Sign in

You're signed outSign in or to get full access.

LG

Latham Group, Inc. (SWIM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was in line with expectations: net sales $111.4M (+0.7% YoY), diluted EPS $(0.05), and Adjusted EBITDA $11.1M (10.0% margin), with 190 bps gross margin expansion to 29.5% driven by lean manufacturing and value engineering .
  • Relative strength in autocovers (helped by Coverstar acquisitions) and fiberglass; in-ground pool sales declined amid soft industry conditions, while SG&A rose to support Sand State growth initiatives .
  • Full-year 2025 guidance was maintained: net sales $535–$565M, Adjusted EBITDA $90–$100M, capex $27–$33M; management reiterated operating leverage and category share gains as drivers .
  • Catalysts: continued gross margin expansion, targeted price increases effective early June to offset tariff headwinds, and execution of Sand State strategy across MPCs (master planned communities) in FL and TX .

What Went Well and What Went Wrong

What Went Well

  • Strength in fiberglass and autocovers; management: “we saw relative strength in our fiberglass and autocover product categories” and “made notable progress on our Sand State expansion strategy” .
  • Gross margin expanded 190 bps to ~29.5% on similar volumes from lean manufacturing/value engineering and Coverstar mix: “delivered a 190 basis point expansion in gross margin” .
  • Autocovers outperformed, aided by integration of Coverstar acquisitions; organic growth also contributed, with ~$3M acquisition-added performance in Q1 .

What Went Wrong

  • Adjusted EBITDA declined 9.4% YoY to $11.1M and margin fell 110 bps to 10.0%, primarily from increased sales/marketing investments .
  • SG&A increased 16.6% to $30.6M on growth investments and Coverstar integration; amortization also higher YoY .
  • In-ground pool sales fell ~4% YoY and liners down ~8% due to soft industry and weather in a seasonally small quarter; CFO noted demand cadence and seasonal dynamics .
  • Tariff headwind quantified at 350–400 bps (~$20M) pre-mitigation; more than half mitigated via supply chain actions, with remaining mitigated via pricing (effective early June) .

Financial Results

Core P&L and Margins

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$150.5 $87.3 $111.4
Diluted EPS ($USD)$0.05 $(0.25) $(0.05)
Gross Margin %32.4% 24.6% 29.5%
Adjusted EBITDA ($USD Millions)$29.8 $3.6 $11.1
Adjusted EBITDA Margin %19.8% 4.2% 10.0%
Net Income (Loss) ($USD Millions)$5.9 $(29.2) $(6.0)

Actual vs Wall Street Consensus (S&P Global)

Values marked with * are from S&P Global.

MetricQ3 2024Q4 2024Q1 2025
Revenue Actual ($USD Millions)$150.496$87.273$111.420
Revenue Consensus Mean ($USD Millions)*$152.118$85.137$110.926
EPS Actual ($USD, Primary)*$0.0793$(0.1291)$(0.0492)
Primary EPS Consensus Mean ($USD)*$0.0649$(0.0998)$(0.0462)

Values retrieved from S&P Global.

Q1 2025 performance vs consensus: revenue slight beat (+0.4%), EPS modest miss ($0.003). Q4 2024: revenue beat (+2.5%), EPS miss; Q3 2024: revenue miss, EPS beat.*

YoY and QoQ (Q1 2025 vs comps)

MetricQ1 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$110.6 $87.3 $111.4
YoY Change——+0.7%
QoQ Change——+27.6%
Gross Margin %27.7% 24.6% 29.5%
YoY Change——+190 bps
Adjusted EBITDA ($USD Millions)$12.3 $3.6 $11.1
YoY Change——−9.4%
Diluted EPS ($USD)$(0.07) $(0.25) $(0.05)

Segment/Product Line Net Sales

Product Line ($USD Thousands)Q3 2024Q4 2024Q1 2025
In-Ground Swimming Pools$74,785 $43,639 $57,734
Covers$47,755 $31,209 $31,611
Liners$27,956 $12,425 $22,075
Total$150,496 $87,273 $111,420

KPIs and Balance Sheet

KPIQ4 2024Q1 2025
Cash and Equivalents ($USD Millions)$56.4 $24.0
Net Cash from Operating Activities ($USD Millions)$6.2 (Q4) $(46.9) (Q1)
Total Debt ($USD Millions)$281.5 $306.9
Net Debt ($USD Millions)$225.1 $282.9
Net Debt Leverage Ratio2.8x 3.6x
Capital Expenditures ($USD Millions)$20.1 (FY 2024) $3.5 (Q1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025$535–$565M $535–$565M Maintained
Adjusted EBITDAFY 2025$90–$100M $90–$100M Maintained
Capital ExpendituresFY 2025$27–$33M $27–$33M Maintained

Management reiterated operating leverage and category share gains (fiberglass, autocovers) and contributions from acquisitions as drivers of the guide .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Sand State expansion (FL, TX, AZ, CA)Strategy launched; GOOTSA campaign drove +40% leads in TX; fiberglass underpenetrated in sand states; target MPCs; dealer buildout Progress in MPC engagement; new fiberglass models (Astoria 14, Apollo 14); accelerated dealer alignment; expect 200–300 bps improvement in sand state revenue mix in 2025 Improving
Autocovers adoptionVertical integration via Coverstar Central; EBITDA accretive; additional New York/Tennessee acquisitions; ~140 bps margin lift annualized Strong Q1 outperformance; ~$3M acquisition contribution plus organic growth; high attachment rates in some markets (50–80% covers) Accelerating
Lean manufacturing & value engineeringFour consecutive quarters of GM expansion; ~$8–9M annual savings; dual-sourcing procurement improvements 190 bps GM expansion in Q1; continued projects with $2–$2.5M per quarter savings cadence Stable to improving
Tariffs/macroWatching raw material basket; modest deflation/stability; prepared nearshoring and sourcing Tariff headwind pre-mitigation 350–400 bps (~$20M); >50% mitigated via supply chain; pricing effective early June to close remainder Manageable with mitigation
AI/technology (Measure by Latham)AI measuring tech announced; digitization initiatives (context)AI-powered “Measure by Latham” adoption; ~half of dealers purchasing were new; integrated with order entry for quotes, tracking Expanding
Demand cadence & mixQ4 seasonally slow; dealer feedback cautiously optimistic; gross margin drivers detailed Slow start in Jan; ramp through March–May; in-ground pools −4% YoY; covers +18% (organic + M&A); liners −8% Mixed, improving cadence

Management Commentary

  • “Our first quarter results were in line with our expectations…relative strength of Latham’s fiberglass pool and autocover…ongoing benefits from our lean manufacturing and value engineering initiatives.” – CEO Scott Rajeski .
  • “We expect fiberglass pools to gain another 1% of market share…scarcity of labor will be a tailwind for fiberglass…” – CEO .
  • “We achieved a first quarter gross margin of approximately 30%…190 bps increase…primarily due to lean manufacturing… and margin benefit from the 3 Coverstar acquisitions.” – CFO Oliver Gloe .
  • “Tariff headwind…350 to 400 basis points or…about $20 million…a little bit more than half…mitigated… price increase…aims to mitigate remaining impact on a dollar basis.” – CFO .
  • “We are maintaining our full year 2025 guidance…driven by category share gains in fiberglass pools and autocovers…and acquisitions.” – CEO .

Q&A Highlights

  • SG&A leverage cadence: investments “anniversarying” with leverage increasing as sales rise; starting 3Q, flat YoY SG&A vs increasing sales .
  • Sand State progress: builder alignment in FL MPCs; aiming to accelerate +200–300 bps improvement in sand state revenue mix in 2025 .
  • Demand dynamics: fiberglass short-cycle install vs long buyer journey; affluent, cash buyers underpin stability; holding assumption of flat pool starts .
  • Tariffs: quantified 350–400 bps (~$20M) pre-mitigation; >50% mitigated via supply chain; price increase effective early June to close remaining impact .
  • Autocovers growth: ~$3M acquisition-driven benefit with remainder organic; attachment rates high in certain markets (up to 80%+) .

Estimates Context

  • Q1 2025 vs consensus: revenue beat (+0.4%) and EPS miss (~$0.003) on S&P Global “Primary EPS” metric; company-reported GAAP diluted EPS was $(0.05). This reflects investment-driven margin mix (SG&A) vs strong gross margin expansion .
  • Prior quarters: Q4 2024 revenue beat and EPS miss; Q3 2024 revenue miss and EPS beat.*
  • Implications: Street models likely to adjust for SG&A cadence and tariff mitigation/pricing flows beginning June, while maintaining higher gross margin trajectory and contributions from acquisitions .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Lean/value engineering is structurally expanding gross margins (Q1 +190 bps to 29.5%); this underpins medium-term EBITDA leverage as volumes recover .
  • Autocovers are a secular growth category; integration of Coverstar assets plus organic adoption drives mix and margin accretion, with high attachment rates in certain regions .
  • Sand State strategy is a multi-year share gain opportunity; early traction in MPCs and new models support fiberglass conversion in underpenetrated markets .
  • Tariff risk is being actively mitigated; >50% offset via supply chain actions with targeted price increases effective early June to protect dollars—watch Q2/Q3 flow-through .
  • FY25 guide reaffirmed (sales $535–$565M; Adj. EBITDA $90–$100M), signaling confidence despite macro/tariff uncertainty; catalysts include seasonal ramp and pricing offset .
  • Near-term trading: focus on Q2/Q3 cadence, autocover/Share gains, and confirmation of SG&A leverage as investments anniversary; any upside to pool starts or faster sand-state conversion could re-rate margin trajectory .
  • Medium-term thesis: margin structure plus category leadership (fiberglass/autocovers) suggests outsized earnings power as pool starts normalize; management’s long-term framework (revenues ~$750M, Adj. EBITDA ~$160M at 2019 pool starts) highlights embedded operating leverage .

Additional Relevant Press Releases

  • Water Safety Month partnership with Bode Miller to promote autocover safety benefits, enhancing consumer awareness for covers category .
  • Q1 earnings release logistics announcement (Apr 8) .

Notes

  • Leadership change: CCO resignation effective May 16, 2025; management emphasized depth in commercial team to continue execution .
  • Non-GAAP: Adjusted EBITDA excludes D&A, interest, taxes, strategic initiatives, acquisition/integration costs, FX, restructuring, stock-based comp; reconciliations provided in exhibits .