Latham Group Inc. Earnings Call: Balancing Growth and Challenges

Latham Group Inc ((SWIM)) has held its Q1 earnings call. Read on for the main highlights of the call.

In the recent earnings call, Latham Group Inc. presented a balanced view of its financial performance, highlighting both strengths and challenges. The company reported strong growth in its fiberglass and auto cover product categories, alongside a successful expansion strategy in the Sand States. However, declines in in-ground pool and liner sales, coupled with a decrease in adjusted EBITDA due to increased marketing expenses, tempered the overall sentiment. Tariff-related risks were also acknowledged, contributing to a neutral sentiment overall.

Fiberglass and Auto Cover Product Strength

Latham Group saw notable strength in its fiberglass and auto cover product categories, which contributed positively to the quarter’s results. This growth was a key highlight, showcasing the company’s ability to capitalize on high-demand products.

Sand States Expansion Strategy

The company’s expansion strategy in the Sand States, particularly in Florida, Texas, Arizona, and California, was a major focus. This initiative represents a significant growth opportunity, and Latham reported substantial progress in these regions.

Gross Margin Expansion

Latham achieved a 190 basis point expansion in gross margin, thanks to lean manufacturing and value engineering initiatives. This improvement underscores the company’s operational efficiency and focus on enhancing profitability.

Auto Covers Sales Growth

Sales of auto covers increased by 18%, driven by organic growth and the benefits of recent acquisitions. This growth highlights the strong demand for Latham’s auto cover products and the successful integration of acquired assets.

Strong Brand Visibility and Engagement

Latham maintained its leadership in brand visibility and engagement, being the most searched brand online among major fiberglass manufacturers. This strong brand presence is a testament to the company’s effective marketing strategies.

Positive Financial Position

The company ended the first quarter with a cash position of $24 million and plans to fully repay its revolver by the end of the second quarter. This financial stability provides a solid foundation for future growth initiatives.

In-Ground Pool Sales Decline

In-ground pool sales were down 4% from Q1 2024, impacted by soft industry conditions and adverse weather. This decline highlights the challenges faced in this segment of the market.

Liner Sales Decline

Liner sales also saw a decline of 8% compared to the first quarter of 2024, indicating challenges in maintaining sales momentum in this product category.

Adjusted EBITDA Decrease

Adjusted EBITDA decreased by $1 million from the prior year period, primarily due to higher sales and marketing spend. This decrease reflects the increased investment in marketing to support growth strategies.

Risks from Tariffs

Tariffs posed a potential headwind, with an estimated impact of 350 to 400 basis points pre-mitigation. The company is actively managing these risks through strategic measures.

Forward-Looking Guidance

Latham Group Inc. provided forward-looking guidance for 2025, maintaining revenue growth expectations at 8%, with 5% from organic growth and 3% from acquisitions. They projected a 19% growth in adjusted EBITDA, reflecting significant operating leverage. The company emphasized its Sand States expansion strategy and anticipated positive impacts from marketing efforts, including partnerships and new product models. Additionally, Latham plans to manage tariff impacts through strategic pre-purchasing and price increases to protect margins.

In conclusion, Latham Group Inc.’s earnings call presented a mixed but overall stable outlook. While there are challenges in certain product segments and external risks such as tariffs, the company’s strategic initiatives in product growth and regional expansion, along with its strong financial position, provide a promising path forward. Investors and market watchers will be keen to see how these strategies unfold in the coming quarters.