Latham Group Reports Mixed Q3 Results Amid Challenging Market Conditions

Latham Group, Inc. reported its financial results for the fiscal quarter and three fiscal quarters ended September 28, 2024, revealing a mixed performance amid challenging market conditions. For the fiscal quarter, net sales decreased by 6.4% to $150.5 million, down from $160.8 million in the same quarter of the previous year. The decline was attributed to a $9.5 million drop in sales volume and a $0.8 million decrease in pricing, particularly affecting in-ground swimming pools and liners. However, gross profit increased slightly to $48.7 million, resulting in a gross margin of 32.4%, up from 29.9% a year earlier, driven by production efficiencies and lower material costs.

For the three fiscal quarters, net sales fell 11.4% to $421.2 million compared to $475.6 million in the prior year. Despite this, net income improved significantly to $11.3 million, a turnaround from a net loss of $2.5 million in the same period last year. This improvement was supported by a decrease in cost of sales and selling, general, and administrative expenses, which contributed to a net income margin of 2.7%.

The company completed the acquisition of Coverstar Central, LLC on August 2, 2024, for $64.0 million, which is expected to enhance its market position and profitability through vertical integration. The acquisition contributed incremental net sales of $4.1 million but also resulted in a net loss of $0.6 million from the acquired entity during the reporting period.

Latham's total assets increased to $853.4 million as of September 28, 2024, from $835.0 million at the end of the previous fiscal year, with total stockholders' equity rising to $416.6 million. The company reported a decrease in cash reserves, down to $59.9 million from $102.8 million, while trade receivables surged to $66.1 million, reflecting increased sales activity.

Operating cash flow for the three fiscal quarters was $55.2 million, a decline from $88.1 million in the prior year, primarily due to changes in working capital. The company also reported net cash used in investing activities of $77.9 million, significantly higher than the previous year's $28.3 million, largely due to the acquisition of Coverstar Central.

Overall, Latham Group's strategic focus on cost management and investment in growth initiatives, including the recent acquisition, positions the company for potential recovery in a challenging economic environment.