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Freshii Inc. Announces Second Quarter Fiscal 2018 Results

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. 

/EIN News/ -- 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.

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