8-K: Latham Group Reports Slight Sales Increase in Q1 2025, Maintains Full Year Guidance

Latham Group, Inc. announced its Q1 2025 financial results, reporting a slight increase in net sales and reaffirming its full-year guidance for sales and adjusted EBITDA growth.

Summary

• Latham Group, Inc. reported its financial results for the first quarter of 2025, ended March 29, 2025.
• Net sales increased slightly to $111.4 million, a 0.7% increase from $110.6 million in the prior year's first quarter.
• The company reported a net loss of $6.0 million, or $0.05 per diluted share, compared to a net loss of $7.9 million, or $0.07 per diluted share, in the prior year.
• Adjusted EBITDA decreased to $11.1 million from $12.3 million in the prior year.
• Gross margin expanded by 190 basis points to 29.5%, driven by lean manufacturing and value engineering initiatives.
• The company maintains its full-year guidance for 8% sales growth and 19% growth in Adjusted EBITDA at the midpoints.
• Capital expenditures for the full year are projected to be between $27 million and $33 million.
• The company's Sand State expansion strategy is on track, targeting Florida, Texas, Arizona, and California.
• The company ended the quarter with $24.0 million in cash and total debt of $306.9 million, resulting in a net debt leverage ratio of 3.6.
• The company is monitoring the impact of elevated tariffs on imported raw materials, which represent 15-20% of their raw materials.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company reported a net loss, they maintained their full-year guidance and saw some positive trends in gross margin and specific product categories. The company is also actively managing risks related to tariffs.

Positives

• Net sales increased slightly to $111.4 million.
• Gross margin expanded by 190 basis points to 29.5%.
• Net loss narrowed to $6.0 million, or $0.05 per diluted share.
• The company maintains its full-year guidance for 8% sales growth and 19% Adjusted EBITDA growth at the midpoints.
• The Sand State expansion strategy is progressing as planned.
• Lean manufacturing and value engineering initiatives are driving margin improvements.
• Fiberglass pools and autocovers are showing relative strength.

Negatives

• Adjusted EBITDA decreased to $11.1 million from $12.3 million in the prior year.
• Net loss of $6.0 million, or $0.05 per diluted share.
• Increased SG&A spending due to growth initiatives impacted profitability.
• Adjusted EBITDA margin was 10.0%, 110 basis points below the prior year period.

Risks

• The company is monitoring the impact of elevated tariffs on imported raw materials.
• New pool starts are projected to be roughly in line with 2024 levels, indicating limited growth in that area.
• Unfavorable economic conditions could impact consumer spending and demand for the company's products.
• Inflationary impacts could affect consumer demand.
• The company faces competitive risks in the market.

Future Outlook

Latham Group maintains its full-year 2025 guidance, projecting 8% sales growth and 19% growth in Adjusted EBITDA at the midpoints. The company expects progressively higher year-on-year comparisons during the second and third quarters.

Management Comments

• Scott Rajeski, President and CEO, stated that the first quarter results were in line with expectations and reflected the relative strength of Latham's fiberglass pool and autocover product categories.
• Mr. Rajeski concluded that Adjusted EBITDA growth of 19% at the midpoint reflects the significant operating leverage inherent in their business model, while also accounting for increased investment in growth initiatives.

Industry Context

Latham Group is the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. The company's performance is influenced by factors such as consumer spending, housing market trends, and competition within the pool industry. The company is actively pursuing market share gains through its Sand State expansion strategy and targeted marketing campaigns.

Comparison to Industry Standards

• It's difficult to provide a precise comparison without knowing the specific financial details of Latham's direct competitors.
• However, key competitors in the pool manufacturing and distribution space include companies like Hayward Holdings, Pentair, and Pool Corporation.
• Latham's focus on fiberglass pools and autocovers positions them in specific segments of the market, and their performance should be compared against companies with similar product offerings.
• The 190-basis point increase in gross margin suggests effective cost management compared to industry averages, but a deeper analysis of competitor margins would be needed for a definitive assessment.
• Latham's net debt leverage ratio of 3.6 should be compared to the leverage ratios of its peers to assess its financial risk relative to the industry.

Management Changes

Stakeholder Impact

• Shareholders: The company's performance and future guidance will impact shareholder value.
• Employees: The company's cost reduction plans and strategic initiatives may impact employees.
• Customers: The company's product quality and pricing decisions will impact customers.
• Suppliers: The company's sourcing strategies and payment terms will impact suppliers.
• Creditors: The company's debt levels and financial performance will impact creditors.

Next Steps

• The company will hold a conference call on May 6, 2025, to discuss the first quarter 2025 financial results.
• The company will continue to execute its Sand State expansion strategy.
• The company will continue to monitor and manage the impact of tariffs on imported raw materials.

Key Dates

Keywords

Latham Group, financial results, swimming pools, Adjusted EBITDA, net sales, gross margin, guidance, fiberglass pools, autocovers