Executive Summary / Key Takeaways

• Hayward Holdings operates a resilient business model deeply tied to the pool aftermarket, historically representing over 80% of sales, driven by an 8-11 year product replacement cycle.
• The company is strategically focused on technology leadership, operational excellence, and commercial expansion, exemplified by the recent launch of the OmniX aftermarket automation platform and the acquisition of ChlorKing.
• Despite macroeconomic headwinds impacting discretionary spending (new construction/remodel) and new tariffs, Hayward delivered solid Q1 2025 results with 7.7% net sales growth and expanded gross margins to 49.5%.
• Management has confirmed full-year 2025 guidance, projecting 1-5% net sales growth and $280-$290 million in Adjusted EBITDA, underpinned by aggressive tariff mitigation plans including pricing actions and supply chain restructuring.
• Strong cash flow generation, evidenced by $188 million in free cash flow in 2024 and a target of ~$150 million in 2025, supports strategic investments, debt reduction (net leverage at 2.8x), and potential shareholder returns.

A Century of Hayward: Building the Foundation for Outdoor Living

Hayward Holdings, Inc. (NYSE: HAYW) traces its roots back to 1925, evolving from a tool and die maker into a global leader in pool and outdoor living technology. A pivotal moment arrived in the 1960s with the acquisition by Oscar Davis, marking the company's entry into the swimming pool market. This history has forged a business model characterized by deep, decades-long relationships with channel partners and a significant reliance on the aftermarket – the ongoing repair, replacement, remodeling, and upgrading of equipment for existing pools. This segment historically accounts for over 80% of Hayward's net sales, providing a stable, recurring revenue base driven by the natural 8-11 year product replacement cycle.

The pool industry itself boasts attractive fundamentals, including this robust aftermarket, opportunities for innovation-led growth, and a favorable structure. Hayward has capitalized on this by centering its strategy around three core pillars: technology leadership, brand and multichannel strength, and operational excellence. The company operates seven manufacturing facilities globally, with a significant footprint in North America, where approximately 85% of its North America sales are produced domestically. This integrated approach, combined with a focus on continuous improvement, forms the bedrock of its competitive positioning.

Within the competitive landscape, Hayward operates alongside major players like Fluidra (FTRLY), Pentair (PNR), and Pool Corporation (POOL). While Fluidra and Pentair compete directly in manufacturing across residential and commercial segments, Pool Corporation is primarily a distributor. Hayward distinguishes itself through its focus on technological innovation and strong channel partnerships, holding an estimated 33% share of the North American residential pool market. The company's strategic aim is not just to compete on price, but to differentiate through product performance, reliability, and customer support, fostering loyalty among trade professionals and pool owners.

The Engine of Innovation: Powering Efficiency and Connectivity

At its core, Hayward is a products company, and its investment in research, development, and engineering is central to its growth strategy. With R&D investment increasing 5% to $26 million in 2024, the company is focused on delivering innovative, energy-efficient, and automated solutions that enhance the pool ownership experience.

A key differentiator lies in Hayward's technology portfolio. The OmniLogic platform has been a staple for new construction and remodel automation. More recently, the company introduced the Microchannel Temperature Control Unit, an industry-first single unit capable of heating, cooling, and even enabling a 40-degree cold plunge. The OmniPro app provides trade professionals with a valuable cloud-based tool for real-time remote monitoring and equipment configuration, improving efficiency and customer service.

Perhaps the most significant recent technological development is the launch of OmniX in Q1 2025. This breakthrough smart IoT technology is specifically designed to cost-effectively enable wireless control of the vast existing installed base of pools that are not currently automated – an estimated 3.5 million pools in the U.S. OmniX is a decentralized wireless platform that eliminates the need for a traditional, wired stand-alone control unit. By embedding control capabilities directly into key products, starting with the newly launched OmniX variable speed pump, homeowners can build their smart pool ecosystem one product at a time as equipment naturally needs replacement. This offers a simpler, more cost-effective path to automation compared to traditional methods, presenting a compelling upgrade opportunity for both homeowners and service professionals.

The "so what" for investors is clear: OmniX represents a strategic move to unlock a massive segment of the aftermarket that was previously less accessible to automation upgrades due to cost and complexity barriers. This innovation strengthens Hayward's competitive moat, drives upgrades to higher-value, potentially higher-margin products, and reinforces its technology leadership, positioning it favorably against competitors in capturing future aftermarket growth. While specific quantitative performance metrics for OmniX adoption are not yet available, the strategic intent is to drive increased aftermarket conversion opportunities by providing a valuable, easily installed upgrade path.

Operational Strength and Strategic Expansion

Hayward's commitment to operational excellence and continuous improvement has been a significant driver of its financial performance, particularly in expanding margins. Despite fluctuations in volume, the company's gross profit margin has expanded impressively, growing over 600 basis points in the last five years to 50.5% in 2024, and nearly 400 basis points since 2021. This is attributed to productivity gains from lean manufacturing initiatives, a favorable mix shift towards higher-margin technology products, operating leverage from utilizing existing manufacturing capacity (U.S. facilities are currently around 60% utilized, offering significant headroom), and proactive price-cost management. Initiatives like SKU rationalization are underway to improve the efficiency of the product catalog and manufacturing processes, aiming to be accretive to margins over time without negatively impacting the top line.

Strategic expansion, particularly in the commercial pool market, is another key growth vector. The June 2024 acquisition of ChlorKing, a leader in commercial water sanitization technologies (saline chlorinators, UV disinfection), was a significant step. This acquisition nearly doubled Hayward's commercial sales and broadened its portfolio in this attractive vertical. ChlorKing brings patented technologies, strong relationships with commercial pool designers and operators, and expands the addressable market for other Hayward products. The integration is expected to yield synergies through cross-selling opportunities and operational efficiencies, leveraging Hayward's scale and manufacturing base. This move diversifies Hayward's revenue streams and positions it for growth in a segment that has shown robust performance.

Navigating Headwinds and Delivering Financial Performance

The macroeconomic environment has presented challenges, particularly impacting the more discretionary segments of the pool market – new construction and large-scale remodels. Elevated interest rates and economic uncertainty have led to reduced demand in these areas, with U.S. permits for new pools seeing declines. However, the value of these permits has remained more resilient, suggesting relative strength in the high-end segment. Hayward's core aftermarket business, tied to essential repair and replacement, has remained resilient, providing a stable foundation.

Channel inventory dynamics have also been a factor, with distributors pursuing leaner positions. Hayward is working closely with its partners to optimize inventory levels and ensure timely supply, leveraging its manufacturing responsiveness. The Early Buy program remains a key mechanism for stocking the channel ahead of the peak season, offering incentives like price discounts and extended payment terms.

Pricing has been a critical lever in managing costs and capturing value. Hayward has historically demonstrated the ability to implement price increases to offset inflation. For the 2025 season, annual price increases of approximately 3-5% in the U.S. and 1-2% internationally were implemented. More recently, in response to increased tariffs, the company announced incremental out-of-cycle pricing actions expected to contribute approximately 3%, bringing the total anticipated net price contribution for full-year 2025 to 5-6%.

Financially, Hayward has demonstrated solid execution. Q1 2025 saw net sales increase 7.7% to $228.8 million, driven by volume, acquisitions (ChlorKing), and price. Gross profit margin expanded by 30 basis points to 49.5%, primarily due to positive net price realization. Adjusted EBITDA grew 9% to $49.1 million, with the margin increasing 30 basis points to 21.5%. This builds on a strong 2024 performance where net sales grew 6% to $1.05 billion, gross margin reached a record 50.5%, and Adjusted EBITDA increased 12% to $277 million.

The company's liquidity and balance sheet are solid. As of March 29, 2025, cash and equivalents stood at $181.3 million, with total liquidity of $398 million including ABL availability.

Net debt to Adjusted EBITDA improved to 2.8x, within the targeted range of 2x to 3x. Hayward proactively managed its debt, including a voluntary early repayment of $123 million on its incremental Term Loan B in Q2 2024, reducing interest expense.

Strong cash flow generation is a hallmark, with $188 million in free cash flow in 2024 and a target of approximately $150 million in 2025, supports strategic investments and financial flexibility.

Outlook and Risks

Hayward has confirmed its full-year 2025 guidance, projecting net sales of $1.06 billion to $1.1 billion (1-5% growth) and Adjusted EBITDA of $280 million to $290 million. This outlook incorporates a pragmatic view of market volumes, anticipating continued pressure on discretionary segments while the aftermarket remains resilient. Crucially, the guidance assumes that aggressive mitigation plans will fully offset the estimated $85 million annualized impact of recent tariffs, primarily through supply chain restructuring (reducing China sourcing from ~10% to ~3% of COGS by year-end 2025) and pricing actions.

Key risks to monitor include the timing and extent of a recovery in discretionary pool spending, the successful execution of tariff mitigation plans, potential disruptions to the global supply chain, volatility in raw material costs, and the impact of geopolitical conflicts on international markets (particularly in the ERW segment). The company is also involved in securities class action and shareholder derivative lawsuits, the financial outcome of which is currently uncertain.

Conclusion

Hayward Holdings presents a compelling investment narrative grounded in the resilience of its aftermarket core, a century-long history of industry leadership, and a clear strategic roadmap focused on innovation, operational excellence, and targeted expansion. Despite navigating macroeconomic headwinds and the impact of new tariffs, the company has demonstrated the ability to deliver solid financial performance, expand margins, and maintain a strong balance sheet. The launch of the OmniX platform positions Hayward to unlock significant aftermarket potential, while the integration of ChlorKing strengthens its presence in the growing commercial segment. The confirmed 2025 guidance reflects management's confidence in their ability to execute mitigation plans and drive growth, even in a dynamic environment. For investors, Hayward offers exposure to a stable industry core with upside potential driven by technological innovation and strategic initiatives, supported by robust cash flow generation and disciplined capital allocation.