Thanks again for joining us in person. We really appreciate it. I just want to welcome the Hayward Holdings team with us today. My name is Michael Halloran, industrial analyst at Baird, and we're pleased to welcome Hayward to their first ever in-person industrial conference since they came public when we were still in COVID lockdown, essentially. Here to tell you more about the story, Kevin Holleran, CEO, Eifion Jones, CFO, Stuart Baker, VP. Kevin Maczka is buried in the crowd here. He's IR. We got the whole team with us today. Kevin's going to give us a quick intro, and then we're going to go through questions. If you've got any questions, please email me. I'll make sure we weave it in. We're going to start higher level, and then we're going to dig through the P&L and into the balance sheet. Any questions you have, we'll make sure we weave them in. With that, Kevin, please. Great. Good morning, everyone. It's good to meet Michael in person. We share a similar last name. He spells it the more common H-A as opposed to H-O. It's good to be with you all today. I'm pleased to be joined by a couple of my colleagues. I've got two slides, and then we'll turn to the fireside and answer more live Q&A there. I know that we're a new story to some in the audience today. Thought first slide, I'd just give a quick overview of who Hayward is. Just looking at the pie charts. We're 85% North America, 15% Europe, rest of world. We view that as advantage given the pricing and the margin profile in North America is best in the industry. Moving right, residential pool. We are a pool pure play, largely tied to the residential backyard with smaller businesses in the commercial pool and flow control. You can see we are a full line supplier, innovative, environmentally sustainable products, everything that you need to safely operate any type of pool, whether it's an in-ground, commercial or above ground pool. Hayward is the best known and most trusted brand in the industry. We have a large installed base that results from decades of focusing on the pool business. That's part of our competitive moat. New pool construction gets a lot of attention, really, the revenue profile of our business is really tied to this roughly 80% resilient, largely non-discretionary aftermarket, which results from repair, replace, upgrading, and full scale remodeling. Finally, the business boasts strong financials with 28% adjusted EBITDA margins on $1.3 billion in sales. Next slide. Now I'll just pivot to the industry that we participate in for my second and final slide. We consider it large, growing, and predictable. What do we mean by large? 25 million pools are in use around the globe day in and day out, with nearly a $6.5 billion TAM. It's growing both in terms of number of pools in the installed base as well as average spend per pool PAD. Dating all the way back to 1970, the number of pools has grown, meaning that there are more new pools constructed than decommissioned every year. It may go back further than 1970, but that's as far as the data actually goes back. Over the last 10 years, we've seen an 8% new construction growth rate. In addition to just the raw number of pools in use, using equipment day in and day out, is this increase in the ticket price to the PAD. Admittedly, some of that is price driven over the last few years based on inflation. More so than that, you see pool owners expressing greater interest in higher functioning, connected, environmentally sustainable products to really drive further enjoyment to their backyard living. Finally, predictable. It's a choice whether you want to build a pool or buy a home that already has a pool. Once you've made that decision, we have a lifetime relationship with that pool owner or that homeowner. Depending upon usage, equipment starts to need replacement somewhere in the seven-year time period. Full scale remodel, somewhere between 15 and 20 years is really when you see folks doing a more whole, full scale remodel, tearing out the vinyl liner, putting in new hardscaping, normally a new PAD of equipment at that point in time. The final piece is, again, over the last couple of years, more inflationary pressures, but this is a very well-structured industry that normally to start off the fall season, there's an expectation to absorb somewhere between a 2% and 3% pricing increase to offset inflation. That's been passed along and realized for years on end. That's a little bit about who we are as Hayward, and then more broadly, the pool industry that we participate in. Thanks, Mike. Great. Thanks for that. As a reminder, if you have any questions, you can email me, use the card in front of you, and I'll make sure I get those questions in. Let's start high level with a few things here. Level set. A question I get a lot, particularly from people who are getting up to speed on the supplier side of this pool space, is what the differentiation point is between you, Fluidra, Pentair, and some of those smaller fragmented pieces that are actually still out there. Maybe just talk on that and what you see your differentiation is in the marketplace. Yeah. Good question. The industry, I guess, particularly in North America, would be considered an oligopoly. There really are three large full-scale players, ourselves, Pentair, and Fluidra, who market under a couple different brands. I would say, in North America, what we really view our strengths to be vis-a-vis others is from an operational standpoint. When we were a private company up through 2021, we really thought we were advantaged from a supply chain and an operational management standpoint, lean culture. I think that was on full display during the supply chain challenges over the last two years as we were able to ramp production and manage the complexities of supply chain shortages, by most accounts better than some of our competitors. I think second to operations management would really be our product planning. Admittedly, we do not necessarily identify every single product category as something that you need to have product leadership in. We've identified what we think are the pace-setting products on the pool PAD, where if you can exhibit product leadership around things like the variable speed pump, automation and controls, water sanitization, that creates a halo around other equipment decisions. That's really where a disproportionate amount of our resources are allocated. I would say finally, I'm really proud of the balanced approach to our sales profile. Two-step distribution is the primary means to market in this industry. However, we are the in-store brand with Leslie's. It's a long-standing relationship. I'm pleased to be benefiting and helping to enable some of their growth. We're the leading e-commerce provider. We came out with a totally new policy back in 2020 that really put some discipline into the Wild Wild West with some MAP pricing and pared down the number of open SKUs that could be sold across the internet. Finally, people like a Blue Haven or some of the large buying groups out there like UAG and Carecraft, we deal with on a direct basis. They have the ability to plan their inventory. We'll deal with them happily on a direct basis. I think it's really three things that we focus on. One, operations management, product planning, and our go-to-market strategy, I think are some differences between ourselves and others in the industry. Let's ignore the last couple of years and next year where you've got kind of wide swings in what the market's going to give you. What's the run rate growth profile, and how do you build it out between pricing, volume, opportunity set, and mix, and then maybe dig a little bit in on what that mix opportunity looks like? Yeah. Setting aside the last couple of years, this industry, I think why it's attracted so much outside interest is that this was a high single-digit growth industry for years and years. There's kind of several ingredients that go into that. It's still on the slide in the lower right corner there. Again, the assumption that you're going to realize a couple of percent every single year on top of the volume and the mix that comes with a growing installed base, churning through equipment, bringing more technology, more connectivity to the industry. Really between pricing, a couple of percent, and then somewhere between, call it 4%-6% annually, that due to new construction, full-scale remodel, and then this large 80% profile for the aftermarket. That's really what's driven this sort of 6%-9%, pretty much count on it, growth profile for years and years in the pool industry. The mix piece should be ongoing, right? Yeah. I mean, on a forward basis, it feels like this continuous shift up towards. Yep a little more technology, maybe a little more reliance on using the app. Yep. Some of the features around it, correct? Yeah. We have some material on our investor site illustrating the difference between take rate at time of new construction, then what's buried in the installed base. It's kind of eye-popping, the take rate difference. When someone's building a pool, they're perhaps no more educated than that very time, right? They do all their research, both online and talking with their builder, and they know exactly what they want, and they're really up to speed on what the technology and some of the ambiance options are. Again, we've got this 5.9 in the lower left corner there, 5.9 million in-ground pools in North America alone, many of which were constructed before IoT was even a thing, long before variable speed pumps have largely replaced single speed pumps from an energy efficiency standpoint. This mix up is absolutely going to continue when you consider the embedded conversion rate in the aftermarket. It's on us as OEMs, working hand in glove with our dealers to make sure that as those servicers are going out on the service calls to replace a broken pump, that they're comfortable and they have the selling tools to be able to upgrade and make a sales call while they're replacing what they were called for. They can take stock of what's on there and perhaps do an upsell. Hasn't been much of that the last two years. Those servicers have been so busy just filling the inbound calls that there really hasn't been this opportunity to upsell. That's a vein that the industry's going to be able to mine for the next several years. Good. Let's spend a little more time on the top-line trends, current and perspective here. You were right. If you look back over the 2000 to mid-year, this year type timeframe, your ability to scale your capacity to meet market demand was very differentiated. Now we're on the flip side of that, and we're talking about the inventory destock period. Couple things here. One, maybe just talk about how you think the market share piece tracked over that period of time as you were able to meet demand, and how much do you think you can keep? Because this typically is a slower-moving market as far as share shifts go. Sure. Any help would be great. Yeah. I think during the pandemic, we probably captured about 2.5% market share. Again, Mike, you follow the industry pretty closely. Share movement is kind of at a glacial pace, that is a meaningful pickup there. We feel I'm with the company now a little over three years, and from the day I joined the company, our top-level improvement priority was to grow profitably greater than market every year. Our entire organization is aligned around not conceding or handing back share that was earned through product, through go-to-market, through operations management, but to continue growing and taking share. I think what gives me comfort that we're going to be able to build from here is the fact that some of our reorganization within our sales force, creating specialization, creating hunter roles that are out there targeting new builder conversions, and bringing servicers into the Hayward family. We've had enormous success over the last couple of years, bringing 1,500 new Totally Hayward dealers into our loyalty program. Through nine months this year, another 1,800, many of which are competitive builders that bring big portfolios of business with them. From the folks out representing us, carrying the flag in the backyard, and we're going to continue arming them with the best in the industry products. I like our chances to continue building from here. Now we're in the destocking mode. That's right. A lot of that happened because you were putting content in the market so quickly to meet demand, and demand turned quickly, right? You made some progress in the third quarter. Maybe talk about a couple things here. One, when you think the destocking piece is mostly going to be over. Two, if there are pockets in there that maybe have a little less need than others when you look at the product categories. I'll start, and I'll hand off to one of my colleagues. We did make meaningful progress. We came out of Q2, and we saw from a months-on-hand standpoint, we thought that we really needed to de-stock. Right up until then, the channel was still angrily placing phone calls about filling their orders. I think it was wise for us to pump the brakes and to be able to get the inventory to the correct level as we exit 2022 and head into 2023. Our assumption is, being one quarter into it, that we'll be where we want to be by the end of 2022. The big assumption there is that we'll continue to see the type of retail sell-out of the channel that we've experienced this year. Which is, throughout the year, it ebbs and flows, but it's somewhere between kind of low double-digit to high single-digit pull-through, which is still really strong with some of the economic uncertainty out there. That's a big assumption that we have. During this earnings season, some of our competitors kind of realized the same thing we did 90 days ago and are calling for more of a channel de-stock. There's some talk that may bleed into 2023 for them. Our expectation is that we'll be able to be at the right levels exiting 2022. Last part of the question was, some product categories, frankly, never got to an overstock position. Variable speed pumps. Variable speed pumps. We got kind of back to normal lead times faster than some of our competitors on the variable speed pumps. Just about anything that required electronic componentry or PCBAs, or just printed circuit boards, were really in short supply. Things like automation and controls, even some of the salt cells, water sanitization, and LED lights were things that I would say never really got to an overstock position. Whereas we've seen better performance through the first 90 days or so around heaters, heat pumps, cleaners, and even some of our pumps. We've seen nice depletion of inventories. Helpful. Maybe one question I get a lot that you could help with is PoolCorp, not your only customer. Right. PoolCorp is someone who's talking about bleeding inventory off through the second quarter. You look at your commentary here, you hope to be done by year-end, partially because you started sooner than others. You look at the other two big players, they're not saying anything all that differently, bleed into the first quarter a little bit. What's the difference between your commentary and what PoolCorp's commentary is? We'll get to this as the next question, it's not like the end market expectations for next year are all that different when you look across the pool space and what people are saying. Is it just a product difference? Any help on that? What I would say is echoing what Kevin has said. We're getting after the channel destocking a little bit more quickly than the rest of our peers in the industry. We're still behind on electronics. The assumption going into next year is it's a similar retail pull-through environment. We don't expect to have a lot of bleed in to Q1. Could there be some? Possibly. We expect to be normalized by the end of this year. I'm not sure if that answers it. Yeah, no. Good enough. Let's talk the sell in through sell out. Obviously it's the sell in part that's got the excess, and that's what's being adjusted out the sell out side. When you talk about through this year, high single digits, low teen kind of sell out. Is that including a positive volume environment or is most of that? I'm sure a chunk of that's still going to be the pricing side of things. Any help on that side would be great. Yeah. I would say for the full year, we'd expect the volume to be only slightly positive on the pull out by the time we get to the end of the year. There is a lot of price comparatively this year versus last year. We would say price is definitely, as we exit into the second half, high single digits. When you look at the overall growth factor, that would mean in the second half of this year, there's probably a little bit of a decrement on volume in the second half vis-a-vis last year. That's for you. Are you saying that from an industry sell-through as well? I would say from an industry sell-through in the second half, that's probably correct as well. When we think about next year, and you guys have given a little bit of preliminary help here, maybe just help everyone understand how you're thinking about the three buckets, repair and replace, large scale remodel, and then the new housing kind of tide business, the new pool tide business. Yeah. I'd probably add one other. Pricing is obviously a big piece. Correct. There'll be some carryover from some mid-year announcements this year, and we've also announced, in late Q3, which will be effective January 1st, another kind of weighted 4.5% based upon our basket of inputs require another price increase. Starting on the repair and replace, pools are being used, right? That's 55% of our revenue or whatnot, we believe on the pure repair and replace is going to continue to stay resilient. At that point in time, some people are upgrading, you see some mix benefit going on with the repair and replace. New construction based upon our analysis is really most closely aligned to single family home starts. We all presume that that will be down here in 2022, perhaps again in 2023. Our initial thinking is new construction could actually take a bit of a step back. Again, for 20% of our business, you can make an assumption and we will, which will ultimately inform our guidance when we come out after the new year. That could present a bit of a headwind, but again, with pricing and with resiliency of the repair, replace, there's certainly some positive offsets. This thing that the industry has been talking about, we're not quite sure when it's going to monetize, is this pent-up repair, full-scale remodel opportunity. It's an aging installed base out there, we know that that was deprioritized over the last couple of years, really by both parties. The homeowner did not want to lose use of their family entertainment, the builders are the same people who do the remodels, we know that they were prioritizing what frankly is an easier project to build new than to deconstruct and then build back. That does have some tie to the interest rate environment, whether that opportunity materializes in 2023 or continues to get pushed a little bit to the right. This we know that that's going to monetize at some point in time. We just need to get more clear on whether that's a 2023 or later opportunity. Those are some of the things around price, remodel, break, fix, or repair, replace and new construction that we're weighing as we work through the final quarter of the year here. Helpful. Go ahead. Can you just touch on general capital allocation philosophy as well as where you'd like the company to leverage? The question was, just capital allocation philosophy and how we want to think about leverage on a go forward. Yeah. I'll just reiterate what we said before, which is our priority remains first and foremost the organic business. We'll protect the organic business. Reinvestment, particularly right now, we're going through a reinvestment campaign into our manufacturing base, automating our facilities, particularly in North America. Secondly is M&A. We've executed on a few tuck-in acquisitions over the last 12 months. Relatively small, but we have executed and put about $50 million onto the top line additional revenue. Thirdly, return to shareholder. The cash profile of the business is strong. We have the opportunity to look at all three elements of capital allocation, and we've deployed $343 million in share repurchases this year. We have about 400 remaining under our approved share repurchase program. Again, the first and foremost is the organic business. In terms of leverage, we feel comfortable between two and three times. Right now we're at 2.4 coming out of Q3, we would expect to stay within that range. Strong cash generation, right? Very strong cash. You think about the income statement profile of this business, high gross margins, high EBITDA margins and conversion of net income greater than 100% outside of working capital investment periods. This year will be a working capital investment period, you heard my commentary on the earnings call. Most likely we'll be deleveraging our inventory positions over the course of the next six to nine months. That will be a nice source of liquidity. Kevin, earlier you mentioned pricing is a tailwind as well. You guys are pushing through a 4% or 5% price increase as we head into next year. I think effective January 1st. That's right. Pretty normal timeline for a price increase if you ignore the last couple of years, right? What are the inflation metrics that are driving that? Do you expect the broader industry to follow? The inputs, I would say there are a few that we're starting to see some maybe reset around freight has gotten better. The broad basket of inputs, I would say we're seeing slowing inflation, but we have not seen deflation. As we weighed all of that's what ultimately led to the kind of weighted 4.5% that we announced a few weeks ago. That'll take effect on invoice January 1st. As for competition, obviously, they weigh their own inputs. The fact that we use some of the same suppliers, a lot of the same commodities to build our products, I would imagine that they feel much of the same pressures that we felt, which ultimately led to our price increase. As, I think, further evidence of your ability to be nimble on the up and nimble on the down. Right. You also just talked about a kind of SG&A reduction. That's right. plan associated with the pullback here, maybe some of those levers, what are you trying to accomplish. I'll stop there and add a follow-up after. Sure. You want to take it, Eifion? Yeah, sure. We've identified approximately 10% of the SG&A base to come out of the organization over the course of the next four months. Hopefully, the majority of that will be in place by the end of this year. That's the plan. It really is concurrent with an organizational redesign. We're going through the process now of identifying all the pieces to that redesign. We're taking a more central approach out of the U.S. to manage the global footprint of the organization from an SG&A perspective. What we didn't mention is we're also looking at rationalizing some of the cost out of our manufacturing facilities. We've learned a tremendous amount over the last four years in terms of what we can do with those facilities. We've upsized them at times at 80% increase in capacity over 2019. As we take all of that learning now, we are channeling that into further lean manufacturing initiatives. What type of delta? Yeah, ordinarily this business, you see over the last five years, we've been able to grow the organization with an incremental rate of 35%-40% on the bottom line. Our decrementals will be, broadly speaking, 40% over the course of a couple of quarters. It may shift around a little bit quarter-to-quarter. We are a nimble organization, both at the manufacturing level and we're deploying that lean approach to some of the SG&A functions as well. Great. Appreciate that. From our talks post-conference call too, it's not like the moves you're doing currently are going to impede your ability to ramp as capacity is necessary and as the volumes kind of return as you look to next year and probably beyond, right? That's correct. The focus here is to be able to be much more responsive to the marketplace, both at the manufacturing level and in our SG&A. You have to remember this is a family organization for the longest period of time, it's transitioning now into a world-class public company. We're adopting a data-driven, process-driven approach to our SG&A base that we believe sets us up for success in the future. A lot of work to do, some of the decisions are not easy to take, impact people's lives. We believe we're on the right course. I would just point out, Mike, that as we look at the SG&A, we're paying special attention to product development and the broad go-to-market to ensure that the growth levers are not compromised through this SG&A activity that we're undertaking in the third quarter and then we'll complete by end of this year. In the last minute or so, obviously a smaller percentage of your portfolio, less profitable percentage of your portfolio, but maybe just talk to how you see the European landscape playing out here, given all of the well-publicized challenges. There are a lot of moving parts in Europe now. Clearly, consumer confidence, energy concerns, the ongoing conflict. It's a meaningful piece of our business, call it high single digit 10% with enormous growth opportunities. Europe is really more fragmented than what I described about North America. There's a lot of regional players there, with one very large player in Fluidra. I think the marketplace is really thirsty for another full line supplier to sort of emerge as an alternative to the primary there. We don't build as much of our product in Europe as we do in North America, we're looking at kind of a broad range of strategic initiatives on how we can continue to improve the profitability and the conversion of the growth in Europe going forward. It's a meaningful market that's feeling some pressure right now. We'll get through this, and it's going to be a good growth engine for us going forward. Great. Well, please join me in thanking the Hayward team for their time today.