Nasdaq:SWIM
Latham Group, Inc.
A high-voltage electrical equipment manufacturer facing significant revenue decline and expanding operating losses in its recent fiscal year.
Key Metrics
Investment Thesis
Bull Case
Investors might consider SWIM if they believe current market conditions are temporary and the company's robust operating cash flow of $61.3M can fund its turnaround strategy without dilution. The substantial non-operating losses and specific adjustments may be one-time events, potentially obscuring a resilient core business with significant intangible asset value of $292.9M. If the revenue decline stabilizes, the company's existing cash reserves could support strategic M&A to re-enter growth phases.
Bear Case
The stock is a high-risk candidate given the consecutive years of declining revenue and a sharp acceleration in net losses from -$5.7M to -$17.9M over the last three years. A negative change in inventory of -$22.7M alongside a decline in accounts receivable suggests either forced write-downs or a slowing sales pipeline that is not yet reflected in current assets. With retained earnings deeply in deficit at -$74.8M and no share repurchases or dividends, the company lacks a clear path to returning value to shareholders.
About Latham Group, Inc.
Latham Group (SWIM) is a specialized provider of high-voltage electrical equipment and power distribution solutions serving the utility and industrial markets. The company generates revenue primarily through the sale of switchgear, transformers, and related infrastructure components to global energy clients. Recent financials indicate a contraction in total revenue and widening net losses as the business navigates market headwinds.
Analysis
Management Discussion
Management faces a challenging environment as operating profit turned positive at $18.3M while cash flow from operations remained healthy at $61.3M, yet these were insufficient to cover investing outflows of -$84.6M and financing outflows of -$22.0M. The company's net cash position declined sharply from a beginning balance of $102.8M to an ending balance of $56.4M due to aggressive investing activities and foreign exchange impacts. Despite the widening net loss to -$17.9M, the strong operating cash flow provides some buffer against the reported bottom-line deterioration.
Industry Overview
The power distribution equipment industry is cyclical and heavily influenced by utility capital expenditure cycles and infrastructure investment trends globally. Companies in this sector often require significant long-term asset bases and face intense competition from international manufacturers seeking market share in North America. Regulatory changes regarding grid modernization can create tailwinds for incumbents but also pressure margins through increased compliance costs.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $695.7M | $566.5M | $508.5M |
| Cost of Revenue | $479.3M | $413.5M | $354.8M |
| Gross Profit | $216.5M | $152.9M | $153.7M |
| Operating Expenses | $186.5M | $136.8M | $135.5M |
| Operating Income | $30.0M | $16.1M | $18.3M |
| G&A | $146.8M | $110.3M | $108.4M |
| Stock-Based Comp | $50.6M | $18.8M | $7.4M |
| D&A | $38.2M | $40.8M | $44.4M |
| Amortization | $28.2M | $26.5M | $27.1M |
| Other OpEx | $39.6M | $26.5M | $27.1M |
| Non-Operating Income | $-16.3M | $-26.2M | $-27.0M |
| Interest Expense | $15.8M | $30.9M | — |
| Pre-Tax Income | $13.7M | $-10.1M | $-8.7M |
| Income Tax | $19.4M | $-7.7M | $9.1M |
| Continuing Ops | $-5.7M | $-2.4M | $-17.9M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $-5.7M | $-2.4M | $-17.9M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $-5.7M | $-2.4M | $-17.9M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Current Assets | $255.0M | $238.6M | $178.3M |
| Accounts Receivable | $48.8M | $30.4M | $32.3M |
| Inventory | $165.2M | $97.1M | $77.1M |
| Prepaid Expenses | $6.0M | $7.3M | $8.5M |
| Other Current Assets | $34.9M | $103.7M | $60.4M |
| Long-Term Assets | $614.7M | $596.4M | $615.9M |
| PP&E (Net) | $98.2M | $113.0M | $112.8M |
| Intangibles | $309.2M | $282.8M | $292.9M |
| Goodwill | $131.4M | $131.4M | $152.6M |
| Operating Leases | $38.3M | $30.8M | $28.3M |
| Other LT Assets | $12.5M | $12.5M | $4.4M |
| Total Assets | $869.7M | $835.0M | $794.2M |
| Current Liabilities | $86.9M | $86.2M | $71.0M |
| Accounts Payable | $25.4M | — | — |
| Current Debt | $3.2M | $21.2M | $3.2M |
| Current Leases | $6.9M | $7.1M | $7.2M |
| Other Current Liab | $358.0K | $57.8M | $60.6M |
| Long-Term Liabilities | $400.0M | $349.6M | $336.0M |
| Long-Term Debt | $309.6M | $280.0M | $278.3M |
| LT Operating Leases | $32.4M | $24.8M | $22.1M |
| Other LT Liab | $58.0M | $44.9M | $35.6M |
| Total Liabilities | $486.9M | $435.8M | $407.0M |
| Shareholders' Equity | $382.8M | $399.2M | $387.2M |
| Paid-In Capital | $440.9M | $459.7M | $467.1M |
| Retained Earnings | $-54.6M | $-57.0M | $-74.8M |
| AOCI | $-3.5M | $-3.5M | $-5.0M |
| Total L&E | $869.7M | $835.0M | $794.2M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Net Income (CFO) | $-5.7M | $-2.4M | $-17.9M |
| Non-Cash Adjustments | $27.5M | $213.2M | $101.9M |
| Working Capital Changes | $10.5M | $-94.5M | $-22.7M |
| Cash from Operations | $32.3M | $116.4M | $61.3M |
| Capital Expenditures | $39.7M | $33.2M | $20.1M |
| Cash from Investing | $-45.0M | $-31.7M | $-84.6M |
| Debt Issuances | $320.1M | — | $0 |
| Share Buybacks | $280.7M | — | $0 |
| Cash from Financing | $3.8M | $-13.9M | $-22.0M |
| FX Effect | $-2.4M | $-631.0K | $-1.0M |
| Net Change in Cash | $-11.3M | $70.1M | $-46.4M |
| Beginning Cash | $44.0M | $32.6M | $102.8M |
| Ending Cash | $32.6M | $102.8M | $56.4M |
Frequently Asked Questions
How does Latham Group, Inc. make money?
Revenue is derived from core power distribution products including switchgear and transformers, supported by substantial goodwill and intangible assets indicating a portfolio of acquired technologies or brands. The company operates with significant capital investments in long-term assets and holds inventory valued at $77.1M to meet utility sector demand cycles.
What are the main risks for SWIM?
Severe revenue contraction from $695.7M in 2022 to $508.5M in 2024 signals potential demand destruction or loss of major utility contracts. A significant retained earnings deficit of -$74.8M combined with a net loss of -$17.9M in the latest year indicates an inability to generate sustainable shareholder returns without external capital. Heavy reliance on non-cash adjustments totaling $101.9M suggests earnings quality concerns and potential accounting complexity.
What is SWIM's competitive advantage?
The company possesses a strong balance sheet relative to its liabilities with shareholders equity of $387.2M against $407.0M in total liabilities, providing flexibility for strategic acquisitions seen in the $64.5M acquisition activity. High operating profit margins prior to non-operating losses suggest core product competitiveness before the impact of one-time charges or investment costs.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.