GNC Holdings, Inc. (NYSE: GNC)

Transcription

1 GNC Holdings, Inc. (NYSE: GNC) MIKE ARCHBOLD, CEO TRICIA TOLIVAR, EXECUTIVE VICE PRESIDENT AND CFO November 17, 2015

2 Forward looking statement THIS CONFERENCE CALL AND PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INCLUDE INFORMATION CONCERNING OUR FUTURE RESULTS, TRENDS, AND OTHER INFORMATION THAT IS NOT HISTORICAL INFORMATION. ALL FORWARD-LOOKING STATEMENTS INCLUDED ON THIS CALL AND IN THIS PRESENTATION ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE OF THIS CALL, CURRENT EXPECTATIONS, AND VARIOUS ASSUMPTIONS. WE BELIEVE THERE IS A REASONABLE BASIS FOR OUR EXPECTATIONS AND ASSUMPTIONS, BUT THEY ARE INHERENTLY UNCERTAIN, AND MAY NOT PROVE CORRECT. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE, OR REVISE, ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS, ATTRIBUTABLE TO US, OR PERSONS ACTING ON OUR BEHALF, ARE EXPRESSLY QUALIFIED, IN THEIR ENTIRETY, BY THE CAUTIONARY STATEMENTS CONTAINED THROUGHOUT THIS CALL. FOR A LIST OF IMPORTANT FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS ON THIS CALL AND IN THIS PRESENTATION, PLEASE REFER TO OUR PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION AND OUR EARNINGS RELEASE THIS MORNING. MANAGEMENT HAS INCLUDED NON-GAAP FINANCIAL MEASURES IN THIS PRESS RELEASE BECAUSE IT BELIEVES THEY REPRESENT AN EFFECTIVE SUPPLEMENTAL MEANS BY WHICH TO MEASURE THE COMPANY S OPERATING PERFORMANCE. MANAGEMENT BELIEVES THAT NET INCOME AND EARNINGS PER SHARE, EXCLUDING ASSET IMPAIRMENT CHARGES AS REFLECTED IN THIS RELEASE, AND FREE CASH FLOW ARE USEFUL TO INVESTORS AS THEY ENABLE THE COMPANY AND ITS INVESTORS TO EVALUATE AND COMPARE THE COMPANY S RESULTS FROM OPERATIONS IN A MORE MEANINGFUL AND CONSISTENT MANNER BY EXCLUDING SPECIFIC ITEMS WHICH ARE NOT REFLECTIVE OF ONGOING OPERATING RESULTS. HOWEVER, THESE MEASURES ARE NOT MEASUREMENTS OF THE COMPANY S PERFORMANCE UNDER GAAP AND SHOULD NOT BE CONSIDERED AS ALTERNATIVES TO EARNINGS PER SHARE, NET INCOME OR ANY OTHER PERFORMANCE MEASURES DERIVED IN ACCORDANCE WITH GAAP, OR AS AN ALTERNATIVE TO GAAP CASH FLOW FROM OPERATING ACTIVITIES, OR AS A MEASURE OF THE COMPANY S PROFITABILITY OR LIQUIDITY. FOR MORE INFORMATION, SEE THE ATTACHED RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES. 2

3 Today s Agenda I. Investment Rationale II. The Industry III. GNC s Strategic Evolution IV. GNC s Commitment to Quality V. Financial Highlights VI. Company-Owned vs. Franchise Store Strategy VII. Capital Discipline 3

4 I. Compelling Investment Rationale Recognized leader in large and growing health, wellness and performance industry Highly-trusted and recognized brand Clear strategy to drive profitable growth Drive improved connection with a broader range of customers Leverage customer research to drive enhanced decision-making Strong cash flow and disciplined capital allocation strategy Balanced approach to reinvesting in business and returning cash to shareholders through dividends and share repurchases 4

5 The Industry 5

6 II. The Industry Historical Growth The industry has grown meaningfully over time Source: NBJ; $ in Bil 6

7 II. The Industry Projected Growth and is expected to continue Source: NBJ; $ in Bil 7

8 e 2016e 2017e 2018e 2019e 2020e e 2016e 2017e 2018e 2019e 2020e e 2016e 2017e 2018e 2019e 2020e e 2016e 2017e 2018e 2019e 2020e II. The Industry Category Growth $16 $14 Vitamins $16 $14 Herbs $12 $12 $10 $10 $8 $8 $6 $6 $4 $4 $2 $2 $0 $0 $16 $14 Sports $16 $14 Meal Replacements $12 $12 $10 $10 $8 $8 $6 $6 $4 $4 $2 $2 $0 $0 Each major category has, and is expected to, contribute to growth Source: NBJ; $ in Bil 8

9 GNC s Strategic Evolution 9

10 III. GNC s Strategic Evolution Transformation Cultural Evolution Focus on profitable growth Decisions informed by qualitative and quantitative customer research Evolutionary, not revolutionary brand positioning Focused on performance and wellness customers Target one-to-one customer engagement Guided by brand pillars Transformation takes time but we are beginning to see progress as we connect our customers to their best 10

11 III. GNC s Strategic Evolution Brand Evolution Health, wellness & performance industry ~$37 BN Sports nutrition & performance ~$5 BN New brand positioning is grounded in data and evolutionary, not revolutionary Seek to both expand share of wallet and broaden reach Source: NBJ 11

12 III. GNC s Strategic Evolution Progress Decreased reliance on excessive promotions Increase in sales from Wellness, Natural Living, Grab-n-Go customer Increase in mix of female customers Positive ROI on natural and plant-based proteins, functional foods Positive ROI on expanded assortment Significant reduction in store service complaints 12

13 III. GNC s Strategic Evolution Focus Areas Continued refinement of marketing and promotions Enhance Gold Card program with loyalty component Develop improved pricing and promotional strategy Clearly define role and intent by category Improve customer s perception of quality Improved operational consistency 13

14 GNC s Commitment to Quality 14

15 IV. GNC Commitment to Quality 80 year history of health, wellness and performance Own a 300,000 square foot state of the art manufacturing facility Fully FDA and TGA cgmp compliant, qualified to manufacture supplements for sale in over 50 countries Dedicated laboratories for raw material and finished product inspection and testing Proprietary manufactured product subjected to 150+ quality checks Employ over 150 scientists, nutritionists, formulators, chemists, engineers and quality control experts 15

16 IV. GNC Commitment to Quality Highly Valued, Trusted Brand Brand Awareness Walmart GNC Walgreens 82% CVS Amazon Target Rite Aid Vitamin Shoppe Costco Sam's Whole Foods Vitamin World 0% 20% 40% 60% 80% 100% Source: Decision Analyst 2015 GNC Brand Equity Study Brand Awareness includes aided and unaided awareness 16

17 IV. GNC s Commitment to Quality Formed Coalition More than 40 industry-leading companies participating in the coalition Includes retailers (including e-commerce), raw material suppliers, manufacturers, multi-level marketing companies, practitioners, and pharmaceutical companies Goals are to: Establish industry Good Manufacturing Practices for the raw material supply chain, including traceability standards and testing requirements Establish minimum standards across the industry for annual facility inspections and certifications, and the issuance of raw material and finished goods product quality seals Evaluate and promote an industry sponsored product database and product numbering system Change the narrative about the industry 17

18 IV. GNC s Commitment to Quality Coalition Working Groups Media Strategy Quality Seals & Facilities Certification Raw Materials Good Manufacturing Practices Industry Product Notification Database & Numbering Codes Improve Customer Confidence Answer Govt. Regulators Answer Media Establish Standards Threshold Facilities Certification Raw Material & Finished Products Quality Seals Establish Raw Material cgmp s Traceability Standards Testing Requirements Review and recommend on advisability of industry database Mechanics of industry notification and numbering system 18

19 Financial Highlights 19

20 V. Financial Highlights Consolidated $ in thousands except per share amounts; unaudited Q Q Revenue $672,244 $656,326 Increased 2.4% Gross profit $250,644 $247,748 Product margin rate improvement in domestic retail business Offset by: % of Revenue 37.3% 37.7% higher third-party wholesale product sales to international franchisees de-leverage Total SG&A $141,155 $147,382 Advertising decreased $1.2 million, to 2.8% Offset by increase in compensation and % of Revenue 21.0% 22.5% benefits, and de-leverage Long-lived asset impairments $28,333 - Adjusted EPS $0.76 $0.75 Increased 1.3% Free cash flow / share $0.95 $0.74 Increased 28.4% Discount Supplements; $0.21 reduction in EPS including related tax benefit Free cash flow per share increased 28% in the quarter, and 42% to $2.83 on a YTD basis, due to improved working capital and lower capital expenditures 20

21 Company-Owned vs. Franchise Store Strategy 21

22 VI. Company-Owned vs. Franchise Store Strategy Strategies to increase the portion of domestic stores that are franchise locations: 1) Beginning in Q4 2015, expect majority of new stores to be franchise locations 2) Execute re-franchising strategy in select markets Negotiations are underway Letters of intent have been obtained for 33 locations* * as discussed on Q earnings call 22

23 Capital Discipline 23

24 VII. Capital Discipline Returns-based approach to business decisions, spanning Capital expenditures Marketing Promotions Returning capital to shareholders Announced $200 mil share buyback on November 3, 2015 Current Dividend Yield >2% 24

25 VII. Capital Discipline Total Shareholder Return since IPO 145% 114% 75% GNC S&P 500 S&P RETAIL GNC S&P 500 S&P Retail Source: Bloomberg Capital IQ, IBES. Market data as of Nov 6,

26 Compelling Investment Rationale Recognized leader in large and growing health, wellness and performance industry Highly-trusted and recognized brand Clear strategy to drive profitable growth Drive improved connection with a broader range of customers Leverage customer research to drive enhanced decision-making Strong cash flow and disciplined capital allocation strategy Balanced approach to reinvesting in business and returning cash to shareholders through dividends and share repurchases 26

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