Latham Group Inc (SWIM) Reports 15.1% Decrease in Q3 Net Sales, Adjusted EBITDA Margin Improves
Q3 net sales down by 15.1% year-over-year to $160.8 million
Net income for Q3 stands at $6.2 million, down from $11.9 million in the same period last year
Adjusted EBITDA for Q3 was $36.1 million, a decrease of 14.6% year-over-year
Strong cash generation in Q3 supports $10 million debt repayment
Latham Group Inc (NASDAQ:SWIM) announced its financial results for the third quarter and first nine months of its fiscal year 2023 on November 7, 2023. The company reported a decrease in net sales for the third quarter, primarily due to volume declines attributed to ongoing macroeconomic challenges.
Financial Performance
Net sales for the third quarter of fiscal 2023 were $160.8 million, down $28.6 million or 15.1%, from $189.4 million in the prior years third quarter. Gross profit for the third quarter was $48.1 million, down $10.7 million or 18.2%, from $58.9 million in the prior years third quarter. The decrease in gross profit and gross margin was driven by reduced net sales, right-sizing of inventory, and sell-through of higher cost inventory.
Net income for the third quarter was $6.2 million, or $0.05 per share, compared to net income of $11.9 million, or $0.10 per share, for the prior years third quarter. Adjusted EBITDA for the third quarter of fiscal 2023 was $36.1 million, down $6.2 million or 14.6%, from $42.3 million in the prior years third quarter. However, the Adjusted EBITDA margin improved year-over-year to 22.4% from 22.3% in the prior year period.
Nine Months Fiscal 2023 Highlights
Net sales for the nine months ended September 30, 2023 were $475.6 million, down $112.2 million or 19.1%, from $587.8 million from the comparable prior year period. Net loss for the nine months ended September 30, 2023 was ($2.5) million, or ($0.02) per share, as compared to net income of $13.3 million, or $0.12 per share, in the prior year period.
Balance Sheet, Cash Flow and Liquidity
As of September 30, 2023, the company had cash of $78.1 million, $75 million of borrowing availability on its revolving credit facility, and total debt of $301.6 million. Net cash provided by operating activities was $88.1 million for the nine months ended September 30, 2023 compared to $5.2 million in the prior year period primarily driven by the rightsizing of inventory.
Fiscal 2023 Outlook
Latham has updated its net sales, adjusted EBITDA and capital expenditures guidance for the full year fiscal 2023. The company now expects net sales to be between $555 million and $570 million, down from the previous guidance of $570 million to $600 million. Adjusted EBITDA is expected to be between $82 million and $87 million, down from the previous guidance of $90 million to $100 million.
Scott Rajeski, President and CEO of Latham, commented on the results,
Our year-to-date in-ground swimming pool net sales have outperformed the anticipated decline in U.S. new pool installations for 2023, similar to how we outpaced the market last year. These results demonstrate the competitive strengths of fiberglass pools, which are cost effective, easy to install, and more eco-friendly than concrete pools."
Explore the complete 8-K earnings release (here) from Latham Group Inc for further details.
This article first appeared on GuruFocus.
