Making Every
Occasion
a Celebration

Cue the Confetti

2017 was another year of growth at Party City.

We continue to be a leading player in our category. A globally recognized brand. And one of the world’s largest designers, manufacturers and retailers of party goods.

We continue to expand our geographical footprint. With over 800 permanent company-owned stores across the US and Canada. Another 300 temporary Halloween stores. About 40,000 rooftops around the world. And more to come.

We continue to give our customers the best experience. In store. Online. At sporting events and theme parks and cruise ships and wherever else their celebrations take them.

Yes, 2017 was a strong year. And the party’s not stopping yet.

Party city
by the numbers

Financial Highlights

4%

Total
Revenues
[$2.37 Billion]

3%

Share
of Shelf

40

BPS Gross Profit Margin

8%

Adjusted
Eps
[$1.24]

11%

Free Cash
Flow1
[$342.2 Million]

5%

Third-Party
Wholesale Sales2

Consistent growth. Multiple levers to grow our topline. A unique vertical model that drives gross margin accretion. Strong cash flow characteristics.

2017 was marked by solid financial performance, driven by our vertically integrated business model. We are well-positioned to deliver even greater success in the coming year.

1Adjusted EBITDA less capital expenditures 2After adjusting for acquired franchise stores

From
Our CEO

James M. Harrison

A Toast To Profitable Growth.

Dear Shareholders, Customers and Employees:

“Making Every Occasion a Celebration” is what Party City Holdco is all about. Whether the consumer is shopping in one of our Party City stores or one of the more than 40,000 rooftops around the globe we supply, we are the clear leader in the marketplace, as we help our customers celebrate life’s special moments. With our unrivaled breadth of assortment and expanding distribution footprint across domestic and international markets, we remain the destination of choice for consumers’ celebrations. While I am proud of our achievements over the past 20 plus years, I am even more excited about the opportunities ahead of us.

Sustainable growth remains an inherent characteristic of our business, and 2017 was another important year for our Company. We delivered our 8th straight year of record revenues in constant currency, and our 17th straight year of adjusted EBITDA growth. We continue to operate this business looking to leverage the full complement of our manufacturing, wholesaling and retailing capabilities with the goal of increasing value for our shareholders. We accomplished a lot in 2017, with the clear realization that we have a lot more to do.

2017 was a year of many significant achievements for our Company, highlighted by the fact that we:

  • Grew revenues by 4% in constant currencies, reflecting many of our attractive and diverse opportunities for attaining topline growth;
  • Increased gross margins by 40 bps, driven largely by increasing our share of shelf (the percentage of product sold in our retail business that flows through our vertical model) by 3 percentage points to 79.6%, and building out our sourcing reach beyond China;
  • Broadened our international presence while realizing 15% constant currency growth in international wholesale revenues, primarily driven by strong growth in the U.K., Germany and Australia and our expanded presence in Mexico;
  • Increased our retail store base by 53 net new stores, totaling almost 9% in net square footage growth;
  • Expanded our manufacturing capabilities through the strategic acquisitions of Granmark (Mexico) and Print Appeal (Dallas);
  • Strengthened our balance sheet by generating $342 million in free cash flow, allowing us, in part, to execute a highly accretive share buyback program in the fourth quarter;
  • Grew adjusted EPS by 8%, to $1.24 per share.

As an organization, we reject the status quo, and embrace a mindset of always challenging ourselves to be better and to get better in every aspect of our business. In 2017, we took aggressive steps towards becoming a world-class retailer; structurally increasing the productivity of our stores while focusing on improving the shopping experience for our customers, by providing improved in-store engagement and service, creating a unique shopping experience commensurate with our products, and enhancing technology to meet the growing expectations of our customers.

The party supplies consumer continues to demonstrate their preference to shop this category in-store to best experience the innovation and inspiration of our unmatched product offering. However we recognize that the lines between brick-and-mortar and online continue to blur. As such, we are focused on creating a seamless shopping experience wherever, and however, the consumer chooses to shop.

In 2017 we also took bold steps to better position our consumer products businesses for growth. Domestically, we continued to enhance our manufacturing capabilities, allowing us to focus on further developing innovative products that will expand our offering to new and growing channels of trade outside of the core specialty party goods channel. These include alternative channels such as cruise lines, zoos and theme parks to name a few. Internationally, we strengthened our relationships with key wholesale and retail partners across the globe, leveraging our product expertise and category management know-how.

Our unique vertical model was once again the engine that drove our financial results. In 2017, we expanded this vertical model, as share of shelf grew 300bps year over year. We increased our sourcing presence across the world and made the necessary investments to increase manufacturing productivity and efficiency. Profitable growth, in large part through consistent and structural gross margin gains, remains a clear competitive advantage for our business; and significant opportunity remains.

Our capital allocation philosophy is straightforward, reflecting the inherent strong cash flow characteristics of the business. We continued to focus on the disciplined pay down of debt while investing for growth and opportunistically repurchasing stock, and the Tax Cuts and Jobs Act of 2017 will only strengthen our position.

With a focus on our strategic priorities, and with the passion and commitment of all of our great associates, we are well-positioned for future success. I want to personally thank the twenty thousand year-round associates who bring our products to life every day, and also thank our shareholders for their continued support.

Sincerely,

Signature James M. Harrison

Vertically Integrated

Our vertical model

The Soul of Party City.

Our vertical model is at the core of our business.

We are the only party goods supplier to directly control every step of the brand development process and overall value chain – from design, sourcing and production through the sale of products across all channels. Not only does this model enhance our profitability, but it sets us apart from competitors.

The insights we gain at retail come full circle, as we tailor our product offerings to consumers’ evolving tastes. And it’s all done with unmatched speed to market.

manufacturing

Manufacturing

One out of every 5 products we sell at retail is produced at our manufacturing facilities in the US and abroad. Of products sourced internationally, we continue to optimize our geographical footprint to take advantage of profitable opportunities in emerging markets.

Our goal is to self-manufacture at least half of the products we sell in our retail business. This is our key to becoming even more cost-competitive, ensuring the quickest route-to-market, and providing the most innovative design solutions.

wholesale

Wholesale

Party City is much more than a retailer. At our core, we are a products business serving a broad customer base across all channels and geographies. Innovative product development, channel expansion and further market penetration continue to fuel our growth.

Our multi-channel customer base remains balanced. No single customer represents more than 10% of third party sales.

retail

Retail

Our consumers prefer shopping in-store, given the breadth of our offering, emotional connection and unique shopping experience. That’s why our 800+ company-owned stores remain a vital asset. And why we expanded to include another 53 stores during 2017. We also have a meaningful online business, accounting for ~9% of our total retail sales.

We’re instituting ongoing initiatives for improving store performance and elevating the in-store experience. Just a few of these involve a more interactive approach, increased labor productivity and customized product assortments.

~23%

self-manufactured

5%

Third party sales1

800+

Company-owned stores

1After adjusting for acquired franchise stores.

A Lifetime Of Celebrations

From Birth To Retirement

We’re proud to be a trusted part of every special moment in a person’s life.
No matter the occasion, our unmatched product offering uniquely equips us to make it a special celebration.
In 2017, the products we designed for everyday occasions made up 70% of our retail sales.
The remaining sales comprised of our holiday and seasonal items.

We're Party Ready Anytime. Anywhere. Any Reason.

Product Assortment

The Deepest.
The Widest.
The Most Innovative.

Every year, we introduce more than 8,000 new products and 50 new coordinated ensembles. This wouldn’t be possible without our in-house design team consistently identifying trends, innovating products, and composing ensembles.

Our proprietary designs, coupled with top tier licenses from major brands, enable us to offer a deeper assortment of merchandise than most competitors. At a price point they struggle to match.

30K

SKUs
IN STORE
SKUs in store

80K

SKUs
ONLINE
SKUs online

Seamless Shopping Experience

Omni-channel strategy

Multiple Channels. One Brand.

Today’s digitally adept customer demands a smooth transition from in-store to online shopping. Across any device.

We are committed to providing our customers with an unmatched shopping experience, wherever, and however, they prefer to shop this category.

We strengthened our e-commerce platform, bolstering core functionality and site responsiveness.

We improved the shopping experience by optimizing and refining search capabilities.

We deployed buy online and pick up in-store functionality, and enhanced technology to allow users to perform real-time inventory availability checks at their closest stores.

Our Guest List is Growing

Global expansion

4 Core International Markets.

Our expansive product offering and category management expertise has helped fuel strong partnerships with key retailers around the world. Our products are now sold in over 100 countries – including our core international markets in the United Kingdom, Europe, Mexico and Australia.

In the last year we’ve seen ~15% growth in consumer products sales internationally. This rise has been driven by key acquisitions, product innovation and our expanding store-in-store strategy with prominent retailers across our key markets.

United Kingdom, Australia & Europe

Deploying our store-in-store concept throughout Europe and Australia, we act as category manager of party products in partner retail locations. This approach provides for organic category expansion while further reinforcing our position as the market leader.

MEXICO

By acquiring Granmark and partnering with Grupo Max in Mexican markets, we‘ve not just broadened our retail operations in Latin America. We’ve also created an incremental demand for our products.

New Ways To Party

Alternative Channels

Beyond Our Core Channels of Trade.

More and more, consumers are taking their celebrations out of the home and into new celebration venues. We plan to meet them there, equipped with alternative party goods to match: Costume kits and accessories on cruise ships. Branded popcorn tubs for movie theaters. Licensed souvenir products at sports stadiums.

With our manufacturing and sourcing capabilities, there is no end to what we can deliver.

The Party People

Our Community

9,400 full-time employees. 10,400 part-time employees.

We pride ourselves on creating a tremendous environment for every person touched by the Party City brand. This is only done with the right associates. Our world class management team is committed to attracting and maintaining people impassioned by our mission – that is, to create the most memorable moments in people’s lives.

Over $16 million in charitable donations since 2011.

United in our pursuit, we hope to have a significant positive impact on the world.

Cleveland Clinic
Make A Wish
Children's Hospital Colorado
St. Jude Children's Research Hospital
Boston Children's Hospital
Boys & Girls Clubs
American Heart Association
Wounded Nature
Sunshine
University of Vermont Children's Hosptal
Dyslexic Advantage
Adaptive Sports Foundation
Sesame Street
Memorial Sloan Kettering Cancer Center

Corporate Info

Board of Directorsas of April 12, 2018

Gerald C. Rittenberg Director & Non-Executive Chairman

James M. Harrison Director & Chief Executive Officer

Todd M. Abbrecht Director

Steven J. Collins Director

William S. Creekmuir Director

Douglas A. Haber Director

Uttam K. Jain Director

Lisa K. Klinger Director

Norman S. Matthews Director

Joshua M. Nelson Director

Morry J. Weiss Director

Executive management

James M. Harrison Director & Chief Executive Officer

Daniel J. SullivanEVP, Chief Financial Officer

Gregg A. Melnick President – PCHI

Ryan T. VeroEVP, President – Retail

Michael P. HarrisonSr. Vice-President & General Manager – North American Consumer Products Group

Corporate offices

80 Grasslands Road
Elmsford, NY 10523

Annual meeting

The Annual Meeting of Shareholders of Party City Holdco Inc. will be held June 6, 2018 at 10:00 a.m. local time at 100 Grasslands Road, Elmsford, NY 10523

Transfer Agent and Registrar

ComputerShare

Stock

Since the Company’s initial public offering on April 16, 2015, shares of Party City have been quoted on the NYSE, and currently trade under the symbol “PRTY”.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP
New York, New York

Investor Relations

InvestorRelations@partycity.com