Latham Group, Inc. (SWIM) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong potential for growth, particularly due to the Sand State expansion, increased marketing efforts, and acquisitions. The gross margin improvement and narrowing net loss signal financial health. The Q&A highlighted sustainable margin improvements and positive lead generation, although management was vague on some specifics. Overall, the optimistic guidance, recovery from weather impacts, and strategic initiatives suggest a likely positive stock price movement in the short term.
Key Financial Performance
Revenue Growth Year-on-year revenue growth of 7.8%, driven by organic and acquisition-related sales growth, despite adverse weather conditions and delayed pool building activity.
Adjusted EBITDA Growth Adjusted EBITDA grew by 15.7% year-over-year, supported by increased operating profitability, lean manufacturing, and value engineering initiatives.
Net Sales Net sales for Q2 2025 were $173 million, up $13 million or 7.8% from $160 million in Q2 2024, driven by increased volumes for autocovers and pool liners.
In-Ground Pool Sales Sales were $79 million, down 2.9% year-over-year, due to adverse weather conditions and delayed pool building activity, particularly in the Northeast.
Cover Sales Sales were $37 million, an increase of 46% year-over-year, driven by organic growth and acquisitions of Coverstar Central, New York, and Tennessee.
Liner Sales Sales were $57 million, up 5.8% year-over-year, attributed to the adoption of the Measure by Latham AI tool.
Gross Margin Gross margin improved to 37.1%, up 400 basis points from the prior year, due to volume leverage, lean manufacturing, and value engineering initiatives.
SG&A Expenses Increased to $31.9 million, up $5.3 million year-over-year, due to investments in marketing, personnel for Sand State growth strategy, and ERP infrastructure.
Net Income Net income was $16 million, up from $13.3 million in Q2 2024, representing an increase in earnings per diluted share from $0.11 to $0.13.
Adjusted EBITDA Margin Expanded to 23.1%, a 160-basis point improvement from 21.5% in Q2 2024, driven by higher sales and gross profit.
First Half Net Sales Net sales for the first half of 2025 were $284 million, up from $271 million in the first half of 2024, reflecting organic and acquisition growth.
First Half Net Income Net income for the first half of 2025 was $10 million, up from $5.4 million in the first half of 2024.
First Half Adjusted EBITDA Adjusted EBITDA for the first half of 2025 increased by 9.1% to $51 million, with a margin improvement to 18% from 17.3% in the prior year.
Cash Position Cash at the end of Q2 2025 was $27 million, with net cash provided by operating activities at $36 million for the quarter.
Total Debt Total debt was $281 million, with a net debt leverage ratio of 3.0.
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Operating Highlights
Fiberglass Pools: Tracking to account for approximately 75% of in-ground pool sales for the full year. Investments in targeted marketing programs have led to an 18% increase in dealer leads and a 34% increase in consumer sessions on the website.
Autocovers: Contributed significantly to sales growth with a 46% increase in sales. Highlighted for safety and cost savings, with compatibility across all in-ground pool types.
Measure by Latham: Proprietary AI tool for pool liner and cover measurement. 25% of dealers using the tool were new to Latham, aiding market share expansion.
Sand State Strategy: Focused on Florida and Texas, with increased dealer base and new fiberglass pool models tailored to these markets. Marketing efforts have driven over a 20% increase in dealer leads.
Lean Manufacturing and Value Engineering: Improved production efficiencies and margin profile, contributing to a 400 basis point improvement in gross margin.
Coverstar Acquisitions: Fully integrated, contributing to incremental sales and margins.
Market Positioning in Sand States: Latham is underrepresented in these markets, providing a substantial growth opportunity. Efforts include dealer expansion and targeted marketing.
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Risk or Challenges
Adverse Weather Conditions: Adverse weather conditions in many parts of the country delayed pool building activity, leading to a slight decline in in-ground pool sales, particularly impacting packaged pool sales.
Labor Shortages: Widespread labor shortages across many U.S. markets are limiting the ability of pool builders to construct new pools, with 46% of pool builders citing limited access to qualified labor as a substantial challenge.
Market Softness: The pool market is currently in a trough period, with U.S. pool starts expected to decline slightly from 62,000 in 2024 to 60,000 in 2025, reflecting a challenging industry environment.
Geographic Underrepresentation: Latham is underrepresented in the Sand States (Florida, Texas, Arizona, California), which account for two-thirds of annual new pool starts in the U.S., posing a challenge to capturing market share in these high-growth regions.
Increased SG&A Expenses: SG&A expenses increased due to investments in marketing, new personnel for the Sand State growth strategy, and ERP infrastructure, which could pressure margins if not offset by revenue growth.
Economic Sensitivity: The pool market's reliance on cash purchasers, as opposed to financed buyers, limits the addressable market during periods of economic uncertainty or tighter consumer spending.
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Guidance & Outlook
Fiberglass Pools Market Penetration: Fiberglass pools are expected to account for approximately 75% of in-ground pool sales for the full year 2025, with an additional 1% market penetration in the in-ground pool category projected for 2025.
Sand State Market Expansion: The company is focusing on expanding its presence in the Sand States (Florida, Texas, Arizona, and California), which represent two-thirds of annual new pool starts in the U.S. Efforts include increasing the pool dealer base, launching new fiberglass pool models, and ramping up marketing efforts in these regions.
Autocovers Growth: Autocovers are gaining momentum with consumers due to safety and cost-saving benefits. The company expects continued growth in this category, supported by expanded pool safety regulations in 16 states and municipalities.
Measure by Latham Tool Adoption: The proprietary AI-powered tool is expected to drive market share gains in liners and covers, with 25% of new tool adopters being new to Latham.
2025 Financial Guidance: The company reconfirmed its 2025 guidance of 8% net sales growth and 19% adjusted EBITDA growth at the midpoints.
Long-term Financial Projections: When U.S. pool starts return to 78,000 annually (2019 levels), the company expects to achieve $750 million in net sales and $160 million in adjusted EBITDA. At 100,000 pool starts annually, further financial growth is projected.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How are you measuring success for your marketing campaigns and what are your expectations for the balance of the year?
A:The focus is on driving brand awareness and building dealer capacity in areas with demand. The GOOTSA campaign and DIRECTV ads have generated significant interest, with increased website activity and leads, particularly in Florida and Texas. While immediate sales are unlikely due to delayed consumer buying decisions, the efforts aim to build a pipeline for future demand, potentially translating to sales in the fall or 2026.
Q:Can you provide an update on the Sand State strategy, particularly in Florida and Texas?
A:Progress is ahead of schedule in recruiting new dealers and entering communities for pool installations. However, market conditions in Florida and Texas, including reduced permit activity, have slowed the pace. Lead generation has recently improved significantly in both states. The company aims to increase the percentage of pool revenue from Sand States from 17% to 19-20% by year-end.
Q:Have fiberglass pool sales returned to growth, and how has weather impacted the in-ground pool business?
A:The in-ground pool category was down 3% in Q2, with packaged pools more affected than fiberglass. An unusually wet spring caused a measurable impact of $3-5 million. However, fiberglass pools returned to year-over-year growth in June and July as weather improved.
Q:What drove the strong gross margin performance in the quarter, and is this level sustainable?
A:Gross margin increased by 400 basis points year-over-year, driven by acquisitions, lean value engineering, and volume leverage. There were no significant one-time items, and the margin improvement is considered sustainable.
Q:Did you see a lift in orders in June and July after the rainy May, and how is the backlog for fiberglass pools?
A:There was an uptick in several categories, including autocovers and liners, post-Memorial Day. Fiberglass backlog has held up well, with lead times of 2-4 weeks. Fiberglass is expected to grow in the second half of the year, supported by strong lead generation and marketing efforts.
Q:Are there any changes to the revenue guidance or its components?
A:No significant changes to the seasonal profile. Safety cover season is starting, and organic growth in autocovers is expected to continue. Fiberglass is returning to year-over-year growth. The acquisition of Coverstar Central will also contribute to the second half.
Q:How much did price and acquisitions contribute to sales in the second quarter?
A:Price contributed around $1 million, and the three Coverstar acquisitions combined contributed approximately $7 million.
Q:Does the tariff impact have margin implications?
A:The tariff impact is broadly neutral, with supply chain mitigation and pricing adjustments balancing the effects.
Q:How does labor availability impact the value proposition of fiberglass pools?
A:Labor availability is not an issue for the company or its dealers. Fiberglass pools require fewer workers and less time to install compared to concrete pools, making them more attractive, especially in a tight labor market. The company has successfully converted concrete builders to fiberglass, citing Shasta Pools as an example.
Q:What drove the 400 basis points gross margin improvement, and how will it impact the second half?
A:Half of the improvement came from the Coverstar acquisition, with the rest evenly split between lean value engineering and cost leverage through volume. The margin profile is expected to continue in the second half.
Q:How is the liners business performing, and what is the impact of regulatory changes on safety covers?
A:The liners business grew 6% year-over-year, supported by the proprietary liners measurement tool. Regulatory changes allowing autocovers instead of fences in some states are driving higher adoption rates, contributing to future growth.
Q:What are the capital allocation priorities going forward?
A:The priorities are: 1) Investing in the business, including Sand State growth; 2) M&A, with a history of acquiring one company per year; 3) Debt repayment, with $30-35 million repaid over the last 2.5 years.
Q:What is driving the expected double-digit revenue growth in the second half?
A:Factors include recovery from weather delays, fiberglass returning to growth, contributions from the Coverstar acquisition, and a strong safety cover season supported by the Measure by Latham tool.
Q:How are delayed pool builds impacting the second half?
A:Delayed pool builds from earlier in the year are expected to be completed before winter, contributing to second-half revenue. Fiberglass and in-ground vinyl liner pools, which have faster installation times, are better positioned to meet this demand.
Q:Review of Unclear Management Responses
A:Management avoided providing specific metrics or quantifiable details in several areas, including the exact contribution of the GOOTSA campaign to sales, the precise impact of regulatory changes on safety cover adoption, and the detailed breakdown of gross margin improvements. Additionally, while they expressed confidence in second-half growth, they did not provide granular data to substantiate the expected double-digit revenue increase.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
CFO Gloe
Chief
Coverstar acquisition
Incorporated Research
LLC Research
Officer
Rajeski
Research Division
SGA
Sand State
Sand States
State market
Unidentified
acquisition product
adoption Measure
adoption fiberglass
awareness fiberglass
brand
building activity
consumer marketing
contributor
country pool
date pool
homeowner
increase volume
interest
marketing effort
marketing program
organic acquisition
pool autocovers
pool liner
progress date
tool
weather condition
SWIM Transcript
Latham Group, Inc. (SWIM) Q1 2026 Earnings Call Transcript
Unknown5-6
The earnings call presents a mixed outlook. While revenue and EBITDA guidance show growth, the financial health is concerning with high net debt and cash burn. The Q&A reveals challenges like flat demand, uncertain resin costs, and competitive pressures. However, strong April orders, strategic market segmentation, and promising branding efforts provide some optimism. Given these factors, the stock price is likely to remain stable, resulting in a neutral prediction.
Latham Group, Inc. (SWIM) Q4 2025 Earnings Call Transcript
Unknown3-4
The earnings call reveals mixed signals. The basic financial performance and product updates are positive, with growth in fiberglass pools and autocovers. However, market strategy and expenses show caution due to flat industry demand and moderate margin improvements. Shareholder returns are not highlighted, and management's reluctance to provide specific guidance raises concerns. The Q&A section does not provide strong positive or negative insights, leading to a neutral sentiment overall.
Latham Group, Inc. (SWIM) Q3 2025 Earnings Call Transcript
Positive11-4
The earnings call reflects positive sentiment with strong financial metrics, including a decrease in leverage ratio and increased leads. The company's strategic focus on fiberglass pools and expansion in key markets like Florida and the Sand States is promising. Despite tariff uncertainties, price adjustments and productivity initiatives have improved margins. The Q&A section highlighted strategic partnerships and market share gains, particularly in fiberglass, contributing to a positive outlook. Although some guidance lacked clarity, overall sentiment remains positive, indicating a potential stock price increase in the near term.
Latham Group, Inc. (SWIM) Q2 2025 Earnings Call Transcript
Positive8-6
The earnings call indicates strong potential for growth, particularly due to the Sand State expansion, increased marketing efforts, and acquisitions. The gross margin improvement and narrowing net loss signal financial health. The Q&A highlighted sustainable margin improvements and positive lead generation, although management was vague on some specifics. Overall, the optimistic guidance, recovery from weather impacts, and strategic initiatives suggest a likely positive stock price movement in the short term.
SWIM Slides
Latham Q4 2025 slides: fiberglass gains drive double-digit growth2026-03-03
Latham Group Q3 2025 slides: outpacing market despite earnings miss2025-11-04
Latham Group Q2 2025 slides: revenue up 7.8%, EBITDA margins expand2025-08-05
Latham Group Q1 2025 slides: projecting 8% growth despite flat pool market2025-05-06
SWIM Report
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