- Net revenue of $532.4 million, an increase of 6.6% from Q3
2022
- Comparable store sales growth of 3.8% and Adjusted Comparable
Store Sales Growth of 4.3% from Q3 2022
- Net loss of $73.8 million and Diluted EPS of $(0.94), inclusive
of $79.4 million in non-cash impairment charges related to the
termination of the Walmart partnership, compared with Net income of
$11.5 million and Diluted EPS of $0.15, respectively, in Q3
2022
- Adjusted Operating Income of $15.7 million compared with $21.5
million in Q3 2022
- Adjusted Diluted EPS of $0.15 compared with $0.15 in Q3
2022
- Announces Cost Savings and Pricing Initiatives
National Vision Holdings, Inc. (NASDAQ: EYE) (“National Vision”
or the “Company”) today reported its financial results for the
third quarter ended September 30, 2023.
Reade Fahs, National Vision's CEO, said, “Our third quarter
results reflect ongoing strength in our managed care business as
well as continued progress on our strategic initiatives focused on
expanding exam capacity, particularly within America’s Best. We
delivered a solid Back to School selling season, supported by our
focus on delivering incredible value while offering exceptional
customer service.”
Mr. Fahs continued, “I am proud of how our teams have continued
to operate with discipline and focus on customer care as we
continue to navigate a dynamic macro environment. With the upcoming
termination of our Walmart partnership, we have taken actions to
mitigate disruption of the business until the transition is
completed while identifying opportunities within our cost structure
to better align our expense profile with our go-forward operating
model. As we look to the balance of this year, we are focused on
continuing to execute on our initiatives and remain committed to
our mission of making quality eye care and eyewear more affordable
and accessible.”
This release includes certain Non-GAAP Financial Measures that
are not 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 2023 Summary
- Net revenue increased 6.6% to $532.4 million compared with the
third quarter of 2022 primarily due to an increase in Adjusted
Comparable Store Sales Growth, growth from new store sales, and
higher revenue from the Company's AC Lens business, partially
offset by the effect of unearned revenue in the third quarter of
2023 compared with the prior-year quarter. Net revenue includes a
(0.3%) impact from the timing of unearned revenue in the
current-year quarter compared with the prior-year quarter.
- Comparable store sales growth was 3.8% and Adjusted Comparable
Store Sales Growth was 4.3%, both reflecting an increase in
customer transactions and higher average ticket. Comparable store
sales growth was negatively impacted by the effects of unearned and
deferred revenue in the current-year quarter compared with the
prior-year quarter.
- The Company opened 21 new stores and ended the quarter with
1,402 stores. Overall, store count grew 5.3% from October 1, 2022
to September 30, 2023.
- Costs applicable to revenue increased 8.3% to $252.0 million
compared with the third quarter of 2022. As a percentage of net
revenue, costs applicable to revenue increased 70 basis points to
47.3% compared with the third quarter of 2022 and were primarily
driven by an increase in optometrist-related costs as well as a
reduction in components of service revenue, including product
protection plan revenue. These costs were partially offset by
ongoing strength in exam revenue as well as a decrease in product
costs attributable to higher eyeglass margin and decreased freight
expense.
- Selling, general and administrative expenses (SG&A)
increased 11.0% to $249.7 million compared with the third quarter
of 2022. Adjusted SG&A increased 8.7% to $241.5 million
compared with the third quarter of 2022. As a percentage of net
revenue, SG&A increased 180 basis points to 46.9% compared with
the third quarter of 2022 mainly due to increases in
performance-based incentive and stock-based compensation, payroll,
and expenses related to the termination of the Walmart partnership,
partially offset by advertising leverage. As a percentage of net
revenue, Adjusted SG&A increased 90 basis points to 45.4%
compared with the third quarter of 2022, driven by increases in
performance-based incentive compensation and payroll, partially
offset by advertising leverage.
- Depreciation and amortization expense of $24.4 million
decreased 1.8% from the prior-year period primarily driven by a
decrease in amortization of intangible assets as a result of
impairing the Walmart contract and relationship asset during the
third quarter of 2023, partially offset by investments in remote
medicine technology.
- Net income (loss) decreased to $(73.8) million, inclusive of
non-cash impairment charges related to the termination of the
Walmart partnership of $79.4 million, compared to $11.5 million in
the third quarter of 2022. Net income (loss) margin decreased to
(13.9)% compared to 2.3% in the third quarter of 2022.
- Diluted earnings (loss) per share (EPS) decreased to $(0.94),
inclusive of non-cash impairment charges related to the termination
of the Walmart partnership of $79.4 million, compared to $0.15 in
the third quarter of 2022. Adjusted Diluted EPS was $0.15 compared
with $0.15 in the third quarter of 2022. The net change in margin
on unearned revenue negatively impacted both Diluted EPS and
Adjusted Diluted EPS by $0.01.
- Adjusted Operating Income decreased 26.8% to $15.7 million
compared with the third quarter of 2022. Adjusted Operating Margin
decreased 130 basis points to 3.0% compared with the third quarter
of 2022. The net change in margin on unearned revenue negatively
impacted net income by $0.9 million and Adjusted Operating Income
by $1.3 million.
Nine Months Year-to-Date Summary
- Net revenue increased 5.4% to $1,620.1 million compared with
the same period of 2022 and was primarily driven by growth from new
store sales, an increase in Adjusted Comparable Store Sales Growth,
higher revenue from the Company's AC Lens business and the effect
of unearned revenue in the current period compared with the
prior-year period. Net revenue includes a 0.3% impact from the
timing of unearned revenue in the current-year period compared with
the prior-year period.
- Comparable store sales growth was 2.3% and Adjusted Comparable
Store Sales Growth was 2.0%, both reflecting an increase in
customer transactions and higher average ticket.
- The Company opened 53 new stores, closed five stores, and ended
the period with 1,402 stores.
- Costs applicable to revenue increased 7.2% to $753.9 million
compared with the same period in 2022. As a percentage of net
revenue, compared with the prior-year period, costs applicable to
revenue increased 70 basis points to 46.5%, mainly due to an
increase in optometrist-related costs and a reduction in other
components of service revenue, including product protection plan
revenue, as well as other product mix and margin effects. These
costs were partially offset by increased exam revenue and the
effects from increased eyeglass mix and higher eyeglass
margin.
- SG&A increased 9.1% to $743.6 million compared with the
same period in 2022. Adjusted SG&A increased 8.4% to $725.1
million compared with the same period of 2022. As a percentage of
net revenue, SG&A increased 160 basis points to 45.9% compared
with the same period in 2022 mainly due to increases in
performance-based incentive compensation, payroll, stock-based
compensation, and occupancy expense, partially offset by
advertising leverage. As a percentage of net revenue, Adjusted
SG&A increased 130 basis points driven by increases in
performance-based incentive compensation, payroll, and occupancy
expense, partially offset by advertising leverage.
- Depreciation and amortization expense of $74.1 million
decreased 1.5% from the prior-year period primarily due to a shift
to cloud-based software investments that are amortized in SG&A
and a decrease in amortization of intangible assets as a result of
impairing the Walmart contracts and relationship asset, partially
offset by investments in remote medicine technology and new store
openings.
- Net income (loss) decreased to $(49.9) million, inclusive of
non-cash impairment charges related to the termination of the
Walmart partnership of $79.4 million, and compared to $51.4 million
in the same period in 2022. Net income (loss) margin decreased to
(3.1)% compared to 3.3% in the same period in 2022.
- Diluted EPS decreased to $(0.64), inclusive of non-cash
impairment charges related to the termination of the Walmart
partnership of $79.4 million, compared to $0.63 in the same period
in 2022. Adjusted Diluted EPS decreased to $0.66 compared to $0.69
in the same period in 2022. The net change in margin on unearned
revenue benefited both Diluted EPS and Adjusted Diluted EPS by
$0.03.
- Adjusted Operating Income decreased 23.8% to $72.0 million
compared with the same period of 2022. Adjusted Operating Margin
decreased 180 basis points to 4.4% compared with the same period in
2022. The net change in margin on unearned revenue benefited net
income (loss) by $2.6 million and Adjusted Operating Income by $3.4
million.
Balance Sheet and Cash Flow Highlights as of September 30,
2023
- National Vision's cash balance was $265.8 million as of
September 30, 2023. The Company had no borrowings under its $300.0
million first-lien revolving-credit facility (“Revolving Loans”),
exclusive of letters of credit of $6.4 million.
- Total debt was $562.8 million as of September 30, 2023,
consisting of outstanding first-lien term loans, convertible senior
notes (“2025 Notes”) and finance lease obligations, net of
unamortized discounts.
- Cash flows from operating activities for the first nine months
of 2023 were $153.3 million compared to $121.3 million for the same
period in 2022. The year-over-year increase was primarily due to
timing of incentive compensation-related payments.
- Capital expenditures for the first nine months of 2023 totaled
$82.0 million compared to $86.1 million for the third quarter of
2022.
Share Repurchase Program
In the third quarter of 2023, the Company did not repurchase any
shares of its common stock. Year to date through September 30,
2023, National Vision repurchased approximately 1.1 million shares
for $25.0 million. The Company has $25.0 million remaining under
its current share repurchase authorization.
Termination of Walmart Partnership
As previously announced on July 26, 2023, the Company’s
partnership with Walmart Inc. (“Walmart”) will be ending in 2024.
This includes supplying and operating Vision Centers in 229 Walmart
stores, providing contact lens distribution and related services to
Walmart and its affiliate, Sam's Club, and arranging for the
provision of optometric services at certain Walmart locations in
California.
For fiscal 2023, the Company expects its Walmart store
operations and the wholesale distribution and related services to
Walmart and its affiliate, Sam's Club, included in its AC Lens
operations recorded in the Corporate/Other segment to generate
approximately $355 million in revenue. The remaining portion of the
AC Lens operations, which is immaterial from an earnings
perspective, will be wound down in conjunction with the wholesale
distribution and e-commerce contact lens services, and is expected
to generate approximately $45 million in sales for fiscal 2023.
Combined, the Walmart store operations and the AC Lens operations
are expected to generate approximately $400 million in revenue and
Earnings before income tax of approximately $15 million.
The annualized direct and indirect costs associated with these
operations for fiscal 2023 are expected to be approximately $385
million. The Company expects these costs to be wound down in
conjunction with the contract termination dates, and includes the
plan to consolidate the Company's distribution network with the
closing of its Ohio distribution center, which primarily supports
the AC Lens operations. The Company currently expects approximately
7% of its total associate headcount to be impacted by the
termination of the Walmart partnership and the wind down of the AC
Lens operations.
The Company recorded non-cash impairment charges of $79.4
million related to the termination of the Walmart partnership for
the three months ended September 30, 2023, including $60.1 million
related to goodwill, $9.1 million related to contracts and
relationships, and $10.2 million related to property and
equipment.
Cost Savings & Pricing Initiatives
The Company has announced that beginning in 2024, it will be
implementing an incremental expense reduction program targeting
annualized savings in the range of $10 million to $12 million. The
program will focus on streamlining corporate overhead including
optimizing non-customer facing labor costs, as well as reducing
travel expenses and third-party spend.
This program, together with the expected benefits from
non-headline pricing actions the Company is planning to take, is
expected to more than offset the profitability gap created by the
termination of the Walmart partnership.
Fiscal 2023 Outlook
National Vision's fiscal 2023 outlook reflects current expected
or estimated impacts related to macro-economic factors, including
inflation, geopolitical instability and risks of recession, as well
as constraints on exam capacity; however, the ultimate impact of
these factors on the Company’s financial outlook remains uncertain
with dynamic market conditions and the outlook shown below assumes
no material deterioration to the Company’s current business
operations as a result of such factors or as a result of the
termination of the Walmart partnership.
The Company is providing the following updated outlook for the
52 weeks ending December 30, 2023:
Current Fiscal-2023
Outlook
Prior Fiscal-2023
Outlook
New Stores
65 to 70
65 to 70
Adjusted Comparable Store Sales
Growth1
~2%
0% to 3%
Net Revenue
$2.115 billion to $2.125
billion
$2.075 billion to $2.135
billion
Adjusted Operating Income
$60 million to $65 million
$48 million to $66 million
Adjusted Diluted EPS2
$0.53 to $0.58
$0.42 to $0.60
Depreciation and Amortization3
$99 million to $101 million
$99 million to $101 million
Interest4
~$3 million
~$3 million
Tax Rate5
26% to 28%
26% to 28%
Capital Expenditures
$115 million to $120 million
$115 million to $120 million
1 Refer to the Reconciliation of Adjusted
Comparable Stores Sales Growth to Total Comparable Store Sales
Growth.
2 Assumes approximately 78 million shares
and does not include 12.9 million shares attributable to the 2025
Notes and shares from stock-based compensation awards as the
Company anticipates them to be anti-dilutive to earnings per share
for fiscal year 2023.
3 Includes amortization of acquisition
intangibles of approximately $5.3 million, which is excluded in the
definition of Adjusted Operating Income and reflects the
anticipated impact of the intangible asset impairment in connection
with the termination of the Walmart agreements.
4 Before the impact of gains or losses on
change in fair value of derivatives and charges related to
amortization of debt discounts and deferred financing costs.
5 Excluding the impact of vesting of
restricted stock units and stock option exercises.
The fiscal 2023 outlook information provided above includes
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 fiscal 2023 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 fiscal 2023 outlook. The Company uses these
forward-looking measures internally to assess and benchmark its
results and strategic plans. See “Forward-Looking Statements”
below.
Conference Call Details
The Company will host a conference call to discuss its third
quarter 2023 financial results and fiscal-year 2023 guidance today,
November 9, 2023, at 8:30 a.m. Eastern Time. To pre-register for
the conference call and obtain a dial-in number and passcode please
refer to the “Investors” section of the Company’s website at
https://www.nationalvision.com/investors/. A live audio webcast of
the conference call will be available on the “Investors” section of
the Company’s website at https://www.nationalvision.com/investors/,
where presentation materials will be posted prior to the conference
call. 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 the second largest optical
retail company in the United States (by sales) with more than 1,400
retail stores in 44 states and Puerto Rico. With a mission of
helping people by making quality eye care 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, and 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’ eye care 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 “Fiscal 2023 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 including remote medicine and
optometrist recruiting and retention initiatives, 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 forward-looking statements. Such factors include, but
are not limited to, market volatility and an overall decline in the
health of the economy and other factors impacting consumer
spending, including inflation and uncertainty in financial markets
(including as a result of recent events affecting financial
institutions); our ability to recruit and retain vision care
professionals for our stores and remote medicine offerings in
general and in light of the pandemic; our ability to compete
successfully; our ability to successfully open new stores and enter
new markets; our ability to expand our remote medicine offerings
and electronic health records capabilities; 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 successfully navigate the termination of our Walmart
partnership, including the transition period; our ability to
maintain sufficient levels of cash flow from our operations to
execute or sustain our growth strategy or obtain additional
financing at satisfactory terms or at all; the impact of wage rate
increases, inflation, cost increases and increases in raw material
prices and energy prices; our growth strategy straining our
existing resources and causing the performance of our existing
stores to suffer; the COVID-19 pandemic and future resurgences, and
related impacts including federal, state, and local governmental
actions in response thereto; customer behavior in response to the
pandemic, including the impact of such behavior on in-store traffic
and sales; our ability to successfully and efficiently 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; our ability to manage our inventory;
seasonal fluctuations in our operating results and inventory
levels; risks associated with our e-commerce and omni-channel
business; 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; risk of losses arising from our
investments in technological innovators in the optical retail
industry including artificial intelligence; risks associated with
environmental, social and governance issues, including climate
change; risks associated with vendors from whom our products are
sourced, including our dependence on a limited number of suppliers;
our ability to develop, maintain and extend relationships with
managed vision care companies, vision insurance providers and other
third-party payors; our ability to effectively operate our
information technology systems and prevent interruption or security
breach; our reliance on third-party coverage and reimbursement,
including government programs, for an increasing portion of our
revenues; 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 adhere to changing state, local and federal privacy,
data security and data protection laws and regulations; 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; our ability to
adequately protect our intellectual property; our significant
amount of indebtedness and our ability to generate sufficient cash
flow to satisfy our debt obligations; a change 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 the timing,
manner and volume of repurchases of common stock pursuant to our
share repurchase program), 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 latest Annual Report on
Form 10-K and subsequent Quarterly Reports on Form 10-Q, 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 Operating Income,” “Adjusted
Operating Margin,” “Adjusted EBITDA,” “Adjusted EBITDA Margin,”
“Adjusted Diluted EPS,” “Adjusted Comparable Stores Sales Growth,”
“Adjusted SG&A,” and “Adjusted SG&A Percent of Net
Revenue.” We believe EBITDA, Adjusted Operating Income, Adjusted
Operating Margin, Adjusted EBITDA, Adjusted EBITDA 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.
EBITDA: We define EBITDA as net income (loss), plus
interest expense (income), net, income tax provision (benefit), and
depreciation and amortization.
Adjusted Operating Income: We define Adjusted Operating
Income as net income (loss), plus interest expense (income), net
and income tax provision (benefit), further adjusted to exclude
stock-based 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, Enterprise
Resource Planning (“ERP”) implementation expenses and certain other
expenses.
Adjusted Operating Margin: We define Adjusted Operating
Margin as Adjusted Operating Income as a percentage of net
revenue.
Adjusted EBITDA: We define Adjusted EBITDA as net income
(loss), plus interest expense (income), net, income tax provision
(benefit) and depreciation and amortization, further adjusted to
exclude stock-based compensation expense, loss on extinguishment of
debt, asset impairment, litigation settlement, secondary offering
expenses, management realignment expenses, long-term incentive plan
expenses, ERP implementation expenses and certain other
expenses.
Adjusted EBITDA Margin: We define Adjusted EBITDA Margin
as Adjusted EBITDA 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-based 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 discounts and deferred financing costs of our
term loan borrowings, amortization of the conversion feature and
deferred financing costs related to our 2025 Notes when not
required under U.S. GAAP to be added back for diluted earnings
(loss) per share, losses (gains) on change in fair value of
derivatives, ERP implementation expenses, certain other expenses,
and tax expense (benefit) from stock-based compensation, less the
tax effect of these adjustments.
Adjusted SG&A: We define Adjusted SG&A as
SG&A, adjusted to exclude stock-based compensation expense,
litigation settlement, secondary offering expenses, management
realignment expenses, long-term incentive plan expense, ERP
implementation expenses and certain other expenses.
Adjusted SG&A Percent of Net Revenue: We define
Adjusted SG&A Percent of Net Revenue as Adjusted SG&A as a
percentage of 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.
EBITDA, Adjusted Operating Income, Adjusted Operating Margin,
Adjusted EBITDA, Adjusted EBITDA 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 U.S. GAAP and should not be considered as an alternative to
net income (loss) or the ratio of net income (loss) 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 U.S. 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 U.S.
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
In Thousands, Except Par
Value
(Unaudited)
As of September 30, 2023
As of December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
265,815
$
229,425
Accounts receivable, net
76,640
79,892
Inventories
120,583
123,158
Prepaid expenses and other current
assets
37,024
41,361
Total current assets
500,062
473,836
Noncurrent assets:
Property and equipment, net
358,010
359,775
Goodwill
717,544
777,613
Trademarks and trade names
240,547
240,547
Other intangible assets, net
20,814
34,669
Right of use assets
402,788
382,825
Other assets
26,669
21,981
Total noncurrent assets
1,766,372
1,817,410
Total assets
$
2,266,434
$
2,291,246
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
62,882
$
65,276
Other payables and accrued expenses
113,378
94,225
Unearned revenue
40,082
41,239
Deferred revenue
64,061
62,201
Current maturities of long-term debt and
finance lease obligations
10,636
4,137
Current operating lease obligations
82,489
77,186
Total current liabilities
373,528
344,264
Noncurrent liabilities:
Long-term debt and finance lease
obligations, less current portion and debt discount
552,191
563,388
Noncurrent operating lease obligations
374,810
358,110
Deferred revenue
22,116
21,601
Other liabilities
9,786
8,900
Deferred income taxes, net
93,651
93,870
Total non-current liabilities
1,052,554
1,045,869
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 200,000
shares authorized; 84,652 and 84,273 shares issued as of September
30, 2023 and December 31, 2022, respectively; 78,179 and 78,992
shares outstanding as of September 30, 2023 and December 31, 2022,
respectively
846
842
Additional paid-in capital
783,355
767,112
Accumulated other comprehensive loss
(611
)
(1,179
)
Retained earnings
270,603
320,517
Treasury stock, at cost; 6,473 and 5,281
shares as of September 30, 2023 and December 31, 2022,
respectively
(213,841
)
(186,179
)
Total stockholders’ equity
840,352
901,113
Total liabilities and stockholders’
equity
$
2,266,434
$
2,291,246
National Vision Holdings, Inc.
and Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income
In Thousands, Except Earnings Per
Share
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Revenue:
Net product sales
$
435,556
$
410,701
$
1,333,242
$
1,265,554
Net sales of services and plans
96,800
88,506
286,823
270,919
Total net revenue
532,356
499,207
1,620,065
1,536,473
Costs applicable to revenue (exclusive
of depreciation and amortization):
Products
167,407
160,645
508,023
488,225
Services and plans
84,619
72,155
245,894
215,179
Total costs applicable to revenue
252,026
232,800
753,917
703,404
Operating expenses:
Selling, general and administrative
expenses
249,705
225,028
743,598
681,411
Depreciation and amortization
24,407
24,852
74,149
75,248
Asset impairment
80,834
1,263
82,114
5,178
Other expense (income), net
(19
)
(95
)
(153
)
170
Total operating expenses
354,927
251,048
899,708
762,007
Income (loss) from operations
(74,597
)
15,359
(33,560
)
71,062
Interest expense (income), net
3,722
(1,977
)
10,425
(2,158
)
Earnings (loss) before income taxes
(78,319
)
17,336
(43,985
)
73,220
Income tax provision (benefit)
(4,521
)
5,834
5,929
21,837
Net income (loss)
$
(73,798
)
$
11,502
$
(49,914
)
$
51,383
Earnings (loss) per share:
Basic
$
(0.94
)
$
0.15
$
(0.64
)
$
0.64
Diluted
$
(0.94
)
$
0.15
$
(0.64
)
$
0.63
Weighted average shares
outstanding:
Basic
78,163
78,910
78,328
80,133
Diluted
78,163
79,304
78,328
93,477
Comprehensive income (loss):
Net income (loss)
$
(73,798
)
$
11,502
$
(49,914
)
$
51,383
Unrealized gain on hedge instruments
255
255
763
762
Tax provision of unrealized gain on hedge
instruments
65
65
195
194
Comprehensive income (loss)
$
(73,608
)
$
11,692
$
(49,346
)
$
51,951
Note: Diluted EPS related to the 2025
Notes is calculated using the if-converted method. The 2025 Notes
were dilutive for the nine months ended October 1, 2022. The
Company added back $7.1 million in interest expense (after tax)
related to the 2025 Notes and assumed conversion of the 2025 Notes
at the beginning of the period.
National Vision Holdings, Inc.
and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
In Thousands
(Unaudited)
Nine Months Ended
September 30, 2023
October 1, 2022
Cash flows from operating
activities:
Net income (loss)
$
(49,914
)
$
51,383
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
74,149
75,248
Amortization of debt discount and deferred
financing costs
2,604
2,456
Asset impairment
82,114
5,178
Deferred income tax expense (benefit)
(413
)
4,652
Stock-based compensation expense
15,040
10,540
Losses (gains) on change in fair value of
derivatives
(1,942
)
(16,724
)
Inventory adjustments
2,886
2,218
Other
2,283
3,531
Changes in operating assets and
liabilities:
Accounts receivable
2,743
(8,896
)
Inventories
(311
)
(582
)
Operating lease right of use assets and
lease liabilities
59
262
Other assets
4,797
3,070
Accounts payable
(2,394
)
4,648
Deferred and unearned revenue
1,218
752
Other liabilities
20,353
(16,399
)
Net cash provided by operating
activities
153,272
121,337
Cash flows from investing
activities:
Purchase of property and equipment
(81,965
)
(86,120
)
Other
(614
)
53
Net cash used for investing activities
(82,579
)
(86,067
)
Cash flows from financing
activities:
Repayments on long-term debt
(1,875
)
(4
)
Proceeds from issuance of common stock
1,326
2,515
Purchase of treasury stock
(27,662
)
(83,676
)
Payments of debt issuance costs
(2,869
)
—
Payments on finance lease obligations
(3,085
)
(3,459
)
Net cash used for financing activities
(34,165
)
(84,624
)
Net change in cash, cash equivalents and
restricted cash
36,528
(49,354
)
Cash, cash equivalents and restricted
cash, beginning of year
230,624
306,876
Cash, cash equivalents and restricted
cash, end of period
$
267,152
$
257,522
Supplemental cash flow disclosure
information:
Cash paid for interest
$
6,378
$
11,000
Cash paid for taxes
$
6,338
$
6,617
Capital expenditures accrued at the end of
the period
$
8,969
$
11,167
National Vision Holdings, Inc.
and Subsidiaries
Reconciliation of Non-GAAP to
GAAP Financial Measures
In Thousands, Except Earnings Per
Share
(Unaudited)
Reconciliation of Adjusted Operating
Income to Net Income (loss)
Three Months Ended
Nine Months Ended
In thousands
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Net income (loss)
$
(73,798
)
$
11,502
$
(49,914
)
$
51,383
Interest expense (income), net
3,722
(1,977
)
10,425
(2,158
)
Income tax provision (benefit)
(4,521
)
5,834
5,929
21,837
Stock-based compensation expense (a)
5,252
3,168
15,040
10,540
Asset impairment (b)
80,834
1,263
82,114
5,178
Amortization of acquisition intangibles
(c)
977
1,872
4,721
5,616
ERP implementation expenses (f)
173
—
173
—
Other (g)
3,068
(199
)
3,540
2,151
Adjusted Operating Income
$
15,707
$
21,463
$
72,028
$
94,547
Net income (loss) margin
(13.9
)%
2.3
%
(3.1
)%
3.3
%
Adjusted Operating Margin
3.0
%
4.3
%
4.4
%
6.2
%
Note: Percentages reflect line item as a
percentage of net revenue, adjusted for rounding.
Reconciliation of EBITDA and Adjusted
EBITDA to Net Income (loss)
Three Months Ended
Nine Months Ended
In thousands
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Net income (loss)
$
(73,798
)
$
11,502
$
(49,914
)
$
51,383
Interest expense (income), net
3,722
(1,977
)
10,425
(2,158
)
Income tax provision (benefit)
(4,521
)
5,834
5,929
21,837
Depreciation and amortization
24,407
24,852
74,149
75,248
EBITDA
(50,190
)
40,211
40,589
146,310
Stock-based compensation expense (a)
5,252
3,168
15,040
10,540
Asset impairment (b)
80,834
1,263
82,114
5,178
ERP implementation expenses (f)
173
—
173
—
Other (g)
3,068
(199
)
3,540
2,151
Adjusted EBITDA
$
39,137
$
44,443
$
141,456
$
164,179
Net income (loss) margin
(13.9
)%
2.3
%
(3.1
)%
3.3
%
Adjusted EBITDA Margin
7.4
%
8.9
%
8.7
%
10.7
%
Note: Percentages reflect line item as a
percentage of net revenue, adjusted for rounding.
Reconciliation of Adjusted Diluted EPS
to Diluted EPS
Three Months Ended
Nine Months Ended
Shares in thousands, except per share
amounts
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Diluted EPS
$
(0.94
)
$
0.15
$
(0.64
)
$
0.63
Stock-based compensation expense (a)
0.07
0.04
0.19
0.11
Asset impairment (b)
1.03
0.02
1.05
0.06
Amortization of acquisition intangibles
(c)
0.01
0.02
0.06
0.06
Amortization of debt discount and deferred
financing costs (d)
0.01
0.01
0.03
0.01
Losses (gains) on change in fair value of
derivatives (e)
0.03
(0.08
)
0.08
(0.18
)
ERP implementation expenses (f)
0.00
—
0.00
—
Other (j)
0.04
(0.00
)
0.05
0.02
Tax expense (benefit) from stock-based
compensation (h)
0.00
(0.00
)
0.01
0.00
Tax effect of total adjustments (i)
(0.11
)
(0.00
)
(0.17
)
(0.02
)
Adjusted Diluted EPS
$
0.15
$
0.15
$
0.66
$
0.69
Weighted average diluted shares
outstanding
78,163
79,304
78,328
93,477
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 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
SG&A
$
249,705
$
225,028
$
743,598
$
681,411
Stock compensation expense (a)
5,252
3,168
15,040
10,540
ERP implementation expenses (f)
173
—
173
—
Other (k)
2,802
(199
)
3,278
1,896
Adjusted SG&A
$
241,478
$
222,059
$
725,107
$
668,975
SG&A Percent of Net Revenue
46.9
%
45.1
%
45.9
%
44.3
%
Adjusted SG&A Percent of Net
Revenue
45.4
%
44.5
%
44.8
%
43.5
%
Note: Percentages reflect line item as a
percentage of net revenue.
(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 related to impairment
of long-lived assets, primarily goodwill of the Legacy Segment,
Walmart contracts and relationship asset, property and equipment at
Walmart stores and associated with our AC Lens business, and
impairment of property, equipment and lease-related assets on
closed or underperforming stores.
(c)
Amortization of the increase in carrying
values of finite-lived intangible assets resulting from the
application of purchase accounting following the acquisition of the
Company by affiliates of KKR & Co. Inc.
(d)
Amortization of deferred financing costs
and other non-cash charges related to our long-term debt. We adjust
for amortization of deferred financing costs related to the 2025
Notes only when adjustment for these costs is not required in the
calculation of diluted earnings per share under U.S. GAAP.
(e)
Reflects losses (gains) recognized in
interest expense (income), net on change in fair value of
de-designated hedges.
(f)
Costs related to the Company's ERP
implementation.
(g)
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), which
are primarily costs related to the termination of the Walmart
partnership of $2.1 million for the three and nine months ended
September 30, 2023, excess payroll taxes on vesting of restricted
stock units and exercises of stock options, executive severance and
relocation and other expenses and adjustments, including losses on
other investments of $0.3 million for the nine months ended October
1, 2022.
(h)
Tax expense (benefit) associated with
accounting guidance requiring excess tax expense (benefit) related
to vesting of restricted stock units and exercises of stock options
to be recorded in earnings as discrete items in the reporting
period in which they occur.
(i)
Represents the income tax effect of the
total adjustments at our combined statutory federal and state
income tax rates, excluding Walmart goodwill impairment charges of
$60.1 million for the three and nine months ended September 30,
2023.
(j)
Reflects other expenses in (g) above,
including debt issuance costs of $0.2 million for the nine months
ended September 30, 2023.
(k)
Reflects other expenses in (g) above,
except for immaterial amounts for the three and nine months ended
September 30, 2023, losses on other investments of $0.3 million for
the nine months ended October 1, 2022, and optometrist-related
employee retention bonuses of $0.3 million for the three and nine
months ended September 30, 2023.
Reconciliation of Adjusted Comparable
Store Sales Growth to Total Comparable Store Sales Growth
Comparable store sales growth
(a)
Three Months Ended September 30,
2023
Three Months Ended October 1,
2022
Nine Months Ended September 30,
2023
Nine Months Ended October 1,
2022
2023 Outlook (b)
Owned & Host segment
America’s Best
5.7
%
(7.8
)%
3.0
%
(9.4
)%
Eyeglass World
(1.2
)%
(7.8
)%
(1.7
)%
(7.7
)%
Military
3.8
%
(6.3
)%
2.3
%
(5.5
)%
Fred Meyer
(3.7
)%
(7.6
)%
(5.9
)%
(5.4
)%
Legacy segment
1.0
%
(10.7
)%
(0.7
)%
(9.3
)%
Total comparable store sales growth
3.8
%
(8.0
)%
2.3
%
(8.0
)%
~2%
Adjusted Comparable Store Sales Growth
(b)
4.3
%
(8.1
)%
2.0
%
(9.1
)%
~2%
(a) Total comparable store sales is
calculated 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 I. Item 1. in our Quarterly Report on
Form 10-Q for the period ended September 30, 2023, with the
exception of the Legacy segment, which is adjusted as noted in (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 0.4% for the three months ended September 30, 2023, and a
decrease of 0.2% and a decrease of 1.0% for the nine months ended
September 30, 2023 and October 1, 2022, 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 in the following changes from total
comparable store sales growth based on consolidated net revenue: an
increase of 0.1% and a decrease of 0.1% for the three months ended
September 30, 2023 and October 1, 2022, respectively, and a
decrease of 0.1% and a decrease of 0.1% for the nine months ended
September 30, 2023 and October 1, 2022, respectively; (iii) with
respect to the Company’s 2023 Outlook, Adjusted Comparable Store
Sales Growth includes an estimated 0.5% decrease for the effect of
deferred and unearned revenue as if such revenues were earned at
the point of sale and retail sales to the Legacy partner’s
customers (rather than the revenues recognized consistent with the
management & services agreement).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109048928/en/
Investors: Caitlin Churchill, ICR
investor.relations@nationalvision.com
Media: Racheal Peters media@nationalvision.com
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