THIRD QUARTER 2020 November 9, 2020
Q3 2020 Highlights Strong performance across Retail & Wholesale business • Retail brand comparable sales growth of +8.3%, the highest in 9 years • Stabilization of Wholesale business with total Wholesale sales decline of 0.8% or 1.6% decline in constant currency • Adjusted EPS of $0.10, an increase of $0.38 per share year over year • Adjusted EBITDA increased almost threefold to $49.2 million 2
Q3 2020 Retail Performance Update Highest comp performance in 9 years • Total Retail sales declined 1.3% or 1.5% decline in constant currency • Q3 brand comparable sales up 8.3%, the highest comparable store sales growth in 9 years ‒ E-commerce and digitally enabled sales grew 36.0% including BOPIS, curbside pickup, and same day delivery, reflecting the expanded fulfillment options for customers ‒ Double digit sales growth in core categories particularly in balloon, birthday and entertaining • 8.3% brand comparable sales offset primarily by: ‒ Strategic reduction in Party City store count that resulted in 739 Party City stores in Q3 2020 versus 843 stores in Q3 2019 and includes ‒ The divestiture of 65 Canadian retail stores in October 2019 ‒ The impact of 76 store closures from the store optimization program throughout 2019 and 2020 and strategic reduction of Halloween City pop-up stores 3
Q3 2020 Wholesale Performance Update Wholesale business demonstrated strong resiliency and stabilized • Total Wholesale sales declined 0.8% or declined 1.6% constant currency ‒ The sales improvement in Q3 is encouraging as the franchise customer volume returned to more normalized levels ‒ Strength in Canadian wholesale business and Anagram metallic balloon business delivered solid growth • Anagram balloon business momentum continued with third party sales up 22.1% ‒ Anagram’s innovative designs and market strength have resulted in a particularly strong recovery ‒ Overall Anagram EBITDA increased by $7.5 million or 164% over last year driven by strong sales leverage 4
Halloween Season and October Update Better than expected Halloween and October results • Halloween was planned conservatively given the extraordinary environment as a result of the pandemic and election uncertainty • For the month of October, total brand comps were down 2.9%, with Halloween comp sales down 12.9% partially offset by continued growth in core categories, an encouraging indicator of underlying business strength • Dramatically improved Halloween go-to market strategy, including significant improvements to assortment, in-store merchandising, pricing, marketing and digital experience, as well as the in- store customer experience, including new curbside pickup and delivery options helped drive results • Within the Halloween categories, our Décor business saw positive growth while Kids and Licensed Costumes and Costume Accessories were negatively impacted by the lack of kid’s activities and the postponement of most licensed properties into the future • Total October Retail revenue decline of approximately 16.0% was attributable to: ‒ Strategic decrease in total corporate stores with 740 Party City locations vs. 778 in the prior year ‒ Operated 25 Halloween City pop-up stores vs 256 in the same period last year 5
Advancing Strategic Initiatives Agility and discipline helped drive results #1 - Developing a more relevant in-store experience − Opened 13 Next Gen stores since June including three original pilot stores, five Las Vegas stores, three Kansas City stores and two new stores recently opened in North Carolina and Alaska − The new customer and associate experience in Next Gen store format addresses friction points that exist in our legacy format and has enabled us to implement easy shopping experience enhancements #2 - Win in balloons − Focal point of growth strategy − Unmatched product breadth and category leading innovation in product, do-it-yourself options with “how-to” guidelines − New digital engagement − New access points with additional fulfillment options through curbside pick-up and delivery • Buying balloons online with the ability to pick up in store, at curbside or same day delivery is increasing balloon demand 6
Advancing Strategic Initiatives #3 - Address price value perception in key categories − Since fall of 2019, we have reduced Party City retail prices on approximately 9,400 SKUs, almost one third of the total current active SKU count − The customer has noticed and responded favorably, with unit sales volume increasing as projected − The price reductions were offset by elimination of previous ineffective promotional offers driving increased enterprise margin dollars and retail margin rate expansion #4 - Improve our customer engagement selling culture − Dramatic shift in digital content including new, more relevant content formats, carefully curated product assortments, and interesting new technology has driven growth in customer engagement as well as online conversion rates #5 - Build on our omni-channel platform − BOPIS/curbside and same-day-delivery grew 278% in Q3, reflecting our omni-channel capabilities which are becoming core to our customer experience − Rolled out an enhanced curbside delivery experience in Q3 in all stores, which creates a more intuitive and efficient experience for our customers − Improved technology for delivery process and expanded last-mile delivery partner network improving customer experience 7
Key Takeaways • Retail brand comparable sales growth of +8.3% • North American ecommerce and digitally enabled sales growth of 36.0% driven by expanded fulfillment options for customers • We are making strides on increasing our relevancy, evident in the core business category growth • Core business strength continued into October and demonstrates the strength and resiliency of our underlying business • Better than expected Halloween and October performance • Stabilization of Wholesale business
FINANCIAL SUMMARY 9
Q3 2020 Financial Summary Q3 2020 Actual Total Revenues $533.8 million Brand Comp 8.3% North America E-comm Including BOPIS, 36.0% curbside pickup and same day delivery Adjusted EBITDA* $49.2 million GAAP Net Income (Loss) $239.7 million Adjusted Net Income (Loss)* $11.0 million GAAP EPS $2.24 Adjusted EPS* $0.10 Free Cash Flow** $35.4 million Party City Corporate Stores 739 Halloween City Stores 25 *Please refer to appendix for reconciliation of GAAP to Non-GAAP measures **Free cash flow defined as Adjusted EBITDA less capital expenditures 10
Q3 2020 Revenue Performance Total Reported Revenues Decreased 1.2% and 1.6% in Constant Currency Wholesale Retail Total Net Sales Growth -1.3% Revenue Decline -0.8% Constant Currency Decline -1.5% Constant Currency Decline -1.6% Domestic Comparable Brand Sales 8.3% Revenue Decline -12.1% International North America Digitally Enabled Sales 36.0% Growth Including BOPIS* * Includes curbside pickup and delivery Revenue Growth 2.3% Constant Currency Growth 0.6% 11
Balance Sheet and Free Cash Flow Sept 30, 2020 Dec 31, 2019 Sept 30, 2019 Cash $171 million $35 million $35 million Inventories, net $630 million $658 million $760 million Accounts Payable $180 million $152 million $140 million Total Principal Debt* $1,323 million $1,669 million $2,004 million Leverage Ratio** 9.6x 6.2x 5.9x LTM Free Cash Flow*** $90 million $207 million $273 million *Net of cash **Defined as principal debt (net of cash) to adjusted EBITDA ***Free cash flow defined as Adjusted EBITDA less capital expenditures 12
Bridge of Balance Sheet Debt to Principal Balance of Debt Party City Anagram Holdings, LLC PCHI Consolidated Credit Group September 30, September 30, September 30, December 31, September 30, 2020 2020 2020 2019 2019 Balance sheet debt, net of deferred financing costs $ 1,349,512 $ 303,062 $ 1,652,574 $ 1,704,317 $ 2,038,613 Less: Future interest payments 50,172 108,376 158,548 - - Principal balance of debt outstanding, net of deferred financing costs 1,299,340 194,686 1,494,026 1,704,317 2,038,613 Less: Cash 150,352 20,210 170,562 34,917 34,572 Principal balance of debt net of cash $ 1,148,988 $ 174,476 $ 1,323,464 $ 1,669,400 $ 2,004,041 13
Outlook Q4 Outlook 2020 Revenue $675 to $695 million Brand Comparable Sales Flat to down LSD GAAP Net Income $30 to $37 million GAAP Diluted EPS $0.28 to $0.35 Adjusted EBITDA* $80 to $90 million Adjusted Net Income * $33 to $40 million Adjusted Diluted EPS* $0.31 to $0.37 Interest expense ~$15 million; cash interest payments ~$9 million D&A ~$19 million ~$76 million Capital Expenditures ~ $13 to $18 million $45 to $50 million Ending Corp Store Count ~740 stores Principal balance of debt, ~$1.3 billion net of cash * Please refer to appendix for reconciliation of GAAP to Non-GAAP measures ** Fiscal 2020 will contain an additional, non-comparable “53rd week” in the fourth quarter. The 53rd week is expected to contribute approximately $35 million in sales, approximately $7 million in Adjusted EBITDA, and approximately $0.05 in adjusted diluted EPS ***This outlook is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic 14
APPENDIX 15
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