8-K: Latham Group Showcases Fiberglass Pool Growth Strategy at Florida Site Visit

Latham Group, a leading designer, manufacturer, and marketer of in-ground residential swimming pools, outlined its strategy to accelerate fiberglass pool adoption, particularly in the Sun Belt states, during an investor event at its Zephyrhills, Florida facility.

Summary

• Latham Group hosted an investor event at its Zephyrhills, Florida facility on November 20, 2024.
• The event highlighted Latham's strategy to increase fiberglass pool adoption, especially in the 'Sand States' of Florida, Texas, Arizona, Nevada, and California.
• The company is focusing on expanding its pool dealer base, marketing the benefits of fiberglass pools to consumers and builders, and aligning its product offerings with regional demand.
• Latham highlighted its lean manufacturing and value engineering initiatives, which have resulted in significant cost structure improvements since 2023.
• The company aims to continue outperforming the market and achieve long-term growth in net sales and Adjusted EBITDA.
• In 2023, the 'Sand States' accounted for approximately 85% of Latham's fiberglass pool sales, while non-Sand States accounted for approximately 15%.
• Latham's management estimates that the total number of pool starts in 2024 will be approximately 78,000.
• Latham's management estimates that Adjusted EBITDA will grow from $36 million in 2015 to approximately $160 million by 2024.
• Latham's management estimates that net sales will grow from $223 million in 2015 to approximately $750 million by 2024.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for Latham Group, highlighting its growth strategy, operational improvements, and strong market position. However, it also acknowledges potential risks and challenges, such as economic conditions and competition.

Positives

• Latham is experiencing strong growth in the fiberglass pool market, particularly in the Sand States.
• The company's focus on expanding its dealer network and providing training is driving increased productivity.
• Latham's marketing efforts are effectively communicating the benefits of fiberglass pools to both consumers and builders.
• The company's lean manufacturing and value engineering initiatives have significantly improved its cost structure.
• Latham's acquisition strategy and strong financial position support its growth objectives.
• The company is well-positioned to capitalize on the growing demand for residential swimming pools.
• Latham's partnership with Concord Pools & Spas demonstrates the success of its dealer network strategy.

Negatives

• The company faces unfavorable economic conditions and related impacts on consumer spending.
• Adverse weather conditions can impact sales and lead to significant variability in reporting periods.
• Latham is exposed to risks associated with natural disasters, geopolitical events, and public health issues.
• The company faces competition from other pool manufacturers and builders.
• Inflationary impacts could affect consumer demand and the company's costs.
• Latham may face challenges in sourcing raw materials and components for manufacturing.
• The company is dependent on information technology systems and faces cybersecurity risks.

Risks

• Economic downturns could reduce consumer spending on discretionary items like swimming pools.
• Extreme weather events can disrupt operations and impact sales.
• Competition from other pool manufacturers and builders could put pressure on pricing and market share.
• Supply chain disruptions could lead to increased costs and production delays.
• Failure to keep pace with technological developments and standards could harm the company's competitive position.
• Cybersecurity breaches and data leaks could damage the company's reputation and result in financial losses.
• Changes in government regulations could increase compliance costs.
• The company's substantial indebtedness could limit its financial flexibility.
• The company faces risks associated with international business operations.

Future Outlook

Latham anticipates continued growth driven by its Sand State strategy, increased adoption of automatic safety covers, the full rollout of Measure by Latham, and ongoing production efficiencies. The company expects these initiatives to support significant long-term growth in net sales and Adjusted EBITDA.

Management Comments

• Our goal of continuing to outperform the market
• Significant long-term growth in Net Sales & Adjusted EBITDA
• Lathams Fiberglass pools are feature-rich with high-quality finishes and unmatched warranties
• Real-time responsiveness from the industrys largest in-ground pool manufacturer leads to the development of products that meet current market demand
• Latham is an early developer and adopter of tools that drive business development and efficiency in the field
• Latham acts as a business partner unique in the pool industry to drive growth for both Latham and their dealers

Industry Context

Latham's focus on fiberglass pools aligns with the broader industry trend of increasing consumer preference for fiberglass over traditional concrete pools due to its faster installation time, lower maintenance costs, and durability. The company's expansion in the Sand States also reflects the growing demand for residential pools in these regions.

Comparison to Industry Standards

• Latham's focus on fiberglass pools is in line with industry trends, as fiberglass is gaining market share from concrete pools.
• Compared to competitors like Pool Corporation (PoolCorp) and Hayward Holdings, Latham is more focused on the fiberglass segment.
• PoolCorp, a major distributor, reported a decline in new pool construction in its Q3 2023 earnings, while Latham is aiming to outperform the market.
• Hayward, a manufacturer of pool equipment, also noted a slowdown in new pool construction in its recent earnings.
• Latham's growth strategy in the Sand States is similar to that of regional builders like Premier Pools & Spas, which has a strong presence in these markets.
• Latham's dealer training program is comparable to those offered by other manufacturers, but its focus on fiberglass installation is a differentiator.
• Concord Pools & Spas, one of Latham's dealers, is ranked in the top 1% of pool builders nationwide, indicating the effectiveness of Latham's dealer network.

Stakeholder Impact

• Shareholders: Potential for increased shareholder value through continued growth and profitability.
• Employees: Potential for job creation and career development opportunities as the company expands.
• Customers: Benefits from faster installation, lower cost of ownership, and high-quality products.
• Suppliers: Potential for increased business as Latham's production volume grows.
• Creditors: Latham's strong financial position suggests a lower risk of default.

Next Steps

• Continue expanding the pool dealer base in the Sand States.
• Broaden the reach of the 'Get Out Of The Stone Age (GOOTSA)' marketing campaign in 2025.
• Focus on Master Planned Communities, particularly Babcock Ranch (FL) and Silverado (TX).
• Continue implementing lean manufacturing and value engineering initiatives.
• Drive growth in automatic safety covers and pool liners.
• Host additional Fiberglass Bootcamps for dealer training.

Key Dates

Keywords

fiberglass pools, residential swimming pools, pool manufacturing, Sand States, pool dealer network, lean manufacturing, value engineering, Master Planned Communities, pool installation, pool market, pool construction, pool builder, pool industry, pool sales, pool adoption