What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-06 · 169 added, 98 removed, 192 unchanged (58% of the section changed)

34 unchanged sentences

Recent Developments

Highlights for the fiscal quarter ended March 28, 2026

• Increase in net sales of 5.3%, or $5.9 million, to $117.3 million for the fiscal quarter ended March 28, 2026, compared to $111.4 million for the fiscal quarter ended March 29, 2025.

• Increase in net loss of $2.6 million to $8.5 million and representing a 7.3% net loss margin for the fiscal quarter ended March 28, 2026, compared to $6.0 million and representing a 5.4% net loss margin for the fiscal quarter ended March 29, 2025.

• Increase in Adjusted EBITDA (as defined below) of $1.0 million to $12.2 million for the fiscal quarter ended March 28, 2026, compared to $11.1 million for the fiscal quarter ended March 29, 2025.

Adjusted EBITDA margin increased from 10.0% to 10.4%.

Highlights for the fiscal quarter ended June 27, 2026

• Increase in net sales of 14.4%, or $24.8 million, to $197.5 million for the fiscal quarter ended June 27, 2026, compared to $172.6 million for the fiscal quarter ended June 28, 2025.

• Decrease in net income of $3.2 million to $12.8 million and representing a 6.5% net income margin for the fiscal quarter ended June 27, 2026, compared to $16.0 million and representing a 9.3% net income margin for the fiscal quarter ended June 28, 2025.

• Increase in Adjusted EBITDA (as defined below) of $4.7 million to $44.6 million for the fiscal quarter ended June 27, 2026, compared to $39.9 million for the fiscal quarter ended June 28, 2025.

Adjusted EBITDA margin decreased from 23.1% to 22.6%.

Highlights for the two fiscal quarters ended June 27, 2026

• Increase in net sales of 10.8%, or $30.7 million, to $314.8 million for the two fiscal quarters ended June 27, 2026, compared to $284.1 million for the two fiscal quarters ended June 28, 2025.

• Decrease in net income of $5.8 million to a net income of $4.2 million and representing a 1.3% net income margin for the two fiscal quarters ended June 27, 2026, compared to net income of $10.0 million and representing a 3.5% net income margin for the two fiscal quarters ended June 28, 2025.

• Increase in Adjusted EBITDA of $5.7 million to $56.8 million for the two fiscal quarters ended June 27, 2026, compared to $51.0 million for the two fiscal quarters ended June 28, 2025.

Adjusted EBITDA margin remained flat at 18.0%.

Business Update

We continue to execute effectively on our strategic priorities and achieved sales growth in each of our product lines in the first quarter.

Sales growth was led by gains in autocovers and liners and the benefits of the Freedom Pools acquisition while adverse weather conditions in North America kept organic in-ground pool sales steady year-over-year.

Adjusted EBITDA growth outpaced sales growth by a considerable margin, demonstrating our substantial operating leverage and cost discipline, which more than offset the impact of higher investments in growth initiatives.

We continued to gain traction in Florida, our initial Sand State target market, where our fiberglass pool sales increased at a double-digit rate in the first quarter.

This growth reflected the new dealer sign-ups we executed in 2025 and increased brand and product awareness driven by our advertising and marketing campaign.

To accelerate our growth in Florida and the other Sand State markets, we are moving forward with several new initiatives to capture consumer demand and provide additional value to our dealers.

These initiatives include the build out of our commercial organization, a new market development framework around segmentation by neighborhood, and the addition of sales resources in the field to keep Latham engaged with the consumer throughout the pool purchasing process while linking customers to our dealer network.

These initiatives will be supported by a targeted marketing campaign aimed at educating consumers on the benefits of fiberglass and pool ownership.

Leadership Transition

Effective January 5, 2026, Sean Gadd was appointed as our President and Chief Executive Officer and as a member of the Board.

Scott Rajeski retired from such positions effective as of January 4, 2026 and will serve as a Special Adviser for a six-month period.

Second quarter sales growth was driven by execution of our strategic priorities and supports our expectations of continued share gains across our product lines.

Our in-ground pool sales increased 22.5%, or 13.6% organically, led by fiberglass pool sales, which are on track to account for approximately 80% of our full year in-ground pool sales in 2026.

Cover sales were up 10% in the second quarter, led by growth in autocovers, indicating a steady increase in attachment rates on new pool installations.

We continued to gain traction in the Sand States, a key growth market for Latham, where second quarter sales increased at a double-digit rate.

As noted last quarter, we are moving ahead with several new initiatives to accelerate our growth in these geographies, which have the potential to drive a step-change in companywide sales.

In the last several months, we have made considerable progress in building our commercial organization, identified multiple target micro-markets as part of a refined market development framework around segmentation by communities, and added sales resources in the field to facilitate the sales process in concert with our dealers.

Second quarter gross profit increased, supported by higher volume and continued progress with lean manufacturing and value engineering initiatives.

Demand for fiberglass pools accelerated faster than our typical seasonal ramp-up, resulting in approximately $2.8 million of incremental costs in the quarter, which represented a gross margin headwind of approximately 140 basis points.

The majority of these costs are expected to be recovered in the second half of the year.

Adjusted EBITDA increased 11.9% year over year, with Adjusted EBITDA margin of 22.6%, reflecting the impact of lower gross margin and the timing of sales and marketing investments.

We also completed a program to optimize certain operational and administrative functions, which is enabling us to redeploy resources to sales and marketing initiatives designed to accelerate growth.

Strategic Acquisition

1 unchanged sentence

On February 26, 2026, we completed the acquisition of Freedom Pools, a fiberglass pool manufacturer and installer operating in Australia and New Zealand.

The acquisition is

expected to be immediately accretive to our earnings, adding approximately $20.0 million in net sales and approximately $4.0 million in adjusted EBITDA, on an annualized basis, before acquisition synergies.

The acquisition has been and is expected to continue to be immediately accretive to our earnings, adding approximately $20.0 million in net sales and approximately $4.0 million in Adjusted EBITDA, on an annualized basis, before acquisition synergies.

The GAAP purchase price was $15.4 million, and included a holdback of $1.6 million that has been accrued on our condensed consolidated balance sheet.

1 unchanged sentence

Purchase of Property

We purchased four fiberglass production facilities that had previously been leased during the quarter ended March 28, 2026.

During the fiscal quarter ended March 28, 2026, we purchased four fiberglass production facilities that had previously been leased.

The transaction was completed on February 6, 2026 for a total purchase price of $17.6 million.

The purchase price included a $12 million deposit made in the fourth quarter of 2025, and $5.6 million paid at closing.

This purchase was the primary reason for the increase of property and equipment, net on the condensed consolidated balance sheet.

This purchase was the primary reason for the increase of property and equipment, net on the condensed consolidated balance sheet as of June 27, 2026.

Key Performance Indicators

21 unchanged sentences

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

We have presented Adjusted EBITDA and Adjusted EBITDA margin solely as supplemental disclosures because we believe they allow for a more complete analysis of results

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

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

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

8 unchanged sentences

Results of Operations

Fiscal Quarter Ended March 28, 2026 Compared to Fiscal Quarter Ended March 29, 2025

The following table summarizes our results of operations for the fiscal quarter ended March 28, 2026 and March 29, 2025 (dollars in thousands):

Fiscal Quarter Ended June 27, 2026 Compared to Fiscal Quarter Ended June 28, 2025

The following table summarizes our results of operations for the fiscal quarter ended June 27, 2026 and June 28, 2025 (dollars in thousands):

Fiscal Quarter Ended

% of % of Change

March 28, Net March 29, Net Change % of

June 27, Net June 28, Net Change % of

2026 Sales 2025 Sales Amount Net Sales

4 unchanged sentences

Amortization 7,366 3.7 % 7,299 4.2 % 67 (0.5) %

Loss from operations (6,601) (5.6) % (4,931) (4.4) % (1,670) (1.2) %

Income from operations 25,092 12.7 % 24,724 14.3 % 368 (1.6) %

Other expense (income):

3 unchanged sentences

Earnings from equity method investment 1,081 0.5 % 488 0.3 % 593 0.2 %

Loss before income taxes (11,340) (9.7) % (10,041) (9.0) % (1,299) (0.7) %

Income tax benefit (2,806) (2.4) % (4,079) (3.6) % 1,273 1.2 %

Net loss $ (8,534) (7.3) % $ (5,962) (5.4) % $ (2,572) (1.9) %

Income before income taxes 18,867 9.6 % 21,110 12.2 % (2,243) (2.6) %

Income tax expense 6,113 3.1 % 5,130 2.9 % 983 0.2 %

Net income $ 12,754 6.5 % $ 15,980 9.3 % $ (3,226) (2.8) %

Adjusted EBITDA (a)

2 unchanged sentences

(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 was $117.3 million for the fiscal quarter ended March 28, 2026, compared to $111.4 million for the fiscal quarter ended March 29, 2025.

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 was $197.5 million for the fiscal quarter ended June 27, 2026, compared to $172.6 million for the fiscal quarter ended June 28, 2025.

The $24.8 million, or 14.4%, increase in net sales was due to a $19.0 million increase in sales volume and a $5.8 million increase from higher pricing.

The increase in net sales was primarily driven by organic growth in liners and covers, the acquisition of Freedom Pools, sales growth in Florida and the full year benefit of the 2025 price increase partially offset by adverse weather conditions across North America.

The increase in net sales of $5.9 million across our product lines consisted of an increase of $2.0 million for in-ground swimming pools, $2.0 million for liners and $1.9 million for covers.

The increase in net sales was primarily driven by organic growth in each of our product lines, particularly the growth of our in-ground pool sales, sales growth in the Sand States, the acquisition of Freedom Pools and the full year benefit of the 2025 price increase.

The increase in net sales of $24.8 million across our product lines consisted of an increase of $17.7 million for in-ground swimming pools, $3.7 million for covers and $3.4 million for liners.

Cost of Sales and Gross Margin

Cost of sales was $80.2 million for the fiscal quarter ended March 28, 2026, compared to $78.5 million for the fiscal quarter ended March 29, 2025.

Gross margin increased by 2.2%, to 31.7% of net sales for the fiscal quarter ended March 28, 2026, compared to 29.5% of net sales for the fiscal quarter ended March 29, 2025.

Cost of sales was $127.4 million for the fiscal quarter ended June 27, 2026, compared to $108.7 million for the fiscal quarter ended June 28, 2025.

Gross margin decreased by 1.6%, to 35.5% of net sales for the fiscal quarter ended June 27, 2026, compared to 37.1% of net sales for the fiscal quarter ended June 28, 2025.

The $18.7 million, or 17.2%, 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 2.2% increase in gross margin was primarily driven by volume leverage and the benefits of lean manufacturing and value engineering initiatives.

The 1.6% decrease in gross margin was primarily driven by quarter specific ramp-up costs of $2.8 million.

Selling, General, and Administrative Expense

Selling, general, and administrative expense was $36.6 million for the fiscal quarter ended March 28, 2026, compared to $30.6 million for the fiscal quarter ended March 29, 2025.

The $6.0 million, or 19.5%, increase in selling, general, and administrative expense was primarily due to acquisition and integration related costs, increased sales and marketing investment to accelerate the fiberglass conversion strategy in the Sand State markets, and our digital transformation efforts.

Amortization was $7.2 million for both of the fiscal quarters ended March 28, 2026 and March 29, 2025.

Selling, general, and administrative expense was $37.6 million for the fiscal quarter ended June 27, 2026, compared to $31.9 million for the fiscal quarter ended June 28, 2025.

The $5.7 million, or 17.8%, increase in selling, general, and administrative expense was primarily due to investments in our growth strategies, the timing of sales and marketing initiatives to accelerate the fiberglass conversion strategy in the Sand States, acquisition and integration related costs, which included $2.2 million of performance-based compensatory earn-out expenses related to our Coverstar Central acquisition in 2024, as well as our digital transformation efforts.

Amortization was $7.4 million for the fiscal quarter ended June 27, 2026 and $7.3 million for the fiscal quarter ended June 28, 2025.

The $0.1 million, or 0.9% , increase in amortization was due to the Freedom Pools acquisition.

Interest Expense, net

Interest expense, net was $4.8 million for the fiscal quarter ended March 28, 2026, compared to $6.4 million for the fiscal quarter ended March 29, 2025.

The $1.6 million, or 25.3%, decrease in interest expense, net was primarily the result of the change in the fair value of our interest rate swap, compared to the fiscal quarter ended March 29, 2025.

Interest expense, net was $5.9 million for the fiscal quarter ended June 27, 2026, compared to $7.1 million for the fiscal quarter ended June 28, 2025.

The $1.2 million, or 17.1%, decrease in interest expense, net was primarily the result of the change in the fair value of our interest rate swap and a decrease in interest rates, compared to the fiscal quarter ended June 28, 2025.

Other Expense (Income), Net

Other expense, net was $0.8 million for the fiscal quarter ended March 28, 2026, compared to other income, net of $0.3 million for fiscal quarter ended March 29, 2025.

Other expense, net was $1.4 million for the fiscal quarter ended June 27, 2026, compared to other income, net of $3.0 million for fiscal quarter ended June 28, 2025.

The $4.4 million increase in other expense, net was primarily driven by an unfavorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.

Earnings from Equity Method Investment

Earnings from our equity method investment in Premier Pools & Spas was $0.8 million for the fiscal quarter ended March 28, 2026, compared to $1.0 million for the fiscal quarter ended March 29, 2025, due to the financial performance of Premier Pools & Spas.

Income Tax Benefit

Income tax benefit was $2.8 million for the fiscal quarter ended March 28, 2026, compared to $4.1 million for the fiscal quarter ended March 29, 2025.

Our effective tax rate was 24.8% for the fiscal quarter ended March 28, 2026, compared to 40.6% for the fiscal quarter ended March 29, 2025.

Earnings from our equity method investment in Premier Pools & Spas was $1.1 million for the fiscal quarter ended June 27, 2026, compared to $0.5 million for the fiscal quarter ended June 28, 2025, due to the financial performance of Premier Pools & Spas.

Income Tax Expense

Income tax expense was $6.1 million for the fiscal quarter ended June 27, 2026, compared to $5.1 million for the fiscal quarter ended June 28, 2025.

Our effective tax rate was 32.4 % for the fiscal quarter ended June 27, 2026, compared to 24.3 % for the fiscal quarter ended June 28, 2025.

The differences between the U.S.

federal statutory income tax rate and our effective income tax rates for the fiscal quarter ended March 28, 2026 and the fiscal quarter ended March 29, 2025 were primarily attributable to the discrete impact of stock-based compensation expense for which there is no associated tax benefit and the effects of branch accounting for Latham Canada.

Net loss was $8.5 million for the fiscal quarter ended March 28, 2026, compared to $6.0 million for the fiscal quarter ended March 29, 2025.

The $2.6 million, or 43.1%, increase in net loss was primarily because of the factors described above.

Net Loss Margin

Net loss margin was 7.3% for the fiscal quarter ended March 28, 2026, compared to 5.4% for the fiscal quarter ended March 29, 2025.

The 1.9% increase in net loss margin was driven by the factors described above.

federal statutory income tax rate and our effective income tax rates for the fiscal quarter ended June 27, 2026 and the fiscal quarter ended June 28, 2025 were primarily attributable to the discrete impact of stock compensation expense for which there is no associated tax benefit, the effects of branch accounting for Latham Canada and the jurisdictional mix of income.

Net income was $12.8 million for the fiscal quarter ended June 27, 2026, compared to $16.0 million for the fiscal quarter ended June 28, 2025.

The $3.2 million, or 20.2%, decrease in net income was primarily driven by an unfavorable change in net foreign currency transaction gains and losses associated with our international subsidiaries of $5.0 million, as well as the other factors described above.

Net Income Margin

Net income margin was 6.5% for the fiscal quarter ended June 27, 2026, compared to 9.3% for the fiscal quarter ended June 28, 2025.

The 2.8% decrease in net income margin was primarily driven by the $3.2 million decrease in net income, as well as the other factors described above.

Adjusted EBITDA

Adjusted EBITDA was $12.2 million for the fiscal quarter ended March 28, 2026, compared to $11.1 million for the fiscal quarter ended March 29, 2025.

The $1.0 million, or 9.2%, increase in Adjusted EBITDA was primarily because of the gross profit growth from the increase in net sales, as well as the other factors described above.

Adjusted EBITDA was $44.6 million for the fiscal quarter ended June 27, 2026, compared to $39.9 million for the fiscal quarter ended June 28, 2025.

The $4.7 million, or 11.9%, increase in Adjusted EBITDA was primarily because of the factors described above.

Adjusted EBITDA Margin

Adjusted EBITDA margin was 10.4% for the fiscal quarter ended March 28, 2026, compared to 10.0% for the fiscal quarter ended March 29, 2025.

The 0.4% increase in Adjusted EBITDA margin was primarily because of a $1.0 million increase in Adjusted EBITDA, compared to the fiscal quarter ended March 29, 2025, which was impacted by the factors described above.

Adjusted EBITDA margin was 22.6% for the fiscal quarter ended June 27, 2026, compared to 23.1% for the fiscal quarter ended June 28, 2025.

The 0.5% decrease in Adjusted EBITDA margin was primarily because of the decrease in gross margin and the timing of sales and marketing campaigns to accelerate market penetration in the Sand States as well as the other factors described above.

Two Fiscal Quarters Ended June 27, 2026 Compared to Two Fiscal Quarters Ended June 28, 2025

The following table summarizes our results of operations for the two fiscal quarters ended June 27, 2026 and June 28, 2025:

Two Fiscal Quarters Ended

% of % of Change

June 27, Net June 28, Net Change % of

2026 Sales 2025 Sales Amount Net Sales

Net sales $ 314,789 100.0 % $ 284,059 100.0 % $ 30,730 — %

Cost of sales 207,554 65.9 % 187,215 65.9 % 20,339 — %

Gross profit 107,235 34.1 % 96,844 34.1 % 10,391 — %

Selling, general, and administrative expense 74,209 23.6 % 62,560 22.0 % 11,649 1.6 %

Amortization 14,535 4.6 % 14,491 5.1 % 44 (0.5) %

Income from operations 18,491 5.9 % 19,793 7.0 % (1,302) (1.1) %

Other expense (income):

Interest expense, net 10,686 3.4 % 13,520 4.8 % (2,834) (1.4) %

Other expense (income), net 2,194 0.7 % (3,355) (1.2) % 5,549 1.9 %

Total other expense, net 12,880 4.1 % 10,165 3.6 % 2,715 0.5 %

Earnings from equity method investment 1,916 0.6 % 1,441 0.5 % 475 0.1 %

Income before income taxes 7,527 2.4 % 11,069 3.9 % (3,542) (1.5) %

Income tax expense 3,307 1.1 % 1,051 0.4 % 2,256 0.7 %

Net income $ 4,220 1.3 % $ 10,018 3.5 % $ (5,798) (2.2) %

Adjusted EBITDA (a)

$ 56,776 18.0 % $ 51,027 18.0 % $ 5,749 — %

______________________________________________________________

(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 $314.8 million for the two fiscal quarters ended June 27, 2026, compared to $284.1 million for the two fiscal quarters ended June 28, 2025.

The $30.7 million, or 10.8%, increase in net sales was due to a $22.0 million increase in sales volume and a $8.7 million increase from higher pricing.

The sales volume increase was primarily due to organic growth of 7.5% with the acquisition of Freedom Pools contributing the remainder.

The increase in net sales across our

product lines consisted of an increase of $19.7 million for in-ground swimming pools, $5.6 million for covers and $5.4 million for liners.

Cost of Sales and Gross Margin

Cost of sales was $207.6 million for the two fiscal quarters ended June 27, 2026, compared to $187.2 million for the two fiscal quarters ended June 28, 2025.

Gross margin was 34.1% of net sales for the two fiscal quarters ended June 27, 2026 and June 28, 2025.

The $20.3 million increase in cost of sales was primarily the result of the increase in sales volume, partially offset by the impact of production efficiencies resulting from lean manufacturing and value engineering programs.

Gross margin was in line with prior year, and included second-quarter-specific ramp-up costs that offset the benefits of lean manufacturing and value engineering initiatives.

Selling, General, and Administrative Expense

Selling, general, and administrative expense was $74.2 million for the two fiscal quarters ended June 27, 2026, compared to $62.6 million for the two fiscal quarters ended June 28, 2025.

The $11.6 million, or 18.6%, increase in selling, general, and administrative expense was primarily driven by increased sales and marketing investments to accelerate our fiberglass conversion strategy in the Sand States, acquisition and integration related costs, which included $4.5 million of performance-based compensatory earn-out expenses related to our Coverstar Central acquisition in 2024 and costs related to our digital transformation program.

Amortization was $14.5 million for both the two fiscal quarters ended June 27, 2026 and June 28, 2025.

Interest Expense, net

Interest expense, net was $10.7 million for the two fiscal quarters ended June 27, 2026, compared to $13.5 million for the two fiscal quarters ended June 28, 2025.

The $2.8 million, or 21.0%, decrease in interest expense, net was the result of the change in the fair value of our interest rate swap and a decrease in the outstanding balance of long-term debt, compared to the two fiscal quarters ended June 28, 2025.

Other (Income) Expense, Net

Other expense, net was $2.2 million for the two fiscal quarters ended June 27, 2026, compared to other income, net of $3.4 million for the two fiscal quarters ended June 28, 2025.

The $5.5 million increase in other expense, net was primarily driven by an unfavorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.

Earnings from Equity Method Investment

Earnings from our equity method investment in Premier Pools & Spas were $1.9 million for the two fiscal quarters ended June 27, 2026, compared to $1.4 million for the two fiscal quarters ended June 28, 2025, due to the financial performance of Premier Pools & Spas.

Income Tax Expense

Income tax expense was $3.3 million for the two fiscal quarters ended June 27, 2026, compared to income tax expense of $1.1 million for the two fiscal quarters ended June 28, 2025.

Our effective tax rate was 43.9% for the two fiscal quarters ended June 27, 2026, compared to 9.5% for the two fiscal quarters ended June 28, 2025.

The difference between the U.S.

federal statutory income tax rate and our effective income tax rate for both the two fiscal quarters ended June 27, 2026 and June 28, 2025 was primarily attributable to the discrete impact of stock compensation expense for which there is no associated tax benefit, the effects of branch accounting for Latham Canada and the jurisdictional mix of income.

Net income was $4.2 million for the two fiscal quarters ended June 27, 2026, compared to $10.0 million for the two fiscal quarters ended June 28, 2025.

The $5.8 million, or 57.9%, decrease in net income was primarily driven by an

unfavorable change in net foreign currency transaction gains and losses associated with our international subsidiaries of $6.4 million, as well as the other factors described above.

Net Income Margin

Net income margin was 1.3% for the two fiscal quarters ended June 27, 2026, compared to 3.5% for the two fiscal quarters ended June 28, 2025.

The 2.2% decrease in net income margin was driven by a $5.8 million decrease in net income as well as the other factors described above.

Adjusted EBITDA

Adjusted EBITDA was $56.8 million for the two fiscal quarters ended June 27, 2026, compared to $51.0 million for the two fiscal quarters ended June 28, 2025.

The $5.7 million, or 11.3%, increase in Adjusted EBITDA was driven by the factors described above.

Adjusted EBITDA Margin

Adjusted EBITDA margin was 18.0% and remained flat for the two fiscal quarters ended June 27, 2026 compared to the two fiscal quarters ended June 28, 2025.

Non-GAAP Financial Measures

20 unchanged sentences

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 (dollars in thousands):

Fiscal Quarter Ended

March 28, March 29,

Net loss $ (8,534) $ (5,962)

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

Fiscal Quarter Ended Two Fiscal Quarters Ended

June 27, June 28, June 27, June 28,

2026 2025 2026 2025

Net income $ 12,754 $ 15,980 $ 4,220 $ 10,018

Depreciation and amortization 13,672 12,697 26,739 25,097

Interest expense, net 5,930 7,149 10,686 13,520

Income tax benefit (2,806) (4,079)

Gain on sale and disposal of property and equipment — (69)

Income tax expense 6,113 5,130 3,307 1,051

Loss on sale and disposal of property and equipment — 115 — 46

Restructuring charges (a)

Stock-based compensation expense (b)

1,609 1,381 2,713 3,352

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

1,231 (3,643) 2,227 (4,059)

Strategic initiative costs (d)

509 918 959 1,562

Acquisition and integration related costs (e)

2,798 16 5,925 283

Adjusted EBITDA $ 44,616 $ 39,887 $ 56,776 $ 51,027

Net sales $ 197,474 $ 172,639 $ 314,789 $ 284,059

Net loss margin (7.3) % (5.4) %

Net income margin 6.5 % 9.3 % 1.3 % 3.5 %

Adjusted EBITDA margin 22.6 % 23.1 % 18.0 % 18.0 %

4 unchanged sentences

(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.

(e) Represents acquisition and integration costs, including the earn-out related to the Coverstar Central acquisition, 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.

2 unchanged sentences

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

As of March 28, 2026, we had $27.5 million of cash, $280.2 million of outstanding borrowings and an additional $44.0 million of borrowing availability under our Revolving Credit Facility.

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

As of June 27, 2026, we had $43.5 million of cash, $279.8 million of outstanding borrowings 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.

Our working capital requirements fluctuate during the fiscal year, driven primarily by seasonality and the timing of raw material purchases.

Our capital expenditures are primarily related to our

growth strategy, including production capacity, diversifying our product offerings, storage, and delivery equipment.

We are in the middle of our digital transformation effort to upgrade all of our technology and enterprise resource planning ("ERP") systems.

Our capital expenditures are primarily related to our growth strategy, including production capacity, diversifying our product offerings, storage, and delivery equipment.

We are currently undergoing a digital transformation effort to upgrade all of our technology and enterprise resource planning ("ERP") systems.

We expect to fund these capital expenditures from net cash provided by operating activities or the utilization of a portion of our borrowing availability under our Revolving Credit Facility.

Our disciplined capital activity allocation strategy remains focused on deploying capital opportunistically to position Latham for profitable organic and acquisition-related growth and to de-lever and further reduce our net debt leverage ratio.

It is our belief that our existing cash, cash generated from operations and availability under our Revolving Credit Facility will be adequate to fund our operating expenses and capital expenditure requirements over the next 12 months, as well as our longer-term liquidity needs.

It is our belief that our existing cash, cash generated from operations and availability under our Revolving Credit Facility (which maturity is expected to be extended in the ordinary course before it matures) will be adequate to fund our operating expenses and capital expenditure requirements over the next 12 months, as well as our longer-term liquidity needs.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

9 unchanged sentences

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 March 28, 2026, we were in compliance with all covenants under the Credit Agreement.

As of June 27, 2026, we were in compliance with all covenants under the Credit Agreement.

Revolving Credit Facility

2 unchanged sentences

The Revolving Credit Facility matures on February 23, 2027.

We are currently in discussions to extend the Revolving Credit Facility before it matures.

Loans outstanding under the Revolving Credit Facility denominated in U.S.

4 unchanged sentences

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

As of March 28, 2026, we had $31.0 million in outstanding borrowings under the Revolving Credit Facility and $44.0 million was available for future borrowing.

During the two fiscal quarters ended June 27, 2026, we repaid $35.0 million of outstanding borrowings on the Revolving Credit Facility.

As of June 27, 2026, 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.

Loans outstanding under the Term Loan bear interest, at the borrower’s option, at a rate per annum based on Term SOFR (as defined in the Credit Agreement), plus a margin ranging from 3.75%

to 4.00%, depending on the First Lien Net Leverage Ratio, or based on the Base Rate (each as defined in the Credit Agreement), plus a margin ranging from 2.75% to 3.00%, depending on the First Lien Net Leverage Ratio.

Loans outstanding under the Term Loan bear interest, at the borrower’s option, at a rate per annum based on Term SOFR (as defined in the Credit Agreement), plus a margin ranging from 3.75% to 4.00%, depending on the First Lien Net Leverage Ratio, or based on the Base Rate (each as defined in the Credit Agreement), plus a margin ranging from 2.75% to 3.00%, depending on the First Lien Net Leverage Ratio.

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 28, 2026, we had $280.2 million of outstanding borrowings under the Term Loan.

As of June 27, 2026, we had $279.8 million of outstanding borrowings under the Term Loan.

The following table summarizes our sources and uses of cash for each of the periods presented (dollars in thousands):

Fiscal Quarter Ended

March 28, March 29,

Net cash used in operating activities $ (47,720) $ (46,882)

Two Fiscal Quarters Ended

June 27, June 28,

Net cash provided by (used in) operating activities $ 5,783 $ (10,905)

Net cash used in investing activities (30,303) (15,278)

Net cash provided by financing activities 28,402 22,493

Net cash used in financing activities (3,730) (3,580)

Effect of exchange rate changes on cash 687 308

1 unchanged sentence

Operating Activities

During the fiscal quarter ended March 28, 2026, operating activities used $47.7 million of cash.

Net loss, after adjustments for non-cash items, provided cash of $8.0 million.

Cash used in operating activities was primarily driven by changes in our operating assets and liabilities, which used $55.7 million.

Net cash used due to changes in our operating assets and liabilities for the fiscal quarter ended March 28, 2026 consisted primarily of a $49.5 million increase in trade receivables, a $9.6 million increase in inventories, a $3.0 million increase in income tax receivable, a $2.3 million decrease in accrued expenses and other current liabilities, a $0.8 million increase in prepaid expenses and other current assets and a $0.1 million increase in other assets, partially offset by a $9.7 million increase in accounts payable.

The change in trade receivables was primarily driven by the increase and timing of net sales, the change in accounts payable was primarily driven by volume of purchases and timing of payments and the change in inventories was primarily driven by the acquisition of Freedom Pools.

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 due to 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 two fiscal quarters ended June 27, 2026, operating activities provided $5.8 million of cash.

Net income, after adjustments for non-cash items, provided cash of $38.2 million.

Cash provided by operating activities was primarily driven by changes in our operating assets and liabilities, which used $32.4 million.

Net cash used due to changes in our operating assets and liabilities for the two fiscal quarters ended June 27, 2026 consisted primarily of a $56.1 million increase in trade receivables, a $3.0 million increase in prepaid expenses and other current assets, a $1.2 million increase in inventories, a $0.5 million increase in other assets and a $0.1 million decrease in other long-term liabilities, partially offset by a $17.8 million increase in accounts payable, a $7.7 million increase in accrued expenses and other current liabilities

and a $2.9 million decrease in income tax receivable.

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

Investing Activities

During the fiscal quarter ended March 28, 2026, investing activities used $24.9 million of cash, consisting of a cash payment for the acquisition of business, net of cash acquired of $14.4 million and purchases of property and equipment for $10.5 million.

Acquisition of business, net of cash acquired included a $13.9 million cash paid for the acquisition of Freedom Pools and $0.5 million for a holdback paid related to the acquisition of two of our smaller autocover dealers in New York and Tennessee.

During the two fiscal quarters ended June 27, 2026, investing activities used $30.3 million of cash, consisting of purchases of property and equipment for $16.1 million and a cash payment for the acquisition of business, net of cash acquired of $14.3 million.

Acquisition of business, net of cash acquired included $13.9 million cash paid for the acquisition of Freedom Pools and $0.4 million for a holdback paid related to the acquisition of two of our smaller autocover dealers in New York and Tennessee.

Purchases of property and equipment included the second payment of $5.6 million that was paid as a follow up to the deposit made in the prior year of $12.0 million for the purchase of four fiberglass plants that had previously been leased.

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

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 purchases 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 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.

Financing Activities

During the fiscal quarter ended March 28, 2026, financing activities provided $28.4 million of cash, primarily consisting of proceeds from borrowing on our Revolving Credit Facility of $31.0 million, partially offset by common stock withheld for taxes on restricted stock units of $2.4 million and repayments of finance lease obligations of $0.2 million.

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 two fiscal quarters ended June 27, 2026, financing activities used $3.7 million of cash, primarily consisting of common stock withheld for taxes on restricted stock units of $2.5 million , payments on long-term debt borrowings of $0.8 million and repayments of finance lease obligations of $0.4 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.

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 28, 2026 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 27, 2026 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

8 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis