Hayward Holdings, Inc. (HAYW)

Executive Summary / Key Takeaways

• Hayward Holdings, Inc. (NYSE:HAYW) demonstrates robust financial performance, driven by its resilient aftermarket business model, which accounts for over 80% of revenue, and strategic technological innovation.
• The company's new OmniX automation platform is poised to unlock significant growth in the vast installed base of non-automated pools, enhancing its competitive moat and driving higher-value product adoption.
• Aggressive tariff mitigation strategies, including reducing China sourcing to the U.S. from 10% to 3% of cost of goods sold by year-end 2025, are effectively offsetting cost headwinds and de-risking the supply chain.
• Strong cash flow generation has significantly deleveraged the balance sheet to 1.8x net debt to Adjusted EBITDA, providing substantial financial flexibility for organic investments, strategic M&A, and share repurchases.
• Hayward has raised its full-year 2025 guidance, projecting net sales growth of 4% to 5.5% and Adjusted EBITDA growth of 5% to 7%, reflecting confidence in its execution and strategic initiatives despite macroeconomic uncertainties.

A Century of Innovation: Hayward's Enduring Market Leadership

Hayward Holdings, Inc. (NYSE:HAYW), celebrating its 100th anniversary in 2025, stands as a global leader in pool and outdoor living technology. Founded in 1925 as a tool and die maker, the company's pivotal entry into the pool market in the 1960s laid the foundation for its current position as a designer and manufacturer of essential pool equipment and automation systems. This century-long journey has cultivated a resilient business model, with over 80% of its revenue derived from the aftermarket, catering to the ongoing repair, replacement, remodeling, and upgrading needs of existing pools. This aftermarket focus, characterized by a product replacement cycle of 8 to 11 years, provides a stable and recurring revenue stream, underpinning Hayward's consistent performance.

The pool industry itself offers attractive market characteristics, including innovation-led growth opportunities and a favorable structure. Hayward holds an estimated North American residential pool market share of approximately 33%, a testament to its established brand and extensive distribution network. The company's strategic responses to market dynamics are deeply informed by its history, emphasizing continuous product innovation, operational excellence, and strong customer relationships.

Technological Edge: OmniX and the Future of Pool Automation

Hayward's core strategy is deeply intertwined with its technological differentiation, which serves as a significant competitive moat. The company has consistently invested in advanced engineering and product development, bringing innovative solutions to market. A prime example is the Microchannel Temperature Control Unit, an industry-first product offering both heating and cooling capabilities for pool water, alongside a unique cold plunge feature. The proprietary OmniPro app further enhances the trade professional's toolkit, providing cloud-based remote monitoring and equipment configuration.

The most recent and perhaps most impactful technological leap is the introduction of OmniX, a breakthrough smart IoT technology. This platform is specifically designed to cost-effectively enable wireless control for the vast installed base of non-automated pools in the U.S., estimated at approximately 3.5 million. Unlike traditional centralized control units that require extensive wiring, OmniX operates as a decentralized wireless platform, significantly simplifying the path to automation. Homeowners can gradually build their automated ecosystem by replacing existing equipment with OmniX-enabled products as natural break-fix events occur, utilizing the intuitive OmniX app for effortless control. This approach mitigates the initial cost barrier, making advanced automation accessible to a broader market. Hayward has already launched the OmniX variable speed pump and plans to introduce other OmniX-enabled product categories in the coming quarters. This technological advantage is expected to accelerate technology adoption, increase the average equipment content per pool pad, and solidify Hayward's market positioning, directly contributing to higher average selling prices and improved margins over the long term.

Beyond product innovation, Hayward is also leveraging artificial intelligence (AI) to enhance customer experience. AI agents are progressively handling inbound customer service calls, resolving approximately 80% of these inquiries without human intervention and even proposing enhancements to training programs. This early success in AI implementation underscores Hayward's commitment to continuous improvement and operational efficiency.

Competitive Landscape and Strategic Positioning

Hayward operates in a competitive environment with both direct and indirect rivals. Key direct competitors include Pentair plc (PNR), Fluidra, and Pool Corporation (POOL). Hayward's competitive standing is primarily built on its specialized innovation in pool automation, a complete product line, and a strong reputation for quality and service.

Compared to Pentair, which offers a broader water solutions portfolio, Hayward's focus on pool-specific innovation, particularly with its IoT-enabled controls like OmniX, provides a unique value proposition. Hayward's user-friendly automation interfaces and established brand in pool products can foster stronger customer loyalty. While Pentair benefits from larger scale and diversified revenue streams, Hayward's specialization can lead to more efficient R&D and potentially superior operating margins in its core segments.

Against Fluidra, a global leader with strong international distribution, Hayward emphasizes its energy-efficient pool equipment and in-house design capabilities. Hayward's historical focus on North American consumers contributes to strong brand resonance in this critical market. While Fluidra boasts broader geographic reach, Hayward's targeted strategy and product reliability for automation provide a distinct edge.

In contrast to Pool Corporation, primarily a distributor, Hayward's strength lies in its manufacturing and direct innovation. Hayward leads in technological advancements and product performance, such as LED illumination and advanced sanitization, while Pool Corporation excels in distribution reach. Hayward's proprietary products can yield stronger gross margins due to better cost control.

Hayward's strategy to support the U.S. market with over 90% of products built in its four U.S. manufacturing facilities (Rhode Island, North Carolina, Tennessee, and Georgia) further strengthens its competitive position by shortening supply chains and enhancing responsiveness. This domestic manufacturing focus, coupled with a national network of authorized service centers and technical resources, reinforces its value proposition against lower-priced offshore competitors and private label offerings.

Financial Performance and Operational Excellence

Hayward's financial performance in 2025 has been robust, reflecting the effectiveness of its strategic initiatives. For the three months ended September 27, 2025, net sales increased 7.4% to $244.30 million, driven by positive net price, increased volume from favorable order timing, and favorable foreign currency translation. Gross profit margin expanded by 150 basis points year-over-year to 51.20%, primarily due to positive net price realization, operational efficiencies, and the absence of a prior-year non-cash inventory step-up adjustment. Adjusted EBITDA for the quarter rose 16% to $59 million, with the Adjusted EBITDA margin increasing 170 basis points to 24.2%. Adjusted diluted EPS saw a significant 27% increase to $0.14.

Year-to-date for the nine months ended September 27, 2025, net sales grew 6.7% to $772.80 million, contributing to a 9.9% increase in Adjusted EBITDA to $196.4 million. The gross profit margin for this period expanded 120 basis points to 51.30%. This consistent margin expansion, marking ten consecutive quarters of year-over-year gross margin improvement, is a direct result of Hayward's operational excellence culture, including lean practices, SKU rationalization, and strategic investments in automation. Management aims to drive selling, general, and administrative (SGA) expenses as a percentage of sales into the low 20s in the medium term, further enhancing profitability.

The North America (NAM) segment, accounting for 85% of total net sales in Q3 2025, saw net sales increase 6.8% to $208.2 million, with segment income margin at 26.6%. The Europe Rest of World (ERW) segment, while smaller, demonstrated significant improvement, with net sales increasing 10.7% to $36.1 million and gross profit margin surging 750 basis points to 41.9% in Q3 2025. This ERW improvement is attributed to operational efficiencies, leadership changes, and facility consolidation, signaling a successful turnaround from a transitional 2024.

Liquidity, Capital Allocation, and Outlook

Hayward's financial health is further underscored by its strong liquidity and disciplined capital allocation. Net debt to Adjusted EBITDA improved significantly to 1.8x as of September 27, 2025, the lowest level in nearly four years. Total liquidity stands at $552 million, comprising $448 million in cash and short-term investments and $104 million in credit facility availability. The company benefits from no near-term debt maturities, with term debt and the undrawn ABL facility maturing in 2028, and $600 million of debt hedged with fixed interest rate swap agreements.

Cash flow generation remains robust, with year-to-date cash flow from operations at $283 million and free cash flow at $262 million. This strong cash position supports Hayward's capital allocation priorities:

1. Organic Growth Investments: Capital expenditures are expected to increase to 3% or more of revenue over the next several years, funding manufacturing automation, supply chain capabilities, and ongoing ERP implementation.
2. Strategic Acquisitions: Hayward maintains an active M&A pipeline, seeking bolt-on opportunities in residential pool, commercial pool, and industrial flow control to augment organic growth and leverage existing distribution. The acquisition of ChlorKing HoldCo, LLC in June 2024 has already doubled North American commercial sales year-to-date in 2025, demonstrating successful integration and cross-selling opportunities.
3. Shareholder Returns: The Board authorized a new $450 million share repurchase program on July 28, 2025, expiring in 2028, allowing for opportunistic returns to shareholders.

Looking ahead, Hayward has raised its full-year 2025 guidance, now expecting net sales to increase approximately 4% to 5.5%, reaching $1.095 billion to $1.110 billion. Adjusted EBITDA is projected to grow 5% to 7%, landing between $292 million and $297 million. Free cash flow guidance has also been increased to approximately $170 million. This positive outlook is based on solid execution, continued positive net price realization (mid-single digits in 2025, with mid-to-high single digits expected for 2026 in the U.S.), and ongoing product technology adoption. While modest reductions are anticipated in discretionary market segments like new construction and remodels due to macroeconomic pressures, the resilient aftermarket is expected to maintain volume.

Risks and Mitigation Strategies

Despite a compelling investment thesis, Hayward faces several risks. Macroeconomic conditions, particularly elevated interest rates, continue to impact discretionary spending on new pool construction and remodels. Geopolitical conflicts and tariff uncertainty remain significant concerns, with an estimated annualized tariff impact of approximately $30 million (mostly related to China) for 2025. The company is also exposed to litigation risks, including securities class action and shareholder derivative lawsuits, with unquantifiable financial obligations. The evolving regulatory landscape for AI technologies presents potential business, intellectual property, and reputational risks.

Hayward is proactively addressing these challenges. To mitigate tariff impacts, the company is aggressively executing a four-pronged strategy: structural supply chain alternatives (reducing direct China sourcing to the U.S. from 10% to 3% of COGS by year-end 2025), supplier price renegotiations, strategic inventory management, and targeted pricing actions. These mitigation plans are expected to fully offset tariff-related cost increases and volume pressures. The company's focus on operational efficiencies and SKU rationalization further supports profitability and agile working capital management, even in a dynamic environment.

Conclusion

Hayward Holdings, Inc. presents a compelling investment narrative, rooted in a century of industry leadership and a robust, aftermarket-driven business model. The company's strategic emphasis on technological innovation, particularly with the OmniX platform, positions it to capture significant growth in the expanding pool automation market. Coupled with proactive tariff mitigation, disciplined capital allocation, and a strong balance sheet, Hayward has demonstrated its ability to deliver consistent financial performance and expand margins even amidst macroeconomic headwinds.

The raised 2025 guidance underscores management's confidence in its strategic execution and the enduring strength of the pool industry's aftermarket. While risks from discretionary market softness and geopolitical uncertainty persist, Hayward's foundational strengths, technological leadership, and proven operational resilience suggest a continued trajectory of profitable growth and shareholder value creation.