Latham (US:SWIM)2024-03-12 23:15Financial Data and Key Metrics Changes - Net sales for Q4 2023 were $91 million, down from $108 million in Q4 2022, reflecting lower volumes and a 23% decline in in-ground pool sales [89] - Full year net sales were $566 million, compared to $696 million in the prior year, with in-ground swimming pool sales down 23% year-over-year [90] - Adjusted EBITDA for the full year was $88 million, down from $143 million in the prior year, resulting in an adjusted EBITDA margin of 15.5% compared to 20.6% in 2022 [91] - Gross margin for Q4 2023 reached 23.3%, an increase of 540 basis points from 17.9% in Q4 2022, driven by cost reduction programs [74] Business Line Data and Key Metrics Changes - Liner sales for the full year were $128 million, down 16%, while cover sales were $141 million, declining 11% [75] - Fiberglass product sales accounted for approximately 73% of in-ground pool sales for the full year 2023, with a compounded annual growth rate of about 15% since 2019 [85] - Sales of fiberglass pools declined 20% year-over-year, which was about 10 percentage points better than the overall market decline [5] Market Data and Key Metrics Changes - Fiberglass now accounts for approximately 22% of new pool starts in the U.S., up from 21% in 2022 and 18% in 2021, indicating a growing market share [69] - The overall U.S. new in-ground pool installation market is estimated to have declined by 30% in 2023 compared to 2022 [90] - The company anticipates a 15% decline in new pool starts for 2024, reflecting cautious market conditions [117] Company Strategy and Development Direction - The company is focused on driving the adoption of fiberglass pools and automatic safety covers, aiming to capture additional market share as conditions improve [95] - Continued investments in cost reduction, lean manufacturing, and digital transformation are prioritized to enhance operational efficiency [95] - The company plans to leverage its strong dealer network and consumer engagement to increase fiberglass penetration in markets dominated by concrete pools [85] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2024, noting that lower interest rates and improved consumer confidence are not expected to benefit the peak pool buying season [72] - The company is positioned to capitalize on a potential market recovery in 2025, with expectations of increased pool starts [121] - Management highlighted the importance of maintaining flexibility in pricing strategies to stimulate demand amid current economic conditions [152] Other Important Information - The company ended 2023 with a record cash position of over $100 million, providing substantial financial flexibility [68] - Capital expenditures for 2023 were $33 million, down from $40 million in the prior year, with projections for 2024 ranging from $18 million to $22 million [76][77] - The company repaid $13 million of term debt in 2023, ending the year with total debt of $301 million and a net debt leverage ratio of 2.25 [76][128] Q&A Session Summary Question: How is the company managing the balance sheet for 2024? - The company is pleased with its cash flow generation and has reduced net working capital, especially inventory, leading to a cash position of $102.8 million at year-end [12] Question: What are the key items to consider for 2024 EBITDA guidance? - Key items include the impact of lower volume and fixed costs, modest deflation, and ongoing investments in lead generation and fiberglass conversion [99] Question: What is the outlook for gross margins in 2024? - Gross margins are expected to remain roughly in line with 2023 levels, with slight tailwinds from cost containment actions [134] Question: How is the company positioned for a potential market recovery? - The company has a strong vendor base and supply chain, allowing for quick adjustments to production if market conditions improve [49] Question: What is the current capacity utilization rate? - The company is in a good position regarding capacity utilization, with no immediate need for additional plants [138]