SECOND QUARTER FISCAL 2024 SUMMARY
- Net Sales increased year-over-year to $284.4 million
- Net Income increased 28% year-over-year to $37.6 million
- Adjusted EBITDA* increased 4% year-over-year to $82.6
million
- Diluted EPS increased 31% year-over-year to $0.17 and adjusted
diluted EPS* increased 11% year-over-year to $0.21
- Year-to-date cash flow from operations increased 26%
year-over-year to $209.8 million
Hayward Holdings, Inc. (NYSE: HAYW) (“Hayward” or the
“Company”), a global designer, manufacturer and marketer of a broad
portfolio of pool and outdoor living technology, today announced
financial results for the second quarter ended June 29, 2024 of its
fiscal year 2024. Comparisons are to financial results for the
prior-year second fiscal quarter.
CEO COMMENTS
“I am pleased to report second quarter results consistent with
expectations,” said Kevin Holleran, Hayward’s President and Chief
Executive Officer. “We delivered record gross margins and increased
cash flow through ongoing operational execution and working capital
management. This performance enabled us to further strengthen the
balance sheet and fund our growth initiatives. During the quarter,
we reduced net leverage meaningfully while completing a voluntary
early debt repayment and strategic acquisition of ChlorKing, a
leader in commercial pool water sanitization. ChlorKing’s
innovative technologies and strong customer relationships expand
our product offering and improve access to a broader set of
customers in this growing market. The economic and interest rate
environment remains uncertain, and we are seeing progressively
leaner channel inventory positions. However, our team continues to
execute at a high level, strengthening Hayward’s leadership
position in the pool industry.”
SECOND QUARTER FISCAL 2024 CONSOLIDATED RESULTS
Net sales increased modestly to $284.4 million for the second
quarter of fiscal 2024. The modest increase in net sales during the
quarter was the result of increases in net price, partially offset
by a decline in volume. The decrease in volume resulted from market
declines in the Middle East and Asia and lower new construction and
remodels in the U.S., partially offset by growth in Europe and
Canada.
Gross profit increased by 6% to $145.1 million for the second
quarter of fiscal 2024. Gross profit margin increased 290 basis
points to 51.0%. The increase in gross profit margin was primarily
due to operational efficiencies in our manufacturing facilities and
net price increases.
Selling, general, and administrative expense (“SG&A”)
increased by 9% to $63.2 million for the second quarter of fiscal
2024. The increase in SG&A was driven by increased warranty,
incentive compensation and selling expenses. As a percentage of net
sales, SG&A increased 180 basis points to 22.2%, compared to
the prior-year period of 20.4%, driven by the factors discussed
above. Research, development, and engineering expenses were $6.1
million for the second quarter of fiscal 2024, or 2% of net sales,
as compared to $6.9 million for the prior-year period, or 2% of net
sales.
Operating income increased by 8% to $68.0 million for the second
quarter of fiscal 2024, due to the aggregated effects of the items
described above. Operating income as a percentage of net sales
(“operating margin”) was 23.9% for the second quarter of fiscal
2024, a 170 basis point increase from the 22.2% operating margin in
the prior-year period.
Interest expense, net, decreased by 12% to $16.8 million for the
second quarter of fiscal 2024 primarily due to the repayment of the
Incremental Term Loan B principal balance in April 2024 and higher
interest income on cash investment balances. Additionally, due to
the Company’s voluntary early debt repayment during the quarter,
the Company incurred a $4.9 million debt extinguishment loss.
Income tax expense for the second quarter of fiscal 2024 was
$9.4 million, for an effective tax rate of 19.9%, compared to
income tax expense of $13.8 million, for an effective tax rate of
31.9%, for the prior-year period. The change in the effective tax
rate was primarily due to the change to the Company’s permanent
reinvestment assertion for one jurisdiction during the prior-year
period and a tax benefit from a return-to-provision adjustment in
the second quarter of fiscal 2024.
Net income increased by 28% to $37.6 million for the second
quarter of fiscal 2024.
Adjusted EBITDA* increased to $82.6 million for the second
quarter of fiscal 2024 from $79.5 million in the prior-year period.
Adjusted EBITDA margin* expanded 100 basis points to 29.0%.
Diluted EPS increased by 31% to $0.17 for the second quarter of
fiscal 2024. Adjusted diluted EPS* increased by 11% to $0.21 for
the second quarter of fiscal 2024.
SECOND QUARTER FISCAL 2024 SEGMENT RESULTS
North America
Net sales increased by 2% to $241.1 million for the second
quarter of fiscal 2024. The increase was primarily driven by net
price improvement and volume growth in Canada, partially offset by
a modest decline in volume in the U.S. due to lower new
construction and remodels.
Segment income increased by 6% to $75.3 million for the second
quarter of fiscal 2024. Adjusted segment income* increased by 6% to
$81.3 million.
Europe & Rest of World
Net sales decreased by 6% to $43.3 million for the second
quarter of fiscal 2024. The decline was primarily due to a decline
in volume, partially offset by the favorable impact of net price.
The decline in volume is driven primarily by market declines in the
Middle East and Asia, partially offset by growth in Europe.
Segment income decreased by 12% to $8.3 million for the second
quarter of fiscal 2024. Adjusted segment income* decreased by 11%
to $8.6 million.
BALANCE SHEET AND CASH FLOW
As of June 29, 2024, Hayward had cash and cash equivalents of
$215.1 million and approximately $232.6 million available for
future borrowings under its revolving credit facilities. Cash flow
provided by operations for the six months ended June 29, 2024 of
$209.8 million was an increase of $43.3 million from the prior-year
period. The increase in cash provided was primarily driven by
greater cash generated by working capital compared to the
prior-year period and due to an increase in net income.
OUTLOOK
Hayward is narrowing its full-year 2024 guidance, reflecting
better than expected margins offset by a more challenging demand
environment, particularly in new construction and remodels and
certain international markets. For fiscal year 2024, Hayward now
expects net sales of $1.010 billion to $1.040 billion, or an
increase of approximately 2% to 5% from fiscal year 2023, including
a contribution from the ChlorKing acquisition of approximately 1%,
compared to our prior guidance of $1.010 billion to $1.060 billion.
We now expect Adjusted EBITDA* of $255 million to $270 million, or
an increase of approximately 3% to 9% from fiscal year 2023,
compared to our prior guidance of $255 million to $275 million.
The pool industry remains attractive and benefits from
sustainable secular demand trends in outdoor living. Hayward
continues to leverage our competitive advantages and drive
increasing adoption of our leading SmartPad™ pool equipment
products both in new construction and the aftermarket, which has
historically represented approximately 80% of net sales. Hayward is
confident in its long-term outlook for profitable growth and robust
cash flow generation, driven by its technology leadership,
operational excellence, strong brand and installed base, and
multi-channel capabilities.
Please see the Forward-Looking Statements section of this
release for a discussion of certain risks relevant to Hayward’s
outlook.
CONFERENCE CALL INFORMATION
Hayward will hold a conference call to discuss the results
today, July 30, 2024 at 9:00 a.m. (ET).
Interested investors and other parties can listen to a webcast
of the live conference call by logging onto the Investor Relations
section of the Company’s website at
https://investor.hayward.com/events-and-presentations/default.aspx.
An earnings presentation will be posted to the Investor Relations
section of the company’s website prior to the conference call.
The conference call can also be accessed by dialing (877)
423-9813 or (201) 689-8573.
For those unable to listen to the live conference call, a replay
will be available approximately two hours after the call through
the archived webcast on the Hayward website or by dialing (844)
512-2921 or (412) 317-6671. The access code for the replay is
13747810. The replay will be available until 11:59 p.m. Eastern
Time on August 13, 2024.
ABOUT HAYWARD HOLDINGS, INC.
Hayward Holdings, Inc. (NYSE: HAYW) is a leading global designer
and manufacturer of pool and outdoor living technology. With a
mission to deliver exceptional products, outstanding service and
innovative solutions to transform the experience of water, Hayward
offers a full line of energy-efficient and sustainable residential
and commercial pool equipment including pumps, heaters, sanitizers,
filters, LED lighting, water features, and cleaners all digitally
connected through Hayward’s intuitive IoT-enabled SmartPad™.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains certain statements that are
“forward-looking statements” as that term is defined under the
Private Securities Litigation Reform Act of 1995 (the “Act”) and
releases issued by the Securities and Exchange Commission (the
“SEC”). Such forward-looking statements relating to Hayward are
based on the beliefs of Hayward’s management as well as assumptions
made by, and information currently available to it. These
forward-looking statements include, but are not limited to,
statements about Hayward’s strategies, plans, objectives,
expectations, intentions, expenditures and assumptions and other
statements contained in or incorporated by reference in this
earnings release that are not historical facts. When used in this
document, words such as “guidance,” “outlook,” “may,” “will,”
“should,” “could,” “intend,” “potential,” “continue,” “anticipate,”
“believe,” “estimate,” “expect,” “plan,” “target,” “predict,”
“project,” “seek” and similar expressions as they relate to Hayward
are intended to identify forward-looking statements. Hayward
believes that it is important to communicate its future
expectations to its stockholders, and it therefore makes
forward-looking statements in reliance upon the safe harbor
provisions of the Act. However, there may be events in the future
that Hayward is not able to accurately predict or control, and
actual results may differ materially from the expectations it
describes in its forward-looking statements.
Examples of forward-looking statements include, among others,
statements Hayward makes regarding: Hayward’s 2024 guidance;
business plans and objectives; general economic and industry
trends; business prospects; future product development and
acquisition strategies; future channel stocking levels; and growth
and expansion opportunities. The forward-looking statements in this
earnings release are only predictions. Hayward may not achieve the
plans, intentions or expectations disclosed in Hayward’s
forward-looking statements, and you should not place significant
reliance on its forward-looking statements. Hayward has based these
forward-looking statements largely on its current expectations and
projections about future events and financial trends that it
believes may affect its business, financial condition and results
of operations. Moreover, neither Hayward nor any other person
assumes responsibility for the accuracy and completeness of
forward-looking statements taken from third-party industry and
market reports.
Important factors that could affect Hayward’s future results and
could cause those results or other outcomes to differ materially
from those indicated in its forward-looking statements include the
following: its relationships with and the performance of
distributors, builders, buying groups, retailers and servicers who
sell Hayward’s products to pool owners; impacts on Hayward’s
business from the sensitivity of its business to seasonality and
unfavorable economic business and weather conditions; competition
from national and global companies, as well as lower-cost
manufacturers; Hayward’s ability to develop, manufacture and
effectively and profitably market and sell its new planned and
future products; its ability to execute on its growth strategies
and expansion opportunities; Hayward’s exposure to credit risk on
its accounts receivable, impacts on Hayward’s business from
political, regulatory, economic, trade, and other risks associated
with operating foreign businesses, including risks associated with
geopolitical conflict; its ability to maintain favorable
relationships with suppliers and manage disruptions to its global
supply chain and the availability of raw materials; Hayward’s
ability to identify emerging technological and other trends in its
target end markets; failure of markets to accept new product
introductions and enhancements; the ability to successfully
identify, finance, complete and integrate acquisitions; its
reliance on information technology systems and susceptibility to
threats to those systems, including cybersecurity threats, and
risks arising from its collection and use of personal information
data; regulatory changes and developments affecting Hayward’s
current and future products; volatility in currency exchange rates
and interest rates; Hayward’s ability to service its existing
indebtedness and obtain additional capital to finance operations
and its growth opportunities; Hayward’s ability to establish,
maintain and effectively enforce intellectual property protection
for its products, as well as its ability to operate its business
without infringing, misappropriating or otherwise violating the
intellectual property rights of others; the impact of material cost
and other inflation; Hayward’s ability to attract and retain senior
management and other qualified personnel; the impact of changes in
laws, regulations and administrative policy, including those that
limit U.S. tax benefits, impact trade agreements and tariffs, or
address the impacts of climate change; the outcome of litigation
and governmental proceedings; impacts on Hayward’s product
manufacturing disruptions, including as a result of catastrophic
and other events beyond its control; uncertainties related to
distribution channel inventory practices and the impact on net
sales volumes; Hayward’s ability to realize cost savings from
restructuring activities; Hayward’s and its customers’ ability to
manage product inventory in an effective and efficient manner; and
other factors set forth in Hayward’s most recent Annual Report on
Form 10-K and Quarterly Report on Form 10-Q.
Many of these factors are macroeconomic in nature and are,
therefore, beyond Hayward’s control. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, Hayward’s actual results, performance
or achievements may vary materially from those described in this
earnings release as anticipated, believed, estimated, expected,
intended, planned or projected. The forward-looking statements
included in this earnings release are made only as of the date of
this earnings release. Unless required by United States federal
securities laws, Hayward neither intends nor assumes any obligation
to update these forward-looking statements for any reason after the
date of this earnings release to conform these statements to actual
results or to changes in Hayward’s expectations.
*NON-GAAP FINANCIAL MEASURES
This earnings release includes certain financial measures not
presented in accordance with the generally accepted accounting
principles in the United States (“GAAP”) including adjusted net
income, adjusted basic EPS, adjusted diluted EPS, EBITDA, adjusted
EBITDA, adjusted EBITDA margin, total segment income, adjusted
total segment income, adjusted total segment income margin,
adjusted segment income and adjusted segment income margin. These
financial measures are not measures of financial performance in
accordance with GAAP and may exclude items that are significant in
understanding and assessing the Company’s financial results.
Hayward believes these non-GAAP measures provide analysts,
investors and other interested parties with additional insight into
the underlying trends of its business and assist these parties in
analyzing the Company’s performance across reporting periods on a
consistent basis by excluding items that it does not believe are
indicative of its core operating performance, which allows for a
better comparison against historical results and expectations for
future performance. Management uses these non-GAAP measures to
understand and compare operating results across reporting periods
for various purposes including internal budgeting and forecasting,
short and long-term operating planning, employee incentive
compensation, and debt compliance. Therefore, these measures should
not be considered in isolation or as an alternative to net income,
segment income or other measures of profitability, performance or
financial condition under GAAP. You should be aware that the
Company’s presentation of these measures may not be comparable to
similarly titled measures used by other companies, which may be
defined and calculated differently. See the appendix for a
reconciliation of historical non-GAAP measures to the most directly
comparable GAAP measures.
Reconciliation of full fiscal year 2024 adjusted EBITDA outlook
to the comparable GAAP measure is not being provided, as Hayward
does not currently have sufficient data to accurately estimate the
variables and individual adjustments for such reconciliation.
Adjusted EBITDA outlook for full year 2024 is calculated in a
manner consistent with the historical presentation of this measure
in the appendix.
Hayward Holdings, Inc. Unaudited
Condensed Consolidated Balance Sheets (In thousands)
June 29, 2024
December 31, 2023
Assets
Current assets
Cash and cash equivalents
$
215,056
$
178,097
Short-term investments
—
25,000
Accounts receivable, net of allowances of
$2,993 and $2,870, respectively
148,233
270,875
Inventories, net
213,559
215,180
Prepaid expenses
15,789
14,331
Income tax receivable
—
9,994
Other current assets
17,579
11,264
Total current assets
610,216
724,741
Property, plant, and equipment, net of
accumulated depreciation of $103,894 and $95,917, respectively
160,657
158,979
Goodwill
951,879
935,013
Trademark
736,000
736,000
Customer relationships, net
218,252
206,308
Other intangibles, net
95,656
94,082
Other non-current assets
90,011
91,161
Total assets
$
2,862,671
$
2,946,284
Liabilities and Stockholders’
Equity
Current liabilities
Current portion of long-term debt
$
14,261
$
15,088
Accounts payable
69,392
68,943
Accrued expenses and other liabilities
148,813
155,543
Income taxes payable
2,974
109
Total current liabilities
235,440
239,683
Long-term debt, net
959,840
1,079,280
Deferred tax liabilities, net
242,608
248,967
Other non-current liabilities
67,385
66,896
Total liabilities
1,505,273
1,634,826
Stockholders’ equity
Preferred stock, $0.001 par value,
100,000,000 authorized, no shares issued or outstanding as of June
29, 2024 and December 31, 2023
—
—
Common stock $0.001 par value, 750,000,000
authorized; 243,738,167 issued and 215,071,798 outstanding at June
29, 2024; 242,832,045 issued and 214,165,676 outstanding at
December 31, 2023
244
243
Additional paid-in capital
1,086,680
1,080,894
Common stock in treasury; 28,666,369 and
28,666,369 at June 29, 2024 and December 31, 2023, respectively
(358,110
)
(357,755
)
Retained earnings
628,330
580,909
Accumulated other comprehensive income
254
7,167
Total stockholders’ equity
1,357,398
1,311,458
Total liabilities, redeemable stock, and
stockholders’ equity
$
2,862,671
$
2,946,284
Hayward Holdings, Inc. Unaudited
Condensed Consolidated Statements of Operations (Dollars in
thousands, except per share data)
Three Months Ended
Six Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Net sales
$
284,393
$
283,543
$
496,962
$
493,679
Cost of sales
139,306
147,033
247,296
259,278
Gross profit
145,087
136,510
249,666
234,401
Selling, general and administrative
expense
63,155
57,716
123,169
112,603
Research, development and engineering
expense
6,119
6,873
12,421
12,850
Acquisition and restructuring related
expense
839
1,309
1,343
2,872
Amortization of intangible assets
6,949
7,637
13,849
15,254
Operating income
68,025
62,975
98,884
90,822
Interest expense, net
16,799
19,130
35,391
38,491
Loss on debt extinguishment
4,926
—
4,926
—
Other (income) expense, net
(646
)
625
(1,284
)
(134
)
Total other expense
21,079
19,755
39,033
38,357
Income from operations before income
taxes
46,946
43,220
59,851
52,465
Provision for income taxes
9,365
13,767
12,430
14,602
Net income
$
37,581
$
29,453
$
47,421
$
37,863
Earnings per share
Basic
$
0.17
$
0.14
$
0.22
$
0.18
Diluted
$
0.17
$
0.13
$
0.21
$
0.17
Weighted average common shares
outstanding
Basic
214,915,338
212,861,564
214,637,930
212,692,393
Diluted
221,259,232
220,503,544
221,159,419
220,506,921
Hayward Holdings, Inc. Unaudited
Condensed Consolidated Statements of Cash Flows (In
thousands)
Six Months Ended
June 29, 2024
July 1, 2023
Cash flows from operating
activities
Net income
$
47,421
$
37,863
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation
9,067
8,590
Amortization of intangible assets
17,046
18,543
Amortization of deferred debt issuance
fees
2,294
2,242
Stock-based compensation
4,632
4,146
Deferred income taxes
(6,631
)
(1,673
)
Allowance for bad debts
81
(879
)
Loss on debt extinguishment
4,926
—
(Gain) loss on sale of property, plant and
equipment
(504
)
137
Changes in operating assets and
liabilities
Accounts receivable
124,537
63,801
Inventories
6,384
50,234
Other current and non-current assets
7,803
15,225
Accounts payable
(562
)
(427
)
Accrued expenses and other liabilities
(6,655
)
(31,286
)
Net cash provided by operating
activities
209,839
166,516
Cash flows from investing
activities
Purchases of property, plant, and
equipment
(10,706
)
(15,703
)
Acquisitions, net of cash acquired
(62,367
)
—
Proceeds from sale of property, plant, and
equipment
48
5
Proceeds from short-term investments
25,000
—
Net cash used in investing activities
(48,025
)
(15,698
)
Cash flows from financing
activities
Proceeds from revolving credit
facility
—
144,100
Payments on revolving credit facility
—
(144,100
)
Proceeds from issuance of long-term
debt
2,856
1,827
Payments of long-term debt
(129,401
)
(6,153
)
Proceeds from issuance of short-term notes
payable
6,340
5,347
Payments of short-term notes payable
(2,888
)
(3,542
)
Other, net
(514
)
(360
)
Net cash used in financing activities
(123,607
)
(2,881
)
Effect of exchange rate changes on cash
and cash equivalents
(1,248
)
888
Change in cash and cash equivalents
36,959
148,825
Cash and cash equivalents, beginning of
period
178,097
56,177
Cash and cash equivalents, end of
period
$
215,056
$
205,002
Supplemental disclosures of cash flow
information
Cash paid-interest
$
36,601
$
37,223
Cash paid-income taxes
6,221
6,779
Equipment financed under finance
leases
630
—
Reconciliations Consolidated Reconciliations Adjusted EBITDA
and Adjusted EBITDA Margin Reconciliations (Non-GAAP) Following is
a reconciliation from net income to adjusted EBITDA:
(Dollars in thousands)
Three Months Ended
Six Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Net income
$
37,581
$
29,453
$
47,421
$
37,863
Depreciation
4,757
4,228
9,067
8,590
Amortization
8,503
9,289
17,046
18,543
Interest expense
16,799
19,130
35,391
38,491
Income taxes
9,365
13,767
12,430
14,602
Loss on debt extinguishment
4,926
—
4,926
—
EBITDA
81,931
75,867
126,281
118,089
Stock-based compensation (a)
230
375
420
732
Currency exchange items (b)
(180
)
1,205
(126
)
1,131
Acquisition and restructuring related
expense, net (c)
839
1,309
1,343
2,872
Other (d)
(206
)
722
(263
)
1,583
Total Adjustments
683
3,611
1,374
6,318
Adjusted EBITDA
$
82,614
$
79,478
$
127,655
$
124,407
Adjusted EBITDA margin
29.0
%
28.0
%
25.7
%
25.2
%
(a)
Represents non-cash stock-based
compensation expense related to equity awards issued to management,
employees, and directors. The adjustment includes only expense
related to awards issued under the 2017 Equity Incentive Plan,
which were awards granted prior to the effective date of Hayward’s
initial public offering (the “IPO”).
(b)
Represents unrealized non-cash (gains)
losses on foreign denominated monetary assets and liabilities and
foreign currency contracts.
(c)
Adjustments in the three months ended June
29, 2024 are primarily driven by $0.6 million of transaction costs
associated with the acquisition of ChlorKing HoldCo, LLC and
related entities (“ChlorKing”) and $0.3 million of separation and
other costs associated with the centralization of operations in
Europe. Adjustments in the three months ended July 1, 2023 are
primarily driven by $0.5 million of separation costs associated
with the enterprise cost-reduction program initiated in 2022, $0.5
million of integration costs from prior acquisitions and $0.3
million of costs associated with the relocation of the corporate
headquarters.
Adjustments in the six months ended June
29, 2024 are primarily driven by $0.7 million of separation and
other costs associated with the centralization of operations in
Europe and $0.6 million of transaction costs associated with the
acquisition of ChlorKing. Adjustments in the six months ended July
1, 2023 are primarily driven by $1.3 million of separation costs
associated with the enterprise cost-reduction program initiated in
2022, $0.8 million of integration costs from prior acquisitions and
$0.6 million of costs associated with the relocation of the
corporate headquarters.
(d)
Adjustments in the three months ended June
29, 2024 are primarily driven by $0.5 million of gains on the sale
of assets, partially offset by $0.2 million of costs incurred
related to litigation. Adjustments in the three months ended July
1, 2023 primarily include $0.3 million of costs incurred related to
the selling stockholder offering of shares in May 2023, which are
reported in SG&A in the unaudited condensed consolidated
statement of operations, and other miscellaneous items the Company
believes are not representative of its ongoing business
operations.
Adjustments in the six months ended June
29, 2024 are primarily driven by $0.5 million of gains on the sale
of assets, partially offset by $0.3 million of costs incurred
related to litigation. Adjustments in the six months ended July 1,
2023 primarily includes $0.6 million of costs associated with
follow-on equity offerings, $0.4 million of transitional expenses
incurred to enable go-forward public company regulatory compliance
and other miscellaneous items the Company believes are not
representative of its ongoing business operations.
Following is a reconciliation from net income to adjusted EBITDA
for the last twelve months:
(Dollars in thousands)
Last Twelve Months(e)
Fiscal Year
June 29, 2024
December 31, 2023
Net income
$
90,245
$
80,687
Depreciation
16,460
15,983
Amortization
35,582
37,079
Interest expense
70,484
73,584
Income taxes
18,228
20,400
Loss on debt extinguishment
4,926
—
EBITDA
235,925
227,733
Stock-based compensation (a)
958
1,270
Currency exchange items (b)
(471
)
786
Acquisition and restructuring related
expense, net (c)
11,684
13,213
Other (d)
2,425
4,271
Total Adjustments
14,596
19,540
Adjusted EBITDA
$
250,521
$
247,273
Adjusted EBITDA margin
25.2
%
24.9
%
(a)
Represents non-cash stock-based
compensation expense related to equity awards issued to management,
employees, and directors. The adjustment includes only expense
related to awards issued under the 2017 Equity Incentive Plan,
which were awards granted prior to the effective date of the
IPO.
(b)
Represents unrealized non-cash (gains)
losses on foreign denominated monetary assets and liabilities and
foreign currency contracts.
(c)
Adjustments in the last twelve months
ended June 29, 2024 include $6.7 million of costs related to the
discontinuation of a product line leading to an impairment of the
associated fixed assets, inventory and intangible assets, $3.0
million related to programs to centralize and consolidate
operations and professional services in Europe, $1.5 million of
costs associated with the relocation of the corporate headquarters
and $0.6 million of transaction costs associated with the
acquisition of ChlorKing.
Adjustments in the year ended December 31,
2023 primarily include $6.7 million of costs related to the
discontinuation of a product line leading to an impairment of the
associated fixed assets, inventory and intangible assets, $2.4
million related to programs to centralize and consolidate
operations and professional services in Europe, $1.9 million of
costs associated with the relocation of the corporate headquarters,
$1.2 million separation costs associated with the 2022 cost
reduction program and $0.8 million of costs associated with
integration costs from prior acquisitions.
(d)
Adjustments in the last twelve months
ended June 29, 2024 primarily include $1.3 million of costs related
to inventory and fixed assets as part of the centralization of
operations in Europe, $0.8 million of costs associated with
follow-on equity offerings and $0.3 million of costs incurred
related to litigation.
Adjustments in the year ended December 31,
2023 primarily include $1.8 million related to inventory and fixed
asset write-offs in Europe and $1.5 million of costs incurred
related to the selling stockholder offerings of shares in March,
May and August 2023, which are reported in SG&A in our
consolidated statements of operations.
(e)
Items for the last twelve months ended
June 29, 2024 are calculated by adding the items for the six months
ended June 29, 2024 plus fiscal year ended December 31, 2023 and
subtracting the items for the six months ended July 1, 2023.
Adjusted Net Income and Adjusted EPS Reconciliation
(Non-GAAP)
Following is a reconciliation of net income to adjusted net
income and earnings per share to adjusted earnings per share:
(Dollars in thousands)
Three Months Ended
Six Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Net income
$
37,581
$
29,453
$
47,421
$
37,863
Tax adjustments (a)
(1,624
)
3,046
(1,771
)
1,498
Other adjustments and amortization:
Stock-based compensation (b)
230
375
420
732
Currency exchange items (c)
(180
)
1,205
(126
)
1,131
Acquisition and restructuring related
expense, net (d)
839
1,309
1,343
2,872
Other (e)
(206
)
722
(263
)
1,583
Total other adjustments
683
3,611
1,374
6,318
Loss on debt extinguishment
4,926
—
4,926
—
Amortization
8,503
9,289
17,046
18,543
Tax effect (f)
(3,304
)
(3,200
)
(5,539
)
(6,284
)
Adjusted net income
$
46,765
$
42,199
$
63,457
$
57,938
Weighted average number of common shares
outstanding, basic
214,915,338
212,861,564
214,637,930
212,692,393
Weighted average number of common shares
outstanding, diluted
221,259,232
220,503,544
221,159,419
220,506,921
Basic EPS
$
0.17
$
0.14
$
0.22
$
0.18
Diluted EPS
$
0.17
$
0.13
$
0.21
$
0.17
Adjusted basic EPS
$
0.22
$
0.20
$
0.30
$
0.27
Adjusted diluted EPS
$
0.21
$
0.19
$
0.29
$
0.26
(a)
Tax adjustments for the three and six
months ended June 29, 2024 reflect a normalized tax rate of 23.4%
and 23.7%, respectively, compared to the Company’s effective tax
rate of 19.9% and 20.8%, respectively. The Company’s effective tax
rate for the three months ended June 29, 2024 includes the tax
benefits resulting from stock compensation and the six months ended
June 29, 2024 additionally include a tax benefit resulting from a
return-to-provision adjustment. Tax adjustments for the three and
six months ended July 1, 2023 reflect a normalized tax rate of
24.8% and 25.0%, respectively, compared to the Company's effective
tax rate of 31.9% and 27.8%, respectively. The Company’s effective
tax rate for the three and six months ended July 1, 2023 includes
the impact of a discrete tax expense related to a change in the
indefinite reinvestment assertion for one jurisdiction, partially
offset by a tax benefit resulting from the exercise of stock
options.
(b)
Represents non-cash stock-based
compensation expense related to equity awards issued to management,
employees, and directors. The adjustment includes only expense
related to awards issued under the 2017 Equity Incentive Plan,
which were awards granted prior to the effective date of the
IPO.
(c)
Represents unrealized non-cash (gains)
losses on foreign denominated monetary assets and liabilities and
foreign currency contracts.
(d)
Adjustments in the three months ended June
29, 2024 are primarily driven by $0.6 million of transaction costs
associated with the acquisition of ChlorKing HoldCo, LLC and
related entities (“ChlorKing”) and $0.3 million of separation and
other costs associated with the centralization of operations in
Europe. Adjustments in the three months ended July 1, 2023 are
primarily driven by $0.5 million of separation costs associated
with the enterprise cost-reduction program initiated in 2022, $0.5
million of integration costs from prior acquisitions and $0.3
million of costs associated with the relocation of the corporate
headquarters.
Adjustments in the six months ended June
29, 2024 are primarily driven by $0.7 million of separation and
other costs associated with the centralization of operations in
Europe and $0.6 million of transaction costs associated with the
acquisition of ChlorKing. Adjustments in the six months ended July
1, 2023 are primarily driven by $1.3 million of separation costs
associated with the enterprise cost-reduction program initiated in
2022, $0.8 million of integration costs from prior acquisitions and
$0.6 million of costs associated with the relocation of the
corporate headquarters.
(e)
Adjustments in the three months ended June
29, 2024 are primarily driven by $0.5 million of gains on the sale
of assets, partially offset by $0.2 million of costs incurred
related to litigation. Adjustments in the three months ended July
1, 2023 primarily include $0.3 million of costs incurred related to
the selling stockholder offering of shares in May 2023, which are
reported in SG&A in the unaudited condensed consolidated
statement of operations, and other miscellaneous items the Company
believes are not representative of its ongoing business
operations.
Adjustments in the six months ended June
29, 2024 are primarily driven by $0.5 million of gains on the sale
of assets, partially offset by $0.3 million of costs incurred
related to litigation. Adjustments in the six months ended July 1,
2023 primarily includes $0.6 million of costs associated with
follow-on equity offerings, $0.4 million of transitional expenses
incurred to enable go-forward public company regulatory compliance
and other miscellaneous items the Company believes are not
representative of its ongoing business operations.
(f)
The tax effect represents the immediately
preceding adjustments at the normalized tax rates as discussed in
footnote (a) above.
Segment Reconciliations
Following is a reconciliation from segment income to adjusted
segment income for the North America (“NAM”) and Europe & Rest
of World (“E&RW”) segments:
(Dollars in thousands)
Three Months Ended
Three Months Ended
June 29, 2024
July 1, 2023
Total
NAM
E&RW
Total
NAM
E&RW
Net sales
$
284,393
$
241,113
$
43,280
$
283,543
$
237,352
$
46,191
Gross profit
$
145,087
$
127,430
$
17,657
$
136,510
$
118,442
$
18,068
Gross profit margin %
51.0
%
52.9
%
40.8
%
48.1
%
49.9
%
39.1
%
Income from operations before income
taxes
$
46,946
$
43,220
Expenses not allocated to segments
Corporate expense, net
7,811
8,425
Acquisition and restructuring related
expense
839
1,309
Amortization of intangible assets
6,949
7,637
Interest expense, net
16,799
19,130
Loss on debt extinguishment
4,926
—
Other (income) expense, net
(646
)
625
Segment income
$
83,624
$
75,335
$
8,289
$
80,346
$
70,962
$
9,384
Segment income margin %
29.4
%
31.2
%
19.2
%
28.3
%
29.9
%
20.3
%
Depreciation
$
4,591
$
4,328
$
263
$
4,068
$
3,837
$
231
Amortization
1,554
1,554
—
1,651
1,651
—
Stock-based compensation
57
57
—
192
180
12
Other (a)
—
—
—
290
290
—
Total adjustments
6,202
5,939
263
6,201
5,958
243
Adjusted segment income
$
89,826
$
81,274
$
8,552
$
86,547
$
76,920
$
9,627
Adjusted segment income margin %
31.6
%
33.7
%
19.8
%
30.5
%
32.4
%
20.8
%
(a)
The three months ended July 1, 2023
includes miscellaneous items the Company believes are not
representative of its ongoing business operations.
(Dollars in thousands)
Six Months Ended
Six Months Ended
June 29, 2024
July 1, 2023
Total
NAM
E&RW
Total
NAM
E&RW
Net sales
$
496,962
$
414,542
$
82,420
$
493,679
$
400,056
$
93,623
Gross profit
$
249,666
$
217,307
$
32,359
$
234,401
$
197,455
$
36,946
Gross profit margin %
50.2
%
52.4
%
39.3
%
47.5
%
49.4
%
39.5
%
Income from operations before income
taxes
$
59,851
$
52,465
Expenses not allocated to segments
Corporate expense, net
15,326
14,524
Acquisition and restructuring related
expense
1,343
2,872
Amortization of intangible assets
13,849
15,254
Interest expense, net
35,391
38,491
Loss on debt extinguishment
4,926
—
Other (income) expense, net
(1,284
)
(134
)
Segment income
$
129,402
$
115,077
$
14,325
$
123,472
$
104,238
$
19,234
Segment income margin %
26.0
%
27.8
%
17.4
%
25.0
%
26.1
%
20.5
%
Depreciation
$
8,735
$
8,215
$
520
$
8,373
$
7,925
$
448
Amortization
3,197
3,197
—
3,288
3,288
—
Stock-based compensation
79
69
10
365
342
23
Other (a)
19
19
—
388
388
—
Total adjustments
12,030
11,500
530
12,414
11,943
471
Adjusted segment income
$
141,432
$
126,577
$
14,855
$
135,886
$
116,181
$
19,705
Adjusted segment income margin %
28.5
%
30.5
%
18.0
%
27.5
%
29.0
%
21.0
%
(a)
The six months ended June 29, 2024
represents losses on the sale of assets. The six months ended July
1, 2023 includes miscellaneous items the Company believes are not
representative of its ongoing business operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240730598272/en/
Investor Relations: Kevin Maczka investor.relations@hayward.com
Media Relations: Tanya McNabb tmcnabb@hayward.com
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