December 2018 - GNC Holdings, Inc.
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December 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
FORWARDLOOKING 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 IN OUR THIRD QUARTER EARNINGS RELEASE.
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.
2
Table of Contents
I. Go Forward Strategy
II. Financial Overview
3
Leading Global Health and Wellness Brand
Business Overview Global Footprint
Leading vertically integrated health and wellness brand with Latvia
Lithuania
80+ year history
Ukraine Russia
Canada
Approximately 8,500 locations worldwide + online sales channels Ireland
Romania Mongolia
Cayman Islands Montenegro Bulgaria
Company owned + franchise stores + online storefront (GNC.com and U.S.
Lebanon Bahrain
Qatar
China South Korea
Turks & Caicos Hong Kong Taiwan
Amazon marketplace) Mexico Saudi Arabia India Vietnam
Dominican Republic
Guatemala
Highly valued, trusted, and well-recognized brand El Salvador
Aruba
Nigeria U.A.E
Pakistan
Brunei
Philippines
Guam
Sri Lanka
Malaysia
Broad product portfolio across protein, performance supplements, Honduras Trinidad & Tobago Oman
Bangladesh
Costa Rica
vitamins and other categories Panama
Peru Myanmar
Thailand
Indonesia
Bolivia
Singapore
Proprietary GNC brand offerings + robust innovation capabilities Paraguay
Australia
South Africa
Vertically integrated & sophisticated manufacturing, warehousing and Chile Argentina
Colors Denote # of Locations
distribution facilities
U.S. >100 51 - 100 11 - 50 1 - 10
Breakdown of Store Count and Financials by Store Type
Store Count (as of 2018 Q3) 2018 Q3 LTM Revenue 2018 Q3 LTM System-Wide Sales
Domestic International International
Franchise Manufacturing / 8% 19%
12% U.S. & Wholesale1
Canada 9% Wholesale2
Store Q3 LTM System-
International Company- 4% wide
Count: Revenue2:
8,769 Owned 39% $2.4bn Sales:
Stores 23% $2.7bn
U.S. and U.S. and
Canada Canada
Rite Aid 26%
83% 77%
Source: Company filings and management. Global footprint as of 2018 Q2.
1 Excludes intersegment revenue. 2 Includes Rite Aid, Sam’s Club, and PetSmart.
4
Three Revenue Generating Segments
2018 Q3 LTM Revenue 2018 Q3 LTM Adj. EBIT1
Segment Description $ % of Total % Margin $ % of Total
1,048 franchise stores in the
83% 53%
U.S.
3,283 company-owned stores
U.S. & Canada in the U.S., Puerto Rico, and
$1,968mm 7.4% $145mm [55%]
Canada
E-Commerce operations
1,952 franchise locations and 8% 23%
distribution and licensing
[21%] [21%]
agreements in ~50 countries
International $186mm 33.9% $63mm
5 company-owned locations
in China and 11 (The Health
Store) in Ireland
Manufactured products sold 9% 24%
to other segments [24%]
Third-party contract [24%]
Manufacturing /
Wholesale
manufacturing $214mm2 30.8% $66mm
Sales to wholesale partners,
the largest of which are Rite
Aid, Sam’s Club and PetSmart
1 EBIT adjusted for expenses outlined in quarterly earnings releases to calculate adjusted EPS (unallocated corporate overhead is disclosed separately).
2 Excludes intersegment sales.
5
Harbin Investment Overview
Transaction Overview
On February 13, 2018, GNC and Harbin Pharmaceutical Group Holding ("Harbin") announced that they reached an agreement regarding a strategic
partnership
— Harbin will invest $300 million in GNC in the form of newly issued convertible perpetual preferred shares with a conversion price of $5.35 and a 6.5%
annual coupon payable in cash or in kind
— Investment will be funded in three separate tranches with $100 million funded on November 9, 2018; with additional $50 million to be funded by
December 28, 2018 and the final $150 million to be funded by February 13, 2019
— Following the investments, Harbin will own c. 40% of GNC on an as converted basis, becoming the single largest shareholder in GNC
In addition, GNC and Harbin have agreed to form a joint venture for the manufacturing, marketing, sale and distribution of GNC-branded products in China,
leveraging the synergies between Harbin and GNC in the fast growing Chinese market
Transaction Terms & Details
Convertible Preferred China Joint Venture Rationale
Structure Perpetual Convertible Preferred Stock China is the largest international market for supplements and GNC
is one of the most recognized brands by consumers in the market
Amount $300 million, representing ~40% of Company’s
outstanding Common Stock on an as-converted As a leading player in China, Harbin provides established networks
basis and relationships in the market which will support GNC’s efforts to
Dividend 6.5% coupon payable in cash or in kind expand in China, including the ability to accelerate product
introduction by leveraging existing “Blue Hat” registrations required
Dilution Conversion into Common Stock at Conversion for sales in China
Price: $5.35
Harbin will provide GNC with access to a leading pharmaceutical
Governance In connection with the investment, the GNC distribution network in China as well as expertise in operational and
board will be expanded to 11 members including manufacturing which will serve as critical resources as GNC works to
five members from GNC, five members from expand its reach in China
Harbin and CEO Ken Martindale
6
Harbin Investment Overview (Cont’d)
Overview of Harbin and CITIC Capital
Harbin is one of the leading pharma and vitamins, minerals One of the largest
and supplements (“VMS”) companies in China portfolios of “Blue Hat”
— Access to an extensive distribution and retailing network health foods registrations
by directly operating more than 300 chain retail
pharmacies and collaboration with ~800 drug and VMS
distributors to build nationwide coverage
— Broad portfolio of OTC, Rx and VMS products, with many
national renowned brands with high consumer awareness Large number of local
and leading market shares CFDA drug approvals
CITIC Capital is an alternative investment management and
advisory company founded in 2002
— CITIC Capital is a large, strategic shareholder of Harbin
Robust distribution
— Firm manages over $22 billion of capital across 100 funds,
with over 130 portfolio companies that span 11 sectors network with
and employ over 820,000 people nationwide retail
— Extensive experience with accelerating the growth of pharmacy coverage
international brands in China including McDonald’s and
King Koil
Best-in-class
manufacturing
capabilities with 6
cGMP facilities
7
I. Go Forward Strategy
8
Overview of GNC Go Forward Strategy
GNC’s CEO, Ken Martindale, has now been in his role for a year and has completed a detailed review of the Company’s corporate strategy,
identifying four key focus areas to better serve customers and drive future performance and growth:
1 Grow as a Global Brand 2 Store Portfolio Optimization
Strong Brand Recognition Reinvest in High Performing
Grow GNC Brand Business Stores
Reposition Stores or Renegotiate
International Growth
Leases
Close Stores to Drive Improved
Profitability
Continued Product and Service
3 Enhanced Customer Engagement 4 Innovation
Loyalty Programs Differentiated Offering
Omnichannel Innovation Pipeline
Improved In-Store Experience
Identified cost savings of $40-50mm to be reinvested into key focus areas
9
1 Grow as a Global Brand
Strong Brand Recognition
GNC Maintains Distinct Advantage vs. Peers For Key Metrics Brand Awareness
Employee
Walmart 20% 46% 83%
training /
Product Exclusive Loyalty Customer
assortment products program service Price GNC 25% 45% 77%
CVS 6% 25% 76%
Amazon.com 11% 30% 75%
Specialty Walgreens 27% 73%
retailers
Grocery Store 22% 71%
Drug store Target 22% 67%
Vitamin Shoppe 12% 56%
Big box
retailers Rite Aid 11% 56%
Costco 10% 50%
Grocery
Whole Foods 7% 45%
Sam's Club 43%
Natural
food retail Vitamin World 37%
Local, Natural Store 36%
e-Commerce
Vitacost.com 13%
Advantage Strength Neutral Weakness Lacks presence Total Unaided/Aided
Bodybuilding.com 12%
80+ year history as the authority in the health, wellness and performance industry bringing Total Unaided
together superior product quality and innovation in an engaging in-store experience
LuckyVitamin.com 8% Top Of Mind
Source: Decision Analyst Q3’18 GNC Brand Equity Study Brand Awareness
101 Grow as a Global Brand
Growth of GNC Brand Business
% of system-wide retail GNC Brand Mix Strategies
product sales1
Mix shift towards proprietary GNC products with meaningfully higher margin profile
70% would drive higher operating profit
One New GNC Launch — Every 100 bps improvement in GNC brand mix drives $1 to $3mm incremental
margin
— Ongoing innovation and strong product pipeline continues to drive GNC brand
uplift (e.g., Beyond Raw, Earth Genius, Tamaflex brands)
60% Continued focus Defined owned brands are targets of marketing focus and spend
57% 57% on driving brand — “Compare & Save” in-store and external marketing initiative to communicate
55% mix improvement superiority vs. specific 3rd-party leaders
54%
52% 52% 52% — In-store sampling of GNC brand newness, limited editions and hero categories
50% 50% — Cash-wrap strategy to more effectively utilize impulse register area to highlight,
50% sample, and sell GNC brands – increase basket size & attachment rate
50% 50%
48% 48% Proprietary Products
48%
46% 45% GNC Branded Products 3rd Party Exclusive Products
43% 43%
40%
30%
2015 2016 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18
GNC-branded 3rd Party
Source: Company filings and management
~52% of sales Additional ~9% of sales
1 Includes U.S. company-owned and franchised stores, GNC.com and wholesale partners.
111 Grow as a Global Brand
Significant International White Space
$129bn Global Supplement Market Represents Enormous International Opportunity
Supplement Market
# of GNC Locations2 2018 International Update
($ in bn, 2018)
Australia Entered partnership with leading
North America1 $ 46bn 7,394 consumer health products
company to develop strategic
distribution channels including
China $ 23bn 5 stores, e-commerce, sporting
goods retailers, and fitness
Other APAC centers (via the high touch of
(ex. China / Japan) $ 21bn 649 personal trainers )
$3.1B health and wellness
market (sixth largest)
Europe $ 20bn 50
India Expanding 15-year, existing
presence in pharmacies through
Japan $ 12bn 0 entering into a new partnership
with broad strategic omnichannel
approach to growth, including e-
commerce, extended retail
Latin America $ 7bn 397 distribution, and licensing
through local manufacturing
Middle East & Africa $ 2bn 274 $2.3B health and wellness
market (eleventh largest)
Total $ 129bn 8,769 Japan Signed local partnership to
develop GNC brand with initial e-
commerce launch followed by
phased introduction of additional
channels
Actively targeting white space opportunities in Europe ($20bn market)
$11.5B health and wellness
and Brazil and Columbia (account for half of $7bn LatAm market) market (third largest)
1 Includes supplement market in the U.S. of ~$44bn, Canada of ~$2bn as of 2018.
2 As of Q2 2018.
121 Grow as a Global Brand
International Growth
Projected International Retail Sales GNC International Market Share Strategy
($, millions)
Leverage Strategic Partnerships: Provide additional business
International (excl. China)1 International Growth model options to extend the brand in international markets,
China with GNC team providing support
$ 902 E-Commerce: Partner with local leading e-commerce
platforms to build GNC online presence (e.g., Amazon)
$ 753 Localization:
— Design products within global brand architecture that are
$ 644
locally-made (e.g., Europe, India, Mexico, South Africa)
$ 572
$ 531 — Design products and branding well-suited for region-
specific distribution (e.g., Olive Young in South Korea)
Product Innovation: Continuous innovation with international
and global brand launches tailored to local needs (e.g., Mum,
Baby & Kids (MBK), Endurance, Beauty)
2017A 2018E 2019E 2020E 2021E
7.8 % 12.5 % 16.9 % 19.8 %
1 International consists of Franchisee retail sales in approximately 50 countries and Corporate retail sales in Ireland
131 GNC China Strategy
Enormous Untapped Opportunity in 2nd-Largest Market Globally
China Health Food Market Sales¹ Favorable Consumer Trends
($, billions) CAGR % Consumers’ behavior and preferences have been evolving towards high
2013-18E 2018-23E health awareness and differentiated needs that GNC is uniquely
Total 13.8 12.2 positioned to deliver:
Sports Nutrition2 42.0 27.2 Rising willingness to purchase health food and sports nutrition
— 85% of consumers choose to consume health food to enhance
Weight Management3 16.3 19.9 health over alternatives including diet and sport
Vitamins, Minerals & Increased consumption of weight management products
13.3 11.0
Dietary Supplement4 — China has the largest obesity population in the world and morbidity
risk associated with weight
$45 Differentiated consumer needs
5 — In general, females prefer beauty, immunity, prenatal products
— In general males prefer energy, joint, heart health and sports
$25 nutrition
Fragmented Market Landscape5
38
$13
2017 Market Share (%)
23
12
Main branded
competition
2013 2018E 2023E represents 5%
3.8%
of market
0.8% 0.8% 0.3%
#2 Market Globally After U.S.
Competitor 1 Competitor 2 Competitor 3 Competitor 4
Source: Euromonitor, Credit Suisse Global Wealth Report 2017, Chinese National Bureau of Statistics, L.E.K. Consulting.
1 Sales value is calculated using retail sale price (RSP), Market size is based on Euromonitor data and adjust based on market insights of online value, USD/CNY = 6.66; 2 Sports nutrition includes sports protein bars,
sports protein powder and sports non-protein products; 3 Weight management includes meal replacement, slimming teas, weight loss supplements, and supplement nutrition drinks; 4 Dietary supplement includes
herbal/traditional supplements, non-herbal supplements and combination supplements; 5 Share of RSP value.
141 GNC China Strategy
Partnership with Harbin will Accelerate GNC’s Growth and Expansion
GNC China Revenue Forecast¹ Multi-Channel Approach
($, millions) Channel Description
~ $200
Online sales through cross-border e-commerce platforms
— Presents full product portfolio and maintains
imported brand image
— Fast growing channel with expected growth rate of
Cross-border 30% p.a., driven by young consumers and
Online encouraging policies
Online sales within China (T-mall, JD.com, etc.)
— Expected to launch 4 additional online stores
— Provides value for money and convenience
2015A 2016A 2017A 2018E 2019E 2021E
— Expected to grow at double digits till 2023, driven by
Domestic diverse product options and heavy platform
Advantages from Harbin Partnership Online promotion
Harbin partnership will provide significant benefits including: Sales of products through 42-60k retail pharmacies,
leveraging Harbin’s existing distribution network
Ability to capitalize on the demand for nutritional supplements in
— Enhances brand awareness through in-person
China through a leading pharmaceutical company with a strong interaction and attracts new customers
distribution network
Retail — Leverages Harbin Pharma and independent
Provides GNC with regulatory, operational, distribution, and Pharmacies distributors capability to reach pharmacies
manufacturing expertise in China, the largest international market Projected to open additional flagship stores in Tier 1 cities
for supplements (in addition to 5 currently)
— Offers opportunity to establish brand image and
Enables accelerated introduction of GNC-branded products by
enhance customer relationship
leveraging existing “Blue Hat” registrations required for health food
sales in China Standalone — Despite thin margin, remains an essential brand
Stores building venue
1 In MSP value, USD/CNY = 6.66
152 Healthy Store Base with Significant Flexibility
Store Base Overview Domestic Company-Owned and Franchise Locations¹
80
9
10 9
39 4
Short lease terms allow for 15
82 24
67 85
~2.7 years
11 256
significant flexibility which
Favorable Lease provides a competitive
9 121 15
47
Average remaining lease 34 185
Contracts contracts advantage relative to other
43
44
22
173
157 89
144
20
82
retailers 79
68
28 124
414 36
49
147
77 79
44
25 28 68
148
Targeted closures of company 40 67
owned stores backed by 368
Right Sizing the
400+ stores analytics help right sizing the
63
389
207 company-owned footprint bolster margins 17
Footprint stores closed in 2017 and while minimizing sales loss 27
200+ to be closed in 2018 Continued opportunistic
refranchising
Colors Denote # of Stores
>100 51 - 100 11 - 50 1 - 10
Compelling store level Store Details (as of Q3 2018)
Store Level 90%+ economics drive the favorable
Stores are Cash Flow and cash flow profile of the Typically range in size from 1k to 2k sq. feet
Economics EBITDA Positive business U.S. and Canada company owned stores: 3,283
U.S. franchises: 1,048
Store-within-a-store (Rite Aid): 2,242
Source: Company filings
1 Company-owned and franchise stores in the United States as of December 31, 2017.
162 Store Portfolio Optimization
Overview of Portfolio Review Store Portfolio Optimization Process
In September 2018, GNC and external consultants completed a 1 Analyzed all stores using quantitative approach
comprehensive store review leveraging customer and store-level Categorized all stores using decision tree based on three
data key factors:
Plan to exit or reposition 700-900 underperforming stores in U.S.
— Sales
and Canada over the next 3 years
— Transforming store profile to higher-grossing stores with — Occupancy costs as percentage of sales
increased margins as a result of sales transfer, reinvestment in — EBITDA (absolute dollar amount and margin)
store base, and implementation of omnichannel and in-store
initiatives 2 Conducted comprehensive review at the market and
— Store closings have realized 30%+ sales accretion to nearby individual store level
stores and online
Analyzed each market to understand customer demand
Projected U.S. Store Closures and how to align with current store footprint
Examined each store and considered qualitative factors
such as outlook on location and impact on strategy
306 Cross-functional approach involving real estate, finance,
and field store operations functions
207 225
189
3 Made final decision on every corporate store
141
High-profitability stores targeted for lease renewal (and
possible refurbishment) if high growth potential and
location in core household area
2017A 2018E 2019E 2020E 2021E Low-performing stores targeted for closure
Continue to monitor performance of third group of stores
and either seek rent reduction or renew on short-term
basis in order to optimize fleet while maximizing flexibility
173 Enhanced Customer Engagement
Overview of Customer Base Buildout
GNC is a “one-stop” shop providing a unique experience for customers
A B C
In Store
Loyalty Programs Omnichannel
Experience
myGNC Rewards / Customer Education
GNC.com / Amazon
Pro Access and Service
Customer Engagement
Omnichannel Initiatives “Lab” Store Initiative
Strategy
183A Enhanced Customer Engagement
Loyalty Programs and Customer Engagement Strategy
Loyalty Programs Overview Customer Engagement Strategy
Retain / Maximize
Strategic enhancement of PRO membership tier
Invest in customers through highly targeted rewards
Free Loyalty Tier (point-based system)
Exclusive service, communication and proposition development
myGNC Strong sign-up rate of ~16mm total Example: Recently altered PRO Days schedule to allow easier
Rewards members as of end of Q3 2018 participation
Loyalty members average order value Nurture
(AOV) higher than non-member AOV Personalized recommendations and content to enhance GNC brand
On track to reach 2018 enrollment target Investment to drive share of wallet, AOV and trips
Example: Expand data collection to improve customization and evolve
CRM to increase personalization
Acquire
Paid Loyalty Tier Targeted use of paid media to win net new customers and encourage
Pro Access ~1mm members as of end of Q3 2018 one more trip
Improve first contact recognizing initial product, channel and customer
Members visit more often and spend 4x as feedback
much Example: Relaunching new customer welcome series to drive
increased engagement
Number of Customers by Annual Spend ($)
Acquire
Nurture
90% of revenue tracked in loyalty programs, Retain / Maximize
allowing GNC to optimize media spend to drive
omnichannel sales most efficiently
< $20 $20-$300 $300+
193B Enhanced Customer Engagement
Online Platforms
GNC.com Amazon Site
More than 20mm visits each quarter Launched in 2017 and outperforming expectations
Aligned pricings and promotions between GNC.com and in-store Strong sales of GNC-branded products
Online platforms accounted for $150mm in LTM sales (+28% YTD growth)
203B Enhanced Customer Engagement
Omnichannel Initiatives
Completed / In Progress Initiatives GNC Will Effectively Engage the Customer Across All Platforms
Web
Website enhancements
— E.g., Search, taxonomy, item
attribution, streamlined checkout
Integrated Mobile strategy for customer
Shopping engagement
Experience Develop guided shopping experiences
online
Integrate data connectivity across tools
/ platforms
Deploy and enhance subscription
service
Order
Management / Local store inventory availability on
Fulfilment website
GNC Delivers program giving in-store
customers access to extended aisle
214 Continued Product Innovations
Differentiated Offering: GNC Branded and 3rd Party Exclusive Products
GNC Branded Products 3rd Party Exclusive Products
Proprietary products drive significant margin capture 3rd Party Exclusive partner for 3rd
GNC Branded
GNC branded products are increasing as share of ~52% Exclusive party brands to get new ~9%
Products Total Sales innovations to market Total Sales
sales with trend expected to continue Products
Innovation Case Study: Slimvance Preferred Product Program rewards vendors
who deliver on:
Slimvance is a category-defining, weight loss supplement that can help consumers lose 6X
more weight than diet and exercise alone as proven in a clinical study
— Products with meaningful differentiation
Launch of Slimvance has increased market share in the weight management category that are exclusive to GNC
Slimvance has successfully attracted new customers and driven a larger basket (and — Distribution plan that protects the
majority of items in average basket are GNC-branded attached items) specialty channel
— Nearly half of Slimvance customers in 2018 are new GNC customers — Top-of-the funnel advertising that directs
consumers to GNC
Slimvance average ticket
+ ~35%
Weight Management w/o Slimvance
Slimvance
224 Continued Product Innovations
2018 Innovation Pipeline
Innovation Case Study: Beyond Raw Relaunch
Beyond Raw Beyond Raw is the #1 selling Performance Brand at GNC
(Brand — On pace for over $100M in 2018 Sales (over 100% growth) Sales ($ in millions)
Relaunch) Full brand relaunch inclusive of new packaging and flavors
$50 mm
AMP Brand and Wheybolic February 2018 relaunch has reinvigorated
AMP
product line and resulted in positive growth
(Brand
Relaunch encompassed 12 new products and re-formulated or enhanced
Relaunch) 35 other products
Earth Genius was created as a natural, wholesome alternative for the
mainstream customer—gluten free, non-GMO, crafted with no artificial
Earth Genius colors, flavors, or sweeteners
Initial distribution in June with full marketing launch at end of September
~ 125% CAGR
All-natural botanical blend with unique and quantifiable clinical
benefits; proven to improve joint stiffness, function and comfort
Tamaflex GNC has secured global rights to the Tamaflex trademark and will bring the
ingredient to market first
Official launch in stores at end of September
$10 mm
Total Lean is a comprehensive line of products for weight management
which includes meal replacements, snacks and thermogenics (for
Total Lean improved calorie burning)
Relaunch planned in 2019
H1'16 H2'16 H1'17 H2'17 H1'18
Innovative Product Development Provides A Unique Competitive Advantage:
Expecting to Introduce 275+ GNC SKUs in 2018 Generating $200mm Sales
23Cost Savings Initiatives to
Fund Go-Forward Strategy
Overview of Expected Cost Savings Expected Cost Savings Detail
($ in millions)
Selected Initiatives
$40-50
Simplify product packaging e.g., eliminate
Product Cost & boxes and shrink wrap, reduce weight
Packaging Reverse auction for product ingredients
Reduce packing costs
Distribution &
Conduct network review to reduce shipping
Transportation costs
Occupancy Review and optimize leases
Salaries & Benefits Re-align organization to new focus areas
Reduce spend on lower-impact channels
(e.g., traditional advertising)
Marketing
Redirect to higher ROI digital advertising,
social, and CRM
Product Cost & Distribution and Occupancy Salaries & Marketing Other SG&A Total Expected
Packaging Transportation Benefits Cost Savings
Reduce consulting spend
Other SG&A
1 2 3 4 5 6 Reduce IT spend
~$40-50mm of cost savings targeted across the organization over the next 2 years
with implementation aided by third-party consultants ($15-20mm in 2019 and $25-30mm in 2020)
24II. Financial Overview
25Historical Financial Performance
($ in millions)
Revenue & same store sales growth ($mm) Adjusted EBITDA2 & margin ($mm)
Revenue Growth EBITDA margin
SSS Growth1 $498
$2,683 $2,570 $405
$2,481 $2,368
$278
$237
2015 2016 2017 LTM 3Q18 2015 2016 2017 LTM 3Q18
1.1% (4.2)% (3.5)% (4.6)% 18.6% 15.8% 11.0% 10.1%
(1.2)% (6.3)% 0.2% 0.8%
Free cash flow3 ($mm) Capex
$309 $60
$46
$187 $197
$32
$132
$19
2015 2016 2017 LTM 3Q18 2015 2016 2017 LTM 3Q18
Source: Company filings; SSS growth reflects domestic retail and GNC.com SSS performance.
Note: FY 2016 – LTM 3Q18 results reflect the adoption of revised revenue recognition guidance. FY 2015 results not adjusted for revised revenue recognition.
1 Figures based on product sales only.
2 As defined per credit agreement. Please refer to Appendix in Third Quarter Earnings Release for reconciliation of non-GAAP measures.
3 Defined as operating cash flows (excluding fees relating to the debt refinancing) less investing cash flows (excluding acquisitions, except for store acquisitions).
26Pro Forma Capitalization
($ in millions)
30-Sep-18 x Adj. Tranche
CCR: B3 / CCC+ ($mm) EBITDA Pricing Maturity Ratings
Cash & Cash Equivalents $ 33
$100mm ABL Revolver1 $- -x L + 175 Aug-22 - / B-
FILO Term Loan1 263 1.1 L + 700 Dec-22 Ba3 / B
Tranche B-1 Term Loan 148 1.7 L(0.75%) + 250 Mar-19 B3 / B-
Tranche B-2 Term Loan1,2 547 4.0 L(0.75%) + 925 Mar-21 B3 / B-
Total Secured Debt $ 959 4.0 x
Net Secured Debt 926 3.9
Convertible Notes 174 4.8 1.500 % Aug-20 -/-
Total Debt $ 1,133 4.8 x
Net Debt 1,099 4.6
Harbin Investment 100
LTM Adj. EBITDA $ 237
Liquidity Analysis ($mm)
Cash & Cash Equivalents $ 33
(+) ABL Borrowing Base Capacity 100
(-) ABL Drawn -
(-) Letters of Credit Outstanding (6)
Total Liquidity $ 127
Annualized Interest Expense3 ($mm)
$100mm ABL Revolver $1
FILO Term Loan 28
Tranche B-1 Term Loan 7
Tranche B-2 Term Loan 69
Convertible Notes 3
Total Annualized Cash Interest Expense $ 108
EBITDA / Annualized Cash Interest Expense 2.2 x
1 Subject to May 2020 springing maturity if Convertible Notes balance is not paid down to at least $139 million.
2 Pro forma for 8-Nov-18 $100mm par repayment using cash proceeds from Harbin Pharmaceutical Group Holdings Co., Ltd.
3 Represents cash interest paid during the three-month period ending 30-Sep-18 on an annualized basis. Tranche B-2 Term Loan calculated on a pro rata basis for $100mm par repayment.
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