National Vision Holdings, Inc. Reports Fourth Quarter and Fiscal 2020 Financial Results

Rhea-AI Summary

National Vision, trading under NASDAQ: EYE, reported robust fourth quarter results for FY 2020, marking a 23.6% increase in net revenue to $496.7 million. Net income surged 795% to $35.1 million, with diluted EPS up 779% to $0.42. Adjusted EBITDA soared 118% to $83.5 million. Despite a fiscal year revenue dip of 0.7% to $1.71 billion, the company anticipates opening approximately 75 new stores in 2021 and expects adjusted diluted EPS between $0.88 - $0.93.

Positive

• Net revenue up 23.6% to $496.7 million in Q4 2020.
• Net income increased 795% to $35.1 million; diluted EPS reached $0.42.
• Adjusted EBITDA rose 118% to $83.5 million.
• Expansion plans increased with a projected 2,150 total stores.

Negative

• Fiscal 2020 net revenue decreased 0.7% to $1.71 billion.
• Comparable store sales growth fell by 5.6%.

National Vision Holdings, Inc. (NASDAQ: EYE) (“National Vision” or the “Company”) today reported its financial results for the fourth quarter and fiscal year ended January 2, 2021 and is providing its outlook for fiscal 2021.

Note: The fourth quarter of fiscal 2020 consisted of 14 weeks compared with 13 weeks for the prior year. The 14th week added $32.2 million to net revenue and approximately $0.01 to diluted EPS for the quarter and the year. The additional week is not included in comparable store sales growth and Adjusted Comparable Store Sales Growth for the quarter or the year.

Fourth Quarter 2020 Summary:

• Net revenue increased 23.6% to $496.7 million
• Comparable store sales growth of 14.3%; Adjusted Comparable Store Sales Growth of 10.6%
• Net income increased 795% to $35.1 million; Diluted EPS increased 779% to $0.42
• Adjusted EBITDA increased 118% to $83.5 million; Adjusted Operating Income increased 281% to $62.8 million
• Adjusted Diluted EPS increased 372% to $0.45
• Cash balance of $374 million
• Increases America's Best and Eyeglass World whitespace to at least 2,150 stores

Reade Fahs, chief executive officer, stated, “As I reflect on 2020 in general and the fourth quarter in particular, I could not be more pleased with how the National Vision team rallied to serve our patients and customer’s needs while maintaining a core focus on “safety first.” In the fourth quarter, we once again posted double digit comps. Our low cost eye care and eyewear offerings seem to be even more in demand during this pandemic economy.”

Mr. Fahs continued, “We are excited to announce that, based on independent research, we have raised our long-term projected whitespace opportunity by 300 stores to at least 2,150 locations, allowing us to further increase penetration in both existing and new markets. As a result, we believe America’s Best can grow to at least 1,300 locations - up from our previous estimate of 1,000 - and continue to believe that Eyeglass World can grow to at least 850 stores. With the hastening of industry trends that seem to favor our value-oriented free-standing models, we believe that the optical category in a post-COVID environment remains ripe for our expansion.”

Mr. Fahs concluded, “Entering 2021, we are off to a solid start despite severe weather disruptions in February. I want to thank the 2,000-plus affiliated optometrists and over 12,000 associates for their tireless hard work and continued commitment to serve our patients and customers. While significant uncertainty remains, I am confident that we have what it takes to navigate the rest of this pandemic and beyond.”

Adjusted Comparable Store Sales Growth, Adjusted EBITDA, Adjusted Operating Income, Adjusted Diluted EPS, Adjusted Operating Margin, and Adjusted EBITDA Margin are not measures recognized under generally accepted accounting principles (“GAAP”). Please see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for more information.

Fourth Quarter 2020 Highlights

• Net revenue increased 23.6% to $496.7 million from $401.8 million for the fourth quarter of 2019. Net revenue growth was positively impacted by 2.8% due to the timing of unearned revenue.
• The 14th week in the fourth quarter of fiscal 2020 added $32.2 million to net revenue and approximately $0.01 to diluted EPS for the quarter and the year.
• Comparable store sales growth was 14.3% and Adjusted Comparable Store Sales Growth was 10.6%.
• The Company opened five new stores, closed one store, and ended the quarter with 1,205 stores.
• Costs applicable to revenue increased 15.4% to $216.5 million from $187.5 million for the fourth quarter of 2019. As a percentage of net revenue, costs applicable to revenue decreased 310 basis points to 43.6% from 46.7% for the fourth quarter of 2019. This decrease, as a percentage of net revenue, was primarily driven by increased eyeglass mix, higher eyeglass margin, and lower growth in optometrist costs.
• Selling, general and administrative expenses (“SG&A”) increased 12.2% to $199.8 million from $178.0 million for the fourth quarter of 2019. As a percentage of net revenue, SG&A decreased 410 basis points to 40.2% from 44.3% for the fourth quarter of 2019. This decrease, as a percentage of net revenue, was driven bystore and corporate payroll expense, occupancy expense and corporate overhead leverage. SG&A for the fourth quarter of 2020 was impacted by $0.8 million of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic.
• Net income increased 795% to $35.1 million compared to $3.9 million for the fourth quarter of 2019.
• Diluted earnings per share increased 779% to $0.42 compared to $0.05 for the fourth quarter of 2019. Adjusted Diluted EPS increased 372% to $0.45 compared to $0.09 for the fourth quarter of 2019. The net change in margin on unearned revenue benefited Adjusted Diluted EPS by $0.07.
• Adjusted EBITDA increased 118% to $83.5 million compared to $38.3 million for the fourth quarter of 2019. Adjusted EBITDA Margin increased 730 basis points to 16.8% from 9.5% for the fourth quarter of 2019.
• Adjusted Operating Income increased 281% to $62.8 million compared to $16.5 million for the fourth quarter of 2019. Adjusted Operating Margin increased 850 basis points to 12.6% from 4.1% for the fourth quarter of 2019. The net change in margin on unearned revenue benefited Adjusted EBITDA and Adjusted Operating Income by $8.9 million.

Fiscal 2020 Highlights

• Net revenue decreased 0.7% to $1.71 billion from $1.72 billion for fiscal year 2019. Net revenue growth was negatively impacted by 0.2% due to the timing of unearned revenue.
• Comparable store sales growth was (5.6)% and Adjusted Comparable Store Sales Growth was (6.1)%.
• The Company opened 57 stores, transitioned five Vision Centers in Walmart stores to its management, closed eight stores and ended the period with 1,205 stores. Overall, store count grew 4.7% from December 29, 2019 to January 2, 2021. In July, the Company entered into an amendment to its existing Management & Services Agreement (“MSA”) with Walmart Inc. that extended the current term and economics of the MSA by three years to February 23, 2024.
• Costs applicable to revenue decreased 2.5% to $786.6 million from $806.5 million for fiscal year 2019. As a percentage of net revenue, costs applicable to revenue decreased 80 basis points to 46.0% from 46.8% for fiscal year 2019. This decrease as a percentage of net revenue was primarily driven by higher eyeglass margin, partially offset by increased contact lens mix and optometrist costs incurred during temporary store closures in response to the COVID-19 pandemic.
• SG&A decreased 3.2% to $720.6 million from $744.5 million for fiscal year 2019. As a percentage of net revenue, SG&A decreased 110 basis points to 42.1% from 43.2% for fiscal year 2019. This decrease as a percentage of net revenue was primarily driven by lower advertising investment partially offset by store and corporate payroll and occupancy expenses incurred during temporary store closures. SG&A for fiscal 2020 includes $8.6 million of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic.
• Net income increased 10.6% to $36.3 million compared to $32.8 million for fiscal year 2019.
• Diluted earnings per share increased 9.1% to $0.44 compared to $0.40 for fiscal year 2019. Adjusted Diluted EPS increased 21.9% to $0.91 compared to $0.75 for fiscal year 2019. The net change in margin on unearned revenue negatively impacted Adjusted Diluted EPS by $0.02.
• Adjusted EBITDA increased 12.4% to $218.3 million compared to $194.1 million for fiscal year 2019. Adjusted EBITDA Margin increased 150 basis points to 12.8% from 11.3% for fiscal year 2019.
• Adjusted Operating Income increased 17.4% to $134.1 million compared to $114.3 million for fiscal year 2019. Adjusted Operating Margin increased 120 basis points to 7.8% from 6.6% for 2019. The net change in margin on unearned revenue negatively impacted Adjusted EBITDA and Adjusted Operating Income by $2.8 million.

Balance Sheet and Cash Flow Highlights

• The Company’s cash balance was $373.9 million as of January 2, 2021. The Company had no borrowings under its $300.0 million first lien revolving credit facility, exclusive of letters of credit of $6.4 million.
• Total debt was $655.4 million as of January 2, 2021, consisting of outstanding first lien term loans, convertible senior notes and finance lease obligations, net of unamortized discounts.
• Cash flows from operating activities for 2020 increased to $235.0 million compared to $165.1 million for 2019.
• Capital expenditures for 2020 totaled $76.8 million compared to $101.3 million for 2019, primarily due to a delay in the timing of new store capital investments.

Fiscal 2021 Outlook

The Company is continuing its practice of providing selected full year guidance for 2021 and the outlook reflects current expected impacts related to COVID. However, the Company anticipates potential significant volatility driven by ongoing uncertainty related to the pandemic. The outlook currently assumes no material deterioration as a result of COVID, government actions and regulations, including potential changes to the federal minimum wage and federal tax rate.

The Company is providing the following outlook for the 52 weeks ending January 1, 2022, compared to the 53 weeks ending January 2, 2021:

	Fiscal 2021 Outlook
New Stores	~ 75
Adjusted Comparable Store Sales Growth1	13% - 16%
Net Revenue	$1.93 - $1.98 billion
Adjusted Operating Income	$130 - $137 million
Adjusted Diluted EPS2	$0.88 - $0.93
Depreciation and Amortization3	$97 - $98 million
Interest4	~ $28 million
Tax Rate5	~ 26%
Capital Expenditures	$100 - $105 million
1 - For the 52 weeks ending January 1, 2022 2 - Assumes approximately 96 million shares, including 12.9 million shares for the convertible notes under the if-converted method 3 - Includes amortization of acquisition intangibles of approximately $7.5 million, which is excluded in the definition of Adjusted Operating Income 4 - Before the impact of gains or losses related to hedge ineffectiveness and charges related to amortization of debt discounts and deferred financing costs 5 - Excluding the impact of stock option exercises

The fiscal 2021 outlook information provided above includes Adjusted Operating Income and Adjusted Diluted EPS, 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 potentially be significant.

The fiscal 2021 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 2021 outlook. The Company uses these forward looking measures internally to assess and benchmark its results and strategic plans.

Conference Call Details

A conference call to discuss the fourth quarter 2020 financial results is scheduled for today, March 3, 2021, at 10:00 a.m. Eastern Time. The U.S. toll free dial-in for the conference call is 866-754-6931 and the international dial-in is 636-812-6625. The conference passcode is 6395554. A live audio webcast of the conference call will be available on the “Investor” section of the Company’s website www.nationalvision.com/investors, where presentation materials will be posted prior to the conference call.

A telephone replay will be available shortly after the broadcast through Wednesday, March 10, 2021, by dialing 855-859-2056 from the U.S. or 404-537-3406 from international locations, and entering conference passcode 6395554. A replay of the audio webcast will also be archived on the “Investors” section of the Company’s website.

About National Vision Holdings, Inc.

National Vision Holdings, Inc. is one of the largest optical retail companies in the United States with more than 1,200 retail stores in 44 states plus the District of Columbia and Puerto Rico. With a mission of helping people by making quality 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 2021 Outlook” as well as other statements related to our current beliefs and expectations regarding the performance of our industry, the Company’s strategic direction, market position, prospects and future results. You can identify these forward-looking statements by the use of words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Caution should be taken not to place undue reliance on any forward-looking statement as such statements speak only as of the date when made. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. Forward-looking statements are not guarantees and are subject to various risks and uncertainties, which may cause actual results to differ materially from those implied in forward-looking statements. Such factors include, but are not limited to, the COVID-19 pandemic and its resurgence, and the impact of evolving federal, state, and local governmental actions in response thereto; customer behavior in response to the continuing pandemic and its resurgence, including the impact of such behavior on in-store traffic and sales; our ability to keep our reopened stores open in a safe and cost-effective manner, or at all, in light of the continuing COVID-19 pandemic and its resurgence; our ability to recruit and retain vision care professionals for our stores in general and in light of the pandemic; our ability to develop, maintain and extend relationships with managed vision care companies, vision insurance providers and other third-party payors; our ability to maintain the performance of our host and legacy brands and our current operating relationships with our host and legacy partners; our ability to adhere to extensive state, local and federal vision care and healthcare laws and regulations; our compliance with managed vision care laws and regulations; our ability to maintain sufficient levels of cash flow from our operations to execute or sustain our growth strategy or obtain additional financing at satisfactory terms or at all; the loss of, or disruption in the operations of, one or more of our distribution centers and/or optical laboratories, resulting in the inability to fulfill customer orders and deliver our products in a timely manner; risks associated with vendors from whom our products are sourced, including our dependence on a limited number of suppliers; our ability to compete successfully; our ability to effectively operate our information technology systems and prevent interruption or security breach; our growth strategy straining our existing resources and causing the performance of our existing stores to suffer; the impact of wage rate increases, inflation, cost increases and increases in raw material prices and energy prices; our ability to successfully implement our marketing, advertising and promotional efforts; risks associated with leasing substantial amounts of space, including future increases in occupancy costs; the impact of certain technological advances, and the greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, and future drug development for the correction of vision-related problems; our ability to retain our existing senior management team and attract qualified new personnel; overall decline in the health of the economy and other factors impacting consumer spending; our ability to manage our inventory; seasonal fluctuations in our operating results and inventory levels; our reliance on third-party coverage and reimbursement, including government programs, for an increasing portion of our revenues; risks associated with our e-commerce and omni-channel business; product liability, product recall or personal injury issues; our failure to comply with, or changes in, laws, regulations, enforcement activities and other requirements; the impact of any adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations; risk of losses arising from our investments in technological innovators in the optical retail industry; our ability to adequately protect our intellectual property; our significant amount of indebtedness and our ability to generate sufficient cash flow to satisfy our 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 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 EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Operating Income,” “Adjusted Operating Margin,” “Adjusted Diluted EPS,” “Adjusted Comparable Stores Sales Growth,” “Adjusted SG&A,” and “Adjusted SG&A Percent of Net Revenue.” We believe EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Diluted EPS, Adjusted SG&A and Adjusted SG&A Percent of Net Revenue assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core

FAQ

What were National Vision's Q4 2020 financial results?

In Q4 2020, National Vision reported a 23.6% increase in net revenue to $496.7 million and a net income rise of 795%, reaching $35.1 million.

What is National Vision's fiscal outlook for 2021?

National Vision expects to open approximately 75 new stores in 2021 with an anticipated net revenue between $1.93 billion and $1.98 billion.

What is the adjusted diluted EPS guidance for National Vision in 2021?

The adjusted diluted EPS for fiscal 2021 is projected to be between $0.88 and $0.93.

How did the pandemic affect National Vision's store performance?

National Vision experienced a 5.6% decline in comparable store sales for fiscal 2020, influenced by COVID-19.

How much cash did National Vision report at the end of Q4 2020?

As of January 2, 2021, National Vision reported a cash balance of $374 million.