LathamSWIM

Key highlights

• In ground pool sales surge: Sales of in-ground pools grew 22.5% to $96.3 million, outperforming a broader pool market that the company expects to remain flat this year. This growth is a key indicator that the company is winning market share by convincing more homeowners to choose fiberglass over traditional materials.
• Temporary costs pinch margins: Gross margin, a measure of how much profit is left after production costs, fell to 35.5% compared to 37.1% last year. This dip happened because demand for fiberglass pools spiked faster than expected, leading to $2.8 million in extra costs to ramp up production quickly.
• Strategic focus on Sand States: Sales in the Sand States, specifically Texas and Florida, grew at a double-digit rate as the company added new sales staff and refined its marketing. These states are vital for long-term growth because they represent large markets where fiberglass pools still have significant room to replace older pool types.
• Autocover sales maintain momentum: Revenue from pool covers rose 10% to $40.9 million, led by automatic covers that are increasingly being installed on new pools. These covers provide a steady secondary stream of income and are now being attached to new pool sales at a consistent rate.
• Full year outlook raised: Management increased its yearly revenue forecast to a range of $600 million to $620 million, which would be 11.7% growth at the midpoint. They also raised their profit target, known as adjusted EBITDA, to a range of $110 million to $120 million as they expect to recover most of the production costs lost this quarter.

Our take: This was a strong quarter defined by healthy demand that actually exceeded the company's own ability to supply it efficiently. While the extra costs to meet that demand temporarily hurt profit margins, the raised full year outlook shows management is confident this momentum is sustainable. The steady shift toward fiberglass pools continues to strengthen the long term case for the business.