Q1 2023 Highlights
- Comparable sales grew 5.1 percent year-over-year and
10.2 percent on a two-year basis, resulting in the 18th
consecutive quarter of comparable sales growth
- Net revenue of $1.56
billion increased 5.4 percent year-over-year
- Net loss of $1.9 million, or
$(0.01) per diluted share compared to
net income of $24.7 million, or
$0.09 per diluted share in the prior
year
- Adjusted EBITDA1 of $111.0
million compared to $119.2
million in the prior year, a decrease of 6.9 percent
year-over-year
- Adjusted Earnings Per Share1 of
$0.06, compared to $0.14 per share in the prior year, a decrease of
$0.08 year-over-year
- The Company reaffirms its full year 2023 guidance
SAN
DIEGO, May 24, 2023 /PRNewswire/ -- Petco Health
and Wellness Company, Inc. (Nasdaq: WOOF), a complete partner in
pet health and wellness, today announced its first quarter 2023
financial results.
In the first quarter of 2023, Petco delivered net revenue of
$1.56 billion, up 5.4 percent versus
prior year, driven by strength in the company's consumables
business, up 11.2 percent versus prior year, and services and other
business, up 25.4 percent versus prior year. First quarter
revenue growth was partially offset by the company's supplies and
companion animal business, down 7.6 percent versus prior year. Net
loss was $1.9 million or $(0.01) per share, driven primarily by a
$0.05 per share increase in interest
expense year-over-year, compared to net income of $24.7 million or $0.09 per share in the prior year. Adjusted
Net Income1 was $14.9
million or $0.06 per share,
compared to $36.3 million or
$0.14 per share in the prior year.
Adjusted EBITDA1 was $111.0
million compared to $119.2
million in the prior year.
In the first quarter of 2023, Petco paid down $35 million in principal on its term loan.
In May 2023, Petco paid down another
$25 million in principal on its term
loan for a total of $60 million in
principal payments year-to-date. The company continues to
target a total of $100 million in
principal payments for 2023 and remains committed to strengthening
its balance sheet through de-levering long-term.
"We continue to execute on our strategy amidst the current
environment, delivering our 18th consecutive quarter of
comp sales growth in the first quarter, driven by the ongoing
strength in consumables and record performance in our services
business," said Petco CEO Ron
Coughlin. "We remain confident in our unique 360-degree
pet wellness offering delivered through our core pillars of
services, differentiated merchandise, and competitively advantaged
omnichannel capabilities all powered by our incredible Petco
partners. Looking ahead, we are focused on what's within our
control and capitalizing on the secular trends of the resilient pet
category to drive long-term, profitable growth."
Q1 2023 Operating Results:
Comparisons are first quarter of fiscal 2023 ended
April 29, 2023 versus first quarter
of fiscal 2022 ended April 30, 2022
unless otherwise noted.
- Net revenue increased 5.4 percent to $1.56 billion driven by comparable sales growth
of 5.1 percent
- Net loss of $1.9 million compared
to net income of $24.7 million, a
decrease of $26.6 million
- Adjusted Net Income1 decreased $21.4 million to $14.9
million
- Adjusted EBITDA1 decreased 6.9 percent to
$111.0 million
- Operating cash flow decreased 34.5 percent to $37.7 million
- Free Cash Flow1 decreased $16.0 million to $(24.4)
million
(1)
|
Adjusted EBITDA,
Adjusted Net Income, Adjusted Earnings Per Share ("Adjusted EPS"),
and Free Cash Flow are non-GAAP financial measures. See "Non-GAAP
Financial Measures" for additional information on non-GAAP
financial measures and a reconciliation to the most comparable GAAP
measures.
|
Fiscal 2023 Guidance:
The company is reaffirming its fiscal 2023 guidance and
expects:
Metric*
|
2023
Guidance
|
Net Revenue
|
$6.150 billion to
$6.275 billion
|
Adjusted EBITDA
|
$520 million to $540
million
|
Adjusted EPS
|
$0.40 to
$0.48
|
Capital Expenditures
|
$225 million to $250
million
|
In Fiscal 2023, the company continues to expect to make a total
of $100 million in principal payments
on its term loan, which is inclusive of $60
million in principal payments on its debt made through
May 2023.
*Assumptions in the guidance include that economic conditions,
currency rates and the tax and regulatory landscape remain
generally consistent. Adjusted EPS guidance assumes approximately
$145 to $155
million of interest expense, an estimated $43 to $53 million
increase in interest expense year-over-year, a 26 percent tax rate,
and a 273 million weighted average diluted share count. The Company
estimates that the increase in interest expense will impact
Adjusted EPS by approximately $0.12
to $0.15 per share. Furthermore,
Fiscal 2023 will be a 53-week year, leading to an incremental week
of operations. Adjusted EBITDA and Adjusted EPS are non-GAAP
financial measures and have not been reconciled to the most
comparable GAAP outlook because it is not possible to do so without
unreasonable efforts due to the uncertainty and potential
variability of reconciling items, which are dependent on future
events and often outside of management's control and which could be
significant. Because such items cannot be reasonably predicted with
the level of precision required, we are unable to provide outlook
for the comparable GAAP measures. Forward-looking estimates of
Adjusted EBITDA and Adjusted EPS are made in a manner consistent
with the relevant definitions and assumptions noted herein and in
our filings with the SEC.
Earnings Conference Call Webcast Information:
Management will host an earnings conference call on May 24, 2023 at 8:00 AM
Eastern Time to discuss the company's financial results. The
conference call will be accessible through a live webcast.
Interested investors and other individuals can access the webcast,
earnings release, earnings presentation, and infographic via the
company's investor relations page at ir.petco.com. A replay of
the webcast will be archived on the company's investor relations
page through June 7, 2023 until
approximately 5:00 PM Eastern Time.
About Petco, The
Health + Wellness Co.:
Founded in 1965, Petco is a category-defining health and
wellness company focused on improving the lives of pets, pet
parents and our own Petco partners. We've consistently set new
standards in pet care while delivering comprehensive pet wellness
products, services and solutions, and creating communities that
deepen the pet-pet parent bond. We operate more than 1,500 pet care
centers across the U.S., Mexico
and Puerto Rico, which offer
merchandise, companion animals, grooming, training and a growing
network of on-site veterinary hospitals and mobile veterinary
clinics. Our complete pet health and wellness ecosystem is
accessible through our pet care centers and digitally at
petco.com and on the Petco app. In tandem with
Petco Love (formerly the Petco Foundation), an independent
nonprofit organization, we work with and support thousands of local
animal welfare groups across the country and, through in-store
adoption events, we've helped find homes for nearly 7 million
animals.
Forward-Looking Statements:
This earnings release contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995 as contained in Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, concerning expectations, beliefs, plans, objectives,
goals, strategies, future events or performance and underlying
assumptions and other statements that are not statements of
historical fact, including statements regarding our fiscal year
2023 guidance. Such forward-looking statements can generally be
identified by the use of forward-looking terms such as "believes,"
"expects," "may," "intends," "will," "shall," "should,"
"anticipates," "opportunity," "illustrative", or the negative
thereof or other variations thereon or comparable terminology.
Although Petco believes that the expectations and assumptions
reflected in these statements are reasonable, there can be no
assurance that these expectations will prove to be correct or that
any forward-looking results will occur or be realized. Nothing
contained in this earnings release is, or should be relied upon as,
a promise or representation or warranty as to any future matter,
including any matter in respect of the operations or business or
financial condition of Petco. All forward-looking statements are
based on current expectations and assumptions about future events
that may or may not be correct or necessarily take place and that
are by their nature subject to significant uncertainties and
contingencies, many of which are outside the control of Petco.
Forward-looking statements are subject to a number of risks,
uncertainties and other factors that could cause actual results or
events to differ materially from the potential results or events
discussed in the forward-looking statements, including, without
limitation, those identified in this earnings release as well as
the following: (i) increased competition (including from
multi-channel retailers and e-Commerce providers); (ii) reduced
consumer demand for our products and/or services; (iii) our
reliance on key vendors; (iv) our ability to attract and retain
qualified employees; (v) risks arising from statutory, regulatory
and/or legal developments; (vi) macroeconomic pressures in the
markets in which we operate, including inflation and prevailing
interest rates; (vii) failure to effectively manage our costs;
(viii) our reliance on our information technology systems; (ix) our
ability to prevent or effectively respond to a data privacy or
security breach; (x) our ability to effectively manage or integrate
strategic ventures, alliances or acquisitions and realize the
anticipated benefits of such transactions; (xi) economic or
regulatory developments that might affect our ability to provide
attractive promotional financing; (xii) business interruptions and
other supply chain issues; (xiii) catastrophic events, political
tensions, conflicts and wars (such as the ongoing conflict in
Ukraine), health crises, and
pandemics; (xiv) our ability to maintain positive brand perception
and recognition; (xv) product safety and quality concerns; (xvi)
changes to labor or employment laws or regulations; (xvii) our
ability to effectively manage our real estate portfolio; (xviii)
constraints in the capital markets or our vendor credit terms;
(xix) changes in our credit ratings; and (xx) the other risks,
uncertainties and other factors identified under "Risk Factors" and
elsewhere in Petco's Securities and Exchange Commission filings.
The occurrence of any such factors could significantly alter the
results set forth in these statements.
Petco cautions that the foregoing list of risks, uncertainties
and other factors is not complete, and forward-looking statements
speak only as of the date they are made. Petco undertakes no duty
to update publicly any such forward-looking statement, whether as a
result of new information, future events or otherwise, except as
may be required by applicable law, regulation or other competent
legal authority.
PETCO HEALTH AND
WELLNESS COMPANY, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands, except
per share amounts)
|
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
|
|
|
|
|
13 Weeks
Ended
|
|
|
|
April 29,
2023
|
|
April 30,
2022
|
|
Percent
Change
|
|
Net
sales
|
|
$
1,555,908
|
|
$1,475,991
|
|
5 %
|
|
Cost of
sales
|
|
951,426
|
|
868,317
|
|
10 %
|
|
Gross
profit
|
|
604,482
|
|
607,674
|
|
(1 %)
|
|
Selling, general and
administrative expenses
|
|
576,865
|
|
557,735
|
|
3 %
|
|
Operating
income
|
|
27,617
|
|
49,939
|
|
(45 %)
|
|
Interest
income
|
|
(1,177)
|
|
(20)
|
|
5,785 %
|
|
Interest
expense
|
|
37,202
|
|
19,634
|
|
89 %
|
|
Loss on partial
extinguishment of debt
|
|
441
|
|
—
|
|
N/M
|
|
Other non-operating
income
|
|
(2,819)
|
|
(314)
|
|
798 %
|
|
(Loss) income before
income taxes and income from
equity method investees
|
|
(6,030)
|
|
30,639
|
|
N/M
|
|
Income tax (benefit)
expense
|
|
(1,008)
|
|
10,000
|
|
N/M
|
|
Income from equity
method investees
|
|
(3,130)
|
|
(3,163)
|
|
(1 %)
|
|
Net (loss)
income
|
|
(1,892)
|
|
23,802
|
|
N/M
|
|
Net loss attributable
to noncontrolling interest
|
|
—
|
|
(891)
|
|
(100 %)
|
|
Net (loss) income
attributable to Class A and B-1 common
stockholders
|
|
$
(1,892)
|
|
$ 24,693
|
|
N/M
|
|
|
|
|
|
|
|
|
|
Net (loss) income
per Class A and B-1 common share:
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.01)
|
|
$
0.09
|
|
N/M
|
|
Diluted
|
|
$
(0.01)
|
|
$
0.09
|
|
N/M
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing net (loss) income per Class A
and B-1 common share:
|
|
|
|
|
|
|
|
Basic
|
|
266,485
|
|
265,050
|
|
1 %
|
|
Diluted
|
|
266,485
|
|
265,701
|
|
0 %
|
|
PETCO HEALTH AND
WELLNESS COMPANY, INC.
|
CONSOLIDATED BALANCE
SHEETS
|
(In thousands, except
per share amounts)
|
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
April 29,
2023
|
|
January
28,
2023
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
148,942
|
|
$
201,901
|
Receivables, less
allowance for credit losses1
|
|
45,414
|
|
49,580
|
Merchandise
inventories, net
|
|
667,938
|
|
652,430
|
Prepaid
expenses
|
|
53,290
|
|
51,274
|
Other current
assets
|
|
61,224
|
|
60,809
|
Total current
assets
|
|
976,808
|
|
1,015,994
|
Fixed assets
|
|
2,041,601
|
|
1,987,560
|
Less accumulated
depreciation
|
|
(1,229,445)
|
|
(1,184,233)
|
Fixed assets,
net
|
|
812,156
|
|
803,327
|
Operating lease
right-of-use assets
|
|
1,378,342
|
|
1,397,761
|
Goodwill
|
|
2,194,491
|
|
2,193,941
|
Trade name
|
|
1,025,000
|
|
1,025,000
|
Other long-term
assets
|
|
185,597
|
|
176,806
|
Total assets
|
|
$6,572,394
|
|
$6,612,829
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
book overdrafts
|
|
$
393,795
|
|
$
381,213
|
Accrued salaries and
employee benefits
|
|
108,760
|
|
89,929
|
Accrued expenses and
other liabilities
|
|
206,750
|
|
217,556
|
Current portion of
operating lease liabilities
|
|
281,680
|
|
309,766
|
Current portion of
long-term debt and other lease liabilities
|
|
5,908
|
|
22,794
|
Total current
liabilities
|
|
996,893
|
|
1,021,258
|
Senior secured credit
facilities, net, excluding current portion
|
|
1,612,009
|
|
1,628,331
|
Operating lease
liabilities, excluding current portion
|
|
1,132,750
|
|
1,148,155
|
Deferred taxes,
net
|
|
297,779
|
|
303,121
|
Other long-term
liabilities
|
|
131,843
|
|
130,487
|
Total
liabilities
|
|
4,171,274
|
|
4,231,352
|
Commitments and
contingencies
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Class A common
stock2
|
|
229
|
|
228
|
Class B-1 common
stock3
|
|
38
|
|
38
|
Class B-2 common
stock4
|
|
—
|
|
—
|
Preferred
stock5
|
|
—
|
|
—
|
Additional
paid-in-capital
|
|
2,173,370
|
|
2,152,342
|
Retained
earnings
|
|
231,075
|
|
232,967
|
Accumulated other
comprehensive loss
|
|
(3,592)
|
|
(4,098)
|
Total stockholders'
equity
|
|
2,401,120
|
|
2,381,477
|
Total liabilities and
stockholders' equity
|
|
$6,572,394
|
|
$6,612,829
|
|
|
(1)
|
Allowances for credit
losses are $949 and $952, respectively
|
(2)
|
Class A common stock,
$0.001 par value: Authorized - 1.0 billion shares; Issued and
outstanding - 229.1 million and 228.3 million shares,
respectively
|
(3)
|
Class B-1 common stock,
$0.001 par value: Authorized - 75.0 million shares; Issued and
outstanding - 37.8 million shares
|
(4)
|
Class B-2 common stock,
$0.000001 par value: Authorized - 75.0 million shares; Issued and
outstanding - 37.8 million shares
|
(5)
|
Preferred stock, $0.001
par value: Authorized - 25.0 million shares; Issued and outstanding
- none
|
PETCO HEALTH AND
WELLNESS COMPANY, INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
|
|
13 Weeks
Ended
|
|
|
April 29,
2023
|
|
April 30,
2022
|
Cash flows from
operating activities:
|
|
|
|
|
Net (loss)
income
|
|
$
(1,892)
|
|
$
23,802
|
Adjustments to
reconcile net (loss) income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and
amortization
|
|
49,255
|
|
46,967
|
Amortization of debt
discounts and issuance costs
|
|
1,238
|
|
1,224
|
Provision for deferred
taxes
|
|
(5,530)
|
|
4,832
|
Equity-based
compensation
|
|
22,129
|
|
12,222
|
Impairments, write-offs
and losses on sale of fixed and other assets
|
|
4
|
|
162
|
Loss on partial
extinguishment of debt
|
|
441
|
|
—
|
Amounts reclassified
out of accumulated other comprehensive loss
|
|
575
|
|
—
|
Income from equity
method investees
|
|
(3,130)
|
|
(3,163)
|
Non-cash operating
lease costs
|
|
106,316
|
|
105,249
|
Other non-operating
income
|
|
(2,819)
|
|
(314)
|
Changes in assets and
liabilities:
|
|
|
|
|
Receivables
|
|
4,165
|
|
13,397
|
Merchandise
inventories
|
|
(15,508)
|
|
(6,930)
|
Prepaid expenses and
other assets
|
|
(12,115)
|
|
(9,896)
|
Accounts payable and
book overdrafts
|
|
12,582
|
|
(11,314)
|
Accrued salaries and
employee benefits
|
|
18,982
|
|
(16,478)
|
Accrued expenses and
other liabilities
|
|
(8,736)
|
|
11,290
|
Operating lease
liabilities
|
|
(130,297)
|
|
(112,272)
|
Other long-term
liabilities
|
|
1,991
|
|
(1,259)
|
Net cash
provided by operating activities
|
|
37,651
|
|
57,519
|
Cash flows from
investing activities:
|
|
|
|
|
Cash paid for fixed
assets
|
|
(62,050)
|
|
(65,910)
|
Cash paid for
acquisitions, net of cash acquired
|
|
(725)
|
|
—
|
Net cash
used in investing activities
|
|
(62,775)
|
|
(65,910)
|
Cash flows from
financing activities:
|
|
|
|
|
Repayments of long-term
debt
|
|
(35,000)
|
|
(4,250)
|
Payments for finance
lease liabilities
|
|
(1,250)
|
|
(1,022)
|
Proceeds from employee
stock purchase plan and stock option exercises
|
|
1,378
|
|
1,453
|
Tax withholdings on
stock-based awards
|
|
(2,210)
|
|
(11,441)
|
Net cash
used in financing activities
|
|
(37,082)
|
|
(15,260)
|
|
|
|
|
|
Net decrease in cash,
cash equivalents and restricted cash
|
|
(62,206)
|
|
(23,651)
|
Cash, cash equivalents
and restricted cash at beginning of period
|
|
213,727
|
|
221,890
|
Cash, cash equivalents
and restricted cash at end of period
|
|
$151,521
|
|
$198,239
|
NON-GAAP FINANCIAL MEASURES
The following information provides definitions and
reconciliations of the non-GAAP financial measures presented in
this earnings release to the most directly comparable financial
measures calculated and presented in accordance with generally
accepted accounting principles (GAAP). The company has provided
this non-GAAP financial information, which is not calculated or
presented in accordance with GAAP, as information supplemental and
in addition to the financial measures presented in this earnings
release that are calculated and presented in accordance with GAAP.
Such non-GAAP financial measures should not be considered superior
to, as a substitute for or alternative to, and should be considered
in conjunction with, the GAAP financial measures presented in this
earnings release. The non-GAAP financial measures in this earnings
release may differ from similarly titled measures used by other
companies.
The tables below reflect the calculation of Adjusted EBITDA,
Adjusted Net Income, and Adjusted EPS, as applicable, for the
thirteen weeks ended April 29, 2023
compared to the thirteen weeks ended April
30, 2022, respectively.
Adjusted EBITDA and Trailing Twelve Month Adjusted
EBITDA
Adjusted EBITDA, including Trailing Twelve Month Adjusted
EBITDA, is considered a non-GAAP financial measure under the
Securities and Exchange Commission's (SEC) rules because it
excludes certain amounts included in net income calculated in
accordance with GAAP. Management believes that Adjusted EBITDA is a
meaningful measure to share with investors because it facilitates
comparison of the current period performance with that of the
comparable prior period. In addition, Adjusted EBITDA affords
investors a view of what management considers to be Petco's core
operating performance as well as the ability to make a more
informed assessment of such operating performance as compared with
that of the prior period. Please see the company's
Annual Report on Form 10-K for the fiscal year ended January 28, 2023 filed with the SEC on
March 28, 2023 for additional
information on Adjusted EBITDA.
(dollars in
thousands)
|
|
13 Weeks
Ended
|
Reconciliation of
Net (Loss) Income Attributable to Class A and B-1
Common Stockholders to Adjusted EBITDA
|
|
April 29,
2023
|
|
April 30,
2022
|
Net (loss) income
attributable to Class A and B-1 common stockholders
|
|
$ (1,892)
|
|
$ 24,693
|
Add
(deduct):
|
|
|
|
|
Interest expense,
net
|
|
36,025
|
|
19,614
|
Income tax
expense
|
|
(1,008)
|
|
10,000
|
Depreciation and
amortization
|
|
49,255
|
|
46,967
|
Income from equity
method investees
|
|
(3,130)
|
|
(3,163)
|
Loss on partial
extinguishment of debt
|
|
441
|
|
—
|
Asset impairments and
write offs
|
|
4
|
|
162
|
Equity-based
compensation
|
|
22,129
|
|
12,222
|
Other non-operating
income
|
|
(2,819)
|
|
(314)
|
Mexico joint venture
EBITDA (1)
|
|
8,734
|
|
6,778
|
Acquisition-related
integration costs (2)
|
|
—
|
|
2,236
|
Other costs
(3)
|
|
3,287
|
|
—
|
Adjusted
EBITDA
|
|
$
111,026
|
|
$
119,195
|
Net sales
|
|
$1,555,908
|
|
$1,475,991
|
Net margin
(4)
|
|
(0.1 %)
|
|
1.7 %
|
Adjusted EBITDA
Margin
|
|
7.1 %
|
|
8.1 %
|
(dollars in
thousands)
|
|
Trailing Twelve
Months
|
Reconciliation of
Net Income Attributable to Class A and B-1
Common Stockholders to Adjusted EBITDA
|
|
April 29,
2023
|
|
January 28,
2023
|
|
April 30,
2022
|
Net income
attributable to Class A and B-1 common stockholders
|
|
$ 64,216
|
|
$ 90,801
|
|
$
181,550
|
Add
(deduct):
|
|
|
|
|
|
|
Interest expense,
net
|
|
117,022
|
|
100,611
|
|
76,442
|
Income tax
expense
|
|
24,339
|
|
35,347
|
|
60,795
|
Depreciation and
amortization
|
|
196,116
|
|
193,828
|
|
177,791
|
Income from equity
method investees
|
|
(12,943)
|
|
(12,976)
|
|
(11,622)
|
Loss on partial
extinguishment of debt
|
|
441
|
|
—
|
|
—
|
Asset impairments and
write offs
|
|
1,834
|
|
1,992
|
|
10,133
|
Equity-based
compensation
|
|
70,691
|
|
60,784
|
|
49,883
|
Other non-operating
loss (income)
|
|
10,162
|
|
12,667
|
|
(34,812)
|
Mexico joint venture
EBITDA (1)
|
|
31,540
|
|
29,584
|
|
27,609
|
Acquisition-related
integration costs (2)
|
|
13,078
|
|
15,314
|
|
2,236
|
Other costs
(3)
|
|
6,104
|
|
2,817
|
|
10,995
|
Adjusted
EBITDA
|
|
$
522,600
|
|
$
530,769
|
|
$
551,000
|
Net sales
|
|
$6,115,884
|
|
$6,035,967
|
|
$5,868,146
|
Net margin
(4)
|
|
1.0 %
|
|
1.5 %
|
|
3.1 %
|
Adjusted EBITDA
Margin
|
|
8.5 %
|
|
8.8 %
|
|
9.4 %
|
Adjusted Net Income and Adjusted EPS
Adjusted Net Income and Adjusted diluted Earnings Per Share
attributable to Petco common stockholders (Adjusted EPS) are
considered non-GAAP financial measures under the SEC's rules
because they exclude certain amounts included in the net
income attributable to Petco common stockholders and
diluted earnings per share attributable to Petco common
stockholders calculated in accordance with GAAP. Management
believes that Adjusted Net Income and Adjusted EPS are meaningful
measures to share with investors because they facilitate comparison
of the current period performance with that of the comparable prior
period. In addition, Adjusted Net Income and Adjusted EPS afford
investors a view of what management considers to be Petco's core
earnings performance as well as the ability to make a more
informed assessment of such earnings performance with
that of the prior period.
(in thousands,
except per share amounts)
|
|
13 Weeks
Ended
|
Reconciliation of
Diluted EPS to Adjusted EPS
|
|
April 29,
2023
|
|
April 30,
2022
|
|
|
Amount
|
|
Per
share
|
|
Amount
|
|
Per
share
|
Net (loss) income
attributable to common stockholders / diluted EPS
|
|
$
(1,892)
|
|
$
(0.01)
|
|
$
24,693
|
|
$ 0.09
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
(1,008)
|
|
(0.01)
|
|
10,000
|
|
0.04
|
Loss on partial
extinguishment of debt
|
|
441
|
|
0.00
|
|
—
|
|
—
|
Asset impairments and
write offs
|
|
4
|
|
0.00
|
|
162
|
|
0.00
|
Equity-based
compensation
|
|
22,129
|
|
0.10
|
|
12,222
|
|
0.04
|
Other non-operating
income
|
|
(2,819)
|
|
(0.01)
|
|
(314)
|
|
(0.00)
|
Acquisition-related
integration costs (2)
|
|
—
|
|
—
|
|
2,236
|
|
0.01
|
Other costs
(3)
|
|
3,287
|
|
0.01
|
|
—
|
|
—
|
Adjusted pre-tax income
/ diluted earnings per share
|
|
$20,142
|
|
$ 0.08
|
|
$
48,999
|
|
$ 0.18
|
Income tax expense at
26% normalized tax rate
|
|
5,237
|
|
0.02
|
|
12,739
|
|
0.04
|
Adjusted Net Income
/ Adjusted EPS
|
|
$14,905
|
|
$ 0.06
|
|
$
36,260
|
|
$ 0.14
|
Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that is
calculated as net cash provided by operating activities less cash
paid for fixed assets. Management believes that Free Cash Flow,
which measures the ability to generate additional cash from
business operations, is an important financial measure for use in
evaluating the company's financial performance.
The table below reflects the calculation of Free Cash Flow for
the thirteen weeks ended April 29,
2023 and April 30, 2022,
respectively.
(in
thousands)
|
|
13 Weeks
Ended
|
|
|
April 29,
2023
|
|
April 30,
2022
|
Net cash provided by
operating activities
|
|
$
37,651
|
|
$
57,519
|
Cash paid for fixed
assets
|
|
(62,050)
|
|
(65,910)
|
Free Cash
Flow
|
|
$
(24,399)
|
|
$
(8,391)
|
Adjusted EBITDA, Adjusted Net Income and Adjusted EPS
Footnotes
(1)
|
Mexico Joint Venture
EBITDA represents 50 percent of the entity's operating results for
all periods, as adjusted to reflect the results on a basis
comparable to Adjusted EBITDA. In the financial statements, this
joint venture is accounted for as an equity method investment and
reported net of depreciation and income taxes. Because such a
presentation would not reflect the adjustments made in the
calculation of Adjusted EBITDA, we include the 50 percent interest
in the company's Mexico joint venture on an Adjusted EBITDA basis
to ensure consistency. The table below presents a reconciliation of
Mexico joint venture net income to Mexico joint venture
EBITDA.
|
|
|
|
|
13 Weeks
Ended
|
(in
thousands)
|
|
April 29,
2023
|
|
April 30,
2022
|
Net income
|
|
$
6,259
|
|
$
5,133
|
Depreciation
|
|
5,708
|
|
4,294
|
Income tax
expense
|
|
4,074
|
|
2,997
|
Foreign currency loss
(gain)
|
|
127
|
|
(64)
|
Interest expense,
net
|
|
1,300
|
|
1,196
|
EBITDA
|
|
$ 17,468
|
|
$ 13,556
|
50% of
EBITDA
|
|
$
8,734
|
|
$
6,778
|
|
|
(2)
|
Acquisition-related
integration costs include direct costs resulting from acquiring and
integrating businesses. These include third-party professional and
legal fees and other integration-related costs that would not have
otherwise been incurred as part of the company's
operations.
|
(3)
|
Other costs include, as
incurred: restructuring costs and restructuring-related severance
costs; legal reserves associated with significant, non-ordinary
course legal or regulatory matters; and costs related to certain
significant strategic transactions.
|
(4)
|
We define net margin as
net income attributable to Class A and B-1 common stockholders
divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA
divided by net sales.
|
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SOURCE Petco - Investor Relations