Latham Group, Inc.

Good afternoon and welcome to the Latham Group fourth quarter and full year 2024 earnings conference call. All participants will be in a 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 and then two. Please note that this event is being recorded. I would now like to turn the conference over to Casey Coterie, Investor Relations Representative. Please go ahead.

Thank you. This afternoon, we issued our fourth quarter and full year 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 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 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.

Thanks, Casey, and thank you all for participating in today's call to discuss our fourth quarter and full year 2024 results and review our outlook for 2025. We are pleased with how well the team navigated challenging industry conditions in 2024. In the face of an estimated decline of approximately 15% in U.S. pool starts, Latham continued to outperform the market, and we are positioned to achieve considerable sales growth and accelerated profitability in 2025 and beyond. Key takeaways of our full year performance include, first, our success in driving increased market penetration of fiberglass pools. By our analysis, fiberglass pools represented 24% of U.S. pool starts in 2024, up from 23% in 2023, and a gain of six percentage points since 2021. In addition to the cost advantages, our sales and marketing campaigns have been focusing on the key competitive benefits of fiberglass over concrete pools, namely their fast and easy installation, low maintenance requirements, and eco-friendly attributes, which are resonating with consumers. In 2024, fiberglass pools represented 75% of our in-ground pool sales compared to 73% in 2023. Second, our adjusted EBITDA results were a highlight of the year, reaching just over $80 million and representing an adjusted EBITDA margin of 15.8%. 30 basis points ahead of the prior year and considerably lower sales. This strong performance was led by robust gross margin expansion that reflects our structurally reduced cost structure and disciplined SG&A spending while we continue to increase investments in growth initiatives. Third, the benefits of our acquisition of CoverStar Central, which has enabled us to vertically integrate our automatic safety cover line in the 29 states where CoverStar Central was our exclusive dealer, and has set the stage for revenue synergy opportunities and additional acquisitions in this arena. CoverStar is a good example of this type of accretive acquisition opportunities in the market. And lastly, we ended 2024 in a very strong financial position, providing the flexibility to invest in organic growth projects and consider potential acquisitions. Oliver will cover the specifics of our fourth quarter and full year results later in this We were pleased that our performance was in line with our expectations and enabled us to exceed the midpoint of our full-year sales guidance and demonstrated our ability to continuously drive operational efficiencies and savings even in a declining demand environment. Importantly, while we effectively managed through the substantial decline in U.S. pool starts in 2024, we also moved ahead with strategic investments in initiatives that are designed to drive substantial growth over time and are focused primarily on our two major growth product categories, namely fiberglass pools and automatic pool safety covers. The most prominent of these growth initiatives is the planned expansion of Latham's market share in the sand states, which we define as Florida, Texas, Arizona, and California. To put this opportunity in context, the sand states collectively account for approximately two-thirds of U.S. pool starts in the U.S. in 2024, and we expect that number will be similar in 2025. Approximately 17% of Latham's total fiberglass pool sales in 2024 were in the sand states, and as we are the largest pool manufacturer in North America with nine plants producing fiberglass pools, the market share expansion opportunity for us is clear. In executing the Honor Sand State strategy, we are focused on four key priorities. Expanding our pool dealer base, which involves working to increase the productivity of our existing dealers, as well as standing up new builders and converting concrete builders to fiberglass. Targeting master plan communities, which are large-scale mixed-use residential developments with robust curated amenities, the largest of which are found in Florida and Texas. Aligning our product offerings with market demand in the Sand States, where builders and consumers tend to favor rectangular pool shapes, pool-spa combos, and smaller-sized plunge pools. This year, we plan to launch several new fiberglass pool models with these characteristics to continue to increase our market share in the sand states. And addressing our marketing campaign specifically to consumers and builders in those markets. In other words, we're highlighting the faster installation and lower cost of ownership than concrete to consumers, and stressing the benefits to builders, such as being more profitable and faster to scale than concrete. And we believe the scarcity of labor will be a tailwind for fiberglass, given the much greater labor intensity associated with building a concrete pool versus a fiberglass pool. Of course, gaining a meaningful share of the Sandstates marketplace will take time, but we were encouraged by the initial dealer, builder, and consumer response in the short time since we began implementing this strategy. For example, our GUSA ad campaign, which stands for Get Out of the Stone Age, was launched in Texas during the fourth quarter of 2024 and resulted in over 40% more leads for our dealers than in the prior year. And in Florida, Latham sponsored events at Babcock Ranch, a master playing community on over 170,000 acres, have attracted large crowds and solid lead generation. We have a full range of targeted marketing activities planned in Florida and Texas in the coming months and are expecting to see incremental sales from these initiatives beginning this year. And while our primary focus in the Sand States is on conversion to fiberglass pools from concrete, we also see the Sand States as an excellent market for increased adoption of automatic safety covers. Latham's automatic pool covers offer unparalleled safety, forming an isolation barrier when they are closed that seals off all sides of the pool. In addition to its safety benefits, this product line offers several important savings and maintenance benefits for pool owners, including significant reductions in water evaporation, lower pool heating and electricity costs, and reduce chemical usage. In essence, they often pay for themselves after four to five years of ownership and come with a multi-year warranty. In August, 2024, we acquired our largest automatic safety cover dealer, CoverStar Central. The vertical integration of this product line in the acquired geographies has expanded our adjusted EBITDA margin, and we are working together with the leadership team at CoverStar Central to accelerate the adoption of this excellent product line. Today, we are also very excited to announce two smaller but strategic acquisitions, bringing in our CoverStar New York and CoverStar Tennessee VARs, which further strengthens our position in this growing product category. Looking ahead to 2025, Industry conditions are slightly more favorable than they were one year ago, but we believe trough market conditions are likely to continue through much of the year. Therefore, we are managing to a new US pool starts in 2025 that will approximate 2024 levels, but we have the ability to quickly and efficiently ramp up to capture any increase in market demand. As you have seen from our earnings release, we expect to considerably outperform the market in 2025, supported primarily by our market share gains in the SAM states, increased adoption of auto covers, and the impact of last year's acquisition of CoverStar Central, along with the contribution from the two small acquisitions we just completed. I will now turn the call over to Oliver, our CFO, to review our fourth quarter and full year financial performance and discuss our guidance for 2025. Oliver?