DULUTH, Ga.--(BUSINESS WIRE)--National Vision Holdings, Inc. (NASDAQ: EYE) today reported its financial results for the third quarter ended September 26, 2020.

“The National Vision team delivered an exceptionally strong Q3—establishing a new record for quarterly profit for our three years as a public company,” stated Reade Fahs, chief executive officer. “And our Q3 comps were clearly the best I’ve witnessed since joining National Vision 18 years ago. We also opened 18 stores, including our 1,200th location, as we continued to build market share. These results reinforce our belief that our affordable eye care and eyewear offerings have become even more important since the pandemic arrived.”

Mr. Fahs concluded, “I would like to thank the 2,000-plus affiliated optometrists and over 12,000 associates at National Vision, as our performance stems from their tireless hard work, their resilience and their commitment to a ‘safety-first’ mindset and approach. As we enter the fourth quarter, while significant uncertainty remains, we are off to a strong start as the third quarter comp momentum continued throughout October. Overall, we continue to believe that we are well positioned to navigate the pandemic given our emphasis on safety in our store and supply chain operations and strong financial condition.”

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.

Third Quarter 2020 Summary

• Netrevenue increased 12.4% to $485.4 million from $431.9 million for the third quarter of 2019. The impact from the timing of unearned revenue on net revenue and profitability was immaterial for the third quarter of 2020.
• Comparable store sales growth was 11.6% and Adjusted Comparable Store Sales Growth was 12.4%.
• The Company opened 18 new stores, closed one store, and ended the quarter with 1,201 stores. Overall, store count grew 4.9% from September 28, 2019 to September 26, 2020. 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 increased 3.1% to $210.8 million from $204.5 million for the third quarter of 2019. As a percentage of net revenue, costs applicable to revenue decreased 390 basis points to 43.4% from 47.3% for the third 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.
• SG&A increased 0.1% to $190.5 million from $190.3 million for the third quarter of 2019. As a percentage of net revenue, SG&A decreased 480 basis points to 39.3% from 44.1% for the third quarter of 2019. This decrease as a percentage of net revenue was primarily driven by lower advertising investment and lower stock-based compensation expense. SG&A for the third quarter of 2020 was impacted by $4.7 million of incremental costs directly related to adapting the Company’s operations during the COVID-19 pandemic, including an individual one-time $250 cash bonus to all front-line associates and the Company’s network of doctors.
• Net income increased 2,860% to $35.3 million compared to net income of $1.2 million for the third quarter of 2019.
• Diluted earnings per share increased 2,782% to $0.42 compared to $0.01 for the third quarter of 2019. Adjusted Diluted EPS increased 226% to $0.54 compared to $0.16 for the third quarter of 2019.
• Adjusted EBITDA increased 89.3% to $88.1 million compared to $46.6 million for the third quarter of 2019. Adjusted EBITDA Margin increased 740 basis points to 18.2% from 10.8% for the third quarter of 2019.
• Adjusted Operating Income increased 160% to $67.7 million compared to $26.1 million for the third quarter of 2019. Adjusted Operating Margin increased 800 basis points to 14.0% from 6.0% for the third quarter of 2019.

Nine-Month Period Highlights

• Netrevenue decreased 8.1% to $1.2 billion from $1.3 billion for the same period of 2019.
• Net revenue was negatively impacted by 1.1% due to the timing of unearned revenue.
• Comparable store sales growth was (11.7)% and Adjusted Comparable Store Sales Growth was (11.1)%.
• The Company opened 52 new stores, transitioned five Vision Centers in Walmart stores to its management, closed seven stores, and ended the period with 1,201 stores.
• Costs applicable to revenue decreased 7.9% to $570.1 million from $619.0 million for the same period of 2019. As a percentage of net revenue, costs applicable to revenue increased 10 basis points to 46.9% from 46.8% for the same period of 2019. This increase as a percentage of net revenue was primarily driven by optometrist costs incurred during temporary store closures in response to the COVID-19 pandemic as well as increased contact lens mix, partially offset by higher eyeglass margin.
• SG&A decreased 8.1% to $520.8 million from $566.4 million for the same period of 2019. As a percentage of net revenue, SG&A increased 10 basis points to 42.9% from 42.8% for the same period of 2019. This increase as a percentage of net revenue was primarily driven by store and corporate payroll and occupancy expenses incurred during temporary store closures, partially offset by lower advertising investment. SG&A for the first nine months of 2020 includes $7.8 million of incremental costs directly related to adapting the Company's operations during the COVID-19 pandemic.
• Net income decreased 96% to $1.2 million compared to net income of $28.9 million for the same period of 2019.
• Diluted earnings per share decreased 95.9% to $0.01 compared to $0.35 for the same period of 2019. Adjusted Diluted EPS decreased 36.0% to $0.42 compared to $0.66 for the same period of 2019. The net change in margin on unearned revenue negatively impacted Adjusted Diluted EPS by $(0.11).
• Adjusted EBITDA decreased 13.5% to $134.8 million compared to $155.8 million for the same period of 2019. Adjusted EBITDA Margin decreased 70 basis points to 11.1% from 11.8% for the same period of 2019.
• Adjusted Operating Income decreased 27.0% to $71.4 million compared to $97.8 million for the same period of 2019. Adjusted Operating Margin decreased 150 basis points to 5.9% from 7.4% for the same period of 2019. The net change in margin on unearned revenue negatively impacted Adjusted EBITDA and Adjusted Operating Income by $(11.7) million.

Balance Sheet and Cash Flow Highlights as of September 26, 2020

• The Company’s cash balance was $377.0 million as of September 26, 2020. The Company had no borrowings under its $300.0 million first lien revolving credit facility, exclusive of letters of credit of $5.7 million.
• Total debt was $651.7 million as of September 26, 2020, consisting of outstanding first lien term loans, convertible senior notes and finance lease obligations, net of unamortized discounts.
• Cash flows from operating activities for the first nine months of 2020 were $203.7 million compared to $170.9 million for the same period of 2019.
• Capital expenditures for the first nine months of 2020 totaled $40.8 million compared to $76.5 million for the same period of 2019, primarily due to the timing of new store capital investments.
• The Company believes it has sufficient liquidity to fund operations for at least the next 12 months, given cash on hand, cash expected to be generated from operations, and the cash available through its revolving credit facility.

Fourth Quarter and Fiscal 2020 Outlook

The Company is providing the following outlook for the 14 week and 53 week periods ending January 2, 2021, respectively. For the Company’s fourth quarter and fiscal 2020 outlook, the Company estimates that the 53rd week will contribute approximately $35 million to net revenue with an approximately break-even impact to Adjusted Diluted EPS due to the net change in margin on unearned revenue. The Company’s fourth quarter and fiscal 2020 outlook reflects the currently expected impacts related to COVID-19, however, the ultimate impacts of COVID-19 on the Company’s financial outlook remain uncertain. The outlook shown below assumes no material deterioration to the Company’s current business operations as a result of COVID-19, governmental actions and regulations. Given the uncertainties, dynamic nature, resurgence, and unknown duration of the pandemic, the Company is continuing to evaluate additional measures that may be taken to respond to the impact of COVID-19 on its business.

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 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 select Fred Meyer stores and on select military bases, and several e-commerce websites, offering a variety of products and services for customers’ eyecare needs.