Latham Group Inc ((SWIM)) has held its Q4 earnings call. Read on for the main highlights of the call.
Latham Group Inc. recently held its earnings call, revealing a mixed sentiment. The company showcased its strong strategic positioning and operational improvements, particularly in the expansion of fiberglass pools and successful acquisitions. However, challenges such as decreased net sales, increased SG&A expenses, and a decline in the U.S. pool market were also acknowledged. Despite these hurdles, Latham remains optimistic about future growth opportunities.
Increased Market Penetration of Fiberglass Pools
Fiberglass pools have become a significant part of Latham’s business strategy, representing 24% of U.S. pool starts in 2024, up from 23% in 2023. These pools constituted 75% of Latham’s in-ground pool sales, an increase from 73% in the previous year, highlighting the company’s successful market penetration.
Adjusted EBITDA Growth
Latham Group reported an adjusted EBITDA of over $80 million, with a margin of 15.8%, which is 30 basis points ahead of the previous year. This growth was achieved despite lower sales volumes, showcasing the company’s ability to maintain profitability in challenging market conditions.
Successful Acquisition of CoverStar Central
The acquisition of CoverStar Central has enabled Latham to vertically integrate its automatic safety cover line across 29 states. This strategic move has opened up revenue synergy opportunities and paved the way for further acquisitions, strengthening the company’s market position.
Strong Financial Position
Latham ended 2024 with a robust financial position, providing the company with the flexibility to pursue organic growth projects and potential acquisitions. This financial strength is a testament to the company’s effective management and strategic foresight.
Growth Strategy in Sand States
The company has focused its expansion efforts in the sand states of Florida, Texas, Arizona, and California. In these regions, fiberglass pool sales increased from 15% to 17% of total sales, reflecting the effectiveness of Latham’s targeted growth strategy.
Lean Manufacturing and Value Engineering Initiatives
Latham’s lean manufacturing and value engineering initiatives resulted in $9 million in savings, enhancing production efficiencies and improving gross margins. These initiatives are part of the company’s ongoing efforts to optimize operations and drive profitability.
Decline in Net Sales
Net sales for the fourth quarter of 2024 were $87 million, a decrease of 4% from $91 million in Q4 2023. This decline reflects lower volumes due to industry softness, highlighting the challenges Latham faces in the current market environment.
Net Loss for the Year
Latham reported a net loss of $18 million for the full year, compared to a net income of $2 million in the prior year. This loss underscores the financial challenges posed by the current market conditions.
Increased SG&A Expenses
SG&A expenses rose to $108 million from $110 million in 2023, driven by increased investments in sales, marketing, and higher performance-based compensation. These expenses reflect Latham’s commitment to strengthening its market presence despite financial pressures.
Challenges in U.S. Pool Market
Latham is facing an estimated decline of approximately 15% in U.S. pool starts in 2024, with challenging market conditions expected to persist through much of 2025. This decline poses significant challenges for the company as it navigates a tough market landscape.
Forward-Looking Guidance
Looking ahead, Latham Group has outlined its fiscal 2025 guidance with optimism. The company anticipates net sales growth between 5% and 11%, reaching between $535 million and $565 million, supported by market share gains in key sand states. Adjusted EBITDA is projected to increase by 19% at the midpoint, with a margin expansion of 150 basis points. Latham plans to invest significantly in capital expenditures, including developing new fiberglass pool models tailored to sand states. Despite external challenges, the company is confident in achieving its 2025 objectives through strategic initiatives and operational efficiencies.
In conclusion, Latham Group’s earnings call reflected a mix of optimism and caution. While the company faces challenges such as decreased net sales and a declining U.S. pool market, its strategic initiatives in fiberglass pools, acquisitions, and lean manufacturing position it well for future growth. The forward-looking guidance underscores Latham’s confidence in its ability to navigate the current market landscape and achieve its objectives.