National Vision Holdings, Inc.

Good day and thank you for standing by. Welcome to the fourth quarter 2024 National Vision Holdings 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'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Tamara Gonzalez, VP of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to National Vision's fourth quarter and fiscal 2024 earnings call. Joining me on the call today are Reid Fahs, CEO, Alex Wilkes, President, and Melissa Rasmussen, CFO. Our earnings release issue this morning and the presentation accompanying our call are both available in the Investors section of our website, nationalvision.com. A replay of the audio webcast will be archived in the Investors section after the call. Reid will review our 2024 results, then Alex will discuss our 2025 strategic priorities, and then Melissa will provide our financial results and details on our outlook for 2025. 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 in today's presentation also includes certain non-GAAP measures. Reconciliation of these measures is included in our release and the supplemental presentation. We would like to draw your attention to slide two in today's presentation for additional information about forward-looking statements and non-GAAP measures. Further, please note that all financial measures in today's commentary are based on a continuing operations basis unless otherwise noted. As a reminder, National Visions provides investor presentations and supplemental materials for investor reference in the Investors section of our website. I will now turn the call over to Reid. Reid?

Thank you, Tamara, and good morning, everyone. Thank you for joining us today. Before we begin our review of the fourth quarter and fiscal 2024 results, I'd like to take a moment to extend our appreciation to Melissa Rasmussen. Last month, we announced that Melissa is stepping down as CFO and will be taking up an opportunity in another industry. Melissa has been instrumental in key aspects of our transformation to date, and we thank her for her dedication to National Vision in the over five years she's been with us. I've enjoyed our time working together and wish her the very best in her future endeavors. Earlier today, we announced the appointment of Chris Layden as our new CFO, who will begin on March 31st. Chris joins us from Community Veterinary Partners, where he served as Chief Financial Officer. He brings with him nearly two decades of experience in both healthcare and optical retail, having also held leadership positions at Pearl Vision, a division of Essilor Lexotica, including Head of Finance. We're thrilled to welcome Christopher to the NBI team. To assist with the transition, Patrick Moore, who currently serves as a special advisor and who is recently our COO for just over two years and our former CFO for eight years, will serve as interim CFO. Patrick will work closely with Christopher to ensure a smooth transition. 2024 was an important year for National Vision as we took ever more aggressive actions to transform the business. We implemented meaningful change throughout the organization, including adding new members to our leadership team who bring deep optical and retail expertise and new approaches that will help accelerate our transformation efforts, particularly across managed care, pricing, and our field leadership organization. The early success of these results is evident in our strong fourth quarter results. Sales in the fourth quarter increased 3.9% to $437.3 million, and we delivered our eighth consecutive quarter of positive adjusted comparable store sales. For the quarter, adjusted comparable store sales were plus 1.5%, supported by America's best comparable store sales growth of plus 2%, which was on top of 7.2% comp in last year's fourth quarter. This was offset by Eyeglass World's comparable store sales decline of negative 1.7%, as the brand was disproportionately affected by Hurricane Helene in October, and approximately 35% of its stores are located in Florida. Our stronger than expected top line performance was driven by actions started mid-quarter, including new selling methods and targeted pricing actions, which together drove increases in average ticket. Importantly, while average ticket rose, Conversion held steady, which is an encouraging sign of consumer acceptance of the price changes. Sales in the quarter also continued to benefit from strong managed care sales, which comped high single digits throughout the year, offsetting continued relative softness in cash pay sales. With respect to profitability, adjusted operating income increased to $3.2 million, and adjusted diluted earnings per share was a loss of four cents. These results led to full-year top-line performance that came in as expected and bottom-line performance above our expectations. For the year, fiscal 2024 net revenue increased 3.8% to $1,823,000,000. And adjusted comparable store sales increased 1.3%, driven by continued strength in managed care sales. In 2024, managed care grew to approximately 40% of our revenues, Adjusted operating income of $65.5 million increased 21.5%, resulting in adjusted diluted earnings per share of $0.52. With that, let me review the progress we're making on our transformation initiatives. Over the past two years, we've made great strides evolving and strengthening the foundation of our operations, improving exam capacity through recruiting and retention initiatives, and expanding our remote exam capabilities. We've also made meaningful progress in enhancing our systems to further digitize our stores and corporate office. These efforts resulted in ending 2024 with doctor capacity on solid footing. Doctor retention squarely in line with historical ranges of between 80 and 90%. And for the third consecutive year in a row, we recruited at least 10% of the 2024 graduating class of all the optometry schools in the U.S. In addition, we ended 2024 with over 730 locations enabled with remote technology, with remote exams representing about 12% of exams in remote-enabled states for the year, and with remote doctor patients seen per day exceeding that of in-store doctors in the second half of fiscal 2024. We also launched our hybrid remote pilot in 2024, enabling in-store optometrists to perform exams in other stores based on availability and demand. Turning to our investments in technology, which continued in 2024, we invested in a finance ERP, which will go live in the second quarter, as well as the new Adobe CRM platform, which we expect to go live in the second half of this year. Thus, we're entering 2025 on a healthier footing relative to exam capacity and the tools we need to improve efficiencies and customer marketing strength. In terms of store operations, We identified areas where we can improve operational execution to drive comparable store sales and improve profitability. We completed a comprehensive review of our store fleet and announced that we will be taking action on 43 stores through fiscal year 2026 to improve the underlying foundation of our core business. In addition, we are incorporating learnings from the review into our go-forward store growth plans and testing a few smaller size store formats for America's Best. Finally, during the year, we began to use approaches such as a progressives bundle and a single-payer offer. We entered 2025 ready to accelerate the next phase of our transformation, which we began to lay the groundwork for in the second half of fiscal 2024. Alex will go into more specifics, but in a sentence, the next phase of our transformation involves a strategic shift in focus to our more valuable current customer segments while maintaining our traditional base. Historically, our business was built for cash pay, highly budget-conscious consumers, with our messaging and customer journeys heavily emphasizing the lowest out-the-door price. Despite our messaging and offering speaking more directly to this customer segment, we also attracted managed care customers, progressive lens wearers, and those who came to us with a prescription already in hand looking for the solution for their eyewear needs. This group of customers, over time, has grown to represent about half of our customer base and a significantly higher percentage of our sales today. They find value in the quality of eye care we offer, our accessibility, and our broad range of product offerings to solve their needs rather than just the absolute lowest price. Given the significance that this group has on our business today and the opportunity we see, our efforts going forward will focus on creating enhanced journeys and experiences for these types of customers and personalizing messaging to their different motivations. With this approach, we believe we can grow our share of these more valuable customers and ultimately more profitably expand our customer base. Alex will go into more detail on how we're approaching this shift in mindset and selling strategy, but we're very encouraged by the early results we saw in the fourth quarter from the initial efforts underway. Concurrent with this customer-facing aspect of our transformation, we're maintaining strong discipline across expense management. We're attacking SG&A by driving operational efficiencies and better aligning our cost structure to reinvest in the patient and customer experience. Before I turn the call over to Alex, I'd like to give some commentary on our guidance range. January sales were quite strong for us, but more recently we experienced negative traffic trends beginning the second week of February. While we believe it's too soon to determine the cause for this, we've observed significantly colder weather than normal across the country, And of course, we've all seen news about the uncertainty around consumer sentiment. Given this, we believe a wider range is appropriate to cover a broader set of scenarios. Melissa will go into this in more detail after Alex shares more of our 2025 priorities. Alex?