DEF: Latham Group Reports Strong 2025 Sales, Seeks Equity Plan Boost

Latham Group, Inc. announced a 7.4% net sales increase to $545.9 million in 2025, outperforming the U.S. in-ground pool market, and is seeking stockholder approval to increase its equity incentive plan by 3.4 million shares.

Summary

• Net sales grew 7.4% year-over-year to $545.9 million in 2025, despite an estimated lowto mid-single-digit decline in the U.S. in-ground pool market.
• Net income for 2025 was $11.1 million, and Adjusted EBITDA increased 24.4% to $99.8 million.
• Gross margin expanded by 320 basis points in 2025, driven by lean manufacturing, value engineering, and accretive acquisitions.
• The company saw double-digit growth in fiberglass pool sales in Florida, a key Sand State market, and established strategic partnerships with custom homebuilders.
• Latham ended 2025 with a robust cash balance of $71.0 million, supported by $63.4 million in net cash from operating activities.
• Stockholders are invited to the 2026 Annual Meeting on April 30, 2026, to vote on the election of three Class II directors, the ratification of Deloitte & Touche LLP as the independent auditor, and an amendment to the 2021 Omnibus Equity Incentive Plan.
• The proposed amendment to the 2021 Omnibus Equity Incentive Plan seeks to increase the number of shares available for awards by 3,400,000, bringing the total reserved shares to 24,570,212 if approved.
• Sean Gadd was appointed President and Chief Executive Officer, effective January 5, 2026, succeeding Scott M. Rajeski who retired.
• The company published its 2024 sustainability report in Q4 2025, highlighting reduced Scope 1 and 2 greenhouse gas emissions, expanded energy-efficient lighting, and improved employee safety.
• Employee engagement scores increased by 8% from 2024 to 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing positively due to Latham Group's strong financial performance in a declining market, significant margin expansion, and successful strategic initiatives, despite the potential for shareholder dilution from the equity plan increase.

Positives

• Net sales increased by 7.4% year-over-year to $545.9 million in 2025, significantly outperforming the U.S. in-ground pool market which declined by lowto mid-single digits.
• Adjusted EBITDA grew by 24.4% to $99.8 million in 2025, demonstrating accelerated profitability.
• Gross margin expanded by 320 basis points in 2025 due to lean manufacturing, value engineering initiatives, and accretive acquisitions (Coverstar Central in August 2024, Coverstar New York and Tennessee in early 2025).
• Achieved double-digit growth in fiberglass pool sales in Florida, indicating strong progress in the Sand States expansion strategy.
• Concluded 2025 with a robust cash balance of $71.0 million, providing substantial financial flexibility.
• Fiberglass pools represented 76.5% of total in-ground pool sales in 2025, showing increased market penetration and continued share gains.
• Employee engagement score increased by 8% from 2024 to 2025, reflecting positive human capital management.
• Reduced Scope 1 and 2 greenhouse gas emissions in relation to the 2022 baseline and improved employee safety with a year-on-year reduction in reportable incidents.
• The 2021 Omnibus Equity Plan includes significant compensation and governance best practices, such as independent administration, no evergreen share pool provision, no liberal share recycling, minimum vesting periods, and no discounted stock options or SARs.

Negatives

• The U.S. in-ground pool market declined by an estimated lowto mid-single digits in 2025, indicating a challenging industry environment.
• Net income was $11.1 million, which, while positive, is a relatively small portion of net sales compared to the Adjusted EBITDA.
• Several executive officers and directors filed Form 4 reports late for PSUs earned over a one-year performance period, indicating a lapse in Section 16(a) compliance.
• The company is seeking to increase its equity incentive plan by 3,400,000 shares, which will result in additional dilution for existing stockholders.

Risks

• Macroeconomic Conditions and Stock Price Volatility: Historical equity grants were strongly impacted by macroeconomic conditions and stock price volatility, which could continue to affect the effectiveness of equity compensation.
• Competitive Market: Operating in a very competitive and rapidly changing environment, with new risks emerging over time.
• Ability to Attract and Retain Talent: If the proposed equity plan amendment is not approved, the company may be significantly limited in offering equity awards, potentially disadvantaging it in competing for top talent and impacting long-term growth initiatives.
• Supply Chain Challenges: Critical out-of-the-ordinary course matters such as supply chain challenges are a risk factor.
• Geopolitical Events and Natural Disasters: Unusual items beyond management's control, such as natural disasters (including weather events), geopolitical events, war, terrorism, and public health issues, pose risks.
• Cybersecurity and Data Privacy: Active oversight of cybersecurity, data privacy matters, and related risk mitigation activities is required, indicating these are ongoing risks.
• Implementation of Enterprise Resource Planning System: The multi-year enterprise resource planning implementation is a risk factor.
• Regulatory Compliance: Failure to comply with laws, rules, or regulations, including those related to financial reporting and internal controls, could lead to legal proceedings or penalties.
• Stockholder Dilution: The proposed increase of 3,400,000 shares to the 2021 Omnibus Equity Incentive Plan will result in further dilution for existing stockholders.

Future Outlook

Latham Group plans to continue executing key strategic priorities in 2026, focusing on increasing awareness and adoption of fiberglass pools and autocovers to significantly outperform the U.S. in-ground pool market. This includes expanding branding and marketing in Sand State markets through greater contractor and homebuilder engagement. The company anticipates its leadership in the growing fiberglass pool category, expanding automatic safety cover business, Sand States growth opportunities, and improved cost structure will support another year of market outperformance under similar industry conditions to 2025.

Management Comments

• In 2025, we continued to outperform the U.S. in-ground pool market, growing our net sales by 7.4% year-over-year, and succeeded in expanding margins despite a market for U.S. in-ground pool starts that we estimate declined by lowto mid-single digits.
• We made investments that have positioned the Company for sales growth and accelerated profitability in 2025 and beyond.
• As consumers continued to recognize the speed of installation, eco-friendly and cost savings advantages of fiberglass pools, this product category represented 76.5% of Lathams total in-ground pool sales in 2025, demonstrating increased market penetration.
• In 2026, we will continue to execute on our key strategic priorities, namely, to drive increased awareness and adoption of fiberglass pools and autocovers to continue to significantly outperform the U.S. in-ground pool market.
• We enter 2026 in a strong competitive position. Under similar industry conditions to 2025, we believe our leadership in the growing fiberglass pool category, our expanding automatic safety cover business, growth opportunities in the Sand States and our improved cost structure should support another year of market outperformance.

Industry Context

StockSavvy.ai notes that Latham Group's strong 7.4% net sales growth and 24.4% Adjusted EBITDA increase in 2025 significantly outpaced the broader U.S. in-ground pool market, which experienced a lowto mid-single-digit decline. This outperformance is largely attributed to the company's strategic focus on fiberglass pools, which are gaining market share due to perceived installation speed, eco-friendliness, and cost savings, representing 76.5% of Latham's in-ground pool sales. The expansion into 'Sand States' like Florida, with double-digit growth in fiberglass pools, aligns with a broader trend of companies targeting high-growth regional markets and product categories within a mature or contracting overall market. The emphasis on automatic safety covers also taps into increasing consumer demand for convenience and safety features, potentially differentiating Latham from competitors relying on traditional pool types.

Comparison to Industry Standards

• Latham Group's 7.4% net sales growth in 2025 significantly outperformed the estimated lowto mid-single-digit decline in the overall U.S. in-ground pool market, indicating strong competitive positioning relative to the industry average.
• The company's focus on fiberglass pools, which constituted 76.5% of its in-ground pool sales, demonstrates a successful strategy in a segment gaining market share due to perceived advantages over traditional concrete or vinyl liner pools.
• Gross margin expansion of 320 basis points, driven by lean manufacturing and value engineering, suggests effective cost management and operational efficiency, potentially exceeding industry benchmarks for margin improvement in a challenging market.
• Double-digit growth in Florida fiberglass pool sales highlights successful regional market penetration, which could be a benchmark for other companies looking to expand in specific high-growth areas.
• The increase in employee engagement score by 8% from 2024 to 2025 indicates strong internal performance in human capital management, potentially surpassing typical improvements in employee satisfaction metrics across industries.

Management Changes

Corporate Governance

Related Party Transactions

• Stockholders Agreement: Entered into on April 27, 2021, with Pamplona Capital Partners V, L.P. (Pamplona Fund) and Wynnchurch Capital Partners IV, L.P. (Wynnchurch Funds). Grants Pamplona the right to nominate directors based on ownership percentage.
• Director Designees: Frank J. Dellaquila, Mark P. Laven, Brian Pratt, and William M. Pruellage are current designees of Pamplona.
• Wynnchurch Waiver: On July 20, 2022, Wynnchurch irrevocably waived its director nomination rights and committed not to vote more than 9.9% of outstanding Common Stock.
• Expense Reimbursement: The company is required to reimburse reasonable out-of-pocket costs and expenses of Pamplona and Wynnchurch in connection with monitoring their investment. Less than $0.1 million was paid to each in 2025.
• Registration Rights Agreement: Entered into on April 27, 2021, with Pamplona Fund and Wynnchurch Funds, granting them demand and piggyback registration rights for their Common Stock.
• Indemnification Agreements: Entered into with current directors and executive officers, requiring the company to indemnify them to the fullest extent permitted by Delaware law.

Stakeholder Impact

• Shareholders: Potential dilution from the proposed increase in the equity incentive plan shares (3.4 million shares, ~2.90% of outstanding shares). Positive financial performance (sales growth, margin expansion) and strategic initiatives aim to increase long-term shareholder value. Strong corporate governance practices are in place to protect shareholder interests.
• Employees: Equity awards are a core component of compensation, designed to attract, motivate, and retain qualified employees. Increased employee engagement scores and comprehensive health and safety programs indicate a positive work environment. Succession planning provides career development opportunities.
• Customers (Homeowners/Dealers): Continued focus on fiberglass pools and automatic safety covers, along with strategic partnerships with dealers and homebuilders, aims to enhance product offerings and customer satisfaction. Latham University provides training to dealers, strengthening partnerships.
• Creditors: Strong cash balance of $71.0 million and net cash from operating activities of $63.4 million in 2025 indicate healthy liquidity and financial stability.
• Community/Environment: Sustainability initiatives, including reduced greenhouse gas emissions, expanded energy-efficient lighting, and waste reduction measures, demonstrate a commitment to environmental responsibility.

Next Steps

• Hold the 2026 Annual Meeting of Stockholders on April 30, 2026.
• Stockholders to vote on the election of three Class II directors.
• Stockholders to vote on the ratification of Deloitte & Touche LLP as the independent registered public accounting firm for 2026.
• Stockholders to vote on the approval of an amendment to the 2021 Omnibus Equity Incentive Plan to increase available shares by 3,400,000.
• Continue to execute key strategic priorities in 2026, including driving increased awareness and adoption of fiberglass pools and autocovers.
• Expand and refine branding and marketing spend in 2026, with increased focus on building presence in Sand State markets through greater contractor and homebuilder engagement.
• Publish an annual sustainability report to update stakeholders on ongoing sustainability journey.
• File a Registration Statement on Form S-8 covering the additional shares available for issuance if the equity plan amendment is approved.
• Announce preliminary voting results at the Annual Meeting and disclose final results on a Current Report on Form 8-K within four business days after the meeting.

Key Dates

Recommendation

Latham Group demonstrated strong operational and financial outperformance in 2025, growing sales and expanding margins in a declining market. Strategic initiatives like Sand States expansion and fiberglass pool adoption are yielding positive results. However, the broader U.S. in-ground pool market faces headwinds, and the proposed significant increase in the equity incentive plan, while necessary for talent, introduces further dilution. Given the mixed signals of strong company-specific performance against a challenging industry backdrop and potential dilution, a 'hold' recommendation is appropriate for investors to monitor continued execution of strategic priorities and market conditions.

Keywords

Latham Group, LATH, SEC Filing, Proxy Statement, Annual Meeting, Fiberglass Pools, Automatic Safety Covers, Pool Industry, Financial Performance, Net Sales, Adjusted EBITDA, Corporate Governance, Equity Incentive Plan, Executive Compensation, Risk Management, Sustainability, Sand States, Homebuilding, Manufacturing, Shareholder Vote