UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

FORM 10-Q

~~FORM 10-Q~~

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April ~~3, 2021~~02, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

~~For the transition period from to~~

Commission File ~~Number:~~ Number 001-39667

LESLIE’S, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	20-8397425
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2005 East Indian School Road Phoenix, AZ	85016
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: ~~(602)~~ (602) 366-3999

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common ~~stock,~~Stock, par value $0.001 per share

LESL

The Nasdaq Global Select Market

Indicate by check mark whether the ~~registrant~~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~~Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No☐

Indicate by check mark whether the ~~registrant~~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~~Registrant was required to submit such files). Yes☒ No☐

Indicate by check mark whether the ~~registrant~~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.

If an emerging growth company, indicate by check mark if the ~~registrant~~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~~Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No☒

As of May ~~7, 2021,~~2, 2022, the ~~registrant~~Registrant had ~~187,918,474~~182,838,623 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page
PART I.I	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Stockholders’ Deficit	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1415
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2425
Item 4.	Controls and Procedures	2426

PART ~~II.~~II	OTHER INFORMATION
Item 1.	Legal Proceedings	2527
Item 1A.	Risk Factors	2527
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2527
Item 3.	Defaults Upon Senior Securities	2527
Item 4.	Mine Safety Disclosures	2527
Item 5.	Other Information	2527
Item 6.	Exhibits	2628

Signatures	27	29

Table of Contents

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 ~~facts~~fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. ~~Our actual~~Actual results or outcomes could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:

•

our ability to execute on our growth strategies;

•

our ability to maintain favorable relationships with suppliers and manufacturers;

•

competition from mass merchants and specialty retailers;

•

impacts on our business from the sensitivity of our business to weather conditions, changes in the economy, and the housing market;

•

our ability to implement technology initiatives that deliver the anticipated benefits, without disrupting our operations;

•

our ability to attract and retain senior management and other qualified personnel;

•

regulatory changes and development affecting our current and future products;

•

our ability to obtain additional capital to finance operations;

•

commodity price inflation and deflation;

•

impacts on our business from the COVID-19 pandemic;

•

impacts on our business from cyber incidents and other security threats or disruptions; and

•

other risks and uncertainties, including those listed in the section titled “Risk Factors” in our filings with the United States Securities and Exchange Commission.

•

~~our ability to execute on our growth strategies;~~

•

~~our ability to maintain favorable relationships with suppliers and manufacturers;~~

•

~~competition from mass merchants and specialty retailers;~~

•

~~impacts on our business from the sensitivity of our business to weather conditions, changes in the economy, and the housing market;~~

•

~~our ability to implement technology initiatives that deliver the anticipated benefits, without disrupting our operations;~~

•

~~regulatory changes and development affecting our current and future products;~~

•

~~our ability to obtain additional capital to finance operations;~~

•

~~commodity price inflation and deflation;~~

•

~~impacts on our business from the COVID-19 pandemic; and~~

•

~~other risks and uncertainties, including those listed in the section titled “Risk Factors” in our filings with the United States Securities and Exchange Commission~~

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this 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” of our Annual Report on Form 10-K for the year ended October ~~3, 2020, Part II, Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended January~~ 2, 2021, ~~Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q,~~ and elsewhere in this Quarterly Report on Form ~~10-Q.~~10-Q, and in our other filings with the Securities and Exchange Commission. 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, events, and circumstances reflected in the forward-looking statements may not be ~~achieved~~achieved or occur, and actual results ~~events,~~ or ~~circumstances~~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~~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 or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

Table of Contents

PART I—I -FINANCIAL INFORMATION

Item 1. Financial Statements.

LESLIE’S, INC.

~~Condensed Consolidated~~CONDENSED Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Per Share Amounts)


										April 2, 2022			October 2, 2021			April 3, 2021
	April 3, 2021			October 3, 2020			March 28, 2020			(Unaudited)			(Audited)			(Unaudited)
Assets	(Unaudited)			(Audited)			(Unaudited)
Current assets
Cash and cash equivalents	$	90,328		$	157,072		$	11,934		$	51,971		$	343,498		$	88,732
Accounts and other receivables, net		41,733			31,481			30,924			33,619			38,860			41,733
Inventories		277,860			148,966			244,662			345,046			198,789			277,860
Prepaid expenses and other current assets		58,331			34,614			41,609			41,240			20,564			40,001
Total current assets		468,252			372,133			329,129			471,876			601,711			448,326
Property and equipment, net		63,632			66,391			72,169			70,547			70,335			63,632
Operating lease right-of-use assets		181,581			177,655			200,746			208,531			212,284			181,581
Goodwill and other intangibles, net		127,851			121,186			122,213			146,865			129,020			127,851
Deferred tax assets		15,293			6,583			—			2,429			3,734			15,293
Other assets		2,302			2,490			1,270			29,947			25,148			20,632
Total assets	$	858,911		$	746,438		$	725,527		$	930,195		$	1,042,232		$	857,315
Liabilities and stockholders’ deficit
Current liabilities
Accounts payable	$	181,524		$	92,372		$	143,197
Accrued expenses		82,338			101,167			67,091
Accounts payable and accrued expenses										$	268,475		$	233,597		$	262,266
Operating lease liabilities		55,395			54,459			59,721			61,612			61,071			55,395
Income taxes payable		—			1,857			—			0			6,945			0
Current portion of long-term debt		8,100			8,341			8,341			8,100			8,100			8,100
Total current liabilities		327,357			258,196			278,350			338,187			309,713			325,761
Deferred tax liabilities		—			—			4,273
Operating lease liabilities, noncurrent		130,496			130,234			151,059			149,818			160,037			130,496
Revolving credit facility											45,000			0			0
Long-term debt, net		789,339			1,179,550			1,234,003			782,921			786,125			789,339
Other long-term liabilities		2,729			5,457			5			0			3,915			2,729
Total liabilities		1,249,921			1,573,437			1,667,690			1,315,926			1,259,790			1,248,325
Commitments and contingencies
Stockholders’ deficit
Common stock, $0.001 par value, 1,000,000,000 shares authorized and 186,884,621 issued and outstanding as of April 3, 2021 and 156,500,000 shares authorized, issued and outstanding as of October 3, 2020 and March 28, 2020, respectively.		187			157			157
Additional paid in capital (deficit)		194,605			(278,063	)		(278,653	)
Common stock, $0.001 par value, 1,000,000,000 shares authorized and 182,784,211, 189,821,011, and 186,884,621 issued and outstanding as of April 2, 2022, October 2, 2021, and April 3, 2021, respectively.											183			190			187
Additional paid in capital											83,074			204,711			194,605
Retained deficit		(585,802	)		(549,093	)		(663,667	)		(468,988	)		(422,459	)		(585,802	)
Total stockholders’ deficit		(391,010	)		(826,999	)		(942,163	)		(385,731	)		(217,558	)		(391,010	)
Total liabilities and stockholders’ deficit	$	858,911		$	746,438		$	725,527		$	930,195		$	1,042,232		$	857,315

See accompanying notes which are an integral part of these condensed consolidated financial statements.

Table of Contents

LESLIE’S, INC.

~~Condensed~~CONDENSED Consolidated ~~Statements~~Statements of Operations

(Amounts in Thousands, Except Per Share Amounts)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	April 3, 2021			March 28, 2020			April 3, 2021			March 28, 2020			April 2, 2022			April 3, 2021			April 2, 2022			April 3, 2021
Sales	$	192,441		$	126,377		$	337,447		$	249,355		$	228,072		$	192,441		$	412,896		$	337,447
Cost of merchandise and services sold		120,758			86,464			214,049			168,364			142,443			120,758			259,951			214,049
Gross profit		71,683			39,913			123,398			80,991			85,629			71,683			152,945			123,398
Selling, general and administrative expenses		70,374			56,048			147,863			115,769			89,618			70,374			169,403			147,863
Operating income (loss)		1,309			(16,135	)		(24,465	)		(34,778	)
Operating (loss) income														(3,989	)		1,309			(16,458	)		(24,465	)
Other expense:
Interest expense		8,126			22,709			19,642			45,126			6,949			8,126			13,812			19,642
Loss on debt extinguishment		1,888			—			9,169			—			—			1,888			—			9,169
Other expenses, net		1,057			187			1,057			324			161			1,057			550			1,057
Total other expense		11,071			22,896			29,868			45,450			7,110			11,071			14,362			29,868
Loss before taxes		(9,762	)		(39,031	)		(54,333	)		(80,228	)		(11,099	)		(9,762	)		(30,820	)		(54,333	)
Income tax benefit		(3,310	)		(9,205	)		(17,624	)		(24,215	)		(3,659	)		(3,310	)		(8,929	)		(17,624	)
Net loss	$	(6,452	)	$	(29,826	)	$	(36,709	)	$	(56,013	)	$	(7,440	)	$	(6,452	)	$	(21,891	)	$	(36,709	)
Net loss per share
Basic and diluted	$	(0.03	)	$	(0.19	)	$	(0.20	)	$	(0.36	)
Weighted average shares outstanding
Basic and diluted		186,810			156,500			181,900			156,500
Earnings per share:
Basic													$	(0.04	)	$	(0.03	)	$	(0.12	)	$	(0.20	)
Diluted													$	(0.04	)	$	(0.03	)	$	(0.12	)	$	(0.20	)
Weighted average shares outstanding:
Basic														182,678			186,810			185,592			181,900
Diluted														182,678			186,810			185,592			181,900

See accompanying notes which are an integral part of these condensed consolidated financial statements.

Table of Contents

LESLIE’S, INC.

~~Condensed~~CONDENSED Consolidated Statements of Stockholders’ Deficit

(Amounts in Thousands)

(Unaudited)

	Common Stock				Additional Paid in Capital				Retained			Total Stockholders’
	Shares		Amount		(Deficit)				Deficit			Deficit			Common Stock						Additional Paid in Capital			Retained			Total Stockholders’
Balance, December 28, 2019		156,500	$	157	$	(279,251	)		$	(633,841	)	$	(912,935	)
Equity-based compensation		—		—		598				—			598
Net loss		—		—		—				(29,826	)		(29,826	)
Balance, March 28, 2020		156,500	$	157	$	(278,653	)		$	(663,667	)	$	(942,163	)
															Shares			Amount			(Deficit)			Deficit			Deficit
Balance, January 2, 2021		186,619	$	187	$	192,753			$	(579,350	)	$	(386,410	)		186,619		$	187		$	192,753		$	(579,350	)	$	(386,410	)
Issuance of shares under stock incentive plans		266		—		—				—			—
Issuance of common stock upon initial public offering, net of offering costs		—		—		(99	)	��		—			(99	)		—			—			(99	)		—			(99	)
Issuance of common stock under the Plan																266			—			—			—			—
Equity-based compensation		—		—		1,951				—			1,951			—			—			1,951			—			1,951
Net loss		—		—		—				(6,452	)		(6,452	)		—			—			—			(6,452	)		(6,452	)
Balance, April 3, 2021		186,885	$	187	$	194,605			$	(585,802	)	$	(391,010	)		186,885		$	187		$	194,605		$	(585,802	)	$	(391,010	)

Balance, January 1, 2022																182,497		$	182		$	80,062		$	(461,548	)	$	(381,304	)
Issuance of common stock under the Plan																287			1			228			—			229
Equity-based compensation																—			—			2,784			—			2,784
Net loss																—			—			—			(7,440	)		(7,440	)
Balance, April 2, 2022																182,784		$	183		$	83,074		$	(468,988	)	$	(385,731	)

															Common Stock						Additional Paid in Capital			Retained			Total Stockholders’
															Shares			Amount			(Deficit)			Deficit			Deficit
Balance, October 3, 2020																156,500		$	157		$	(278,063	)	$	(549,093	)	$	(826,999	)
Issuance of common stock upon initial public offering, net of offering costs																30,000			30			458,557			—			458,587
Issuance of common stock under the Plan																385			—			—			—			—
Equity-based compensation																—			—			14,111			—			14,111
Net loss																—			—			—			(36,709	)		(36,709	)
Balance, April 3, 2021																186,885		$	187		$	194,605		$	(585,802	)	$	(391,010	)

Balance, October 2, 2021																189,821		$	190		$	204,711		$	(422,459	)	$	(217,558	)
Issuance of common stock under the Plan																463			1			328			—			329
Equity-based compensation																—			—			5,535			—			5,535
Repurchase and retirement of common stock																(7,500	)		(8	)		(127,500	)		(24,638	)		(152,146	)
Net loss																—			—			—			(21,891	)		(21,891	)
Balance, April 2, 2022																182,784		$	183		$	83,074		$	(468,988	)	$	(385,731	)

Common Stock

Additional
Paid in
Capital

Retained

Total
Stockholders’

Shares

Amount

(Deficit)

Deficit

Deficit

Balance, September 28, 2019

156,500

$
157

$
(279,848
)

$
(607,666
)

$
(887,357
)
Impact of adoption of new accounting pronouncements

—

—

—

12

12

Equity-based compensation

—

—

1,195

—

1,195

Net loss

—

—

—

(56,013
)

(56,013
)
Balance, March 28, 2020

156,500

$
157

$
(278,653
)

$
(663,667
)

$
(942,163
)

Balance, October 3, 2020

156,500

$
157

$
(278,063
)

$
(549,093
)

$
(826,999
)
Issuance of shares under stock incentive plans

385

—

—

—

—

Issuance of common stock upon initial public offering,
net of offering costs

30,000

30

458,557

—

458,587

Equity-based compensation

—

—

14,111

—

14,111

Net loss

—

—

—

(36,709
)

(36,709
)
Balance, April 3, 2021

186,885

$
187

$
194,605

$
(585,802
)

$
(391,010
)

See accompanying notes which are an integral part of these condensed consolidated financial statements.

Table of Contents

LESLIE’S, INC.

~~Condensed~~CONDENSED Consolidated ~~Statements~~Statements of Cash Flows

(Amounts in Thousands)

(Unaudited)


	Six Months Ended						Six Months Ended
	April 3, 2021			March 28, 2020			April 2, 2022			April 3, 2021
Operating Activities
Net loss	$	(36,709	)	$	(56,013	)	$	(21,891	)	$	(36,709	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		12,858			14,088			15,817			12,858
Equity-based compensation		14,111			1,195			5,535			14,111
Amortization of deferred financing costs and debt discounts		1,134			1,685			986			1,134
Provision for doubtful accounts		64			149			418			64
Deferred income taxes		(8,711	)		3,033			1,305			(8,711	)
(Gain) loss on disposition of assets		(1,753	)		470
Loss (gain) on disposition of assets								118			(1,753	)
Loss on debt extinguishment		9,169			—			—			9,169
Changes in operating assets and liabilities:
Accounts and other receivables		(10,316	)		(11,046	)		4,823			(10,316	)
Inventories		(127,814	)		(93,933	)		(132,358	)		(127,814	)
Prepaid expenses and other current assets		(23,473	)		(20,063	)		(20,306	)		(17,095	)
Other assets		228			150			(4,922	)		(6,150	)
Accounts payable and accrued expenses		64,332			50,829			26,588			64,007
Income taxes payable		(1,857	)		(6,713	)		(6,945	)		(1,857	)
Operating lease assets and liabilities, net		(2,728	)		10,034			(5,925	)		(2,728	)
Net cash used in operating activities		(111,465	)		(106,135	)		(136,757	)		(111,790	)
Investing Activities
Purchases of property and equipment		(9,490	)		(12,478	)		(14,322	)		(9,490	)
Acquisitions, net of cash acquired		(6,040	)		(6,188	)
Business acquisitions, net of cash acquired								(29,988	)		(6,040	)
Proceeds from disposition of fixed assets		2,404			6			407			2,404
Net cash used in investing activities		(13,126	)		(18,660	)		(43,903	)		(13,126	)
Financing Activities
Borrowings on revolving commitment		—			181,750
Payments on revolving commitment		—			(131,750	)
Repayment of long term debt		(392,085	)		(4,170	)
Issuance of long term debt		907			—
Borrowings on revolving credit facility								45,000			0
Repayment of long-term debt								(4,050	)		(392,085	)
Issuance of long-term debt								0			907
Payment of deferred financing costs		(9,562	)		—			0			(9,562	)
Proceeds from options exercised								329			0
Repurchase and retirement of common stock								(152,146	)		—
Proceeds from issuance of common stock upon initial public offering, net		458,587			—			0			458,587
Net cash provided by financing activities		57,847			45,830
Net cash (used in) provided by financing activities								(110,867	)		57,847
Net decrease in cash and cash equivalents		(66,744	)		(78,965	)		(291,527	)		(67,069	)
Cash and cash equivalents, beginning of period		157,072			90,899			343,498			155,801
Cash and cash equivalents, end of period	$	90,328		$	11,934		$	51,971		$	88,732
Supplemental Disclosure of Cash Payments for:
Supplemental Information:
Interest	$	27,081		$	44,762		$	13,325		$	27,081
Income taxes		3,078			2,882
Income taxes, net of refunds received								7,358			3,998

See accompanying notes which are an integral part of these condensed consolidated financial statements.

Table of Contents

LESLIE’S, INC.

NOTES TO THE CONDENSED 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 ~~940~~965 company-operated locations in 38 states and e-commerce websites.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We prepared the accompanying interim condensed 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 condensed consolidated financial statements include the accounts of Leslie’s, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated. These interim condensed consolidated financial statements and the related notes ~~should be read~~included in ~~conjunction with the audited condensed consolidated financial statements and notes~~our Annual Report on Form 10-K for the ~~years~~year ended October ~~3, 2020 and September 28, 2019.~~2, 2021.

~~Initial and Subsequent Public Offering~~

In November 2020, the Company completed an initial public offering (“IPO”) of 30.0 million shares of common stock at a public offering price of $17.00 per share for net proceeds of $458.7 million, after deducting underwriting discounts and commissions of $45.0 million and offering costs of $6.3 million. The shares of common stock sold in the IPO and the net proceeds from the IPO included the full exercise of the underwriters’ option to purchase additional shares. The Company used the net proceeds from the IPO to repay the entire outstanding amount related to its $390.0 million Senior Unsecured Notes. The remaining proceeds will be used for working capital and general corporate purposes.

In February 2021, certain of the Company’s stockholders, completed a subsequent public offering of 29.0 million shares of common stock, with a 30-day option for the underwriters to purchase up to 4.4 million additional shares of common stock, at a public offering price of $26.00 per share for net proceeds of $731.4 million, after deducting underwriting discounts and commissions of $22.6 million. All proceeds from the sale of shares of common stock in this offering were received by the selling stockholders.

~~Stock Split~~

All share and per share information included in the accompanying condensed consolidated financial statements has been adjusted to reflect a 156,500-for-1 stock split which was effected on October 23, 2020. The par value of the common stock was not adjusted as the result of the stock split.

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 ~~fiscal year 2021 refer to~~ the ~~fiscal year ending October~~three months ended April 2, ~~2021, which contains 52 weeks,~~2022 and ~~references to fiscal year 2020 refer to the fiscal year ended October 3, 2020, which contained 53 weeks. References to~~ the three months ended April 3, 2021 ~~and the three months ended March 28, 2020~~ refer to the 13 weeks ended April 2, 2022 and April 3, 2021, ~~and March 28, 2020,~~ respectively. References to the six months ended April ~~3, 2021~~2, 2022 and the six months ended ~~March 28, 2020~~April 3, 2021 refer to the 26 weeks ended April 2, 2022 and April 3, 2021, ~~and March 28, 2020,~~ respectively.

Use of Estimates

To prepare financial statements that conform to GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Our most significant estimates relate to ~~the allowance for doubtful accounts,~~sales returns, inventory obsolescence reserves, lease assumptions, vendor rebate programs, income taxes, self-insurance, valuation of intangible assets and goodwill, and intangible asset impairment evaluations. We continually review our estimates and make adjustments as necessary, but actual results could be significantly different from what we expected when we made these estimates.

Prior Period Reclassifications

~~Table~~Reclassifications of ~~Contents~~certain immaterial prior period amounts have been made to conform to current period presentation.

Fair Value Measurements

We use fair value measurements to record fair value of certain assets and to estimate fair value of financial instruments 0t recorded at fair value but required to be disclosed at fair value.

As of April ~~3, 2021~~2, 2022 and October ~~3, 2020,~~2, 2021, we held 0 assets that ~~were~~are required to be measured at fair value on a recurring basis.

~~Fair Value of Financial Instruments~~

~~We evaluate our financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period.~~

The fair value of ~~the~~ our amended and restated term loan credit agreement (“Term ~~Loan~~Loan”) due in 2028 (see Note 7)9—Long-Term Debt, Net) was determined to be ~~$804.7~~$790.9 million and $802.9 million as of April ~~3, 2021.~~2, 2022 and October 2, 2021, respectively. These fair value estimates, determined to be Level 2, are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

The fair value of the interest rate cap agreements (see Note 7) was determined to be Level 2 and is included in other assets on the condensed consolidated balance sheets as of October 3, 2020. Our interest rate cap agreements expired in ~~March 2021~~; consequently, we had 0 interest rate cap agreements as of April 3, 2021. Changes in fair value of the interest rate cap are recorded in other expenses, net on our condensed consolidated statements of operations.

The carrying amounts of cash, ~~and~~ cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term maturity of these instruments.

There were 0 transfers between levels in the fair value hierarchy during the three and six months ended April 2, 2022 and April 3, 2021, ~~and March 28, 2020,~~ respectively.

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Seasonality

~~Seasonality~~

Our business is highly seasonal. In general, sales and earnings are highest during our ~~fiscal~~ third and fourth fiscal quarters, ~~which include~~being April through September, and represent the peak months of swimming pool use. Sales are substantially lower during our ~~fiscal~~ first and second fiscal quarters.

Recent Accounting Pronouncements

~~Prior Period Reclassifications~~

~~Reclassifications~~In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions related to intraperiod tax allocations, foreign subsidiaries and interim reporting that are present within existing GAAP rules. The ASU also provides updated guidance regarding the tax treatment of certain ~~immaterial prior~~franchise taxes, goodwill and nontaxable entities, among other items. In addition, ASU 2019-12 clarifies that the effect of a change in tax laws or rates should be reflected in the annual effective tax rate computation during the interim period ~~amounts~~that includes the enactment date. We adopted ASU 2019-12 as of October 3, 2021, (as of the beginning of the current annual period) and its adoption did not have ~~been made~~a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which includes certain amendments to ~~conform to current~~improve, simplify, and provide consistency for recognition and measurement of acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments require that an acquirer recognize and measure such contract assets and contract liabilities under Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. The amendments also allow for election of certain practical expedients, which are applied on an acquisition-by-acquisition basis. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including for any interim period, ~~presentation.~~and if elected, the amendments are applied retrospectively for any acquisitions that occurred in the fiscal year of interim adoption. We adopted ASU 2021-08 during the second quarter of fiscal 2022 and its adoption did not have a material impact on our consolidated financial statements.

Note 3—Business Combinations

The following acquisitions did not have a material impact on our financial position or results of operations. Our condensed consolidated financial statements include the results of operations of these acquisitions from the date of acquisition. The total purchase consideration was allocated to the tangible and intangible assets acquired and the liabilities assumed at their estimated fair values as of each acquisition date, with the ~~date of acquisition, as determined by management. The~~ excess ~~of the purchase price over the amounts allocated~~recorded to ~~assets acquired and liabilities assumed has been recorded as~~ goodwill. The goodwill resulting from these acquisitions ~~are~~is expected to be deductible for income tax purposes. During the measurement periods, which will not exceed one year from each closing, we will continue to obtain information to assist us in finalizing the acquisition date fair values. Any qualifying changes to our preliminary estimates will be recorded as adjustments to the respective assets and liabilities, with any residual amounts allocated to goodwill.

Fiscal 2022 Acquisitions

During the six months ended April 2, 2022, we acquired 2 businesses for an aggregate purchase price of $30.0 million. These acquisitions expanded our pool and spa footprint and added 14 new retail locations. We are in the process of obtaining third-party valuations of certain intangible assets and inventories; thus, the provisional measurement of inventories, intangible assets and goodwill are subject to change. The following table sets forth the preliminary allocation of these acquisitions in the aggregate (in thousands):


Total purchase consideration, net of cash acquired	$	29,988
Less fair value of assets acquired and liabilities assumed:
Inventory		13,899
Intangibles		2,000
Other assets and liabilities, net		(1,644	)
Total assets acquired, net of liabilities assumed		14,255
Goodwill	$	15,733

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Fiscal 2021 ~~Acquisition~~Acquisitions

In ~~March~~fiscal 2021, we ~~acquired the assets~~completed 3 acquisitions of ~~a retailer~~retailers of supplies and services for hot tubs and swim spas ~~and fireplaces. The acquisition included 4 store locations in~~with 8 locations. During the ~~Denver, Colorado area and expanded our physical presence to 38 states. Our estimates and assumptions are subject to change as~~six months ended April 2, 2022, we ~~gather additional information throughout the~~recorded measurement period ~~which is up~~adjustments resulting in an increase in goodwill of $1.5 million related to ~~12 months after the acquisition date, and if we make changes to the amounts recorded, such amounts are recorded in the period in which they are identified.~~

~~Fiscal 2020 Acquisition~~

In October 2019, we acquired the assets of a retailer of supplies and services for hot tubs, swim spas and saunas. The acquisition included 6 locations in the Pacific Northwest and expanded our physical presence to 37 states.these acquisitions. The purchase accounting for ~~this acquisition~~two of the three acquisitions is complete.

Note 4 —Goodwill and Other Intangibles, Net

Goodwill

The ~~carrying amounts of~~following table details the changes in goodwill ~~are as follows~~ (in thousands):


	April 2, 2022		October 2, 2021		April 3, 2021
Balance at beginning of the period	$	101,114	$	93,295	$	93,295
Acquisitions		15,733		7,819		4,397
Measurement period adjustments		1,475		0		0
Balance at the end of the period	$	118,322	$	101,114	$	97,692

Other Intangible Assets

Carrying Value

Balance, April 3, 2021

$
97,692

Balance, October 3, 2020

93,295

Balance, March 28, 2020

92,821

7Other intangible assets consisted of the following as of April 2, 2022 (in thousands, except weighted average remaining useful life):


	Weighted Average Remaining Useful Life (in Years)		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
Trade name and trademarks (finite life)		9.2	$	7,940	$	(5,350	)	$	2,590
Trade name and trademarks (indefinite life)	Indefinite			17,750		—			17,750
Non-compete agreements		7.0		8,683		(7,276	)		1,407
Consumer relationships		6.1		19,000		(12,513	)		6,487
Other intangibles		6.7		6,620		(6,311	)		309
Total			$	59,993	$	(31,450	)	$	28,543

Other intangible assets consisted of the following as of October 2, 2021 (in thousands, except weighted average remaining useful life):


	Weighted Average Remaining Useful Life (in Years)		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
Trade name and trademarks (finite life)		6.6	$	5,940	$	(5,274	)	$	666
Trade name and trademarks (indefinite life)	Indefinite			17,750		—			17,750
Non-compete agreements		7.5		8,633		(7,123	)		1,510
Consumer relationships		6.4		19,000		(11,688	)		7,312
Other intangibles		7.0		6,620		(5,952	)		668
Total			$	57,943	$	(30,037	)	$	27,906

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~~Other Intangible Assets~~

Other intangible assets consisted of the following as of April 3, 2021 (in thousands, except weighted average remaining useful life):


	Weighted Average Remaining Useful Life (in Years)		Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
Trade name and trademarks (finite life)		3.1	$	5,540	$	(5,195	)	$	345
Trade name and trademarks (indefinite life)	Indefinite			18,550		—			18,550
Non-compete agreements		8.9		9,833		(7,014	)		2,819
Consumer relationships		6.5		18,500		(10,853	)		7,647
Other intangibles		7.3		5,303		(4,505	)		798
Total			$	57,726	$	(27,567	)	$	30,159

Weighted
Average
Remaining
Useful Life
(in Years)

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Amount

Trade name and trademarks (finite life)

1.6

$
5,540

$
(5,195
)

$
345

Trade name and trademarks (indefinite life)

Indefinite

18,550

—

18,550

Non-compete agreements

4.4

9,833

(7,014
)

2,819

Consumer relationships

3.2

18,500

(10,853
)

7,647

Internally developed software

2.0

4,000

(3,530
)

470

Other

0.7

1,000

(975
)

25

Total

$
57,423

$
(27,567
)

$
29,856

~~Other intangible assets are as follows as of October 3, 2020 (in thousands, except weighted average remaining useful life):~~

Weighted
Average
Remaining
Useful Life
(in Years)

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Amount

Trade name and trademarks (finite life)

2.6

$
5,540

$
(5,139
)

$
401

Trade name and trademarks (indefinite life)

Indefinite

17,750

—

17,750

Non-compete agreements

4.9

8,633

(6,872
)

1,761

Consumer relationships

3.8

17,200

(10,118
)

7,082

Internally developed software

2.9

4,000

(3,434
)

566

Other

1.6

1,000

(958
)

42

Total

$
54,123

$
(26,521
)

$
27,602

~~Other intangible assets are as follows as of March 28, 2020 (in thousands, except weighted average remaining useful life):~~

Weighted
Average
Remaining
Useful Life
(in Years)

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Amount

Trade name and trademarks (finite life)

2.3

$
5,540

$
(5,082
)

$
458

Trade name and trademarks (indefinite life)

Indefinite

17,750

—

17,750

Non-compete agreements

4.2

8,633

(6,364
)

2,269

Consumer relationships

3.5

17,200

(9,340
)

7,860

Internally developed software

2.5

4,000

(3,307
)

693

Other

1.3

1,000

(942
)

58

Total

$
54,123

$
(25,035
)

$
29,088

Amortization ~~expense~~expense was $0.1 million and $0.5 million for the three months ended April 2, 2022, and April 3, 2021, ~~and March 28, 2020 was $0.5 million.~~respectively. Amortization expense was $1.4 million and $1.0 million for the six months ended April 2, 2022, and April 3, 2021, ~~and March 28, 2020 was $1.0 million and $1.1 million,~~ respectively. NaN impairment of goodwill or other intangible assets was recorded during the three and six months ended April 2, 2022, and April 3, 2021, ~~and March 28, 2020,~~ respectively.

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The following table summarizes the estimated future amortization expense related to finite-lived intangible assets on our condensed consolidated balance sheet as of April ~~3, 2021~~2, 2022 (in thousands):


	Amount
Remainder of fiscal 2022	$	1,174
2023		2,123
2024		1,485
2025		1,388
2026		1,142
Thereafter		3,481
Total	$	10,793

Amount

Remainder of Fiscal 2021

$
1,197

2022

2,266

2023

2,033

2024

1,395

2025

1,298

Thereafter

3,918

Total

$
12,107

Intangible assets also include costs associated with acquiring mailing lists for our proprietary database. As of April 3, 2021, October 3, 2020, and March 28, 2020, gross amounts capitalized on the condensed consolidated balance sheets for mailing lists were $1.6 million with a net carrying value of $0.3 million.

Note 5—~~Inventories~~Accounts and Other Receivables, Net

~~Inventory~~Accounts and other receivables, net consisted of the following (in thousands):


	April 2, 2022			October 2, 2021			April 3, 2021
Vendor and other rebates receivable	$	20,519		$	23,222		$	29,288
Customer receivables		12,193			13,473			10,464
Other receivables		1,932			4,621			2,545
Allowance for doubtful accounts		(1,025	)		(2,456	)		(564	)
Total	$	33,619		$	38,860		$	41,733

April 3, 2021

October 3, 2020

March 28, 2020

Raw materials

$
4,274

$
1,967

$
2,047

Finished goods

273,586

146,999

242,615

Inventories

$
277,860

$
148,966

$
244,662

Note 6—Inventories

Inventories consisted of the following (in thousands):


	April 2, 2022		October 2, 2021		April 3, 2021
Raw materials	$	9,595	$	4,244	$	4,274
Finished goods		335,451		194,545		273,586
Total	$	345,046	$	198,789	$	277,860

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Note 7—Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	April 2, 2022		October 2, 2021		April 3, 2021
Prepaid expenses	$	21,209	$	12,814	$	23,809
Income taxes receivable		10,555		—		11,054
Other current assets		9,476		7,750		5,138
Total	$	41,240	$	20,564	$	40,001

Note 8—Accounts Payable and Accrued Expenses

~~Accrued~~Accounts payable and accrued expenses consisted of the following (in thousands):

April 3, 2021

October 3, 2020

March 28, 2020

Accrued payroll and employee benefits

$
23,030

$
32,420

$
10,120

Occupancy expenses

1,817

3,573

12,145

Interest

524

9,377

16,283

Sales taxes

11,902

11,164

7,685

Self-insurance reserves

5,081

6,518

5,822

Customer deposits

17,884

13,286

3,980

All other current liabilities

22,100

24,829

11,056

Total

$
82,338

$
101,167

$
67,091


	April 2,2022		October 2, 2021		April 3, 2021
Accounts payable	$	160,909	$	100,960	$	181,524
Accrued payroll and employee benefits		20,050		40,071		20,492
Customer deposits		16,874		19,861		16,288
Interest		4,293		4,898		524
Inventory related accruals		15,072		12,444		10,544
Loyalty and deferred revenue		8,727		6,685		2,835
Sales taxes		11,807		13,975		11,741
Self-insurance reserves		11,182		7,679		5,039
Other accrued liabilities		19,561		27,024		13,279
Total	$	268,475	$	233,597	$	262,266

~~Table~~As of ~~Contents~~April 2, 2022 and October 2, 2021 there were capital expenditures included in other accrued liabilities of $2.0 million and $1.5 million, respectively. As of April 3, 2021 there were 0 capital expenditures included in other accrued liabilities.

Note 7—9—Long-Term Debt, Net

Our long-term debt, ~~obligations~~net consisted of the following (in thousands, except interest rates):


	Effective Interest Rate (1)				April 2, 2022			October 2, 2021			April 3, 2021
Term Loan—due on March 9, 2028		3.02	%	(2)	$	801,900		$	805,950		$	810,000
Revolving Credit Facility		1.25	%	(3)		45,000			0			0
Total long-term debt						846,900			805,950			810,000
Less: current portion of long-term debt						(8,100	)		(8,100	)		(8,100	)
Less: noncurrent Revolving Credit Facility						(45,000	)		0			0
Less: unamortized discount						(3,046	)		(3,285	)		(3,519	)
Less: deferred financing charges						(7,833	)		(8,440	)		(9,042	)
Total long-term debt, net					$	782,921		$	786,125		$	789,339

Effective
Interest Rate ⁽¹⁾

April 3, 2021

October 3, 2020

March 28, 2020

Term Loan—due on March 9, 2028

3.25
%
⁽²⁾
$
810,000

$
811,178

$
817,434

Senior Unsecured Notes

—

390,000

390,000

ABL Credit Facility

2.50
%
⁽³⁾

—

—

50,000

Total long-term debt

810,000

1,201,178

1,257,434

Less: current portion of long-term debt

(8,100
)

(8,341
)

(8,341
)
Less: unamortized discount

(3,519
)

(9,348
)

(10,510
)
Less: deferred financing charges

(9,042
)

(3,939
)

(4,580
)
Long-term debt, net

$
789,339

$
1,179,550

$
1,234,003

(1)

Effective interest rates as of April 2, 2022.

(2)

Carries interest at a specified margin over LIBOR between 2.50% and 2.75% with a minimum LIBOR of 0.50%.

(3)

Carries interest at a specific margin between 0.25% and 0.75% with respect to Base Rate loans and between 1.25% and 1.75% with respect to Eurodollar Rate loans.

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~~(1)~~

~~Effective interest rates as of April 3, 2021.~~

~~(2)~~

~~Carries interest at a specified margin over LIBOR of 2.75% with a minimum LIBOR of 0.50%.~~

~~(3)~~

~~Carries interest at a specific margin between 0.75% and 1.00% with respect to Base Rate loans and between 1.75% and 2.00% with respect to Eurodollar Rate loans with a minimum LIBOR of 0.75%.~~

Term ~~Loan—~~Loan

In March 2021, we entered into an amendment to our Term Loan. The amended ~~and restated term loan credit agreement (the “Term Loan”). The~~ Term Loan provides for an ~~$810.0~~$810.0 million secured term loan facility ~~decreased pricing by 75 basis points and extended the~~with a maturity date to of March 9, 2028. The other material terms of the Term Loan prior to the amendment remained substantially unchanged. In addition, as a result of the Term Loan, during the three months ended April 3, 2021, we recognized a $1.9 million loss on early debt extinguishment related to the prepayment of the underlying loan tranches prepaid in connection with the amended Term Loan.2028

. Borrowings under the Term Loan have an initial applicable rate, at our option of, ~~(i) 2.75%~~ (i) 2.75% for loans that are LIBOR loans and (ii) ~~1.75%~~1.75% of loans that are ABR loans. The applicable rate of the Term Loan is based on our first lien leverage ratio as follows: (a) if the first lien leverage ratio is greater than2.75 to 1.00 ~~the~~, the applicable rate will be ~~2.75%~~2.75% for LIBOR loans and ~~1.75%~~ 1.75% for ABR loans and (b) the first lien leverage ratio is less than or equal to2.75 to 1.00, the applicable rate will be ~~2.50%~~2.50% for LIBOR loans and ~~1.50%~~1.50% for ABR loans. For LIBOR loans, the loans will bear interest at the adjusted LIBOR rate plus the applicable rate, where the adjusted LIBOR rate will not be less than ~~0.50%~~0.50%.

~~Substantially all~~ As a result 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 contains customary events of default and no event of default had occurred under the ~~Term Loan as of~~amendment during the three months ended April 3, 2021, ~~or October 3, 2020.~~we recognized a $1.9 million loss on debt extinguishment on our condensed consolidated statements of operations.

~~ABL~~Revolving Credit ~~Facility—~~Facility

In ~~August 2020,~~April 2021, we entered into ~~an agreement~~Amendment No. 5 to ~~amend~~ our ~~ABL~~$200.0 million credit facility (the “Revolving Credit ~~Facility to extend the final maturity to~~ Facility”) maturing on August 13, 2025 (the “Amendment”). The Amendment has (i) an applicable margin on the Base Rate loans with a range of 0.25% to 0.75%, (ii) an applicable margin on the Eurodollar Rate loans with a range of 1.25% to 1.75%, (iii) a LIBOR floor of 0%, and ~~increase our borrowing capacity to $200.0 million, subject to certain restrictions. We are obligated to pay the lender~~(iv) a commitment fee rate of ~~0.375% per annum, payable quarterly in arrears.~~ 0.25%.

We are also obligated to pay a commission on all outstanding letters of credit as well as customary administrative, issuance, fronting, amendment, payment, and negotiation fees. As of April 2, 2022, we had $45.0 million outstanding on the Revolving Credit Facility. As of October 2, 2021 and April 3, 2021, ~~and October 3, 2020,~~ 0 amounts were outstanding on the ~~ABL~~Revolving Credit ~~Facility.~~Facility, respectively. The amount available was reduced by ~~$9.2~~$10.0 million of existing standby letters of credit as of April ~~3, 2021.~~

~~Substantially all of our assets are pledged as collateral~~2, 2022. Subsequent to ~~secure our indebtedness The ABL~~April 2, 2022, we repaid the outstanding balance on the Revolving Credit Facility ~~does not require us to comply with any financial covenants. The ABL Credit Facility contains customary events~~ of default, including default upon the nonpayment of principal, interest, fees or other amounts, or the occurrence of a change of control. No event of default had occurred under the ABL Credit Facility as of April 3, 2021 and October 3, 2020.$45.0 million.

Senior Unsecured Notes

—The ~~Senior Unsecured Notes~~senior unsecured notes principal of ~~$390.0~~$390.0 million was paid in full on November 3, 2020, resulting in a loss on debt extinguishment of ~~$7.3~~$7.3 million on our condensed consolidated statements of operations for the six months ended April 3, ~~2021. The Senior Unsecured Notes were guaranteed on a senior basis by us~~2021, respectively.

Representations and all our present and future domestic wholly owned subsidiaries. Interest-only payments on the Senior Unsecured Notes were payable quarterly on January 10, April 10, July 10, and October 10 of each year. We incurred interest of 8.50% plus LIBOR, subject to a minimum rate of 1.00%, on the Senior Unsecured Notes. The Senior Unsecured Notes had restrictive covenants that limited the ability to, among other things, incur or guarantee additional indebtedness or issue preferred stock; pay dividends and make other restricted payments; incur restrictions on the payment of dividends or other distributions; create or incur certain liens; make certain investments; transfer or sell assets; engage in transactions with affiliates; and merge or consolidate with other companies or transfer all or substantiallyCovenants

Substantially all of our ~~assets.~~

~~Table~~assets are pledged as collateral to secure our indebtedness. The Term Loan and the Revolving Credit Facility do not require us to comply with any financial covenants. The Term Loan and Revolving Credit Facility contain customary representations and warranties, covenants, and conditions to borrowing. No event of ~~Contents~~

~~Interest Rate Cap Agreements~~

In March 2017, we entered into interest rate cap agreements in order to manage the variability of cash flows related to a portion of our floating rate indebtedness. Pursuant to the agreements, we capped LIBOR at 3.00% with respect to the aggregate notional amount of $750.0 million. In March 2021, our interest rate cap agreements expired.

~~The fair value of our interest rate cap agreements were 0~~default had occurred as of April 2, 2022, October ~~3, 2020. We did 0t recognize any gain~~2, 2021, or ~~loss on our interest rate cap agreements during the three and six months ended~~ April 3, ~~2021 and March 28, 2020, respectively.~~2021.

Future Debt Maturities

The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as ofof April ~~3, 2021~~2, 2022 (in thousands):


	Amount
Remainder of fiscal 2022	$	4,050
2023		8,100
2024		6,075
2025		55,125
2026		8,100
Thereafter		765,450
Total	$	846,900

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Amount

Remainder of Fiscal 2021

$
4,050

2022

8,100

2023

8,100

2024

6,075

2025

10,125

Thereafter

773,550

Total

$
810,000

Note 10—Income Taxes

~~Note 8—Leases~~

~~Lessee Arrangements~~

~~Operating Leases~~

~~We lease certain store, office, distribution, and manufacturing facilities under operating leases that expire at various dates through~~ ~~October 2030. We are obligated to make cash payments in connection with various lease obligations and purchase commitments. All~~Our effective income tax rate was a benefit of these obligations require cash payments to be made by us over varying periods of time. Certain leases are renewable at our option for periods of five to ten years. Certain of these arrangements are cancelable on short notice and others require payments upon early termination.

~~The following table summarizes the future annual minimum lease payments as of April 3, 2021 (in thousands):~~

Amount

Remainder of Fiscal 2021

$
34,560

2022

61,431

2023

49,272

2024

36,334

2025

22,248

Thereafter

17,224

Total

$
221,069

Less: amount of lease payments representing imputed interest

35,178

Present value of future minimum lease payments

185,891

Less: current obligations under leases

55,395

Long-Term lease obligations

$
130,496

~~Operating lease expense totaled $16.3 million and $16.1 million~~29.0% for the ~~three~~six months ended April ~~3, 2021 and March 28, 2020, respectively. Operating lease expense totaled $33.3 million and $31.9 million~~2, 2022, compared to a benefit of 32.4% for the six months ended April 3, ~~2021~~2021. The difference between the statutory rate and ~~March 28, 2020, respectively.~~

~~Note 9 —Income Taxes~~

~~Our~~our effective ~~income tax~~ rate ~~was 31.8%~~ for the six months ended April ~~3, 2021, compared~~2, 2022, was primarily attributable to ~~30.7% for the six months ended March 28, 2020.~~state taxes. The difference between the statutory rate and our effective rate for the six months ended April 3, 2021, ~~and March 28, 2020~~ was primarily ~~attributed~~attributable to a reduction in the valuation allowance for our interest limitation carryforward ~~during the period.~~and state taxes. Our effective income tax rate can fluctuate due to factors including valuation allowances, changes in tax ~~law,~~laws, federal and state audits, and the impact of other discrete items.

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Note ~~10—~~11—Commitments & Contingencies

Contingencies

We are defendants in lawsuits or potential claims encountered in the normal course of business. When the potential liability from a matter can be estimated and the loss is considered probable, we record the estimated loss. Due to uncertainties related to the resolution of lawsuits, investigations and claims, the ultimate outcome may differ from the estimates. We do not expect that the resolutions of any of these matters will have a material effect onto our condensed consolidated financial position or results of operations. We did not record any material loss contingencies as of April 2, 2022, October 2, 2021, and April 3, 2021, ~~October 3, 2020, and March 28, 2020.~~respectively.

Our workers’ compensation insurance program, general liability insurance program, and employee group medical plan have self-insurance retention features of up to ~~$0.4 million~~$0.4 million per event as of April ~~3, 2021~~2, 2022 and October ~~3, 2020 respectively.~~2, 2021. We had standby letters of credit outstanding in the amounts of ~~$9.2~~$10.0 million ~~and $11.6 million~~ as of April ~~3, 2021 and October 3, 2020, respectively,~~2, 2022 for the purpose of securing such obligations under our workers’ compensation self-insurance programs.

~~Purchase Commitments~~

~~In addition to our lease obligations, we maintain future purchase commitments related to inventory and operational requirements.~~

~~The following table summarizes the future minimum purchase commitments as of April 3, 2021 (in thousands):~~

Amount

Remainder of Fiscal 2021

$
77,607

2022

87,389

2023

84,731

2024

68,698

2025

48,446

Thereafter

7,687

Total

$
374,558

Note ~~11—~~12—Related Party Transactions

In February 2017, we entered into a management services agreement with our private equity sponsors in connection with our acquisition in February 2017. The management services agreement ~~provides~~provided that we ~~will~~ pay an annual fee for ~~them to provide~~ management and advisory services to us and our affiliates, including general management consulting services, support and analysis with respect to financing alternatives and strategic planning functions. The management services agreement terminated in October 2020 in connection with the completion of our initial public ~~offering.~~offering (“IPO”). During the ~~three~~six months ended ~~March 28, 2020,~~April 3, 2021, we paid or accrued management fees in the amount of ~~$0.6~~$0.4 million.

On December 14, 2021, the Company entered into a share repurchase agreement with Bubbles Investor Aggregator, L.P. and Explorer Investment Pte. Ltd. (together, the “Selling Stockholders”), each a greater than 5% beneficial owner of the Company’s common stock, providing for the repurchase by the Company from the Selling Stockholders of an aggregate of 7.5 million shares of common stock, conditioned on the closing of a contemporaneous secondary public offering (the “Offering”). The price per share of repurchased common stock paid by the Company was $20.25, which represents the per share price at which shares of common stock were sold to the public in the Offering less the underwriting discount. The repurchase transaction closed on December 16, 2021. See Note 13—Share Repurchase Program for detailed information regarding the repurchase program.

Note 13—Share Repurchase Program

On December 3, 2021, the Board of Directors authorized a share repurchase program for up to an aggregate amount of $300 million of the Company’s outstanding shares of common stock over a period of three years. The amount and timing of repurchases depends on a number of factors, including the Company’s financial condition, capital requirements, cash flows, results of operations, future business prospects, and other factors our management may deem relevant. The timing, volume, and nature of repurchases, are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time. Shares may be repurchased from time to time on the open market, in privately negotiated transactions, or otherwise.

On December 16, 2021, the Company repurchased and retired 7.5 million shares of common stock at a price per share of $20.25. The Company paid $151.9 million ($152.1 million including offering costs) to fund the share repurchase using existing cash on hand. The Company accounted for the share repurchase and retirement under the cost method by deducting its par value from common stock, reducing additional paid-in-capital by $127.5 million using the share price when the stock was originally issued, and the remaining

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excess cost of $24.4 million increased retained deficit. As of April 2, 2022, $148.1 million remained available for future purchases under the program.

The following table presents information about our repurchases of common stock (in thousands):


	Three Months Ended				Six Months Ended
	April 2, 2022		April 3, 2021		April 2, 2022		April 3, 2021
Total number of shares repurchased		—		—		7,500		—
Total amount paid for shares repurchased	$	—	$	—	$	151,875	$	—

Note 14—Equity-Based Compensation

Equity-Based Compensation

2020 Omnibus Incentive Plan

In October 2020, we adopted the Leslie’s, Inc. 2020 Omnibus Incentive Plan (the “Plan”). The Plan provides for the grant of awards such as stock options to purchase Leslie’s common stock (each, a “Stock Option”) and restricted stock units (“RSUs”) which may settle in Leslie’s, Inc. common stock to our directors, executives and eligible employees of the Company. Stock Options granted under the Plan generally expire ten years from the date of grant and consist of Stock Options that vest upon the satisfaction of time-based requirements (“Service Stock Option”) and performance-based Stock Options that vest upon satisfaction of a performance-based requirement (“Performance Stock Options”). RSUs consist of grants that vest ratably upon the satisfaction of time-based requirements (“Service RSU”) and performance-based RSUs that vest upon satisfaction of performance-based requirements (“Performance RSU”). In each case, vesting of the Company’s outstanding and unvested Stock Options and RSUs is contingent upon the holder’s continued service through the date of each applicable vesting event. As of April 2, 2022, we had approximately 7.5 million shares of common stock available for future grants under the Plan.

As of April 2, 2022, the aggregate unamortized value of all outstanding equity-based compensation awards was approximately $34.8 million, which is expected to be recognized over a weighted average period of approximately 2.8 years.

Stock Options

The following tables summarizes our Stock Option activity under the Plan during the six months ended (in thousands, except per share amounts):


	April 2, 2022
	Number of Options			Weighted Average Exercise Price
Outstanding, Beginning		4,877		$	18.22
Granted		0			0
Exercised		(19	)		17.00
Forfeited		(334	)		18.33
Balance, Ending		4,524		$	18.22

Vested as of April 2, 2022(1)		1,363		$	17.71

(1)

Includes 550,736 stock options that were subject to the Company’s achievement of the fiscal 2021 net income target which was deemed to have been met during the six months ended April 2, 2022.


	As of April 2, 2022
Aggregate intrinsic value of options outstanding	$	12,009
Unamortized value of unvested stock options	$	12,122
Weighted average period (years) that expense is expected to be recognized		2.1
Weighted average remaining contractual life (years) for options outstanding		9.0

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Restricted Stock Units

The following table summarizes our RSU activity under the Plan during the six months ended (in thousands, except per share amounts):


	April 2, 2022
	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding, Beginning		3,135		$	6.90
Granted		455			19.94
Vested		(444	)		4.13
Forfeited		(276	)		6.76
Balance, Ending		2,870		$	9.41


	As of April 2, 2022
Unamortized value of unvested RSUs	$	22,701
Weighted average period (years) expense is expected to be recognized		3.2

During the three and six months ended April 2, 2022, equity-based compensation expense was $2.9 million and $5.7 million, respectively, and includes Company related payroll tax expense. During the three months ended April 3, 2021, equity-based compensation expense was $2.0 million. During the six months ended April 3, 2021, equity-based compensation expense was $14.1 million and ~~March 28, 2020, we paid or accrued management fees~~was primarily due to the vesting of performance-based equity units as a result of the Company’s IPO. These costs are reported in ~~the amount~~selling, general and administrative expenses (“SG&A”) in our condensed consolidated statements of ~~$0.4 million and $1.9 million, respectively.~~operations.

Note ~~12—Net Loss~~15—Earnings Per Share

The following is a reconciliation of basic weighted average common shares outstanding to diluted weighted average common shares outstanding (in ~~thousands)~~thousands, except per share amounts):


	Three Months Ended						Six Months Ended
	April 2, 2022			April 3, 2021			April 2, 2022			April 3, 2021
Numerator:
Net loss	$	(7,440	)	$	(6,452	)	$	(21,891	)	$	(36,709	)
Denominator:
Weighted average shares outstanding - basic		182,678			186,810			185,592			181,900
Effect of dilutive securities:
Stock options		—			—			—			—
RSUs		—			—			—			—
Weighted average shares outstanding - diluted		182,678			186,810			185,592			181,900

Basic earnings per share	$	(0.04	)	$	(0.03	)	$	(0.12	)	$	(0.20	)
Diluted earnings per share	$	(0.04	)	$	(0.03	)	$	(0.12	)	$	(0.20	)

Three Months Ended

Six Months Ended

April 3, 2021

March 28, 2020

April 3, 2021

March 28, 2020

Weighted average common shares outstanding, used for basic computation

186,810

156,500

181,900

156,500

Plus: Incremental shares of potentially dilutive securities

-

-

-

-

Weighted average number of common and dilutive potential common shares outstanding

186,810

156,500

181,900

156,500

~~Stock options and restricted stock units not included in~~The following number of weighted-average potentially dilutive shares were excluded from the ~~computation~~calculation of diluted ~~net loss~~earnings per share ~~were 4.8 million and 5.7 million, respectively, for~~because the ~~three months ended April 3, 2021 because their inclusion~~effect of including such shares would have been anti-dilutive. Stock options and restricted stock units not included in the computation of diluted net loss per share were 4.7 million and 5.8 million, respectively, for the six months ended April 3, 2021 because their inclusion would have been anti-dilutive. NaN potentially dilutive securities were outstanding during the three and six months ended March 28, 2020.antidilutive (in thousands):


	Three Months Ended				Six Months Ended
	April 2, 2022		April 3, 2021		April 2, 2022		April 3, 2021
Stock options		811		760		860		437
RSUs		2,467		5,505		2,652		4,673
Total		3,278		6,265		3,512		5,110

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~~Note 13—Subsequent Events~~

On April 12, 2021, we entered into Amendment No. 5 to our $200.0 million ABL Credit Facility (the “Amendment”). The Amendment (i) decreased the applicable margin on the Base Rate loans to a range of 0.25% to 0.75% from 0.75% to 1.00%, (ii) decreased the applicable margin on the Eurodollar Rate loans to a range of 1.25% to 1.75% from 1.75% to 2.00%, (iii) changed the LIBOR floor to 0% from 0.75%, and (iv) decreased our commitment fee rate to 0.25% from 0.375%. The other terms of the ABL Credit Facility prior to the amendment thereof remain substantially unchanged.

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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 condensed 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. ~~Our actual~~Actual results or outcomes may differ materially from those anticipated in these forward-looking statements, ~~as a result of various~~which is subject to risks, uncertainties, and other factors ~~including those set forth~~described in Part I,l, Item 1A, ~~“Risk Factors”~~“Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended October ~~3, 2020, Part II, Item 1A, “Risk Factors” of our Quarterly Report on From 10-Q for the quarter ended January~~ 2, 2021, ~~Part II, Item 1A, “Risk Factors” of~~and elsewhere in this Quarterly Report on Form 10-Q, orand in our other ~~sections of this Quarterly Report on Form 10-Q.~~filings with the Securities and Exchange Commission.

Our Company

We are the largest and most trusted ~~direct-to-consumer~~direct-to-consumer brand in the ~~$11~~$14 billion United States pool and spa care industry, serving residential ~~professional,~~ and ~~commercial~~professional consumers. Founded in 1963, we are the only direct-to-consumer pool and spa care brand with national scale, operating an integrated marketing and distribution ecosystem powered by a physical network of ~~940~~965 branded locations and a robust digital platform. We offer an extensive assortment of professional-grade products, the majority of which are exclusive to Leslie’s, as well as certified installation and repair services, all of which are essential to the ongoing maintenance of pools and spas. Our dedicated team of associates, pool and spa care experts, and experienced service technicians are passionate about empowering our consumers with the knowledge, products, and solutions necessary to confidently maintain and 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 every pool and spa in the continental United States.

We operate primarily in the pool and spa aftermarket industry, which is one of the most fundamentally attractive consumer categories given its scale, predictability, and growth outlook. We have a highly predictable, recurring revenue model, as evidenced by our 5758 consecutive years of sales growth. Approximately 80% of our assortment is comprised of non-discretionary products essential to the care of residential and commercial pools and spas. Our assortment includes ~~chemicals,~~chemicals, equipment and parts, cleaning and maintenance equipment, and safety, recreational, and fitness-related products. We also offer important essential services, such as equipment installation and repair for residential consumers and ~~commercial consumers.~~professional pool operators. Consumers receive the benefit of extended vendor warranties ~~when purchasing product through~~on purchased products from our locations and on installations or ~~when~~repairs from our certified in-field ~~technicians install or repair equipment on-site.~~technicians. We offer complimentary, commercial-grade in-store water testing and analysis via our proprietary ~~AccuBlue~~^®AccuBlue® system, which increases 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 ~~our history,~~the years, positioning us as the most trusted water treatment service provider in the industry. Due to the non-discretionary nature of our products and services, our business has historically delivered strong, uninterrupted growth and profitability in all market environments, including through the Great Recession and the COVID-19 pandemic.

We have a legacy of leadership and disruptive innovation. Since our founding in 1963, we have been the leading innovator in our category and have provided our consumers with the most advanced pool and spa care available. As we have scaled, we have leveraged our competitive advantages to strategically reinvest in our business and intellectual property to develop new value-added capabilities. Over the course of our history, we have pioneered complimentary in-store water testing, offered complimentary in-store equipment repair services, introduced the industry’s first loyalty program, and developed an expansive platform of owned and exclusive brands. 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 ~~GAAP~~ measures we use under United States GAAP are sales, gross profit and gross margin, ~~selling, general and administrative expenses,~~SG&A, and operating ~~income.~~income (loss). The key non-GAAP measures and other operating measures we use are comparable sales, comparable sales growth, Adjusted EBITDA, ~~adjusted~~Adjusted net income (loss), and ~~adjusted net income (loss)~~Adjusted earnings per share.

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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 ~~are~~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 from retail customers is generally at the point of sale and payment terms for ~~commercial~~professional pool operator customers are based on ~~the Company’s~~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 product mix and availability, as well as promotional and competitive activities and the spending habits of our consumers. 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 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 52 weeks 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 ~~are~~is not calculated in the same manner by all companies, and accordingly, are not necessarily comparable to similarly titled measures of other companies and may not be 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 build-outs, fixtures, and equipment, which we amortize over time as well as cash required for inventory.

~~We operated 940 and 932 retail locations~~As of April 2, 2022, we operated 965 retail locations in 38 ~~and 37~~ states across the United ~~States as of April 3, 2021 and March 28, 2020, respectively.~~States. We ~~own~~owned 27 locations and ~~lease~~leased the remainder of our locations. Our initial lease terms are typically five years with options to renew for multiple ~~successive~~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 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, which are generally treated as a reduction of merchandise costs. We recognize such vendor rebates at the time the obligations to purchase products or perform services have been completed, and the related inventory has been sold. 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 increase proportionate to ~~increase as~~ our ~~company grows.~~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.

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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.

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Selling, General and Administrative Expenses

Our ~~selling, general and administrative expenses (“~~SG~~&A”) include~~&A includes selling and operating expenses at across our retail locations, digital platform, and ~~corporate-level~~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 ~~will be~~are expected to increase over time to support ~~the needs of~~ our ~~growing company.~~growth and public company obligations. The components of our SG&A may not be comparable to the components of similar measures of other companies.

Operating Income (Loss)

Operating income (loss) is gross profit less SG&A. Operating income (loss) excludes interest expense, loss on debt extinguishment, income tax expense (benefit), and other expenses, net. We use operating income (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, management fees, equity-based compensation expense, loss on debt extinguishment, costs related to equity offerings, strategic project costs, executive transition costs, loss (gain) on disposition of ~~fixed~~ assets, ~~management fees, equity-based compensation expense,~~ mark-to-market on interest rate cap, ~~loss on debt extinguishment,~~ and ~~special~~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 entitled 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 income (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 Income (Loss) and Adjusted ~~Net Income (Loss)~~Earnings per Share

Adjusted net income (loss) and ~~adjusted net income (loss)~~Adjusted earnings per share are additional key measures used by management and our board of directors to assess our financial performance. Adjusted net income (loss) and ~~adjusted net income (loss)~~Adjusted earnings per share are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.

Adjusted net income (loss) is defined as net income (loss) adjusted to exclude management fees, equity-based compensation expense, loss on debt extinguishment, costs related to equity offerings, strategic project costs, executive transition costs, loss (gain) on disposition of ~~fixed~~ assets, ~~management fees, equity-based compensation expense,~~ mark-to-market on interest rate cap, ~~loss on debt extinguishment,~~ and ~~special~~other non-recurring, non-cash or discrete items. Adjusted ~~net income (loss)~~diluted earnings per share is defined as ~~adjusted~~Adjusted net income (loss) divided by the diluted weighted average number of common shares outstanding.

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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 COVID-19

We ~~are closely monitoring~~continue to closely monitor the ~~continuing~~ongoing impact of COVID-19 on all aspects of our business and in all of our locations. As of April 3, 2021, we operated 940 locations in 38 states and all locations are currently open. During the 13- and 26- weeks ended April 3, 2021, we maintained operations as an ‘essential’ business, as defined by various federal, state, and local authorities, by providing essential products and services that maintain the safety and sanitization of homes and businesses. From time to time, certain of our locations may be temporarily closed or restricted to curbside service only. Closures and restrictions did not have a material impact on our performance during the ~~13- and 26-~~13 weeks ended April 2, 2022 and April 3, ~~2021.~~2021, respectively. We remain committed to supporting federal, state, and ~~local~~local mandates to prevent the spread of COVID-19 while we operate our business and to do our part in protecting public health.

We help keep our communities safe from serious public health risks by providing essential products and services. Water that is not properly maintained can serve as a breeding ground for potentially fatal bacteria and viruses.

As a business, the health and safety of our consumers, communities, and associates remain our highest priority, and we continue to take all precautions recommended by the Centers for Disease Control and Prevention to ensure their safety and well-being. We have proactively implemented extensive measures in response to COVID-19 throughout our business operations, including:

•

Required employees who are experiencing symptoms or have been in close contact with someone who has symptoms or have been exposed to the coronavirus to stay home;

•

Provided additional employee benefits related to COVID-19, including paid sick leave while employees recover from receiving the COVID-19 vaccine;

•

Provided vaccination clinics for our employees at our corporate office and distribution centers;

•

Distributed personal protective equipment and implemented new monitoring protocols, including the installation of contactless temperature scanners in our corporate offices and distribution centers;

•

Enhanced facility cleaning including routine sanitization of high touch surfaces;

•

Implemented social distancing guidelines in our locations;

•

Implemented mask guidelines for all locations and distribution centers;

•

Encouraged contactless payments and introduced curbside pickup and contact-free service calls;

•

Executed remote workforce plan for associates in our corporate offices. Effective October 2021, all corporate office employees returned to work at the corporate office on a hybrid schedule; and

•

Effective October 2021, enacted a vaccination policy requiring certain employees to provide proof of vaccination or receive a religious or medical exemption. The vaccination policy currently applies to all corporate office employees.

•

~~Required team members who are experiencing symptoms or have been in close contact with someone who has symptoms or has been exposed to the coronavirus to stay home;~~

•

~~Provided additional employee benefits related to COVID-19, including covering the cost of the vaccine for our employees;~~

•

~~Distributed personal protective equipment and implemented new monitoring protocols, including the installation of contactless temperature scanners in our corporate offices and distribution centers;~~

•

~~Enhanced facility cleaning including routine sanitization of high touch surfaces;~~

•

~~Implemented social distancing guidelines and capacity restrictions in our locations and reduced operating hours;~~

•

~~Encouraged contactless payments and introduced curbside pickup and contact-free service calls;~~

•

~~Incurred front line recognition pay for associates in our locations, distribution centers, and service technicians during the third and fourth quarters of 2020;~~

•

~~Executed remote workforce plan for associates in our corporate offices; and~~

•

~~Enacted mandatory travel restrictions.~~

We have also closely coordinated with our vendor partners to minimize the impact of supply disruptions and maintain the flow of essential products to meet the elevated demand from consumers in the current environment. The full impact of COVID-19 on our financial and operating performance depends significantly on the duration and severity of the pandemic, the actions taken to contain or mitigate its impact, and any changes in consumer behaviors. It is not possible to predict the likelihood, timing, or severity of the aforementioned direct and indirect impacts of COVID-19 on our business. Restrictions on the operation of our locations and distribution facilities could have a material impact on our sales and earnings. COVID-19 could also lead to significant disruption to our supply chain for products we sell and could have a material impact on our sales and earnings.

Business Acquisitions

Our business acquisitions did not have a material impact on our financial position or results of operations. See Note ~~3 –~~ 3—Business Combinations to ~~the accompanying unaudited~~our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding ~~our~~our business acquisitions.

Table of Contents

Incremental Public Company Expenses

As a newly public company we will incur significant expenses on an ongoing basis that we did not incur as a private company. Those costs include additional director compensation and director and officer liability insurance expenses, as well as third-party and internal resources related to accounting, auditing, Sarbanes-Oxley Act compliance, legal, and investor and public relations expenses. These costs will generally be ~~expensed under~~included in SG&A in ~~the~~our condensed consolidated ~~statement~~statements of operations.

1719

Table of Contents

Results of Operations

We derived ~~the~~our condensed consolidated statements of operations for the 13- and 26- weeks ended April 2, 2022 and April 3, 2021 ~~and March 28, 2020~~ from our condensed consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following ~~tables summarize~~table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our ~~sales.~~sales (in thousands, except per share amounts).


	Three Months Ended						Six Months Ended
Statements of Operations data:	April 2, 2022			April 3, 2021			April 2, 2022			April 3, 2021
Sales	$	228,072		$	192,441		$	412,896		$	337,447
Cost of merchandise and services sold		142,443			120,758			259,951			214,049
Gross profit		85,629			71,683			152,945			123,398
Selling, general and administrative expenses		89,618			70,374			169,403			147,863
Operating (loss) income		(3,989	)		1,309			(16,458	)		(24,465	)
Other expense:
Interest expense		6,949			8,126			13,812			19,642
Loss on debt extinguishment		—			1,888			—			9,169
Other expenses, net		161			1,057			550			1,057
Total other expense		7,110			11,071			14,362			29,868
Loss before taxes		(11,099	)		(9,762	)		(30,820	)		(54,333	)
Income tax benefit		(3,659	)		(3,310	)		(8,929	)		(17,624	)
Net loss	$	(7,440	)	$	(6,452	)	$	(21,891	)	$	(36,709	)
Earnings per share
Basic	$	(0.04	)	$	(0.03	)	$	(0.12	)	$	(0.20	)
Diluted	$	(0.04	)	$	(0.03	)	$	(0.12	)	$	(0.20	)
Weighted average shares outstanding
Basic		182,678			186,810			185,592			181,900
Diluted		182,678			186,810			185,592			181,900

Percentage of Sales(1)	(%)			(%)			(%)			(%)
Sales		100.0			100.0			100.0			100.0
Cost of merchandise and services sold		62.5			62.8			63.0			63.4
Gross margin		37.5			37.2			37.0			36.6
Selling, general and administrative expenses		39.3			36.6			41.0			43.8
Operating (loss) income		(1.7	)		0.7			(4.0	)		(7.3	)
Other expense:
Interest expense		3.0			4.2			3.3			5.8
Loss on debt extinguishment		—			1.0			—			2.7
Other expenses, net		0.1			0.5			0.1			0.3
Total other expense		3.1			5.8			3.5			8.9
Loss before taxes		(4.9	)		(5.1	)		(7.5	)		(16.1	)
Income tax benefit		(1.6	)		(1.7	)		(2.2	)		(5.2	)
Net loss		(3.3	)		(3.4	)		(5.3	)		(10.9	)
Other Financial and Operations data:
Number of new and acquired locations, net		6			4			13			4
Number of locations open at end of period		965			940			965			940
Comparable sales growth(2)		13.3	%		51.3	%		16.4	%		33.7	%
Adjusted EBITDA(3)	$	8,696		$	9,528		$	9,792		$	9,285
Adjusted EBITDA as a percentage of sales(3)		3.8	%		5.0	%		2.4	%		2.8	%
Adjusted net loss(3)	$	(2,738	)	$	(2,781	)	$	(13,654	)	$	(13,400	)
Adjusted diluted earnings per share	$	(0.01	)	$	(0.01	)	$	(0.07	)	$	(0.07	)

(1)

Components may not add to totals due to rounding.

(2)

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors and Measures We Use to Evaluate Our Business.”

(3)

The tables below provide a reconciliation from our net loss to Adjusted EBITDA and net loss to Adjusted net loss for the 13 and 26 weeks ended April 2, 2022 and April 3, 2021, respectively (in thousands).

Table of Contents


	Three Months Ended						Six Months Ended
	April 2, 2022			April 3, 2021			April 2, 2022			April 3, 2021
Net loss	$	(7,440	)	$	(6,452	)	$	(21,891	)	$	(36,709	)
Interest expense		6,949			8,126			13,812			19,642
Income tax benefit		(3,659	)		(3,310	)		(8,929	)		(17,624	)
Depreciation and amortization expense(1)		6,576			6,263			15,817			12,858
Management fees(2)		—			—			—			382
Equity-based compensation expense(3)		2,918			1,951			5,712			14,111
Loss on debt extinguishment(4)		—			1,888			—			9,169
Costs related to equity offerings(5)		161			1,057			550			9,209
Strategic project costs(6)		2,274			—			3,787			—
Executive transition costs and other(7)		917			5			934			(1,753	)
Adjusted EBITDA	$	8,696		$	9,528		$	9,792		$	9,285


	Three Months Ended						Six Months Ended
	April 2, 2022			April 3, 2021			April 2, 2022			April 3, 2021
Net loss	$	(7,440	)	$	(6,452	)	$	(21,891	)	$	(36,709	)
Management fees(2)		—			—			—			382
Equity-based compensation expense(3)		2,918			1,951			5,712			14,111
Loss on debt extinguishment(4)		—			1,888			—			9,169
Costs related to equity offerings(5)		161			1,057			550			9,209
Strategic project costs(6)		2,274			—			3,787			—
Executive transition costs and other(7)		917			5			934			(1,753	)
Tax effects of these adjustments(8)		(1,568	)		(1,230	)		(2,746	)		(7,809	)
Adjusted net loss	$	(2,738	)	$	(2,781	)	$	(13,654	)	$	(13,400	)

(dollars in thousands, except per share amounts)

Three Months Ended

Six Months Ended

Statement of operations data:

April 3, 2021

March 28, 2020

April 3, 2021

March 28, 2020

Sales

$
192,441

$
126,377

$
337,447

$
249,355

Cost of merchandise and services sold

120,758

86,464

214,049

168,364

Gross profit

71,683

39,913

123,398

80,991

Selling, general and administrative expenses

70,374

56,048

147,863

115,769

Operating income (loss)

1,309

(16,135
)

(24,465
)

(34,778
)
Other expense:

Interest expense

8,126

22,709

19,642

45,126

Loss on debt extinguishment

1,888

—

9,169

—

Other expenses, net

1,057

187

1,057

324

Total other expense

11,071

22,896

29,868

45,450

Loss before taxes

(9,762
)

(39,031
)

(54,333
)

(80,228
)
Income tax benefit

(3,310
)

(9,205
)

(17,624
)

(24,215
)
Net loss

$
(6,452
)

$
(29,826
)

$
(36,709
)

$
(56,013
)
Net loss per share

Basic and diluted

$
(0.03
)

$
(0.19
)

$
(0.20
)

$
(0.36
)
Weighted average shares outstanding

Basic and diluted

186,810

156,500

181,900

156,500

Percentage of Sales⁽¹⁾

(%)

(%)

(%)

(%)

Sales

100.0

100.0

100.0

100.0

Cost of merchandise and services sold

62.8

68.4

63.4

67.5

Gross margin

37.2

31.6

36.6

32.5

Selling, general and administrative expenses

36.6

44.4

43.8

46.4

Operating income (loss)

0.7

(12.8
)

(7.3
)

(13.9
)
Other expense:

Interest expense

4.2

18.0

5.8

18.1

Loss on debt extinguishment

1.0

-

2.7

-

Other expenses, net

0.5

0.1

0.3

0.1

Total other expense

5.8

18.1

8.9

18.2

Loss before taxes

(5.1
)

(30.9
)

(16.1
)

(32.2
)
Income tax benefit

(1.7
)

(7.3
)

(5.2
)

(9.7
)
Net loss

(3.4
)

(23.6
)

(10.9
)

(22.5
)
Other financial and operations data:

Number of new and acquired locations

4

—

4

6

Number of locations open at end of period

940

932

940

932

Comparable sales growth⁽²⁾

51.3
%

13.7
%

33.7
%

8.4
%
Adjusted EBITDA⁽³⁾

$
9,528

$
(8,081
)

$
9,285

$
(17,085
)
Adjusted EBITDA as a percentage of sales⁽³⁾

5.0
%

(6.4
)%

2.8
%

(6.9
)%
Adjusted net loss⁽³⁾

$
(2,781
)

$
(28,756
)

$
(13,400
)

$
(53,070
)
Adjusted net loss per share

$
(0.01
)

$
(0.18
)

$
(0.07
)

$
(0.34
)
(1)

Includes depreciation related to our distribution centers and locations, which is reported in cost of merchandise and services sold in our condensed consolidated statements of operations.

(2)

Represents amounts paid or accrued in connection with our management services agreement, which was terminated upon the completion of our IPO in November 2020 and are reported in SG&A in our condensed consolidated statements of operations.

(3)

Represents charges related to equity-based compensation and the related Company payroll tax expense which are reported in SG&A in our condensed consolidated statements of operations.

(4)

Represents non-cash expense due to the write-off of deferred financing costs related to the Term Loan modification during the three months ended April 3, 2021 and the repayment of our senior unsecured notes during the six months ended April 3, 2021 which are reported in loss on debt extinguishment in our condensed consolidated statements of operations.

(5)

Includes one-time payments of contractual amounts incurred in connection with our IPO that was completed in November 2020 which are reported in SG&A, and costs incurred for follow-on equity offerings in December 2021 which are reported in other expenses, net in our condensed consolidated statements of operations.

(6)

Represents non-recurring costs, such as third-party consulting costs that are not part of our ongoing operations and are incurred to execute differentiated, strategic projects, and are reported in SG&A in our condensed consolidated statements of operations.

(7)

Includes executive transition costs, losses (gains) on disposition of fixed assets and other non-recurring, non-cash or discrete items as determined by management. Amounts are reported in SG&A and other expenses, net in our condensed consolidated statements of operations.

(8)

Represents the tax effect of the total adjustments based on our actual statutory tax rate. Amounts are reported in income tax benefit in our condensed consolidated statements of operations.

~~(1)~~21

~~Components may not add to totals due to rounding.~~

~~(2)~~

~~See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors and Measures We Use to Evaluate Our Business.”~~

~~(3)~~

~~The tables below provide a reconciliation from our net loss to Adjusted EBITDA and net loss to adjusted net loss for the 13- and 26- weeks ended April 3, 2021 and March 28, 2020 (in thousands).~~

Table of Contents

Three Months Ended

Six Months Ended

April 3, 2021

March 28, 2020

April 3, 2021

March 28, 2020

Net loss

$
(6,452
)

$
(29,826
)

$
(36,709
)

$
(56,013
)
Interest expense

8,126

22,709

19,642

45,126

Income tax benefit

(3,310
)

(9,205
)

(17,624
)

(24,215
)
Depreciation and amortization expenses^(a)

6,263

6,812

12,858

14,088

Loss (gain) on disposition of fixed assets^(b)

5

27

(1,753
)

470

Management fee^(c)

—

617

382

1,940

Equity-based compensation expense^(d)

1,951

598

14,111

1,195

Mark-to-market on interest rate cap^(e)

—

—

—

22

Loss on debt extinguishment^(f)

1,888

—

9,169

—

Costs related to equity offerings^(g)

1,057

—

9,209

—

Other^(h)

—

187

—

302

Adjusted EBITDA

$
9,528

$
(8,081
)

$
9,285

$
(17,085
)

Three Months Ended

Six Months Ended

April 3, 2021

March 28, 2020

April 3, 2021

March 28, 2020

Net loss

$
(6,452
)

$
(29,826
)

$
(36,709
)

$
(56,013
)
Loss (gain) on disposition of fixed assets^(b)

5

27

(1,753
)

470

Management fee^(c)

—

617

382

1,940

Equity-based compensation expense^(d)

1,951

598

14,111

1,195

Mark-to-market on interest rate cap^(e)

—

—

—

22

Loss on debt extinguishment^(f)

1,888

—

9,169

—

Costs related to equity offerings^(g)

1,057

—

9,209

—

Other^(h)

—

187

—

302

Tax effects of these adjustments⁽ⁱ⁾

(1,230
)

(359
)

(7,809
)

(986
)
Adjusted net loss

$
(2,781
)

$
(28,756
)

$
(13,400
)

$
(53,070
)

~~______________~~

~~(a)~~

Includes depreciation related to our distribution centers and stores, which is included within the cost of merchandise and services sold line item in our condensed consolidated statements of operations.

~~(b)~~

~~Consists of loss (gain) loss on disposition of assets associated with store closures or the sale of property and equipment.~~

~~(c)~~

Represents amounts paid or accrued in connection with our management services agreement. The management services agreement terminated upon the completion of our initial public offering during the six months ended April 3, 2021.

~~(d)~~

~~Represents non-cash charges related to equity-based compensation.~~

~~(e)~~

~~Includes non-cash charges related to the change in fair value of our interest rate cap agreements, which expired in March 2021.~~

~~(f)~~

Represents non-cash expense due to the write-off of deferred financing costs related to our Term Loan modification during the three months ended April 3, 2021 and the repayment of our Senior Unsecured Notes during the six months ended April 3, 2021.

~~(g)~~

~~Includes one-time payments of contractual amounts incurred in connection with our IPO that was completed in November 2020 and our follow-on equity offering in February 2021.~~

~~(h)~~

Other non-recurring, non-cash or discrete items as determined by management, such as transaction related costs, personnel-related costs, legal expenses, strategic project costs, and miscellaneous costs.

~~(i)~~

~~Represents the tax effect of the total adjustments based on our actual statutory tax rate for fiscal year 2020 and our estimated statutory tax rate for fiscal year 2021.~~

~~Table of Contents~~

Selected Financial Information

Sales

Sales increased to ~~$192.4~~$228.1 million for the three months ended April ~~3, 2021~~2, 2022, from $126.4 million in the prior period, an increase of $66.0 million or 52.3%. This increase was the result of a comparable sales increase of 51.3% and non-comparable sales growth primarily attributable to acquisitions. The comparable sales increase of $64.8 million for the three months ended April 3, 2021 was driven by an increase in consumer demand across all product categories due to higher use of residential pools and spas.

~~Sales increased to $337.4 million for the six months ended April 3, 2021 from $249.4~~$192.4 million in the prior year period, an increase of ~~$88.0~~$35.7 million, or ~~35.3%~~18.5%. ~~This~~The increase was ~~the result of a~~primarily driven by higher comparable sales ~~increase~~growth of ~~33.7% and~~$25.5 million, or 13.3% in the current year period as well as non-comparable sales growth ~~primarily attributable~~driven by acquisitions and new locations open for less than 52 weeks.

Sales increased to ~~acquisitions. The comparable sales increase of $84.1~~$412.9 million for the six months ended April ~~3, 2021~~2, 2022, from $337.4 million in the prior year period, an increase of $75.5 million, or 22.4%. The increase was primarily driven by ~~an increase~~higher comparable sales growth of $55.2 million, or 16.4% in ~~consumer demand across all product categories due to higher use of residential pools~~the current year period as well as non-comparable sales growth driven by acquisitions and ~~spas.~~new locations open for less than 52 weeks

We believe that COVID-19 has accelerated secular trends in consumer behavior and has favorably impacted our sales. While the duration and effects of the COVID-19 pandemic are uncertain, we anticipate that the changes in consumer behavior will continue for the foreseeable future.

Gross Profit and Gross Margin

Gross profit increased to ~~$71.7~~$85.6 million for the three months ended April ~~3, 2021~~2, 2022 from $39.9 million in the prior period, an increase of $31.8 million or 79.6%. Gross margin increased to 37.2% for the three months ended April 3, 2021 compared to 31.6% in the prior year period, an increase of 567 basis points.

~~Gross profit increased to $123.4 million for the six months ended April 3, 2021 from $81.0~~$71.7 million in the prior year period, an increase of ~~$42.4~~$13.9 million, or ~~52.4%~~19.5%. Gross margin increased to ~~36.6% for the six months ended April 3, 2021~~37.5% compared to ~~32.5%~~37.2% in the prior year period, an increase of ~~409~~30 basis points. ~~These increases in gross~~

Gross profit ~~were primarily driven by the increase in comparable sales.~~

~~Selling, General and Administrative Expenses~~

~~SG&A~~ increased to $70.4 million for the three months ended April 3, 2021 from $56.0 million in the prior period, an increase of $14.4 million or 25.6%. As a percentage of sales, SG&A decreased to 36.6% for the three months ended April 3, 2021 compared to 44.4% in the prior period, a decrease of 779 basis points. The increase in SG&A for the three months ended April 3, 2021, consisted primarily of $12.1 million attributed to the increase in overall sales and our continued investments to support Company growth and $2.0 million related to noncash equity-based compensation charges.

~~SG&A increased to $147.9~~$152.9 million for the six months ended April ~~3, 2021~~2, 2022 from ~~$115.8~~$123.4 million in the prior year period, an increase of ~~$32.1~~$29.5 million, or ~~27.7%~~23.9%. ~~As a percentage of sales, SG&A decreased~~Gross margin increased to ~~43.8% for the six months ended April 3, 2021~~37.0% compared to ~~46.4%~~36.6% in the prior year period, ~~a decrease~~an increase of ~~261~~40 basis points. ~~The increase~~

These increases in SG&A for the six months ended April 3, 2021, consisted primarily of $14.8 million attributed to the increase in overall sales and our continued investments to support Company growth, $12.9 million related to noncash equity-based compensation chargesgross profit were primarily due to ~~the vesting of performance-based equity units at the time of the IPO,~~product margin improvements and ~~$8.2 million of one-time contractual amounts incurred in connection with the IPO,~~occupancy leverage, partially offset by ~~$3.8 million of expenses related~~business mix.

Selling, General and Administrative Expenses

SG&A increased to ~~the strategic consolidation of certain locations during the first quarter of fiscal year 2020.~~

~~Total Other Expense~~

~~Total other expense decreased to $11.1~~$89.6 million for the three months ended April ~~3, 2021~~2, 2022 from ~~$22.9~~$70.4 million in the prior year period, an increase of $19.2 million, or 27.3%. This increase in SG&A was primarily related to a ~~decrease~~$15.2 million increase associated with higher sales, M&A, and other investments to support Company growth, a $3.0 million increase primarily related to strategic project costs incurred in the second quarter of ~~$11.8~~fiscal 2022, and higher non-cash equity-based compensation expense of $1.0 million. ~~Total other expense decreased~~

SG&A increased to ~~$29.9~~$169.4 million for the six months ended April 3,2, 2022 from $147.9 million in the prior year period, an increase of $21.5 million, or 14.6%. This increase in SG&A was primarily related to a $31.7 million increase associated with higher sales, M&A, and other investments to support Company growth, a $2.6 million reduction primarily in gain on sale of assets realized in the first half of fiscal 2021, and a $3.8 million increase related to strategic project costs incurred in the first half of fiscal 2022. This increase was offset by lower non-cash equity-based compensation costs of $8.4 million and certain one-time payments of contractual amounts of $8.2 million, as compared to the prior year period. These offsets were primarily incurred in connection with our IPO in the first half of fiscal 2021.

Total Other Expense

Total other expenses decreased to $7.1 million for the three months ended April 2, 2022 from ~~$45.5~~$11.1 million in the prior year period, a decrease of ~~$15.6~~$4.0 million. Total other expenses decreased to $14.4 million for the six months ended April 2, 2022 from $29.9 million in the prior year period, a decrease of $15.5 million.

These decreases were primarily driven by $1.9 million and $9.2 million of non-cash loss on debt extinguishment related to the refinancing of the Term Loan and repayment of our senior unsecured notes during the three and six months ended April 2, 2021, respectively, and lower interest ~~expense on~~expenses related to the repayment of our ~~floating rate debt~~senior unsecured notes with the proceeds of ~~$14.6~~our IPO in November 2020 of $1.2 million and ~~$25.5~~$5.8 million, respectively.

Income Taxes

Income tax benefit increased to $3.7 million for the three months ended April 2, 2022 from $3.3 million in the prior year period, an increase of $0.4 million. Income tax benefit decreased to $8.9 million for the six months ended April 2, 2022, from $17.6 million in the prior year period, a decrease of $8.7 million.

The effective income tax rate was a benefit of 33.0% and 29.0% for the three and six months ended April 2, 2022, respectively, and includes the net income tax benefits attributable to equity-based compensation awards and research and development credits. The effective income tax rate was 33.9% and 32.4% for the three and six months ended April 3, 2021, respectively, partially offset by a loss on debt extinguishment related to the repayment of our Senior Unsecured Notes and Term Loan of $1.9 million and $9.2 million for the three and six months ended April 3, 2021, respectively.

~~Income Taxes~~

The income tax benefit decreased to $3.3 million for the three months ended April 3, 2021 from $9.2 million compared to the prior period, a decrease of $5.9 million. The income tax benefit decreased to $17.6 million for the six months ended April 3, 2021 from $24.2 million compared to the prior year period, a decrease of $6.6 million. These decreases primarily relate to a lower loss before taxes in each of the current year periods.

~~Table of Contents~~

The effective income tax rate was 31.8% for the six months ended April 3, 2021 and includes the reversal of a valuation allowance for our interest limitation carryforward as a result of our IPO and subsequent debt paydown. The effective income tax rate was 30.7% for the six months ended March 28, 2020 and includes a decrease in the valuation allowance for our interest limitation carryforward ~~due~~and net income tax benefits attributable to ~~favorable provisions~~equity-based compensation awards.

Table of ~~the CARES Act.~~Contents

Net Loss and ~~Net Loss~~Earnings per Share

Net loss ~~improved~~was $7.4 million for the three months ended April 2, 2022 compared to anet loss of $6.5 million in the prior year period. Net loss decreased to $21.9 million for the six months ended April 2, 2022 compared to a net loss of $36.7 million in the prior year period, an improvement of $14.8 million.

Diluted earnings per share was $(0.04) for the three months ended April 2, 2022 compared to $(0.03) in the prior year period. Diluted earnings per share improved to $(0.12) for the six months ended April 2, 2022 from $(0.20) in the prior year period.

Adjusted net loss improved slightly to $2.7 million for the three months ended April ~~3, 2021 from a~~2, 2022 compared to an Adjusted net loss of ~~$29.8~~$2.8 million in the prior ~~period, an increase of $23.3 million or 78.4%. Net~~year period. Adjusted net loss ~~per share improved to a loss of $0.03 per share for the three months ended April 3, 2021 from a loss of $0.19 per share in the prior period.~~

~~Net loss improved to a loss of $36.7~~was $13.7 million for the six months ended April ~~3, 2021 from a~~2, 2022 compared to an Adjusted net loss of ~~$56.0~~$13.4 million in the prior year period.

Adjusted diluted earnings per share of $(0.01) and $(0.07) for the three and six months ended April 2, 2022 remained consistent with the prior year periods.

Adjusted EBITDA

Adjusted EBITDA was $8.7 million for the three months ended April 2, 2022 compared to $9.5 million in the prior year period, a decrease of $0.8 million. Adjusted EBITDA increased to $9.8 million for the six months ended April 2, 2022 compared to $9.3 million in the prior year period, an increase of ~~$19.3 million or 34.5%. Net loss per share improved to a loss of $0.20 per share for the six months ended April 3, 2021 from a loss of $0.36 per share in the prior year period.~~$0.5 million.

~~Adjusted EBITDA~~

Adjusted EBITDA improved to $9.5 million for the three months ended April 3, 2021 compared to an Adjusted EBITDA loss of $8.1 million in the prior year period, an increase of $17.6 million. Adjusted EBITDA improved to $9.3 million for the six months ended April 3, 2021 compared to an Adjusted EBITDA loss of $17.1 million in the prior year period, an increase of $26.4 million. These improvements are due primarily to our increase in comparable sales and an improvement in gross margin.

~~Adjusted Net Loss and Adjusted Net loss per Share~~

Adjusted net loss improved to a loss of $2.8 million for the three months ended April 3, 2021 from an adjusted net loss of $28.8 million in the prior year period. Adjusted net loss per share improved to a loss of $0.01 for the three months ended April 3, 2021 from an adjusted net loss per share of $0.18 in the prior year period.

Adjusted net loss improved to a loss of $13.4 million for the six months ended April 3, 2021 from an adjusted net loss of $53.1 million in the prior year period. Adjusted net loss per share improved to a loss of $0.07 for the six months ended April 3, 2021 from an adjusted net loss per share of $0.34 in the prior year period.

Seasonality and Quarterly Fluctuations

Our business is highly seasonal. In general, sales and earnings are highest during ~~our fiscal year~~the third and fourth fiscal quarters, which include April through September, and represent the peak months of swimming pool use. In fiscal ~~year 2020,~~2021, we generated ~~77%~~75% of our sales and ~~109%~~97% of our Adjusted EBITDA in the third and fourth quarters of our fiscal year. Sales are substantially lower during our ~~fiscal~~ first and second fiscal quarters. 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 during our first and second fiscal quarters.

We experience a build-up of inventory and accounts payable during the ~~fiscal~~ first and second fiscal quarters ~~of the year~~ 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. ~~As a result of lower sales volumes during our fiscal first and second quarters, we reach peak borrowing during our fiscal second quarter.~~

The principal external factor affecting our business is weather. Hot weather can increase purchases of chemicals and other non-discretionary products and purchases of discretionary products, and can drive increased ~~activity around~~purchases of installation and repair ~~services we offer.~~services. Unseasonably cool weather or significant amounts of rainfall during the peak 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.

We generally open new locations before our peak selling season begins and we close locations after our peak selling season ends. We expect that our quarterly results of operations will fluctuate depending on the timing and amount of sales contributed by new locations.

~~Table of Contents~~

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are net cash provided by operating activities and borrowing availability under our ~~ABL~~Revolving Credit Facility. Historically, we have funded working capital requirements, capital expenditures, payments related to acquisitions, ~~and~~ debt service requirements and repurchases of shares of our common stock with internally generated cash on hand and ~~borrowings under~~through our ~~ABL~~Revolving Credit Facility.

Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents totaled ~~$90.3~~$52.0 million and $343.5 million as of April 3,2, 2022 and October 2, 2021, ~~and $157.1~~respectively. As of April 2, 2022, we had $45.0 million outstanding on our Revolving Credit Facility as compared to $0 as of October ~~3, 2020. There were no amounts~~2, 2021. Subsequent to April 2, 2022, we repaid the outstanding ~~under~~balance of $45.0 million on the ~~ABL~~Revolving Credit ~~Facility as of April 3, 2021 and October 3, 2020. On April 12, 2021, we entered into an amendment to the $200.0 million ABL Credit~~ Facility. ~~See Note 7-Long-Term Debt to the notes of the unaudited condensed consolidated financial statements for more detail.~~

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.

Table of Contents

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, we believe our cash and cash equivalents position, net cash provided by operating activities and borrowing availability under our ~~ABL~~Revolving Credit Facility will be adequate to finance our working capital requirements, planned capital expenditures, share repurchases, and debt service over the next 12 months. In the future, we may also allocate capital toward additional strategic ~~acquisitions.~~acquisitions and share repurchases. If cash provided by operating activities and borrowings under our ~~ABL~~Revolving Credit Facility are not sufficient or available to meet our capital requirements, then we ~~will be required~~may need to obtain additional equity or debt ~~financing in the future.~~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.

As of April ~~3, 2021,~~2, 2022, outstanding standby letters of credit totaled ~~$9.2~~$10.0 million and, after considering borrowing base restrictions, we had ~~$190.8~~$145.0 million of available borrowing capacity under the terms of the ~~ABL~~Revolving Credit Facility. As of April ~~3, 2021,~~2, 2022, we were in compliance with the covenants under the ~~ABL~~Revolving Credit Facility and ~~the~~our Term ~~Loan.~~Loan agreements.

Summary of Cash Flows

~~The following is a~~A summary of our cash flows from operating, investing, and financing activities is presented in the following table (in thousands):


	Six Months Ended						Six Months Ended
	April 3, 2021			March 28, 2020			April 2, 2022			April 3, 2021
Net cash used in operating activities	$	(111,465	)	$	(106,135	)	$	(136,757	)	$	(111,790	)
Net cash used in investing activities		(13,126	)		(18,660	)		(43,903	)		(13,126	)
Net cash provided by financing activities		57,847			45,830
Net cash (used in) provided by financing activities								(110,867	)		57,847
Net decrease in cash and cash equivalents	$	(66,744	)	$	(78,965	)	$	(291,527	)	$	(67,069	)

Cash Used in Operating Activities

Net cash used in operating activities increased to ~~$111.5~~$136.8 million for the six months ended April ~~3, 2021 from $106.1~~2, 2022 compared to $111.8 million in the prior year period, an increase of ~~$5.4~~$25.0 million. This increase was primarily driven by changes in working capital related to ~~our sales growth and~~ the ~~build-up of~~strategic investment in product inventories ~~and related accounts payable in preparation for our peak season.~~to meet heightened customer demand across product categories.

Cash Used in Investing Activities

Net cash used in investing activities ~~decreased~~increased to ~~$13.1~~$43.9 million for the six months ended April ~~3, 2021 from $18.7 million in the prior year period, a decrease of $5.6 million. This decrease in net cash used in investing activities was primarily driven by a $3.0 million decrease related~~2, 2022 compared to ~~the timing of investments in property and equipment purchases and a $2.4 million reduction in proceeds from asset dispositions.~~

~~Table of Contents~~

~~Cash Provided by Financing Activities~~

~~Net cash provided by financing activities increased to $57.8 million for the six months ended April 3, 2021 from $45.8~~$13.1 million in the prior year period, an increase of ~~$12.0~~$30.8 million. This increase was primarily driven by increased spend for business acquisitions of $23.9 million and investments in property and equipment of $4.8 million, partially offset by a decrease in proceeds from fixed asset dispositions of $2.0 million.

Cash (Used in) Provided by Financing Activities

Net cash used in financing activities for the six months ended April 2, 2022 of $110.9 million, was primarily related to the repurchase and retirement of common stock of $152.1 million and net repayment of long-term debt of $4.0 million, partially offset by borrowings on our Revolving Credit Facility of $45.0 million. Net cash provided by financing activities for the six months ended April 3, 2021 of $57.8 million, was primarily related to ~~net~~ proceeds raised during our ~~initial public offering~~IPO in November 2020 of ~~$458.6~~ $458.6 million, partially offset by the ~~increase in~~ net ~~repayments~~repayment of ~~long term~~long-term debt and deferred financing costs totaling $ 400.7 million.

Share Repurchase Program

On December 3, 2021, the Board of ~~$396.6~~Directors authorized a share repurchase program for up to an aggregate amount of $300 million of the Company’s outstanding shares of common stock over a period of three years. The amount and timing of repurchases depends on a ~~decrease~~number of factors, including the Company's financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors our management may deem relevant. The timing, volume and nature of repurchases, are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time. Shares may be repurchased from time to time on the open market, in ~~borrowings~~privately negotiated transactions, or otherwise.

Table of Contents

On December 16, 2021, the Company repurchased and retired 7.5 million shares of common stock at a price per share of $20.25. The Company paid $151.9 million ($152.1 million including offering costs) to fund the share repurchase using existing cash on ~~our revolving commitment~~hand. The Company accounted for the share repurchase and retirement under the cost method by deducting its par value from common stock, reducing additional paid-in-capital by $127.5 million using the share price when the stock was originally issued, and the remaining excess cost of ~~$50.0 million.~~$24.4 million increased retained deficit. As of April 2, 2022, $148.1 million remained available for future purchases under the program.

Contractual Obligations and Other Commitments

There were no material changes to our contractual obligations outside the ordinary course of our business during the three months and six months ended April 3, 2021 except for the $390.0 million repayment of the Senior Unsecured Notes in November 2020. See Note 10 – Commitments and Contingencies to the accompanying unaudited condensed consolidated financial statements for information regarding our commitments.2, 2022.

~~Off-Balance Sheet Arrangements~~

~~We did not have any off-balance sheet arrangements as of April 3, 2021.~~

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP and the applicable rules and regulations of the SEC for interim reporting. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

There have been no material changes to our critical accounting policies and estimates during the 13- and 26- weeks ended April ~~3, 2021~~2, 2022 from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October ~~3, 2020 filed with the SEC on December 23, 2020.~~2, 2021.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2—Summary of Significant Accounting Policies to our condensed 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 toin our ~~recent accounting pronouncements as~~primary risk exposures or management of ~~April 3, 2021~~market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October ~~3, 2020 filed with the SEC on December 23, 2020.~~2, 2021.

~~Table~~Impact of ~~Contents~~Inflation and Deflation

~~Item 3. Quantitative~~We experience inflation and ~~Qualitative Disclosures About Market Risk.~~

~~Interest Rate Risk~~

~~Our operating results are subject~~deflation related to ~~risk from interest rate fluctuations~~our purchase of certain products. This price volatility could potentially have a material impact on our ~~borrowings, which carry variable interest rates. Our borrowings include~~financial condition and/or our ABL Credit Facility and Term Loan. Our ABL Credit Facility provides for revolving loans of up to $200.0 million, with a sub-commitment for issuance of letters of credit of $25.0 million. Because our borrowings bear interest at a variable rate, we are exposed to market risks relating to changes in interest rates. As of April 3, 2021, we had variable rate debt outstanding of $810.0 million under our Term Loan. No amounts were outstanding under our ABL Credit Facility as of April 3, 2021. In conjunction with our IPO all of our obligations related to the Senior Unsecured Notes have been settled. Based on the outstanding variable rate loan balance for the Term Loan an increase or decrease of 1% in the effective interest rate would cause an increase or decrease in interest cost of approximately $8.1 million over the next 12 months. From time to time we enter into interest rate cap agreements to manage interest rate risk. Such agreements cap the borrowing rate on variable debt to provide a hedge against the risk of rising rates. As of October 3, 2020, we had two interest rate cap agreements with a total notional amount of $750 million (the “Cap Agreements”) to mitigate the impact of fluctuations in the three-month LIBOR and effectively cap the LIBOR applicable to our variable rate debt at a rate of 3.00%. Fluctuations in the market value of the Cap Agreements are recorded in other expenses, net on our condensed consolidated statements of operations. In March 2021, our Cap Agreements expired.

~~Impact of Inflation~~

~~Our~~ results of ~~operations and financial condition are presented based on historical cost.~~operations. We actively manage the impact of inflation, including tariffs, through strong relationships with our diverse supplier base, vendor negotiation, ~~and price~~ and promotion management. We also strategically invest through inventory purchases in order to obtain favorable pricing ahead of any vendor price increases. AsIn order to mitigate price volatility, we monitor price fluctuations and may adjust our selling prices accordingly, however, our ability to recover higher costs through increased pricing may be limited by the competitive environment in which we operate. Although we may experience periodic effects on sales, gross profit, gross margins and cash flows as a result of changing prices, including most recently from inflationary pressures due primarily to supply chain disruptions complicated by the COVID-19 pandemic, we ~~believe we~~do not expect the effect of inflation or deflation to have ana material impact on our ability to ~~substantially mitigate negative impacts~~execute our long-term business strategy. We currently do not use derivative instruments to manage these risks.

Table of ~~inflation.~~Contents

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 ~~the~~our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the ~~supervisions~~supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our disclosure controls and procedures were effective as of ~~April 3, 2021.~~the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

~~This Quarterly Report on Form 10-Q does not include disclosure of~~There were no changes in our internal control over financial reporting ~~due~~during the quarter ended April 2, 2022 that materially affected, or are reasonably likely to ~~a transition period established by rules of the SEC for newly public companies.~~materially affect, our internal control over financial reporting.

2426

Table of Contents

PART ~~II—~~II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are subject to various litigations, 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 ~~3, 2021,~~2, 2022, 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.

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 ~~3, 2020, as updated by the risk factors disclosed in our Quarterly Report on Form 10-Q for the period ended January~~ 2, ~~2021, other than the risk factors presented below.~~

~~Future sales of shares by existing stockholders could cause our stock price to decline.~~

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the contractual lock-up agreements described below expire and other restrictions on resale lapse, the trading price of our common stock could be adversely impacted. As of May 7, 2021, we had 187,918,474 million shares of common stock outstanding. A substantial portion of these shares were subject to a 180-day contractual lock-up with the underwriters in connection with our initial public offering, with such lock-up agreements having expired on April 26, 2021. In addition, as discussed in “Certain Relationships and Related Party Transactions,” in our Annual Report on Form 10-K, pursuant to our registration rights and lock-up agreement, certain of our stockholders are subject to additional lock-up periods, including the following:

•

each stockholder party to our registration rights and lock-up agreement will be prohibited from selling shares for 90 days following any public offering subject to such agreement, subject to limited waivers and exceptions, which created an additional lock-up period as a result of our public offering in February 2021 that expires on May 11, 2021; and

•

any employee, member of management or director as of the time of closing of our initial public offering will be prohibited from selling shares for an additional 540 days, subject to limited waivers and exceptions, with such additional lock-up period expiring on October 18, 2022.

Upon expiration of each of these lock-up periods, all such shares will be eligible for resale in the public market, subject to applicable securities laws, including the Securities Act. The trading price of our common stock could be adversely impacted if any of these certain significant stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market.

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~~Other Information.

None.

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Table of Contents

Item 6. ~~Exhibits.~~Exhibits.

~~Exhibit~~ ~~Number~~		~~Description~~

~~3.1~~		Fifth Amended and Restated Certificate of Incorporation, effective as of November 2, 2020 (filed with the SEC as Exhibit 3.1 to the Company’s Form 8-K filed on November 2, 2020 and incorporated hereinIncorporated by ~~reference)~~.Reference
Exhibit
~~3.2~~Number		~~Amended and Restated Bylaws, effective as of November 2, 2020 (filed with the SEC as~~ Exhibit ~~3.2 to the Company’s Form 8-K filed November 2, 2020 and incorporated herein by reference).~~

~~4.1~~Description		~~First Amendment to Registration Rights and Lock-up Agreement between Leslie’s, Inc. and Bubbles Investor Aggregator, L.P. (filed with the SEC as Exhibit 4.5 to the Company’s~~ Form ~~S-1 filed on February 8, 2021 and incorporated herein by reference).~~

~~10.1~~		Amendment & Restated Term Loan Credit Agreement, dated as of March 9, 2021, by and among the Company, Leslie’s Poolmart, Inc., the lenders from time to time party thereto and Nomura Corporate Funding Americas, LLC, as administrative agent for the Lenders and as collateral agent for the Secured Parties (filed with the SEC as Exhibit ~~10.1 to the Company’s Form 8-K filed on March 10, 2021 and incorporated herein by reference).~~

10.2*		Amendment No. 5, dated as of April 12, 2021, to the Credit Agreement among Leslie’s Poolmart, Inc., the subsidiary borrowers from time to time party thereto, Leslie’s, Inc., each lender from time to time party thereto, Bank of America, N.A., as Administrative Agent, and U.S. National Association, as Co-Collateral Agent.Filing Date/
		Period End Date
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of ~~1934.~~1934

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of ~~1934.~~1934

32.1+		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section ~~1350.~~1350

32.2+		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section ~~1350.~~1350

~~101.INS~~101.INS*		Inline XBRL Instance Document ~~– the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.~~

~~101.SCH~~101.SCH*		Inline XBRL ~~Taxonomy Extension~~ Schema ~~Document.~~
Document
~~101.CAL~~101.CAL*		Inline XBRL ~~Taxonomy Extension~~ Calculation Linkbase ~~Document.~~
Document
~~101.DEF~~101.LAB*		Inline XBRL ~~Taxonomy Extension Definition~~Label Linkbase ~~Document.~~
Document
~~101.LAB~~101.PRE*		Inline XBRL ~~Taxonomy Extension Label~~Presentation Linkbase ~~Document.~~
Document
~~101.PRE~~101.DEF*		Inline XBRL ~~Taxonomy Extension Presentation~~Definition Linkbase ~~Document.~~
Document
~~104~~104*		Cover Page Interactive Data File (embedded within the Inline XBRL document).

*	~~Filed herewith.~~

#	~~Indicates a management contract or compensatory plan or arrangement.~~

* 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.

~~Table of Contents~~

~~SIGNATURES~~

~~Pursuant to the requirements~~ of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing under the ~~registrant~~Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Table of Contents

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly ~~authorized.~~authorized.


	LESLIE’S, INC.

Date: May ~~10, 2021~~6, 2022	By:	/s/ Steven M. Weddell
		Steven M. Weddell
		Executive Vice President and Chief Financial Officer ~~(Principal~~
		(Principal Financial Officer and Principal Accounting Officer)

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	Carrying Value
Balance, April 3, 2021	$	97,692
Balance, October 3, 2020		93,295
Balance, March 28, 2020		92,821

	Amount
Remainder of Fiscal 2021	$	1,197
2022		2,266
2023		2,033
2024		1,395
2025		1,298
Thereafter		3,918
Total	$	12,107

	Effective Interest Rate ⁽¹⁾				April 3, 2021			October 3, 2020			March 28, 2020
Term Loan—due on March 9, 2028		3.25	%	⁽²⁾	$	810,000		$	811,178		$	817,434
Senior Unsecured Notes						—			390,000			390,000
ABL Credit Facility		2.50	%	⁽³⁾		—			—			50,000
Total long-term debt						810,000			1,201,178			1,257,434
Less: current portion of long-term debt						(8,100	)		(8,341	)		(8,341	)
Less: unamortized discount						(3,519	)		(9,348	)		(10,510	)
Less: deferred financing charges						(9,042	)		(3,939	)		(4,580	)
Long-term debt, net					$	789,339		$	1,179,550		$	1,234,003

	Amount
Remainder of Fiscal 2021	$	34,560
2022		61,431
2023		49,272
2024		36,334
2025		22,248
Thereafter		17,224
Total	$	221,069
Less: amount of lease payments representing imputed interest		35,178
Present value of future minimum lease payments		185,891
Less: current obligations under leases		55,395
Long-Term lease obligations	$	130,496

	Amount
Remainder of Fiscal 2021	$	77,607
2022		87,389
2023		84,731
2024		68,698
2025		48,446
Thereafter		7,687
Total	$	374,558

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company