Leslie's, Inc.

Good morning, and welcome to the fourth quarter and fiscal year 2020 conference call for Lesley's Inc. At this time, all participants are in a listen-only mode. Following the prepared remarks, management will conduct a question-and-answer session. If you should require any operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded and will be available for replay later today on the company's website. I'll now turn the call over to Caitlin Churchill, Investor Relations.

Thank you and good morning. I would like to remind everyone that comments made today may include forward-looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations. These statements speak as of today and will not be updated in the future if circumstances change. Please review the cautionary statements and risk factors contained in the company's earnings press release and recent filings with the SEC. During the call today, management may refer to certain non-GAAP financial measures. A reconciliation between the GAAP and non-GAAP financial measures can be found in the company's earnings press release, which was filed with the SEC today and posted to the investor relations section of Leslie's website at ir.lesliespool.com. On the call today from Leslie's Inc. is Mike Ejek, Chief Executive Officer, and Steve Waddell, Chief Financial Officer. With that, I will turn the call over to Mike Ejek. Mike?

Thanks, Caitlin, and good morning, everyone. Thank you for joining us today. It is great to be here on our first earnings call following our IPO. I speak for all of us at Lesley's when I say we are pleased to have completed what was a very exciting and a very expedited and Zoom-intensive IPO process. Now that we have that behind us, we have settled into life as a public company, with all of our focus firmly on executing against our initiatives to further solidify our market leadership and on driving value for all of our stakeholders. For those of you who have met me over Zoom before, you might notice my voice is a little rougher than normal today. I'm a little under the weather. I'm going to say I'm running about 90%, but Steve is running his normal 120%, so we should be fine, and most importantly, we have good numbers to present, including posting our 57th consecutive year of sales growth and handily surpassing $1 billion in sales for the first time in our company's history, achieving comp sales growth of 18%, driven both by consumer file growth and file productivity, and growing adjusted EBITDA to a record $183 million. Steve will discuss our financial performance in more detail shortly. but I would note that our results reflect the three pillars that are unique to Lesley's and that make our business so compelling. One, we operate in one of the most advantaged and fundamentally attractive consumer products industries, an industry which benefits from highly predictable, recurring, and non-discretionary demand. Two, we have developed an integrated network of capabilities and assets that our competitors simply cannot match. And three, Despite being the largest direct-to-consumer brand in our industry, we have tremendous growth opportunities. Let me make a couple of points about the current state of the pool industry. The first is that the installed base of pools in the U.S. has grown every year for 50 years. But this year was an all-time record year for new pool permit growth. It is estimated that more than 200,000 new pools will be built in 2020 and 2021. And once a new pool is built, that has to be maintained, which is where we come in. An average pool costs about $800 a year to maintain, which creates an annuity-like revenue stream of aftermarket spend. We estimate that the 200,000 new pools built this year and next year will create $5 billion in incremental aftermarket lifetime value and will benefit our business for years to come. The second point is that this year the industry benefited from an acceleration in several macro trends that collectively contributed to what we believe is a permanent step expansion in demand. This year we saw an increased focus on an investment in the home, the embracing of a healthy outdoor lifestyle, a migration to the suburbs and exurbs, and a heightened attention to safety and sanitization. All of these appear to be enduring secular trends that will persist long after the pandemic is behind us and will create favorable tailwinds for Lesley's as we move into fiscal 2021 and beyond. Our results benefit from this resilient and strong industry backdrop, but they're driven by the competitive advantages of our integrated ecosystem of physical and digital assets, which enable us to provide pool and spa owners a total solution whatever their need, and wherever, whenever, and however they want to shop. A key capability in our ecosystem is our proprietary digitized AccuBlue water test, which provides pool owners a pool score and a complete step-by-step prescription for proper water treatment in a clean, safe pool. This is an important point to understand with regards to how we compete. Our competitors sell pool products. we sell the total step-by-step solution for a clean, safe, and beautiful pool. That is the end product consumers need and want now more than ever. We began the rollout of AccuBlue earlier this year, and it is now in place across all of our physical locations, and we are seeing the benefits reflected in our comp sales. In addition to completing the AccuBlue rollout, our expanded omni-channel capabilities, including BOPUS, BORIS, ship from store, and ship to store remain unscheduled to be operational in time for pool season 2021. When fully implemented, these capabilities will allow us to both leverage inventory more effectively and to serve any pool or spa within the continental U.S. in 24 hours, further strengthening our integrated ecosystem and competitive positioning. Now let's talk about growth. Despite our leading market share position, we have multiple sizable growth opportunities available to us. U.S. pool industry is highly fragmented with an estimated 8,000 regional and independent operators, and third-party research has validated there are 700 residential and 200 pro markets that are still underserved. We have multiple levers that we can and will deploy against these opportunities to expand our market share, including additional residential and pro locations. utilizing our new digital capabilities and programmatic M&A. Let me take a moment to discuss a few of our other key initiatives, starting with growing our consumer file. With the enhanced marketing capabilities we've developed, we have a significant opportunity to continue to increase customer acquisition and reactivation spend with high ROIs. We're presently focusing our file growth efforts on reactivating lapsed consumers targeting the 200,000 new pools and adding new consumers by leveraging our proprietary database of virtually all the 14 million pools and spas in the U.S. Next, driving greater loyalty among our existing consumers. We believe we have a clear opportunity to expand our existing consumer share of wallet through the introduction of a revamped loyalty program and enhancing our product and services service. We're currently developing Loyalty 2.0 with proven best practice enhancements to drive loyalty penetration and member value and are on track to launch in time for pool season next year. We will support our new loyalty program with an enhanced assortment with particular focus on expanding spa and hot tub products, lifestyle and recreation products, as well as offering eco-friendly products across our categories. And then there's the pro market. Although we've grown our pro business significantly the last five years, we still have less than 10% market share. Our research suggests that small and mid-sized professional consumers value convenience and referrals, both of which Leslie's is uniquely positioned to offer, given our 936 locations and the industry's largest consumer file. With additional pro locations, the launch of a pro affiliate program and a dedicated pro website, all coming online in 2021 we intend to continue to grow share in this attractive market finally launching our new connected pool technology and subscription service which we believe represents a disruptive opportunity in pool and spa care as some of you know we are leveraging our proprietary water testing software to develop a full service connected home solution that tests your water develops and prescribes a treatment plan, and delivers to your home the assortment of products needed to maintain a clean, safe, and beautiful pool. We know through our research that there is considerable demand for this offering, and we plan to have the initial version of Acid Blue Home in market for pool season 2021. As we all know, fiscal 2020 has been an unprecedented year. Before I turn the call over to Steve to discuss in more detail the results and outlook, I want to take a moment to thank our teams for their dedication and contributions. Our store and operating team goes to all the challenges and opportunities that 2020 presented and worked diligently to safely and efficiently serve our consumers while still producing excellent operating results. I'm extremely proud of how our associates performed this year and it's that performance that enabled us to successfully enter the public markets. We have an outstanding team. a proven durable business model, and clear strategies to capitalize on the growth opportunities in front of us. We feel very good about our 2020 results, and we look forward to continuing our track record of growth in 2021. With that, I'll turn the call over to Steve. Steve?