Latham Group (SWIM) Q4 2023 earnings summary

Executive summary

• 2023 sales declined 18.6% amid weak pool demand and wholesale-channel destocking; cost reductions, productivity gains and fiberglass conversion supported performance.

• Sales outperformed U.S. new in-ground pool starts by ~10 percentage points, while fiberglass represented ~73% of in-ground pool sales.

• Operating cash flow reached $116.4 million and year-end cash rose to a record $102.8 million; $13.25 million of debt was repaid.

Financial highlights

• Q4 net sales were $90.9 million, down 15.8% YoY; Adjusted EBITDA was $9.9 million, up 125.8%, and net income was $0.1 million versus a $19.0 million loss.

• FY net sales were $566.5 million, down 18.6%; Adjusted EBITDA fell 38.6% to $88.0 million.

• FY net loss was $2.4 million versus net income of $38.2 million in FY 2022.

• FY gross profit was $152.9 million versus $216.5 million; lower utilization reduced gross margin, partly offset by lower fixed costs and modest material-cost deflation.

• FY SG&A fell 24.9% to $110.3 million; excluding non-cash stock-based compensation, it declined $8.4 million, or 8.4%, YoY.

Outlook and guidance

• FY 2024 guidance: net sales of $490 million–$520 million, Adjusted EBITDA of $60 million–$70 million and capital expenditures of $18 million–$22 million.

• Guidance assumes pool starts in served markets decline ~15%; the sales midpoint is 11% below 2023, with fiberglass penetration expected to increase.

• Q1 2024 sales guidance is $98 million–$104 million and Adjusted EBITDA guidance is $6 million–$8 million; YoY sales comparisons are expected to improve from Q2.

• Positive operating cash flow is expected in 2024; plans include cost containment, productivity, growth investment and normalized performance-based compensation.