Description of Business and Basis of Presentation	9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]
Description of Business and Basis of Presentation	Description of Business and Basis of Presentation Nature of Operations National Vision Holdings, Inc. (“NVHI,” the “Company,” “we,” “our,” or “us”) is a holding company whose operating subsidiaries include its indirect wholly-owned subsidiary, National Vision, Inc. (“NVI”) and NVI’s wholly-owned subsidiaries. We are a leading value retailer of eyeglasses and contact lenses in the United States. We operated 1,402 and 1,354 retail optical locations in the United States and its territories as of September 30, 2023 and December 31, 2022, respectively, through our five store brands, including America’s Best Contacts and Eyeglasses (“America’s Best”), Eyeglass World, Vista Optical locations on select U.S. Army/Air Force military bases (“Military”) and within select Fred Meyer stores, and our management & services arrangement with Walmart (“Legacy”). Refer to Note 2. “Termination of Walmart Partnership” for developments related to the Walmart exit. Basis of Presentation and Principles of Consolidation We prepare our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and, therefore, do not include all information and disclosures required by U.S. GAAP for complete consolidated financial statements. The Condensed Consolidated Balance Sheet as of December 31, 2022 has been derived from the audited consolidated balance sheet for the fiscal year then ended. These condensed consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s consolidated results of the interim period. Certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted; however, we believe that the disclosures included herein are sufficient for a fair presentation of the information presented. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2022 included in the 2022 Annual Report on Form 10-K. The Company’s significant accounting policies are set forth in Note 1 within those consolidated financial statements. We use the same accounting policies in preparing interim condensed consolidated financial information and annual consolidated financial statements. There were no changes to our significant accounting policies during the nine months ended September 30, 2023. The condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts within the footnotes to the financial statements for fiscal year 2022 have been reclassified to conform to the fiscal year 2023 presentation. The Company has consolidated certain entities meeting the definition of a variable interest entity (“VIE”) as the Company concluded that it is the primary beneficiary of the entities under the provisions of Accounting Standards Codification 810, Consolidation. At September 30, 2023, the variable interest entities include 32 professional corporations. The total assets of the consolidated VIEs included in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, were $3.7 million and $7.9 million, respectively, and the total liabilities of the consolidated VIEs were $5.1 million and $8.3 million, respectively. Fiscal Year Our fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31. Fiscal year 2023 contains 52 weeks and will end on December 30, 2023. All three and nine month periods presented herein contain 13 and 39 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods. Seasonality The consolidated results of operations for the three and nine months ended September 30, 2023 and October 1, 2022, are not necessarily indicative of the results to be expected for the full fiscal year due to seasonality and uncertainty of general economic conditions that may impact our key markets. Historically, our business has realized a higher portion of net revenue, income from operations, and cash flows from operations in the first half of the year, and a lower portion of net revenue, income from operations, and cash flows from operations in the fourth fiscal quarter. The first half seasonality is attributable primarily to the timing of our customers’ personal income tax refunds and annual health insurance program start/reset periods. Seasonality related to fourth quarter holiday spending by retail customers generally does not impact our business. Our quarterly consolidated results generally may also be affected by the timing of new store openings, store closings, and certain holidays. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Asset Impairment Non-cash impairment charges of $80.8 million and $82.1 million were recorded for the three and nine months ended September 30, 2023, respectively, compared to $1.3 million and $5.2 million for the three and nine months ended October 1, 2022, respectively. The majority of the impairment charges this quarter are associated with our Legacy segment and AC Lens. Refer to Note 2. “Termination of Walmart Partnership” for more detail. In addition to the Walmart and AC Lens related impairment charges, we recorded impairment charges primarily related to tangible long-lived assets and ROU assets associated with our Owned & Host segment which are driven by lower than projected customer sales volume in certain stores, and other entity-specific assumptions. We considered multiple factors including, but not limited to: forecasted scenarios related to store performance and the likelihood that these scenarios would be ultimately realized; and the remaining useful lives of the assets. Asset impairment expenses were recognized in Corporate/Other. Refer to Note 4. “Fair Value Measurements” for additional information on impairment charges unrelated to the termination of the Walmart partnership. Income Taxes Our effective tax rate for the three months ended September 30, 2023 was 5.8%, reflecting our statutory federal and state rate of 25.4%, the disallowance of the Legacy segment goodwill impairment loss for income tax purposes and effects of other permanent items. Our effective tax rate for the three months ended October 1, 2022 was 33.7%, reflecting our statutory federal and state rate of 25.5% and effects of other permanent items. Our effective tax rate for the nine months ended September 30, 2023 was (13.5)%, reflecting our statutory federal and state rate of 25.4%, the disallowance of the Legacy segment goodwill impairment loss for income tax purposes and other permanent items. Our effective tax rate for the nine months ended October 1, 2022 was 29.8%, reflecting our statutory federal and state rate of 25.5% and effects of other permanent items. Share Repurchases During the nine months ended September 30, 2023 and October 1, 2022, the Company repurchased 1.1 million shares of its common stock for $25.0 million, and 2.7 million shares of its common stock for $80.0 million, respectively, under the share repurchase program. As of September 30, 2023, $25.0 million remains available under the share repurchase authorization. In August 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”) which, among other things, provides for a 15% corporate alternative minimum tax based on a prescribed measure of income as well as a 1% excise tax on stock repurchases. Investment In the second quarter of fiscal year 2023, we completed an investment in an entity specializing in applying artificial intelligence-powered screening and diagnostic tools to retinal imaging. The initial investment of $0.9 million was recognized in Other assets in the Condensed Consolidated Balance Sheets as of September 30, 2023 and in Other in the investing section of the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023. We have agreed to invest up to an additional $2.4 million in the entity upon the completion of certain milestones. Future Adoption of Accounting Pronouncements Reference Rate Reform. The Financial Accounting Standards Board (“FASB”) has issued guidance at various points over the last several years that provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that may be affected by the cessation of the London Inter-bank Offered Rate (“LIBOR”). We are currently able to apply this new guidance for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2024. Refer to Note 5. “Long-term Debt” and Note 6. “Interest Rate Derivatives” for more information on our transition from LIBOR to Term Secured Overnight Financing Rate (“Term SOFR”). The FASB issued other accounting guidance during the period that is not currently applicable or expected to have a material impact on the Company’s financial statements, and therefore, is not described above.

National Vision Holdings, Inc. (“NVHI,” the “Company,” “we,” “our,” or “us”) is a holding company whose operating subsidiaries include its indirect wholly-owned subsidiary, National Vision, Inc. (“NVI”) and NVI’s wholly-owned subsidiaries. We are a leading value retailer of eyeglasses and contact lenses in the United States. We operated 1,402 and 1,354 retail optical locations in the United States and its territories as of September 30, 2023 and December 31, 2022, respectively, through our five store brands, including America’s Best Contacts and Eyeglasses (“America’s Best”), Eyeglass World, Vista Optical locations on select U.S. Army/Air Force military bases (“Military”) and within select Fred Meyer stores, and our management & services arrangement with Walmart (“Legacy”). Refer to Note 2. “Termination of Walmart Partnership” for developments related to the Walmart exit.

We prepare our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and, therefore, do not include all information and disclosures required by U.S. GAAP for complete consolidated financial statements. The Condensed Consolidated Balance Sheet as of December 31, 2022 has been derived from the audited consolidated balance sheet for the fiscal year then ended. These condensed consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s consolidated results of the interim period.

Certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted; however, we believe that the disclosures included herein are sufficient for a fair presentation of the information presented. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2022 included in the 2022 Annual Report on Form 10-K. The Company’s significant accounting policies are set forth in Note 1 within those consolidated financial statements. We use the same accounting policies in preparing interim condensed consolidated financial information and annual consolidated financial statements. There were no changes to our significant accounting policies during the nine months ended September 30, 2023.

The condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts within the footnotes to the financial statements for fiscal year 2022 have been reclassified to conform to the fiscal year 2023 presentation.

The Company has consolidated certain entities meeting the definition of a variable interest entity (“VIE”) as the Company concluded that it is the primary beneficiary of the entities under the provisions of Accounting Standards Codification 810, Consolidation. At September 30, 2023, the variable interest entities include 32 professional corporations. The total assets of the consolidated VIEs included in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, were $3.7 million and $7.9 million, respectively, and the total liabilities of the consolidated VIEs were $5.1 million and $8.3 million, respectively.

Our fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31. Fiscal year 2023 contains 52 weeks and will end on December 30, 2023. All three and nine month periods presented herein contain 13 and 39 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

The consolidated results of operations for the three and nine months ended September 30, 2023 and October 1, 2022, are not necessarily indicative of the results to be expected for the full fiscal year due to seasonality and uncertainty of general economic conditions that may impact our key markets. Historically, our business has realized a higher portion of net revenue, income from operations, and cash flows from operations in the first half of the year, and a lower portion of net revenue, income from operations, and cash flows from operations in the fourth fiscal quarter. The first half seasonality is attributable primarily to the timing of our customers’ personal income tax refunds and annual health insurance program start/reset periods. Seasonality related to fourth quarter holiday spending by retail customers generally does not impact our business. Our quarterly consolidated results generally may also be affected by the timing of new store openings, store closings, and certain holidays.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Non-cash impairment charges of $80.8 million and $82.1 million were recorded for the three and nine months ended September 30, 2023, respectively, compared to $1.3 million and $5.2 million for the three and nine months ended October 1, 2022, respectively. The majority of the impairment charges this quarter are associated with our Legacy segment and AC Lens. Refer to Note 2. “Termination of Walmart Partnership” for more detail. In addition to the Walmart and AC Lens related impairment charges, we recorded impairment charges primarily related to tangible long-lived assets and ROU assets associated with our Owned & Host segment which are driven by lower than projected customer sales volume in certain stores, and other entity-specific assumptions. We considered multiple factors including, but not limited to: forecasted scenarios related to store performance and the likelihood that these scenarios would be ultimately realized; and the remaining useful lives of the assets. Asset impairment expenses were recognized in Corporate/Other. Refer to Note 4. “Fair Value Measurements” for additional information on impairment charges unrelated to the termination of the Walmart partnership.

Our effective tax rate for the three months ended September 30, 2023 was 5.8%, reflecting our statutory federal and state rate of 25.4%, the disallowance of the Legacy segment goodwill impairment loss for income tax purposes and effects of other permanent items. Our effective tax rate for the three months ended October 1, 2022 was 33.7%, reflecting our statutory federal and state rate of 25.5% and effects of other permanent items.

Our effective tax rate for the nine months ended September 30, 2023 was (13.5)%, reflecting our statutory federal and state rate of 25.4%, the disallowance of the Legacy segment goodwill impairment loss for income tax purposes and other permanent items. Our effective tax rate for the nine months ended October 1, 2022 was 29.8%, reflecting our statutory federal and state rate of 25.5% and effects of other permanent items.

During the nine months ended September 30, 2023 and October 1, 2022, the Company repurchased 1.1 million shares of its common stock for $25.0 million, and 2.7 million shares of its common stock for $80.0 million, respectively, under the share repurchase program. As of September 30, 2023, $25.0 million remains available under the share repurchase authorization.

In August 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”) which, among other things, provides for a 15% corporate alternative minimum tax based on a prescribed measure of income as well as a 1% excise tax on stock repurchases.

In the second quarter of fiscal year 2023, we completed an investment in an entity specializing in applying artificial intelligence-powered screening and diagnostic tools to retinal imaging. The initial investment of $0.9 million was recognized in Other assets in the Condensed Consolidated Balance Sheets as of September 30, 2023 and in Other in the investing section of the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023. We have agreed to invest up to an additional $2.4 million in the entity upon the completion of certain milestones.

Reference Rate Reform. The Financial Accounting Standards Board (“FASB”) has issued guidance at various points over the last several years that provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that may be affected by the cessation of the London Inter-bank Offered Rate (“LIBOR”). We are currently able to apply this new guidance for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2024. Refer to Note 5. “Long-term Debt” and Note 6. “Interest Rate Derivatives” for more information on our transition from LIBOR to Term Secured Overnight Financing Rate (“Term SOFR”).