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1
INVESTOR
PRESENTATION
MARCH 2020
2
Forward Looking Statements Disclaimer Some of the statements in this presentation are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934. The Company generally identifies forward-looking statements in this presentation using words like “believe,” “intend,” “target,” “expect,” “estimate,”
“may,” “should,” “plan,” “project,” “contemplate,” “anticipate,” “predict” or similar expressions. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These forward-
looking statements are based on the Company’s expectations, assumptions, estimates and projections about its business and the industry in which it operates as of the date of this presentation. These
statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s or its industry’s actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and uncertainties include: our ability to compete
effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store
growth strategy; decreases in our Halloween sales; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer
spending and general economic conditions; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risks and
uncertainties set forth in “Risk Factors” in the Company’s latest Form 10-K and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although the Company believes that the
expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. You are
cautioned not to place undue reliance on these forward-looking statements. Except as may be required by any applicable laws, the Company assumes no obligation to publicly update or revise such
forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.
Non-GAAP Information This presentation includes non-GAAP measures including Adjusted EBITDA and Adjusted Net Income/Loss and Adjusted Earnings per Share. We present these non-GAAP financial
measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core
operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit
facilities use Adjusted EBITDA to measure compliance with certain covenants. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in
tables accompanying this release. We also evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure,
excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period
exchange rates and comparing these adjusted amounts to our current period reported results. We also provide free cash flow, defined as Adjusted EBITDA less capital expenditures, and net debt leverage,
which is calculated by adding Loans and Notes Payable, Current Portion of Long Term Obligations and Long Term Obligations, Excluding Current Portion, subtracting Cash and Cash Equivalents and dividing
by Adjusted EBITDA for the trailing twelve month period. Adjusted Earnings per Share is calculated by dividing Adjusted Net Income by the Weighted Average Number of Common Shares-Diluted. We
believe providing these non-GAAP measures provides valuable supplemental information regarding our results of operations and leverage, consistent with how we evaluate our performance. In evaluating
these non-GAAP financial measures, investors should be aware that in the future the Company may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in
this presentation. The Company's presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. The Company has provided
this information as a means to evaluate the results of its core operations. Other companies in the Company's industry may calculate these items differently than it does. Each of these measures is not a
measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures
have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.
Disclaimer
3
Our Purpose is to create joy
by making it easy to create
unforgettable memories!
4
THE PARTY
▪ Who We Are
▪ Unique Differentiated Model
▪ Experiential Store Format
▪ The Party Vision
▪ Financials
5
THE PARTY
▪ Who We Are
▪ Unique Differentiated Model
▪ Customer Centric Retail Experience
▪ The Party Vision
▪ Financials
6
Party
Goods Consumer Technology Athletic Cosmetics Mattresses
Party Specialty
Retail Pet Supplies Sporting Goods Home Improvement
Consu
mer
Pro
duct
sSpeci
alty R
eta
il
(Consumer Products)
#1 vs. #2
player(1)~1.2x ~1.6x ~2.5x ~1.2x
We lead and define the party consumer products category
1 Represents comparison of global sales of the #1 vs. #2 player
+4.0x
7
PARTIES FOR PEOPLE
AROUND THE WORLDManufacture Retail StoresWholesaleDesign
Unparalleled capabilities for delivering unforgettable moments
Create joy by making unforgettable memories.
8
THE PARTY
▪ Who We Are
▪ Unique Differentiated Model
▪ Customer Centric Retail Experience
▪ The Party Vision
▪ Financials
9
Uniquely positioned within party goods market
Grocery
Independents
Specialty
Discount
Product Design
Wholesale / Distributors
Global Sourcing
Manufacturing
8,000 new
products/yr
10
Locations
5 countries
9 cities
45K SKUs
sold in 100
countries
World’s largest party good’s manufacturer, distributor, retailer
10
Trend InnovationLicenses
Unmatched design and innovation capabilities with ≈ 200 person team develops proprietary designs and licenses via customer insights
Product design differentiates the customer experience
11
Product sourcing & manufacturing excellence drive competitive advantage
Distribution
Manufacturing
Sourcing
Approximately 24% of retail sales is manufactured in-house (largely US based) with strategy to continue to decrease China-based sourced product; Nine sourcing offices
12
LATEX BALLOONS
PAPER PLATES & BOWLS
PLASTIC TABLEWARE
INJECTED MOLDED PLASTICS
FOIL BALLOONS
COSTUMES
PERSONALIZED PARTY
PRODUCTS
PIÑATAS, PARTY KITS
PAPER CUPS, STRAWS
& NAPKINS
PRINTED PAPER DÉCOR
& ACCCESSORIES
Manufacturing capabilities allow for differentiation, speed to market
Benefit from operating excellence driven by end to end control over product life cycle and pricing
13
WHOLESALE 77%
THIRD PARTY 23%
Leveraging internal strength to improve retail profitability
Powerful vertically integrated model is a unique competitive advantage that enables margin expansion
SOURCED
14
THE PARTY
▪ Who We Are
▪ Unique Differentiated Model
▪ Customer Centric Retail Experience
▪ The Party Vision
▪ Financials
15
Customer centric capabilities
DATA ANALYTICS
LOYALTY
CUSTOMER INSIGHTS KAZZAM
BALLOON DELIVERY
PARTY PLANNERS
Customer first mind-set with the addition of relevant services distinguishes Party City and
enables the premier destination for parties and special events
16
Consumer insights drive our go-to market strategy enabling a personalized experience across touch points
MarketingDigital Merchandising
Inspiration Trend Value
Developing trend-right and ownable assortments
17
Costumes & Accessories
BalloonsDécor
Authoritative assortments, merchandising, value and convenience supports easy
do-it-yourself experience
Halloween destination to inspire customization
18
Dominant omnichannel platform
800 Retail Stores
63M customers
PartyCity.com
162M visitors
13M subscribers
Social Media
4.7M Followers
2019 Core Web + BOPIS Sales 800+ Stores
Buy online pick up in store
≈40% of online orders
E commerce penetration Store Locations
19
Piloting experiential store format
• Race track shop-in-shop layout
• Enhanced Balloon shopping experience
• Category adjacencies to improve party solution selling
• Testing low capital investment format
20
747 804 777
148 96 98
2017 2018 2019
Store Count
US Corp Stores Franchise Stores
Optimizing store fleet to drive retail profitability
COMPELLING NEW STORE ECONOMICS
Store Size ≈12,000 square feet
Net Investment $450K
Payback Period ≈ 2 years
895 900 875
eCommerce
growth-0.7% 16.9% 14.8%
21
THE PARTY
▪ Who We Are
▪ Unique Differentiated Model
▪ Customer Centric Retail Experience
▪ The Party Vision
▪ Financials
22
The Path to a Party Platform
PARTY SUPPLIES COMPANY
• Party product manufacturer,
wholesaler and distributor
• Convenient retail locations
• E-Commerce basics
FULLY INTEGRATED VERTICAL RETAILER
• Optimized inventory, assortment and space
• Efficient enterprise supply chain
• Selling culture focused on customer needs
• Enhanced omni-channel
A PARTY PLATFORM
• Technology enabled
• One-stop-shop
• End-to-end services
• Predictor of needs & wants
MEMORY MAKERS & PLANNING EXPERTS
• In-store and online integrated party planning services
• Dedicated local services platform
• Highly personalized engagement needs
• Fully omni-channel
23
2020 Priorities to stabilize retail performance
WIN with
balloons
Pilot in-store
experience
enhancements
Address
price value
perception
Improve
in-store customer
engagement
Enhance digital
omni-channel
capabilities
24
THE PARTY
▪ Who We Are
▪ Unique Differentiated Model
▪ Customer Centric Retail Experience
▪ The Party Vision
▪ Financials
25
Financial Summary
Q4 2019 Actual FY2019 Actual
Total Revenues $731.6 million $2,348.8 million
Brand Comp (5.1%) (3.0%)
North America E-comm Growth Including BOPIS +14.7% +14.8%
Adjusted EBITDA* $119.5 million $269.2 million
GAAP Net Income (Loss) ($268.8 million) ($532.9 million)
Adjusted Net Income* $47.8 million $43.4 million
GAAP EPS ($2.88) ($5.71)
Adjusted EPS* $0.51 $0.46
Free Cash Flow** $135.5 million $207.5 million
Party City Corporate Stores 777 777
*Please refer to appendix for reconciliation of GAAP to Non-GAAP measures
**Free cash flow defined as Adjusted EBITDA less capital expenditures
26
Total reported revenues decreased 9.2% and 9.1% in constant currency
Q4 2019 Revenue Performance
Wholesale Retail
Total Net Sales Growth -12.4%
Revenue Growth +4.6% Constant Currency Growth -12.4%
Constant Currency Growth, ex-franchise
acquisitions
+5.0%
Domestic Comparable Brand Sales -5.1%
Revenue Growth +1.1% New Years Eve Timing Shift -70 bps
Growth, ex-franchise acquisitions +1.1% North America E-Comm Growth Ex-BOPIS +2.1%
International North America E-Comm Growth with BOPIS +14.7%
Revenue Growth +12.8%
Constant Currency Growth +13.7%
27
Total reported revenues decreased 3.2% and 2.7% constant currency
FY19 Revenue Performance
Wholesale Retail
Total Net Sales Growth -3.4%
Revenue Growth -2.6% Constant Currency Growth -3.2%
Constant Currency Growth, ex-franchise
acquisitions
+1.3%
Domestic Comparable Brand Sales -3.0%
Revenue Growth -3.6% Helium Comp Impact -190 bps
Growth, ex-franchise acquisitions +2.1% North America E-Comm Growth Ex-BOPIS +2.8%
International North America E-Comm Growth with BOPIS +14.8%
Revenue Growth +0.6%
Constant Currency Growth +4.3%
28
Q4 and 2019 Gross margin versus prior year
Q4 FY
2018 Reported Gross Margin 45.3% 40.6%
Promotional/Discount Activity (180 bps) (100 bps)
Store Optimization (130 bps) (130 bps)
Helium Headwind (80 bps) (100 bps)
Freight/Supply Chain Disruption NA (60 bps)
Sales Mix Shift (60 bps) (50 bps)
Sales Deleverage (50 bps) (30 bps)
Total Gross Margin Decline (500 bps) (470 bps)
2019 Reported Gross Margin 40.3% 35.9%
29
Balance Sheet and Free Cash Flow
FY2019 Actual FY2018 Actual
Cash $34.9 million $58.9 million
Inventories, net $658.4 million $756.0 million
Accounts Payable $152.3 million $208.1 million
Total Debt* $1,669.1 million $1,879.1 million
Leverage Ratio** 6.2x 4.7x
Free Cash Flow*** $207 million $315 million
**Net of cash
**Defined as debt (net of cash) to adjusted EBITDA
**Free cash flow defined as Adjusted EBITDA less capital expenditures
30
FY20 Guidance
Guidance
Total Revenue Mid-Single Digit % Decline
Brand Comp Low-Single Digit % Decline
Adjusted EBITDA* $250 to $270 million
Adjusted Net Income* $47 to $63 million
Adjusted EPS $0.50 to $0.68
Net Debt Continue to prioritize debt pay down
*Please refer to appendix for reconciliation of GAAP to Non-GAAP measures
31
APPENDIX
32
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
2019 2018 2019 2018
Net (loss) income ($268,829) $98,374 ($532,858) $122,819
Interest expense, net 26,042 29,225 114,899 105,706
Income taxes 20,504 29,335 (1,305) 38,778
Depreciation and amortization 18,736 20,789 81,116 78,575
EBITDA (203,547) 177,723 (338,148) 345,878
Non-cash purchase accounting adjustments 243 3,500 3,000 6,196
Store impairment and restructuring charges (a) 3,818 - 58,778 -
Other restructuring, retention and severance (b)
1,212 292 6,460 3,397
Goodwill and intangibles impairment (c)
303,531 - 562,631 -
Deferred rent (d) (754) 1,728 (1,796) 5,351
Closed store expense (e)
1,021 781 4,445 4,211
Foreign currency losses (gains), net (65) (104) 421 24
Stock option expense (f)
169 252 1,319 1,744
Non-employee equity based compensation (g)
129 (271) 515 81
Undistributed income in equity method investments (277) 211 (472) (369)
Corporate development expenses (h)
2,426 2,905 14,208 11,314
Non-recurring consulting costs (i)
- 271 - 12,514
Refinancing charges (j)
36 - 36 6,237
Restricted stock units - time-based (k)
490 452 2,033 1,174
Restricted stock units - performance-based (l)
(1,036) (1,482) - -
Non-recurring legal settlements/costs (m)
6,753 2,380 8,548 2,380
Gain on sale/leaseback transaction (n)
- - (58,381) -
(Gain) loss on sale of assets (o)
5,074 - 5,074 -
Other 301 279 518 (16)
Adjusted EBITDA $119,524 188,917 $269,189 400,116
Adjusted EBITDA margin 16.3% 23.4% 11.5% 16.5%
Three Months Ended December 31, Year Ended December 31,
(k) Non-cash charges for restricted stock units that vest based on service conditions.
(l) Non-cash charges for restricted stock units that vest based on performance conditions.
(i) Non-recurring consulting charges related to the Company's retail operations.
(f) Represents non-cash charges related to stock options.
(d) The “deferred rent” adjustment reflects the difference between accounting for rent and landlord incentives in accordance with
GAAP and the Company’s actual cash outlay for such items.
(m) Non-recurring legal settlements/costs.
(o) Represents a loss on sale of ownership interest in Punchbowl (See the 2019 Form 10-K for further discussion) and certain
property, plant and equipment, and a write-off of goodwill related to the Company’s sale of its Canadian-based Party City stores.
(a) During the year ended December 31, 2019, the Company performed a comprehensive review of its store locations aimed at
improving the overall productivity of such locations (“store optimization program”) and made the decision to accelerate the optimization of
its store portfolio with the closure of approximately 55 stores which are primarily located in close proximity to other Party City stores. In
conjunction with the store optimization program, the Company recorded the following charges: inventory reserves: $21.3 million, operating
lease asset impairment: $14.9 million, property plant and equipment impairment: $4.7 million, labor and other costs related to closing the
stores: $8.7 million and severance: $0.7 million. The charge for inventory reserves was recorded in cost of sales in the Company’s
statement of operations and comprehensive (loss) income. The other charges were recorded in store impairment and restructuring
charges in the Company’s statement of operations and comprehensive (loss) income. See the 2019 Form 10-K for further discussion.
Additionally, during the process of liquidating the inventory in such stores, the Company lost margin of $8.5 million.
(n) During June 2019, the Company reported a $58.4 million gain from the sale and leaseback of its main distribution center in
Chester, New York and its metallic balloons manufacturing facility in Eden Prairie, Minnesota. The aggregate sale price for the three
properties was $128.0 million. Simultaneous with the sale, the Company entered into twenty year leases for each of the facilities.
(j) During 2018, the Company amended its credit facilities. In conjunction with the amendments, the Company wrote-off capitalized
deferred financing costs, original issue discounts and call premiums. Further, in conjunction with the amendment, the Company expensed
investment banking and legal fees. Such amounts are included in "Refinancing charges" above.
(g) Principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services. See the 2019 Form 10-K for
further discussion.
(b) For the year ended December 31, 2019, amounts expensed principally related to executive severance and the write-off of inventory for
a section of the Company’s Party City stores that were restructured.
(e) Principally charges incurred related to closing underperforming stores.
(c) As a result of a sustained decline in market capitalization, the Company recognized a non-cash pre-tax goodwill impairment charge
during the year ended December 31, 2019 of $562.6 million. This includes a non-cash pre-tax tradename impairment charge of $6.6
million.
(h) Primarily represents third-party costs related to acquisitions (mainly legal expenses and diligence fees). Such costs are excluded
from the definition of “Consolidated Adjusted EBITDA” that is utilized for certain covenants in the Company’s credit agreements.
Additionally, 2019 includes continued start-up costs for Kazzam (see the 2019 Form 10-K for further discussion of Kazzam).
33
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
2019 2018 2019 2018
(Loss) income before income taxes ($248,325) $127,709 ($534,163) $161,597
Intangible asset amortization 3,572 4,312 14,100 12,271
Non-cash purchase accounting adjustments 2 4,190 4,202 6,812
Amortization of deferred financing costs and
original issuance discounts (a)
1,211 1,155 4,722 10,989
Store impairment and restructuring charges (b)
3,818 - 58,778 -
Other restructuring charges (c)
389 - 3,211 809
Goodwill and intangibles impairment (d)
303,531 - 562,631 -
Non-employee equity based compensation (e)
129 (271) 515 81
Refinancing charges (a)
- - 36 -
Non-recurring consulting costs (f)
- 271 - 12,514
Stock option expense (g)
169 252 1,319 1,744
Gain on sale/leaseback transaction (h)
- - (58,381) -
Restricted stock units - performance-based (i)
(1,036) (1,482) - -
Non-recurring legal settlements/costs (j)
6,500 2,380 6,500 2,380
(Gain) on sale of Canada retail assets (k)
(2,873) - (2,873) -
Adjusted (loss) income before income taxes $67,087 $138,516 $60,597 $209,197
Adjusted income tax (benefit) expense (l)
19,300 35,142 17,183 52,355
Adjusted net (loss) income $47,787 103,374 $43,414 156,842
Adjusted net (loss) income per common share - diluted $0.51 $1.08 $0.46 $1.61
Weighted-average number of common shares-diluted 93,372,232 96,031,332 93,604,794 97,271,050
Year Ended December 31, Three Months Ended December 31,
(f) Non-recurring consulting charges related to the Company’s retail operations.
(i) Non-cash charges for restricted stock units that vest based on performance conditions.
(j) Non-recurring legal settlements/costs.
(k) The Company recorded a $2.9 million gain on sale of its Canadian-based Party City stores.
(g) Represents non-cash charges related to stock options.
(l) Represents income tax expense/benefit after excluding the specific tax impacts for each of the pre-tax adjustments. The tax
impacts for each of the adjustments were determined by applying to the pre-tax adjustments the effective income tax rates for the
specific legal entities in which the adjustments were recorded.
(e) Principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services. See the 2019
Form 10-K for further discussion.
(a) Includes the non-cash amortization of deferred financing costs, original issuance discounts and capitalized call premiums. In
addition, during 2018, the Company amended its credit facilities and in conjunction with the amendments, the Company wrote-off
capitalized deferred financing costs, original issue discounts and call premiums. Further, in conjunction with the amendment, the
Company expensed investment banking and legal fees. Such amounts are included in "Amortization of deferred financing costs and
original issuance discounts" above.
(c) For the year ended December 31, 2019, amounts expensed principally related to executive severance and the write-off of
inventory for a section of the Company’s Party City stores that were restructured.
(h) During June 2019, the Company reported a $58.4 million gain from the sale and leaseback of its main distribution center
in Chester, New York and its metallic balloons manufacturing facility in Eden Prairie, Minnesota. The aggregate sale price for
the three properties was $128.0 million. Simultaneous with the sale, the Company entered into twenty year leases for each of
the facilities.
(b) During the year ended December 31, 2019, the Company performed a comprehensive review of its store locations aimed
at improving the overall productivity of such locations (“store optimization program”) and made the decision to accelerate the
optimization of its store portfolio with the closure of approximately 55 stores which are primarily located in close proximity to
other Party City stores. In conjunction with the store optimization program, the Company recorded the following charges:
inventory reserves: $21.3 million, operating lease asset impairment: $14.9 million, property plant and equipment impairment: $4.7
million, labor and other costs related to closing the stores: $8.7 million and severance: $0.7 million. The charge for inventory
reserves was recorded in cost of sales in the Company’s statement of operations and comprehensive (loss) income. The other
charges were recorded in store impairment and restructuring charges in the Company’s statement of operations and
comprehensive (loss) income. See the 2019 Form 10-K for further discussion. Additionally, during the process of liquidating the
inventory in such stores, the Company lost margin of $8.5 million.
(d) As a result of a sustained decline in market capitalization, the Company recognized a non-cash pre-tax goodwill
impairment charge during the year ended December 31, 2019 of $562.6 million. This includes a non-cash pre-tax tradename
impairment charge of $6.6 million.
34
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
35