Hayward Holdings, Inc.

Welcome to Hayward Holdings third quarter 2024 earnings call. My name is Jessie 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 touch tone phone. Please note that this conference is being recorded. I will now turn the call over to Kevin Mosca, Vice President, Investor Relations and FP&A. Mr. Mosca, you may begin.

Thank you, and good morning, everyone. We issued our third quarter 2024 earnings press release this morning, which has been posted to the investor relations section 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 today joined by Kevin Halloran, President, 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 are considered forward-looking in nature, including management's outlook for 2024 and future periods. Such statements are subject to a variety of risks and uncertainties, including those disclosed in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission that could cause actual results to differ materially. 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. Reconciliations of historical non-GAAP measures discussed on this call to the comparable GAAP measures can be found in our earnings release and the appendix to the slide presentation. I would now like to turn the call over to Kevin Halloran.

Thank you, Kevin, and good morning, everyone. It's my pleasure to welcome all of you to Hayward's third quarter earnings call. Before we begin, I'd like to offer our deepest sympathies to those impacted by the hurricanes that devastated many regions across the southeastern United States, including in our home state of North Carolina. We have many employees, customers, and other stakeholders throughout the southeast. Our thoughts are with our neighboring communities in this time of great need, and we are committed to assisting in any way we can. Now I'll start on slide four of our earnings presentation with today's key messages. I am pleased to report third quarter results consistent with expectations. We executed well again this quarter, delivering strong profitability, increased cash flow, and improved balance sheet. We continue to drive our growth strategy by advancing our technology leadership position, leveraging our culture of continuous improvement and operational excellence, and expanding customer relationships. Net sales increased 3% year over year in the third quarter, driven by positive net price realization and the recent acquisition of CloreKing. We were very pleased with the performance of this business in the first full quarter of Hayward ownership. Gross profit margins expanded 190 basis points to 49.7%. This represents the seventh consecutive quarter of year over year gross margin expansion. Cashflow generation was also solid with cash from operations increasing 27% year to date. This enabled us to fund our growth initiatives and reduce balance sheet leverage by more than a full turn on a year over year basis to 2.8 times. After a slow start to the pool season this year, our North American business benefited from an extended season and improved in season orders. Additionally, the early buy program is progressing in line with our expected participation. Finally, we're refining our full year guidance, raising the lower end of the ranges to reflect modestly improved sales and profitability. For the full year 2024, we now expect net sales to increase approximately three to 5% and adjusted EBITDA to increase approximately five to 9% from full year 2023. Turning now to slide five, highlighting the results of the quarter. Net sales in the third quarter increased 3% year over year to 228 million. The positive contributions of net price and core king were partially offset by lower volumes. By segment, net sales increased 5% in North America and declined 7% in Europe and the rest of the world. As I mentioned, gross profit margins expanded 190 basis points year over year to 49.7%, despite an approximate 70 basis point diluted impact of purchase accounting related to the Clark King acquisition. This is a strong performance in a seasonally lower sales quarter. Adjusted EBITDA margin in the third quarter increased 110 basis points year-over-year to 22.5%, and adjusted diluted EPS was 11 cents. Turning now to slide six for a business update. In-season demand for Hayward products was generally consistent with our expectations in the quarter, with North America outperforming Europe and the rest of the world. In North America, we saw increased in-season orders as the pool season started slowly on the front end but extended on the back end. Aftermarket repair and replacement remains resilient, but demand for the majority of new construction and remodel continues to be impacted by current economic conditions and interest rates. However, while we see the number of U.S. permits down, the value of permits remains more resilient, indicative of relative strength in the high-end new construction and remodel segments of the market. The early buy programs are nearing completion in North America and underway in Europe. and we are pleased with the progress to date. Incoming orders are trending in line with expectations and we anticipate solid participation. The pool industry has always been very disciplined on price and we continue to expect positive net price realization of at least 2% in 2024. We've been implementing value-based pricing strategies and skew rationalization to optimize our price structure and ensure our products are priced appropriately relative to the exceptional value provided to pool owners. Given these initiatives, we implemented annual price increases in conjunction with the early buy program that we expect to yield approximately 3 to 5% in the U.S. and 1 to 2% in international markets. Technology leadership and new product introduction are central to our growth strategy, and we were extremely excited to see our efforts recognized recently by the largest global distributor. Specifically, Hayward received separate awards for both innovation leadership and operational excellence. This achievement is a testament to the dedication and hard work of all of our teams and employees at Hayward. Thank you for enabling us to be such a valued partner in our industry. One example of an exciting new innovation is the microchannel temperature control unit, which we introduced you to on a prior earnings call. This industry-first product offers the ability to heat pool water cool it to a comfortable temperature in the extreme summer heat, and even cool as low as 40 degrees if desired for a cold plunge. We are encouraged by the initial success of this unique product in the marketplace. Today, we're highlighting another new product introduction, the Paramount RDX unblockable drain. We continue to lead in drain technology, and the new RDX combines safety and high flow, ensuring swift and effective removal of debris. Compatible with concrete finishes, the design is able to collect large debris while blending seamlessly into the pool floor. Differentiated innovative products like these add value to our customers and drive future growth. We are investing in enhanced customer service and support, including new dedicated leadership and staffing, customer productivity tools, and training opportunities. During the quarter, we appointed a proven leader within Hayward to the newly created role of Vice President of Customer Experience, tasked with leading an industry-best customer care organization. We are also seeing increased adoption of our proprietary OmniPro app, an innovative cloud-based productivity tool for trade professionals, enabling real-time remote monitoring of a homeowner's pool and equipment configuration. As the industry becomes increasingly technology-oriented, we believe best-in-class support will be critical to further elevate the Hayward brand and drive customer intimacy, resulting in increased aftermarket conversion opportunities. Next, I'd like to provide a brief update on Chlor-King. We acquired the business in late June and we're very pleased with its performance in the quarter. Chlor-King is a leader in commercial pool water sanitization and a great strategic fit with a strong financial profile, advancing our position in the attractive commercial pool market. We are already seeing the synergies of the integration with Hayward's existing commercial business. Our sales teams are actively leveraging each other's customer bases to win new projects, serving the demand for sustainable, cutting-edge water sanitization systems. With that, I'd like to turn the call over to Avian, who will discuss our financial results in more detail.