- Fourth Quarter U.S. System-wide Comparable
Store Sales Increase 8.4% -
- Fourth Quarter Company-owned Comparable Store
Sales Increase 10.5% -
- Fourth Quarter Net Income of $2.8 million, or
$0.17 per diluted share -
Papa Murphy's Holdings, Inc. (Nasdaq:FRSH) today announced
financial results for its fourth quarter and full fiscal year ended
December 29, 2014.
Key financial highlights for the fourth quarter of 2014
include:
- Total revenue increased 24.8% to $28.3 million compared to the
fourth quarter of 2013.
- Domestic system comparable store sales increased 8.4%,
including increases of 10.5% at company-owned stores and 8.2% at
domestic franchisee-owned stores.
- Net income was $2.8 million, or $0.17 per diluted share,
compared to a net loss of $2.9 million in the fourth quarter of
2013. Pro forma net income(1) in the fourth quarter of 2013 was
$443,000, or $0.03 per diluted share.
- Adjusted EBITDA(1) increased 16.6% to $8.8 million compared to
the fourth quarter of 2013.
- Papa Murphy's opened 38 stores system-wide, including 37 in the
U.S.
Key financial highlights for the full year 2014
include:
- Total revenue increased 21.0% to $97.4 million compared to
fiscal year 2013.
- Domestic system comparable store sales increased 4.5%,
including increases of 8.1% at company-owned stores and 4.3% for
domestic franchisee-owned stores.
- Reported net income was $1.2 million, compared to a reported
net loss of $2.6 million in 2013.
- Pro forma net income(1) was $7.2 million, or $0.43 per diluted
share, compared to pro forma net income of $1.9 million, or $0.11
per diluted share in 2013.
- Adjusted EBITDA(1) increased 13.3% to $27.7 million.
- Papa Murphy's opened 95 stores system-wide, including 87 in the
U.S.
______________________
(1) Pro forma net income and Adjusted EBITDA are non-GAAP
measures. For reconciliations of Adjusted EBITDA and pro forma net
income to GAAP net income and discussions of why we consider
Adjusted EBITDA and pro forma net income to be useful measures, see
the financial tables accompanying this release and the paragraph
below entitled "Non-GAAP Financial Measures."
Ken Calwell, President and Chief Executive Officer of Papa
Murphy's Holdings, Inc., stated, "The fourth quarter marked another
quarter of strong operating results for Papa Murphy's. Our
system-wide comparable store sales growth of 8.4%, which included a
10.5% increase at our Company stores, represented our 16th
consecutive quarter of growth and was driven by a healthy balance
of transaction growth, price, and favorable product mix shift. Our
new product pipeline, along with our strategic initiatives, are
powering continued improvement in operations and customer
experience, and we're seeing the results in our top-line and in
enhanced store level productivity."
Calwell added, "We remain confident in our long term growth
opportunity and continue to invest in our Company Store Division
through strategic franchise acquisitions to spur growth in our
frontier markets. Through this investment, combined with future
company-owned and ongoing franchise store development, we believe
we can continue to drive increased awareness of the Papa Murphy's
brand and, in turn, further improvements in sales and
profitability."
Key Operating
Metrics |
|
Three Months Ended |
Twelve Months Ended |
|
|
|
|
|
|
December |
December |
December |
December |
|
29,
2014 |
30,
2013 |
29,
2014 |
30,
2013 |
Domestic comparable store sales growth |
|
|
|
|
Franchised stores |
8.2% |
3.9% |
4.3% |
2.8% |
Company-owned stores |
10.5% |
6.5% |
8.1% |
4.2% |
System-wide |
8.4% |
4.0% |
4.5% |
2.8% |
|
|
|
|
|
System-wide sales ($'s in 000s) |
$ 238,948 |
$ 214,105 |
$ 849,682 |
$ 785,630 |
|
|
|
|
|
Adjusted EBITDA ($'s in 000s) |
$ 8,824 |
$ 7,566 |
$ 27,678 |
$ 24,421 |
|
|
|
|
|
Store Count |
|
|
|
|
Franchised |
1,370 |
1,349 |
1,370 |
1,349 |
Company-owned |
91 |
69 |
91 |
69 |
System-wide |
1,461 |
1,418 |
1,461 |
1,418 |
We evaluate the performance of our business using a variety of
operating and performance metrics. Below is a description of our
key operating metrics:
Comparable Store Sales represents the change in
year-over-year sales for domestic comparable stores. A comparable
store is a store that has been open for at least 52 full weeks from
the comparable date (the Tuesday following the opening date). As of
the end of the fourth quarter of 2014 and 2013, there were 1,335
and 1,294 domestic comparable stores, respectively.
System-wide Sales include net sales by all of
our system-wide stores.
Adjusted EBITDA is defined as net income (loss)
before interest expense, provision for (benefit from) income taxes
and depreciation and amortization, with further adjustments to
reflect the additions and eliminations of various income statement
items including non-cash charges, income and expenses that we
consider not indicative of ongoing operations and various other
adjustments. For a reconciliation of Adjusted EBITDA to net income,
the most directly comparable GAAP measure, see the financial tables
accompanying this release.
Acquisition Update
Subsequent to the end of the fourth quarter 2014, the Company
acquired six existing Papa Murphy's stores from a franchisee in
Seattle, Washington for approximately $4.0 million, bringing the
number of company-owned stores in the Seattle market to
twelve. Overall, the Company and its franchisees operate 99
stores in Seattle, with plans to add additional stores in the
future. This recent transaction is expected to be accretive to
current year earnings per share by $0.01 to $0.02, and will
contribute approximately $675,000 of incremental EBITDA(2) in 2015,
net of foregone royalties.
______________________
(2) EBITDA is a non-GAAP measures. For reconciliations of EBITDA
to GAAP net income and discussions of why we consider EBITDA to be
useful measures, see the financial tables accompanying this release
and the paragraph below entitled "Non-GAAP Financial Measures".
From the beginning of the fourth quarter 2014 through March 17,
2015, the Company has acquired a total of 30 existing Papa Murphy's
stores from franchisees in both established markets like Seattle,
Washington; Portland, Oregon; and Boise, Idaho, and in frontier
markets like Knoxville, Tennessee; Jacksonville, Florida; and
Dallas, Texas. In the aggregate these acquisitions, including
the six stores acquired in Seattle, are expected to be accretive to
current year earnings per share in the range of $0.02 to $0.03, and
contribute approximately $16.0 million to revenue and approximately
$0.9 million to EBITDA in 2015, net of foregone royalties. The
Company currently operates 108 stores in eleven markets.
Calwell concluded, "We continue to execute on our strategic
initiatives, which include growing our Company Store Division
through value-creating acquisitions. We believe it's
important for us to lead the Papa Murphy's system through our
Company Store Division, not only in the execution of our sales,
marketing and operational initiatives, but also through key
acquisitions that give us a strong company footprint in the East,
where we can grow and also serve as a catalyst for franchisee
growth in high-potential, but currently underpenetrated markets. We
are doing this while simultaneously solidifying Company scale in
highly profitable and established markets like Seattle and
Portland."
2015 Financial Outlook
Based on current information, Papa Murphy's Holdings, Inc. is
providing the following full-year guidance for fiscal year 2015,
which ends on December 28, 2015:
- Domestic system-wide comparable store sales growth of
approximately 3.0%;
- Total system-wide sales of approximately $900 million to $920
million;
- 110 to 115 new domestic store openings, including 10 to 15 new
company-owned stores;
- Selling, general and administrative expenses of approximately
$28.0 million to $30.0 million; and
- Capital expenditures of approximately $17.0 million to $21.0
million.
Conference Call
Papa Murphy's Holdings, Inc. will host a conference call to
discuss the fourth quarter financial results on Tuesday, March 17,
2015 at 5:00 p.m. Eastern Time.
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 after the call and can be
accessed by dialing 877-870-5176 or for international callers by
dialing 858-384-5517; the passcode is 13599459. The replay will be
available until Tuesday, March 24, 2015. The conference call will
also be webcast live from the Company's corporate website at
investors.papamurphys.com, under the "Events & Presentations"
page. An archive of the webcast will be available at this
location shortly after the call has concluded.
About Papa Murphy's
Papa Murphy's is a franchisor and operator of the largest Take
'N' Bake pizza chain in the United States, selling uncooked pizzas
that customers bake at home. The Company was founded in 1981 and
currently operates over 1,400 franchised and company-owned fresh
pizza stores in 38 states, Canada and United Arab Emirates. Papa
Murphy's core purpose is to bring all families together through
food people love with a goal to create fun, convenient and
fulfilling family dinners. In addition to scratch-made pizzas, the
Company offers a growing menu of grab 'n' go items, including
salads, sides and desserts. For more information, visit
www.papamurphys.com.
Forward-looking Statements
This news release, as well as other information provided from
time to time by Papa Murphy's Holdings, Inc. or its employees, may
contain forward looking statements that involve risks and
uncertainties that could cause actual results to differ materially
from those anticipated in the forward looking statements.
Forward-looking statements give the Company's current expectations
and projections relating to the Company's 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 "guidance,"
"anticipate," "estimate," "expect," "forecast," "project," "plan,"
"intend," "believe," "confident," "may," "should," "can have,"
"likely," "future" 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.
Forward-looking statements in this press release include
statements relating to the Company's projected sales growth,
projected new store openings, projected selling, general, and
administrative expenses, projected capital expenditures, new
products, strategic initiatives, future financial or operational
results, productivity, and potential new markets and
acquisitions.
Any such forward-looking statements are not guarantees of
performance or results, and involve risks, uncertainties (some of
which are beyond the Company's control) and assumptions. Although
the Company believes any forward-looking statements are based on
reasonable assumptions, you should be aware that many factors could
affect our actual financial results and cause them to differ
materially from those anticipated in any forward-looking
statements. Please refer to the risk factors discussed in the
Company's current Annual report on Form 10-K for the fiscal year
ended December 29, 2014 (which was filed today and can be found at
the SEC's website www.sec.gov); each such risk factor is
specifically incorporated into this press release. Should one or
more of these risks or uncertainties materialize, the Company's
actual results may vary in material respects from those projected
in any forward-looking statements.
Any forward-looking statement made by the Company in this press
release speaks only as of the date on which it is made. The Company
undertakes no obligation to update any forward-looking statement,
whether as a result of new information, future developments or
otherwise.
Non-GAAP Financial Measures
To supplement its financial information presented in accordance
with generally accepted accounting principles (GAAP), the Company
is also providing with this press release the non-GAAP financial
measures of EBITDA, Adjusted EBITDA and pro forma net
income. EBITDA, Adjusted EBITDA and pro forma net income are
not derived in accordance with GAAP and should not be considered by
the reader as an alternative to net income (the most comparable
GAAP financial measure to each of EBITDA, Adjusted EBITDA and pro
forma net income). The Company's management believes that EBITDA
and Adjusted EBITDA are helpful as indicators of the current
financial performance of the Company because EBITDA and Adjusted
EBITDA reflect the additions and eliminations of various income
statement items that management does not consider indicative of
ongoing operating results. Management believes that pro forma
net income is also helpful as an indicator of the financial
performance of the Company during fiscal year 2014 and prior
periods because it adjusts net income to reflect the Company's
performance as if the Company's initial public offering, and
subsequent repayment of a portion of its long-term debt, had
occurred at the beginning of the
period. We have provided
reconciliations of EBITDA, Adjusted EBITDA and pro forma net income
to GAAP net income in the financial tables accompanying this
release.
PAPA MURPHY'S HOLDINGS,
INC. AND SUBSIDIARIES |
Consolidated Statements
of Operations and Comprehensive Income (Loss) |
(In thousands of dollars,
except share and per share data) |
|
|
|
|
|
|
Three Months
Ended |
Three Months
Ended |
|
December 29, |
December 30, |
December 29, |
December 30, |
|
2014 |
2013 |
2014 |
2013 |
|
(Unaudited) |
|
|
REVENUES |
|
|
|
|
Franchise royalties |
$ 10,956 |
$ 10,020 |
$ 39,305 |
$ 36,897 |
Franchise and development
fees |
1,412 |
1,266 |
4,531 |
4,330 |
Company-owned store sales |
15,477 |
11,340 |
50,598 |
39,148 |
Lease and other income |
422 |
25 |
2,965 |
120 |
|
|
|
|
|
Total
revenues |
28,267 |
22,651 |
97,399 |
80,495 |
|
|
|
|
|
COSTS AND EXPENSES |
|
|
|
|
Store operating costs
(exclusive of depreciation and amortization shown separately
below): |
|
|
|
|
Cost of food and
packaging |
5,936 |
4,264 |
19,686 |
14,700 |
Compensation and
benefits |
3,738 |
2,875 |
12,673 |
10,687 |
Advertising |
1,511 |
1,076 |
5,041 |
3,820 |
Occupancy |
824 |
621 |
2,873 |
2,365 |
Other store
operating costs |
1,283 |
1,198 |
4,434 |
3,988 |
Selling, general, and
administrative |
6,325 |
6,695 |
29,263 |
24,180 |
Depreciation and
amortization |
2,237 |
1,734 |
8,052 |
6,973 |
Loss on disposal or impairment
of property and equipment |
45 |
98 |
72 |
847 |
|
|
|
|
|
Total costs and
expenses |
21,899 |
18,561 |
82,094 |
67,560 |
|
|
|
|
|
OPERATING INCOME |
6,368 |
4,090 |
15,305 |
12,935 |
|
|
|
|
|
Interest expense |
1,131 |
2,934 |
8,098 |
10,523 |
Interest income |
(6) |
(29) |
(73) |
(94) |
Loss on early retirement of
debt |
-- |
4,029 |
4,619 |
4,029 |
Other expense, net |
60 |
10 |
178 |
44 |
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
5,183 |
(2,854) |
2,483 |
(1,567) |
|
|
|
|
|
Provision for income taxes |
2,359 |
47 |
1,235 |
1,024 |
|
|
|
|
|
NET INCOME (LOSS) |
2,824 |
(2,901) |
1,248 |
(2,591) |
|
|
|
|
|
Net loss attributable to
noncontrolling interests |
-- |
19 |
-- |
19 |
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO PAPA
MURPHY'S |
2,824 |
(2,882) |
1,248 |
(2,572) |
|
|
|
|
|
OTHER COMPREHENSIVE LOSS |
|
|
|
|
Foreign currency translation
adjustment |
-- |
(2) |
-- |
(2) |
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME (LOSS) |
$ 2,824 |
$ (2,884) |
$ 1,248 |
$ (2,574) |
|
|
|
|
|
Earnings (loss) per share of common
stock |
|
|
|
|
Basic |
$ 0.17 |
$ (1.15) |
$ (0.07) |
$ (2.34) |
Diluted |
$ 0.17 |
$ (1.15) |
$ (0.07) |
$ (2.34) |
Weighted average common stock
outstanding |
|
|
|
|
Basic |
16,594,464 |
3,881,523 |
12,101,236 |
3,847,861 |
Diluted |
16,710,913 |
3,881,523 |
12,101,236 |
3,847,861 |
|
|
|
|
|
|
|
|
|
|
PAPA MURPHY'S HOLDINGS,
INC. AND SUBSIDIARIES |
|
|
|
Selected Balance Sheet
Data |
(In thousands of dollars) |
|
|
|
|
December 29, |
December 30, |
|
2014 |
2013 |
Cash and cash equivalents |
$ 5,056 |
$ 3,705 |
Total current assets |
16,329 |
16,377 |
Total assets |
266,949 |
264,502 |
Total current liabilities |
18,558 |
17,965 |
Long-term debt, net of current portion |
112,200 |
168,330 |
Total Papa Murphy's Holdings Inc.
shareholders' equity |
91,298 |
33,925 |
|
|
|
|
|
|
PAPA MURPHY'S HOLDINGS,
INC. AND SUBSIDIARIES |
|
|
|
|
|
Reconciliation of Net
Income (Loss) to EBITDA and Adjusted EBITDA |
(In thousands of dollars) |
|
|
Three
months ended |
Twelve months ended |
|
|
|
|
|
|
December 29, |
December 30, |
December 29, |
December 30, |
|
2014 |
2013 |
2014 |
2013 |
Net income (loss) as
reported |
$ 2,824 |
$ (2,901) |
$ 1,248 |
$ (2,591) |
Depreciation and amortization |
2,237 |
1,734 |
8,052 |
6,973 |
Income tax benefit |
2,359 |
47 |
1,235 |
1,024 |
Interest expense, net |
1,125 |
2,905 |
8,025 |
10,429 |
EBITDA |
8,545 |
1,785 |
18,560 |
15,835 |
Loss on disposal or impairment of property
and equipment (a) |
45 |
98 |
72 |
847 |
Expenses not indicative of future operations
(b) |
-- |
621 |
622 |
1,880 |
Management fees and related expenses (c) |
-- |
174 |
1,678 |
586 |
Transaction costs (d) |
6 |
379 |
78 |
402 |
New store pre-opening expenses (e) |
21 |
19 |
32 |
19 |
Non-cash expenses and non-income based state
taxes (f) |
207 |
526 |
2,017 |
909 |
Loss (gain) on settlement of liabilities
(g) |
-- |
3,964 |
4,619 |
3,943 |
Adjusted EBITDA |
$ 8,824 |
$ 7,566 |
$ 27,678 |
$ 24,421 |
|
|
|
|
|
Adjusted EBITDA margin
(1) |
31.2% |
33.4% |
28.4% |
30.3% |
|
|
|
|
|
(1) Adjusted EBITDA margin is
calculated by dividing Adjusted EBITDA by total revenues. |
|
|
|
|
|
(a) Represents non-cash losses
resulting from disposal or impairment of property and equipment,
including divested company stores. |
|
|
|
|
|
(b) Represents non-recurring
advisory expenses and management transition and restructuring costs
in connection with recruiting a new chief financial officer. |
|
|
|
|
|
(c) Represents the elimination of
management fees and related costs paid to Lee Equity Partners, LLC
and its affiliates (the "Sponsor") for advisory services provided
pursuant to an advisory services and monitoring agreement and the
termination fee incurred with our initial public offering (the
"IPO"). |
|
|
|
|
|
(d) Represents transaction costs
relating to acquisitions and divestitures. |
|
|
|
|
|
(e) Represents expenses directly
associated with the opening of new stores and incurred prior to the
opening of new stores, including wages, benefits, travel for the
training of opening teams, grand opening marketing costs and other
store operating costs. |
|
|
|
|
|
(f) Represents (i) non-cash
expenses related to equity-based compensation; (ii) non-cash
expenses related to the difference between GAAP and cash rent
expense; (iii) non-cash expenses related to the fair valuation of
certain common stock and Series A Preferred Stock subject to put
options; and (iv) state revenue taxes levied in lieu of an income
tax. |
|
|
|
|
|
(g) Represents losses resulting
from refinancing of long-term debt and gains from settlement of
asset retirement obligations. |
|
|
|
|
|
|
|
|
|
|
PAPA MURPHY'S HOLDINGS,
INC. AND SUBSIDIARIES |
|
Reconciliation of Net
Income (Loss) to Pro Forma Net Income (Loss) |
(In thousands of dollars,
except share and per share data) |
|
|
|
|
Three Months Ended |
Twelve Months Ended |
|
December 29, |
December 30, |
December 29, |
December 30, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Net income (loss) as reported |
$ 2,824 |
$ (2,901) |
$ 1,248 |
$ (2,591) |
Management fees and expenses
(1) |
-- |
174 |
1,678 |
586 |
Loss on early retirement of
debt (2) |
-- |
4,029 |
4,619 |
4,029 |
Reduction in interest expense
based on reduced debt balance and lower interest rates (3) |
-- |
842 |
1,839 |
3,660 |
Expenses not indicative of
future operations (4) |
-- |
859 |
2,116 |
859 |
Incremental public costs
(5) |
-- |
(466) |
(655) |
(1,864) |
Income tax expense on
adjustments (6) |
-- |
(2,094) |
(3,634) |
(2,747) |
Pro forma net income |
$ 2,824 |
$ 443 |
$ 7,211 |
$ 1,932 |
|
|
|
|
|
Earnings per share - pro forma: |
|
|
|
|
Basic - pro forma (7) |
$ 0.17 |
$ 0.03 |
$ 0.43 |
$ 0.12 |
Diluted - pro forma (7) |
$ 0.17 |
$ 0.03 |
$ 0.43 |
$ 0.11 |
|
|
|
|
|
Weighted-average shares outstanding - pro
forma: |
|
|
|
|
Basic - pro forma |
16,594,464 |
16,626,641 |
16,583,043 |
16,592,981 |
Diluted - pro forma |
16,710,913 |
16,871,576 |
16,741,989 |
16,861,865 |
|
|
|
|
|
(1) Represents the elimination of
management fees and related costs paid to the Sponsor for advisory
services provided pursuant to an advisory services and monitoring
agreement and the termination fee incurred with the IPO. |
|
|
|
|
|
(2) Represents losses resulting
from refinancing of long-term debt and gains from settlement of
asset retirement obligations. |
|
(3) Represents the lower interest
expense assuming the $55.5 million partial repayment of long-term
debt from the net proceeds of the IPO occurred as of the beginning
of fiscal year 2013. This interest expense calculation also assumes
a reduction in the interest rate under our prior credit facility to
5.5% due to the reduction in our total leverage ratio to below
4.25x Adjusted EBITDA as defined in our prior credit
facility. The interest adjustment also includes a reduction to
the amortization of deferred financing costs consistent with the
write-off of deferred financing costs related to the $55.5 million
partial repayment of long-term debt, which occurred on May 7,
2014. |
|
|
|
|
|
(4) Reflects the elimination of
stock compensation charges incurred related to fully-vested
make-whole options granted to management concurrently with the IPO
and non-recurring advisory expenses. |
|
|
|
|
|
(5) Reflects an estimate of
recurring incremental legal, accounting, insurance and other
compliance costs we expect to incur as a public company above
historical amounts. |
|
|
|
|
|
(6) Reflects the tax expense
associated with the adjustments in 1 through 5 above at the
normalized tax rate of 38.5%, which reflects our estimated
long-term effective tax rate. |
|
|
|
|
|
(7) Share amounts for 2013
reflect the impact of (i) a conversion of our preferred shares to
common stock, (ii) a 1 to 2.2630 common stock split, and (iii) the
issuance of 5,833,333 shares of common stock in our IPO. |
CONTACT: Investor Contact:
Fitzhugh Taylor, ICR
fitzhugh.taylor@icrinc.com
877-747-7272
Media Contact:
Jessica Liddell, ICR
jessica.liddell@icrinc.com
203-682-8208
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