Q1 2025 Hayward Holdings Inc Earnings Call

Welcome to Hayward Holdings first quarter 2025 earnings call. My name is Christine and I'll be your operator for today's call at.

Operator: Welcome to Hayward Holdings first quarter 2025 earnings call.

Operator: My name is Christine and I'll be your operator for today's call. At this time, all participants are in a listen-only mode.

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session.

Operator: 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 touchtone phone. Please note that this conference is being recorded.

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.

Kevin Masker: I will now turn the call over to Kevin Masker, Vice President Investor Relations and F. P N a Mr.

Kevin Maczka: I will now turn the call over to Kevin Maczka, Vice President, Investor Relations and FP&A. Mr. Maczka, you may begin. Thank you and good morning, everyone.

Speaker Change: Mr. <unk> you may begin.

Speaker Change: And good morning, everyone. We issued our first quarter 2025 earnings press release. This morning, which has been posted to the Investor Relations section of our website at Investor day at Hayward Dotcom.

Kevin Maczka: We issued our first quarter 2025 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.

Speaker Change: Here you can also find an earnings slide presentation that we will reference during this call.

Kevin Maczka: I'm joined today by Kevin Holleran, President and Chief Executive Officer, and Eifion 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 2025 and future periods. Such statements are subject to a variety of risks and uncertainties, including those discussed in our most recent Form 10-K, filed with the Securities and Exchange Commission, that could cause actual results to differ materially.

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

Speaker Change: 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 2025 in future periods, such statements are subject to a variety of risks and uncertainties, including those discussed in our most recent Form 10-K filed with the secured.

Kevin Holleran: He is an exchange commission that could cause actual results to differ materially the.

Kevin Maczka: 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. All comparisons will be made on a year-over-year basis unless otherwise indicated.

Speaker Change: The company does not undertake any duty to update such forward looking statements.

Speaker Change: 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.

Speaker Change: All comparisons will be made on a year over year basis, unless otherwise indicated I will now turn the call over to Kevin Howard.

Kevin Holleran: I will now turn the call over to Kevin Holleran. Thank you, Kevin, and good morning, everyone. It's my pleasure to welcome all of you to Hayward's first quarter earnings call. I'll begin on slide four of our earnings presentation with today's key message. I'm pleased to report first quarter results exceeded expectations. Net sales increased 8% with growth across both segments, North America and Europe and rest of world, and positive contributions from volume and price. We delivered solid profitability in our seasonally softest quarter with gross profit margins increasing to 49.5% and adjusted EBITDA margins increasing to 21.5%.

Speaker Change: Did you Kevin and good morning, everyone. It's my pleasure to welcome all of you. The Haywards first quarter earnings call I'll begin on slide four of our earnings presentation with today's key messages.

Speaker Change: Pleased to report first quarter results exceeded expectations net sales increased 8% with growth across both segments, North America, and Europe, and rest of world and positive contributions from volume and price, we delivered solid profitability in our seasonally softest quarter with gross profit margins increasing to 49.

Speaker Change: 0.5% and adjusted EBITDA margins, increasing to 21, 5%. This represents the ninth consecutive quarter of year over year gross margin expansion.

Kevin Holleran: This represents the ninth consecutive quarter of year-over-year gross margin expansion. Robust sales growth and profitability coupled with effective working capital management enabled us to maintain net leverage within our targeted range at 2.8 times while funding our growth strategies and launching innovative new products. We're especially excited about the recent launch of OmniX, an industry-first suite of innovative products for the app. The OmniX automation platform is easily deployed in the installed base, providing tremendous opportunity to unlock the addressable aftermarket of millions of non-automated pools to wireless IoT connectivity and control. I'll provide more commentary on this differentiated new solution for pool owners in a moment.

Speaker Change: Robust sales growth and profitability, coupled with effective working capital management enabled us to maintain net leverage within our targeted range at two eight times, while funding our growth strategies and launching innovative new products, we're especially excited about the recent launch of omni X and industry first suite of innovative products for the App.

Speaker Change: The Army X automation platform is easily deployed in the installed base, providing tremendous opportunity to unlock the addressable aftermarket of millions of non automated tools to wireless Iot connectivity and control I'll provide more commentary on this differentiated new solutions for pool owners in a bulk dirt.

Kevin Holleran: During this period of increased tariffs and heightened global economic uncertainty, we are aggressively executing our plans to mitigate the impact of tariffs, support margins, and position the company for continued growth while supporting our customers. Our team is rising to the occasion, and I'm very proud and appreciative of their efforts. We have a resilient business model with over 80 percent of our sales aligned with serving the aftermarket needs of the existing installed base and a strong balance sheet providing financial flexibility. I'm confident in our ability to navigate this rapidly evolving environment. That said, we are confirming our guidance for the full year 2025, reflecting the implications of the current tariff environment and execution of mitigation action plans.

Speaker Change: This period of increased tariffs and heightened global economic uncertainty, we are aggressively executing our plans to mitigate the impact of tariffs support margins and position the company for continued growth while supporting our customers. Our team is rising to the occasion and I'm very proud and appreciative of their efforts we have.

Speaker Change: Our resilient business model with over 80% of our sales aligned with sort of in the aftermarket needs of the existing installed base and a strong balance sheet, providing financial flexibility.

Speaker Change: I'm confident in our ability to navigate this rapidly evolving environment.

That said, we are confirming our guidance for the full year 2025, reflecting the implications of the current tariff environment and execution of mitigation action plans. We continue to expect net sales to increase approximately one 5% and adjusted EBITDA of 280 to 290.

Kevin Holleran: We continue to expect net sales to increase approximately one to five percent and adjusted EBITDA of $280 to $290 million.

Kevin Holleran: This guidance is unchanged, but many of the underlying assumptions certainly have, and Ivan will detail this for you.

Speaker Change: <unk>.

Speaker Change: This guidance is unchanged, but many of the underlying assumptions certainly have and Ivan will detail. This for you turning now to slide five highlighting the results of the first quarter net sales increased 8% to $229 million driven by 3% increases in both price and organic volume plus a 3%.

Kevin Holleran: Turning now to slide five, highlighting the results of the first quarter. Net sales increased eight percent to $229 million, driven by three percent increases in both price and organic volume, plus a three percent contribution from the Clork King acquisition. Sales growth was solid and consistent across both segments, with net sales increasing eight percent in North America and seven percent in Europe and the rest of the world. Trends improved in March after a slower start to the year, with end demand for Hayward product now generally consistent with normal seasonal trends as we approach the peak pool season.

Ivan: Contribution from the core King acquisition.

Ivan: Sales growth was solid and consistent across both segments with net sales, increasing 8% in North America, and 7% in Europe and rest of world.

Ivan: Trends improved in March after a slow start to the year with end demand for Hayward product now generally consistent with normal seasonal trends as we approach the peak pool season during the quarter, we saw solid growth in critical product categories of pumps lighting automation and standardization. In addition, our.

Kevin Holleran: During the quarter, we saw solid growth in critical product categories of pumps, lighting, automation, and sanitization. In addition, our commercial pool business continues to grow organically and benefit from the integration of the Clork King acquisition. As we all know, the economic outlook has become increasingly uncertain, but the majority of our business is resilient and tied to non-discretionary aftermarket maintenance. the more discretionary elements of the market, new construction, and remodel, have been impacted by these economic conditions and higher interest rates, as we expected entering the year. Gross profit margins increased 30 basis points to 49.5%. Adjusted EBITDA increased 9% to 49 million and adjusted EBITDA margin also increased 30 basis points to 21.5%.

Ivan: Commercial pool business continues to grow organically and benefit from the integration of the core King acquisition as we all know the economic outlook has become increasingly uncertain, but the majority of our business is resilient and tied to non discretionary aftermarket maintenance the more discretionary elements of the market.

Ivan: New construction and remodel had been impacted by these economic conditions and higher interest rates as we expected entering the year gross profit margins increased 30 basis points to 49, 5%.

Ivan: Adjusted EBITDA increased 9% to $49 million and adjusted EBITDA margin also increased 30 basis points to 21, 5%.

Kevin Holleran: We continue investing in the business to drive future growth. On the commercial side, we are executing targeted sales and marketing strategies to further increase our presence in high-growth regions and capture market share. We are increasing investments in customer care, leveraging new technologies and tools to enhance customer experience. Following the successful launch of the first Hayward Hub and Support Facility in Texas, we added additional hub locations in Arizona and North Carolina to better support our dealers and trade professionals in the regions. On the product side, we are introducing a dedicated advanced engineering and innovation team to accelerate the development of new technology products.

Ivan: We continue investing in the business to drive future growth on the commercial side, we are executing targeted sales and marketing strategies to further increase our presence in high growth regions and capture market share we are increasing investments in customer care, leveraging new technologies and tools to enhance customer experience.

Ivan: Following the successful launch of the first Hayward hubs and support facility in Texas, We added additional hub locations in Arizona, and North Carolina to better support our dealers and trade professionals in the regions on the product side, we are introducing a dedicated advanced engineering and innovation team to accelerate the development of new Tech.

Ivan: <unk> products finally, adjusted diluted EPS increased 25% to 10.

Kevin Holleran: Finally, adjusted diluted EPS increased 25 percent to 10 cents.

Ivan: Turning now to slide six for an update on tariffs tariffs.

Eifion Jones: I'm turning now to slide six for an update on Tariff. Tariffs have, of course, been front-page news for many weeks now, and the global trade situation continues to evolve. As a reminder, we are predominantly a domestic manufacturer with approximately 85 percent of our North America sales produced in North America. However, we do source certain products from our Hayward facility in China and other third-party suppliers in China that are impacted by the more significant incremental tariff of 145 percent. Based on the latest information available, we estimate a total annualized tariff impact of approximately $85 million, with a partial-year impact in 2025 of approximately $30 million, mostly related to China.

Ivan: Terrorists have of course been front page news for many weeks now in the global trade situation continues to evolve as a reminder, we are predominantly a domestic manufacturer with approximately 85% of our North American sales produced in North America. However, we do source certain products from our Hayward facility in China and other.

Ivan: Third party suppliers in China that are impacted by the more significant incremental tariffs of 145%.

Ivan: Based on the latest information available we estimated total annualized tariff impact of approximately $85 million with a partial year impact in 2025 of approximately 30 million mostly related to China.

Eifion Jones: Our planning assumption is that the current tariff rates remain in place.

Ivan: Planning assumption is that the current tariff rates remain in place as such we are aggressively executing mitigation action plans, including cost and supply chain initiatives plus other pricing actions, we're working to establish increased certainty in our supply chain, rather than having to respond to geopolitical uncertainty.

Eifion Jones: As such, we are aggressively executing mitigation action plans, including cost and supply chain initiatives plus other pricing actions. We are working to establish increased certainty in our supply chain rather than having to respond to geopolitical uncertainty. On the cost side, we're accelerating cost reduction and productivity initiatives and actioning structural supply chain alternatives. As a result, we expect our direct sourcing from China into the U.S. as a percentage of cost of goods sold to decline from approximately 10 percent to 3 percent by year-end. At this point, we expect our mitigation plans to fully offset the expected tariff-related cost increases and volume pressures.

Ivan: On the cost side, we're accelerating cost reduction and productivity initiatives and actioning structural supply chain alternatives. As a result, we expect our direct sourcing from China into the U S. As a percentage of cost of goods sold to decline from approximately 10% to 3% by year end at this point, we expect our mitigation plan.

Ivan: To fully offset the expected tariff related cost increases and volume pressures on the pricing side, we announced a 3% price increase in North America effective in late April and more recently announced another increase of 4% effective mid June we will continue evaluating the need for additional pricing action.

Eifion Jones: On the pricing side, we announced a 3 percent price increase in North America effective in late April and more recently announced another increase of 4 percent effective mid-June. We will continue evaluating the need for additional pricing action and managing channel inventory appropriately by limiting pre-orders ahead of the price increases. Our teams are working very diligently to support our customers while protecting profitability.

Ivan: And managing channel inventory appropriately by limiting preorders ahead of the price increases our teams are working very diligently to support our customers while protecting profitability turning to slide seven for many years Hayward has been a leader in Iot controls with our omni logic tool automation platform for the new <unk>.

Kevin Holleran: Turning to slide 7, for many years, Hayward has been a leader in IoT controls with our OmniLogic pool automation platform for the new construction and remodel markets in the U.S.

Ivan: Struction and remodel markets in the U S. We are now excited to announce on the ex our breakthrough smart Iot technology designed to cost effectively enable wireless control of the existing installed base. We estimate approximately two thirds of the $5 4 million in ground pools in the U S or <unk>.

Kevin Holleran: We are now excited to announce OmniX, our breakthrough smart IoT technology designed to cost-effectively enable wireless control of the existing installed base. We estimate approximately two-thirds of the 5.4 million in-ground pools in the U.S. or 3.5 million pools are currently not automated. Today, homeowners with an existing manually operated pool interested in IoT control are faced with just one option, the installation of a centralized control unit wired to all of the equipment. OmniX, on the other hand, is a decentralized wireless platform eliminating the need for a standalone control unit. By design, it provides a far more cost-effective, simpler path to automation.

Ivan: $3 5 million pools are currently not automated today homeowners with an existing manually operated pool interested in Iot control are faced with just one option the installation of a centralized control unit wire to all of the equipment Omni X on the other hand is a decentralized wireless platform.

Ivan: Eliminating the need for a standalone control unit by design. It provides a far more cost effective simpler path to automation.

Ivan: Starting with our newly launched omni ex variable speed pump, we are embedding control capabilities into our key products.

Kevin Holleran: Starting with our newly launched OmniX variable speed pump, we are embedding control capabilities into our key products. At the time of natural break fix of equipment on the pool pad, homeowners build their ecosystem one product at a time by replacing with OmniX-enabled equipment. As they do, they can utilize the OmniX app to effortlessly control their pool. This represents a great value proposition for both the homeowner as well as our service professionals now able to offer a compelling, easily installed upgrade.

Ivan: At the time of natural break fix of equipment on the pool pad homeowners and builder ecosystem, one product at a time by replacing with on the <unk> enabled equipment as they do.

Ivan: They can utilize the omni ex app to effortlessly controller pool. This represents a great value proposition for both the homeowner as well as our service professionals now able to offer compelling easily installed upgrade with that I'd like to turn the call over to Ivan to discuss our financial results in more detail.

Eifion Jones: With that, I'd like to turn the call over to Eifion to discuss our financial results in more detail. Thank you, Kevin, and good morning. I'll start on slide A. As Kevin stated, we are pleased with our first quarter financial performance. Net sales increased and exceeded expectations. We delivered strong margins and maintained net leverage within our targeted range during our seasonally softest period for sales and cash collections. Looking at the results in more detail, net sales for the first quarter increased 8%, 229 million. This was driven by 3% positive net price realization, a 3% increase in volume, and a 3% contribution from the acquisition of cloaking, partially offset by 1% from foreign currency translation.

Ivan: Thank you Kevin and good morning, I'll start on slide eight as Kevin stated, we are pleased with our first quarter financial performance net sales increased and exceeded expectations. We delivered strong margins and maintain net leverage within our targeted range during a seasonally soft period for sales and cash collections looking at the results in more detail Matt.

Matt: Sales for the first quarter increased 8% $229 million. This was driven by a 3% positive net price realization of 3% increase in volume and a 3% contribution from the acquisition of coking, obviously offset by 1% from foreign currency translation to profit in the first quarter.

Eifion Jones: Profit in the first quarter increased 8% to 113 million. Gross profit margin increased 30 basis points to 49.5%, with a 100 basis point increase in North America offsetting a reduction in Europe and the rest of the world. We took steps throughout 2024 to improve the performance in Europe and the rest of the world, and are pleased to see the sequential margin progress in the quarter, increasing 360 basis points from the fourth quarter 2024. Adjusted EBITDA increased 9% to 49 million in the first quarter, and adjusted EBITDA margin increased 30 basis points to 21.5%. As a reminder, we are strategically reinvesting in the business to drive future growth, with targeted initiatives in sales and marketing, customer service, and engineering.

Matt: Increased 8% to $113 million gross profit margin increased 30 basis points to 49, 5% with a 100 basis point increase in North America offsetting a reduction in Europe and rest of World. We took steps throughout 2020 full to improve the performance in Europe and rest of the world and the police.

Matt: To see the sequential margin progress in the quarter, increasing 360 basis points from the fourth quarter 2020, adjusted EBITDA increased 9% to $49 million in the first quarter and adjusted EBITDA margin increased 30 basis points to 21, 5% as a reminder, we are strategically.

Matt: First thing in the business to drive future growth with targeted initiatives in sales and marketing customer service and engineering, our effective tax rate was 23% in the first quarter consistent with the prior year period, adjusted diluted EPS increased 25% to 10 cents.

Eifion Jones: Our effective tax rate was 23% in the first quarter, consistent with the prior year period. Adjusted diluted EPS increased 25% to 10 cents.

Eifion Jones: Turning to slide 9 for a review of our reportable segment results for the first quarter. North American net sales increased 8% to 187 million, driven by 3% net price realization, 2% higher volume, and 3% from the cloaking acquisition. Net sales increased 9% in the U.S. and reduced 5% in Canada. Seasonal demand is increasing as expected as we approach the peak of the 2025 pool season. We did see an increase in orders late in the quarter after a slower start to the year. Importantly, we are working closely with our channel partners to manage the level of Hayward inventory on hand relative to current demand levels and forward expectations.

Matt: Turning to slide nine, but a review of our reportable segment results for the first quarter North America net sales increased 8% to $187 million driven by 3% net price realization of 2% volume and 3% from Nicole King acquisition net sales increased 9%.

Matt: In the U S and reduce odd percent in Canada seasonal demand is increasing as expected as we approach the peak of the 2020, probably cool season, we see an increase in orders late in the quarter. After a slow start the year.

Matt: Ultimately, we are working closely with our channel partners to manage the level of the HAE with inventory on hand relative to current demand levels and forward expectations gross profit margin increased 100 basis points to a robust 52, 8% and adjusted segment income margin also increased 100 basis points.

Eifion Jones: Gross profit margin increased 100 basis points to a robust 52.8 percent and adjusted segment income margin also increased 100 basis points to 27.1 percent.

Matt: At 27, 1% or so.

Eifion Jones: Turning to Europe and the rest of the world, net sales per quarter increased 7 percent to 42 million. Net sales benefited from 1 percent favorable net pricing and 8 percent higher volume, partially offset by 2 percent from foreign currency translation. Net sales increased 8 percent in Europe and 3 percent in the rest of the world. We are pleased to see the volume growth and margin progression in the quarter.

Matt: Turning to Europe, and rest of World net sales for the quarter increased 7% to $42 million net sales benefited from 1% favorable net pricing and 8% higher volume, partially offset by 2% from foreign currency translation net sales increased 8% in Europe and 3% in rest of world.

Matt: We are pleased to see the volume growth margin progression in the quarter on a sequential basis gross profit margins increased 360 basis points to 35% and adjusted segment income margins increased 380 basis points.

Eifion Jones: On a sequential basis, gross profit margins increased 360 basis points to 35 percent and adjusted segment income margins increased 380 basis points to 16.6 percent.

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Eifion Jones: Turning to slide 10 for a review of our balance sheet and cash flow highlights, we are pleased with the quality of our balance sheet. Net debt to adjusted EBITDA improved significantly from four times a year ago to 2.8 times at the end of the first quarter, consistent with our targeted range of two to three times. Total liquidity at the end of the first quarter was $398 million, including $181 million in cash and cash equivalents, plus availability under our credit facilities of $217 million. We have no near-term maturities on our debt. The term debt matures in 2028 and the undrawn ABR matures in 2026, and we are in the process of extending this maturity.

Matt: Turning to slide 10 for a review of our balance sheet and cash flow highlights. We are pleased with the quality of our balance sheet net debt to adjusted EBITDA improved significantly from four times a year ago to two eight times at the end of the first quarter consistent with our targeted range of two to three titles total liquidity at the end of the first.

Matt: The quarter was $398 million, including 181 million in cash cash equivalents.

Matt: <unk> ability under our credit facilities of $217 million we.

Matt: Have no near term maturities on our debt to image.

Matt: That matures in 2028, and the Undrawn ABL matures in 2026, and we're in the process of extending this maturity our borrowing rate benefits from 600 million in debt currently tied to fixed interest rate swap program and maturing in 2025 through 2028, limiting our cash interest.

Eifion Jones: Our borrowing rate benefits from $600 million in debt currently tied to fixed interest rate swapper agreements, maturing in 2025 through 2028, limiting our interest rate on the term facilities to 5.8% in the quarter. Our average interest rate earned on global cash deposits for the first quarter, 4.2%. The business has strong free cash flow generation characteristics driven by high-quality earnings. Cash flows are seasonal and the company typically uses cash in the first quarter and has strong cash generation in the second quarter related to the collection of early buyer receivables. Cash flow used in operations was $6 million in the first quarter compared to $77 million in the year-ago period.

Matt: On the <unk> facilities to five 8% in the quarter. Our average interest rate earned on global cash deposits for the first quarter four 2%. The business has strong free cash flow generation characteristics driven by high quality earnings cash flows are seasonal and the company typically uses.

Matt: Cash in the first quarter and had strong cash generation in the second quarter related to the collection of early buy receivables cash flow used in operations was $6 million in the first quarter compared to $77 million in the year ago period, the first quarter 2025 benefits and 99 million in net.

Eifion Jones: The first quarter of 2025 benefited $99 million in net proceeds from the sales of accounts receivable under the Receivable Purchase Agreement initiated in 2024. This receivable sale provides the business additional flexibility during a traditionally low cash quarter at a relatively modest cost and reduces the risk of a step-up in the term loan interest rate as a consequence of seasonally penalized net leverage.

Matt: Proceeds from the sales of accounts receivable under the receivable purchase agreement initiated in 2024. This receivable sale provides the business additional flexibility during a traditionally low cashcall at relatively modest cost and reduces the risk of a step up in the term loan interest rate as a consequence of <unk>.

Matt: Seasonally penalizes net leverage.

Eifion Jones: CAPEX was $6 million in the first quarter, consistent with the prior year, and consequently free cash flow was a use of $12 million.

Matt: <unk> was 6 million in the first quarter consistent with the prior year.

Matt: Sequentially free cash flow was a use of $12 million. So.

Eifion Jones: Turning now to capital allocation on slide 11, we maintain a disciplined and balanced approach to capital allocation, emphasizing strategic growth investments and shareholder returns while maintaining prudent financial leverage. We continue to pursue additional acquisition opportunities to augment our organic growth plans in addition to opportunistic share repurchase.

Matt: Turning now to capital allocation on slide 11, we maintain a disciplined and balanced approach to capital allocation emphasizing strategic growth investments and shareholder returns, while maintaining prudent financial leverage we continue to pursue additional acquisition opportunities to augment our organic growth plans. In addition to.

Matt: Share repurchases, turning now to slide 12 for our full year 2025 outlook many of our timing assumptions have changed from a quarter ago as a consequence.

Eifion Jones: Turning now to slide 12 for our full year 2025 outlook, many of our planning assumptions have changed from a quarter ago as a consequence of the evolving tariff environment. But overall, our outlook for the year is unchanged. This is a testament to the hard work and dedication of the entire Hayward team. For fiscal year 2025, Hayward continues to expect net sales to increase approximately 1% to 5% to 1.06 to 1.1 billion and adjusted EBITDA of 280 to 290 million. We continue to expect solid execution across the organisation, positive price realisation and continued technology adoption. We expect incremental out-of-cycle pricing of approximately 3% to offset the tariff-related inflation.

Matt: All of the tariff environment, but overall our outlook for the year is unchanged. This is a testament to the hard work and dedication of the entire Haywood theme for fiscal year 2025, Haywood continues to expect net sales to increase approximately 1% to 5% So 1.06.

Matt: The $1 1 billion and adjusted EBITDA of $280 million to $219 million. We continue to expect solid execution across the organization positive price realization and continued technology adoption, we expect incremental adds to cycle pricing of approximately three.

Matt: 3% to offset the tariff related inflation as a result, we now anticipate a positive net price contribution of approximately five 6%. We're also taking a more pragmatic view of volumes given the heightened global macroeconomic uncertainty non discretionary aftermarket maintenance remains resilient.

Eifion Jones: As a result, we now anticipate a positive net price contribution of approximately 5% to 6%. We're also taking a more pragmatic view of volumes, given the heightened global macroeconomic uncertainty. Non-discretionary aftermarket maintenance remains resilient. We could see pressure on the more discretionary elements of the market, namely new construction, remodel and upgrade. We are executing structural cost and productivity initiatives to offset volume pressure and support profitability. We continue to evaluate the situation and will respond with appropriate supply chain and pricing actions as needed.

Matt: We could see pressure on the more discretionary elements of the market, namely new construction remodel and upgrade we are executing structural cost and productivity initiatives to offset volume pressure and support profitability. We continue to evaluate the situation and will respond with appropriate supply chain and pricing.

Matt: Actions as needed.

Eifion Jones: Our business is seasonal. We expect normal seasonal strength in the second and fourth quarters, with more waiting for the second half of the year due to the timing of the out-of-cycle tariff price increase. We also expect solid cash flow generation in 2025 with a conversion of greater than 100% of net income and approximately $150 million.

Matt: This seasonal we expect normal seasonal strength in the second and fourth quarters with more weighting to the second half of the year due to the timing of the outdoor cycle tire price increases. We also expect solid cash flow generation in 2025 with the conversion of greater than 100% of net income at approximately.

Matt: $150 million.

Eifion Jones: We are confident in our ability to successfully execute in a dynamic environment and remain very positive about the long-term growth outlook for the pool industry, particularly the strength of the aftermarket.

Kevin: We're confident in our ability to successfully execute in a dynamic environment and remain very positive about the long term growth outlook the pool industry, particularly the strength of the asset the market with that I'll now turn the call back to Kevin.

Kevin Holleran: And with that, I'll now turn the call back to Kevin. Thanks, Eifion. I'll pick back up on slide 13.

Kevin: I'll pick back up on slide 13.

Kevin Holleran: Before we close, let me reiterate how thankful I am for the team's performance during this incredibly disruptive time. In one of the more challenging and uncertain environments we've seen in decades, Hayward delivered another strong quarter, exceeding expectations. Net sales increased 8%, margins continued to expand, and we delivered the balance sheet while investing for growth and introducing a groundbreaking new technology platform for pool owners. We confirmed our guidance for the full year, effectively countermeasuring significant new tariff headwinds. As I mentioned, I'm very proud of the entire team for their performance during this quarter and the rapid and effective execution of our mitigation plans.

Kevin: Before we close let me reiterate how thankful I am for the teams performance during this incredibly disruptive time.

Kevin: And one of the more challenging and uncertain environments. We've seen in decades. They were delivered another strong.

Kevin: Exceeding expectations.

Kevin: Net sales increased 8% margins continued to expand and we de levered the balance sheet, while investing for growth and introducing a ground breaking new technology platform for pool owners, we confirmed our guidance for the full year effectively counter measuring significant new tariff headwinds as I mentioned I'm very proud of the entire team for their performance.

Kevin: <unk> during this quarter and the rapid and effective execution of our mitigation plans Hayward is a solid foundation built over the last 100 years and I'm confident we have the right strategy and talent in place to drive compelling financial results and shareholder value creation with that we're now ready to open the line for questions.

Kevin Holleran: Hayward is a solid foundation built over the last 100 years, and I'm confident we have the right strategy and talent in place to drive compelling financial results and shareholder value creation.

Kevin Holleran: With that, we're now ready to open the line for questions. Thank you.

Kevin: Thank you we will.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Kevin: Now be conducting a question and answer session.

Kevin: We'd like to ask a question. Please press star one on your telephone keypad.

Kevin: Confirmation tone will indicate your line is in the question queue.

Kevin: You May press Star two if you would like to remove your question from the queue.

Kevin: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Operator: One moment, please, while we poll for questions.

Speaker Change: Thank you. Our first question comes from the line of Andrew Carter with Stifel. Please proceed with your question.

Andrew Carter: Our first question comes from the line of Andrew Carter with Stiefel. Please proceed with your question. Hey, thank you. Good morning. Kind of two parts as I kind of close the loop on tariffs for me. USMCA, you mentioned you don't think it changes. I assume you're talking about what you have in kind of the US that goes in Canada that's not affected. And then the second part of the question, just getting into kind of the actions you're taking, you mentioned China going 10% to 3%. Could you talk more about those mitigation actions? Are there costs to it?

Andrew Carter: Thank you good morning kind of two parts as I kind of close the loop on tariffs for me U S. MCA. You mentioned you don't think it changes I assume you're talking about what you have in the U S that goes in Canada, that's not affected and then the second part of the question just getting into kind of the actions you're taking you mentioned, China go and turn to 3%.

Speaker Change: Could you talk more about those mitigation actions.

Speaker Change: The cost to it I noticed free cash flow guidance went down a little bit and then the and then the second if you're going to end it free and I assume you plan to leave these prices in places that our gross margin tailwind or where you're going have higher operating where net net it would be neutral to where you would've been before liberation day. Thanks.

Andrew Carter: I noticed free cash flow guidance went down a little bit.

Andrew Carter: And then the second, if you're going to end it free, and I assume you plan to leave these prices in place, is that a gross margin tailwind or where you're going have higher operating to where net nets would be neutral to where you would have been before Liberation Day? Thanks.

Speaker Change: Sure, let me more than Andrew.

Speaker Change: Regarding.

Speaker Change: The terrorists.

Speaker Change: The mitigation you know as we said we're seeing on an annualized basis about 85 billion. That's the result, primarily of China based products.

Speaker Change: We have a facility over there bringing finished goods into the US Then of course, we have some tier wanted to tier two suppliers.

Speaker Change: And then thirdly, which is much smaller element of the $85 million would be material coming from other terrorists impacted countries. You mentioned, Mexico at this point because of U S. MCA, we do have products not finished goods, but we do have material.

Speaker Change: Eating our factories in the U S out of Mexico, but that but that's not really an element of this $85 million based upon the assumption that we will continue to qualify for exemption there.

Speaker Change: You know as I look at our as our global manufacturing footprint, we have seven facilities four of which are in the U S. One in China.

Speaker Change: And as as I said in the prepared remarks, 85% of that.

Speaker Change: That product sold in the U S is made in one of those four U S factories as we worked through our mitigation.

Speaker Change: That will increase to something north of 90% as we resource.

Speaker Change: And move some of this some of the manufacturing into our those four U S facilities, we really are trying to get front footed here.

Speaker Change: Proactively managing the situation are working to increase certainty in our supply chain, rather than having to respond to all the uncertainty created by <unk>.

Speaker Change: This by the <unk>.

Speaker Change: Policies in the geopolitical events right now and I'll point out that we've really been working on this for several years.

Speaker Change: <unk>.

Speaker Change: In terms of trying to limit our exposure to.

Speaker Change: To China sourcing along before the the tariff announcements over the last several weeks that included <unk>.

Speaker Change: Ransford, it even duplicating some tooling.

Speaker Change: That was in our China facility into the U S and bringing some value added assembly out of China into our domestic facilities at the same time prioritizing capital investments to automate further automate some of these domestic locations.

Speaker Change: As you point out, it's really going to move us from what was even Ah ha high teen reliance on China, only five years ago to something more around the 10% Mark today.

Speaker Change: To to a low single digits by year end with the mitigation.

Speaker Change: You know it worked through the system.

Kevin Holleran: So, that's really our first, I'd say, prong of a four-prong mitigation strategy around structural sourcing alternatives. You know, augmenting that is really supplier price renegotiations with China-based suppliers and other tariff-impacted countries. Inventory management, we did pre-buy some inventory, which allowed us to minimize the impact here in 2025. And then finally, pricing. We take out-of-cycle price increases very seriously and we're very thoughtful about them and that became necessary given the magnitude and the immediacy of the tariff increases.

Speaker Change: So that's really our first I'd.

Speaker Change: I'd say prong of our four pronged mitigation strategy around structural sourced sourcing alternatives.

Speaker Change: Augmenting that is really supplier price renegotiations with China based suppliers and other tariff impacted countries.

Speaker Change: Inventory management, we did pre buy some inventory, which allowed us to minimize the impact here in 2025, and then finally pricing we take out of cycle price increases are very seriously and we're very thoughtful about them and that became necessary given the magnitude.

Speaker Change: And the immediacy of the tariff increases you won't talk about some of the.

Eifion Jones: You want to talk about some of them? Yeah.

Eifion Jones: Good morning, Andrew. Let me just tackle the first point around cash flow. We have dropped from 160 million to 150 million dimers for the year. You're right, that does include some capex to tool up inside the U.S. to accommodate the transfer of production out of our WUSHI facility back in to the United States. Additionally, we're recognizing that the closing working capital at the end of the year will actually be a little bit more expensive for that residual 3%-ish that Kevin was suggesting there that we will still be procuring from China. But still a very handsome cash result, you know, significantly higher than that.

Speaker Change: Voting, Andrew let me just tackle first.

Speaker Change: Point, the ramp cash flow cash flow, we have dropped from a $160 million 150 million diamonds right that does include some capex to two locked inside the U S to accommodate the transfer of production out of our Wuxi facility back in.

Speaker Change: The United States. Additionally, we're recognizing that the closing working capital at the end of the will actually be a little bit more expensive for that residual.

Speaker Change: 3% ish, then Kevin was suggesting that we will still be procuring.

Speaker Change: From China, but still.

Speaker Change: Still a very handsome cash result.

Speaker Change: Significantly higher than the net income.

Speaker Change: Thanks, and then you said you were being thoughtful so as far as the price increases go I assume they are targeted towards the affected products or is it a broad line line increase and then you did mentioned managing kind of the managing pre buys are you managing like the pre buys tighter than a typical.

Andrew Carter: Thanks. And then you said you were being thoughtful.

Andrew Carter: So as far as the price increases go, I assume they are targeted towards the affected products, or is it a broad line increase? And then you did mention managing pre-buys. Are you managing the pre-buys tighter than a typical pre-buy? And then if you are, do you see – is there any extra headwind implied in gross margin from a potential disconnect of somebody buying out ahead of the increase and then reducing it later? In terms of pricing, there will be some variation when final price lists on our most recent announcement are distributed, but by and large, it is more across the line as opposed to just targeting those specific SKUs that are manufactured or most impacted.

Speaker Change: <unk> pre buy and then you know if you are I mean do you see is there any extra headwind implied in gross margin from like a potential disconnect of somebody buying you know out ahead of the increase and then reducing it later thanks.

Speaker Change: Yeah in terms of pricing.

Speaker Change: Did I mean there'll be some variation when when when final price lists on our most recent announcement are distributed but by and large it's a it's more across the line as opposed to just targeting those specific skus that are that are manufactured our most important.

Speaker Change: <unk> dose.

Andrew Carter: Those increases would effectively more or less take you out of the market on some of those products, and we take being a full-line supplier very seriously, so there's some sharing across the entirety of the product line. I forgot what the second part of the question was.

Speaker Change: Those increases would effectively.

Speaker Change: Now more or less take out of the market on some of those products and we take full line.

Speaker Change: Being a full line supplier very seriously so theres some sharing.

Speaker Change: Across the entirety of the product line.

I forgot the second part of the question was pretty much Oh.

Eifion Jones: Oh, around pre-buy. You know, I would say we probably are a little tighter in terms of the cap that we put out there right now. I mean, what we normally put out there for the, you know, for the early buyer, the winter stocking program has a little bit more flex upwards to it. At this point in time, given the time of year when these price increases take effect, early buys been delivered, you know, as we work with our channel partners, their inventories and days on hand are appropriate and well suited for where we are in the season.

Speaker Change: Around pre buy.

Speaker Change: We I would say, we probably are a little tighter in terms of the cap that we put out there right now I mean, what we normally put out there for the for the for the early buy or the winter stocking program has a little bit more flex.

Speaker Change: Words to us at this point in time, given the time of year. When these price increases take effect early buys been delivered as we work with our channel partners their inventories and that days on hand are appropriate and well suited for where we are in the season. So we're just really trying to protect.

Eifion Jones: So we're just really trying to protect all of us from overstocking here and then having to deal with the pain of a destock later on. We're really just trying to match sales out with the replenishment, the replenishment in on par with what the sales out is. And that's really what's driving sort of the sort of the cap that we that we've announced to the channel partners.

Speaker Change: All of us from.

Speaker Change: From Overstocking here, and then having to deal with with the pain of a destock later on we're really just trying to match sales out.

Speaker Change: With the with the replenish the.

Speaker Change: The replenishment in on par with what the sales out is.

Speaker Change: And that's really what's driving sort of the sort of the cap that we that we've announced the channel partners.

Speaker Change: Thanks, I'll pass it on.

Andrew Carter: Thanks, I'll pass it on.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of three but its ski with Jefferies. Please proceed with your question.

Saree Boroditsky: Our next question comes from the line of Saree Boroditsky with Jeffreys. Please proceed with your question. Hi, thanks for taking the question.

Speaker Change: Hi, Thanks for taking the question, maybe just building on that.

Saree Boroditsky: Maybe just building on that, I did think one of the larger pool distributors talked about increasing inventory levels, which is maybe clearly talk about how channel inventory looks today, and then how that impacts demand as you go through the rest of the year. Yeah, I mean, the information we see, you know, broadly across our channel partners is we feel really good about where the where the days on hand are for where we're at in the season. You know, obviously, late April here, you know, all markets as we work through the Easter weekend, that's that really ushers in the season in the more seasonal markets.

Speaker Change: I think one of the larger quota.

Speaker Change: You guys talk about it.

Speaker Change: Tony level. So just maybe talk about how channel inventory looks today, and then how that impacts the mandates.

Speaker Change: Thank you.

Speaker Change: Yeah, I mean, the information we see.

Speaker Change: Broadly across our channel partners is we feel really good about where the where the days on hand are for where we're at in the season. You know obviously late April here in all markets as we work through the Easter weekend, Thats that really ushers in the season and the more seasonal markets.

Speaker Change: So what.

Eifion Jones: So what we see is we're very with with where we're at.

Speaker Change: What we see is we're very pleased with where we're at now we've spoken about this on previous earnings calls that the destock in the Recalibration of the inventory levels. That's been accomplished in prior periods early buy has been deliberate through first quarter and.

Eifion Jones: And we've spoken about this on previous earnings calls that the D stock and recalibration of the inventory levels that's been accomplished in prior periods, early by has been delivered through first quarter. And, you know, we, we feel that inventories are appropriately are appropriate at this point in time.

Speaker Change: We feel that inventories are appropriately.

Speaker Change: Are appropriate at this point in time.

Speaker Change: I appreciate the color and then maybe just a bigger picture you have core Clinton.

Saree Boroditsky: I appreciate the color. And then maybe just a bigger picture, you know, pool equipment has obviously gotten significantly more expensive over the last several years. You know, I know equipment is still a small portion of the new pool build, but, you know, how are you thinking about balancing price and demand levels given the recent increases? And have you seen any customers trading down or repairing or replacing? Yeah, great question and something we keep our eyes peeled on. You know, I would say, I think the first part of your question was really asking, has there been demand destruction with just the overall project cost?

Speaker Change: Significantly mark until the last several years, you know I know cleanliness, though a small portion of the new cool about that how you're thinking about balancing pace.

Speaker Change: And then there were some increases and have you seen any customers trading down or a plane a great replacement equipment.

Speaker Change: Yeah, Great question, and something we keep our eyes peeled on.

Speaker Change: I would say I think the first part of your question was really asking has there been demand destruction with with just the overall project cost.

Kevin Holleran: You know, what we debate is deferral versus destruction.

Speaker Change: You know what we debate is is deferral versus disruption at this point in time because of the housing market the turnover not being what what it has been historically I think some of those larger refurbishment or even building the pool at a new house that you bought.

Kevin Holleran: At this point in time, you know, because of the housing market, the turnover not being what it has been historically, I think some of those larger refurbishment or even building the pool at a new house that you bought, I think that's being delayed a bit as existing home sales have struggled the last couple of years. So we see it a bit more as a deferral around some of that discretionary spend as opposed to destruction. In terms of trading down, you know, our guide, you know, is really trying to take that into account. We think it could happen.

Speaker Change: That's being delayed a bit as as existing home sales.

Speaker Change: Have have struggled the last couple of years, so we see it a bit more as a deferral around some of that discretionary spend as opposed to destruction in terms of trading down.

Speaker Change: Our guide you know is really trying to take.

Speaker Change: To take that into account, we think it could happen. We don't have strong evidence of that happening as we look at permit values.

Saree Boroditsky: We don't have strong evidence of that happening. You know, as we look at permit values, we've spoken about this in the past. While the unit count on permits the last couple of years have been down, the value of those permits have actually continued to climb, which would indicate that people who are building or doing the full scale remodels are doing it right and putting the features and the functionality on the pool as they want it. However, you know, again, with a couple more equipment increases rolling through the system here in the channel here in 2025, we're trying to take a pragmatic approach and protect against that if it were to happen as the year progresses.

Speaker Change: We've spoken about this in the past while the unit count on permits. The last couple of years has been down the value of those permits have actually continued to climb which would indicate that people who are building or doing the whole scale remodels are doing it right and they're putting the features and the functionality on the pool as.

They want it.

Speaker Change: However, you know again with a couple more.

Speaker Change: Equipment increases rolling through the system here in the channel.

Speaker Change: Here in 2025, we're trying to take a pragmatic approach.

Speaker Change: And protect against.

Speaker Change: Against that if it were to happen as the year progresses.

Saree Boroditsky: Appreciate the question.

Speaker Change: I appreciate the question.

Speaker Change: Our next question comes from the line of Jeff Hammond with Keybanc. Please proceed with your question.

Jeff Hammond: Our next question comes from the line of Jeff Hammond with KeyBank. Please proceed with your question. Hey, good morning, everyone.

David Tarantino: Hey, Good morning, everyone. This is David Tarantino on for Jeff.

David Tarantino: This is David Tarantino on for Jeff. I know it's early, but maybe could you give us some color on recent trends to start the selling season, particularly around if you've heard any feedback from dealers around shifts in consumer behavior, following Liberation Day and the pricing action. Yeah. You know, Q1, I would say, you may have heard this from some others who reported before us, you know, the year started a bit slowly. I think I think weather may have played into that a bit, you know, in January into maybe. middle of February or so. But March, as it turned out, was a really strong sales out month across the entire network.

David Tarantino: I know, it's early but maybe could you give us some color on recent trends to start the selling season, particularly around if you've heard any feedback from dealers around shifts in consumer behavior, following liberation day, and the pricing actions.

David Tarantino: Yeah.

David Tarantino: You know Q1, I would say.

David Tarantino: You may have heard this from some others, who reported before US you know the the year started a bit slowly I.

David Tarantino: I think I think weather may have played into that a bit in January into maybe.

David Tarantino: Middle of February or so, but but march as it turned out it was a really strong sales out month.

David Tarantino: Across the.

David Tarantino: Across the entire network so.

Kevin Holleran: So that gave us some real optimism as the weather started improving, David. You know, I would say what we've seen in April, I'm not going to go too deep into that. I'd say what we've seen is contemplated in our confirming of the guide that we announced here this morning. So again, you know, weather is improving. Easter is behind us. Pools are opening in all markets at this point. And we feel that it's going to be a good season. And that's being affirmed by the dealers that we talk to, you know, every day. And I think that we do have, as I mentioned in the prepared remarks, I think we have, you know, really some wind at our back with the recent introduction of this OmniX platform, which, you know, we've talked about it for years.

David Tarantino: That gave us some real optimism.

David Tarantino: The weather started improving David.

David Tarantino: You know I would say what we've seen in April I'm, not going to go too deep into that I'd say, what we've seen is contemplated.

David Tarantino: In our in our confirming of the guide that we announced here this morning.

David Tarantino: So again.

David Tarantino: Weather is improving Easter is behind US pools are opening in all markets at this point and we feel that it's going to be a good season, and that's being being affirmed by our by the dealers that we talk to.

David Tarantino: Every every day.

David Tarantino: I think that we do have as I mentioned in the prepared remarks, I think we have really some some wind at our back with the introduction of the recent introduction of this omni X platform, which we've talked about it for years and this is a grace.

Kevin Holleran: And this is a great product that really gives the service trade and the existing pool owner who doesn't have automation or control the opportunity to take more control of that backyard and the functionality of it. So we're very bullish on what OmniX represents for us and the industry as we work through the 2025 pool season.

David Tarantino: Product that really gives the service trade and the existing pool owner, who doesn't have automation or control the opportunity to take more control of that back yard and the functionality of it. So we're we're very bullish on what omni X represents for us and for the industry as we are as we work.

David Tarantino: Through the 2025 pool season.

Speaker Change: Great and then maybe as a follow up just on the margin bridge on Slide 12 could you walk us through the cost levers, you're pulling kind of outside of price and reducing the China exposure to offset tariffs.

Eifion Jones: Then maybe as a follow up, just on the margin bridge on slide 12, could you walk us through the cost levers you're polling outside of price and reducing the China exposure to offset tariffs? Margin growth has been pretty impressive in recent years. So any color on the opportunity still out there would be helpful. Yeah, sure. We've talked about this before. We have, outside of China, six facilities, three large ones in the United States, a smaller one through acquisition. We can continue to variabilize the input of production into those facilities, rather than having to add fixed costs.

Speaker Change: <unk> been pretty impressive in recent years, so any color on the opportunities still out there would be helpful.

Speaker Change: Yeah sure we've talked about this before we have.

Speaker Change: Outside of China, six facilities Street in the United States, a small one through acquisition. We can continue to variable is the input of production into those facilities, rather than having to add fixed costs. So thats the first lever that.

Eifion Jones: So that's the first level that we can do, leveraging those facilities on a variable nature. The second thing is we're very honed in right now on our de-rationalization programs of Bill & Material and value engineering initiatives and looking at that collective to really hone in on the cost of manufacturing and how do we make it smarter, how do we make it less expensive as it goes through our production facilities, without compromising quality, of course. So those initiatives are in play today.

Speaker Change: We can do leveraging those facilities on the variable nature. The second thing is we're very honed in right now with our SKU rationalization programs of bill of material and value engineering initiatives and looking at.

Speaker Change: That collective too to really hone in on the cost of manufacturing and how do we make it as small to how do we make it less expensive as it goes through our production facilities without compromising quality of calls so.

Speaker Change: Initiatives are in play today, as we onboard tooling in the United States.

Eifion Jones: As we onboard tooling into the United States to take on the current either outsourced or insourced China manufacturing, we'll do that, we believe, in an intelligent way and take the opportunity to put automation into our facilities to make that new addition of production in a very cost-effective way.

Speaker Change: To take on the current either outsourced or <unk>, China manufacturing, we'll do that we believe in an intelligent way and take the opportunity to put automation into our facilities to make that a new edition of production in a very cost effective way.

Speaker Change: Great. Thanks, guys.

Eifion Jones: Great. Thanks, guys.

Speaker Change: Thanks Ted.

Speaker Change: Our next question comes from the line of Ralph <unk> with Bank of America. Please proceed with your question.

Rafe Jadrosich: Our next question comes from the line of Rafe Jadrosich with Bank of America. Please proceed with your question. Hi guys, this is actually Sean Kalman, I'm for Rafe.

Shaun Calnan: Hi, guys. This is actually Shaun calnan on for Ralph.

Sean Kalman: Just first, the midpoint of guidance implies it looks like a mid-single-digit to high-single-digit decline in volumes for the rest of the year, so could you give us some more detail on the drivers in terms of maintenance volume, discretionary volume, and then anything around trade-down and destock assumptions? Yeah, good morning again. Yes, I mean, in terms of our guidance, the way it bridges out, we are calling for a further reduction in the discretionary side of the market, namely new construction, remodels and upgrade. You know, I think that's, as Kevin said, using his word, a pragmatic approach, given where the macro situation is right now.

Shaun Calnan: First the mid point of guidance implies it looks like a mid single digit to high single digit decline in volumes for the rest of the year. So could you give us some more detail on the drivers in terms of maintenance volume discretionary volume and then anything around trade down and Destocking assumptions.

Shaun Calnan: Yeah.

Shaun Calnan: Good morning, again, yes, I mean in terms of our guidance the.

Shaun Calnan: The way it reaches out.

Speaker Change: <unk>, calling for a further reduction in the discretionary side.

Shaun Calnan: And we do construction remodels and upgrade.

Shaun Calnan: Hum.

Shaun Calnan: I think that side.

Kevin Holleran: As Kevin said using his word a pragmatic approach given where the macro situation is right now.

Eifion Jones: Obviously, new construction, we see the permit data, that's trending down, even though the ticket value has gone up. In terms of the remodel and the upgrading, as Kevin just mentioned, we don't see that as disruption. We see that as a push sideways as the consumer defers those elements. We know that existing home sale turnover creates acceleration in remodels, whether it be the homeowner just before they sell, tuning up, or whether it be the new homeowner after purchase does some remodeling. So we're still waiting here for this existing home resale market to get some acceleration behind it.

Kevin Holleran: Obviously, new construction when we see the permit data that's trending down even though the ticket value has gone up.

Kevin Holleran: In terms of the remodel and the upgrading as Kevin just mentioned, we don't see that as destruction, we see that as a push sideways.

Kevin Holleran: Sure.

Kevin Holleran: Those elements.

Kevin Holleran:

Kevin Holleran: We know that existing home sales turnover creates acceleration in remodels, whether it'd be the homebuilder just before they sell tuning up whether it be the whole new homeowner after purchase.

Kevin Holleran: Some remodeling so we're still waiting here for this existing home resale market to get some acceleration behind it but that's a consequence of where the macro situations that we think is.

Eifion Jones: But as a consequence of where the macro situation stands today, we think it's pragmatic to take down that discretionary side of the marketplace. We don't believe individuals are foregoing the critical elements of the pool. You need that pool engine. That's the beauty of our industry. And if you're an existing pool owner, you have to maintain that pool. So that is a robust element. So the maintenance side of the business is very resilient. Sean, I would just add, in terms of the 50-plus percent amount of our revenue from the break-fix aftermarket, non-discretionary side, where we're thinking volume will hold year on year, we have accounted for a little bit of a mix-down, trade-down in the current guide that we confirmed here today.

Kevin Holleran: Magic to take down that discretionary side of the marketplace. We don't believe individuals forgoing the critical elements of the pool you need a cool engine. That's the beauty of our industry and if you are an existing loan that you have to maintain that so that is that is robust elements of maintenance.

Kevin Holleran: Out of the business is very resilient, Sean I would just add in terms of.

Kevin Holleran: D plus percent amount.

Kevin Holleran: The amount of our revenue from the from the break fix aftermarket non discretionary side.

Kevin Holleran: Where we're where we're thinking volume will hold year on year, we have accounted for a little bit of a mix down a trade down in the in the current in the current guide.

Kevin Holleran: We confirmed here today.

Speaker Change: Got it that's very helpful.

Sean Kalman: Got it. It's very helpful.

Kevin Holleran: And then just kind of following up on that trade down. So you guys in the industry have really benefited from the adoption of automation. Do you think these additional price increases can limit that adoption? And then any color you have on early trends with OmniX sales would be helpful. Thanks. I would say I think OmniX is the answer to both parts of your question, Sean. The initial load in with the channel and some of the early pull through with the dealers has been encouraging for us. And I would say, in terms of automation, OmniX brings a lot of things, as I spoke about in the prepared remarks.

Speaker Change: And then just kind of following up on that trade down so.

Speaker Change: You guys in the industry have really benefited from the adoption of automation do you think.

Speaker Change: These additional price increases can limit that adoption and then any color you have on early trends with omnia itself would be helpful. Thank you.

Speaker Change: Yeah, I would say I think on the X is the answer to both parts of your question.

Speaker Change: Sean.

Speaker Change: The initial load in with the channel and some of the early pull through with the dealers has been encouraging.

Speaker Change: For us.

Speaker Change: And I would say in terms of automation.

Speaker Change: On the X brings a lot of things you know as I as I spoke about in the prepared remarks, but it really does allow you to build your ecosystem. One at a time as you as natural break fix occurs we don't have the entire product line introduced yet that.

Kevin Holleran: But it really does allow you to build your ecosystem one at a time as natural break-fix occurs. We don't have the entire product line introduced yet. That will be phased over the next several quarters. But it's a much more cost-effective way for any homeowner, whether you're building new, whether you're refurbishing, or whether you're wanting to upgrade a 20-year pool that didn't have any automation or controls. It can be done in a much more efficient, cost-effective manner, which I believe will mitigate some of the concerns you raised in your question about the overarching price to bring that control and automation to the pool owners' palm of their hand.

Speaker Change: Will be phased over the next several quarters, but it's a much more cost effective way for any homeowner, whether you're building, new whether you're refurbishing or whether you're wanting to upgrade you know a 20 year pool that didn't have any automation of controls it can be done in a much more efficient cost effective.

Speaker Change: Manner, which I believe will will mitigate some of the concerns you raised in your question about the overarching price to bring that that control and automation to the to the pool owners.

Speaker Change: Palm of their hand.

Speaker Change: Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Brian Lee: Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Nick: Hi, everyone is Nick on for Brian Lee has already doing that.

Nikon: Hi everyone, this is Nikon from Brian Lee. How's everybody? Hey Nick, good morning. Just a quick one. I think, you know, last year, around this time, we were talking about utilization rates. I think you guys are running around. in your factories, which. you know, some decent operating leverage in the outer years when volume returns, but just, you know, wondering on. If you're going to bring more manufacturing to the U.S. to mitigate tariffs and those additional costs, I would... going to increase, you know, some of, you know, your U.S. manufacturing utilization and could this help margins?

Speaker Change: Hey, Nick.

Speaker Change: Good morning.

Speaker Change: Just a quick one I think last year around this time, we were talking about utilization rates. I think you guys are running around 60 or 65% utilization in your factories, which.

Speaker Change: We expected to bring you know some decent operating leverage in the outer years when volume returns, but just wondering on.

Speaker Change: If you're going to bring more manufacturing to the U S to mitigate tariffs and those additional costs I would assume this is going to increase some of your U S manufacturing utilization and could this health margins and is any of that uplift like included in the mitigation efforts or we could see additional upside from there I know you talked about variable.

Eifion Jones: And, uh, is any of that uplift, like, included in the mitigation efforts? know, additional upside from there. I know you talked about, you know, variabilizing these facilities, but just wondering if there is any additional leverage.

These facilities, but just wondering if there is any additional leverage embedded there. Thank you.

Speaker Change: Yes, great question.

Eifion Jones: Yeah, it's a great question. You're right. Today, we're probably around about 60% utilized in our US facilities. That provides us with a large amount of capacity to onboard this production coming out of China or insourcing from third parties in China. Kevin mentioned, we're probably 10% today coming out of China, whether it be a combination of outsourced and our own facility that's reducing to an exit rate of 25% to 3%. So that 7% comes into the US facilities, which raises from 60% to high 60% utilization. So still quite a lot of headroom. As I mentioned a few questions ago, we're going to take the opportunity in that transfer of production to look at how to do that intelligently, smartly, in a more automated way.

Speaker Change: You're right today, we're probably ran about 60% utilized.

Speaker Change: Our U S facilities that provides us with the launch of amount of capacity to onboard this production coming out of China or in sourcing.

She is in China.

Speaker Change: Kevin mentioned, 10% today coming out of China, whether it be.

Speaker Change: A combination of <unk> and our own facility, reducing to an exit rate out of 25, 3%. So that 7% comes into the U S facilities, which raises 62 high sixty's utilization, so still quite a lot of headroom as I mentioned a few questions.

Speaker Change: [noise] ago, we're going to take the opportunity in that in that trend.

Speaker Change: <unk>.

Speaker Change: Some of it has to do that intelligently smartly.

Speaker Change: More automated way, so we'll get the leverage across the fixed cost base, but I'm, hoping as well now.

Eifion Jones: So we'll get the leverage across the fixed cost base, but I'm hoping as well now, and I believe in the team that they'll actually be able to get a two for one here, get the leverage and get a bill of material reduction as we put some automation into our facilities.

Speaker Change: And I believe in the team that they'll actually be able to get a two for one here get the leverage and get a bill of material reduction as we put some automation into our facilities.

No that's super helpful color. Thank you.

Eifion Jones: No, that's super helpful, Culler.

Speaker Change: Yes.

Speaker Change: We have reached the end of the question and answer session. Mr. Hollywood I would now like to turn the floor back over to you for closing comments.

Operator: We have reached the end of the question and answer session.

Kevin Holleran: Mr. Holleran, I would now like to turn the floor back over to you for closing comments. Thanks, Christine. In closing, I'd like to sincerely thank our dedicated employees and valiant partners around the world. Your hard work, passion, and unwavering commitment are the driving force behind our success. Please contact our team if you have any follow-up questions, and we look forward to talking to you again on the second quarter earnings call. Thank you for your interest in Hayward.

Speaker Change: Thanks, Christine in closing I'd like to sincerely, thank our dedicated employees and valued partners around the world you hard work passion and unwavering commitment are the driving force behind our success, let's contact our team. If you have any follow up questions and we look forward to talking to you again on our second quarter earnings call. Thank you for your interest in Hayward Christine you can now.

Operator: Christine, you can now end the call.

Speaker Change: When the call. Thank you.

Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.