10-K: Latham Group Swings to Profit on Strong Pool Demand

Latham Group, Inc. reported a significant turnaround in 2025, achieving net income of $11.1 million on increased net sales, driven by strong fiberglass pool and automatic safety cover adoption.

Summary

• Net sales increased by 7.4%, or $37.4 million, to $545.9 million for the year ended December 31, 2025, compared to $508.5 million in 2024.
• The company achieved a net income of $11.1 million for the year ended December 31, 2025, representing a 2.0% net income margin, a significant improvement from a net loss of $17.9 million in 2024.
• Adjusted EBITDA increased by $19.6 million, or 24.4%, to $99.8 million for the year ended December 31, 2025, with the Adjusted EBITDA margin rising from 15.8% to 18.3%.
• Gross margin improved by 3.2% to 33.4% in 2025, primarily driven by production efficiencies from lean manufacturing and value engineering initiatives, and the accretive benefit of three Coverstar acquisitions.
• Sean Gadd was appointed President and Chief Executive Officer, and a member of the Board, effective January 5, 2026, succeeding Scott Rajeski who retired.
• The company completed the acquisition of Freedom Pools, a fiberglass pool manufacturer and installer in Australia and New Zealand, on February 26, 2026, for approximately $17.0 million, expected to add $20.0 million in net sales and $4.0 million in Adjusted EBITDA annually.
• The company entered into an agreement on February 5, 2026, to purchase four currently leased production facilities for $17.6 million, with a $12.0 million deposit made in 2025.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, highlighting a significant return to profitability and robust growth in key financial metrics, driven by strategic execution in fiberglass conversion and accretive acquisitions. While risks like inflation and ERP implementation exist, the overall trajectory is favorable.

Positives

• Achieved a significant turnaround from a net loss of $17.9 million in 2024 to a net income of $11.1 million in 2025.
• Reported strong net sales growth of 7.4% ($37.4 million increase) in 2025, driven by volume and tariff-related pricing increases.
• Experienced substantial growth in Adjusted EBITDA by 24.4% to $99.8 million, with an expansion of Adjusted EBITDA margin to 18.3%.
• Improved gross margin by 3.2% to 33.4%, attributed to production efficiencies from lean manufacturing, value engineering initiatives, and accretive acquisitions.
• Successfully executed strategies to drive fiberglass and automatic safety cover penetration, gaining market share.
• Completed strategic acquisitions, including two smaller Coverstar dealers in February 2025 and Freedom Pools in February 2026, which are expected to be immediately accretive to earnings and expand market presence.
• Generated strong net cash provided by operating activities of $63.4 million in 2025.
• Maintained compliance with all covenants under the Credit Agreement as of December 31, 2025.
• Invested in digital strategies and consumer marketing, including an Augmented Reality Pool Visualizer app, to generate high-quality, purchase-ready leads for dealer partners.
• Introduced AI-powered tools like Measure and MeasurePro to significantly reduce dealer time and error in measuring pool safety covers and liners.
• Geographic diversity across North America, Australia, and New Zealand helps mitigate risks associated with seasonality and adverse weather conditions.

Negatives

• Selling, general, and administrative expense increased by 13.1% to $122.6 million in 2025, outpacing net sales growth, due to investments in the Sand States strategy and digital transformation efforts.
• Interest expense, net, increased by $1.0 million to $25.8 million in 2025, primarily due to changes in the fair value of the interest rate swap.
• Continues to experience inflationary pressures on labor, raw materials, and services, with a substantial risk that demand for products may soften if price increases are passed on to offset these costs.
• Relies on a global network of third-party suppliers, with 12% of supplies purchased from the largest supplier and 60% from the top ten suppliers, posing concentration and supply chain risks.
• A significant portion of accounts receivables is concentrated within a relatively small number of customers, with one customer representing 22.6% of net sales in 2025, increasing credit risk exposure.
• The company's stock price has been highly volatile in recent years, and investors must rely on stock appreciation for returns as no quarterly cash dividends are anticipated.
• The exclusive supply agreement with Premier Pools & Spas terminated on January 16, 2025, and was replaced with a non-exclusive, preferred supplier agreement, potentially impacting sales channels.

Risks

• Potential cyber-attacks or system failures on information technology infrastructure, including those exacerbated by AI technologies, could disrupt operations, lead to unauthorized payments, or compromise confidential information.
• Global political uncertainty and instability, changes in international trade relationships, and conflicts could make it more difficult to access financing and adversely affect business and operations.
• Inflationary impacts, including on costs of labor, raw materials, and services, and on consumer demand for pool products, could decrease net sales and gross margins.
• Changes in trade policies, including the imposition of or increase in tariffs, could substantially increase the cost and limit the availability of raw materials or finished products.
• Catastrophic events such as natural disasters, war, terrorism, or public health emergencies could disrupt the supply chain, manufacturing, delivery, and customer demand.
• Adverse weather conditions could negatively impact sales, especially during peak seasons, and result in significant variability of sales in reporting periods.
• An interruption of production capability at one or more manufacturing facilities from accident, calamity, or other causes could adversely affect business and results of operations.
• Unfavorable economic conditions and the related impact on consumer discretionary spending, driven by factors like interest rates, credit availability, and housing affordability, could reduce sales.
• Inability to keep pace with rapidly evolving technological developments and standards, such as generative artificial intelligence, could impact future growth, increase costs, and liability risk.
• Declining home ownership rates could lead to reduced demand for products and adversely affect business, financial condition, and results of operations.
• Delays in, or systems disruptions issues caused by, the implementation of the new enterprise resource planning (ERP) system could adversely affect operations and results of operations.
• Dependence on a global network of third-party suppliers for components and raw materials, with risks of price increases or deviations in quantity or quality.
• Intensified competition from within the industry and from other outdoor living products, potentially leading to pricing pressures or loss of market share.
• Product quality issues, warranty claims, installation or safety concerns, and other claims due to the failure of third-party installers or direct involvement in autocover installation could negatively impact sales and lead to increased costs.
• Inability to realize the anticipated growth opportunities and cost synergies from acquisitions.
• Difficulty attracting, developing, and retaining highly qualified personnel, particularly a technically skilled workforce, in a competitive labor market.
• Pricing pressures resulting from industry consolidation among dealers and distributors could adversely affect business, financial condition, and results of operations.
• Inability to collect accounts receivables from customers, especially given the concentration with a few large customers, may adversely impact cash flows.
• Failure to adequately protect intellectual property rights or claims by third parties of intellectual property infringement could harm the business.
• International operations expose the company to additional risks, including political, economic, and regulatory conditions, trade restrictions, and currency fluctuations.
• Possible impairments to goodwill, other intangible assets, or fixed assets could result in significant charges to earnings.
• Substantial indebtedness ($279.8 million Term Loan as of December 31, 2025) could limit additional financing, require a significant portion of cash flow for debt service, and increase vulnerability to adverse conditions.
• Restrictive terms and financial covenants in the Credit Agreement could lead to default and acceleration of debt if not complied with.
• Variable interest rate debt subjects the company to interest rate risk, which could cause debt service obligations to increase significantly.
• The significant influence of Principal Stockholders (Pamplona and Wynnchurch) over corporate decisions could limit the ability of other stockholders to influence outcomes.
• Organizational documents and Delaware law may impede or discourage a takeover, potentially depriving investors of a premium on their shares.
• The certificate of incorporation contains a provision renouncing the company's interest and expectancy in certain corporate opportunities for Principal Stockholders.
• The certificate of incorporation's forum selection clause could limit stockholders' ability to obtain a favorable judicial forum for disputes.

Future Outlook

The company expects to continue executing its key strategic priorities in 2026, focusing on building the Latham brand and driving increased awareness and adoption of fiberglass pools and automatic safety covers. It anticipates significantly outperforming the U.S. in-ground pool market, which is projected to remain flat in 2026. Plans include expanding marketing spend in the Sand States and maintaining a disciplined approach to capital investments in product innovation, facility upgrades, and technology. The company also expects to expand margins through mix shift towards fiberglass and productivity initiatives, and to continue pursuing strategic acquisitions. Revisions to the international tax framework are effective for the year ended December 31, 2026. However, there is a substantial risk that demand for products may continue to soften due to ongoing inflationary pressures.

Management Comments

• "We are the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand."
• "It is our view that we are the most sought-after brand in the pool industry. We are Latham, The Pool Company TM."
• "We pioneered the first direct-to-homeowner digital and social marketing strategy that has transformed the homeowners purchase journey."
• "Partnership with our dealers is integral to our collective success, and we have enjoyed long-tenured relationships averaging over 15 years."
• "Our mission is to design and manufacture high-quality pool products, with the homeowner in mind, and to be a value-added partner to our dealers."
• "In 2025, we built on our market leadership with further gains in fiberglass and autocover penetration and greater representation in the Sand States."
• "In 2026, we will continue to execute on our key strategic priorities, namely, to build the Latham brand and drive increased awareness and adoption of fiberglass pools and autocovers, which we expect will enable us to continue to significantly outperform the U.S. in-ground pool market which we believe will remain flat in 2026."
• "We continue to make progress executing our strategy to drive adoption and awareness of fiberglass pools and automatic safety covers and gain additional operating efficiencies through value engineering and lean manufacturing initiatives."
• "We continue to take a disciplined approach to capital investments, with the focus on product innovation, facility upgrades and technology and systems."
• "It is our belief that our existing cash, cash generated from operations and availability under our Revolving Credit Facility, will be adequate to fund our operating expenses and capital expenditure requirements over the next 12 months, as well as our longer-term liquidity needs."
• "We are experiencing inflationary pressures in certain areas of our business, including with respect to our employee wages, although, to date, we have been able to offset such pressures, to some extent, through price increases and other measures."

Industry Context

StockSavvy.ai notes that Latham Group's strong performance in fiberglass pool and automatic safety cover adoption aligns with broader industry trends favoring more efficient, lower-maintenance pool solutions. The company's pioneering direct-to-homeowner digital marketing strategy is a significant differentiator in a traditionally business-to-business market, positioning it well to capture evolving consumer preferences for enhanced outdoor living spaces. The strategic focus on underpenetrated "Sand States" (Florida, Texas, Arizona, California) indicates a targeted effort to capitalize on high-growth regional markets, while the expectation of outperforming a flat U.S. in-ground pool market in 2026 suggests Latham aims to gain market share through material conversion rather than overall market expansion. The recent acquisition of Freedom Pools further strengthens its international footprint in key growth regions, reinforcing its global leadership.

Comparison to Industry Standards

• Fiberglass pools can be installed in as little as two to three days, significantly faster than the three or more months typically required for concrete pools of comparable size.
• Fiberglass pools offer lower up-front and lifecycle costs, along with reduced operating and repair expenses, compared to concrete pools.
• The smooth, non-porous finish of fiberglass pools significantly reduces the need for harsh chemicals and allows for eyeand skin-friendly saltwater pools without corrosion concerns, a key advantage over legacy materials.
• Latham's fiberglass pools are backed by a lifetime warranty to the original purchaser, unlike concrete pools that often require resurfacing or repainting every eight to ten years.
• The company's Ultra-Seam™ technology for vinyl pool liners provides an industry-leading capability to reduce seam tear or separation.
• Latham offers a three-day delivery promise from design to shipment for custom liners, which is better than the industry standard delivery window.
• Automatic safety cover manufacturing facilities operate at or better than the industry standard delivery window from design to shipment.
• Latham holds the leading position in North America in every product category in which it competes, and is the only participant with national distribution in the fiberglass pool product category.

Management Changes

Corporate Governance

Legal Proceedings

• No legal proceedings against the company are believed to have a material adverse effect on its business, financial condition, results of operations, or cash flows as of December 31, 2025.
• No material legal proceedings were terminated, settled, or otherwise resolved during the fourth quarter of the year ended December 31, 2025.
• The company may incur significant costs and experience a diversion of management resources from future legal proceedings, regardless of the outcome.

Related Party Transactions

• The company has a Stockholders Agreement with Pamplona Capital Management and Wynnchurch Capital, L.P. (Principal Stockholders) requiring reimbursement of reasonable out-of-pocket costs and expenses for monitoring and overseeing their investment.
• Less than $0.1 million in transactions with the Sponsor or Wynnchurch Capital, L.P. occurred during the years ended December 31, 2025, 2024, and 2023.
• The exclusive supply agreement with Premier Pools & Spas (in which Latham holds an equity method investment) terminated on January 16, 2025, and was replaced with a non-exclusive, preferred supplier agreement. Products sold to Premier Pools & Spas franchisees are not considered related party transactions.

Stakeholder Impact

• Shareholders: Positive impact from the return to profitability, increased net sales and Adjusted EBITDA, and strategic acquisitions. However, reliance on stock appreciation for returns due to no anticipated cash dividends and potential stock price volatility remain factors.
• Employees: Continued investment in competitive wages, incentive plans, bonus plans, and comprehensive health and safety programs. Potential for workforce reductions if softened demand persists.
• Customers (Dealers/Distributors): Strengthened relationships through the Latham Grand dealer program, offering exclusivity, early access to leads, co-branded marketing, and training. Enhanced product portfolio and digital tools aim to drive sales. Risks include industry consolidation potentially leading to pricing pressure or loss of large customers.
• Homeowners: Benefit from innovative, high-quality fiberglass pools with lower lifecycle costs, faster installation, and lifetime warranties. Increased safety and convenience from automatic safety covers. Enhanced digital tools facilitate the pool buying journey.
• Suppliers: The centralized sourcing model focuses on ensuring best-in-class product quality, competitive costs, and supply availability. Diversified supplier base. Risks include price volatility of raw materials and dependence on a few large suppliers.
• Creditors: Improved financial performance, including net income and Adjusted EBITDA, strengthens the company's ability to service its debt obligations. Compliance with all debt covenants as of December 31, 2025, provides reassurance, though substantial indebtedness remains a key consideration.

Next Steps

• Continue to execute on key strategic priorities in 2026, including building the Latham brand and driving increased awareness and adoption of fiberglass pools and automatic safety covers.
• Expand and further target branding and marketing spend in 2026, with increased focus on building presence in the Sand State markets through contractor and homebuilder engagement.
• Maintain a disciplined approach to capital investments, focusing on product innovation, facility upgrades, and technology and systems.
• Grow industry capacity by onboarding and training new dealer partners, including educating small business owners and related trades about economic opportunities in the fiberglass product category.
• Continue to publish an annual sustainability report to update stakeholders on the ongoing sustainability journey.
• Monitor and evaluate the impacts of emerging legal and regulatory requirements on climate-related issues.
• Complete the multi-year implementation of the new enterprise resource planning (ERP) system.
• Potentially raise additional funds through new equity securities, debt, or a combination of both in the future.
• Complete the purchase of four currently leased production facilities, as per the agreement entered on February 5, 2026.

Key Dates

Recommendation

Latham Group's strong financial turnaround in 2025, marked by a swing to net income, robust net sales growth, and significant Adjusted EBITDA and gross margin expansion, indicates effective execution of its strategic priorities. The company's leadership in fiberglass pools and automatic safety covers, coupled with its innovative direct-to-homeowner marketing and accretive acquisitions (including Freedom Pools), positions it for continued market share gains even in a potentially flat overall pool market. While macroeconomic headwinds and ERP implementation risks exist, the demonstrated operational efficiencies and strategic growth initiatives suggest a positive outlook for long-term value creation.

Keywords

Fiberglass pools, Automatic safety covers, Pool liners, In-ground swimming pools, Residential pools, Outdoor living, Material conversion, Sand States, Digital marketing, Dealer network, Acquisitions, Financial performance, SEC 10-K, Latham Group, SWIM, Corporate governance, Risk management, Capital expenditures, Debt, Interest rates, Inflation, Supply chain, Cybersecurity, AI, Environmental regulations