GNC - Seeking Alpha
29
GNC Morgan Stanley – Leveraged Finance Conference June 6, 2018
Transcript of GNC - Seeking Alpha
GNC Morgan Stanley – Leveraged Finance Conference
June 6, 2018
Disclaimer THIS PRESENTATION INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS
INCLUDE STATEMENTS THAT MAY RELATE TO OUR PLANS, OBJECTIVES, GOALS, STRATEGIES, FUTURE EVENTS, FUTURE REVENUES OR PERFORMANCE, CAPITAL
EXPENDITURES, FINANCING NEEDS AND OTHER INFORMATION THAT IS NOT HISTORICAL INFORMATION. FORWARD-LOOKING STATEMENTS CAN OFTEN BE
IDENTIFIED BY THE USE OF TERMINOLOGY SUCH AS “SUBJECT TO,” “BELIEVE,” “ANTICIPATE,” “PLAN,” “POTENTIAL,” “PREDICT,” “EXPECT,” “INTEND,” “ESTIMATE,”
“PROJECT,” “MAY,” “WILL,” “SHOULD,” “WOULD,” “CONTINUE,” “SEEK,” “COULD,” “CAN,” “THINK,” THE NEGATIVES THEREOF, VARIATIONS THEREON AND SIMILAR
EXPRESSIONS, OR BY DISCUSSIONS OF STRATEGY. ALL FORWARD-LOOKING STATEMENTS, INCLUDING, WITHOUT LIMITATION, OUR EXAMINATION OF HISTORICAL
OPERATING TRENDS, ARE BASED UPON OUR CURRENT EXPECTATIONS AND VARIOUS ASSUMPTIONS. WE BELIEVE THERE IS A REASONABLE BASIS FOR OUR
EXPECTATIONS AND BELIEFS, BUT THEY ARE INHERENTLY UNCERTAIN. WE MAY NOT REALIZE OUR EXPECTATIONS, AND OUR BELIEFS MAY NOT PROVE CORRECT. A
DETAILED DISCUSSION OF RISK AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS AND EVENTS TO DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING
STATEMENTS IS INCLUDED IN THE SECTION TITLED “RISK FACTORS” IN OUR 2017 10-K. CONSEQUENTLY, FORWARD-LOOKING STATEMENTS SHOULD BE REGARDED
SOLELY AS OUR CURRENT PLANS, ESTIMATES AND BELIEFS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. WE CANNOT
GUARANTEE FUTURE RESULTS, EVENTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PRESENTATION ARE MADE AS OF ITS DATE. WE DO NOT UNDERTAKE AND SPECIFICALLY DECLINE ANY OBLIGATION TO UPDATE, REPUBLISH OR REVISE FORWARD-
LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES OR TO REFLECT THE OCCURRENCES OF UNANTICIPATED EVENTS.
THIS PRESENTATION INCLUDES NON-GAAP FINANCIAL MEASURES BECAUSE THE COMPANY BELIEVES THEY REPRESENT AN EFFECTIVE SUPPLEMENTAL MEANS BY
WHICH TO MEASURE THE COMPANY’S OPERATING PERFORMANCE. HOWEVER, THESE MEASURES ARE NOT MEASUREMENTS OF THE COMPANY’S PERFORMANCE
UNDER GAAP AND SHOULD NOT BE CONSIDERED AS ALTERNATIVES TO EARNINGS PER SHARE, NET INCOME OR ANY OTHER PERFORMANCE MEASURES DERIVED IN
ACCORDANCE WITH GAAP, OR AS AN ALTERNATIVE TO GAAP CASH FLOW FROM OPERATING ACTIVITIES, OR AS A MEASURE OF THE COMPANY’S PROFITABILITY OR
LIQUIDITY. FOR MORE INFORMATION, SEE THE RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AVAILABLE AT THE END OF THIS PRESENTATION.
THIS PRESENTATION IS NOT AN OFFER TO SELL SECURITIES AND IT IS NOT SOLICITING OFFERS TO BUY SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE
IS NOT PERMITTED. ANY OFFERING OF SECURITIES WILL ONLY BE MADE IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE SEC
REGULATIONS, OR AN EXEMPTION THEREFROM.
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I. Strategic Highlights
3
Strategic Highlights
4
Operating Improvements Gaining Traction 1
Differentiated Brand, Products and Customer Experience 3
Attractive and Loyal Customer Base 4
Strong Free-Cash-Flow Profile 6
Highly Experience and Committed Management Team 7
Favorable Industry Dynamics 2
Diversified and flexible store portfolio 5
Operating Improvements Gaining Traction In December 2016, GNC launched its One New GNC strategy to refocus the business around GNC’s core strengths
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1
Then Now
Customer Experience
Over emphasis on promotional activity
Inconsistent associate knowledge and capabilities
Legacy POS and inventory management systems
Product depth / selection Trusted advisors – training associates in solutions-
based selling Technology: new registers, tablets and mobile
app including loyalty and personalization functionality
Inventory management: improved in-stock position
Pricing & Loyalty
Multiple pricing structures across channels and membership levels
Various membership levels with unclear benefits
Single price for everyone Lower prices throughout the store Free rewards loyalty program (myGNC rewards) Clarifying our value proposition Increased customer data and insights
Product Innovation
Reformulation and line extensions Limited vendor selection Less trend focused
New product & brand launches throughout 2017 ROI driven customer acquisition Includes new vendor relationships Increased focus on driving traffic
Marketing Multiple strategies and customer
targets Limited products
Targeted marketing utilizing 10+ million customer database
Exclusive products Expanded GNC brand offering Online marketing: paid search, SEO, display Enhanced social media Targeted marketing leveraging 10+ million
customer database
Results Driving improved comps
Increased efficiency in marketing and advertising spend
Shift toward higher margin GNC branded products
Improved customer retention and share of wallet
Three straight quarters of positive same store sales, driven by stabilizing domestic retail business and strength in GNC.com1
Source: Company filings and management.
1 GNC quarterly numbers per company disclosure.
Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1
Domestic Retail SSS
(1.9%) (3.4%) (6.5%) (6.6%) (4.5%) (3.6%) (0.5%) (1.2%) 0.2% (1.4%) (1.2%)
GNC.com Contribution (0.4%) (0.5%) (2.1%) (4.7%) (1.8%) (0.3%) (0.4%) 2.5% 5.5% 1.6% 1.7%
Total Same Store Sales (2.3%) (3.9%) (8.6%) (11.3%) (6.3%) (3.9%) (0.9%) 1.3% 5.7% 0.2% 0.5%
2016 2017
1
One New GNC Launch
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Operating Improvements Gaining Traction Strategy is already driving noticeable improvement with more to come
2018
GNC.com 2017 comp was 22%; Q1’ 2018 comp was 22% driven by (1) Amazon storefront launch in early 2017 and (2) GNC.com initiatives such as subscription services and expanded aisle
Transaction growth in 2017 was nearly 12% driven by the One New GNC refinements to loyalty, pricing and promotions
Operating Improvements Gaining Traction One New GNC strategy is already driving noticeable improvement with more to come
GNC brand mix strategies
Opportunity to rationalize inventory
Mix shift towards proprietary GNC products with meaningfully higher margin profile would drive higher operating profit – every 1% improvement in GNC brand mix drives $1 to $3mm incremental margin
Defined owned brands that will be targets of marketing focus and spend (Beyond Raw, AMP, Total Lean, GNC Vitapaks)
Compare & Save in-store & external marketing initiative to communicate superiority vs. specific 3rd party leaders
In-store sampling of GNC brand newness, limited editions and hero categories
Cash-wrap strategy to more effectively utilize impulse register area to highlight, sample, and sell GNC brands – increase basket size & attachment rate
Source: Company filings and management 1 Includes U.S. company-owned and franchised stores, GNC.com and wholesale partners. 2 Sales and inventory adjusted in all quarters for impact of revenue recognition standard effective 1/1/18.
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1
48%
54% 57% 57% 55%
52% 50% 52%
46% 43% 43% 45%
48%
50%
30%
40%
50%
60%
70%
2015 2016 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1
% of system-wide retail product sales1
One New GNC Launch
GNC-branded 3rd Party
Management sees a path to further inventory reductions
Segmentation – evaluating the right inventory categories and quantity by store customer demographics to achieve efficiencies and appropriate ROI
Vendor promoted sell-down and return to vendor initiatives
Implementing core disciplines – vendor ship windows, concentrating on reducing weeks of supply and reducing lead times
Optimizing reordering process and store delivery frequency to minimize out-of-stock inventory
Improving inventory management of non-core decentralized entities
19.8%
21.9% 22.7%
21.9%
20.5% 19.6%
20.9%
18%
20%
22%
24%
2015 2016 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18
Inventory % of LTM Sales2 One New GNC Launch
Inventory rationalization initiatives expected to reduce inventory in-line with pre-2015 levels
Favorable Industry Dynamics Broad momentum in the health & wellness space will continue driving growth in an already multi-billion dollar nutritional supplement market
Health &Wellness Mega Trends
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Total U.S. Supplement Sales by Category ($ in bn)
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$23bn
$41bn
$53bn
2006 2016 2020E
5.0%
8.3%
6.6%
7.3% 2006–2016 CAGR
2016–2020 CAGR
by Category Focus on
Self-Care due to Rising
Healthcare Costs
Rising Obesity Rates
Increase in Specialist
Diets
Scientific Substantiation of Supplement
Benefits
Aging Population
Increased Participation of
Millennials
Global Emergence of
the Middle Class Focused
on Healthy Living
Scientific Substantiation
of Supplement Benefits
Consumer access to and desire for health related
knowledge
Physician Support of Supplement
Use
Lifestyle
Demographics
Consumer Education
& Engagement
Vitamins
Herbs & Botanicals
Sports Nutrition
Meal Replacements
2016–2020 CAGR
6.2%
6.2%
Specialty / Other
Minerals 5.1%
6.0%
37%
27%
16%
9%
6%
5%
Channel GNC Other
Examples Channel Mix % of ~$41bn
U.S. Supplement Sales 2016 – 2020 Sales CAGR
% of Total Natural / Specially Sales by Product Category
GNC Market Share
Specialty Retail & Natural
~$15bn
Mass Market ~$11bn
Multi-Level / Network
Marketing ~$7bn
Practitioner ~$4bn
Internet ~$2bn
Mail & Radio ~$2bn
Favorable Industry Dynamics GNC is favorably positioned in the large and growing specialty retail & natural channel as well as the high growth internet channel
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U.S. Supplement Industry by Channel
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6.5%
5.4%
5.5%
7.3%
10.0%
3.3%
35%
19%
18%
16%
9% 3%
Specialty Retail & Natural Channel by Category
Meal Replacements
Minerals
Herbs and Botanicals
Specialty / Other
Sports Nutrition
Vitamins
Within the Specialty / Natural Channel, GNC is a leader in Sports Nutrition with significant
opportunity in Vitamins
1% 2%
3%
22%
36%
5%
~$15bn
6.2% Total 2016-2020 CAGR
Favorable Industry Dynamics Significant international opportunity remains in an estimated ~$122bn global supplement market (2016)
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2
North America1 $ 45bn 5.9% 7,571
China $ 20bn 6.9% 5
Other APAC (ex China/Japan) $ 20bn 3.3% 659
Europe $ 18bn 3.0% 49
Japan $ 11bn 0.7% 0
Latin America $ 5bn 1.8% 396
Middle East & Africa $ 2bn 4.8% 275
Total $ 122bn 4.6% 8,955
Supplement Market ($ in bn, 2016) # of GNC Stores2 Commentary
China: Opportunity for expansion though partnership
Europe: Whitespace to develop new European operations by entering new markets
Japan: High consumer demand and awareness for dietary supplements makes Japan a leading opportunity for growth
— Partnership agreement in place with stores planned to open in 2019
eCommerce: Room to Increase international e-Commerce presence by penetrating in-country marketplaces and developing GNC platform
International Opportunity
Supplement Market (2016-2020 CAGR)
1 Includes supplement market in the U.S. of ~$41 billion, Canada of ~$2bn and Mexico of ~$2bn as of 2016. 2 Store count as of December 31, 2017.
Brand awareness
83%
80%
77%
75%
73%
70%
66%
58%
57%
48%
44%
43%
38%
37%
13%
9%
7%
43%
45%
26%
25%
30%
22%
19%
10%
12%
8%
5%
6%
4%
5%
19%
26%
5%
6%
11%
5%
3%
3%
Walmart
GNC
Walgreens
CVS
Amazon.com
Grocery Store
Target
Rite Aid
Vitamin Shoppe
Costco
Sam's Club
Whole Foods
Local, Natural Store
Vitamin World
Vitacost.com
Bodybuilding.com
LuckyVitamin.com
Total Unaided/Aided
Total Unaided
Top Of Mind
Source: Decision Analyst Q1’18 GNC Brand Equity Study Brand Awareness includes aided and unaided awareness.
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Differentiated Brand, Products and Customer Experience Brand Differentiation
Differentiated Brand, Products and Customer Experience Product Differentiation:~60% of Sales are GNC Branded or 3rd Party Products Sold Exclusively through GNC
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Differentiated Offering
GNC Branded Products
~50% of total Sales are GNC branded products Proprietary products drive significant margin
capture GNC branded products are increasing as share of
sales and expected to continue New product introductions in 2017
have been well received
~50% Total Sales are GNC Branded Products
3rd Party Exclusive Products
Exclusive provider of MuscleTech Revolution & other key brands
Exclusive partner for 3rd party brands to get new innovations to market
~10% Total Sales are 3rd Party Products Exclusively Sold
in GNC
Robust pipeline of new product
launches
150+ new GNC Brand SKUs (+25% vs. 2016) Over $100mm of total gross new brand sales
including new, reforms and extensions (+42% vs. 2016)
Launched category-defining weight loss supplement Slimvance in December 2017
150+ New GNC Brand
SKUs
Product Mix
Comprehensive mix of sports & wellness products 2,000+ SKUs in-stores 3,500+ additional SKUs in expanded aisle 9 different categories Ongoing product rationalization
5,500+ Total SKUs
9 categories
GNC Branded Products
3rd Party Exclusive Products
Proprietary Customer Research
Global market , consumer and product trends Trade shows and publications Store Feedback Medical Trends
~50,000 Customer Research
Participants
Supplier Expertise
Vertically integrated global supply chain Raw materials sourced from 250+ suppliers and 50+ third-party vendors New ingredient and technology discovery assures constant reformulation of products
250+ Suppliers
50+ 3rd Party Vendors
Scientific and
Medical Expertise
Demonstrated ability to develop unique, branded, and scientifically verified product lines in-house
Employ over 150 technical professionals including scientists, nutritionists, formulators, chemists, engineers and quality control experts
Partnership access to 30+ world class medical research facilities and consultants Full visibility of intellectual property, regulatory status and clinical research
150+ Technical
Professionals
30+ Partnerships
Manufacturing GNC’s own manufacturing facilities operate above the industry's highest US and International
Standards GNC manufactures ~50% of GNC Branded Products
~50% GNC Branded Products are
manufactured by GNC
Quality Control
Only high quality ingredients are sourced and tested before going into GNC branded products 150+ quality checks including raw materials, purity, potency and expiry
150+ Quality Checks
Differentiated Brand, Products and Customer Experience Product Differentiation: GNC has built the leading customer centric nutritional supplement business with uncompromising standards for quality and innovation
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Product Quality Overview
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3
Differentiated Customer Experience: Overview
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Differentiated Brand, Products and Customer Experience Customer Experience Differentiation: Overview
In Store Experience Omnichannel Loyalty Programs
Customer Education
Inventory Selection
GNC.com
Amazon Storefront
Initiatives
myGNC Rewards
Pro Access
A B C
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Differentiated Customer Experience
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In Store Experience
Customer Education
The nutritional supplement consumer often desires and seeks out knowledgeable customer service
Our well-trained sales associates who are aided by regular trainings and in-store technology provide engaged customer service for a differentiated shopping experience
Inventory Selection
One of our continued priorities is working on improvements in product availability and in-store shopping experience that will differentiate us from our competitors in the mind of the consumer
Differentiated Brand, Products and Customer Experience Customer Experience Differentiation: In Store Experience
A
3
Differentiated Customer Experience
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Omnichannel
GNC.com
Recently aligned pricing and promotion between GNC.com and in-store and implemented platform changes
2017 showing positive trends with an 88% comp Q4’17 and 22% comp FY 2017
Continued with Q1’18 22% comp
Amazon Storefront
Launched in January 2017 - Outperforming sales expectations and is leading with strong sales from GNC branded products
26% of those who purchased a GNC-branded product purchased it from Amazon (up from 13% in Q2’17).
Initiatives
GNC Delivers: ~3,500 SKUs more than doubles the in-store offering
Subscription Services: Direct to doorstep available now; in-store subscription available in Q2’18
Order online, pick up in store: available in the next 12 months
Ship from Store: Reduces ship times and is cost effective
Adding training / educational content to GNC.com driving heightened experiential environment
Differentiated Brand, Products and Customer Experience Customer Experience Differentiation: Omnichannel
B
3
Differentiated Customer Experience
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Loyalty Programs
myGNC Rewards
Free loyalty program Strong sign-up rate of more
than 13mm total members as of March 2018
Loyalty members average order value (AOV) is more than non-member AOV
Pro Access
$39.99 Annual Membership 935,000+ members as of March
2018 Members visit 2x as often, and
spend 4x as much
Differentiated Brand, Products and Customer Experience Customer Experience Differentiation: Loyalty Programs
C
1 Rewards Point for every dollar spent $5 Cash Back Reward for every 150 Rewards Points earned Bonus points events Free birthday gift1
Quarterly Pick-Your-Day sales – pick the day that works for you and shop your own personal sale with a new 3x Rewards Points offer every 90 days
Free shipping all year on GNC.com – expedited shipping starts March 2018
PRO Boxes delivered to your door twice a year – free gifts, samples, coupons and more1
Stay healthy and win big: earn chances to win once-in-a-lifetime adventures and amazing health and fitness prizes with PRO Access Giveaways
Upgraded amenities – 30 extra days to redeem rewards and the PRO Access Insider Line, a direct support line to program experts
Benefits
Free Annual fee $39.99
Product assortment
Exclusive products Price
Employee training /
Customer service Vertical
integration Loyalty program
Specialty retailers
Drug store
Big box retailers
Grocery
Natural food retail
e-Commerce
Source: NBJ Supplement Business Report 2016, company filings and websites, management estimates and industry research.
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GNC maintains distinct advantage vs. peers across key metrics
Advantage Strength Neutral Weakness Lacks presence
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Differentiated Brand, Products and Customer Experience Combined, our brand and products customer experience provide a sustainable competitive advantage
Attractive and Loyal Customer Base Core Customer and Customer Segments
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4
Core Customer Why GNC?
Highly engaged in wellness goals (a.k.a. healthy living focused)
Live active lifestyle Want results-based products
(a.k.a. performance driven) Want latest and greatest innovations Higher than average income across range of ages Core age group 35-45 Slightly more male
Reliable
Trustworthy
Quality products
Proven to help performance
Associates that support their goals
Top Three Customer Segments
Active Wellness Performance Driven Athlete Wellness Focused
TBU TBU
23% Sales Engaged to improve health;
Educated Shop for fish oil, eye/joint health,
beauty, protein Drive by innovation, regimen
support through enhanced marketing and associate training, building engagement with loyalty rewards, in future add influencers and content to grow connection
30% Sales
Fit & Active
Value total body health
Shop for broad range: multis, fish oil, protein
Drive by adding quality products, rewarding their loyalty, and provide online shopping options
29% Sales
Value fitness goals and appearance
Shop for performance supps, protein, thermogenics
Drive by innovation (Beyond Raw), upgrading brands (Amp), exclusive access (Pro), in future add influencers and content to grow connection
Favorable Lease Contracts
~2.5 years1
Average remaining lease contracts
Short lease terms allow for significant flexibility which provides a competitive advantage relative to other retailers
Right Sizing the Footprint
207 stores Company owned stores closed
in 2017
Targeted closures of company owned stores backed by analytics help right sizing the footprint bolster margins without losing sales
~200 more closures planned for 2018
Continued opportunistic refranchising
Strong Store Level Economics
90%+ Stores are Cash Flow and
EBITDA Positive
Compelling store level economics drive the favorable cash flow profile of the business
Diversified and flexible store portfolio Favorable lease contracts provide significant flexibility as we continue to right size the footprint and improve already strong store level economics
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Store Base Overview
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Domestic company-owned and franchise locations2
Typically range in size from 1k to 2k sq. feet
U.S. and Canada company owned stores: 3,423
U.S. franchises: 1,099
Store-within-a-store (Rite Aid): 2,418
Store details (as of Dec. 31, 2017)
Source: Company filings. 1 2.5 years is the average lease contract remaining across the fleet. For corporate owned stores it is 2.6 years and for franchisee stores it is 2.3 years.
2 Company-owned and franchise stores in the United States as of December 31, 2017; map excludes 36 locations in Puerto Rico, 5 locations on U.S. military bases, and 8 locations in Washington, D.C.
Colors Denote # of Stores >100 51 - 100 11 - 50 1 - 10
9
28
67
80
4
124 44
368
79
11
68
15
185
39
44
157
256
43
25
144
24
22
9
147
10
40
68
82
121
9
89
85
63
49
82 173
15
34
27
148
389
20
47
79 414
77 28
51
36
17
Significant free cash flow generation
$189
$228
$309
$186
$87
$129 $148
$197 $201
2013 2014 2015 2016 LTMQ1'17
LTMQ2'17
LTMQ3'17
YTD2017
LTMQ1'18
Free cash flow1 ($mm)
Highly profitable and productive store base with low capital intensity and continues to deliver strong free cash flow generation
More than 90% of stores cash flow and EBITDA positive
Consistently delivered >$180mm free cash flow during the past five year period
Expecting $90 to $110 million free cash flow in 2018 due to higher interest expense and less inventory optimization opportunity
CFFO $239 $304 $355 $208 $112 $150 $188 $221 $200
Capital Expenditures (50) (70) (46) (60) (63) (59) (50) (32) (22)
Refranchising Proceeds – 4 3 39 40 40 12 4 3
Store Acquisition Costs – (9) (3) (2) (2) (1) (2) (2) (2)
Proceeds from Lucky Disposition – – – – – – – 6 6
Refi 3rd Party Fees – – – – – – – – 16
Free Cash Flow $189 $228 $309 $186 $87 $129 $148 $197 $201
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1 Defined as operating cash flows less investing cash flows excluding acquisitions, except for store acquisitions.
One New GNC Launch
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Ken Martindale Chief Executive Officer
35+ Most recently served as CEO of Rite Aid Stores and President of Rite Aid Corporation since 2015 Prior to being appointed CEO of Rite Aid, served in various senior management roles including President
and COO, EVP and COO and EVP of Merchandising, Marketing and Logistics after joining in 2008 Previously served as Co-President, Chief Merchandising and Marketing Officer for Pathmark Stores
Tricia Tolivar Executive Vice President,
Chief Financial Officer 25+
Joined GNC as the Executive Vice President and Chief Financial Officer in March 2015 with significant senior executive experience and finance expertise
Previously served in leadership positions with Ernst & Young from 2007 to 2015 including most recently as Americas Director of Finance, Advisory
Also held CFO position at Greater Memphis Arts Council (2006 to 2008) and various leadership positions at AutoZone (1996 to 2005)
Eddie Burt Executive Vice President,
Merchandising & Supply Chain 25+
Joined GNC in January 2017 Held multiple leadership positions at PetSmart from 2007-2015 including SVP Supply Chain
and SVP Real Estate Previously spent over 16 years with Target Corporation and 3 years with The Home Depot in various roles
Name / Title Years
Experience Selected Bio
Guru Ramanathan Ph.D. Senior Vice President,
Chief Innovation Officer
SVP and Chief Innovation Officer since December 2009 and joined GNC in 1998 Industry experience spans clinical care, pharma, consumer health, animal health and the retail sectors Previously served as Director and Secretary for the Efamol of subsidiary of Scotia Pharmaceutical in Boston
and held various industry consulting and management roles as well as clinical, research and teaching appointments both within and outside the United States
30+
Joined GNC in 2013 Previous experience in domestic and international operations for L Brands (Victoria's Secret, Bath & Body
Works and La Senza), Abercrombie & Fitch, The Limited, Old Navy and The Gap Prior to current role, he served as Senior Vice President of International Store Operations for L Brands
Carl Seletz Senior Vice President,
International
30+
Robert F. Moran Non-Executive Chairman
Interim CEO from July 2016 to September 2017; joined GNC’s board in 2013 Formerly served as the Chairman and Chief Executive Officer of PetSmart, Inc., President of Toys 'R' US
Canada Worked for 30 years with Sears, Roebuck and Company
40+
Prior Experience
7 Experienced management team
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Joe Gorman Executive Vice President,
Operations 25+
Joined GNC in 2015 Formerly Founder and President of Anomaly Clothing Previously spent over 17 years with Home Depot and 6 years with Gamestop in various roles
II. Business Update
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Leading global specialty retailer of nutritional supplements
U.S. and Canada
84%
Manufacturing / Wholesale1
9%
International 7%
2017 Revenue2:
$2.4bn
Store count (as of Dec. 31, 2017) 2017 Revenue
Leading vertically integrated specialty retailer of nutritional supplements with 80+ year history
Nearly 9,000 locations worldwide + online sales channels Company owned + franchise stores + online storefront (GNC.com and
Amazon marketplace)
Highly valued, trusted, and well-recognized brand
Broad product portfolio across protein, performance supplements, vitamins and other categories
Proprietary GNC brand offerings + robust innovation capabilities
Vertically integrated & sophisticated manufacturing, warehousing and distribution facilities
U.S. & Canada
Company-Owned 38%
Rite Aid 27%
International Stores 23%
U.S. Franchise
12%
Store Count: 8,955
Business overview Global footprint
Breakdown of store count and financials by store type
Source: Company filings and management. Global footprint as of December 31, 2017. Note: Amounts above do not reflect impact of revenue recognition standard effective 1/1/18. 1 Excludes intersegment revenue. 2 Excludes Lucky Vitamin of $66mm.
Colors Denote # of Locations
U.S. >100 51 - 100 11 - 50 1 - 10
India
Qatar
Pakistan
Bangladesh Myanmar
Sri Lanka
Bahrain
Oman
Bulgaria China
Thailand
Hong Kong Mexico
U.S. 6,712
El Salvador
Costa Rica Honduras
Panama
Guatemala
Cayman Islands
Canada
Paraguay
Peru
Chile
Bolivia
U.A.E
Saudi Arabia
Romania
Ukraine
Lebanon Turks & Caicos
Aruba Dominican Republic
Trinidad & Tobago
Singapore
Indonesia
Brunei
Vietnam
Malaysia
Philippines
Taiwan
Guam
South Korea Montenegro
Latvia Lithuania
Ireland Mongolia
Nigeria
Russian
South Africa
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Australia
Argentina
Ecuador
China Opportunity – Deal with Harbin Pharmaceutical Expected to Close Back Half 2018
Entered Securities Purchase Agreement with Harbin Pharmaceutical on February 28th Harbin invests $300 million for convertible perpetual preferred stock
GNC and Harbin to enter joint venture of GNC brand in China
Shareholder approval complete for both parties
CFIUS and China regulatory approvals in process
Benefits
Partnership provides platform for growth with GNC’s brand strength coupled with Harbin’s distribution network and regulatory expertise
$300 million investment to be mainly used for paying down debt enhancing GNC’s capital structure
China is $20 billion market expected to grow at nearly 7% per year through 2020
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2017 Revenue 2017 Adj. EBIT2
Segment Description $ % of Total $ % of Total
U.S. & Canada
1,099 franchise stores in the U.S. 3,423 company-owned stores in the
U.S., Puerto Rico, and Canada E-Commerce operations
$1,9931mm
$166mm
International
1,999 franchise locations in approximately 50 countries
11 Company-owned The Health Store locations in Ireland
5 Company-owned locations in China
$177mm
$62mm
Manufacturing / Wholesale
Manufactured products sold to other segments
Third-party contract manufacturing Sales to wholesale partners, the
largest of which are Rite Aid, Sam’s Club and PetSmart
$216mm
$72mm
9%
84%
Three Revenue Generating Segments
26
[55%]
[21%]
[24%]
[21%]
[24%]
7%
24%
55%
21%
Note: Amounts above do not reflect impact of revenue recognition standard effective 1/1/18. 1 Excludes Lucky Vitamin of $66mm.
2 EBIT adjusted for expenses outlined in quarterly earnings releases to calculate adjusted EPS (unallocated corporate overhead is disclosed separately).
Overview of historical financial performance
$2,463 $2,664 $2,655 $2,683 $2,540 $2,453
2012 2013 2014 2015 2016 2017
$485 $534 $513 $498
$404
$274
2012 2013 2014 2015 2016 2017
17.0% 8.2% (0.3%) 1.1% (5.3%) (3.4%)
11.4% 5.7% (3.6%) (1.2%) (6.3%) 0.2%
Revenue Growth SSS Growth1
19.7% 20.0% 19.3% 18.6% 15.9% 11.2%
$180 $189 $235
$309
$186 $197
2012 2013 2014 2015 2016 2017Source: Company filings; SSS growth reflects domestic retail and GNC.com SSS performance. Note: Amounts above do not reflect impact of revenue recognition standard effective 1/1/18. 1 Figures based on product sales only. 2 As defined per credit agreement. 3 Defined as operating cash flows less investing cash flows excluding acquisitions, except for store acquisitions.
Revenue & same store sales growth ($mm) Adjusted EBITDA2 & margin ($mm)
EBITDA margin
Free cash flow3 ($mm) Capex
27
$42 $50
$70
$46
$60
$32
2012 2013 2014 2015 2016 2017
III. Appendix
28
Consolidated Adjusted EBITDA Calculation Full Year Results ($mm)
Note: Amounts above do not reflect impact of revenue recognition standard effective 1/1/18. 1 Adjustments as permitted per Credit Agreement.
2016 2017
Net loss ($286.3) (148.9)
Plus:1
Income tax expense (benefit) 52.9 (164.8)
Total interest expense (net of interest income) 60.4 64.2
Gain on convertible debt and debt refinancing costs 0.0 (11.0)
Depreciation expense 51.8 49.4
Amortization of intangibles 8.2 7.4
Long-lived asset impairments 476.6 457.8
Unusual or non-recurring expenses/losses 11.8 3.6
Non-cash compensation and other non cash charges 14.6 8.4
Expenses for restructuring, closing stores, relocation, severance, integration, transition 2.9 5.1
One-time start up costs, new ventures, strategic initiatives, etc. 11.0 2.9
Consolidated adjusted EBITDA $403.9 $274.1
29
