Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Latham Group Inc (SWIM, Financial) increased its adjusted EBITDA guidance for full year 2024 by $15 million, reflecting strong profitability gains.
- The company achieved a 400 basis point year-over-year increase in adjusted EBITDA margin despite lower sales volumes.
- Latham Group Inc (SWIM) completed an accretive acquisition of Coverstar Central, expected to expand margins and accelerate sales.
- Fiberglass pools showed relative strength, gaining market share due to cost efficiency, fast installation, and eco-friendly advantages.
- The company maintained a strong financial position with $90.8 million in cash and a net debt leverage ratio of 2.1 times.
Negative Points
- Net sales for the second quarter were down 9.6% year-over-year, reflecting challenging macroeconomic conditions.
- In-ground pool sales declined 10.6%, liners declined 7.2%, and covers were down 11.3% in the second quarter.
- The company is facing a forecasted 15% decline in new pool starts for 2024, impacting overall sales.
- Year-over-year comparisons are expected to become more difficult as the year progresses due to better performance in the second half of 2023.
- Despite strong interest in pools, consumer purchases remain delayed, with many potential buyers on the sidelines.
Q & A Highlights
Q: Can you confirm if the fiberglass business performed better than the total company, and provide details on dealer interest in fiberglass pools during the downturn?
A: Yes, fiberglass continues to outperform the total market and in-ground pool category. We are seeing ongoing penetration and adoption of fiberglass pools. Dealers are increasingly interested, especially in a slower demand environment, as they have more time to explore our products and attend training. New dealer sign-ups and existing dealer growth are positive trends. - Scott Rajeski, President and CEO
Q: How significant is the auto-cover business within your cover segment, and what is your approach to M&A given the current market conditions?
A: Auto-covers are a larger part of our cover product category. We see significant benefits for homeowners, including safety and cost savings. Our auto-cover dealers act as an extension of our sales force. We will continue to evaluate accretive M&A opportunities across our product categories. - Scott Rajeski, President and CEO
Q: What factors contributed to the better gross margins, and can you quantify these?
A: Our 400 basis point increase in EBITDA margins was driven by strong cost management, lean and value engineering programs, and material cost benefits. These initiatives are yielding results earlier than expected, contributing significantly to our performance. - Oliver Gloe, CFO
Q: Can you provide an update on new pool models and demand trends within the fiberglass segment?
A: We are seeing a trend towards more rectangular, feature-rich pools. Our Astoria Collection, with built-in spa and tanning ledges, is popular. Smaller pools are in demand due to limited backyard space. Our new vinyl liner plunge pools will offer cost-effective options. - Scott Rajeski, President and CEO
Q: What are the recent demand trends, particularly in July, and how do they compare month-to-month?
A: Demand remained consistent through Q2, with no significant peak. The trend continued into July at a slightly lower rate due to seasonal factors. Interest in pools remains high, with strong website traffic and lead generation, indicating consumer interest despite current market conditions. - Scott Rajeski, President and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
