What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-04 compared with 2025-03-05 · 146 added, 134 removed, 313 unchanged (47% of the section changed)

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We hold the leading position in North America in every product category in which we compete.

It is our view that we are the most sought-after brand in the pool industry and the only pool company that has established a direct relationship with the homeowner.

We are Latham, The Pool Company.

It is our view that we are the most sought-after brand in the pool industry.

We are Latham, The Pool Company TM .

With an operating history that spans over 70 years, we offer the industry’s broadest portfolio of pools and related products, including in-ground swimming pools, pool covers, and pool liners.

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Partnership with our dealers is integral to our collective success, and we have enjoyed long-tenured relationships averaging over 15 years.

We support our dealer network with business development tools, co-branded marketing programs.

We support our dealer network with business development tools, co-branded marketing programs, and in-house training.

The full resources of our company are dedicated to designing and manufacturing high-quality pool products, with the homeowner in mind, and positioning ourselves as a value-added partner to our dealers.

We conduct our business as one operating and reportable segment that designs, manufactures, and markets in-ground swimming pools, pool covers, and pool liners.

Our operations consist of approximately 1,800 employees across about 30 locations.

Our operations consist of approximately 1,850 employees on average across approximately 30 locations.

The broad geographic reach of our national manufacturing and distribution network allows us to service our customers on short lead times and to deliver our products in a cost-effective manner.

Our mission is to design and manufacture high-quality pool products, with the homeowner in mind, and to be a value-added partner to our dealers.

We conduct our business as one operating and reportable segment that designs, manufactures, and markets in-ground swimming pools, pool covers, and pool liners.

Recent Developments

Highlights for the year ended December 31, 2025

● Decrease in net sales of 10.2%, or $58.0 million, to $508.5 million for the year ended December 31, 2024, compared to $566.5 million for the year ended December 31, 2023.

● Increase in net loss of $15.5 million, to $17.9 million for the year ended December 31, 2024, compared to a net loss of $2.4 million for the year ended December 31, 2023, representing a 3.5% net loss margin for the year ended December 31, 2024.

● Decrease in Adjusted EBITDA (as defined below) of $7.8 million, to $80.2 million for the year ended December 31, 2024, compared to $88.0 million for the year ended December 31, 2023.

• Increase in net sales of 7.4%, or $37.4 million, to $545.9 million for the year ended December 31, 2025, compared to $508.5 million for the year ended December 31, 2024.

• Increase in net income of $29.0 million, to $11.1 million for the year ended December 31, 2025 and representing a 2.0% net income margin for the year ended December 31, 2025, compared to a net loss of $17.9 million for the year ended December 31, 2024.

• Increase in Adjusted EBITDA (as defined below) of $19.6 million, to $99.8 million for the year ended December 31, 2025, compared to $80.2 million for the year ended December 31, 2024.

Adjusted EBITDA margin increased from 15.8% to 18.3% .

Business Update

Ongoing macroeconomic softness has impacted and is expected to continue to impact consumer spending and demand.

As anticipated, this resulted in a decline in new in-ground residential pool installations during the year ended December 31, 2024.

Within our in-ground pool product line, fiberglass pools continue to show strength relative to packaged pools.

In 2025, we built on our market leadership with further gains in fiberglass and autocover penetration and greater representation in the Sand States.

In 2026, we will continue to execute on our key strategic priorities, namely, to build the Latham brand and drive increased awareness and adoption of fiberglass pools and autocovers, which we expect will enable us to continue to significantly outperform the U.S.

in-ground pool market which we believe will remain flat in 2026.

We plan to expand and further target our branding and marketing spend in 2026, with increased focus on building out our presence in the important Sand State markets through greater contractor and homebuilder engagement.

We continue to make progress executing our strategy to drive adoption and awareness of fiberglass pools and automatic safety covers and gain additional operating efficiencies through value engineering and lean manufacturing initiatives.

We continue to take a disciplined approach to capital investments, with the focus on the completion of previously announced projects such as our recent multi-year capital plan to invest in our facilities, technology and systems.

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

As previously disclosed, we have responded to economic uncertainty by implementing cost reduction programs and lean manufacturing initiatives that structurally reduce our cost basis, while maintaining capacity.

We believe that Latham’s financial model has changed structurally, which has increased our underlying earnings capabilities amid an industry recovery.

We are increasing our investments in sales and marketing and product development initiatives to ensure that we capture an incremental share of in-ground pool sales once volumes rebound.

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

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

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.

Strategic Acquisition

Strategic transactions continue to be part of our growth strategy.

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

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

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

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

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

The Coverstar Central Acquisition was immediately accretive to our net income, Adjusted EBITDA and Adjusted EBITDA margin for the fiscal year ended December 31, 2024 and will enhance our gross margins in the long-term.

The cash purchase price was $64.5 million, net of cash acquired.

The transaction was fully funded with cash on hand.

With key integration activities completed, we are moving forward with a unified sales and marketing strategy designed to accelerate the sales growth of this product line.

We further strengthened our position in this growing category by acquiring two of our smaller autocover dealers in February of this year.

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 purchase price was approximately $17.0 million, and the transaction was fully funded with cash on hand.

Key Factors Affecting our Performance

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• Sales, distribution, and marketing:

While we have traditionally relied on our dealers and distributors to raise awareness of our products, we pioneered the first “direct-to-homeowner” digital and social marketing strategy that has transformed the homeowner’s purchase journey.

In addition to the efforts of our dealers and distributors to raise awareness of our products, 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 generate and provide high quality, purchase-ready consumer leads to our dealer partners.

In order to strengthen our relationship with our loyal dealer partners, we have implemented “Latham Grand,” a key dealer strategy whereby we have secured exclusivity from over 300 of our largest dealers in North America.

In order to strengthen our relationship with our loyal dealer partners, we have implemented “Latham Grand,” a key dealer strategy whereby we have established exclusive supply arrangements with over 375 of our largest dealers in North America.

We also have a strong distribution network as a result of over 475 distributor branch locations that represent our products.

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From our perspective this will be a long-term trend toward material conversion from traditional concrete pools.

We believe that our fiberglass pools offer a compelling value proposition because of their lower up-front and lifecycle cost of ownership, less maintenance, higher quality, lower usage of harsh chemicals, quicker installation, and more convenient experience, compared to products manufactured from traditional materials.

We believe that our fiberglass pools offer a compelling value proposition because of their lower up-front and lifecycle costs, better quality, fewer chemicals, faster and easier installation, and more convenient experience, compared to products manufactured from traditional materials.

We anticipate that sales of our fiberglass pool products will continue to benefit from material conversion.

We have taken a similar approach with our automatic safety cover line.

Autocovers provide increased safety and economic benefits and can be installed on almost any size and shape of fiberglass, vinyl or concrete pool.

We completed acquisitions in 2025 to improve our market share in autocovers.

The success of our efforts to drive conversion during any given period will impact the volume of our products sold during that period.

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A frequent source of borrowing is home equity financing, and accordingly, the level of equity in homes will affect consumers’ ability to obtain a home equity line of credit and to engage in backyard renovations that would result in purchases of our products.

Demand for our products is also affected by the level of interest rates and the availability of credit, consumer confidence and spending, housing affordability, demographic trends, employment levels, and other macroeconomic factors that may influence the extent to which consumers engage in renovations to their backyard, including pool installation projects to enhance the outdoor living spaces of their homes.

Demand for our products is also affected by the level of interest rates and the availability of credit, consumer confidence and ability and willingness to spend, housing affordability, demographic trends, employment levels, tariffs and other macroeconomic factors that may influence the extent to which consumers engage in renovations to their backyard, including pool installation projects to enhance the outdoor living spaces of their homes.

• Seasonality and weather:

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Severe weather also may play a role in affecting sales growth, as particularly rainy or cold years tend to slow the volume of sales, including as a result of complicating conditions for pool installations.

Catastrophic events, such as hurricanes, tornadoes, and

earthquakes can cause interruptions to our operations, as well as our dealers and distributors, and may cause customers to delay purchases.

Catastrophic events, such as hurricanes, tornadoes, and earthquakes can cause interruptions to our operations, as well as our dealers and distributors, and may cause customers to delay purchases.

These scenarios are partially mitigated by our geographic diversity, both across the United States and through international markets.

In general, our products are priced to be competitive in the in-ground swimming pool market, including the prices for concrete pools, and to keep in line with changes in our input costs.

In general, our products are priced to be competitive in the in-ground swimming pool market, including the prices for concrete pools, and to keep in line with changes in our input costs, while also maintaining a good value proposition for the homeowner.

We continue to monitor the potential impact of tariffs in our pricing models.

Cost and Availability of Materials

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The cost of the raw materials used in our manufacturing processes is subject to volatility and has been affected by changes in supply and demand.

We have minimal fixed-price contracts with our major vendors.

We have minimal fixed-price contracts with

our major vendors.

We have not entered into hedges of our raw material costs historically, but we may choose to enter into such hedges in the future.

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Acquisitions and Partnerships

On August 2, 2024, we acquired Coverstar Central, our exclusive dealer of automatic safety covers.

This acquisition has allowed us to vertically integrate the automatic safety cover product line and to align on sales and marketing strategies.

On November 8, 2022, we acquired certain fiberglass pool manufacturing assets in Seminole, Oklahoma, which qualified as a business combination.

This acquisition replaced lost fiberglass manufacturing capacity in Odessa, TX because of a plant fire and placed our production closer to strong consumer markets in the region.

Strategic transactions continue to be part of our growth strategy.

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

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

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

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

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

In February 2025, we acquired two smaller Coverstar dealers in New York and Tennessee.

The consolidated financial statements include the results of operations of these acquisitions since their respective acquisition dates.

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Products are sold directly to the franchisees, third parties independent of Premier Pools & Spas, and are therefore not considered related party transactions.

Our investment in Premier Pools & Spas is reflected as an equity method investment on our consolidated balance sheet as of December 31, 2024 and 2023, and our proportionate share of earnings or losses of Premier Pools & Spas is recognized in earnings (losses) from equity method investment in our consolidated statement of operations on a three-month lag.

Our investment in Premier Pools & Spas is reflected as an equity method investment on our consolidated balance sheets as of December 31, 2025 and 2024, and our proportionate share of earnings or losses of Premier Pools & Spas is recognized in earnings (losses) from equity method investment in our consolidated statements of operations on a three-month lag.

Key Performance Indicators

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We sell liners for the interior surface of vinyl pools (including pools that were not manufactured by us).

We also sell all-season covers, which are winterizing mesh or solid

pool covers that protect pools against debris and cold or inclement weather, and automatic safety covers for pools that can be operated with a switch.

We also sell all-season pool covers, which are winterizing mesh or solid pool covers that protect pools against debris and cold or inclement weather, and automatic safety covers for pools that can be operated with a switch.

Our sales are made through one-step and two-step business-to-business distribution channels.

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With the exception of our extended service warranties and our custom product contracts, we recognize our revenue when control of our promised goods is transferred to our customers (dealer in one-step distribution channel or distributor in two-step distribution channel), either upon shipment or arrival at our customer’s destination depending upon the terms of the purchase order.

Sales are recognized net of any estimated rebates, returns, allowances, cash discounts or other sales incentives.

Sales are recognized net of any estimated rebates, returns, allowances or other sales incentives.

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

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

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

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis.

In evaluating Adjusted EBITDA and Adjusted EBITDA margin, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.

There can be no assurance that we will not modify the presentation of Adjusted EBITDA and

Adjusted EBITDA margin in the future, and any such modification may be material.

We encourage evaluation of these adjustments and the reasons we consider them appropriate for supplemental analysis.

In evaluating Adjusted EBITDA and Adjusted EBITDA margin, be mindful that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.

There can be no assurance that we will not modify the presentation of Adjusted EBITDA and Adjusted EBITDA margin in the future, and any such modification may be material.

Our presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed to imply that our future results will be unaffected by any such adjustments.

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Year Ended December 31,

% of % of Change

Net Net Change % of

2025 Sales 2024 Sales Amount Net Sales

(dollars in thousands)

Net sales $ 545,912 100.0 % $ 508,520 100.0 % $ 37,392 — %

Cost of sales $ 363,824 66.6 % $ 354,776 69.8 % $ 9,048 (3.2) %

Gross profit $ 182,088 33.4 % $ 153,744 30.2 % $ 28,344 3.2 %

Selling, general, and administrative expense $ 122,565 22.5 % $ 108,364 21.3 % $ 14,201 1.2 %

Amortization $ 28,944 5.3 % $ 27,103 5.3 % $ 1,841 — %

Income from operations $ 30,579 5.6 % $ 18,277 3.6 % $ 12,302 2.0 %

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Interest expense, net $ 25,805 4.7 % $ 24,840 4.9 % $ 965 (0.2) %

Other expense (income), net

Other (income) expense, net $ (3,492) (0.6) % $ 6,237 1.2 % $ (9,729) (1.8) %

Total other expense, net $ 22,313 4.1 % $ 31,077 6.1 % $ (8,764) (2.0) %

Earnings from equity method investment $ 5,222 1.0 % $ 4,060 0.8 % $ 1,162 0.2 %

Loss before income taxes

Income tax expense (benefit)

Income (loss) before income taxes $ 13,488 2.5 % $ (8,740) (1.7) % $ 22,228 4.2 %

Income tax expense $ 2,364 0.4 % $ 9,120 1.8 % $ (6,756) (1.4) %

Net income (loss) $ 11,124 2.0 % $ (17,860) (3.5) % $ 28,984 5.5 %

Adjusted EBITDA $ 99,831 18.3 % $ 80,219 15.8 % $ 19,612 2.5 %

Net sales was $545.9 million for the year ended December 31, 2025, compared to $508.5 million for the year ended December 31, 2024.

The $58.0 million, or 10.2%, decrease in net sales was driven by a $55.1 million decrease from volume and a $2.9 million decrease from pricing.

The $55.1 million volume decrease was largely driven by soft industry conditions.

The decrease in total net sales across our product lines was $38.6 million for in-ground swimming pools, $9.7 million for liners and $9.6 million for covers.

The $37.4 million, or 7.4%, increase in net sales was driven by a $32.8 million increase from volume and a $4.6 million increase from tariff related pricing increases.

The $32.8 million volume increase was primarily driven by organic- and acquisition-related growth.

The increase in total net sales across our product lines was $29.4 million for covers, $5.2 million for liners and $2.7 million for in-ground swimming pools.

Cost of Sales and Gross Margin

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Gross margin increased by 3.2% to 33.4% for the year ended December 31, 2025, compared to 30.2% for the year ended December 31, 2024.

The $58.7 million, or 14.2%, decrease in cost of sales was primarily the result of a decrease in sales volume.

The 3.2% increase in gross margin was primarily driven by production efficiencies from lean manufacturing and value engineering initiatives, improved procurement, and modest deflation.

The $9.0 million, or 2.6%, increase in cost of sales was primarily the result of an increase in sales volume, partially offset by the impact of production efficiencies.

The 3.2% increase in gross margin was primarily driven by production efficiencies from our lean manufacturing and value engineering initiatives and the accretive benefit of the three Coverstar acquisitions.

Selling, General, and Administrative Expense

Selling, general, and administrative expense was $122.6 million for the year ended December 31, 2025, compared to $108.4 million for the year ended December 31, 2024, and increased as a percentage of net sales by 1.2%.

The $1.9 million, or 1.8%, decrease in selling, general, and administrative expense was primarily driven by an $11.3 million reduction in non-cash stock-based compensation expenses, as well as our cost containment initiatives and restructuring programs, which were partially offset by approximately $8 million in higher performance-based

compensation and higher sales and marketing spend to gain share in the Sand States and further strengthen our market position.

The $14.2 million, or 13.1%, increase in selling, general, and administrative expense was primarily due to commercial headcount and marketing expense due to investment in the fiberglass conversion strategy in the Sand States, our digital transformation efforts and the inclusion of the three Coverstar acquisitions.

Amortization was $28.9 million for the year ended December 31, 2025, compared to $27.1 million for the year ended December 31, 2024.

The $0.6 million, or 2.2%, increase in amortization was driven by the acquisition of Coverstar Central.

The $1.8 million, or 6.8%, increase in amortization was driven by the three Coverstar acquisitions.

Interest Expense, Net

Interest expense, net was $25.8 million for the year ended December 31, 2025, compared to $24.8 million for the year ended December 31, 2024.

The $6.1 million, or 19.7%, decrease in interest expense, net was primarily the result of the change in the fair value of our interest rate swap, compared to the year ended December 31, 2023.

Other Expense (Income), Net

Other expense (income), net was $6.2 million for the year ended December 31, 2024, compared to $ (1.0) million for the year ended December 31, 2023.

The $7.2 million increase in other expense (income), net was primarily driven by an unfavorable change in net foreign currency transaction gains and losses associated with our international subsidiaries.

The $1.0 million, or 3.9%, increase in interest expense, net was primarily the result of the change in the fair value of our interest rate swap, compared to the year ended December 31, 2024.

Other (Income) Expense, Net

Other income, net was $3.5 million for the year ended December 31, 2025, compared to other expense of $6.2 million for the year ended December 31, 2024.

The $9.7 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 Investments

Earnings from equity method investment of Premier Pools & Spas was $4.1 million for the year ended December 31, 2024, compared to $3.7 million for the year ended December 31, 2023, primarily because of the financial performance of Premier Pools & Spas.

Income Tax Expense (Benefit)

Income tax expense was $9.1 million for the year ended December 31, 2024, compared to a $ (7.7) million income tax benefit for the year ended December 31, 2023.

Earnings from equity method investment of Premier Pools & Spas was $5.2 million for the year ended December 31, 2025, compared to $4.1 million for the year ended December 31, 2024, due to the financial performance of Premier Pools & Spas.

Income Tax Expense

Income tax expense was $2.4 million for the year ended December 31, 2025, compared to $9.1 million for the year ended December 31, 2024.

Our effective tax rate was 17.5% for the year ended December 31, 2025, compared to (104.4)% for the year ended December 31, 2024.

The income tax expense of $2.4 million for the year ended December 31, 2025 was primarily due to the effects of branch accounting, the jurisdictional mix of income and $1.3 million of federal research credits.

The income tax expense of $9.1 million for the year ended December 31, 2024 was primarily due to the valuation allowance established on foreign deferred tax assets, the effects of branch accounting and the jurisdictional mix of income.

The income tax benefit of $7.7 million for the year ended December 31, 2023 was primarily due to a $10.3 million benefit related to the release of uncertain tax positions and a $2.1 million benefit related to restructuring, partially offset by $3.1 million expense related to a change in valuation allowance and non-deductible stock compensation of $2.4 million.

Net loss was $17.9 million for the year ended December 31, 2024, compared to $2.4 million for the year ended December 31, 2023.

The $15.5 million, or 647.9%, increase in net loss was primarily driven by the factors described above.

Net Loss Margin

Net loss margin was 3.5% for the year ended December 31, 2024, compared to net loss margin of 0.4% for the year ended December 31, 2023.

The 3.1% increase in net loss margin was driven by a $15.5 million increase in net loss and a $58.0 million decrease in net sales, compared to the year ended December 31, 2023 because of the factors described above.

Net Income (Loss)

Net income was $11.1 million for the year ended December 31, 2025, compared to net loss of $17.9 million for the year ended December 31, 2024.

The $29.0 million, or 162.3%, increase in net income was primarily driven by the factors described above.

Net Income (Loss) Margin

Net income margin was 2.0% for the year ended December 31, 2025, compared to net loss margin of 3.5% for the year ended December 31, 2024.

The 5.5% increase in net income margin was driven by a $29.0 million increase in net income and a $37.4 million increase in net sales, compared to the year ended December 31, 2024 because of the factors described above.

Adjusted EBITDA

Adjusted EBITDA was $99.8 million for the year ended December 31, 2025, compared to $80.2 million for the year ended December 31, 2024.

The $7.8 million, or 8.9%, decrease in Adjusted EBITDA was primarily because of higher performance-based compensation and increased investment in sales and marketing programs to further strengthen our market position.

The $19.6 million, or 24.4%, increase in Adjusted EBITDA was primarily because of the increase in net income of $29.0 million, partially offset by the change in unrealized gains in foreign currency transactions.

For a discussion of Adjusted EBITDA and Adjusted EBITDA margin and the limitations on their use, and the reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and our calculation of Adjusted EBITDA margin see “— Non-GAAP Financial Measures” below.

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Year Ended December 31,

% of % of Change % of

2024 Net Sales 2023 Net Sales Amount Net Sales

(dollars in thousands)

Net sales $ 508,520 100.0 % $ 566,492 100.0 % $ (57,972) — %

Cost of sales $ 354,776 69.8 % $ 413,548 73.0 % $ (58,772) (3.2) %

Gross profit $ 153,744 30.2 % $ 152,944 27.0 % $ 800 3.2 %

Selling, general, and administrative expense $ 108,364 21.3 % $ 110,296 19.5 % $ (1,932) 1.8 %

Underwriting fees related to offering of common stock

Amortization $ 27,103 5.3 % $ 26,519 4.7 % $ 584 0.6 %

Income from operations $ 18,277 3.6 % $ 16,129 2.8 % $ 2,148 0.8 %

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Interest expense, net $ 24,840 4.9 % $ 30,916 5.5 % $ (6,076) (0.6) %

Loss on extinguishment of debt

Other (income) expense, net

Other expense (income), net $ 6,237 1.2 % $ (1,004) (0.2) % $ 7,241 1.4 %

Total other expense, net $ 31,077 6.1 % $ 29,912 5.3 % $ 1,165 0.8 %

Earnings from equity method investment $ 4,060 0.8 % $ 3,723 0.7 % $ 337 0.1 %

(Loss) income before income taxes

Income tax (benefit) expense

Loss before income taxes $ (8,740) (1.7) % $ (10,060) (1.8) % $ 1,320 0.1 %

Income tax expense (benefit) $ 9,120 1.8 % $ (7,672) (1.4) % $ 16,792 3.2 %

Net loss $ (17,860) (3.5) % $ (2,388) (0.4) % $ (15,472) (3.1) %

Adjusted EBITDA $ 80,219 15.8 % $ 88,025 15.5 % $ (7,806) 0.3 %

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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.

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) loss (gain) on sale and disposal of property and equipment, (v) restructuring charges, (vi) stock-based compensation expense, (vii) unrealized (gains) losses on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs, (x) loss on extinguishment of debt, (xi) underwriting fees related to offering of common stock, (xii) the Odessa fire and other such unusual events, and (xiii) 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 (gains) losses on foreign currency transactions, (viii) strategic initiative costs, (ix) acquisition and integration related costs, (x) the Odessa fire and other such unusual events, and (xi) other.

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis.

In evaluating Adjusted EBITDA and Adjusted EBITDA margin, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.

We encourage evaluation of these adjustments and the reasons we consider them appropriate for supplemental analysis.

In evaluating Adjusted EBITDA and Adjusted EBITDA margin, be mindful that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation.

There can be no assurance that we will not modify the presentation of Adjusted EBITDA and Adjusted EBITDA margin in the future, and any such modification may be material.

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In addition, other companies, including companies in our industry, may not calculate Adjusted EBITDA and Adjusted EBITDA margin at all or may calculate Adjusted EBITDA and Adjusted EBITDA margin differently and accordingly, are not necessarily comparable to similarly entitled measures of other companies, which reduces the usefulness of Adjusted EBITDA and Adjusted EBITDA margin as tools for comparison.

Adjusted EBITDA and Adjusted EBITDA margin have their limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Adjusted EBITDA and Adjusted EBITDA margin have their limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

Some of these limitations are that Adjusted EBITDA and Adjusted EBITDA margin:

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• do not reflect changes in our working capital needs;

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

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

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

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

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

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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 (loss) to Adjusted EBITDA for the periods presented and the calculation of Adjusted EBITDA margin:

Year Ended December 31,

(in thousands)

2025 2024 2023

Net income (loss) $ 11,124 $ (17,860) $ (2,388)

Depreciation and amortization 51,354 44,446 40,751

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Income tax expense (benefit) 2,364 9,120 (7,672)

Loss on sale and disposal of property and equipment

(Gain) loss on sale and disposal of property and equipment (21) 408 138

Restructuring charges(a) 523 512 3,727

Stock-based compensation expense(b) 9,247 7,392 18,804

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

Unrealized (gains) losses on foreign currency transactions(c) (4,131) 6,223 (110)

Strategic initiative costs(d) 2,806 3,329 4,092

Acquisition and integration related costs(e) 785 2,348 911

Loss on extinguishment of debt (f)

Underwriting fees related to offering of common stock (g)

Odessa fire (h)

Odessa fire(f) — — (2,600)

Other(g) (25) (539) 1,456

Adjusted EBITDA $ 99,831 $ 80,219 $ 88,025

Net loss margin

Net sales $ 545,912 $ 508,520 $ 566,492

Net income (loss) margin 2.0 % (3.5) % (0.4) %

Adjusted EBITDA margin 18.3 % 15.8 % 15.5 %

(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 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.

(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) Represents the loss on extinguishment of debt in connection with our debt refinancing on February 23, 2022.

(g) Represents underwriting fees related to our offering of common stock that was completed in January 2022.

(h) Represents costs incurred and insurance recoveries related to a production facility fire in Odessa, Texas.

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

(f) Represents costs incurred and insurance recoveries related to a production facility fire in Odessa, Texas.

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

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

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As of December 31, 2025, we had $71.0 million of cash, $279.8 million of outstanding borrowings, and an additional $75.0 million of availability under our Revolving Credit Facility.

On August 2, 2024, we completed the Coverstar Central Acquisition.

The purchase price was $64.5 million, subject to certain adjustments, including for working capital, as compared to an agreed upon target and transaction expenses.

The Coverstar Central Acquisition was fully funded with cash on hand.

While our existing cash balances and net cash provided by operating activities have generally been sufficient to fund our general corporate and working capital needs, our use of significant existing cash on hand to fund the Coverstar Central Acquisition may require us in the future to utilize a portion of our 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 year, driven primarily by seasonality and the timing of raw material purchases.

Our working capital requirements fluctuate during the 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, storage, and delivery equipment.

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

We are in the middle of our 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 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.

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Dollar senior secured term loan (the “Term Loan”) in an initial principal amount of $325.0 million.

On the closing date, proceeds under the agreement were used to repay and replace $294.0 million under, and terminate, the previous credit agreement and for general corporate purposes.

The obligations under the Credit Agreement are guaranteed by certain of our wholly owned subsidiaries 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, but not limited to, their accounts receivables, equipment, intellectual property, inventory, cash and cash equivalents, deposit accounts and security accounts.

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 December 31, 2025, we were in compliance with all covenants under the Credit Agreement.

Revolving Credit Facility

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The Revolving Credit Facility is not subject to amortization.

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

As of December 31, 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.

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 (as defined in the Credit Agreement, the “First Lien Net Leverage Ratio”), or based on the Base Rate (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 December 31, 2025, 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:

Year Ended December 31,

2025 2024 2023

(in thousands)

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Net cash used in investing activities (42,319) (84,643) (31,726)

Net cash (used in) provided by financing activities

Net cash used in financing activities (6,973) (22,021) (13,875)

Effect of exchange rate changes on cash 507 (1,008) (631)

Net (decrease) increase in cash

Net increase (decrease) in cash $ 14,645 $ (46,365) $ 70,137

Operating Activities

During the year ended December 31, 2025, operating activities provided $63.4 million of cash.

Net income, after adjustments for non-cash items, provided cash of $80.7 million.

Cash provided by operating activities was partially offset by changes in our operating assets and liabilities, which used $17.3 million.

Net cash used in changes in our operating assets and liabilities for the year ended December 31, 2025 consisted primarily of a $9.2 million increase in trade receivables, a $8.2 million increase in income tax receivable, a $6.1 million decrease in accrued expenses and other current liabilities, a $1.6 million increase in prepaid expenses and other current assets, a $0.6 million decrease in other long-term liabilities and a $0.2 million increase in other assets, partially offset by a $5.8 million increase in accounts payable and $2.8 million decrease in inventories.

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

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

During the year ended December 31, 2024, operating activities provided $61.3 million of cash.

Net loss, after adjustments for non-cash items, provided cash of $50.8 million.

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The changes in accrued expenses and other current liabilities, and accounts payable were primarily because of volume of purchases and timing of payments, as well as an increase in incentive compensation.

During the year ended December 31, 2023, operating activities provided $116.4 million of cash.

Net loss, after adjustments for non-cash items, provided cash of $57.1 million.

Cash provided by operating activities was further driven by changes in our operating assets and liabilities, which provided $59.3 million.

Net cash provided in changes in our operating assets and liabilities for the year ended December 31, 2023 consisted primarily of a $68.2 million decrease in inventories, a $13.0 million decrease in trade receivables, a $2.8 million increase in other long-term liabilities and a $1.3 million decrease in income tax receivable, partially offset by a $11.9 million decrease in accrued expenses and other current liabilities, a $8.5 million decrease in accounts payable, a $4.3 million increase in other assets and a $1.3 million increase in prepaid expenses and other current assets.

The change in trade receivables was primarily driven by the amount and timing of net sales, and the decrease in inventories was primarily driven by a business decision to right size our inventory levels to better align with demand.

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

Investing Activities

During the year ended December 31, 2025, investing activities used $42.3 million of cash, consisting of purchases of property and equipment for $25.4 million, a $12.0 million deposit made toward the purchase of several of our fiberglass pool manufacturing facilities that are currently leased 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 ongoing strategic initiatives such as digital transformation.

During the year ended December 31, 2024, investing activities used $84.6 million of cash, consisting of our acquisition of Coverstar Central for $64.5 million and the purchase of property and equipment for $20.1 million.

The purchase of property and equipment was primarily to expand capacity for production and diversify offerings, especially for fiberglass pools, as well as our ongoing digital transformation project.

During the year ended December 31, 2023, investing activities used $31.7 million of cash, primarily consisting of the purchase of property and equipment for $33.2 million partially offset by capital reimbursed from insurance proceeds for $1.5 million.

The purchase of property and equipment was primarily to expand capacity for production, especially for fiberglass pools.

Financing Activities

During the year ended December 31, 2025, financing activities used $7.0 million of cash, primarily consisting of Term Loan payments of $3.3 million, common stock withheld for taxes on restricted stock units of $2.9 million and repayments of finance lease obligations of $0.8 million.

During the year ended December 31, 2024, financing activities used $22.0 million of cash, consisting of repayments on long-term debt borrowings of $21.2 million, and repayments of finance lease obligations of $0.8 million.

During the year ended December 31, 2023, financing activities used $13.9 million of cash, primarily consisting of repayments on revolving credit facilities of $48.0 million, repayments on long-term debt borrowings of $13.2 million, and repayments of finance lease obligations of $0.6 million, partially offset by borrowings on revolving credit facilities of $48.0 million.

For discussion on operating, investing, and financing activities of the year ended December 31, 2023, see the Liquidity and Capital Resources section disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 5, 2025.

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For each product shipped, the transaction price by product is specified in the purchase order.

We recognize revenue on the transaction price less any estimated rebates, returns, allowances, cash discounts, or other sales incentives.

Customer rebates, returns, allowances, cash discounts, and other sales incentives are estimated by applying the portfolio approach using the most-likely-amount method and are recorded as a reduction to revenue.

Customer Rebates and Cash Discounts

We recognize revenue on the transaction price less any estimated rebates, returns, allowances or other sales incentives.

Customer rebates, returns, allowances and other sales incentives are estimated by applying the portfolio approach using the most-likely-amount method and are recorded as a reduction to revenue.

Customer Rebates

We offer rebates to our customers based on factors such as the total amount of the customer’s purchase and expected sales for a particular customer during the year.

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The quantitative analysis requires comparing the carrying value of the reporting unit, including goodwill, to its fair value.

If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and no further testing is required.

If the fair value of the reporting unit exceeds its carrying amount,

goodwill is not considered to be impaired and no further testing is required.

If the carrying amount of the reporting unit exceeds its fair value, there is an impairment of goodwill and an impairment loss is recorded.

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The goodwill impairment is limited to the carrying value of the goodwill.

Based on the results of the qualitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at September 29, 2024.

Based on the results of the quantitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at October 1, 2023.

Based on the results of the qualitative assessment performed for our one reporting unit, we determined that goodwill was not impaired at September 28, 2025 and September 29, 2024.

However, if factors exist that could indicate an impairment in the future, including a sustained decrease in our stock price, we may be required to record impairment charges in future periods.

For our quantitative impairment test performed for our reporting unit at October 1, 2023, we estimated the fair value of our reporting unit based on a market approach.

Under the market approach, we estimated the fair value of our single reporting unit based on enterprise value using our share price on the Nasdaq Global Select Market and an appropriate control premium.

The market approach utilizes consideration of control premium associated with cost synergies that arise from obtaining control over a reporting unit and guideline transactions.

The qualitative factors we assessed included economic conditions, industry and market considerations, cost factors, overall financial performance, and other entity specific events.

In addition, we considered our market capitalization based on quoted market prices of our securities on the Nasdaq Global Select Market, adjusted for the effect of a control premium as contemplated by ASC 350.

Stock-Based Compensation

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Treasury zero-coupon issues similar in duration to the expected term of the stock-based award.

We consider the historical volatility of our stock price, as well as implied volatility.

Due to the lack of a public market for the our common stock and lack of company-specific historical and implied volatility data, we have based our computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the ours.

The historical volatility is calculated based on a period of time corresponding with expected term assumption.

We utilized a dividend yield of zero, as we have no history or plan of declaring dividends on our common stock.

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We continue to assess whether any significant changes in circumstances or assumptions have occurred that could materially affect our ability to realize deferred tax assets.

We released the valuation allowance in 2021 since we believed we had sufficient positive evidence, including, but not limited to, three years’ of cumulative pre-tax book income, including permanent adjustments and recent profits within taxing jurisdictions, to overcome any negative evidence related to loss utilization expiration periods.

We record liabilities for uncertain income tax positions based on a two-step process.

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The actual benefits ultimately realized may differ from the estimates.

We classify interest and penalties related to unrecognized tax benefits as a component of income tax expense (benefit) within the consolidated statements of operations.

interest and penalties related to unrecognized tax benefits as a component of income tax expense (benefit) within the consolidated statements of operations.

Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different.

In future periods, changes in facts, circumstances, and new information may require us to change the recognition and measurement estimates with regard to individual tax positions.

Our liabilities for uncertain tax positions were $0.0 million and $0.0 million for the years ended December 31, 2024 and 2023, respectively.

We had no liabilities for uncertain tax positions for the years ended December 31, 2025 and 2024, respectively.

Changes in recognition and measurement estimates are recorded in income tax expense (benefit) and liability in the period in which such changes occur.

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The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.

We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis