Announces New Actions to Accelerate
Transformation
Second quarter 2024 highlights(1) compared to Q2
2023:
- Net revenue from continuing operations of $451.7 million, an
increase of 4.6%
- Comparable store sales growth of 2.2% and Adjusted Comparable
Store Sales Growth of 2.4%
- Net loss from continuing operations of $(1.0) million, Diluted
EPS from continuing operations of $(0.01)
- Adjusted Operating Income from continuing operations of $14.1
million
- Adjusted Diluted EPS from continuing operations of $0.15
- Discontinued Operations resulted in net revenue of $53.5
million, Net loss, net of tax, of $(2.1) million, Diluted EPS of
$(0.03) and Adjusted Diluted EPS of $0.00
- Revises fiscal 2024 outlook
(1) During the first quarter of 2024, the Company completed the
termination of its Walmart partnership and discontinued the prior
Legacy segment. During the second quarter of 2024, the Company
completed the wind down of AC Lens operations and discontinued
operations in that business.
National Vision Holdings, Inc. (NASDAQ: EYE) (“National Vision”
or the “Company”) today reported its financial results for the
second quarter ended June 29, 2024.
“Comparable store sales growth in the second quarter improved
sequentially from the first quarter largely due to increased
traffic,” said Reade Fahs, National Vision’s CEO. “We delivered an
overall 2.4% increase in adjusted comparable store sales, and a
2.9% increase at America’s Best, reflecting ongoing strength in
managed care and a notable improvement in comparable store sales
from cash pay customers. Although this progress is positive, we
needed a greater inflection in sales to deliver on the results we
originally expected and are revising our guidance accordingly.
“We have been transforming our business over the past two years
to adapt to new market realities and made valuable changes to the
way we operate, however we need to do more to accelerate both the
pace and rigor of our transformation. As such, we are taking new
actions to drive profitable growth, including recently announced
additions to our leadership team that will bring new talent and
fresh perspectives to our business as we seek to expand exam
capacity, implement new sales drivers and improve efficiencies to
strengthen our foundation. In addition, we are actively reviewing
all stores to optimize our fleet to drive growth and ensure we
continue to be disciplined stewards of capital. While our
transformation will take time, I remain excited about the
opportunity ahead for National Vision as we invest in the resources
and talent to deliver long-term success.”
During the first six months of fiscal 2024, the Company ceased
its Walmart and AC Lens operations which met the accounting
requirements for reporting each of the Legacy segment and AC Lens
operations as discontinued operations. Accordingly, the condensed
consolidated financial statements reflect the results of the Legacy
segment and the substantial majority of AC Lens operations as
discontinued operations for all periods presented.
Unless otherwise noted, amounts and disclosures below relate to
the Company’s continuing operations.
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.
Second Quarter 2024 Summary
- Net revenue increased 4.6% to $451.7 million compared to the
second quarter of 2023 and was primarily driven by growth from new
store sales and Adjusted Comparable Store Sales Growth, partially
offset by the effect of converted and closed stores.
- Comparable store sales growth was 2.2% and Adjusted Comparable
Store Sales Growth was 2.4%, both reflecting an increase in
customer transactions and higher average ticket.
- The Company opened 17 new stores and ended the quarter with
1,216 stores. Overall, store count grew 5.6% from July 1, 2023 to
June 29, 2024.
- Costs applicable to revenue increased 7.4% to $193.6 million
compared to the second quarter of 2023. As a percentage of net
revenue, costs applicable to revenue increased 110 basis points to
42.9% compared with the second quarter of 2023 and were primarily
driven by lower eyeglass mix, and an increase in
optometrist-related costs as well as other mix and margin effects.
As a percentage of net revenue, these increased costs were
partially offset by higher exam revenue.
- Selling, general and administrative expenses (SG&A)
increased 3.8% to $231.4 million compared with the second quarter
of 2023. Adjusted SG&A increased 2.0% to $221.8 million
compared with the second quarter of 2023. As a percentage of net
revenue, SG&A decreased 40 basis points to 51.2% compared with
the second quarter of 2023 mainly due to lower performance-based
incentive compensation and lower advertising expense, partially
offset by higher legal and professional expenses, higher occupancy
expense and other operating expenses. As a percentage of net
revenue, Adjusted SG&A decreased 120 basis points to 49.1%
compared with the second quarter of 2023, driven by lower
performance-based incentive compensation and lower advertising
expense, partially offset by higher other operating expenses,
including occupancy expense.
- Depreciation and amortization expense of $22.7 million
increased 2.7% from the prior-year period, primarily driven by new
store openings and investments in remote medicine technology.
- Income (loss) from continuing operations, net of tax, decreased
to $(1.0) million, compared to $3.6 million in the second quarter
of 2023. Income (loss) from continuing operations, net of tax,
margin decreased to (0.2)% compared to 0.8% in the second quarter
of 2023.
- Diluted earnings (loss) per share (EPS) from continuing
operations decreased to $(0.01), compared to $0.05 in the second
quarter of 2023. Adjusted Diluted EPS was $0.15 compared with $0.12
in the second quarter of 2023.
- Adjusted Operating Income increased 13.8% to $14.1 million
compared with the second quarter of 2023. Adjusted Operating Margin
was 3.1% for the second quarter of 2024 compared to 2.9% for the
second quarter of 2023. The net change in margin on unearned
revenue negatively impacted net income (loss) by $0.1 million and
Adjusted Operating Income by $0.2 million.
Year-to-Date 2024 Summary
- Net revenue increased 4.2% to $934.5 million compared to the
prior-year period and was primarily driven by growth from new store
sales, Adjusted Comparable Store Sales Growth and the effect of
unearned revenue, partially offset by the effect of converted and
closed stores. 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 1.8% and Adjusted Comparable
Store Sales Growth was 1.3%, primarily due to higher average ticket
and an increase in customer transactions.
- The Company opened 31 new stores, and converted 20 Eyeglass
World stores to America's Best stores, and ended the period with
1,216 stores. Overall, store count grew 5.6% from July 1, 2023 to
June 29, 2024.
- Costs applicable to revenue increased 6.2% to $389.1 million
compared to the prior-year period. As a percentage of net revenue,
compared with the prior-year period, costs applicable to revenue
increased 70 basis points to 41.6%, mainly due to lower eyeglass
mix and an increase in optometrist-related costs as well as other
mix and margin effects. As a percentage of revenue, these increased
costs were partially offset by higher exam revenue.
- SG&A increased 4.4% to $471.5 million compared with the
same period in 2023. Adjusted SG&A increased 2.3% to $452.3
million compared with the same period in 2023. As a percentage of
net revenue, SG&A increased 10 basis points to 50.5% compared
with the same period of 2023, mainly due to litigation settlement
and legal and professional expenses as well as other operating
expenses, partially offset by decreases in performance-based
incentive compensation. As a percentage of net revenue, Adjusted
SG&A decreased 90 basis points driven by a decrease in
performance-based incentive compensation, partially offset by other
operating expenses.
- Depreciation and amortization expense of $45.9 million
increased 4.2% from the prior-year period, primarily due to new
store openings and investments in remote medicine technology.
- Income from continuing operations, net of tax, decreased to
$10.7 million compared to $18.7 million in the same period in 2023.
Income from continuing operations, net of tax, margin decreased to
1.1% compared to 2.1% in the same period in 2023.
- Diluted EPS from continuing operations decreased to $0.14
compared to $0.24 in the same period in 2023. Adjusted Diluted EPS
increased to $0.44 compared to $0.41 in the same period in 2023.
The net change in margin on unearned revenue benefited both Diluted
EPS and Adjusted Diluted EPS by $0.02.
- Adjusted Operating Income increased 6.7% to $48.0 million
compared with the same period of 2023. Adjusted Operating Margin
was 5.1% compared with 5.0% for the same period in 2023. The net
change in margin on unearned revenue benefited net income by $1.7
million and Adjusted Operating Income by $2.3 million.
Balance Sheet and Cash Flow Highlights as of June 29,
2024
- National Vision’s cash balance was $179.5 million as of June
29, 2024. 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 $456.8 million as of June 29, 2024, consisting
of outstanding first lien term loans, 2.50% convertible senior
notes due on May 15, 2025 (“2025 Notes”) and finance lease
obligations, net of unamortized discounts.
- Cash flows from operating activities for the first six months
of 2024 were $75.4 million compared to $112.2 million for the same
period in 2023.
- Capital expenditures for the first six months of 2024 totaled
$39.6 million compared to $54.1 million for the same period in
2023.
Termination of AC Lens Business
As previously announced on July 26, 2023, the Company’s
Management and Services Agreement with Walmart Inc. (“Walmart MSA”)
terminated as of February 23, 2024. This included supplying and
operating Vision Centers in 225 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.
During the second quarter of 2024, the Company wound down its
remaining AC Lens operations, including the closure of its Ohio
distribution center, which largely supported the wholesale
distribution and e-commerce contact lens services that the Company
provided to Walmart and Sam’s Club, such that AC Lens operations
are included in discontinued operations for all periods
presented.
New Actions to Accelerate Transformation
The Company announced a new phase of its transformation which
includes new additions to its executive leadership team, continued
expansion of exam capacity, new traffic-driving initiatives and
initiatives to strengthen the foundation of the business for
profitable growth. As part of this transformation, the Company has
initiated a review of all stores to optimize the fleet and is
evaluating its deployment of capital as it considers new store
opening plans in 2025.
Separately, today the Company issued a press release announcing
leadership changes, including the appointment of Alex Wilkes as
National Vision’s President, effective August 19, 2024, and that
Patrick Moore, the Company’s Chief Operating Officer, has shared
his plans to retire at the end of the year. The press release is
available on the Company’s website.
Fiscal 2024 Outlook
National Vision’s fiscal 2024 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. Unless otherwise noted, the
outlook below is on a continuing operations basis.
The Company is providing the following updated outlook for the
52 weeks ending December 28, 2024:
Prior Total Company Fiscal
2024 Outlook
(as of May 8, 2024)
Prior Continuing
Operations
Fiscal 2024 Outlook*
(as of May 8, 2024)
Updated Continuing
Operations
Fiscal 2024 Outlook**
(As of August 7, 2024)
New Stores
65 - 70
65-70
Adjusted Comparable Store Sales
Growth1
2.0% - 4.0%
0.5% - 1.5%
Net Revenue (billions)
$1.965 - $2.005
$1.825 - $1.865
$1.820 - $1.840
Adjusted Operating Income (millions)
$61 - $76
$60 - $75
$57 - $62
Adjusted Diluted EPS2
$0.50 - $0.65
$0.45 - $0.50
Depreciation and Amortization3
(millions)
$95 - $100
$94 - $99
Interest4 (millions)
$7 - $9
$7 - $9
Tax Rate5
26% to 28%
26% to 28%
Capital Expenditures (millions)
$110 - $115
$110 - $115
*As detailed on slide 14 in the Q1 2024
Earnings Presentation; reflected exclusion of estimated
discontinued operations for the six months ended June 29, 2024
including $140M in revenue and $1M in Adjusted Operating Income
**Reflects current outlook and exclusion
of actual discontinued operations for the six months ended June 29,
2024 which included $132M in revenue and $0.7M in Adjusted
Operating Income
1 Refer to the Reconciliation of Adjusted
Comparable Stores Sales Growth to Total Comparable Store Sales
Growth.
2 Assumes approximately 79 million shares,
and does not include 9.7 million shares attributable to the 2025
Notes as the Company anticipates them to be anti-dilutive to
earnings per share for fiscal year 2024.
3 Includes amortization of acquisition
intangibles of approximately $1.5 million for continuing
operations, which is excluded in the definition of Adjusted
Operating Income.
4 Before the impact of gains or losses on
change in fair value of derivatives and charges related to debt
discounts and deferred financing costs.
5 Excluding the impact of vesting of
restricted stock units and stock option exercises.
The fiscal 2024 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 comparable GAAP measures
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 2024 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 2024 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 the second quarter 2024 financial
results and fiscal-year 2024 guidance today, August 7, 2024, 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
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 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. (NASDAQ: EYE) is one of the largest optical retail
companies in the United States with more than 1,200 stores in 38
states and Puerto Rico. With a mission of helping people by making
quality eye care and eyewear more affordable and accessible, the
company operates four retail brands: America’s Best Contacts &
Eyeglasses, Eyeglass World, and Vista Opticals inside select Fred
Meyer stores and on select military bases, and e-commerce websites,
offering a variety of products and services for customers’ eye care
needs. For more information, please visit
www.nationalvision.com.
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 2024 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, the termination of
our partnership with Walmart, including the transition period and
other wind down activities, will have an impact on our business,
revenues, profitability and cash flows, which impact could be
material; market volatility, an overall decline in the health of
the economy and other factors impacting consumer spending,
including inflation, uncertainty in financial markets, recessionary
conditions, escalated interest rates, the timing and issuance of
tax refunds, governmental instability, war and natural disasters,
may affect consumer purchases, which could reduce demand for our
products and materially harm our sales, profitability and financial
condition; failure to recruit and retain vision care professionals
for in-store roles or to provide remote care offerings could
adversely affect our business, financial condition and results of
operations; the optical retail industry is highly competitive, and
if we do not compete successfully, our business may be adversely
impacted; if we fail to open and operate new stores in a timely and
cost-effective manner or fail to successfully enter new markets,
our financial performance could be materially and adversely
affected; if the performance of our Host brands declines or we are
unable to maintain or extend our operating relationships with our
Host partners, our business, profitability and cash flows may be
adversely affected and we may be required to incur impairment
charges; we are a low-cost provider and our business model relies
on the low-cost of inputs and factors such as wage rate increases,
inflation, cost increases, increases in the price of raw materials
and energy prices could have a material adverse effect on our
business, financial condition and results of operations; we require
significant capital to fund our expanding business, including
updating our Enterprise Resource Planning (“ERP”) and Customer
Relationship Management (“CRM”), and other technological, systems
and capabilities; our growth strategy could strain our existing
resources and cause the performance of our existing stores to
suffer; our success depends upon our marketing, advertising and
promotional efforts and if we are unable to implement them
successfully or efficiently, or if our competitors are more
effective than we are, we may experience a material adverse effect
on our business, financial condition and results of operations; we
are subject to risks associated with leasing substantial amounts of
space, including future increases in occupancy costs; certain
technological advances, greater availability of, or increased
consumer preferences for, vision correction alternatives to
prescription eyeglasses or contact lenses, or future drug
development for the correction of vision-related problems may
reduce the demand for our products and adversely impact our
business and profitability; if we fail to retain our existing
senior management team or attract qualified new personnel such
failure could have a material adverse effect on our business,
financial condition and results of operations; our profitability
and cash flows may be negatively affected if we are not successful
in managing our inventory balances and inventory shrinkage; our
operating results and inventory levels fluctuate on a seasonal
basis; our e-commerce and omni-channel business faces distinct
risks, and our failure to successfully manage those risks could
have a negative impact on our profitability; we depend on our
distribution centers and/or optical laboratories; we may incur
losses arising from our investments in technological innovators in
the optical retail industry, including artificial intelligence,
which would negatively affect our financial results; ESG issues,
including those related to climate change, could have a material
adverse effect on our business, financial condition and results of
operations; changing climate and weather patterns leading to severe
weather and disasters may cause significant business interruptions
and expenditures; future operational success depends on our ability
to develop, maintain and extend relationships with managed vision
care companies, vision insurance providers and other third-party
payors; we face risks associated with vendors from whom our
products are sourced and are dependent on a limited number of
suppliers; we rely heavily on our information technology systems,
as well as those of our vendors, for our business to effectively
operate and to safeguard confidential information; any significant
failure, inadequacy, interruption or security breach could
adversely affect our business, financial condition and operations;
we rely on third-party coverage and reimbursement, including
government programs, for an increasing portion of our revenues, the
future reduction of which could adversely affect our results of
operations; we are subject to extensive state, local and federal
vision care and healthcare laws and regulations and failure to
adhere to such laws and regulations would adversely affect our
business; we are subject to managed vision care laws and
regulations; we are subject to rapidly changing and increasingly
stringent laws, regulations, contractual obligations, and industry
standards relating to privacy, data security and data protection
which could subject us to liabilities that adversely affect our
business, operations and financial performance; we could be
adversely affected by product liability, product recall or personal
injury issues; failure to comply with laws, regulations and
enforcement activities or changes in statutory, regulatory,
accounting and other legal requirements could potentially impact
our operating and financial results; adverse judgments or
settlements resulting from legal proceedings relating to our
business operations could materially adversely affect our business,
financial condition and results of operations; we may not be able
to adequately protect our intellectual property, which could harm
the value of our brand and adversely affect our business; we have a
significant amount of indebtedness which could adversely affect our
business and financial position, including limiting our business
flexibility and preventing us from meeting our debt obligations; a
change in interest rates may adversely affect our business; our
credit agreement contains restrictions that limit our flexibility
in operating our business; conversion of the 2025 Notes could
dilute the ownership interest of existing stockholders or may
otherwise depress the price of our common stock; and risks related
to owning our common stock, including our ability to comply with
requirements to design and implement and maintain effective
internal controls. Additional information about these and other
factors that could cause National Vision’s results to differ
materially from those described in the forward-looking statements
can be found in filings by National Vision with the Securities and
Exchange Commission (“SEC”), including our 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 from continuing operations as
net income, minus income (loss) from discontinued operations, net
of tax, plus interest expense (income), net, income tax provision
(benefit), and depreciation and amortization.
Adjusted Operating Income: We define Adjusted Operating
Income from continuing operations as net income, minus income
(loss) from discontinued operations, net of tax, 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, Enterprise Resource Planning
(“ERP”) and Customer Relationship Management ("CRM") implementation
expenses and certain other expenses.
Adjusted Operating Margin: We define Adjusted Operating
Margin from continuing operations as Adjusted Operating Income from
continuing operations as a percentage of total net revenue.
Adjusted EBITDA: We define Adjusted EBITDA from
continuing operations as net income, minus income (loss) from
discontinued operations, net of tax, 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 and
CRM implementation expenses and certain other expenses.
Adjusted EBITDA Margin: We define Adjusted EBITDA Margin
from continuing operations as Adjusted EBITDA from continuing
operations as a percentage of total net revenue.
Adjusted Diluted EPS: We define Adjusted Diluted EPS from
continuing operations as diluted earnings per share, minus diluted
earnings per share from discontinued operations, 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 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 per share, derivative fair value
adjustments, ERP and CRM implementation expenses, certain other
expenses, and related tax effects.
Adjusted SG&A: We define Adjusted SG&A from
continuing operations as SG&A from continuing operations
adjusted to exclude stock-based compensation expense, litigation
settlement, secondary offering expenses, management realignment
expenses, long-term incentive plan expense, ERP and CRM
implementation expenses, and certain other expenses.
Adjusted SG&A Percent of Net Revenue: We define
Adjusted SG&A Percent of Net Revenue from continuing operations
as Adjusted SG&A from continuing operations as a percentage of
total 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 or the ratio of net income to net revenue as a measure
of financial performance, SG&A, the ratio of SG&A to net
revenue as a measure of financial performance, cash flows provided
by operating activities as a measure of liquidity, comparable store
sales growth as a measure of operating performance, or any other
performance measure derived in accordance with 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.
Adjustment to Method of Tax Provision Calculation
The Company’s quarterly provision (benefit) for income taxes has
historically been calculated using the annualized effective tax
rate method (“AETR method”), which applies an estimated annual
effective tax rate to pre-tax income or loss. For the three and six
months ended June 29, 2024, the Company determined that the AETR
method would not provide a reliable estimate for its tax provision
(benefit) due to the fact that small changes in the Company’s
estimated pre-tax income or loss would result in significant
changes in the estimated AETR. Accordingly, for these periods, the
Company instead elected to calculate its provision (benefit) for
income taxes using a discrete effective tax rate (“ETR”)
method.
National Vision Holdings, Inc.
and Subsidiaries
Condensed Consolidated Balance
Sheets (Unaudited)
In Thousands, Except Par Value
As of
June 29, 2024
As of
December 30, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
179,515
$
149,896
Accounts receivable, net
61,068
86,854
Inventories
90,956
119,908
Prepaid expenses and other current
assets
32,863
40,012
Total current assets
364,402
396,670
Noncurrent assets:
Property and equipment, net
357,057
360,187
Goodwill
717,544
717,544
Trademarks and trade names
240,547
240,547
Other intangible assets, net
19,385
20,173
Right of use assets
414,446
406,275
Other assets
32,919
28,336
Noncurrent assets of discontinued
operations
—
2,779
Total noncurrent assets
1,781,898
1,775,841
Total assets
$
2,146,300
$
2,172,511
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
49,969
$
67,556
Other payables and accrued expenses
110,004
123,288
Unearned revenue
39,471
48,117
Deferred revenue
63,835
62,867
Current maturities of long-term debt and
finance lease obligations
312,888
10,480
Current operating lease obligations
86,994
85,090
Current liabilities of discontinued
operations
—
302
Total current liabilities
663,161
397,700
Noncurrent liabilities:
Long-term debt and finance lease
obligations, less current portion and debt discount
143,927
450,771
Noncurrent operating lease obligations
382,548
376,814
Deferred revenue
22,416
21,459
Other liabilities
8,381
8,465
Deferred income taxes, net
82,459
87,884
Total non-current liabilities
639,731
945,393
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 200,000
shares authorized; 85,267 and 84,831 shares issued as of June 29,
2024 and December 30, 2023, respectively; 78,628 and 78,311 shares
outstanding as of June 29, 2024 and December 30, 2023,
respectively
853
848
Additional paid-in capital
796,812
788,967
Accumulated other comprehensive loss
(64
)
(419
)
Retained earnings
263,176
254,616
Treasury stock, at cost; 6,639 and 6,520
shares as of June 29, 2024 and December 30, 2023, respectively
(217,369
)
(214,594
)
Total stockholders’ equity
843,408
829,418
Total liabilities and stockholders’
equity
$
2,146,300
$
2,172,511
National Vision Holdings, Inc.
and Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended
Six Months Ended
In Thousands, Except Earnings (Loss) Per
Share
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Revenue:
Net product sales
$
361,967
$
352,180
$
750,050
$
732,333
Net sales of services and plans
89,766
79,606
184,477
164,265
Total net revenue
451,733
431,786
934,527
896,598
Costs applicable to revenue (exclusive
of depreciation and amortization):
Products
111,213
106,362
224,417
217,436
Services and plans
82,367
73,960
164,709
149,013
Total costs applicable to revenue
193,580
180,322
389,126
366,449
Operating expenses:
Selling, general and administrative
expenses
231,353
222,924
471,481
451,600
Depreciation and amortization
22,692
22,089
45,913
44,045
Asset impairment
3,519
893
3,975
1,247
Other expense (income), net
(2
)
(3
)
(1
)
(104
)
Total operating expenses
257,562
245,903
521,368
496,788
Income from operations
591
5,561
24,033
33,361
Interest expense, net
3,196
1,836
7,452
6,703
Earnings (loss) from continuing operations
before income taxes
(2,605
)
3,725
16,581
26,658
Income tax provision (benefit)
(1,564
)
88
5,869
8,007
Income (loss) from continuing operations,
net of tax
(1,041
)
3,637
10,712
18,651
Income (loss) from discontinued
operations, net of tax
(2,084
)
1,977
(2,152
)
5,233
Net income (loss)
$
(3,125
)
$
5,614
$
8,560
$
23,884
Basic earnings (loss) per
share:
Continuing operations
$
(0.01
)
$
0.05
$
0.14
$
0.24
Discontinued operations
$
(0.03
)
$
0.03
$
(0.03
)
$
0.07
Total
$
(0.04
)
$
0.07
$
0.11
$
0.30
Diluted earnings (loss) per
share:
Continuing operations
$
(0.01
)
$
0.05
$
0.14
$
0.24
Discontinued operations
$
(0.03
)
$
0.03
$
(0.03
)
$
0.07
Total
$
(0.04
)
$
0.07
$
0.11
$
0.30
Weighted average shares
outstanding:
Basic
78,575
78,101
78,480
78,411
Diluted
78,575
78,343
78,774
78,784
Comprehensive income (loss):
Net income (loss)
$
(3,125
)
$
5,614
$
8,560
$
23,884
Unrealized gain on hedge instruments
229
255
483
508
Tax provision of unrealized gain on hedge
instruments
64
65
128
130
Comprehensive income (loss)
$
(2,960
)
$
5,804
$
8,915
$
24,262
Note: Diluted EPS related to the 2025
Notes is calculated using the if-converted method. The 2025 Notes
were anti-dilutive for all periods disclosed above and excluded
from the computation of the weighted average shares for diluted
EPS. Some totals in the table above do not foot due to rounding
differences.
National Vision Holdings, Inc.
and Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Six Months Ended
In Thousands
June 29, 2024
July 1, 2023
Cash flows from operating
activities:
Net income
$
8,560
$
23,884
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
47,244
49,742
Amortization of debt discount and deferred
financing costs
1,261
1,800
Amortization of cloud computing
implementation costs
2,330
1,289
Asset impairment
3,975
1,280
Deferred income tax expense (benefit)
(5,425
)
1,220
Stock-based compensation expense
7,246
9,788
Losses (gains) on change in fair value of
derivatives
(66
)
(1,750
)
Inventory adjustments
2,951
1,996
Other
1,218
1,509
Changes in operating assets and
liabilities:
Accounts receivable
24,351
560
Inventories
26,000
290
Operating lease right of use assets and
lease liabilities
(1,722
)
525
Other assets
1,248
2,239
Accounts payable
(17,587
)
(1,168
)
Deferred and unearned revenue
(6,721
)
824
Other liabilities
(19,415
)
18,188
Net cash provided by operating
activities
75,448
112,216
Cash flows from investing
activities:
Purchase of property and equipment
(39,620
)
(54,120
)
Other
1,577
(665
)
Net cash used for investing activities
(38,043
)
(54,785
)
Cash flows from financing
activities:
Repayments on long-term debt
(3,750
)
—
Proceeds from issuance of common stock
670
945
Purchase of treasury stock
(2,775
)
(27,611
)
Payments of debt issuance costs
—
(2,869
)
Payments on finance lease obligations
(1,585
)
(2,536
)
Net cash used for financing activities
(7,440
)
(32,071
)
Net change in cash, cash equivalents and
restricted cash
29,965
25,360
Cash, cash equivalents and restricted
cash, beginning of year
151,027
230,624
Cash, cash equivalents and restricted
cash, end of period
$
180,992
$
255,984
Supplemental cash flow disclosure
information:
Cash paid for interest
$
4,196
$
5,399
Cash paid for taxes
$
5,084
$
4,347
Capital expenditures accrued at the end of
the period
$
12,124
$
10,770
National Vision Holdings, Inc.
and Subsidiaries
Reconciliation of Non-GAAP to
GAAP Financial Measures (Unaudited)
Reconciliation of Adjusted Operating
Income from Continuing Operations to Net Income (Loss)
Three Months Ended
Six Months Ended
In thousands
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Net income (loss)
(3,125
)
5,614
8,560
23,884
Income (loss) from discontinued
operations, net of tax
(2,084
)
1,977
(2,152
)
5,233
Income (loss) from continuing
operations, net of tax
$
(1,041
)
$
3,637
$
10,712
$
18,651
Interest expense, net
3,196
1,836
7,452
6,703
Income tax provision (benefit)
(1,564
)
88
5,869
8,007
Stock-based compensation expense (a)
4,750
5,172
7,164
9,221
Asset impairment (b)
3,519
893
3,975
1,247
Litigation settlement (c)
—
—
4,450
—
ERP and CRM implementation expenses
(f)
2,141
—
2,657
—
Other (g)
3,072
743
5,688
1,105
Adjusted Operating Income from
continuing operations
$
14,073
$
12,369
$
47,967
$
44,934
Income (loss) from continuing
operations, net of tax margin
(0.2
)%
0.8
%
1.1
%
2.1
%
Adjusted Operating Margin from
continuing operations
3.1
%
2.9
%
5.1
%
5.0
%
Note: Percentages reflect line item as a
percentage of total net revenue, adjusted for rounding.
Reconciliation of EBITDA from
Continuing Operations and Adjusted EBITDA from Continuing
Operations to Net Income (Loss)
Three Months Ended
Six Months Ended
In thousands
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Net income (loss)
(3,125
)
5,614
8,560
23,884
Income (loss) from discontinued
operations, net of tax
(2,084
)
1,977
(2,152
)
5,233
Income (loss) from continuing
operations, net of tax
$
(1,041
)
$
3,637
$
10,712
$
18,651
Interest expense, net
3,196
1,836
7,452
6,703
Income tax provision (benefit)
(1,564
)
88
5,869
8,007
Depreciation and amortization
22,692
22,089
45,913
44,045
EBITDA from continuing
operations
23,283
27,650
69,946
77,406
Stock-based compensation expense (a)
4,750
5,172
7,164
9,221
Asset impairment (b)
3,519
893
3,975
1,247
Litigation settlement (c)
—
—
4,450
—
ERP and CRM implementation expenses
(f)
2,141
—
2,657
—
Other (g)
2,690
361
4,925
342
Adjusted EBITDA from continuing
operations
$
36,383
$
34,076
$
93,117
$
88,216
Income (loss) from continuing operations, net of tax margin
(0.2
)%
0.8
%
1.1
%
2.1
%
Adjusted EBITDA Margin from continuing
operations
8.1
%
7.9
%
10.0
%
9.8
%
Note: Percentages reflect line item as a
percentage of total net revenue, adjusted for rounding.
Reconciliation of Adjusted Diluted EPS
from Continuing Operations to Diluted EPS
Three Months Ended
Six Months Ended
Shares in thousands, except per share
amounts
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Diluted EPS
$
(0.04
)
$
0.07
$
0.11
$
0.30
Diluted EPS from discontinued
operations
(0.03
)
0.03
(0.03
)
0.07
Diluted EPS from continuing
operations
$
(0.01
)
$
0.05
$
0.14
$
0.24
Stock-based compensation expense (a)
0.06
0.07
0.09
0.12
Asset impairment (b)
0.04
0.01
0.05
0.02
Litigation settlement (c)
—
—
0.06
—
Amortization of debt discount and deferred
financing costs (d)
0.01
0.01
0.02
0.02
Derivatives fair value adjustments (e)
0.04
0.00
0.07
0.04
ERP and CRM implementation expenses
(f)
0.03
—
0.03
—
Other (g)
0.04
0.01
0.07
0.02
Tax effects (h)
(0.05
)
(0.03
)
(0.09
)
(0.04
)
Adjusted Diluted EPS from continuing
operations
$
0.15
$
0.12
$
0.44
$
0.41
Weighted average diluted shares
outstanding
78,575
78,343
78,774
78,784
Note: Some of the totals in the table
above do not foot due to rounding differences.
Reconciliation of Adjusted Diluted EPS
from Discontinued Operations to Diluted EPS from Discontinued
Operations
Three Months Ended
Six Months Ended
Shares in thousands, except per share
amounts
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Diluted EPS from discontinued
operations
$
(0.03
)
$
0.03
$
(0.03
)
$
0.07
Stock-based compensation expense (a)
0.00
0.00
0.00
0.01
Asset impairment (b)
—
—
—
0.00
Other (i)
0.04
0.02
0.07
0.04
Tax effects (h)
(0.01
)
(0.01
)
(0.02
)
(0.01
)
Adjusted Diluted EPS from discontinued
operations
$
0.00
$
0.04
$
0.03
$
0.10
Weighted average diluted shares
outstanding
78,575
78,343
78,774
78,784
Note: Some of the totals in the table
above do not foot due to rounding differences.
Reconciliation of Adjusted SG&A
from Continuing Operations to SG&A from Continuing
Operations
Three Months Ended
Six Months Ended
In thousands
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
SG&A from continuing
operations
$
231,353
$
222,924
$
471,481
$
451,600
Stock-based compensation expense (a)
4,750
5,172
7,164
9,221
Litigation settlement (c)
—
—
4,450
—
ERP and CRM implementation expenses
(f)
2,141
—
2,657
—
Other (g)
2,690
365
4,925
346
Adjusted SG&A from continuing
operations
$
221,772
$
217,387
$
452,285
$
442,033
SG&A from continuing operations
Percent of Net Revenue
51.2
%
51.6
%
50.5
%
50.4
%
Adjusted SG&A from continuing
operations Percent of Net Revenue
49.1
%
50.3
%
48.4
%
49.3
%
Note: Percentages reflect line item as a
percentage of total 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 impairment of property, equipment
and lease-related assets on closed or underperforming stores.
(c)
Expenses associated with settlement of
certain litigation.
(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)
The adjustments for the derivative fair
value (gains) and losses have the effect of adjusting the (gain) or
loss for changes in the fair value of derivative instruments and
amortization of AOCL for derivatives not designated as accounting
hedges. This results in reflecting derivative (gains) and losses
within Adjusted Diluted EPS during the period the derivative is
settled.
(f)
Costs related to the Company’s ERP and CRM
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 related to costs associated with the digitization of
paper-based records of $2.3 million and $4.1 million for the three
and six months ended June 29, 2024, respectively, and other
expenses and adjustments. Other adjustments for both Adjusted
Operating Income and Adjusted Diluted EPS include 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.
Adjusted Diluted EPS is also adjusted to include debt issuance
costs. Other adjustments for Adjusted SG&A exclude gains and
losses on other investments.
(h)
Represents the income tax effect of the
total adjustments at our combined statutory federal and state
income tax rates, including tax expense (benefit) from stock-based
compensation.
(i)
Represents primarily costs related to the
Walmart partnership termination and wind down of AC Lens of $2.9
million and $5.7 million for the three and six months ended June
29, 2024, respectively. and 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 of $1.5 million and
$3.0 million for the three and six months ended July 1, 2023,
respectively.
Reconciliation of Adjusted Comparable
Store Sales Growth from Continuing Operations to Total Comparable
Store Sales Growth from Continuing Operations
Comparable store sales growth
from continuing operations (a)
Three Months
Ended June
29, 2024
Three Months
Ended July 1,
2023
Six Months
Ended June 29,
2024
Six Months
Ended July 1,
2023
2024 Outlook (b)
Owned & Host segment
America’s Best
2.9
%
1.8
%
2.0
%
1.8
%
Eyeglass World
(0.5
)%
(2.8
)%
(2.9
)%
(2.0
)%
Military
(0.1
)%
(0.1
)%
(0.8
)%
1.6
%
Fred Meyer
(2.7
)%
(4.2
)%
(4.3
)%
(6.9
)%
Total comparable store sales growth
from continuing operations
2.2
%
(0.2
)%
1.8
%
1.6
%
1.0% - 2.0%
Adjustments for effects of: (b)
Unearned & deferred revenue
0.2
%
1.3
%
(0.5
)%
(0.4
)%
Adjusted Comparable Store Sales Growth
from continuing operations
2.4
%
1.1
%
1.3
%
1.2
%
0.5% - 1.5%
(a)
Total comparable store sales is calculated
based on consolidated net revenue from continuing operations
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 12.
“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 June 29, 2024.
(b)
Adjusted Comparable Store Sales Growth
from continuing operations includes the effect of deferred and
unearned revenue as if such revenues were earned at the point of
sale, resulting in the changes from total comparable store sales
growth from continuing operations based on consolidated net revenue
from continuing operations; with respect to the Company’s 2024
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240807649435/en/
Investor contact: investor.relations@nationalvision.com
National Vision Holdings, Inc. Tamara Gonzalez
ICR, Inc. Caitlin Churchill
Media contact: media@nationalvision.com
National Vision Holdings, Inc. Racheal Peters
National Vision (NASDAQ:EYE)
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