Freshii Inc. Announces Fourth Quarter and Fiscal Year 2021 Results

February 23, 2022

Q4 2021 revenue more than doubles vs. prior year, driven by growth across all business lines and completion of Natura Market transaction
Signs agreements for 42 new North American Franchise Restaurant locations between November 2021 and Q1 2022 to date
North American Franchised Restaurant Segment records Q4 2021 Adjusted EBITDA1 growth of 15%, and Net Income growth of 85%, vs. Q4 2020
Natura Market records 20% revenue growth post-transaction between November 1 and December 26, 2021 vs. the corresponding period in 20202
CPG business records CPG system sales3 growth of 135% in Q4 2021 vs. Q4 2020

TORONTO, Feb. 23, 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 fourth quarter and fiscal year ended December 26, 2021 (“Q4 2021” and “FY 2021”, respectively).

“2021 was a year that presented our company with both unique opportunities and unique challenges,” said Matthew Corrin, Chairman and Chief Executive Officer of Freshii. “Freshii closed out the year with growth and momentum across each of our omnichannel business lines. Our core North American Franchised Restaurant segment demonstrated continued resilience in the face of pandemic challenges, with same-store sales4 growth of just over 10% for the fourth quarter and strong Adjusted EBITDA growth even after considerable investments.

We have also experienced an acceleration of our new store development pipeline, with current North American franchise partners signing agreements between November 2021 and Q1 2022 to date to open 42 additional sites across Canada and the United States. This recent pipeline acceleration was driven by a combination of our ongoing performance-based franchisee incentive program – launched in late Q4 2021 - and the recently announced multi-unit deal in Texas.

Our CPG business - which in addition to our Ecommerce business, comprises our Retail and Ecommerce segment - recorded a year-over-year CPG system sales increase of over 80% in fiscal 2021, and entered into a number of new retailer partnerships, including the recently announced national rollout in 600+ 7-Eleven locations across Canada.

In our Ecommerce business, the fourth quarter acquisition of majority control of online health and wellness retailer, Natura Market, represented another major step in Freshii’s growth as an omnichannel health and wellness company. We are pleased with Natura’s performance to date, and we believe that Natura Market provides a strong platform and opportunities for future growth. Since the completion of the transaction on November 1, 2021, Natura recorded 20% revenue growth between November 1 and December 26, 2021 vs. the corresponding period in 2020 and more than doubled its sales revenue vs. the corresponding period in 20195.

Through 2021, we believe we successfully navigated the Freshii business through a challenging period for the restaurant industry, and that we succeeded in driving highly significant growth in our ‘beyond-restaurant’ Retail and Ecommerce segment.   Freshii continues to expand its presence as an omnichannel brand, making health and wellness convenient and affordable.”

Freshii’s Business Segments

Commencing in Q4 2021, the Company is reporting using two new reportable segments. Freshii’s restaurant operations remain at the core of our omnichannel health and wellness business, and a key area for continued growth and investment. However, we believe that the growth of the Company’s non-restaurant business and the acquisition of a majority interest in Natura Market Ecommerce Inc. (“Natura” or “Natura Market”) mean that a change in our financial reporting is important. We believe that this change more fully reflects the evolving nature of our business and will help 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.

Our new 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 America6. 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.

While the NAF Restaurant and Retail and Ecommerce segments each benefit from shared services support, they offer largely different products and generally have separate organizational structures, financial and marketing strategies and are offered for sale through different channels. They also are at different stages of development. Freshii believes that its more established NAF Restaurant segment is best evaluated using a combination of profitability focused metrics and measures, such as Adjusted EBITDA, same-store sales growth, and, as the impacts of the COVID-19 pandemic abate, restaurant network growth metrics including new openings and development pipeline strength. The Retail and Ecommerce Segment consists of more recently established businesses that have grown rapidly over recent years, and management therefore sees this segment as an earlier growth-stage business that should be managed and measured accordingly.

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.

North American Franchised Restaurant Segment

Freshii’s NAF Restaurant segment continued its pandemic recovery trajectory in Q4 2021, recording 10.1% same-store sales growth vs. the prior year, with sales recovery peaking just prior to the onset of the Omicron variant wave in key markets late in the quarter. We believe that contributors to this improvement included the Company’s continued menu innovation efforts, with its new limited time offer (“LTO”) healthy soups lineup proving popular with guests as the weather became colder and doubling Freshii’s soup product mix (or ‘pmix’) during the LTO period.   The Company’s digital momentum also continued in Q4 2021 as digital sales7 through Freshii’s app increased by 58% vs.Q4 2020.

Freshii opened 5 new NAF restaurant locations during Q4 2021 (including 3 sites that had previously been marked as ‘closures’ during the pandemic but which have since re-opened) and closed 4 locations, resulting in 1 net new NAF system store8 in the quarter. Given the capacity we continue to believe exists for restaurant growth in Canada, in late Q4 2021 Freshii announced a performance-based incentive program for qualified existing Canadian franchise partners, providing certain fee reductions for partners that committed to opening new locations during the program period. Between this ongoing program and the recently signed multi-unit deal for planned development in the state of Texas, Freshii has signed agreements for 42 new restaurants with existing North American franchise partners between November 2021 and Q1 2022 to date.

Operationally, Freshii continues to launch programs across the restaurant network that are aimed at assisting franchise partners in improving profitability. Our new food cost management program, recently rolled out, is having a positive impact, with restaurants enrolled in the program for more than 90 days seeing more than a 200 basis point reduction in their monthly food cost, exceeding our expectations and driving savings for our franchise partners. We also have a number of labour optimization programs in development and/or pilot that we believe have the potential to scale and drive further cost savings for our franchise partners.

In 2021, Freshii’s NAF Restaurant segment benefitted from significant investments in marketing, digital and franchise profitability strategies and is well positioned for growth as COVID-19 related government restrictions relax in our major markets. Moving forward, in 2022 we plan to continue to invest in accelerating our digital strategy. Our digital and loyalty teams have several planned initiatives targeting further digital growth, including a new loyalty plan with improved features for our guests.

With positive same-store sales in Q4 2021, the new store development pipeline growing, further technology, profitability and loyalty updates on the horizon and the Freshii menu innovation team continuing to bring high-quality, craveable, better-for-you options to our restaurants, we believe the NAF Restaurant segment is building a platform for accelerated growth going forward.

Retail and Ecommerce Segment

Freshii acquired majority control of Natura Market in Q4 2021. We are excited about the growth of Natura Market to date and its viability as a platform for the further expansion of our ecommerce business going forward. From November 1 through December 26, 2021, the period immediately following the completion of the Natura transaction, Natura revenue grew 20% as compared to the corresponding period in 2020 and more than doubled as compared to the corresponding period in 20199. Contributing to this sales lift were Natura’s Black Friday and Cyber-Monday sales in Q4 2021.

Natura continues to be led by its Founder and President, Shakhzod Khabibov, and operated by the same team that drove the company’s growth prior to Freshii acquiring majority control. Freshii and Natura are actively exploring potential opportunities for synergies across their businesses. Early examples of this cooperation among Natura and Freshii’s other businesses include the addition of Freshii CPG’s energii bites to Natura’s marketplace. Freshii and Natura also believe that back-office support sharing opportunities will provide certain cost efficiencies.

Freshii’s CPG business continued to develop and grow throughout 2021. The CPG business sells healthy, on-the-go wraps, salads, bowls, snacks and beverages across hundreds of retailer points of distribution. CPG system sales (based on sales reported by Freshii’s retail partners) were up 135% in Q4 2021 as compared to Q4 2020, with energii bite and elixir shot sales notably up 226% and 155% year-over-year in the period, respectively. In Q1 2022, the CPG business added approximately 600 7-Eleven locations to its CPG retail network, which already includes large-scale partnerships with retailers like Walmart, Shell and ONroute.

Freshii’s CPG business continues to innovate its product set, particularly in the energii-bite category that is proving popular with both retail partners and customers. Freshii’s peppermint-cocoa energii bite was a successful holiday period LTO in both retail and Freshii restaurants and the Company has plans for further evolution in this snacking category. Going forward, Freshii’s CPG team expects to continue grow the list of retail partners offering its products, driving profitability improvements through scale.

During 2021, our Retail and Ecommerce segment received key infrastructure investments in marketing, supply chain, customer service and the expansion of its sales team.

Acquisition of Natura Market

Further to the above, on November 1, 2021, Freshii completed its acquisition of 60% of the issued and outstanding common shares of Natura Market along with rights to purchase the remaining 40% of Natura Market’s shares through Q1 2025, at prices to be based on a multiple of EBITDA (as defined in the applicable purchase agreement). Natura Market is a growing, founder-led online retailer with a Freshii-aligned mission of making on-trend, healthy products available at scale across Canada. Natura Market had sales of $20.2 million in the 52-week period ended December 26, 2021. The Natura Market business significantly expands the Company’s presence and capability in the delivery and digital commerce spaces.

Financial Highlights for the Fourth Quarter

  • Revenues in Q4 2021 were $8.5 million, compared to $3.9 million for Q4 2020, representing an increase of $4.6 million.
  • Total Freshii system sales10 were $36.9 million in Q4 2021, compared to $31.3 million for Q4 2020 representing an increase of $5.6 million.
  • NAF Restaurant segment same-store sales growth was 10.1% in Q4 2021 compared to Q4 2020.
  • In Q4 2021, the Company opened 5 NAF system stores, 3 of which had previously been classified as permanently closed but which have since opened again as COVID-19 pandemic impacts have abated. The Company permanently closed 4 NAF system stores in Q4 2021, resulting in net new store growth of 1 NAF system store in the quarter.
  • NAF Restaurant Adjusted EBITDA was $1.3 million, and NAF Restaurant Net Income was $1.2 million, for Q4 2021, compared to $1.1 million and $0.6 million, respectively, for Q4 2020.
  • Retail and Ecommerce segment revenue was $4.4 million in Q4 2021, compared to $0.4 million for Q4 2020. Adjusted to remove the effect of the Natura Market majority acquisition, the comparable segment revenue figure for Q4 2021 would have been $1.3 million.
  • Net loss was $7.3 million for Q4 2021, compared to net loss of $1.0 million in Q4 2020. This change was driven principally by a derecognition of deferred tax assets previously reflected on the Company’s balance sheet due to pandemic-driven taxable losses in fiscal 2020 and fiscal 2021. Adjusted net loss11 was $0.8 million for Q4 2021, compared to adjusted net loss of $0.8 million for Q4 2020.

Financial Highlights for Fiscal 2021

  • Revenues in fiscal 2021 were $23.6 million, compared to $18.3 million for fiscal 2020, representing an increase of $5.3 million.
  • Total Freshii system sales12 were $149.8 million in fiscal 2021, compared to $140.8 million for fiscal 2020 representing an increase of $9.0 million.
  • NAF Restaurant segment same-store sales growth was 9.4% in fiscal 2021 compared to fiscal 2020.
  • In fiscal 2021, the Company opened 20 NAF system stores and permanently closed 38 NAF system stores in fiscal 2021, resulting in net store closures of 18 NAF system stores in the fiscal year.
  • NAF Restaurant Adjusted EBITDA was $6.3 million, and NAF Restaurant Net Income was $6.6 million, for fiscal 2021, compared to $6.1 million and $4.0 million, respectively, for fiscal 2020.
  • Retail and Ecommerce segment revenue was $7.3 million in fiscal 2021, compared to $1.4 million for fiscal 2020. Adjusted to remove the effect of the Natura Market majority acquisition, the comparable segment revenue figure for fiscal 2021 would have been $4.2 million.
  • Net loss was $10.0 million for fiscal 2021, compared to net loss of $5.3 million in fiscal 2020. This change was driven principally by a derecognition of deferred tax assets previously reflected on the Company’s balance sheet due to pandemic-driven taxable losses in fiscal 2020 and fiscal 2021. Adjusted net loss was $1.6 million for fiscal 2021, compared to adjusted net loss of $2.1 million for fiscal 2020.

Capital Allocation and Liquidity Update

The Company has maintained a strong cash position through the pandemic to date, with $30.8 million on hand as at December 26, 2021. As previously disclosed, Freshii is committed to maintaining adequate liquidity and financial flexibility throughout the COVID-19 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 new operating segments in a disciplined manner, and, where appropriate, the continued execution of our normal course issuer bid program.

Acceptance of Normal Course Issuer Bid Program by TSX

The Company also announced that the Toronto Stock Exchange (the “TSX”) has advised that it will accept the notice filed by the Company to make a normal course issuer bid (“NCIB”), effective February 28, 2022.

The Company sought and received approval from the TSX to establish a normal course issuer bid to purchase up to 2,399,477 of its Class A subordinate voting shares, commencing on March 2, 2022.

The NCIB commences on March 2, 2022 and will terminate on March 1, 2023, 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 2,399,477 of its Class A subordinate voting shares (out of the 23,994,776 Class A subordinate voting shares in the public float of such shares as at February 16, 2022) representing approximately 10% of the public float of its Class A subordinate voting shares as at February 16, 2022, by way of normal course purchases effected through the facilities of the TSX and/or alternative Canadian trading systems. As of February 16, 2022, there were 25,186,759 Class A subordinate voting shares issued and outstanding. The average daily trading volume for the six months ended January 31, 2022 was 17,066 Class A subordinate voting shares. Class A subordinate voting shares purchased by the Company will be cancelled.

In deciding to renew its NCIB, the Company continues to believe 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 4,266 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 expects to enter into an automatic share purchase plan in connection with the NCIB.

In connection with Freshii’s previous NCIB, which terminates on March 1, 2022 (the “previous NCIB”), the Company sought and received approval from the TSX to establish a normal course issuer bid to purchase up to 2,582,944 of its Class A subordinate voting shares, commencing on March 2, 2021. As of February 16, 2022, the Company purchased 2,146,878 Class A subordinate voting shares at a volume weighted average price of $2.04 under the previous NCIB. The purchases were made on the open market through the facilities of the Toronto Stock Exchange and through alternative Canadian trading systems.

Earnings Conference Call and Audio Webcast

A conference call to discuss Q4 and Fiscal 2021 financial results is scheduled for February 24, 2022, at 8:30 a.m. Eastern Time. The conference call can be accessed live over the phone by dialing 1-844-825-9789 (U.S. and Canada), or 1-412-317-5180 (International). An audio replay will be available from 11:30 a.m. Eastern Time on Thursday, February 24, 2022 through Thursday, March 3, 2022. To access the replay, please call 1-844-512-2921 (U.S. & Canada) or 1-412-317-6671 (International) and enter confirmation code 10163725. The call will also be webcast live from Freshii’s investor relations website at www.freshii.inc. Following completion of the call, a recorded replay of the webcast will be available on the 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 division caters to every taste and dietary preference.

Freshii’s CPG and nutritional supplements offerings further increase the touchpoints that Freshii has with its customers, as does the Company’s majority interest in fast-growing health and wellness ecommerce retailer, Natura Market.

Since it was founded in 2005, Freshii has grown to 343 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 and non-IFRS ratio to the most directly comparable IFRS financial measure is found in the “Non-IFRS Reconciliation” section below.

This news release also makes reference to “system sales”, “system 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.

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 MD&A for the thirteen weeks and 52 weeks ended December 26, 2021 dated February 23, 2022 is incorporated by reference. This information is found in the section of our MD&A titled “Non-IFRS Financial Measures and Industry Metrics”. The MD&A for the thirteen weeks and 52 weeks ended December 26, 2021 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 the expected benefits of the Natura Market acquisition and opportunities for future growth, opportunities for synergies arising from the Natura Market acquisition and the belief that back-office support sharing will provide certain cost efficiencies, Freshii’s ability to purchase the remaining share of Natura Market, the Company’s belief for future growth of the NAF Restaurant segment, labour optimization programs in pilot and the belief that they have the potential to scale and drive further cost savings for Freshii’s franchise partners, that Freshii is well positioned for growth as COVID-19 related government restrictions relax in the Company’s major markets, plans to accelerate Freshii’s digital strategy, planned initiatives targeting digital growth, including a new loyalty plan with improved features for guests, product innovation in the CPG business and plans for further evolution of the energii bite product category, expectations with respect to the growth of CPG retail partners offering CPG product and the results thereof, Freshii’s efforts to maintain our strong cash position while still reinvesting for growth, Freshii’s capital allocation priorities, details with respect to the NCIB and the previous NCIB, store count and anticipated new store openings (including the number, timing and locations of planned store openings under the Company’s performance based franchisee incentive program and pursuant to the Company’s multi-unit franchise agreement for planned development in Texas, United States), recovery of the Company’s franchise system and the extent of the expected impact of the COVID-19 pandemic and associated government regulation on Freshii’s business, operations and financial performance (including that the impacts of COVD-19 will continue to abate and that the Company’s work with its franchise partners to mitigate the ongoing impacts will have the intended results on the timelines anticipated or at all) 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 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, 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; the availability and timely receipt of funds expected by management to be received in connection with applicable government relief programs; Freshii will be able to continue to effectively assist its franchise partners; the recovery and re-opening of the economies (including the dates upon which various regions are 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; 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, the continued development of the Company’s new app and any future phases of development, the planned implementation of enhancements to the loyalty program, the use of our food cost management program, the implementation and/or use of labour optimization programs in development and/or pilot, the development of the Company’s enhanced customer experience feedback program,the Company’s partnerships with major grocery and other retailers and investments in its CPG business line, the continuation of the Company’s Franchisee Incremental Investment Program, the anticipated growth in the dinner daypart (and launch of the Company’s evolved dinner plates platform), the Company’s ability to develop and grow its omnichannel businesses, and the development of strategies to drive down costs with franchise partners and cost control activities at the corporate level 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.

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 26, 2021, the Company's Management’s Discussion and Analysis dated February 23, 2022,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.

Selected Quarterly Consolidated Information

The following table summarizes our results of operations for the 13 and 52 week periods ended December 26, 2021 and December 27, 2020, respectively:

  For the 13 weeks ended December 26, 2021     For the 13 weeks ended December 27, 2020  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
System sales   $ 32,540     $ 1,878     $ 2,519     $ 36,937     $ 28,542     $ 800     $ 1,950     $ 31,292  
                                                                 
Revenue     3,893       4,407       153       8,453       3,320       364       197       3,881  
Gross profit     3,893       751       92       4,736       3,320       186       173       3,679  
                                                                 
Selling, general and administrative     2,642       978       1,392       5,012       2,228       571       339       3,138  
Depreciation and amortization     46       240       399       685       441       1       345       787  
                                                                 
Net income (loss)     1,204       (482 )     (7,989 )     (7,267 )     649       (386 )     (1,234 )     (971 )
Adjusted net income (loss)     1,205       (476 )     (1,511 )     (782 )     650       (386 )     (1,110 )     (846 )
Adjusted EBITDA     1,251       (227 )     (1,300 )     (276 )     1,092       (385 )     (1,286 )     (579 )

  For the 52 weeks ended December 26, 2021     For the 52 weeks ended December 27, 2020  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
System sales   $ 135,132     $ 6,339     $ 8,365     $ 149,836     $ 127,167     $ 3,459     $ 10,176     $ 140,802  
                                                                 
Revenue     15,594       7,287       692       23,573       15,233       1,372       1,692       18,297  
Gross profit     15,594       1,819       426       17,839       15,233       867       935       17,035  
                                                                 
Selling, general and administrative     8,566       2,946       5,792       17,304       9,096       1,492       6,160       16,748  
Depreciation and amortization     377       248       1,257       1,882       2,151       2       2,585       4,738  
                                                                 
Net income (loss)     6,617       (1,390 )     (15,193 )     (9,966 )     3,985       (627 )     (8,676 )     (5,318 )
Adjusted net income (loss)     6,098       (1,384 )     (6,356 )     (1,642 )     3,986       (627 )     (5,539 )     (2,180 )
Adjusted EBITDA     6,288       (1,127 )     (5,366 )     (205 )     6,137       (625 )     (4,224 )     1,288  

The following table summarizes our Consolidated Statement of Balance Sheet Information as at December 26, 2021 and December 27, 2020:

(in thousands)       As at
December 26, 2021
      As at
December 27, 2020
      Variance       % Variance  
Cash       $ 30,756       $ 40,569       $ (9,813 )       (24 %)
Total assets         56,876         63,238         (6,362 )       (10 %)
Equity         30,447         41,475         (11,028 )       (27 %)

The following table shows our cash flows information for the 52 week periods ended December 26, 2021 and December 27, 2020, respectively:

      For the 52 weeks ended  
(in thousands)       December 26, 2021       December 27, 2020       Variance       % Variance  
Net cash provided by (used in) operations       $ (203 )     $ 462       $ (665 )       (144 )%
Net cash used in investing         (5,663 )       (596 )       (5,067 )       850 %
Net cash used in financing         (3,941 )       (437 )       (3,504 )       802 %
Net increase (decrease) in cash       $ (9,807 )     $ (571 )     $ (9,236 )       1,618 %

Non-IFRS Reconciliations

The following tables reconciles EBITDA, Adjusted EBITDA, and Adjusted Net Income to the most directly comparable IFRS financial performance measure:

  For the 13 weeks ended December 26, 2021     For the 13 weeks ended December 27, 2020  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
Net income (loss)   $ 1,204     $ (482 )   $ (7,989 )   $ (7,267 )   $ 649     $ (386 )   $ (1,234 )   $ (971 )
Interest income, net     -       7       7       14       -       -       23       23  
Income tax expense (recovery)     -       -       5,328       5,328       -       -       (482 )     (482 )
Depreciation and amortization     46       240       399       685       441       1       345       787  
EBITDA     1,250       (235 )     (2,255 )     (1,240 )     1,090       (385 )     (1,348 )     (643 )
Adjustments:                                                                
Share-based compensation expense     -       -       601       601       -       -       756       756  
Foreign exchange (gain) loss     1       8       12       21       2       -       426       428  
Other adjustments(i)     -       -       342       342       -       -       (1,120 )     (1,120 )
Adjusted EBITDA   $ 1,251     $ (227 )   $ (1,300 )   $ (276 )   $ 1,092     $ (385 )   $ (1,286 )   $ (579 )
                                                                 
Net income (loss)   $ 1,204     $ (482 )   $ (7,989 )   $ (7,267 )   $ 649     $ (386 )   $ (1,234 )   $ (971 )
Adjustments:                                                                
Share-based compensation expense     -       -       601       601       -       -       756       756  
Foreign exchange (gain) loss     1       8       12       21       2       -       426       428  
Other adjustments(i)     -       -       342       342       -       -       (1,120 )     (1,120 )
Derecognition of defered tax assets     -       -       5,776       5,776       -       -       78       78  
Related tax effects(ii)     -       (2 )     (253 )     (255 )     (1 )     -       (16 )     (17 )
Adjusted net income (loss)   $ 1,205     $ (476 )   $ (1,511 )   $ (782 )   $ 650     $ (386 )   $ (1,110 )   $ (846 )

Notes:
(i) For the 13 week period ended December 26, 2021, non-recurring expenditures related to the acquisition of Natura Market. For the 13 week period ended December 27, 2020, represents certain professional fees associated with one-time investments in the Company’s growth strategy in addition to one-time settlements paid by the Company with respect to contract terminations.
(ii) Related tax effects are calculated at statutory rates in Canada or U.S. depending on adjustment.

  For the 52 weeks ended December 26, 2021     For the 52 weeks ended December 27, 2020  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
Net income (loss)   $ 6,617     $ (1,390 )   $ (15,193 )   $ (9,966 )   $ 3,985     $ (627 )   $ (8,676 )   $ (5,318 )
Interest income, net     -       7       18       25       -       -       13       13  
Income tax expense (recovery)     -       -       5,047       5,047       -       -       (2,308 )     (2,308 )
Depreciation and amortization     377       248       1,257       1,882       2,151       2       2,585       4,738  
EBITDA     6,994       (1,135 )     (8,871 )     (3,012 )     6,136       (625 )     (8,386 )     (2,875 )
Adjustments:                                                                
Share-based compensation expense     -       -       2,796       2,796       -       -       2,967       2,967  
Foreign exchange (gain) loss     34       8       168       210       1       -       194       195  
Other adjustments(i)     (740 )     -       541       (199 )     -       -       1,001       1,001  
Adjusted EBITDA   $ 6,288     $ (1,127 )   $ (5,366 )   $ (205 )   $ 6,137     $ (625 )   $ (4,224 )   $ 1,288  
                                                                 
Net income (loss)   $ 6,617     $ (1,390 )   $ (15,193 )   $ (9,966 )   $ 3,985     $ (627 )   $ (8,676 )   $ (5,318 )
Adjustments:                                                                
Share-based compensation expense     -       -       2,796       2,796       -       -       2,967       2,967  
Foreign exchange (gain) loss     34       8       168       210       1       -       194       195  
Other adjustments(i)     (740 )     -       541       (199 )     -       -       1,001       1,001  
Derecognition of defered tax assets     -       -       6,261       6,261       -       -       78       78  
Related tax effects(ii)     187       (2 )     (929 )     (744 )     -       -       (1,103 )     (1,103 )
Adjusted net income (loss)   $ 6,098     $ (1,384 )   $ (6,356 )   $ (1,642 )   $ 3,986     $ (627 )   $ (5,539 )   $ (2,180 )

Notes:
(i) For the 52 week period ended December 26, 2021, Enterprise non-recurring expenditures related to the acquisition of Natura Market. Also included in the 52 week period ended December 26, 2021 for the NAF Restaurant segment, franchise fee revenue, net of related commissions, resulting from a change in the Company’s estimated future performance obligations. The inclusion of this revenue is a one-time occurrence and so has been removed for purposes of calculating Adjusted EBITDA. For the 52 week period ended December 27, 2020, represents certain professional fees associated with one-time investments in the Company’s growth strategy in addition to one-time settlements paid by the Company with respect to contract terminations.
(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 52 week periods ended December 26, 2021 and December 27, 2020 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 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.
2 Natura Market Ecommerce Inc’s financial statements related to periods prior to November 1, 2021, are unaudited.
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 Natura Market Ecommerce Inc’s financial statements related to periods prior to November 1, 2021, are unaudited.
6 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.
7 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.
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 Natura Market Ecommerce Inc’s financial statements related to periods prior to November 1, 2021, are unaudited.
10 Includes NAF Restaurant system sales and CPG system sales but does not include sales made through Natura Market other than of Freshii CPG products.
11 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.
12 Includes NAF Restaurant system sales and CPG system sales but does not include sales made through Natura Market other than of Freshii CPG products.


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Source: Freshii Inc.