Latham Group, Inc.

Good afternoon and welcome to the Latham Group Second Quarter 2024 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 Cordery, Investor Relations Representative. Please go ahead.

Thank you. This afternoon, we issued our second quarter 2024 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 Rajewski, 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 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, everyone, and thank you for participating in today's call to review our second quarter and first half 2024 results. We will also discuss our business outlook for the rest of the year. We effectively managed through soft business conditions in the second quarter, drove substantial year-on-year gains in profitability, and strengthened our competitive position. And as you have seen from our release, this performance together with our announced acquisition of CoverStar Central, enabled us to increase our adjusted EBITDA guidance for full year 2024 by $15 million. In terms of this quarter's key takeaways, first, market conditions played out in line with our original expectations for an approximate 15% decline in new pool starts this year. This is what we planned for and what our guidance for full year sales was based on. Our pool start forecast reflects a strong process, including the unique visibility that Latham has, given our strong relationships with dealers and contractors in the field. Second, we substantially outperformed on profitability, achieving a 400 basis point year-over-year increase in adjusted EBITDA margin, despite lower sales volume, driven by our restructuring programs, production efficiencies from our lean and value engineering programs, ongoing cost containment, and lower raw material costs. And lastly, we continue to build upon our leadership in fiberglass pools, which have shown relative strength in the first half of this year, thanks to their significant advantages over concrete pools. In addition to our second quarter activities, we recently effectively deployed capital by completing an accretive acquisition that is expected to expand our margins, accelerate the sales of our automatic safety cover product lines, and provide opportunities for us to increase fiberglass pool market penetration. As you can see, we have a lot to talk about this quarter. I will begin by reviewing our progress on the three key priorities we called out when we provided full-year 2024 guidance in early March. The first priority we noted was to continue to drive awareness and adoption of fiberglass pools and automatic safety covers, which we view as key long-term growth drivers for Latham. I am pleased to report that year-to-date fiberglass pool sales, while down year-on-year, showed relative strength and continue to represent the majority of our in-ground pool sales. Our market intelligence indicates that fiberglass pools have gained share year-to-date and are increasingly being recognized for their cost efficiency, fast and easy installation, and eco-friendly advantages over concrete pools. These advantages? together with our industry-leading service levels and best-in-class lead times, are strengthening our ability to attract new dealers. In the second quarter, we continue to invest in innovation with the addition of the Astoria 14 to our best-selling Astoria fiberglass pool collection. This new model is designed to fit narrower outdoor spaces and offers a full relaxation experience, complete with a built-in spa and tanning ledge. features that are especially appealing in the sand states. The plunge pool category is seeing increased demand as these models provide the homeowner with space-saving, lower-cost options that are ideal for aquatic exercises and rehabilitation as well as for social gatherings. We are capitalizing on the popularity of this product line with preparations for a vinyl plunge pool launch in the spring of 2025. Our offering will include four models, providing consumers with a choice of features designed to meet their budgets, a quick installation timeline, and style preferences for a broad range of consumers across North America. We also moved ahead with the rollout of Measure by Latham, the only tool in the marketplace that simplifies the pool measurement and quoting process for pool liner and cover installers, while ensuring their accuracy. This tool continues to meet with a very positive response from our dealers and contractors, And our objective is for all of our dealers to have it with all the functionality in place ahead of the 2025 pool building season. Another key accomplishment for Latham was the accretive acquisition of CoverStar Central, which was completed on August 2nd, in which we further detailed in a separate release today. CoverStar Central is Latham's exclusive automatic safety cover dealer in 29 states in the Northeast, Southeast, and Midwest, including Texas. We have partnered together for almost 20 years and view this transaction as mutually beneficial in several ways. First, we expect the vertical integration of this product to expand our adjusted EBITDA margin by approximately 140 basis points on an annualized basis. Second, with an integrated sales and marketing strategy and our combined resources, we expect to accelerate sales growth of this excellent product, which can be fitted on all types of in-ground pools. Our automatic safety covers provide unparalleled safety and offer significant resource savings that can result in up to a 70% reduction in both pool heating costs and chemical usage. Third, we see opportunities to leverage the longstanding relationship that CoverStar Central has developed with the 400-plus pool builders they serve to drive further awareness and adoption of fiberglass pools. And lastly, with this transaction, We are bringing a dedicated and talented group of business professionals and industry experts to Latham who share our commitment to superior customer service. The Latham team is happy to welcome our new team members from CoverStar Central. Oliver will provide additional financial details on the acquisition a little later in this call. I just would like to comment that we were very pleased to have the capital available to pay for the transaction with cash on hand, which reflects how effectively we are managing through this industry downturn. The second priority we outlined was to continue to gain additional operating efficiency for our value engineering and lean manufacturing initiatives. I am pleased to report that these initiatives are leading to significant structural cost benefits that will have a long-term positive impact on Latham's margin profile. Amongst the many first-half achievements are a 27% year-on-year reduction in production time across our North American fiberglass plants, and labor efficiencies of 8% in our safety cover and vinyl liner manufacturing facilities. Our third key priority was to maintain a strong financial position. Oliver will provide details on the success of our financial strategy in a moment. I would like to congratulate the Latham team on the discipline they have shown in our tremendous accomplishments in improving our cost structure, driving productivity gains, and reducing working capital needs. Through these actions, Latham has the operating and financial flexibility to remain resilient in the current soft industry environment while maintaining the resources to invest in organic growth initiatives and consider other accretive acquisitions that position Latham for accelerated profitable growth when pools start to rebound. With that, I'll turn the call over to Oliver, our CFO for a financial review. Oliver.