Freshii Inc. Announces Second Quarter 2022 Results
Q2 2022 Revenue up 87% vs. Q2 2021, driven largely by the consolidation of Natura Market
Strengthened leadership team with key additions and promotions
Initiating critical investments in expanded field team to support franchise partners to help drive operational excellence and improved profitability
Expanding real estate, development and construction teams to accelerate progress of the planned development pipeline of over 100 locations
Launched phase 1 of updated mobile app and loyalty program, with improved loyalty capabilities
Launching fall traffic driving initiatives intended for the current operating environment
TORONTO, Aug. 10, 2022 (GLOBE NEWSWIRE) — Omnichannel health and wellness brand, Freshii Inc. (TSX: FRII) (“Freshii”, the “Company”, “us”, “our” or “we”), today announced financial results for the second quarter ended June 26, 2022 (“Q2 2022”).
“In Q2, we realigned our organizational structure by strengthening our leadership team, adding field resources to help improve existing operations, while also investing in functions like real estate, development and construction ahead of our expected next phase of growth which will be anchored on the restaurant business and a close partnership with our franchise partners,” said Daniel Haroun, Chief Executive Officer of Freshii. “In the past 90 days, we have spent a considerable amount of time in markets across North America with our franchise partners, focused on developing a deeper understanding of our key opportunities and challenges on the ground, as well as assessing our real estate for a post-COVID-19 operating environment, as we work to lay the foundation for future growth. We’ve come away from this time in market with strong conviction about the opportunity to grow our business over the long term, an appreciation for the importance of facing our most pressing challenges with urgency, and certain actionable steps we can take in the coming quarters to help prepare us to do so. Throughout our visits, we felt energized by our franchise partners’ continued passion for, and belief in, the Freshii brand. We also believe that our Retail and Ecommerce segment continues to play an important role in positioning the Freshii brand, with our CPG business and Natura Market platform offering healthier options to consumers and the potential for growing the business overall.”
Freshii’s Business Segments
Commencing in the fourth quarter of 2021, the Company began reporting using two new reportable segments, more fully reflecting the evolving nature of our omnichannel business and helping to provide clearer insight into the results and performance of our various business lines given their varying stages of development and their complementary but distinct key performance metrics.
As a reminder, our reportable segments are:
- North American Franchised (“NAF”) Restaurant segment: This segment is comprised of our network of traditional and non-traditional franchised restaurants located in North America1. North America encompasses our most well-established markets and represents the significant majority of our franchised stores and royalty revenues.
- Retail and Ecommerce segment: This segment is comprised of two distinct businesses: the third party retail sales of Freshii’s consumer packaged goods (“CPG”) business and Natura Market’s ecommerce platform. Each business within the Retail and Ecommerce segment offers a unique method of bringing health and wellness products to consumers.
In addition to the NAF Restaurant and Retail and Ecommerce segments, we consolidate revenue and expenses from other operations, including Company-owned and international restaurant locations, as well as Freshii HQ enterprise costs that do not fit into either of the reportable segments, in our Financial Statements in Enterprise & Other.
For more information on our reportable segments, please see our Q2 2022 Management’s Discussion and Analysis, available on SEDAR at www.sedar.com.
North American Franchised Restaurant Segment
NAF Restaurant system sales2 were up 5% to $38M in Q2 2022 as compared to $36M in the second quarter of 2021 (“Q2 2021”), driven primarily by an increase in the number of open and operating NAF Restaurant system stores3 compared to Q2 2021. Same-store sales growth4 was (0.1%) as compared to Q2 2021, as performance in the quarter was mixed, as further set out below.
Across our NAF Restaurant segment, performance in the first half of Q2 2022 (to mid-May) was stronger than the second half. NAF Restaurant system sales in the first half of the quarter benefitted from the re-launch of our Tacos limited time offer (“LTO”) and the continuation of our smoothie platform. NAF Restaurant same-store sales performance in the second half of Q2 2022 was primarily impacted by four major factors. First, based on industry data, the onset of significant inflation weighed on consumer demand and resulted in reduced customer visits and transactions. Second, the year-over-year performance of the NAF Restaurant segment is compared against Q2 2021, in which the quick service restaurant industry benefitted from pandemic related restrictions placed on travel, full-service dining and other experiences and, as such, a certain amount of normalization of same-store sales growth in Q2 2022 is, in the view of management, to be expected. Third, in Q2 2022, primarily as a result of the lessening of pandemic related restrictions, customer traffic shifted in part from digital channels back to in-store, which reduced our average cheque on transactions involving those customers. Lastly, in the second half of Q2 2022, we saw a comparatively quieter promotional period as we ended the Tacos LTO and associated marketing earlier than planned (as further discussed below), and this quieter promotional period continued into July. While the overall negative same-store sales growth trend has continued into the third quarter of 2022, we intend to help mitigate the impact with an increased focus on more simplified innovation (such as the ‘Classics LTO’ discussed below), marketing activity and traffic driving initiatives in the fall.
The re-launched Tacos LTO continued to be well received by our customers in the first half of Q2 2022, however it did not meet our overall internal system sales expectations, as we believe the premium price positioning was better received prior to the onset of the current high inflationary environment. We also received feedback from our franchise partners that suggested that the offering added operational complexity in an already challenged labour market, with unique ingredients, more complicated recipes and more time-consuming preparation as compared to our traditional menu offerings. Having considered this feedback, we made the decision in consultation with our franchise partners to end the Tacos LTO early. We believe that a more simplified approach to innovation, focused on our core menu platforms and offering a wider variety of price points for the customer – utilizing existing ingredients and preparation models to develop new offerings where possible – will allow us to deliver a great customer experience for our current menu, while offering exciting innovation for our guests. For example, in August we launched our ‘Classics’ LTO, which consists of four new menu offerings made up entirely of existing ingredients and workflows.
Freshii opened 1 new NAF Restaurant system store during Q2 2022 and closed 10 NAF Restaurant system stores, resulting in a net loss of 9 NAF Restaurant system stores in the quarter. As previously discussed, given the capacity we continue to believe exists for restaurant growth in North America, we have continued to take steps to strengthen our NAF Restaurant pipeline which currently includes agreements for the planned development of over 100 locations5. We are particularly pleased to report that many of our multi-unit partnerships are proceeding ahead of schedule, despite a very competitive real estate environment outside of the urban core locations. Our development team has also been very active in re-engaging with the landlord community for a holistic review of our NAF Restaurant network and is optimistic that these relationships can enable continued growth of the NAF Restaurant pipeline. We plan to continue to be disciplined in respect of selecting the right real estate in the right trade areas to help position our franchise partners for potential long-term success. In addition, we have made critical leadership hires in our franchise development, real estate, and design and construction teams. We have also implemented new processes and technologies to assist in improved site and candidate selection. We believe these changes will help to improve the quality of the Freshii network over the long term.
As previously disclosed, there is a wide degree of variation between our top performing and bottom performing stores. For context, as of Q2 2022, the top performing 85% NAF Restaurant locations have AUVs6 that are on average more than double the AUVs of the bottom performing 15% of such locations. The Freshii management team’s time spent in markets across North America highlighted that a significant differentiator in top performing stores versus bottom performing stores was a combination of operational experience and knowing how to manage through challenges, such as the impact of labour shortages on customer experience, the inflationary pressures on franchise partner profitability, and the operational changes resulting from our recent innovation programs. As a result of these findings, we have determined that making additional investments in our field support team across certain regions in North America will help put our franchise partners in a better position to establish operational readiness while also allowing the opportunity for improvements in bottom performing stores through more regular contact with, and coaching of, our franchise partners. It is important to note that our overall performance continues to be impacted by employers’ ‘return to office’ timeline, which in many cases has continued to progress at a slower rate than anticipated, and reduced NAF Restaurant store hours of operation compared to the pre-pandemic hours in the second quarter of 2019, driven in part by labour shortages.
In Q2 2022, we continued our focus on digital growth with the launch of phase 1 of significant updates to our mobile app and loyalty program. We view our mobile app as an important strategic capability that will improve the way we engage with our loyal customers and improve the overall customer experience. NAF Restaurant system sales attributable to the Freshii mobile app declined for the quarter as compared to Q2 2021, as we scaled down customer engagement efforts to focus on testing and app stabilization during the implementation of the app updates.
Subsequent to the quarter, we began to engage a normal course long-term strategic planning process. We intend to provide further updates in the coming quarters.
Retail and Ecommerce Segment
As previously disclosed, Freshii acquired a majority interest in Natura Market Ecommerce Inc. (“Natura Market”) in the fourth quarter of 2021. In Q2 2022, Natura Market revenue declined by 23% as compared to the corresponding period in 20217. As we previously disclosed, Natura is beginning to lap 2021 periods that saw high growth as a result of the COVID-19 pandemic and consumers shift towards increased reliance on ecommerce platforms. With the lessening of pandemic related restrictions and a tendency towards consumers reducing their reliance on ecommerce purchasing, Natura Market saw a decline in overall sales that is in line with trends observed for the retail ecommerce sector. In our view, the Natura Market team has performed well through this challenging ecommerce environment, focusing on product selection, while taking a disciplined approach to managing the business during headwinds that we believe to be temporary.
Freshii’s CPG business, which sells healthy, on-the-go wraps, salads, bowls, snacks and beverages across hundreds of retailer points of distribution, had another strong quarter in Q2 2022. CPG system sales8 (based on sales reported by Freshii’s retail partners) were up 99% in Q2 2022 as compared to Q2 2021, with the portion of those CPG system sales attributable to energii bites and elixir shots notably up 55% and 195% year-over-year in Q2 2022, respectively. The CPG business partnerships include Walmart, Shell, ONroute, and 7-Eleven. Freshii’s CPG team expects to continue to pursue strong relationships with retailers, with a focus on its highest performing products and markets.
Financial Highlights for the Second Quarter
- Revenues in Q2 2022 were $10.5 million, compared to $5.6 million for Q2 2021, representing an increase of $4.9 million.
- Total Freshii system sales (which includes NAF Restaurant system sales and CPG system sales but not non-Freshii CPG Natura Market sales) were $41.9 million in Q2 2022, compared to $39.2 million for Q2 2021 representing an increase of $2.7 million.
- NAF Restaurant segment same-store sales growth was (0.1%) in Q2 2022 compared to Q2 2021.
- In Q2 2022, the Company opened 1 NAF system stores and permanently closed 10 NAF system stores in Q2 2022, resulting in net store closures of 9 NAF Restaurant system stores in the quarter.
- NAF Restaurant Adjusted EBITDA9 was $1.8 million, and NAF Restaurant Net Income was $1.6 million, for Q2 2022, compared to $1.7 million and $2.3 million, respectively, for Q2 2021.
- Retail and Ecommerce segment revenue was $6.3 million in Q2 2022, compared to $0.8 million for Q2 2021. Retail sales, which represents Retail and Ecommerce segment revenue excluding the effect of the Natura Market majority acquisition, for Q2 2022 was $1.9 million.
- Net loss was $1.7 million for Q2 2022, compared to a net loss of $0.6 million in Q2 2021. Adjusted EBITDA was $0.2M in Q2 2022, compared to $0.1M in Q2 2021. Adjusted net loss10 was $0.4 million for Q2 2022, compared to adjusted net loss of $0.3 million for Q2 2021.
Capital Allocation and Liquidity Update
The Company has maintained a strong cash position through the COVID-19 pandemic to date, with $23.7 million on hand as at June 26, 2022. As previously disclosed, Freshii is committed to maintaining adequate liquidity and financial flexibility throughout the pandemic and coming out of it, while also investing in strategic priorities across its NAF Restaurant and Retail and Ecommerce segments. We intend to continue to make efforts to maintain our strong cash position in the coming quarters while still reinvesting for growth across our business lines.
The Company’s capital allocation priorities at present are to invest in the growth of our current divisions, pursue acquisitions within our operating segments in a disciplined manner, and, where appropriate, the continued execution of our normal course issuer bid program.
Earnings Conference Call and Audio Webcast
A conference call to discuss Q2 2022 financial results is scheduled for August 11, 2022, at 8:30 a.m. Eastern Time. The conference call can be accessed live over the phone by dialing 1-877-425-9470 (U.S. and Canada), or 1-201-389-0878 (International). The conference call will also be webcast on the investor relations section of the Company’s website at www.freshii.inc.
For those unable to participate, an audio replay will be available from 11:30 a.m. Eastern Time on Thursday, August 11, 2022 through Thursday, August 18, 2022. To access the replay, please call 1-844-512-2921 (U.S. & Canada) or 1-412-317-6671 (International) and enter confirmation code 13731599. A web-based archive of the conference call will also be available at the above website.
About Freshii
Eat. Energize. That’s the Freshii mantra. Freshii is an omnichannel health and wellness brand on a mission to help citizens of the world live better by making healthy eating and overall wellness 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 eco-friendly environment, Freshii’s restaurant business caters to every taste and dietary preference.
Freshii’s CPG offerings further increase the touchpoints that Freshii has with its customers, as does the Company’s majority interest in health and wellness ecommerce retailer, Natura Market.
Since it was founded in 2005, Freshii has grown to 335 franchised restaurant locations across North America, expanded its CPG lineup across hundreds of major retailer points of distribution and added Natura Market to its business lines. With the Company’s expanding distribution and product sets, Freshii guests can energize with Freshii’s products anywhere from cosmopolitan cities and fitness clubs to sports arenas and airplanes, as well as in major retail outlets and directly from home.
Inquire about how to join the Freshii family: https://www.freshii.com/ca/en-ca/franchise
Learn more about investing in Freshii: http://www.freshii.inc
Find your nearest Freshii: http://www.freshii.com/
Follow Freshii on Twitter and Instagram: @freshii
Non-IFRS Measures and Industry Metrics
This news release uses non-IFRS financial measures and non-IFRS ratios. Non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. These measures include “EBITDA”, “Adjusted EBITDA”, and “Adjusted net income”. A reconciliation of each non-IFRS measure to the most directly comparable IFRS financial measure is found in the “Non-IFRS Reconciliation” section below.
This news release also makes reference to “AUV”, “system sales”, “system stores”, and “same-store sales growth” which are commonly used operating metrics in the restaurant industry, but may be calculated differently by other companies in the restaurant industry.
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 and enable comparison with other companies in the restaurant industry. Our management also uses non-IFRS measures, non-IFRS ratios and supplementary financial measures, 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. Certain information about non-IFRS financial measures, non-IFRS ratios and supplementary financial measures found in our Management’s Discussion & Analysis for the thirteen and twenty-six weeks ended June 26, 2022, dated August 10, 2022 (the “Q2 MD&A”) is incorporated by reference. This information is found in the on-IFRS Financial Measures and Industry Metrics section of the Q2 MD&A. The Q2 MD&A is available on SEDAR at www.sedar.com.
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 restaurant development pipeline and that the NAF Restaurant pipeline currently includes agreements for the planned development of over 100 locations and the completion of, and timeline for, opening of such locations, details regarding Natura Market’s business and strategic plans and expected results thereof, expectations with respect to Natura Market’s year over year sales comparison, expectations that the Natura Market team’s performance through the challenging ecommerce environment will continue and that the headwinds faced by the business will be temporary, the Company’s intention to continue to engage in a normal course long-term strategic planning process and the Company’s intention to provide further updates in the coming quarters, the Company’s belief that its next phase of expected growth will be anchored on the restaurant business and a close partnership with its franchise partners, the Company’s belief in the Retail and Ecommerce segment’s important role in positioning the Freshii brand and potential for growing the business, the Company’s belief of capacity for restaurant growth in North America, actionable steps the Company can take in the coming quarters arising from spending time in markets across North America and its intention to make (and continue making) critical investments in expanded field team to support franchise partners in driving operational excellence, the ability of the Company’s development team to engage with landlords and the impact of those relationships on continued growth of the Company’s NAF Restaurant pipeline, the Company’s expectations regarding our multi-unit partnerships proceeding ahead of schedule, the Company’s ability to continue to be disciplined in respect of selecting the right real estate in the right trade areas to position our franchise partners for potential long term success and the anticipated results thereof, the Company’s intention to help franchise partners mitigate the impact of the challenging operating environment with increased focus on more simplified innovation, marketing activity and traffic driving initiatives in the fall, the implementation of new processes and technology to assist in improved site and candidate selection and the anticipated results thereof, the Company’s beliefs with respect to its mobile app, the Company’s commitment to maintaining adequate liquidity and financial flexibility throughout the pandemic and coming out of it while also investing in strategic priorities across its NAF Restaurant and Retail and Ecommerce segments, the Company’s expectation that its CPG team will continue to pursue strong relationships with retailers, with a focus on its highest performing products and markets, the Company’s intention to make efforts to maintain its strong cash position while still reinvesting for growth across its business lines, the Company’s capital allocation priorities, and store count and anticipated new store openings (including the number, timing and locations of planned store openings), constitute forward-looking information. In many but not necessarily all cases, the words “may”, “will”, “anticipate”, “intend”, “estimate”, “expect”, “plan”, “believe”, “lead”, “continue”, “plan”, “design”, “likely” and similar expressions identify forward-looking information and forward-looking statements. Forward-looking information and forward-looking statements should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the information in this news release containing forward-looking information or forward-looking statements is qualified by these cautionary statements. In particular, the Company notes that the dynamic nature of the COVID-19 pandemic and the events and circumstances resulting from or associated with that pandemic and general macroeconomic trends and resulting changes in consumer habits mean that management can offer no assurance such forward-looking information or forward-looking statements will occur or be accurate in the circumstances.
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, high levels of inflation, a potential recession, 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 ability of management to identify and utilize synergies between the Company and Natura Market, and among the Company’s omnichannel businesses generally; the ability of the Company to acquire the remaining 40% interest of Natura Market; the continued availability of food commodities used by Freshii locations at stable prices, including that ongoing global supply chain disruptions will not materially affect the availability or price of food commodities or other supplies and will not materially disrupt or affect business, operations or financial performance of the Company or its franchise partners other than as currently anticipated by management; Freshii will be able to continue to effectively assist its franchise partners; the continued recovery and re-opening of the economies (including the relaxing or removing restrictions relating to the COVID-19 pandemic) in Canada and the United States and elsewhere will occur in the manner and on the timelines anticipated by management and that such recovery and re-opening will be sustained; the continued access by the Company and its franchise partners to a pool of suitable workers at reasonable wage levels; the foreign exchange rates may continue to fluctuate (in particular, that the value of the Canadian dollar will continue to fluctuate against the US dollar and other currencies); the recovery of Freshii’s franchise system occurs on the timelines and in the manner anticipated by management; new store openings will not occur on a timeline, in a location or in a manner that is materially different than what is currently anticipated by management; healthy eating trends continue in the manner anticipated; the timelines for new menu rollouts and operational innovations, any future phases of development of the Company’s mobile app and any future enhancements to or phases of the loyalty program, the use of our food cost management program, the implementation and/or use of operational efficiency programs, the ability to utilize information gather from the Company’s customer experience program, the Company’s partnerships with major grocery and other retailers and investments in its CPG business line, the Company’s ability to develop and grow its omnichannel businesses, the development of strategies to drive down costs with franchise partners and cost control activities at the corporate level, and the normal course long-term strategic planning process will each have the anticipated effect on the Company’s business, operations and financial performance and will proceed on the timelines and in the manner currently anticipated by management, the planned development of the NAF Restaurant pipeline, including the existing agreements for the planned development of over 100 locations will proceed in the manner, with the conversion rate and on the timelines currently anticipated by the Company and other matters discussed in the Company’s materials filed with Canadian securities regulators from time to time (including the Q2 MD&A).
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 March 28, 2022, the Company’s annual Management’s Discussion and Analysis dated February 23, 2022, the Q2 MD&A, and in the Company’s other filings, which are available on SEDAR at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended.
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.
Market and Industry Data and Information
Market and industry data and information contained in this press release have been obtained from industry publications, various publicly available sources and subscription-based reports as well as from management’s good faith estimates, which are derived from management’s knowledge of the industry and independent sources that management believes to be reliable. Industry publications, surveys and forecasts generally state that the information contained in this press release has been obtained from sources believed to be reliable. Freshii has not independently verified any of the information from third-party sources nor has it ascertained the validity or accuracy of the underlying economic assumptions relied upon therein. Freshii hereby disclaims any responsibility or liability whatsoever in respect of any third-party sources of market and industry data or information.
Selected Quarterly Consolidated Information
The following tables summarize our results of operations for the 13 and 26 week periods ended June 26, 2022 and June 27, 2021, respectively:
| For the 13 weeks ended June 26, 2022 | For the 13 weeks ended June 27, 2021 | ||||||||||||||||||||||||||||||
| (in thousands) | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | |||||||||||||||||||||||
| System sales (ii) (iii) | $ | 37,824 | $ | 2,270 | $ | 1,826 | $ | 41,920 | $ | 36,142 | $ | 1,143 | $ | 1,886 | $ | 39,171 | |||||||||||||||
| Revenue | 4,079 | 6,317 | 152 | 10,548 | 4,618 | 824 | 194 | 5,636 | |||||||||||||||||||||||
| Gross profit | 4,079 | 1,104 | 75 | 5,258 | 4,618 | 391 | 147 | 5,156 | |||||||||||||||||||||||
| Selling, general and administrative | 2,326 | 1,341 | 2,036 | 5,703 | 2,184 | 806 | 1,308 | 4,298 | |||||||||||||||||||||||
| Depreciation and amortization | 189 | 397 | 245 | 831 | 138 | 2 | 252 | 392 | |||||||||||||||||||||||
| Net income (loss) | 1,566 | (651 | ) | (2,613 | ) | (1,698 | ) | 2,299 | (417 | ) | (2,508 | ) | (626 | ) | |||||||||||||||||
| Adjusted net income (loss) (i) | 1,565 | (646 | ) | (1,324 | ) | (405 | ) | 1,752 | (417 | ) | (1,656 | ) | (321 | ) | |||||||||||||||||
| Adjusted EBITDA (i) | 1,753 | (237 | ) | (1,281 | ) | 235 | 1,693 | (415 | ) | (1,161 | ) | 117 | |||||||||||||||||||
| For the 26 weeks ended June 26, 2022 | For the 26 weeks ended June 27, 2021 | ||||||||||||||||||||||||||||||
| (in thousands) | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | |||||||||||||||||||||||
| System sales (ii) (iii) | $ | 67,928 | $ | 3,926 | $ | 3,610 | $ | 75,464 | $ | 63,271 | $ | 2,039 | $ | 3,706 | $ | 69,016 | |||||||||||||||
| Revenue | 7,358 | 12,532 | 260 | 20,150 | 7,588 | 1,323 | 389 | 9,300 | |||||||||||||||||||||||
| Gross profit | 7,358 | 2,454 | 99 | 9,911 | 7,588 | 661 | 304 | 8,553 | |||||||||||||||||||||||
| Selling, general and administrative | 4,365 | 2,833 | 4,176 | 11,374 | 3,774 | 1,306 | 3,070 | 8,150 | |||||||||||||||||||||||
| Depreciation and amortization | 311 | 814 | 484 | 1,609 | 280 | 4 | 504 | 788 | |||||||||||||||||||||||
| Net income (loss) | 2,685 | (1,223 | ) | (5,584 | ) | (4,122 | ) | 3,502 | (649 | ) | (4,803 | ) | (1,950 | ) | |||||||||||||||||
| Adjusted net income (loss) (i) | 2,683 | (1,216 | ) | (3,240 | ) | (1,773 | ) | 2,981 | (649 | ) | (3,192 | ) | (860 | ) | |||||||||||||||||
| Adjusted EBITDA (i) | 2,993 | (379 | ) | (3,062 | ) | (448 | ) | 3,073 | (645 | ) | (2,766 | ) | (338 | ) | |||||||||||||||||
(i) Represents a non-IFRS financial measure or non-IFRS ratio. For further information on non-IFRS measures and non-IFRS ratios, see the “Non-IFRS and Industry Metrics” section of this release.
(ii) NAF Restaurant system sales represent sales made at our NAF restaurants. Retail and Ecommerce system sales represent sales of Freshii CPG products made by third party retail partners, but do not include any sales made through Natura Market other than of Freshii CPG products. Enterprise & Other system sales represent sales made at our Company-owned stores and our international franchised stores.
(iii) This industry metric represents a supplemental financial measure. For further information on supplemental financial measures, see the “Non-IFRS and Industry Metrics” section of this release.
The following table summarizes our Consolidated Statement of Balance Sheet Information as at June 26, 2022 and December 26, 2021:
| (in thousands) | As at June 26, 2022 | As at December 26, 2021 |
Variance | % Variance | |||||||||||
| Cash | $ | 23,714 | $ | 30,756 | $ | (7,042 | ) | (23 | %) | ||||||
| Total assets | 47,774 | 56,876 | (9,102 | ) | (16 | %) | |||||||||
| Equity | 25,428 | 30,447 | (5,019 | ) | (16 | %) | |||||||||
The following table shows our cash flows information for the 26 week periods ended June 26, 2022 and June 27, 2021, respectively:
| For the 26 weeks ended | |||||||||||||||
| (in thousands) | June 26, 2022 | June 27, 2021 | Variance | % Variance | |||||||||||
| Net cash provided by (used in) operations | $ | (3,676 | ) | $ | (828 | ) | $ | (2,848 | ) | 344 | % | ||||
| Net cash used in investing | (87 | ) | 27 | (114 | ) | (422 | %) | ||||||||
| Net cash used in financing | (3,298 | ) | (1,662 | ) | (1,636 | ) | 98 | % | |||||||
| Net increase (decrease) in cash | $ | (7,061 | ) | $ | (2,463 | ) | $ | (4,598 | ) | 187 | % | ||||
Non-IFRS Reconciliations
The following tables reconcile EBITDA, Adjusted EBITDA, and Adjusted net income to the most directly comparable IFRS financial performance measure:
| For the 13 weeks ended June 26, 2022 | For the 13 weeks ended June 27, 2021 | ||||||||||||||||||||||||||||||
| (in thousands) | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | |||||||||||||||||||||||
| Net income (loss) | $ | 1,566 | $ | (651 | ) | $ | (2,613 | ) | $ | (1,698 | ) | $ | 2,299 | $ | (417 | ) | $ | (2,508 | ) | $ | (626 | ) | |||||||||
| Interest expense, net | – | 10 | (2 | ) | 8 | – | – | 2 | 2 | ||||||||||||||||||||||
| Income tax expense (recovery) | – | – | (111 | ) | (111 | ) | – | – | 223 | 223 | |||||||||||||||||||||
| Depreciation and amortization | 189 | 397 | 245 | 831 | 138 | 2 | 252 | 392 | |||||||||||||||||||||||
| EBITDA | 1,755 | (244 | ) | (2,481 | ) | (970 | ) | 2,437 | (415 | ) | (2,031 | ) | (9 | ) | |||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||
| Share-based compensation expense | – | – | 547 | 547 | – | – | 827 | 827 | |||||||||||||||||||||||
| Foreign exchange (gain) loss | (2 | ) | 7 | (27 | ) | (22 | ) | (4 | ) | – | 43 | 39 | |||||||||||||||||||
| Other adjustments(i) | – | – | 680 | 680 | (740 | ) | – | – | (740 | ) | |||||||||||||||||||||
| Adjusted EBITDA | $ | 1,753 | $ | (237 | ) | $ | (1,281 | ) | $ | 235 | $ | 1,693 | $ | (415 | ) | $ | (1,161 | ) | $ | 117 | |||||||||||
| Net income (loss) | $ | 1,566 | $ | (651 | ) | $ | (2,613 | ) | $ | (1,698 | ) | $ | 2,299 | $ | (417 | ) | $ | (2,508 | ) | $ | (626 | ) | |||||||||
| Adjustments: | |||||||||||||||||||||||||||||||
| Share-based compensation expense | – | – | 547 | 547 | – | – | 827 | 827 | |||||||||||||||||||||||
| Foreign exchange (gain) loss | (2 | ) | 7 | (27 | ) | (22 | ) | (4 | ) | – | 43 | 39 | |||||||||||||||||||
| Other adjustments(i) | – | – | 680 | 680 | (740 | ) | – | – | (740 | ) | |||||||||||||||||||||
| Derecognition of deferred tax assets | – | – | 407 | 407 | – | – | 213 | 213 | |||||||||||||||||||||||
| Related tax effects(ii) | 1 | (2 | ) | (318 | ) | (319 | ) | 197 | – | (231 | ) | (34 | ) | ||||||||||||||||||
| Adjusted net income (loss) | $ | 1,565 | $ | (646 | ) | $ | (1,324 | ) | $ | (405 | ) | $ | 1,752 | $ | (417 | ) | $ | (1,656 | ) | $ | (321 | ) | |||||||||
(i) For the 13 weeks ended June 26, 2022, Enterprise & Other non-recurring expenditures expenses related to separation amounts paid to employees previously employed by the Company.
(ii) Related tax effects are calculated at statutory rates in Canada or U.S. depending on adjustment.
| For the 26 weeks ended June 26, 2022 | For the 26 weeks ended June 27, 2021 | ||||||||||||||||||||||||||||||
| (in thousands) | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | NAF Restaurant | Retail & Ecommerce | Enterprise & Other | Total | |||||||||||||||||||||||
| Net income (loss) | $ | 2,685 | $ | (1,223 | ) | $ | (5,584 | ) | $ | (4,122 | ) | $ | 3,502 | $ | (649 | ) | $ | (4,803 | ) | $ | (1,950 | ) | |||||||||
| Interest expense, net | – | 20 | 17 | 37 | – | – | 7 | 7 | |||||||||||||||||||||||
| Income tax expense (recovery) | – | – | (124 | ) | (124 | ) | – | – | (168 | ) | (168 | ) | |||||||||||||||||||
| Depreciation and amortization | 311 | 814 | 484 | 1,609 | 280 | 4 | 504 | 788 | |||||||||||||||||||||||
| EBITDA | 2,996 | (389 | ) | (5,207 | ) | (2,600 | ) | 3,782 | (645 | ) | (4,460 | ) | (1,323 | ) | |||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||
| Share-based compensation expense | – | – | 1,146 | 1,146 | – | – | 1,515 | 1,515 | |||||||||||||||||||||||
| Foreign exchange (gain) loss | (3 | ) | 10 | (16 | ) | (9 | ) | 31 | – | 179 | 210 | ||||||||||||||||||||
| Other adjustments(i) | – | – | 1,015 | 1,015 | (740 | ) | – | – | (740 | ) | |||||||||||||||||||||
| Adjusted EBITDA | $ | 2,993 | $ | (379 | ) | $ | (3,062 | ) | $ | (448 | ) | $ | 3,073 | $ | (645 | ) | $ | (2,766 | ) | $ | (338 | ) | |||||||||
| Net income (loss) | $ | 2,685 | $ | (1,223 | ) | $ | (5,584 | ) | $ | (4,122 | ) | $ | 3,502 | $ | (649 | ) | $ | (4,803 | ) | $ | (1,950 | ) | |||||||||
| Adjustments: | |||||||||||||||||||||||||||||||
| Share-based compensation expense | – | – | 1,146 | 1,146 | – | – | 1,515 | 1,515 | |||||||||||||||||||||||
| Foreign exchange (gain) loss | (3 | ) | 10 | (16 | ) | (9 | ) | 31 | – | 179 | 210 | ||||||||||||||||||||
| Other adjustments(i) | – | – | 1,015 | 1,015 | (740 | ) | – | – | (740 | ) | |||||||||||||||||||||
| Derecognition of deferred tax assets | – | – | 767 | 767 | – | – | 366 | 366 | |||||||||||||||||||||||
| Related tax effects(i) | 1 | (3 | ) | (568 | ) | (570 | ) | 188 | – | (449 | ) | (261 | ) | ||||||||||||||||||
| Adjusted net income (loss) | $ | 2,683 | $ | (1,216 | ) | $ | (3,240 | ) | $ | (1,773 | ) | $ | 2,981 | $ | (649 | ) | $ | (3,192 | ) | $ | (860 | ) | |||||||||
(i) For the 26 weeks ended June 26, 2022, Enterprise & Other non-recurring expenditures are related to separation amounts paid to employees previously employed by the Company and expected credit losses on legacy lease receivables where the Company is an intermediate lessor on restaurant premises that have been closed.
(ii) Related tax effects are calculated at statutory rates in Canada or U.S. depending on adjustment.
The Company’s condensed consolidated interim financial statements for the 13 and 26 week periods ended June 26, 2022 and the relevant Management’s Discussion and Analysis documents, are available under the Company’s profile on SEDAR at www.sedar.com.
For further information contact:
Investor Relations
ir@freshii.com
1.866.337.4265
Source: Freshii Inc.
_______________
1 For the purposes of this news release, “North America” is defined to include Canada and the US (where the vast majority of Freshii restaurants are located) and Mexico.
2 Represents a supplementary financial measure used commonly in the restaurant industry. For further information on supplementary financial measures, see the “Non-IFRS and Industry Metrics” section in this news release.
3 Represents a supplementary financial measure used commonly in the restaurant industry. For further information on supplementary financial measures, see the “Non-IFRS and Industry Metrics” section in this news release.
4 Represents a supplementary financial measure used commonly in the restaurant industry. For further information on supplementary financial measures, see the “Non-IFRS and Industry Metrics” section in this news release.
5 Development of planned locations is dependent on, among other things, finding the appropriate real estate and leases being successfully negotiated in respect of such real estate. Therefore, uncertainty remains in respect of the completion of, and timelines for, the opening of locations in our NAF Restaurant pipeline.
6 Represents a supplementary financial measure used commonly in the restaurant industry. For further information on supplementary financial measures, see the “Non-IFRS and Industry Metrics” section in this news release.
7 Natura Market Ecommerce Inc.’s financial statements related to periods prior to November 1, 2021, are unaudited and are not included in the Retail and Ecommerce segment’s results prior to such date.
8 Represents a supplementary financial measure used commonly in the restaurant industry. For further information on supplementary financial measures, see the “Non-IFRS and Industry Metrics” section in this news release.
9 Represents a non-IFRS financial measure or non-IFRS ratio. For further information on non-IFRS measures, see the “Non-IFRS and Industry Metrics” section in this news release and the table reconciling such measures to the most directly comparable IFRS financial performance measure contained in the “Non-IFRS Reconciliations” section of this news release.
10 Represents a non-IFRS financial measure or non-IFRS ratio. For further information on non-IFRS measures, see the “Non-IFRS and Industry Metrics” section in this news release and the table reconciling such measures to the most directly comparable IFRS financial performance measure contained in the “Non-IFRS Reconciliations” section of this news release.
