Hayward Holdings, Inc.

Good day. Thank you for standing by and welcome to the Huard Holdings Inc. Fourth Quarter and Full Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. In addition, if you require any further assistance, you may press star zero. Thank you. I would now like to hand the conference over to your speaker today, Mr. Kevin Holleran, Chief Executive Officer of Hayward Holdings, Inc. Sir, please go ahead.

Thank you. Good morning, everyone. We issued our fourth quarter full year 2021 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'll reference during this call. I'm joined today by Kevin Harlan, President, Chief Executive Officer, and Afin Jones, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to remind everyone that during this call, 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 to release posted on the website and will be provided in our Form 10-K for our full 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 also 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 calculated under GAAP to adjusted EBITDA, 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 10-K for our full fiscal year 2021. I would now like to turn the call over to Kevin Horan.

Thank you, Stuart, and good morning, everyone. It's my pleasure to welcome all of you to Hayward's fourth quarter and full year earnings call. I'll start on slide four of our earnings presentation with some highlights from our fourth quarter results. We had another very strong quarter of growth as we delivered net sales of $352 million, an increase of 35% year-over-year, an adjusted EBITDA of $106 million, an increase of 43% year-over-year. We achieved nearly 170 basis points of margin expansion, returning to greater than 30% adjusted EBITDA margin despite continuation of inflation and supply chain headwinds during the quarter. We were also able to further strengthen the balance sheet in the quarter deleveraging the 1.7 times to support current and future growth investments as part of our balanced capital allocation strategy. The strong fourth quarter results cap an incredible full year for Hayward and its first as a public company. I would like to take this time to acknowledge the entire Hayward team for their tireless efforts to meet market demands despite many challenges. I'd also like to thank our suppliers and trade partners for their support and dedication, which allowed us to achieve incredible growth and strengthened our market position in the very attractive fuel industry. Turning to slide five, the full year we achieved net sales growth of 60% to close the full year at just over 1.4 billion as we executed on the number of growth levers such as smart pad conversion, increased market adoption of new products, and expansion of our customer base, all of which were supported by Hayward's investment in capacity and distribution, resulting in higher output levels and driven by strong secular trends in outdoor living. Record adjusted EBITDA of $422 million was an increase of 82% year over year. Caleb's strategic manufacturing footprint, operational capabilities, and vertically integrated systems are key differentiators, allowing us to successfully operate in periods of high demand and disruption as seen over the course of this past year. In addition to these key differentiators, we were able to navigate effectively through the inflationary environment by successfully implementing pricing initiatives to soften the impact of rising prices across our cost base. All of this combined together has allowed us to not only increase output but achieve significant margin expansion with our adjusted EBITDA margin expanding by more than 360 basis points for the full year to 30.1%. Turning to slide six, I would like to highlight in more detail the drivers of our growth in 2021 and beyond as we expect these drivers to continue supporting sustainable growth across the pool industry. In 2021, we saw our proprietary OmniControl app drive accelerated demand for higher value IoT products, especially in the aftermarket upgrade and replacement markets, which represents roughly 80% of our sales. As demand for IoT products and technologies grow, so does the OmniApps user base as the pool is the centerpiece of the backyard. In the year, we saw our Omni users increase by almost 50% compared to the prior year. We focused our commercial team on channel development and new customer acquisition. This resulted in our total Hayward partners base growing by more than 20% compared to prior year. The growth comes as we introduce field-based business development roles focused on increasing our dealer base and market adoption of Hayward products and broadening our omnichannel capabilities with expansion of our e-commerce platforms. Hayward's innovation and technology played a major role in the recent growth. As a market leader, our engineered products achieved significant growth in the key segments of controls, sanitization, as well as energy-efficient pumps and LED color lights, delivering simple-to-use, environmentally sustainable solutions. In Q4, we enhanced our offerings and capabilities with the acquisition of three technology companies, all of which will join our OmniControl ecosystem, thanks to its modern architecture. On slide seven, I'll discuss the powerful SmartPAD conversion taking place in our industry, led by Omni Automation Systems. Omni is at the heart of the SmartPAD, creating the pole for IoT-enabled devices. The power and simplicity of use has driven connectivity of a broad array of technologies, with the top five growth categories in the industry being LED color lights, controls, variable speed pumps, heaters, and sanitization. Hayward's growth in these categories has outperformed the industry. A quick comment on heaters, which has received a lot of attention. As you can see, heaters have grown, but they're not tops on the list. But we do appreciate the role they play in extending the swim season for pool owners by up to 50% in some geographic markets, and thereby they increase the use of all equipment on the pool pad, which accelerates the repair, replacement, and upgrade cycle on those pools. These high-growth products are transforming the way people enjoy their pool and backyard living, and Hayward is leading the way with progressive launches of new products or upgrades to this connected ecosystem. Moving now to slide eight, we focus on a number of key aftermarket conversion upgrade opportunities. For each of the three categories shown, controls, salt chlorination, and variable speed pumps, we compare the take rate at time of new pool construction to the current level of aftermarket penetration. We believe in the premise that existing pool owners, if educated as to the merits of these compelling technologies, would desire the same benefits. Our sales teams are working with trade professionals to promote these exciting new technologies as aftermarket upgrades occur. Moving to the aftermarket to new construction penetration in these three categories alone affords a market opportunity of nearly $6 billion. On slide nine, we build upon the previous slide, which highlights key new technology adoption at the point of new construction or full-scale remodel. These new SmartPad pools, of course, have many other technology choices, including water features, LED color lights, multiple pumps, and heater solutions. The difference between a SmartPad pool and a legacy, lower technology, non-automated pool is typically around $7,000 for the equipment manufacturer. Even a typical pool has a lifetime of around 30 years. and an equipment replacement cycle every 10 years, there's compelling annuity stream associated with the conversion, one which we feel is very positive for our industry, providing future growth. This opportunity is a key focus for our sales and marketing teams as we work with trade professionals to execute the vision. Finally, on slide 10, I'd like to briefly discuss our M&A strategy, which focuses on core pool product or technology tuck-ins, as well as backyard adjacency. We recently closed on three businesses which complement each other and further leverage our Hayward's leading OmniControls technology to increase the ambiance of the pool, spa, and backyard with a variety of novel water features, all of which benefit from our LED lighting technologies. With that, I'd like to turn the call over to Ivy and Jones to discuss our financial results in more detail.