GlobeNewswire Inc | Nov 9, 2020 05:55AM EST

November 09, 2020

Total Sales of $533.8 million for Third Quarter; Brand comparable sales growth of 8.3%, highest in 9 yearsNet Income of $239.7Million; Adjusted EBITDA of $49.2 million up 187% from Third Quarter 2019Better Than Expected Halloween and October Performance

ELMSFORD, N.Y., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Party City Holdco Inc. (the Company or PRTY; NYSE:PRTY) today announced financial results for the third quarter ended September 30, 2020, as well as total revenue for fiscal October 2020.

Brad Weston, Chief Executive Officer, stated, We are very pleased with our better than expected third quarter performance, highlighted by the continued strength in our core business. Against a pandemic-impacted environment, we delivered $534 million in sales, including an 8.3% brand comparable sales increase, a stabilization in our Wholesale revenues and an almost threefold increase in Adjusted EBITDA over the prior year period.

The strides we are making to increase relevancy and elevate our customer experience across channels continue to strengthen our position of authority when it comes to celebrations. In addition, these results reflect the consumers desire and willingness to celebrate and are a testament to the agility and discipline with which we are operating the business. Mr. Weston added.

Third Quarter Summary:

-- Total revenues were $533.8 million, a decrease of 1.2% on a reported basis and a decrease of 1.6% on a constant currency basis. -- Total Retail sales decreased 1.3% on a reported basis and 1.5% on a constant currency basis, with a brand comparable sales increase of 8.3%, offset primarily by the divestiture of 65 Canadian retail stores in October 2019 as well as the impact of 76 store closures from the company's store optimization program throughout 2019 and 2020. The total number of corporate Party City stores was 739 as of September 30, 2020 compared to 843 a year ago. -- Brand comparable sales increased 8.3% in the third quarter due to strength in our core business particularly in the balloon, birthday, and entertaining categories. -- North American digitally enabled sales increased 36.0% including BOPIS, curbside pickup, and delivery. -- Net third-party Wholesale revenues decreased 0.8% or a decrease of 1.6% in constant currency, with continued improvement in independent and franchise customer trends. -- Total gross profit margin increased 250 basis points to 33.1% of net sales. Excluding certain items not indicative of core operating performance, gross profit margin increased 250 basis points to 34.4% of net sales mainly due to occupancy leverage, lower sales promotions, and favorable sales mix. -- Operating expenses totaled $160.2 million or $25.0 million lower than the third quarter of 2019 (excluding the goodwill impairment charges in 2020 and 2019). Excluding certain items not indicative of core operating performance, operating expenses totaled $152.4 million, or 28.6% of revenue, a reduction of $23.6 million or 400 basis points compared to the third quarter of 2019, primarily due to lower retail operating expenses as a result of the lower store count, lower Wholesale selling expenses and the temporary benefits from cost cutting related to the pandemic. -- Interest expense was $13.4 million during the third quarter of 2020, compared to $29.4 million during the third quarter of 2019 mainly due to $12.2 million in forgiveness of certain semi-annual interest as a result of the debt exchange refinancing transaction completed in July 2020. -- Reported GAAP net income was $239.7 million, or $2.24 per share. -- Adjusted net income was $11.0 million, or $0.10 per diluted share, an improvement of $0.38 per share compared to adjusted net loss of $25.7 million, or $0.28 per share, in the third quarter of 2019. (See Non-GAAP Financial Information) -- Adjusted EBITDA was $49.2 million, versus $17.1 million during the third quarter of 2019. (See Non-GAAP Financial Information)

Fiscal October 2020 Update:

For fiscal October 2020 (for the Companys retail segment, fiscal October 2020 consisted of the five-week period ended October 31, 2020), the Company reported total revenue of $364.3 million, or 15.9% below the same period of last year. Total Retail revenue decreased approximately 16.0%. Brand comparable sales, which include Company-owned Party City stores in the U.S and North American e-commerce operations, decreased 2.9% with Halloween declines partially offset by continued strength in core categories. North American digitally enabled sales, including BOPIS, curbside pickup, and delivery increased 30.2%. The remaining decrease was due to a strategic reduction in store count versus the prior year period. During the month of October 2020, the Company operated 740 total Party City locations vs 778 in the prior year period, and 25 temporary Halloween City stores, compared to 256 in 2019.

Mr. Weston continued, Our Halloween results were ahead of our expectations, driven by strong results within dcor and better than expected sales of costumes, despite the challenges of a pandemic-impacted backdrop. We are very proud of our entire Party City team who delivered an exceptional Halloween experience for our customers, despite the backdrop. We are particularly encouraged by the performance of our core categories into October, which demonstrate the strength and resiliency of our business and the traction we are seeing from our strategic initiatives, both of which bode well for our future performance.

We continue to relentlessly focus on our customers as we work to fulfill our mission of creating joy and making it easy to create unforgettable memories. We look forward to building on our progress as we close out the year in a substantially stronger competitive and financial position, concluded Mr. Weston.

Balance Sheet Highlights:

As of the end of the third quarter on September 30, 2020, the Company had $170.6 million in cash and approximately $178.5 million of availability under the ABL Facility, for total liquidity of $349.1 million.

In addition, the principal balance of debt net of cash on September 30, 2020 is $1,323 million. The principal balance of debt is used for the purpose of all leverage ratio calculations under our debt agreements. The following table shows the bridge from the balance sheet debt to the principal balance of debt:

Party City Anagram PCHI Consolidated Credit Group Holdings, LLC September30, September30, September30, December31, September30, 2020 2020 2020 2019 2019Balancesheet debt,net of $ 1,349,512 $ 303,062 $ 1,652,574 $ 1,704,317 $ 2,038,613 deferredfinancingcostsLess: Futureinterest 50,172 108,376 158,548 - - paymentsPrincipalbalance ofdebtoutstanding, 1,299,340 194,686 1,494,026 1,704,317 2,038,613 net ofdeferredfinancingcostsLess: Cash 150,352 20,210 170,562 34,917 34,572 Principalbalance of $ 1,148,988 $ 174,476 $ 1,323,464 $ 1,669,400 $ 2,004,041 debt net ofcash

Outlook:

The Company is providing the following fiscal Q4 2020 outlook. This outlook is subject to potential consumer and marketplace volatility due to the COVID-19 pandemic:

-- Total revenue of $675 to $695 million -- Brand comparable sales flat to down a low single digit percentage -- GAAP net income of $30 to $37 million -- GAAP diluted EPS of $0.28 to $0.35 -- Adjusted EBITDA of $80 to $90 million -- Adjusted net income of $33 to $40 million -- Adjusted diluted EPS of $0.31 to $0.37 -- Interest expense of approximately $15 million, with cash interest payments of approximately $9 million -- Ending corporate store count is expected to be approximately 740 stores -- Capital expenditures of approximately $13 to $18 million in Q4 2020 and approximately $45 to $50 million for the full year -- D&A of approximately $19 million in Q4 2020 and approximately $76 million for the full year. -- Principal balance of debt, net of cash at end of year of approximately $1.3 billion -- 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.

Conference Call Information

A conference call to discuss thethird quarter 2020 financial results is scheduled for today, November 9, 2020, at 8:00 a.m. Eastern Time, and the Company has posted certain supplemental presentation materials to its investor relations website. Investors and analysts interested in participating in the call are invited to dial 866-270-1533 (U.S. domestic) or 412-317-0797 (international) approximately 10 minutes prior to the start of the call. The conference call will also be webcast at http://investor.partycity.com/. To listen to the live call, please go to the website at least 15 minutes early to register and download any necessary audio software. The webcast will be accessible for one year after the call.

Website Information

We routinely post important information for investors on the Investor Relations section of our website, http://investor.partycity.com/. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Non-GAAP Information

This press release includes non-GAAP measures including Adjusted EBITDA and Adjusted Net Income/Loss and Adjusted Earnings per Share. We present these non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit facilities use Adjusted EBITDA to measure compliance with certain covenants. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures in tables accompanying this release. We also evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. We also provide free cash flow, defined as Adjusted EBITDA less capital expenditures, and net debt leverage, which is calculated by adding Loans and Notes Payable, Current Portion of Long Term Obligations and Long Term Obligations, Excluding Current Portion, subtracting Cash and Cash Equivalents and dividing by Adjusted EBITDA for the trailing twelve month period. Adjusted Earnings per Share is calculated by dividing Adjusted Net Income by the Weighted Average Number of Common Shares-Diluted. We believe providing these non-GAAP measures provides valuable supplemental information regarding our results of operations and leverage, consistent with how we evaluate our performance. In evaluating these non-GAAP financial measures, investors should be aware that in the future the Company may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. The Company's presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. The Company has provided this information as a means to evaluate the results of its core operations. Other companies in the Company's industry may calculate these items differently than it does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

Forward-Looking Statements

This press release and the commentary in the conference call to be held today each contains forward-looking statements. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, including Party Citys expectations regarding its ability to maximize the potential of its plans to open and close stores, plans to invest capital expenditures, and anticipated interest expense and depreciation and amortization expense for fiscal year 2020. The forward-looking statements contained in this press release are based on management's good-faith belief and reasonable judgment based on current information, and these statements are qualified by important risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those forecasted or indicated by such forward-looking statements. These risks and uncertainties include: potential risks and uncertainties relating to the ultimate geographic spread of COVID-19; the severity of the COVID-19 pandemic; the duration of the COVID-19 pandemic; actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to treat its impact; the potential negative impacts of COVID-19 on the global economy and foreign sourcing; the impacts of COVID-19 on our financial condition and business operation; our ability to compete effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store growth strategy; decreases in our Halloween sales; the impact of helium shortages on our financial performance; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer spending and general economic conditions, including as a result of the COVID-19 pandemic; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risks and uncertainties set forth in Risk Factors in Party Citys Annual Report on Form 10-K for the year ended December 31, 2019 and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward looking statements. Except as may be required by any applicable laws, Party City assumes no obligation to publicly update or revise such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information, future developments or otherwise.

About Party City

Party City Holdco Inc. is the leading party goods company by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue. The Company is a popular one-stop shopping destination for party supplies, balloons, and costumes. In addition to being a great retail brand, the Company is a global, world-class organization that combines state-of-the-art manufacturing and sourcing operations, and sophisticated wholesale operations complemented by a multi-channel retailing strategy and e-commerce retail operations. The Company is the leading player in its category, vertically integrated and unique in its breadth and depth. The Company designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. The Companys retail operations include approximately 830 specialty retail party supply stores (including franchise stores) throughout North America operating under the names Party City and Halloween City, and e-commerce websites, principally through the domain name PartyCity.com.

PARTY CITY HOLDCO INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share data, unaudited)

September30, December31, 2020 2019 (Note 2) (Note 2) (Unaudited)ASSETS Current assets: Cash and cash equivalents $ 170,562 $ 34,917 Accounts receivable, net 149,825 149,109 Inventories, net 630,357 658,419 Prepaid expenses and other current assets 112,038 51,685 Total current assets 1,062,782 894,130 Property, plant and equipment, net 206,447 243,572 Operating lease asset 741,524 802,634 Goodwill 669,564 1,072,330 Trade names 383,666 530,320 Other intangible assets, net 34,505 45,060 Other assets, net 9,521 7,273 Total assets $ 3,108,009 $ 3,595,319 LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS? EQUITYCurrent liabilities: Loans and notes payable $ 303,894 $ 128,806 Accounts payable 179,938 152,300 Accrued expenses 202,636 150,921 Current portion of operating lease liability 194,476 155,471 Income taxes payable ? 35,905 Current portion of long-term obligations 14,342 71,524 Total current liabilities 895,286 694,927 Long-term obligations, excluding current 1,334,338 1,503,987 portionLong-term portion of operating lease 677,183 720,735 liabilityDeferred income tax liabilities, net 49,508 126,081 Other long-term liabilities 15,559 16,517 Total liabilities 2,971,874 3,062,247 Redeemable securities ? 3,351 Commitments and contingencies Stockholders? equity: Common stock (110,573,555 and 94,461,576shares outstanding and 121,848,074 and 1,371 1,211 121,662,540 shares issued at September30,2020 and December31, 2019, respectively)Additional paid-in capital 970,145 928,573 Accumulated deficit (469,040 ) (37,219 )Accumulated other comprehensive loss (38,907 ) (35,734 )Total Party City Holdco Inc. stockholders? 463,569 856,831 equity before common stock held in treasuryLess: Common stock held in treasury, at cost(11,274,519 and 27,200,964 shares at (327,170 ) (327,086 )September30, 2020 and December31, 2019,respectively)Total Party City Holdco Inc. stockholders? 136,399 529,745 equityNoncontrolling interests (264 ) (24 ) Total stockholders? equity 136,135 529,721 Total liabilities, redeemable $ 3,108,009 $ 3,595,319 securities and stockholders? equity

PARTY CITY HOLDCO INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(In thousands, except share and per share data, unaudited)

Three Months Ended Nine Months Ended September30, September30, 2020 2019 2020 2019 Revenues: Net sales $ 532,053 $ 538,345 $ 1,198,160 $ 1,611,149 Royalties and 1,722 1,886 4,349 6,089 franchise feesTotal revenues 533,775 540,231 1,202,509 1,617,238 Cost of sales 355,923 373,413 890,587 1,065,511 Wholesale 11,950 16,084 37,115 50,929 selling expensesRetail operating 97,100 111,595 250,502 302,756 expensesFranchise 2,795 3,274 9,225 9,813 expensesGeneral andadministrative 42,191 43,062 162,118 126,497 expensesArt anddevelopment 4,257 5,927 13,095 17,568 costsDevelopment ? 2,728 2,932 7,966 stage expensesGain on sale/leaseback ? ? ? (58,381 )transactionStore impairmentand 1,926 2,574 20,818 25,817 restructuringchargesGoodwill,intangibles andlong-lived 44,732 259,100 581,380 259,100 assetsimpairmentTotal expenses 560,874 817,757 1,967,772 1,807,576 Loss from (27,099 ) (277,526 ) (765,263 ) (190,338 )operationsInterest 13,422 29,424 63,954 88,857 expense, netOther (income) (2,873 ) 2,047 4,287 6,643 expense, net(Gain) on debt (273,149 ) ? (273,149 ) ? refinancingIncome (loss)before income 235,501 (308,997 ) (560,355 ) (285,838 )taxesIncome tax (4,164 ) (27,252 ) (128,293 ) (21,809 )(benefit)Net income 239,665 (281,745 ) (432,062 ) (264,029 )(loss)Less: Net (loss)attributable to (42 ) (212 ) (241 ) (352 )noncontrollinginterestsNet income(loss)attributable tocommon $ 239,707 $ (281,533 ) $ (431,821 ) $ (263,677 )shareholders ofParty CityHoldco Inc.Net income(loss) per shareattributable tocommon $ 2.25 $ (3.02 ) $ (4.41 ) $ (2.83 )shareholders ofParty CityHoldcoInc.?BasicNet income(loss) per shareattributable tocommon $ 2.24 $ (3.02 ) $ (4.41 ) $ (2.83 )shareholders ofParty CityHoldcoInc.?DilutedWeighted-averagenumber of common 106,709,307 93,346,448 97,872,174 93,271,392 shares-BasicWeighted-averagenumber of common 106,875,631 93,346,448 97,872,174 93,271,392 shares-DilutedDividendsdeclared per $ ? $ ? $ ? $ ? shareComprehensive $ 244,607 $ (288,573 ) $ (435,235 ) $ (266,883 )income (loss)Less:Comprehensive(loss) (42 ) (213 ) (241 ) (364 )attributable tononcontrollinginterestsComprehensiveincome (loss)attributable tocommon $ 244,649 $ (288,360 ) $ (434,994 ) $ (266,519 )shareholders ofParty CityHoldco Inc.

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA(In thousands, unaudited)

Three Months Ended Nine Months Ended September30, September30, 2020 2019 2020 2019 (Dollars in thousands) Net (loss) income $ 239,665 $ (281,745 ) $ (432,062 ) $ (264,029 )Interest expense, net 13,422 29,424 63,954 88,857 Income tax (benefit) (4,164 ) (27,252 ) (128,293 ) (21,809 )Depreciation and 17,278 19,155 57,796 62,380 amortizationEBITDA 266,201 (260,418 ) (438,605 ) (134,601 )Non-cash purchase ? ? ? 2,757 accounting adjustmentsStore impairment andrestructuring charges 6,763 8,694 36,285 54,960 (a)Other restructuring,retention and 2,957 (73 ) 11,701 5,248 severance (b)Goodwill, intangiblesand long-lived assets 44,732 259,100 581,380 259,100 impairment (c)Deferred rent (d) 254 446 (2,618 ) (1,042 )Closed store expense 1,247 2,326 2,882 3,424 (e)Foreign currency (3,312 ) 646 955 486 losses/(gains), netStock optionexpense?time?based 111 409 671 1,150 (f)Stock option expense?performance?based ? ? 7,847 ? (n)Restricted stock unitand restricted cash 510 ? 510 ? awards expense ?performance-basedNon-employeeequity-based ? 128 1,033 386 compensation (g)Undistributed income(loss) in equity (59 ) 7 356 (195 )method investmentsCorporate development 581 4,588 6,193 11,782 expenses (h)Restricted stock units 429 610 1,568 1,543 ? time-based (i)Restricted stock unitexpense ? ? 560 ? 1,036 performance-based (m)Non-recurring legal 661 194 7,170 1,795 settlements/costs(Gain) on debt (273,149 ) ? (273,149 ) ? refinancing (p)Gain on sale/leaseback ? ? ? (58,381 )transaction (o)COVID - 19 (l) 679 ? 71,059 ? Other 546 (75 ) 3,034 217 Adjusted EBITDA $ 49,151 $ 17,142 $ 18,272 $ 149,665

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA, Continued(In thousands, unaudited)

Three Months Ended September 30, 2020 EBITDA Adjustments Stock Option Expense/Non- Employee Other September Store Corporate Equity restructuring, Closed OtherSeptember 30, 2020 Goodwill, intangibles impairment Gain on debt development Compensation Deferred retention store COVID- Foreign 30, GAAP and long-lived assets and refinancing expenses Legal / Rent and expense 19 currency 2020 Basis (as impairment (c) restructuring (p) (h) Restricted (d) severance (e) (l) losses Non-GAAP reported) charges (a) stock units (b) basis ? time- based (f)(g)(i)(n)Revenues: Net sales $ 532,053 $532,053Royalties and franchise 1,722 1,722feesTotal revenues 533,775 533,775Cost of sales 355,923 (4,837 ) (80 ) (1,266 ) (469) 349,271Wholesale selling expenses 11,950 11,950Retail operating expenses 97,100 (224 ) (1,225 ) (1,745 ) 93,906Franchise expenses 2,795 2,795General and administrative 42,191 (370 ) (661 ) (1,050 ) 50 (2,957 ) (22 ) 2,332 39,513expensesArt and development costs 4,257 4,257Store impairment and 1,926 (1,926 ) ?restructuring chargesGoodwill, intangibles andlong-lived assets 44,732 (44,732 ) ?impairmentTotal expenses 560,874 (44,732 ) (6,763 ) ? (370 ) (661 ) (1,050 ) (254 ) (2,957 ) (1,247 ) (679 ) ? (469) 501,692(Loss) from operations (27,099 ) 32,083Interest expense, net 13,422 13,422Other (income) expense, net (2,873 ) (211 ) 3,312 (18)210(Gain) on debt refinancing (273,149 ) 273,149 ?Income (loss) before income 235,501 18,451taxesInterest expense, net 13,422 13,422Depreciation and 17,278 17,278amortizationEBITDA 266,201 49,151Adjustments to EBITDA (217,050 ) (44,732 ) (6,763 ) 273,149 (581 ) (661 ) (1,050 ) (254 ) (2,957 ) (1,247 ) (679 ) 3,312 (487)?Adjusted EBITDA $ 49,151 $ (44,732 ) $ (6,763 ) $ 273,149 $ (581 ) $ (661 ) $ (1,050 ) $ (254 ) $ (2,957 ) $ (1,247 ) $ (679 ) $ 3,312 $ (487) $49,151

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA, Continued(In thousands, unaudited)

Three Months Ended September 30, 2019 EBITDA Adjustments Stock Option Expense/Non- September Goodwill, Store Employee Other 30, intangibles impairment Gain Corporate Equity restructuring, Closed September 2019 and and on sale/ development Compensation Deferred retention store Foreign 30, GAAP long- restructuring leaseback expenses Legal / Rent and expense currency Other 2019 Basis lived assets charges transaction (h) Restricted (d) severance (e) gains Non-GAAP (as impairment (c) (a) (o) stock (b) basis reported) units ? time- based (f)(g)(i)(m)Revenues: Net sales $ 538,345 $ 538,345 Royalties and franchise fees 1,886 1,886 Total revenues 540,231 540,231 Cost of sales 373,413 (6,120 ) (656 ) 366,637 Wholesale selling expenses 16,084 16,084 Retail operating expenses 111,595 (2,240 ) 109,355 Franchise expenses 3,274 3,274 General and administrative 43,062 (194 ) (1,707 ) 210 73 (86 ) 41,358 expensesArt and development costs 5,927 5,927 Development stage expenses 2,728 (2,728 ) ? Store impairment and 2,574 (2,574 ) ? restructuring chargesGoodwill, intangibles and 259,100 (259,100 ) ? long-lived assets impairmentTotal expenses 817,757 (259,100 ) (8,694 ) ? (2,728 ) (194 ) (1,707 ) (446 ) 73 (2,326 ) ? ? 542,635 Income from operations (277,526 ) (2,404 )Interest expense, net 29,424 29,424 Other expense, net 2,047 (1,860 ) (646 ) 68 (391 )Income before income taxes (308,997 ) (31,437 )Interest expense, net 29,424 29,424 Depreciation and amortization 19,155 19,155 EBITDA (260,418 ) 17,142 Adjustments to EBITDA 277,560 (259,100 ) (8,694 ) ? (4,588 ) (194 ) (1,707 ) (446 ) 73 (2,326 ) (646 ) 68 ? Adjusted EBITDA $ 17,142 $ (259,100 ) $ (8,694 ) $ ? $ (4,588 ) $ (194 ) $ (1,707 ) $ (446 ) $ 73 $ (2,326 ) $ (646 ) $ 68 $ 17,142

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA, Continued(In thousands, unaudited)

Nine Months Ended September 30, 2020 EBITDA Adjustments Stock Goodwill, Option September intangibles Store Expense/Non- Other OtherSeptember 30, and impairment Gain on Corporate Employee restructuring, Closed 30, 2020 long- and debt development Equity Deferred retention store COVID- Foreign 2020 GAAP lived restructuring refinancing expenses Legal Compensation Rent and expense 19 currency Non- Basis assets charges (p) (h) / (d) severance (e) (l) losses GAAP (as impairment (a) Restricted (b) basis reported) (c) stock units (f)(g)(i)(n)Revenues: Net sales $ 1,198,160 $1,198,160Royalties and franchise fees 4,349 4,349Total revenues 1,202,509 1,202,509Cost of sales 890,587 (15,467 ) (214 ) (4,437 ) (42,446 ) (898)827,125Wholesale selling expenses 37,115 (1,840 ) (623 ) 34,652Retail operating expenses 250,502 2,685 (2,733 ) (16,312 ) 234,142Franchise expenses 9,225 (672 ) 8,553General and administrative expenses 162,118 (570 ) (7,170 ) (10,596 ) 147 (7,264 ) (149 ) (11,006 ) 125,510Art and development costs 13,095 13,095Development stage expenses 2,932 (2,932 ) ?(Gain) on sale/leaseback transaction ? ?Store impairment and restructuring 20,818 (20,818 ) ?chargesGoodwill, intangibles and long-lived 581,380 (581,380 ) ?assets impairmentTotal expense 1,967,772 (581,380 ) (36,285 ) ? (5,342 ) (7,170 ) (10,596 ) 2,618 (11,701 ) (2,882 ) (71,059 ) ? (898) 1,243,077(Loss) from operations (765,263 ) (40,568)Interest expense, net 63,954 63,954Other expense, net 4,287 (851 ) (1,033 ) (955 ) (2,492) (1,044)(Gain) on debt refinancing (273,149 ) 273,149 ?(Loss) before income taxes (560,355 ) (103,478)Interest expense, net 63,954 63,954Depreciation and amortization 57,796 57,796EBITDA (438,605 ) 18,272Adjustments to EBITDA 456,877 (581,380 ) (36,285 ) 273,149 (6,193 ) (7,170 ) (11,629 ) 2,618 (11,701 ) (2,882 ) (71,059 ) (955 ) (3,390)?Adjusted EBITDA $ 18,272 $ (581,380 ) $ (36,285 ) $ 273,149 $ (6,193 ) $ (7,170 ) $ (11,629 ) $ 2,618 $ (11,701 ) $ (2,882 ) $ (71,059 ) $ (955 ) $(3,390) $18,272

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED EBITDA, Continued(In thousands, unaudited)

Nine Months Ended September 30, 2019 EBITDA Adjustments Stock Option September Goodwill, Store Expense/Non- Other OtherSeptember 30, intangibles impairment Gain on Corporate Employee restructuring, Closed Non-Cash 30, 2019 and long- and sale development Equity Deferred retention store Purchase Foreign 2019 GAAP lived restructuring /leaseback expenses Legal Compensation Rent and expense Accounting currency Non- Basis (as assets charges transaction (h) / (d) severance (e) Adjustments gains GAAP reported) impairment (a) (o) Restricted (b) basis (c) stock units (f)(g)(i)(m)Revenues: Net sales $ 1,611,149 $1,611,149Royalties and franchise fees 6,089 6,089Total revenues 1,617,238 1,617,238Cost of sales 1,065,511 (29,143 ) 831 1,037,199Wholesale selling expenses 50,929 50,929Retail operating expenses 302,756 (31 ) (3,111 ) 299,614Franchise expenses 9,813 9,813General and administrative expenses 126,497 (1,795 ) (4,115 ) 211 (5,217 ) (313 ) 115,268Art and development costs 17,568 17,568Development stage expenses 7,966 (7,965 ) 1Gain on sale/leaseback transaction (58,381 ) 58,381 ?Store impairment and restructuring 25,817 (25,817 ) ?chargesGoodwill, intangibles and long-lived 259,100 (259,100 ) ?assets impairmentTotal expenses 1,807,576 (259,100 ) (54,960 ) 58,381 (7,965 ) (1,795 ) (4,115 ) 1,042 (5,248 ) (3,424 ) ? ? ?1,530,392Income from operations (190,338 ) 86,846Interest expense, net 88,857 88,857Other expense, net 6,643 (3,817 ) (2,757 ) (486 ) (22)(439)(Loss) before income taxes (285,838 ) (1,572)Interest expense, net 88,857 88,857Depreciation and amortization 62,380 62,380EBITDA (134,601 ) 149,665Adjustments to EBITDA 284,266 (259,100 ) (54,960 ) 58,381 (11,782 ) (1,795 ) (4,115 ) 1,042 (5,248 ) (3,424 ) (2,757 ) (486 ) (22)?Adjusted EBITDA $ 149,665 $ (259,100 ) $ (54,960 ) $ 58,381 $ (11,782 ) $ (1,795 ) $ (4,115 ) $ 1,042 $ (5,248 ) $ (3,424 ) $ (2,757 ) $ (486 ) $ (22)$149,665

During the three and nine months ended September 30, 2019, the Company initiated a store optimization program under which it identified 55 stores for closure, out of which 35 stores were closed in 2019 and 20 stores were closed in January 2020. In addition, 21 stores identified for closure in the first quarter of 2020 were closed in the third quarter. In conjunction with the program, during the nine months ended September 30, 2020, the Company recorded the following charges: inventory reserves: $12,880, operating lease asset impairment: $14,530 (including $6,051 related primarily to its active stores that were closed in earlier in(a) 2020 due to COVID-19), plant and equipment impairment: $2,065 and labor and other costs related to closing the stores: $4,223. During the first nine months ended September 30, 2019, the Company recorded the following charges related to the store optimization program: inventory reserves: $21,285, operating lease asset impairment: $14,149, property, plant and equipment impairment: $4,680, labor and other costs relates to closing stores: $6,327 and severance: $661. See Note 3 ? Store Impairment and Restructuring Charges in Item 1 for further discussion. Additionally, during the process of liquidating the inventory in such stores, the Company lost margin of $5,230. Amounts expensed during the first nine months of 2020 principally relate(b) to severance due to organizational changes. Amounts expensed during 2019 principally relate to executive severance and the write-off of inventory for a section of the Company?s Party City stores that were restructured. As a result of a sustained decline in market capitalization and reduced(c) fair value of certain intangibles and long-lived assets, the Company recognized non-cash pre-tax goodwill and intangibles impairment charges for the nine months ended September 30, 2020 totaling $581.4. The ?deferred rent? adjustment reflects the difference between accounting for rent and landlord incentives in accordance with GAAP and the(d) Company?s actual cash outlay for such items. During the first quarter of 2019, the Company adopted ASC 842. Under the standard, the difference between accounting for rent and landlord incentives in accordance with GAAP and the Company?s actual cash outlay for such items is now incorporated in the Company?s operating lease asset.(e) Charges incurred related to closing and relocating stores in the ordinary course of business.(f) Represents non-cash charges related to stock options ? time-based and performance-based.(g) The acquisition of Ampology?s interest in Kazzam, LLC in an equity transaction. See Note 19 ? Kazzam, LLC in Item 1 for further discussion. Primarily represents costs for Kazzam (see Note 19 ? Kazzam, LLC in Item(h) 1 for further discussion) and third-party costs related to acquisitions (principally legal and diligence expenses).(i) Non-cash charges for restricted stock units that vest based on service conditions. During February 2018, the Company amended the Term Loan Credit Agreement.(j) In conjunction with the amendment, the Company wrote-off capitalized deferred financing costs, original issue discounts and call premiums. The amounts are included in ?Amortization of deferred financing costs and original issuance discounts? in the adjusted net income table above. Represents income tax expense/benefit after excluding the specific tax(k) impacts for each of the pre-tax adjustments. The tax impacts for each of the adjustments were determined by applying to the pre-tax adjustments the effective income tax rates for the specific legal entities in which the adjustments were recorded. Represents COVID-19 expenses for employees on temporary furlough for whom(l) the Company provides health benefits; non-payroll expenses including advertising, occupancy and other store expenses.(m) Non-cash charges for restricted stock units that vest based on performance conditions. Represents non-cash charges related to stock options that vest based on performance conditions. For the three and nine months ended September 30,(n) 2020, this includes a one-time compensation expense of $7,847 that resulted from THL not achieving specified investment returns. See Note 10, Capital Stock of Item 1, ?Condensed Consolidated Financial Statements (Unaudited)? in this Quarterly Report on Form 10-Q. During June 2019, the Company reported a $58,381 gain from the sale and leaseback of its main distribution center in Chester, New York and its(o) metallic balloons manufacturing facility in Eden Prairie, Minnesota. The aggregate sale price for the three properties was $128,000. Simultaneous with the sale, the Company entered into twenty-year leases for each of the facilities. As described in Note 16 ? Current and Long-Term Obligations of Item 1,(p) ?Condensed Consolidated Financial Statements (Unaudited)? in this Quarterly Report on Form 10-Q, the Company recognized a gain of $273,149 on debt refinancing transactions.

PARTY CITY HOLDCO INC.RECONCILIATION OF ADJUSTED NET INCOME(In thousands, except share and per share data, unaudited)

Three Months Ended September Nine Months Ended September 30, 30, 2020 2019 2020 2019 (Dollars in thousands,except per share amounts)Income (loss) before $ 235,501 $ (308,997 ) $ (560,355 ) $ (285,838 )income taxesIntangible asset 2,899 3,553 8,444 10,528 amortizationNon-cash purchase ? 424 ? 4,200 accounting adjustmentsAmortization ofdeferred financing 875 1,222 3,276 3,511 costs and originalissuance discounts (j)Store impairment andrestructuring charges 1,321 8,694 29,475 54,960 (a)Other restructuring 2,622 (263 ) 10,139 2,822 charges (b)Goodwill, intangiblesand long-lived assets 44,732 259,100 581,380 259,100 impairment (c)Non-employeeequity-based ? 128 1,033 386 compensation (g)Refinancing charges ? ? ? 36 (j)Non-recurring legal 605 ? 7,026 ? settlements/costsStock optionexpense?time?based 110 409 671 1,150 (f)Stock option expense?performance?based ? ? 7,847 ? (n)Gain on sale/leaseback ? ? ? (58,381 )transaction (o)(Gain) on debt (273,149 ) ? (273,149 ) ? refinancing (p)Restricted stock unitexpense ? ? 560 ? 1,036 performance-based (m)COVID - 19 (l) 733 ? 71,113 ? Adjusted income (loss) 16,249 (35,170 ) (113,100 ) (6,490 )before income taxesAdjusted income tax 5,234 (9,459 ) (36,416 ) (2,117 )(benefit) expense (k)Adjusted net (loss) $ 11,015 $ (25,711 ) $ (76,684 ) $ (4,373 )incomeAdjusted net (loss)income per common $ 0.10 $ (0.28 ) $ (0.78 ) $ (0.05 )share ? dilutedWeighted-averagenumber of common 106,875,631 93,346,448 97,872,174 93,271,392 shares-diluted

During the three and nine months ended September 30, 2019, the Company initiated a store optimization program under which it identified 55 stores for closure, out of which 35 stores were closed in 2019 and 20 stores were closed in January 2020. In addition, 21 stores identified for closure in the first quarter of 2020 were closed in the third quarter. In conjunction with the program, during the nine months ended September 30,(a) 2020, the Company recorded the following charges: inventory reserves: $12,880, operating lease asset impairment: $14,530 (including $6,051 related primarily to its active stores that were closed in earlier in 2020 due to COVID-19), plant and equipment impairment: $2,065 and labor and other costs related to closing the stores: $4,223. During the first nine months ended September 30, 2019, the Company recorded the following charges related to the store optimization program: inventory reserves: $21,285, operating lease asset impairment: $14,149, property, plant and equipment impairment: $4,680, labor and other costs relates to closing stores: $6,327 and severance: $661. See Note 3 ? Store Impairment and Restructuring Charges in Item 1 for further discussion. Additionally, during the process of liquidating the inventory in such stores, the Company lost margin of $5,230. Amounts expensed during the first nine months of 2020 principally relate(b) to severance due to organizational changes. Amounts expensed during 2019 principally relate to executive severance and the write-off of inventory for a section of the Company?s Party City stores that were restructured. As a result of a sustained decline in market capitalization and reduced(c) fair value of certain intangibles and long-lived assets, the Company recognized non-cash pre-tax goodwill and intangibles impairment charges for the nine months ended September 30, 2020 totaling $581.4. The ?deferred rent? adjustment reflects the difference between accounting for rent and landlord incentives in accordance with GAAP and the(d) Company?s actual cash outlay for such items. During the first quarter of 2019, the Company adopted ASC 842. Under the standard, the difference between accounting for rent and landlord incentives in accordance with GAAP and the Company?s actual cash outlay for such items is now incorporated in the Company?s operating lease asset.(e) Charges incurred related to closing and relocating stores in the ordinary course of business.(f) Represents non-cash charges related to stock options ? time-based and performance-based.(g) The acquisition of Ampology?s interest in Kazzam, LLC in an equity transaction. See Note 19 ? Kazzam, LLC in Item 1 for further discussion. Primarily represents costs for Kazzam (see Note 19 ? Kazzam, LLC in Item(h) 1 for further discussion) and third-party costs related to acquisitions (principally legal and diligence expenses).(i) Non-cash charges for restricted stock units that vest based on service conditions. During February 2018, the Company amended the Term Loan Credit Agreement.(j) In conjunction with the amendment, the Company wrote-off capitalized deferred financing costs, original issue discounts and call premiums. The amounts are included in ?Amortization of deferred financing costs and original issuance discounts? in the adjusted net income table above. Represents income tax expense/benefit after excluding the specific tax(k) impacts for each of the pre-tax adjustments. The tax impacts for each of the adjustments were determined by applying to the pre-tax adjustments the effective income tax rates for the specific legal entities in which the adjustments were recorded. Represents COVID-19 expenses for employees on temporary furlough for whom(l) the Company provides health benefits; non-payroll expenses including advertising, occupancy and other store expenses.(m) Non-cash charges for restricted stock units that vest based on performance conditions. Represents non-cash charges related to stock options that vest based on performance conditions. For the three and nine months ended September 30,(n) 2020, this includes a one-time compensation expense of $7,847 that resulted from THL not achieving specified investment returns. See Note 10, Capital Stock of Item 1, ?Condensed Consolidated Financial Statements (Unaudited)? in this Quarterly Report on Form 10-Q. During June 2019, the Company reported a $58,381 gain from the sale and leaseback of its main distribution center in Chester, New York and its(o) metallic balloons manufacturing facility in Eden Prairie, Minnesota. The aggregate sale price for the three properties was $128,000. Simultaneous with the sale, the Company entered into twenty-year leases for each of the facilities. As described in Note 16 ? Current and Long-Term Obligations of Item 1,(p) ?Condensed Consolidated Financial Statements (Unaudited)? in this Quarterly Report on Form 10-Q, the Company recognized a gain of $273,149 on debt refinancing transactions.

PARTY CITY HOLDCO INC.SEGMENT INFORMATION(In thousands, except percentages, unaudited)

Three Months Ended September30, 2020 2019 Dollars in Percentage of Dollars in Percentage of Thousands Total Revenues Thousands Total RevenuesNet Sales: Wholesale $ 346,621 64.9 % $ 383,425 71.0 %Eliminations (179,049 ) (33.5 ) (214,547 ) (39.7 ) Net 167,572 31.4 168,878 31.3 wholesaleRetail 364,481 68.3 369,467 68.4 Total net 532,053 99.7 538,345 99.7 salesRoyaltiesand 1,722 0.3 1,886 0.3 franchisefeesTotal $ 533,775 100.0 % $ 540,231 100.0 %revenues

Nine Months Ended September30, 2020 2019 Dollars in Percentage of Dollars in Percentage of Thousands Total Revenues Thousands Total RevenuesNet Sales: Wholesale $ 692,715 57.6 % $ 962,793 59.5 %Eliminations (345,167 ) (28.7 ) (522,421 ) (32.3 ) Net 347,548 28.9 440,372 27.2 wholesaleRetail 850,612 70.7 1,170,777 72.4 Total net 1,198,160 99.6 1,611,149 99.6 salesRoyaltiesand 4,349 0.4 6,089 0.4 franchisefeesTotal $ 1,202,509 100.0 % $ 1,617,238 100.0 %revenues

Three Months Ended September30, 2020 2019 Dollars in Percentage Dollars in Percentage Thousands ofNet Thousands ofNet Sales SalesRetail $ 133,817 36.7 % $ 128,692 34.8 %Wholesale 42,313 25.3 36,240 21.5 TotalGross $ 176,130 33.1 % $ 164,932 30.6 %Profit

Nine Months Ended September30, 2020 2019 Dollars in Percentage Dollars in Percentage Thousands ofNet Thousands ofNet Sales SalesRetail $ 257,035 30.2 % $ 436,761 37.3 %Wholesale 50,538 14.5 108,877 24.7 TotalGross $ 307,573 25.7 % $ 545,638 33.9 %Profit

PARTY CITY HOLDCO INC.OPERATING METRICS

Three Months Ended September30, LTM 2020 2019 2020 Store Count Corporate Stores: Beginning of period 757 865 843 New stores opened 1 ? 2 Acquired 2 3 2 Closed (21 ) (25 ) (108 )End of period 739 843 739 Franchise Stores Beginning of period 96 98 98 New stores opened ? ? ? Sold to Party City (1 ) ? (2 )Closed (5 ) ? (6 )End of period 90 98 90 Grand Total 829 941 829

Three Months Ended Nine Months Ended September30, September30, 2020 2019 2020 2019 Wholesale Share of 81.1% 78.3% 81.4% 78.0%Shelf (a)Manufacturing Share 29.6% 25.4% 30.2% 26.7%of Shelf (b) Three Months Ended Nine Months Ended September30, September30, 2020 2019 2020 2019 Brand comparable 8.3% -2.6% -21.8% -2.0%sales (c)

(a) Wholesale share of shelf represents the percentage of our retail product cost of sales supplied by our wholesale operations.(b) Manufacturing share of shelf represents the percentage of our retail product cost of sales manufactured by the company.(c) Party city brand comparable sales include North American e-commerce sales.



Contacts:

Investor RelationsICRFarah Soi and Rachel Schacter203-682-8200InvestorRelations@partycity.com

Media RelationsICRBrittany Fraser203-682-8200PartyCityPR@partycity.com

Source: Party City Holdco Inc.