PRTY - Earnings call transcript Q4 2020

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Operator

Good morning, and welcome to the Party City Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ian Heller, Vice President and Deputy General Counsel. ahead. go Please

Ian Heller

Good This operator. full and for thanks XXXX Thank we morning released us. morning, results. and our joining financial you, everyone, fourth year quarter

our of You a our website at press can investor.partycity.com. copy release find on

Now, are on I'd today's who here like our team introduce to executive call.

Please these may Vogensen, Todd about up to make or call We future or prepared and that differ with Weston, forward-looking statements statements. Todd remarks subject executive that regarding from actual events before and officer. risks it their financial business the note by officer; beliefs chief Brad chief expectations cause plans. discussion, Q&A. future We'll are and we to today's some could for performance, Company's open have and statements uncertainties These future Brad results prospects materially management our our in start the

contained the Although disclaim to reasonable, you statements, can give are we in be our believe We statements that will that these provide forward-looking well updates we duty future the expectations as to everyone in realized. or of assurance expectations as no forward-looking reflected result earnings new events a our in such any expressly provided review filings. information, statements release the otherwise. to We factors Safe whether risk SEC Harbor our urge as

Company's call, today's financial and operating results. the non-GAAP we of During will measures refer and to GAAP financial both

directly the call release. more GAAP financial And For to the Weston. I'll and please most that, turn Brad over comparable non-GAAP refer information regarding the with our measures, reconciliations to to earnings measures

Brad Weston

on quarter XXXX five plan financial on go review results are our provide progress thoughts how our for you and and elaborate we for I'll then Ian. and XXXX. our will strategic forward financial the today. Thank discuss approaching results everyone, you, Good Todd then our us thank morning and some initiatives. on and operational fourth and joining

enabling improvement next of loan our financial with combined in our refinancing our experience American additional pilot store end delivery, store debt PCHI setting generation the allows of team retail for our all position and initiatives, performance, vertical proud and continued grit wholesale business to these and XX positioning work of Their operations, maintain customers; And continuity the the of environment. of for win customers. completion capabilities a the deepest I and improved expressing our global contributions the of while the needs; stage customers, refinancing with changing times, I'm they gratitude driving to year. their more better pandemic throughout rollout to more entire to meet strengthens financial simultaneously rising by going in determination narrow my and omnichannel which XXXX. against Before us curated be continue one, turning needs by ways. despite to Key were; relevance customers' amongst progress each continuing start fulfillment the model, celebrating focus us in on hard to and and our unprecedented for a North and initial XXXX unique expansion stores in presented rationalization edited accomplished improving and to to Successful improved dramatically of to a results, during and acceleration significantly online to meet to not the further quarter term in our assortment and could challenges who our our core accomplishments the they formats our progress while changing look strategic different all did of and executing subsequent this in-store our against pickup XXXX, flexibility. curbside including options our and and convenience

next meaningful not our transactions, these of until Importantly, result XXXX. as a maturity debt substantially is and we our reduced

a inclusion our and evolved components; on strategy XXXX a awareness, precedent. diversity around into three our everyday people Our creating embed developing the and core our and certainly raising and listening to empathy with culture, equity, and belonging learning behaviors. practices focused organization year diversity, was to inclusion without work infrastructure

Our reflect to months, operated the limited the three environment the a where business, full-year including results of stores we significant open. impact in with store closed pandemic or

supporting COVID-XX was and our time that customer. of During and safety response our the to centered employees on well-being

meaningful made a five in better flat place the with initiatives our in as that though, few strategic retail back we half ourselves we business foundational our successfully impact in for our operations of growth, the despite is centered building context on the pivoted at a Importantly progress I to which of pandemic, prepare discuss and put on gathering. social enabled minutes. COVID than brand comps year expected around to This will the blocks the

fourth discuss me let key Now performance. quarter the of highlights our

sales the $XXX For comparable of were quarter negative brand million sales X.X%. with

COVID-XX behavior November expected had customer greater cases on As than the December. the January, in surge months in we a impact shared in of and rapid

As we in in gathering. saw like are social categories tableware by well as like certain size Northeast, most as regions of a that result, impacted underperformance the the reduced

a review business, retail determine levels, to progress the next the experience. focus In were we pandemic strength our build delivered relevance customer We five work well were year the Comparable superior underpin as celebration the associate and customers. the to essential bodes strategic experience. a sales forward. core next-gen optimal categories we is forward advance XX generation pricing, going in fourth opened priorities to on by demonstrable the categories stores XXXX we that our then to developing our momentum occasions will transitions strength executed discussed of work in-store seasonal I the and store retail a inventory to very relevant encouraged key our our continue having and Importantly, with to far in will as XXXX. which briefly more core prototype. quarter assortments, for across our in post the will look X.X% know we One, normal key in I eventually. XXXX quarter, our plans initiatives impact will now fourth in come expanding which are and stabilize

from the win with to improving our around and significant Our focus for work million on unnecessary going processes work to strong our $XX carry We the product across and categories customer of end last the year creates XXXX. was These are will at associates our saw in optimize were essential customers. category. shopping more the forward, and to time assortments throughout to and approximately reductions continue rewarded experience, operational success in core identified of balloons year we eliminated that Two, and results inventory store balloons. seasonal

profiling balloon in unmatched manufacturing from perception City all distribution Enforced key a trends, the on. their wholesale, relevant by and balloons address way we on of customers perception celebrations. improved player price price categories. over We the innovation dominant pipeline, almost Three, the our contests, global to do-it-yourself introduced fulfillment retail XXXX, in builder new go-to-market approach XXXX XXXX, SKU uniquely more prices we data, customer awareness with of the expanded In customer an every by Party retail, addressed with capitalizing capabilities. trip through total one-third of vision day and new and celebration. active inspiring and head extended led for supported the are how product reduced customer easier business balloon interactive capabilities. in we to category along experiences, driver In or innovation, SKUs assortment, realize category of breadth We [ph] by As their modeling, elasticity product, City we accessible insight positioned for and Party it though value and the count. part product current making making basket

customers noticed favorably. Our responded and

the as the sales incremental driving gross enterprise. With unit volume projected, dollars profit increasing for

behind have result, critical this we As us. work a now

our monitor pricing an data, customer relevancy price to data customer perception. and on ensure will Four, we we analyze engagement However, culture. selling with based correlated basis maintain ongoing on improve

we and in as go-to-market our engagement emerged, our adapted marketing to became safe important Improving them pivoted critical greater manner. product a milestones our pandemic as enabling and well needs, the with As celebrate customers’ relevancy. experiences offering messages, meet brand, quickly approach, across merchandising our life's evolving digital driving to customer to our and approach

launch carefully views of content, engagement, thousands build inspirational well was has content rates. on expanded options of assortments, consumers, the reinforcing shift by spring pandemic in as Digital more position accelerated as social product I dramatic Our reached and format, in fulfillment and hundreds growth workshops millions platforms on driven consumer authoritative conversion our technology the whose leader. online digital in celebration our and platform. already touched garnered including XXXX. of new our as Five, relevant solutions, across the new in curated omni-channel content interactive

XXXX, pick online, purchase omni-channel more growth to our and XX% generated of experience and these We also up core curbside buy focus make fast-tracked to seamless. capabilities making website in approximately improvements experience. in options delivery This simpler store, our customer to

on to insights XXXX, build consumer we As to those strong a continuing transformation. evolution upon, our look and we're foundation and greater with

significant in and innovation, vertical obsessed, building advancing our fundamental being continued Innovation. blocks; will product experience, deliver following We of the steps party platform our mission furthering take to the model. celebration by in-store leverage Product

data. product on insights consumer focus innovation grounded Our in and is

is fortifying celebration. to with the our of relevant authority to consumer, extremely goal comes when stay it Our position

relevancy innovation opportunity product have quality. significant increased We to both and our advance with

wholesaler a an better make and retailer. building aggressive us more expansive pipeline are teams innovation Our that manufacturer, will product and

in quality. investing also are We

product, expensive even to not joy the Our product consumer, drive is but the that enhancing relevant to higher celebration. more end bring better In-store with Experience. more focus to and market resonates with is retails in

legacy continue shop. improve for and as modify we stores. needs, the customer assortments in services in our include the are well well reductions allowing to as planogram the improving it operational prototype our chain generated edited for experience as forward heights, curated improved will The with and stores, next-gen go experiences. relentless across both corresponding product experience and to in-store us adjacencies, We our lowered XXXX making in the focus inventory new easier and as on new customers, These insights

stores be XXXX, open all number and While not finalized we in in next-gen will the we remodeled next-gen new relocated the prototype. have will exact yet of stores

XXXX, results bullish far far better will our team with This be customers, position initiative unnecessary February assortments for better increasing bringing comprehensive the our customers tasks, to are quarter, every our planning Obsessed. need. by point. and new to number team at have we members and in solutions Occasion in the party will aggressive inspire we Celebration seen Enabled remodel to eliminating satisfaction annually with support partner elevate and thus total next-gen Be plan are size. members and stores. this to facilitate of XX. engagement or we our a this this have with By the be to We rolled remodeled end with of XX thus will prototype stores and to out on opened We stores partner ideas with customers in positioned curating our celebration basket

has or this party the unique building the solutions the strategy to best influencer position party New into or set assortments, their performance. we consumers, our our market one-stop occasion customer build The insights birthdays, inspiration to leader. the for balloons provide, and to versus the more our will they selection unique special, significantly communicate puts celebrations On improve celebration, up and the core category their availability, and brand options and including for pricing, the consumers make to basket home the the reinforce destination. design customers relevant data in-store [ph] picked highlights value includes opportunity their partycity.com a visibility own shop categories, enhanced us market a celebrations we party on take entertaining, shop newest demonstrating starts solid significantly authority and one-stop innovation, on in When and capability. recent which how new illustrate be for package, why knowledge, complete contributed introduce of way exactly It our unique is celebration purchase planning and want convenient year. to The consideration to to fulfillment greater occasion, designed process delivery, share. ability it. specialist and customizable proposition marketplace, also of UX in our The with as customer our focus generalist ability with as ready our social delivered leadership

We are model. also focused vertical on our North American

transportation, XXXX.This goal on a and vertical in chain, American the A an and led with with Canada, operations our international efficiencies of Amscan customer a portion throughout XXXX, to party business of achieving a the with business retail of and the working with be building substantial vertical on key model. our new operating we sale the our in International effective which announced our rationalizing we'll streamlined in on includes North of distribution, in December progress driving this focus XXXX sale XXXX block entered platform improved combined more levels is supply core Following inventory model.

add management will demand We warehouse expanded new of along capabilities, systems. planning and forecasting with use

these see position continued as of channels. the we costs industry to we in transportation extend distribution across capabilities is Importantly, our will discuss. headwinds the efficiencies Todd expect finally, we key which help and facing, some increasing deeper leadership market evolve offset further further expansion our opportunity omni-channel categories And and and

We to shop digital will commerce choice. at enabling make of social easy for customers begin channel new a us in channel, deploy to particularly in to commerce, their it

We updated this on on you will keep have to to front share. progress continue more we our as

we Todd sort our The are and outlook. on for results. formal Turning provide to XXXX, far will details additional performance, I that to with provide our pleased expectations will and any outlook dynamic of first share remains for our some quarter-to-date operating environment quarter too

of about be a think to normal see hold, Regardless, agile, return take opportunity the ability XXXX. remainder we have we the we remain in we more half more back to year, demonstrated as gradual as disciplined we the followed the and As social will vaccinations in by gatherings.

pivoting XXXX are customers. and the of So five challenges PCHI the safety We and we the exchange needs customers, then in far, our to on term the navigated has I the the continue our swiftly how both through that our while am our proud in pandemic work debt the completion offering and in evolving made all position pleased transform summary, the of initiatives of commitment demonstrated presented, organization refinancing loan July, been prioritizing entire health and with strides our meet associates we financial 'XX. our our team, the of all February the in accomplished improved business. significantly important thus and as strategic hard successful and environment, despite by to

stronger XXXX. result of to call more year I'd As some like today and significant of share position XXXX. we we further to are work, as in a over now, quarter thoughts And discuss this all enter turn a see the strengthen results in to on position our opportunity substantially full fourth leverage We in Todd, industry. detail, the the and and authority to

Todd Vogensen

full Thanks, morning discuss year everyone. the fiscal Brad, key and of focus then I'll and quarter Today, performance, we're highlights on how I'll good fourth approaching XXXX. our and

to release which website. are our our press slides and the regarding on the financial details full For Relations accompanying results, please of Investor available refer earnings section our

environment, during As Brad the that the $XXX flow initiatives, highly operating discussed, fourth we discipline speaks and in as progress our with and in flow throughout made the pandemic, ended and our we did The generated challenging focus challenging advanced we're liquidity. than able to strategic cash pleased Despite we total we the operate we with of higher we meet pivoted the this how free our business. fact customer with financially. the Despite XXXX, organization XXXX quarter approximately strong XXXX navigated and cash improve needs swiftly which during demand. we operationally environment, the the in environment XXXX, million to were both and to evolving

Now turning our to results.

quarter of our As This fiscal significant portion a included a week, X, New ending calendar which XXXX. XXXX sales calendar pulled otherwise reminder, XX, of into fourth year shift, Eve December first XXXX. XXrd retail of versus the would full segment quarter the XXXX, on fiscal in XXXX Retail a a with into January creating fallen have the in Year's fiscal

million diluted the approximately XXXX, adjusted week and revenue, EPS. in million in XXrd $XX in $X.XX $XX So approximately in adjusted EBITDA, contributed

were X.X%, optimization revenue consolidated comparable comparable QX the sales primary that surge lockdowns the during XX.X%, Canada, the of brand government basis. our comparable to revenues revenues constant from The everyday of currency including and of rapid a closures on quarter, throughout sharply which cases impact reflective first, our Wholesale wholesale XXXX includes COVID-XX X.X%. store quarter. decline and four was the brand's categories components; though, fourth discussed, were mandated core the in quarter and XXXX for international included Brad of program, XX store declined which due decline sales importantly down decline sales up For XX% The decline

been the customers in overall had during supply domestically, value solidly, who but and mass the softness party impacted were by quarter. performing Second, demand also

rate we gross a lagged X.X% Adjusted down fourth designs adjusted did some period, Next sales the prior relative of and and declined market franchisees the primarily our category has and in we've to decline. decrease our basis shipments XX stores for in in business, QX, independents COVID from strong gross Adjusted margin innovative prior a million, of who statement quarter. revenues the to from fixed the Party and third-party to operating out but the margin throughout company finally expense Anagram's strength due costs on And general the quarter quarter. management said declines the the performance, have expenses in XX.X% year points in QX due XX.X% to year in response of largely as revenue into City in from have were resulting approximately retail our before, as balloon period, manufacturing $X $XXX million timeframe. leverage move Anagram, the resulted

operations EBITDA from an per EPS compared earnings XXXX, $XX adjusted $XXX So million prior compared to income million was basis result, period. on million approximately was dollars year. $X.XX income operations as and was adjusted QX, adjusted of adjusted a Adjusted in $XX to approximately million compared share of in year to from $XX $X.XX the last

were of store COVID-XX XXXX XX.X% in basis, full XX.X% domestic reflecting revenues currency program, and decline same brand on store declined wholesale XX.X%, with decline sales includes our which contended the benefits gross and on revenue the adjusted Adjusted cutting sales rates impact the declines. and $XXX of by the in $XX prior pandemic as well comparable a the closures consolidated headwinds of currency proven international XX constant margin gross a and throughout deleverage declined constant business, basis, year, and to the both year, related customers Adjusted pandemic. year. the the cost demand to the store For costs on on due primarily XXXX approximately operations from management to optimization largely of our to million, XX.X% primarily points of from our XXX as as expenses driven margin temporary operating relating of decrease throughout from to prior year, year million basis XX.X% expenses fixed a

As operations to a full compared EBITDA XXXX, earnings for and adjusted from operations share share to the of from was compared per $XX year. period. last compared result, income was in $XXX in million year prior the loss year, adjusted of $X.XX, million million to approximately adjusted was Adjusted $XX $XXX $X.XX income million per adjusted

we Turning target previously had annual to to drivers; primary Inventory million was disclosed quarter end higher the balance made strategic to the carryover. XX.X% $XX sell-through inventory due first, seasonal disposal season down and inventory in the in we year-over-year of sheet. three fourth less decision our as

that sale in included Next, finally, today. the store working included of in sold would later operations details an be which optimized The the inventory international announced of international capital will realizing the ongoing XX-K which and benefits inventory previously be sale base. of the brick-and-mortar write-down part filed our substantial of the was portion $XX as then international million business, of a of management,

a the health in which actions business the our year. completed include our financial portion more to significantly Amscan of improved exchange and that position we inventory XXXX, improved last sale as ongoing result closed Now our and At balance and a management. XXXX, seasonal look was just plan this XXXX, our stores, of the sheet curated we year's of as improved through sell-throughs, January, working of multiple of to substantial July, successful our inventory overall transaction versus These continue turns in core assortments took sale Canadian offer International to forward liquidity management. and end we strengthen capital for

debt of the net As period. prior of the reduced versus million by of balances end approximately $XXX of year, cash we year principal

million was comprised in position Our $XXX cash revolver million approximately of of in liquidity availability. million $XXX and year-end $XXX

all business Subsequent term step offering this are to our through refinancing our we we've proud and flexibility, implement another our yet an accomplished priorities. completed of We the XXXX This confident the just the that in that health and strengthened very of we financial to even senior February, to is as end, of financial XXXX the health. in which secured we're and quarter year. stronger position. end to notes, strategic our strengthen To financial feel entering provide loan runway

we're me COVID-XX recognized risks that XXXX and for sustained now turn optimistic about from We're the prospects return normal. So how the to my economic business XXXX. elevated the to let thinking about recovery the remain We comments in eventual pandemic.

those earnings So providing guidance. the not in given and annual factors, we're interim specific sales

expense however select annual for are We providing capital guidance and expenditures. interest

expense interest in million range expect for We be $XXX $XX the full to the to million year.

our our capital of million to supply web across manufacturing ongoing expenditures, with assets. we to XXXX facility range, investments terms In $XX and store e-commerce investments, our balance million and spend spend $XX enhancements, the in and next-gen expect be chain in stores,

terms earnings. and sales In of

While release. provided about earnings the since on first press year we on first XX% we our we're in results, for Based quarter-to-date guidance, today's providing through quarter way not outlook full the have our quarter, approximately consolidated increase the to brand a be to the our sales in million range quarter expect for with period XX% XXXX. first the $XXX in $XXX XX% XX-week comp compared we to million, sales to are

meaningful sales is segment, was in XX-week Now guidance that which X% Patrick's, Retail business, weeks Year's Valentine's year XXX to as of things others. mini core the strong show has of including still like of as causing holidays a Super see Day, move our continue Bowl, Days creates XX%. XXXX, This a end the us I XXXX. in core up that in several New first to Brad XXXX Day, an quarter of and mentioned, Quarter-to-date, can to earlier. quarter strength to fourth increase Dr. drive calendar our for Eve so mentioned strength categories our School, Mardi St. to If our heavy Year's un-shifted through would Gras timing, QX traditionally New the into and and year's being Seuss allowed last we comparable a demand we shift a

to cost strong also structure as modest look enable for So even growth. the core well as some bodes of strength leverage, should form we our normal comparable on current in our return sales

For performance the a there that first want highlight quarter, did are for items impact will planning few which we our unique your to purposes.

the we New is First is $X million to estimate of due Eve, EBITDA XXXX, Year's in which the impact that was into shifted week. XXrd

of first Next, The areas headwind that $X two costs. we evolving factors, helium our those and in levels. and relative get delivery is two frequently, of of asked million XXXX XXXX a couple cost the omni-channel to about approximately quarter, elements total a

of of we a looking cost As million the immaterial our end periods. be EBITDA the in amount to operations in $XX year And mitigation fiscal bulk million the of first of headwinds ourselves. portion our to work, to discussed with others $XX quarter for quarter. adjusted confirm that expected January. approximately of both XXXX as fourth through revenues million substantial $XXX sale today, of recognized were we are in Net complete headwinds an and the we full those did those operations international to we The of XXXX, at are the for finally, have XXXX quarter with the there to in expect those transportation million be mitigate costs of EBITDA $X second

wrap down going So, wrap revenue in the transaction a we far as us and reason XXXX The moving to to line and our bottom in financials. those thus give year. continue around strategic optimism We through and progress our initiatives metrics around. for our seeing that impact signs pieces amounts clearly the XXXX have is the we're business of throughout that in lot expectations exceeding are positive we we and core as our are

summary, that our unprecedented are and So financial strategic continuity retail maintaining we've year, we opportunities us and to to XXXX of to that, finished our but of well the over with while still health, in very an the on operations. accomplished to and stronger in was operator and priorities company all XXXX advance to enhance wholesale And turn start session. our positioned better and We of it Q&A the I'll beyond. as a capitalize XXXX are ahead proud the

Operator

Seth question Instructions] from [Operator The Sigman first ahead. Credit Please of comes Suisse. go

Seth Sigman

mentioned are and markets Everybody, you I taking guess good What Hey, now? regional are, leading any open thanks you the there other elaborate more I can that you on And hoping for considered that seeing that. in can that differences, are some you question. morning, Brad, was right indicators up point recently how you a of lower kits. shape seeing, unit talked sort similar, the see to? selling reverse? starting I For but much. think that I'm example, being down you're ticket volume most to that about smaller curious spring Thanks trade Is here. something so you're just

Brad Weston

cases the expected colder Seth, had behavior like Northeast. hi as in our than on regions evidenced impact a in as November in and of COVID-XX December, release, months the greater said our, January underperformance was by said in we Yes, we which customer

gatherings weather activities there. outdoor are cold the so know, QX, we was saw social As as to more in impact certainly conducive we

the party We XX, referenced we New lower questions about QX, drag The declined. but school a you did is, increase Year's gatherings saw while the got significant XX, XXX larger past because about office our experienced XX Year's of at ICR on New and in in our recently sales, in Eve how and sales Year's core good. was and in a we improved party One kit, know sell little activities the January, and Christmas December, talk because guests. bit for that is we Eve were a person Eve, we November just holiday when lower of really increments that units holiday business we in example XX where kits kits New business had that, in

really such moved our now that St. Valentine's strong. into gathering, smaller very period. we're that in we Todd remains were obviously as right Patrick's As and the et cetera, Day, mentioned, those Day core large Super by Bowl, But Gras, Mardi business celebrations impacted gatherings.

our seasonal, occasions, the notion have really celebration business really categories, good driving so with for a around And we those our that bodes well versus result, can core us.

Seth Sigman

Okay, follow That's My biggest because the thank question of is you very the margin here. gross opportunity, and recovery long for opportunities that. around the term up helpful. think do that's one I

think about on is based what said, If pricing largely you your seems behind. like, you work

Your Thank should gross and sales be Hopefully margin, opportunity longer the on term cleaner. inventory as trajectory. you. are how sounds in I better well? a for about guess thinking like And ‘XX, thinking then it's we

Todd Vogensen

Sure, thanks, it's Todd.

of we us So in terms manufacturing looked across rationalize point we in a continued good this perspective. how number position done of cost a a things plants. of from We've wholesale at in optimize the structures promotions have We've to at that our gross retail. some margin, margin put

margin with this have that Brad we it's that earlier, really point, flow through that a made structure leverage start at see that to set modest increases, so even cost So comment really quickly. sales we

likely line bottom in the line. be So much the growth that top top leverage margin does driver result improvements the it to way big to will but in flow does drive of take and does line, leverage not that just through the of

Seth Sigman

much. very thanks Okay,

Operator

Please Stephens. ahead. next from Nelson go of question The is Rick

Rick Nelson

guidance insight taking Hi, Halloween have question. thanks. my around Thanks but color I don't this XXXX? that any planning for helpful? realize you're Good there, would morning. you Brad, At point, be into for how out any

Brad Weston

experience, than made those great experience Halloween to our year. is us. our changes our any which learning’s. lot not year. a detail learnings half a expected we're period We take had for big and talk all We're some is back better going our in to of really to our around that I'll to What created clearly marketing, Halloween you we of tell too much last Yes, a going in-store to about digital

had will on year. as And we're Our piece innovation and talked going that a more write-down will newness of our mentioned, had And improved before, as obviously and piloted seasonal more so good come that take freshness with a posture all the we of answer Halloween on cleaner, in Halloween as ways and turn into to we of be be inventories City, several are we that a your And categories aggressive year. this to well. to learnings experience. City, is our this those of into as was -- competitive really and it, lot Halloween different some our about learnings question we

Rick Nelson

may XXXX? economics. stores Perfect. The there the versus can I the you can speak next-gen, thinking the you mean, incorporate have rest you -- for of the next-gen you, about can chat are know on comps, you many stores new to would new how if could chain, mentioned stores, I be And

Brad Weston

we focused, little We I've as and cost bit focus sort can experience on optimizing then occasions categories Yes, levels of we're let address really a me about assortments, a inventory the in little celebration and our about talked thinking the a of, on those talk bit reaction return that. on how about versus, just where before, shop-in-shop of product. really environment getting and optimizing use and Todd

learnings. the but the the about reactions of getting from and the instead us customer had As a them results quite Clearly, we half. through a and next-gen cost set with back be mostly optimistic still the getting out we're We're of of to easier the we're finding that the we've to working half increasingly have and going continue in have concept, is and liked XX back have as category. opened entire ‘XX, operating ready year, bullish enough year because tell we bullish what aggressive XX have opened optimization number learnings as to to be to discuss But exactly We're by provides lift. the we're that, for you opened modified not to model in associates. we QX, that year, optimization bit it in this would stores, made well especially final in that Todd? to to rollout. last we will excited based just we're that, as on our we finding XX We're do those

Todd Vogensen

cost only the $XX in million things guidance new include this the remodels next-gen I Yes to and that gave add or would we capital are, stores expenditure the year. the million about overall does $XX

forward, amount you costs a the also efficient is that pretty a new managing Brad Remodels said. cost -- We're So marching less stores. overall significant bullish but tells than where we're as in way. we're very

the for the getting do of that the plans we're point in approximately we're making and approximately engineer things to process have effectively. We in XX things doing and And maybe closures. we're can the the some doing coming sure new we cross where so, that year X more stores much

real around at out part better be is optimizing to point that space. do to probably work an would or nodes continue of to I of have this we of estate say going our So whitespace where we strategy. the might ongoing and be it's opportunity where

equation fill us. that's position sides in in opportunities really, can We both out store see where opportunity demographic there and continue appropriately, on footprint an a that's growing, spread that to we where is it's our where for a markets is has of in,

Brad Weston

add to the expecting would is, One we certainly that very thing were might next-gen be positive that customer I reaction the to Rick stores.

-- this to keep Todd in coming environment, tie the ability that shopping what consumers balloons expenditure a family very in eager One exciting next-gen response experience allowances to the stores. is, in overall table with and are about something with of the excitement Our are and we're stores that's omni-channel positive when with reaction to helium they centers People and been in capital would tenant the back And our their and landlord that us helium in our have line that obviously comes rollout. our to associate hub our environment brick to they're with be thing to are next-gen our new. draw -- really to when stores. this said

Rick Nelson

Very good.

do are today? you see where or overall about store So count you the XXXX, in higher lower

Brad Weston

I spacing an we've a like Like year, opportunistic course would relative the our gotten we've our density through and same on to, like stores anything and we a are to that efficiently, there's be gets that's said, franchisee franchise not stores a or out stores good big feeling and see one we push the market there may a something and money increase opportunities or where think, We certainly I move more us expect no franchisees gotten and it's us. that deal so geographies of that. across the get in look spend good while a about at net there we question we've applies Same, on to XX for the other. go acquiring open material concept franchisees, can but work gone to and with is way would move owning

Rick Nelson

and as thanks forward. answering luck for Great, questions we good push the

Brad Weston

Thanks, Rick.

Todd Vogensen

Thanks, Rick.

Operator

from go Casella question next is of JP Morgan. ahead. The Carla Please

Carla Casella

a that what had until guided. say you changed the you Can than from Hi, It's took. to just inventory time it what reporting? higher adjustment the my last question relates today's little you you got

Todd Vogensen

Yes, asking Todd. is thanks for the question. This

million about said we we So and had were in going we disposed $XX that inventory have -- we of did.

additional for seasonal identified was we were dispose able category, going we doing and that the of on we in to that same that physically of little for wanted were need were doing Halloween. we the tie-outs through of, the a final year, and As we not to next our but especially see all exactly as inventory going inventory bit through mortems didn't post reserve

cleanup than as characterize and anything would I more final broad. it reconciliation So more

Carla Casella

you've of any much sense of skew party is goods it of Halloween maybe changed And what inventory, how can much you us the how kind assortment? or of costumes that it versus give

Todd Vogensen

we're our as seasonal but City shifting is cut everything our -- seasonal about also forth. the across or so that talking we're Halloween and well. the was all investment of Halloween. was The the bulk stores, so from there Year's, sales, it It's obviously so of New will opportunity focus the Easter Halloween was as that inventory Valentine's, of within that of inventory, bulk

So a large portion inventory. indeed is Halloween of that

Carla Casella

evaluating you are could then we you see charges do the it And further into or process done of with think XXXX?

Todd Vogensen

we a absolutely there would predict may so it. not we there But was or may at I take are far look If charge, continuing wouldn't go to as we if inventory. to do, be charges.

think are our that to be analyzing looked of some what seasonal, continues And of going with we easily is shoppable. opportunity I looking what our have we've that forward. as more turning be and but to committed at doubt, without figuring the to might like there to our there's more through going we it At out we're having very inventory and go newness, look that categories, our least, on a into that inventory. it she's more Particularly opportunity. ensuring quicker efficient and for we it's core process shelves,

Carla Casella

then have past And I did same-store great. in that's the you sales know you -- excluding provide Okay, e-com?

Todd Vogensen

specifically. that we I up that sales XX%. enabled provided do not digitally The believe were

being think honest, digital digital the The because portion is of curbside that at is really versus pretty love of up digital, have would stores So segregating amount that are intense. move I fulfilled to away we did we in To there. be significant a sales. so in-store, getting sales ending from becoming our overlap

felt the do probably segregating. that the that right from means digital So thing dynamic it true that given And away it this the that we'll to from but in move future. away COVID, what shift we just year would probably were, to like show had orders

Carla Casella

you penetration this digital did and say Okay, quarter? the

Todd Vogensen

did No, break that not we separately. out

party that. that [ph] online. activity activity a more interactions have in is the I online store where we're said or into on break buy Clearly online so for amount she getting into don't preference out to that the translate ideation, drag really didn't XX% clearly can we from wants to planning the ship then the It's strong know online was We those us growing be past. a it and of order so we goal the specifically so, no but an have e-commerce significantly. really penetration, [ph]

Carla Casella

And renovating you call this other question, exciting you got so get financial CapEx, stores. would much investments Okay. you've CapEx you've cap, and How actually one got at of your next-gen and point? maintenance some between some into

Todd Vogensen

little CapEx to said down I $XX XX. CapEx we initiative hard a maintenance in we've bit clearly, what CapEx. the such of, or it's a past, our back thing. In so there. we million of were significantly the pulled saw it's million call, was you to would get $XX in Yes, and There XXXX growth pretty

for So million $XX purposes modeling good million point probably to for starting a that is $XX you.

Carla Casella

much. so you thank Okay,

Brad Weston

Absolutely.

Todd Vogensen

Carla. Thanks,

Operator

question is Feldman go of Joe ahead. next The Telsey Group. from Please Advisory

Joe Feldman

something hey, Carla guys. Actually the that for to up that questions I was wanted Yes, Thanks asking. inventory questions. follow on

to my for up guess question seems I'm maybe, ‘XX. should it curious I to even year in and faster And it turning like down I low again is, end that me. guess, XX% where the as you're to So is trying about could going year? 'XX level or up to or a we how end be the the of give of it to relative us, X% down at think you should the should it at like the end be inventory XX% of little XXXX

Brad Weston

in cash look it we're outside at I wrote year. since we're now the I would still further Yes, not, getting say, off. for at we're There's little as point, details, did going The of and about the we than like a have you bit we tangible, store closures. international bit say moves flow probably our there. did in year, we of exact this the that by the is through still amount did have obviously in is go inventory more deferred of seasonal XXXX company $XX where the we're, that million we weighted. particularly XXXX frontend inventory we'll more [ph] XX which through little least million back I ramps then there as $XX paying some from categories, million opportunity of about maybe should making be offset would through the efficiencies just as numbers That we the working at core some inventory but course $XX over the seem said, be carry analytics. a

stores. roughly where that goes chain, the So XX% the away with obviously inventory of

did should plain management, core well be ongoing. have inventory as structural some we which So as elements just

Joe Feldman

of know some sense. next-gen ones, Got two nice it. -- for I the have learning terms that rest are that more chain might have that makes this stores, of learned a you're Thanks question those impact roll business? things there quick about, you've but the Yes, a things that can in the year then, And to there actually prototype, I that. in clarifying guess is other I the are the lot out quickly you

Brad Weston

that we're reachable down doesn't roll we in inventory the make comment a average remarks layout consumer made like planogram’s that more provide we much those in or we'd reduced shoppable, of many, our legacy that to, It prepared bit weren't our assortment, but reduced quite I Yes, them environment our more bring past. learnings, and our stores. not, for to the can a quite into our can the the executing

the might pictures roll be assortments the continue of still will experience. but all in in significant instead way chain. the the curated will to the our shopping be height the change of higher, going most our will reachable the across the That So But of product top. we all be rationalization to assortment

Joe Feldman

you. but one I I'll it, to have mentioned And Got know thank it, more then you come just, anyway. the on one, other Brad, ask

if You mentioned Thanks. media. social Instagram this through selling social commerce are particular, and I play could you forward? go is is how or of of you like and guess, a more Facebook, this I guys to share a making don't any there know, or more approaching kind color, that

Brad Weston

now, up. our and yes up, and Facebook Pinterest, best Instagram, about most. our shows places shows brand are the you of sort elements TikTok the think Yes yes in if where Well, even the category

to and using we're ability some when inspiration levels the where those able available. customers and in and showcase gives provide, that, really we doing ability us and translate product look to that's look of things, and amazing the amazing So the at into commerce, the we ideas, product innovation to the at the

Our up us. that's so great brand and opportunity remains shows on for social a, that media an

Joe Feldman

thanks And it. sense. luck That with and good makes Got this you. Thank quarter.

Brad Weston

Joe. Thanks,

Operator

go Please Sachs. from question Jenna The next is Goldman of Giannelli ahead.

Jenna Giannelli

My questions. is Hi, thanks just for first on the taking wholesale one business. my

one and or were the then spoke really was, of we of retail in a on, see kind between nature, you so versus temporary this seems there wholesale, anything first saw customer, versus I value the that four You it as, Do was little mean, equal a quarter of But follow bit comparability about? it all I related outline Thanks. guess, that different. specifically was did question to other? decline. you there? any the year for the permanent roughly that granted, divergence prior changed that those drove as divestitures the include first And level guess that more the is in and the I factors

Brad Weston

Sure.

That's a same fair sense franchising So It's rougher true, to throughout equal. because just stores around go say and versus infrastructure the definitely has retail stores. makes It pandemic. our it not independent the of kind of forth. been there's really the all so not omni-channel

bit had working in we've those closely In that that on it though forth So gone I'm the with has International headwinds. a been teams. on back International past. little of go lot in slow has a Canada still we're footprint, that including and

Australian we kind for with shutdown, timeframe, and others, what been of down, in so that's then we our a we there the during Canada store both base. and just along follows our celebration both and work seasonal more a there timeframe, got scaled were And that into businesses, business. wholesale across quarter, government have similar fairly as wouldn't see family European for There's the that in see requirements, all significant U.S. necessarily So, barrier the just clearly, lot as that headwinds just a path of of it translated of natural where celebrations that retail customers. and as there's the for regulations well more were there the itself

Jenna Giannelli

to I and helium thanks. then helpful. expected for make Okay, quarter that? That's $X omni, up understood The for million the that's headwind a just follow first correctly. just sure is And super

Brad Weston

That's Yes, correct. of the the that's total two.

Jenna Giannelli

XX flattish thinking guess towards, relative if leans I is I other? out comfortable Okay. I've an been the about is or not And breaking one the these that the about feel then full that would headwind to helium as to based in base? sort we you Is to fact incremental I XX off model should of you headwind. it way more mean, guess, not the for have, the a wrong? XX that on think visibility in then And right it? Is it because year

Brad Weston

comparing XX% As and it's into but settled level that kind than as a But -- back downs. to cost have was XXXX where ups been there higher rule, general had had there, you're is, pre a historically an increasing of is XX% the lot costs a to it a of XXXX, helium good shortage.

one say dramatically put said, more that will or was million. of emphasis that. more be would bit have was for headwind a less $X it probably I the on we than little there, would So there I

assume can, it's spread. So you relatively

Jenna Giannelli

Okay, great.

Brad Weston

half I think the QX of back to XXXX. first helium way and started think extended through too XXXX about and ‘XX, the the QX another late shortage is really really recovery in of helium in

Jenna Giannelli

on That's you breakdown finally more did the just perfect. but broad granularity helpful. on the know right, of little maybe on just then all a Okay, CapEx, strokes And I what spend, through spending that on didn't top that line this flow last how and of might you the be to you'll year as specifically spend through go year, back year? we the

Brad Weston

sure. Not

we first, perspective, what few storage last on semi So, quite would from a facilities, obviously call spending spend. pulled maintenance versus capital things a a I bit year back

a But e-commerce of about. more will this little Brad on And that should of pretty so, fresh some hiring little going general talked as bit and things we then like meaningful a I that overall technology a year the so and of the bit little would more thumb to total. probably it be expect more new capabilities XX investment And we in stores. up And the across going next-gen new the way to bit and air done to technology e-commerce that with rule as a conditioners it stores things to you're stores as just make stores are spread. going ramp get way would, see that is is a in they bit, little more our be, we of spends have

Brad Weston

going done as ensure that of focused quite are bit expenditures results we're on bit capital planned, can little to surgical a doing than mean, future may drive that work imagine really they're you of a I a more have past. our we in to the in way we the investments

Jenna Giannelli

Thanks all the color. for

Brad Weston

my It’s bet. pleasure. You

Operator

Please The America. Bank of next from is of go William question ahead. Reuter

William Reuter

was for good taking the first thanks about quarter. tailwinds the in Hi, here It hear to question. the retail

bit than going was that little imply I comps. and think in both guidance wholesale? a brand What weaker for for it to is implies expecting. the maybe that does revenue I wholesale be

Brad Weston

have I performances probably expect would in what of a is a see quarter we shutdowns more there to of normally continue this That's have like short extended I retail getting Canada, franchise further portions really. or as the pandemic. I that And we would to the into time. ongoing until would than of from over of thing that I the our business helps, guidance. say go correct the were think pullback is if comeback seen perform will we we independence. terms were in structural Well, in well. just

further And a when overcome more lot year. Those we wholesale to into tough the of opportunity So we see I probably the shutdown. is more yes, having are get pieces. economy the meaningful think as two

hopefully bit. certainly a behavior So little then business celebratory business, take gives It retail and the improvement expect we only once would returned that normal. you than but in is vaccines wholesale in Not our broader to businesses hold retail really models. increased

William Reuter

second right? based when closed. some in or comparable imply stores I calculated that Is the does brand wholesale that upon Yes, and have guess first sales is quarter. in companies Okay. it open differently quarter down But were the

Brad Weston

we the would that revenue guidance gave. think with I be fair,

as clearly last been just quarters. does that there we've think headwinds there, I imply there's through have it the like gone several

William Reuter

you're are lack to inventory demand if increases? of be that get inventory, you on it actually short next need places about over thinking may you just then expecting guess, quarters potential And port and I of, to it or the couple Okay. the the congestion, tough

Brad Weston

retailers the that because large, The we of there, improve cost shipping the has about through most a don't around since this of job into, put that of U.S. ports do. year is headwinds a basis. a really a spending on a come have of sure that, Coast same sports. From little things the perspective, an face from pressure that we're talking into work we're capital doing importing supply the are actually and there around lot of and the been of that through making overall on but other availability to timing goods East getting team our perspective, there's timely We are our level chain, good supply containers, things effectiveness chain congestion maybe of call. part by lot and And actually U.S. efficiency

the So flows we there. good about feel fly

William Reuter

from Thank Great, me. all that's you. all right,

Brad Weston

you. Thank

Operator

is question ahead. Jefferies. Karru next go of Please from Martinson The

Karru Martinson

can even Good we've up you the I of the quantify in northeast, morning. impact, was first the and and Texas months the what outdoor on the gatherings. the hear though, impact the in colder performance? that hitting the Certainly the storms, wondering here was I'm on that quarter, drag weather had

Brad Weston

art on whether but science, we've as it a far, quarter based as sales. clearly an has always point to-date impact, what been a So been there seen so of much than on is little a bit our percentage has quantifying more impact

on last that around wrapping are have impact of a a year. lot didn't We year weather

an about a So And that it's does on mean, us. good didn't -- they percent, about it as if a impact that's think have probably you range.

Todd Vogensen

over time weather had that we approximately a drove of was saw or period days based stores were there closed on a few the where And hours XXX that had Okay. which, limited severe we up.

was days. So impacted that's chain that for a a fair piece of the few

Karru Martinson

that's during $XX.X XXXX we coming is income about think that to, how Okay, I million. the cash cash for there tax was here receivable year? going in was and should was the an that taxes about and

Brad Weston

we the cash we'll the refund to place back get takes probably be return in that Yes, half coming year towards means of through XX%-ish should loss plan, the other later payments position estimated use we'll of at then think back going the part taxable goes you that where would year, going the as XXXX taxes a of goes IRS be an our that if best the making back do that estimated tax taxes we through or so the future cash XXXX cash as the of year. year. that From off probably claiming looking rate this there's into roughly reflect tax income expense that process way get a to cash and normal if typically tax about the all process we payments according part amount forward,

Karru Martinson

the the did? just Okay, and liquidity post refinancing. cleared and that the the having with now revolver And today the balance refinancing we where stand structure then you do on

Brad Weston

update at what was perspective. to liquidity did out we're do But also ABL. think from we on specific of we I where part exactly a gave the extend our

got in and the so with calculations we've another similar ABL So for forth. years five place and borrowing base

with $XXX million. we same, pay structure off did the core the has little a million, term So stayed that loan less than $XXX

the also that liquidity bit just So to transaction little cover little extra. of and a costs helps provide of a

a where as So general about good statement, feeling perspective. we're liquidity we're the at on

think We manage half positive signs as continue But cash year, of the solid the to towards we a tightly. feeling I in like we're we're back the position. with go seeing we're

Karru Martinson

appreciate you guys. very much, Thank I it.

Brad Weston

Thank you.

Operator

remarks. answer and concludes turn the Brad session. would to This our like back for I Weston closing over question to conference

Brad Weston

us of social monumental XXXX to for everybody today. all retail content year and conclusion, the In as a proud our I'm on retail year on joining our despite we keenly extremely accomplished you, which was stabilization focused business back we pandemic brand were in a flat half the us impact of that gatherings. testament, of Thank for the

up to made financial drove amount down dramatically of first of increased the the we financial to the which debt, flexibility, extension overall and our XXXX. our significant debt efforts On maturity address including our side,

were just begin put But in growth a we financially building we're XXXX. XXXX for we company, the a both different in place position in future very As year a ago. than and blocks operationally that we as

strong as and and intensely more vertical this We American effectively unique and year, industry transformation North remain we the our foundation we model consumer, our which leadership further a focused have continue build position. leveraging on strengthen upon our operating to

So thanks again everyone for joining us morning. this

Operator

The attending conference has now for concluded. today's presentation. you Thank

You may now disconnect.

Party City Holdco (PRTYQ) 11 Mar 212020 Q4 Earnings call transcript