Hayward Holdings Inc.

04/29/2026 | Press release | Distributed by Public on 04/29/2026 05:07

Quarterly Report for Quarter Ending March 28, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Company
The Company is a leading global specialty water management company focused on designing and manufacturing pool and outdoor living technology and industrial flow control products. The Company benefits from a large installed base, recurring aftermarket demand (such as the ongoing repair, replacement, remodeling and upgrading of equipment for existing pools) and from a history of innovation, which together support long-term growth and cash generation. Our engineered products, which include various energy-efficient and more environmentally sustainable offerings, enhance the pool owner's outdoor living lifestyle while also delivering high quality water, pleasant ambiance and ease of use for the ultimate backyard experience. Aftermarket replacements and upgrades to higher value IoT and energy efficient models are a primary growth driver for our business.
We have an estimated North American residential pool market share of approximately 33%. 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. Our product replacement cycle of approximately eight to 11 years drives multiple replacement opportunities over the typical life of a pool, creating opportunities to generate aftermarket product sales as pool owners repair, remodel and upgrade their pools. We estimate aftermarket sales based upon feedback from certain representative customers and management's interpretation of available industry and government data, and not upon our GAAP net sales results.
The Company has seven manufacturing facilities worldwide, which are located in North Carolina, Georgia, Tennessee, Rhode Island, Spain (two) and China, and other facilities in the United States, Canada, France and Australia.
Segments
Our business is organized into two reportable segments: North America ("NAM") and Europe & Rest of World ("E&RW"). The Company determined its reportable segments based on how the Chief Operating Decision Maker ("CODM") reviews the Company's operating results in assessing performance and allocating resources. The Company's CODM is the President and Chief Executive Officer.
NAM manufactures and sells a complete line of residential and commercial swimming pool equipment and supplies in the United States and Canada, and manufactures and sells flow control products.
E&RW manufactures and sells residential and commercial swimming pool equipment and supplies in Europe, Central and South America, the Middle East, Australia and other Asia Pacific countries.
NAM accounted for 82% of total net sales for both the three months ended March 28, 2026 and March 29, 2025, and E&RW accounted for 18% of total net sales for both the three months ended March 28, 2026 and March 29, 2025.
Factors Affecting the Comparability of our Results of Operations
Our results of operations for the three months ended March 28, 2026 and March 29, 2025 have been affected by the following, among other events, which must be understood to assess the comparability of our period-to-period financial performance and condition.
Our fiscal quarters end on the Saturday closest to and before the calendar quarter end, with the exception of year end which ends on December 31 of each fiscal year. The interim closing date for the first, second and third quarters of 2026 are March 28, June 27, and September 26, compared to the respective March 29, June 28, and September 27, 2025 dates. This resulted in one fewer working day for the three months ended March 28, 2026 compared to the 2025 period.
Seasonality
Our business is seasonal, with sales typically higher in the second and fourth quarters. During the second quarter of a fiscal year, sales are higher in anticipation of the start of the summer pool season. In the fourth quarter, we incentivize customers to buy and stock up in preparation for next year's pool season under an "Early Buy" program, which features price discounts and extended payment terms. Shipments for the 2025 Early Buy program began in the late third quarter and continued through approximately the first quarter of 2026. The favorable payment terms extended as part of the Early Buy program generally do not exceed 180 days. 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. Our accounts receivable balance increases from September to April as a result of the Early Buy extended terms and
increases through June due to higher sales in the second quarter. Also, because the majority of our sales are to distributors whose inventory of our products may vary, including due to reasons beyond our control, such as end-user demand, supply chain lead times and macroeconomic factors, our revenue may fluctuate from period to period.
Tariffs, Trade Restrictions and Other Geopolitical Events
The imposition of, and threat of imposition of, tariffs and other trade restrictions by the United States government in 2025, and tariffs and other trade restrictions announced by governments of other nations in response to these actions, have created substantial uncertainty in the global economy. On February 20, 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Following the Supreme Court's decision, the U.S. announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. Furthermore, the Company may be eligible to receive refunds of certain tariffs it paid that were levied under the IEEPA. If it is determined that the Company is eligible for refunds, the availability, amount and timing of such refunds is uncertain and subject to further developments. This uncertainty, as well as the direct impact of tariffs and other trade restrictions, may adversely affect the Company's business by reducing market demand for the Company's products, increasing the Company's supply costs that cannot be passed on to customers and/or adversely affecting the competitiveness of the Company's products against those of manufacturers not subject to such tariffs and trade restrictions. Geopolitical conflicts around the world have also created substantial uncertainty in the global economy, including as a result of sanctions and penalties imposed in response to these conflicts. In particular, armed conflicts in the Middle East and in Ukraine and Russia have adversely affected market demand in the Middle East and Asia, which has negatively impacted our results in our E&RW segment. See "-Segment-Europe & Rest of World," below. Given the nature of our business and global operations, if these or other geopolitical conflicts continue or worsen, our business and results of operations may be adversely affected.
Key Measures We Use to Evaluate Our Business
We consider a variety of financial and operating measures in assessing the performance of our business. The key GAAP measures we use are net sales, gross profit and gross profit margin, selling, general, and administrative expense ("SG&A"), research, development, and engineering expense ("RD&E"), operating income and operating income margin. The key non-GAAP measures we use are EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income, adjusted segment income margin, adjusted net income, adjusted net income margin, and adjusted diluted earnings per share.
For information about our use of Non-GAAP measures and a reconciliation of these metrics to the most directly comparable GAAP measures see "-Non-GAAP Reconciliations."
Results of Operations
Consolidated
The following tables summarize key components of our results of operations for the periods indicated. We derived the consolidated statements of operations for the three months ended March 28, 2026 and March 29, 2025 from our unaudited condensed consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following table summarizes our results of operations:
(In thousands) Three Months Ended
March 28, 2026 March 29, 2025
Net sales $ 255,216 $ 228,841
Cost of sales 136,515 123,588
Gross profit 118,701 105,253
Selling, general and administrative expense 62,586 56,995
Research, development and engineering expense 6,756 5,986
Acquisition and restructuring related expense 505 1,926
Amortization of intangible assets 6,366 6,835
Operating income 42,488 33,511
Interest expense, net 11,507 13,651
Loss on debt extinguishment 201 -
Other expense, net 666 1,179
Total other expense 12,374 14,830
Income from operations before income taxes 30,114 18,681
Provision for income taxes 6,755 4,348
Net income $ 23,359 $ 14,333
Adjusted net income (a)
$ 29,836 $ 22,110
Adjusted EBITDA (a)
$ 56,381 $ 49,102
(a) See "-Non-GAAP Reconciliations."
Net sales
Net sales increased to $255.2 million for the three months ended March 28, 2026 from $228.8 million for the three months ended March 29, 2025, an increase of $26.4 million, or 11.5%. See the segment discussion below for further information.
The year-over-year net sales increase was driven by the following:
Three Months Ended
March 28, 2026
Price, net of discounts and allowances 8.6 %
Currency and other 1.9
Volume 1.0
Total 11.5 %
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 and gross profit margin
Gross profit increased to $118.7 million for the three months ended March 28, 2026 from $105.3 million for the three months ended March 29, 2025, an increase of $13.4 million, or 12.8%.
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.
Selling, general, and administrative expense
Selling, general, and administrative expense ("SG&A") increased to $62.6 million for the three months ended March 28, 2026 from $57.0 million for the three months ended March 29, 2025, an increase of $5.6 million, or 9.8%, primarily due to the timing of certain sales expenses during the year, incremental advertising expense for trade shows and new customers, and increased software costs.
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.
Research, development, and engineering expense
Research, development, and engineering expense (RD&E) increased to $6.8 million for the three months ended March 28, 2026 from $6.0 million for the three months ended March 29, 2025, an increase of $0.8 million, or 12.9%. RD&E spend continues to be focused on new product development and new product performance improvements.
As a percentage of net sales, RD&E remained relatively consistent at 2.6% for both the three months ended March 28, 2026 and March 29, 2025.
Acquisition and restructuring related expense
For the three months ended March 28, 2026, we incurred $0.5 million of acquisition and restructuring related expense as compared to $1.9 million of expense for the three months ended March 29, 2025. The expense in the three months ended March 28, 2026 was driven by costs associated with restructuring actions, while the prior period expense was primarily driven by costs associated with the acquisition of ChlorKing HoldCo, LLC and related entities ("ChlorKing"), including the deferred purchase price treated as compensation cost over the 12-month service period from the date of acquisition.
Amortization of intangible assets
For the three months ended March 28, 2026, amortization of intangible assets decreased by $0.5 million compared to the three months ended March 29, 2025 due to the amortization pattern of certain intangible asset classes based on the declining balance method.
Operating income
For the three months ended March 28, 2026, operating income increased by $9.0 million due to the aggregated effect of the items described above.
Interest expense, net
Interest expense, net, decreased to $11.5 million for the three months ended March 28, 2026 from $13.7 million for the three months ended March 29, 2025, a decrease of $2.2 million, or 15.7%, primarily due to higher interest income on cash deposits and decreased net interest expense on bank debt.
Interest expense, net, for the three months ended March 28, 2026 consisted of $13.6 million of interest expense on the outstanding debt and $0.8 million of amortization of deferred financing fees, partially offset by $2.9 million of interest income on cash deposits. The effective interest rate on our borrowings, including the impact of interest rate hedges, was 6.21% for the three months ended March 28, 2026.
Interest expense, net, for the three months ended March 29, 2025 consisted of $14.3 million of interest expense on the outstanding debt and $0.9 million of amortization of deferred financing fees, partially offset by $1.5 million of interest income on cash deposits. The effective interest rate on our borrowings, including the impact of interest rate hedges, was 6.31% for the three months ended March 29, 2025.
Loss on extinguishment of debt
The $0.2 million loss on extinguishment of debt for the three months ended March 28, 2026 was incurred as a result of the voluntary repayment of the principal balance for a portion of other bank debt in February 2026. There was no loss on extinguishment of debt for the three months ended March 29, 2025.
Provision for income taxes
We incurred income tax expense of $6.8 million for the three months ended March 28, 2026, compared to income tax expense of $4.3 million for the three months ended March 29, 2025, an increase of $2.5 million, or 55.4%. While pretax income increased 61.2% for the three months ended March 28, 2026, the effective tax rate decreased, resulting in a 55.4% increase in income tax expense compared to the three months ended March 29, 2025.
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 and net income margin
As a result of the foregoing, net income increased by $9.0 million, or 63.0%, for the three months ended March 28, 2026.
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 net income and Adjusted net income margin
Adjusted net income increased to $29.8 million for the three months ended March 28, 2026 from $22.1 million for the three months ended March 29, 2025, an increase of $7.7 million, or 34.9%, driven primarily by increased net sales.
Adjusted net income margin increased to 11.7% for the three months ended March 28, 2026 compared to 9.7% for the three months ended March 29, 2025, an increase of 200 basis points.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA increased to $56.4 million for the three months ended March 28, 2026 from $49.1 million for the three months ended March 29, 2025, an increase of $7.3 million, or 14.8%, driven primarily by increased net sales.
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.
Segment Results of Operations
The Company manages its business primarily on a geographic basis. The Company's reportable segments consist of NAM and E&RW. We evaluate performance based on net sales, gross profit, segment income and adjusted segment income, and we use gross profit margin, segment income margin and adjusted segment income margin as comparable performance measures for our reporting segments.
Segment income represents segment net sales less cost of sales, segment SG&A and RD&E, excluding acquisition and restructuring related expense as well as amortization of intangible assets. A reconciliation of segment income to our operating income is detailed below. Adjusted segment income represents segment income adjusted for the impact of depreciation, amortization of intangible assets recorded within cost of sales and certain non-cash, nonrecurring or other items that are included in segment income that we do not consider indicative of the ongoing segment operating performance. See "-Non-GAAP Reconciliations" for reconciliations of these metrics to the most directly comparable GAAP metric.
North America
(Dollars in thousands) Three Months Ended
March 28, 2026 March 29, 2025
Net sales $ 209,797 $ 187,069
Gross profit $ 102,421 $ 91,243
Gross profit margin % 48.8 % 48.8 %
Segment income $ 50,506 $ 43,454
Segment income margin % 24.1 % 23.2 %
Adjusted segment income (a)
$ 57,335 $ 50,657
Adjusted segment income margin % (a)
27.3 % 27.1 %
(a) See "-Non-GAAP Reconciliations."
Net sales
Net sales increased to $209.8 million for the three months ended March 28, 2026 from $187.1 million for the three months ended March 29, 2025, an increase of $22.7 million, or 12.1%.
The year-over-year net sales increase was driven by the following factors:
Three Months Ended
March 28, 2026
Price, net of allowances and discounts 10.3 %
Volume 1.4 %
Currency and other 0.4 %
Total 12.1 %
The net sales increase for the three months ended March 28, 2026 was driven primarily by positive net price to offset inflation and tariffs, an increase in volume, and the favorable impact from foreign currency translation.
Gross profit and gross profit margin
Gross profit increased to $102.4 million for the three months ended March 28, 2026 from $91.2 million for the three months ended March 29, 2025, an increase of $11.2 million, or 12.3%.
Gross profit margin remained relatively flat at 48.8% for both the three months ended March 28, 2026 and March 29, 2025, primarily due to the offsetting impacts of positive net price, operating efficiencies and increased costs due to tariffs and inflation.
Segment income and segment income margin
Segment income increased to $50.5 million for the three months ended March 28, 2026 from $43.5 million for the three months ended March 29, 2025, an increase of $7.0 million, or 16.2%. This was primarily driven by an increase in net sales, partially offset by an increase in SG&A due to the timing of sales expenses and incremental advertising expenses.
Segment income margin increased to 24.1% for the three months ended March 28, 2026 from 23.2% for the three months ended March 29, 2025, an increase of 90 basis points. The increase was driven by the same factors discussed above in segment income.
Adjusted segment income and Adjusted segment income margin
Adjusted segment income increased to $57.3 million for the three months ended March 28, 2026 from $50.7 million for the three months ended March 29, 2025, an increase of $6.6 million, or 13.2%. This was driven by the increase in segment income as discussed above, after adjusting for the non-cash and specified costs discussed below in "- Non-GAAP Reconciliations."
Adjusted segment income margin increased to 27.3% for the three months ended March 28, 2026 from 27.1% for the three months ended March 29, 2025, an increase of 20 basis points.
Europe & Rest of World
(Dollars in thousands) Three Months Ended
March 28, 2026 March 29, 2025
Net sales $ 45,419 $ 41,772
Gross profit $ 16,280 $ 14,010
Gross profit margin % 35.8 % 33.5 %
Segment income $ 8,283 $ 6,538
Segment income margin % 18.2 % 15.7 %
Adjusted segment income (a)
$ 8,791 $ 6,952
Adjusted segment income margin % (a)
19.4 % 16.6 %
(a) See "-Non-GAAP Reconciliations."
Net sales
Net sales increased to $45.4 million for the three months ended March 28, 2026 from $41.8 million for the three months ended March 29, 2025, an increase of $3.6 million, or 8.7%.
The year-over-year net sales increase was driven by the following:
Three Months Ended
March 28, 2026
Currency and other 8.6 %
Price, net of allowances and discounts 0.7 %
Volume (0.6) %
Total 8.7 %
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.
Gross profit and Gross profit margin
Gross profit increased to $16.3 million for the three months ended March 28, 2026 from $14.0 million for the three months ended March 29, 2025, an increase of $2.3 million, or 16.2%.
Gross profit margin increased to 35.8% for the three months ended March 28, 2026 from 33.5% for the three months ended March 29, 2025, an increase of 230 basis points, primarily driven by operational efficiencies.
Segment income and Segment income margin
Segment income increased to $8.3 million for the three months ended March 28, 2026 from $6.5 million for the three months ended March 29, 2025, an increase of $1.8 million, or 26.7%. This was primarily driven by an increase in net sales and gross profit as discussed above.
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.
Adjusted segment income and Adjusted segment income margin
Adjusted segment income increased to $8.8 million for the three months ended March 28, 2026 from $7.0 million for the three months ended March 29, 2025, an increase of $1.8 million or 26.5%. This was primarily driven by the increase in net sales and gross profit as discussed above, after adjusting for the non-cash and specified costs described in "-Non-GAAP Reconciliations" below.
Adjusted segment income margin increased to 19.4% for the three months ended March 28, 2026 from 16.6% for the three months ended March 29, 2025, an increase of 280 basis points.
Non-GAAP Reconciliations
The Company uses EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income, adjusted segment income margin, adjusted net income, adjusted net income margin and adjusted diluted earnings per share to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies. These metrics are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.
EBITDA is defined as earnings before interest (including amortization of debt costs), income taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of restructuring related income or expenses, stock-based compensation, currency exchange items, and certain non-cash, nonrecurring, or other items that are included in net income and EBITDA that we do not consider indicative of our ongoing operating performance. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net sales. Adjusted segment income is defined as segment income adjusted for the impact of depreciation, amortization of intangible assets recorded within cost of sales, stock-based compensation and certain non-cash, nonrecurring or other items that are included in segment income that we do not consider indicative of the ongoing segment operating performance. Adjusted segment income margin is defined as adjusted segment income divided by segment net sales. Adjusted net income is defined as net income adjusted for the impact of restructuring related income or expenses, amortization, stock-based compensation, currency exchange items, and certain non-cash, nonrecurring, or other items that are
included in net income that we do not consider indicative of our ongoing operating performance. These adjustments are further adjusted to reflect a normalized tax rate. Adjusted net income margin is defined as adjusted net income divided by net sales.
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income, adjusted segment income margin, adjusted net income, adjusted net income margin and adjusted diluted earnings per share are not recognized measures of financial performance under GAAP. We believe these non-GAAP measures provide analysts, investors and other interested parties with additional insight into the underlying trends of our business and assist these parties in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, which allows for a better comparison against historical results and expectations for future performance. Management uses these non-GAAP measures to understand and compare operating results across reporting periods for various purposes including internal budgeting and forecasting, short and long-term operating planning, employee incentive compensation, and debt compliance. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP.
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income, adjusted segment income margin, adjusted net income, adjusted net income margin and adjusted diluted earnings per share are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly titled measures of other companies and may not be an appropriate measure for performance relative to other companies. EBITDA, adjusted EBITDA, adjusted segment income and adjusted net income should not be construed as indicators of a company's operating performance in isolation from, or as a substitute for, net income (loss) and segment income, which are prepared in accordance with GAAP. We have presented EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted segment income, adjusted segment income margin, adjusted net income, adjusted net income margin and adjusted diluted earnings per share solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. In the future we may incur expenses such as those added back to calculate adjusted EBITDA and adjusted net income. Our presentation of adjusted EBITDA, adjusted segment income and adjusted net income should not be construed as an inference that our future results will be unaffected by these items.
Net Income and Net Income Margin to Adjusted EBITDA and Adjusted EBITDA Margin
Following is a reconciliation from net income and net income margin to adjusted EBITDA and adjusted EBITDA margin:
(Dollars in thousands) Three Months Ended
March 28, 2026 March 29, 2025
Net income $ 23,359 $ 14,333
Depreciation 5,949 6,263
Amortization 8,181 8,535
Interest expense, net
11,507 13,651
Income taxes 6,755 4,348
Loss on debt extinguishment 201 -
EBITDA 55,952 47,130
Stock-based compensation (a)
- 46
Currency exchange items (b)
(76) (6)
Acquisition and restructuring related expense, net (c)
505 1,926
Other (d)
- 6
Total Adjustments 429 1,972
Adjusted EBITDA $ 56,381 $ 49,102
Net income margin 9.2 % 6.3 %
Adjusted EBITDA margin 22.1 % 21.5 %
(a)
Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. 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").
(b)
Represents unrealized non-cash (gains) losses on foreign denominated monetary assets and liabilities and foreign currency contracts.
(c)
Adjustments in the three months ended March 28, 2026 were primarily driven by $0.5 million of costs related to termination benefits associated with the restructuring of several teams.
Adjustments in the three months ended March 29, 2025 were primarily driven by $1.7 million of transaction and integration costs associated with the acquisition of the ChlorKing business and $0.2 million of separation costs for the consolidation of operations in North America.
(d)
Adjustments in the three months ended March 29, 2025 were primarily driven by losses on the sale of assets.
Net Income and Net Income Margin to Adjusted Net Income and Adjusted Net Income Margin
Following is a reconciliation from net income and net income margin to adjusted net income and adjusted net income margin:
(Dollars in thousands, except per share data) Three Months Ended
March 28, 2026 March 29, 2025
Net income $ 23,359 $ 14,333
Tax adjustments (a)
(277) (182)
Other adjustments and amortization:
Stock-based compensation (b)
- 46
Currency exchange items (c)
(76) (6)
Acquisition and restructuring related expense, net (d)
505 1,926
Other (e)
- 6
Total other adjustments 429 1,972
Loss on extinguishment of debt 201 -
Amortization 8,181 8,535
Tax effect (f)
(2,057) (2,548)
Adjusted net income $ 29,836 $ 22,110
Net income margin 9.2 % 6.3 %
Adjusted net income margin 11.7 % 9.7 %
Weighted average number of common shares outstanding, basic 217,359,824 215,962,018
Weighted average number of common shares outstanding, diluted 222,423,409 221,851,399
Basic EPS $ 0.11 $ 0.07
Diluted EPS $ 0.11 $ 0.06
Adjusted basic EPS $ 0.14 $ 0.10
Adjusted diluted EPS $ 0.13 $ 0.10
(a)
Tax adjustments for the three months ended March 28, 2026 reflected a normalized tax rate of 23.3% compared to the Company's effective tax rate of 22.4%. The Company's effective tax rate for the three months ended March 28, 2026 was primarily driven by tax benefits resulting from stock-based compensation. Tax adjustments for the three months ended March 29, 2025 reflected a normalized tax rate of 24.3% compared to the Company's effective tax rate of 23.3%. The Company's effective tax rate for the three months ended March 29, 2025 primarily included the tax benefits resulting from stock-based compensation.
(b)
Represents non-cash stock-based compensation expense related to equity awards issued to management, employees, and directors. 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.
(c)
Represents unrealized non-cash (gains) losses on foreign denominated monetary assets and liabilities and foreign currency contracts.
(d)
Adjustments in the three months ended March 28, 2026 were primarily driven by $0.5 million of costs related to termination benefits associated with the restructuring of several teams.
Adjustments in the three months ended March 29, 2025 were primarily driven by $1.7 million of transaction and integration costs associated with the acquisition of the ChlorKing business and $0.2 million of separation costs for the consolidation of operations in North America.
(e) Adjustments in the three months ended March 29, 2025 were primarily driven by losses on the sale of assets.
(f)
The tax effect represented the immediately preceding adjustments at the normalized tax rates as discussed in footnote (a) above.
Following is a reconciliation from segment income and segment income margin to adjusted segment income and adjusted segment income margin for NAM (dollars in thousands):
NAM Three Months Ended
March 28, 2026 March 29, 2025
Segment income $ 50,506 $ 43,454
Depreciation 5,013 5,500
Amortization 1,816 1,700
Other (a)
- 3
Total adjustments 6,829 7,203
Adjusted segment income $ 57,335 $ 50,657
Segment income margin 24.1 % 23.2 %
Adjusted segment income margin 27.3 % 27.1 %
(a) Adjustments in the three months ended March 29, 2025 for NAM represented losses on the sale of assets, which the Company believes are not representative of its ongoing business operations.
Following is a reconciliation from segment income and segment income margin to adjusted segment income and adjusted segment income margin for E&RW (dollars in thousands):
E&RW Three Months Ended
March 28, 2026 March 29, 2025
Segment income $ 8,283 $ 6,538
Depreciation 508 414
Total Adjustments 508 414
Adjusted segment income $ 8,791 $ 6,952
Segment income margin 18.2 % 15.7 %
Adjusted segment income margin 19.4 % 16.6 %
Liquidity and Capital Resources
Our primary sources of liquidity are net cash provided by operating activities and availability under the ABL Revolving Credit Facility ("ABL Facility").
Primary working capital requirements are for raw materials, components and certain finished goods inventories and supplies, payroll, manufacturing, freight and distribution, facility, and other operating expenses. Cash flows from operating activities and working capital requirements fluctuate during the year, driven primarily by the seasonal demand for our products, an Early Buy program, the timing of inventory purchases and receipt of customer payments, and as such, the utilization of the ABL Facility may fluctuate during the year. Our borrowing availability reported under the ABL Facility includes a reduction from the impact of accounts receivable for customers eligible under the Receivables Purchase Agreement.
Unrestricted cash and cash equivalents totaled $135.8 million as of March 28, 2026, which was a decrease of $193.8 million from $329.6 million at December 31, 2025. The decrease reflects the seasonal low in our cash cycle due to the extended payment terms under the Early Buy program. As of March 28, 2026 and December 31, 2025, the Company had $94.9 million and $69.5 million, respectively, in time deposits and commercial paper, which were included in short-term investments on the unaudited condensed consolidated balance sheets.
We focus on increasing cash flow, solidifying the liquidity position through working capital initiatives, and paying our debt obligations, while continuing to fund business growth initiatives and return of capital to stockholders. We believe that net cash provided by operating activities and availability under the ABL Facility will be adequate to finance our working capital requirements, inclusive of capital expenditures, and debt service over the next 12 months.
Beyond the next 12 months, our principal demand for funds will be for maintenance of our core business, to satisfy long-term contractual obligations, the Company's ongoing capital expenditure program designed to improve the effectiveness and capabilities of its facilities and technology, research and development activities, potential share repurchases and any potential merger and acquisition activity. The Company's material contractual obligations include outstanding debt, operating leases and finance leases. For additional details related to the Company's long-term contractual obligations for long-term debt, see Note 7 and for contractual obligations for leases seeNote 13. We believe the combination of our current cash level, net cash flows provided by operating activities, and availability under the ABL Facility will be sufficient to satisfy the above requirements.
Accounts Receivable Sales
On July 3, 2024, the Company entered into a Receivables Purchase Agreement under which it may offer to sell eligible accounts receivable. The agreement is uncommitted and the eligible accounts receivable to be sold under the agreement consist of up to $125 million in accounts receivable generated by sales to specified customers of the Company. The Company will be paid a discounted purchase price for each receivable sold. The discount rate used to determine the purchase price for the subject receivables is based upon an annual interest rate equal to the forward-looking term rate based on the secured overnight financing rate for the period of time between payment to the Company and the due date for the receivable plus a buffer period specific to the obligor, plus a margin applicable to the specified obligor.
Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the unaudited condensed consolidated balance sheets at the time of the sales transaction. For ease of administration, the Company collects customer payments related to the receivables sold and remits those payments to the purchaser. Proceeds received from the sales of accounts receivable are classified as operating cash flows in the unaudited condensed consolidated statements of cash flows. We record the discount in the "Other expense, net" line in the unaudited condensed consolidated statements of operations. The Company, as the servicer under the Receivables Purchase Agreement, continues to service the accounts receivable sold. No sales of accounts receivable occurred during the three months ended March 28, 2026. For the three months ended March 29, 2025, there were $99.1 million of proceeds from the sale of $100.0 million of receivables under the Receivables Purchase Agreement, and $100.0 million of sold receivables remained to be collected and remitted to the transferee as of March 29, 2025. The loss recognized on the sales for the three months ended March 29, 2025 was $0.9 million.
Credit Facilities
The First Lien Term Facility and ABL Facility (collectively, the "Credit Facilities") contain various restrictions, covenants and collateral requirements. Refer to Note 7. "Long-Term Debt, Net" of Notes to unaudited condensed consolidated financial statements for further information on the terms of the Credit Facilities. We also have a revolving credit facility for our Spain subsidiary in the amount of €0.5 million as a local source of liquidity. As of March 28, 2026, the Spain revolving facility balance was zero with a borrowing availability of €0.5 million.
Long-Term Debt, Net, consisted of the following (in thousands):
March 28, 2026 December 31, 2025
First Lien Term Facility, due May 28, 2028 $ 955,000 $ 955,000
Other bank debt 1,429 4,826
Finance lease obligations 3,422 3,639
Subtotal 959,851 963,465
Less: Current portion of the long-term debt (11,053) (13,261)
Less: Unamortized debt issuance costs (6,042) (6,657)
Total $ 942,756 $ 943,547
ABL Facility
The ABL Facility provides for an aggregate amount of borrowings up to $425.0 million, with a discretionary peak season commitment of $475.0 million, subject to a borrowing base calculation based on available eligible receivables, eligible inventory, and qualified cash in North America. Accounts receivable for customers whose receivables are eligible for purchase under the Receivables Purchase Agreement, regardless of whether any amount of outstanding accounts receivable with those specific customers have been sold under the Receivables Purchase Agreement, are not eligible accounts receivable under the ABL Facility. An amount of up to 30% (or up to 40% with agent consent) of the then-outstanding commitments under the ABL Facility is available to our Canada and Spain subsidiaries. A portion of the ABL Facility not to exceed $50 million is available for the issuance of letters of credit in U.S. Dollars, of which $20.0 million is available for the issuance of letters of credit in Canadian dollars. The maturity of the facility is February 25, 2028.
On June 18, 2025, the Company entered into the Fifth Amendment to its existing ABL Facility to extend the maturity date to February 25, 2028. The amendment also included the removal of the 10 basis points credit spread adjustment previously applicable to Secured Overnight Financing Rate ("Term SOFR") borrowings and the removal of the first-in, last-out subfacility.
The borrowings under the ABL Facility bear interest at a rate equal to the Term SOFR and a margin of between 1.25% to 1.75%, or at a base rate plus a margin of 0.25% to 0.75%.
The borrowings under the ABL Facility prior to the Fifth Amendment on June 18, 2025, bore interest at a rate equal to the Term SOFR plus a 0.10% credit spread adjustment and a margin of between 1.25% to 1.75%, or at a base rate plus a margin of 0.25% to 0.75% with no credit spread adjustment.
For the three months ended March 28, 2026, the average borrowing base under the ABL Facility was $161.5 million, and the average loan balance outstanding was zero. As of March 28, 2026, the loan balance was zero with a borrowing availability of $186.0 million.
For the year ended December 31, 2025, the average borrowing base under the ABL Facility was $153.3 million, and the average loan balance outstanding was zero. As of December 31, 2025, the loan balance was zero with a borrowing availability of $124.9 million.
First Lien Term Facilities
The Company's First Lien Term Facility bears interest at a rate equal to a base rate or Term SOFR, plus, in either case, an applicable margin. The applicable margin is 2.75% per annum with a 0.50% floor, with a stepdown to 2.50% per annum with a 0.50% floor when net secured leverage as defined by the First Lien Credit Agreement is less than 2.5x. The loan under the First Lien Term Facility amortizes quarterly at a rate of 0.25% of the original principal amount and requires a $2.5 million repayment of principal on the last business day of each March, June, September and December.
Under the agreement governing the First Lien Credit Facility (the "First Lien Credit Agreement"), the Company must make an annual mandatory prepayment of principal for between 0% and 50% of the excess cash and subject to permitted deductions, as defined in the First Lien Credit Agreement, generated in the prior calendar year. The amount due varies with the First Lien Leverage Ratio as defined in the First Lien Credit Agreement, from zero if the First Lien Leverage Ratio is less than or equal to 2.5x, to fifty percent if the First Lien Leverage Ratio is greater than 3.0x, in each case as of December 31 of the prior year. The First Lien Term Facility matures on May 28, 2028.
As of March 28, 2026, the balance outstanding under the First Lien Term Facility was $955.0 million.
For the three months ended March 28, 2026, the effective interest rate on borrowings under the First Lien Term Facility, including the impact of an interest rate hedge, was 5.97%. The effective interest rate is comprised of 6.30% for interest and 0.28% for financing costs, partially offset by 0.61% for interest income on the interest rate swaps.
Covenant Compliance
The Credit Facilities contain various restrictions, covenants and collateral requirements. As of March 28, 2026, we were in compliance with all covenants under the Credit Facilities.
Sources and Uses of Cash
Following is a summary of our cash flows from operating, investing, and financing activities:
(Dollars in thousands) Three Months Ended
March 28, 2026 March 29, 2025
Net cash used in operating activities $ (150,637) $ (5,850)
Net cash used in investing activities (32,164) (6,111)
Net cash used in financing activities (10,965) (3,735)
Effect of exchange rate changes on cash and cash equivalents (88) 440
Change in cash and cash equivalents $ (193,854) $ (15,256)
Net cash used in operating activities
Net cash used in operating activities increased to $150.6 million for the three months ended March 28, 2026 from $5.9 million for the three months ended March 29, 2025, an increase of $144.7 million, or 2,475.0%. The increase in cash used 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.
Net cash used in investing activities
Net cash used in investing activities was $32.2 million for the three months ended March 28, 2026 compared to net cash used in investing activities of $6.1 million for the three months ended March 29, 2025, an increase of $26.1 million, or 426.3%. The increase in net cash used was driven by the net purchases of short-term investments.
Net cash used in financing activities
Net cash used in financing activities was $11.0 million for the three months ended March 28, 2026 compared to net cash used in financing activities of $3.7 million for the three months ended March 29, 2025, an increase of $7.3 million, or 193.6%. The increase in net cash used was driven by higher purchases of common stock and payments of long-term debt.
Off-Balance Sheet Arrangements
We had $3.9 million of outstanding letters of credit on our ABL Facility as of each of March 28, 2026 and December 31, 2025.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein. The estimates that require management's most difficult, subjective or complex judgments are described in Part II, Item 7, under the heading "Critical Accounting Estimates" in our Annual Report on Form 10-K, which section is incorporated herein by reference.There have been no material changes to our critical accounting estimates during the three months ended March 28, 2026.
Recently Issued Accounting Standards
See Note 2. "Significant Accounting Policies" of Notes to our Unaudited Condensed Consolidated Financial Statements for additional information.
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