[Leslie's, Inc. Second Quarter Fiscal 2024 Financial Results](index=1&type=section&id=Leslie's,%20Inc.%20Second%20Quarter%20Fiscal%202024%20Financial%20Results) Presents Leslie's, Inc.'s financial performance for the second quarter of fiscal year 2024, including key results, balance sheet highlights, and future outlook [Executive Summary & Business Overview](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Overview) CEO Mike Egeck noted Q2 financial performance met profit expectations despite sales impacts from adverse weather and a post-pandemic shift in consumer spending, with the company focused on execution for the seasonally important second half - Sales were impacted by poor weather and a shift in consumer spending away from high-ticket items post-pandemic[3](index=3&type=chunk) - The company improved conversion through healthy inventory levels and competitive pricing[3](index=3&type=chunk) - Management is confident in its position for the upcoming pool season, which generates the majority of sales and all profit[3](index=3&type=chunk) [Second Quarter Fiscal 2024 Financial Performance](index=1&type=section&id=Second%20Quarter%20Fiscal%202024%20Financial%20Performance) For the three months ended March 30, 2024, Leslie's reported an 11.4% sales decrease to $188.7 million, a wider net loss of $34.6 million, and negative Adjusted EBITDA of $(19.3) million, alongside gross margin contraction Q2 FY2024 Key Financial Metrics (vs. Q2 FY2023) | Metric | Q2 FY2024 | Q2 FY2023 | | :--- | :--- | :--- | | Sales | $188.7 million | $212.8 million | | Net Loss | $34.6 million | $31.5 million | | Adjusted EBITDA | $(19.3) million | $(8.4) million | | Diluted EPS | $(0.19) | $(0.17) | | Adjusted Diluted EPS | $(0.17) | $(0.14) | - Comparable sales decreased by **12.1%** year-over-year[6](index=6&type=chunk) - Gross margin decreased to **28.8%** from 33.4% in the prior year period[6](index=6&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **11.9%** to **$84.9 million**[6](index=6&type=chunk) [Balance Sheet and Cash Flow Highlights](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow%20Highlights) As of March 30, 2024, the company significantly reduced inventory by 23% to $379.1 million and lowered total funded debt to $882.7 million, while net cash used in operating activities improved to $115.1 million - Inventories were reduced by **$113.2 million (23%)** to **$379.1 million** compared to the prior year[11](index=11&type=chunk) - Funded debt decreased to **$882.7 million** from **$965.8 million** year-over-year[11](index=11&type=chunk) - Net cash used in operating activities improved significantly to **$115.1 million** from **$246.0 million** in the prior year's second quarter[11](index=11&type=chunk) [Fiscal 2024 Outlook](index=2&type=section&id=Fiscal%202024%20Outlook) The company reaffirmed its full-year fiscal 2024 guidance, projecting sales between $1,410 million and $1,470 million, Adjusted EBITDA from $170 million to $190 million, and Adjusted diluted EPS between $0.25 and $0.33 Full Year Fiscal 2024 Outlook | Metric | Guidance Range | | :--- | :--- | | Sales | $1,410 to $1,470 million | | Gross profit | $550 to $573 million | | Net income | $32 to $46 million | | Adjusted net income | $46 to $60 million | | Adjusted EBITDA | $170 to $190 million | | Adjusted diluted EPS | $0.25 to $0.33 | [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) This section provides the detailed, unaudited condensed consolidated financial statements for the periods ended March 30, 2024, including Statements of Operations, Balance Sheets, and Statements of Cash Flows [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Presents the company's revenues, expenses, and net loss for the three and six months ended March 30, 2024 Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended | Six Months Ended | | :--- | :--- | :--- | | | **Mar 30, 2024** | **Apr 1, 2023** | **Mar 30, 2024** | **Apr 1, 2023** | | **Sales** | **$188,664** | **$212,844** | **$362,624** | **$407,948** | | Gross profit | $54,328 | $71,170 | $104,736 | $136,466 | | Operating loss | $(30,528) | $(25,187) | $(66,998) | $(52,172) | | **Net loss** | **$(34,553)** | **$(31,527)** | **$(74,106)** | **$(61,786)** | | Diluted EPS | $(0.19) | $(0.17) | $(0.40) | $(0.34) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's assets, liabilities, and stockholders' deficit as of March 30, 2024, and comparative periods Condensed Consolidated Balance Sheet Highlights (in thousands) | | Mar 30, 2024 | Sep 30, 2023 | Apr 1, 2023 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $8,436 | $55,420 | $8,701 | | Inventories | $379,090 | $311,837 | $492,328 | | Total current assets | $453,632 | $420,286 | $591,718 | | Total assets | $1,095,248 | $1,034,435 | $1,163,230 | | Total current liabilities | $262,101 | $225,830 | $292,391 | | Long-term debt, net | $770,157 | $773,276 | $776,542 | | Total liabilities | $1,326,220 | $1,195,797 | $1,418,195 | | Total stockholders' deficit | $(230,972) | $(161,362) | $(254,965) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended March 30, 2024 Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended, in thousands) | | Mar 30, 2024 | Apr 1, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(115,082) | $(245,990) | | Net cash used in investing activities | $(23,964) | $(23,591) | | Net cash provided by financing activities | $92,062 | $165,989 | | Net decrease in cash and cash equivalents | $(46,984) | $(103,592) | | Cash and cash equivalents, end of period | $8,436 | $8,701 | [Non-GAAP Financial Measures & Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) The company utilizes non-GAAP measures like Adjusted EBITDA, Adjusted net income, and Adjusted earnings per share to evaluate business performance, with this section defining these metrics and providing detailed reconciliations from GAAP net loss [Definitions of Non-GAAP Measures](index=3&type=section&id=Definitions%20of%20Non-GAAP%20Measures) Defines the non-GAAP financial measures used by the company, including comparable sales growth, Adjusted EBITDA, and Adjusted net income - The company uses non-GAAP measures like comparable sales growth, Adjusted EBITDA, and Adjusted net income to evaluate business strategies and performance[13](index=13&type=chunk) - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and other specific adjustments like equity-based compensation and strategic project costs[15](index=15&type=chunk) - Adjusted Net Income excludes items such as equity-based compensation, strategic project costs, and other non-recurring items from the GAAP net income figure[18](index=18&type=chunk) [GAAP to Non-GAAP Reconciliation](index=9&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliation) Provides detailed reconciliations of GAAP net loss to Adjusted EBITDA and Adjusted net loss for the three and six-month periods Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | | Three Months Ended | Six Months Ended | | :--- | :--- | :--- | | | **Mar 30, 2024** | **Apr 1, 2023** | **Mar 30, 2024** | **Apr 1, 2023** | | **Net loss** | **$(34,553)** | **$(31,527)** | **$(74,106)** | **$(61,786)** | | Interest expense | $18,153 | $17,247 | $35,224 | $30,607 | | Income tax benefit | $(14,128) | $(10,907) | $(28,116) | $(20,993) | | Depreciation and amortization | $7,843 | $8,922 | $16,173 | $17,425 | | Other adjustments | $3,407 | $7,825 | $7,127 | $14,392 | | **Adjusted EBITDA** | **$(19,278)** | **$(8,440)** | **$(43,698)** | **$(20,355)** | Reconciliation of Net Loss to Adjusted Net Loss (in thousands) | | Three Months Ended | Six Months Ended | | :--- | :--- | :--- | | | **Mar 30, 2024** | **Apr 1, 2023** | **Mar 30, 2024** | **Apr 1, 2023** | | **Net loss** | **$(34,553)** | **$(31,527)** | **$(74,106)** | **$(61,786)** | | Adjustments | $3,407 | $7,825 | $7,127 | $14,392 | | Tax effects of adjustments | $(852) | $(1,957) | $(1,782) | $(3,598) | | **Adjusted net loss** | **$(31,998)** | **$(25,659)** | **$(68,761)** | **$(50,992)** | [Forward-Looking Statements & Risk Factors](index=4&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) This section contains standard "safe harbor" language, cautioning investors that the press release includes forward-looking statements subject to substantial risks and uncertainties, listing factors like economic conditions, weather, competition, and supply chain disruptions that could impact actual results - The report contains forward-looking statements regarding future results, strategy, and growth opportunities, which are not guarantees of future performance[19](index=19&type=chunk) - Key risks include sensitivity to weather, economic changes (inflation, interest rates), competition from mass merchants, and supply disruptions[20](index=20&type=chunk) - The company directs investors to the "Risk Factors" section of its Form 10-K for a more comprehensive list of uncertainties[21](index=21&type=chunk)

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides Leslie's, Inc.'s unaudited condensed consolidated financial information, including statements and detailed notes for the quarter ended December 30, 2023 [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Leslie's, Inc.'s unaudited condensed consolidated financial statements for the quarter ended December 30, 2023, including balance sheets, statements of operations, stockholders' deficit, and cash flows, along with detailed notes on business operations, accounting policies, goodwill, intangibles, receivables, inventories, debt, income taxes, commitments, related party transactions, share repurchases, equity-based compensation, and earnings per share [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of Leslie's, Inc.'s financial position, detailing assets, liabilities, and stockholders' deficit as of specific dates | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Total Assets | $998,520 | $1,034,435 | $1,076,782 | | Total Liabilities | $1,197,168 | $1,195,797 | $1,302,417 | | Total Stockholders' Deficit | $(198,648) | $(161,362) | $(225,635) | - Total assets decreased by **$35.9 million** from September 30, 2023, and by **$78.3 million** from December 31, 2022[15](index=15&type=chunk) - Total liabilities remained relatively stable QoQ but decreased by **$105.2 million** YoY[15](index=15&type=chunk) - Stockholders' deficit increased by **$37.3 million** QoQ, indicating a larger negative equity position[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement outlines Leslie's, Inc.'s financial performance, including sales, expenses, and net loss for the three months ended December 30, 2023 | Metric | Three Months Ended Dec 30, 2023 (Thousands) | Three Months Ended Dec 31, 2022 (Thousands) | Change (YoY) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------- | | Sales | $173,960 | $195,104 | $(21,144) | | Cost of merchandise and services sold | $123,552 | $129,808 | $(6,256) | | Gross profit | $50,408 | $65,296 | $(14,888) | | Selling, general and administrative expenses | $86,878 | $92,281 | $(5,403) | | Operating loss | $(36,470) | $(26,985) | $(9,485) | | Interest expense | $17,071 | $13,360 | $3,711 | | Loss before taxes | $(53,541) | $(40,345) | $(13,196) | | Income tax benefit | $(13,988) | $(10,086) | $(3,902) | | Net loss | $(39,553) | $(30,259) | $(9,294) | | Basic EPS | $(0.21) | $(0.16) | $(0.05) | | Diluted EPS | $(0.21) | $(0.16) | $(0.05) | - Sales decreased by **10.8%** year-over-year, leading to a **22.8%** decrease in gross profit[17](index=17&type=chunk) - Operating loss widened by **35.1%** and net loss increased by **30.7%** compared to the prior year period, primarily due to lower sales and higher interest expense[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Deficit) This statement details changes in Leslie's, Inc.'s equity, specifically the stockholders' deficit, over the reporting period | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Common Stock | $184 | $184 | $184 | | Additional Paid in Capital | $101,547 | $99,280 | $92,508 | | Retained Deficit | $(300,379) | $(260,826) | $(318,327) | | Total Stockholders' Deficit | $(198,648) | $(161,362) | $(225,635) | - The total stockholders' deficit increased from **$(161.4) million** at September 30, 2023, to **$(198.6) million** at December 30, 2023, primarily due to the net loss of **$(39.6) million** for the quarter, partially offset by equity-based compensation[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes Leslie's, Inc.'s cash inflows and outflows from operating, investing, and financing activities | Activity | Three Months Ended Dec 30, 2023 (Thousands) | Three Months Ended Dec 31, 2022 (Thousands) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net cash used in operating activities | $(71,874) | $(184,409) | | Net cash used in investing activities | $(10,699) | $(13,749) | | Net cash provided by financing activities | $35,547 | $88,556 | | Net decrease in cash and cash equivalents | $(47,026) | $(109,602) | | Cash and cash equivalents, end of period | $8,394 | $2,691 | - Net cash used in operating activities significantly decreased by **$112.5 million** year-over-year, primarily due to reductions in product inventories[22](index=22&type=chunk) - Net cash provided by financing activities decreased by **$53.1 million**, mainly due to lower borrowings on the Revolving Credit Facility[22](index=22&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [Note 1—Business and Operations](index=9&type=section&id=Note%201%E2%80%94Business%20and%20Operations) This note describes Leslie's, Inc.'s core business, market position, and product offerings in the pool and spa care industry - Leslie's, Inc. is a leading direct-to-consumer pool and spa care brand, operating over 1,000 company-operated locations in 39 states and e-commerce websites[24](index=24&type=chunk) - Products include maintenance items like chemicals, equipment, parts, and cleaning accessories, as well as safety, recreational, and fitness-related products[24](index=24&type=chunk) [Note 2—Summary of Significant Accounting Policies](index=9&type=section&id=Note%202%E2%80%94Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles, estimates, and seasonal factors influencing Leslie's, Inc.'s financial reporting - The interim condensed consolidated financial statements are prepared in accordance with GAAP, including normal and recurring adjustments[25](index=25&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) - The company operates on a fiscal calendar ending on the Saturday closest to September 30th, with each quarter typically having 13 weeks[25](index=25&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) - Significant estimates include inventory reserves, lease assumptions, vendor rebates, and income taxes[25](index=25&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) - The business is highly seasonal, with sales and earnings highest during the third and fourth fiscal quarters (April through September)[30](index=30&type=chunk) - A new accounting pronouncement (ASU No. 2023-09) on income tax disclosures is effective for annual periods beginning after December 15, 2024, and the company is evaluating its impact[32](index=32&type=chunk) [Note 3 —Goodwill and Other Intangibles, Net](index=10&type=section&id=Note%203%20%E2%80%94Goodwill%20and%20Other%20Intangibles%2C%20Net) This note details Leslie's, Inc.'s goodwill and other intangible assets, including changes and amortization over the period | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Goodwill | $180,698 | $180,698 | $176,163 | | Net Other Intangible Assets | $37,211 | $38,157 | $41,956 | | Total Goodwill and Other Intangibles, Net | $217,909 | $218,855 | $218,119 | - Goodwill remained stable at **$180.7 million** from September 30, 2023, with no acquisitions in the current quarter[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - Net other intangible assets decreased slightly due to amortization[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - Amortization expense was **$0.9 million** for both the current and prior year three-month periods, with no impairment recorded[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 4—Accounts and Other Receivables, Net](index=11&type=section&id=Note%204%E2%80%94Accounts%20and%20Other%20Receivables%2C%20Net) This note provides a breakdown of Leslie's, Inc.'s accounts and other receivables, net, and their changes | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Vendor and other rebates receivable | $6,532 | $6,818 | $27,521 | | Customer receivables | $13,400 | $18,334 | $15,969 | | Other receivables | $4,229 | $5,900 | $4,512 | | Allowance for doubtful accounts | $(1,673) | $(1,656) | $(1,627) | | Total | $22,488 | $29,396 | $46,375 | - Total accounts and other receivables, net, decreased by **$6.9 million** from September 30, 2023, and by **$23.9 million** from December 31, 2022, primarily driven by a significant reduction in vendor and other rebates receivable[37](index=37&type=chunk) [Note 5—Inventories](index=11&type=section&id=Note%205%E2%80%94Inventories) This note details Leslie's, Inc.'s inventory composition and changes, including raw materials and finished goods | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Raw materials | $4,633 | $3,076 | $7,987 | | Finished goods | $329,398 | $308,761 | $421,530 | | Total | $334,031 | $311,837 | $429,517 | - Total inventories increased by **$22.2 million** from September 30, 2023, but decreased by **$95.5 million** from December 31, 2022, mainly due to a reduction in finished goods inventory[38](index=38&type=chunk) [Note 6—Prepaid Expenses and Other Current Assets](index=12&type=section&id=Note%206%E2%80%94Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note outlines Leslie's, Inc.'s prepaid expenses and other current assets, highlighting key components and period-over-period changes | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Prepaid insurance | $4,702 | $1,236 | $6,812 | | Prepaid occupancy costs | $1,976 | $1,967 | $2,004 | | Prepaid sales tax | $1,843 | $4,060 | $1,753 | | Prepaid inventory | — | — | $771 | | Prepaid other | $6,592 | $6,239 | $4,382 | | Other current assets | $12,018 | $10,131 | $14,199 | | Total | $27,131 | $23,633 | $29,921 | - Prepaid expenses and other current assets increased by **$3.5 million** from September 30, 2023, primarily due to an increase in prepaid insurance and other current assets[39](index=39&type=chunk) [Note 7—Accrued Expenses and Other Current Liabilities](index=12&type=section&id=Note%207%E2%80%94Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note details Leslie's, Inc.'s accrued expenses and other current liabilities, including changes and key components | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Accrued payroll and employee benefits | $14,493 | $18,558 | $13,154 | | Customer deposits | $4,491 | $7,356 | $7,505 | | Inventory related accruals | $7,821 | $13,843 | $11,254 | | Loyalty and deferred revenue | $7,264 | $6,785 | $6,157 | | Self-insurance reserves | $10,024 | $9,138 | $8,417 | | Other accrued liabilities | $21,115 | $25,191 | $13,900 | | Total | $69,854 | $90,598 | $65,494 | - Accrued expenses and other current liabilities decreased by **$20.7 million** from September 30, 2023, mainly due to decreases in accrued payroll, customer deposits, and inventory-related accruals[40](index=40&type=chunk) [Note 8—Long-Term Debt, Net](index=12&type=section&id=Note%208%E2%80%94Long-Term%20Debt%2C%20Net) This note provides information on Leslie's, Inc.'s long-term debt, including term loans, revolving credit facilities, and interest rates | Metric | Dec 30, 2023 (Thousands) | Sep 30, 2023 (Thousands) | Dec 31, 2022 (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Term Loan | $787,725 | $789,750 | $795,825 | | Revolving Credit Facility | $38,000 | — | $91,000 | | Total long-term debt | $825,725 | $789,750 | $886,825 | | Total long-term debt, net | $771,718 | $773,276 | $778,133 | - Total long-term debt increased by **$35.9 million** from September 30, 2023, primarily due to **$38.0 million** outstanding on the Revolving Credit Facility, which had no outstanding balance in the prior quarter[41](index=41&type=chunk)[46](index=46&type=chunk) - The Term Loan carries an effective interest rate of **8.21%** as of December 30, 2023[41](index=41&type=chunk)[46](index=46&type=chunk) - The Term Loan and Revolving Credit Facility interest rates are now Term SOFR-based following amendments in June and March 2023, respectively[43](index=43&type=chunk)[45](index=45&type=chunk) - The Term Loan matures on March 9, 2028, and the Revolving Credit Facility matures on August 13, 2025[43](index=43&type=chunk)[45](index=45&type=chunk) [Note 9—Income Taxes](index=13&type=section&id=Note%209%E2%80%94Income%20Taxes) This note discusses Leslie's, Inc.'s effective income tax rate and factors influencing its fluctuations - The effective income tax rate was **26.1%** for the three months ended December 30, 2023, an increase from **25.0%** in the prior year period[49](index=49&type=chunk) - This difference is primarily due to state taxes and can fluctuate based on valuation allowances, tax law changes, and other discrete items[49](index=49&type=chunk) [Note 10—Commitments & Contingencies](index=14&type=section&id=Note%2010%E2%80%94Commitments%20%26%20Contingencies) This note outlines Leslie's, Inc.'s legal proceedings, self-insurance reserves, and other potential financial obligations - A class action complaint for federal securities law violations was filed on September 8, 2023, alleging materially false and misleading statements[50](index=50&type=chunk) - The company disputes the allegations and intends to defend itself vigorously, but cannot reasonably estimate the potential range of loss at this early stage[50](index=50&type=chunk) - The company has self-insurance retention features of up to **$0.4 million** per event for workers' compensation, general liability, and employee group medical plans, secured by **$10.6 million** in standby letters of credit[52](index=52&type=chunk) [Note 11—Related Party Transactions](index=14&type=section&id=Note%2011%E2%80%94Related%20Party%20Transactions) This note discloses Leslie's, Inc.'s transactions with related parties, specifically a share repurchase from significant beneficial owners - On December 14, 2021, the Company repurchased **7.5 million** shares of common stock from Bubbles Investor Aggregator, L.P. and Explorer Investment Pte. Ltd. (Selling Stockholders), both greater than **5%** beneficial owners at the time, for **$20.25** per share[53](index=53&type=chunk) [Note 12—Share Repurchase Program](index=14&type=section&id=Note%2012%E2%80%94Share%20Repurchase%20Program) This note details Leslie's, Inc.'s board-authorized share repurchase program, including available funds and activity - The board authorized a **$300 million** share repurchase program on December 3, 2021, expiring December 31, 2024[54](index=54&type=chunk)[56](index=56&type=chunk) - As of December 30, 2023, approximately **$147.7 million** remained available for future purchases[54](index=54&type=chunk)[56](index=56&type=chunk) | Metric | Three Months Ended Dec 30, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Total number of shares repurchased | — | 27 | | Total amount paid for shares repurchased | $0 | $419 | [Note 13—Equity-Based Compensation](index=15&type=section&id=Note%2013%E2%80%94Equity-Based%20Compensation) This note describes Leslie's, Inc.'s equity-based compensation plans, outstanding awards, and associated expenses - The 2020 Omnibus Incentive Plan allows for grants of stock options, restricted stock units (RSUs), and performance stock units (PSUs)[57](index=57&type=chunk) - As of December 30, 2023, approximately **6.4 million** shares were available for future grants[57](index=57&type=chunk) - The aggregate unamortized value of outstanding equity-based compensation awards was **$24.6 million**, expected to be recognized over approximately **2.7 years**[58](index=58&type=chunk)[63](index=63&type=chunk) - Equity-based compensation expense was **$2.7 million** for the three months ended December 30, 2023, down from **$3.0 million** in the prior year[58](index=58&type=chunk)[63](index=63&type=chunk) | Metric | Stock Options (Thousands) | RSUs/PSUs (Thousands) | | :-------------------------------- | :------------------------ | :-------------------- | | Outstanding, Beginning (Dec 30, 2023) | 3,308 | 2,084 | | Granted (Dec 30, 2023) | — | 1,638 | | Vested (Dec 30, 2023) | — | (221) | | Forfeited/Expired (Dec 30, 2023) | (230) | (133) | | Balance, Ending (Dec 30, 2023) | 3,078 | 3,368 | | Unamortized value (Dec 30, 2023) | $3,115 | $21,505 | | Weighted average period expense expected to be recognized (years) | 0.9 | 2.9 | [Note 14—Earnings Per Share](index=16&type=section&id=Note%2014%E2%80%94Earnings%20Per%20Share) This note presents Leslie's, Inc.'s basic and diluted earnings per share calculations, including factors affecting dilution | Metric | Three Months Ended Dec 30, 2023 | Three Months Ended Dec 31, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net loss (Thousands) | $(39,553) | $(30,259) | | Weighted average shares outstanding - basic (Thousands) | 184,383 | 183,513 | | Weighted average shares outstanding - diluted (Thousands) | 184,383 | 183,513 | | Basic earnings per share | $(0.21) | $(0.16) | | Diluted earnings per share | $(0.21) | $(0.16) | - Diluted EPS was **$(0.21)** for the three months ended December 30, 2023, compared to **$(0.16)** in the prior year period[64](index=64&type=chunk) - Potentially dilutive shares (Stock Options and RSUs) totaling **4.9 million** were excluded from the diluted EPS calculation as their effect would have been antidilutive due to the net loss[64](index=64&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed discussion and analysis of Leslie's, Inc.'s financial condition and results of operations for the three months ended December 30, 2023. It covers the company's business overview, key performance measures, factors impacting comparability, a detailed breakdown of financial results, seasonality, liquidity, and capital resources [Our Company](index=17&type=section&id=Our%20Company) This section provides an overview of Leslie's, Inc.'s market position, product offerings, and strategic innovations in the pool and spa care industry - Leslie's is the largest direct-to-consumer brand in the U.S. pool and spa care industry, with over 1,000 branded locations and a robust digital platform[68](index=68&type=chunk) - It holds approximately **15%** market share of residential aftermarket product spend as of 2022[68](index=68&type=chunk) - Over **80%** of the product assortment consists of non-discretionary maintenance items, including chemicals, equipment, and cleaning accessories, along with essential services like installation and repair[69](index=69&type=chunk) - The company offers complimentary in-store water testing via its proprietary AccuBlue® system[69](index=69&type=chunk) - The company emphasizes a legacy of leadership and innovation, having pioneered in-store water testing, equipment repair services, loyalty programs, and an expansive platform of owned and exclusive brands[70](index=70&type=chunk) [Key Factors and Measures We Use to Evaluate Our Business](index=17&type=section&id=Key%20Factors%20and%20Measures%20We%20Use%20to%20Evaluate%20Our%20Business) This section outlines the key GAAP and non-GAAP financial metrics and operational measures Leslie's, Inc. uses to assess its business performance - Key GAAP measures include sales, gross profit and gross margin, selling, general and administrative expenses (SG&A), and operating income (loss)[72](index=72&type=chunk) - Key non-GAAP measures and other operating measures include comparable sales, comparable sales growth, Adjusted EBITDA, Adjusted net income (loss), and Adjusted earnings per share[72](index=72&type=chunk)[74](index=74&type=chunk) - Comparable sales growth is a key metric for assessing financial performance[72](index=72&type=chunk)[74](index=74&type=chunk) - Adjusted EBITDA and Adjusted net income (loss) are used by management and the board to evaluate business strategies, budgeting, and industry comparisons, excluding non-recurring or non-cash items[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Factors Affecting the Comparability of our Results of Operations](index=20&type=section&id=Factors%20Affecting%20the%20Comparability%20of%20our%20Results%20of%20Operations) This section discusses macroeconomic, geopolitical, and consumer behavior factors that influence the comparability of Leslie's, Inc.'s financial results - Financial performance is impacted by macroeconomic and geopolitical developments, including supply chain disruptions, labor market constraints, inflation, rising interest rates, and general economic slowdowns[89](index=89&type=chunk) - Adverse trends increase consumer price sensitivity[89](index=89&type=chunk) - Consumer purchasing patterns, such as stockpiling of granular chlorine compounds due to unstable supply, can lead to unpredictable changes in demand and revenue fluctuations[90](index=90&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of Leslie's, Inc.'s sales, gross profit, expenses, and net loss for the reporting period | Metric | Three Months Ended Dec 30, 2023 (Thousands) | Three Months Ended Dec 31, 2022 (Thousands) | Change (YoY) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :------------- | | Sales | $173,960 | $195,104 | $(21,144) | | Comparable sales growth | (11.7)% | 4.0% | (15.7) pp | | Gross profit | $50,408 | $65,296 | $(14,888) | | Gross margin | 29.0% | 33.5% | (450) bps | | Selling, general and administrative expenses | $86,878 | $92,281 | $(5,403) | | Operating loss | $(36,470) | $(26,985) | $(9,485) | | Interest expense | $17,071 | $13,360 | $3,711 | | Net loss | $(39,553) | $(30,259) | $(9,294) | | Diluted EPS | $(0.21) | $(0.16) | $(0.05) | | Adjusted EBITDA | $(24,420) | $(11,915) | $(12,505) | | Adjusted net loss | $(36,763) | $(25,333) | $(11,430) | | Adjusted diluted EPS | $(0.20) | $(0.14) | $(0.06) | - Sales decreased by **10.8%** to **$174.0 million**, with comparable sales declining by **11.7%**[93](index=93&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - Gross profit decreased by **22.8%**, and gross margin fell by **450 basis points** to **29.0%**, primarily due to timing of rebate recognition, expensing of capitalized distribution expenses, and deleverage on distribution and occupancy costs[93](index=93&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - SG&A decreased by **5.9%** to **$86.9 million**, driven by lower merchant fees, headcount, executive transition costs, and M&A costs[99](index=99&type=chunk)[100](index=100&type=chunk) - Interest expense increased by **$3.7 million** due to higher interest rates[99](index=99&type=chunk)[100](index=100&type=chunk) - Net loss increased to **$(39.6) million**, and Adjusted EBITDA decreased to **$(24.4) million**, primarily due to the decline in gross profit[103](index=103&type=chunk)[105](index=105&type=chunk) [Seasonality and Quarterly Fluctuations](index=25&type=section&id=Seasonality%20and%20Quarterly%20Fluctuations) This section explains the seasonal nature of Leslie's, Inc.'s business and its impact on sales, earnings, and cash flow - The business is highly seasonal, with peak sales and earnings occurring in the third and fourth fiscal quarters (April through September) due to swimming pool use[107](index=107&type=chunk) - The first and second fiscal quarters typically have substantially lower sales[107](index=107&type=chunk) - Investments in operating expenses, working capital, and capital expenditures are made throughout the year, negatively impacting earnings and cash flow in the first and second quarters[107](index=107&type=chunk)[108](index=108&type=chunk) - Inventory and accounts payable build up during the first and second quarters in anticipation of the peak selling season[107](index=107&type=chunk)[108](index=108&type=chunk) - Weather is a principal external factor, with hot weather increasing purchases and unseasonably cool or rainy weather reducing consumption and sales[109](index=109&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) This section details Leslie's, Inc.'s sources of liquidity, cash position, and borrowing capacity under its credit facilities - Primary liquidity sources are net cash from operating activities and borrowing availability under the Revolving Credit Facility[112](index=112&type=chunk)[113](index=113&type=chunk) - Cash and cash equivalents were **$8.4 million** as of December 30, 2023, down from **$55.4 million** at September 30, 2023[112](index=112&type=chunk)[113](index=113&type=chunk) - As of December 30, 2023, **$38.0 million** was outstanding on the Revolving Credit Facility, with **$201.4 million** of available borrowing capacity after considering standby letters of credit[113](index=113&type=chunk)[117](index=117&type=chunk) - No events of default occurred[113](index=113&type=chunk)[117](index=117&type=chunk) - Net cash used in operating activities decreased by **$112.5 million** year-over-year to **$71.9 million**, primarily due to reductions in product inventories[118](index=118&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk) - Net cash provided by financing activities decreased by **$53.1 million** due to lower Revolving Credit Facility borrowings[118](index=118&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk) [Share Repurchase Program](index=27&type=section&id=Share%20Repurchase%20Program) This section provides an update on Leslie's, Inc.'s share repurchase program, including remaining authorization - As of December 30, 2023, approximately **$147.7 million** remained available for future purchases under the **$300 million** share repurchase program, which expires on December 31, 2024[123](index=123&type=chunk) [Contractual Obligations and Other Commitments](index=27&type=section&id=Contractual%20Obligations%20and%20Other%20Commitments) This section confirms no material changes to Leslie's, Inc.'s contractual obligations since the prior annual report - There have been no material changes to contractual obligations and other commitments during the three months ended December 30, 2023, from those disclosed in the Annual Report on Form 10-K for fiscal year ended September 30, 2023[125](index=125&type=chunk) [Critical Accounting Estimates](index=27&type=section&id=Critical%20Accounting%20Estimates) This section confirms no material changes to Leslie's, Inc.'s critical accounting estimates since the prior annual report - No material changes to critical accounting estimates were made during the three months ended December 30, 2023, from those disclosed in the Annual Report on Form 10-K for fiscal year ended September 30, 2023[128](index=128&type=chunk) [Recent Accounting Pronouncements](index=27&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to disclosures regarding recent accounting pronouncements relevant to Leslie's, Inc.'s financial statements - Information regarding recent accounting pronouncements is provided in Note 2—Summary of Significant Accounting Policies[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in the company's primary risk exposures or management of market risks, including interest rate risk and the impact of inflation and deflation, from those disclosed in its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 - No material changes in primary risk exposures or management of market risks, including interest rate risk and the impact of inflation and deflation, from those disclosed in the Annual Report on Form 10-K for fiscal year ended September 30, 2023[131](index=131&type=chunk)[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of Leslie's, Inc.'s disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls and procedures were ineffective due to un-remediated material weaknesses in internal control over financial reporting, with remediation efforts ongoing and expected to be completed in fiscal year 2024 - Management concluded that disclosure controls and procedures were ineffective as of December 30, 2023, due to un-remediated material weaknesses in internal control over financial reporting, as disclosed in the prior Annual Report on Form 10-K[133](index=133&type=chunk) - Remediation efforts for the material weaknesses are ongoing and are anticipated to be completed during fiscal year 2024[134](index=134&type=chunk)[135](index=135&type=chunk) - No other material changes in internal control over financial reporting occurred during the quarter[134](index=134&type=chunk)[135](index=135&type=chunk) [PART II - OTHER INFORMATION](index=29&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information beyond financial statements, covering legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section states that Leslie's, Inc. is subject to routine litigation and claims, for which reserves are established when probable and estimable, but these are not expected to have a material adverse effect. There have been no material changes to legal proceedings from those described in the Annual Report on Form 10-K, except as noted in the financial statements - The company is subject to routine litigation and claims, with established reserves for probable and estimable losses, which are not significant[138](index=138&type=chunk) - The ultimate liability is not expected to have a material adverse effect[138](index=138&type=chunk) - No material changes to legal proceedings from the Annual Report on Form 10-K, except for the class action complaint mentioned in Note 10 of the condensed consolidated financial statements[139](index=139&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section indicates that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended September 30, 2023 - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended September 30, 2023[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities and no issuer purchases of equity securities during the reporting period - No issuer purchases of equity securities or sales of unregistered securities occurred during the reporting period[141](index=141&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[142](index=142&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to Leslie's, Inc. - Mine safety disclosures are not applicable[143](index=143&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) This section reports that there was no information required to be disclosed on Form 8-K, no changes to procedures for recommending director nominees, and no director or Section 16 officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No information required on Form 8-K, no changes to director nominee procedures, and no trading plan adoptions or terminations by directors or Section 16 officers during the quarter[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the 2024 Form of Performance Unit Award Agreement, certifications of the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Exhibits include the 2024 Form of Performance Unit Award Agreement, certifications of the Principal Executive Officer and Principal Financial Officer (pursuant to Rules 13a-14(a) and 15d-14(a) and 18 U.S.C. Section 1350), and various Inline XBRL documents[148](index=148&type=chunk) [Signatures](index=31&type=section&id=Signatures) This section contains the signature of Leslie's, Inc.'s Chief Financial Officer, Scott Bowman, certifying the filing of the report on February 1, 2024 - The report was signed by Scott Bowman, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) on behalf of Leslie's, Inc. on February 1, 2024[152](index=152&type=chunk)[154](index=154&type=chunk)

Leslie's, Inc. (NASDAQ:LESL) Q1 2024 Earnings Conference Call February 1, 2024 4:30 PM ET Company Participants Caitlin Churchill - Investor Relations Mike Egeck - Chief Executive Officer Scott Bowman - Chief Financial Officer Conference Call Participants Ryan Merkel - William Blair Jonathan Matuszewski - Jefferies Simeon Gutman - Morgan Stanley Steven Forbes - Guggenheim Securities Garik Shmois - Loop Capital Markets Andrew Carter - Stifel Justin Kleber - Baird Operator Good afternoon and welcome to the Fir ...

First Quarter 2024 Earnings February 1, 2024 This presentation includes market data and certain other statistical information and estimates that are based on reports and other publications from industry analysts, market research firms, and other independent sources, as well as management's own good faith estimates and analyses. We believe these third-party reports to be reputable, but have not independently verified the underlying data sources, methodologies, or assumptions. Information that is based on est ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2023 OR LESLIE'S, INC. (Exact Name of Registrant as Specified in its Charter) | Delaware | 20-8397425 | | --- | --- | | (State or other jurisdiction of | (I.R.S. Employer | | incorporation or organization) | Identification No.) | | 2005 East Indian School Road | | | Phoenix, AZ | 85016 | | ( ...

Third Quarter 2023 Earnings August 2, 2023 INDUSTRY INFORMATION NON-GAAP FINANCIAL MEASURES FORWARD-LOOKING STATEMENTS Our actual results or outcomes could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others: our ability to execute on our growth strategies; supply disruptions; our ability to maintain favorable relationships with suppliers and manufacturers; competition from mass merchants and specialty retailers; impacts on our busines ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements for the quarterly period ended July 1, 2023, along with management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the quarterly period ended July 1, 2023, including balance sheets, statements of operations, stockholders' deficit, cash flows, and accompanying notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of July 1, 2023, total assets increased slightly to $1.137 billion, driven by higher inventories offset by a sharp decrease in cash, while total liabilities marginally increased and stockholders' deficit improved Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 1, 2023 (Unaudited) | October 1, 2022 (Audited) | July 2, 2022 (Unaudited) | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $19,430 | $112,293 | $193,130 | | Inventories | $436,557 | $361,686 | $361,391 | | Total current assets | $536,704 | $542,378 | $632,329 | | Total assets | $1,137,425 | $1,109,631 | $1,116,991 | | **Liabilities & Stockholders' Deficit** | | | | | Total current liabilities | $315,297 | $347,956 | $432,895 | | Long-term debt, net | $774,884 | $779,726 | $781,322 | | Total liabilities | $1,317,235 | $1,307,582 | $1,375,760 | | Total stockholders' deficit | $(179,810) | $(197,951) | $(258,769) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q3 fiscal 2023, sales decreased 9.3% year-over-year to $610.9 million, and net income fell 41.0% to $72.5 million, with diluted EPS at $0.39 Consolidated Statements of Operations Summary (in thousands, except per share amounts) | Metric | Three Months Ended July 1, 2023 | Three Months Ended July 2, 2022 | Nine Months Ended July 1, 2023 | Nine Months Ended July 2, 2022 | | :--- | :--- | :--- | :--- | :--- | | Sales | $610,891 | $673,633 | $1,018,839 | $1,086,529 | | Gross Profit | $251,596 | $303,607 | $388,062 | $456,552 | | Operating Income | $115,807 | $172,138 | $63,635 | $155,680 | | Net Income | $72,547 | $122,986 | $10,761 | $101,095 | | Diluted EPS | $0.39 | $0.67 | $0.06 | $0.54 | [Condensed Consolidated Statements of Stockholders' Deficit](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) The total stockholders' deficit improved to $(179.8) million as of July 1, 2023, primarily due to net income and equity-based compensation - The total stockholders' deficit decreased to **$(179.8) million** as of July 1, 2023, from **$(198.0) million** at the beginning of the fiscal year (October 1, 2022) This improvement was primarily due to the recognition of **$10.8 million** in net income and **$9.2 million** in equity-based compensation during the nine-month period[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended July 1, 2023, net cash used in operating activities was $(74.8) million, a significant negative swing from the prior year, primarily due to lower net income and increased inventories Summary of Cash Flows (in thousands) | Activity | Nine Months Ended July 1, 2023 | Nine Months Ended July 2, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(74,813) | $72,658 | | Net cash used in investing activities | $(40,898) | $(66,183) | | Net cash provided by (used in) financing activities | $22,848 | $(156,843) | | **Net decrease in cash and cash equivalents** | **$(92,863)** | **$(150,368)** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, including the acquisition of five businesses for $15.5 million, the transition of debt facilities to Term SOFR, an increased effective tax rate, and remaining share repurchase availability - During the first nine months of fiscal 2023, the company acquired five businesses for an aggregate purchase price of **$15.5 million**, net of cash acquired, adding 12 new locations[32](index=32&type=chunk) - In March 2023, the Revolving Credit Facility was increased by **$50.0 million** to an aggregate of **$250.0 million** and transitioned from a LIBOR-based rate to a Term SOFR-based rate The Term Loan also transitioned to a Term SOFR benchmark in June 2023[47](index=47&type=chunk)[49](index=49&type=chunk) - The effective income tax rate for the nine months ended July 1, 2023, was **29.9%**, compared to **24.9%** for the prior-year period The increase was primarily due to state taxes and tax expenses related to equity-based compensation[53](index=53&type=chunk) - As of July 1, 2023, approximately **$147.7 million** remained available for future purchases under the company's **$300 million** share repurchase program, which expires in December 2024[60](index=60&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 9.3% Q3 sales decrease to traffic declines and an 11.8% drop in comparable sales, leading to gross margin contraction and significant declines in net income and Adjusted EBITDA Key Financial and Operational Data | Metric | Three Months Ended July 1, 2023 | Three Months Ended July 2, 2022 | Nine Months Ended July 1, 2023 | Nine Months Ended July 2, 2022 | | :--- | :--- | :--- | :--- | :--- | | Sales | $610,891K | $673,633K | $1,018,839K | $1,086,529K | | Comparable sales growth | (11.8)% | 7.4% | (10.9)% | 10.7% | | Gross Margin | 41.2% | 45.1% | 38.1% | 42.0% | | Net Income | $72,547K | $122,986K | $10,761K | $101,095K | | Adjusted EBITDA | $129,038K | $182,942K | $108,683K | $192,734K | - Q3 sales decreased **9.3%** YoY to **$610.9 million**, with comparable sales down **11.8%**, primarily driven by traffic declines For the nine-month period, sales decreased **6.2%** with comparable sales down **10.9%**[101](index=101&type=chunk)[102](index=102&type=chunk) - Gross margin for both the three and nine-month periods decreased by **390 basis points** year-over-year This was primarily driven by product margin rate declines from increased product costs that could not be passed to consumers, higher distribution expenses, and occupancy deleverage[103](index=103&type=chunk) - The company's business is highly seasonal, with sales and earnings peaking in the third and fourth fiscal quarters (April-September) Unseasonable weather can significantly impact sales[114](index=114&type=chunk)[116](index=116&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risk exposures since its last Annual Report, noting the transition of its debt facilities from LIBOR to Term SOFR-based rates - There have been no material changes in the company's primary risk exposures, including interest rate risk and inflation, from those disclosed in the fiscal 2022 Annual Report on Form 10-K[140](index=140&type=chunk)[141](index=141&type=chunk) - Due to the discontinuation of LIBOR, the company has transitioned the interest rate benchmarks for its Revolving Credit Facility and Term Loan to Term SOFR-based rates[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were ineffective as of July 1, 2023, due to an un-remediated material weakness in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **ineffective** as of July 1, 2023[142](index=142&type=chunk) - The ineffectiveness stems from a material weakness in internal control over financial reporting, disclosed in the fiscal 2022 Form 10-K, which was not yet remediated[142](index=142&type=chunk) - The company is in the process of remediating the material weakness and anticipates that the remediation will be completed during fiscal year 2023[144](index=144&type=chunk) [PART II - OTHER INFORMATION](index=30&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, other information, and a list of exhibits [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigations and claims, which management does not expect to have a material adverse effect on its financial position or results - The company is subject to various legal proceedings from the ordinary course of business, which are not expected to have a material adverse effect on its financials[147](index=147&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since its fiscal 2022 Annual Report on Form 10-K, except as previously disclosed in its Q1 2023 Form 10-Q - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended October 1, 2022, except as disclosed in the Q1 2023 Form 10-Q[148](index=148&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no issuer purchases of its equity securities and no sales of unregistered securities during the reporting period - There were no issuer purchases of equity securities or sales of unregistered securities in the reported quarter[149](index=149&type=chunk) [Item 3. Defaults Upon Senior Securities](index=30&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports that there have been no defaults upon its senior securities - No defaults upon senior securities occurred[150](index=150&type=chunk) [Item 4. Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[151](index=151&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) On August 1, 2023, the company's board adopted Amended and Restated Bylaws to enhance procedural mechanics for stockholder proposals and director nominations, aligning with universal proxy rules - On August 1, 2023, the company's board of directors approved and adopted Amended and Restated Bylaws[152](index=152&type=chunk) - Key amendments include enhancing procedural and disclosure requirements for stockholder proposals and director nominations, aligning with SEC's universal proxy rules, and updating procedures for stockholder meetings and board conduct[152](index=152&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including Amended and Restated Bylaws, an amendment to the Term Loan Credit Agreement, and various officer certifications - Key exhibits filed with this report include the Amended and Restated Bylaws (Exhibit 3.1), Amendment No 1 to the Term Loan Credit Agreement (Exhibit 10.1), and officer certifications (Exhibits 31.1, 31.2, 32.1, 32.2)[155](index=155&type=chunk)

Leslie's, Inc. (NASDAQ:LESL) Q2 2023 Earnings Conference Call May 3, 2023 4:30 PM ET Company Participants Caitlin Churchill - IR Mike Egeck - CEO Steve Weddell - CFO Conference Call Participants Steven Forbes - Guggenheim Partners Hannah Pittock - Morgan Stanley Garik Shmois - Loop Capital Markets Jonathan Matuszewski - Jefferies Kate McShane - Goldman Sachs Peter Keith - Piper Sandler Andrew Carter - Stifel David Bellinger - MKM ROTH Operator Greetings, and welcome to the Leslie's, Inc. Q2 2023 Earnings Co ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number: 001-39667 LESLIE'S, INC. (Exact Name of Registrant as Specified in its Charter) Emerging growth company ☐ If an emerging growth comp ...

Disclaimer Included in this presentation and the accompanying oral presentation are certain non-GAAP financial measures designed to supplement the Company's financial information presented in accordance with U.S. generally accepted accounting principles ("GAAP"). These non-GAAP measures should not be considered in isolation or as substitutes for the Company's results as reported under GAAP. In addition, these nonGAAP financial measures are not calculated in the same manner by all companies, and accordingly, ...