Q1 2021 Latham Group Inc Earnings Call

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Good morning, everyone and welcome to the Laythan Group incorporated first quarter 2021 earnings Conference call.

All participants will be in a listen only mode should you need assistance, placing all of the conference specialist by pressing the star key followed by zero.

After todays presentation, and there will be and opportunity to ask questions.

Ask a question you May press Star and then 1 using a telephone keypad.

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Please also note today's event is being recorded.

At this time I would like to turn the conference call over to the call Begay Laythan Investor Relations Representative Ma'am. Please go ahead.

Thank you operator, good morning, everyone welcome to life, and Q1 fiscal 2020.1 earnings call.

Earlier. This morning, the issued our earnings press release, which is available on the Investor relations portion of our website.

On today's call are lengthens, President and CEO, Scott Rydzewski and CFO Mark Force it.

Following their remarks, we'll open up the call to questions.

During this call the company may make certain statements that constitute forward looking statements.

Statements reflect the company's views with respect to future events as of today and are based on our management's current expectations estimates forecasts and projections and assumptions beliefs and information.

These statements are subject to a number of risks and uncertainties that could cause actual events and results to differ materially from those described and the forward looking statements.

For further details concerning these risks and uncertainties. Please see our final prospectus for initial public offering filed with the SEC on April 26.2021.

The company expressly disclaims any obligation to publicly update or review any forward looking statements, whether as a result of new information future developments or otherwise, except as required by applicable law.

In addition, during today's call of the company will discuss non-GAAP financial measures, which we believe could be useful in evaluating our performance.

Conciliation of adjusted EBITDA to net income calculated under GAAP can be found in our earnings press release. It will be included in our form 10-Q for Q1 'twenty 'twenty 1.

Now I'll turn the call over to Scott Rachesky.

Thank you Nicole good morning, and welcome to the late in the first earnings call of the public offering we completed our IPO in late April and I wanted to take this opportunity to think of the entire team who supported that successful process.

Several years ago, we sell on a journey to re imagine the pool by and experience for customers and the increased awareness and adoption of fiberglass schools.

Total company, we now have greater opportunities and resources to continue on that path.

Before we dive into the quarter I'd like to share a little more about and lease them and our industry.

Most of them is the largest designer manufacturer and marketer of residential and ground swimming pools, and North America, Australia, and New Zealand and we're the leader and the fiberglass product category of the residential and ground swimming pool market in North America with over 50% share.

We are transforming our industry with our unique direct the homeowner model.

For the consumer at the center of everything we do our strategy is powered by our leading brand and superior suite of digital technologies that engages the home or drive them to the belief and Brown and then watch them through the decision making process of pool selection.

We have been able to deliver purchase ready leads for dealers length of is the only pool comprehensive establish a direct relationship with the homeowner and.

And our strong brand awareness and go to market strategy have enabled us to build the largest dealer network and North America and continued to drive the material converging towards fiber the last pools.

The pool market dynamics are very attractive with strong underlying growth we are positioned to benefit from the favorable long term consumer demand trends driven by continued homeowner investment and the outdoor living.

We are especially excited about the opportunities when the fast growing the fiberglass segment as we drive the education of the benefits of fiberglass over concrete, including superior lifetime performance, lower upfront and the lifecycle cost faster and easier installation premium quality and aesthetics and.

Easy or maintenance, along with less chemical usage.

Lisa would not be the company. It is today without our dedicated team members and their hard work and commitment, especially in the face of what has been and incredibly challenging and uncertain time over the last year is key to our success.

We are heavily invested in our employees wellbeing and <unk>.

Tried to ensure our employees know how much the meaningful way for them and our future. So I'm excited to share that leap and was recently awarded a 2021 top workplaces are by the Albany Times Union, we are honored and humbled to have received this recognition.

Let's now turn to a high level overview of our first quarter results. Our strong results are a testament to our team's hard work and dedication of our mission of making high quality in ground swimming pool and attainable luxury for every homeowner's backyard.

Net sales for the first quarter grew from $51.1 million in 2020 to $148.7 million. The Q1 of 2021, representing a 97.6 million or 191% increase.

This translated to strong adjusted EBITDA growth, reaching 33.5 million and the first quarter of 2021, increasing by $35.4 million from the prior year period.

And we think about our long term growth strategy and our results will be driven by 4 strategic pillars, 1 strong consumer demand as a result of our brand and digital initiatives.

And enhancing our leadership position across our entire product portfolio.

Accelerating the material conversion for fiberglass and for expanding our strategic partnership with the <unk> exclusive dealers.

Starting with the first pillar, we continued to drive purchase ready leads for our dealer partners by focusing on our digital initiatives, which are resulted in new customer acquisition metrics that continue to outpace our expectations.

We are seeing greater search ability and visibility to our search engine optimization efforts with lytham ranking on page 1 for over 2000 keywords.

Also we are excited to report, we just launched our new plenty of pools section on our website. This new section provides a unique immersive experience to consumers.

And the accrual and backyard project and also had 2 new interactive pieces. The pool cost estimator that enables users to build their dream pool and generate an estimate for us and.

And the other interactive piece is mildly and our first logged and area for homeowners, where they can save their preferences and options for their dream backyard as well as all of the estimate of scenarios that they may of 1.

Moving to the second pillar, we offer the industry's broadest portfolio of pools and related products and <unk>.

<unk> and ground swimming pools pool liners and pool covers we hold the number 1 market position and North America and every product category, we compete in and.

Continue to focus on strengthening our leadership position.

Third material conversion is key to our growth we see significant opportunity.

To accelerate the trend from concrete pool, the higher quality fiberglass tools, we remain focused on driving awareness and education with homeowners and dealers on the many benefits of fiberglass presents.

Last is extending the pool installations season by giving dealers the ability to install earlier and later in the year, our dealers are investing and their business to increase their capacity and capitalize on the opportunities within the fiberglass and fac, we had dealers installing fiberglass pools in new England.

Starting as early as of February of this year.

Today fiberglass accounts for about 18% of the U S residential and ground swimming pool market as compared to Australia.

70% of all in ground pools of fiberglass we of a long runway ahead of us and are very confident that we can drive that number to 25% by 2023.

Lastly, we are committed to maintaining and growing our strong dealer relationships in fact in the first quarter, we saw a significant increase and new exclusive lytham Grand dealers versus the same period last year, demonstrating our growing brand power.

Additionally, we launched the neuro and franchising model and the U S and the first quarter, which has had a very nice start and the onboarding of many new franchisees.

As we look ahead, there continues to be some headwinds and our supply chain as it relates to both materials and supply and inflation.

This is due in large parts of the deep freeze and taxes, which caused shortages and many resin based products.

Boeing challenges related to transportation.

And the overall tightness and the supply of many commodities the.

This has had a minimal impact on our ability to deliver on our strong sales and earnings growth.

The team has done a great job of managing this and of its something we will continue to monitor and offset with price and productivity.

Many other companies. We are also facing a very tight labor market, which we believe will be alleviated over time.

Despite these headwinds we are very optimistic about 2021 as reflected in the guidance that Mark will share with you we have a very large addressable market and the strong underlying secular trends are continuing.

Outdoor living remains the fastest growing repair and remodel segment and we see that trend reflected and our business. As a result, our dealers are seeing strong future demand into 2022.

We are also accelerating our capex investments and fiscal 2021 to continue our fiberglass expansion and to stay ahead of the demand curve.

We also have multiple levers to drive further growth across our platform by continuing to leverage our brand and the digital assets and enhancing our leadership position across our products.

Accelerating the pace of fiberglass material conversion and prioritizing strategic partnerships with the exclusive dealers with that I will turn it over to mark to take a deeper dive into our financials Mark.

Thank you Scott and good morning, everyone.

Today I'll be reviewing our first quarter fiscal 2021, the results and our outlook for the full fiscal year.

Please note that all comparisons are on a year over year basis compared to Q1 of fiscal 2020. Additionally.

Additionally, Q1 of 2020 results do not include the acquisition of Gli or our investment and premier pools and spas as both of those are cured and Q4 of 2012.

Starting with our first quarter results Q1 was a strong quarter as we continued to benefit from strong consumer demand and the execution of our growth strategy net.

Net sales were up by $97.6 million or 191%.

The $148.7 million.

Primarily attributable to continued strong consumer demand and order volumes across our product portfolio.

Expand and strategic partnerships with Latham exclusive dealers.

Our acquisition of <unk> and price increases and.

In addition, our year over year strength reflects lighter comps amid the initial headwinds from the pandemic last year.

If we include <unk> sales and the first quarter of last year, our Q1 sales growth would be 152%.

Reflecting very strong organic growth.

Looking at net sales by product category and.

In ground pools increased 218% to $93.6 million.

Covers increased 118% to $24 million.

And liners increased 192% to $31.1 million and.

The real strong performance across the portfolio.

Gross profit increased by $42.3 million to $52.4 million driven.

Driven primarily by the strong first quarter sales growth.

Gross margin increased to 35, 3 percentage of sales compared to 19, 8% of sales last year, driven by higher utilization of our fixed cost structure.

Price increases and a mix shift towards in ground pools.

Shall we offset by inflation and the cost of our raw materials.

Selling general and administrative expenses increased by $11.7 million or <unk> 76, 1% to $27.2 million or 18, 3% of net sales.

Of the year over year increase about half was related to IPO cost.

Stock based compensation expense and the acquisition of <unk>.

The balance was mainly driven by wage and headcount increases from the addition of customer facing roles to support our expansion and by incentive plan accruals, reflecting our strong start to the year.

Net income was $8.5 million for 8 per share as compared to a net loss of $15.5 million last year and.

Adjusted EBITDA increased by $35.4 million to $33.5 million and the quarter and adjusted EBITDA margin expanded the 22, 5% to sales.

Now, let's turn to the balance sheet.

As of April 3.2021, we had cash and cash equivalents of nearly $20 million $14 million undrawn on our revolving credit line and total debt of $406 million.

Our net debt to leverage ratio was 3.3 times as of April for 2021.

Please note that we define net debt as total debt less cash.

The company typically uses of cash to support operating activities in the first quarter and it was no exception. This year with net cash used in operating activities of $41 million, primarily driven by higher receivable levels tied to our increased sales.

Capital expenditures totaled $4.6 million compared to $2.8 million last year.

Primarily as the result of multiple projects to increased fiberglass manufacturing capacity.

Subsequent to quarter and we completed our initial public offering of 23 million shares of common stock inclusive of 3 million shares sold pursuant for the full exercise of the underwriters option to purchase additional shares.

The aggregate net proceeds received by the company from the IPO were $400.1 million after deducting underwriting discounts commissions and other offering costs.

We used the net proceeds to pay down of $152 million of our term debt and repay the $16 million outstanding on our revolving credit facility, which reduced our net debt leverage ratio to about 1.5 times.

We also use the net proceeds to repurchase nearly $12.3 million shares of common stock from certain existing shareholders for $216.7 million and we intend to use the remaining $14.7 million to fund general corporate requirements, including working capital.

Now, let's turn to our guidance.

As noted in our earnings release, we have introduced guidance for the full year fiscal 2021, including.

Net sales and the range of 580 to 620 million reps.

Representing annual growth of between 44% and 54%.

If we were to include Gli results for all of 2020.

Net sales growth would be between 25 and 34%.

Adjusted EBITDA of 126 to 138 million with adjusted EBITDA margin is projected to increase 80 to 150 basis points from 2020.

To a range of $21.7 to 22, 3% of sales.

And capital expenditures of 28% to $36 million, driven primarily by fiberglass capacity expansion initiatives.

While we won't be providing quarterly guidance to day or going forward. Historically, there is some seasonality and our business.

And we typically do more business during the warm summer months Q2 and Q3.

Which our peak months of swimming pool use <unk>.

The installation and remodeling and repair activities.

The seasonality is being somewhat mitigated by our fiberglass growth, which allows for installation and bolt earlier and later in the season.

Of 2020 was a bit of an anomaly to the typical year.

As our economy shut down for a period of time and the first half of the year as the result of the global pandemic.

This market event combined with the early results of our unique director of homeowner model drove very strong second half growth and the business as a result, our year over year comps will become more difficult as we move into the second half of the year and is reflected in our full year guidance.

We expect adjusted EBITDA margin expansion will be led by sales growth and.

And a mix shift benefit towards of our fast growing fiberglass segment.

We also dissipate facing continued headwinds related to supply chain constraints and the labor pressures, which we will look to come and with price increases and productivity initiatives.

We will continue to invest and resources to support the growth of the business and enhance the customer buying experience.

In addition, we are accelerating our investments and the fiberglass manufacturing capacity to stay ahead of the expected demand curve.

Please note that significant noncash stock based compensation expenses, which will lead to a meaningful net income loss for the year are and add back and arriving at our adjusted EBITDA guidance.

As our onetime costs associated with our IPO and other select adjustments, which are not reflective of the ongoing underlying performance of the business.

Our outlook for revenue growth and margin expansion reflects continued strong consumer demand as homeowners and best in the backyard and growth across our product portfolio driven by the strategic pillars, Scott shared with you earlier.

Scott I'll turn it back to you for closing remarks.

Thanks Mark.

Amazing company is supported by an experienced team and.

Confident and our ability to continue disrupting the industry and our favor with the only consumer centric business model and the pool of industry.

We have delivered 11 years of consecutive annual net sales growth and adjusted EBITDA margin expansion and have a clear path to continued its growth trajectory.

Looking ahead longer term over the next 3 to 5 years, we expect to deliver the following net sales growth of 10% to 12% adjusted EBITDA growth of 12% to 15% and adjusted EBITDA margin improvement of about 500 basis points.

These compelling targets are driven by our consumer driven strategy the material and conversion of fiberglass our capacity investments and our disciplined approach the price and cost management.

Truly believed that we're only scratching the surface of making high quality pool and attainable luxury around the world. We look forward to executing on our growth strategy and delivering value to our shareholders. The future for leatham is very bright and with that operator. Please open the line for questions.

Sure.

Ladies and gentlemen at this time well begin the question and answer session.

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If you are using a speaker phone and we do ask you. Please pickup your handset before pressing the keys to ensure the best sound quality.

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We'll pause momentarily to some of the roster.

Okay.

And our first question today comes from Matthew Bouley from Barclays. Please go ahead with your question.

Good morning, everyone and congrats on the results and on the first quarter out of the gates here.

So first question on that note with the.

The IPO and deleveraging event sort of in the rearview mirror.

Scott you talked at the top about sort of having the resources now to I guess affect your goals around boosting fiberglass adoption can you speak a little and.

In light of all of that just about sort of your wishlist here in terms of the next leg of investments is it more to come around digital efforts your growth Capex plans.

And even how youre thinking about the M&A pipeline post the IPO. Thank you.

Yes, so good morning, Mac of the talk to you again here. This morning, So I think it's going to be more of the same we're going to continue to invest in growth Capex both of the book.

<unk> focused on fiberglass and staying ahead of the demand curve, we believe with the digital investments and our strategy, we're making educating the consumer on the benefits of fiberglass will continue on that will drive the demand and to go along with let's say the third pillar of its all about the dealers know continuing to sign up premier dealer.

And all of our Grand dealers and making sure we've got the capacity with the with the installer base. The meet all of that demand we're driving for them.

Perfect much appreciated the second 1 actually a good segue I wanted to ask about the strategic dealer partnerships you made a comment at the top as well about I think you said of significant acceleration. There is there is there any numbers you could put around.

And the recent trends with the Lytham Grand program.

And here into June and maybe broader if you could kind of tie that in with where you think these installers are today from a labor perspective.

And in terms of their ability to meet all of the strong man.

Yes, so Matt we're not going to discuss specific numbers on the number of dealers. We are signing up but I think we're pretty confident to say, we're outpacing prior year on the grand deal or conversion going extremely well, we're seeing great growth out of that base of dealer the premier pools, and spas relationship and we've done of strategic session with.

That team again outpaced and expectations there with the number of dealers, we're converting the pace of fiberglass.

The conversion with that partnership and let's not forget about the morale and expansion of North America as well, we're standing that up simultaneously as that moves forward and we're just seeing great progress on all 3 of those fronts and then the dealer standpoint with labor that's the great benefit of fiberglass right. They can use a lot less labor.

Get a fiberglass pool installed and the ground versus the comparable concrete pool. So its actually a benefit for them to make that conversion to get more pools installed for consumers.

Great well, thank you for taking the questions and congrats again guys. Thanks.

Thanks Matthew.

And our next question comes from Josh <unk> from Morgan Stanley. Please go ahead with your question.

Hey, good morning, guys and congrats on being live here.

Thanks, Josh.

Great.

So maybe just a follow up on the <unk> question.

The understanding you don't want to get into too many specifics here, but.

Maybe just the progress report on all of the folks that you have signed up over the last probably 3 to 9 months I would imagine have been pretty solid given the market backdrop.

How is that kind of seasoning process gone.

The installs per deal or is that something thats ratcheting up too.

Or should we just kind of pay attention more to the or sign ups I'm just trying to get a feel for how many of these folks that are coming in are sort of hitting the ground running versus dipping a toe in the water, yes pun intended on that as well.

Okay.

And I like that 1 Josh we might use that in the future again.

And again without getting the specific numbers again back back for the strategy right at signing up new dealers, but it's also working with the existing dealer base and getting them to grow getting from let's say 1 install a week. The 2 installs of the week eventually the 5 installed the week of that pool of day getting built and the ground. So our sales.

Team and business consultants are working with the dealer partnership we're holding more and more boot camps with the dealers. The train them on what is the perfect process for installing the pool. The maximized the number of installs. They can get so it's both aspects of that and I would just say on all fronts, it's gone extremely well for us.

Got it that's helpful.

And then just thinking about some of the kind of various pinch points, whether it's inflation on the material side or labor.

Transportation and kind of all of the things we hear about across the.

The universe here.

How should we think about the phasing of margins or incremental margins as we move through the year. So when do those things you kind of reach maximum pain point and when do you see them sort of improving.

Yes, so Josh I'll address the pinch points and I'll, let mark kind of talk of about the margin and I think when you look at inflation part of our model is our price increase the stay ahead of inflation and the marketplace and.

We teach that all the way through the supply chain with our dealers for the consumer. So I think were and are really good position there and is to continue to expand margins like we have historically.

Material that we mentioned a band of struggled across the board for every industry not just the.

Pools of let's say late zone, and again I think our supply chain team has done a very good job managing through that to ensure we have all of the material. We need labor continues to be a battle on many fronts, but we've hired over 350, almost 400 employees and over the last several months, we will continue to add people into our facilities and.

And we grow it has not been of constraint for us at this point and I think overall when you look at where we're headed.

I think we will continue to see nice growth throughout the rest of the year and it's all about just managing the business and that.

The late and teams a great team that's what the big of paid to do every day, we manage those channel we manage those challenges and we're not going to let us let us stop ups and mark amount of comment a little bit on the margin.

Hey, Josh Oreo.

So Scott yes, we're.

Very pleased with the first quarter results and the margin expansion that we that we saw and the quarter.

Josh and we did start seeing some of the impact of inflation both on the raw material side is labor as well as labor, we would expect that to continue.

Throughout the year, it's reflected in our guidance.

As Scott mentioned, we believe that through productivity and price, we can continue to find ways to offset that and.

And full year guidance, we're talking about 80 to 150 basis points of margin expansion. So as we go through the year, we would expect to be able to manage our way through that and.

And the deliveries of the guidance.

Great appreciate it guys and best of luck.

Sure. Thanks, Joe Thanks Assia.

And our next question comes from Susan Macquarie from TFS. Please go ahead with your question.

Thank you good morning, and let me add my congratulations to everyone.

Thanks Suzanne.

Yeah, Mike.

The first question is just kind.

The building on the last question around inflation and pricing can you just kind of remind us of how we should be thinking about the timing and terms of some of these costs flowing through the P&L, where you are in terms of the pricing and how youre thinking about price versus cost as we move through the quarters. The other.

Coming up.

Yes.

And again back to what we've shown historically.

We stay ahead of the inflation with price, which has allowed us to continue to expand margins historically and what <unk> seen here and the first quarter and that trend will be reflected through the rest of 'twenty, 1 and the guidance. We've provided we've announced 3 price increases through the year now so I think youll continue to see the phase in and I think the.

The safe bet to say is that those price increases will continue to outperform the inflation.

We will not get caught behind at any point and a quarter.

From a margin compression standpoint, Mark any color you wanted to add there or the only thing I would add I think thats, well said, Scott and the only thing I would add is Susan as you might imagine there might be some quarterly timing differences, but.

As we look at the full year.

And certainly expect to be able to outperform and.

And inflationary pressures and deliver more margin expansion.

Okay. That's helpful and then.

And you obviously have some some pretty interesting plans as you think about ramping your capex to meet this growth debt coming due can you give us an update on where you are in terms of adding some of that capacity and how we should be thinking about that coming online over the next couple of quarters.

Yes, So we'll continue to accelerate those investments versus what we did and the first quarter.

But again like we've talked to all of you guys over time.

And it's about gauging the expansion of the investment when we need them bring them on the exact right time, Theres, a lot of small investments and molds and equipment delivery of equipment, increasing efficiency and capacity of the different facilities now expanding the footprint of existing facilities and again continuing to evaluate.

And the footprint and from a regional basis, so where we might need to expand over time I think youll see that continue to accelerate here through through the next couple of quarters. When you look specifically at let's say the full year guidance number for Capex and what's been spent year to date, but again, we'll be very judicious on our approach with that is we have been historically.

Okay, great. Thank you.

Thanks, Susan.

Once again, if you would like to ask a question. Please press star and then 1 to withdraw your question you May press Star and 2.

Our next question comes from David.

Bellinger from Wolfe Research. Please go ahead with your question.

Hey, guys, congrats and nice quarter here.

I apologize. If this was mentioned earlier, we talked a lot about pricing here and you mentioned and kind of today your ability to raise prices and offset the pressures elsewhere.

And just talk about what you've done historically.

Have you raised prices across every category and really how much pricing power, we can see now and the marketplace.

Is there any or has there been any pushback to date.

So again, if you go back historically on price, we've averaged around 3% of year historically.

When we pushed price increases we do look at it by product line based on where we're seeing the inflationary trends. So we can expand margins and every product line not just on a total basis and I would say is we've pushed the second and third price increase throughout the year, it's varied by product line and Thats varied percentage wise.

And some cases, we've seen mid mid mid single digit increases and I'm, a little bit higher AUM and particular REIT.

Products segments and.

And look I think we've done a good job educating our dealers and given the visibility of what's coming down the pipeline with price was there pricing projects for the consumer and Theyre looking at a project thats, 3% to 6 or 9 months out they can pass that price increase off of the consumer as well and look no 1 ever likes of price increase but I think when you are.

Open and disciplined with the approach of being the industry leader like we are.

It flows through the entire supply chain.

Understood and then.

And then as my follow up here on the the introduction of the full year guidance.

Can you walk us through how much of that is reflective of the better Q1 result, and also of your outlook for the remaining quarters of the year have those moved up versus.

And the internal expectations and based on everything that you've seen the pivot.

The data at this point.

Hey, David This is mark and <unk>.

Thanks for the question on the guidance.

The guidance our initial guidance that we put out the range of $5, 80% of $6.20.

Absolutely reflects what we saw in Q1.

The guidance, we will generate somewhere between 40 and 50% year on year growth with margin expansion.

Do expect to see tougher second half comps as we go through the year.

The impact of the pandemic last year and the first half of the year and some of the early results that we're seeing from the 4 pillars of the business that Scott mentioned so.

Yes, our guidance.

Is baked into what we saw and the first quarter.

Great. Thank you very much.

Thanks, David.

Okay.

Our next question comes from Tim <unk> from Baird. Please go ahead with your question.

Hey, gentlemen, and good morning, and let me add my congrats.

Maybe just the first question I had.

We're hearing that a lot of anchor out installers are out until 'twenty 2 already in terms of pool building.

And I'm just curious have you seen any evidence that <unk>.

Consumers are shifting of fiberglass as a result of those extended lead times already for presumably Gahnite builders.

Yes, Tim if you made the call those dealer resolve give me a call later and I'll give you a dealer who is not sold out and give you a full this year.

And we do anecdotally, we do we do hear that quite a bit and.

And I just dealt with the consumer up and Maine, who call the deal or they were out and we were able to quickly call of dealer and New Hampshire is actually 1 of our Premier dealers, who said I have got the ability to put that all of them for you. So there is a lot of flexibility there and is out there from place to place.

And the benefit is when a homeowner calls and want the pool.

Again, saying, we can get you a fiberglass pool of lot faster the dealers converting the putting more fiberglass and to get more pools and the ground for consumers to meet that demand and when you think about the buying cycle of a swimming pool, you're not waking up tomorrow, and saying I want a swimming pool next week that just doesn't have the you may make the decision of we're going to get a pool.

But you start plan and that project over time, and I think thats, what Youre seeing is people who are now coming into the summer months. This is kind of that next well buying decision starting to heat up the are saying they want of pool and look a lot of dealers are kind of booked through the rest of the summer, but I can state probably 20 examples of where dealer said if you pick for.

Fiber glass I can squeeze you win on Saturday I can squeeze you in 4 weeks from now so that's the big benefit of the sole material conversion strategy.

Faster install at Fluke and Glenn 1 day to 5 days versus a <unk>.

<unk> versus a steel or polymer wall vinyl pool for that 3 to 6 month build cycle for a for a concrete pool and think about the labor constraint and trying to build the concrete pool. The number of subs you need it just makes that situation much more difficult for.

Of those dealers and Thats. The success I think we're seeing with premier pools, and spas with Paul and his team with the number of franchisees converting to do fiber glass to get all the pools and the ground for us.

Okay, Okay, very good and then I guess.

Second question is just kind of big picture, but when you think of the new the new pool construction market and kind of where we are today versus call. It 150000 pools and that the industry kind of average historically what had been the constraints kind of getting back to those prior average is and do you think there is consumer demand.

And there that gives you visibility to do so.

Yes ill focus on the demand side, because I think that's the easier 1 theres a ton of demand out there to meet those needs to get back to those levels, probably more demand and installation capacity and if you look at the stack, there's 90 million homes, the existing homes and the U S debt do not have a swimming pool today that have the backyard capability for 1.

And when you then look at the interest and swimming pools and the number 1 the highest consumer satisfaction purchase you can make for both pretty much anything else thats out there of kitchen remodel landscape and redo buying a car so with the very strong high consumer interest and investment in the backyard at 2.3 ex R&R spend and the backyard and has been hot for.

For a long time and has continued to accelerate migration from the urban areas of the suburbs will generate more demand and the housing market and when you kind of look through the.

Of that 90 million homes and convert back to how many people are likely to buy a swimming pool and the next 5 years, and then heavily discount that by a significant backlog of 80%.

Equate to over 1.5 million pools of demand the year over the next 5 years. We're building what 96000 pools last year will target probably a 105 to 110000 pool installed this year. So it's not a demand issue, it's a matter of educating the home or on the benefits of the swimming pool Wi fiberglass.

Wildly from fiberglass pool, and then having the best of dealer network out there with our brand dealers of Premier pool, and spa dealers and and our neuro and dealers were standing up and just leading them down that path to make that the purchase decision.

Okay, Okay great.

And I'll hop back in Q2 of luck on a sort of you guys.

Alright, thanks, Thank you.

No.

Our next question comes from Ken Zenner from Keybanc Capital markets. Please go ahead with your question.

Good morning, everybody.

Hey, good morning, Ken.

Just wanted to go over a couple of different points here. So.

And lots of conversations with clients and the kind of want us to use this for him to flesh out some of those.

Quarterly questions as well as these broader ones that have come up.

And your capacity the obviously with the high growth.

You have many different plants. So it's not just 1 answer and focusing specifically on in ground pools can you talk to kind of what your network looks like I know you are adding capacity, but can you give us an example of what looks like.

A stressed out plant and what Youre doing there versus a more smooth running plan and the quarter, where you had sales going up.

And the doubling and in ground pools, just give us a little context for that if you and Scott.

Yeah, So Ken I think the the 1 the 1 easy example, the give and it's 1 we share quite a bit and it's probably 1 that our dealers and consumers struggled with from time to time they want a particular.

Model, let's say and I'll go to my favorite model of the pool Io and the late and Fiji. So they want of Fiji and it's coming out of just because they plant and so I'm not going to be specific with the facility it's of high demand model and bold.

And the lead time on that May have gone from a typical 2 week to let's just take 2 months and that particular model. So of homeowner will call and want it and they'll say and sold out so what do we do we will add another Fiji mall, which is a ex dollar capacity and vessels at the sub $100 of dollar of investment will put another mold.

And of that facility and we can now get our lead time back down the 2 weeks. So those of the things we're working with it's kind of a very tactical model by model plant by plant situation and other example would be and we dealt with this yesterday afternoon and the office here, we need to add some more trucks to deliver pools and a few facilities.

The matter of.

Adding a big rig of trailer of pilot car and being able to ship 5 more pools of week out of that facility because we have the demand there. So those of the types of things where do and its not major constraints, we have plenty of permitted capacity throughout the entire fiberglass network and that applies to all of our vinyl plants are.

Youll play and our polymer plant and it's just those 1 off of particular pool molder model and our dealers I think I've done a really good job, sometimes switching of homeowner that want that will right now from the BG to Panama, because the very similar shape and size and they can get it quicker.

Very good.

The second.

Okay, if we could talk about regional dynamics a little bit.

Obviously with the national footprint, which was built up from your acquisitions and the path.

Can you talk about how youre seeing regional trends and perhaps how.

Obviously, you are the second largest competitors added some capacity through the planned purchase but could you talk about how.

Regional demand is occurring as opposed to or intertwined with competitors own behavior, because they don't have necessarily of the capital that you do which 1 would think of as an advantage for you.

Yes, I think regionally, we're seeing strength across the board and every region in the territory and we plan.

Highlight 1 area that is growing faster than another and I think you could argue we're seeing great success and the stand States, Florida, Texas, Arizona, Las Vegas, Nevada, California, with fiberglass, but again thats all related debt that material conversion story right those of the heavy concrete state and that's where we're attacking the.

And the concrete dealers to convert from that to fiberglass. So I think we're seeing really nice growth there, but overall and you look in general we're growth pretty evenly across all territories, we're actually seeing really really great success and the Canadian market is while it does not think the U S, but I think the neuro and franchisee.

And the classic dealers up there, we're seeing phenomenal growth and conversion rates of fiberglass and I think with the shorter pool season up there the benefit for our Canadian homeowner is they can have that fiberglass pool and a week and they can leverage their summer versus usually they lose and entire summer building another type of pool and and.

And the investment for the following year.

Rob based strength across the board and even if I looked down and Australia, New Zealand 10, it's the same concept I mean, I think we're seeing strong growth in every territory and region down there and really nice trends overall.

Perfect.

Out of the things I know you guys talked about U S sales and international but could you clarify.

International versus let's say, just North America, which would include Canada just to maybe get some.

Context around.

And what is North America versus Australia.

New Zealand et cetera, or do you feel comfortable doing that.

Well, yes, I mean ballpark, Ken and I think this was in the S..1 as well if you look at International and Canada, New Zealand, Australia, it's around 20% of our total revenue and we can.

Can follow up of the specific number for you later.

Around 20 think of it that way.

Great and my last question is this you touched on and with Canada, but the northern markets not only can benefit from the quicker install but because of <unk>.

Temperature differentials tie of cracking et cetera et cetera.

There are higher is there something about the weather that might create.

Okay.

The more propensity for for those non seasonal markets to use fiberglass and not only because of the construction time, but because of the weather impact on kyle's cracking et cetera.

Look I would say in general that applies to any place and I want to make it specifically a cold weather climate. The performance of of fiberglass pool is better than any other any other pool type in any type of climate and it will outperform of vinyl line of pool and will outperform of fiberglass pool has at 28% total lower upfront.

Cost of 43% total lifecycle cost lower than the other side of a concrete pool and the benefits across the board of great and once you build that pool and that's in the ground.

And have to do anything to it ever again with the concrete pool Youre right and I know you own the concrete 1 of your goals for refurbished it is going to crack of you're going to have the refinish. It youre going to have to do that every 10 to 12 years of vinyl line of pool and every 8 to 10 year replacement of liner fiberglass and I'd like to just say set it and forget it right. Its the easiest will the own and.

Pain out there.

Thank you gentlemen.

And welcome to debt.

And ladies and gentlemen, our next question comes from Keith Hughes from true. Please go ahead with your question.

I'm, sorry, I was on mute there.

I guess my question.

Gets back to.

The pacing in the quarter and the price increases you announced.

Do you think youll get back to parity.

The raw material inflation, thats coming and the second quarter by the end of the quarter, we will extend in the second half of any sort of book on that would be helpful.

And Mark how are you how are you.

And you're good to hear from you. So thanks. Thanks for your question.

What I can mentioned our share with your key for us and.

The first quarter.

Where we started to see some.

Some of the impact from inflation, we were able to stay ahead of inflation through price and productivity of the first quarter.

We would expect that to continue through the balance of the year based on the pricing actions we've already taken.

But what we are monitoring the situation and managing the inflation, both on raw material and labor very closely.

And to the extent that we need to take more price during the year to continue to stay ahead of that we will do that.

And we have baked that expectation into our guidance as we look at the margin expansion and we believe we can deliver for the year.

Okay. Thank you.

And welcome.

And ladies and gentlemen, with that we will conclude today's question and answer session I would like to turn the floor back over to Scott Richards for any closing remarks.

Yes. Thank you, so hey, I would like to thank everyone for joining us. This morning for Les for his first earnings call. As you just heard we are delivering strong results, which is the testament of the team's hard work and dedication each and every day, we are of great business and growth strategy that will continue to deliver over time as we drive the material conversion of fiberglass and the pool.

And of choice for both homeowners and dealers, we look forward to providing another update on our <unk> earnings call again. Thank you for your time today and have a great day.

Ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending you may now disconnect your lines.

Okay.

[music].

[music].

Good morning, everyone and welcome to the you laid them group incorporated first quarter 2021 earnings conference call.

All participants will be in a listen only mode since the data.

Systems, and placing our conference specialist by pressing the star key followed by zero.

After todays presentation, and there will be and opportunity to ask questions.

Ask the question you May press Star and then 1 using a telephone keypad.

Withdraw your question you May press Star and 2.

Please also note today's event is being recorded.

At this time I'd like to turn the conference call over to the call per day Laythan Investor Relations Representative Ma'am. Please go ahead.

Thank you operator, good morning, everyone welcome to life, and Q1 fiscal 'twenty 'twenty, 1 and earnings call.

Earlier. This morning, we issued our earnings press release, which is available on the Investor relations portion of our website.

On today's call are leatham, President and CEO, Scott Rydzewski and CFO Mark for said.

Following their remarks, we'll open up the call for questions.

During this call the company may make certain statements that constitute forward looking statements.

Such statements reflect the company's views with respect to future events as of today and are based on our management's current expectations estimates forecasts and projections and assumptions beliefs and information.

These statements are subject to a number of risks and uncertainties that could cause actual events and results to differ materially from those described and the forward looking statements.

For further details concerning these risks and uncertainties. Please see our final prospectus for initial public offering filed with the SEC on April 'twenty 6 'twenty 'twenty 1 the.

The company expressly disclaims any obligation to publicly update or review any forward looking statements, whether as a result of new information future developments or otherwise, except as required by applicable law.

In addition, during today's call of the company will discuss non-GAAP financial measures, which we believe could be useful in evaluating our performance.

Reconciliations of adjusted EBITDA to net income calculated under GAAP can be found in our earnings press release and will be included in our form 10-Q for Q1.2021.

I'll now turn the call over to Scott Rydzewski.

Thank you Nicole good morning, and welcome until late in the first earnings call of a public company. We completed our IPO in late April and I wanted to take this opportunity to think of the entire team who supported that successful process. Several years ago, we sell on the journey to re imagine the pool by and experience for customers.

And the increased awareness and adoption of fiberglass pools.

As a public company, we now have greater opportunities and the resources to continue on that path before we dive into the quarter I'd like to share a little more about Nathan and our industry.

Listen as the largest designer manufacturer and marketer of residential and ground swimming pools, and North America, Australia, and New Zealand.

And we're the leader and the fiberglass product category of the residential and ground swimming pool market in North America with over 50% share.

We are transforming our industry with our unique direct the homeowner model, which places the consumer at the center of everything we do our strategy of power by our leading brand and superior suite of digital technologies that engages the homeowner drives them to the laser Brown and then watch them through the decision making process of.

<unk> selection.

We have been able to deliver purchase ready leads for dealers lengthening of the only pool confidence has established the direct relationship with the homeowner and.

Our strong brand awareness and go to market strategy have enabled us to build the largest dealer network and North America and continue to drive the material converging towards fiber the last pools.

The pool market dynamics are very attractive with strong underlying growth we are positioned to benefit from the favorable long term consumer demand trends driven by continued homeowner investment and outdoor living.

We are especially excited about the opportunities when the fast growing the fiberglass segment as we drive the education of the benefits of fiberglass over concrete, including superior lifetime performance, lower upfront and the lifecycle cost faster and easier installation premium quality and aesthetics and easier and maintenance.

Along with less chemical usage.

Lethal would not be the company. This today without our dedicated team members for their hard work and commitment, especially in the face of what has been and incredibly challenging and uncertain time over the last year is key to our success.

And are heavily invested in our employees wellbeing and strive to ensure our employees know how much the meaningful way zone.

And our future. So I'm excited to share the belief and was recently awarded the 2021 top workplaces are by the Albany Times Union, we are honored and humbled to have received this recognition.

Let's now turn to a high level overview of our first quarter results. Our strong results are a testament to our team's hard work and dedication to all of our mission of making high quality and ground swimming pool and attainable luxury for every homeowner's backyard.

Net sales for the first quarter grew from $51.1.002 million 20 to $148.7 million. The Q1 of 2021, representing a 97.6 million or 191% increase.

This translated to strong adjusted EBITDA growth, reaching 33.5 million and the first quarter of 2021, increasing by $35.4 million from the prior year period.

And we think about our long term growth strategy and our results will be driven by 4 strategic pillars.

Strong consumer demand as a result of our brand and digital initiatives.

And enhancing our leadership position across our entire product portfolio.

3 accelerate and the material conversion for fiberglass and.

And for expanding our strategic partnerships with the <unk> exclusive dealers.

Starting with the first pillar, we continued to drive purchase ready leads for our dealer partners by focusing on our digital initiatives, which are resulted in new customer acquisition metrics that continue to outpace our expectations.

We are seeing greater search ability and visibility to our search engine optimization efforts with Latham ranking on page 1 for over $2 and key words.

Also we are excited to report, we just launched our new plenty of pools section on our website.

Section provides a unique immersive experience for consumers.

And the accrual and backyard project and.

And also had 2 new interactive pieces the pool cost estimator that enables users to build their dream pool and generate an estimate for it and other interactive piece is mildly so our first logged and area for homeowners, where they can save their preferences and options for their dream backyard as well all of the estimate of.

The scenarios that they may of 1.

Moving to the second pillar, we offer the industry's broadest portfolio of pool and related products, including in growth swimming pools pool liners and pool cars, we hold the number 1 market position and North America and every product category, we compete in and continue to focus on strengthening.

Our leadership position.

Third material conversion is key to our growth.

See significant opportunity.

And <unk> to accelerate the trend from concrete pool, the higher quality of fiberglass tools, we remain focused on driving awareness and education with homeowners and dealers and the many benefits of fiberglass presents.

For the last is extending the pool of installations season by giving dealers the ability to install earlier and later in the year, our dealers are investing and their business to increase their capacity and capitalize on the opportunities within the fiberglass and fac, we had dealers installing fiberglass pools in new England.

Starting as early as of February of this year.

Today fiberglass accounts for about 18% of the U S residential and ground swimming pool market as compared to Australia, where 70% of all in ground pools of fiberglass and we have a long runway ahead of us and are very confident that we can drive that number of 25.

By 2023.

Lastly, we are committed to maintaining and growing our strong dealer relationships and fat and the first quarter. We saw a significant increase and new exclusive lytham Grand dealers versus the same period last year, demonstrating our growing brand power.

Additionally, we launched and the relative franchising model and the U S and the first quarter, which has had a very nice start and the onboarding of many new franchisees.

As we look ahead, there continues to be some headwinds and our supply chain as it relates to both materials and supply and inflation.

This is due in large parts of the deep freeze and taxes, which caused shortages and many resin based products.

Ongoing challenges related to transportation and the overall tightness and the supply of Mei commodities. The day. This has had a minimal impact on and our ability to deliver on our strong sales and earnings growth.

And our team has done a great job of managing this and it is something we will continue to monitor and offset with price and productivity.

And with many other companies. We are also facing a very tight labor market, which we believe will be alleviated over time.

Despite these headwinds we are very optimistic about 2021 as reflected in the guidance that mark will share with you.

A very large addressable market and the strong underlying secular trends are continuing.

Outdoor living and remains the fastest growing repair and remodel segment and we see that trend reflected and our business. As a result, our dealers are seeing strong future demand into 2022, we.

We are also accelerating our capex investments and fiscal 2021 to continue our fiberglass expansion and to stay ahead of the demand curve.

We also have multiple levers to drive further growth across our platform by continuing to leverage our brand and the digital assets and enhancing our leadership position across our products.

Salary and the pace of fiberglass material conversion and prioritizing strategic partnerships and the exclusive dealers.

With that I will turn it over to mark to take a deeper dive into our financials Mark.

Thank you Scott and good morning, everyone.

Today I'll be reviewing our first quarter fiscal 2020 on the results and our outlook for the full fiscal year.

Please note that all comparisons are on a year over year basis compared to Q1 of the fiscal 2020 <unk>.

Additionally, Q1 of 2020 results do not include the acquisition of Gli or our investment and premier pools and spas as both of those secure and Q4 of 2020.

Starting with our first quarter results Q1 was a strong quarter as we continued to benefit from strong consumer demand and the execution of our growth strategy net.

Net sales were up by $97.6 million or 191%.

The $148.7 million.

Primarily attributable to continued strong consumer demand and order volumes across our product portfolio.

The expanded strategic partnerships with Latham exclusive dealers.

Our acquisition of <unk> and price increases and.

In addition, our year over year strength reflects lighter comps amid the initial headwinds from the pandemic last year.

If we include <unk> sales and the first quarter of last year, our Q1 sales growth would be 152%.

<unk> very strong organic growth.

Looking at net sales by product category in.

In ground pools increased 218% and $93.6 million.

Covers decrease of 118% $24 million.

And liners increased 192% to $31.1 million and.

The real strong performance across the portfolio.

Gross profit increased by $42.3 million to $52.4 million driven.

Driven primarily by the strong first quarter sales growth.

Gross margin increased to 35, 3% of sales compared to 19, 8% of sales last year, driven by higher utilization of our fixed cost structure.

Price increases and a mix shift towards in ground pools, partially offset by inflation and the cost of our raw materials.

Selling general and administrative expenses increased by 11, 7 million or <unk> 76, 1% to $27.2 million or 18, 3% of net sales.

Of the year over year increase of about half was related to IPO cost.

Talk based compensation expense and the acquisition of <unk>.

The balance was mainly driven by wage and headcount increases from the addition of customer facing roles to support our expansion and by incentive plan accruals, reflecting our strong start to the year.

Net income was $8.5 million for 8 per share as compared to a net loss of $15.5 million of last year and.

Adjusted EBITDA increased by $35.4 million to $33.5 million and the quarter and adjusted EBITDA margin and expanded the 22, 5% to sales.

Now, let's turn to the balance sheet.

As of April 3.2021, we had cash and cash equivalents of nearly $20 million 14 million undrawn on our revolving credit line and total debt of $406 million.

Our net debt to leverage ratio was 3.3 times as of April for 2021.

Please note that we define net debt as total debt less cash.

The company typically uses cash to support operating activities in the first quarter and it was no exception. This year with net cash used in operating activities of $41 million, primarily driven by higher receivable levels tied to our increased sales.

Total expenditures totaled $4.6 million compared to $2.8 million last year.

Primarily as the result of multiple projects to increased fiberglass manufacturing capacity.

Subsequent to quarter and we completed our initial public offering of 23 million shares of common stock inclusive of 3 million shares sold pursuant for the full exercise of the underwriters option to purchase additional shares.

The aggregate net proceeds received by the company from the IPO of $400.1 million after deducting underwriting discounts commissions and other offer and costs.

We used the net proceeds to pay down of $152 million of our term debt and repay the $16 million outstanding on our revolving credit facility, which reduced our net average debt leverage ratio to about 1.5 times.

We also use the net proceeds to repurchase of nearly $12.3 million shares of common stock from certain existing shareholders for $216.7 million and we intend to use the remaining $14.7 million to fund general corporate requirements, including working capital.

Now, let's turn to our guidance.

As noted in our earnings release, we have introduced guidance for the full year fiscal 2021, including.

Net sales and the range of $580 million to $620 million reps.

Representing annual growth of between 44% and 54%.

If we were to include <unk> results for all of 2020.

Net sales growth would be between 25 and 34%.

Adjusted EBITDA of 126 to 138 million with adjusted EBITDA margin is projected to increase 80 to 150 basis points from 2020.

To a range of $21.7 to 22, 3% of sales.

And capital expenditures of 28% to $36 million, driven primarily by fiberglass capacity expansion initiatives.

While we won't be providing quarterly guidance to day or going forward. Historically, there is some seasonality and our business.

And we typically do more business during the warm summer months Q2 and Q3.

Which our peak months of swimming pool use <unk>.

The installation and remodeling and repair activities.

The seasonality is being somewhat mitigated by our fiberglass growth, which allows for installation and bolt earlier and later in the season.

Of 2020 was a bit of an anomaly to the typical year.

As our economy shut down for a period of time and the first half of the year as the result of the global pandemic.

This market event combined with the early results of our unique direct of homeowner model drove very strong second half growth of the business as a result, our year over year comps will become more difficult as we move into the second half of the year and is reflected in our full year guidance.

We expect adjusted EBITDA margin expansion will be led by sales growth and a mix shift benefit towards our fast growing fiberglass segment.

We also anticipate facing continued headwinds related to supply chain constraints and the labor pressures, which we will look to counter with price increases and productivity initiatives.

We will continue to invest and resources to support the growth of the business and enhance the customer buying experience.

Additionally, we are accelerating our investments and the fiberglass manufacturing capacity to stay ahead of the expected demand curve.

Please note that a significant noncash stock based compensation expenses, which will lead to a meaningful net income loss for the year are and add back and arriving at our adjusted EBITDA guidance.

As our onetime costs associated with our IPO and other select adjustments, which are not reflective of the ongoing underlying performance of the business.

Our outlook for revenue growth and margin expansion reflects continued strong consumer demand as homeowners and invest in the backyard and growth across our product portfolio driven by the strategic pillars, Scott shared with you earlier.

Scott I'll turn it back to you for closing remarks, thanks Mark.

And the Amazing company is supported by an experienced team and I am confident and our ability to continue disrupting the industry and our favor with the only consumer centric business model and the pool of industry.

We have delivered 11 years of consecutive annual net sales growth and adjusted EBITDA margin expansion and have a clear path to continue its growth trajectory.

Looking ahead longer term over the next 3 to 5 years, we expect to deliver the following net sales growth of 10% to 12%.

Just the EBITDA growth of 12% to 15% and of.

Adjusted EBITDA margin improvement of about 500 basis points.

These compelling targets are driven by our consumer driven strategy the material and conversion of fiberglass our capacity investments and our disciplined approach and price and cost management.

I truly believe that we're only scratching the surface of making high quality pool and attainable luxury around the world. We look forward to executing on our growth strategy and delivering value to our shareholders. The future for late them is very bright and with that operator. Please open the line for questions.

And.

Ladies and gentlemen at this time, we will begin the question and answer session.

A question you May press Star and then 1 using a telephone keypad if.

If you are using a speaker phone and we do ask you. Please pickup your handset before pressing the keys to ensure the best sound quality.

So the dollar your question you May press, the star and too.

Once again that the Star and then 1 day joined the question for you.

We'll pause momentarily to some other author.

Okay.

And our first question today comes from Matthew Bouley from Barclays. Please go ahead with your question.

Good morning, everyone.

Congrats on the results and on the first quarter out of the gates here.

So first question on that note with the.

The IPO and deleveraging event sort of in the rearview mirror.

Scott you talked at the top about sort of having the resources now to I guess affect your goals around boosting fiberglass adoption can you speak a little and.

In light of all of that just about sort of your wish list here in terms of the next leg of investments is it more to come around digital efforts your growth Capex plans.

And even how youre thinking about the M&A pipeline post the IPO. Thank you.

Yes, so good morning, Mac of the talk to you again here. This morning, So I think it's going to be more of the same we're going to continue to invest in growth Capex both of the both.

The focus on fiberglass and staying ahead of the demand curve, we believe with the digital investments and our strategy, we're making educating the consumer on the benefits of fiberglass will continue and that will drive the demand and to go along and let's say the third pillar of its all about the dealers you know continuing to sign up premier dealer.

And all of our Grand dealers and making sure we've got the capacity with the with the installer base. The meet all of that demand we're driving for them.

Perfect much appreciated the second 1 actually of good segue I wanted to ask about the strategic dealer partnerships you made a comment at the top as well about I think you said of significant acceleration. There is there is there any numbers you could put around.

The recent trends with the late some Grand program here into June and maybe broader if you could kind of tie that in with where you think these installers are today from a labor perspective.

And in terms of their ability to meet all of the strong net.

Yes, so Matt we're not going to discuss specific numbers on the number of dealers were signing up but I think we're pretty confident to say, we're outpacing prior year on the grand deal or conversion going extremely well, we're seeing great growth out of that base of dealer the premier pools, and spas relationship and we've done of strategic session with.

That team again outpaced and expectations there with the number of dealer, we're converting the pace of fiberglass.

The conversion with that partnership and let's not forget about the morale of expansion and North America as well, we're standing that up simultaneously does that moves forward and we're just seeing great progress on all 3 of those fronts and then from the dealer standpoint with labor. That's the great benefit of fiberglass right. They can use a lot less labor.

Get a fiberglass pool installed and the ground versus the comparable concrete pool. So its actually a benefit for them to make that converge and to get more pools installed for consumers.

Great well, thank you for taking the questions and congrats again guys. Thanks.

Thanks Matthew.

And our next question comes from Josh <unk> from Morgan Stanley. Please go ahead with your question.

Hey, good morning, guys and congrats on being live here.

Thanks, Josh.

Great.

So maybe just a follow up on the deal question.

The understanding you don't want to get into too many specifics here, but.

Maybe just the progress report on all of the folks that <unk> signed up over the last probably 3 the 9 months I would imagine have been pretty solid given the market backdrop.

How is that kind of seasoning process gone with installs per deal or is that something thats ratcheting up too.

Or should we just.

The pay attention more to the or sign ups and I'm just trying to get a feel for how many of these folks that are coming in are sort of hitting the ground running versus dipping a toe in the water, yes pun intended on that as well.

Okay.

And I like that 1 Josh we might use that in the future.

And I'll get into specific numbers again back back for the strategy right at signing up new dealers, but it's also working with the existing dealer base and getting them to grow getting from let's say 1 install of weak the to install of the week. Eventually the 5 installed the week of that pool of day getting built and the ground. So our sales team.

And and business consultants are working with the dealer partnership we're holding more and more boot camps with the dealers. The train them on what is the perfect process for installing the pool the maximized the number of installs they can get it.

Both aspects of that and I would just say on all slot, that's going extremely well for us.

Got it thats helpful and.

And then just thinking about some of the kind of areas.

Pinch points, whether it's inflation on the material side or labor.

Transportation and kind of all of the things where we can.

About across the.

The universe here.

How should we think about the phasing of margins or incremental margins as we move through the year. So when do those things you kind of reach maximum pain point and when do you see them sort of improving.

Yes, so Josh I'll address the pinch points and I'll, let mark kind of talk a bit about the margin and I think when you look at inflation part of our model as our price increases stay ahead of inflation and the marketplace and we teach that all the way through the supply chain with our dealers for the consumer. So I think were and are really good position there and is to continue to expand margins like we have historically.

Eric Lee.

The material that we mentioned a band of struggled across the board for every industry not just the pool.

Pools of let's say late zone, and again I think our supply chain team has done a very good job managing through that to ensure we have all of the material. We need labor continues to be a battle on many fronts, but we've hired over 350 of almost 400 employees and over the last several months, we will continue to add people and to our facilities and.

And we grow it has not been of constraint for us at this point and I think overall when you look at where we're headed.

I think we will continue to see nice growth throughout the rest of the year and it's all about just managing the business and that's the.

The leasing teams of great team, that's what the big of need to do every day, we manage those channel we manage those challenges and we're not going to let us whether at the top ups and mark amount of comment little bit on the margin.

Hey, Josh Oreo.

So thanks, Scott Yeah.

Very pleased with the first quarter results on the margin expansion that we that we saw and the quarter.

Josh and we did start seeing some of the impact of inflation both on the raw material side is labor as well as labor, we would expect that to continue.

Throughout the year as reflected in our guidance.

As Scott mentioned, we believe that through productivity and price, we can continue to find ways to offset that.

And full year guidance, we're talking about 80 to 150 basis points of margin expansion. So as we go through the year, we would expect to be able to manage our way through that.

Members of the guidance.

Great appreciate it guys and best of luck.

Sure. Thanks, Joe Thanks Assia.

And our next question comes from Susan Macquarie from DBS. Please go ahead with your question.

Thank you good morning, and let me add my congratulations to everyone.

Thanks Suzanne.

Yeah.

First question is just kind.

Building on the last question around inflation and pricing can you just kind of remind us of how we should be thinking about the timing and terms of some of these costs flowing through the P&L, where you are in terms of the pricing and how youre thinking about price versus cost as we move through the quarters that are coming up.

Yes.

Susan and getting back to what we've shown historically no. We stay ahead of the inflation with price, which has allowed us to continue to expand margins historically and what <unk> seen here and the first quarter and that trend will be reflected through the rest of 'twenty, 1 and the guidance. We've provided we've announced 3 price increases through the year.

And now so I think youll continue to see the phase in and I think the safe bet to say is that those price increases will continue to outperform the inflation.

We will not get caught behind at any point and a quarter.

The margin compression standpoint, Mark any color you wanted to add there or the only thing I would add I think thats well said Scott the only thing I would add is Susan as you might imagine there might be some quarterly timing differences, but.

As we look at the full year.

Certainly expect to be able to outperform and.

And inflationary pressures and deliver more margin expansion.

Okay. That's helpful and then.

And then you obviously have some pretty interesting plans as you think about ramping your capex to meet this growth debt coming through can you give us an update on where you are in terms of adding some of that capacity and how we should be thinking about that coming online over the next couple of quarters.

Yes, So we'll continue to accelerate those investments versus what we did and the first quarter, but again like we've talked to all of you guys over time.

It's about gaining the expansion of the investments when we need them bring them on the exact right time Theres a lot of small investments and molds and equipment delivery of equipment now increasing efficiency and capacity of the different facilities now expanding the footprint of existing facilities and again continuing to evaluate.

And the footprint and are from a regional basis, so where we might need to expand over time I think youll see that continue to accelerate here through through the next couple of quarters now when you look specifically at let's say the full year guidance number for Capex and what's been spent year to date, but again, we'll be very judicious on our approach with that is we have been historically.

Okay, great. Thank you.

Thanks, Susan.

Once again, if you would like to ask a question. Please press star and then 1 to withdraw your question you May press Star and 2.

Our next question comes from David <unk>.

Bellinger from Wolfe Research. Please go ahead with your question.

Hey, guys, congrats and nice quarter here.

Apologize if this has mentioned the earlier.

Talked a lot about pricing here and you maintained the same kind of today your ability to raise prices and offset the pressure elsewhere.

And can you just talk about what you've done historically.

Have you raised prices across every category and really how much pricing power and can see now in the marketplace and is there any or has there been any pushback to date.

So again, if you go back historically on price, we've averaged around 3% of year historically.

And when we pushed price increases we do look at it by product line based on where we're seeing the inflationary trends. So we can expand margins and every product line not just on a total basis and I would say is we've pushed the second and third price increase throughout the year, it's varied by product line and Thats varied percentage wise and.

And some cases, we've seen mid mid mid single digit increases and I'm, a little bit higher and in particular.

The products segments, and and look I think we've done a good job educating our dealers and given the visibility of what's coming down the pipeline with price was there pricing projects for the consumer and Theyre looking at a project, that's 3% to 6 or 9 months out and they can pass that price increase off of the consumer as well and.

No 1 ever likes of price increase, but I think when you're open and disciplined with the approach of being the industry leader like we are.

Our debt.

It flows through the entire supply chain.

Understood and then as my follow up here on the the introduction of the full year guidance.

Can you walk us through how much of that is reflective of the better Q1 result, and also of your outlook for the remaining quarters of the year have those moved up versus.

And the internal expectations and based on everything magnets and pivot to date at this point.

Hey, David This is mark and <unk>.

Thanks for the question on the guidance.

The guidance our initial guidance that we put out the range of $5, 80% of $6.20.

Absolutely reflects what we saw in Q1.

The guidance, we will generate somewhere between 40 and 50% year on year growth with margin expansion.

Do expect to see tougher second half comps as we go through the year.

The impact of the pandemic last year and the first half of the year and some of the early results that we're seeing from the 4 pillars of the business that Scott mentioned so.

Yes, our guidance.

It is baked into what we saw and the first quarter.

Great. Thank you very much.

Thanks, David.

Okay.

Our next question comes from Tim <unk>.

From Baird. Please go ahead with your question.

Hey, gentlemen, good morning, and let me add my congrats.

Maybe just the first question I had.

We're hearing that a lot of anchor out installers are out until 'twenty 2 already in terms of pool building.

And I'm just curious have you seen any evidence that.

Consumers are shifting of fiberglass as a result of those extended lead times already for presumably Gahnite builders.

Yes, Tim if you made the call those dealer resolve give me a call later and I'll get you a dealer who is not sold out and give you a full this year.

We do anecdotally, we do we do hear that quite a bit and again I just dealt with the consumer up and Maine, who call the deal or they were out and we were able to quickly call of dealer and New Hampshire is actually 1 of our Premier dealers, who said I have got the ability to put that all of them for you. So there is a lot of flexibility there and is out there from place to place.

But the benefit is when a homeowner calls and want the pool.

Again, it's a and we can get you of fiberglass pool of lot faster the dealers converting the putting more fiberglass and to get more pools and the ground for consumers to meet that demand and when you think about the buying cycle of the swimming pool, you're not waking up tomorrow, and saying I want the swimming pool next week that just doesn't have the you may make the decision of we're going to get a pool.

But you start to plan and that project over time, and I think thats, what youre seeing is people who are now coming into the summer months. This is kind of that next well buying decision starting to heat up the are saying they want of pool and look a lot of dealers are kind of booked through the rest of the summer, but I can state probably 20 examples of where a dealer said if you pick.

Fiber glass I can squeeze you win on a Saturday I can squeeze you in 4 weeks from now so that's the big benefit of the small material conversion strategy.

The Bachelor install at work and Glenn 1 day to 5 days versus a month.

<unk> versus a steel of polymer wall vinyl pool for that 3 to 6 month build cycle for a for a concrete pool and think about the labor constraint and trying to build the concrete pool. The number of subs you need it just makes that situation much more difficult for.

Of those dealers and Thats. The success I think we are seeing with premier pools, and spas with Paul and his team with the number of franchisees converting to do fiberglass to get all of those pools and the ground for us.

Okay, Okay, very good and then I guess.

The second question, just kind of big picture, but when you think of the new the new pool construction market and kind of where we are today versus call. It 150000 pools that.

And that the industry is kind of average historically.

What had been the constraints kind of getting back to those prior averages and do you think there is consumer demand out there that gives you the visibility to do so.

Yes ill focus on the demand side, because I think that's the easier 1 theres a ton of demand out there to meet those needs to get back to those levels, probably more demand and installation capacity and if you look at the stack, there's 90 million homes, the existing homes and the U S debt do not have a swimming pool today that have the backyard capability for 1.

When you then look at the interest and swimming pools and the number 1 the highest consumer satisfaction purchase you can make for both pretty much anything else thats out there of kitchen remodel landscape and redo buying a car. So at the very strong high consumer interest and investment in the backyard that 2.3 ex R&R spend and the backyard has been hot for a <unk>.

Long time and has continued to accelerate migration from the urban areas of the suburbs will generate more demand and the housing market and when you kind of look through the the.

Of that 90 million homes and convert back to how many people are likely to buy a swimming pool of the next 5 years, and then heavily discount that by a significant back like 80%.

Wait too.

The 96000 pools last year will target, probably a 105 to 110000 pool installed this year. So it's not a demand issue. It's a matter of educating the home around the benefits of the swimming pool Wi fiberglass wildly from fiberglass.

And then having the best of dealer network out there with our brand dealers.

Mir pool, and spa dealers, and and our neuro and dealers were standing up and just leading them down that path to make that the purchase decision.

Okay, Okay great.

I'll hop back in Q2 of luck on a risk of you guys.

Thank you.

Okay.

Our next question comes from Ken Zenner from Keybanc Capital markets. Please go ahead with your question.

Good morning, everybody.

Hey, good morning, Ken.

Just wanted to go over a couple of different points here. So.

Lots of conversations with clients and I kind of want us to use this for them to flesh out some of those.

The quarterly questions as well as these broader ones that have come out.

And your capacity the obviously with the high growth.

You have many different plants. So it's not just 1 to answer the focusing specifically on the in ground pools can you talk to kind of what your network looks like I know you are adding capacity, but can you give us an example of what looks like.

Stressed out plant and what Youre doing there versus a more smooth running plan and the quarter, where you had sales going up.

Basically doubling and in ground pools, just give us a little context for that if you and Scott.

So Ken I think the the 1 the 1 easy example, the give and it's 1 we share quite a bit that's probably 1 that our dealers and consumers struggled with from time to time they want a particular.

The model, let's say and I'll go to my favorite model of the pool I own the late and Fiji. So they want of Fiji and it's coming out of I'm, just because the plant so I'm not going to be specific for the facility it's of high demand model and bold.

The lead time on that May have gone from a typical 2 week 2 let's just take 2 months and that particular model. So of homeowner will call and want it and they'll say sold out so what do we do we will add another Fiji mall, which is ex dollar capacity and vessels at the start of $100 of dollar of investment will put another mole.

And of that facility and we can now get our lead time back down the 2 weeks. So those of the things we're working with it's kind of a very tactical model by model plant by plant situation and other example would be and we dealt with this yesterday afternoon and the office here, we need to add some more trucks to deliver pools and a few facilities.

It's a matter of.

Adding a big rig of trailer of pilot car and being able to ship 5 more pools of week out of that facility because we have the demand there. So those of the types of things where do and its not major constraint. We have plenty of permitted capacity throughout the entire fiberglass network and that applies to all of our vinyl plants are.

Youll play and our polymer plant and it's just those 1 off of particular pool molder model and our deals I think I've done a really good job, sometimes switching of homeowner that want that will right now from the BG to Panama, because theyre very similar shape and size and they can get it quicker.

Very good.

The second.

Okay, if we could talk about regional dynamics a little bit.

Obviously with the national footprint, which was built up from your acquisitions and the past.

Can you talk about how youre seeing regional trends and perhaps how.

Obviously, you are the second largest competitors added some capacity through the plant purchase but could you talk about how.

Regional demand is occurring as opposed to or.

And with competitors own behavior, because they don't have the necessarily the capital that you deal, which 1 would think of as an advantage for you.

Yes, I think regionally, we're seeing strength across the board and every region and territory and we plan.

Can't highlight 1 area that is growing faster than another and I think you could argue we're seeing great success in the standard State, Florida, Texas, Arizona, Las Vegas, Nevada, California, with fiberglass, but again thats all related debt that material conversion story right those of the heavy concrete state and that's where we're attacking.

The concrete dealers to convert from that to fiberglass. So I think we're seeing really nice growth there, but overall when you look in general we're growth pretty evenly across all territories, we're actually seeing a really really great success and the Canadian market is while it does not think the U S, but I think the neuro and franchisee.

And the classic dealers up there, we're seeing phenomenal growth and conversion rates of fiberglass.

With the shorter pool season up there the benefit for our Canadian homeowner is they can have that fiberglass pool and we.

And they can leverage their summer versus usually they lose and entire summer building another type of pool and it's an investment for the following year.

Broad based strength across the board and even if I looked down and Australia, New Zealand and it's the same concept I mean, I think we're seeing strong growth in every territory and region down there and really nice trends overall.

That's perfect.

The other things I know you guys talked about U S sales and international but could you clarify.

International versus let's say, just North America, which would include Canada just to maybe get some.

The context around what is North America versus the Australia.

New Zealand et cetera, or do you feel comfortable doing that.

Well, yes, I mean for all.

The part Ken and I think this was in the S..1 as well if you look at International and Canada, New Zealand, Australia, it's around 20% of our total revenue and we.

We can follow up of the specific number for you later.

It's around 20 think of it that way.

Great and my last question is this you touched out and with Canada, but the Maryland and northern markets not only can benefit from the quicker install but because of <unk>.

Temperature differentials tie of cracking et cetera et cetera.

Is there a higher is there something about the weather that might create.

The more propensity for for those non seasonal markets to use fiberglass and not only because of the construction time, but because of the weather impact on tiles cracking et cetera.

Look I would say in general that applies to any place and I want to make it specifically a cold weather climate. The performance of of fiberglass pool is better than any other any other school type in any type of climate. It will outperform of vinyl line of pool and will outperform of fiberglass pool.

Of that 28% total lower upfront costs, 43% total lifecycle cost lower than the other side.

<unk> pool the.

Benefits across the board of Great. Once you build that pool of and then the ground.

You don't have to do anything to it ever again with the concrete pool Youre right and I know you own the concrete 1 of your goals for refurbished it is going to crack you are going to have the refinish. It youre going to have to do that every 10 to 12 years of vinyl line of pooling of every 8 to 10 year replacement of liner fiberglass and I'd like to just say set it and forget it right. Its the easiest will the O&M.

And maintain out there.

Thank you gentlemen.

And welcome Dan.

And ladies and gentlemen, our next question comes from Keith Hughes from true. Please go ahead with your question.

Well.

Sorry, I was on mute there.

Yes my question.

Get back to.

Pacing and the quarter and the price increases you announced.

And do you think youll get back to parity.

With the raw material inflation, that's coming in the second quarter by the end of the quarter. We will extend in the second half of any sort of look on that would be helpful.

Hey, Mark how are you.

How are you good.

Good to hear from you. So thanks, Thanks for your question.

What I can mentioned our share with your key for us.

And the first quarter.

And where we started to see some.

Some of the impact from inflation, we were able to stay ahead of inflation through price and productivity of the first quarter.

We would expect that to continue through the balance of the year based on the pricing actions we've already taken.

But look we're monitoring the situation and managing the inflation both of raw material and labor very closely and to the extent that we need to take more price during the year to continue to stay ahead of that we will do that and.

And we have baked that expectation into our guidance as we look at the margin expansion and we believe we can deliver for the year.

Okay. Thank you.

Welcome.

And ladies and gentlemen, with that we will conclude today's question and answer session I would like to turn the floor back over to Scott Richards for any closing remarks.

Yes. Thank you, so hey, I would like to thank everyone for joining us. This morning for late the first earnings call and you just heard we are delivering strong results, which is the testament to the team's hard work and dedication each and every day, we are of great business and growth strategy that will continue to deliver over time as we drive the material conversion of fiberglass and the.

<unk> brand of choice for both homeowners and dealers, we look forward to providing another update and our 2 few earnings call again. Thank you for your time today and have a great day.

Ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending you may now disconnect your lines.