Papa Murphys Holdings, Inc.
Mar 15, 2017

Papa Murphy's Holdings, Inc. Reports Fourth Quarter and Full-Year 2016 Results and 2017 Outlook

VANCOUVER, Wash., March 15, 2017 (GLOBE NEWSWIRE) -- Papa Murphy's Holdings, Inc. (NASDAQ:FRSH) today announced complete financial results for the 14-week fourth quarter and 53-week fiscal year ended January 2, 2017, having previously announced preliminary results for those periods.

Key financial highlights for the 14-week fourth quarter of 2016 ended January 2, 2017, compared to the 13-week fourth quarter ended December 28, 2015, were as follows:

Key financial highlights for the 53-week fiscal year ended January 2, 2017, compared to the 52-week fiscal year ended December 28, 2015, were as follows:


(1) Adjusted EBITDA is a non-GAAP measure. For a reconciliation of Adjusted EBITDA to GAAP net income/(loss) and discussion of why we consider Adjusted EBITDA to be a useful measure, see the financial tables accompanying this release and the paragraph below entitled "Non-GAAP Financial Measures."

Jean Birch, Board Chair and interim Chief Executive Officer of Papa Murphy's Holdings, Inc., stated, "While top-line results continued to be challenged, we are pleased that we were able to maintain profitability in the quarter by focusing on cost controls and company-store margins. As we look ahead, we believe we have made progress in 2017 and are on the right track to return this system to growth. So far, we have tested national cable television advertising, generating brand awareness in many markets that have never benefited from television. We announced our first strategic refranchising transaction with an experienced operator committed to grow the business. We right-sized SG&A expenses while better focusing resources on our asset-light franchise business. And, just this week, we launched a delivery test with Amazon's Restaurant Delivery Service, Prime Now. We have a long way to go in an increasingly competitive environment, but believe we are on the right track to ultimately reward all of our franchise owners, employees, and shareholders." 

Key Operating Metrics

  Three Months Ended   Twelve Months Ended
 January 02,
 December 28,
 January 02,
 December 28,
Domestic comparable store sales:       
Franchised stores -7.5%  -3.2%  -5.0%  1.9%
Company-owned stores -11.1%  -2.7%  -7.3%  1.8%
Combined -7.8%  -3.1%  -5.2%  1.9%
System-wide sales ($'s in 000s)$247,287  $238,787  $898,709  $892,249 
Adjusted EBITDA ($'s in 000s)$7,785  $7,527  $24,796  $28,118 
Store Count:       
Franchised 1,369    1,369   1,369   1,369 
Company-owned 168   127   168   127 
International 40   40   40   40 
System-wide 1,577   1,536   1,577   1,536 


We use a variety of operating and performance metrics to evaluate the performance of our business. Below is a description of our key operating metrics:

Comparable Store Sales represents the change in year-over-year sales for domestic comparable stores. A comparable store is a store that has been open for at least 52 full weeks from the comparable date (the Tuesday following the store's opening date). As of the end of the fourth quarter of 2016 and 2015, we had 1,434 and 1,389 domestic comparable stores, respectively.

System-wide Sales include net sales by all of our company-owned and franchise-owned stores.

Adjusted EBITDA is defined as net income/(loss) before interest expense, provision for (benefit from) income taxes and depreciation and amortization, with further adjustments to reflect the additions and eliminations of various income statement items including non-cash charges, income and expenses that we consider not indicative of ongoing operations and various other adjustments. For a reconciliation of Adjusted EBITDA to net income/(loss), the most directly comparable GAAP measure, see the financial tables accompanying this release.

2017 Financial Outlook

Based on current information, Papa Murphy's Holdings, Inc. is providing the following full-year outlook for fiscal 2017, which ends on January 1, 2018:

Conference Call

Papa Murphy's Holdings, Inc. will host a conference call to discuss the fourth-quarter financial results on Wednesday, March 15, 2017 at 5:00 p.m. Eastern Time.

The conference call can be accessed live by dialing 877-407-3982 or for international callers by dialing 201-493-6780. A replay will be available after the call and can be accessed by dialing 844-512-2921 or for international callers by dialing 412-317-6671; the passcode is 13656328. The replay will be available until Wednesday, March 22, 2017. The conference call will also be webcast live from the Company's corporate website at, under the "Events & Presentations" page. An archive of the webcast will be available at this location shortly after the call has concluded.

About Papa Murphy's

Papa Murphy's Holdings, Inc. (NASDAQ:FRSH) is a franchisor and operator of the largest Take ‘n' Bake pizza brand in the United States, selling fresh, hand-crafted pizzas ready for customers to bake at home. The company was founded in 1981 and currently operates more than 1,575 franchised and corporate-owned fresh pizza stores in 38 States, Canada and United Arab Emirates. Papa Murphy's core purpose is to bring all families together through food people love with a goal to create fun, convenient and fulfilling family dinners. In addition to scratch-made pizzas, the company offers a growing menu of grab 'n' go items, including salads, sides and desserts. For more information visit

Forward-looking Statements

This press release, as well as other information provided from time to time by Papa Murphy's Holdings, Inc. or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Forward-looking statements give the Company's current expectations and projections relating to the Company's financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "guidance," "anticipate," "estimate," "expect," "forecast," "project," "plan," "intend," "believe," "confident," "may," "should," "can have," "likely," "future" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

Forward-looking statements in this press release include statements relating to the Company's expected results of television advertising campaign, projected comparable stores sales, projected new store openings, projected selling, general, and administrative expenses, including projected severance costs, projected EBITDA, projected capital expenditures, projected cash proceeds from refranchising, projected cash flow from operations, projected effective tax rate, projected diluted share count, strategic, future financial or operational results, and marketing strategy.

Any such forward-looking statements are not guarantees of performance or results, and involve risks, uncertainties (some of which are beyond the Company's control) and assumptions. Although the Company believes any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in any forward-looking statements. Please refer to the risk factors discussed in the Company's annual report on Form 10-K for the fiscal year ended January 2, 2017, (which can be found at the SEC's website; each such risk factor is specifically incorporated into this press release. Should one or more of these risks or uncertainties materialize, the Company's actual results may vary in material respects from those projected in any forward-looking statements.

Any forward-looking statement made by the Company in this press release speaks only as of the date on which it is made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

To supplement its financial information presented in accordance with generally accepted accounting principles (GAAP), the Company is also providing with this press release the non-GAAP financial measures of EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are not derived in accordance with GAAP and should not be considered by the reader as an alternative to net income (the most comparable GAAP financial measure to EBITDA and Adjusted EBITDA). The Company's management believes that EBITDA and Adjusted EBITDA are helpful as indicators of the current financial performance of the Company because EBITDA and Adjusted EBITDA reflect the additions and eliminations of various income statement items that management does not consider indicative of ongoing operating results. We have provided reconciliations of EBITDA and Adjusted EBITDA to GAAP net income in the financial tables accompanying this release.

Condensed Consolidated Statements of Net Income
(In thousands of dollars, except share and per share data)

     Three Months Ended   Twelve Months Ended   
    January 02,
 December 28,
 January 02,
 December 28,
    Unaudited Unaudited Unaudited Unaudited  
 Franchise royalties$10,983  $10,687   $39,851 $40,243   
 Franchise and development fees 739   1,129   2,912  4,222   
 Company-owned store sales 23,231   21,373   82,080  74,300   
 Other 532   599   2,040  1,444   
   Total revenues 35,485   33,788   126,883  120,209   
Costs and Expenses         
 Store operating costs:         
   Cost of food and packaging 7,806   7,662   28,347  26,603   
  Compensation and benefits 6,687   5,864   23,746  19,858   
  Advertising 2,413   2,660   8,203  7,888   
  Occupancy 1,740   1,363   6,226  4,750   
  Other store operating costs 2,660   2,155   10,268  7,517   
 Selling, general, and administrative 6,943   7,125   28,108  28,207    
 Depreciation and amortization 3,469   2,622   12,236  10,002   
 (Gain)/loss on disposal of property and equipment (54)  (317)  101  (251)  
   Total costs and expenses 31,664   29,134   117,235  104,574   
Operating Income 3,821   4,654    9,648  15,635   
 Interest expense, net 1,280   1,117   4,868  4,523   
 Loss on impairment of investments -   -   -  4,500   
 Other expense, net 62   43   188  133   
Income Before Income Taxes 2,479   3,494   4,592  6,479   
 Provision for income taxes 1,003   862   1,943  2,068   
Net Income$1,476  $2,632  $2,649 $4,411   
Earnings per share of common stock         
 Basic $0.09  $0.16  $0.16 $0.29   
 Diluted$0.09  $0.16  $0.16 $0.29   
Weighted average common stock outstanding          
 Basic  16,757,586   16,706,308   16,743,285  16,653,127   
 Diluted 16,775,488   16,805,559   16,773,493  16,870,693   

Selected Balance Sheet Data
(In thousands of dollars)

 January 02,
 December 28,
Cash and cash equivalents$2,069 $ 6,867
Total current assets 13,116  18,896
Total assets 273,872  275,471
Total current liabilities 22,900  24,149
Long-term debt, net of current portion 100,965  108,237
Total stockholders' equity 101,496  97,656

Reconciliation of Net Income to EBITDA and Adjusted EBITDA 
(In thousands of dollars)

  Three Months Ended   Twelve Months Ended  
 January 02,
 December 28,
 January 02,
 December 28,
Net Income As Reported$1,476  $2,632  $2,649  $4,411  
Net loss attributable to noncontrolling interests -   -   -   500  
Net Income Attributable To Papa Murphy's 1,476   2,632   2,649   4,911  
Depreciation and amortization  3,469   2,622   12,236   10,002  
Provision for income taxes 1,003   862   1,943   2,068  
Interest expense, net 1,280   1,117   4,868   4,523  
EBITDA  7,228   7,233   21,696   21,504  
(Gain)/loss on disposal of property and equipment (a) (54)  (317)  101   (251) 
Transaction costs (b) -   -   -   65  
New store pre-opening expenses (c) 115   232   1,331   696  
Non-cash expenses and non-income based state taxes (d)  496   379   1,668   1,434  
Expenses not indicative of future operations  (e) -   -   -   4,670  
Adjusted EBITDA $7,785  $7,527  $24,796  $28,118  
Adjusted EBITDA margin (1) 21.9%  22.3%   19.5%  23.4% 

(a) Represents non-cash gains and losses resulting from disposal of property and equipment, including divested company-owned stores.
(b) Represents transaction costs incurred in connection with the acquisition of multiple franchised stores.
(c) Represents expenses directly associated with the opening of new stores and incurred primarily in advance of the store opening, including grand opening marketing costs, training wages and travel of opening teams and other store operating costs.
(d) Represents (i) non-cash expenses related to equity-based compensation; (ii) non-cash expenses related to the difference between GAAP and cash rent expense; and (iii) state revenue taxes levied in lieu of an income tax.
(e) Represents (i) a $4 million loss recognized upon impairment of Project Pie, LLC, a cost-method investment, and its subsequent disposal, and the write-off as bad debt of receivables totaling $325,000 and (ii) offering costs related to the 2015 secondary offering.
(1) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total revenues.

Investor Contact:

Alexis Tessier, ICR


Media Contact:

Christine Beggan, ICR


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Source: Papa Murphy's Holdings, Inc.

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