Hayward Holdings, Inc.

Welcome to Hayward Holdings Second Quarter 2021 Earnings Call. My name is Ashley and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star then 1 on your touch-tone phone. Please note that this conference is being recorded. I will now turn the call over to Stuart Baker, Vice President, Global Strategic Planning and Business Development. Mr. Baker, you may begin.

Thank you, and good morning, everyone. We issued our earnings press release this morning to the investor relations portion of our website at investor.hayward.com, where you can also find an earnings slide presentation that we will reference during this call. I'm joined today by Kevin Halloran, President, Chief Executive Officer, and Ifean Jones, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to remind everyone that during this call that the company may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, anticipation, beliefs, estimates, forecasts, plans, and prospects. Such statements are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in the company's earnings release posted on the website and will be provided in our Form 10Q for our second quarter of fiscal year 2021 as filed with the Securities and Exchange Commission. The company does not undertake any duty to update such forward-looking statements. Additionally, during today's call, the company will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of net income to adjusted EBITDA calculated under GAAP as well as reconciliations for other non-GAAP measures discussed on this call can be found in our earnings release and will be included in our form 10Q for our second quarter fiscal year 2021. I would now like to turn the call over to Kevin Halloran.

Thank you Stuart and good morning everyone. It's my pleasure to welcome all of you to Hayward's second quarter earnings call. I'll start on slide four of our earnings presentation with some highlights from our second quarter results. During the quarter, we delivered record net sales of $364 million, an increase of 66% year over year. Significant profitability growth with adjusted EBITDA of $110 million, an increase of 81% year over year, despite inflationary and supply chain headwinds. This result continued to enhance our financial flexibility through rapid deleveraging. Our results build upon the solid growth we reported during the same period last year in which net sales grew 14% and adjusted EBITDA grew 21%. Our exceptional performance this quarter is proof of Hayward's product adoption across the channel, sustainable secular industry tailwinds, operational excellence, and an expansion of totally Hayward dealers. The demand for pools and pool equipment remains strong, and we believe our innovative technology and products will continue to deliver growth, especially in the aftermarket. We are increasingly confident in our ability to continue to benefit from market expansion given our competitive advantages around product range and technology, operational platform, and partner relationships. Now moving to our guidance on slide five. I'll summarize some recent trends and why the industry's outlook continues to remain strong, not only in 2021, but as we look into 2022 and beyond. In the near term, the market backdrop is driving demand and excessive labor and global supply chain capabilities, resulting in higher inflation, which we are successfully passing through the channel. Builder backlogs greatly expanded in 2020 and 2021, and we expect this trend to continue in 2022, driven by new pool construction with upgrades to smart pad products, along with repair and remodel project activity. Our industry is supported by favorable housing dynamics, including increased levels of prospective homeownership, particularly the millennial buyer, migration to suburbs and the Sunbelt, and a strong repair and remodel market driven by an overall aging housing stock. We are also seeing evidence that pool usage levels continue to rise due to extended seasons and more upgrades with innovative capabilities with the pool as the focal point of the backyard. While these trends were magnified during the pandemic through stay-at-home conditions, we believe these are secular trends with significant runway well beyond 2021. Now turning to our full year 2021 financial guidance, which is influenced by a number of factors, including our financial results to date. As the year progresses, we have greater visibility through our channel partners and insight into builder activity levels and backlogs, which have continued to show considerable strength and sustainability. Given the strong performance in the first six months of the year, visibility into the order file, and increased confidence in our ability to execute, we are raising our guidance for the full year fiscal 2021. We now expect net sales for the year to grow 54% to 58% year over year, and adjusted EBITDA of $405 million to $425 million, a growth of 75% to 84% year over year. This compares to previous guidance for net sales growth of 40% to 45% year-over-year and adjusted EBITDA of $360 million to $390 million, or a growth range of 55% to 68% year-over-year. Turning to slide six. As a reminder, at Hayward, we segment our business into North America and Europe and the rest of the world. North America is approximately 80% of total sales, which is advantageous given this region has the best pricing and margin profile in the industry. We are also a pool pure play equipment manufacturer with the vast majority of our sales tied to the residential backyard. We offer a complete line of innovative, environmentally sustainable products, providing the pool owner everything needed to safely operate any type of pool. Hayward is the leading innovator with the most known and trusted brand in our growing industry. The industry is supported by sustainable secular trends such as de-urbanization, migration to warmer climates, and increased investment in outdoor living. New construction is a key pillar of growth, driving the overall installed base of pools that we serve. However, 75% of our revenue profile stems from a resilient, non-discretionary pool aftermarket, which includes equipment replacement, upgrades, and remodels. Turning to slide seven, Hayward has several key competitive advantages, creating customer stickiness and delivering growth for our stakeholders. The first layer is an incredibly strong and trusted brand, decades in the making, supported by a very large and growing installed base, resulting from having a complete product line across all pool types. Secondly, we have an extensive network and very strong relationship with our partners from totally Hayward dealers, comprised of builders and servicers that stake their reputation on our products each day. to distributors, retailers, e-sellers, and authorized service centers that help us sell and support Hayward products in the backyard. Through June, I am pleased to say we have already seen a double-digit growth in the number of new builders and servicers joining our Totally Hayward Reward program this year. We believe this is clear evidence of the stickiness of our share gain as trade professionals see the benefits of our products and the support and relationships they are building with Hayward. We continue to demonstrate our operational excellence and ability to leverage volume at attractive margins. We manufacture in-market with roughly 70% of our product built in the U.S., and we are vertically integrated. As such, we have a more simplified, dynamic supply chain than our competitors. We are highly automated and have capacity available to build more product while deploying very manageable levels of capital. These factors were on display during Q2 as we increased our production by over 80% year over year. The final key Hayward advantage is our innovative and product design capabilities. Products are our lifeblood and we spend in excess of $20 million per year in engineering to ensure that our products are at the forefront of technology with leading functionality. We have extensive IP that we protect with active and pending patents. We also have top product performers in many key categories, like omni controls, variable speed pumps, and salt chlorine generators, which are fueling our growth as the industry has made significant shifts towards digital and energy-efficient capabilities, and pool owners increasingly seek out these smart pad, environmentally sustainable technologies. Turning to slide eight, There are a number of key secular trends we are seeing centered around home building and the increased focus on smart homes that we believe will continue to enhance the awareness and demand for Hayward products. There is a significant percentage of new home buyers coming to the market, which is heavily concentrated in the Sunbelt states. Confidence levels in home remodeling industry continue to increase, driving demand towards repair, remodel, and upgrade activity. As previously highlighted, Hayward is at the forefront of product and technology innovation, which is driving conversion to pools with SmartPads. This coincides with the projected penetration levels of smart home systems growing from approximately 40% today to approximately 60% in 2025. With that, I'd like to turn the call over to Ivan Jones, who will discuss our financial results in more detail.