Hayward (HAYW) 30 Jul 242024 Q2 Earnings call transcript

Greetings and welcome to the Hayward Holdings Second Quarter 2024 Earnings Call. My name is Melissa, 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. Thank you, sir.

begin. may You

at good reference XXXX and been We our presentation our issued to find can Thank earnings this an press morning, call. release quarter slide website of section earnings Investor we has There, this second you the also will you, that Relations everyone. investor.hayward.com. during morning, posted which

Financial I'm Senior Vice Jones, Officer; and joined today Eifion by Kevin and Holleran, Officer. Chief President and Chief Executive President

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

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

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

good and Hayward's all of Second my morning, you Kevin, you, pleasure Thank to Quarter It's everyone. to welcome Earnings Call.

expectations. profitability, key Slide I'll sheet. increased with earnings well pleased executed and I'm messages. an today's environment, report this of delivering to challenging start improved quarter quarter with cash industry strong X consistent We on presentation in again second results our balance flow a

expect and value entire of performance strength and technology around in creation. I'm centered during above-market and the growth strategy, brand shareholder growth our advance result to of team operational quarter. and excellence to continue the multichannel proud Hayward the this We leadership,

expanded of gross increasing the in the as during XX%. flow was first XX% Cash initiatives. price margin Strong year-over-year consecutive also net fund half. balance seasonally quarter flow collections generation to solid strengthen basis Gross for strong lower to cash and by sheet volumes. year-over-year was period operations year-over-year growth the profit our sixth further increased record This sales realization and from the represents offset XXX enabled modestly us cash margins points with Net profitability positive a expansion.

the of to sequentially our pool by During X.Xx a net and commercial great presentation. an quarter, water the pool profile, reduced leverage is entire ChlorKing sanitization than fit of more market. our a acquire the team Loan full we I'll on details paid use and cash the from quarter basis basis. ChlorKing in down B in leader the the additional a very share incremental voluntary to business to in Hayward, end strategic Xx the excluding at turn organic on later a on to with commercial advancing a excited ChlorKing, position We're welcome strong the Term financial

certain international half demand a Finally, year and the in remodels better-than-expected environment, markets. the full enter our by particularly new are and narrowing we margins offset as we reflecting more year, second guidance, challenging construction of

increase to the we XXXX, approximately adjusted X% sales X% For net full year to X% to expect now X%. and to increase EBITDA approximately

sales of North Europe net modestly X% results the America and in with quarter. World. year-over-year sales to whereas World the in the of of X, quarter increased second $XXX X% Rest XX%. with growth sales Turning X% segment, By the Net Slide Rest Europe expectations. declined outperformed in now highlighting and declined consistent quarter, increased sales million, to in

America like We continued sales a basis driving inorganically an are following robust multiyear the in segment on and commercial in both increase acquisitions of pool trend ChlorKing. North growth. focused of to growth organic on market, organically the Commercial through

record XX% basis second XX% points and a profit margins EPS $X.XX. gross in quarter. second mentioned, increased EBITDA to margin Adjusted I XX% As in XXX adjusted to the XXX year-over-year the to year-over-year expanded increased points quarter basis

Turning with America now repair new Europe of be for In-season expectation to X quarter replace interest the Slide consistent continues our demand remodel majority and product current a economic rest North and resilient with the outperforming in the Hayward by business higher and world. and for but demand impacted update. rates. for Aftermarket construction remains of was to conditions

permits While also in relative in new the and the construction indicative high of the value we down of U.S. mid- permits strength the remains the segments number see high-end to teens, market. resilient, remodel of of

XXXX. in trends similar the half expect second We of

execute our innovative introducing go-to-market many advance drive profitable our position to developing our capabilities and support. furthering to strengthen growth. continue and channel initiatives important leadership business new products includes and dealer improving to strategic We This technology

the On water we pool heat accounts. the pool a introduced innovative the utilize response microchannel for unit. unit, XX with control the our a plunge. cool fourth engagement new like and to ability earnings temperature call, target excited the products value about positive spa add providing single ability extremely product, and degrees drive this with first-of-its-kind with a been Customer to both has quarter to owners Differentiated to customers cold

key common XXX life of This to opening in Hayward Hayward of center the service. and this already intimacy technical existing customers in the to market. successful market, specific in customer investments leadership target believe in initiative dealer note for Hub to in teams latest attended managing the comprise teams in and more expand the This as support markets this important and These acquired growth of engagement focused continue Central managers mid-QX, at behavior. serve working development loyalty key from support. We will have winning the and driving sessions One We than Hayward a sales as technology West service first U.S. formula and both dealers conversion long-term Since nearly we companies and structure grow launch with ongoing the be business XX South like a through is conversions. training hub. on for this facility newly individuals cycle from will key education, the training, under in side-by-side professionals is working trade accounts and its kind Texas. DFW support

our support real-time benefit pools, installations. tool, of this OmniPro value monitoring respond in of business their remote builders and the allowing cloud. we this providing value service monitoring period introduced efficiency them from of and proactive of to year, trade further app the significant completion form via existing the and large construction needs. through warranty a professionals homeowner's earlier particularly organizations the Similarly, professional prioritize service to To the of to remote configuration dealers, new equipment pool see

these the positioned well future drive and growth. pleased initiatives with progress to are We of

Moving to channel. the on

Our partners work increased efficiency to inventory goals. leaner pursuing are positions they as achieve

on Hayward price, been of facility We continue maintain previously an very with them to mix by on optimize XXXX pool hand inventory implemented the neutrality. industry SKU the reduce price disciplined and has The to work price/cost outs. the occurrence and to always to level inventory stock annual for of we increase

net to year, of approximately in price continue consistent half. full expect with realization We the for X% positive contribution the the first

and implementing relative value-based provided to pool are value optimize pricing the priced ensure to are products SKU our to and exceptional rationalization owners. appropriately pricing We strategies

Lewis our leadership and from benefits World. strengthened of key included these and as Chief Vicario We Resource realize This filling X further by to of Dario accomplished the as as General of team these May, incremental Rest Gallagher organization. were initiatives welcome Human keep delighted Chief the Officer; roles. Manager forward. Europe senior expect leaders Ray Officer; positions Engineering We to within Kevin we to In going appointment

their from benefiting already diverse proven record is company track of success. Our backgrounds and

as TriStar Hayward customers. were strive a energy-efficient produce as honored recognized the responsibility sustainable underscores for variable-speed we to Finally, that and Builder to most the sustainability solutions of year. XL our environmental the Magazine product Green commitment our This we pump

Turning now X. to Slide

I water block and team business, ChlorKing, are opportunities of in lower excited complementary commercial distributors annual previously, over and water professionals, Operating are business As relationships space. doubling to products generators Key operators. as and ultraviolet into Georgia, are pool and in the wealth products brings disinfection and specified store in pool pool existing knowledge systems. our recreational to commercial while is of world. our all company Steve costs by sales chlorine trade and help solve handle operating well environmentally need patented Hayward's of addition commercial key Innovative the with our about commercial large Pierce, and his and sustainable, sanitization These into nearly Atlanta, the leading are as technologies customers. projects natural These develop and mentioned for technologies grown industry the specialty designers, products technologies. range experience has a CEO, building product chlorine the quality avoiding with include enhancing volumes market. Co-Founder ChlorKing the water technology and we This led to the the high-capacity

Importantly, products. of organization expand award the the market trade other and ChlorKing sales relationships size for addressable

our ChlorKing and leadership. pool domestic and to to this in operational Atlanta business international under of of integrate growth vertical. opportunities. synergies growth related existing distribution other Haywards future compelling important ChlorKing our commercial base, will operate Pierce's Hayward's network and forward supply global Similarly, present chain reporting manufacturing and afford out Steve scale We opportunities. financial product look

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

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

with quarter Net expectations pleased sales As the quarter, financial delivered in profitability. and Kevin with stated, for outstanding second are were line we our we performance.

Cash ChlorKing. the debt reduced flow enabling strategic and generation meaningfully acquisition the Net of quarter. was leverage early repayment in robust,

XXX sequentially driven price our positive lower X% second increased operations. improvement quarter $XX in the Adjusted profit and XXX more $XXX strong points gains to a Looking increased increased This million the at Net in second and basis for in results XX%. XXX increased in the points a increased year-over-year, $XXX to manufacturing result, and to profit second by of XXX adjusted points margin record Net and EBITDA sales primarily XX%. gross is by year-over-year basis was realization X% X% margin million, quarter, a to efficiency the EBITDA sequentially to volumes. points modestly Gross basis continuous offset million. quarter detail. basis X%

rate XX% items. tax tax to year of Adjusted the effective timing XX% second in discrete Our EPS to change prior the the in compared increased was the quarter The $X.XX. in primarily to was quarter XX% due period.

American income X% in higher to pleased North U.S. increased beginning of quarter the increased margin Canada. robust I'll a X. was driven net Canada significant Net and XX.X%, in sales year-over-year financing due results, segment to market We costs. Slide sales Now in on orders economic and our were sales reportable quarter consecutive basis X% X% second the pricing. see the the by for profit in points favorable the $XXX to XXX impact representing discuss in margin Gross million, segment to increased sequentially margin that XX.X%. points despite increased conditions basis quarter and expansion. XXX year-over-year Adjusted sixth in

quarter sales East Europe to is Turning the Europe declined points and sequentially current The segment second $XX encouraging, of lower in to Rest but sales XX.X%. increased to continue increased of Net basis Adjusted certain margin due for increased and and Middle X% margin conditions. and profit to XXX and Rest million markets Europe sales decreased X% impact volumes. geopolitical in XX.X%. of income in basis World. feel World. Net points XX% macroeconomic the year-over-year Gross was Asia to XXX

of XX cash highlights. a review the to and Slide flow for balance sheet the Turning

improved $XXX was Net the the equivalents at impact balance leverage Xx million are plus debt Total quarter end $XXX including cash our X.Xx excluding quarter. acquisition, the quarter the the outlay with net first of a million, ChlorKing sheet strong quarter, end sequential liquidity cash of availability significantly X.Xx. and We improvement basis facilities EBITDA from end was at the cash credit of the the and to the second pleased $XXX the under the performance at flow for of of including the to adjusted of very acquisition, million. in

our have near-term in schedule XXXX attractive strategic flexibility The execute plans. XXXX. term as financial matures the maturity We no maturities and This undrawn in ABL debt. provides on debt matures our we

from rate agreements in in swap $XXX interest cash to debt rate the through to interest quarter. our XXXX X.X% Our tied our second on fixed the borrowing million term rate benefits currently of XXXX, maturing facilities limiting

Year-to-date, million the million, The global average $XXX rate generation cash earned cash levels, free a period. This interest prior improvement to related resulting attractive seasonal X.X%. of due $XXX the with in a operations XX% of improvement prior cash flow in deposits free capital in in early below of year-over-year inventories. has the Our strength flow payment year-to-date year working a $XX project inventory timing, from XX% was CapEx receivables. quarter reduction continuous on for increase collection to management compared quarter attributes business second in flow first to the period the reflects excluding to was increase in primarily million. buy year cash acquired was XX% half

expect to cash free with of cash full flow XXX% million. generation approximately of income, flow $XXX continue net year of We greater XXXX than free

our As previously repayment discussed, debt given voluntary second balance. quarter increasing completed a we in early the cash

repay used outstanding on hand we to of the approximately incremental term cash on $XXX full Specifically, our loan million. balance B

expect million of net approximately year interest to partial or the of in for $X result income, savings million, We this savings reflecting interest $XX expense expected $X year net annualized XXXX million fiscal approximately impact. are

XX. Slide Turning allocation now to capital on

strategic a financial debt we In and growth before, we've maintained prioritizing are we and and approach, term, near inorganic while highlighted growth maintaining prudent disciplined investments organic a take repayment. policy emphasizing the and returns shareholder leverage. investments financial As balanced

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

Slide coupled Turning in Entering for and regarding range by challenging to half inventory particularly and channel with a environment, conditions and the construction of trends, guidance markets. year in margins, new now are remodels XX narrowing spending our full better-than-expected certain year, international more our the reflecting levels. global offset the guidance, we consumer second demand expectations macro uncertainty contemplates The outlook.

ChlorKing We $XXX X% anticipate expect adjusted to to to year execution approximately cash now to We approximately realization sales approximately a X% acquisition million including approximately year a organization, of to the $X.XX technology we to flow EBITDA $X.XX price full to million. The or adoption. full and million of We from range billion positive continue increased X% increase of solid contribution increase X%. net billion, anticipate now of $XXX free the $XXX across expect fiscal of X%. XXXX, an

tax Our for million expectation the forecast CapEx of rate expense approximately million. and net year, $XX effective interest remains approximately is of early forecast XX% debt remainder our reflects the spending repayment. The the $XX

remain about of particularly XXXX, the beyond growth industry. the of the we profile the out very health strength Looking positive and long-term pool aftermarket.

our growth in our execute confident successfully ability are strategic plans. to We

to material that like note CrowdStrike I'd no recent the Finally, on the had impact company. outage

with And now turn to that, call the Kevin. back I'll

I'll pick up on Eifion. Thanks, back Slide XX.

delivered with the key close, from a takeaways call. second consistent challenging quarter in let we results reiterate today's We Before me expectations environment.

us execute gross to strategies and Our cash fund and team margins term to our continues allowing our fully growth robust delivering flow, incremental record repay loan early.

in opportunities about that leadership broader the many ChlorKing's and see we right of We value growing a growth. are proven addition better excited I'm strategy innovative profitable drive creation. shareholder talent technologies confident the and team, results added drive portfolio, We leverage the this to to senior have market commercial to and we place compelling the financial serve and

questions. With line that, for open ready we're the now to

Blair. Our question Instructions] Merkel [Operator of the first William from with Ryan comes line

It Kevin, like or ChlorKing. are business. -- the What bigger what see X that the one of I are there? of X a sounds acquisition wanted to the opportunities, with nice off you start really

A, What Class standardization a the the ChlorKing. Ryan, excited Yes. well what then. over to the great margins. welcome in past, really comes you years growth their we've -- commercial from of apartment growth in is larger Class Hayward nice have that which has the XXXX category, mix is many the when et really condos, allowed market. But product it's nice than -- the speaks is to a leadership experienced opportunities a double-digit the to the strength their really Class great well plays -- bring ChlorKing's recent positions B, a really introduced XX% in we some the we're gives in water gallons, company, at they've sweet of and to they us parks, pools, so it to is B, of cross-selling HMAC, commercial when but the A really commercial A. kinds really is. Commercial products But yes, great look really refer trajectory bodies that I the added of cetera. categories: by since be is Class Class aside B, Class of of defined is a the real exposure X Commercial likewise, a them we A A line to to segment And performed to really so of and A where That's market. really some participating. commercial the by motel, product of ChlorKing in B. in and competition and Hayward. well, But broadly us participates acronym many extremely of not water, Class which about seen into all product there's pools open. the when It this the we're segment. Class more those already greater Hayward spot where market B, XX% were to Class as Class and hotel is line into XXX,XXX some the more able company the defined more stronghold leverage think for be There's really Class

So builders, -- distribution. today frankly, operator, remarks, lots architects designers, I -- prepared and don't in great specialty of that, around my great the we mentioned have don't pool we as relationships

We years, a relationship the So the sell B. into Steve we for that actually ChlorKing team several label with standardization had, we've had actually Class I a water had years. Steve, and private for many

intimacy continuing a with So a commercial of the integrating in lot trajectory and looking -- high and our really growth space. each we other, have other know have level to each forward

come year that so contractors this still be weak. then XXX,XXX you of That's rates is you going do is the weak? Do market for follow-up, once pretty think great. can from hearing Are just pools on a function Obviously, it's XX,XXX, that why I pools. really we new was for outlook down? rates, curious my interest And longer-term to the

long-term profile. I us have year, -- is I decline. the do Yes. I that of so, coalescing relief most is be viability in low do decline of new I mean, this interest the XX,XXX the rates. And There off a another the XX% that desirable. the XX% I around backyard water you're think we reliance as and familiar absolutely can -- with are which though this year's get XX,XXX sort interest do is some last would that construction predict desire of industry sure around heavy highly upon not in still to think this I'm can long-term while rates a pool there. or

single-family can Our you last really GFC. not has -- kept home starts family the to really back with to several up formation say dating the -- years, the several the over

going some new point point, -- is correlation addressed a a which construction. strong that's new -- to pool at So be for is which

healthy So construction to is outdoor and those back home, having in at I future. migration all to XXXX hopefully around as -- we're forward and can secular lifestyle, a to we well a when tailwind being get in new time low interest rates finally pool think base trends for as interest start watermark, looking this a the near

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

impact at year we're full acquisition. now X looking excluding X, the sort of so I of the to Just think the outlook,

POOLCORP kind from the be helpful. was that can inventories, just more pressure adjustment you that saw in sort equipment just their And unpack the if you're -- making So X% but to about down sell-through a obviously, from of bit the we would maybe numbers. versus maybe of the

had plus North obviously in America. You X%

quarter wondering the well. saw second just sell-through as was you -- on in Just what

sure. Yes,

one. that -- let Let me me start

guidance, of address the contributed me narrowing the to Let narrowing first what the Nigel.

in from original talked start we with year. me through Let our earlier bridge the that is unchanged what

couple percent to We continue a at through year. expect of price for to the flow

the is range repeat X% a we laid continue be overall. to We we'll bit the plus extra increasing discretionary we Originally, World, or Similarly, FX. and North is in that what that America, one assume What Europe, was of market for so down interactions call that volume. aspect seeing and X% has XX%. then destock in would of also headwind, partners the our now dealer be out with assume channel to not a to on what in changed still aspects pivoting of the really, Rest to XX%. XX%. on And up to just upon to our the to overall assumption down We're but felt the -- XX% market in kind discretionary absence XX% based XXXX, with market through where permits we're we're that inventory data expectation of little down negative to the of XXXX, increasing an point,

X% second it, to mentioned, that of from really And as a as from percent flow you through now -- you would the X.X% X.X%. to half down, an midpoint of to that of get expectation if take the around down of our So X.X% revision really ChlorKing that acquisition market plus call X%. -- original the business, the volume the would with X% in range us the in then

Nigel. ahead, Go

just of -- you've -- for of if Sunbelt But $XX Just and initiatives seen about of very was some talked on second in about just terms like to it so sure that's answer the just then the dealer but in perhaps the with fulsome conversions. make you the update just revenue. annualized I sort case. success talk Coast, the then about of of the the an West those million share is sell-through the in And train want space. on quarter, the ChlorKing particular, that a sounds Maybe some initiatives that.

year Just half to revenue of the the $XX result year, of has About the conversion, Kevin? of on million. you first the second calibrate around the an it annualized ChlorKing, dealer [indiscernible] half

some additional dealers that we've a is in our say service South in really Carolina. markets we out. Obviously, like mentioned, see [indiscernible] pilot. we that proof-of-concept of to in my some product street support some I also lot around past, we spoken conversion, are growth that standpoint, opportunities, the be selling would ago, the resources And -- underway. there's going then call lines couple Florida, and sell from that small to on specifically would is market standpoint. there in additional in footprint a North then where the that's West, equipment nuanced great with brought remarks, years pad. for be our Northeast in example, in differences and need lot of we forward dealer really play you on it and a have share one-stop maybe for we of those the from We which training say something or smaller to initiatives a would the as out a a marketing to On what Yes. expectation And extremely that the some get Central prepared have heater, well spoke of shop doing a products coming to on a the out we'll square where roll the about set sports on West continue smaller Coast would a hub, and I foot

nice being focusing of us allocated those resources have paid share for being organization line opportunity and frankly, markets So continue we occurring see attention we lower our lots on those to for and in trend inside markets. growth, where,

question next of Hammond Capital Our Jeff the Markets. from comes KeyBanc with line

early some inventory. pool of to but the might dynamics the at seeing I'm go the different. changed sound the out any level assumption, on then what about the you've hold with channel same and preannouncement you're same or doesn't how discretionary wondering wanted It softer kind discussions play to early the to around maybe the and Just destock the buy different inventory back or like want of just

channel say ago, Yes. was was through perfect terms I of the say we plus I that, which out. on think From laid require we're our assumption little seeing obviously, first still holds door, when on what I out aggressive But inventory, inventory don't have overall you the days when still to a We in we've there. would a channel XX contemplate that movement -- I frankly in. inventory held. more in inventory hand. bit on bridge with probably is walking us environment Less an I the less that talking at just not maintain that standpoint, we're seen will would in the and I moment really half, the sales information. say look would think the allows generalities, And guidance. operating unexpected to

which this point, least all reductions, interest have not at occurred. we think I by Now for were or hoping some rate assuming

has So inventory cost be not a at pretty as lead are carry. all now the it comes. OEMs, less creating to right that across for broad serve frankly, standpoint the carrying able reduced from channel And responsive think, to incentive time demand us, I

And in for movement XX seen -- of down the some play play us our around second that we we've the So expectations. out with around positive for original as assumption full year year through will half the the XXXX.

buy, on early for As it's a bit early that.

as the conversations would early the in participation you intending had, program So this expect we're know roll solid still definitely on Based that I on we we defining are to at by ship audience, into season. and avoidance load later writing the of our both program out. early and for XXXX know it and future this, increases designed broader the that but is manufacturers, we year price allows plan, but as offering factories level we've us distributors us and a really buy of win-win for elements some discretion. our is

out the it, the roll we these is the linked to are next, obviously, working call together of through early expect a response in with end to or inventory so buy X the channel. program So upon that the month here. strong season will the based reduction would questions inventory, What

Okay.

pulling see about Just space? opportunity this more fill and then than with you mass market on just bolt-ons deal the other pool ChlorKing, just best pulling you for through, for the where revenue the critical in through? talk look to And continue to synergies commercial you pipeline commercial Maybe pools. what's out other them

Yes.

important is higher for Class some that -- and volume pumps, the products us, offer higher I products -- some -- increase But really are catalog will as A Class what Hayward B sold ChlorKing A, organic looks is horsepower be historically. Class happy, This our we on had for. seeing growth. future standpoint, Class -- X to some double-digit a Class that would can been capacity us think X nor like heaters into or A new that look describing either with some I the we us I continue like an the focused so really opportunities where there. now that solve really development what opportunity ChlorKing time This running or We up there. said, relatively that larger market B, is think does to commercial there's we for for that pleased Class -- focus. filters that to -- not but spent last still I to that -- from A. a the That years -- or presents is an years example, really inorganic for we're really some have catalog We've in over this or that

anxious keep So we're on to commercial that with opportunities organically . we're growing us, of excited, broader get relationships brings to and and there's leverage this set this to Jeff. now other and a inorganically ChlorKing and business,

Stifel. from of comes Our next the with Carter question Andrew line

outlook million. for I $XXX at question free to at wanted your cash ask, the First flow year looking

working the purchase a significant to year-to-date upside therefore, you're else or something past that heavy couple capital the the cash EBITDA, pretty on flow Is doesn't implying pretty implying on a in the and inventory significant predicated more levels? in the work prebuy increase a Given years. what I'm drag in if prebuy, of prebuy, than

position robust year, that's a will the guidance. Yes. contemplated -- the Andrew. our We end year-over-year, buy, expect early account raise at do the that's in that receivable of

both diligently year-over-year inventory to from very have Additionally, worked we reduce of the which XXXX. position, end our

We of some the finished as have balance enter we XXXX forecast. strategic working will to particular have the invest goods anticipation developments planned a be take timing position now we in we in earning XXXX. probably that, in that capital improved how within sheet we for for of but of is exactly the position, ERP That determined still out

I about on to can you taken, heavier you've kind number lean is, take a to any too with seen that? you the help something value. thing is SKU know there. Or low that decisions year been high you've us from equipment pricing one, give And there your going pretty prices commentary anything or of and you really take around the on would mentioned you kind of today. future optimization on a resilient. you're if off? Just earlier I products? Would for And pricing you you know potentially anything off kind to or of that option I not mean, -- the had lean has it But year give would regarding are too pricing second like

that last is said, more Yes. within what there isn't done product the SKU value attention has really plenty engineering certainly go be continue done to We ongoing received That in that's that some that so. lot this episodes, rationalization the and to product tighten rationalization operations is allows obviously process. management, but meaningful to catalog, product and something year. which in creation each through flow this our through at that throughout and look we're us line up then a or conscious more last year had there's organization

the Looking at to offer the some life very value, that equipment through the objectively the the the channel we homeowners. functionality of from that get expectancy, you

year. I either and they're off I not I'm the see as other replacing absolutely one linked. sure if -- it So in if

time I stuck. more value But with plenty point, looking value and can the still not count able of sort give. commensurate it's priced from are your a market both. products to historically, I standpoint SKU in to Frankly, think also think that there's and of lineup, that inflation. been lot a offset think been that think then But creation. spending a from do has This we're do really certainly has I pricing we I that,

I So see what there's plenty can think offset get in to just of kind take opportunity, maximization of but to a future we pricing. and look real objective not inflation,

question next Boroditsky comes of from Saree the Jefferies. line Our with

rationalization -- discussion, and years? how we out I the the as for that SKU like your could . about -- building you impacts think guess, first your on just on performance margin potential last quantify

you quarter? just Saree, repeat which can question, Sorry, the

the margin Could years? rationalization potential and in performance that the quantify SKU you how out for impacts

Yes, sure.

We a it's very we're first probably give the been tackling year but specifics here. out. SKU QX don't and progress. now, the our SKUs rationalizing, ago that exact the reduction We're it progressively U.S. made rationalization we've meaningful to good roll initiated we'll end program on close a facilities of through then cancer So

As it implicates initiatives, as margin initiatives or value-based our a have all well as positive impact of our price methodology. goods capital working it pricing ability will on our to a

to a manage manufacturing enable more look It efficient will in more gain the in way. throughput we range. development much a fund So to our locations continue through SKU margin continued

the business. to be as allow programs will the about in business. the focused into best It the on we across platforms positive inflation have think manage that we're us then developing procurement and So through more the continue cash product key line future, will a there. to And additionally,

lot also channel's that, expansion margin XXXX, help well us we as and working saying we working capital capital. provide into step will a as our as So of think the that opportunity will all with

color. distributors your on I capital inventory for that more? and do rely And talked a lead distributors continue expect Or OEMs this inventories, more you to on this response? -- appreciate the does year. impact to Then on inventory on working lower for time about you XXXX you? efficient channel Is the get relying it

very I with mean I to partners think right continue ensure at -- we'll right Yes. to our work time channel location. I inventory, right closely

responsiveness a continue of I standpoint. is into our of manufacturing the Hayward real historically the from future think will chain one strengths a and supply and

products in to the have think may I be to occurring be the the So whatever partners dealers look But channel respond ready to interest sale -- when there come front obviously, marketplace. of with in -- door. to point in I -- to changes to at us the the can is channel think our timely continue to keen able

So late destock the ended that into good mean we're going last we our to out sure retail position really the very hand we're on coordinated sales our being the really what to timely right when to days this feel marketplace. to well of in them year, factories I the And our chain I commensurate and continue demand signals their supply sales and respond and match are closely like and having channel. in able our make out -- with being to to work with that

-- development So look to I here XXXX, into future. continue the think in that, great to and that's been a we'll that

question comes next of the from Our line Mike Halloran Baird. with

to end is want on Pes This challenged margin performance in I Mike. Obviously, questions. for follow volumes is healthy on here markets. against lower up Saree's

that margin a a operational obviously, as little in then prove margin you little but seasonal out half. of bit and back how we structural mix and think well efficiencies benefit, called here sustainability cadence talk more bit should pretty should Maybe You normal sustainable. about the expect about

manufacturing a improve done hard Yes. our lot of I the management we Do of the the mean site a time period of terms Absolutely. that And to we've the now Obviously, the last work is accrete continue X are in gross to rationalization we productivity over period mirror fighting work of years. rearview years we X that's our last course for the result sustainable? inflation. continuously seeing quality improve of were a footprint. in in price/cost think very what of to margin. done course firmly margins gone you're a positively we've the of through the inflation, over of of We've as

we We able last the years, production sufficient acquisition. we very We'll existing we couple been recent excellently. of operating over But can with grow not very opportunity continue will as always do go manufacturer platform have into we into that Hayward to forward, our inorganically other the pretty footprint. much That's to a acquired that that as collapse every most business businesses that facility location. we've the

manufacturing produce the culture continues across We of in to Sigma improvements have a our here Kaizen term. Six that medium long legacy facility, a lean

that the gross that comfortable all as to we margin sustain can feel continue saying, we we So very grow.

tremendous available We're utilized. to capacity around XX% approximately today. utilization have us probably cap We

to without any to can having additional add we continue So CapEx. grow this business

But In little bit see leverage up. that little a to our yes, we how detriment get the QX the get of in in the And period QX, back. wait have in down of terms QX by penalty. then discount a we balance very we of similar QX the size the QX, and But leverage know, to that be to sales consequently, up that so we do that to margin we terms -- tends get you of the of step early as will from year, for when as in opens QX. QX step of looks cadence bit business.

effect X. We have October a price goes into announcement that

to on go we'll discounts we're feel continue impact comfortable we of the phenomenal us. margin. pleased net evaluate greater margin year-to-date early gross performance We its at. that October X position into in by, a able than and very to the be over have effect the where And XX%. But and then cement with with that team, as That's We're result course a for time. of management we and

And you're filter funnel? about leaning or on to highlight particular residential your inorganic are super up about products I'm the It priority versus commercial maybe helpful. but trying pool? prepared traditional just prioritization you Maybe gears the or talk thinking moved prioritize as through how maybe deployment. in ChlorKing. list any finished maybe way fact sounded you switching like on we you're then its remarks, technologies capital that Can of there the to just That's that

Let me on touch process. just capital standard our allocation

first some to facilities, consequence timing of than always originally look expenditure had We continue our We back our manufacturer. to have per We're that business. not our take million. to deviated We'll lower a around priority between an for investment said, into of care profile the calling we bit $XX of facilities we It's year, [indiscernible]. X% U.S. we're we're with a investments that's into of those little and X% as from take upgrade that. year. capital a putting We're a and This facilities. purely our

now cash our here then delever inorganic our short to the really we of job, into share the balance on now, M&A. profile attribute will thirdly, sheet, done pipeline. though our growth we've very at or cash then over also to covers our our will X do rich but given acquisition. It have X of afford the -- merger us been basis, consideration continue an opportunity target year. shareholders. We taking continue It's move X.Xx appropriate to the And of to remaining on to both X.Xx mentioned, priority That recent focus. program moved finally, no profile return was organization. And our be for attribute and $XXX a one. a term balance ChlorKing organic specific think good just Xx a do to million commercial this flow a the Right a in for always has our been I to in cooking, organization. activities repurchase commitments we've residential available this most the over there, we're deployment sequentially, does as range to growth about into from down believe, Secondly, great Xx that's and we

I would a maintain mentioned, just we mean, as I add, healthy I've pipeline.

stronger Our are market position in where than is commercial. we residential significantly in

cetera. out pumps, from equipment, the a as I'd catalog. at standpoint commercial I very opportunity we pad strong say So that may of filters, cleaners, we us we're chlor building in But afford call terms what more mean, look product technology, et

products automation around organically more continue points around as to us, contemplate inorganic going both lifestyle of key will of emphasis and opportunities we the be things forward. for and So

of Our comes next Jadrosich question from America. of Rafe Bank the line with

on you about us to new of the you're into follow-up typical -- permits. lag on new between at just when point, flow construction of Like we through your on construction Can seeing like on starts the trend actually or revenue? some and bottoms the that would comments ask think that some to do side. your business whenever some how I comment remind the permits on the wanted -- inflect

couple what it's permitting. Yes, how Rafe, of is terms we see months, would define probably of in we think I a

so follow to specific that's upon workload be what depending of the were to think you you'd the one the I or through process, the dealer specifically of kind XX XX between rate. filing days permit If is somewhere

it. Got

Okay.

pretty a it's permit a -- it's So from yourself. the quick turnaround to quick pretty

Okay. And then...

I a that in is. asked that talking that. on months -- of But would wasn't that COVID. kind would general, during say it have question -- X I so. been it haven't longer think or we during Now tail you're

the and market market the consolidated resi controlling you with of look relative talk the and Okay. That's X is pretty can helpful. step resi, if at -- And about how commercial majority mean players I large have then size set back we core that to other is you commercial what your today? And what's consolidation competitively versus the legacy up of you in like business then the margin that relative size profile is of the compared like of of commercial resi? terms kind of the business that to

Yes.

a one add standpoint, the profile at -- strong the think And business. from I'll benefits as of end Hayward. let it's I'll I is Eifion business let margin here, pretty at similar a margin of real margin ChlorKing but it's joining the that

often BTU to fragmented, might pumps what the out you heaters see space filter residential horsepower more larger brands you in the categories. extent. regenerative bit say globally the look competitive guess, I to some participate as of from But some the as commercial commercial than of product the in landscape, referring some larger some there. all some X, the big terms I to It of to market do is individual In would we're of the around of a

a feel it's I we would bit a So fragmented, it's the as more -- residential know I -- it. business than bit maybe more

adjusted the it's between commercial segment residential In these comparable. about nice different DNA. us. see within EBITDA don't thing margin terms type a for of bottom income in Maybe margin business. slightly very gross of and and major the The between comparability, the line, acquisitions a NASH I'd have say, generally profile But we at speaking, we difference line

of an opportunity we progressively acquisition course we improve time, bring to purchase raw the the can that have Over material to power with cost. the the margin

bring. same look of applies can And course attribute the continue acquisition the clocking that to of so expand to type that acquisitions, And we over time. future to we

follow-up the Research. next Coe of with Our Nigel a is Wolfe line question from

couple I Eifion. quick for of you, think a ones

you so now or assuming right a is I factory is normal points absorption. say level? utilization about mentioned X would I'm that's What about and XX%. Because think you gross margin

what is the -- you wondering And if level? number with view? one, just if that agree I'm So normal

Yes.

XX% to would is approximately we these where say operate just normal, today. probably correct trending level. to where said that for you, So we pre-pandemic say When in I utilized units back normally us, we is would

accelerated of the pandemic, advantage the we the to capacity facilities in take the the machinery in During shifts day. hours in the within

have machine grow the we in to in week to able the latent access volumetrically. opportunity It be those as more shifts get the over those on to So shifts still hours that tap get that weekend. to in and to additional learning pandemic capacity a was the business and we period great continue to

to opportunity out the facilities. balance, so given our that. that's a we've now in match cost us right operational the And underabsorbing labor and production facilities kudos massive proven facilities. not team. awesome they in current to balance the those those is always We do we our this We're level for variable can in

good of And labor got It's rightsize grow in the that to profile we we've absorption. continue with we business. will base we're keep level we absorption need So to appropriate absorption to the incurring. volume, cost as walkup

normally, [ a ] Q-to-Q [ and Okay. And we but ] this to flow. that from quick I receivable just fell I Accounts on must do read comments. know then see free AR XX X down the X drawdown degree. cash in XX not one

help Or organic? thoughts quarter? the there all in factoring that there? is from wondering, just I'm was So some Any

Yes.

business. consequence that decline normally from bio the to in all come into as So it the does QX a receivable, accounts terms of of QX early receipts the

discount terms. buy extended a know, early you up As and to payment X months offers

our early in year. the And comes by receivable of and case in -- quarter, power that was early this come the that for so most cash second saw you

with we're early current to time, again QX which see receivable And will the step through Happy that on the balance as as climate. great for pleased by accounts very ship early the year. season. So now, report period exactly the increase this is XXXX in we majority in vast year to of by the have paid collection the cash we for

But no there? big impact factoring

No, at all. no, not

to concludes Thank final for comments. any I'll Holleran you. back session. turn Mr. Ladies and question-and-answer the our gentlemen, that floor

thank Hayward. in for interest everyone to I'd Melissa. you, like their Thank

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

Thank you. This today's concludes conference.

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