Leslie’s, Inc. ("Leslie's" or the “Company”; NASDAQ: LESL), the
largest and most trusted direct-to-consumer brand in the U.S. pool
and spa care industry, today announced preliminary financial
results for the third quarter of Fiscal 2023. The preliminary third
quarter of Fiscal 2023 results are unaudited and subject to
adjustment and finalization by the Company.
The Company expects preliminary sales for the
third quarter of $611 million including a comparable sales decline
of (12)%. Gross profit is expected to be $249 to $251 million and
gross margin is expected to be approximately 41%. Net income is
expected to be $70 to $73 million, Adjusted EBITDA is expected to
be $124 to $128 million, Adjusted net income is expected to be $73
to $76 million, and Adjusted diluted earnings per share are
expected to be $0.39 to $0.41.
In light of these results and the expectation
that trends experienced in the third quarter will persist through
the fiscal fourth quarter, the Company is revising its Fiscal 2023
outlook. Net sales are now expected to be $1,430 to $1,450 million,
gross profit is expected to be $549 to $559 million, net income is
expected to be $33 to $40 million, Adjusted EBITDA is expected to
be $170 to $180 million, Adjusted net income is expected to be $52
to $59 million, and Adjusted diluted earnings per share are
expected to be $0.28 to $0.32.
Mike Egeck, Chief Executive Officer, commented,
“Our fiscal third quarter results were well below our expectations
as low double digit traffic declines in our Residential and Pro
businesses drove negative comps across both discretionary and
non-discretionary categories. While abnormal weather continued to
pressure traffic levels, customer surveys conducted towards the end
of the quarter also indicated increased price sensitivity and that
consumers entered the pool season with a greater than normal amount
of chemicals leftover from last year.”
Mr. Egeck continued, “Our third quarter gross
margins were down year-over-year due to higher product costs that
we could not pass through to consumers, the impact of higher
distribution-related expenses and capitalized costs as we reduce
inventory from peak levels, and fixed cost deleverage. While our
team navigates these dynamics, we also continue to focus on the
levers in our control – delivering exceptional customer service,
bringing innovative and energy-saving products to market, and
managing costs. We also continue to aggressively manage our
inventory balances and rigorously review our costs to further
optimize our non-store headcount. While this year’s pool season has
presented a unique confluence of challenges, we remain focused on
driving long-term market share gains and shareholder value.”
Chief Financial Officer
Transition
Leslie’s also announced today that Scott Bowman
has been appointed Chief Financial Officer, effective August 7,
2023. Mr. Bowman will join the company on July 17, 2023 and serve
as Chief Financial Officer Designate through August 6, 2023. Steve
Weddell, who is stepping down as CFO effective August 7, 2023, will
remain an advisor to the Company through December 31, 2023 to
facilitate the transition.
Mr. Egeck commented, “I am very pleased to
welcome Scott to our leadership team. Scott is a seasoned public
company CFO who brings over thirty years of finance and accounting
experience, as well as experience in areas including supply chain,
manufacturing, M&A, and corporate strategy. Scott has built
deep expertise developing and executing operating plans as well as
enhancing financial processes and developing talent across the
organizations he has served. He will be a strong addition to the
Leslie’s team and I look forward to working with him closely to
drive the business forward.”
Mr. Bowman is a veteran public and private
company CFO with extensive experience at retail, manufacturing, and
CPG companies. He most recently served as CFO for True Food Kitchen
after serving as CFO for Dave & Buster’s (NASDAQ: PLAY) from
2019 to 2021 and Hibbett Sports (NASDAQ: HIBB) from 2012 to 2019.
Mr. Bowman previously served as a Divisional CFO at The Home Depot,
and held prior leadership positions in various corporate finance
roles having started his career in the audit department of The
Sherwin-Williams Company. Mr. Bowman is a CPA and holds an MBA from
Emory Goizueta Business School and a B.S. in Accounting and Finance
from Miami University (Ohio).
Scott Bowman said, “I admire Leslie’s and the
impressive leadership position the company has built over its long
history in the pool and spa care industry. I look forward to
joining Mike and the rest of the team in executing on our strategic
growth priorities, enhancing operational efficiencies and driving
value for our shareholders.”
Mr. Egeck added, “I want to thank Steve for his
leadership and contributions to Leslie’s over the past eight years.
Steve was instrumental in leading our IPO process and has been a
trusted partner as we transitioned to a public company. I am
grateful that he will remain as an advisor through this transition
and wish him all the best in his next chapter.”
Third Quarter Fiscal 2023 Earnings
Results and Conference Call
The Company will release its full financial
results for the third quarter of fiscal 2023 after market close on
Wednesday, August 2, 2023. The Company will host a conference call
at 4:30 p.m. Eastern time to discuss its final results and revised
outlook in more detail. Investors and analysts interested in
participating in the call are invited to dial 877-407-0784
(international callers please dial 1-201-689-8560) approximately 10
minutes prior to the start of the call. A live audio webcast of the
conference call will be available online at
https://ir.lesliespool.com.
A recorded replay of the conference call will be
available within approximately three hours of the conclusion of the
call and can be accessed, along with the associated slides, online
at https://ir.lesliespool.com for 90 days.
About Leslie’s
Founded in 1963, Leslie’s is the largest and
most trusted direct-to-consumer brand in the U.S. pool and spa care
industry. The Company serves the aftermarket needs of residential
and professional consumers with an extensive and largely exclusive
assortment of essential pool and spa care products. The Company
operates an integrated ecosystem of over 1,000 physical locations
and a robust digital platform, enabling consumers to engage with
Leslie’s whenever, wherever, and however they prefer to shop. Its
dedicated team of associates, pool and spa care experts, and
experienced service technicians are passionate about empowering
Leslie’s consumers with the knowledge, products, and solutions
necessary to confidently maintain and enjoy their pools and
spas.
Use of Non-GAAP Financial Measures and
Other Operating Measures
In addition to reporting financial results in
accordance with accounting principles generally accepted in the
United States (“GAAP”), we use certain non-GAAP financial measures
and other operating measures, including comparable sales growth and
Adjusted EBITDA, Adjusted net income (loss), and Adjusted earnings
per share, to evaluate the effectiveness of our business
strategies, to make budgeting decisions, and to compare our
performance against that of other peer companies using similar
measures. These non-GAAP financial measures and other operating
measures should not be considered in isolation or as substitutes
for our results as reported under GAAP. In addition, these non-GAAP
financial measures and other operating measures are not calculated
in the same manner by all companies, and accordingly, are not
necessarily comparable to similarly titled measures of other
companies and may not be appropriate measures for performance
relative to other companies.
Comparable Sales Growth
We measure comparable sales growth as the
increase or decrease in sales recorded by the comparable base in
any reporting period, compared to sales recorded by the comparable
base in the prior reporting period. The comparable base includes
sales through our locations and through our e-commerce websites and
third-party marketplaces. Comparable sales growth is a key measure
used by management and our board of directors to assess our
financial performance.
Adjusted EBITDA
Adjusted EBITDA is defined as earnings before
interest (including amortization of debt issuance costs), taxes,
depreciation and amortization, management fees, equity-based
compensation expense, loss on debt extinguishment, costs related to
equity offerings, strategic project costs, executive transition
costs, severance, losses (gains) on asset dispositions, merger and
acquisition costs, and other non-recurring, non-cash or discrete
items. Adjusted EBITDA is a key measure used by management and our
board of directors to assess our financial performance. Adjusted
EBITDA is also frequently used by analysts, investors, and other
interested parties to evaluate companies in our industry, when
considered alongside other GAAP measures. We use Adjusted EBITDA to
supplement GAAP measures of performance to evaluate the
effectiveness of our business strategies, to make budgeting
decisions, and to compare our performance against that of other
companies using similar measures.
Adjusted EBITDA is not a recognized measure of
financial performance under GAAP but is used by some investors to
determine a company’s ability to service or incur indebtedness.
Adjusted EBITDA is not calculated in the same manner by all
companies, and accordingly, is not necessarily comparable to
similarly titled measures of other companies and may not be an
appropriate measure for performance relative to other companies.
Adjusted EBITDA should not be construed as an indicator of a
company’s operating performance in isolation from, or as a
substitute for, net income (loss), cash flows from operations or
cash flow data, all of which are prepared in accordance with GAAP.
We have presented Adjusted EBITDA solely as supplemental disclosure
because we believe it allows for a more complete analysis of
results of operations. Adjusted EBITDA is not intended to
represent, and should not be considered more meaningful than, or as
an alternative to, measures of operating performance as determined
in accordance with GAAP. In the future, we may incur expenses or
charges such as those added back to calculate Adjusted EBITDA. Our
presentation of Adjusted EBITDA should not be construed as an
inference that our future results will be unaffected by these
items.
Adjusted Net Income (Loss) and Adjusted Earnings
per Share
Adjusted net income (loss) and Adjusted earnings
per share are additional key measures used by management and our
board of directors to assess our financial performance. Adjusted
net income (loss) and Adjusted earnings per share are also
frequently used by analysts, investors, and other interested
parties to evaluate companies in our industry, when considered
alongside other GAAP measures.
Adjusted net income (loss) is defined as net
income (loss) adjusted to exclude management fees, equity-based
compensation expense, loss on debt extinguishment, costs related to
equity offerings, strategic project costs, executive transition
costs, severance, losses (gains) on asset dispositions, merger and
acquisition costs, and other non-recurring, non-cash, or discrete
items. Adjusted diluted earnings per share is defined as Adjusted
net income (loss) divided by the diluted weighted average number of
common shares outstanding.
Note: A reconciliation of non-GAAP guidance
measures to corresponding GAAP measures is not available on a
forward-looking basis without unreasonable effort due to the
uncertainty of expenses that may be incurred in the future,
although it is important to note that these factors could be
material to our results computed in accordance with GAAP.
Forward-Looking Statements
This press release contains forward-looking
statements about us and our industry that involve substantial risks
and uncertainties. All statements other than statements of
historical fact contained in this press release, including
statements regarding our future results of operations or financial
condition, business strategy, and plans and objectives of
management for future operations, are forward-looking statements.
In some cases, you can identify forward-looking statements because
they contain words such as “anticipate,” “believe,” “contemplate,”
“continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“potential,” “predict,” “project,” “should,” “target,” “will,” or
“would,” or the negative of these words or other similar terms or
expressions. 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
business from the sensitivity of our business to weather
conditions, changes in the economy (including rising interest
rates, recession fears, and inflationary pressures), geopolitical
events or conflicts, and the housing market;
- disruptions in the
operations of our distribution centers;
- our ability to
implement technology initiatives that deliver the anticipated
benefits, without disrupting our operations;
- our ability to
attract and retain senior management and other qualified
personnel;
- regulatory changes
and development affecting our current and future products;
- our ability to
obtain additional capital to finance operations;
- commodity price
inflation and deflation;
- impacts on our
business from epidemics, pandemics, or natural disasters;
- impacts on our
business from cyber incidents and other security threats or
disruptions;
- our ability to
remediate the material weakness in our internal control over
financial reporting or additional material weaknesses or other
deficiencies in the future or to maintain effective disclosure
controls and procedures and internal control over financial
reporting; and
- other risks and
uncertainties, including those listed in the section titled “Risk
Factors” in our filings with the United States Securities and
Exchange Commission (“SEC”).
You should not rely on forward-looking
statements as predictions of future events. We have based the
forward-looking statements contained in this press release
primarily on our current expectations and projections about future
events and trends that we believe may affect our business,
financial condition, and operating results. The outcome of the
events described in these forward-looking statements is subject to
risks, uncertainties, and other factors described above and in our
filings with the SEC. Moreover, we operate in a very competitive
and rapidly changing environment. New risks and uncertainties
emerge from time to time, and it is not possible for us to predict
all risks and uncertainties that could have an impact on the
forward-looking statements contained in this press release. The
results, events, and circumstances reflected in the forward-looking
statements may not be achieved or occur, and actual results or
outcomes could differ materially from those described in the
forward-looking statements.
In addition, statements that “we believe” and
similar statements reflect our beliefs and opinions on the relevant
subject. These statements are based on information available to us
as of the date of this press release, and while we believe that
information provides a reasonable basis for these statements, that
information may be limited or incomplete. Our statements should not
be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all relevant information. These statements are
inherently uncertain, and investors are cautioned not to unduly
rely on these statements.
The forward-looking statements made in this
press release are based on events or circumstances as of the date
on which the statements are made. We undertake no obligation to
update any forward-looking statements made in this press release to
reflect events or circumstances after the date of this press
release or to reflect new information or the occurrence of
unanticipated events, except as required by law. We may not
actually achieve the plans, intentions, or expectations disclosed
in our forward-looking statements, and you should not place undue
reliance on our forward-looking statements. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures, or
investments. Additionally, our expectations regarding the third
quarter fiscal 2023 results are based on preliminary financial
information about the third quarter and are subject to adjustment.
Although the third quarter is now completed, we are still in the
process of our standard financial reporting closing procedures.
GAAP to Non-GAAP Reconciliation of
Preliminary Results(Amounts in millions, except
per share amounts)(unaudited)
|
|
Three Months Ended July 1, 2023 |
|
|
|
Low |
|
|
High |
|
Net income |
|
$ |
70 |
|
|
$ |
73 |
|
Interest expense |
|
|
18 |
|
|
|
18 |
|
Income tax benefit |
|
|
23 |
|
|
|
24 |
|
Depreciation and amortization
expense(1) |
|
|
8 |
|
|
|
8 |
|
Equity-based compensation
expense(2) |
|
|
3 |
|
|
|
3 |
|
Strategic project costs(3) |
|
|
1 |
|
|
|
1 |
|
Executive transition costs and
other(4) |
|
|
1 |
|
|
|
1 |
|
Adjusted EBITDA |
|
$ |
124 |
|
|
$ |
128 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 1, 2023 |
|
|
|
Low |
|
|
High |
|
Net income |
|
$ |
70 |
|
|
$ |
73 |
|
Equity-based compensation
expense(2) |
|
|
3 |
|
|
|
3 |
|
Strategic project costs(3) |
|
|
1 |
|
|
|
1 |
|
Executive transition costs and
other(4) |
|
|
1 |
|
|
|
1 |
|
Tax effects of these
adjustments(5) |
|
|
(2 |
) |
|
|
(2 |
) |
Adjusted net income |
|
$ |
73 |
|
|
$ |
76 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.37 |
|
|
$ |
0.39 |
|
Adjusted diluted earnings per
share |
|
$ |
0.39 |
|
|
$ |
0.41 |
|
Weighted average shares
outstanding |
|
|
|
|
|
|
Diluted |
|
|
185 |
|
|
|
185 |
|
(1) Includes depreciation related to our
distribution centers and locations, which is reported in cost of
merchandise and services sold in our condensed consolidated
statements of operations. (2) Represents charges related to
equity-based compensation and the related Company payroll tax
expense, which are reported in SG&A in our condensed
consolidated statements of operations. (3) Represents non-recurring
costs, such as third-party consulting costs, which are not part of
our ongoing operations and are incurred to execute differentiated,
strategic projects, and are reported in SG&A in our condensed
consolidated statements of operations. (4) Includes executive
transition costs, severance associated with corporate
restructuring, losses (gains) on asset dispositions, merger and
acquisition costs, and other non-recurring, non-cash, or discrete
items as determined by management. Amounts are reported in SG&A
in our condensed consolidated statements of operations. (5)
Represents the tax effect of the total adjustments based on our
actual statutory tax rate. Amounts are reported in income tax
expense in our condensed consolidated statements of operations.
ContactInvestorsFarah Soi/Caitlin
ChurchillICRinvestorrelations@lesl.com
Media FGS GlobalLeslies@fgsglobal.com
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