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Leslie’s, Inc. Announces Second Quarter Fiscal 2021 Financial Results; Raises Full Year Outlook

May 5, 2021 4:05 PM

PHOENIX, May 05, 2021 (GLOBE NEWSWIRE) -- Leslie's, Inc. ("Leslie's" or the “Company”; NASDAQ: LESL), the largest and most trusted direct-to-consumer brand in the U.S. pool and spa care industry, today announced its financial results for the second quarter of Fiscal 2021.

Mike Egeck, Chief Executive Officer, commented on the results saying “We are very pleased with our second quarter performance which exceeded our expectations and produced record results for the quarter on both the top and bottom line. Broad-based industry tailwinds combined with our integrated and expanding physical and digital capabilities, as well as strong execution of our growth initiatives were the key drivers of this performance. In addition, the unique dynamics of severe weather in the south central U.S. and chlorine retail inflation were positive factors in the quarter.”

“As we look to the second half of our fiscal year, our growth initiatives are continuing to gain traction, our teams continue to execute at a high level and we are well prepared for what we believe will be a strong 2021 pool season. Our results to date combined with our expectations for the second half are driving another increase in our full year outlook,” added Mr. Egeck.

For the Thirteen Weeks Ended April 3, 2021 Highlights

For the Twenty-Six Weeks Ended April 3, 2021 Highlights

Balance Sheet and Cash Flow Highlights

Fiscal 2021 OutlookThe Company raised guidance for the full year Fiscal 2021, a 52-week year. Fiscal 2020 included a 53rd week, which added approximately $18.0 million in sales, $1.5 million in net income, and $3.0 million in Adjusted EBITDA.

Current OutlookPrior Outlook
Sales$1,250 to $1,270 million$1,175 to $1,195 million
GAAP net income$95 to $105 million$82 to $92 million
Adjusted net income$125 to $135 million$106 to $116 million
Adjusted EBITDA$225 to $235 million$202 to $208 million
Adjusted net income per share$0.65 to $0.70$0.55 to $0.60
Diluted share count193 million193 million

Conference Call DetailsA conference call to discuss its financial results for the second quarter of Fiscal 2021 is scheduled for today, May 5, 2021 at 4:30 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 855-327-6837 (international callers please dial 1-631-891-4304) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at https://ir.lesliespool.com/.

A recorded replay of the conference call will be available within approximately three hours of the conclusion of the call and can be accessed online at https://ir.lesliespool.com/ for 90 days.

About Leslie'sFounded in 1963, Leslie's is the largest direct-to-consumer brand in the U.S. pool and spa care industry, serving residential, professional, and commercial consumers. Leslie's markets its products through more than 940 physical locations and multiple digital platforms. The company employs more than 5,000 associates, pool and spa care experts, and certified technicians who are passionate about empowering consumers with the knowledge, products, and solutions necessary to confidently maintain and enjoy their pools and spas.

Use of Non-GAAP Financial MeasuresIn addition to reporting financial results in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses certain non-GAAP financial measures, including comparable sales growth and adjusted EBITDA, adjusted net income, and adjusted net income per share, to evaluate the effectiveness of its business strategies, to make budgeting decisions, and to compare its performance against that of other peer companies using similar measures. These non-GAAP financial measures should not be considered in isolation or as substitutes for the Company’s results as reported under GAAP. In addition, these non-GAAP financial measures are not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly titled measures of other companies and may not be appropriate measures for performance relative to other companies.

Comparable Sales GrowthWe measure comparable sales growth as the increase or decrease in sales recorded by the comparable base in any reporting period, compared to sales recorded by the comparable base in the prior reporting period. The comparable base includes sales through our locations and through our e-commerce websites and third-party marketplaces. Comparable sales is a key measure used by management and our board of directors to assess our financial performance.

Adjusted EBITDAAdjusted EBITDA is a key measure used by management and our board of directors to assess our financial performance. Adjusted EBITDA is also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.

Adjusted EBITDA is defined as earnings before interest (including amortization of debt costs), taxes, depreciation, amortization, loss (gain) on disposition of assets, management fees, equity-based compensation expense, mark-to-market on interest rate cap, and special items. Adjusted EBITDA is not a recognized measure of financial performance under GAAP but is used by some investors to determine a company’s ability to service or incur indebtedness. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance in isolation from, or as a substitute for, net income, cash flows from operations or cash flow data, all of which are prepared in accordance with GAAP. We have presented adjusted EBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations. Adjusted EBITDA is not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP. In the future, we may incur expenses or charges such as those added back to calculate adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these items.

Adjusted Net Income and Adjusted Net Income per ShareAdjusted net income and adjusted net income per share are additional key measures used by management and our board of directors to assess our financial performance. Adjusted net income and adjusted net income per share are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.

Adjusted net income is defined as net income adjusted to exclude loss (gain) on disposition of assets, management fees, equity-based compensation expense, mark-to-market on interest rate cap, and special items. Adjusted net income per share is defined as adjusted net income divided by the weighted average number of common shares outstanding.

Forward Looking StatementsThis press release contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. Our actual results could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this press release primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described above. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this press release. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject based on information available to us as of the date of this press release. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete.

The forward-looking statements made in this press release are based on events or circumstances as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

Contact

InvestorsFarah Soi/Caitlin ChurchillICR[email protected]

MediaMegan GaffneySHIFT Communications[email protected]

Condensed Consolidated Statements of Operations (amounts in thousands, except per share amounts)(unaudited)

Three Months Ended Six Months Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Sales$192,441 $126,377 $337,447 $249,355
Cost of merchandise and services sold 120,758 86,464 214,049 168,364
Gross profit 71,683 39,913 123,398 80,991
Selling, general and administrative expenses 70,374 56,048 147,863 115,769
Operating income (loss) 1,309 (16,135) (24,465) (34,778)
Other expense:
Interest expense 8,126 22,709 19,642 45,126
Loss on debt extinguishment 1,888 — 9,169 —
Other expense, net 1,057 187 1,057 324
Total other expense 11,071 22,896 29,868 45,450
Loss before taxes (9,762) (39,031) (54,333) (80,228)
Income tax benefit (3,310) (9,205) (17,624) (24,215)
Net loss$(6,452) $(29,826) $(36,709) $(56,013)
Net loss per share
Basic and diluted$(0.03) $(0.19) $(0.20) $(0.36)
Weighted average shares outstanding
Basic and diluted 186,810 156,500 181,900 156,500

Other Financial Data (1)

Three Months Ended Six Months Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Adjusted EBITDA$9,528 $(8,081) $9,285 $(17,085)
Adjusted net loss$(2,781) $(28,756) $(13,400) $(53,070)
Adjusted net loss per share$(0.01) $(0.18) $(0.07) $(0.34)

(1)See section titled “GAAP to Non-GAAP Reconciliation”.

Condensed Consolidated Balance Sheets (amounts in thousands, except share and per share amounts)

April 3, 2021 October 3, 2020 March 28, 2020
Assets(Unaudited) (Audited) (Unaudited)
Current assets
Cash and cash equivalents$90,328 $157,072 $11,934
Accounts and other receivables, net 41,733 31,481 30,924
Inventories 277,860 148,966 244,662
Prepaid expenses and other current assets 58,331 34,614 41,609
Total current assets 468,252 372,133 329,129
Property and equipment, net 63,632 66,391 72,169
Operating lease right-of-use assets 181,581 177,655 200,746
Goodwill and other intangibles, net 127,851 121,186 122,213
Deferred tax assets 15,293 6,583 —
Other assets 2,302 2,490 1,270
Total assets$858,911 $746,438 $725,527
Liabilities and stockholders’ deficit
Current liabilities
Accounts payable$181,524 $92,372 $143,197
Accrued expenses 82,338 101,167 67,091
Operating lease liabilities 55,395 54,459 59,721
Income taxes payable — 1,857 —
Current portion of long-term debt 8,100 8,341 8,341
Total current liabilities 327,357 258,196 278,350
Deferred tax liabilities — — 4,273
Operating lease liabilities, noncurrent 130,496 130,234 151,059
Long-term debt, net 789,339 1,179,550 1,234,003
Other long-term liabilities 2,729 5,457 5
Total liabilities 1,249,921 1,573,437 1,667,690
Commitments and contingencies
Stockholders’ deficit
Common stock, $ par value, shares authorized and 186,884,621 issued and outstanding as of April 3, 2021 and 156,500,000 shares authorized, issued and outstanding as of October 3, 2020 and March 28, 2020, respectively. 187 157 157
Additional paid in capital (deficit) 194,605 (278,063) (278,653)
Retained deficit (585,802) (549,093) (663,667)
Total stockholders’ deficit (391,010) (826,999) (942,163)
Total liabilities and stockholders’ deficit$858,911 $746,438 $725,527

Condensed Consolidated Statements of Cash Flows (amounts in thousands)(unaudited)

Six Months Ended
April 3, 2021 March 28, 2020
Operating Activities
Net loss$(36,709) $(56,013)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 12,858 14,088
Equity-based compensation 14,111 1,195
Amortization of deferred financing costs and debt discounts 1,134 1,685
Provision for doubtful accounts 64 149
Deferred income taxes (8,711) 3,033
(Gain) loss on disposition of assets (1,753) 470
Loss on debt extinguishment 9,169 —
Changes in operating assets and liabilities:
Accounts and other receivables (10,316) (11,046)
Inventories (127,814) (93,933)
Prepaid expenses and other current assets (23,473) (20,063)
Other assets 228 150
Accounts payable and accrued expenses 64,332 50,829
Income taxes payable (1,857) (6,713)
Operating lease assets and liabilities, net (2,728) 10,034
Net cash used in operating activities (111,465) (106,135)
Investing Activities
Purchases of property and equipment (9,490) (12,478)
Acquisitions, net of cash acquired (6,040) (6,188)
Proceeds from disposition of fixed assets 2,404 6
Net cash used in investing activities (13,126) (18,660)
Financing Activities
Borrowings on revolving commitment — 181,750
Payments on revolving commitment — (131,750)
Repayment of long term debt (392,085) (4,170)
Issuance of long term debt 907 —
Payment of deferred financing costs (9,562) —
Proceeds from issuance of common stock upon initial public offering, net 458,587 —
Net cash provided by financing activities 57,847 45,830
Net decrease in cash and cash equivalents (66,744) (78,965)
Cash and cash equivalents, beginning of period 157,072 90,899
Cash and cash equivalents, end of period$90,328 $11,934
Supplemental Disclosure of Cash Payments for:
Interest$27,081 $44,762
Income taxes 3,078 2,882

GAAP to Non-GAAP Reconciliation (amounts in thousands except per share amounts)(unaudited)

Three Months Ended Six Months Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Net loss$(6,452) $(29,826) $(36,709) $(56,013)
Interest expense 8,126 22,709 19,642 45,126
Income tax benefit (3,310) (9,205) (17,624) (24,215)
Depreciation and amortization expenses(a) 6,263 6,812 12,858 14,088
Loss (gain) on disposition of fixed assets(b) 5 27 (1,753) 470
Management fee(c) — 617 382 1,940
Equity-based compensation expense(d) 1,951 598 14,111 1,195
Mark-to-market on interest rate cap(e) — — — 22
Loss on debt extinguishment(f) 1,888 — 9,169 —
Costs related to equity offerings(g) 1,057 — 9,209 —
Other(h) — 187 — 302
Adjusted EBITDA$9,528 $(8,081) $9,285 $(17,085)

Three Months Ended Six Months Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Net loss$(6,452) $(29,826) $(36,709) $(56,013)
Loss (gain) on disposition of fixed assets(b) 5 27 (1,753) 470
Management fee(c) — 617 382 1,940
Equity-based compensation expense(d) 1,951 598 14,111 1,195
Mark-to-market on interest rate cap(e) — — — 22
Loss on debt extinguishment(f) 1,888 — 9,169 —
Costs related to equity offerings(g) 1,057 — 9,209 —
Other(h) — 187 — 302
Tax effects of these adjustments(i) (1,230) (359) (7,809) (986)
Adjusted net loss$(2,781) $(28,756) $(13,400) $(53,070)

Three Months Ended Six Months Ended
April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Adjusted net loss per share$(0.01) $(0.18) $(0.07) $(0.34)
Weighted average shares outstanding
Basic and diluted 186,810 156,500 181,900 156,500

(a)Includes depreciation related to our distribution centers and stores, which is included within the cost of merchandise and services sold line item in our condensed consolidated statements of operations.
(b)Consists of loss (gain) loss on disposition of assets associated with store closures or the sale of property and equipment.
(c)Represents amounts paid or accrued in connection with our management services agreement. The management services agreement terminated upon the completion of our initial public offering during the six months ended April 3, 2021.
(d)Represents non-cash charges related to equity-based compensation.
(e)Includes non-cash charges related to the change in fair value of our interest rate cap agreements, which expired in March 2021.
(f)Represents non-cash expense due to the write-off of deferred financing costs related to our Term Loan modification during the three months ended April 3, 2021 and the repayment of our Senior Unsecured Notes during the six months ended April 3, 2021.
(g)Includes one-time payments of contractual amounts incurred in connection with our IPO that was completed in November 2020 and costs incurred for a follow-on equity offering in February 2021.
(h)Other non-recurring, non-cash or discrete items as determined by management, such as transaction related costs, personnel-related costs, legal expenses, strategic project costs, and miscellaneous costs.
(i)Represents the tax effect of the total adjustments based on our actual statutory tax rate for Fiscal 2020 and our estimated statutory tax rate for Fiscal 2021.

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Source: Leslie’s Inc.

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