Latham (US:SWIM)2025-11-04 22:30Financial Data and Key Metrics Changes - Net sales increased by 7.6% year-on-year, reaching $162 million compared to $151 million in the prior year [13] - Adjusted EBITDA rose by $8.5 million, or 28.5%, totaling $38.3 million, with an adjusted EBITDA margin of 23.7%, up 390 basis points from the previous year [18] - Gross margin expanded to 35.4%, an increase of 300 basis points year-on-year [17] Business Line Data and Key Metrics Changes - In-ground pool sales increased modestly by just under 1% year-on-year, driven by fiberglass pool sales, which are expected to account for approximately 75% of full-year 2025 in-ground pool sales [6][15] - Pool covers sales grew by 15%, with significant organic growth in auto covers [9][16] - Liner sales increased by 13%, supported by the successful rollout of the Measure by Latham tool [10][16] Market Data and Key Metrics Changes - The U.S. in-ground pool market is expected to remain flat to slightly down compared to 2024 levels, yet Latham outperformed this market [4][21] - Florida sales increased at a high single-digit rate, with Latham gaining traction in master plan communities [11][12] Company Strategy and Development Direction - The company is focused on increasing awareness and adoption of fiberglass pools and auto covers, as well as expanding sales of in-ground pool liners [14] - Strategic partnerships with custom home builders in Florida are being established to enhance market presence [12][34] - Latham aims to leverage its proprietary measuring tool to gain market share in the liner product line and winter safety cover market [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth despite a challenging industry environment, projecting 7% sales growth and 19% adjusted EBITDA growth for 2025 [20][21] - The company anticipates that fiberglass pool and auto cover adoption will enable it to outperform the in-ground pool market [21] Other Important Information - The company ended the third quarter with a strong financial position, maintaining cash of $71 million and a net debt leverage ratio of 2.3 [19] - Capital expenditures for the third quarter were $5.8 million, with a revised estimate for full-year CapEx set at $22-$24 million [20] Q&A Session Summary Question: What have you seen in terms of upstream metrics from leads and consumer confidence? - Management noted strong lead generation throughout the peak pool building season, with significant year-over-year increases, although consumer confidence remains affected by tariff and interest rate uncertainties [25][26] Question: Can you provide context on the liners' performance and market share gains? - The performance is attributed to a combination of share gains in the replacement market and challenges in the lower end of the new construction market [27][28] Question: How did demand progress geographically throughout the quarter? - Demand was consistent across most regions, with strong performance in Florida, while Texas and California remained challenging markets [31][32] Question: What is the outlook for pricing and tariffs? - Price increases implemented in June have effectively mitigated tariff impacts, with net tariff exposure remaining stable at approximately $10 million [42][43] Question: Is there potential for accelerated market share gains in fiberglass pools? - Management believes that while a 1% market share gain per year is a reasonable expectation, increased traction in the Sand States could lead to accelerated growth [46][48] Question: What is the strategy for SG&A spending moving forward? - SG&A spending is expected to remain stable, with continued investments in sales and marketing initiatives, particularly in the Sand States [49][50]