Papa Murphys Holdings, Inc.
Mar 9, 2016

Papa Murphy's Holdings, Inc. Reports Fourth Quarter and Full Year 2015 Results and 2016 Outlook

- 4Q Revenue Growth of +19.5% -

- 46 New Store Openings in the Quarter -

VANCOUVER, Wash., March 09, 2016 (GLOBE NEWSWIRE) -- Papa Murphy's Holdings, Inc. (NASDAQ:FRSH) today announced financial results for its fourth quarter and full fiscal year ended December 28, 2015.

Key financial highlights for the fourth quarter of 2015 include:

Key financial highlights for the full year 2015 include:

(1) Pro forma net income and Adjusted EBITDA are non-GAAP measures. For reconciliations of Adjusted EBITDA and pro forma net income to GAAP net income and discussions of why we consider Adjusted EBITDA and pro forma net income to be useful measures, see the financial tables accompanying this release and the paragraph below entitled "Non-GAAP Financial Measures."

Ken Calwell, President and Chief Executive Officer of Papa Murphy's Holdings, Inc., stated, "Our consistent run of 19 consecutive quarters of positive comparable store sales growth ended as we lapped the highly successful national launch of Gourmet Delites, which drove overall comparable store sales growth of 8.4% in the prior year quarter.  However, we continue to be encouraged by the performance of some of our less developed markets where comparable store sales growth outperformed the system average by over five-hundred basis points in the quarter.  Our strategy of raising brand awareness in these underpenetrated markets by investing in advertising and building stores is resonating with the customer and that gives us and our franchisee partners even greater confidence as we accelerate new unit growth in those markets."    

Calwell continued, "We continue to build our online ordering and digital marketing capability, including an accelerated launch of our new eCommerce platform, which went live across the country last week, three months ahead of schedule.  We now have online ordering capability and a mobile app available in over 80% of our domestic stores and have started phase one of Precision Marketing."

"We opened 46 stores across the system in the quarter, including 40 in the U.S., bringing our system-wide  new store count for the year to 111 units and the domestic new store count for the year to 99 units.  We had 11 domestic store openings planned for late 2015 that slipped into early 2016, all of which have now opened.  Since the end of the quarter, we have opened a total of 18 domestic stores and expect total first-quarter domestic openings of at least 25 stores," Calwell concluded.          

Key Operating Metrics
  Three Months Ended   Twelve Months Ended 
 December 28,
  December 29,
 December 28,
  December 29,
Domestic comparable store sales growth:       
Franchised stores -3.2%  8.2%  1.9%  4.3%
Company-owned stores -2.7%  10.5%  1.8%  8.1%
Combined -3.1%  8.4%  1.9%   4.5%
System-wide sales ($'s in 000s)$238,787  $238,948  $892,249  $849,682 
Adjusted EBITDA ($'s in 000s)$7,527  $8,824  $28,118  $27,678 
Store Count       
Franchised 1,369   1,342   1,369   1,342 
Company-owned  127   91   127   91 
International 40   28   40   28 
System-wide 1,536   1,461   1,536   1,461 

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 opening date). As of the end of the fourth quarter of 2015 and 2014, we had 1,389 and 1,335 domestic comparable stores, respectively.

System-wide Sales include net sales by all of our company-owned and franchisee-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, the most directly comparable GAAP measure, see the financial tables accompanying this release.

2016 Financial Outlook

Based on current information, Papa Murphy's Holdings, Inc. is providing the following full-year guidance for fiscal year 2016, which ends on January 2, 2017:

Conference Call

Papa Murphy's Holdings, Inc. will host a conference call to discuss the fourth quarter financial results on Wednesday, March 9, 2016 at 5:00 p.m. Eastern Time.

The conference call can be accessed live over the phone 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 877-870-5176 or for international callers by dialing 858-384-5517; the passcode is 13630727. The replay will be available until Wednesday, March 16, 2016. 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 chain 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 over 1,500 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 news 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 projected sales growth, projected system-wide sales, projected new store openings, projected selling, general, and administrative expenses, projected revenue from transaction fees, projected pre-opening costs, projected capital expenditures, projected effective tax rate, projected diluted share count, strategic, operational, and technological initiatives, including the roll-out of its e-commerce platform, future financial or operational results, and speed of consumer acceptance.

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 December 28, 2015 (which was filed today and 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, Adjusted EBITDA and pro forma net income.  EBITDA, Adjusted EBITDA and pro forma net income 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 each of EBITDA, Adjusted EBITDA and pro forma net income). 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.  Management believes that pro forma net income is also helpful as an indicator of the financial performance of the Company during fiscal year 2015 and prior periods because it adjusts net income to reflect the Company's performance as if the Company's initial public offering and secondary offering, repayment of a portion of its long-term debt, write-down of its interest in Project Pie, LLC, and partial expensing of market vesting stock compensation had occurred at the beginning of the applicable periods and removes specific costs that are not indicative of ongoing operations.   We have provided reconciliations of EBITDA, Adjusted EBITDA and pro forma net income to GAAP net income in the financial tables accompanying this release.

Consolidated Statements of Operations
(In thousands of dollars, except share and per share data)
     Three Months Ended   Twelve Months Ended  
    December 28,
  December 29,
 December 28,
  December 29,
    Unaudited Unaudited    
 Franchise royalties$10,687  $10,956  $40,243  $39,305 
 Franchise and development fees 1,129   1,412   4,222   4,531 
 Company-owned store sales 21,373   15,477   74,300   50,598 
 Lease and other 599   422   1,444   2,965 
   Total revenues 33,788   28,267   120,209   97,399 
 Store operating costs:       
  Cost of food and packaging 7,662   5,936   26,603   19,686 
  Compensation and benefits 5,864   3,738   19,858   12,673 
  Advertising 2,660   1,511   7,888   5,041 
  Occupancy 1,363   824   4,750   2,873 
  Other store operating costs 2,155   1,283   7,517   4,434 
 Selling, general, and administrative 7,125   6,325   28,207    29,263 
 Depreciation and amortization 2,622   2,237   10,002   8,052 
 Loss (gain) on disposal of property and equipment (317)  45   (251)  72 
   Total costs and expenses 29,134   21,899   104,574   82,094 
OPERATING INCOME 4,654   6,368   15,635   15,305 
 Interest expense, net 1,117   1,125   4,523   8,025 
 Loss on early retirement of debt -   -   -   4,619 
 Loss on impairment of investments -   -   4,500   - 
 Other expense, net 43   60   133   178 
INCOME BEFORE INCOME TAXES 3,494   5,183   6,479   2,483 
 Provision for income taxes  862   2,359   2,068   1,235 
NET INCOME 2,632   2,824   4,411   1,248 
 Net loss attributable to noncontrolling interests -   -   500    - 
NET INCOME ATTRIBUTABLE TO PAPA MURPHY'S 2,632    2,824   4,911   1,248 
Earnings (Loss) per share of common stock       
$0.16  $0.17  $0.29  $(0.07)
 Diluted$0.16  $0.17  $0.29  $(0.07)
Weighted average common stock outstanding       
 16,706,308   16,594,464   16,653,127   12,101,236 
 Diluted 16,805,559   16,710,913   16,870,693   12,101,236 

Selected Balance Sheet Data
(In thousands of dollars)
 December 28,
  December 29,
Cash and cash equivalents$6,867  $5,056 
Total current assets 18,896   14,991 
Total assets 275,471   264,127 
Total current liabilities 24,149   18,558 
Long-term debt, net of current portion 108,237   110,715 
Total Papa Murphy's Holdings, Inc. shareholders' equity 97,656   91,298 

Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(In thousands of dollars)
  Three months ended Twelve months ended
 December 28,
  December 29,
 December 28,
  December 29,
Net income as reported$2,632  $2,824  $4,411  $1,248 
Net loss attributable to noncontrolling interests -   -   500   - 
Net Income Attributable to Papa Murphy's 2,632   2,824   4,911   1,248 
Depreciation and amortization 2,622   2,237   10,002   8,052 
Income tax provision 862   2,359   2,068   1,235 
Interest expense, net 1,117   1,125   4,523   8,025 
EBITDA  7,233   8,545   21,504   18,560 
Loss (gain) on disposal of property and equipment (a) (317)  45   (251)  72 
Expenses not indicative of future operations  (b)  -   -   4,670    2,300 
Transaction costs (c) -   6   65   78 
New store pre-opening expenses (d) 232   21   696   32 
Non-cash expenses and non-income based state taxes (e) 379   207   1,434    2,017 
Loss on early retirement of debt (f) -   -   -   4,619 
Adjusted EBITDA $7,527  $8,824   $28,118  $27,678 
Adjusted EBITDA margin (1) 22.3%  31.2%  23.4%  28.4%
(1) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total revenues.
(a) Represents non-cash (gains) and losses resulting from disposal of property and equipment, including divested Company-owned stores.
(b) For 2015 represents $4,000 loss from the impairment and disposal of Project Pie, a cost-method investment, $325 bad debt on related receivables, and $345 in secondary offering costs.  For 2014, $1,677 represents the elimination of management and advisory fees and related costs paid to Lee Equity Partners, LLC, $278 in IPO preparation costs, and $345 in non-recurring accrued management transition and restructuring costs related to recruiting a new CFO.
(c) Represents transaction costs relating to the acquisition of franchised stores.
(d) Represents expenses directly associated with the opening of new stores and incurred primarily in advance of the store opening, including wages, benefits, travel for training of opening teams, grand opening marketing costs and other store operating costs.
(e) 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.
(f) Represents losses resulting from the early refinancing of long-term debt.

Reconciliation of Net Income to Pro Forma Net Income
(In thousands of dollars, except share and per share data)
    Three Months Ended   Twelve months ended 
   December 28,
 December 29,
  December 28,
 December 29,
Net income as reported$2,632  $2,824  $4,411  $1,248 
 Net loss attributable to noncontrolling interests -   -   500   - 
Net Income Attributable to Papa Murphy's  2,632   2,824   4,911   1,248 
 Management fees and expenses     -   1,678 
 Loss on early retirement of debt (1)     -   4,619 
 Reduction in interest expense based on reduced debt balance      -   1,839 
 Expenses not indicative of future operations:       
  Secondary offering and IPO preparation costs     345   652 
  Loss on Project Pie impairment and disposal     4,325   - 
  Non-cash compensation expenses     287   1,464 
 Incremental public company costs     -   (655)
 Income tax expense on adjustments (2)     (1,908)  (3,634)
Pro forma net income$2,632  $2,824  $7,960  $7,211 
Earnings per share - pro forma:       
 Basic$0.16  $0.17  $0.48  $0.43 
 Diluted$0.16  $0.17  $0.47  $0.43 
Weighted-average shares outstanding - pro forma:        
 Basic 16,706,308   16,594,464   16,653,127   16,583,043 
 Diluted  16,805,559   16,710,913   16,870,693    16,741,989 
(1) Represents losses resulting from refinancing of long-term debt.
(2) Reflects the tax expense associated with adjustment 1 above at a normalized tax rate in line with our estimated long-term effective tax rate.

Investor Contact:

Fitzhugh Taylor, ICR


Media Contact:

Christine Beggan, ICR


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Source: Papa Murphy's Holdings, Inc.

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