Latham Group Q3 Earnings Call Highlights

Key Points

• Q3 sales and profitability grew: Net sales rose 12.5% to $182.2 million, while adjusted EBITDA increased 18.1% to $45 million and its margin expanded 110 basis points to 24.8%. Fiberglass pools drove in-ground sales growth, which reached 22.6%.
• Expansion in the Sand States is gaining traction: Sales in Florida and Texas helped drive 21% growth across the Sand States, alongside sharply higher leads in both states. Latham plans to add staff, launch new pool models, and enter Arizona as it targets further fiberglass market-share gains.
• Outlook and capital returns: Latham narrowed its 2026 guidance to $605–$615 million in sales and $112–$118 million in adjusted EBITDA, and is planning for a flat pool market in 2027. The board approved a three-year, $100 million share repurchase program.

Latham Group NASDAQ: SWIM reported third-quarter sales growth and higher profitability as the pool manufacturer expanded fiberglass-pool sales, increased activity in Florida and Texas, and continued to invest in marketing and commercial capabilities despite what management described as challenging market conditions.

Net sales rose 12.5% year over year to $182.2 million in the third quarter, including 8.4% organic growth and 4.1% growth related to the Freedom Pools acquisition. Adjusted EBITDA increased 18.1% to $45 million, while adjusted EBITDA margin expanded 110 basis points to 24.8%.

“Latham is not waiting for the market to rebound,” President and CEO Sean Gadd said on the company’s earnings call. “We are driving growth in our established markets through high-impact marketing campaigns and sales execution” while pursuing fiberglass conversion opportunities in the so-called Sand States.

Fiberglass Pools Drive In-Ground Sales Growth

In-ground pool sales increased 22.6% to $92 million during the quarter, including 13.9% organic growth. CFO Oliver Gloe said organic growth was driven almost entirely by fiberglass pools, while the Freedom Pools acquisition accounted for the acquisition-related growth.

Gadd said fiberglass pools are expected to represent about 80% of Latham’s total in-ground pool sales this year. Based on the company’s internal data, Latham expects fiberglass to gain at least one percentage point of U.S. in-ground pool market share in 2026, reaching approximately 25% of total U.S. in-ground pool sales.

During the question-and-answer session, Gadd said the company believes its fiberglass market-share gain may be closer to 1.5% to 2%, although it is waiting for third-party confirmation. He said Latham expects to continue gaining at least one point of share annually.

Cover sales increased 8.7% to $60 million, led by autocovers, which account for roughly two-thirds of cover sales. The business continues to benefit from revenue synergies related to Latham’s acquisitions of three Coverstar dealers. Liner sales declined 4.9% to $30 million, primarily due to a difficult comparison with the prior-year period, when liner sales rose 13%.

Sand States Strategy Gains Momentum

Latham’s sales in the Sand States increased 21% in the third quarter and 16.6% for the first nine months of 2026. The company cited accelerated growth in Florida and Texas, markets where it has historically been underrepresented and where concrete pools have been more prevalent.

Gadd said the company’s direct-to-consumer marketing and neighborhood-focused market-development strategy are beginning to produce results. Latham hosted three community pool events in targeted Florida neighborhoods during the quarter, which resulted in 15 additional pool sales in those areas, he said.

National leads increased 25% year over year through the first nine months, while lead volume in Florida rose 89% and Texas rose 115%, according to the company. Latham also plans to introduce three rectangular fiberglass pool models ahead of the 2027 season that are designed for Sand State markets and include swim areas and built-in bench seating.

The company has expanded its Florida field resources, expects to complete hiring for Texas by year-end and plans to move into Arizona beginning in January, Gadd said. In addition, Latham partnered with a national home builder in Florida to offer fiberglass pools as an option in new-home construction. One pool has been installed at a model home, and management said it expects to explore expanding the relationship.

Gadd said Latham believes the primary hurdle in Sand State markets is awareness rather than the economics of fiberglass pools. He cited the products’ installation speed, lower maintenance needs and consumer data indicating fewer regrets among fiberglass-pool buyers compared with cement-pool buyers.

Margins Expand as Capacity Constraints Ease

Gross profit increased 16.6% to $67 million, and gross margin rose 130 basis points to 36.7%. Gloe attributed the improvement primarily to greater plant absorption on higher volumes after the company resolved manufacturing capacity constraints that had affected the second quarter, as well as lean manufacturing and value-engineering initiatives.

SG&A expenses increased $7 million to $36 million, reflecting spending on marketing and sales initiatives, acquisition and integration costs, digital-transformation efforts and $3.2 million of performance-based earn-out expense associated with the 2024 Coverstar Central acquisition.

Net income was $12 million, or $0.10 per diluted share, compared with $8 million, or $0.07 per diluted share, a year earlier. Third-quarter results included a $5 million one-time loss on the extinguishment and modification of debt tied to the company’s refinancing.

For the first nine months, sales rose 11.4% to $497 million and adjusted EBITDA increased 14.2% to $102 million. Net income was $16 million, compared with $18 million in the prior-year period, including the debt-related charge.

Guidance Narrowed; Company Plans for Flat Pool Market in 2027

Latham reaffirmed and narrowed its 2026 guidance. The company now expects net sales of $605 million to $615 million, representing 11.7% growth at the midpoint, and adjusted EBITDA of $112 million to $118 million, representing 15.2% growth at the midpoint.

The updated outlook incorporates management’s assessment of fourth-quarter effects from the ongoing Middle East conflict. The company increased freight surcharges and announced price increases for pool liners and autocovers to address transportation and commodity-cost pressures. Gloe said current surcharges and pricing actions are expected to fully offset those pressures at current fuel, transportation and commodity price levels.

The company said it expects Canadian tariffs and counter-tariffs to have an immaterial effect on 2026 results after positioning seasonal inventory in the appropriate jurisdictions. For 2027, Latham plans to use its U.S. fiberglass manufacturing footprint to support markets previously served from Canada and is pursuing additional localization initiatives.

Management said it is planning for a flat overall pool market in 2027. “We’re going to continue to grow through 2027, but we’re not thinking we’re going to get a lot of help from the market,” Gadd said.

Latham ended the quarter with $95 million in cash and total debt of $293 million. Its net debt leverage ratio was 1.8 times, ahead of its year-end target of 2.0 times. During the quarter, the company refinanced its debt, establishing a $300 million term loan maturing in 2033 and a $75 million revolving credit facility maturing in 2031.

The board also approved a three-year, $100 million share repurchase program. Management said capital allocation priorities remain reinvestment in organic growth, selective strategic acquisitions and shareholder returns while maintaining a strong balance sheet.

About Latham Group (NASDAQ:SWIM)

Latham Group, Inc designs, manufactures and markets residential swimming pool products. The company is best known for its in-ground fiberglass pools, which are manufactured as pre-formed shells and installed at residential properties. Its product portfolio also includes vinyl pool liners, automatic and safety pool covers, pool walls, steps, stairs and related components.

Latham serves the residential swimming pool construction and renovation markets through a network of dealers, builders and distributors.

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