Second Quarter 2024 Earnings
May 8, 2024
Disclaimer
INDUSTRY INFORMATION
This presentation includes market data and certain other statistical information and estimates that are based on reports and other publications from industry analysts, market research firms, and other independent sources, as well as management's own good faith estimates and analyses. We believe these third-party reports to be reputable, but have not independently verified the underlying data sources, methodologies, or assumptions. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information.
NON-GAAP FINANCIAL MEASURES
Included in this presentation and the accompanying oral presentation are certain non-GAAP financial measures and other operating measures designed to supplement the Company's financial information presented in accordance with U.S. generally accepted accounting principles ("GAAP"). These non-GAAP 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. Our presentation of the non-GAAP measures and other operating measures, which may include adjustments to exclude other unusual or non-recurring items, should not be construed to imply that our future results will be unaffected by these or other unexpected items. See the appendix to this presentation for a reconciliation of each of these non-GAAP measures and other operating measures to their most comparable financial measure compiled in accordance with GAAP.
FORWARD-LOOKING STATEMENTS
This presentation 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 presentation, including statements regarding our future results of operations or financial condition, business strategy, legal proceedings, market size, growth opportunities, industry expectations, value proposition, plans and objectives of management for future operations, and expected industry dynamics, 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 including evolving legal standards and regulations concerning environmental, social and governance ("ESG") matters; 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 material weaknesses or other deficiencies in our internal control over financial reporting 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 U.S. Securities and Exchange Commission, including but not limited to, our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this presentation 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 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 presentation. 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.
The forward-looking statements made in this presentation 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 presentation, to reflect events or circumstances after the date of this presentation or to reflect new information, changed expectations, the occurrence of unanticipated events or otherwise, except as required by law.
To the extent forward looking non-GAAP financial measures are provided herein, they are not reconciled to comparable forward-looking GAAP measures as a reconciliation 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.
2Q FY2 0 24 | 2 |
EARNINGS |
Second Quarter 2024 Earnings Call
Mike Egeck
Chief Executive Officer
Scott Bowman
Chief Financial Officer
: LESL
3
Our Mission
As the trusted leader in pool and spa care, we are committed to delivering unparalleled expertise, service, and innovative solutions
Backyard moments that
become memories
Purpose
Consumer
Need
Pride and joy in the pool | Core | Get it right | Here to serve | |||
Beliefs | Make it easy | Have some fun | ||||
A clean, safe, and beautiful pool | Leslie's | Trusted pool expertise and products | ||||
Solution | ||||||
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Leslie's is the largest and most trusted direct-to-consumer brand in the advantaged pool and spa industry
Pool & Spa Care Industry
Large & Fragmented Market: 14M+ bodies of water / $15B+ TAM
Consistent Growth: The installed base of pools has grown each year for 50+ years
Annuity-likeDemand: Predominately non- discretionary products
Favorable Dynamics: Continued investment in the home and migration to the sunbelt
1,000+ locations, more than our 20 largest competitors combined
80% of U.S. pools are within 20 miles of a
Leslie's location
Digital sales ~5x our largest competitor
National, customer-centricloyalty program
5
Second Quarter Key Takeaways
Second quarter bottom-line results largely in-line with expectations as improved conversion and expense management offset weather-driventop-line impacts
Sales impacted by lower traffic due to unfavorable weather across all markets
Gross margin impacted by occupancy deleverage and the June 2023 chemical price actions
Strong inventory and SG&A management:
- 23% reduction in inventory vs. prior year
- 12% reduction in SG&A vs. prior year
- In stock levels, service metrics and NPS scores remain at high levels
Advantaged pool industry fundamentals and long-term secular tailwinds remain intact
Executing strategic initiatives to capture long-term growth and profit opportunity as industry normalizes while taking direct action to impact balance of fiscal year
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Second Quarter 2024 Results
(11)%
Sales change
Sales of $189M
- Includes negative 260bps impact of June 2023 chemical price actions
- Includes negative 180bps impact of two-day calendar shift vs. 2Q FY2023
- Comp sales: (12)%
- Two-yearstack comp: (26)%
PRO Pool | Residential Pool | Residential Hot Tub |
(9)% | (12)% | (14)% |
Sales change | Sales change | Sales change |
Key Updates
28.8%
Gross margin
Gross Profit of $54M
- Year-over-yearchange in gross profit: (24)%
- Gross margin rate contracted 464bps vs. prior year quarter
• Total sales (11)% driven by: |
• Average Order Value (5)% and Transactions (6)% |
• Average Revenue per Customer (8)% and Customer File (3)% |
• Non-discretionary sales (11)% |
• Discretionary sales (13)% |
• Chemical sales (11)%, including a (575) bps impact from the June 2023 chemical price actions |
• Equipment sales (10)% |
Adj. EBITDA1 of $(19)M
• Adj. EBITDA1 lower by $11M vs. prior year quarter
Adj. EPS1 of $(0.17)
• Compared to $(0.14) a year ago
• | Unfavorable weather across non-seasonal and seasonal markets |
• | Traffic declined 10% year-over-year driven by unfavorable weather |
2Q FY2 0 24 | Note: Unless otherwise stated, all comparisons are relative to the prior year period | 7 |
1 See Appendix for reconciliation of non-GAAP measures to the most directly comparable GAAP measures. | ||
EARNINGS |
Sales Bridge - Second Quarter 2024
Second Quarter 2024 Sales Bridge ($M)
$(16)
$213 | $(4) |
$(4)
$189
2Q23 | Residential | PRO | Residential | 2Q24 |
Sales | Pool | Pool | Hot Tub | Sales |
2Q FY2 0 24 | 8 |
EARNINGS |
Gross Margin Bridge - Second Quarter 2024
Second Quarter 2024 Gross Margin Bridge
33.44%
(131)bps
(91)bps
(10)bps
(44)bps
(229)bps
28.80%
41bps
2Q23 | Chemical Price Actions | Other Product Rate | Rebates | DC Costs | Occupancy | Inventory Adjustments | 2Q24 |
Margin | Margin |
2Q FY2 0 24 | 9 |
EARNINGS |
Strategic Growth Initiatives Update
Second Quarter 2024 Update | ||
Grow Our | • Customer file contracted 3% in 2Q FY24 vs. 8% in 1Q FY24 as file continues to normalize from | |
Consumer File | pandemic spike | |
Deepen Customer | • Average revenue per customer declined 8% year-over-year | |
• Average revenue per customer for loyalty members outperformed, down 4% year-over-year | ||
Relationships | ||
• 4,088 PRO Partner contracts in place | ||
The PRO Market | • 102 PRO locations | |
• Leslie's PRO website supporting PRO Partners | ||
Location Growth | • On track to open 15 new stores for FY24 pool season | |
Disruptive | • AccuBlue Home® smart tech water testing device continuing to resonate with | |
Innovation | customers and device production on plan to support expected FY24 demand | |
2Q FY2 0 24 | 10 |
EARNINGS |
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Disclaimer
Leslie's Inc. published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 21:06:26 UTC.