eye-20240330

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________

FORM 10-Q

_______________________________________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38257

_______________________________________________________________________

National Vision Holdings, Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________________________________


Delaware						46-4841717
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2435 Commerce Ave
Building 2200						30096
Duluth, Georgia						(Zip Code)
(Address of principal executive offices)

(770) 822‑3600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

_______________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

EYE

Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at April 26, 2024
Common stock, $0.01 par value						78,560,994

NATIONAL VISION HOLDINGS, INC. AND SUBSIDIARIES

Table of Contents


			Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			3
PART I – FINANCIAL INFORMATION			5
	Item 1.	Financial Statements (Unaudited)	5
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Operations and Comprehensive Income	6
		Condensed Consolidated Statements of Stockholders’ Equity	7
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
	Item 4.	Controls and Procedures	34
PART II – OTHER INFORMATION			35
	Item 1.	Legal Proceedings	35
	Item 1A.	Risk Factors	35
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
	Item 3.	Defaults Upon Senior Securities	35
	Item 4.	Mine Safety Disclosures	35
	Item 5.	Other Information	35
	Item 6.	Exhibits	36
		Signatures	37

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) 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, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends and other information, may be forward-looking statements.

Words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts or guarantees of future performance and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth in Part I, Item 1A - “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 30, 2023 (the “2023 Annual Report on Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov, and also include, but are not limited to, the termination of our partnership with Walmart, including the transition period and other wind down activities, will have an impact on our business, revenues, profitability and cash flows, which impact could be material; market volatility, an overall decline in the health of the economy and other factors impacting consumer spending, including inflation, uncertainty in financial markets, recessionary conditions, escalated interest rates, the timing and issuance of tax refunds, governmental instability, war and natural disasters, may affect consumer purchases, which could reduce demand for our products and materially harm our sales, profitability and financial condition; failure to recruit and retain vision care professionals for in-store roles or to provide remote care offerings could adversely affect our business, financial condition and results of operations; the optical retail industry is highly competitive, and if we do not compete successfully, our business may be adversely impacted; if we fail to open and operate new stores in a timely and cost-effective manner or fail to successfully enter new markets, our financial performance could be materially and adversely affected; if the performance of our Host brands declines or we are unable to maintain or extend our operating relationships with our Host partners, our business, profitability and cash flows may be adversely affected and we may be required to incur impairment charges; we are a low-cost provider and our business model relies on the low-cost of inputs and factors such as wage rate increases, inflation, cost increases, increases in the price of raw materials and energy prices could have a material adverse effect on our business, financial condition and results of operations; we require significant capital to fund our expanding business, including updating our Enterprise Resource Planning (“ERP”), and other technological, systems and capabilities; our growth strategy could strain our existing resources and cause the performance of our existing stores to suffer; our success depends upon our marketing, advertising and promotional efforts and if we are unable to implement them successfully or efficiently, or if our competitors are more effective than we are, we may experience a material adverse effect on our business, financial condition and results of operations; we are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs; certain technological advances, greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, or future drug development for the correction of vision-related problems may reduce the demand for our products and adversely impact our business and profitability; if we fail to retain our existing senior management team or attract qualified new personnel such failure could have a material adverse effect on our business, financial condition and results of operations; our profitability and cash flows may be negatively affected if we are not successful in managing our inventory balances and inventory shrinkage; our operating results and inventory levels fluctuate on a seasonal basis; our e-commerce and omni-channel business faces distinct risks, and our failure to successfully manage those risks could have a negative impact on our profitability; we depend on our distribution centers and/or optical laboratories; we may incur losses arising from our investments in technological innovators in the optical retail industry, including artificial intelligence, which would negatively affect our financial results; ESG issues, including those related to climate change, could have a material adverse effect on our business, financial condition and results of operations; changing climate and weather patterns leading to severe weather and disasters may cause significant business interruptions and expenditures; future operational success depends on our

ability to develop, maintain and extend relationships with managed vision care companies, vision insurance providers and other third-party payors; we face risks associated with vendors from whom our products are sourced and are dependent on a limited number of suppliers; we rely heavily on our information technology systems, as well as those of our vendors, for our business to effectively operate and to safeguard confidential information; any significant failure, inadequacy, interruption or security breach could adversely affect our business, financial condition and operations; we rely on third-party coverage and reimbursement, including government programs, for an increasing portion of our revenues, the future reduction of which could adversely affect our results of operations; we are subject to extensive state, local and federal vision care and healthcare laws and regulations and failure to adhere to such laws and regulations would adversely affect our business; we are subject to managed vision care laws and regulations; we are subject to rapidly changing and increasingly stringent laws, regulations, contractual obligations, and industry standards relating to privacy, data security and data protection which could subject us to liabilities that adversely affect our business, operations and financial performance; we could be adversely affected by product liability, product recall or personal injury issues; failure to comply with laws, regulations and enforcement activities or changes in statutory, regulatory, accounting and other legal requirements could potentially impact our operating and financial results; adverse judgments or settlements resulting from legal proceedings relating to our business operations could materially adversely affect our business, financial condition and results of operations; we may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business; we have a significant amount of indebtedness which could adversely affect our business and financial position, including limiting our business flexibility and preventing us from meeting our debt obligations; a change in interest rates may adversely affect our business; our credit agreement contains restrictions that limit our flexibility in operating our business; conversion of the 2025 Notes could dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock; and risks related to owning our common stock, including our ability to comply with requirements to design and implement and maintain effective internal controls.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this Form 10-Q apply only as of the date of this Form 10-Q or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

All references to “we,” “us,” “our,” or the “Company” in this Form 10-Q mean National Vision Holdings, Inc. and its subsidiaries, unless the context otherwise requires. References to “eye care practitioners” in this Form 10-Q mean optometrists and ophthalmologists and references to “vision care professionals” mean optometrists (including optometrists employed by us or by professional corporations owned by eye care practitioners with which we have arrangements) and opticians.

Website Disclosure

We use our website www.nationalvision.com as a channel of distribution of Company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about National Vision Holdings, Inc. when you enroll your e-mail address by visiting the “Email Alerts” page of the Investor Resources section of our website at www.nationalvision.com/investors. The contents of our website are not, however, a part of this Form 10-Q.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


In thousands, except par value	As of March 30, 2024		As of December 30, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	150,050	$	149,896
Accounts receivable, net	74,273		86,854
Inventories	118,564		119,908
Prepaid expenses and other current assets	36,025		40,012
Total current assets	378,912		396,670

Noncurrent assets:
Property and equipment, net	357,390		360,772
Goodwill	717,544		717,544
Trademarks and trade names	240,547		240,547
Other intangible assets, net	19,779		20,173
Right of use assets	410,709		406,275
Other assets	30,487		28,336
Noncurrent assets of discontinued operations	—		2,194
Total noncurrent assets	1,776,456		1,775,841
Total assets	$	2,155,368	$	2,172,511

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	60,797	$	67,556
Other payables and accrued expenses	108,139		123,288
Unearned revenue	45,604		48,117
Deferred revenue	63,846		62,867
Current maturities of long-term debt and finance lease obligations	10,329		10,480
Current operating lease obligations	86,291		85,090
Current liabilities of discontinued operations	—		302
Total current liabilities	375,006		397,700

Noncurrent liabilities:
Long-term debt and finance lease obligations, less current portion and debt discount	448,617		450,771
Noncurrent operating lease obligations	380,090		376,814
Deferred revenue	22,005		21,459
Other liabilities	8,399		8,465
Deferred income taxes, net	79,932		87,884

Total noncurrent liabilities	939,043		945,393
Commitments and contingencies (See Note 11)
Stockholders’ equity:
Common stock, $0.01 par value; 200,000 shares authorized; 85,194 and 84,831 shares issued as of March 30, 2024 and December 30, 2023, respectively; 78,558 and 78,311 shares outstanding as of March 30, 2024 and December 30, 2023, respectively	852		848
Additional paid-in capital	791,710		788,967
Accumulated other comprehensive loss	(229)		(419)
Retained earnings	266,301		254,616
Treasury stock, at cost; 6,636 and 6,520 shares as of March 30, 2024 and December 30, 2023, respectively	(217,315)		(214,594)
Total stockholders’ equity	841,319		829,418
Total liabilities and stockholders’ equity	$	2,155,368	$	2,172,511

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)


	Three Months Ended
In thousands, except earnings per share		March 30, 2024		April 1, 2023
Revenue:
Net product sales		$	447,812	$	436,114
Net sales of services and plans		94,711		84,683
Total net revenue		542,523		520,797
Costs applicable to revenue (exclusive of depreciation and amortization):
Products		166,324		160,334
Services and plans		82,342		75,075
Total costs applicable to revenue		248,666		235,409
Operating expenses:
Selling, general and administrative expenses		245,366		233,331
Depreciation and amortization		23,637		22,734
Asset impairment		456		354
Other expense (income), net		(12)		(117)
Total operating expenses		269,447		256,302
Income from operations		24,410		29,086
Interest expense, net		4,256		4,867
Earnings from continuing operations before income taxes		20,154		24,219
Income tax provision		7,915		8,246
Income from continuing operations, net of tax		12,239		15,973
Income (loss) from discontinued operations, net of tax (See Note 2)		(554)		2,297
Net income		$	11,685	$	18,270

Basic earnings per share:
Continuing operations		$	0.16	$	0.20
Discontinued operations		$	(0.01)	$	0.03
Total		$	0.15	$	0.23
Diluted earnings per share:
Continuing operations		$	0.16	$	0.20
Discontinued operations		$	(0.01)	$	0.02
Total		$	0.15	$	0.22

Weighted average shares outstanding:
Basic		78,384		78,721
Diluted		78,826		92,136

Comprehensive income:
Net income		$	11,685	$	18,270
Unrealized gain on hedge instruments		254		253
Tax provision of unrealized gain on hedge instruments		64		65
Comprehensive income		$	11,875	$	18,458

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)


	Three Months Ended March 30, 2024
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Stockholders’ Equity
In thousands	Shares	Amount
Balances at December 30, 2023	78,311	$	848	$	788,967	$	(419)	$	254,616	$	(214,594)	$	829,418
Issuance of common stock	363	4		312								316
Stock-based compensation				2,431								2,431
Purchase of treasury stock	(116)									(2,721)		(2,721)

Unrealized gain on hedge instruments, net of tax						190						190
Net income								11,685				11,685
Balances at March 30, 2024	78,558	$	852	$	791,710	$	(229)	$	266,301	$	(217,315)	$	841,319


	Three Months Ended April 1, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Stockholders’ Equity
In thousands	Shares	Amount
Balances at December 31, 2022	78,992	$	842	$	767,112	$	(1,179)	$	320,517	$	(186,179)	$	901,113


Issuance of common stock	282	3		490		—		—		—		493
Stock-based compensation	—	—		4,271		—		—		—		4,271
Purchase of treasury stock	(1,189)	—		—		—		—		(27,609)		(27,609)

Unrealized gain on hedge instruments, net of tax	—	—		—		188		—		—		188
Net income	—	—		—		—		18,270		—		18,270
Balances at April 1, 2023	78,085	$	845	$	771,873	$	(991)	$	338,787	$	(213,788)	$	896,726

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

National Vision Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Three Months Ended
In thousands	March 30, 2024		April 1, 2023
Cash flows from operating activities:
Net income	$	11,685	$	18,270
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,181		24,813
Amortization of debt discount and deferred financing costs	629		792
Amortization of cloud computing implementation costs	1,132		588
Asset impairment	456		387
Deferred income tax expense (benefit)	(7,952)		(6,377)
Stock-based compensation expense	2,465		4,315
Losses (gains) on change in fair value of derivatives	(190)		776
Inventory adjustments	1,350		944
Other	(303)		799
Changes in operating assets and liabilities:
Accounts receivable	12,287		(416)
Inventories	(6)		(1,310)
Operating lease right of use assets and lease liabilities	(705)		1,103
Other assets	1,401		2,997
Accounts payable	(6,759)		9,348
Deferred and unearned revenue	(988)		5,498
Other liabilities	(14,696)		11,537
Net cash provided by operating activities	23,987		74,064
Cash flows from investing activities:
Purchase of property and equipment	(20,014)		(27,721)
Other	1,805		106
Net cash used for investing activities	(18,209)		(27,615)
Cash flows from financing activities:
Repayments on long-term debt	(1,875)		—
Proceeds from issuance of common stock	320		493
Purchase of treasury stock	(2,721)		(27,609)

Payments on finance lease obligations	(897)		(1,546)
Net cash used for financing activities	(5,173)		(28,662)
Net change in cash, cash equivalents and restricted cash	605		17,787
Cash, cash equivalents and restricted cash, beginning of year	151,027		230,624
Cash, cash equivalents and restricted cash, end of period	$	151,632	$	248,411

Supplemental cash flow disclosure information:
Cash paid for interest	$	245	$	459
Cash paid for taxes	$	113	$	106
Capital expenditures accrued at the end of the period	$	5,662	$	7,634

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

National Vision Holdings, Inc. and Subsidiaries

Index to Notes to Condensed Consolidated Financial Statements


			Page

1. Description of Business and Basis of Presentation			10
2. Discontinued Operations			12
3. Costs Related to Wind Down Activities			14
4. Details of Certain Balance Sheet Accounts			14
5. Fair Value Measurement			15
6. Long-term Debt			16
7. Interest Rate Derivatives			17
8. Stock Incentive Plans			18
9. Revenue from Contracts with Customers			18
10. Leases			19
1 1 . Commitments and Contingencies			19
1 2 . Segment Reporting			20
1 3 . Earnings Per Share			22

Table of Contents

National Vision Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Description of Business and Basis of Presentation

Nature of Operations

National Vision Holdings, Inc. (“NVHI,” the “Company,” “we,” “our,” or “us”) is a holding company whose operating subsidiaries include its indirect wholly-owned subsidiary, National Vision, Inc. (“NVI”) and NVI’s wholly-owned subsidiaries. We are a leading value retailer of eyeglasses and contact lenses in the United States (the “U.S.”). We operated 1,201 and 1,188 retail optical locations in the U.S. and its territories as of March 30, 2024 and December 30, 2023, respectively, through our four store brands, including America’s Best Contacts and Eyeglasses (“America’s Best”), Eyeglass World, Vista Optical locations on select U.S. Army/Air Force military bases (“Military”) and within select Fred Meyer stores. We operated 225 stores for Walmart Inc. (“Walmart”) as of December 30, 2023; these stores are not reflected in the store counts above and the operating results of these stores are presented as discontinued operations as discussed further in Note 2. “Discontinued Operations.”

Basis of Presentation and Principles of Consolidation

We prepare our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and, therefore, do not include all information and disclosures required by U.S. GAAP for complete consolidated financial statements. The Condensed Consolidated Balance Sheet as of December 30, 2023 has been derived from the audited consolidated balance sheet for the fiscal year then ended. These condensed consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s consolidated results of the interim period.

Certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted; however, we believe that the disclosures included herein are sufficient for a fair presentation of the information presented. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the fiscal year ended December 30, 2023 included in the 2023 Annual Report on Form 10-K. The Company’s significant accounting policies are set forth in Note 1. within those consolidated financial statements. We use the same accounting policies in preparing interim condensed consolidated financial information and annual consolidated financial statements. There were no changes to our significant accounting policies during the three months ended March 30, 2024.

The condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts within the Condensed Consolidated Statements of Cash Flows and footnotes to the financial statements for fiscal year 2023 have been reclassified to conform to the fiscal year 2024 presentation. Retrospective reclassifications have been made to prior period financial statements and disclosures to present the discontinued operations. Refer to Note 2. “Discontinued Operations” for more information on discontinued operations.

The Company has consolidated certain entities meeting the definition of a variable interest entity (“VIE”) as the Company concluded that it is the primary beneficiary of the entities under the provisions of Accounting Standards Codification 810, Consolidation. As of March 30, 2024, the variable interest entities include 30 professional corporations. The total assets of the consolidated VIEs included in the accompanying Condensed Consolidated Balance Sheets as of March 30, 2024 and December 30, 2023, were $3.8 million and $8.3 million, respectively, and the total liabilities of the consolidated VIEs were $5.1 million and $9.8 million, respectively.

Fiscal Year

Our fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31. Fiscal year 2024 contains 52 weeks and will end on December 28, 2024. All three month periods presented herein contain 13 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

Seasonality

The consolidated results of operations for the three months ended March 30, 2024 and April 1, 2023, are not necessarily indicative of the results to be expected for the full fiscal year due to seasonality and uncertainty of general economic conditions that may impact our key markets. Historically, our business has realized a higher portion of net revenue, income from operations, and cash flows from operations in the first half of the year, and a lower portion of net revenue, income from operations, and cash flows from operations in the fourth fiscal quarter. The first half seasonality is attributable primarily to the timing of our customers’ personal income tax refunds and annual health insurance program start/reset periods. Seasonality related to fourth quarter holiday spending by retail customers generally does not impact our business. Our quarterly consolidated results generally may also be affected by the timing of new store openings, store closings, and certain holidays.

Table of Contents

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Asset Impairment

Non-cash impairment charges of $0.5 million were recorded for the three months ended March 30, 2024 compared to $0.4 million for the three months ended April 1, 2023 related to tangible long-lived store assets and ROU assets. The impairments were primarily driven by lower than projected customer sales volume in certain stores and other entity-specific assumptions. We considered multiple factors including, but not limited to: forecasted scenarios related to store performance and the likelihood that these scenarios would be ultimately realized; and the remaining useful lives of the assets. Asset impairment expenses were recognized in Corporate/Other. Refer to Note 5. “Fair Value Measurements” for additional information on impairment charges.

Income Taxes

Our effective tax rate for the three months ended March 30, 2024 was 39.3%, reflecting our statutory federal and state rate of 25.2%, non-deductible compensation expense and other permanent items. Our effective tax rate for the three months ended April 1, 2023 was 34.0%, reflecting our statutory federal and state rate of 25.4%, tax impacts of consolidated VIEs, reduced deductibility of meals and entertainment expenses and effects of other permanent items.

Share Repurchases

Effective February 23, 2024, the Board authorized the Company to repurchase up to $50 million aggregate amount of shares of the Company’s common stock until January 3, 2026. During the three months ended April 1, 2023, the Company repurchased 1.1 million shares of its common stock for $25.0 million. As of March 30, 2024, $50 million remains available under the share repurchase authorization.

Discontinued Operations

In accordance with ASC 205-20 “Presentation of Financial Statements: Discontinued Operations,” a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. In the period in which the component meets held-for-sale or discontinued operations criteria, the major current assets, non-current assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations.

Our operations related to Walmart stores, including our former Legacy reportable segment, met the definition of a discontinued operation as of March 30, 2024. Accordingly, we classified the results of our Walmart store operations, as discontinued operations in the condensed consolidated statements of operations for all periods presented. The results of all discontinued operations, less applicable income taxes, are reported as components of net income separate from the net income of continuing operations. Certain assets and liabilities associated with our Walmart store operations were classified as assets and liabilities of discontinued operations in the condensed consolidated balance sheets for the periods presented. Additionally, the cash flows and comprehensive income of Walmart store operations have not been segregated and are included in the interim Condensed Consolidated Statements of Cash Flows and Condensed Consolidated Statements of Operations and Comprehensive Income, respectively, for all periods presented. All amounts included in the notes to the unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted. For additional information, see Note 2, “Discontinued Operations.”

Future Adoption of Accounting Pronouncements

Reference Rate Reform. The Financial Accounting Standards Board (“FASB”) has issued guidance at various points over the last several years that provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that may be affected by the cessation of the London Inter-bank Offered Rate (“LIBOR”). We are currently able to apply this new guidance for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2024. Refer to Note 7. “Interest Rate Derivatives” for more information on our transition from LIBOR to Term Secured Overnight Financing Rate (“Term SOFR”).

Segment reporting. In November 2023, the FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update provides, among other things, enhanced segment disclosure requirements including disclosures about significant segment expenses. This

Table of Contents

ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures.

Income taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and for interim periods within fiscal years beginning after December 15, 2025. The Company is currently evaluating the impact of the guidance on the consolidated financial statements and disclosures.

The Enhancement and Standardization of Climate-Related Disclosures for Investors. In March 2024, the SEC issued its final rule on the enhancement and standardization of climate-related disclosures for investors. These wide-ranging disclosures require annual disclosure of material greenhouse gas emissions as well as disclosure of governance, risk management and strategy related to material climate-related risks. Within the notes to financial statements, the final rule requires disclosure of expenditures recognized, subject to certain thresholds, attributable to severe weather. Outside of the financial statements, the final rule requires qualitative and quantitative disclosures about material scope 1 and scope 2 greenhouse gas emissions. Also required is disclosure of the risk management process and the oversight practices of the Board of Directors and management related to climate-related risks. Unless legal challenges prevail, the final rule follows a compliance phase-in timeline, with the first requirements required to be adopted for the Company’s fiscal year 2025, followed in later years by greenhouse gas-related requirements. The Company is currently evaluating the rule to determine the impact on its consolidated financial statements and disclosures.

The FASB issued other accounting guidance during the period that is not currently applicable or expected to have a material impact on the Company’s financial statements, and therefore, is not described above.

2. Discontinued Operations

On July 20, 2023, the Company received a notice of non-renewal from Walmart of the Management & Services Agreement by and between NVI and Walmart, dated as of May 1, 2012 (as amended, supplemented or otherwise modified from time to time, the “Walmart MSA”). In accordance with the terms of the Walmart MSA and the notice, the agreement terminated as of February 23, 2024 (the “Termination Date”). In connection with the termination of the Walmart MSA, the Amended and Restated Supplier Agreement between NVI and Walmart, dated as of January 17, 2017; the agreement between FirstSight Vision Services, Inc. (“FirstSight”), a wholly-owned subsidiary of the Company, and Walmart, which arranged for the provision by FirstSight of optometric services at optometric offices next to certain Walmart stores throughout California; and certain other related agreements also terminated as of the Termination Date. The Walmart MSA includes provisions governing the transition period and post-termination obligations of the parties.

As a result of the termination of the Walmart MSA, our Walmart store operations, including our former Legacy reportable segment and certain other results previously included in our Corporate/Other and Reconciliations categories, met the criteria to be presented as discontinued operations as of March 30, 2024. Accordingly, the assets and liabilities and results of operations of the discontinued operations have been presented in the tables below.

Refer to Note 3. “Costs Related to Wind Down Activities” for more information on the additional wind down activities related to our continuing operations.

Major classes of assets and liabilities related to discontinued operations are presented in the table below. We have retained working capital and deferred tax balances related to discontinued operations; consequently, these items are not part of the disposal group.

Table of Contents


In thousands	As of March 30, 2024		As of December 30, 2023
Noncurrent assets:
Property and equipment, net	$	—	$	1,791
Right of use assets	—		304
Other intangible assets, net	—		99

Total noncurrent assets of discontinued operations	$	—	$	2,194

Current liabilities:
Current operating lease obligations	$	—	$	302
Total current liabilities of discontinued operations	$	—	$	302

The following table presents income(loss) from discontinued operations, net of tax:


In thousands	Three Months Ended March 30, 2024		Three Months Ended April 1, 2023
Revenue:
Net product sales	$	13,871	$	28,647
Net sales of services and plans	4,513		12,925
Total net revenue	18,384		41,572
Costs applicable to revenue (exclusive of depreciation and amortization):
Products	6,508		12,768
Services and plans	2,755		5,875
Total costs applicable to revenue	9,263

SEC Form 10-Q filed by National Vision Holdings Inc.