Q2 2023 Operating Results
- Comparable sales grew 3.2 percent
year-over-year and 7.0 percent on a
two-year basis, resulting in the 19th consecutive
quarter of comparable sales growth
- Net revenue of $1.53 billion
increased 3.4 percent
year-over-year
- Net loss of $14.6 million,
or $(0.05) per share compared to net income
of $13.5 million,
or $0.05 per
share in the prior year
- Adjusted Net
Income1 decreased $27.2 million to
$16.3 million
- Adjusted EBITDA1 of
$112.6 million compared
to $133.5 million in the prior
year
- Adjusted Earnings Per
Share1 of $0.06, compared
to $0.16 per
share in the prior year
- Operating Cash Flow of $96.6 million compared
to $42.6 million in the prior
year
- Free Cash Flow1 of $44.6 million, compared
to $(27.7) million in the prior
year
SAN
DIEGO, Aug. 24, 2023 /PRNewswire/ -- Petco Health
and Wellness Company, Inc. (Nasdaq: WOOF), a complete partner in
pet health and wellness, today announced its second quarter 2023
financial results.
In the second quarter of 2023, Petco delivered net revenue of
$1.53 billion, up 3.4 percent versus
prior year, driven by strength in the company's consumables
business, up 6.8 percent versus prior year, and services and
other business, up 30.6 percent versus prior year. Second
quarter revenue growth was partially offset by the company's
supplies and companion animal business, down 9.4 percent
versus prior year. Net loss was $14.6
million or $(0.05) per share,
driven in part by a $0.04 per share
increase in interest expense year-over-year, compared to net income
of $13.5 million or $0.05 per share in the prior year. Adjusted
Net Income1 was $16.3
million or $0.06 per share,
compared to $43.5 million or
$0.16 per share in the prior
year. Adjusted EBITDA1 was $112.6 million compared to $133.5 million in the prior year.
"We continue to focus on execution through an uncertain
environment, delivering our 19th consecutive quarter of comp sales
growth, with ongoing strength in consumables and services,
particularly in vet," said Petco CEO Ron
Coughlin. "With discretionary spending continuing to be
pressured, we're taking numerous strategic actions to strengthen
our business, including initiatives to unlock a targeted
$150 million in cost savings and
productivity enhancements by the end of fiscal 2025. These actions,
combined with the enduring competitive advantages of our
differentiated offering, will position us even better to deliver
sustainable and profitable growth for the long term."
"In Q2, we delivered solid top line results and strong free cash
flow," said Petco CFO Brian
LaRose. "That said, the shift in consumer spending and
pressures on our discretionary business mean we're revising our
guidance accordingly. Looking ahead, we remain focused on debt
paydown and cash flow, both of which will be supported by our
productivity initiatives in addition to tightly controlled expense
management."
In the second quarter of 2023, Petco paid
down $25 million in principal on its term loan. In
August, the company further paid down an additional $15 million in principal on its term loan for a
total of $75 million in principal
payments year-to-date. The company continues to target a
total of $100 million in principal payments for fiscal 2023
and remains committed to strengthening its balance sheet through
de-levering.
The company also initiated a cost action plan in the quarter and
estimates annualized gross run rate cost savings of $150 million by the end of fiscal 2025, from
merchandise, supply chain, and G&A categories. In year
one, the company expects to achieve $40
million in savings. In Q2 2023, the company recorded
$6 million in headcount
reduction-related charges related to the cost action plan.
(1)
|
Adjusted EBITDA,
Adjusted Net Income, Adjusted Earnings Per Share ("Adjusted EPS"),
and Free Cash Flow are non-GAAP financial measures. See "Non-GAAP
Financial Measures" for additional information on non-GAAP
financial measures and a reconciliation to the most comparable GAAP
measures.
|
Fiscal 2023 Guidance:
The company is updating its fiscal 2023 guidance for Adjusted
EBITDA, Adjusted EPS and Capital Expenditures and now expects:
Metric*
|
2023
Guidance
|
Net Revenue
|
$6.150 billion to
$6.275 billion
|
Adjusted
EBITDA
|
$460 million to $480
million
|
Adjusted EPS
|
$0.24 to
$0.30
|
Capital
Expenditures
|
$215 million to $225
million
|
*Assumptions in the guidance include that economic conditions,
currency rates and the tax and regulatory landscape remain
generally consistent. Adjusted EPS guidance assumes approximately
$145 to $155
million of interest expense, an estimated $43 to $53 million
increase in interest expense year-over-year, a 26 percent tax rate,
and a 269 million weighted average diluted share count. The Company
estimates that the increase in interest expense will impact
Adjusted EPS by approximately $0.12
to $0.15 per share.
Furthermore, Fiscal 2023 will be a 53-week year, leading to an
incremental week of operations. Adjusted EBITDA
and Adjusted EPS are non-GAAP financial measures and have not been
reconciled to the most comparable GAAP outlook because it is not
possible to do so without unreasonable efforts due to the
uncertainty and potential variability of reconciling items, which
are dependent on future events and often outside of management's
control and which could be significant. Because such items cannot
be reasonably predicted with the level of precision required, we
are unable to provide outlook for the comparable GAAP measures.
Forward-looking estimates of Adjusted EBITDA and Adjusted EPS are
made in a manner consistent with the relevant definitions and
assumptions noted herein and in our filings with the Securities and
Exchange Commission.
Earnings Conference Call Webcast Information:
Management will host an earnings conference call on August 24, 2023 at 8:00 AM
Eastern Time to discuss the company's financial
results. The conference call will be accessible through a
live webcast. Interested investors and other individuals can access
the webcast, earnings release, earnings presentation, and
infographic via the company's investor relations page at
ir.petco.com. A replay of the webcast will be archived on the
company's investor relations page through September 7, 2023 until approximately
5:00PM Eastern Time.
About Petco, The Health + Wellness Co.:
Founded in 1965, Petco is a category-defining health and
wellness company focused on improving the lives of pets, pet
parents and our own Petco partners. We've consistently set new
standards in pet care while delivering comprehensive pet wellness
products, services and solutions, and creating communities that
deepen the pet-pet parent bond. We operate more than 1,500 pet care
centers across the U.S., Mexico
and Puerto Rico, which offer
merchandise, companion animals, grooming, training and a growing
network of on-site veterinary hospitals and mobile veterinary
clinics. Our complete pet health and wellness ecosystem is
accessible through our pet care centers and digitally
at petco.com and on the Petco app. In tandem
with Petco Love, a life-changing organization, we work with
and support thousands of local animal welfare groups across the
country and, through in-store adoption events, we've helped find
homes for nearly 7 million animals.
Forward-Looking Statements:
This earnings release contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995 as contained in Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, concerning expectations, beliefs, plans, objectives,
goals, strategies, future events or performance and underlying
assumptions and other statements that are not statements of
historical fact, including statements regarding our fiscal year
2023 guidance. Such forward-looking statements can generally be
identified by the use of forward-looking terms such as "believes,"
"expects," "may," "intends," "will," "shall," "should,"
"anticipates," "opportunity," "illustrative," or the negative
thereof or other variations thereon or comparable terminology.
Although Petco believes that the expectations and assumptions
reflected in these statements are reasonable, there can be no
assurance that these expectations will prove to be correct or that
any forward-looking results will occur or be realized. Nothing
contained in this earnings release is, or should be relied upon as,
a promise or representation or warranty as to any future matter,
including any matter in respect of the operations or business or
financial condition of Petco. All forward-looking statements are
based on current expectations and assumptions about future events
that may or may not be correct or necessarily take place and that
are by their nature subject to significant uncertainties and
contingencies, many of which are outside the control of Petco.
Forward-looking statements are subject to a number of risks,
uncertainties and other factors that could cause actual results or
events to differ materially from the potential results or events
discussed in the forward-looking statements, including, without
limitation, those identified in this earnings release as well as
the following: (i) increased competition (including from
multi-channel retailers and e-Commerce providers); (ii) reduced
consumer demand for our products and/or services; (iii) our
reliance on key vendors; (iv) our ability to attract and retain
qualified employees; (v) risks arising from statutory, regulatory
and/or legal developments; (vi) macroeconomic pressures in the
markets in which we operate, including inflation and prevailing
interest rates; (vii) failure to effectively manage our costs;
(viii) our reliance on our information technology systems; (ix) our
ability to prevent or effectively respond to a data privacy or
security breach; (x) our ability to effectively manage or integrate
strategic ventures, alliances or acquisitions and realize the
anticipated benefits of such transactions; (xi) economic or
regulatory developments that might affect our ability to provide
attractive promotional financing; (xii) business interruptions and
other supply chain issues; (xiii) catastrophic events, political
tensions, conflicts and wars (such as the ongoing conflict in
Ukraine), health crises, and
pandemics; (xiv) our ability to maintain positive brand perception
and recognition; (xv) product safety and quality concerns; (xvi)
changes to labor or employment laws or regulations; (xvii) our
ability to effectively manage our real estate portfolio; (xviii)
constraints in the capital markets or our vendor credit terms;
(xix) changes in our credit ratings; and (xx) the other risks,
uncertainties and other factors identified under "Risk Factors" and
elsewhere in Petco's Securities and Exchange Commission filings.
The occurrence of any such factors could significantly alter the
results set forth in these statements.
Petco cautions that the foregoing list of risks, uncertainties
and other factors is not complete, and forward-looking statements
speak only as of the date they are made. Petco undertakes no duty
to update publicly any such forward-looking statement, whether as a
result of new information, future events or otherwise, except as
may be required by applicable law, regulation or other competent
legal authority.
PETCO HEALTH AND
WELLNESS COMPANY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except
per share amounts)
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
July 29,
2023
|
|
July 30,
2022
|
|
Percent
Change
|
|
Net sales
|
|
$ 1,530,734
|
|
$ 1,480,797
|
|
3 %
|
|
Cost of
sales
|
|
937,730
|
|
886,320
|
|
6 %
|
|
Gross profit
|
|
593,004
|
|
594,477
|
|
(0 %)
|
|
Selling, general and
administrative expenses
|
|
568,967
|
|
544,472
|
|
4 %
|
|
Operating income
|
|
24,037
|
|
50,005
|
|
(52 %)
|
|
Interest
income
|
|
(764)
|
|
(137)
|
|
458 %
|
|
Interest
expense
|
|
37,493
|
|
21,820
|
|
72 %
|
|
Loss on partial
extinguishment of debt
|
|
305
|
|
—
|
|
N/M
|
|
Other non-operating
(income) loss
|
|
(1,795)
|
|
10,259
|
|
N/M
|
|
(Loss) income before income taxes and income from
equity method investees
|
|
(11,202)
|
|
18,063
|
|
N/M
|
|
Income tax
expense
|
|
6,732
|
|
6,638
|
|
1 %
|
|
Income from equity
method investees
|
|
(3,328)
|
|
(2,031)
|
|
64 %
|
|
Net (loss) income
|
|
(14,606)
|
|
13,456
|
|
N/M
|
|
Net loss attributable
to noncontrolling interest
|
|
—
|
|
—
|
|
N/M
|
|
Net (loss) income attributable to Class A and B-1
common
stockholders
|
|
$
(14,606)
|
|
$
13,456
|
|
N/M
|
|
|
|
|
|
|
|
|
|
Net (loss) income per Class A and B-1 common
share:
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.05)
|
|
$
0.05
|
|
N/M
|
|
Diluted
|
|
$
(0.05)
|
|
$
0.05
|
|
N/M
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing net (loss)
income per Class A
and B-1 common share:
|
|
|
|
|
|
|
|
Basic
|
|
267,163
|
|
265,431
|
|
1 %
|
|
Diluted
|
|
267,163
|
|
265,835
|
|
0 %
|
|
|
|
|
|
|
|
|
|
PETCO HEALTH AND
WELLNESS COMPANY, INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except
per share amounts)
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
July 29,
2023
|
|
|
January 28,
2023
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
173,014
|
|
|
$
|
201,901
|
|
Receivables, less
allowance for credit losses1
|
|
|
66,258
|
|
|
|
49,580
|
|
Merchandise
inventories, net
|
|
|
675,441
|
|
|
|
652,430
|
|
Prepaid
expenses
|
|
|
54,880
|
|
|
|
51,274
|
|
Other current
assets
|
|
|
55,247
|
|
|
|
60,809
|
|
Total current
assets
|
|
|
1,024,840
|
|
|
|
1,015,994
|
|
Fixed assets
|
|
|
2,090,367
|
|
|
|
1,987,560
|
|
Less accumulated
depreciation
|
|
|
(1,270,141)
|
|
|
|
(1,184,233)
|
|
Fixed assets,
net
|
|
|
820,226
|
|
|
|
803,327
|
|
Operating lease
right-of-use assets
|
|
|
1,401,834
|
|
|
|
1,397,761
|
|
Goodwill
|
|
|
2,196,664
|
|
|
|
2,193,941
|
|
Trade name
|
|
|
1,025,000
|
|
|
|
1,025,000
|
|
Other long-term
assets
|
|
|
193,698
|
|
|
|
176,806
|
|
Total
assets
|
|
$
|
6,662,262
|
|
|
$
|
6,612,829
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts payable and
book overdrafts
|
|
$
|
477,748
|
|
|
$
|
381,213
|
|
Accrued salaries and
employee benefits
|
|
|
90,796
|
|
|
|
89,929
|
|
Accrued expenses and
other liabilities
|
|
|
219,910
|
|
|
|
217,556
|
|
Current portion of
operating lease liabilities
|
|
|
281,415
|
|
|
|
309,766
|
|
Current portion of
long-term debt and other lease liabilities
|
|
|
5,077
|
|
|
|
22,794
|
|
Total current
liabilities
|
|
|
1,074,946
|
|
|
|
1,021,258
|
|
Senior secured credit
facilities, net, excluding current portion
|
|
|
1,588,523
|
|
|
|
1,628,331
|
|
Operating lease
liabilities, excluding current portion
|
|
|
1,159,696
|
|
|
|
1,148,155
|
|
Deferred taxes,
net
|
|
|
294,094
|
|
|
|
303,121
|
|
Other long-term
liabilities
|
|
|
130,239
|
|
|
|
130,487
|
|
Total
liabilities
|
|
|
4,247,498
|
|
|
|
4,231,352
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Class A common
stock2
|
|
|
230
|
|
|
|
228
|
|
Class B-1 common
stock3
|
|
|
38
|
|
|
|
38
|
|
Class B-2 common
stock4
|
|
|
—
|
|
|
|
—
|
|
Preferred
stock5
|
|
|
—
|
|
|
|
—
|
|
Additional
paid-in-capital
|
|
|
2,196,235
|
|
|
|
2,152,342
|
|
Retained
earnings
|
|
|
216,470
|
|
|
|
232,967
|
|
Accumulated other
comprehensive income (loss)
|
|
|
1,791
|
|
|
|
(4,098)
|
|
Total stockholders'
equity
|
|
|
2,414,764
|
|
|
|
2,381,477
|
|
Total liabilities and
stockholders' equity
|
|
$
|
6,662,262
|
|
|
$
|
6,612,829
|
|
|
|
(1)
|
Allowances for credit
losses are $1,164 and $952, respectively
|
(2)
|
Class A common stock,
$0.001 par value: Authorized - 1.0 billion shares; Issued and
outstanding - 229.8 million and 228.3 million shares,
respectively
|
(3)
|
Class B-1 common stock,
$0.001 par value: Authorized - 75.0 million shares; Issued and
outstanding - 37.8 million shares
|
(4)
|
Class B-2 common stock,
$0.000001 par value: Authorized - 75.0 million shares; Issued and
outstanding - 37.8 million shares
|
(5)
|
Preferred stock, $0.001
par value: Authorized - 25.0 million shares; Issued and outstanding
- none
|
PETCO HEALTH AND
WELLNESS COMPANY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
26 Weeks
Ended
|
|
|
|
July 29,
2023
|
|
|
July 30,
2022
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(16,498)
|
|
|
$
|
37,258
|
|
Adjustments to
reconcile net (loss) income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
97,919
|
|
|
|
95,570
|
|
Amortization of debt
discounts and issuance costs
|
|
|
2,446
|
|
|
|
2,456
|
|
Provision for deferred
taxes
|
|
|
(11,002)
|
|
|
|
9,216
|
|
Equity-based
compensation
|
|
|
46,248
|
|
|
|
25,117
|
|
Impairments,
write-offs and losses on sale of fixed and other assets
|
|
|
1,035
|
|
|
|
1,369
|
|
Loss on partial
extinguishment of debt
|
|
|
746
|
|
|
|
—
|
|
Amounts reclassified
out of accumulated other comprehensive income (loss)
|
|
|
1,055
|
|
|
|
—
|
|
Income from equity
method investees
|
|
|
(6,458)
|
|
|
|
(5,194)
|
|
Non-cash operating
lease costs
|
|
|
211,576
|
|
|
|
210,946
|
|
Other non-operating
(income) loss
|
|
|
(4,614)
|
|
|
|
9,945
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
Receivables
|
|
|
(16,679)
|
|
|
|
10,856
|
|
Merchandise
inventories
|
|
|
(23,011)
|
|
|
|
(48,225)
|
|
Prepaid expenses and
other assets
|
|
|
(14,237)
|
|
|
|
(21,932)
|
|
Accounts payable and
book overdrafts
|
|
|
97,062
|
|
|
|
12,626
|
|
Accrued salaries and
employee benefits
|
|
|
1,221
|
|
|
|
(37,345)
|
|
Accrued expenses and
other liabilities
|
|
|
(1,238)
|
|
|
|
5,148
|
|
Operating lease
liabilities
|
|
|
(232,518)
|
|
|
|
(205,884)
|
|
Other long-term
liabilities
|
|
|
1,212
|
|
|
|
(1,839)
|
|
Net cash provided by
operating activities
|
|
|
134,265
|
|
|
|
100,088
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Cash paid for fixed
assets
|
|
|
(114,023)
|
|
|
|
(136,190)
|
|
Cash paid for
acquisitions, net of cash acquired
|
|
|
(2,040)
|
|
|
|
(2,888)
|
|
Cash paid for interest
in veterinary joint venture
|
|
|
—
|
|
|
|
(35,000)
|
|
Proceeds from
investment
|
|
|
10,248
|
|
|
|
—
|
|
Proceeds from sale of
assets
|
|
|
—
|
|
|
|
2,127
|
|
Net cash used in
investing activities
|
|
|
(105,815)
|
|
|
|
(171,951)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Borrowings under
long-term debt agreements
|
|
|
—
|
|
|
|
4,000
|
|
Repayments of
long-term debt
|
|
|
(60,000)
|
|
|
|
(12,500)
|
|
Payments for finance
lease liabilities
|
|
|
(3,349)
|
|
|
|
(2,964)
|
|
Proceeds from employee
stock purchase plan and stock option exercises
|
|
|
2,454
|
|
|
|
2,591
|
|
Tax withholdings on
stock-based awards
|
|
|
(4,873)
|
|
|
|
(13,461)
|
|
Net cash used in
financing activities
|
|
|
(65,768)
|
|
|
|
(22,334)
|
|
|
|
|
|
|
|
|
Net decrease in cash,
cash equivalents and restricted cash
|
|
|
(37,318)
|
|
|
|
(94,197)
|
|
Cash, cash equivalents
and restricted cash at beginning of period
|
|
|
213,727
|
|
|
|
221,890
|
|
Cash, cash equivalents
and restricted cash at end of period
|
|
$
|
176,409
|
|
|
$
|
127,693
|
|
NON-GAAP FINANCIAL MEASURES
The following information provides definitions and
reconciliations of the non-GAAP financial measures presented in
this earnings release to the most directly comparable financial
measures calculated and presented in accordance with generally
accepted accounting principles (GAAP). The company has provided
this non-GAAP financial information, which is not calculated or
presented in accordance with GAAP, as information supplemental and
in addition to the financial measures presented in this earnings
release that are calculated and presented in accordance with GAAP.
Such non-GAAP financial measures should not be considered superior
to, as a substitute for or alternative to, and should be considered
in conjunction with, the GAAP financial measures presented in this
earnings release. The non-GAAP financial measures in this earnings
release may differ from similarly titled measures used by other
companies.
The tables below reflect the calculation of Adjusted EBITDA
(include Trailing Twelve Month Adjusted EBITDA), Adjusted Net
Income, Adjusted EPS, and Free Cash Flow, for the thirteen weeks
ended July 29, 2023, compared to the
thirteen weeks ended July 30, 2022 as
well as the twelve-month period ended January 28, 2023.
Adjusted EBITDA and Trailing Twelve Month Adjusted
EBITDA
Adjusted EBITDA, including Trailing Twelve Month Adjusted
EBITDA, is considered a non-GAAP financial measure under the
Securities and Exchange Commission's (SEC) rules because it
excludes certain amounts included in net income calculated in
accordance with GAAP. Management believes that Adjusted EBITDA is a
meaningful measure to share with investors because it facilitates
comparison of the current period performance with that of the
comparable prior period. In addition, Adjusted EBITDA affords
investors a view of what management considers to be Petco's core
operating performance as well as the ability to make a more
informed assessment of such operating performance as compared with
that of the prior period. Please see the company's Annual Report on
Form 10-K for the fiscal year ended January
28, 2023 filed with the SEC on March
28, 2023 for additional information on Adjusted EBITDA.
|
|
|
|
|
|
(dollars in thousands)
|
|
13 Weeks Ended
|
|
Reconciliation of Net (Loss) Income Attributable to
Class A and B-1
Common Stockholders to Adjusted
EBITDA
|
|
July 29,
2023
|
|
July 30,
2022
|
|
Net (loss) income attributable to Class A and B-1
common stockholders
|
|
$ (14,606)
|
|
$
13,456
|
|
Add
(deduct):
|
|
|
|
|
|
Interest expense,
net
|
|
36,729
|
|
21,683
|
|
Income tax
expense
|
|
6,732
|
|
6,638
|
|
Depreciation and
amortization
|
|
48,664
|
|
48,603
|
|
Income from equity
method investees
|
|
(3,328)
|
|
(2,031)
|
|
Loss on partial
extinguishment of debt
|
|
305
|
|
—
|
|
Asset impairments and
write offs
|
|
1,031
|
|
1,207
|
|
Equity-based
compensation
|
|
24,119
|
|
12,895
|
|
Other non-operating
(income) loss
|
|
(1,795)
|
|
10,259
|
|
Mexico joint venture
EBITDA (1)
|
|
8,544
|
|
6,501
|
|
Acquisition-related
integration costs (2)
|
|
—
|
|
10,859
|
|
Other costs
(3)
|
|
6,183
|
|
3,427
|
|
Adjusted EBITDA
|
|
$
112,578
|
|
$
133,497
|
|
Net sales
|
|
$ 1,530,734
|
|
$ 1,480,797
|
|
Net margin
(4)
|
|
(1.0 %)
|
|
0.9 %
|
|
Adjusted EBITDA
Margin
|
|
7.4 %
|
|
9.0 %
|
|
(dollars in
thousands)
|
|
Trailing Twelve
Months
|
|
Reconciliation of
Net Income Attributable to Class A and B-1
Common Stockholders to Adjusted EBITDA
|
|
July 29,
2023
|
|
|
January 28,
2023
|
|
|
July 30,
2022
|
|
Net income
attributable to Class A and B-1 common stockholders
|
|
$
|
36,154
|
|
|
$
|
90,801
|
|
|
$
|
119,895
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
132,068
|
|
|
|
100,611
|
|
|
|
78,932
|
|
Income tax
expense
|
|
|
24,433
|
|
|
|
35,347
|
|
|
|
40,422
|
|
Depreciation and
amortization
|
|
|
196,177
|
|
|
|
193,828
|
|
|
|
185,156
|
|
Income from equity
method investees
|
|
|
(14,240)
|
|
|
|
(12,976)
|
|
|
|
(11,224)
|
|
Loss on partial
extinguishment of debt
|
|
|
746
|
|
|
|
—
|
|
|
|
—
|
|
Asset impairments and
write offs
|
|
|
1,658
|
|
|
|
1,992
|
|
|
|
9,597
|
|
Equity-based
compensation
|
|
|
81,915
|
|
|
|
60,784
|
|
|
|
51,272
|
|
Other non-operating
(income) loss
|
|
|
(1,892)
|
|
|
|
12,667
|
|
|
|
20,609
|
|
Mexico joint venture
EBITDA (1)
|
|
|
33,583
|
|
|
|
29,584
|
|
|
|
28,254
|
|
Acquisition-related
integration costs (2)
|
|
|
2,219
|
|
|
|
15,314
|
|
|
|
13,095
|
|
Other costs
(3)
|
|
|
8,860
|
|
|
|
2,817
|
|
|
|
3,448
|
|
Adjusted
EBITDA
|
|
$
|
501,681
|
|
|
$
|
530,769
|
|
|
$
|
539,456
|
|
Net sales
|
|
$
|
6,165,821
|
|
|
$
|
6,035,967
|
|
|
$
|
5,914,409
|
|
Net margin
(4)
|
|
|
0.6
|
%
|
|
|
1.5
|
%
|
|
|
2.0
|
%
|
Adjusted EBITDA
Margin
|
|
|
8.1
|
%
|
|
|
8.8
|
%
|
|
|
9.1
|
%
|
Adjusted Net Income and Adjusted EPS
Adjusted Net Income and Adjusted diluted Earnings Per Share
attributable to Petco common stockholders (Adjusted EPS) are
considered non-GAAP financial measures under the SEC's rules
because they exclude certain amounts included in the net income
attributable to Petco common stockholders and diluted earnings per
share attributable to Petco common stockholders calculated in
accordance with GAAP. Management believes that Adjusted Net Income
and Adjusted EPS are meaningful measures to share with investors
because they facilitate comparison of the current period
performance with that of the comparable prior period. In addition,
Adjusted Net Income and Adjusted EPS afford investors a view of
what management considers to be Petco's core earnings performance
as well as the ability to make a more informed assessment of such
earnings performance with that of the prior period.
(in thousands,
except per share amounts)
|
|
13 Weeks
Ended
|
|
Reconciliation of
Diluted EPS to Adjusted EPS
|
|
July 29,
2023
|
|
|
July 30,
2022
|
|
|
|
Amount
|
|
|
Per
share
|
|
|
Amount
|
|
|
Per
share
|
|
Net (loss) income
attributable to common stockholders / diluted EPS
|
|
$
|
(14,606)
|
|
|
$
|
(0.05)
|
|
|
$
|
13,456
|
|
|
$
|
0.05
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
6,732
|
|
|
|
0.02
|
|
|
|
6,638
|
|
|
|
0.02
|
|
Loss on partial
extinguishment of debt
|
|
|
305
|
|
|
|
0.00
|
|
|
|
—
|
|
|
|
—
|
|
Asset impairments and
write offs
|
|
|
1,031
|
|
|
|
0.01
|
|
|
|
1,207
|
|
|
|
0.01
|
|
Equity-based
compensation
|
|
|
24,119
|
|
|
|
0.09
|
|
|
|
12,895
|
|
|
|
0.05
|
|
Other non-operating
(income) loss
|
|
|
(1,795)
|
|
|
|
(0.01)
|
|
|
|
10,259
|
|
|
|
0.04
|
|
Acquisition-related
integration costs (2)
|
|
|
—
|
|
|
|
—
|
|
|
|
10,859
|
|
|
|
0.04
|
|
Other costs
(3)
|
|
|
6,183
|
|
|
|
0.02
|
|
|
|
3,427
|
|
|
|
0.01
|
|
Adjusted pre-tax income
/ diluted earnings per share
|
|
$
|
21,969
|
|
|
$
|
0.08
|
|
|
$
|
58,741
|
|
|
$
|
0.22
|
|
Income tax expense at
26% normalized tax rate
|
|
|
5,712
|
|
|
|
0.02
|
|
|
|
15,273
|
|
|
|
0.06
|
|
Adjusted Net Income
/ Adjusted EPS
|
|
$
|
16,257
|
|
|
$
|
0.06
|
|
|
$
|
43,468
|
|
|
$
|
0.16
|
|
Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that is
calculated as net cash provided by operating activities less cash
paid for fixed assets. Management believes that Free Cash Flow,
which measures the ability to generate additional cash from
business operations, is an important financial measure for use in
evaluating the company's financial performance.
|
|
|
|
|
|
(in thousands)
|
|
13 Weeks Ended
|
|
|
|
July 29,
2023
|
|
July 30,
2022
|
|
Net cash provided by
operating activities
|
|
$ 96,614
|
|
$ 42,569
|
|
Cash paid for fixed
assets
|
|
(51,973)
|
|
(70,280)
|
|
Free Cash Flow
|
|
$
44,641
|
|
$ (27,711)
|
|
Non-GAAP Financial Measures Footnotes
(1)
|
Mexico Joint Venture
EBITDA represents 50 percent of the entity's operating results for
all periods, as adjusted to reflect the results on a basis
comparable to Adjusted EBITDA. In the financial statements, this
joint venture is accounted for as an equity method investment and
reported net of depreciation and income taxes because such a
presentation would not reflect the adjustments made in the
calculation of Adjusted EBITDA, we include the 50 percent interest
in the company's Mexico joint venture on an Adjusted EBITDA basis
to ensure consistency. The table below presents a reconciliation of
Mexico joint venture net income to Mexico joint venture
EBITDA.
|
|
|
|
|
13 Weeks
Ended
|
|
(in
thousands)
|
|
July 29,
2023
|
|
July 30,
2022
|
|
Net income
|
|
$
6,656
|
|
$
4,064
|
|
Depreciation
|
|
6,443
|
|
4,711
|
|
Income tax
expense
|
|
2,364
|
|
2,390
|
|
Foreign currency
loss
|
|
395
|
|
444
|
|
Interest expense,
net
|
|
1,230
|
|
1,392
|
|
EBITDA
|
|
$ 17,088
|
|
$ 13,001
|
|
50% of
EBITDA
|
|
$
8,544
|
|
$
6,501
|
|
|
|
(2)
|
Acquisition-related
integration costs include direct costs resulting from acquiring and
integrating businesses. These include third-party professional and
legal fees and other integration-related costs that would not have
otherwise been incurred as part of the company's
operations.
|
(3)
|
Other costs include, as
incurred: restructuring costs and restructuring-related severance
costs; legal reserves associated with significant, non-ordinary
course legal or regulatory matters; and costs related to certain
significant strategic transactions.
|
(4)
|
We define net margin as
net income attributable to Class A and B-1 common stockholders
divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA
divided by net sales.
|
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SOURCE Petco - Investor Relations