HAYW

Hayward Holdings, Inc. 2025 Q3 10-Q Summary

Business Context and Reporting Period

Hayward Holdings, Inc. is a global designer and manufacturer of pool and outdoor living technology. This report covers the quarterly period ended September 27, 2025. The Company operates through two reportable segments: North America (NAM) and Europe & Rest of World (E&RW). The business is seasonal, with cash flow typically higher in the second and third quarters due to sales terms and the "Early Buy" program for distributors.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 7.4% in Q3 and 6.7% YTD, driven primarily by positive net pricing (offsetting inflation and tariffs), modest volume growth, and favorable currency translation. The NAM segment contributed the majority of growth.
• Margin Expansion: Gross margin improved by 150 basis points in Q3 and 120 basis points YTD. This was due to pricing actions, operational efficiencies, and the absence of a non-cash inventory step-up adjustment from the prior-year ChlorKing acquisition.
• Expense Management: SG&A expenses increased due to higher incentive compensation, wage inflation, and a non-recurring litigation expense of $2.8M in Q3. However, restructuring costs decreased significantly compared to the prior year.
• Interest Expense: Net interest expense decreased 14.3% in Q3 and 20.5% YTD, attributed to lower interest rates, reduced debt principal, and higher interest income on cash deposits.
• Liquidity: Cash and cash equivalents increased by $232.1M to $428.7M, driven by strong operating cash flows of $283.0M YTD.

Guidance, Outlook, and Risks

Outlook: Management anticipates continued growth driven by aftermarket replacements and upgrades. The "Early Buy" program for the 2026 season began in late Q3, which typically increases accounts receivable and inventory levels in the fourth quarter. No specific numerical guidance for full-year 2025 was provided in this text.

Risks and Contingencies:

• Legal Proceedings: The Company is involved in a consolidated securities class action and shareholder derivative lawsuits regarding 2022 financial projections. These cases are currently stayed pending mediation. A wrongful death lawsuit settlement of $22.0M was paid in Q3, fully covered by insurance.
• Geopolitical & Trade: Tariffs, trade restrictions, and geopolitical conflicts (Middle East, Ukraine/Russia) create uncertainty and may impact demand and supply costs.
• Seasonality: Results are subject to seasonal fluctuations, with higher sales typically in Q2 and Q4.
• AI & Technology: Risks associated with the deployment of artificial intelligence technologies, including data privacy, intellectual property, and implementation challenges.

Investor Verification Checklist

• Legal Exposure: Verify the status of the stayed securities class action and derivative lawsuits and potential future financial obligations beyond the current accruals.
• Debt Covenants: Confirm continued compliance with the First Lien Term Facility and ABL Revolving Credit Facility covenants, specifically the leverage ratio requirements.
• Working Capital: Monitor the impact of the "Early Buy" program on Q4 accounts receivable and inventory levels.
• Acquisition Integration: Assess the ongoing integration and performance contribution of the ChlorKing acquisition to the commercial pool segment.
• Tariff Impact: Evaluate the sustainability of pricing strategies used to offset inflation and tariff costs in the current economic environment.