Latham Group, Inc. Q2 FY2025 Earnings Call

Good afternoon, and welcome to Latham Group's Second Quarter 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Casey Kotary, Investor Relations Representative. Please go ahead.

Thank you. This afternoon, we issued our second quarter 2025 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, Oliver Gloe. Following their remarks, we will open the call to questions. During this call, the company may make certain statements that constitute forward-looking statements, which reflect the company's views with respect to future events and financial performance as of today or the date specified. Actual events and results may differ materially from those contemplated by such forward-looking statements due to risks and other factors that are set forth in the company's annual report on Form 10-K and subsequent reports filed or furnished with the SEC as well as today's earnings release. The company expressly disclaims any obligation to update any forward-looking statements, except as required by applicable law. In addition, during today's call, the company will discuss certain non-GAAP financial measures. Reconciliations of the directly comparable GAAP measures to these non-GAAP measures can be found in the slide presentation that is available on our Investor Relations website. I'll now turn the call over to Scott Rajeski.

Thank you, Casey, and thank you all for participating in today's call to review our second quarter results and discuss our business outlook. The Latham team executed very well in the second quarter, driving year-on-year revenue growth of 7.8% and adjusted EBITDA growth of twice that at 15.7%. Our ability to achieve this level of organic- and acquisition-related sales growth, along with increased operating profitability despite ongoing trough industry conditions is supported by several key factors. First, we have a diversified product portfolio and have the #1 share in every subcategory in which we compete. Second, we have been successful in driving the awareness and adoption of fiberglass pools and autocovers, two product categories with substantial growth runways. Third, we recently completed accretive acquisitions of three of our autocover dealers, contributing to sales growth and strengthening our margin profile. And lastly, our lean manufacturing and value engineering initiatives continue to drive production efficiencies that scaled further with higher second quarter volumes. These factors were the major contributors to our strong second quarter and year-to-date performance, and they continue to underpin our confidence in Latham's ability to drive accelerated revenue and adjusted EBITDA growth as industry conditions improve. Taking a closer look at second quarter business trends, adverse weather conditions in many parts of the country delayed pool building activity, resulting in a slight decline in our in-ground pool sales. This had a greater impact on our packaged pool sales than on fiberglass pools, and fiberglass pools are tracking to account for approximately 75% of our in-ground pool sales for the full year. Based on our current projections, we continue to expect fiberglass pools to gain another 1% of market penetration in the in-ground pool category in 2025. Our investments in targeted marketing programs to drive the adoption and awareness of fiberglass pools are yielding positive results. Year-to-date, we have delivered an 18% increase in leads to our dealers, while consumer sessions on our website have increased 34%. We are also seeing strong signals of pool purchase interest and intent with consumers spending more time on our website, viewing more pages, and increasingly engaging with our digital tools. All these metrics were up year-over-year in the second quarter and year-to-date compared to the same periods in 2024. In particular, the cost benefits and fast and easy installation of fiberglass pools are resonating with consumers. Given widespread labor shortages across many U.S. markets, we continue to believe the significantly lower labor requirements for installing a fiberglass pool will be a tailwind for fiberglass over concrete pools. According to recent research, 46% of pool builders cited limited access to qualified labor as having a substantial impact on their ability to build new pools. Autocovers were a standout performer in the second quarter. Through a combination of organic and acquisition-related growth, this product category was a key contributor to our second quarter sales growth and is gaining momentum with consumers. Our marketing programs have been effective in driving home the benefits of autocovers, highlighting their unparalleled safety and significant cost savings from reduced water, energy, and chemical use. These savings enable autocovers to effectively pay for themselves within four to five years of installation. Additionally, 16 states, in addition to a number of municipalities across the country, have now expanded their pool safety regulations to allow for autocovers to be used in place of traditional fencing around the pool, which results in additional savings for the homeowner. Also, their compatibility with all types of in-ground pools significantly expands our addressable market. Our replacement liner business also showed solid growth in the second quarter, which we attribute to our industry-leading lead times and the continued adoption of Measure by Latham, our proprietary pool liner and cover measuring AI tool. This is the only solution in the marketplace that streamlines the measurement and quoting process for installers, ensuring a high degree of accuracy and enabling a smooth and efficient installation. This tool is fully integrated with our order entry system, allowing dealers to generate real-time quotes, seamlessly submit orders, and track their status. In the first half of this year, 25% of the dealers who purchased this tool were new to Latham, supporting our expectation that Measure by Latham will not only improve the efficiency of our dealer network, but will also help expand our market share in liners and covers. We are already seeing early signs of those gains. Our consumer-facing marketing programs are centered around building awareness for Latham's fiberglass pools, autocovers, and plunge pools with emphasis on the Sand State markets, which represent a substantial growth opportunity for us. Our initial targets in the Sand States are Florida and Texas, which together with Arizona and California account for approximately two-thirds of annual new pool starts in the United States. Latham, as the largest in-ground pool manufacturer, is currently underrepresented in the Sand States, which provides us with a substantial growth opportunity. We launched our Sand State strategy in late 2024, and we've made considerable progress in the first half of 2025 on the pillars that form the foundation of this strategy. Specifically, we have increased our pool dealer base in both Florida and Texas, adding additional dealers in the second quarter. We expanded our plunge pool collection and launched new fiberglass pool models to align our product offerings with market preferences in the Sand States, and we ramped up our marketing efforts, drawing strong interest from both current and prospective homeowners, including in key target markets such as Florida and Texas. Our national marketing efforts have resulted in over a 20% increase in dealer leads year-to-date, and Latham continues to be the most searched for fiberglass pool brand among major competitors. We continue to actively partner with some of our top-performing pool dealers across the country to expand their operations into the Sand States by establishing a presence in key master planned communities or MPCs that we have identified in Florida and Texas. At the same time, we're evaluating additional complementary strategies to further accelerate our growth in these MPCs, where we are already driving awareness of the Latham brand and our product lineup. More on that in the next quarter or two. In summary, our second quarter results were in line with our expectations and demonstrated the continued execution of our strategy to drive the awareness and adoption of fiberglass pools and autocovers, expand our presence in the Sand State markets, and improve margin through accretive acquisitions, lean manufacturing, and value engineering initiatives. Our lean manufacturing and value engineering initiatives have structurally changed our business model and are an important factor enabling us to achieve significant leverage as industry conditions improve. We issued a release today and filed an 8-K, noting that Jeff Jackson, who currently serves as Chief Executive Officer at Cabinetworks Group, has joined our Board of Directors. Many of you may know Jeff as the former President and CEO of PGT Innovations before it was acquired in 2024. We are pleased to have Jeff on our Board and look forward to benefiting from his valuable operational and strategic experience. I will now turn the call over to our CFO, Oliver Gloe, for a financial review of our second quarter and first half results. Oliver?

Thank you, Scott, and good afternoon, everyone. I'm pleased to report on our second quarter financial performance, which represented Latham's continued market outperformance. Please note that all comparisons that I will discuss today are on a year-over-year basis compared to the second quarter and first half of fiscal 2024, unless otherwise noted. Net sales for the second quarter were $173 million compared to $160 million, up $13 million, or 7.8%, reflecting both organic- and acquisition-related growth, primarily driven by an increase in volumes for autocovers as well as an increase in volume for pool liners. Our strong sales performance underscores our successful execution and continued commitment to delivering on our growth strategies, both organic and through opportunistic acquisitions. Across our product categories, in-ground pool sales were $79 million, down 2.9% in the second quarter, reflecting a flat market as well as adverse weather conditions and delayed pool building activity across several important regions, primarily in the Northeast. Cover sales were $37 million, an increase of 46%, reflecting both contributions from our recent acquisitions of Coverstar Central, New York and Tennessee, and importantly, organic growth driven by the increasing awareness and adoption of autocovers. We are very pleased to see the benefits of our autocover growth strategy materialize in such an impactful way. Liner sales of $57 million grew 5.8%, driven by the continued adoption of Measure by Latham, our proprietary AI-powered measuring tool. We have a meaningful number of measure devices in the market, contributing to increased sales of liners and covers across North America. We delivered a gross margin of 37.1% in the second quarter, 400 basis points above last year. This material improvement was primarily driven by volume leverage in our covers and liners product lines, the continued benefits of our lean manufacturing and value engineering initiatives, and the margin benefit from our recent Coverstar acquisitions. SG&A expenses increased to $31.9 million, up $5.3 million, primarily due to increased investments in marketing and new personnel to support our Sand State growth strategy, including expanding the awareness and adoption of fiberglass pools and autocovers. Investments in our new ERP infrastructure and the inclusion of Coverstar Central-related overhead also contributed to the increase. Net income was $16 million, or $0.13 per diluted share, an increase from $13.3 million, or $0.11 per diluted share for the prior year's second quarter. Adjusted EBITDA of $39.9 million increased $5.4 million or 15.7% from last year's $34.5 million, and adjusted EBITDA margin expanded to 23.1%, a 160-basis point improvement over 21.5% in the prior year period. This increase was primarily due to higher sales and gross profit that more than offset increased SG&A spending. Now turning to our first half year-over-year result comparisons. Net sales were $284 million compared to $271 million, reflecting the benefit of both organic and acquisition growth. Net income was $10 million compared to $5.4 million in the prior year period. Adjusted EBITDA increased by 9.1% to $51 million from $46.8 million, and adjusted EBITDA margin increased by 70 basis points to 18% from 17.3%. This performance reflects higher revenue and improved gross margins, which more than offset our ongoing investments to increase the awareness and adoption of fiberglass pools and autocovers. Turning to our balance sheet and cash flow statement. We continue to maintain a strong financial position with cash of $27 million at the end of the quarter. Net cash provided by operating activities was $36 million in the second quarter. In the first half, net cash used in operating activities was $10.9 million. Total debt for the period was $281 million with a net debt leverage ratio of 3.0, and our capital expenditures were $7 million for the second quarter of 2025. As we have previously noted, we expect 2025 CapEx to range between $27 million to $33 million with the increase from last year due to the development of new fiberglass pool models tailored to the Sand State markets as well as the addition of usable space at our fiberglass pool manufacturing facilities in Florida and Oklahoma. Our substantial financial flexibility allows Latham to pursue strategic growth opportunities, both organic and through acquisitions. As we enter the second half of 2025, we are pleased with our financial progress to date. Despite the pool market being in a trough period, we remain focused on executing on our strategic growth initiatives. Our Coverstar acquisitions have been fully integrated into the business, and we are seeing the anticipated benefits materialize in both incremental sales and margins. As Scott mentioned, we remain focused on increasing awareness and adoption of fiberglass pools, particularly in the Sand State markets. We have seen encouraging progress to date, which will position the business for accelerated profitable growth as the pool market rebounds. Moving on to our outlooks. We are reconfirming our 2025 guidance of 8% net sales growth and 19% adjusted EBITDA growth at the midpoints. While market conditions remain challenging, we are cautiously optimistic heading into the second half of the year, and our guidance is based on our current market visibility and supported by our recent strategic acquisitions, ongoing efforts to grow our share in the Sand States, and continued benefits from our lean manufacturing and value engineering initiatives.

Thanks, Oliver. A word on market conditions. We expect approximately 60,000 U.S. pool starts in 2025, consistent with our original estimates and slightly down from the 62,000 that PK data reported for 2024. This softness aligns with our analysis that today's pool buyer is primarily a cash purchaser, representing only a portion of the long-term average of approximately 100,000 pool starts annually. Within this challenging industry environment, we are pleased to be able to reconfirm our full year 2025 guidance, which anticipates another year of significant market outperformance for Latham. Additionally, we have outlined a clear path for advancing our growth strategy, including the specific financial results we expect to achieve in the future. When new U.S. pool starts return to 78,000 per year, meaning when they return to their 2019 level, our new structurally changed business model should enable us to achieve about $750 million in net sales and $160 million in adjusted EBITDA. This would represent more than double our 2019 revenue and 2.5 times our adjusted EBITDA at the same volume of new U.S. pool starts. When new U.S. pool starts return to the long-term average of 100,000 pools per year, we project meaningful increases beyond the aforementioned financial results. With that, operator, I would like to open the call to questions.

Operator instructions. The first question comes from the line of Greg Palm with Craig-Hallum Capital Group.

Congrats on the execution and sort of the continued outperformance in what we all know is a pretty difficult operating environment out there.

Thanks, Greg.

Maybe starting with kind of the investments around the marketing campaigns that you're making, I mean how are you measuring success right now, the return on investment? It's obviously not a robust environment, but you seem to be building interest. You're signing up dealers. Is the initial thought, hey, let's get the awareness up? Let's sign up a bunch of dealers. Maybe this materializes into orders activity next year. Maybe you're already seeing a little bit of that this year. I'd just love to get your sort of thoughts on kind of the return on that investment so far and what your expectations are sort of for the balance of the year.

Yes. So Greg, I think it's a little bit of everything you mentioned, right? It's clearly focused on driving the awareness of the brand and the awareness of fiberglass pools out there, making sure we've got the dealers and the dealer capacity in the areas where we're generating the demand and the lead. And then we talked a lot about our GOOTSA campaign. Hopefully, many of you have seen the DIRECTV campaign we've been running over the last couple of months. The interest generated from that was substantial in terms of we were able to measure it distinctly with the codes, the phone numbers, and a massive uptick in activity on the website, time on the website, leads generated from that. A lot of great activity in both Florida and Texas, the Sand State as part of that strategy, significant numbers increasing there. It's not going to translate to an immediate pool sale. We all know that the buying decision is delayed with kind of, let's say, where the consumer confidence sits today. But we view it as building the pipeline of future demand for us. Some of those pools of interest may translate to a sale this fall. More likely it will translate to hopefully nice tailwinds for us as we move into 2026.

Yes. Okay. That makes sense. And just on the Sand State strategy, just would love to get kind of an update on, a, how Florida is going. And then b, in terms of what you're targeting in terms of communities that you want to be in either by year-end or over the next 6 or 12 months? Just curious what the ramp-up of that looks like as well.

Yes. I believe we will continue to speed up our progress in this area. Currently, we are ahead in recruiting new dealers and in the number of MPCs or other communities we've joined to initiate pool installations. Overall, we're making solid progress. However, we would prefer a faster pace. A minor slowdown may be due to the general market conditions in Florida and Texas, where many have observed a decline in permit activities. That said, we have seen some recent positive developments, particularly in lead generation, which has significantly improved in Florida. Texas has also experienced an uptick in lead generation in the past few weeks, despite the challenging weather conditions. We are pleased with our direction. We had a productive meeting in the Albany area about a month ago with many of our top dealers, particularly from the Sand States. The marketing efforts and the model we are developing resonate well in the Sand States with various appealing features. We will share more details about our metrics as we progress. Currently, the percentage of pool revenue in the Sand States is around 17%, and we hope to increase that to about 19% to 20% by the end of the year.

Next question comes from the line of Andrew Carter with Stifel.

I don’t recall hearing you mention weather affecting your business before, but you mentioned it impacted the package pools. In terms of the in-ground pools segment, specifically fiberglass pool sales, have those returned to growth, or is it mainly the weather and the package pools that are seeing a decline?

No, I think the in-ground pool category in the second quarter was around about 3% down, right? Both were affected by that, probably packaged pools. The impact was larger than fiberglass. We usually don't talk about weather, but I think we had an unusually wet spring. It rained in New England all the way up until June. Once the season turned on us and then we had good weather, we actually saw a nice trajectory in June and July returning for fiberglass back to year-over-year growth. It was a measurable impact, I would say, somewhere between $3 million and $5 million that we would attribute to weather here.

That's helpful. My second question is about the strong gross margin performance this quarter that raises your trailing twelve-month figure to 32%. Are most of the acquisitions at an appropriate structural level? Were there any one-time items that positively influenced this quarter? What should we consider structurally at this level? Naturally, you will want to build on that.

I think we are very pleased with where we are from a gross margin perspective. A 400 basis point increase year-over-year. The main buckets of that list come again from the acquisitions. Lean value engineering is a really good contributor and a stable contributor from a sequential perspective. It's nice to see volume kicking in, and that helps utilization and cost leverage, right? Not really a one-timer that I would call out, probably a slight favorability in absorption. We had a couple of days of plant shutdowns in the first quarter. They were also weather-related that we caught up on early in the second quarter. Outside of this, it was a fairly normal quarter. We are very pleased with our year-over-year improvement here.

Next question comes from the line of Ryan Merkel with William Blair.

My first question is just on the current orders. I think you mentioned it's tracking well. I'm curious, did you see a lift in June and July after the rainy May? Or would you say it's just been kind of steady as the year has progressed here?

Yes, we observed an increase in several categories after Memorial Day as the weather improved, especially as we entered the summer in early August. We saw strong performance in autocovers and liner categories, and fiberglass has also experienced a positive turnaround. However, packaged pools have remained flat, primarily in the lower entry-level market. I believe this stagnation relates more to consumer confidence and limited financing options rather than weather conditions. Looking ahead, we need to note the upcoming shift from the pool building season to the fall pool closing and safety cover season. Early trends in this area have shown promising movement in the past few weeks as people begin to think about back-to-school and closing their pools in the next 30 to 45 days.

Got it. Okay. That's helpful. And then on fiberglass, you mentioned in the release substantial year-over-year growth in leads. I'm just sort of curious, how is your backlog looking right now? Would you say it's normal for this time of year? Or is it a little depressed? And the second part of that question, do you expect fiberglass to return to growth in the second half of the year, just given some of the sales and marketing seems to be working?

Yes. I'd say fiberglass or fiberglass backlog in general has held up pretty well for us. I think it's hard to judge backlog levels with our lead times and service levels right now. I think we're out there three to five days. In the majority of the business, fiberglass pools sit independent on region two to four weeks on average. We're turning orders pretty quickly for dealers out there. Backlogs have held up well. We like where we sit as we’re coming into Q3. I think fiberglass will definitely start to turn as we think about the back half of the year here. We've seen that last thing as Oliver said, four, five, six weeks. We like where we're sitting. There's still a tough market out there, right? I mean tough for the consumer, consumer confidence, what's happening. But again, the higher-end consumer is always doing well. We're really focused on trying to generate a lot of leads for dealers, keeping that funnel full, keeping the interest there and hoping some of those leads will convert to a sale for a fall install for us.

Next question comes from the line of Tim Wojs with Baird.

Regarding the revenue guidance, can you clarify if there are any changes to the underlying components, such as fiberglass growth, liners, covers, or pricing? Is everything in line with your expectations for the top line, or have there been any shifts beneath the surface?

No, I don't think that there's any change to the usual seasonal profile, right? As Scott just mentioned, the safety cover season is now starting and I think with Measure by Latham, we are set up well for that. We are very pleased with the organic growth in autocovers, obviously in addition to the impact of the acquisitions. We expect that to continue to benefit. From a year-over-year perspective, the acquisition of Coverstar Central that happened in August means you'll see some dynamics of the changing comps here. From a sequential perspective, as we navigate the season, I don't think there's anything overly extraordinary in our season in '24 versus prior year.

Okay. That sounds good. And then just, I guess, a couple of kind of cleanup modeling things. Just is there any way to kind of talk about how much price contributed in the second quarter and how much the acquisition sales were?

Yes, sure. So as you think of price, we did price for some tariff impacts in June. Just as a reminder, and nothing really has changed to what we said about tariffs last quarter. About $20 million is the headwind. More than half is remediated and mitigated on the supply chain side with a little bit less on the pricing side. That went into effect in June. So I think about one month of that. Give it probably around $1 million. The contribution of the Coverstar business in the quarter was probably about $7 million, all three acquisitions combined.

Okay. Can you remind us about the tariff situation? Does your approach have any margin implications, or since you're taking out costs and raising prices slightly, is the impact from offsetting tariffs generally neutral?

Yes. I'd put it broadly, it's neutral. I want to complement our supply chain team for having worked through a very dynamic tariff environment that keeps on changing. Since we met last time, China came down, some other countries went up. At this point in time, we are fairly balanced when it comes to the impact and the mitigation. That comment is a run rate comment as well as a 2025 comment.

Next question comes from the line of Matthew Bouley with Barclays.

I guess, first one, I just wanted to ask around labor availability between both, I guess, installation of fiberglass, but then also, I don't know, I guess a competitive product. And the reason I ask is because, obviously, you guys highlight the sort of forever advantage that it's always going to be quicker and more cost effective to install fiberglass. But just in a market where pool starts are down so much, I mean presumably there's more labor availability. So I just wanted to kind of get a sense of what you're hearing out there. How does that impact, I guess, the value prop of fiberglass versus installing the sort of traditional materials?

Yes. So Matt, I mean, I'll start maybe first for us internally, right? No issues, no challenges getting labor. I think we've been pretty stable throughout the entire season, year, seeing extremely low turnover numbers, great retention across the board. We feel really good with the talent we have on the team to support and run the business in all of our factories as we balance the different seasonality aspects. When we talk to our dealers, they don't appear to be having any issues with labor. Again, they have really great crews and have had longevity with some of their core teams. It takes a lot less people to install a fiberglass pool. We're talking three guys in the backyard for a couple of days to get that pool in the ground and set. We've heard and seen some stats on the concrete side that trying to get subs and have the subs out there for three, four, or five months at a time. There has been labor challenges. That's why I think going back to one of the questions earlier in the call about dealer acquisition and dealer ramp-up. We have seen a lot of good success now of concrete builders making that change to Latham and Latham fiberglass because of the labor availability challenge. This is a big help for us and a nice tailwind as we go forward. One of the things we've talked about is how do we target some good concrete builders for a conversion. We've kind of teed this one over the last quarter or two, but Shasta Pools, based out of Phoenix, Arizona, probably one of the largest concrete builders out there in the country, now installing Latham fiberglass pools. They just opened a really nice beautiful new design center featuring fiberglass pools. They just did their big kickoff event about a week or so ago. Getting them to come on board and support and install fiberglass, is a testament to what we've been able to do with demand lead generation, but also a great pool installer realizing that that's going to help fight through labor challenges and issues. We expect to see a lot of great success as we move forward.

Got it. Okay. No, that's super helpful color. Secondly, kind of drilling down into the gross margin, obviously up something like over 400 basis points year-over-year. I think you called out some good volume leverage and where you had the growth in covers and liners and the continued success with lean manufacturing and some accretion from Coverstar as well specifically. Is it possible to kind of bucket that out between what drove that increase amongst those or if there were any other drivers? And then how may those pieces play into the margin in the second half?

I want to start by discussing Coverstar, which likely accounts for about half of the contribution as we expected, consistent with our description of the business at the time of the acquisition. That margin profile has continued into the third and fourth quarters. Some of the benefits will phase out since we completed the Coverstar Central acquisition last August. The remaining difference contributing to our 400 basis point gross margin improvement is mostly divided between lean value engineering and cost leverage through volume, with a slight advantage on the lean value engineering side.

The next question comes from the line of Susan Maklari with Goldman Sachs.

This is Charles Perron in for Susan. First, I just want to go back to your prepared comments about the liners. I think what the Measures by Latham is driving share gains relative to the underlying market. Can you maybe help us quantify the share gains and how you're outperforming the market? Also, when you think about the change in the regulation to accept full safety covers instead of fences in some states, how is this part of your growth algorithm going forward and the opportunity set that it can provide for the business?

Yes. I would say we are very pleased with the performance of the liners business. It was 6% up year-over-year. A key contributor is our proprietary liners measurement tool. We don't specifically break out the contribution of that, but again, very pleased with the number of devices in the market, the feedback from our dealers, and as a result, the year-over-year stats when it comes to volume and sales.

And any commentary on the pool safety cover and changes in regulation for fences?

Yes. So that's kind of more on the autocover side of the equation versus the winter safety cover. When you look at the underlying performance we've been seeing, as Oliver has talked about our growth in autocovers organically from the acquisitions, our focus is there. It's clearly part of the algorithm of us outperforming the market. That autocover goes on all pool types. It goes on competitor pools. It has a really nice ROI and payback for the homeowner with lower chemical usage, less water evaporation, and keeping your pool cleaner than just the ultimate safety aspect of it. We've talked a lot about, right? We've done a lot of marketing with Bode Miller and his foundation, knowing the SWIM, promoting it. In territories where an autocover can be used in lieu of a fence, we see a very high take rate and uptick in terms of the number of pools getting autocovers. This will be part of that future growth algorithm of Latham to be able to outperform the market overall, even in a flat or slower growth pool start environment. We're pleased with the progress we're making. We believe penetration of autocovers on new pools is in the low 20s, which presents a huge opportunity to really move the needle very similarly to what we've talked about in the fiberglass arena.

Got it. That's good color. And then second, talking about capital allocation. Obviously, your balance sheet remains strong. When you think about the capital allocation priorities going forward between deleveraging, opportunities to buy maybe more dealers, and just the general M&A pipeline out there, how do you see the most important priorities going forward?

I want to say our capital allocation priorities remain unchanged. Our top priority is investing in the business. Over the last three, three and a half years, more than 40% of our capital has gone into this area. We've built a plant and are ramping up our investment in the Sand States to prepare for that growth. The second priority is M&A. About 30% of our funds have been allocated to M&A. We've been acquiring about a company here over the last one to one and a half decades with the three Coverstar businesses being the last examples. Finally, debt repayment is a key pillar as well with about 15% of our allocated capital. We've repaid $30 million to $35 million over the last two to two and a half years, and we'll certainly continue to pursue that as one of our uses for capital.

Next question comes from the line of Shaun Calnan with Bank of America.

First one, just a follow-up on the earlier revenue guidance question. At the midpoint, it would imply second half revenue growth of double-digits versus mid-single digits in the first half. It seems like you're getting less of a contribution from M&A in the second half. Can you talk about what's driving that growth and your confidence in hitting those numbers?

Yes. I think a couple of points, right? We did see a little bit of weather delays, which should, at a minimum, not impact the second half of the year. Maybe there will be a little bit of uptick, and that's something we certainly saw in June and July, the fiberglass business returning to year-over-year growth. Please don't forget the acquisitions run rate. They were brought mid to end of Q3 last year. There will still be a contribution from Coverstar Central in the very important third quarter season. Lastly, as we've talked about, we expect a strong safety cover season supported again by Measure by Latham. These are the three main building blocks, in addition to a bit of pricing that we announced and implemented in June.

Okay. Got it. On the delayed pool builds, is that something that you guys have already realized the benefits of in the last month, or do people typically delay them until after the summer if they can't get it built in time?

Yes. Look, I think it's going to be a continued push right up until winter sets in. Folks who made that decision for the pool, in the April, May, June timeframe that couldn't get it, are still going to get their pool this summer. Builders will continue to build here in the slower months of August and September. We'll see the fall installs continue into early October, late October. So those pools will hopefully still get in the ground. The advantage of fiberglass is that it provides a much faster build. The ability for our dealers to catch up and get those pools in the ground is much better than, let's say, someone who is hoping to get a concrete pool in a wet market like Texas. Our guys are busy and working hard, which will help some of the second half revenue guidance versus the first half of the year as we see stronger numbers.

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

Yes. Thank you all for your time this afternoon. We really appreciate all of your continued support of Latham. I hope you all have a great end to the summer season as we head into the upcoming Labor Day holiday here in the U.S., and I'm looking forward to connecting with many of you at upcoming conferences and meetings. I hope you all have a great evening. Thank you.

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