Papa Murphy’s Holdings, Inc. (NASDAQ:FRSH) today announced
financial results for its fiscal fourth quarter and full fiscal
year ended December 31, 2018.
Key financial highlights for the quarter ended December
31, 2018, compared to the quarter ended January 1, 2018
include the following(1):
- Revenue was $32.0 million compared to
$38.5 million, driven primarily by the net refranchising of 29
Company-owned stores and net closure of 10 Company-owned stores
during fiscal year 2018. Revenue in the prior year fourth quarter
was positively impacted by approximately $1.9 million from an
additional contribution by all stores to the Brand Marketing Fund
to help fund a national TV advertising test;
- Comparable store sales decreased 1.3%
compared to the fourth quarter of 2017;
- Reported Net Income was $2.0 million,
or $0.12 per diluted share, compared to Net Income of $12.2
million, or $0.72 per diluted share in the prior year fourth
quarter. Net Income in the prior year fourth quarter included a
$12.4 million positive effect resulting from the Tax Cuts and Jobs
Act of 2017;
- Pro-Forma Net income(2) in the quarter
was $2.4 million, or $0.14 per diluted share, compared to $3.1
million, or $0.18 per diluted share;
- Adjusted EBITDA(2) was $5.9 million
compared to $9.3 million.
Key financial highlights for the fiscal year ended December
31, 2018, compared to the fiscal year ended January
1, 2018 were as follows(1):
- Revenue was $126.4 million compared to
$148.5 million;
- Comparable store sales decreased 2.5%
compared to fiscal 2017;
- Reported Net Income was $4.3 million,
or $0.25 per diluted share, compared to a Net Loss of
$1.8 million, or $(0.11) per diluted share. Net Income in the
prior year included a $12.4 million positive effect resulting
from the Tax Cuts and Jobs Act of 2017;
- Pro-Forma Net income(2) was $7.3
million, or $0.43 per diluted share, compared to $1.9 million, or
$0.11 per diluted share;
- Adjusted EBITDA(2) was
$22.3 million, compared to $20.5 million.
______________________ (1) Please note that results
reflect the first quarter 2018 adoption by the Company of two new
accounting standards (ASC topic 606 – Revenue from contracts with
customers, and ASC topic 842 – Leases). 2017 financial results have
been adjusted to reflect the implementation of these standards. (2)
Pro-Forma Net Income and Adjusted EBITDA are non-GAAP measures. For
a reconciliation of Pro-Forma Net Income and Adjusted EBITDA to
GAAP net income/(loss) and discussion of why we consider Pro-Forma
Net Income and Adjusted EBITDA to be useful measures, see the
financial tables accompanying this release and the paragraph below
entitled “Non-GAAP Financial Measures.”
Weldon Spangler, Chief Executive Officer of Papa Murphy’s
Holdings, Inc., stated, “We are very pleased with the continued
progress of our strategic initiatives and the impact they had on
our results in the fourth quarter. We saw positive comparable store
sales growth in October, marking our first period of comparable
store sales growth in 37 months. We continue to believe that we
have the right initiatives in place to drive long-term success for
Papa Murphy’s and we are excited for the year ahead.”
Key Operating Metrics
Three Months Ended
Twelve Months Ended December 31, 2018
January 1, 2018 December 31, 2018
January 1, 2018 Comparable store sales: Franchised stores
-1.0 % -2.6 % -2.3 % -3.8 % Company-owned stores -5.8 % -2.3 % -4.8
% -5.5 % Combined -1.3 % -2.6 % -2.5 % -4.0 % System-wide
sales ($’s in 000s) $ 214,665 $ 223,815 $ 808,727 $ 846,864
Adjusted EBITDA ($’s in 000s) $ 5,925 $ 9,270 $ 22,306 $ 20,500
Store Count Franchised 1,331 1,378 1,331 1,378 Company-owned
106 145 106 145 System-wide 1,437 1,523
1,437 1,523
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 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 2018 and 2017, we had 1,419 and 1,478
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.
2019 Financial Outlook
Based on current information, Papa Murphy’s Holdings, Inc. is
providing the following guidance for fiscal 2019, which ends on
December 30, 2019:
- Full year system-wide comparable store
sales growth in the range of flat to low single-digit
positive;
- Domestic franchise new store openings
of approximately 10 units;
- Full year selling, general and
administrative expenses of approximately $48 million, excluding
non-recurring costs totaling approximately $2 million;
- Adjusted EBITDA of at least $22
million;
- Cash flow from operations of
approximately $15 million, which includes non-recurring payments
totaling approximately $2 million;
- Cash used in investing activities of
approximately $2 million;
- Full-year effective tax book tax rate
of approximately 25.6%; and
- Diluted share count of approximately 17
million.
Conference Call
Papa Murphy’s Holdings, Inc. will host a conference call to
discuss the fourth quarter financial results on Thursday,
March 14, 2019 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
844-512-2921 or for international callers by dialing 412-317-6671;
the passcode is 13686750. The replay will be available until
Thursday, March 21, 2019. 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. (“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 hand-crafted, fresh
pizzas for customers to bake at home. The Company was founded in
1981 and currently operates over 1,400 franchised and
corporate-owned stores in 37 states, Canada, and the United Arab
Emirates. Papa Murphy’s core purpose is to help anyone with an oven
and 15 minutes serve a scratch-made meal. In addition to fresh
pizzas, the Company offers hand-crafted salads, sides and desserts
to complete the meal. Order online today at www.papamurphys.com for
easy pick up everywhere, and find us on your favorite delivery apps
in select markets.
Forward-looking Statements
This 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, projected new store openings, projected Adjusted
EBITDA, projected selling, general and administrative expenses,
projected cash flow from operations, projected cash flow used in
investing activities, projected effective tax rate, projected
diluted share count, sales trends, and future financial or
operational results and business strategy, including the expected
effects of our strategic initiatives and cost saving
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
December 31, 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 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. EBITDA, Adjusted EBITDA and Pro-Forma Net
Income should not be considered by the reader as an alternative to
net income (loss) (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 income (loss) 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 SUBSIDIARIES Consolidated Statements of Operations
(In thousands of dollars, except share and
per share data)
Three Months Ended Twelve Months Ended
December 31, 2018 January 1,
2018 December 31, 2018
January 1, 2018 Unaudited Unaudited
Revenues
Franchise $ 17,777 $ 18,679 $ 64,653 $ 71,640 Company-owned store
sales 14,257 19,858 61,776 76,868 Total
revenues 32,034 38,537 126,429 148,508
Costs and Expenses Store operating costs: Cost of
food and packaging 4,758 6,582 20,415 25,958 Compensation and
benefits 4,418 5,868 19,601 23,603 Advertising 1,094 1,629 4,794
6,684 Occupancy and other store operating costs 2,516 3,676 11,441
13,931 Selling, general, and administrative 13,585 15,523 49,731
64,565 Depreciation and amortization 1,564 2,093 7,241 10,452 Loss
on disposal or impairment of property and equipment 129 530
1,937 18,360 Total costs and expenses 28,064
35,901 115,160 163,553
Operating Income (Loss) 3,970 2,636 11,269 (15,045 )
Interest expense, net 1,370 1,260 5,212 5,078 Loss on early
retirement of debt 38 — 38 — Other
expense, net 52 55 212 204
Income
(Loss) Before Income Taxes 2,510 1,321 5,807 (20,327 )
Provision for (benefit from) income taxes 513 (10,831 )
1,483 (18,509 )
Net Income (Loss) $ 1,997 $
12,152 $ 4,324 $ (1,818 ) Earnings per share
of common stock Basic $ 0.12 $ 0.72 $ 0.26 $ (0.11 ) Diluted $ 0.12
$ 0.72 $ 0.25 $ (0.11 ) Weighted average common stock outstanding
Basic 16,946,942 16,890,687 16,929,764 16,870,013 Diluted
16,994,349 16,954,938 17,000,858 16,870,013
PAPA MURPHY’S HOLDINGS, INC. AND
SUBSIDIARIES Selected Balance Sheet Data
(In thousands of dollars)
December 31, 2018 January 1,
2018 Cash and cash equivalents $ 5,766 $ 2,174 Total current
assets 12,052 8,962 Total assets 246,724 262,115 Total current
liabilities 32,787 31,117 Long-term debt, net of current portion
70,644 86,994 Total stockholders’ equity 99,023 94,142
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 31, 2018 January 1,
2018 December 31, 2018
January 1, 2018 Net Income (Loss) As Reported
$ 1,997 $ 12,152 $ 4,324 $ (1,818 ) Depreciation and amortization
1,564 2,093 7,241 10,452 Provision for (benefit from) income taxes
513 (10,831 ) 1,483 (18,509 ) Interest expense, net 1,370
1,260 5,212 5,078
EBITDA $ 5,444 $
4,674 $ 18,260 $ (4,797 ) Expenses not indicative of future
operations: CEO transition & restructuring (a) 206 95 595 2,614
E-commerce impairment (b) — (39 ) 350 9,085 Store closures and
impairment (c) 121 550 1,918 9,145 Litigation settlements and
reserves (d) (121 ) 3,990 908 4,453 Strategic alternatives (e) 237
— 237 — Debt refinancing (f) 38 — 38 —
Adjusted EBITDA $ 5,925 $ 9,270 $ 22,306
$ 20,500
Adjusted EBITDA margin
(1) 18.5 % 24.1 % 17.6 % 13.8 % (a) Represents
non-recurring management transition and restructuring costs plus
costs associated with recruitment of a new Chief Executive Officer
and other executive positions. (b) Represents impairment of our
e-commerce platform based on the decision to move to a third party
developed and hosted solution and non-recurring costs incurred to
complete the transition. (c) 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. (d)
Accruals made for litigation settlements. (e) Reflects costs
associated with the Company's exploration of strategic
alternatives. (f) Reflects costs associated with amendments to the
Company's credit facilities. (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 Twelve Months Ended
December 31, 2018 January 1,
2018 December 31, 2018
January 1, 2018 Net Income (Loss) As Reported
$ 1,997 $ 12,152 $ 4,324 $ (1,818 ) Expenses not indicative of
future operations: CEO transition & restructuring (a) 206 95
595 2,614 E-commerce impairment (b) — (39 ) 350 9,085 Store
closures and impairment (c) 121 550 1,918 9,145 Litigation
settlements and reserves (d) (121 ) 3,990 908 4,453 Strategic
alternatives (e) 237 — 237 — Debt refinancing (f) 38 — 38 — Income
tax expense on above adjustments (g) (123 ) (1,257 ) (1,031 )
(9,227 ) Exclude impact of federal income tax rate change (h) —
(12,356 ) — (12,356 )
Pro Forma Net Income $
2,355 $ 3,135 $ 7,339 $ 1,896
Earnings per share - pro forma: Basic $ 0.14 $ 0.19 $ 0.43 $ 0.11
Diluted $ 0.14 $ 0.18 $ 0.43 $ 0.11 Weighted average shares
outstanding - pro forma: Basic 16,946,942 16,890,687 16,929,764
16,870,013 Diluted 16,994,349 16,954,938 17,000,858 16,913,790 (a)
Represents non-recurring management transition and
restructuring costs plus costs associated with recruitment of a new
Chief Executive Officer and other executive positions. (b)
Represents impairment of our e-commerce platform based on the
decision to move to a third party developed and hosted solution and
non-recurring costs incurred to complete the transition. (c)
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. (d) Accruals made
for litigation settlements. (e) Reflects costs associated with the
Company's exploration of strategic alternatives. (f) Reflects costs
associated with amendments to the Company's credit facilities. (g)
Reflects the tax expense associated with above adjustments at a
normalized tax rate of 25.5% for 2018 and 38.5% for 2017, except
for $3.9 million of litigation reserves in 2017 which utilized the
estimated long-term effective tax rate of 25.5%. (h) Reflects the
impact of the Tax Cuts and Jobs Act of 2017, primarily a decrease
in our effective tax rate.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190314005841/en/
Investors:Maurice
Hinesmaurice.hines@papamurphys.com360-449-4008
Media:Alexis Diltz or Daniel
Evanscommunications@papamurphys.com360-449-4001
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