GNC Presentation on Growth from 2011

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GNC's presentation to address growth concerns from 2011.

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GNC Presentation on Growth from 2011

  1. 1. Investor Presentation William Blair Growth Stock Conference June 14, 2011
  2. 2. 2 Disclaimer This presentation includes certain statements, estimates, forecasts and projections with respect to anticipated future performance based on our current expectations, assumptions, estimates and projections about GNC Acquisition Holdings, Inc. (to be renamed GNC Holdings, Inc.) (the “Company”) and our industry. These forward- looking statements include, without limitation, statements about our market opportunities, our strategy, our competition, our projected revenues and expense levels and other financial results and the adequacy of our available cash resources. These forward-looking statements are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but they are inherently subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. As such, you should not place undue reliance on any of the forward-looking statements made in this presentation. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the various risks described in the “Risk Factors” section and elsewhere in our registration statement on Form S-1 (File No. 333 – 169618), that we have filed with the Securities and Exchange Commission. These forward-looking statements are subject to change based on factors beyond our control. Consequently, forward-looking statements should be regarded solely as our current plans, estimates, and beliefs. Except where otherwise indicated, this presentation speaks as of the date hereof. We undertake no obligation to update publicly any forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events. This presentation is not a prospectus and shall not constitute an offer to sell or a solicitation of an offer to purchase securities, and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. This presentation is being delivered only for purposes of considering an investment in the Company’s Class A common stock and not for any other purpose. By attending the meeting where this presentation is made, or by reading these slides, you agree to accept the limitations set forth above.
  3. 3. 3 Company Overview
  4. 4. 4 Who We Are Leading multi-channel specialty retailer in the growing health & wellness industry Exceptional brand awareness strengthened by science and innovation Consumer-packaged-goods product development capabilities drive unique product offerings Foundation for growth anchored by a world-class management team Robust, long-term growth opportunities in each major segment – retail, franchise and manufacturing / wholesale Consistent historical financial performance with compelling long-term growth opportunities
  5. 5. 5 GNC is the Leading Global Specialty Retailer of Health and Wellness Products Source: Public filings (1) Total Operating Income includes corporate overhead, distribution and transportation expenses; Segment Operating Income – excluding these expenses – was $345mm Retail 74% 2010 Total Net Revenue: $1,822mm GNC Reporting Segments: Retail: Domestic Retail, Canada, GNC.com Franchise: Domestic and International Franchise Manufacturing / Wholesale: US Manufacturing, Rite Aid, drugstore.com, PetSmart Manufacturing / Wholesale 10% 2010 Total Company Operating Income: $212mm(1) Retail 53% Manufacturing / Wholesale 20%Franchise 16% Franchise 27% 2010 Operating Income by Segment2010 Net Revenue by Segment
  6. 6. 6 5,695 497 457 0 1,000 2,000 3,000 4,000 5,000 6,000 Commanding Domestic Market Position with Global Reach Leading US Presence in Retail… (1) Includes domestic company-owned stores, domestic franchises and Rite Aid locations for GNC as of March 31, 2011. Excludes Canada. (2) Vitamin Shoppe and Vitamin World store count as of 3/26/11 and 12/31/10 respectively, according to most recent company filings. (3) GNC store count as of March 31, 2011. (4) 169 stores in Canada are company-owned and 2 are franchised. Total US Store Count(1)(2) … And Strong Global Reach GNC International Locations(3) 498 49 57 60 63 64 137 151 171 389 Other Saudi Arabia Hong Kong Singapore Malaysia Turkey Chile S. Korea Canada Mexico Total: 1,639 locations
  7. 7. 7  One of the largest online retailers of supplements in the US  Sales are incremental to domestic retail “brick and mortar” revenue Overview of Retail Segment ($ in millions)  Retail stores are 1,000 – 2,000 sq ft; proven success in malls, strips, and downtown locations  Customer service approach – key advantage  Mature store 20%+ 4-wall EBITDA Margin; New Store 20% 5-year IRR target GNC.com Overview $989 $1,123 $1,169 $1,219 $1,256 $1,344 2005 2006 2007 2008 2009 2010 Revenue Growth SSS Growth(1) 13.5% 11.1% 4.1% 1.4% 4.3% 2.7% 3.0% 2.8% 7.0% 5.6% $77 $127 $135 $141 $153 $182 2005 2006 2007 2008 2009 2010 Margin: Sources: Public filings and L.E.K. interviews and analysis (1) Beginning in the first quarter of 2006, GNC domestic retail company-owned same store sales calculation includes GNC.com sales. 7.8% 11.4% 11.5% 11.6% 12.2% 13.5% Operating Profit & Margin Revenue & GrowthRetail Overview
  8. 8. 8 $213 $232 $241 $258 $264 $186 $294 2005 2006 2007 2008 2009 2010 $108 Revenue Growth 9.2% 3.8% 7.0% 2.4% 11.1%  Global franchise presence – Domestic Franchise: 895 locations, 520 franchisees – International Franchise: 1,470 locations, in 48 countries  Key strengths: – Domestic franchise: Financially stable, annuity-like model – International franchise: Strong core model allows for continued expansion $52 $64 $70 $81 $81 $94 2005 2006 2007 2008 2009 2010 24.4% 27.6% 28.8% 31.3% 30.6% 32.0%Margin: Source: Public filings Intl Franchise Top Line 2005-2010 CAGR 18.5% Franchise Overview Revenue & Growth Operating Profit & Margin Overview of Domestic and International Franchise Segment ($ in millions) Domestic International
  9. 9. 9 Manufacturing / Wholesale Overview Revenue & Growth Operating Profit & Margin  Manufacturing: Produces variety of products for extensive base of third- party contract customers – Capacity to produce over 15 billion units annually – All facilities are cGMP and TGA compliant  Wholesale: Sells products to third parties – Rite Aid: GNC-branded store-within-a- store locations – Sam’s Club: GNC-branded products – Drugstore.com: Distribution agreement – PetSmart: GNC-branded pet products Third-Party Intersegment $115 $132 $143 $179 $187 $184 $164 $170 $169 $180 $201 $209 2005 2006 2007 2008 2009 2010 Revenue Growth(1) 14.5% 8.3% 25.4% 4.0% (1.2)% $46 $51 $49 $67 $73 $69 2005 2006 2007 2008 2009 2010 Operating Margin(2) 16.5% 16.9% 15.8% 18.7% 18.9% 17.6% Source: Public filings. Intersegment revenues are eliminated from consolidated revenue (1) Revenue growth based on third-party revenue. (2) Operating margin based on total manufacturing / wholesale revenue. Overview of Manufacturing / Wholesale Segment ($ in millions) Third-Party 2005-2010 CAGR 9.9%
  10. 10. 10 GNC‟s Strengths Align with Industry Macro Trends  Leading market share  Destination for fast-growing customer segment Sports  Premium products supported by science and innovation VMHS  Exceptional brand awareness (87%, aided)  “First stop” for new consumers seeking nutrition products  Customer service - knowledgeable, trusted authority  Synonymous with health and wellness Overall GNC Strengths
  11. 11. 11 Strong Industry Growth Driven by Positive Macro Trends Source: Nutrition Business Journal’s Supplement Business Report 2010  More educated consumer  Goal to live longer, feel younger …and the Vitamins / Herbs Category Broadening of the Sports Nutrition Space…  Healthy living can help reduce medical costs  Increasing indications of support from the medical community  Movement towards premium, specialty products as consumers become more sophisticated Weight lifters and body builders High performance athletes Routine and occasional exercisers Young athletes: high school, college  Sports is the fastest growing category in the supplement industry  GNC sports customer skewing younger over last four years  Higher spending from a younger customer base Industry Trends
  12. 12. 12 Connection with High Quality Customer Base Source: Beanstalk Marketing and LJS & Associates and 2010 GNC Equity Tracker Average spend has grown consistently each year Tend to cross-shop – Over 30% of Sports customers buy multi-vitamins or VitaPaks®  Product-focused, not price-obsessed – GNC surveys show most highly-rated by customers for new, innovative products and selection  4.9mm Gold Card members – ~50% of corporate sales – Higher average ticket Skew towards a younger demographic – Growing “young” demographic base of customers is a key differentiator – 35% of customers under age 35 – Gold Card customers age 19 – 29 are 26% of sales today vs. 18% in 2006 Gender balanced – split evenly between male and female customers Well-educated with higher than average income levels More engaged in fitness routines than average US supplement buyer More engaged in digital communication and social websites GNC Customers: As a Result: Our Customer is Differentiated from the Mass Customer
  13. 13. 13 In Store In Print Outdoor Lincoln Tunnel 9th Avenue @ 30th St. Times Square Broadway @ 52nd St. Advertising that Embodies Brand and Core Consumer
  14. 14. 14 Vertical Integration Allows for Innovative Proprietary Product Development WELLbeING® Total Lean™ Beyond Raw™ Mega Men® Longevity Factor™ Women‟s Ultra Mega® Triple Strength Fish Oil Pro Performance® AMP PetSmart Phenom CPG-like Focus on Sub-Brand Development  More than a retailer – Ability to develop unique, branded product lines in- house – Product flexibility – Rapid pace of product innovation – Supports attractive margins Development Time No Clinicals: 4-7 months With Clinicals: 6-18 months
  15. 15. 15 Significant, GNC-Branded Proprietary Product Base Sports NutritionVMHS  GNC specializes in developing sophisticated, proprietary branded products  GNC‟s condition and lifestyle-specific focus drives innovation  Premium proprietary sub-brands: – 20+ different VitaPaks® – GNC branded Triple Strength Fish Oil – MegaMen®, GNC Women’s Ultra Mega® franchises  GNC widely recognized as a premier distributor of sports nutrition products  GNC‟s Pro Performance® branded products, including AMP and Beyond Raw, are the #1 sports nutrition products in our stores and are only available through GNC  A leading distributor of third-party sports nutrition brands – many first-to-market opportunities Source: Public filings 81% 36% VMHS Sports VMHS and Sports Nutrition Proprietary Sales Proprietary Sales as % of Total Company-Owned Domestic Retail Sales 2010 Drives Higher Retail Margin Total Proprietary Sales 48% 55% 2007 2010
  16. 16. 16 Progression to Beyond Raw Proprietary Products – Continued innovation Always Looking to “Take it Up a Level” Through Innovative Capabilities 2009 2011 Established Brand
  17. 17. 17 Growth Opportunities
  18. 18. 18 Multi-Pronged Growth Strategies GNC‟s extensive line of premium vitamins and innovative sports nutrition product offerings target the industry‟s fastest growing segments Q1 Update: 7.5% comp, strength in core categories and proprietary products Significant domestic company-owned new store growth opportunity Q1 Update: 100 net new stores planned for 2011, including 23 net new in Q1 Future growth in high-profit GNC.com with opportunities to add new online banners Q1 Update: 34.1% revenue growth driven by unique conversion rate improvement Substantial growth potential internationally (stores, countries, distribution arrangements) utilizing franchise and non-franchise business models Q1 Update: 100 net new stores planned for 2011, including 33 net new in Q1 Innovative brand extensions and corporate partnerships that capitalize on mass market growth opportunities Q1 Update: Sam’s Club, PetSmart contributed to results; Phenom ready to launch
  19. 19. 19 28% 31% 27% 43% 11% 9%27% 10% 7% 7% VMS Sports Herbs Diet Other GNC‟s Core Categories Target the Industry‟s Fastest Growing Segments GNC‟s Product Offerings Are Weighted Towards Vitamins and Sports Nutrition 2006-2010 CAGR 2010-2015E CAGR Supplement Categories NBJ 2006 Report Estimate NBJ 2010 Report Estimate 2009 NBJ Report Estimate 2010 NBJ Report Revision Vitamins 3.7% 7.0% 3.9% 5.3% Sports Nutrition 4.7% 7.0% 5.2% 7.2% Supplement Industry Revenue Growth VMHS & Sports: 66% VMHS & Sports: 83% Source: Nutrition Business Journal Supplement’s Business Report and public filings 2001 2010
  20. 20. 20 23 Consecutive Quarters of Positive Domestic Company-Owned Same Store Sales Growth1.0% 8.1% 14.5% 11.5% 11.7% 6.5% 0.5% 1.6% 3.3% 0.2% 2.2% 4.5% 1.5% 2.5% 5.4% 0.3% 4.3% 1.2% 3.1% 6.5% 7.1% 5.8% 7.5% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2009 20102006 Note: Beginning in the first quarter of 2006, GNC domestic retail company-owned same store sales calculation includes GNC.com sales 20072005 GNC has demonstrated consistent growth Annual Retail SSS Growth: 11.1% 1.4% 2.7% 2.8% 5.6% 2011
  21. 21. 21 Considerable Domestic White Space The US market can support a significant number of additional GNC stores Note: GNC store count as of March 31, 2011; excludes Rite Aid store-within-a-store locations (1) Based on analysis conducted by The Buxton Company. 169 41 158 31 233 124 199 84 224 95 111 40 62 10 61 3 57 22 60 5 54 5 25 5 20 10 27 4 20 2 27 12 22 4 22 11 39 7 20 3 8 0 4 0 15 5 41 4 15 3 26 410 11 5 0 8 0 5 4 6 0 7 5 26 6 55 20 55 12 67 8 103 45 79 35 42 25 92 44 31 22 102 21 85 20 5 1 85 33 14 1 21 0 24 0 41 11 42 21 2,771/ 895 Company-owned / Franchised stores States with highest potential net market gain(1) and states with less than 50 total existing GNC stores 7 5 35 11 Potential: 4,500+ stores(1) Current: 3,666 stores
  22. 22. 22 Strong and Expanding Presence in Industry‟s Fastest Growing Channel ($ in millions) $17 $28 $36 $47 $59 2006 2007 2008 2009 2010 Source: Public filings, NBJ, Company websites, SEC Filings, Alexa.com, Hoovers, Manta, Selectory, L.E.K. interviews and analysis Consistent Top Line Growth of High Margin Business GNC.com Overview  $59mm in sales in 2010, 26% growth over 2009 – Q1 2011 sales increased 34.1% over Q1 2010  High margin business (20%+) driven by proprietary brands  Full re-launch of GNC.com in September 2009  GNC.com named „Hot 100‟ website in 2010 by Internet Retailer  Substantial opportunity for continued growth Opportunities to acquire or develop additional web banners to expand market share
  23. 23. 23 $46 $56 $67 $78 $86 $108 2005 2006 2007 2008 2009 2010 Multi-Channel Growth Opportunities in New and Existing International Markets ($ in millions) Revenue Growth 20.9% 20.2% 16.1% 9.8% 26.0% International Franchise Revenue & GrowthInternational Stores 858 961 1,078 1,190 1,307 1,437 2005 2006 2007 2008 2009 2010 Source: Public filings  Global presence with more than 1,400 locations in 48 countries  Strong same store sales  Net new store openings ~100 per year, most contractually obligated  Expanded distribution in existing countries  New franchise agreements in new countries (2-5 countries per year)  Wholesale / licensing opportunities in select new markets  Direct investment approach where appropriate  China – major focus for 2011 Existing Markets New Markets International Opportunities
  24. 24. 24  Opportunity to provide GNC- branded pet supplements exclusively through PetSmart stores – Replaces most of the PetSmart-branded supplement lines Innovative Brand Extensions That Support Growth and Increase Brand Awareness PetSmart Partnership (Sept. 2010; 1,000+ stores) Phenom / PepsiCo JV (Spring 2011)  GNC and PepsiCo are launching Phenom, a line of fortified coconut water – Initial sales in GNC stores and plans for mass market introduction Sam‟s Club (March 2011)  Opportunity to introduce additional customer base to the GNC brand – Key GNC-branded products, on a rotational basis
  25. 25. 25 Financial Overview & First Quarter Update
  26. 26. 26 Consistent Financial Performance ($ in millions) Source: Public filings (1) Beginning in the first quarter of 2006, GNC domestic retail company-owned same store sales calculation includes GNC.com sales. (2) Adjusted EBITDA includes costs related to the adjustments for Sponsor Management Fee of $1.5mm annually. Additional one-time adjustments to EBITDA include international franchise adjustments in 2005, Merger related costs in 2006 and 2007 and evaluation of Strategic Alternatives in 2010. Revenue & Same Store Sales Growth $1,318 $1,487 $1,553 $1,657 $1,707 $1,822 2005 2006 2007 2008 2009 2010 Revenue Growth: 4.4% 6.7% 3.0% 6.7%12.9% SSS Growth (1): 1.4% 2.7% 2.8% 5.6%11.1% Adjusted EBITDA(2) & Margin $110 $174 $192 $214 $229 $265 2005 2006 2007 2008 2009 2010 Adj. EBITDA Margin: 8.3% 12.3% 12.9% 13.4% 14.5%11.7%
  27. 27. 27 Recent Company Events Refinancing (closed March 4, 2011) $1.2bil 7-year Term Loan; LIBOR (1.25% floor) +3.0% $80 mil Revolving Credit Facility Initial Public Offering (closed April 6, 2011) $16 per share 25.875 million shares (16 million issued by Company) Funds from Refinancing and Proceeds from IPO together with cash on hand used to refinance former debt, redeem all Preferred Stock, and pay down portion of new debt Sam‟s Club (launched Q1 2011) Selling existing GNC products in Sam‟s Club stores Drive trial with expanded customer base 400 stores initially, and growing Marketing Campaign (launched Q1 2011) Live Well Major markets focus for Outdoor Aligned in print, store, digital Capital Structure Company Initiatives
  28. 28. 28 Financial Update – First Quarter 2011 Performance Overview Total Revenue Growth 8.8% Domestic Same Store Sales (incl. web) 7.5% Adjusted* Operating Income Growth 22.4% Adjusted* EBITDA growth 18.2% Adjusted* Net Income $34.9 mil Adjusted* EPS $0.33 * Adjusted results exclude refinancing and IPO related costs and sponsor obligation payments, and utilizes a normalized tax rate and proforma post-IPO diluted weighted average share count
  29. 29. 29 Financial Update – First Quarter 2011 2011 2010 V% Highlights Retail Revenue $384 $351 9.4% Sports Nutrition, Vitamins, Transactions, Store and Web growth Operating Income $64 $50 26.7% OM% 16.6% 14.3% 230 bps Gross product margin, operating leverage Franchise Revenue $77 $73 6.6% International segment +14% Operating Income $25 $22 15.4% OM% 32.8% 30.3% 250 bps Gross product margin, operating leverage Manufacturing / Wholesale Revenue $45 $42 8.0% 3rd Party sales, Sam’s Club, PetSmart Operating Income $17 $17 (1.9%) OM% 36.9% 40.6% -370 bps Anticipated timing of Rite Aid revenue Segment Results $ in mil
  30. 30. 30 Financial Update Current Capital Structure – Adjusted for IPO * Cash $76.9 Long-term Debt $901.6 Leverage: Net Debt / Adjusted EBITDA 3x Stockholder’s Equity $865.2 Diluted Shares Outstanding (for EPS calculations) 106.6 mil * Results shown exclude transaction related costs and sponsor obligation payments and utilize proforma post-IPO diluted weighted average share count $ in mil
  31. 31. 31 Financials Total Company Revenue Growth $1.95 - $1.97 bil +7 – 8% Domestic same store sales Mid single digit increase Adjusted* EBITDA $294 - $299 mil +11 – 13% Adjusted* Net Income $125 - $128 mil E.P.S. $1.17 - $1.20 2011 Guidance (as provided in April 28, 2011 Earnings Release) * Adjusted results exclude refinancing and IPO related costs and sponsor obligation payments, and utilizes a normalized tax rate and proforma post-IPO diluted weighted average share count; E.P.S. based on Adjusted Net Income guidance
  32. 32. 32 Multi-Pronged Strategy to Drive Growth Retail Corporate Stores and GNC.com Franchise Domestic and International Manufacturing / Wholesale Brand Extensions Domestic retail store annual SSS growth in the mid single digits – New product driven – Transaction comps – Marketing strategy Grow domestic retail square footage by ~3-4% per year, or 100 net new stores Continued GNC.com revenue growth Umbrella of websites, growing market share in highly fragmented online marketplace Domestic franchise – Wholesale sales driven by SSS growth and new stores International franchise – Robust pipeline of new int’l franchise locations currently under contract – Continued strong SSS growth from existing international locations Expanded product distribution in both existing and new countries Development of “GNC China” Other direct investment from GNC outside of N. America and China Expand third-party contract manufacturing – High margin specialty products – Incremental volume supporting absorption benefits Brand Extension partnerships – PetSmart – future product extensions – GNC products in new distribution channels (e.g. Sam’s Club) – Innovative new products / brand development (e.g. Phenom / Pepsi) Growth Strategies Clearly Defined and Well-Positioned for Execution
  33. 33. 33 GNC Investor Presentation

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