IPIC® Entertainment Inc. (“IPIC” or the “Company”) (NASDAQ: IPIC),
creators of America’s coveted IPIC® luxury theater-and-restaurant
destinations, today reported financial results for the first
quarter ended March 31, 2019. The Company also reiterated its four
key strategic initiatives designed to create long-term value for
stockholders.
Hamid Hashemi, Founder & Chief Executive
Officer of IPIC® Entertainment, commented, “Although the industry
surprised us all with an even slower-than-expected start to the
year, we are pleased with the effectiveness of our Q1 cost control
efforts. In fact, both our food and beverage margins and our
theater margins improved as a percentage of their applicable
revenue, which protected our bottom-line from a potentially more
severe deleverage impact. Looking ahead, we are poised to take full
advantage of the strong film offerings for the balance of 2019 with
these key cost initiatives firmly entrenched in our business
processes. In addition, our ACCESS Membership Rewards™ Program
continues to grow steadily as more and more guests take advantage
of the new perks the Program has to offer.”
Hashemi continued, “From a top-line perspective,
Q1 already had a tough comparison as Black Panther made Q1 2018 the
second highest grossing Q1 of all time. The government shutdown in
January and unfavorable weather in February at some of our highest
volume locations only added to this challenge. The good news is
that Avengers: Endgame served as a reminder of how quickly momentum
can swing and we share the same positive sentiment as film industry
analysts for the remaining three quarters of the year. However, in
view of our Q1 top-line performance and the opening delay of our
Irvine, CA location into next year, we have lowered our total
revenues guidance while remaining confident that our Store-level
EBITDA and Adjusted EBITDA ranges are still within reach.”
Hashemi concluded, “Our four key strategic
initiatives are designed to create long-term value for
stockholders. First, our cost control efforts should lead to an
increase in Store-level EBITDA and a narrowing of our Adjusted
EBITDA loss compared to 2018. Second, we are building on the
success of our sponsorship and membership program to drive
high-margin revenue. Third, we have opened a location in Delray
Beach, FL that is off to a strong start and have a robust pipeline
of up to five scheduled domestic openings in 2020 and 2021.
Finally, we are also pursuing international growth opportunities
and eagerly await our operating license for Saudi Arabia.”
First Quarter 2019 Financial Results
Compared to Prior Year
Total revenues for the three months ended March
31, 2019 were $30.2 million compared to $38.7 million for the three
months ended March 31, 2018. Comparable-store sales decreased
21.7%.
Net loss attributable to IPIC Entertainment Inc.
for the three months ended March 31, 2019 was $(9.3) million
compared to $(6.4) million for the three months ended March 31,
2018.
Store-level EBITDA* was $1.0 million in the
three months ended March 31, 2019, compared to $3.3 million in the
three months ended March 31, 2018. EBITDA* improved by $7.0 million
to $(5.3) million in the three months ended March 31, 2019,
compared to $(12.3) million in the three months ended March 31,
2018. Adjusted EBITDA* for the three months ended March 31, 2019
was $(3.8) million compared to $(1.2) million for the three months
ended March 31, 2018.
* Store-level EBITDA, EBITDA, and Adjusted
EBITDA are non-GAAP measures. Reconciliations of store-level
EBITDA, EBITDA and adjusted EBITDA to net income (loss), the most
directly comparable financial measures presented in accordance with
GAAP, are set forth in the schedules accompanying this release. See
"Non-GAAP Financial Measures."
Key Strategic Initiatives
- Improving Profitability at Existing Locations:
- IPIC intends to realize greater cost efficiencies and higher
profitability at the Store-level. Under the current cost structure,
the Company generally estimates that roughly 30% of any
comparable-store sales growth that exceeds the cost of inflation in
that store would flow through to Adjusted EBITDA.
- IPIC implemented a new labor scheduling technology in January
2019 across all locations which is expected to increase labor
productivity by up to 100 basis points this year despite continuing
increases in minimum wage rates affecting certain locations and the
tight labor market overall.
- Increasing Alternative Revenue Streams:
- IPIC launched a new ACCESS Membership Rewards™ program that
offers exciting new benefits and plans to its customer base. The
Company has been pleased with the success from its new digital
performance marketing initiatives geared to drive Gold membership
sign-ups, which rose 74% compared to the year-ago period. It has
also made it easier and more seamless for guests to earn Platinum
and Platinum Elite status. IPIC will continue leveraging its
growing membership network as the brand expands and increases its
market presence.
- IPIC projects membership and sponsorship revenues to grow at a
faster pace than other revenue streams for the foreseeable future.
- Opening New IPIC Locations Domestically:
- IPIC currently operates 123 screens at 16 locations in nine
states.
- The Company opened its newest location in Delray Beach, FL on
March 7th. The Irvine, CA location which had been expected to open
in the fourth quarter of 2019 has shifted into the first half of
2020. The Company now expects to open up to five new domestic units
in 2020 and 2021 and thereafter.
- IPIC has nine signed leases, four of which are under
construction, and an additional ten sites that are in lease
negotiations.
- Pursuing International Growth Opportunities:
- The Company is exploring the potential to expand the IPIC®
brand internationally through licensed and/or asset-light
partnerships.
- IPIC has already been cleared to receive its license to operate
theaters in The Kingdom of Saudi Arabia and should receive its
license once required final documents are processed. The first
one-of-a-kind, world-class luxurious IPIC® theater-and-restaurant
location in Saudi Arabia will be in Riyadh, the county’s capital
and main financial hub.
- The Company believes the market in Saudi Arabia is large enough
to support 25 to 30 IPIC® locations within the next ten years and
over time expects to expand to all parts of the country.
Updated Full Year 2019 Financial Outlook
For the year ending December 31, 2019 IPIC
is updating its annual outlook to the following guided ranges. This
updated outlook reflects its performance through the first quarter
of 2019 along with the Company’s expectations for the remainder of
the year.
- Total revenue of $146 million to $150 million (previously $153
million to $158 million).
- Comparable-store sales of low-to-mid single digit growth
(unchanged).
- Store-level EBITDA* $19 million to $21 million (unchanged but
likely at the lower-end of this range).
- Adjusted EBITDA* of $(3.0) million to $(1.0) million (unchanged
but likely at the lower-end of this range).
- One new location in Delray Beach, FL which opened during the
first quarter. The Irvine, CA, location has since moved to the
first half of 2020 due to construction delays.
- Capital expenditures of $17 million to $19 million, net of
tenant improvement dollars, which include the Delray Beach, FL
location that has been completed, marking a substantial decrease
from 2018.
Recent Events
- Mr. Jason Daniel was appointed as IPIC’s Senior Vice President,
Operations on May 6, 2019. In this role, he will lead and oversee
operations, working collaboratively with field leaders and the
Executive team to integrate operations, marketing, financial, and
human resources initiatives across the entire IPIC brand of
theaters and restaurants. Daniel brings a significant amount of
hospitality and leadership experience from three decades to IPIC,
having worked in Operations Leadership roles for brands including
Bennigan’s, Boston Market, Macaroni Grill, Metromedia Tavern and
most recently, Cheddar’s Scratch Kitchen. Daniel will be assuming a
new role in the company and will be focused on people and processes
to ensure the brand is set up for scale and best in class
execution.
- On May 15, 2019 IPIC was notified by the Nasdaq that the
Company no longer meets its Listing Rules (the “Rules”) for listed
securities, which required a minimum Market Value of Listed
Securities (MVLS) of $35 million for 30 consecutive business days.
Consequently, a deficiency exists with regard to the Rule. However,
the Rules also provide the Company a compliance period of 180
calendar days in which to regain compliance. If at any time during
this compliance period, which ends on November 11, 2019, the
Company’s MVLS closes at $35 million or more for a minimum of ten
consecutive business days, Nasdaq will provide IPIC written
confirmation of compliance and this matter will be closed.
Conference Call
IPIC will host a conference call today at 4:30
p.m. ET. The conference call can be accessed live over the phone by
dialing (201) 389-0878. A replay will be available after the call
and can be accessed by dialing (412) 317-6671; the passcode is
13690782. The replay will be available until June 20, 2019.
The conference call will also be webcast live
from the Company's Investors website at www.ipic.com under the
“Events & Presentations” page. An archive of the webcast will
be available at the same location on the corporate website shortly
after the call has concluded.
Key Financial Definitions
New store openings – Our ability to expand our
business and reach new guests is influenced by the opening of
additional IPIC locations in both new and existing markets. The
success of our new IPIC locations is indicative of our brand appeal
and the efficacy of our site selection and operating models.
Comparable-store sales – Comparable-store sales
are a year-over-year comparison of sales at IPIC locations open at
the end of the period which have been open for at least 12 months
prior to the start of such quarterly period. It is a key
performance indicator used within the industry and is indicative of
acceptance of our initiatives as well as local economic and
consumer trends. Our comparable IPICs consisted of 14 and 15 IPICs
as of the end of the first quarter of 2018 and 2019, respectively.
From period to period, comparable-store sales are generally
impacted by attendance and average spend per person. Spend per
person is, in turn, composed of pricing and sales-mix changes.
Store-level EBITDA – A non-GAAP measure,
Store-level EBITDA consists of total revenues less Store-level
expenses that include food-and beverage cost-of-goods sold,
box-office-and-other-income costs-of-goods-sold, labor costs,
occupancy expenses and other-operating expenses.
EBITDA – A non-GAAP measure, is defined as net
income before net interest, taxes, depreciation and
amortization.
Adjusted EBITDA – A non-GAAP measure, is defined
as net income before net interest, taxes, depreciation and
amortization, and which also excludes equity-based compensation
expense, losses on the disposal of property and equipment, as well
as certain non-recurring items that the Company does not believe
directly reflect its core operations.
About IPIC® Entertainment
Inc.
Established in 2010 and headquartered in
Boca Raton, FL, IPIC® Entertainment is America’s premier
luxury restaurant-and-theater brand. A pioneer of the dine-in
theater concept, IPIC® Entertainment’s mission is to provide
visionary entertainment escapes, presenting high-quality,
chef-driven culinary and mixology in architecturally unique
destinations that include premium movie theaters and restaurants.
IPIC® Theaters offers guests two tiers of luxury leather seating,
Premium Chaise lounge and Premium Plus pod or reclining seating
options. IPIC® Theaters currently operates 16 locations with
123 screens in Arizona, California, Florida, Illinois, Maryland,
New Jersey, New York, Texas, and Washington and new locations
planned for Georgia, Texas, California and Connecticut. For more
information, visit www.ipic.com.
Forward-Looking Statements
This press release includes ''forward-looking
statements'' within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements regarding our financial outlook for the full
year 2019; our expectations with respect to the opening of
new locations in the near and long term; our expectations with
respect to capital expenditures and improvements to existing
locations; our expectations with respect to international growth;
and our ability to grow our membership network. Such
forward-looking statements can be identified by the use of words
such as ''should,'' ''may,'' ''intends,'' ''anticipates,''
''believes,'' ''estimates,'' ''projects,'' ''forecasts,''
''expects,'' ''plans,'' and ''proposes'' or other variation of
these or similar words, or by discussions of future events,
strategies or risks and uncertainties. Such forward looking
statements are inherently subject to risks, uncertainties and
assumptions about us, including risks related to the following: our
inability to successfully identify and secure appropriate sites and
timely develop and expand our operations in existing and new
markets, including international markets; our inability to optimize
our theater circuit through new construction and transforming our
existing theaters; competition from other theater chains and
restaurants; our inability to operate profitably; our dependence on
a small number of suppliers for motion picture products; our
inability to manage fluctuations in attendance in the motion
picture exhibition industry; our inability to address the increased
use of alternative film delivery methods or other forms of
entertainment; our ability to serve menu items that appeal to our
guests and to avoid food safety problems; our inability to obtain
sufficient capital to open up new units, to renovate existing units
and to deploy strategic initiatives; our ability to address
issues associated with entering into long-term non-cancelable
leases; our inability to protect against security breaches of
confidential guest information; our inability to manage our growth;
our inability to maintain sufficient levels of cash flow, or access
to capital, to meet growth expectations; our inability to manage
our substantial level of outstanding debt; our ability to continue
as a going concern; our failure to meet any operational and
financial performance guidance we provide to the public; our
ability to compete and succeed in a highly competitive and evolving
industry; we have identified a material weakness in our internal
control over financial reporting which may result in our financial
statements containing material misstatements or cause us to fail to
meet our periodic reporting obligations and other factors described
in our Annual Report on Form 10-K, our Quarterly Reports on Form
10-Q and our Current Reports on Form 8-K, each as filed with the
Securities and Exchange Commission.
Although the forward-looking statements in this
press release are based on our beliefs, assumptions and
expectations, taking into account all information currently
available to us, we cannot guarantee future transactions, results,
performance, achievements or outcomes. No assurance can be made
that the expectations reflected in our forward-looking statements
will be attained. Should one or more of the risks or uncertainties
referred to above materialize or should any of our assumptions
prove to be incorrect, our actual results may vary in material and
adverse respects from those projected in these forward-looking
statements. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise, except as may be required under
applicable securities laws.
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IPIC Entertainment, Inc. Consolidated
Statements of Operations (unaudited, in thousands) |
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Three Months
Ended |
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March
31, |
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March
31, |
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2019 |
|
2018 |
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Revenues |
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Food and beverage |
|
$ |
15,685 |
|
|
$ |
19,992 |
|
|
|
|
|
Theater |
|
$ |
14,071 |
|
|
|
17,753 |
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|
|
|
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Other |
|
|
482 |
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|
959 |
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Total revenues |
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|
30,238 |
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|
|
38,704 |
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Operating expenses |
|
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|
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|
Cost of food and beverage |
|
|
4,071 |
|
|
|
5,486 |
|
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|
|
|
Cost of theater |
|
|
5,618 |
|
|
|
7,687 |
|
|
|
|
|
Operating payroll and benefits |
|
|
9,144 |
|
|
|
10,578 |
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|
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Occupancy expenses |
|
|
4,910 |
|
|
|
4,676 |
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|
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Other operating expenses |
|
|
5,599 |
|
|
|
7,608 |
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|
|
|
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General and administrative expenses |
|
|
5,062 |
|
|
|
13,115 |
|
|
|
|
|
Depreciation and amortization expense |
|
|
4,787 |
|
|
|
4,840 |
|
|
|
|
|
Pre-opening expenses |
|
|
1,138 |
|
|
|
- |
|
|
|
|
|
Loss on abandonment of lease |
|
|
- |
|
|
|
1,839 |
|
|
|
|
|
Operating expenses |
|
|
40,329 |
|
|
|
55,829 |
|
|
|
|
|
|
|
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|
|
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Operating loss |
|
|
(10,091 |
) |
|
|
(17,125 |
) |
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Other Expense |
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Interest expense, net |
|
|
(4,832 |
) |
|
|
(4,614 |
) |
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Total other income (expense) |
|
|
(4,832 |
) |
|
|
(4,614 |
) |
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Net loss before income tax expense |
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$ |
(14,923 |
) |
|
$ |
(21,739 |
) |
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|
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|
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|
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Income tax expense |
|
|
13 |
|
|
|
22 |
|
|
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|
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Net loss |
|
|
(14,936 |
) |
|
|
(21,761 |
) |
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Less: Net loss attributable to non-controlling interests |
|
|
(5,631 |
) |
|
|
(15,385 |
) |
|
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Net loss attributable to IPIC Entertainment,
Inc. |
|
$ |
(9,305 |
) |
|
$ |
(6,376 |
) |
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IPIC Entertainment, Inc. Consolidated
Balance Sheet Data (unaudited, in thousands) |
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March 31, 2019 |
|
December 31, 2018 |
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Cash and cash equivalents |
$ |
3,562 |
|
|
$ |
6,026 |
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Current assets |
|
12,077 |
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|
|
14,926 |
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Property and equipment, net |
|
144,562 |
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|
|
143,539 |
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Total assets |
|
156,969 |
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|
158,724 |
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Current liabilities |
|
27,103 |
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|
29,607 |
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Long-term debt – related party |
|
203,567 |
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|
|
188,261 |
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|
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Total stockholders' / members’ deficit |
|
(149,883 |
) |
|
|
(140,744 |
) |
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IPIC Entertainment, Inc. Non-GAAP
Financial Measures |
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(unaudited, in thousands) |
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|
Three Months
Ended |
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|
March
31, |
|
March
31, |
|
|
|
|
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
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|
|
Net loss |
|
$ |
(14,936 |
) |
|
$ |
(21,761 |
) |
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Plus: |
|
|
|
|
|
|
|
|
Interest expense |
|
|
4,832 |
|
|
|
4,614 |
|
|
|
|
|
Income tax expense |
|
|
13 |
|
|
|
22 |
|
|
|
|
|
Depreciation and amortization expense |
|
|
4,787 |
|
|
|
4,840 |
|
|
|
|
|
EBITDA |
|
|
(5,304 |
) |
|
|
(12,285 |
) |
|
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|
|
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Plus: |
|
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|
|
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|
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Pre-opening expenses |
|
|
1,138 |
|
|
|
- |
|
|
|
|
|
Equity-based compensation |
|
|
266 |
|
|
|
8,568 |
|
|
|
|
|
Loss on abandonment of lease |
|
|
- |
|
|
|
1,839 |
|
|
|
|
|
Non-recurring charges |
|
|
123 |
|
|
|
652 |
|
|
|
|
|
Adjusted EBITDA |
|
|
(3,777 |
) |
|
|
(1,226 |
) |
|
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|
|
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|
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Plus: |
|
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|
|
|
|
|
|
General and administrative expense |
|
|
4,796 |
|
|
|
4,547 |
|
|
|
|
|
Store-Level EBITDA |
|
$ |
1,019 |
|
|
$ |
3,321 |
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Non-GAAP Measures
Certain financial measures presented in this
press release, such as EBITDA, Adjusted EBITDA and Store-Level
EBITDA are not recognized under accounting principles generally
accepted in the United States, which we refer to as “GAAP.” We
define these terms as follows:
“EBITDA” means, for any reporting period, net
loss before interest, taxes, depreciation, and amortization.
“Adjusted EBITDA” is a supplemental measure of
our performance and is also the basis for performance evaluation
under our executive compensation programs. Adjusted EBITDA is
defined as EBITDA adjusted for the impact of certain non-cash and
other items that we do not consider in our evaluation of ongoing
operating performance. These items include, among other things,
equity-based compensation expense, pre-opening expenses, other
income and loss on disposal of property and equipment, impairment
of property and equipment as well as certain non-recurring charges.
We believe that Adjusted EBITDA is an appropriate measure of
operating performance because it eliminates the impact of expenses
that do not relate to our ongoing business performance.
“Store-Level EBITDA” is a supplemental measure
of our performance which we believe provides management and
investors with additional information to measure the performance of
our locations, individually and as an entirety. Store-Level EBITDA
is defined by us as EBITDA adjusted for pre-opening expenses, other
income, loss on disposal of property and equipment, impairment of
property and equipment, non-recurring charges, and general and
administrative expense. We use Store-Level EBITDA to measure
operating performance and returns from opening new stores. We
believe that Store-Level EBITDA is another useful measure in
evaluating our operating performance because it removes the impact
of general and administrative expenses, which are not incurred at
the store level, and the costs of opening new stores, which are
non-recurring at the store-level, and thereby enables the
comparability of the operating performance of our stores for the
periods presented. We also believe that Store-Level EBITDA is a
useful measure in evaluating our operating performance within the
entertainment and dining industry because it permits the evaluation
of store-level productivity, efficiency and performance, and we use
Store-Level EBITDA as a means of evaluating store financial
performance compared with our competitors.
You are encouraged to evaluate the adjustments
we have made to GAAP financial measures and the reasons we consider
them appropriate for supplemental analysis. In evaluating Adjusted
EBITDA and Store-Level EBITDA, you should be aware that in the
future we may incur income and expenses that are the same as or
similar to some of the adjustments used to calculate the non-GAAP
financial measures contained in this press release.
EBITDA and Adjusted EBITDA are included in this
press release because they are key metrics used by management and
our board of directors to assess our financial performance. EBITDA
and Adjusted EBITDA are frequently used by analysts, investors and
other interested parties to evaluate companies in our industry.
Store-Level EBITDA is utilized to measure the performance of our
locations, both individually and in entirety.
EBITDA, Adjusted EBITDA and Store-Level EBITDA
are not GAAP measures of our financial performance or liquidity and
should not be considered as alternatives to net income (loss) as a
measure of financial performance or cash flows from operations as
measures of liquidity, or any other performance measure derived in
accordance with GAAP. Our presentation of Adjusted EBITDA and
Store-Level EBITDA should not be construed as an inference that our
future results will be unaffected by unusual or non-recurring
items. Additionally, EBITDA and Adjusted EBITDA are not intended to
be measures of free cash flow for management’s discretionary use,
as they do not reflect tax payments, debt service requirements,
capital expenditures, IPIC openings and certain other cash costs
that may recur in the future, including, among other things, cash
requirements for working capital needs and cash costs to replace
assets being depreciated and amortized. Management compensates for
these limitations by relying on our GAAP results in addition to
using EBITDA and Adjusted EBITDA supplementally. Our measures of
EBITDA and Adjusted EBITDA are not necessarily comparable to
similarly titled captions of other companies due to different
methods of calculation.
Investor Relations: ICRRaphael
Gross IPICIR@icrinc.com203-682-8253
Media Relations:The Gab Group
for IPIC® Entertainment Corporate Michelle
Soudrymsoudry@thegabgroup.com 561-750-3500
iPic Entertainment (NASDAQ:IPIC)
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iPic Entertainment (NASDAQ:IPIC)
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