Latham Group Earnings Call Highlights Growth, Challenges

Latham Group Inc ((SWIM)) has held its Q4 earnings call. Read on for the main highlights of the call.

Latham Group’s latest earnings call struck a notably upbeat tone, with management emphasizing solid revenue growth, sharp margin expansion and a return to full-year profitability despite a sluggish U.S. pool market. Executives highlighted stronger cash generation, a cleaner balance sheet and accretive acquisitions, arguing these positives outweigh regional softness, higher spending and macro uncertainty.

Quarterly Revenue Growth

Latham reported Q4 net sales of $100.0 million, up 15% year over year with organic growth of 14% as demand improved across the portfolio. All three product lines—In-Ground pools, covers and liners—grew for the second straight quarter, signaling momentum into the new year despite broader market headwinds.

Full-Year Revenue and Organic Growth

For FY2025, net sales climbed to $546 million from $509 million in 2024, a 7% increase driven by both organic execution and acquisitions. Organic growth of 5% stood out against a down industry, underscoring Latham’s share gains as it leans into targeted commercial initiatives and product innovation.

Adjusted EBITDA and Margin Expansion

Profitability improved sharply, with Q4 adjusted EBITDA reaching $10 million—about triple the prior year—and margins widening to 11%, up 630 basis points. For FY2025, adjusted EBITDA rose to $100 million, up $20 million, lifting the full-year margin to 18.3% and showcasing the benefits of cost discipline and scale.

Gross Margin Improvement

Gross margins continued to trend higher, expanding to 28% in Q4 and 33% for the full year, up 340 and 320 basis points respectively. Management credited volume leverage, lean manufacturing and value-engineering initiatives, along with acquisition synergies, for the structural uplift.

Product Line Strength — Fiberglass Pools

In-Ground pool sales reached $262 million for the year, up 1% despite an industry that was down low- to mid-single digits, highlighting Latham’s resilience. Fiberglass pools accounted for 76.5% of In-Ground sales and grew roughly 2.5%, with U.S. fiberglass penetration estimated at about 24% of pool starts, up around one point.

Product Line Strength — Covers and Liners

Covers delivered standout performance, with FY2025 sales up 22% to $161 million and Q4 covers up 19% to $37 million, fueled by strong demand for autocovers. Liners also contributed, growing 4% for the year to $123 million, while Q4 liner sales rose 2% to $13 million, reflecting steady replacement demand.

Cash Flow, Balance Sheet and Deleveraging

The company exited the year with $71 million in cash and generated $51 million of net cash from operations in FY2025, bolstering financial flexibility. Total debt stood at $280 million, translating to a net debt leverage ratio of 2.1x, and management expects leverage to remain below 3x in Q1 and improve thereafter.

Strategic Acquisitions and Capacity Moves

Management spotlighted the Freedom Pools acquisition, which is expected to add about $20 million in annual sales and roughly $4 million in adjusted EBITDA, enhancing scale in fiberglass. Latham also bought four previously leased fiberglass production sites, locking in strategic manufacturing capacity and supporting future growth.

Commercial Execution and Market Development

The company reported meaningful progress in its Sand States strategy, with these markets now representing about 17% of sales and Florida delivering double-digit growth. Dealer network expansion, stronger ties with master-planned communities and a renewed CEO-led focus on market development are aimed at accelerating adoption in key sunbelt regions.

Overall Market Weakness and Geographic Headwinds

Despite company-level gains, management noted the U.S. In-Ground pool market was down low- to mid-single digits in 2025 and is expected to be roughly flat in 2026, limiting cyclical tailwinds. Texas remained a notable weak spot, with double-digit permit declines offsetting strength in states like Florida and Arizona and tempering overall Sand States growth.

Q4 GAAP Loss Despite FY Profit

Latham posted a Q4 GAAP net loss of $7 million, or $0.06 per diluted share, though this marked an improvement from a $29 million loss in the prior-year quarter. For the full year, net income was positive at $11 million, illustrating both the seasonal nature of the business and the underlying profitability trajectory.

Rising SG&A and Increased Investments

Operating expenses moved higher, with SG&A rising to $31 million in Q4 from $27 million and to $123 million for FY2025 from $108 million. Management framed this as deliberate investment in sales, marketing and personnel to accelerate fiberglass and autocover penetration, accepting near-term pressure on operating leverage for longer-term growth.

Higher CapEx and Integration Costs

Capital expenditures rose to $25 million in FY2025 from $20 million, reflecting facility investments and early integration spend. Looking ahead, the company plans significantly higher CapEx in 2026 tied to facility purchases, upgrades and the Freedom integration, which will weigh on free cash flow in the near term but is intended to underpin capacity and efficiency.

Demand Sensitivity to Weather and Macro

Management acknowledged that Q4 benefited from favorable weather and an elongated selling season, which may not repeat. They flagged weather swings and consumer factors such as interest rates and confidence as key risks that can delay big-ticket pool purchases and mute short-term demand despite strong execution.

Regional Execution Challenges

While Sand States remain a strategic priority, their sales mix stayed roughly flat at 17%, highlighting uneven progress across regions. Growth was concentrated in Florida and Arizona, while persistent weakness in Texas continued to drag, underscoring the operational challenge of converting all target markets at the desired pace.

2026 Outlook and Guidance

For 2026, Latham guided net sales to $580–$610 million and adjusted EBITDA to $105–$120 million, implying around 9% sales and 12.7% EBITDA growth at the midpoint. The outlook assumes mid-single-digit organic growth of roughly 6%, contributions from Freedom Pools, materially higher CapEx of $42–48 million, stable pool starts, further gross margin progress toward 35% and leverage remaining comfortably below 3x.

Latham’s earnings call painted a picture of a company gaining operational traction and improving profitability even as its end market remains sluggish and regionally choppy. For investors, the story now hinges on management’s ability to convert higher spending and strategic bets in fiberglass, covers and Sand States into sustained growth and margin gains through 2026 and beyond.