Latham Group, Inc.

Good day and welcome to the Latham Group first quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Nicole Breguet, the company's investor relations representative. Please go ahead.

Thank you, and welcome to Latham's Q1 Fiscal 2022 Earnings Call. Earlier this morning, we issued our earnings press release, which is available on the investor relations portion of our website, where you can also find the slide presentation that accompanies our prepared remarks. On today's call are Latham's President and CEO, Scott Rojeski, and CFO, Mark Borseth. Following their remarks, we will open the call up to questions. During this call, the company may make certain statements that constitute forward-looking statements. Such statements reflect the company's views with respect to future events as of today and are based on our management's current expectations, estimates, forecasts, projections, assumptions, belief, and information. These statements are subject to a number of risks that could cause actual events and results to differ materially. Such risks and other factors are set forth in the company's earnings release posted on its investor relations website and will be provided in our form PENQ for the first quarter of fiscal year 2022. The company expressly disclaims any obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. In addition, during today's call, the company will discuss non-GAAP financial measures, which we believe could be useful in evaluating our performance. Reconciliations of adjusted EBITDA to net income calculated under GAAP can be found in our earnings press release and will be included in our Form 10-Q for Q1 2022. I'll now turn the call over to Scott Rogeski.

Thanks, Nicole. Good morning. Thank you for joining us for our first quarter 2022 earnings call. Just a few weeks ago, we celebrated the one-year anniversary of our IPO, and I am proud of all that we've accomplished in that time. We have consistently executed on our strategy, navigated a constantly changing environment, and delivered strong growth. We have entered 2022 in a position of strength, and I want to thank our employees, dealer partners, and investors for their ongoing support. The first quarter was a strong one for Latham, and we are encouraged by the early excitement and anticipation we're seeing from both consumers and dealers as we head into peak pool building season. We've been on the road connecting with dealers and homeowners across the country, further educating the market on the value proposition of fiberglass. What we're seeing and hearing across the board is homeowner demand for pool ownership is strong, and awareness of the Latham brand and the benefits of fiberglass continues to grow. We continue to focus on dealer education and we are pleased that our new world-class training center in Florida is now open. The hands-on training that we can provide at this center is in high demand and our schedule is quickly filling up for the rest of this year. This is just one of the many measures we are taking to help our dealers increase installation capacity, and we are excited to welcome new dealers and quickly and successfully onboard them in a flexible, technologically advanced learning environment. The homeowner interest in pools is there, and during the quarter, we continue to enhance our ability to meet demand. Our fiberglass production continued to improve as we brought on new material sources and expanded resin supply from our existing sources. As a result, North American fiberglass production increased about 50% sequentially in Q1 versus Q4 last year, and that came on top of a 35% sequential improvement in Q4 versus Q3 last year. We continue to make progress on our fiberglass order backlog especially on pools that were ordered at a lower price than we are charging now. Lead times improved across many of our fiberglass plants and models. Continuing to improve lead times is a key focus for us across the business, and I am proud to say that we are tracking back toward normalized competitive lead times in all of our other product categories. We also turbocharged our employee recruitment efforts during Q1 and meaningfully filled open direct labor positions. In turn, this enabled us to successfully navigate labor headwinds related to the Omicron variant in January and February. Our branding and digital initiatives continue to differentiate us from subscale regional manufacturers and remain an important driver of our ability to create demand and drive future growth. The work we have done with search engine optimization continues to strengthen our competitive leadership position in the market. Our website traffic remains strong with 700,000 sessions and 2.1 million page views year-to-date. This organic web traffic has also further improved our search rankings across all our product categories. In addition, we continue to develop tools that empower homeowners to build the pool of their dreams. We have made updates to key product areas like fiberglass, enabling users to view different designs and select what best speaks to their style. All our work to further our branding and digital initiatives, coupled with our operational excellence efforts, is helping to drive the awareness and adoption of fiberglass. As a result of all of these efforts, Q1 net sales grew approximately 29% year-over-year, and adjusted EBITDA grew about 43% year-over-year, getting us off to a great start to the year. Q1 was a great demonstration of the team's ability to successfully execute tremendous growth while navigating the difficulties that come with today's disruptive global supply chain. Our business continues to face new short-term challenges each quarter, a few of which we expect to impact Q2. First, like many others, we continue to face an unprecedented supply chain environment, and we are not immune to short-term supply challenges. To that end, during Q2, we are experiencing a temporary shortage of material that goes into the production of our unique fiberglass flake for several of our fiberglass color offerings. To address this, we are leveraging our vendor relationships to ramp up supply of this input, and we expect to return the full availability of this material in early Q3. We have a proven ability to respond quickly to supply chain challenges, as our team has done a tremendous job showing up our resin supply for our fiberglass tools, both through productivity initiatives and supply diversification efforts. Just as we saw throughout 2020 and 2021, We believe the breadth of our offering and strong supplier and dealer relationships will enable us to navigate today's difficult supply chain environment. Second, unseasonable weather in April impacted dealers' ability to install pools in the Northeast, Midwest, and Canada. As it gets warmer and we approach peak pool building months in Q2 and Q3, we expect installations to pick up quickly. Lastly, as many of you know, in April, we experienced a fire at one of our smallest fiberglass facilities in Odessa, Texas. Thankfully, none of our employees were on site at the time of the incident, and I am grateful to report there were no injuries. I'm proud of our team's efforts to quickly redeploy assets and resources to mitigate the impact of this lost capacity. We have shifted production from this facility to our other fiberglass manufacturing sites which have capacity to accommodate the additional orders thanks to our ongoing expansion investments across our manufacturing footprint. We are currently in the process of cleaning up the site and evaluating future uses for the location. In the interim, we are using the ODESA facility for distribution purposes to service the region. Although this will impact Q2 net sales and gross margins, we anticipate the Odessa incident will have minimal impact on the full year as we quickly shifted production to our other fiberglass manufacturing facilities. Despite these near-term issues, we feel good about the actions we are taking to position ourselves for success as we enter the peak pool building season and the back half of the year. We continue to see growth across our product portfolio, and our dealers continue to book orders through 2022 and even into 2023. Where our dealers have additional capacity or are expanding their installation crews, our digital marketing engine is ensuring a healthy supply of consumer lead to drive them to more pool installs. We will continue to ramp up fiberglass volume growth in the second half of the year as we realize the benefits of our resident supply actions and comp a period of softer volumes because of the raw material availability challenges we experienced in the back half of 2021. Our pricing actions and surcharges have enabled us to counter the impacts of cost inflation on raw materials, freight, and labor. We continue to see cost inflation, although the rate of the increase does seem to be abating. We are comfortable with our current pricing levels and the value proposition of our product offerings remain intact. And we will remain nimble in addressing inflation and are prepared to respond quickly to any future market changes. Thanks to our strong focus on operational excellence, continued execution of our growth strategy, and the health of our industry, we are pleased to reiterate our fiscal 2022 guidance, which implies 35 to 40% year-over-year net sales growth and 32 to 46% year-over-year adjusted EBITDA growth. Looking further ahead, we continue to build our business for the long term. As demand for our products grows, we continue to expand our manufacturing capacity. We are in the final stages of installing a new state-of-the-art, highly automated line in Fort Wayne, Indiana, which will drive a more efficient manufacturing process for our steel panel package pools and at incremental capacity to support future growth. I'm also pleased to share that the construction of our new Kingston facility remains on track to be in production in 2023. We have also started hiring efforts at the new Kingston facility. The dynamics of the large outdoor repair and remodel market remain attractive as investments in the backyard continue. As the only pool company with a direct relationship with the homeowner and the market leader in every pool subcategory in which we compete in, we remain confident in our ability to deliver outsized growth. The confidence in our future is shared by our board of directors. who have approved the share repurchase program with an authorization of up to $100 million of our common stock over the next three years. With that, I'll turn the call over to Mark to review our financial results, outlook, and capital allocation priorities in greater detail. Mark?