Cuộc họp công bố kết quả kinh doanh Q3 2026 của Hayward Holdings (HAYW): Nâng triển vọng khi doanh thu tăng 6%

Nội dung chính

• Hayward Holdings báo cáo doanh thu thuần quý 3/2026 đạt 260 triệu USD, tăng 6% so với cùng kỳ năm trước, nhờ mức giá thuận lợi và sản lượng tăng.
• EBITDA điều chỉnh tăng 9% lên 65 triệu USD, trong khi biên EBITDA điều chỉnh tăng 60 điểm cơ bản lên 24,8%. EPS pha loãng điều chỉnh tăng 29% lên 0,18 USD.
• Doanh thu tại Bắc Mỹ tăng 9% lên 226 triệu USD, nhờ mức tăng giá thực tế 7% và sản lượng tăng 2%. Doanh thu tại Châu Âu và Phần còn lại của thế giới giảm 6% xuống 34 triệu USD, một phần do thời điểm ghi nhận đơn hàng.
• Ban lãnh đạo đã nâng triển vọng năm 2026 với mức tăng trưởng doanh thu thuần khoảng 5% đến 6% và EPS pha loãng điều chỉnh đạt 0,86 USD đến 0,88 USD, tương ứng mức tăng trưởng khoảng 12% đến 14%.
• Hơn 85% doanh thu đến từ lượng thiết bị đã lắp đặt sẵn. Ban lãnh đạo cho biết nhu cầu thị trường hậu mãi khả quan và sự tăng trưởng thị phần trên diện rộng tiếp tục bù đắp cho sự sụt giảm trong mảng xây dựng hồ bơi mới.
• Tỷ lệ đòn bẩy ròng duy trì ở mức 1,5 lần, mức thấp nhất kể từ đợt IPO năm 2021 của Hayward. Giá trị mua lại cổ phiếu từ đầu năm đến nay đạt khoảng 115 triệu USD.

Dữ liệu tài chính chính

Tính chung 9 tháng đầu năm 2026, doanh thu thuần tăng 8%, EBITDA điều chỉnh tăng 9% và EPS pha loãng điều chỉnh tăng 21%.

Kết quả kinh doanh và hoạt động

Lượng thiết bị đã lắp đặt của Hayward tiếp tục là nguồn cầu chính, chiếm hơn 85% doanh thu. Ban lãnh đạo so sánh hoạt động thay thế hậu mãi mang tính chu kỳ này với tính chất tùy nghi của mảng xây dựng hồ bơi mới. Dù hoạt động xây dựng hồ bơi âm sàn mới tại Mỹ đã giảm hơn 20% trong 3 năm qua, công ty cho biết dự báo cho năm 2026 của mình cho thấy mức tăng trưởng doanh thu thuần tích lũy gần 20% trong giai đoạn đó.

Bắc Mỹ tiếp tục là động lực tăng trưởng chính. Doanh thu tại Mỹ tăng 10% trong quý, trong khi Canada giảm 9% sau khi đạt mức tăng trưởng hai chữ số trong nửa đầu năm. Ban lãnh đạo cho biết sự sụt giảm tại Canada là do khách hàng tiết giảm mua sắm trong bối cảnh chính sách thuế quan giữa Mỹ và Canada có những diễn biến mới.

Các mảng Hồ bơi thương mại và Kiểm soát dòng chảy đều đạt mức tăng trưởng doanh thu hai chữ số trong cả quý và giai đoạn từ đầu năm đến nay. Tăng trưởng thị phần diễn ra trên diện rộng ở các khu vực, danh mục sản phẩm và loại hình đại lý, trong đó phát triển mạnh mẽ nhất ở các mảng xử lý nước, tự động hóa và kiểm soát, và hệ thống chiếu sáng LED.

Doanh thu tại Châu Âu giảm 18% trong quý 3, phần lớn do tuyến cung ứng mới từ nhà máy của Hayward tại Vô Tích (Trung Quốc) tạm thời kéo dài thời gian giao hàng. Các lô hàng bị ảnh hưởng này đã được ghi nhận vào quý 4. Doanh thu tại Phần còn lại của thế giới tăng 6% trong quý.

Hayward đang từng bước chuyển đổi công năng nhà máy Vô Tích để phục vụ thị trường Châu Âu và Phần còn lại của thế giới sau khi đưa hoạt động sản xuất phục vụ thị trường Mỹ trở lại nội địa. Ban lãnh đạo kỳ vọng động thái này sẽ nâng cao năng lực cạnh tranh và biên lợi nhuận tại khu vực, mặc dù chưa đưa ra con số ước tính cụ thể cho lợi ích này.

Công ty cũng đã mở Trung tâm Hayward thứ sáu tại Atlanta. Đây là trung tâm đào tạo về thiết bị hồ bơi thương mại đầu tiên của Hayward, trưng bày cả sản phẩm hồ bơi thương mại và dân dụng.

Dự báo của Ban lãnh đạo

Ban lãnh đạo đã nâng triển vọng cho cả năm 2026 như sau:

Dự báo này hàm ý tăng trưởng doanh thu thuần quý 4 ở mức khoảng 0% đến 3%. Ban lãnh đạo dự kiến giá bán tăng ở mức từ một chữ số thấp đến trung bình, trong đó sản lượng là biến số chính trong khoảng này.

Hayward tiếp tục kỳ vọng biên lợi nhuận gộp cả năm đạt khoảng 48%, về cơ bản tương đương với năm 2025. Ban lãnh đạo dự kiến mức tăng giá ròng thực tế đạt khoảng một chữ số trung bình trong năm 2026 và cho biết lạm phát cả năm có khả năng cao hơn một chút so với mức một chữ số trung bình.

Các đơn hàng mua sớm tại Bắc Mỹ cho mùa hồ bơi năm 2027 vào cuối quý 3 đã vượt cùng kỳ năm ngoái. Ban lãnh đạo kỳ vọng chương trình hoàn tất sẽ bao gồm mức tăng giá gộp khoảng một chữ số trung bình trước chiết khấu và tăng trưởng sản lượng ở mức một chữ số thấp. Công ty vẫn chưa đưa ra dự báo chính thức cho năm 2027.

Rủi ro và các điểm cần theo dõi

• Hoạt động xây dựng hồ bơi mới tại Mỹ vẫn yếu, với số lượng giấy phép xây dựng giảm nhẹ so với cùng kỳ năm ngoái. Ban lãnh đạo cho biết bối cảnh kinh tế vĩ mô chưa cải thiện đủ để hỗ trợ một triển vọng khả quan hơn cho mảng xây dựng.
• Lạm phát đối với kim loại chuyên dụng, nhựa resin, cước vận chuyển và các chi phí đầu vào khác vẫn ở mức cao. Thuế quan cũng tiếp tục gây áp lực lên chi phí.
• Một số đối tác kênh phân phối có thể giảm nhẹ hàng tồn kho khi chuẩn bị cho mùa hồ bơi tiếp theo, mặc dù ban lãnh đạo đánh giá hàng tồn kho hiện tại đang ở mức cân bằng.
• Khu vực Châu Âu và Phần còn lại của thế giới vẫn đối mặt với những bất ổn về kinh tế vĩ mô và địa chính trị.
• Số liệu đối chiếu quý 4 bao gồm các đơn hàng cuối mùa mua theo giá niêm yết tăng mạnh bất thường ở cùng kỳ năm trước. Ban lãnh đạo không giả định rằng các đơn hàng này sẽ lặp lại.
• Tỷ trọng cao hơn của các khoản doanh số mua sớm có chiết khấu dự kiến sẽ ảnh hưởng đến cơ cấu giá và biên lợi nhuận trong quý 4, mặc dù ban lãnh đạo không xem đây là một vấn đề mang tính cấu trúc đối với biên lợi nhuận gộp.

Tóm tắt phiên hỏi đáp với chuyên gia phân tích

Hàng tồn kho tại kênh phân phối và nhu cầu mua sớm: Ban lãnh đạo cho biết hàng tồn kho sản phẩm Hayward tại các đối tác lớn ở Bắc Mỹ đã giảm so với quý trước trong quý 3, trong khi doanh số bán hàng qua kênh phân phối của các sản phẩm Hayward tăng trưởng ở mức một chữ số cao. Công ty tin rằng thời gian giao hàng ngắn hơn có thể hỗ trợ tăng trưởng tiếp tục với số ngày tồn kho thấp hơn.

Tiềm năng sản lượng năm 2027: Hayward kỳ vọng việc chuyển đổi đại lý đã đạt được trong năm 2026 sẽ tiếp tục tăng tốc trong năm 2027. Ban lãnh đạo từ chối đưa ra con số định lượng cho mức tăng trưởng tiềm năng nhưng cho biết họ kỳ vọng công ty sẽ tăng trưởng tốt hơn so với bối cảnh sản lượng chung của ngành đi ngang.

Giá bán và lạm phát: Việc điều chỉnh tăng giá được thực hiện vào cuối quý 3 và đầu quý 4 dự kiến sẽ giúp bù đắp lạm phát khi bước sang năm 2027. Ban lãnh đạo cho biết các hành động điều chỉnh giá tiếp theo vẫn có thể xảy ra nếu môi trường chi phí thay đổi, nhưng nâng cao năng suất và tiết kiệm từ chuỗi cung ứng vẫn là các biện pháp bù đắp được ưu tiên.

Cải thiện biên lợi nhuận tại Châu Âu: Việc sử dụng cơ sở sản xuất tại Vô Tích dự kiến sẽ mang lại lợi thế chi phí bổ sung ngoài những cải thiện tại cơ sở Barcelona và việc hợp nhất chi phí SG&A ở Madrid. Ban lãnh đạo muốn có dữ liệu hoạt động trong vài quý trước khi định lượng lợi ích này.

Chu kỳ thay thế: Ban lãnh đạo cho biết thiết bị được lắp đặt trong giai đoạn nhu cầu bùng nổ thời đại dịch COVID hiện đang hết hạn bảo hành. Dựa trên chu kỳ thay thế từ 7 đến 10 năm, một số nhu cầu liên quan có thể bắt đầu xuất hiện trong vòng một năm tới hoặc lâu hơn.

Phân bổ vốn: Các ưu tiên của Hayward vẫn là đầu tư tự thân, M&A chiến lược và mua lại cổ phiếu khi có cơ hội thuận lợi. Công ty còn lại 331 triệu USD trong hạn mức mua lại cổ phiếu 450 triệu USD được phê duyệt vào cuối quý.

Toàn văn biên bản cuộc họp kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Welcome to Hayward Holdings Third Quarter 2026 Earnings Call. My name is Carrie, and I will be your operator for today's call. [Operator Instructions] Please note this conference is being recorded. I will now turn the call over to Kevin Maczka, Vice President, Strategic Finance and Capital Markets. Mr. Maczka, you may begin.

Kevin Maczka

Thank you, and good morning, everyone. We issued our third quarter 2026 earnings press release this morning. which has been posted to the Investor Relations section of our website at investor.hayward.com. There, you can also find the earnings slide presentation referenced during this call. I'm joined today by Kevin Holleran, President and Chief Executive Officer; and Eifion Jones, Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind everyone that during this call, the company may make certain statements that are considered forward-looking in nature including management's outlook for 2026 and future periods.

Such statements are subject to a variety of risks and uncertainties, including those discussed in our most recent Form 10-K and subsequent Forms 10-Q filed with the Securities and Exchange Commission that could cause actual results to differ materially. The company does not undertake any duty to update such forward-looking statements. During today's call, the company will discuss non-GAAP measures. Reconciliations of historical non-GAAP measures discussed on this call to the comparable GAAP measures can be found in our earnings release and the appendix to the slide presentation. All comparisons will be made on a year-over-year basis, unless otherwise indicated. I will now turn the call over to Kevin Holleran.

Kevin Holleran

Thank you, Kevin, and good morning, everyone. It's my pleasure to welcome all of you to Hayward's Third Quarter Earnings Call. I'll begin on Slide 4 with key takeaways from the quarter. Hayward delivered another solid quarter. Net sales increased 6% driven by favorable price realization and higher volumes. Adjusted diluted EPS increased 29%, reflecting the operating leverage in our model. Year-to-date, net sales are up 8%. We also maintained gross margin and expanded adjusted EBITDA margin despite continued significant inflationary pressures and ongoing investment in product innovation, operational capabilities and sales and marketing initiatives. .

The strength and quality of our financial results underscore 2 defining advantages of our business, a large and growing installed base that generates recurring aftermarket demand and a technology adoption curve that continues to expand the addressable opportunity for connected, automated and energy-efficient pool solutions. Together, these resilient demand drivers support consistent performance across market cycles, including the currently challenged new construction environment. Data from our primary U.S. channel partners indicate healthy demand for Hayward products, durable share gains and balanced channel inventories Against that backdrop, our early buy program for the 2027 pool season is progressing well with North America orders ahead of the prior year.

Our financial position remains a source of strength. Net leverage remained at 1.5x matching the second quarter results and the lowest level since our 2021 IPO even as we increased share repurchases, demonstrating our confidence in the business. Our strong year-to-date performance and continued execution support our increased full year outlook. For the full year 2026, we now expect net sales to increase approximately 5% to 6% and adjusted diluted EPS to increase 12% to 14%. Overall, the quarter reinforced the strength of our strategy, the momentum behind our share gain initiatives and our ability to deliver profitable growth in a dynamic macroeconomic environment.

I'm proud of the team's performance and appreciate the continued support of our dealers, partners and vendors. Turning to Slide 5, I'll review our third quarter and year-to-date results. Net sales increased 6% to $260 million in the quarter. North America grew 9% with a positive contribution from price and another quarter of volume growth supported by the proven resilience of the aftermarket. Net sales in Europe and rest of world declined 6% in the third quarter but were down just 1%, including the timing of an in-transit shipment now recognized in the fourth quarter.

Commercial Pool and Flow Control again delivered strong results with both product groups generating double-digit net sales growth in the quarter and year-to-date periods. Consolidated gross margin expanded 10 basis points in the quarter and remained in line with the strong prior year level on a year-to-date basis. This is an impressive accomplishment given the meaningful incremental inflation and tariff headwinds. Adjusted EBITDA margin increased in both the quarter and year-to-date. We continue to increase investments in R&D and advanced engineering to fuel product innovation while lower SG&A spending in the quarter reflected disciplined cost management and the absence of a nonrecurring prior year expense.

As a result, adjusted diluted EPS increased 29% in the quarter and 21% year-to-date. Through the first 9 months, net sales increased 8%. Adjusted EBITDA grew 9% and adjusted diluted EPS rose 21% this is particularly strong performance given the challenging operating environment, highlighting the durability and earnings power of our model. Turning to Slide 6. I'll provide an update on the business. The 2026 pool season ended on a high note as our primary U.S. channel partners reported robust third quarter growth in Hayward sales with momentum building as the quarter progressed.

We are pleased to see our strategic growth initiatives translating into share gains and strong end demand for Hayward products. This performance also reflects the stability of the aftermarket as the existing installed base drives more than 85% of our sales. While a new pool is a discretionary purchase, maintaining an existing pool is not. Once the pool is installed, is water and equipment require timely ongoing care not only to keep it safe and swimmable but to protect the value of the home. That essential maintenance creates recurring demand independent of new pool construction. This aftermarket stability is evident in our recent performance.

Over the last 3 years, new in-ground pool construction in the United States declined over 20% towards lows not seen since the great financial crisis. Yet our guidance implies a cumulative increase in Hayward net sales of nearly 20%. Our growth is driven far more by recurring demand than by new pool construction. Our broad-based share gains reflect differentiated products and deeper engagement with builders and servicers. Our new aftermarket offering simplified the substitution for Hayward equipment on existing pool pads, making it easier for trade professionals to align with Hayward, the share gains we've earned over multiple recent quarters are the result of investments in innovation, service and dealer conversion, giving us confidence that these gains are durable. U.S. channel inventories remain balanced for Hayward and we've continued to deliver growth even as some customers have modestly reduced days on hand.

We view that as prudent inventory management rather than a reflection of demand concerns as sales out of the channel at our primary U.S. partners were strong throughout the quarter. Combined with solid early buy momentum and ongoing share gains, the data points we monitor give us confidence that inventory levels are healthy. Early Buy programs are progressing well across both segments. North America orders were ahead of the prior year at the end of the third quarter, and we expect the program to conclude in the fourth quarter with solid year-over-year growth.

Innovation remains central to our growth strategy. We are proud to recently receive the 2026 Innovation Award from the Pool industry's largest distributor. Recognizing the impact of our investments in research, development and engineering, specifically noting the advancements we've made in Omni X, our proprietary automation ecosystem for the aftermarket, the pool industry has historically demonstrated strong pricing discipline. This year, we implemented targeted pricing actions to address inflation and tariffs, not fully offset by productivity gains, and we continue to expect mid-single-digit positive net price realization in 2026.

We are also progressing with value-based pricing and SKU rationalization to better align pricing with the differentiated value we deliver, creating an additional opportunity over time. We continue to advance the strategic priorities that support profitable growth and long-term stockholder value creation. We see a tremendous opportunity in progressively automating the large installed base of manually controlled pools and our product road map is increasingly focused on technology solutions for the aftermarket.

At the same time, we are deepening relationships with the trade and converting dealers. The key decision-makers on equipment purchases to Hayward. We have a long proven track record of operational excellence, and this remains another important value driver. We are investing in automation and productivity, reducing supply chain risk and advancing value engineering across our products and processes. We are progressively repurposing our Wuxi, China facility to support a greater share of demand in Europe and rest of world after reshoring U.S.-focused production. This makes excellent use of a cost advantage efficient facility with a dedicated workforce and will support greater competitiveness and profitability in Europe and rest of world.

In summary, our business is strong and our strategies are delivering results. We are executing well in the current environment and reinvesting to position for sustained profitable growth. Turning now to Slide 7. I'd like to provide an update on Hayward hubs. As discussed on previous calls, expanding our network of Hayward Hub customer training centers is an important priority. More than showrooms, these facilities give trade professionals hands-on experience with our products in real-world settings guided by experienced trainers.

I'm pleased to share that the Atlanta hub, our sixth location is now fully operational. Commercial pool remains a key growth driver, making the Atlanta opening especially exciting. This is our first commercial aquatics hub, showcasing our full range of commercial as well as residential pool products. With that, I'd like to turn the call over to Eifion to discuss our financial results in more detail.

Eifion Jones

Thank you, Kevin, and good morning. Turning to Slide 8. I'll walk through our third quarter financial performance in more detail. We delivered another solid quarter of sales and earnings growth, with net sales increasing 6% and to $260 million against a robust 7% growth comparison from the prior year period. Growth was primarily driven by price realization to combat inflation and tariffs, along with another quarter of volume growth. I am particularly pleased to see volume increase 2% in our primary North American market for the quarter and year-to-date, reflecting the impact of the investments we've made in new products and sales and marketing.

Consolidated gross margin expanded 10 basis points in the quarter as a greater mix of higher-margin North American sales more than offset modest declines in both segments. Pricing and productivity gains primarily offset increased costs from specialty metals, resins, freight and other inputs. Year-to-date gross profit margin remained in line with the strong prior year level as our commercial and operations teams continued their impressive work to mitigate these pressures and sustain strong profitability. Research, development and engineering investment increased 21% as we continued funding new product development and advanced engineering capabilities.

Sales, general and administrative costs declined 3%, reflecting disciplined cost management and the absence of nonrecurring expense in the prior year period. As a result, adjusted EBITDA increased 9% to $65 million while adjusted EBITDA margin expanded 60 basis points to 24.8%. The effective tax rate was 21% and adjusted diluted EPS increased 29% to $0.18. Turning to Slide 9, I'll review our third quarter segment results. North America net sales rose 9% to $226 million, driven by a 7% price realization and 2% volume growth. U.S. sales increased 10%, while Canada declined 9%, following double-digit first half growth as customer concerns over evolving U.S. Canada tariff policies moderated purchases.

Gross margin remained approximately 49%, consistent with the prior year, while adjusted segment income margin expanded 80 basis points to a robust 30.4%. Europe and rest of world sales declined 6% to $34 million, reflecting lower volume and a greater mix of customary late season discount programs. Europe declined 18%, largely due to the timing of initial shipments from our facility in Wuxi, China to support the European market. Establishing this new supply route temporarily extended lead times shift in the recognition of certain third quarter shipments into the fourth quarter.

Those shipments have been recognized in the fourth quarter and going forward, we expect to settle into a regular cadence. Rest of World grew 6%. Gross margin reduced 40 basis points to 40% and we were pleased to see the sequential improvement of 210 basis points. Adjusted segment income margin expanded 50 basis points to 19%, reflecting stronger operational execution. Turning to Slide 10. Year-to-date segment performance remained strong. North America net sales grew 10%, driven by 8% price realization and 2% volume growth. U.S. sales also increased 10% while Canada grew 5%.

Europe and rest of world declined 2%, but was essentially flat after adjusting for the shipment delay from China I just discussed. Gross margin in North America declined modestly from strong prior year levels to 49.5%, while Europe and Rest of World increased 70 basis points to 37.7%. Adjusted segment income margin increased in both segments contributing to strong year-to-date performance. Turning to Slide 11. Our strong financial position provides significant flexibility to execute our plans. Net leverage declined year-over-year to 1.5x match in the second quarter result and the lowest level since our IPO, even as we increased share repurchases.

We ended the quarter with $475 million in cash, cash equivalents and short-term investments, including available credit capacity total liquidity was approximately $900 million. Year-to-date, cash flow from operations was $225 million, compared to $283 million in the prior year period. The decline primarily reflected higher working capital from the timing of customer orders, which resulted in a greater mix of shipments late in the quarter as well as higher inventory as we prepare to support a larger early buy program. We expect to cut most of these receivables in the fourth quarter with the remainder due under customary early buy terms.

Year-to-date capital expenditures were in line with expectations at $29 million, resulting in free cash flow of $196 million. We prioritized growth capital investments this year, including further upgrading of manufacturing facilities, and we are delivering on these plans. In summary, our low leverage, ample liquidity and cash generation position us to continue investing organically, pursuing strategic M&A and returning capital to stockholders. Turning to Slide 12. We balanced investments in growth with stockholder returns while maintaining prudent leverage. Our priorities remain organic investment into manufacturing and supply chain capabilities followed by strategic M&A.

We also view share repurchases as an important capital allocation tool and we'll continue to pursue them opportunistically. During the third quarter, we continued repurchasing shares bringing the year-to-date deployment to approximately $115 million. At quarter end, $331 million remained available under our $450 million authorization. Turning to Slide 13. Our strong year-to-date performance and visibility into the fourth quarter support an increased 2026 outlook. We now expect full year 2026 net sales growth of approximately 5% and to 6% up from prior guidance of approximately 5%.

We also expect adjusted diluted EPS of $0.86 to $0.88, an increase of approximately 12% and to 14% year-over-year compared to our prior guidance of $0.84 to $0.87. As we think about the balance of the year, we are taking a thoughtful approach to our assumptions. The fourth quarter comparison includes strong late season orders in the prior year period, but we do not necessarily expect to repeat. While North American Early buy orders are ahead of last year and channel inventories and demand trends remain healthy, our outlook also allows for some partners to modestly tighten inventory positions as they prepare for the upcoming season.

Overall, we believe the guidance appropriately balances these assumptions with the continued strength of our aftermarket and share gain momentum. We continue to expect free cash flow of around$200 million, exceeding 100% of net income. Our outlook assumes approximately $47 million of net interest expense a normalized effective tax rate of about 24% and capital expenditures of approximately $40 million as we continue investing in operational capabilities. We remain confident in our ability to execute our strategic initiatives and the strength and the resilience of the aftermarket. With that, I'll turn the call back to Kevin.

Kevin Holleran

Thanks, Eifion. Before we open the line for questions, let me close by reinforcing the key messages from today's call. Hayward delivered another solid quarter and an impressive year-to-date performance. We are executing our strategies around innovation, deeper customer engagement and operational excellence and the results are evident. Mid-single-digit top line growth over the past 2 years and again, year-to-date, while expanding profitability from already strong levels despite the challenging macroeconomic and new construction environment, continued inflation and geopolitical disruption.

Aftermarket demand remains strong. channel conditions are healthy and early buy orders for the 2027 pool season are encouraging. We have strong momentum and intend to capitalize on it to deliver sustained profitable growth and long-term stockholder value. With that, we're now ready to open the line for questions.

Operator

[Operator Instructions]

And our first question will come from Jeff Hammond with KeyBanc Capital Markets.

Phần hỏi đáp

Jeffrey Hammond

Just on -- maybe just talk about inventory levels, there seems to be an approach from your distributors to kind of lean harder on inventory destock into the kind of end of the season? And then I think you had said early by you're encouraged, but also kind of hearing in the channel that there might be a more measured approach. It doesn't seem like you're seeing that, but maybe just speak to early buy in greater detail?

Kevin Holleran

Sure. On inventory first, Jeff, this is a process that we manage very closely with our primary North American partners maintaining visibility into the sell-through and the corresponding inventory levels. Our partners tell us that they're pleased with Hayward inventory levels and the velocity that they see with our product on their balance sheet, given that retail demand pull-through that they see for Hayward products. I see this as setting up extremely well for the early buy season.

As you've heard me say many times, Q2 and Q3 or critical periods where we sell out of the channel more than we sell in and thus, inventory levels reduce that occurred. Like it in Q2, it did sequentially again in Q3. So the quarter, we actually saw beginning of the quarter kind of mid-single-digit percentage increase year-on-year, that actually depleted to more like low single-digit percentage on a year-over-year basis. So that doesn't even really cover inflation the way we look at it at low single digits, while supporting out-the-door sales of Hayward product during the third quarter more in the high single-digit percentage range.

So that's what we're referring to in our prepared remarks when we say we've seen modest belt tightening, and you also referenced it in the second part of your question. So we're confident with our operational capabilities and our short lead times that we can continue to support growth and share gains at these modestly lower days on hand inventory levels. In terms of early buy, as I said in the prepared remarks, the curtain has not yet dropped on the early buy period.

But we're pretty well into it and giving us confidence at the end of the third quarter on a year-over-year basis, we are up on orders received. There's still a couple of other parts of our distribution base and Canada specifically, that we're still waiting on a couple of more weeks. But based upon everything we're hearing and seeing we're seeing up year-on-year order capture through the early buy program despite maybe what you may be hearing with some of your channel checks, Jeff.

Jeffrey Hammond

Okay. Great. And then we continue to see kind of consumer pressure and rates have moved higher again. I'm just wondering if you're seeing any kind of change in sentiment full permitting pipeline activity as you kind of move into '27 that forms any kind of early view on '27.

Kevin Holleran

Yes. I mean we're going to take advantage of the last couple of months here before we land on a guide for 2027. A lot a lot to go yet. Obviously, with the midterms with a couple more Fed meetings this afternoon included. So we to see whether maybe anything with the housing market loosens up through the housing bill that was passed several months ago. I know that's the early innings of that. In terms of permitting, as I think you would have heard from others that reported before us, modestly down on a year-over-year basis.

Values continue to hold pulled up okay. But I wouldn't yet say that the macro has improved to the point where we'd yet be more bullish on a new construction outlook. But again, 85-plus percent of our revenue is being driven off the installed base, which continues to be extremely resilient and durable. Even in these challenging macro times.

Operator

Our next question will come from Rafe Jadrosich with Bank of America.

Rafe Jadrosich

I just wanted to start on cost inflation. Can you just talk about what you're expecting for the year? And is there any sort of visibility into '27 like what you'll be carrying forward?

Eifion Jones

Sure. I mean for the full year, we expect inflation in '26 to be mid, mid-slightly higher than mid-single digits, and that's net of any recalibration we've done within our supply chain. Obviously, there's a range of outcomes there when it comes to inflation and some of the more commoditized elements of our purchase basket are running hotter than that. So a lot of inflation passports have come our way, particularly over the last 6 months. We're managing it. We took price increase late which started to benefit the invoice lead in Q3 and will combat inflation in Q4.

We're relying heavily on the operational team to manage the costs through building materials savings, manufacturing efficiency, spraying cost reductions. And I'd say we're being quite successful there. But mid -- slightly over mid-single digits inflation this year across the whole basket, not quite ready to call '27 yet Rafe, but we think the pricing action that we put into place here in Q3, late Q3, early Q4, will cover us as we step into '27.

If the environment changes, we'll reconsider what we need to do. But we're going to rely heavily upon our operational team to continue to drive costs out of our cost of sales, both at the raw material, manufacturing overhead and freight level to help defray the need to put more pricing. But if we have to, then we'll consider that particular outcome.

Rafe Jadrosich

Okay. That's helpful. And then can you -- you've spoken a lot about share gains and it's definitely showing up in the results. Can you talk about where you think you're gaining the most share? Is there -- are there specific channels or product categories where have you made the most progress?

Kevin Holleran

Yes. We're really encouraged by the results. I think it's become more evident over the last couple of quarters, Rafe. But frankly, the team has been delivering on share capture for several years as they've really implemented the playbook broadly around growing greater than end market, product line introductions, investing in the brand, serving the entirety of the market from high-end builder to the service trade and even the entry-level above ground pool serving that entire market and then backing it up with availability and dealer support.

I think it's pretty broad-based when we look at share and market performance, we really do look across maybe 3 lenses, regionally, product category and then dealer type, whether it's the service trade and/or new builders or dealers who refurbish existing pools. And we actually see encouraging results across all 3 of those lenses. Maybe particularly on the product side, with some of our sanitization and our automation and controls and some of our LED lighting, specifically have seen nice growth on a year-to-date basis. We are certainly improving share in some of our historically underserved, underpenetrated markets out West and in the South Central and then really broad-based across the dealer.

We're developing relationships with folks that serve all parts of the market from the top 50 builders where we have higher representation there to the service trade and all points in between. So I would say the answer is pretty broad-based and really isn't just specific around any 1 particular region or product category or dealer type, Rafe.

Operator

And we'll hear next from Andrew Carter with Stifel.

Unknown Analyst

It seems like the industry is coalescing around flat volumes next year. So I guess I would just ask, if you just took the current dealer conversions that you have in hand and like assumed a full run rate because some takes longer than others to get up to speed what would your Hayward North America volume growth be next year in a flat market?

Kevin Holleran

Well, you're right in posing the question that as conversions occur, there is lead time as training occurs as they work through the current backlog with another brand. So there is time. It doesn't happen just when when maybe a contract or an agreement is signed, and we're working through some nice conversions here in the latter half of 2026. I don't know if I'm going to put a number on it right now, Andrew.

I think I'm just going to leave it that, again, if the industry is coalescing around last I would expect our team to deliver something better than that as we continue with the ramp-up with already won and converted accounts and then add more on top of that as we head through 2027 that the conversations internally here are not holding on to what has been captured, but what's the rate of future growth.

Unknown Analyst

Second question, switching gears and to ask about Europe. Macro weakness obviously hit with spin in the rest of the world. Now it's kind of in Europe with kind of France, obviously, the higher nat gas prices across the world, your factories in Spain. Of course, you are doing the China plan that you are sorry, outsourcing a lot of that market to the China facility. So I guess I would ask is you have before outlined a margin improvement program there. Is the China incremental to that? Is it kind of keep you on track for it? Or was this the plan all along? Anything that can help and of course, you're obviously likely thinking about another step down in kind of revenue in that market just given the weakness.

Eifion Jones

I'll take that Andrew look, I mean we're building a very strong team there, and they're really focused on improving the efficiency of that business. We are -- we've taken a lot of strides to improving our Barcelona facility, which is our primary manufacturing location servicing Europe we've done a lot around the SG&A base, aggressively consolidating into our Madrid HQ for Europe. And as you mentioned, we're progressively using more of our Wuxi, China facility and repurposing that production to support our Europe and rest of world.

And that does bring a cost competitive advantage to the European business. And I would say, generally speaking, it probably is incremental to how we originally thought about the gross margin opportunity we have in Europe. But we're not at the point where we're willing to put a number exactly on how much incremental that's going to deliver. We need to demonstrate the supply chain over the next couple of quarters and getting a regular cadence of operation there. In terms of top line, look, it's a challenging environment, but we see progress. We see progress around the type of businesses we're earning, the quality of the businesses that we're involved with.

And there are identified opportunities, which are encouraging. As I discussed in my prepared remarks, once you give account to the in-transit delay at the end of Q3, which is now invoiced herein early in Q4, Europe is essentially flat year-over-year on a year-to-date basis. Rest of the world is down at misle 4%, but I think we all recognize the more geopolitical pressures there, which are maybe episodic to '26 and hopefully behind us as we step progressively into '27 but generally speaking, the quality of that business overall is steadily improving.

We have a good team in place. The repurposing of us China is a good move. It's a high-quality facility, very cost advantage. And I do expect this to progressively add to the margin profile, just not at the point yet, Andrew, we're willing to put a definitive number on that, more to come as we continue the conversation.

Kevin Holleran

Andrew, as you know, our European team is headquartered in Spain. I just want to give a shout out to our team over there expressing our condolences to all the families impacted by today's terrible news of the high-speed train crash that occurred over there. .

Operator

And we'll go next to Brian Lee with Goldman Sachs.

Brian Lee

I had -- I guess just if we think about the read across from the early buy in program. I know like you said, Kevin, it's not -- you haven't closed the curtain on that quite yet. But the past couple of years, I feel like you guys have had good success and good read from these early buy-in programs, but the composition has generally been status quo where and so a decent amount of price, not much volume. Anything to kind of glean into the early results from the early buy-in program as we look into '27?

I know most folks don't expect a lot of volume growth, but you guys have been eating out a little bit of volume. But do you anticipate your composition could shift in terms of the top line growth algorithm into next year a bit more toward volume and a little less price. One of the reasons I ask is your competition recently came out and was talking about sort of 3% to 4% price increases, maybe more low single digits versus mid-single digits. I don't know if that kind of played into your views here as you headed into the early buy season.

Kevin Holleran

We certainly, based on our inflationary assumptions, which informs the price announcements that correspond with the early buy program on a year-over-year basis it was down modestly, so not quite as much price coming through the early buy program for 2027 as prior year. Again, with a couple more weeks to go we'd like to see the final results before giving anything definitive. But the inventory positions that we hear from our channel partners really does give us confidence that the turns and that they're well positioned based upon the sales out activity they see for Hayward product positions them well to participate meaningfully in our early buy program.

Historically, early buy is maybe 30-ish no more than 1/3 of what the total annual purchases are. So while it's a good leading indicator, hanging into the year, it's not necessarily the make or break on what 2027 is going to look like. So it's -- like I said, it's a good early indication of what the channel sees, what they're hearing from the Hayward dealers out there. Our inventories are well positioned for strong participation and we look forward to seeing how everything wraps up over the next couple of weeks.

Eifion Jones

Let me just come back to the price. And as Kevin mentioned, the price increase for this early buy is lower than the price increase we had over the prior year period, in the prior early buy period. When you compare the 2, we've got mid-single-digit price increase early by this year before discounts and we have low single-digit volume growth expected once the program closes.

Brian Lee

Yes. I appreciate that color. That's super helpful. And then maybe just 1 more for me and I'll pass it on. You mentioned the leverage ratio here has gotten back to lows not seen since the IPO. You guys have been busy from a capital allocation perspective, buyback wise. How are you thinking about the sort of strategy and priorities given the balance sheet strength here as we head into '27? Update your thoughts on kind of the hierarchy of buybacks versus M&A versus other capital allocation of priority.

Eifion Jones

I would say our capital allocation priorities are unchanged. As I mentioned, first, we invest in the business. As I mentioned in the call, $40 million is the expected CapEx for this for this year. That's a large year for us, and it reflects aggressive automating and upgrading across our network of factories and warehousing. M&A is second admittedly, we've been somewhat quiet while we have delevered the balance sheet down to 1.5x, but we are continuing to nurture an active pipeline. Of opportunities. We remain very disciplined around how we think about those individual opportunities and will only pull the trigger when convinced it's the right acquisition behavior.

And then as you mentioned, we do have the ability to return our excess capital to shareholders, $115 million returned through Q3. That gives us $331 million remaining under our $450 million capacity. Share repurchases, I would say, are an important part of our capital allocation tool kit and we'll continue to evaluate them opportunistically along the other uses of capital I just mentioned. I mean the bottom line is that the cash generation profile of Hayward supports all capital allocation initiatives. And we'll remain disciplined around those priorities while maintaining an appropriate level of net leverage.

Operator

And Robert Davies with Wolfe Research has our next question.

Robert Davies

One was just on the expectation of volume and pricing trends through the back half -- back quarter of the year. You've obviously been kind of running mid- to high single digit on pricing in the North American market year-to-date, just implicitly kind of getting to that 5% to 6% guide for the year, obviously, kind of suggest there's going to be a bit of a squeeze on sort of price over volume through the fourth quarter. I just wanted to flesh out the details of what exactly was going on there. And then the second question, just in terms of investor questions around potential replacement cycle kind of tailwinds into 2027 from some of the installations were put in around the kind of cobidperid, are you hearing anything on that front? Any color on that would be great.

Eifion Jones

I'll take the first part Yes.

When we think about Q4, what's implied within our guidance is revenue or net sales flat to positive 3%. And I would say that range is primarily based on the volume outlook. Pricing is positive low to mid-single digits. But it's a different type of price dynamic year-over-year. If we look at what occurred last year, we had unusually strong in-season orders, which we're not assuming we'll repeat this year. They may, but we're not assuming they will repeat. That type of business comes at full price, undiscounted whereas this year, we're assuming a heavy earlier but participation, which is discounted pricing.

So that's factoring in to a lower single-digit price dynamic year-over-year. We remain cautious, I would say, generally speaking, around Europe and rest of world. We want to make sure I get that comment through given the geopolitical uncertainty there but we think it's prudent right now to give the type of forecast we've given in the current macro environment. But generally speaking, year-over-year, we're looking at flat to plus 3% in terms of net sales within the 5% to 6% full year guided range.

More positive price than volume. Volume becomes the moving piece in the range and a different pricing dynamic implicit within the guidance, given the absence of in-season orders last year, which were not necessarily forecasting to repeat this year.

Kevin Holleran

And Robert, as for that COVID replacement cycle, I would think that, that should start to appear that volume surge really occurred, call it, late 2020 over the next couple of years or so, we think of a placement cycle in the 7- to 10-year period. All that equipment that was set early in the COVID experience is now out of warranty. We don't necessarily see any recent trend about repair versus replace. So call it, over the next year plus or so, we should start to see some of that replacement appear. .

Operator

And we'll hear next from Steve Volkman with Jefferies.

Jae Hyun Ko

This is James on for Steve. I guess I wanted to touch on the Oliva. And can you just kind of help me understand what is like driving the growth in Oliva as of now the market really hasn't inflected here. And you talked about distributors being more prudent on working capital management. And I think the pricing ran higher. So I think distributors had more to buy more last year versus this year. So are you guys putting different cap on Oliva this year or doing anything differently that's driving the prot in olibay?

Eifion Jones

Yes, James. Firstly, no real change in the parameters of the early buy in terms of caps. Obviously, are early buy has a different gross price and discounting structure, but no differential in caps. What I would say is we're expecting a bigger early buy than last year, as Kevin mentioned, there's some positive volume growth in there. You know we're gaining share in the marketplace. That's going to be reflected in the early buy program this year. as that new business rolls into the channel, that's very positive for us.

And I would say, coming back to my previous remarks, there's an expectation that the channel is leaning more into the early buy than they were probably in in-season orders because early buy comes with very, very favorable payment terms. They don't have to pay for that working capital until Q2 of next year. So there's a lot of incentive as they manage their balance sheet to lean into early buy as a preference to in-season orders.

So we're feeling good about early buy given where it's progressing. Right now, the program remains constructed in the same way it did last year. pricing is slightly lower at the gross level, discounts are somewhat similar. We expect the channel partners, given the favorability of terms that are implicit within these programs to lean heavily into the working capital advantage of this program.

Jae Hyun Ko

Great. And I wanted to touch on the margin here a bit. I mean, 3Q margin was pretty good, but it seems like the guidance kind of suggests the year-over-year contraction in margins for 4Q. Can you kind of talk about your expectation for gross margin and SG&A leverage and how the price cost dynamic is kind of flowing through and if there are any one-off items that we need to be mindful of and any dose into kind of 2027 here in terms of margins?

Eifion Jones

Yes. No. Look, we're super pleased with the margin profile earned year-to-date, flat year-over-year through the end of Q3, despite all the inflation, as I call them, fasthold that have been thrown at surer dealing with those exceptionally well. As we think about quarter 4, again, there's a little bit of different mix in the tank business. That's not a structural issue with the gross margin level. It's less in-season orders, which are at full price less. It's more early buy, which is being purchased on some discounts.

That's going to factor in. But as I've said repeatedly, I think throughout this year, we feel very good as a management team that the full year gross margin is still expected to be in line at approximately 48% as last year, and last year was a rapid gross margin. So that's still the target and the outcome, we are moving towards this particular year. We're dealing with inflation as it comes through. We've put price in we're operating in a leaner, more efficient way and that's protecting that gross margin has been completed out of the year. But we feel very good about where the margin is right now.

Operator

This now concludes our question-and-answer session. I would like to turn the floor back over to Kevin Holleran for closing comments.

Kevin Holleran

Thanks, Carrie. In closing, I want to thank our employees and partners around the world. Your dedication and hard work continue to be critical to the progress we're making across our business. We're encouraged by our strong year-to-date performance and remain confident in our strategy. If you have any follow-up questions, please reach out to our team. We appreciate your continued interest in Hayward and look forward to speaking with you again on our next earnings call. Carrie, you can now end the call. .

Operator

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day. .