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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 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.
Net Sales Net sales for the third quarter were $162 million, up $11 million or 7.6% year-over-year. This increase was primarily driven by organic growth of 4.7%, acquisition-related growth in sales volumes, and a tariff-related price increase.
Adjusted EBITDA Adjusted EBITDA was $38.3 million, an increase of $8.5 million or 28.5% from last year's $29.8 million. Adjusted EBITDA margin increased to 23.7%, up 390 basis points from 19.8% in the prior year period. This growth was attributed to investments in marketing initiatives and operational efficiencies.
Gross Margin Gross margin expanded by 300 basis points to 35.4% in the third quarter. This was primarily due to the accretive benefit of the 3 Coverstar acquisitions and the success of lean manufacturing and value engineering initiatives.
In-Ground Pool Sales In-ground pool sales increased by approximately 1% year-over-year. This growth reflects continued momentum in fiberglass penetration as builders and consumers increasingly recognize the appeal and benefits of fiberglass pools.
Pool Cover Sales Sales of pool covers increased by 15% year-over-year. This growth was driven by higher adoption rates for auto covers, revenue synergies from the 3 Coverstar acquisitions, and strong consumer engagement with marketing initiatives.
Pool Liner Sales Liner sales increased by 13% year-over-year. This growth was driven by industry-leading lead times and the increased adoption of the Measure by Latham tool, which streamlines the measurement and quoting process for installers.
Net Income Net income was $8.1 million or $0.07 per diluted share, an increase of $2.2 million or 37.7% compared to the $5.9 million or $0.05 per diluted share for the prior year's third quarter.
Year-to-Date Net Sales Year-to-date net sales were $446 million, up 5.9% compared to $421 million in the prior year. This growth was driven by strategic initiatives and product adoption.
Year-to-Date Adjusted EBITDA Year-to-date adjusted EBITDA was $89.4 million, up 16.7% compared to $76.6 million in the prior year. Adjusted EBITDA margin increased 180 basis points to 20% from 18.2%.
Cash Position Cash at the end of the quarter was $71 million. Net cash provided by operating activities was $51 million in the third quarter and $40 million for the first 9 months.
Total Debt and Leverage Ratio Total debt as of the end of the period was $281 million with a net debt leverage ratio of 2.3, down from 3.0 in the year's second quarter. The company expects the net debt leverage ratio to approach 2 by year-end.
Fiberglass Pools: Continued positive momentum with fiberglass pools accounting for approximately 75% of full-year 2025 in-ground pool sales. Fiberglass pools are expected to gain another 1% of the total in-ground pool market, representing 24% of total U.S. in-ground pool sales in 2025.
Measure Pro and Measure Go Tools: AI-powered tools for measuring pool liners and covers, reducing measurement time from hours to minutes. Measure Pro was rebranded, and Measure Go was launched to expand reach using iPhone LiDAR technology. 25% of tool adopters were new to Latham.
Sand States Expansion: Dealer conversions in Florida have driven high single-digit sales growth. Strategic partnerships with custom homebuilders in Florida are increasing Latham's presence in master-planned communities.
Gross Margin: Increased to 35.4%, up 300 basis points year-on-year, driven by lean manufacturing and value engineering initiatives.
Adjusted EBITDA Margin: Increased to 23.7%, up 390 basis points year-on-year, reflecting operational efficiencies and marketing investments.
Market Leadership: Strengthened leadership in fiberglass pools, auto covers, and in-ground pool liners, with significant traction in sand states.
Safety Regulations: 16 states now allow auto covers to replace traditional fencing, enhancing cost savings and safety for pool owners.
Market Conditions: The U.S. in-ground pool market is expected to remain flat or slightly down in 2025, which could limit growth opportunities for the company.
Competitive Pressures: The company faces challenges in maintaining its market leadership position, particularly in the fiberglass pool segment, as competitors may also target this growing market.
Regulatory Hurdles: While some states have expanded pool safety regulations to allow auto covers in place of traditional fencing, regulatory changes could still pose challenges in other regions.
Supply Chain Disruptions: No explicit mention of current supply chain disruptions, but reliance on proprietary tools and acquisitions could expose the company to potential supply chain risks.
Economic Uncertainties: The broader economic environment, including consumer spending trends, could impact demand for in-ground pools and related products.
Strategic Execution Risks: The company is heavily investing in growth initiatives such as expanding in the Sand States and promoting fiberglass pools. Failure to execute these strategies effectively could impact financial performance.
Net Sales Guidance: The company has narrowed its net sales guidance range to $540 million to $550 million for 2025, representing 7% year-over-year growth at the midpoint.
Adjusted EBITDA Guidance: The adjusted EBITDA guidance range is now $92 million to $98 million, representing 19% year-over-year growth at the midpoint.
Capital Expenditures (CapEx) Guidance: The CapEx estimate for 2025 has been revised to a range of $22 million to $24 million.
Market Outlook for 2025: The company expects 2025 new U.S. pool starts to be flat to slightly down compared to 2024.
Future Market Potential: When new U.S. pool starts return to 78,000 per year (2019 levels), the company anticipates achieving approximately $750 million in net sales and $160 million in adjusted EBITDA, more than doubling 2019 revenue and 2.5x adjusted EBITDA at the same volume of new pool starts.
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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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