Hayward Holdings at William Blair Conference: Strategic Growth and Innovation

On Thursday, 05 June 2025, Hayward Holdings (NYSE:HAYW) presented at the 45th Annual William Blair Growth Stock Conference, offering a strategic overview of its position in the pool equipment industry. The company highlighted its robust market presence and growth potential, while also addressing challenges such as inflationary pressures and supply chain disruptions.

Key Takeaways

• Hayward has a strong aftermarket focus, with 85% of sales from existing pool owners.
• The company reported a 5-year sales CAGR of 7.5% and gross margins exceeding 50%.
• Hayward is investing in innovation, with new products like the OmniX control system.
• A significant opportunity exists in converting existing pools to smart systems.
• The company is committed to disciplined capital deployment and margin expansion.

Financial Results

• Sales have grown at a compound annual growth rate (CAGR) of 7.5% over five years.
• Gross margins have expanded by 600 basis points in the last five years, reaching over 50% in 2024.
• Adjusted EBITDA has seen a 5-year CAGR of 10%.
• Despite reduced volumes, gross margins have increased by nearly 400 basis points since 2021.

Operational Updates

• The aftermarket accounts for approximately 85% of net sales, with a significant installed base of 5.5 million in-ground pools in the US and nearly 25 million globally.
• Hayward’s vertically integrated manufacturing and distribution capabilities ensure 85% of products are built in the US.
• The company operates dedicated training and service centers in high-volume US markets, such as Dallas Fort Worth and the Carolinas.

Future Outlook

• Hayward aims for organic growth through product innovation and enhanced customer experience.
• The company plans to expand margins via productivity gains and a higher mix of high-margin technology products.
• Strategic acquisitions will complement organic growth, with a $6.5 billion opportunity in pool automation and control.
• New product innovations include the OmniX control system and microchannel technology heat pump.

Q&A Highlights

• Hayward’s pricing power in the aftermarket and supply chain efficiencies are key to maintaining gross margins.
• The company is embedding controls automation into individual equipment pieces, enhancing pool management ease for owners.
• Leadership expressed confidence in the resilience of the pool market and the company’s strategic direction.

In conclusion, Hayward Holdings remains focused on leveraging its strong market position and innovative product offerings to drive growth and shareholder value. For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Ryan Merkel, Building Products Analyst, William Blair: Alright. Hello, everyone. Good morning. Welcome to the Hayward presentation. Sorry, I’m late.

A little snafu with the schedule. I’m Ryan Merkel. I cover Building Products at William Blair. Before we begin, need to remind you that a complete list of disclosures and conflicts of interest is available on our website. With us today is Kevin Holleran, President and CEO Ivey and Jones, CFO and Stuart Baker, Vice President of Business Development.

For those that don’t know Hayward, Hayward is a leading pool equipment OEM known for pumps, filters, heaters and control systems. Roughly 75% of sales is tied to the aftermarket, which in my opinion allows for consistent earnings growth across the cycle. Hayward has done a nice job on margins despite pressures on discretionary sales. And with that, let me turn it over to Kevin.

Kevin Holleran, President and CEO, Hayward: Yeah. Thanks, Ryan. Morning, everyone. Thanks, Ryan, and the William Blair team for for for having us today. I know some in the room are new to the Hayward story, we’re gonna spend time giving a high level of what the company is and and the market the the pool market that we participate in.

Here on the first slide, you can you can see we are a we are a global but heavily concentrated in North America. Full line OEM, that’s the, that’s the bottom, right hand pie chart. And we’re a we’re a pure play. When I say pure play, 95% of our net sales is generated from the pool industry, primarily residential, with 5%, commercial and then, an industrial flow control business, as well. We have two segments.

North America, US and Canada is about 85% of our revenue, and Europe, rest of world represents the balance of of 15%. We serve all pool types, from in ground, commercial, and above ground pools. There’s a number of stats along the right hand, sorry, left hand panel there, on the on the slide. I’ll just draw your attention to a few. We we are just north of a billion dollars.

Over the last five years, we’ve had a CAGR of seven and a half percent, not necessarily linear through the COVID experience, but still seven and a half percent over that five year period. Our margins last year crested on a full year basis north of 50% gross margins. And from an adjusted EBITDA standpoint over that same five year period, we’ve posted a 10%, CAGR. We spend quite a bit of money on, on engineering, and innovation, and we protect that IP. And I would inch up, the percent that that Ryan had in his intro.

We’re actually closer based upon new new construction being down the last couple years. We’re actually closer to 85% of our, net sales is derived from an existing pool. So a pool, whether it’s break fix, a full scale remodel, or so or some form of of upgrade. We’ll talk more about that. Next slide.

I just wanna spend a moment. We are celebrating, our hundred year anniversary. We’re very proud of that. It is a rare feat. Research would indicate that less than 1% of companies reach that that milestone.

We are we are sharing it with a couple household names this year, namely Delta Airlines, Caterpillar, and Goodyear tire and rubber. But as we, as we celebrate, we reflect with great pride, you know, on what the last, hundred years has represented from the founding by Scottish immigrant as a tool and die maker in Brooklyn to Oscar Davis buying it in the sixties who really charted the current course that we’re on by entering the pool, market back, after he bought it in 1964 to the global public company that we are. For all of our accomplishments in the first hundred years, I’m confident that, that that our best days and greater days lie in the in the second century of our existence. Next slide. So where do we sit?

We really sit right here, as an anchor, in the backyard. We believe that that this desire for healthy outdoor living is a is a sustainable trend. Homeowners continue investing in their homes both in and outside, and oftentimes the pool is the center investment in that in that outdoor living. Things like the outdoor kitchen, the decking, the landscaping, the lighting are are frequently, you know, put in around the the pool there. Additionally, we’re also seeing increased demand for smart connected products in in the home.

That applies to the pool as well. We find that there really is high adoption rate at time of new construction, but there’s very low representation in the installed base around smart connected capabilities. It’s a huge opportunity for the industry, as well as as Hayward. And Stuart will spend a couple minutes talking about that shortly. Next slide.

So let me just talk about some of the long term dynamics around the the industry. You know, there are a couple other secular trends beyond just the the two that I mentioned on the prior slide. You know, migration patterns are generally to warmer climates where where pools are more prevalent. And then there’s there there there’s this ever growing demand for environmentally sustainable products, which our portfolio, participates in very well. More specific to the pool industry, there is a large installed base.

In The United States alone, there’s five and a half million in ground pools in existence today. Globally, there’s nearly 25,000,000 pools, and that increases every year as every year there are more pools that are built than there are decommissioned or taken offline. So it’s an ever growing, aftermarket. The average age, is at a high. We estimate it, to be about twenty three years.

Both the size of the aftermarket and the installed base really, do provide great, great tailwinds for, an an opportunity around aftermarket upgrade conversion modernization to increase the enjoyment, the ease of use, and the and the cost of ownership around the pool. I think it it is important to note of the pricing power that that our company and our industry has. You know, equipment in general is a pretty low percent of the overall construction cost somewhere between ten and fifteen percent. And when product fails, you know, you’re on the clock. You know, you need to get the get the get the water circulating.

You need to be treating and filtering the the water. The industry, is accustomed to annual price increases to at least offset inflation. And we’ve shown during the, the inflation post COVID and more recently around tariffs that we have the the ability to pass through off cycle price increases to preserve margins. Specifically, around Hayward on the far right hand side of the slide, you know, would be some deep rooted competitive advantages that I think strengthen our our market position and and drive long term growth. We have incredibly strong and and trusted brand.

Again, hundred years in the making. One of the largest installed bases out there. We do have a reputation in in the industry as an innovation leader. Again, Stuart will talk on some of the more recent innovations that that we’ve brought to the marketplace. During COVID and since, you know, our operational excellence and our supply chain capabilities were on full display as we were able to satisfy that demand surge and even more recently drive margin increases as the industry has normalized around lower volumes more recently.

And we do employ a more multipronged, multichannel go to market strategy, which I’ll touch on in just a moment. Next slide. Around our strategy, it really is driven around three main themes of, of organic growth, margin expansion, and disciplined capital deployment. You know, initially, you know, around organic growth, it really is around products and customer, customer experience and customer service levels. Our product roadmaps are really geared towards delivering solutions that transform the experience of water and make for more enjoyable pool ownership.

We’re spending quite a bit of effort around driving customer experience both at the channel level as well as at the dealer servicer builder level. You know, around margins, you know, we’ve, again, proven we’ve we’ve really shown the ability to drive margin expansion, you know, from already robust levels. You know, I would mention that our that our gross margins have expanded 600 basis points the last five years to 50.5% year ending 2024 and up nearly 400 basis points since 2021 despite reduced volumes, again, as the industry normalized post COVID. We do see opportunity to increase margin expansion around four key key pillars, productivity gains around operational excellence and automation in our facilities, a higher mix of higher margin technology products, operational leverage and supply chain capabilities as we increase our capacity utilization in our manufacturing facilities and then proactive price cost management. I’ll close on the on the slide really around disciplined capital allocation, you know, which really emphasizes investment in organic growth and balancing that with with some strategic acquisition opportunities.

We did one last year. We’re we’re about to anniversary Clor King, which was a great bolt on addition to augment our organic growth strategy around growing in the commercial segment. So in summary, I’m very confident in our that we have the right strategy in place to continue to drive growth and shareholder value creation. With that, I’ll turn it over to Ivan to walk through a couple of slides.

Ivey Jones, CFO, Hayward: Yes. Next slide. I mean Kevin mentioned it earlier on in the conversation. The strength of our industry is the resilience of the end market and is predicated on this tremendous aftermarket that we have today of around about 5,500,000 in ground pools inside The United States. I get asked we get asked a lot about new construction, but the fact of the matter is the majority of our financial earnings come from the installed base, which is growing every single year and has grown through each of the economic cycles represented on that slide in the yellow bars.

Even in the post pandemic period here, more pools were added. So approximately 300,000 pools have been added to the installed base from 2019 to where we are today. And that’s driving the recurring revenue stream that this industry has become accustomed to. What I would say, again, in terms of new construction, it’s important. But the majority of the earnings around equipment sales come from the lifetime annuity that’s created once that new equipment is installed on the pool pad.

Think almost a ratio of three to one, onetime at new construction, three times sales opportunity across the lifetime of that pool ownership. Most of that annuity is either semi or fully nondiscretionary. Once you own a pool, if we have any pool owners in the room, you know you’re managing that pool environment consistently and avoiding any breakage in the management of that pool. So that’s the engine of our industry. New construction is good, but this is the annuity factor that drives us as an organization.

Next slide please. In terms of exactly how that aftermarket breaks down, today we would say that we don’t have precise data, approximately 55% of the overall sales profile of Haywood is directed towards the aftermarket repair and replace. And again, can’t emphasize how critical it is as a pool owner that you make sure that your pool is operating on a continuous basis. You have very little time from the breakage of a filtration or a pump to saving that environment. Think in terms of twenty four to seventy two hours after which time if you haven’t made that repair, you have a compromised pool environment.

The other elements of the Pinwheel in terms of upgrading, upgrading for us, we define upgrading as additive to the pool pad. So if you’re a pool owner and you decide to put a heater onto your pool pad, that’s what we classify as an upgrade. Or if you have tab chlorination that you now switch to an inline salt chlorination system, that would be an upgrade. And then finally, remodel. Like anything in the home environment, you go through a cycle of remodel, whether it be your bathroom, your kitchen, similarly with the pool environment.

Every eight to ten years, you’ll be going through a cycle of remodel, the decking and most likely a full sweep of the pool equipment pad itself. And then the residual is the new construction, which you can see in the pie chart. Important, but it only represents approximately 15% today. We fight hard for the new construction because it creates that three year sorry, that thirty year annuity, that three lifetime turnover in the pool equipment. We’re focused in the aftermarket progressively as an organization through our product technology platforms.

We have an opportunity around moving technology in there at higher margin levels. So it’s a rich environment for us as a revenue driver for the organization. Next slide. I’ll finally close with just maybe quantifying exactly what that technology opportunity is. On the top left hand side, most pools that are in existence today are around twenty three years old.

Most of them, nearly two thirds of them, are what we call mechanically operated. So they’re switches that often require the homeowner to actually physically go out to the pool pad and make that switch change, either turn on the light or adjust the pump situation. You fast forward to today, nearly two thirds of pools are being installed with smart controls. And the differential in value to us as an OEM seller is significant. We’re talking about the mechanical pool in real pricing terms today around $4,000 a fully smart suited pool probably closer to around $16,000 So a quantumly larger sales opportunity for us as an organization.

Then you extrapolate that over the lifetime of pool ownership, it creates a tremendous amount of incremental revenue for us as an organization.

Stuart Baker, Vice President of Business Development, Hayward: Okay. I’m going to build on that theme a little bit and just explain to you what we mean about the opportunity the aftermarket. And I’ve really just chosen three things here: digital conversion, which is automation, IoT controls chemical conversion, which is salt chlorination as opposed to liquid or chlorine tablets and energy conversion. And the way to read the chart is the two gray columns. The first one, I’ll just use digital first, new construction take rate for digital controls, IoT controls.

If you’re building a new pool, 70% of people elect to get automation put onto the pool. But in the aftermarket, it’s only 35% penetrated. So we as Kevin was saying, we look at that and think, any pool owner, if they’re educated to the same level as they were are during new construction phase, why wouldn’t they want to have automation? Why wouldn’t they want to be able to run their pool from their phone and their app? So there’s a huge discrepancy between new and aftermarket.

So that opportunity gap, we’re really working hard to monetize that. Chemical conversion, swimming in a salt chlorine generated pool is like swimming in a big water softener. Again, similarly, rough just over a third of the aftermarket is penetrated. Variable speed pumps have become mandated. So you see a pretty high take rate on new construction.

The aftermarket is growing because as your single speed pumps come up for replacement, they have to be replaced with a variable speed. So this is a nice tailwind for the business. But in total, it’s around a 6,500,000,000 opportunity if we can get the installed base to the same level of automation and control as the new construction. I don’t have a lot of time, so I’m just going to briefly mention three pivotal products that we launched last year. On the left, the new heat pump, which also has the ability to chill water.

A lot of people you may all be many of you may have pools today, so you’re familiar with the benefits of heating a pool. But if you live in the Sunbelt, there’s also benefits of cooling the pool in the height of summer. And there’s a new trend around plunge pools, so you can actually turn your spa into a plunge pool. You can actually drop the temperature down to about 40 degrees if you so wish. So this microchannel technology heat pump is a bit of a breakthrough in the industry.

It was only introduced last year and now 80% of the units we sell today are of this technology. In the middle is talking about our app system for Omni. Omni is our automation platform. The Omni app for consumers has been a big differentiator for us. It’s been a great success for us.

But we launched the Pro app, which is a system for a special version of the app for our big service and builder customers, so that they can see all of their clients’ Omnis and they can the whole concept of who’s watching your water, they can actually see proactively whose pool may be in distress, see what pools are in alarm status so they can proactively go out and make a service call and fix the pool often before the homeowner even knows they have a problem. They can also do remote configuration, over the air updates and that sort of thing. So it’s a great convenience for the service company. And then lastly, on the right, our new lighting platform, which has directional lighting, also detachable cord, makes it super easy to install, super easy to service. And then finally, I’m just going to close on a breakthrough product that you may have heard Kevin talking about on the recent earnings call around a new Omni derivative called Omni X.

On the left hand side is a typical diagram of what we call a centralized control system. So if you were starting with a brand new pool, there will be a control panel on the wall with a breaker box and all of the various components hardwired into the control and you have IoT control. That’s perfect for brand new construction or a full remodel. But what about the aftermarket? What about all the installed pools out there that have no automation?

It’s quite a heavy barrier for a homeowner to maybe invest $3.3005 dollars to retroactively put a control box in. Also, there’s a barrier from the trade professional services don’t do a great job of going out trying to educate homeowners of the art of the possible. So we’ve actually started to with OmniX, started to embed controls automation onto individual pieces of equipment. So as your pump breaks, you buy a new pump and it comes with OmniX controls automatically embedded in the system. And as you replace other pieces of equipment, they can be added to that OmniX ecosystem, a bit like a ring doorbell strategy where you buy the doorbell, the security camera, and so on and so on.

So you can build a controls platform. And in the interest of time, I’m going to move on.

Kevin Holleran, President and CEO, Hayward: Okay. So we bring these industry leading products to market through multiple channels. Three quarters of our product is sold through distribution, names like Pool Corp, SRS, Heritage and then the and then the regional network of distributors out there. The remaining one quarter is split, between direct sales to either retailers, to esellers, or to some builders and and buying groups that have scale and inventory planning capabilities. You know?

So we really employ both a push working with our channel partners to ensure we got the right product, right location, right time, as well as a pull strategy working with the with the professionals, builders, the servicers to pull product through the distribution channel and out into the backyard. Next slide. One key strategy that we that we kicked off last year to pull more products through the channel are what we call Hayward hubs. They’re really targeting high volume US markets. Really, the first of the kind, no one else has has has has launched a concept like this, is to is really put in market dedicated training service and support centers to to support that local high volume region.

It’s very hands on where our trade professionals can learn about the features, the setup, the programming, the troubleshooting of any of the the equipment that they may encounter in the backyard. The feedback out of our initial pilot in Dallas Fort Worth has has encouraged us to expand this model to where we now have two additional ones open, support Carolinas and the greater Phoenix, Scottsdale area. And you can see with the crosshairs there, a couple other markets that I would anticipate opening facilities in SoCal, in the Atlanta Metro Area, as well as Florida, in the coming quarters. Next slide, we really touch on our on our manufacturing and our distribution capabilities. We do have a long history, proud history around lean manufacturing, and it’s resulted in a very agile and very efficient manufacturing distribution footprint that services sales into over a hundred countries.

We’re very vertically integrated, with shorter supply chains than than than many others that we compete against, highly automated facilities, with a proven ability to flex production up and down as as market demands and be able to deliver, margins with very limited incremental capital investment. We build approximately 85% of our product in The US, and that’s increasing as we accelerate the supply chain repositioning in the wake of the tariff disruption. And this has all really given us a competitive advantage, relative to other OEMs that rely more on Asia or or outsourcing, private labeling of their, of their product. Final slide, you know, just to culminate why, to invest in in Hayward is really centered around a couple, key themes here. Our leadership in a very attractive, pool industry known for recurring, aftermarket model and proven pricing power.

Secondly, really, these durable competitive advantages that we feel Hayward has centered around brand awareness, installed base, investing in innovation and technology, our lean manufacturing, vertically integrated, operations, and and and distribution footprint, and our multiple channel go to market strategy. Strong financial profile, with historic sales, CAGR in the mid to high single digits, and strong gross margins, at or over, 50%, and a commitment to sustainability, with many energy efficient, environmentally responsible products. So with that, I don’t know if well, we have thirty seconds left.

Ryan Merkel, Building Products Analyst, William Blair: I’ll ask one question. So yeah. There’s not many industrial companies with 50% gross margins, Kevin. Talk about some of the factors as to why you get that kind of margin.

Kevin Holleran, President and CEO, Hayward: Yeah. Well, you know, I I think it starts with the innovative products that we bring to the the the marketplace. We have pricing power, the durability, and the reliability of the aftermarket. The break fix is over 50% of our revenue, which you’re on the clock. When something fails, you’ve got somewhere between two and four days to kinda get that that price.

And you’re not replacing that equipment annually, so you don’t necessarily remember what you paid for the pump six years previously, and you know that you have to get it. So there is pricing power there. But, you know, I mean, I don’t mean to leave it to to last, but our supply chain and our operations team do a fantastic job of driving cost out on an annual basis to, to address the cost of good goods sold. Obviously, we’re in a very dynamic environment, around tariffs, but that’s on the heels of some hyperinflation, not that long ago. So the the ability to price that into the marketplace and our operations team taking the challenge annually to drive cost of goods lower is really the yin and the yang that’s been, allowing us to drive 50 plus percent gross margins.

Ryan Merkel, Building Products Analyst, William Blair: Alright. Well, we’re out of time. Thanks so much. Thanks. We’ll have a breakout session on the other side.

Kevin Holleran, President and CEO, Hayward: We’re upstairs upstairs in Richardson, I think it is.

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