Latham (SWIM)2024-11-06 00:47Financial Data and Key Metrics Changes - Net sales for Q3 2024 were 160.8 million in the prior year, a decrease of 6.4% primarily due to lower sales volumes [22][23] - Gross margin expanded by 250 basis points to 32.4% despite lower utilization rates, reflecting successful cost reduction initiatives [23][14] - Net income was 0.05 per diluted share, compared to 0.05 per diluted share for the prior year's third quarter [25] - Adjusted EBITDA was 36.1 million, with an adjusted EBITDA margin of 19.8% [25][26] Business Line Data and Key Metrics Changes - In-ground pool sales declined by 9.8% in Q3, while liners declined by 8.1%, with covers remaining approximately in line with the prior year due to the acquisition of Coverstar Central [22][23] - Fiberglass pool sales showed relative strength, expected to account for about 75% of total in-ground pool sales in 2024 [11][10] Market Data and Key Metrics Changes - Market conditions indicated an approximate 15% decline in new pool starts for 2024, consistent with expectations [6][31] - The company is focusing on increasing market share in the Sand States, which represent 70% to 75% of all new pool starts [54][55] Company Strategy and Development Direction - The company is investing in sales and marketing initiatives, particularly in the Sand States, to drive awareness and adoption of fiberglass pools and automatic safety covers [17][45] - The acquisition of Coverstar Central is expected to add 60 million in cash after the acquisition of Coverstar Central and repayment of debt [8][27] - The company reported no physical harm to employees from recent hurricanes, although some orders were pushed out due to plant shutdowns [20][50] Q&A Session Summary Question: Can you unpack the structural changes for higher margins? - Management highlighted cost reduction initiatives and increased scale as key factors for achieving higher margins, aiming to return to over 20% EBITDA margins [36][38] Question: How are dealers feeling about next year? - Dealers are optimistic about 2025, expecting improvements in consumer confidence and potential interest rate reductions [41][44] Question: Can you quantify the impact of hurricanes on shipments? - Management estimated a 2 million impact in Q3 and an equal amount in Q4 due to rescheduled shipments [50] Question: What are the gross margin differentials between product lines? - Management indicated that gross margins across product categories are closely aligned, with no significant differences [51] Question: What is the strategy for the Sand States? - The company is focusing on increasing its presence in the Sand States, which are underrepresented in its portfolio, targeting significant market share growth [54][55] Question: What are the expectations for material and labor inflation in 2025? - Management noted that raw material costs have been stable, with modest inflation expected, but it is too early to provide precise guidance [91]