Executive Summary

Q2 delivered solid execution: net sales $172.6M (+7.8% y/y), gross margin 37.1% (+400 bps y/y) and Adjusted EBITDA $39.9M (+15.7% y/y), while FY25 guidance was reaffirmed (sales $535–$565M; Adj. EBITDA $90–$100M) .
Mix and operational levers drove the quarter: 46% y/y auto cover growth (organic + M&A), liner growth +6%, lean/value-engineering benefits, and Coverstar acquisitions lifted margins; in-ground pool revenue was down ~3% as adverse weather delayed builds, with fiberglass better than packaged pools .
Versus S&P Global consensus, revenue was slightly below and EPS slightly above: $172.6M vs $173.5M* (miss); $0.13 vs $0.128* (beat). Adjusted EBITDA outpaced EBITDA consensus ($39.9M vs $39.0M*) despite non-GAAP definitional differences *.
Management reconfirmed ~60k U.S. pool starts for 2025 and reiterated a medium-term path to ~$750M sales and ~$160M Adj. EBITDA when U.S. pool starts return to 2019 levels (78k), framing operating leverage as a catalyst as demand normalizes .

What Went Well and What Went Wrong

What Went Well
- Auto covers were a standout: sales +46% y/y from organic growth and Coverstar acquisitions; messaging on safety and 4–5 year payback resonated .
- Gross margin and profitability improved: GM 37.1% (+400 bps y/y) on volume leverage in covers/liners, lean and value-engineering, and Coverstar accretion; Adj. EBITDA margin 23.1% (+160 bps) .
- Strategic progress in Sand States and demand funnel: dealer adds, targeted models (plunge/rectangular with features), 18% ytd lead growth and 34% higher web sessions; “GOOTSA” campaign boosted traffic in FL/TX .
What Went Wrong
- Weather delays impacted in-ground pools, with larger effect on packaged pools; management estimated a $3–$5M revenue impact and called Q2 pool category ~3% down .
- SG&A rose 20% to $31.9M on growth investments (marketing, personnel, ERP) and Coverstar overhead; though absorbed by gross profit, it limited bottom-line flow-through .
- Tariff environment remains dynamic; ~<$20M headwind for 2025 is largely mitigated via supply chain and price (one month of price in Q2 ≈ ~$1M), but requires continued vigilance; impact broadly neutral to margins per CFO .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025 (Actual)	Q2 2025 (Consensus)*
Revenue ($M)	$160.1	$111.4	$172.6	$173.5*
Diluted EPS ($)	$0.11	$(0.05)	$0.13	$0.128*
Gross Margin (%)	33.1	29.5	37.1	—
Adjusted EBITDA ($M)	$34.5	$11.1	$39.9	EBITDA $39.0*
Adjusted EBITDA Margin (%)	21.5	10.0	23.1	—

Note: Consensus metrics marked with * are from S&P Global; EBITDA consensus may not be strictly comparable to company-reported Adjusted EBITDA. Values retrieved from S&P Global.

Segment revenue mix (Q2):

Product Line	Q2 2024 ($000s)	Q2 2025 ($000s)	y/y
In-ground Swimming Pools	$80,958	$78,601	-2.9%
Covers	$25,503	$37,245	+46%
Liners	$53,661	$56,793	+5.8%
Total	$160,122	$172,639	+7.8%

Selected KPIs and balance sheet:

KPI	Q2 2024	Q2 2025
Leads to dealers (ytd)	—	+18% y/y
Website sessions (ytd)	—	+34% y/y
Cash ($M)	—	$26.9
Net cash from ops ($M)	—	$36.0 (Q2)
Total Debt ($M)	—	$281.5
Net Debt Leverage (x)	—	3.0x

Guidance Changes

Metric	Period	Previous Guidance (Q1’25, May 6)	Current Guidance (Q2’25, Aug 5)	Change
Net Sales	FY 2025	$535–$565M	$535–$565M	Maintained
Adjusted EBITDA	FY 2025	$90–$100M	$90–$100M	Maintained
Capital Expenditures	FY 2025	$27–$33M	$27–$33M	Maintained

Management reiterated ~8% sales growth and ~19% Adj. EBITDA growth at midpoints, driven by category share gains and Coverstar contributions .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current (Q2’25)	Trend
Sand States strategy (FL/TX focus; MPCs)	Strategy launched; GOOTSA drove +40% TX leads; sand states ~17% of pool revenue in 2024; targeting new models and dealer expansion	Dealer adds ahead of plan; strong lead growth in FL/TX; continued focus on MPC entries; aim to lift Sand States mix toward ~19–20%	Accelerating
Product performance: Fiberglass & auto covers	Fiberglass leadership; auto covers strengthened by Coverstar; benefits of safety and payback	Auto covers +46% y/y; liners +6%; fiberglass outperforming packaged pools; backlog healthy and lead times short	Positive
Tariffs & pricing	~$15–$20M headwind discussed; mitigation via nearshoring, pre-buys, logistics shifts; pricing lever in place	~$20M headwind; >half mitigated via supply chain; remainder offset with price (effective early June); broadly margin neutral	Managed/Stable
Lean manufacturing & value engineering	~$9M 2024 savings run-rate; 2–2.5M/quarter cadence; more to come	Continued structural benefits; major contributor to +400 bps GM y/y in Q2	Positive
Market/macro & demand	2025 pool starts ~flat with 2024; cautiously optimistic tone	2025 pool starts ~60k; weather delays but June/July improved; guidance reaffirmed	Stable
AI/Tech enablement (Measure by Latham)	AI tool rollout aided liners/covers; reseller adoption; share gains expected	Tool adoption supporting liners and covers; integrated with ordering; attracting new dealers	Positive

Management Commentary

“Our lean manufacturing and value engineering initiatives continue to drive production efficiencies… contributing to our strong second quarter and year-to-date performance.” — CEO Scott Rajeski .
“Cover sales were $37M, an increase of 46%, reflecting contributions from Coverstar acquisitions and organic growth.” — CFO Oliver Gloe .
“Gross margin [was] 37.1%… driven by volume leverage in covers and liners, lean manufacturing and value engineering initiatives, and Coverstar acquisitions.” — CFO Oliver Gloe .
“We are reconfirming our 2025 guidance of 8% net sales growth and 19% adjusted EBITDA growth at the midpoint.” — CFO Oliver Gloe .
“When U.S. pool starts return to 78,000 per year… our business model should enable about $750M in net sales and $160M in adjusted EBITDA.” — CEO Scott Rajeski .

Q&A Highlights

Marketing ROI and pipeline: GOOTSA/DirectTV campaigns markedly increased web activity and leads; strategy is pipeline-building with conversion expected into late 2025–2026 .
Weather and category dynamics: Unusually wet spring delayed builds (New England to June), with $3–$5M revenue impact; fiberglass returned to y/y growth in late Q2; packaged pools flattish .
Tariff mitigation and pricing cadence: Headwind ~$20M; >50% mitigated by supply chain; remainder priced in (effective June), intended to be broadly margin-neutral .
Revenue cadence and mix in 2H: Expect normal seasonality, strong safety cover season supported by Measure by Latham; fiberglass to return to y/y growth; acquisitions lap in Q3 comps .
Capital allocation: Priorities remain investing in the business, M&A (dealer roll-ups), and deleveraging; revolver usage seasonal and being reduced .

Estimates Context

Q2 2025 vs S&P Global consensus: Revenue $172.6M vs $173.5M* (slight miss); Diluted EPS $0.13 vs $0.128* (slight beat). EBITDA consensus $39.0M* vs company Adj. EBITDA $39.9M (beat; note definitional differences) *.
FY 2025 consensus vs guidance: Revenue consensus ~$542.1M* sits below guidance midpoint ($550M); EBITDA consensus ~$95.0M* aligns closely with guidance midpoint ($95M). Guidance reaffirmation suggests limited need for estimate cuts barring macro/seasonality variability *.

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

Mix shift and operational discipline are working: Auto covers strength and value-engineering/lean gains drove +400 bps GM and +160 bps Adj. EBITDA margin expansion despite industry trough conditions .
Modest headline variance to consensus (slight rev miss, EPS beat) coupled with reiterated FY outlook should anchor near-term sentiment; focus likely on sustainability of gross margin gains and 2H cadence *.
Sand States are a multi-year share gain opportunity: stronger dealer footprint, tailored models, MPC presence, and targeted media should compound fiberglass adoption as financing normalizes and labor scarcity persists .
Tariff headwinds are manageable with balanced mitigation (sourcing/logistics) and pricing; management frames P&L impact as broadly neutral to margins .
Watch 2H execution on safety covers and fiberglass growth trajectories, SG&A investment payback, and cash conversion as capex ramps for mold expansions in FL/OK facilities .
Medium-term algorithm intact: Management’s $750M sales/$160M Adj. EBITDA at 2019 pool-start levels highlights embedded operating leverage for an eventual demand recovery .

Additional Notables in Q2

Governance: Jeff Jackson appointed to the Board and Audit Committee, bringing building products operating expertise .
Liquidity/Leverage: Cash $26.9M; total debt $281.5M; net leverage 3.0x LTM Adj. EBITDA; Q2 operating cash flow $36.0M .

Latham Group, Inc. (SWIM)·Q2 2025 Earnings Summary