Petco Health + Wellness Company, Inc. Reports Fourth Quarter And Full Year 2024 Financial Results

Expects Double-Digit Adjusted EBITDA Growth in 2025* SAN DIEGO, March 26, 2025 /PRNewswire/ -- Petco Health and Wellness Company, Inc. (Nasdaq: WOOF ) today announced its fourth quarter and full year 2024 financial results. Q4 2024 Overview Full Year 2024 Overview "Our results in the fourth quarter demonstrate the progress we've made to return Petco to retail operating excellence," said Joel Anderson, Petco's Chief Executive Officer.

"While there is more work ahead, I am confident our new leadership team is well-positioned to build on this early momentum, deliver double-digit adjusted EBITDA improvement in 2025 and set the business up for sustainable profitable growth." Full Year 2025 Guidance FY 2025 Guidance* Net revenue Down low single digits year over year Adjusted EBITDA $375 million to $390 million Net interest expense ~$130 million Capital expenditures $130-140 million Depreciation & amortization ~$200 million Real estate ~20-30 net closures First Quarter 2025 Guidance Q1 2025 Guidance* Net revenue Down low single digits year over year Adjusted EBITDA $82 million to $83 million *Assumptions in the guidance include that economic conditions, currency rates and the tax and regulatory landscape remain generally consistent. Adjusted EBITDA is a non-GAAP financial measure and has 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 are made in a manner consistent with the relevant definitions and assumptions noted herein and in our filings with the Securities and Exchange Commission. (1) Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures.

See "Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures. Earnings Conference Call Webcast Information: Management will host an earnings conference call on March 26, 2025 at approximately 4:30 PM Eastern Time to discuss the company's financial results. The conference call will be accessible through a live webcast.

Interested investors and other individuals can access the webcast, earnings release, and earnings presentation via the company's investor relations page at href="" rel="nofollow" petc . A replay of the webcast will be archived on the company's investor relations page through April 9, 2025 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 and on the Petco app .

In tandem with Petco Love , a life-changing 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, but not limited to, statements regarding our Q1 and full year 2025 guidance, operational reset of our business, our competitive positioning, profitability, cost action plans and associated cost-savings. 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, mass and grocery 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, prevailing interest rates and the impact of tariffs; (vii) failure to effectively manage our costs; (viii) our reliance on our information technology systems; (ix) our ability to prevent or effectively respond to a data privacy or security breach; (x) our ability to effectively manage or integrate strategic ventures, alliances or acquisitions and realize the anticipated benefits of such transactions; (xi) economic or regulatory developments that might affect our ability to provide attractive promotional financing; (xii) business interruptions and other supply chain issues; (xiii) catastrophic events, political tensions, conflicts and wars (such as the ongoing conflicts in Ukraine and the Middle East), 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; (xx) impairments of the carrying value of our goodwill and other intangible assets; (xxi) our ability to successfully implement our operational adjustments, achieve the expected benefits of our cost action plans and drive improved profitability; and (xxii) 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 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended February 1, 2025 February 3, 2024 Percent Change February 1, 2025 February 3, 2024 Percent Change Net sales: Products $ 1,310,217 $ 1,420,713 (8 %) $ 5,116,891 $ 5,273,710 (3 %) Services and other 241,913 253,763 (5 %) 999,571 981,574 2 % Total net sales 1,552,130 1,674,476 (7 %) 6,116,462 6,255,284 (2 %) Cost of sales: Products 811,204 903,156 (10 %) 3,173,269 3,269,628 (3 %) Services and other 151,666 164,972 (8 %) 618,791 631,821 (2 %) Total cost of sales 962,870 1,068,128 (10 %) 3,792,060 3,901,449 (3 %) Gross profit 589,260 606,348 (3 %) 2,324,402 2,353,835 (1 %) Selling, general and administrative expenses 571,872 606,182 (6 %) 2,317,351 2,311,625 0 % Goodwill impairment - - N/M - 1,222,524 (100 %) Operating income (loss) 17,388 166 10,375 % 7,051 (1,180,314) N/M Interest income (1,278) (326) 292 % (3,714) (3,405) 9 % Interest expense 34,111 39,658 (14 %) 143,531 150,909 (5 %) Loss on extinguishment and modification of debt - - N/M - 920 (100 %) Other non-operating loss (income) 1,000 - N/M (4,800) (4,727) 2 % Loss before income taxes and income from equity method investees (16,445) (39,166) (58 %) (127,966) (1,324,011) (90 %) Income tax expense (benefit) 2,504 (10,435) N/M (7,481) (27,613) (73 %) Income from equity method investees (5,112) (6,156) (17 %) (18,669) (16,188) 15 % Net loss attributable to Class A and B-1 common stockholders $ (13,837) $ (22,575) (39 %) $ (101,816) $ (1,280,210) (92 %) Net loss per Class A and B-1 common share: Basic $ (0.

05) $ (0.08) (40 %) $ (0.37) $ (4.

78) (92 %) Diluted $ (0.05) $ (0.08) (40 %) $ (0.

37) $ (4.78) (92 %) Weighted average shares used in computing net loss per Class A and B-1 common share: Basic 276,305 268,615 3 % 273,410 267,549 2 % Diluted 276,305 268,615 3 % 273,410 267,549 2 % PETCO HEALTH AND WELLNESS COMPANY, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) (Unaudited and subject to reclassification) February 1, 2025 February 3, 2024 ASSETS Current assets: Cash and cash equivalents $ 165,756 $ 125,428 Receivables, less allowance for credit losses 1 40,425 44,369 Merchandise inventories, net 653,329 684,502 Prepaid expenses 53,515 58,615 Other current assets 60,594 38,830 Total current assets 973,619 951,744 Fixed assets, net 725,438 816,367 Operating lease right-of-use assets 1,302,346 1,384,050 Goodwill 980,064 980,297 Trade name 1,025,000 1,025,000 Other long-term assets 187,963 205,694 Total assets $ 5,194,430 $ 5,363,152 LIABILITIES AND EQUITY Current liabilities: Accounts payable and book overdrafts $ 492,878 $ 485,131 Accrued salaries and employee benefits 157,460 101,265 Accrued expenses and other liabilities 177,079 200,278 Current portion of operating lease liabilities 306,400 310,507 Current portion of long-term debt and other lease liabilities 5,346 15,962 Total current liabilities 1,139,163 1,113,143 Senior secured credit facilities, net, excluding current portion 1,578,091 1,576,223 Operating lease liabilities, excluding current portion 1,037,206 1,116,615 Deferred taxes, net 217,712 251,629 Other long-term liabilities 108,628 121,113 Total liabilities 4,080,800 4,178,723 Commitments and contingencies Stockholders' equity: Class A common stock 2 239 231 Class B-1 common stock 3 38 38 Class B-2 common stock 4 - - Preferred stock 5 - - Additional paid-in-capital 2,280,495 2,229,582 Accumulated deficit (1,149,059) (1,047,243) Accumulated other comprehensive (loss) income (18,083) 1,821 Total stockholders' equity 1,113,630 1,184,429 Total liabilities and stockholders' equity $ 5,194,430 $ 5,363,152 1 Allowances for credit losses are $1,594 and $1,806, respectively 2 Class A common stock, $0.

001 par value: Authorized - 1.0 billion shares; Issued and outstanding - 239.1 million and 231.

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 53 Weeks Ended February 1, 2025 February 3, 2024 Cash flows from operating activities: Net loss $ (101,816) $ (1,280,210) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 199,727 200,782 Amortization of debt discounts and issuance costs 4,896 4,972 Provision for deferred taxes (30,492) (53,549) Equity-based compensation expense 50,212 81,859 Impairments, write-offs and losses on sale of fixed and other assets 8,790 2,833 Loss on extinguishment and modification of debt - 920 Income from equity method investees (18,669) (16,188) Amounts reclassified out of accumulated other comprehensive loss (3,146) (488) Goodwill impairment - 1,222,524 Non-cash operating lease costs 414,396 429,056 Other non-operating loss (income) (4,800) (4,727) Changes in assets and liabilities: Receivables 4,178 5,211 Merchandise inventories 30,767 (32,072) Prepaid expenses and other assets (3,960) (8,009) Accounts payable and book overdrafts 8,484 103,919 Accrued salaries and employee benefits 56,981 11,347 Accrued expenses and other liabilities (12,455) (8,495) Operating lease liabilities (418,219) (446,981) Other long-term liabilities (7,201) 3,015 Net cash provided by operating activities 177,673 215,719 Cash flows from investing activities: Cash paid for fixed assets (127,990) (225,598) Cash paid for acquisitions, net of cash acquired (629) (6,725) Cash paid for investments (457) - Proceeds from investment 998 24,878 Proceeds from sale of assets 1,369 - Cash received from partial surrender of officers' life insurance 2,806 - Net cash used in investing activities (123,903) (207,445) Cash flows from financing activities: Borrowings under long-term debt agreements 201,000 273,000 Repayments of long-term debt (201,000) (348,000) Debt refinancing costs (3,028) - Payments for finance lease liabilities (5,707) (5,925) Proceeds from employee stock purchase plan and stock option exercises 3,770 4,223 Tax withholdings on stock-based awards (6,289) (8,650) Proceeds from issuance of common stock 2,500 - Net cash used in financing activities (8,754) (85,352) Net decrease in cash, cash equivalents and restricted cash 45,016 (77,078) Cash, cash equivalents and restricted cash at beginning of period 136,649 213,727 Cash, cash equivalents and restricted cash at end of period $ 181,665 $ 136,649 NON-GAAP FINANCIAL MEASURES The following information provides definitions and reconciliations of the non-GAAP financial measures presented in this earnings release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release.

The non-GAAP financial measures in this earnings release may differ from similarly titled measures used by other companies. The tables below reflect the calculation of Adjusted EBITDA as applicable, for the thirteen and fifty-two weeks ended February 1, 2025 compared to the fourteen and fifty-three weeks ended February 3, 2024, respectively. Adjusted EBITDA 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 February 3, 2024 filed with the SEC on April 3, 2024 for additional information on Adjusted EBITDA.

(dollars in thousands) 13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended Reconciliation of Net Loss Attributable to Class A and B-1 Common Stockholders to Adjusted EBITDA February 1, 2025 February 3, 2024 February 1, 2025 February 3, 2024 Net loss attributable to Class A and B-1 common stockholders $ (13,837) $ (22,575) $ (101,816) $ (1,280,210) Add (deduct): Interest expense, net 32,833 39,332 139,817 147,504 Income tax expense (benefit) 2,504 (10,435) (7,481) (27,613) Depreciation and amortization 50,313 52,189 199,727 200,782 Income from equity method investees (5,112) (6,156) (18,669) (16,188) Loss on debt extinguishment and modification - - - 920 Goodwill impairment - - - 1,222,524 Losses on sale of assets, impairments and write-offs 341 631 8,790 2,833 Equity-based compensation expense 9,507 17,428 50,212 81,859 Other non-operating loss (income) 1,000 - (4,800) (4,727) Mexico joint venture EBITDA (1) 11,233 11,759 41,615 38,226 Acquisition and divestiture-related integration costs (2) - - 3,719 - Other costs (3) 7,341 23,167 25,412 35,193 Adjusted EBITDA $ 96,123 $ 105,340 $ 336,526 $ 401,103 Net sales $ 1,552,130 $ 1,674,476 $ 6,116,462 $ 6,255,284 Net margin (4) (0.9 %) (1.3 %) (1.

7 %) (20.5 %) Adjusted EBITDA Margin 6.2 % 6.

3 % 5.5 % 6.4 % 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 fifty-two weeks ended February 1, 2025 compared to the fifty-three weeks ended February 3, 2024. (in thousands) 52 Weeks Ended 53 Weeks Ended February 1, 2025 February 3, 2024 Net cash provided by operating activities $ 177,673 $ 215,719 Cash paid for fixed assets (127,990) (225,598) Free Cash Flow $ 49,683 $ (9,879) Non-GAAP Financial Measures Footnotes (1) Mexico Joint Venture EBITDA represents 50 percent of the entity's operating results for all periods, as adjusted to reflect the results on a basis comparable to Adjusted EBITDA.

In the financial statements, this joint venture is accounted for as an equity method investment and reported net of depreciation and income taxes because such a presentation would not reflect the adjustments made in the calculation of Adjusted EBITDA, we include the 50 percent interest in the company's Mexico joint venture on an Adjusted EBITDA basis to ensure consistency. The table below presents a reconciliation of Mexico joint venture net income to Mexico joint venture EBITDA. 13 Weeks Ended 14 Weeks Ended 52 Weeks Ended 53 Weeks Ended (in thousands) February 1, 2025 February 3, 2024 February 1, 2025 February 3, 2024 Net income $ 10,224 $ 12,311 $ 37,559 $ 32,375 Depreciation 6,536 7,070 27,360 26,141 Income tax expense 5,014 2,541 16,010 11,449 Foreign currency loss 176 557 169 1,520 Interest expense, net 516 1,039 2,131 4,966 EBITDA $ 22,466 $ 23,518 $ 83,229 $ 76,451 50% of EBITDA $ 11,233 $ 11,759 $ 41,615 $ 38,226 (2) Acquisition and divestiture-related integration costs include direct costs resulting from acquiring, integrating, or divesting businesses.

These include third-party professional and legal fees, losses on sales of divestitures, and other integration-related costs that would not have otherwise been incurred as part of the company's operations. (3) Other costs include, as incurred: restructuring costs and restructuring-related severance costs; legal reserves associated with significant, non-ordinary course legal or regulatory matters; and costs related to certain significant strategic transactions. (4) We define net margin as net loss 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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