Q4 2024 National Vision Holdings Inc Earnings Call
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Unknown Executive: Welcome to the fourth quarter 2024 National Vision Holdings Earnings Conference. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 one again.
Welcome to the fourth quarter 2024 at National Vision Holdings earnings Conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one one on your telephone.
We will then hear an automated message advising your hand is raised.
Withdraw your question. Please press star one again.
Unknown Executive: Please be advised that today's conference is being.
Please be advised that today's conference is being recorded.
Tamara Gonzalez: I would now like to hand the conference over to Tamara Gonzalez, VP of Investor Relations. Please call ahead.
Tomorrow Gonzales: I would now like to hand, the conference Tomorrow Gonzales VP of Investor Relations. Please go ahead.
Tamara Gonzalez: Thank you and good morning, everyone. Welcome to National Vision's fourth quarter and fiscal 2024 earnings. Joining me on the call today are Reid Faz, CEO, Alex Wilkes, President, and Melissa Rasmussen, CFO. Our earnings release issued this morning and the presentation accompanying our call are both available in the Investor's section of our website, nationalvision.com. A replay of the audio webcast will be archived in the Investor's section after the webinar.
Tomorrow Gonzales: Thank you and good morning, everyone and welcome to the National Vision fourth quarter and fiscal 'twenty 'twenty four earnings call joining.
Speaker Change: Joining me on the call today are being CEO, Alex well President and Melissa.
Our earnings release issued this morning, and the presentation accompanying our.
Tomorrow Gonzales: Both are available in the investor.
Tomorrow Gonzales: Our website nationals Dot com.
Replay of the audio webcast will be archived in the investors section after the call.
Tamara Gonzalez: We will review our 2024 results, then Alex will discuss our 2025 strategic priorities, and then Melissa will provide our financial results and details on our outcome. Before we begin, let me remind you that our earnings materials and today's. forward-looking statements as defined in the Private Security Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. These risks and uncertainties include, but are not limited to, the factors identified in the release and our filings with the Securities and Exchange Commission. The release in today's presentation also includes certain non-GAP.
We will review our 2024 result.
Alex will discuss our 2025 strategic priorities and then Melissa will provide our financial results in detail on our outlook for 2025.
Tomorrow Gonzales: Before we begin let me remind you that our earnings materials and today's presentation include forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Tomorrow Gonzales: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.
Speaker Change: These risks and uncertainties include but are not limited to the factors identified in the release and our filings with the Securities and Exchange Commission.
Tomorrow Gonzales: Today's presentation also includes certain non-GAAP measures reconciliation of these measures is included in our release and the supplemental presentation.
Tamara Gonzalez: The conciliation of these measures is included in our release and the supplement.
Tamara Gonzalez: We would like to draw your attention to Slide 2 in today's For additional information about forward-looking statements and non- Further, please note that all financial measures in today's commentary are based on a continuing operations basis, unless otherwise requested. As a reminder, National Vision provides investment. and Supplemental Materials for Investor Reference in the Investors section of our website.
Tomorrow Gonzales: We would like to draw your attention to slide two in today's presentation for additional information about forward looking statements and non-GAAP measures.
Tomorrow Gonzales: Please note that all financial measures in todays commentary are based on a continuing operations basis, unless otherwise noted.
Speaker Change: As a reminder, national vision provides investor presentation, and supplemental materials for Investor reference in the investors section of our website.
Reid Faz: I will now turn the call over to Reid. Thank you, Tamara. And good morning, everyone. Thank you for joining us today.
Speaker Change: I will now turn the call over to me right.
Speaker Change: Thank you Tamara and good morning, everyone. Thank you for joining us today before we begin our review of the fourth quarter and fiscal 2024 results I'd like to take a moment to extend our appreciation to Melissa Rasmussen last month, we announced that Melissa is stepping down as CFO and will be taken up an opportunity in another industry.
Reid Faz: Before we begin our review of the fourth quarter and fiscal 2024 results, I'd like to take a moment to extend our appreciation to Melissa Rasmussen. Last month, we announced that Melissa is stepping down as CFO and will be taking up an opportunity in another industry. Melissa has been instrumental in key aspects of our transformation to date, and we thank her for her dedication to National Vision in the over five years she's been with us. I've enjoyed our time working together and wish her the very best in her future endeavor.
Speaker Change: Melissa has been instrumental in key aspects of our transformation to date and we thank her for her dedication from national vision and the over five years she's been with us.
Speaker Change: Joined our time working together and wish her the very best in her future endeavors.
Reid Faz: Earlier today, we announced the appointment of Chris Layden as our new CFO, who will begin on March 31st. Chris joins us from Community Veterinary Partners, where he served as chief financial officer. He brings with him nearly two decades of experience in both health care and optical retail, having also held leadership positions at Pearl Vision, a division of Essilor Laxatica, including head of finance.
Speaker Change: Earlier today, we announced the appointment of Chris laid him as our new CFO, who will begin on March 31, Chris joins us from community Veterinary partners, where he served as Chief financial Officer. He brings with him nearly two decades of experience in both health care and optical retail having also held leadership positions at Pearle vision a division.
Speaker Change: Essilor luxottica, including head of finance, we're thrilled to welcome Christopher NPI team to assist with the transition Patrick Moore, who currently serves as a special adviser and was recently our CLO for just over two years and our former CFO for eight years will serve as interim CFO Patrick will work.
Reid Faz: We're thrilled to welcome Christopher to the NVI team. To assist with the transition, Patrick Moore, who currently serves as a special advisor, and who is recently our COO for just over two years, and our former CFO for eight years, will serve as interim CFO. Patrick will work closely with Christopher to ensure a smooth transition.
Speaker Change: Lead with Christopher to ensure a smooth transition.
Reid Faz: 2024 was an important year for National Vision as we took ever more aggressive actions to transform the business. We implemented meaningful change throughout the organization, including adding new members to our leadership team who bring deep optical and retail expertise and new approaches that will help accelerate our transformation efforts, particularly across managed care, pricing, and our field leadership organization. The early success of these results is evident in our strong fourth quarter results. Sales in the fourth quarter increased 3.9% to $437.3 million, and we delivered our eighth consecutive quarter of positive adjusted comparable store sales. For the quarter, adjusted comparable store sales were plus 1.5 percent, supported by America's best comparable store sales growth of plus 2 percent, which was on top of 7.2 percent comp in last year's fourth quarter.
Speaker Change: 2024 was an important year for national vision, as we took ever more aggressive actions to transform the business, we implemented meaningful change throughout the organization, including adding new members to our leadership team, who bring deep optical and retail expertise and new approaches that will help accelerate our transformation efforts, particularly across.
Speaker Change: <unk> managed care pricing and our field leadership organization. The early success of these results as evident in our strong fourth quarter results.
Speaker Change: Sales in the fourth quarter increased three 9% to $437 3 million and we.
Speaker Change: <unk>, our eighth consecutive quarter of positive adjusted comparable store sales.
Speaker Change: For the quarter adjusted comparable store sales were plus one 5% supported by America's best comparable store sales growth of plus 2%, which was on top of seven 2% comp in last year's fourth quarter. This was offset by eyeglass world comparable store sales decline of negative one 7% as the brand was.
Reid Faz: This was offset by Eyeglass World's comparable store sales decline of negative 1.7 percent as the brand was disproportionately affected by Hurricane Helene in October, and approximately 35 percent of its stores are located in Florida. Our stronger-than-expected top-line performance was driven by actions started mid-quarter, including new selling methods and targeted pricing actions, which together drove increases in average ticket. Importantly, while average ticket rose, conversion held steady, which is an encouraging sign of consumer acceptance of the price changes. Sales in the quarter also continued to benefit from strong managed care sales, which comped high single digits throughout the year, offsetting continued relative softness in cash pay sales.
Speaker Change: Disproportionately affected by Hurricane Helene in October and approximately 35% of its stores are located in Florida.
Speaker Change: Our stronger than expected topline performance was driven by actions started mid quarter, including new selling methods and targeted pricing actions, which together drove increases in average ticket importantly, while average ticket rose conversion held steady which is an encouraging sign of consumer acceptance of the price change.
Speaker Change: Yes.
Speaker Change: Sales in the quarter also continued to benefit from strong managed care sales, which comp high single digits throughout the year offsetting continued relative softness in cash pay sales.
Reid Faz: With respect to profitability, adjusted operating income increased to $3.2 million, and adjusted diluted earnings per share was a loss of 4 cents.
Speaker Change: With respect to profitability adjusted operating income increased to $3 $2 million and adjusted diluted earnings per share was a loss of <unk> five.
Reid Faz: These results led to full year top line performance that came in as expected and bottom line performance above our expectations. For the year, fiscal 2024 net revenue increased 3.8% to $1,823,000,000 and adjusted comparable store sales increased 1.3%, driven by continued strength in managed care sales. In 2024, managed care grew to approximately 40% of our revenues. Adjusted operating income of $65.5 million increased 21.5%, resulting in adjusted diluted earnings per share of $52.7.
Speaker Change: These results led to full year topline performance that came in as expected and Bottomline performance above our expectations for the year fiscal 2024 net revenue increased three 8%.
Speaker Change: $1 billion $823 million.
Speaker Change: And adjusted comparable store sales increased one 3% driven by continued strength in managed care sales.
Speaker Change: In 2020 for managed care grew to approximately 40% of our revenues adjusted operating income of $65 5 million increased 21, 5%, resulting in adjusted diluted earnings per share of <unk> 52.
Reid Faz: With that, let me review the progress we're making on our transformation initiative. Over the past two years, we've made great strides evolving and strengthening the foundation of our operations, improving exam capacity through recruiting and retention initiatives, and expanding our remote exam capabilities. We've also made meaningful progress in enhancing our systems to further digitize our stores and corporate offices. These efforts resulted in ending 2024 with doctor capacity on solid footing. Doctor retention squarely in line with historical ranges of between 80 and 90%. And for the 3rd consecutive year in a row, we recruited at least 10% of the 2024 graduating class of all the optometry schools in the US.
Speaker Change: With that let me review the progress, we're making on our transformation initiatives over the past two years, we've made great strides evolving and strengthening the foundation of our operations improving exam capacity through recruiting and retention initiatives and expanding our remote exam capabilities.
Speaker Change: We've also made meaningful progress in enhancing our systems to further digitize our stores and corporate office.
Speaker Change: These efforts resulted in ending 2024 with doctor capacity on solid footing, Dr retention squarely in line with historical ranges between 80 and 90%.
Speaker Change: For the third consecutive year in a row, we recruited at least 10% of the 2024, graduating class of all the optometry schools in the U S.
Reid Faz: In addition, we ended 2024 with over 730 locations enabled with remote technology, with remote exams representing about 12% of exams in remote enabled states for the year, and with remote doctor patients seen per day, exceeding that of in-store doctors in the second half of fiscal 2024. We also launched our hybrid remote pilot in 2024, enabling in-store optometrists to perform exams in other stores based on availability and demand. Turning to our investments in technology, which continued in 2024, we invested in a finance ERP, which will go live in the second quarter, as well as a new Adobe CRM platform, which we expect to go live in the second half of this year.
Speaker Change: In addition, we ended 2024 with over 730 locations enabled with remote technology with remote exams, representing about 12% of exam and remote enabled states for the year and with remote doctor patient seen per day exceeding that of in store doctors in the second half of fiscal 2024.
Speaker Change: We also launched our hybrid remote pilot in 2024, enabling in store optometrists to perform exams in other stores based on availability and demand.
Speaker Change: Turning to our investments in technology, which continued in 2024, we invested in our finance ERP, which will go live in the second quarter as well as the new Adobe CRM platform, which we expect to go live in the second half of this year.
Reid Faz: Thus, we're entering 2025 on a healthier footing relative to exam capacity and the tools we need to improve efficiencies and customer marketing.
Speaker Change: Thus, we're entering 2025 on a healthier funding relative to exam capacity and the tools, we need to improve efficiencies and customer marketing strength in.
Reid Faz: In terms of store operations, we identified areas where we can improve operational execution to drive comparable store sales and improve profitability. We completed a comprehensive review of our store fleet and announced that we will be taking action on 43 stores through fiscal year 2026 to improve the underlying foundation of our core business. In addition, we are incorporating learnings from the review into our go forward store growth plan and testing a few smaller size store formats for America's Best. Finally, during the year, we began to use new and different promotional approaches, such as a progressives bundle and a single-payer offer.
Speaker Change: In terms of store operations, we identified areas, where we can improve operational execution to drive comparable store sales and improve profitability.
Speaker Change: We completed a comprehensive review of our store fleet and announced that we will be taking action on 43 stores through fiscal year 2026 to improve the underlying foundation of our core business in.
Speaker Change: In addition, we are incorporating learnings from the review into our go forward store growth plans and testing a few smaller sized store formats for America's best.
Speaker Change: Finally during the year, we began to use new and different promotional approaches such as a progressive bundle and a single payer offer.
Reid Faz: We enter 2025 ready to accelerate the next phase of our transformation, which we began to lay the groundwork for in the second half of fiscal 2024. Alex will go into more specifics, but in a sentence, the next phase of our transformation involves a strategic shift in focus to our more valuable current customer segments while maintaining our traditional base. Historically, our business was built for cash pay, highly budget conscious consumers, with our messaging and customer journeys heavily emphasizing the lowest out-the-door price. Despite our messaging and offerings speaking more directly to this customer segment, we also attracted managed care customers, progressive lens wearers, and those who came to us with a prescription already in hand, looking for the solution for their eyewear needs.
Speaker Change: We entered 2025 ready to accelerate the next phase of our transformation, which we began to lay the groundwork for it in the second half of fiscal 2024.
Alex: Alex will go into more specifics, but in a sentence. The next phase of our transformation involves the strategic shift and focus to our more valuable current customer segments, while maintaining our traditional base.
Speaker Change: Historically, our business was built for cash pay highly budget conscious consumers with our messaging and customer journeys heavily emphasizing the lowest out the door price.
Speaker Change: Despite our messaging and offerings speaking more directly to this customer segment. We also attracted managed care customers progressive lens wearers and those who came to us with the prescription already in hand looking for the solution for their eyewear needs.
Reid Faz: This group of customers over time has grown to represent about half of our customer base and a significantly higher percentage of our sales today. They find value in the quality of eye care we offer, our accessibility, and our broad range of product offerings to solve their needs, rather than just the absolute lowest price. Given the significance that this group has on our business today and the opportunity we see, our efforts going forward will focus on creating enhanced journeys and experiences for these types of customers and personalizing messaging to their different motivations. With this approach, we believe we can grow our share of these more valuable customers and ultimately more profitably expand our customer base.
Speaker Change: This group of customers over time has grown to represent about half of our customer base and a significantly higher percentage of our sales today.
Speaker Change: They find value in the quality of Ikea, we offer our accessibility and our broad range of product offerings to solve their needs rather than just the absolute lowest price.
Speaker Change: Given the significance that this group has on our business today and the opportunity we see our efforts going forward will focus on creating enhanced journeys and experiences for these types of customers and personalized messaging to their different motivations with this approach. We believe we can grow our share of these more valuable customers and ultimately.
Speaker Change: More profitably expand our customer base.
Reid Faz: Alex will go into more detail on how we're approaching this shift in mindset and selling strategy, but we're very encouraged by the early results we saw in the fourth quarter from the initial efforts underway. Concurrent with this customer facing aspect of our transformation, we're maintaining strong discipline across expense management. We're attacking SG&A by driving operational efficiencies and better aligning our cost structure to reinvest in the patient and customer experience.
Speaker Change: Alex will go into more detail on how we're approaching this shift in mindset and selling strategy, but we're very encouraged by the early results. We saw in the fourth quarter from the initial efforts underway.
Speaker Change: Concurrent with this customer facing aspects of our transformation, we're maintaining strong discipline across expense management, we're attacking SG&A by driving operational efficiencies and better aligning our cost structure to reinvest in the patient and customer experience.
Reid Faz: Before I turn the call over to Alex, I'd like to give some commentary on our guidance range. January sales were quite strong for us, but more recently, we experienced negative traffic trends beginning the second week of February. While we believe it's too soon to determine the cause for this, we've observed significantly colder weather than normal across the country. And, of course, we've all seen news about the uncertainty around consumer sentiment.
Speaker Change: I turn the call over to Alex I'd like to give some commentary on our guidance range January sales were quite strong for us, but more recently, we experienced negative traffic trends beginning the second week of February while we believe it's too soon to determine the cause for this we've observed significantly colder weather than normal across the country and of course.
Speaker Change: We've all seen news about the uncertainty around consumer sentiment given this we believe a wider range is appropriate to cover a broader set of scenarios. Melissa will go into this in more detail after Alex shares more of our 2025 priorities.
Reid Faz: Given this, we believe a wider range is appropriate to cover a broader set of scenarios.
Reid Faz: Melissa will go into this more in more detail after Alex shares more of our 2025 priorities.
Alex Wilkes: Alex. Thank you, Reid, and good morning, everyone. I'll start by saying just how encouraged I am by the momentum we saw during the fourth quarter. Our teams are embracing our strategic priorities with excitement, and that is evident in both the stores and our retail support centers. I'm impressed with the way in which our teams are engaged to drive improvement. And as Reed mentioned, the entire team is executing with a transformation mindset. Since joining the team in August, I've spent my time with our team developing a framework that aligns our investment decisions with our operational action plan.
Speaker Change: Alex.
Alex: Thank you Ryan and good morning, everyone I'll start by saying just how encouraged I am by the momentum we saw during the fourth quarter. Our teams are embracing our strategic priorities with excitement and that is evident in both our stores and our retail support center.
Speaker Change: Pressed with the way in which our teams are engaged to drive improvement.
Speaker Change: And as we've mentioned the entire team is executing with a transformation mindset.
Speaker Change: Since joining the team in August I've spent my time with our team developing a framework that aligns our investment decisions with our operational action plan.
Alex Wilkes: We're getting the organization focused on creating an improved store experience and building our brand around our expanded customer view, all with intense focus on discipline, expense management to improve profitability. As we shared on our third quarter call, 2025 will be a year to continue to strengthen our core business and to accelerate long-term growth. We are being thoughtful and are focused on all aspects of demand generation and cost efficiency in this next phase of our transformation. Our priorities for 2025 begin with our customer in mind and their journey. We know that we attract a wider audience than we have historically targeted, and one that is much more skewed to middle-income households, similar to that of the U.S.
Speaker Change: We're getting the organization focused on creating an improved store experience and building our brand around our expanded customer view all with intense focus on disciplined expense management to improve profitability.
Speaker Change: As we shared on our third quarter call 2025 will be a year to continue to strengthen our core business and to accelerate long term growth.
Speaker Change: We are being thoughtful and are focused on all aspects of demand generation and cost efficiency in the next phase of our transformation.
Speaker Change: Our priorities for 2025 begin with our customer in mind and their journey with us.
Speaker Change: We know that we attract a wider audience than we have historically targeted and one that is much more skewed to middle income households, similar to that of the U S population.
Alex Wilkes: population. We're making rapid advances to ensure we provide value across this wider audience that is unique to each of our customer segments with an emphasis on managed care, our fastest growing customer cohort. Over the years, we've seen a broadening of our customer base, demonstrating that America's Best has diverse appeal and, importantly, validates our go-forward approach to targeting value-seeking consumers across needs, basis, and income demographics. As we continue to enhance our customer segmentation, we are defining value propositions focused on our highest value customers. As Reid said, we know our highest value customers generate a disproportionate level of sales.
Speaker Change: We're making rapid advances to ensure we provide a value across a wider audience that is unique to each of our customer segments with an emphasis on managed care our fastest growing customer cohort.
Speaker Change: Over the years, we have seen a broadening of our customer base demonstrating that America's best has diverse appeal and importantly, validates our go forward approach to targeting value seeking consumers across need basis and income demographics.
Speaker Change: As we continue to enhance our customer segmentation, we are defining value proposition focused on our highest value customers.
Speaker Change: We know our highest value customers generate a disproportionate level of sales and going forward, we expect to tailor messages and offers to them.
Alex Wilkes: And going forward, we expect to tailor messages and offers to them. While not walking away from our price-seeking segments, we will evolve our approach to the customer segments that are not as price-sensitive as our historical segments.
Speaker Change: While not walking away from our price seeking segments, we will evolve our approach to the customer segment that are not as price sensitive as our historical targets.
Alex Wilkes: With this perspective and building on the work we've accomplished throughout 2024, for the next phase of the transformation, we've outlined the following key strategic priorities for 2025. First, our pricing strategy has historically been architected around the cash-to-pay customer, which made sense at a time when managed vision care represented a smaller portion of our customer base. Fast forward, as Managed Care continues to supply a larger portion of our customers, now 40% and growing high single digits, we're adapting accordingly with attractive product at price points better suited to the Managed Care customer. Separately, during the fourth quarter, we implemented a set of tactical pricing actions on frames.
Speaker Change: With this perspective and building on the work we've accomplished throughout 2024 for the next phase of the transformation we've outlined the following key strategic priorities for 2025.
Speaker Change: First our pricing strategy has historically been architected around their cash paid customer, which made sense at a time when managed vision care represented a smaller portion of our customer base.
Speaker Change: Fast forward as managed care continues to supply a larger portion of our customers now, 40% and growing high single digits.
Speaker Change: We're adapting accordingly with attractive product at price points better suited to the managed care customer.
Speaker Change: Separately during the fourth quarter, we implemented a tactical pricing actions on frame.
Alex Wilkes: This, along with salesforce training, is reflected in our higher average ticket price. And during the first quarter of 2025, we increased our headline two-pair offer by $10 at both Eyeglass World and America's Second, we are implementing targeted initiatives to enhance the customer and patient experience to drive both ticket and traffic. We are evolving our selling model and enhancing our training to provide more emphasis on solving customers' needs rather than primarily providing the lowest possible price. As Reid mentioned, this effort began in the fourth quarter, and although in early stages, we're seeing encouraging results and expect this to be an increasing benefit as the year progresses and we ramp up our efforts.
Speaker Change: This along with Salesforce training as reflected in our higher average ticket performance.
Speaker Change: And during the first quarter of 2025, we increased our headline two pair offer by $10 at both eyeglass World and America's Best.
Speaker Change: Second we are implementing targeted initiatives.
Speaker Change: Hence the customer and patient experience to drive both ticket and traffic.
Speaker Change: We are evolving our selling model and enhancing our training to provide more emphasis on solving customers' needs rather than primarily providing the lowest possible price point.
Speaker Change: As we mentioned this effort began in the fourth quarter.
Speaker Change: And although in early stages, we're seeing encouraging results and expect this to be an increasing benefit as the year progresses, and we ramp up our efforts.
Alex Wilkes: And as we expand our Managed Vision Peer customer base, we're evaluating technologies and processes that both streamline the customer and patient experience and improve collections, as well as implementing associate training programs to delight our insured customers. Over the past year, we've been actively working to involve our product assortment to better align with the preferences of our customers. As this effort continues in 2025, it will also help our objective of better serving our higher income consumers. Customers will start to see a better balance of high-quality, low-cost frames with an expanded assortment of more fashion-forward and branded frames at higher prices.
Speaker Change: And as we expand our managed vision care customer base, we're evaluating technologies and processes that both streamline the customer and patient experience and improved collections as well as implementing associate training program to delight, our insured customers.
Speaker Change: Over the past year, we've been actively working to evolve our product assortment to better align with the preferences of our customers.
Speaker Change: As this effort continues in 2025. It will also help our objective of better serving our higher income consumers.
Speaker Change: Customers will start to see a better balance.
Speaker Change: High quality low cost frames with an expanded assortment of more fashion forward and branded frame at higher prices.
Alex Wilkes: Our success with the exclusive launches of Pear and Florence by Mills are some examples as both target a strong fashion flash value proposition. And we're excited to test two innovative new products. The Nuance All-in-One Hearing Glasses and the Ray-Ban Metaglasses starting in the second quarter. Nuance audio glasses will be available in 50 America's best in eyeglass world stores. Nuance is an exciting and innovative solution for those with mild to moderate hearing loss, affecting approximately 30 million people in the U.S. alone. We're also thrilled to announce that the Ray-Ban Metaglasses will be available in approximately 50 stores in the second quarter of 2025.
Speaker Change: Our success with the exclusive launches of pair in Florence by Mills are some examples as both target a strong fashion flash value proposition.
Speaker Change: And we're excited to test two innovative new products, the new <unk> all in one hearing glasses and the Ray ban medical office, starting in the second quarter.
Speaker Change: Nuance audio glasses will be available in 50, America's best and Eyeglass World stores, nuances and exciting and innovative solutions for those with mild to moderate hearing loss affecting approximately 30 million people in the U S alone. We're also thrilled to announce that the radon and medical office will be available in approximately 50 <unk>.
Speaker Change: Stores in the second quarter of 2005 and.
Alex Wilkes: And we continue to make progress at the intersection of eye care and health care by bringing innovation to our patients. Our investment in Toku, Inc., a leader in applying AI-powered diagnostic and screening tools to retinal imaging, continues to be a unique and valuable asset. We've expanded our pilot of BioAge, Toku's wellness product that utilizes retinal images to determine a person's biological age, which can give an indication of their overall health. BioAge is currently in 117 stores across five states, including New York. Third, complementing these initiatives are the investments we're making to transform our marketing and omni-channel capability.
Speaker Change: And we continue to make progress at the intersection of Ikea and healthcare.
Speaker Change: Bringing innovation to our patients our investment in Tokyo, Inc. A leader in applying AI powered diagnostic and screening tools to retinal imaging continues to be a unique and valuable asset with.
Speaker Change: We've expanded our pilot of bio H <unk> wellness product that utilizes retinal images to determinate persons biological age, which can give an indication of their overall health.
Speaker Change: <unk> is currently in 117 stores across five states, including New York.
Speaker Change: Third complementing these initiatives are the investments, we're making to transform our marketing and omnichannel capabilities.
Alex Wilkes: We have made intentional investments in the business to position us for growth. In addition to the Adobe CRM implementation and the second half of this year, we are investing in upgrading our e-commerce platform to strengthen our omni-channel. This will allow us to create new, personalized journeys for all of our customers and significantly enhance how our customers experience us online. We're moving the organization to better leverage digital marketing and made the decision to change advertising agencies to one that specializes in the entire digital marketing. Our new agency of record, VML, is tasked with helping us redefine our communication and brand platform.
Speaker Change: We have made intentional investments in the business to position us for growth. In addition to the Adobe CRM implementation in the second half of this year, we are investing and upgrading our e-commerce platform to strengthen our omnichannel experience.
Speaker Change: This will allow us to create new personalized journey for all of our customers and significantly enhance how our customers experience us online.
Speaker Change: We're moving the organization to better leverage digital marketing and made the decision to change advertising agencies to one that specializes in the entire digital marketing ecosystem.
Speaker Change: Our new agency of record the ml is tasked with helping us redefine our communication of brand platforms.
Alex Wilkes: We intentionally partnered with an agency that has deep marketing capabilities and a proven track record of maximizing investments in digital marketing technology. particularly with Adobe Plus. Customers will get a refreshed, modern, and more personalized experience from America's best in eyeglass world, marketing, and Throughout 2025, we will continue to roll out behavior-based training in addition to investments in digital capabilities, product assortment refreshes, marketing and CRM investments as we move towards a future where we can personalize our experience and offerings to customers, individuals, and businesses. To support these efforts, during the fourth quarter, we established a partnership with Accenture to help us redefine the customer experience and our online presence.
Speaker Change: Essentially partnered with an agency that has deep marketing capabilities and a proven track record of maximizing investment in digital marketing technologies.
Speaker Change: Particularly with Adobe platforms.
Speaker Change: Customers will get a refreshed modern and more personalized experience from America's best and Eyeglass World marketing and messaging.
Speaker Change: Throughout 2025, we will continue to rollout behavior based training. In addition to investments in digital capabilities product assortment refreshes marketing and CRM investments as we move towards the future, where we can personalize our experience and offerings to customers individual needs.
Speaker Change: To support these efforts during the fourth quarter, we established a partnership with Accenture to help us redefine the customer experience and our online presence.
Alex Wilkes: Our teams will be working closely together as we enhance our digital experience and implement the tools and capabilities needed to modernize our office. This work is well underway. Our primary key performance indicators to determine the success of these initiatives this year are improving comparable store sales and improving our profits. To help drive this transformation, we reorganized our leadership to better align with our strategic approach and promote growth in strategic areas. In January, we announced a new leadership structure with heightened ownership and clarity around accountability. One great example of this is what we did with Managed Care, which now has one leader driving strategy and revenue cycle management under one umbrella for this key strategic growth priority.
Speaker Change: Our teams will be working closely together as we enhance our digital experience and implement the tools and capabilities needed to modernize our offering this.
Speaker Change: This work is well underway.
Speaker Change: Our primary key performance indicators to determine the success of these initiatives. This year are improving comparable store sales and improving our profitability.
Speaker Change: To help drive this transformation, we reorganized our leadership to better align with our strategic approach and promote growth in strategic areas.
Speaker Change: In January we announced a new leadership structure with heightened ownership and clarity around accountability.
Speaker Change: One Great example of this is what we did with managed care, which now has one leader driving strategy and revenue cycle management under one umbrella for this key strategic growth priority.
Alex Wilkes: We now have more focused and devoted leadership responsible for transforming both the America's best brand and strengthening eyeglass world. America's Best now has a dedicated and experienced leader overseeing enhancements to the customer journey and in-store experience. During 2024, we took several actions to get eyeglass world on a path towards stabilization, including applying learnings from America's Under dedicated leadership in 2025, we're focused on continuing to stabilize operations while developing a go-forward strategy and an updated brand identity with the help of our new agency at Brexit. All with a focus on how we deliver the customer experience and how we deliver our service properly.
Speaker Change: We now have more focussed and devoted leadership responsible for transforming both the America's best brand and strengthening eyeglass world.
Speaker Change: America's Best has a dedicated and experienced leader overseeing enhancements to the customer journey and in store experience.
Speaker Change: During 2024, we took several actions to get eyeglass world on a path towards stabilization, including applying learnings from America's best.
Speaker Change: Under dedicated leadership in 2025, we're focused on continuing to stabilize operation while developing a go forward strategy and an updated brand identity with the help of our new agency of record.
Speaker Change: All with a focus on how we deliver the customer experience and how we deliver our service promise.
Alex Wilkes: These leadership changes are an important step to move the business forward. As we look to increase efficiencies, we're attacking excess costs throughout the business. In 2025, discipline expense reductions are expected to come in two steps. The first includes $12 million of expense reduction in 2025, which is reflected in our guidance for the year. To facilitate this expense reduction, we made the tough decision to eliminate just over 10% of our existing corporate support positions. Although this was difficult, it was necessary for two reasons. One, we are aligning our talent with our strategic priorities, and we'll reinvest some of the savings from impacted positions into areas where we are growing and enhancing the customer experience.
Speaker Change: These leadership changes are an important step to move the business forward.
Speaker Change: As we look to increase efficiencies, we're attacking excess cost throughout the business and.
Speaker Change: In 2025 disciplined expense reductions are expected to come in two steps.
Speaker Change: The first includes $12 million of expense reduction and 25, which is reflected in our guidance for the year.
Speaker Change: To facilitate this expense reduction we made the tough decision to eliminate just over 10% of our existing corporate support positions.
Speaker Change: Although this was difficult it was necessary for two reasons.
Speaker Change: One we are aligning our talent with our strategic priorities that we will reinvest some of the savings are impacted positions into areas, where we are growing and enhancing the customer experience and two we are taking disciplined expense actions to create a stronger more profitable business.
Alex Wilkes: And two, we have taken disciplined expense actions to create a stronger, more profitable. Our cost reduction initiatives will also be supported through our partnership with Accenture, and we will share more on this work as we move through the year.
Speaker Change: Our cost reduction initiatives will also be supported through our partnership with Accenture and we will share more on this work as we move through the year.
Alex Wilkes: In summary, we are excited about the opportunities that lie ahead. We have a clear game plan to grow our customer base. We've taken bold decisions to invest in our transformation agenda, while remaining disciplined with respect to our cost.
Speaker Change: In summary, we are excited about the opportunities that lie ahead, we have a clear game plan to grow our customer base, we've taken bold decision to invest in our transformation agenda, while remaining disciplined with respect to our cost structure.
Melissa Rasmussen: And with that, I'll turn the call over to Melissa to review our financial results. Thank you, Alex, and good morning everyone. As discussed, we are pleased to have delivered a strong end to the year, reflecting the acceleration of our transformation effort. Well, the first phase of our transformation initiative. have been critical in stabilizing the foundation of our business. This next phase will enhance focus on accelerating demand generation and aligning our pricing and cost structure to reinvigorate the organization. The team is building a stronger foundation for sustainable long-term growth through the actions currently underway, and our fourth quarter results provide the team with conviction as they move forward.
Speaker Change: And with that I'll turn the call over to Melissa to review our financial results.
Speaker Change: The.
Melissa Rasmussen: Thank you Alex and good morning, everyone. As discussed we are pleased to have delivered a strong end to the year, reflecting the acceleration of our transformation effort.
Speaker Change: The first phase of our transformation initiatives.
Speaker Change: Has been critical in stabilizing the foundation of our business. This next phase will enhance focus on accelerating demand generation and aligning our pricing and cost structure to reinvigorate the organization.
Speaker Change: <unk> is building a stronger foundation for sustainable long term growth through the actions currently underway and our fourth quarter results provide the team with conviction as they move forward.
Melissa Rasmussen: Before we review our outlook, let me provide more details on our fourth quarter results. For the fourth quarter, net revenue increased 3.9% compared to the prior year, driven by growth from new store sales and adjusted comparable store sales growth of 1.5%. Partially offset by the effect of converted and closed stores and lower revenue from our DiscountContacts.com website, as explained. The Timing of Unearned Revenue, Benefited Revenue in the Period by 80 Days. Unit growth in our America's Best and Eyeglass World brands increased 4.4% on a combined basis over the total store base last year. During the quarter, we opened 20 new America's Best stores, while also executing our fleet optimization plan by closing seven America's Best stores and four Eyeglass World.
Speaker Change: Before we review our outlook, let me provide more details on our fourth quarter results.
Speaker Change: For the fourth quarter net revenue increased three 9% compared to the prior year driven by growth from new store sales and adjusted comparable store sales growth of one 5%.
Speaker Change: Partially offset by the effect of converted and closed stores and lower revenues from our discount contacts dot com website as expected.
Speaker Change: Timing of energy revenue benefited revenue in the period by 80 basis points.
Speaker Change: Unit growth in our America's Best and Eyeglass World brands increased four 4% on a combined basis over the total store base last year.
Speaker Change: During the quarter, we opened 20, new America's best stores, while also executing our fleet optimization plan by closings, Devin America's best stores and for Eyeglass World stores.
Melissa Rasmussen: In addition, we converted four Eyeglass World stores to America's Best Stores, and we ended the quarter with a total of 1,240 stores. For the year, on average, dark stores continue to represent a low single-digit percentage of our America's Best fleet, while dim stores, on average, continue to represent a high single-digit percentage of the America's Best fleet. As a reminder, we define dark stores as stores that do not have doctor coverage and are not remote enabled, and dense stores are not remote enabled and have less than three days of doctor coverage. Adjusted comparable store sales were driven by an increase in average ticket of 3%, supported by price increases and new selling methods implemented during the quarter.
Speaker Change: In addition, we converted for eyeglass World stores to America's Best stores, and we ended the quarter with a total of 1240 stores.
Speaker Change: For the year on average dark stores continue to represent a low single digit percentage of our America's Best fleet, while den stores on average continue to represent a high single digit percentage of the America's Best Fleet.
Speaker Change: As a reminder, we define dark stores and stores that do not have doctor coverage or not remote enabled.
Speaker Change: In stores are not remote enabled and have less than three days of Dr. Pepper.
Speaker Change: Adjusted comparable store sales were driven by an increase in average ticket of 3%.
Speaker Change: Courted by price increases and new selling method implemented during the quarter.
Melissa Rasmussen: Encouragingly, conversion rates remained consistent as we implemented new pricing adjustments. The increase in average ticket was partially offset by a 1.1% decline in customer transactions. primarily due to the calendar shift resulting in a shorter selling season during our peak year-end week. In fact, leading up to the customer holiday, customer transactions were up 1.1%. As a percentage of net revenue, cost applicable to revenue decreased approximately 150 basis points compared with the prior year quarter, resulting in a gross margin increase of approximately 150 basis points. The improvement in gross margin was driven primarily by lower optometrist-related costs and higher eyeglass margins, resulting from the pricing actions taken during the quarter.
Speaker Change: <unk> conversion rates remain consistent as we implemented new pricing adjustments.
Speaker Change: The increase in average ticket was partially offset by a one 1% decline in customer transaction.
Speaker Change: Primarily due to the calendar shift, resulting in a shorter selling season during our peak year and weak.
Speaker Change: In fact, leading up to the customer holiday customer transactions were up one 1%.
Speaker Change: As a percentage of net revenue cost applicable to revenue decreased approximately 150 basis points compared with the prior year quarter, resulting in a gross margin increase of approximately 150 basis points.
Speaker Change: The improvement in gross margin was driven primarily by lower optometrists related costs and higher eyeglass margin, resulting from the pricing actions taken during the quarter.
Melissa Rasmussen: Adjusted SG&A expense as a percentage of revenue increased 40 basis points compared with the fourth quarter of 2023. The increase in adjusted SG&A as a percentage of net revenue was primarily driven by higher legal and professional fees related to the initial investment in our partnership with Accenture that Alex reviewed. As well as higher payroll expense and amortization of cloud-based software investment. partially offset by lower advertising. Depreciation and amortization expense of $22.7 million decreased slightly compared to $23.4 million in the prior year period. Adjusted operating income was $3.2 million compared to an adjusted operating loss of $2.7 million in the prior year period.
Speaker Change: Adjusted SG&A expense as a percentage of revenue increased 40 basis points compared with the fourth quarter of 2023.
Speaker Change: The increase in adjusted SG&A as a percentage of net revenue was primarily driven by higher legal and professional fees related to the initial investment and our partnership with Accenture that Alex reviewed as.
Speaker Change: As well as higher payroll expense and amortization of cloud based software investments.
Speaker Change: Partially offset by lower advertising expense.
Speaker Change: Depreciation and amortization expense of $22 7 million.
Speaker Change: Triste slightly compared to $23 4 million.
Speaker Change: In the prior year period.
Speaker Change: Adjusted operating income was $3 2 million.
Speaker Change: Compared to an adjusted operating loss of $2 7 million in the prior year period.
Melissa Rasmussen: Adjusted operating margin increased 140 basis points to 0.7% compared to the prior year period due primarily to the factors mentioned above. Net interest expense was $4.6 million compared to $3.9 million in the prior year period. The year-over-year increase was driven primarily by lower interest income on cash balances of $2 million, partially offset by $0.7 million of lower derivative income, and a decrease in interest expense of $0.5 million compared to the prior year period. As a reminder, our guidance excludes non-cash marked market and deferred financing costs, which totaled $0.4 million for the period. Excluding these costs, interest expense was $4.2 million for the quarter, compared to a benefit of $0.4 million less.
Speaker Change: Adjusted operating margin increased 140 basis points to 0.7% compared to the prior year period due primarily to the factors mentioned above.
Speaker Change: Net interest expense with $4 6 million.
Speaker Change: Compared to $3 9 million in the prior year period, the year over year increase was driven primarily by lower interest income on cash balances of $2 million.
Speaker Change: Partially offset by $7 million.
Speaker Change: Lower derivative income and a decrease in interest expense of $5 million.
Speaker Change: Compared to the prior year period.
Speaker Change: As a reminder, our guidance excludes noncash mark to market and deferred financing costs, which totaled <unk> <unk>.
Speaker Change: $4 million for the period, excluding these costs interest expense was $4 2 million for the quarter compared to a benefit of <unk>.
Speaker Change: $4 million last year.
Melissa Rasmussen: Non-cash marked market charges for the prior year were $3.6 million, which did not repeat in fourth quarter 2024 as the derivative hedge matured in July. Adjusted EPS was negative four cents per share. The same as the prior year period.
Speaker Change: Noncash mark to market charges for the prior year or $3 6 million.
Speaker Change: Which did not repeat in fourth quarter 2024, as the derivative hedge matured in July.
Speaker Change: Adjusted EPS was negative four cents per share.
Speaker Change: The same as the prior year period.
Melissa Rasmussen: Turning now to our financial results for Fiscal 2024 as compared with Fiscal 2023. Net revenue increased approximately 3.8% driven by new stores and adjusted comparable store sales growth of 1.3%. The timing of unearned revenue positively impacted net revenue by 50 basis points. Adjusted operating margin increased 50 basis points to 3.6% compared to the prior year period, driven primarily by the decrease in adjusted SG&A as a percentage of revenue, given the decline in incentive compensation and improved flow through due to the pricing actions already designed. For the year, adjusted diluted earnings per share were $0.52, which exceeded the high end of our prior guidance range by $0.02 in the prior year by $0.50.
Speaker Change: Turning now to our financial results for fiscal 2024 as compared with fiscal 2023.
Speaker Change: Net revenue increased approximately three 8% driven by new stores and adjusted comparable store sales growth of one 3%.
The timing of unearned revenue positively impacted net revenue by 50 basis points.
Speaker Change: Adjusted operating margin increased 50 basis points to three 6% compared to the prior year period, driven primarily by the decrease in adjusted SG&A as a percentage of revenue given the decline in compensation and increased flow through due to the pricing actions already discussed.
Speaker Change: For the year adjusted diluted earnings per share were <unk> 52 cents.
Speaker Change: Which exceeded the high end of our prior guidance range by Tuesday.
Speaker Change: The prior year.
Melissa Rasmussen: Please note our adjusted results for the fourth quarter and full year exclude one-time non-recurring exit charges related to store optimization plans, as well as charges related to our ERP and CRM rollout, among other non-recurring items that are detailed in the reconciliation table found in our press release. Adjusted EPS excludes an after-tax, non-cash impairment charge of $18.6 million for our iLast World brand following the comprehensive fleet review and action plan. Turning next to our balance sheet, we ended the year with a cash balance of approximately $74 million and total liquidity of $368 million, including available capacity from our revolving credit facility.
Speaker Change: Please note our adjusted results for the fourth quarter and full year exclude one time nonrecurring exit charges related to store optimization plan as well as charges related to our ERP and CRM rollout among other nonrecurring items that are detailed in the reconciliation.
Speaker Change: <unk> found in our press release.
Speaker Change: Adjusted EPS excludes an after tax noncash impairment charge of $18 6 million.
Speaker Change: Our eyeglass World brand following the comprehensive fleet review and actions taken.
Speaker Change: Turning next to our balance sheet, we ended the year with a cash balance of approximately $74 million.
Speaker Change: And total liquidity of $368 million incurred.
Speaker Change: Including available capacity from our revolving credit facility as of December 28, our total debt outstanding net of unamortized discount was $350 million and for the trailing 12 months. We ended the year with net debt to adjusted EBITDA of one eight times.
Melissa Rasmussen: As of December 28th, our total debt outstanding net of unamortized discounts was $350 million, and for the trailing 12 months, we ended the year with net debt to adjusted EBITDA of 1.8 times. In 2024, we generated operating cash flow of $134 million and invested $96 million in capital expenditures. primarily driven by investments in new and existing. and Remote Exam Technology. We continue to maintain a strong balance sheet and healthy cash flow to support our growth and capital allocation priorities. In 2025, our first priority with respect to capital allocation will continue to be investing in growth through new store openings and technology investments as we continue to digitize our stores and corporate offices.
Speaker Change: In 2024, we generated operating cash flow of $134 million and.
Speaker Change: And invested $96 million in capital expenditures.
Speaker Change: Primarily driven by investments in new and existing doors Internet exam technology, we continue to maintain a strong balance sheet and healthy cash flow to support our growth and capital allocation priorities.
Speaker Change: In 2025, our first priority with respect to capital allocation, we will continue to be investing in growth through new store opening and technology investments as we continue to digitize our stores and corporate office.
Melissa Rasmussen: Our second priority is on our debt structure, given the May 2025 maturity of our convertible notes of approximately $85 million. As we demonstrated with the repurchase in August, we plan to take fiscally responsible actions with the outstanding balance and are monitoring the markets for future opportunistic actions and other potential strategies.
Speaker Change: Our second priority is on our debt structure, given the May 2025 maturity of our convertible notes of approximately $85 million.
As we demonstrated with the repurchase in August we plan to take fiscally responsible action with the outstanding balance and are monitoring the markets for future opportunistic action and other potential strategy.
Melissa Rasmussen: Before I discuss our outlook, I'll share how we expect to manage anticipated tariffs in 2025 as we have been closely monitoring these fluid developments. Less than 10% of our costs applicable to revenue are directly subject to tariffs from China. Regarding Mexico, we have mitigation plans in place if tariffs are imposed there. Where our exposure relates to our outsourcing relationship with our third party laboratory. Including mitigation plans, we estimate that less than 1% of our costs applicable to revenue are subject to tariffs and mechanisms. Moving now to the discussion of our 2025 outlook, which includes the 53rd week.
Speaker Change: Before I discuss our outlook I'll share, how we expect to manage anticipated tariff in 2025 as we have been closely monitoring these fluids development.
Speaker Change: Less than 10% of our cost applicable to revenue are directly subject to tariffs from China.
Speaker Change: Regarding Mexico, we have mitigation plans in place if tariffs are imposed there.
Speaker Change: Our our exposure relates to our outsourcing relationship with our third Party laboratory.
Speaker Change: Including mitigation plans, we estimate that less than 1% of our cost applicable to revenue are subject to tariffs in Mexico.
Speaker Change: Moving now to the discussion of our 2025 outlook, which includes a 50 <unk> week.
Melissa Rasmussen: We estimate that the 53rd week will add approximately $35 million of net revenue and approximately $3 million of adjusted operating income. In addition, as Reid mentioned, our outlet contemplates the strong performance in January, as well as the recent change in traffic trends we have seen in February. Given the noise with weather, policy changes, and updates in consumer sentiment, we believe it is prudent to widen the range of scenarios underlying our outlet. For our 2025 fiscal year, we currently expect net revenue between $1.901 billion and $1.955 billion. Supported by adjusted comparable store sales growth of 0.5% to 3.5% and new store sales based on our expectation to open approximately 30 to 35 new stores this year.
Speaker Change: We estimate that the 50 <unk> week will add approximately $35 million of net revenue and approximately $3 million of adjusted operating income.
Speaker Change: In addition, as Ray mentioned, our outlook contemplates the strong performance in January as well as the recent change in traffic trends, we have seen in February.
Speaker Change: Given the noise with weather policy changes and updates and consumer sentiment. We believe it is prudent to widen the range of scenarios underlying our outlook.
Speaker Change: For our 2025 fiscal year, we currently expect net revenue between one nine.
Speaker Change: 901 billion and $1 nine by $5 billion.
Speaker Change: Supported by adjusted comparable store sales growth.
Speaker Change: 5% to three 5% and new store sales based on our expectation to open approximately 30% to 35 new stores this year.
Melissa Rasmussen: As a reminder, adjusted comparable store sales growth is calculated on a 52-week comparable basis to prior year. With respect to profitability for 2025, we expect adjusted operating income between $73 million and $88 million, which includes a range for depreciation and amortization of $93 million to $96 million. We expect adjusted diluted EPS to be between $0.52 per share and $0.64 per share, which assumes approximately 79 million weighted average diluted shares outstanding. At the midpoint, this outlook assumes fiscal 2025 adjusted operating margins to increase approximately 50 basis points relative to fiscal 2024. More than entirely driven by SG&A leverage, reflecting the disciplined actions we have taken and will continue to take.
Speaker Change: As a reminder, adjusted comparable store sales growth is calculated on a 52 week comparable basis to the prior year.
Speaker Change: With respect to profitability for 2025, we expect adjusted operating income between $73 million and $88 million.
Speaker Change: Which includes a range for depreciation and amortization of $93 million to $96 million.
Speaker Change: We expect adjusted diluted EPS to be between <unk> 52 per share and 64 per share, which assumes approximately 17 9 million weighted average diluted shares outstanding.
Speaker Change: At the midpoint. This outlook assumes fiscal 2025, adjusted operating margin to increase approximately 50 basis points relative to fiscal 2024.
Speaker Change: More than entirely driven by SG&A deleverage, reflecting the disciplined actions, we have taken and will continue to take.
Melissa Rasmussen: Before I turn the call over to Reed, I wanted to acknowledge the National Vision team as they continue to work tirelessly and embrace change to drive results and execute our mission. We believe the initiatives being put in place are the right actions to take for the health of the business, controlling what can be controlled. While I look forward to my next chapter, I will miss being part of this organization and will be cheering for the team as they continue to position National Vision for long-term. Thank you for your time today.
Reed: Before I turn the call over to Reed I wanted to acknowledge the national vision team as they continue to work tirelessly and embrace change to drive results and execute our initiatives.
Reed: We believe the initiatives being put in place are the right actions to take for the health of the business.
Speaker Change: Controlling what can be controlled.
Speaker Change: While I look forward to the next chapter I will Miss being part of this organization and will be cheering for the tool as they continue to position national vision for long term success.
Speaker Change: Thank you for your time today I will now turn the call over to read before we open the call for questions.
Reid Faz: I will now turn the call over to Reed before we open the call for questions. In summary, we hope you are taking away a greater understanding of our Transformation Gain Plan and the tangibility of how we have been and will continue to bring it to life at National Vision. The first phase of our transformation involves addressing our exam capacity constraints via retention, recruitment, remote, and hybrid remote initiatives. This next phase, which started to impact the fourth quarter, involves significantly heightening segmentation, personalization, and digitization in our messaging, experience, and product offering. We are targeting the segments of our customer base where we've already shown growth and success in recent years, especially managed care, which is now 40% of our customer base and growing at high single-digit comps.
Speaker Change: Right.
Speaker Change: In summary, we hope you are taking away a greater understanding of our transformation game plan and the Tangibilitate of how we have been and will continue to bring it to life at National vision.
Speaker Change: The first phase of our transformation involves addressing our exam capacity constraints via retention recruitment remote and hybrid remote initiatives.
Speaker Change: This next phase, which started to impact the fourth quarter involves significantly heightening segmentation personalization and digitization and our messaging experience and product offerings.
Speaker Change: We are targeting the segments of our customer base, where we've already shown growth and success in recent years, especially managed care, which is now 40% of our customer base customer base and growing at high single digit comps. The segments that are most insulated from today's economic challenges and the segments that are the most valuable to us as they currently represent.
Reid Faz: The segments that are most insulated from today's economic challenges and the segments that are the most valuable to us, as they currently represent 50% of our customers, but a much higher percentage of our sales. We are doing this in ways that we think should broaden our appeal to new potential customers. We're doing this in ways that we believe will allow us to concurrently maintain our historical target of the most price-driven and budget-conscious customers. We're doing this with the help of world-class partners like Accenture, Adobe, and a new, highly digitally-focused ad agency. And we're doing this in a way that is ever watchful of keeping our costs and expenditures under control.
Speaker Change: 50% of our customers, but a much higher percentage of our sales. We are doing this in ways that we think should broaden our appeal to new potential customers. We're doing this in ways that we believe will allow us to concurrently maintain our historical target of the most price driven and budget conscious customers. We're doing this with the help of World class partners like <unk>.
Speaker Change: Center, Adobe and a new highly digitally focused AD agency and we're doing this in a way that is ever watchful of keeping our costs and expenditures under control.
Reid Faz: Most importantly, the organization is embracing this as the right way forward for us to expand and properly grow in 2025 and the years to come. We think our results in the fourth quarter demonstrate encouraging green shoots and momentum that we hope to build upon throughout 2025.
Speaker Change: Most importantly, the organization is embracing this is the right way forward for us to expand and profitably grow in 2025 and the years to come.
Speaker Change: We think our results in the fourth quarter demonstrate encouraging green shoots and momentum that we hope to build upon throughout 2025 and with that I'll open the line for questions.
Unknown Executive: And with that, I'll open the line for questions.
Unknown Executive: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster.
Speaker Change: As a reminder, if you'd like to ask a question at this time. Please press star one one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Yes.
Michael Lasser: Our first question comes from Michael Lasser with UBS. Good morning. Thank you so much for taking my question.
Our first question comes from Michael Lasser with UBS.
Michael Lasser: Good morning. Thank you so much for taking my question can you give us.
Reid Faz: Reid, can you give us a sense for how you have factored in any resources and risks from what seems like a significant pivot, not away from your core, more needs-based customer, to this more moderate, middle-income-type consumer? In addition, how do you balance the expectations of what's probably a higher expectation consumer as you expand the focus for the model? Thank you. Michael, thank you so much for that. You know, the good thing about how we're approaching this is this is a significant part of our current customer base that we're talking about here. So, these are customers who have found us and enjoy the value that we offer.
Speaker Change: Or how you have factored in any resources and risks.
Michael Lasser: It seems like a significant pivot.
Speaker Change: Not away from your core.
Speaker Change: More needs based customer to this more moderate.
Speaker Change: Middle income type consumer.
Speaker Change: In addition, how do you balance the expectations of what's probably a.
Speaker Change: A higher expectation consumer as you expand the focus for the model. Thank you.
Michael Lasser: Michael Thank you so much for that.
Speaker Change: The.
Speaker Change: Good thing about how we're approaching this is this is.
A significant part of our current customer base that we're talking about here. So these are customers, who have found us and and enjoying the value that we offer as we said customers like managed care customers progresses customers and customers who come to us with an RSA got someplace else.
Reid Faz: As we said, you know, customers like managed care customers, progressive customers, and customers who come to us within Rx. They got someplace else to take advantage of our great prices on a wide array of products. So, the fact that we're leveraging what is currently about half of our customer base already brings us a lot of security that this is the right direction. And, you know, these people have been coming to us. They're all three are sort of growing segments. And, what we're trying to do is make the experience ever better for them, you know. And, this is the customer experience work that Alex has been talking about.
Speaker Change: To take advantage of our great prices on a wide array of project product. So.
Speaker Change: The fact that we're we're leveraging what is current are currently about half of our customer base already brings us a lot of security that this is the right direction and these people have been coming to us. They're all three are sort of growing growing segment.
Speaker Change: And what we're trying to do is make the experience ever better for them.
Speaker Change: And this is that customer experience work that Alex has been talking about we are doing this through enhanced training. We're doing this through enhanced product. We're doing this through just really thinking through their customer journeys and how that how they just make it even better for them.
Reid Faz: We're doing this through enhanced training. We're doing this through enhanced product. We're doing this through just really thinking through their customer journeys and how to just make it even better for them. Thank you.
Reid Faz: My follow-up question is, can you give us a little bit more context on what you've seen quarter-to-date? Has it been broad-based, more specific to certain geographies? And if it persists over the course of the year, how should we think about the achievability of your full-year guidance?
Speaker Change: Thank you my follow up question is can you give us a little bit more context on what you've seen quarter to date has been broad based.
Speaker Change: More specific to certain geographies.
Speaker Change: And if it persists over the course of the year, how should we think about the <unk> ability of your full year guidance. Thank you.
Reid Faz: Thank you. I'm sorry, were you talking about a reference to the last two weeks of February? Yes, sir. Yeah, good. Sorry, there was a little breakup in the line there. Yeah, so again, Q4 was really encouraging. We put in a lot of programs mid-quarter and saw them take root, so we're happy with that. And January was quite strong, so we were very encouraged with that. The last two weeks were choppy and a little surprising, so that's why we decided to call that out. We're pretty sure we're not alone in that. We're hearing that from our category.
Speaker Change: I'm sorry, when you talked about I referenced in the last two weeks of February.
Speaker Change: Yes.
Speaker Change: Yes, sorry, if there was a little breakup.
Speaker Change: And in the line there, yes. So again Q4 was really encouraging we put in a lot of programs mid quarter and saw them then take routes and we're happy with that in January was with quite strong. So we were very encouraged with that the last two weeks were choppy and a little surprising. So that's why we decided to call that out we're pretty sure we're not.
Speaker Change: Alone and that we are hearing that from our category. We're hearing that throughout a lot of consumer retail we think our initiatives are the right initiatives, but we just wanted to be a little bit more conservative in our guide given.
Reid Faz: We're hearing that throughout a lot of consumer retail.
Reid Faz: We think our initiatives are the right initiatives, but we just wanted to be a little bit more conservative in our guide, given the oddity of the past two weeks.
Speaker Change: The oddity of capacity two weeks.
Michael Lasser: Thank you very much. Thank you, Michael.
Speaker Change: Thank you very much thank you Michael.
Anthony Chukumba: Our next question comes from Anthony Chukumba with Loop Capital. Morning, thank you for taking my question. So, in terms of I just wanted to clarify, so okay, so the guidance midpoint is for 50 basis points of expansion. And, you know, previously, and I know it was very preliminary, but you previously expected our operating margin to be essentially flat year over year. So I just wanted to understand, is the 50 basis points, is that just the $12 million of cost reduction? Or are there other aspects?
Speaker Change: Our next question comes from Anthony <unk> with loop capital markets.
Anthony: Good morning, Thank you for taking my question.
Speaker Change: So.
Speaker Change: In terms of I just wanted to clarify so okay. So the guidance midpoint is for 50 basis points of expansion in previously and I know, it's very preliminary but.
Speaker Change: Previously expected our operating margin to be essentially flat.
Speaker Change: Year over year, So I just wanted to.
Speaker Change: Understand.
Speaker Change: Is the 50 basis points is that just the $12 million of cost reduction or are there other aspects to it.
Melissa Rasmussen: 0 Hi, Anthony. It's Melissa. Apologies in advance. I'm a little under the weather. Yeah, as far as the 50 basis point expansion, when we had referred to the flat operating margin year over year, that was taking into consideration the things that we had announced at the time. We had talked about our fleet optimization, and we had talked about the incentive compensation grow over. We had also talked about, we expected our initiative to be upside from that. Those were the factors that were incorporated into that discussion. With that, we had also subsequent to that point taken out about $12 million in in reductions in expense, primarily focused on SG&A.
Melissa Rasmussen: Hi, Anthony its Melissa.
Speaker Change: Apologies in advance I'm, a little under the weather.
Speaker Change: Yes, as far as the 50 basis point expansion when we had referred to.
Speaker Change: Flat.
Speaker Change: Flat.
Speaker Change: Operating margin year over year that was taking into consideration the things that we had announced that we had talked about our fleet optimization and we have talked about the incentive compensation. However, we had also talked about we expected our initiative to be upside from that those were the factors that were incorporated in.
Speaker Change: Into that discussion with that we had also subsequent to that point taken out about $12 million in.
Speaker Change: <unk>.
Speaker Change: In reductions in expense, primarily focused on SG&A. So with that that is what gets you to that midpoint is that 50 basis point improvement in.
Melissa Rasmussen: So with that, that is what gets you to that midpoint of that 50 basis point improvement in profitability year over year. That's helpful.
Speaker Change: In profitability year over year.
Reid Faz: And then you also talked about the fact that you now offer remote in over 730 stores.
Speaker Change: Got it that's helpful. And then you also talked about the fact as you now offer more than 700 or over 730 stores.
Reid Faz: What's the plan for the remote rollout in 2024? You know, we'll continue to open where, as laws allow, and that sort of thing as we progress and fill in where we need to. And of course, our new stores in the states where it's allowable will be remote enabled. And this is a balancing act, sort of, as we have retention of doctors, we don't need to use the remote as much, but where we need it, we use it. The nice thing is, and I'd really like to make this clear, we now just find this is just part of our business.
Speaker Change: What's the plan for the remote rollout in 2025.
Speaker Change: We'll continue to open where.
Speaker Change: As laws allow and that sort of thing as we progress and fill in where we need to and of course, our new stores in the states, where it's allowed ROE will be will be remote enabled and this is a balancing act sort of weak as we have retention.
Speaker Change: Doctors, we don't need to use the remote as much but where we need it we use it the nice thing is and I really like that makes this clear. We now define this is just part of our business we rolled it out and we're using it that this is now just an ongoing part of our offering so we're probably not going to be we're talking about.
Reid Faz: We've rolled it out and we're using it, but this is now just an ongoing part of our offering. So we're probably not going to be talking about it in depth a whole lot because we've done it. We've put it in. Got it.
Speaker Change: If you didn't get a whole lot because.
Speaker Change: Because we've done it.
Speaker Change: We put it in.
Anthony Chukumba: Thank you so much.
Speaker Change: Got it thank you so much and Melissa.
Melissa Rasmussen: And, Melissa, good luck on your next opportunity. Thank you, Anthony.
Speaker Change: Good luck on your next opportunity.
Melissa Rasmussen: Thank you Anthony.
Zachary Fadem: Our next question comes from the line of Zachary Fadem with Wells Fargo. Hi, good morning.
Melissa Rasmussen: Our next question comes from the line of Zachary <unk> with Wells Fargo.
Alex Wilkes: This is Taylor Brumberg on for Zach. Can you elaborate on the drivers of comps in 2025 and what is implied in the top and bottom of the guide and any color on cadence expected throughout the year? Thank you. Yeah, good morning. It's Alex. Thanks so much for the question. Yeah, as we look at the composition of comp going into 25, we think it's equal parts traffic and equal parts average ticket. Again, as we mentioned during our prepared statements, we've seen nice growth on ticket from the initiatives that we put in place in Q4, and we're seeing those holds as well as our conversion rates.
Speaker Change: Hi, Good morning. This is Taylor Berg on for Zach can you elaborate on the drivers of comps in 2025, and what was implied in the top and bottom of the guide and any color on cadence expected throughout the year. Thank you.
Speaker Change: Yes. Good morning, it's Alex Thanks, so much for the question, yes, as we look at the composition of comp going into 'twenty. Five we think is equal parts traffic in equal parts average ticket again as we mentioned during our prepared statements. We've seen nice growth I'll take it from the initiatives that we've put in place in Q4, and we're seeing those holes as well as our convert.
Alex Wilkes: We feel incredibly bullish about our ticket and the actions that we've taken there. Again, we started Q1 in January pretty strong. In the last couple of weeks, as we mentioned, we saw wobble in the consumer, but you know, go for it. We're super bullish on what we're going to achieve through both ticket and through customer count growth.
Speaker Change: Right. So we feel incredibly bullish about our our ticket and the actions that we've taken there and again, we started Q1 and generate pretty pretty strong in the last couple of weeks as <unk> mentioned, we saw some some wobble in the consumer but Gulfport, we're super bullish on what we're going to achieve through both ticket and through.
Speaker Change: Customer count growth.
Alex Wilkes: Okay, great. Thank you.
Alex Wilkes: And then for my follow up, how do you think about immigration policy potential impacts and how is that reflected in your guide, if it is reflected in your guide? You know, we see immigration as one of the many factors affecting consumer sentiment out there, and so it's part of the combination package of trying to assess just the direction of the consumer. One factor. Great, thank you.
Speaker Change: Okay, great. Thank you and then for my follow up how do you think about immigration policy potential impacts and how is that reflected in your guide if it is reflected in your guide.
Speaker Change: We see we see immigration is one of the many factors affecting consumer sentiment out there.
Speaker Change: It's part of the combination package package of trying to assess just the direction of the consumer.
Speaker Change: One factor.
Speaker Change: Great. Thank you.
Taylor Brumberg: Thank you, Taylor.
Speaker Change: Thank you Taylor.
Paul Lejuez: Our next question comes from Paul Lejuez with Citi. Hey, everyone.
Speaker Change: Yes.
Speaker Change: Our next question comes from Paul Lajoie with Citi.
Brandon Cheatham: Brandon Cheatham on for Paul. I was wondering, can you break out how you're thinking of managed care in 2025 in terms of top line guidance versus your cash paying customer? You know, you know, we think about managed care is 40% of the business growing high single digits, that would seem to imply if those trends kind of continue, that's roughly like 3%. So I'm just wondering if you can help us parse out managed care versus cash paying in 2025. So, as you know, managed care is now 40% of the business growing at high single digit comps.
Speaker Change: Hey, Brandon Cheatham on for Paul I was wondering can you breakout how youre thinking of managed care.
Speaker Change: In 2025 in terms of topline guidance versus your cash paying customer.
Speaker Change: We think about managed care is 40% of the business is growing high single digits that would seem to imply those trends kind of continue that's roughly like 3%. So I'm. Just wondering if you can help us parse out managed care versus cash paying in 'twenty five.
Speaker Change: So.
Speaker Change: Managed care is now 40% of the business growing at high single digit comps managed care customer.
Reid Faz: Managed care customer is just more insulated from the challenging economic times that we live in, because so much of their purchase is covered by their insurance. We sort of said that we believe this will keep growing. And again, the cash pay consumer is the one that is most challenged. And so we're saying that we think the next milestone is 50% for managed care, but we aren't saying when we think we'll get there. I just want to reinforce, though, even though we're talking about sort of these higher value consumers groups and segments, we still love our core cash pay, budget conscious consumer.
Speaker Change: More insulated from the challenging economic times, we live in and because so much of their purchase is covered by their insurance, we sort of.
Speaker Change: We believe this will keep growing.
Speaker Change: And again the cash pay consumer is the one that is most challenged.
Speaker Change: And so we are saying that we think the next milestone is 50% for managed care, but we arent, saying when we think we'll get there I just want to reinforce though even though we're talking about sort of these higher value consumers.
Speaker Change: <unk> segment, we still love our core cash pay budget conscious consumer we are still there for them and they are still a key part of what we are we just see that opportunity, especially in this economic moment.
Reid Faz: We are still there for them, and they're still a key part of what we are. We just see the opportunity, especially in this economic moment of riding the momentum that we've shown that we can drive with the higher value consumers to us. Got it.
Speaker Change: Writing the momentum that we've shown that we can we can drive.
Speaker Change: With the higher value of consumers to us.
Reid Faz: And my follow up, I just anything in January that made you feel encouraged that, you know, maybe the repurchasing cycle was coming back and then digging in on the last two weeks of February. I understand it's choppy. There's some weather concerns. Were there any differences by geography? I think the West was, you know, not nearly as cold as the rest of the nation. So was the West segment also choppy? So, again, January was quite positive. It was positive on a two-year stack basis also, so that was really encouraging, and we saw it as continued momentum from the programs we put in in the middle of the quarter.
Got it and my follow up just anything in January that made you feel encouraged.
Speaker Change: Maybe the repurchasing cycle was coming back.
Speaker Change: Thank you again on the last two weeks of February I understand it's choppy. There is some weather concerns were there any differences by geography, I think the west was not nearly as cold as the rest of the nation. So.
Speaker Change: The West <unk>.
Speaker Change: Segment also choppy.
Speaker Change: Yes.
Speaker Change: Again January was was quite positive as positive as on a two year stack basis. Also so that was that was a really encouraging and we saw it as continued momentum from the programs we put in in the middle of the quarter and yes in the past two weeks there was some variable geographically and again, we think whether it was a.
Reid Faz: And, yeah, in the past two weeks, there was some variable geographically, and, again, we think weather was a component of the past two weeks. We just aren't ready to say that that was the only component of the past two weeks, so we're just being cautiously prudent. Got it. That's helpful. Thanks very much and good luck.
Speaker Change: The past two weeks, we just arent ready to say that that was the only component of the past two weeks. So we're just being cautiously prudent.
Speaker Change: Got it that's helpful. Thanks, very much and good luck.
Simeon Gutman: Our next question comes from a line of Simeon Gutman with Morgan.
Speaker Change: Our next question comes from the line of Simeon Gutman with Morgan Stanley.
Simeon Gutman: Hello, everyone. I want to ask about the improvement in core EBIT in 25, excluding the extra week. Can you frame for us how much comes from the operating businesses, America's Best, Eyeglass World, versus some of the, I guess, the leeway that you get from the corporate overhead reduction? So just thinking about the sources of upside or growth and EBIT on a core basis?
Simeon Gutman: Hello, everyone I wanted to ask about the improvement in core EBIT in 25, excluding the extra week can you frame for us how much comes from the operating businesses America's Best Eyeglass World versus some of the.
Speaker Change: Yes.
Speaker Change: The leeway or that you get from the corporate overhead reductions I was just thinking about the sources of upside or growth in EBIT on a core basis.
Melissa Rasmussen: Yeah, hey, Simeon. As it relates to the improvement in EBIT year over year, a substantial portion of that improvement is coming from the SG&A takeout that we had talked about, that $12 million of improvement. As we had talked about the overall year over year performance, we had expected that things would be relatively flat when we factored in the initiatives that we had discussed last year. We do expect that we have some upside related to these initiatives that we're putting in place this year, and we expect that we'll continue to see improvement based upon those actions.
Simeon Gutman: Yeah, Hey, Simeon.
Simeon Gutman: It relates to the improvement in EBIT year over year, a substantial portion of that improvement is coming from.
Simeon Gutman: The SG&A takeout that we had talked about that $12 million of improvement as we had talked about the overall.
Simeon Gutman: Year over year performance, we had expected that things would be relatively flat when we factored in the initiatives that we have discussed last year. We do expect that we have some upside related to these initiatives that we're putting in place this year.
Simeon Gutman: And we expect that we'll continue to see improvement based upon those action with that we continue to mitigate costs, where we can and be financially prudent in taking out expenses, where it makes sense to do so without stifling ongoing growth.
Melissa Rasmussen: With that, we continue to mitigate costs where we can and be financially prudent in taking out expenses where it makes sense to do so without cycling ongoing growth.
Melissa Rasmussen: That's helpful. Is there a way to quantify... The comp that's either required on either side of business, America's best or eyeglass world, where the margin expansion, irrespective, I guess, yeah, there is some leverage and gross margins as well. But so what's the comp that allows the margins of each of the individual segments to start levering or to start expanding? Well, what we had historically talked about was a mid-single-digit. However, we had also talked about taking actions to ensure that we could leverage on less than a mid-single-digit current. We are looking at it holistically from a business.
Simeon Gutman: Yeah.
Speaker Change: That's helpful is there a way to quantify.
Speaker Change: The comp that's either required on either side of the business America's best or Eyeglass World, where the margin expansion Aerospace I guess, yes. There is some leverage in gross margins as well, but so what's the comp that allows the margins of each of the individual segments to start levering or to start expanding.
Speaker Change: Well, what we had historically talked about with a mid single digit. However, we had also talked about taking.
Speaker Change: Actions to ensure that we can leverage on less than a mid single digit curve. We are looking at it holistically from a business obviously America's best is our larger of the two brands and the movement within that brand drive more profitability just Bryan this year size at the end of the <unk>.
Melissa Rasmussen: Obviously, American Vest is our larger of the two brands, and the movement within that brand drives more profitability just from the sheer size of the brand. With that, we'll put more information out as the year unfolds between brands, but we do expect that our Eyeglass World initiative will provide some upside as well. However, again, American Vest is the larger of the two brands.
Speaker Change: And with that.
Speaker Change: We'll put more information out as the year unfold between brands, but we do expect that our eyeglass world initiatives will provide some upside as well. However, again America's best is the larger of the two brands.
Simeon Gutman: Great. Thanks.
Unknown Executive: Good luck, everyone.
Speaker Change: Great. Thanks, Good luck, everyone take care.
Unknown Executive: Take care.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Megan Holton: Our next question comes from Brian Tanquilut with Jeff. Good morning, this is Megan Holton for Brian.
Speaker Change: Our next.
Speaker Change: Question comes from Brian <unk> with Jefferies.
Speaker Change: Good morning. This is meghan hold on for Brian just wanted to start with thanks and good luck two months on your next adventure.
Reid Faz: Just want to start with thanks and good luck to Melissa on your next adventure. The question we want to ask is about Tocu BioAge. How is this reimbursed? And is this something that could gain traction with commercial insurance plans? And then as a quick follow up to the managed care question that was asked earlier, how are you proactively driving that penetration to get to that 50% target? Good.
Speaker Change: The question, where you wanted to ask is about <unk>. How is this reimbursement is this something that could gain traction with commercial insurance plans and then as a quick follow up to the managed care question that was asked earlier, how are you proactively driving that penetration to get to that 50% target.
Reid Faz: Okay, I'll take the first part, and then Alex will take the managed care piece. So, Tocu BioAge is sort of our first step into the world of using AI to scan for a variety of diseases, disease states. And these are, you know, the key thing that Tocu is trying to do is get FDA approval to their AI scan for cardiovascular issue assessment and kidney issue assessment. While we await that, we're trying to build some muscle memory by offering a product in our stores where a patient or a customer can get an assessment of their biological age, biological age as opposed to chronological age.
Speaker Change: Okay I'll take the first part and then Alex will take the managed care piece. So toco bio age is sort of our our first step into the world of using AI to scan for a variety of diseases.
Speaker Change: The disease States and these are.
Speaker Change: The key thing that token is trying to do is get FDA approval to their AI scan for cardiovascular issue assessment and kidney issue assessment.
Speaker Change: While we await that we're trying to build some muscle memory by offering a product.
Speaker Change: In our stores, where we're Ah patients in our customer can get an assessment of their biological AG biological agents opposed to chronological age. This is something that you read about in the press a lot that people have a lot of interest in the wall Street journal's covered this sort of thing a lot part of the longevity movement and so.
Reid Faz: This is something that you read about in the press a lot that people have a lot of interest in. The Wall Street Journal has covered this sort of thing a lot, part of the longevity movement. And so people are paying to get that assessment. It is not reimbursable. There's no insurance. This is all consumer cash pay and we've been pleased with the uptake. But primarily, this is, let's develop the muscle memory on how to use AI scans of the retinal images.
Speaker Change: So people are paying to get that assessment it is not.
Speaker Change: <unk> of all if there is no insurance. This is all consumer cash pay and we've been pleased with the uptake, but primarily this is let's develop the muscle memory on how to use AI scans retinal images, we taken all of our stores.
Reid Faz: We've taken all our.
Alex Wilkes: Great, thanks, and I'll answer the managed care question. So there's, think about two primary ways that we're going to grow the managed care consumer. The first is, as we look to personalize our marketing capabilities, we're going to be able to talk to that managed care consumer with a specific managed care message personalized to them. Again, this is something we haven't been able to do in the past. So being able to have a very specific message to a consumer with that type of plan and specific to their plan design is going to be a huge advantage for us.
Speaker Change: Great, Thanks, and I'll answer the.
Speaker Change: The managed care question so thanks.
Speaker Change: Thanks, Bob two primary ways that we're going to grow the managed care consumer. The first is as we look to personalize our marketing capabilities, we're going to be able to talk to that managed care consumer with a specific managed care message personalized to them again. This is something we haven't been able to do in the past so being able to have a very specific.
Speaker Change: Message to a consumer with that type of that type of plan and specific to their plan design is going to be a huge advantage for us. The second thing is as we begin to evolve our product and product offerings. We know we're going to make investments in products and capabilities that are more attractive to the managed care consumer so not only are we going to.
Alex Wilkes: The second thing is, as we begin to evolve our product and product offerings, we know we're going to make investments in products and capabilities that are more attractive to the managed care consumer. So not only are we going to be able to talk to them differently, we're going to be able to offer them different experiences. And we think those are two significant ways that we're going to increase our management. And Megan, it's just a great example of when we talked about segmentation, personalization, and digitization in our messaging, customer experience, and product offerings. Managed Care is a great example of how we're going to do that.
Speaker Change: Able to talk to them definitely we're going to be able to offer them different experiences and we think those are two significant ways that we're going to increase our managed vision care consumer base and Meg and it's just a great example of when we talked about segmentation personalization and digitization in our messaging customer experience and product offering managed care is a great example.
Speaker Change: We're going to do that.
Unknown Executive: Got it.
Unknown Executive: Thank you.
Speaker Change: Got it thank you.
Speaker Change: Yes.
Adrienne Yih: Our next question comes from Adrienne Yih with Barclays. Great. Nice to see the progress. And Melissa, congrats and thanks for all the help over the years.
Speaker Change: Our next question comes from Adrienne <unk> with Barclays.
Speaker Change: Great nice to see the progress and Melissa Congrats and thanks for all the help over the years.
Melissa Rasmussen: My question is, again, on the managed care piece of this, we've talked about kind of how the transaction size is, you know, larger versus the cash pay, but the margin implications may not be as profitable. So, can you talk about the gross margin drivers that we've seen over the past 3 quarters in particular? A lot of that obviously has to do with the Walmart exit, but where can the gross margins go from here? And what would the drivers be?
My question is.
Speaker Change: Then on the managed care piece of that.
Speaker Change: We've talked about kind of how the transaction size is larger versus the cash pay but the margin implications may not be as.
Profitable. So can you talk about the gross margin drivers that we've seen over the past three quarters in particular, a lot of that obviously has to do with the Walmart exit.
Speaker Change: But where can the gross margins go from here and what would the drivers today and then secondly on the store rationalization can you talk about how many stores would be.
Melissa Rasmussen: And then secondly, on the store rationalization, can you talk about how many stores would be of those would be eyeglass store closures versus AD? Thanks so much.
Speaker Change: With the eyeglass store closures versus Andy Thanks, so much.
Melissa Rasmussen: Hi, Adrienne. Thank you. Yes, as it relates to gross margin, there's been a lot of factors in gross margin in 2024. With that, obviously, the margin profile changes with the Walmart exit, with the AC lens wind down, and we have basically our core business that remains. With that, you see some movement between quarters based upon specials that we were running or promotions that we were running, where if we were running a one-pair offer versus a two-pair offer, that margin profile looks a bit different. When we released our guidance for 2025, margin is pretty consistent year over year.
Speaker Change: Hi, Adrienne thank you.
Speaker Change: Yes, as it relates to the gross margin there has been a lot of <unk>.
Speaker Change: Factors in gross margin in 2020 or with that obviously the margin profile changes with the Walmart exit with the AC lens lines down.
Speaker Change: We have basically our core business that remains with that you see some movement between quarters based upon specials that we were running our promotions that we were running where if we are running a one peer offer versus acute care offer that margin profile looks a bit different when we really.
Speaker Change: <unk> our guidance for 2025 margin is pretty consistent year over year. There is some slight deleverage, but we'll make that up.
Melissa Rasmussen: There's some slight deleverage, but we'll make that up as we progress through the year. We have – excuse me. As we think about our fleet closures, that impacts more of our operating margins than our gross margin. The November press release that we had put out related to our fleet optimization has the details that we expected for the revenue reduction, as well as the operating margin reduction based on those closures. As we go forward with 2025, we expect that by quarter, we'll be largely consistent with how we were in 2024, as far as the quarter makeup.
Speaker Change: We progressed through the year we have.
Excuse me.
Speaker Change: We think about our fleet closures that impact more of our operating margin and our gross margin.
Speaker Change: November press release that we had put out related to our fleet optimization has the details that we expected for the revenue.
Speaker Change: Reduction as well as the operating.
Speaker Change: Margin reduction based on the Ahmed pleasures.
Speaker Change: As we go forward with 2025, we expect that by quarter will be largely consistent with how we were in 2024 as far as the quarter makeup. However that will be based on a continuing operations basis.
Melissa Rasmussen: However, that would be based on a continuing operations basis.
Melissa Rasmussen: Okay, and just very quickly, there's no issue with the, you're not that leveraged to the Easter or spring break kind of March to April transition based on what you said. With spring break, we don't typically see a significant change based upon spring break. Our historical seasonality periods, we have, you know, managed care at the beginning of the year, the rush at the end of the year. We have a slight bump with back to school season. Those are really what our busy periods are. And with that spring break, sometimes you'll have kids coming in because they're out of school.
Speaker Change: Okay.
Speaker Change: Okay, and just very quickly there is no issue with that youre not that leveraged to the Easter spring break kind of March to April transition.
Speaker Change: On what you said.
Speaker Change: With spring break we don't typically see a significant change based recurrent spring break our historical seasonality period, we have.
Speaker Change: Managed care at the beginning of the year the rush at the end of the year, we have a slight bump.
Speaker Change: With back to school season, those are really what our.
Speaker Change: Busy periods are and with that spring break sometimes youll have kids coming in because they are out of school, but for the most part those other seasons that I, just mentioned or where do we have high seasonality.
Melissa Rasmussen: But for the most part, those other seasons that I just mentioned are where we have high seasonality. Perfect.
Melissa Rasmussen: And the store closures. Thank you very much. The store closures for 2025, we expect that we'll still have three American Best stores closing and Fred Meyer will be closing nine stores. Those are primarily going to be focused in the first quarter for Fred Meyer. And again, with that, the release that we put out in November has the detail of the revenue reduction and then the operating margin improvement based upon those closures. Great. Thank you very much. Best of luck. Thank you.
Speaker Change: Perfect and the store closures. Thank you very much.
Speaker Change: The store closures for 2025, we expect that we'll still have three America's best stores closing and Fred Meyer, we will be closing.
Speaker Change: Stores those are primarily going to be focused in this first quarter for Fred Meyer.
Speaker Change: And again with that release that we put out in November has the detail of the revenue reduction in the operating margin improvement based upon.
Speaker Change: Measures.
Speaker Change: Great. Thank you very much and best of luck.
Speaker Change: Thank you.
Melissa Rasmussen: Our next question comes from Molly Baum with Bank of America. Hi, thanks so much for taking my question. So I just wanted to get a little bit of additional color on the optometrist recruiting. I know you mentioned that for the third year now, you've recruited at least 10% of the graduating class. But, you know, in 2Q this year, you had also talked about a little bit of a softer than expected optometrist recruiting for the year. So can you just kind of talk about where you stand in that process, what your expectations are for 2025? And then maybe at a higher level, you know, do you need to recruit as many doctors now that you have kind of increasing penetration of remote?
Speaker Change: Our next question comes from Molly Baum with Bank of America.
Molly Baum: Hi, Thanks, so much for taking my question.
Molly Baum: So I just wanted to get a little bit of additional color on the optometrist recruiting I know you mentioned that for the third year now you've recruited at least 10% of the graduating class.
Molly Baum: But.
Molly Baum: And <unk>. This year you had also talked about a little bit of a softer than expected optometrist recruiting for the year. So.
Molly Baum: So can you just kind of talk about where you stand in that process. What your expectations are for 2025, and then maybe at a higher level do.
Molly Baum: Do you need to recruit as many doctors now that you have kind of increasing penetration of remote thank you.
Molly Baum: Thank you.
Reid Faz: Great, Molly, great, great questions. Yeah, on the on the recruitment side. So, yes, we third year in a row, ten percent of the students. We really like that. I think it really shows that our model, our reputation, our brand, our offering and the flexibility programs that we put in place a while ago are really taking hold with the students. Good observation, Molly, that we were sort of, I think it was mid year talking about recruitment being a little behind where we wanted to be and the team rallied. It was great that the team rallied and stepped up and we ended in a healthy place there.
Molly Baum: Great great great questions.
Molly Baum: On the recruitment side.
Molly Baum: Yes, we third year in a row, 10% of the students we really like that I think it really shows that our model or our reputation our brand our offering and the flexibility programs that we put in place a while ago are really taking hold with the students.
Molly Baum: Good observation Molly.
Molly Baum: Sure.
Molly Baum: That we were sort of I think it was mid year talking about.
Molly Baum: Recruitment being a little behind.
Molly Baum: We want it to be and the team rallied it was great. The team rallied and stepped up and we ended in a healthy place there.
Reid Faz: So that was good. And yes, on the remote side, we are sort of using remote doctors and learning how to adjust to the right levels. Again, it's now only twelve percent of exams, but it does provide us a lot more flexibility. We do like, sort of have been leaning towards live doctors, but the remote is the thing that allows us to balance it now in a variety of good ways. So, as I hope you're taking away that we both ended the year and entered the year in an encouraging place relative to exam capacity. And it's been a lot of work over the years getting to that.
Molly Baum: That was good and and.
Molly Baum: And yes on the remote side, we are instead of using remote doctors and learning how to adjust to the right levels again, it's now only 12% of exams, but it does provide us a lot more flexibility we do like <unk>.
Molly Baum: <unk> have been leaning toward life doctors, but the remote is the thing that allows us to do to balance it now in a variety of a good way so.
Molly Baum: I Hope you were taken away that we both ended the year and entered the year and an encouraging place relative to extend capacity and it's been up a lot of work over the years getting to that end, we're pleased to be in the position. We're in now.
Molly Baum: And we're pleased to be in the position. We're in now. Got it. Thanks so much. That's it for me. Thank you.
Molly Baum: Got it thanks, so much that's it from me.
Molly Baum: Thank you.
Unknown Executive: That concludes today's question and answer session.
That concludes today's question and answer session I would like to turn the call back to <unk> for closing remarks.
Reid Faz: I'd like to turn the call back to Reed for closing remarks. Good. Elizabeth, thank you so much for your help with this and thank you all for your time and attention to the call and to our business. We look forward to updating you on the progress of our transformation and our Q1 release in May. Thank you all so much.
Molly Baum: Good I listen thank you so much for your help with US and thank you all for your time and attention they call arm to our to our business. We look forward to updating you on the progress of our transformation and our Q1 release in May. Thank you all so much.
Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.
Molly Baum: This concludes today's conference call. Thank you for participating you may now disconnect.
Molly Baum: Okay.