Latham Group (SWIM) Q4 2024: Fiberglass Penetration Drives Market Outperformance Amid Industry Decline
Latham Group demonstrated resilience in a contracting U.S. in-ground pool market by expanding fiberglass pool share and improving margins through lean manufacturing and strategic acquisitions. The company’s focused investments in the Sand States and automatic safety covers position it for accelerated growth despite persistent industry softness. Guidance for 2025 reflects confidence in market share gains and operational leverage, with a clear pathway to higher profitability as demand stabilizes.
Summary
- Fiberglass Market Expansion: Latham increased fiberglass pool penetration, driving outperformance in a declining market.
- Operational Efficiency Gains: Margin expansion reflects disciplined cost management and lean manufacturing initiatives.
- Growth Investments in Sand States: Targeted product launches and marketing campaigns support long-term share gains in key regions.
Business Overview
Latham Group is the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. The company generates revenue primarily through three product lines: in-ground swimming pools, covers (including automatic safety covers), and liners. Its business model combines manufacturing scale with a broad product portfolio that serves both new pool installations and replacement markets, providing diversified revenue streams.
Performance Analysis
In 2024, Latham faced a challenging industry environment with an estimated 15% decline in U.S. pool starts. Despite this, the company’s net sales contracted 10% year-over-year to $508.5 million, outperforming the broader market decline. This resilience was driven by a strategic shift toward fiberglass pools, which accounted for 75% of in-ground pool sales, up from 73% in 2023. Fiberglass penetration in the U.S. rose to 24%, reflecting a growing consumer preference for its faster installation, lower maintenance, and eco-friendly attributes compared to concrete pools.
Gross margin expanded by 320 basis points to 30.2%, fueled by lean manufacturing, value engineering, improved procurement, and modest deflation. These operational efficiencies more than offset the volume decline and contributed to a slight increase in adjusted EBITDA margin to 15.8%. However, adjusted EBITDA declined 8.9% to $80.2 million due to increased investments in performance-based compensation and sales and marketing initiatives to support growth strategies.
- Market Outperformance Despite Volume Pressure: Sales decline was less severe than the industry, highlighting effective market penetration.
- Margin Expansion from Structural Cost Reductions: Lean manufacturing and value engineering delivered $9 million in annual savings.
- Strategic Acquisitions Bolster Product Portfolio: The CoverStar Central acquisition and subsequent smaller deals enhanced vertical integration and growth potential in automatic safety covers.
Latham’s balance sheet remains robust, ending 2024 with $56 million in cash after acquisition and debt repayments, and a net debt leverage ratio of 2.8 times adjusted EBITDA. Capital expenditures decreased to $20 million, reflecting disciplined investment aligned with strategic priorities.
Executive Commentary
"This was a year of substantial achievement for Latham Group. Our in-ground pool sales continued to outperform the U.S. in-ground pool market, we succeeded in expanding margins despite lower utilization, and we made investments that have positioned the Company for sales growth and increased profitability in 2025 and beyond."
Scott Rogeski, President and CEO
"We have successfully navigated a year of challenging market conditions. Our structurally improved cost basis and disciplined spending position us well to capitalize on growth opportunities, particularly in the Sand States and automatic safety covers."
Oliver Glow, Chief Financial Officer
Strategic Positioning
1. Accelerating Fiberglass Pool Penetration
Latham is capitalizing on the growing consumer preference for fiberglass pools, which offer faster installation, lower maintenance, and environmental benefits over concrete. Fiberglass now represents 24% of U.S. pool starts, with Latham’s sales mix reflecting 75% fiberglass pools. This shift underpins the company’s ability to outperform the overall market and drives margin expansion through production efficiencies.
2. Focused Growth in the Sand States
The Sand States—Florida, Texas, Arizona, and California—account for approximately two-thirds of U.S. pool starts. Latham’s “Honor Sand State” strategy targets these regions through dealer expansion, product alignment with local preferences (e.g., rectangular shapes, pool-spa combos, plunge pools), and targeted marketing campaigns such as the GUSA (Get Out of the Stone Age) initiative. Early results include a 40% increase in dealer leads in Texas and growing market share from 15% to 17% of fiberglass pool sales in the Sand States.
3. Vertical Integration and Expansion of Automatic Safety Covers
The acquisition of CoverStar Central and two smaller CoverStar dealers enhances Latham’s vertical integration in automatic safety covers, a product with safety, maintenance, and cost-saving benefits. This category offers cross-selling and revenue synergy opportunities, supporting adjusted EBITDA margin expansion and complementing pool sales growth.
4. Operational Excellence Through Lean Manufacturing and Value Engineering
Continuous improvement initiatives have delivered approximately $9 million in annual cost savings, improving gross margins despite lower volumes. These efforts focus on process flow optimization, labor productivity, and product redesign, enabling scalable margin expansion as volumes recover.
5. Financial Discipline and Strategic Capital Allocation
Latham maintains a strong balance sheet with $56 million in cash and a manageable leverage profile. Capital expenditures are focused on capacity enhancements and new product development, particularly in the Sand States. The company is balancing organic growth investments with selective acquisitions to strengthen market position.
Key Considerations
Latham’s 2024 results highlight the company’s ability to outperform a declining market through product innovation, operational efficiency, and strategic acquisitions. Key considerations for investors include:
- Market Share Gains in Fiberglass Pools: Continued penetration growth is critical to offset industry softness and drive revenue expansion.
- Sand States Strategy Execution: Success depends on dealer expansion, product-market fit, and effective marketing to convert concrete pool builders and consumers.
- Margin Expansion Sustainability: Maintaining and accelerating lean manufacturing and value engineering savings will be essential as volumes normalize.
- Tariff and Supply Chain Risks: Recent tariffs on Canadian and Mexican imports pose potential cost pressures, though mitigation strategies are in place.
- M&A Integration: Effective integration of CoverStar acquisitions will be key to realizing expected synergies and growth.
Risks
Industry cyclicality and macroeconomic factors continue to pressure demand, with U.S. pool starts expected to remain near 2024 levels in 2025. Tariff developments on imports from Canada and Mexico introduce cost uncertainties despite mitigation efforts. Execution risk exists in scaling the Sand States strategy and integrating acquisitions while managing elevated sales and marketing spending.
Forward Outlook
For Q1 2025, Latham expects sales to be flat year-over-year, reflecting a seasonal low period and timing effects from acquisitions. Adjusted EBITDA is anticipated to reflect increased investments in growth initiatives. For full year 2025, guidance calls for net sales between $535 million and $565 million, representing approximately 8% growth at the midpoint, and adjusted EBITDA between $90 million and $100 million, a 19% increase at the midpoint. Capital expenditures are projected at $27 million to $33 million, up by $10 million from 2024, driven by new fiberglass pool models tailored to the Sand States and facility expansions.
Takeaways
Latham’s strategic focus on fiberglass pool penetration and automatic safety covers is driving outperformance in a weak market. Operational efficiencies and disciplined cost management have expanded margins, offsetting volume declines. The Sand States growth initiative, supported by dealer expansion and targeted marketing, represents a significant opportunity for market share gains and margin leverage. Investors should monitor execution of this strategy, tariff impacts, and integration of recent acquisitions as key factors influencing future performance.
- Outperformance in Challenging Market: Latham’s ability to grow fiberglass sales and expand margins underscores its competitive positioning.
- Strategic Investments in Growth Markets: The Sand States initiative offers a scalable platform for long-term revenue and earnings growth.
- Operational and Financial Discipline: Continued lean manufacturing savings and prudent capital allocation provide a foundation for improved profitability.
Conclusion
Latham Group navigated a difficult 2024 with strategic focus and operational rigor, achieving market share gains and margin expansion despite industry headwinds. The company’s targeted growth initiatives in fiberglass pools and automatic safety covers, particularly in the Sand States, position it well for accelerated growth and profitability as market conditions stabilize.
Industry Read-Through
Latham’s results highlight broader industry trends including rising consumer preference for fiberglass pools due to installation speed and eco-friendly benefits, and growing demand for automatic safety covers driven by safety and cost-saving features. The company’s success in leveraging lean manufacturing and value engineering underscores the importance of operational efficiency in a cyclical market. Other industry participants should watch the Sand States as a battleground for market share shifts and monitor tariff impacts on supply chains. Latham’s strategic acquisitions illustrate consolidation trends in pool-related product segments, signaling potential for further M&A activity in the sector.