Leslie’s, Inc. Announces Second Quarter Fiscal 2021 Financial Results; Raises Full Year Outlook


  • Record second quarter sales of $192.4 million, an increase of 52.3% from prior year quarter; comparable sales growth of 51.3% on a reported basis and 35.5% on a shifted basis as a result of the 53rd week in Fiscal 2020
  • GAAP net loss of $(6.5) million compared to $(29.8) million in the prior year quarter; Adjusted net loss of $(2.8) million compared to $(28.8) million in the prior year quarter, an improvement of $26.0 million
  • Adjusted EBITDA of $9.5 million compared to $(8.1) million in the prior year quarter, an improvement of $17.6 million
  • Raises Fiscal 2021 sales outlook by $75 million, Adjusted EBITDA by $25 million, and Adjusted net income per share by $0.10

PHOENIX, May 05, 2021 (GLOBE NEWSWIRE) -- 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 its financial results for the second quarter of Fiscal 2021.

Mike Egeck, Chief Executive Officer, commented on the results saying “We are very pleased with our second quarter performance which exceeded our expectations and produced record results for the quarter on both the top and bottom line. Broad-based industry tailwinds combined with our integrated and expanding physical and digital capabilities, as well as strong execution of our growth initiatives were the key drivers of this performance. In addition, the unique dynamics of severe weather in the south central U.S. and chlorine retail inflation were positive factors in the quarter.”

“As we look to the second half of our fiscal year, our growth initiatives are continuing to gain traction, our teams continue to execute at a high level and we are well prepared for what we believe will be a strong 2021 pool season. Our results to date combined with our expectations for the second half are driving another increase in our full year outlook,” added Mr. Egeck.

For the Thirteen Weeks Ended April 3, 2021 Highlights

  • Sales increased 52.3%, or $66.0 million, to $192.4 million from $126.4 million in the second quarter of 2020. Comparable sales on an unshifted basis increased 51.3% for the second quarter of 2021 compared to the second quarter of 2020. On a shifted basis, using a realigned period in 2020 for comparability given the 53rd week in Fiscal 2020, comparable sales increased 35.5%.
  • Gross profit increased 79.6% to $71.7 million from $39.9 million in the second quarter of 2020 and gross margin was 37.2% compared to 31.6% in the second quarter of 2020, an increase of 567 basis points.
  • SG&A increased to $70.4 million from $56.0 million in the second quarter of 2020, or an increase of $14.4 million, driven by the increase in overall sales and continued investments to support Company growth.
  • Operating income was $1.3 million compared to an operating loss of $(16.1) million in the second quarter of 2020.
  • Net loss improved to $(6.5) million compared to $(29.8) million in the second quarter of 2020. Adjusted net loss improved by $26.0 million to $(2.8) million from $(28.8) million in the second quarter of 2020.
  • Net loss per common share improved to $(0.03) compared to $(0.19) in the second quarter of 2020. Adjusted loss per common share improved by $0.17 to $(0.01) from $(0.18) in the second quarter of 2020.
  • Adjusted EBITDA improved by $17.6 million to $9.5 million from $(8.1) million in the second quarter of 2020.

For the Twenty-Six Weeks Ended April 3, 2021 Highlights

  • Sales increased 35.3%, or $88.0 million, to $337.4 million from $249.4 million for the same period of Fiscal 2020. Comparable sales on an unshifted basis increased 33.7% for Fiscal 2021 compared to the same period of Fiscal 2020. On a shifted basis, using a realigned period in 2020 for comparability given the 53rd week in Fiscal 2020, comparable sales increased 31.1%.
  • Gross profit increased 52.4% to $123.4 million from $81.0 million for the same period of Fiscal 2020 and gross margin was 36.6% compared to 32.5% in the same period of Fiscal 2020, an increase of 409 basis points.
  • SG&A increased to $147.9 million from $115.8 million for the same period of Fiscal 2020, or an increase of $32.1 million.
  • Operating loss was $(24.5) million compared to $(34.8) million for the same period of Fiscal 2020.
  • Net loss improved to $(36.7) million compared to $(56.0) million for the same period of Fiscal 2020. Adjusted net loss improved by $39.7 million to $(13.4) million from $(53.1) million for the same period of Fiscal 2020.
  • Net loss per common share improved to $(0.20) compared to $(0.36) in the same period of Fiscal 2020. Adjusted loss per common share improved by $0.27 to $(0.07) from $(0.34) for the same period of Fiscal 2020.
  • Adjusted EBITDA improved by $26.4 million to $9.3 million from $(17.1) million for the same period of Fiscal 2020.

Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents totaled $90.3 million and there were no borrowings under our revolver for Fiscal 2021 compared to cash and cash equivalents of $11.9 million and borrowings of $50.0 million under our revolver for the same period of Fiscal 2020.
  • Inventory totaled $277.9 million at the end of Fiscal 2021 compared to $244.7 million at end of the same period of Fiscal 2020.
  • Net cash used in operating activities totaled $111.5 million for Fiscal 2021 compared to $106.1 million for the same period of Fiscal 2020.
  • Capital expenditures totaled $9.5 million for Fiscal 2021 compared to $12.5 million for the same period of Fiscal 2020.

Fiscal 2021 Outlook
The Company raised guidance for the full year Fiscal 2021, a 52-week year. Fiscal 2020 included a 53rd week, which added approximately $18.0 million in sales, $1.5 million in net income, and $3.0 million in Adjusted EBITDA.

 Current OutlookPrior Outlook
Sales$1,250 to $1,270 million$1,175 to $1,195 million
GAAP net income$95 to $105 million$82 to $92 million
Adjusted net income$125 to $135 million$106 to $116 million
Adjusted EBITDA$225 to $235 million$202 to $208 million
Adjusted net income per share$0.65 to $0.70$0.55 to $0.60
Diluted share count193 million193 million

Conference Call Details
A conference call to discuss its financial results for the second quarter of Fiscal 2021 is scheduled for today, May 5, 2021 at 4:30 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 855-327-6837 (international callers please dial 1-631-891-4304) 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 online at https://ir.lesliespool.com/ for 90 days.

About Leslie's
Founded in 1963, Leslie's is the largest direct-to-consumer brand in the U.S. pool and spa care industry, serving residential, professional, and commercial consumers. Leslie's markets its products through more than 940 physical locations and multiple digital platforms. The company employs more than 5,000 associates, pool and spa care experts, and certified technicians who are passionate about empowering consumers with the knowledge, products, and solutions necessary to confidently maintain and enjoy their pools and spas.

Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses certain non-GAAP financial measures, including comparable sales growth and adjusted EBITDA, adjusted net income, and adjusted net income per share, to evaluate the effectiveness of its business strategies, to make budgeting decisions, and to compare its performance against that of other peer companies using similar measures. These non-GAAP financial measures should not be considered in isolation or as substitutes for the Company’s results as reported under GAAP. In addition, these non-GAAP financial 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 is a key measure used by management and our board of directors to assess our financial performance.

Adjusted EBITDA
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.

Adjusted EBITDA is defined as earnings before interest (including amortization of debt costs), taxes, depreciation, amortization, loss (gain) on disposition of assets, management fees, equity-based compensation expense, mark-to-market on interest rate cap, and special items. 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 should not be construed as an indicator of a company’s operating performance in isolation from, or as a substitute for, net income, 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 and Adjusted Net Income per Share
Adjusted net income and adjusted net income per share are additional key measures used by management and our board of directors to assess our financial performance. Adjusted net income and adjusted net income 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 is defined as net income adjusted to exclude loss (gain) on disposition of assets, management fees, equity-based compensation expense, mark-to-market on interest rate cap, and special items. Adjusted net income per share is defined as adjusted net income divided by the weighted average number of common shares outstanding.

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 facts 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 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;
  • 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, and the housing market;
  • our ability to implement technology initiatives that deliver the anticipated benefits, without disrupting our operations;
  • 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 the COVID-19 pandemic; and
  • other risks and uncertainties, including those listed in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2020, Quarterly Report on Form 10-Q for the quarter ended January 2, 2021, and subsequent filings with the U.S. Securities and Exchange Commission.

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. 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, events, or circumstances 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 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.

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.

Contact

Investors
Farah Soi/Caitlin Churchill
ICR
investorrelations@lesl.com

Media
Megan Gaffney
SHIFT Communications
media@lesl.com


Condensed Consolidated Statements of Operations
(amounts in thousands, except per share amounts)
(unaudited)

 Three Months Ended  Six Months Ended
 April 3, 2021  March 28, 2020  April 3, 2021  March 28, 2020
Sales$192,441  $126,377  $337,447  $249,355 
Cost of merchandise and services sold 120,758   86,464   214,049   168,364 
Gross profit 71,683   39,913   123,398   80,991 
Selling, general and administrative expenses 70,374   56,048   147,863   115,769 
Operating income (loss) 1,309   (16,135)  (24,465)  (34,778)
Other expense:              
Interest expense 8,126   22,709   19,642   45,126 
Loss on debt extinguishment 1,888      9,169    
Other expense, net 1,057   187   1,057   324 
Total other expense 11,071   22,896   29,868   45,450 
Loss before taxes (9,762)  (39,031)  (54,333)  (80,228)
Income tax benefit (3,310)  (9,205)  (17,624)  (24,215)
Net loss$(6,452) $(29,826) $(36,709) $(56,013)
Net loss per share              
Basic and diluted$(0.03) $(0.19) $(0.20) $(0.36)
Weighted average shares outstanding              
Basic and diluted 186,810   156,500   181,900   156,500 
                

Other Financial Data (1)

 Three Months Ended Six Months Ended
 April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020
Adjusted EBITDA$9,528  $(8,081) $9,285  $(17,085)
Adjusted net loss$(2,781) $(28,756) $(13,400) $(53,070)
Adjusted net loss per share$(0.01) $(0.18) $(0.07) $(0.34)


(1)See section titled “GAAP to Non-GAAP Reconciliation”.


Condensed Consolidated Balance Sheets

(amounts in thousands, except share and per share amounts)

 April 3, 2021  October 3, 2020  March 28, 2020
Assets(Unaudited)   (Audited)  (Unaudited)
Current assets          
Cash and cash equivalents$90,328  $157,072  $11,934 
Accounts and other receivables, net 41,733   31,481   30,924 
Inventories 277,860   148,966   244,662 
Prepaid expenses and other current assets 58,331   34,614   41,609 
Total current assets 468,252   372,133   329,129 
Property and equipment, net 63,632   66,391   72,169 
Operating lease right-of-use assets 181,581   177,655   200,746 
Goodwill and other intangibles, net 127,851   121,186   122,213 
Deferred tax assets 15,293   6,583    
Other assets 2,302   2,490   1,270 
Total assets$858,911  $746,438  $725,527 
Liabilities and stockholders’ deficit          
Current liabilities          
Accounts payable$181,524  $92,372  $143,197 
Accrued expenses 82,338   101,167   67,091 
Operating lease liabilities 55,395   54,459   59,721 
Income taxes payable    1,857    
Current portion of long-term debt 8,100   8,341   8,341 
Total current liabilities 327,357   258,196   278,350 
Deferred tax liabilities       4,273 
Operating lease liabilities, noncurrent 130,496   130,234   151,059 
Long-term debt, net 789,339   1,179,550   1,234,003 
Other long-term liabilities 2,729   5,457   5 
Total liabilities 1,249,921   1,573,437   1,667,690 
Commitments and contingencies          
Stockholders’ deficit          
Common stock, $ par value, shares authorized and 186,884,621 issued and outstanding as of April 3, 2021 and 156,500,000 shares authorized, issued and outstanding as of October 3, 2020 and March 28, 2020, respectively. 187   157   157 
Additional paid in capital (deficit) 194,605   (278,063)  (278,653)
Retained deficit (585,802)  (549,093)  (663,667)
Total stockholders’ deficit (391,010)  (826,999)  (942,163)
Total liabilities and stockholders’ deficit$858,911  $746,438  $725,527 


Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)

 Six Months Ended
 April 3, 2021  March 28, 2020
Operating Activities      
Net loss$(36,709) $(56,013)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 12,858   14,088 
Equity-based compensation 14,111   1,195 
Amortization of deferred financing costs and debt discounts 1,134   1,685 
Provision for doubtful accounts 64   149 
Deferred income taxes (8,711)  3,033 
(Gain) loss on disposition of assets (1,753)  470 
Loss on debt extinguishment 9,169    
Changes in operating assets and liabilities:      
Accounts and other receivables (10,316)  (11,046)
Inventories (127,814)  (93,933)
Prepaid expenses and other current assets (23,473)  (20,063)
Other assets 228   150 
Accounts payable and accrued expenses 64,332   50,829 
Income taxes payable (1,857)  (6,713)
Operating lease assets and liabilities, net (2,728)  10,034 
Net cash used in operating activities (111,465)  (106,135)
Investing Activities      
Purchases of property and equipment (9,490)  (12,478)
Acquisitions, net of cash acquired (6,040)  (6,188)
Proceeds from disposition of fixed assets 2,404   6 
Net cash used in investing activities (13,126)  (18,660)
Financing Activities      
Borrowings on revolving commitment    181,750 
Payments on revolving commitment    (131,750)
Repayment of long term debt (392,085)  (4,170)
Issuance of long term debt 907    
Payment of deferred financing costs (9,562)   
Proceeds from issuance of common stock upon initial public offering, net 458,587    
Net cash provided by financing activities 57,847   45,830 
Net decrease in cash and cash equivalents (66,744)  (78,965)
Cash and cash equivalents, beginning of period 157,072   90,899 
Cash and cash equivalents, end of period$90,328  $11,934 
Supplemental Disclosure of Cash Payments for:      
Interest$27,081  $44,762 
Income taxes 3,078   2,882 


GAAP to Non-GAAP Reconciliation
(amounts in thousands except per share amounts)
(unaudited)

 Three Months Ended  Six Months Ended 
 April 3, 2021  March 28, 2020  April 3, 2021  March 28, 2020 
Net loss$(6,452) $(29,826) $(36,709) $(56,013)
Interest expense 8,126   22,709   19,642   45,126 
Income tax benefit (3,310)  (9,205)  (17,624)  (24,215)
Depreciation and amortization expenses(a) 6,263   6,812   12,858   14,088 
Loss (gain) on disposition of fixed assets(b) 5   27   (1,753)  470 
Management fee(c)    617   382   1,940 
Equity-based compensation expense(d) 1,951   598   14,111   1,195 
Mark-to-market on interest rate cap(e)          22 
Loss on debt extinguishment(f) 1,888      9,169    
Costs related to equity offerings(g) 1,057      9,209    
Other(h)    187      302 
Adjusted EBITDA$9,528  $(8,081) $9,285  $(17,085)


 Three Months Ended  Six Months Ended 
 April 3, 2021  March 28, 2020  April 3, 2021  March 28, 2020 
Net loss$(6,452) $(29,826) $(36,709) $(56,013
Loss (gain) on disposition of fixed assets(b) 5   27   (1,753)  470 
Management fee(c)    617   382   1,940 
Equity-based compensation expense(d) 1,951   598   14,111   1,195 
Mark-to-market on interest rate cap(e)          22 
Loss on debt extinguishment(f) 1,888      9,169    
Costs related to equity offerings(g) 1,057      9,209    
Other(h)    187      302 
Tax effects of these adjustments(i) (1,230)  (359)  (7,809)  (986
Adjusted net loss$(2,781) $(28,756) $(13,400) $(53,070


 Three Months Ended  Six Months Ended 
 April 3, 2021  March 28, 2020  April 3, 2021  March 28, 2020 
Adjusted net loss per share$(0.01) $(0.18) $(0.07) $(0.34)
Weighted average shares outstanding               
Basic and diluted 186,810   156,500   181,900   156,500 

 

(a)Includes depreciation related to our distribution centers and stores, which is included within the cost of merchandise and services sold line item in our condensed consolidated statements of operations.
(b)Consists of loss (gain) loss on disposition of assets associated with store closures or the sale of property and equipment.
(c)Represents amounts paid or accrued in connection with our management services agreement. The management services agreement terminated upon the completion of our initial public offering during the six months ended April 3, 2021.
(d)Represents non-cash charges related to equity-based compensation.
(e)Includes non-cash charges related to the change in fair value of our interest rate cap agreements, which expired in March 2021.
(f)Represents non-cash expense due to the write-off of deferred financing costs related to our Term Loan modification during the three months ended April 3, 2021 and the repayment of our Senior Unsecured Notes during the six months ended April 3, 2021.
(g)Includes one-time payments of contractual amounts incurred in connection with our IPO that was completed in November 2020 and costs incurred for a follow-on equity offering in February 2021.
(h)Other non-recurring, non-cash or discrete items as determined by management, such as transaction related costs, personnel-related costs, legal expenses, strategic project costs, and miscellaneous costs.
(i)Represents the tax effect of the total adjustments based on our actual statutory tax rate for Fiscal 2020 and our estimated statutory tax rate for Fiscal 2021.