PRTY Party City Holdco Inc

Party City Holdco Inc. (the “Company” or “PRTY”; NYSE:PRTY) today announced financial results for the quarter ended September 30, 2021.

Brad Weston, Chief Executive Officer of Party City, stated, “We are very pleased with our third quarter results that came in at the high end of our expectations. Our performance was again broad based as we continue to be celebration obsessed and take concrete steps to increase relevancy with our customers to ensure we are top of mind when it comes to anything celebratory. To that end, this strong performance continued into October fueled by ongoing strength in our core categories. We are thrilled with our Halloween results driven by the team’s excellent execution of our improved Halloween go-to market strategy across all four channels of our business including Party City, Party City.com, Halloween City and Wholesale.”

Mr. Weston added, “As we look to the final quarter of the year, we feel good about our positioning for the holiday season. We will continue to update and improve our product assortments and inventory position, as we expand our relevancy and elevate our customer experience. Given the still dynamic operating environment, we will remain flexible and agile, with our learnings from this year giving us increased confidence in our inflation mitigation strategies and the trajectory of our business.”

Third Quarter Summary:

• Total net sales were $510.2 million, a decrease of 4.4% compared to the third quarter 2020 primarily driven by the divestiture of a significant portion of our international operations in the first quarter of 2021, partially offset by strong retail sales growth.
• Total retail sales increased 8.9% versus third quarter 2020 driven by a strong comparable sales increase in our core everyday categories.
• The total number of corporate Party City stores was 754 as of September 30, 2021 compared to 739 in the prior year period.
• Brand comparable sales increased 7.5% in the third quarter versus the 13 weeks ended October 3, 2020 and increased 14.2% compared to the 13 weeks ended October 5, 2019.
• Net third-party wholesale sales decreased 33.6% compared to the third quarter of 2020 principally due to the divestiture of a significant portion of our international operations in the first quarter of 2021. Excluding international operations, net third-party wholesale sales increased 7.8%, driven by strong performance at our Anagram balloon division.
• Total gross profit margin increased 270 basis points to 36.0% of net sales. Excluding certain items not indicative of core operating performance, gross profit margin improved approximately 175 basis points to 36.3% of net sales driven primarily by the divestiture of international operations and leverage on retail occupancy costs.
• Operating expenses totaled $163.6 million or $41.4 million lower than the third quarter of 2020 primarily due to impairment of certain indefinite-lived intangible assets recorded in the third quarter of 2020. Excluding certain items not indicative of core operating performance, operating expenses totaled $157.6 million, or 30.9% of net sales, a 230-basis point increase versus prior-year period primarily driven by the divestiture of a significant portion of our international operations.
• Interest expense was $23.9 million during the third quarter of 2021, compared to $13.4 million during the third quarter of 2020. The increase primarily reflects higher cost debt from the debt refinancing in the first quarter of 2021 and the forgiveness of interest as part of the debt refinancing in the third quarter of 2020.
• Reported GAAP net loss was $2.8 million, or loss of $0.02 per diluted share.
• Adjusted net income was $2.9 million, or earnings of $0.02 per diluted share, compared to adjusted net income of $11.0 million, or income of $0.10 per share, in the third quarter of 2020. (See “Non-GAAP Information”)
• Adjusted EBITDA was $42.9 million, versus $49.2 million during the third quarter of 2020. (See “Non-GAAP Information”).

Fiscal October 2021 Update:

For fiscal October 2021 (for the Company’s retail segment, fiscal October 2021 consisted of the five-week period ended November 6, 2021), the Company reported total revenue of $415.5 million, or 13.9% above the same period of last year. Total Retail revenue increased approximately 19.8%. Brand comparable sales increased 16.0% versus prior year driven by continued strength in core categories and higher Halloween sales. During the month of October 2021, the Company operated 754 total Party City locations vs 739 in the prior year period, and 90 temporary Halloween City stores, compared to 25 in 2020.

Balance Sheet and Cash Flow Highlights:

As of the end of the third quarter 2021, the Company had $60.7 million in cash and approximately $280.3 million of availability under the ABL Facility and approximately $14.6 million of availability under the Anagram ABL Facility, for total liquidity of $355.6 million.

The carrying value of the Company's debt as of September 30, 2021 was $1,539.3 million. The principal balance of debt net of cash on September 30, 2021 was $1,374.5 million versus $1,333.7 million in the prior-year period. The principal balance of debt is used for the purpose of all leverage ratio calculations under our debt agreements. The following table reflects both principal amounts as well as net carrying amounts of debt across the Company’s debt instruments:

						Party City Credit Group				Anagram Holdings, LLC				PCHI Consolidated
						September 30, 2021								September 30, 2021
(in Thousands)		Principal Amount				Net Carrying Amount				Net Carrying Amount				Net Carrying Amount
8.75% Senior Secured First Lien Notes – due 2026		$	750,000			$	732,124				-			$	732,124
6.125% Senior Notes – due 2023			22,924				22,820				-				22,820
6.625% Senior Notes – due 2026			92,254				91,555				-				91,555
First Lien Party City Notes – due 2025			161,669				198,076				-				198,076
First Lien Anagram Notes – due 2025			115,804				-				149,676				149,676
Second Lien Anagram Notes – due 2026			89,155				-				144,665				144,665
Finance lease obligations			13,267				13,267				-				13,267
Total long-term obligations			1,245,073				1,057,842				294,341				1,352,183
Less: current portion		N/A					(1,297	)			-				(1,297	)
Long-term obligations, excluding current portion			1,245,073				1,056,545				294,341				1,350,886
Loans and notes payable*			190,150				187,084				-				187,084
Less: Cash			(60,740	)			(33,050	)			(27,691	)			(60,741	)
Principal balance net of cash		$	1,374,483			$	1,210,579			$	266,650			$	1,477,229

*Balance consists of ABL Facility.

Net cash used in operating activities in the first nine months of 2021 was $73.6 million, compared to net cash used in operating activities of $56.8 million in the prior year period. The increase in cash used is primarily attributable to an increase in seasonal inventory and the related freight, as well as the repayment of rents deferred from 2020. Free cash flowa in the first nine months of 2021 was $111.9 million compared to $(13.8) million in the prior year period, with the improvement driven by higher Adjusted EBITDA due to improved operating results, partially offset by higher capital expenditures.aFree cash flow defined as Adjusted EBITDA less capital expenditures (See “Non-GAAP Financial Information”).

Outlook:

The Company is providing the following fiscal fourth quarter 2021 outlook*. This outlook is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic:

• Total revenue of $685 to $700 million
• Brand comparable sales percentage increase of high-teens compared to fourth quarter 2020 and low-teens versus fourth quarter 2019
• GAAP net income of $39 million to $47 million with an assumed Q4 tax rate of 26%
• Adjusted EBITDA of $100 to $110 million

* As previously disclosed, in the fourth quarter of 2020, the 53rd week contributed $40 million in revenue and approximately $12 million in Adjusted EBITDA.

The table below sets forth a reconciliation from our fourth quarter 2021 forecasted GAAP Net Income to our Adjusted EBITDA.

		Q4 2021
(in thousands)		High			Low
Net Income		$	46,700		$	38,700
Provision for Income Taxes			16,400			13,600
Interest Expense			23,800			24,200
Depreciation and Amortization Expense			16,800			17,200
EBITDA		$	103,700		$	93,700
EBITDA Add-Backs			6,300			6,300
Adjusted EBITDA		$	110,000		$	100,000

Conference Call Information

A conference call to discuss the third quarter 2021 financial results is scheduled for today, November 9, 2021, at 8:30 a.m. Eastern Time, and the Company has posted certain supplemental presentation materials to its investor relations website. Investors and analysts interested in participating in the call are invited to dial 844-757-5731 (U.S. domestic) or 412-542-4126 (international) approximately 10 minutes prior to the start of the call. The conference call will also be webcast at http://investor.partycity.com/. To listen to the live call, please go to the website at least 15 minutes early to register and download any necessary audio software. The webcast will be accessible for one year after the call.

Website Information

We routinely post important information for investors on the Investor Relations section of our website, http://investor.partycity.com/. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Information

This press release includes non-GAAP measures including Adjusted EBITDA and Adjusted Net Income/Loss. We present these non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit facilities use Adjusted EBITDA to measure compliance with certain covenants. We also utilized operating expense excluding certain items not indicative of core operating performance. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in tables accompanying this release. We also evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. We also provide debt principal net of cash, which is calculated by adding Loans and Notes Payable, Current Portion of Long Term Obligations and Long Term Obligations, Excluding Current Portion, subtracting Cash and Cash Equivalents and dividing by Adjusted EBITDA for the trailing twelve month period. We also define free cash flow as Adjusted EBITDA less capital expenditures. We believe providing these non-GAAP measures provides valuable supplemental information regarding our results of operations and leverage, consistent with how we evaluate our performance. In evaluating these non-GAAP financial measures, investors should be aware that in the future the Company may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. The Company's presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. The Company has provided this information as means to evaluate the results of its core operations. Other companies in the Company's industry may calculate these items differently than it does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

Forward-Looking Statements

This press release and the commentary in the conference call to be held today each contains forward-looking statements. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance and include Party City’s expectations regarding revenues, brand comparable sales, net income, Adjusted EBITDA, Adjusted Net Income, interest expense and capital expenditures. The forward-looking statements contained in this press release are based on management’s good-faith belief and reasonable judgment based on current information, and these statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: our ability to compete effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store growth strategy; decreases in our Halloween sales; the impact of COVID-19 on our financial performance; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer spending and general economic conditions; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risks and uncertainties set forth in “Risk Factors” in Party City’s Annual Report on Form 10-K for the year ended December 31, 2020 and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. Except as may be required by any applicable laws, Party City assumes no obligation to publicly update or revise such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.

About Party City

Party City Holdco Inc. is the leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue. The Company is a popular one-stop shopping destination for party supplies, balloons, and costumes. In addition to being a great retail brand, the Company is a global, world-class organization that combines state-of-the-art manufacturing and sourcing operations, and sophisticated wholesale operations complemented by a multi-channel retailing strategy and e-commerce retail operations. The Company is a leading player in its category, vertically integrated and unique in its breadth and depth. The Company designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. The Company’s retail operations include 830 specialty retail party supply stores (including franchise stores) throughout North America operating under the names Party City and Halloween City, and e-commerce websites, principally through the domain name PartyCity.com.

Source: Party City Holdco Inc.

PARTY CITY HOLDCO INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share data, unaudited)

		September 30,2021				December 31,2020				September 30,2020
		(Unaudited)								(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	60,740			$	119,532			$	170,562
Accounts receivable, net			100,946				90,879				149,825
Inventories, net			520,046				412,285				630,357
Prepaid expenses and other current assets			85,004				45,905				112,038
Income tax receivable			56,361				57,549				—
Assets held for sale, net			—				83,110				—
Total current assets			823,097				809,260				1,062,782
Property, plant and equipment, net			213,959				209,412				206,447
Operating lease asset			700,668				700,087				741,524
Goodwill			662,163				661,251				669,564
Trade names			383,733				384,428				383,666
Other intangible assets, net			25,821				32,134				34,505
Other assets, net			27,385				9,883				9,521
Total assets		$	2,836,826			$	2,806,455			$	3,108,009
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable		$	187,084			$	175,707			$	303,894
Accounts payable			167,445				118,928				179,938
Accrued expenses			178,155				160,605				202,636
Liabilities held for sale			—				68,492				—
Current portion of operating lease liability			131,653				176,045				194,476
Income taxes payable			—				524				—
Current portion of long-term obligations			1,297				13,576				14,342
Total current liabilities			665,634				713,877				895,286
Long-term obligations, excluding current portion			1,350,886				1,329,808				1,334,338
Long-term portion of operating lease liability			639,560				654,729				677,183
Deferred income tax liabilities, net			43,537				34,705				49,508
Other long-term liabilities			34,718				22,815				15,559
Total liabilities			2,734,335				2,755,934				2,971,874
Commitments and contingencies
Stockholders’ equity:
Common stock (112,194,330, 110,781,613 and 110,573,555 shares outstanding and 123,816,514, 122,061,711 and 121,848,074 shares issued at September 30, 2021, December 31, 2020, and September 30, 2020, respectively)			1,384				1,373				1,371
Additional paid-in capital			980,399				971,972				970,145
Accumulated deficit			(552,445	)			(565,457	)			(469,040	)
Accumulated other comprehensive income (loss)			3,128				(29,916	)			(38,907	)
Total Party City Holdco Inc. stockholders’ equity before common stock held in treasury			432,466				377,972				463,569
Less: Common stock held in treasury, at cost (11,622,184, 11,280,098 and 11,274,519 shares at September 30, 2021, December 31, 2020, and June 30, 2020, respectively)			(329,975	)			(327,182	)			(327,170	)
Total Party City Holdco Inc. stockholders’ equity			102,491				50,790				136,399
Noncontrolling interests			—				(269	)			(264	)
Total stockholders’ equity			102,491				50,521				136,135
Total liabilities and stockholders’ equity		$	2,836,826			$	2,806,455			$	3,108,009

PARTY CITY HOLDCO INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)(In thousands, except share and per share data, unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Net sales*		$	510,199			$	533,775			$	1,472,752			$	1,202,509
Cost of sales			326,501				355,923				919,596				890,587
Gross profit			183,698				177,852				553,156				311,922
Wholesale selling expenses			7,503				11,950				23,977				37,115
Retail operating expenses			105,206				97,100				291,281				250,502
General and administrative expenses			45,495				44,986				137,328				174,275
Art and development costs			5,440				4,257				15,415				13,095
Store impairment and restructuring charges			—				1,926				—				20,818
Loss on disposal of assets in international operations			—				—				3,211				—
Goodwill, intangibles and long-lived assets impairment			—				44,732				—				581,380
Income (loss) from operations			20,054				(27,099	)			81,944				(765,263	)
Interest expense, net			23,899				13,422				64,229				63,954
Other (income) expense, net			(1,444	)			(2,873	)			(2,317	)			4,287
(Gain) on debt refinancing			—				(273,149	)			—				(273,149	)
(Loss) income before income taxes			(2,401	)			235,501				20,032				(560,355	)
Income tax (benefit) expense			388				(4,164	)			7,128				(128,293	)
Net (loss) income			(2,789	)			239,665				12,904				(432,062	)
Less: Net (loss) attributable to noncontrolling interests			—				(42	)			(54	)			(241	)
Net (loss) income attributable to common shareholders of Party City Holdco Inc.		$	(2,789	)		$	239,707			$	12,958			$	(431,821	)
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc.–Basic		$	(0.02	)		$	2.25			$	0.12			$	(4.41	)
Net (loss) income per share attributable to common shareholders of Party City Holdco Inc.–Diluted		$	(0.02	)		$	2.24			$	0.11			$	(4.41	)
Weighted-average number of common shares-Basic			112,037,224				106,709,307				111,431,623				97,872,174
Weighted-average number of common shares-Diluted			112,037,224				106,875,631				115,822,121				97,872,174
Dividends declared per share		$	—			$	—			$	—			$	—
Comprehensive (loss) income		$	(5,753	)		$	244,607			$	45,989			$	(435,235	)
Less: Comprehensive (loss) attributable to noncontrolling interests			(24	)			(42	)			(54	)			(241	)
Comprehensive (loss) income attributable to common shareholders of Party City Holdco Inc.		$	(5,729	)		$	244,649			$	46,043			$	(434,994	)

*Includes royalties and franchise fees. Prior year amounts conformed to current year presentation

PARTY CITY HOLDCO INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited)

		Nine Months Ended September 30,
		2021				2020
Cash flows (used in) operating activities:
Net income (loss)		$	12,904			$	(432,062	)
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization expense			50,293				57,796
Amortization of deferred financing costs and original issuance discounts			3,257				3,276
Provision for doubtful accounts			1,610				5,746
Deferred income tax expense (benefit)			9,116				(76,833	)
Change in operating lease liability/asset			(58,875	)			32,121
Undistributed (income) loss in equity method investments			(820	)			356
Loss on disposal of assets			2,796				83
Loss on disposal of assets in international operations			3,211				—
Non-cash adjustment for store impairment and restructuring charges			—				16,595
Goodwill, intangibles and long-lived assets impairment			—				581,380
Non-employee equity-based compensation**			—				1,033
Stock option expense – time – based			310				671
Stock option expense – performance – based			—				7,847
Restricted stock unit expense – time-based			1,643				1,568
Restricted stock unit – performance-based			2,706				510
Directors – non-cash compensation			171				75
Gain on debt refinancing			(1,105	)			(273,149	)
Changes in operating assets and liabilities:
(Increase) in accounts receivable			(17,339	)			(8,562	)
(Increase) decrease in inventories			(109,227	)			27,959
(Increase) in prepaid expenses and other current assets			(49,570	)			(64,715	)
Increase in accounts payable, accrued expenses and income taxes payable			75,368				61,478
Net cash (used in) operating activities			(73,551	)			(56,827	)
Cash flows (used in) investing activities:
Cash paid in connection with acquisitions, net of cash acquired			(4,405	)			(362	)
Capital expenditures			(49,211	)			(32,095	)
Proceeds from disposal of property and equipment			3			82
Proceeds from sale of international operations, net of cash disposed			20,556				—
Net cash (used in) investing activities			(33,057	)			(32,375	)
Cash flows provided by financing activities:
Repayment of loans, notes payable and long-term obligations			(844,952	)			(122,373	)
Proceeds from loans, notes payable and long-term obligations			882,500				369,785
Treasury stock purchases			(2,793	)			(85	)
Exercise of stock options			3,621				—
Debt issuance costs			(21,437	)			(19,955	)
Net cash provided by financing activities			16,939				227,372
Effect of exchange rate changes on cash and cash equivalents			100				(2,659	)
Net (decrease) increase in cash and cash equivalents and restricted cash			(89,569	)			135,511
Change in cash classified within current assets held for sale			31,628				—
Cash and cash equivalents and restricted cash at beginning of period			119,681				35,176
Cash and cash equivalents and restricted cash at end of period*		$	61,740			$	170,687
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense		$	56,748			$	55,999
Cash paid during the period for income taxes, net of refunds		$	5,303			$	24,421

*Includes $1,000 and $125 of restricted cash for the nine months ended September 30, 2021 and 2020. The Company recorded restricted cash in other assets, net as presented in the consolidated balance sheet at September 30, 2021 and in prepaid expenses and other current assets as presented in the consolidated balance sheets at December 31, 2020 and September 30, 2020.

** See Note 17 – Kazzam, LLC of Item 1, “Condensed Consolidated Financial Statements (Unaudited)” in the September 30, 2021 Quarterly Report on Form 10-Q 2021.

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA(Unaudited)

		Three Months Ended September 30,								Nine months ended September 30,
		2021				2020				2021				2020
(Dollars in thousands)
Net (loss) income		$	(2,789	)		$	239,665			$	12,904			$	(432,062	)
Interest expense, net			23,899				13,422				64,229				63,954
Income tax expense (benefit)			388				(4,164	)			7,128				(128,293	)
Depreciation and amortization			15,433				17,278				50,293				57,796
EBITDA			36,931				266,201				134,554				(438,605	)
Store impairment and restructuring charges (a)			—				6,763				—				36,285
Inventory restructuring and early lease terminations (j)			520				—				7,157				—
Other restructuring, retention and severance (b)			—				2,957				2,082				11,701
Goodwill, intangibles and long-lived assets impairment (c)			—				44,732				—				581,380
Deferred rent (d)			904				254				2,032				(2,618	)
Closed store expense (e)			603				1,247				3,739				2,882
Foreign currency losses/(gains), net			343				(3,312	)			(968	)			955
Stock option expense – time-based			93				111				310				671
Stock option expense – performance – based			—				—				—				7,847
Restricted stock unit and restricted cash awards expense – performance-based			923				510				2,901				510
Restricted stock units – time-based			876				429				1,643				1,568
Non-employee equity-based compensation (f)			—				—				—				1,033
Undistributed loss (income) in equity method investments			(609	)			(59	)			(820	)			356
Corporate development expenses (g)			5				581				5				6,193
Non-recurring legal settlements/costs			—				661				—				7,170
Loss on sale of property, plant and equipment*			2,687				—				2,798				—
COVID - 19 (i)			—				679				1,270				71,059
Loss on sale of business			—				—				3,211				—
(Gain) on debt repayment/refinancing (k)			(1,332	)			(273,149	)			(1,106	)			(273,149	)
Other*			943				546				2,331				3,034
Adjusted EBITDA		$	42,887			$	49,151			$	161,139			$	18,272

* Prior period amounts have been reclassified to conform with current period presentation.

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA, Continued (In thousands, unaudited)

				Three Months Ended September 30, 2021 EBITDA Adjustments
	September 30, 2021GAAPBasis (asreported)				Inventory restructuring and early lease terminations (j)				Net gain on debt repayment (k)				Corporatedevelopmentexpenses (g)				Stock OptionExpense/Non-Employee EquityCompensation/Restrictedstock units				DeferredRent (d)				Otherrestructuring,retention andseverance (b)				Closed storeexpense (e)				COVID-19 (i)				Foreigncurrencygains				Other				September 30, 2021Non-GAAPbasis
Net sales	$	510,199																																											$	510,199
Cost of sales		326,501				(520	)															(945	)																							325,036
Gross profit		183,698																																												185,163
Wholesale selling expenses		7,503																																												7,503
Retail operating expenses		105,206																												(612	)											(908	)			103,686
General and administrative expenses		45,495																(1,892	)			41								9												(2,639	)			41,014
Art and development costs		5,440																																												5,440
Income from operations		20,054																																												27,520
Interest expense, net		23,899																																								(33	)			23,866
Other (income) expense, net		(1,444	)							1,332				(5	)																							(343	)			559				99
(Loss) income before income taxes		(2,401	)																																											3,555
Interest expense, net		23,899																																												23,899
Depreciation and amortization		15,433																																												15,433
EBITDA		36,931																																												42,887
Adjustments to EBITDA		5,956				(520	)			1,332				(5	)			(1,892	)			(904	)			—				(603	)			—				(343	)			(3,021	)			—
Adjusted EBITDA	$	42,887			$	(520	)		$	1,332			$	(5	)		$	(1,892	)		$	(904	)		$	—			$	(603	)		$	—			$	(343	)		$	(3,021	)		$	42,887

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA, Continued (In thousands, unaudited)

						Three Months Ended September 30, 2020 EBITDA Adjustments
		September 30, 2020GAAPBasis (asreported)				Goodwill, intangibles and long-lived assets impairment (c)				Storeimpairmentandrestructuringcharges (a)				Gain on debt refinancing (k)				Corporatedevelopmentexpenses (g)				Legal				Stock OptionExpense/Non-Employee EquityCompensation/Restricted stock units – time-based				DeferredRent (d)				Otherrestructuring,retention andseverance (b)				Closedstoreexpense (e)				COVID-19 (i)				Foreigncurrencylosses				Other				September 30,2020Non-GAAPbasis
Net sales		$	533,775																																																			$	533,775
Cost of sales			355,923								(4,837	)																			(80	)											(1,266	)							(469	)			349,271
Gross profit			177,852																																																				184,504
Wholesale selling expenses			11,950																																																				11,950
Retail operating expenses			97,100																												(224	)							(1,225	)			(1,745	)											93,906
General and administrative expenses			44,986																(370	)			(661	)			(1,050	)			50				(2,957	)			(22	)			2,332												42,308
Art and development costs			4,257																																																				4,257
Store impairment and restructuring charges			1,926								(1,926	)																																											—
Goodwill, intangibles and long-lived assets impairment			44,732				(44,732	)																																															—
(Loss) from operations			(27,099	)																																																			32,083
Interest expense, net			13,422																																																				13,422
Other (income) expense, net			(2,873	)															(211	)																											3,312				(18	)			210
(Gain) on debt refinancing			(273,149	)											273,149																																								—
Income (loss) before income taxes			235,501																																																				18,451
Interest expense, net			13,422																																																				13,422
Depreciation and amortization			17,278																																																				17,278
EBITDA			266,201																																																				49,151
Adjustments to EBITDA			(217,050	)			(44,732	)			(6,763	)			273,149				(581	)			(661	)			(1,050	)			(254	)			(2,957	)			(1,247	)			(679	)			3,312				(487	)			—
Adjusted EBITDA		$	49,151			$	(44,732	)		$	(6,763	)		$	273,149			$	(581	)		$	(661	)		$	(1,050	)		$	(254	)		$	(2,957	)		$	(1,247	)		$	(679	)		$	3,312			$	(487	)		$	49,151

PARTY CITY HOLDCO INCRECONCILIATION OF ADJUSTED EBITDA, Continued (In thousands, unaudited)

						Nine Months Ended September 30, 2021 EBITDA Adjustments
		September 30, 2021GAAPBasis (asreported)				Inventory restructuring and early lease terminations (j)				Net gain on debt repayment (k)				Corporatedevelopmentexpenses (g)				Stock OptionExpense/Non-Employee EquityCompensation/Restrictedstock units				DeferredRent (d)				Otherrestructuring,retention andseverance (b)				Closed storeexpense (e)				COVID-19 (i)				Foreigncurrencygains				Other				September 30, 2021Non-GAAPbasis
Net sales		$	1,472,752																																											$	1,472,752
Cost of sales			919,596				(4,214	)															(945	)																			124				914,561
Gross profit			553,156																																												558,191
Wholesale selling expenses			23,977																																												23,977
Retail operating expenses			291,281				(2,943	)															(1,212	)							(3,690	)			(1,053	)							(1,626	)			280,757
General and administrative expenses			137,328																(4,854	)			125				(2,082	)			(49	)			(217	)							(3,328	)			126,923
Art and development costs			15,415																																												15,415
Loss on disposal of assets in international operations			3,211																																								(3,211	)			—
Income from operations			81,944																																												111,119
Interest expense, net			64,229																																								(138	)			64,091
Other (income) expense, net			(2,317	)							1,106				(5	)																							968				659				411
Income before Income Taxes			20,032																																												46,617
Interest expense, net			64,229																																												64,229
Depreciation and amortization			50,293																																												50,293
EBITDA			134,554																																												161,139
Adjustments to EBITDA			26,585				(7,157	)			1,106				(5	)			(4,854	)			(2,032	)			(2,082	)			(3,739	)			(1,270	)			968				(7,520	)			—
Adjusted EBITDA		$	161,139			$	(7,157	)		$	1,106			$	(5	)		$	(4,854	)		$	(2,032	)		$	(2,082	)		$	(3,739	)		$	(1,270	)		$	968			$	(7,520	)		$	161,139

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA, Continued (In thousands, unaudited)

						Nine Months Ended September 30, 2020 EBITDA Adjustments
		September 30, 2020GAAPBasis (asreported)				Goodwill, intangibles and long-lived assets impairment (c)				Storeimpairmentandrestructuringcharges (a)				Gain on debt refinancing(k)			Corporatedevelopmentexpenses (g)				Legal				Stock OptionExpense/Non-Employee EquityCompensation/Restricted stock units(f)(g)				DeferredRent (d)				Otherrestructuring,retention andseverance (b)				Closedstoreexpense (e)				COVID-19 (i)				Foreigncurrencyloss				Other				September 30,2020Non-GAAPbasis
Net sales		$	1,202,509																																																		$	1,202,509
Cost of sales			890,587								(15,467	)																		(214	)			(4,437	)							(42,446	)							(898	)			827,125
Gross profit			311,922																																																			375,384
Wholesale selling expenses			37,115															(1,840	)																							(623	)											34,652
Retail operating expenses			250,502																											2,685								(2,733	)			(16,312	)											234,142
General and administrative expenses			174,275															(3,502	)			(7,170	)			(10,596	)			147				(7,264	)			(149	)			(11,678	)											134,063
Art and development costs			13,095																																																			13,095
Store impairment and restructuring charges			20,818								(20,818	)																																										—
Goodwill, intangibles and long-lived assets impairment			581,380				(581,380	)																																														—
(Loss) from operations			(765,263	)																																																		(40,568	)
Interest expense, net			63,954																																																			63,954
Other (income) expense, net			4,287															(851	)							(1,033	)																			(955	)			(2,492	)			(1,044	)
(Gain) on debt refinancing			(273,149	)											273,149																																							—
(Loss) before income taxes			(560,355	)																																																		(103,478	)
Interest expense, net			63,954																																																			63,954
Depreciation and amortization			57,796																																																			57,796
EBITDA			(438,605	)																																																		18,272
Adjustments to EBITDA			456,877				(581,380	)			(36,285	)			273,149			(6,193	)			(7,170	)			(11,629	)			2,618				(11,701	)			(2,882	)			(71,059	)			(955	)			(3,390	)			—
Adjusted EBITDA		$	18,272			$	(581,380	)		$	(36,285	)		$	273,149		$	(6,193	)		$	(7,170	)		$	(11,629	)		$	2,618			$	(11,701	)		$	(2,882	)		$	(71,059	)		$	(955	)		$	(3,390	)		$	18,272

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED NET INCOME(Unaudited)

		Three Months Ended September 30,								Nine months ended September 30,
		2021				2020				2021				2020
(Dollars in thousands, except per share amounts)
(Loss) income before income taxes		$	(2,401	)		$	235,501			$	20,032			$	(560,355	)
Intangible asset amortization			2,177				2,899				7,008				8,444
Amortization of deferred financing costs and original issuance discounts			1,320				875				3,257				3,276
Store impairment and restructuring charges (a)			—				1,321				—				29,475
Other restructuring charges (b)			—				2,622				1,967				10,139
Goodwill, intangibles and long-lived assets impairment (c)			—				44,732				—				581,380
Non-employee equity-based compensation (f)			—				—				—				1,033
Non-recurring legal settlements/costs			—				605				—				7,026
Stock option expense – time-based			93				110				310				671
Stock option expense – performance – based			—				—				—				7,847
Loss on sale of assets			2,642				—				2,642				—
(Gain) on debt repayment/refinancing (k)			—				(273,149	)			—				(273,149	)
Restricted stock unit and restricted cash awards expense – performance-based			930				—				2,901				—
COVID - 19 (i)			—				733				1,270				71,113
Loss on sale of business			—				—				3,211				—
Inventory disposals			—				—				926				—
Adjusted income (loss) before income taxes			4,761				16,249				43,524				(113,100	)
Adjusted income tax expense (benefit) (h)			1,902				5,234				11,966				(36,416	)
Adjusted net income (loss)		$	2,859			$	11,015			$	31,558			$	(76,684	)
Adjusted net income (loss) per common share – diluted		$	0.02			$	0.10			$	0.27			$	(0.78	)
Weighted-average number of common shares-diluted			116,467,755				106,875,631				115,822,121				97,872,174

(a)    The Company performed a comprehensive review of its store locations aimed at improving the overall productivity of such locations (“store optimization program”). After careful consideration and evaluation of the store locations, the Company made the decision to accelerate the optimization of its store portfolio with the closure of stores, which are primarily located in close proximity to other Party City stores. For further detail, refer to Note 3 – Store Impairment and Restructuring Charges of Item 1, “Condensed Consolidated Financial Statements (Unaudited)” in the September 30, 2021 Quarterly Report on Form 10-Q 2021.

(b)    Amounts expensed principally relate to severance due to organizational changes.

(c)    As a result of a sustained decline in market capitalization and reduced fair value of certain intangibles and long-lived assets, the Company recognized non-cash pre-tax goodwill and intangibles impairment charges.

(d)    The “deferred rent” adjustment reflects the difference between accounting for rent and landlord incentives in accordance with GAAP and the Company’s actual cash outlay.

(e)    Charges incurred related to closing and relocating stores in the ordinary course of business.

(f)    The acquisition of Ampology’s interest in Kazzam, LLC in an equity transaction. See Note 17 – Kazzam, LLC of Item 1 in the September 30, 2021 Quarterly Report on Form 10-Q.

(g)    Primarily represents costs for Kazzam (See Note 17 – Kazzam, LLC of Item 1 in the September 30, 2021 Quarterly Report on Form 10-Q for further discussion).

(h)    Represents income tax expense/benefit after excluding the specific tax impacts for each of the pre-tax adjustments. The tax impacts for each of the adjustments were determined by applying to the pre-tax adjustments the effective income tax rates for the specific legal entities in which the adjustments were recorded.

(i)    Represents COVID-19 expenses for employees on temporary furlough for whom the Company provides health benefits; non-payroll expenses including advertising, occupancy and other store expenses.

(j)    Costs incurred for early lease terminations and a merchandise transformation project to transition and optimize stores to the reduced SKU assortment levels.

(k)    The Company recognized net gain on debt repayment in 2021. The Company recognized a gain on debt refinancing transactions in 2020. PARTY CITY HOLDCO INC.SEGMENT INFORMATION(In thousands, except percentages, unaudited)

		Three Months Ended September 30,
		2021									2020
		Dollars inThousands				Percentage ofNet sales					Dollars inThousands				Percentage ofNet sales
Net sales:
Wholesale		$	279,634				54.8		%		$	346,621				64.9		%
Eliminations			(168,308	)			(33.0	)				(179,049	)			(33.5	)
Net wholesale			111,326				21.8					167,572				31.4
Retail*			398,873				78.2					366,203				68.6
Total net sales		$	510,199				100.0		%		$	533,775				100.0		%

*Retail net sales include royalties and franchise fees. Prior year amount conformed to current year presentation.

		Nine months ended September 30,
		2021								2020
		Dollars inThousands				Percentage ofNet sales					Dollars inThousands				Percentage ofNet sales
Net sales:
Wholesale		$	722,732				49.1		%		$	692,715				57.6		%
Eliminations			(425,947	)			(28.9	)				(345,167	)			(28.7	)
Net wholesale			296,785				20.2					347,548				28.9
Retail*			1,175,967				79.8					854,961				71.1
Total net sales		$	1,472,752				100.0		%		$	1,202,509				100.0		%

*Retail net sales include royalties and franchise fees. Prior year amount conformed to current year presentation.

		Three Months Ended September 30,
		2021									2020
		Dollars inThousands				Percentageof Net Sales					Dollars inThousands				Percentageof Net Sales
Retail gross profit*		$	161,822				40.6		%		$	135,539				37.0		%
Wholesale gross profit			21,876				19.7					42,313				25.3
Total gross profit		$	183,698				36.0		%		$	177,852				33.3		%

*Retail gross profit include royalties and franchise fees. Prior year amount conformed to current year presentation.

		Nine months ended September 30,
		2021									2020
		Dollars in Thousands				Percentage of Net Sales					Dollars in Thousands				Percentage of Net Sales
Retail gross profit*		$	478,565				40.7		%		$	257,035				30.1		%
Wholesale gross profit			74,591				25.1					50,538				14.5
Total gross profit		$	553,156				37.6		%		$	307,573				25.6		%

*Retail gross profit include royalties and franchise fees. Prior year amount conformed to current year presentation.

PARTY CITY HOLDCO INC.OPERATING METRICS

		Three months ended September 30,								LTM
		2021				2020				2021
Store Count
Corporate Stores:
Beginning of period			749				757				739
New stores opened			4				1				12
Acquired			6				2				10
Closed			(5	)			(21	)			(7	)
End of period			754				739				754
Franchise Stores
Beginning of period			82				96				90
New stores opened		—					—			—
Sold to Party City			(6	)			(1	)			(10	)
Closed		—					(5	)			(4	)
End of period			76				90				76
Grand Total			830				829				830

		Three months ended September 30,						Nine months ended September 30,
		2021			2020			2021			2020
Wholesale Share of Shelf (a)		80.2	%		81.1	%		80.9	%		81.4	%
Manufacturing Share of Shelf (b)		28.2	%		29.6	%		30.3	%		30.2	%
		Three months ended September 30,						Nine months ended September 30,
		2021			2020			2021			2020
Brand comparable sales (c)		7.5	%		8.3	%		43.7	%		-21.8	%

(a)  Wholesale share of shelf represents the percentage of our retail product cost of sales supplied by our wholesale operations.

(b)    Manufacturing share of shelf represents the percentage of our retail product cost of sales manufactured by the company.

(c)    Party City brand comparable sales include North American e-commerce sales.

Contact:
ICR
Farah Soi and Rachel Schacter
203-682-8200
InvestorRelations@partycity.com