Executive Summary

Q3 2025 delivered solid operational outperformance (revenue +7.6% YoY; gross margin +300 bps; Adj. EBITDA +28.5%), but both revenue ($161.9M) and EPS ($0.07) missed S&P Global consensus, creating a modest negative stock reaction despite strong margin execution .
Management narrowed FY25 guidance: net sales to $540–$550M (from $535–$565M) and Adj. EBITDA to $92–$98M (from $90–$100M); FY25 capex cut to $22–$24M (from $27–$33M), reinforcing cash discipline and deleveraging (net debt leverage down to 2.3x) .
Strategic drivers remain intact: fiberglass on track for ~75% of FY25 in‑ground pool sales; strong covers/liners; continued traction in Sand States (notably Florida) and tangible efficiency gains (lean manufacturing, value engineering, accretive Coverstar acquisitions) .
Key near-term swing factors: winter safety cover season execution, Sand States conversion momentum, tariff/pricing stability (2025 tariff exposure mitigated via supply-chain actions and June price increase), and macro/interest-rate sensitivity at the low end of market .

What Went Well and What Went Wrong

What Went Well
- Broad-based growth and margin expansion: revenue +7.6% YoY to $161.9M; gross margin +300 bps to 35.4%; Adj. EBITDA +28.5% to $38.3M (23.7% margin) .
- Strategic mix wins: covers +15% and liners +13% YoY in the quarter; fiberglass continues to gain share and is tracking to ~75% of FY25 in‑ground pool sales; Florida showing high single-digit YTD growth with MPC and homebuilder partnerships .
- Quote (CEO): “Gross margin increased by 300 basis points due to the accretive benefit from the three Coverstar acquisitions as well as…lean manufacturing and value engineering…” .
What Went Wrong
- Estimates miss: revenue ($161.9M) and EPS ($0.07) came in below S&P Global consensus, contributing to a muted share reaction despite operational gains * .
- Regional headwinds: Texas and California remain soft; management called out permitting/market challenges and lingering interest-rate/tariff uncertainty affecting buyer confidence .
- Sequential seasonality: revenue down vs Q2’s peak season (Q2 revenue $172.6M vs Q3 $161.9M), as expected, which amplified the optics of an EPS miss .

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($M)	$150.5	$172.6	$161.9
Gross Margin %	32.4%	37.1%	35.4%
Adjusted EBITDA ($M)	$29.8	$39.9	$38.3
Adjusted EBITDA Margin %	19.8%	23.1%	23.7%
Net Income ($M)	$5.9	$16.0	$8.1
Diluted EPS ($)	$0.05	$0.13	$0.07
Net Income Margin %	3.9%	9.3%	5.0%

Vs. S&P Global consensus (Q3 2025)

Metric	Consensus	Actual	Surprise
Revenue ($M)	165.35*	161.90	-2.1%
EPS ($)	0.0975*	0.07	-28.2%

*Values retrieved from S&P Global

Segment/product line net sales

Product Line	Q3 2024 ($000s)	Q3 2025 ($000s)
In-ground Swimming Pools	74,785	75,377
Covers	47,755	54,893
Liners	27,956	31,633
Total	150,496	161,903

Key operating/financial KPIs (Q3 2025)

KPI	Q3 2025
Cash and Equivalents	$70.5M
Total Debt	$281.1M
Net Debt	$210.6M
Net Debt Leverage Ratio	2.3x
Operating Cash Flow (Quarter)	$51.0M
Capital Expenditures (Quarter)	$5.8M

Notes: Adjusted EBITDA is non‑GAAP; see reconciliation and definition in filings .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY 2025	$535–$565M	$540–$550M	Narrowed (midpoint maintained)
Adjusted EBITDA	FY 2025	$90–$100M	$92–$98M	Narrowed (midpoint maintained)
Capital Expenditures	FY 2025	$27–$33M	$22–$24M	Lowered

Management expects net debt leverage to approach ~2.0x by year‑end (from 2.3x at Q3) .

Earnings Call Themes & Trends

Topic	Q-2 (Q2 2025)	Q-1 (Q1 2025)	Current (Q3 2025)	Trend
Sand States expansion	Dealer adds in FL/TX; product lineup tailored to Sand States; marketing driving leads	Strategy “on track”; active in MPCs; targeted campaigns (GOOTSA)	FL up high-single-digit YTD; more MPCs; partnerships with custom builders	Building momentum
Fiberglass adoption/share	~75% of FY25 in‑ground pool sales expected; share +100 bps YoY	“Relative strength” in fiberglass vs broader market	~75% of FY25 in‑ground pool sales; conversions of concrete builders (e.g., Shasta)	Positive structural mix
Covers & liners	Covers +46% in Q2 (org + M&A); liners +6% YoY; Measure tool boosting liners	Measure tool adoption; lead times aiding liners	Covers +15% and liners +13% YoY; Measure Pro/Go rollout	Consistent growth
Tariffs & pricing	June price increase; net ~$10M tariff exposure offset via supply chain + pricing	Monitoring tariffs; targeted price increases	Tariff net ~~$10M; June pricing (~~$3M benefit in Q3); exposure mitigated	Managed/neutral
Supply chain/operations	Lean/value engineering lifting margins; Coverstar integration accretive	Lean/value engineering drove +190 bps GM	GM +300 bps; lean/value engineering + Coverstar accretion; structural	Structural efficiencies
Regional trends	Weather impacted Northeast in Q2; Texas/California soft	Seasonal ramp visible by March	Strength in Canada/NE/MW/SE/FL; TX/CA remain tough	Mixed by region
Capital allocation	Capex for Sand States models/capacity; delever; M&A ongoing	Capex $3.5M in Q1; leverage 3.6x	Capex trimmed; leverage toward ~2x; M&A pipeline intact	More conservative capex

Management Commentary

“In-ground pool sales increased modestly in the third quarter and benefitted from continued positive momentum in fiberglass pools…Covers and liners were important contributors…” (Scott Rajeski, CEO) .
“Adjusted EBITDA margin expanded 390 basis points to 23.7%, while we continued to invest in marketing programs to increase awareness and adoption of autocovers and fiberglass pools” .
“With much of the pool building season now behind us…we are narrowing our net sales guidance range to $540–$550 million and our adjusted EBITDA guidance range to $92–$98 million…capex…$22–$24 million” .
“Net tariff exposure…has remained at about $10 million…we have covered with that price increase in June” (CFO) .

Q&A Highlights

Demand/lead funnel: Lead generation remained strong through Q3 (national DIRECTV campaign), but purchase confidence still lags on tariff and rate uncertainty; organic growth ~5% aided by lead flow .
Liners strength: Gains from Measure tool adoption and replacement demand; low-end new vinyl pools remain pressured vs fiberglass .
Regional color: Broad strength ex‑TX/CA; Florida outperformance driven by MPC presence and conversions of concrete installers to fiberglass .
Pricing/tariffs: June price added ~$3M in Q3 revenue; net tariff exposure ~$10M mitigated via supply chain and pricing; impact broadly neutral to margins .
SG&A cadence/leverage: Investment stepped up mid‑2024; Q3 flat-ish YoY; continue to invest in Sand States as ROI improves .
Deleveraging/M&A: Expect ~2.0x net leverage by YE; continue selective M&A while prioritizing organic Sand States investments .

Estimates Context

Q3 2025 vs S&P Global consensus: revenue $161.9M vs $165.35M* (miss ~2.1%); EPS $0.07 vs $0.0975* (miss ~28.2%) .
Forward consensus (seasonality evident):
- Q4 2025: revenue $96.2M*, EPS -$0.077*
- Q1 2026: revenue $119.7M*, EPS -$0.030*
- Q2 2026: revenue $182.3M*, EPS $0.153*
  Coverage: 6–7 rev/5–6 EPS estimates per quarter, with target price consensus ~$7.79* [functions.GetEstimates].
Note: Company reports Adjusted EBITDA; S&P “EBITDA Consensus Mean” may not be directly comparable to company’s Adjusted EBITDA, so we do not anchor investment conclusions on EBITDA estimate variances.
*Values retrieved from S&P Global

Where estimates may adjust: Narrower FY25 revenue/Adj. EBITDA ranges and lower capex imply slightly tighter modeling bands; strong Q3 margin/cover-liner momentum could support upward margin revisions, but sequential Q4 seasonality and macro sensitivity may temper near-term EPS.

Key Takeaways for Investors

Despite a revenue/EPS miss, Q3 showcased structural margin improvement (GM +300 bps; Adj. EBITDA margin 23.7%) from mix (covers/liners/fiberglass), lean/value engineering, and Coverstar accretion—strengthening the quality of earnings .
Guidance narrowing with capex cuts points to disciplined cash deployment and accelerated deleveraging toward ~2x—supportive for equity risk-premium compression as execution continues .
Sand States remain the multi‑year growth vector; observed dealer conversions (incl. concrete to fiberglass) and early MPC traction (Florida) should compound as housing/permits stabilize .
Tariff risk for 2025 appears neutralized by supply-chain mitigation and June pricing; monitor any 2026 tariff resets and price elasticity .
Near-term trading: stock likely keys off winter safety cover season strength, Q4 seasonality, and any incremental Sand States updates; estimate bands may tighten around the guided midpoints .
Medium-term thesis: mix shift to fiberglass/autocovers + operational excellence support structurally higher margins; management’s longer-term framework (at 2019 pool-start levels) targets ~$750M revenue and ~$160M Adj. EBITDA potential .
Watchlist: TX/CA demand trends, interest-rate path, fiberglass penetration pace (~+100 bps/yr), Measure Pro/Go adoption, and incremental M&A on covers ecosystem .

Additional Q3 2025 press releases: company announced participation at the Baird 2025 Global Industrial Conference (Nov 11, 2025) .

Citations:

Q3 2025 8‑K/press release (results, guidance, financials): .
Q3 2025 earnings call transcript (strategy, regional trends, tariffs/pricing, guidance color): .
Q2 2025 8‑K/press (for prior‑quarter comps and prior guidance): .
Q1 2025 8‑K (trend context): .
Market/estimates reaction: .
S&P Global consensus figures: functions.GetEstimates (see tables; values marked *).

Latham Group, Inc. (SWIM)·Q3 2025 Earnings Summary