Hayward Q3 FY2026 Earnings: Margin Expansion Drives Faster Profit Growth

Hayward (NYSE: HAYW) reported Q3 FY2026 net sales of $260.1 million, up 6% year over year, while diluted EPS increased 36% to $0.15. For the quarter ended September 26, 2026, operating margin expanded 250 basis points as lower SG&A and interest expense helped net income grow substantially faster than revenue.

Core Earnings Data

Revenue growth reflected favorable net pricing, which offset inflation and tariffs, together with modest volume growth. Gross margin improved only slightly because a more favorable North American sales mix was partly offset by inflation exceeding pricing benefits within both operating segments.

Profit growth was stronger further down the income statement. SG&A declined 3% because the prior-year quarter included a nonrecurring litigation expense, while net interest expense fell 30% to $7.9 million.

Adjusted EBITDA margin, a non-GAAP measure, increased 60 basis points to 24.8%. Non-GAAP adjusted diluted EPS rose 29% to $0.18.

Business and Segment Performance

North America drove consolidated growth, while Europe and the rest of the world contracted. The regional mix shift also supported the slight improvement in consolidated gross margin.

North American sales benefited from favorable pricing that offset inflation and tariffs, as well as higher volume. Adjusted segment income increased 11% to $68.8 million.

Europe and Rest of World sales declined because geopolitical conflicts in the Middle East reduced volume, while net pricing decreased modestly. Adjusted segment income fell 4% to $6.4 million.

Profitability, Cash Flow, and Balance Sheet

The 250-basis-point operating margin expansion was substantially larger than the gross margin improvement. SG&A declined to 22.9% of sales from 25.1%, more than offsetting a 21% increase in research, development, and engineering expense to $8.6 million. Hayward attributed the higher RD&E spending to new product development, product performance improvements, and additional specialized engineering talent.

Cash flow was weaker despite higher earnings, but the cash flow figures cover the first nine months rather than Q3 alone. Nine-month operating cash flow declined by $57.5 million to $225.5 million, reflecting the timing of collections and inventory purchases and higher payments for customer rebates and incentive plans.

Inventory increased to $245.5 million from $210.7 million at the end of fiscal 2025. Cash and cash equivalents fell to $236.3 million, but short-term investments rose to $239.2 million, leaving a combined $475.4 million in cash and short-term investments. Hayward also had $422.3 million available under its revolving credit facilities and reported net leverage of 1.5 times.

The company spent $115.3 million on share repurchases during the first nine months of FY2026. This capital allocation contributed to financing cash outflow but does not, by itself, indicate management’s view of the stock’s valuation.

FY2026 Guidance

Hayward raised its full-year outlook based on positive pricing, technology adoption, and execution across the business. The sales growth range now extends one percentage point above the previous target, while both ends of the adjusted EPS range increased.

The adjusted EPS outlook is non-GAAP, and Hayward did not provide a reconciliation to projected GAAP diluted EPS because it said certain future adjustments could not be estimated accurately.

Management Commentary

CEO Kevin Holleran said data from Hayward’s primary U.S. channel partners indicated healthy product demand, market-share gains, and balanced channel inventories. He also said orders under the early-buy program for the 2027 pool season were ahead of the prior year in North America.

Management continues to emphasize the installed-base aftermarket model and adoption of its SmartPad products. The aftermarket accounts for approximately 85% of North American residential pool net sales, making replacement and technology-upgrade demand an important component of the company’s growth strategy.

Recent Insider Transactions

The supplied six-month summary reports 599,187 shares purchased and 435,278 shares sold across 32 transactions, resulting in net purchases of 163,909 shares. However, the latest individual records are concentrated in direct sales and derivative-security exercises, so the transaction types should be considered separately.

The other recent records included three derivative-security exercises by Holleran at $1.40 per share and one stock award to director Stephen J. Felice. Derivative exercises and stock grants are not equivalent to open-market purchases, and the disclosed transactions alone do not establish insiders’ views of Hayward’s prospects.

Risks Investors Should Watch

• Inflation and tariffs: Pricing offset these costs at the sales level, but inflation slightly exceeded pricing benefits within both segments and pressured segment gross margins.
• International weakness: Europe and Rest of World sales fell 6%, with lower volume tied partly to geopolitical conflicts in the Middle East.
• Cash conversion: Nine-month operating cash flow declined even as net income increased, reflecting working-capital timing, inventory purchases, rebates, and incentive payments.
• Higher inventory: Inventory rose by approximately $34.8 million from fiscal year-end, making future sell-through and working-capital management important to monitor.
• Execution behind raised guidance: The higher outlook depends on continued price realization, technology adoption, and operating execution through the remainder of FY2026.

Summary

Hayward’s Q3 FY2026 results combined moderate sales growth with faster profit expansion, primarily because North American growth, lower SG&A, and reduced interest expense outweighed international weakness and ongoing cost inflation. The raised full-year guidance points to confidence in continued execution, while cash conversion, inventory levels, regional performance, and the balance between pricing and inflation remain the main areas to monitor.