Latham Group, Inc. (SWIM) Cash Flow Statement

The conversion multiples are far above one in profitable quarters, which suggests that reported net income is conservative relative to cash generation, largely because non-cash D&A of roughly $12-14M per quarter and working capital releases are inflating operating cash flow. The negative 2026Q1 and 2025Q1 operating cash flows of -$47.7M and -$46.9M alongside net losses of $8.5M and $6.0M indicate that seasonal working capital build can overwhelm earnings, so quarterly conversion ratios should be read on a trailing basis rather than individually. Investors should monitor whether the strong conversion in recent quarters persists once working capital normalizes.

The two most recent quarters show FCF of $48.0M and $42.7M, a level that would be meaningful if sustained, yet the swing from -$58.2M in 2026Q1 illustrates how concentrated annual free cash generation is in the second half of the year. Capex has remained modest at roughly 2.8% to 3.6% of revenue in profitable quarters, so the FCF trajectory is driven primarily by working capital rather than capital intensity. Investors should treat the recent margin recovery as encouraging but not yet evidence of a durable baseline.

The consistent pattern of large first-quarter working capital consumption followed by reversals in later quarters suggests seasonal inventory build and receivables timing rather than structural deterioration, though the reported figures alone cannot confirm the drivers. The magnitude of the swing relative to operating cash flow indicates that working capital, not earnings, dictates short-term liquidity. Investors should monitor whether year-end collections fully reverse the first-half build in future periods.

The absence of dividends and small buyback activity suggests management is prioritizing balance sheet flexibility over capital returns, consistent with a company whose cash generation is still seasonally uneven. The $64.0M acquisition outflow in 2024Q3 represents the largest deployment in the period and would require return analysis that the supplied data does not fully establish. Investors should watch whether cash accumulated in strong quarters is redeployed into acquisitions or retained as a buffer against first-half outflows.