Papa Murphy’s Holdings, Inc. (NASDAQ:FRSH) today announced
financial results for its fourth quarter and fiscal year ended
January 1, 2018.
Key financial highlights for the 13-week quarter ended
January 1, 2018, compared to the 14-week quarter ended January 2,
2017, include the following:
- Revenue was $30.7 million compared to $35.5 million in the
fourth quarter of 2016; the fourth quarter of 2016 included
approximately $2.7 million in revenue attributable to the extra
operating week.
- Domestic system comparable store sales decreased 2.6% compared
to the fourth quarter of 2016 on a comparable 13-week basis,
including a 2.3% decline at Company-owned stores.
- Selling, general and administrative expense was $7.7 million,
including a non-cash litigation reserve of approximately $4.0
million and $0.1 million related to CEO transition and
restructuring, partially offset by a deficit recovery of $3.4
million in the national advertising fund (ADF).
- The Company recorded a non-cash charge of $0.6 million pre-tax
related to the closure of three Company-owned stores in the
quarter.
- Reported Net Income was $13.5 million, or $0.79 per diluted
share, which included a $12.6 million positive impact of the Tax
Cuts and Jobs Act of 2017, compared to Net Income of $1.5 million,
or $0.09 per diluted share in the prior year fourth quarter.
- Pro-Forma Net income(1) in the quarter was $4.2 million, or
$0.25 per diluted share, compared to $1.5 million, or $0.09 per
diluted share in the fourth quarter last year; the fourth quarter
of 2016 included an approximate $0.1 million benefit, or $0.01 per
share, attributable to the extra operating week.
- Adjusted EBITDA(1) increased 29.2% to $9.3 million, compared to
EBITDA of $7.2 million in the prior year fourth quarter; the fourth
quarter of 2016 included an approximate $0.5 million benefit
attributable to the extra operating week.
Key financial highlights for the 52-week fiscal year
ended January 1, 2018, compared to the 53-week fiscal year ended
January 2, 2017 were as follows:
- Revenue was $118.7 million compared to $126.9 million in fiscal
2016; fiscal 2016 included approximately $2.7 million in revenue
attributable to the extra operating week.
- Domestic system comparable store sales decreased 4.0% compared
to fiscal 2016 on a comparable 52-week basis, including a 5.5%
decline at Company-owned stores.
- Selling, general and administrative expense was $33.9 million,
including non-recurring and mostly non-cash charges totaling
approximately $7.1 million, consisting of $4.5 million
related to litigation settlement reserves and payments and $2.6
million related to CEO transition and restructuring; the annual
deficit increase in the national advertising fund totaled $0.4
million.
- The Company recorded non-recurring and mostly non-cash charges
totaling $16.8 million pre-tax, including $9.1 million related to
the impairment of the legacy e-commerce platform and $7.7 million
related to the impairment and closure of Company-owned
stores.
- Reported Net loss was $7,000, or $0.00 per diluted share, which
includes a $12.6 million positive impact of the Tax Cuts and Jobs
Act of 2017, compared to Net Income of $2.6 million, or $0.16 per
diluted share in the prior year.
- Pro-Forma Net income(1) was $2.6 million, or $0.15 per diluted
share, compared to $2.6 million, or $0.16 per diluted share last
year; fiscal 2016 results included an approximate $0.1 million
benefit, or $0.01 per share, attributable to the extra operating
week.
- Adjusted EBITDA(1) was $19.8 million, compared to EBITDA of
$21.7 million in the prior year; fiscal 2016 results included an
approximate $0.5 million benefit attributable to the extra
operating week.
______________________
- Pro-Forma Net Income and Adjusted EBITDA are non-GAAP measures.
For a reconciliation of Pro-Forma Net Income and Adjusted EBITDA to
GAAP net income/(loss) and discussion of why we consider Pro-Forma
Net Income and Adjusted EBITDA to be useful measures, see the
financial tables accompanying this release and the paragraph below
entitled “Non-GAAP Financial Measures.”
Weldon Spangler, Chief Executive Officer of Papa Murphy’s
Holdings, Inc., stated, “While we continue to be disappointed with
reported comparable store sales performance, I am pleased with the
progress we made in the fourth quarter against our new strategic
initiatives, and the sequential improvement we’ve begun to
see in our business. We are confident that we will return
this brand to growth and profitability through our initiatives
designed to improve both convenience and relevance to
consumers. We believe the consumer-facing initiatives we are
pursuing, including the transition to Olo’s digital platform and
the rollout of delivery, as well as the work we’re doing on brand
positioning and messaging, will complement our continuing
initiatives focused on serving our franchise owners, and building
internal people-capability and process. We expect these
efforts to drive positive brand momentum in 2018 and beyond.”
Spangler added, “Subsequent to the end of the fourth quarter we
entered into preliminary agreements to refranchise stores in three
markets to existing franchise owner groups and expect the
transactions to close in the second and third quarters. We
continue to pursue additional refranchising transactions as we
return to a 95% franchise system, and expect to have no more than
60 company-operated stores by the end of the year.”
Key Operating Metrics
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
January 1, 2018 |
|
January 2, 2017 |
|
January 1, 2018 |
|
January 2, 2017 |
Domestic comparable
store sales: |
|
|
|
|
|
|
|
Franchised stores |
-2.6 |
% |
|
-7.5 |
% |
|
-3.8 |
% |
|
-5.0 |
% |
Company-owned stores |
-2.3 |
% |
|
-11.1 |
% |
|
-5.5 |
% |
|
-7.3 |
% |
Combined |
-2.6 |
% |
|
-7.8 |
% |
|
-4.0 |
% |
|
-5.2 |
% |
|
|
|
|
|
|
|
|
System-wide sales ($’s
in 000s) |
$ |
223,815 |
|
|
$ |
247,287 |
|
|
$ |
846,864 |
|
|
$ |
898,709 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA ($’s in
000s) |
$ |
9,338 |
|
|
$ |
7,228 |
|
|
$ |
19,844 |
|
|
$ |
21,696 |
|
|
|
|
|
|
|
|
|
Store Count |
|
|
|
|
|
|
|
Franchised |
1,338 |
|
|
1,369 |
|
|
1,338 |
|
|
1,369 |
|
Company-owned |
145 |
|
|
168 |
|
|
145 |
|
|
168 |
|
International |
40 |
|
|
40 |
|
|
40 |
|
|
40 |
|
System-wide |
1,523 |
|
|
1,577 |
|
|
1,523 |
|
|
1,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 fourth quarter of 2017 and 2016, we had 1,443 and
1,434 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 elimination of various expenses that we consider not
indicative of ongoing operations. For a reconciliation of
Adjusted EBITDA to net income/(loss), the most directly comparable
GAAP measure, see the financial tables accompanying this
release.
2018 Financial Outlook
Based on current information, Papa Murphy’s Holdings, Inc. is
offering the following guidance for fiscal 2018, which ends on
December 31, 2018:
- Domestic system-wide comparable store sales growth flat to low
single digits, including a low single digit decline in Q1;
- Year-End Company-owned store count no more than 60 units;
- Domestic franchise new store openings of approximately 10
units;
- Selling, general and administrative expenses of approximately
$26 million, excluding expected non-recurring costs totaling around
$3.8 million;
- Adjusted EBITDA of at least $21 million;
- Cash Used in Investing Activities of no more than $1
million;
- Cash Flow from Operations less Cash Used in Investing
Activities of around $12 million, exclusive of dispute resolution
payments of approximately $4 million;
- Full-year effective book tax rate of approximately 25.5%;
and
- Diluted share-count of approximately 16.9 million.
Note that the 2018 Financial Outlook does not reflect the
effects of two new accounting standards (ASC topic 606 – Revenue
from contracts with customers and ASC topic 842 – Leases) that we
expect to adopt for 2018 financial reporting or the refranchising
of Company-owned stores in the year. We expect to update the
financial outlook to reflect the full impact of these accounting
changes when we report results for the first quarter of fiscal 2018
and will update the financial outlook for the effects of
refranchising when we have greater certainty around specific deal
points and timing.
Conference Call
Papa Murphy’s Holdings, Inc. will host a conference call to
discuss the fourth quarter financial results on Wednesday, March
14, 2018 at 5:00 PM 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
844-512-2921 or for international callers by dialing 412-317-6671;
the passcode is 13676705. The replay will be available until
Wednesday, March 21, 2018. 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.
(“Papa Murphy’s” or the “Company”) (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 39 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 press 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 growth or decline, projected Company-owned store count,
projected new store openings, projected selling, general and
administrative expenses, including projected non-recurring costs,
projected Adjusted EBITDA, projected refranchising activities,
projected cash used in investing activities, projected cash flow
from operations, projected effective tax rate, projected diluted
share count, and future financial or operational results and
business strategy, including the expected effects of our strategic
initiatives.
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
January 1, 2018 (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 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. EBITDA, Adjusted EBITDA and Pro-Forma Net
Income should not be considered by the reader as an alternative to
net (loss) income (the most comparable GAAP financial measure to
EBITDA, Adjusted EBITDA and Pro-Forma Net Income). The Company’s
management believes that EBITDA, Adjusted EBITDA, and Pro-Forma Net
Income are helpful as indicators of the current financial
performance of the Company because EBITDA, Adjusted EBITDA, and
Pro-Forma Net Income 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 EBITDA, Adjusted EBITDA and Pro-Forma Net Income
to GAAP net (loss) income in the financial tables accompanying this
release.
The Company is also providing with this press release a forward
looking estimate of the non-GAAP financial measure of Adjusted
EBITDA. We do not, however, provide a reconciliation of this
forward-looking non-GAAP measure to the most comparable GAAP
measure because of the inherent difficulty in forecasting and
quantifying various adjustments that are necessary for this
reconciliation and, accordingly, the reconciling information cannot
be obtained without unreasonable effort.
PAPA MURPHY’S HOLDINGS, INC. AND
SUBSIDIARIESConsolidated Statements of
Operations (In thousands of dollars, except share and per
share data)
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
January 1,2018 |
|
January 2,2017 |
|
January 1,2018 |
|
January 2,2017 |
|
Unaudited |
|
Unaudited |
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Franchise
royalties |
$ |
9,878 |
|
|
$ |
10,983 |
|
|
$ |
37,552 |
|
|
$ |
39,851 |
|
Franchise
and development fees |
472 |
|
|
739 |
|
|
2,220 |
|
|
2,912 |
|
Company-owned store sales |
19,858 |
|
|
23,231 |
|
|
76,868 |
|
|
82,080 |
|
Other |
533 |
|
|
532 |
|
|
2,021 |
|
|
2,040 |
|
Total
revenues |
30,741 |
|
|
35,485 |
|
|
118,661 |
|
|
126,883 |
|
|
|
|
|
|
|
|
|
Costs and
Expenses |
|
|
|
|
|
|
|
Store
operating costs: |
|
|
|
|
|
|
|
Cost of
food and packaging |
6,582 |
|
|
7,806 |
|
|
25,958 |
|
|
28,347 |
|
Compensation and benefits |
5,868 |
|
|
6,687 |
|
|
23,603 |
|
|
23,746 |
|
Advertising |
2,026 |
|
|
2,413 |
|
|
8,221 |
|
|
8,203 |
|
Occupancy |
1,638 |
|
|
1,740 |
|
|
7,043 |
|
|
6,226 |
|
Other
store operating costs |
1,958 |
|
|
2,660 |
|
|
8,102 |
|
|
10,268 |
|
Selling,
general, and administrative |
7,654 |
|
|
6,943 |
|
|
33,870 |
|
|
28,108 |
|
Depreciation and amortization |
2,093 |
|
|
3,469 |
|
|
10,452 |
|
|
12,236 |
|
Loss on
disposal or impairment of property and equipment |
303 |
|
|
(54 |
) |
|
15,680 |
|
|
101 |
|
Total
costs and expenses |
28,122 |
|
|
31,664 |
|
|
132,929 |
|
|
117,235 |
|
|
|
|
|
|
|
|
|
Operating
(Loss) Income |
2,619 |
|
|
3,821 |
|
|
(14,268 |
) |
|
9,648 |
|
|
|
|
|
|
|
|
|
Interest
expense, net |
1,260 |
|
|
1,280 |
|
|
5,078 |
|
|
4,868 |
|
Other
expense, net |
55 |
|
|
62 |
|
|
204 |
|
|
188 |
|
Income (Loss)
Before Income Taxes |
1,304 |
|
|
2,479 |
|
|
(19,550 |
) |
|
4,592 |
|
|
|
|
|
|
|
|
|
(Benefit
from) provision for income taxes |
(12,158 |
) |
|
1,003 |
|
|
(19,543 |
) |
|
1,943 |
|
Net Income
(Loss) |
$ |
13,462 |
|
|
$ |
1,476 |
|
|
$ |
(7 |
) |
|
$ |
2,649 |
|
|
|
|
|
|
|
|
|
Earnings per share
of common stock |
|
|
|
|
|
|
|
Basic |
$ |
0.80 |
|
|
$ |
0.09 |
|
|
$ |
0.00 |
|
|
$ |
0.16 |
|
Diluted |
$ |
0.79 |
|
|
$ |
0.09 |
|
|
$ |
0.00 |
|
|
$ |
0.16 |
|
Weighted average common
stock outstanding |
|
|
|
|
|
|
|
Basic |
16,890,687 |
|
|
16,757,586 |
|
|
16,870,013 |
|
|
16,743,285 |
|
Diluted |
16,954,938 |
|
|
16,775,488 |
|
|
16,870,013 |
|
|
16,773,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAPA MURPHY’S HOLDINGS, INC. AND
SUBSIDIARIESSelected Balance Sheet
Data(In thousands of dollars) |
|
|
January 1,2018 |
|
January 2,2017 |
Cash and cash
equivalents |
$ |
2,174 |
|
|
$ |
2,069 |
|
Total current
assets |
9,352 |
|
|
13,116 |
|
Total assets |
246,174 |
|
|
273,872 |
|
Total current
liabilities |
27,846 |
|
|
22,900 |
|
Long-term debt, net of
current portion |
86,994 |
|
|
100,965 |
|
Total stockholders’
equity |
102,171 |
|
|
101,496 |
|
|
|
|
|
|
|
PAPA MURPHY’S HOLDINGS, INC. AND
SUBSIDIARIESReconciliation of Net Income (Loss) to
EBITDA and Adjusted EBITDA(In thousands of dollars)
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
January 1,2018 |
|
January 2,2017 |
|
January 1,2018 |
|
January 2,2017 |
Net Income
(Loss) As Reported |
$ |
13,462 |
|
|
$ |
1,476 |
|
|
$ |
(7 |
) |
|
$ |
2,649 |
|
Depreciation and amortization |
2,093 |
|
|
3,469 |
|
|
10,452 |
|
|
12,236 |
|
(Benefit
from) provision for income taxes |
(12,158 |
) |
|
1,003 |
|
|
(19,543 |
) |
|
1,943 |
|
Interest
expense, net |
1,260 |
|
|
1,280 |
|
|
5,078 |
|
|
4,868 |
|
EBITDA |
$ |
4,657 |
|
|
$ |
7,228 |
|
|
$ |
(4,020 |
) |
|
$ |
21,696 |
|
|
|
|
|
|
|
|
|
Expenses not indicative
of future operations: |
|
|
|
|
|
|
|
CEO
transition & restructuring (a) |
95 |
|
|
— |
|
|
2,614 |
|
|
— |
|
E-commerce impairment (b) |
(39 |
) |
|
— |
|
|
9,085 |
|
|
— |
|
Store
closures and impairment (c) |
635 |
|
|
— |
|
|
7,712 |
|
|
— |
|
Litigation settlements and reserves (d) |
3,990 |
|
|
— |
|
|
4,453 |
|
|
— |
|
Adjusted
EBITDA |
$ |
9,338 |
|
|
$ |
7,228 |
|
|
$ |
19,844 |
|
|
$ |
21,696 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
margin (1) |
30.4 |
% |
|
20.4 |
% |
|
16.7 |
% |
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
- Represents non-recurring management transition and
restructuring costs plus costs associated with recruitment of a new
Chief Executive Officer and Chief Financial Officer.
- Represents impairment of our e-commerce platform based on the
decision to move to a third party developed and hosted
solution.
- Represents non-cash charges associated with the disposal or
impairment of store assets upon the determination that the book
value of certain stores was higher than the fair value of those
stores, plus lease buyouts and reserves for the residual
contractual lease obligations on closed stores.
- Payments and accruals made toward franchisee settlements and
litigation reserves.
- 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 |
|
Twelve Months Ended |
|
January 1,2018 |
|
January 2,2017 |
|
January 1,2018 |
|
January 2,2017 |
Net Income
(Loss) As Reported |
$ |
13,462 |
|
|
$ |
1,476 |
|
|
$ |
(7 |
) |
|
$ |
2,649 |
|
Expenses
not indicative of future operations: |
|
|
|
|
|
|
|
CEO
transition & restructuring (a) |
95 |
|
|
— |
|
|
2,614 |
|
|
— |
|
E-commerce impairment (b) |
(39 |
) |
|
— |
|
|
9,085 |
|
|
— |
|
Store
closures and impairment (c) |
635 |
|
|
— |
|
|
7,712 |
|
|
— |
|
Litigation settlements and reserves (d) |
3,990 |
|
|
— |
|
|
4,453 |
|
|
— |
|
Income
tax expense on above adjustments (e) |
(1,290 |
) |
|
— |
|
|
(8,676 |
) |
|
— |
|
Exclude
impact of federal income tax rate change (f) |
(12,621 |
) |
|
— |
|
|
(12,621 |
) |
|
— |
|
Pro Forma Net
Income |
$ |
4,232 |
|
|
$ |
1,476 |
|
|
$ |
2,560 |
|
|
$ |
2,649 |
|
|
|
|
|
|
|
|
|
Earnings per share -
pro forma: |
|
|
|
|
|
|
|
Basic |
$ |
0.25 |
|
|
$ |
0.09 |
|
|
$ |
0.15 |
|
|
$ |
0.16 |
|
Diluted |
$ |
0.25 |
|
|
$ |
0.09 |
|
|
$ |
0.15 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - pro forma: |
|
|
|
|
|
|
|
Basic |
16,890,687 |
|
|
16,757,586 |
|
|
16,870,013 |
|
|
16,743,285 |
|
Diluted |
16,954,938 |
|
|
16,775,488 |
|
|
16,913,790 |
|
|
16,773,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- Represents non-recurring management transition and
restructuring costs plus costs associated with recruitment of a new
Chief Executive Officer and Chief Financial Officer.
- Represents impairment of our e-commerce platform based on the
decision to move to a third party developed and hosted
solution.
- Represents non-cash charges associated with the disposal or
impairment of store assets upon the determination that the book
value of certain stores was higher than the fair value of those
stores, plus lease buyouts and reserves for the residual
contractual lease obligations on closed stores.
- Payments and accruals made toward franchisee settlements and
litigation reserves.
- Reflects the tax expense associated with above adjustments at a
normalized tax rate of 38.5%, except for $3.9 million of litigation
reserves at 25.5%, which represents the estimated long-term
effective tax rate for 2018.
- Reflects the impact of the Tax Cuts and Jobs Act of 2017,
primarily a decrease in our effective tax rate.
Investor Contact:Alexis Tessier,
ICRpapamurphys-ir@icrinc.com877-747-7272
Media Contact:Rachael Smith,
ICRRachael.Smith@icrinc.com646-277-1261
Freshworks (NASDAQ:FRSH)
Historical Stock Chart
From Aug 2024 to Sep 2024
Freshworks (NASDAQ:FRSH)
Historical Stock Chart
From Sep 2023 to Sep 2024