Latham Group Inc (SWIM, Financial) released its 8-K filing on November 5, 2024, detailing its financial results for the third quarter of 2024. As a leading designer, manufacturer, and marketer of in-ground residential swimming pools, liners, and covers in North America, Australia, and New Zealand, Latham Group Inc derives a significant portion of its revenue from the United States.
Third Quarter 2024 Financial Overview
For the third quarter of 2024, Latham Group Inc reported net sales of $150.5 million, which fell short of the analyst estimate of $152.30 million. However, the company met the earnings per share (EPS) estimate with a reported EPS of $0.05. The net income for the quarter was $5.9 million, maintaining a net income margin of 3.9%, slightly above the 3.8% margin from the same period last year.
Despite a challenging macroeconomic environment, Latham Group Inc's gross profit increased to $48.7 million, up from $48.1 million in the previous year's third quarter. The gross margin expanded by 250 basis points to 32.4%, attributed to production efficiencies and the strategic acquisition of Coverstar Central.
Performance and Challenges
The company's net sales decreased by 6.4% year-over-year, primarily due to lower sales volumes amid continued soft industry conditions. The decline in sales was most notable in the in-ground swimming pools segment, which saw a reduction from $82.9 million to $74.8 million. However, the covers segment showed resilience with a slight increase in sales.
Scott Rajeski, President and CEO, commented, “We continued to execute well within a difficult industry environment, increasing awareness and adoption of fiberglass pools and automatic safety covers, gaining production efficiencies, and controlling costs, while investing in initiatives to drive future growth.”
Financial Achievements and Industry Implications
Latham Group Inc's strategic focus on fiberglass pools, which are gaining market share due to their superior quality and cost benefits, has been a key driver of its sales performance. The acquisition of Coverstar Central has also contributed to stable gross profit performance and expanded gross margins, despite lower year-on-year sales.
Adjusted EBITDA for the quarter was $29.8 million, representing 19.8% of net sales, although this was a decrease from $36.1 million in the prior year. The adjusted EBITDA margin also declined by 260 basis points to 19.8%.
Balance Sheet and Cash Flow Insights
As of the end of the third quarter, Latham Group Inc held $59.9 million in cash, following the acquisition of Coverstar Central for approximately $65 million. The company also repaid $19.6 million of debt during the first nine months of 2024. Total debt stood at $282.8 million, with a net debt leverage ratio of 2.6, up from 2.1 in the previous quarter.
Net cash provided by operating activities was $37.2 million for the third quarter and $55.2 million for the first nine months of 2024. Capital expenditures were $4.0 million for the quarter, aligning with the company's guidance.
Analysis and Outlook
Latham Group Inc's performance reflects its resilience and strategic positioning in the face of industry challenges. The company's focus on fiberglass conversion and automatic safety cover adoption, along with strategic acquisitions, positions it to potentially outperform the industry as conditions improve.
Looking ahead, Latham Group Inc has narrowed its full-year 2024 guidance ranges for net sales to $500-510 million and adjusted EBITDA to $77-83 million, reflecting the seasonal end of the pool building season and potential impacts from recent hurricanes.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Sales | $150.5 million | $160.8 million |
| Net Income | $5.9 million | $6.2 million |
| EPS (Diluted) | $0.05 | $0.05 |
| Adjusted EBITDA | $29.8 million | $36.1 million |
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Explore the complete 8-K earnings release (here) from Latham Group Inc for further details.
