Q1 2024 Latham Group Inc Earnings Call

Good afternoon, and welcome to the laser group first quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal our conference specialist by pressing the star key followed by zero.

Operator: Good afternoon, and welcome to the Latham Group first quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I'd now like to turn the conference over to Casey Kotary, Investor Relations Representative. Please go ahead.

Casey Kotary: This afternoon, we issued our first quarter 2024 earnings press release, which is available on the investor relations portion of our website, where you can also find the slide presentation that accompanies our prepared remarks. On today's call are Latham's President and CEO, Scott Rajeski, and CFO, Oliver Gloe. Following their remarks, we will open the call to questions. During this call, the company may make certain statements that constitute forward-looking statements, which reflect the company's views with respect to future events and financial performance as of today or the date specified.

Casey Kotary: After today's remarks, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Casey Coterie Investor Relations Representative. Please go ahead.

Scott M. Rajeski: Thank you. This afternoon, we issued our first quarter 'twenty 'twenty four earnings press release, which is available on the Investor Relations portion of our website, where you can also find the slide presentation that accompanies our prepared remarks on today's call are <unk>, President and CEO, Scott Rich F E N C F O olive or glass.

Casey Kotary: Following their remarks people to open the call to questions. During this call. The company may make certain statements that constitute forward looking statements, which reflect the company's views with respect to future events and financial performance as of today or the date specified.

Casey Kotary: Actual events and results may differ materially from those contemplated by such forward-looking statements due to risks and other factors that are set forth in the company's annual report on Form 10-K and subsequent reports filed or furnished with the SEC as well as today's earnings release. The company expressly disclaims any obligation to update any forward-looking statements except as required by applicable law. In addition, during today's call, the company will discuss certain non-GAAP financial measures; reconciliations of the directly comparable GAAP measures to these non-GAAP measures can be found in the slide presentation that accompanies our prepared remarks, which can be found on our investor relations website. I will now turn the call over to Scott Rajeski.

Casey Kotary: Actual events and results may differ materially from those contemplated by such forward looking statements due to risks and other factors that are set forth in the Companys annual report on Form 10-K, and subsequent reports filed or furnished with the SEC as well as today's earnings release, the company expressly disclaims any obligation to update any forward looking statements.

Scott M. Rajeski: Sept as required by applicable law. In addition, during today's call. The company will discuss certain non-GAAP financial measures reconciliations of the directly comparable GAAP measures to these non-GAAP measures can be found in the slide presentation that accompanies our prepared remarks, which can be found on our investor Relations website I'll now turn the call over to Scott Richard.

Casey Kotary: Ski.

Scott M. Rajeski: Thank you Casey and good afternoon, everyone and thank you all for joining today's call to review, our first quarter 2024 results and discuss our latest business trends in terms of key takeaways first we were pleased with our first quarter results represented a solid start to the year and exceeded the guidance we provided at the time.

Scott M. Rajeski: Thank you, Casey. Good afternoon, everyone, and thank you all for joining today's call to review our first quarter 2024 results and discuss our latest business trends. In terms of key takeaways, first, we were pleased with our first quarter results. They represented a solid start to the year and exceeded the guidance we provided at the time of our fourth quarter conference call in March. Second, our performance demonstrated our ability to execute effectively during periods of uneven order flows and reflected the benefits of our reduced cost structure and actions we have taken to accelerate our value engineering efforts and lean manufacturing initiatives.

Scott M. Rajeski: These actions continue to drive ongoing production efficiencies and incremental capacity in our plants, providing us with more flexibility to serve customers with our industry-leading lead times. And third, we continue to maintain a substantial cash position, even after the usual seasonal outlay for working capital and an $18.8 million debt repayment. This cash provides Latham with significant resilience to manage through soft business conditions for the pool industry and the resources to take advantage of opportunities to drive future growth.

Scott M. Rajeski: After a slow start to the quarter, we saw a significant pickup in orders starting in mid-March. Our operations team was able to do a great job on execution, achieving lead times of three to five days. Fiberglass pool sales, while down year on year, showed relative strength and continued to represent the majority of our in-ground pool sales. On our last earnings conference call, we cited Latham's priorities for 2024.

Scott M. Rajeski: The first was to continue to drive the adoption and awareness of both fiberglass and automatic safety covers. And in the first quarter, we made considerable progress in the areas of new and refreshed product introductions, as well as new dealer wins. During the quarter, we launched the Enchantment Pledge Pool Series for our California plant, which serves the important California, Arizona, and Nevada markets. Plunge pools are becoming increasingly popular as they provide the homeowner with space-saving, lower-cost options that are ideal for aquatic exercises and rehabilitation.

Scott M. Rajeski: In the first quarter, we also relaunched the Providence and Tuscany Series in North America, which is a very trendy rectangular pool with an attractive side entry feature. Additionally, we put the finishing touches on a new fiberglass pool model that has a broad array of features, including swim-up seating and a built-in spa that is currently available to our largest dealers. We are also in the early stages of rolling out a line of plunge pools in our vinyl liner in-ground pool category. More on that in the coming months.

Scott M. Rajeski: Time of our fourth quarter conference call in March 2nd our performance demonstrated our ability to execute effectively during periods of uneven order flow and reflects the benefits of a reduced cost structure and actions, we have taken to accelerate our value engineering effort.

Scott M. Rajeski: Manufacturing initiatives.

Scott M. Rajeski: These actions continue to drive ongoing production efficiencies and incremental capacity in our plants, providing us with more flexibility to serve customers with our industry, leading lead times and third we continue to maintain a substantial cash position even after the usual seasonal outlays for working capital and an 18.

Scott M. Rajeski: 8 million debt repayment is passed directly from the significant resilience to manage through soft business conditions for the pool industry and the resources to take advantage of opportunities to drive future growth.

Scott M. Rajeski: Taking a closer look at Q1.

Scott M. Rajeski: After a slow start to the quarter, we saw a significant pickup in orders starting in mid March our operations team was able to do a great job on execution achieving lead times are three to five days fiberglass pool sales, while down year on year, showing relative strength and continued to represent the majority of our <unk>.

Scott M. Rajeski: <unk> sales.

Scott M. Rajeski: On our last earnings Conference call. We started late group priorities for 2020 for the first was to continue to drive the adoption and awareness of both fiberglass and automatic safety covers in the first quarter. We made considerable progress in the areas of new and refreshed product introductions as well as new dealer wins.

Scott M. Rajeski: During the quarter, we launched the <unk> series of our California plants, which serve the important, California, Arizona and Nevada markets. One pools are becoming increasingly popular they provided a homewood space saving lower cost options that are ideal for aquatic exercises and rehabilitation and.

Scott M. Rajeski: In the first quarter, we also relaunched the Providence in Tuscany series in North America, which is a very trendy rectangular pool when theyre attractive site entry feature. Additionally.

Scott M. Rajeski: Additionally, we put the finishing touches on our new fiberglass school model has a broad array of features including we're not seating and a built in spa and is currently available for our largest dealers. We are also in the early stages of rolling out a lineup one pool that our vinyl liner in ground pool category more on that in the coming months.

Scott M. Rajeski: With respect to automatic safety covers which are another key priority for US we continue to work with our tool covered distribution network as well as many of our competitors dealers, including concrete pool builders with Vance awareness and adoption of these products in.

Scott M. Rajeski: With respect to automatic Safety Covers, which are another key priority for us, we continue to work with our pool cover distribution network, as well as many of our competitors' dealers, including concrete pool builders, to advance awareness and adoption of these products. In addition to providing unparalleled protection, these automatic covers offer significant resource savings, resulting in up to a 70% reduction in both pool heating costs and chemical usage. We are continuing to drive operational improvements in our auto cover plants to reduce lead times and gain incremental capacity.

Scott M. Rajeski: In addition to providing unparalleled protection. These auto covers offer significant resource savings, resulting in up to a 70% reduction in bulk pool heating costs and chemical usage.

Scott M. Rajeski: We are continuing to drive operational improvements in our auto cover plants reduce lead times and gain incremental capacity. Our operations team is also working on changes to our product lineup that will expand our price points and capabilities.

Scott M. Rajeski: Our operations team is also working on changes to our product lineup that will expand price points and capabilities. And we're making it a key focus to ensure that all of our newly launched pool models in our InGround category are auto cover ready. We also continued the successful rollout of Measure by Latham, the first tool of its kind that simplifies the pool measurement and quoting process for liner and cover installers. This easy-to-use AI-powered device provides dealers with high-performance measuring accuracy and precise specifications for swimming pool covers and vinyl liners, all within minutes and all integrated with our project management portal, which enables dealers to quickly and easily receive quotes and submit and track orders.

Scott M. Rajeski: And we're making it is a key focus to ensure that all of our newly launched pool models and are in growing category, our autocar ready.

Scott M. Rajeski: We also continued the successful rollout of measured by late the first tool. This kind of simplified full measure rent and quoting process for liner and cover installers is easy to use AI powered device provides dealers with high performance measurement accuracy with precise specifications for swimming pool covers and <unk>.

Scott M. Rajeski: <unk> liners, all within minutes and all integrated with our project management portal, which enables dealers to quickly and easily receive quotes and submit and track orders.

Scott M. Rajeski: As you can imagine, this tool has been met with a very positive response from our dealers in contract. We will continue its rollout to make sure all of our dealers have it and all the functionalities in place ahead of the 2025 pool building season. Latham's extensive and appealing product lineup, together with our industry-leading service levels and best-in-class lead times, are strengthening our ability to attract new dealers. In the first quarter, we were able to convert several new dealers in the U.S. and Canada that we believe will enable us to continue to drive penetration and growth in several key markets.

Scott M. Rajeski: As you can imagine this tool has been met with a very positive response from our dealers and contractors. We will continue its rollout to make sure all of our dealers habit and all the functionalities in place ahead of the 2020 by pool building season.

Scott M. Rajeski: Later, his extensive and appealing product lineup together with our industry, leading service levels and best in class lead times are strengthening our ability to attract new dealers in the first quarter, we were able to convert several new dealers in the U S and Canada that we believe will enable us to continue to drive penetration and growth in several key markets.

Scott M. Rajeski: For some of these dealers, while they are established pool builders, this will be their first experience with fiberglass products. They are motivated by the much shorter installation time, which, of course, is very attractive to their end consumers, as well as the ease of installation and the aesthetics of the product, both of which often result in additional leads for them from neighboring homeowners.

Scott M. Rajeski: For some of these dealers while they are established pool builders. This will be their first experience with fiberglass products. They are motivated by the much shorter installation time, which of course very attractive their end consumers.

Scott M. Rajeski: Well as the ease of installation and the aesthetics of the products both of which often result in additional leads for them from neighboring homeowners in working with lethal even the most experienced new dealers go through our bootcamp to be trained in fiberglass installation to maximize our success.

Scott M. Rajeski: In working with Latham, even the most experienced new dealers go through our boot camp to be trained in fiberglass installation to maximize their success. The second priority for 2024 that we mentioned on our last earnings call is our programs to continue to gain additional operating efficiencies through value engineering and lean manufacturing initiatives. These structural cost benefits will have a long-term positive impact on Latham's margin profile and will be an important factor for us in 2025 when we expect improved market conditions to drive increased volume.

Scott M. Rajeski: The second priority for 2024 that we mentioned on our last earnings call as our programs to continue to gain additional operating efficiencies through value engineering and lean manufacturing initiatives.

Scott M. Rajeski: These structural cost benefits level long term positive impact on late those margin profile and will be an important factor for us in 2025, when we would expect improved market conditions to drive increased volumes.

Scott M. Rajeski: For example, the initial benefits from these programs in our largest liner and cover manufacturing plant included an 8% improvement in labor efficiency, a 20% increase in throughput, and an overall improvement in employee health and safety. All of this contributed to our first quarter margin performance. Lastly, we prioritize maintaining a strong balance sheet to both retain our resilience in today's soft market environment and retain the resources to support future growth. Oliver will provide details on that in a moment, but I can say that we've been very disciplined in our spending and have the operational and financial flexibility to flex up and down in response to market conditions, as well as take advantage of opportunities to drive future growth. With that, I will turn over the call to our CFO, Oliver Gloe, for a first-quarter financial review.

Scott M. Rajeski: For example, the initial benefits from these programs in our largest liner and cover manufacturing plant, including 8% improvement in labor efficiency, a 20% increase in throughput and an overall improvement in employee health and safety all of this contributed to our first quarter margin performance.

Oliver Gloe: Lastly, we prioritized maintaining a strong balance sheet to both retain our resilience in today's soft market environment and retain the resources to support future growth.

Oliver Gloe: Aldo will provide details on that in a moment, but I can say that we've been very disciplined in our spending and have the operational and financial flexibility to flex up and down in response to market conditions as well as take advantage of opportunities to drive future growth.

Oliver Gloe: With that I will turn over the call to our CFO Oliver glow for our first quarter Financial review Oliver.

Oliver Gloe: Thank you, Scott, and good afternoon, everyone. Please note that all comparisons that I will discuss today are on a year-over-year basis compared to the first quarter of fiscal 2023, unless otherwise noted. Our first quarter results exceeded our expectations, reflecting strong execution, cost savings, and our lean and value engineering initiatives. As we anticipated, first quarter comparisons reflect the challenging macroeconomic conditions that have reduced pool starts. Net sales were $110.6 million compared to $137.7 million in Q1 of 2023, down $27.1 million on 19.7%.

Oliver Gloe: Scott and good afternoon, everyone. Please note that all comparisons that I will discuss today on a year over year basis compared to the first quarter of fiscal 'twenty to 'twenty three unless otherwise noted.

Oliver Gloe: Our first quarter results exceeded our expectations, reflecting strong execution cost savings and <unk>.

Oliver Gloe: Our lean and value engineering initiatives.

Oliver Gloe: As we anticipated first quarter comparisons reflect the challenging macroeconomic conditions that have reduced crew starts net sales were $110 6 million compared to $137 7 million in Q1 of 2023 down $27 1 million.

Oliver Gloe: 19, 7%.

Oliver Gloe: The 23, 9% decline in in ground pools sales was primarily due to lower packaged food demand, while fiberglass <unk> products continued to show relative strength and continued to account for the large majority of lasers in growing <unk> sales.

Oliver Gloe: The 23.9% decline in in-ground pool sales was primarily due to lower package pool demand, while fiberglass pool products continued to show relative strength and continue to account for the large majority of Latham's in-ground pool sales. Liners remained more resilient, declining 9.2% due to the replacement cycle of these products, and covers were down 17.9%.

Oliver Gloe: <unk> remained more resilient declining nine 2% due to the replacement cycle of these products and covers were down 17, 9%.

Oliver Gloe: We were pleased to see our gross margin increased 350 basis points to 27, 7% despite lower sales.

Oliver Gloe: We were pleased to see our gross margin increase 350 basis points to 27.7% despite lower sales. This increase was driven by carryover benefits from the cost reduction actions we took in 2023, as well as low raw material costs and lean manufacturing initiatives. Year-on-year comparisons also benefited from two meaningful headwinds impacting Q1 2023, consuming the remainder of our high-cost inventory and our inventory reduction programs, which resulted in underabsorption at our plant. These factors more than offset the impact of lower utilization from lower volumes and the Wage Increase.

Oliver Gloe: This increase was driven by carryover benefits from the cost reduction actions, we took in 2023.

Oliver Gloe: As well as lower raw material costs and lean manufacturing initiatives.

Oliver Gloe: The year on year comparisons also benefited from two meaningful headwinds impacting Q1 2023.

Oliver Gloe: Consuming the remainder of our higher cost inventory and the inventory reduction programs, which resulted in under absorption at all plants.

Oliver Gloe: These factors more than offset the impact of lower utilization from lower volumes and wage increases.

Oliver Gloe: SG&A expenses decreased to $26.3 million, down $6.8 million, primarily due to our ongoing cost reduction efforts and a $5.1 million decrease in non-cash stock-based compensation expenses. For 2024, non-cash stock-based compensation is expected to amount to approximately $8 million. The net loss was $7.9 million or $0.07 per share compared to a net loss of $14.4 million or $0.13 per share for the prior year's

Oliver Gloe: SG&A expenses decreased to $26 3 million down $6 8 million, primarily due to our ongoing cost reduction efforts and a $5 1 million decrease in noncash stock based compensation expense.

Oliver Gloe: For 2020 for noncash stock based compensation is expected to amount to approximately $8 million.

Oliver Gloe: Net loss was $7 9 million or seven cents per share compared to a net loss of $14 4 million or <unk> 13 per share for the prior year's first quarter.

Oliver Gloe: Adjusted EBITDA of $12.3 million was up from the prior year period by $1.3 million or 11.4% compared to $11 million in Q1 2023. This strong performance is the result of solid execution in a difficult market, primarily due to cost savings and progress made with our lean and value engineering. The adjusted EBITDA margin was 11.1%, a considerable improvement compared to 8% in the prior year period. As you know, our full year 2024 guidance implies decremental EBITDA margins for the remainder of 2024, primarily reflecting our planned investments in future growth. Notably, this involves continued investments in sales and marketing, engineering, and R&D to accelerate the conversion to fiberglass pool products, ongoing digital transformation programs, and normalized performance-based compensation.

Oliver Gloe: Adjusted EBITDA of $12 3 million was up from the prior year period by $1 3 million or 11, 4% compared to $11 million in Q1 2023.

Oliver Gloe: This strong performance is the result of solid execution in a difficult market, primarily due to cost savings and progress made with our lean and value engineering initiatives.

Oliver Gloe: Adjusted EBITDA margin was 11, 1% a considerable improvement compared to 8% in the prior year period.

Oliver Gloe: As you know our full year 2024 guidance implies decremental EBITDA margins for the remainder of 2024, primarily reflecting our planned investments in future growth.

Oliver Gloe: Notably this involves continued investments in sales and marketing engineering and R&D to accelerate conversion to fiberglass wound products ongoing digital transformation programs the normalized performance based compensation.

Oliver Gloe: Turning to our balance sheet, we continue to maintain a strong financial position with cash of $43.8 million at the end of the quarter after the repayment of $18.8 million in debt in Q1. Net cash used in operating activities was $34.5 million, reflecting a seasonal increase in net working capital of $41 million as the company enters its peak full selling season. Total debt for the period was $282.8 million, with a net debt leverage ratio of 2.7.

Oliver Gloe: Turning to our balance sheet, we continue to maintain a strong financial position with cash of $43 8 million at the end of the quarter. After the repayment of $18 8 million in depth in Q1 <unk>.

Oliver Gloe: Net cash used in operating activities was $34 5 million, reflecting a seasonal increase in networking capital of $41 million as the company enters peak selling.

Oliver Gloe: Selling season.

Oliver Gloe: Total debt for the period was $282 8 million with a net debt leverage ratio of two seven.

Scott M. Rajeski: And our capital expenditures were $5.3 million for the first quarter of 2024, considerably lower than the $9.9 million in the prior year. We expect a comparable run rate in quarterly capex throughout 2024. Our cash position and capital expenditures are in line with our expectations and reflect seasonality as well as our conservative capital allocation strategy given the uncertain economic outlook. That said, we will continue to deploy our capital opportunistically to best position us for accelerated profitable growth as market conditions improve.

Oliver Gloe: Our capital expenditures were $5 3 million for the first quarter in 2024 considerably lower than the $9 9 million in the prior year.

Scott M. Rajeski: We expect a comparable run rate in quarterly Capex throughout 2024.

Scott M. Rajeski: Our cash position and capital expenditures in line with our expectations and reflect seasonality as well as our conservative capital allocation strategy, given the uncertain economic outlook.

Scott M. Rajeski: That said, we will continue to deploy our capital Opportunistically to best position us for accelerated profitable growth as market conditions improve.

Scott M. Rajeski: First quarter results together with our current visibility underpin the guidance metrics, we provided at the time of our fourth quarter 2023 earnings release.

Scott M. Rajeski: First quarter results, together with our current visibility, underpin the guidance metrics we provided at the time of our fourth quarter 2023 earnings release. With that, I will turn the call back to Scott for his closing remarks.

Scott M. Rajeski: With that I will turn the call back to Scott for his closing remarks.

Scott M. Rajeski: Thank you, Oliver. While the first quarter represents a small percentage of our annual revenues in adjusted EBITDA, we are very pleased with how well our team performed amid a choppy start to the season. Latham's strong execution, cost savings, and lean and value engineering initiatives all contributed to quarterly performance that exceeded our guidance and demonstrated our ability to execute efficiently. We appreciate the commitment and engagement of Latham's team members throughout our organization who made this possible.

Scott: Oliver while the first quarter represents a small percentage of our annual revenues and adjusted EBITDA. We are very pleased with how well our teams executed amid a choppy start to the season weight them strong execution cost savings and lean and value engineering initiatives, all contributed to quarterly performance that exceeded our guidance and <unk>.

Scott M. Rajeski: Demonstrated our ability to execute efficiently.

Scott M. Rajeski: We appreciate the commitment and engagement of <unk> team members throughout our organization, who made this possible. We also want to thank all of our customers and suppliers, who continued to be strong supporters of lethal.

Scott M. Rajeski: We also want to thank all of our customers and suppliers who continue to be strong supporters of Latham. Our first quarter results support our full year guidance expectations for 2024 and underpin our confidence in Latham's ability to effectively navigate the current market environment and emerge as an even stronger company. Operator, I would like to open the call to questions. Thank you.

Scott M. Rajeski: Our first quarter results support our full year guidance expectations for 2024, and underpin our confidence in <unk> ability to effectively navigate the current market environment and emerge as an even stronger company operator, I would like to open the call to questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speaker phone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Speaker Change: In the interest of time, please limit yourself to one question and one follow up at this time, we'll pause momentarily to assemble our roster.

Operator: Our first question comes from Jonathan Bettenhausen from Truest. Please go ahead.

Operator: To withdraw your question, please press star, then two. In the interest of time, please limit yourself to one question and one follow-up. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Jonathan Bettenhausen from Truist. Please go ahead.

Jonathan Bettenhausen: Hey, I'm on for our car Ts and CS evening. Thanks for taking my question. So on the 2020 for cost savings realization.

Jonathan Bettenhausen: Hey, I'm on behalf of Keith Hughes this evening. Thanks for taking my question. So on the 2024 cost savings realization, I think last quarter you indicated targeting maybe about $4 million in incremental savings. How's that progressing? Looks like maybe most of that has already been realized here in OneQ. Am I looking at that right?

Jonathan Bettenhausen: Last quarter, you indicated targeting maybe about $4 million in incremental savings hows that progressing it looks like maybe the most of that has already been realized here in <unk> and I looking at that right.

Speaker Change: Yeah, Yeah, you're absolutely right. So we had about a 4 million spillover from our cost savings initiatives. The all the initiatives are fully implemented all of that $4 million.

Oliver Gloe: Yeah, you're absolutely right. So we had about a $4 million spillover from our cost savings initiatives. All the initiatives are fully implemented. Of that $4 million, about $2.7 million is in our Q1, with the remainder being left for Q2.

Oliver Gloe: About $2 7 million in Q1 with the remainder being desktops.

Oliver Gloe: Okay got it and were there any surprises in our sales momentum heading into the second quarter was that the demand ramp kind of about what you expected in March.

Scott M. Rajeski: Okay, got it. And were there any surprises in sales momentum heading into the second quarter? Was the demand ramp kind of about what you expected in March?

Speaker Change: Yeah. So I think if you look at our Q1 played out for us and I think we've heard this from others you know little bit slower start in January and February right around the time, we were on our Q4 earnings call and I think we saw really nice pick up in the seasonality you know maybe a few weeks a jumpstart there.

Scott M. Rajeski: Yeah, so I think if you look at how Q1 played out for us, and I think we've heard this from others, you know, a little bit slower start in January and February, you know, right around the time we were on our Q4 earnings call. And I think we saw a really nice pickup in seasonality, you know, maybe a few weeks' jump-start there, as the season took off as we moved through the back part of March.

Scott M. Rajeski: As the season took off as we move through the back part of March I think you know as we look kind of moving through April here as well I'd say the season is kind of ramping as expected on track with the guidance that we reconfirmed out there today.

Scott M. Rajeski: You know, I think, as we look kind of moving through April here as well, I'd say the season is kind of rampant, you know, as it is expected, on track with the guidance that we reconfirmed out there today.

Speaker Change: Okay got it I appreciate it.

Jonathan Bettenhausen: Okay, I got it. I appreciate it.

Jonathan Bettenhausen: Yep.

Tim: The next question comes from Tim will just from Baird. Please go ahead.

Operator: The next question comes from Tim Wojs from Baird. Please go ahead.

Operator: Okay.

Timothy Ronald Wojs: Hey, everybody. Good afternoon. Maybe just, you know, first question, Scott, just... In your prepared remarks, you talked about seeing some incremental traction on dealer ads, and I'm just kind of I guess wondering if the investments that you've made and then just with the slower kind of pool environment are seeing kind of an incremental propensity from dealers to like kind of consider fiberglass and then also kind of consider being part of, excuse me, the Latham network.

Timothy Ronald Wojs: Hey, everybody good afternoon.

Timothy Ronald Wojs: Maybe just a first question Scott just.

Timothy Ronald Wojs: In the in the prepared remarks, you talked about.

Timothy Ronald Wojs: Seem to make a lot of traction on dealer at then I'm just kind of I guess wondering if the investments that you've made and then just with the slower kind of pull environment.

Timothy Ronald Wojs: If you are seeing kind of an incremental propensity from dealers to like kind of consider fiberglass and then also kind of consider being part of excuse me the Oh wait the network.

Scott: Yeah, I think Tim you know as we've talked over the years right part of what we've always done is constantly recruit and attract new dealer delayed zone.

Scott M. Rajeski: Yeah, you look at I think, Tim, as we've talked over the years, right, part of what we've always done is constantly recruit and attract new dealers to Latham on all aspects of all product lines, really a big focus on fiberglass. You know, I think when you come back and just look at the value proposition of fiberglass, the speed of the install, and then the lower cost compared to, let's say, concrete pools.

Scott M. Rajeski: On all aspects of all product lines, you know really a big focus fiberglass yeah I think when you when you come back and just look at the value proposition of fiberglass right. The speed of the install and then the lower cost compared to let's say concrete pools and I think that continues to resonate at both the dealer and the homeowner Bob.

Scott M. Rajeski: And I think that continues to resonate at both the dealer and the homeowner level, giving them a lower cost option, especially as we've seen the cost of the pool drastically increased at the consumer level. Then you combine that with, you know, the cost of financing, you know, I think it's just giving them an opportunity to, you know, quote, unquote, jump in and establish themselves as a dealer, get trained up, right; it's all nice, incremental volume for those dealers.

Scott M. Rajeski: We'll all giving them a lower cost option, especially as we've seen the cost of the pool drastically increase at the consumer level and then you combine that with cost of financing.

Scott M. Rajeski: It's just given them an opportunity to quote unquote jump in and established themselves as a dealer to get trained up right. It's all nice incremental volume for those dealers and again I think we show them you know what this is a long term play for us right when the market rebounds.

Scott M. Rajeski: And again, I think we show them, you know, look, this is a long-term play for us, right? When the market rebounds, they'll be well positioned, they'll be trained, they'll have gone through the boot camps, and they'll be ready to kind of, you know, rapidly increase their productivity and efficiency for fiberglass schools.

Scott M. Rajeski: There'll be well position there'll be trained or have gone through their boot camps, and they'll be ready to kind of rapidly increase their productivity and efficiency for fiberglass schools.

Scott M. Rajeski: Okay.

Scott M. Rajeski: Okay, so you say it's kind of more of a, you know, kind of what you've seen over time. It's not that, hey, there's a smaller environment, and there's any sort of, you know, kind of, increased kind of view at, you know, for fiberglass, it's just kind of the constant share that you're seeing.

Scott M. Rajeski: Okay do you want to see.

Scott M. Rajeski: You say, it's kind of more of a you know Cai.

Scott M. Rajeski: What you've seen over time, it's not that hey, there's a slower environment than there is any sort of you know kind of increased kind of new for fiberglass I just kind of a constant share that you're you're kind of thing.

Scott M. Rajeski: yeah yeah I think that what made the one clarification there Tim it's a good point you know what we've become a little bit more aggressive out there so you could say that the number of dealers and the quality dealers we've been adding is um much better than you know maybe in the last two three four years during the difficult supply chain challenge issues you know I think why they're choosing this look if you if you if you look at our footprint one right we got a great footprint throughout the entire country so we bring a lower cost to serve for all dealers throughout the country and you know if you look at the quality of our pools and then where we stand from a lead time and service standpoint you know we're in a really good position and that's kind of back to um it was Jonathan's question you know right out of the gate here you know we came through one cue our ability to quickly respond to incremental demand signals in March is really what enabled us to kind of post up some really good results in one cue there

Speaker Change: Yeah, Yeah, I think that what maybe one clarification there Tim it's a good point.

Scott M. Rajeski: We've become a little bit more aggressive out there. So you could say that the number of dealers and the quality of dealers. We've been adding is much better than you know maybe in the last 234 years during the difficult supply chain challenges shoes.

Scott M. Rajeski: Why they're choosing there is look if you will if you if you look at our footprint one right. We've got a great footprint throughout the entire country. So we bring a lower cost to serve all dealers throughout the country.

Scott M. Rajeski: And if you look at the quality of our pools, and then where we stand from a lead time and service standpoint, we're in a really good position and that's kind of back to Jonathan.

Scott M. Rajeski: Jonathan's question.

Scott M. Rajeski: Right out of the gate here as we came through one Q our ability to quickly respond to incremental demand signals in March is really what enabled us to kind of post up some really good results in <unk> there.

Timothy Ronald Wojs: Okay, okay, good. And then, from a seasonality perspective, I mean, from a sequencing perspective, I mean, revenue should kind of be the highest in Q2, and then, you know, kind of lower a little bit in Q3, and then, you know, kind of see a drop off in Q4. And would that kind of be how profitability would also kind of phase through the year? Just trying to think about how to think about the seasonality impact. We haven't seen what I guess normal seasonality is in three or four years.

Speaker Change: Okay. Okay. Good.

Timothy Ronald Wojs: I guess from a seasonality perspective, I mean ship from a sequencing perspective, I mean sure.

Timothy Ronald Wojs: Revenue kind of be the highest in Q2, and then kind of lower a little bit in Q3, and then drop off in Q4 and with that kind of be how profitability would also kind of phase through the year, just trying to think about.

Timothy Ronald Wojs: How to think about the seasonality impact just we haven't seen what I guess normal seasonality is in three or four years.

Speaker Change: Yeah. So Tim first question, what I was driving in this morning.

Scott M. Rajeski: Yeah, so Tim, fair question. You know, when I was driving in this morning, I was thinking about, you know, I've been in the business for 14 years.

Speaker Change: Thinking about I've been in the business for 14 years, I don't think I've seen a normal season of 14 years.

Tim: I'm not really sure what a normal season is anymore with with everything out there, but I'd say, we're kind of returning to what is returning to what has been more typical of the seasonality. We've seen we've talked over the years you could probably argue think a 50 50 split right <unk> came in just a little over 20%.

Scott M. Rajeski: I don't think I've seen a normal season in 14 years. So, you know, I'm not really sure what a normal season is anymore with everything out there. But I'd say we're kind of returning to what has been more typical of the seasonality we've seen. You know, we've talked over the years, you could probably argue, think of a 50-50 split, right? You know, one queue came in at just a little over 20%.

Speaker Change: Clearly <unk> and <unk> is the bulk of the season. So I think you know if we just said you know around 30% ish in <unk> and <unk> ballpark give or take a few rounds. No then the balance coming in for Q.

Scott M. Rajeski: You know, clearly, two queue and three queue is the bulk of the season. So I think, you know, if we just said, you know, around 30%-ish in two queue and three queue ballpark, give or take a few rounds, you know, then the balance comes in four queue. And then, you know, I'll let Oliver address that, but you could probably argue that the EBITDA profile would be a little similar to that.

Speaker Change: And then I'll, let Oliver address it but you could probably argue that.

Oliver Gloe: The EBITDA, while what would be a little similar to that but again.

Scott M. Rajeski: You know, but again, we had the depressing conversation on the last call. So you just got to watch that as we move through the rest of the year. But, you know, again, we're kind of happy with how the season's ramping up. I think it's lining up really nice to our guidance and overall market expectations. Oliver, do you want to talk to me about the profitability profile as it flows through?

Oliver Gloe: We had the decremental conversation on the last call She's got to watch that as we move through the rest of the year, but again, we're kind of happy with how this season's ramping I think it is lining up really nice to you our guidance and overall market expectations out of.

Oliver Gloe: Talking about the profitability profile of that flows through from an EBITDA cadence if you take our midpoint guidance sitting right now at $65 million deduct.

Oliver Gloe: While the contribution to that from the Youre left with about $52 7 million right now single bed.

Oliver Gloe: Being being by majority contributed by Q2 Q3. These are by far our most most.

Oliver Gloe: Those quarters with the most sales activity and, therefore, EBITDA contribution with a small share per in-queue.

Oliver Gloe: Those quarters with most.

Oliver Gloe: Activity and therefore, EBITDA contribution with a small.

Oliver Gloe: With a small ship.

Timothy Ronald Wojs: Okay, okay, that's helpful. Thanks, everybody.

Oliver Gloe: Okay. Okay. That's helpful. Thanks, everybody.

Timothy Ronald Wojs: Okay.

Speaker Change: You're welcome.

Operator: The next question comes from Andrew Carter from Stiefel. Please go ahead.

Timothy Ronald Wojs: The next question comes from Andrew Carter from Stifel. Please go ahead.

William Andrew Carter: Hey, thanks. I just wanted to ask, kind of late in the quarter, related to the outperformance, and you said shipments picked up. I know you hate to talk about it, but pool corp called out the weather, obviously hit the south, hit the northeast where you're strong. In addition, again, I know it's something you hate to talk about, but kind of the channel inventory, did you see anything like a difference between your shipments and what you think went out of the channel, particularly, I guess, for the package pools, as well as the covers? Thanks.

William Andrew Carter: Hey, Thanks wanted to ask a kind of late in the quarter related to the outperformance in you said shipments picked up I know you hate to talk about it but pool Corp called out weather, obviously hit the south hit the northeast where you're strong. In addition, again I know something you hate to talk about but kind of the channel inventory did you see anything like difference between your shipments.

William Andrew Carter: And what you think went out of the channel, particularly I guess for the packaged pools as well as the the covers thanks.

William Andrew Carter: Yes, So hey, Andrew good good question, there I think as we looked at it you know.

Scott M. Rajeski: Yeah, so hey, Andrew, you know, good, good question there. I think as we looked at it, you know, In-ground liners, right, was really a key point for us in Q1 of that season, start of the ramp in the south, slowly moving up through the north. And again, if we, kind of the regional differences, you're right, you know, the northeast is a little bit tougher, wetter, a little bit colder start to the season, but in the warmer climates where it really started to take off for us, we're sitting, you know, you know, in some cases, in a few of the plants with, you know, one, two-day lead times for liners, you know, as that, those orders started to flow, we were able to convert those in a two or three-day cycle and really take advantage of the push we saw there.

Scott M. Rajeski: In ground liners, right was really a key point for us in Q1 of that season started to ramp in the south slowly moving up to the north but again, if we kind of regional differences you're right now in the northeast a little bit tougher weather, a little bit colder start to the season, but in the warmer climates, where it really started to take off for US we're sitting you know.

Scott M. Rajeski: You know in some cases and a few of the plants with one two day lead times for Whiners.

Scott M. Rajeski: Those orders started the floor, we were able to convert those two or three day cycle and really take advantage of the push we saw there and I think the other really strong point for US was fiberglass right fiberglass performed extremely well we have inventory on the ground and the common models and a lot of it.

Scott M. Rajeski: And I think the other really strong point for us was fiberglass, right? Fiberglass performed extremely well, you know, we have inventory on the ground and the common models in a lot of territories, you know, as those orders were rolling in, and let's say where the weather was more favorable, we were able to get pools pushed out to dealers, get them in the ground, so good execution across the board by, you know, both the operations team and our customers there, you know, fiberglass still is making up the majority of the chunk of the in-ground category, you know, I think that part is continuing to be a little bit slow for us, you know, we've really not seen the restocking or pull through orders, you know, from the distribution branches, whether it's pool corp or any of the big distribution partners, heritage, etc., out there, and I think that's what we'll start to see as we move through 2Q and product really starts to move off the shelf as we hit the peak pool building season here in May, June, and July.

Scott M. Rajeski: Territories.

Scott M. Rajeski: Those orders were rolling in and let's say, where the weather was more favorable we were able to get pushed out the dealers get them in the ground. So good good execution across the board by both the.

Scott M. Rajeski: <unk> team and our customers there.

Scott M. Rajeski: Fiberglass still making up the majority of the chunk of the in ground category.

Scott M. Rajeski: Think back that far has continued a little bit slow for us.

Scott M. Rajeski: We've really not seen the restocking or pull through orders from the distribution branches, whether its pool corporate or any of other big distribution partners heritage et cetera out there.

Scott M. Rajeski: And I think that's what we'll start to see as we move through <unk> and product really starts to move off the shelf as we hit the peak will building season here in May June and July.

Speaker Change: And then second question looking kind of at your SG&A and granted who knows my math could be wrong, but it looks like so for the final nine months of the year I've got SG&A up $31 million to $33 million. That's excluding charges also excluding SBC you were flat could you dimensionalize that 30 that has that kind of increase.

William Andrew Carter: The second question, looking kind of at your SG&A, and granted, who knows, my math could be wrong, but it looks like, for the final nine months of the year, I've got SG&A up 31 to 33 million. That's excluding charges, also excluding SBC. You were flat.

William Andrew Carter: The final night I know, there's some incentive comp restoration in there that you can avoid theres not really any cost savings in there, but there is some also variable investment as you say get ready when start to accelerate and how how much is that truly variable and could you quickly pull that pull that back and when would you know whether you wanted to pull that back or not at what point in the season.

William Andrew Carter: Could you dimensionalize that kind of increase over the final nines? I know there's some incentive comp restoration in there that you can't avoid. There's not really any cost savings in there, but there is some variable investment, as you say, get ready when it starts to accelerate.

William Andrew Carter: Thanks.

Speaker Change: Yeah I'll hit the first the last part Andrew first.

Scott M. Rajeski: And how much is that truly variable? And could you quickly pull that back? And when would you know whether you wanted to pull that back or not? At what point in the season? Thanks.

Scott M. Rajeski: When would you be able to pull back anything on the variable portion of the spend there.

Scott M. Rajeski: We typically kind of wait until we get into late May.

Scott M. Rajeski: Mid June which will really give us a read for how the season is playing out in terms of pool starts is.

Scott M. Rajeski: In line with our expectations or anything so we're in that waiting game of peak.

Scott M. Rajeski: Bill, where we don't want to start doing anything too drastic too early but we've also talked about we have made incremental investments we are trying to.

Oliver Gloe: Yeah, I'll hit the first and last part, Andrew, first. When would you be able to pull back anything on the variable portion of the spend there? You know, look, we typically kind of wait until we get into late May or, you know, mid June, which will really give us a read for how the season is playing out in terms of pool starts is in line with our expectations or anything.

Oliver Gloe: Retain folks we are trying to push leads out their dealers with our sales and marketing efforts. So we don't want to pull the trigger too quickly, but again, there's a piece that's variable in there that if we had the toggle if the market worse and more than what our expectations were and I think thats. The key point right our outlook for the market was probably.

Oliver Gloe: So, you know, we're in that waiting game of peak build. Our outlook for the market was probably further down than others in the industry. And we think we're tracking to that, you know, roughly 15% down in new pool starts versus last year's number. So, you know, we've got many levers we can pull there. And Oliver, I'm going to address the first part of the question. Yeah, absolutely. So, you know, two drivers that, in

Oliver Gloe: Further down than others in the industry and we think we're tracking to that roughly 15% dollar new pool starts versus last year's number. So you know we've got many levers we can play and pull there.

Speaker Change: Address the first part of the question, yes, absolutely. So two drivers that increased SG&A year over year, we talked about the snapback of performance based compensation.

Oliver Gloe: Yeah, absolutely. So, you know, two drivers that increase SG&A year over year. We talked about the snapback of performance-based compensation with about 7 to 8 million. And then Scott just mentioned the investments into future growth to over-proportionally participate once the market comes back. So those are really the two drivers there for SG&A.

Oliver Gloe: $7 million to $8 million and then Scott just mentioned the investments into Q2.

Oliver Gloe: User growth to over proportionally fitness, but once the market comes back. So those are the two drivers therefore assume it.

Speaker Change: Thanks, I'll pass it on.

Speaker Change: Thank you thanks, Andrew.

Operator: The next question comes from Shaun Calnan from Bank of America. Please go ahead.

Oliver Gloe: The next question comes from Shaun Calnan from Bank of America. Please go ahead.

Shaun Francis Calnan: Hey, guys. Thank you for taking my questions.

Shaun Francis Calnan: Hey guys, thank you for taking my question. Just given the sales beat in the quarter and talking about the pickup as we kind of went through the quarter and through March, is there any reason you guys chose not to raise the guidance? I'm just curious if there was maybe a pull-forward in demand, or you're starting, it doesn't sound like it, but if you were starting to see orders slow in April versus your original expectation.

Shaun Francis Calnan: Given the sales beat in the quarter and talking about the pickup as we kind of went through the quarter and through March is there. Any reason you guys chose not to raise the guidance I'm. Just curious if there was maybe a pull forward of demand or sorry, it doesn't sound like it but if you were starting to see orders slow in April versus your original.

Shaun Francis Calnan: <unk>.

Speaker Change: Yeah, I think you could chalk it up Sean probably partly just timing and how we had the quarter's profiled out we had an expectation of what total market was going to do.

Scott M. Rajeski: Yeah, I think, you know, you could chalk it up, Shaun, probably partly just timing how we had the quarters profiled out, you know; we had an expectation of what the total market was going to do. You know, I think as we try to work back through what a normal season should look like, we probably took a little bit more of a conservative approach in Q1, assuming a little bit slower start.

Scott M. Rajeski: I think as we try to work back through the what is a normal season look like we probably took a little bit more of a conservative approach in Q1 is suitable or of a slower start and again, we had the luxury at that point in time seeing how January and February was playing out when we did the quarter and look we did.

Scott M. Rajeski: You know, again, we had the luxury at that point in time of seeing how January and February were playing out when we did the quarter. And look, you know, we did see a nice ramp-up of orders in March. But I don't, I don't believe any of it was pull-forward demand. I think it was just, you know, whether it was good in some markets that helped us; we were in a good position from a lead time ability to quickly turn those short cycle orders.

Scott M. Rajeski: See a nice ramp up of orders in March I don't I don't believe any of it was pull forward demand I think it was just weather weather was good in some markets that helped US we were in a good position from a lead time ability to quickly turn those short cycle orders and I think when we look out there and talk to dealers and others in the industry.

Scott M. Rajeski: You know I still believe our view of market being down 15% overall still feels about right.

Scott M. Rajeski: Look we've only completed roughly little over 20% in the year for US we've really got to move through this this big quarter here <unk> see how the season ramps.

Scott M. Rajeski: Quite to the weather and as I mentioned up top.

Scott M. Rajeski: Five weeks into the quarter, so far I would say things are tracking extremely well tracking towards what our guide and projections are and you know I think we got to get through Q2 here and when we chat in August that's why I think we'll be able to take a full assessment of what do we think the full year is going to look like.

Scott M. Rajeski: And, you know, when we look out there and talk to dealers and others in the industry, you know, I still believe our view of the market being down 15% overall still feels about right. A full assessment of what we think the full year is going to look like.

Speaker Change: Okay got it and then do you have any early metrics on the measure tool in terms of adoption by dealers our revenue at this point.

Shaun Francis Calnan: Okay, got it. And then do you have any early metrics on the measure tool in terms of adoption by dealers or revenue at this point?

Shaun Francis Calnan: Yeah.

Scott M. Rajeski: Yeah, look, it's just rolling out there for covers, right? And if you think about it, right, the cover season really kicks in for us in the fall.

Scott M. Rajeski: Yeah, I love it.

Shaun Francis Calnan: It's just rolling out therefore covers right and if you if you think about it right that cover season really kicks in for us in the fall. So it's the math portion of getting all the units out there deployed into the field with the dealers with the view as they are out there opening pools for the season right.

Scott M. Rajeski: So it's a mass push to get all the units out there deployed in the field with the dealers with the view that as they're out there opening pools for the season, right? They're evaluating the covers on the pools, we're encouraging them to measure the covers, inspect them, do they need a replacement, take those measurements now while they're out there, get trained up, get geared up. And look, and this is a big deployment for us in terms of units out there.

Scott M. Rajeski: We're evaluating that covers on the pools or encourage them to measure that covers inspect them do they need a replacement take those measurements now all are out there get trained up get geared up and look at this as a big deploy for us in terms of units out there and the training.

Scott M. Rajeski: And the training, we're still in the beta testing of what we're doing with the liners, again, early good success on that. So we're also teaching them how they can be measuring for liners, as we get ready to do that launch in the fall for the early 2025 season. But you know, we're not at a point where it's of any significance that we want to be talking about metrics units, the number of units in dealers' hands, the number of units we're processing. We are taking orders, we are processing orders through our plants, and shipping them back out to dealers.

Scott M. Rajeski: We're still in the beta testing of what we're doing the liners again early good success on that so we're also teach them how they can be measuring for liners as we get ready to do that launched in the fall for the early 2025 season.

Scott M. Rajeski: We're not at a point, where it's of any significance that we want to be talking about that metric.

Scott M. Rajeski: Metrics units number of.

Scott M. Rajeski: Units and dealers and number of units. We're processing. We are taking orders we are processing orders through our plants ship them back out to dealers and I think the key thing here is response rate acceptance has been phenomenal.

Scott M. Rajeski: And I think the key thing here is response rate. The response rate has been phenomenal, and I think we'll eventually be able to talk about, you know, market share gains that we're going to be able to achieve, again, by attracting, you know, dealers who may have been buying from other manufacturers out there coming to Latham because this is a huge productivity and time-saving device for them. And also ensuring the accuracy of those measurements that they're taking, almost foolproofing, you know, the quality of the liner and cover they're going to get because they will know the measurements are dead on, based on the AI and Intel in the device as it moves through the system.

Scott M. Rajeski: And I think will eventually be able to talk about market share gains, we're going to be able to achieve again by attracting dealers who may have been.

Scott M. Rajeski: Buying from other manufacturers out there coming to late them. Because this is a huge productivity and time saving device for them.

Scott M. Rajeski: Also ensuring the accuracy of those measurements that theyre taking.

Scott M. Rajeski: Almost full proofing.

Scott M. Rajeski: The quality of the liner and cover Theyre going to get because they will know the measurements are dead on on based on the AI and Intel and the device on as it moves through the system. So look we're really excited about it I think this will be gained breaking for us and as we move through the next couple of quarters, we will start the <unk>.

Scott M. Rajeski: So, look, we're really excited about it. I think this will be, you know, game-changing for us. And, you know, as we move through the next couple quarters, we'll start disclosing more information on units deployed, number of dealers, and unit volumes and stuff like that. It's just a little too early to, you know, get out there with that data yet.

Scott M. Rajeski: Closing more more information on units deployed number of dealers in unit volumes and stuff.

Scott M. Rajeski: Assessing through just a little too early to get out there with that that data yet.

Speaker Change: Great. Thank you.

Scott M. Rajeski: Welcome Sean.

Operator: Again, if you have a question, please press star, then 1. The next question comes from Matthew Bouley from Barclays; please go ahead.

Scott M. Rajeski: Again, if you have a question. Please press Star then one.

Operator: Our next question comes from Matthew Bouley from Barclays. Please go ahead.

Operator: Good evening. You have Anika Dholakia on for Matt.

Matthew Adrien Bouley: Good evening do you have any <unk> on for Matt. Thanks for taking my questions.

Anika Dholakia: Thanks for taking my questions. So, the first question is on kind of your customer base. So, you know, some industry peers have spoken to more challenge demand for their lower end pools. And I'm just curious if you're seeing similar mix effects and maybe how you think this could trend into the second half given the current macro backdrop. Thanks.

Anika Dholakia: So the first question is on kind of your customer base.

Anika Dholakia: We've seen some industry peers have spoken to more challenged demand for there.

Anika Dholakia: Pause and I'm, just curious if you're seeing similar mix effects and maybe how you think that could trend into the second half given the current macro backdrop. Thanks.

Anika Dholakia: Yes.

Scott M. Rajeski: Yeah, no, so similar views. And again, there are two sides of this coin that you know, one that really, you know, I think two didn't really help us in one. That's a little bit of a drag.

Anika Dholakia: Similar views and again Theres two sides of this coin that one that really I would say two didn't really help us and one that's a little bit of a drag but again. This was all contemplated in the guidance we issued at the reconfirm right for fiberglass, we're seeing really good performance, because it's a lower cost option versus.

Scott M. Rajeski: But again, this was all contemplated in the guide we issued at the reconfirm, right? For fiberglass, we're seeing really good performance because it's a lower cost option versus concrete pools. So as consumers are trading down from concrete price points, they're stepping into fiberglass pools, which are working really well for us in a 75 to 100k, you know, consumer price point. The package pool or the other piece of the inground vinyl business, again, is doing okay, but that's kind of more of middle America.

Scott M. Rajeski: Concrete pool, so as consumers are trading down from from the.

Scott M. Rajeski: The concrete price points theyre stepping in the fiberglass pools, which are working really well for us and a 75 to 100 K.

Scott M. Rajeski: Consumer price point.

Scott M. Rajeski: The packaged pool or the other piece of the in ground vinyl business.

Scott M. Rajeski: Again as do it okay, but thats kind of more of the Middle America, that's where a lot of the pool financing a curve that's out there I think we're trending to the numbers we had expected in our guide overall.

Scott M. Rajeski: That's where a lot of the pool financing occurs. It's out there, you know, I think we're trending to the numbers we had expected in our guide overall, you know, but what's happening is we're seeing good traction with our radiant panels and radiant pools, because that's a lower price inground vinyl liner option for those consumers that I hate to say step down to because the radiant panel and pool, they really, really nice pool compared to other options out there at that, let's say maybe a little bit more entry level or, you know, second level pool you'd be stepping into versus your typical, you know, on ground or above ground pool you would see.

Scott M. Rajeski: But what's happening is we're seeing good traction with our radian panels and radian pools, because that's a lower price.

Scott M. Rajeski: Ground vinyl liner option for those consumers.

Scott M. Rajeski: I hate to say step down too because the radiant panel and pool, they really really nice pool compared to other options out there at that let's say, maybe a little bit more entry level or second level tool you'd be separate NC versus your typical.

Scott M. Rajeski: On ground or above ground pool, you would see so a little bit of a mixed bag, but when we look at the fiberglass that's what we'd like to see we'd like to see the traction we're getting with the radio pool out there and the acceptance as well.

Scott M. Rajeski: So, a little bit of a mixed bag. But you know, when we look at the fiberglass, that's what we like to see. We like to see the traction we're getting with the radiant pool out there and the acceptance as well.

Anika Dholakia: That's really helpful, thanks. And then second, just curious, you know, how are you guys thinking about current capacity levels today? Should we assume that there's going to be additional capacity investment in the near term? Or maybe, you know, given your Kingston investment and some other cost initiatives, maybe you're holding off on that? Thanks.

Speaker Change: That's really helpful. Thanks.

Anika Dholakia: And then second just curious how are you guys thinking about current capacity levels today should we assume that there is gonna be additional capacity investment in the near term or maybe you know given your kingstone investment.

Anika Dholakia: Some other cost initiatives, maybe are holding off on that thanks.

Speaker Change: Yeah. So on the on the capacity side, we really like where we sit we capacity today from all the investments getting Kingston brought online.

Scott M. Rajeski: Yeah, so on the capacity side, we really like where we sit with capacity today from all the investments in getting Kingston brought online, you know, and just thinking about Kingston, it gives us the opportunity to attract new dealers to those locations, right? They now have capacity in their backyard with fiberglass, much more capacity than we had before. You know, they're looking at Latham as a manufacturer of choice. It gives them a lower cost model to pass on to their consumers to get more demand. So we had a really, really nice customer win and take up there. I think we might have briefly touched on that in the last call.

Scott M. Rajeski: And just thinking about Kingston right. It gives us the opportunity to attract new dealers.

Scott M. Rajeski: Two to those locations right. They now have capacity in their backyard with fiberglass much more capacity than we had before.

Scott M. Rajeski: Theyre looking at later.

Scott M. Rajeski: Manufacturer of choice.

Scott M. Rajeski: Gives them a lower cost model to pass on to their consumers to get more demand. So we had a really really nice customer wins take up there I think we might have briefly touched on that in the last call.

Scott M. Rajeski: Similar similar in other other areas of the market. We've got good capacity in at least the great service levels in lead times, where we will continue to invest is in.

Scott M. Rajeski: Similar in other areas of the market, you know, we've got good capacity, and that leads to great service levels and lead times. Where we will continue to invest is in product launches, product lineup, new models, new features, fiberglass pools, we've talked a lot about the plunge pool series. And, you know, some of the new models we're getting out there where consumers are looking for particular features, whether it's a side entry, bigger tanning ledges, or some of these smaller cocktail slash plunge pools. So I think it's those types of investments.

Scott M. Rajeski: Product launches product lineup, new models, new feature rich fiberglass pools, we talked a lot about plunge pool theories and some of the new models, where we're getting out there where consumers are looking for particular features whether it's a site entry bigger tanning lodges or some of the smaller cocktail slashed one pool. So I think it's both.

Scott M. Rajeski: But look, the operations team continues to drive a lot of really, really good value engineering and lean events in the facilities, which is actually creating more capacity. And, you know, not to sound like a broken record, but you go back to the big cost reduction initiatives we were able to do last year, taking, you know, five facilities and locations offline. It's because of all those efforts of the operations team freeing up capacity.

Scott M. Rajeski: Types of investments, but look the operations team continues to drive a lot of really really good value engineering of lean events in the facilities, which is actually creating more capacity and not to sound like a broken record, but you know you go back to the big cost reduction initiatives, we were able to do last year taken.

Scott M. Rajeski: Five five facilities and locations offline.

Scott M. Rajeski: It's because of all those efforts of the operations team freeing up capacity. So we're in a good.

Scott M. Rajeski: So we're in a good position. You know, as of right now, it's not like we need to go add chunky types of capacity. It's tweaks in each of the small facilities to make sure we're positioned, looking out to the, you know, 25, 26, 27, you know, market and where new tool starts will be.

Scott M. Rajeski: Good position.

Scott M. Rajeski: As of right now, it's not like we need to go do SCHUNK <unk> type of capacity, it's tweaks in each of the small facilities to make sure we're position looking out to the 'twenty five 'twenty six 'twenty seven.

Scott M. Rajeski: Market and where new tool starts will be.

Speaker Change: Great. Thank you guys. Good luck.

Anika Dholakia: Great. Thank you, guys. Good luck.

Speaker Change: You're welcome thank you.

Operator: The next question comes from Susan Maklari from Goldman Sachs. Please go ahead. Thank you.

Anika Dholakia: The next question comes from Susan Mcclary from Goldman Sachs. Please go ahead.

Susan Marie Maklari: Thank you good afternoon, everyone.

Susan Marie Maklari: My first question is, you know, thinking just a little bit about the input cost environment, how that came together through the quarter, any changes that you're seeing as you think about the balance of the year, you know, perhaps any chemicals that are coming up or those types of things, and then, you know, just any thoughts on price-cost, how that trended through the quarter and the outlook there.

Susan Marie Maklari: Sure.

Susan Marie Maklari: My first question is.

Susan Marie Maklari: Taking just a little bit about the input cost environment, how that came together through the quarter any changes that youre seeing as you think about the balance of the year, perhaps any chemicals that are coming up with those types of things and then.

Susan Marie Maklari: Just any thoughts on price cost how that trended through the quarter and the outlook there.

Oliver Gloe: Yeah, let me take that, Susan. So, let me start with our annual guides, and then I'll go back and take that back to Q1. So we guided on price, slavish, and on deflation. We added some modest deflation to our guide. And in Q1, we've seen deflation in several parts of our baskets, primarily resins, PVC film, and aluminum, quite in line with our guide. And our expectations, maybe a little bit better, more favorable. But we're also seeing some increases, most recently driven by styrene and benzene.

Speaker Change: Yeah, Let me, let me take that.

Susan: So let me start with our annual guidance.

Susan: I wanted to go back and take that back to Q1.

Oliver Gloe: So we guided on non price flattish deflation.

Oliver Gloe: Deflation.

Susan: We added some modest deflation to our guide.

Oliver Gloe: And in Q1, we've seen deflation in several parts of our baskets, primarily resin PVC foam aluminum quite in line with our guide at.

Susan: And our expectation, maybe a little bit better more favorable.

Oliver Gloe: But we're also seeing some increases more most recently driven by Starwood in benzene. So so I would say overall, our guidance of being a modest deflation for the year is quiet and take them and confirmed by our Q1 performance.

Oliver Gloe: So I would say, you know, overall, our guidance of modest deflation for the year is quite intact and confirmed by our Q1 performance. I give you a similar comment on the pricing side. We generally see prices sticking. You know, on the last earnings call, we said that some of our product categories took down a little bit, and some we took up a little bit. But overall, we guide towards a flattish price. And, you know, that, again, the same is true for Q1. We saw flattish pricing in Q1.

Susan: Are you a similar comment on the pricing side, we generally see price a sticky.

Susan Marie Maklari: Okay. All right. That's helpful.

Oliver Gloe: Last earnings call, we said that.

Susan Marie Maklari: Some some of our product categories to down a little bit. Some we took up a little bit but overall regards was a flattish price.

Susan Marie Maklari: Again, the same is true for Q1, we saw.

Susan Marie Maklari: Average pricing in mid June.

Susan Marie Maklari: And then, you know, when we kind of look across our coverage, I think there are some companies that have talked about seeing, you know, perhaps a moderation in activity as rates have moved higher in the last couple of weeks or so. But it doesn't sound like you are seeing that as we get into the kind of core of the pool season. But I guess, Scott, can you just talk a bit about what you are hearing on the ground from some of your dealers? Has there been any response to the moving rates? And, you know, just how are you thinking about that as we get into spring and summer?

Speaker Change: Okay, Alright, that's helpful and then.

Susan Marie Maklari: Across our coverage I think there are some companies that have talked about seeing perhaps a moderation in activity as rates have moved higher in the last couple of weeks or so it does sound like you are seeing that as we get into the kind of core of the pool season.

Susan Marie Maklari: Scott can you just talk a bit to what you are hearing on the ground from some of your dealers has there been any response to the move in rates and just how are you thinking about that as we do get into the spring and the summer.

Scott M. Rajeski: Yeah, Susan, you know, again, if we go back to kind of our guide for the year, right, we were expecting pool starts to be down further than others and probably the rest of the entire industry. But I think some of the commentary we've seen out there is, you know, I think people are experiencing closer to our number of, you know, call it around 15% down for new pool starts. You know, there's really not a lot of finance and activity out there right now.

Scott: Yes, so Susan again, if we go back to kind of our guide for the year right. We were expecting pool starts to be down further than others and probably the rest of the entire industry I think some of the commentary we've seen out there is I think people are experiencing closer to our number.

Scott M. Rajeski: Call it around 15% down for new pool starts.

Scott M. Rajeski: There's really not a lot of financing activity out there right now so as rates continue to.

Scott M. Rajeski: So as rates continue to, you know, trend up, trend down, bounce where they are at this point, you know, I don't really think that's impacting our dealers or our consumer base. You know, we typically have the higher end of the market, more cash buyers. We're actually seeing the, you know, 7,500, 100 plus thousand type pool backyards holding up extremely well as those individuals, you know, have the capital that they can deploy to make the pool purchase. So I think all this will be helpful to us as we go forward here, you know, so I think we're in a good position there, Susan.

Scott M. Rajeski: Trend off trend down balance where they are at this point.

Scott M. Rajeski: I don't really think thats impacting.

Scott M. Rajeski: Our dealers are consumer base, we typically have the higher end of the market more of the cash buyers. We are actually seeing the 7500 100, plus thousand type pool backyards holding up extremely well as those individuals have the capital that they can deploy to make the pool.

Scott M. Rajeski: <unk> purchase.

Scott M. Rajeski: So I think all all helpful to us as we go forward here.

Speaker Change: So I think we're in a good position there Susan and look we're all looking forward to when the fed starts to see the rates go down. So I think that will really start to allow others to come back into the market. We got some new Intel from one of our third party financing companies.

Scott M. Rajeski: And look, we're all looking forward to when the Fed starts to, you know, see interest rates go down. So I think that will really start to allow others to come back into the market. We got some new intel from one of our third-party financing companies, and I think, you know, they've just tightened up the credit limits. And I think what they're doing now is they're getting a little bit creative. One of our partners has now introduced the 20-year loan again. They have pulled that back over the last year or two.

Scott M. Rajeski: I think they've just they've tightened up the credit limits and I think what they're doing now is again, a little bit creative one of our partners has now introduced the 20 year loan again, they had pulled that back.

Scott M. Rajeski: Over the last year or two so the fact that now you can go out there and finance approval project for 20 years helps lower the overall monthly payment for a consumer which is keeping keeping folks out there and I think dealers are also getting very creative.

Scott M. Rajeski: So the fact that now you can go out there and finance a pool project for 20 years helps lower the overall, you know, monthly payment for a consumer, which is keeping folks out there. And I think dealers are also getting very creative with scaling back the overall dream of the homeowner for the backyard, right? Homeowners are coming in, they've got, you know, their pool, their huge patio, their outdoor kitchen, the fire pit, the pavilion, all the lighting, the landscaping.

Scott M. Rajeski: Scaling back the overall dream of the homeowner for the backyard right homeowners are coming in they're they've got their pool their huge patio outdoor kitchen, the fire pit 1 billion all the lighting the landscaping and I think dealers are saying, Hey look we'll quote out the full backyard project for you.

Scott M. Rajeski: And I think dealers are saying, hey, look, we'll quote out the full backyard and project for you, but we're gonna do it in segments. If you can only afford X, let's get the pool in, and let's get your three feet of concrete in, and we can fit you into your budget and payment that way. And then we will come back in a year or so and finish up your dream of what you want your whole backyard to look like with, you know, a bigger patio, getting that fire pit put in there, and, you know, the outdoor kitchen.

Scott M. Rajeski: But we're going to do it in segments. If you can only afford ex let's get the pool and let's get you three feet of concrete in and we can fit into your budget and payment that way and then we will come back.

Scott M. Rajeski: In a year or so and finish up your dream of what you want your whole backyard to look like with <unk>.

Scott M. Rajeski: A bigger patio getting that fire put in there in the outdoor kitchen. So I think it's people being creative in some cases dealers.

Scott M. Rajeski: So I think it's, you know, people being creative; in some cases, dealers, you know, have had to lower their price to the consumer as they readjust their pricing model in a lower demand and lower new pool start environment. So, you know, it's really, you know, I'd say, you know, the accumulation of several different factors they're working on out there, Susan, to try to keep the business flowing and keep their employees engaged out there.

Scott M. Rajeski: Have had to lower their price to the consumer as they readjust their pricing model in a in a lower demand and lower new who will start environment.

Scott M. Rajeski: It's really.

Scott M. Rajeski: I'd say accumulation of several different factors that are working on out there Susan to try to keep business flow and keep their employees.

Scott M. Rajeski: Engaged out there we'll look.

Scott M. Rajeski: But look, we're, you know, Gates says, you know, we're looking forward to getting into 25. You know, we still think 24 will be the trough, you know, new pool starts, you know, you know, I don't see how they could be any worse next year than they are this year; they should go up, you know, barring any unforeseen incident. But you know, that's where we want to be conservative in our actions as a company here, you know, making sure we've got the capacity, we've got the investments in plants and personnel, and we keep investing in new models and new product launches, you know, because we're looking forward to 25 and 26 when the market rebounds.

Scott M. Rajeski: Gate say, we're looking forward to getting into 'twenty five we still think 24 will be the trough.

Scott M. Rajeski: New pool starts.

Scott M. Rajeski: I don't see how they can be any worse next year than they are this year. They should go up borrowing any unforeseen incident, but that's where we want to be conservative in our actions as a company here, making sure. We've got the capacity we've got the investments in plants and personnel, we keep investing in new model new product.

Scott M. Rajeski: Launches.

Scott M. Rajeski: We're looking for about 25 and 26 when the market rebounds.

Susan Marie Maklari: Okay, that's a very helpful caller Scott. Thanks for that, and good luck with everything.

Speaker Change: Okay. That's very helpful color Scott, Thanks for that and good luck with everything.

Scott M. Rajeski: Thanks, Susan. You're welcome.

Scott: Thanks, Susan and welcome.

Speaker Change: There are no more questions in the queue. This concludes our question and answer session I would like to turn the conference back over to Scott <unk> for any closing remarks.

Operator: There are no more questions. This concludes our questions. I'd like to turn the conference back over to Scott Rajeski.

Scott M. Rajeski: Yeah, well, you know, thanks, everyone, for participating in this afternoon's call. I look forward to seeing you all at upcoming conferences and meetings. And I hope everyone has a good evening and everyone, you know, has a safe summer until the next time we talk. Take care, conference participants.

Operator: Yes.

Scott M. Rajeski: Thanks, everyone for participating in this afternoons call look forward to seeing you all in upcoming conferences and meetings and hope everyone has a good evening everyone.

Scott M. Rajeski: Have a safe summer until the next time, we talk take care.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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