Matthew Corrin reports
FRESHII INC. ANNOUNCES THIRD QUARTER 2019 RESULTS; RENEWAL OF NORMAL COURSE ISSUER BID
Freshii Inc. has released financial results for the third quarter ended Sept. 29, 2019.
Highlights for the third quarter fiscal 2019:
Systemwide sales grew to $49.2-million in third quarter 2019, compared with $45.8-million in the 13 weeks ended Sept. 30, 2018, an increase of 7 per cent.
The company opened 10 net new stores in third quarter 2019, composed of 16 openings and six closures. During the 52 weeks ended Sept. 29, 2019, the company opened 33 net new stores, resulting in year-over-year net new store growth of 8 per cent.
Royalty revenue and co-ordination fees, the company's most predictable and stable recurring revenue streams, totalled $4.8-million for third quarter 2019, an increase of $600,000 or 14 per cent over third quarter 2018.
Same-store-sales growth for third quarter 2019 was (3.7 per cent), compared with same-store sales growth of (0.8 per cent) for third quarter 2018.
Net income (loss) was ($400,000) for third quarter 2019, no change compared with third quarter 2018.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $1.8-million for third quarter 2019, an increase of $400,000 or 29 per cent over third quarter 2018.
Selling, general and administrative expenses were $3.6-million for third quarter 2019, an increase of $100,000 or 3 per cent over third quarter 2018.
The company adopted international financial reporting standard 16 on Dec. 31, 2018, a new standard on leases that affects the manner in which the company records the expense of lease obligations. See Note 3 in the company's interim financial statements for third quarter 2019 (available at SEDAR) for further details and a summary of these changes.
Matthew Corrin, chairman and chief executive officer of Freshii, said:
"Freshii has grown into a leading healthy food brand with more than 700 points of distribution between our growing restaurant network and our ever expanding retail partnerships. We currently do business in 16 countries, in over 200 cities and growing. In third quarter 2019, we continued to work closely as a new management team to evolve our strategy for omnichannel growth, while growing systemwide sales for the 12th consecutive quarter as a public company and generating strong adjusted EBITDA and cash flow. Our increased cash flow will be valuable as we execute our go-forward strategy based around three pillars: driving sales through marketing and menu initiatives; strengthening the trust and confidence our franchise partners have in our brand; and delivering a world-class customer experience."
Renewal of normal course issuer bid program
The company also announced that the Toronto Stock Exchange has accepted the notice filed by the company to make a normal course issuer bid (NCIB). The NCIB effectively renews the previous NCIB, which ended on Nov. 11, 2019.
In connection with the previous NCIB, the company sought and received approval from the TSX to establish a normal course issuer bid to purchase up to 2,556,790 of its Class A subordinate voting shares, commencing on Nov. 12, 2018. The previous NCIB terminated on Nov. 11, 2019. Under the previous NCIB, the company purchased a total of 528,008 Class A subordinate voting shares at an average price of $1.96 (U.S.) ($2.59), net of commission costs.
The NCIB commences on Nov. 18, 2019, and will terminate on Nov. 17, 2020, or on such earlier date as the company may complete its purchases pursuant to a notice of intention filed with the TSX. Under the NCIB, the company is authorized to purchase up to 2,536,746 of its Class A subordinate voting shares (out of the 25,367,464 Class A subordinate voting shares in the public float of such shares as at Nov. 8, 2019), representing approximately 10 per cent of the public float of its Class A subordinate voting shares as at Nov. 8, 2019, by way of normal course purchases effected through the facilities of the TSX and/or alternative Canadian trading systems. As of Nov. 8, 2019, there were 25,778,511 Class A subordinate voting shares issued and outstanding. The average daily trading volume for the six months ended Oct. 31, 2019, was 36,550 Class A subordinate voting shares. Class A subordinate voting shares purchased by the company will be cancelled.
In deciding to effectively renew the previous NCIB, the company believes that the market price of the Class A subordinate voting shares may not, from time to time, fully reflect their value, and accordingly, the purchase of the Class A subordinate voting shares would be in the best interest of the company and an attractive and appropriate use of available funds.
Purchases will be made by the company in accordance with the requirements of the TSX, and the price which the company will pay for any such Class A subordinate voting shares will be the market price of any such Class A subordinate voting shares at the time of acquisition, or such other price as may be permitted by the TSX. For purposes of the TSX rules, a maximum of 9,137 Class A subordinate voting shares may be purchased by the company on any one day under the bid, except where purchases are made in accordance with the block purchase exception of the TSX rules.
The company has not currently entered into an automatic share purchase plan with its broker. However, the company may in the future enter into such a plan with its broker to allow for the purchase of shares at times when the company ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules or otherwise, provided that the company does not possess material non-public information about itself or its securities at the time that it enters into such agreement.
Earnings conference call and audio webcast
A conference call to discuss third quarter 2019 financial results is scheduled for Nov. 14, 2019, at 8:30 a.m. Eastern Time. The conference call can be accessed live over the phone by dialling 1-877-425-9470 (United States and Canada) or 1-201-389-0878 (international). An audio replay will be available from 11:30 a.m. Eastern Time on Nov. 14, 2019, through Nov. 21, 2019. To access the replay, please call 1-844-512-2921 (United States and Canada) or 1-412-317-6671 (international) and enter confirmation code 13695876. The call will also be webcast live from Freshii's investor relations website. Following completion of the call, a recorded replay of the webcast will be available on the website.
About Freshii Inc.
Freshii is a health and wellness brand on a mission to help citizens of the world live better by making healthy eating convenient and affordable. With a diverse and completely customizable menu of breakfast, soups, salads, wraps, bowls, burritos, frozen yogurt, juices and smoothies served in an ecofriendly environment, Freshii caters to every taste and dietary preference.
Since it was founded in 2005, Freshii has opened 464 restaurants in 16 countries around the world.
The attached table summarizes its results of operations for the 13- and 39-week periods ended Sept. 29, 2019, and Sept. 30, 2018, respectively.
For the 13 weeks ended
Sept. 29, 2019 Sept. 30, 2018
Franchise revenue $5,206 $4,752
Company-owned store revenue 679 850
Total revenue 5,885 5,602
Costs and expenses
Cost of sales 599 719
Selling, general and administrative 3,589 3,463
Depreciation and amortization 1,243 566
Share-based compensation expense 498 889
Total costs and expenses 5,929 5,637
Income before interest costs, foreign exchange and income taxes (44) (35)
Interest income, net (33) (125)
Foreign exchange loss (gain) (71) 33
Income before income tax expense 60 57
Income tax expense 475 503
Net income (loss) (415) (446)
For the 39 weeks ended
Sept. 29, 2019 Sept. 30, 2018
Franchise revenue $14,895 $13,794
Company-owned store revenue 1,952 2,205
Total revenue 16,847 15,999
Costs and expenses
Cost of sales 1,743 1,909
Selling, general and administrative 10,804 9,774
Depreciation and amortization 2,182 988
Share-based compensation expense 1,157 2,598
Total costs and expenses 15,886 15,269
Income before interest costs, foreign exchange and income taxes 961 730
Interest income, net (117) (341)
Foreign exchange loss (gain) 155 (73)
Income before income tax expense 923 1,144
Income tax expense 802 861
Net income 121 283
The company's consolidated financial statements for the 13- and 39-week periods ended Sept. 29, 2019, Dec. 30, 2018, and Sept. 30, 2018, and the relevant management's discussion and analysis documents, are available under the company's profile on SEDAR.
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