Leslie's(LESL) - 2024 Q4 - Annual Results

Executive Summary & Company Overview Headline Financials (Q4 & FY2024) Leslie's reported Q4 sales of $397.9 million and FY2024 sales of $1,330.1 million, with net losses of $9.9 million and $23.4 million respectively Headline Financials (Q4 & FY2024) | Metric | Q4 Fiscal 2024 (Millions) | FY Fiscal 2024 (Millions) | | :---------------------- | :------------------------ | :------------------------ | | Sales | $397.9 | $1,330.1 | | Net Loss | $(9.9) | $(23.4) | | Adjusted EBITDA | $43.0 | $108.7 | | Diluted EPS | $(0.05) | $(0.13) | | Adjusted Diluted EPS | $0.02 | $(0.01) | CEO Commentary CEO noted Q4 results met top-line expectations, with strong Pro segment performance despite market softness - Fourth quarter results were in line with revised top-line expectations, showing strong performance in the Pro segment[4] - Profitability was affected by deleverage from sales decline and a one-time contract item, but SG&A expenses remained disciplined[4] - The company is developing and executing a customer-centric strategy to drive long-term profitable growth, with a strategic roadmap to be detailed in coming quarters[4] About Leslie's Leslie's is the largest direct-to-consumer U.S. pool and spa care brand, operating 1,000+ physical locations and a digital platform - Leslie's is the largest and most trusted direct-to-consumer brand in the U.S. pool and spa care industry, founded in 1963[13] - The company offers an extensive and largely exclusive assortment of essential pool and spa care products to residential and professional consumers[13] - Leslie's operates an integrated ecosystem comprising over 1,000 physical locations and a robust digital platform[13] Financial Highlights Fourth Quarter Fiscal 2024 Highlights Q4 fiscal 2024 saw an 8.0% sales decrease to $397.9 million, a 10.6% gross profit decline to $143.2 million, and a net loss of $(9.9) million Fourth Quarter Fiscal 2024 Financial Highlights | Metric | Q4 FY2024 (Millions) | Q4 FY2023 (Millions) | Change (%) | | :---------------------- | :------------------- | :------------------- | :--------- | | Sales | $397.9 | $432.4 | -8.0% | | Comparable Sales | -8.3% | N/A | N/A | | Gross Profit | $143.2 | $160.2 | -10.6% | | Gross Margin | 36.0% | 37.0% | -1.0 pp | | SG&A | $116.8 | $121.6 | -4.0% | | Operating Income | $26.4 | $38.5 | -31.4% | | Net (Loss) Income | $(9.9) | $16.5 | -159.9% | | Adjusted Net Income | $4.4 | $25.7 | -82.9% | | Diluted EPS | $(0.05) | $0.09 | -155.6% | | Adjusted Diluted EPS | $0.02 | $0.14 | -85.7% | | Adjusted EBITDA | $43.0 | $59.5 | -27.7% | - The decrease in gross margin rate was driven by deleverage on occupancy and distribution costs, as well as a one-time item of approximately $5 million related to rebates and warranties on a revised contract[5] - Adjusted EBITDA decreased primarily due to lower sales volume, with decreases in product rate and occupancy deleverage largely offset by lower SG&A and reduced inventory adjustments[6] Fiscal Year 2024 Highlights Fiscal year 2024 sales decreased 8.3% to $1,330.1 million, with gross profit down 13.0% to $476.8 million, resulting in a net loss of $(23.4) million Fiscal Year 2024 Financial Highlights | Metric | FY2024 (Millions) | FY2023 (Millions) | Change (%) | | :---------------------- | :---------------- | :---------------- | :--------- | | Sales | $1,330.1 | $1,451.2 | -8.3% | | Comparable Sales | -8.8% | N/A | N/A | | Gross Profit | $476.8 | $548.2 | -13.0% | | Gross Margin | 35.8% | 37.8% | -2.0 pp | | SG&A | $419.7 | $446.0 | -5.9% | | Operating Income | $57.1 | $102.2 | -44.1% | | Net (Loss) Income | $(23.4) | $27.2 | -186.0% | | Adjusted Net (Loss) Income | $(1.1) | $51.1 | -102.1% | | Diluted EPS | $(0.13) | $0.15 | -186.7% | | Adjusted Diluted EPS | $(0.01) | $0.28 | -103.6% | | Adjusted EBITDA | $108.7 | $168.1 | -35.3% | - The decrease in gross margin was primarily driven by negative impacts of 121 basis points from a decreased product rate, 94 basis points from deleverage on occupancy costs, and 50 basis points from expensing previously capitalized distribution costs due to significant inventory reductions[7] Balance Sheet and Cash Flow Highlights Cash and cash equivalents increased by $53.1 million to $108.5 million, inventories decreased by 24.9% to $234.3 million, and net cash from operating activities rose significantly to $107.5 million in fiscal 2024 Balance Sheet and Cash Flow Highlights | Metric | As of Sep 28, 2024 (Millions) | As of Sep 30, 2023 (Millions) | Change (Millions) | Change (%) | | :----------------------------------- | :---------------------------- | :---------------------------- | :---------------- | :--------- | | Cash and cash equivalents | $108.5 | $55.4 | $53.1 | 95.8% | | Inventories | $234.3 | $311.8 | $(77.5) | -24.9% | | Funded debt | $783.7 | $789.8 | $(6.1) | -0.8% | | Net cash provided by operating activities (FY) | $107.5 | $6.5 | $101.0 | 1553.8% | | Capital expenditures (FY) | $47.2 | $38.6 | $8.6 | 22.3% | - There were no outstanding borrowings on the revolving credit facility as of September 28, 2024, and September 30, 2023[8] Financial Statements Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations detail Leslie's financial performance for the three months and full fiscal year ended September 28, 2024, compared to the prior year Condensed Consolidated Statements of Operations (Amounts in thousands, except per share amounts) | Metric | Three Months Ended Sep 28, 2024 | Three Months Ended Sep 30, 2023 | Year Ended Sep 28, 2024 | Year Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Sales | $397,859 | $432,370 | $1,330,121 | $1,451,209 | | Cost of merchandise and services sold| 254,645 | 272,209 | 853,331 | 902,986 | | Gross profit | 143,214 | 160,161 | 476,790 | 548,223 | | Selling, general and administrative expenses | 116,795 | 121,617 | 419,673 | 446,044 | | Operating income | 26,419 | 38,544 | 57,117 | 102,179 | | Interest expense | 17,015 | 17,156 | 70,395 | 65,438 | | Income (loss) before taxes | 9,404 | 21,388 | (13,278) | 36,741 | | Income tax expense | 19,328 | 4,907 | 10,101 | 9,499 | | Net (loss) income | $(9,924) | $16,481 | $(23,379) | $27,242 | | Diluted Earnings per share | $(0