What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 162 added, 101 removed, 182 unchanged (59% of the section changed)

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In an industry that has traditionally marketed on a business-to-business basis (pool manufacturer to dealer), we pioneered the first “direct-to-homeowner” digital and social marketing strategy that has transformed the homeowner’s purchase journey.

Through this marketing strategy, we are able to create demand for our pools and to provide high quality, purchase-ready consumer leads to our dealer partners.

Through this marketing strategy, we are able to create demand for our pools and provide high quality, purchase-ready consumer leads to our dealer partners.

Partnership with our dealers is integral to our collective success, and we have enjoyed long-tenured relationships averaging over 14 years.

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Recent Developments

Highlights for the fiscal quarter ended March 29, 2025

● Increase in net sales of 0.7%, or $0.8 million, to $111.4 million for the fiscal quarter ended March 29, 2025, compared to $110.6 million for the fiscal quarter ended March 30, 2024.

● Decrease in net loss of $1.9 million to $6.0 million and representing a 5.4% net loss margin for the fiscal quarter ended March 29, 2025, compared to net loss of $7.9 million for the fiscal quarter ended March 30, 2024.

● Decrease in Adjusted EBITDA (as defined below) of $1.2 million to $11.1 million for the fiscal quarter ended March 29, 2025, compared to $12.3 million for the fiscal quarter ended March 30, 2024.

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.

Adjusted EBITDA margin increased from 21.5% to 23.1%.

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.

Adjusted EBITDA margin improved from 17.3% to 18.0%.

Business Update

Based on our current business trends reflecting the seasonal ramp-up orders in the later part of the first fiscal quarter, our results of operations for the fiscal quarter ended March 29, 2025 were aligned with our expectations.

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

The seasonal ramp-up in orders began in late March, supporting our expectation for progressively higher year-on-year comparisons during the typically stronger second and third fiscal quarters of the year.

At the same time, we remain cautious on 2025 new pool starts, which we currently project to be roughly in line with 2024 levels.

Additionally, we are closely monitoring the potential impact of current macroeconomic and geopolitical conditions, including the global trade environment and elevated tariffs on imported raw materials, as well as general reduced consumer confidence and increased economic uncertainty.

Imports represent approximately 15-20% of the raw materials used in our manufacturing process, so our exposure to additional recently implemented tariffs is relatively limited.

While global trade and economic uncertainty remains, we are confident in our ability to offset raw material cost increases through strategic pre-purchasing and operational adjustments.

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.

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.

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

Additionally, we recently implemented targeted price increases on certain products to help further mitigate the potential impact of tariffs.

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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 fiscal quarter ended March 29, 2025, we further strengthened our position in this growing category by acquiring two of our smaller autocover dealers located in Tennessee and New York.

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.

Key Performance Indicators

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Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA margin are key metrics used by management and our Board to assess our financial performance.

Adjusted EBITDA and Adjusted EBITDA margin are key metrics used by management and our Board of Directors of the Company (the “Board”) to assess our financial performance.

Adjusted EBITDA and Adjusted EBITDA margin are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.

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Results of Operations

Fiscal Quarter Ended March 29, 2025 Compared to Fiscal Quarter Ended March 30, 2024

The following table summarizes our results of operations for the fiscal quarter ended March 29, 2025 and March 30, 2024 (dollars in thousands):

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

March 29, 2025

March 30, 2024

June 28, 2025

June 29, 2024

(dollars in thousands)

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Selling, general, and administrative expense

Loss from operations

Income from operations

Other expense (income):

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Earnings from equity method investment

Loss before income taxes

Income tax (benefit) expense

Income before income taxes

Income tax expense

Adjusted EBITDA (a)

________________________________________

(a) Adjusted EBITDA is a non-GAAP measure.

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

Net sales were $111.4 million for the fiscal quarter ended March 29, 2025, compared to $110.6 million for the fiscal quarter ended March 30, 2024.

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.

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.

The $1.6 million, or 1.5%, 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.

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.

The $0.9 million, or 13.6%, 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.

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.

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.

The $2.7 million, or 20.3%, 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.

The 1.0% 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 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

(dollars in thousands)

Cost of sales

Selling, general, and administrative expense

Income from operations

Other expense (income):

Interest expense, net

Other (income) expense, net

Total other expense, net

Earnings from equity method investment

Income before income taxes

Income tax expense

Adjusted EBITDA (a)

(a) Adjusted EBITDA is a non-GAAP measure.

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.

The increase in total net sales of $0.8 million across our product lines consisted of an increase of $4.7 million for pool covers, partially offset by decreases of $2.1 million for in-ground swimming pools and $1.8 million for pool liners.

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

The increase in net sales across our product lines consisted of an increase of $16.5 million for covers and $1.3 million for liners, partially offset by a decrease of $4.5 million for in-ground swimming pools.

Cost of Sales and Gross Margin

Cost of sales was $78.5 million for the fiscal quarter ended March 29, 2025, compared to $80.0 million for the fiscal quarter ended March 30, 2024.

The $1.5 million, or 1.9%, decrease in cost of sales was primarily the result of the decrease in fixed cost leverage.

Gross margin increased by 1.8%, to 29.5% of net sales for the fiscal quarter ended March 29, 2025, compared to 27.7% of net sales for the fiscal quarter ended March 30, 2024.

The 1.8% increase in gross margin was primarily driven by our lean manufacturing and value engineering initiatives and a margin benefit from the three Coverstar acquisitions.

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.

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 $30.6 million for the fiscal quarter ended March 29, 2025, compared to $26.3 million for the fiscal quarter ended March 30, 2024, and increased as a percentage of net sales by 3.6%.

The $4.3 million, or 16.6%, increase in selling, general, and administrative expense was primarily driven by increased spending on sales and marketing to drive future growth, as well as the three Coverstar acquisitions.

Amortization was $7.2 million for the fiscal quarter ended March 29, 2025, compared to $6.4 million for the fiscal quarter ended March 30, 2024.

The $0.8 million, or 12.2%, increase in amortization was primarily driven by the three Coverstar acquisitions.

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.

The $9.8 million, or 18.4%, 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.

The $1.7 million, or 12.9%, increase in amortization was driven by the three Coverstar acquisitions.

Interest Expense, net

Interest expense, net was $6.4 million for the fiscal quarter ended March 29, 2025, compared to $5.0 million for the fiscal quarter ended March 30, 2024.

The $1.4 million, or 27.9%, 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 March 30, 2024, partially offset by a lower effective interest rate.

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.

Other (Income) Expense, Net

Other income, net was $0.3 million for the fiscal quarter ended March 29, 2025, compared to other expense, net of $1.6 million for fiscal quarter ended March 30, 2024.

The $1.9 million increase in other (income) expense, net was primarily driven by a favorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.

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.

The $5.8 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.

Earnings from Equity Method Investment

Earnings from our equity method investment in Premier Pools & Spa were $1.0 million for the fiscal quarter ended March 29, 2025, compared to $1.3 million for the fiscal quarter ended March 30, 2024 representing the financial performance of Premier Pools & Spa.

Income Tax (Benefit) Expense

Income tax benefit was $4.1 million for the fiscal quarter ended March 29, 2025, compared to income tax expense of $0.5 million for the fiscal quarter ended March 30, 2024.

Our effective tax rate was 40.6% for the fiscal quarter ended March 29, 2025, compared to (7.2)% for the fiscal quarter ended March 30, 2024.

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.

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.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for both the fiscal quarters ended March 29, 2025 and March 30, 2024 was primarily attributable to the discrete impact of stock compensation expense for which there is no associated tax benefit and the effects of branch accounting for Latham Canada.

Net loss was $6.0 million for the fiscal quarter ended March 29, 2025, compared to $7.9 million for the fiscal quarter ended March 30, 2024.

The $1.9 million, or 24.2%, decrease in net loss was primarily because of the factors described above.

Net Loss Margin

Net loss margin was 5.4% for the fiscal quarter ended March 29, 2025, compared to 7.1% for the fiscal quarter ended March 30, 2024.

The 1.7% decrease in net loss margin was driven by a $1.9 million decrease in net loss, compared to the fiscal quarter ended March 30, 2024 because of the factors described above.

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.

The $4.6 million, or 85.0%, 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.

Adjusted EBITDA

Adjusted EBITDA was $11.1 million for the fiscal quarter ended March 29, 2025, compared to $12.3 million for the fiscal quarter ended March 30, 2024.

The $1.2 million, or 9.4%, decrease in Adjusted EBITDA was primarily because of increased investment in sales and marketing programs, partially offset by the benefits from lean manufacturing and value engineering initiatives, as well as the other factors described above.

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 Margin

Adjusted EBITDA margin was 10.0% for the fiscal quarter ended March 29, 2025, compared to 11.1% for the fiscal quarter ended March 30, 2024.

The 1.1% decrease in Adjusted EBITDA margin was primarily because of a $1.2 million increase in Adjusted EBITDA and a $0.8 million increase in net sales, compared to the fiscal quarter ended March 30, 2024, which were impacted by the factors described above.

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.

Non-GAAP Financial Measures

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Management compensates for these limitations by primarily relying on our GAAP results, while using Adjusted EBITDA and Adjusted EBITDA margin as supplements to the corresponding GAAP financial measures.

The following table provides a reconciliation of our net loss to Adjusted EBITDA for the periods presented and the calculation of Adjusted EBITDA margin:

The following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented and the calculation of Adjusted EBITDA margin:

Fiscal Quarter Ended

March 29, 2025

March 30, 2024

Two Fiscal Quarters Ended

June 28, 2025

June 29, 2024

June 28, 2025

June 29, 2024

(dollars in thousands)

Depreciation and amortization

Interest expense, net

Income tax (benefit) expense

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

Income tax expense

Loss on sale and disposal of property and equipment

Restructuring charges (a)

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Adjusted EBITDA

Net loss margin

Net income margin

Adjusted EBITDA margin

(a) Represents costs related to a cost reduction plan that includes severance and other costs for our executive management changes and additional costs related to our cost reduction plans, which include further actions to reduce our manufacturing overhead by reducing headcount in addition to facility shutdowns.

(a) Represents costs that include severance and other expenses for our executive management changes.

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

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

(e) Represents acquisition and integration costs as well as other costs related to potential transactions.

(f) Other costs consist of other discrete items as determined by management, primarily including:

(i) fees paid to external advisors for various matters and (ii) other items.

(f) Other costs consist of other discrete items as determined by management, primarily including (i) fees paid to external advisors for various matters and (ii) other items.

Liquidity and Capital Resources

Our primary sources of liquidity are net cash provided by operating activities and availability under our Revolving Credit Facility (as defined below).

Our primary sources of liquidity are existing cash on hand, net cash provided by operating activities and availability under our Revolving Credit Facility (as defined below).

Historically, we have funded working capital requirements, capital expenditures, payments related to acquisitions, and debt service requirements with internally generated cash on hand, borrowings under our credit facilities, and the issuance of shares of our common stock.

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 March 29, 2025, we had $24.0 million of cash, $306.9 million of outstanding indebtedness and an additional $50.0 million of borrowing availability under our Revolving Credit Facility.

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.

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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The obligations under the Credit Agreement are secured by substantially all of the guarantors’ tangible and intangible assets, including, but not limited to, their accounts receivables, equipment, intellectual property, inventory, cash and cash equivalents, deposit accounts and security accounts.

The Company is required to meet certain financial covenants, including maintain specific liquidity measurements.

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 the Company, declare dividends and make restricted payments and other distributions.

As of March 29, 2025, we were in compliance with all covenants under the Credit Agreement.

We are required to meet certain financial covenants, including maintain specific liquidity measurements.

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.

Revolving Credit Facility

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Loans outstanding under the Revolving Credit Facility denominated in Euros or Australian Dollars bear interest based on EURIBOR or the AUD Rate (each, as defined in the Credit Agreement), respectively, plus a margin of 3.50%.

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 initially was 0.375% per annum and thereafter accrues at a rate per annum ranging from 0.25% to 0.50%, depending on the First Lien Net Leverage Ratio (as defined in the Credit

Agreement, the “First Lien Net Leverage Ratio”).

A commitment fee accrues on any unused portion of the commitments under the Revolving

Credit Facility.

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

As of March 29, 2025, we had $25.0 million in outstanding borrowings under the Revolving Credit Facility and $50.0 million was available for future borrowing.

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.

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 March 29, 2025, we had $281.9 million of outstanding borrowings under the Term Loan.

As of June 28, 2025, we had $281.5 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 authorizes us to repurchase up to $100 million of our shares of common stock by May 2025.

We may effect these repurchases in open market transactions, privately negotiated purchases or other acquisitions.

We are not obligated to repurchase any of our outstanding shares under the Repurchase Program and the timing and amount of any repurchases will depend on market conditions, our stock price, alternative uses of capital, the terms of our debt instruments and other factors.

We did not repurchase any shares of our common stock during the fiscal quarter ended March 29, 2025.

As of March 29, 2025, $77.0 million remained available for share repurchases pursuant to our 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 do not have an effective stock repurchase program.

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

Fiscal Quarter Ended

March 29, 2025

March 30, 2024

Two Fiscal Quarters Ended

June 28, 2025

June 29, 2024

(in thousands)

Net cash used in operating activities

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash

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Operating Activities

During the fiscal quarter ended March 29, 2025, operating activities used $46.9 million of cash.

Net loss, after adjustments for non-cash items, provided cash of $10.3 million.

Cash used in operating activities was driven by changes in our operating assets and liabilities of $57.2 million.

Net cash used by changes in our operating assets and liabilities for the fiscal quarter ended March 29, 2025 consisted primarily of a $52.6 million increase in trade receivables, a $9.6 million increase in inventories, a $4.9 million decrease in accrued expenses and other current liabilities, a $4.6 million increase in income tax receivable, a $0.1 million decrease in other long-term liabilities and a less than $0.1 million increase in other assets, partially offset by a $14.3 million increase in accounts payable and a $0.2 million decrease in prepaid expenses and other current assets.

The change in trade receivables was primarily driven by the timing of net sales.

The change in inventory was driven by pre-purchasing due to the global trade environment.

The changes in accrued expenses and other current liabilities and accounts payable were primarily driven by volume of purchases and timing of payments.

During the fiscal quarter ended March 30, 2024, operating activities used $34.5 million of cash.

Net loss, after adjustments for non-cash items, provided cash of $6.8 million.

Cash used in operating activities was driven by changes in our operating assets and liabilities of $41.3 million.

Net cash used by changes in our operating assets and liabilities for the fiscal quarter ended March 30, 2024 consisted primarily of a $44.9 million increase in trade receivables, a $6.0 million decrease in accrued expenses and other current liabilities, a $0.4 million increase in income tax receivable, a $0.2 million decrease in other long-term liabilities and a $0.1 million

increase in other assets, partially offset by a $8.2 million increase in accounts payable, a $1.6 million decrease in inventories and a $0.5 million decrease in prepaid expenses and other current assets.

The change in trade receivables was primarily driven by the timing of net sales.

The changes in accrued expenses and other current liabilities and accounts payable were primarily driven by volume of purchases and timing of payments.

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

Net income, after adjustments for non-cash items, provided cash of $40.0 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.

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.

Net income, after adjustments for non-cash items, provided cash of $36.1 million.

Cash provided by operating activities was further impacted by changes in our operating assets and liabilities, which used $18.2 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.

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 fiscal quarter ended March 29, 2025, investing activities used $8.4 million of cash, consisting of the acquisition of two of our autocover dealers of $4.9 million and purchases of property and equipment for $3.5 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 relates to finishing up carryover projects from the prior year.

During the fiscal quarter ended March 30, 2024, investing activities used $5.3 million of cash, consisting of purchases of property and equipment for $5.3 million.

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.

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.

Financing Activities

During the fiscal quarter ended March 29, 2025, financing activities provided $22.5 million of cash, primarily consisting of long-term debt borrowings of $25.0 million partially offset by common stock withheld for taxes on restricted stock units of $2.3 million and repayments of finance lease obligations of $0.2 million.

During the fiscal quarter ended March 30, 2024, financing activities used $19.0 million of cash, primarily consisting of repayments on long-term debt borrowings of $18.8 million and repayments of finance lease obligations of $0.2 million

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.

Contractual Obligations

There have been no material changes, outside of the ordinary course of business, to our contractual obligations during the fiscal quarter ended March 29, 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 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.

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis