Core Insights - Latham, The Pool Company has been recognized as one of America's Greatest Companies 2025 by Newsweek, highlighting its commitment to innovation, sustainability, and employee experience [1][3]. Company Performance - The recognition is based on a comprehensive study evaluating companies with over $75 million in annual revenue, involving over 151,000 employees and 3.3 million company reviews on various performance metrics [2]. - Latham's selection was influenced by its financial performance, employee satisfaction, innovation, and sustainability efforts [1][2]. Sustainability Efforts - Latham achieved a 50% reduction in waste from fiberglass pool production in 2023 compared to 2022, and recycled thousands of tons of materials, including scrap vinyl, galvanized steel, and aluminum [3]. - The company expanded energy-efficient LED lighting to nearly half of its fiberglass facilities, contributing to its environmental stewardship [3]. Employee Commitment - Latham's President and CEO emphasized the company's dedication to fostering a culture that empowers employees and drives innovation, which is reflected in the recognition received [3][4]. - The company aims to build brand trust, which is crucial for consumer decisions in the outdoor products market [4]. Company Overview - Latham Group, Inc. is the largest designer, manufacturer, and marketer of in-ground residential swimming pools and pool accessories in North America, Australia, and New Zealand, with over 60 years of experience [5].

Financial Data and Key Metrics Changes - Year-on-year revenue growth of 7.8% and adjusted EBITDA growth of 15.7% were reported for the second quarter [5][19] - Net sales for the second quarter were $173 million, up from $160 million, reflecting both organic and acquisition-related growth [16] - Adjusted EBITDA increased to $39.9 million, with an adjusted EBITDA margin of 23.1%, a 160 basis point improvement [19][20] Business Line Data and Key Metrics Changes - In-ground pool sales were $79 million, down 2.9%, impacted by adverse weather conditions [17] - Cover sales increased to $37 million, reflecting a 46% growth due to acquisitions and organic growth [17] - Liner sales grew by 5.8% to $57 million, driven by the adoption of the proprietary AI measuring tool [17][18] Market Data and Key Metrics Changes - Fiberglass pools are projected to account for approximately 75% of in-ground pool sales for the full year [6] - The company expects fiberglass pools to gain another 1% market penetration in 2025 [7] - The Sand States (Florida, Texas, Arizona, California) represent a substantial growth opportunity, accounting for two-thirds of annual new pool starts in the U.S. [12] Company Strategy and Development Direction - The company is focused on increasing awareness and adoption of fiberglass pools and auto covers, particularly in the Sand States [12][14] - Recent acquisitions have strengthened the margin profile and contributed to sales growth [6][22] - Lean manufacturing and value engineering initiatives are expected to drive production efficiencies and margin improvements [6][14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the second half of the year despite challenging market conditions [24] - The company reconfirmed its 2025 guidance of 8% net sales growth and 19% adjusted EBITDA growth at the midpoint [23][24] - Management noted that the current pool market is in a trough period, with expectations of a rebound as conditions improve [26] Other Important Information - The company has integrated recent acquisitions fully and is seeing anticipated benefits in sales and margins [22] - The balance sheet remains strong, with cash of $27 million at the end of the quarter and a net debt leverage ratio of 3.0 [20][21] - The company plans to invest between $27 million to $33 million in capital expenditures for 2025 [21] Q&A Session Summary Question: How is the company measuring success in marketing campaigns? - Management indicated that the focus is on driving brand awareness and dealer capacity, with significant increases in website activity and leads generated from marketing efforts [34][36] Question: Update on the Sand State strategy? - Management reported good progress in recruiting new dealers and entering master plan communities, with expectations for increased revenue from these markets [38][41] Question: Were fiberglass pool sales affected by weather? - Management confirmed that fiberglass pool sales were impacted but showed a positive trajectory in June and July as weather improved [46][48] Question: What is the outlook for gross margins? - Management expressed satisfaction with the gross margin performance, attributing improvements to acquisitions and lean manufacturing initiatives [49][50] Question: How is labor availability affecting installation? - Management noted no issues with labor availability for fiberglass pool installations, highlighting the efficiency of fiberglass compared to traditional materials [70][72] Question: What are the capital allocation priorities going forward? - Management outlined priorities as investing in the business, pursuing M&A opportunities, and debt repayment [88][90]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $111.4 million, slightly above $110.6 million in Q1 2024, reflecting positive momentum in fiberglass pools and auto covers [18] - Gross margin increased by 190 basis points to approximately 30% from 28% in the prior year, driven by lean manufacturing and value engineering initiatives [19][20] - SG&A expenses rose to $31 million, up from $26 million in Q1 2024, primarily due to strategic investments in sales and marketing [20] - Net loss narrowed to $6 million or $0.05 per diluted share from a net loss of $8 million or $0.07 per diluted share in the prior year [20] Business Line Data and Key Metrics Changes - Inground pool sales were $58 million, down 4% from Q1 2024, impacted by soft industry conditions and adverse weather [19] - Cover sales increased by 18% to $32 million, benefiting from organic growth and acquisitions [19] - Liner sales decreased by 8% to $22 million compared to Q1 2024 [19] Market Data and Key Metrics Changes - Fiberglass pools are expected to gain an additional 1% market share in the in-ground pool sector in 2025, driven by cost advantages and eco-friendly attributes [6][7] - Labor scarcity is seen as a tailwind for fiberglass pools due to lower labor intensity compared to concrete pools [8] Company Strategy and Development Direction - The company is focusing on expanding its presence in Florida, Texas, Arizona, and California, which account for about two-thirds of annual new pool starts [13] - Key priorities include expanding the dealer base, targeting master plan communities, aligning product offerings with market demand, and targeted marketing campaigns [13] - The company aims to significantly increase its market share in the Sand States through strategic partnerships and new product launches [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the market, noting a slight improvement in industry conditions compared to the previous year, but still expecting trough market conditions to persist in 2025 [5][23] - The company maintains its revenue growth expectation of 8% for 2025, with approximately 5% organic growth and 3% from acquisitions [23] Other Important Information - The company has implemented targeted price increases to mitigate the impact of tariffs on raw materials, which represent about 15% to 20% of the materials used in manufacturing [22] - The company is confident in its ability to offset raw material cost increases through strategic pre-purchasing and operational adjustments [22] Q&A Session Summary Question: Outlook for margin expansion and SG&A leverage - Management indicated that SG&A leverage is expected to increase as year-over-year growth sets in, with sales projected to increase by about 8% [27] Question: Reaction to new molds and marketing efforts in Sand States - Management reported positive trends in sales and strong progress in aligning with builders in the Sand States, with expectations for continued improvement [29][30] Question: Risks and opportunities in fiberglass pool demand - Management noted that while fiberglass pools can be installed quickly, the buying decision is a longer process, and they have not seen any slowdown in trends [36][39] Question: Impact of tariffs on pricing and margins - Management quantified the tariff headwind at approximately 350 to 400 basis points, with pricing increases aimed at mitigating the remaining impact [41][42] Question: Strength in auto covers and organic growth - The auto cover business outperformed primarily due to acquisitions, but there was also a positive organic impact [76] Question: Demand environment and potential marketing expense adjustments - Management plans to maintain marketing expenses as part of a long-term strategy, despite potential fluctuations in discretionary spending [78][81]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $111.4 million, slightly above $110.6 million in Q1 2024, reflecting positive momentum in fiberglass pools and auto covers [18] - Gross margin increased by 190 basis points to approximately 30% compared to 28% in the prior year, driven by lean manufacturing and value engineering initiatives [19][20] - SG&A expenses rose to $31 million, up from $26 million in Q1 2024, primarily due to strategic investments in sales and marketing [20] - Net loss narrowed to $6 million or $0.05 per diluted share from a net loss of $8 million or $0.07 per diluted share in the prior year [20] Business Line Data and Key Metrics Changes - Inground pool sales were $58 million, down 4% from Q1 2024, impacted by soft industry conditions and adverse weather [19] - Cover sales increased by 18% to $32 million, benefiting from organic growth and acquisitions [19] - Liner sales decreased by 8% to $22 million compared to the first quarter of 2024 [19] Market Data and Key Metrics Changes - Fiberglass pools are expected to gain an additional 1% market share in the inground pool sector in 2025 due to cost advantages and easier installation compared to concrete pools [6][7] - Labor scarcity is seen as a tailwind for fiberglass pools, with 46% of pool builders citing limited access to qualified labor as a significant issue [8] Company Strategy and Development Direction - The company is focusing on expanding its presence in Florida, Texas, Arizona, and California, which account for about two-thirds of annual new pool starts [13] - Key priorities include expanding the dealer base, targeting master plan communities, aligning product offerings with market demand, and targeted marketing campaigns [13] - The company aims to significantly increase its market share in the Sand States through strategic partnerships and new product launches [14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the market, noting a slight improvement in industry conditions compared to the previous year, but still expecting trough market conditions to persist in 2025 [5][23] - The company maintains its revenue growth expectation of 8% for 2025, with approximately 5% organic growth and 3% from acquisitions [23] - Management highlighted the importance of brand visibility and engagement, noting that Latham is the most searched brand among major fiberglass manufacturers [12] Other Important Information - The company announced the resignation of its Chief Commercial Officer, but emphasized the strength of its commercial team [17] - Capital expenditures are expected to range between $27 million and $33 million in 2025, reflecting investments in new production modes and facility expansions [22] Q&A Session Summary Question: Outlook for margin expansion and SG&A leverage - Management indicated that SG&A leverage is expected to increase as year-over-year sales grow, with a focus on maintaining flat SG&A expenses in the latter part of the year [27][28] Question: Reaction to new molds and marketing efforts in Sand States - Management reported positive trends in sales and strong progress in aligning with builders in the Sand States, with expectations for continued improvement [30][31] Question: Risks and opportunities in the fiberglass pool market - Management noted that while the decision to purchase a pool is a long-term process, they have not seen any significant slowdown in consumer interest or buying decisions [39][41] Question: Impact of tariffs on costs and pricing strategy - Management quantified the tariff headwind at approximately 350 to 400 basis points, with pricing strategies aimed at mitigating the remaining impact [43][44] Question: Strength of auto cover sales and organic growth - The auto cover business outperformed primarily due to acquisitions, but also saw positive organic growth, with a significant portion of sales coming from existing pools [77] Question: Demand environment and potential adjustments to marketing expenses - Management plans to maintain marketing investments despite potential changes in discretionary spending, emphasizing a long-term growth strategy [80][81]