Welcome to Hayward Holdings First Quarter 2023 Earnings Call. My name is Jordan, and I will be the operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press Star then one on your touchtone phone. Please note, this conference is being recorded. I will now turn the call over to Kevin Maczka, Vice President, Investor Relations. Mr. Maczka, please go ahead. Thank you. Good morning, everyone. We issued our first quarter 2023 earnings press release this morning, which has been posted to the investor relations section of our website at investor.hayward.com. There you can also find an earnings slide presentation that we will reference during this call. I'm joined today by Kevin Holleran, President and Chief Executive Officer, and Eifion Jones, Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind everyone that during this call, the company may make certain statements that are considered forward-looking in nature, including management's outlook for 2023 and future periods. Such statements are subject to a variety of risks and uncertainties, including those discussed in our most recent Form 10-K and Form 10-Q filings with the Securities and Exchange Commission that could cause actual results to differ materially. The company does not undertake any duty to update such forward-looking statements. Additionally, during today's call, the company will discuss non-GAAP measures. Reconciliations of historical non-GAAP measures discussed on this call to the comparable GAAP measures can be found in our earnings release in the appendix to the slide presentation. I would now like to turn the call over to Kevin Holleran. Thank you, Kevin, and good morning, everyone. It's my pleasure to welcome all of you to Hayward's first quarter earnings call. I'll start on Slide four of our earnings presentation with today's key messages. I'm pleased to report first quarter results in line with expectations, reflecting strong execution in a challenging operating environment, including adverse weather conditions in certain key markets that we successfully offset with market share gains. Sales out of the channel were stronger than sales into the channel as our partners made further progress recalibrating the level of inventory on hand. We maintain disciplined cost control by reducing production levels to align with current market conditions and delivering on our previously communicated commitment to reduce SG&A costs. Price realization remained favorable, offsetting inflation. These efforts result in a robust profitability as we delivered excellent structural margins at lower volumes. I'm especially pleased with sequential gross margin expansion of over 400 basis points despite lower net sales. As we proactively manage costs, we continue to invest in the business to support customers with innovative new solutions and superior service and drive future growth. To that end, we continue to launch exciting new products, and I'll highlight some examples in a moment. We also hosted two significant customer events: our first ever partner summit in Nashville and a large builder event in Phoenix. These events showcased our technology leadership and provided value-added training opportunities. The dealer response was exceptional, and we expect these unique customer engagements to drive brand loyalty and increase demand for Hayward products and services going forward. Overall, I'm proud of our performance during the quarter. Finally, we are maintaining full-year guidance. For the full year 2023, we continue to expect net sales to reduce approximately 18%-22% and Adjusted EBITDA of $265 million-$285 million. Looking out beyond 2023, we have every expectation of resuming a solid historical growth trajectory of mid to high single digits. Turning now to Slide five, highlighting the results of the quarter. Net sales in the first quarter reduced 49% year-over-year to $210 million, largely due to channel inventory movements and softer market conditions related to global economic uncertainty. This compares to a period of extremely strong growth of 23% in the first quarter of 2022 and 96% in the first quarter 2021. We are seeing a return to more normal seasonality with Q1 expected to be the low point for total net sales. We are encouraged by continued positive price realization to offset inflation and the success of our innovative new solutions. As I mentioned, the gross margin performance in the quarter was exceptional. Despite reduced net sales, gross profit margins expanded 20 basis points year-over-year and 430 basis points sequentially to a robust 46.6%. Our operations teams have done an outstanding job to start the year with a right-sized manufacturing cost base, and we are encouraged by this ability to maintain strong gross margins at much lower production volumes. Adjusted EBITDA in the first quarter was $45 million, with a margin of 21.4%. We realized the expected SG&A savings under our cost reduction program. Adjusted EPS in the quarter was $0.07. Turning now to Slide six for a business update. We estimate that Hayward captured significant market share over the last three years. This was most notable in the strategically important U.S. Sun Belt and in critical products like IoT controls, variable speed pumps, water sanitization, and LED lighting. Our IoT digital leadership position is clear. The market is responding favorably to the connected products within our Omni automation ecosystem, and we continue to gain traction with dealer additions in our Totally Hayward loyalty program. Underlying end consumer demand trends continue to moderate in North America with the Sun Belt an area of relative strength. Weather was historically unfavorable in the Western markets, and we were pleased to offset this with further market share gains in the West and the Southeast. Overall, Europe and Rest of World exceeded our expectations in the quarter, and I'm very pleased with the performance of our team, particularly in targeted new Asian markets where we've realized growth year-over-year. Our channel partners continue to recalibrate the level of inventory to be appropriately positioned relative to a softer global economic outlook, normalized lead times, and higher costs of carrying inventory. This played out generally as expected in the first quarter as we continue to believe the channel will trend towards the low end of historical ranges for inventory days on hand over the course of the year. Turning to the price versus cost dynamic. We implemented a price increase of 4%-5% at the beginning of January to maintain price cost neutrality, and we are realizing this pricing as expected. As you know, we took a number of proactive actions in recent quarters to streamline the organization, optimize the cost structure and support margins. This included a reduction of variable costs in our manufacturing cost base and supply chain, as well as structural SG&A savings of $25 million-$30 million on a full year basis. These actions are intended to maintain a healthy margin profile with full year gross margins in the mid to high forties and Adjusted EBITDA in the high twenties. We are delivering on these commitments. Finally, we continue to make great progress on our ESG journey. I'm pleased to report that Hayward received a 2023 regional top-rated award for ESG performance by Morningstar Sustainalytics, a leading ESG research ratings and data firm. While still very early in our journey, we are proud to be recognized with one of the best ESG ratings for all companies in the U.S. and Canada. Turning now to Slide seven. Last quarter, I detailed our new product development strategy and shared some of the recent innovations driving our technology leadership in the industry. Today, I would like to highlight two new product launches. SmartPower is the first to market technology, which revolutionizes multi-zone lighting in the backyard, encompassing the pool, spa, water features and landscape lighting. This dramatically reduces component and labor costs while increasing reliability and ease of use for the homeowner. Next, the TracVac Suction Cleaner. This new cleaner outperforms its peers in superior pool surface coverage, speed of cleaning, and ability to handle any obstacles it encounters. We continue to prioritize investments in the development of new products like these to further strengthen our competitive positioning and support customers with industry-leading products and technologies. Turning now to Slide eight. I'd like to re-emphasize the attractive long-term fundamentals of the pool industry and Hayward. 2023 is a year of normalization. Softer market conditions related to global economic uncertainty, channel inventory reductions and comparisons to periods of strong growth are impacting near-term results. We view this as a temporary dynamic in a resilient industry characterized by consistent growth driven by an ever-growing aftermarket. I would like to revisit the solid long-term fundamentals and growth outlook. A number of secular tailwinds, including the appeal of outdoor living, Sun Belt migration, connected smart home technologies, and environmentally sustainable products are here to stay, and the pool industry is a beneficiary of each of them. More specific to the industry, the large installed base of over five million in-ground pools in the U.S. and 25 million pools globally increases each and every year as new pools are built, and the average age is highest on record. This provides significant opportunity for aftermarket sales as pool owners maintain and modernize their pools with new IoT-enabled technologies to enhance enjoyment, ease of use, and cost of ownership. As we've discussed in the past, Hayward enjoys deep-rooted competitive advantages that strengthen our market position and drive compelling long-term growth for our shareholders. We have an incredibly strong and trusted brand, nearly a century in the making, and one of the largest installed bases that comes from having a complete product line across all pool types. Proven technology leadership, operational excellence, and multi-channel strength are meaningful differentiators for Hayward. To summarize, we are proactively managing through this year of normalization, controlling what we can control to position the company for robust growth and profitability over the long term. As a leader in this very attractive industry, I'm optimistic about Hayward's long-term growth outlook. With that, I'd like to turn the call over to Eifion Jones, who will discuss our financial results in more detail. Eifion? Thank you, Kevin. Good morning. I'll pick up on Slide nine. All comparisons I'll make will be made on a year-over-year basis. We are pleased with our first quarter financial results. Net sales were in line with expectations and reflected a return to normal seasonality, coupled with a progressive right sizing of channel inventory. We delivered exceptional sequential gross margin back into the high 40s, and we're realizing our SG&A cost reductions in line with plan. Our balance sheet is strong with first quarter seasonal use of our revolving credit facility now fully repaid as of today, with expected strong cash flow for the balance of the year. Specifically, our net sales for the first quarter decreased 49% to $210 million. This was in line with our expectations and driven by a 54% reduction in volume, partially offset by positive price realization of 5%. It's important to understand that the volume decline during the quarter was primarily driven by distribution channel inventory movements, in addition to moderating and demand trends in discretionary elements of the markets, namely new construction and larger remodels. Despite the reduction in sales in the quarter, we've delivered a three-year CAGR of 7% when compared to the first quarter of 2020, the last pre-COVID quarter. That's a three-year stack growth of approximately 24%. Gross profit in the first quarter was $98 million. Gross profit margin increased 20 basis points year-over-year and 430 basis points sequentially to a strong 46.6%. Disciplined manufacturing cost control, continued price realization, and moderating input cost inflation more than offset the impact of reduced production volumes. We have worked hard to achieve price cost neutrality and recalibrate our manufacturing cost base to deliver this strong gross margin performance. It sets the business up well to deliver robust profitability for the remainder of the year and beyond. Selling general and administrative expenses declined 20% year-over-year to $55 million in the first quarter. As a reminder, we took proactive actions during the fourth quarter of last year to streamline the organization and optimize the SG&A cost structure, and we're delivering on the targeted run rate savings of $25 million-$30 million annually. Adjusted EBITDA was $45 million in the first quarter. Adjusted EBITDA margin was 21.4%. We're pleased to maintain Adjusted EBITDA margin north of 21% at these reduced volume levels. We're positioned to drive solid margin expansion as volume growth returns. Despite the year-over-year reduction in the quarter, we've delivered three-year net sales and Adjusted EBITDA CAGRs 7% and 8% respectively when compared to the first quarter of 2020. Our effective tax rate was 9% in the first quarter compared to 24% in the prior year period. The year-over-year change was primarily due to the timing of a discrete tax benefit. Adjusted EPS in the quarter of $0.07 on a fully diluted share count of approximately 221 million shares. Diluted share count decreased approximately 23 million shares or 9% year-over-year as a consequence of share repurchase activity in the prior year. Let's turn now to Slide 10 for a review of our reportable segment results. North America net sales for the first quarter declined 53% to $163 million, driven by 59% lower volumes, partially offset by a favorable 5% price impact. The reduction in volume again was largely due to the anticipated right sizing of channel inventories and a moderation in end market trends. Gross profit margin was 48.6%, a sequential improvement of 560 basis points, and Adjusted segment income margin was 24.1%. Again, we are pleased with the margin performance in the quarter, and frankly, very proud of the operations team in their success recalibrating our manufacturing cost base. A tremendous achievement. Turning now to Europe and Rest of World. Net sales for the first quarter decreased 26% to $47 million. Net sales benefited from a favorable pricing increase of approximately 5%, we were adversely impacted by a 28% decline in volumes due to channel inventory reductions and the impact of geopolitical circumstances in Northern Europe, as well as a 2% headwind from unfavorable foreign currency translation. Gross profit margin was 39.8% and adjusted segment income margin was 21.2%. Turning to Slide 11 for a review of our balance sheet and cash flow highlights. Total liquidity at the end of the first quarter was $263 million, including a cash and cash equivalent balance of $41 million and availability under our credit facilities of $222 million. Net debt to Adjusted EBITDA was 4.1 x compared to 2.9 x at year-end 2022. The increase reflects reduced EBITDA and a seasonally soft period for cash collections in the first quarter. A large part of our accounts receivable at the end of Q1 is early buy business sold on extended terms to be collected in Q2. We expect net leverage to be closer to 3 x by the end of the year. As of today, our ABL is undrawn. Additionally, we will not make any excess cash flow payment in 2023, given our credit agreements permit deductions for CapEx, share repurchases, and M&A. We plan to complete the transition from LIBOR to SOFR on Term Loan B borrowings during the second quarter. This change will not materially impact our financial position. Our borrowing rate continues to benefit from the $600 million of debt currently tied to fixed interest rate swap agreements. Cash flow from operations was a use of $91 million in the first quarter, reflecting the increase in accounts receivable driven by early buy order terms. Inventory declined sequentially in the quarter after peaking in the third quarter of 2022 and is down $39 million since then. CapEx of $6 million in the first quarter was consistent with the prior year period. Consequently, free cash flow was a use of $97 million. We have strong free cash flow generation characteristics driven by high-quality earnings. Cash flows are seasonal. With the return to normal seasonality, the company will typically use cash in the first quarter and generate cash in the balance of the year. We expect free cash flow conversion of greater than 100% of net income, with free cash flow exceeding $150 million in 2023. Turning now to capital allocation on Slide 12. As we've highlighted before, we maintain a disciplined financial policy and take a balanced approach emphasizing strategic growth, investments, and shareholder returns while maintaining prudent financial leverage. We continue to consider tuck-in acquisition opportunities to complement our product offering, geographic footprint, commercial relationships, and opportunistic share repurchases. In the near term, we're prioritizing organic growth investments and reducing net leverage within our targeted range of 2x-3x. Turning now to Slide 13 for our outlook. We remain very positive about the long-term health and growth profile of the pool industry, particularly the strength of the aftermarket. Our outlook for 2023 is unchanged as we continue to anticipate a decrease in consolidated net sales of 18%-22%. This outlook reflects resiliency in the North American non-discretionary aftermarket and reductions in new construction and discretionary remodeling upgrade. In Europe and Rest of World, we expect reductions of approximately 25%. As geopolitical circumstances negatively impact consumer sentiment in that region, although we are seeing green shoots in this segment. These decreases will be partially offset by a 4%-5% net sales contribution from price increases initiated at the beginning of the year. Our unchanged guidance contemplates additional reduction of channel inventory in 2023 as a consequence of the reduced consumer demand, a reversion to normal supply chains, and a higher cost of capital. Channel partners are adopting a lean inventory position given these dynamics and are moving to the lower end of their desired days on hand target. We expect gross profit margin to continue to increase over the balance of 2023. We're holding our anticipated full year 2023 Adjusted EBITDA in the range of $265 million-$285 million. As discussed, we also expect a strong improvement in free cash flow in 2023 as we reduce our own inventory levels with free cash flow exceeding $150 million. Our interest expense expectation remains unchanged at approximately $78 million, reflecting the current interest rate environment of borrowing levels. The effective tax rate forecast remains approximately 25% for the remainder of the year, and our CapEx spending forecast also remains unchanged at $25 million-$30 million. I'll close on the same point that I started. I am proud of the Hayward team's ability to rapidly recalibrate, delivering net sales in line with expectations and a significant improvement in gross margin back into the high forties, realizing SG&A cost savings in line with the plan and managing cash flow in line with normal seasonality. With that, I'll now turn the call back to Kevin. Thanks, Eifion. I'll pick back up on Slide 14. Before we close, let me reiterate the key takeaways from today's presentation. We delivered first quarter results consistent with expectations and reaffirmed our outlook for the year. Our team executed well in a challenging environment, maintaining disciplined cost control, demonstrating our agile manufacturing capabilities, and offsetting weather-related headwinds with share gains. We're very pleased with the strong gross margin performance in the quarter. We continue to invest in our business to drive future growth and believe the actions we are taking today are strengthening our position as a premier company in the attractive pool industry. Finally, I'm confident we have the right strategy and talent in place to drive compelling financial results and shareholder value creation. We're now ready to open the line for questions. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw a question, you may press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jeff Hammond with KeyBanc Capital Markets. Please go ahead. Hey, good morning, everyone. Morning, Jeff. Really just want to dig in on this gross margin. I mean, really impressive sequential improvement here given the sales drop, and maybe just unpack the moving pieces to really drive that. Then it sounds sustainable, maybe just talk about, you know, what's to come on the gross margin line. Thanks. Great. I mean, I would say that we saw great execution from our operations and supply chain teams. You know, to see over 400 basis point improvement sequentially and a more modest improvement year-over-year when obviously volumes were significantly different, first quarter last year versus this year, is a great accomplishment. You know, I would say the price increase that took effect January 1, again, delivered price cost neutrality. We're seeing a moderation in inflation. By no means deflation, but a moderation. Supply chains by and large are back to normal. No longer requiring us to venture into the spot buy market or air freighting or working overtime. All of those are obviously headwinds that we no longer face from a gross margin standpoint. You know, I think I would just close, Jeff, by saying, you know, as we've shown over the last two years, we have installed capacity that can fuel future growth with very modest to no CapEx. I think we're well-positioned as volumes improve, that we can continue driving higher gross margins through the business. Okay, great. Then, just kind of on the, on the North America business, maybe just, you know, level set us on where you think the progress is in the destock versus maybe how you thought it would be exiting 1Q. Then, you know, the weaker kind of guide for North America, is that just a function of kind of the early weather or is there something more, more broad than that? Thanks. Yeah. I'll take the channel side. You know, I'd say that Q1, you know, we expected and called for channel destock in Q1. It was reflected in our guidance, it largely played out to our expectations. You know, our retail and channel partners' data coming back to us would reflect sort of mid-teen to high-teen sellout decrease year-over-year, which I think is consistent really industry-wide. The balance is really channel destock. We made great progress. We would call for the channel to be back to normalized levels, by the end of the season, latest, if not sooner. Yeah, we feel like good progress was accomplished here in the first quarter, Jeff. Jeff, it's Eifion. In terms of the guidance for North America, we've notched new construction decrement up a little bit. You know, we're seeing permit declines in the first quarter here. It has leveled off a little bit as we exit Q1 into Q2. We have taken the current new construction environment as an indicator that maybe we need to move up to -30% in terms of new construction decrement year-over-year. I would say we have some balancing attributes in other parts of the business, and that's enabled us to keep guidance for Hayward's totality in that 18%-22% range down year-over-year at the net sales level. Okay. Good color, guys. Thanks. Our next question comes from Ryan Merkel with William Blair. Please go ahead. Hey, guys. Two questions from me. First off, you mentioned the weather. I'm just curious if you could quantify the impact in the quarter 'cause your sales were better than I was thinking. Then in areas where you saw better weather in the quarter, did you see better sell-through? Yeah. You know, there I would say weather probably impacted a couple points. You know, I think probably it had an impact on what could have occurred in the first quarter. You know, as I think you've heard from some others before us, you know, the West Coast, both very wet and very cold. You know, we rely on some sellouts in that California-Arizona region, which was certainly impacted in the first quarter. You know, I think the impact there on us is, is, you know, maybe the sellout is a little less than it could have been in those regions, and that may impact the timing of some reorders back into those regions of the country. You know, conversely, you know, if you really look sort of Texas East, and particularly in the Southeast, you know, we had strong weather patterns, both from a precipitation and a temperature standpoint, and we saw really strong performance in those regions, particularly Florida, and the Southeast where, you know, Q1 was very warm. In the case of Florida, had very minimal precipitation and more normal precipitation in the Southeast U.S. Yeah, we would say that where weather was not a headwind, that the performance was much more in line to maybe even better than we initially expected. Got it. That's helpful, Kevin. Thanks. Then I wanted to follow up with a question on the non-discretionary part of your business. There's some fears out there that that might not hold up as well. People might repair equipment versus replacement. There could be some trade down. I know it's the first quarter, it's a small part of the season, but are you seeing any fears there that that could be worse, or is that part of the business tracking as expected? Yeah, I mean, as Eifion said, I think that we ticked down, you know, the range maybe five points from our initial guide, you know, specifically around new construction and some of the renovation or the upgrade activities. You know, I would say it's generally playing out the way we initially guided. I mean, certainly, you know, our input from our builders and our large renovators is that, you know, they're not quite as busy as they were in the past few years. You know, again, this is, you know, this is an industry that's known for 50%+, very resilient, very non-discretionary aftermarket. That's holding up extremely well. You know, we're just keeping close tabs on, call it that 40%+ of the business that's more discretionary in nature, whether that's the decision to build a new pool or to take a pool offline and renovate it. You know, we're keeping close tabs on that here in 2023 as certainly monetary policy is having an effect on some of that consumer discretion right now, Ryan. Perfect. I'll pass it on. Thanks. Thanks, Ryan. Our next question comes from Saree Boroditsky with Jefferies. Please go ahead. Good morning. Just following up on that question, you obviously updated the outlook for new construction and remodels, and you went through that, but could you quantify how you're thinking about that more resilient aftermarket demand piece of the business? Yeah. Hi, Saree. It's Eifion here. In terms of the aftermarket, we're basically calling it flat year-over-year. We are beginning to see some positive momentum in markets that we've targeted for market share gain. We've seen some good results coming out of the West Coast. Even though that had some weather impacts in that region, we still performed very well comparably against expectations. In terms of the Southeast and the Florida markets in the U.S., we saw some great momentum there in those markets as the warm weather enabled maybe an earlier start to the seasons there, which was great to see, and that's predominantly the aftermarket. As I mentioned in my prepared remarks, we're beginning to see some green shoots in the aftermarket in Europe, which has kind of been hunkered down for the last year. We're beginning to see some positivity coming out of Northern Europe. In new markets that we're targeting on the export side, particularly in Asia. I'd say right now we're feeling positive about the aftermarket. As Kevin said, it's resilient. We're seeing that resiliency come through in our Q1 results where we're very pleased with the sales out of the channel in Q1. Appreciate the color. Now you mentioned destocking lasting potentially through the end of the season. Would this mean you would not expect sales to turn positive until potentially 4Q because you do have that easier comp head into 3Q? Just any color on the cadence of sales growth through the year. Thank you. Yeah. That, that's exactly kind of how we see the year. This return to normal seasonality will mean the comparison in Q2 will be tough given where we were this time last year, but it will be an elevated sequential period over Q1. We'll probably go to an even position in Q3 and then start to see a normal early buy in Q4, which will be the positive comp year-over-year. We don't give specific guidance on each quarter, but that's kind of the cadence we see within the year. Appreciate the color. I'll pass it on. Our next question comes from Rob Wertheimer with Melius Research. Please go ahead. Hi, good morning, everybody. Good morning. I think you touched on this on the prepared comments, but just to clarify, what's your best guess on where, you know, as we get through the destock event, where channel inventory sits, you know, days versus normal, you know, kind of as we exit the year? If I missed it, how much destock is embedded in your revenue guide explicitly? We don't specifically call out the specific number, but it's approximately 9%-11% of the decrement year-over-year is associated with channel inventory reduction. I'll remind you that every time we see a decrement on the sell out, we need to take a little bit more inventory out of the channel and vice versa. When we start to see recovery, year-over-year in channel sell through, there'll be a pull through of inventory back into the channel. But it's approximately 9%-11% of the year-over-year decrements associated with channel destock. We do believe we made great progress in Q1 in that reduction in the channel. We do believe it will be complete by the end of the pool season or sooner, given we started this recalibration maybe a little bit earlier than some of our peers. We, we expect to be fully complete by the end of the season. And at that point, to answer the first part of your question, we believe the channel will be down to the lower end of where it has been traditionally in months on hand. Somewhere between three to 3.5 months on hand in the channel. Some, some higher and some distributors lower. And that yardstick, Rob, is really, you know, we're referencing 2019, which was the last, call it normal year pre-pandemic as our benchmark for, you know, for those metrics that Eifion just mentioned. You know, based upon these couple factors, whether it's cost of carrying the inventory or the OEMs having much more normal lead times coupled with, you know, some market dynamics, I think those three forces are maybe pressing down to slightly below, you know, normal by 2019 standards. That's really what we, what we measure against. Perfect. Thank you. Our next question comes from Andrew Carter with Stifel. Please go ahead. Yeah. Hey, thanks. Good morning. First thing I wanted to double click on, I think you said price cost was in line. First off, is pricing ahead of material cost and is that different by region, i.e. North America and Europe, Rest of World? Has that benefit improved from 4Q? I would suspect if it has, does that tailwind increase through the remainder of the year? Yeah. Good morning. We would say, in Q4 last year, the margin was compressed because of the acquired cost of raw materials in Q3 last year. We were a little bit behind the curve in price cost dynamics in Q4 last year. We announced a price increase for January 1 that went into effect 4%-5%, depending upon the region. That's now brought us back to price cost neutrality. We don't believe there's very much inflation within the current year. We believe the actions that we're taking to combat some of the more elevated elements of inflation over the prior two years, like spot buying, expedited freight, that will come off. If there's any residual inflation, it will be covered by the better discipline we have in the business. Right now we believe we're at price cost neutrality. That will continue. The important point is, if we do see inflation return back to the business, then we're prepared to be agile and move price back into the marketplace. We've got to be cautious about that given the level of price that's gone into the market over the last two years, but we're prepared to protect the margin. Yeah. On that note, you know, the level of pricing that's kind of gone in the market, do you see anything out there, in terms of risk at holding it? Are you seeing any incremental promotions by any of the distributors? Any demands on your end? I'm not sure exactly what their demands would be. Or just anything that risks the pricing environment really down to the channel level? I mean, as you know, Andrew, it's a very disciplined, industry. You know, there has been a lot of price, out of necessity, put into the marketplace. I'd say that You know, what we're currently seeing in this environment is maybe a return to normalcy around traditional promotion activities where there wasn't much need for that over the prior two years. Given the demand environment, I'd say it's more of a return. You know, we really, you know, look at it, and what gives us confidence is... You know, I think that there is good value-based pricing with really strong payback for what the equipment costs. Overall, the equipment is still a very low percentage of a project, whether that's a renovation or a new construction. Obviously, there's a very non-discretionary purchase you know, which gives very, you know, inelastic opportunities based on the infrequency of the equipment replacement. really, for all of those factors, we feel very confident that the industry, and us will be able to maintain a pricing that's been put into the market. Thanks. I'll pass it on. Thank you. Our next question comes from Nigel Coe with Wolfe Research. Please go ahead. Thanks. Good morning, guys. Thanks for the question. Good morning. I think you said sell-through in sort of the mid to high teens decline in North America, obviously that would include price. It looks like units down maybe 20%-21%. When you think about the gap between the down 59% and the down 20%-25%, that's all inventory. We took out a lot of inventory in 1 Q. Would you expect the magnitude of that inventory headwind to be similar in 2 Q, or does it start to narrow here from here on? Yeah. We don't expect the headwind to be as severe in Q2. I mean, the majority of the comp decrement is gonna be in Q1. We're pleased with the channel destock that we saw in Q1. We'll see a little bit more come through in Q2. It's a natural sellout period in the Q2 period as the distribution channel service the season. You expect channel inventory to be reduced during this time period. We'll sell in obviously to keep up with that demand. We do expect to see a moderation downwards in overall channel inventory. As I mentioned, by the end of Q3, the heel of the season will be fully back to normal in terms of months on hand, days on hand. Okay. There's no concerns about shadow inventory, you know, held by contractors and dealers at this point? Concern, no. I mean, I think there is some. We know there's some, is a better way of stating it, Nigel Coe. I think a good deal of it was burned off last year. There was some carryover, which is working its way through the system. You know, part of the figure that Eifion Jones gave a few moments ago in that 10-11% of our overall year-over-year reduction is related to channel. You know, there is a portion of that that would be considered a shadow. You know, we think that that's accounted for in our guidance, of a 2% that gets burned off from the dealer base. Great. Then my follow-on question is really around maybe some of the competitive dynamics in the market. You know, obviously we heard from Pentair last week, and their pool sales were, I think, down mid-teens. I understand that there's some prior year market share and supply chain differences between yourself and them. But is there any difference in behavior with competitors? Any sense from that would be great. I don't know if I have much on that, Nigel. You know, not exactly sure what their position in terms of channel stock was when the market demand started softening. You know, as you know, we were pretty early in our ability to respond to the surge in demand, ramping production and really solving the order file fairly quickly. Not as fast as anybody wanted, but I'd say relatively speaking, pretty quickly. You know, I think that that's what we're facing as a large part of this Q1 decrement is obviously some market slowdown on the discretionary side, but a much bigger piece of it is the recalibration and the restocking that our channel is burning off. Right. Okay. Thanks, guys. Appreciate it. Our next question comes from Joshua Pokrzywinski from Morgan Stanley. Please go ahead. Hi, good morning, guys. Good morning. Just apologies, I jumped on a little bit late with all the calls on this morning. Would you guys mind walking through, you know, maybe category or mix changes? Obviously, a lot of inventory coming down in the channel, which is good to see, but, you know, maybe not totally homogenous. Any categories where you were surprised by results, and, you know, kind of overall comment on mix would be helpful. Yeah. We haven't seen a tremendous mix shift in what we're selling into the channel. Clearly, if you go back a year ago, there was probably some more heat being sold into the channel than there is currently. Generally speaking, as we see today, it's a full complement of products going into the channel. That's a very positive. It, you know, it reinforces the. The new product programs that we've put into place, you know, we've mentioned our new product introduction program, Vitality Index in Q1 was 20%, which is sequentially up from Q4. At this time, it's a full complement with maybe a little bit less heat than we saw a year ago. There's still a high demand for IoT and controls. We continue to expand our production capabilities in our Rodano facility to make sure we're keeping up with that particular demand. That's a very positive indicator of the adoption rate in controls. Regionally, the mix, a little bit more in Europe and the rest of the world than we were expecting in Q1, so there's a bit of a regional mix effect. That's we see that as a positive, right? We were a little bit less bullish about Europe coming into the year. That's actually percolating a bit more positively than we expected and elsewhere in Rest of World as well. We need the seasonal markets in North America now to start opening up, and our guidance reflects a robust sequential improvement in sales from Q1 to Q2, as well as channel destock in Q2. I would just add Josh, that there are some products, I even mentioned a few more. Think of the electronic products, whether it's whether it's salt chlorine, LED lights, or automation and controls, where we were much more hand-to-mouth up until very recently. You know, we just weren't in a position to really overstock, or the channel wasn't in a position to really overstock there. More of the products that we caught up on sooner would be the product categories that we collectively are working hard to get down to more normal days on hand. Got it. That's helpful. Just on the destock side, we've covered a lot of ground, but just wondering if higher interest rates and, you know, kind of the sensitivity around seasonal working capital lines of credit is maybe causing distributors to throw the switch a little harder than usual on inventory. I guess what I mean is when we get through this, will they potentially be far too low just because the carrying cost is high? I certainly think that the interest rate and the carrying costs are impacting some channel partners' decisions on inventory. I think that decision is perhaps made a little easier given the fact that lead times from the OEMs are back to normal levels. Yeah, I mean, we're keeping close tabs on understanding what the service levels are, what the inventory levels are as we really open all markets heading into the pool season here. While we've resized our factories based upon the demand environment, we will do everything possible to be able to respond if by chance we have maybe lowered inventory in some regions or some product categories lower than us and the channel want. Got it. Helpful color. That's all, guys. Thanks, Josh. Thanks. Our next question comes from Brian Lee with Goldman Sachs. Please go ahead. Hey, everyone. This is Miguel on for Brian. I think all our most of our questions have been asked, but I just had one, if I could. You guys talked about green shoots in the Rest of World, and then in the slides, you called out Rest of World as exceeding expectations. Just wondering, could you maybe give more color on that? What markets, what's driving those regions, and whether that's market share gain or just better underlying demand or anything notable? The short answer is yes and yes. We've targeted certain markets in Rest of World. We've put some sales teams into those regions. We'll call them new regions. We've always serviced them at arm's length, but now we've got personnel, particularly in the Asian market. We've seen great response to the Hayward brand in that region, and it's been very positive in Q1. In terms of Australia, which is another big pool market, it's also better than expectations, and that's good to see. The Middle East is a little bit off, but more than compensated by the other regions. When we get into Continental Europe, Northern Europe, again, we've started to see some green shoots, particularly in the key German market, where they have a high attachment to controls and technology. We're beginning to see some percolation there. I would add domestically, the commercial pool market has been strong. That's been an area of relative strength in the U.S. Obviously, that was more impacted in the early days of COVID, but it's performed extremely well since then, Miguel. Great. Thanks, everyone. I'll pass it on. This concludes the question and answer session. I would like to turn the conference back over to Kevin Holleran for closing remarks. Thank you, Jordan. In closing, I'd like to thank everyone for their interest in Hayward. Our business is very well positioned to navigate the near-term challenges and deliver value for all stakeholders in the years ahead. This would not be possible without the hard work, dedication, and resilience of our employees and partners around the world. Please contact our team if you have any follow-up questions, and we look forward to talking to you again on the second quarter earnings call. Thanks, Jordan. You may now end the call. The conference is now concluded. Thank You for attending today's presentation. You may now disconnect.