Leslie’s, Inc. Announces Record Results for Third Quarter Fiscal 2021; Raises Full Year Outlook

Phoenix, Arizona, UNITED STATES


  • Third quarter sales of $596.5 million compared to $479.9 million in the prior year quarter, an increase of 24.3%; comparable sales growth of 23.9% on a reported basis and 19.4% on a shifted basis as a result of the 53rd week in fiscal 2020
  • Net income of $118.8 million compared to $71.9 million in the prior year quarter, an increase of 65.2%; Adjusted net income of $124.4 million compared to $73.7 million in the prior year quarter, an increase of 68.8%
  • Adjusted EBITDA of $179.3 million compared to $119.8 million in the prior year quarter, an increase of 49.7%
  • Diluted net income per share of $0.61 compared to $0.46 in the prior year quarter. Adjusted diluted net income per share of $0.64 compared to $0.47 in the prior year quarter.
  • Raises fiscal 2021 sales outlook to $1,315 million, Adjusted EBITDA to $265 million, and Adjusted diluted net income per share to $0.83 at the midpoint of the ranges.

PHOENIX, Aug. 04, 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 third quarter of fiscal 2021.

Mike Egeck, Chief Executive Officer, commented, “We delivered a record third quarter marking the largest sales, gross profit, and EBITDA quarter in our history. These results reflect the great efforts and contributions of all of our associates and vendor partners who navigated constrained supply chains to meet elevated consumer demand. This financial performance also demonstrates continued strong execution against our strategic initiatives. As we look ahead, we remain encouraged by consumer demand and the momentum we are seeing across our growth initiatives, both of which position us well for the remainder of the year and beyond.”

For the Thirteen Weeks Ended July 3, 2021 Highlights

  • Sales increased to $596.5 million compared to $479.9 million in the prior year period, an increase of $116.6 million or 24.3%. Comparable sales on a reported basis increased 23.9% compared to the prior year period. On a shifted basis, using a realigned period in 2020 for comparability given the 53rd week in fiscal 2020, comparable sales increased 19.4%.
  • Gross profit increased to $283.7 million compared to $210.8 million in the prior year period, an increase of $72.9 or 34.6%, and gross margin was 47.6% compared to 43.9% in the prior year period, an increase of 364 basis points.
  • SG&A increased to $117.3 million compared to $99.2 million in the prior year period, an increase of $18.1 million or 18.2%, driven by the increase in overall sales and continued investments to support Company growth. SG&A as a percentage of sales was 19.7% compared to 20.7% in the prior year period, a decrease of 101 basis points.
  • Operating income was $166.4 million compared to $111.6 million in the prior year period.
  • Net income increased to $118.8 million compared to $71.9 million in the prior year period.
  • Adjusted net income increased to $124.4 million compared to $73.7 million in the prior year period, an increase of $50.7 million or 68.8%.
  • Diluted net income per share increased to $0.61 compared to $0.46 in the prior year period. Adjusted diluted net income per share increased to $0.64 compared to $0.47 in the prior year period, an increase of $0.17 per share or 36.2%.
  • Adjusted EBITDA increased to $179.3 million compared to $119.8 million in the prior year period, an increase of $59.5 million or 49.7%. Adjusted EBITDA as a percentage of sales was 30.1% compared to 25.0% in the prior year period, an increase of 510 basis points.

For the Thirty-Nine Weeks Ended July 3, 2021 Highlights

  • Sales increased to $934.0 million compared to $729.3 million in the prior year period, an increase of $204.7 million or 28.1%. Comparable sales on a reported basis increased 27.2% for the same period of 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 23.4%.
  • Gross profit increased to $407.1 million compared to $291.8 million in the prior year period, an increase of $115.3 million or 39.5%, and gross margin was 43.6% compared to 40.0% in the prior year period, an increase of 358 basis points.
  • SG&A increased to $265.1 million compared to $214.9 million in the prior year period, an increase of $50.2 million or 23.4%. SG&A as a percentage of sales was 28.4% compared to 29.5% for the same period of fiscal 2020, a decrease of 109 basis points.
  • Operating income was $142.0 million compared to $76.8 million in the prior year period.
  • Net income increased to $82.1 million compared to $15.9 million in the prior year period.
  • Adjusted net income increased to $111.0 million compared to $20.7 million in the prior year period, an increase of $90.3 million.
  • Diluted net income per share increased to $0.43 compared to $0.10 in the prior year period. Adjusted diluted net income per share increased to $0.59 compared to $0.13 for the prior year period, an increase of $0.46 per share
  • Adjusted EBITDA increased to $188.6 million compared to $102.7 million in the prior year period, an increase of $85.9 million or 83.6%. Adjusted EBITDA as a percentage of sales was 20.2% compared to 14.1% for the prior year period, an increase of 611 basis points.

Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents totaled $309.1 million at the end of the third quarter fiscal 2021 compared to cash and cash equivalents of $148.9 million at the end of the prior year period. There were no borrowings under our revolver as of July 3, 2021 or June 27, 2020.
  • Inventories totaled $224.5 million at the end of the third quarter fiscal 2021 compared to $181.1 million at end of the same period of fiscal 2020. The Company continues to invest in inventory to meet heightened consumer demand.
  • Net cash provided by operating activities totaled $118.4 million for the first nine months of fiscal 2021 compared to $85.9 million for the same period of fiscal 2020.
  • Capital expenditures totaled $17.8 million for the first nine months of fiscal 2021 compared to $15.5 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 million in sales, $1.5 million in net income, and $3.0 million in Adjusted EBITDA.

 Current OutlookPrior Outlook
Sales$1,305 to $1,325 million$1,280 to $1,300 million
Net income$125 to $130 million$115 to $125 million
Adjusted net income$155 to $160 million$145 to $155 million
Adjusted EBITDA$260 to $270 million$245 to $255 million
Adjusted net income per share$0.80 to $0.85$0.75 to $0.80
Diluted share count192 million193 million

Conference Call Details
A conference call to discuss its financial results for the third quarter of fiscal 2021 is scheduled for today, August 4, 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 and Other Operating 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 and other operating 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 and other operating 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 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 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 other non-recurring, non-cash or discrete 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 included in the calculation of 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 other non-recurring, non-cash or discrete items. Adjusted diluted net income per share is defined as Adjusted net income divided by the diluted 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;
  • impacts on our business from cyber and other security threats or disruptions; 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, Quarterly Report on Form 10-Q for the quarter ended April 3, 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. 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, 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. 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.

Contact

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

 
 
Condensed Consolidated Statements of Income
(amounts in thousands, except per share amounts)
(unaudited)
 
  Three Months Ended
 Nine Months Ended
  July 3, 2021
 June 27, 2020
 July 3, 2021
 June 27, 2020
Sales $596,543  $479,929  $933,991  $729,285 
Cost of merchandise and services sold  312,845   269,160   526,895   437,526 
Gross profit  283,698   210,769   407,096   291,759 
Selling, general and administrative expenses  117,264   99,165   265,127   214,933 
Operating income  166,434   111,604   141,969   76,826 
Other expense:                
Interest expense  7,399   19,472   27,041   64,597 
Loss on debt extinguishment        9,169    
Other expenses, net  861   585   1,917   910 
Total other expense  8,260   20,057   38,127   65,507 
Income before taxes  158,174   91,547   103,842   11,319 
Income tax expense (benefit)  39,372   19,613   21,749   (4,602)
Net income $118,802  $71,934  $82,093  $15,921 
Net income per share                
Basic $0.63  $0.46  $0.45  $0.10 
Diluted $0.61  $0.46  $0.43  $0.10 
Weighted average shares outstanding                
Basic  188,264   156,500   184,021   156,500 
Diluted  194,200   156,500   189,603   156,500 

Other Financial Data (1)

  Three Months Ended  Nine Months Ended 
  July 3, 2021  June 27, 2020
 July 3, 2021
 June 27, 2020
Adjusted EBITDA $179,346  $119,800  $188,631  $102,714 
Adjusted net income $124,364  $73,737  $110,964  $20,667 
Adjusted net income per share - Basic $0.66  $0.47  $0.60  $0.13 
Adjusted net income per share - Diluted $0.64  $0.47  $0.59  $0.13 

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

 
Condensed Consolidated Balance Sheets
(amounts in thousands, except share and per share amounts)
 
  July 3, 2021
 October 3, 2020
 June 27, 2020
Assets (Unaudited)
 (Audited)
 (Unaudited)
Current assets            
Cash and cash equivalents $309,077  $157,072  $148,901 
Accounts and other receivables, net  47,848   31,481   35,854 
Inventories  224,526   148,966   181,108 
Prepaid expenses and other current assets  28,615   34,614   24,539 
Total current assets  610,066   372,133   390,402 
Property and equipment, net  66,363   66,391   69,254 
Operating lease right-of-use assets  169,001   177,655   191,343 
Goodwill and other intangibles, net  127,740   121,186   121,711 
Deferred tax assets  6,386   6,583    
Other assets  18,238   2,490   1,193 
Total assets $997,794  $746,438  $773,903 
Liabilities and stockholders’ deficit            
Current liabilities            
Accounts payable $155,525  $92,372  $133,090 
Accrued expenses  117,888   101,167   112,628 
Operating lease liabilities  53,700   54,459   63,606 
Income taxes payable  18,906   1,857    
Current portion of long-term debt  8,100   8,341   8,341 
Total current liabilities  354,119   258,196   317,665 
Deferred tax liabilities        782 
Operating lease liabilities, noncurrent  118,941   130,234   142,307 
Long-term debt, net  787,731   1,179,550   1,182,780 
Other long-term liabilities  2,729   5,457   1 
Total liabilities  1,263,520   1,573,437   1,643,535 
Commitments and contingencies            
Stockholders’ deficit            
Common stock, $0.001 par value, 1,000,000,000 shares authorized
and 189,284,566 issued and outstanding as of July 3, 2021 and
156,500,000 shares authorized, issued and outstanding as of
October 3, 2020 and June 27, 2020, respectively.
  189   157   157 
Additional paid in capital (deficit)  201,085   (278,063)  (278,056)
Retained deficit  (467,000)  (549,093)  (591,733)
Total stockholders’ deficit  (265,726)  (826,999)  (869,632)
Total liabilities and stockholders’ deficit $997,794  $746,438  $773,903 


 
Condensed Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
  Nine Months Ended 
  July 3, 2021
 June 27, 2020
Operating Activities        
Net income $82,093  $15,921 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  19,205   20,462 
Equity-based compensation  20,591   1,792 
Amortization of deferred financing costs and debt discounts  1,551   2,548 
Provision for doubtful accounts  134   368 
Deferred income taxes  197   (457)
(Gain) loss on disposition of assets  (1,668)  486 
Loss on debt extinguishment  9,169    
Changes in operating assets and liabilities:        
Accounts and other receivables  (16,501)  (16,194)
Inventories  (74,401)  (30,380)
Prepaid expenses and other current assets  6,289   (2,993)
Other assets  (15,696)  227 
Accounts payable and accrued expenses  73,761   86,283 
Income taxes payable  17,049   (6,713)
Operating lease assets and liabilities, net  (3,397)  14,571 
Net cash provided by operating activities  118,376   85,921 
Investing Activities        
Purchases of property and equipment  (17,799)  (15,483)
Acquisitions, net of cash acquired  (6,806)  (6,188)
Proceeds from disposition of fixed assets  2,429   7 
Net cash used in investing activities  (22,176)  (21,664)
Financing Activities        
Borrowings on revolving commitment     238,750 
Payments on revolving commitment     (238,750)
Repayment of long term debt  (394,110)  (6,255)
Issuance of long term debt  907    
Payment of deferred financing costs  (9,579)   
Proceeds from issuance of common stock upon initial public offering, net  458,587    
Net cash provided by (used in) financing activities  55,805   (6,255)
Net increase in cash and cash equivalents  152,005   58,002 
Cash and cash equivalents, beginning of period  157,072   90,899 
Cash and cash equivalents, end of period $309,077  $148,901 
Supplemental Disclosure of Cash Payments for:        
Interest $29,549  $68,599 
Income taxes $4,503  $2,832 


GAAP to Non-GAAP Reconciliation
(amounts in thousands except per share amounts)
(unaudited)
 
  Three Months Ended
 Nine Months Ended
  July 3, 2021
 June 27, 2020
 July 3, 2021
 June 27, 2020
Net income $118,802  $71,934  $82,093  $15,921 
Interest expense  7,399   19,472   27,041   64,597 
Income tax expense  39,372   19,613   21,749   (4,602)
Depreciation and amortization expenses(a)  6,347   6,374   19,205   20,462 
Loss (gain) on disposition of fixed assets(b)  85   16   (1,668)  486 
Management fee(c)     1,209   382   3,148 
Equity-based compensation expense(d)  6,480   597   20,591   1,792 
Mark-to-market on interest rate cap(e)           22 
Loss on debt extinguishment(f)        9,169    
Costs related to equity offerings(g)  778      9,986    
Other(h)  83   585   83   888 
Adjusted EBITDA $179,346  $119,800  $188,631  $102,714 
                 
  Three Months Ended  Nine Months Ended 
  July 3, 2021
 June 27, 2020
 July 3, 2021
 June 27, 2020
Net income $118,802  $71,934  $82,093  $15,921 
Loss (gain) on disposition of fixed assets(b)  85   16   (1,668)  486 
Management fee(c)     1,209   382   3,148 
Equity-based compensation expense(d)  6,480   597   20,591   1,792 
Mark-to-market on interest rate cap(e)           22 
Loss on debt extinguishment(f)        9,169    
Costs related to equity offerings(g)  778      9,986    
Other(h)  83   585   83   888 
Tax effects of these adjustments(i)  (1,864)  (604)  (9,672)  (1,590)
Adjusted net income $124,364  $73,737  $110,964  $20,667 
                 
  Three Months Ended  Nine Months Ended 
  July 3, 2021
 June 27, 2020
 July 3, 2021
 June 27, 2020
Adjusted net income per share - basic $0.66  $0.47  $0.60  $0.13 
Adjusted net income per share - diluted $0.64  $0.47  $0.59  $0.13 
Weighted average shares outstanding                
Basic  188,264   156,500   184,021   156,500 
Diluted  194,200   156,500   189,603   156,500 


(a)Includes depreciation related to our distribution centers and stores, which is included in cost of merchandise and services sold in our condensed consolidated statements of income.
(b)Consists of loss (gain) 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 which was terminated upon the completion of our initial public offering in November 2020.
(d)Represents non-cash charges related to equity-based compensation included in selling, general and administrative expenses in our condensed consolidated statements of income.
(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 and the repayment of our Senior Unsecured Notes during the nine months ended July 3, 2021.
(g)Includes one-time payments of contractual amounts incurred in connection with our IPO that was completed in November 2020, which are reported in selling, general and administrative expenses, and costs incurred for follow-on equity offerings in February and June 2021, which are reported in other expenses, net in our condensed consolidated statements of income.
(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.