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    SWIM
    Earnings call· Jun 2026(Q2 FY26)

    Latham Group Q2 FY26 earnings call SWIM

    Aug 4, 2026 Source

    Executive summary

    Latham Group Q2 FY26 — Strong Sales Growth and Raised Full-Year Guidance

    Latham Group delivered strong Q2 FY26 results, outperforming a flat market with 14% sales growth and 10% organic growth, driven by strategic initiatives and Sand States expansion. Despite temporary gross margin pressure from rapid demand ramp-up, the company raised its full-year sales and adjusted EBITDA guidance, signaling confidence in continued share gains and operational improvements.

    Highlights

    5

    • Sales grew 14% year over year, with 10% organic growth, driven by robust demand.

    • Sand States sales increased at a double-digit rate, with Florida showing strong growth.

    • Full-year sales guidance raised to 11.7% growth (midpoint) from 9%.

    • Full-year adjusted EBITDA guidance raised to 15.2% growth (midpoint) from 12.7%.

    • Consumer leads were up 60% year over year, website traffic up 30%, and Google search demand up over 100%.

    Concerns

    4

    • Gross margin declined 160 basis points year over year to 35.5% due to $2.8 million in quarter-specific ramp-up costs.

    • Net income decreased to $13 million (11 cents per diluted share) from $16 million (13 cents per diluted share) year over year.

    • Adjusted EBITDA margin contracted to 22.6% from 23.1% in the prior year period.

    • Transportation costs increased due to the Middle East conflict, partially offset by surcharges.

    Guidance & targets

    3
    CategoryTargetConfidence
    Full-year 2026 Net Sales Growth
    11.7%
    high materiality
    High
    Full-year 2026 Adjusted EBITDA Growth
    15.2%
    high materiality
    High
    Net Debt Leverage Ratio
    below 2
    medium materiality
    High

    Operational metrics

    30
    Net sales
    $197Mup 14% YoY from $173M
    Q2 FY26

    Total net sales for the quarter.

    Organic growth
    10%
    Q2 FY26

    Portion of net sales growth that was organic.

    Acquisition growth
    4%
    Q2 FY26

    Portion of net sales growth from the Freedom Pools acquisition.

    In-ground pool sales
    $96Mup 23% YoY
    Q2 FY26

    Sales for in-ground pools, with strong growth in fiberglass pools.

    Cover sales
    $41Mup 10% YoY
    Q2 FY26

    Sales for covers, primarily driven by continued growth in auto covers.

    Liner sales
    $60Mup 6% YoY
    Q2 FY26

    Sales for liners, driven by proprietary measure-by-late technology.

    Gross profit
    $70Mup 9.6% YoY
    Q2 FY26

    Gross profit for the quarter.

    Lean manufacturing and value engineering impact
    $2.7M
    Q2 FY26

    Positive impact on gross profit from efficiency programs.

    Ramp-up incremental costs
    $2.8M
    Q2 FY26

    Costs incurred due to sudden surge in demand temporarily outpacing production. Majority expected to be recovered in H2 FY26.

    SG&A expenses
    $38Mup $6M YoY
    Q2 FY26

    Primarily due to investment in growth strategies, sales and marketing initiatives, acquisition and integration related costs, and digital transformation program.

    Performance-based compensatory burnout expenses
    $2.2M
    Q2 FY26

    Included in SG&A expenses.

    Annualized savings from restructuring
    $2.5M
    Annual

    Resulting from a restructuring and voluntary early retirement program. Savings will be redeployed to strategic priorities.

    One-time restructuring charge
    $1.5M
    H2 FY26

    Associated with the restructuring and voluntary early retirement program.

    Net income margin
    6.5%down from 9.3% YoY
    Q2 FY26

    Net income margin for the quarter.

    Unfavorable change in net foreign currency transaction gains and losses
    $5M
    Q2 FY26

    Associated with international subsidiaries, impacting net income.

    Adjusted EBITDA
    $40Mup $5M (12%) YoY
    Q2 FY26

    Adjusted EBITDA for the quarter.

    Adjusted EBITDA margin
    22.6%down 50 bps YoY from 23.1%
    Q2 FY26

    Adjusted EBITDA margin for the quarter.

    Cash from operating activities
    $54M
    Q2 FY26

    Net cash provided by operating activities in Q2 FY26.

    Cash from operating activities
    $6M
    H1 FY26

    Net cash provided by operating activities in H1 FY26.

    Total debt
    $280M
    Period end

    Total debt at the end of the period.

    Net debt leverage ratio
    2.2
    Period end

    Net debt leverage ratio at the end of the period.

    Capital expenditures
    $6M
    Q2 FY26

    Capital expenditures for Q2 FY26.

    Capital expenditures
    $28.1M
    H1 FY26

    Capital expenditures for H1 FY26.

    Consumer leads
    up 60%YoY
    Q2 FY26

    Increase in consumer leads generated by marketing campaigns.

    Latham website traffic
    up 30%YoY
    Q2 FY26

    Increase in website traffic.

    Google search demand for Latham
    up over 100%YoY
    Q2 FY26

    Increase in Google search demand for the brand.

    Fiberglass pools as % of in-ground pool sales
    approximately 80%
    FY26

    On track to account for this percentage of full-year in-ground pool sales.

    Price contribution to reported growth
    3%
    Q2 FY26

    Portion of the 14% reported growth attributed to price.

    Gross margin impact from Freedom Pools
    -40 bps
    Q2 FY26

    Headwind to group gross margin from the Freedom Pools acquisition, which is a slightly lower margin, lower cost business.

    Cost base split
    70% variable, 30% fixed
    Current

    Company's total cost base composition.

    Industry KPIs

    8
    MetricValueDetails
    EPS11 centsper diluted share
    Revenue$197MUSD
    Net income$13MUSD
    Gross margin35.5%%
    Market share1 percentage point%
    Sg a OPEX ratio$38MUSD
    Adjusted EBITDA ebita$40MUSD
    Tariff impact mitigationreceivedUSD

    Product announcements

    1
    ProductTypeDetails
    Zero is Possible safety initiativelaunch

    Deals & partnerships

    1
    Freedom PoolsAcquisition of a pool manufacturing company.$17M

    Company completed the acquisition of Freedom Pools in February 2026 for a purchase price of $17 million.

    Risks & headwinds

    4
    Gross margin decline due to ramp-up costsQ2 FY26

    $2.8M (140 bps headwind)

    Mitigation: Majority of costs expected to be recovered in H2 FY26 as manufacturing lines ramp to current demand levels.

    Increased transportation costsOngoing, impacting Q2 FY26 and beyond

    Unquantified, but due to Middle East conflict

    Mitigation: Instituted a surcharge; additional mitigation strategies in place to fully or mostly offset commodity headwinds related to higher oil prices.

    Commodity headwindsExpected to start impacting P&L towards mid or late Q3 FY26

    Related to higher oil prices

    Mitigation: Additional price increases (e.g., for vinyl liners) and other mitigation strategies (volume, cost) are being implemented.

    One-time restructuring chargeH2 FY26

    $1.5M

    Mitigation: Part of a program yielding $2.5M in annualized savings, with resources redeployed to strategic priorities.

    What to watch in Q3 FY26

    5

    Gross Margin Recovery

    H2 FY26
    Current35.5% (Q2 FY26), impacted by $2.8M ramp-up costs
    TargetRecovery of majority of $2.8M incremental costs

    Why it matters

    Indicates operational efficiency and ability to manage demand surges without significant margin erosion, crucial for profitability.

    The majority of these costs are expected to be recovered in the second half of this year.

    Q&A highlights

    6

    Was the Q2 demand surge broad-based or specific to weather-thawed regions? Is it core share gain or sales strategy return?

    Sean Gadd attributed the surge to pent-up Q1 demand, share gains over the last 12 months, and effective national marketing campaigns. He confirmed it was broad-based across all geographies, with core markets growing and good gains in southern markets.

    “I think it's a little bit of everything. I think it's a result of a marketing campaign, you know We are now further into its run. It's certainly resonating. We hear a lot from dealers that homeowners are saying they saw us, they heard about us. That's starting to kick in.”

    asked by Timothy Weiss · answered by Sean Gadd

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and Strategic Execution

    Latham reported 14% year-over-year sales growth, including 10% organic growth, despite a flat market for new US pool stocks. CEO Sean Gadd highlighted positive momentum from several initiatives, which are already producing encouraging early results and are expected to drive sustained growth. The company's performance reflects its ability to execute on strategic priorities and outpace the market.

    02

    Sand States Expansion and Market Penetration

    The Sand States strategy continues to gain traction, contributing to double-digit growth in Florida and overall for the Sand States. Latham plans to expand its market development framework from Florida into Texas, and subsequently into Arizona and California. This expansion will be supported by strengthening the commercial organization, implementing new market development, and adding sales resources, with funding from operational optimization programs.

    03

    Marketing and Consumer Engagement

    National advertising and marketing campaigns are resonating with consumers, generating increased demand and supporting growth initiatives. In Q2 FY26, consumer leads were up 60% year-over-year, Latham website traffic increased 30%, and Google search demand for Latham was up over 100%. Latham remains the number one searched brand among fiberglass competitors, indicating strong brand recognition and market pull.

    04

    Operational Efficiency and Cost Management

    Lean manufacturing and value engineering programs positively impacted gross profit by approximately $2.7 million in Q2. The company completed a restructuring and voluntary early retirement program, resulting in $2.5 million of annualized savings. These savings will be redeployed to align talent and resources with strategic priorities, including strengthening the commercial organization, with a one-time📎 charge of $1.5 million expected in the second half of the year.

    05

    Gross Margin Dynamics

    Gross margin was 35.5% in Q2, a 160 basis points decline year-over-year. This was primarily due to approximately $2.8 million in incremental costs from a sudden surge in demand for fiberglass pools that temporarily outpaced production, leading to pronounced ramp-up costs. The majority of these costs are expected to be recovered in the second half of the year, as manufacturing lines are now well-positioned for current demand levels.

    06

    Capital Allocation Priorities

    Latham's capital allocation priorities include reinvesting in the business to capture organic growth opportunities, selectively pursuing strategic acquisitions, and evaluating opportunities to return capital to shareholders over time⏳, all while maintaining a strong balance sheet. The company aims for a net debt leverage ratio of below 2 by year-end, providing significant dry powder for future initiatives.

    AI-generated summary of the company’s earnings call. Not investment advice.