National Vision Holdings, Inc.

Previous wording

The following contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q (this “Form 10-Q”) and the audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2024 (the “2023 Annual Report on Form 10-K.”) This discussion contains forward-looking statements that reflect our plans, estimates and beliefs as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. These forward-looking statements involve numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” sections of this Form 10-Q and the 2023 Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Form 10-Q.

Current wording

The following contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q (this “Form 10-Q”) and the audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2025 (the “2024 Annual Report on Form 10-K.”) This discussion contains forward-looking statements that reflect our plans, estimates and beliefs as of the date hereof and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. These forward-looking statements involve numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of the 2024 Annual Report on Form 10-K, as such risk factors may be updated from time to time in our periodic filings with the SEC. Actual results may differ materially from those contained in any forward-looking statements. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Form 10-Q.

Previous wording

We are one of the largest optical retailers in the U.S. and a leader in the attractive value segment of the U.S. optical retail industry. We believe that vision is central to quality of life and that people deserve to see their best to live their best, regardless of their budget. We achieve this by providing eye exams, eyeglasses and contact lenses to value seeking and lower income consumers with an opening price point that strives to be among the lowest in the industry, enabled by our low-cost operating platform. We reach our customers through a diverse portfolio of 1,231 retail stores across four brands as well as multiple consumer websites as of September 28, 2024.

Current wording

We are one of the largest optical retailers in the U.S. and a leader in the value segment of the U.S. optical retail industry. We believe that vision is central to quality of life and that people deserve to see their best to live their best, regardless of their budget. Our mission is to make quality eye care and eyewear affordable and accessible to all Americans. We achieve this by providing eye exams, eyeglasses and contact lenses to value-seeking consumers. We deliver exceptional value and convenience to our customers, with attractive price points that provide value for a range of consumers. We reach our customers through a diverse portfolio of 1,237 retail stores across four brands and associated omni-channel consumer websites as of March 29, 2025.

Previous wording

As of September 28, 2024, our operations consisted of one reportable segment. During the nine months ended September 28, 2024, our Walmart store operations, including our former Legacy reportable segment and components of our Corporate/Other category met the requirements to be classified as discontinued operations; refer to Part I. Item 1. Note 2. “Discontinued Operations” for more information on discontinued operations.

Current wording

As of March 29, 2025, our operations consisted of one reportable segment. During fiscal year 2024, our Walmart store operations, including our former Legacy reportable segment and components of our AC Lens operating segment met the requirements to be classified as discontinued operations. Refer to Part II. Item 8. Note 2. “Discontinued Operations” of the 2024 Annual Report on Form 10-K for more information on discontinued operations.

Previous wording

•Owned & Host - As of September 28, 2024, our owned brands consisted of 1,019 America’s Best Contacts and Eyeglasses retail stores and 130 Eyeglass World retail stores. Our Host brands consisted of 53 Vista Optical locations on select military bases and 29 Vista Optical locations within select Fred Meyer stores as of September 28, 2024. All brands utilize our centralized laboratories. This segment also includes sales from our America’s Best, Eyeglass World, and Military omni-channel websites.

Current wording

•Owned & Host - As of March 29, 2025, our owned brands consisted of 1,042 America’s Best Contacts and Eyeglasses (“America’s Best”) retail stores and 122 Eyeglass World retail stores. Our Host brands consisted of 53 Vista Optical locations on select military bases and 20 Vista Optical locations within select Fred Meyer stores as of March 29, 2025. All brands utilize our centralized laboratories. This segment also includes sales from our America’s Best, Eyeglass World, and Military omni-channel websites.

Previous wording

Our consolidated results also include the following activity recorded in our Corporate/Other category:

Current wording

Our consolidated results also include the following:

Previous wording

Deferred revenue represents the timing difference of when we collect the cash from the customer and when services related to product protection plans and eye care club memberships are performed. Increases or decreases in deferred revenue during the reporting period represent cash collections in excess of, or below the recognition of, previous deferrals. Unearned revenue represents the timing difference of when we collect cash from the customer and delivery/customer acceptance, and includes sales of prescription eyewear during approximately the last seven to 10 days of the reporting period.

Current wording

•Effects of unearned and deferred revenue — Reportable segment information is presented on the same basis as our consolidated financial statements, except reportable segment sales which are presented on a cash basis, including point of sales for managed care payors and excluding the effects of unearned and deferred revenue, consistent with what our chief operating decision maker (“CODM”) regularly reviews. We present the effects of unearned and deferred revenues separately from our reportable segment information. See Note 9. “Segment Reporting” in our condensed consolidated financial statements. Deferred revenue represents the timing difference of when we collect the cash from the customer and when services related to product protection plans and eye care club memberships are performed. Increases or decreases in deferred revenue during the reporting period represent cash collections in excess of, or below the recognition of, previous deferrals. Unearned revenue represents the timing difference of when we collect cash from the customer and delivery/customer acceptance, and includes sales of prescription eyewear during approximately the last seven to ten days of the reporting period.

Previous wording

Current macroeconomic conditions, including elevated inflation and interest rates and overall consumer sentiment, have negatively impacted and may continue to have adverse effects on our business, results of operations and financial condition, which could be material. Inflation has resulted in increased costs and greater profitability pressure. We have experienced wage rate pressure and increases in raw materials prices, which we expect to continue. Inflationary pressures, including elevated wages, consumer confidence and preferences and increased raw material costs could impact our profitability and lead us to attempt to offset such increases through various pricing actions. We have historically employed a simple low price/high value strategy and seek to balance our pricing and growth in a way that consistently delivers savings to our customers. From time to time, and increasingly in connection with our new transformation initiatives, we may take pricing actions and introduce limited-time promotions or new offers designed to increase traffic, awareness and sales. Several factors may impact the level of success of such actions and promotions, including consumer sentiment, macroeconomic conditions and marketing effectiveness, and as a result, if they do not meet our expectations, they could negatively impact our margins and profitability.

Current wording

Inflation has resulted in increased costs and greater profitability pressure. We have experienced wage rate pressure and increases in raw materials prices, which we expect to continue. Inflationary pressures, including elevated wages, consumer confidence and preferences and increased raw material costs could impact our profitability and lead us to attempt to offset such increases through various pricing actions. We have historically employed a simple low price/high value strategy and seek to balance our pricing and growth in a way that consistently delivers savings to our customers. From time to time, and increasingly in connection with our new transformation initiatives, we may take pricing actions and introduce limited-time promotions or new offers designed to increase traffic, awareness and sales. Several factors may impact the level of success of such actions and promotions, including consumer sentiment, macroeconomic conditions and marketing effectiveness, and as a result, if they do not meet our expectations, they could negatively impact our margins and profitability.

Previous wording

Additionally, our ability to continue to attract and retain qualified vision care professionals impacts exam capacity. We believe factors such as an increasingly challenging recruiting market (in particular for new graduates), preferences for adjusted work schedules, and the demand for optometrists exceeding supply in certain areas have caused constraints in vision care professional availability, and therefore exam capacity, which are continuing. As a result, recruiting and retaining optometrists has become more challenging and the costs to employ or retain optometrists have increased and may increase further, potentially materially.

Current wording

Additionally, our ability to continue to attract and retain qualified vision care professionals impacts exam capacity and our operations. We believe factors such as an increasingly challenging recruiting market (in particular for new graduates), preferences for adjusted work schedules, and the demand for optometrists exceeding supply in certain areas have caused constraints in vision care professional availability, and therefore exam capacity, which are continuing. As a result, recruiting and retaining optometrists has become more challenging and the costs to employ or retain optometrists have increased and may increase further, potentially materially. Further, a limited number of professional corporations or similar entities provide for the vision care services at a number of our retail locations, exposing us to some concentration risk. A material change in our relationship with vision care professionals, whether resulting from constraints in exam capacity, a dispute with an eye care practitioner or a group of eye care practitioners controlling multiple practice locations, a government or regulatory authority challenging our operating structure or our relationship with vision care professionals, or other changes to applicable laws or regulations (or interpretations of the same), or the loss of these relationships, could impair our ability to provide services to our customers, cause our customers to go elsewhere for their optical needs, or result in legal sanctions against us.

Previous wording

We believe that customers in our target market are value-seeking consumers, many of whom are lower income consumers and may rely on tax refunds to pay for eyewear and eye care. Historically, our business has experienced seasonality in the first half of the year that we believe is primarily attributable to the timing of customers’ income tax refunds and health insurance start/reset periods. A delay in the issuance of tax refunds or changes in the amount of tax refunds can, accordingly. have a negative impact on our quarterly financial results in the first half of the year. Consumer behavior with respect to the utilization of tax refund proceeds is also subject to change.

Current wording

Historically, our business has experienced seasonality in the first half of the year that we believe is primarily attributable to the timing of customers’ income tax refunds and health insurance start/reset periods. We believe that many customers in our target market of value-seeking consumers may rely on tax refunds to pay for eyewear and eye care. A delay in the issuance of tax refunds or changes in the amount of tax refunds can, accordingly, have a negative impact on our quarterly financial results in the first half of the year. Consumer behavior with respect to the utilization of tax refund proceeds is also subject to change.

Previous wording

The total number of new stores per year and the timing of store openings has had an impact, and we expect will continue to have an impact, on our results. We expect to open 65 to 70 stores in the current year. We plan to open 30-35 new stores in fiscal year 2025 to allow us to invest capital in existing operations to enhance the overall store experience. We are continuing to monitor and determine our plans for future new store openings at a level appropriate for incremental free cash flow generation and healthy growth, and based on health, safety and economic conditions.

Current wording

The total number of new stores per year and the timing of store openings has had an impact, and we expect will continue to have an impact, on our results. We plan to open a total of 30-35 new stores in fiscal year 2025 to allow us to invest capital in existing operations to enhance the overall store experience. We are continuing to monitor and determine our plans for future new store openings at a level appropriate for incremental free cash flow generation.

Previous wording

Adjusted Operating Income, Adjusted Operating Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS (collectively, the “Company Non-GAAP Measures”)

Current wording

Adjusted Operating Income, Adjusted Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS (collectively, the “Company Non-GAAP Measures”)

Previous wording

Certain components of our operations met the requirements to be classified as discontinued operations. Refer to Part I. Item 1. Note 2. “Discontinued Operations” for information related to our discontinued operations. Unless otherwise noted, the discussion of U.S. GAAP results below is based on results from continuing operations.

Current wording

Certain components of our operations met the requirements to be classified as discontinued operations. Refer to Note 2. “Discontinued Operations” in Part II. of the 2024 Annual Report on Form 10-K for information related to our discontinued operations. Unless otherwise noted, the discussion of U.S. GAAP results below is based on results from continuing operations.

Previous wording

(1)We calculate total comparable store sales from continuing operations based on consolidated net revenue from continuing operations excluding the impact of (i) Corporate/Other segment net revenue, (ii) sales from stores opened less than 13 months, (iii) stores closed in the periods presented, (iv) sales from partial months of operation when stores do not open or close on the first day of the month and (v) if applicable, the impact of a 53rd week in a fiscal year. Brand-level comparable store sales growth is calculated based on cash basis revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 12. “Segment Reporting” in our unaudited condensed consolidated financial statements included in Part I. Item 1. of this Form 10-Q.

Current wording

(1)We calculate total comparable store sales from continuing operations based on consolidated net revenue from continuing operations excluding the impact of (i) other segments revenue, (ii) sales from stores opened less than 13 months, (iii) stores closed in the periods presented, (iv) sales from partial months of operation when stores do not open or close on the first day of the month and (v) if applicable, the impact of a 53rd week in a fiscal year. Brand-level comparable store sales growth and net revenue are calculated based on cash basis revenues consistent with what the CODM reviews, and consistent with reportable segment revenues presented in Note 9. “Segment Reporting” in our unaudited condensed consolidated financial statements included in Part I. Item 1. of this Form 10-Q.

Previous wording

(3)Adjusted Comparable Store Sales Growth from continuing operations includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in a decrease of 0.5% and an increase of 0.6% from total comparable store sales growth from continuing operations based on consolidated net revenue from continuing operations for the three months ended September 28, 2024 and September 30, 2023, respectively.

Current wording

(3)Adjusted Comparable Store Sales Growth from continuing operations includes the effect of deferred and unearned revenue as if such revenues were earned at the point of sale, resulting in an increase of 1.4% and a decrease of 1.0% from total comparable store sales growth from continuing operations based on consolidated net revenue from continuing operations for the three months ended March 29, 2025 and March 30, 2024, respectively.

Previous wording

Total net revenue of $451.5 million for the three months ended September 28, 2024 increased $12.7 million, or 2.9%, from $438.8 million for the three months ended September 30, 2023. Approximately 110% of the increase was driven by growth from new store sales, approximately 30% of the increase was driven by Adjusted Comparable Store Sales Growth from continuing operations and 10% from the timing of unearned revenue, partially offset by approximately 20% from effects of converted and closed stores and 20% from lower e-commerce revenue.

Current wording

Total net revenue of $510.3 million for the three months ended March 29, 2025 increased $27.5 million, or 5.7%, from $482.8 million for the three months ended March 30, 2024. Of the $27.5 million increase, approximately 90% was driven by Adjusted Comparable Store Sales Growth from continuing operations and approximately 60% of the increase was driven by growth from new store sales, partially offset by approximately 30% by effects of unearned revenue for the period and approximately 10% from closed stores. Net revenue includes a negative (1.5)% impact from the timing of unearned revenue for the three months ended March 29, 2025 as compared to three months ended March 30, 2024.

Previous wording

Comparable store sales growth from continuing operations and Adjusted Comparable Store Sales Growth from continuing operations for the three months ended September 28, 2024 were 1.4% and 0.9%, respectively, both reflecting a higher average ticket and an increase in customer transactions.

Current wording

Comparable store sales growth from continuing operations and Adjusted Comparable Store Sales Growth from continuing operations for the three months ended March 29, 2025 were 4.1% and 5.5%, respectively, both reflecting a higher average ticket, a slight increase in customer traffic and continued strength in the Company’s managed care cohort.

Previous wording

In the three months ended September 28, 2024, we opened 18 America’s Best stores and closed two America’s Best and one Military store as a result of the host partner’s decision to cease its overall operations at the location. Overall, store count grew 4.9% from September 30, 2023 to September 28, 2024 (56 and three net new America’s Best and Eyeglass World stores were added, respectively, and one Military store closed). We also converted 20 Eyeglass World stores to America’s Best stores from September 30, 2023 to September 28, 2024.

Current wording

In the three months ended March 29, 2025, we opened nine new America’s Best stores, closed nine Fred Meyer stores and three America’s Best stores. We also converted four Eyeglass World stores to America’s Best stores from March 30, 2024 to March 29, 2025. Overall, store count grew 3.0% from March 30, 2024 to March 29, 2025 (exclusive of the aforementioned conversions, we had 48 net new America’s Best stores, nine net closures of Fred Meyer stores, two net closures of Eyeglass World stores, and one Military store closed).

Previous wording

Net product sales comprised 80.3% and 81.4% of total net revenue for the nine months ended September 28, 2024 and September 30, 2023, respectively. Net product sales increased $26.3 million, or 2.4%, in the nine months ended September 28, 2024 compared to the nine months ended September 30, 2023, primarily due to a $18.6 million, or 2.2%, increase in eyeglass sales and a $5.5 million, or 2.4%, increase in contact lens sales.

Current wording

Net product sales comprised 80.9% and 80.4% of total net revenue for the three months ended March 29, 2025 and March 30, 2024, respectively. Net product sales increased $24.7 million, or 6.4%, in the three months ended March 29, 2025 compared to the three months ended March 30, 2024, primarily due to a $21.6 million, or 7.0%, increase in eyeglass sales and a $2.0 million, or 2.5%, increase in contact lens sales and net growth from other add-on sales.

Previous wording

Net sales of services and plans for the three months ended September 28, 2024 increased $4.1 million, or 4.9%, compared to the three months ended September 30, 2023, driven primarily by higher eye exam revenues of $3.9 million, or 7.3%.

Current wording

Net sales of services and plans for the three months ended March 29, 2025 increased $2.8 million, or 3.0%, compared to the three months ended March 30, 2024, driven primarily by higher exam revenues of $3.5 million, or 5.6%.

Previous wording

Owned & Host segment costs of products. Costs of products as a percentage of net product sales decreased from 28.8% for the three months ended September 30, 2023 to 28.5% for the three months ended September 28, 2024, primarily driven by higher contact lens margin, partially offset by lower eyeglass mix.

Current wording

Owned & Host segment costs of products. Costs of products as a percentage of net product sales decreased from 28.2% for the three months ended March 30, 2024 to 27.4% for the three months ended March 29, 2025, primarily driven by margin improvement of eyeglass frames and lenses, partially offset by a decrease in margins of contact lenses.

Previous wording

Costs of services and plans as a percentage of net sales of services and plans increased from 92.6% for the three months ended September 30, 2023 to 94.5% for the three months ended September 28, 2024. The increase was primarily driven by growth in optometrist-related costs, partially offset by higher eye exam revenue.

Current wording

Costs of services and plans as a percentage of net sales of services and plans increased from 86.9% for the three months ended March 30, 2024 to 90.5% for the three months ended March 29, 2025. The increase was primarily driven by growth in optometrist-related costs, partially offset by higher exam revenue.

Previous wording

Owned & Host segment costs of services and plans. Costs of services and plans as a percentage of net sales of services and plans increased from 92.4% for the three months ended September 30, 2023 to 94.2% for the three months ended September 28, 2024. The increase was primarily driven by growth in optometrist-related costs, partially offset by higher eye exam revenue.

Current wording

Owned & Host segment costs of services and plans. Costs of services and plans as a percentage of net sales of services and plans increased from 85.5% for the three months ended March 30, 2024 to 88.4% for the three months ended March 29, 2025. The increase was primarily driven by growth in optometrist-related costs related to revenue growth, partially offset by higher exam revenue.

Previous wording

Owned & Host SG&A. SG&A as a percentage of net revenue increased from 39.2% for the three months ended September 30, 2023 to 40.3% for the three months ended September 28, 2024, primarily driven by an increase in payroll and other operating expenses.

Current wording

Owned & Host SG&A. SG&A as a percentage of net revenue decreased from 37.7% for the three months ended March 30, 2024 to 36.5% for the three months ended March 29, 2025, driven primarily by lower advertising investments.

Previous wording

Depreciation and amortization expense of $68.6 million for the nine months ended September 28, 2024 increased $2.1 million, or 3.1%, from $66.5 million for the nine months ended September 30, 2023 primarily driven by new store openings and investments in remote medicine technology, partially offset by lower depreciation of labs and distribution center.

Current wording

Depreciation and amortization expense of $23.0 million for the three months ended March 29, 2025 decreased $0.3 million, or 1.1%, from $23.2 million for the three months ended March 30, 2024 primarily driven by lower depreciation of information technology assets, partially offset by higher depreciation of store remodeling costs.

Previous wording

We recognized $13.7 million primarily for impairment related to the Fred Meyer contracts and relationships intangible asset and tangible long-lived assets and ROU assets associated with our retail stores during the three months ended September 28, 2024, compared to $1.5 million impairment recognized during the three months ended September 30, 2023 for tangible long-lived assets and ROU assets associated with our retail stores. Refer to Part I. Item 1. Note 1. “Description of Business and Basis of Presentation” for more details on the Fred Meyer contracts and relationships intangible asset. The store asset impairment charge is related to our Owned & Host segment driven by lower than projected customer sales volume, and other entity-specific assumptions, and also reflects the effects of certain store closure decisions made as part of the Company’s store optimization review in the current period. 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.

Current wording

We recognized $0.5 million primarily for impairment related to tangible long-lived assets and ROU assets associated with our retail stores during the three months ended March 29, 2025, compared to $0.5 million impairment recognized during the three months ended March 30, 2024 for tangible long-lived assets and ROU assets associated with our retail stores.

Previous wording

We recognized $17.7 million primarily for impairment related to the Fred Meyer contracts and relationships intangible asset and tangible long-lived assets and ROU assets associated with our retail stores during the nine months ended September 28, 2024, compared to $2.7 million impairment recognized during the nine months ended September 30, 2023 for tangible long-lived assets and ROU assets associated with our retail stores. Refer to Part I. Item 1. Note 1. “Description of Business and Basis of Presentation” for more details on the Fred Meyer contracts and relationships intangible asset. The store asset impairment charge is related to our Owned & Host segment and is driven by lower than projected customer sales volume in certain stores, and other entity-specific assumptions and also reflects the effects of certain store closure decisions made as part of the Company’s store optimization review in the current period. 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.

Current wording

The store asset impairment charge is related to our Owned & Host segment and is driven by lower than projected customer sales and profitability 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 and other.

Previous wording

Interest expense, net, was $4.1 million for the three months ended September 28, 2024, compared to $3.7 million for the three months ended September 30, 2023. The change was primarily a result of lower interest income on cash balances of $1.0 million, partially offset by lower interest expense on our debt of $0.8 million.

Current wording

Interest expense, net was $4.6 million for the three months ended March 29, 2025, compared to $4.3 million for the three months ended March 30, 2024. The change was primarily a result of lower income on cash balances of $0.4 million, partially offset by lower interest expense on our debt of $0.3 million.

Previous wording

Our effective tax rates for the nine months ended September 28, 2024 and September 30, 2023 were 49.6% and 31.0%, respectively. The change in effective tax rates reflects our statutory federal and state rates of 25.2% and 25.4%, respectively, tax impacts of consolidated VIEs and non-deductible compensation expense as well as effects of other permanent items.

Current wording

Our effective tax rates for the three months ended March 29, 2025 and March 30, 2024 were 34.2% and 38.7%, respectively. The change in effective tax rates reflects tax impacts of consolidated VIEs, non-deductible compensation anddiscrete effects of permanent adjustments related to equity compensation and other effects of permanent items.

Previous wording

We define Adjusted Operating Income as net income (loss), plus interest expense (income), net and income tax provision (benefit), further adjusted to exclude stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, ERP and CRM implementation expenses and certain other expenses. We define Adjusted Operating Margin as Adjusted Operating Income as a percentage of net revenue. We define EBITDA as net income (loss), plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization. We define Adjusted EBITDA as net income (loss), plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, ERP and CRM implementation expenses and certain other expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net revenue. We define Adjusted Diluted EPS as diluted earnings (loss) per share, adjusted for the per share impact of stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of debt discounts and deferred financing costs of our term loan borrowings, amortization of the conversion feature and deferred financing costs related to our 2025 Notes when not required under U.S. GAAP to be added back for diluted earnings (loss) per share, derivative fair value adjustments, ERP and CRM implementation expenses, certain other expenses, less the tax effect of these adjustments, including tax expense (benefit) from stock-based compensation.

Current wording

We refer to these measures as the “Company Non-GAAP Measures.” We define Adjusted Operating Income as net income (loss), plus interest expense (income), net and income tax provision (benefit), further adjusted to exclude stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles, ERP and CRM implementation expenses, shareholder activism costs, severance and employee-related costs associated with organizational restructuring and certain other expenses. We define Adjusted Operating Margin as Adjusted Operating Income as a percentage of net revenue. We define EBITDA as net income (loss), plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization. We define Adjusted EBITDA as net income (loss), plus interest expense (income), net, income tax provision (benefit) and depreciation and amortization, further adjusted to exclude stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of acquisition intangibles, ERP and CRM implementation expenses, shareholder activism, severance and employee-related costs associated with restructuring and certain other expenses. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net revenue. We define Adjusted Diluted EPS as diluted earnings (loss) per share, adjusted for the per share impact of stock-based compensation expense, (gain) loss on extinguishment of debt, asset impairment, litigation settlement, secondary offering expenses, management realignment expenses, long-term incentive plan expenses, amortization of debt discounts and deferred financing costs of our term loan borrowings, amortization of the conversion feature and deferred financing costs related to our 2025 Notes when not required under U.S. GAAP to be added back for diluted earnings (loss) per share, derivative fair value adjustments, ERP and CRM implementation expenses, shareholder activism, severance and employee-related costs associated with restructuring, and certain other expenses, less the tax effect of these adjustments, including tax expense (benefit) from stock-based compensation.

Previous wording

EBITDA and the Company Non-GAAP Measures can vary substantially in size from one period to the next, and certain types of expenses are non-recurring in nature and consequently may not have been incurred in any of the periods presented below.

Current wording

The Company Non-GAAP Measures can vary substantially in size from one period to the next, and certain types of expenses are non-recurring in nature and consequently may not have been incurred in any of the periods presented below.

Previous wording

EBITDA and the Company Non-GAAP Measures have been presented as supplemental measures of financial performance that are not required by, or presented in accordance with U.S. GAAP, because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes EBITDA, and the Company Non-GAAP Measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. We also use EBITDA and the Company Non-GAAP Measures to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements U.S. GAAP results with Non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than U.S. GAAP results alone. We continue to evaluate our use of the Company Non-GAAP measures in the context of the development of our business, and may introduce or discontinue certain measures in the future as we deem appropriate.

Current wording

The Company Non-GAAP Measures have been presented as supplemental measures of financial performance that are not required by, or presented in accordance with U.S. GAAP, because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes The Company Non-GAAP Measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. We also use The Company Non-GAAP Measures to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. Management supplements U.S. GAAP results with Non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than U.S. GAAP results alone. We continue to evaluate our use of the Company Non-GAAP measures in the context of the development of our business, and may introduce or discontinue certain measures in the future as we deem appropriate.

Previous wording

EBITDA and the Company Non-GAAP Measures are not recognized terms under U.S. GAAP and should not be considered as an alternative to net income or income from operations as a measure of financial performance or cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with U.S. GAAP. Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. In evaluating EBITDA and the Company Non-GAAP Measures, we may incur expenses in the future that are the same as or similar to some of the adjustments in this presentation. Our presentation of EBITDA and the Company Non-GAAP Measures should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on our U.S. GAAP results in addition to using EBITDA and the Company Non-GAAP Measures.

Current wording

The Company Non-GAAP Measures are not recognized terms under U.S. GAAP and should not be considered as an alternative to net income or income from operations as a measure of financial performance or cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with U.S. GAAP. Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. In evaluating The Company Non-GAAP Measures, we may incur expenses in the future that are the same as or similar to some of the adjustments in this presentation. Our presentation of The Company Non-GAAP Measures should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on our U.S. GAAP results in addition to using The Company Non-GAAP Measures.

Previous wording

Because of these limitations, EBITDA and the Company Non-GAAP Measures should not be considered as measures of discretionary cash available to invest in business growth or to reduce indebtedness.

Current wording

Because of these limitations, The Company Non-GAAP Measures should not be considered as measures of discretionary cash available to invest in business growth or to reduce indebtedness.

Previous wording

(c)Reflects write-off related to non-cash impairment charges of long-lived assets, primarily impairment of Fred Meyer contracts and relationships intangible asset of $10.5 million for the three and nine months ended September 28, 2024, and impairment of property, equipment and lease-related assets on closed or underperforming stores and certain store closure decisions made as part of the Company’s store optimization review in the current period.

Current wording

(b)Reflects write-off related to non-cash impairment charges of long-lived assets, primarily impairment of property, equipment and lease-related assets on closed or underperforming stores.

Previous wording

(d)Expenses associated with settlement of certain litigation.

Current wording

(c)Expenses associated with settlement of certain litigation.

Previous wording

(h)Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA), which are primarily related to costs associated with the digitization of paper-based records of $1.5 million and $5.7 million for the three and nine months ended September 28, 2024, respectively, costs associated with the store fleet review of $1.1 million for the three and nine months ended September 28, 2024, and other expenses and adjustments. Other adjustments for both Adjusted Operating Income and Adjusted Diluted EPS include amortization of the increase in carrying values of finite-lived intangible assets resulting from the application of purchase accounting following the acquisition of the Company by affiliates of KKR & Co. Inc. Adjusted Diluted EPS is also adjusted to include debt issuance costs.

Current wording

(h)Other adjustments include amounts that management believes are not representative of our operating performance (amounts in brackets represent reductions in Adjusted Operating Income, Adjusted Diluted EPS and Adjusted EBITDA), which are primarily related to shareholder activism costs of $2.1 million and severance and employee-related costs associated with organizational restructuring of $2.1 million for the three months ended March 29, 2025, costs associated with the digitization of paper-based records of $1.8 million for the three months ended March 30, 2024, and other expenses and adjustments. Adjusted Diluted EPS is also adjusted to include debt issuance costs.

Previous wording

Our primary cash needs are for inventory, payroll, store rent, advertising, capital expenditures associated with new stores and updating existing stores, as well as information and remote medicine technology and infrastructure, including our corporate office, distribution centers, and laboratories. When appropriate, the Company may utilize excess liquidity towards debt service requirements, including voluntary debt prepayments, or required interest and principal payments, if any, as well as repurchases of common stock or other securities, based on excess cash flows. The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, deferred and unearned revenue and other payables and accrued expenses. We exercise prudence in our use of cash and closely monitor various items related to cash flow including, but not limited to, cash receipts, cash disbursements, payment terms and alternative sources of funding. We continue to be focused on these items in addition to other key measures we use to determine how our consolidated business and operating segments are performing. We believe that cash on hand, cash expected to be generated from operations and the availability of borrowings under our Revolving Loans will be sufficient to fund our working capital requirements, liquidity obligations, anticipated capital expenditures, and payments due under our existing debt for the next 12 months and thereafter for the foreseeable future. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our Term Loan A where possible.

Current wording

Our primary cash needs are for inventory, payroll, store rent, advertising, capital expenditures associated with new stores and updating existing stores, as well as information and remote medicine technology and infrastructure, including our corporate office, distribution centers, and laboratories. When appropriate, the Company may utilize excess liquidity towards debt service requirements, including voluntary debt prepayments, or required interest and principal payments, if any, as well as repurchases of common stock or other securities, based on excess cash flows. The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, deferred and unearned revenue and other payables and accrued expenses. We exercise prudence in our use of cash and closely monitor various items related to cash flow including, but not limited to, cash receipts, cash disbursements, payment terms and alternative sources of funding. We continue to be focused on these items in addition to other key measures we use to determine how our consolidated business and operating segments are performing. We believe that cash on hand, cash expected to be generated from operations and the availability of borrowings under our revolving credit loans in an aggregate principal amount of $300.0 million (the “Revolving Loans”) will be sufficient to fund our working capital requirements, liquidity obligations, anticipated capital expenditures, and payments due under our existing debt for the next 12 months and thereafter for the foreseeable future. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our $250.9 million outstanding principal first lien term loan (“Term Loan A”) where possible.

Previous wording

We recently established an incremental term loan in the amount of $115.0 million and used the proceeds of this borrowing in addition to cash on hand to repurchase $217.7 million of aggregate principal amount of the 2025 Notes. Refer to Part I. Item 1. Note 6. “Debt” for more information. Depending on market conditions and other factors, we may elect to repurchase all or a significant portion of our 2025 Notes outstanding principal balance of $84.8 million prior to their maturity on May 15, 2025, utilizing cash on hand and/or one or more of the additional liquidity sources noted above. Our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside of our control. We primarily fund our working capital needs using cash provided by operations. Our working capital requirements for inventory will increase as we continue to open additional stores.

Current wording

Our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside of our control. We primarily fund our working capital needs using cash provided by operations. Our working capital requirements for inventory will increase as we continue to open additional stores.

Previous wording

As of September 28, 2024, we had $81.2 million in cash and cash equivalents and $293.6 million of availability under our Revolving Loans, which includes $6.4 million in outstanding letters of credit.

Current wording

As of March 29, 2025, we had $80.0 million in cash and cash equivalents and $293.6 million of availability under our Revolving Loans, which includes $6.4 million in outstanding letters of credit.

Previous wording

As of September 28, 2024, we had $257.5 million of Term Loan A outstanding under our credit agreement. We were in compliance with all covenants related to our debt as of September 28, 2024.

Current wording

As of March 29, 2025, we had $250.9 million of Term Loan A outstanding under our credit agreement. We were in compliance with all covenants related to our debt as of March 29, 2025.