FOURTH QUARTER FISCAL 2023 SUMMARY
- Net Sales increased 8% year-over-year to $278.5 million
- Net Income increased 94% year-over-year to $31.0 million
- Adjusted EBITDA* increased 42% year-over-year to $75.7
million
- Diluted EPS increased 100% year-over-year to $0.14
- Adjusted diluted EPS* increased 82% year-over-year to
$0.20
FULL FISCAL YEAR 2023 HIGHLIGHTS
- Net Sales decreased 24% year-over-year to $992.5 million
- Net Income decreased 55% year-over-year to $80.7 million
- Adjusted EBITDA* decreased 33% year-over-year to $247.3
million
- Diluted EPS of $0.37 and adjusted diluted EPS* of $0.56
- Strong cash flow from operations of $184.5 million
Hayward Holdings, Inc. (NYSE: HAYW) (“Hayward” or the
“Company”), a global designer, manufacturer, and marketer of a
broad portfolio of pool and outdoor living technology, today
announced financial results for the fourth quarter and full fiscal
year ended December 31, 2023.
CEO COMMENTS
“Our fourth quarter results were consistent with expectations,”
said Kevin Holleran, Hayward’s President and Chief Executive
Officer. “We delivered net sales and earnings growth, record gross
profit margins, and better than projected cash flow. 2023 was
characterized by a normalization of supply chains, channel
inventory destocking, and a return to established seasonal buying
patterns. Despite the macroeconomic impact on the consumer, I am
proud of the strong execution of our team, resulting in gross
profit margin expansion, delivery of our SG&A cost reduction
program, and robust cash flow growth. We accomplished many
important strategic initiatives to strengthen our competitive
advantages and drive profitable growth. This included advancing our
technology leadership position with innovative connected pool
solutions, leveraging our culture of continuous improvement and
operational excellence, and expanding commercial relationships
across sales channels. While economic conditions remain uncertain
and our customers are taking a cautious approach ahead of the peak
pool season, I am confident in our team’s ability to continue
executing on our growth strategy and to create value for
shareholders.”
FOURTH QUARTER FISCAL 2023 CONSOLIDATED RESULTS
Net sales increased by 8% to $278.5 million for the fourth
quarter of fiscal 2023. The increase in net sales during the
quarter was the result of higher volumes and favorable pricing. The
growth in volume was primarily the result of strong early buy
shipments.
Gross profit increased by 25% to $137.1 million for the fourth
quarter of fiscal 2023. Gross profit margin increased 690 basis
points to 49.2%. The increase in gross margin was principally due
to the management of our manufacturing costs as well as less
provisioning for slow-moving or obsolete inventory as compared to
the prior-year period.
Selling, general, and administrative (“SG&A”) expenses
increased by 2% to $61.6 million for the fourth quarter of fiscal
2023 compared to $60.5 million for the fourth quarter of fiscal
2022. As a percentage of net sales, SG&A decreased 130 basis
points to 22%, compared to the prior-year period of 23% due to the
increase in net sales. Research, development, and engineering
expenses were $5.5 million for the fourth quarter of fiscal 2023,
or 2% of net sales, as compared to $5.9 million for the prior-year
period, or 2% of net sales.
Operating income increased by 54% to $55.5 million for the
fourth quarter of fiscal 2023. The increase in operating income was
driven by higher sales resulting from a strong early buy season.
Operating income as a percentage of net sales (“operating margin”)
was 19.9% for the fourth quarter of fiscal 2023, a 600 basis point
increase from the 13.9% operating margin in the fourth quarter of
fiscal 2022.
Interest expense, net, increased by approximately 8% to $17.6
million for the fourth quarter of fiscal 2023 primarily as a result
of variable rate increases on the term loan and incremental term
loan, partially offset by net interest income on our interest rate
swaps and interest income on cash investment balances.
Income tax expense for the fourth quarter of fiscal 2023 was
$8.1 million for an effective tax rate of 20.6%, compared to $6.9
million at an effective tax rate of 30.2% for the prior-year
period. The increase was primarily due to the increase in income
from operations as well as a reduced benefit from stock option
exercises due to timing of exercises during the year. The decrease
in the effective tax rate was driven by reduced tax expense for
nondeductible compensation and the absence of withholding taxes on
foreign earnings that occurred during the prior-year period.
Net income increased by 94% to $31.0 million for the fourth
quarter of fiscal 2023.
Adjusted EBITDA* increased by 42% to $75.7 million for the
fourth quarter of fiscal 2023. Adjusted EBITDA margin* expanded 660
basis points to 27.2%.
Diluted EPS increased by 100% to $0.14 for the fourth quarter of
fiscal 2023. Adjusted diluted EPS* increased by 82% to $0.20 for
the fourth quarter of fiscal 2023.
FOURTH QUARTER FISCAL 2023 SEGMENT RESULTS
North America
Net sales increased by 10% to $238.2 million for the fourth
quarter of fiscal 2023. The increase was primarily the result of an
increase in volume and the favorable impact of price. The growth in
volume was driven by strong early buy shipments, partially offset
by the moderation of end market demand trends due to macroeconomic
factors and a changing competitive landscape in certain markets.
The increase in net price was due to price increases enacted to
offset inflationary pressure.
Segment income increased by 74% to $71.1 million for the fourth
quarter of fiscal 2023. Adjusted segment income increased by 60% to
$75.4 million.
Europe & Rest of World
Net sales decreased by 4% to $40.3 million for the fourth
quarter of fiscal 2023. The decrease was primarily due to a decline
in volume as a result of the moderation of end market demand due to
macroeconomic factors and channel destocking, partially offset by
the favorable impact of price and the favorable impact of foreign
currency translation.
Segment income decreased by 6% to $7.9 million for the fourth
quarter of fiscal 2023. Adjusted segment income decreased by 3% to
$8.1 million.
FULL FISCAL YEAR 2023 CONSOLIDATED RESULTS
Net sales decreased by 24% to $992.5 million for the full fiscal
year 2023. The decrease in net sales was primarily the result of
the moderation of end market demand trends due to macroeconomic
factors and distribution channel destocking. Geopolitical factors
in Europe also contributed to the decline in volume. The increase
in net price was due to price increases enacted to offset
inflationary pressure.
Gross profit decreased by 20% to $477.0 million for the full
fiscal year 2023. Gross profit margin increased to 48.1% for the
fiscal year 2023, an increase of 270 basis points compared to the
prior full year, primarily due to the management of manufacturing
costs and the net price increase discussed above, partially offset
by lower operating leverage.
Operating income decreased by 39% to $175.2 million for the full
fiscal year 2023. The decrease in operating income was driven by
the decrease in net sales. Operating margin was 17.7% in the full
fiscal year 2023, a 400 basis point reduction from the 21.7%
operating margin in the prior full year.
Net income decreased by 55% to $80.7 million for the full fiscal
year 2023. Adjusted net income decreased by 46% to $122.9 million
compared to the prior fiscal year.
Adjusted EBITDA* decreased by 33% to $247.3 million for the full
fiscal year 2023 driven primarily by decreased net sales and lower
operating leverage, partially offset by a decrease in SG&A
expenses. Adjusted EBITDA margin* decreased by 310 basis points to
24.9% for the full fiscal year 2023 compared to the prior fiscal
year.
Diluted EPS decreased by 53% to $0.37 for the full fiscal year
2023. Adjusted diluted EPS* decreased by 43% to $0.56 for the
fiscal year 2023.
BALANCE SHEET AND CASH FLOW
As of December 31, 2023, Hayward had cash and cash equivalents
of $178.1 million and approximately $256.5 million available for
borrowing under its credit facilities. Cash flow from operations
for fiscal 2023 of approximately $185 million was an increase of
approximately $69 million from the prior year as a result of an
increase in cash generated by working capital compared to cash used
for working capital during the prior year, partially offset by a
decrease in net income.
OUTLOOK
Hayward is introducing 2024 guidance reflecting a return to
sales and earnings growth driven by solid execution across the
organization, positive price realization and continued technology
adoption. The guidance range also contemplates continued
uncertainty around global macro conditions and consumer spending,
coupled with our current expectations regarding channel inventory
levels. For fiscal year 2024, Hayward expects net sales of
approximately $1.010 billion to $1.060 billion, or an increase of
approximately 2% to 7%, and Adjusted EBITDA* of $255 million to
$275 million.
The pool industry remains attractive and continues to benefit
from sustainable secular demand trends in outdoor living. Hayward
continues to leverage our competitive advantages and drive
increasing adoption of our leading SmartPad™ pool equipment
products both in new construction and the aftermarket, which
represents approximately 80% of our business. Hayward is confident
in its long-term outlook for profitable growth and robust cash flow
generation, driven by new product innovation, expanding commercial
relationships, and operational excellence.
Please see the Forward-Looking Statements section of this
release for a discussion of certain risks relevant to Hayward’s
outlook.
CONFERENCE CALL INFORMATION
Hayward will hold a conference call to discuss the results
today, February 29, 2024 at 9:00 a.m. (ET).
Interested investors and other parties can also listen to a
webcast of the live conference call by logging onto the Investor
Relations section of the company's website at
https://investor.hayward.com/events-and-presentations/default.aspx.
An earnings presentation will be posted to the Investor Relations
section of the Company’s website prior to the conference call. The
conference call may also be accessed by dialing (877) 423-9813 or
(201) 689-8573.
For those unable to listen to the live conference call, a replay
will be available approximately two hours after the call through
the archived webcast on the Hayward website or by dialing (844)
512-2921, or (412) 317-6671. The access code for the replay is
13744093. The replay will be available until 11:59 p.m. Eastern
Time on March 14, 2024.
ABOUT HAYWARD HOLDINGS, INC.
Hayward Holdings, Inc. (NYSE: HAYW) is a leading global designer
and manufacturer of pool and outdoor living technology. With a
mission to deliver exceptional products, outstanding service and
innovative solutions to transform the experience of water, Hayward
offers a full line of energy-efficient and sustainable residential
and commercial pool equipment including pumps, filters, heaters,
cleaners, sanitizers, LED lighting, and water features all
digitally connected through Hayward’s intuitive IoT-enabled
SmartPad™.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains certain statements that are
“forward-looking statements” as that term is defined under the
Private Securities Litigation Reform Act of 1995 (the “Act”) and
releases issued by the Securities and Exchange Commission (the
“SEC”). Such forward-looking statements relating to Hayward are
based on the beliefs of Hayward’s management as well as assumptions
made by, and information currently available to it. These
forward-looking statements include, but are not limited to,
statements about Hayward’s strategies, plans, objectives,
expectations, intentions, expenditures and assumptions and other
statements contained in or incorporated by reference in this
earnings release that are not historical facts. When used in this
document, words such as “guidance,” “may,” “will,” “should,”
“could,” “intend,” “potential,” “continue,” “anticipate,”
“believe,” “estimate,” “expect,” “plan,” “target,” “predict,”
“project,” “seek” and similar expressions as they relate to Hayward
are intended to identify forward-looking statements. Hayward
believes that it is important to communicate its future
expectations to its stockholders, and it therefore makes
forward-looking statements in reliance upon the safe harbor
provisions of the Act. However, there may be events in the future
that Hayward is not able to accurately predict or control, and
actual results may differ materially from the expectations it
describes in its forward-looking statements.
Examples of forward-looking statements include, among others,
statements Hayward makes regarding: Hayward’s 2024 guidance;
business plans and objectives; general economic and industry
trends; business prospects; future product development and
acquisition strategies; future channel stocking levels; and growth
and expansion opportunities. The forward-looking statements in this
earnings release are only predictions. Hayward may not achieve the
plans, intentions or expectations disclosed in Hayward’s
forward-looking statements, and you should not place significant
reliance on its forward-looking statements. Hayward has based these
forward-looking statements largely on its current expectations and
projections about future events and financial trends that it
believes may affect its business, financial condition and results
of operations. Moreover, neither Hayward nor any other person
assumes responsibility for the accuracy and completeness of
forward-looking statements taken from third-party industry and
market reports.
Important factors that could affect Hayward’s future results and
could cause those results or other outcomes to differ materially
from those indicated in its forward-looking statements include the
following: its relationships with and the performance of
distributors, builders, buying groups, retailers and servicers who
sell Hayward’s products to pool owners; impacts on Hayward’s
business from the sensitivity of its business to seasonality and
unfavorable economic business conditions; competition from national
and global companies, as well as lower-cost manufacturers;
Hayward’s ability to develop, manufacture and effectively and
profitably market and sell its new planned and future products; its
ability to execute on its growth strategies and expansion
opportunities; impacts on Hayward’s business from political,
regulatory, economic, trade, and other risks associated with
operating foreign businesses, including risks associated with
geopolitical conflict; its ability to maintain favorable
relationships with suppliers and manage disruptions to its global
supply chain and the availability of raw materials; Hayward’s
ability to identify emerging technological and other trends in its
target end markets; failure of markets to accept new product
introductions and enhancements; the ability to successfully
identify, finance, complete and integrate acquisitions; its
reliance on information technology systems and susceptibility to
threats to those systems, including cybersecurity threats, and
risks arising from its collection and use of personal information
data; regulatory changes and developments affecting Hayward’s
current and future products; volatility in currency exchange rates
and interest rates; Hayward’s ability to service its existing
indebtedness and obtain additional capital to finance operations
and its growth opportunities; Hayward’s ability to establish and
maintain intellectual property protection for its products, as well
as its ability to operate its business without infringing,
misappropriating or otherwise violating the intellectual property
rights of others; the impact of material cost and other inflation;
Hayward’s ability to attract and retain senior management and other
qualified personnel; the impact of changes in laws, regulations and
administrative policy, including those that limit U.S. tax
benefits, impact trade agreements and tariffs, or address the
impacts of climate change; the outcome of litigation and
governmental proceedings; the impact of product manufacturing
disruptions, including as a result of catastrophic and other events
beyond Hayward's control; uncertainties of the pace of distribution
channel destocking and its impact on sales volumes; Hayward’s
ability to realize cost savings from restructuring activities;
Hayward’s and its customers’ ability to manage product inventory in
an effective and efficient manner; customer decisions to reduce
inventory levels; and other factors set forth in “Risk Factors” in
Hayward’s most recent Annual Report on Form 10-K and Quarterly
Report on Form 10-Q.
Many of these factors are macroeconomic in nature and are,
therefore, beyond Hayward’s control. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, Hayward’s actual results, performance
or achievements may vary materially from those described in this
earnings release as anticipated, believed, estimated, expected,
intended, planned or projected. The forward-looking statements
included in this earnings release are made only as of the date of
this earnings release. Unless required by United States federal
securities laws, Hayward neither intends nor assumes any obligation
to update these forward-looking statements for any reason after the
date of this earnings release to conform these statements to actual
results or to changes in Hayward’s expectations.
*NON-GAAP FINANCIAL MEASURES
This earnings release includes certain financial measures not
presented in accordance with the generally accepted accounting
principles in the United States (“GAAP”) including adjusted net
income, adjusted basic EPS, adjusted diluted EPS, EBITDA, adjusted
EBITDA, adjusted EBITDA margin, consolidated segment income,
adjusted consolidated segment income, adjusted consolidated segment
income margin, adjusted segment income and adjusted segment income
margin. These financial measures are not measures of financial
performance in accordance with GAAP and may exclude items that are
significant in understanding and assessing the Company’s financial
results. Therefore, these measures should not be considered in
isolation or as an alternative to net income (loss), segment income
or other measures of profitability or performance under GAAP. You
should be aware that the Company’s presentation of these measures
may not be comparable to similarly titled measures used by other
companies, which may be defined and calculated differently. See the
appendix for a reconciliation of historical non-GAAP measures to
the most directly comparable GAAP measures.
Reconciliation of fiscal 2024 adjusted EBITDA guidance (which is
presented on a basis similar to the presentation of historical
adjusted EBITDA) is not being provided, as Hayward does not
currently have sufficient data to accurately estimate the variables
and individual adjustments for such reconciliation.
Hayward Holdings, Inc.
Unaudited Consolidated Balance
Sheets
(Dollars in thousands, except per share
data)
December 31, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
178,097
$
56,177
Short-term investments
25,000
—
Accounts receivable, net of allowances of
$2,870 and $3,937, respectively
270,875
209,109
Inventories, net
215,180
283,658
Prepaid expenses
14,331
14,981
Income tax receivable
9,994
27,173
Other current assets
11,264
21,186
Total current assets
724,741
612,284
Property, plant, and equipment, net of
accumulated depreciation of $95,917 and $84,119, respectively
158,979
149,828
Goodwill
935,013
932,396
Trademark
736,000
736,000
Customer relationships, net
206,308
230,503
Other intangibles, net
94,082
106,673
Other non-current assets
91,161
107,329
Total assets
$
2,946,284
$
2,875,013
Liabilities and Stockholders’
Equity
Current liabilities
Current portion of long-term debt
$
15,088
$
14,531
Accounts payable
68,943
54,022
Accrued expenses and other liabilities
155,543
163,283
Income taxes payable
109
574
Total current liabilities
239,683
232,410
Long-term debt, net
1,079,280
1,085,055
Deferred tax liabilities, net
248,967
264,111
Other non-current liabilities
66,896
70,403
Total liabilities
1,634,826
1,651,979
Stockholders’ equity
Preferred stock, $0.001 par value,
100,000,000 authorized, no shares issued or outstanding as of
December 31, 2023 and December 31, 2022
—
—
Common stock $0.001 par value, 750,000,000
authorized; 242,832,045 issued and 214,165,676 outstanding at
December 31, 2023; 240,529,150 issued and 211,862,781 outstanding
at December 31, 2022
243
241
Additional paid-in capital
1,080,894
1,069,878
Common stock in treasury; 28,666,369 and
28,666,369 at December 31, 2023 and December 31, 2022,
respectively
(357,755
)
(357,415
)
Retained earnings
580,909
500,222
Accumulated other comprehensive income
7,167
10,108
Total stockholders’ equity
1,311,458
1,223,034
Total liabilities, redeemable stock, and
stockholders’ equity
$
2,946,284
$
2,875,013
Hayward Holdings, Inc.
Unaudited Consolidated Statements of
Operations
(Dollars in thousands, except per share
data)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net sales
$
278,469
$
258,967
$
992,452
$
1,314,136
Cost of sales
141,331
149,475
515,502
717,101
Gross profit
137,138
109,492
476,950
597,035
Selling, general, and administrative
expense
61,550
60,515
233,607
248,812
Research, development, and engineering
expense
5,520
5,948
24,547
22,359
Acquisition and restructuring related
expense (income)
6,993
(1,337
)
13,213
8,162
Amortization of intangible assets
7,584
8,301
30,361
32,129
Operating income
55,491
36,065
175,222
285,573
Interest expense, net
17,645
16,282
73,584
51,387
Other (income) expense, net
(1,247
)
(3,107
)
551
(51
)
Total other expense
16,398
13,175
74,135
51,336
Income from operations before income
taxes
39,093
22,890
101,087
234,237
Provision for income taxes
8,057
6,922
20,400
54,890
Net income
$
31,036
$
15,968
$
80,687
$
179,347
Earnings per share
Basic
$
0.15
$
0.08
$
0.38
$
0.82
Diluted
$
0.14
$
0.07
$
0.37
$
0.78
Weighted average common shares
outstanding
Basic
213,768,108
211,406,214
213,144,063
219,945,024
Diluted
220,848,098
219,958,655
220,688,616
229,726,497
Hayward Holdings, Inc.
Unaudited Consolidated Statements of
Cash Flows
(In thousands)
Year Ended
December 31, 2023
December 31, 2022
Cash flows from operating
activities
Net income
$
80,687
$
179,347
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation
15,983
19,246
Amortization of intangible assets
37,079
38,393
Amortization of deferred debt issuance
fees
4,696
3,271
Stock-based compensation
9,165
7,948
Deferred income taxes
(12,786
)
(5,345
)
Allowance for bad debts
(1,067
)
1,934
Loss on impairment
6,720
—
Loss on sale of property, plant and
equipment
1,000
6,128
Changes in operating assets and
liabilities
Accounts receivable
(58,700
)
(3,409
)
Inventories
67,824
(35,117
)
Other current and non-current assets
24,820
(40,197
)
Accounts payable
14,551
(36,773
)
Accrued expenses and other liabilities
(5,432
)
(19,482
)
Net cash provided by operating
activities
184,540
115,944
Cash flows from investing
activities
Purchases of property, plant, and
equipment
(30,994
)
(29,625
)
Purchases of short-term investments
(25,000
)
—
Acquisitions, net of cash acquired
—
(62,952
)
Proceeds from sale of property, plant, and
equipment
613
4
Net cash used in investing activities
(55,381
)
(92,573
)
Cash flows from financing
activities
Purchases of common stock for treasury
(340
)
(343,349
)
Proceeds from issuance of long-term
debt
5,448
129,725
Debt issuance costs
—
(8,547
)
Payments of long-term debt
(12,518
)
(10,445
)
Proceeds from revolving credit
facility
144,100
150,000
Payments on revolving credit facility
(144,100
)
(150,000
)
Proceeds from issuance of short term
debt
6,130
8,119
Payments of short term debt
(6,894
)
(5,063
)
Other, net
562
320
Net cash used in financing activities
(7,612
)
(229,240
)
Effect of exchange rate changes on cash
and cash equivalents
373
(3,750
)
Change in cash and cash equivalents
121,920
(209,619
)
Cash and cash equivalents, beginning of
year
56,177
265,796
Cash and cash equivalents, end of year
$
178,097
$
56,177
Supplemental disclosures of cash flow
information:
Cash paid-interest
$
75,658
$
51,499
Cash paid-income taxes
16,420
99,395
Equipment financed under finance
leases
(21
)
1,603
Reconciliations
Consolidated
Reconciliations
Adjusted EBITDA and Adjusted EBITDA Margin Reconciliations
(Non-GAAP)
Following is a reconciliation from net income to adjusted
EBITDA:
(Dollars in thousands)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income
$
31,036
$
15,968
$
80,687
$
179,347
Depreciation
2,965
5,315
15,983
19,246
Amortization
9,276
9,956
37,079
38,393
Interest expense
17,645
16,282
73,584
51,387
Income taxes
8,057
6,922
20,400
54,890
EBITDA
68,979
54,443
227,733
343,263
Stock-based compensation (a)
269
354
1,270
1,602
Currency exchange items (b)
(490
)
(1,850
)
786
926
Acquisition and restructuring related
expense, net (c)
6,993
(1,337
)
13,213
8,162
Other (d)
(96
)
1,652
4,271
13,622
Total Adjustments
6,676
(1,181
)
19,540
24,312
Adjusted EBITDA
$
75,655
$
53,262
$
247,273
$
367,575
Adjusted EBITDA margin
27.2
%
20.6
%
24.9
%
28.0
%
(a)
Represents non-cash stock-based
compensation expense related to equity awards issued to management,
employees, and directors. Beginning in the three months ended July
2, 2022, the adjustment includes only expense related to awards
issued under the 2017 Equity Incentive Plan, which were awards
granted prior to the effective date of Hayward’s initial public
offering (the “IPO”), whereas in prior periods, the adjustment
included stock-based compensation expense for all equity awards.
Under the current presentation, the stock-based compensation
adjustment for the year ended December 31, 2022 would have been
$0.4 million.
(b)
Represents unrealized non-cash losses
(gains) on foreign denominated monetary assets and liabilities and
foreign currency contracts.
(c)
Adjustments in the fiscal quarter ended
December 31, 2023 are primarily driven by a $6.7 million of costs
related to the discontinuation of a product line leading to an
impairment of the associated fixed assets, inventory and intangible
assets.
Adjustments in the fiscal quarter ended
December 31, 2022 include a $2.4 million gain resulting from the
release of certain reserves associated with the exit of an
early-stage product line discontinued in 2021, partially offset by
separation costs associated with a reduction-in-force.
Adjustments in the year ended December 31,
2023 primarily include $6.7 million of costs related to the
discontinuation of a product line leading to an impairment of the
associated fixed assets, inventory and intangible assets, $2.4
million related to programs to centralize and consolidate
operations and professional services in Europe, $1.9 million of
costs associated with the relocation of the corporate headquarters
to Charlotte, North Carolina, $1.2 million separation costs
associated with the 2022 cost reduction program and $0.8 million of
costs associated with integration costs from prior
acquisitions.
Adjustments in the year ended December 31,
2022 primarily include $5.0 million of costs associated with the
relocation of the Corporate headquarters, $2.9 million separation
costs associated with a reduction-in-force, $1.9 million
transaction costs associated with the acquisition of the specialty
lighting business of Halco Lighting Technologies, LLC (“Specialty
Lighting Business”), partially offset by a $2.4 million gain
resulting from the release of certain reserves associated with the
exit of an early-stage product line discontinued in 2021.
(d)
Adjustments in the fiscal quarter ended
December 31, 2023 are primarily related to programs to centralize
and consolidate operations and professional services in Europe.
Adjustments in the fiscal quarter ended
December 31, 2022 primarily includes a $0.7 million non-cash
increase in cost of goods sold resulting from the fair value
inventory step-up adjustment recognized as part of the purchase
accounting for the Specialty Lighting Business, $0.7 million of
transitional expenses incurred to enable go-forward public company
regulatory compliance, and other immaterial items.
Adjustments in the year ended December 31,
2023 primarily include $1.8 million related to inventory and fixed
asset write-offs in Europe and $1.5 million of costs incurred
related to the selling stockholder offerings of shares in March,
May and August 2023, which are reported in SG&A in our
consolidated statements of operations.
Adjustments in the year ended December 31,
2022 primarily include $5.5 million of expenses associated with the
discontinuation of a product joint development agreement, a $3.3
million non-cash increase in cost of goods sold resulting from the
fair value inventory step-up adjustment recognized as part of the
purchase accounting for the Specialty Lighting Business, $2.3
million of transitional expenses incurred to enable go-forward
public company regulatory compliance, $1.4 million of costs
incurred related to the selling stockholder offering of shares in
May 2022, which are reported in SG&A in our consolidated
statements of operations, $0.9 million of expenses related to the
Corporate headquarters transition, $0.2 million bad debt reserves
related to certain customers impacted by the conflict in Russia and
Ukraine, and other immaterial items, partially offset by subsequent
collections and $1.1 million of gains resulting from an insurance
policy reimbursement related to the fire incident in our
manufacturing and administrative facilities in Yuncos, Spain.
Adjusted Net Income and Adjusted EPS Reconciliation
(Non-GAAP)
Following is a reconciliation of net income to adjusted net
income and earnings per share to adjusted earnings per share:
(Dollars in thousands, except per share
data)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income
$
31,036
$
15,968
$
80,687
$
179,347
Tax adjustments (a)
974
1,164
(1,930
)
(2,676
)
Other adjustments and amortization:
Stock-based compensation (b)
269
354
1,270
1,602
Currency exchange items (c)
(490
)
(1,850
)
786
926
Acquisition and restructuring related
expense, net (d)
6,993
(1,337
)
13,213
8,162
Other (e)
(96
)
1,652
4,271
13,622
Total other adjustments
6,676
(1,181
)
19,540
24,312
Amortization
9,276
9,956
37,079
38,393
Tax effect (f)
(2,890
)
(2,207
)
(12,507
)
(15,379
)
Certain transactional-related adjustments
(g):
Acquisitions
—
—
—
2,761
Tax effect (f)
—
—
—
(678
)
Adjusted net income
$
45,072
$
23,700
$
122,869
$
226,080
Weighted average number of common shares
outstanding, basic
213,768,108
211,406,214
213,144,063
219,945,024
Weighted average number of common shares
outstanding, diluted
220,848,098
219,958,655
220,688,616
229,726,497
Basic EPS
$
0.15
$
0.08
$
0.38
$
0.82
Diluted EPS
$
0.14
$
0.07
$
0.37
$
0.78
Adjusted basic EPS
$
0.21
$
0.11
$
0.58
$
1.03
Adjusted diluted EPS
$
0.20
$
0.11
$
0.56
$
0.98
(a)
Tax adjustments for the three and twelve
months ended December 31, 2023 reflect a normalized tax rate of
18.1% and 22.1% compared to our effective tax rate of 20.6% and
20.2%, respectively. Our effective tax rate for the three months
ended December 31, 2023 includes discrete tax expenses related to
state tax audit settlements and stock options exercises, partially
offset by the tax benefits from a state franchise tax adjustment
and other miscellaneous items. Our effective tax rate for the
twelve months ended December 31, 2023 includes the tax benefits
resulting from the exercise of stock options and prior period
return-to-provision adjustments, partially offset by the impact of
a discrete tax expense related to a change in the indefinite
reinvestment assertion for one jurisdiction and other miscellaneous
items. Tax adjustments for the three and twelve months ended
December 31, 2022 reflect a normalized tax rate of 25.2% and 24.6%
compared to our effective tax rate of 30.2% and 23.4%,
respectively. Our effective tax rate for the three months ended
December 31, 2022 includes discrete tax expense associated with
withholding taxes related to the repatriation of foreign earnings
and share-based compensation activity. Our effective tax rate for
the twelve months ended December 31, 2022 includes discrete tax
expenses related to the impact of the revaluation of deferred tax
liabilities as a result of state tax law changes, the exercise of
stock options and return to provision items, partially offset by a
tax benefit from withholding taxes related to the repatriation of
foreign earnings.
(b)
Represents non-cash stock-based
compensation expense related to equity awards issued to management,
employees, and directors. Beginning in the three months ended July
2, 2022, the adjustment includes only expense related to awards
issued under the 2017 Equity Incentive Plan, which were awards
granted prior to the effective date of Hayward’s IPO, whereas in
prior periods, the adjustment included stock-based compensation
expense for all equity awards. Under the current presentation, the
stock-based compensation adjustment for the year ended December 31,
2022 would have been $0.4 million.
(c)
Represents unrealized non-cash losses
(gains) on foreign denominated monetary assets and liabilities and
foreign currency contracts.
(d)
Adjustments in the fiscal quarter ended
December 31, 2023 are primarily driven by a $6.7 million of costs
related to the discontinuation of a product line leading to an
impairment of the associated fixed assets, inventory and intangible
assets.
Adjustments in the fiscal quarter ended
December 31, 2022 include a $2.4 million gain resulting from the
release of certain reserves associated with the exit of an
early-stage product line discontinued in 2021, partially offset by
separation costs associated with a reduction-in-force.
Adjustments in the year ended December 31,
2023 primarily include $6.7 million of costs related to the
discontinuation of a product line leading to an impairment of the
associated fixed assets, inventory and intangible assets, $2.4
million related to programs to centralize and consolidate
manufacturing operations and professional services in Europe, $1.9
million of costs associated with the relocation of the corporate
headquarters to Charlotte, North Carolina, $1.2 million separation
costs associated with the 2022 cost reduction program and $0.8
million of costs associated with integration costs from prior
acquisitions.
Adjustments in the year ended December 31,
2022 primarily include $5.0 million of costs associated with the
relocation of the Corporate headquarters, $2.9 million separation
costs associated with a reduction-in-force, $1.9 million
transaction costs associated with the acquisition of the Specialty
Lighting Business, partially offset by a $2.4 million gain
resulting from the release of certain reserves associated with the
exit of an early-stage product line discontinued in 2021.
(e)
Adjustments in the fiscal quarter ended
December 31, 2023 are primarily related to programs to centralize
and consolidate operations and professional services in Europe.
Adjustments in the fiscal quarter ended
December 31, 2022 primarily includes a $0.7 million non-cash
increase in cost of goods sold resulting from the fair value
inventory step-up adjustment recognized as part of the purchase
accounting for the Specialty Lighting Business, $0.7 million of
transitional expenses incurred to enable go-forward public company
regulatory compliance, and other immaterial items.
Adjustments in the year ended December 31,
2023 primarily include $1.8 million related to inventory and fixed
asset write-offs in Europe and $1.5 million of costs incurred
related to the selling stockholder offerings of shares in March,
May and August 2023, which are reported in SG&A in our
consolidated statements of operations.
Adjustments in the year ended December 31,
2022 primarily include $5.5 million of expenses associated with the
discontinuation of a product joint development agreement, a $3.3
million non-cash increase in cost of goods sold resulting from the
fair value inventory step-up adjustment recognized as part of the
purchase accounting for the Specialty Lighting Business, $2.3
million of transitional expenses incurred to enable go-forward
public company regulatory compliance, $1.4 million of costs
incurred related to the selling stockholder offering of shares in
May 2022, which are reported in SG&A in our consolidated
statements of operations, $0.9 million of expenses related to the
Corporate headquarters transition, $0.2 million bad debt reserves
related to certain customers impacted by the conflict in Russia and
Ukraine, and other immaterial items, partially offset by subsequent
collections and $1.1 million of gains resulting from an insurance
policy reimbursement related to the fire incident in our
manufacturing and administrative facilities in Yuncos, Spain.
(f)
The tax effect represents the immediately
preceding adjustments at the normalized tax rates as discussed in
footnote (a) above.
(g)
The adjustments for the twelve months
ended December 31, 2022 represent adjustments related to the
acquisition of the Specialty Lighting Business as if the
acquisition had occurred at the beginning of the period.
Segment Reconciliations
Following is a reconciliation from income from operations before
income taxes to consolidated segment income and segment income to
adjusted segment income for the North America (“NAM”) and Europe
& Rest of World (“E&RW”) segments:
(Dollars in thousands)
Three Months Ended
Three Months Ended
December 31, 2023
December 31, 2022
Total
NAM
E&RW
Total
NAM
E&RW
Net sales
$
278,469
$
238,150
$
40,319
$
258,967
$
216,809
$
42,158
Gross profit
137,138
121,730
15,408
109,492
93,130
16,362
Gross profit margin %
49.2
%
51.1
%
38.2
%
42.3
%
43.0
%
38.8
%
Income from operations before income
taxes
$
39,093
$
22,890
Expenses not allocated to segments
Corporate expense, net
8,882
6,142
Acquisition and restructuring related
expense (income)
6,993
(1,337
)
Amortization of intangible assets
7,584
8,301
Interest expense, net
17,645
16,282
Other (income) expense, net
(1,247
)
(3,107
)
Segment income
$
78,950
$
71,079
$
7,871
$
49,171
$
40,773
$
8,398
Segment income margin %
28.4
%
29.8
%
19.5
%
19.0
%
18.8
%
19.9
%
Depreciation
$
2,904
$
2,658
$
246
$
4,809
$
4,614
$
195
Amortization
1,692
1,692
—
1,656
1,656
—
Stock-based compensation (a)
31
20
11
(617
)
(566
)
(51
)
Other (b)
—
—
—
568
716
(148
)
Total adjustments
4,627
4,370
257
6,416
6,420
(4
)
Adjusted segment income
$
83,577
$
75,449
$
8,128
$
55,587
$
47,193
$
8,394
Adjusted segment income margin %
30.0
%
31.7
%
20.2
%
21.5
%
21.8
%
19.9
%
(a)
Represents non-cash stock-based
compensation expense related to equity awards issued to management,
employees, and directors.
(b)
Adjustments in the fiscal quarter ended
December 31, 2022 for NAM primarily includes a $0.7 million
non-cash increase in cost of goods sold resulting from the fair
value inventory step-up adjustment recognized as part of the
purchase accounting for the Specialty Lighting Business
Adjustments in the fiscal quarter ended
December 31, 2022 for E&RW primarily includes collections of
previously reserved bad debt expense related to certain customers
impacted by the conflict in Russia and Ukraine.
(Dollars in thousands)
Twelve Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
Total
NAM
E&RW
Total
NAM
E&RW
Net sales
$
992,452
$
823,276
$
169,176
$
1,314,136
$
1,108,859
$
205,277
Gross profit
476,950
410,641
66,309
597,035
514,855
82,180
Gross profit margin %
48.1
%
49.9
%
39.2
%
45.4
%
46.4
%
40.0
%
Income from operations before income
taxes
$
101,087
$
234,237
Expenses not allocated to segments
Corporate expense, net
30,147
30,151
Acquisition and restructuring related
expense
13,213
8,162
Amortization of intangible assets
30,361
32,129
Interest expense, net
73,584
51,387
Other (income) expense, net
551
(51
)
Segment income
$
248,943
$
215,425
$
33,518
$
356,015
$
308,627
$
47,388
Segment income margin %
25.1
%
26.2
%
19.8
%
27.1
%
27.8
%
23.1
%
Depreciation
$
15,550
$
14,610
$
940
$
17,815
$
17,049
$
766
Amortization
6,718
6,718
—
6,265
6,265
—
Stock-based compensation (a)
482
437
45
(434
)
(494
)
60
Other (b)
503
503
—
9,534
9,332
202
Total adjustments
23,253
22,268
985
33,180
32,152
1,028
Adjusted segment income
$
272,196
$
237,693
$
34,503
$
389,195
$
340,779
$
48,416
Adjusted segment income margin %
27.4
%
28.9
%
20.4
%
29.6
%
30.7
%
23.6
%
(a)
Represents non-cash stock-based
compensation expense related to equity awards issued to management,
employees, and directors. Beginning in the three months ended July
2, 2022, the adjustment includes only expense related to awards
issued under the 2017 Equity Incentive Plan, which were awards
granted prior to the effective date of the IPO, whereas in prior
periods, the adjustment included stock-based compensation expense
for all equity awards. Under the current presentation, the
stock-based compensation adjustment for the twelve months ended
December 31, 2023 would have been an income of $0.7 million and
expense of $0.1 million for NAM and E&RW, respectively.
(b)
Adjustments in the year ended December 31,
2023 for NAM include miscellaneous items we believe are not
representative of our ongoing business operations.
Adjustments in the year ended December 31,
2022 for NAM include $5.5 million of expenses associated with the
discontinuation of a product joint development agreement and a $3.3
million non-cash increase in cost of goods sold resulting from the
fair value inventory step-up adjustment recognized as part of the
purchase accounting for the Specialty Lighting Business, and other
immaterial items.
Adjustments in the year ended December 31,
2022 for E&RW include $0.2 million bad debt reserves related to
certain customers impacted by the conflict in Russia and Ukraine
partially offset by subsequent collections.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240229946063/en/
Media Relations: Tanya McNabb tmcnabb@hayward.com
Investor Relations: Kevin Maczka
investor.relations@hayward.com
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