10-Q: Hayward Holdings Q1 2026 Earnings Surge on Strong Sales

Hayward Holdings reports a significant increase in net sales and net income for the first quarter of 2026, driven by price increases and volume growth.

Summary

• Hayward Holdings reported a 11.5% increase in net sales for the first quarter of 2026, reaching $255.2 million compared to $228.8 million in the prior year period.
• Gross profit increased by 12.8% to $118.7 million, with gross profit margin improving to 46.5% from 46.0%.
• Operating income saw a substantial rise of 26.8% to $42.5 million.
• Net income more than doubled, increasing by 63.0% to $23.4 million, with diluted EPS rising to $0.11 from $0.06.
• The North America segment led the growth with a 12.1% increase in net sales, while the Europe & Rest of World segment saw an 8.7% increase.
• The company experienced a significant increase in cash used in operating activities, primarily due to changes in accounts receivable related to the absence of sales under the Receivables Purchase Agreement in the current period compared to the prior year.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, with significant growth in sales and profits, improved margins, and effective management of costs, despite some cash flow headwinds explained by specific accounting transactions.

Positives

• Net sales increased by 11.5% to $255.2 million, driven by price increases, favorable currency translation, and volume growth.
• Gross profit increased by 12.8% to $118.7 million, and gross profit margin improved by 50 basis points to 46.5%.
• Operating income increased by 26.8% to $42.5 million.
• Net income increased by 63.0% to $23.4 million.
• Diluted earnings per share increased to $0.11 from $0.06.
• Adjusted EBITDA increased by 14.8% to $56.4 million, with Adjusted EBITDA margin improving to 22.1%.
• North America segment net sales grew by 12.1% to $209.8 million.
• Europe & Rest of World segment net sales grew by 8.7% to $45.4 million, with gross profit margin increasing by 230 basis points.
• The company ended the quarter with $135.8 million in cash and cash equivalents.
• The company was in compliance with all covenants under its credit facilities.

Negatives

• Net cash used in operating activities increased significantly to $150.6 million from $5.9 million in the prior year period, primarily due to higher accounts receivable as no sales were made under the Receivables Purchase Agreement in the current period.
• Net cash used in investing activities increased to $32.2 million from $6.1 million, driven by net purchases of short-term investments.
• Net cash used in financing activities increased to $11.0 million from $3.7 million, driven by higher share repurchases and debt payments.
• The company faces ongoing uncertainty regarding tariffs and trade restrictions, which could adversely affect its business.
• The company is involved in ongoing litigation, including securities class action and shareholder derivative lawsuits, with a final settlement hearing for the securities class action scheduled for July 28, 2026.

Risks

• Dependence on distributors, builders, buying groups, retailers, and servicers.
• Adverse impact of unfavorable economic and business conditions on product demand.
• High levels of competition in operating markets.
• Future success dependent on new product development, manufacturing, and market adoption.
• Ability to keep pace with rapidly evolving technological developments, including AI.
• Fluctuations in quarterly results of operations and cash flows.
• Risk of loss or reduction in purchases from large customers.
• Exposure to credit risk on accounts receivable.
• Risks associated with international business operations.
• Inability to identify, finance, and complete suitable acquisitions.
• Negative impacts of litigation and other claims.
• Potential future impairment of goodwill and intangible assets.
• Exchange rate fluctuations, cost increases, inflation, changes in effective tax rate, or additional income tax liabilities.
• Ability to attract, develop, and retain highly qualified personnel.
• Disruptions in financial markets.
• Significant disruption or breach of technology infrastructure or failure to maintain security of confidential information.
• Difficulties in operating or implementing new ERP or human resources information systems.
• Misuse of technology-enabled products.
• Failure to maintain an effective system of internal controls.
• Dependence on key suppliers, including single-source and sole-source suppliers.
• Ability to manage product inventory effectively.
• Product manufacturing disruptions, including from catastrophic events.
• Tariffs and other trade restrictions, and the cost of raw materials.
• Compliance with and potential liabilities under various governmental laws and regulations.
• Risks related to handling of personal information.
• Misconduct by employees, commercial partners, or vendors.
• Violations of anti-corruption laws.
• Failure to comply with international trade compliance regulations and changes in U.S. government sanctions.
• Changes in laws, regulations, government policies, or regulatory interpretations.
• Climate change and responses thereto, and increasing stakeholder scrutiny on sustainability matters.
• Ability to obtain, maintain, and enforce intellectual property and proprietary rights.
• Protection of trademarks or trade names.
• Reliance on access to third-party intellectual property.
• Claims of wrongful use or disclosure of trade secrets or proprietary information, or claims of ownership of intellectual property.
• Ability to enforce intellectual property rights in all jurisdictions.
• Other risks related to indebtedness, corporate structure, and ownership of common stock.
• Uncertainty regarding the duration and impact of existing and newly announced tariffs and trade restrictions.
• Potential for customers to receive refunds of tariffs, which could reduce any benefit to the company.

Future Outlook

The company believes that net cash provided by operating activities and availability under the ABL Facility will be adequate to finance its working capital requirements, including capital expenditures, and debt service over the next 12 months. Beyond the next 12 months, demands for funds will include maintenance of the core business, long-term contractual obligations, capital expenditure programs, R&D, potential share repurchases, and potential M&A activity. The company believes its current cash, operating cash flows, and ABL Facility availability will be sufficient to meet these requirements.

Management Comments

• Aftermarket replacements and upgrades to higher value IoT and energy efficient models are a primary growth driver for our business.
• We estimate aftermarket sales represent approximately 85% of North American residential pool net sales and are generally recurring in nature since these products are critical to the ongoing operation of pools given requirements for water quality and sanitization.
• The net sales increase for the three months ended March 28, 2026 was driven by positive net price to offset inflation and tariffs, the favorable impact from foreign currency translation, and an increase in volume.
• Gross profit margin increased to 46.5% for the three months ended March 28, 2026 compared to 46.0% for the three months ended March 29, 2025, an increase of 50 basis points, due to positive net price and operating efficiencies, partially offset by an increase in cost of sales driven by tariffs and inflation.
• As a percentage of net sales, SG&A decreased to 24.5% for the three months ended March 28, 2026 as compared to 24.9% for the three months ended March 29, 2025, a decrease of 40 basis points, as the growth in net sales exceeded the growth in SG&A.
• RD&E spend continues to be focused on new product development and new product performance improvements.
• The decrease in the Company's effective tax rate from 23.3% for the three months ended March 29, 2025 to 22.4% for the three months ended March 28, 2026 was primarily due to lower state taxes.
• Net income margin increased to 9.2% for the three months ended March 28, 2026 compared to 6.3% for the three months ended March 29, 2025, an increase of 290 basis points.
• Adjusted EBITDA margin increased to 22.1% for the three months ended March 28, 2026 compared to 21.5% for the three months ended March 29, 2025, an increase of 60 basis points.
• The net sales increase for the three months ended March 28, 2026 was primarily due to the favorable impact of foreign currency translation and positive net price, partially offset by the impact of a modest decrease in volume.
• Segment income margin increased by 250 basis points from 15.7% for the three months ended March 29, 2025 to 18.2% for the three months ended March 28, 2026, resulting from the increase in gross profit.
• The decrease in cash used in operating activities was primarily driven by higher accounts receivable, largely because there were no sales under the Receivables Purchase Agreement in the current period, whereas the prior year period included the sale of $100.0 million of accounts receivable.

Industry Context

StockSavvy.ai notes that Hayward Holdings' performance in Q1 2026 reflects a resilient demand for pool and outdoor living products, with the company successfully navigating inflationary pressures through price increases. The growth in both North America and Europe & Rest of World segments indicates a broad market acceptance of their technology and product offerings. The company's focus on aftermarket sales and upgrades to energy-efficient and IoT-enabled products aligns with broader industry trends towards sustainability and smart home integration.

Comparison to Industry Standards

• Hayward Holdings' gross profit margin of 46.5% for Q1 2026 is strong within the pool and outdoor living sector. Competitors like Pool Corporation (POOL) often report gross margins in the high 30s to low 40s, suggesting Hayward's operational efficiencies and pricing power are competitive.
• The company's net sales growth of 11.5% outpaces general consumer discretionary spending trends, indicating specific strength in its niche market. For comparison, broader home improvement retailers might see single-digit growth in similar periods.
• Hayward's focus on aftermarket sales (estimated at 85% of North American residential pool net sales) provides a more stable and recurring revenue stream compared to companies heavily reliant on new pool construction, which is more cyclical.
• The company's investment in R&D as a percentage of net sales (2.6%) is consistent with industry standards for technology-driven product development in the water management and pool equipment sector.

Corporate Governance

Legal Proceedings

• Securities Class Action: A settlement in principle has been reached, with preliminary approval granted on February 28, 2026. A final settlement hearing is scheduled for July 28, 2026. The action seeks unspecified monetary damages.
• Shareholder Derivative Lawsuits (Heicklen, Hertzog, Tackett, Aitken Actions): These actions allege breaches of fiduciary duties and other claims. The Heicklen and Hertzog Actions are stayed. The Tackett and Aitken Actions are in early stages. The company disputes the allegations and is unable to estimate a reasonably possible range of financial loss for these actions.
• Other litigation arising in the normal course of business is not expected to have a material adverse effect.

Related Party Transactions

• No significant related-party transactions were incurred during the three months ended March 28, 2026 and March 29, 2025.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, EPS, and improved margins. The ongoing share repurchase program also benefits shareholders. However, the company faces ongoing litigation which could have future financial implications.
• Employees: The approval of the Executive Severance Plan provides security for executives in certain termination scenarios.
• Creditors: The company remains in compliance with its debt covenants, indicating stability for lenders.
• Customers: The company is passing on price increases to offset inflation and tariffs, which may impact customer costs.

Next Steps

• The final settlement hearing for the Securities Class Action is scheduled for July 28, 2026.
• The company will continue to focus on increasing cash flow, solidifying its liquidity position, and paying debt obligations.
• Continued funding of business growth initiatives and return of capital to stockholders.
• Ongoing capital expenditure program to improve facilities and technology.
• Continued research and development activities.
• Potential share repurchases and merger and acquisition activity.

Key Dates

Recommendation

The company demonstrated robust top-line growth and significant improvements in profitability and margins, exceeding expectations. Despite a temporary increase in cash used in operations due to specific accounting treatments, the underlying business performance is strong. The successful pricing strategies, operational efficiencies, and positive outlook, coupled with a reasonable valuation implied by the current market, suggest a strong investment opportunity.

Keywords

Hayward Holdings, Form 10-Q, Quarterly Report, Pool Equipment, Water Management, Financial Results, Net Sales, Gross Profit, Operating Income, Net Income, EPS, North America, Europe, Trade Tariffs, Litigation