Latham Group, Inc. (SWIM) Earnings Call Transcript & Summary

Okay. Hello, everyone. We are delighted this afternoon to have Latham Group with us. Joining us is Scott Rajeski, CEO; as well as Mark Borseth, CFO of Latham. Welcome. And I'm going to actually turn the floor over to Scott and Mark to kind of give a brief intro of Latham, and then we'll dive into some Q&A.

All right. Thanks, Susan. Good afternoon. And again, thanks, Susan and the entire Goldman team for having Latham at today's conference. We're really excited to be here with you guys today. Let me give a quick intro to Latham before we get started. For those who are not as familiar with Latham Group, we are the largest designer, manufacturer and marketer of residential in-ground swimming pools in North America, Australia and New Zealand. Our operating history spans over 65 years now. We offer the industry's broadest portfolio of tools and related products, including in-ground swimming pools, pool liners and automatic safety covers. We're the leader -- the clear leader in that very important fiberglass pool category in the residential in-ground swimming pool market with over 50% share in fiberglass. Several years ago, when I took over as a CEO, we set out to completely reimagine the entire pool buying experience. What we wanted to do was create a much better experience for the consumer, increase the awareness and adoption of fiberglass pools. We completed our IPO back in April. And now as a public company, we feel we've got a much greater opportunity and a lot more resources to continue to drive that initiative and strategy we laid out. We're really transforming the industry with this unique direct-to-homeowner model. We put the consumer at the forefront of everything we do. The strategy is powered by our leading brand and a superior suite of digital technologies that we -- that engages that homeowner, drives them to the Latham brand and then walks them through that entire decision-making process of pool selection. What that does is give a purchase-ready lead to the dealer. The customer now walks in and says, I want to Sapphire G3 Fiji pool, when can I have it? When the consumer walks in and calls out the exact pool they want, it's difficult for a dealer to convert them to a different pool type. We really believe that the dynamics of this pool market are very attractive with strong underlying growth. We're positioned to benefit from the long-term growth in consumer demand trends, driven by continued homeowner investment in outdoor living, specifically that outdoor dream experience of having a swimming pool, reliving the memory of when you're a child, growing up with your grandparents pool or at your parent's house or that whole resort experience that you have when you want a vacation. People want that in their backyard again and they're doing it. Well, where we get really excited is fiberglass. I know everyone says why fiberglass, why fiberglass. Look, there's great economics with that product, not only for the consumer, 28% lower upfront cost, 43% lower total cost of ownership for them but also for the dealer. The dealer can install that pool much faster. They can do it with less labor, and a fiberglass swimming pool can be installed as quick as 1 day, so the consumer can enjoy their backyard and have it much faster. As we continue to drive that and educate people on why fiberglass, we truly believe that we can drive that material conversion story just like many other successful business product companies have done, but we can do it with a lower upfront cost and a total lower cost of ownership. And look, it's been great being a public company for the last 4-plus months, almost 5 months here now. We've got a great growth plan in front of us. We got a great strategy in place. And more importantly, we got a really great team across the Board and the business. We're really excited about how we're going to move forward. With that, Mark, do you want to make a few comments?

Thanks very much, Scott. Again, Susan, thanks for the invitation to be here. As Scott mentioned, it's very exciting times at Latham, worlds of opportunity in front of us, and we're well positioned to capture on that opportunity. And as Scott mentioned, 4 months as a public company, maybe seems like a little bit longer than that sometimes, right? But it's all good stuff and very excited to be here and then share more about the Latham story today.

Great. And I guess with that, why don't we start by talking a little bit about demand? Can you just kind of contextualize for us how this year has come together relative to your expectations?

Yes, demand has been phenomenal. If you look at over the last several years, again go back to the strategy, educating consumers on why fiberglass, convincing dealers to sign up and install fiberglass and then providing all of that lead management system to our dealers where consumers are now calling out and wanting a fiberglass pool. If you look at the macroeconomic trends of investment in the backyards, migration from the cities to the suburbs, delayed formation of households, all of those tailwinds are all going in our favor and will continue. And look, consumers want to invest in their home because they're staying in their home much longer. They've got the economic ability to make those big investments. And we're really confident in the demand environment going forward, and we don't see any stop on it. And particularly when we look at fiberglass, that 18% penetration number, we want to drive that to 40% and then eventually to 70% where it sits in Australia and New Zealand today.

Okay. And can you kind of describe for us your core customer? How do you contextualize that person and describe them?

Yes. We talk of customers in 2 different kind of areas here, Susan. One, there's the consumer and the homeowner. So the typical consumer for us that's buying a swimming pool, usually, they're on their second hole. They just started a family. They've got a young family. They want to re-create and invest in that backyard for their children, and they have fun and entertain. The way we go to market is, right, we try to get that consumer to pick the fiberglass pool, go to our dealer. Fiberglass is a dealer-direct model. We're delivering that swimming pool from one of our factories right to the backyard as a service to the dealer. It's craned off the pool and set in the hall on that particular day. Most of the rest of the business goes to our other channel partners, the wholesale distribution partners. They're stocking a product on the shelf. But again, we have a consumer who requests a pool. We design that pool for them. We sign them up with a dealer. The dealer will then go get those components for that swimming pool from that wholesale distributor, bring them to the backyard and then build that pool to the design and spec that we met for the consumer.

Got you. Okay. And so then with that, can you talk a little bit to the implications of a tight labor market? And we've heard from lots of companies that obviously, it's really been tough to get labor over the last year, 18 months. What are the implications for Latham as well as for your dealer?

Yes. There's 2 sides of that story as well, Susan. The first one is, the tight labor market actually works very well for Latham and our conversion story. With a concrete pool, you're going to have a crew of 8 to 10 people, skilled craftsmen, building a swimming pool in a backyard for a homeowner over the course of 3 to 6 months. With labor being tight and availability of labor and people willing to show up day in, day out to do a job like that, fiberglass is a great opportunity for the dealer and for Latham. We can install fiberglass pool in a week, a dealer can, with 3 people, so 1/3 of the crew size, they can build that pool in less than 1 week versus the 3 to 6 months. And it gives them the ability to get a lot more pools in the ground, making the same money per pool. So fiberglass pools actually solve the labor shortage for dealers where they can do 6x as many pools in a year, 1/3 the labor and then make 3x the profit for themselves. So it actually works very well. And then particularly for us in our factories, look, continuing to provide a great paying job, great benefit package, recruiting people into what's a really, really fun industry. COVID has been a challenge on the hiring front as we all know. We ensured safety in all of our factories, taking care of our people with incremental pay time off, social distancing practices, closing offices to keep people out of the facilities to protect the hourly production workers. And we've done a really, really good job of that over the time period. And I think we've had some success. We've hired almost 500 people over the last 6 to 9 months during this time period as we've ramped up, and we've done a pretty good job growing the business based on both of those equations.

Got you. Okay. And when you do get new dealers that come to you, what is a lot of the feedback that you get from them? What kind of draws them either to fiberglass or to Latham specifically?

Yes. There's 2 pieces of that one as well. One, when the consumer is walking into a dealer showroom and specifically calling out they want a Latham fiberglass pool, it's not very hard to convince that dealer, when 8 or 10 people that are walking in there say I want a fiberglass pool, to sign up, one, to start doing fiberglass; but two to say, I want to be an exclusive dealer of Latham because of all the leads you're sending me. It really starts with that lead. That's the service we're providing. We've proven to our dealers that we can give them more leads in 1 week in the pools that they can install in 1 year. So that's the first hook we get them with. The bigger hook is that once they sign up and become a grand dealer, it's all of the training programs that we provide them. We walk them through how to build a swimming pool. They have that exclusivity. They have access to all of the new models. They get that lead generation. We take them through the boot camps. It's constant training. We teach them how to be better business people, how to install more pools, how to drive their installation capacity and improve their profitability. And then we also have the dealer conference or the annual rewards conference. They earn their way to that conference. It's more training and education, and it also recognizes the top builders and dealers and they then get the opportunity to kind of teach what they've done to be successful to the new dealers we're bringing in. So it's a full model that resonates very well with everyone who's decided to partner with Latham.

Yes. Okay. That's great color there. The other thing is when we think about the industry really broadly, right, we're sitting at about 125,000 new pools a year or so. When you think about all these different puts and takes going on out there, do you think the industry overall can sustain that level of new construction? And I guess, more broadly, too, like what keeps us from maybe growing past that a little bit?

Yes. So there's quite a few points in there, Susan. So if you think about where the industry was last year at 96,000 pool starts, it's still well off that -- I'll say, that 125,000 number, which people talk about as the long-term industry average, right? The peak was 180,000 pools. The thing that's limiting pools from getting back to 180,000 right now, I would say, is dealer installation capacity in general. 50% being concrete back to the labor issue. That's where we believe fiberglass is the solution to get the number of pool installs up drastically. And I'd like to kind of tell the story, an average dealer, an average pool builder does 10 pools a year. If there's, on average, 40 weeks of installation capacity that you can be building a pool, if you are a really good dealer, you could be doing on fiber last pool a week or 40 tools a year. Right there, that could increase installation capacity by 4x if they convert it to fiberglass. If they got really, really good from all the teaching and training we do for them, they could put 3 fiberglass pools in a year and get to 120 pools installed a year. So if you think about that, we're solving the installation capacity issue with our dealer base. The dealers that we've signed up to be exclusive for us can continue to grow and ramp and that can move the needle. But the reality is we don't really need new pool starts to drastically increase because as we target that material conversion story, we go after 50% of the market, which is concrete that's going to take that needle from 18% fiberglass to 25% to 40% and to what we see in the Australian market, 70%. So it works in both ways. We're adding installation capacity with our dealers, fiberglass solves the problem, and we can convert the existing pools being installed in the other categories and win on all fronts.

Got you. And talk a little bit about how you think about the role of rising home prices and its ability to kind of drive demand for pools.

Yes. That's another key lever of maybe why we've not returned to where the growth numbers were back in the early 2000s. And it's also what limited the growth, let's say, coming out of the Great Recession. People finance their pools 1 of 3 ways. They're a cash buyer. Second, a home equity line of credit. They're tapping their house, they equity in their home to buy the swimming pool, and that market has been doing very well as people see the increase in equity in their homes. I think that's what's going to continue to drive it there as well. The third aspect is, call it, independent financing where they go to a LightStream, they go to SunTrust Bank, they go to Lions Financial. All partners we work with to finance swimming pools. And that market has really made a comeback over the last 3 or 4 years as well. We've seen a lot of great success. So the ability of the consumer on their balance sheets are cleaned up, they're all in a much better situation, right? The stock market has done very well for a lot of these people. And one of the other things I'd like to say that will help drive all of this. There's 90 million homes out there right now in the U.S. that do not have a swimming pool in their backyard. If you think about the number of people who have an interest in a swimming pool and a high likelihood to potentially buy a swimming pool the next 5 years, that math equates to 1.7 million of pools. 1.7 million pools of potential demand per year over the next 5 years. We were just talking about numbers in the $100,000, $120,000 range. So clearly, demand, the ability to find those people who want a swimming pool, market to them with our model, put them up with a dealer and drive that is not the fundamental issue. It's making sure we have enough dealers to get those pools in the ground and that the dealers have everything they need to fulfill that demand that's out there.

Yes, it seems like, too, in addition to just the sheer volume, we've also seen this kind of shift towards more sophisticated or nicer backyards, I guess I would say. People want all kinds of amenities kind of extending it as a living area of the home. Talk about the world that pools have played in that and the implications there.

Yes. It goes back, Susan, and I think that was one of my lines I used a lot, too, is you've won a vacation, you're sitting at that resort, right, and you just see that beautiful swimming pool in front of you. People want that in their own backyard. Look, the swimming pools today are much different than what the pool I grew up with. I grew up with a basic rectangle vinyl pool. It was the most boring pool probably in the entire neighborhood like that one, right? You look at the pools now, they mimic all those features, right? They mimic the features that you only used to be able to do with concrete. They've got the benches, the bench entry systems, the ledges, the swim-out ledges, in-floor cleaning, the lighting, the saltwater coordination, the automation. They're so easy to maintain now and throw an automatic safety cover on the pool. You've got the auto -- you've got such a great, safe environment in your backyard for your children and your pets. When you do that, that auto cover also is now protecting that investment. It's reducing the cost of operating your pool. You're not out there cleaning your pool, logging chlorine like you used to have to back in the day. And when you turn on your tanning ledge and your water features and your bubblers and your jets and the sprayers, I mean you basically have this outdoor oasis. When I ask a lot of people when they're looking to buy a swimming pool, how are you going to use your swimming pool? Most of them say, "I'm just going to sit around and look at it." Most people aren't swimming, diving in it. The kids will play in it and everything. I very rarely swim in mine, unless [indiscernible] I'm hot. Well, it's just -- it's part of that backyard. It's no different than you've heard me say it, the center isle in your kitchen. It's a gathering spot. It's the old dining room table from back in the day, right? It's a place to entertain, hangout, recreate. It's another extension of your living room. And then when you throw your grill out there, your patio furniture, a covered space to get out of the sun, barbecue, watch TV, I mean some people's backyards are now just as nice as the inside of their home. I mean, it's truly amazing what some of these pools look like these days.

Yes. No, it absolutely is. It's like being at a resort in your own home, nothing could be better. The other thing that you've talked about is the desire to stay 12 or 24 months kind of ahead of the demand curve. But when you think about the kind of growth that we've been seeing, especially in the last year or 18 months or so, what's your ability to do that? How hard is that to achieve today?

Yes. I think we're staying ahead of that curve, and it's also a key part of why you've seen an acceleration in the investments we're making and the announcement of the Kingston facility in Canada for fiberglass. It will be our largest fiberglass facility. Probably the largest fiberglass facility in the world. It will be the flagship facility for us. We wanted to get that going now because we see that demand that's out there. We see that potential. We see the acceleration of dealers signing up with us. We see the acceleration of the growth they're having and the acceptance of fiberglass at the consumer level. So again, we want to stay 1 to 2 steps ahead of where that demand is as we look out into '23 and '24 on that march to 25% and 40% penetration. So that's what we've always done. We're well ahead of it from a capacity standpoint on permitting and mold capability. Labor and supply chain has been a challenge, we all know that, and we'll continue to work on solving those problems. But [indiscernible] capacity from a true manufacturing standpoint, we do not want to get caught short on, and that's why we're kind of making all those investments across the board.

Yes. And one of the kind of unique things about your model, and you talked about this earlier, is that you're going direct to the consumer to some extent. You're really trying to draw that demand yourself. And so when we think about all the headwinds that you are facing, how do you ensure customer satisfaction when there is that dealer that kind of sits between you and the customer as you go through this process?

Yes. That's part of the shift of B2B to B2C, right? As we now interact with the consumer and talk to them about all the things they should get and could get, there's now an expectation that the dealer has to perform and match that expectation as well. If we talk about a 1-day install, consumers are going to want a 1 day install. That's why we kind of mentioned 1 week on average for fiberglass, but also why we try to teach the dealer to do that. It's also part of why dealers sign up with us and become a grand exclusive dealer because they also want to provide that high level of service, right? These are small, independent, very successful business owners throughout the world now that are working with us. They don't want to let the customer down either, right? They're dedicated. They're very proud of what they do when they install for consumers. But look, I'll be brutally honest, right? We all can always communicate much better in the world. Us to dealer, dealer to consumer expectations of what's going to happen, when is my pool coming? When my pool arrives, what's going to happen? How do I operate my pool? And even once the pool is installed, is the customer satisfied with both the experience, the pool, the dealer, the entire thing? So we're going to continue to work on driving that ultimate customer experience and dealer experience. That's what will make us all better. And look, there's just such an opportunity out there to just drive this across the board and continue to professionalize the industry. And I think that's the big lesson we learned with the Narellan acquisition from Australia. That was what accelerated the growth of fiberglass in Australia and New Zealand was just putting together the ultimate consumer and dealer experience and kind of a closed system. That model drove 20 points of conversion in that last decade. We're bringing that same concept here. That's what we're working on, that Narellan licensee model is here, the relationship with our grand exclusive dealers. And we've created this grand concept even in the vinyl liner pool space as well. So it's the whole ecosystem, Susan, of just always upping your game and providing the best customer service experience you can, us to our dealer, our dealer to our consumer.

Yes. Okay. That's great color, Scott. There's obviously been a lot of focus on the supply chain, especially I think post the hurricane that came through in the Gulf region. Can you talk to where you're seeing the greatest headwinds? Talk about raw materials, transportation, all those different pieces of it?

I really don't want to, Susan, but I guess I should because I think when we see it every single day when we look at the newspaper and look, it's the world we're all living in, right? So it's -- first of all, it's not unique to the pool industry as we all know, and we've talked throughout the day with everyone. Every day is a unique challenge in the environment we're living in. Going back to last year with COVID, do a supply chain challenges then, labor was an issue. It's been a constant rolling and intermittent challenge throughout the time. And what I'd like to say is, it's no different than challenges we've also faced over the last 11 years as a company, right? We've overcome every challenge that's been thrown us with 11 consecutive years of top line growth, EBITDA dollar growth and margin expansion. That's kind of what we do. We figure out how to weather through it. And our fiberglass product somewhat helps us through that. The world has gotten more difficult to operate in as a business leader and an owner with supply chain challenges. And look, it started with the deep freeze in Texas with resin. And let's particularly talk about resin, that's kind of the hot topic of the day. That then rolled through some upstream impacts with some key components that go into resin production, particularly for what we buy with some of our vendor base. And you combine that with logistic challenges of getting material from other countries, from overseas through the ports, being able to find a tank wag and a steel drum, a truck driver to transport it. That entire supply chain becomes a challenge. And look, the way we overcome it is by having great vendor partners. Back to the communication of a great customer experience, we need vendors who communicate clearly with us on expectations of supply to facility so we can communicate to customers. It also starts with having a great team. And look, unfortunately, you guys saw the 8-K. Jeff Leake, our COO, decided to go in a different direction, resigned from the company. But the fact of having a great team is our global supply chain leader that we have is from a $2.5 billion chemical company who ran a global supply chain organization. He's been with us for 6 months, doing a phenomenal job overcoming all of these challenges with what he's working on with his team and bringing in incremental resources from other places to really rethink and work with our vendors to procure ultimate sources for them to help them even think through their challenges. Two of the other leaders in the operations arena, who are working on the logistics and manufacturing operations aspect, again, both came from 2, I'll say, Fortune 50 if not Fortune 100 firms, multibillion-dollar companies, who've been with us for a while, leading their operations, another 30-plus year in the packaged pool space. The team just goes very, very deep with the talent we've brought in. Look, we used to be a $250 million business. We -- our projections for full year guidance is $600 million. It's kind of what we do. We continue to bring great talent in across the board in the entire organization. We're all problems solvers at the end of the day. You guys know I'm a math major, I love solving problems. Every day I come in, right, there's some other channels we have to overcome. And look, our full year guidance -- right, let's just go back to the full year guidance we gave a few months back. We took the bottom up. It's going to be very strong growth on the top line, the bottom line with margin expansion. We're doing what we said we're going to do, and we'll post up our 12th year of that. And I think as we go on and drive this great growth story, I don't want to think about what the challenges will be in '22, '23, but that's why you assemble a great team of talent to just continue to overcome and then post up the results like we have as a company.

Yes. Okay. I got you. And when we do think about the second quarter specifically, there was about 330 basis points in the gross margin that kind of came from those operational headwinds. Can you maybe just parse that out for us a bit? How much of that was raw materials, inflation, production and efficiencies, all those kinds of things?

Susan, thank you for a question for Mark, finally.

Susan, I thought we had a deal here. Thanks very much. Glad to jump in. And yes, we did have some margin compression in the second quarter, as you mentioned, Susan. And a couple of things really driving that. One is, these intermittent shortages of raw materials and -- which meant that we were essentially running our factories, particularly on the fiberglass side, not as efficiently as we would like. So of that 330 basis points, I think about half of that kind of is inefficiencies in the factories. The other is, we really saw -- I think unprecedented inflation in the second quarter. We responded very aggressively with price increases. But it's going to take a little bit of time for those price increases to actually materialize on the P&L. We would expect to see those coming through more aggressively in the second half of the year.

And can you talk a little bit about pricing? You've put through multiple price increases, I think, in the last year or so. Kind of where does that stand?

Yes. No, thanks, Susan. The company historically has been able to pass along the price. And I think, fundamentally, that comes from the value-add that we're bringing both to our dealer network as well as to our consumers, the homeowners. When the dealers can make more money installing fiberglass pools and other alternatives, when the consumer can get a fabulous product in their backyard and it's less expensive than the alternatives, that value-add that you bring to the marketplace, you can pass along and take some of that with price, and we've been able to do that. We've averaged 3% roughly per year historically on price increases. That's not just across the board, it varies by product line, timing, but on average, 3%. We'll do more than that this year, for sure. We've already had several price increases. As I mentioned in our second quarter earnings call, Susan, the current, let's call it, supply and demand imbalances that everybody is seeing in the supply chain, we saw as well, which drove some pretty high inflation for us. We responded aggressively with price increases. We will do so again as we continue to -- if need be, and we continue to monitor that situation on a day-to-day basis.

Yes. And one of the questions I get often times about pools and pricing is you -- within fiberglass, it's fairly concentrated, right? But as you kind of step away, it becomes much more fragmented. And so how do you get that pricing power? How sustainable is that over time for you?

Yes. Let me jump in on this one, Susan, because my view is, I believe it's sustainable over time, and we can continue to drive it. And again, when you think about the backyard, let's go back to your resort oasis backyard concept, the pool is just one small part of that entire equation, right? So the amount of price the pool is compared to the entire backyard project is just one component of it. I don't want to state percentage or anything because it's almost impossible to do. There's the pool installation cost, then it's how much concrete in the patio or what type of patio, how much extensive landscaping, what are the other features, the fencing. There's so much that goes into that entire project. That's where I think for us, right, we can price that pool through to the dealer. They've got to go then price that back through the consumer and look at that full scope of the backyard. I'm just going to throw some numbers out to the kind of I think fair numbers. They've been published on the website and that. If we just said, look, a pool installed is $50,000 for the pool and the equipment and that experience and let's just say, the minimal patio surround you need for proper installation. Most backyards with that type of pool are going to be $75,000 to $100,000. So if you think about even that $50,000 install where we're a component or a piece of that $50,000 because there's the installation of labor costs for the dealer. And let's just say, a 5% price increase on a piece of that, it might be $1,000, $500 on a $100,000 or $125,000 project in total. So we believe the ability for us to push through and dealer to continue to push through to homeowner level is sustainable over time.

Yes. And I also want to go back to the announcement around the Kingstone facility. And I know, Scott, you mentioned this a little bit when we were talking about growth. But can you just give us some context of why did you decide to expand there? I think that when people think about housing, we think about a lot of growth coming through in the southern and the western parts of the United States. So talk about that decision in and of itself.

Yes. Look, I'd say the success of the strategy we've had in the Canadian market and the Northeast, we've -- the Canadian pool market is a great pool market to begin with. The season up there is very short too, and this is what's great about fiberglass. If you're building a pool in Canada, you're losing an entire swimming season. Fiberglass gives you the ability to build a pool and save that first swimming season. So the acceleration of fiberglass in the Canadian market has really taken hold. And again, 80% of the market, right, is the Greater Montreal, Greater Toronto area. So we situated kind of right in the middle there. The success of the Narellan licensees when that Narellan business launched there 3 years ago has really exploded for us. The team has done a phenomenal job growing that business. They had an existing facility up there that I think we've decided we kind of -- we got a lot out of it. We've got a little bit more to go. But we really looked at where the footprint was, where we saw our growth coming from and the fact that we were trying to feed that market out of our West Virginia and Tennessee facility up into the Northeastern Canada. It worked. We've now got a large enough base of business there that will support and sustain a brand-new facility, the largest facility we're putting in. And that will satisfy that market and feedback in the Northeast, giving relief to the other 2 facilities to continue to grow and expand there. And it's part of just the overall business model how we smartly expand in the regions, how we add capacity and the number of tools we have at our disposal to expand capacity in existing facilities as we've talked with burner technology, molds, equipment, base, delivery equipment. And look, as we continue to have great success conquering against the [indiscernible] market in the Sand States, a lot of our facilities are already situated there, in Louisiana, in Florida, in Texas, in California. So we will grow in as we have success in that concrete dominant market. And where we have 1 or 2 other holes, specifically the southwestern part of the country. As we grow into that market, we'll feed in, we'll establish an approach there. And some point down the road, we'll probably be talking about the need for a facility there, but that just means that acceleration against the concrete market is really taking hold in a very dominant area of the country.

Yes. Okay. All right. Great. The other thing, too, is let's talk a little bit about capital allocation. You did the Narellan deal fairly recently. You've done a couple of other deals in the past. Talk about your appetite for M&A. And maybe especially how you think about it domestically versus internationally?

Yes. When I think of M&A, I mean, the first part is, it's not core to what our growth strategy is as we've laid out in our long-term projections. We believe we can grow nicely without doing any more M&A, but it's been part of the DNA of our company. There's a lot of phenomenal great regional competitors out there that we like in the space across the board in all 3 categories. All very successful business owners. They all have unique attributes that could be nice add-ons and fits for us. Personally, we know everyone in the industry that is out there. We have constant dialogue with them. And I think we'll be smart with how we do M&A, whether it's distinct technology, marketing, maybe something with the product that they have, maybe they fit out a regional footprint for us where we might not have access to a market or a facility, and it will help us from that point, or look, maybe it's a nice adjacency, something we're not even into that's still pool-centric with a particular pool type or model or space. So we'll continue to look at, evaluate where we go with that one. And I think we really want to stay North America-centric right now in the short term, Susan. We've got the business in Australia and New Zealand. We're still focused on growing and expanding there. But the European market would be a really nice next move for us down the road, right? Not in the 3- to 5-year time frame, because we don't believe we need it. We do, do some business over in Europe. It's called all kind of an import, shipping in small volumes. But I think North America-focused, growing the footprint, looking at some of these regional competitors and just being smart with the deals that we'll do in the future, just like we have in the past with everything.

Yes. Okay. I hear you. And talk to us a little bit in general about overall kind of priorities for uses of cash. How do you think about allocating those dollars?

Yes, Susan. Thank you for that. First of all, I think what I'll just restate the obvious, we're a growth company. So we see tremendous opportunities to reinvest in the business. So our first priority here is going to be reinvesting in the organic growth of the business and whether that's capital expansion or whether that's investment in operating expenses to better the consumer experience that they have with Latham. That will be priority number one. The second priority for us, as Scott mentioned, is we have done some M&A in the past. And I think we've done it successfully. And so the option of having some add-on tuck-in type acquisitions in this space, I think, is high. So well, Scott is -- I completely agree with them, it's not a requirement. I think we're in a very good position to be very opportunistic and take advantage of those opportunities when they arise. Third for us, Susan would be retirement of debt. And then fourth, based on the opportunities we see today to invest capital, we think it's highly unlikely. We don't foresee a dividend payments in the near or medium term.

And I think one other thing I would add into is just back to the employees and the tight labor market, investing in our employees, I think, is also important and making sure we're paying competitive wage in each of the areas we participate in, providing a great benefits package overall. I think we've done a lot on that front to try to help recruit and drive and attract top talent to the organization, and we'll continue to focus on our employees because that's an important part of the mission of what we're doing. And also even investing in our customers, right? That's another critical part with some of the marketing initiatives we've done with rebranding their stores with the Latham branding, supporting them with different charities and activities. And I think the charitable piece is another important one for our company, where we ask our employees to kind of take part in the local communities. What are the things they'd like to support and take care of? So we've done a lot of charitable things as well, not a big use of cash. But I think just one of those things, listen to the employees, taking care of our people, our customers and our communities.

Yes. No, you've made a lot of investments as you think about the labor and the dealers and just the overall support that you provide them, which I think does help to kind of attract them to your business overall, for sure. Good. Well, I think we're just about up at time with that. So I think that we will cut it there then. Thank you both for joining us this afternoon.

Thank you, Susan.

Thanks Susan, and again, the entire Goldman Sachs team and everyone who's dialed in live and will watch this later. We really appreciate all your support and help. We've got a great company. And if you're not a current Latham pool owner, give one of us a call because we want you to be a future Latham pool owner. Thanks, everyone. Have a great weekend.

Thank you. Bye.