Leslie's(US:LESL)2022-02-04 02:02Financial Data and Key Metrics Changes - Sales for Q1 2022 reached a record $185 million, representing a 27.5% increase compared to Q1 2021 [7][22] - Gross profit increased by 30.2% to $67 million, with a gross margin rate improvement of 70 basis points to 36.4% [8][24] - Adjusted EBITDA turned positive at $1.1 million, a significant improvement from a loss of $0.2 million in Q1 2021 [9][27] - Adjusted net loss remained relatively flat at $10.9 million compared to a net loss of $10.6 million in the prior year [29] Business Line Data and Key Metrics Changes - Residential pool sales grew by 18%, residential hot tub sales surged by 66%, and PRO pool sales increased by 40% [7][22] - Comparable sales increased by 21% for the quarter, with a two-year stack comp of 46% [7][22] Market Data and Key Metrics Changes - Retail price inflation was nearly 12% in the quarter, slightly above expectations, but demand remained strong [11] - The company expects inflation to moderate in the coming quarters, projecting approximately 5% for the full year [11] Company Strategy and Development Direction - The company is focused on six strategic growth initiatives, including enhancing consumer relationships and expanding the PRO business [12][46] - The company is actively pursuing M&A opportunities, having closed the acquisition of B&L Pools and entered into an LOI for another retailer [18] - The company plans to open at least 10 new residential locations in 2022 and is on track with its pro initiatives [16][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong consumer demand driven by macro trends and the ability to pass costs through to consumers [10][44] - The company raised its full-year fiscal 2022 sales outlook to $1,495 million to $1,520 million, reflecting an increase of 11% to 13% compared to the prior year [37][40] - Management noted that Q1 is a small quarter and emphasized the importance of the upcoming peak pool season for assessing future performance [66] Other Important Information - The company completed a $300 million share buyback program, repurchasing 7.5 million shares at an average price of $20.25 [9][33] - The company ended Q1 2022 with cash and cash equivalents of $53 million and total funded debt of $804 million [30][32] Q&A Session Summary Question: Update on gross margin and occupancy costs - Management indicated occupancy costs are running about $25 million per quarter and emphasized their ability to pass on costs to consumers [50][52] Question: Impact of Q1 performance on the rest of the year - Management stated that Q1 is small and emphasized the importance of the peak season for better forecasting [66] Question: Historical performance during rising interest rates - Management noted that the company has historically grown during periods of rising interest rates, averaging double-digit growth [72] Question: Potential impact of chlorine pricing on fiscal 2023 - Management expects stabilized chlorine prices but does not anticipate a return to pre-2020 pricing levels [77] Question: Demand response to higher prices - Management reported no significant drop in demand despite higher prices, with some consumers opting for smaller purchases [90] Question: Performance of loyalty program - Management expressed slight disappointment in a 7% growth in loyalty but noted strong growth in average revenue per consumer [87] Question: M&A environment and margin impact - Management confirmed ongoing M&A activity and the addition of staff to support these efforts [101] Question: Performance in the pro-business segment - Management reported steady growth in the pro segment, with pro partner sales doubling in the quarter [104]