Q4 2022 Highlights
- Comparable sales grew 5.3 percent year over year and 18.8
percent on a two-year basis, resulting in the seventeenth
consecutive quarter of comparable sales growth
- Net revenue of $1.58
billion increased 4.2 percent year over year
- Delivered net income of $32.7
million, an increase of 12.9 percent year over year, and
Adjusted EBITDA1 of $170.3
million, a decrease of 1.1 percent year over year
- Earnings per share of $0.12,
an increase of $0.01 from prior year;
Adjusted Earnings Per Share1 of $0.23, a decline of $0.05 from prior year
- Generated $136.5 million of
operating cash flow, an increase of 95.7 percent year over
year
- Delivered $70.6 million of
Free Cash Flow1, an increase of $75.6 million year over year
Full Year 2022 Highlights
- Comparable sales grew 4.5 percent year over year and 23.5
percent on a two-year basis
- Net revenue of $6.04 billion
increased 3.9 percent year over year
- Delivered net income of $90.8
million, a decrease of 44.8 percent year over year, and
Adjusted EBITDA1 of $582.3
million, a decrease of 1.5 percent year over year
- Earnings per share of $0.34, a
decline of $0.28 year over year;
Adjusted Earnings Per Share1 of $0.75, a decline of $0.16 year over year
- Generated $346.0 million of
operating cash flow, a decrease of 3.4 percent year over
year
- Delivered $68.0 million of
Free Cash Flow1, a decrease of $51.1 million year over year
SAN
DIEGO, March 22, 2023 /PRNewswire/ -- Petco
Health and Wellness Company, Inc. (Nasdaq: WOOF), a
complete partner in pet health and wellness, today
announced its fourth quarter and full year 2022 financial
results.
In the fourth quarter of 2022, Petco delivered net revenue of
$1.58 billion, up 4.2 percent versus
prior year, driven by strength in the company's consumables
business, up 12.1 percent versus prior year, and services and other
business, up 17.0 percent versus prior year, which was partially
offset by its supplies and companion animal business, down 7.8
percent versus prior year. Net income was $32.7 million or $0.12 per share, compared to $29.0 million or $0.11 per share in the prior year. Adjusted Net
Income1 was $62.0 million
or $0.23 per share, compared to
$75.1 million or $0.28 per share in the prior year. Adjusted
EBITDA1 was $170.3 million
compared to $172.2 million in the
prior year.
For the full year 2022, Petco delivered net revenue of
$6.04 billion, up 3.9 percent versus
prior year. Revenue growth was driven by strength in the
company's consumables business, up 12.9 percent versus prior year,
and services and other business, up 20.2 percent versus prior year,
and partially offset by its supplies and companion animal business,
down 8.9 percent versus prior year. Net income was $90.8 million or $0.34 per share, compared to $164.4 million or $0.62 per share in the prior year. Adjusted Net
Income1 was $200.8 million
or $0.75 per share, compared to
$241.1 million or $0.91 per share in the prior year. Adjusted
EBITDA1 was $582.3 million
compared to $591.5 million in the
prior year.
In March 2023, Petco paid down
$35 million on its term loan,
$31 million more than the required
quarterly payment and is targeting $100
million total in principal payments for 2023.
"Record fourth quarter sales, with cash flow exceeding
expectations, rounded out a solid fiscal year, once again
demonstrating the enduring strength of the pet category and Petco's
ability to grow through economic cycles," said Petco CEO
Ron Coughlin. "I'm grateful for
our incredible partners and their ongoing commitment to Petco's
mission of improving the lives of pets, pet parents, and the
partners who work at Petco. As we look ahead, the pet category
remains resilient and growing, and we'll continue to execute day-in
and day-out while we progress our differentiated long-term growth
strategy."
Q4 2022 Operating Results:
Comparisons are fourth quarter of fiscal 2022 ended
January 28, 2023 versus fourth
quarter of fiscal 2021 ended January 29,
2022 unless otherwise noted.
- Net revenue increased 4.2 percent to $1.58 billion driven by comparable sales growth
of 5.3 percent
- Net income increased $3.7 million
to $32.7 million or $0.12 per share
- Adjusted Net
Income1 decreased $13.1 million
to $62.0 million or $0.23 per share
- Adjusted EBITDA1 decreased $1.9 million to $170.3 million
- Operating cash flow increased 95.7 percent to $136.5 million
- Free Cash Flow1 increased $75.6 million to $70.6
million
Fiscal 2022 Operating Results:
Comparisons are fiscal year ended January
28, 2023 versus fiscal year ended January 29, 2022
unless otherwise noted.
- Net revenue increased 3.9 percent to $6.04 billion driven by comparable sales growth
of 4.5 percent
- Net income decreased $73.6
million to $90.8 million or
$0.34 per share
- Adjusted Net
Income1 decreased $40.3 million
to $200.8 million or $0.75 per share
- Adjusted EBITDA1 decreased $9.1 million to $582.3 million
- Operating cash flow decreased 3.4 percent to $346.0 million
- Free Cash Flow1 decreased $51.1 million to $68.0
million
(1)
|
Adjusted EBITDA,
Adjusted Net Income, Adjusted EPS, and Free Cash Flow are non-GAAP
financial measures. Beginning in fiscal 2023, the company has made
certain changes to how it defines these metrics that impact the
comparability to prior periods. See "Changes in non-GAAP
Definitions and Fiscal 2023 Outlook" and "Non-GAAP Financial
Measures" for additional information on changes to these non-GAAP
financial measures, a reconciliation to the most comparable GAAP
measures, and a reconciliation between the differences in metric
definitions pre- and post-fiscal 2023 for all periods
presented.
|
Changes in non-GAAP Definitions and Fiscal 2023
Outlook
Beginning in fiscal 2023, Petco has made certain changes to its
definitions for Adjusted EBITDA, Adjusted Net Income, and Adjusted
EPS that impact the comparability of the metrics to prior
periods. Specifically, Petco will no longer include store
pre-opening expenses, store closing expenses, non-cash occupancy
costs, and certain other costs in its non-GAAP add-backs.
Accordingly, Petco's 2023 Adjusted EBITDA and Adjusted EPS guidance
reflects Petco's updated definition of Adjusted EBITDA and Adjusted
EPS. See "Non-GAAP Financial Measures" below for additional
details of these changes and a reconciliation of the definitions
prior to fiscal 2023 to allow for like-for-like comparisons to the
new definitions for all periods presented.
Furthermore, Fiscal 2023 will be a 53-week year for Petco,
leading to an incremental week of operations relative to Fiscal
2022.
Given the foregoing, inclusive of Petco's expected
53rd week of operations, the company expects:
Metric*
|
2023
Guidance,
YoY
|
Net Revenue
|
$6.150 billion to
$6.275 billion
|
Adjusted EBITDA
|
Down approx. $10
million to up approx. $10 million
|
Adjusted EPS
|
Down $0.21 to down
$0.13
|
Capital Expenditures
|
$225 million to $250
million
|
In light of the current macroeconomic environment, the company
is providing one-time commentary on its debt paydown
expectations. In Fiscal 2023, the company expects to make a
total of $100 million in principal
payments on its term loan, which is inclusive of the $35 million paid in March detailed above.
*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 $44 to $54 million increase in interest expense, a
26 percent tax rate, and a 273
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. 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 SEC.
Earnings Conference Call Webcast Information:
Management will host an earnings conference call on March 22, 2023 at 8:00 AM
Eastern Time to discuss the
company's financial results.
The conference call will be accessible through
live webcast. Interested investors and other
individuals can access the webcast, earnings release, earnings
presentation, infographic, and earnings supplement 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 April 5, 2023 until
approximately 5:00 PM 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 (formerly the Petco Foundation), an independent
nonprofit 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 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.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(In thousands, except
per share amounts)
|
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks
Ended
|
|
52 Weeks
Ended
|
|
|
January 28,
2023
|
|
January 29,
2022
|
|
Percent
Change
|
|
January 28,
2023
|
|
January 29,
2022
|
|
Percent
Change
|
Net
sales
|
|
$1,577,959
|
|
$1,514,357
|
|
4 %
|
|
$6,035,967
|
|
$5,807,149
|
|
3.9 %
|
Cost of
sales
|
|
950,680
|
|
878,851
|
|
8 %
|
|
3,608,860
|
|
3,380,539
|
|
7 %
|
Gross
profit
|
|
627,279
|
|
635,506
|
|
(1 %)
|
|
2,427,107
|
|
2,426,610
|
|
0 %
|
Selling, general and
administrative expenses
|
|
549,719
|
|
552,601
|
|
(1 %)
|
|
2,201,548
|
|
2,160,539
|
|
2 %
|
Operating
income
|
|
77,560
|
|
82,905
|
|
(6 %)
|
|
225,559
|
|
266,071
|
|
(15 %)
|
Interest
income
|
|
(745)
|
|
(9)
|
|
8,178 %
|
|
(1,032)
|
|
(62)
|
|
1,565 %
|
Interest
expense
|
|
32,882
|
|
18,893
|
|
74 %
|
|
101,643
|
|
77,397
|
|
31 %
|
Loss on extinguishment
and modification of debt
|
|
—
|
|
—
|
|
N/M
|
|
—
|
|
20,838
|
|
(100 %)
|
Other non-operating
loss (income)
|
|
3,298
|
|
30,437
|
|
(89 %)
|
|
12,667
|
|
(34,497)
|
|
N/M
|
Income before income
taxes and income from
equity method investees
|
|
42,125
|
|
33,584
|
|
25 %
|
|
112,281
|
|
202,395
|
|
(45 %)
|
Income tax
expense
|
|
14,548
|
|
9,689
|
|
50 %
|
|
35,347
|
|
53,473
|
|
(34 %)
|
Income from equity
method investees
|
|
(5,155)
|
|
(3,393)
|
|
52 %
|
|
(12,976)
|
|
(10,883)
|
|
19 %
|
Net
income
|
|
32,732
|
|
27,288
|
|
20 %
|
|
89,910
|
|
159,805
|
|
(44 %)
|
Net loss attributable
to noncontrolling interest
|
|
—
|
|
(1,706)
|
|
(100 %)
|
|
(891)
|
|
(4,612)
|
|
(81 %)
|
Net income
attributable to Class A and B-1 common
stockholders
|
|
$
32,732
|
|
$
28,994
|
|
13 %
|
|
$
90,801
|
|
$
164,417
|
|
(45 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per Class
A and B-1 common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.12
|
|
$
0.11
|
|
12 %
|
|
$
0.34
|
|
$
0.62
|
|
(45 %)
|
Diluted
|
|
$
0.12
|
|
$
0.11
|
|
13 %
|
|
$
0.34
|
|
$
0.62
|
|
(45 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computing net income per Class A
and B-1 common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
265,918
|
|
264,384
|
|
1 %
|
|
265,522
|
|
264,261
|
|
0 %
|
Diluted
|
|
266,297
|
|
265,785
|
|
0 %
|
|
265,951
|
|
265,338
|
|
0 %
|
PETCO HEALTH AND
WELLNESS COMPANY, INC.
|
CONSOLIDATED BALANCE
SHEETS
|
(In thousands, except
per share amounts)
|
(Unaudited and subject
to reclassification)
|
|
|
|
|
|
January
28,
2023
|
|
January
29,
2022
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
201,901
|
|
$
211,602
|
Receivables, less
allowance for credit losses1
|
|
49,580
|
|
55,618
|
Merchandise
inventories, net
|
|
652,430
|
|
675,111
|
Prepaid
expenses
|
|
51,274
|
|
42,355
|
Other current
assets
|
|
60,809
|
|
86,091
|
Total current
assets
|
|
1,015,994
|
|
1,070,777
|
Fixed assets,
net
|
|
803,327
|
|
726,922
|
Operating lease
right-of-use assets
|
|
1,397,761
|
|
1,338,465
|
Goodwill
|
|
2,193,941
|
|
2,183,991
|
Trade name
|
|
1,025,000
|
|
1,025,000
|
Other long-term
assets
|
|
176,806
|
|
152,786
|
Total assets
|
|
$
6,612,829
|
|
$
6,497,941
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable and
book overdrafts
|
|
$
381,213
|
|
$
403,976
|
Accrued salaries and
employee benefits
|
|
89,929
|
|
150,630
|
Accrued expenses and
other liabilities
|
|
217,556
|
|
210,872
|
Current portion of
operating lease liabilities
|
|
309,766
|
|
265,897
|
Current portion of
long-term debt and other lease liabilities
|
|
22,794
|
|
21,764
|
Total current
liabilities
|
|
1,021,258
|
|
1,053,139
|
Senior secured credit
facilities, net, excluding current portion
|
|
1,628,331
|
|
1,640,390
|
Operating lease
liabilities, excluding current portion
|
|
1,148,155
|
|
1,096,133
|
Deferred taxes,
net
|
|
303,121
|
|
318,355
|
Other long-term
liabilities
|
|
130,487
|
|
134,105
|
Total
liabilities
|
|
4,231,352
|
|
4,242,122
|
Commitments and
contingencies
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Class A common
stock2
|
|
228
|
|
227
|
Class B-1 common
stock3
|
|
38
|
|
38
|
Class B-2 common
stock4
|
|
—
|
|
—
|
Preferred
stock5
|
|
—
|
|
—
|
Additional
paid-in-capital
|
|
2,152,342
|
|
2,133,821
|
Retained
earnings
|
|
232,967
|
|
142,166
|
Accumulated other
comprehensive loss
|
|
(4,098)
|
|
(2,238)
|
Total stockholders'
equity
|
|
2,381,477
|
|
2,274,014
|
Noncontrolling
interest
|
|
—
|
|
(18,195)
|
Total equity
|
|
2,381,477
|
|
2,255,819
|
Total liabilities and
equity
|
|
$
6,612,829
|
|
$
6,497,941
|
|
|
(1)
|
Allowances for credit
losses are $952 and $931, respectively
|
(2)
|
Class A common stock,
$0.001 par value: Authorized - 1.0 billion shares; Issued and
outstanding - 228.3 million and 227.2 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)
|
|
|
|
|
|
|
|
52 Weeks Ended
|
|
|
January 28,
2023
|
|
January 29,
2022
|
Cash flows from operating
activities:
|
|
|
|
|
Net
income
|
|
$ 89,910
|
|
$
159,805
|
Adjustments to reconcile net income to net cash provided
by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
193,828
|
|
172,431
|
Amortization of debt discounts and issuance costs
|
|
4,940
|
|
5,796
|
Provision for deferred taxes
|
|
(893)
|
|
37,741
|
Equity-based compensation
|
|
60,784
|
|
49,265
|
Impairments, write-offs and losses on sale of fixed and
other assets
|
|
1,992
|
|
10,918
|
Loss on extinguishment and modification of debt
|
|
—
|
|
20,838
|
Income from equity method investees
|
|
(12,976)
|
|
(10,883)
|
Amounts reclassified out of accumulated other comprehensive
income
|
|
168
|
|
—
|
Non-cash operating lease costs
|
|
422,792
|
|
422,465
|
Other non-operating loss (income)
|
|
12,667
|
|
(34,497)
|
Changes in assets and liabilities:
|
|
|
|
|
Receivables
|
|
6,038
|
|
(13,791)
|
Merchandise inventories
|
|
22,681
|
|
(136,404)
|
Prepaid expenses and other
assets
|
|
(5,933)
|
|
(17,664)
|
Accounts payable and book
overdrafts
|
|
(22,763)
|
|
71,775
|
Accrued salaries and employee
benefits
|
|
(51,427)
|
|
10,679
|
Accrued expenses and other
liabilities
|
|
13,616
|
|
42,899
|
Operating lease liabilities
|
|
(386,259)
|
|
(418,210)
|
Other long-term liabilities
|
|
(3,162)
|
|
(14,948)
|
Net cash provided
by operating activities
|
|
346,003
|
|
358,215
|
Cash flows from investing
activities:
|
|
|
|
|
Cash paid for fixed assets
|
|
(278,020)
|
|
(239,110)
|
Cash paid for acquisitions, net of cash acquired
|
|
(9,640)
|
|
(4,334)
|
Cash paid for interest in veterinary joint venture
|
|
(35,000)
|
|
—
|
Proceeds from investments
|
|
—
|
|
6,135
|
Proceeds from sale of assets
|
|
2,336
|
|
226
|
Net cash used in
investing activities
|
|
(320,324)
|
|
(237,083)
|
Cash flows from financing
activities:
|
|
|
|
|
Borrowings under long-term debt agreements
|
|
123,000
|
|
1,700,000
|
Repayments of long-term debt
|
|
(140,000)
|
|
(1,690,861)
|
Debt refinancing costs
|
|
—
|
|
(24,665)
|
Payments for finance lease liabilities
|
|
(5,083)
|
|
(3,564)
|
Proceeds from employee stock purchase plan and stock option
exercises
|
|
3,796
|
|
4,185
|
Tax
withholdings on stock-based awards
|
|
(15,555)
|
|
(33)
|
Payment of offering costs
|
|
—
|
|
(3,844)
|
Net cash used in
financing activities
|
|
(33,842)
|
|
(18,782)
|
|
|
|
|
|
Net (decrease) increase
in cash, cash equivalents and restricted cash
|
|
(8,163)
|
|
102,350
|
Cash, cash equivalents
and restricted cash at beginning of period
|
|
221,890
|
|
119,540
|
Cash, cash equivalents
and restricted cash at end of period
|
|
$
213,727
|
|
$
221,890
|
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.
Beginning in fiscal 2023, Petco has made certain changes to how
it defines Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS
that impact the comparability of the metrics to prior periods.
Specifically, Petco will no longer include store pre-opening
expenses, store closing expenses, non-cash occupancy costs, and
certain other costs in its non-GAAP add-backs. Details of these
changes and a reconciliation of the definitions prior to fiscal
2023 to the go-forward definition is presented in the tables and
related footnotes below. The tables below reflect the calculation
of Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS, as
applicable, for the thirteen and fifty-two weeks ended January 28, 2023 compared to the thirteen and
fifty-two weeks ended January 29,
2022, respectively.
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 29, 2022 filed with the SEC on
March 24, 2022 for additional
information on Adjusted EBITDA.
(dollars in
thousands)
|
|
13 Weeks
Ended
|
|
52 Weeks
Ended
|
Reconciliation of
Net Income Attributable to Class A and B-1
Common Stockholders to Adjusted EBITDA
|
|
January 28,
2023
|
|
January 29,
2022
|
|
January 28,
2023
|
|
January 29,
2022
|
Net income
attributable to Class A and B-1 common stockholders
|
|
$
32,732
|
|
$
28,994
|
|
$
90,801
|
|
$
164,417
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
32,137
|
|
18,884
|
|
100,611
|
|
77,335
|
Income tax
expense
|
|
14,548
|
|
9,689
|
|
35,347
|
|
53,473
|
Depreciation and
amortization
|
|
50,229
|
|
46,794
|
|
193,828
|
|
172,431
|
Income from equity
method investees
|
|
(5,155)
|
|
(3,393)
|
|
(12,976)
|
|
(10,883)
|
Loss on debt
extinguishment and modification
|
|
—
|
|
—
|
|
—
|
|
20,838
|
(Gains) losses on sale
of assets, impairments and write-offs
|
|
(307)
|
|
5,000
|
|
1,992
|
|
10,918
|
Equity-based
compensation
|
|
19,892
|
|
12,774
|
|
60,784
|
|
49,265
|
Other non-operating
loss (income)
|
|
3,298
|
|
30,437
|
|
12,667
|
|
(34,497)
|
Mexico joint venture
EBITDA (1)
|
|
9,265
|
|
8,314
|
|
29,584
|
|
26,837
|
Store pre-opening
expenses (2)
|
|
3,900
|
|
3,026
|
|
14,993
|
|
14,765
|
Store closing expenses
(2)
|
|
1,117
|
|
1,699
|
|
5,168
|
|
5,028
|
Non-cash
occupancy-related costs (3)
|
|
1,456
|
|
2,550
|
|
8,432
|
|
8,114
|
Acquisition-related
integration costs (4)
|
|
627
|
|
—
|
|
15,314
|
|
—
|
Other costs
(5)
|
|
6,535
|
|
7,382
|
|
25,790
|
|
33,437
|
Adjusted EBITDA, as
defined through fiscal 2022
|
|
$
170,274
|
|
$
172,150
|
|
$
582,335
|
|
$
591,478
|
|
|
|
|
|
|
|
|
|
Store pre-opening
expenses (2)
|
|
(3,900)
|
|
(3,026)
|
|
(14,993)
|
|
(14,765)
|
Store closing expenses
(2)
|
|
(1,117)
|
|
(1,699)
|
|
(5,168)
|
|
(5,028)
|
Non-cash
occupancy-related costs (3)
|
|
(1,456)
|
|
(2,550)
|
|
(8,432)
|
|
(8,114)
|
Other costs
(5)
|
|
(5,912)
|
|
(7,378)
|
|
(22,973)
|
|
(15,202)
|
Adjusted EBITDA, as
defined beginning fiscal 2023
|
|
$
157,889
|
|
$
157,497
|
|
$
530,769
|
|
$
548,369
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ 1,577,959
|
|
$ 1,514,357
|
|
$ 6,035,967
|
|
$ 5,807,149
|
Net margin
(6)
|
|
2.1 %
|
|
1.9 %
|
|
1.5 %
|
|
2.8 %
|
Adjusted EBITDA Margin,
as defined through fiscal 2022 (6)
|
|
10.8 %
|
|
11.4 %
|
|
9.6 %
|
|
10.2 %
|
Adjusted EBITDA Margin,
as defined beginning fiscal 2023 (6)
|
|
10.0 %
|
|
10.4 %
|
|
8.8 %
|
|
9.4 %
|
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
|
|
January 28,
2023
|
|
January 29,
2022
|
|
|
Amount
|
|
Per
share
|
|
Amount
|
|
Per
share
|
Net income
attributable to common stockholders / diluted EPS
|
|
$
32,732
|
|
$
0.12
|
|
$
28,994
|
|
$
0.11
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
14,548
|
|
0.05
|
|
9,689
|
|
0.04
|
(Gains) losses on sale
of assets, impairments and write-offs
|
|
(307)
|
|
(0.00)
|
|
5,000
|
|
0.02
|
Equity-based
compensation
|
|
19,892
|
|
0.08
|
|
12,774
|
|
0.05
|
Other non-operating
loss
|
|
3,298
|
|
0.01
|
|
30,437
|
|
0.11
|
Store pre-opening
expenses (2)
|
|
3,900
|
|
0.02
|
|
3,026
|
|
0.01
|
Store closing expenses
(2)
|
|
1,117
|
|
0.00
|
|
1,699
|
|
0.01
|
Non-cash
occupancy-related costs (3)
|
|
1,456
|
|
0.01
|
|
2,550
|
|
0.01
|
Acquisition-related
integration costs (4)
|
|
627
|
|
0.00
|
|
—
|
|
—
|
Other costs
(5)
|
|
6,535
|
|
0.02
|
|
7,382
|
|
0.02
|
Adjusted pre-tax income
/ diluted earnings per share
|
|
$ 83,798
|
|
$
0.31
|
|
$
101,551
|
|
$
0.38
|
Income tax expense at
26% normalized tax rate
|
|
21,787
|
|
0.08
|
|
26,403
|
|
0.10
|
Adjusted Net Income
/ Adjusted EPS, as defined through fiscal 2022
|
|
$
62,011
|
|
$
0.23
|
|
$
75,148
|
|
$
0.28
|
|
|
|
|
|
|
|
|
|
Store pre-opening
expenses (2)
|
|
(3,900)
|
|
(0.02)
|
|
(3,026)
|
|
(0.01)
|
Store closing expenses
(2)
|
|
(1,117)
|
|
(0.00)
|
|
(1,699)
|
|
(0.01)
|
Non-cash
occupancy-related costs (3)
|
|
(1,456)
|
|
(0.01)
|
|
(2,550)
|
|
(0.01)
|
Other costs
(5)
|
|
(5,912)
|
|
(0.01)
|
|
(7,378)
|
|
(0.02)
|
Income tax effect of
above items at 26% normalized tax rate
|
|
3,220
|
|
0.01
|
|
3,810
|
|
0.01
|
Adjusted Net Income
/ Adjusted EPS, as defined beginning fiscal 2023
|
|
$
52,846
|
|
$
0.20
|
|
$
64,305
|
|
$
0.24
|
|
|
(in thousands,
except per share amounts)
|
|
52 Weeks
Ended
|
Reconciliation of
Diluted EPS to Adjusted EPS
|
|
January 28,
2023
|
|
January 29,
2022
|
|
|
Amount
|
|
Per
share
|
|
Amount
|
|
Per
share
|
Net income
attributable to common stockholders / diluted EPS
|
|
$
90,801
|
|
$
0.34
|
|
$
164,417
|
|
$
0.62
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
35,347
|
|
0.13
|
|
53,473
|
|
0.20
|
Loss on debt
extinguishment and modification
|
|
—
|
|
—
|
|
20,838
|
|
0.08
|
(Gains) losses on sale
of assets, impairments and write-offs
|
|
1,992
|
|
0.01
|
|
10,918
|
|
0.04
|
Equity-based
compensation
|
|
60,784
|
|
0.22
|
|
49,265
|
|
0.19
|
Other non-operating
loss (income)
|
|
12,667
|
|
0.05
|
|
(34,497)
|
|
(0.13)
|
Store pre-opening
expenses (2)
|
|
14,993
|
|
0.06
|
|
14,765
|
|
0.06
|
Store closing expenses
(2)
|
|
5,168
|
|
0.02
|
|
5,028
|
|
0.02
|
Non-cash
occupancy-related costs (3)
|
|
8,432
|
|
0.03
|
|
8,114
|
|
0.03
|
Acquisition-related
integration costs (4)
|
|
15,314
|
|
0.06
|
|
—
|
|
—
|
Other costs
(5)
|
|
25,790
|
|
0.10
|
|
33,437
|
|
0.12
|
Adjusted pre-tax income
/ diluted earnings per share
|
|
$
271,288
|
|
$
1.02
|
|
$
325,758
|
|
$
1.23
|
Income tax expense at
26% normalized tax rate
|
|
70,535
|
|
0.27
|
|
84,697
|
|
0.32
|
Adjusted Net Income
/ Adjusted EPS, as defined through fiscal 2022
|
|
$
200,753
|
|
$
0.75
|
|
$
241,061
|
|
$
0.91
|
|
|
|
|
|
|
|
|
|
Store pre-opening
expenses (2)
|
|
(14,993)
|
|
(0.06)
|
|
(14,765)
|
|
(0.06)
|
Store closing expenses
(2)
|
|
(5,168)
|
|
(0.02)
|
|
(5,028)
|
|
(0.02)
|
Non-cash
occupancy-related costs (3)
|
|
(8,432)
|
|
(0.03)
|
|
(8,114)
|
|
(0.03)
|
Other costs
(5)
|
|
(22,973)
|
|
(0.08)
|
|
(15,202)
|
|
(0.05)
|
Income tax effect of
above items at 26% normalized tax rate
|
|
13,407
|
|
0.05
|
|
11,208
|
|
0.04
|
Adjusted Net Income
/ Adjusted EPS, as defined beginning fiscal 2023
|
|
$
162,594
|
|
$
0.61
|
|
$
209,160
|
|
$
0.79
|
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.
The table below reflects the calculation of Free Cash Flow for
the thirteen and fifty-two weeks ended January 28, 2023 and January 29, 2022, respectively.
(in
thousands)
|
|
13 Weeks
Ended
|
|
52 Weeks
Ended
|
|
|
January 28,
2023
|
|
January 29,
2022
|
|
January 28,
2023
|
|
January 29,
2022
|
Net cash provided by
operating activities
|
|
$
136,540
|
|
$ 69,771
|
|
$
346,003
|
|
$
358,215
|
Cash paid for fixed
assets
|
|
(65,946)
|
|
(74,780)
|
|
(278,020)
|
|
(239,110)
|
Free Cash
Flow
|
|
$
70,594
|
|
$
(5,009)
|
|
$
67,983
|
|
$
119,105
|
Adjusted EBITDA, Adjusted Net Income and Adjusted EPS
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
|
|
52 Weeks
Ended
|
(in
thousands)
|
|
January 28,
2023
|
|
January 29,
2022
|
|
January 28,
2023
|
|
January 29,
2022
|
Net income
|
|
$
10,309
|
|
$
6,786
|
|
$ 24,757
|
|
$ 21,773
|
Depreciation
|
|
5,954
|
|
5,218
|
|
19,820
|
|
15,679
|
Income tax
expense
|
|
1,065
|
|
2,702
|
|
9,409
|
|
11,390
|
Foreign currency (gain)
loss
|
|
(253)
|
|
116
|
|
(268)
|
|
(431)
|
Interest expense,
net
|
|
1,455
|
|
1,806
|
|
5,449
|
|
5,263
|
EBITDA
|
|
$ 18,530
|
|
$ 16,628
|
|
$ 59,167
|
|
$ 53,674
|
50% of
EBITDA
|
|
$
9,265
|
|
$
8,314
|
|
$
29,584
|
|
$
26,837
|
(2)
|
Store pre-opening and
closing expenses were adjusted for periods prior to fiscal 2023.
Beginning in fiscal 2023, such expenses will no longer be
adjusted.
|
|
|
(3)
|
Non-cash
occupancy-related costs include the difference between cash and
straight-line rent and were adjusted for periods prior to fiscal
2023. Beginning in fiscal 2023, such expenses will no longer be
adjusted.
|
|
|
(4)
|
Acquisition/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. For the thirteen
weeks ended January 28, 2023, approximately $0.6 million of Thrive
integration costs were recorded in cost of sales and $0.1 million
of integration costs were recorded in selling, general and
administrative expenses. For the fifty-two weeks ended January 28,
2023, approximately $8.2 million of Thrive integration costs were
recorded in cost of sales and $7.1 million of integration costs
were recorded in selling, general and administrative
expenses.
|
|
|
(5)
|
Other costs prior to
fiscal 2023 included: severance; legal reserves and related fees;
one-time consulting and other costs associated with our strategic
transformation initiatives; discontinuation and liquidation costs;
and costs related to our initial public offering and refinancing.
Other costs beginning in fiscal 2023 will 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.
|
|
|
(6)
|
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