Latham Group, Inc. (SWIM) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended March 28, 2026. Latham Group, Inc. is the largest designer, manufacturer, and marketer of in-ground residential swimming pools, covers, and liners in North America, Australia, and New Zealand. The company operates as a single reportable segment and is classified as an emerging growth company and an accelerated filer.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $117.3 million | $111.4 million |
| Gross Profit | $37.2 million | $32.9 million |
| Gross Margin | 31.7% | 29.5% |
| Net Loss | $(8.5) million | $(6.0) million |
| Adjusted EBITDA | $12.2 million | $11.1 million |
| Adjusted EBITDA Margin | 10.4% | 10.0% |
| Cash and Equivalents | $27.5 million | $24.0 million |
| Total Debt (Gross) | $315.8 million | $325.0 million |
| Revolving Credit Availability | $44.0 million | N/A |
Note: Total Debt includes $280.2 million in Term Loan and $31.0 million in Revolving Credit Facility borrowings.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 5.3% ($5.9 million) driven by a $3.0 million volume increase and $2.9 million from higher pricing. Growth was led by organic gains in liners and covers, the acquisition of Freedom Pools, and sales growth in Florida, partially offset by adverse weather in North America.
- Profitability: While GAAP net loss widened to $8.5 million (from $6.0 million), Adjusted EBITDA improved to $12.2 million. The widening net loss was primarily due to increased SG&A expenses ($6.0 million increase) related to acquisition integration, marketing investments, and digital transformation efforts.
- Acquisitions: Completed the acquisition of Freedom Pools in Australia for $15.4 million (including a $1.6 million holdback) in February 2026. This transaction is expected to add approximately $20.0 million in annualized net sales and $4.0 million in Adjusted EBITDA.
- Capital Expenditures: Purchased four fiberglass production facilities previously leased for $17.6 million, significantly increasing property and equipment on the balance sheet.
- Liquidity: Cash decreased by $43.6 million due to operating cash outflows ($47.7 million) and investing activities ($24.9 million), partially offset by $31.0 million in borrowings from the Revolving Credit Facility.
Guidance, Outlook, and Risks
- Strategic Initiatives: Management is accelerating growth in "Sand State" markets (e.g., Florida) through new dealer sign-ups, a commercial organization build-out, and targeted marketing campaigns. The company is also in the midst of a multi-year digital transformation and ERP system implementation.
- Leadership Transition: Sean Gadd was appointed President and CEO effective January 5, 2026, succeeding Scott Rajeski.
- Debt Maturity: The Revolving Credit Facility matures on February 23, 2027. The company is currently in discussions to extend this facility.
- Risk Factors: Significant risks include geopolitical instability (specifically the conflict in the Middle East affecting energy prices and supply chains), trade protectionism, and the company's reliance on seasonal demand. The company notes that adverse weather conditions can materially impact sales.
Investor Verification Checklist
- Debt Extension: Verify the status of negotiations to extend the Revolving Credit Facility maturing in February 2027.
- Acquisition Integration: Monitor the integration progress and financial accretion of the Freedom Pools acquisition in Australia.
- Working Capital Trends: Review the significant increase in trade receivables ($49.5 million increase in cash flow usage) and inventory levels to ensure collection and sales velocity remain healthy.
- Seasonality Impact: Assess the impact of adverse weather on Q1 organic pool sales and the potential for recovery in peak Q2/Q3 seasons.
- Capital Allocation: Track the $17.6 million purchase of production facilities and its impact on future depreciation and capacity utilization.