Residential swimming pool manufacturer Latham (NASDAQ:SWIM) reported Q1 CY2024 results topping analysts' expectations, with revenue down 19.7% year on year to $110.6 million. The company expects the full year's revenue to be around $505 million, in line with analysts' estimates. It made a GAAP loss of $0.07 per share, improving from its loss of $0.13 per share in the same quarter last year.
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Latham (SWIM) Q1 CY2024 Highlights:
- Revenue: $110.6 million vs analyst estimates of $101.7 million (8.8% beat)
- Adjusted EBITDA: $12.3 million vs analyst estimates of $6.6 million (large beat)
- EPS: -$0.07 vs analyst estimates of -$0.12 (42.9% beat)
- The company reconfirmed its revenue guidance for the full year of $505 million at the midpoint
- Gross Margin (GAAP): 27.7%, up from 24.2% in the same quarter last year
- Free Cash Flow was -$39.86 million, down from $23.33 million in the previous quarter
- Market Capitalization: $340.4 million
Started as a family business, Latham (NASDAQ:SWIM) is a global designer and manufacturer of in-ground residential swimming pools and related products.
Leisure ProductsLeisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Latham's annualized revenue growth rate of 2.5% over the last three years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Latham's recent history shows a reversal from its already weak three-year trend as its revenue has shown annualized declines of 10.5% over the last two years.
This quarter, Latham's revenue fell 19.7% year on year to $110.6 million but beat Wall Street's estimates by 8.8%. Looking ahead, Wall Street expects revenue to decline 5.2% over the next 12 months.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, Latham has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 8.5%, subpar for a consumer discretionary business.
Latham burned through $39.86 million of cash in Q1, equivalent to a negative 36% margin, reducing its cash burn by 63.2% year on year. Over the next year, analysts predict Latham's cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 12.6% will decrease to 2.5%.
Key Takeaways from Latham's Q1 Results We were impressed by how significantly Latham blew past analysts' adjusted EBITDA and EPS expectations this quarter. Zooming out, we think this was a great quarter that shareholders will appreciate. The stock is flat after reporting and currently trades at $2.99 per share.