10-Q: Hayward Holdings Q2 2026 Earnings: Sales Rise, Margins Dip Amid Inflation

Hayward Holdings reports a 6.3% increase in net sales for Q2 2026, driven by pricing strategies, though gross profit margin saw a slight decrease due to inflation and tariffs.

Summary

• Hayward Holdings reported net sales of $318.4 million for the three months ended June 27, 2026, a 6.3% increase compared to the same period last year.
• For the six months ended June 27, 2026, net sales increased by 8.5% to $573.6 million.
• Gross profit for the quarter rose to $155.1 million, but the gross profit margin slightly decreased to 48.7% from 49.2% year-over-year.
• Selling, general, and administrative (SG&A) expenses increased by 4.5% for the quarter, but as a percentage of net sales, it decreased.
• Research, development, and engineering (RD&E) expenses increased by 25.2% for the quarter, reflecting investment in new product development.
• The company refinanced its debt on June 23, 2026, resulting in a $1.8 million loss on debt extinguishment.
• Net income for the quarter was $45.6 million, a slight increase from $44.8 million in the prior year.
• Adjusted EBITDA increased by 5.1% to $92.7 million for the quarter.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as moderately positive, with solid top-line growth and strong liquidity, but tempered by margin pressures from inflation and geopolitical impacts in certain regions.

Positives

• Net sales increased by 6.3% to $318.4 million for the three months ended June 27, 2026, driven by positive net price to offset inflation and tariffs, and a favorable impact from foreign currency translation.
• For the six months ended June 27, 2026, net sales increased by 8.5% to $573.6 million, driven by positive net price, favorable foreign currency translation, and a modest increase in volume.
• North America segment net sales increased by 8.8% for the quarter, driven by positive net price and increased volume.
• Adjusted net income increased by 10.6% to $57.8 million for the three months ended June 27, 2026.
• Adjusted EBITDA increased by 5.1% to $92.7 million for the three months ended June 27, 2026.
• The company was in compliance with all covenants under its Credit Agreement as of June 27, 2026.
• The company has $304.1 million in cash and cash equivalents as of June 27, 2026, indicating strong liquidity.
• The share repurchase program has $382.3 million remaining available as of June 27, 2026.

Negatives

• Gross profit margin decreased to 48.7% for the three months ended June 27, 2026, from 49.2% in the prior year, primarily due to increased costs from inflation and tariffs.
• Europe & Rest of World (E&RW) segment net sales decreased by 8.3% to $40.7 million for the three months ended June 27, 2026, primarily due to a decline in volume driven by geopolitical conflicts.
• A $1.8 million loss on debt extinguishment was recorded in the quarter due to debt refinancing.
• Interest expense, net, increased by 24.4% to $17.0 million for the three months ended June 27, 2026, largely due to debt financing costs from the new Credit Agreement.
• The E&RW segment income margin decreased by 80 basis points to 16.3% for the three months ended June 27, 2026.

Risks

• The demand for products may be adversely affected by unfavorable economic and business conditions.
• The company operates in markets with high levels of competition.
• Future success depends on developing, manufacturing, and attaining market adoption of new products and maintaining product quality and reliability.
• The company's ability to keep pace with rapidly evolving technological developments and standards, including artificial intelligence (AI), and effectively develop and deploy such technologies.
• Results of operations and cash flows may fluctuate from quarter to quarter.
• Tariffs and other trade restrictions, as well as geopolitical conflicts, may adversely affect the business.
• The company is involved in ongoing litigation, including securities class action and shareholder derivative lawsuits, the ultimate outcome of which is uncertain.

Future Outlook

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

Management Comments

• "Aftermarket replacements and upgrades to higher value IoT and energy efficient models are a primary growth driver for our business."
• "We believe that we are well-positioned for future growth."
• "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."
• "We aim to keep our manufacturing plants running at a constant level throughout the year and consequently we generally build inventory in the first and third quarters, and inventory is sold-down in the second and fourth quarters."

Industry Context

StockSavvy.ai notes that Hayward Holdings' performance reflects broader industry trends in the pool and outdoor living sector, with a continued emphasis on energy-efficient and smart home technologies (IoT). The company's strategy to offset inflation and tariffs through pricing aligns with many manufacturers, while the geopolitical impacts on the E&RW segment highlight global economic sensitivities.

Comparison to Industry Standards

• The company estimates its North American residential pool market share at approximately 33%, which is a significant position in a competitive market.
• The gross profit margin of 48.7% for Q2 2026 is strong for the specialty manufacturing sector, though slightly below the prior year's 49.2%. Competitors in the pool equipment manufacturing space, such as Pentair and Pool Corporation, often report margins in a similar range, with variations depending on product mix and geographic exposure.
• The increase in RD&E spending to 2.4% of net sales for the quarter indicates a commitment to innovation, which is crucial for maintaining market share against competitors investing in smart pool technology and energy-efficient solutions.

Legal Proceedings

• A securities class action complaint was filed in August 2023 and a related complaint in September 2023, which were consolidated. A settlement received preliminary approval in February 2026 and final approval in July 2026. The action sought unspecified monetary damages.
• Shareholder derivative lawsuits were filed in November 2023, August 2025, November 2025, and April 2026, alleging breaches of fiduciary duties. The Heicklen and Hertzog actions are stayed. The Tackett and Aitken actions are in early stages. The company disputes the allegations and cannot estimate a range of financial loss for these actions.
• The company is subject to other litigation arising in the normal course of business, including product liability claims, which are not expected to have a material adverse effect.

Related Party Transactions

• No significant related-party transactions were incurred during the three and six months ended June 27, 2026, or June 28, 2025.

Stakeholder Impact

• Shareholders may benefit from the ongoing share repurchase program, which has $382.3 million remaining.
• Creditors are impacted by the recent debt refinancing, which extended maturities and established new credit facilities.
• Customers may experience price increases due to inflation and tariffs, though the company aims to offset these through pricing strategies.
• Employees may be impacted by restructuring actions in the E&RW segment, as indicated by restructuring costs.

Next Steps

• Continue to fund working capital requirements, capital expenditures, and debt service over the next 12 months.
• Focus on increasing cash flow and solidifying liquidity through working capital initiatives.
• Continue to fund business growth initiatives and return of capital to stockholders.
• Fund maintenance of core business, long-term contractual obligations, capital expenditure programs, R&D, potential share repurchases, and potential M&A activity beyond the next 12 months.

Key Dates

Recommendation

The company demonstrates solid revenue growth and maintains strong liquidity, supported by a significant market share. However, margin compression due to inflation and tariffs, coupled with the ongoing legal proceedings and geopolitical risks affecting international sales, warrant a cautious 'hold' stance until these pressures ease and the outcomes of legal matters become clearer.

Keywords

pool equipment, water management, outdoor living, flow control, residential pool, commercial pool, aftermarket sales, debt refinancing