Latham Group’s Earnings Call Highlights Growth and Challenges

Latham Group Inc ((SWIM)) has held its Q3 earnings call. Read on for the main highlights of the call.Meet Your ETF AI Analyst Discover how TipRanks' ETF AI Analyst can help you make smarter investment decisions Explore ETFs TipRanks' users love and see what insights the ETF AI Analyst reveals about the ones you follow. Latham Group’s recent earnings call conveyed a predominantly optimistic outlook, highlighted by substantial growth in net sales, adjusted EBITDA, and market share for fiberglass pools. Despite facing challenges in specific regions and managing ongoing tariff issues, the company’s robust financial performance and strategic initiatives position it well for continued success. Net Sales Increase Latham Group reported a 7.6% year-on-year increase in net sales, significantly outperforming the U.S. in-ground pool market, which is expected to remain flat or slightly below 2024 levels. This growth underscores the company’s strong market position and effective sales strategies. Adjusted EBITDA Growth The company saw a notable increase in adjusted EBITDA, which rose by $8.5 million or 28.5%. The adjusted EBITDA margin also improved to 23.7%, up 390 basis points year-on-year, reflecting efficient cost management and operational improvements. Product Line Growth All three of Latham’s product lines experienced growth over the past year. In-ground pool sales increased modestly, while sales of covers and liners saw impressive gains of 15% and 13%, respectively, indicating strong consumer demand and successful product diversification. Gross Margin Expansion The company’s gross margin expanded to 35.4%, up 300 basis points year-on-year. This improvement was driven by lean manufacturing and value engineering initiatives, showcasing Latham’s commitment to operational efficiency and cost control. Strong Financial Position Latham ended the third quarter with $71 million in cash and a net debt leverage ratio of 2.3, with expectations to reduce this ratio to 2 by year-end. This strong financial position provides the company with flexibility to invest in growth opportunities and manage potential challenges. Fiberglass Pool Market Share Gains Fiberglass pools are set to gain an additional 1% of the total in-ground pool market, expected to account for approximately 24% of total U.S. in-ground pool sales by 2025. This growth highlights the increasing popularity and acceptance of fiberglass pools among consumers. Challenges in Texas and California Despite overall positive performance, Latham faces challenges in the Texas and California markets, which remain difficult and are considered negative spots in the company’s geographical performance. Addressing these challenges will be crucial for sustaining growth in these key regions. Tariff Impact The company continues to manage a net tariff exposure of $10 million, necessitating supply chain adjustments and a price increase in June. This ongoing issue requires strategic management to mitigate its impact on profitability. Forward-Looking Guidance Looking ahead, Latham Group has revised its net sales guidance for 2025 to a range of $540-$550 million, with adjusted EBITDA expected to be between $92-$98 million. These projections reflect the company’s confidence in its growth strategies and market potential. In conclusion, Latham Group’s earnings call painted a largely positive picture of the company’s current performance and future prospects. With significant growth in key financial metrics and strategic initiatives in place, Latham is well-positioned to capitalize on market opportunities, despite facing regional challenges and tariff impacts.