LESL 10-K & 10-Q changes, risk factors and insider trading

Investing in our common stock involves a high degree of risk.risk and uncertainty. You should carefully consider the risksrisks, events and uncertainties described below in addition to the other information set forth in this Annual Report on Form 10-K, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations section and the consolidated financial statements and related notes, before making an investment decision. The risks and uncertainties described below are not the only risks or uncertainties we face. The occurrence of any of the following risks and uncertainties or additional risksrisks, events and uncertainties not presently known to us, or that we currently believe to be immaterial, could materially and adversely affect our business, financial condition, prospects, or results of operations.operations, cash flows or liquidity. In such case, the trading price of our common stock could decline, and you may lose all or part of your original investment. Some of the factors, events and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future. Our actual results and outcomes, or the timing of our results and outcomes, could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

The following summarizes the risks facing our business, all of which are more fully described below. This summary should be read in conjunction with the Risk Factors below and should not be relied upon as an exhaustive summary of the material risks facing our business. The order of presentation is not necessarily indicative of the level of risk that each factor poses to us.

Disruptions from natural disasters and similar weather-driven events could have a material adverse effect on our business.

We face competition byfrom manufacturers, retailers, distributors, and service providers in the residential and professional pool and spa care market.

The demand for our swimming pool and spa relatedspa-related products and services may be adversely affected by unfavorable economic conditions.

Our results of operations may fluctuate from quarter to quarter for many reasons, including cyclicality and seasonality.

Adverse developments affecting the financial services industry, such as actual events or concerns involving prevailing interest rates, liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.

Any limitation or restriction on our ability to sell onvia online platforms could harm our profitability.

We may acquire other companies or technologies, which could fail to result in a commercialcommercialized productproducts and otherwise disrupt our business.

Our aspirations and disclosures related to ESGsustainability matters expose us to risks that could adversely affect our reputation and performance.

Our substantial indebtedness could materially adversely affect our financial condition and our ability to operate our business.

Certain provisions of our sixthseventh amended and restated certificate of incorporation may have the effect of discouraging lawsuits against our directors and officers.

We have identified material weaknesses in our internal control over financial reporting. Such weaknesses led to a determination that our internal control over financial reporting and disclosure controls and procedures were not effective as of September 28, 2024. Our inability to remediate these material weaknesses, our identification of any additional weaknesses, or our inability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting in a timely manner could adversely affect our results of operations, our stock price and investor confidence in us.

Our success depends on increasing comparable sales through our merchandising and marketing strategy and on our ability to increase sales and profits. To increase sales and profits, and therefore comparable sales growth, we focus on delivering value and generating consumer excitement by staffing our locations with pool and spa experts, developing compelling products, optimizing inventory management, maintaining strong location conditions, and effectively marketing current products and new product offerings. If these efforts become less successful, we may not be able to maintain or improve the levels of comparable sales that we have experienced in the past, which could adversely impact our profitability and overall business results. In addition,; competition and pricing pressures from competitors may also materially adversely impact our operating margins. Our comparable sales growth could be, and has been in the past, lower than our historical average or our target for many reasons, including general economic conditions, operational performance, price inflation or deflation, competitive price on similar products, high interest rates, recession fears, industry competition, new competitive entrants near our locations, price changes in response to competitive factors, the impact of new locations entering the comparable base, cycling against any year or quarter of above-average sales results, unfavorable weather conditions, supply shortages or other operational disruptions, the number and dollar amount of consumer transactions in our locations, our ability to provide product or service offerings that generate new and repeat visits to our locations, and the level of consumer engagement that we provide in our locations. Opening new locations in our established markets may result in inadvertent oversaturation, temporary or permanent diversion of consumers, and sales from our existing locations to new locations and reduced comparable sales, thus adversely affecting our overall financial performance. These factors may cause our comparable sales results to be materially lower than in recent periods, which could harm our profitability and business.

provide a relevant omni-channel experienceexperiences to rapidly evolving consumer expectations through our proprietary mobile app and e-commerce websites;

From time-to-time,time to time, we are a party to legal proceedings, including matters involving personnel and employment issues, personal injury, antitrust claims, intellectual property claims, securities law claims, and other proceedings arising in or outside of the ordinary course of business. We cannot guarantee that the insurance coverage we maintain for the Company and our directors and officers will be available for or adequately cover current or future claims or that we will be able to maintain adequate insurance in the future at rates we consider reasonable. In addition, there are an increasing number of cases being filed against companies generally, including class-action allegations under federal and state wage and hour laws. We estimate our exposure to these legal proceedings and establish reserves for the probable and reasonably estimated liabilities. Assessing and predicting the outcome of these matters involves substantial uncertainties. Although not currently anticipated by management, unexpected outcomes in these legal proceedings or changes in management’s forecast assumptions or predictions could have a material adverse impact on our results of operations.

Natural or man-made disasters or extreme weather (including as a result of climate change), public health and safety issues, geopolitical events and conflicts (including terrorist attacks and armed hostilities), labor or trade disputes, macroeconomic crises (including any stemming from recent adverse developments in the financial services industry), and similar events can lead to uncertainty and have a negative impact on demand for our products, in addition to causing disruptions to our supply chain. Discretionary spending on chemicals, equipment and parts, cleaning and maintenance equipment, and safety, recreational, and fitness-related products, such as ours, is generally adversely affected during times of economic, social, or political uncertainty. For example, recent and potential changes to US trade policies, particularly escalating tariff exchanges with China and other countries, have disrupted supply chains and increased costs, potentially creating unpredictable customer spending patterns and economic uncertainty that could impact consumers’ discretionary spending. The potential for natural or man-made disasters or extreme weather, geopolitical events and conflicts, labor or trade disputes, macroeconomic crises, and similar events could create these types of uncertainties and negatively impact our business for the short- or long-term in ways that cannot presently be predicted.

We face competition byfrom manufacturers, retailers, distributors, and service providers in the residential and professional pool and spa care market.

Most of our competition comes from regional and local independent retailers. National home improvement and retailers, such as Home Depot, Lowe’s, and local and regional hardware stores, typically compete with us mainly on a seasonal basis during the spring and summer months, but experience significantly higher foot traffic than our retail locations. We also face competition from mass-market retail competitors, such as Walmart and Costco, who devote shelf space to merchandise and products targeted to our consumers, as well as online mass-market retailers such as Amazon, who devote online categories to merchandise and products targeted to our consumers. Historically, mass-market retailers have generally expanded by adding new stores and product breadth, but their product offerings of pool-related products have remained relatively constant.] If pool and spa owners are attracted by the convenience afforded by any of our competitors, they may be less inclined to purchase products and/or services from us.

Consumer discretionary spending affects our sales and is impacted by factors outside of our control, including general economic conditions, the residential housing market, unemployment rates and wage levels, high interest rates, high inflation, disposable income levels, consumer confidence, recession fears, and access to credit. In economic downturns, the demand for swimming pool and spa related products and services may decline, often corresponding with declines in discretionary consumer spending, the growth rate of pool-eligible households, and swimming pool construction. A weak economy may also cause consumers to defer discretionary replacement and refurbishment activity. Even in generally favorable economic conditions, severe and/or prolonged downturns in the housing market could have a material adverse impact on our financial performance. Similarly, slow growth in the number of pool-eligible households can have a lasting negative impact by limiting the potential for future growth of the pool and spa maintenance market.

We believe that homeowners’ access to consumer credit is a critical factor enabling the purchase of new pools, spas and related products. Unfavorable economic conditions and downturndownturns in the housing market can result in significant tightening of credit markets, which limit the ability of consumers to access financing for new swimming pools, spas, and related supplies, and consequently, replacement, repair, and maintenance of equipment. Tightening consumer credit could prevent consumers from obtaining financing for pool and spa projects, which could negatively impact our sales of products and services.

Adverse developments affecting the financial services industry, such as actual events or concerns involving prevailing interest rates, liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and our financial condition and results of operations.

Actual events involving reduced or limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. Investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Increased interest rates impact the Company and our consumers by making new borrowings or refinancings of our indebtedness obligations more expensive and, for consumers, reducing their access to favorable credit can slow new pool construction and thus reduce demand for our equipment and aftermarket care products. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, or result in breaches of our financial and/or contractual obligations. Any of these impacts, or any other impacts resulting from the factors described above or other similar factors, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.

Given the nature of our business, weather is one of the principal external factors affecting our business. Unseasonably cool weather or significant amounts of rainfall during the peak sales season have in the past and can in the future reduce chemical consumption in pools and spas and decrease consumer purchases of our products and services. In addition, unseasonably early or late warming trends have in the past and can in the future 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. While warmer weather conditions favorably impact our sales, global warming trends and other significant climate changes can create more variability in the short-term or lead to other unfavorable weather conditions that could adversely impact our sales or operations.operations and could make our operations, seasonality and sales cycles less predictable than in previous years. Drought conditions or water management initiatives sometimes lead to municipal ordinances related to water use restrictions. To the extent such restrictions result in decreased pool installations, our sales could be negatively impacted.

Certain extreme weather events, such as hurricanes and tropical storms, may become more frequent, and when such events occur, they can impact demand for our products and services, our ability to deliver our products, provide services, continue to keep our facilities open and operational, cause damage to our facilities, or impact our business in other ways. As a consequence of these or other catastrophic or uncharacteristic events, we may experience interruption to our operations, increased costs or loss of property, equipment or inventory, which would adversely affect our revenue and profitability.

Our numerous procedures and protocols designed to mitigate cybersecurity risks (including processes for timely notification of appropriate personnel, for assessment and resolution of cybersecurity incidents, and for company-wide training programs, our investments in information technology security and our updates to our business continuity plan) may not prevent or effectively mitigate adverse consequences from cybersecurity risks. Any failure by us to maintain or protect our information technology systems and data integrity, including from cyberattacks, intrusions, or other breaches, could result in the unauthorized access to consumer data, credit card information, and personally identifiable information, theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations, putting us at a competitive disadvantage. Such a breach could result in damage to our reputation and subject us to potential litigation, liability, fines, and penalties, resulting in a possible material adverse impact on our financial condition and results of operations.

We experienced a decline in sales, and thus profitability, betweenbeginning the Fiscalfiscal Yearyears ending September 23,30, 2023, andthrough the Fiscalfiscal Yearyear ending SeptemberOctober 28,4, 2024.2025. The current declines in our revenue and operating margins means our revenue and margin growth may be less than expected. If we are unable to scale our operations efficiently or maintain pricing power,power and competitive pricing, we may fail to achieve expected operating margins, which would have a material and adverse effect on our operating results. Diminished growth may also stress our ability to adequately manage our operations, quality of products, safety, and regulatory compliance. If growth significantly decreases, it could negatively impact our cash reserves, and it may be necessary to obtain additional financing, which could increase indebtedness or result in dilution to shareholders. Further, we may not be able to obtain additional financing on acceptable terms, if at all.

Our aspirations and disclosures related to ESGsustainability matters expose us to risks that could adversely affect our reputation and performance.

Our ability to achieve any ESGsustainability objective is subject to numerous risks, many of which are outside of our control. Additionally, standards for tracking and reporting ESGsustainability matters continue to evolve.evolve and vary. Our selection of voluntary disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, may change from time-to-timetime -to-time or differ from those of others. This may result in a lack of consistent or meaningful comparative data from period to period or between us and other companies in the same industry.

In addition, our processes and controls may not comply with evolving standards for identifying, measuring, and reporting ESGsustainability metrics, including ESG-relatedsustainability -related disclosures that may be required of public companies by theU.S. SECfederal or state governments,governments and other regulators, and such standards may change over time, which could result in significant revisions to our existing processes and controls, reporting, and current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.

IfOur our ESGsustainability practices domay not meetsatisfy evolvingall investor or other stakeholder expectations and standards, thenwhich are evolving and varied and may not align with our sustainability strategy. As a result, our reputation, our ability to attract or retain employees, and our attractiveness as an investment or partner could be negatively impacted. Further, our success, failure or perceived failure to pursuepursue, track report or fulfill our goals and objectives or to satisfy various reporting standards on a timely basis, or at all, could haveadversely similaraffect negativeour impactsreputation, orfinancial performance, and growth, and expose us to governmentincreased scrutiny, review, or litigation from our stakeholders, including the investment community, media outlets (including social media) and enforcement actions and private litigation.authorities.

We operate chemical repackaging and manufacturing facilities and we store chemicals in our locations and in our distribution facilities. Because some of the chemicals we repackagerepackage, manufacture and store are hazardous materials, we must comply with various fire and safety ordinances. However, a release at a location or a fire at one of our facilities could give rise to liability claims against us and potential environmental liability. In addition, if an incident involves a repackagingrepackaging, manufacturing or distribution facility, we might be required temporarily to use alternate sources of supply that could increase our cost of sales.

We rely on various suppliers and vendors to provide and deliver product inventory on a continuous basis, some of which are located outside of the United States. These suppliers (and those they depend upon for materials and services) are subject to risks, including from natural or man-made disasters or extreme weather (including as a result of climate change), public health and safety issues, geopolitical events and conflicts (including terrorist attacks and armed hostilities), power outages, labor or trade disputes, union organizing activities, disruption to transportation routes, changes in tariffs or duties imposed on imported products or raw materials, financial liquidity problems, and similar events, as well as supply constraints and general economic, social, and political conditions that can limit their ability to provide us (or our suppliers) with quality products and services in a timely manner.manner and at reasonable cost. The occurrence of these or other unexpected events can cause us to suffer significant product inventory losseslosses, and significant lost revenue.revenue, and increased cost of sales. For example, recent and potential changes to U.S. trade policies, particularly escalating tariff exchanges with China and other countries, have disrupted supply chains and increased costs, potentially creating unpredictable customer spending patterns and economic uncertainty that could, directly or indirectly, significantly impact business operations, financial conditions, and results in ways difficult to anticipate or mitigate.

Our principal chemical raw materials are granular chlorine compounds, which are commodity materials. The prices of granular chlorine compounds are a function of, among other things, manufacturing capacity and demand. WeIn the past, we have generally passedbeen throughable to pass along chlorine price increases to our consumers. TheHowever should the price of granular chlorine compounds may increase in the future andfuture, we may not be able to pass on any such increase to our consumers. We purchase granular chlorine compounds primarily from the nation’s largest suppliers. The alternate sources of supply we currently view as reliable may ultimately be unable to supply us with all of our raw materials and finished goods, including chlorine products. Additionally, significant price fluctuations or shortages in raw materials needed for our products have increased our cost of goods sold for certain products and may cause our results of operations and financial condition to suffer. For example, during times of highly unstable supply of granular chlorine compounds we believe some customers stockpile chemicals, resulting in unexpected changes in demand. As a result of such behavior, our revenue is higher than normal during periods of stockpiling and lower than normal during the period after stockpiling has occurred. We believe that consumer stockpiling of chemicals may have negatively impacted our results of operations in fiscal 2023 and may impact us in future periods.

We utilize a national network consisting of a mix of company-operated distribution centers as well as third-party operated distribution centers to manage the receipt, storage, sorting, packing and distribution of our merchandise to appropriate stores or to customers directly. We depend in large part on the orderly operation of our receiving and distribution process, which depends, in turn, on adherence to shipping schedules, proper functioning of our information technology and inventory control systems and, the overall effective management of such distribution centers. Work stoppages, labor shortages, operations below historical efficiency levels, supply chain disruptions, inclement weather, or other unforeseen events in the areas or regions in which these distribution centers operate could impair our ability to adequately stock our stores, ship products to our e-commerce customers, process returns of products, and may adversely affect our sales and profitability.

Most of the raw materials that go into our products, and those products not repackaged by usus, are purchased directly from manufacturers. It is common in the swimming pool supply industry for certain manufacturers to offer extended payment terms on certain products to quantityvolume purchasers such aslike us. These payment terms typically include favorable pricing and are available to us for pre-season or early season purchases.purchases Ifso that we are able to meet anticipated demand each year. However, if we do not continue to maintain such favorable purchase terms with manufacturers, it could adversely affect our operating results.

Compliance with new and proposed ESGsustainability disclosure requirements, including the climate change disclosure requirements ofon the SECU.S. andfederal theor Statestate of California,level, could require significant effort and divert management’s attention and resources, which could adversely affect our operating results. We are also subject to evolving data privacy and cybersecurity laws and regulations (including applicable standards), compliance with which may also increase our costs of doing business.

Management has processes in place to facilitate and support our compliance with these requirements. However, failure to comply with these laws and regulationsregulations, which have become increasingly varied in different regions in which we operate, may result in investigations, the assessment of administrative, civil and criminal fines, damages, seizures, disgorgements, penalties, or the imposition of injunctive relief. Moreover, compliance with such laws and regulations in the future could prove to be costly. Although we presently do not expect to incur any material capital or other expenditures relating to regulatory matters in amounts that may be material to us, we may be required to make such expenditures in the future. These laws and regulations have changed substantially and rapidly in recent years, and we anticipate that there will be continuing changes.

TheThere currenthas been a general trend in environmental, health, transportation, and safety regulations is to place more restrictions and limitations on activities that impact the environment, such as the use and handling of chemicals. Increasingly, strict restrictions and limitations have resulted in higher operating costs for us and it is possible that the costs of compliance with such laws and regulations will continue to increase. Our attempts to anticipate future regulatory requirements that might be imposed and our plans to remain in compliance with changing regulations and to minimize the costs of such compliance may not be as effective as we anticipate.

We have a substantial amount of indebtedness. As of NovemberDecember 26,5, 2024,2025, our total borrowings under our Amended and Restated Term Loan Credit Agreement (the “Term Loan”) and our $250.0 million credit facility, as amended from time-to-time, among Leslie’s Poolmart, Inc., the subsidiary borrowers, Leslie’s, Inc., each lender party thereto, Bank of America, N.A., as Administrative Agent, and U.S. Bank National Association, as Co-Collateral Agentfacility (the “Revolving Credit Facility,Facility” together,and together with the Term Loan, the “Credit Facilities”) was $781.7$756.7 million. Subject to restrictions in the agreements governing our debt, it is possible that we may incur additional debt.

Our substantial debt could have important consequences to our stockholders, including but not limited to the following:

The market price of our common stock mayhas fluctuatefluctuated upwards and downwards significantly in the past and is likely to be volatile in the future in response to numerous factors, many of which are beyond our control, including:

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes, which are included elsewhere in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results or outcomes may differ materially from those anticipated in these forward-looking statements, which are subject to risks, uncertainties, and other factors, including those described in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for the fiscal year ended SeptemberOctober 28,4, 2024.2025.

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 2025, 2024, 2023, and 20222023 refer to the fiscal years ended October 4, 2025, September 28, 2024, and September 30, 2023,2023. Fiscal 2025 included 53 weeks of operations and October 1, 2022, respectively. Fiscal 2024, 2023,2024 and 20222023, included 52 weeks of operations.

WeFounded in 1963 by Phil Leslie Jr. in Southern California, the Company today known simply as “Leslie’s” has over six decades of disruptive retail innovation in the $15 billion U.S. pool and spa care industry. Today, we are the largest and most trusted direct-to-consumer brand in theour $15 billion United States pool and spa care industry,segment, serving residential consumers and professionalpool consumers.professionals, Foundedand many of the largest commercial property operators in 1963,the country. With over 1,000 retail locations, an integrated, digitally forward omnichannel strategy, and a horizontally integrated, nationwide ecosystem under the Leslie’s and In the Swim® brands, among others, we arehave thebuilt onlya direct-to-consumermarket-leading poolshare of residential aftermarket product spend, based on 2024 industry analyst reports, and spa care brand with national scale, operating an integrated marketing and distribution ecosystem powered by a physical network larger than the sum of overour 1,00020 brandedlargest locations and a robust digital platform.competitors. We offer an extensive assortment of professional-grade products, the majority of which are exclusive to Leslie’s, as well asmanufacturer certified installation and repair services, alland ofin whichsome aremarkets, essentialweekly to the ongoingpool maintenance of pools and spas.services. Our dedicateddedicated, knowledgeable team of associates, pool and spa care experts, and experienced service technicianstechnicians, are passionate about empowering ourevery consumerssingle Leslie’s customer with the knowledge, products, and solutions necessary to confidently maintain and thoroughly enjoy their pools and spas. The considerable scale of our integrated marketing and distribution ecosystem, which is powered by our direct-to-consumer network, uniquely enables us to efficiently reach and service nearly every pool and spa in the continental United States.

We operate primarily in the pool and spa aftermarket industry, which is one of the mosta fundamentally attractive consumercategory categoriesin retail, given its scale, historical predictability, and growth outlook. More than 80%85% of our product assortment is comprised of non-discretionary products essential to the care of residential and commercial pools and spas. Our assortmentThis includes chemicals, equipmentnew and replacement 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 consumersand andcommercial customers. We have relationships with professional pool operators.operators Consumersfrom receivemajor hotel and apartment owners to municipal, county and state governments, all the benefitway to sole proprietors. In addition to a strong consumer and commercial retail and service presence, we operate a wholesale specialty pool and spa parts distribution business, giving us unique access to hard-to-find specialty parts; an integrated manufacturing plant, giving us vertical scale and competitive cost on parts of extended vendor warranties on purchased products from our locationschemical assortment; and ona installationsregionally orlocated, repairshub-and-spoke fromdistribution oursystem certified in-field technicians. We offer complimentary, commercial-grade in-store water testing and analysis via our proprietary 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 fromthroughout the millionscontinental ofUnited water tests we have performed over the years, positioning us as the most trusted water treatment service provider in the industry.States.

We offer a broad range of products that consists of regularly purchased, non-discretionary pool and spa maintenance items such as chemicals, equipment, cleaning accessories and parts, as well as installation and repair services for pool and spa equipment. Our offering of proprietary, owned, and third-party brands across diverse product categories drives sales growth by attracting new consumers and encouraging repeat visits from our existing consumers. Revenue from merchandise sales at retail locations is recognized at the point of sale, revenue from services is recognized when the services are rendered, and revenue from e-commerce merchandise sales is generally recognized upon shipment of the merchandise. Revenue is recorded net of related discounts and sales tax. Payment from retail customers is generally at the point of sale and payment terms for professional pool operator customers are based on our credit requirements and generally have terms of less than 60 days. When we receive payment from a consumer before the consumer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue or as a customer deposit until the sale or service is complete. Sales are impacted by weather, seasonality, product mix and availability, as well as promotional and competitive activities and the spending habits of our consumers, as well as inflation and interest rates. Growth of our sales is primarily driven by comparable sales growth and expansion of our locations in existing and new markets.

As of SeptemberOctober 28,4, 2024,2025, we operated over 1,000 locations in 39 states across the United States. We owned 27 locations and leased the remainder of our locations. Our initial lease terms are typically five years with options to renew for multiple successive five-year periods. We evaluate new opportunities in new and existing markets based on the number of pools and spas in the market, competition, our existing locations, availability and cost of real estate, and distribution and operating costs of our locations. We review the performance of our locations on a regular basis and evaluate opportunities to strategically close locations to improve our profitability. Our limited investment costs in individual locations and our ability to transfer sales to our extensive network of remaining locations and e-commerce websites allows us to improve profitability as a result of any strategic closures.

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 (gain) on debt extinguishment, loss (gain) on asset and contract dispositions, executive transition costs, severance, costs related to equity offerings, strategic project costs, merger and acquisition costs, and other non-recurring, non-cash or discrete items. Adjusted EBITDA is a key measure used by management and our board of directors to assess our financial performance. Adjusted EBITDA is also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures. We use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other companies using similar measures.

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (loss) per Share

Adjusted net income (loss) and Adjusted diluted earnings (loss) 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 diluted earnings (loss) per share are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.

Adjusted net income (loss) is defined as net income (loss) adjusted to exclude management fees, equity-based compensation expense, loss (gain) on debt extinguishment, loss (gain) on asset and contract dispositions, executive transition costs, severance, costs related to equity offerings, strategic project costs, merger and acquisition costs, change in valuation allowance for deferred taxes, and other non-recurring, non-cash, or discrete items. Adjusted diluted earnings (loss) per share is defined as Adjusted net income (loss) divided by the diluted weighted average number of common shares outstanding.

Our financial performance and condition may be impacted to varying extents from period to period by macroeconomic and geopolitical developments, including public health crises, escalating global conflicts, tariffs, supply chain disruptions, labor market constraints, high rates of inflation, risinghigh interest rates, general economic slowdown, and potential failures among financial institutions. TheNew director increased tariffs and indirectother barriers to trade, especially in light of comments and executive orders made by the U.S. presidential administration, could further impact COVID-19or exacerbate these conditions. The United States has hadannounced tariffs on ourimports financialfrom most countries, including significant tariffs on imports from Canada, Mexico and operatingChina. performanceIn sinceresponse 2020to hastariffs, madeother period-to-periodcountries analysishave implemented retaliatory tariffs on U.S. goods. There is substantial uncertainty about the duration of existing tariffs and accuratewhether forecastingadditional difficult.tariffs Duemay tobe imposed, modified or suspended, and the non-discretionary natureimpacts of oursuch products and services, our business delivered strong growth and profitability throughout the pandemic, in spite of restrictionsactions on the operationCompany’s of our locations and distribution facilities.business. Significant disruption to our supply chain for products we sell, as a result of geopolitical conflictconflict, tariffs or trade policies or otherwise, can also have a material impact on our sales and earnings and cause unpredictable changes in results. In addition, we believe adverse macroeconomic trends and uncertainties including inflationinflation, tariffs, and varying interest rates also increase consumers’ sensitivity to price and result in cost-conscious behavior inclusive of high ticket items, which can result in corresponding declines in sales and/or gross profit.

AnAdditional additional uncertaintyuncertainties that can impact our results of operations isare consumer purchasing patterns.patterns Dueand toconsumer cost-consciousness. In the highly unstable supply of granular chlorine compounds over the last three years,past, we believe some customers stockpiled chemicals, resulting in unexpected changes in demand. As a result of such behavior, our revenue may be higher than normal during the periods of stockpiling and may be lower than normal during the periods after stockpiling has occurred.

We derived our consolidated statements of operations for fiscal 2025, 2024, 2023, and 20222023 from our consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following table summarizes key components of our results of operations for the periodsyears indicated, both in dollars and as a percentage of our sales (in thousands, except per share amounts and percentages):

The tables below provide a reconciliation from our net (loss) income to Adjusted EBITDA and net (loss) income to Adjusted net (loss) income for fiscal 2025, 2024, 2023, and 20222023 (in thousands).

Includes depreciation related to our distribution centers and store locations, which is reported in cost of merchandise and services sold and selling, general and administrativeSG&A in our consolidated statements of operations.

Represents thea taxnon-cash effectchange ofin thevaluation totalallowance adjustmentsfor baseddeferred ontaxes. ourThis combineditem U.S. federal and state statutory tax rates. Amounts areis reported in income tax benefit (benefitexpense) expense in our consolidated statements of operations.

Sales decreased to $1,330.1 million in fiscal 2024 compared to $1,451.2 million in fiscal 2023, a decrease of $121.1 million, or 8.3%.8.3%, primarily driven by declines in traffic and average order value. Comparable sales decreased $127.4 million, or 8.8%, compared to fiscal 2023, primarily driven by declines in traffic and average order value. Non-comparable sales including acquisitions and new stores were $7.9 million.million in fiscal 2024.

Gross profit decreased to $476.8 million in fiscal 2024 compared to $548.2 million in fiscal 2023, a decrease of $71.4 million or 13.0%. Gross margin decreased to 35.8% compared to 37.8% in fiscal 2023, a decrease of 200 basis points. The decrease in gross margin was primarily driven by negative impacts of 121 basis points from product rate, 94 basis points from deleverage on occupancy costs and 50 basis points from the expensing of previously capitalized distribution center costs due to significant reductions in inventory during thefiscal current year period.2024. Additionally, there was a one-time item of approximately $5.0 million related to rebates and warranties on a contract that has subsequently been revised. The impacts discussed above were partially offset by a 72 basis point reduction related to inventory adjustments and distribution costs.

Income tax expense was $10.1 million in fiscal 2024 compared to $9.5 million in fiscal 2023, an increase of $0.6 million. The change in income tax expense was the result of the impact of limitations on interest expense deductibility requiring us to record a $11.2 million non-cash valuation allowance against our deferred tax asset, partially offset by pretax loss in 2024, compared to pretax income in 2023. Our effective tax rate was -76.1% for fiscal 2024 compared to 25.9% for fiscal 2023.

Adjusted EBITDA decreased to $108.7 million in fiscal 2024 compared to $168.1 million in fiscal 2023, a decrease of $59.4 million. The decrease was primarily driven by lower sales volume during thefiscal period,2024, combined with decreases in gross margin, driven by higher product rate and occupancy deleverage. These decreases were partially offset by lower SG&A and inventory adjustments.

Our common stock may be delisted from The Nasdaq Global Select Market if we are unable to regain and maintain compliance with Nasdaq's continued listing standards.

As previously disclosed, on February 11, 2026, we received notification from Nasdaq that our common stock iswas subject to potential delisting from The Nasdaq Global Select Market because thewe Company iswere not in compliance with Nasdaq Listing Rule 5450(b)(3)(C) because, for a period of 30 consecutive business days, the Companywe failed to maintain a minimum market value of publicly held shares (“MVPHS”) of itsour common stock of $15,000,000 (as calculated pursuant to Nasdaq Listing Rules). On May 29, 2026, we received a letter from Nasdaq notifying us that we had regained compliance with Nasdaq Listing Rule 5450(b)(3)(C) by maintaining MVPHS of $15,000,000 or greater for the “MVPHSperiod Rule”).from WeMay have until August 10,14, 2026 to regainMay compliance28, and, if we do not regain compliance with the MVPHS Rule by the applicable deadline, Nasdaq will provide written notification to us that our common stock will be subject to delisting. At that time, we may appeal Nasdaq’s delisting determination to a Nasdaq Listing Qualifications Panel (the “Panel”). We expect that our common stock would remain listed pending the Panel’s decision, however, there can be no assurance that, if we do appeal the delisting determination by Nasdaq to the Panel, that such appeal would be successful. There can be no assurance that we will be able to regain compliance with the MVPHS Rule.2026.

However, there can be no assurance that we will be able to maintain compliance with Nasdaq’s continued listing standards. If we do not regain and maintain compliance with the Nasdaq standards,these, our common stock may be delisted from Nasdaq. Any delisting of our common stock would likely adversely affect the market liquidity and market price of our common stock and our ability to obtain financing for the continuation of our operations. Consequently, stockholders may not be able to sell our common stock at prices equal to or greater than the price paid.

We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended AprilJuly 4, 2026 and MarchJune 29,28, 2025 refer to the 13 weeks ended AprilJuly 4, 2026 and MarchJune 29,28, 2025. References to the sixnine months ended AprilJuly 4, 2026 and MarchJune 29,28, 2025 refer to the 2639 weeks ended AprilJuly 4, 2026 and MarchJune 29,28, 2025.

Founded in 1963 by Phil Leslie Jr. in Southern California, the Company today known simply as “Leslie’s” has over six decades of disruptive retail innovation in the $15 billion U.S. pool and spa care industry. Today, we are the largest and most trusted direct-to-consumer brand in our segment, serving residential consumers and pool professionals, and many of the largest commercial property operators in the country. With approximatelyover 950900 retail locations, an integrated, digitally forward omnichannel strategy, and a horizontally integrated, nationwide ecosystem under the Leslie’s and In the Swim® brands, among others, we have built a market-leading share of residential aftermarket product spend, based on 2024 industry analyst reports, and a physical network larger than the sum of our 20 largest competitors. We offer an extensive assortment of professional-grade products, the majority of which are exclusive to Leslie’s, manufacturer certified installation and repair services, and in some markets, weekly pool maintenance services. Our dedicated, knowledgeable team of associates, pool and spa care experts, and experienced service technicians, are passionate about empowering every single Leslie’s customer with the knowledge, products, and solutions necessary to confidently maintain and thoroughly enjoy their pools and spas. The considerable scale of our integrated marketing and distribution ecosystem, which is powered by our direct-to-consumer network, uniquely enables us to efficiently reach and service nearly every pool and spa in the continental United States.

We operate primarily in the pool and spa aftermarket industry, a fundamentally attractive category in retail, given its scale, historical predictability, and growth outlook. MoreA than 85%majority of our product assortment is comprised of non-discretionary products essential to the care of residential and commercial pools and spas. This includes chemicals, new and replacement parts, cleaning and maintenance equipment, safety, recreational, and fitness-related products. We also offer important essential services, such as equipment installation and repair for residential and commercial customers. We have relationships with professional pool operators from major hotel and apartment owners to municipal, county and state governments, all the way to sole proprietors. In addition to a strong consumer and commercial retail and service presence, we operate a wholesale specialty pool and spa parts distribution business, giving us unique access to hard-to-find specialty parts; an integrated manufacturing plant, giving us vertical scale and competitive cost on parts of our chemical assortment; and a regionally located, hub-and-spoke distribution system throughout the continental United States.

We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use under United States generally accepted accounting principles (“GAAP”) are sales, gross profit and gross margin, selling, general and administrative expenses (“SG&A”), impairment, and operating loss.income (loss). The key non-GAAP measures and other operating measures we use are comparable sales, comparable sales growth, Adjusted EBITDA, Adjusted net loss,income (loss), and Adjusted diluted earnings (loss) per share.

We offer a broad range of products that consists of regularly purchased, non-discretionaryessential pool and spa maintenance items such as chemicals, equipment, cleaning accessories and parts, as well as installation and repair services for pool and spa equipment. Our offering of proprietary, owned, and third-party brands across diverse product categories drives sales growth by attracting new consumers and encouraging repeat visits from our existing consumers. Revenue from merchandise sales at retail locations is recognized at the point of sale, revenue from services is recognized when the services are rendered, and revenue from e-commerce merchandise sales is generally recognized upon shipment of the merchandise. Revenue is recorded net of related discounts and sales tax. Payment from retail customers is generally at the point of sale and payment terms for professional pool operator customers are based on our credit requirements and generally have terms of less than 60 days. When we receive payment from a consumer before the consumer has taken possession of the merchandise or the service has been performed, the amount received is recorded as deferred revenue or as a customer deposit until the sale or service is complete. Sales are impacted by weather, seasonality, product mix and availability, promotional and competitive activities, and the spending habits of our consumers, as well as inflation and interest rates. Growth of our sales is primarily driven by comparable sales growth and expansion of our locations in existing and new markets.

As of AprilJuly 4, 2026, we operated approximately 950943 locations in 38 states across the United States. We owned 27 locations and leased the remainder of our locations. Our initial lease terms are typically five years with options to renew for multiple successive five-year periods. We evaluate new opportunities in new and existing markets based on the number of pools and spas in the market, competition, our existing locations, availability and cost of real estate, and distribution and operating costs of our locations. We review the performance of our locations on a regular basis and evaluate opportunities to strategically close locations to improve our profitability. Our limited investment costs in individual locations and our ability to transfer sales to our extensive network of remaining locations and e-commerce websites allows us to improve profitability as a result of any strategic closures.

Operating Income (Loss)

Operating income (loss) is gross profit less SG&A and impairment. Operating income (loss) excludes interest expense and income tax expense (benefit). We use operating income (loss) as an indicator of the productivity of our business and our ability to manage expenses.

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) per Share

Adjusted net income (loss) and Adjusted diluted earnings (loss) 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 diluted earnings (loss) per share are also frequently used by analysts, investors, and other interested parties to evaluate companies in our industry, when considered alongside other GAAP measures.

Adjusted net income (loss) is defined as net income (loss) adjusted to exclude equity-based compensation expense, executive transition costs, severance, strategic project costs, merger and acquisition costs, and other non-recurring, non-cash, or discrete items. Adjusted diluted earnings (loss) per share is defined as Adjusted net income (loss) divided by the diluted weighted average number of common shares outstanding.

Our financial performance and condition may be impacted to varying extents from period to period by macroeconomic and geopolitical developments, including public health crises, escalating global conflicts (including the ongoing conflict in Ukraine, the conflicts in the Middle East, and the related impacts on commodity prices, including the price of oil), tariffs, supply chain disruptions, labor market constraints, high rates of inflation, high interest rates, general economic slowdown, and potential failures among financial institutions. New or increased tariffs and other barriers to trade, especially in light of comments and executive orders made by the U.S. presidential administration, could further impact or exacerbate these conditions. The United States has announced tariffs on imports from most countries, including significant tariffs on imports from Canada, Mexico and China. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. There is substantial uncertainty about the duration of existing tariffs and whether additional tariffs may be imposed, modified or suspended, and the impacts of such actions on the Company’s business. Significant disruption to our supply chain for products we sell or increased costs (including in the cost of oil), as a result of geopolitical conflict, tariffs or trade policies or otherwise, can also have a material impact on our sales and earnings and cause unpredictable changes in results. In addition, we believe adverse macroeconomic trends and uncertainties including inflation, tariffs, and varying interest rates also increase consumers’ sensitivity to price and result in cost-conscious behavior inclusive of high tickethigh-ticket items, which can result in corresponding declines in sales and/or gross profit.

We derived our consolidated statements of operations for the three and sixnine months ended AprilJuly 4, 2026 and MarchJune 29,28, 2025 from our consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our sales (in thousands, except per share amounts and percentages):

The tables below provide a reconciliation from our net income (loss) to Adjusted EBITDA and net income (loss) to Adjusted net income (loss) for the three and sixnine months ended AprilJuly 4, 2026 and MarchJune 29,28, 2025 (in thousands). Adjusted net income (loss) reported for the three and sixnine months ended MarchJune 29,28, 2025 reflects a correction of ana immaterialcalculation error in the “tax effects of these adjustments” amounts reported in the firstprior and second quarter of 2025.period. Additionally, the prior period comparative reconciliation has been updated to conform to the current period presentation.

Represents non-cash charges related to asset write offs for certain underperforming stores and certain inventory related to the store and distribution center closings.

Sales were $184.7$458.5 million for the three months ended AprilJuly 4, 2026 compared to $177.1$500.3 million in the prior year period, ana increasedecrease of $7.6$41.9 million, or 4.3%.8.4%. The increasedecrease was driven by a strengthsoftness in our retail business anddue favorability driven byto a weekslower calendarsummer shiftpool inseason comparingas towell the prior year. These benefits were partially offset byas the loss of sales from the closure of underperforming stores. Comparable sales for the three months ended on AprilJuly 4, 2026 increaseddecreased $11.5$30.4 million or 6.6%6.2% compared to the prior year period.

Sales were $331.9$790.4 million for the sixnine months ended AprilJuly 4, 2026, compared to $352.4$852.7 million in the prior year period, a decrease of $20.5$62.3 million, or 5.8%.7.3%. The decrease was primarily driven by lower traffic and transactions in our stores due to overall softness in the summer pool season and lower sales asresulting a result offrom the closure of underperforming stores during the period,period. Additionally, first-quarter revenue faced headwinds in our first quarter as wethe anniversariedCompany increasedcycled against elevated demand in the priorprior-year yearperiod, periodwhich had been driven by an active hurricane season and demand driven by the liquidation of certain products. Comparable sales for the sixnine months ended AprilJuly 4, 2026 decreased $15.5$45.9 million or 4.5%5.5% compared to the prior year period.

Gross profit for the three months ended AprilJuly 4, 2026 was $53.3$167.1 million compared to $43.9$197.9 million in the prior year period, representing ana increasedecrease of $9.4$30.8 million, or 21.4%.15.5%. Gross margin increaseddecreased to 28.9%36.5% compared to 24.8%39.6% in the prior year period, ana increasedecrease of approximately 410310 basis points. The increasedecrease was driven by an approximately 290195 basis pointspoint impact due to savingsa decrease in occupancyvolume of high margin products sold and distribution center costs, approximately 75 basis points due to increased volume and improved product mix,mix and an approximately 45115 basis point benefitimpact due to inventorydistribution reservecenter adjustments.and manufacturing costs.

Gross profit for the sixnine months ended AprilJuly 4, 2026 was $80.4$247.5 million compared to $91.7$289.6 million in the prior year period, a decrease of $11.3$42.0 million, or 12.3%.14.5%. Gross margin decreased to 24.2%31.3% compared to 26.0%34.0% in the prior year period, a decrease of approximately 180265 basis points. A negative impact of approximately 16570 basis points was due to an inventory impairment charge of $5.5$5.4 million relating to store and DC closures during the sixnine month period. The remaining approximately 15195 basis points decline was due to an approximately 70145 basis point impact due to a decrease in volume of high margin products sold and mix, partially offset byand an approximately 5550 basis point impact due to occupancyoccupancy, distribution center, and distributionmanufacturing center costs savings.costs.

SG&A for the three months ended AprilJuly 4, 2026 was $92.2$106.4 million compared to $92.3$129.6 million in the prior year period, a decrease of $0.1$23.2 million, or 0.1%.17.9%. As a percentage of sales SG&A was 49.9%23.2% compared to 52.1%,25.9%, down 220270 basis points from the prior year.year period. The decrease in SG&A was primarily related to a one-time gain for a credit card interchange fee settlement of $17.5 million, net of legal fees. Additionally, SG&A decreased due to decreases of $1.6 million in labor and fringe costs, $0.8$3.4 million in direct store and other operating expenses, and $0.2$2.1 million in merchant fees, $1.2 million in labor and fringe costs, and $0.4 million in marketing fees. Partially offsetting the decrease werewas increasesan increase of $1.4 million in marketing fees and $1.1 million in technology costs.

SG&A for the sixnine months ended AprilJuly 4, 2026 was $177.9$284.2 million compared to $179.7$309.3 million in the prior year period, a decrease of $1.9$25.1 million, or 1.0%.8.1%. As a percentage of sales SG&A was 53.6%36.0% compared to 51.0%,36.3%, ana increasedecrease of 25930 basis points from the prior year. The decrease in SG&A was primarily related to a one-time gain for a credit card interchange fee settlement of $17.5 million, net of legal fees. Additionally, SG&A decreased due to decreases of $2.7 million in labor and fringe costs, $1.9$5.2 million in direct store and other operating expenses, $3.9 million in labor and $1.5fringe costs, and $3.6 million in merchant fees. Partially offsetting the decrease were increases of $2.3$3.3 million in marketingtechnology feescosts and $1.9 million in technologymarketing costs.fees.

Non-cash impairment for the three months ended AprilJuly 4, 2026 was $(1.20.7) million, which was comprised of non-cash lease gains due to lease terminations on stores that were closed and impaired during the first quarter of 2026. For the sixnine months ended AprilJuly 4, 2026 impairment was $9.0$8.3 million, which was comprised of $5.4 million of property and equipment impairment, $4.8 million right-of-use asset impairment, and $(1.21.9) million non-cash lease gains all relating to the store and distribution center closures that occurred during the first quarter of 2026. There was no impairment during either period in the prior year.

Interest expense for the three months ended AprilJuly 4, 2026 was $14.4$14.1 million compared to $15.9$15.8 million in the prior year period, a decrease of $1.5$1.6 million. Interest expense for the sixnine months ended AprilJuly 4, 2026 was $27.9$42.0 million compared to $31.7$47.4 million in the prior year period, a decrease of $3.8$5.4 million. The decrease in both periods was driven by lower interest rates on our Term Loan.

Income tax expensebenefit increasedwas to $0.4$0.5 million for the three months ended AprilJuly 4, 2026 compared to aan benefitexpense of $13.0$30.8 million in the prior year period, an increase of $13.4$31.3 million. Income tax expense increasedwas to $1.1$0.7 million for the sixnine months ended AprilJuly 4, 2026 compared to a benefit of $23.9$7.0 million in the prior year period, ana increasedecrease of $25.0$6.3 million. The increaseschanges were primarily attributable to the change in valuation allowance and use of the discrete effective tax rate method in the prior year period.periods.

The effective income tax rate was (0.91.0)% and (0.8)% for the three and sixnine months ended AprilJuly 4, 2026, respectively, and included net income tax expenses attributable to state taxes and the change in valuation allowance. The effective income tax rate was 20.2%58.7% and 19.9%(10.4)% for the three and sixnine months ended MarchJune 29,28, 2025, respectively, and included net income tax expenses attributable to equity-based compensation awards and the change in valuation allowance related to our interest expense limitation.allowance.

Net Income (Loss) and Diluted Earnings (Loss) per Share

Diluted lossearnings per share was $5.63$5.01 for the three months ended AprilJuly 4, 2026 compared to $5.54$2.34 in the prior year period. Diluted loss per share was $14.55$(9.40) for the sixnine months ended AprilJuly 4, 2026 compared to $10.36$(8.01) in the prior year period.

Adjusted dilutednet loss per share was $5.36income for the three months ended AprilJuly 4, 2026 was $37.8 million compared to $5.21$25.2 million in the prior year period.period, an increase of $12.6 million. Adjusted dilutednet loss per share was $12.62 for the sixnine months ended AprilJuly 4, 2026 was $(79.7) million compared to $9.86$(66.0) million in the prior year period.period, an increase of $13.7 million.

Adjusted EBITDA for the three months ended AprilJuly 4, 2026 was $(26.8)$55.7 million compared to $(36.1) million in the prior year period, an increase of $9.2 million. Adjusted EBITDA for the six months ended April 4, 2026 was $(67.1) million compared to $(65.4)$81.6 million in the prior year period, a decrease of $1.7$25.9 million. Adjusted EBITDA for the nine months ended July 4, 2026 was $(11.4) million compared to $16.2 million in the prior year period, a decrease of $27.6 million. The changesdecreases in Adjusted EBITDA during the three months ended AprilJuly 4, 2026 wereand primarily due to increases in gross profit. The changes in Adjusted EBITDA during the sixnine months ended AprilJuly 4, 2026 were primarily due to decreases in gross profit due to lower sales andpartially theoffset impairmentby chargessavings in the current year.SG&A.

The principal external factor affecting our business is weather. Hot weather can increase purchases of chemicals and other non-discretionaryessential products as well as purchases of discretionary products and can drive increased purchases of installation and repair services. Unseasonably cool weather or significant amounts of rainfall during the peak pool sales season can reduce chemical consumption in pools and spas and decrease consumer purchases of our products and services. In addition, unseasonably early or late warming trends can increase or decrease the length of the pool season and impact timing around pool openings and closings and, therefore, our total sales and timing of our sales. Further, we generally close locations after our peak selling season ends.

Our primary sources of liquidity are net cash provided by operating activities and borrowing availability under our Revolving Credit Facility. Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents totaled $16.9$45.9 million as of AprilJuly 4, 2026, $64.3 million as of October 4, 2025, and $17.3$42.7 million as of MarchJune 29,28, 2025. Outstanding borrowings on our Revolving Credit Facility were $99.0$30.0 million as of AprilJuly 4, 20262026, and $101.5$20.0 million as of MarchJune 29,28, 2025. We had no amounts outstanding on our Revolving Credit Facility as of October 4, 2025.

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.

Net cash used in operating activities was $136.6$37.6 million for the sixnine months ended AprilJuly 4, 20262026, compared to $154.3$39.4 million in the prior year period, a decrease of $17.8$1.8 million. The decrease was primarily driven by a strategic decreasechanges in working capital primarily relating to inventory of $40.9 million and $25.0accounts million due to deferred income taxes. Partially offsetting this decrease was a higher net loss in the current year.payable.

Net cash used in investing activities was $9.5$10.4 million for the sixnine months ended AprilJuly 4, 20262026, compared to $11.1$18.9 million in the prior year period, a decrease of $1.6$8.5 million. This decrease was driven by lower investments in purchases of property and equipment.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities for the sixnine months ended AprilJuly 4, 20262026, was $98.6$29.6 million compared to $74.2net cash used in financing activities of $7.5 million in the prior year period, an increase of $24.5$37.1 million. This increase was due to a $27.0 million principal payment made during the prior year period,period partiallyas offsetwell byas $2.5$10.0 million ofin decreasedadditional borrowingsborrowing on the Revolving Credit Facility in the current year period.

There have been no material changes to our contractual obligations and other commitments during the sixnine months ended AprilJuly 4, 20262026, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025 except as disclosed in Note 10—Leases and Note 12—Commitments & Contingencies in this Quarterly Report on Form 10-Q.

There have been no material changes to our critical accounting estimates during the sixnine months ended AprilJuly 4, 20262026, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended October 4, 2025.