8-K: Latham Group Reports Strong Q2 2025, Adds Director

Latham Group, Inc. announced strong second quarter 2025 financial results with increased net sales and gross margin, alongside the appointment of Jeffrey T. Jackson to its Board of Directors and Audit Committee.

Summary

• Net sales for the second quarter of 2025 were $172.6 million, an increase of 7.8% from $160.1 million in the prior year's second quarter.
• Gross profit for the second quarter of 2025 was $64.0 million, up 20.6% from $53.0 million in the prior year's second quarter, with gross margin expanding by 400 basis points to 37.1%.
• Net income for the second quarter of 2025 was $16.0 million, or $0.13 per diluted share, compared to $13.3 million, or $0.11 per diluted share, in the prior year's second quarter.
• Adjusted EBITDA for the second quarter of 2025 was $39.9 million, an increase of 15.7% compared to $34.5 million in the prior year's second quarter, with Adjusted EBITDA margin at 23.1%.
• For the six months ended June 28, 2025, net sales were $284.1 million, up 4.9% from $270.8 million in the prior-year period, and Adjusted EBITDA was $51.0 million, up 9.1%.
• The company reaffirmed its full-year 2025 guidance, projecting net sales between $535 million and $565 million and Adjusted EBITDA between $90 million and $100 million.
• Jeffrey T. Jackson, age 59, was appointed to the Board of Directors as a Class III member and to the Audit Committee, effective August 5, 2025, increasing the Board size from eight to nine directors.
• DeLu Jackson ceased service as a member of the Audit Committee, effective August 5, 2025.

Sentiment

Score: 8

Explanation: The company reported strong financial results with significant margin expansion and reaffirmed its full-year guidance despite challenging market conditions. Strategic initiatives are showing positive traction, and a highly experienced director was appointed, indicating strong operational execution and governance. While debt is present, the net debt leverage ratio is manageable, and the overall outlook is positive.

Positives

• Achieved strong second quarter net sales growth of 7.8% to $172.6 million, reflecting both organic and acquisition-related growth.
• Realized significant gross margin expansion of 400 basis points to 37.1% in Q2 2025, driven by higher volumes, lean manufacturing, value engineering initiatives, and recent autocover acquisitions.
• Adjusted EBITDA margin expanded by 160 basis points to 23.1% in Q2 2025, demonstrating improved profitability.
• Net income increased to $16.0 million in Q2 2025 from $13.3 million in Q2 2024, indicating stronger bottom-line performance.
• Autocover sales increased by 46% year-over-year, benefiting from organic growth and the acquisition of Coverstar businesses.
• Liner sales contributed to growth, increasing 6% year-over-year, supported by industry-leading lead times and the adoption of the AI-powered 'Measure by Latham' tool.
• Strengthened leadership in fiberglass pools through targeted marketing programs, resulting in substantial year-over-year growth in dealer leads and consumer website sessions.
• Added a considerable number of new dealers in the strategic Sand State markets, supporting fiberglass adoption.
• Reaffirmed full-year 2025 guidance for net sales and Adjusted EBITDA, signaling confidence in continued performance despite challenging market conditions.
• Appointed Jeffrey T. Jackson, a highly experienced industry executive and financial expert, to the Board and Audit Committee, enhancing corporate governance and strategic oversight.

Negatives

• In-ground swimming pool sales decreased by 2.9% to $78.6 million in Q2 2025 compared to $80.9 million in Q2 2024.
• Selling, general, and administrative expenses increased by 20.1% to $31.9 million in Q2 2025, primarily due to increased marketing, personnel investment for the Sand State strategy, and investments in new ERP infrastructure.
• Net cash used in operating activities was $10.9 million for the first half of 2025, a decrease from net cash provided of $17.9 million in the prior year period.
• Total debt stood at $281.5 million at the end of the second quarter of 2025.

Risks

• Unfavorable economic conditions and their impact on consumer spending and demand for products.
• Inflationary impacts, including on consumer demand for products.
• Ability to globally source raw materials and components for manufacturing products.
• Impact of trade policies on the global supply chain, import/export costs, and consumer confidence.
• Declining home ownership affecting demand for products.
• Competitive risks within the industry.
• Natural disasters, geopolitical events, war, terrorism, public health issues, or other catastrophic events.
• Disturbances and breaches to technological infrastructure, and reliance on information technology systems.
• Adverse weather conditions impacting sales, leading to significant variability in reporting periods.
• Consequences of industry consolidation on the customer base and pricing.
• Interruption of production capability at manufacturing facilities from accident, fire, calamity, and other causes.
• Product quality issues, warranty claims, or safety concerns, such as those due to the failure of builders to follow product installation instructions and specifications.
• Ability to keep pace with technological developments and standards, such as generative artificial intelligence.
• Delays in, or systems disruptions issues caused by the implementation of the ERP system.
• Ability to attract, develop, and retain highly qualified personnel.
• Ability to collect accounts receivables from customers.
• Compliance with government regulations.
• Ability and the cost to obtain transportation services.
• Protection of intellectual property and defense of third-party infringement claims.
• International business risks.
• Realizing anticipated benefits from acquisitions.
• Possible asset impairments.
• Ability to secure financing and substantial indebtedness.

Future Outlook

Latham Group reconfirmed its full-year 2025 guidance, projecting net sales between $535 million and $565 million and Adjusted EBITDA between $90 million and $100 million. This outlook is primarily driven by anticipated category share gains in fiberglass pools, autocovers, and liners, along with contributions from recent acquisitions. The company expects approximately 60,000 new U.S. pool starts in 2025, in line with original estimates, and anticipates continued strong year-over-year growth despite challenging industry conditions.

Management Comments

• "Our second quarter performance demonstrated the continued execution of our strategy to drive awareness and adoption of fiberglass pools and autocovers, expand our presence in the Sand State markets, and improve margins through lean manufacturing and value engineering initiatives and accretive acquisitions."
• "We achieved strong second quarter net sales growth despite challenging market conditions, highlighting the diversity of our portfolio and Lathams leading position in each of our product lines."
• "Consumer recognition of the advantages of fiberglass pools, such as cost-efficiency, fast and easy installation, low maintenance requirements, and eco-friendliness continues to build, and our fiberglass pool sales are on track to represent approximately 75% of the Companys full-year 2025 in-ground pool sales."
• "Latham autocovers continue to gain traction as consumers increasingly value their unparalleled safety benefits and the significant cost savings they offer through reduced water evaporation, energy use, and chemical consumption, which enables autocovers to effectively pay for themselves within four to five years."
• "Amid difficult industry conditions in 2025, we are executing well, staying focused, and positioned to deliver strong year-over-year growth."
• "We are very pleased to welcome Jeff to Lathams Board. Jeff is known as a visionary leader and brings extensive executive management and financial expertise to the Board, with a career spanning nearly three decades across the manufacturing, consumer goods, and building products industries. His broad sector knowledge, branding expertise, and industry relationships equip him with valuable operational and strategic experience that can support Lathams growth and enhance our competitive positioning." (Comment from James C. Cline, Chairman of the Latham Board)

Industry Context

The company's strong second-quarter performance, particularly in fiberglass pools and autocovers, indicates its ability to outperform the broader market for new U.S. pool starts, which is projected to remain challenging at approximately 60,000 in 2025. The strategic focus on expanding into 'Sand State' markets and increasing fiberglass adoption aligns with a trend towards more efficient and lower-maintenance pool solutions. The growth in autocover sales also reflects increasing consumer demand for safety and cost-saving features in pool accessories, a trend that could be driven by rising energy and water costs. The appointment of an executive with extensive experience in manufacturing and building products, including windows and doors, suggests a focus on operational efficiency and market leadership within the broader home improvement and construction sectors.

Comparison to Industry Standards

• The company's ability to achieve strong net sales growth (7.8% in Q2) and significant gross margin expansion (400 basis points) in a 'challenging market environment' for new U.S. pool starts (projected 60,000 in 2025) suggests outperformance relative to general industry conditions.
• The strategic focus on fiberglass pools, aiming for 75% of full-year 2025 in-ground pool sales, positions the company strongly against traditional concrete or vinyl liner pools, which may have higher installation costs and maintenance requirements.
• The 46% increase in cover sales, partly driven by acquisitions, highlights a successful strategy in a segment that offers significant safety and cost-saving benefits, potentially setting a benchmark for innovation and value proposition in pool accessories.
• The company's 'industry-leading lead times' for liners and adoption of AI-powered tools like 'Measure by Latham' indicate a competitive advantage in operational efficiency and customer service compared to less technologically advanced competitors.
• The appointment of Jeffrey T. Jackson, with his background at PGT Innovations (NYSE: PGTI), a manufacturer of windows, doors, and garage doors, and Cabinetworks Group, Inc., suggests a focus on leveraging best practices from adjacent building products and manufacturing industries for operational excellence and market penetration. His experience with companies like The Hershey Company (NYSE: HSY), Mrs. Smiths Bakeries (Flower Foods, Inc. (NYSE: FLO)), and The Coca-Cola Company (NYSE: KO) also brings consumer goods branding and distribution expertise, which could be a differentiator in the pool industry.

Management Changes

Corporate Governance

Related Party Transactions

• No material interest in any transaction required to be disclosed under Item 404(a) of Regulation S-K was reported for Mr. Jackson.

Stakeholder Impact

• Shareholders: Positive financial results (increased net sales, gross margin, net income, Adjusted EBITDA) and reaffirmed guidance could lead to increased investor confidence and potential share price appreciation. The appointment of an experienced independent director to the board and audit committee enhances corporate governance.
• Customers: Continued focus on fiberglass pools, autocovers, and liners, along with improved lead times and AI-powered tools, suggests enhanced product offerings, efficiency, and service.
• Employees: Investments in personnel for the Sand State strategy and new ERP infrastructure indicate continued growth and potential for new opportunities, though SG&A increases could imply higher operational costs.
• Dealers/Contractors: Strategic initiatives like targeted marketing and adding new dealers in Sand States aim to support and expand the dealer network, providing more leads and business opportunities.
• Creditors: The total debt of $281.5 million and a net debt leverage ratio of 3.0 indicate a manageable debt level, which is generally favorable for creditors.

Next Steps

• Continue execution of strategy to drive awareness and adoption of fiberglass pools and autocovers.
• Expand presence in Sand State markets.
• Improve margins through lean manufacturing and value engineering initiatives.
• Integrate recent acquisitions (Coverstar businesses).
• Continue targeted marketing programs for fiberglass pools.
• Continue increasing brand recognition in key target locations.
• Continue strong momentum in the replacement liner business.
• Further adoption of 'Measure by Latham' AI-powered tool.
• Ongoing investments in new enterprise resource planning (ERP) infrastructure.
• Hold a conference call to discuss Q2 2025 financial results on August 5, 2025.

Key Dates

Recommendation

The company demonstrated strong financial performance in a challenging market, exceeding expectations in key metrics like net sales, gross margin, and Adjusted EBITDA. The reaffirmation of full-year guidance, coupled with strategic initiatives showing tangible results (fiberglass adoption, autocover growth, Sand State expansion), indicates robust operational execution and market leadership. The appointment of a highly experienced independent director further strengthens governance. Despite increased SG&A and a slight decrease in in-ground pool sales, the overall trajectory and competitive advantages suggest strong future growth potential, making it an attractive investment.

Keywords

Swimming Pools, Fiberglass Pools, Autocovers, Liners, Residential Pools, Pool Manufacturing, Building Products, Home Improvement, Financial Results, SEC Filing, Corporate Governance, Board Appointment, Latham Group, SWIM