Franchise Group Inc (FRG) 2022 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Franchise Group's Fiscal 2022 Second Quarter Conference Call. (Operator Instructions)

女士們，先生們，感謝您的支持並歡迎參加 Franchise Group 的 2022 財年第二季度電話會議。 （操作員說明）

I would now like to hand the conference over to your host, Andrew Kaminsky, Executive Vice President and Chief Administrative Officer of Franchise Group.

我現在想將會議移交給您的主持人，Franchise Group 執行副總裁兼首席行政官 Andrew Kaminsky。

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

謝謝你，[傑辛達]。下午好，感謝您加入我們的電話會議。我正在與 Franchise Group 總裁兼首席執行官 Brian Kahn 通話； Franchise Group 的首席財務官 Eric Seeton。

Before getting started, I would like to mention that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws. These forward-looking statements are based on management's current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by the forward-looking statements. The forward-looking statements are made as of the date of this call, and except as required by law, Franchise Group assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements. For a more detailed discussion of these and other risks and uncertainties that could cause Franchise Group's actual results to differ materially from those indicated in the forward-looking statements, please see our Form 10-K for the fiscal year ended December 25, 2021, and other filings we make with the SEC.

在開始之前，我想提一下，本次電話會議中討論的某些事項可能包含 1995 年《私人證券訴訟改革法案》和聯邦證券法其他規定所指的前瞻性陳述。這些前瞻性陳述基於管理層當前的預期，並不保證未來的業績。實際結果可能與前瞻性陳述中表達或暗示的結果存在重大差異。前瞻性陳述於本次電話會議之日作出，除法律要求外，特許經營集團不承擔更新或修改它們的義務。告誡投資者不要過分依賴這些前瞻性陳述。有關可能導致 Franchise Group 的實際結果與前瞻性陳述中所示結果大不相同的這些和其他風險和不確定性的更詳細討論，請參閱我們截至 2021 年 12 月 25 日的財政年度的 10-K 表格，以及我們向 SEC 提交的其他文件。

The financial measures discussed today include non-GAAP measures that we believe investors focus on in comparing our results between periods and among our peer companies. Please see our earnings release in the News and Events section of our website at franchisegrp.com for a reconciliation of non-GAAP financial measures to GAAP measures. Non-GAAP financial information should not be considered in isolation from as a substitute for or superior to GAAP financial information, but we include it because management believes it provides meaningful supplemental information regarding our operating results when assessing our business and is useful to investors for informational comparative purposes. The non-GAAP financial measures the company uses have limitations and may differ from those used by other companies. Now I'd like to turn the call over to Brian. Brian?

今天討論的財務指標包括非公認會計準則指標，我們認為投資者在比較我們不同時期和同行公司的業績時會重點關注這些指標。請在我們網站上的新聞和活動部分查看我們的收益發布，網址為：franchisegrp.com，了解非 GAAP 財務指標與 GAAP 指標的對賬情況。非 GAAP 財務信息不應被視為獨立於 GAAP 財務信息的替代品或優於 GAAP 財務信息，但我們將其包括在內，因為管理層認為它在評估我們的業務時提供了有關我們經營業績的有意義的補充信息，並且對投資者有用的信息比較的目的。公司使用的非公認會計原則財務指標有局限性，可能與其他公司使用的不同。現在我想把電話轉給布賴恩。布賴恩？

Thank you, Andrew, and good afternoon to our listeners, and thank you for joining us. Before we discuss FRG business, I just like to give a quick shout out to Charlie Loudermilk, who passed away yesterday at the age of 95. Charlie happens to be the founder of [Aaron Rents], and he also happens to have been all around good guy among other things. And he was larger than life and his legacy does live on in many aspects of what we do at FRG and how we do it.

謝謝你，安德魯，下午好，我們的聽眾，感謝你加入我們。在我們討論 FRG 業務之前，我想簡單地向昨天去世，享年 95 歲的 Charlie Loudermilk 說一聲。Charlie 恰好是 [Aaron Rents] 的創始人，他也恰好在身邊除其他外的好人。他比生命更偉大，他的遺產確實存在於我們在 FRG 所做的事情以及我們如何做的許多方面。

So moving on to FRG business. I will provide a general update before turning the call over to Eric to provide financial details. We'll then be happy to answer questions. A Franchise Group second quarter financial performance was within our expectations. But for the full year 2022, we're lowering our financial outlook for revenue to approximately $4.3 billion from $4.45 billion, adjusted EBITDA to approximately $390 million from $450 million and non-GAAP earnings per share to approximately $4 a share from $5 a share.

所以轉向FRG業務。在將電話轉給 Eric 以提供財務詳細信息之前，我將提供一般更新。然後我們很樂意回答問題。 A Franchise Group 第二季度的財務表現在我們的預期之內。但對於 2022 年全年，我們將收入的財務前景從 44.5 億美元下調至約 43 億美元，調整後的 EBITDA 從 4.5 億美元下調至約 3.9 億美元，非 GAAP 每股收益從每股 5 美元下調至約 4 美元。

Inflationary pressure is leading to lower profitability in our home furnishing businesses, while profit growth in pet health and wellness and education services are providing the diversification and scale that allowed FRG to declare another quarterly dividend at a $2.50 per share annual rate. Specifically, product and freight costs within our home furnishing businesses are reducing margins and food and energy inflation is taking a larger share of our lower income customers wallet, which is reducing transaction volumes. This combination is meaningful. Although American Freight is emphatically expected to be a material contributor to FRG's long-term growth, the impact of inflation this year is likely to result in approximately $100 million less EBITDA than what the current store base would be expected to generate in the steady state.

通貨膨脹壓力導致我們的家居業務盈利能力下降，而寵物健康和教育服務的利潤增長提供了多元化和規模，使 FRG 能夠以每股 2.50 美元的年利率再次宣布季度股息。具體而言，我們家居業務的產品和運費成本正在降低利潤率，而食品和能源通脹在我們的低收入客戶錢包中佔據了更大的份額，這正在減少交易量。這種組合是有意義的。儘管美國貨運預計將成為 FRG 長期增長的重要貢獻者，但今年通貨膨脹的影響可能會導致 EBITDA 比當前商店基礎在穩定狀態下的預期減少約 1 億美元。

American Freight is expected to generate approximately $200 million less revenue than planned. That revenue loss comes with roughly 30% EBITDA flow through, and additionally, the nearly $1 billion of revenue that American Freight will generate will come at a cost of over 500 basis points of excess freight. That math totals over $100 million of EBITDA impact at American Freight this year alone. We are frequently asked how FRG will perform in a suboptimal economic environment, shareholders, lenders, vendors and franchisees all want to understand the downside just as we want to understand the downside and we perform diligence on potential acquisition candidates or vendors. I think this environment will provide an excellent opportunity to enhance our credibility with all of our stakeholders by demonstrating that FRG is built to band but not to break.

美國貨運預計將比計劃產生約 2 億美元的收入。這種收入損失伴隨著大約 30% 的 EBITDA 流量，此外，American Freight 將產生的近 10 億美元收入將以超過 500 個基點的超額運費為代價。僅今年一年，美國貨運公司的 EBITDA 影響就總計超過 1 億美元。我們經常被問到 FRG 在次優經濟環境中的表現如何，股東、貸方、供應商和特許經營商都想了解不利因素，就像我們想了解不利因素一樣，我們對潛在的收購候選人或供應商進行盡職調查。我認為這種環境將提供一個極好的機會，通過證明 FRG 是為團結而非破壞而建立的，從而提高我們在所有利益相關者中的可信度。

FRG's cumulative profitability and cash flow are more reliable in the whole than in part -- and that ultimately should make FRG more valuable as a whole than in parts. The primary difference between the business climate today and the one we shared after the first quarter is that freight costs and home furnishing product costs have -- we are now ordering new inventory at lower product costs and lower incoming freight costs. Some cost reductions are more material than others. But generally, we're headed in the right direction. Markets are ultimately a self-correcting mechanism, and we believe the supply and demand imbalance for products and human capital are both correcting in our favor, and we expect this trend to continue.

FRG 的累積盈利能力和現金流在整體上比部分更可靠——這最終應該使 FRG 整體上比部分更有價值。今天的商業環境與我們在第一季度之後分享的商業環境之間的主要區別在於貨運成本和家居產品成本——我們現在以更低的產品成本和更低的進貨成本訂購新庫存。一些成本降低比其他成本降低更重要。但總的來說，我們正朝著正確的方向前進。市場最終是一種自我修正機制，我們認為產品和人力資本的供需失衡正在對我們有利，我們預計這一趨勢將持續下去。

Despite these changing trends in our favor since the velocity of transactions are much lower than normal, it will likely take the rest of this year to sell the older higher cost inventory through our system. We're also keeping an eye on energy prices as the surge in gas prices has deterred the marginal customer from getting in the car to make an incremental trip to the store. We've seen this phenomena manifest itself with fewer transactions and larger transaction sizes as customers attempt to limit their need to buy fuel. We expect typical market forces ultimately to reduce gas prices back to within a normal range and provide relief for our customers. If we're wrong and fuel prices continue to increase, it would be worse for our customers and our same-store profitability.

儘管這些變化趨勢對我們有利，因為交易速度遠低於正常水平，但今年剩餘時間可能需要通過我們的系統銷售較舊的成本較高的庫存。我們還密切關注能源價格，因為汽油價格的飆升阻止了邊際客戶上車去商店進行增量旅行。當客戶試圖限制他們購買燃料的需求時，我們已經看到這種現象表現為交易減少和交易規模擴大。我們預計典型的市場力量最終會將天然氣價格降低到正常範圍內，並為我們的客戶提供救濟。如果我們錯了，燃油價格繼續上漲，那對我們的客戶和我們的同店盈利能力都會更糟。

As a management team, we spend significant time diligencing acquisitions to further diversify and scale FRG, but recognize the tremendous opportunity to drive material incremental cash flow and earnings per share from continuing to block and tackle as we drive franchise unit growth and execution within our current brands. More importantly, unit growth is within our current brand, is completely within our control and does not require any M&A or capital market cooperation. Franchising activity continues to accelerate across FRG. For the first 6 months of 2022, we sold 88 new territories and opened 54 new locations. We're starting to see cost of construction materials and labor improving and believe our franchisees will have an easier time opening stores over the next couple of years compared to the last couple of years.

作為一個管理團隊，我們花費大量時間進行收購以進一步多元化和擴展 FRG，但我們認識到，隨著我們在當前範圍內推動特許經營單位的增長和執行，繼續阻止和解決繼續阻礙和解決重大增量現金流和每股收益的巨大機會品牌。更重要的是，單位增長在我們現有的品牌範圍內，完全在我們的控制範圍內，不需要任何併購或資本市場合作。整個 FRG 的特許經營活動繼續加速。在 2022 年的前 6 個月，我們銷售了 88 個新地區並開設了 54 個新地點。我們開始看到建築材料和勞動力成本的改善，並相信與過去幾年相比，我們的加盟商在未來幾年內開店會更容易。

I'll be happy to answer any questions after Eric provides the financial details. Before I hand it over, I just want to publicly thank all of our financial partners for their support over the last several months. FRG is very lucky to have the support of a great group of lenders and real estate partners. It's very easy to get lender support when the risk-free rate is 0 and when the economy is humming, but I've always learned the most about people in stressful times. When the credit markets shut down completely last quarter, Oak Street Real Estate stepped up and closed on the sale of our Badcock [DCs] anyway. And earlier this week, closed again on the Badcock headquarter sale. We also appreciate that our revolver lenders chose to give us a larger share of their balance sheet despite suboptimal market conditions and recently upsized our revolver.

在 Eric 提供財務細節後，我很樂意回答任何問題。在我交出它之前，我只想公開感謝我們所有的財務合作夥伴在過去幾個月中的支持。 FRG 非常幸運能夠得到一大群貸款人和房地產合作夥伴的支持。當無風險利率為 0 且經濟繁榮時，很容易獲得貸款人的支持，但我總是在壓力大的時候了解最多的人。上個季度信貸市場完全關閉時，橡樹街房地產公司加緊出售我們的 Badcock [DC]。本週早些時候，Badcock 總部銷售再次結束。我們也感謝我們的左輪手槍放款人選擇在他們的資產負債表中為我們提供更大的份額，儘管市場條件欠佳，並且最近擴大了我們的左輪手槍。

And our term loan lenders, the nimblest, most creative and smartest partners we get asked for, and we appreciate their efforts on our behalf. Everybody plays his role really well and everybody works well together and the group we've assembled is uniquely positioned to help us take advantage of opportunities that are going to come our way in the current environment. Their [patience] will pay off, and I appreciate their support of FRG and their trust in our management team.

我們的定期貸款人是我們被要求的最靈活、最有創意和最聰明的合作夥伴，我們感謝他們代表我們所做的努力。每個人都很好地發揮了自己的作用，每個人都可以很好地合作，我們組建的團隊具有獨特的定位，可以幫助我們利用當前環境中即將出現的機會。他們的[耐心]會得到回報，我感謝他們對 FRG 的支持以及對我們管理團隊的信任。

Eric will turn it to you to provide the financial details, and then we can wrap up with Q&A. Thank you.

Eric 將把它交給你提供財務細節，然後我們可以結束問答。謝謝你。

Thank you, Brian. Before I address the results of operations, I would like to remind you that we will be making many references to pro forma items throughout this call. Our press releases and filings may refer to historical financial results for the acquired businesses prior to their acquisition by Franchise Group. These items have been adjusted to align with our fiscal calendar and accounting policies to the extent reasonable. Comparison to pro forma results will allow us to discuss and evaluate performance of the acquired companies when a comparable period is not available due to the timing of the acquisition.

謝謝你，布賴恩。在我談到運營結果之前，我想提醒您，我們將在整個電話會議中多次提及備考項目。我們的新聞稿和文件可能會參考被收購業務在被特許經營集團收購之前的歷史財務業績。這些項目已在合理範圍內進行了調整，以符合我們的財政日曆和會計政策。與備考結果的比較將使我們能夠在由於收購時間而無法獲得可比期間時討論和評估被收購公司的業績。

Moving to the second quarter results. I will start with a quick recap of our Home Furnishings businesses. In the second quarter, system-wide Buddy's has a negative same store sales comp of 4.8% with franchisee comps declined by 4.7% and corporate stores declining 5.4%. Buddy's opened 7 new franchise stores and awarded 3 new locations, bringing backlog to 98 locations. Badcock counts down 11.4% for the second quarter. During the quarter, we closed on the sale of Badcock's retail and distribution centers for $94 million and $150 million, respectively. And used the net proceeds to pay off the balance of the Badcock acquisition financing.

轉到第二季度的結果。我將首先快速回顧一下我們的家居用品業務。第二季度，全系統 Buddy's 的同店銷售額為負 4.8%，加盟店銷售額下降 4.7%，企業店面銷售額下降 5.4%。 Buddy's 開設了 7 家新的特許經營店並授予 3 個新地點，使積壓的地點達到 98 個。 Badcock 第二季度下跌 11.4%。在本季度，我們分別以 9400 萬美元和 1.5 億美元的價格出售了 Badcock 的零售和配送中心。並用所得款項淨額償還了 Badcock 收購融資的餘額。

Earlier this week, we closed on the previously announced sale of Badcock's headquarters for $23.5 million. The net proceeds will be used to reduce outstanding debt. American print comps down 13.7% for the quarter. We sold 10 new franchises in the second quarter, bringing total franchise backlog to 26 locations. Sylvan continued to perform well in the second quarter and delivered comps of 3.7% as it heads into the slower summer months. Sylvan opened 1 new location and sold 7 new franchises in the quarter, bringing its backlog to 20 units. Pet Supplies Plus generated system-wide same-store sales comps for the second quarter of 5.8%, franchisee comps grew 7.1% in the quarter, while corporate stores grew 4.2% for the quarter.

本週早些時候，我們以 2350 萬美元的價格完成了先前宣布的 Badcock 總部的出售。所得款項淨額將用於減少未償債務。美國印刷品本季度下降 13.7%。我們在第二季度出售了 10 個新的特許經營權，使特許經營權積壓總數達到 26 個。 Sylvan 在第二季度繼續表現良好，並在進入較慢的夏季月份時實現了 3.7% 的業績。 Sylvan 在本季度開設了 1 個新地點並出售了 7 個新的特許經營權，使其積壓至 20 個單位。 Pet Supplies Plus 第二季度全系統同店銷售收入增長 5.8%，加盟商收入增長 7.1%，而公司門店增長 4.2%。

PSP continues to accelerate its growth and brand building with 8 new store openings and the sale of 20 new franchisee area development agreements in the second quarter, bringing total backlog PSP to 230 locations. The acquisition of Wag N' Wash has been going well and is almost integrated into the PSP system. There has been strong interest in the concept, and we believe we will be in a position to capitalize on this demand later this quarter, when do we expect the Wag N' Wash FDD to be approved. Vitamin Shoppe comps were up 2.1% in the second quarter due to continued increases in store traffic and increased customer interest in sports and nutrition products. Direct-to-consumer accounted for approximately 24.8% of the business in the quarter. Franchising continues to build momentum with 8 stores sold in the second quarter, bringing backlog to 20 stores.

PSP 繼續加速其增長和品牌建設，在第二季度開設了 8 家新店並出售了 20 個新的特許經營區域開發協議，使 PSP 的積壓總數達到 230 個。 Wag N' Wash 的收購進展順利，幾乎融入了 PSP 系統。人們對該概念產生了濃厚的興趣，我們相信我們將能夠在本季度晚些時候利用這一需求，我們預計 Wag N' Wash FDD 何時獲得批准。由於商店客流量持續增加以及客戶對運動和營養產品的興趣增加，維他命專櫃的銷售額在第二季度增長了 2.1%。直接面向消費者的業務佔本季度業務的約 24.8%。特許經營繼續發展勢頭，第二季度售出 8 家門店，積壓至 20 家門店。

On a consolidated basis for the second quarter of 2022, total reported revenue for Franchise Group was $1.1 billion. Net income from continuing operations was $41 million or $0.94 per fully diluted share. Adjusted EBITDA was $103.4 million and non-GAAP EPS was $1.19 per share.

在 2022 年第二季度的綜合基礎上，特許經營集團報告的總收入為 11 億美元。來自持續經營的淨收入為 4100 萬美元或每股完全稀釋後的每股 0.94 美元。調整後的 EBITDA 為 1.034 億美元，非公認會計原則每股收益為 1.19 美元。

FRG's overall financial results included the financial results of all acquisitions from the date of acquisition. In the second quarter and for the first 6 months of fiscal 2022, all 6 businesses segments were fully included in our results and are detailed in our press release and filings. We are still in the process of transitioning consumer finance (inaudible) Badcock from in-house to third-party partners and have excluded the noncore results of the finance business from adjusted EBITDA and non-GAAP EPS. While we can't pro forma the income statement for consumer lending, the balance sheet continues to reflect securitization debt and accounts receivables despite most of the receivables having been sold to third parties. Once we discontinue originating customer loans, we believe that securitized receivables will be accounted for as a sale and the related assets and liabilities will no longer be reported on our balance sheet.

FRG 的整體財務業績包括自收購之日起所有收購的財務業績。在第二季度和 2022 財年的前 6 個月，所有 6 個業務部門都完全包含在我們的業績中，並在我們的新聞稿和文件中進行了詳細說明。我們仍在將消費金融（聽不清）Badcock 從內部過渡到第三方合作夥伴，並已將金融業務的非核心業績從調整後的 EBITDA 和非公認會計準則每股收益中排除。雖然我們無法為消費貸款編制損益表，但資產負債表繼續反映證券化債務和應收賬款，儘管大部分應收賬款已出售給第三方。一旦我們停止提供客戶貸款，我們相信證券化應收賬款將作為銷售入賬，相關資產和負債將不再在我們的資產負債表上報告。

We ended the quarter with approximately $1.1 billion in outstanding term debt and cash of approximately $95 million. During the quarter, we increased the size of our ABL revolver to $250 million and had approximately $130 million of availability remaining. All of our debt is over based and with the recent increase in interest rates. Our cash interest expense has increased accordingly as expected to cost an incremental of $10 million annually. In conjunction with our balance sheet and business performance, we believe we have sufficient liquidity to continue to meet all of our obligations and support all of our businesses for the foreseeable future.

我們在本季度末有約 11 億美元的未償定期債務和約 9500 萬美元的現金。在本季度，我們將 ABL 左輪手槍的規模增加到 2.5 億美元，剩餘約 1.3 億美元的可用性。我們所有的債務都超出了基礎，而且最近利率上升。正如預期的那樣，我們的現金利息支出相應增加，每年將增加 1000 萬美元。結合我們的資產負債表和業務表現，我們相信我們有足夠的流動性來繼續履行我們的所有義務並在可預見的未來支持我們所有的業務。

Operator, please open the line for questions.

接線員，請打開電話提問。

(Operator Instructions)

（操作員說明）

Our first question comes from the line of Larry Solow from CJS Securities.

我們的第一個問題來自 CJS Securities 的 Larry Solow。

Great. First question, just on a high level on guidance. I know you don't guide specifically to the businesses. But -- and clearly, the biggest driver here is the furniture business. Is it really specifically American Freight. Does that -- I mean is that like the lion's share of this deduction? Is there anything else coming out at all in your general outlook that's significant?

偉大的。第一個問題，只是高水平的指導。我知道你沒有專門指導企業。但是——很明顯，這裡最大的驅動力是家具業務。真的是美國貨運嗎。那 - 我的意思是這就像這個扣除的最大份額？在你的總體前景中，還有什麼重要的東西出現了嗎？

Yes. Larry, I'd say that the balance -- American Freight has had to see the greatest impact from inflation. I think it's relative to our guidance overall, but the rest is really just noise. There's minor pluses and minuses in the other businesses, but it's really amounts to noise outside of American Freight.

是的。拉里，我想說的是，美國貨運必須看到通貨膨脹的最大影響。我認為這與我們的總體指導有關，但其餘的實際上只是噪音。其他業務都有一些小的優點和缺點，但在美國貨運之外，這確實相當於噪音。

And you've been Badcock specifically, I'm just trying to get my hands a little bit better on that because I know you've taken out the EBITDA contributions from the lending piece of it. But this [25] -- I think you've done like $50 million year-to-date in EBITDA or something close to that. But I thought that the run rate number was more like $60 million because you had a little excess last year from government stimulus that you thought and then obviously taking out the lending business. So I'm just taking my hands a little bit better on because the Badcock numbers were actually a little bit -- the first 2 quarters were actually kind of better than a little bit of an offset to American Freight, which was already worse. So any thoughts there on what sort of an annualized EBITDA number could look like should look like? Is there anything artificial or onetime in this quarter?

而且你特別是 Badcock，我只是想讓我的手在這方面做得更好一點，因為我知道你已經從它的貸款部分中取出了 EBITDA 貢獻。但是這個[25]——我認為你今年迄今為止在 EBITDA 上已經完成了 5000 萬美元或接近這個數字。但我認為運行率數字更像是 6000 萬美元，因為您去年從政府刺激計劃中獲得了一點超額收益，然後顯然是取消了貸款業務。所以我只是稍微好一點，因為巴德科克的數字實際上有點——前兩個季度實際上比對美國貨運的一點抵消要好，這已經更糟了。那麼，關於年化 EBITDA 數字應該是什麼樣子的任何想法？本季度有什麼人為的或一次性的嗎？

Yes. No, it's a good point. That's why I said that the rest of the business is combined to be noise Badcock on an overall EBITDA performance in the first half of the year outperformed by a little bit versus what we would have expected. But Badcock is a home furnishing business as well as it says in its name, and it's seeing a lot of inflationary pressures, not quite to the same extent that American -- American Freight, their unit cost and their average selling prices are significantly below that of what Badcock. And Badcock is pretty deep value as well. So American Freight has seen more of it. We obviously set our projections for the year giving Badcock a cushion as well. So it's important that you understand that all of the home furnishing businesses are seeing the same inflationary pressure. But as far as the impact relative to our financial projections for FRG as a whole, that -- the bridge really come from American Freight. It seems like for a magnitude for what you're thinking about for Badcock though is directionally correct.

是的。不，這是一個好點子。這就是為什麼我說其餘業務合併為噪音 Badcock 在今年上半年的整體 EBITDA 表現上略高於我們的預期。但是，正如其名稱所言，Badcock 是一家家居用品企業，它面臨著很多通脹壓力，其程度不及 American -- American Freight，其單位成本和平均售價遠低於該水平什麼巴德科克。 Badcock 的價值也相當高。所以美國貨運已經看到了更多。我們顯然設定了今年的預測，也給了 Badcock 一個緩衝。因此，重要的是您要了解所有的家居企業都面臨著同樣的通脹壓力。但就我們對 FRG 整體財務預測的影響而言，這座橋確實來自美國貨運。儘管在方向上是正確的，但您對 Badcock 的想法似乎具有很大的意義。

Right. And just correct me if I'm wrong, because it seems like American Freight, it's a cheaper furniture that's much more sensitive to price, both on the fact that you're freight expenses are now significantly relative to the overall price of the good, but more importantly, your customers who normally you're attracting are now being basically priced out, it's not a normal type of recession. Usually, prices are lower, not higher that consumer is getting hurt more than...

正確的。如果我錯了，請糾正我，因為它看起來像 American Freight，它是一種更便宜的家具，對價格更敏感，因為你的運費現在相對於商品的整體價格顯著增加，但更重要的是，您通常吸引的客戶現在基本上都被淘汰了，這不是一種正常的衰退類型。通常，價格更低，而不是更高，消費者受到的傷害比……

Totally correct for a lot of reasons. Look, American Freight, if you look at their freight costs that are loaded on to the product cost compared to pre-COVID because these last couple of years don't really give you much in terms of really good information. But their freight costs are up almost 200% from where they were at and Badcock is up more order of magnitude 50%. So there is a very large difference. And you're also correct that at American Freight, the -- what you would typically see is in a recession, you would see, though, the lower-income customer, everybody the jobless rate is going up, unemployment is increasing. So you have a trade down, the higher income customer now becomes your customer and the lower income customer who you may lose is replaced that's not really what's happening now. We're not seeing unemployment go up. What we're seeing is the low-income customer having their wallet squeezed and then we're compounding their problem as we've been increasing our prices as we've been getting price increases from our vendors.

完全正確的原因有很多。看，American Freight，如果您查看與 COVID 之前相比加載到產品成本中的運費，因為過去幾年並沒有真正為您提供太多真正好的信息。但他們的運費比原來上漲了近 200%，而 Badcock 的運費上漲了 50% 以上。所以有非常大的區別。你也是正確的，在美國貨運，你通常會看到經濟衰退，但你會看到低收入客戶，每個人的失業率都在上升，失業率在上升。因此，您進行了交易，收入較高的客戶現在成為您的客戶，而您可能失去的收入較低的客戶被替換，這並不是現在真正發生的事情。我們沒有看到失業率上升。我們看到的是低收入客戶的錢包被擠壓，然後我們正在加劇他們的問題，因為我們一直在提高價格，因為我們已經從供應商那裡獲得了價格上漲。

We're very -- we're not doing that again for the back half of the year, which is part of the reason for our guidance. as we continue to increase prices to that low-income consumer, we're just having more and more customers say, "No, I'll wait. So you could increase the pricing. You're going to end up taking more from the customers who continue to buy from you, but you're just going to lose more customers. And we've got 370 stores going to 1,300 stores. It is an opportunity for us to get back into being that value home furnishings business that has spread by word of mouth. I think you know that the American Freight stores, they're not (inaudible) main in [Maine] because they don't have to be the best form of advertising or American Freight is word of mouth because you get a great deal and then you hear about it from a buddy and then you go to the American Freight store.

我們非常 - 我們不會在今年下半年再次這樣做，這是我們指導的部分原因。隨著我們繼續提高低收入消費者的價格，我們只是有越來越多的客戶說，“不，我會等。所以你可以提高價格。你最終會從繼續向您購買的客戶，但您只會失去更多客戶。我們有 370 家商店將增加到 1,300 家商店。這是我們重新成為已經普及的價值家居業務的機會口口相傳。我想你知道 American Freight 商店，它們在 [緬因州] 不是（聽不清）主要，因為它們不必是最好的廣告形式，或者 American Freight 是口耳相傳，因為你得到很多，然後你從朋友那裡聽說，然後你去美國貨運商店。

We'll if all of a sudden, American Freight isn't offering those great deals that, that could end up having a bigger impact. So we're just not going to increase prices. We're going to eat the cost increases that we have embedded in the inventory now we see costs coming down and in some cases, very significantly. We have one of our larger and better vendors, decreasing prices, product cost, 30% to 40% in major category. So we'll shift our purchasing as much as we can to those vendors that are reducing their prices as dramatically as that and see where we go.

如果突然之間，American Freight 沒有提供那些可能最終產生更大影響的優惠交易，我們會這樣做。所以我們只是不打算提高價格。現在我們看到成本下降並且在某些情況下非常顯著，我們將承擔我們嵌入庫存中的成本增加。我們有一個更大更好的供應商，主要類別的價格、產品成本降低了 30% 到 40%。因此，我們將盡可能多地將採購轉移到那些大幅降低價格的供應商那裡，看看我們會去哪裡。

On the other hand, the higher income customer, he or she is not losing their jobs, so they don't need to trade down. And we see this quite a bit in the application. We use a third-party virtual rent-owned provider, and we see in the applications that score of 600 or more in FICO scores that are actually -- the applications are up. So it shows you that, that customer is fine. The scores below 600 we're seeing applications -- just applications, forget what actually gets completed. Applications are down, on average, over 20% and the lower the FICO score, the bigger the decrease in applications. So you're absolutely seeing it, and it's very clear to us, and we're not going to do anything to make it worse for that customer because that customer -- we want that customer to be a customer for life.

另一方面，收入較高的客戶，他或她並沒有失去工作，所以他們不需要降價交易。我們在應用程序中看到了很多。我們使用第三方虛擬租賃提供商，我們在應用程序中看到 FICO 分數達到 600 或更高，實際上是 - 應用程序上升了。所以它告訴你，那個客戶很好。我們看到的分數低於 600 的應用程序 - 只是應用程序，忘記實際完成的內容。申請量平均下降 20% 以上，FICO 分數越低，申請量下降幅度越大。所以你絕對看到了，這對我們來說很清楚，我們不會做任何事情讓那個客戶的情況變得更糟，因為那個客戶——我們希望那個客戶成為終生的客戶。

Right. I appreciate all that color. Can you just switching gears on just Vitamin Shoppe pet supplies. I think you mentioned like 2% and 6% or maybe a little bit less on the same-store growth. Are those numbers -- they're aided by price, I imagine, right? You get some decent price in both those companies. So -- just trying to figure out what the sort of volume growth or what are...

正確的。我欣賞所有這些顏色。你能在維生素專櫃寵物用品上換檔嗎？我認為你提到了 2% 和 6% 或者可能更少的同店增長。這些數字 - 我想它們是由價格輔助的，對吧？你在這兩家公司都能得到一些不錯的價格。所以 - 只是想弄清楚什麼是銷量增長或什麼是......

It's not as dramatic. The inflation is not nearly as dramatic in either health and wellness or pet supplies as it is in home furnishings. Units year-to-date, both at Vitamin Shoppe and PSP traffic down to PSP, units are down at Vitamin Shoppe, but pricing is up, but you're talking single digits on both sides as that end up leading to positive same-store sales. PSP has got higher tickets, but lower traffic.

它沒有那麼戲劇化。健康和保健或寵物用品的通貨膨脹並不像家居用品那樣劇烈。年初至今，Vitamin Shoppe 和 PSP 的銷量下降到 PSP，Vitamin Shoppe 的銷量下降，但價格上漲，但雙方都在談論個位數，因為這最終會導致積極的同店銷售量。 PSP 的門票更高，但流量更低。

And as PSP -- I mean because usually, you get the same sort of -- historically, pet supplies have kind of -- pet industry has grown, but we have heard that there is some less like people buying the dog food and the food but some less of like the bones and more discretionary stuff. Are you guys seeing that also?

作為 PSP——我的意思是因為通常情況下，你會得到相同的——從歷史上看，寵物用品有那種——寵物行業已經發展，但我們聽說有些人不太喜歡購買狗糧和食品但有些不像骨頭和更多可自由支配的東西。你們也看到了嗎？

Absolutely. Absolutely.

絕對地。絕對地。

Okay. Great. Just lastly, just a quick comment. I saw nice to see encouraging to see that you've added a good up to '20 and Vitamin Shoppe and, I think, 20 (inaudible) in the backlog for franchise because I know both of those businesses were basically starting at 0, just like last year, right, so -- or close to 0. So good to see that start to pick up.

好的。偉大的。最後，只是一個簡短的評論。我很高興看到您在 20 年和維生素專櫃中添加了一個很好的產品，我認為，在特許經營的積壓中增加了 20 個（聽不清），因為我知道這兩個業務基本上都是從 0 開始的，只是就像去年一樣，對，所以 - 或接近 0。很高興看到這種情況開始好轉。

Our next question comes from the line of Michael Baker.

我們的下一個問題來自 Michael Baker。

Okay. Thanks. Can you hear me guys?

好的。謝謝。你們能聽到我的聲音嗎？

Yes.

是的。

Right. All right. So first, I'll start off. I guess I'd be remiss if I didn't ask you about Kohl's. You have put out some press release regard -- press releases regarding that. So I think it's a fair game. In some ways, it fit your criteria of what you might buy just because of the cash flow generation and the fact that you could sort of buy it without any incremental equity. On the other hand, Franchise Group doesn't feel like Kohl's is a franchisable model, I guess could you explain the thought process, what you're thinking to even be involved in that? And then what -- if you want to answer, why did it work out? It seems like it could fit. Ultimately, what happened?

正確的。好的。所以首先，我要開始了。如果我不問你關於 Kohl's 的事，我想我會失職。您已經發布了一些關於新聞稿的內容——關於此的新聞稿。所以我認為這是一場公平的比賽。在某些方面，它符合您可能購買的標準，僅僅是因為現金流的產生以及您可以在沒有任何增量股權的情況下購買它的事實。另一方面，Franchise Group 不覺得 Kohl's 是一個可特許經營的模式，我想你能解釋一下思考過程，你在想什麼甚至參與其中？然後——如果你想回答，為什麼會成功？好像可以裝。最終，發生了什麼？

Yes. Good questions. And Yes. I'll make a couple of comments. I think I can help you. You're right. First of all, we don't view Kohl's as a franchisable business. And we struggled the first couple of times we were approached with the concept, it didn't really make sense for us because it didn't fit Franchise Group as a franchisable business. But ultimately, it was the structure of what was proposed to us that is the transaction structure that was too good to ignore. If we have the opportunity to engage in a transaction that brings that much potential cash flow to Franchise Group without actually having any net tax investment risk out of FRG, that transaction, we have to at least explore ultimately, and I know we did put out a couple of releases one outlining what we might do and then also saying that we weren't going forward.

是的。好問題。是的。我會發表一些評論。我想我可以幫助你。你是對的。首先，我們不認為 Kohl's 是一個可特許經營的企業。最初幾次我們接觸這個概念時我們都很掙扎，這對我們來說真的沒有意義，因為它不適合特許經營集團作為特許經營業務。但最終，向我們提出的交易結構是太好了，不容忽視。如果我們有機會進行一項交易，為特許經營集團帶來如此多的潛在現金流，而實際上沒有任何來自 FRG 的淨稅收投資風險，那麼該交易，我們至少必須最終探索，我知道我們確實推出了幾個版本，其中一個概述了我們可能會做的事情，然後還說我們不會繼續前進。

But ultimately, the goalpost moved a little bit from where we started as far as not having any net cash investment risk out of FRG, but it didn't move by so much that it made sense to just walk away from offhand, I think if we had proceeded it would have been a structure where we would have had at a minimum, all of our risk of our cash risk paid off very quickly, months, not years. And then ultimately, the goal would be to use that free cash flow to accelerate the growth and diversification of Franchise Group with franchisable businesses. Yes, obviously, the transaction did not go forward. I think we are likely to see a lot of benefit from going through the process, but it's not a transaction that we ultimately culminated.

但最終，球門柱從我們開始的地方稍微移動了一點，因為 FRG 沒有任何淨現金投資風險，但它並沒有移動太多，以至於離開副手是有意義的，我認為如果我們已經著手，這將是一個我們至少可以擁有的結構，我們所有的現金風險都很快得到了回報，幾個月，而不是幾年。最終，目標將是利用自由現金流來加速特許經營集團的增長和多元化，以及特許經營業務。是的，顯然，交易沒有進行。我認為我們可能會從這個過程中看到很多好處，但這並不是我們最終達到頂峰的交易。

So I guess a follow-up to that would be what now, plenty of dry powder. That was going to be a big one. You were willing to do it. I didn't go forward. So now you presumably have a lot of dry powder. So how is the acquisition pipeline now? Is it better because businesses are struggling? Is it worse because maybe it's hard to get financing? And how should we think about the next steps for Franchise Group.

所以我想接下來會是什麼，大量的干粉。那將是一件大事。你願意這樣做。我沒有往前走。所以現在你大概有很多乾粉。那麼現在的收購渠道如何？是不是因為企業正在苦苦掙扎而變得更好？是不是因為很難獲得融資而變得更糟？以及我們應該如何考慮特許集團的下一步。

Yes. Well, all of the above is correct. I think that the -- the environment -- there's plenty of vision, plenty of opportunities for us to explore some bigger, some smaller. Look, our lenders, and I mentioned them in the script, our lenders were fantastic in that transaction. And I have to say, as I sit here today, I think our lenders are probably more disappointed than we work even that the transaction didn't end up going forward. I mean they were there for us, and they are very anxious to help us with whatever comes next, and we're going to take them up on that. I think we're certainly back within our comfort zone as far as leverage, even under-levered. If the right opportunity comes up, I think we will be prepared to take advantage of it for sure. You're absolutely correct. Those capital markets were quite chaotic.

是的。嗯，以上都是正確的。我認為 - 環境 - 有很多遠見，有很多機會讓我們探索更大的，一些更小的。看，我們的貸方，我在腳本中提到了他們，我們的貸方在那筆交易中表現出色。我不得不說，當我今天坐在這裡時，我認為我們的貸方可能比我們的工作更失望，即使交易沒有最終進行。我的意思是他們在我們身邊，他們非常渴望在接下來的任何事情上幫助我們，我們將接受他們。我認為就槓桿率而言，我們肯定回到了我們的舒適區，甚至是槓桿率不足。如果出現合適的機會，我認為我們肯定會做好充分利用它的準備。你完全正確。那些資本市場相當混亂。

The cost of capital is extremely high generally, to the extent that our cost of capital is going to be high as the threshold for what we're going to need to get in return for accepting that cost of capital that threshold goes up as well. But yes, look, I think that this environment that we're in has and will continue to create more opportunities. And as we've discussed many times on these calls before, there is an opportunity cost to doing that next transaction because it's -- if you're going to lever up, we need to delever before we can really engage in anything else meaningfully after that. So I think we're going to be very mindful about what that next larger transaction is. And while we're at it, we can certainly look at tuck-ins and other verticals to add on a smaller basis.

資本成本通常非常高，以至於我們的資本成本將很高，因為我們需要獲得什麼以換取接受該門檻的資本成本。但是，是的，看，我認為我們所處的環境已經並將繼續創造更多機會。正如我們之前在這些電話會議上多次討論過的那樣，進行下一筆交易存在機會成本，因為它是——如果你要提高槓桿，我們需要先去槓桿，然後才能真正有意義地參與其他任何事情。那。所以我認為我們會非常注意下一個更大的交易是什麼。雖然我們正在這樣做，但我們當然可以查看折疊和其他垂直方向以在較小的基礎上添加。

Makes sense. If I could so one more, just switching gears. On American Freight, one thought is that this was a little bit perhaps a recession, I don't want to call it recession proof, but a recession resistant model, I guess it's turning out not to be the case. But if you could just talk about the long-term expectations, if you will, for American Freight, why this is still a good business. And part of that, if you could talk about the idea that inflation now coming down, when does that start to flow through the P&L, presumably from your guidance, not this year? It sounds like in the further process maybe next year, but if you could just delve into that a little bit.

說得通。如果我可以再做一次，那就換個檔次。在 American Freight 上，有人認為這可能有點衰退，我不想稱之為衰退證明，而是一種抗衰退模型，我想事實並非如此。但如果你能談談長期預期，如果你願意的話，對於美國貨運來說，為什麼這仍然是一個好生意。其中一部分是，如果您可以談論通貨膨脹現在正在下降的想法，那麼它什麼時候開始通過損益表流動，大概是根據您的指導，而不是今年？聽起來可能會在明年進行進一步的處理，但是如果您可以深入研究一下。

Sure. And you're correct. We do believe American Freight is recession resistant. And I think that the problem is this is not an actual recession and a recession where you're going to see unemployment rates go up, that impacts lower income, middle income and higher income customers. This is really just an impact of inflation. This is -- I'm not sure what the right term would be, but this is like 3 standard deviation type inflation that we're seeing. And unfortunately, it's not a recession. I think in a good old-fashioned recession, you'll see American Freight perform very well. And once someday, there will be another good old-fashioned recession.

當然。你是對的。我們確實相信 American Freight 能夠抵禦經濟衰退。而且我認為問題在於，這不是一場真正的衰退，而是一場你會看到失業率上升的衰退，這會影響低收入、中等收入和高收入客戶。這實際上只是通貨膨脹的影響。這是 - 我不確定正確的術語是什麼，但這就像我們看到的 3 個標準差類型的通貨膨脹。不幸的是，這不是經濟衰退。我認為在老式的衰退中，你會看到美國貨運表現非常好。有朝一日，又會出現另一場老式的衰退。

The American Freight in my mind, is still -- it's the best unit economics of all the brands that we have right now. There's a ton of demand from franchisees we're limited by finding real estate and being able to get stores open. I think you know it's the only brand that we have where we are as eager as we can be to even open company-owned stores and part of our plan is open company-owned stores every year, whether we end up ultimately refranchising those or not. But whether it's 2 years, 3 years, 5 years, 10 years from now, American Freight, is ultimately likely to be the most valuable business that we own, contributing the most free cash flow of any business that we own today, that is, of course, and it really is a fantastic business.

在我看來，美國貨運仍然是——它是我們目前擁有的所有品牌中最好的單位經濟學。加盟商有大量需求，我們受限於尋找房地產和開店的能力。我想你知道這是我們唯一一個我們渴望開公司自有商店的品牌，我們計劃的一部分是每年開設公司自有商店，無論我們最終是否重新特許經營這些商店.但無論是從現在開始的 2 年、3 年、5 年、10 年，American Freight 最終都可能成為我們擁有的最有價值的業務，貢獻了我們今天擁有的任何業務中最多的自由現金流，也就是說，當然，這確實是一項了不起的業務。

It's just been hit with quite a storm that makes it very deep value products not so deep value in the customers' eyes and our main customer can't afford the product. So we're seeing that's -- if I told you we would be seeing units in furniture and mattress down over 50% compared to pre-COVID, not COVID peak, pre-COVID levels and the business would still be generating the EBITDA that it's generating, I don't think I would have believed that myself, but it is. That's just how good of a business it is. It is withstanding as I said, at least 3 standard deviations of chaotic performance right now.

它剛剛遭遇了一場風暴，使得它在客戶眼中價值非常高的產品價值不那麼高，我們的主要客戶買不起產品。所以我們看到的是——如果我告訴你，我們會看到家具和床墊中的單位與 COVID 之前的水平相比下降了 50% 以上，而不是 COVID 峰值、COVID 之前的水平，並且業務仍將產生它的 EBITDA生成，我不認為我會相信自己，但確實如此。這就是它的好生意。正如我所說，目前至少有 3 個標準差的混沌性能。

Our next question comes from (inaudible) Ian Zaffino at OPCO.

我們的下一個問題來自 OPCO 的（聽不清）Ian Zaffino。

It's Ian Zaffino from Oppenheimer. A couple of questions here. I guess the first one, I guess you explained the comp or the same-store sales slowdown in pet supply. It seems like its traffic was down, also discretionary was weaker. But can you tell us maybe why that traffic was down, what you're seeing there? And then also Vitamin Shoppe, I guess, also decelerated. What was that attributable to on a same-store basis?

是奧本海默的伊恩·扎菲諾。這裡有幾個問題。我猜第一個，我猜你解釋了寵物供應的補償或同店銷售放緩。似乎它的流量下降了，自由裁量權也變弱了。但是你能告訴我們為什麼流量下降，你在那裡看到了什麼嗎？然後還有維生素專櫃，我猜，也減速了。同店的原因是什麼？

Yes. Thanks, Ian. And I think that it's really across the board, although the -- I know we spent a lot of time talking about the home furnishings business because the inflation there has been such a -- had such a dramatic impact. But across the board, you're still saying the average consumer for all of our businesses seeing food and energy inflation and the cost to fill up the tank is greater and they're trying to limit the number of trips to any store. That would include Vitamin Shoppe. That would include Pet Supplies Plus. I think that's why even though we're seeing the traffic down at PSP. We're seeing still higher average ticket prices, and that's what's leading to the positive revenue comps. Vitamin Shoppe, same thing. People are making fewer trips to the store, their units are down to tickets up, but the units per transaction are actually down as well.

是的。謝謝，伊恩。而且我認為它確實是全面的，儘管 - 我知道我們花了很多時間談論家居用品業務，因為那裡的通貨膨脹已經如此 - 產生瞭如此巨大的影響。但總體而言，您仍然在說我們所有企業的普通消費者看到食品和能源通脹以及加滿油箱的成本更高，他們正試圖限制前往任何商店的次數。這將包括維生素專櫃。這將包括 Pet Supplies Plus。我認為這就是為什麼即使我們看到 PSP 的流量下降的原因。我們看到平均票價仍然更高，這就是導致正收入組合的原因。維生素專櫃，同樣的事情。人們去商店的次數減少了，他們的單位減少到門票上漲，但每筆交易的單位實際上也在下降。

So I just think that it's across the board. Look, (inaudible), even as we get into the summer, customers are taking vacations that they didn't take last summer, and so utilization is down. It still comped positively, but utilization is still lower. So I think it's really across the board buddies. The same dynamic. We have fewer customers per store that are paying more on a monthly basis, then they're used to paying. And so the business still generates plenty of cash. The business is doing well. But there's a lot going on underneath the themes we're or under the covers with the actual customer activity.

所以我只是認為它是全面的。看，（聽不清），即使我們進入夏天，客戶也在休假，他們去年夏天沒有休假，所以利用率下降了。它仍然是積極的，但利用率仍然較低。所以我認為這真的是全面的哥們。同樣的動態。每個商店每月支付更多費用的客戶越來越少，然後他們就習慣了支付。因此，該業務仍然產生大量現金。生意做得很好。但是在我們的主題之下或在實際客戶活動的幕後，有很多事情發生。

Okay. Perfect. And then also stock is well off the high we'll probably see some more downside coming up. Any consideration of a meaningful buyback here or anything like that as far as return to capital, take advantage of where the share price is at this point?

好的。完美的。然後股票也遠離高位，我們可能會看到更多的下行空間。是否考慮在這裡進行有意義的回購或類似的資本回報，利用此時的股價？

Yes. So we authorized at our 2 Board meetings, we authorized a $500 million buyback over the next few years. We did not intend to do a [10b5-1]. We want to be strategic about when and how much we acquire. Certainly it is something that -- we just to say we've not had an open window, still don't have an open window. We didn't have an open window because of the Kohl's transaction, and then we got into the quiet period. So we haven't had no window yet to speak of. But look, we will -- we now have the ability to weigh buying more of our existing businesses against buying other businesses. That's not a tool that we've had in the toolbox for. We have it now. We're very excited about that, and I don't think anybody knows our business is better than we do. which is a good thing. So I think we'll be opportunistic as we can be.

是的。因此，我們在 2 次董事會會議上授權，我們授權在未來幾年進行 5 億美元的回購。我們不打算做 [10b5-1]。我們希望對我們獲得的時間和數量具有戰略意義。當然，它是——我們只是說我們沒有打開的窗口，仍然沒有打開的窗口。由於科爾的交易，我們沒有打開窗口，然後我們進入了安靜期。所以我們還沒有窗口可言。但是看，我們將 - 我們現在有能力在購買更多現有業務與購買其他業務之間進行權衡。這不是我們在工具箱中擁有的工具。我們現在有了。我們對此感到非常興奮，我認為沒有人知道我們的業務比我們做得更好。這是一件好事。所以我認為我們會盡可能地投機取巧。

I would now like to turn it back to Brian for closing remarks.

我現在想把它轉回布賴恩的閉幕詞。

Great. Well, thank you very much for joining us today. And operator, please end the call.

偉大的。嗯，非常感謝你今天加入我們。接線員，請結束通話。

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

感謝您參加今天的會議。這確實結束了程序。您現在可以斷開連接。