National Vision Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q2 2023 National Visions Holding Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Angie McCabe, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to National Vision's second quarter 2023 earnings call. Joining me on the call today are Reid Fogg, CEO, and Melissa Rasmussen, CFO. Patrick Moore, COO, is also with us and will be available during the Q&A portion of the call. Our earnings relief issued this morning and the presentation accompanying our call are both available in the investor section of our website, nationalvision.com. A replay of the audio webcast will be archived in the investor section after the call. Before we begin, let me remind you that our earnings materials and today's presentation include forward-looking statements as defined in the private securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and our filings with the Securities and Exchange Commission. The release and today's presentation also include certain non-GAAP measures. Reconciliation of these measures is included in our release and the supplemental presentation. We also would like to draw your attention to slide two in today's presentation for additional information about forward-looking statements and non-GAAP measures. As a reminder, National Vision provides investor presentations and supplemental materials for investor reference in the investor section of our website. I will now turn the call over to Reid. Reid?

Thank you, Angie. Good morning, everyone. Thank you all for joining us today. As you likely saw on July 26th, we announced our preliminary second quarter financial results in conjunction with the news that our partnership with Walmart will be ending in 2024. This morning, I'll provide some highlights from the second quarter, update you on the progress we're making on our key strategic initiatives with particular emphasis on how we're expanding exam capacity, and provide some color on the Walmart transition. Then Melissa will review our second quarter financial results and 2023 outlook in more detail. As we communicated two weeks ago, our second quarter 2023 results were largely in line with our expectations and reflected trends similar to what we experienced in the first quarter. Compared with the second quarter of 2022, we delivered net revenue growth of 3.1% and delivered adjusted comparable store sales growth of 1%. We continue to see strength in our managed care business, as well as a further shift in the number of higher income customers who traded into our more value priced offerings. During the second quarter, we opened 24 new stores and remain on track to open approximately 65 to 70 new stores this year. As I'll discuss later in my remarks, we continue to see tangible results from the execution of our key strategic initiatives. These factors, among others that Melissa will discuss, resulted in adjusted diluted EPS of 17 cents for the second quarter. Importantly, we believe the adjusted operating income and adjusted diluted EPS will be at or above the midpoint of our fiscal 2023 guidance ranges. Regarding our Walmart relationship, as we detailed it in our July 26 press release, as of February 23, 2024, we will no longer be managing the 229 vision centers in select Walmart locations, nor will we be providing our related optometric services for Walmart in California. Consequently, we made the decision to end the wholesale distribution and e-commerce contact lens services that we provide to Walmart and Sam's Club through our AC Lens business when our contract ends on June 30th, 2024. While we did not expect this decision from Walmart, for well over a decade, we've been focusing on growing our two larger, more strategic brands, America's Best and Eyeglass World, driving the revenue from Walmart stores down to about 8% of our net revenue in fiscal 2022. We have created a dedicated transition team, and over the coming months, it will be focused on executing a successful transition of the vision centers we operate to Walmart. In addition, we are focused on ensuring we align our cost structure with our go-forward business model and expect to provide more details on this when appropriate. As we look ahead, as a less complex and more streamlined organization, we will be able to have even greater focus on the core strategic initiatives that will grow our two large growth brands and return to a mid-single-digit adjusted operating margin milestone while solidifying our leadership position in the marketplace. We continue to make progress on our strategic initiatives, which underscores our confidence and our ability to adapt our business to thrive in this new and evolving environment. Our primary strategic focus has been on expanding exam capacity. In Q2 as in Q1, The stores that achieved our capacity goals produced positive comparable sales growth above our reported consolidated comp. We are laser focused on improving coverage and are making progress on this front. One example is in dark stores where there is no in-store optometrist coverage or remote exam enablement. In America's Best, dark stores were at their highest level in the second quarter of 2022 and are now at less than half that. even while we have increased our store base. We are also focused on improving coverage in our DIM stores, which are generally stores with some coverage, but well below our desired levels. The number of DIM stores can fluctuate throughout the year. We've been attacking coverage and continue to attack it through recruiting and retention efforts and deployment of our remote technology. We also continue to drive increased exam capacity through retention of existing optometrists in our network, recruitment of new optometrists to our network, and deployment of our remote medicine capabilities. We believe that the increase in flexible scheduling options that we now offer to new and existing optometrists is one of the key drivers of improved recruitment and retention levels. We're pleased that we remain on track to deliver a second consecutive year of improved retention rates as we work towards returning to retention levels at or above where they were prior to the COVID-19 pandemic. Additionally, we're pleased this year's student recruitment efforts are shaping up to be another record year. We believe the flexible scheduling options offered to graduating optometrists were a key driver of the increase in new graduates joining us. Now more than ever, new and experienced healthcare professionals want more control over their schedules, including how and when they decide to practice. Scheduling flexibility combined with other incentives is resulting in strong levels of interest by new graduates and experienced optometrists in joining the optometrist network since we launched changes to our recruitment approach and benefits earlier this year. Another driver of expanding exam capacity is the continued rollout of our remote medicine technology. Year to date, through July 1st, we deployed remote in nearly half of our 200 targeted locations, mainly in our America's Best locations, and remain on track with our rollout target this year. Notably, more than 40% of our 926 America's Best locations are now enabled with both our remote and electronic health record platforms. We're deploying remote in tandem with electronic health record technology as the two work together to drive expanded capacity, improve in-store efficiencies, and importantly, improve the patient experience. The combination of these two initiatives is resulting in added exam capacity and sales that we would not have had otherwise. and we remain on track for remote to be EBITDA profitable in 2023. Many optometrists enjoy practicing via a remote setting, which helps support both recruitment and retention efforts. While still in the early innings of our remote program, we remain confident in its ability to continue to expand exam capacity over time, thereby allowing remote optometrists to serve even more patients. As we look ahead, we are focused on carefully navigating the evolving and complex state regulatory landscape in future deployment phases. Before I conclude and turn the call over to Melissa, there are a couple of other recent highlights that I want to touch on. First, and as we mentioned in our first quarter earnings call in May, we recently undertook a study of our pricing architecture to complement the internal pricing analysis we do on a regular basis. This study was recently completed And while still early in our evaluation of the findings, we're already implementing some modest non-headline adjustments. Second, we are currently in the midst of back to school season, which is our second largest selling season after the first quarter, when health benefit plans reset and customers receive tax refunds. During back to school season, children are getting eye exams and glasses in preparation for returning to school, and we can currently see a seasonal increase in adult customers. As has been our historical practice prior to the COVID-19 pandemic, over the past several weeks, we conducted robust in-person back-to-school meetings across the country with our store teams where we listened to our customer-facing associates to ensure we're providing them with everything they need to best serve our patients and customers. We are reinforcing our focus on our field management to improve operations and thereby improve performance. As we look ahead, we remain encouraged by the progress we're making across the business with execution of our strategic initiatives. While our model is evolving, we remain focused on our mission to help people by making quality eye care and eyewear more affordable and accessible. I'll now turn the call over to Melissa for a more detailed discussion of our second quarter financial results and our outlook for the remainder of 2023. Melissa?