Papa Murphys Holdings, Inc.
May 4, 2016

Papa Murphy's Holdings, Inc. Reports First Quarter 2016 Results

- Q1 Revenue Growth of +13.1% -
- 27 New Store Openings in the Quarter -

VANCOUVER, Wash., May 04, 2016 (GLOBE NEWSWIRE) -- Papa Murphy's Holdings, Inc. (NASDAQ:FRSH) today announced financial results for its first quarter ended March 28, 2016.

Key financial highlights for the first quarter of 2016 include:

______________________
(1) Adjusted EBITDA is a non-GAAP measure. For a reconciliation of Adjusted EBITDA to GAAP net income and discussion of why we consider Adjusted EBITDA to be a useful measure, see the financial table 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, "We are disappointed with our overall comparable store sales performance in the first quarter and the resultant level of profitability.  We have identified and are taking action against specific areas for improvement and expect to demonstrate progress in the second half of the year."

Calwell continued, "There were some bright spots in the quarter, including the early launch of our on-line ordering and eCommerce site, providing us with a technology platform foundation for future growth.  We now have online ordering capability available in over 82% of our domestic stores, with the full rollout expected to be complete in June, and we are beginning to see the mix of orders placed online increase as we market the site.  Additionally, we continue to be encouraged by the outperformance of some of our less developed markets where we are focused on raising brand awareness by investing in advertising and building stores.  Comparable store sales growth in these less penetrated markets outperformed the system average by 290 basis points in the quarter."

"We opened 27 new stores system-wide during the quarter, including 25 in the U.S.  The development process enhancements we put in place in 2015 have been effective, leading to a significantly more balanced new store opening cadence this year.  We remain on track to open 115 to 120 new units in 2016," Calwell concluded.          

Key Operating Metrics

PAPA MURPHY'S HOLDINGS, INC. AND SUBSIDIARIES    
Key Operating Metrics     
      
      
  Three Months Ended    
 March 28,
2016
 March 30,
2015
  
Domestic comparable store sales:     
Franchised stores -2.8%  5.5%  
Company-owned stores -2.8%  6.4%  
Combined -2.8%  5.6%  
      
System-wide sales ($'s in 000s)$236,851  $234,633   
      
Adjusted EBITDA ($'s in 000s)$5,729  $8,015   
      
Store Count      
Franchised 1,378   1,338   
Company-owned 135   108   
International 42   30   
System-wide 1,555   1,476   
      

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 first quarter of 2016 and 2015, we had 1,407 and 1,356 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 updating 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 first quarter financial results on Wednesday, May 4, 2016 at 4:30 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 13634357. The replay will be available until Wednesday, May 11, 2016. The conference call will also be webcast live from the Company's corporate website at investors.papamurphys.com, 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 www.papamurphys.com.

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 and quarterly report on Form 10-Q for the fiscal quarter ended March 28, 2016 (each of which can be found at the SEC's website www.sec.gov); 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 measure 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 each of 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.

PAPA MURPHY'S HOLDINGS, INC. AND SUBSIDIARIES 
Consolidated Statements of Net Income 
(In thousands of dollars, except share and per share data) 
         
     Three Months Ended   
    March 28,
2016
 March 30,
2015
  
    Unaudited Unaudited  
Revenues     
 Franchise royalties$10,496  $10,679   
 Franchise and development fees 954   1,140   
 Company-owned store sales 20,674   17,167   
 Other 861   182   
         
   Total revenues 32,985   29,168   
         
Costs and Expenses     
 Store operating costs:     
  Cost of food and packaging 7,272   6,089   
  Compensation and benefits 5,734   4,354   
  Advertising 2,166   1,669   
  Occupancy 1,375   1,003   
  Other store operating costs 2,291   1,445   
 Selling, general, and administrative 9,055   6,882   
  Depreciation and amortization 2,715   2,319   
  Loss on disposal of property and equipment 54   59   
         
   Total costs and expenses 30,662   23,820   
         
Operating Income 2,323   5,348   
         
 Interest expense, net 1,179   1,130   
 Other expense, net 42   2   
         
Income Before Income Taxes 1,102   4,216   
         
 Provision for income taxes 460   1,620   
         
Net Income$642  $2,596   
         
Earnings per share of common stock     
 Basic $ 0.04  $0.16   
 Diluted$0.04  $0.15   
Weighted average common stock outstanding     
 Basic  16,716,610   16,604,206    
 Diluted 16,753,294   16,791,684   
         

 

PAPA MURPHY'S HOLDINGS, INC. AND SUBSIDIARIES
Selected Balance Sheet Data
(In thousands of dollars)
(unaudited)
    
 March 28,
2016
 December 28,
2015
Cash and cash equivalents$481  $6,867 
Total current assets 10,013   18,896 
Total assets  267,189   275,471 
Total current liabilities 16,412   24,149 
Long-term debt, net of current portion 106,517    108,237 
Total Papa Murphy's Holdings, Inc. shareholders' equity 98,519   97,656 

 

PAPA MURPHY'S HOLDINGS, INC. AND SUBSIDIARIES 
Reconciliation of Net Income to EBITDA and Adjusted EBITDA 
(In thousands of dollars) 
      
  Three Months Ended   
 March 28,
2016
 March 30,
2015
  
Net Income As Reported$642  $ 2,596   
Depreciation and amortization 2,715   2,319   
Provision for income taxes 460   1,620   
Interest expense, net 1,179   1,130   
EBITDA 4,996   7,665   
Loss on disposal of property and equipment (a) 54   59   
Transaction costs (b) -   33   
New store pre-opening expenses (c) 290   70   
Non-cash expenses and non-income based state taxes (d) 389   188   
Adjusted EBITDA$5,729  $8,015   
      
Adjusted EBITDA margin (1) 17.4%  27.5%  
      
      
(a) Represents non-cash 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. 
      
(1) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total revenues.  
      

Investor Contact:

Fitzhugh Taylor, ICR

fitzhugh.taylor@icrinc.com

877-747-7272



Media Contact:

Christine Beggan, ICR

Christine.Beggan@icrinc.com

203-682-8329

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Source: Papa Murphy's Holdings, Inc.

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