Latham Group, Inc. Q2 FY2021 Earnings Call

Good day and welcome to the Latham Group Inc. Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Please also note, today's event is being recorded. I'd like to turn the conference call over to Nicole Briguet. Please go ahead.

Thank you, operator. Good morning, everyone. Welcome to Latham’s Q2 fiscal 2021 earnings call. Earlier this morning, we issued our earnings press release, which is available on the Investor Relations portion of our website. On today's call are Latham's President and CEO, Scott Rajeski; and CFO, Mark Borseth. Following their remarks, we'll open up the call to questions. During this call, the company may make certain statements that constitute forward-looking statements. Such statements reflect the company's views with respect to future events as of today and are based on our management's current expectations, estimates, forecasts, projections, assumptions, beliefs and information. These statements are subject to a number of risks that could cause actual events and results to differ materially. Such risks and other factors are set forth in the company's earnings release associated on its investor relations website and will be provided our Form 10-Q for our second quarter fiscal year 2021. The company expressly disclaims any obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law. In addition, during today's call, the company will discuss non-GAAP financial measures, which we believe could be useful in evaluating our performance. Reconciliations of adjusted EBITDA to net income calculated under GAAP can be found in our earnings press release and will be included in our Form 10-Q for Q2, 2021. I'll now turn the call over to Scott Rajeski.

Thank you, Nicole. Good morning and welcome everyone to Latham's second earnings call. I would be remiss if I did not kick off today's call by first thanking our employees for their unwavering dedication to our mission of making high-quality swimming pools an attainable luxury for every homeowner's backyard. I'd also like to thank each and every one of our dealers and channel partners across our robust network for their continued partnership. Together, we continue to execute on our unique growth strategy and deliver strong results. And our second quarter performance exemplifies this. Our strong second quarter results are a continuation of the trends we outlined in our first quarter call only two months ago. We continue to see robust consumer demand for our products and are delivering growth as a result of our efforts to drive material conversion of fiberglass, our unique direct-to-consumer and digital strategies, as well as the positive industry trends in outdoor living. As a result, second quarter net sales grew 60.3% to $180.9 million and adjusted EBITDA grew 29.5% to $42.8 million compared to the second quarter last year. Our growth is being recognized by the market. In fact, we were recently added to the U.S. small-cap Russell 2000 Index on June 28. Our inclusion represents an opportunity to increase our visibility within the investment community and expand our shareholder base. A key driver of our success is the continued execution of our growth strategy. So, I would like to take a moment to highlight our progress against our strategic pillars. Starting with our digital and brand initiatives. We have a content-rich platform that provides homeowners with education and engagement tools to navigate and simplify the pool buying journey and connects them directly with our dealers. This strategy continues to drive leads and convert in particular, our SEO and content creation efforts have proven cost-effective ways to build consumer awareness of our products, positioning us well to capitalize on homeowner demand. In fact, thanks to the success of these initiatives and significant continued interest in pools, we've been able to drive down our cost per lead in 2021 year-to-date as compared to 2020, while still delivering impressive revenue growth. Since the relaunch of our website in January 2020, we have been focused on developing engaging content that speaks to every step of the pool buying journey. Homeowners relate to this content because it not only answers their product questions but also addresses topics like maintenance and care as well as safety. We constantly monitor search trends using real-time data analysis to uncover opportunities for new relevant content. As consumers educate themselves on pool ownership, we are viewed as a go-to resource for them. And our efforts to expand and enhance our digital tools earlier in Q2, we launched our new Plan Your Pool section on our website. This pool planning section offers a new immersive experience for homeowners to personalize, prepare in budget ahead of making any purchase decision. Plan Your Pool includes the pool cost estimator, which allows homeowners to compare and contrast different pricing options that fit their budget. Another interactive piece of this new tool is My Latham, which enables consumers to create an account and save their preferences for their dream backyard. This allows us to gather helpful data and intelligence on consumer preferences, guiding our product and brand positioning as well as content development efforts. Although we are still in the early days of Plan Your Pool section, we are seeing good conversion into purchase-ready leads. Turning to our product portfolio, we have three market-leading product lines and are investing across all three areas of our business. Today, I'm excited to share an update on our investments in fiberglass. In today's release, we announced the planned construction of a new 170,000 square foot fiberglass manufacturing facility on a 148-acre site in Kingston, Ontario, which will be the largest fiberglass facility in our history. We will be building the factory of the future, which will allow us to offer our world-class Latham and Narellan fiberglass products to the Eastern half of Canada, as well as the Northeast and Upper Midwest of the U.S. Adding this new manufacturing facility will help us scale our operations in North America and create new job opportunities for the Kingston community. Construction will begin in late fall 2021, and we expect production to commence in 2023. The facility should be fully operational by 2024. This is a very exciting development for Latham. We are seeing tremendous success in driving the material conversion of fiberglass, which has caused us to accelerate our investments in capacity. With this new facility, we'll be well-positioned to continue to stay ahead of the demand curve, as we work towards driving fiberglass' penetration of all U.S. residential in-ground swimming pools to 25% by 2023. Our relationships with dealer partners are a critical element to our long-term success. Our dealers continue to see robust demand across the board, further reinforcing our confidence in the long-term viability of the growth we're seeing across the pool industry. As homeowners continue to invest in the backyard, we are deepening our relationships with existing dealers and adding new ones in under-penetrated markets. Notably, the rollout of our Narellan franchisee model and the Premier Pools & Spas partnership are outpacing our expectations and have been key in our efforts to drive the adoption of fiberglass. While we are always looking to grow our dealer base, our primary focus is on enhancing our existing dealers' productivity. We have several initiatives in place to help them grow their businesses. Our Latham University program equips dealers with tools to support their education on the benefits of fiberglass, as well as hands-on installation training, and we're seeing strong dealer interest in these training sessions. In fact, we have held nearly twice as many boot camps in 2021 year-to-date compared to a typical year. Our Latham business excellence coaches are helping our dealers learn how to better scale their business and add new crews, enabling them to expand the average number of pools they install per year. Expanding on these efforts, we're also planning to open a world-class training center with a soft opening planned for the fourth quarter. We're driving solid growth despite facing a challenging macro backdrop, including material inflation and intermittent raw material shortages, which has continued into the third quarter. We understand the challenges our suppliers are facing, and we appreciate their close partnership as we navigate intermittent shortages to meet consumer demand for our products. Additionally, our teams are doing a tremendous job countering these headwinds through price increases and productivity initiatives. Thanks to our pricing strategy and the breadth of value-adding products we offer, we have been able to pass-through price increases through our value chain to help counter the inflation we're seeing on raw materials. As we enter the back half of the year, we will continue to work as a team to navigate these macro pressures and feel well-positioned to capitalize on the continued consumer demand for pools. The strong underlying secular trends of our industry remain intact, and we continue to see our growth strategy take hold. With that, I'll turn it over to Mark.

Thank you, Scott, and good morning, everyone. Today, I'll review our second quarter and first half fiscal 2021 results and provide an update on our outlook for the full fiscal year. All comparisons I'll be sharing are on a year-over-year basis compared to the second quarter and first half of fiscal 2020. Please note 2020 results do not include the acquisition of GLI or our investment in Premier Pools & Spas, both of which occurred in the fourth quarter last year. Sales for the second quarter were up by $68.1 million or 60.3% year-over-year to $180.9 million. This increase was primarily attributable to strong consumer demand and order volume, expanded strategic partnerships with our exclusive dealers, the acquisition of GLI and price increases. If we include GLI sales in the second quarter of last year, our sales growth would be 35%. By product category, net sales for in-ground pools increased 73.8% to $108 million. Covers increased 55.9% to $26.2 million and liners increased 37.8% to $46.7 million. Gross profit increased by $14 million or 31.5% to $58.4 million, mainly due to an increase in net sales, partially offset by the addition of non-cash stock-based compensation. Gross margin decreased to 32.3% compared to 39.3% last year. Our 2020 second quarter gross margin benefited from a number of pandemic-induced actions and outcomes. With the uncertainty of the economic environment last year, we implemented a number of temporary cost-saving initiatives, including wage decreases and hiring freezes. We also saw lower rebate and incentive accruals, reflecting the modest volume expectations for 2020 at the time. This year's gross margin has been impacted by the inclusion of non-cash stock-based compensation expenses of $4.9 million. Excluding this stock-based expense, Q2 gross margin would have been 270 basis points higher or 35% to sales. The balance of the year-over-year gross margin decline in Q2, 2021 was driven by higher rebates from our strong sales growth, as well as temporary manufacturing inefficiencies at our plants from the interruptions in raw material availability and the inflationary impact of the timing of cost increases versus our price increases. Market supply and demand imbalances continue to drive costs of raw materials higher, with some key commodities experiencing unprecedented price inflation in the quarter. We have responded to this with a series of price increases of which we will see a more meaningful impact in the second half of the year. Selling, general and administrative expenses increased to $95.3 million from $15.4 million in the second quarter of 2020. This increase was primarily driven by non-cash stock-based compensation expense of $70.6 million, as well as the acquisition of GLI, wage and headcount increases from the addition of customer-facing roles, ongoing public company costs and incentive plan accruals reflecting our strong sales performance. This translated into higher SG&A as a percent of sales to 52.7% from 13.6% of sales in the second quarter of last year. Excluding stock-based compensation expense and the ongoing costs associated with being a public company, SG&A in the quarter was $22.9 million or 12.7% of sales compared to 13.4% of sales last year. Adjusted EBITDA increased by $9.7 million or 29.5% to $42.8 million, while the adjusted EBITDA margin decreased to 23.7% of sales as a result of the gross margin compression we just discussed. Net loss was $53.6 million or a $0.49 loss per share as compared to a net income of $16.4 million or $0.17 per share for the second quarter of fiscal 2020, largely driven by the non-cash stock comp expense of $75.5 million. For the first half of fiscal 2021, net sales increased 101.1% to $329.6 million from $164 million for the first six months of 2020. Looking at the net sales performance in our three product segments for the first six months of fiscal 2021, we have seen robust growth across our product lines. In-ground pools increased 120.2% to $201.6 million. Covers increased 80.5% to $50.2 million, and liners increased 74.6% to $77.8 million. Gross profit increased 103.4% to $110.8 million from $54.5 million for the prior year period, inclusive of a non-cash stock-based compensation expense of $4.9 million. Gross margin for the first six months of 2021 increased to 33.6%, inclusive of stock-based compensation compared to 33.2% for the prior year period. Margin expansion was driven by price increases, higher utilization of our fixed cost structure and a mix shift towards in-ground pools and was partially offset by challenges in our supply chain, including intermittent raw material shortages and cost inflation, higher rebates driven by strong sales growth and stock-based compensation. Adjusted EBITDA was up 144.7% to $76.4 million for the six months of 2021 and adjusted EBITDA margin increased to 23.2% from 19.0% for the prior year period. Turning to the balance sheet. As of July 3rd, 2021, we had cash and cash equivalents of $76.5 million and total debt of $237.3 million. Our net debt leverage ratio was 1.3 times. This compares to cash and cash equivalent of $59.3 million, total debt of $221.5 million and a net debt leverage ratio of 2.0 times as of December 31st, 2020. As of July 3rd, our liquidity, which we define as net cash plus availability under our revolver, increased to $106.5 million compared to $89.3 million as of December 31st, 2020. Net cash provided by operating activities was $14.2 million for the six months ended July 3rd, 2021 versus $10.2 million in the prior year period, primarily driven by the increased level of adjusted EBITDA and partially offset by our increased investment in working capital to support our strong growth, mainly in accounts receivable. Capital expenditures totaled $8.4 million in the second quarter of fiscal 2021 compared to $3.4 million in the second quarter of fiscal 2020. The increase in capital spending was primarily related to our fiberglass capacity expansion initiatives. Capital expenditures totaled $13 million in the six months ended July 3rd, 2021 compared to $6.2 million in the prior year period. I'll now share an update on our guidance for fiscal 2021. Our outlook for the year reflects our strong first half financial results and our optimism in our ability to continue to drive the material conversion to fiberglass, leverage our unique direct-to-homeowner digital strategies to generate leads for our dealer partners, capitalize on the positive trends in outdoor living, and manage any supply chain and inflationary related headwinds in these very unique times. Additionally, as we discussed on our last call, our outlook reflects tougher second half comparisons as a result of the pandemic and the early success of our unique direct-to-homeowner model which drove very strong growth in the last six months of fiscal 2020. For the full year, we are raising the lower end of our prior net sales guidance, and now expect full year 2021 revenue to be in the range of $600 million to $620 million, representing annual growth of between 49% and 54%. If we were to include GLI results for all of 2020, net sales growth would be between 30% and 34%. We are also raising the lower end of our prior adjusted EBITDA guidance, and now expect full year adjusted EBITDA in the range of $130 million to $138 million. Our capital expenditure guidance for the full fiscal year remains unchanged at $28 million to $36 million, which would include any 2021 spend related to our Kingston investments. As Scott mentioned earlier, the supply chain dynamics we experienced in Q2 are continuing into the third quarter. Although we don't provide quarterly guidance, given the unique operating environment we find ourselves in, we felt it was helpful to provide color on our expectations for profitability in the third quarter. We have taken quick action to increase prices in response to the supply chain pressures that we have been discussing today. And we will start seeing more of an impact from these as we go through the second half of the year. In the meantime, this will place pressure on our bottom line in Q3. Taking all of this into consideration, we expect to deliver adjusted EBITDA in Q3 in the range of $36 million to $42 million. Scott, I'll turn it back to you for closing remarks.

Thanks Mark. I am very proud of all we have accomplished so far in just a few months as a public company. The last 18 months have been unlike anything we've ever seen and through it all, whether it be the pandemic or the ongoing supply chain challenges or whatever might come next, our team members continue to show up every day to drive our business forward. We are seeing great traction on our efforts to reimagine the pool buying experience for customers. And we are excited about our opportunities to drive future growth. Operator, please open the line for questions.

We will now begin the question-and-answer session. Our first question comes from Matthew Bouley with Barclays. Please go ahead.

Good morning. This is actually Ashley Kim on for Matt today. So, you've talked about a normalized 50/50 split between the first and second half revenues, but the full-year guidance implied second half a little less than that 50%. So, should we be thinking there's some conservatism baked into the revenue outlook? Or is that just a function of a really strong first half?

Yeah. So, good morning, Ashley. Good to talk to you again this morning. So, I think we've talked through times about the seasonality of the business and where we've been, let's say, the dynamics of the wet 2019, the pandemic of 2020, and eventually reverting back to the mean. A 50-50 split is probably not the exact split we're talking about there as we go back to the normalization of the quarters. I think what we're faced against in the second half is really strong comps that we've talked about a few times. And as we move through that and look at the supply chain challenges we are fighting through, I think we'll still post phenomenal results on a full-year basis. And that's what I think we want to keep coming back to. So, when you look at full-year results, there will be pretty good year-over-year comps, and we'll keep working through the second half of the year.

All right. That's helpful. And then, how are you thinking about material deflation? If we ever see the other side of this? Have you historically had to give price back to customers?

And if I look at my crystal ball right now, I don't see material deflation in the future at any point. And how I think through that is the spikes we've seen have been phenomenal across the board that all folks are fighting through. I don't think we'll see material prices revert back to prior lows or go below where they were, let's say, three or six months ago. The peaks will be knocked down some, but we'll still be in an inflationary environment when you compare back to six, nine or 12 months ago.

All right. Thanks for the color.

Thanks, Ashley.

Hi. Good morning, guys.

Good morning, Josh.

Good morning.

So, just a question on kind of your own capacity and backlog situation. Just wondering if you guys are essentially sold out for the rest of the year and how that kind of plays into price increases for folks who already have products on order? And then how much visibility into 2022 do you have at this point?

Yeah. So, Josh, we don't specifically disclose capacity or backlog numbers. But I can tell you we are not sold out at this point in time for 2021. We have plenty of capacity, which is part of our strategy, staying well ahead of that capacity, and thus, the reason for accelerating the investment with the announcement of the Kingston facility. We want to keep staying out 12, 18, 24 months ahead of the curve with the demand that we're seeing in driving with that fiberglass material conversion. The other thing to think about is we're really just entering into the winter safety cover season here in the next few months, which will be a whole new wave of business coming at us as that season kicks off. We can still take orders, manufacture products, and ship it out to dealers that want pools. And again, it's that balance of dealer capacity versus ours, but we have plenty of capacity. It just comes down to the ability to get all the raw material we need to make the pools and get them out on time.

Got it. But there's no locked-in price for folks who do have orders that are maybe dated a few months out where you're not, I guess, hedged or locked in on the purchases to support that?

We have recently implemented additional price increases over the past 30 to 45 days. This decision was made to protect our backlog of existing customer orders for the year. However, all new orders will be subject to these higher prices as we progress through the latter half of 2021 and into 2022.

Got it. That's helpful. Appreciate the color.

Thanks, Josh.

Thank you, Josh.

Thank you. Good morning, everyone. My first question is following up on the price cost discussion. Can you give us some color on when you expect to be priced cost neutral? Will that come in the fourth quarter, or is that something that you're aiming for in 2022? Does any color on how we should think about that dynamic?

Yeah. So good morning, Susan. I'd say high level, when we say price cost neutral, I think we always try to have price exceed the cost and the inflation we're seeing across the board. That's been our strategy and the key driver to our margin expansion over time. And that's what we're kind of trying to stay in front of. And I think that's why we also chose to give some guidance on the EBITDA numbers for the third quarter. As we look at that dynamic, the recent spike, not repricing the backlog and making sure we continue to expand and grow the margins as we move forward.

Okay. Thank you. My next question is, you discussed the new facility up in Canada that you're starting to work on. Can you give us some sense of what the revenue or the volume that facility will be able to handle as it starts to come online and fully ramps up over time?

Yeah. So, Susan, we're not going to disclose distinct capacity or volume projections out of a particular facility. What we will say about that plant, it will be by far the largest and biggest out of all the fiberglass facilities we have. It will be a state-of-the-art facility. We'll be deploying several new concepts and technologies there to maximize output from that facility, the ability to stage and grow it rapidly over time with minimal additional investments. And I think when you look at the model, in general, in our three to five-year projections of where we see fiberglass growth going to eventually get to 25% of the market in 2023, as we work towards the 50% number we've discussed, that plant will be a key enabler to help us accelerate and hit those numbers and projections.

Okay. Gotcha. Good luck.

Thank you, Susan.

Hey, good morning. Thanks for taking the questions. First one on the intermittent raw materials shortages, has that led you to miss out on some level of sales near-term, or is that more of a delayed effect where we could see some impact to the top line over the next few quarters?

Yes, David. We have experienced intermittent shortages of raw materials across various commodities, and there are times when specific deliveries do not arrive at our facilities as scheduled. At a high level, I would say we have likely missed some revenue because of this. However, it's challenging to quantify the exact amount since it also depends on what the dealer has been able to receive and incorporate into their operations. I would say the impact has been minimal, but we are continuing to monitor this as we navigate the supply chain challenges.

Understood. And then follow-up here, just on the gross margin decline somewhere in a range of 700 basis points here in Q2. Can you help us bucket the key drivers there? How much of that is transitory based on the actions you took last year? And two, do we see margins rebound into the back half?

Yeah. Hey, David. It’s Mark. You're right. A 700 basis point gross margin decline in the quarter versus last year. And I think, like you said, there's a little of unpacking to do there. First, the addition of the non-cash stock-based comp expense accounts for 270 of the 700 basis points. Secondly, the actions that we took last year probably account for about another hundred of that basis point year-over-year reduction, which leaves you with, let's call it, 330 basis points that I would call more operational. And that's really a combination of the inflation that we're seeing in our raw materials as well as, I think, some of the manufacturing inefficiencies that are a result of these intermittent raw material shortages. As I mentioned, we've taken significant price actions. But as we protect the backlog, it's going to take us a little bit longer to see benefits flow through to the bottom line. But hopefully that helps unpack it a little bit.

Yeah. That's very helpful. So, I could just squeeze one - quick one in here. Clearly, there's a lot of labor concerns out there. So, what are you seeing in terms of labor pressures, maybe talk about the limited amount of labor required to install a fiberglass pool versus legacy materials? And just given that dynamic, you're seeing your share gains accelerate in the near-term.

Yeah. So, David, I'll take it in two pieces. One, let's say our factories, we've continued to ramp and hire folks over time, over a hundred folks year-to-date so far. I think it's close to 400 if we look back over the last year or so. The market continues to be challenging to hire and recruit talent in. I think we've done a really good job of getting folks there. We've continued to increase wages for all of our factory workers to meet market levels and competition. And that's been received very well. And we've seen a lot of great progress on a regional basis where we've done that, which has really helped boost output in several facilities. I think, when you look at the conversion on piece of that equation against concrete, I think that's been a big benefit to us as well. The fact that you can use fewer people to get a fiberglass pool on the ground faster than a concrete pool or even a vinyl liner pool has really helped drive the acceleration of that conversion, which again goes back to why we have such a strong belief that the demand and acceleration in that conversion story is going to continue to resonate over the next three to five years for us. And again, I'll just bring it right back. It's also why we're making this big investment in the Kingston facility earlier than we had planned or scheduled, because we're seeing that take hold. And I think that trend's going to continue. Labor shortages are not going away any time soon in our economy, and that will continue to force those concrete guys to have to switch. And that's been the success we've seen with, let's say, the new Narellan dealers coming online, as well as the success we've had with Premier Pools & Spas, which is specifically targeting concrete conversion.

Thanks so much. I appreciate all the detail here.

Welcome, David.

Our next question comes from Ryan Merkel with William Blair. Please go ahead.

Hey, guys. Thanks for taking the question.

Hey, Ryan.

So, back to gross margins, how should we think about gross margins sequentially into the third quarter? Should we expect some improvement from price capture and improved gross?

For the third quarter, we don't provide quarterly guidance. However, we are confident about the $36 million to $42 million EBITDA range for the quarter and the updated guidance we've given. We anticipate that the intermittent raw material shortages we faced in Q2 will continue into Q3. The pricing actions we've implemented in the past have allowed us to offset inflationary pressures, and we expect to achieve this again for the full year. Overall, we are optimistic about our outlook for the full year and what we foresee for Q3.

Okay. That's helpful. And then, to the full year outlook, what's sort of the biggest variable that gets you to the high end and should we assume that you're baking in some conservatism, just given the challenging supply chain environment?

I think, a couple of things. We continue to see, as Scott mentioned, really robust demand. Demand continues to be very strong. We feel good about the B2C transformation that we're driving in the business. So, we feel good about that. We do have these intermittent supply challenges. And I think, having those work their way clear, probably drives us closer to the higher end of the range than the bottom.

One other thing I'll mention is that we need to keep an eye on and manage dealer installation capacity for the latter half of the year. We are increasingly hearing that more dealers are sold out and booking orders into 2022, with some even extending into 2023. Our approach with these dealers and partners involves sharing the demand outlook for next year and demonstrating our new digital strategies to generate leads for them. We are encouraging them to consider adding a second or third crew in many cases, allowing them to double the number of pools they are installing. A key focus for us is getting new franchisees established in under-penetrated markets and encouraging those with an existing crew to expand. This will help us increase revenue in the second half and pave the way for significant growth in 2022 and beyond.

Got it. Thanks for the color.

Welcome.

Thanks Ryan.

Hey, gentlemen. Good morning.

Good morning, Tim.

Maybe just, Scott, on that last question, I mean, are there any incentives that you can provide your dealer partners to add crews versus just telling them how good demand is and they should add more?

So, I think there's a lot of things we do there, Tim, day-in and day-out with our dealer partners. The first one I think really is the demand and leads, right? Proven to them that we can give them more leads than they can currently handle and get pools in the ground is really the first part of what we do there and just showing them we can deliver. The second one then is the training that we provide with our business excellence coaches specifically in the fiberglass world, getting them to train their crews up, spending time in the field. We will be in the backyard of the consumer for the first, second, and third install with those new dealers and new crews to help them through that scenario. And then, I think there's the rebate program that we also offer and the rewards and incentive programs where, as they grow, they can earn more rebates. They earn their way to our dealer conference, where they can sit in on all the classroom training we provide. So, it's kind of the whole package we provide. I don't think there's any incremental incentives we need to give on a dollar basis for doing that. It's more about the coaching and just how we partner with all of our dealers as we move forward. And look, we have offered from time to time to buy a truck, a trailer and incremental excavator because the ROI and some of those smaller investments are phenomenal if a dealer was strapped from a working capital standpoint, we just bring everything to the arsenal we can.

Okay. Good. And then when you think about the midpoint of the guide, I think it's gone up about $10 million. Is the way to think about that, that's all price and basically your volume assumptions for the year are essentially unchanged?

Hey, Tim. Yeah. I think a fair portion of that would be the incremental prices that we've pushed along. But as I mentioned, orders, demand for the product remains very strong. We like what we're seeing there. But certainly, the incremental price went a long way towards moving the bottom end up.

Okay. Good. Well, good luck on the second half, guys. Thank you.

Thank you.

Thanks, Tim.

Thank you. This is Judy in for Keith Hughes. You noted, and with the new Kingston facility in Canada, but it also served the Northeast and the Midwest U.S. Have you made any other investments in capacity, existing capacities such as the Southeast or Southwest U.S.? Thank you.

Yeah. So, good morning, Judy, it's good to talk to you again. Look, we've continued to add significant amounts of CapEx from a growth standpoint across the entire footprint of our business. And again, most of the existing fiberglass plants do sit in kind of Virginia, the Southeast, the Southwest, the Midwest. The Northeast and Canada, I think we've talked a few times was one of those spots where it was the next place to go put a bigger facility. We have an existing facility in Kingston. I think we've just outgrown that site and what we can do there. So, the new facility will really enable us to cost efficiently serve that market. We discussed Eastern Canada, Northeast, upper Midwest, access to those markets where we're seeing tremendous growth, and conversion of fiberglass there. But we're continuing to add capacity across the entire footprint.

This concludes the question-and-answer section. I would like to turn the conference back over to Scott Rajeski for any closing remarks.

Great. Thanks. So, hey, first of all, I really want to thank everyone for joining us on the call here this morning. We do step back at times and say, look, it's two months since we've been public. We've done our second earnings call. That may be a record potentially in terms of the gap between the first and the second. But the key themes of our business continue to resonate very well across the board. Overall, that demand outlook remains very strong. We're starting to get really good visibility as we look out into 2022, and I think many dealers are also very bullish about 2023, as they look forward. The reason for that is, look, we've got great dealer partners across the entire globe, no matter where you look, they're working with us to figure out how we can get them to double their installation capacity and get more pools in the ground per dealer. And as we expand and grow the dealer base, that's going to help continue to drive that growth. Our consumer and digital strategy investments continue to resonate. We continue to be very creative with what we're pushing out there, and we've got a lot more coming down the pipeline as we stand up all of those tools to convince consumers why fiberglass. And I think all of that really comes back down to the most important part of our strategy, that material conversion story of converting to a fiberglass pool for all of the benefits that provides lower costs, faster install, and the lifetime warranties we offer, just an overall better ownership and swimming experience for the consumer, that continues to accelerate. I think we're very, very pleased with all of our efforts with all of our channel partners through everything we're doing here, that we really want to come back and step away from this call and say guys, the march to that 25% of the total market being fiberglass in 2023, we will get there if not exceed it. And really what we're starting to get our eyes focused on is what do we need to do to continue to drive that to get that 50% or 60% number that we've talked about, which starts to get as close to where the Australian market is today. So, we couldn't be more pleased with the overall efforts of the business. And I think when you just step back and look at the first half results that we posted up year-to-date, pretty impressive growth numbers across the board. And I know we could not be happier with what we've been able to deliver for everyone. So, with that, I'll conclude, and again, just thank you for your time. And I hope all you guys have a great day and just be safe out there because the world's still a scary place as we know with the Delta variant raging. So, thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.