gnc investor presentation - icr conference january 13, 2016

8/20/2019 GNC Investor Presentation - ICR Conference January 13, 2016

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GNC Holdings, Inc. (NYSE: GNC)

MIKE ARCHBOLD, CEOTRICIA TOLIVAR, EXECUTIVE VICE PRESIDENT AND CFO

January 13, 2016


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Forward looking statementTHIS CONFERENCE CALL AND PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INCLUDE INFORMATION CONCERNING OUR

FUTURE RESULTS, TRENDS, AND OTHER INFORMATION THAT IS NOT HISTORICAL INFORMATION. ALL FORWARD-LOOKING STATEMENTS

INCLUDED ON THIS CALL AND IN THIS PRESENTATION ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE OF THIS CALL, CURRENT

EXPECTATIONS, AND VARIOUS ASSUMPTIONS. WE BELIEVE THERE IS A REASONABLE BASIS FOR OUR EXPECTATIONS AND ASSUMPTIONS, BUT

THEY ARE INHERENTLY UNCERTAIN, AND MAY NOT PROVE CORRECT. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE, OR REVISE, ANY

FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. ALL SUBSEQUENT

WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS, ATTRIBUTABLE TO US, OR PERSONS ACTING ON OUR BEHALF, ARE EXPRESSLY

QUALIFIED, IN THEIR ENTIRETY, BY THE CAUTIONARY STATEMENTS CONTAINED THROUGHOUT THIS CALL. FOR A LIST OF IMPORTANT FACTORS

THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS ON THIS CALL AND IN THIS

PRESENTATION, PLEASE REFER TO OUR PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION AND OUR EARNINGS RELEASE THISMORNING.

MANAGEMENT HAS INCLUDED NON-GAAP FINANCIAL MEASURES IN THIS PRESS RELEASE BECAUSE IT BELIEVES THEY REPRESENT AN EFFECTIVE

SUPPLEMENTAL MEANS BY WHICH TO MEASURE THE COMPANY’S OPERATING PERFORMANCE. MANAGEMENT BELIEVES THAT NET INCOME

AND EARNINGS PER SHARE, EXCLUDING ASSET IMPAIRMENT CHARGES AS REFLECTED IN THIS RELEASE, AND FREE CASH FLOW ARE USEFUL TO

INVESTORS AS THEY ENABLE THE COMPANY AND ITS INVESTORS TO EVALUATE AND COMPARE THE COMPANY’S RESULTS FROM OPERATIONS

IN A MORE MEANINGFUL AND CONSISTENT MANNER BY EXCLUDING SPECIFIC ITEMS WHICH ARE NOT REFLECTIVE OF ONGOING OPERATING

RESULTS. 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 ATTACHED RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES.


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Today’s Agenda

I. Investment Rationale

II. The Industry

III. GNC’s Strategic Evolution

IV. GNC’s Commitment to Quality

V. Company-Owned vs. Franchise Store Strategy

VI. Capital Discipline


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I. Compelling Investment Rationale

Recognized leader in large and growing health, wellness and performance

industry

Highly-trusted and recognized brand

Clear strategy to drive profitable growth

Drive improved connection with a broader range of customers

Leverage customer research to drive enhanced decision-making

Strong cash flow and disciplined capital allocation strategy

Balanced approach to reinvesting in business and returning cash to

shareholders through dividends and share repurchases


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The Industry


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The industry has grown meaningfully over time…

II. The Industry Historical Growth

Source: NBJ; $ in Bil


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…and is expected to continue

II. The Industry Projected Growth



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II. The Industry Category Growth


Each major category has, and is expected to, contribute to growth

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Herbs

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Meal Replacements


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GNC’s Strategic Evolution


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Cultural Evolution

Focus on profitable growth

Decisions informed by qualitative and quantitative customer research

Evolutionary, not revolutionary brand positioning

Focused on performance and wellness customers

Target one-to-one customer engagement

Guided by brand pillars

Transformation takes time…but we are beginning to see progress as we connect our

customers to their best

Transformation


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New brand positioning is grounded in data and evolutionary, not revolutionary

Seek to both expand share of wallet and broaden reach

Health, wellness &performance industry

~$37 BN

Sports nutrition &

performance

~$5 BN

Source: NBJ

III. GNC’s Strategic Evolution Brand Evolution


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Decreased reliance on excessive promotions

Increase in sales from Wellness, Natural Living, Grab-n-Go customer

Increase in mix of female customers

Positive ROI on natural and plant-based proteins, functional foods

Positive ROI on expanded assortment

Significant reduction in store service complaints

Progress


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III. GNC’s Strategic Evolution Focus Areas

Continued refinement of marketing and promotions

Test Gold Card program with loyalty component enhancement

Develop improved pricing and promotional strategy

Clearly define role and intent by category

Improve customer’s perception of quality

Improved operational consistency


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GNC’s Commitment to Quality


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IV. GNC’ Commitment to Quality

80 year history of health, wellness and performance

Own a 300,000 square foot state of the art manufacturing facility

Fully FDA and TGA cGMP compliant, qualified to manufacture

supplements for sale in over 50 countries

Dedicated laboratories for raw material and finished product

inspection and testing

Proprietary manufactured product subjected to 150+ quality checks

Employ over 150 scientists, nutritionists, formulators, chemists,

engineers and quality control experts


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IV. GNC’ Commitment to Quality Highly Valued, Trusted Brand

82%

0% 20% 40% 60% 80% 100%

Vitamin World

Whole Foods

Sam's

Costco

Vitamin Shoppe

Rite Aid

Target

Amazon

CVS

Walgreens

GNC

Walmart

Brand Awareness

GNC

Source: Decision Analyst 2015 GNC Brand Equity Study

Brand Awareness includes aided and unaided awareness


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More than 40 industry-leading companies participating in the coalition

Includes retailers (including e-commerce), raw material suppliers,manufacturers, multi-level marketing companies, practitioners, and

pharmaceutical companies

Goals are to:

Establish industry Good Manufacturing Practices for the raw material supply

chain, including traceability standards and testing requirements

Establish minimum standards across the industry for annual facility inspections

and certifications, and the issuance of raw material and finished goods product

quality seals

Evaluate and promote an industry sponsored product database and product

numbering system

Change the narrative about the industry

Formed CoalitionIV. GNC’s Commitment to Quality


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Coalition Working GroupsIV. GNC’s Commitment to Quality

Establish Four Action Oriented Working Groups

Media Strategy

Group

• Improve Customer

Confidence

•Answer Govt.

Regulators

•Answer Media

Quality Seals &Facilities Certification

Group

•Establish Standards

Threshold

•Facilities Certification

•RM & Finished

Products Quality

Seals

Raw Materials GMPGroup

•Establish RM cGMPs

•Traceability

Standards

•Testing Requirements

Industry ProductNotification Database& Numbering Codes

•Review and

recommend on

advisability of

industry database•Mechanics of

industry notification

and numbering

system


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Company-Owned vs. Franchise Store Strategy


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Strategies to increase the portion of domestic stores that are franchise

locations:

1) Beginning in Q4 2015, expect majority of new stores to be franchise

locations

2) Execute re-franchising strategy in select markets

Negotiations are underway

Letters of intent have been obtained for 33 locations*

V. Company-Owned vs. Franchise Store Strategy

* as discussed on Q3 2015 earnings call


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Capital Discipline


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Returns-based approach to business decisions, spanning

Capital expenditures

Marketing

Promotions

Returning capital to shareholders

Announced $200 mil share buyback on November 3,

2015

Current Dividend Yield >2%

Free cash flow per share increased 42% to $2.83 on a YTD basis through Q3 2015, due

to improved working capital and lower capital expenditures


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105%

71%

144%

GNC S&P 500 S&P RETAIL

Total Shareholder Return since IPO

GNC S&P 500 S&P Retail

Source: Bloomberg Capital IQ, IBES. Market data as of December 31, 2015


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Compelling Investment Rationale

Recognized leader in large and growing health, wellness and performance

industry

Highly-trusted and recognized brand

Clear strategy to drive profitable growth

Drive improved connection with a broader range of customers

Leverage customer research to drive enhanced decision-making

Strong cash flow and disciplined capital allocation strategy

Balanced approach to reinvesting in business and returning cash to

shareholders through dividends and share repurchases


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gnc investor presentation - icr conference january 13, 2016

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