- Net revenue decreased 39.5% to $260.0 million
- Negative comparable store sales growth of (44.7)%; Adjusted
Comparable Store Sales Growth of (36.5)%
- For June, comparable store sales growth of 14.3% and Adjusted
Comparable Stores Sales Growth of 19.3%
- Net loss of $(43.8) million; Diluted EPS of $(0.55)
- Adjusted EBITDA of $(14.4) million
- Adjusted Operating Income of $(34.4) million
- Adjusted Diluted EPS of $(0.41)
- Extended partnership with Walmart Inc. for three years
National Vision Holdings, Inc. (NASDAQ: EYE) (“National Vision”
or the “Company”) today reported its financial results for the
second quarter ended June 27, 2020.
“The second quarter represented one of the most eventful periods
in our Company's history and our respective careers,” stated Reade
Fahs, chief executive officer. “Following our March closings, we
are pleased to have safely reopened our stores by early June. With
our many new protocols in place, we believe we have an effective,
safety first approach to serve patients and customers in a COVID-19
environment. While we expect the macro environment will continue to
evolve, we believe we are well positioned to continue operations
throughout the remainder of the COVID-19 pandemic.”
Mr. Fahs further commented, “Since reopening, our stores have
experienced consistently strong demand from our patients and
customers. June comps increased over 19%, the best reported comp
increase in my 18 years at National Vision, with similar momentum
continuing throughout July. Results were likely helped by pent-up
demand during the lock-down and benefits from government stimulus
payments. But performance also reflects successful macro and micro
navigation of this dynamic situation by our operations and product
teams. As our stores provide essential healthcare services and
products, and given the state of the economy, we believe ever more
consumers are drawn to our affordably priced eye exams, eyeglasses,
and contact lenses.”
Mr. Fahs continued, “In May, we took the financial steps to
strengthen our balance sheet and are confident in our financial
flexibility and liquidity to navigate the remainder of the
pandemic. In July, we were pleased to extend our 30-year
partnership with Walmart for another three years into 2024. This
contract extension comes on the heels of the successful transition
of the five additional Vision Centers that Walmart granted in
January. We have been encouraged by the initial results at these
stores to date and see tremendous future potential for them as
well.”
Mr. Fahs concluded, “As matters of diversity and inclusion are
ever more on the minds of both consumers and associates, especially
relative to the Black community, they remain a priority at National
Vision as we strive to be an ever more inclusive workplace. In the
second quarter, we established a Diversity, Equity and Inclusion
Council to give a stronger voice to our Black associates and other
minorities within the National Vision family. And, as we continue
to strive to provide a life-giving culture for our associates and
doctors who practice alongside our stores, we made investments in
our people including a one-time $250 ‘appreciation’ bonus to our
front line associates and network of doctors for their exceptional
work under difficult circumstances over the past several months. I
derive constant inspiration by the work and determination of the
extended National Vision team. While there remains uncertainty
about the future, I am confident that we will emerge stronger and
better from this extraordinary experience.”
Adjusted Comparable Store Sales Growth, Adjusted EBITDA,
Adjusted Operating Income, Adjusted Diluted EPS, Adjusted Operating
Margin, Adjusted EBITDA Margin, and EBITDA are not measures
recognized under generally accepted accounting principles (“GAAP”).
Please see “Non-GAAP Financial Measures” and “Reconciliation of
Non-GAAP to GAAP Financial Measures” below for more
information.
COVID-19 Response Update
The Company continues to take actions to manage its business
through the dynamic and challenging environment resulting from the
COVID-19 pandemic. Following temporary store closures to the public
in March 2020, the Company completed the process of reopening
stores with enhanced safety and cleaning protocols in early June
2020. In addition, the Company continues to take actions to manage
the business that the Company believes are prudent in these
circumstances, including:
- In May 2020, the Company completed the issuance of $402.5
million aggregate principal amount of 2.50% convertible senior
notes due 2025;
- In May 2020, the Company and the lenders under its credit
facility entered into an amendment to the facility. This amendment
is intended to prevent the effects of the COVID-19 pandemic,
including the temporary closure of stores, from creating
uncertainty relative to the Company’s ability to comply with
certain financial covenants and allow it to focus on prudent
management of the business over the quarters ahead. The amendment
suspends certain financial maintenance covenants contained in the
facility until testing at the end of the second fiscal quarter of
2021;
- In connection with the reopening to the public of its retail
stores, the Company returned to previous levels of compensation and
work hours across the organization, and the respective base
salaries of executive officers were reinstated to pre-COVID-19
levels effective as of June 7, 2020;
- In May 2020, the Company resumed unit growth and expects to
open between 50 and 55 new stores in 2020. In addition to new store
openings, as previously announced, the Company transitioned five
additional Vision Centers in Walmart stores to its management
during the second quarter of 2020; and
- The Company recorded a credit of $10.8 million as a reduction
of costs applicable to revenue and selling, general and
administrative expenses ("SG&A") as a result of the employee
retention credits made available under the Coronavirus Aid, Relief
and Economic Security Act (CARES Act).
Given the uncertainties, dynamic nature, resurgence, and unknown
duration of the pandemic, the Company is continuing to evaluate
additional operational and financial measures that may be taken as
the Company continues to respond to the impact of COVID-19 on its
business.
Second Quarter 2020 Summary
- Net revenue decreased 39.5% to $260.0 million from $429.5
million for the second quarter of 2019.
- Net revenue was negatively impacted by 10.0% due to the timing
of unearned revenue, which also resulted in material impacts to
profitability. The Company experienced an increase in unearned
revenue of $34.4 million in the second quarter compared to a
decrease in unearned revenue of $8.5 million for the same period of
2019. The increase in unearned revenue resulted from the temporary
store closures at the end of the first quarter of 2020 as well as
stronger sales at the end of the second quarter of 2020.
- Comparable store sales growth was (44.7)% and Adjusted
Comparable Store Sales Growth was (36.5)%.
- In light of the temporary store closures, the Company is
providing certain additional comparable store sales growth
information. For the respective months ended April 25, 2020, May
30, 2020, and June 27, 2020:
- Comparable store sales growth was (83.9)%, (56.6)% and 14.3%;
and
- Adjusted Comparable Store Sales Growth was (86.6)%, (38.5)% and
19.3%.
- The Company opened 12 new stores, transitioned five Vision
Centers in Walmart stores to its management, closed five stores,
and ended the quarter with 1,185 stores. Overall, store count grew
5.1% from June 29, 2019 to June 27, 2020.
- Costs applicable to revenue decreased 30.5% to $140.8 million
from $202.5 million for the second quarter of 2019. As a percentage
of net revenue, costs applicable to revenue increased 690 basis
points to 54.1% from 47.2% for the second quarter of 2019. This
increase as a percentage of net revenue was primarily driven by
optometrist costs incurred during store closures and increased
contact lens mix.
- SG&A decreased 25.1% to $136.6 million from $182.3 million
for the second quarter of 2019. As a percentage of net revenue,
SG&A increased 1,010 basis points to 52.5% from 42.4% for the
second quarter of 2019. This increase as a percentage of net
revenue was primarily driven by store and corporate payroll and
occupancy costs incurred during store closures, partially offset by
lower advertising investment. SG&A for the second quarter of
2020 includes $2.5 million of incremental costs directly related to
adapting the Company's operations during the COVID-19
pandemic.
- Net income decreased 527% to a net loss of $43.8 million
compared to net income of $10.3 million for the second quarter of
2019.
- Diluted earnings (loss) per share decreased 533% to $(0.55)
compared to $0.13 for the second quarter of 2019. Adjusted Diluted
EPS decreased 325% to $(0.41) compared to $0.18 for the second
quarter of 2019. The net change in margin on unearned revenue
negatively impacted Adjusted Diluted EPS by $(0.30).
- Adjusted EBITDA decreased 130% to $(14.4) million compared to
$48.1 million for the second quarter of 2019. Adjusted EBITDA
Margin decreased 1,670 basis points to (5.5)% from 11.2% for the
second quarter of 2019.
- Adjusted Operating Income decreased 218% to $(34.4) million
compared to $29.1 million for the second quarter of 2019. Adjusted
Operating Margin decreased 2,000 basis points to (13.2)% from 6.8%
for the second quarter of 2019. The net change in margin on
unearned revenue negatively impacted Adjusted EBITDA and Adjusted
Operating Income by $(32.5) million.
Six-Month Period Highlights
- Net revenue decreased 18.1% to $729.7 million from $890.7
million for the same period of 2019.
- Net revenue was negatively impacted by 1.7% due to the timing
of unearned revenue.
- Comparable store sales growth was (23.0)% and Adjusted
Comparable Store Sales Growth was (22.6)%.
- The Company opened 35 new stores, transitioned five Vision
Centers in Walmart stores to its management, closed six stores, and
ended the period with 1,185 stores.
- Costs applicable to revenue decreased 13.3% to $359.3 million
from $414.5 million for the same period of 2019. As a percentage of
net revenue, costs applicable to revenue increased 270 basis points
to 49.2% from 46.5% for the same period of 2019. This increase as a
percentage of net revenue was primarily driven by optometrist costs
incurred during store closures as well as increased contact lens
mix, partially offset by higher eyeglass margin.
- SG&A decreased 12.2% to $330.3 million from $376.2 million
for the same period of 2019. As a percentage of net revenue,
SG&A increased 310 basis points to 45.3% from 42.2% for the
same period of 2019. This increase as a percentage of net revenue
was primarily driven by store and corporate payroll and occupancy
expense, partially offset by lower advertising investment. SG&A
for the first six months of 2020 includes $3.1 million of
incremental costs directly related to adapting the Company's
operations during the COVID-19 pandemic.
- Net income decreased 223% to a net loss of $34.1 million
compared to net income of $27.7 million for the same period of
2019.
- Diluted earnings (loss) per share decreased 225% to $(0.42)
compared to $0.34 for the same period of 2019. Adjusted Diluted EPS
decreased 126% to $(0.13) compared to $0.49 for the same period of
2019. The net change in margin on unearned revenue negatively
impacted Adjusted Diluted EPS by $(0.11).
- Adjusted EBITDA decreased 57.3% to $46.7 million compared to
$109.3 million for the same period of 2019. Adjusted EBITDA Margin
decreased 590 basis points to 6.4% from 12.3% for the same period
of 2019.
- Adjusted Operating Income decreased 94.9% to $3.6 million
compared to $71.7 million for the same period of 2019. Adjusted
Operating Margin decreased 760 basis points to 0.5% from 8.1% for
the same period of 2019. The net change in margin on unearned
revenue negatively impacted Adjusted EBITDA and Adjusted Operating
Income by $(11.9) million.
Balance Sheet and Cash Flow Highlights as of June 27,
2020
- The Company’s cash balance was $256.3 million as of June 27,
2020. The Company had no borrowings under its $300.0 million first
lien revolving credit facility, exclusive of letters of credit of
$5.7 million.
- Total debt was $648.2 million as of June 27, 2020, consisting
of outstanding first lien term loans, convertible senior notes and
finance lease obligations, net of unamortized discounts.
- As noted above, in May 2020, the Company completed the issuance
of $402.5 million aggregate principal amount of 2.50% convertible
senior notes due 2025. The Company received proceeds from the
offering of $390.9 million, net of underwriting fees and other
issuance costs. The Company used $294.3 million of the net proceeds
to repay the full amount outstanding under the revolving credit
facility and $75.0 million to partially repay the term loans.
- Cash flows from operating activities for first six months of
2020 were $71.4 million compared to $119.3 million for the same
period of 2019.
- Capital expenditures for the first six months of 2020 totaled
$25.8 million compared to $52.1 million for the same period of
2019, primarily due to the postponement of capital projects.
- The Company believes it has sufficient liquidity to fund
operations for at least the next 12 months, given cash on hand,
cash expected to be generated from operations, and the cash
available through its revolving credit facility.
Recent Developments
- In July, the Company granted a one-time $250 cash bonus to
front-line associates and the Company's network of doctors in
recognition of their hard work and dedication toward safely serving
patients and customers.
- In July, the Company entered into an amendment to its existing
Management & Services Agreement ("MSA") with Walmart Inc. that
extended the current term and economics of the MSA by three years
to February 23, 2024.
Fiscal 2020 Outlook
As previously disclosed, given the uncertainty surrounding the
magnitude and duration of the COVID-19 pandemic, the Company
withdrew its fiscal 2020 outlook on March 27, 2020 and is not
providing an earnings outlook at this time. However, the Company is
providing the following updated assumptions for fiscal 2020:
New Stores
50 - 55 New Stores
Depreciation and Amortization1
$94 - $95 million
Interest2
$33 - $34 million
Capital Expenditures
$65 - $75 million
Incremental COVID-19 Expenses
~$8 million
1 - Includes amortization of acquisition
intangibles of approximately $7.4 million 2 - Before the impact of
gains or losses related to hedge ineffectiveness and charges
related to interest payments and amortization of debt discounts
related to the 2025 Notes
Conference Call Details
A conference call to discuss the second quarter 2020 financial
results is scheduled for today, August 6, 2020, at 10:00 a.m.
Eastern Time. The U.S. toll free dial-in for the conference call is
866-754-6931 and the international dial-in is 636-812-6625. The
conference passcode is 8585726. A live audio webcast of the
conference call will be available on the “Investors” section of the
Company’s website www.nationalvision.com/investors, where
presentation materials will be posted prior to the conference
call.
A telephone replay will be available shortly after the broadcast
through Thursday, August 13, 2020, by dialing 855-859-2056 from the
U.S. or 404-537-3406 from international locations, and entering
conference passcode 8585726. A replay of the audio webcast will
also be archived on the “Investors” section of the Company’s
website.
About National Vision Holdings, Inc.
National Vision Holdings, Inc. is one of the largest optical
retail companies in the United States with over 1,100 retail stores
in 44 states plus the District of Columbia and Puerto Rico. With a
mission of helping people by making quality eyecare and eyewear
more affordable and accessible, the Company operates five retail
brands: America’s Best Contacts & Eyeglasses, Eyeglass World,
Vision Centers inside select Walmart stores, Vista Opticals inside
select Fred Meyer stores and on select military bases, and several
e-commerce websites, offering a variety of products and services
for customers’ eyecare needs.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”) and Section 21E of the Securities
Exchange Act of 1934. These statements include, but are not limited
to, statements related to our current beliefs and expectations
regarding the performance of our industry, the Company's strategic
direction, market position, prospects and future results. You can
identify these forward-looking statements by the use of words such
as “outlook,” “guidance,” “believes,” “expects,” “potential,”
“continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,”
“predicts,” “intends,” “plans,” “estimates,” “anticipates” or the
negative version of these words or other comparable words. Caution
should be taken not to place undue reliance on any forward-looking
statement as such statements speak only as of the date when made.
We undertake no obligation to publicly update or review any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as required by law.
Forward-looking statements are not guarantees and are subject to
various risks and uncertainties, which may cause actual results to
differ materially from those implied in the forward-looking
statements. Such factors include, but are not limited to, the
scale, scope and duration of the novel coronavirus, or COVID-19,
pandemic and its resurgence, and the impact of evolving federal,
state, and local governmental actions in response thereto; customer
behavior in response to the continuing pandemic and its resurgence,
and evolving federal, state, and local governmental actions,
including the impact of such behavior on in-store traffic and
sales; our ability to keep our reopened stores open in a safe and
cost-effective manner, or at all, in light of the continuing
COVID-19 pandemic and its resurgence, and to open and operate new
stores, and to successfully enter new markets in a timely and
cost-effective manner; operational disruptions if a significant
percentage of our workforce is unable to work or we experience
labor shortages, including because of illness or travel or
government restrictions in connection with the pandemic; the impact
on our business of civil unrest, implementation of curfews and
protests in certain locations, and related store closures or
damage; our ability to recruit and retain vision care professionals
for our stores in general and in light of the pandemic; our ability
to develop and maintain relationships with managed vision care
companies, vision insurance providers and other third-party payors;
our ability to maintain the performance of our host and legacy
brands and our current operating relationships with our host and
legacy partners; our ability to adhere to extensive state, local
and federal vision care and healthcare laws and regulations; our
compliance with managed vision care laws and regulations; our
ability to maintain sufficient levels of cash flow from our
operations to execute or sustain our growth strategy; the loss of,
or disruption in the operations of, one or more of our distribution
centers and/or optical laboratories, resulting in the inability to
fulfill customer orders and deliver our products in a timely
manner; risks associated with vendors from whom our products are
sourced, including our dependence on a limited number of suppliers;
our ability to successfully compete in the highly competitive
optical retail industry; any failure, inadequacy, interruption,
security failure or breach of our information technology systems;
our growth strategy straining our existing resources and causing
the performance of our existing stores to suffer; the impact of
wage rate increases, inflation, cost increases and increases in raw
material prices and energy prices; our ability to successfully
implement our marketing, advertising and promotional efforts; risks
associated with leasing substantial amounts of space, including
future increases in occupancy costs; the impact of certain
technological advances, and the greater availability of, or
increased consumer preferences for, vision correction alternatives
to prescription eyeglasses or contact lenses, and future drug
development for the correction of vision-related problems; our
ability to retain our existing senior management team and attract
qualified new personnel; overall decline in the health of the
economy and consumer spending affecting consumer purchases; our
ability to manage our inventory balances and inventory shrinkage;
seasonal fluctuations in our operating results and inventory
levels; our reliance on third-party coverage and reimbursement,
including government programs, for an increasing portion of our
revenues; risks associated with our e-commerce business; product
liability, product recall or personal injury issues; our failure to
comply with, or changes in, laws, regulations, enforcement
activities and other requirements; the impact of any adverse
litigation judgments or settlements resulting from legal
proceedings relating to our business operations; risks of losses
arising from our investments in technological innovators in the
optical retail industry; our ability to adequately protect our
intellectual property; our significant amount of indebtedness and
our ability to generate sufficient cash flow to satisfy our
significant debt service obligations; an increase in interest rates
as well as changes in benchmark rates and uncertainty related to
the foregoing; restrictions in our credit agreement that limits our
flexibility in operating our business; and risks related to owning
our common stock, including our ability to comply with requirements
to design and implement and maintain effective internal controls.
Additional information about these and other factors that could
cause National Vision’s results to differ materially from those
described in the forward-looking statements can be found in filings
by National Vision with the Securities and Exchange Commission
(“SEC”), including our Annual Report on Form 10-K, our Form 8-K
filed on March 19, 2020, our Quarterly Reports on Form 10-Q filed
on May 7, 2020 and August 6, 2020, and subsequent filings with the
SEC, which are accessible on the SEC’s website at www.sec.gov.
These factors should not be construed as exhaustive and should be
read in conjunction with the other cautionary statements that are
included in this release and in our filings with the SEC.
Non-GAAP Financial Measures
To supplement the Company’s financial information presented in
accordance with GAAP and aid understanding of the Company’s
business performance, the Company uses certain non-GAAP financial
measures, namely “EBITDA,” “Adjusted EBITDA,” “Adjusted EBITDA
Margin,” “Adjusted Operating Income,” “Adjusted Operating Margin,”,
“Adjusted Diluted EPS,” “Adjusted SG&A” and “Adjusted SG&A
Percent of Net Revenue.” We believe EBITDA, Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted Operating Income, Adjusted
Operating Margin, Adjusted Diluted EPS, Adjusted SG&A and
Adjusted SG&A Percent of Net Revenue assist investors and
analysts in comparing our operating performance across reporting
periods on a consistent basis by excluding items that we do not
believe are indicative of our core operating performance.
Management believes these non-GAAP financial measures are useful to
investors in highlighting trends in our operating performance,
while other measures can differ significantly depending on
long-term strategic decisions regarding capital structure, the tax
jurisdictions in which we operate and capital investments.
Management uses these non-GAAP financial measures to supplement
GAAP measures of performance in the evaluation of the effectiveness
of our business strategies, to make budgeting decisions, to
establish discretionary annual incentive compensation and to
compare our performance against that of other peer companies using
similar measures. Management supplements GAAP results with non-GAAP
financial measures to provide a more complete understanding of the
factors and trends affecting the business than GAAP results
alone.
To supplement the Company’s comparable store sales growth
presented in accordance with GAAP, the Company provides “Adjusted
Comparable Store Sales Growth,” which is a non-GAAP financial
measure we believe is useful because it provides timely and
accurate information relating to the two core metrics of retail
sales: number of transactions and value of transactions. Management
uses Adjusted Comparable Store Sales Growth as the basis for key
operating decisions, such as allocation of advertising to
particular markets and implementation of special marketing
programs. Accordingly, we believe that Adjusted Comparable Store
Sales Growth provides timely and accurate information relating to
the operational health and overall performance of each brand. We
also believe that, for the same reasons, investors find our
calculation of Adjusted Comparable Store Sales Growth to be
meaningful.
In the first quarter of 2020, we introduced Adjusted Operating
Income and Adjusted Operating Margin as measures of performance we
will use in connection with Adjusted EBITDA, Adjusted EBITDA Margin
and Adjusted Diluted EPS. Further, consistent with our presentation
of Adjusted Operating Income, we no longer exclude new store
pre-opening expenses and non-cash rent from our presentation of
Adjusted EBITDA and Adjusted Diluted EPS. See our Form 8-K filed
with the SEC on February 26, 2020 for more information.
Beginning with the first quarter of fiscal 2020, the Company
updated its definitions of Adjusted EBITDA, Adjusted SG&A, and
Adjusted Diluted EPS discussed below, so that they no longer
exclude new store pre-opening expenses and non-cash rent.
EBITDA: We define EBITDA as net income (loss), plus
interest expense, income tax provision (benefit) and depreciation
and amortization.
Adjusted EBITDA: We define Adjusted EBITDA as net income
(loss), plus interest expense, income tax provision (benefit) and
depreciation and amortization, further adjusted to exclude stock
compensation expense, asset impairment, litigation settlement,
management realignment expenses, long-term incentive plan expenses,
and other expenses.
Adjusted EBITDA Margin: We define Adjusted EBITDA Margin
as Adjusted EBITDA as a percentage of net revenue.
Adjusted Operating Income: We define Adjusted Operating
Income as net income (loss), plus interest expense and income tax
provision (benefit), further adjusted to exclude stock compensation
expense, asset impairment, litigation settlement, management
realignment expenses, long-term incentive plan expenses,
amortization of acquisition intangibles, and other expenses.
Adjusted Operating Margin: We define Adjusted Operating
Margin as Adjusted Operating Income as a percentage of net
revenue.
Adjusted Diluted EPS: We define Adjusted Diluted EPS as
diluted earnings (loss) per share, adjusted for the per share
impact of stock compensation expense, asset impairment, litigation
settlement, management realignment expenses, long-term incentive
plan expenses, amortization of acquisition intangibles,
amortization of debt discount and deferred financing costs, losses
(gains) on change in fair value of derivatives, other expenses, and
tax benefit of stock option exercises, less the tax effect of these
adjustments.
Adjusted SG&A: We define Adjusted SG&A as
SG&A, adjusted to exclude stock compensation expense,
management realignment expenses, long-term incentive plan expenses,
and other expenses except for the share of losses on equity method
investments.
Adjusted SG&A Percent of Net Revenue: We define
Adjusted SG&A Percent of Net Revenue as Adjusted SG&A
divided by net revenue.
Adjusted Comparable Store Sales Growth: We measure
Adjusted Comparable Store Sales Growth as the increase or decrease
in sales recorded by the comparable store base in any reporting
period, compared to sales recorded by the comparable store base in
the prior reporting period, which we calculate as follows: (i)
sales are recorded on a cash basis (i.e., when the order is placed
and paid for or submitted to a managed care payor, compared to when
the order is delivered), utilizing cash basis point of sale
information from stores; (ii) stores are added to the calculation
during the 13th full fiscal month following the store’s opening;
(iii) closed stores are removed from the calculation for time
periods that are not comparable; (iv) sales from partial months of
operation are excluded when stores do not open or close on the
first day of the month; and (v) when applicable, we adjust for the
effect of the 53rd week. Quarterly, year-to-date and annual
adjusted comparable store sales are aggregated using only sales
from all whole months of operation included in both the current
reporting period and the prior reporting period. When a partial
month is excluded from the calculation, the corresponding month in
the subsequent period is also excluded from the calculation. There
may be variations in the way in which some of our competitors and
other retailers calculate comparable store sales. As a result, our
adjusted comparable store sales may not be comparable to similar
data made available by other retailers. We did not adjust our
calculation of Adjusted Comparable Store Sales Growth for the
temporary closure of our stores to the public as a result of the
COVID-19 pandemic.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted
Operating Income, Adjusted Operating Margin, Adjusted Diluted EPS,
Adjusted SG&A, Adjusted SG&A Percent of Net Revenue, and
Adjusted Comparable Store Sales Growth are not recognized terms
under GAAP and should not be considered as an alternative to net
income, the ratio of net income to net revenue as a measure of
financial performance, SG&A, the ratio of SG&A to net
revenue as a measure of financial performance, cash flows provided
by operating activities as a measure of liquidity, comparable store
sales growth as a measure of operating performance, or any other
performance measure derived in accordance with GAAP. Additionally,
these measures are not intended to be a measure of free cash flow
available for management’s discretionary use as they do not
consider certain cash requirements such as interest payments, tax
payments and debt service requirements. The presentations of these
measures have limitations as analytical tools and should not be
considered in isolation, or as a substitute for analysis of our
results as reported under GAAP. Because not all companies use
identical calculations, the presentations of these measures may not
be comparable to other similarly titled measures of other companies
and can differ significantly from company to company.
Please see “Reconciliation of Non-GAAP to GAAP Financial
Measures” below for reconciliations of non-GAAP financial measures
used in this release to their most directly comparable GAAP
financial measures.
National Vision Holdings, Inc. and
Subsidiaries Condensed Consolidated Balance Sheets As
of June 27, 2020 and December 28, 2019 In Thousands, Except Par
Value Information (Unaudited)
ASSETS
As of June 27, 2020
As of December 28, 2019
Current assets:
Cash and cash equivalents
$
256,292
$
39,342
Accounts receivable, net
58,451
44,475
Inventories
117,859
127,556
Prepaid expenses and other current
assets
20,520
23,266
Total current assets
453,122
234,639
Property and equipment, net
339,905
366,767
Other assets:
Goodwill
777,613
777,613
Trademarks and trade names
240,547
240,547
Other intangible assets, net
53,236
56,940
Right of use assets
341,743
348,090
Other assets
12,871
8,129
Total non-current assets
1,765,915
1,798,086
Total assets
$
2,219,037
$
2,032,725
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
52,432
$
40,782
Other payables and accrued expenses
106,865
82,829
Unearned revenue
42,365
28,002
Deferred revenue
51,624
55,870
Current maturities of long-term debt and
finance lease obligations
3,293
13,759
Current operating lease obligations
55,363
51,937
Total current liabilities
311,942
273,179
Long-term debt and finance lease
obligations, less current portion and debt discount
644,941
555,933
Non-current operating lease
obligations
328,453
331,769
Other non-current liabilities:
Deferred revenue
19,438
21,530
Other liabilities
25,928
13,731
Deferred income taxes, net
67,396
60,146
Total other non-current liabilities
112,762
95,407
Commitments and contingencies (See Note
9)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000
shares authorized; 81,342 and 80,603 shares issued as of June 27,
2020 and December 28, 2019, respectively; 80,415 and 79,678 shares
outstanding as of June 27, 2020 and December 28, 2019,
respectively
812
805
Additional paid-in capital
782,851
700,121
Accumulated other comprehensive loss
(7,355)
(3,814)
Retained earnings
72,512
107,132
Treasury stock, at cost; 927 and 925
shares as of June 27, 2020 and December 28, 2019, respectively
(27,881)
(27,807)
Total stockholders’ equity
820,939
776,437
Total liabilities and stockholders’
equity
$
2,219,037
$
2,032,725
National Vision Holdings, Inc. and
Subsidiaries Condensed Consolidated Statements of Operations
and Comprehensive Income For the Three and Six Months Ended
June 27, 2020 and June 29, 2019 In Thousands, Except Earnings
Per Share (Unaudited)
Three Months Ended
Six Months Ended
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Revenue:
Net product sales
$
209,707
$
357,533
$
602,548
$
740,693
Net sales of services and plans
50,300
71,918
127,163
149,973
Total net revenue
260,007
429,451
729,711
890,666
Costs applicable to revenue (exclusive
of depreciation and amortization):
Products
97,635
145,654
254,005
299,658
Services and plans
43,145
56,852
105,329
114,817
Total costs applicable to revenue
140,780
202,506
359,334
414,475
Operating expenses:
Selling, general and administrative
expenses
136,582
182,278
330,323
376,154
Depreciation and amortization
21,924
20,819
46,734
41,234
Asset impairment
2,411
1,790
13,766
3,872
Litigation settlement
—
—
4,395
—
Other expense (income), net
(92)
356
(158)
829
Total operating expenses
160,825
205,243
395,060
422,089
Income (loss) from operations
(41,598)
21,702
(24,683)
54,102
Interest expense, net
15,502
8,968
22,957
18,029
Debt issuance costs
136
—
136
—
Earnings (loss) before income taxes
(57,236)
12,734
(47,776)
36,073
Income tax provision (benefit)
(13,403)
2,477
(13,685)
8,387
Net income (loss)
$
(43,833)
$
10,257
$
(34,091)
$
27,686
Earnings (loss) per share:
Basic
$
(0.55)
$
0.13
$
(0.42)
$
0.35
Diluted
$
(0.55)
$
0.13
$
(0.42)
$
0.34
Weighted average shares
outstanding:
Basic
80,325
78,318
80,226
78,262
Diluted
80,325
81,424
80,226
81,437
Comprehensive income (loss):
Net income (loss)
$
(43,833)
$
10,257
$
(34,091)
$
27,686
Unrealized gain (loss) on hedge
instruments
4,111
(2,246)
(4,747)
(3,519)
Tax provision (benefit) of unrealized gain
(loss) on hedge instruments
1,050
(576)
(1,206)
(902)
Comprehensive income (loss)
$
(40,772)
$
8,587
$
(37,632)
$
25,069
National Vision Holdings, Inc. and
Subsidiaries Condensed Consolidated Statements of Cash
Flows For the Six Months Ended June 27, 2020 and June 29,
2019 In Thousands (Unaudited)
Six Months Ended
June 27, 2020
June 29, 2019
Cash flows from operating
activities:
Net income (loss)
$
(34,091)
$
27,686
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
46,734
41,234
Amortization of debt discount and deferred
financing costs
2,717
892
Asset impairment
13,766
3,872
Deferred income tax expense (benefit)
(13,686)
8,239
Stock based compensation expense
5,445
4,717
Losses (gains) on change in fair value of
derivatives
4,871
—
Inventory adjustments
2,883
2,043
Credit loss expense
432
3,865
Other
1,373
1,592
Changes in operating assets and
liabilities:
Accounts receivable
(14,408)
(10,567)
Inventories
6,814
8,319
Other assets
3,444
11,391
Accounts payable
11,630
3,458
Deferred revenue
(6,338)
5,804
Other liabilities
39,834
6,734
Net cash provided by operating
activities
71,420
119,279
Cash flows from investing
activities:
Purchase of property and equipment
(25,796)
(52,103)
Other
265
315
Net cash used for investing activities
(25,531)
(51,788)
Cash flows from financing
activities:
Borrowings on long-term debt, net of
discounts
548,769
—
Repayments on long-term debt
(369,269)
(2,500)
Proceeds from exercise of stock
options
5,998
2,066
Purchase of treasury stock
(74)
—
Payments of debt issuance costs
(12,400)
—
Payments on finance lease obligations
(1,587)
(1,190)
Net cash provided by (used for) financing
activities
171,437
(1,624)
Net change in cash, cash equivalents and
restricted cash
217,326
65,867
Cash, cash equivalents and restricted
cash, beginning of year
40,307
17,998
Cash, cash equivalents and restricted
cash, end of period
$
257,633
$
83,865
Supplemental cash flow disclosure
information:
Cash paid for interest
$
13,810
$
17,438
Capital expenditures accrued at the end of
the period
$
11,265
$
22,033
Right of use assets acquired under finance
leases
$
1,257
$
9,763
Right of use assets acquired under
operating leases
$
35,870
$
58,528
National Vision Holdings, Inc. and
Subsidiaries Reconciliation of Non-GAAP to GAAP Financial
Measures For the Three and Six Months Ended June 27, 2020
and June 29, 2019 In Thousands, Except Per Share Information
(Unaudited)
Reconciliation of Adjusted Operating
Income to Net Income
Three Months Ended
Six Months Ended
In thousands
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Net income (loss)
$
(43,833
)
(16.9
)%
$
10,257
2.4
%
$
(34,091
)
(4.7
)%
$
27,686
3.1%
Interest expense
15,502
6.0
%
8,968
2.1
%
22,957
3.1
%
18,029
2.0
%
Income tax provision (benefit)
(13,403
)
(5.2
)%
2,477
0.6
%
(13,685
)
(1.9
)%
8,387
0.9
%
Stock compensation expense (a)
3,352
1.3
%
1,741
0.4
%
5,445
0.7
%
4,717
0.5
%
Asset impairment (b)
2,411
0.9
%
1,790
0.4
%
13,766
1.9
%
3,872
0.4
%
Litigation settlement (c)
—
—
%
—
—
%
4,395
0.6
%
—
—
%
Management realignment expenses (d)
—
—
%
—
—
%
—
—
%
2,155
0.2
%
Long-term incentive plan (e)
—
—
%
781
0.2
%
—
—
%
722
0.1
%
Amortization of acquisition intangibles
(f)
1,851
0.7
%
1,851
0.4
%
3,702
0.5
%
3,702
0.4
%
Other (i)
(307
)
(0.1
)%
1,223
0.3
%
1,149
0.2
%
2,467
0.3
%
Adjusted Operating Income / Adjusted
Operating Margin
$
(34,427
)
(13.2
)%
$
29,088
6.8
%
$
3,638
0.5
%
$
71,737
8.1%
Note: Percentages reflect line item
as a percentage of net revenue, adjusted for rounding.
Some of the percentage totals in the
table above do not foot due to rounding differences.
Reconciliation of EBITDA and Adjusted
EBITDA to Net Income
Three Months Ended
Six Months Ended
In thousands
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Net income (loss)
$
(43,833
)
(16.9
)%
$
10,257
2.4
%
$
(34,091
)
(4.7
)%
$
27,686
3.1%
Interest expense
15,502
6.0
%
8,968
2.1
%
22,957
3.1
%
18,029
2.0
%
Income tax provision (benefit)
(13,403
)
(5.2
)%
2,477
0.6
%
(13,685
)
(1.9
)%
8,387
0.9
%
Depreciation and amortization
21,924
8.4
%
20,819
4.8
%
46,734
6.4
%
41,234
4.6
%
EBITDA
(19,810
)
(7.6
)%
42,521
9.9
%
21,915
3.0
%
95,336
10.7
%
Stock compensation expense (a)
3,352
1.3
%
1,741
0.4
%
5,445
0.7
%
4,717
0.5
%
Asset impairment (b)
2,411
0.9
%
1,790
0.4
%
13,766
1.9
%
3,872
0.4
%
Litigation settlement (c)
—
—
%
—
—
%
4,395
0.6
%
—
—
%
Management realignment expenses (d)
—
—
%
—
—
%
—
—
%
2,155
0.2
%
Long-term incentive plan (e)
—
—
%
781
0.2
%
—
—
%
722
0.1
%
Other (i)
(307
)
(0.1
)%
1,223
0.3
%
1,149
0.2
%
2,467
0.3
%
Adjusted EBITDA / Adjusted EBITDA
Margin
$
(14,354
)
(5.5
)%
$
48,056
11.2
%
$
46,670
6.4
%
$
109,269
12.3%
Note: Percentages reflect line item
as a percentage of net revenue, adjusted for rounding. Some
of the percentage totals in the table above do not foot due to
rounding differences
Reconciliation of Adjusted Diluted EPS
to Diluted EPS
Three Months Ended
Six Months Ended
In thousands, except per share amounts
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Diluted EPS
$
(0.55
)
$
0.13
$
(0.42
)
$
0.34
Stock compensation expense (a)
0.04
0.02
0.07
0.06
Asset impairment (b)
0.03
0.02
0.17
0.05
Litigation settlement (c)
—
—
0.05
—
Management realignment expenses (d)
—
—
—
0.03
Long-term incentive plan (e)
—
0.01
—
0.01
Amortization of acquisition intangibles
(f)
0.02
0.02
0.05
0.05
Amortization of debt discount and deferred
financing costs (g)
0.03
0.01
0.03
0.01
Losses (gains) on change in fair value of
derivatives (h)
0.06
—
0.06
—
Other (i)
—
0.02
0.01
0.03
Tax benefit of stock option exercises
(j)
—
(0.01
)
(0.04
)
(0.02
)
Tax effect of total adjustments (k)
(0.05
)
(0.02
)
(0.12
)
(0.06
)
Adjusted Diluted EPS
$
(0.41
)
$
0.18
$
(0.13
)
$
0.49
Weighted average diluted shares
outstanding
80,325
81,424
80,226
81,437
Note: Some of the totals in the table
above do not foot due to rounding differences
Reconciliation of Adjusted SG&A and
Adjusted SG&A Percent of Net Revenue to SG&A
Three Months Ended
Six Months Ended
In thousands
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
SG&A
$136,582
52.5
%
$182,278
42.4
%
$330,323
45.3%
$376,154
42.2
%
Stock compensation expense (a)
3,352
1.3
%
1,741
0.4
%
5,445
0.7
%
4,717
0.5
%
Management realignment expenses (d)
—
—
%
—
—
%
—
—
%
2,155
0.2
%
Long-term incentive plan (e)
—
—
%
781
0.2
%
—
—
%
722
0.1
%
Other (l)
(307
)
(0.1
)%
776
0.2
%
1,149
0.2
%
1,460
0.2
%
Adjusted SG&A/ Adjusted SG&A
Percent of Net Revenue
$133,537
51.4
%
$178,980
41.7
%
$323,729
44.4
%
$367,100
41.2
%
Note: Percentages reflect line item as a
percentage of net revenue.
Some of the percentage totals in the table
above do not foot due to rounding differences.
- Non-cash charges related to stock-based compensation programs,
which vary from period to period depending on the timing of awards
and performance vesting conditions.
- Reflects write-off of property, equipment and lease related
assets on closed or underperforming stores.
- Expenses associated with settlement of litigation. See Note 9.
“Commitments and Contingencies” for further details.
- Expenses related to a non-recurring management realignment
described in the Current Report on Form 8-K filed with the SEC on
January 10, 2019.
- Expenses pursuant to a long-term incentive plan for
non-executive employees who were not participants in the management
equity plan for fiscal year 2019. This plan was effective in 2014
following the acquisition of the Company by affiliates of KKR &
Co. Inc. (the "KKR Acquisition").
- Amortization of the increase in carrying values of finite-lived
intangible assets resulting from the application of purchase
accounting to the KKR Acquisition.
- Amortization of debt discount is associated with the
amortization of the conversion feature related to the convertible
notes and amortization of deferred financing costs relate to the
convertible note, term loan and revolving credit facility
borrowings. Amortization of debt discount and deferred financing
costs in aggregate total $2.5 million and $0.5 million for the
three months ended June 27, 2020 and June 29, 2019, respectively,
and $2.7 million and $0.9 million for the six months ended June 27,
2020 and June 29, 2019, respectively.
- Reflects $4.9 million of losses recognized in interest expense
on change in fair value of de-designated hedges for the three and
six months ended June 27, 2020.
- Other adjustments include amounts that management believes are
not representative of our operating performance (amounts in
brackets represent reductions in Adjusted Operating Income,
Adjusted Diluted EPS and Adjusted EBITDA), including our share of
losses on equity method investments of $0.4 million for the three
months ended June 29, 2019 and $1.0 million for the six months
ended June 29, 2019; the amortization impact of adjustments related
to the KKR Acquisition, (e.g., fair value of leasehold interests)
of $0.1 million for each of the three months ended June 27, 2020
and June 29, 2019, respectively, and $0.2 million for each of the
six months ended June 27, 2020 and June 29, 2019, respectively;
costs of severance and relocation of $0.2 million and $0.6 million
for the three months ended June 27, 2020 and June 29, 2019,
respectively, and $0.5 million and $0.8 million for the six months
ended June 27, 2020 and June 29, 2019, respectively; excess payroll
taxes related to stock option exercises of $0.1 million for the
three months ended June 29, 2019, and $0.3 million and $0.1 million
for the six months ended June 27, 2020 and June 29, 2019,
respectively; incremental costs directly related to adapting the
Company’s operations during the COVID-19 pandemic of $0.6 million
for the six months ended June 27, 2020; and other expenses and
adjustments totaling $(0.7) million and $(31) thousand for the
three months ended June 27, 2020 and June 29, 2019, respectively,
and $(0.5) million and $0.3 million for the six months ended June
27, 2020 and June 29, 2019, respectively.
- Tax benefit associated with accounting guidance requiring
excess tax benefits related to stock option exercises to be
recorded in earnings as discrete items in the reporting period in
which they occur.
- Represents the income tax effect of the total adjustments at
our combined statutory federal and state income tax rates.
- Reflects other expenses in (i) above, except for our share of
losses on equity method investments of $0.4 million for the three
months ended June 29, 2019 and $1.0 million for the six months
ended June 29, 2019, respectively.
Reconciliation of Adjusted Comparable
Store Sales Growth to Total Comparable Store Sales Growth
Comparable store sales
growth(a)
Three Months Ended
Six Months Ended
June 27, 2020
June 29, 2019
June 27, 2020
June 29, 2019
Owned & Host segment
America’s Best
(37.1)
%
4.5
%
(22.2)
%
6.4
%
Eyeglass World
(31.6)
%
5.2
%
(21.2)
%
5.9
%
Military
(44.6)
%
0.3
%
(27.8)
%
(2.2)
%
Fred Meyer
(48.6)
%
(5.3)
%
(32.5)
%
(7.5)
%
Legacy segment
(35.8)
%
0.4
%
(24.4)
%
1.1
%
Total comparable store sales growth
(44.7)
%
4.4
%
(23.0)
%
5.4
%
Adjusted Comparable Store Sales
Growth(b)
(36.5)
%
3.8
%
(22.6)
%
5.3
%
Additional Comparable Store Sales
Growth information for Q2 2020
One
Month Ended April 25,
2020
One
Month Ended May 30,
2020
One
Month Ended June 27,
2020
Total comparable store sales growth
(83.9)
%
(56.6)
%
14.3
%
Adjusted Comparable Store Sales
Growth(b)
(86.6)
%
(38.5)
%
19.3
%
- Total comparable store sales based on consolidated net revenue
excluding the impact of (i) Corporate/Other segment net revenue,
(ii) sales from stores opened less than 13 months, (iii) stores
closed in the periods presented, (iv) sales from partial months of
operation when stores do not open or close on the first day of the
month and (v) if applicable, the impact of a 53rd week in a fiscal
year. Brand-level comparable store sales growth is calculated based
on cash basis revenues consistent with what the CODM reviews, and
consistent with reportable segment revenues presented in Note 10.
“Segment Reporting” in our unaudited condensed consolidated
financial statements included in Part 1. Item 1. in our Quarterly
Report on Form 10-Q, with the exception of the Legacy segment,
which is adjusted as noted in clause (b) (ii) below.
- There are two differences between total comparable store sales
growth based on consolidated net revenue and Adjusted Comparable
Store Sales Growth: (i) Adjusted Comparable Store Sales Growth
includes the effect of deferred and unearned revenue as if such
revenues were earned at the point of sale, resulting in the
following changes from total comparable store sales growth based on
consolidated net revenue: an increase of 8.1% and a decrease of
0.4% for the three months ended June 27, 2020 and June 29, 2019,
respectively, an increase of 0.3% and an increase of 0.2% for the
six months ended June 27, 2020 and June 29, 2019, respectively, a
decrease of 3.3% for the one month ended April 25, 2020, an
increase of 17.7% for the one month ended May 30, 2020, and an
increase of 6.0% for the one month ended June 27, 2020; and (ii)
Adjusted Comparable Store Sales Growth includes retail sales to the
Legacy partner’s customers (rather than the revenues recognized
consistent with the management & services agreement with the
legacy partner), resulting the following changes from total
comparable store sales growth based on consolidated net revenue: an
increase of 0.1% and a decrease of 0.2% for three months ended June
27, 2020 and June 29, 2019, respectively, an increase of 0.1% and a
decrease of 0.3% for the six months ended June 27, 2020 and June
29, 2019, respectively, an increase of 0.6% for the one month ended
April 25, 2020, an increase of 0.4% for the one month ended May 30,
2020, and a decrease of 1.0% for the one month ended June 27,
2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005344/en/
Investors: National Vision Holdings, Inc. David Mann,
CFA, Vice President of Investor Relations (470) 448-2448
investor.relations@nationalvision.com
Media: National Vision Holdings, Inc. Kristina Gross,
Vice President of Communications (470) 448-2355
media@nationalvision.com
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