Hayward Holdings Inc. (HAYW)

A. Company Overview

Hayward Holdings Inc. is a preeminent global designer, manufacturer, and marketer specializing in a comprehensive range of pool equipment and associated automation systems. Founded in 1925, the organization has evolved into an industry leader with a diverse portfolio that caters to both residential and commercial pool owners. The core of Hayward's business model is built around the growing outdoor living space, which has created attractive market characteristics including robust aftermarket opportunities that encompass repair, replacement, remodeling, and upgrades of existing pool equipment.

A significant portion of Hayward's sales volume—approximately 80%—comes from aftermarket products, highlighting the company's enduring relationships with key channel partners and customers. The firm prides itself on technological innovation and the delivery of environmentally sustainable products that enhance the outdoor living experience for pool owners, ensuring efficient water quality maintenance, comfort, and ease of use.

B. Business Segments

Hayward operates within a global pool equipment market with an estimated installed base of approximately 25 million pools worldwide. The company's business segments are classified into two major categories: North America (NAM) and Europe & Rest of World (E&RW). North America and Europe represent the predominant markets, accounting for about 68% of the global installed base and 84% of total equipment sales.

For Fiscal Year 2023, the North American segment generated an estimated 83% of total net sales, while E&RW contributed around 17%. This division underlines the company's strategic commitment to leveraging market opportunities within diverse geographic regions.

North America

The North American business segment encompasses the United States and Canada. Hayward’s approach in this region involves direct engagement with specialized pool distributors, major retailers, and pool builders, which are supported by dedicated field teams. Logistics for U.S. trade customer shipments are managed through distribution centers located on both the East Coast and West Coast based on the customer's proximity.

Europe and Rest of World

Hayward’s E&RW segment includes all markets outside of the U.S. and Canada, with Europe and Australia being notable contributors. The sales strategy in these regions echoes that of North America, relying on localized distribution centers in France and Spain for customer shipment fulfillment, as well as smaller regional hubs in Australia. Additional geographical markets are accessed through U.S.-based regional managers who work with established distributors.

C. Products and Services

Since its inception, Hayward has provided a growing array of pool equipment marked by cutting-edge features and high quality. The product lineup includes high efficiency variable speed pumps, filters, robotic cleaners, energy-efficient heaters, LED lighting, water sanitization systems, safety equipment, and automated cleaning systems. These products are integrated into the SmartPad™ platform, which connects users through IoT technology for streamlined pool management.

The company focuses on sustainability in its product offerings, ensuring that equipment is environmentally friendly with reduced energy consumption and chemical usage. Hayward's innovative designs, such as high-capacity cartridge filters, underscore the commitment to products that are not only effective but also capable of facilitating substantial long-term savings for pool owners.

The diverse array of products also extends across different pool types, including in-ground and above-ground variants, which are diversified into entry, mid-range, and premium segments.

D. Customer Base

Hayward's products are sold through various channels predominantly to specialty distributors. This channel accounts for a substantial part of the company's sales and facilitates connections with pool builders and service professionals. In Fiscal Year 2023, one customer represented approximately 36% of net sales; however, other customers did not exceed 10%, allowing for a relatively stable customer concentration profile.

E. Raw Materials and Suppliers

With longstanding relationships with approximately 700 suppliers, Hayward strategically secures a range of assembled components and raw materials, such as metals and plastics, necessary for manufacturing its diverse portfolio. Agreements with suppliers typically provide fixed pricing, mitigated from commodity price fluctuations, and a focus is maintained on quality through supplier audits and evaluations.

F. Sales Channels

The company's sales channels are multifaceted, encompassing specialty distributors, direct sales to large builders and retailers, and support for buying groups. This structured sales network allows Hayward to efficiently reach its clients while solidifying long-term partnerships that enhance growth and market reach.

G. Seasonality

Sales for Hayward are subject to seasonality, with peak demand occurring in the second and fourth quarters, which aligns with the summer pool season. Anticipatory buying behaviors lead to increased sales during this time, influenced by cyclical factors in consumer demand.

H. Competition

The market landscape for Hayward is competitive and characterized by both large multinational corporations and regional players. The company leverages its strong brand recognition, loyalty among trade customers, and extensive product range to compete effectively. A variety of competitors vie for market share through competitive pricing strategies, especially in non-engineered products.

I. Intellectual Property

Hayward's innovation is supported by a robust intellectual property portfolio comprising numerous patents and trademarks that ensure protection over its unique technologies and product designs. The company actively manages its intellectual property rights through stringent monitoring and, when necessary, takes legal action against infringers.

J. Regulatory Compliance

Hayward adheres to a broad spectrum of regulatory standards at both local and international levels, which includes compliance with product safety and environmental legislation. The increasing complexity and number of regulations present an ongoing challenge, necessitating proactive strategies to ensure adherence and minimize potential liabilities.