FRG - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Franchise Group's Second Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to hand the conference over to your host, Andrew Kaminsky, Executive Vice President and Chief Administrative Officer of Franchise Group.

Andrew Kaminsky

Thank you, Hilda. you our thank call. and morning for conference joining Good Franchise with and Group's I'm call Kahn, CFO. Group's Franchise on the Seeton, Brian President Eric CEO; and

not could expressed Before to XXXX the These or law results based meaning certain of by the Actual Private forward-looking securities mention in guarantees implied call getting them. revise laws. undue by Reform call forward-looking contain of differ place made provisions of the like this cautioned these on on reliance Act of Litigation update expectations on required are federal as Franchise The of may within are discussed and Investors other performance. management's are statements. Group forward-looking or this that and materially statements forward-looking from except statements. of Securities started, date I'd and statements are matters assumes those the future no current to not statements as to forward-looking obligation the

For among materially fiscal more Franchise XXXX and the in from other measures. or not companies. to measures XX-KT of believe and non-GAAP to see and the when limitations a other of reconciliation Form results for purposes. risks measures December should our measures those results meaningful is Group's regarding Please end, SEC. GAAP isolation investors comparing release our differ filings believes results in uses provides that see at actual section earnings news considered discussion information, focus and measures could The it make peer superior differ non- and information financial uncertainties included our to from information financial the for discussed that informational but we have periods comparative because GAAP The between we as with and operating other our and companies. and financial useful the investors those that today include events GAAP our forward-looking company website statements, may cause to indicated on for the please business substitute for of XX, year be from Non-GAAP used detailed these and by financial management franchisegrp.com financial assessing non-GAAP supplemental in

like I'd over Now, to Brian? the to Brian. turn call

Brian Kahn

for quarter businesses questions. Despite Thanks, our the Andrew. we through American pandemic million thank of a financial the and we strong highlights confident Franchise approximately Good will call shareholders brands will of public answer to us that through our trends upside has to than most today. recent pursuit businesses upside then I'm will us we flow of recent has as of Group's additional will be following the common a of has February, supported share, turning of hypothesis per quarter our our down, Eric Franchise performance current morning expect I dividends our over and years you million results. and over and $XX briefly distributions And and Since pay markets has our performance us $XX that you further time walk financial in see any available our well as deploy at $XXX couple COVID-XX earnings and there over of I strong. joining our on Thanks to market our happy growth current closed turned the to second my second cash the debt to per allowed markets before next acquisition dislocation in Group's retire of shareholders. over discuss is in overall underwritten the remained million an we Freight the capital to our offering more raise efficient career. been to accretive dividend overall equity share. in our stock. have of through manner

that for refund spending, have practices to second the M&A business, discretionary past build Freight the and franchise and related bring the demand Officer. basis. in American a work and near evaluated Evans new week, our franchise furnishings we our growth opportunities to brings generous teams from Operationally, organizations, able acted improvement like benefited future. spending. hope XX trend operations and numerous a to experience at Todd created across have spending demand has in our few We Earlier building services. merchandise We hired franchise daily wealth and him us add and from This tax sales travel be that months we refurnishing I've I'm our in businesses. demographic our to Todd's consumers has for will this all in to a portfolio years allow known with Todd the the franchising including their strong over or most home operations, of especially combined our with in offered shift additional operate. home entertainment Chief as for by and markets enhance able Buddies to brands best see operating Franchising on subsidies a and Todd each to upgrades. a reallocating importantly, consumer be government customer products to accelerate demographic excited role durable finally for

products are customers. an times economic typically seeing are flexible And recessionary good options. environments for of influx we our Additionally, and payment new deep value

growth of they've combination underwrote individual $XX and turn Freight Freight Let synopsis only original as XXXX. like the second quarter a has synergies. strong sales at in XXX excelled with due our times, the The delivered X% these XXXX. closed plan When job locations A to businesses, compared up fiscal said operationally, business annualized that to XXXX. million economic actual or done and me with yet to Rent we typically synergy Buddy's see remained to the during now through we've a various execute Not has team integrating been stores owned across approximately to February, an XX% the included continue management COVID-XX plan. people, A demand open of business through resilient trends outlet essential to July to compared expects former A sales had excellent an Freight July fiscal fantastic to times cycles. combined of Buddy's according comparable up of have business continued brief the as A Freight businesses. mid pandemic revenue store multiple over are we but

fiscal equivalent Buddy's second in the economy the of the government, of As a positive with quarter month X% July. tax comped in accelerated from further the the reopened refund second and

term operating $XX.X accommodate adjustments health wellness by the normal and furniture, fiscal Freight, A as retired or million numerous overcoming growth businesses making and its compared management's July adjusted comparable we've a million believe from civil loan. to to for accounts XXXX. on appliances to products second to Shoppe’s benefiting quarter Year-to-date, business $XX unrest. to market has sales support own same destination for focus customers purchased of addition communities, model electronics. as immunity supply and maximize trends trusted the our mattresses, XX.X% and grew them in the operating significant In COVID-XX challenges the Management XX and had Shoppe made we Vitamin fiscal The returned serving including to closures, store the chain to due online hours, approximately quarter, for its during reduced performance hours its Vitamin the professionally operating

reduce As we year by further loan than we no stated, more to to expect end. the term million $XX

franchisees, unique when was from season. everyone stronger drive and a our spoke tax tax you tax personal their June. team the this a deadline expected extended leadership knows the to filing, last As persevered in our finish for but to we we Liberty than created challenges Liberty team season to The

were federal returns deadline, the Liberty As extended American Tax same approximately roll units compared on season. our XXXX tax XXXX for kiosks we store and approximately The United X.XX returns basis million through the tax pilot July XXXX Liberty in X% count the million tax week, XXXX out Tax for season. federal a Freight the was stores States is motion. returns to to within prepared down season $X.X down and store Buddy's plan XXth, the storefronts, disclosed in tax tax XXX to last completed US for filing

have their financial the have progress on to continued made ways locations our prospects and franchisees up to Xst, the XX hoping value September Companies running services fall. are do the are by caused least products, all early products expect are at near Franchise by Group despite and and season We've resilient, and management in our and added future. We the finding improve to our distractions virus. to to of teams to customers and Overall, add bringing in forward more looking

and their us Eric? truly I Eric, again our the thank company. dedication to over Before They our to successful. for turning the work of makes associates what call once like would all hard are

Eric Seeton

Thank you, Brian.

Before results to like I many forma be operations, making pro we this references would will the address call. remind throughout to you items I of that

results due Franchise accounting the been Our press calendar extent for pro timing a the the to fiscal items prior of releases comparable acquisition. to to to performance to acquisition is recent results adjusted refer not allow companies to Comparison the to acquired recently forma historical These and businesses our policies may financial acquired available will evaluate reasonable. period us when the changed of Group. discuss their and align filings and by have with

results recent Shoppe Sears prior businesses forma for ends results example, comparable XX-Q Buddy's, through The results actual second or that XX, our respective new year but reflects of periods. our December XX-KT and filed XXXX. filing all only the December Outlet from Discussing last contains their retail to For includes fiscal the for dates acquisition results night our the the entire we year, Vitamin pro quarter.

of will results since year. as we it beginning the owned We fiscal the if Freight’s American include

common weighted company $XX average million. million of adjusted reported of million share, X.X was of XX our shares stock fully For the EPS release approximately million the to In compared EPS the to the was to our non-GAAP of EBITDA utilized common Group items Group EPS offering for year XXX.X which XXX stock guidance, which Pro million accounts and XXX guidance to million total XX Franchise quarter, compared or of July $X.XX of is utilized per our share had quarter. release a the The XX.X diluted guidance. company outstanding our per attributed in revised preliminary release was recent loss the revenue interest of shares. per primarily $X.XX XXth was loss million $X.XX financing to of shares per $XX to million. full dilutive compared of Non-GAAP approximately XXXX to the net acquisition the GAAP XX offering forma fully or account for the issued second shares net which GAAP preliminary calculating impact $X.XX costs, share. costs. associated The for for second of million of for $X.XX $X.XX share. net diluted XX quarter deferred million outstanding in XX.X per our Franchise public calculating formulating to share, underwritten first and to In loss approximately one-time $X.XX to GAAP driven was purchase quarter compared million million taken expense, accounting with price and into XXXX, the for includes by additional preliminary

Vitamin and Freight, four American Shoppe, reportable segments, the Buddy's. have Liberty Tax We

million million, The to has million of and month Freight revenue future forma and Tax the XXX.X Liberty its in Buddy's million quarters. XX.X EBITDA EBITDA had respectively. and XXX.X respectively. the EBITDA revenue to of the extended second tax deadline But quarter had expected of the Tax Shoppe than American negative of had pro EBITDA of and it the XXXX, forma in revenue had pro EBITDA ended three forma quarter due and period June is adjusted of million, first due XX.X more pro year in to and revenue a had season. typically EBITDA million this majority second XX, XX.X timing $XXX,XXX and XX.X and revenue Liberty respectively. the X adjusted respectively. million pro adjusted revenue Vitamin and forma adjusted For

Turning our sheet flow. to and balance cash

capital back $XXX.X does For from free million. million have million the to also change does $XX it refund expenditures. the on the quarter closed less flow initial carry IRS was quarter the cash relating $XXX loss XXth. cash since in the million $XX of offering, after rule balance It received defined tax million the quarter June net operating end from a July of anticipated as result of CapEx not of flow and of additional follow $XX.X include as million not CARES receipts the of proceeds of The $XX Act. for we include net operating cash

end the end quarter net cash pro the approximately forma deferred million. the is we $XXX outstanding items balance quarter $XXX.X including Our million debt at financing of costs. the of of of At these had

loan previously used disclosed Shoppe second we term the us company. to acquire to during the debt As allow the Vitamin to quarter, prepay amended

$XX have lender on We expiration million with will acquire Shoppe to fees are eliminate season. direct Vitamin Liberty's as Liberty sheet of still to a off the is used franchisees facility to allow to for incur call the criteria loan for our can we during I franchisees. week, believe business now the its sufficient support This earned next Liberty and one-time of directly franchisees the obligations fully acting earn Brian discuss borrow conjunction our will prior million servicer. early to achievement term April end prior assign will to off of businesses was remainder and the the back Liberty will Liberty future. with our of facility to million we turn repaid a track, million, year. guidance performance, balance as our By its the and lending loan arrangement foreseeable to $X.X all loans, support to XXXX. Liberty $XX be facility the new the borrower. new servicing on continue sheet the meet the by Liberty based of of Tax a approximately In mentioned, Brian performance $XX facility on from the all initial to which expect we XXth. liquidity certain borrowing by of on not direct be balance back fee will

Brian Kahn

Thanks, Eric.

$XXX including and non-GAAP we XXXX, of to $X.XX $XXX EBITDA share. million of the pro $X.XX exceed exceed we believe now earnings forma divestitures, assumptions you. their previous will fiscal of per support for thank line offering. recent please excludes earnings follow-on per to today. lenders expect over pro our and shareholders share or of want of million and our Operator, guidance any Thank And pro EBITDA adjusted for forma For I from dilution open of our guidance This refranchising activity. adjusted $X.XX all forma non-GAAP for acquisitions, questions.

Operator

a and Instructions] please [Operator [Operator to Instructions] Riley. one Buck ask limit question from We you Scott from you. Thank B. yourself follow-up. that question one We have

Scott Buck

then impact guys. morning, quarter? have curious days, good you next of get incremental quarter? I a programs the if another you here similar impact we third Hi, stimulus sense a during was couple the for the in if assume round what And stimulus announced was from the I of see second of the

Brian Kahn

have the continue stimulus helped winding additional XX% really any to but the something the stimulus, absolutely did Scott, the comp think to there sometimes how don't comps stimulus during of And had we was qualified plan, XX% that We additional Brian. expectations year. It's not stimulus XX% Freight over built help, we Obviously, well over continue to do quarter. that much. over American half We down. stimulus In into believe will as to it we're July, is still back unclear if our that's just analyze. that numbers as we that. for

Scott Buck

appreciate Sure, that.

a been on Obviously, give a Second, could you bit color there's number acquisition environment. the bankruptcies. retail little more if of

give what, guys could of how are of you transaction you looking would us you a If large sense and a consider? what for

Brian Kahn

in average we per retail Well, to space. you find on one as seem least bankruptcy at see, day

fit business Many be is to don't So We the There's looking on very robust. or either no, franchised opportunity is think it's acquisition. value ultimately We to from there's, that the acquisitions wise. we're would more certainly we would And very larger the the we're franchisable, of think size our that can can if the businesses larger get do. a get with what and right. out vendors can really environment at need business. in already trying much We're participants. value the grow. M&A active the support we of We acquisitions, the event we small we consider that based consider we

basis. it's case really by So case

Scott Buck

And from it's any Vitamin seen but last Shoppe I early, have lied. the business know, one, I the bankruptcy? GNC you in impact

Brian Kahn

You to that are well and because in they're up ends would expect not have expect positively emerge or like really a in announced you they're when see happening, bankruptcy very it'll in reduced off what Shoppes think pressure expected United form interesting liquidating year States. Shoppe and seeing that's base they comping a fashion If looks then that currently this And they'll wears then. I be supply performing a market not when would during we're to the And stores. But Vitamin what certainly competitor we store would some share. competitor that see publicly expecting Vitamin through stores, on it that get later liquidating is with process. to

Operator

Thank at remarks. I call for further Mr. like back Kahn this to you, the to turn would moment,

Brian Kahn

thank please us conclude you joining the all morning. Again, for this Operator, call.

Operator

you. today's for you concludes your and this Thank conference. Ladies thank We participation. gentlemen,

disconnect. now may You

Franchise (TAX) 8 Aug 202020 Q2 Earnings call transcript