Latham Group, Inc.

And welcome to the Latham Group fourth quarter and full year 2023 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 telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Casey Cotery, Investor Relations Representative. Please go ahead.

Thank you. This afternoon, we issued our fourth quarter and full year 2023 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 Rogeski, and CFO, Oliver Glow. Following their remarks, we will open the call to questions. During this call, the company may make certain statements that constitute forward-looking statements, which reflect the company's views with respect to the future events and financial performance as of today or the date specified. Actual events and results may differ materially from those contemplated by such forward-looking statements, due to risks and other factors that are set forth in the company's annual report on Form 10-K and subsequent reports filed or furnished with the SEC, as well as today's earnings release. The company expressly disclaims any obligation to update any forward-looking statements, except as required by applicable law. In addition, during today's call, the company will discuss certain non-GAAP financial measures. Reconciliations of the directly comparable GAAP measures to these non-GAAP measures can be found in the slide presentation that accompanies our prepared remarks, which can be found on our Investor Relations website. I'll now turn the call over to Scott Rogeski.

Thank you, Casey. Good afternoon, and thank you all for joining us to review our fourth quarter and full year 2023 results and discuss our outlook for 2024. We were pleased that our fourth quarter results came in slightly ahead of our guidance range, capping a year in which we focused on several structural cost saving initiatives to mitigate the impact of another year of lower pool starts. It also was another year that showed the resilience of our business and Latham's ability to both outperform the overall market decline and to generate substantial cash flow from operations. There are several key takeaways worth noting that helped us navigate the challenging business environment in 2023 and they have set us up to emerge an even stronger company and competitor as business conditions improved. First, we continue to drive the conversion to fiberglass pools over concrete pools. As a result of Latham's leadership in this category, we were able to report sales for the year that outperformed the decline in new pool starts in the US by approximately 10 percentage points. Second, we ended 2023 in a strong competitive position with leading market share in all product categories in which we compete, an energized dealer network, and greater consumer engagement, all supporting Latham's ability to capture additional market share as industry conditions improve. Third, we took decisive actions early in the year that have fundamentally improved our cost structure by closing facilities, streamlining operations, and accelerating our value engineering and lean manufacturing initiatives we have structurally reduced our costs and increased our capacity, giving us the ability to considerably increase our profit margins once volumes recover. Lastly, we strengthen our financial position in 2023, ending the year with a record cash position of just over $100 million, providing substantial financial flexibility and demonstrating our ability to efficiently manage through difficult market conditions. In summary, Latham exited a year which saw a significant decline in new in-ground pool starts and has entered 2024, which strengthened market positioning and the resources that quickly take advantage of the eventual rebound. Specifically, we continue to see progress in fiberglass's penetration of the new in-ground pool market, and expected fiberglass now accounts for approximately 22% of pool starts in the U.S. This compares with 21% and 18% in 2022 and 2021, respectively, a clear indication of our leadership position in fiberglass driving this ongoing conversion progress. Latham's fiberglass product sales accounted for approximately 73% of Latham's full year 2023 in-ground pool sales. Since 2019, we have grown our fiberglass product sales at a compounded annual rate of about 15%. And we have several strategic initiatives in process to leverage the share gains we've achieved to date in states like Texas and the Carolinas to further penetrate the sand states, notably California, Florida, Arizona, and Nevada, where concrete pools continue to dominate. The value proposition is compelling. Fiberglass pools have an average 25% to 30% lower upfront cost versus concrete pools. and a total overall lower cost of ownership of 35% to 40% over time. They can be installed as fast as one day by some of the best dealers and approximately three days on average for the majority of our dealers, compared to three to six months for most concrete pools. Also, fiberglass pools are more eco-friendly than concrete pools, using 30% less chlorine, eliminating the pollution created by the production of concrete, and not requiring the ongoing maintenance, repair, and refinishing generally needed for concrete pools. In 2023, we had approximately 300 fiberglass brand dealers who sold at least five pools, which is about 100 more than we had in 2019, and speaks to the positive momentum for both fiberglass pools and for Latham's expansive dealer network. While dealer recruitment is important to our growth strategy, increasing dealer productivity is an even greater priority and we've moved ahead with several initiatives in 2023 that have done just that. These include the Latham Design Center, which enabled our dealers to easily create branded content and customized collateral materials, our fiberglass boot camp training sessions, and, of course, our lead generation programs, which result from the direct consumer engagement that we continue to build in 2023. Our marketing spend continues to yield very positive results. Recent data show that Latham ranks number one in fiberglass pools, And in 2023, our website traffic increased substantially over 2022 levels, pointing to pent-up consumer demand for pools, which we believe is substantial. Our integrated marketing programs that inform and educate the consumer and feature regional builders have been successful in driving traffic, along with our robust tools that give homeowners the ability to design, plan, and actually visualize how a new pool will look in their outdoor space. Through this direct engagement with consumers, we were able to provide our dealers with an increasing number of highly qualified leads in their respective markets. While fiberglass conversion represents Latham's largest growth potential, approximately 47% of our total 2023 sales came from our covers and liners product lines, the majority of which represent replacement products that are not as tied to new pool starts and are therefore more resilient during cyclical downturns. We also continue to prioritize new product introductions within these categories to drive sales. In particular, our automatic safety covers, which can be used on any type of in-ground pool, experienced increased consumer adoption and demand in 2023. In addition to their safety features, these covers provide the homeowner with significant energy, water, and maintenance savings. And Measure by Latham, our proprietary AI-powered measurement tool for pool covers and liners, has been met with very positive dealer response and should continue to help drive demand for these product lines as we continue to roll it out through 2024. To sum up, there were many bright spots for Latham in what was a very difficult industry environment in 2023. We have entered the new year cautiously mindful that lower interest rates and improved consumer confidence levels are not likely to occur in time to benefit the 2024 pool buying season. we do expect that there will be a tailwind as we exit 2024 and head into the 2025 season. Our conversations with channel partners and colleagues in the field and at recent trade shows, as well as our own data, indicate a high level of consumer interest in pool ownership, but buying decisions are being delayed, particularly by those who plan to finance the purchases. We do not expect the projected declines in interest rates to occur quickly enough to impact our peak pool building season in 2024, and therefore, we are managing to an approximate 15% decline in new pool starts in 2024. Within that context, you can expect Latham to continue to reduce structural costs while maintaining investments in future growth and capability so that we are positioned to rapidly capture share as pool starts increase, which we anticipate will occur in 2025. Let me now turn over the call to our CFO, Oliver Glow, who will provide a review of Latham's fourth quarter and full year financial results. Oliver.