Latham (SWIM) 6 Aug 24 2024 Q2 Earnings call transcript

In the recently held earnings call, Latham Group, a leading player in the pool industry, showcased a commendable performance in the second quarter of 2024 despite facing a challenging macroeconomic environment. The company effectively managed through soft business conditions, driving substantial year-on-year gains in profitability and strengthening its competitive position.

Achieving Strong Financial Performance

Latham Group reported a 400-basis point year-over-year increase in adjusted EBITDA margin, underscoring the company's resilience and strategic financial management. This achievement was driven by a combination of factors, including lower sales volume, restructuring programs, production efficiencies, and cost containment efforts. The company's focus on lean manufacturing and value engineering initiatives also contributed significantly to its improved financial performance.

Market Position and Competitive Advantage

Despite a forecasted 15% decline in new pool starts for 2024, Latham Group continues to outperform the market, with fiberglass pools showing relative strength. The company's fiberglass pools, which offer significant advantages over concrete pools in terms of cost efficiency, fast installation, and eco-friendly features, have gained share in the market. Latham's industry-leading service level and best-in-class lead times have also been instrumental in attracting new dealers and retaining existing ones.

Strategic Acquisition of Coverstar Central

A notable highlight of Latham Group's strategy is the recent acquisition of Coverstar Central, which is expected to expand the company's margins, accelerate sales of its automatic safety cover product line, and provide opportunities for increased fiberglass pool market penetration. This strategic move aligns with Latham's focus on long-term growth drivers and highlights its commitment to innovation and strategic expansion.

Financial Health and Future Outlook

Latham Group's financial health remains robust, with a strong balance sheet, cash flow, and a disciplined approach to managing costs and working capital. The company's ability to pay for the Coverstar Central acquisition with cash on hand is a testament to its financial strength and effective cost management strategies. Looking ahead, Latham Group has increased its full-year revenue and adjusted EBITDA guidance, reflecting the positive impact of the Coverstar Central acquisition and the company's ongoing strategic initiatives.

In conclusion, Latham Group's second-quarter performance highlights its resilience and strategic focus in the face of challenging market conditions. The company's strong financial performance, strategic acquisitions, and commitment to innovation position it well for future growth and profitability. Investors and stakeholders can look forward to Latham Group's continued leadership in the pool industry and its ability to navigate the market dynamics effectively.