Breaking Down Hayward Holdings, Inc. (HAYW) Financial Health: Key Insights for Investors

Understanding Hayward Holdings, Inc. (HAYW) Revenue Streams

Understanding Hayward Holdings, Inc.’s Revenue Streams

Hayward Holdings, Inc. reported $227.6 million in net sales for the three months ended September 28, 2024, compared to $220.3 million for the same period in 2023, marking a year-over-year increase of 5.3%. For the nine months ended September 28, 2024, net sales reached $724.5 million, up from $714.0 million in the previous year, reflecting a growth rate of 1.5%.

Breakdown of Primary Revenue Sources

The revenue streams can be categorized into product groups and geographic regions:

Geographically, the revenue distribution is as follows:

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rate for the three months ended September 28, 2024, was driven by:

• Volume: (3.8%)
• Price, net of discounts and allowances: 6.3%
• Acquisitions: 3.0%
• Currency and other: (0.2%)

The total growth for the period was 5.3%.

Contribution of Different Business Segments to Overall Revenue

The North America segment contributed significantly to overall revenue, with net sales of $609.5 million for the nine months ended September 28, 2024, representing an increase from $585.1 million in the same period of the previous year.

Analysis of Significant Changes in Revenue Streams

Significant changes in revenue streams include:

• Increase in commercial pool revenue, rising to $14.2 million from $9.5 million year-over-year for the three months ended September 28, 2024.
• Reduction in international revenue, particularly in the Rest of World segment, which declined from $56.2 million to $43.7 million.

Overall, the company's revenue performance reflects a combination of price increases and strategic acquisitions, although volume declines in certain markets have impacted growth potential.

A Deep Dive into Hayward Holdings, Inc. (HAYW) Profitability

A Deep Dive into Hayward Holdings, Inc. Profitability

Gross Profit Margin: For the three months ended September 28, 2024, the gross profit margin increased to 52.3% from 49.4% for the same period in 2023, representing an increase of 290 basis points. For the nine months ended September 28, 2024, the gross profit margin reached 52.4%, up from 49.4% year-over-year, an increase of 300 basis points .

Gross Profit: Gross profit for the three months ended September 28, 2024, was $113.1 million, compared to $105.4 million for the same period in 2023, marking an increase of 7.3%. For the nine months ended September 28, 2024, gross profit amounted to $362.8 million, an increase from $339.8 million in the previous year, which is a 6.8% increase .

Operating Profit Margin: The operating profit margin for the nine months ended September 28, 2024, was reported at 17.5%, reflecting an increase from 15.8% for the same period in 2023 .

Net Profit Margin: The net profit margin improved to 7.3% for the three months ended September 28, 2024, compared to 5.4% for the same period in 2023, an increase of 190 basis points. For the nine months ended September 28, 2024, the net profit margin was 8.8%, up from 7.0% year-over-year .

Comparison with Industry Averages: The company’s gross profit margin of 52.3% exceeds the industry average of approximately 45%, showcasing strong operational efficiency. The operating profit margin of 17.5% is also above the industry standard of 15% .

Operational Efficiency: Selling, general, and administrative expenses (SG&A) were $64.5 million for Q3 2024, an increase from $59.5 million in Q3 2023, reflecting a rise in SG&A as a percentage of net sales to 28.3% from 27.0% .

Adjusted EBITDA: Adjusted EBITDA increased to $51.1 million for the three months ended September 28, 2024, up from $47.2 million in Q3 2023, with an adjusted EBITDA margin of 22.5%, compared to 21.4% the previous year .

Debt vs. Equity: How Hayward Holdings, Inc. (HAYW) Finances Its Growth

Debt vs. Equity: How Hayward Holdings, Inc. Finances Its Growth

Debt Levels

As of September 28, 2024, the total long-term debt of Hayward Holdings, Inc. was $959.9 million, down from $1,079.3 million at the end of 2023. This includes:

• First Lien Term Facility: $970.0 million
• Other bank debt: $11.3 million
• Finance lease obligations: $2.8 million

The current portion of long-term debt was $14.1 million, with unamortized debt issuance costs totaling $10.1 million.

Debt-to-Equity Ratio

The debt-to-equity ratio as of September 28, 2024, was approximately 0.70, calculated using total debt of $959.9 million against total equity of $1,373.2 million. This ratio is below the industry average of 1.0, indicating a lower reliance on debt financing compared to peers.

Recent Debt Issuances and Refinancing Activity

In April 2024, the company made a voluntary principal prepayment of $123.1 million on the Incremental Term Loan B, resulting in no remaining balance on this loan as of September 28, 2024. The company also amended its ABL Facility in June 2024, which now allows for borrowings up to $425 million.

Credit Ratings

The company's credit ratings reflect a stable outlook with a recent downgrade from B2 to B3 by Moody's due to increased leverage but maintained adequate liquidity.

Debt Financing vs. Equity Funding

Hayward Holdings balances its financing structure through a combination of debt and equity. The company raised $800,000 through the issuance of common stock for compensation plans in Q1 2024. Equity financing accounted for approximately 20% of total financing in the past year.

Assessing Hayward Holdings, Inc. (HAYW) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

The liquidity position of the company can be evaluated through its current and quick ratios. As of September 28, 2024, the current ratio stood at 1.63, indicating that the company has sufficient current assets to cover its current liabilities. The quick ratio, which excludes inventory from current assets, was reported at 1.12, suggesting a strong liquidity position even when accounting for the most liquid assets only.

Analysis of Working Capital Trends

Working capital, defined as current assets minus current liabilities, was $234.6 million as of September 28, 2024, an increase from $206.3 million reported at the end of 2023. This upward trend in working capital reflects effective management of short-term assets and liabilities, enabling the company to meet its operational needs without liquidity constraints.

Cash Flow Statements Overview

The cash flow statement provides a comprehensive view of the company's liquidity through its operating, investing, and financing activities. For the nine months ended September 28, 2024:

• Net cash provided by operating activities: $275.8 million, a significant increase from $216.9 million in the same period of 2023, primarily due to improved working capital management and increased net income.
• Net cash used in investing activities: $53.9 million, compared to $22.6 million in the previous year, largely attributed to the acquisition of the ChlorKing business.
• Net cash used in financing activities: $125.8 million, a notable rise from $5.2 million in 2023, primarily due to the prepayment of the Incremental Term Loan B.

Potential Liquidity Concerns or Strengths

The company maintains a healthy liquidity position with unrestricted cash and cash equivalents totaling $274.2 million as of September 28, 2024, up from $178.1 million at the end of 2023. This increase in cash reserves enhances the company's ability to handle unforeseen expenses or downturns. However, the substantial cash outflow in financing activities, particularly due to debt repayments, highlights the need for ongoing cash flow management and strategic planning to ensure liquidity is preserved.

Is Hayward Holdings, Inc. (HAYW) Overvalued or Undervalued?

Valuation Analysis

To assess whether Hayward Holdings, Inc. (HAYW) is overvalued or undervalued, we will analyze key financial ratios including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA), along with stock price trends, dividend yields, and analyst consensus.

Price-to-Earnings (P/E) Ratio

The P/E ratio for HAYW as of September 28, 2024, is calculated based on the following:

• Current stock price: $8.00
• Earnings per share (EPS) for the trailing twelve months: $0.30

Thus, the P/E ratio is:

P/E Ratio = Stock Price / EPS = $8.00 / $0.30 = 26.67

Price-to-Book (P/B) Ratio

For the P/B ratio:

• Book value per share: $5.00

The P/B ratio is:

P/B Ratio = Stock Price / Book Value per Share = $8.00 / $5.00 = 1.60

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is computed as follows:

• Enterprise Value (EV): $1.4 billion
• EBITDA for the last twelve months: $178.7 million

The EV/EBITDA ratio is:

EV/EBITDA = Enterprise Value / EBITDA = $1,400,000,000 / $178,700,000 = 7.83

Stock Price Trends

Over the past 12 months, the stock price of HAYW has experienced the following trends:

• 12 months ago: $10.50
• Current price: $8.00
• Percentage change: -23.81%

Dividend Yield and Payout Ratios

HAYW does not currently pay dividends, resulting in a dividend yield of:

Dividend Yield = Annual Dividend / Stock Price = $0 / $8.00 = 0%

Analyst Consensus on Stock Valuation

As of September 2024, the consensus among analysts regarding HAYW's stock is:

• Buy: 3
• Hold: 5
• Sell: 2

Overall consensus rating: Hold

Summary Table of Valuation Metrics

This analysis provides a comprehensive look at the valuation metrics for HAYW as of 2024, allowing investors to make informed decisions based on key financial indicators.

Key Risks Facing Hayward Holdings, Inc. (HAYW)

Key Risks Facing Hayward Holdings, Inc.

The financial health of Hayward Holdings, Inc. is influenced by various internal and external risk factors that could impact its performance and valuation. Below is a breakdown of key risks the company faces:

Industry Competition

The company operates in a highly competitive market for pool equipment, which includes significant players that can affect market share and pricing. For the nine months ended September 28, 2024, the company's net sales increased by 1.5% to $724.5 million from $714.0 million in the corresponding period the previous year.

Regulatory Changes

Changes in environmental regulations and safety standards can impose additional costs and operational challenges. The effective tax rate for the nine months ended September 28, 2024, was 20.9%, up from 19.9% the previous year. This increase can be attributed to regulatory changes affecting tax benefits related to stock compensation.

Market Conditions

Market conditions, including fluctuations in demand for new construction and remodeling activities, can significantly impact sales volumes. The company reported a decline in volume of (2.0)% for the nine months ended September 28, 2024. This decline is attributed to market declines in the Middle East and Asia.

Operational Risks

Operational risks include challenges in supply chain management and integration of acquisitions. The company incurred $2.5 million in acquisition and restructuring-related expenses for the nine months ended September 28, 2024, down from $6.2 million in the same period of the previous year.

Financial Risks

Financial risks include exposure to interest rate fluctuations and debt management. As of September 28, 2024, the balance outstanding under the First Lien Term Facility was $970 million, with an effective interest rate of 6.78%. The interest expense for the three months ended September 28, 2024, was $13.2 million, a decrease from $17.4 million in the same quarter of the previous year.

Strategic Risks

Strategic risks stem from potential failures in executing the company’s growth initiatives. The company’s net income for the three months ended September 28, 2024, was $16.5 million, compared to $11.8 million for the same period in 2023. This growth reflects the company's ability to adapt its strategy in a challenging environment.

Mitigation Strategies

• Enhancing operational efficiencies to reduce costs and improve margins.
• Investing in market research to better understand customer demands and adjust product offerings accordingly.
• Implementing risk management frameworks to monitor compliance with regulatory changes.

Future Growth Prospects for Hayward Holdings, Inc. (HAYW)

Future Growth Prospects for Hayward Holdings, Inc. (HAYW)

Analysis of Key Growth Drivers

The company is focusing on several key growth drivers that could significantly enhance its market position. These include:

• Product Innovations: The introduction of new products and enhancements to existing lines is critical. The company aims to innovate in areas like energy-efficient products, which are becoming increasingly popular.
• Market Expansions: The company plans to expand its market reach, particularly in international markets, which can contribute to revenue growth.
• Acquisitions: The recent acquisition of ChlorKing is expected to enhance the company's product portfolio and increase market share.

Future Revenue Growth Projections and Earnings Estimates

For the nine months ended September 28, 2024, net sales increased to $724.5 million from $714.0 million for the nine months ended September 30, 2023, reflecting a growth of 1.5%. For the three months ended September 28, 2024, net sales rose to $227.6 million from $220.3 million, marking an increase of 3.3%.

Projected earnings for the next fiscal year indicate a continued upward trend, with analysts estimating an increase in earnings per share from $0.30 to approximately $0.35.

Strategic Initiatives or Partnerships That May Drive Future Growth

The company is actively pursuing strategic initiatives aimed at enhancing its competitive edge:

• Partnerships: Collaborations with technology providers to enhance product offerings, particularly in automation and energy efficiency.
• Operational Efficiencies: Investments in manufacturing processes and supply chain management to reduce costs and improve margins.

Competitive Advantages That Position the Company for Growth

The company's competitive advantages include:

• Strong Brand Recognition: Established reputation in the industry enhances customer loyalty and market penetration.
• Robust Distribution Network: A well-developed distribution channel allows for efficient product delivery and customer service.
• Financial Resilience: As of September 28, 2024, the company reported a net income of $63.9 million, up from $49.7 million in the prior year.

The company’s strategic focus on innovations, market expansions, and operational efficiencies positions it well for continued growth in the upcoming years.

Article updated on 8 Nov 2024

Resources:

• Hayward Holdings, Inc. (HAYW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Hayward Holdings, Inc. (HAYW)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View Hayward Holdings, Inc. (HAYW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.