Hayward Holdings, Inc.

Welcome to Hayward Holdings' second quarter 2022 earnings call. My name is Sam, and I will 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 one on your touchtone phone. Please note that this conference is being recorded. I will now turn the call over to Kevin Maska, Vice President of Investor Relations. Mr. Mazka may begin.

Thank you and good morning everyone. We issued our second quarter 2022 earnings press release this morning, which has been posted to the investor relations portion of our website at investor.hayward.com. There you can also find an earnings slide presentation that we will reference during this call. I'm joined today by Kevin Holleran, President and Chief Executive Officer, and Ivian Jones, Senior Vice President and Chief Financial Officer. Before we begin, I would 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 release posted on the website, and will be provided in our Form 10-Q for second quarter 2022 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 calculated under U.S. 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 Form 10-Q. I would now like to turn the call over to Kevin Halloran.

Thank you, Kevin, and welcome to the team. 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 the second quarter. We delivered another solid quarter marked by net sales growth of 10% year over year to $399 million, which was on top of exceptional growth of 66% in second quarter of 2021. In our core North American market, net sales increased 17%. Adjusted EBITDA in the second quarter grew 16% year-over-year to 128 million, yielding a 32% margin. This represents an increase of 166 basis points over the prior year level, despite the sustained inflationary headwinds. Later in the presentation, we'll discuss our outlook for the year, which we have revised to reflect current channel inventory dynamics and macroeconomic conditions. Before we do that, I'd like to take you through why we're so confident in the long-term growth model for Hayward and the industry. As outlined on slide five, our performance continues to be driven by our ability to execute on the core drivers of growth, including digital leadership, dealer conversions, new products, operational excellence, and broad channel access and environmental sustainability. Importantly, this resulted in solid net sales growth of 28% over the last year. Notably, I'd like to highlight continued strength in our OmniLogic IoT-enabled pool controller installations, which have grown over 60% in the last 12 months. We also see continued strong momentum with our sales team, who have added over 1,000 Totally Hayward partners year-to-date after approximately 1,500 in full year 2021. These dealer additions are key to our long-term growth through their dedication and advocacy of Hayward products. Finally, I'd like to draw your attention to our new product vitality index, which increased 29% due in large part to our market success with the industry's most efficient variable speed pumps, omni-logic controls, and sanitization products. On slide six, Our focus on strengthening our IoT digital leadership position through smart pad conversions is continuing to take place with the ongoing development of new products that pair with our Omni automation systems. The industry's top growth categories include energy efficient variable speed pumps, controls, and LED lighting. Hayward has made significant investments across all these categories through innovation, new product development, and acquisitions. Our ability to enhance and expand our offering provides diversification, strengthens brand recognition, and overall market penetration. This has allowed us to fully participate across our key end markets of aftermarket upgrade, repair and replace, remodeling, and new pool construction. Moving to slide seven, I'd like to revisit an important slide that we've highlighted before with some updated market trends reflecting an ever increasing total addressable market opportunity. A key driver in our industry is the technology upgrade conversion occurring in the aftermarket with opportunities for digital, chemical, and energy. For each of these three categories of IoT enabled 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 as consumers building new pools are they would desire the same benefits. First is digital conversion with controls and automation replacing manual time clocks adding iot enabled controls delivered what we call the smart pad. Individual equipment components dynamically controlled to make pool use easier and more enjoyable, while lowering the cost of ownership. Second is conversion to non-chemical forms of water sanitization as chemical chlorine is replaced with salt chlorine generators and UV ozone products, making a safer, more natural swimming experience. Finally, a conversion to more energy efficient products, notably variable speed pumps replacing single speed pumps and color LED lights replacing white incandescent lights. Our sales teams are working with trade professionals to promote these exciting new technologies as aftermarket upgrades. Moving aftermarket to new construction penetration levels in these three categories alone affords a market opportunity of well over $6 billion. On slide 8, as I mentioned, at the time of new construction or full remodel, homeowners have several great new technologies available to deliver comfort, ambiance, and convenience of pool ownership. These technologies also offer a compelling cost of ownership benefit when compared to older legacy equipment. As you see here, reimagining the backyard with the pool as the central feature both day or night is now a reality. These technologies provide a real win-win for both the pool owner and Hayward. At the point of construction, a smart pad pool on average has $7,000 more OEM content when compared to a legacy non-smart pad pool. Given most pools have a typical lifespan of 30 years and equipment typically needs replacing every 10 years, there will be two replacement cycles yielding a $21,000 lifetime incremental value per pool. Turning now to slide nine. While new construction is a key part of the industry, the core driver of our business is the resilient aftermarket. Through various economic cycles over the last 50 years, shown here in orange, The installed base has always grown and is now approximately 5.4 million in-ground pools in the United States. This creates a lifetime need for repair, replace, remodel, and upgrade. On slide 10, I'll briefly discuss our M&A activity focused on core pool product or technology tuck-ins as well as backyard adjacencies. During the quarter, we completed the acquisition of J&J Electronics and Solos, which represent the specialty lighting business of Halco. As discussed earlier, lighting is one of the top growth categories in the industry, highlighting pool owners' desire to increase the function and ambience of their outdoor living space by leveraging the Omni app. We are pleased with the progress made to date into integrating these businesses, as well as the other businesses we added to the Hayward family late last year. These technologies and products will increasingly differentiate our leading lifestyle product portfolio. With that, I'd like to turn the call over to Ivan Jones, who will discuss our financial results in more detail.