Leslie's(LESL) - 2024 Q2 - Quarterly Results

Leslie's, Inc. Second Quarter Fiscal 2024 Financial Results 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 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] - The company improved conversion through healthy inventory levels and competitive pricing[3] - Management is confident in its position for the upcoming pool season, which generates the majority of sales and all profit[3] Second Quarter Fiscal 2024 Financial Performance 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] - Gross margin decreased to 28.8% from 33.4% in the prior year period[6] - Selling, general and administrative (SG&A) expenses decreased by 11.9% to $84.9 million[6] Balance Sheet and Cash Flow Highlights 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] - Funded debt decreased to $882.7 million from $965.8 million year-over-year[11] - Net cash used in operating activities improved significantly to $115.1 million from $246.0 million in the prior year's second quarter[11] Fiscal 2024 Outlook 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 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 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 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 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 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 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] - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and other specific adjustments like equity-based compensation and strategic project costs[15] - 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] GAAP to Non-GAAP Reconciliation 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 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] - Key risks include sensitivity to weather, economic changes (inflation, interest rates), competition from mass merchants, and supply disruptions[20] - The company directs investors to the "Risk Factors" section of its Form 10-K for a more comprehensive list of uncertainties[21]