news releases

• Comparable sales grew 4.1 percent year over year and 19.6 percent on a two-year basis, resulting in sixteenth consecutive quarter of comparable sales growth
• Net revenue of $1.50 billion increased 4.0 percent year over year
• Delivered net income of $19.9 million and Adjusted EBITDA¹ of $137.6 million
• Earnings per share of $0.07, a decline of $0.13 from prior year; Adjusted Earnings Per Share¹ of $0.16, a decline of $0.04 from prior year
• Generated $109.4 million of operating cash flow in the third quarter, an increase of 27% year over year
• Reaffirms full year guidance for net revenue of $5.975 billion to $6.05 billion and Adjusted EBITDA¹ of $580.0 million to $595.0 million; Updates full year guidance for Adjusted Earnings Per Share¹ to between $0.75 and $0.79

SAN DIEGO, Nov. 30, 2022 /PRNewswire/ -- Petco Health and Wellness Company, Inc. (Nasdaq: WOOF), a complete partner in pet health and wellness, today announced its third quarter 2022 financial results.

In the third quarter of 2022, Petco delivered net revenue of $1.50 billion, up 4.0 percent versus prior year. Net income was $19.9 million or $0.07 per share compared to $52.8 million or $0.20 per share in the prior year. Adjusted Net Income¹ was $42.9 million or $0.16 per share, compared to $54.0 million or $0.20 per share in the prior year.

"Our Q3 results demonstrate the resilience of the pet category through economic cycles, the competitive advantages inherent in our model, and the Petco team's incredible execution," said Petco CEO Ron Coughlin. "Pet parents continue to prioritize the health and wellness of their pets with Petco, from our high-quality food, vet care and services, to membership programs like Vital Care which act as drivers of value and loyalty. We remain committed to redefining the industry through our differentiated offering and innovative partnerships, demonstrating the attractiveness of our one-of-a-kind ecosystem and powered by the most passionate team in retail."

Comparisons are third quarter of 2022 ended October 29, 2022 versus third quarter of 2021 ended October 30, 2021 unless otherwise noted.

Third quarter results reflect continued business and customer growth and operational execution, while investing in strategic growth initiatives.

• Net revenue increased 4.0 percent to $1.50 billion driven by comparable sales growth of 4.1 percent
• Net income decreased $32.8 million to $19.9 million or $0.07 per share, which was impacted by a $19.2 million non-cash change in the fair value of one of the company's investments
• Adjusted Net Income¹ decreased $11.1 million to $42.9 million or $0.16 per share
• Adjusted EBITDA¹ decreased $1.0 million to $137.6 million

Petco has reaffirmed its full year 2022 financial guidance for net revenue, Adjusted EBITDA¹ and capital expenditures and updated its full year 2022 financial guidance for Adjusted Earnings Per Share¹. For the full year, Petco now expects Adjusted Earnings Per Share¹ between $0.75 and $0.79. Full details can be found in the schedules below.

Management will host an earnings conference call on November 30, 2022 at 8:30 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, and infographic via the company's investor relations page at ir.petco.com. A replay of the webcast will be archived on the company's investor relations page through December 14, 2022 at approximately 5:00 PM Eastern Time.

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 more than 6.6 million animals.

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 2022 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 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; (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.

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.

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. The tables below reflect the calculation of Adjusted EBITDA for the thirteen weeks and trailing twelve months ended October 29, 2022 compared to the thirteen weeks and trailing twelve months ended October 30, 2021, respectively, as well as the twelve-month period ended January 29, 2022.

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.

The tables below reflect the calculation of Adjusted Net Income and Adjusted EPS for the thirteen weeks ended October 29, 2022 compared to the thirteen weeks ended October 30, 2021.

Assumptions in the company's Fiscal 2022 guidance include that economic conditions, currency rates and the tax and regulatory landscape remain generally consistent. Adjusted EPS guidance assumes approximately $100 million of interest expense (prior guidance assumed $90 million), a 26 percent tax rate and a 267 million weighted average diluted share count. 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.

WOOF-F

SOURCE Petco Health and Wellness Company, Inc.