Latham Group at William Blair Conference: Strategic Growth in Sand States

On Thursday, 05 June 2025, Latham Group (NASDAQ:SWIM) presented its strategic priorities at the 45th Annual William Blair Growth Stock Conference. The company, a leading manufacturer of inground swimming pools, outlined its plans to expand in the "Sand States" and improve operational efficiency. While optimistic about growth, Latham also acknowledged challenges such as tariffs and a flat market outlook.

Key Takeaways

• Latham targets an 8% increase in net sales for 2025, driven by organic growth and acquisitions.
• The company plans to expand fiberglass pool adoption in key "Sand States" similar to its success in Australia.
• Projected 19% increase in EBITDA for 2025, supported by cost-saving measures.
• Long-term vision includes reaching $750 million in net sales and $160 million in EBITDA.
• Market expected to recover to 78,000 pools annually within 3-5 years.

Financial Results

• 2025 Net Sales Guidance: $550 million, representing an 8% year-over-year increase.
• 2025 EBITDA Guidance: $95 million, a 19% rise from the previous year.
• Market Outlook: Flat conditions anticipated with 62,000 pools in 2025.
• Growth Contributions: Organic growth expected to add 5% to net sales; acquisitions to contribute an additional 3%.
• Cost Management: Lean manufacturing and value engineering to save $2 million to $2.5 million quarterly.
• Tariff Impact: A $20 million headwind anticipated, mitigated by supply chain strategies and price adjustments.

Operational Updates

• Strategic Focus: Emphasis on fiberglass pools, auto covers, and the "Measured by Latham" system.
• Sand State Strategy: Increase market share in Florida, Texas, Arizona, and California by educating builders and expanding the dealer network.
• Efficiency Improvements: Lean manufacturing and value engineering continue to enhance cost structure and efficiency.

Future Outlook

• Market Recovery: Expectation for the pool market to grow to 78,000 units in the next 3-5 years, with a long-term average of 100,000 pools.
• Fiberglass Pool Penetration: Aiming to increase market share, drawing comparisons to Australia’s 70% adoption rate.

Q&A Highlights

• Market Recovery Potential: Confidence in reaching 78,000 pools annually within 3-5 years.
• Fiberglass Conversion: Steady increase in market share by roughly 100 basis points per year.
• Tariff Mitigation: Effective strategies in place to counteract tariff impacts.
• Cancellations/Delays: No significant increase in order cancellations or delays reported.

For a detailed understanding, readers are encouraged to refer to the full conference call transcript.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Ryan Merkel, Analyst, William Blair: Morning, everyone. Thanks for being here. This is the SWIM presentation, Latham. Before we begin, I need to remind you that a complete list of disclosures and conflicts of interest is available on our website. I’m Ryan Merkel.

I cover building products at William Blair. With us today is Oliver Glow, CFO of Latham. For those that don’t know the company, Latham is a leading producer of inground residential pools specializing in fiberglass pools, vinyl liners and pool covers. We believe fiberglass is gaining market share over concrete pools due to lower costs and faster installation. With that, let me turn it to Oliver.

Oliver Glow, CFO, Latham: Brian, thank you very much for the introduction. With that, you have actually done half of the presentation already. But welcome everybody to Latham, The Pool Company. Over the next half an hour or so, Josh and I will give you an overview of who we are and what we do as a company. We’ll touch on some of the key growth drivers that we see.

And then I’ll go through a couple of financial slides to reintroduce you to our guidance 2025 and give you a way on how to think about the capabilities of this business going forward. As Ryan has said, we are the largest manufacturer of in ground swimming pools in North America, Australia and New Zealand. Within our product categories, we focus on growth, especially for fiberglass pools and auto covers. Both are products which are growing within their respective markets. We have an especially we’re focusing on the scent states, where both fiberglass pools and auto covers are underrepresented, while the sand states, we define those to be Florida, Texas, Arizona and California, represent the majority of the domestic pool installs.

We are carefully balancing our growth investments with being disciplined on our cost base. We have done a number of coming out of COVID, we’ve done a number of restructuring projects to significantly work on our operating cost basis, increasing operating efficiencies, introducing programs such as lean and value engineering. And if you take our opportunities for growth, the growth strategies that we’re actively investing in, plus a disciplined approach on managing cost, that positions us for accelerated and profitable growth going forward. A quick view on our product portfolio. I’ll start on the left.

About half of our product portfolio, measured by revenue, sits in the in ground swimming pool category. That is a combination of fiberglass pools as well as packaged pools. 26% of our business sits in the cover category. That is the in season automatic safety cover and the off season winter safety cover, with about 23 represented by vinyl liners. In every category we compete in, we are the market leader.

Most importantly, we have about a 50% share in the growing fiberglass category, whereas in the other categories we still are the market leader with about 30%, thirty five forty % share. The majority, vast majority of our sales are domestic sales, 85% of our sales are here in The U. S, with the balance being between Canada, Australia and New Zealand. On the middle of the chart, if you look at the inground pool sales, the vast majority, three quarters, are fiberglass pools. Now why is that important?

Within The U. S. Market, 23% of all pools being installed is fiberglass. That number has consistently increased year after year, and we expect that number to increase going forward. Another stat is 17% of our fiberglass pools are in the sense states.

Now why is that important? Because, as I mentioned earlier, the sense states represent the majority of The U. S. Inground pool sales. And in the sense states, fiberglass pools are underrepresented, even far below the 23% national average.

While most of while all of the inground sales are tied to new pool construction, our liners and covers categories actually have a very healthy share. About half of the sales go into replacement. You have a large installed base of liners and winter covers in the market that on average need to be replaced every eight to ten years, therefore providing us with a very consistent annual stream of replacement revenue. A quick view on our strategic priorities. We have three strategic priorities that we are actively investing against.

The first one, I mentioned already, fiberglass pools, growing category within the market, and especially in the scent state. And Josh will touch on that in a minute. I would make a similar comment on auto covers. Auto covers based on the benefits of an auto cover, increasing penetration in the market today, about 20%, a little bit more of all pools come with an auto cover. The tendency is increasing and we are certainly participating in that growth.

And then lastly, we’ve developed a revolutionary device on how to better, more efficiently, faster and more accurately measure a pool for us to, you know, produce a vinyl liner and a safety cover. And that tool, that device only works on our system and enables us to increase our market share within the pool liner and winter cover categories. We have been outperforming based on our growth drivers, we have been outperforming the market both in an upturn and a downturn. And then, again, together with our cost savings disciplined approach on managing cost, lean and value engineering, we see a significant long term growth both for net sales and adjusted EBITDA. A quick overview of fiberglass pool and why this category is growing.

Our pools are highly customizable. We have about 60 pool models, different shapes, different sizes, rectangular, free form, that can be combined with features such as tanning ledges, lights, spillover spars. Our pools are very easy to install. Our pools can be installed in as fast as one day. An average pool installed for fiberglass pool takes three to four days.

That compares to a similar concrete pool, similar size, that many times takes three, sometimes above six months to install, therefore reducing the disruption to the homeowner, as well as increasing dealer productivity and installer productivity. Last but not least, on average, a fiberglass pool comes at a 25% advantage in terms of upfront cost versus a comparable concrete pool. Now since our pools are essentially maintenance free, we refer to them as set it and forget it, and other pools, like a concrete pool, need refurnishings, replacements and costly repairs. That lifetime, that cost advantage, initially 25% over the lifetime of the pool, can easily increase to 35% or more. Based on the advantages of fiberglass pools, as you can see on the top left of this chart, the share of fiberglass pools within the industry has consistently increased.

In 2019, about 16% of all pools sold in The U. S. Were fiberglass pools. That has increased year after year to today 23%, and we expect that to increase going forward. While that increase is great for us, in an international comparison, that’s still a low number.

23% is far below where Europe is on average 35 to 40%, or where Australia stands being at 70%. So again, the share of fiberglass pools within the pool market is increasing and we estimate that to increase going forward. Let’s talk about the market itself. We believe that the market is today with 62,000 pools being sold in 2024 at trough condition. We believe that ’25 we plan for a flattish pool industry, but we believe that it’s at the trough, whereas the jump off point before COVID was 78,000 pools and the long term average is 100,000 pools annually.

Let me touch on auto covers for a minute. An auto cover has two main benefits. One is safety, the other one is cost savings. In terms of safety, we refer to our auto covers as essentially the garage door of your pool. In the morning, you open your pool, and after you’re done swimming, you close the pool.

Once you close the pool, nothing and nobody can fall inside, therefore, you know, providing the homeowner with the ease of mind that as the pool

Josh, Latham: is

Oliver Glow, CFO, Latham: unattended, your family is safe, your pets are safe, your neighbors are safe. As a matter of fact, in an increasing number of jurisdictions, if you have an autocover, that gets you out of the need to build a fence around your pool. Second key advantage of an auto cover is cost savings. It’s essentially a very effective barrier between your pool and the atmosphere. You have less water evaporation, less chemical usage and a lower heating bill.

On average, we estimate that an auto cover has an ROI of about four years. With that, I would like to turn it over to Josh to dive into our journey with fiberglass in the sense states. Thank you, Josh. Thank you, Oliver.

Josh, Latham: Thank you everybody for coming today. I do apologize if I move a little bit back and forth between here. I tend to be a walker, so this stage isn’t quite as big as I’m as I’m used to.

Ryan Merkel, Analyst, William Blair: Middle one.

Josh, Latham: All right. So today we’re going to start with the opportunity for Latham when it comes to growing our market share and growing our product experience throughout The United States. You can see on the board we have 62,000 pools were sold in The United States in 2024. Of that, more than 50% came out of four states. Arizona, California, Texas and Florida being the predominant state when it came to new pools in the ground or new permits started.

If you have a look at the final graph, you can see that Latham at the moment is incredibly strong in 22% of the market with 83% of our pools coming out of that market. We only have 17% of Sand State share. That was at 1.15% and the goal is now to move slowly up to 1920% and continue to snowball that through. We really want to focus on our biggest opportunity, and the biggest opportunity is to get into the Sand States, create adoption, create an opportunity with our customers that allow us to be successful and give them the best value for money product. The benefit we have with that is that when you look at case studies around the world, Australia, which is an incredible case study and it’s no coincidence that I come from Australia.

So I’ve seen the rise of fiberglass pools in that market. Australia is 70% market share with fiberglass pools. The biggest factor that makes going into the Sand States very achievable for us is that demographics, climate and market needs in Australia where 70% market share has been achieved is very, very similar in the four sand states that we see here. So we believe that we actually have a great opportunity to offer customers something that is very, very different as opposed to the gunite product that they’ve been used to for such a long period of time. So when you look at how you’re going to grow and how you’re going to develop as a company, you want to look at not where you’re strongest, but where your biggest opportunities are going to be.

And no one in the fiberglass market has really developed a strong, solid sand state strategy. So how do we attack this and do it in a smart way? The first thing that we looked at is we need to increase customer awareness of our product. Our product has a lot of features and benefits that create a unique value proposition, whether it be smoother surface, the least invasive backyard renovation or backyard project you can do. We are in and out in sometimes three days.

We are a product that provides less money and a cost of ownership. And we are a product that has over 50 different choices that you can then customize to create an incredible backyard experience. So we believe we’re the best value for money. We need to start to get that across to the consumer in a market that has been predominantly focused on the Ganite product. We do have a benefit that there is a lot of snowbirds moving from colder states down into Arizona, into Florida, into Texas who already have exposure to fiberglass pools.

So that does give us a leg up that we already have that benefit when it comes to going after that market. The other thing is getting pool builders to understand the benefits of fiberglass to their business. Now COVID created a lot of backlog where pool builders were looking for ways to be able to be more successful in bringing their product to their customer. The beauty of fiberglass is, as Oliver mentioned earlier on, it can take anywhere between four, six months to get a fiberglass pool in. You can sorry, a ganite pool in.

You can put a fiberglass three fiberglass pools in, in the same time you can put one gunite pool at the same profit margin. So it would only make sense that if you can do three times more and make the same amount of money, it’s a more profitable proposition, and now you have something that’s different that you can offer to your customers. So building awareness for the consumers to understand that this is the best value for value proposition or the best value for money that they can buy, But then from the builder’s standpoint, this is actually the best revenue model that they can take into the marketplace, especially if they want to continue to diversify in a constantly changing market. So the four pillars we put together to be successful in The Sand States was expanding the pool dealer base. Now, when we talk about that, it isn’t necessarily we need to get more pool builders to sell our product.

We need to get the right pool builders in the right place, trained correctly and allowing them to have the capacity to be able to handle this increased demand that’s going to come from the broad awareness campaign. So when we look at standing up new builders, it is do we have the right builders in the right place? Are they trained properly? Do they have the capacity and the growth and the drive? And then also, where are areas where we have gaps that we can add these builders?

And that then moved into, well, we don’t just want to go into a market and say, let’s just attack Florida. Florida is a big place. Let’s just attack Texas. Texas is a big place. And they both have different regional needs.

So we started to look at master plan communities. These are live, play, stay communities that have been built in Florida and Texas predominantly, with over 34,000 new homes in 2024 were built in these master plan communities. And they make up 75% of Florida and Texas when it comes to new home builds and the development of these areas. We wanted to focus on diving into these markets and be very, very precision focused with how we market to the consumers in these areas, how we bring builders into these areas. And it has actually been so successful for us that we have a lot of our President Club builders, companies that are our top builders that might be in New York, that might be in the Midwest, that have wanted to move their operations south and come into these master plan communities because they see the opportunity of bringing something different to the consumer and being able to take substantial market share.

To be that successful, we followed the Australian concept, which was products need to meet market demand. In the past, we have built a product that suited the whole of the world. Well, it doesn’t work like that in Florida. It doesn’t work like that in Texas. In Florida, you need pools that are 12 by 25 long, smaller pools, smaller backyards, smaller customers, tanning ledges, 14 by 30, a lot of spas, very, very, very popular.

So we started to develop a product range that suited the regionalities of the Florida market. We also looked at Texas, which is a different market. Bigger pools. They’re still very heavily focused on free form pools. So we started to create models that handled slightly larger areas, slightly more free form models that modernized our range.

But instead of it just being this is the product you have, we are now pinpointing the products we put into those different markets. Squares are becoming very popular, but Texas is still very much a fifty-fifty free form market. The final thing we needed to do was build broad awareness. Build awareness, create interest, interest creates a buying consumer. So we wanted to highlight the benefits of fiberglass, which is faster installation.

You could be making memories with your family substantially quicker than you can with any other product in your backyard. And I often say to people, how patient are your children? Because if you have a hole with no water in it in your backyard for six months, do you think your life is going to be very, very pleasant? Or what if I could have you swimming in fifteen days? Does that sound like something that you would be happy with?

And that’s the benefit of a fiberglass pool. We can get that product finished in a much shorter period of time, making memories with their family. We also talk about lower cost of ownership. How long do you plan to be in the home? A fiberglass pool will cost you virtually nothing long term, whereas you will have to refurb a concrete pool.

And sometimes when even talking to customers, we say things like they say, oh, I’ve heard about fiberglass pools back in the day, and, you know, my friend had one. And I respond with that by saying, in 02/2001, would you have bought an electric vehicle? But in 2024 today, we have people buying electric vehicles all over the place. That’s because it’s not a fiberglass pool. It’s a composite technology that is designed to be the most advanced product in the industry.

The final thing is looking at the master plan communities in Florida, developing ground game. We are now part of the communities in these master plan communities. We sponsor baseball teams. We sponsor Friday free coffees. We sponsor different events so people now see us.

Oliver had the pleasure of going down to Florida and seeing one of these master plan communities. And people turned around and said, I know Latham. They actually recognize the brand. The pool industry is not an industry where people recognize the brand of a product and they were recognizing our brand. So we were very successful in starting to build that awareness campaign.

And if we continue to do that, we’re going to continue to have builders come to us who want to get on board and be part of this project. And at the end of the day, do you want in your backyard for the most second biggest investment in your life, do you want what cracks on the sidewalk, or do you want the product that’s being sent to space? It’s a very simple decision at the end of the day. Finally, giving you an idea of some of the master plan communities that we are investing in and we’re working into. You can see Murata, Lakewood Ranch, Welland Park, Babcock Ranch, The Villages, which is the biggest master plan community in the world.

I think there’s more golf courses in The Villages, 50 4 golf courses, I think, from memory than anywhere that I’ve ever been. But the benefit is if you see the blue circles that are around there, there are a lot of smaller master plan communities popping up, which allows us to expand without having to move drastically and change our marketing programs, change our builders and change our client experience. So the biggest benefit is that the customer gets their pool quicker, the builder is able to make more money, and we have a laser focused attack, and we’re invested in these sand states long term. I’ll now pass it back to Oliver.

Oliver Glow, CFO, Latham: Thank you, Josh.

Josh, Latham: Thank you.

Oliver Glow, CFO, Latham: A couple of slides on our financial performance. I already mentioned coming out of COVID where you basically saw the market going from 117,000 pools to 62,000 pools. Today, we’ve done our fair share of re looking at our cost structure. We implemented a couple of ways of restructuring programs, and we significantly changed the cost footprint of our company, while at the same time setting up a lean manufacturing and value engineering team that’s going from plant to plant, implementing best practices, and on an ongoing basis work on our cost structure. If you had followed our earnings calls, you have heard me saying, on average, about 2,000,000 to 2,500,000.0 is the contribution of the lean manufacturing and value engineering team on a quarterly basis.

We did 9,000,000 last year, and I expect another similar amount to come this year. You’ve heard me saying we are outperforming the market, whether the market is going up or the market is declining. Our guidance for 2025 is based on an outlook of a flat market condition: 62,000 pools last year, about 62,000 pools this year. At midpoint of our guidance, net sales is increasing by 8%. Now let me walk you through on how we where the 8% is coming from.

The first five percent is organic growth. Again, it’s the concept of outperforming the industry in any environment, which is continued conversion towards fiberglass, especially driven by the sense states, and then our other growth drivers being the auto covers as well as measured by latham for vinyl liners and safety covers. About 3% is the contribution of our recently purchased Coverstar business. We’ve done three acquisitions over the twelve months, and this is the run rate impact of these acquisitions, about 3%. At midpoint, our EBITDA increased by about 19% versus 2024, which is the combination of our volume growth, the 5% organic growth, is the result of the contribution from lean manufacturing and value engineering projects as well as the accretive contribution from our three acquisitions.

And lastly, let’s look beyond 2025 on what this business can is capable of producing. Let me start off by, know, again, you’ll see on the bottom right market being at 62,000 pools in 2025. Again, guidance is at midpoint $550,000,000 net sales and $95,000,000 in EBITDA. The last time this business was in a market with 60,000 pools was 2015. On the left side, can see at that time, our business was $223,000,000 in revenue and 36,000,000 in terms of EBITDA, meaning over a decade, the market is at roughly comparable size, whereas our net sales and EBITDA has more than doubled.

Now if you take, let’s say, the jump off point 78,000 pools before COVID hit, right, and run that forward, right? So once the market is back at 78,000 pools, once, you know, we have a couple of years of our growth strategies under our belt, we estimate that this company is about $750,000,000 in size and about 160,000,000 in EBITDA. And again, if you compare 2019 to 2000 and you know, call it the future, a couple of years out, right, when the market is back at 78,000 pools, again our revenue base will have more than doubled, as well as the profitability of this company. With that, I think we have a couple of minutes for some Q and A.

Ryan Merkel, Analyst, William Blair: Any questions? Okay, Alex. Seventy eight thousand, can you just unpack why that’s sort of the number that it shows? And then the long term average is close to 100,000. Why isn’t that the number?

Oliver Glow, CFO, Latham: Should be. It should be, right? I think what we saw in the great financial crisis we were at $175,000 The great financial crisis brought it down to the mid-50s. That’s where we kind of have only cash buyers left. That’s why we believe at 62 we’re at trough, right?

And you’re absolutely right, the long term average is 100,000. That’s where the market should be. I think, you know, as we have had a couple of years building up to 78,000 pools, that I think is the immediate next kind of three, five years out kind of plateau that we are targeting here. But you’re absolutely right. The long term average should be at 100,000.

Ryan Merkel, Analyst, William Blair: Then you showed 23% share for fiberglass. What has been the conversion rate annually? And then what is the long term potential of where you think the conversion could go?

Oliver Glow, CFO, Latham: So we’ve been driving that 23% roughly it’s 100 basis points, pretty consistently 100 basis points per year, right? And again, the 23% is a U. S. Number, and that compares to an average in Europe somewhere 35%, forty %. Some countries are higher.

Then Australia is at 70%. Australia has been at for a little bit longer than we have, right? But there’s no reason why The U. S. Shouldn’t be on par with its international comparisons.

Ryan Merkel, Analyst, William Blair: Talk about tariffs. How is it impacting your costs and what are you doing with pricing, if anything?

Oliver Glow, CFO, Latham: Yes, so tariffs continues to be a dynamic picture, right? What we disclosed in our last earnings call is that the unmitigated headwind is about $20,000,000 for 2025, right? Good thing is our supply chain team has been at it for, you know, not weeks, probably by now half a year, right, to mitigate. And we mitigate in terms of, hey, we pre bought a lot of inventory, we near shore, we value engineer us out of some situations where we buy materials that exposed to tariffs. About 15% to 20% of our raw material basket is actually imported, so exposure is relatively limited.

Right? So I would say where we stand today, about half, maybe a little bit more of that 20,000,000 is mitigated on a supply chain basis. Okay? And then we have actually announced and implemented a price increase to cover the rest.

Ryan Merkel, Analyst, William Blair: Are you seeing any cancellations or delays due to the uncertainty? I realize the consumer will put down money maybe six, twelve months ago. How is

Oliver Glow, CFO, Latham: that Exactly. I think, first of all, at 62,000 pools a year, you’re basically talking about the cash buyer, right? And then the pool buying decision is a relatively long decision, somewhere twelve, eighteen months, meaning the pools that are installed today, those decisions have been made a long time ago. These are families that have made down payments. They are scheduled for their install.

They’ve made milestone payments. So we don’t see, you know, and also in speaking with our dealers, we don’t see an elevated level of push outs or cancellations.

Ryan Merkel, Analyst, William Blair: Okay. We’re out of time. Thanks, Oliver.

Oliver Glow, CFO, Latham: Thanks, John. Thank you very much. Thank you.

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