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Core Insights - Leslie's, Inc. reported quarterly earnings of $0.09 per share, significantly missing the Zacks Consensus Estimate of $1.12 per share, representing an earnings surprise of -91.96% [1] - The company posted revenues of $389.21 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 5.64%, but down from $397.86 million year-over-year [2] - The stock has underperformed, losing approximately 93.4% since the beginning of the year, while the S&P 500 gained 15.8% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$4.04 on revenues of $165.7 million, and -$1.34 on revenues of $1.21 billion for the current fiscal year [7] - The estimate revisions trend for Leslie's was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Consumer Products - Staples industry, to which Leslie's belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Another company in the same industry, Ollie's Bargain Outlet, is expected to report quarterly earnings of $0.71 per share, reflecting a year-over-year increase of 22.4% [9]

Financial Data and Key Metrics Changes - Net sales for Q4 were $389.2 million, a 2.2% decline from $397.9 million in the same quarter last year [26] - Same-store sales decreased by 6.8% on a 13-week basis compared to the same period in fiscal year 2024 [27] - Adjusted EBITDA for Q4 increased to $45.2 million from $43 million in Q4 2024 [31] - Net loss for Q4 was $162.8 million, or $17.54 per diluted share, compared to a net loss of $9.9 million, or $1.07 per diluted share in the prior year [30] - Full year 2025 sales were approximately $1.24 billion, down from $1.33 billion in 2024 [32] Business Line Data and Key Metrics Changes - Chemicals category sales were down approximately 7.1%, and equipment category sales were down 7.6% on a 13-week comparable basis [27] - The company experienced a net loss of over 160,000 residential customers, with a decline in residential traffic of 8.6% in 2025 [6][10] Market Data and Key Metrics Changes - The company noted a significant price-value challenge leading to market share loss [5] - The competitive pricing environment in Q4 was influenced by excess supply and aggressive pricing from competitors [80] Company Strategy and Development Direction - The company is focusing on cost optimization, cash and capital management, and improving the price-value equation [4][6] - Plans to close 80 to 90 underperforming stores, which will impact annual sales by approximately $25 million to $35 million but improve net EBITDA by $4 million to $10 million [17][34] - The company aims to enhance its customer value proposition through targeted marketing and improved pricing strategies [8][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment and its impact on consumer spending [38] - The company expects to generate the majority of its sales and earnings in the second half of the year due to the seasonal nature of the industry [38] - For fiscal 2026, the company anticipates sales between $1.1 billion and $1.25 billion and adjusted EBITDA of $55 million to $75 million [39] Other Important Information - The company is implementing a comprehensive expense reduction initiative and renegotiating contracts with vendors and suppliers [35] - Inventory levels were reduced by $26 million year-over-year, with a focus on improving in-stock percentages on core SKUs [29][32] Q&A Session Summary Question: Are supplier partners supporting the turnaround efforts? - Management confirmed that vendor partners have been supportive, allowing for better inventory forecasts and improved in-stock positions [49][51] Question: How much of the EBITDA guide is expected to convert into free cash flow? - The midpoint of the EBITDA guide assumes free cash flow positivity for the year [53] Question: Where do you see the most opportunity in pricing? - The focus is on key value items, particularly in the chemicals category, with a strategy to remain competitive against specialty and big box retailers [60][61] Question: What is the impact of store closures on revenue? - The closures are expected to have a $25 million to $35 million impact on revenue, but the majority of the stores being closed were unprofitable [70][72] Question: What is the plan to regain lost customers? - The company plans to target lost customers with customized marketing efforts based on their previous purchasing behavior [74][76] Question: Can you comment on competitive dynamics in Q4? - Management noted aggressive pricing in the marketplace and the need to remain competitive, which has led to sequential improvements in performance [80]

Financial Data and Key Metrics Changes - Net sales for Q4 were $389.2 million, a decline of 2.2% from $397.9 million in the same quarter last year [26] - Same-store sales decreased by 6.8% on a 13-week basis compared to the same period in fiscal year 2024 [27] - Gross margin for Q4 increased to 38.6% from 36% in the prior year, driven by favorable vendor rebates and freight costs [29] - Net loss for Q4 was $162.8 million, or $17.54 per diluted share, compared to a net loss of $9.9 million, or $1.07 per diluted share in the same quarter last year [30] - Adjusted EBITDA for Q4 increased to $45.2 million from $43 million in Q4 2024 [31] - Full year 2025 sales were approximately $1.24 billion, down from $1.33 billion in 2024 [31] Business Line Data and Key Metrics Changes - Chemicals sales were down approximately 7.1%, and equipment sales were down 7.6% on a 13-week comparable basis [27] - The company experienced a net loss of over 160,000 residential customers, with a decline in residential traffic of 8.6% in 2025 [6][10] Market Data and Key Metrics Changes - The company noted a competitive pricing environment in Q4, which affected sales performance [80] - The company is focusing on improving its price-value perception to regain market share lost due to pricing challenges [6][10] Company Strategy and Development Direction - The company is implementing immediate actions to improve operations and accelerate financial profitability, including closing 80-90 underperforming stores [7][17] - A restructuring of field teams is underway to enhance customer relationships and drive growth [11] - The company is focusing on a customer-centric approach, enhancing its value proposition through targeted marketing and pricing strategies [12][44] - Plans to optimize inventory and reduce SKU counts by over 2,000 are in place to improve operational efficiency [20][37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment and its impact on consumer spending, but expressed confidence in the company's strategic direction [38] - The company expects to generate the majority of its sales and earnings in the second half of the year, consistent with the seasonal nature of the industry [39] - Guidance for fiscal 2026 includes expected sales of $1.1 billion to $1.25 billion and adjusted EBITDA of $55 million to $75 million [39] Other Important Information - The company ended the fiscal year with no outstanding borrowings on its line of credit and $752 million of net long-term debt [32] - A $184 million impairment charge was recorded in Q4, primarily related to goodwill and the closure of underperforming stores [30] Q&A Session Summary Question: Are supplier partners supporting the turnaround efforts? - Management confirmed that vendor partners have been supportive, allowing for better inventory forecasts and improved in-stock positions [49][51] Question: What is the expected free cash flow conversion for this year? - The midpoint of the guidance assumes free cash flow positivity for the year [52] Question: Where do the most pricing opportunities lie? - The focus is on key value items, particularly in the chemicals category, with a strategy to remain competitive against other retailers [60] Question: What is the impact of store closures on revenue? - The closures are expected to impact annual sales by approximately $25-$35 million, but the majority of the stores being closed were unprofitable [70][72] Question: How does the company plan to regain lost customers? - Targeted marketing efforts will be employed to reach former customers, leveraging data from the Pool Perks Loyalty Program [74][76] Question: What are the competitive dynamics observed in Q4? - Management noted aggressive pricing in the marketplace and the need to remain competitive, which has led to sequential improvements in performance [80]

Financial Data and Key Metrics Changes - Net sales for Q4 2025 were $389.2 million, a 2.2% decline from $397.9 million in Q4 2024, with the 53rd week contributing an estimated $18.3 million in net sales [26][27] - Same-store sales decreased by 6.8% in Q4 2025 compared to the same period in 2024, with chemicals down approximately 7.1% and equipment down 7.6% [27] - Adjusted EBITDA for Q4 increased to $45.2 million from $43 million in Q4 2024, while the net loss for Q4 was $162.8 million compared to a net loss of $9.9 million in the prior year [30][31] Business Line Data and Key Metrics Changes - The company experienced a net loss of over 160,000 residential customers in 2025, with a decline in residential traffic of 8.6% [6][30] - The company is focusing on improving the price-value equation on key items to regain lost customers and improve traffic performance [6][11] Market Data and Key Metrics Changes - The competitive landscape saw aggressive pricing strategies from competitors, impacting the company's pricing and sales performance [58] - The company is adjusting its pricing strategy to ensure competitiveness, particularly in the chemicals category, which is a key focus area [50][51] Company Strategy and Development Direction - The company is undergoing a transformation to achieve sustainable, profitable growth, focusing on cost optimization, cash management, and capital structure [4][24] - Key initiatives include closing 80-90 underperforming stores, optimizing inventory, and enhancing customer value propositions through targeted marketing [7][18][34] - The company aims to become America's one-stop shop for pool care by integrating services and improving customer relationships [12][43] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment and its impact on consumer spending, emphasizing the need for strategic pricing and operational efficiency [39][41] - The outlook for fiscal 2026 includes expected sales of $1.1 billion to $1.25 billion and adjusted EBITDA of $55 million to $75 million, with a focus on long-term value creation [40][41] Other Important Information - The company is committed to transparent communication and has engaged advisors to identify opportunities for enhancing profitability and optimizing operations [41][42] - A significant impairment charge of $184 million was recorded in Q4, primarily related to goodwill and store closures [29][30] Q&A Session Summary Question: Are supplier partners supporting the turnaround efforts? - Management confirmed strong support from vendor partners, which has been crucial for maintaining inventory levels and improving in-stock positions [46][47] Question: What is the expected free cash flow conversion for this year? - The midpoint of the EBITDA guidance assumes free cash flow positivity for the year, although specific guidance was not provided [48] Question: Where do you see the most opportunity in pricing? - The focus is on optimizing prices for key value items, particularly in the chemicals category, to remain competitive against other retailers [49][50] Question: What is the impact of store closures on revenue? - The closure of 80-90 underperforming stores is expected to impact annual sales by approximately $25-$35 million, but will improve net EBITDA by $4-$10 million [34][55] Question: How will the company regain lost customers? - The company plans to target lost customers with personalized marketing efforts, leveraging data from the Pool Perks Loyalty Program to efficiently allocate marketing spend [56] Question: What are the competitive dynamics observed in Q4? - Management noted high competitive pricing in the marketplace, which led to aggressive pricing strategies to maintain competitiveness [58] Question: What are the biggest learnings from the strategic pillar framework? - The strategic framework has unified the team around a common vision, with a focus on improving price value to regain market share [60][61]

Financial Performance - Fourth quarter sales were $389.2 million, a decrease of 2.2% compared to $397.9 million in the prior year period[3]. - Adjusted EBITDA increased to $45.2 million compared to $43.0 million in the prior year period[3]. - The net loss for the fourth quarter was $(162.8) million compared to $(9.9) million in the prior year period[3]. - Full year fiscal 2025 sales were $1,242.0 million, a decrease of 6.6% compared to $1,330.1 million in the prior year[9]. - Gross profit for the fourth quarter was $150.1 million, an increase of 4.8% compared to $143.2 million in the prior year[3]. - Basic and diluted earnings per share for the three months ended October 4, 2025, were both $(17.54), compared to $(1.07) for the same period in 2024[23]. - Adjusted net income for the year ended October 4, 2025, was $(43,664), compared to $(1,084) for the year ended September 28, 2024[25]. Impairments and Valuation - The company recorded an impairment of $183.8 million, including $180.7 million for goodwill[3][9]. - The company incurred impairments of $183,826 for the three months ended October 4, 2025, with no impairments reported for the same period in 2024[23]. - The company reported a non-cash change in valuation allowance for deferred taxes, impacting income tax benefit (expense) in the condensed consolidated statements of operations[35]. - The tax effect of total adjustments was based on the combined U.S. federal and state statutory tax rates, reflected in income tax benefit (expense) in the condensed consolidated statements of operations[35]. Store Closures and Operational Changes - The company plans to close 80 to 90 underperforming stores and one distribution center, which is expected to yield immediate EBITDA improvement for FY26[1][2]. - Inventory efficiency improved with a year-over-year reduction of approximately 10%[1][2]. Future Projections - Fiscal 2026 sales guidance is projected between $1,100 million and $1,250 million, with adjusted EBITDA expected between $55 million and $75 million[6]. Cash and Assets - Cash and cash equivalents totaled $64.3 million as of October 4, 2025, a decrease of $44.2 million compared to $108.5 million as of September 28, 2024[9]. - Total current assets decreased to $328,789 as of October 4, 2025, from $422,434 as of September 28, 2024[28]. - Total liabilities decreased to $1,149,467 as of October 4, 2025, from $1,227,474 as of September 28, 2024[28]. - The company had cash and cash equivalents of $64,340 as of October 4, 2025, down from $108,505 as of September 28, 2024[28]. Sales Data - Total sales for the three months ended October 4, 2025, were $389,206, a decrease of 2% from $397,859 for the same period in 2024[23]. - Gross profit for the three months ended October 4, 2025, was $150,094, an increase of 5.1% compared to $143,214 for the same period in 2024[23]. - Adjusted EBITDA for the three months ended October 4, 2025, was $45,163, an increase from $42,972 for the same period in 2024[25].

Core Insights - Leslie's, Inc. reported fourth quarter sales and adjusted EBITDA that exceeded the high end of its guidance range, indicating a positive operational performance despite challenges [1][2] - The company plans to close 80 to 90 underperforming stores and one distribution center, which is expected to yield immediate EBITDA improvement for fiscal year 2026 [1][2] - Leslie's aims to improve its cost structure by reducing inventory by approximately 10% year-over-year and achieving direct cost reductions of $7 million to $12 million, which will be reinvested into enhancing customer value [2] Financial Performance - For the fiscal fourth quarter ended October 4, 2025, sales were $389.2 million, a decrease of 2.2% from $397.9 million in the prior year period, with comparable sales down 6.5% [5] - Gross profit increased to $150.1 million, up 4.8% from $143.2 million in the prior year, resulting in a gross margin improvement to 38.6% from 36.0% [5] - The company reported a net loss of $162.8 million compared to a net loss of $9.9 million in the prior year, with adjusted net income at $0.8 million, down from $4.4 million [5] Strategic Initiatives - The strategic transformation plan focuses on strengthening the balance sheet, optimizing cost structures, and rebuilding stakeholder confidence [2] - The company anticipates generating the majority of its sales and earnings during the second half of fiscal year 2026, driven by the seasonal nature of the pool and spa care industry [7] - Full year fiscal 2026 expectations include sales guidance of $1.1 billion to $1.25 billion and adjusted EBITDA of $55 million to $75 million [8] Balance Sheet and Liquidity - As of October 4, 2025, available liquidity was approximately $168 million, with no borrowings under the asset-based lending facility [1] - Cash and cash equivalents decreased to $64.3 million from $108.5 million as of September 28, 2024, while inventories decreased by 11.2% to $208.0 million [13][30] - The company recorded impairments totaling $183.8 million, primarily related to goodwill and asset write-offs for underperforming stores [5][30]

Core Insights - Leslie's, Inc. will release its fourth quarter and full year fiscal 2025 financial results on December 2, 2025, after market close [1] - A conference call will be held on the same day at 5:00 p.m. Eastern time to discuss the financial results and the company's strategic transformation initiatives [2] Company Overview - Founded in 1963, Leslie's is the largest direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals [3] - The company offers a wide range of essential pool and spa care products through over 1,000 physical locations and a robust digital platform, catering to the aftermarket needs of its consumers [3] - Leslie's employs a dedicated team of associates and experts to provide consumers with the knowledge and solutions necessary for maintaining their pools and spas [3]

Core Points - Leslie's, Inc. has appointed Jeff White as the new Chief Financial Officer and Treasurer, effective October 5, 2025, succeeding Tony Iskander who resigned for personal reasons [1][2] - Jeff White brings extensive experience in financial strategy, capital markets, and operational efficiency, having previously served as CFO for Sportsman's Warehouse [2] - The company acknowledges Tony Iskander's contributions and will retain him in an advisory role until January 3, 2026, to ensure a smooth transition [3] Company Overview - Founded in 1963, Leslie's is the largest direct-to-customer brand in the U.S. pool and spa care industry, serving both residential customers and pool professionals [4] - The company operates over 1,000 physical locations and a robust digital platform, providing a wide range of essential pool and spa care products [4] - Leslie's aims to empower consumers with knowledge and solutions for maintaining their pools and spas through a dedicated team of experts and service technicians [4]

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that forward-looking statements involve substantial risks, and actual results may differ materially [Overview of Forward-Looking Statements](index=3&type=section&id=Overview%20of%20Forward-Looking%20Statements) This section clarifies that forward-looking statements involve substantial risks, advising against reliance as actual results may differ - All statements in this report, other than historical facts, regarding future results, financial condition, business strategy, legal proceedings, competitive advantages, market size, growth opportunities, industry expectations, and management plans are considered forward-looking statements[6](index=6&type=chunk) - Readers should not rely on forward-looking statements as predictions of future events, as actual outcomes could differ materially due to various risks and uncertainties[7](index=7&type=chunk) [Factors Affecting Forward-Looking Statements](index=3&type=section&id=Factors%20Affecting%20Forward-Looking%20Statements) Numerous factors, including growth, cash, supply, competition, economic conditions, and regulations, could cause actual results to differ - Key factors that could cause actual results to differ include the company's ability to execute growth strategies, manage cash resources, navigate supply disruptions and increased costs, maintain supplier relationships, and compete effectively[8](index=8&type=chunk) - External impacts such as weather conditions, economic changes (high interest rates, inflation, recession fears), geopolitical events, and the housing market can significantly affect business outcomes[8](index=8&type=chunk) - Operational risks include disruptions in distribution centers, challenges in implementing technology initiatives, management transition plans, regulatory changes, commodity price fluctuations, cyber incidents, and the ability to regain and maintain Nasdaq listing standards[8](index=8&type=chunk) [PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Leslie's unaudited condensed consolidated financial statements and detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (Amounts in Thousands) | Metric | June 28, 2025 (Unaudited) | September 28, 2024 (Audited) | June 29, 2024 (Unaudited) | | :-------------------------------- | :-------------------------- | :--------------------------- | :-------------------------- | | **Assets** | | | | | Cash and cash equivalents | $42,684 | $108,505 | $74,438 | | Total current assets | $385,130 | $422,434 | $457,009 | | Total assets | $989,493 | $1,050,325 | $1,105,188 | | **Liabilities and Stockholders' Deficit** | | | | | Total current liabilities | $261,971 | $246,919 | $285,881 | | Revolving credit facility | $20,000 | $— | $— | | Long-term debt, net | $751,547 | $769,065 | $768,598 | | Total liabilities | $1,235,660 | $1,227,474 | $1,273,345 | | Total stockholders' deficit | $(246,167) | $(177,149) | $(168,157) | - Total assets decreased from **$1,050,325 thousand** as of September 28, 2024, to **$989,493 thousand** as of June 28, 2025[14](index=14&type=chunk) - Total stockholders' deficit increased from **$(177,149) thousand** as of September 28, 2024, to **$(246,167) thousand** as of June 28, 2025[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including sales, gross profit, and net income Condensed Consolidated Statements of Operations (Amounts in Thousands, Except Per Share Amounts) | Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Sales | $500,347 | $569,638 | $852,709 | $932,262 | | Gross profit | $197,890 | $228,840 | $289,553 | $333,576 | | Operating income (loss) | $68,318 | $97,695 | $(19,760) | $30,697 | | Net income (loss) | $21,730 | $60,650 | $(74,154) | $(13,456) | | Basic earnings (loss) per share | $0.12 | $0.33 | $(0.40) | $(0.07) | | Diluted earnings (loss) per share | $0.12 | $0.33 | $(0.40) | $(0.07) | - Sales decreased by **12.2%** for the three months ended June 28, 2025, and by **8.5%** for the nine months ended June 28, 2025, compared to the prior year periods[17](index=17&type=chunk) - Net income for the three months ended June 28, 2025, was **$21,730 thousand**, a significant decrease from **$60,650 thousand** in the prior year period. The company reported a net loss of **$(74,154) thousand** for the nine months ended June 28, 2025, compared to a loss of **$(13,456) thousand** in the prior year period[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Deficit) This section outlines changes in the company's equity, including common stock, additional paid-in capital, and retained deficit Changes in Stockholders' Deficit (Amounts in Thousands) | Metric | Balance, March 30, 2025 | Net Income (Loss) | Balance, June 28, 2025 | | :-------------------------------- | :---------------------- | :------------------ | :--------------------- | | Common Stock (Amount) | $185 | $— | $186 | | Additional Paid-in Capital | $110,445 | $1,571 | $112,006 | | Retained Deficit | $(380,089) | $21,730 | $(358,359) | | Total Stockholders' Deficit | $(269,459) | $21,730 | $(246,167) | - The total stockholders' deficit increased from **$(168,157) thousand** as of June 29, 2024, to **$(246,167) thousand** as of June 28, 2025[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Amounts in Thousands) | Activity | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash (used in) provided by operating activities | $(39,398) | $60,410 | | Net cash used in investing activities | $(18,947) | $(34,247) | | Net cash used in financing activities | $(7,476) | $(7,145) | | Net (decrease) increase in cash and cash equivalents | $(65,821) | $19,018 | | Cash and cash equivalents, end of period | $42,684 | $74,438 | - Net cash used in operating activities was **$(39,398) thousand** for the nine months ended June 28, 2025, a significant decrease from **$60,410 thousand** provided in the prior year period[22](index=22&type=chunk) - Cash and cash equivalents decreased by **$65,821 thousand**, ending at **$42,684 thousand** as of June 28, 2025, compared to **$74,438 thousand** in the prior year[22](index=22&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements [Note 1—Business and Operations](index=10&type=section&id=Note%201%E2%80%94Business%20and%20Operations) This note describes Leslie's, Inc. as a leading direct-to-consumer pool and spa care brand - Leslie's, Inc. is a leading direct-to-consumer pool and spa care brand, selling maintenance items, equipment, parts, cleaning accessories, and safety/recreational products[24](index=24&type=chunk) - The company operates over **1,000** company-operated locations in **39** states and through e-commerce websites[24](index=24&type=chunk) [Note 2—Summary of Significant Accounting Policies](index=10&type=section&id=Note%202%E2%80%94Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements - The interim condensed consolidated financial statements are prepared following GAAP and include all normal and recurring adjustments for fair presentation[25](index=25&type=chunk) - The company's business is highly seasonal, with sales and earnings highest during the third and fourth fiscal quarters (April through September), corresponding to peak swimming pool use[30](index=30&type=chunk) - Recent accounting pronouncements (ASU 2025-01, 2024-03, 2023-09, 2023-07) are being evaluated, but no material impact on disclosures is expected[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 3 —Goodwill and Other Intangibles, Net](index=11&type=section&id=Note%203%20%E2%80%94Goodwill%20and%20Other%20Intangibles,%20Net) This note details the company's goodwill and other intangible assets, including impairment evaluations Goodwill (in thousands) | Metric | June 28, 2025 | September 28, 2024 | June 29, 2024 | | :----------------------- | :------------ | :----------------- | :------------ | | Balance at end of period | $180,698 | $180,698 | $180,698 | - Management identified indicators (decline in market capitalization, reduced operating performance) requiring an interim goodwill and indefinite-lived intangible asset impairment evaluation during the three months ended June 28, 2025[37](index=37&type=chunk) - Based on quantitative impairment tests using discounted cash flow and market approaches, the fair value of the reporting unit and indefinite-lived intangibles exceeded their carrying amounts, resulting in no impairment loss recognized[38](index=38&type=chunk)[40](index=40&type=chunk) Other Intangible Assets (Net Carrying Amount in thousands) | Category | June 28, 2025 | September 28, 2024 | June 29, 2024 | | :-------------------------------- | :------------ | :----------------- | :------------ | | Trade name and trademarks (finite life) | $15,266 | $16,745 | $17,239 | | Trade name and trademarks (indefinite life) | $9,350 | $9,350 | $9,350 | | Non-compete agreements | $737 | $892 | $943 | | Consumer relationships | $6,303 | $7,362 | $7,715 | | Other intangibles | $53 | $80 | $96 | | Total | $31,709 | $34,429 | $35,343 | [Note 4—Accounts and Other Receivables, Net](index=14&type=section&id=Note%204%E2%80%94Accounts%20and%20Other%20Receivables,%20Net) This note provides a breakdown of accounts and other receivables, net Accounts and Other Receivables, Net (in thousands) | Category | June 28, 2025 | September 28, 2024 | June 29, 2024 | | :----------------------------- | :------------ | :----------------- | :------------ | | Vendor and other rebates receivable | $13,527 | $24,713 | $20,393 | | Customer receivables | $20,287 | $18,262 | $21,592 | | Other receivables | $3,210 | $4,723 | $6,031 | | Allowance for credit losses | $(2,230) | $(2,231) | $(2,199) | | Total | $34,794 | $45,467 | $45,817 | - Total accounts and other receivables, net, decreased from **$45,467 thousand** as of September 28, 2024, to **$34,794 thousand** as of June 28, 2025, primarily due to a decrease in vendor and other rebates receivable[43](index=43&type=chunk) [Note 5—Inventories](index=14&type=section&id=Note%205%E2%80%94Inventories) This note details the company's inventory composition, including raw materials and finished goods Inventories (in thousands) | Category | June 28, 2025 | September 28, 2024 | June 29, 2024 | | :------------- | :------------ | :----------------- | :------------ | | Raw materials | $3,038 | $3,381 | $4,787 | | Finished goods | $270,154 | $230,902 | $297,422 | | Total | $273,192 | $234,283 | $302,209 | - Total inventories increased from **$234,283 thousand** as of September 28, 2024, to **$273,192 thousand** as of June 28, 2025, driven by an increase in finished goods[44](index=44&type=chunk) [Note 6—Prepaid Expenses and Other Current Assets](index=14&type=section&id=Note%206%E2%80%94Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note outlines the company's prepaid expenses and other current assets Prepaid Expenses and Other Current Assets (in thousands) | Category | June 28, 2025 | September 28, 2024 | June 29, 2024 | | :------------------------------ | :------------ | :----------------- | :------------ | | Prepaid insurance | $3,164 | $1,120 | $3,449 | | Prepaid occupancy costs | $2,280 | $2,132 | $2,173 | | Prepaid sales tax | $6,734 | $3,719 | $6,788 | | Prepaid maintenance | $5,140 | $4,388 | $5,038 | | Prepaid other | $4,209 | $13,380 | $5,626 | | Other current assets | $12,933 | $9,440 | $11,471 | | Total | $34,460 | $34,179 | $34,545 | - Prepaid expenses and other current assets remained relatively stable, with a slight increase from **$34,179 thousand** as of September 28, 2024, to **$34,460 thousand** as of June 28, 2025[45](index=45&type=chunk) [Note 7—Accrued Expenses and Other Current Liabilities](index=15&type=section&id=Note%207%E2%80%94Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note details the company's accrued expenses and other current liabilities Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 28, 2025 | September 28, 2024 | June 29, 2024 | | :-------------------------------- | :------------ | :----------------- | :------------ | | Accrued payroll and employee benefits | $18,780 | $20,813 | $12,484 | | Customer deposits | $5,807 | $5,289 | $5,428 | | Interest | $4,888 | $5,545 | $555 | | Inventory related accruals | $13,001 | $13,586 | $14,323 | | Loyalty and deferred revenue | $7,919 | $6,269 | $6,685 | | Sales tax | $13,916 | $8,282 | $15,442 | | Self-insurance reserves | $11,666 | $9,287 | $11,228 | | Other accrued liabilities | $28,652 | $37,642 | $41,063 | | Total | $104,629 | $106,713 | $107,208 | - Total accrued expenses and other current liabilities decreased from **$106,713 thousand** as of September 28, 2024, to **$104,629 thousand** as of June 28, 2025[46](index=46&type=chunk) [Note 8—Long-Term Debt, Net](index=16&type=section&id=Note%208%E2%80%94Long-Term%20Debt,%20Net) This note provides details on the company's long-term debt, including the Term Loan and Revolving Credit Facility Long-Term Debt, Net (in thousands) | Category | June 28, 2025 | September 28, 2024 | June 29, 2024 | | :-------------------------- | :------------ | :----------------- | :------------ | | Term Loan | $756,650 | $783,675 | $783,675 | | Revolving Credit Facility | $20,000 | $— | $— | | Total long-term debt | $776,650 | $783,675 | $783,675 | | Total long-term debt, net | $751,547 | $769,065 | $768,598 | - The Term Loan has a maturity date of **March 9, 2028**, and carries interest at a specified margin over Term SOFR[51](index=51&type=chunk) - The Revolving Credit Facility was amended on **April 3, 2024**, extending its maturity date to **April 3, 2029**, and revising applicable margins[54](index=54&type=chunk) - As of June 28, 2025, **$20.0 million** was outstanding on the Revolving Credit Facility, which was paid off subsequent to quarter end[55](index=55&type=chunk) [Note 9—Income Taxes](index=18&type=section&id=Note%209%E2%80%94Income%20Taxes) This note discusses the company's income tax provisions and effective tax rates - The effective income tax rate was **(10.4)%** for the nine months ended June 28, 2025, compared to a benefit of **40.7%** for the nine months ended June 29, 2024, primarily due to state taxes and changes in valuation allowance[59](index=59&type=chunk) - The company uses the discrete effective tax rate method for interim income tax provision due to the sensitivity of tax adjustments to marginal pre-tax book profitability[60](index=60&type=chunk) - The recently signed One Big Beautiful Bill Act (OBBBA) is being assessed for potential impacts, but no material impact on 2025 financial results is currently expected[61](index=61&type=chunk) [Note 10—Commitments & Contingencies](index=18&type=section&id=Note%2010%E2%80%94Commitments%20%26%20Contingencies) This note outlines the company's legal proceedings and vendor agreement amendments - A class action complaint for federal securities law violations was dismissed on **July 14, 2025**, with leave for the plaintiff to file a second amended complaint by **August 13, 2025**[63](index=63&type=chunk) - Derivative actions against officers and directors are stayed pending the outcome of the securities class action[64](index=64&type=chunk) - An amended vendor agreement in **August 2024**, which included a warranty guarantee and additional rebates, was further amended in **November 2024** to eliminate the guarantee and reduce future rebates[66](index=66&type=chunk)[68](index=68&type=chunk) [Note 11—Share Repurchase Program](index=20&type=section&id=Note%2011%E2%80%94Share%20Repurchase%20Program) This note describes the company's expired share repurchase program and reports no repurchases - The board authorized a **$300 million** share repurchase program on **December 3, 2021**, which expired on **December 31, 2024**[70](index=70&type=chunk) - No shares were repurchased during the three and nine months ended June 28, 2025, or June 29, 2024[72](index=72&type=chunk) [Note 12—Equity-Based Compensation](index=23&type=section&id=Note%2012%E2%80%94Equity-Based%20Compensation) This note details the company's equity-based compensation plan and recognized expenses - As of June 28, 2025, **12.3 million** shares were available for future grants under the 2020 Omnibus Incentive Plan[73](index=73&type=chunk) - The aggregate unamortized value of outstanding equity-based compensation awards was **$10.6 million**, expected to be recognized over a weighted average period of **2.2 years**[74](index=74&type=chunk) Equity-Based Compensation Expense (in thousands) | Period | Equity-Based Compensation Expense | | :-------------------------------- | :-------------------------------- | | Three months ended June 28, 2025 | $1,600 | | Three months ended June 29, 2024 | $2,200 | | Nine months ended June 28, 2025 | $5,200 | | Nine months ended June 29, 2024 | $7,600 | [Note 13—Earnings (Loss) Per Share](index=24&type=section&id=Note%2013%E2%80%94Earnings%20(Loss)%20Per%20Share) This note presents the basic and diluted earnings (loss) per share Earnings (Loss) Per Share | Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Basic earnings (loss) per share | $0.12 | $0.33 | $(0.40) | $(0.07) | | Diluted earnings (loss) per share | $0.12 | $0.33 | $(0.40) | $(0.07) | - Diluted earnings per share decreased from **$0.33** in the prior year period to **$0.12** for the three months ended June 28, 2025. Diluted loss per share increased from **$(0.07)** to **$(0.40)** for the nine months ended June 28, 2025[81](index=81&type=chunk) Weighted-Average Potentially Dilutive Shares Excluded (in thousands) | Category | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | | :----------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Stock Options | 818 | 2,253 | 1,112 | 2,780 | | RSUs | 4,756 | 2,351 | 3,552 | 1,459 | | Total | 5,574 | 4,604 | 4,664 | 4,239 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Leslie's financial condition and operations, analyzing key performance measures, sales, gross profit, net income, Adjusted EBITDA, seasonality, and liquidity [Our Company](index=25&type=section&id=Our%20Company) This section introduces Leslie's as the largest direct-to-consumer pool and spa care brand - Leslie's is the largest direct-to-consumer brand in the **$15 billion** U.S. pool and spa care industry, with over **1,000** branded locations and a robust digital platform[85](index=85&type=chunk) - The company holds approximately **15%** market share of residential aftermarket product spend as of 2023 and offers a wide range of non-discretionary products and essential services[85](index=85&type=chunk)[86](index=86&type=chunk) - Leslie's provides complimentary in-store water testing via its proprietary AccuBlue® system, in-store equipment repair, and has pioneered the industry's first loyalty program[86](index=86&type=chunk)[87](index=87&type=chunk) [Key Factors and Measures We Use to Evaluate Our Business](index=25&type=section&id=Key%20Factors%20and%20Measures%20We%20Use%20to%20Evaluate%20Our%20Business) This section outlines the GAAP and non-GAAP financial metrics used to assess performance - Key GAAP measures include sales, gross profit and gross margin, selling, general and administrative expenses (SG&A), and operating income (loss)[89](index=89&type=chunk) - Key non-GAAP measures and other operating measures include comparable sales, comparable sales growth, Adjusted EBITDA, Adjusted net income (loss), and Adjusted diluted earnings (loss) per share[89](index=89&type=chunk) - Adjusted EBITDA and Adjusted net income (loss) are used by management and the board to assess financial performance and evaluate business strategies, excluding non-recurring or non-cash items[100](index=100&type=chunk)[102](index=102&type=chunk) [Factors Affecting the Comparability of our Results of Operations](index=27&type=section&id=Factors%20Affecting%20the%20Comparability%20of%20our%20Results%20of%20Operations) This section discusses macroeconomic, geopolitical, and consumer behavior factors impacting financial results - Macroeconomic and geopolitical developments, including tariffs, public health crises, global conflicts, supply chain disruptions, labor market constraints, inflation, and interest rates, significantly impact financial performance[106](index=106&type=chunk)[107](index=107&type=chunk) - Consumer purchasing patterns, particularly related to stockpiling of granular chlorine compounds due to unstable supply, can cause unpredictable changes in demand and revenue[108](index=108&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance Key Components of Results of Operations (in thousands, except per share amounts and percentages) | Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Sales | $500,347 | $569,638 | $852,709 | $932,262 | | Gross profit | $197,890 | $228,840 | $289,553 | $333,576 | | Operating income (loss) | $68,318 | $97,695 | $(19,760) | $30,697 | | Net income (loss) | $21,730 | $60,650 | $(74,154) | $(13,456) | | Diluted EPS | $0.12 | $0.33 | $(0.40) | $(0.07) | | Comparable sales growth | (12.4)% | (4.0)% | (8.8)% | (4.1)% | | Adjusted EBITDA | $81,570 | $109,469 | $16,193 | $65,771 | | Adjusted diluted EPS | $0.20 | $0.34 | $(0.27) | $(0.03) | - Sales decreased by **12.2%** for the three months and **8.5%** for the nine months ended June 28, 2025, primarily due to lower transaction volume and product mix[115](index=115&type=chunk)[116](index=116&type=chunk) - Gross margin decreased to **39.6%** (from 40.2%) for the three months and **34.0%** (from 35.8%) for the nine months ended June 28, 2025, mainly due to higher occupancy and distribution center costs and decreased volume[118](index=118&type=chunk)[119](index=119&type=chunk) - Net income decreased by **$38.9 million** for the three months ended June 28, 2025, and net loss increased by **$60.7 million** for the nine months, primarily due to lower sales and increased SG&A[125](index=125&type=chunk) [Seasonality and Quarterly Fluctuations](index=34&type=section&id=Seasonality%20and%20Quarterly%20Fluctuations) This section explains the seasonal nature of the business, with peak sales and earnings in warmer months - The business is highly seasonal, with highest sales and earnings in the third and fourth fiscal quarters (April-September) due to peak swimming pool use[131](index=131&type=chunk) - First and second fiscal quarters typically generate net losses and negative operating cash flow due to lower sales and ongoing investments[131](index=131&type=chunk) - Weather is a principal external factor, with hot weather increasing purchases and unseasonably cool or rainy weather reducing demand[133](index=133&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity, cash flow, and borrowing capacity - Primary liquidity sources are net cash from operating activities and borrowing availability under the Revolving Credit Facility[136](index=136&type=chunk) Summary of Cash Flows (in thousands) | Activity | Nine Months Ended June 28, 2025 | Nine Months Ended June 29, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash (used in) provided by operating activities | $(39,398) | $60,410 | | Net cash used in investing activities | $(18,947) | $(34,247) | | Net cash used in financing activities | $(7,476) | $(7,145) | | Net (decrease) increase in cash and cash equivalents | $(65,821) | $19,018 | - Net cash used in operating activities decreased by **$99.8 million** for the nine months ended June 28, 2025, primarily due to increased product inventories and reduced accrued expenses[144](index=144&type=chunk) - The company had **$218.2 million** of available borrowing capacity under the Revolving Credit Facility as of June 28, 2025, and was in compliance with all debt covenants[141](index=141&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) This section highlights key accounting estimates and assumptions, including inventory and goodwill impairment - Management makes significant estimates and assumptions for financial statements, including inventory reserves, lease assumptions, vendor rebate programs, income taxes, and recoverability of intangible assets and goodwill[151](index=151&type=chunk) - Goodwill and indefinite-lived intangible assets are reviewed for impairment annually or more frequently if indicators arise, using qualitative or quantitative assessments[153](index=153&type=chunk)[156](index=156&type=chunk) - A quantitative assessment of goodwill and indefinite life intangible assets was performed during Q3 2025, and no impairment was noted[157](index=157&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 for information regarding recent accounting pronouncements - For information regarding recent accounting pronouncements, refer to Note 2—Summary of Significant Accounting Policies[159](index=159&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposures, including interest rate and inflation/deflation impacts, were reported - No material changes in interest rate risk exposures were reported since the last Annual Report on Form 10-K[160](index=160&type=chunk) - No material changes in exposure to inflation or deflation were reported since the last Annual Report on Form 10-K[161](index=161&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective due to un-remediated material weaknesses; a remediation plan is underway - The Chief Executive Officer and Interim Chief Financial Officer concluded that disclosure controls and procedures were ineffective as of June 28, 2025, due to un-remediated material weaknesses in internal control over financial reporting[162](index=162&type=chunk) - The company is implementing a remediation plan to address material weaknesses, focusing on enhancing existing inventory controls and designing/executing new controls for vendor rebates[164](index=164&type=chunk)[165](index=165&type=chunk) - All open accounting roles were filled with experienced personnel during the quarter ended June 28, 2025, to complement the existing team and assist with remediation efforts, which are expected to be completed during fiscal year 2025[165](index=165&type=chunk)[166](index=166&type=chunk) [PART II - OTHER INFORMATION](index=40&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers other relevant information, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company faces routine litigation with established reserves; no material changes were reported - The company is involved in routine litigation and claims, with reserves established for probable and estimable liabilities, which are not significant[169](index=169&type=chunk) - No material changes to legal proceedings were reported, other than those disclosed in Note 10—Commitments & Contingencies[170](index=170&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the last Annual Report - No material changes to risk factors were reported, except as disclosed in the Quarterly Report on Form 10-Q for the quarter ended March 29, 2025[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or issuer purchases were reported - There were no issuer purchases of equity securities[172](index=172&type=chunk) - There were no sales of unregistered securities[172](index=172&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults on senior securities during the period - No defaults upon senior securities were reported[173](index=173&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item regarding mine safety disclosures is not applicable to the company - Mine Safety Disclosures are not applicable[174](index=174&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) No Form 8-K disclosures, changes to director nominee procedures, or trading arrangements were reported - No information required to be disclosed on Form 8-K[175](index=175&type=chunk) - No changes to procedures for recommending director nominees[175](index=175&type=chunk) - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 28, 2025[176](index=176&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL documents - Exhibits include certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) and 18 U.S.C. Section 1350[177](index=177&type=chunk) - Inline XBRL Instance Document, Taxonomy Schema Document, and Cover Page Interactive Data File are included[177](index=177&type=chunk) [SIGNATURES](index=42&type=section&id=SIGNATURES) This section contains the authorized signatures for the report [Signature of Authorized Officer](index=42&type=section&id=Signature%20of%20Authorized%20Officer) The report is signed by Anthony Iskander, Interim Chief Financial Officer and Treasurer - The report was signed by Anthony Iskander, Interim Chief Financial Officer and Treasurer, on **August 7, 2025**[183](index=183&type=chunk)