- Revenue Increased by 2.7% -- Net Income
Increased by $2.4 million -- New Store Openings Increased by 75%
-
Papa Murphy’s Holdings, Inc. (NASDAQ:FRSH) today announced
financial results for its second quarter ended June 27, 2016.
Key financial highlights for the second
quarter of 2016 include:
- Revenue of $29.9 million, an increase of 2.7% compared to the
second quarter of 2015.
- Domestic system comparable store sales compared with the second
quarter of 2015 decreased by 4.0%, including a 3.7% decrease at
domestic franchisee-owned stores and a 6.6% decrease at
company-owned stores.
- Net income was $952,000, or $0.06 per diluted share, compared
to net loss of $1.4 million, or $(0.09) per diluted share and
pro-forma net income(1) of $1.6 million, or $0.09 per diluted
share, in the second quarter of 2015.
- Adjusted EBITDA(1) was $6.5 million, flat compared to the
second quarter of 2015.
- Papa Murphy’s opened 28 new stores in the quarter, all in the
U.S., compared to 16 new store openings in the U.S. in the second
quarter of 2015.
______________________(1) Adjusted EBITDA and
pro-forma net income are non-GAAP measures. For a reconciliation of
Adjusted EBITDA and pro-forma net income to GAAP net income/(loss)
and discussion 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, “We continued to
face top-line challenges throughout the second quarter as a result
of an increasingly competitive landscape, including significantly
more aggressive value offerings across pizza and other foodservice,
lower seasonal and absolute media levels, and the impact from our
first quarter marketing shift to promote online ordering that
extended into the early part of the second quarter. In spite
of the near-term challenges, we continue to believe that our
strategies are on point and will drive long-term top line growth
and profitability.”
Calwell continued, “New US store openings in the
quarter totaled 28 units, a 75% increase compared with the number
of openings in the second quarter of last year. That brings
our year-to-date openings in the US to 53 units, which is 17 units
more than we opened in the first half of 2015. The process
enhancements we put in place in the second half of last year, with
a focus on lowering the build cost and reducing the cycle-time from
franchise sale to store opening, have enabled us to deliver a
significantly more balanced new store opening cadence this year and
we remain on track to open between 115 and 120 new units in
2016.”
“Throughout the second half of the year, our
primary marketing messages will feature traditional pizza offerings
sharply focused on value and product innovation with a secondary
focus on acquiring new customers and migrating existing customers
to online ordering. Although we continue to expect a
challenging consumer environment over the next few quarters, we
will maintain a sharp focus on thoughtful cost controls and process
improvements while continuing to invest in the areas that will
drive our future growth,” Calwell concluded.
Key Operating Metrics
Key Operating
Metrics |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
June 27, 2016 |
|
June 29, 2015 |
|
Domestic comparable
store sales: |
|
|
|
|
Franchised stores |
|
-3.7 |
% |
|
|
4.5 |
% |
|
Company-owned stores |
|
-6.6 |
% |
|
|
4.9 |
% |
|
Combined |
|
-4.0 |
% |
|
|
4.5 |
% |
|
|
|
|
|
|
System-wide sales ($'s
in 000s) |
$ |
215,253 |
|
|
$ |
215,752 |
|
|
|
|
|
|
|
Adjusted EBITDA ($'s in
000s) |
$ |
6,470 |
|
|
$ |
6,432 |
|
|
|
|
|
|
|
Store Count: |
|
|
|
|
Franchised |
|
1,375 |
|
|
|
1,333 |
|
|
Company-owned |
|
156 |
|
|
|
118 |
|
|
International |
|
39 |
|
|
|
34 |
|
|
System-wide |
|
1,570 |
|
|
|
1,485 |
|
|
|
|
|
|
|
We use a variety of operating and performance
metrics to evaluate the performance of our 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 second quarter of
2016 and 2015, we had 1,410 and 1,363 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.
2016 Financial Outlook
Based on current information, Papa Murphy’s Holdings, Inc. is
updating full year guidance for fiscal year 2016, which ends on
January 2, 2017.
- Domestic system-wide comparable store sales decline of
approximately 2.0% to 3.0%, including a comparable store sale
decline of approximately 3% in the third-quarter, compared to
previous full year guidance of comparable store sale growth of flat
to +1.0%;
- Domestic new store openings of between 115 and 120 units,
including about 25 company-owned exclusive of any pre-sale
development stores opened and held by the company at year-end;
- Revenue to include transaction fees from franchisees for use of
the new on-line ordering platform of approximately $0.7 million and
zero-margin POS License revenue of approximately $0.7 million,
compared to previous guidance of transaction fee income of
approximately $1.7 million and zero-margin POS License revenue of
approximately $2.1 million;
- Selling, general and administrative expenses of approximately
$28.0 million to $29.0 million, inclusive of operating costs of
approximately $1.4 million associated with the new on-line ordering
platform and approximately $0.7 million associated with POS
licenses resold to franchise-owners at cost, compared to previous
guidance totaling $33.0 million to $34.0 million, inclusive of
operating costs of approximately $3.1 million associated with the
new on-line ordering platform and approximately $2.1 million
associated with POS licenses resold to franchise-owners at
cost;
- Pre-opening costs associated with new company and unsold
pre-sale development stores, net of recoveries associated with
pre-sale development sales, of approximately $1.0 million to $1.2
million, compared to previous guidance of approximately $0.9
million for new company stores;
- Capital expenditures, including acquisitions and divestitures
of approximately $15.0 million to $17.0 million, compared to
previous guidance of approximately $13.0 million to $15.0
million;
- Expected full-year effective tax rate of approximately 39.5%,
compared to previous guidance of 38.5%; and
- Diluted share-count of approximately 16.8 million, compared to
previous guidance of 17.0 million.
Conference Call
Papa Murphy’s Holdings, Inc. will host a
conference call to discuss the second quarter financial results on
Wednesday, August 3, 2016 at 4:30 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 13640823. The
replay will be available until Wednesday, August 10, 2016. 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’sPapa Murphy's Holdings, Inc.
(Nasdaq:FRSH) is a franchisor and operator of the largest Take ‘N'
Bake pizza brand 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 more than 1,500 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. Order online today
at www.papamurphys.com.
Forward-looking StatementsThis
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 comparable
stores sales, projected new store openings, projected selling,
general, and administrative expenses, projected revenue from
transaction fees and POS licenses, projected pre-opening costs,
projected capital expenditures (including acquisitions), projected
effective tax rate, projected diluted share count, strategic,
future financial or operational results, and marketing
strategy.
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 28, 2015 and quarterly report on Form
10-Q for the fiscal quarter ended March 28, 2016 (each of 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 MeasuresTo 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 measure of
pro-forma net income, EBITDA and Adjusted EBITDA. Pro-forma
net income, EBITDA and Adjusted EBITDA 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 pro-forma net income, EBITDA and Adjusted
EBITDA). The Company’s management believes that pro-forma net
income, EBITDA and Adjusted EBITDA are helpful as indicators of the
current financial performance of the Company because pro-forma net
income, EBITDA and Adjusted EBITDA reflect the additions and
eliminations of various income statement items that management does
not consider indicative of ongoing operating results. We have
provided reconciliations of pro-forma net income, EBITDA and
Adjusted EBITDA to GAAP net income in the financial tables
accompanying this release.
PAPA MURPHY'S HOLDINGS, INC. AND
SUBSIDIARIES |
|
Condensed Consolidated Statements of Net
Income (Loss) |
|
(In thousands of dollars, except share and per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
|
|
June 27, 2016 |
|
June 29, 2015 |
|
|
|
|
|
|
Unaudited |
|
Unaudited |
|
|
Revenues |
|
|
|
|
|
|
Franchise
royalties |
$ |
9,538 |
|
|
$ |
9,753 |
|
|
|
|
Franchise
and development fees |
|
574 |
|
|
|
830 |
|
|
|
|
Company-owned store sales |
|
19,470 |
|
|
|
18,156 |
|
|
|
|
Other |
|
312 |
|
|
|
382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
29,894 |
|
|
|
29,121 |
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
Store
operating costs: |
|
|
|
|
|
|
|
Cost of
food and packaging |
|
6,781 |
|
|
|
6,443 |
|
|
|
|
|
Compensation and benefits |
|
5,577 |
|
|
|
4,722 |
|
|
|
|
|
Advertising |
|
1,897 |
|
|
|
1,753 |
|
|
|
|
|
Occupancy |
|
1,503 |
|
|
|
1,174 |
|
|
|
|
|
Other store
operating costs |
|
2,555 |
|
|
|
1,856 |
|
|
|
|
Selling,
general, and administrative |
|
5,912 |
|
|
|
8,162 |
|
|
|
|
Depreciation and amortization |
|
2,915 |
|
|
|
2,420 |
|
|
|
|
(Gain) Loss
on disposal of property and equipment |
|
(59 |
) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and
expenses |
|
27,081 |
|
|
|
26,533 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
2,813 |
|
|
|
2,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
1,208 |
|
|
|
1,143 |
|
|
|
|
Loss on
impairment of investments |
|
- |
|
|
|
4,500 |
|
|
|
|
Other
expense, net |
|
43 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes |
|
1,562 |
|
|
|
(3,099 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for (benefit from) income taxes |
|
610 |
|
|
|
(1,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) |
|
952 |
|
|
|
(1,939 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to noncontrolling interests |
|
- |
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) Attributable To Papa Murphy's |
$ |
952 |
|
|
$ |
(1,439 |
) |
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) per share of common stock |
|
|
|
|
|
|
Basic |
|
$ |
0.06 |
|
|
$ |
(0.09 |
) |
|
|
|
Diluted |
$ |
0.06 |
|
|
$ |
(0.09 |
) |
|
|
Weighted
average common stock outstanding |
|
|
|
|
|
|
Basic |
|
|
16,744,553 |
|
|
|
16,629,666 |
|
|
|
|
Diluted |
|
16,766,587 |
|
|
|
16,629,666 |
|
|
|
|
|
|
|
|
|
|
|
|
PAPA MURPHY'S HOLDINGS, INC. AND
SUBSIDIARIES |
Selected Balance Sheet Data |
(In thousands of dollars) |
(unaudited) |
|
|
|
|
|
June 27, 2016 |
|
December 28, 2015 |
Cash and cash
equivalents |
$ |
435 |
|
|
$ |
6,867 |
|
Total current
assets |
|
9,398 |
|
|
|
18,896 |
|
Total assets |
|
272,026 |
|
|
|
275,471 |
|
Total current
liabilities |
|
18,544 |
|
|
|
24,149 |
|
Long-term debt, net of
current portion |
|
107,195 |
|
|
|
108,237 |
|
Total stockholders'
equity |
|
99,990 |
|
|
|
97,656 |
|
PAPA MURPHY'S HOLDINGS, INC. AND
SUBSIDIARIES |
|
Reconciliation of Net Income (Loss) to EBITDA
and Adjusted EBITDA |
|
(In thousands of dollars) |
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
June 27, 2016 |
|
June 29, 2015 |
|
|
Net Income
(Loss) As Reported |
$ |
952 |
|
|
$ |
(1,939 |
) |
|
|
Net loss attributable to
noncontrolling interests |
|
- |
|
|
|
500 |
|
|
|
Net Income
(Loss) Attributable To Papa Murphy's |
|
952 |
|
|
|
(1,439 |
) |
|
|
Depreciation and
amortization |
|
2,915 |
|
|
|
2,420 |
|
|
|
Provision for (benefit from) income
taxes |
|
610 |
|
|
|
(1,160 |
) |
|
|
Interest expense, net |
|
1,208 |
|
|
|
1,143 |
|
|
|
EBITDA |
|
5,685 |
|
|
|
964 |
|
|
|
(Gain) Loss on disposal of property
and equipment (a) |
|
(59 |
) |
|
|
3 |
|
|
|
Transaction costs (b) |
|
- |
|
|
|
29 |
|
|
|
New store pre-opening expenses
(c) |
|
476 |
|
|
|
176 |
|
|
|
Non-cash expenses and non-income
based state taxes (d) |
|
368 |
|
|
|
590 |
|
|
|
Expenses not indicative of future
operations (e) |
|
- |
|
|
|
4,670 |
|
|
|
Adjusted
EBITDA |
$ |
6,470 |
|
|
$ |
6,432 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin (1) |
|
21.6 |
% |
|
|
22.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents non-cash gains and losses resulting from
disposal of property and equipment, including divested
Company-owned stores. |
|
|
|
|
|
|
|
(b) Represents transaction costs incurred in connection with
the acquisition of multiple franchised stores. |
|
|
|
|
|
|
|
(c) Represents expenses directly associated with the opening of
new stores and incurred primarily in advance of the store opening,
including grand opening marketing costs, training wages and travel
of opening teams and other store operating costs. |
|
|
|
|
|
|
|
(d) 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. |
|
|
|
|
|
|
|
(e) Represents (i) a $4 million loss recognized upon impairment
of Project Pie, LLC, a cost-method investment, and its subsequent
disposal, and the write-off as bad debt of receivables totaling
$325,000 and (ii) offering costs related to the 2015 secondary
offering. |
|
|
|
|
|
|
|
(1) Adjusted EBITDA margin is calculated by dividing Adjusted
EBITDA by total revenues. |
|
|
|
|
|
|
|
|
PAPA MURPHY'S HOLDINGS, INC. AND
SUBSIDIARIES |
|
Reconciliation of Net Income (Loss) to Pro
Forma Net Income |
|
(In thousands of dollars, except share and per share
data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
June 27, 2016 |
|
June 29, 2015 |
|
|
|
|
|
|
|
|
Net
Income (Loss) As Reported |
$ |
952 |
|
|
$ |
(1,939 |
) |
|
Net loss attributable
to noncontrolling interests |
|
- |
|
|
|
500 |
|
|
Net
Income (Loss) Attributable To Papa Murphy's |
|
952 |
|
|
|
(1,439 |
) |
|
|
Expenses not indicative of future operations: |
|
|
|
|
|
Secondary offering
costs (1) |
|
- |
|
|
|
345 |
|
|
|
Loss on Project Pie,
LLC impairment and disposal (2) |
|
- |
|
|
|
4,325 |
|
|
|
Non-cash compensation
expenses (3) |
|
- |
|
|
|
287 |
|
|
|
Income tax expense on adjustments (4) |
|
- |
|
|
|
(1,909 |
) |
|
Pro
forma net Income |
$ |
952 |
|
|
$ |
1,609 |
|
|
|
|
|
|
|
|
|
Earnings
per share - pro forma: |
|
|
|
|
|
Basic |
$ |
0.06 |
|
|
$ |
0.10 |
|
|
|
Diluted |
$ |
0.06 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding - pro forma: |
|
|
|
|
|
Basic |
|
16,744,553 |
|
|
|
16,629,666 |
|
|
|
Diluted |
|
16,766,587 |
|
|
|
16,950,524 |
|
|
|
|
|
|
|
|
|
(1) Represents costs incurred from the Company's 2015
secondary offering |
|
|
|
|
|
|
|
|
(2) Represents a $4 million loss recognized upon impairment of
Project Pie, LLC, a cost-method investment, and its subsequent
disposal, and the write-off as bad debt of receivables totaling
$325,000. |
|
|
|
|
|
|
|
|
(3) Represents catch-up stock compensation expenses related to
market vesting of restricted stock issued prior to the IPO |
|
|
|
|
|
|
|
|
(4) Reflects the tax expense associated with above adjustments
at a normalized tax rate in line with our estimated long-term
effective tax rate. |
|
|
|
|
|
|
|
|
Investor Contact:
Fitzhugh Taylor, ICR
fitzhugh.taylor@icrinc.com
877-747-7272
Media Contact:
Christine Beggan, ICR
Christine.Beggan@icrinc.com
203-682-8329
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