Leslie's, Inc.

drove the acceleration in sales we experienced in the quarter. Now we'll walk through the performance of each of our six strategic growth initiatives. First, our consumer file continues to show strong sustained growth. Total target file growth was 11% in the quarter. Q1 2022 was our ninth straight quarter of double digit file growth driven by our digital marketing capabilities and compelling assortment. As we mentioned during our last call, We continue to achieve high ROI on market expense and have increased our marketing budget for 2022 by approximately 30%. Consumers are also responding well to our Lesley's Connect omnichannel capabilities. Buy online, pick up in store, ship from store, ship to store, and buy online, return in store. These capabilities allow us to utilize inventory in our location network to effectively fulfill consumer orders in whatever manner they choose. and to increase consumer retention. Lesley's Connect enabled more than 30% of Lesley's digital orders in the quarter. Next, we continued to deepen our relationship with our consumers. Our loyalty program, Lesley's Pool Perks, drove loyalty file growth of 7% in the quarter as consumers continue to be drawn to the program's key benefits. A 5% rewards earn rate and free shipping. Pool Perks In conjunction with our targeted and personalized marketing tactics, helped grow average revenue per consumer 14% in the quarter. Third, our pro initiatives are driving strong results. Our plan to convert 25 and build five new pro locations in 2022 remains on track. All 30 locations are scheduled to be operating by the start of the pool season. During our last call, I noted that we had executed more than 1,000 pro-affiliate agreements and had targeted 1,500 plus for 2022. I'm encouraged to say that as of last week, we have surpassed that target number and that our pro-affiliate partner sales doubled in the quarter. The new and converted pro locations, our expanding pro-affiliate program, and our dedicated Leslie's Pro e-commerce site helped grow our total pro business 40% in the quarter. Moving to M&A. In the quarter, we closed on the acquisition of B&L Pools, which operates seven locations in the greater Phoenix area. In addition, we have entered into an LOI for an additional pool and spa retailer, and we expect to close that acquisition this month. We continue to see a wealth of acquisition opportunities in the pool and spa industry, and we have staffed up to accelerate our ability to acquire and integrate businesses in 2022. With regard to our residential white space initiatives, We added two new locations in a quarter and remain on track to open at least 10 new residential locations in 2022. Finally, AccuBlue Home. Due to delays in required microchips, the exact number of devices that we will be able to produce for this pool season remains uncertain. However, we have confirmed that we'll have enough version 2.0 production devices to do a small pilot release with a limited number of customers. At this time, we are still not planning any significant sales, initiative in 2022. We are very pleased with how our strategic growth initiative and the teams leading them performed in the quarter. With regard to corporate governance, our inaugural proxy was published on January 31st, 2022, and we look forward to our inaugural shareholder meeting on March 17th, 2022. This meeting will be virtual, and you're all welcome to listen in. Now I'll turn it over to Steve to share more detail on our Q1 financial results and increased fiscal 2022 guidance. Steve?

Thank you, Mike, and good afternoon, everyone. Today, we're pleased to report record results for the quarter. Today, I'll review our first quarter of fiscal 2022 performance and our outlook for full year of fiscal 2022. Our first quarter results. Our first quarter included 13 weeks and ended on January 1, 2022. Total reported sales increased to $184.8 million, or 27.5% compared to first quarter of fiscal 2021. Our comparable sales growth increased 20.5%. This increase is on top of shifted comparable sales growth of 25.7% in the first quarter of fiscal 2021 and represents comparable sales growth on a two-year stack basis of 46.2%. We generated strong results across consumer types with particular strength with our pro pool and residential hot tub consumers. We also continue to see strong performance in the core sanitizer and equipment product categories during the quarter. Retail price inflation remained elevated and primarily related to chemical products and equipment. Also, as we mentioned last quarter, we've seen an increase in average cost per pound related to trichlor And as a result of our efforts to procure and convert more pounds of triachlor this year, we've factored these cost increases into our retail pricing for fiscal 2022. Gross profit increased 30.2% and gross margin rate increased by 70 basis points to 36.4% from 35.7% in the prior year, primarily due to product margin improvements across our businesses and occupancy leverage. Gross margin improvement was partially offset by business mix, including strong growth with both our pro pool and residential hot tub consumers. SG&A increased 3.0% over the prior year on a reported basis. In the first quarter of fiscal 2021, we reported non-cash equity-based compensation costs of $12.2 million and certain one-time contractual payments totaling $8.2 million. Approximately 19 million of these costs were non-recurring and primarily incurred in connection with our IPO. Excluding these non-recurring items in fiscal 2021, the year-over-year SG&A increase in the first quarter of fiscal 2022 was driven primarily by our sales increase, investments to support our growth, and expenses associated with acquisitions completed after the end of the first quarter of fiscal 2021. As a reminder, we continue to invest in the business throughout the year, and this does impact flow through in the first half of the fiscal year when SG&A as a percentage of sales is elevated. Adjusted EBITDA improved by 1.3 million to positive 1.1 million from a loss of 0.2 million in the first quarter of fiscal 2021. During the current year quarter, we converted the increase in sales at a higher gross margin and invested against our key strategic priorities. we generated a positive EBITDA quarter when historically the first quarter has represented approximately negative 5% of annual EBITDA. Adjusted net loss remained relatively flat at 10.9 million in the first quarter of fiscal 2022 compared to a net loss of 10.6 million in the prior year. Adjusted loss per share was six cents in both the first quarter of fiscal 2022 and in the prior year. Moving to the balance sheet. We finished the first quarter of fiscal 2022 with cash and cash equivalents of 53 million compared to 103 million at the end of the first quarter of fiscal 2021. We did not have any borrowings on a revolver at the end of either quarter. We expect inventory conditions in the industry to remain tight throughout fiscal 2022, particularly for chemicals and equipment. As a result of the tireless efforts of our team, we ended the first quarter of fiscal 2022 with inventory of 245 million up 40% compared to 175 million at the end of the prior year quarter. We have an always-on procurement strategy at Lesley's. Our team continues to proactively work with our vendor partners to manage the flow of inventory, and we continue to identify opportunities to strategically invest in inventory to meet heightened consumer demand and prepare for pool season. With regard to debt, At the end of the first quarter of fiscal 2022, total funded debt was $804 million compared to $809 million at the end of the prior year quarter. During the first quarter of fiscal 2022, we announced our first share repurchase program with a $300 million share repurchase authorization. We're in a unique position, a high growth company with strong and consistent cash flow generation. On December 16th, we completed the repurchase of 7.5 million shares for a total of 152 million. This action is consistent with our balanced and disciplined approach to capital allocation, our commitment to driving shareholder value, and demonstrates our confidence in our long-term growth prospects. Before I get to our outlook, I want to remind everyone of the natural seasonality of our business. Our primary selling season occurs during our fiscal third and fourth quarters, which span April through September. In fiscal 2021, the first half of the year accounted for approximately 25% of our annual sales, while the third quarter represented approximately 45%, and the fourth quarter represented approximately 30%. We generate substantially all of our full-year profits in the second half of our fiscal year. We are uniquely positioned to invest in our business throughout the year, including in talent, operating expenses, working capital, and capital expenditures. While these investments drive performance during our primary selling season, they reduce our earnings and cash flow during the first half of our fiscal year. We're pleased with our strong start to the fiscal year. We're firmly focused on driving our initiatives in preparing for pool season 2022. With regard to our outlook, today we're raising our full year fiscal 2022 outlook to reflect the first quarter beat to our expectations. We expect sales of $1,495 million to $1,520 million, representing an increase of 11% to 13% compared to the prior year. This is a $20 million increase compared to our outlook in December and the growth rates compared to our long term growth algorithm of mid to high single digits. We expect gross profit of $665 million to $675 million which implies a small improvement to gross margin compared to the prior year. This is a 10 million increase compared to our outlook in December, and the improvement in gross margin over the prior year is in line with our long-term growth algorithm of flat to positive 25 basis points per year. We expect adjusted EBITDA of 300 million to 310 million, representing an increase of 11 to 14% compared to the prior year. This is a $5 million increase compared to our outlook in December, and the growth rates compared to our long-term growth algorithm of low double digits. We expect net income of $170 million to $180 million and adjusted net income of $183 million to $193 million. We expect diluted adjusted earnings per share of $0.97 to $1.03, representing an increase of 14% to 21% compared to the prior year. This represents a three cent increase compared to our outlook in December and the growth rates compared to our long-term growth algorithm of mid to high teens earnings growth. As a result of our share repurchase completed in the first quarter, we now estimate a diluted share count of 187 million to 189 million shares. This range does not include the impact of any additional share repurchases that may be completed during fiscal 2022. We have a balanced and disciplined approach to capital allocation and our priorities are as follows. Our first priority is capital structure. Our second priority is to invest in growth through both capital expenditures and M&A. Our final priority is to return excess cash to shareholders. We have 148 million remaining under our share repurchase authorization and we will continue to evaluate opportunities to repurchase shares based on our financial position, investment opportunities to drive growth and market conditions. In summary, during the first quarter of fiscal 2022, we generated record sales, reported positive EBITDA, and continue to see strong results from our growth initiatives. And we're grateful for all the contributions of our entire team as they continue to execute at a high level in this environment of heightened consumer demand. And with that, I'll hand it back over to Mike. Thank you.

Thanks, Steve. Since it is the NFL playoff season, I'd like to end with a football analogy. The analogy is that, just like the best NFL teams, Leslie's has a strong offense and defense. I'll start with our defense and remind you of four key defensive attributes of our business. One, we are benefiting from strong secular macro trends that are driving durable consumer demand and are showing no signs of slowing. Two, We operate in an industry that is able to pass costs through to consumers. Three, 80% of our assortment is non-discretionary. And four, we have a long history of strong and consistent free cash flow generation that enables both continued investment in our business as well as opportunistic return of capital to shareholders in the form of share buyback. Leslie's also has a high-powered offense, which has resulted in nine consecutive quarters of record sales in EBITDA. Our offense also has four important components. One, we have six tangible strategic growth initiatives that are driving meaningful results and are still early stage in their development. Two, our multi-pronged pro initiative is accelerating rapidly. Three, we have set ourselves up to capitalize on the robust M&A opportunities that we continue to see in the pool and spa industry. And four, great execution by our merchandise team has put us in a favorable and advantaged inventory position. We don't have to rely on just a strong offense or defense. We have both. This is why, in a unique and advantaged industry, we believe Lesley's is uniquely positioned and advantaged to continue to win. With that, I'll hand it back to the operator, Q&A.