Party City Holdco (PRTYQ) 8-K Party City Announces Second Quarter 2017 Results

Exhibit 99.1

Party City Announces Second Quarter 2017 Results

ELMSFORD, N.Y, August 2, 2017 — Party City Holdco Inc. (NYSE:PRTY) today announced financial results for the second quarter ended June 30, 2017.

James M. Harrison, Chief Executive Officer, stated, “We delivered strong second quarter revenue growth of just under 5% on a reported basis, or almost 6% in constant currency, and are pleased with how the quarter played out, as we met our topline and bottom line objectives. By focusing on our fundamentals of topline growth, gross margin expansion and solid cost control, Adjusted EBITDA increased 13.5% and Adjusted EPS increased 17%”.

Mr. Harrison continued, “During the quarter, we grew our vertical model, made good progress integrating recent acquisitions in both our retail and wholesale businesses, strengthened our digital assets and furthered our global presence by accelerating our growth internationally.”

Highlights for the second quarter:

• Grew total revenues by 4.9% on a reported basis or 5.7% on a constant currency basis

• Acquired a minority interest in Punchbowl, a leader in digital invitations and greeting cards

• Expanded gross margins 30bps from the same period last year, largely driven by share of shelf¹ gains of 150 bps to 78.5%

• Increased reported net income by 11% and adjusted net income by 17.6%

• Increased Adjusted EBITDA 13.5% to $96.5 million

• Generated free cash flow² of $77.1 million in the second quarter and $114.8 millionyear-to-date, and reduced net debt leverage ratio to 4.1 times³

“While retail comps were slightly softer than we had forecasted, which we have reflected in our updated full year comp outlook, we were very pleased with our revenue growth and our overall profitability. Given our first half performance, we are on track to deliver our previously provided full year total revenue and earnings guidance,” Mr. Harrison added.

Second quarter summary:

• Reported net income of $25.0 million compared to $22.5 million in the second quarter of 2016.

• Adjusted net income increased 17.6% to $33.3 million, compared to $28.3 million for the prior year quarter.

• Adjusted EBITDA increased 13.5% to $96.5 million, compared to $85.1 million in the second quarter of 2016.

• Reported diluted earnings per share totaled $0.21 compared to $0.19 in the prior year quarter. Adjusted diluted income per share improved 16.7% to $0.28 from $0.24 in the second quarter of 2016.

• Total revenues of $544.9 million increased 4.9% on a reported basis and 5.7% on a constant currency basis.

• Retail sales increased 6.3% on a reported basis (6.7% on a constant currency basis) driven primarily by increased store count through acquired franchise stores (36), one acquired independent store and new store growth (22 net new Party City stores added in the past twelve months) and modest growth in brand comparable sales.

• Brand comparable sales increased 0.1% during the second quarter.

• Net third-party wholesale revenues increased 1.8% on a reported basis (increased 7.8% on an adjusted basis when adjusting for the currency effect as well as the impact of eliminating $5.6 million in intercompany sales for the 36 franchise store acquisitions over the last twelve months).

• Total gross profit margin increased 30 basis points (50 basis points when excluding the negative effects of foreign exchange) to 40.6% of net sales, primarily due to higher share of shelf and product mix shift.

• During the quarter, the Company invested approximately $6 million into the development of Kazzam, its online exchange platform for party-related services. Despite such spend, operating expenses as a percentage of revenues, 29.8%, were relatively consistent with the second quarter of 2016. Excluding suchstart-up costs, operating expenses totaled 28.6% of revenues, a decrease of 90 basis points from the corresponding quarter of the prior year.

• During the quarter, the Company opened five new stores, acquired one independent store and closed one store.

Balance sheet highlights as of June 30, 2017

The Company ended the quarter with $1,665 million in debt (net of cash) resulting in net debt leverage³ of 4.1 times and approximately $329 million in availability under its asset-based revolving credit facility.

Fiscal 2017 Outlook

For 2017, the Company is adjusting brand comparable sales growth and reiterating guidance for all other line items:

• Total revenue of $2.35 to $2.45 billion

• Brand comparable sales growth of approximately 1.0%

• GAAP net income of $123 to $133 million

• GAAP diluted EPS of $1.02 to $1.10

• Adjusted net income of $148 to $158 million

• Adjusted diluted EPS of $1.23 to $1.30

• Adjusted EBITDA of $400 to $417 million

• Net debt leverage of approximately 3.5x times by the end of 2017

The Company has reconciledNon-GAAP outlook measures to the most directly comparable GAAP measures later in this release. See“Non-GAAP Information” and “Reconciliation of 2017 Outlook” for a more detailed explanation, including definitions of the variousNon-GAAP terms used in this release.

¹  The percentage of our retail product cost of sales supplied by our wholesale operations

²  Defined as adjusted EBITDA less capital expenditures

³  Defined as net debt to adjusted EBITDA

Conference Call Information

A conference call to discuss the second quarter 2017 financial results is scheduled for today, August 2, 2017, at 8:00 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877)201-0168 (U.S. domestic) and (647)788-4901 (international), and enter conference ID#53279794, approximately 10 minutes prior to the start of the call. The conference call will also be webcast at http://investor.partycity.com/. To listen to the live call, please go to the website at least 15 minutes early to register and download any necessary audio software. The webcast will be accessible for one year after the call.

Website Information

We routinely post important information for investors on the Investor Relations section of our website, http://investor.partycity.com/. We intend to use this website as a means of disclosing material,non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Information

This press release includesnon-GAAP measures including Adjusted EBITDA and Adjusted Net Income/Loss and Adjusted Earnings per Share. We present thesenon-GAAP financial measures because we believe they assist investors in comparing our performance across

reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit facilities use Adjusted EBITDA to measure compliance with certain covenants. The Company has reconciled thesenon-GAAP financial measures with the most directly comparable GAAP financial measures in tables accompanying this release. We also evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is anon-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. We also provide free cash flow, defined as Adjusted EBITDA less capital expenditures, and net debt leverage, which is calculated by adding Loans and Notes Payable, Current Portion of Long Term Obligations and Long Term Obligations, Excluding Current Portion, subtracting Cash and Cash Equivalents and dividing by Adjusted EBITDA for the trailing twelve month period. Adjusted Earnings per Share is calculated by dividing Adjusted Net Income by the Weighted Average Number of Common Shares-Diluted. We believe providing thesenon-GAAP measures provides valuable supplemental information regarding our results of operations and leverage, consistent with how we evaluate our performance. In evaluating thesenon-GAAP financial measures, investors should be aware that in the future the Company may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation ofnon-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. The Company has provided this information as a means to evaluate the results of its core operations. Other companies in the Company’s industry may calculate these items differently than it does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP.Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

Forward-Looking Statements

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, and include Party City’s expectations regarding revenues, brand comparable sales, Adjusted EBITDA, Adjusted net income/loss, adjusted diluted earnings per share, average common shares outstanding and the effective tax rate. The forward-looking statements contained in this press release are based on management’s good-faith belief and reasonable judgment based on current information, and these statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: our ability to compete

effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store growth strategy; decreases in our Halloween sales; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer spending and general economic conditions; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risks and uncertainties set forth in “Risk Factors” in Party City’s latest Form10-K and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward looking statements. Except as may be required by any applicable laws, Party City assumes no obligation to publicly update or revise such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.

About Party City

Party City Holdco Inc. is the leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue. The Company is a popularone-stop shopping destination for party supplies, balloons, and costumes. In addition to being a great retail brand, the Company is a global, world-class organization that combinesstate-of-the-art manufacturing and sourcing operations, and sophisticated wholesale operations complemented by a multi-channel retailing strategy ande-commerce retail operations. The Company is the leading player in its category, vertically integrated and unique in its breadth and depth. Party City Holdco designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. The Company’s retail operations include over 900 specialty retail party supply stores (including approximately 150 franchise stores) throughout North America operating under the names Party City and Halloween City, ande-commerce websites, principally through the domain name PartyCity.com.

Contact

ICR

Farah Soi and Rachel Schacter

203-682-8200

InvestorRelations@partycity.com

Source: Party City Holdco Inc.

PARTY CITY HOLDCO INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	June 30,			December 31,
	2017			2016
ASSETS	Unaudited
Current assets:
Cash and cash equivalents	$	69,018		$	64,610
Accounts receivable, net		121,131			134,091
Inventories, net		642,469			613,868
Prepaid expenses and other current assets		70,552			68,255
Total current assets		903,170			880,824
Property, plant and equipment, net		296,535			292,904
Goodwill		1,626,323			1,572,568
Trade names		567,171			566,599
Other intangible assets, net		68,857			76,581
Other assets, net		9,794			4,502
Total assets	$	3,471,850		$	3,393,978
LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	185,132		$	120,138
Accounts payable		156,763			163,415
Accrued expenses		164,780			149,683
Income taxes payable		8,182			46,675
Current portion of long-term obligations		13,177			13,348
Total current liabilities		528,034			493,259
Long-term obligations, excluding current portion		1,535,287			1,539,604
Deferred income tax liabilities		280,689			278,819
Deferred rent and other long-term liabilities		73,987			65,507
Total liabilities		2,417,997			2,377,189
Redeemable securities		3,000			—
Stockholders’ equity:
Common stock (119,528,409 and 119,515,894 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively)		1,195			1,195
Additionalpaid-in capital		913,721			910,167
Retained earnings		177,965			157,666
Accumulated other comprehensive loss		(42,028	)		(52,239	)
Total stockholders’ equity		1,050,853			1,016,789
Total liabilities, redeemable securities and stockholders’ equity	$	3,471,850		$	3,393,978

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017		2016
Revenues:
Net sales	$	541,653		$	515,426		$	1,015,616	$	969,712
Royalties and franchise fees		3,225			3,987			6,261		7,441
Total revenues		544,878			519,413			1,021,877		977,153
Expenses:
Cost of sales		321,900			307,865			620,619		595,632
Wholesale selling expenses		16,045			15,273			31,672		31,115
Retail operating expenses		90,512			90,615			181,242		177,324
Franchise expenses		3,713			3,574			7,030		7,137
General and administrative expenses		39,655			37,930			87,792		76,856
Art and development costs		5,942			5,676			11,740		11,053
Development stage expenses		6,412			0			6,412		0
Total expenses		484,179			460,933			946,507		899,117
Income from operations		60,699			58,480			75,370		78,036
Interest expense, net		21,294			22,781			41,986		45,433
Other expense (income), net		(895	)		(224	)		267		(3,202	)
Income before income taxes		40,300			35,923			33,117		35,805
Income tax expense		15,318			13,408			12,818		13,684
Net income	$	24,982		$	22,515		$	20,299	$	22,121
Comprehensive income	$	31,985		$	14,788		$	30,510	$	16,327
Net income per common share-Basic	$	0.21		$	0.19		$	0.17	$	0.19
Net income per common share-Diluted	$	0.21		$	0.19		$	0.17	$	0.18
Weighted-average number of common shares-Basic		119,528,147			119,323,104			119,526,007		119,307,539
Weighted-average number of common shares-Diluted		120,943,745			120,323,581			120,903,032		120,232,590

PARTY CITY HOLDCO INC.

RECONCILIATION OF ADJUSTED EBITDA

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net income	$	24,982		$	22,515		$	20,299		$	22,121
Interest expense, net		21,294			22,781			41,986			45,433
Income taxes		15,318			13,408			12,818			13,684
Depreciation and amortization		21,124			20,282			41,825			41,171
EBITDA		82,718			78,986			116,928			122,409
Non-cash purchase accounting adjustments		3,000			2,288			4,850			3,689
Restructuring, retention and severance (a)		813			95			8,627			162
Deferred rent (b)		2,552			3,162			2,915			5,145
Closed store expense (c)		1,512			536			2,879			1,956
Foreign currency gains, net		(1,183	)		(2,014	)		(1,720	)		(5,178	)
Employee equity based compensation (d)		824			933			3,222			1,881
Non-employee equity based compensation (e)		3,265			—			3,265			—
Undistributed (income) loss in unconsolidated joint ventures		(942	)		120			(226	)		267
Corporate development expenses(f)		3,721			946			4,444			1,212
Other		260			15			478			57
Adjusted EBITDA	$	96,540		$	85,067		$	145,662		$	131,600
Adjusted EBITDA margin		17.7	%		16.4	%		14.3	%		13.5	%

(a) During the first quarter of 2017, the Company recorded $7,814 of restructuring charges. This amount excludes a $1,362 stock option modification charge for Gerald Rittenberg, which is included in “Employee equity based compensation” in this table.

(b) The deferred rent adjustment reflects the difference between accounting for rent and landlord incentives in accordance with GAAP and the Company’s actual cash outlay for such items.

(c) Charges incurred related to closing underperforming stores.

(d) The first quarter of 2017 includes a $1,362 stock option modification charge for Gerald Rittenberg.

(e) Principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services.

(f) Primarily representsstart-up costs for Kazzam and third-party costs related to acquisitions (principally legal expenses).

PARTY CITY HOLDCO INC.

RECONCILIATION OF ADJUSTED NET INCOME

(In thousands, except share and per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Income before income taxes	$	40,300	$	35,923	$	33,117	$	35,805
Intangible asset amortization		4,112		3,988		7,825		8,133
Non-cash purchase accounting adjustments (a)		3,920		3,137		5,924		5,093
Amortization of deferred financing costs and original issuance discount		1,226		1,270		2,459		2,544
Restructuring, retention and severance (b)		—		—		7,814		—
Non-employee equity based compensation (c)		3,265		—		3,265		—
Employee equity based compensation (d)		824		933		3,222		1,881
Adjusted income before income taxes		53,647		45,251		63,626		53,456
Adjusted income tax expense (e)		20,318		16,904		24,246		20,350
Adjusted net income	$	33,329	$	28,347	$	39,380	$	33,106
Adjusted net income per common share - diluted	$	0.28	$	0.24	$	0.33	$	0.28
Weighted-average number of common shares - diluted		120,943,745		120,323,581		120,903,032		120,232,590

(a) On July 27, 2012, PC Merger Sub, Inc., which was our wholly-owned indirect subsidiary, merged into Party City Holdings Inc. (“PCHI”), with PCHI being the surviving entity (the “Transaction”). As a result of the Transaction, the Company applied the acquisition method of accounting and increased the value of certain property, plant and equipment. The impact of such adjustments on depreciation expense increased the Company’s expenses. These property, plant and equipment depreciation amounts are included in“Non-cash purchase accounting adjustments” for purposes of calculating “adjusted net income,” but are excluded from“Non-cash purchase accounting adjustments” for purposes of calculating adjusted EBITDA since they are included in depreciation expense.

(b) During the first quarter of 2017, the Company recorded $7,814 of restructuring charges. This amount excludes a $1,362 stock option modification charge for Gerald Rittenberg, which is included in “Employee equity based compensation” in this table.

(c) Principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services.

(d) The first quarter of 2017 includes a $1,362 stock option modification charge for Gerald Rittenberg.

(e) Represents income tax expense/benefit after excluding the specific tax impacts for each of thepre-tax adjustments. The tax impacts for each of the adjustments were determined by applying to thepre-tax adjustments the effective income tax rates for the specific legal entities in which the adjustments were recorded.

PARTY CITY HOLDCO INC.

RECONCILIATION OF 2017 OUTLOOK

(In millions)

UNAUDITED

	Full year 2017 Outlook
Net income:	$123  -  $133
Intangible asset amortization, net of tax:	8
Equity based compensation, net of tax:	5
Restructuring, retention and severance, net of tax:	5
Non-cash purchase accounting adjustments, net of tax:	5
Amortization of deferred financing costs and original issuance discount, net of tax:	2
Adjusted net income:	$148  -  $158
Net income:	$123  -  $133
Income taxes:	74  -  80
Interest expense, net:	86  -  84
Depreciation and amortization:	83  -  82
EBITDA:	$366  -  $379
Corporate development expenses:	7  -  9
Restructuring, retention and severance:	8
Equity based compensation:	8
Deferred rent:	5  -  7
Non-cash purchase accounting adjustments:	6
Adjusted EBITDA:	$400  -  $417

PARTY CITY HOLDCO INC.

SEGMENT INFORMATION

(In thousands except percentages)

	Three Months Ended June 30,
	2017						2016
	Dollars in thousands			Percentage of Total Revenues			Dollars in thousands			Percentage of Total Revenues
Total Revenues
Net Sales:
Wholesale	$	276,705			50.8	%	$	268,863			51.8	%
Eliminations		(134,853	)		(24.8	%)		(129,536	)		(25.0	%)
Net wholesale		141,852			26.0	%		139,327			26.8	%
Retail		399,801			73.4	%		376,099			72.4	%
Total net sales		541,653			99.4	%		515,426			99.2	%
Royalties and franchise fees		3,225			0.6	%		3,987			0.8	%
Total revenues	$	544,878			100.0	%	$	519,413			100.0	%
	Six Months Ended June 30,
	2017						2016
	Dollars in thousands			Percentage of Total Revenues			Dollars in thousands			Percentage of Total Revenues
Total Revenues
Net Sales:
Wholesale	$	547,397			53.6	%	$	528,684			54.1	%
Eliminations		(270,851	)		(26.5	%)		(254,627	)		(26.1	%)
Net wholesale		276,546			27.1	%		274,057			28.0	%
Retail		739,070			72.3	%		695,655			71.2	%
Total net sales		1,015,616			99.4	%		969,712			99.2	%
Royalties and franchise fees		6,261			0.6	%		7,441			0.8	%
Total revenues	$	1,021,877			100.0	%	$	977,153			100.0	%
	Three Months Ended June 30,
	2017						2016
	Dollars in thousands			Percentage of Net Sales			Dollars in thousands			Percentage of Net Sales
Total Gross Profit
Retail	$	173,872			43.5	%	$	162,080			43.1	%
Wholesale		45,881			32.3	%		45,481			32.6	%
Total	$	219,753			40.6	%	$	207,561			40.3	%
	Six Months Ended June 30,
	2017						2016
	Dollars in thousands			Percentage of Net Sales			Dollars in thousands			Percentage of Net Sales
Total Gross Profit
Retail	$	306,453			41.5	%	$	286,106			41.1	%
Wholesale		88,544			32.0	%		87,974			32.1	%
Total	$	394,997			38.9	%	$	374,080			38.6	%

PARTY CITY HOLDCO INC.

OPERATING METRICS

	Three Months Ended June 30,						LTM
	2017			2016			2017
Store Count
Corporate Stores:
Beginning of period		784			731			730
New stores opened		5			4			30
Acquired		1			—			37
Closed		(1	)		(5	)		(8	)
End of period		789			730			789
Franchise Stores:
Beginning of period		146			181			183
Opened		1			2			4
Sold to Party City		—			—			(36	)
Closed		—			—			(4	)
End of period		147			183			147
Grand Total		936			913			936

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Share of Shelf (a)		78.5	%		77.0	%		78.0	%		76.3	%
	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Brand comparable sales(b)		0.1	%		3.8	%		0.9	%		1.3	%

(a) Share of shelf represents the percentage of our retail product cost of sales supplied by our wholesale operations.

(b) Party City brand comparable sales include North Americane-commerce sales.