TORONTO, May 09, 2018 (GLOBE NEWSWIRE) -- Fast-growing health and wellness brand Freshii Inc. (TSX:FRII) (the “Company”) today announced financial results for the first quarter
ended April 1, 2018 (“Q1 2018”). Unless otherwise indicated, all amounts are expressed in U.S. dollars. Certain metrics, including
those expressed on an adjusted basis, are non-IFRS measures. See "Non-IFRS Measures and Industry Metrics" below.
Beginning with Q1 2018, the Company adopted IFRS 15, a new revenue recognition standard that affects the manner
in which the Company records revenue on upfront franchise fees. While this new accounting standard has resulted in a revision
of the Company’s 2019 Proforma Adjusted EBITDA outlook as described below, it has no effect on the cash flows of the business, or
the manner in which the Company collects these fees, which is at the time of execution of each franchise agreement. The Company has
restated its 2017 financials for the retrospective adoption of IFRS 15, and all figures for Q1 2018 and the 13-week period ended
March 26, 2017 (“Q1 2017”) below are presented as if IFRS 15 was adopted in Q1 2017 for comparability purposes.
Highlights for the First Quarter Fiscal 2018:
- The Company’s system-wide sales grew to $39.0 million in Q1 2018, an increase of 34%, compared to Q1 2017;
- The Company opened 26 net new stores in Q1 2018, comprised of 27 openings and 1 closure, resulting in year-over-year net new
store growth of 32%;
- Royalty revenue and coordination fees, the Company’s most predictable and stable recurring revenue streams, totaled $3.6
million for Q1 2018, an increase of 38% over Q1 2017;
- Same-store sales growth for Q1 2018 was 1.6%, building on same-store sales growth of 6.4% for Q1 2017. The Company estimates
that the timing of the Easter weekend had a negative impact of 1.2% on same-store sales growth in Q1 2018. Additionally, the
Company estimates that unfavorable weather had a negative impact of approximately 1% on same-store sales growth in Q1 2018;
- Adjusted EBITDA was $1.5 million for Q1 2018, representing an increase of 50% as compared to Q1 2017;
- Proforma Adjusted EBITDA was $1.5 million for Q1 2018, representing an increase of 36% as compared to Q1 2017; and
- Net income (loss) was $0.4 million for Q1 2018 compared to ($1.1) million in Q1 2017.
Matthew Corrin, Chairman and Chief Executive Officer of Freshii, commented,
“So far this year, we have made progress towards driving our mission of building a global omni-channel health
and wellness brand. We just announced a new partnership with Shell to bring innovative, healthy and convenient offerings to
almost 30 Shell sites across Ontario, through both an elevated grab and go model as well as our full-serve flagship
locations. This is phase one of what we believe can be a long-term partnership between Shell and Freshii to make healthy food
convenient and affordable for citizens of the world. Our partnerships with both Air Canada and now Shell, as well as many
other global opportunities we are negotiating, are great examples of partnering with brands to drive our mutual missions, and we’re
just scratching the surface on how significant this opportunity can be for Freshii in the years to come. In addition, in the first
quarter of 2018, we opened 26 net new restaurants around the world, representing 32% year-over-year unit growth. Our positive
same-store sales of 1.6% was impacted by both the shift of Easter into Q1 2018 this year as well as some unusually harsh weather in
many of our largest markets, which typically favours less healthy categories like pizza and wings, but we believe weather tends to
even out over the long-term; and importantly, our recurring royalty revenue streams continue to grow in excess of 30%
year-over-year, which underscores the asset-lite, cash generative nature of our business model.”
Outlook:
The Company reiterates its outlook for the period through the end of fiscal 2019 that was issued on September
25, 2017, with the exception of the outlook related to Proforma Adjusted EBITDA, which is being revised solely as a result of the
adoption of IFRS 15. Specifically, the Company reiterates the following:
- System-wide store count of between 730 and 760 stores by the end of fiscal 2019 (there are no e-stores included in this
fiscal 2019 outlook);
- Annual same store sales growth outlook of between 3.0% and 4.0% for the period fiscal 2018 through fiscal 2019;
- System-wide sales growing to between $275 million and $285 million by the end of fiscal 2019; and
- Selling, general and administrative expenses as a percentage of system-wide sales of between 5.0% and 6.0% for the period
fiscal 2018 through fiscal 2019.
The Company revises its outlook for the period through the end of fiscal 2019 as follows:
- Solely as a result of the adoption of IFRS 15, a non-cash accounting pronouncement that impacts the way our industry
recognizes upfront franchise fee revenue, the Company revises its 2019 Proforma Adjusted EBITDA outlook from a range of $15
million to $17 million to a range of $12 million to $14 million.
Prior to the adoption of IFRS 15, the Company’s outlook assumed average franchise fee revenue of approximately
$30,000 per store in local currency (except for our international franchise partners, who are required to pay this amount in U.S.
Dollars) would be recognized at the time of a new store opening. With the required adoption of IFRS 15, our Proforma Adjusted
EBITDA outlook now assumes approximately half of the upfront franchise fee per store in local currency will be recognized at the
time of a new store opening, with the remaining half deferred and amortized over the life of the franchise agreement, which is
typically 10 years. There is no impact to cash flows, as we will continue to collect the franchise fee at the time of execution of
the franchise agreement.
Our outlook is based on management’s current strategies and its assessment of its business and the restaurant
industry as a whole and is considered to be forward-looking information for purposes of applicable Canadian securities laws.
Readers are cautioned that actual results may vary. See “Forward-Looking Information” below for a description of the risks and
uncertainties that impact Freshii’s business and that could cause actual results to vary. Further information on the Company’s
outlook can be found in the ‘outlook’ section of Freshii’s Q1 2018 Management’s Discussion and Analysis, available at www.sedar.com.
Earnings Conference Call and Audio Webcast:
A conference call to discuss second quarter financial results is scheduled for May 10, 2018, at 9:30 a.m. ET.
The conference call can be accessed live over the phone by dialing 1-877-425-9470 (U.S. and Canada), or 1-201-389-0878
(International). An audio replay will be available from 12:30 p.m. Eastern Time on Thursday, May 10, 2018 through Thursday,
May 17, 2018 at 11:59 p.m. Eastern Time. To access the replay, please call 1-844-512-2921 (U.S. & Canada) or 1-412-317-6671
(International) and enter confirmation code 13679042. The call will also be webcast live from Freshii’s investor relations website
at http://ir.freshii.com. Following completion of the call, a recorded replay of the webcast will
be available on the website.
About Freshii
Eat. Energize. That’s the Freshii mantra. Freshii is a health and wellness brand on a mission to
help citizens of the world live better by making healthy eating convenient and affordable. With a diverse and completely
customizable menu of breakfast, soups, salads, wraps, bowls, burritos, frozen yogurt, juices, and smoothies served in an
eco-friendly environment, Freshii caters to every taste and dietary preference.
Since it was founded in 2005, Freshii has opened over 390 restaurants in more than 17 countries around the
world. Now, guests can energize with Freshii’s menu anywhere from cosmopolitan cities and fitness clubs to sports arenas
and airplanes.
Inquire about how to join the Freshii family: https://freshii.com/us/franchising.
Learn more about investing in Freshii: http://ir.freshii.com.
Learn about the Freshii brand: https://vimeo.com/195658178.
Find your nearest Freshii: http://www.freshii.com.
Follow Freshii on Twitter and Instagram: @freshii
Non-IFRS Measures and Industry Metrics
This news release makes reference to certain non-IFRS measures including key performance indicators used by
management and typically used by our competitors in the restaurant industry. These measures are not recognized measures under IFRS
and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented
by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing
further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be
considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures
including “EBITDA”, “Adjusted EBITDA”, “Pro Forma Adjusted EBITDA”, “free cash flow”, “free cash flow conversion”, “Adjusted Net
Income” and “Pro Forma Adjusted Net Income”. This news release also makes reference to “system-wide sales”, "system-wide stores",
and “same-store sales growth” which are commonly used operating metrics in the restaurant industry but may be calculated
differently by other companies in the restaurant industry. These non-IFRS measures and restaurant industry metrics are used to
provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business
that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and
other interested parties frequently use non-IFRS measures, including restaurant industry metrics in the evaluation of companies in
the restaurant industry. Our management also uses non-IFRS measures and restaurant industry metrics, in order to facilitate
operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine
components of executive compensation. For a: (i) detailed definition of each of the non-IFRS measures and industry metrics referred
to; and (ii) reconciliation of these non-IFRS measures refer to the Company's Management’s Discussion and Analysis dated May 9,
2018, which is available on SEDAR at www.sedar.com.
Forward-Looking Information
Certain information in this news release contains forward-looking information and forward-looking statements
which reflect the current view of management with respect to the Company's objectives, plans, goals, strategies, outlook, results
of operations, financial and operating performance, prospects and opportunities, including statements relating to store count and
same-store sales growth. Wherever used, the words "may", "will", "anticipate", "intend", "estimate", "expect", "plan", "believe"
and similar expressions identify forward-looking information and forward-looking statements. Forward-looking information and
forward-looking statements should not be read as guarantees of future events, performance or results, and will not necessarily be
accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the
information in this news release containing forward-looking information or forward-looking statements is qualified by these
cautionary statements.
Forward-looking information and forward-looking statements are based on information available to management at
the time they are made, underlying estimates, opinions and assumptions made by management and management's current good faith
belief with respect to future strategies, prospects, events, performance and results, and are subject to inherent risks and
uncertainties surrounding future expectations generally. Such risks and uncertainties include, but are not limited to, those
described in “Forward-Looking Statements” which are described in the Company's Management’s Discussion and Analysis dated May 9,
2018, which is available on SEDAR at www.sedar.com.
Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the
forward-looking information and forward-looking statements and are cautioned not to place undue reliance on such information and
statements. The Company does not undertake to update any such forward-looking information or forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by applicable laws.
Selected Quarterly Consolidated Information
The following tables summarize our results of operations for the 13 week periods ended April 1, 2018 and March
26, 2017 (in thousands).
| |
| |
|
For the 13 weeks
ended |
| |
|
April 1,
2018 |
|
March 26, 2017 |
| |
|
Amount |
|
|
Percent of
Total
Revenue |
|
Amount |
|
|
Percent of
Total
Revenue |
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Franchise revenue |
|
$ |
4,355 |
|
|
|
90 |
|
% |
|
$ |
3,023 |
|
|
|
84 |
|
% |
| Company-owned store revenue |
|
|
479 |
|
|
|
10 |
|
|
|
|
584 |
|
|
|
16 |
|
|
| Total revenue |
|
|
4,834 |
|
|
|
100 |
|
|
|
|
3,607 |
|
|
|
100 |
|
|
| Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
420 |
|
|
|
9 |
|
|
|
|
502 |
|
|
|
14 |
|
|
| Selling, general and administrative |
|
|
2,943 |
|
|
|
61 |
|
|
|
|
3,672 |
|
|
|
102 |
|
|
| Depreciation and amortization |
|
|
213 |
|
|
|
4 |
|
|
|
|
60 |
|
|
|
2 |
|
|
| Share based compensation expense |
|
|
783 |
|
|
|
16 |
|
|
|
|
1,441 |
|
|
|
39 |
|
|
| Total costs and expenses |
|
|
4,359 |
|
|
|
90 |
|
|
|
|
5,675 |
|
|
|
157 |
|
|
| Income (loss) before interest costs, foreign exchange
and income taxes |
|
|
475 |
|
|
|
10 |
|
|
|
|
(2,068 |
) |
|
|
(57 |
) |
|
| Interest expense, net |
|
|
(110 |
) |
|
|
(2 |
) |
|
|
|
78 |
|
|
|
2 |
|
|
| Foreign exchange loss (gain) |
|
|
(58 |
) |
|
|
(1 |
) |
|
|
|
(463 |
) |
|
|
(12 |
) |
|
| Income (loss) before income tax expense |
|
|
643 |
|
|
|
13 |
|
|
|
|
(1,683 |
) |
|
|
(47 |
) |
|
| Income tax expense (recovery) |
|
|
212 |
|
|
|
4 |
|
|
|
|
(564 |
) |
|
|
(16 |
) |
|
| Net income (loss) |
|
$ |
431 |
|
|
|
9 |
|
% |
|
$ |
(1,119 |
) |
|
|
(31 |
) |
% |
| |
| |
The following table summarizes our Consolidated Statement of Balance Sheet Information as at April 1, 2018 and December 31,
2017:
| |
|
| |
|
As at
April 1, 2018 |
|
|
As at December 31,
2017 |
|
| |
|
(in thousands) |
|
| Cash |
|
$ |
28,311 |
|
|
$ |
28,584 |
|
| Total assets |
|
|
43,122 |
|
|
|
42,541 |
|
| Non-current financial liabilities |
|
|
— |
|
|
|
— |
|
| Total debt |
|
|
— |
|
|
|
— |
|
| Equity (deficit) |
|
|
32,004 |
|
|
|
31,792 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
The following table shows our cash flows information for the 13 week periods ended April 1, 2018 and March 26, 2017:
| |
|
| |
|
For the 13 weeks
ended |
|
| |
|
April 1,
2018 |
|
|
March 26, 2017 |
|
| |
|
(in thousands) |
|
| Net cash provided by (used in) operations |
|
|
982 |
|
|
|
(3,077 |
) |
| Net cash provided by (used in) investing |
|
|
(749 |
) |
|
|
87 |
|
| Net cash provided by (used in) financing |
|
|
(8 |
) |
|
|
26,374 |
|
| Net increase (decrease) in cash |
|
$ |
225 |
|
|
$ |
23,384 |
|
| |
|
| |
|
The following table reconciles EBITDA, Adjusted EBITDA, Pro Forma Adjusted EBITDA, free cash flow, free cash
flow conversion, Adjusted Net Income and Pro Forma Adjusted Net Income to the most directly comparable IFRS financial performance
measure.
| |
|
| |
|
For the 13 weeks
ended |
|
| |
|
(in
thousands)
|
|
| |
|
April 1,
2018 |
|
|
March 26,
2017 |
|
| Net income (loss) |
|
$ |
|
431 |
|
|
$ |
|
(1,119 |
) |
| Interest expense, net |
|
|
|
(110 |
) |
|
|
|
78 |
|
| Income tax expense (recovery) |
|
|
|
212 |
|
|
|
|
(564 |
) |
| Depreciation and amortization |
|
|
|
213 |
|
|
|
|
60 |
|
| EBITDA |
|
$ |
|
746 |
|
|
$ |
|
(1,545 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense(1) |
|
|
|
783 |
|
|
|
|
1,441 |
|
| Foreign exchange gain(2) |
|
|
|
— |
|
|
|
|
(481 |
) |
| Transaction and other costs(3) |
|
|
|
— |
|
|
|
|
1,608 |
|
| Adjusted EBITDA |
|
$ |
|
1,529 |
|
|
$ |
|
1,023 |
|
| Chicago master agreement commission costs(4) |
|
|
|
— |
|
|
|
|
125 |
|
| Pro Forma Adjusted EBITDA |
|
$ |
|
1,529 |
|
|
$ |
|
1,148 |
|
| Pro Forma Adjusted EBITDA C$(6) |
|
C$ |
|
1,940 |
|
|
C$ |
|
1,457 |
|
| Less capital expenditures |
|
$ |
|
449 |
|
|
$ |
|
43 |
|
| Free cash flow |
|
$ |
|
1,080 |
|
|
$ |
|
1,105 |
|
| Free cash flow conversion |
|
|
|
70.6 |
% |
|
|
|
96.3 |
% |
| Net income (loss) |
|
|
|
431 |
|
|
|
|
(1,119 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense(1) |
|
|
|
783 |
|
|
|
|
1,441 |
|
| Foreign exchange gain(2) |
|
|
|
— |
|
|
|
|
(481 |
) |
| Transaction and other costs(3) |
|
|
|
— |
|
|
|
|
1,608 |
|
| Related tax effects(5) |
|
|
|
(204 |
) |
|
|
|
(793 |
) |
| Adjusted Net Income |
|
$ |
|
1,010 |
|
|
$ |
|
656 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
| Chicago master agreement commission costs(4) |
|
|
|
— |
|
|
|
|
125 |
|
| Related tax effects(5) |
|
|
|
— |
|
|
|
|
(44 |
) |
| Pro Forma Adjusted Net Income (loss) |
|
$ |
|
1,010 |
|
|
$ |
|
737 |
|
| |
|
|
|
|
|
|
|
|
|
|
Notes:
(1) In the 13 weeks ended April 1, 2018 and March 26, 2017, the Company granted RSUs to executive officers,
management, employees, and non-management directors of the Company in conjunction with an annual employee grant and the Offering,
respectively. In the 13weeks ended April 1, 2018 and March 26, 2017, this amount includes non-cash, share-based compensation.
(2) Represents non-recurring foreign exchange gain on the Credit Facility. The Credit Facility was repaid during the 13 week
period ended March 26, 2017.
(3) Represents expenses relating to the Offering (that relate to the selling shareholders) and other expenses such as
Reorganization and restructuring costs.
(4) Represents commission costs paid under the Chicago master franchise agreement for which the Company bought back the Master
Franchise Agreement as part of the acquisition of 100% of the membership interests in MHD, LLC completed during the 13 week period
ended June 25, 2017.
(5) Related tax effects are calculated at statutory rates in Canada or U.S. depending on adjustment.
(6) Represents the Canadian dollar Pro Forma Adjusted EBITDA converted at the average exchange rates for each respective
period.
The Company’s unaudited consolidated financial statements for the 13 week period ended April 1, 2018 and
Management’s Discussion and Analysis are available under the Company’s profile on SEDAR at www.sedar.com.
Source: Freshii Inc.
For further information contact:
Investor Relations
ir@freshii.com
1.866.337.4265
