Hayward Holdings, Inc. (HAYW) Earnings

Management highlights

### Overall Financial Performance - Q2 2026 net sales grew 6% YoY to $318 million, and first half 2026 net sales grew 9% YoY, driven by positive price realization and stable overall volume. - Adjusted diluted EPS increased 8% YoY to 26 cents in Q2, and grew 18% YoY for the first half. Adjusted EBITDA grew 9% YoY for the first half. - Gross profit margin declined modestly in Q2 but remained near record levels (second highest since IPO), with the 2025 Q2 holding the all-time record. ### Balance Sheet and Capital Structure - Completed a comprehensive debt refinancing that extends debt maturities, reduces full-year annual interest expense by approximately $6 million, and adds significant financial flexibility. Moody's upgraded the corporate family rating, and S&P affirmed the rating with a positive outlook. - Net leverage reduced to 1.5x, the lowest level since the 2021 IPO, down from 2.1x a year prior. Total ending liquidity (cash, investments and available credit) exceeds $900 million. - Maintains a disciplined capital allocation framework that prioritizes organic manufacturing/supply chain investment, followed by strategic M&A, then opportunistic share repurchases. $64 million was deployed to repurchase 4.4 million shares in the first half, with repurchase activity accelerated.

Guidance

- Management is maintaining its full year 2026 guidance, reaffirming prior targets: - Net sales are expected to increase approximately 5% YoY - Adjusted diluted EPS is expected to increase approximately 9% to 13% YoY, to a range of $0.84 to $0.87 - Full year free cash flow is expected to be approximately $200 million, exceeding 100% of net income - Full year net interest expense is expected to be approximately $45 million, with a normalized effective tax rate of ~24% and capex of approximately $40 million for operational capability upgrades - Management expects full year 2026 gross margins to remain approximately in line with 2025's record levels

Segment performance

### Q2 2026 - North America: Net sales increased 9% year-over-year to $278 million, contributing 87.4% of total consolidated net sales. Gross margin was 50.4%, a 90 basis point decline YoY due to inflationary pressures and mitigation timing. - Europe and Rest of the World (RoW): Net sales declined 8% YoY to $41 million, contributing 12.9% of total consolidated net sales. Europe sales declined 4% while RoW sales declined 16% primarily due to Middle East geopolitical disruption. Gross margin increased 50 basis points YoY to 37.9%, and adjusted segment income margin was flat YoY at 18.1%. ### First Half 2026 - North America: Net sales increased 10% YoY, driven by 8% price realization and 2% volume growth, with both the U.S. and Canada delivering double-digit gains. Adjusted segment income margin remained consistent with strong prior year levels. - Europe and Rest of the World (RoW): Overall net sales was flat YoY, with 5% growth in Europe offsetting a 9% decline in RoW driven by Middle East conflict disruption. Adjusted segment income margin expanded 130 basis points YoY.

Risks & headwinds

- Continued macroeconomic weakness and geopolitical disruption, specifically ongoing conflicts in Ukraine and the Middle East, have negatively impacted demand in Europe and the rest of the world - Incremental inflationary pressure on specialty metals, freight, and resin costs created temporary margin pressure in Q2 2026 before mitigation actions were fully implemented - Industry competitor dislocation and channel inventory rightsizing create uncertainty around near-term demand and channel stocking patterns

Analyst Q&A

• Q: With industry news of peer declines and channel inventory rightsizing, what is your channel inventory position today, how does it compare to pre-COVID levels, and what is the expected end-of-year position? /

  A: Management stated channel inventory exiting Q2 is very normal and aligned with seasonal patterns, following a typical Q2 inventory reduction after pre-season builds in Q4 and Q1. Aggregate channel inventory across North America and core European markets is just over four months, which matches historical seasonal levels. No channel partners are planning step-level inventory reductions, and inventory is balanced across all major partners. Q3 is expected to see another smaller net reduction, with inventory climbing back to normal levels by year-end ahead of the early buying season. Shorter domestic supply chain lead times remove any need for the channel to hold excess inventory.

• Q: Are you seeing market share gains from current competitor industry dislocation, and what is your strategy to sustain these gains? /

  A: Management confirms it has been executing a consistent multi-pronged share gain strategy since 2019, and gains are becoming more apparent amid current competitor disruption. Product strategy focuses on innovation for like-for-like replacements, installed base upgrades, and drop-in replacements for competitive products. Commercial levers include brand building, field organization reorganization that combines sales and technical service, dealer training and support via Hayward Hub centers, and reliable domestic short lead time supply chain. Management expects share gains to be durable and continue on their current positive trajectory.

• Q: How should we think about future pricing power, after several years of price increases to offset inflation, and is there pushback from the channel? /

  A: Management is currently working through 2027 pricing as part of the annual early buy program process. The company is confident it can pass through necessary price increases dollar-for-dollar to offset any ongoing inflation. Given the cumulative price increases over the past three years, the company is focused on internal cost reduction, productivity, and efficiency projects to grow structural margins without unnecessary additional price hikes.

• Q: What is the expected impact of IEPA refunds, and is any benefit included in current guidance? /

  A: Management expects total IEPA refunds of approximately $8 to $10 million, with the first tranche received as of Q3. The company is currently evaluating how to pass these refunds back to customers, and no benefit from the refunds is included in full year 2026 guidance. An update will be provided after Q3 once plans are finalized.