Latham (SWIM) - 2025 Q2 - Quarterly Results

Overview of Q2 2025 Performance Financial Highlights Latham Group reported strong financial results for the second quarter and first six months of 2025, highlighted by net sales growth, significant gross margin expansion, and a double-digit increase in Adjusted EBITDA for the quarter Q2 2025 Financial Highlights | Metric | Value | | :--- | :--- | | Net Sales | $172.6 million | | Net Income | $16.0 million | | Net Income per Diluted Share | $0.13 | | Adjusted EBITDA | $39.9 million | | Adjusted EBITDA Margin | 23.1% | Six Months 2025 Financial Highlights | Metric | Value | | :--- | :--- | | Net Sales | $284.1 million | | Net Income | $10.0 million | | Net Income per Diluted Share | $0.08 | | Adjusted EBITDA | $51.0 million | | Adjusted EBITDA Margin | 18.0% | - The company reconfirmed its full-year guidance, which includes midpoints of 8% net sales growth and 19% Adjusted EBITDA growth[4] Management Commentary The CEO attributed strong Q2 performance to successful execution of key strategies, including driving fiberglass pool and autocover adoption, expanding in Sand State markets, and improving margins through operational efficiencies and acquisitions - Strategic focus areas include driving awareness and adoption of fiberglass pools and autocovers, expanding in Sand State markets, and improving margins through lean manufacturing and acquisitions[2] - Fiberglass pool sales are projected to be about 75% of the company's full-year 2025 in-ground pool sales, with a significant number of new dealers added in the Sand States[3] - Autocover sales increased by 46% in Q2, driven by organic growth and the acquisition of Coverstar businesses, while liner sales also grew by 6% year-over-year[5] - Gross margin expanded by 400 basis points to 37.1% due to higher volumes, lean manufacturing initiatives, and recent acquisitions, with Adjusted EBITDA margin growing by 160 basis points to 23.1%[6] Detailed Financial Results Second Quarter 2025 Results In Q2 2025, Latham Group's net sales increased 7.8% year-over-year to $172.6 million, driven by both organic and acquisition-related growth, with gross profit rising 20.6% to $64.0 million, and net income growing to $16.0 million Overall Performance The company achieved broad-based growth in Q2 2025, with a 7.8% increase in net sales and a 20.6% rise in gross profit, while net income and Adjusted EBITDA saw significant year-over-year growth of 20.3% and 15.7% respectively Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $172.6M | $160.1M | +7.8% | | Gross Profit | $64.0M | $53.0M | +20.6% | | Gross Margin | 37.1% | 33.1% | +400 bps | | SG&A Expenses | $31.9M | $26.6M | +20.1% | | Net Income | $16.0M | $13.3M | +20.3% | | Adjusted EBITDA | $39.9M | $34.5M | +15.7% | | Adjusted EBITDA Margin | 23.1% | 21.5% | +160 bps | - The increase in Selling, general, and administrative (SG&A) expenses was primarily driven by investments in marketing for the Sand State strategy, a new ERP system, and the inclusion of Coverstar Central[10] Net Sales by Product Line In the second quarter, sales growth was led by the Covers segment, which increased 46.0% year-over-year, and the Liners segment, which grew 6.0%, while sales for In-ground Swimming Pools experienced a slight decline of 2.9% Q2 Net Sales by Product Line (in thousands) | Product Line | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | In-ground Swimming Pools | $78,601 | $80,958 | -2.9% | | Covers | $37,245 | $25,503 | +46.0% | | Liners | $56,793 | $53,661 | +6.0% | | Total | $172,639 | $160,122 | +7.8% | Six Months 2025 Results For the first six months of 2025, net sales grew 4.9% to $284.1 million, gross margin expanded by 320 basis points to 34.1%, and net income nearly doubled to $10.0 million, with Adjusted EBITDA increasing by 9.1% to $51.0 million Six Months 2025 vs 2024 Performance | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $284.1M | $270.8M | +4.9% | | Gross Profit | $96.8M | $83.6M | +15.8% | | Gross Margin | 34.1% | 30.9% | +320 bps | | Net Income | $10.0M | $5.4M | +85.2% | | Adjusted EBITDA | $51.0M | $46.8M | +9.1% | | Adjusted EBITDA Margin | 18.0% | 17.3% | +70 bps | - Similar to the quarterly results, the six-month increase in SG&A expenses was primarily due to investments in the Sand State strategy, a new ERP system, and the inclusion of Coverstar Central[15] Balance Sheet, Cash Flow, and Liquidity As of Q2 2025, Latham Group reported $26.9 million in cash, $281.5 million in total debt with a 3.0 net debt leverage ratio, and generated $36.0 million in operating cash flow for the quarter - Ended Q2 2025 with $26.9 million in cash[17] - Total debt stood at $281.5 million, with a net debt leverage ratio of 3.0[18] - Net cash provided by operating activities was $36.0 million in Q2 2025[17] - Capital expenditures were $6.8 million in Q2 2025 and $10.3 million for the first half of the year[18] Business Outlook Summary and Outlook Management expressed confidence in outperforming the market and reaffirmed full-year 2025 guidance, projecting growth through market share gains in fiberglass pools, autocovers, and liners, supported by competitive advantages and recent acquisitions despite an estimated 60,000 new U.S. pool starts - The company continues to project approximately 60,000 new U.S. pool starts in 2025, consistent with original estimates[19] - Guidance for 8% net sales growth and 19% Adjusted EBITDA growth (at midpoints) is driven by expected category share gains and contributions from the Coverstar Central acquisition[19] - Key competitive advantages cited include high-quality products, the industry's largest manufacturing footprint, and a strong network of dealers and contractors[20] Full-Year 2025 Guidance Latham Group reaffirmed its full-year 2025 financial guidance, projecting net sales in the range of $535 million to $565 million and Adjusted EBITDA between $90 million and $100 million, with capital expenditures expected to be between $27 million and $33 million FY 2025 Guidance | Metric | Low | High | | :--- | :--- | :--- | | Net Sales | $535 million | $565 million | | Adjusted EBITDA | $90 million | $100 million | | Capital Expenditures | $27 million | $33 million | Appendix: Financial Statements and Reconciliations Condensed Consolidated Statements of Operations The income statement reflects year-over-year increases in net sales and gross profit for both Q2 and the first six months of 2025, with net income rising to $16.0 million in Q2 and $10.0 million for the six-month period Condensed Consolidated Statements of Operations (in thousands) | | Fiscal Quarter Ended | Two Fiscal Quarters Ended | | :--- | :--- | :--- | | | June 28, 2025 | June 29, 2024 | June 28, 2025 | June 29, 2024 | | Net sales | $172,639 | $160,122 | $284,059 | $270,751 | | Gross profit | $63,963 | $53,022 | $96,844 | $83,611 | | Income from operations | $24,724 | $20,006 | $19,793 | $17,933 | | Net income | $15,980 | $13,279 | $10,018 | $5,415 | | Diluted EPS | $0.13 | $0.11 | $0.08 | $0.05 | Condensed Consolidated Balance Sheets As of June 28, 2025, the balance sheet reported total assets of $822.1 million, total liabilities of $423.7 million, a decrease in cash to $26.9 million, and an increase in total stockholders' equity to $398.4 million Key Balance Sheet Items (in thousands) | Account | June 28, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $26,943 | $56,398 | | Total current assets | $214,368 | $178,298 | | Total assets | $822,142 | $794,207 | | Total current liabilities | $89,868 | $70,977 | | Long-term debt, net | $278,243 | $278,271 | | Total liabilities | $423,714 | $406,985 | | Total stockholders' equity | $398,428 | $387,222 | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash used in operating activities was $10.9 million, a reversal from the prior year, leading to a $29.5 million decrease in the company's cash balance Six Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | June 28, 2025 | June 29, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(10,905) | $17,911 | | Net cash used in investing activities | $(15,278) | $(9,833) | | Net cash used in financing activities | $(3,580) | $(20,005) | | Net decrease in cash | $(29,455) | $(11,995) | | Cash at end of period | $26,943 | $90,768 | Non-GAAP Reconciliations This section provides detailed reconciliations for the non-GAAP financial measures used in the report, specifically Adjusted EBITDA and the Net Debt Leverage Ratio, bridging them to the most directly comparable GAAP figures Adjusted EBITDA Reconciliation Adjusted EBITDA for Q2 2025 was $39.9 million and $51.0 million for the first six months, reconciled from net income by adjusting for items such as depreciation, interest, and stock-based compensation Adjusted EBITDA Reconciliation Summary (in thousands) | | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $15,980 | $13,279 | $10,018 | $5,415 | | Depreciation and amortization | $12,697 | $10,593 | $25,097 | $20,967 | | Interest expense, net | $7,149 | $6,013 | $13,520 | $10,995 | | Income tax expense | $5,130 | $442 | $1,051 | $974 | | Stock-based compensation | $1,381 | $2,100 | $3,352 | $3,343 | | Other adjustments | $(1,425) | $2,150 | $(951) | $5,075 | | Adjusted EBITDA | $39,887 | $34,478 | $51,027 | $46,770 | | Adjusted EBITDA margin | 23.1% | 21.5% | 18.0% | 17.3% | Net Debt Leverage Ratio As of June 28, 2025, the company's Net Debt was calculated at $254.6 million, resulting in a Net Debt Leverage Ratio of 3.0 based on a Last Twelve Months (LTM) Adjusted EBITDA of $84.5 million Net Debt Leverage Ratio Calculation (as of June 28, 2025, in thousands) | Metric | Value | | :--- | :--- | | Total Debt | $281,493 | | Less: Cash | $(26,943) | | Net Debt | $254,550 | | LTM Adjusted EBITDA | $84,476 | | Net Debt Leverage Ratio | 3.0 |