- Net revenue increased 12.4% to $485.4 million
- Comparable store sales growth of 11.6%; Adjusted Comparable
Store Sales Growth of 12.4%
- Net income increased 2,860% to $35.3 million; Diluted EPS
increased 2,782% to $0.42
- Adjusted EBITDA increased 89.3% to $88.1 million
- Adjusted Operating Income increased 160% to $67.7 million
- Adjusted Diluted EPS increased 226% to $0.54
- Cash balance of $377 million
- Reinstates Fiscal 2020 Outlook
National Vision Holdings, Inc. (NASDAQ: EYE) (“National Vision”
or the “Company”) today reported its financial results for the
third quarter ended September 26, 2020.
“The National Vision team delivered an exceptionally strong
Q3—establishing a new record for quarterly profit for our three
years as a public company,” stated Reade Fahs, chief executive
officer. “And our Q3 comps were clearly the best I’ve witnessed
since joining National Vision 18 years ago. We also opened 18
stores, including our 1,200th location, as we continued to build
market share. These results reinforce our belief that our
affordable eye care and eyewear offerings have become even more
important since the pandemic arrived.”
Mr. Fahs concluded, “I would like to thank the 2,000-plus
affiliated optometrists and over 12,000 associates at National
Vision, as our performance stems from their tireless hard work,
their resilience and their commitment to a ‘safety-first’ mindset
and approach. As we enter the fourth quarter, while significant
uncertainty remains, we are off to a strong start as the third
quarter comp momentum continued throughout October. Overall, we
continue to believe that we are well positioned to navigate the
pandemic given our emphasis on safety in our store and supply chain
operations and strong financial condition.”
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.
Third Quarter 2020 Summary
- Net revenue increased 12.4% to $485.4 million from $431.9
million for the third quarter of 2019. The impact from the timing
of unearned revenue on net revenue and profitability was immaterial
for the third quarter of 2020.
- Comparable store sales growth was 11.6% and Adjusted Comparable
Store Sales Growth was 12.4%.
- The Company opened 18 new stores, closed one store, and ended
the quarter with 1,201 stores. Overall, store count grew 4.9% from
September 28, 2019 to September 26, 2020. 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.
- Costs applicable to revenue increased 3.1% to $210.8 million
from $204.5 million for the third quarter of 2019. As a percentage
of net revenue, costs applicable to revenue decreased 390 basis
points to 43.4% from 47.3% for the third quarter of 2019. This
decrease as a percentage of net revenue was primarily driven by
increased eyeglass mix, higher eyeglass margin, and lower growth in
optometrist costs.
- SG&A increased 0.1% to $190.5 million from $190.3 million
for the third quarter of 2019. As a percentage of net revenue,
SG&A decreased 480 basis points to 39.3% from 44.1% for the
third quarter of 2019. This decrease as a percentage of net revenue
was primarily driven by lower advertising investment and lower
stock-based compensation expense. SG&A for the third quarter of
2020 was impacted by $4.7 million of incremental costs directly
related to adapting the Company’s operations during the COVID-19
pandemic, including an individual one-time $250 cash bonus to all
front-line associates and the Company’s network of doctors.
- Net income increased 2,860% to $35.3 million compared to net
income of $1.2 million for the third quarter of 2019.
- Diluted earnings per share increased 2,782% to $0.42 compared
to $0.01 for the third quarter of 2019. Adjusted Diluted EPS
increased 226% to $0.54 compared to $0.16 for the third quarter of
2019.
- Adjusted EBITDA increased 89.3% to $88.1 million compared to
$46.6 million for the third quarter of 2019. Adjusted EBITDA Margin
increased 740 basis points to 18.2% from 10.8% for the third
quarter of 2019.
- Adjusted Operating Income increased 160% to $67.7 million
compared to $26.1 million for the third quarter of 2019. Adjusted
Operating Margin increased 800 basis points to 14.0% from 6.0% for
the third quarter of 2019.
Nine-Month Period Highlights
- Net revenue decreased 8.1% to $1.2 billion from $1.3 billion
for the same period of 2019.
- Net revenue was negatively impacted by 1.1% due to the timing
of unearned revenue.
- Comparable store sales growth was (11.7)% and Adjusted
Comparable Store Sales Growth was (11.1)%.
- The Company opened 52 new stores, transitioned five Vision
Centers in Walmart stores to its management, closed seven stores,
and ended the period with 1,201 stores.
- Costs applicable to revenue decreased 7.9% to $570.1 million
from $619.0 million for the same period of 2019. As a percentage of
net revenue, costs applicable to revenue increased 10 basis points
to 46.9% from 46.8% for the same period of 2019. This increase as a
percentage of net revenue was primarily driven by optometrist costs
incurred during temporary store closures in response to the
COVID-19 pandemic as well as increased contact lens mix, partially
offset by higher eyeglass margin.
- SG&A decreased 8.1% to $520.8 million from $566.4 million
for the same period of 2019. As a percentage of net revenue,
SG&A increased 10 basis points to 42.9% from 42.8% for the same
period of 2019. This increase as a percentage of net revenue was
primarily driven by store and corporate payroll and occupancy
expenses incurred during temporary store closures, partially offset
by lower advertising investment. SG&A for the first nine months
of 2020 includes $7.8 million of incremental costs directly related
to adapting the Company's operations during the COVID-19
pandemic.
- Net income decreased 96% to $1.2 million compared to net income
of $28.9 million for the same period of 2019.
- Diluted earnings per share decreased 95.9% to $0.01 compared to
$0.35 for the same period of 2019. Adjusted Diluted EPS decreased
36.0% to $0.42 compared to $0.66 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 13.5% to $134.8 million compared to
$155.8 million for the same period of 2019. Adjusted EBITDA Margin
decreased 70 basis points to 11.1% from 11.8% for the same period
of 2019.
- Adjusted Operating Income decreased 27.0% to $71.4 million
compared to $97.8 million for the same period of 2019. Adjusted
Operating Margin decreased 150 basis points to 5.9% from 7.4% for
the same period of 2019. The net change in margin on unearned
revenue negatively impacted Adjusted EBITDA and Adjusted Operating
Income by $(11.7) million.
Balance Sheet and Cash Flow Highlights as of September 26,
2020
- The Company’s cash balance was $377.0 million as of September
26, 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 $651.7 million as of September 26, 2020,
consisting of outstanding first lien term loans, convertible senior
notes and finance lease obligations, net of unamortized
discounts.
- Cash flows from operating activities for the first nine months
of 2020 were $203.7 million compared to $170.9 million for the same
period of 2019.
- Capital expenditures for the first nine months of 2020 totaled
$40.8 million compared to $76.5 million for the same period of
2019, primarily due to the timing of new store capital
investments.
- 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.
Fourth Quarter and Fiscal 2020 Outlook
The Company is providing the following outlook for the 14 week
and 53 week periods ending January 2, 2021, respectively. For the
Company’s fourth quarter and fiscal 2020 outlook, the Company
estimates that the 53rd week will contribute approximately $35
million to net revenue with an approximately break-even impact to
Adjusted Diluted EPS due to the net change in margin on unearned
revenue. The Company’s fourth quarter and fiscal 2020 outlook
reflects the currently expected impacts related to COVID-19,
however, the ultimate impacts of COVID-19 on the Company’s
financial outlook remain uncertain. The outlook shown below assumes
no material deterioration to the Company’s current business
operations as a result of COVID-19, governmental actions and
regulations. Given the uncertainties, dynamic nature, resurgence,
and unknown duration of the pandemic, the Company is continuing to
evaluate additional measures that may be taken to respond to the
impact of COVID-19 on its business.
For the 14 weeks ending
January 2, 2021
New Stores
~5
Adjusted Comparable Store Sales
Growth1
5% - 9%
Net Revenue
$460 - $475 million
Adjusted EBITDA
$42 - $47 million
Adjusted Operating Income
$20 - $25 million
Adjusted Diluted EPS
$0.10 - $0.14
For the 53 weeks ending
January 2, 2021
New Stores
~57
Adjusted Comparable Store Sales
Growth1
(6.4%) - (7.4%)
Net Revenue
$1.675 - $1.690 billion
Adjusted EBITDA
$176.5 - $181.5 million
Adjusted Operating Income
$91 - $96 million
Adjusted Diluted EPS
$0.53 - $0.57
Depreciation and Amortization2
~$93 million
Interest3
~$32.5 million
Tax Rate4
~26%
Capital Expenditures
$75 - $80 million
Incremental COVID-19 Expenses
~$9 million
1 - For the 13 weeks and 52 weeks ending
December 26, 2020, respectively 2 - Includes amortization of
acquisition intangibles of approximately $1.9 million and $7.4
million for the 14 weeks and 53 weeks ending January 2, 2021
respectively 3 - Before the impact of gains or losses related to
hedge ineffectiveness and charges related to amortization of debt
discounts and deferred financing costs 4 - Excluding the impact of
stock option exercises
The fourth quarter and fiscal 2020 outlook information provided
above includes Adjusted EBITDA, Adjusted Operating Income and
Adjusted Diluted EPS guidance, which are non-GAAP financial
measures management uses in measuring performance. The Company is
not able to reconcile these forward-looking non-GAAP measures to
GAAP without unreasonable efforts because it is not possible to
predict with a reasonable degree of certainty the actual impact of
certain items and unanticipated events, including taxes and
non-recurring items, which would be included in GAAP results. The
impact of such items and unanticipated events could be potentially
significant.
The fourth quarter and fiscal 2020 outlook is forward-looking,
subject to significant business, economic, regulatory and
competitive uncertainties and contingencies, many of which are
beyond the control of the Company and its management, and based
upon assumptions with respect to future decisions, which are
subject to change. Actual results may vary and those variations may
be material. As such, the Company’s results may not fall within the
ranges contained in its fourth quarter and fiscal 2020 outlook. The
Company uses these forward looking measures internally to assess
and benchmark its results and strategic plans.
Conference Call Details
A conference call to discuss the third quarter 2020 financial
results is scheduled for today, November 5, 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 8282008. 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, November 12, 2020, by dialing 855-859-2056 from
the U.S. or 404-537-3406 from international locations, and entering
conference passcode 8282008. 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 more than 1,200 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 contained under “Fourth Quarter and Fiscal 2020
Outlook” as well as other 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; potential dilution to
existing stockholders upon the conversion of our convertible notes;
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, August 6, 2020, and November 5,
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, loss on extinguishment of debt, asset
impairment, litigation settlement, secondary offering expenses,
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, loss on extinguishment of debt, asset impairment,
litigation settlement, secondary offering expenses, 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, loss on extinguishment of
debt, asset impairment, litigation settlement, secondary offering
expenses, 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, secondary
offering expenses, 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 September 26, 2020 and
December 28, 2019
In Thousands, Except Par Value
Information
(Unaudited)
ASSETS
As of September 26, 2020
As of December 28, 2019
Current assets:
Cash and cash equivalents
$
377,007
$
39,342
Accounts receivable, net
49,678
44,475
Inventories
111,700
127,556
Prepaid expenses and other current
assets
17,050
23,266
Total current assets
555,435
234,639
Property and equipment, net
330,356
366,767
Other assets:
Goodwill
777,613
777,613
Trademarks and trade names
240,547
240,547
Other intangible assets, net
51,384
56,940
Right of use assets
335,860
348,090
Other assets
16,318
8,129
Total non-current assets
1,752,078
1,798,086
Total assets
$
2,307,513
$
2,032,725
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
68,629
$
40,782
Other payables and accrued expenses
125,278
82,829
Unearned revenue
44,723
28,002
Deferred revenue
56,846
55,870
Current maturities of long-term debt and
finance lease obligations
3,537
13,759
Current operating lease obligations
57,036
51,937
Total current liabilities
356,049
273,179
Long-term debt and finance lease
obligations, less current portion and debt discount
648,138
555,933
Non-current operating lease
obligations
320,155
331,769
Other non-current liabilities:
Deferred revenue
20,773
21,530
Other liabilities
23,686
13,731
Deferred income taxes, net
73,749
60,146
Total other non-current liabilities
118,208
95,407
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 200,000
shares authorized; 81,917 and 80,603 shares issued as of September
26, 2020 and December 28, 2019, respectively; 80,989 and 79,678
shares outstanding as of September 26, 2020 and December 28, 2019,
respectively
818
805
Additional paid-in capital
790,188
700,121
Accumulated other comprehensive loss
(5,944
)
(3,814
)
Retained earnings
107,801
107,132
Treasury stock, at cost; 928 and 925
shares as of September 26, 2020 and December 28, 2019,
respectively
(27,900
)
(27,807
)
Total stockholders’ equity
864,963
776,437
Total liabilities and stockholders’
equity
$
2,307,513
$
2,032,725
National Vision Holdings, Inc.
and Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income
For the Three and Nine Months
Ended September 26, 2020 and September 28, 2019
In Thousands, Except Earnings Per
Share
(Unaudited)
Three Months Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Revenue:
Net product sales
$
403,336
$
355,789
$
1,005,884
$
1,096,482
Net sales of services and plans
82,017
76,113
209,180
226,086
Total net revenue
485,353
431,902
1,215,064
1,322,568
Costs applicable to revenue (exclusive
of depreciation and amortization):
Products
148,274
144,518
402,279
444,177
Services and plans
62,535
59,984
167,864
174,801
Total costs applicable to revenue
210,809
204,502
570,143
618,978
Operating expenses:
Selling, general and administrative
expenses
190,518
190,290
520,841
566,444
Depreciation and amortization
22,236
22,336
68,970
63,570
Asset impairment
7,150
3,516
20,916
7,387
Litigation settlement
—
—
4,395
—
Other expense (income), net
(154
)
146
(312
)
975
Total operating expenses
219,750
216,288
614,810
638,376
Income from operations
54,794
11,112
30,111
65,214
Interest expense, net
12,475
7,873
35,432
25,902
Debt issuance costs
—
—
136
—
Loss on extinguishment of debt
—
9,786
—
9,786
Earnings (loss) before income taxes
42,319
(6,547
)
(5,457
)
29,526
Income tax provision (benefit)
7,030
(7,739
)
(6,655
)
647
Net income
$
35,289
$
1,192
$
1,198
$
28,879
Earnings per share:
Basic
$
0.44
$
0.02
$
0.01
$
0.37
Diluted
$
0.42
$
0.01
$
0.01
$
0.35
Weighted average shares
outstanding:
Basic
80,676
78,474
80,376
78,387
Diluted
83,795
81,561
82,718
81,510
Comprehensive income:
Net income
$
35,289
$
1,192
$
1,198
$
28,879
Unrealized gain (loss) on hedge
instruments
1,894
681
(2,853
)
(2,837
)
Tax provision (benefit) of unrealized gain
(loss) on hedge instruments
483
175
(723
)
(727
)
Comprehensive income (loss)
$
36,700
$
1,698
$
(932
)
$
26,769
National Vision Holdings, Inc.
and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
For the Nine Months Ended
September 26, 2020 and September 28, 2019
In Thousands
(Unaudited)
Nine Months Ended
September 26, 2020
September 28, 2019
Cash flows from operating
activities:
Net income
$
1,198
$
28,879
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
68,970
63,570
Amortization of debt discount and deferred
financing costs
7,248
1,071
Asset impairment
20,916
7,387
Deferred income tax expense (benefit)
(6,735)
651
Stock based compensation expense
8,335
10,840
Losses (gains) on change in fair value of
derivatives
4,596
—
Inventory adjustments
3,502
3,065
Credit loss expense
482
6,265
Loss on extinguishment of debt
—
9,786
Other
1,665
1,963
Changes in operating assets and
liabilities:
Accounts receivable
(5,685)
(6,023)
Inventories
12,354
1,063
Other assets
2,538
11,373
Accounts payable
27,847
1,694
Deferred revenue
219
7,068
Other liabilities
56,266
22,286
Net cash provided by operating
activities
203,716
170,938
Cash flows from investing
activities:
Purchase of property and equipment
(40,837)
(76,472)
Other
323
564
Net cash used for investing activities
(40,514)
(75,908)
Cash flows from financing
activities:
Borrowings on long-term debt, net of
discounts
548,769
566,550
Repayments on long-term debt
(369,269)
(564,300)
Proceeds from exercise of stock
options
10,478
9,992
Purchase of treasury stock
(93)
(25,000)
Payments of debt issuance costs
(12,462)
(2,930)
Payments on finance lease obligations
(2,517)
(2,054)
Net cash provided by (used for) financing
activities
174,906
(17,742)
Net change in cash, cash equivalents and
restricted cash
338,108
77,288
Cash, cash equivalents and restricted
cash, beginning of year
40,307
17,998
Cash, cash equivalents and restricted
cash, end of period
$
378,415
$
95,286
Supplemental cash flow disclosure
information:
Cash paid for interest
$
19,508
$
25,182
Capital expenditures accrued at the end of
the period
$
13,516
$
13,808
Right of use assets acquired under finance
leases
$
1,257
$
9,551
Right of use assets acquired under
operating leases
$
45,154
$
84,643
National Vision Holdings, Inc.
and Subsidiaries
Reconciliation of Non-GAAP to
GAAP Financial Measures
For the Three and Nine Months
Ended September 26, 2020 and September 28, 2019
In Thousands, Except Per Share
Information
(Unaudited)
Reconciliation of Adjusted Operating
Income to Net Income
Three Months Ended
Nine Months Ended
In thousands
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net income
$
35,289
7.3
%
$
1,192
0.3
%
$
1,198
0.1
%
$
28,879
2.2
%
Interest expense
12,475
2.6
%
7,873
1.8
%
35,432
2.9
%
25,902
2.0
%
Income tax provision (benefit)
7,030
1.4
%
(7,739
)
(1.8
)%
(6,655
)
(0.5
)%
647
—
%
Stock compensation expense (a)
2,890
0.6
%
6,123
1.4
%
8,335
0.7
%
10,840
0.8
%
Loss on extinguishment of debt (b)
—
—
%
9,786
2.3
%
—
—
%
9,786
0.7
%
Asset impairment (c)
7,150
1.5
%
3,516
0.8
%
20,916
1.7
%
7,387
0.6
%
Litigation settlement (d)
—
—
%
—
—
%
4,395
0.4
%
—
—
%
Secondary offering expenses (e)
—
—
%
401
0.1
%
26
—
%
406
—
%
Management realignment expenses (f)
—
—
%
—
—
%
—
—
%
2,155
0.2
%
Long-term incentive plan (g)
—
—
%
1,108
0.3
%
—
—
%
1,830
0.1
%
Amortization of acquisition intangibles
(h)
1,851
0.4
%
1,851
0.4
%
5,554
0.5
%
5,553
0.4
%
Other (k)
1,057
0.2
%
1,956
0.5
%
2,180
0.2
%
4,423
0.3
%
Adjusted Operating Income / Adjusted
Operating Margin
$
67,742
14.0
%
$
26,067
6.0
%
$
71,381
5.9
%
$
97,808
7.4
%
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
Nine Months Ended
In thousands
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net income
$
35,289
7.3
%
$
1,192
0.3
%
$
1,198
0.1
%
$
28,879
2.2
%
Interest expense
12,475
2.6
%
7,873
1.8
%
35,432
2.9
%
25,902
2.0
%
Income tax provision (benefit)
7,030
1.4
%
(7,739
)
(1.8
)%
(6,655
)
(0.5
)%
647
—
%
Depreciation and amortization
22,236
4.6
%
22,336
5.2
%
68,970
5.7
%
63,570
4.8
%
EBITDA
77,030
15.9
%
23,662
5.5
%
98,945
8.1
%
118,998
9.0
%
Stock compensation expense (a)
2,890
0.6
%
6,123
1.4
%
8,335
0.7
%
10,840
0.8
%
Loss on extinguishment of debt (b)
—
—
%
9,786
2.3
%
—
—
%
9,786
0.7
%
Asset impairment (c)
7,150
1.5
%
3,516
0.8
%
20,916
1.7
%
7,387
0.6
%
Litigation settlement (d)
—
—
%
—
—
%
4,395
0.4
%
—
—
%
Secondary offering expenses (e)
—
—
%
401
0.1
%
26
—
%
406
—
%
Management realignment expenses (f)
—
—
%
—
—
%
—
—
%
2,155
0.2
%
Long-term incentive plan (g)
—
—
%
1,108
0.3
%
—
—
%
1,830
0.1
%
Other (k)
1,057
0.2
%
1,956
0.5
%
2,180
0.2
%
4,423
0.3
%
Adjusted EBITDA / Adjusted EBITDA
Margin
$
88,127
18.2
%
$
46,552
10.8
%
$
134,797
11.1
%
$
155,825
11.8
%
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
Nine Months Ended
In thousands, except per share amounts
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Diluted EPS
$
0.42
$
0.01
$
0.01
$
0.35
Stock compensation expense (a)
0.03
0.08
0.10
0.13
Loss on extinguishment of debt (b)
—
0.12
—
0.12
Asset impairment (c)
0.09
0.04
0.25
0.09
Litigation settlement (d)
—
—
0.05
—
Secondary offering expenses (e)
—
—
—
—
Management realignment expenses (f)
—
—
—
0.03
Long-term incentive plan (g)
—
0.01
—
0.02
Amortization of acquisition intangibles
(h)
0.02
0.02
0.07
0.07
Amortization of debt discount and deferred
financing costs (i)
0.05
—
0.09
0.01
Losses (gains) on change in fair value of
derivatives (j)
—
—
0.06
—
Other (k)
0.01
0.02
0.03
0.05
Tax benefit of stock option exercises
(l)
(0.04
)
(0.08
)
(0.07
)
(0.09
)
Tax effect of total adjustments (m)
(0.05
)
(0.08
)
(0.16
)
(0.14
)
Adjusted Diluted EPS
$
0.54
$
0.16
$
0.42
$
0.66
Weighted average diluted shares
outstanding
83,795
81,561
82,718
81,510
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
Nine Months Ended
In thousands
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
SG&A
$
190,518
39.3
%
$
190,290
44.1
%
$
520,841
42.9
%
$
566,444
42.8
%
Stock compensation expense (a)
2,890
0.6
%
6,123
1.4
%
8,335
0.7
%
10,840
0.8
%
Secondary offering expenses (e)
—
—
%
401
0.1
%
26
—
%
406
—
%
Management realignment expenses (f)
—
—
%
—
—
%
—
—
%
2,155
0.2
%
Long-term incentive plan (g)
—
—
%
1,108
0.3
%
—
—
%
1,830
0.1
%
Other (n)
1,057
0.2
%
1,727
0.4
%
2,180
0.2
%
3,187
0.2
%
Adjusted SG&A/ Adjusted SG&A
Percent of Net Revenue
$
186,571
38.4
%
$
180,931
41.9
%
$
510,300
42.0
%
$
548,026
41.4
%
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
(a)
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.
(b)
Reflects write-off of deferred financing
fees related to the extinguishment of debt.
(c)
Reflects write-off of property, equipment
and lease related assets on closed or underperforming stores.
(d)
Expenses associated with settlement of
litigation. See Note 10. “Commitments and Contingencies” for
further details.
(e)
Expenses related to our secondary public
offerings for the three and nine months ended September 28, 2019
and September 29, 2018, respectively.
(f)
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.
(g)
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 KKR Acquisition.
(h)
Amortization of the increase in carrying
values of finite-lived intangible assets resulting from the
application of purchase accounting to the KKR Acquisition.
(i)
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 $4.5 million and $0.2
million for the three months ended September 26, 2020 and September
28, 2019, respectively, and $7.2 million and $1.1 million for the
nine months ended September 26, 2020 and September 28, 2019,
respectively.
(j)
Reflects $0.3 million of gains recognized
in interest expense on change in fair value of de-designated hedges
for the three months ended September 26, 2020 and $4.6 million of
losses for the nine months ended September 26, 2020.
(k)
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 $0.2
million for the three months ended September 28, 2019 and $1.2
million for the nine months ended September 28, 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 September 26, 2020 and September 28,
2019, respectively, and $0.4 million and $0.3 million for the nine
months ended September 26, 2020 and September 28, 2019,
respectively; costs of severance and relocation of $0.6 million and
$1.0 million for the three months ended September 26, 2020 and
September 28, 2019, respectively, and $1.1 million and $1.8 million
for the nine months ended September 26, 2020 and September 28,
2019, respectively; excess payroll taxes related to stock option
exercises of $0.2 million and $0.5 million for the three months
ended September 26, 2020 and September 28, 2019, respectively, and
$0.6 million for each of the nine months ended September 26, 2020
and September 28, 2019; incremental costs directly related to
adapting the Company’s operations during the COVID-19 pandemic of
$0.6 million for the nine months ended September 26, 2020; and
other expenses and adjustments totaling $0.1 million and $0.2
million for the three months ended September 26, 2020 and September
28, 2019, respectively, and $(0.5) million and $0.5 million for the
nine months ended September 26, 2020 and September 28, 2019,
respectively.
(l)
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.
(m)
Represents the income tax effect of the
total adjustments at our combined statutory federal and state
income tax rates.
(n)
Reflects other expenses in (k) above,
except for our share of losses on equity method investments of $0.2
million for the three months ended September 28, 2019 and $1.2
million for the nine months ended September 28, 2019
Reconciliation of Adjusted Comparable Store Sales Growth to
Total Comparable Store Sales Growth
Comparable store sales
growth(a)
Three Months Ended
Nine Months Ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Q4 Outlook
2020 Outlook
Owned & Host segment
America’s Best
13.6
%
6.7
%
(10.4)
%
6.5
%
Eyeglass World
18.4
%
5.2
%
(8.6)
%
5.7
%
Military
(4.6)
%
2.5
%
(20.2)
%
(0.7)
%
Fred Meyer
(7.8)
%
(2.8)
%
(24.6)
%
(6.1)
%
Legacy segment
3.3
%
5.7
%
(15.4)
%
2.5
%
Total comparable store sales growth
11.6
%
5.7
%
(11.7)
%
5.5
%
5.5 - 9.5%
(6.6) - (7.6%)
Adjusted Comparable Store Sales
Growth(b)
12.4
%
6.2
%
(11.1)
%
5.6
%
5 - 9
%
(6.4) - (7.4%)
(a)
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 11. “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.
(b)
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 0.9%
and an increase of 0.6% for the three months ended September 26,
2020 and September 28, 2019, respectively, an increase of 0.5% and
an increase of 0.3% for the nine months ended September 26, 2020
and September 28, 2019, respectively; 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: a decrease of 0.1% and a
decrease of 0.1% for the three months ended September 26, 2020 and
September 28, 2019, respectively, and an increase of 0.1% and a
decrease of 0.2% for the nine months ended September 26, 2020 and
September 28, 2019, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105005354/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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