Latham Group, Inc. Q2 FY2025 earnings call

• Latham achieved 7.8% revenue growth and 15.7% adjusted EBITDA growth in Q2. • Diversified product portfolio with #1 share in subcategories. • Success in driving awareness and adoption of fiberglass pools and autocovers. • Completed accretive acquisitions of autocover dealers. • Lean manufacturing and value engineering initiatives drive production efficiencies. • Marketing programs focus on Sand States (Florida, Texas, etc.) for growth. • Measure by Latham AI tool boosts liner and cover sales. • Autocovers show strong growth with regulatory expansions and market compatibility. • Replacement liner business grows due to industry-leading lead times and Measure by Latham.

In the second quarter, net sales were $173 million, up 7.8% year-over-year. In-ground pool sales were $79 million, down 2.9%; cover sales were $37 million, up 46%; liner sales were $57 million, up 5.8%. In-ground pool sales were affected by adverse weather, while covers and liners saw growth. Cover sales growth was driven by acquisitions and organic growth of autocovers. Liner sales growth was due to the adoption of Measure by Latham.

• Reconfirms 2025 guidance of 8% net sales growth and 19% adjusted EBITDA growth at midpoints. • When U.S. pool starts return to 2019 level (78,000 per year), expects $750 million net sales and $160 million adjusted EBITDA. • When pool starts return to long-term average (100,000 per year), projects meaningful increases beyond previous projections.

• Adverse weather conditions delayed pool building activity, impacting in-ground pool sales. • Labor shortages in the industry could affect pool building and installation. • Market conditions remain challenging with soft pool start numbers.

Q: How are you measuring the return on investment for marketing campaigns?

A: Focused on driving brand and fiberglass pool awareness, signing up dealers, and building a pipeline of future demand. Leads and website activity are up, with some interest translating to potential sales.

Q: Were fiberglass pool sales returning to growth after weather impacts?

A: Yes, saw a nice trajectory in June and July, with fiberglass back to year-over-year growth despite initial weather impacts.

Q: How much did acquisitions contribute to Q2 gross margin?

A: Coverstar accounted for about half of the gross margin improvement, with remaining difference from lean value engineering and volume cost leverage.

Q: Can you quantify share gains from Measures by Latham?

A: Not specifically broken out, but pleased with liners business performance and the tool's impact on sales.

Q: What are capital allocation priorities?

A: First, investing in the business; second, M&A; third, debt repayment