This article first appeared on GuruFocus .
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Net Sales:Increased 6% to $318 million in Q2 2026.
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North America Sales:Up 9%, driven by 7% price realization and 2% volume growth.
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Europe and Rest of World Sales:Declined 8% to $41 million.
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Gross Profit Margin:Declined 50 basis points to 48.7%.
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Adjusted EBITDA:Increased 5% to $93 million, with a margin of 29.1%.
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Adjusted Diluted EPS:Increased 8% to $0.26.
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Net Leverage:Reduced to 1.5 times, the lowest level since IPO.
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Free Cash Flow:$154 million in the first half of 2026.
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Share Repurchases:$64 million spent to repurchase 4.4 million shares.
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Full Year 2026 Guidance:Net sales expected to increase approximately 5%, adjusted diluted EPS to increase 9% to 13%.
Release Date: July 29, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Net sales increased by 6% in the second quarter and 9% in the first half, driven by positive price realization and stable volume.
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Completed a comprehensive debt refinancing, reducing the cost of capital by approximately $6 million annually and extending maturities.
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Reduced net leverage to 1.5 times, the lowest level since the IPO in 2021, while increasing share repurchases.
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Continued solid demand for discretionary product categories such as salt chlorine generators, automation, and lighting.
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Maintained guidance for full year 2026 with expected net sales increase of approximately 5% and adjusted diluted EPS increase of 9% to 13%.
Negative Points
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Gross profit margin declined modestly in the second quarter due to incremental inflation in specialty metals, freight, and resin costs.
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Europe and rest of world sales declined 8% due to macroeconomic conditions and geopolitical disruptions.
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Adjusted EBITDA margin declined 40 basis points year-over-year to 29.1%.
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Faced challenges over the past 12 months, including tariffs, commodity inflation, and higher transportation costs.
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Inventory levels in the channel are expected to climb as the year progresses, potentially impacting cash flow.
Q & A Highlights
Q: Given the news in the industry with Pentair's declines and channel rightsizing, could you provide an estimate of your sellout to customers and how it varies by customer? Also, how many days of inventory are in the channel now, and how does it compare to pre-COVID levels? A: Kevin Holleran, President and CEO, explained that Hayward feels balanced with their inventory in the channel, ending Q2 at very normal levels. They expect another net reduction in Q3, although not as significant as in Q2. The company has improved processes with North American channel partners, sharing information on inventory levels and sales expectations. Eifion Jones, CFO, added that they typically operate with just over four months' worth of inventory in the channel, and they feel good about their setup for Q3 and Q4.
Q: Regarding competitor dislocation, are there any areas where you might be benefiting from this? A: Kevin Holleran noted that Hayward has been gaining market share over a longer period, driven by a consistent strategy to grow greater than the market. The company has been executing a multi-pronged playbook, including product innovation, brand building, and supply chain capabilities, which have contributed to their share gains.
Q: Can you discuss how you see gross margins trending into Q3 and Q4, and how you're managing price-cost issues? A: Eifion Jones stated that they expected a lower sequential gain in Q2 compared to the prior year but were pleased with the gross margin gain achieved. They have reacted to inflationary pressures with surcharges and expect margins to decrease in Q3 due to lower leverage, with an improvement in Q4. They aim to maintain gross margins in line with last year, which was a record level.
Q: How should we think about your ability to continue leveraging price, and are you facing any pushback from the channel? A: Kevin Holleran expressed confidence in passing along dollar-for-dollar impacts of inflationary pressures. They are focusing on cost-out and productivity projects to protect structural margins, aiming to limit price increases to necessary levels while leveraging their facilities to maintain margins.
Q: Regarding market share gains, how do you plan to maintain or accelerate these gains? A: Kevin Holleran emphasized that their share gains are durable and sticky, driven by better storytelling and product innovation that resonates with dealers. They focus on helping dealers succeed and continue to offer a multi-pronged approach involving commercial operations, supply chain, and product innovation to maintain their positive trajectory.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
