Latham Group Q2 Earnings Call Highlights

Key Points

• Q2 sales grew 14% year over year to $197 million, driven by 23% growth in in-ground pools, demand for fiberglass products, and the Freedom Pools acquisition. Management cited market-share gains, stronger demand and increased consumer engagement.
• Fiberglass pools remain central to the strategy, expected to comprise about 80% of full-year in-ground pool sales. Latham plans to expand its “Sand States” presence beyond Florida and Dallas into Texas, Arizona and Southern California.
• The company raised its full-year outlook, now targeting 11.7% net sales growth and 15.2% adjusted EBITDA growth. Margins were pressured by production ramp-up costs and higher investments, but management expects improvement in the second half and leverage below 2x by year-end.

Latham Group NASDAQ: SWIM reported second-quarter 2026 sales growth that outpaced a flat market for new U.S. pool starts, led by demand for fiberglass pools, covers and liners. The company raised its full-year sales and adjusted EBITDA growth outlook, citing first-half demand, share gains and current order trends.

Net sales rose 14% year over year to $197 million in the second quarter, including 10% organic growth and a 4% contribution from the Freedom Pools acquisition completed in February. In-ground pool sales increased 23% to $96 million, or 14% organically, while cover sales rose 10% to $41 million and liner sales increased 6% to $60 million.

President and CEO Sean Gadd said the company benefited from a stronger-than-expected increase in demand following a weather-affected first quarter. He attributed the performance to market-share gains, national marketing efforts and progress in core markets and the so-called Sand States.

“The demand in Q2 was higher than we had expected,” Gadd said during the company’s earnings call. “It looked like there’s just a true spike in demand, which is a result, in my mind, from us taking share over the last sort of 12 months.”

Fiberglass and Sand States Strategy

Fiberglass pools remain central to Latham’s growth strategy. Gadd said fiberglass is expected to represent about 80% of the company’s full-year 2026 in-ground pool sales and is projected to gain another percentage point of market share this year, reaching about 25% of new U.S. pool starts.

The company reported double-digit sales growth in the Sand States, including Florida, where Latham has been targeting areas with favorable home values, lot sizes and household income profiles. The company plans to expand its market-development framework into Texas, followed by Arizona and California.

Gadd said Texas represents a significant opportunity, with Latham currently concentrated in Dallas and seeking to build its presence in San Antonio, Austin and Houston. The company has also opened a role for a vice president of Sand States West as it evaluates expansion in Arizona and Southern California.

Latham’s marketing activity also produced higher consumer engagement during the quarter. Consumer leads increased 60% from a year earlier, website traffic rose 30%, and Google search demand for Latham was up more than 100%, according to Gadd. He said Latham remained the most-searched brand among fiberglass pool competitors.

The company is also seeking to raise automatic-cover attachment rates, with Gadd describing the goal as “an auto cover on every new pool installation.” Cover sales rose during the quarter, driven primarily by automatic covers, while liner sales benefited from Latham’s Measure by Latham technology and lead times, management said.

Margins Affected by Rapid Production Ramp

Gross profit increased 9.6% to $70 million, though gross margin declined 160 basis points to 35.5%. Chief Financial Officer Oliver Gloe said lean manufacturing and value-engineering programs added about $2.7 million to gross profit during the quarter.

However, a rapid early-quarter increase in fiberglass pool orders led to approximately $2.8 million of incremental costs, including production ramp-up expenses and lower plant-cost absorption. The costs represented roughly a 140-basis-point gross-margin headwind.

Gloe said much of the impact came from selling inventory to meet demand and from accelerating hiring, training and overtime at manufacturing facilities. He said the company expects to recover the majority of those costs during the second half as it replenishes inventory and production operations normalize.

“June, and let me add in July as well, shows the usual gross margin and EBITDA expansion versus prior year,” Gloe said.

Second-quarter SG&A expense increased by $6 million to $38 million, reflecting investments in growth programs, sales and marketing initiatives, acquisition and integration costs, digital transformation spending, and $2.2 million of performance-based earn-out expense related to Coverstar Central acquisitions completed in 2024.

The company completed a restructuring and voluntary early-retirement program that is expected to generate $2.5 million in annualized savings. Latham expects to incur a one-time $1.5 million charge in the second half related to the program, while redeploying savings toward commercial and growth initiatives.

Earnings, Cash Flow and Outlook

Net income was $30 million, or $0.11 per diluted share, compared with $60 million, or $0.13 per diluted share, in the prior-year quarter. Net income margin declined to 6.5% from 9.3%, including a $5 million unfavorable year-over-year change in net foreign-currency transaction gains and losses tied to international subsidiaries.

Adjusted EBITDA increased 12% to $45 million, while adjusted EBITDA margin declined 50 basis points to 22.6%. Gloe said the margin decline reflected the lower gross margin and the timing of sales and marketing investments intended to accelerate share gains in the Sand States.

For the first half, sales rose 11% to $315 million, including 7.5% organic growth. Adjusted EBITDA also increased 11%, reaching $57 million, while adjusted EBITDA margin remained flat at 18%.

Latham ended the quarter with $43 million in cash and $280 million in total debt, for a net debt leverage ratio of 2.2. Gloe said the company is tracking toward a ratio below 2 by year-end based on expected seasonal cash-flow generation.

The company raised the midpoint of its full-year net sales growth outlook to 11.7% from 9%, including expected organic growth of 8.4%. It also lifted the midpoint of its adjusted EBITDA growth outlook to 15.2% from 12.7%.

Management said the revised outlook incorporates higher transportation costs associated with the Middle East conflict. Latham implemented a surcharge to address transportation costs and said it has additional strategies to fully or mostly offset commodity headwinds linked to higher oil prices. Gloe also said the company announced a price increase for vinyl liners that is expected to take effect in the third quarter.

About Latham Group (NASDAQ:SWIM)

Latham Group, Inc designs, manufactures and supplies a broad range of aquatic products and services for residential and commercial applications. Offerings include fiberglass and vinyl-liner pool shells, commercial water park structures, water slides, surf simulators, pumps, filters, heaters and sanitation systems. The company also provides parts, equipment and technical support for pool installation, maintenance and repair.

Operating across three core segments—commercial, residential and aftermarket—Latham delivers turnkey aquatic facilities and attractions for municipal, hospitality and resort clients, offers packaged pool kits and equipment packages to builders and dealers, and supplies replacement parts, service contracts and technical assistance to support ongoing pool operations.

Headquartered in the United States, Latham Group maintains manufacturing and distribution centers throughout North America and Europe.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source