Latham Group (SWIM) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong profitability and margin expansion despite a 9.6% sales decline, driven by cost controls, lean manufacturing, and lower material costs.

• Net income more than doubled to $13.3 million, with adjusted EBITDA rising to $34.5 million and margin expanding by 400 basis points year-over-year.

• Completed the acquisition of Coverstar Central for $64.5–$65 million, expected to be immediately accretive, expand margins, and add $20 million in annualized net sales.

• Fiberglass pools and automatic safety covers continued to gain market share and show relative strength, supported by new product launches and digital initiatives.

• Launched new products, including the Astoria 14 fiberglass pool, and prepared for a vinyl plunge pool launch in 2025.

Financial highlights

• Q2 2024 net sales were $160.1 million, down 9.6% year-over-year; first half net sales were $270.8 million.

• Q2 net income was $13.3 million (8.3% margin), more than double the prior year; adjusted EBITDA was $34.5 million (21.5% margin), up 11.2% year-over-year.

• Gross margin expanded to 33.1% in Q2, up 470 basis points, driven by restructuring, lean manufacturing, and lower material costs.

• SG&A expenses declined 12% in Q2, mainly from lower stock-based compensation and cost containment.

• Operating cash flow for the first half was $17.9 million; cash at quarter end was $90.8 million.

Outlook and guidance

• Full-year 2024 net sales guidance raised to $495–$525 million, reflecting the Coverstar Central acquisition.

• Adjusted EBITDA guidance increased to $75–$85 million, with $12 million from margin outperformance and $3 million from the acquisition.

• Now expects full-year gross margin of 29–30%, up from prior guidance of 27%.

• Maintains forecast for a 15% decline in new pool starts for 2024 and expects normal seasonal slowdown in the second half.

• Capital expenditures expected at $18–22 million for FY 2024.