What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-06 · 113 added, 109 removed, 235 unchanged (49% of the section changed)

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Recent Developments

Highlights for the fiscal quarter ended June 28, 2025

● Increase in net sales of 7.8%, or $12.5 million, to $172.6 million for the fiscal quarter ended June 28, 2025, compared to $160.1 million for the fiscal quarter ended June 29, 2024.

● Increase in net income of $2.7 million to $16.0 million and representing a 9.3% net income margin for the fiscal quarter ended June 28, 2025, compared to net income of $13.3 million and representing a 8.3% net income margin for the fiscal quarter ended June 29, 2024.

● Increase in Adjusted EBITDA (as defined below) of $5.4 million to $39.9 million for the fiscal quarter ended June 28, 2025, compared to $34.5 million for the fiscal quarter ended June 29, 2024.

Highlights for the fiscal quarter ended September 27, 2025

● Increase in net sales of 7.6%, or $11.4 million, to $161.9 million for the fiscal quarter ended September 27, 2025, compared to $150.5 million for the fiscal quarter ended September 28, 2024.

● Increase in net income of $2.2 million to a net income of $8.1 million and representing a 5.0% net income margin for the fiscal quarter ended September 27, 2025, compared to net income of $5.9 million and representing a 3.9% net income margin for the fiscal quarter ended September 28, 2024.

● Increase in Adjusted EBITDA (as defined below) of $8.5 million to $38.3 million for the fiscal quarter ended September 27, 2025, compared to $29.8 million for the fiscal quarter ended September 28, 2024.

Adjusted EBITDA margin increased from 19.8% to 23.7%.

Highlights for the two fiscal quarters ended June 28, 2025

● Increase in net sales of 4.9%, or $13.3 million, to $284.1 million for the two fiscal quarters ended June 28, 2025, compared to $270.8 million for the two fiscal quarters ended June 29, 2024.

● Increase in net income of $4.6 million to a net income of $10.0 million and representing a 3.5% net income margin for the two fiscal quarters ended June 28, 2025, compared to net income of $5.4 million and representing a 2.0% net income margin for the two fiscal quarters ended June 29, 2024.

● Increase in Adjusted EBITDA of $4.2 million to $51.0 million for the two fiscal quarters ended June 28, 2025, compared to $46.8 million for the two fiscal quarters ended June 29, 2024.

Highlights for the three fiscal quarters ended September 27, 2025

● Increase in net sales of 5.9%, or $24.8 million, to $446.0 million for the three fiscal quarters ended September 27, 2025, compared to $421.2 million for the three fiscal quarters ended September 28, 2024.

● Increase in net income of $6.8 million to a net income of $18.1 million and representing a 4.1% net income margin for the three fiscal quarters ended September 27, 2025, compared to net income of $11.3 million and representing a 2.7% net income margin for the three fiscal quarters ended September 28, 2024.

● Increase in Adjusted EBITDA of $12.8 million to $89.4 million for the three fiscal quarters ended September 27, 2025, compared to $76.6 million for the three fiscal quarters ended September 28, 2024.

Adjusted EBITDA margin improved from 18.2% to 20.0%.

Business Update

Our current business results reflect a strong second quarter sales growth despite challenging market conditions and our results of operations for the two fiscal quarters ended June 28, 2025 were aligned with our expectations.

Our current business results reflect a strong third quarter sales growth despite challenging market conditions and our results of operations for the three fiscal quarters ended September 27, 2025 were aligned with our expectations.

These results were primarily driven by category share gains in autocovers, along with contributions from the Coverstar Central, LLC (“Coverstar Central”) acquisition in August 2024 and the early 2025 acquisitions of two of our smaller autocover dealers.

Based on current business trends and market conditions, we remain cautious on 2025 new pool starts, which we currently project to be roughly in line with 2024 levels.

Liners also saw growth, reflecting success in our Measure by Latham tool.

Based on sales for three fiscal quarters and current business trends and market conditions, we currently project 2025 new pool starts to be flat to slightly down from 2024 levels.

We are closely monitoring the potential impact of current macroeconomic and geopolitical conditions, as well as general reduced consumer confidence and increased economic uncertainty.

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We continue to take a disciplined approach to capital investments, with the focus on product innovation, facility upgrades and technology and systems.

Due to greater-than-expected efficiency of certain projects, we have reduced our capital expenditure estimate for 2025.

These initiatives complement continued investment in our sales, marketing, engineering and research and development efforts that are designed to accelerate conversion to fiberglass pool products and ongoing digital transformation programs.

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On August 2, 2024, we completed a stock acquisition of Coverstar Central, our exclusive dealer of automatic safety covers in 29 states – mainly in the center of the U.S.

Coverstar Central has been our trusted partner since 2006, and this acquisition represents a valuable strategic opportunity that we expect to benefit from in multiple ways.

First, the vertical integration of our automatic safety cover product line in the acquired geographies is expected to increase margins.

Second, as one company with a fully integrated sales and marketing strategy, we expect to accelerate the sales growth of this product line.

Finally, we see opportunities to leverage Coverstar Central’s long-standing relationships with pool builders in its markets to increase the awareness of, and conversion to, fiberglass pools.

During the two fiscal quarters ended June 28, 2025, we further strengthened our position in this growing category by acquiring two of our smaller autocover dealers located in Tennessee and New York.

Coverstar Central has been our trusted partner since 2006, and this acquisition represented a valuable strategic opportunity that we benefited from in multiple ways.

First, the vertical integration of our automatic safety cover product line in the acquired geographies increased margins.

Second, as one company with a fully integrated sales and marketing strategy, we were able to accelerate the sales growth of this product line.

Finally, we leveraged Coverstar Central’s long-standing relationships with pool builders in its markets to increase the awareness of, and conversion to, fiberglass pools.

During the three fiscal quarters ended September 27, 2025, we further strengthened our position in this growing category by acquiring two of our smaller autocover dealers located in Tennessee and New York.

Key Performance Indicators

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Revenue that is derived from our extended service warranties, which are separately priced and sold, is recognized over the term of the contracts.

Revenue from custom products is recognized over time utilizing an input method that compares the cost of cumulative work-in-process to date to the most current estimates for the entire cost of the performance obligation.

Revenue from custom products is recognized over time utilizing an input

method that compares the cost of cumulative work-in-process to date to the most current estimates for the entire cost of the performance obligation.

Gross margin is gross profit as a percentage of our net sales.

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We use Adjusted EBITDA and Adjusted EBITDA margin to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to utilize as a significant performance metric in our annual management incentive bonus plan compensation, and to compare our performance against that of other companies using similar measures.

We have presented Adjusted EBITDA and Adjusted EBITDA margin solely as supplemental disclosures because we believe they allow for a more complete analysis of results of operations and assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax (benefit) expense, (iv) (gain) loss on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized (gains) losses on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs and (x) other.

We have presented Adjusted EBITDA and Adjusted EBITDA margin solely as supplemental disclosures because we believe they allow for a more complete analysis of results of operations and assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense (benefit), (iv) (gain) loss on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized losses (gains) on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs and (x) other.

Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures and should not be considered as alternatives to net income (loss) as a measure of financial performance or any other performance measure derived in accordance with GAAP, and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

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Results of Operations

Fiscal Quarter Ended June 28, 2025 Compared to Fiscal Quarter Ended June 29, 2024

The following table summarizes our results of operations for the fiscal quarter ended June 28, 2025 and June 29, 2024 (dollars in thousands):

Fiscal Quarter Ended September 27, 2025 Compared to Fiscal Quarter Ended September 28, 2024

The following table summarizes our results of operations for the fiscal quarter ended September 27, 2025 and September 28, 2024 (dollars in thousands):

Fiscal Quarter Ended

June 28, 2025

June 29, 2024

September 27, 2025

September 28, 2024

(dollars in thousands)

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Interest expense, net

Other (income) expense, net

Other expense (income), net

Total other expense, net

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Income before income taxes

Income tax expense

Income tax expense (benefit)

Adjusted EBITDA (a)

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See “Non-GAAP Financial Measures” for a reconciliation to net income, the most directly comparable GAAP measure, and for information regarding our use of Adjusted EBITDA.

Net sales were $172.6 million for the fiscal quarter ended June 28, 2025, compared to $160.1 million for the fiscal quarter ended June 29, 2024.

The $12.5 million, or 7.8%, increase in net sales was due to a $12.0 million increase in sales volume and a $0.5 million increase from pricing.

The sales volume increase was primarily driven by both organic- and acquisition-related growth.

The increase in net sales of $12.5 million across our product lines consisted of an increase of $11.7 million for covers and $3.1 million for liners, partially offset by a $2.4 million decrease for in-ground swimming pools.

Net sales were $161.9 million for the fiscal quarter ended September 27, 2025, compared to $150.5 million for the fiscal quarter ended September 28, 2024.

The $11.4 million, or 7.6%, increase in net sales was due to a $8.4 million increase in sales volume and a $3.0 million increase from higher pricing.

The sales volume increase was primarily driven by organic- and acquisition-related growth.

The increase in net sales of $11.4 million across our product lines consisted of an increase of $7.1 million for covers, $3.7 million for liners and a $0.6 million increase for in-ground swimming pools.

Cost of Sales and Gross Margin

Cost of sales was $108.7 million for the fiscal quarter ended June 28, 2025, compared to $107.1 million for the fiscal quarter ended June 29, 2024.

Gross margin increased by 4.0%, to 37.1% of net sales for the fiscal quarter ended June 28, 2025, compared to 33.1% of net sales for the fiscal quarter ended June 29, 2024.

Cost of sales was $104.6 million for the fiscal quarter ended September 27, 2025, compared to $101.8 million for the fiscal quarter ended September 28, 2024.

Gross margin increased by 3.0%, to 35.4% of net sales for the fiscal quarter ended September 27, 2025, compared to 32.4% of net sales for the fiscal quarter ended September 28, 2024.

The $2.8 million, or 2.7%, increase in cost of sales was primarily the result of the increase in sales volume, partially offset by the impact of production efficiencies resulting from lean manufacturing and value engineering programs.

The 4.0% increase in gross margin was primarily driven by higher volumes, lean manufacturing and value engineering initiatives, and a margin benefit from the three Coverstar acquisitions.

The 3.0% increase in gross margin was primarily driven by the accretive benefit of the three Coverstar acquisitions, lean manufacturing and value engineering initiatives and production efficiencies.

Selling, General, and Administrative Expense

Selling, general, and administrative expense was $31.9 million for the fiscal quarter ended June 28, 2025, compared to $26.6 million for the fiscal quarter ended June 29, 2024.

The $5.3 million, or 20.1%, increase in selling, general, and administrative expense

was primarily driven by increased marketing and personnel investment tied to our Sand States strategy, investments in new enterprise resource planning (“ERP”) infrastructure and inclusion of Coverstar Central.

Amortization was $7.3 million for the fiscal quarter ended June 28, 2025, compared to $6.4 million for the fiscal quarter ended June 29, 2024.

Selling, general, and administrative expense was $28.6 million for the fiscal quarter ended September 27, 2025, compared to $28.3 million for the fiscal quarter ended September 28, 2024.

The $0.3 million, or 0.9%, increase in selling, general, and administrative expense was primarily driven by increased marketing and personnel investment tied to our Sand States strategy and

investments in new enterprise resource planning (“ERP”) infrastructure, partially offset by the timing of performance based compensation.

Amortization was $7.2 million for the fiscal quarter ended September 27, 2025, compared to $7.0 million for the fiscal quarter ended September 28, 2024.

The $0.2 million, or 3.3%, increase in amortization was driven by the three Coverstar acquisitions.

Interest Expense, net

Interest expense, net was $7.1 million for the fiscal quarter ended June 28, 2025, compared to $6.0 million for the fiscal quarter ended June 29, 2024.

The $1.1 million, or 18.9%, increase in interest expense, net was primarily the result of the change in the fair value of our interest rate swap, compared to the fiscal quarter ended June 29, 2024.

Other (Income) Expense, Net

Other income, net was $3.0 million for the fiscal quarter ended June 28, 2025, compared to other expense, net of $0.8 million for fiscal quarter ended June 29, 2024.

The $3.8 million increase in other income, net was primarily driven by a favorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.

Interest expense, net was $6.1 million for the fiscal quarter ended September 27, 2025, compared to $9.2 million for the fiscal quarter ended September 28, 2024.

The $3.1 million, or 33.7%, decrease in interest expense, net was primarily the result of the change in the fair value of our interest rate swap, compared to the fiscal quarter ended September 28, 2024.

Other Expense (Income), Net

Other expense, net was $1.2 million for the fiscal quarter ended September 27, 2025, compared to other income, net of $ (0.7) million for fiscal quarter ended September 28, 2024.

The $1.9 million increase in other expense, net was primarily driven by an unfavorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.

Earnings from Equity Method Investment

Earnings from our equity method investment in Premier Pools & Spa were $0.5 million for the fiscal quarter ended June 28, 2025, largely unchanged from the fiscal quarter ended June 29, 2024, due to the financial performance of Premier Pools & Spa.

Income Tax Expense

Income tax expense was $5.1 million for the fiscal quarter ended June 28, 2025, compared to income tax expense of $0.4 million for the fiscal quarter ended June 29, 2024.

Our effective tax rate was 24.3% for the fiscal quarter ended June 28, 2025, compared to 3.2% for the fiscal quarter ended June 29, 2024.

Earnings from our equity method investment in Premier Pools & Spa were $1.3 million for the fiscal quarter ended September 27, 2025, compared to $0.9 million for the fiscal quarter ended September 28, 2024, due to the financial performance of Premier Pools & Spa.

Income Tax Expense (Benefit)

Income tax expense was $7.5 million for the fiscal quarter ended September 27, 2025, compared to income tax benefit of less than $0.1 million for the fiscal quarter ended September 28, 2024.

Our effective tax rate was 47.9% for the fiscal quarter ended September 27, 2025, compared to (0.7)% for the fiscal quarter ended September 28, 2024.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for both the fiscal quarters ended June 28, 2025 and June 29, 2024 was primarily attributable to the impacts of stock-based compensation expense and foreign income.

Net income was $16.0 million for the fiscal quarter ended June 28, 2025, compared to $13.3 million for the fiscal quarter ended June 29, 2024.

federal statutory income tax rate and our effective income tax rate for both the fiscal quarters ended September 27, 2025 and September 28, 2024 was primarily attributable to the discrete impact of stock-based compensation expense for which there is no associated tax benefit and the effects of branch accounting for Latham Canada.

Net income was $8.1 million for the fiscal quarter ended September 27, 2025, compared to $5.9 million for the fiscal quarter ended September 28, 2024.

The $2.2 million, or 37.7%, increase in net income was primarily because of the factors described above.

Net Income Margin

Net income margin was 9.3% for the fiscal quarter ended June 28, 2025, compared to 8.3% for the fiscal quarter ended June 29, 2024.

Net income margin was 5.0% for the fiscal quarter ended September 27, 2025, compared to 3.9% for the fiscal quarter ended September 28, 2024.

The 1.1% increase in net income margin was driven by the factors described above.

Adjusted EBITDA

Adjusted EBITDA was $39.9 million for the fiscal quarter ended June 28, 2025, compared to $34.5 million for the fiscal quarter ended June 29, 2024.

The $5.4 million, or 15.7%, increase in Adjusted EBITDA was primarily because of the gross profit growth from increase in net sales that more than offset higher selling, general and administrative expense, as well as the other factors described above.

Adjusted EBITDA was $38.3 million for the fiscal quarter ended September 27, 2025, compared to $29.8 million for the fiscal quarter ended September 28, 2024.

The $8.5 million, or 28.5%, increase in Adjusted EBITDA was primarily because of the gross profit growth from increase in net sales, as well as the other factors described above.

Adjusted EBITDA Margin

Adjusted EBITDA margin was 23.1% for the fiscal quarter ended June 28, 2025, compared to 21.5% for the fiscal quarter ended June 29, 2024.

The 1.6% increase in Adjusted EBITDA margin was primarily because of a $5.4 million increase in Adjusted EBITDA, compared to the fiscal quarter ended June 29, 2024, which was impacted by the factors described above.

Two Fiscal Quarters Ended June 28, 2025 Compared to Two Fiscal Quarters Ended June 29, 2024

The following table summarizes our results of operations for the two fiscal quarters ended June 28, 2025 and June 29, 2024:

Two Fiscal Quarters Ended

June 28, 2025

June 29, 2024

Adjusted EBITDA margin was 23.7% for the fiscal quarter ended September 27, 2025, compared to 19.8% for the fiscal quarter ended September 28, 2024.

The 3.9% increase in Adjusted EBITDA margin was primarily because of a $8.5 million increase in Adjusted EBITDA, compared to the fiscal quarter ended September 28, 2024, which was impacted by the factors described above.

Three Fiscal Quarters Ended September 27, 2025 Compared to Three Fiscal Quarters Ended September 28, 2024

The following table summarizes our results of operations for the three fiscal quarters ended September 27, 2025 and September 28, 2024:

Three Fiscal Quarters Ended

September 27, 2025

September 28, 2024

(dollars in thousands)

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See “Non-GAAP Financial Measures” for a reconciliation to net income, the most directly comparable GAAP measure, and for information regarding our use of Adjusted EBITDA.

Net sales were $284.1 million for the two fiscal quarters ended June 28, 2025, compared to $270.8 million for the two fiscal quarters ended June 29, 2024.

The $13.3 million, or 4.9%, increase in net sales was due to a $14.4 million increase in sales volume, partially offset by a $1.1 million decrease from lower pricing.

Net sales were $446.0 million for the three fiscal quarters ended September 27, 2025, compared to $421.2 million for the three fiscal quarters ended September 28, 2024.

The $24.8 million, or 5.9%, increase in net sales was due to a $22.8 million increase in sales volume and a $2.0 million increase from higher pricing.

The sales volume increase was primarily driven by both organic- and acquisition-related growth.

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Cost of Sales and Gross Margin

Cost of sales was $187.2 million for the two fiscal quarters ended June 28, 2025, compared to $187.1 million for the two fiscal quarters ended June 29, 2024.

Gross margin increased by 3.2%, to 34.1% of net sales for the two fiscal quarters ended June 28, 2025, compared to 30.9% of net sales for the two fiscal quarters ended June 29, 2024.

The $0.1 million increase in cost of sales was primarily the result of the increase in sales volume, offset by the impact of production efficiencies resulting from lean manufacturing and value engineering programs.

Cost of sales was $291.8 million for the three fiscal quarters ended September 27, 2025, compared to $288.9 million for the three fiscal quarters ended September 28, 2024.

Gross margin increased by 3.2%, to 34.6% of net sales for the three fiscal quarters ended September 27, 2025, compared to 31.4% of net sales for the three fiscal quarters ended September 28, 2024.

The $2.9 million increase in cost of sales was primarily the result of the increase in sales volume, partially offset by the impact of production efficiencies resulting from lean manufacturing and value engineering programs.

The 3.2% increase in gross margin was primarily driven by higher volumes, lean manufacturing and value engineering initiatives, and a margin benefit from the three Coverstar acquisitions.

Selling, General, and Administrative Expense

Selling, general, and administrative expense was $62.6 million for the two fiscal quarters ended June 28, 2025, compared to $52.8 million for the two fiscal quarters ended June 29, 2024.

Selling, general, and administrative expense was $91.1 million for the three fiscal quarters ended September 27, 2025, compared to $81.2 million for the three fiscal quarters ended September 28, 2024.

The $9.9 million, or 12.3%, increase in selling, general, and administrative expense was primarily driven by increased marketing and personnel investment tied to our Sand State strategy, investments in new ERP infrastructure and the inclusion of Coverstar Central.

Amortization was $14.5 million for the two fiscal quarters ended June 28, 2025, compared to $12.8 million for the two fiscal quarters ended June 29, 2024.

Amortization was $21.7 million for the three fiscal quarters ended September 27, 2025, compared to $19.8 million for the three fiscal quarters ended September 28, 2024.

The $1.9 million, or 9.5%, increase in amortization was driven by the three Coverstar acquisitions.

Interest Expense, net

Interest expense, net was $13.5 million for the two fiscal quarters ended June 28, 2025, compared to $11.0 million for the two fiscal quarters ended June 29, 2024.

The $2.5 million, or 23.0%, increase in interest expense, net was primarily the result of the change in the fair value of our interest rate swap, compared to the two fiscal quarters ended June 29, 2024.

Interest expense, net was $19.6 million for the three fiscal quarters ended September 27, 2025, compared to $20.2 million for the three fiscal quarters ended September 28, 2024.

The $0.6 million, or 2.8%, decrease in interest expense, net was the result of the change in the fair value of our interest rate swap and a decrease in the outstanding balance of long-term debt, compared to the three fiscal quarters ended September 28, 2024.

Other (Income) Expense, Net

Other income, net was $3.4 million for the two fiscal quarters ended June 28, 2025, compared to other expense, net of $2.4 million for the two fiscal quarters ended June 29, 2024.

Other income, net was $2.2 million for the three fiscal quarters ended September 27, 2025, compared to other expense, net of $1.7 million for the three fiscal quarters ended September 28, 2024.

The $3.9 million increase in other income, net was primarily driven by a favorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.

Earnings from Equity Method Investment

Earnings from our equity method investment in Premier Pools & Spa were $1.4 million for the two fiscal quarters ended June 28, 2025, compared to $1.8 million for the two fiscal quarters ended June 29, 2024, due to the financial performance of Premier Pools & Spa.

Earnings from our equity method investment in Premier Pools & Spa were $2.8 million for the three fiscal quarters ended September 27, 2025, largely unchanged from the three fiscal quarters ended September 28, 2024, due to the financial performance of Premier Pools & Spa.

Income Tax Expense

Income tax expense was $1.1 million for the two fiscal quarters ended June 28, 2025, compared to income tax expense of $1.0 million for the two fiscal quarters ended June 29, 2024.

Our effective tax rate was 9.5% for the two fiscal quarters ended June 28, 2025, compared to 15.2% for the two fiscal quarters ended June 29, 2024.

Income tax expense was $8.5 million for the three fiscal quarters ended September 27, 2025, compared to income tax expense of $0.9 million for the three fiscal quarters ended September 28, 2024.

Our effective tax rate was 32.0% for the three fiscal quarters ended September 27, 2025, compared to 7.6% for the three fiscal quarters ended September 28, 2024.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for both the two fiscal quarters ended June 28, 2025 and June 29, 2024 was primarily attributable to the impacts of stock-based compensation expense and foreign income.

Net income was $10.0 million for the two fiscal quarters ended June 28, 2025, compared to $5.4 million for the two fiscal quarters ended June 29, 2024.

federal statutory income tax rate and our effective income tax rate for both the three fiscal quarters ended September 27, 2025 and September 28, 2024 was primarily attributable to the discrete impact of stock-based compensation expense for which there is no associated tax benefit and the effects of branch accounting for Latham Canada.

Net income was $18.1 million for the three fiscal quarters ended September 27, 2025, compared to $11.3 million for the three fiscal quarters ended September 28, 2024.

The $6.8 million, or 60.3%, increase in net income was primarily because of the factors described above.

Net Income Margin

Net income margin was 3.5% for the two fiscal quarters ended June 28, 2025, compared to 2.0% for the two fiscal quarters ended June 29, 2024.

The 1.5% increase in net income margin was driven by a $4.6 million increase in net income, compared to the two fiscal quarters ended June 29, 2024 because of the factors described above.

Net income margin was 4.1% for the three fiscal quarters ended September 27, 2025, compared to 2.7% for the three fiscal quarters ended September 28, 2024.

The 1.4% increase in net income margin was driven by a $6.8 million increase in net income, compared to the three fiscal quarters ended September 28, 2024 because of the factors described above.

Adjusted EBITDA

Adjusted EBITDA was $51.0 million for the two fiscal quarters ended June 28, 2025, compared to $46.8 million for the two fiscal quarters ended June 29, 2024.

The $4.2 million, or 9.1%, increase in Adjusted EBITDA was primarily because of the increase in net sales, as well as the other factors described above.

Adjusted EBITDA was $89.4 million for the three fiscal quarters ended September 27, 2025, compared to $76.6 million for the three fiscal quarters ended September 28, 2024.

The $12.8 million, or 16.7%, increase in Adjusted EBITDA was primarily because of the increase in net sales that more than offset higher selling, general and administrative expense, as well as the other factors described above.

Adjusted EBITDA Margin

Adjusted EBITDA margin was 18.0% for the two fiscal quarters ended June 28, 2025, compared to 17.3% for the two fiscal quarters ended June 29, 2024.

The 0.7% increase in Adjusted EBITDA margin was primarily because of the $4.2 million increase in Adjusted EBITDA, compared to the two fiscal quarters ended June 29, 2024, which was impacted by the other factors described above.

Adjusted EBITDA margin was 20.0% for the three fiscal quarters ended September 27, 2025, compared to 18.2% for the three fiscal quarters ended September 28, 2024.

The 1.8% increase in Adjusted EBITDA margin was primarily because of the $12.8 million increase in Adjusted EBITDA, compared to the three fiscal quarters ended September 28, 2024, which was impacted by the other factors described above.

Non-GAAP Financial Measures

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We have presented Adjusted EBITDA and Adjusted EBITDA margin solely as supplemental disclosures because we believe they allow for a more complete analysis of results of operations and assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as (i) depreciation and amortization, (ii) interest expense, net, (iii) income tax expense (benefit), (iv) (gain) loss on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized losses (gains) on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs and (x) other.

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● do not reflect the interest expense, or the amounts necessary to service interest or principal payments, on our outstanding debt;

● do not reflect income tax (benefit) expense, and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate;

● do not reflect income tax expense (benefit), and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate;

● do not reflect non-cash stock-based compensation, which will remain a key element of our overall compensation package;

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Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 28, 2025

June 29, 2024

June 28, 2025

June 29, 2024

Three Fiscal Quarters Ended

September 27, 2025

September 28, 2024

September 27, 2025

September 28, 2024

(dollars in thousands)

1 unchanged sentence

Interest expense, net

Income tax expense

Loss on sale and disposal of property and equipment

Income tax expense (benefit)

(Gain) loss on sale and disposal of property and equipment

Restructuring charges (a)

Stock-based compensation expense (b)

Unrealized (gains) losses on foreign currency transactions (c)

Unrealized losses (gains) on foreign currency transactions (c)

Strategic initiative costs (d)

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(b) Represents non-cash stock-based compensation expense.

(d) Represents fees paid to external consultants and other expenses for our strategic initiatives.

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Our primary cash needs are to fund working capital, capital expenditures, debt service requirements, any acquisitions, or investments we may undertake, and any share repurchases we may make.

As of June 28, 2025, we had $26.9 million of cash, $281.5 million of outstanding indebtedness and an additional $75.0 million of borrowing availability under our Revolving Credit Facility.

As of September 27, 2025, we had $70.5 million of cash, $281.1 million of outstanding indebtedness and an additional $75.0 million of borrowing availability under our Revolving Credit Facility.

Our primary working capital requirements are for the purchase of inventory, payroll, rent, facility costs and other selling, general, and administrative costs.

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There are also negative covenants, including certain restrictions on our ability and the ability of our subsidiaries to incur additional indebtedness, create liens, make investments, consolidate or merge with other entities, enter into transactions with affiliates, make prepayments with respect to certain indebtedness, make dividend payments, loans, or advances to us, declare dividends and make restricted payments and other distributions.

As of June 28, 2025, we were in compliance with all covenants under the Credit Agreement.

As of September 27, 2025, we were in compliance with all covenants under the Credit Agreement.

Revolving Credit Facility

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Borrowings under the Revolving Credit Facility are not subject to amortization and are due at maturity.

On June 12, 2025, we repaid the $25.0 million of outstanding borrowings on the Revolving Credit Facility.

As of June 28, 2025, we had no outstanding borrowings under the Revolving Credit Facility and $75.0 million was available for future borrowing.

During the three fiscal quarters ended September 27, 2025, we repaid the $25.0 million of outstanding borrowings on the Revolving Credit Facility.

As of September 27, 2025, we had no outstanding borrowings under the Revolving Credit Facility and $75.0 million was available for future borrowing.

The Term Loan matures on February 23, 2029.

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Loans under the Term Loan are subject to scheduled quarterly amortization payments equal to 0.25% of the initial principal amount of the Term Loan.

As of June 28, 2025, we had $281.5 million of outstanding borrowings under the Term Loan.

As of September 27, 2025, we had $281.1 million of outstanding borrowings under the Term Loan.

Share Repurchase Program

On May 10, 2022, our Board approved a stock repurchase program (the “Repurchase Program”), which authorized us to repurchase up to $100 million of our shares of common stock by May 2025.

We did not repurchase any shares of our common stock during the two fiscal quarters ended June 28, 2025, and our Repurchase Program expired on May 10, 2025.

We did not repurchase any shares of our common stock during the three fiscal quarters ended September 27, 2025, and our Repurchase Program expired on May 10, 2025.

We do not have an effective stock repurchase program.

The following table summarizes our sources and uses of cash for each of the periods presented:

Two Fiscal Quarters Ended

June 28, 2025

June 29, 2024

Three Fiscal Quarters Ended

September 27, 2025

September 28, 2024

(in thousands)

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Net cash used in investing activities

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Effect of exchange rate changes on cash

Net decrease in cash

Net increase (decrease) in cash

Operating Activities

During the two fiscal quarters ended June 28, 2025, operating activities used $10.9 million of cash.

During the three fiscal quarters ended September 27, 2025, operating activities provided $40.1 million of cash.

Net income, after adjustments for non-cash items, provided cash of $67.3 million.

Cash used in operating activities was driven by changes in our operating assets and liabilities, which used $50.9 million.

Net cash used by changes in our operating assets and liabilities for the two fiscal quarters ended June 28, 2025 consisted primarily of a $57.4 million increase in trade receivables, a $4.9 million increase in income tax receivable, a $2.7 million increase in prepaid expenses and other current assets, a $0.9 million increase in inventories, a $0.2 million decrease in other long-term liabilities and a $0.2 million increase in other assets, partially offset by a $13.1 million increase in accounts payable and a $2.4 million increase in accrued expenses and other current liabilities.

Cash provided by operating activities was partially reduced by changes in our operating assets and liabilities, which used $27.1 million.

Net cash used by changes in our operating assets and liabilities for the three fiscal quarters ended September 27, 2025 consisted primarily of a $50.4 million increase in trade receivables, a $5.6 million increase in income tax receivable, a $0.8 million increase in prepaid expenses and other current assets, a $0.5 million decrease in other long-term liabilities and a $0.2 million increase in other assets, partially offset by a $16.3 million increase in accounts payable, a $7.3 million decrease in inventories and a $6.7 million increase in accrued expenses and other current liabilities.

The change in trade receivables was primarily driven by the increase and timing of net sales and the change in accounts payable were primarily driven by volume of purchases and timing of payments.

During the two fiscal quarters ended June 29, 2024, operating activities provided $17.9 million of cash.

During the three fiscal quarters ended September 28, 2024, operating activities provided $55.2 million of cash.

Net income, after adjustments for non-cash items, provided cash of $60.3 million.

Cash provided by operating activities was further impacted by changes in our operating assets and liabilities, which used $5.2 million.

Net cash used by changes in our operating assets and liabilities for the two fiscal quarters ended June 29, 2024 consisted primarily of a $36.8 million increase in trade receivables, a $2.3 million increase in prepaid expenses and other current assets, a $1.2 million decrease in accrued expenses and other current liabilities,

a $0.7 million increase in income tax receivable and a $0.4 million decrease in other long-term liabilities, partially offset by a $13.1 million decrease in inventories, a $9.8 million increase in accounts payable and a $0.3 million decrease in other assets.

Net cash used by changes in our operating assets and liabilities for the three fiscal quarters ended September 28, 2024 consisted primarily of a $35.6 million increase in trade receivables, a $6.6

million increase in income tax receivable, a $2.3 million increase in prepaid expenses and other current assets and a $0.6 million increase in other long-term liabilities, partially offset by a $25.5 million decrease in inventories, a $10.4 million increase in accounts payable, a $3.4 million increase in accrued expenses and other current liabilities, and a $0.6 million decrease in other assets.

The change in trade receivables was primarily driven by the timing of net sales, the change in inventories was driven by efforts to meet a reduced demand outlook while maintaining lead times and service levels and the changes in accounts payable were primarily driven by volume of purchases and timing of payments.

Investing Activities

During the two fiscal quarters ended June 28, 2025, investing activities used $15.3 million of cash, consisting of purchases of property and equipment for $10.3 million and the acquisition of two of our autocover dealers of $4.9 million.

During the three fiscal quarters ended September 27, 2025, investing activities used $21.1 million of cash, consisting of purchases of property and equipment for $16.2 million and the acquisition of two of our autocover dealers of $4.9 million.

The purchase of property and equipment was primarily to expand capacity for production and diversify offerings, especially for fiberglass pools, as well as on-going strategic initiatives such as digital transformation.

During the two fiscal quarters ended June 29, 2024, investing activities used $9.8 million of cash, consisting of purchases of property and equipment primarily to expand capacity for production, especially for fiberglass pools.

During the three fiscal quarters ended September 28, 2024, investing activities used $77.9 million of cash, consisting of our acquisition of Coverstar Central for cash consideration of $64.0 million, net of cash acquired, and purchases of property and equipment for $13.9 million.

The purchase of property and equipment was primarily to expand capacity for production and diversify offerings, especially for fiberglass pools, the majority of which related to finishing up carryover projects from the prior fiscal year.

Financing Activities

During the two fiscal quarters ended June 28, 2025, financing activities used $3.6 million of cash, primarily consisting of common stock withheld for taxes on restricted stock units of $2.4 million, Term Loan payments of $0.8 million and repayments of finance lease obligations of $0.4 million.

During the two fiscal quarters ended June 29, 2024, financing activities used $20.0 million of cash, primarily consisting of repayments on long-term debt borrowings of $19.6 million and repayments of finance lease obligations of $0.4 million.

During the three fiscal quarters ended September 27, 2025, financing activities used $4.9 million of cash, primarily consisting of common stock withheld for taxes on restricted stock units of $2.7 million, Term Loan payments of $1.6 million and repayments of finance lease obligations of $0.6 million.

During the three fiscal quarters ended September 28, 2024, financing activities used $20.2 million of cash, primarily consisting of repayments on long-term debt borrowings of $19.6 million and repayments of finance lease obligations of $0.6 million.

Contractual Obligations

There have been no material changes, outside of the ordinary course of business, to our contractual obligations during the two fiscal quarters ended June 28, 2025 from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in our Annual Report.

There have been no material changes, outside of the ordinary course of business, to our contractual obligations during the three fiscal quarters ended September 27, 2025 from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations” in our Annual Report.

Critical Accounting Policies and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis