Financial Performance - Sales for the second quarter of fiscal 2025 were $177.1 million, a decrease of 6.1% compared to $188.7 million in the prior year period[4] - Gross profit was $43.9 million, down 19.1% from $54.3 million in the prior year, with a gross margin of 24.8% compared to 28.8% in the prior year[4] - The operating loss for the quarter was $48.4 million, compared to a loss of $30.5 million in the prior year period[4] - Net loss was $51.3 million, an increase from a loss of $34.6 million in the prior year[4] - Adjusted EBITDA was $(36.1) million, compared to $(19.3) million in the prior year[4] - Sales for the three months ended March 29, 2025, were $177.134 million, a decrease of 6.9% compared to $188.664 million for the same period in 2024[22] - Gross profit for the six months ended March 29, 2025, was $91.663 million, down 12.5% from $104.736 million in the prior year[22] - The net loss for the three months ended March 29, 2025, was $51.320 million, compared to a net loss of $34.553 million for the same period in 2024, representing a 48.5% increase in losses[22] - Adjusted EBITDA for the six months ended March 29, 2025, was $(65.379) million, worsening from $(43.698) million in the same period of 2024[24] - The company reported an adjusted net loss of $46.525 million for the three months ended March 29, 2025, compared to $31.998 million for the same period in 2024[24] - Basic earnings per share for the three months ended March 29, 2025, were $(0.28), compared to $(0.19) for the same period in 2024[22] Cash and Liquidity - Cash and cash equivalents totaled $17.3 million as of March 29, 2025, an increase of $8.9 million from $8.4 million as of March 30, 2024[4] - Cash and cash equivalents decreased to $17.252 million as of March 29, 2025, from $108.505 million at the end of September 2024[26] Inventory and Liabilities - Inventories decreased by $44.0 million or 11.6% to $335.1 million as of March 29, 2025, compared to $379.1 million as of March 30, 2024[4] - Total liabilities increased to $1.312 billion as of March 29, 2025, compared to $1.227 billion as of March 30, 2024[26] Guidance and Outlook - The company reiterated its full year fiscal 2025 sales outlook of $1,304 million to $1,370 million[5] - Adjusted EBITDA guidance for the full year is projected to be between $96 million and $116 million[5] Strategic Focus - The company is focused on strategic themes including customer centricity, convenience, and asset utilization to drive long-term value[3] Other Financial Information - The company incurred interest expenses of $15.897 million for the three months ended March 29, 2025, down from $18.153 million in the same period of 2024[22] - The weighted average shares outstanding for the three months ended March 29, 2025, were 185.256 million, slightly up from 184.625 million in the same period of 2024[22] - The company incurred costs related to senior executive transitions and severance due to corporate restructuring activities[33] - Non-cash changes in valuation allowance for deferred taxes were reported, which management does not consider indicative of ongoing operations[34] - The tax effect of total adjustments was based on combined U.S. federal and state statutory tax rates, impacting income tax benefit[34]

Core Viewpoint - Leslie's, Inc. reported a decrease in sales and significant net losses for the second quarter of fiscal 2025, while emphasizing a commitment to strategic transformation and operational improvements [2][4][5]. Financial Results - Sales for the second quarter were $177.1 million, down 6.1% from $188.7 million in the same period last year [5]. - Comparable sales decreased by 6.7%, with new stores contributing $0.9 million [5]. - Gross profit was $43.9 million, a decrease of 19.1% compared to $54.3 million in the prior year, resulting in a gross margin of 24.8% [5]. - Selling, general and administrative expenses increased to $92.3 million from $84.9 million [5]. - The operating loss was $48.4 million, compared to a loss of $30.5 million in the prior year [5]. - Net loss for the quarter was $51.3 million, compared to a loss of $34.6 million in the prior year [5]. - Adjusted EBITDA was $(36.1) million, worsening from $(19.3) million in the prior year [5]. Full Year Fiscal 2025 Outlook - The company reiterated its full-year fiscal 2025 outlook, projecting sales between $1,304 million and $1,370 million, and adjusted EBITDA between $96 million and $116 million [4]. - Expected adjusted net loss ranges from $(2) million to $13 million, with adjusted diluted loss per share between $(0.01) and $0.07 [4]. Cash and Inventory Management - Cash and cash equivalents increased to $17.3 million as of March 29, 2025, from $8.4 million a year earlier [5]. - Inventories decreased by 11.6% to $335.1 million compared to $379.1 million as of March 30, 2024 [5]. Strategic Focus - The CEO highlighted a focus on customer centricity, convenience, and asset utilization, with early indicators of progress being observed [2]. - The company is committed to maximizing cash flow, reducing leverage, and driving long-term value for stakeholders [2].

Core Insights - Leslie's, Inc. is set to release its fiscal 2025 second quarter financial results on May 8, 2025, after market close [1] - A conference call will be held on the same day at 5:30 p.m. Eastern time to discuss the financial results and the company's strategic transformation initiatives [2] Company Overview - Founded in 1963, Leslie's is the largest direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals [3] - The company offers a wide range of essential pool and spa care products through over 1,000 physical locations and a robust digital platform, catering to the aftermarket needs of its consumers [3] - Leslie's employs a dedicated team of associates and experts to empower consumers with the knowledge and solutions necessary for pool and spa maintenance [3]

Core Viewpoint - Leslie's, Inc. is undergoing a transformation with significant leadership changes aimed at enhancing long-term value creation and operational efficiency [1][3]. Leadership Changes - Tony Iskander has been appointed as Interim Chief Financial Officer (CFO) and Treasurer, effective March 14, 2025, bringing nearly 30 years of experience in corporate finance and operational leadership [2][5]. - Scott Bowman, the previous CFO since 2023, has left the company concurrently with Iskander's appointment, with no reported disagreements regarding company operations [3][4]. - Naomi Cramer has been promoted to Chief Retail Operations and Talent Officer, leveraging her 28 years of retail experience, including significant roles at Target [4][6]. Strategic Focus - The company emphasizes a commitment to debt reduction and balance sheet optimization as part of its strategic plan, with Iskander playing a critical role in these efforts [3][4]. - The leadership changes are intended to enhance retail execution fundamentals and drive long-term growth [4][6]. Company Background - Founded in 1963, Leslie's is the largest direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals [10]. - The company operates over 1,000 physical locations and a robust digital platform, providing a wide range of essential pool and spa care products [10].

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $175 million, an increase of 0.7% compared to Q1 2024, reaching the top end of guidance [10][49] - Adjusted EBITDA was a loss of $29 million, at the bottom end of guidance, compared to a loss of $24 million in the same period last year [11][52] - Gross profit was $48 million, down from $50 million year-over-year, with a gross margin rate decrease of 180 basis points to 27.2% [51] - Adjusted net loss was $41 million, compared to a loss of $37 million in the same period last year, with adjusted diluted loss per share at $0.22 [53] Business Line Data and Key Metrics Changes - Pro Pool sales increased by 9%, while residential pool sales declined by 1% and residential hot tub sales declined by 5% [11][49] - Core chemical sales were up approximately 4%, driven by improved in-stock positions and supply chain focus [50][51] - Equipment sales stabilized, down 4% compared to a decline of 18% a year ago [17] Market Data and Key Metrics Changes - Traffic improved to flat compared to a decline in mid-single digits a year ago [13] - Conversion rate increased by over 160 basis points year-over-year, attributed to improved customer service [14] Company Strategy and Development Direction - The company is focused on three strategic themes: customer centricity, convenience, and asset utilization [22][43] - Initiatives include establishing local fulfillment centers (LFCs) to improve inventory management and customer service [24][30] - The company aims to leverage its national omnichannel capabilities to drive same-store sales growth [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pool and spa industry's future potential and emphasized the importance of inventory reliability [9][80] - The company expects to see the benefits of its initiatives more prominently during the peak pool season in Q3 and Q4 [77][84] - The financial focus remains on executing strategic initiatives to support sustainable revenue growth and margin expansion [62] Other Important Information - The company paid down $27 million of debt in the quarter and ended with cash and cash equivalents of $12 million [54] - Inventory levels decreased by $63 million or 19% year-over-year, while in-stock positions improved significantly [16][55] Q&A Session Summary Question: Early signs of progress from transformation initiatives - Management noted improvements in asset utilization and inventory efficiency, particularly with local fulfillment centers [70][75] Question: Size of out-of-stock issues - Management emphasized the importance of inventory reliability and mentioned that LFCs would help maintain necessary stock levels [80][82] Question: Revenue outlook assumptions - Management provided context on Q2 being a smaller quarter and discussed the cautious approach to forecasting due to the timing of initiatives [88][90] Question: Impact of tariffs on chemicals - Management indicated minimal exposure to tariffs due to domestic sourcing [94] Question: Gross margin outlook - Management acknowledged the challenges in gross margins but expressed optimism for improvement in the second half of the year [101][102] Question: Breakdown of pro business growth - The growth in pro business was primarily driven by an increase in transactions, with a focus on improving inventory availability [120] Question: Transformational expenses impact - Management indicated that transformational expenses would dissipate in the back half of the year, setting a new normal for future EBITDA [123][125] Question: Wage growth considerations - Management noted moderate wage growth and the impact of minimum wage increases in certain states [131] Question: Store closure considerations - Management has not considered a store closure program but is monitoring underperforming locations [132]

Core Viewpoint - Leslie's, Inc. reported a quarterly loss of $0.22 per share, slightly worse than the Zacks Consensus Estimate of a loss of $0.21, and compared to a loss of $0.20 per share a year ago, indicating a negative earnings surprise of -4.76% [1] Financial Performance - The company posted revenues of $175.23 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.68%, and showing a year-over-year increase from $173.96 million [2] - Over the last four quarters, Leslie's has only surpassed consensus EPS estimates once [2] Stock Performance and Outlook - Leslie's shares have declined approximately 0.5% since the beginning of the year, while the S&P 500 has gained 3.1% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.17 on revenues of $190.42 million, and for the current fiscal year, it is $0.12 on revenues of $1.37 billion [7] Industry Context - The Consumer Products - Staples industry, to which Leslie's belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, indicating potential underperformance compared to higher-ranked industries [8]

Market Position and Operations - The company holds a market-leading share of approximately 15% in the $15 billion U.S. pool and spa care industry as of 2023[80]. - The company operates over 1,000 locations across 39 states, with a mix of owned and leased properties[89]. - More than 80% of the company's product assortment consists of non-discretionary items essential for pool and spa maintenance[81]. - The company has a significant digital sales presence, estimated to be over five times larger than its largest digital competitor[80]. - Number of locations open at end of period increased to 1,021 compared to 1,007 in the prior year[111]. Financial Performance - Sales increased to $175.2 million for the three months ended December 28, 2024, from $173.9 million in the prior year period, an increase of $1.3 million, or 0.7%[111]. - Gross profit decreased to $47.7 million for the three months ended December 28, 2024, from $50.4 million in the prior year period, a decrease of $2.7 million, or 5.3%[112]. - Gross margin decreased to 27.2% compared to 29.0% in the prior year period, representing a decrease of 180 basis points[112]. - Net loss increased to $44.6 million for the three months ended December 28, 2024, compared to $39.6 million in the prior year period, an increase of $5.0 million[117]. - Adjusted net loss increased to $41.3 million for the three months ended December 28, 2024, compared to $36.8 million in the prior year period, an increase of $4.5 million[118]. - Adjusted EBITDA decreased to $(29.3) million for the three months ended December 28, 2024, compared to $(24.4) million in the prior year period, a decrease of $4.9 million[119]. - Net cash used in operating activities was $105.1 million for the three months ended December 28, 2024, compared to $71.9 million in the prior year period, an increase of $33.2 million[133]. - Interest expense decreased to $15.8 million for the three months ended December 28, 2024, from $17.1 million in the prior year period, a decrease of $1.3 million[114]. - Income tax benefit decreased to $10.9 million for the three months ended December 28, 2024, compared to $14.0 million in the prior year period, a decrease of $3.1 million[115]. - Net cash used in investing activities decreased to $4.6 million for the three months ended December 28, 2024, down from $10.7 million in the prior year, a reduction of $6.1 million[134]. - Net cash provided by financing activities was $12.8 million for the three months ended December 28, 2024, compared to $35.5 million in the prior year, a decrease of $22.7 million[135]. - As of December 28, 2024, approximately $147.7 million remained available for future purchases under the share repurchase program, which had an aggregate authorization of $300 million[136]. Internal Controls and Risk Management - Management's evaluation concluded that the design and operation of disclosure controls and procedures were ineffective as of December 28, 2024, due to unresolved material weaknesses in internal control over financial reporting[147]. - The company is in the process of implementing a plan to address material weaknesses in internal control over financial reporting, with remediation activities anticipated to be completed during fiscal year 2025[150]. - The company is enhancing existing inventory controls and creating new controls regarding vendor rebates[150]. - There have been no material changes in primary risk exposures or management of market risks from those disclosed in the Annual Report for the fiscal year ended September 28, 2024[144]. - The company is committed to improving internal control processes and may take additional measures to address control deficiencies[150]. - There have been no material changes to contractual obligations and other commitments during the three months ended December 28, 2024[138]. - There have been no material changes to critical accounting estimates during the three months ended December 28, 2024[141]. Management and Strategy - The company measures comparable sales growth as the increase or decrease in sales from the same locations in different reporting periods[86]. - Adjusted EBITDA is a key performance measure used by management, reflecting earnings before interest, taxes, depreciation, and other non-recurring items[95]. - The company’s gross margin is influenced by merchandise costs, pricing, product mix, and distribution costs[91]. - The company’s SG&A expenses include costs related to retail operations, corporate functions, and marketing, which generally vary with sales[93]. - The company has a legacy of innovation, having introduced various services and products that enhance customer engagement and loyalty[82]. - The company’s financial performance is impacted by macroeconomic factors such as inflation and consumer purchasing patterns[101].

Sales Performance - Sales for the first quarter of fiscal 2025 were $175.2 million, an increase of 0.7% compared to $174.0 million in the prior year period[4]. - Comparable sales increased by 0.2%, marking the first comparable store sales gain in two years[4]. - Sales for the three months ended December 28, 2024, were $175,228,000, a slight increase from $173,960,000 for the same period in 2023, representing a growth of approximately 0.73%[26]. - The company expects second quarter sales to range from $179 million to $189 million, with a projected net loss of $(47) million to $(44) million[6]. - For the full year fiscal 2025, sales are projected to be between $1,304 million and $1,370 million, with an expected net loss ranging from $(10) million to $5 million[7]. Financial Losses - The net loss for the quarter was $45 million, reflecting typical operational deleverage during the pool offseason[4]. - The net loss for the three months ended December 28, 2024, was $44,564,000, compared to a net loss of $39,553,000 for the same period in 2023, indicating an increase in losses of approximately 12.7%[26]. - The company reported an adjusted net loss of $41,292,000 for the three months ended December 28, 2024, compared to an adjusted net loss of $36,763,000 for the same period in 2023, an increase of about 12.9%[28]. - Basic and diluted earnings per share for the three months ended December 28, 2024, were both $(0.24), compared to $(0.21) for the same period in 2023, indicating a decline of approximately 14.3%[26]. Profitability Metrics - Adjusted EBITDA was $(29) million, at the lower end of guidance, including transformational expenses[4]. - Adjusted EBITDA for the three months ended December 28, 2024, was $(29,319,000), worsening from $(24,420,000) in the same period of 2023, a decline of about 20.5%[28]. - Gross profit for the first quarter was $47.7 million, a decrease of 5.4% compared to $50.4 million in the prior year period, with a gross margin of 27.2%[7]. - Gross profit decreased to $47,717,000 for the three months ended December 28, 2024, down from $50,408,000 in the prior year, reflecting a decline of about 5.4%[26]. Cash Flow and Liquidity - Cash and cash equivalents decreased significantly to $11,615,000 as of December 28, 2024, down from $108,505,000 at the end of the previous quarter, a drop of approximately 89.3%[30]. - The company utilized $105,078,000 in net cash for operating activities during the three months ended December 28, 2024, compared to $71,874,000 for the same period in 2023, an increase of about 46.2%[32]. Inventory and Assets - Inventories decreased by $62.9 million or 18.8% to $271.1 million as of December 28, 2024, compared to $334.0 million as of December 30, 2023[7]. - Total assets decreased to $966,993,000 as of December 28, 2024, compared to $1,050,325,000 at the end of the previous quarter, a reduction of about 7.9%[30]. - Total liabilities were $1,187,031,000 as of December 28, 2024, down from $1,227,474,000 at the end of the previous quarter, reflecting a decrease of approximately 3.3%[30]. Capital Expenditures and Debt - Capital expenditures totaled $4.7 million in the first quarter, down from $10.7 million in the prior year[7]. - The effective rate on the term loan during the first quarter was 7.6%, down from 8.2% in the prior year[7].

Core Insights - Leslie's, Inc. reported financial results for the first quarter of fiscal 2025, highlighting a focus on customer-centric transformation and strategic initiatives aimed at improving performance [2][5][6]. Financial Performance - Sales reached $175 million, an increase of 0.7% compared to $174 million in the prior year [5][6]. - The company experienced a net loss of $44.6 million, compared to a loss of $39.6 million in the prior year [6][25]. - Adjusted EBITDA was $(29.3) million, reflecting transformational expenses and at the lower end of guidance [5][6]. - Diluted earnings per share were $(0.24), compared to $(0.21) in the prior year [6][25]. Operational Highlights - Comparable store sales increased by 0.2%, marking the first gain in two years [2][5]. - Gross profit was $47.7 million, a decrease of 5.4% from $50.4 million in the prior year, with a gross margin of 27.2% [6][25]. - Selling, general and administrative expenses were $87.4 million, slightly up from $86.9 million in the prior year [6][25]. Balance Sheet and Cash Flow - Cash and cash equivalents totaled $11.6 million, an increase of $3.2 million from $8.4 million as of December 30, 2023 [4][11]. - Inventories decreased by 18.8% to $271.1 million compared to $334 million in the prior year [11][29]. - Funded debt was $796.7 million, down from $825.7 million as of December 30, 2023 [11][29]. Future Outlook - For the second quarter of fiscal 2025, the company expects sales between $179 million and $189 million, with a net loss projected between $(47) million and $(44) million [7]. - The full year outlook anticipates sales of $1,304 million to $1,370 million, with an expected net loss ranging from $(10) million to $5 million [8].

Core Viewpoint - Leslie's, Inc. will release its financial results for the first quarter of fiscal 2025 on February 6, 2025, and will host a conference call to discuss these results [1] Group 1: Company Overview - Leslie's, Inc. is the largest and most trusted direct-to-consumer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals nationwide [3] - The company was founded in 1963 and operates over 1,000 physical locations along with a robust digital platform, providing an extensive assortment of essential pool and spa care products [3] - Leslie's aims to empower consumers with knowledge, products, and solutions necessary for maintaining and enjoying their pools and spas through a dedicated team of associates and service technicians [3] Group 2: Financial Communication - The financial results will be released after market close on February 6, 2025, followed by a conference call at 4:30 p.m. Eastern Time [1] - Investors and analysts can participate in the call by dialing specific numbers provided, and a live audio webcast will be available online [2] - A recorded replay of the conference call will be accessible online for 180 days after the event [2]