• Net revenue increased 1.8% to $469.7 million
• Negative comparable store sales growth of (2.9)%; Adjusted Comparable Store Sales Growth of (10.3)%
• Net income decreased 44.1% to $9.7 million; Diluted EPS decreased 44.6% to $0.12
• Adjusted EBITDA decreased 0.3% to $61.0 million
• Adjusted Operating Income decreased 10.8% to $38.1 million
• Adjusted Diluted EPS decreased 9.4% to $0.28

DULUTH, Ga.--(BUSINESS WIRE)-- First sentence of "Conference Call Details" section should read: "...May 7, 2020, at 8:00 a.m. Eastern Time" (insead of "...May 7, 2020, at 10:00 a.m. Eastern Time").

The corrected release reads:

NATIONAL VISION HOLDINGS, INC. REPORTS FIRST QUARTER 2020 FINANCIAL RESULTS

• Net revenue increased 1.8% to $469.7 million
• Negative comparable store sales growth of (2.9)%; Adjusted Comparable Store Sales Growth of (10.3)%
• Net income decreased 44.1% to $9.7 million; Diluted EPS decreased 44.6% to $0.12
• Adjusted EBITDA decreased 0.3% to $61.0 million
• Adjusted Operating Income decreased 10.8% to $38.1 million
• Adjusted Diluted EPS decreased 9.4% to $0.28

National Vision Holdings, Inc. (NASDAQ: EYE) (“National Vision” or the “Company”) today reported its financial results for the first quarter ended March 28, 2020.

“The COVID-19 pandemic has affected all of us as individuals and most U.S. companies,” stated Reade Fahs, chief executive officer. “Our hearts go out to those suffering from the disease and our praise and appreciation go out to the heroic front line healthcare workers throughout the country who are treating those living with the disease.”

Mr. Fahs further commented, “As safety concerns mounted in mid-March, we acted rapidly with the best interests of the safety of our teams, customers, and communities in mind. With the temporary closing of our stores on March 19, our quarterly results are a tale of two periods. Pre-COVID-19, in January and February, our business was robust with continued sales momentum building on the strong results in the latter half of 2019. In response to the COVID-19 crisis and our temporary store closure, we shifted to solidifying our financial well-being, focusing on our liquidity position and implementing numerous near-term cost reduction efforts.”

Mr. Fahs continued, “While our doors were temporarily locked to the public, our stores were staffed with skeleton crews to meet the essential eye care and eyewear needs of patients and customers. The past seven weeks have been a vivid reminder of the fact that the optical services and products we offer truly are a medical necessity. There have been a great many stories of associates and optometrists who have gone above and beyond to provide exceptional customer and patient care amidst adverse circumstances. Last week, we began the process of safely and gradually re-opening our stores to the public. Given the state of the economy and the financial hardships it is creating for so many, we believe patients and customers will need and appreciate our affordably priced optical products and services even more.”

Mr. Fahs concluded, “In thinking about the events of the last several weeks and how the entire National Vision team has risen to its challenges, I could not be more proud and appreciative of their inspiring endurance amidst shared sacrifice and strife. While the road ahead is still uncertain, I am confident the entire National Vision team, and our network of more than 2,000 optometrists practicing alongside our stores, will emerge from this extraordinary experience stronger from the adversity we will have overcome together.”

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

COVID-19 Response Update

On March 19, 2020, the Company temporarily closed all of its stores to the public and, on April 7, it temporarily furloughed a significant portion of its employees. On April 23, 2020, the Company announced plans to reopen stores selectively over the coming weeks with a goal for all stores within its family of retail brands to be open to the public by early June. In response to the evolving and uncertain situation, we have taken aggressive actions that we believe are prudent in these circumstances, including:

• Borrowed in March 2020 the remaining $146.3 million in available funds under our revolving credit facility, as a precautionary measure to preserve financial flexibility. The total borrowings outstanding as of quarter end of $300 million represents the maximum borrowings permitted thereunder;
• Effective May 5, 2020, the Company and the lenders under its credit facility entered into an amendment of the facility. This amendment is intended to prevent the effects of the COVID-19 pandemic, including the temporary closure of our stores, from creating uncertainty relative to our ability to comply with certain financial covenants and allow the Company to focus on prudent management of the business over the quarters ahead. The amendment suspends certain financial maintenance covenants contained in the facility until testing at the end of the second fiscal quarter of 2021. As part of the amendment, the Company among other things agreed to modify the rate of interest paid under the facility and to limit its ability to engage in certain transactions during the covenant suspension period, including the ability to declare or pay dividends, incur additional debt and make investments and dispositions;
• Reduced compensation and work hours across the organization. CEO Reade Fahs has elected to reduce his base salary to $1 for the remainder of 2020, and each of the other members of the senior management team have elected to take significant reductions in base salary. The members of the Board of Directors also have elected to reduce the remainder of their respective annual cash retainer fees for 2020 to $1 for their service on the Board;
• Postponed a significant amount of planned capital expenditures in fiscal 2020, including a pause in new store openings;
• Reduced near term marketing, non-essential travel and other discretionary spend;
• Working with a base of vendors and landlords to extend payment terms and modify existing contracts; and
• Implementing applicable benefits of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), such as utilizing the employee retention credit and deferring employer payroll taxes.

While we anticipate that these measures are temporary, their specific duration has a high degree of uncertainty and we may elect or need to take additional operational and financial measures as we continue to assess the evolving situation, including obtaining additional debt and/or equity capital to provide further liquidity in the coming months.

First Quarter 2020 Summary

• Net revenue increased 1.8% to $469.7 million from $461.2 million for the first quarter of 2019.
• Net revenue was positively impacted by 6.0% due to the timing of unearned revenue, which resulted in material benefits to net revenue and profitability. While the Company usually experiences an increase in unearned revenue for sales in the last seven to ten days of each quarter, the closure of stores on March 19, 2020 through the end of the first quarter caused virtually all of this increase to not be realized. As a result, the Company experienced a decrease in unearned revenue of $19.9 million compared to an increase in unearned revenue of $7.8 million for the first quarter of 2019.
• Comparable store sales growth was (2.9)% and Adjusted Comparable Store Sales Growth was (10.3)%.
• In light of its temporary store closures, the Company is providing certain additional comparable store sales information. For the two months ended February 29, 2020 and the one month ended March 28, 2020, comparable store sales growth was 5.6% and (18.8)%, respectively, and Adjusted Comparable Store Sales Growth was 5.7% and (41.5)%, respectively.
• The Company opened 23 new stores, closed one store and ended the quarter with 1,173 stores.
• Costs applicable to revenue increased 3.1% to $218.6 million from $212.0 million for the first quarter of 2019. As a percentage of net revenue, costs applicable to revenue increased 50 basis points to 46.5% from 46.0% for the first quarter of 2019. This increase as a percentage of net revenue was primarily driven by optometrist costs incurred during store closures as well as contact lens revenue growth, partially offset by higher eyeglass margin.
• Selling, general and administrative expenses (“SG&A”) decreased 0.1% to $193.7 million from $193.9 million for the first quarter of 2019. As a percentage of net revenue, SG&A decreased 80 basis points to 41.2% from 42.0% for the first quarter of 2019. This decrease as a percentage of net revenue was primarily driven by the recognition of unearned revenue noted above as well as lower performance-based incentive compensation, partially offset by deleveraging of store payroll expense due to store closures.
• Net income decreased 44.1% to $9.7 million compared to net income of $17.4 million for the first quarter of 2019.
• Diluted earnings per share decreased 44.6% to $0.12 per share compared to diluted earnings per share of $0.21 for the first quarter of 2019. Adjusted Diluted EPS decreased 9.4% to $0.28 compared to $0.31 per diluted share for the first quarter of 2019. The net change in margin on unearned revenue positively impacted Adjusted Diluted EPS by $0.19.
• Adjusted EBITDA decreased 0.3% to $61.0 million compared to $61.2 million for the first quarter of 2019. The net change in margin on unearned revenue positively impacted year-over-year Adjusted EBITDA growth by 33.7%. Adjusted EBITDA Margin decreased 30 basis points to 13.0% from 13.3% for the first quarter of 2019.
• Adjusted Operating Income decreased 10.8% to $38.1 million compared to $42.7 million for the first quarter of 2019. The net change in margin on unearned revenue positively impacted year-over-year Adjusted Operating Income growth by 48.3%. Adjusted Operating Margin decreased 110 basis points to 8.1% from 9.2% for the first quarter of 2019.

Balance Sheet and Cash Flow Highlights as of March 28, 2020

• The Company’s cash balance was $263.2 million as of March 28, 2020. The Company had $294.3 million in borrowings under its $300.0 million first lien revolving credit facility, exclusive of letters of credit of $5.7 million.
• Total debt was $716.8 million as of March 28, 2020, consisting of outstanding first lien term loans, first lien revolving credit facility and finance lease obligations. As noted above, in March 2020, the Company borrowed the remaining $146.3 million in available funds under its revolving credit facility as a precautionary measure to preserve financial flexibility.
• Cash flows from operating activities for the first quarter of 2020 were $86.1 million compared to $83.0 million for the first quarter of 2019.
• Capital expenditures for the first quarter of 2020 totaled $13.1 million compared to $26.0 million for the first quarter of 2019, primarily due to the planned timing and postponement of capital projects.

Fiscal 2020 Outlook

On March 27, 2020, given the ongoing uncertainty surrounding the magnitude and duration of the COVID-19 pandemic and its impact on the U.S., the Company withdrew its previously issued fiscal 2020 outlook.

Conference Call Details

A conference call to discuss the first quarter 2020 financial results is scheduled for today, May 7, 2020, at 8:00 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 3243907. A live audio webcast of the conference call will be available on the “Investors” section of the Company’s website www.nationalvision.com/investors, where presentation materials will be posted prior to the conference call.

A telephone replay will be available shortly after the broadcast through Thursday, May 14, 2020, by dialing 855-859-2056 from the U.S. or 404-537-3406 from international locations, and entering conference passcode 3243907. 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 over 1,100 retail stores in 44 states plus the District of Columbia and Puerto Rico. With a mission of helping people by making quality eyecare and eyewear more affordable and accessible, the Company operates five retail brands: America’s Best Contacts & Eyeglasses, Eyeglass World, Vision Centers inside select Walmart stores, Vista Opticals inside Fred Meyer stores and on select military bases, and several e-commerce websites, offering a variety of products and services for customers’ eyecare needs.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements related to our current beliefs and expectations regarding the performance of our industry, the Company's strategic direction, market position, prospects and future results. You can identify these forward-looking statements by the use of words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Caution should be taken not to place undue reliance on any forward-looking statement as such statements speak only as of the date when made. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. Forward-looking statements are not guarantees and are subject to various risks and uncertainties, which may cause actual results to differ materially from those implied in the forward-looking statements. Such factors include, but are not limited to, the scale and scope of the novel coronavirus, or COVID-19, pandemic is unknown and, due to the temporary closure of our stores to the public and other factors, is adversely impacting, and is expected to continue to adversely impact, our business at least for the near term, including the impact of federal, state, and local governmental actions and customer behavior in response to the pandemic and such governmental actions and operational disruptions if a significant percentage of our workforce is unable to work or we experience labor shortages, including because of illness or travel or government restrictions in connection with the pandemic; our ability to selectively re-open stores as announced and to open and operate new stores in a timely and cost-effective manner, and to successfully enter new markets; our ability to recruit and retain vision care professionals for our stores; our ability to develop and maintain relationships with managed vision care companies, vision insurance providers and other third-party payors; our ability to maintain the performance of our host and legacy brands and our current operating relationships with our host and legacy partners; our ability to adhere to extensive state, local and federal vision care and healthcare laws and regulations; our compliance with managed vision care laws and regulations; our ability to maintain sufficient levels of cash flow from our operations to execute or sustain our growth strategy; the loss of, or disruption in the operations of, one or more of our distribution centers and/or optical laboratories, resulting in the inability to fulfill customer orders and deliver our products in a timely manner; risks associated with vendors from whom our products are sourced, including our dependence on a limited number of suppliers; our ability to successfully compete in the highly competitive optical retail industry; any failure, inadequacy, interruption, security failure or breach of our information technology systems; our growth strategy straining our existing resources and causing the performance of our existing stores to suffer; the impact of wage rate increases, inflation, cost increases and increases in raw material prices and energy prices; our ability to successfully implement our marketing, advertising and promotional efforts; risks associated with leasing substantial amounts of space, including future increases in occupancy costs; the impact of certain technological advances, and the greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, and future drug development for the correction of vision-related problems; our ability to retain our existing senior management team and attract qualified new personnel; overall decline in the health of the economy and consumer spending affecting consumer purchases; our ability to manage our inventory balances and inventory shrinkage; seasonal fluctuations in our operating results and inventory levels; our reliance on third-party coverage and reimbursement, including government programs, for an increasing portion of our revenues; risks associated with our e-commerce business; product liability, product recall or personal injury issues; our failure to comply with, or changes in, laws, regulations, enforcement activities and other requirements; the impact of any adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations; risks of losses arising from our investments in technological innovators in the optical retail industry; our ability to adequately protect our intellectual property; our significant amount of indebtedness and our ability to generate sufficient cash flow to satisfy our significant debt service obligations; an increase in interest rates as well as changes in benchmark rates and uncertainty related to the foregoing; restrictions in our credit agreement that limits our flexibility in operating our business; and risks related to owning our common stock, including our ability to comply with requirements to design and implement and maintain effective internal controls. Additional information about these and other factors that could cause National Vision’s results to differ materially from those described in the forward-looking statements can be found in filings by National Vision with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K, our Form 8-K filed on March 19, 2020, our Quarterly Report on Form 10-Q filed on May 7, 2020, and subsequent filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC.

Non-GAAP Financial Measures

To supplement the Company’s financial information presented in accordance with GAAP and aid understanding of the Company’s business performance, the Company uses certain non-GAAP financial measures, namely “EBITDA,” “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Operating Income,” “Adjusted Operating Margin,”, “Adjusted Diluted EPS,” “Adjusted SG&A” and “Adjusted SG&A Percent of Net Revenue.” We believe EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Diluted EPS, Adjusted SG&A and Adjusted SG&A Percent of Net Revenue assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes these non-GAAP financial measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management uses these non-GAAP financial measures to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

To supplement the Company’s comparable store sales growth presented in accordance with GAAP, the Company provides “Adjusted Comparable Store Sales Growth,” which is a non-GAAP financial measure we believe is useful because it provides timely and accurate information relating to the two core metrics of retail sales: number of transactions and value of transactions. Management uses Adjusted Comparable Store Sales Growth as the basis for key operating decisions, such as allocation of advertising to particular markets and implementation of special marketing programs. Accordingly, we believe that Adjusted Comparable Store Sales Growth provides timely and accurate information relating to the operational health and overall performance of each brand. We also believe that, for the same reasons, investors find our calculation of Adjusted Comparable Store Sales Growth to be meaningful.

In the first quarter of 2020, we introduced Adjusted Operating Income and Adjusted Operating Margin as measures of performance we will use in connection with Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS. Further, consistent with our presentation of Adjusted Operating Income, we no longer exclude new store pre-opening expenses and non-cash rent from our presentation of Adjusted EBITDA and Adjusted Diluted EPS. See our Form 8-K filed with the SEC on February 26, 2020 for more information.

Beginning with the first quarter of fiscal 2020, the Company updated its definitions of Adjusted EBITDA, Adjusted SG&A, and Adjusted Diluted EPS discussed below, so that they no longer exclude new store pre-opening expenses and non-cash rent.

EBITDA: We define EBITDA as net income, plus interest expense, income tax provision and depreciation and amortization.

Adjusted EBITDA: We define Adjusted EBITDA as net income, plus interest expense, income tax provision and depreciation and amortization, further adjusted to exclude stock compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, and other expenses.

Adjusted EBITDA Margin: We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net revenue.

Adjusted Operating Income: We define Adjusted Operating Income as net income, plus interest expense and income tax provision, further adjusted to exclude stock compensation expense, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles, and other expenses.

Adjusted Operating Margin: We define Adjusted Operating Margin as Adjusted Operating Income as a percentage of net revenue.

Adjusted Diluted EPS: We define Adjusted Diluted EPS as diluted earnings per share, adjusted for the per share impact of stock compensation expense, loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, other expenses, amortization of acquisition intangibles and deferred financing costs, and tax benefit of stock option exercises, less the tax effect of these adjustments.

Adjusted SG&A: We define Adjusted SG&A as SG&A, adjusted to exclude stock compensation expense, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, and other expenses except for the share of losses on equity method investments.

Adjusted SG&A Percent of Net Revenue: We define Adjusted SG&A Percent of Net Revenue as Adjusted SG&A divided by net revenue.

Adjusted Comparable Store Sales Growth: We measure Adjusted Comparable Store Sales Growth as the increase or decrease in sales recorded by the comparable store base in any reporting period, compared to sales recorded by the comparable store base in the prior reporting period, which we calculate as follows: (i) sales are recorded on a cash basis (i.e., when the order is placed and paid for or submitted to a managed care payor, compared to when the order is delivered), utilizing cash basis point of sale information from stores; (ii) stores are added to the calculation during the 13th full fiscal month following the store’s opening; (iii) closed stores are removed from the calculation for time periods that are not comparable; (iv) sales from partial months of operation are excluded when stores do not open or close on the first day of the month; and (v) when applicable, we adjust for the effect of the 53rd week. Quarterly, year-to-date and annual adjusted comparable store sales are aggregated using only sales from all whole months of operation included in both the current reporting period and the prior reporting period. When a partial month is excluded from the calculation, the corresponding month in the subsequent period is also excluded from the calculation. There may be variations in the way in which some of our competitors and other retailers calculate comparable store sales. As a result, our adjusted comparable store sales may not be comparable to similar data made available by other retailers. We did not adjust our calculation of Adjusted Comparable Store Sales Growth for the temporary closure of our stores to the public as a result of the COVID-19 pandemic.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Diluted EPS, Adjusted SG&A, Adjusted SG&A Percent of Net Revenue, and Adjusted Comparable Store Sales Growth are not recognized terms under GAAP and should not be considered as an alternative to net income (loss), 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 GAAP. Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.

Please see “Reconciliation of Non-GAAP to GAAP Financial Measures” below for reconciliations of non-GAAP financial measures used in this release to their most directly comparable GAAP financial measures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200507005366/en/

Investors: National Vision Holdings, Inc.David Mann, CFA, Vice President of Investor Relations (470) 448-2448 investor.relations@nationalvision.com

Media: National Vision Holdings, Inc.Kristina Gross, Vice President of Communications (470) 448-2355 media@nationalvision.com

Source: National Vision Holdings, Inc.