Latham Group, Inc. 10-Q

Item 1. Financial Statements Index to Condensed Consolidated Financial Statements (Unaudited) ​ ​ ​ Condensed Consolidated Balance Sheets 4 Condensed Consolidated Statements of Operations ​ 5 Condensed Consolidated Statements of Comprehensive (Loss) Income ​ 6 Condensed Consolidated Statements of Stockholders’ Equity ​ 7 Condensed Consolidated Statements of Cash Flows ​ 9 Notes to Condensed Consolidated Financial Statements ​ 10 ​ ​ ​ 3 Table of Contents Latham Group, Inc. Condensed Consolidated Balance Sheets (in thousands, except share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 2, ​ December 31, ​ ​ 2021 2020 ​ Assets ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ Cash ​ $ 90,869 ​ $ 59,310 ​ Trade receivables, net ​ 75,314 ​ 32,758 ​ Inventories, net ​ 80,705 ​ 64,818 ​ Income tax receivable ​ 6,129 ​ 4,377 ​ Prepaid expenses and other current assets ​ 10,676 ​ 6,063 ​ Total current assets ​ 263,693 ​ 167,326 ​ Property and equipment, net ​ 58,767 ​ 47,357 ​ Equity method investment ​ 21,997 ​ 25,384 ​ Deferred tax assets ​ 793 ​ 345 ​ Deferred offering costs ​ — ​ 1,041 ​ Goodwill ​ 115,158 ​ 115,750 ​ Intangible assets, net ​ 271,831 ​ 289,473 ​ Other assets ​ ​ 1,506 ​ ​ — ​ Total assets ​ $ 733,745 ​ $ 646,676 ​ Liabilities and Stockholders’ Equity ​ ​ ​ Current liabilities: ​ ​ ​ Accounts payable ​ $ 39,921 ​ $ 29,789 ​ Accounts payable – related party ​ 1,050 ​ 500 ​ Current maturities of long-term debt ​ 14,234 ​ 13,042 ​ Accrued expenses and other current liabilities ​ 59,454 ​ 50,606 ​ Total current liabilities ​ 114,659 ​ 93,937 ​ Long-term debt, net of discount and current portion ​ 219,967 ​ 208,454 ​ Deferred income tax liabilities, net ​ 55,949 ​ 55,193 ​ Liability for uncertain tax positions ​ 5,649 ​ 5,540 ​ Other long-term liabilities ​ 2,026 ​ 1,943 ​ Total liabilities ​ 398,250 ​ 365,067 ​ Commitments and contingencies ​ ​ ​ Stockholders’ equity: ​ ​ ​ Preferred stock, $ 0.0001 par value; 100,000,000 and no shares authorized as of October 2, 2021 and December 31, 2020, respectively; no shares issued and outstanding as of both October 2, 2021 and December 31, 2020 ​ ​ — ​ ​ — ​ Common stock, $ 0.0001 par value; 900,000,000 and 500,000,000 shares authorized as of October 2, 2021 and December 31, 2020, respectively; 119,849,589 and 118,854,249 shares issued and outstanding as of October 2, 2021 and December 31, 2020, respectively ​ 12 ​ 12 ​ Additional paid-in capital ​ 377,649 ​ 265,478 ​ (Accumulated deficit) retained earnings ​ ( 42,596 ) ​ 13,765 ​ Accumulated other comprehensive income ​ 430 ​ 2,354 ​ Total stockholders’ equity ​ 335,495 ​ 281,609 ​ Total liabilities and stockholders’ equity ​ $ 733,745 ​ $ 646,676 ​ ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 4 Table of Contents Latham Group, Inc. Condensed Consolidated Statements of Operations (in thousands, except share and per share data) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended ​ Three Fiscal Quarters Ended ​ ​ October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020 ​ Net sales ​ $ 161,957 ​ $ 127,512 ​ $ 491,592 ​ $ 291,468 ​ Cost of sales ​ 110,965 ​ 77,204 ​ 329,805 ​ 186,699 ​ Gross profit ​ 50,992 ​ 50,308 ​ 161,787 ​ 104,769 ​ Selling, general and administrative expense ​ 48,072 ​ 20,096 ​ 170,532 ​ 50,888 ​ Amortization ​ 5,486 ​ 4,047 ​ 16,560 ​ 12,173 ​ (Loss) income from operations ​ ( 2,566 ) ​ 26,165 ​ ( 25,305 ) ​ 41,708 ​ Other expense (income): ​ ​ ​ ​ ​ Interest expense ​ 4,271 ​ 3,992 ​ 20,843 ​ 13,633 ​ Other (income) expense, net ​ ( 2,538 ) ​ ( 1,378 ) ​ ( 3,887 ) ​ 1,121 ​ Total other expense, net ​ 1,733 ​ 2,614 ​ 16,956 ​ 14,754 ​ Earnings from equity method investment ​ ​ 810 ​ ​ — ​ ​ 1,808 ​ ​ — ​ (Loss) income before income taxes ​ ( 3,489 ) ​ 23,551 ​ ( 40,453 ) ​ 26,954 ​ Income tax expense ​ 7,807 ​ 5,811 ​ 15,908 ​ 8,251 ​ Net (loss) income ​ $ ( 11,296 ) ​ $ 17,740 ​ $ ( 56,361 ) ​ $ 18,703 ​ Net (loss) income per share attributable to common stockholders: ​ ​ ​ ​ ​ Basic ​ $ ( 0.10 ) ​ $ 0.18 ​ $ ( 0.51 ) ​ $ 0.19 ​ Diluted ​ $ ( 0.10 ) ​ $ 0.18 ​ $ ( 0.51 ) ​ $ 0.19 ​ Weighted-average common shares outstanding – basic and diluted ​ ​ ​ ​ ​ Basic ​ 112,153,832 ​ 97,393,002 ​ 110,121,240 ​ 96,665,708 ​ Diluted ​ 112,153,832 ​ 98,011,795 ​ 110,121,240 ​ 97,122,885 ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 5 Table of Contents Latham Group, Inc. Condensed Consolidated Statements of Comprehensive (Loss) Income (in thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended ​ Three Fiscal Quarters Ended ​ ​ October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020 ​ Net (loss) income ​ $ ( 11,296 ) ​ $ 17,740 ​ $ ( 56,361 ) ​ $ 18,703 ​ Other comprehensive (loss) income, net of tax: ​ ​ ​ ​ ​ Foreign currency translation adjustments ​ ( 887 ) ​ 47 ​ ( 1,924 ) ​ 404 ​ Comprehensive (loss) income ​ $ ( 12,183 ) ​ $ 17,787 ​ $ ( 58,285 ) ​ $ 19,107 ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 6 Table of Contents Latham Group, Inc. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retained Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Earnings ​ Other ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ (Accumulated ​ Comprehensive ​ Stockholders' ​ ​ Shares ​ Amount ​ Capital ​ Deficit) ​ Income (Loss) ​ Equity Balances at December 31, 2019 96,498,943 ​ $ 10 ​ $ 196,474 ​ $ ( 2,218 ) ​ $ ( 471 ) ​ $ 193,795 Net loss — ​ — ​ — ​ ( 15,451 ) ​ — ​ ( 15,451 ) Foreign currency translation adjustments — ​ — ​ — ​ — ​ ( 1,938 ) ​ ( 1,938 ) Repurchase and retirement of treasury stock ​ ( 200,173 ) ​ ​ — ​ ​ ( 400 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 400 ) Stock-based compensation expense — ​ — ​ 224 ​ — ​ — ​ 224 Balances at March 28, 2020 96,298,770 ​ 10 ​ 196,298 ​ ( 17,669 ) ​ ( 2,409 ) ​ 176,230 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ — ​ — ​ 16,414 ​ — ​ 16,414 Foreign currency translation adjustments — ​ — ​ — ​ — ​ 2,295 ​ 2,295 Repurchase and retirement of treasury stock ( 75,065 ) ​ — ​ ( 176 ) ​ — ​ — ​ ( 176 ) Stock-based compensation expense ​ — ​ ​ — ​ ​ 240 ​ ​ — ​ ​ — ​ ​ 240 Balances at June 27, 2020 96,223,705 ​ ​ 10 ​ ​ 196,362 ​ ​ ( 1,255 ) ​ ​ ( 114 ) ​ ​ 195,003 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ — ​ — ​ 17,740 ​ — ​ 17,740 Foreign currency translation adjustments — ​ — ​ — ​ — ​ 47 ​ 47 Issuance of common stock ​ 963,891 ​ ​ — ​ ​ 2,823 ​ ​ — ​ ​ — ​ ​ 2,823 Stock-based compensation expense ​ — ​ ​ — ​ ​ 978 ​ ​ — ​ ​ — ​ ​ 978 Balances at September 26, 2020 97,187,596 ​ $ 10 ​ $ 200,163 ​ $ 16,485 ​ $ ( 67 ) ​ $ 216,591 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 7 Table of Contents ​ Latham Group, Inc. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Retained Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Earnings ​ Other ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ (Accumulated ​ Comprehensive ​ Stockholders' ​ ​ Shares ​ Amount ​ Capital ​ Deficit) ​ Income (Loss) ​ Equity Balances at December 31, 2020 118,854,249 ​ $ 12 ​ $ 265,478 ​ $ 13,765 ​ $ 2,354 ​ $ 281,609 Net income — ​ — ​ — ​ 8,533 ​ — ​ 8,533 Foreign currency translation adjustments — ​ — ​ — ​ — ​ ( 1,201 ) ​ ( 1,201 ) Dividend ($ 1.00 per share) — ​ — ​ ( 110,033 ) ​ — ​ — ​ ( 110,033 ) Repurchase and retirement of treasury stock ​ ( 21,666,653 ) ​ ​ ( 2 ) ​ ​ ( 64,936 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 64,938 ) Stock-based compensation expense — ​ — ​ 1,464 ​ — ​ — ​ 1,464 Balances at April 3, 2021 97,187,596 ​ 10 ​ 91,973 ​ 22,298 ​ 1,153 ​ 115,434 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ ( 53,598 ) ​ — ​ ( 53,598 ) Foreign currency translation adjustments — ​ — ​ — ​ — ​ 164 ​ 164 Net proceeds from initial public offering ​ 23,000,000 ​ ​ 2 ​ ​ 399,262 ​ ​ — ​ ​ — ​ ​ 399,264 Repurchase and retirement of treasury stock ( 12,264,438 ) ​ ( 1 ) ​ ( 216,699 ) ​ — ​ — ​ ( 216,700 ) Issuance of restricted stock in connection with the Reorganization ​ 8,340,126 ​ ​ 1 ​ ​ ( 1 ) ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon conversion of Class B units ​ 4,145,987 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 75,511 ​ ​ — ​ ​ — ​ ​ 75,511 Balances at July 3, 2021 120,409,271 ​ ​ 12 ​ ​ 350,046 ​ ​ ( 31,300 ) ​ ​ 1,317 ​ ​ 320,075 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ ( 11,296 ) ​ — ​ ( 11,296 ) Foreign currency translation adjustments — ​ — ​ — ​ — ​ ( 887 ) ​ ( 887 ) Retirement of restricted stock ( 559,682 ) ​ — ​ — ​ — ​ — ​ — Stock-based compensation expense ​ — ​ ​ — ​ ​ 27,603 ​ ​ — ​ ​ — ​ ​ 27,603 Balances at October 2, 2021 119,849,589 ​ $ 12 ​ $ 377,649 ​ $ ( 42,596 ) ​ $ 430 ​ $ 335,495 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 8 Table of Contents Latham Group, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Fiscal Quarters Ended ​ ​ ​ October 2, ​ September 26, ​ ​ 2021 2020 ​ Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ ( 56,361 ) ​ $ 18,703 ​ Adjustments to reconcile net (loss) income to net cash provided by operating activities: ​ ​ ​ Depreciation and amortization ​ 23,689 ​ 17,461 ​ Amortization of deferred financing costs and debt discount ​ 5,907 ​ 1,867 ​ Stock-based compensation expense ​ 104,578 ​ 1,442 ​ Other non-cash ​ ​ 1,349 ​ ​ 825 ​ Gain on sale of equity method investment ​ ​ ( 3,856 ) ​ ​ — ​ Earnings from equity method investment ​ ​ ( 1,808 ) ​ ​ — ​ Distributions received from equity method investment ​ ​ 1,808 ​ ​ — ​ Changes in operating assets and liabilities: ​ ​ ​ Trade receivables ​ ( 43,134 ) ​ ( 18,732 ) ​ Inventories ​ ( 16,128 ) ​ ( 2,202 ) ​ Prepaid expenses and other current assets ​ ( 4,774 ) ​ 279 ​ Income tax receivable ​ ( 1,752 ) ​ ( 1,287 ) ​ Other assets ​ ​ ( 465 ) ​ ​ — ​ Accounts payable ​ 10,550 ​ 16,192 ​ Accrued expenses and other current liabilities ​ 9,740 ​ 20,449 ​ Other long-term liabilities ​ 83 ​ 59 ​ Net cash provided by operating activities ​ 29,426 ​ 55,056 ​ Cash flows from investing activities : ​ ​ ​ Purchases of property and equipment ​ ( 19,242 ) ​ ( 9,677 ) ​ Proceeds from the sale of property and equipment ​ 33 ​ 560 ​ Return of equity method investment ​ ​ 447 ​ ​ — ​ Proceeds from the sale of equity method investment ​ ​ 6,796 ​ ​ — ​ Net cash used in investing activities ​ ( 11,966 ) ​ ( 9,117 ) ​ Cash flows from financing activities : ​ ​ ​ Proceeds from long-term debt borrowings ​ 172,813 ​ — ​ Payments on long-term debt borrowings ​ ( 164,833 ) ​ ( 20,925 ) ​ Proceeds from borrowings on revolving credit facility ​ ​ 16,000 ​ ​ 5,000 ​ Payments on revolving credit facility ​ ​ ( 16,000 ) ​ ​ ( 5,000 ) ​ Deferred financing fees paid ​ ​ ( 1,250 ) ​ ​ — ​ Dividend to Class A unitholders ​ ​ ( 110,033 ) ​ ​ — ​ Proceeds from the issuance of common stock ​ ​ — ​ ​ 615 ​ Proceeds from initial public offering, net of underwriting discounts, commissions and offering costs ​ 399,264 ​ — ​ Repurchase and retirement of treasury stock ​ ​ ( 281,638 ) ​ ​ ( 576 ) ​ Payments of Narellan Group Pty Limited contingent consideration ​ — ​ ( 6,624 ) ​ Net cash provided by (used in) financing activities ​ 14,323 ​ ( 27,510 ) ​ Effect of exchange rate changes on cash ​ ( 224 ) ​ 769 ​ Net increase (decrease) in cash ​ 31,559 ​ 19,198 ​ Cash at beginning of period ​ 59,310 ​ 56,655 ​ Cash at end of period ​ $ 90,869 ​ $ 75,853 ​ Supplemental cash flow information : ​ ​ ​ Cash paid for interest ​ $ 14,208 ​ $ 12,693 ​ Income taxes paid, net ​ $ 15,213 ​ $ 9,100 ​ Supplemental disclosure of non-cash investing and financing activities : ​ ​ ​ Purchases of property and equipment included in accounts payable and accrued expenses ​ $ 226 ​ $ 635 ​ Capitalized internal-use software included in accounts payable – related party ​ $ 1,050 ​ $ — ​ Fair value of equity issued by Parent to settle contingent consideration in connection with the acquisition of Narellan Group Pty Limited ​ $ — ​ $ 2,208 ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 9 Table of Contents Notes to Condensed Consolidated Financial Statements  1. NATURE OF THE BUSINESS Latham Group, Inc. (“the Company”) wholly owns Latham Pool Products, Inc. (“Latham Pool Products”) (together, “Latham”) and is a designer, manufacturer and marketer of in-ground residential swimming pools in North America, Australia and New Zealand. Latham offers a portfolio of pools and related products, including in-ground swimming pools, pool liners and pool covers. On December 18, 2018, Latham Investment Holdings, LP (“Parent”), an investment fund managed by affiliates of Pamplona Capital Management (the “Sponsor”), Wynnchurch Capital, L.P. and management acquired all of the outstanding equity interests of Latham Topco., Inc., a newly incorporated entity in the State of Delaware. Latham Topco, Inc. changed its name to Latham Group, Inc. on March 3, 2021. Initial Public Offering, Reorganization and Stock Split On April 27, 2021, the Company completed its initial public offering (the “IPO”), pursuant to which it issued and sold 23,000,000 shares of common stock, inclusive of 3,000,000 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $ 399.3 million, after deducting underwriting discounts and commissions and other offering costs. Prior to the closing of the Company’s IPO on April 27, 2021 (the “Closing of the IPO”), the Company’s parent entity, Parent, merged with and into Latham Group, Inc., with Latham Group, Inc. surviving the merger (the “Reorganization”). The purpose of the Reorganization was to allow existing indirect owners of the Company to become direct shareholders of the Company. In connection with the Reorganization, Class A units of the Parent (the “Class A units”) were converted into shares of the Company’s common stock, and Class B units of the Parent (the “Class B units”) were converted into an economically equivalent number of restricted and unrestricted shares of the Company’s common stock on a pro rata basis. The Reorganization was accounted for as an equity reorganization between entities under common control. As the Class A units were akin to common shares as all holders held economic interest of the Parent and were entitled to distributions on a pro rata basis to their ownership, the conversion of Class A units to common shares as part of the Reorganization was considered to be equivalent to a stock split , which requires retrospective treatment for accounting purposes. Accordingly, all share and per share amounts in these condensed consolidated financial statements and related notes have been retroactively restated, where applicable, to give effect to the conversion ratio applied in connection with the Reorganization. Class B units were historically accounted for as compensatory arrangements in accordance with ASC 718 “ Compensation – Stock Compensation ”, akin to stock appreciation rights, that, when vested, would share on the economic appreciation of the equity value of Parent over the agreed hurdles. As a result of the Reorganization, the Company determined that only vested Class B units are considered outstanding for accounting purposes. A portion of the Class B units vest based on continued employment by the holder, or time-vesting units, and the remaining Class B units vest upon defined performance and market conditions, or performance-vesting units. Therefore, the Company has considered any unvested restricted shares as contingently issuable shares until they vest. The conversion of time-vesting Class B units to restricted shares is retrospectively included in the weighted-average common shares outstanding for diluted net income (loss) per share using the treasury stock method for each period in which the individual unit holder’s threshold was met at the reporting date and therefore the individual unit holder would have participated in a hypothetical distribution to the Parent unit holders. The conversion of performance-vesting Class B units to restricted shares is not included in the shares outstanding for diluted net income (loss) per share for any period prior to the Reorganization and IPO as the performance vesting thresholds were not satisfied and the performance units were not considered probable to vest historically. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 10 Table of Contents Unaudited Interim Financial Information The consolidated balance sheet at December 31, 2020 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of October 2, 2021 and for the fiscal quarters and three fiscal quarters ended October 2, 2021 and September 26, 2020 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with Latham Group, Inc.’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Registration Statement on Form S-1, as amended, File No. 333-254930 on file with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of October 2, 2021 and results of operations for the fiscal quarters and three fiscal quarters ended October 2, 2021 and September 26, 2020 and cash flows for the three fiscal quarters ended October 2, 2021 and September 26, 2020 have been made. The Company’s results of operations for the fiscal quarter and three fiscal quarters ended October 2, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021. Use of Estimates The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are evaluated on an ongoing basis and revised as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Seasonality Although the Company generally has demand for its products throughout the year, its business is seasonal and weather is one of the principal external factors affecting the business. Historically, net sales and net income are highest during spring and summer, representing the peak months of swimming pool use, pool installation and remodeling and repair activities. Sales periods having severe weather may also affect net sales. Accounting Policies Refer to the Company’s final prospectus for the IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on April 26, 2021 (“the Prospectus”) for a discussion of the Company’s accounting policies, as updated below. Stock-based Compensation Stock-based compensation is measured and recognized based on the grant date fair value of the awards. The Class B units of the Parent were granted to employees in the form of Profits Interest Units (“PIUs”). The Company determined the grant date fair value of PIUs using the Black-Scholes option pricing model. As part of the Reorganization, the vested and unvested PIUs of the Parent, were converted on a pro rata basis into equivalent restricted stock units and restricted stock awards of the Company’s underlying common stock. The fair value of the awards is expensed using a graded vesting method over the requisite service period in which employees earn the awards. The Company accounts for forfeitures of stock-based awards as they occur rather than applying an estimated forfeiture rate to stock-based compensation expense. The Black-Scholes pricing model requires critical assumptions including risk-free rate, volatility, expected term and expected dividend yield. The expected term is computed using the simplified method. The Company uses the simplified method to calculate expected term of the PIUs as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the stock-based award. The Company considers the historical volatility of the Company’s stock price, as well as implied volatility. The Company utilized a dividend yield of zero, as it had no history or plan of declaring dividends on its common stock. The assumptions underlying these valuations represented the Company’s best estimate, which involved inherent 11 Table of Contents uncertainties and the application of judgment. As a result, if the Company had used significantly different assumptions or estimates, the fair value of the Company’s stock-based compensation expense could have been materially different. Contemporaneously with the pricing of the Company’s IPO, on April 22, 2021, the Company effected its Omnibus Incentive Plan in which it granted to certain employees of the Company restricted stock awards, restricted stock units and option awards inclusive of the as converted Class B units as a result of the Reorganization (see Note 14). Equity Method Investments Investments and ownership interests in common stock or in-substance common stock are accounted for under the equity method accounting if the Company has the ability to exercise significant influence over the entity but does not have a controlling financial interest. Under the equity method, investments are initially recognized at cost and adjusted to reflect the Company’s interest in net earnings, dividends received and other-than-temporary impairments. The Company records its interest in the net earnings of its equity method investee, along with adjustments for amortization of basis differences, investee capital transactions and other comprehensive income (loss), within earnings from equity method investment in the condensed consolidated statements of operations. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to the underlying basis differences. Profits or losses related to intra-entity sales with its equity method investee are eliminated until realized by the investor or investee. The Company records its proportionate share of earnings or losses of Premier Holdco, LLC (“Premier Pools & Spas”) within earnings from equity method investment in the condensed consolidated statements of operations on a three-month lag. The Company recorded its interest in the net earnings of Premier Pools & Spas of $ 0.8 million and $ 1.8 million, respectively, for the fiscal quarter and three fiscal quarters ended October 2, 2021, which included a $ 0.1 million and $ 0.2 million adjustment for the amortization of basis differences, within earnings from equity method investment in the condensed consolidated statements of operations during the fiscal quarter and three fiscal quarters ended October 2, 2021. As the Company initially invested in Premier Pools & Spas on October 30, 2020, there was no earnings from equity method investment recorded during the fiscal quarter and the three fiscal quarters ended September 26, 2020. The Company received distributions of $ 1.1 million and $ 2.2 million during the fiscal quarter and three fiscal quarters ended October 2, 2021, respectively. For presentation in the condensed consolidated statements of cash flows, the Company utilizes the cumulative earnings approach for purposes of determining whether distributions should be classified as either a return on investment, which are be included in operating activities, or a return of investment, which would be included in investing activities. Under the cumulative earnings approach, the Company compares the distributions received to its cumulative equity-method earnings since inception. Any distributions received up to the amount of cumulative equity earnings are be considered a return on investment and classified in operating activities. Any excess distributions would be considered a return of investment and classified in investing activities. Equity method goodwill is not amortized or tested for impairment; instead the Company evaluates equity method investments for impairment when events or changes in circumstances indicate that the decline in value below the carrying amount of its equity method investment is determined to be other than temporary. In such a case, the decline in value below the carrying amount of its equity method investment is recognized in the condensed consolidated statements of operations in the period the impairment occurs. Recently Issued Accounting Pronouncements The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. In February 2016, the FASB issued ASU 2016-02 , Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is 12 Table of Contents recognized based on an effective interest method or on a straight-line basis over the term of the lease. In addition, a lessee is required to record (i) a right-of-use asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense in its consolidated statement of operations for operating leases and amortization and interest expense in its consolidated statement of operations for financing leases. Leases with a term of 12 months or less may be accounted for similar to prior guidance for operating leases today. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842) , which added an optional transition method that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented. In November 2019, the FASB issued guidance delaying the effective date for all entities, except for public business entities. For nonpublic entities, this guidance is effective for annual periods beginning after December 15, 2020. In June 2020, the FASB issued additional guidance delaying the effective date for all entities, except for public business entities. For public entities, ASU 2016-02 was effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. For nonpublic entities, this guidance is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses , which narrowed the scope and changed the effective date for nonpublic entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU 2019-05, Financial Instruments — Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For public entities that are SEC filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which is intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its consolidated financial statements. In addition to that main objective, the amendments in the update make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. Additional updates to further clarify the guidance in ASU 2017-12 were issued by the FASB in October 2018 within ASU 2018-16. For public entities, the amendment is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For nonpublic entities, ASU 2017-12 is effective for fiscal years beginning after December 15, 2020 and interim periods beginning after December 15, 2021. Early application is permitted in any interim period after the issuance of the update. The Company is currently evaluating the impact that the adoption of ASU 2017-12 will have on its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. For public entities, ASU 2019-12 is effective for annual periods beginning after December 15, 2020, and interim periods within those reporting periods. For nonpublic companies, ASU 2019-12 is effective for annual periods beginning after December 15, 2021, and interim periods within those reporting periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2019-12 will have on its consolidated financial statements. In January 2020, the FASB issued ASU 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. For public entities, ASU 2020-01 is effective for annual periods beginning after December 15, 2020, and interim periods within those reporting periods. For nonpublic companies, ASU 2020-01 is effective for annual periods beginning after December 15, 2021, and 13 Table of Contents interim periods within those reporting periods. The Company is currently evaluating the impact that the adoption of ASU 2020-01 will have on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. This guidance is effective for all entities upon issuance on March 12, 2020 and may be applied through December 31, 2022. The expedients and exceptions in this guidance are optional, and the Company is evaluating the potential future financial statement impact of any such expedient or exception that it may elect to apply as the Company evaluates the effects of adopting this guidance on its consolidated financial statements. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope , which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, this guidance applies to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The ASU became effective as of March 12, 2020 and can be adopted anytime during the period of January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact that the adoption of ASU 2021-01 will have on its consolidated financial statements. ​ 3. ACQUISITIONS GL International, LLC On October 22, 2020, Latham Pool Products acquired GL International, LLC (“GLI”) for a total purchase price of $ 79.7 million (the “GLI Acquisition”). The results of GLI’s operations have been included in the condensed consolidated financial statements since that date. GLI specializes in manufacturing custom pool liners and safety covers. As a result, this acquisition expanded the Company’s liner and safety cover product offerings. In connection with the GLI Acquisition, consideration paid was $ 79.7 million in cash, or $ 74.7 million net of cash acquired of $ 5.0 million, and excluding a net working capital adjustment receivable of $ 0.8 million. The net working capital adjustment receivable was settled during fiscal quarter ended April 3, 2021. The cash consideration was funded from existing cash on hand. The Company incurred $ 2.4 million in transaction costs. The Company accounted for the GLI Acquisition using the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations (“ASC 805”). This requires that the assets acquired and liabilities assumed be measured at fair value. The Company estimated, using Level 3 inputs, the fair value of certain fixed assets using a combination of the cost approach and the market approach. Inventories were valued using the comparative sales method, less the cost of disposal. Specific to intangible assets, dealer relationships were valued using the multi-period excess earnings method, whereas trade names were valued using the relief from royalty method. The Company recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. 14 Table of Contents The following summarizes the purchase price allocation for the GLI Acquisition: ​ ​ ​ ​ ​ (in thousands) October 22, 2020 Total consideration ​ $ 79,743 Allocation of purchase price: ​ Cash ​ 5,007 Trade receivables ​ 10,639 Inventories ​ 11,854 Prepaid expenses and other current assets ​ 3,949 Property and equipment ​ 1,402 Intangible assets ​ 46,700 Total assets acquired ​ 79,551 Accounts payable ​ 3,536 Accrued expenses and other current liabilities ​ 8,853 Other long-term liabilities ​ 524 Total liabilities assumed ​ 12,913 Total fair value of net assets acquired, excluding goodwill: ​ 66,638 Goodwill ​ $ 13,105 ​ The excess of the purchase price over the fair value of the identifiable assets acquired and the liabilities assumed in the acquisition was allocated to goodwill in the amount of $ 13.1 million. Goodwill resulting from the GLI Acquisition was attributable to the expanded market share and product offerings. Goodwill resulting from the GLI Acquisition is deductible for tax purposes. The Company allocated a portion of the purchase price to specific intangible asset categories as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ Amortization Period Definite-lived intangible assets: (in thousands) (in years) Trade names ​ $ 9,500 9 Dealer relationships ​ 37,200 8 ​ ​ $ 46,700 ​ ​ ​ Pro Forma Financial Information (Unaudited) The following pro forma financial information presents the statements of operations of the Company combined with GLI as if the acquisition occurred on January 1, 2020. The pro forma results do not include any anticipated synergies, cost savings or other expected benefits of an acquisition. The pro forma financial information is not necessarily indicative of what the financial results would have been had the acquisition been completed on January 1, 2020 and is not necessarily indicative of the Company’s future financial results. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended ​ Three Fiscal Quarters Ended ​ (in thousands) September 26, 2020 ​ September 26, 2020 ​ Net sales ​ $ 152,508 ​ $ 345,200 ​ Net loss ​ $ 22,598 ​ $ 21,952 ​ ​ The pro forma financial information presented above has been calculated after adjusting for the results of the GLI Acquisition for the fiscal quarter and the three fiscal quarters ended September 26, 2020 to reflect the accounting effects as a result of the acquisition, including the amortization expense from acquired intangible assets, the depreciation and amortization expense from acquired property and equipment, the additional cost of sales from acquired inventory, interest expense from debt financing, and any related tax effects. 15 Table of Contents 4. EQUITY METHOD INVESTMENT On October 30, 2020, the Company entered into a securities purchase agreement to purchase 28 % of the common units of Premier Pools & Spas for $ 25.4 million. On August 6, 2021, the Company entered into a securities purchase agreement, together with Premier Holdco LLC, Premier Pools Management Corp. Holdco, Premier Franchise Management Holdco, PFC Holdco, and PPSF, LLC, pursuant to which Premier Group Holdings Inc., an affiliate of Wynnchurch Capital, L.P., acquired 29.8 % of the common units of Premier Pools & Spas in aggregate from all sellers, including the Company. Sellers who were not related parties of Wynnchurch Capital, L.P. or the Company determined the purchase price per common unit paid by Premier Group Holdings Inc., indicating the amount paid for the common units of Premier Pools & Spas reflects the price that would be paid in an arm's-length transaction. As a result of the transaction, the Company received cash proceeds of $ 6.8 million and recorded a gain on the sale of equity method investment of $ 3.9 million, which was recorded within other (income) expense, net on the condensed consolidated statements of operations during the fiscal quarter ended October 2, 2021. The Company’s post-sale ownership interest in Premier Pools & Spas is 20.1 %. The Company concluded, both before and after the sale of common units on August 6, 2021, that it holds common stock of Premier Pools & Spas and has the ability to exercise significant influence over Premier Pools & Spas but does not have a controlling financial interest. Accordingly, the Company accounts for this investment using the equity method of accounting. The Company’s proportionate share of the earnings or losses of the investee are reported as a separate line in the condensed consolidated statements of operations. Premier Pools & Spas is a holding company for its manufacturing and franchising companies including PFC LLC, Premier Franchise Management LLC, Premier Pools Management LLC, and Premier Fiberglass LLC (the “Premier Companies”). The Premier Companies are a leading swimming pool-building brand that uses its franchisee network to sell and install pools around the United States. In connection with Latham’s Investment in Premier Pools & Spas, the Company entered into an exclusive supply agreement with Premier Pools & Spas, the Premier Companies, and Premier Pools & Spas’ franchisees (“Premier Franchisees”) (together, the “Customer”). Premier Pools & Spas does not consolidate the operations of the Premier Franchisees. Per the supply agreement, Latham is the exclusive supplier of the Premier Franchisees for specific pool and pool products. These products include fiberglass products and package pool products. The initial term of the supply agreement is ten years . For the first three years of the supply agreement, the Customer is entitled to a low-teens percentage rebate for all fiberglass pools sold and an additional growth rebate of a low single-digit to low-teens percentage based on year over year sales growth on fiberglass pools (the “Rebates”). The Rebates will be paid directly to Premier Pools Management Corp. Holdco. As of October 2, 2021, the Company’s carrying amount for the equity method investment in Premier Pools & Spas was $ 22.0 million. During the three fiscal quarters ended October 2, 2021, Premier Pools & Spas paid the Company dividends of $ 2.2 million that are presented on the condensed consolidated statement of cash flows as distribution received from equity method investment of $ 1.8 million and return of equity method investment of $ 0.4 million, respectively. The Company has elected a three-month financial reporting lag. The Company recorded its interest in net earnings of Premier Pools & Spas of $ 0.8 million and $ 1.8 million for the fiscal quarter and three fiscal quarters ended October 2, 2021, along with a basis difference adjustment of $ 0.1 million and $ 0.2 million, respectively. 5. FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value. Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly. Level 3 — Unobservable inputs that reflect the Company’s own assumptions incorporated into valuation techniques. These valuations require significant judgment. 16 Table of Contents In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When there is more than one input at different levels within the hierarchy, the fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input to the fair value measurement in its entirety requires substantial judgment and consideration of factors specific to the asset or liability. Level 3 inputs are inherently difficult to estimate. Changes to these inputs can have significant impact on fair value measurements. Assets and liabilities measured at fair value using Level 3 inputs are based on one or more of the following valuation techniques: market approach, income approach or cost approach. There were no transfers between fair value measurement levels during the three fiscal quarters ended October 2, 2021 or September 26, 2020. Assets and liabilities measured at fair value on a nonrecurring basis The Company’s non-financial assets such as goodwill, intangible assets and property and equipment are measured at fair value upon acquisition or remeasured to fair value when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 2 and Level 3 inputs. Assets and liabilities measured at fair value on a recurring basis On May 31, 2019 (the “Acquisition Date”), Latham Pool Products acquired Narellan Group Pty Limited and its subsidiaries (collectively “Narellan”) for a total purchase price of $ 35.2 million (the “Narellan Acquisition”). In connection with the Narellan Acquisition, consideration paid included $ 20.2 million in cash, $ 7.6 million in equity consideration and $ 7.4 million of contingent consideration as of the Acquisition Date. The Company agreed to pay the contingent consideration in the form of cash and equity consideration to the seller if certain EBITDA targets were achieved for any of the trailing twelve months periods ended December 31, 2019, June 30, 2020 or the year ended December 31, 2020 (the “Contingent Consideration”). The fair value of the Contingent Consideration at the Acquisition Date was $ 7.4 million. On September 25, 2020, the Company amended the terms of the Narellan Share Purchase Agreement and settled the Contingent Consideration with the selling shareholders of Narellan based upon estimated EBITDA for the year ended December 31, 2020. The fair value of the Company’s Contingent Consideration was measured and recorded on the condensed consolidated balance sheets using Level 3 inputs because it was valued based on unobservable inputs and other estimation techniques due to the absence of quoted market prices. The Company valued the Contingent Consideration using a Monte Carlo simulation, which relied on management’s projections of EBITDA and the estimated probability of achieving such targets. Estimates of fair value are subjective in nature, involve uncertainties and matters of significant judgment, and are made at a specific point in time. Thus, changes in key assumptions from period to period could significantly affect the estimate of fair value. Pension Plan The fair value of the benefit plan assets related to the Company’s pension plan was historically measured and recorded on the condensed consolidated balance sheets using Level 2 inputs. During the fiscal quarter ended September 26, 2020, the Company terminated its defined benefit pension plan. Fair value of financial instruments The Company considers the carrying amounts of cash, trade receivables, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities, to approximate fair value due to the short-term maturities of these instruments. 17 Table of Contents Term loan The term loan is carried at amortized cost; however, the Company estimates the fair value of the term loan for disclosure purposes. The fair value of the term loan is determined using inputs based on observable market data of a non-public exchange using, which are classified as Level 2 inputs. The following table sets forth the carrying amount and fair value of the term loan (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 2, 2021 ​ December 31, 2020 ​ ​ ​ Carrying ​ Estimated ​ Carrying ​ Estimated ​ ​ Value Fair Value Value Fair Value ​ Term loan ​ $ 234,201 ​ $ 235,372 ​ $ 221,496 ​ $ 221,081 ​ ​ Interest rate swap The Company estimates the fair value of the interest rate swap (see Note 8) on a quarterly basis using Level 2 inputs, including the forward LIBOR curve. The fair value is estimated by comparing (i) the present value of all future monthly fixed rate payments versus (ii) the variable payments based on the forward LIBOR curve. As of October 2, 2021 and December 31, 2020, the Company’s interest rate swap liability was $ 0.6 million and $ 0.3 million, respectively, which was recorded within other long-term liabilities on the condensed consolidated balance sheets. 6. GOODWILL AND INTANGIBLE ASSETS, NET Goodwill The carrying amount of goodwill as of October 2, 2021 and as of December 31, 2020 was $ 115.2 million and $ 115.8 million, respectively. The change in the carrying value during the three fiscal quarters ended October 2, 2021 was solely due to fluctuations in foreign currency exchange rates. Intangible Assets Intangible assets, net as of October 2, 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 2, 2021 ​ ​ Gross ​ Foreign ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Currency ​ Accumulated ​ Net ​ Amount Translation Amortization Amount Trade names and trademarks ​ $ 135,100 ​ $ 476 ​ $ 14,839 ​ $ 120,737 Patented technology ​ 16,126 ​ 70 ​ 4,772 ​ 11,424 Pool designs ​ 5,728 ​ 286 ​ 956 ​ 5,058 Franchise relationships ​ 1,187 ​ 59 ​ 694 ​ 552 Dealer relationships ​ 160,376 ​ 23 ​ 27,434 ​ 132,965 Non-competition agreements ​ 2,476 ​ — ​ 1,381 ​ 1,095 ​ ​ $ 320,993 ​ $ 914 ​ $ 50,076 ​ $ 271,831 ​ The Company recognized $ 5.5 million and $ 16.6 million of amortization expense related to intangible assets during the fiscal quarter and the three fiscal quarters ended October 2, 2021, respectively. 18 Table of Contents Intangible assets, net as of December 31, 2020 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ Gross ​ Foreign ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Currency ​ Accumulated ​ Net ​ Amount Translation Amortization Amount Trade names and trademarks ​ $ 135,100 ​ $ 1,047 ​ $ 10,258 ​ $ 125,889 Patented technology ​ 16,126 ​ 155 ​ 3,452 ​ 12,829 Pool designs ​ 5,728 ​ 629 ​ 648 ​ 5,709 Franchise relationships ​ 1,187 ​ 130 ​ 470 ​ 847 Dealer relationships ​ 160,376 ​ 52 ​ 17,697 ​ 142,731 Non-competition agreements ​ 2,476 ​ — ​ 1,008 ​ 1,468 ​ ​ $ 320,993 ​ $ 2,013 ​ $ 33,533 ​ $ 289,473 ​ The Company recognized $ 4.0 million and $ 12.2 million of amortization expense related to intangible assets during the fiscal quarter and the three fiscal quarters ended September 26, 2020, respectively. The Company estimates that amortization expense related to definite-lived intangible assets will be as follows in each of the next five years and thereafter (in thousands): ​ ​ ​ ​ ​ ​ ​ Estimated Future Year Ended Amortization Expense Remainder of fiscal 2021 ​ $ 5,415 2022 ​ 21,959 2023 ​ 21,768 2024 ​ 20,948 2025 ​ 20,791 Thereafter ​ 180,950 ​ ​ $ 271,831 ​ ​ ​ 7. INVENTORIES, NET Inventories, net consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 2, 2021 December 31, 2020 ​ Raw materials ​ $ 57,165 ​ $ 37,010 ​ Finished goods ​ 23,540 ​ 27,808 ​ ​ ​ $ 80,705 ​ $ 64,818 ​ ​ ​ ​ 8. LONG-TERM DEBT The components of the Company’s outstanding debt obligations consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 2, 2021 December 31, 2020 ​ Term loan ​ $ 238,314 ​ $ 228,147 ​ Less: Unamortized discount and debt issuance costs ​ ( 4,113 ) ​ ( 6,651 ) ​ Total debt ​ 234,201 ​ 221,496 ​ Less: Current portion of long-term debt ​ ( 14,234 ) ​ ( 13,042 ) ​ Total long-term debt ​ $ 219,967 ​ $ 208,454 ​ ​ 19 Table of Contents Revolving Credit Facility On December 18, 2018, the Latham Pool Products entered into an agreement (the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC (“Nomura”) that included a revolving line of credit (the “Revolver”) and letters of credit (“Letters of Credit” or collectively with the Revolver, the “Revolving Credit Facility”), as well as a term loan (as described below). The Revolving Credit Facility is available to finance ongoing general corporate and working capital needs with the Revolver of up to $ 30.0 million. The Revolving Credit Facility matures on December 18, 2023. On April 27, 2021, upon completion of the IPO, the Company used $ 16.0 million of the net proceeds from the IPO to repay $ 16.0 million then outstanding on the Revolver. The Revolving Credit Facility allows for either Eurocurrency borrowings, bearing interest ranging from 4.50 % to 4.75 %, or base rate borrowings, bearing interest ranging from 3.50 % to 3.75 % depending on the First Lien Net Leverage Ratio, as defined in the Credit Agreement. A commitment fee accrues on any unused portion of the commitments under the Revolving Credit Facility. The commitment fee is due and payable quarterly in arrears and is equal to the applicable margin times the actual daily amount by which the $ 30.0 million initial commitment exceeds the sum of the outstanding borrowings under the Revolver and outstanding Letters of Credit obligations. The applicable margin ranges from 0.375 % to 0.500 % as determined by the Company’s First Lien Net Leverage Ratio as defined in the Credit Agreement. The Company is required to meet certain financial covenants, including maintaining specific liquidity measurements. There are also negative covenants, including certain restrictions on the Company’s ability to incur additional indebtedness, create liens, make investments, consolidate or merge with other entities, enter into transactions with affiliates and make prepayments. As of October 2, 2021 and December 31, 2020, the Company was in compliance with all financial-related covenants related to the Credit Agreement. There were no amounts outstanding as of both October 2, 2021 and December 31, 2020, on the Revolving Credit Facility or Letters of Credit. Term Loan Facility On December 18, 2018, in connection with the Acquisition, the Company entered into the Credit Agreement with Nomura to borrow $ 215.0 million (the “Original Term Loan”). The Company incurred debt issuance costs of $ 11.5 million related to the transaction. The Original Term Loan was amended on May 29, 2019, to provide additional borrowings of $ 23.0 million at a discount of $ 0.7 million (the “First Amendment”) to fund the Narellan Acquisition. Any portion of the First Amendment not used to fund the Narellan Acquisition was required to be applied to repay the First Amendment in an aggregate amount equal to such portion of the First Amendment, without any premium or penalty. On August 6, 2020, the Company entered into a Form of Affiliated Lender Assignment and Assumption with Nomura (the “Assignment”). Under the Assignment, the Company repaid $ 5.0 million of the outstanding principal balance. On October 14, 2020, the Company entered into a subsequent amendment under the Original Term Loan with Nomura to borrow an additional $ 20.0 million (the “Second Amendment” and collectively with the Original Term Loan and the First Amendment, the “Term Loan”). The Company accounted for the borrowings under the Second Amendment as new debt and recorded $ 0.1 million of third-party costs as a direct reduction to the carrying amount of long-term debt on the condensed consolidated balance sheet. There were no financing costs incurred with the Second Amendment. The Term Loan has a maturity date of June 18, 2025. Interest and principal payments are due quarterly. On January 25, 2021, the Company entered into a subsequent amendment to the Term Loan with Nomura to borrow an additional $ 175.0 million (the “Third Amendment” and collectively with the “Term Loan”, the “Amended Term Loan”). In connection with the Third Amendment, the Company is required to repay the outstanding principal balance of the Amended Term Loan in fixed quarterly payments of $ 5.8 million, commencing March 31, 2021. The amendment did not change the maturity date of the Term Loan and the Amended Term Loan bears interest under the same terms as the Term Loan. The Company accounted for $ 165.0 million of the borrowings under the Third Amendment as new debt and $ 10.0 million of the borrowings under the Third Amendment as a debt modification. The Company recorded an aggregate of $ 1.2 million of debt issuance costs as a direct reduction to the carrying amount of long-term debt on the condensed consolidated balance sheet. During the fiscal quarter ended July 3, 2021, in accordance with the terms of the Amended Term Loan, the Company elected to change the terms of the prepayment schedule from an inverse application 20 Table of Contents to a pro rata application and as a result the Company is required to repay the outstanding principal balance of the Amended Term Loan in fixed quarterly payments of $ 3.6 million, commencing June 30, 2021. The Amended Term Loan allowed for the $ 175.0 million of proceeds to be distributed to Class A unitholders. On February 2, 2021, the Company used the proceeds of the Amended Term Loan to repurchase and retire treasury stock of $ 64.9 million and to pay a dividend to Class A unitholders of $ 110.0 million. On April 27, 2021, upon completion of the IPO, the Company used $ 152.7 million of the net proceeds from the IPO to repay $ 152.7 million of the Amended Term Loan. The Term Loan bears interest at (1) a base rate equal to the highest of (i) the Federal Funds Rate plus 1∕2 of 1% , (ii) the “prime rate” published in the Money Rates section of the Wall Street Journal and (iii) LIBOR (2) plus a Loan Margin of (i) 6.00 % for Eurocurrency Rate Loans and (ii) 5.00 % for Base Rate Loans, as defined in the Credit Agreement. Principal payments under the First Amendment were calculated as 0.629 % of the outstanding principal balance. Outstanding borrowings as of October 2, 2021 and December 31, 2020 were $ 234.2 million and $ 221.5 million, respectively, net of discount and debt issuance costs of $ 4.1 million and $ 6.7 million, respectively. In connection with the Term Loan, the Company is subject to various financial reporting, financial and other covenants, including maintaining specific liquidity measurements. As of October 2, 2021, the unamortized debt issuance costs and discount on the Term Loan were $ 2.9 million and $ 1.2 million, respectively. As of December 31, 2020, the unamortized debt issuance costs and discount on the Term Loan were $ 6.3 million and $ 0.4 million, respectively. The effective interest rate was 7.24 % at October 2, 2021. Interest rate risk associated with the Company’s Credit Agreement is managed through an interest rate swap which the Company executed on April 30, 2020. The swap has an effective date of May 18, 2020 and a termination date of May 18, 2023. Under the terms of the swap, the Company fixed its LIBOR borrowing rate at 0.442 % on a notional amount of $ 200.0 million. The interest rate swap is not designated as a hedging instrument for accounting purposes (see Note 2 and Note 5). ​ Principal payments due on the outstanding debt in the next five fiscal years, excluding any potential payments based on excess cash flow levels, are as follows (in thousands): ​ ​ ​ ​ ​ Year Ended Term Loan Facility Remainder of fiscal 2021 ​ $ 3,558 2022 ​ 14,234 2023 ​ 14,234 2024 ​ 14,234 2025 ​ 192,054 ​ ​ $ 238,314 ​ The obligations under the Credit Agreement are guaranteed by certain wholly owned subsidiaries (the “Guarantors”) of the Company as defined in the security agreement. The obligations under the Credit Agreement are secured by substantially all of the Guarantors’ tangible and intangible assets, including their accounts receivables, equipment, intellectual property, inventory, cash and cash equivalents, deposit accounts and security accounts. The Credit Agreement also restricts payments and other distributions unless certain conditions are met, which could restrict the Company’s ability to pay dividends. 9. PRODUCT WARRANTIES The warranty reserve activity consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Fiscal Quarters Ended ​ ​ October 2, 2021 September 26, 2020 ​ Balance at the beginning of the year ​ $ 2,882 ​ $ 2,846 ​ Accruals for warranties issued ​ 4,369 ​ 2,270 ​ Less: Settlements made (in cash or in kind) ​ ( 3,825 ) ​ ( 2,501 ) ​ Balance at the end of the year ​ $ 3,426 ​ $ 2,615 ​ ​ ​ 21 Table of Contents 10. NET SALES The following table sets forth the Company’s disaggregation of net sales by product line (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended ​ Three Fiscal Quarters Ended ​ ​ October 2, 2021 September 26, 2020 ​ October 2, 2021 September 26, 2020 ​ In-ground Swimming Pools ​ $ 84,060 ​ $ 78,094 ​ $ 285,704 ​ $ 169,681 ​ Covers ​ 44,125 ​ 25,695 ​ 94,354 ​ 53,528 ​ Liners ​ 33,772 ​ 23,723 ​ 111,534 ​ 68,259 ​ ​ ​ $ 161,957 ​ $ 127,512 ​ $ 491,592 ​ $ 291,468 ​ ​ ​ ​ ​ ​ 11. INCOME TAXES The effective income tax rate for the fiscal quarter and three fiscal quarters ended October 2, 2021 was ( 223.8 )% and ( 39.3 )%, respectively, compared to 24.7 % and 30.6 % for the fiscal quarter and three fiscal quarters ended September 26, 2020, respectively. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the fiscal quarter and three fiscal quarters ended October 2, 2021 was primarily attributable to the discrete impact of stock compensation expense pursuant to the Reorganization. The results for the quarter include pre-tax stock compensation expense of $ 25.4 million and $ 98.9 million for fiscal quarters and three fiscal quarters ended October 2, 2021 related to the Reorganization for which there is no associated tax benefit. The difference between the U.S. federal statutory income tax rate and our effective income tax rate for the fiscal quarter and three fiscal quarters ended September 26, 2020 was impacted by a variety of factors, primarily stemming from impact of state taxes. The pre-tax income for three fiscal quarters ended September 26, 2020 included losses in tax jurisdictions for which the company did not record a tax benefit, which increased the effective income tax rate for the fiscal quarter ended September 26, 2020. ​ 12. SHAREHOLDERS’ EQUITY Equity Structure Prior to Reorganization Prior to the IPO and the Reorganization, the Parent owned 100 % of the issued and outstanding common stock of the Company. The capital structure of the Parent consisted of two different classes of limited partnership interests, Class A and Class B units (profits interests). Prior to the Reorganization, none of the Class B units would have been vested for accounting purposes due to the Parent’s $0 Repurchase Right, which applied in the event of a voluntary termination or termination without cause, since it functions as a vesting condition. Equity Structure Subsequent to the Reorganization On April 13, 2021, the Company’s certificate of incorporation was amended, which amended and restated certain terms of the certificate of incorporation. Under the amended certificate of incorporation, the Company had authority to issue 500,000,000 shares of common stock, par value $ 0.0001 per share. On April 12, 2021, the Company’s board of directors declared and on April 13, 2021, the Company effected a 109,673.709 -for-one stock split of its issued and outstanding shares of common stock. As a part of the equity Reorganization, on April 22, 2021, 194,207,115 Class A units converted into 97,187,596 shares of common stock and 26,158,894 Class B units converted into 4,145,987 shares of common stock and 8,340,126 shares of unvested restricted stock. Refer to Note 1 for detail regarding the Company’s Reorganization and conversion of Class A and Class B units to common and restricted shares. Amendment and Restatement of Certificate of Incorporation On April 22, 2021, the Company’s certificate of incorporation was further amended and restated to, among other things, increase the authorized shares to 1,000,000,000 , of which 900,000,000 are shares of common stock, par value $ 0.0001 per share and 100,000,000 are shares of preferred stock, par value 0.0001 per share. As of October 2, 2021 and December 31, 2020, 112,153,832 and 118,854,249 shares of common stock are issued and outstanding for accounting purposes, respectively. ​ 22 Table of Contents 13. PROFITS INTEREST UNITS Prior to the Reorganization, the Company’s Parent granted PIUs in the form of Class B units of the Parent to certain key employees and directors for purposes of retaining them and enabling such individuals to participate in the long-term growth and financial success of the Company. The following table summarizes the activity for all PIUs during the three fiscal quarters ended October 2, 2021 and the year ended December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ Grant-Date ​ Number of PIUs Fair Value Balance at January 1, 2020 ​ 21,734,170 ​ $ 0.60 Granted ​ 7,843,107 ​ ​ 0.35 Forfeited ( 2,152,315 ) ​ ​ 0.43 Balance at December 31, 2020 27,424,962 ​ Granted — ​ ​ ​ Forfeited ( 1,266,068 ) ​ ​ 0.34 Balance at April 21, 2021 ​ 26,158,894 ​ ​ ​ Converted at IPO in connection with the Reorganization ​ ( 26,158,894 ) ​ $ 0.43 Balance at October 2, 2021 — ​ ​ ​ ​ On January 29, 2021 an employee holder of PIUs terminated his employment with the Company, at which time all 1,055,057 of his performance-vesting units were forfeited. At the time of his termination, the employee held 527,528 of time-vesting units, of which 211,011 time-vesting units were vested. Per the terms of his termination agreement, the Company accelerated the vesting of an additional 105,506 time-vesting units, such that the total time-vesting units vested were equal to 316,517 upon his termination and the remaining 211,011 of unvested time-vesting units were forfeited upon his termination. As the employee’s profits interest units had not vested from an accounting perspective, the retention and immediate vesting of the retained time-vesting units was accounted for as a cancellation of the original award and a new grant under the revised terms. A cumulative catch-up charge of $ 1.1 million was recorded during the fiscal quarter ended April 3, 2021 to reflect the incremental fair value of the awards as of the date of the modification, as compared to the grant-date fair value. 14. STOCK-BASED COMPENSATION On April 12, 2021, the Company’s stockholders approved the 2021 Omnibus Incentive Plan (the “Omnibus Incentive Plan”), which became effective on April 22, 2021, upon pricing of the IPO. The Omnibus Incentive Plan provides for the issuance of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based and cash-based awards. The maximum aggregate number of shares reserved for issuance under the Omnibus Incentive Plan is 13,170,212 shares. The maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director under the Omnibus Incentive Plan during any one fiscal year, together with any cash fees paid to such non-employee director during such fiscal year, will be $ 750 thousand. Contemporaneously with the pricing of the Company’s IPO, on April 22, 2021 the Company granted 8,340,126 of restricted stock awards, 341,301 of restricted stock units and 886,862 of option awards under the Omnibus Incentive Plan to employees of the Company. Of the 8,340,126 restricted stock awards granted, (i) 6,799,414 vest every six months in equal installments beginning on December 27, 2021 and ending on December 27, 2023, and (ii) 1,540,712 vest every six months in equal installments, beginning on December 27, 2021 and ending on December 27, 2024. Of the 341,301 restricted stock unit awards granted, (i) 251,828 vest 1/3 on the nine-month anniversary of the Closing of the IPO, 1/3 on the first anniversary of the Closing of the IPO, and 1/3 on the two-year anniversary of the Closing of the IPO; (ii) 22,367 vest on the first anniversary of the Closing of the IPO; (iii) 51,316 vest on the nine-month anniversary of the Closing of the IPO; and (iv) 15,790 vest evenly on each of the first three anniversaries of the Closing of the IPO. All 886,862 of the option awards vest 25 % annually on each of the first four anniversaries of the Closing of the IPO. The option awards were granted with a strike price of $ 19.00 per share. Under the terms of the Omnibus Incentive Plan, all stock options will expire if not exercised within ten years of the grant date. Stock-based compensation expense for the fiscal quarters and three fiscal quarters ended October 2, 2021 was $ 27.6 million and $ 104.6 million, respectively. Stock-based compensation expense for the fiscal quarters and three fiscal quarters ended September 26, 2020 was and $ 1.0 million and $ 1.4 million, respectively. Stock-based compensation expense of $ 1.9 million and $ 25.7 was recorded 23 Table of Contents in cost of sales and selling, general and administrative expense, respectively, for the fiscal quarter ended October 2, 2021. Stock-based compensation expense of $ 6.8 million and $ 97.8 was recorded in cost of sales and selling, general and administrative expense, respectively, for the three fiscal quarters ended October 2, 2021. Stock-based compensation expense for the fiscal quarters and three fiscal quarters ended September 26, 2020 was recorded in selling, general and administrative expense on the condensed consolidated statements of operations. Of the $ 104.6 million of stock-based compensation expense recorded during the three fiscal quarters ended October 2, 2021, $ 0.5 million was due to the accelerated vesting of restricted stock and $ 49.0 million was due to the modification as a result of the Reorganization. Refer to Note 12 above for detail regarding the Company’s equity-based awards issued in the form of PIUs prior to the Reorganization and IPO. As of October 2, 2021, total unrecognized stock-based compensation expense related to all unvested stock-based awards of $ 106.2 million, which is expected to be recognized over a weighted-average period of 1.49 years. The following table sets forth the significant assumptions used in the Black-Scholes option-pricing model on a weighted-average basis to determine the fair value of option awards granted: ​ ​ ​ ​ ​ ​ ​ Three Fiscal Quarters Ended ​ ​ ​ October 2, 2021 Risk-free interest rate 0.63 % Expected volatility 38.16 % Expected term (in years) 6.25 ​ Expected dividend yield 0.00 % ​ Restricted Stock Awards The following table represents the Company’s restricted stock awards activity during the three fiscal quarters ended October 2, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average Grant- ​ Shares Date Fair Value Outstanding at January 1, 2021 — ​ $ — Granted 8,340,126 ​ 19.00 Vested ( 84,687 ) ​ — Forfeited ( 559,682 ) ​ 19.00 Outstanding at October 2, 2021 7,695,757 ​ $ 19.00 ​ Restricted Stock Units The following table represents the Company’s restricted stock units activity during the three fiscal quarters ended October 2, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average Grant- ​ ​ Shares ​ Date Fair Value Outstanding at January 1, 2021 — ​ $ — Granted 341,301 ​ 19.00 Vested — ​ — Forfeited ( 16,767 ) ​ 19.00 Outstanding at October 2, 2021 324,534 ​ $ 19.00 ​ ​ 24 Table of Contents Stock Options The following table represents the Company’s stock option activity during the three fiscal quarters ended October 2, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- Weighted- ​ ​ ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ ​ ​ Exercise Price ​ Remaining ​ Aggregate ​ Shares per Share Contract Term Intrinsic Value ​ ​ ​ ​ ​ (in years) ​ (in thousands) Outstanding on January 1, 2021 — ​ $ — — ​ $ — Granted 886,862 ​ ​ 19.00 ​ Exercised — ​ ​ Forfeited ( 81,092 ) ​ ​ Outstanding at October 2, 2021 805,770 ​ $ 19.00 9.55 ​ $ — Vested and expected to vest at October 2, 2021 805,770 ​ $ 19.00 9.55 ​ $ — Options exercisable at October 2, 2021 — ​ — — ​ — ​ The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock . The weighted average grant-date fair value of stock options granted during the three fiscal quarters ended October 2, 2021 was $ 7.20 per share. ​ 15. NET INCOME (LOSS) PER SHARE Basic and diluted net income (loss) per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended ​ Three Fiscal Quarters Ended ​ ​ October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020 ​ Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income attributable to common stockholders ​ $ ( 11,296 ) ​ $ 17,740 ​ $ ( 56,361 ) ​ $ 18,703 ​ Denominator: ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 112,153,832 ​ ​ 97,393,002 ​ ​ 110,121,240 ​ ​ 96,665,708 ​ Diluted ​ ​ 112,153,832 ​ ​ 98,011,795 ​ ​ 110,121,240 ​ ​ 97,122,885 ​ Net (loss) income per share attributable to common stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.10 ) ​ $ 0.18 ​ $ ( 0.51 ) ​ $ 0.19 ​ Diluted ​ $ ( 0.10 ) ​ $ 0.18 ​ $ ( 0.51 ) ​ $ 0.19 ​ ​ The following table includes the number of shares that may be dilutive common shares in the future that were not included in the computation of diluted net income (loss) per share because the effect was anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended Three Fiscal Quarters Ended ​ ​ ​ October 2, 2021 September 26, 2020 ​ October 2, 2021 September 26, 2020 ​ Restricted stock awards 2,952,422 47,690 6,813,166 47,446 ​ Restricted stock units 146,398 — 84,866 — ​ Stock options — — 4,235 — ​ ​ ​ 25 Table of Contents 16. RELATED PARTY TRANSACTIONS BrightAI Services Starting in 2020, BrightAI rendered services to the Company, for which the cost was capitalized as internal-use software. A co-founder of BrightAI Services has served on the Company’s board of directors since December 9, 2020. During the three fiscal quarters ended October 2, 2021 and the year ended December 31, 2020, the Company incurred $ 1.9 million and $ 0.5 million, respectively, associated with services performed by BrightAI, which is recorded as construction in progress within property and equipment, net on the condensed consolidated balance sheet as of October 2, 2021. As of October 2, 2021 and December 31, 2020, the Company had accounts payable - related party to BrightAI of $ 1.1 million and $ 0.5 million, respectively. There were no services rendered by BrightAI during the three fiscal quarters ended September 26, 2020. Expense Reimbursement and Management Fees The Company had an expense reimbursement agreement (the “management fee arrangement”) with the Sponsor and Wynnchurch Capital, L.P. for ongoing consulting and advisory services. The management fee arrangement provided for the aggregate payment of up to $ 1.0 million each year for reimbursement of expenses incurred with services provided and, depending on the extent of services provided, management fees. The management fee arrangement terminated upon consummation of the Company’s IPO. The Company entered into a Stockholders’ Agreement with the Sponsor and Wynnchurch Capital, L.P. on April 27, 2021. The Stockholders’ Agreement requires the Company to reimburse the Sponsor and Wynnchurch Capital, L.P. the reasonable out-of-pocket costs and expenses in connection with monitoring and overseeing their investment in the Company. There were no management fees incurred by the Company during the three fiscal quarters ended October 2, 2021 and September 26, 2020. The Company reimbursed less than $ 0.1 million of out-of-pocket costs and expenses to the Sponsor and Wynnchurch Capital, L.P. during both the three fiscal quarters ended October 2, 2021 and September 26, 2020. As of October 2, 2021, there were no outstanding amounts payable to the Sponsor and Wynnchurch Capital, L.P. As of September 26, 2020, there was less than $ 0.1 million outstanding amounts payable to the Sponsor and Wynnchurch Capital, L.P. Operating Lease In May 2019, in connection with the Narellan Acquisition, the Company assumed an operating lease for the manufacture, sale and storage of swimming pools and associated equipment with Acquigen Pty Ltd, which is owned by an employee who is also a shareholder of the Company. The lease expires in June 2028. As of October 2, 2021 and December 31, 2020, future minimum lease payments related to this lease totaled $ 3.6 million and $ 4.2 million, respectively. The Company recognized $ 0.1 million of rent expense related to this lease during each of the fiscal quarters ended October 2, 2021 and September 26, 2020, as well as $ 0.4 million and $ 0.3 million of rent expense during the three fiscal quarters ended October 2, 2021 and September 26, 2020, which is recognized within selling, general and administrative expense on the condensed consolidated statements of operations. 17. SEGMENT AND GEOGRAPHIC INFORMATION Segment Information During 2020, the Company made operational changes in how its CODM manages the business including organizational alignment, performance assessment and resource allocation. The segment disclosure is based on the intention to provide the users of the financial statements with a view of the business from the Company’s perspective. The Company conducts its business as one operating and reportable segment that designs, manufactures and markets in-ground swimming pools, liners and covers. ​ 26 Table of Contents Geographic Information Net sales by geography is based on the delivery address of the customer as specified in purchase order. Net sales by geographic area was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Quarter Ended ​ Three Fiscal Quarters Ended ​ ​ October 2, 2021 September 26, 2020 ​ October 2, 2021 September 26, 2020 ​ Net sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 123,477 ​ $ 102,663 ​ $ 385,259 ​ $ 234,439 ​ Canada ​ 28,103 ​ 16,785 ​ ​ 76,619 ​ 38,197 ​ Australia ​ 6,330 ​ 5,439 ​ ​ 18,581 ​ 13,187 ​ New Zealand ​ 1,749 ​ 941 ​ ​ 5,277 ​ 2,357 ​ Other ​ 2,298 ​ 1,684 ​ ​ 5,856 ​ 3,288 ​ Total ​ $ 161,957 ​ $ 127,512 ​ $ 491,592 ​ $ 291,468 ​ ​ Our long-lived assets by geographic area, which consist of property and equipment, net assets were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ October 2, ​ December 31, ​ ​ ​ 2021 2020 ​ Long-lived assets ​ ​ ​ ​ ​ United States ​ $ 48,158 ​ $ 37,680 ​ Canada ​ ​ 4,358 ​ 3,050 ​ Australia ​ ​ 4,394 ​ 4,979 ​ New Zealand ​ ​ 1,857 ​ 1,648 ​ Total ​ $ 58,767 ​ $ 47,357 ​ ​ ​ ​ ​ ​ 27 Table of Contents