Q2 2024 Latham Group Inc Earnings Call
Operator: Good afternoon, and welcome to the Latham Group second 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 presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. 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 Kotary. Investor Relations Representative
Good afternoon, and welcome to the Leatham Group second 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.
Casey Kotary: Please go ahead.
Speaker Change: Today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad 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 Inver.
Speaker Change: <unk> Relations representative. Please go ahead. Thank you.
Casey Kotary: This afternoon, we issued our second 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.
Speaker Change: This afternoon, we issued our second 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.
Speaker Change: On today's call are Laythan, President and CEO, Scott Rich F E N C F O olive or globe.
Speaker Change: Following their remarks, we will open the call to questions.
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.
Speaker Change: 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.
Speaker Change: 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 FCC as well as today's earnings release, the company expressly disclaims any obligation to update any forward looking.
Speaker Change: 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'll now turn the call over.
Casey Kotary: 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 Rajeski.
Scott Rydzewski: To Scott Rydzewski.
Yeah.
Scott Rajeski: Thank you, Casey. Good afternoon, everyone, and thank you for participating in today's call to review our second quarter and first half 2024 results. We will also discuss our business outlook for the rest of the year. We effectively managed through soft business conditions in the second quarter, drove substantial year-on-year gains in profitability, and strengthened our competitive position. And as you have seen from our release, this performance, together with our announced acquisition of CoverStar Central, enabled us to increase our adjusted EBITDA guidance for full year 2024 by $15 million. In terms of this, Porter's key takeaway.
Scott Rydzewski: Thank you Casey and good afternoon, everyone and thank you for participating in today's call review, our second quarter and first half 2024 results. We will also discuss our business outlook for the rest of the year.
Speaker Change: We have effectively managed through soft business conditions in the second quarter drove substantial year on year gains in profitability and strengthen our competitive position.
Speaker Change: Now you have seen from our release this performance.
With our announced acquisition of a cover star Central enabled us to increase our adjusted EBITDA guidance for full year 2024 by $15 billion.
Speaker Change: In terms of this quarters key takeaways.
Scott Rajeski: First, market conditions played out in line with our original expectations for an approximate 15% decline in new pool starts this year. This is what we planned for and what our guidance for full-year sales was based on. Our Pool Start forecast reflects a strong process, including the unique visibility that Latham has given our strong relationships with dealers and contractors in the field. Second, we substantially outperformed on profitability, achieving a 400 basis point year-over-year increase in adjusted EBITDA margin despite lower sales volume, driven by our restructuring programs, production efficiencies from our lean and value engineering programs, ongoing cost containment, and lower raw material costs.
Speaker Change: Market conditions played out in line with our original expectations for an approximate 15% decline in new pool starts this year.
Speaker Change: This is what we planned for and what our guidance for full year sale was based on our full start forecast reflects a strong process, including the unique visibility at Lytham has given our strong relationships with dealers and contractors in the field.
Speaker Change: Second we substantially outperformed on profitability, achieving a 400 basis point year over year increase in adjusted EBITDA margin, Despite lower sales volume driven by our restructuring programs.
Speaker Change: Actual efficiencies from our lean and value engineering programs ongoing cost containment and lower raw material costs.
Scott Rajeski: And lastly, we continue to build upon our leadership in fiberglass pools, which have shown relative strength in the first half of this year thanks to their significant advantages over concrete pools. In addition to our second quarter activities, we recently effectively deployed capital by completing an accretive acquisition that is expected to expand our margins, accelerate the sale of our automatic safety cover product line, and provide opportunities for us to increase fiberglass pool market penetration. As you can see, we have a lot to talk about this quarter.
Speaker Change: And lastly, we continue to build upon our leadership in fiberglass pool, which has shown relative strength in the first half of this year, thanks to their significant advantages over concrete walls.
Speaker Change: In addition to our second quarter activities, we've recently effectively deploying capital by completing an accretive acquisition that is expected to expand our margins.
Speaker Change: Celebrate the sales of our automatic safety cover product line and provide opportunities for us to increase fiberglass pool market penetration.
Speaker Change: As you can see we have a lot to talk about this quarter.
Scott Rajeski: I will begin by reviewing our progress on the three key priorities we called out when we provided full year 2024 guidance in early March. The first priority we noted was to continue to drive awareness and adoption of fiberglass pools and automatic safety covers, which we view as key long-term growth drivers for Latham. I am pleased to report that year-to-date fiberglass pool cells, while down year-on-year, showed relative strength and continue to represent the majority of our in-ground pool cells.
Speaker Change: I will begin by reviewing our progress on the three key priorities, we called out when we provided full year 2024 guidance in early March.
Speaker Change: The first priority. We noted wants to continue to drive awareness and adoption of fiberglass pools and automatic safety covers which we view as a key long term growth drivers for label.
Speaker Change: I am pleased to report that year to date, five or less pool sale, while down year on year showed relative strength and continued to represent the majority of our inbound wholesales are.
Scott Rajeski: Our market intelligence indicates that fiberglass pools have gained share year-to-date and are increasingly being recognized for their cost efficiency, fast and easy installation, and eco-friendly advantages over concrete pools. These advantages, together with our industry-leading service levels and best-in-class lead times, are strengthening our ability to attract new dealers. In the second quarter, we continue to invest in innovation with the addition of the Astoria 14 to our best-selling Astoria fiberglass pool collection. This new model is designed to fit in narrower outdoor spaces and offers a full relaxation experience, complete with a built-in spa and tanning ledge, features that are especially appealing in the sandstorm.
Speaker Change: Our market intelligence indicates that fiberglass pools have gained share year to date and are increasingly being recognized for their cost efficiency fast and easy installation and eco friendly advantages over concrete pools. These advantages together with our industry, leading service level and best in class lead times.
Speaker Change: We are strengthening our ability to attract new dealers.
Speaker Change: In the second quarter, we continued to invest in innovation with the addition of the a story of 2014, our best selling the story of fiberglass pool collection. This new model is designed to be narrower outdoor spaces and offers a full relaxation experience complete with a built in spa and Janney match features that are <unk>.
Speaker Change: Specialty appealing in the stance.
Scott Rajeski: The plunge pool category is seeing increased demand, as these models provide the homeowner with space-saving, lower-cost options that are ideal for aquatic exercises and rehabilitation, as well as for social gatherings. We are capitalizing on the popularity of this product line with preparations for a vinyl plunge pool launch in the spring of 2025. Our offering will include four models providing consumers with a choice of features designed to meet their budgets, a quick installation timeline, and style preferences for a broad range of consumers across North America.
Speaker Change: The plunge pool category has seen increased demand and these models provide a homeowner with space saving lower cost options that are ideal for aquatic exercises and rehabilitation as well as for social gatherings. We are capitalizing on the popularity of this product line with preparations for a vital one Washington to spring.
Speaker Change: 2025.
Speaker Change: Our offering will include four models, providing consumers with a choice of features designed to meet their budgets are quick installation timeline in style preferences for a broad range of consumers across North America.
Scott Rajeski: We also moved ahead with the rollout of Measure by Latham, the only tool in the marketplace that simplifies the pool measurement and quoting process for pool liner and cover installers while ensuring their accuracy. This tool continues to meet with a very positive response from our dealers and contractors, and our objective is for all of our dealers to have it with all the functionality in place ahead of the 2025 pool building season.
Speaker Change: We also moved ahead with the rollout of measure by.
Speaker Change: The only tool in the marketplace that simplifies the pool measurement and quoting process for all liner and cover installers, while ensuring their accuracy.
Speaker Change: This tool continues to meet with a very positive response, Marty lumping contractors and our objective is for all of our dealers to have the all the functionality in place ahead of the 2025 pool building season.
Scott Rajeski: Another key accomplishment for Latham was the accretive acquisition of CoverStar Central, which was completed on August 2nd and which we further detailed in a separate release today. CoverStar Central is Latham's exclusive automatic safety cover dealer in 29 states in the Northeast, Southeast, and Midwest, including Texas.
Speaker Change: Another key accomplishment was the accretive acquisition of cover Star Central which was completed on August 2nd and which we further detailed in a separate release today cover star samples lengthens exclusive automatic safety covered dealer in 2019 states in the northeast southeast and Midwest, including Texas, We are partners.
Scott Rajeski: We have partnered together for almost 20 years and view this transaction as mutually beneficial in several ways. First, we expect the vertical integration of this product to expand our adjusted EBITDA margin by approximately 140 basis points on an annualized basis. Second, with an integrated sales and marketing strategy and our combined resources, we expect to accelerate sales growth of this excellent product, which can be fitted on all types of in-ground pools. Our automatic safety covers provide unparalleled safety and offer significant resource savings that can result in up to a 70% reduction in both pool heating costs and chemical usage.
Speaker Change: Got it for almost 20 years and view this transaction as mutually beneficial in several ways first we expect the vertical integration of this product to expand our adjusted EBITDA margin by approximately 140 basis points on an annualized basis.
Speaker Change: With an integrated sales and marketing strategy and our combined resources, we expect to accelerate sales drove this excellent product, which can be fitted on all types of in ground pools are automatic safety covers provide unparalleled safety and all the offer significant resource savings that can result in upwards of 70%.
Speaker Change: A reduction in both pool heating costs and chemical usage.
Scott Rajeski: Third, we see opportunities to leverage the longstanding relationship that CoverStar Central has developed with the 400-plus pool builders they serve to drive further awareness and adoption of fiberglass pools. And lastly, with this transaction, we are bringing a dedicated and talented group of business professionals and industry experts to Latham, who share our commitment to superior customer service. The Latham team is happy to welcome our new team members from CoverStar Central.
Speaker Change: Third we see opportunities to leverage the long standing relationships that covers our staff will develop when the 400 plus pool builders. They serve to drive further awareness and adoption of fiberglass pools and lastly, with this transaction, we are bringing a dedicated and talented group of business professional and industry X <unk>.
Laythan: First the Laythan, who share our commitment to superior customer service. The leatham team is happy to welcome our new team members from Commerce our central.
Scott Rajeski: Oliver will provide additional financial details on the acquisition a little later in this call. I just would like to comment that we were very pleased to have the capital available to pay for the transaction with cash on hand, which reflects how effectively we are managing through this industry downturn. The second priority we outlined was to continue to gain additional operating efficiency through value engineering and lean manufacturing initiatives. I am pleased to report that these initiatives are leading to significant structural cost benefits that will have a long-term positive impact on Latham's margin profile.
Speaker Change: Oliver will provide additional financial details on the acquisition a little later on this call I just would like to comment that we were very pleased to have the capital available to pay for the transaction with cash on hand, which reflect how effectively we are managing through this industry downturn.
Speaker Change: Our second priority, we outlined was to continue to gain additional operating efficiencies through our value engineering and lean manufacturing initiatives I am pleased to report that these initiatives are leading to significant structural cost benefits that will have a long term positive impact on <unk> margin profile amongst the many first half achievements.
Scott Rajeski: Amongst the many first-half achievements were a 27% year-on-year reduction in production time across our North American fiberglass plants and labor efficiencies of 8% in our safety cover and vinyl liner manufacturing facilities. Our third key priority was to maintain a strong financial position. Oliver will provide details on the success of our financial strategy in a moment. Meanwhile, I would like to congratulate the Latham team on the discipline they have shown in our tremendous accomplishments in improving our cost structure, driving productivity gains, and reducing working capital needs.
Speaker Change: Alright, 27% year on year reduction in production time across our North American fiber glass plants in labor efficiencies up 8% and our safety cover and vinyl line or manufacturing facilities.
Speaker Change: Our third key priority was to maintain a strong financial position Oliver will provide details on the success of our financial strategy in a moment I would like to congratulate the leatham team on the discipline they have shown and our tremendous accomplishments in improving our cost structure driving productivity gains and reducing working capital needs.
Scott Rajeski: Through these actions, Latham has the operating and financial flexibility to remain resilient in the current soft industry environment while maintaining the resources to invest in organic growth initiatives and consider other accretive acquisitions that position Latham for accelerated and profitable growth when pools start to rebound. With that, I'll turn the call over to Oliver, our CFO, for a financial review. Thank you, Scott.
Oliver: Through these actions lead them to have the operating and financial flexibility to remain resilient in the current soft industry environment, while maintaining the resources to invest in organic growth initiatives and consider other accretive acquisitions that position late them for accelerated profitable growth when we will start to rebound.
Speaker Change: With that I'll turn the call over to Oliver.
Oliver: Our CFO for a financial review.
Oliver Gloe: Thank you, Scott, and good afternoon, everyone. I am pleased to report on our second quarter financial performance, which reflected the benefits of actions we have taken to effectively manage in a soft industry environment. Also, I'm pleased to provide further insight into the financial impact of our Carbosta Central acquisition. Please note that all comparisons that I'll discuss today on a year-over-year basis compare to the second quarter and first half of 2023 unless otherwise noted.
Oliver: Thank you Scott and good afternoon, everyone. I am pleased to report our second quarter financial performance, which reflected the benefits of actions, we have taken to effectively manage through a soft industry environment.
Oliver: So I am pleased to provide further insight into the financial impact although it covers the central acquisition.
Oliver: Please note that all comparisons that I'll discuss today on a year over year basis compared to the second quarter and first half of 2023, unless otherwise noted.
Oliver Gloe: Net sales for the second quarter were $160.1 million compared to $177.1 million, down $17 million, or 9.6%, reflecting the impact of continued challenging macroeconomic conditions on new pool starts and a return to a normalized quarterly sales cadence. As Scott mentioned, we continue to track to our forecast of a 15% decline in new pool starts for 2024. The sequential improvement in our absolute sales numbers from Q1 to Q2 reflects the expected seasonal improvement as we entered the peak pool building season. However, across our product categories, in-ground pool sales declined 10.6% in the second quarter, liners declined 7.2% in the quarter, and covers were down 11.3%.
Speaker Change: Net sales for the second quarter were $160 1 million compared to $177 1 million down $17 million or nine 6%, reflecting the impact of continued challenging macroeconomic conditions on new Pud starts and a return to a normalized quarterly savings cadence.
Speaker Change: As Scott mentioned, we continue to track to our forecast of a 15% decline in Youku starts for 2024.
Scott Rydzewski: The sequential improvement in our absolute sales numbers from Q1 Q2 reflects the expected seasonal improvement as we entered peak building season.
Speaker Change: Across all product categories in ground pools sales declined 10, 6% in the second quarter lineup declined seven 2% in the quarter.
Speaker Change: <unk> were down 11, 3%.
Oliver Gloe: Gross margin expanded by 470 basis points to 33.1% in the second quarter despite lower sales. This meaningful increase was primarily due to the impact of previously announced restructuring projects continued progress on our lean manufacturing and value engineering initiatives and our cost containment programs. We also saw a benefit from lower material costs due to supply optimization in addition to modest levels of deflation in line with prior expectations.
Speaker Change: Gross margin expanded by 470 basis points to 33, 1% in the second quarter, despite lower sales.
Speaker Change: This meaningful increase was primarily driven.
Speaker Change: Due to the impact of previously announced restructuring projects continued progress on our lean manufacturing and value engineering initiatives.
Speaker Change: Our cost containment programs.
Speaker Change: We also saw a benefit from lower material costs due to supply optimization. In addition to modest levels of deflation in line with prior expectations.
Oliver Gloe: SG&A expenses decreased to $26.6 million, down $3.6 million, primarily due to a $4.3 million decrease in non-cash stock-based compensation expense, as well as $4.1 million from our cost containment initiatives and restructuring projects, which more than offset our increased spending on initiatives designed to position Latham for meaningful profitable growth as food stocks recover, as well as increased performance-based compensation. Net income was $13.3 million, or $0.11 per diluted share, more than double the net income of $5.7 million, or $0.05 per diluted share, for the prior year's second quarter.
Speaker Change: SG&A expenses decreased to $26 6 million down $3 6 million, primarily due to a <unk> 3 million decrease in noncash stock based compensation expense.
Speaker Change: As well as $4 1 million from our cost containment initiatives and restructuring projects, which more than offset our increased spending on initiatives designed to position Nathan for a meaningful and profitable growth at foodstuffs recover as well as increased performance based compensation.
Speaker Change: Net income was $13 3 million or 11 cents per diluted share more than double the net income of $5 7 million or <unk> <unk> per diluted share for the prior year second quarter.
Oliver Gloe: Adjusted EBITDA of $34.5 million increased $3.5 million, or 11.2% from last year's $31 million, exceeding our expectations. And our adjusted EBITDA margin expanded to 21.5%, a 400 basis points improvement over 17.5% in the prior year period. This outperformance was driven by improved gross margin as well as our focus on expense management. We have fully implemented our previously announced restructuring programs with a total annualized impact of $24 million, which contributed $2 million in savings in the second quarter.
Speaker Change: Adjusted EBITDA of 34, and a half million increased $3 million.
Speaker Change: 11, 2% from last year's 31 million exceeding our expectations.
Speaker Change: Our adjusted EBITDA margin expanded to 21.5%, a 400 basis points improvement over 17% in the prior year period.
Speaker Change: This outperformance was driven by improved gross margin as well as our focus on expense management.
Speaker Change: We have fully implemented our previously announced restructuring programs with a total annualized impact of $24 million, which contributed 2 million in savings in the second quarter.
Oliver Gloe: Now turning to our first half year-over-year results comparison. Net sales were $270.8 million compared to $314.8 million, reflecting the impact of continued challenging macroeconomic conditions on new pool starts and a return to normalized quarterly sales cadence. Net income was $5.4 million versus a loss of $8.7 million.
Speaker Change: Now turning to our first half year over year results comparison, net sales were $217 8 million compared to $314 8 million, reflecting the impact of continued challenging macroeconomic conditions, our new cold starts and a return to normalized quarterly.
Speaker Change: The sales cadence.
Speaker Change: Net income was $5 4 million versus a loss of $8 7 million.
Oliver Gloe: Even with lower first half sales, we were able to increase adjusted EBITDA by 11.4% to 46.8 million from 42 million. Adjusted EBITDA margin increased 400 basis points to 17.3% from 13.3%. This outperformance was driven by improved gross margins from our restructuring programs, lean and value engineering initiatives, our focus on expense management, and lower raw material costs while continuing to invest in our future growth. Turning to our balance sheet and cash flow statement, we continue to maintain a strong financial position with cash of $90.8 million at the end of the quarter after the repayment of $19.6 million of debt year-to-date. Net cash provided by operating activities was $52.4 million in the second quarter and $17.9 million in the first half.
Speaker Change: Even with lower first half sales, we were able to increase adjusted EBITDA by 11, 4% to $46 8 million from $42 million.
Speaker Change: Adjusted EBITDA margin increased 400 basis points to 17, 3% from 13, 3%.
Speaker Change: This outperformance was driven by improved gross margins from our restructuring programs lean and value engineering initiatives, our focus on expense management and lower raw material costs, while continuing to invest in our future growth.
Speaker Change: Turning to our balance sheet and cash flow statement, we continue to maintain a strong financial position with cash of $98 million at the end of the quarter. After the repayment of $19 6 million of debt year to date net.
Speaker Change: Net cash provided by operating activities was $52 4 million in the second quarter.
Speaker Change: And $17 9 million for the first half.
Oliver Gloe: This includes an additional benefit of approximately $15 million from inventory reduction beyond our usual seasonality to further improve inventory efficiency. Total debt for the period was $282.4 million, with a net debt leverage ratio of 2.1, and our capital expenditures were $4.5 million for the second quarter of 2024. CAPEX is in line with our guidance of approximately $5 million per quarter, and our CAPEX expectations for the rest of the year remain unchanged.
Speaker Change: This includes an additional benefit of approximately $15 million from inventory reduction beyond our usual seasonality to further improve inventory efficiency.
Speaker Change: Total debt for the period was $282 4 million with a net debt leverage ratio of two one and our capital expenditure will fall into half million for the second quarter of 2024.
Speaker Change: Capex is in line with our guidance of approximately 5 million per quarter.
Speaker Change: Our capex expectations for the rest of the year remain unchanged.
Oliver Gloe: Scott reviewed the Coverstar Central acquisition from a strategic business perspective. From a financial viewpoint, this acquisition represents an accretive transaction that is expected to add $20 million in net sales and expand our total company-adjusted EBITDA margin by approximately 140 basis points on an annual basis as we vertically integrate our automatic safety cover line in the acquired geography. As Scott mentioned, we were very pleased to be able to source the approximately $65.5 million purchase price from internally generated funds. This speaks to the success we have had in improving our cost structure, driving productivity gains, and increasing working capital efficiency, and our confidence to continue generating cash despite soft market conditions. Moving on to our other...
Scot: Scot reviewed the cover star Central acquisition from a strategic business perspective.
Speaker Change: From a financial viewpoint. This acquisition represents an accretive transaction that is expected to add 20 million of net sales and expand our total company adjusted EBITDA margin by approximately 140 basis points on an annual basis as.
Speaker Change: As we've brought it fully integrated automatic safety comes online in the acquired geographies.
Speaker Change: As Scott mentioned, we were very pleased to be able to source. The approximately 65 million purchase price from internally generated funds.
Oliver Gloe: While we are maintaining our macro forecast for an approximate 15% decline, a new bull start for the year, we are pleased to increase our 2024 guidance. Our revenue guidance range for 2024 increases by $5 million to $495 to $525 million. This increase represents the expected five-month contribution of the Coverstar Central Acquisition. In addition, we are increasing adjusted EBITDA guidance by $15 million to a range of $75 to $85 million. 12 million of this 15 million increase is a function of our better margin performance reflecting the success of our ongoing lean manufacturing, value engineering, and cost containment programs, with the remaining 3 million representing the expected 2024 contribution from the Coverstar Central Acquisition.
Speaker Change: Position.
Oliver Gloe: As a reminder, our guidance for the remainder of 2024 also reflects the normal, modest seasonal slowdown in the second half of the year, impacting both sales and margin levels versus the first half. We also note that year-over-year comparisons will become more difficult as the year progresses given the relative better performance in the second half of 2023 as the cumulative impact from our cost savings initiative and other discrete items positively impacted second half 2023 results.
Speaker Change: As a reminder, our guidance for the remainder of 2024 also reflects the normal modest seasonal slowdown in the second half of the year impacting both sales and margin levels versus the first half.
Speaker Change: We also note that year over year comparisons will become more difficult as the year progresses, given the relative better performance in the second half of 2023 as the accumulated impact from our cost savings initiative and other discrete items positively impacted second half 'twenty.
Speaker Change: 'twenty three results.
Speaker Change: With that I will turn the call back to Scott for his closing remarks.
Scott Rydzewski: Thank you Oliver we are very pleased with how well our teams executed amid soft industry conditions gained traction for fiberglass pools, launching new products driving cost savings and productivity gains throughout the organization and of course, completing an important acquisition that will drive incremental growth for our company.
Lincoln: Lincoln is also pleased to increase guidance. This year and this is due to how well positioned we are in the marketplace and how committed our leadership and team members are to meeting and exceeding our objectives, while ensuring the very best in customer service. In summary, this has been a period of considerable progress for lethal our priorities remain the same.
Speaker Change: And we are confident in our ability to continue to effectively navigate the current environment and emerge as an even stronger company.
Speaker Change: Operator, I would like to open the call to questions.
Speaker Change: We will now begin the question and answer session.
Operator: Hey, everybody, good afternoon.
Speaker Change: With what the team's been able to do there and what our dealers have been able to do and I think right. It is a lower cost product versus a concrete pool. So there's benefits to the consumer to make that switch on the dealer front. The team has done a really nice job continuing to add new dealers right. This has been a focus for us over the last 12 to 18 months.
Speaker Change: I think in an environment, where maybe there's not as much as demand that they have seen going.
Speaker Change: Going back to the 'twenty, one 'twenty two time frame they do have a little bit more time to look at the product trial the product. The 10, one of our boot camps.
Speaker Change: Get educated on all the benefits of fiber glass go through the training see how our lead generation works. We can show how we can generate leads for them.
Speaker Change: And then the full support we deliver with our footprint of the fiber glass facility the ability to ship pools quicker and look at our lead times and our service are in phenomenal position, where we can quickly turn tools to them. So I think we've seen a nice trend with new dealer sign up and those that have been with us for let's say more than a year progressing and grow.
Speaker Change: And their business with kind of the.
Speaker Change: The want and willingness to actually grow the business environment, where pool starts are down overall.
Speaker Change: Okay. Okay.
Speaker Change: Thanks for that and then just published bar.
Speaker Change: Can you remind us just how big the auto cover businesses.
Speaker Change: While 29 states our largest.
Speaker Change: Auto cover our dealer out there in our network great partnership and relationship with that team I think it is going to really help us drive the adoption and awareness much faster in this category similar to fiberglass, but more importantly, it's give me give us access to a lot of dealers, we do not do business with today.
Speaker Change: Right.
Speaker Change: That team is putting auto covers on concrete pools competitors vinyl pools competitors fiberglass pools.
Speaker Change: Now have the ability to jointly share a lot of data, we did not share before to accelerate.
Speaker Change: Dealer conversion drive more covers on pools and basically get a hold of the population of people 400, plus dealers who are not buying late the products today other than maybe an auto cover exposure to that product. So we're really excited and then on your question on M&A.
Speaker Change: We'll continue to evaluate the market as opportunities exist out there for transactions that can be accretive in all of our product categories. It's been a history of our comprehensive core part of our DNA.
Speaker Change: We will continue to look at the opportunities that they exist and continued dialogues with.
Speaker Change: Anyone out there who would be looking potentially come join the late the failing where and when it makes sense and at the right value.
Speaker Change: Basis points outperformed year over year, and 10% of all of it.
Speaker Change: Okay, Perfect and then second one for me can.
Speaker Change: Can you give an update on some of the refreshed and the new pool models that you've discussed in last quarter and then also within that the fiberglass segment. In particular has there been a difference in demand trends between some of the more like higher priced pools in the lower price.
Speaker Change: Okay.
Speaker Change: Yes, so those specifics.
Speaker Change: Over the last models again, we're constantly taken a pulse of the consumer.
Speaker Change: Interest in pools as they are on our website looking at the various models we have.
Speaker Change: Feedback of what consumers are looking for and I think the trends are more and more rectangular pools extremely feature rich.
Speaker Change: If you look at the story of collection right. It's got it's got the built in spots got the bigger tanning legends has got a lot of bench seating are very feature rich pool that I think resonates very well.
Speaker Change: At the consumer and dealer level and again launching some of these pools and 12 foot in 2014 foot wide.
Speaker Change: People are moving more towards smaller pools backyard spaces are getting smaller the pool becomes part of an overall backyard entertainment experience.
Speaker Change: And that continues to resonate at all levels and I think thats why.
Speaker Change: We look at consumer demand right. This is the big one we watch the interest in pool is still out there and it's pretty big we look at all the stats of time on web site interest in pool accounts being signed up.
Speaker Change: Leads being generated.
Speaker Change: All of those metrics are really good indicators that the interest in pools is out there. The consumer is just on the sideline waiting to make that purchase.
Speaker Change: And look our service levels operationally in a really good position, where when that demand comes and someone makes the decision. We can quickly satisfy the demand in some cases being able to turn a product in two or three days for a dealer if they can close a sale with a consumer who is ready to kind of make the purchase.
Speaker Change: Okay Super helpful. Thanks.
Speaker Change: And then on my second question I'm curious have you guys.
Speaker Change: Talk a little bit about volume and pricing expectations for the year are.
Speaker Change: Are you still expecting flattish pricing, if you could walk through <unk>.
Speaker Change: Yeah, I'm going to say nothing has changed with our guidance the last to Cogs.
Speaker Change: We generally see price of sticking in the market that doesn't mean that we run certain promotions or.
Speaker Change: Go for it.
Speaker Change: An increase in some of the categories, but overall net net pricing is exactly where we guided.
Speaker Change: Would still say that.
Speaker Change: With us at all of our pooled shows and like I said, they're an extension of the team I think it just may.
Speaker Change: It made sense at this point in time to take another step to just try to drive the awareness of this business and more importantly provide more growth opportunities because they do access a lot of dealers, we don't touch today and that's probably the exciting part not just the auto cover piece, but what we can do with converting <unk>.
Speaker Change: Concrete dealers, the fiber glass, where theyre putting covers on those those pools for those dealers.
Speaker Change: Thanks ill pass it on.
Speaker Change: Okay.
Speaker Change: Again, if you have a question. Please press Star then one the next question comes from Susan Mcclary with Goldman Sachs. Please go ahead.
Susan Mcclary: Thank you good afternoon everybody.
Susan Mcclary: Good afternoon, Susan Good afternoon. Scott. My first question is can you talk a bit about the raw materials I think that you mentioned in your remarks that you have seen some relief on that side can you just give a bit more color on that.
Speaker Change: Sure.
Speaker Change: So we continue to see slight deflation it's coming from.
Speaker Change: Selected resins and PVC foam.
Speaker Change: No sequentially, probably deflation is less obvious worth of year over year as we did see in 'twenty to 'twenty three as I said in my prepared remarks, some release midyear in terms of the raw material costs.
Speaker Change: Sure.
Speaker Change: The 2023 relief that we saw then anything sequentially, we see overall, the raw material basket for that.
Speaker Change: Last couple of quarters are relatively stable.
Speaker Change: And again you know.
Scott Rajeski: This concludes our question and answer session. I would like to turn the conference back over to Scott Rajeski for any closing remarks.