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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 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.
Revenue Growth Year-on-year revenue growth of 7.8%, driven by organic and acquisition-related sales growth, despite adverse weather conditions and delayed pool building activity.
Adjusted EBITDA Growth Adjusted EBITDA grew by 15.7% year-over-year, supported by increased operating profitability, lean manufacturing, and value engineering initiatives.
Net Sales Net sales for Q2 2025 were $173 million, up $13 million or 7.8% from $160 million in Q2 2024, driven by increased volumes for autocovers and pool liners.
In-Ground Pool Sales Sales were $79 million, down 2.9% year-over-year, due to adverse weather conditions and delayed pool building activity, particularly in the Northeast.
Cover Sales Sales were $37 million, an increase of 46% year-over-year, driven by organic growth and acquisitions of Coverstar Central, New York, and Tennessee.
Liner Sales Sales were $57 million, up 5.8% year-over-year, attributed to the adoption of the Measure by Latham AI tool.
Gross Margin Gross margin improved to 37.1%, up 400 basis points from the prior year, due to volume leverage, lean manufacturing, and value engineering initiatives.
SG&A Expenses Increased to $31.9 million, up $5.3 million year-over-year, due to investments in marketing, personnel for Sand State growth strategy, and ERP infrastructure.
Net Income Net income was $16 million, up from $13.3 million in Q2 2024, representing an increase in earnings per diluted share from $0.11 to $0.13.
Adjusted EBITDA Margin Expanded to 23.1%, a 160-basis point improvement from 21.5% in Q2 2024, driven by higher sales and gross profit.
First Half Net Sales Net sales for the first half of 2025 were $284 million, up from $271 million in the first half of 2024, reflecting organic and acquisition growth.
First Half Net Income Net income for the first half of 2025 was $10 million, up from $5.4 million in the first half of 2024.
First Half Adjusted EBITDA Adjusted EBITDA for the first half of 2025 increased by 9.1% to $51 million, with a margin improvement to 18% from 17.3% in the prior year.
Cash Position Cash at the end of Q2 2025 was $27 million, with net cash provided by operating activities at $36 million for the quarter.
Total Debt Total debt was $281 million, with a net debt leverage ratio of 3.0.
Fiberglass Pools: Tracking to account for approximately 75% of in-ground pool sales for the full year. Investments in targeted marketing programs have led to an 18% increase in dealer leads and a 34% increase in consumer sessions on the website.
Autocovers: Contributed significantly to sales growth with a 46% increase in sales. Highlighted for safety and cost savings, with compatibility across all in-ground pool types.
Measure by Latham: Proprietary AI tool for pool liner and cover measurement. 25% of dealers using the tool were new to Latham, aiding market share expansion.
Sand State Strategy: Focused on Florida and Texas, with increased dealer base and new fiberglass pool models tailored to these markets. Marketing efforts have driven over a 20% increase in dealer leads.
Lean Manufacturing and Value Engineering: Improved production efficiencies and margin profile, contributing to a 400 basis point improvement in gross margin.
Coverstar Acquisitions: Fully integrated, contributing to incremental sales and margins.
Market Positioning in Sand States: Latham is underrepresented in these markets, providing a substantial growth opportunity. Efforts include dealer expansion and targeted marketing.
Adverse Weather Conditions: Adverse weather conditions in many parts of the country delayed pool building activity, leading to a slight decline in in-ground pool sales, particularly impacting packaged pool sales.
Labor Shortages: Widespread labor shortages across many U.S. markets are limiting the ability of pool builders to construct new pools, with 46% of pool builders citing limited access to qualified labor as a substantial challenge.
Market Softness: The pool market is currently in a trough period, with U.S. pool starts expected to decline slightly from 62,000 in 2024 to 60,000 in 2025, reflecting a challenging industry environment.
Geographic Underrepresentation: Latham is underrepresented in the Sand States (Florida, Texas, Arizona, California), which account for two-thirds of annual new pool starts in the U.S., posing a challenge to capturing market share in these high-growth regions.
Increased SG&A Expenses: SG&A expenses increased due to investments in marketing, new personnel for the Sand State growth strategy, and ERP infrastructure, which could pressure margins if not offset by revenue growth.
Economic Sensitivity: The pool market's reliance on cash purchasers, as opposed to financed buyers, limits the addressable market during periods of economic uncertainty or tighter consumer spending.
Fiberglass Pools Market Penetration: Fiberglass pools are expected to account for approximately 75% of in-ground pool sales for the full year 2025, with an additional 1% market penetration in the in-ground pool category projected for 2025.
Sand State Market Expansion: The company is focusing on expanding its presence in the Sand States (Florida, Texas, Arizona, and California), which represent two-thirds of annual new pool starts in the U.S. Efforts include increasing the pool dealer base, launching new fiberglass pool models, and ramping up marketing efforts in these regions.
Autocovers Growth: Autocovers are gaining momentum with consumers due to safety and cost-saving benefits. The company expects continued growth in this category, supported by expanded pool safety regulations in 16 states and municipalities.
Measure by Latham Tool Adoption: The proprietary AI-powered tool is expected to drive market share gains in liners and covers, with 25% of new tool adopters being new to Latham.
2025 Financial Guidance: The company reconfirmed its 2025 guidance of 8% net sales growth and 19% adjusted EBITDA growth at the midpoints.
Long-term Financial Projections: When U.S. pool starts return to 78,000 annually (2019 levels), the company expects to achieve $750 million in net sales and $160 million in adjusted EBITDA. At 100,000 pool starts annually, further financial growth is projected.
The selected topic was not discussed during the 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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