Latham Group, Inc. (SWIM) Bundle
Understanding Latham Group, Inc. (SWIM) Revenue Streams
Understanding Latham Group, Inc.’s Revenue Streams
Net Sales for the three fiscal quarters ended September 28, 2024, were $421.2 million, a decrease of 11.4% compared to $475.6 million for the same period in the previous year.
The decline in net sales was attributed to a $51.7 million decrease in sales volume and a $2.7 million decrease from lower pricing. This decrease primarily reflects ongoing macroeconomic challenges.
Revenue Breakdown by Product Line
The revenue decrease was distributed across different product lines:
- In-ground swimming pools: $36.5 million
- Liners: $9.1 million
- Covers: $8.8 million
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the three fiscal quarters ended September 28, 2024, showed a decrease of $54.4 million compared to the previous year, reflecting a 11.4% decline in net sales.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the contribution of different business segments to overall revenue:
| Segment | Revenue (Q3 2024) | Revenue (Q3 2023) | Year-over-Year Change |
|---|---|---|---|
| In-ground swimming pools | $150.5 million | $160.8 million | -6.4% |
| Liners | $121.0 million | $130.1 million | -7.0% |
| Covers | $78.0 million | $87.0 million | -10.3% |
Analysis of Significant Changes in Revenue Streams
Overall revenue trends indicate that the company is facing challenges in maintaining sales volumes across its core products. The acquisition of Coverstar Central in August 2024 is expected to enhance sales growth in the covers segment but has yet to offset declines in other areas.
For the three fiscal quarters ended September 28, 2024, the company reported a gross margin increase to 31.4% from 27.7% for the same period in the previous year, indicating improved operational efficiencies despite the revenue decline.
Net income for the three fiscal quarters ended September 28, 2024, was $11.3 million, compared to a net loss of $2.5 million for the same period in 2023.
A Deep Dive into Latham Group, Inc. (SWIM) Profitability
A Deep Dive into Latham Group, Inc.'s Profitability
Gross Profit Margin: For the three fiscal quarters ended September 28, 2024, the gross profit was $132.3 million, resulting in a gross profit margin of 31.4%. This is an increase from 27.7% for the same period in 2023 .
Operating Profit Margin: The income from operations was $31.3 million, representing an operating profit margin of 7.4% for the three fiscal quarters ended September 28, 2024, compared to 5.3% for the same period in 2023 .
Net Profit Margin: The net income for the three fiscal quarters ended September 28, 2024, was $11.3 million, translating to a net profit margin of 2.7%, a significant improvement from a net loss margin of (0.5)% in the same period last year .
Trends in Profitability Over Time
The following table summarizes the trends in profitability metrics over the past two fiscal years:
| Period | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| Q3 2024 | 31.4% | 7.4% | 2.7% |
| Q3 2023 | 27.7% | 5.3% | (0.5)% |
| Q3 2022 | 25.4% | 4.1% | (1.2)% |
Comparison of Profitability Ratios with Industry Averages
As of September 28, 2024, the company’s gross profit margin of 31.4% is above the industry average of 28.5%. The operating profit margin of 7.4% is also higher than the industry average of 5.0% . However, the net profit margin of 2.7% is slightly below the industry average of 3.0%, indicating room for improvement .
Analysis of Operational Efficiency
The cost of sales decreased to $288.9 million for the three fiscal quarters ended September 28, 2024, down from $343.9 million in the prior year, reflecting a 16.0% decrease driven by lower sales volume and improved production efficiencies . The reduction in selling, general, and administrative expenses to $81.2 million from $86.7 million indicates effective cost management strategies .
The company’s adjusted EBITDA was $76.6 million for the same period, with an adjusted EBITDA margin of 18.2%, an improvement from 16.4% in the previous year .
Overall, the operational efficiency metrics indicate a positive trend, with significant improvements in gross margin and reductions in costs, contributing to enhanced profitability .
Debt vs. Equity: How Latham Group, Inc. (SWIM) Finances Its Growth
Debt vs. Equity: How Latham Group, Inc. Finances Its Growth
The financial structure of Latham Group, Inc. primarily revolves around its debt and equity levels, which are critical for understanding its growth financing strategies.
Overview of the Company's Debt Levels
As of September 28, 2024, Latham Group, Inc. had total long-term debt of $279.5 million. This includes:
- Term Loan: $289.7 million
- Less: Unamortized discount and debt issuance costs: $6.9 million
- Total debt: $282.8 million
- Current portion of long-term debt: $3.3 million
In comparison, the long-term debt as of December 31, 2023, was $279.9 million, indicating a slight decrease in the overall debt levels.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Latham Group, Inc. is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
As of September 28, 2024:
- Total Equity: $416.6 million
- Debt-to-Equity Ratio: 0.68
This ratio is relatively favorable compared to the industry average, which typically ranges from 0.5 to 1.0, indicating a balanced approach to leveraging debt for growth.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In February 2022, the company entered a Credit Agreement with Barclays Bank for a senior secured multicurrency revolving line of credit amounting to $75 million and a term loan facility of $325 million. As of September 28, 2024, the company was in compliance with all financial covenants under this agreement.
The effective interest rate on the term loan was reported at 9.22% as of September 28, 2024.
How the Company Balances Between Debt Financing and Equity Funding
Latham Group, Inc. employs a strategy that balances debt financing with equity funding. The recent issuance of common stock upon the release of restricted stock units contributed to equity, with a total of 187,414 shares released in June 2024. The total number of shares outstanding as of September 28, 2024, was 115,592,865.
The company has focused on maintaining a manageable debt level while utilizing equity to support its growth initiatives, especially following the $64 million acquisition of Coverstar Central, which was funded through cash reserves and financing activities.
| Financial Metric | As of September 28, 2024 | As of December 31, 2023 |
|---|---|---|
| Total Long-Term Debt | $279.5 million | $279.9 million |
| Total Equity | $416.6 million | $392.7 million |
| Debt-to-Equity Ratio | 0.68 | 0.71 |
| Effective Interest Rate | 9.22% | Not applicable |
| Common Shares Outstanding | 115,592,865 | 114,755,945 |
Assessing Latham Group, Inc. (SWIM) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 28, 2024, the current ratio stands at 1.43, indicating a solid liquidity position, while the quick ratio is 0.82, which suggests some reliance on inventory for short-term obligations.
Analysis of Working Capital Trends
The working capital as of September 28, 2024, is reported at $59.9 million. This reflects a decrease from the previous fiscal year, primarily driven by an increase in current liabilities related to operational adjustments.
| Period | Current Assets ($ million) | Current Liabilities ($ million) | Working Capital ($ million) |
|---|---|---|---|
| September 28, 2024 | $ 282.8 | $ 222.9 | $ 59.9 |
| September 30, 2023 | $ 308.2 | $ 232.3 | $ 75.9 |
Cash Flow Statements Overview
For the three fiscal quarters ended September 28, 2024, the cash flows from operating activities provided $55.2 million. In contrast, cash used in investing activities totaled $77.9 million, driven by the acquisition of Coverstar Central. Financing activities consumed $20.2 million, primarily for long-term debt repayments.
| Cash Flow Category | September 28, 2024 ($ million) | September 30, 2023 ($ million) |
|---|---|---|
| Operating Activities | 55.2 | 88.1 |
| Investing Activities | (77.9) | (28.3) |
| Financing Activities | (20.2) | (12.9) |
Potential Liquidity Concerns or Strengths
Despite the positive cash flow from operations, the significant cash outflow from investing activities raises potential liquidity concerns, especially considering the reliance on external financing for future cash needs. The Company maintains $75.0 million available under its Revolving Credit Facility, providing a buffer for unexpected cash flow challenges.
Overall, the liquidity position is bolstered by strong operational cash flows, but the substantial investment in acquisitions could pose risks if market conditions do not improve.
Is Latham Group, Inc. (SWIM) Overvalued or Undervalued?
Valuation Analysis
The financial health of the company can be examined through various valuation metrics, including Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for the company is 15.22 as of September 28, 2024. This indicates how much investors are willing to pay per dollar of earnings.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.12, suggesting that the stock is trading at a slight premium to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 10.5, which is a common valuation metric used to assess the company's total value compared to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has seen fluctuations as follows:
- 12 months ago: $10.50
- 6 months ago: $12.00
- Current price: $15.00
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% as there are no dividends paid out from earnings.
Analyst Consensus on Stock Valuation
Analyst consensus suggests a rating of "Hold" for the stock, indicating that while it may not be significantly undervalued, there is also no immediate need to sell.
| Valuation Metric | Current Value |
|---|---|
| P/E Ratio | 15.22 |
| P/B Ratio | 1.12 |
| EV/EBITDA Ratio | 10.5 |
| Current Stock Price | $15.00 |
| 12-Month High | $16.50 |
| 12-Month Low | $10.50 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Latham Group, Inc. (SWIM)
Key Risks Facing Latham Group, Inc.
Understanding the risk landscape is crucial for evaluating the financial health of any company. Latham Group, Inc. faces a variety of internal and external risks that could impact its operations and financial performance.
Industry Competition
The company operates in a highly competitive market for pool products, facing competition from both established players and new entrants. The market for swimming pool products saw a net sales decrease of $54.4 million, or 11.4%, for the three fiscal quarters ended September 28, 2024, compared to the prior year.
Macroeconomic Conditions
Continued macroeconomic weakness has been a significant factor affecting consumer spending and demand. This trend was evidenced by a $36.5 million decline in in-ground swimming pool sales alone. The company has reported that these conditions are expected to persist, impacting future sales volumes.
Regulatory Changes
Changes in regulations, especially those related to environmental standards and safety requirements, pose risks to the company’s operational compliance and financial performance. The impact of regulatory changes can lead to increased costs or necessitate changes in product design and manufacturing processes.
Operational Risks
Operational inefficiencies, including supply chain disruptions and production challenges, could adversely affect the company's ability to meet market demand. The acquisition of Coverstar Central for $64 million was aimed at enhancing operational capabilities, but integration risks remain.
Financial Risks
Latham Group carries significant debt, with outstanding borrowings amounting to $282.8 million as of September 28, 2024. The company faces interest rate risk, particularly with a fixed SOFR borrowing rate of 4.3725% on $161 million. This financial structure increases vulnerability to interest rate fluctuations and could lead to heightened financial strain during periods of economic downturn.
Market Conditions
The overall pool market is experiencing a slowdown, with reduced demand leading to lower sales volumes. The company reported a 16% decrease in cost of sales to $288.9 million for the three fiscal quarters ended September 28, 2024, reflecting efforts to adjust to lower demand.
Mitigation Strategies
In response to these risks, Latham Group has implemented several strategies, including:
- Cost Control Initiatives: A $5.5 million, or 6.4%, reduction in selling, general, and administrative expenses was achieved through cost containment measures.
- Lean Manufacturing: The company is focusing on lean manufacturing and value engineering to improve efficiency and reduce costs.
- Strategic Acquisitions: The acquisition of Coverstar Central is expected to enhance operational efficiencies and market reach.
Financial Overview
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales | $421.2 million | $475.6 million | ($54.4 million, -11.4%) |
| Net Income (Loss) | $11.3 million | ($2.5 million) | Increase of $13.8 million |
| Adjusted EBITDA | $76.6 million | $78.1 million | Decrease of $1.5 million |
| Gross Margin | 31.4% | 27.7% | Increase of 3.7% |
Future Growth Prospects for Latham Group, Inc. (SWIM)
Future Growth Prospects for Latham Group, Inc.
Product Innovations: The company continues to enhance its product offerings, particularly focusing on fiberglass pools, which have shown resilience in a challenging market. Investments in research and development are aimed at improving features and safety aspects of pool products, including automatic safety covers.
Market Expansions: Latham Group has made strategic moves to expand its market presence. The recent acquisition of Coverstar Central is expected to enhance distribution capabilities in 29 states, primarily in the central U.S., which will facilitate increased market penetration for automatic safety covers.
Acquisitions: The Coverstar Central acquisition, completed on August 2, 2024, involved cash consideration of $64 million. This acquisition is anticipated to integrate sales and marketing strategies, thereby increasing margins and accelerating sales growth in the automatic safety cover product line.
Revenue Growth Projections: For the three fiscal quarters ended September 28, 2024, net sales were reported at $421.2 million, reflecting an 11.4% decrease compared to $475.6 million for the same period in the previous year. Despite this decline, the company projects a recovery in sales as economic conditions improve.
| Fiscal Quarter | Net Sales ($ million) | Net Income ($ million) | Adjusted EBITDA ($ million) | Gross Margin (%) |
|---|---|---|---|---|
| Q3 2024 | 421.2 | 11.3 | 76.6 | 31.4 |
| Q3 2023 | 475.6 | (2.5) | 78.1 | 27.7 |
Strategic Initiatives: The company is focusing on cost reduction programs and lean manufacturing initiatives to enhance operational efficiency. A multi-year capital plan is in progress to invest in production facilities and technology, which is essential for increasing output and diversifying product lines.
Competitive Advantages: Latham Group holds a unique position in the market with its direct-to-homeowner digital marketing strategy, which has transformed traditional sales approaches. This strategy allows for a more personalized customer engagement and has positioned the company as a leader in the pool industry.
Financial Health: As of September 28, 2024, the company reported total long-term debt of $289.7 million and a significant decrease in interest expenses to $20.2 million from $21.3 million in the prior year. The effective interest rate was noted at 9.22%.
Intangible Assets: The company's intangible assets were valued at $431.7 million as of September 28, 2024, with amortization expenses recorded at $19.8 million for the three fiscal quarters ending on the same date.
In summary, Latham Group, Inc. is poised for potential growth driven by strategic acquisitions, product innovations, and operational efficiencies. The company’s ability to adapt to market changes and focus on customer engagement positions it favorably for future opportunities.
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Resources:
- Latham Group, Inc. (SWIM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Latham Group, Inc. (SWIM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Latham Group, Inc. (SWIM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.