Good afternoon, everyone, and welcome to the Latham Group third quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Casey Kotary, Investor Relations Representative. Please go ahead.
Thank you. This afternoon, we issued our third quarter 2026 earnings press release, which is available on the Investor Relations portion of our website. On today's call are Latham's President and CEO, Sean Gadd, 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 Sean Gadd.
Thank you, Casey, and thank you all for participating in today's call to review our third quarter results and discuss our business outlook. This was another strong quarter for Latham, in which we effectively executed our strategic priorities and delivered substantial growth in sales and profitability. The key takeaway from both our third quarter and year-to-date performance is that Latham is not waiting for the market to rebound. We are driving growth in our established markets through high-impact marketing campaigns and sales execution, taking advantage of our market development approach to accelerate material conversion in the Sand States, and strengthening our market leadership across all our product categories. The successful execution of our strategy is demonstrated in our financial results, as well as in the substantial operating progress we're making that sets up for our continued growth in 2027 and beyond.
Looking at our Q3 and year-to-date financial highlights, third quarter sales increased 12.5% to $182.2 million, driven by organic growth of 8.4%, bringing our year-to-date sales growth to 11.4%, with organic growth at 7.9%. Sales in the Sand States increased by 21%, driven by accelerated growth in Florida and Texas. For the first nine months, Sand State sales were up 16.6%. Adjusted EBITDA increased 18.1% in the third quarter and 14.2% year-to-date, significantly outpacing sales growth while we continue to invest in growth initiatives. Taking a closer look at the main contributors to our third quarter and year-to-date sales growth, you can see that the operating progress that underpins our confidence in Latham's ability to continue to outperform the market. We are very pleased with our year-to-date net sales growth of 11.4%, including 7.9% organic growth.
This performance was driven primarily by in-ground pool sales, which were up 22.6% in the third quarter, including 13.9% organically from the same period last year. This increase in in-ground pools was driven almost entirely by fiberglass pools, which are on track to account for about 80% of our total in-ground pool sales this year. Based on our internal data, we expect fiberglass to gain at least one additional percentage point of total market share in 2026 to represent 25% of total U.S. in-ground pool sales. This makes us the market leader in a growing category within the pool industry and supports our conviction that Latham is gaining share within trough market conditions. We also are a leader in the growing autocovers category, with strong sales momentum led to 8.7% growth in cover sales in the third quarter and 8.4% growth for the first nine months.
Autocovers, which provides critical safety benefits and are compatible with all types of in-ground pools, have also been supported by the revenue synergies from our past acquisitions of several of our Coverstar dealers. Last quarter, I spoke about concentrating our efforts on four strategic priorities to drive growth, namely to continue to grow our core business in established markets, to drive material conversion to fiberglass from concrete in the Sand States, to increase the attachment rate of our autocovers, and to continue to complete accretive acquisitions. To support these growth drivers, I spoke about the need to achieve sales excellence across all our markets, follow a disciplined market development approach, market directly to the consumer, and earn their path to purchase.
I'm pleased to report that not only are all these initiatives currently underway, but we already see important positive results from these efforts, which support our confidence heading into 2027. Our disciplined and direct-to-consumer marketing approach is working, and nowhere are the results more apparent than in the Sand States. Success in these markets has the potential to drive a step change in company-wide sales over time. Sales in the Sand States accelerated to 21% in the third quarter, demonstrating the contributions of our strategic growth initiatives. Several initial successes are worth noting. First, as part of our new market development framework, we hosted three community pool events in targeted Florida neighborhoods, celebrating the installations of three fiberglass pools. These events resulted in 15 additional pools sold in these neighborhoods. Second, we're taking our market development frameworks to additional neighborhoods in Florida and Texas, with more events planned before year-end.
We are also adding field resources in Florida and plan further expansion in Texas and Arizona as we head into 2027. Third, our advertising and marketing campaigns are resonating with consumers in the Sand States. Year-to-date, overall national leads were up 25% versus prior year, and Florida and Texas have seen dramatic increases in lead volume, up 89% and 115% respectively. Our website traffic increased substantially, and Latham remains the number one brand searched among fiberglass competitors. Taking advantage of the softer market to accelerate growth, Latham is the only fiberglass pool manufacturer investing with this type of scale in advertising and marketing campaigns in today's market, helping strengthen our competitive position among pool builders and increasing brand recognition among consumers. Fourth, we are launching three new pool models ahead of the 2027 season that are purpose-built for the Sand States.
All three are rectangular-shaped with spacious swim areas and built-in bench seating that offer a resort-inspired backyard experience, perfect for these year-round markets. Lastly, we are leveraging my home builder experience to establish a foothold in this market and unlock a new growth opportunity for Latham. In the third quarter, we partnered with a national home builder to offer Latham fiberglass pools as an option in new home construction in Florida. One Latham pool is already installed in a model home, and we look forward to expanding this relationship. More to come on this as it develops.
Beyond the Sand States, I'm pleased to report that we have advanced the build-out of our commercial organization with the appointment of our new Chief Commercial Officer, Todd Antonelli, and the addition of key leadership across sales strategy and sales operations, establishing the foundation for a world-class commercial organization that will drive Latham's growth across our product lines and geographic footprint. As we strengthen and accelerate our commercial execution, we continue to gain efficiencies through lean manufacturing and value engineering, while also reinforcing our commitment to safety across all of Latham's facilities. To sum up, I would like to thank the entire Latham organization for their commitment and hard work in achieving our results. We are pleased with our sales performance to date and the way Latham is effectively navigating challenging market conditions while delivering substantial growth and profitability.
Our board of directors approved a three-year $100 million stock repurchase program, reflecting the growth opportunities we see ahead and demonstrating our confidence in Latham's long-term outlook. Our strong financial position is a key element supporting our current and future success. I will now turn over the call to our CFO, Oliver Gloe, for a financial review. Oliver.
Thank you, Sean, and good afternoon, everyone. I am pleased to report on our strong third quarter financial performance, which highlighted Latham's progress on our growth initiatives and continued ability to outperform the market. Please note that all comparisons that I will discuss today on a year-over-year basis compared to the third quarter and first nine months of fiscal 2025, unless otherwise noted. Net sales for the third quarter were $182 million, 12.5% above $162 million in the prior year, which represented 8.4% organic growth and 4.1% acquisition-related growth contributed by Freedom Pools. Across our product categories, in-ground pool sales were $92 million, up 22.6% in the third quarter, or 13.9% organically. Organic growth was driven almost entirely by fiberglass pools, reflecting our progress in executing on our strategy to continue to grow in our established markets while accelerating our sales in the important Sand States.
Through our branding and marketing initiatives, we are highlighting the speed and efficiency of fiberglass installation compared with concrete, while educating consumers on the durability, attractive finishes, and long-term cost savings of Latham fiberglass pools. With fiberglass representing approximately 70% of the pool market in Australia, which has the highest rate of residential pool ownership in the world, and accounting for approximately 40%-50% of the European market, we see significant opportunity to increase penetration across the U.S. as awareness of the quality and value of our product continues to grow. Cover sales were $60 million, an increase of 8.7%, led by autocovers, which represent approximately two-thirds of our cover sales and which continue to benefit from revenue synergies from our three Coverstar acquisitions.
Liner sales were $30 million, a decrease of 4.9%, primarily related to a difficult comparison to last year when liner sales were up 13% from the prior year's third quarter. Gross profit increased 16.6% to $67 million. Gross margin was 36.7% in the third quarter, a 130 basis point expansion, primarily due to greater plant absorption on higher volumes as we resolved the manufacturing capacity constraints that we faced in the second quarter, along with the continued benefits from our lean manufacturing and value engineering initiatives. SG&A expenses increased to $36 million, up $7 million.
Similar to last quarter, this is primarily due to investments in our growth strategies, the timing of sales and marketing initiatives related to our fiberglass conversion strategy, acquisition and integration-related costs, which included $3.2 million of performance-based compensatory earn-out expenses related to our Coverstar Central acquisition in 2024, and costs related to our digital transformation program. Net income was $12 million, or $0.10 per diluted share, an increase of $4 million, or 48.5%, compared to $8 million, or $0.07 per diluted share, in the prior year period. Third quarter net income included a one-time loss on extinguishment and modification of debt of $5 million related to our debt refinancing. Net income margin was 6.6% compared to 5% for the prior year's third quarter.
Adjusted EBITDA of $45 million increased by $7 million, or 18.1%, from last year's $38 million, and our Adjusted EBITDA margin was 24.8%, a 110 basis point increase from 23.7% in the prior year period, reflecting higher gross margin that more than offset higher sales and marketing initiatives designed to drive share gains for fiberglass pools and autocovers. Now turning to our year-to-date results comparisons. Net sales were $497 million, up 11.4% compared to $446 million. Gross profit increased by 12.9% to $174 million from $154 million, and gross margin increased by 40 basis points to 35%. Net income was $16 million compared to $18 million in the prior year period. Net income margin was 3.3% compared to 4.1% and included the one-time loss on modification and extinguishment of debt of $5 million related to our debt refinancing that I previously mentioned.
Adjusted EBITDA was $102 million, up 14.2% compared to $89 million in the prior year. Adjusted EBITDA margin increased by 50 basis points to 20.5% from 20%. Turning to our balance sheet and cash flow statement, we continue to maintain a strong financial position with cash of $95 million at the end of the quarter. Net cash provided by operating activities was $49 million in the third quarter and $55 million for the first nine months. During the third quarter, we refinanced our existing credit agreement to extend maturities and enhance financial flexibility in support of our strategic priorities. The new financing includes a $300 million term loan facility maturing in 2033 and a $75 million revolving credit facility maturing in 2031, providing long-term financing stability at similar conditions to our prior facilities. It strengthens the balance sheet, supports organic investment and strategic M&A while maintaining disciplined leverage.
Our refinancing was well received, with Moody's and S&P affirming their ratings. Total debt as of the end of the period was $293 million, with a net debt leverage ratio of 1.8x, ahead of our year-end target of 2.0x. Our capital expenditures were $6 million for the third quarter and $34 million for the first nine months of 2026, which includes the purchase of four key previously leased fiberglass production facilities. I would like to emphasize our capital allocation priorities: reinvesting in the business to capture organic growth opportunities, selectively pursuing strategic acquisitions, and returning capital to shareholders while maintaining a strong balance sheet. As Sean mentioned, given our strong cash flow and in light of our confidence in Latham's current and future prospects, our board of directors authorized a three-year $100 million share buyback program. Moving on to our outlook.
With peak pool building season now behind us, and based on our current visibility through year-end, we have reaffirmed and narrowed our 2026 guidance ranges for net sales and Adjusted EBITDA while continuing to expect growth across all product categories. Our net sales guidance range is now $605 million-$615 million, representing 11.7% year-over-year growth at the midpoint, and our Adjusted EBITDA range is now $112 million-$118 million, representing 15.2% year-over-year growth at the midpoint. Our narrowed guidance reflects our assessment of the fourth quarter impact of the ongoing conflict in the Middle East. We have increased the previously implemented freight surcharge to offset higher transportation costs. We have also announced price increases on pool liners and autocovers to mitigate commodity cost pressures.
With respect to the recently announced Canadian tariffs and counter-tariffs, we proactively positioned the balance of our 2026 seasonal inventory within the appropriate jurisdictions, and as a result, we currently expect an immaterial impact on our 2026 financial results. As we plan for 2027, we are leveraging our U.S. fiberglass manufacturing footprint to support markets previously served from Canada and are pursuing additional localization initiatives across other product categories. These actions are designed to mitigate tariff exposure while maintaining service levels and operational flexibility. With that, I will turn the call back to Sean for his closing remarks.
Thanks, Oliver. At Latham, we are creating spaces where lifelong memories are made, and this is an important and exciting time for our organization. We are experiencing solid growth in our established markets and are gaining meaningful traction in the important Sand States markets, which account for approximately two-thirds of the annual new pool starts in the U.S., and where Latham has been underrepresented historically. We are working on developing relationships with national home builders that, if successful, would open another large market to us, and we are doing all this while continuing to drive margin expansion. The longer I am at Latham, the more potential I see to expand our share across the markets we serve and throughout our product portfolio. We are grateful for the dedication and engagement of our employees and the continued loyalty and trust of our dealers and customers.
We remain committed to delivering the high-quality products that make us all proud. With that, operator, please open the call for questions.
At this time, we will begin the question-and-answer session. Once again, to ask a question, please press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one to join the question queue. Our first question today comes from Robert Schultz from Baird. Please go ahead with your question.
Hey, guys. Good afternoon.
Good afternoon.
I know it's early, but just curious, any initial thoughts on how you're thinking about 2027 pool starts? It sounds like there's confidence there to drive continued outperformance in the market, but just curious any feedback you've gotten early from dealers, home builders, in terms of what they're seeing.
Yeah, I'll start. I think from my perspective, Robert, there's no big macro news that's changing. Obviously, if anything, it might be getting a little bit worse. We are thinking, and based on what I've heard in the marketplace, that's from dealers, that's from our distributors, that's from builders, it's pretty much another flat year for 2027. We'll be planning for a flat year, and then obviously, we're not waiting for the market to rebound. We're certainly taking share. We continue to think we can do that. We're going to continue to grow through 2027, but we're not thinking we're going to get a lot of help from the market.
Got it. With the hiring of Todd, the new Chief Commercial Officer, where do you see the biggest opportunity to really sharpen the commercial execution? Is it getting more productivity from your existing dealers, adding distribution, or improving lead conversion? Just curious to your thoughts there.
Yeah, it is a little bit of everything. I think I will start with Todd brings in, obviously, comes with experience. He comes from Marvin, and Marvin has a good structure in which to go and attack the market. I think he has also got Cabinetworks , which is about really getting down and dirty, getting with builders, and trying to figure out how to win. So I think he brings in the right experience. Him and I share the same view of how a sales organization should run, and that really is getting some disciplines around sales process, getting disciplines around sales efficiency, sales effectiveness, and continuously driving improvements through your sales team will get more time with our customers, which should drive better performance.
Generally, my market development experience, that Todd is also experienced as well with Marvin, allows us to accelerate some of the work in the Sand States, I believe. Quite honestly, as we get better with our sales process, part of that is account management, and I do think we have great opportunity with our distribution partners to continuously lean in. When I say lean in, that is really from the top CEO to CEO, all the way back down to the branches, and getting a disproportionate amount of time of our distribution partners because we can drive more growth than any one of their suppliers. So, I just see us really getting gains in all of those areas.
Awesome. Thanks. I will leave it there.
Thank you.
Our next question comes from Ryan Merkel from William Blair. Please go ahead with your question.
Hey, everyone. Nice job this quarter. First question is on the topic of price cost. You mentioned freight surcharges and I think some price increases. So my question is, do you expect to be price cost neutral in 4Q and then also entering 2027?
Yeah, I think it's fair to say First of all, thanks, Ryan, for the question. Let me start with Q3 first, because I think it's very important to understand the sequential impact. In Q3, for the first time, you have now, coming from the Middle East conflict, you have both the transportation headwinds as well as the commodity headwinds. And what you saw in Q3, remember, in Q2, we had oil price spiking all the way up to $113. So, we saw elevated oil prices all the way through Q3. So, we probably, in Q3, had more headwinds than tailwinds. As we, throughout Q3, both increased the surcharge as well as implemented pricing for liners and autocovers.
But to answer your question, going forward, at current oil prices, at current commodity prices, and the current transportation rates, I think we are well-positioned to fully offset the headwinds as they present themselves today.
Got it. Okay, great. My other question, package pools and liners, it looked like the growth slowed a little bit this quarter. Anything to call out?
Nothing to call out. I think, from our perspective, obviously coming towards the end of the season, that's the first thing. We also had a weird comp last year, had significant growth in the same quarter last year with one of our competitors having some issues. That didn't repeat, so we don't see any lack of share, or any share loss, sorry. I would say, definitely as you talk through to our customers, think about a K-shaped economy, that pool segment certainly has been impacted by the macros more than our fiberglass pools. But in general, we're still taking share in all of our product lines.
All right. Sounds good. Thanks. Best of luck.
Thank you.
Our next question comes from Andrew Carter from Stifel. Please go ahead with your question.
Hey, yeah, thank you. Good evening. Just kind of backing into what you said on the fiberglass, taking out the M&A from in-ground pools, I think you said all the growth was primarily fiberglass, then making kind of an assumption in that 77% range for last year would imply like a high teens growth rate for the fiberglass pools business in the quarter. So, I wonder if you could just kind of break that down a little bit, how much pricing is in there? I just love single digits, but want to know. And how much Sand States are contributing to that, just to kind of give the magnitude of the performance of your fiberglass business relative to the market. Thank you.
Yeah, Andrew, let me take that one. So overall, year-over-year, we had a 12.5% growth in Q3. 8.4% of that was organic freedom, and that's entirely a fiberglass business, adding the remaining 4.1%. Out of the 8.4%, think of price being 200, maybe a little bit more basis points. That is pretty much equally across the product lines, leaving the majority of the organic growth really in that volume-driven basket. And that's primarily, as we said in the prepared remarks, between autocovers and fiberglass. The other categories, with the exception of liners, they're adding as well, but it's over proportionally in fiberglass and autocovers. And you're right with the calculation on fiberglass organic growth being in the upper teens here.
I want to say, while we are very, very pleased with the growth in the Sand States being 21% in the quarter, it is still a relatively small number. As we grow in the Sand States, ultimately that becomes bigger and bigger, be more of a driver of total company performance going forward.
Second question I wanted to ask about, you did say the Sand State, yeah, small, but you are getting some momentum on that. The first thing I want to ask is, as you have assessed that, number one, do you think you can go to market, continue to go to the market, or maybe you are changing it, I do not know, with kind of the same price point on shelves to kind of address some of the cost numbers there? As you are getting into it, do you feel like there is a lack of awareness, a lot of misperception out there, things like you need to do with marketing investment? Just one more, you did mention the home builder relationship. I wanted to ask kind of what is your kind of target price you are going after, kind of with the new homes?
Also, could that business, as you are working through it, you might not know this yet, be as profitable as the rest of your business, given the home builder demands? Thanks.
Okay, thank you. I think the first thing I will start with, fiberglass growth in the Sand States is a good sign for us. While it is small, relative to the total size of the business, it is growing. Obviously, we decided to talk about it, I guess, more transparently this quarter because we have hit some milestones. I think that is an important piece for that. In terms of the misconceptions, end of the day, whenever you are selling against the standard, and the standard being gunite, everyone is very familiar with gunite. Everybody understands how to install it. Everybody knows what it is. There is nothing to explain. People may have a view of it. It may even not be accurate, but they believe because they see it everywhere that their view is accurate. The misconceptions are not a problem. They are a fact.
Obviously, people who are learning new products, anytime you take on a new technology, a new product, you have to overcome the fact that there are barriers, and some of those barriers are real and some of them are perceived. Most of the barriers, as we have seen, are perceived. The value proposition of our fiberglass pools, easy install, low maintenance. We have got some data now from both Texas and Florida that says a homeowner who buys fiberglass has less regrets than those who do cement. We feel like that is just an awareness thing. We have got to continue to drive that message. The more dealers we have got at the kitchen table giving our message and giving the story of Latham and fiberglass, the more we are going to win.
We do not need to win everywhere yet, because obviously we are just breaking in, which is why we are doing segmentation, targeting, and positioning, and why we have got a neighborhood approach. What I can say is, where we are targeting, we are winning. I do not worry too much about the misconceptions because we can attack them. That comes through marketing, that comes through our sales team, that comes through our dealer network. I feel good about where we are at. In terms of the home builder, we are early on in the game. We have got a model now that would suggest we can participate with the home builders in an affordable way for them and in a profitable way for us. I am not going to get into price points of home.
What I can tell you is, in Florida, for example, we believe 50% of the homes that go in go with a pool. Those are homes anywhere from sort of move up all the way through to custom. We will be able to participate in all of those price points based on the models that we have and the future path that we have for that builder.
Thanks. Pass it on.
Thank you.
Our next question comes from Greg Palm from Craig-Hallum Capital Group. Please go ahead with your question.
Yeah, thanks. I am a little surprised that you are still only assuming one point of fiberglass penetration this year. I mean, you are seeing some really nice growth this year. Our work suggests you are not the only manufacturer that is growing volumes this year. So, would love to just get a little bit more color on kind of what you are seeing from a structural driver standpoint, and then how you are thinking about that, and then your own company-specific strategy that, I don't know, maybe it translates into additional increased penetration rates going forward.
Yeah, I mean, I think we are being conservative with 1%. I truly believe we are taking I know we are taking share. We are waiting to see it get confirmed pretty much with PK Data. It is good for us to say, but it is better if someone else tells us. I believe it is more like 1.5% to 2%. And again, a good year, solid year. We are doing what we need to do. It is white space for us in terms of where we are marketing. It is. We have a strong sales team. We have got a clear strategy on how to go to market. We are following the strategy, and we are delivering results.
I am not here to debate one or two, but I can tell you, and I keep thinking about this as we build into future years, we should be taking at least one point of share every year, and we would have achieved that this year.
Yeah. Okay. Just following up on a previous question, just to be clear, your confidence in the ability to pass through these inflationary costs, whether that is freight or material, some of the commodity material stuff you mentioned, so that you are continuing to expand margins in FY 2027.
Yeah, Greg, at current implemented surcharges and price increases, it is pretty much a full pass through. Now, obviously, the environment continues to be dynamic, right? But at least in the current zip code of oil prices, gasoline prices, diesel prices, and then commodity prices, we are covered.
I will just add, I mean, the homeowners that are buying a pool today are predominantly cash buyers. This is not a game changer for us. I mean, we do not like the fact that we have to put inflationary pricing through, but it is not going to change the equation for a homeowner.
Yep, understood. Okay, thanks for the call.
Thank you.
Our next question comes from Matthew Bouley from Barclays. Please go ahead with your question.
Hi, you have Elizabeth Langan on for Matt tonight. Thank you for taking the questions. I was wondering, you talked about how you were able to remove some of the manufacturing constraints that you had last quarter, and I was wondering if you could talk about how your inventory positions are tracking and how you're thinking about that through the end of the year.
Yeah, thanks for the question. You summarized the position that we incorrectly. Last quarter, we obviously reported on the manufacturing performance being constrained. We have resolved those constraints in Q3. We are now fully back to where the inventory needs to sit at the end of the third quarter, actually slightly ahead even. That represents our intention to get into the 2027 season with higher levels of inventory to make sure that we supply on customer demand within the appropriate lead times.
Okay, thank you. I guess kind of touching further on the demand point you made, I was wondering if you could talk about anything you can offer around the timeline for your Sand States strategy, how you are thinking about that moving into Arizona and further into Texas next year.
Yeah, we are all but manned up now in Florida. We are currently hiring and filling roles in Texas. We will have those completed by year-end. Then obviously getting people trained is key. Then start of next year, pretty much January, we will start moving into Arizona.
All right. Great. Thank you very much.
Thank you.
Thank you.
Our next question comes from Susan Maklari from Goldman Sachs. Please go ahead with your question.
Good afternoon. This is Charles Perron in for Susan. Thanks for taking my question.
Anytime.
Hi. Yes. First, I want to recognize the strength that you saw in order sales and traffic throughout the quarter. Given the macro uncertainty, I was wondering if you can help us parse out the trends in the quarter in the Sand States and through October you've seen on web traffic and on conversion in sales as rising financing rates have come through.
Yeah. From our perspective, web traffic is pretty good. It's obviously up over last year. We talked about 25% nationally. Where we're really focused, which is the Sand States, we're seeing tremendous traffic to our website, and lead generation is up, 89% and above. So in general, the desire for homeowners to want a pool hasn't really changed. I don't think this will change in time. In fact, I think it might grow. The reason I say that is, one, we're getting our brand more out there. People are starting to recognize who we are. Also, reality is, when you get to Florida, I mean, the temperature of Florida is so high, I mean, you need a pool. I mean, that's the reality. Everybody gets a pool.
Whether they get it when they buy the house in the first year or in the fourth year, they're going to end up with a pool. What's important for us is we have a path to purchase plan that allows a homeowner from when they dream about getting a pool to the time they actually install a pool, that we hold their hand all along the way. We're building that out as we speak, and we'll be rolling that out early next year. Very excited about that, because that allows us to hold a consumer's hand all the way through, which should get us better conversion of our leads. Then you add the fact that we're being very targeted with our approach, and while the macro is not great, it's not all that different from what it was a quarter ago or a quarter before that.
I think reality is, it is what it is. With the K-shaped economy, mainly cash buyers, I think we're not seeing a dip as of right now.
I think continuing there, addressing the rising financing rates that you ask about, we believe that today, the share of pools being financed is minimal. I think you do have the upside once financing normalizes and decreases a little bit of that part of the market coming back in. But I think there is limited downside, just because the pools being financed is just a minimum quantity right now.
Got it. No, that makes sense. That is very good color. Shifting to capital allocation, how do you see the M&A pipeline today now that your leverage is below 2x? How do you approach an opportune versus the $100 million share buyback program you have announced today?
Yeah. From our perspective, obviously, we are looking to ensure we want to put money back into our business first. We want to invest in ourselves, first on growth, second on capital, and M&A. We have got some targets we continue to look at. We have always said we are looking for targets that will open up new markets for us and/or adjacencies, and that are accretive. I think we have got a couple, but in the scheme of things, we do not have any one large target. It is more a handful of medium-sized targets. So, we are continuing to progress on those avenues. Obviously, that will continue, and when they fall in place, they fall in place. But we are definitely focused there, but it starts with our internal growth as the number one.
Got it. Thank you for the color, guys, and good luck with the quarter.
Thank you.
Thank you.
Our next question comes from Sean Callan from Bank of America. Please go ahead with your question.
Hi, guys. Thank you for taking my questions. On your last call, you talked about Florida being the main driver of the Sand States growth, and Texas might take a little longer. It seems like Texas was also really strong this quarter. So, can you talk about what drove the strength there and if you have accelerated the push into Texas faster than you previously expected?
Yeah, I think so appreciate the question. I think Texas is up. I know it is up. It is definitely a result of, in my mind, less about us driving leads, but more about us, the sales organization in place, working with our dealers and getting our dealers in the right place to be ready for the season. I think we have been very diligent around that. The dealers we have in our network are very, very strong dealers, and they are certainly fulfilling the demand that is coming their way.
So that is good. We definitely have had focus in Texas. It is not like we have not, we have sort of pulled back from Texas and just focused on Florida, but we did. Most of the stuff we are learning in Florida is transferring into Texas, and that sales organization is doing a lot of the same things as we were doing in Florida.
What I can say is, we are doing it with too few people, and now we are adding the resources in Texas to sort of accelerate that even faster.
Okay, great. You guys talked a lot about the fuel inflation and surcharges. Can you talk about what you are seeing in terms of resin inflation at this point, and do you expect to have to raise price on fiberglass pools to offset some of that in 2027?
Yeah, I think as part of the overall raw material basket, also resins are increasing. I think, as I said in the prior answer, in combination, the combination of the fuel surcharges as well as the price increases cover going forward, and that is true for all of our product categories.
Okay, great. Thank you.
Thank you.
With that, ladies and gentlemen, we will be concluding today's question and answer session. I would like to turn the floor back over to management for any closing remarks.
I just want to say thank you for joining the call. I am proud of what the team has done and what our organization has delivered this quarter. I am most proud of the fact that we are sticking to our strategies, we are driving results, we are taking share, which is essentially what it is all about. We have the best product on the marketplace. I believe we have the best team in the marketplace. We have great manufacturing capability, value engineering, and lean, and I think it is all starting to show up in a nice way. Thank you very much.
With that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your line.