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01/11 03:32
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals: while there was a slight increase in net sales and a significant gross margin improvement, key areas like inbound pool and liner sales saw declines. Despite positive market strategies and acquisitions, the adjusted EBITDA decreased, and net loss persisted. The Q&A highlighted management's optimism but also revealed uncertainties, particularly around COGS and future demand trends. No share buyback or dividend program was mentioned, and the guidance was not notably strong. These factors suggest a neutral market reaction, with no strong catalysts for significant stock price movement.
Net Sales $111,400,000, up 0.7% from $110,600,000 in Q1 2024, reflecting positive momentum in sales for fiberglass pools and auto covers.
Inbound Pool Sales $58,000,000, down 4% from Q1 2024, due to soft industry conditions and adverse weather.
Cover Sales $32,000,000, up 18% from Q1 2024, driven by organic growth and benefits from the Coverstar Central acquisition.
Liner Sales $22,000,000, down 8% from Q1 2024.
Gross Margin 30%, up 190 basis points from 28% in Q1 2024, due to production efficiencies from lean manufacturing and value engineering initiatives.
SG&A Expenses $31,000,000, up $4,400,000 from $26,000,000 in Q1 2024, largely due to strategic investments in sales and marketing.
Net Loss $6,000,000 or $0.05 per diluted share, improved from a net loss of $8,000,000 or $0.07 per diluted share in Q1 2024.
Adjusted EBITDA $11,000,000, down $1,000,000 from $12,000,000 in Q1 2024, primarily due to higher sales and marketing spend.
Adjusted EBITDA Margin 10%, down 110 basis points from Q1 2024.
Cash Position $24,000,000, in line with expectations.
Net Cash Used in Operating Activities $47,000,000, reflecting seasonal increase in working capital needs.
Total Debt $307,000,000.
Net Debt $283,000,000, including $25,000,000 of revolver usage for seasonal working capital needs.
Capital Expenditures $4,000,000, down from $5,000,000 in Q1 2024.
Net Debt Leverage Ratio 3.6, or 3.3 on a pro forma basis.
New Product Launches: Latham launched two new fiberglass pool models, the Astoria 14 and Apollo 14, designed to appeal to homeowners in the Sand States.
AI Tool Rollout: The rollout of 'Measure by Latham' for liners and covers is going well, streamlining the measurement and quoting process for installers.
Market Expansion: Latham is making notable progress on its Sand State expansion strategy, targeting Florida, Texas, Arizona, and California, which account for two-thirds of annual new pool starts.
Acquisitions: Latham completed acquisitions of CoverStar New York and CoverStar Tennessee, integrating them into its operations to strengthen its auto cover product category.
Gross Margin Expansion: Latham achieved a 190 basis point increase in gross margin, reaching approximately 30%, due to lean manufacturing and value engineering initiatives.
Sales Growth: Net sales for Q1 2025 were $111.4 million, slightly above Q1 2024, driven by fiberglass pools and auto covers.
Marketing Strategy: Latham's increased marketing spend is aimed at expanding brand visibility and consumer engagement, particularly in the Sand States.
Safety Partnership: Latham announced a partnership with Olympic gold medalist Bodie Miller to raise awareness about pool safety.
Market Conditions: The company expects trough market conditions to persist for 2025, with new pool starts projected to be stable with 2024 levels.
Labor Scarcity: 46% of pool builders cited limited access to qualified labor as a substantial impact on their ability to build new pools, which could affect overall production.
Tariff Impact: Imports represent about 15% to 20% of raw materials used in manufacturing, and the company anticipates a headwind of approximately 350 to 400 basis points or about $20 million due to tariffs.
Economic Factors: The company is cautious about consumer spending and discretionary spending on new pools, which could impact sales.
Competitive Pressures: The company is focused on gaining market share in a flat pool market, indicating potential competitive pressures from other manufacturers.
Acquisition Integration: While recent acquisitions have been successful, there is always a risk associated with integrating new businesses and ensuring they perform as expected.
Seasonal Demand Fluctuations: The company experiences seasonal fluctuations in demand, with the first quarter typically accounting for only 20% of full-year sales.
Market Share Growth: Expect fiberglass pools to gain another 1% of market share in the in-ground pool sector in 2025.
Sand State Expansion Strategy: Notable progress made on the sand state expansion strategy, targeting Florida, Texas, Arizona, and California.
Acquisitions: Integration of CoverStar New York and CoverStar Tennessee acquisitions is strengthening the auto cover product category.
Measure by Latham: AI-powered tool for liners and covers is improving efficiency and expanding market share.
Marketing Initiatives: Increased spend on marketing campaigns is enhancing brand visibility and consumer engagement.
Revenue Growth: Maintaining expectations for 2025 revenue growth of 8%, with approximately 5% organic growth and 3% from acquisitions.
Adjusted EBITDA Guidance: 2025 adjusted EBITDA guidance reflects 19% growth at the midpoint.
CapEx Projections: Expect CapEx to range between $27 million and $33 million in 2025, a $10 million increase from 2024.
Gross Margin Expansion: Achieved a gross margin of approximately 30%, reflecting a 190 basis point increase.
Net Loss: Net loss narrowed to $6 million in Q1 2025 from $8 million in Q1 2024.
Shareholder Return Plan: Latham Group Inc. has not announced any specific share buyback program or dividend program during this earnings call.
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.
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.
The earnings call presented mixed signals: while there was a slight increase in net sales and a significant gross margin improvement, key areas like inbound pool and liner sales saw declines. Despite positive market strategies and acquisitions, the adjusted EBITDA decreased, and net loss persisted. The Q&A highlighted management's optimism but also revealed uncertainties, particularly around COGS and future demand trends. No share buyback or dividend program was mentioned, and the guidance was not notably strong. These factors suggest a neutral market reaction, with no strong catalysts for significant stock price movement.
Despite missing EPS expectations, Latham Group shows resilience with positive feedback from dealers and growth in fiberglass pool penetration. Adjusted EBITDA exceeded prior year margins, and strategic initiatives indicate potential future growth. However, lack of share repurchase and challenging market conditions temper positive sentiment, resulting in a neutral outlook.
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