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, 2023 | July 1, 2023 | ||||||||||||||||||||||
Adjusted | Net | Adjusted | Net | ||||||||||||||||||||
Revenue | EBITDA | Income/(Loss) | Revenue | EBITDA | Income/(Loss) | ||||||||||||||||||
(In thousands) | (In thousands) | ||||||||||||||||||||||
American Freight | $ | 203,427 | $ | (16,378 | ) | $ | (27,362 | ) | $ | 439,989 | $ | (23,919 | ) | $ | (121,221 | ) | |||||||
Vitamin Shoppe | 304,727 | 35,316 | 12,388 | 626,429 | 70,435 | 24,280 | |||||||||||||||||
Pet Supplies Plus | 332,783 | 27,297 | 6,929 | 666,854 | 56,921 | 14,688 | |||||||||||||||||
Buddy's | 13,819 | 3,723 | 1,002 | 28,786 | 8,229 | 2,726 | |||||||||||||||||
Sylvan | 11,709 | 3,954 | 306 | 21,941 | 7,296 | 185 | |||||||||||||||||
Badcock | 172,221 | 1,537 | (30,793 | ) | 359,508 | 5,843 | (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, 2023 | December 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), respectively | 256,003 | 170,162 | |||||
Current securitized receivables, net of allowance for credit losses of $(65,519) and $(57,095), respectively | 191,826 | 292,913 | |||||
Inventories, net | 746,753 | 736,841 | |||||
Current assets held for sale | 7,633 | 8,528 | |||||
Other current assets | 28,238 | 27,272 | |||||
Total current assets | 1,336,717 | 1,316,499 | |||||
Property, plant, and equipment, net | 238,922 | 223,718 | |||||
Non-current receivables, net of allowance for credit losses of $(1,070) and $(892), respectively | 10,808 | 11,735 | |||||
Non-current securitized receivables, net of allowance for credit losses of $(8,816) and $(7,705), respectively | 25,812 | 39,527 | |||||
Goodwill | 663,481 | 737,402 | |||||
Intangible assets, net | 111,432 | 116,799 | |||||
Tradenames | 222,703 | 222,703 | |||||
Operating lease right-of-use assets | 890,611 | 890,949 | |||||
Investment in equity securities | 5,977 | 11,587 | |||||
Other non-current assets | 65,398 | 59,493 | |||||
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, net | 341,144 | 340,021 | |||||
Current operating lease liabilities | 179,250 | 179,519 | |||||
Accounts payable and accrued expenses | 407,543 | 376,895 | |||||
Other current liabilities | 34,827 | 40,541 | |||||
Total current liabilities | 975,956 | 943,911 | |||||
Long-term obligations, excluding current installments | 1,526,605 | 1,374,479 | |||||
Non-current installments of debt secured by accounts receivable, net | 44,423 | 107,448 | |||||
Non-current operating lease liabilities | 729,870 | 720,474 | |||||
Other non-current liabilities | 69,576 | 62,720 | |||||
Total liabilities | 3,346,430 | 3,209,032 | |||||
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, respectively | 352 | 349 | |||||
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, 2022 | 45 | 45 | |||||
Additional paid-in capital | 310,654 | 311,069 | |||||
Retained earnings | (85,620 | ) | 109,917 | ||||
Total equity | 225,431 | 421,380 | |||||
Total liabilities and equity | $ | 3,571,861 | $ | 3,630,412 | |||
FRANCHISE GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands, except share count and per share data) | July 1, 2023 | June 25, 2022 | July 1, 2023 | June 25, 2022 | ||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues: | ||||||||||||||||
Product | $ | 916,112 | $ | 952,009 | $ | 1,892,920 | $ | 1,931,173 | ||||||||
Service and other | 115,501 | 135,648 | 236,069 | 283,929 | ||||||||||||
Rental | 7,073 | 7,341 | 14,518 | 15,365 | ||||||||||||
Total revenues | 1,038,686 | 1,094,998 | 2,143,507 | 2,230,467 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue: | ||||||||||||||||
Product | 621,482 | 600,780 | 1,278,386 | 1,217,364 | ||||||||||||
Service and other | 8,634 | 8,732 | 18,213 | 17,395 | ||||||||||||
Rental | 2,507 | 2,741 | 5,133 | 5,603 | ||||||||||||
Total cost of revenue | 632,623 |