TORONTO, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Fast-growing health and wellness brand Freshii
Inc. (TSX: FRII) (the “Company”) today announced financial results for the second quarter ended July 1, 2018 (“Q2 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 on January 1, 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. IFRS 15 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.
All figures for Q2 2018, the 13-week period ended June 25, 2017 (“Q2 2017”), and the 26-week periods ended July 1, 2018 and June
25, 2017, below are presented as if IFRS 15 was adopted at the beginning of fiscal 2017 for comparability purposes.
Highlights for the Second Quarter Fiscal 2018:
- The Company’s system-wide sales grew to $46.3 million in Q2 2018, an increase of 34% compared to Q2 2017;
- The Company opened 25 net new stores in Q2 2018, comprised of 28 openings and 3 closures, resulting in year-over-year net new
store growth of 27%;
- Royalty revenue and coordination fees, the Company’s most predictable and stable recurring revenue streams, totaled $4.2
million for Q2 2018, an increase of 36% over Q2 2017;
- Same-store sales growth for Q2 2018 was 0.9%, building on same-store sales growth of 4.2% for Q2 2017;
- Adjusted EBITDA was $1.5 million for Q2 2018 compared to $1.9 million in Q2 2017;
- Proforma Adjusted EBITDA was $1.5 million for Q2 2018 compared to $2.0 million in Q2 2017; and
- Net income (loss) was $0.3 million for Q2 2018 compared to ($0.4) million in Q2 2017.
Matthew Corrin, Chairman and Chief Executive Officer of Freshii, commented,
“In the second quarter, we continued to make progress towards driving our mission of building a global
omni-channel health and wellness brand. We continue to be pleased with the results from our partnership with Air Canada, and
we will soon open the first wave of elevated grab and go models as part of our partnership with Shell. We are also in late stage
negotiations with several other potential non-traditional partners to build out our omni-channel presence. In addition, in the
second quarter of 2018, we opened 25 net new restaurants around the world, representing 27% year-over-year net new store growth,
and 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. 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;
- 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; and
- Proforma Adjusted EBITDA outlook between a range of $12 million to $14 million.
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 Q2 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 August 10, 2018, at 8:00 a.m.
Eastern Time. 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 11:00 a.m. Eastern Time on Friday, August 10, 2018
through Friday, August 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 13681847. 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 420 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 August 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 August 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 and 26 week periods ended July 1, 2018 and
the 13 and 26 week periods ended June 25, 2017 (in thousands).
| |
| |
|
For the 13 weeks
ended |
| |
|
July 1, 2018
|
|
June 25, 2017
|
| |
|
Amount |
|
|
Percent of |
|
Amount |
|
|
Percent
of
|
|
| Total |
Total
|
|
| Revenue |
Revenue
|
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Franchise revenue |
|
$ |
4,687 |
|
|
|
84 |
% |
|
$ |
3,764 |
|
|
|
85 |
% |
| Company-owned store revenue |
|
|
876 |
|
|
|
16 |
|
|
|
676 |
|
|
|
15 |
|
| Total revenue |
|
|
5,563 |
|
|
|
100 |
|
|
|
4,440 |
|
|
|
100 |
|
| Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
770 |
|
|
|
14 |
|
|
|
547 |
|
|
|
12 |
|
| Selling, general and administrative |
|
|
3,368 |
|
|
|
60 |
|
|
|
1,889 |
|
|
|
43 |
|
| Depreciation and amortization |
|
|
209 |
|
|
|
4 |
|
|
|
65 |
|
|
|
1 |
|
| Share based compensation expense |
|
|
926 |
|
|
|
17 |
|
|
|
2,428 |
|
|
|
55 |
|
| Total costs and expenses |
|
|
5,273 |
|
|
|
95 |
|
|
|
4,929 |
|
|
|
111 |
|
| Income (loss) before interest costs, foreign |
|
|
290 |
|
|
|
5 |
|
|
|
(489 |
) |
|
|
(11 |
) |
| exchange and income taxes |
| Interest expense, net |
|
|
(106 |
) |
|
|
(2 |
) |
|
|
(48 |
) |
|
|
(1 |
) |
| Foreign exchange loss (gain) |
|
|
(48 |
) |
|
|
(1 |
) |
|
|
9 |
|
|
|
- |
|
| Income (loss) before income tax expense |
|
|
444 |
|
|
|
8 |
|
|
|
(450 |
) |
|
|
(10 |
) |
| Income tax expense (recovery) |
|
|
146 |
|
|
|
3 |
|
|
|
(67 |
) |
|
|
(1 |
) |
| Net income (loss) |
|
$ |
298 |
|
|
|
5 |
% |
|
$ |
(383 |
) |
|
|
(9 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
For the 26 weeks
ended |
|
| |
|
July 1, 2018
|
|
June 25, 2017
|
|
| |
|
Amount |
|
|
Percent of |
|
Amount |
|
|
Percent of |
|
| Total |
Total |
| Revenue |
Revenue |
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Franchise revenue |
|
$ |
9,042 |
|
|
|
87 |
% |
|
|
$ |
6,787 |
|
|
|
84 |
|
| Company-owned store revenue |
|
|
1,355 |
|
|
|
13 |
|
|
|
|
1,260 |
|
|
|
16 |
|
| Total revenue |
|
|
10,397 |
|
|
|
100 |
|
|
|
|
8,047 |
|
|
|
100 |
|
| Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
|
1,190 |
|
|
|
11 |
|
|
|
|
1,049 |
|
|
|
13 |
|
| Selling, general and administrative |
|
|
6,311 |
|
|
|
62 |
|
|
|
|
5,561 |
|
|
|
69 |
|
| Depreciation and amortization |
|
|
422 |
|
|
|
4 |
|
|
|
|
125 |
|
|
|
2 |
|
| Share based compensation expense |
|
|
1,709 |
|
|
|
16 |
|
|
|
|
3,869 |
|
|
|
48 |
|
| Total costs and expenses |
|
|
9,632 |
|
|
|
93 |
|
|
|
|
10,604 |
|
|
|
132 |
|
| Income (loss) before interest costs, foreign |
|
|
765 |
|
|
|
7 |
|
|
|
|
(2,557 |
) |
|
|
(32 |
) |
| exchange and income taxes |
| Interest expense, net |
|
|
(216 |
) |
|
|
(2 |
) |
|
|
|
30 |
|
|
|
- |
|
| Foreign exchange loss (gain) |
|
|
(106 |
) |
|
|
(1 |
) |
|
|
|
(454 |
) |
|
|
(5 |
) |
| Income (loss) before income tax expense |
|
|
1,087 |
|
|
|
10 |
|
|
|
|
(2,133 |
) |
|
|
(27 |
) |
| Income tax expense (recovery) |
|
|
358 |
|
|
|
3 |
|
|
|
|
(631 |
) |
|
|
(8 |
) |
| Net income (loss) |
|
$ |
729 |
|
|
|
7 |
% |
|
|
$ |
(1,502 |
) |
|
|
(19 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes our Consolidated Statement of Balance Sheet Information as at July 1, 2018 and December 31,
2017:
| |
|
|
|
|
|
| |
|
As at |
|
As at
December 31, 2017 |
|
July 1, 2018
|
| |
|
(in thousands) |
|
| Cash |
|
$ |
29,439 |
|
$ |
28,584 |
|
| Total assets |
|
|
43,586 |
|
|
42,605 |
|
| Non-current financial liabilities |
|
|
— |
|
|
— |
|
| Total debt |
|
|
— |
|
|
— |
|
| Equity (deficit) |
|
|
32,255 |
|
|
31,594 |
|
| |
|
|
|
|
|
|
|
The following table shows our cash flows information for the 26 week period ended July 1, 2018 and June 25, 2017:
| |
|
|
|
| |
|
For the 26 weeks
ended |
|
| |
|
July 1, 2018
|
|
|
June 25, 2017
|
|
| |
|
(in thousands) |
|
| Net cash provided by (used in) operations |
|
|
2,782 |
|
|
|
(3,324 |
) |
| Net cash provided by (used in) investing |
|
|
(759 |
) |
|
|
(4,144 |
) |
| Net cash provided by (used in) financing |
|
|
(21 |
) |
|
|
26,207 |
|
| Net increase (decrease) in cash |
|
$ |
2,002 |
|
|
$ |
18,739 |
|
| |
|
|
|
|
|
|
|
|
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 |
|
|
For the 26 weeks
ended |
|
| |
|
(in
thousands)
|
|
| |
|
July 1, 2018
|
|
|
June 25, 2017
|
|
|
July 1, 2018
|
|
|
June 25, 2017
|
|
| Net income (loss) |
|
$ |
|
298 |
|
|
$ |
|
(383 |
) |
|
$ |
|
729 |
|
|
$ |
|
(1,502 |
) |
| Interest expense, net |
|
|
|
(106 |
) |
|
|
|
(48 |
) |
|
|
|
(216 |
) |
|
|
|
30 |
|
| Income tax expense (recovery) |
|
|
|
146 |
|
|
|
|
(67 |
) |
|
|
|
358 |
|
|
|
|
(631 |
) |
| Depreciation and amortization |
|
|
|
209 |
|
|
|
|
65 |
|
|
|
|
422 |
|
|
|
|
125 |
|
| EBITDA |
|
$ |
|
547 |
|
|
$ |
|
(433 |
) |
|
$ |
|
1,293 |
|
|
$ |
|
(1,978 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense(1) |
|
|
|
926 |
|
|
|
|
2,428 |
|
|
|
|
1,709 |
|
|
|
|
3,869 |
|
| Foreign exchange gain(2) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(481 |
) |
| Transaction and other costs(3) |
|
|
|
— |
|
|
|
|
(138 |
) |
|
|
|
— |
|
|
|
|
1,470 |
|
| Adjusted EBITDA |
|
$ |
|
1,473 |
|
|
$ |
|
1,857 |
|
|
$ |
|
3,002 |
|
|
$ |
|
2,880 |
|
| Chicago master agreement commission costs(4) |
|
|
|
— |
|
|
|
|
165 |
|
|
|
|
— |
|
|
|
|
290 |
|
| Pro Forma Adjusted EBITDA |
|
$ |
|
1,473 |
|
|
$ |
|
2,022 |
|
|
$ |
|
3,002 |
|
|
$ |
|
3,170 |
|
| Pro Forma Adjusted EBITDA C$(6) |
|
C$ |
|
1,901 |
|
|
C$ |
|
2,709 |
|
|
C$ |
|
3,835 |
|
|
C$ |
|
4,216 |
|
| Less capital expenditures |
|
$ |
|
310 |
|
|
$ |
|
124 |
|
|
$ |
|
759 |
|
|
$ |
|
167 |
|
| Free cash flow |
|
$ |
|
1,163 |
|
|
$ |
|
1,898 |
|
|
$ |
|
2,243 |
|
|
$ |
|
3,003 |
|
| Free cash flow conversion |
|
|
|
79.0 |
% |
|
|
|
93.9 |
% |
|
|
|
74.7 |
% |
|
|
|
94.7 |
% |
| Net income (loss) |
|
|
|
298 |
|
|
|
|
(383 |
) |
|
|
|
729 |
|
|
|
|
(1,502 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share-based compensation expense(1) |
|
|
|
926 |
|
|
|
|
2,428 |
|
|
|
|
1,709 |
|
|
|
|
3,869 |
|
| Foreign exchange gain(2) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(481 |
) |
| Transaction and other costs(3) |
|
|
|
— |
|
|
|
|
(138 |
) |
|
|
|
— |
|
|
|
|
1,470 |
|
| Related tax effects(5) |
|
|
|
(241 |
) |
|
|
|
(595 |
) |
|
|
|
(444 |
) |
|
|
|
(1,263 |
) |
| Adjusted Net Income |
|
$ |
|
983 |
|
|
$ |
|
1,312 |
|
|
$ |
|
1,994 |
|
|
$ |
|
2,093 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Chicago master agreement commission costs(4) |
|
|
|
— |
|
|
|
|
165 |
|
|
|
|
— |
|
|
|
|
290 |
|
| Related tax effects(5) |
|
|
|
— |
|
|
|
|
(58 |
) |
|
|
|
|
|
|
|
|
(102 |
) |
| Pro Forma Adjusted Net Income (loss) |
|
$ |
|
983 |
|
|
$ |
|
1,419 |
|
|
$ |
|
1,994 |
|
|
$ |
|
2,281 |
|
| |
|
| Notes: |
| (1) |
In the 26 weeks ended July 1, 2018 and June 25, 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 13 and 26 weeks ended July 1, 2018 and June 25, 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 and 26 week periods ended July 1, 2018 and
Management’s Discussion and Analysis are available under the Company’s profile on SEDAR at www.sedar.com.
For further information contact:
Investor Relations
ir@freshii.com
1.866.337.4265
Source: Freshii Inc.
