Freshii Inc. Announces Third Quarter 2022 Results

November 9, 2022

Q3 2022 Revenue up 87% vs. Q3 2021, driven by the consolidation of Natura Market
Planned restaurant development pipeline continues to grow, with agreements signed for over 125 locations, including recently signed 6 store development deal in New Jersey
Conditionally agreed to the development of the first purpose-built Freshii drive-through in Western Canada, expected to open in 2023
Q3 2022 NAF Restaurant system sales1 down by 7% vs. Q3 2021
Subsequent to Q3 2022, North American restaurant fall and winter menu launches with warmer options at accessible price points
CPG business continues Convenience and Gas channel expansion with launch in 500 new points of distribution
Recognizes non-cash impairment on goodwill in connection with Natura Market

TORONTO, Nov. 09, 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 third quarter ended September 25, 2022 (“Q3 2022”).

“In Q3, we made significant progress in the long-term expansion of our Omnichannel brand. Our North American Franchised Restaurant segment continued to grow its planned new store development pipeline in the quarter. It currently stands at over 125 locations, based on agreements signed, including a recent multi-unit agreement for the planned development of 6 locations in New Jersey, which was signed with existing franchise partners. Additionally, we have also signed a conditional agreement for the development of the first purpose-built Freshii drive-through in Western Canada, which we expect to open in 2023,” said Daniel Haroun, Chief Executive Officer of Freshii. “We are excited about the continued strong interest from existing and potential new franchise partners who are passionate about our mission and long-term growth potential. Our CPG business had a strong quarter, increasing its system sales with existing customers and launching in 500 new points of distribution near the end of the quarter, again expanding our brand’s reach. At the same time, we recognize the challenging and complex operating environment that we and our franchise partners expect to continue to face in the near term. This operating environment consists of, among other things, two different dynamics, the first is what we expect to be a short-term headwind and that we believe will end in the fourth quarter of 2022, and the second is what we expect to be a significant long-term tailwind that we are beginning to see early positive signs from.

First, throughout much of 2021, Freshii worked to offset some of the pandemic driven declines to in-store traffic with digital initiatives that increased the share of takeout orders, resulting in lessened impacts in the dinner, delivery and digital components of our business. We believe consumers felt safe and confident in choosing takeout options from Freshii at a time when other experiences, such as dining in full-service restaurants, were not available or not an appealing option to those consumers. With restrictions having been largely removed as of Q3 2022, consumers have started to return to their pre-pandemic habits, with full-service dining, as well as other travel and entertainment experiences, being more widely available. As a result, we are seeing the normalization of the dinner, delivery and digital components of our business, which began in the second half of Q2 2022, and we expect to be complete in the fourth quarter of 2022.

Second, in Q3 2022, while office traffic remained significantly below pre-pandemic levels across our key markets, we started to observe an increase in the ‘return to office’ in many of those markets. This was seen primarily in the middle of the week, as we believe employees have tended to choose among Tuesday through Thursday when asked by their employers to return to the office on a hybrid working model, such as two days per week.   As a result, in Q3 2022 and the fourth quarter of 2022 to date, we have seen the very early signs of the headwinds from prior recent periods beginning to normalize, as consumers start to return to pre-pandemic habits. While the pace of ‘return to office’ is beyond our control, we intend to position our partners to be able to continue delivering an exceptional guest experience as we continue to focus on bringing exciting menu innovation to customers and accelerating our digital transformation.

Our talented, dedicated and resilient franchise partners and Partner Support Centre team have embraced the challenge of positioning the business for long-term sustainable growth, while recognizing the importance of providing value and accessibility to consumers at a time when consumers discretionary spend is under pressure from high inflation and economic uncertainty. We believe that our recently launched fall and winter menu, which features warm bowls, soups and pockets at a range of price points (some under $5 and many under $10), will position us well in the fourth quarter of 2022 and into 2023.

As we look forward to 2023, we expect the year-over-year volatility faced by the dinner, delivery and digital components of our business to dissipate, and our franchise partners are ready and excited to welcome office traffic back to their restaurants for lunch and across all dayparts.”

North American Franchised (“NAF”) Restaurant Segment

NAF Restaurant system sales were down 7% to $36.6 million in Q3 2022 as compared to $39.3 million in the third quarter of 2021 (“Q3 2021”), driven primarily by a decrease in same-store sales growth2. Same-store sales growth was (11.0%) as compared to Q3 2021.

We believe same-store sales growth in Q3 2022 was primarily impacted by two major factors that are affecting customer behavior. First, the lessening of pandemic related restrictions beginning earlier in 2022 has resulted in customer spending shifting in part to goods and services that were unavailable or were limited in periods prior to the lessening of such restrictions, such as travel, dining in full-service restaurants and other experiences. This was particularly evident in the Company’s dinner daypart performance which, throughout the pandemic, became a higher percentage of the daypart sales mix, as the Company was able to offset some of the pandemic related declines with an increased share in takeout orders on digital channels. In Q3 2022, the dinner daypart same-store sales performance declined relative to the same period in the previous year, as customers shifted back to dining in full-service restaurants and as such, returned the dinner daypart closer to pre-pandemic sales mix levels. The decline in the dinner daypart explains the majority of the NAF Restaurant same-store sales growth decline on a year-over-year basis.

Second, the impacts of high inflation on consumer discretionary spend has continued to negatively impact customer visits at the Company’s NAF Restaurant system stores3. Industry data from third party sources suggests that the negative impacts on customer traffic at such system stores is similar to the Company’s QSR competitors with non-drive-through models. Freshii, which focuses primarily on healthier options with a higher average price point compared to other competitive QSRs, performs better in a stable low-inflationary economic environment and in times with more robust office traffic. While office traffic recovery progressed in Q3 2022, it remains significantly reduced as compared to 2019 levels – down approximately 60%. We believe that a continued recovery of, and an increase in, ‘return to office’ could be a significant growth driver for the business in the coming years, while also better insulating the Company from economic volatility going forward, as the office customer base has historically been a key driver and stable component of the NAF Restaurant segment. For context, in the fourth quarter of 2022 to date, we are seeing improving trends in same-store sales growth relative to Q3 2022, driven by stronger office traffic in the middle of week (Tuesday through Thursday) in both the breakfast and lunch dayparts, as compared to other days. We’re also seeing improved performance in certain regions with more reported office traffic.

Our September traffic driving initiatives included promotions such as a ‘daily deals’ offering that continued into October. We believe that these offers proved effective at helping improve September restaurant traffic by an encouraging amount as compared to the prior month. We intend to continue to deploy similar promotions, along with other tactics, such as limited time offers (“LTOs”), across in-store and digital channels going forward to mitigate the near-term headwinds discussed above. For example, we’re very excited about the Company’s Fall and Winter LTO that launched in November, consisting of warm bowls, soups and pockets that we expect will delight our guests both in taste and price point.

In Q3 2022, Freshii opened 5 new NAF Restaurant system stores and closed 9 NAF Restaurant system stores, resulting in a net loss of 4 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 125 locations4. We’re particularly excited about the recent multi-unit agreement for the planned development of 6 stores in New Jersey, which was signed with existing franchise partners. Additionally, we have also signed a conditional agreement for the development of the first purpose-built Freshii drive-through in Western Canada, which we expect to open in 2023.

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 Q3 2022, Natura Market revenue declined by 21% as compared to the corresponding period in 20215. As we previously disclosed, Natura Market is lapping 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 customers reducing their reliance on ecommerce purchasing, Natura Market saw a decline in overall sales that is in line with industry data trends for the retail ecommerce sector. During the 13 weeks ended September 25, 2022, in consideration of changes in macro-economic conditions, which resulted in increased discount rates, combined with recent and near-term forecasted performance, the Company performed a test for impairment on the Natura Market cash generating unit, determining that the recoverable amount was less than its carrying value. As a result, an impairment expense of $2.9 million was recorded against goodwill.

Freshii’s consumer packaged goods (“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 Q3 2022. CPG system sales6 were up 33% in Q3 2022 as compared to Q3 2021, with the portion of those system sales attributable to our elixir shot platform notably up 68% year-over-year in Q3 2022. The CPG business partnerships include Walmart, Shell, ONroute, and 7-Eleven.

Financial Highlights for the Third Quarter

  • Revenues in Q3 2022 were $10.9 million, compared to $5.8 million for Q3 2021, representing an increase of $5.1 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 Q3 2022, compared to $43.9 million for Q3 2021 representing a decrease of $2.0 million.
  • NAF Restaurant segment same-store sales growth was (11.0%) in Q3 2022 compared to Q3 2021.
  • In Q3 2022, the Company opened 5 NAF Restaurant system stores and permanently closed 9 NAF Restaurant system stores in Q3 2022, resulting in net store closures of 4 NAF Restaurant system stores in the quarter.
  • NAF Restaurant Adjusted EBITDA7 was $1.4 million, and NAF Restaurant Net Income was $1.2 million, for Q3 2022, compared to $2.0 million and $1.9 million, respectively, for Q3 2021.
  • Retail and Ecommerce segment revenue was $6.9 million in Q3 2022, compared to $1.6 million for Q3 2021. Retail sales, which represents Retail and Ecommerce segment revenue excluding the effect of the Natura Market majority acquisition, for Q3 2022 was $3.2 million.
  • Net loss was $4.3 million for Q3 2022, compared to a net loss of $0.7 million in Q3 2021. Adjusted EBITDA was $0.1M in Q3 2022, compared to $0.4M in Q3 2021. Adjusted net loss8 was $0.6 million for Q3 2022, compared to adjusted net income of $0.0 million for Q3 2021.

Capital Allocation and Liquidity Update

The Company has maintained a strong cash position through the COVID-19 pandemic to date, with $22.4 million on hand as at September 25, 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 Q3 2022 financial results is scheduled for November 10, 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, November 10, 2022 through Thursday, November 17, 2022. To access the replay, please call 1-844-512-2921 (U.S. & Canada) or 1-412-317-6671 (International) and enter confirmation code 13733364. 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 331 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 “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 thirty-nine weeks ended September 25, 2022, dated November 9, 2022 (the “Q3 MD&A”) is incorporated by reference. This information is found in the on-IFRS Financial Measures and Industry Metrics section of the Q3 MD&A. The Q3 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 including our agreement for the planned development in New Jersey, our conditional agreement for the development of the first purpose-built Freshii drive-through in Western Canada and that the NAF Restaurant pipeline currently includes agreements for the planned development of over 125 locations and the completion of, and timeline for, opening of any or all 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, statements regarding the complex and challenging operating environment we and our franchise partners face and for such operating environment in the future, statements regarding customer behaviour adjusting to pre-pandemic trends and the duration of these trends, expectations that the headwinds (including the normalization of the dinner, delivery and digital components of our business) created by the removal of government restrictions and consumers starting to return to pre-pandemic habits will be short-term and will end or be complete in the fourth quarter of 2022, expectations regarding ‘return to office’ and our belief that ‘return to office’ could be a long-term tailwind and significant growth driver for the business in the coming years (while also better insulating the Company from economic volatility going forward), statements regarding us seeing improving trends in the fourth quarter of 2022 in same-store sales growth relative to Q3 2022, driven by stronger office traffic in the middle of week (Tuesday through Thursday) in both the breakfast and lunch dayparts and improved performance in certain regions with more reported office traffic, our intention to continue deploying traffic driving promotions along with other tactics to mitigate near-term headwinds, our expectations regarding the Fall and Winter LTO (including that the fall and winter menu will position us well in the fourth quarter of 2022 and into 2023), that improvement in our NAF Restaurant same-store sales growth as compared to Q3 2022 is an early sign that the gradual ‘return to office’ is having a positive impact on our sales, our intention to position our partners to be able to continue delivering an exceptional guest experience and to continue to focus on bringing exciting menu innovation to customers and accelerating our digital transformation, our expectation that year-over-year volatility faced by the dinner, delivery and digital components will dissipate, and that our franchise partners are ready and excited to welcome office traffic back to their restaurants every day for lunch and across all dayparts, the Company’s belief of capacity for restaurant growth in North America, 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 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 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 gathered 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 125 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 Q3 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 Q3 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 39 week periods ended September 25, 2022 and September 26, 2021, respectively:

  For the 13 weeks ended September 25, 2022     For the 13 weeks ended September 26, 2021  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
System sales (ii) (iii)   $ 36,622     $ 3,228     $ 2,051     $ 41,901     $ 39,322     $ 2,421     $ 2,140     $ 43,883  
                                                                 
Revenue     3,797       6,924       161       10,882       4,113       1,557       150       5,820  
Gross profit     3,797       601       71       4,469       4,113       406       32       4,551  
                                                                 
Selling, general and administrative     2,360       899       1,076       4,335       2,149       662       1,530       4,341  
Depreciation and amortization     195       403       265       863       51       4       354       409  
                                                                 
Net income (loss)     1,242       (3,622 )     (1,963 )     (4,343 )     1,911       (260 )     (2,400 )     (749 )
Adjusted net income (loss) (i)     1,242       (712 )     (1,164 )     (634 )     1,912       (260 )     (1,651 )     1  
Adjusted EBITDA (i)     1,437       (298 )     (1,005 )     134       1,964       (256 )     (1,299 )     409  
                                                                 

 

  For the 39 weeks ended September 25, 2022     For the 39 weeks ended September 26, 2021  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
System sales (ii) (iii)   $ 104,550     $ 7,154     $ 5,661     $ 117,365     $ 102,593     $ 4,461     $ 5,846     $ 112,900  
                                                                 
Revenue     11,155       19,456       421       31,032       11,701       2,880       539       15,120  
Gross profit     11,155       3,055       170       14,380       11,701       1,067       336       13,104  
                                                                 
Selling, general and administrative     6,725       3,732       5,252       15,709       5,923       1,968       4,600       12,491  
Depreciation and amortization     506       1,217       749       2,472       331       8       858       1,197  
                                                                 
Net income (loss)     3,927       (4,845 )     (7,547 )     (8,465 )     5,413       (909 )     (7,203 )     (2,699 )
Adjusted net income (loss) (i)     3,925       (1,928 )     (4,404 )     (2,407 )     4,893       (909 )     (4,843 )     (859 )
Adjusted EBITDA (i)     4,430       (677 )     (4,067 )     (314 )     5,037       (901 )     (4,065 )     71  
                                                                 

 

(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 September 25, 2022 and December 26, 2021:

(in thousands)       As at September 25, 2022       As at December 26, 2021       Variance       % Variance  
Cash       $ 22,419       $ 30,756       $ (8,337 )       (27 %)
Total assets         42,984         56,876         (13,892 )       (24 %)
Equity         21,578         30,447         (8,869 )       (29 %)
                                           

The following table shows our cash flows information for the 39 week periods ended September 25, 2022 and September 26, 2021, respectively:

      For the 39 weeks ended  
(in thousands)       September 25, 2022       September 26, 2021       Variance       % Variance  
Net cash provided by (used in) operations       $ (3,085 )     $ (353 )     $ (2,732 )       774 %
Net cash provided by (used in) investing         (1,529 )       (171 )       (1,358 )       794 %
Net cash provided by (used in) financing         (3,787 )       (2,947 )       (840 )       29 %
Net increase (decrease) in cash       $ (8,401 )     $ (3,471 )     $ (4,930 )       142 %
                                           

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 September 25, 2022     For the 13 weeks ended September 26, 2021  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
Net income (loss)   $ 1,242     $ (3,622 )   $ (1,963 )   $ (4,343 )   $ 1,911     $ (260 )   $ (2,400 )   $ (749 )
Interest expense, net     -       10       (67 )     (57 )     -       -       4       4  
Income tax expense (recovery)     -       -       275       275       -       -       (113 )     (113 )
Depreciation and amortization     195       403       265       863       51       4       354       409  
EBITDA     1,437       (3,209 )     (1,490 )     (3,262 )     1,962       (256 )     (2,155 )     (449 )
Adjustments:                                                                
Share-based compensation expense     -       -       496       496       -       -       680       680  
Foreign exchange (gain) loss     -       5       (11 )     (6 )     2       -       (23 )     (21 )
Impairment     -       2,906       -       2,906       -       -       -       -  
Other adjustments(i)     -       -       -       -       -       -       199       199  
Adjusted EBITDA   $ 1,437     $ (298 )   $ (1,005 )   $ 134     $ 1,964     $ (256 )   $ (1,299 )   $ 409  
                                                                 
Net income (loss)   $ 1,242     $ (3,622 )   $ (1,963 )   $ (4,343 )   $ 1,911     $ (260 )   $ (2,400 )   $ (749 )
Adjustments:                                                                
Share-based compensation expense     -       -       496       496       -       -       680       680  
Foreign exchange (gain) loss     -       5       (11 )     (6 )     2       -       (23 )     (21 )
Impairment     -       2,906       -       2,906       -       -       -       -  
Other adjustments(i)     -       -       -       -       -       -       199       199  
Derecognition of deferred tax assets     -       -       443       443       -       -       119       119  
Related tax effects(ii)     -       (1 )     (129 )     (130 )     (1 )     -       (226 )     (227 )
Adjusted net income (loss)   $ 1,242     $ (712 )   $ (1,164 )   $ (634 )   $ 1,912     $ (260 )   $ (1,651 )   $ 1  
                                                                 

 

(i) For the 13 weeks ended September 26, 2021, Enterprise & Other non-recurring expenditures related to the acquisition of Natura Market.
(ii) Related tax effects are calculated at statutory rates in Canada or U.S. depending on adjustment.

    

  For the 39 weeks ended September 25, 2022     For the 39 weeks ended September 26, 2021  
(in thousands)   NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total     NAF Restaurant     Retail & Ecommerce     Enterprise & Other     Total  
Net income (loss)   $ 3,927     $ (4,845 )   $ (7,547 )   $ (8,465 )   $ 5,414     $ (909 )   $ (7,204 )   $ (2,699 )
Interest expense, net     -       30       (50 )     (20 )     -       -       11       11  
Income tax expense (recovery)     -       -       151       151       -       -       (281 )     (281 )
Depreciation and amortization     506       1,217       749       2,472       331       8       858       1,197  
EBITDA     4,433       (3,598 )     (6,697 )     (5,862 )     5,745       (901 )     (6,616 )     (1,772 )
Adjustments:                                                                
Share-based compensation expense     -       -       1,642       1,642       -       -       2,195       2,195  
Foreign exchange (gain) loss     (3 )     15       (27 )     (15 )     33       -       156       189  
Impairment     -       2,906       -       2,906       -       -       -       -  
Other adjustments(i)     -       -       1,015       1,015       (740 )     -       199       (541 )
Adjusted EBITDA   $ 4,430     $ (677 )   $ (4,067 )   $ (314 )   $ 5,038     $ (901 )   $ (4,066 )   $ 71  
                                                                 
Net income (loss)   $ 3,927     $ (4,845 )   $ (7,547 )   $ (8,465 )   $ 5,414     $ (909 )   $ (7,204 )   $ (2,699 )
Adjustments:                                                                
Share-based compensation expense     -       -       1,642       1,642       -       -       2,195       2,195  
Foreign exchange (gain) loss     (3 )     15       (27 )     (15 )     33       -       156       189  
Impairment     -       2,906       -       2,906       -       -       -       -  
Other adjustments(i)     -       -       1,015       1,015       (740 )     -       199       (541 )
Derecognition of deferred tax assets     -       -       1,210       1,210       -       -       485       485  
Related tax effects(ii)     1       (4 )     (697 )     (700 )     187       -       (675 )     (488 )
Adjusted net income (loss)   $ 3,925     $ (1,928 )   $ (4,404 )   $ (2,407 )   $ 4,894     $ (909 )   $ (4,844 )   $ (859 )
                                                                 

 

(i) For the 39 weeks ended September 25, 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. For the 39 weeks ended September 26, 2021, Enterprise & Other non-recurring expenditures related to the acquisition of Natura Market. NAF Restaurant adjustment for the 39 weeks ended September 26, 2021 relates to 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.
(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 39 week periods ended September 25, 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 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.
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 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.
5 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.
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 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.
8 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.

 


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Source: Freshii Inc.