National Vision Holdings, Inc. — Form 10-K Summary
Period clarification: The filing is for fiscal 2021, the 52 weeks ended January 1, 2022—not fiscal 2020 Q4. The comparable fiscal 2020 included 53 weeks. The filing provides limited fourth-quarter context but no complete standalone Q4 income statement.
Business context
National Vision is a U.S. value optical retailer selling eyewear, contact lenses and eye exams. At year-end it operated 1,278 stores across five brands and 18 consumer websites. Its reportable segments are Owned & Host, including America’s Best and Eyeglass World, and Legacy, consisting of Vision Centers managed in Walmart stores. Walmart-related sales were 8.0% of consolidated revenue; total revenue from Walmart, including other arrangements, was $300.8 million.
Financial performance
| Metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Net revenue | $2,079.5 million | $1,711.8 million |
| Income from operations | $174.9 million; 8.4% margin | $87.0 million; 5.1% margin |
| Net income | $128.2 million; 6.2% margin | $36.3 million; 2.1% margin |
| Diluted EPS | $1.43 | $0.44 |
| Adjusted EBITDA (non-GAAP) | $294.4 million; 14.2% margin | $218.3 million; 12.8% margin |
| Operating cash flow | $258.9 million | $235.0 million |
| Capital expenditures | $95.5 million | $76.8 million |
Revenue increased 21.5%; comparable-store sales grew 22.4% (23.0% on the company’s adjusted basis). Management attributed the increase primarily to recovery from temporary store closures in 2020 and COVID-related stimulus, with new-store growth also contributing. The comparison is affected by 2020’s 53rd week, which contributed approximately $32.2 million of revenue.
Costs applicable to revenue were 43.5% of revenue, down from 46.0%; SG&A was 43.3%, up from 42.4%. The lower cost ratio reflected product mix and margin improvement, while higher advertising and performance-based compensation raised SG&A. Interest expense fell 47.0% to $25.6 million, primarily reflecting lower derivative costs, debt reduction and accounting changes. Fiscal 2021 included a $2.4 million gain on sale of an equity-method investment and $4.4 million of asset impairment charges, versus $22.0 million in 2020.
Cash, debt and liquidity
Year-end cash and cash equivalents were $305.8 million, down from $373.9 million. The company reported $293.6 million available on its $300 million revolving facility, net of $6.4 million of letters of credit. Principal debt was $552.5 million: $402.5 million of 2.50% convertible notes due 2025 and $150.0 million of variable-rate term debt due 2024. The company prepaid $167.4 million of term-loan principal during 2021 and reported compliance with debt covenants. Operating cash flow less capital expenditures was approximately $163.4 million.
Operating, investing and financing cash flows were $258.9 million, negative $92.9 million and negative $234.3 million, respectively. Financing outflows included debt prepayments and $73.3 million of treasury-stock purchases. The company repurchased 1.4 million shares for $69.9 million during fiscal 2021. A February 2022 authorization increased the repurchase program to $200 million, with $130 million remaining after fiscal 2021 repurchases. No cash dividends are planned.
Material changes, outlook and risks
- Store count increased to 1,278 from 1,205; 75 stores opened during fiscal 2021. Management said at least 75 annual openings were sustainable for the foreseeable future, subject to conditions.
- Management expects fiscal 2022 capital expenditures of approximately $110 million to $115 million, primarily for new stores and technology. It provided no specific consolidated revenue or earnings guidance in the supplied filing text.
- COVID-19 continued to create uncertainty around staffing, customer demand, store operations and supply chains. The company reported that it had met customer demand through its laboratories to date and had used inventory forward buys to manage potential disruption.
- Other key exposures include inflation and wage pressure, dependence on a concentrated group of lens and contact-lens suppliers, reliance on managed-care reimbursement, optometrist recruitment, lease commitments and competition. Managed-care revenue was approximately one third of total revenue.
- The Walmart management agreement runs through February 23, 2024, with automatic renewal provisions unless timely notice is given. The agreement’s expiry or adverse changes could affect revenue and cash flow. Fred Meyer agreement renewal was in process.
- The company reported a $118.1 million balance of other contractual commitments, in addition to substantial operating-lease obligations. Operating-lease payments totaled $466.3 million undiscounted across future periods.
- The company early adopted ASU 2020-06 for convertible debt accounting. Adoption increased fiscal 2021 net income by $12.4 million and diluted EPS by $0.04 compared with the prior method, while adding 12.9 million weighted-average diluted shares from assumed conversion.
- A lawsuit involving a former sublease holder was settled and dismissed in February 2022. Deloitte issued unqualified opinions on the financial statements and internal controls; goodwill impairment testing for the Walmart Legacy reporting unit was identified as a critical audit matter.
Important facts for investors to verify
- How much of the 2021 sales and margin rebound is sustainable after accounting for pandemic-related closures and stimulus in the comparison period.
- The company’s 2022 store-opening, capital-spending and comparable-sales trajectory, including the impact of inflation, labor availability and supply costs.
- Debt repayment capacity and potential dilution or settlement choices related to the 2025 convertible notes.
- Renewal prospects and economics of the Walmart and Fred Meyer relationships, plus customer and supplier concentration.
- Non-GAAP adjustments and the effect of the ASU 2020-06 adoption when comparing reported earnings and diluted EPS across periods.