Franchise Group, Inc. Announces Second Quarter Fiscal Year 2023 Financial Results

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Aug 08, 2023

DELAWARE, Ohio, Aug. 08, 2023 (GLOBE NEWSWIRE) -- Franchise Group, Inc. ( FRG) (“Franchise Group,” “FRG” or the “Company”) today announced the financial results for its fiscal second quarter ended July 1, 2023. For the second quarter of fiscal 2023, total reported revenue for Franchise Group was approximately $1.0 billion, net loss from operations was approximately $50.8 million or $1.50 per fully diluted share, Adjusted EBITDA was approximately $53.9 million and Non-GAAP EPS was a loss of $0.22 per share. On July 1, 2023, total cash on hand was approximately $106.3 million and outstanding term debt was approximately $1.4 billion.

The Company currently has six reportable segments: American Freight; The Vitamin Shoppe; Pet Supplies Plus; Buddy’s; Sylvan; and Badcock.

The following table summarizes Revenue, Adjusted EBITDA, and Net Income/(Loss) for each of these segments. Reconciliations of Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS to their respective most comparable GAAP measures, are included below under “Non-GAAP Financial Measures and Key Metrics.”

For the Three Months Ended For the Six Months Ended
July 1, 2023July 1, 2023
AdjustedNetAdjustedNet
RevenueEBITDAIncome/(Loss)RevenueEBITDAIncome/(Loss)
(In thousands)(In thousands)
American Freight$203,427$(16,378)$(27,362)$439,989$(23,919)$(121,221)
Vitamin Shoppe304,72735,31612,388626,42970,43524,280
Pet Supplies Plus332,78327,2976,929666,85456,92114,688
Buddy's13,8193,7231,00228,7868,2292,726
Sylvan11,7093,95430621,9417,296185
Badcock172,2211,537(30,793)359,5085,843(57,981)
Corporate-(1,534)(13,266)-(4,892)(21,790)
Total$1,038,686$53,915$(50,796)$2,143,507$119,914$(159,113)

Redemption of Series A Preferred Stock
As previously disclosed, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Freedom VCM, Inc., a Delaware corporation (“Parent”) and Freedom VCM Subco, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub shall merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent (the “Proposed Merger”). On July 19, 2023, in connection with the Proposed Merger, the Company issued a notice of redemption for all outstanding shares of the Series A Preferred Stock (the “Redemption”), which is contingent upon the successful completion of the Proposed Merger. The Series A Preferred Stock will be redeemed in cash at a redemption price equal to $25.00 per share plus any accrued and unpaid dividends from the last dividend payment date, if any, up to but not including the Redemption Date (the “Redemption Price”). The Redemption Price is expected to be paid on August 18, 2023 or such later date as the parties to the Merger Agreement may agree but in no event later than one business day following the effective time of the Proposed Merger (the “Redemption Date”).

In light of the Proposed Merger, the Company is not scheduling a conference call to discuss its quarterly financial results.

About Franchise Group, Inc.
Franchise Group is an owner and operator of franchised and franchisable businesses that continually looks to grow its portfolio of brands while utilizing its operating and capital allocation philosophy to generate strong cash flow for its shareholders. Franchise Group’s business lines include Pet Supplies Plus, American Freight, The Vitamin Shoppe, Badcock Home Furniture & more, Buddy’s Home Furnishings, Sylvan Learning and Wag N Wash. On a combined basis, Franchise Group currently operates over 3,000 locations predominantly located in the U.S. that are either Company-run or operated pursuant to franchising and dealer agreements.

FRANCHISE GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share count and per share data)July 1, 2023December 31, 2022
Assets(Unaudited)(Unaudited)
Current assets:
Cash and cash equivalents$106,264$80,783
Current receivables, net of allowance for credit losses of $(8,204) and $(4,106), respectively256,003170,162
Current securitized receivables, net of allowance for credit losses of $(65,519) and $(57,095), respectively191,826292,913
Inventories, net746,753736,841
Current assets held for sale7,6338,528
Other current assets28,23827,272
Total current assets1,336,7171,316,499
Property, plant, and equipment, net238,922223,718
Non-current receivables, net of allowance for credit losses of $(1,070) and $(892), respectively10,80811,735
Non-current securitized receivables, net of allowance for credit losses of $(8,816) and $(7,705), respectively25,81239,527
Goodwill663,481737,402
Intangible assets, net111,432116,799
Tradenames222,703222,703
Operating lease right-of-use assets890,611890,949
Investment in equity securities5,97711,587
Other non-current assets65,39859,493
Total assets$3,571,861$3,630,412
Liabilities and Stockholders’ Equity
Current liabilities:
Current installments of long-term obligations, net$13,192$6,935
Current installments of debt secured by accounts receivable, net341,144340,021
Current operating lease liabilities179,250179,519
Accounts payable and accrued expenses407,543376,895
Other current liabilities34,82740,541
Total current liabilities975,956943,911
Long-term obligations, excluding current installments1,526,6051,374,479
Non-current installments of debt secured by accounts receivable, net44,423107,448
Non-current operating lease liabilities729,870720,474
Other non-current liabilities69,57662,720
Total liabilities3,346,4303,209,032
Stockholders’ equity:
Common stock, $0.01 par value per share, 180,000,000 shares authorized, 35,186,943 and 34,925,733 shares issued and outstanding at July 1, 2023 and December 31, 2022, respectively352349
Preferred stock, $0.01 par value per share, 20,000,000 shares authorized and 4,541,125 issued and outstanding at July 1, 2023 and December 31, 20224545
Additional paid-in capital310,654311,069
Retained earnings(85,620)109,917
Total equity225,431421,380
Total liabilities and equity$3,571,861$3,630,412
FRANCHISE GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months EndedSix Months Ended
(In thousands, except share count and per share data)July 1, 2023June 25, 2022July 1, 2023June 25, 2022
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenues:
Product$916,112$952,009$1,892,920$1,931,173
Service and other115,501135,648236,069283,929
Rental7,0737,34114,51815,365
Total revenues1,038,6861,094,9982,143,5072,230,467
Operating expenses:
Cost of revenue:
Product621,482600,7801,278,3861,217,364
Service and other8,6348,73218,21317,395
Rental2,5072,7415,1335,603
Total cost of revenue632,623