Petco Health & Wellness Company, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

Petco Health and Wellness Company, Inc. (together with its consolidated subsidiaries, the “Company”) is a leading pet specialty retailer focused on improving the lives of pets, pet parents, and its own partners. The Company manages its business asone reportable operating segment.

In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Consolidated Financial Statements.

There have been no significant changes from the significant accounting policies disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2026.

The accompanying consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Interim financial results are not necessarily indicative of results anticipated for the full year. The accompanying consolidated financial statements and these Notes to Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2026, from which the prior year balance sheet information herein was derived.

Use of Estimates

The preparation of these consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates are based on information that is currently available and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

Derivative Instruments

The Company has entered into interest rate collar and interest rate swap agreements to limit the maximum interest on a portion of the Company’s variable-rate debt and decrease its exposure to interest rate variability relating to three-month Term SOFR. The interest rate collars and swap are accounted for as cash flow hedges, and changes in the fair value are reported as a component of accumulated other comprehensive income (loss) ("AOCI").

Cash and Cash Equivalents

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets to the total amounts reported in the consolidated statements of cash flows (in thousands):

2. Revenue Recognition

Net sales by product type and services were as follows (in thousands):

3. Senior Secured Credit Facilities

The Company had a $1,700.0 million secured term loan facility originally maturing on March 4, 2028 (the “First Lien Term Loan”). As of January 31, 2026, the outstanding principal balance of the First Lien Term Loan was $1,500.0 million. On February 2, 2026, the Company entered into a refinancing amendment to the credit agreement governing the First Lien Term Loan and issued $600.0 million in aggregate principal amount of senior secured notes (the “Senior Secured Notes”). Among other changes, the amendment provided that certain lenders would provide new term loans to the Company in an aggregate principal amount of $900.0 million (the “Amended First Lien Term Loan”), the proceeds of which, together with cash on hand and the proceeds from the Company's issuance of the Senior Secured Notes, would be used to repay the then outstanding principal on the First Lien Term Loan.

Interest under the Amended First Lien Term Loan is, at the Company’s option, either a base rate plus 3.25% or Term SOFR plus 4.25%, payable quarterly in arrears. The base rate is the greater of the bank prime rate, federal funds effective rate plus 0.5% or one month Term SOFR plus 1.0%. The Amended First Lien Term Loan matures on February 2, 2031. Principal payments are $2.25 million quarterly and commence on June 30, 2026.

The Company has a secured asset-based revolving credit facility (as amended from time to time, the “ABL Revolving Credit Facility”). The first tranche of the ABL Revolving Credit Facility, which had availability of up to $35.0 million, subject to a borrowing base, matured on March 4, 2026. The remaining tranche has availability of up to $546.0 million, subject to a borrowing base, maturing on March 29, 2029. Interest on the ABL Revolving Credit Facility is based on, at the Company's option, either the base rate subject to a 1% floor, or Term SOFR subject to a floor of 0%, plus an applicable margin.

As of May 2, 2026, the Company was in compliance with its covenants under the Amended First Lien Term Loan and the ABL Revolving Credit Facility.

Term Loan Facilities

In connection with the February 2, 2026 transaction, the Company recognized a loss on debt extinguishment and modification of $11.8 million, which consisted of a $4.0 million write-off of unamortized debt discount and issuance costs on the First Term Loan Facility and $7.8 million of third-party expenses. Fees relating to the Company’s entry into the Amended First Lien Term Loan consisted of arranger fees and other third-party expenses. Of those fees, $1.4 million was capitalized as debt issuance costs, along with $9.0 million of original issue discount. The remaining portion of original issue discount and debt issuance costs of the First Term Loan Facility previously capitalized is being amortized over the contractual term of the Amended First Lien Term Loan to interest expense using the effective interest rate in effect at issuance, as these amounts represent the portion that was not substantially modified.

As of May 2, 2026, the outstanding principal balance of the Amended First Lien Term Loan was $900.0 million ($886.1 million, net of the unamortized discount and debt issuance costs). As of January 31, 2026, the outstanding principal balance of the First Lien Term Loan was $1,500.0 million ($1,491.8 million, net of the unamortized discount and debt issuance costs). The weighted average interest rate on the borrowings outstanding was 8.1% and 7.3% as of May 2, 2026 and January 31, 2026, respectively. Debt issuance costs are being amortized over the contractual term to interest expense using the effective interest rate in effect at issuance. As of May 2, 2026, the estimated fair value of the Amended First Lien Term Loan was approximately $893.3 million, based upon Level 2 fair value hierarchy inputs. As of January 31, 2026, the estimated fair value of the First Lien Term Loan was $1,496.3 million, based upon Level 2 fair value hierarchy inputs.

Revolving Credit Facilities

As of May 2, 2026 and January 31, 2026, no amounts were outstanding under the ABL Revolving Credit Facility. As of May 2, 2026, $487.6 million was available under the ABL Revolving Credit Facility, which is net of $58.4 million of outstanding letters of credit issued in the normal course of business. As of May 2, 2026 and January 31, 2026, unamortized debt issuance costs of $3.0 million and $3.2 million, respectively, relating to the ABL Revolving Credit Facility were outstanding and were being amortized using the straight-line method over the remaining term of the agreement.

Interest on the ABL Revolving Credit Facility is based on, at the Company’s option, either the base rate subject to a 1% floor, or Term SOFR subject to a floor of 0%, plus an applicable margin. The applicable margin is currently equal to 25 basis points in the case of base rate loans and 125 basis points in the case of Term SOFR loans.

4. Senior Secured Notes

As part of the February 2, 2026 refinancing of the First Lien Term Loan described in Note 3, "Senior Secured Credit Facilities", the Company issued $600.0 million in aggregate principal amount of senior secured notes. The Senior Secured Notes bear interest at 8.25% per annum, payable semiannually in arrears, and mature on February 1, 2031. Approximately $10.3 million of arranger fees and other third-party expenses relating to the Company’s issuance of the Senior Secured Notes were capitalized as debt issuance costs.

As of May 2, 2026, the outstanding principal balance of the Senior Secured Notes was $600.0 million ($590.1 million, net of the unamortized debt issuance costs). As of May 2, 2026, the weighted average interest rate on the borrowings outstanding was 8.3%. Debt issuance costs are being amortized over the contractual term to interest expense using the effective interest rate in effect at issuance. As of May 2, 2026, the estimated fair value of the Senior Secured Notes was approximately $601.5 million, based upon Level 2 fair value hierarchy inputs.

5. Derivative Instruments

The interest rate swap and collars are accounted for as cash flow hedges because they are expected to be highly effective in hedging variable rate interest payments. Changes in the fair value of the cash flow hedges are reported as a component of AOCI. As of May 2, 2026, AOCI included unrealized gainsof $0.1 million ($0.1 million, net of tax). As of January 31, 2026, AOCI included unrealized losses of $1.0 million ($0.8 million, net of tax). Approximately $0.1 million of pre-tax losses and $0.2 million of pre-tax gains deferred in AOCI were reclassified to interest expense during the thirteen week periods ended May 2, 2026 and May 3, 2025, respectively.

The cash flow hedges are reflected in the Company’s consolidated balance sheets as follows (in thousands):

6. Fair Value Measurements

Assets and Liabilities Measured on a Recurring Basis

The following table presents information about assets and liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value (in thousands):

The fair value of money market mutual funds is based on quoted market prices, such as quoted net asset values published by the fund as supported in an active market. Money market mutual funds included in the Company’s cash and cash equivalents were $113.5 million and $204.0 million as of May 2, 2026 and January 31, 2026, respectively. Also included in the Company’s money market mutual funds balances were $1.2 million and $12.7 million as of May 2, 2026 and January 31, 2026, respectively, which relate to the Company’s restricted cash, and are included in other current assets in the consolidated balance sheets.

The Company maintains a deferred compensation plan for key executives and other members of management, which is funded by investments in officers’ life insurance. The fair value of this obligation is based on participants’ elected investments, which reflect the closing market prices of similar assets.

The Company holds certain investments in equity securities without readily determinable fair values. When an upward or downward adjustment occurs, the resulting gains or losses are included in other non-operating income in the consolidated statements of operations.

Assets Measured on a Non-Recurring Basis

The Company’s non-financial assets, which primarily consist of goodwill, other intangible assets, fixed assets and equity and other investments, are reported at carrying value, or at fair value as of the date of the Company’s acquisition of Petco Holdings, Inc. LLC on January 26, 2016, and are not required to be measured at fair value on a recurring basis. However, on a periodic basis (at least annually for goodwill and indefinite-lived intangibles or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable), non-financial assets are assessed for impairment. If impaired, the carrying values of the assets are written down to fair value using Level 3 inputs.

There were no triggering events identified and no indications of impairment of the Company’s goodwill, indefinite-lived trade name, or equity and other investments during the thirteen week periods ended May 2, 2026 and May 3, 2025. During the thirteen week periods ended May 2, 2026 and May 3, 2025, the Company recorded fixed asset and right-of-use asset impairment charges of $0.1 million and $0.6 million, respectively.

7. Stockholders’ Equity

Equity-Based Compensation

Equity-based compensation awards under the Company’s current equity incentive plan (as amended, the “2021 Equity Incentive Plan”) include restricted stock units (“RSUs,” which include performance-based stock units and market-based stock units), restricted stock awards (“RSAs”), non-qualified stock options, and other equity compensation awards. In addition, the Company has made equity-based compensation awards of RSUs and non-qualified stock options outside of the 2021 Equity Incentive Plan as employment inducement awards (collectively, the “Inducement Awards”). The Company also has an employee stock purchase plan (“ESPP”).

The Company’s controlling parent, Scooby LP, also maintains an incentive plan (the “2016 Incentive Plan”) under which it has awarded partnership unit awards to certain current and former employees, consultants, and non-employee directors of the Company that are restricted profit interests in Scooby LP subject to a distribution threshold (“Series C Units”). No additional Series C Units have been or will be awarded following the Company’s initial public offering. As of May 2, 2026, substantially all Series C Units are fully vested.

The following table summarizes the Company’s equity-based compensation expense by award type (in thousands):

Activity under the 2021 Equity Incentive Plan and the Inducement Awards was as follows (shares and dollars in thousands):

The ESPP allows eligible employees to contribute up to 15% of their base earnings towards purchases of Class A common stock, subject to an annual maximum. The purchase price will be 85% of the lower of (i) the fair market value of the stock on the associated lookback date and (ii) the fair market value of the stock on the last day of the related purchase period.

Loss Per Share

Potentially dilutive securities include potential Class A common shares related to outstanding stock options, unvested RSUs and RSAs, and the ESPP, calculated using the treasury stock method. The calculation of diluted shares outstanding excludes securities where the combination of the exercise or purchase price (in the case of options and the ESPP) and the associated unrecognized compensation expense is greater than the average market price of Class A common shares because the inclusion of these securities would be anti-dilutive.

All outstanding equity awards were excluded from the calculation of diluted loss per Class A and B-1 common share in the thirteen weeks ended May 2, 2026 and May 3, 2025, as their effect would be antidilutive in a net loss period.

8. Commitments and Contingencies

The Company is involved in legal proceedings and is subject to other claims and litigation arising in the ordinary course of its business. The Company has made accruals with respect to certain of these matters, where appropriate, which are reflected in the Company’s consolidated financial statements but are not, individually or in the aggregate, considered material. For other matters, the Company has not made accruals because management has not yet determined that a loss is probable or because the amount of loss cannot be reasonably estimated. While the ultimate outcome of the matters cannot be determined, the Company currently does not expect that these matters will have a material adverse effect on its consolidated financial statements. The outcome of any litigation is inherently uncertain, however, and if decided adversely to the Company, or if the Company determines that settlement of particular litigation is appropriate, the Company may be subject to liability that could have a material adverse effect on its consolidated financial statements.

9. Reportable Segment

The Company hasone reportable segment managed on a consolidated basis. The measure of segment profit or loss is consolidated net income (loss) that is reported on the consolidated statement of operations. The measure of segment assets is reported on the consolidated balance sheet as total assets.

The following represents segment information for the Company’ssingle operating segment, for the periods presented (in thousands):

(1)

Other general & administrative expenses include pet care center expenses, support center labor and occupancy costs, legal, accounting, information technology, consulting costs, and depreciation and amortization.