Latham Group, Inc. (SWIM) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Net Sales Net sales for the third quarter were $162 million, up $11 million or 7.6% year-over-year. This increase was primarily driven by organic growth of 4.7%, acquisition-related growth in sales volumes, and a tariff-related price increase.
Adjusted EBITDA Adjusted EBITDA was $38.3 million, an increase of $8.5 million or 28.5% from last year's $29.8 million. Adjusted EBITDA margin increased to 23.7%, up 390 basis points from 19.8% in the prior year period. This growth was attributed to investments in marketing initiatives and operational efficiencies.
Gross Margin Gross margin expanded by 300 basis points to 35.4% in the third quarter. This was primarily due to the accretive benefit of the 3 Coverstar acquisitions and the success of lean manufacturing and value engineering initiatives.
In-Ground Pool Sales In-ground pool sales increased by approximately 1% year-over-year. This growth reflects continued momentum in fiberglass penetration as builders and consumers increasingly recognize the appeal and benefits of fiberglass pools.
Pool Cover Sales Sales of pool covers increased by 15% year-over-year. This growth was driven by higher adoption rates for auto covers, revenue synergies from the 3 Coverstar acquisitions, and strong consumer engagement with marketing initiatives.
Pool Liner Sales Liner sales increased by 13% year-over-year. This growth was driven by industry-leading lead times and the increased adoption of the Measure by Latham tool, which streamlines the measurement and quoting process for installers.
Net Income Net income was $8.1 million or $0.07 per diluted share, an increase of $2.2 million or 37.7% compared to the $5.9 million or $0.05 per diluted share for the prior year's third quarter.
Year-to-Date Net Sales Year-to-date net sales were $446 million, up 5.9% compared to $421 million in the prior year. This growth was driven by strategic initiatives and product adoption.
Year-to-Date Adjusted EBITDA Year-to-date adjusted EBITDA was $89.4 million, up 16.7% compared to $76.6 million in the prior year. Adjusted EBITDA margin increased 180 basis points to 20% from 18.2%.
Cash Position Cash at the end of the quarter was $71 million. Net cash provided by operating activities was $51 million in the third quarter and $40 million for the first 9 months.
Total Debt and Leverage Ratio Total debt as of the end of the period was $281 million with a net debt leverage ratio of 2.3, down from 3.0 in the year's second quarter. The company expects the net debt leverage ratio to approach 2 by year-end.
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Operating Highlights
Fiberglass Pools: Continued positive momentum with fiberglass pools accounting for approximately 75% of full-year 2025 in-ground pool sales. Fiberglass pools are expected to gain another 1% of the total in-ground pool market, representing 24% of total U.S. in-ground pool sales in 2025.
Measure Pro and Measure Go Tools: AI-powered tools for measuring pool liners and covers, reducing measurement time from hours to minutes. Measure Pro was rebranded, and Measure Go was launched to expand reach using iPhone LiDAR technology. 25% of tool adopters were new to Latham.
Sand States Expansion: Dealer conversions in Florida have driven high single-digit sales growth. Strategic partnerships with custom homebuilders in Florida are increasing Latham's presence in master-planned communities.
Gross Margin: Increased to 35.4%, up 300 basis points year-on-year, driven by lean manufacturing and value engineering initiatives.
Adjusted EBITDA Margin: Increased to 23.7%, up 390 basis points year-on-year, reflecting operational efficiencies and marketing investments.
Market Leadership: Strengthened leadership in fiberglass pools, auto covers, and in-ground pool liners, with significant traction in sand states.
Safety Regulations: 16 states now allow auto covers to replace traditional fencing, enhancing cost savings and safety for pool owners.
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Risk or Challenges
Market Conditions: The U.S. in-ground pool market is expected to remain flat or slightly down in 2025, which could limit growth opportunities for the company.
Competitive Pressures: The company faces challenges in maintaining its market leadership position, particularly in the fiberglass pool segment, as competitors may also target this growing market.
Regulatory Hurdles: While some states have expanded pool safety regulations to allow auto covers in place of traditional fencing, regulatory changes could still pose challenges in other regions.
Supply Chain Disruptions: No explicit mention of current supply chain disruptions, but reliance on proprietary tools and acquisitions could expose the company to potential supply chain risks.
Economic Uncertainties: The broader economic environment, including consumer spending trends, could impact demand for in-ground pools and related products.
Strategic Execution Risks: The company is heavily investing in growth initiatives such as expanding in the Sand States and promoting fiberglass pools. Failure to execute these strategies effectively could impact financial performance.
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Guidance & Outlook
Net Sales Guidance: The company has narrowed its net sales guidance range to $540 million to $550 million for 2025, representing 7% year-over-year growth at the midpoint.
Adjusted EBITDA Guidance: The adjusted EBITDA guidance range is now $92 million to $98 million, representing 19% year-over-year growth at the midpoint.
Capital Expenditures (CapEx) Guidance: The CapEx estimate for 2025 has been revised to a range of $22 million to $24 million.
Market Outlook for 2025: The company expects 2025 new U.S. pool starts to be flat to slightly down compared to 2024.
Future Market Potential: When new U.S. pool starts return to 78,000 per year (2019 levels), the company anticipates achieving approximately $750 million in net sales and $160 million in adjusted EBITDA, more than doubling 2019 revenue and 2.5x adjusted EBITDA at the same volume of new pool starts.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What have you seen in terms of upstream metrics like leads, consumers, and contractors as customers digest tariff costs and incremental uncertainty?
A:Leads have been strong throughout the peak pool building season in Q2 and Q3, with a significant increase in leads year-over-year. However, confidence in making pool buying decisions is lagging due to tariff and interest rate uncertainties. This has contributed to 5% organic growth in the quarter.
Q:Can you provide context on the liners' performance, particularly regarding replacement and new construction?
A:The performance is a combination of share gains in the replacement market and challenges in the new construction market. Replacement and remodel activities have increased as homeowners prioritize pool functionality. New construction, particularly in the lower-end vinyl liner market, remains tough, while the higher-end fiberglass market shows good share gains.
Q:How did demand progress geographically throughout the quarter, and where are you seeing outperformance or underperformance?
A:Demand was consistent across most regions, with strength in Canada, Northeast, Midwest, and Southeast. Florida performed well despite challenges, while Texas and California remained weak.
Q:Can you provide more details on your progress in Florida, including partnerships with custom homebuilders?
A:The company has made significant progress in Florida, entering more MPCs than expected and establishing partnerships with smaller high-end custom homebuilders. These partnerships focus on smaller communities and aim to drive awareness and future pool sales. The company is also converting concrete dealers to fiberglass due to labor and productivity advantages.
Q:Is your outperformance in Florida due to being in MPCs with higher building rates, or are you gaining market share in other communities?
A:The outperformance is attributed to presence in MPCs, share gains from converting concrete dealers to fiberglass, and targeting new MPCs with high potential. Events like the Halloween event at Babcock Ranch have also driven awareness and inquiries.
Q:Where did price land in the quarter, and what is the update on tariffs?
A:Price increased by $3 million in the quarter due to a price hike in June addressing tariffs. The net tariff exposure remains at $10 million, mitigated through supply chain adjustments and the price increase.
Q:Is there room for fiberglass market share to accelerate beyond the 1% annual increase?
A:The company believes the 1% annual increase is sustainable, but there is potential for acceleration as traction grows in the sand states, which account for 75% of pool starts.
Q:How should we think about SG&A spend into Q4 and next year?
A:SG&A spend has stabilized after increases in the first half of the year due to investments in the sand states. The company plans to continue investing in sales and marketing as returns are realized.
Q:What is your pricing strategy going forward, and do you have any early thoughts on pool starts for next year?
A:The company aims to return to an annual seasonal price increase cadence. It is too early to predict pool starts for next year, but order rates have been consistent, and the company is focused on wrapping up Q4 strongly.
Q:Can you provide details on productivity initiatives and their impact on gross margin?
A:Lean manufacturing and value engineering contributed to a 300 basis point gross margin improvement in Q3. These structural improvements are expected to provide $2-2.5 million in quarterly contributions going forward.
Q:What is your approach to capital allocation and M&A activity?
A:The company is focused on investing in the business, pursuing M&A opportunities, and paying down debt. Recent investments include expanding capacity in the sand states, and the company remains acquisitive with a history of one acquisition per year.
Q:Did you slow marketing spend in Q3, and what is the update on the Kingston facility?
A:Marketing spend was consistent with seasonal patterns, and the year-over-year growth in SG&A has stabilized. The Kingston facility continues to operate and ship fiberglass pools to the U.S. as they are USMTA compliant.
Q:Review of Unclear Management Responses
A:Management avoided providing a clear answer on the directionality of pool starts for next year, citing it as too early to predict. They also used vague language when discussing the potential for fiberglass market share acceleration, stating it depends on various factors without providing specific details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Blair
Coverstar acquisition
Measure tool
Rajeski
SGA
ability market
accuracy
adoption fiberglass
auto cover
building season
cover pool
cover sale
date result
estimate
expansion
income
industry lead
installers
lead time
line ground
liner traction
lineup
market ground
market position
measurement
momentum fiberglass
pool auto
pool building
pool cover
pool liner
product portfolio
result strength
sale ground
sale industry
sand state
share gain
share increase
strength product
synergy Coverstar
traction sand
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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