First Quarter U.S. System-wide Comparable Store
Sales Increase 5.6%
First Quarter Net Income of $2.6 million, or
$0.15 per diluted share
Papa Murphy's Holdings, Inc. (Nasdaq:FRSH) today announced
financial results for its first quarter ended March 30, 2015.
Key financial highlights for the first quarter of 2015
include:
- Revenue increased 16.1% to $29.2 million compared to the first
quarter of 2014; excluding the year-over-year impact of
point-of-sale licenses resold to franchisees at cost, total revenue
increased 24.3%.
- Domestic system comparable store sales increased 5.6%,
including increases of 6.4% at company-owned stores and 5.5% at
domestic franchisee-owned stores.
- Net income was $2.6 million, or $0.15 per diluted share
compared to net income of $0.8 million in the first quarter of
2014; pro forma net income(1) in the first quarter of 2014 was $2.0
million, or $0.12 per diluted share.
- Adjusted EBITDA(1) increased 6.4% to $8.0 million compared to
the first quarter of 2014.
- Papa Murphy's opened 22 stores system-wide, including 20 in the
U.S.
_____________________
(1) Pro forma net income and Adjusted EBITDA are non-GAAP
measures. For reconciliations of Adjusted EBITDA and pro forma net
income to GAAP net income and discussions of why we consider
Adjusted EBITDA and pro forma net income to be useful measures, see
the financial tables accompanying this release and the paragraph
below entitled "Non-GAAP Financial Measures."
Ken Calwell, President and Chief Executive Officer of Papa
Murphy's Holdings, Inc., stated, "Our operating momentum continued
into the first quarter with strong top and bottom line growth. Our
continued strong results, including a 17th consecutive quarter of
comparable store sales growth, were driven by an innovative new
product pipeline and consistent improvement in
operations. We believe a significant opportunity remains
to grow our sales and expand margins while at least tripling our
store count."
Calwell added, "Our 2015 development plan is on track as 22 new
Papa Murphy's stores opened during the first quarter. In
addition, we continue to enhance our development process to improve
the speed and predictability of our new store openings. We remain
excited about the opportunities ahead for Papa Murphy's, and
believe we are well positioned with a solid foundation upon which
to build."
Key Operating Metrics
|
Three
Months Ended |
|
March 30, 2015 |
March 31,
2014 |
Domestic comparable store sales growth |
|
|
Franchised stores |
5.5% |
3.1% |
Company-owned stores |
6.4% |
7.1% |
System-wide |
5.6% |
3.3% |
|
|
|
System-wide sales ($'s in 000s) |
$ 234,633 |
$ 215,983 |
|
|
|
Adjusted EBITDA ($'s in 000s) |
$ 8,015 |
$ 7,534 |
|
|
|
Store Count |
|
|
Franchised |
1,368 |
1,360 |
Company-owned |
108 |
69 |
System-wide |
1,476 |
1,429 |
The Company uses a variety of operating and performance metrics
to evaluate the performance of its business. 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 first quarter of 2015 and 2014, there were 1,356 and
1,304 domestic comparable stores, respectively.
System-wide Sales include net sales by all of
our company-owned and franchisee-owned 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.
2015 Financial Outlook
Based on current information, Papa Murphy's Holdings, Inc. is
reiterating 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 ranging from $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 first quarter financial results on Wednesday, May 6,
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 13606670. The replay will be
available until Wednesday, May 13, 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 Holdings, Inc. is a franchisor and operator of the
largest Take 'N' Bake pizza chain in the United States, selling
fresh, hand-crafted pizzas ready for customers to bake at home. The
company was founded in 1981 and currently operates over 1,475
franchised and corporate-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. Find Papa Murphy's on
Facebook at www.facebook.com/papamurphyspizza.
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, projected
increases in margins, new products, strategic, operational, and
technological initiatives, future financial or operational results,
and speed and efficiency of new store openings.
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 annual Report on Form 10-K for the fiscal year ended
December 29, 2014 (which 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 |
Condensed Consolidated
Statements of Operations |
(In thousands of dollars,
except share and per share data) |
|
|
|
|
Three Months Ended |
|
March 30, 2015 |
March 31, 2014 |
|
Unaudited |
REVENUES |
|
|
Franchise royalties |
$ 10,679 |
$ 10,069 |
Franchise and development
fees |
1,140 |
1,169 |
Company-owned store sales |
17,167 |
12,018 |
Lease and other |
182 |
1,861 |
|
|
|
Total revenues |
29,168 |
25,117 |
|
|
|
COSTS AND EXPENSES |
|
|
Store operating costs: |
|
|
Cost of food and packaging |
6,089 |
4,590 |
Compensation and benefits |
4,354 |
3,030 |
Advertising |
1,669 |
1,122 |
Occupancy |
1,003 |
660 |
Other store operating
costs |
1,445 |
1,069 |
Selling, general, and
administrative |
6,882 |
8,199 |
Depreciation and
amortization |
2,319 |
1,841 |
Loss on disposal of property
and equipment |
59 |
6 |
|
|
|
Total costs and expenses |
23,820 |
20,517 |
|
|
|
OPERATING INCOME |
5,348 |
4,600 |
|
|
|
Interest expense |
1,143 |
3,112 |
Interest income |
(13) |
(34) |
Other expense, net |
2 |
12 |
|
|
|
INCOME BEFORE INCOME TAXES |
4,216 |
1,510 |
|
|
|
Provision for income taxes |
1,620 |
691 |
|
|
|
NET INCOME |
2,596 |
819 |
|
|
|
Earnings (loss) per share of common
stock |
|
|
Basic |
$ 0.16 |
$ (0.20) |
Diluted |
$ 0.15 |
$ (0.20) |
Weighted average common stock
outstanding |
|
|
Basic |
16,604,206 |
3,851,741 |
Diluted |
16,791,684 |
3,851,741 |
|
PAPA MURPHY'S HOLDINGS,
INC. AND SUBSIDIARIES |
Selected Balance Sheet
Data |
(In thousands of dollars) |
(unaudited) |
|
March 30, |
December 29, |
|
2015 |
2014 |
Cash and cash equivalents |
$ 1,045 |
$ 5,056 |
Total current assets |
12,689 |
16,329 |
Total assets |
270,583 |
266,949 |
Total current liabilities |
18,896 |
18,558 |
Long-term debt, net of current portion |
111,500 |
112,200 |
Total Papa Murphy's Holdings Inc.
shareholders' equity |
94,100 |
91,298 |
|
|
PAPA MURPHY'S HOLDINGS,
INC. AND SUBSIDIARIES |
|
Reconciliation of Net
Income to EBITDA and Adjusted EBITDA |
|
(In thousands of dollars) |
|
|
Three months
ended |
|
|
March 30, |
March 31, |
|
|
2015 |
2014 |
|
Net income as
reported |
$ 2,596 |
$ 819 |
|
Depreciation and
amortization |
2,319 |
1,841 |
|
Income tax provision |
1,620 |
691 |
|
Interest expense, net |
1,130 |
3,078 |
|
EBITDA |
7,665 |
6,429 |
|
Loss on disposal of property and equipment
(a) |
59 |
6 |
|
Expenses not indicative of future operations
(b) |
-- |
374 |
|
Management fees and related expenses (c) |
-- |
135 |
|
Transaction costs (d) |
33 |
2 |
|
New store pre-opening expenses (e) |
70 |
10 |
|
Non-cash expenses and non-income based state
taxes (f) |
188 |
578 |
|
Adjusted
EBITDA |
$ 8,015 |
$ 7,534 |
|
|
|
|
|
Adjusted EBITDA margin
(1) |
27.5% |
30.0% |
|
|
|
|
|
(1) Adjusted EBITDA margin is
calculated by dividing Adjusted EBITDA by total revenues. |
|
|
|
|
|
(a) Represents non-cash losses
resulting from disposal of property and equipment, including
divested Company stores. |
|
|
|
|
(b) Represents non-recurring
advisory expenses in connection with our initial public offering
(the "IPO") and non-recurring management transition and
restructuring costs, consisting of severance, recruitment,
relocation and other 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. |
|
|
|
|
(d) Represents transaction costs
relating to acquisition of multiple franchised stores and other
investments. |
|
|
|
|
|
(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
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; and (iii) state revenue taxes levied in lieu of an income
tax. |
|
PAPA MURPHY'S HOLDINGS,
INC. AND SUBSIDIARIES |
Reconciliation of Net
Income to Pro Forma Net Income |
(In thousands of dollars,
except share and per share data) |
|
Three
Months Ended |
|
March 30, 2015 |
March 31,
2014 |
|
|
|
Net income as reported: |
$ 2,596 |
$ 819 |
Management fees and expenses
(1) |
-- |
135 |
Reduction in interest expense
based on reduced debt balance (2) |
-- |
1,281 |
Expenses not indicative of
future operations (3) |
-- |
865 |
Incremental public costs
(4) |
-- |
(466) |
Income tax expense on
adjustments (5) |
-- |
(681) |
Pro forma net income |
$ 2,596 |
$ 1,953 |
|
|
|
Earnings per share - pro forma March 31,
2014: |
|
|
Basic |
$ 0.16 |
$ 0.12 |
Diluted |
$ 0.15 |
$ 0.12 |
|
|
|
Weighted-average shares outstanding - pro
forma March 31, 2014: |
|
|
Basic (6) |
16,604,206 |
16,595,255 |
Diluted (6) |
16,791,684 |
16,812,834 |
|
|
|
(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. |
|
|
|
(2) Represents the lower interest
expense assuming our post-IPO long-term debt balance of $115.5
million was outstanding as of the beginning of fiscal year
2013. This balance reflects $55.5 million repayment of
long-term debt from the net proceeds from our IPO. This
interest expense calculation assumes a change in interest rate from
6.75% to 5.5% due to the reduction in our total leverage ratio to
below 4.25x Adjusted EBITDA as defined in our credit
facility. The interest adjustment also reflects lower annual
amortization of deferred financing costs of approximately $110,000
after the write-off of approximately $1.2 million, which occurred
in the second quarter of 2014 but is assumed to have occurred at
the beginning of fiscal 2013. |
|
|
|
(3) Reflects the elimination of
stock compensation charges in the first quarter of 2014 related to
the acceleration of vesting, repurchase of shares, and issuance of
new options with certain executive officers in preparation for the
IPO and other costs to prepare for the IPO. |
|
|
|
(4) Reflects an estimate of
recurring incremental legal, accounting, insurance and other
compliance costs we expect to incur as a public company. |
|
|
|
(5) Reflects the tax expense
associated with the adjustments in 1 through 4 above at a
normalized tax rate in line with our estimated long-term effective
tax rate. |
|
|
|
(6) Pro forma shares outstanding
in 2014 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 upon the
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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