Zoe's Kitchen, Inc. ("Zoës Kitchen" or the "Company") (NYSE:
ZOES) today reported financial results for the twelve and
twenty-eight weeks July 10, 2017.
Highlights for the twelve weeks ended July 10,
2017, as compared to the twelve weeks ended July 11,
2016:
- Total revenue increased 12.1% to $74.3
million.
- Comparable restaurant sales decreased
3.8%.
- 13 new Company-owned restaurants
opened.
- Income from operations decreased 60.9%
to $1.1 million.
- Restaurant contribution* decreased 1.6%
to $14.1 million, or 19.0% of restaurant sales.
- Net income was $0.6 million,
or $0.03 per basic and diluted share, compared to net
income of $1.2 million, or $0.06 per basic and
diluted share.
- Adjusted EBITDA* decreased 1.2% to $7.1
million.
- Adjusted net income* was $0.1
million, or $0.00 per diluted share, compared to adjusted net
income of $1.2 million, or $0.06 per diluted share.
Highlights for the twenty-eight weeks ended
July 10, 2017, as compared to the twenty-eight weeks ended
July 11, 2016:
- Total revenue increased 12.4% to $164.9
million.
- Comparable restaurant sales decreased
3.6%.
- 23 new Company-owned restaurants
opened.
- Income from operations decreased 50.2%
to $2.8 million.
- Restaurant contribution* increased 0.3%
to $32.1 million, or 19.5% of restaurant sales.
- Net income was $0.6 million,
or $0.03 per basic and diluted share, compared to net
income of $2.6 million, or $0.13 per basic and
diluted share.
- Adjusted EBITDA* decreased 2.0% to
$15.2 million.
- Adjusted net income* was $0.3
million, or $0.02 per diluted share, compared to adjusted net
income of $2.3 million, or $0.12 per diluted share.
(*) Restaurant contribution, EBITDA, adjusted EBITDA, and
adjusted net income are non-GAAP measures. For reconciliations of
restaurant contribution to income from operations; EBITDA, adjusted
EBITDA and adjusted net income to GAAP net income; and why the
Company considers these non-GAAP measures useful, see the
reconciliation of non-GAAP measures accompanying this release.
Kevin Miles, President and Chief Executive Officer of Zoës
Kitchen, commented, “Results in the second quarter remained
challenged, however, based on improved quarter-to-date trends, we
believe we are still on track to meet our full year guidance. In
the first half of this year, we made meaningful progress on
multiple strategic initiatives. We are excited with the launch and
early results of all of our new menu items, featuring better for
you ingredients and bold new flavor profiles, which are designed to
extend our leadership position in the Mediterranean restaurant
segment. In early August, we launched our re-platformed website and
by the end of Q3, we expect to launch our new mobile app and
loyalty programs. These tools, along with the infrastructure
initiatives completed earlier this year, set the stage for us to
drive results in the back half of this year and provide the
platform for future growth."
Mr. Miles added, “Our development plan for 2017 remains on
track for 38-40 new restaurants. In 2018, we expect to moderate new
unit growth with a plan to open 25-30 new restaurants. While new
units continue to open at or above expectations, we want to focus
on building brand awareness and sales in our current markets. Our
differentiated brand has proven to resonate with guests, and we are
confident with our long runway for growth."
Second Quarter 2017 Financial Results
Total revenue, which includes restaurant sales from
Company-owned restaurants and royalty fees, increased 12.1% to
$74.3 million in the twelve weeks
ended July 10, 2017, from $66.3 million in
the twelve weeks ended July 11, 2016. Restaurant
sales for the twelve weeks ended July 10,
2017 were $74.3 million, an increase of 12.1% from
$66.2 million in the twelve weeks ended July 11,
2016.
Comparable restaurant sales decreased 3.8% during
the twelve weeks ended July 10, 2017, consisting of
a 5.0% decrease in transactions and product mix offset by a 1.2%
increase in price. The comparable restaurant base includes those
restaurants open for eighteen full periods or longer and included
169 restaurants as of July 10, 2017.
Restaurant contribution decreased 1.6% to $14.1 million in
the twelve weeks ended July 10, 2017, from
$14.3 million in the twelve weeks ended July 11,
2016. As a percentage of restaurant sales, restaurant contribution
margin decreased 2.6% to 19.0% as increases in labor and store
operating expense rates were partially offset by lower cost of
goods rates.
The increase in labor and store operating expense rates was
driven by the dilutive effect on margins from our newest
restaurants, which, on average, initially operate at less than
system-wide average sales volumes and incur some inefficiencies for
a short period of time. In addition, labor rates increased from
hourly wage rate inflation while store operating expense rates
increased due to investments in store technology and marketing.
Net income for the twelve weeks ended July 10,
2017 was $0.6 million, or $0.03 per diluted share,
compared to net income of $1.2 million, or $0.06 per
diluted share, for the twelve weeks ended July 11,
2016. Adjusted net income was $0.1 million, or $0.0 per
diluted share, for the twelve weeks ended July 10,
2017, compared to adjusted net income of $1.2 million, or
$0.06 per diluted share, for the twelve weeks
ended July 11, 2016.
2017 Fiscal Year Financial Results
Total revenue, which includes restaurant sales from
Company-owned restaurants and royalty fees, increased 12.4% to
$164.9 million in the twenty-eight weeks
ended July 10, 2017, from $146.7 million in
the twenty-eight weeks ended July 11, 2016.
Restaurant sales for the twenty-eight weeks
ended July 10, 2017 were $164.8 million, an
increase of 12.4% from $146.6 million in the twenty-eight
weeks ended July 11, 2016.
Comparable restaurant sales decreased 3.6% during
the twenty-eight weeks ended July 10, 2017,
consisting of a 4.8% decrease in transactions and product mix
offset by a 1.2% increase in price. The comparable restaurant base
includes those restaurants open for eighteen full periods or longer
and included 169 restaurants as of July 10, 2017.
Restaurant contribution increased 0.3% to $32.1 million in
the twenty-eight weeks ended July 10,
2017, from $32.0 million in the twenty-eight weeks
ended July 11, 2016. As a percentage of restaurant sales,
restaurant contribution margin decreased 2.4% basis points to 19.5%
as increases in labor and store operating expense rates were
partially offset by lower cost of goods rates.
The increase in labor and store operating expense rates was
driven by the dilutive effect on margins from our newest
restaurants, which, on average, initially operate at less than
system-wide average sales volumes and incur some inefficiencies for
a short period of time. In addition, labor rates increased from
hourly wage rate inflation while store operating expense rates
increased due to investments in store technology and marketing.
Net income for the twenty-eight weeks
ended July 10, 2017 was $0.6 million, or
$0.03 per diluted share, compared to net income of $2.6
million, or $0.13 per diluted share, for the twenty-eight
weeks ended July 11, 2016. Adjusted net income
was $0.3 million, or $0.02 per diluted share, for
the twenty-eight weeks ended July 10, 2017, compared
to adjusted net income of $2.3 million, or $0.12 per diluted
share, for the twenty-eight weeks ended July 11,
2016.
Development
The Company opened 13 new Company-owned restaurants during the
twelve weeks ended July 10, 2017. As of July 10, 2017,
there were 224 Company-owned restaurants and three franchised
restaurants. As of August 17, 2017, the Company has opened
five additional restaurants, bringing the total restaurant count to
232.
FY 2017 Outlook
For the fiscal year ending December 25, 2017, the Company
is confirming its outlook:
- Total revenue between $314.0 million
and $322.0 million (unchanged from previous guidance).
- Comparable restaurant sales of flat to
negative 3.0% (unchanged from previous guidance).
- 38 to 40 Company-owned restaurant
openings (unchanged from previous guidance).
- Restaurant contribution margin between
18.3% and 19.0% (unchanged from previous guidance).
- General and administrative expenses
between 10.7% and 10.9% of total revenue, inclusive of $3.2 million
of non-cash equity based compensation expense (unchanged from
previous guidance).
Earnings Conference Call
As previously announced, the Company will host a conference call
to discuss its second quarter 2017 financial results today at 4:30
PM Eastern Time. Hosting the conference call will be Kevin Miles,
President and Chief Executive Officer, and Sunil Doshi, Chief
Financial Officer.
The conference call can be accessed live over the phone by
dialing 877-407-3982 or for international callers by dialing
201-493-6780. A replay will be available afterwards and can be
accessed by dialing 844-512-2921 or for international callers by
dialing 412-317-6671; the passcode is 13668129. The replay will be
available until Thursday, August 24, 2017.
The conference call will also be webcast live from the Company’s
corporate website at www.zoeskitchen.com under the investor
relations section. An archive of the webcast will also be available
through the corporate website shortly after the conference call has
concluded.
Definitions
The following definitions apply to these terms as used
throughout this release:
Comparable restaurant sales represent the change in
period-over-period sales comparisons for the comparable
Company-owned restaurant base. A restaurant becomes comparable in
its 18th full fiscal period of operation. The Company presents
comparable restaurant sales on a fiscal calendar basis. As a
result, our comparable restaurant sales calculation may not
correspond exactly to the related calendar periods.
Restaurant contribution, a non-GAAP measure, is defined as
restaurant sales less restaurant operating costs, which are cost of
sales, labor, and store operating expenses. Restaurant contribution
margin is restaurant contribution as a percentage of restaurant
sales.
EBITDA, a non-GAAP measure, is defined as net income before
interest, income taxes and depreciation and amortization.
Adjusted EBITDA, a non-GAAP measure, is defined as EBITDA plus
loss from disposal of equipment and pre-opening costs.
Adjusted net income, a non-GAAP measure, is defined as net
income plus the provision for income taxes; less an estimated tax
rate of 38%.
Our first fiscal quarter consists of sixteen weeks and each of
our second, third and fourth fiscal quarters consists of twelve
weeks, except for a fifty-three week year when the fourth quarter
has thirteen weeks.
About Zoës Kitchen
Founded in 1995, Zoës Kitchen is a fast-casual restaurant group
serving a distinct menu of fresh, wholesome, made-from-scratch,
Mediterranean-inspired dishes delivered with warm hospitality. With
no microwaves, or fryers, grilling is the predominate method of
cooking along with an abundance of fresh fruits and vegetables,
fresh herbs, olive oil and lean proteins. With 232 locations in 20
states across the United States, Zoës Kitchen delivers goodness to
its guests by sharing simple, tasty and fresh Mediterranean meals
that inspire guests to lead a balanced lifestyle and feel their
best from the inside out. For more information, please visit
www.zoeskitchen.com, Facebook, Instagram, Twitter or follow
#LiveMed.
Forward-Looking Statements
This press release contains forward-looking statements that are
subject to risks and uncertainties. All statements other than
statements of historical fact included in this press release are
forward-looking statements. Forward-looking statements discuss our
current expectations and projections relating to our financial
condition, results of operations, plans, objectives, future
performance and business. You can identify forward-looking
statements by the fact that they do not relate strictly to
historical or current facts. These statements may include words
such as "aim," "anticipate," "believe," "estimate," "expect,"
"forecast," "outlook," "potential," "project," "projection,"
"plan," "intend," "seek," "may," "could," "would," "will,"
"should," "can," "can have," "likely," the negatives thereof and
other words and terms of similar meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events. They appear in a number of places
throughout this press release and include statements regarding our
intentions, beliefs or current expectations concerning, among other
things, our results of operations, financial condition, liquidity,
prospects, growth, strategies and the industry in which we operate.
All forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those that we expected.
While we believe that our assumptions are reasonable, we caution
that it is very difficult to predict the impact of known factors,
and it is impossible for us to anticipate all factors that could
affect our actual results. All forward-looking statements are
expressly qualified in their entirety by these cautionary
statements. You should evaluate all forward-looking statements made
in this press release in the context of the risks and uncertainties
disclosed in our SEC filings. These filings are available online at
www.sec.gov, www.zoeskitchen.com or upon request from Zoës
Kitchen.
We caution you that the important factors referenced in our SEC
filings may not contain all of the factors that are important to
you. In addition, we cannot assure you that we will realize the
results or developments we expect or anticipate or, even if
substantially realized, that they will result in the consequences
we anticipate or affect us or our operations in the way we expect.
The forward-looking statements included in this press release are
made only as of the date hereof. We undertake no obligation to
publicly update or revise any forward-looking statement as a result
of new information, future events or otherwise, except as otherwise
required by law. If we do update one or more forward-looking
statements, no inference should be made that we will make
additional updates with respect to those or other forward-looking
statements. We qualify all of our forward-looking statements by
these cautionary statements.
Non-GAAP Financial Measures
To supplement its unaudited condensed consolidated financial
statements, which are prepared and presented in accordance with
GAAP, the Company uses the following non-GAAP financial measures:
restaurant contribution, EBITDA, adjusted EBITDA, and adjusted net
income (collectively, the "non-GAAP financial measures"). The
presentation of this financial information is not intended to be
considered in isolation or as a substitute for, or superior to, the
financial information prepared and presented in accordance with
GAAP. The Company uses these non-GAAP financial measures for
financial and operational decision making and as a means to
evaluate period-to-period comparisons. The Company believes that
they provide useful information about operating results, enhance
the overall understanding of past financial performance and future
prospects, and allow for greater transparency with respect to key
metrics used by management in its financial and operational
decision making. The non-GAAP measures used by the Company in this
press release may be different from the methods used by other
companies.
Zoe's Kitchen, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
Twelve Weeks Ended Twenty-eight Weeks Ended July
10, 2017 July 11, 2016 July
10, 2017 July 11, 2016
Revenue: Restaurant sales $ 74,261 $ 66,222 $ 164,765 $
146,570 Royalty fees 44 51 101 114
Total revenue 74,305 66,273 164,866 146,684
Operating expenses: Restaurant operating costs
(excluding depreciation and amortization): Cost of sales 21,791
19,995 48,287 43,984 Labor 22,113 18,810 49,065 42,109 Store
operating expenses 16,242 13,075 35,291 28,448 General and
administrative expenses 7,124 7,270 17,109 16,715 Depreciation
4,161 3,292 9,213 7,284 Amortization 350 373 839 873 Pre-opening
costs 679 552 1,246 1,292 Loss from disposal of equipment 748
100 1,007 337 Total operating expenses
73,208 63,467 162,057 141,042 Income
from operations 1,097 2,806 2,809 5,642
Other income and
expenses: Interest expense, net 1,018 861 2,386 1,983 Other
income (20 ) (20 ) (49 ) (47 ) Total other income and expenses 998
841 2,337 1,936 Income before provision
for income taxes 99 1,965 472 3,706 Provision (benefit) for income
taxes (480 ) 764 (126 ) 1,109
Net income $ 579
$ 1,201 $ 598 $ 2,597 Earnings
per share: Basic $ 0.03 $ 0.06 $ 0.03 $ 0.13 Diluted $ 0.03 $ 0.06
$ 0.03 $ 0.13 Weighted average shares of common stock outstanding:
Basic 19,488,851 19,436,315 19,479,293 19,413,132 Diluted
19,493,514 19,631,272 19,513,743 19,595,542
Zoe's Kitchen, Inc. and
Subsidiaries
Unaudited Condensed Consolidated
Statements of Operations
Margin Analysis
The following table sets forth the
percentage relationship to total revenue, except where otherwise
indicated, for certain items included in the Company's condensed
consolidated statements of operations for the period indicated. The
percentages set forth below may not reconcile due to rounding of
amounts stated:
Twelve Weeks Ended
Twenty-eight Weeks Ended July 10, 2017
July 11, 2016 July 10, 2017
July 11, 2016 Revenue: Restaurant sales 99.9
%
99.9
%
99.9
%
99.9
%
Royalty fees 0.1
%
0.1
%
0.1
%
0.1
%
Total revenue 100.0
%
100.0
%
100.0
%
100.0
%
Operating expenses: Restaurant operating costs (excluding
depreciation and amortization) (1): Cost of sales
29.3
%
30.2
%
29.3
%
30.0
%
Labor 29.8
%
28.4
%
29.8
%
28.7
%
Store operating expenses 21.9
%
19.7
%
21.4
%
19.4
%
General and administrative expenses 9.6
%
11.0
%
10.4
%
11.4
%
Depreciation 5.6
%
5.0
%
5.6
%
5.0
%
Amortization 0.5
%
0.6
%
0.5
%
0.6
%
Pre-opening costs 0.9
%
0.8
%
0.8
%
0.9
%
Loss from disposal of equipment 1.0
%
0.2
%
0.6
%
0.2
%
Total operating expenses 98.5
%
95.8
%
98.3
%
96.2
%
Income from operations 1.5
%
4.2
%
1.7
%
3.8
%
Other income and expenses: Interest expense, net 1.4
%
1.3
%
1.4
%
1.4
%
Other income (0.0
)%
(0.0 )% (0.0 )% (0.0 )% Total other income and expenses 1.3
%
1.3
%
1.4
%
1.3
%
Income before provision for income taxes 0.1
%
3.0
%
0.3
%
2.5
%
Provision (benefit) for income taxes (0.6 )% 1.2
%
(0.1
)%
0.8
%
Net income 0.8
%
1.8
%
0.4
%
1.8
%
(1) As a percentage of restaurant sales.
Zoe's Kitchen, Inc. and
Subsidiaries Unaudited Condensed Consolidated Selected
Balance Sheet Data and Selected Operating Data (in
thousands, except restaurant count data) As of
July 10, 2017 December 26, 2016
Selected Balance Sheet Data: Cash and cash
equivalents $ 4,549 $ 5,493 Total assets 238,886 215,219 Total debt
(1) 42,446 29,913 Total liabilities 106,626 85,253 Total
stockholders' equity 132,260 129,966 (1) Includes $32.4
million and $29.8 million of deemed landlord financing as of July
10, 2017 and December 26, 2016, respectively.
Quarter Ended July 10, 2017
April 17, 2017 December 26,
2016 October 3, 2016 July 11,
2016 Selected Operating Data:
Company-owned restaurants at end
of period 224 211 201 194 183 Franchise-owned restaurants at end of
period 3 3 3 3 3 Company-owned: Comparable restaurant sales (3.8
)%
(3.3 )% 0.7 % 2.4 % 4.0 % Units in the comparable base 169 161 150
143 134
Zoe's Kitchen, Inc.
and Subsidiaries
Unaudited Reconciliation of Income from
Operations to Restaurant Contribution (non-GAAP
presentation)
(in thousands) Twelve Weeks Ended
Twenty-eight Weeks Ended July 10, 2017
July 11, 2016 July 10, 2017
July 11, 2016 Restaurant Contribution:
Income from operations $ 1,097 $ 2,806 $ 2,809 $ 5,642 Less:
Royalty fees 44 51 101 114 Add: General and administrative expenses
7,124 7,270 17,109 16,715 Depreciation and amortization 4,511 3,665
10,052 8,157 Pre-opening costs(1) 679 552 1,246 1,292 Loss from
disposal of equipment 748 100 1,007 337
Restaurant Contribution $ 14,115 $ 14,342 $ 32,122
$ 32,029 Total revenue $ 74,305 $ 66,273 $
164,866 $ 146,684 Less: Royalty fees 44 51 101
114 Restaurant sales $ 74,261 $ 66,222 $
164,765 $ 146,570 Restaurant contribution
margin 19.0 % 21.7 % 19.5 % 21.9 % (1) Represent expenses directly
associated with the opening of new restaurants that are incurred
prior to opening, including pre-opening rent.
Zoe's Kitchen, Inc. and Subsidiaries Unaudited
Reconciliation of Net Income to Adjusted EBITDA (non-GAAP
presentation) (in thousands) Twelve Weeks
Ended Twenty-eight Weeks Ended July 10,
2017 July 11, 2016 July 10,
2017 July 11, 2016 Adjusted
EBITDA: Net income, as reported $ 579 $ 1,201 $
598 $ 2,597 Depreciation and amortization 4,511 3,665 10,052
8,157 Interest expense, net 1,018 861 2,386 1,983 Provision
(benefit) for income taxes (480 ) 764 (126 ) 1,109 EBITDA
5,628 6,491 12,910 13,846 Pre-opening costs(1) 679 552 1,246 1,292
Loss from disposal of equipment 748 100 1,007
337 Adjusted EBITDA $ 7,055 $ 7,143 $
15,163 $ 15,475 (1) Represents expenses directly
associated with the opening of new restaurants that are incurred
prior to opening, including pre-opening rent.
Zoe's Kitchen, Inc. and Subsidiaries Unaudited
Reconciliation of Net Income to Adjusted Net Income (non-GAAP
presentation) (in thousands, except share and per share
data) Twelve Weeks Ended Twenty-eight Weeks
Ended July 10, 2017 July 11,
2016 July 10, 2017 July 11,
2016 Adjusted net income: Net income, as
reported $ 579 $ 1,201 $ 598 $ 2,597 Provision (benefit) for income
taxes (1) (480 ) 764 (126 ) 1,109 Pre-tax Adjusted net
income 99 1,965 472 3,706 Estimated tax provision (1) 38 747
179 1,408 Adjusted net income $ 61 $ 1,218
$ 293 $ 2,298 Adjusted net income per share:
Basic $ 0.00 $ 0.06 $ 0.02 $ 0.12 Diluted $ 0.00 $ 0.06 $ 0.02 $
0.12 Weighted average shares of common stock outstanding: Basic
19,488,851 19,436,315 19,479,293 19,413,132 Diluted 19,493,514
19,631,272 19,513,743 19,595,542 (1) For comparability, the
provision for income taxes is added back to arrive at pre-tax
adjusted net income; then, an estimated 38% tax rate is applied to
arrive at adjusted net income.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170817005870/en/
For Zoe's Kitchen, Inc.Investors:Fitzhugh Taylor,
214-436-8765 x284Fitzhugh.Taylor@icrinc.comorMedia:Casey
Shillingcaseyshilling@zoeskitchen.com
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