Residential swimming pool manufacturer Latham (NASDAQ:SWIM) met Wall Street’s revenue expectations in Q1 CY2025, but sales were flat year on year at $111.4 million. The company’s full-year revenue guidance of $550 million at the midpoint came in 2.5% above analysts’ estimates. Its non-GAAP loss of $0.04 per share was in line with analysts’ consensus estimates.
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Latham (SWIM) Q1 CY2025 Highlights:
- Revenue: $111.4 million vs analyst estimates of $111.3 million (flat year on year, in line)
- Adjusted EPS: -$0.04 vs analyst estimates of -$0.05 (in line)
- Adjusted EBITDA: $11.14 million vs analyst estimates of $10.94 million (10% margin, 1.8% beat)
- The company reconfirmed its revenue guidance for the full year of $550 million at the midpoint
- EBITDA guidance for the full year is $95 million at the midpoint, above analyst estimates of $90.47 million
- Operating Margin: -4.4%, down from -1.9% in the same quarter last year
- Free Cash Flow was -$50.33 million compared to -$39.86 million in the same quarter last year
- Market Capitalization: $723.8 million
StockStory’s Take
Latham’s first quarter results were shaped by stable demand for residential pools, with management highlighting sequential improvements in business activity through March and April. CEO Scott Rajeski pointed to relative strength in fiberglass and automatic pool covers, as well as early traction from the company’s Sand States expansion strategy, which targets underpenetrated markets like Florida, Texas, Arizona, and California. The company also reported a 190 basis point improvement in gross margin, attributing this to ongoing lean manufacturing and value engineering initiatives.
Looking ahead, Latham reaffirmed its full-year revenue and EBITDA guidance, with management emphasizing expectations for increased operating leverage as the year progresses. CFO Oliver Gloe noted that while tariff-related uncertainties remain, the company has taken steps to mitigate cost pressures through inventory pre-purchases, supply chain adjustments, and targeted price increases. Management also cited growing consumer engagement and dealer expansion in key markets as factors supporting its outlook for the rest of the year.
Key Insights from Management’s Remarks
Management’s commentary focused on product mix, operational progress, and market expansion efforts rather than headline financials. The following themes emerged as central to Latham’s performance in the first quarter:
- Fiberglass Pool Momentum: Latham observed ongoing market share gains in fiberglass pools, driven by consumer interest in cost, ease of installation, and lower labor requirements compared to concrete pools. Management expects fiberglass to capture additional share in the in-ground pool market this year.
- Auto Cover Growth and M&A: The automatic pool cover segment benefited from both organic growth and the integration of recent Coverstar dealer acquisitions. Auto covers are being promoted for cost savings, maintenance, and especially safety, with a new partnership aimed at raising water safety awareness.
- Sand States Expansion: The company’s strategy to build presence in high-growth states like Florida and Texas is showing early success, including partnerships with major builders and the launch of new fiberglass models suited to these markets. Targeted marketing campaigns have increased brand engagement and web traffic in these regions.
- Lean Manufacturing and Value Engineering: Latham delivered an improvement in gross margin through operational efficiencies, which management views as structural and key to its ability to drive operating leverage as industry conditions normalize.
- AI-Driven Dealer Tools: The rollout of the Measure by Latham platform, which uses artificial intelligence to streamline pool liner and cover measurements, has attracted new dealers and is expected to support market share gains in these categories.
Drivers of Future Performance
Management’s outlook for the remainder of the year centers on continued operational discipline, targeted market expansion, and the ability to offset inflationary and tariff-related pressures through pricing and supply chain actions.
- Sand States Penetration: The expansion into Florida, Texas, Arizona, and California is expected to drive incremental growth, with management citing early gains in dealer partnerships and product alignment for these markets.
- Tariff Mitigation: Latham’s approach to managing tariff exposure includes pre-purchasing inventory, negotiating with suppliers, and implementing targeted price increases, with the goal of protecting margins even as raw material costs fluctuate.
- Marketing and Dealer Engagement: Increased investment in marketing and AI-powered dealer tools is intended to raise brand visibility and support higher conversion rates, particularly in regions where Latham has historically been underrepresented.
Top Analyst Questions
- Ryan Merkel (William Blair): Asked about expectations for SG&A leverage and margin expansion as the year progresses; management replied that SG&A growth should moderate, with leverage improving in the second half as sales increase.
- Andrew Carter (Stifel): Inquired about risks and opportunities in quick-install fiberglass pools; CEO Scott Rajeski emphasized that the pool buying journey is lengthy, with affluent customers driving steady demand and no signs of order cancellations.
- Robert Schultz (Baird): Questioned the timing and effectiveness of tariff-related price increases; CFO Oliver Gloe explained that seasonal price hikes and additional targeted increases are intended to match the cadence of tariff impacts.
- Greg Palm (Craig-Hallum): Asked whether recent marketing investments are driving immediate or longer-term sales conversions; management responded that brand awareness is rising, with some sales impact this year, but most benefits expected over the longer term.
- Sean Callan (Bank of America): Requested a breakdown of organic versus acquisition-driven growth in auto covers; management disclosed that both factors contributed, with approximately $3 million in growth attributed to recent acquisitions.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will track (1) whether Latham’s Sand States expansion drives accelerating dealer growth and market share, (2) the sustainability of margin improvements amid tariff and supply chain headwinds, and (3) the impact of marketing investments on consumer demand and dealer conversions. Additional signs of progress in AI-enabled dealer platforms and the integration of acquired businesses will be key indicators of execution.
Latham currently trades at a forward P/E ratio of 44.9×. Should you double down or take your chips? Find out in our free research report.
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