FRESHII INC. Continued restaurant sales recovery with over 10% year over year increase in same store sales1 vs Q3 2020
Subsequent to the quarter, completed acquisition of majority control of health and wellness ecommerce retailer,
Subsequent to the quarter, completed 20 site
Continued digital sales momentum with Freshii’s Q3 2021 mobile app sales up 79% vs Q3 2020
Strong CPG division performance, with 75% year over year increase in sales at two largest retail partners by sales volume vs Q3 2020
97% of total locations now open and operating, with 8 more locations operating at end of Q3 2021 vs Q2 2021
“In Q3, our restaurant network continued its sales recovery, with all store types showing sequential improvement vs Q2 2021 in recovering towards pre-pandemic 2019 sales levels, driven in part by continued digital momentum and our best menu innovation performance in years,” said
While certain challenges remain in core urban markets that have traditionally relied heavily on ‘office lunch’ traffic, our suburban ‘drive’ locations, which make up approximately 55% of our North American traditional network, have recovered more than 90% of pre-pandemic sales levels through Q3 2021. We were also encouraged to see more locations reopen this quarter as government restrictions ease in many of our major North American markets. We expect the normalization for our downtown core locations to remain in progress into H1 2022, but overall, we are very pleased with the recovery trend of our network as a whole. We will continue to work with our franchise partners to navigate the challenges that remain, including through additional investments in sales driving and profitability focused store level initiatives - primarily by way of increased marketing investments and operating cost offsets - as we did in the third quarter.
The Company has taken important steps in building its development pipeline and announced a planned 20 store deal in
Freshii’s omnichannel presence in the health and wellness space has also continued to expand. Last week,
Our consumer packaged goods (or ‘CPG’) division is also growing, with our two largest retail partners by sales volume, carrying our broadest assortment of products in dedicated
Acquisition of
On
Further details on the Natura Market transaction can be found in the Company’s news release, dated
Financial Highlights for the Third Quarter2
- Same-store sales growth was 10.6% in Q3 2021 compared to the 13-week period ended
September 27, 2020 (“Q3 2020”). Compared to the 13-week period endedSeptember 29, 2019 (“Q3 2019”), the most recent corresponding period not impacted by the COVID-19 pandemic, same-store sales growth for Q3 2021 was (20.1%). - Royalty revenue and coordination fees totaled
$4.0 million for Q3 2021, representing no change compared to Q3 2020. - In Q3 2021, the Company opened 8 North American locations, certain of which had previously been classified as permanently closed but which have now opened again as COVID-19 pandemic impacts have abated. The Company permanently closed 7 North American locations in Q3 2021, resulting in net new store growth of 1 North American location in the quarter. Including non-North American restaurants, there was no change in Freshii’s total store count in Q3 2021.
- As at the end of Q3 2021, the Company had 372 locations open and operating across its network, representing an increase of 8 locations from the end of Q2 2021.
- As at the end of Q3 2021, the Company had 12 locations categorized as temporarily closed, primarily in airports, malls, and business districts that remain closed or quiet as a result of COVID-19 pandemic restrictions.
- System-wide sales were
$42.0 million in Q3 2021, compared to$36.6 million for Q3 2020 representing an increase of$5.4 million . Compared to Q3 2019, system-wide sales in Q3 2021 decreased by$23.0 million . - Adjusted EBITDA was
$0.4 million for Q3 2021, compared to$0.5 million for Q3 2020. - Net loss was
$0.7 million for Q3 2021, compared to net loss of$0.2 million in Q3 2020. - Free cash flow was
$49 thousand for Q3 2021, compared to$0.5 million for Q3 2020.
Omnichannel Expansion
As set out above, the Company made a major step forward in its omnichannel journey in acquiring majority ownership of Natura Market on
Franchisee Incremental Investment Program
In the second quarter of 2021, the Company announced to our franchise partners that it would be making an additional investment in the system of approximately
- 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, primarily by way of increased marketing investments and operating cost offsets.
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
The Company has 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 direct support, 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 Q3 2021 financial results is scheduled for
About
Eat. Energize. That’s the
Freshii’s consumer-packaged goods (CPG) and nutritional supplements offerings further increase the touchpoints that
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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 and ecommerce industries. 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 industry specific 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 under applicable securities laws. Particularly, 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 the expected benefits of the Natura Market acquisition (including the ability of the Company to leverage the expanded presence and capability in the delivery and digital commerce spaces) and the continued cooperation with Natura Market’s existing management team and any further growth that may result, store count and anticipated new store openings (including the number, timing and locations of planned new store openings in
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 of the Company and/or Natura Market than what is currently anticipated by management; the cooperation with Natura Market’s existing management team will continue, and will not have a materially different impact on the business, operations or financial performance of the Company and/or Natura Market than what is currently anticipated by management; the continued availability of food commodities used by
Forward-looking information is subject to inherent risks and uncertainties surrounding future expectations generally, including, among other things, that such estimates, opinions and assumptions may not be accurate, particularly given the dynamic nature of the COVID-19 pandemic and the events and circumstances resulting from or associated with that pandemic, changes in market and competition, governmental or regulatory developments and a change in overall economic conditions generally. Such risks and uncertainties also include, but are not limited to, those described in the “Risk Factors” section of the Company’s Annual Information Form dated
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. There can be no assurance that such information will prove to be accurate, as actual results and future events can differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. 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 39 week periods ended
| For the 13 weeks ended | |||||||||||||
| (in thousands) | |||||||||||||
| Amount | Percent of Total Revenue | Amount | Percent of Total Revenue | ||||||||||
| Revenue | |||||||||||||
| Franchise revenue | $ | 4,373 | 75 | % | $ | 4,441 | 93 | % | |||||
| Company-owned revenue | 1,447 | 25 | 310 | 7 | |||||||||
| Total revenue | 5,820 | 100 | 4,751 | 100 | |||||||||
| Costs and expenses | |||||||||||||
| Cost of sales | 1,269 | 22 | 333 | 7 | |||||||||
| Selling, general and administrative | 4,341 | 75 | 3,887 | 82 | |||||||||
| Depreciation and amortization | 409 | 7 | 922 | 19 | |||||||||
| Share based compensation expense | 680 | 12 | 680 | 14 | |||||||||
| Total costs and expenses | 6,699 | 116 | 5,822 | 122 | |||||||||
| Loss before interest, foreign exchange & income taxes | (879 | ) | (16 | ) | (1,071 | ) | (22 | ) | |||||
| Interest income, net | 4 | - | 42 | 1 | |||||||||
| Foreign exchange loss (gain) | (21 | ) | - | 214 | 5 | ||||||||
| Loss before income tax expense | (862 | ) | (16 | ) | (1,327 | ) | (28 | ) | |||||
| Income tax expense (recovery) | (113 | ) | (2 | ) | (1,081 | ) | (23 | ) | |||||
| Net loss | (749 | ) | (13 | ) | (246 | ) | (5 | ) | |||||
| Currency translation adjustment | 19 | - | 5 | - | |||||||||
| Comprehensive income (loss) | $ | (730 | ) | (13 | %) | $ | (241 | ) | (5 | %) | |||
| For the 39 weeks ended | |||||||||||||
| (in thousands) | |||||||||||||
| Amount | Percent of Total Revenue | Amount | Percent of Total Revenue | ||||||||||
| Revenue | |||||||||||||
| Franchise revenue | $ | 12,736 | 84 | % | $ | 13,272 | 92 | % | |||||
| Company-owned revenue | 2,384 | 16 | 1,144 | 8 | |||||||||
| Total revenue | 15,120 | 100 | 14,416 | 100 | |||||||||
| Costs and expenses | |||||||||||||
| Cost of sales | 2,017 | 13 | 1,060 | 7 | |||||||||
| Selling, general and administrative | 12,491 | 83 | 13,610 | 94 | |||||||||
| Depreciation and amortization | 1,197 | 8 | 3,951 | 27 | |||||||||
| Share based compensation expense | 2,195 | 15 | 2,211 | 15 | |||||||||
| Total costs and expenses | 17,900 | 119 | 20,832 | 143 | |||||||||
| Income (loss) before interest, foreign exchange & income taxes | (2,780 | ) | (19 | ) | (6,416 | ) | (43 | ) | |||||
| Interest income, net | 11 | - | (10 | ) | - | ||||||||
| Foreign exchange loss (gain) | 189 | 1 | (233 | ) | (2 | ) | |||||||
| Income (loss) before income tax expense | (2,980 | ) | (20 | ) | (6,173 | ) | (41 | ) | |||||
| Income tax expense (recovery) | (281 | ) | (2 | ) | (1,826 | ) | (13 | ) | |||||
| Net loss | (2,699 | ) | (18 | ) | (4,347 | ) | (28 | ) | |||||
| Currency translation adjustment | 64 | - | (46 | ) | - | ||||||||
| Comprehensive income (loss) | $ | (2,635 | ) | (17 | %) | $ | (4,393 | ) | (30 | %) | |||
The following table summarizes our Consolidated Statement of Balance Sheet Information as at
| (in thousands) | As at | As at | |||||
| Cash | $ | 37,091 | $ | 40,569 | |||
| Total assets | 57,418 | 63,238 | |||||
| Equity | 38,385 | 41,475 | |||||
The following table shows our cash flows information for the 13 and 39 week periods ended
| For the 39 weeks ended | |||||||
| (in thousands) | |||||||
| Net cash provided by operations | $ | (147 | ) | $ | 1,066 | ||
| Net cash used in investing | (377 | ) | (477 | ) | |||
| Net cash used in financing | (2,947 | ) | (332 | ) | |||
| Net increase (decrease) in cash | $ | (3,471 | ) | $ | 257 | ||
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 39 weeks ended | ||||||||||||||
| (in thousands) | |||||||||||||||
| Net loss | $ | (749 | ) | $ | (246 | ) | $ | (2,699 | ) | $ | (4,347 | ) | |||
| Interest income, net | 4 | 42 | 11 | (10 | ) | ||||||||||
| Income tax expense (recovery) | (113 | ) | (1,081 | ) | (281 | ) | (1,826 | ) | |||||||
| Depreciation and amortization | 409 | 922 | 1,197 | 3,951 | |||||||||||
| EBITDA | (449 | ) | (363 | ) | (1,772 | ) | (2,232 | ) | |||||||
| Adjustments: | |||||||||||||||
| Share-based compensation expense(1) | 680 | 680 | 2,195 | 2,211 | |||||||||||
| Foreign exchange (gain) loss | (21 | ) | 214 | 189 | (233 | ) | |||||||||
| Other adjustments(2) | 199 | - | (541 | ) | 2,121 | ||||||||||
| Adjusted EBITDA | 409 | 531 | 71 | 1,867 | |||||||||||
| Constant currency remeasurement | - | (58 | ) | - | (200 | ) | |||||||||
| Adjusted EBITDA on a constant currency basis | $ | 409 | $ | 473 | $ | 71 | $ | 1,667 | |||||||
| Less capital expenditures | 360 | 48 | 513 | 528 | |||||||||||
| Free cash flow | $ | 49 | $ | 483 | $ | (442 | ) | $ | 1,339 | ||||||
| Free cash flow conversion | 12.0 | % | 91.0 | % | (622.5 | %) | 71.7 | % | |||||||
| Net loss | (749 | ) | (246 | ) | (2,699 | ) | (4,347 | ) | |||||||
| Adjustments: | |||||||||||||||
| Share-based compensation expense(1) | 680 | 680 | 2,195 | 2,211 | |||||||||||
| Foreign exchange (gain) loss | (21 | ) | 214 | 189 | (233 | ) | |||||||||
| Other adjustments(2) | 199 | - | (541 | ) | 2,121 | ||||||||||
| Related tax effects(3) | (227 | ) | (237 | ) | (488 | ) | (1,086 | ) | |||||||
| Adjusted Net Income (Loss) | $ | (118 | ) | $ | 411 | $ | (1,344 | ) | $ | (1,334 | ) | ||||
Notes:
(1) In the 39 week periods ended
(2) For the 13 and 39 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 39 week periods ended
_______________
1 This is a non-IFRS measure. Please refer to the “Non-IFRS Measures and Industry Metrics” section included later in this news release.
2 System-wide sales, same-store sales growth, EBITDA, Adjusted EBITDA, North American stores 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.
For further information contact:
Investor Relations
ir@freshii.com
1.866.337.4265
Source:
2021 GlobeNewswire, Inc., source
