LESL 10-Q
Leslie's, Inc. (LESL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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The |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 4, 2026 the Registrant had
Table of Contents
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PART I |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
Item 3. |
27 |
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Item 4. |
28 |
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PART II |
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Item 1. |
30 |
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Item 1A. |
30 |
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Item 2. |
30 |
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Item 3. |
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Item 4. |
30 |
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Item 5. |
30 |
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Item 6. |
31 |
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32 |
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy, strategic transformation plan, value proposition, dispositions, legal proceedings, competitive advantages, market size, growth opportunities, industry expectations, 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,” “deliver,” “well-positioned,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions. Our actual results or outcomes, or the timing of our results or outcomes, could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:
1
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q 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 Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended October 4, 2025, elsewhere in this Quarterly Report on Form 10-Q and in our other 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 Quarterly Report on Form 10-Q. The results, outcomes, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results or outcomes, or the timing of results and outcomes, 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. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information, changed expectations, the occurrence of unanticipated events or otherwise, except as required by law. We may not actually achieve the plans, intentions, outcomes, 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.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
LESLIE’S, INC.
Consolidated Balance Sheets
(Amounts in Thousands, Except Share and Per Share Amounts)
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April 4, 2026 |
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October 4, 2025 |
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March 29, 2025 |
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(Unaudited) |
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(Audited) |
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(Unaudited) |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Accounts and other receivables, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Goodwill and other intangibles, net |
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Deferred tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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$ |
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Liabilities and stockholders’ deficit |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liabilities |
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Total current liabilities |
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Deferred tax liabilities |
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Operating lease liabilities, noncurrent |
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Revolving Credit Facility |
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Long-term debt, net |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ deficit |
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Common stock, $ |
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Additional paid-in capital |
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Retained deficit |
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( |
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( |
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( |
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Total stockholders’ deficit |
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( |
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( |
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( |
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Total liabilities and stockholders’ deficit |
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$ |
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$ |
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$ |
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See accompanying notes which are an integral part of these consolidated financial statements.
3
LESLIE’S, INC.
Consolidated Statements of Operations
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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April 4, 2026 |
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March 29, 2025 |
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April 4, 2026 |
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March 29, 2025 |
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Sales |
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$ |
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$ |
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$ |
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$ |
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Cost of merchandise and services sold |
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Gross profit |
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Selling, general and administrative expenses |
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Impairment |
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Operating loss |
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( |
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( |
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( |
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Interest expense |
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Net loss before taxes |
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( |
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( |
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( |
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Income tax expense (benefit) |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Loss per share: |
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Basic |
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$ |
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$ |
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$ |
( |
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$ |
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Diluted |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes which are an integral part of these consolidated financial statements.
4
LESLIE’S, INC.
Consolidated Statements of Stockholders’ Deficit
(Amounts in Thousands)
(Unaudited)
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Common Stock |
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Additional |
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Total |
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Shares |
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Amount |
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Paid in Capital |
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Retained Deficit |
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Stockholders’ Deficit |
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Balance, December 28, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock under the Incentive Plan |
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Equity-based compensation |
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— |
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Restricted stock units surrendered in lieu of withholding taxes |
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— |
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( |
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( |
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Net loss |
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— |
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( |
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( |
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Balance, March 29, 2025 |
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$ |
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$ |
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$ |
( |
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Balance, January 3, 2026 |
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$ |
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$ |
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$ |
( |
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Issuance of common stock under the Incentive Plan |
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Equity-based compensation |
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— |
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Restricted stock units surrendered in lieu of withholding taxes |
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( |
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( |
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( |
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Net loss |
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— |
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( |
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( |
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Balance, April 4, 2026 |
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$ |
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$ |
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$ |
( |
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Additional |
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Total |
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Shares |
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Amount |
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Paid in Capital |
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Retained Deficit |
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Stockholders’ Deficit |
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Balance, September 28, 2024 |
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$ |
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$ |
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$ |
( |
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Issuance of common stock under the Incentive Plan |
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Equity-based compensation |
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— |
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Repurchase and retirement of common stock |
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( |
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( |
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( |
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Net loss |
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— |
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( |
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( |
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Balance, March 29, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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Balance, October 4, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock under the Incentive Plan |
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Equity-based compensation |
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— |
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Restricted stock units surrendered in lieu of withholding taxes |
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( |
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( |
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( |
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Net loss |
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— |
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( |
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( |
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Balance, April 4, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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See accompanying notes which are an integral part of these consolidated financial statements.
5
LESLIE’S, INC.
Consolidated Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
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Six Months Ended |
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April 4, 2026 |
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March 29, 2025 |
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Operating Activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Equity-based compensation |
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Amortization of deferred financing costs and debt discounts |
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Impairment |
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Inventory impairment |
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Provision for credit losses |
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Deferred income taxes |
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( |
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Loss on asset dispositions |
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Changes in operating assets and liabilities: |
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Accounts and other receivables |
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Inventories, net |
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( |
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( |
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Prepaid expenses and other current assets |
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( |
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Other assets |
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( |
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Accounts payable |
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Accrued expenses and other current liabilities |
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( |
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( |
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Income taxes payable |
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( |
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Operating lease assets and liabilities, net |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Investing Activities |
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Purchases of property and equipment |
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( |
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( |
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Proceeds from asset dispositions |
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Net cash used in investing activities |
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( |
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( |
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Financing Activities |
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Borrowings on revolving credit facility |
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Payments on revolving credit facility |
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( |
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( |
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Repayment of long-term debt |
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( |
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Payments on finance leases |
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( |
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( |
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Payment of deferred financing costs |
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( |
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Payments of employee tax withholdings related to restricted stock vesting |
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( |
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( |
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental Information: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes, net of refunds received |
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See accompanying notes which are an integral part of these consolidated financial statements.
6
LESLIE’S, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Business and Operations
Leslie’s, Inc. (“Leslie’s,” “we,” “our,” “us,” “its,” or the “Company”) is the leading direct-to-consumer pool and spa care brand. We market and sell pool and spa supplies and related products and services, which primarily consist of maintenance items such as chemicals, equipment and parts, and cleaning accessories, as well as safety, recreational, and fitness-related products. We currently market our products through approximately
Reverse Stock Split
On September 10, 2025, our shareholders approved a series of amendments to our Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”). On September 26, 2025, we filed a Certificate of Amendment with the Secretary of State of the State of Delaware to effect a reverse stock split of our common stock at a ratio of 1-for-20 (the “Reverse Stock Split”) and proportionately decrease the number of authorized shares of the Company’s common stock, which became effective upon filing (the “Effective Time”). The Company’s common stock began trading on a Reverse Stock Split-adjusted basis on the Nasdaq Global Select Market (“Nasdaq”) as of the open of trading on September 29, 2025 under the existing ticker symbol “LESL”. The Company’s common stock is now represented by a new CUSIP number, 527064 208.
As a result of the Reverse Stock Split, every 20 shares of our common stock issued and outstanding as of the Effective Time of the Reverse Stock Split was automatically converted into one share of common stock. No fractional shares were issued as a result of the Reverse Stock Split. The Company’s transfer agent aggregated all fractional shares of common stock that would otherwise have been issuable as a result of the Reverse Stock Split and sold them at the then prevailing prices on the open market on behalf of those shareholders who would otherwise be entitled to receive such fractional shares. Shareholders who otherwise would be entitled to receive fractional shares received their respective pro rata share of the total proceeds of such sale.
In addition, as of the Effective Time and as a result of the Reverse Stock Split, proportionate adjustments were made in accordance with the terms of the Company’s 2020 Omnibus Incentive Plan (the “Incentive Plan”), with respect to the number of shares of common stock issuable under outstanding stock options, restricted stock units and performance units, and any other equity-based awards, the per-share exercise price with respect to such awards, and the number of shares of common stock reserved for future issuance under the Incentive Plan.
All share and per share amounts in the accompanying consolidated financial statements and notes to the financial statements have been retroactively adjusted to reflect the Reverse Stock Split for all periods.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
We prepared the accompanying interim consolidated financial statements following United States generally accepted accounting principles (“GAAP”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. The interim consolidated financial statements include the accounts of Leslie’s, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated. These interim consolidated financial statements and the related notes should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended October 4, 2025.
Fiscal Periods
We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second, and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended April 4, 2026 and March 29, 2025 refer to the 13 weeks ended April 4, 2026 and March 29, 2025. References to the six months ended April 4, 2026 and March 29, 2025 refer to the 26 weeks ended April 4, 2026 and March 29, 2025.
Use of Estimates
Management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net loss during any period. Actual results could differ from those estimates.
Significant estimates underlying the accompanying consolidated financial statements include inventory reserves, lease assumptions, vendor rebate programs, sales returns reserve, self-insurance liabilities, and the recoverability of intangible assets and long-lived assets.
7
Seasonality
Our business is highly seasonal. Sales and earnings are highest during our third and fourth fiscal quarters, which include April through September, which represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters, when we typically generate net losses and we realize negative operating cash flow.
Summary of Other Significant Accounting Policies
There have been no changes to our Significant Accounting Policies since our Annual Report on Form 10-K for the year ended October 4, 2025. For more information regarding our Significant Accounting Policies and Estimates, see Note 2—Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended October 4, 2025.
Recent Accounting Pronouncements
In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-12, Codification Improvements. The guidance addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S. GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. The amendments make the Codification easier to understand and apply. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
In December 2025, the FASB issued ASU 2025-11 to amend the guidance in Interim Reporting (Topic 270). The update provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. The guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 335-40): Targeted Improvements to the Accounting for Internal-Use Software. The guidance modernizes and clarifies the threshold for when an entity is required to start capitalizing software costs and is based on when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are currently evaluating the ASU to determine its impact on our consolidated financial statements and disclosures; however, we do not expect there to be a material impact.
In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 2020-40): Disaggregation of Income Statement Expenses. This update clarifies the initial effective date for entities that do not have an annual reporting period that ends on December 31 to be the first annual reporting period beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
In November 2024, FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 2020-40): Disaggregation of Income Statement Expenses. This update requires additional disclosures over certain expenses, including purchases of inventory, employee compensation, depreciation, intangible asset amortization, and other specific expense categories. This standard also requires disclosure of the total amount of selling expenses and the Company's definition of selling expenses. This update is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.
There are other new accounting pronouncements issued by the FASB that we have adopted or will adopt, as applicable. We do not believe any of these new accounting pronouncements have had, or will have, a material impact on our consolidated financial statements or disclosures.
8
Note 3—Goodwill and Other Intangibles, Net
Goodwill
The following table details the changes in goodwill (in thousands):
|
|
April 4, 2026 |
|
|
October 4, 2025 |
|
|
March 29, 2025 |
|
|||
Balance at beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Acquisitions, net of measurement period adjustments |
|
|
|
|
|
|
|
|
|
|||
Impairment |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at the end of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other Intangibles
Other intangible assets consisted of the following as of April 4, 2026 (in thousands, except weighted average remaining useful life):
|
|
Weighted |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Trade name and trademarks (finite life) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Trade name and trademarks (indefinite life) |
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Non-compete agreements |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Consumer relationships |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other intangibles |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Other intangible assets consisted of the following as of October 4, 2025 (in thousands, except weighted average remaining useful life):
|
|
Weighted |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Trade name and trademarks (finite life) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Trade name and trademarks (indefinite life) |
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Non-compete agreements |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Consumer relationships |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other intangibles |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Other intangible assets consisted of the following as of March 29, 2025 (in thousands, except weighted average remaining useful life):
|
|
Weighted |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Trade name and trademarks (finite life) |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Trade name and trademarks (indefinite life) |
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Non-compete agreements |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Consumer relationships |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other intangibles |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
9
Amortization expense was $
The following table summarizes the estimated future amortization expense related to finite-lived intangible assets on our consolidated balance sheet as of April 4, 2026 (in thousands):
|
|
Amount |
|
|
Remainder of fiscal 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 4—Impairments, Store Closing, and Other Costs
On November 25, 2025, management committed to a strategic plan to improve operational efficiency by closing 80 underperforming stores and
As a result of this Plan, the Company recognized $(
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Financial Statement Line Item |
|
Charge |
|
April 4, 2026 |
|
|
March 29, 2025 |
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||||
Cost of merchandise and services sold |
|
Non-cash inventory impairment (1) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Selling, general and administrative expense |
|
Wind down and other costs (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Non-cash property and equipment impairments |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Impairment |
|
Non-cash lease impairments (3) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Total |
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
10
Note 5—Accounts and Other Receivables, Net
Accounts and other receivables, net consisted of the following (in thousands):
|
|
April 4, 2026 |
|
|
October 4, 2025 |
|
|
March 29, 2025 |
|
|||
Vendor and other rebates receivable |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Customer receivables |
|
|
|
|
|
|
|
|
|
|||
Other receivables |
|
|
|
|
|
|
|
|
|
|||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 6—Inventories, Net
Inventories, net consisted of the following (in thousands):
|
|
April 4, 2026 |
|
|
October 4, 2025 |
|
|
March 29, 2025 |
|
|||
Raw materials |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Finished goods |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 7—Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
April 4, 2026 |
|
|
October 4, 2025 |
|
|
March 29, 2025 |
|
|||
Prepaid insurance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Prepaid occupancy costs |
|
|
|
|
|
|
|
|
|
|||
Prepaid sales tax |
|
|
|
|
|
|
|
|
|
|||
Prepaid maintenance |
|
|
|
|
|
|
|
|
|
|||
Prepaid other |
|
|
|
|
|
|
|
|
|
|||
Income tax receivable |
|
|
|
|
|
|
|
|
|
|||
Other current assets |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Note 8—Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
April 4, 2026 |
|
|
October 4, 2025 |
|
|
March 29, 2025 |
|
|||
Accrued payroll and employee benefits |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Customer deposits |
|
|
|
|
|
|
|
|
|
|||
Interest |
|
|
|
|
|
|
|
|
|
|||
Inventory related accruals |
|
|
|
|
|
|
|
|
|
|||
Loyalty and deferred revenue |
|
|
|
|
|
|
|
|
|
|||
Sales tax |
|
|
|
|
|
|
|
|
|
|||
Self-insurance reserves |
|
|
|
|
|
|
|
|
|
|||
Other accrued liabilities |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
As of April 4, 2026, October 4, 2025, and March 29, 2025, capital expenditures included in other accrued liabilities were $
11
Note 9—Long-Term Debt, Net
Our long-term debt, net consisted of the following (in thousands, except interest rates):
|
|
Effective |
|
|
April 4, 2026 |
|
|
October 4, 2025 |
|
|
March 29, 2025 |
|
||||
Term Loan |
|
|
% |
(2) |
$ |
|
|
$ |
|
|
$ |
|
||||
Revolving Credit Facility |
|
|
% |
(3) |
|
|
|
|
|
|
|
|
||||
Total long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: noncurrent Revolving Credit Facility |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Less: unamortized discount |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Less: deferred financing charges |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total long-term debt, net |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Term Loan
In June 2023, we entered into Amendment No. 1 (“Term Loan Amendment”) to our Amended and Restated Term Loan Credit Agreement (“Term Loan”). The Term Loan Amendment (i) replaced the existing LIBOR-based interest rate benchmark with a Term SOFR-based benchmark and (ii) amended certain other related terms and provisions, including the addition of a SOFR adjustment of (a)
The Term Loan provides for an $
During the six months ended April 4, 2026,
Revolving Credit Facility
In March 2023, we entered into Amendment No. 6 to our $
On April 3, 2024, we entered into Amendment No. 7 to our Revolving Credit Facility (the “2024 Amendment”). The 2024 Amendment (i) extended the maturity date to
As of April 4, 2026, we had $
12
Fair Value
The fair value of our Term Loan due in 2028 was determined to be $
Representations and Covenants
Substantially all of our assets are pledged as collateral to secure our indebtedness. The Term Loan does not require us to comply with any financial covenants. The Term Loan and the Revolving Credit Facility contain customary representations and warranties, covenants, and conditions to borrowing. No events of default occurred as of April 4, 2026.
Future Debt Maturities
The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of April 4, 2026 (in thousands):
|
|
Amount |
|
|
Remainder of fiscal 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 10—Leases
We lease certain locations, office, distribution, and manufacturing facilities under operating leases that expire at various dates through
The following table summarizes the components of lease expense (in thousands):
|
Three Months Ended |
Six Months Ended |
|
|||||||||||||
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||||
Operating lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Finance lease amortization of ROU asset |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease interest on lease liability |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The three months ended April 4, 2026 includes $(
13
The following table includes supplemental lease information:
|
|
Six Months Ended |
|
|||||
Supplemental Cash Flow Information (dollars in thousands) |
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||
Cash paid for amounts included in the measurements of lease liabilities |
|
|
|
|
|
|
||
Operating cash flow used for operating leases |
|
$ |
|
|
$ |
|
||
Operating cash flow used for finance leases |
|
|
|
|
|
|
||
Financing cash flow used for finance leases |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Other Supplemental Information (dollars in thousands) |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for lease liabilities: |
|
|
|
|
|
|
||
Operating lease |
|
$ |
|
|
$ |
|
||
Finance lease |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Weighted-average remaining operating lease term |
|
|
|
|
||||
Weighted-average discount rate - operating leases |
|
|
% |
|
|
% |
||
Weighted-average remaining finance lease term |
|
|
|
|
||||
Weighted-average discount rate - finance leases |
|
|
% |
|
|
% |
||
The following table summarizes the future annual minimum lease payments for both operating and financing leases as of April 4, 2026 (in thousands):
|
|
Operating |
|
|
Finance |
|
||
Remainder of fiscal 2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Less: amount of lease payments representing imputed interest |
|
|
|
|
|
|
||
Present value of future minimum lease |
|
|
|
|
|
|
||
Less: current lease liabilities |
|
|
|
|
|
|
||
Lease liabilities, noncurrent |
|
$ |
|
|
$ |
|
||
Note 11—Income Taxes
Our effective income tax rate was (
For the six months ended March 29, 2025, we utilized the discrete effective tax rate method, as allowed by ASC 740- 270-30-18, “Income Taxes—Interim Reporting,” to calculate our interim income tax provision. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. The Company believed that the use of this discrete method was more appropriate than the annual effective tax rate method due to the sensitivity of tax adjustments to marginal pre-tax book profitability anticipated for the year.
14
Note 12—Commitments & Contingencies
Contingencies
On September 8, 2023, a class action complaint for violation of federal securities laws was filed by West Palm Beach Police Pension Fund in the U.S. District Court for the District of Arizona against us, our former Chief Executive Officer and our former Chief Financial Officer. The complaint alleges that the defendants violated federal securities laws by issuing materially false and misleading statements that failed to disclose adverse facts about our financial guidance, business operations and prospects, and seeks class certification, damages, interest, attorneys’ fees, and other relief. On April 22, 2024, the defendants filed a motion to dismiss the complaint. That court granted that motion and dismissed the claims on July 14, 2025. The court allowed the plaintiff to file a second amended complaint. On August 13, 2025, the plaintiff filed the second amended complaint. On September 12, 2025, the defendants filed a motion to dismiss the second amended complaint. That motion is fully briefed and pending before the court. Due to the early stage of this proceeding, we cannot reasonably estimate the potential range of loss, if any. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
On March 13, 2024, March 14, 2024, and December 17, 2024, three derivative actions were separately filed in the U.S. District Courts for the Districts of Arizona and Delaware by John Clemens, Sally Flynn, and Ian Mednick, respectively, on behalf of the Company, and against its current and former officers and directors. Each of the three complaints include allegations similar to those in the securities class action, and allege that the defendant directors and officers harmed the Company by either making false or misleading statements, or allowing false or misleading statements to be made. The complaints seek the award of damages, costs, attorneys’ fees, and other declaratory relief. The two derivative actions pending in the U.S. District Court for the District of Arizona have been consolidated into a single proceeding. All of the derivative actions are stayed pending a decision on the motion to dismiss in the securities class action. Due to the early stage of these proceedings, we cannot reasonably estimate the potential range of loss, if any. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.
We are subject to other litigation, claims, and other proceedings that arise from time-to-time in the ordinary course of business. We believe these actions are routine and incidental to the business. As of April 4, 2026, we had established reserves for claims that are probable and estimable and such reserves were not significant. While we cannot feasibly predict the outcome of these matters with certainty, we believe, based on examination of these matters, experience to date and discussions with counsel, that the ultimate liability, individually or in the aggregate, will not have a material adverse effect on our business, financial position, results of operations, or cash flows.
Our workers’ compensation insurance program, general liability insurance program, and employee group medical plan have self-insurance retention features of up to $
Purchase Commitments
During the quarter ended April 4, 2026, the Company entered into a supply agreement with a third-party merchandise vendor to source certain products. The agreement includes annual minimum purchase commitments of approximately $
Except what is noted above, there have been no other material changes from the commitments and contingencies disclosed in our Annual Report on Form 10-K for the year ended October 4, 2025.
Note 13—Equity-Based Compensation
Equity-Based Compensation
2020 Omnibus Incentive Plan
In October 2020, we adopted the Incentive Plan, which was amended and restated by our shareholders at our 2026 Annual Meeting of Shareholders. The Incentive Plan provides for various types of awards, including non-qualified stock options to purchase Leslie’s common stock (each, a “Stock Option”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) which may settle in Leslie’s, Inc. common stock to our directors, executives, and eligible employees of the Company. As of April 4, 2026, we had
15
As of April 4, 2026, the aggregate unamortized value of all outstanding equity-based compensation awards was $
Stock Options
Stock Options granted under the Incentive Plan generally expire
|
|
Number of Options |
|
|
Weighted Average |
|
||
Outstanding, Beginning |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Exercised |
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|
|
|
|
|
||
Forfeited/Expired |
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( |
) |
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|
|
|
Balance, Ending |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Vested and exercisable as of April 4, 2026 |
|
|
|
|
$ |
|
||
|
|
As of April 4, 2026 |
|
|
Aggregate intrinsic value of stock options outstanding |
|
$ |
|
|
Unamortized value of unvested stock options |
|
$ |
|
|
Weighted average years that expense is expected to be recognized |
|
|
|
|
Weighted average remaining contractual years outstanding |
|
|
|
|
Restricted Stock Units and Performance Units
RSUs represent grants that vest ratably upon the satisfaction of time-based requirements. PSUs represent grants potentially issuable in the future based upon the Company’s achievement of certain performance conditions. The fair value of our RSUs and PSUs are calculated based on the Company’s stock price on the date of the grant.
The following table summarizes our RSU and PSU activity under the Incentive Plan during the six months ended April 4, 2026 (in thousands, except per share amounts):
|
|
Number of RSUs/PSUs |
|
|
Weighted Average |
|
||
Outstanding, Beginning |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Balance, Ending |
|
|
|
|
$ |
|
||
In December 2024,
|
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As of April 4, 2026 |
|
|
Unamortized value of unvested RSUs/PSUs (in thousands) |
|
$ |
|
|
Weighted average years that expense is expected to be recognized |
|
|
|
|
During the three months ended April 4, 2026 and March 29, 2025, equity-based compensation expense was $
16
Note 14—Loss Per Share
The following is a reconciliation of basic weighted average common shares outstanding to diluted weighted average common shares outstanding (in thousands, except per share amounts).
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Three Months Ended |
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Six Months Ended |
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April 4, 2026 |
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March 29, 2025 |
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April 4, 2026 |
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March 29, 2025 |
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||||
Numerator: |
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||||
Net loss |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
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||||
Weighted average shares outstanding - basic |
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||||
Effect of dilutive securities: |
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|
||||
Stock Options |
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|
||||
RSUs |
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||||
Weighted average shares outstanding - diluted |
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||||
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|
||||
Basic loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such shares would have been antidilutive (in thousands):
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
April 4, 2026 |
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|
March 29, 2025 |
|
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April 4, 2026 |
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|
March 29, 2025 |
|
||||
Stock Options |
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|
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|
||||
RSUs |
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|
|
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||||
Total |
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||||
17
Note 15—Segment Reporting
We manage our business activities on a consolidated basis and operate as a operating segment. We derive our revenue in the United States by providing pool related goods and services to our customers through a variety of channels. The accounting policies of our operating segment are the same as those that are described in Note 2—Summary of Significant Accounting Policies.
Our chief operating decision maker (“CODM”) is our , who reviews financial information presented on a consolidated basis.
The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||||
Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
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|
|
|
|
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|
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|
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|
||||
Cost of merchandise and services sold (1) |
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||||
Store labor and fringe |
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||||
Merchant fees |
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Direct store expense |
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Marketing |
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||||
Information technology |
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||||
Other segment expense (2) |
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|
||||
Impairment |
|
|
( |
) |
|
|
|
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|
|||
Interest expense |
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|
||||
Income tax expense (benefit) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Segment net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes, which are included elsewhere in this Quarterly Report on Form 10-Q. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results or outcomes may differ materially from those anticipated in these forward-looking statements, which are subject to risks, uncertainties, and other factors, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025, elsewhere in this Quarterly Report on Form 10-Q, and in our other filings with the SEC.
We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended April 4, 2026 and March 29, 2025 refer to the 13 weeks ended April 4, 2026 and March 29, 2025. References to the six months ended April 4, 2026 and March 29, 2025 refer to the 26 weeks ended April 4, 2026 and March 29, 2025.
Our Company
Founded in 1963 by Phil Leslie Jr. in Southern California, the Company today known simply as “Leslie’s” has over six decades of disruptive retail innovation in the $15 billion U.S. pool and spa care industry. Today, we are the largest and most trusted direct-to-consumer brand in our segment, serving residential consumers and pool professionals, and many of the largest commercial property operators in the country. With approximately 950 retail locations, an integrated, digitally forward omnichannel strategy, and a horizontally integrated, nationwide ecosystem under the Leslie’s and In the Swim® brands, among others, we have built a market-leading share of residential aftermarket product spend, based on 2024 industry analyst reports, and a physical network larger than the sum of our 20 largest competitors. We offer an extensive assortment of professional-grade products, the majority of which are exclusive to Leslie’s, manufacturer certified installation and repair services, and in some markets, weekly pool maintenance services. Our dedicated, knowledgeable team of associates, pool and spa care experts, and experienced service technicians, are passionate about empowering every single Leslie’s customer with the knowledge, products, and solutions necessary to confidently maintain and thoroughly enjoy their pools and spas. The considerable scale of our integrated marketing and distribution ecosystem, which is powered by our direct-to-consumer network, uniquely enables us to efficiently reach and service nearly every pool and spa in the continental United States.
We operate primarily in the pool and spa aftermarket industry, a fundamentally attractive category in retail, given its scale, historical predictability, and growth outlook. More than 85% of our product assortment is comprised of non-discretionary products essential to the care of residential and commercial pools and spas. This includes chemicals, new and replacement parts, cleaning and maintenance equipment, safety, recreational, and fitness-related products. We also offer important essential services, such as equipment installation and repair for residential and commercial customers. We have relationships with professional pool operators from major hotel and apartment owners to municipal, county and state governments, all the way to sole proprietors. In addition to a strong consumer and commercial retail and service presence, we operate a wholesale specialty pool and spa parts distribution business, giving us unique access to hard-to-find specialty parts; an integrated manufacturing plant, giving us vertical scale and competitive cost on parts of our chemical assortment; and a regionally located, hub-and-spoke distribution system throughout the continental United States.
We offer complimentary, commercial-grade in-store water testing and analysis via our proprietary AccuBlue® system, leading to increased consumer engagement, conversion, basket size, and loyalty, resulting in higher lifetime value. Our water treatment expertise is powered by data and intelligence accumulated from the millions of water tests we have performed over the years, positioning us as the most trusted water treatment service provider in the recreational pool and spa industry. We then brought AccuBlue® direct to pool owners’ backyards with AccuBlue Home®, a pioneering app-enabled water testing device. These differentiated capabilities allow us to meet the needs of any pool and spa owner, whether they care for their pool or spa themselves or rely on a professional, whenever, wherever, and however they choose to engage with us.
Key Factors and Measures We Use to Evaluate Our Business
We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use under United States generally accepted accounting principles (“GAAP”) are sales, gross profit and gross margin, selling, general and administrative expenses (“SG&A”), impairment, and operating loss. The key non-GAAP measures and other operating measures we use are comparable sales, comparable sales growth, Adjusted EBITDA, Adjusted net loss, and Adjusted diluted loss per share.
Sales
We offer a broad range of products that consists of regularly purchased, non-discretionary pool and spa maintenance items such as chemicals, equipment, cleaning accessories and parts, as well as installation and repair services for pool and spa equipment. Our offering of proprietary, owned, and third-party brands across diverse product categories drives sales growth by attracting new consumers and encouraging repeat visits from our existing consumers. Revenue from merchandise sales at retail locations is recognized at the point of sale, revenue from services is recognized when the services are rendered, and revenue from e-commerce merchandise sales is generally recognized upon shipment of the merchandise. Revenue is recorded net of related discounts and sales tax. Payment
19
from retail customers is generally at the point of sale and payment terms for professional pool operator customers are based on our credit requirements and generally have terms of less than 60 days. When we receive payment from a consumer before the consumer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue or as a customer deposit until the sale or service is complete. Sales are impacted by weather, seasonality, product mix and availability, promotional and competitive activities, and the spending habits of our consumers, as well as inflation and interest rates. Growth of our sales is primarily driven by comparable sales growth and expansion of our locations in existing and new markets.
Comparable Sales and 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.
We consider a new or acquired location comparable in the first full month after it has completed one year of sales. Closed locations become non-comparable during their last partial month of operation. Locations that are relocated are considered comparable at the time the relocation is complete. Comparable sales is not calculated in the same manner by all companies, and accordingly, is not necessarily comparable to similarly titled measures of other companies and may not be an appropriate measure for performance relative to other companies.
The number of new locations reflects the number of locations opened during a particular reporting period. New locations require an initial capital investment in location buildouts, fixtures, and equipment, which we amortize over time as well as cash required for inventory.
As of April 4, 2026, we operated approximately 950 locations in 38 states across the United States. We owned 27 locations and leased the remainder of our locations. Our initial lease terms are typically five years with options to renew for multiple successive five-year periods. We evaluate new opportunities in new and existing markets based on the number of pools and spas in the market, competition, our existing locations, availability and cost of real estate, and distribution and operating costs of our locations. We review the performance of our locations on a regular basis and evaluate opportunities to strategically close locations to improve our profitability. Our limited investment costs in individual locations and our ability to transfer sales to our extensive network of remaining locations and e-commerce websites allows us to improve profitability as a result of any strategic closures.
Gross Profit and Gross Margin
Gross profit is equal to our sales less our cost of merchandise and services sold. Cost of merchandise and services sold reflects the direct cost of purchased merchandise, costs to package certain chemical products, including direct materials and labor, costs to provide services, including labor and materials, as well as distribution and occupancy costs. The direct cost of purchased merchandise includes vendor rebates. We recognize vendor rebates based on an estimated recognition pattern using historical data. Distribution costs include warehousing and transportation expenses, including costs associated with third-party fulfillment centers used to ship merchandise to our e-commerce consumers. Occupancy costs include the rent, common area maintenance, real estate taxes, and depreciation and amortization costs of all retail locations. These costs are significant and are expected to continue to increase proportionate to our growth.
Gross margin is gross profit as a percentage of our sales. Gross margin is impacted by merchandise costs, pricing and promotions, product mix and availability, inflation, and service costs, which can vary. Our proprietary brands, custom-formulated products, and vertical integration provide us with cost savings, as well as greater control over product availability and quality as compared to other companies in the industry. Gross margin is also impacted by the costs of distribution and occupancy costs, which can vary.
Our gross profit is variable in nature and generally follows changes in sales. The components of our cost of merchandise and services sold may not be comparable to the components of cost of sales or similar measures of other companies. As a result, our gross profit and gross margin may not be comparable to similar data made available by other companies.
Selling, General, and Administrative Expenses
Our SG&A includes selling and operating expenses across our retail locations and digital platform, and our corporate-level general and administrative expenses. Selling and operating expenses at retail locations include payroll, bonus and benefit costs for personnel, supplies, and credit and debit card processing costs. Corporate expenses include payroll, bonus, and benefit costs for our corporate and field support functions, equity-based compensation, marketing and advertising, insurance, utilities, occupancy costs related to our corporate office facilities, professional services, and depreciation and amortization for all assets, except those related to our retail locations and distribution operations, which are included in cost of merchandise and services sold. Selling and operating expenses generally vary proportionately with sales and the change in the number of locations. In contrast, general and administrative expenses are generally not directly proportional to sales and the change in the number of locations but may increase over time to support our growth and public company obligations. The components of our SG&A may not be comparable to the components of similar measures of other companies.
20
Impairment
Impairment is non-cash charges resulting from a decline in our operating results and store performance. These charges were due to the carrying value of our store assets being greater than the fair value in the case of asset impairment.
Operating Loss
Operating loss is gross profit less SG&A and impairment. Operating loss excludes interest expense and income tax expense (benefit). We use operating loss as an indicator of the productivity of our business and our ability to manage expenses.
Adjusted EBITDA
Adjusted EBITDA is defined as earnings before interest (including amortization of debt issuance costs), taxes, depreciation and amortization, equity-based compensation expense, executive transition costs, severance, strategic project costs, merger and acquisition costs, and other non-recurring, non-cash, or discrete items. 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. We use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other companies using similar measures.
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 is not calculated in the same manner by all companies, and accordingly, is not necessarily comparable to similarly titled measures of other companies and may not be an appropriate measure for performance relative to other companies. Adjusted EBITDA should not be construed as an indicator of a company’s operating performance in isolation from, or as a substitute for, net loss, 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 Loss and Adjusted Diluted Loss per Share
Adjusted net loss and Adjusted diluted loss per share are additional key measures used by management and our board of directors to assess our financial performance. Adjusted net loss and Adjusted diluted loss 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 loss is defined as net loss adjusted to exclude equity-based compensation expense, executive transition costs, severance, strategic project costs, merger and acquisition costs, and other non-recurring, non-cash, or discrete items. Adjusted diluted loss per share is defined as Adjusted net loss divided by the diluted weighted average number of common shares outstanding.
Factors Affecting the Comparability of our Results of Operations
Our reported results have been affected by, among other events, the following events, which must be understood in order to assess the comparability of our period-to-period financial performance and condition.
Impact of Macroeconomic Events and Uncertainties
Our financial performance and condition may be impacted to varying extents from period to period by macroeconomic and geopolitical developments, including public health crises, escalating global conflicts (including the ongoing conflict in Ukraine, the conflicts in the Middle East, and the related impacts on commodity prices, including the price of oil), tariffs, supply chain disruptions, labor market constraints, high rates of inflation, high interest rates, general economic slowdown, and potential failures among financial institutions. New or increased tariffs and other barriers to trade, especially in light of comments and executive orders made by the U.S. presidential administration, could further impact or exacerbate these conditions. The United States has announced tariffs on imports from most countries, including significant tariffs on imports from Canada, Mexico and China. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. There is substantial uncertainty about the duration of existing tariffs and whether additional tariffs may be imposed, modified or suspended, and the impacts of such actions on the Company’s business. Significant disruption to our supply chain for products we sell or increased costs (including in the cost of oil), as a result of geopolitical conflict, tariffs or trade policies or otherwise, can also have a material impact on our sales and earnings and cause unpredictable changes in results. In addition, we believe adverse macroeconomic trends and uncertainties including inflation, tariffs, and varying interest rates also increase consumers’ sensitivity to price and result in cost-conscious behavior inclusive of high ticket items, which can result in corresponding declines in sales and/or gross profit.
21
Additional uncertainties that can impact our results of operations are consumer purchasing patterns and consumer cost-consciousness. In the past, we believe some customers stockpiled chemicals, resulting in unexpected changes in demand. As a result of such behavior, our revenue may be higher than normal during the periods of stockpiling and may be lower than normal during the periods after stockpiling has occurred.
Reverse Stock Split
On September 10, 2025, our shareholders approved a series of amendments to our Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”). On September 26, 2025, we filed a Certificate of Amendment with the Secretary of State of the State of Delaware to effect a reverse stock split of our common stock at a ratio of 1-for-20 (the “Reverse Stock Split”) and proportionately decrease the number of authorized shares of the Company’s common stock, which became effective upon filing (the “Effective Time”). The Company’s common stock began trading on a Reverse Stock Split-adjusted basis on Nasdaq as of the open of trading on September 29, 2025 under the existing ticker symbol “LESL”. The Company’s common stock is now represented by a new CUSIP number, 527064 208.
As a result of the Reverse Stock Split, every 20 shares of our common stock issued and outstanding as of the Effective Time of the Reverse Stock Split was automatically converted into one share of common stock. No fractional shares were issued as a result of the Reverse Stock Split. The Company’s transfer agent aggregated all fractional shares of common stock that would otherwise have been issuable as a result of the Reverse Stock Split and sold them at the then prevailing prices on the open market on behalf of those shareholders who would otherwise be entitled to receive such fractional shares. Shareholders who otherwise would be entitled to receive fractional shares received their respective pro rata share of the total proceeds of such sale.
In addition, as of the Effective Time and as a result of the Reverse Stock Split, proportionate adjustments were made in accordance with the terms of the Company’s 2020 Omnibus Incentive Plan (the “Incentive Plan”), with respect to the number of shares of common stock issuable under outstanding stock options, restricted stock units and performance units, and any other equity-based awards, the per-share exercise price with respect to such awards, and the number of shares of common stock reserved for future issuance under the Incentive Plan.
All share and per share amounts presented herein have been retroactively adjusted to reflect the Reverse Stock Split for all periods.
22
Results of Operations
We derived our consolidated statements of operations for the three and six months ended April 4, 2026 and March 29, 2025 from our consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our sales (in thousands, except per share amounts and percentages):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Statements of Operations Data: |
|
April 4, 2026 |
|
|
March 29, 2025 |
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||||
Sales |
|
$ |
184,744 |
|
|
$ |
177,134 |
|
|
$ |
331,872 |
|
|
$ |
352,362 |
|
Cost of merchandise and services sold |
|
|
131,398 |
|
|
|
133,188 |
|
|
|
251,457 |
|
|
|
260,699 |
|
Gross profit |
|
|
53,346 |
|
|
|
43,946 |
|
|
|
80,415 |
|
|
|
91,663 |
|
Selling, general and administrative expenses |
|
|
92,206 |
|
|
|
92,325 |
|
|
|
177,875 |
|
|
|
179,741 |
|
Impairment |
|
|
(1,174 |
) |
|
|
— |
|
|
|
8,974 |
|
|
|
— |
|
Operating loss |
|
|
(37,686 |
) |
|
|
(48,379 |
) |
|
|
(106,434 |
) |
|
|
(88,078 |
) |
Interest expense |
|
|
14,364 |
|
|
|
15,897 |
|
|
|
27,900 |
|
|
|
31,661 |
|
Loss before taxes |
|
|
(52,050 |
) |
|
|
(64,276 |
) |
|
|
(134,334 |
) |
|
|
(119,739 |
) |
Income tax expense (benefit) |
|
|
447 |
|
|
|
(12,956 |
) |
|
|
1,134 |
|
|
|
(23,855 |
) |
Net loss |
|
$ |
(52,497 |
) |
|
$ |
(51,320 |
) |
|
$ |
(135,468 |
) |
|
$ |
(95,884 |
) |
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(5.63 |
) |
|
$ |
(5.54 |
) |
|
$ |
(14.55 |
) |
|
$ |
(10.36 |
) |
Diluted |
|
$ |
(5.63 |
) |
|
$ |
(5.54 |
) |
|
$ |
(14.55 |
) |
|
$ |
(10.36 |
) |
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
9,327 |
|
|
|
9,262 |
|
|
|
9,312 |
|
|
|
9,256 |
|
Diluted |
|
|
9,327 |
|
|
|
9,262 |
|
|
|
9,312 |
|
|
|
9,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Percentage of Sales (1) |
|
(%) |
|
|
(%) |
|
|
(%) |
|
|
(%) |
|
||||
Sales |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Cost of merchandise and services sold |
|
|
71.1 |
|
|
|
75.2 |
|
|
|
75.8 |
|
|
|
74.0 |
|
Gross margin |
|
|
28.9 |
|
|
|
24.8 |
|
|
|
24.2 |
|
|
|
26.0 |
|
Selling, general and administrative expenses |
|
|
49.9 |
|
|
|
52.1 |
|
|
|
53.6 |
|
|
|
51.0 |
|
Impairment |
|
|
(0.6 |
) |
|
|
— |
|
|
|
2.7 |
|
|
|
— |
|
Operating loss |
|
|
(20.4 |
) |
|
|
(27.3 |
) |
|
|
(32.1 |
) |
|
|
(25.0 |
) |
Interest expense |
|
|
7.8 |
|
|
|
9.0 |
|
|
|
8.4 |
|
|
|
9.0 |
|
Loss before taxes |
|
|
(28.2 |
) |
|
|
(36.3 |
) |
|
|
(40.5 |
) |
|
|
(34.0 |
) |
Income tax expense (benefit) |
|
|
0.2 |
|
|
|
(7.3 |
) |
|
|
0.3 |
|
|
|
(6.8 |
) |
Net loss |
|
|
(28.4 |
) |
|
|
(29.0 |
) |
|
|
(40.8 |
) |
|
|
(27.2 |
) |
Other Financial and Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Number of new and acquired locations, net |
|
|
(4 |
) |
|
|
(1 |
) |
|
|
(78 |
) |
|
|
(1 |
) |
Number of locations open at end of period |
|
|
944 |
|
|
|
1,020 |
|
|
|
944 |
|
|
|
1,020 |
|
Comparable sales growth (2) |
|
|
6.6 |
% |
|
|
(6.7 |
)% |
|
|
(4.5 |
)% |
|
|
(3.3 |
)% |
Adjusted EBITDA (3) |
|
$ |
(26,819 |
) |
|
$ |
(36,061 |
) |
|
$ |
(67,105 |
) |
|
$ |
(65,379 |
) |
Adjusted EBITDA as a percentage of sales (3) |
|
|
(14.5 |
)% |
|
|
(20.4 |
)% |
|
|
(20.2 |
)% |
|
|
(18.6 |
)% |
Adjusted net loss (3) |
|
$ |
(50,015 |
) |
|
$ |
(48,286 |
) |
|
$ |
(117,520 |
) |
|
$ |
(91,241 |
) |
Adjusted diluted loss per share |
|
$ |
(5.36 |
) |
|
$ |
(5.21 |
) |
|
$ |
(12.62 |
) |
|
$ |
(9.86 |
) |
23
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||||
Net loss |
|
$ |
(52,497 |
) |
|
$ |
(51,320 |
) |
|
$ |
(135,468 |
) |
|
$ |
(95,884 |
) |
Interest expense |
|
|
14,364 |
|
|
|
15,897 |
|
|
|
27,900 |
|
|
|
31,661 |
|
Income tax expense (benefit) |
|
|
447 |
|
|
|
(12,956 |
) |
|
|
1,134 |
|
|
|
(23,855 |
) |
Impairment (1) |
|
|
(2,033 |
) |
|
|
— |
|
|
|
14,486 |
|
|
|
— |
|
Depreciation and amortization expense (2) |
|
|
7,560 |
|
|
|
8,271 |
|
|
|
15,400 |
|
|
|
16,508 |
|
Equity-based compensation expense (3) |
|
|
1,023 |
|
|
|
1,920 |
|
|
|
2,142 |
|
|
|
3,661 |
|
Strategic project costs (4) |
|
|
3,831 |
|
|
|
607 |
|
|
|
6,606 |
|
|
|
779 |
|
Executive transition costs and other (5) |
|
|
486 |
|
|
|
1,520 |
|
|
|
695 |
|
|
|
1,751 |
|
Adjusted EBITDA |
|
$ |
(26,819 |
) |
|
$ |
(36,061 |
) |
|
$ |
(67,105 |
) |
|
$ |
(65,379 |
) |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||||
Net loss |
|
$ |
(52,497 |
) |
|
$ |
(51,320 |
) |
|
$ |
(135,468 |
) |
|
$ |
(95,884 |
) |
Impairment (1) |
|
|
(2,033 |
) |
|
|
— |
|
|
|
14,486 |
|
|
|
— |
|
Equity-based compensation expense (3) |
|
|
1,023 |
|
|
|
1,920 |
|
|
|
2,142 |
|
|
|
3,661 |
|
Strategic project costs (4) |
|
|
3,831 |
|
|
|
607 |
|
|
|
6,606 |
|
|
|
779 |
|
Executive transition costs and other (5) |
|
|
486 |
|
|
|
1,520 |
|
|
|
695 |
|
|
|
1,751 |
|
Tax effects of these adjustments (6) |
|
|
(825 |
) |
|
|
(1,013 |
) |
|
|
(5,981 |
) |
|
|
(1,548 |
) |
Adjusted net loss (7) |
|
$ |
(50,015 |
) |
|
$ |
(48,286 |
) |
|
$ |
(117,520 |
) |
|
$ |
(91,241 |
) |
Selected Financial Information
Sales
Sales were $184.7 million for the three months ended April 4, 2026 compared to $177.1 million in the prior year period, an increase of $7.6 million, or 4.3%. The increase was driven by a strength in our retail business and favorability driven by a week calendar shift in comparing to the prior year. These benefits were partially offset by the loss of sales from the closure of underperforming stores. Comparable sales for the three months ended on April 4, 2026 increased $11.5 million or 6.6% compared to the prior year period.
Sales were $331.9 million for the six months ended April 4, 2026, compared to $352.4 million in the prior year period, a decrease of $20.5 million, or 5.8%. The decrease was primarily driven by lower sales as a result of the closure of underperforming stores during the period, headwinds in our first quarter as we anniversaried increased demand in the prior year period driven by an active hurricane season and demand driven by the liquidation of certain products. Comparable sales for the six months ended April 4, 2026 decreased $15.5 million or 4.5% compared to the prior year period.
24
Gross Profit and Gross Margin
Gross profit for the three months ended April 4, 2026 was $53.3 million compared to $43.9 million in the prior year period, representing an increase of $9.4 million, or 21.4%. Gross margin increased to 28.9% compared to 24.8% in the prior year period, an increase of approximately 410 basis points. The increase was driven by approximately 290 basis points due to savings in occupancy and distribution center costs, approximately 75 basis points due to increased volume and improved product mix, and an approximately 45 basis point benefit due to inventory reserve adjustments.
Gross profit for the six months ended April 4, 2026 was $80.4 million compared to $91.7 million in the prior year period, a decrease of $11.3 million, or 12.3%. Gross margin decreased to 24.2% compared to 26.0% in the prior year period, a decrease of approximately 180 basis points. A negative impact of approximately 165 basis points was due to an inventory impairment charge of $5.5 million relating to store and DC closures during the six month period. The remaining approximately 15 basis points decline was due to an approximately 70 basis point impact due to a decrease in volume of products sold and mix, partially offset by an approximately 55 basis point impact due to occupancy and distribution center costs savings.
Selling, General and Administrative Expenses
SG&A for the three months ended April 4, 2026 was $92.2 million compared to $92.3 million in the prior year period, a decrease of $0.1 million, or 0.1%. As a percentage of sales SG&A was 49.9% compared to 52.1%, down 220 basis points from the prior year. The decrease in SG&A was primarily related to decreases of $1.6 million in labor and fringe costs, $0.8 million in direct store and other operating expenses, and $0.2 million in merchant fees. Partially offsetting the decrease were increases of $1.4 million in marketing fees and $1.1 million in technology costs.
SG&A for the six months ended April 4, 2026 was $177.9 million compared to $179.7 million in the prior year period, a decrease of $1.9 million, or 1.0%. As a percentage of sales SG&A was 53.6% compared to 51.0%, an increase of 259 basis points from the prior year. The decrease in SG&A was primarily related to decreases of $2.7 million in labor and fringe costs, $1.9 million in direct store and other operating expenses, and $1.5 million in merchant fees. Partially offsetting the decrease were increases of $2.3 million in marketing fees and $1.9 million in technology costs.
Impairment
Non-cash impairment for the three months ended April 4, 2026 was $(1.2) million, which was comprised of non-cash lease gains due to lease terminations on stores that were closed and impaired during the first quarter of 2026. For the six months ended April 4, 2026 impairment was $9.0 million, which was comprised of $5.4 million of property and equipment impairment, $4.8 million right-of-use asset impairment, and $(1.2) million non-cash lease gains all relating to the store and distribution center closures that occurred during the first quarter of 2026. There was no impairment during either period in the prior year.
Interest Expense
Interest expense for the three months ended April 4, 2026 was $14.4 million compared to $15.9 million in the prior year period, a decrease of $1.5 million. Interest expense for the six months ended April 4, 2026 was $27.9 million compared to $31.7 million in the prior year period, a decrease of $3.8 million. The decrease in both periods was driven by lower interest rates on our Term Loan.
Income Tax
Income tax expense increased to $0.4 million for the three months ended April 4, 2026 compared to a benefit of $13.0 million in the prior year period, an increase of $13.4 million. Income tax expense increased to $1.1 million for the six months ended April 4, 2026 compared to a benefit of $23.9 million in the prior year period, an increase of $25.0 million. The increases were primarily attributable to the change in valuation allowance and use of the discrete effective tax rate method in the prior year period.
The effective income tax rate was (0.9)% and (0.8)% for the three and six months ended April 4, 2026, respectively, and included net income tax expenses attributable to state taxes and the change in valuation allowance. The effective income tax rate was 20.2% and 19.9% for the three and six months ended March 29, 2025, respectively, and included net income tax expenses attributable to equity-based compensation awards and the change in valuation allowance related to our interest expense limitation.
Net Loss and Diluted Loss per Share
Net loss for the three months ended April 4, 2026 was $52.5 million compared to $51.3 million in the prior year period, a decrease of $1.2 million. The change was primarily due to a tax benefit in the prior year period that was not repeated in the current year period due to the valuation allowance. This decline was partially offset by the increase in gross profit. Net loss for the six months ended April 4, 2026 was $135.5 million compared to $95.9 million in the prior year period, an increase of $39.6 million. The change was primarily due to decreases in gross profit due to lower sales, impairment charges in the current year, and a tax benefit in the prior year that was not repeated in the current year period due to the valuation allowance.
25
Diluted loss per share was $5.63 for the three months ended April 4, 2026 compared to $5.54 in the prior year period. Diluted loss per share was $14.55 for the six months ended April 4, 2026 compared to $10.36 in the prior year period.
Adjusted net loss for the three months ended April 4, 2026 was $50.0 million compared to $48.3 million in the prior year period, an increase of $1.7 million. Adjusted net loss for the six months ended April 4, 2026 was $117.5 million compared to $91.2 million in the prior year period, an increase of $26.3 million.
Adjusted diluted loss per share was $5.36 for the three months ended April 4, 2026 compared to $5.21 in the prior year period. Adjusted diluted loss per share was $12.62 for the six months ended April 4, 2026 compared to $9.86 in the prior year period.
Adjusted EBITDA
Adjusted EBITDA for the three months ended April 4, 2026 was $(26.8) million compared to $(36.1) million in the prior year period, an increase of $9.2 million. Adjusted EBITDA for the six months ended April 4, 2026 was $(67.1) million compared to $(65.4) million in the prior year period, a decrease of $1.7 million. The changes in Adjusted EBITDA during the three months ended April 4, 2026 were primarily due to increases in gross profit. The changes in Adjusted EBITDA during the six months ended April 4, 2026 were primarily due to decreases in gross profit due to lower sales and the impairment charges in the current year.
Seasonality and Quarterly Fluctuations
Our business is highly seasonal. Sales and earnings are highest during the third and fourth fiscal quarters, which include April through September, and represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters when we typically generate net losses and we realize negative operating cash flows. We have a long track record of investing in our business throughout the year, including in operating expenses, working capital, and capital expenditures related to new locations and other growth initiatives. While these investments drive performance during the primary selling season in our third and fourth fiscal quarters, they have a negative impact on our earnings and cash flow during our first and second fiscal quarters.
We typically experience a build-up of inventory and accounts payable during the first and second fiscal quarters in anticipation of the peak swimming pool supply selling season. We negotiate extended payment terms with certain of our primary suppliers as we receive merchandise in December through March, and we pay for merchandise in April through July.
The principal external factor affecting our business is weather. Hot weather can increase purchases of chemicals and other non-discretionary products as well as purchases of discretionary products and can drive increased purchases of installation and repair services. Unseasonably cool weather or significant amounts of rainfall during the peak pool sales season can reduce chemical consumption in pools and spas and decrease consumer purchases of our products and services. In addition, unseasonably early or late warming trends can increase or decrease the length of the pool season and impact timing around pool openings and closings and, therefore, our total sales and timing of our sales. Further, we generally close locations after our peak selling season ends.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are net cash provided by operating activities and borrowing availability under our Revolving Credit Facility. Historically, we have funded working capital requirements, capital expenditures, payments related to acquisitions, and debt service requirements with internally generated cash on hand and through our Revolving Credit Facility.
Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents totaled $16.9 million as of April 4, 2026, $64.3 million as of October 4, 2025, and $17.3 million as of March 29, 2025. Outstanding borrowings on our Revolving Credit Facility were $99.0 million as of April 4, 2026 and $101.5 million as of March 29, 2025. We had no amounts outstanding on our Revolving Credit Facility as of October 4, 2025.
Our primary working capital requirements are for the purchase of inventory, payroll, rent, other facility costs, distribution costs, and general and administrative costs. Our working capital requirements fluctuate during the year, driven primarily by seasonality and the timing of inventory purchases.
Our capital expenditures are primarily related to infrastructure-related investments, including investments related to upgrading and maintaining our information technology systems, ongoing location improvements, expenditures related to our distribution centers, and new location openings. We expect to fund capital expenditures from net cash provided by operating activities.
Based on our growth plans and strategic initiatives, we believe our cash and cash equivalents position, net cash provided by operating activities and borrowing availability under our Revolving Credit Facility will be adequate to finance our working capital requirements, planned capital expenditures, strategic initiatives and acquisitions, and debt service over the next 12 months and thereafter. If cash provided by operating activities and borrowings under our Revolving Credit Facility are not sufficient or available to meet our capital requirements, then we may need to obtain additional equity or debt financing. There can be no assurance that equity or debt financing will be available to us if we need it or, if available, whether the terms will be satisfactory to us.
26
As of April 4, 2026, outstanding standby letters of credit totaled $11.1 million, and after considering borrowing base restrictions, we had $97.1 million of available borrowing capacity under the terms of the Revolving Credit Facility. As of April 4, 2026, we were in compliance with the covenants under the Revolving Credit Facility and our Term Loan.
During the quarter ended January 3, 2026, the Company received downgraded credit rating from Standard and Poor’s (“S&P”) Global Ratings (CCC from CCC+).
Summary of Cash Flows
A summary of our cash flows from operating, investing, and financing activities is presented in the following table (in thousands):
|
|
Six Months Ended |
|
|||||
|
|
April 4, 2026 |
|
|
March 29, 2025 |
|
||
Net cash used in operating activities |
|
$ |
(136,553 |
) |
|
$ |
(154,309 |
) |
Net cash used in investing activities |
|
|
(9,504 |
) |
|
|
(11,125 |
) |
Net cash provided by financing activities |
|
|
98,636 |
|
|
|
74,181 |
|
Net decrease in cash and cash equivalents |
|
$ |
(47,421 |
) |
|
$ |
(91,253 |
) |
Cash Used in Operating Activities
Net cash used in operating activities was $136.6 million for the six months ended April 4, 2026 compared to $154.3 million in the prior year period, a decrease of $17.8 million. The decrease was primarily driven by a strategic decrease in inventory of $40.9 million and $25.0 million due to deferred income taxes. Partially offsetting this decrease was a higher net loss in the current year.
Cash Used in Investing Activities
Net cash used in investing activities was $9.5 million for the six months ended April 4, 2026 compared to $11.1 million in the prior year period, a decrease of $1.6 million. This decrease was driven by lower investments in purchases of property and equipment.
Cash Provided by Financing Activities
Net cash provided by financing activities for the six months ended April 4, 2026 was $98.6 million compared to $74.2 million in the prior year period, an increase of $24.5 million. This increase was due to a $27.0 million principal payment made during the prior year period, partially offset by $2.5 million of decreased borrowings on the Revolving Credit Facility in the current year period.
Contractual Obligations and Other Commitments
There have been no material changes to our contractual obligations and other commitments during the six months ended April 4, 2026 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025 except as disclosed in Note 10—Leases and Note 12—Commitments & Contingencies in this Quarterly Report on Form 10-Q.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the reported periods. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments. Based on this definition, we have identified the critical accounting policies and judgments, which are disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025. We base these estimates on historical results and various other assumptions we believe to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.
There have been no material changes to our critical accounting estimates during the six months ended April 4, 2026 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 2—Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025.
27
Impact of Inflation and Deflation
There have been no material changes in our exposure to inflation or deflation from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the appropriate time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer and Treasurer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer and Treasurer, have evaluated the effectiveness of our disclosure controls and procedures as of April 4, 2026. Based on that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer and Treasurer (Principal Financial Officer) have concluded that our disclosure controls and procedures were not effective as the material weaknesses in our internal control over financial reporting disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025 were not yet remediated as of April 4, 2026.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended April 4, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as described below.
Ongoing Remediation Efforts
As previously disclosed in Part II, Item 9A, “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal years ended October 4, 2025, September 28, 2024, and September 30, 2023, we identified material weaknesses in the Company’s internal control over financial reporting related to the validation of inventory levels and the completeness and accuracy of data used in validating the appropriateness of inventory costing for a subset of the Company’s inventories and inventory reserves. In addition, as previously disclosed in Part II, Item 9A, “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended October 4, 2025, we also identified a material weakness in the Company’s internal control over financial reporting related to the design and operation of controls over the goodwill and other long-lived asset impairments. We are in the process of implementing a plan to address these material weaknesses in internal control over financial reporting. We have devoted and intend to continue to devote significant time and resources to enhance the design and implementation of our existing controls and procedures and to create new complementary and compensating controls as needed.
With respect to inventory controls, the following remediation activities have taken place as of April 4, 2026:
We are further enhancing the execution of existing inventory controls as follows:
With respect to asset impairments, no goodwill remained on the Company’s books as of October 4, 2025, and as a result, the extent to which the goodwill portion of the deficiency currently could lead to a material misstatement in our financial statements is not present.
We are further enhancing the design and execution of existing controls and creating new controls as needed regarding asset impairments as follows:
The actions we are taking are subject to continued senior management review as well as audit committee oversight. We intend to remediate these material weaknesses as soon as possible, and we believe the measures described above will help remediate the material
28
weakness and strengthen our internal control over financial reporting. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We anticipate that our remediation activities will be completed during fiscal year 2026. We are committed to continuing to improve our internal control processes, and, as we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of our remediation measures as described above or as described in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025.
29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject to litigation, claims, and other proceedings that arise from time-to-time in the ordinary course of business. We believe these actions are routine and incidental to the business. As of April 4, 2026, we had established reserves for claims that were probable and estimable and such reserves were not significant. While we cannot feasibly predict the outcome of these matters with certainty, we believe, based on examination of these matters, experience to date and discussions with counsel, that the ultimate liability, individually or in the aggregate, will not have a material adverse effect on our business, financial position, results of operations, or cash flows.
Except as set forth in Note 12—Commitments & Contingencies to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes to the legal proceedings described in Part I, Item 3 “Legal Proceedings” of our Annual Report on Form 10-K for the fiscal year ended October 4, 2025.
Item 1A. Risk Factors.
There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended October 4, 2025 other than as noted below.
Our common stock may be delisted from The Nasdaq Global Select Market if we are unable to regain and maintain compliance with Nasdaq's continued listing standards.
As previously disclosed, on February 11, 2026, we received notification from Nasdaq that our common stock is subject to potential delisting from The Nasdaq Global Select Market because the Company is not in compliance with Nasdaq Listing Rule 5450(b)(3)(C) because, for a period of 30 consecutive business days, the Company failed to maintain a minimum market value of publicly held shares of its common stock of $15,000,000 (as calculated pursuant to Nasdaq Listing Rules) (the “MVPHS Rule”). We have until August 10, 2026 to regain compliance and, if we do not regain compliance with the MVPHS Rule by the applicable deadline, Nasdaq will provide written notification to us that our common stock will be subject to delisting. At that time, we may appeal Nasdaq’s delisting determination to a Nasdaq Listing Qualifications Panel (the “Panel”). We expect that our common stock would remain listed pending the Panel’s decision, however, there can be no assurance that, if we do appeal the delisting determination by Nasdaq to the Panel, that such appeal would be successful. There can be no assurance that we will be able to regain compliance with the MVPHS Rule.
If we do not regain and maintain compliance with the Nasdaq standards, our common stock may be delisted from Nasdaq. Any delisting of our common stock would likely adversely affect the market liquidity and market price of our common stock and our ability to obtain financing for the continuation of our operations. Consequently, stockholders may not be able to sell our common stock at prices equal to or greater than the price paid.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
None.
Sales of Unregistered Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
(a) Information Required to be Disclosed on Form 8-K
None.
(b) Changes to Procedures for Recommending Director Nominees
Not applicable.
(c) Trading Plans
During the quarter ended April 4, 2026, no director or Section 16 officer
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Item 6. Exhibits.
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Incorporated by Reference |
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Exhibit Number |
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Exhibit Description |
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Form |
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Exhibit |
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Filing Date/ Period End Date |
10.1 |
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Leslie’s Inc. Amended and Restated 2020 Omnibus Incentive Plan |
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8-K |
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10.1 |
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3/27/2026 |
31.1* |
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31.2* |
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32.1+ |
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 |
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32.2+ |
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 |
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101.INS* |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH* |
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Inline XBRL Taxonomy Schema Document With Embedded Linkbase Documents |
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104* |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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* Filed herewith.
+ Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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LESLIE’S, INC. |
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Date: May 13, 2026 |
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By: |
/s/ Jeff White |
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Jeff White |
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Chief Financial Officer and Treasurer |
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(Principal Financial Officer and Principal Accounting Officer) |
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