Latham Group, Inc. (SWIM) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. While revenue and EBITDA guidance show growth, the financial health is concerning with high net debt and cash burn. The Q&A reveals challenges like flat demand, uncertain resin costs, and competitive pressures. However, strong April orders, strategic market segmentation, and promising branding efforts provide some optimism. Given these factors, the stock price is likely to remain stable, resulting in a neutral prediction.
Key Financial Performance
Net Sales $117 million, 5% above $111 million in Q1 of 2025. 3% represented organic growth and 2% represented the 1 month's benefit of the Freedom Pools acquisition.
In-Ground Pool Sales $60 million, up 4% from Q1 2025. Virtually all the year-on-year growth came from Freedom's fiberglass pool sales.
Cover Sales $33 million, up 6% compared to Q1 2025. Driven by growth in autocover demand due to safety and economic benefits.
Liner Sales $24 million, up 9% compared to Q1 2025. Reflecting increased demand and buying in advance of the pool season.
Gross Margin 32%, reflecting a 220 basis point increase above last year's 30%. Primarily due to volume leverage and production efficiencies driven by lean manufacturing and value engineering initiatives.
SG&A Expenses $37 million, up 20% from $31 million in Q1 2025. Largely tied to strategic investments in sales and marketing, digital transformation initiatives, and acquisition-related costs.
Net Loss $9 million or $0.07 per diluted share compared to a net loss of $6 million or $0.05 per diluted share in Q1 2025. Primarily due to the increase in SG&A expenses.
Adjusted EBITDA $12 million, 9% above $11 million in Q1 2025. Resulting from volume leverage and efficiencies gained through lean manufacturing and value engineering initiatives.
Adjusted EBITDA Margin 10.4%, a 40 basis point expansion compared to last year's first quarter.
Cash Position $27 million at the end of Q1 2026.
Net Cash Used in Operating Activities $48 million, reflecting a seasonal increase in working capital needs ahead of peak pool selling season.
Total Debt $311 million at the end of Q1 2026.
Net Debt Leverage Ratio 2.8 at the end of Q1 2026.
Capital Expenditures $23 million in Q1 2026 compared to $4 million in Q1 2025. Increase primarily due to the purchase of 4 key fiberglass manufacturing facilities for $18 million and $5 million of ongoing projects.
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Operating Highlights
Fiberglass Pools: Fiberglass pools are expected to approach 80% of full-year In-Ground pool sales in 2026. The Freedom Pools acquisition has expanded the company's presence in Australia and New Zealand, and broadened its reach into Western Australia, including Perth.
Autocovers: Sales advanced 6% in Q1 2026, driven by increased demand due to safety and economic benefits. Educational marketing campaigns have increased consumer awareness.
Pool Liners: Sales increased 9% year-on-year in Q1 2026, reflecting higher demand ahead of the pool season.
Geographic Expansion: The Freedom Pools acquisition has expanded Latham's presence in Australia and New Zealand, particularly in Western Australia and Perth, the fastest-growing city in the country.
Sand States Strategy: Latham is focusing on increasing market penetration in the sand states, particularly Florida, through targeted marketing, sales resources, and a new market development framework. Latham is implementing a targeted approach to increase market share in sand states, focusing on specific neighborhoods with high potential.
Lean Manufacturing and Value Engineering: These initiatives have contributed to a 220 basis point increase in gross margin, improving operational efficiency.
Sales and Marketing Investments: Strategic investments in sales and marketing have been made to accelerate fiberglass adoption and digital transformation.
Branding and Marketing: The company is revamping its campaigns to highlight the benefits of fiberglass pools and increase consumer awareness.
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Risk or Challenges
Adverse Weather Conditions: Adverse weather conditions across North America negatively impacted organic In-Ground pool sales, posing a challenge to achieving consistent sales growth.
High Oil Prices: Increased transportation and commodity costs due to high oil prices are being mitigated with temporary fuel surcharges, but they remain a risk to cost management and profitability.
Geopolitical Developments: The dynamic situation in the Middle East is being closely monitored for potential impacts on freight and raw material costs, which could affect financial performance.
Integration of Acquisitions: The integration of Freedom Pools and other acquisitions involves costs and operational challenges, including performance-based compensatory earn-out expenses, which could impact financial results.
Increased SG&A Expenses: Strategic investments in sales, marketing, and digital transformation have led to a 20% increase in SG&A expenses, impacting net profitability.
Seasonal Working Capital Needs: A seasonal increase in working capital requirements ahead of the peak pool selling season has led to significant cash usage, which could strain liquidity.
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Guidance & Outlook
2026 Guidance Confirmation: The company anticipates significant sales growth and even stronger growth in adjusted EBITDA within a challenging macro environment where pool starts will be about flat to last year.
Revenue Growth: 2026 revenue growth is projected at 9% at the midpoint.
Adjusted EBITDA Growth: 2026 adjusted EBITDA growth is projected at 13% at the midpoint.
Fiberglass Pool Sales: Fiberglass pools are expected to approach 80% of full-year In-Ground pool sales in 2026.
Geographic Expansion: The Freedom Pools acquisition expands the company's presence in Australia and New Zealand, with anticipated revenue synergies and market-leading positions in these regions.
Sand States Strategy: The company plans to accelerate growth in sand states, particularly Florida, through targeted marketing, sales resources, and segmentation strategies.
Capital Expenditures: 2026 CapEx is expected to range between $42 million and $48 million, including $25 million for maintenance and investments in fiberglass manufacturing facilities.
Market Trends: New U.S. pool starts are expected to remain flat in 2026 compared to the previous year.
Cost Management: The company is monitoring geopolitical developments and their potential impact on freight and raw material costs, with mitigation strategies in place.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How is the fiberglass backlog and orders looking as the season begins? Have trends picked up with the weather clearing?
A:The backlog is as expected coming out of Q1. April orders look strong, indicating a seasonal pickup. Management feels confident enough to reaffirm guidance.
Q:What are the biggest tweaks being made to the fiberglass conversion strategy? Are there any early results?
A:Management is segmenting the market differently, focusing on neighborhoods with higher likelihood of conversion to fiberglass. They are testing this approach and adding resources to sales strategy, operations, and execution. It is too early for results, but the strategy appears promising.
Q:Has the demand environment changed significantly in recent months? How is the company dealing with input costs like freight and resin prices?
A:The demand environment remains flat overall, with some positive trends in April and May. Freight costs are being mitigated with temporary fuel surcharges. Resin prices are uncertain, and management is monitoring the situation while leveraging a diversified supply chain.
Q:How does management feel about the current dealer network? What is the strategy for leveraging and expanding it?
A:Management sees opportunities to optimize the current dealer network, especially in core markets like the Midwest, Northeast, and Canada. They aim to improve account management and add dealers in white space areas. In sand states, they plan to grow the network over time.
Q:Are there incremental investments in the sales force and initiatives, or is it a reallocation of resources?
A:There is a mix of incremental investments and resource reallocation. Management plans to add personnel while maintaining SG&A as a percentage of sales over the medium to long term.
Q:Are higher resin costs included in the guidance? Can the company take mid-season price increases if needed?
A:Transportation costs are included in the guidance, but resin costs are uncertain and not fully accounted for. The company has the ability to implement mid-season price increases if necessary, as done in the past.
Q:Does adverse weather in Q1 push sales into Q2? What is the visibility into Q2 and Q3 for in-ground pool installs?
A:Adverse weather in Q1 caused a slight delay, equating to about one shipping day. Q2 is set based on current lead times, and Q3 visibility is still developing. Management remains confident in the guidance.
Q:What are the top concerns from buyers today?
A:The main concerns are difficulty in obtaining financing due to high interest rates and increased competition among dealers, with 4-5 quotes per job compared to the usual 2-3.
Q:What is the cadence and focus of increased branding and marketing spend?
A:The national campaign runs from February to August, targeting both general awareness and specific neighborhoods. Tactics include digital marketing, door hangers, and local events. SG&A as a percentage of sales is expected to remain flat.
Q:What is the opportunity for autocovers, and how is adoption being impacted by macro dynamics?
A:Adoption of autocovers remains strong, with growth expected this year and beyond. The focus is on increasing awareness, as many consumers are still unaware of the product's benefits.
Q:Can lean manufacturing and value engineering initiatives help protect margins amid cost pressures?
A:Yes, these initiatives contribute $2-2.5 million per quarter and are integral to operations. While low-hanging fruits in lean manufacturing are diminishing, value engineering still offers significant opportunities.
Q:What has led to the success in Florida compared to other sand states?
A:Success in Florida is attributed to a strong sales team, effective marketing campaigns, and a compelling value proposition for fiberglass pools over concrete. The focus is on increasing awareness and dealer connections.
Q:Are temporary surcharges aimed at offsetting transportation costs on a dollar or margin basis?
A:Temporary surcharges are aimed at offsetting transportation costs on a dollar basis.
Q:Review of Unclear Management Responses
A:Management avoided providing clear answers on the impact of higher resin costs, stating it is too early to tell. They also did not provide specific details on the magnitude of temporary fuel surcharges or the exact impact of marketing spend on SG&A.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Australia
Florida sand
Freedom Pools
Ground pool
North America
Pools acquisition
SGA
Sean
action
autocovers
branding marketing
condition North
consumer awareness
consumer demand
contribution
design
earn
efficiency manufacturing
experience
fiberglass manufacturing
framework
home
line expectation
liner sale
loss share
manufacturing facility
marketing campaign
neighborhood
product industry
purchase fiberglass
region
sale Freedom
sale month
sale trend
sand state
size
state market
synergy
trend line
understanding
SWIM Transcript
Latham Group, Inc. (SWIM) Q1 2026 Earnings Call Transcript
Unknown5-6
The earnings call presents a mixed outlook. While revenue and EBITDA guidance show growth, the financial health is concerning with high net debt and cash burn. The Q&A reveals challenges like flat demand, uncertain resin costs, and competitive pressures. However, strong April orders, strategic market segmentation, and promising branding efforts provide some optimism. Given these factors, the stock price is likely to remain stable, resulting in a neutral prediction.
Latham Group, Inc. (SWIM) Q4 2025 Earnings Call Transcript
Unknown3-4
The earnings call reveals mixed signals. The basic financial performance and product updates are positive, with growth in fiberglass pools and autocovers. However, market strategy and expenses show caution due to flat industry demand and moderate margin improvements. Shareholder returns are not highlighted, and management's reluctance to provide specific guidance raises concerns. The Q&A section does not provide strong positive or negative insights, leading to a neutral sentiment overall.
Latham Group, Inc. (SWIM) Q3 2025 Earnings Call Transcript
Positive11-4
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.
Latham Group, Inc. (SWIM) Q2 2025 Earnings Call Transcript
Positive8-6
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.
SWIM Slides
Latham Q4 2025 slides: fiberglass gains drive double-digit growth2026-03-03
Latham Group Q3 2025 slides: outpacing market despite earnings miss2025-11-04
Latham Group Q2 2025 slides: revenue up 7.8%, EBITDA margins expand2025-08-05
Latham Group Q1 2025 slides: projecting 8% growth despite flat pool market2025-05-06
SWIM Report
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