Strong sales recovery, with 46% year over year increase in same store sales1 in Q2 2021
Continued digital sales momentum, with
6 more locations open and operating at end of Q2 2021 vs Q1 2021 with 95% of total locations now open
Maintains strong liquidity position while continuing NCIB purchases
Announces additional funds to support franchise partners to accelerate restaurant sales and profitability recovery
Sees strong CPG sales trends and increasing adoption of beverage and snacking options
“In Q2, we were pleased with the sales recovery and location reopening trends experienced in our core restaurant business,” said
Our CPG division continues to expand, with summer sales trends at our most significant retail partners trending positively. In particular, we have been pleased with the growth of the CPG snacking and beverage sales mix, as these longer shelf-life products help broaden the product assortment and appeal of the division overall. For example, our three flavours of energii bites, available in individual and multi-pack format, continue to perform well as CPG retailers and customers embrace this
Change in Presentation Currency
On
Financial Highlights for the Second Quarter2
- Same-store sales growth was 46.7% in Q2 2021 compared to the 13-week period ended
June 28, 2020 (“Q2 2020”). Compared to the 13-week period endedJune 30, 2019 (“Q2 2019”), the most recent corresponding period not impacted by COVID-19, same-store sales growth for Q2 2021 was (29.4%). - In Q2 2021, the Company opened 4 new locations, permanently closed 6 locations that had been open and operating as at the end of Q4 2020, and permanently closed an additional 15 locations previously classified as temporarily closed as of the end of Q1 2021. This resulted in 17 net closures in the quarter.
- As at the end of Q2 2021, the Company had 364 locations open and operating, representing an increase of six locations from the end of Q1 2021, and an increase of 30 locations open and operating vs the end of Q4 2020. This increase vs Q1 2021 is largely the result of the re-opening of 8 locations that had previously been classified as temporarily closed in the prior quarter.
- As at the end of Q2 2021, the Company had 20 locations categorized as temporarily closed, primarily as a result of the impact of COVID-19 pandemic restrictions. A majority of these locations have anticipated re-opening dates in the coming months.
- System-wide sales were
$38.5 million in Q2 2021, compared to$22.2 million for Q2 2020 representing an increase of$16.3 million . Compared to Q2 2019, system-wide sales in Q2 2021 decreased by$27.8 million . - Royalty revenue and coordination fees totaled
$3.7 million for Q2 2021, an increase of$1.2 million or 48% compared to Q2 2020. - Net loss was
$0.6 million for Q2 2021, compared to net loss of$0.7 million in Q2 2020. - Adjusted EBITDA was
$0.1 million for Q2 2021, compared to$0.8 million for Q2 2020. - Free cash flow was
$0.0 million for Q2 2021, compared to$0.8 million for Q2 2020.
Strategic Pillars
The Company continues to focus its effort on its strategic pillars, designed to help accelerate Freshii’s short-term recovery and position the brand for long-term growth. As previously disclosed, Freshii’s ‘omnichannel expansion’ has been added as a strategic pillar in 2021, given the growth the Company has seen in this aspect of our business to date as well as Freshii’s view that the broader brand exposure and synergies provided by omnichannel expansion provide important ancillary benefits to our core restaurant division. As previously disclosed, our strategic pillars are:
- Focus on Core Restaurant Business
- Digital and Delivery Acceleration
- Develop Dinner as a Second Daypart
- Omnichannel Expansion
Focus on Core Restaurant Business
Particularly in the early stages of Q2 2021, restaurant traffic across the industry in many of Freshii’s key markets continued to be impacted by the COVID-19 pandemic and related mobility restrictions. As the pandemic abated and restrictions were lifted in key markets in the second half of Q2 2021, restaurant traffic and sales began to accelerate. Since the end of Q2 2021, this trend appears to have continued, with the Company’s North American traditional locations having recovered more than 80% of 2019 sales as of the four-week period ended
The locations classified by the Company as ‘suburban’ (Freshii’s largest store type by count, consisting of stores in primarily residential areas, excluding mall or non-traditional locations) continue to outperform the rest of the network in sales recovery. In Q2 2021, suburban locations recovered, on average, more than 80% of their Q2 2019 sales levels, despite ongoing government restrictions relating to the COVID-19 pandemic in many of the Company’s largest markets in the first half of the quarter. Since the end of Q2 2021, as of the four-week period ended
In terms of in-restaurant progress in Q2 2021, the Company launched its innovative new tacos limited-time offer across its North American network in May. The tacos LTO, featuring cauliflower-based soft-shell tortillas, three protein options and a host of Mexican-inspired sauces and flavours, was met with a very positive response. The premium price point and significant chips and queso add-on attachment drove cheque and profitability for our restaurants. Additionally, in June,
Digital and Delivery Acceleration
Freshii’s Phase 1 launch of its new mobile app, including the North American system-wide availability of in-app delivery functionality, continues to resonate with our guests. In Q2 2021, growth in sales through the
As noted above, the Company launched its first ‘app-only’ LTO in July. We look forward to continuing to test ways to drive guest attachment to our
Develop Dinner as a Second Daypart
In Q2 2021, the dinner day part made up over 25% of the sales mix in restaurants open during dinner hours. This strong performance was supported by the tacos LTO, which proved popular with guests during both the lunch and dinner dayparts. Having driven a higher mix of sales at dinner and an increase in average cheque during the initial dinner plates test in Q4 2020, the Company expects that its planned launch of an evolved dinner plates platform in late 2021 will further support dinnertime sales. We remain excited about continuing to grow dinner as a second daypart.
Omnichannel Expansion
The Company continues to dedicate effort to the growth of its health and wellness business lines generally, as a complement to its core business of providing great tasting, ‘better-for-you’, restaurant service. Following the Company’s in-store launch of its on-trend Freshii Apple Cider Vinegar (“ACV”) gummies in Q1 2021, in Q2 2021 the Company made these nutritional supplements available to consumers for delivery directly online.
In Q2 2021, the Company’s CPG business continued to work on expanding its points of distribution and refining its product offerings. The Company has generally seen sales acceleration through Q2 2021 and to date, with customers and retailers alike continuing to adopt Freshii’s beverage and snacking products as a larger percentage of the overall sales mix. These snacking and beverage products have a longer shelf life, broaden the overall appeal of our product set and encourage multi-product purchases. An example of the growth in the snacking product set is the recent expansion of both the flavours and the pack-size availability of Freshii’s energii bites, with multi-packs selling well. Energii bites also continue to be an area in which the Company intends to pursue flavour innovation, and
As we continue to increase the channels through which
Franchisee Incremental Investment Program
In Q2 2021,
- Promoting guest adoption of Freshii’s new mobile app;
- incremental marketing and loyalty investments;
- operating cost offsets;
- the engagement of an enhanced customer experience program; and
- direct support for restaurants through sales driving and profit protecting initiatives.
The Company intends to continue to deploy resources to these areas, partially funded by the Company’s cost management initiatives, to continue to support our franchise partners and enable our brand to emerge from the COVID-19 pandemic in a position of strength.
Cost Base Management and Liquidity
We have maintained a strong, stable cash position through the pandemic to date, with
The Company also continues to assist franchise partners in managing their restaurant level cost base. In addition to offering certain of its franchise locations a limited, more streamlined, menu, that allows for improvement in food, labour and operational costs, the Company has implemented inventory management system improvements and labour productivity tools to help partners reduce waste and manage costs. Assisting our restaurants in controlling costs, while still delivering the quality service and products that our guests have come to expect, is key to protecting franchise partner profitability as the COVID-19 pandemic continues to challenge consumer traffic throughout 2021.
Normal Course Issuer Bid Program
In Q1 2021, the Company announced that the
Earnings Conference Call and Audio Webcast:
A conference call to discuss Q2 2021 financial results is scheduled for
About
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Non-IFRS Measures and Industry Metrics
This news release makes reference to certain non-IFRS measures including key performance indicators used by management and typically used by our competitors in the restaurant industry. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures including “EBITDA”, “Adjusted EBITDA”, “Adjusted EBITDA on a constant currency basis”, “free cash flow”, “free cash flow conversion” and “Adjusted Net Income”. This news release also makes reference to “system-wide sales”, "system-wide stores", “same-store sales growth”, and “digital sales” which are commonly used operating metrics in the restaurant industry but may be calculated differently by other companies in the restaurant industry. These non-IFRS measures and restaurant industry metrics are used to provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures, including restaurant industry metrics in the evaluation of companies in the restaurant industry. Our management also uses non-IFRS measures and restaurant industry metrics, in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of executive compensation. For a: (i) detailed definition of each of the non-IFRS measures and industry metrics referred to; and (ii) reconciliation of these non-IFRS measures, refer to the “Non-IFRS Financial Measures and Industry Metrics” section of the Company's Management’s Discussion and Analysis dated
Forward-Looking Information
Certain information in this news release contains forward-looking information and forward-looking statements which reflect the current view of management with respect to the Company's objectives, plans, goals, strategies, outlook, results of operations, financial and operating performance, prospects and opportunities, including statements relating to store count, same-store sales growth, the recovery of the Company’s franchise system (including that stores currently categorized as temporarily closed will re-open on the timelines anticipated or at all and that they will achieve the sales level anticipated), that healthy eating trends will continue, the Company’s strategic pillars, the timelines for and effectiveness of new menu rollouts and operational innovations, the Company’s plans with respect to its Franchisee Incremental Investment Program, the ability of the Company to generally maintain its existing cash position and to reinvest, the growth of and investment in the dinner daypart (including the timing of the Company’s planned launch of an evolved dinner plates platform), the Company’s plans with respect to its CPG business line (including energii bites flavour innovation and seasonal offerings), the Company’s nutritional supplement business line, any future offering of
Forward-looking information and forward-looking statements are based on information available to management at the time they are made, underlying estimates, opinions and assumptions made by management and management's current belief with respect to future strategies, prospects, events, performance and results. These estimates, opinions and assumptions include that the COVID-19 pandemic and associated government regulation, expected consumer behaviour and other matters will not have a materially different impact on the business, operations or financial performance than currently anticipated by management, the continued availability of food commodities used by
Readers are urged to consider these risks, uncertainties and assumptions carefully in evaluating the forward-looking information and forward-looking statements and are cautioned not to place undue reliance on such information and statements. The Company does not undertake to update any such forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.
Selected Quarterly Consolidated Information
The following table summarizes our results of operations for the 13 and 26 week periods ended
For the 13 weeks ended | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||
Amount | Percent of Total Revenue | Amount | Percent of Total Revenue | ||||||||||||||||||
Revenue | |||||||||||||||||||||
Franchise revenue | $ | 5,008 | 89 | % | $ | 3,381 | 95 | % | |||||||||||||
Company-owned revenue | 628 | 11 | 194 | 5 | |||||||||||||||||
Total revenue | 5,636 | 100 | 3,575 | 100 | |||||||||||||||||
Costs and expenses | |||||||||||||||||||||
Cost of sales | 481 | 9 | 203 | 6 | |||||||||||||||||
Selling, general and administrative | 4,298 | 76 | 2,528 | 71 | |||||||||||||||||
Depreciation and amortization | 392 | 7 | 679 | 19 | |||||||||||||||||
Share based compensation expense | 827 | 15 | 598 | 17 | |||||||||||||||||
Total costs and expenses | 5,998 | 107 | 4,008 | 113 | |||||||||||||||||
Loss before interest, foreign exchange & income taxes | (362 | ) | (7 | ) | (433 | ) | (13 | ) | |||||||||||||
Interest income, net | 2 | - | 20 | 1 | |||||||||||||||||
Foreign exchange loss (gain) | 39 | 1 | 287 | 8 | |||||||||||||||||
Loss before income tax expense | (403 | ) | (8 | ) | (740 | ) | (22 | ) | |||||||||||||
Income tax expense (recovery) | 223 | 4 | (14 | ) | - | ||||||||||||||||
Net loss | (626 | ) | (11 | ) | (726 | ) | (22 | ) | |||||||||||||
Currency translation adjustment | 24 | - | 6 | - | |||||||||||||||||
Comprehensive income (loss) | $ | (602 | ) | (11 | %) | $ | (720 | ) | (20 | %) |
For the 26 weeks ended | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||
Amount | Percent of Total Revenue | Amount | Percent of Total Revenue | ||||||||||||||||||
Revenue | |||||||||||||||||||||
Franchise revenue | $ | 8,363 | 90 | % | $ | 8,831 | 91 | % | |||||||||||||
Company-owned revenue | 937 | 10 | 834 | 9 | |||||||||||||||||
Total revenue | 9,300 | 100 | 9,665 | 100 | |||||||||||||||||
Costs and expenses | |||||||||||||||||||||
Cost of sales | 748 | 8 | 727 | 8 | |||||||||||||||||
Selling, general and administrative | 8,150 | 88 | 9,723 | 101 | |||||||||||||||||
Depreciation and amortization | 788 | 8 | 3,029 | 31 | |||||||||||||||||
Share based compensation expense | 1,515 | 16 | 1,531 | 16 | |||||||||||||||||
Total costs and expenses | 11,201 | 120 | 15,010 | 156 | |||||||||||||||||
Income (loss) before interest, foreign exchange & income taxes | (1,901 | ) | (20 | ) | (5,345 | ) | (56 | ) | |||||||||||||
Interest income, net | 7 | - | (52 | ) | (1 | ) | |||||||||||||||
Foreign exchange loss (gain) | 210 | 2 | (447 | ) | (5 | ) | |||||||||||||||
Income (loss) before income tax expense | (2,118 | ) | (22 | ) | (4,846 | ) | (50 | ) | |||||||||||||
Income tax expense (recovery) | (168 | ) | (2 | ) | (745 | ) | (8 | ) | |||||||||||||
Net loss | (1,950 | ) | (21 | ) | (4,101 | ) | (42 | ) | |||||||||||||
Currency translation adjustment | 45 | - | (51 | ) | (1 | ) | |||||||||||||||
Comprehensive income (loss) | $ | (1,905 | ) | (20 | %) | $ | (4,152 | ) | (43 | %) |
The following table summarizes our Consolidated Statement of Balance Sheet Information as at
(in thousands) | As at 2021 | As at December 27, 2020 | |||||||||||||||
Cash | $ | 38,059 | $ | 40,569 | |||||||||||||
Total assets | 58,569 | 63,238 | |||||||||||||||
Equity | 39,530 | 41,475 |
The following table shows our cash flows information for the 13 and 26 week periods ended
For the 26 weeks ended | |||||||||||||||||
(in thousands) | 2021 | 2020 | |||||||||||||||
Net cash provided by operations | $ | (690 | ) | $ | (114 | ) | |||||||||||
Net cash used in investing | (111 | ) | (455 | ) | |||||||||||||
Net cash used in financing | (1,662 | ) | (224 | ) | |||||||||||||
Net increase (decrease) in cash | $ | (2,463 | ) | $ | (793 | ) |
The following table reconciles EBITDA, Adjusted EBITDA, free cash flow, free cash flow conversion, Adjusted Net Income to the most directly comparable IFRS financial performance measure:
For the 13 weeks ended | For the 26 weeks ended | ||||||||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
Net loss | $ | (626 | ) | $ | (726 | ) | $ | (1,950 | ) | $ | (4,101 | ) | |||||||||
Interest income, net | 2 | 20 | 7 | (52 | ) | ||||||||||||||||
Income tax expense (recovery) | 223 | (14 | ) | (168 | ) | (745 | ) | ||||||||||||||
Depreciation and amortization | 392 | 679 | 788 | 3,029 | |||||||||||||||||
EBITDA | (9 | ) | (41 | ) | (1,323 | ) | (1,869 | ) | |||||||||||||
Adjustments: | |||||||||||||||||||||
Share-based compensation expense(1) | 827 | 598 | 1,515 | 1,531 | |||||||||||||||||
Foreign exchange (gain) loss | 39 | 287 | 210 | (447 | ) | ||||||||||||||||
Other adjustments(2) | (740 | ) | - | (740 | ) | 2,121 | |||||||||||||||
Adjusted EBITDA | 117 | 844 | (338 | ) | 1,336 | ||||||||||||||||
Constant currency remeasurement | - | (88 | ) | - | (143 | ) | |||||||||||||||
Adjusted EBITDA on a constant currency basis | $ | 117 | $ | 756 | $ | (338 | ) | $ | 1,193 | ||||||||||||
Less capital expenditures | 78 | 51 | 153 | 480 | |||||||||||||||||
Free cash flow | $ | 39 | $ | 793 | $ | (491 | ) | $ | 856 | ||||||||||||
Free cash flow conversion | 33.3 | % | 94.0 | % | n/a | 64.1 | % | ||||||||||||||
Net loss | (626 | ) | (726 | ) | (1,950 | ) | (4,101 | ) | |||||||||||||
Adjustments: | |||||||||||||||||||||
Share-based compensation expense(1) | 827 | 598 | 1,515 | 1,531 | |||||||||||||||||
Foreign exchange (gain) loss | 39 | 287 | 210 | (447 | ) | ||||||||||||||||
Other adjustments(2) | (740 | ) | - | (740 | ) | 2,121 | |||||||||||||||
Related tax effects(3) | (33 | ) | (235 | ) | (261 | ) | (849 | ) | |||||||||||||
Adjusted Net Income (Loss) | $ | (533 | ) | $ | (76 | ) | $ | (1,226 | ) | $ | (1,745 | ) |
Notes:
(1) In the 26 week periods ended
(2) For the 13 and 26 week periods ended
(3) Related tax effects are calculated at statutory rates in
The Company’s condensed consolidated interim financial statements for the 13 and 26 week periods ended
For further information contact:
Investor Relations
ir@freshii.com
1.866.337.4265
Source:
1 This is a non-IFRS measure. Please refer to the “Non-IFRS Measures and Industry Metrics” section at the end of this press release.
2 System-wide sales, same-store sales growth, EBITDA, Adjusted EBITDA and free cash flow are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. See “Non-IFRS Measures and Industry Metrics” and the table reconciling such measures to the most directly comparable IFRS financial performance measure, included later in this news release.
Source:
2021 GlobeNewswire, Inc., source