Hayward Holdings, Inc.

Note 14. Commitments and Contingencies

Litigation

The Company is involved in litigation arising in the normal course of business, including involving product liability claims. Where appropriate, these matters have been submitted to the Company’s insurance carrier. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. It is not possible to quantify the ultimate liability, if any, in these matters.

As of December 11, 2024, during the discovery phase of litigation in which the Company was one of several named defendants, the Company reached a mutual understanding to settle its liability in a wrongful death lawsuit related to a discontinued product. The resolution included a payment in the amount of $22.0 million during the three months ended September 27, 2025, which was paid entirely by the Company’s insurance carriers pursuant to agreement among the Company and its insurance carriers. At least one co-defendant has not settled, and full and final resolution thus remains pending and appealable. The Company does not anticipate future financial obligation.

On August 2, 2023, a securities class action complaint was filed in the United States District Court for the District of New Jersey against the Company and certain of its current directors and officers (Kevin Holleran and Eifion Jones) and MSD Partners, L.P. and CCMP Capital Advisors, LP on behalf of a putative class of stockholders who acquired shares of the Company’s common stock between March 2, 2022 and July 27, 2022. That action is captioned City of Southfield Fire and Police Retirement System vs. Hayward Holdings, Inc., et al., 2:23-cv-04146-WJM-ESK (D.N.J.) (“City of Southfield”). On September 28, 2023, a second, related securities class action complaint was filed in the United States District Court for the District of New Jersey against the Company and certain of its current directors and officers (Kevin Holleran and Eifion Jones) and MSD Partners, L.P. and CCMP Capital Advisors, LP on behalf of a putative class of stockholders who acquired shares of the Company’s common stock between October 27, 2021 and July 28, 2022. That action is captioned Erie County Employees’ Retirement System vs. Hayward Holdings, Inc., et al., 2:23-cv-04146-WJM-ESK (D.N.J.) (“Erie County”). On December 19, 2023, the Court issued a ruling consolidating thetwo securities class actions (City of Southfield and Erie County) under the City of Southfield docket (the “Securities Class Action”) and appointing a lead plaintiff. In a consolidated class action complaint filed March 4, 2024, the lead plaintiff alleged on behalf of a putative class of stockholders who acquired shares of the Company's common stock between October 27, 2021 and July 28, 2022, among other things, that the Company, Kevin Holleran, and Eifion Jones violated Sections 10(b) and 20(a) of the Exchange Act by, among other things, making materially false or misleading statements regarding inventory, growth, and demand trends and the Company’s financial projections for 2022. On October 2, 2024, the Court issued an Opinion and Order dismissing the consolidated class action complaint and granting the lead plaintiff leave to file an amended complaint within 30 days. On November 1, 2024, the lead plaintiff filed a consolidated amended class action complaint making substantially similar allegations as in the consolidated class action complaint, but adding additional defendants affiliated with MSD Partners, L.P. and CCMP Capital Advisors, LP. On December 18, 2024, the Company and all other defendants moved to dismiss the consolidated amended class action complaint. On June 4, 2025, the Court issued an Opinion and Order granting in part and denying in part the motion to dismiss. The Court thereafter ordered the parties to mediation. On November 20, 2025, the parties reported to the Court that they had reached a settlement in principle, which is subject to Court approval, and on January 23, 2026, lead plaintiff moved the Court for preliminary approval of the settlement. The Securities Class Action seeks monetary damages on behalf of a putative class and an award of costs and expenses, including reasonable attorneys’ fees.

On November 27, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of New Jersey against current and past officers and directors of the Company captioned Heicklen v. Holleran, et al., 2:23-cv-22649 (D.N.J.) (the “Heicklen Action”). On August 28, 2025, a second shareholder derivative lawsuit was filed in the United States District Court for the District of New Jersey against current and past officers and directors of the Company, as well as defendants affiliated with MSD Partners, L.P., CCMP Capital Advisors, LP, and Alberta Investment Management Corporation captioned Hertzog v. Holleran, et al., 2:25-cv-14856 (D.N.J.) (the “Hertzog Action”). On November 18, 2025, a third shareholder derivative lawsuit was filed in the Court of Chancery of the State of Delaware against certain current and past officers and directors of the Company, as well as defendants affiliated with MSD Partners, L.P. and CCMP Capital Advisors, LP captioned Roberta Tackett, Aqua Palace, LLC and Jennifer Roberts vs. Hayward Holdings, Inc., et. al., C.A. No. 2025-1344 (Del. Ch.) (the “Tackett Action”, and together with the Heicklen and Hertzog Actions, the “Derivative Actions”). The Derivative Actions allege claims for breaches of fiduciary duties to Company stockholders and aiding and abetting breaches of fiduciary duties in connection with the claims in the Securities Class Action. The Heicklen Action also alleges claims for unjust enrichment and violations of Section 10(b) of the Exchange Act. The Hertzog Action also alleges claims for insider trading, corporate waste, and violations of Sections 14(a), 21D, 20(a), 29(B) of the Exchange Act. The Tackett Action also alleges claims for insider trading and aiding and abetting insider trading. The plaintiffs in the Derivative Actions seek recovery of unspecified compensatory and punitive damages and attorneys' fees and costs, improvements to the Company’s corporate governance and internal procedures, disgorgement, and restitution. The Heicklen and Hertzog Actions are presently stayed. In the Tackett Action, defendants’ time to respond to the complaint has not yet commenced.

We dispute the allegations of wrongdoing in the Securities Class Action and the Derivative Actions. With respect to the Securities Class Action, the Company has recorded a loss contingency of $19.9 million and insurance receivables of $17.3 million related to the settlement in principle described above, which are recorded within other current assets and accrued expenses and other liabilities on the consolidated balance sheets, respectively. In view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries, at this time we are unable to estimate a reasonably possible range of financial obligation that we may incur to resolve the Derivative Actions. Additional expenses incurred, if any, related to this case are subject to insurance recoveries pursuant to the Company’s retention amount with its insurance carriers.

The Company participates in customs duty drawback programs that provide for the refund of certain import duties, taxes, and fees paid on imported material that is subsequently exported. Such recoveries are subject to review, audit, and final liquidation by customs authorities and require compliance with statutory filing deadlines and documentation requirements. In connection with desk audits conducted by U.S. Customs and Border Protection (“CBP”) during the fourth quarter of 2025 the Company recorded a $5.2 million charge to cost of sales related to certain prior-year drawback claims that were required to be refunded to CBP as a result of claim liquidation. Although we do not currently estimate any additional duty drawback claims related to the current year or prior years to be refunded to CBP, we continue to assess our obligations. Future recoveries of these claims, if any, may differ from amounts previously estimated.

Note 15. Leases

The Company’s operating and finance lease portfolio primarily consists of manufacturing and warehouse space, office space, IT equipment, office equipment, manufacturing equipment and vehicles. Operating lease ROU assets are presented within other non-current assets. The current portion of operating lease liabilities are presented within accrued expenses and other liabilities, and the non-current portion of operating lease liabilities are presented within other non-current liabilities on the consolidated balance sheets. Finance lease assets are included in property, plant and equipment - net, and the finance lease obligations are included in current portion of long-term debt and in long-term debt on the consolidated balance sheets.

The Company has elected to use the short-term lease recognition exemption for all asset classes. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets. For these short-term leases, expense will be recognized on a straight-line basis over the terms of the leases. The Company has also elected the practical expedient to not separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of its lease components for balance sheet purposes.

The following lease cost is included in the consolidated statements of operations (in thousands):

Supplemental cash flow information related to leases was as follows (in thousands):

Supplemental balance sheet information related to leases as of December 31, 2025 was as follows (in thousands):

Weighted average information:

As of December 31, 2025, maturities of lease liabilities were as follows (in thousands):

Note 16. Stockholders’ Equity

Preferred Stock

The Company’s Second Restated Certificate of Incorporation authorizes the Company to issue up to 100,000,000 shares of preferred stock, $0.001 value per share, all of which is undesignated.

Common Stock

The Company’s Second Restated Certificate of Incorporation authorizes the Company to issue up to 750,000,000 shares of Common Stock, $0.001 value per share. Each share of Common Stock is entitled toone vote on all matters submitted to a vote of the Company’s stockholders. The holders of Common Stock are entitled to receive dividends, if any, as may be declared by the Board of Directors.

Dividends paid

For the years ended December 31, 2025 and December 31, 2024, no dividends were declared or paid to the Company’s common stockholders.

Share Repurchase Program

On July 28, 2025, the Board of Directors authorized the Company’s share repurchase program (the “Share Repurchase Program”) such that the Company is authorized to repurchase from time to time up to an aggregate of $450 million of its outstanding shares of common stock, which authorization expires on July 28, 2028.

During the year ended December 31, 2025, the Company repurchased 250,000 shares of Common Stock in the open market at an average price per share of $15.63, for an aggregate consideration of approximately $3.9 million, as part of the Share Repurchase Program. As of December 31, 2025, $446.1 million remained available for additional share repurchases under the program.

Note 17. Stock-based Compensation

Stock-based compensation expense recorded in the consolidated statements of operations for equity-classified stock-based awards was $13.4 million, $10.6 million, and $9.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The Company has establishedtwo equity incentive plans as described below.

2021 Equity Incentive Plan

In March 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”). Under the 2021 Plan, up to 13,737,500 shares of Common Stock may be granted to employees, directors and consultants in the form of stock options, restricted stock units and other stock-based awards. The terms of awards granted under the 2021 Plan are determined by the Compensation Committee of the Board of Directors, subject to the provisions of the 2021 Plan. As of December 31, 2025, there were 9,455,556 shares available for future issuance under the 2021 Plan.

Options granted under the 2021 Plan expire no later than 10 years from the date of grant. The vesting period of stock options and restricted stock units granted under the 2021 Plan is generally three years from the date of grant.

Performance-Based Restricted Stock Units

The Company utilizes performance-based restricted stock units (“PSUs”) as part of its equity awards program for certain senior management and executive officers. The vesting of the PSUs granted during 2025 is tied to net revenue growth, adjusted EBITDA margin and return on gross invested capital, with relative weightings of 50%,30% and 20%, respectively, subject to a modifier of up to plus or minus 15% based on the Company's total shareholder return over athree year performance period. The vesting of the PSUs granted during 2024 is tied to adjusted EBITDA margin, gross profit margin and return on gross invested capital in 2024, with relative weightings of 40%,40% and 20%, respectively, subject to a modifier of up to plus or minus 15% based on the Company’s absolute total shareholder return over athree year performance period. The vesting of the PSUs granted during 2023 is tied to return on gross invested capital and adjusted EBITDA margin with a relative weighting of 50% each.

The PSUs are generally measured over three year performance periods with a minimum of 50% of the target awarded PSUs to be earned for threshold performance and a maximum of 200% of the target awarded PSUs to be earned for maximum performance. The Company reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense if and when achievement of the performance condition is probable.

The following table summarizes activity for PSUs under the 2021 Plan:

At December 31, 2025 total unrecognized compensation cost related to the performance based stock units granted under the 2021 plan is estimated to be $6.5 million, to be recognized over a weighted-average period of 1.79 years.

The Company determined the fair value of the 2025 and 2024 PSUs, which included a modifier based on total shareholder return, at the date of grant using a Monte Carlo simulation.

The following table sets forth fair value per share information, including related weighted-average assumptions, used to determine compensation cost:

The simulation term used was the time period from the date of grant to the end of the performance period for the award. The risk-free interest rate was based on the U.S. Treasury yield curve at date of grant over the simulation term. The expected volatility was based upon the Company's stock price with a look-back period equal to the simulation term. The dividend yield is zero as the Company does not issue a dividend.

Time-based Stock Options

The following table summarizes activity for stock options under the 2021 Plan (aggregate intrinsic value in thousands):

The Company determined the fair value of these time-based stock options at the date of grant using the Black-Scholes option-pricing model. The following table sets forth fair value per share information, including related weighted-average assumptions, used to determine compensation cost:

The risk-free interest rate was based on the U.S. Treasury yield curve at date of grant over the expected term of these stock options. The expected volatility was based upon comparable public company historical volatility. The expected life was based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method,” as prescribed in SEC’s Staff Accounting Bulletin (SAB) No. 107, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.

At December 31, 2025, the total unrecognized compensation cost related to the stock options granted under the 2021 Plan was $0.2 million, to be recognized over a weighted-average period of 0.25 years.

Time-based Restricted Stock Units

The following table summarizes activity for time-based restricted stock units under the 2021 Plan:

At December 31, 2025, the total unrecognized compensation cost related to restricted stock units granted under the 2021 Plan was $12.2 million, to be recognized over a weighted-average period of 2.2 years.

The total fair value of restricted stock awards vested was $6.1 million and $4.0 million in the years ended 2025 and 2024, respectively.

The following table presents the weighted-average fair value of time-based restricted stock units granted during the year:

2017 Equity Incentive Plan

In August 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan”), which provided for the issuance of stock options, restricted stock and restricted stock awards to officers, directors and employees. The stock options granted under the 2017 Plan generally have a maximum term of up to 10 years. Restricted stock, restricted stock awards, and stock options granted under the 2017 Plan generally are eligible to vest based on continued service, generally over five years, or upon an initial public offering and post-initial public offering stock price performance. Due to the Company’s IPO on March 12, 2021 and subsequent stock price performance, all performance-vesting conditions were satisfied on March 26, 2021.

For presentation purposes in this document the Company has recast all figures to reflect the 195-for-1 stock split in the Common Stock that occurred on March 2, 2021.

As of December 31, 2025, there were 4,650,126 outstanding options under the 2017 Plan. No future awards will be made under the 2017 Plan following the Company’s IPO. Shares underlying awards under the 2017 Plan that expire or become unexercisable without delivery of shares, are forfeited to, or repurchased for cash by, the Company, are settled in cash, or otherwise become available again for grant as available for future awards under the 2021 Plan (as described above).

Time-Based Stock Options

The following table summarizes activity for time-based stock options under the 2017 Plan (aggregate intrinsic value in thousands):

The total intrinsic value of options exercised was $15.2 million, $13.6 million and $14.3 million in the years ended 2025, 2024 and 2023, respectively. As of December 31, 2025, there isno remaining unrecognized compensation cost related to time-based stock options.

No stock options under the 2017 Plan were granted during the years ended December 31, 2025, December 31, 2024 and December 31, 2023.

Stock Options with Market and Performance Conditions

The following table summarizes activity for stock options with market and performance conditions under the 2017 Plan (aggregate intrinsic value in thousands):

The performance criteria for these awards was met on March 26, 2021 upon the completion of the Company’s initial public offering. As such, all performance-based stock options vested in 2021 and the Company recognized the related stock-based compensation expense in the year ended 2021. As of December 31, 2025, there isno remaining unrecognized compensation cost related to performance-based stock options.

No stock options under the 2017 Plan were granted during the year ended December 31, 2025, December 31, 2024 and December 31, 2023.

Note 18. Retirement Plans

The Company maintains the Hayward Industries Retirement Plan (the “Retirement Plan”), a defined-contribution 401(k) plan, for substantially all of its U.S. employees. Under the Retirement Plan the Company contributes 3% of compensation as a non-elective contribution, to eligible employees, regardless of employee deferrals, and an additional non-elective contribution between 1 to 3% of compensation, based on age, for employees that were hired before January 1, 1996. To be eligible to receive the Company contribution, an employee must have been with the Company forone year and completed at least 1,000 hours of service. Additionally, the Retirement Plan allows employees to elect to defer up to 60% of their compensation on a pre-tax basis (not to exceed the IRS maximum), unless they are projected to be age 50 or older by the end of the taxable year. The Company matches 50% of each participant’s deferral contribution, in an amount up to 6% of the employee’s deferral. The Company’s contribution to the Retirement Plan was approximately $6.9 million, $6.0 million and $5.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.

The Company also maintains the Supplemental Retirement Plan. The Supplemental Retirement Plan allows key executives to contribute up to 25% of their base salary and up to 100% of their annual bonus (as defined in the Supplemental Retirement Plan). The Company matches 100% of an eligible employee’s deferral in an amount up to 9% of the employee’s eligible compensation contributed to the Supplemental Retirement Plan. The employer contributions vest immediately. The employer contribution was approximately $0.7 million, $0.4 million and $0.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The value of investments related to the Supplemental Retirement Plan is included in other assets and a corresponding liability to participants is recorded in other liabilities. The following table presents the fair values of the related investments (in thousands):

Note 19. Acquisitions and Restructuring

Acquisition and restructuring related expense, net consists of the following (in thousands):

Restructuring

During the year ended December 31, 2025, the Company incurred $0.4 million of costs related to restructuring actions in E&RW that began during the fourth quarter of 2024. The actions included termination benefits associated with a reduction-in-force and consolidation of facilities. The total costs incurred to execute these restructuring actions are $1.3 million.

During the year ended December 31, 2025, the Company incurred a reduction in expense of $0.2 million to finalize the relocation of its corporate office functions to Charlotte, North Carolina from Berkeley Heights, New Jersey. The finalized total cost to execute the program was $5.7 million.

During the third quarter of 2023, the Company initiated programs to centralize and consolidate operations and professional services in Europe. For the year ended December 31, 2024, the Company incurred $0.8 million of expense related to the programs. The total costs incurred to execute the programs were $3.2 million.

The following tables summarize the status of the Company’s restructuring related expense and related liability balances (in thousands):

Restructuring costs are included within acquisition and restructuring related costs on the Company’s consolidated statements of operations, while the restructuring liability is included as a component of accrued expenses and other liabilities on the Company’s consolidated balance sheets.

On June 26, 2024, the Company acquired the equity interests of ChlorKing HoldCo, LLC and related entities (“ChlorKing”). The acquired business includes pool saline chlorinators and UV disinfection systems serving the commercial pools and water treatment market segments. The acquisition broadens the Company’s commercial portfolio of products and expands the market of commercial customers while furthering the Company's commitment to sustainable and energy-efficient technology for both commercial and residential pools. The acquisition is included in our North America segment.

The consideration paid net of cash acquired was $55.2 million. The purchase price was funded with cash on hand. For the year ended December 31, 2025, transaction and integration expenses recognized for the acquisition were $3.3 million. These expenses are included within acquisition and restructuring related costs on the Company’s consolidated statements of operations. The acquisition accounting was complete as of December 31, 2024.

Note 20. Related-Party Transactions

During the year ended December 31, 2025 and December 31, 2024, the Company did not incur any significant related-party transactions.

Note 21. Condensed Financial Information of Registrant (Parent Company Only)

Hayward Holdings, Inc. balance sheets are as follows (in thousands, except per share data):

Hayward Holdings, Inc. statements of operations and comprehensive income are as follows (in thousands):

Hayward Holdings, Inc. statement of cash flows are as follows (in thousands):

Basis of Presentation

These condensed parent company only financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of Hayward Holdings, Inc. (as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25% of the consolidated net assets of the Company. The ability of Hayward Holdings, Inc.’s operating subsidiaries to pay dividends is restricted by the credit agreements governing the subsidiaries’ credit facilities. Under the credit agreements, dividends may only be paid to Hayward Holdings, Inc. for corporate overhead expenses and otherwise pursuant to customary dollar baskets and a portion of equity proceeds among other things, subject to satisfying minimum availability requirements for borrowings under the asset based revolving credit agreement and the absence of certain defaults, and an unlimited amount under the term loan credit agreements subject to Hayward Industries, Inc.’s total leverage not exceeding certain thresholds on a pro forma basis. As of December 31, 2025, the restricted net assets totaled approximately $551 million under the credit agreements.

These condensed parent company financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the only exception being that the parent company accounts for its subsidiaries using the equity method. Under the equity method, the Company elected to apply the nature of the distribution approach. The nature of the distribution approach requires the Company to classify distributions from equity method investments on the basis of the nature of the activities of the investee that generated the distribution as either a return on investment (classified as a cash inflow of operating activities) or a return of investment (classified as a cash inflow from investing activities) when such information is available.

Note 22. Accumulated Other Comprehensive (Loss) Income

The changes in accumulated other comprehensive (loss) income are provided in the tables below (in thousands):

Note 23. Selected Quarterly Financial Data (unaudited)

The effects of the warranty presentation change out of selling, general and administrative expense and into cost of sales, as described in Note 2. “Significant Accounting Policies”, on the consolidated statement of operations for fiscal quarters in fiscal years 2025 and 2024 are summarized in the tables below:

(1) For the three months ended December 31, 2025, $12.7 million of warranty costs were presented within cost of sales on the unaudited condensed consolidated statement of operations.

The following tables show the adjustment of the warranty presentation change to our North America segment significant segment expenses impacted by the change including cost of sales and segment selling, general and administrative expense for fiscal quarters in fiscal year 2025 and 2024, respectively.

(1) For the three months ended December 31, 2025, $12.1 million of warranty costs were presented within cost of sales within the NAM segment.

The following tables show the adjustment of the warranty presentation change to our Europe & Rest of World segment significant segment expenses impacted by the change including cost of sales and segment selling, general and administrative expense for fiscal quarters in fiscal year 2025 and 2024, respectively.

(1) For the three months ended December 31, 2025, $0.6 million of warranty costs were presented within cost of sales within the ER&W segment.