool channel primary normal enter reported to up with positions sales We in in season sell-through a return sets market. encouraged the to leaner inventory this

our business includes and capabilities. in during operational the the profitable innovative the with customers ongoing of strengthening and I'm footprint Hayward support challenging investments our products IoT to and in and pleased execute are to long-term industry-leading performance our development technology continues team operating We drive This consolidation, allowing quarter. our environment, growth. Overall, better further a with connected

updating we're market in more Middle specifically primarily the reflect East Canada, our increased are in guidance expectations. markets, in and Latin year-over-year primary line of U.S. to orders with trending Finally, Early our impact challenging certain America. conditions and buy in macro international

a have orders approach partners been in-season by anticipated, previously recent However, channel of ahead reflecting cautious than softer XXXX.

of full XX% we now a million. we EBITDA XXXX, XX% single trajectory expect to mid- last $XXX $XXX net For sales expect approximately the Longer adjusted and to solid historical compared year to of to high digits. term, resume year to growth million reduce to

to to the stronger by sales results channel market expectations, with and the Europe. softer execution I'm and year-over-year in conditions. Slide U.S. in sales movements million, to Net of quarter $XXX now net largely Turning line inventory quarter. third highlighting report to driven XX% reduced X, the pleased the in due

our and Europe, XX% XX% U.S. largest the the sales than in markets. XX% larger Canada reduced in of the by stabilizing net XX% declines of reduced of markets each international U.S. Europe sales geography, quarter. World. I'm By trends down Rest to and in X% in encouraged with with and see X% in in less

by impacted demand for whereas been markets. retail more Aftermarket conditions, in and resilient, online particularly and repair international and macro maintenance channels product has certain the remains challenging discretionary the categories

quarter. increased again the in digits pool double Commercial sales

driving We and with growth markets are focused in are robust these on pleased demand. the continued

Our the changes incentive annual and in earned quarter than programs, the by gross which are comparative increased but distributor for seasonal rebate X% year-end. offset in fiscal was price more finalized the the third dealer list

distributors In increased of other is words, target and achieve higher mix this and results. rebate fewer positive more channel year. premium earn in year rebates our last attainment partner outcome a a This while thresholds dealers reflects

positive quarter price third basis. on expect realization Importantly, full and dynamic this year a net is a we

a in despite nearly the future and continue rate certain margin us gross Gross volumes third million quarter higher The I This gross costs of result and pricing. basis technology lower allowed freight is improvements, was with margins was material EBITDA mentioned, the improvement of As positioning inflation for year-over-year performance XX.X%. net margin quarter growth. Adjusted and moderating has operational points XX.X%. expanding a a expanded mix lower products. of the XXX profit volumes at a third of in continuous $XX again purchased strong while margins in to production to

consumer to cost savings deliver in offset in partially per were is savings program. the as $XX spare under commitment good whole annual our third our service replace the service reduction SG&A $XX warranty to increase We by our to part a higher field These well costs million call available. to accommodate to with expected a continue in cost not quarter the million an prior if enterprise labor as

service are expect in to production metrics increased quality of for periods, was quarter Consequently, parts in diluted significant prior forward. warranty early moderate spare with Adjusted EPS first-time the increase and has consistent $X.XX. costs demand to our a in buy going response we our field Importantly, parts.

by was with business U.S. impacted been new construction, consistent economic for remodels Nondiscretionary used End demand current a solidly. products Turning and expectations the products markets, with performing rising Slide remains now conditions Hayward for update. rates. but Europe, and to and aftermarket demand largest X resilient in quarter demand our in for upgrades has our discretionary interest

expected, the as cautious ahead program in a XXXX approach are customers but buy in-season early of for result, orders. taking a As participating

higher in U.S., the particularly base. for we record of given see opportunities in remodel signs the installed the However, age in construction to Further, are the and end encouraged market. to the of stabilization see continue upgrade we for compelling of new demand

acceptance the with to Adoption of connected see Omni Omni strong products continue platform standardizing builders largest ecosystem. in of U.S. We of on the suite market of grow the automation the within continues our to now Omni. IoT one

used on app. and rated highly is increase homeowners via and have app stores, XX% activity Omni seen to Apple Google Play Omni's we both of by the all an Our

provides Omni legacy Prologic from also to upgrade which Retrofit by path are the excited a We simple of the uptake technology. controls latest our Kit,

outlook, during normalized the expected higher continued level lead As relative of current carrying the partners to quarter, of cost our inventory. the and times to OEM rebalance channel inventory economic

Our the primary entering partners recalibrating. regions new and the partners the in channel season, reporting whereas U.S. are some are inventory levels pool leaner in still

price the to versus Turning dynamic. cost

We improvements. price-cost maintaining are disciplined margin neutrality through control and manufacturing gross solid productivity expansion cost and driving

evaluate continue our excellence of to our part footprint global as manufacturing We operational initiatives.

align and Barcelona. near the of engineering we us newest the to margins. better Given facility allow the our management Barcelona, merits our and during benefits consolidate facility initiated quarter product into leverage to support closely facility, change manufacturing, will This a plan the modern more of Madrid manufacturing in

positive on deliver by the improvements. flow $XXX continue Total significant working year-to-date capital We a to declined management capital million contributing and prioritize performance. to cash basis, working

With more call our that, to I'd in over like Eifion, discuss to who financial turn the will results detail.

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

quarter stated, Kevin sales cost margin of channel are to for to XX.X%, the we we're As our our normal Net pleased in quarter third return outstanding financial expansion and with reflected inventory. realizing delivered with seasonality, progressive coupled and performance. a the exceeded line We plan. a with SG&A reductions expectations modestly gross rightsizing

Our flow. generated balance and cash is we good sheet strong,

in performances other elements markets. channel moderating our third driven channels in Canada volume the results expected like was to as in more certain reduction decreased movements XX% X% demand price. for net through in during net construction and of The export markets by in new driven sales trends decline retail reduction the the Looking detail, volume as the well was and This discretionary by primarily distribution million. weaker and an and the end X% $XXX.X at quarter inventory quarter

generally approximately incentives, resulting result on X%, is target is dealer this our the results to reduced settlements in year's a is This incentive increases adjustment price Gross final swings an in year margins. some for rebate in third but price and seasonal price and rebates was final to are key quarter increased based are normal. dynamic the more point calculation can of resulted and are performed year solid us The for rebate quarter third annual strong favorable X% by seasonal the to end a in decrease and performance higher quarter. whereas with quarter yielding in net achievements. Last This holding calculations the year, comparably calculation income, the quarter. our programs of our the incentive volume limited for

record the volumes. quarter was year in moderating of and Gross million. Disciplined the reduced material cost compared XX.X% profit offset profit and points increased input second basis more XXX prior $XXX.X freight in a year-over-year quarter production of and in XXXX. XX.X% Gross the third than period costs manufacturing XX.X% to margin achieved the control to impact

lean to our and we chains. across Hayward improvement. manufacturing before, about manufacturing supply excited and to And a commitment our continuous further longstanding plans As discussed deliver I'm productivity gains have has

and the $XX administrative Selling, expenses sequential basis on in million a increased modestly to third quarter. general

million rate prior under We savings reduction run of enterprise are cost to on targeted $XX program. delivering annual $XX the million our

the parts account warranty our and However, accrual labor service to we field for reduced quarter, primarily higher costs spare service in rate availability. increased

moderate taken impact parts, including actions these expect going forward. have of forward, limit and production proactive We costs address the going ramping and to spare this we to

of of The rate reduced In the the increase cost a near yield once is complete. facility quarter, the $X.X variable from Barcelona. offset This in facility expense. million the took we and in charge savings by move primarily compensation approximately annual exit of will movement to our was that manufacturing to $X restructuring our newer related partially manufacturing Madrid million, accrual an

margin are Adjusted EBITDA and was XX.X%. adjusted million the quarter EBITDA $XX.X in third

related of drive favorable recorded tax in positioned the third returns. as expansion an We discrete solid quarter items. margin are growth volume benefit to million to income tax $X.X We

million expect the $X.XX quarter to continue count of on XXX rate diluted of in EPS tax fully fourth share an a We diluted for quarter. XX% Adjusted the shares. was effective

and X and largely the lower in reduction trends The Let's X% moderating X% driven was now unfavorable sales X% of communicated. by million, both rightsizing to to volume previously reportable demand the inventories Slide third $XXX to end turn for net America segment impact. volumes for price our of results. North review quarter net a declined channel expected due as

XXXX. declined is season in-ground that condition a Sales in more financing now the pools Relative costs. period. XX% U.S., to tougher market very there of a and macro This impacted is quarter. and demand in concentration closed short for Canada where And a market lower-cost going by it's above-ground through is significantly higher and pools in economic the

Despite to profit year-over-year points the XX.X%. the margin mentioned, temporary basis in gross previously quarter net dynamic pricing a I solid expanded XXX

pleased For in X We XX% margin was posted NAM performances segment than in quarters Adjusted quarter. the now, row segment with margins. income were gross a the margin greater has XX.X%. the

and net and favorable Net from decreased quarter sales third XX% currency sales price $XX with Europe million. Rest in of World offset X% Net where Europe performance overall in X%, X%, to decline Southern to sales and by of declined pleased We the Rest for a XX%. World. translation benefited realization, declined X% benefited the foreign Europe. In were volume. increased XX% contrast, in Turning

that performances. established continue but was in to and year-over-year as Middle into Again, position, our for well segment basis margin tempering increased where expansion the segment, have Latin seeing XXX share income America. margin region we East a the campaigns to demand in of in solid we're pressure XX.X%. gross points margin expanded XX.X% profit Overall, adjusted a macro and invest solid We as markets Asia

second review Net of and our X.Xx third quarter. adjusted to debt to quarter X the end X.Xx to for Slide balance compared was the Turning highlights. at of the cash flow in a sheet EBITDA

continue shortly. little to targeted to of deleveraging a X prioritize I'll this Xx. range our We further discuss to

$XXX of end quarter third equivalent cash under was million $XXX million, availability a credit million. and cash the at our of liquidity and of balance facilities including $XXX Total the

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

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

for are X.X%. Our average our sheet. earned deposits of cash pleased rate quarter balance was the interest with on the global quality Overall, we

have seasonal cash reflecting operations We from generation million flow We reducing Cash working $XXX of driven period, capital year-to-date. million $XXX compared robust the a the by but flow progress $XXX earnings. management. year-to-date in in capital high-quality strong working effect XXXX made year was characteristic by to prior great a million

CapEx $XX cash compared last period million prior year flow the $XXX with of period. year-to-date free million prior of increased was consistent generation to year. XX% Year-to-date year the

early $XXX activity. million buy million, free XXXX, to year upon $XXX mix versus full order final of the the For we expect standard flow dependent of generation cash approximately

the and quarters. seasonality, the use generate second in and into first early larger and some year, collection This half company typically quarters of extended cash push to payment with terms normal the the With of fourth in will receivables buy orders XXXX. third first will cash the return the

to Slide XX. now on allocation Turning capital

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

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

and our about growth long-term the of Hayward's strength for in now of the industry, positive Turning the XX We pool the health leadership industry. to the very profile aftermarket and particularly position remain Slide within outlook.

and markets. updating of XXXX are We to our in Rest a reflect outlook Canadian reduction for for primarily World the outlook

It's the Europe rather ahead channel and business. continue service partners is purchasing our for we'll increasingly quarter. partners by our of increasingly to outlook XXXX current use in-season clear, the Our fourth than XXXX to in the normalized inventories some stocking moderately tempered and by of cautious the in-season favor albeit U.S. season stocking remaining more

a million, range anticipate $XXX the million cash be of in in sales Consequently, decrease adjusted to and net We now between with XX%. to to $XXX expect million. we free $XXX consolidated of flow now EBITDA XX% $XXX million

full with the forecast quarter expectation $XX the that, approximately turn Our on forecast interest levels. XX% remains is interest borrowing million. And current for $XX our spending reflecting back tax and rate expense the I'll approximately is approximately environment million, to effective for rate now The fourth CapEx year the call Kevin.

enter margins market With XXXX quarter the further with structural a and XX. quarter for to net at line we Thanks, we with reduced gross healthy third Eifion. are strong I'll balance the pick this delivered and back Hayward sales season. as throughout up well on period margin proud We generation. results reducing of in for execute volumes expectation flow industry, close to challenging positions, strong sales ability I'm with cash channel this leaner I'll increased expansion the team's positioned over delivering the inventories XXXX sheet, Slide XXXX, expectations. share summary. of pool ahead

industry Longer a and of growth sustainable term, this tailwinds, characterized a is by sunbelt and outdoor number ever the migration, connected home including living, secular resilient growing smart of technologies appeal and products. environmentally consistent aftermarket

creation. With value leverage As questions. drive attractive for and this excited a profitable growth ready to Hayward's and about line now in that, industry, the to the opportunities competitive shareholder open advantages leader I'm we're

Markets. from [Operator Jeff Instructions] of The the first KeyBanc question with Hammond comes line Capital

there maybe negative kind me just that other works help all confusing the Just to demand, and to or higher, the discounting rebate weaker the me I wanted price. in are is, rebates a given of back to true-up the guess how if what's maybe understand maybe pricing. there's obfuscates underlying go and this why destocking little

Sure, Jeff.

margins bps As quarter XX within those that's remarks, Maybe sales while said impact getting points obviously third net question that profit with even up XX%. margins. the profit XXX knowing we posted your we're gross quarter. in the at pleased sequentially the is that down XX%. Again, up record But posting the net with down the very is prepared was impressive pricing more with sales of XX.X% in last really gross nearly basis

not turn giving year-to-date, just was fully on And out the realized -- seasonal I to up reflection and loss invoice the expect to of is end the really year But to stickiness realization back Eifion the back X% as on to and drops true-ups price some accounting point it's just here. I'll occurred I'll in a occur moment. X through over post increases just reflect a year we in not what positive of price. the positive there. full would price It's third does give up it a quarter. Eifion and for full year on again, The that's list in curtain or a of a want That past this we've really that the over that or to and wraps to the walk or it basis. bit quarter, market of of In as period maybe related pricing this us moment. a it the things, of unique turn

year, occurs, and This income volumes. some calculation end-of-season primarily in can And a secondly, actually the to some was incentives our based quarter, higher-end in rebate of a incentive higher in earn third this year calculations. year's final favorable performance that to more upon adjustment normal. builders result dealers, resulted calculation swings Last rebates then whereas mix which qualifying are this

became that to that the our the in of Anything add, mix. So or out lower continue overall more Eifion? the environment, of well perform again, with the destock to a mid-level a and bigger that's percentage higher-end kind pools occurring sales fact destock,

resulted favorable much quarter. adjustment very in calculation it's a the to Jeff, year's Last limited to say, income. I'd final third Yes.

favorability over a as a rebates This stepping of sales. percentage we year, we're that So more have year-on-year. normalized

positive So it's go seasonal we forward limited rebates, final price on realization to here. year we expect as strictly accounting and

That's starting maybe helpful. to on sell-through shape or most then $XXX recapture destock very you'd any how And million? markets number, and up Okay. seeing are destock we kind just your look of then And that into it. 'XX, just confidence look as 'XX of on update as that you into you impact

validate you progress through at that in We that a I perfect mean, the -- input. doubt do recalibration, get again, have that but great you've we But best on referenced, million us leaner in year-end. globally, inventory, agree. $XXX to talking made great better the our No information some heard regions did and now. estimate that We'll need additional make at some is we getting position but Yes. don't we this largely progress point. have just pockets some or others it's about September. there's That still said, industry behind be

we As able needing say largely would just as for as at X at asking the The us of for kind that around I the work -- comp to on, XXXX. understand. here obviously, spoke heavy some that behind be XXXX, things positives process things I here, of. budgeting some destock but off headwind obviously this look more But better not the through you're -- certainly is in looking point it we time to guidance we're there's positives, we'll from we as just the there's

pricing. question around Your prior was

and base service the to to XXXX XXXX. to maintenance estimates into but list current increase in always announced October It pools into XX,XXX around that on going in going where to more here range, and positive that play We remodel have and that's land, effect And the installed be resiliency. the needing again on play add expect to that to it know we in repair thirdly, again, and we'll resilient we aftermarket ending expect the We'd pricing. as now Again, X out continues than don't the price this out it's had if XXXX. out marketplace. the are pools new then We net future. be and took are

particularly at interest concerning more that based. all some about and that's some certainly, particularly some are level, the going giving going we export or the in which frankly, spoke us the On of into finance-based Canada hitting -- is the all rate new meaningfully see And markets. rates construction at particular, macro tailwind entry or of point, We markets interest that XXXX, more and side, this don't is recover much to pause.

Jeff. that So some and factors XXXX, of overlaying out we with the outlooks as those firm are in we'll our 'XX, February look into be we're back for

comes from of question Saree Boroditsky Jefferies. Next line the with

on This for is James Saree.

I on on October? into orders. this your to quarter sell-through more and previously commentaries in-season color like talk some expected So you provide softer Can how wanted third was and in the about than

Yes.

was reported So out would what we I equipment on saw distributor is, on what for the would with being There's a saw sell-through large for their the earnings. already which kind of the expectations. we rounding Hayward on par I reported say marketplace, the sold of for season here. product sell-through they is who's into expectation what say sort again,

really not And it's buy in quite expectation for early was that, around the the we we advance fourth we're saw the first have as not to more the tempered call third of season by quarter, mean buy. of in-season flow what some expectation. to frankly, order The forward and quarter in early what an I And the just throughout in question, -- calling part orders.

probably [ vigilance that that, think balance and ] sheet continued inventory around considerations. I utilization highlights

out look the in-quarter flow the see didn't look yet orders, was nice at ordering in really complete when you guidance. what quarter on what and in we've quite buy with that's that's the the look we've gets but expectation at full year third there. commentary the and at So combined not that We're season is pause as the we us expectation response. still seen quarter, it, giving early with some fourth overall, seen around But we

the -- I James, Eifion. is think, this

cost around macro very to being I think, now, is see the channel given particularly the in the and James, to carry dynamics what that rates right cautious inventory interest they're inventory. taking you

it we our that, when see not of the And entirety need buying they I across and think, channel it earlier. they're footprint. So

the that is As moving the the we in 'XX have. much said think of season -- closer they're we prepared that of purchasing our in-season remarks, result demands the they to

So cautious, super in are, given channel taking the where what I -- and been interest in. they're has believe, rates just

like Got even into aftermarket like but competitors coming Then about of follow-up, given and interest a in demand rates. talked going resilient believe XXXX, kind it. as about weaker, I you aftermarket talked guys one higher your of

can provide on what mean resilience by here? you you So more color

aftermarket, I that mean then speaking, is that a But remodel aftermarket this define it's when year, an as upgrade. gets the Yes. of last and certainly classic we broadly define the added the that's there that's and everything activity heater a some combination but pad wasn't and year the that if new construction, we of attention. upgrading break-fix just on where lot

think about really So the that to. piece the talking and I we're we're nondiscretionary, that resilient of do that's when break-fix, referring really aftermarket the

by the upgrading by impacted of some rates environment of our elements experiencing. or large, and view the that stayed whether is very resilient aftermarket, But as in interest current XX% And business. macro through activity that this it's environment. certainly break-fix overall that and something we other remodel The the of we're in the macro the range the again, the environment

Next Blair. Ryan Merkel line with question comes of from the William

else than in in is really it lot Is business we XQ, wanted just I a lighter were there? the Or that's with there? off headline What's to what the weaker? expecting. coming start international

what last is, been there's in income Canadian the I Canada headlines terms there a needs that export a an of mean very about, environment periods homeowner concern looking is causing lock the different That our and in of the impact the the would recently -- is. week. were destock obviously up do to lot going that is it's of headline the It there's markets. with having and market, We for that discretionary some Ryan, in really -- -- and homeowner years, the household. Canada they're the what the like headwind say some in the lot Canadian on it's shorter rate market. mortgage in next still to the occur big I couple and the of over to are adjustments look at this,

-- we to periods from experiencing the as to that were factors Canada are U.S. X say seems last what would than even now I be COVID would I And some response macro of market. than years, look say a X in our you stronger the in the So playing over early the even we're recovery U.S. back up in sharper core core that the saw in, what in of the market.

Canada is So the QX affecting headline the outlook. really biggest

interest what what's in channel as be demand seen I a their needs their be lighter our cautious high shift an And it's think expected economy rates. markets, juxtaposed to is the as in expectation taken sell-through wrangle sell-through response, the to buying managing here we've understand we just Ryan, important, with with to patterns I than in, the in also our in to has for XXXX approach I and have channel line as their that expectations. is think in QX. core more they But channel going is actually similar to we U.S. previous to mentioned Europe, sheets we continue as a just general in QX season. balance the

probably was It Ryan. implied,

Of player course, Hayward why the market, Canadian we which outlook that's impact know it, share on not. an such you the We're now. right having in may high is a

Got it.

increase. then with really would out follow-up, my price for change 'XX? a I Okay. incentives think the in then normal? you you've That's early list buy? about helpful. And Or actually you can any to price for come talk just them And call

increase basis. around more go the up a the rest the a on bit around on price whole announce speaking, did And most on first The for next generally labor yes, slightly So see the that X% that's season. about our increase, those hall wording expect inflation the dynamics X% the parts, average a really, of against of once of one, SKU increases price and and to And dynamics. where business. we'd that's the you put an protect in comment. all U.S.-centric But are tackling It to calculation inflation you probably X% the does vary we price year XXXX SKU a actual on consequential we to as into to little goods, of increase globally business. weighted of the range, cost

early we And extended line approach terms the we more buy. the discount in standardized in of in of terms to with terms, more XXX buy, early a terms an history main. gone have the given on on have of payment days In

generally but speaking, Some customers different, to have pricing. slightly days X% XXX discount with a

Carter of comes line Andrew Stifel. from question with the Next

this there. year just and back still vendor telegraphed this year, incremental incentive quarter. probably And you mix know to confused tailwind some sell-through I'm Just pricing the I the given some little a up not about here? better the want of kind was what's it last said that given customers the go much? guess, how had issue be on than of you quarter, clarity rebates assume this could a the why a volume kind last this was but year number Can one, drive would to abrupt outperforming I so in focus year in than I I individual implied.

income when the we is to a final calculations, the rebate aggregate across It resulted positive time calculations in limited Andrew. a This last the back QX performed Yes. adjustment year, seasonal dynamic, given misses channel.

they based performance. channel were rebate are Our channel and sell-in in based on limited last upon main the structures year,

this terms gone actually recognition year-over-year of In quarterly higher restructured we've and destock, U.S., program we've channel we've given this assisting percentage of price this just in to year, were But Has all QX in we structure. price. rebate dynamics you the remains year. and a gross have the programs. in positive year swing with is the more dynamic. had based a year-over-year last had than dynamic. it implication That's a overall slightly have can really no This gets payments the still for to our QX, accounted adjustment we -- Gross

one to hear the relative quickly, a more last So year? incremental this was change thing so I correctly? that program in Did year

program We changed Last based quarterly changed program approach. we year -- more was in the to a seasonal our a incentive. typical U.S.,

rebates. seasonal So you're occurring for

the where the been end make then more channel quarterly is your adjustments and get You of it's evaluate adjustments. accordingly. the year, This you to you season,

I see.

of updated leverage. to flow? That and where wanting there down Is and leverage year-end assume will and on highest how Second priority. worst best dictate right -- dynamics are -- paydown you're understand the know best, much off that pay like your implications that getting first on how I'm kind are what calculating that, go would us the prebuy help -- for worst. because aggressively your there debt. that X.Xx the debt Within what a into quarter. where -- will question Is about your I'm guidance, cash fair is X.Xx. Is to I

dependent range year The And weeks the business we of you final broadly recounted is of Yes. you here. the Sure. it, mix correct. through the heavily said, on XX X, is that as there step as

As we using their mentioned, the orders lower channel moves in-season, here. flow as flow we're terminology

year this and ship to you actually XXXX to those push exit season, that higher closer As inventories. into the cash time collection they orders with slightly you period that

expect the do deleverage So to step as we year. new into we

We next get the in we of end early cash, year. back collect go targeted orders QX, our of see once and to expect QX in range Xx X we of XXXX through back these buy into the to in-season

cash feel We remain reducing on cash on on has done the our this position. We've about job we've a inventory here, good balance liquidity sheet, balance good of ABL sheet. now, facility. a got really own which our significant great been Right on levels undrawn own year. We our our source our

feel timing perspective, into we collection in anticipated the liquidity that's had recognize year, will shift bit whereas from order next cash of and a little the mix, that comfortable business it I position But this very the year. defer just a So issue. we in -- with my with feel

Next question with comes from Halloran the line of Mike Baird.

[ Paz on Mike. ] you. quick for one A for

little moving bit pricing range maybe initially next obviously, looks than of So wider lot the anticipating. expectations But were understand run year the into can given you a right impacting year margins. this or pieces outcomes into and help like? EBITDA us what XQ discounts exiting the you Obviously, possible think a going destocking, we of rate

So on on touch would expectations, if helpful. exit rate a you be could that bit, little that

Yes.

when still high margin calculate to the gross our EBITDA you year at of at exit quality statement, the out adjusted over terms Let's -- in income mid-XXs the slightly XXs results this and expect of midpoint. we

net despite quality the period. of this we're sales destocking year-on-year income pleased through as statement our with So go decline very we channel the

at those up hard come as and to So to the business still that's year we margin. see lot over dynamics, mid-XXs this year, opportunity And margin. in a and going of gross as we the a gross more line to lift EBITDA leverage But next work on consequence, protect that margin we're profit look both adjusted our XXs high indicated, we as slightly the EBITDA importantly, exit of forward line. post adjusted both margin to

dig that can maybe help but gross trends That's in takes adjusted the with the the helpful. into puts quarter? And in And a gross and margin the margin. the diverging it. we at the just drove us that Got gain level, this maybe in margin of EBITDA adjusted and high you margin EBITDA super saw weakness

Yes.

as just strictly be in SG&A low across have then you QX. to of -- And have comes you to coverage down the before, it and look think your cost year. coverage we've less I discussed tend you at base, the QX our when QX

year level, QX SG&A the throughout margins in QX. the will as leverage at across It in margin in get less the base. that healthy we SG&A see quarter. but and again you'll what the this leverage particular that's lift base So margin across EBITDA QX limited more And adjusted gross

a strictly of rolling accrual leveraging as through. it sales in a service recognition in bit true-up We there we increase higher a But again, field SG&A of field SG&A royalty sequential that's back comes of mentioned, will go had, inflation But as costs costs, the consequential forward moderate a little service seasonally period. we the base that across costs to light in here. to

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

right. All

big this your material any So North Canada? you Can in is business? about North there difference percentage margins us What is And American Canada. segment is -- how remind Canada? your Canada and American of is between Canada

over a of Canada, But Historically, Canada. XX% XXXX, had was year. margin this nearly decrement that mix and a overall of in about in basis, say on has much I'd our more basing a handful last job working it, years rate, closer U.S. to great list, call gotten standard, of the the value Nigel. team it's done in price pricing, it's our our been margin the there and comparison X/X

surprised players. Okay. smaller I've being holding behavior caution material smaller I'm crippling distributors That's change -- rate between pool. distributors if imagine larger environments to at cautious, and players and can't you've inventory the the that in the in This of I seen any curious got but costs is I'm difference great. say the the current some

also any issue? So wondering just it seeing I'm not I there's difference if there? is just market rate well? issue as an out it Is mean end you're a

across I've irrational seen necessarily not behavior various the distributor partners.

they're I out with off them earlier, would they of what said into -- as sheet. really to the of move inventory putting that we've cautious irrational marketplace. see we I That's more just their some kind opposed being as As seen the balance pricing rate of maybe reorder kind

the comment a be pricing on to going my really wasn't It Yes. is actually adjustment. pricing, just final But comment.

Is to want to issue? through sure purely now as seasonal I said basis as So, make just bleed a quarter isn't this a you fourth just you've think the really to quarterly opposed XQ basis. a well. going gone I true-up Eifion, into this to

year, really QX repeating it a Yes, year. absolutely this want I to issue, and over is good be it a is clear, stepping not guy Nigel, last

the So we in it's expect a positive It's year-over-year. little realization unfortunate. bit quarter fourth -- price

in have true-ups year-over-year these third seasonal quarter. the We

as basis, full to go QX. used structure you this it be basis, actually historically, in on year program to our We've calendar mentioned, a we've a moved As mentioned, seasonal rebates year. I changed overall a ending of to the to quarterly whereas year on

to then on for the expect go of calendar as year a So to the into basis XXXX. shift and we year balance quarterly we

Next of comes of ] the from [ Sean question with Bank line Elman America.

headwinds, Despite margin near record the gross the levels. was pricing

So expectations and into seeing what inflation can you your labor on XXXX? talk about heading and materials for you're what are

moderately So The we moderating year, of the rate over materials, including some inflated items remains raw commodities. have decreasing. still inflation last overall basket in seen purchased certainly of inflation is but

now positive we dynamic, are quarter of comes labor price price costs, was our to just it the higher, when reasons XXXX. But move to to we price labor list again, costs the move main seeing back list year-over-year. into was as in we positive, increased one why come move that think I and implications, the

into as you continue full the QX. and positive we XXs you'll You've And QX, through realization hold as for which just will year-over-year. anomaly, price into price this very the affecting the unfortunately fullness step got onetime rebate see is But margins Q. expect high step still the to of year, we

line from of Next comes with the Sachs. Goldman question Lee Brian

Brian Cash This is the [ on Nick line Lee. ] for

of guys Just America and I into of had world, regarding seems that's, that tailwind see these other the XXXX do guys fully that possibly I but expect being of could to And base if some a visibility and a still Or know issues being XXXX? in little wanted going the North case. happen rest any gauge really new period the a quick more bit question any you any destocked and destocking seeing in or on rest cautious mentioned guess, markets. you having you the in be are have destocking. and to also are you It just you buyers Canada, how restocking

Yes.

we've inventory are is markets normally open some the through flow because As good, work through and progress the being QX would the that partners normal mentioned restocking where say, then still are made you But of progress September, QX and the work great that feel the early that QX as through and September. are channel some QX There made. then stocking needing periods you to some QX even still inventory recalibration inventory down or or particular I of year we programs there's Canada, occur. close regions, seasonal maybe buy was really and winter everywhere. off the The

we're So seeing destocking standpoint. what that's around really a

the forgot the of part question. I second

rest the of world. into Going 'XX and the

I when the wait think rest and a comes a it of bit it's world, to the of see.

U.S. macro markets. got European of more a sensitivity than Some those have our and markets bit primary

won't channel to XXXX those material we partners full move step have season. them work and to it's with those continue monitor the that that something that until get we'll that channels. actually to help But into situation up So visibility pull-through we through

exhibited to the XXXX. they're as folks in Yes. we chain here as early COVID believe or buy I to play mean channel we season, is best-in-class out to market more our through to orders whether the supply be be the whether program respond partnering through into experience, with capabilities with come able what we'll they in dynamics respond, our an

further no floor back the for are There questions Kevin comments. at you. would Thank Holleran like I turn over to closing this time. to

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

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

the call. now You can end

concludes Thank today's teleconference. you. This

may participation. your at Thank You lines disconnect this for time. your you