8-K: Latham Group Reports Q4 and Full Year 2024 Results, Provides 2025 Guidance

Latham Group announces its Q4 and full year 2024 financial results, highlighting in-ground pool sales outperformance and providing 2025 guidance with anticipated sales and Adjusted EBITDA growth.

Summary

• Latham Group reported net sales of $87.3 million for Q4 2024 and $508.5 million for the full year.
• The company experienced a net loss of $29.2 million in Q4 and $17.9 million for the full year.
• Adjusted EBITDA was $3.6 million for Q4 and $80.2 million for the full year.
• Latham's in-ground pool sales outperformed the U.S. pool market in 2024, driven by fiberglass share gains.
• The company anticipates 8% sales growth and 19% Adjusted EBITDA growth in 2025.
• Latham ended 2024 with a cash balance of $56 million after acquisition payments and debt paydowns.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company experienced a decrease in net sales and net income, they outperformed the market in certain areas and are projecting growth in the coming year.

Positives

• Latham's in-ground pool sales outperformed the U.S. pool market in 2024.
• Fiberglass pools gained market share, accounting for 24% of all in-ground pools installed in the U.S. last year, up from 23% in 2023.
• Gross margin expanded by over 300 basis points in 2024 due to lean manufacturing and value engineering initiatives.
• The company ended 2024 with a cash balance of $56 million after acquisition payments and debt paydowns.
• 2025 guidance anticipates 8% sales growth and 19% growth in Adjusted EBITDA at the midpoints.

Negatives

• Net sales decreased by 10.2% for the full year 2024, primarily due to lower sales volume.
• Net loss was $17.9 million for the full year 2024, compared to a net loss of $2.4 million in the prior year period.
• Adjusted EBITDA decreased by 8.9% for the full year 2024.
• Net sales for the fourth quarter of 2024 were down 4.0% from the prior year's fourth quarter.
• Adjusted EBITDA for the fourth quarter of 2024 was down 63.4% from the prior year's fourth quarter.

Risks

• Unfavorable economic conditions could impact consumer spending and demand for Latham's products.
• Inflationary impacts could affect consumer demand.
• The company faces risks related to sourcing raw materials and components globally.
• Declining home ownership could affect demand for Latham's products.
• Competitive risks exist within the industry.
• Natural disasters, geopolitical events, and public health issues could disrupt operations.
• Disturbances to the company's technological infrastructure could pose risks.
• Adverse weather conditions could impact sales.
• Product quality issues and warranty claims could arise.
• The company's ability to keep pace with technological developments is crucial.
• Delays in the implementation of the enterprise resource planning system could cause disruptions.
• The company's ability to attract and retain qualified personnel is important.
• Compliance with government regulations is necessary.
• The company faces risks related to the protection of its intellectual property.
• International business risks exist.
• Possible asset impairments could occur.
• The company's ability to secure financing and manage its substantial indebtedness is important.

Future Outlook

Latham anticipates 8% sales growth and 19% Adjusted EBITDA growth in 2025, driven by market share gains in fiberglass pools and the benefits of the Coverstar Central acquisition; capital expenditures are expected to be approximately $30 million.

Management Comments

• Scott Rajeski, President and CEO, said, 'This was a year of substantial achievement for Latham Group.'
• Scott Rajeski, President and CEO, said, 'Our in-ground pool sales continued to outperform the U.S. in-ground pool market, we succeeded in expanding margins despite lower utilization, and we made investments that have positioned the Company for sales growth and increased profitability in 2025 and beyond.'

Industry Context

Latham's performance is viewed in the context of a challenging industry environment, with U.S. pool starts estimated to have declined by approximately 15% in 2024; the company's focus on fiberglass pools and automatic safety covers positions it to outperform the market.

Comparison to Industry Standards

• The document states that Latham's in-ground pool sales outperformed the U.S. in-ground pool market, which was down approximately 15% in 2024.
• Fiberglass pools gained one percentage point of total in-ground-pool market share, accounting for 24% of all in-ground pools installed in the U.S. last year, up from 23% in 2023.
• Latham's diversified product mix contributes to its ability to outperform new U.S. pool starts, as its broad portfolio of pool liners and covers provides access to the more stable replacement market.
• The company's leadership position in fiberglass pools was a key driver of its pool market outperformance.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net sales and net income, but encouraged by the projected growth in 2025.
• Employees may be affected by cost reduction plans and restructuring programs.
• Customers may benefit from the company's focus on fiberglass pools and automatic safety covers.
• Suppliers may be affected by the company's supplier diversification initiatives.

Next Steps

• Latham will hold a conference call on March 4, 2025, to discuss its fourth quarter and full year 2024 financial results.
• The company plans to continue driving fiberglass adoption in the Sand States.
• Latham will continue to focus on expanding the adoption of automatic safety covers.

Key Dates