Latham Group, Inc.

Good afternoon and welcome to the Latham Group Third Quarter 2025 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 Coterie, Investor Relations Representative. Please go ahead.

Thank you. This afternoon, we issued our third quarter 2025 earnings press release, which is available on the Investor Relations portion of our website. 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 is available on our Investor Relations website. I'll now turn the call over to Scott Rogeski.

Thank you, Casey, and thank you all for participating in today's call to review our third quarter of and year-to-date results, as well as discuss our business outlook. This was another strong quarter for Latham. Net sales were up 7.6% year-on-year, significantly outpacing the U.S. in-ground pool market, which we expect will be flat to slightly below 2024 levels. Adjusted EBITDA increased by 8.5 million, or 28.5%, a clear indication of the substantial operating leverage inherent in our business model. These results highlight Latham's competitive strengths, our diversified product portfolio, and the actions we have taken to position the company for continued growth. I am pleased to report that our third quarter results showed progress across all of our key financial metrics. First, all three of our product lines experienced year-on-year growth. In-ground pool sales were modestly ahead on a year-over-year basis, reflecting positive momentum in fiberglass pools, partially offset by continued softness in package pool sales. Second, both covers and liners showed strong year-on-year growth, with sales up 15% and 13% respectively. This considerable growth has been driven by investments we have made to strengthen Latham's market position in both product lines. Third, this was another quarter of meaningful margin expansion. Gross margin increased to 35.4 percent, up 300 basis points year-on-year, and adjusted EBITDA margin increased to 23.7 percent for the quarter, up 390 basis points, and with current tariffs fully mitigated. And lastly, we ended the third quarter in a strong financial position, providing Latham with the resources to invest in organic growth projects as well as consider accretive acquisitions. Several factors have enabled Latham to continue to outperform the U.S. in-ground pool market. We have been investing in building the awareness and adoption of fiberglass pools and auto covers, two key growth drivers for Latham, and in developing a proprietary measuring tool to increase our liner and safety cover sales. And in the third quarter, we posted year-on-year net sales growth in each of our product lines within an overall market that we expect is flat to slightly down for the year. Our inground pool sales increased modestly, up just under 1% from last year, but we saw continued positive momentum in fiberglass pool sales, which are tracking to account for approximately 75% of our full year 2025 inground pool sales. Additionally, our initial analysis indicates that fiberglass pools is poised to gain another 1% of the total inground pool market to represent approximately 24% of total U.S. inground pool sales in 2025. Latham has the broadest lineup of fiberglass pool configurations in the market, the widest range of price points, and the greatest array of specialty features, including spas and tanning ledges. Our marketing programs emphasize the cost advantages, fast and easy installation, and lower maintenance requirements of fiberglass pools compared to concrete pools, and these attributes are resonating well with both consumers and dealers. Installers rank the lack of available workforce as one of the top five impediments to growing the business, and with fiberglass, they can install six pools in the time it takes them to build one concrete pool now, and with two-thirds fewer workers. This selling point has enabled us to convert a substantial number of dealers and installers so far in 2025, many of whom are located in our target growth geographies, such as the Sand States. Sales of pool covers increased 15% year-on-year, with a meaningful share of that representing organic growth in auto covers. In addition to the revenue synergies we are gaining from the three CoverStar acquisitions, this considerable growth is a function of very positive consumer response to the unparalleled safety that auto covers offer. As a reminder, Latham's auto covers are compatible with all types of in-ground pools, and their significant cost savings from reduced water, energy, and chemical usage enable auto covers to effectively pay for themselves within four to five years. Also, 16 states, in addition to a number of municipalities around the country, have now expanded their pool safety regulations to allow auto covers to be used in place of traditional fencing around the pool, which results in additional savings for the pool owner. Liner sales increased 13% in the quarter. Our industry-leading lead times, together with the investment we've made in our Measure by Latham tool and its successful rollout, are making a substantive difference for our liner business. This AI-powered tool is proprietary to Latham and streamlines the measurement and quoting process for installers, ensuring a high degree of accuracy in less than 30 minutes versus two to four hours to do the measurements manually. The tool is fully integrated with the Latham order entry system, which allows installers to get real-time quotes and seamlessly submit orders and track their status. Year-to-date, 25% of the installers who purchased this tool were new to Latham, supporting our objective of leveraging this tool to gain share for our line of product lines. It is also helping us gain share of the winter safety cover market. In September, we rebranded Measure as Measure Pro and also launched Measure Go, a new app that expands this technology's reach to more dealers by leveraging the iPhone LiR scanner to enable installers to accurately measure safety covers. As you know, Latham's expansion in the Sand State is a strategic priority for us as it represents a significant multi-year growth opportunity. In the third quarter, we gained traction on several pillars of our growth plan, laying the foundation for future long-term market share gains. Dealer conversions in Florida, one of our initial target markets, have been in high gear. Year-to-date, I am pleased to report that our Florida sales have increased at a high single-digit rate, and Latham is now represented in several master plan communities, or MPCs, in Florida. We continue to evaluate additional complementary strategies to further accelerate our growth in these MPCs, where we are already seeing increased awareness of the Latham brand and our product lineup. Additionally, we have established strategic partnerships with several custom home builders in Florida who are developing smaller-scale, high-end communities that will feature Latham fiberglass pools. To sum up, this was another quarter of considerable market outperformance for Latham. With much of the pool building season behind us, we are very pleased with our year-to-date sales trends. We have strengthened our market leadership position in fiberglass pools, auto covers, and in-ground pool liners, and gained traction in the sand states. All of this has been accomplished while significantly increasing our margins and improving our financial ratios. Now, I will turn the call over to our CFO, Oliver, for a financial review.