Franchise Group Inc (FRG) 2023 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Franchise Group's Fiscal 2023 First Quarter Conference Call. (Operator Instructions) I would now like to hand the conference over to your host, Andrew Kaminsky, Executive Vice President and Chief Administrative Officer of Franchise Group.

女士們、先生們，感謝你們的支持並歡迎參加 Franchise Group 2023 財年第一季電話會議。 （操作員指示）我現在想將會議交給主持人安德魯·卡明斯基（Andrew Kaminsky），他是 Franchise Group 的執行副總裁兼首席行政官。

Thank you, MJ. Good morning 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，喬丹。早安，感謝您參加我們的電話會議。我正在與 Franchise Group 總裁兼執行長 Brian Kahn 和 Franchise Group 財務長 Eric Seeton 通話。

Before getting started, I'd like to mention that certain matters discussed on this call may contain forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995 and other provisions of federal securities laws. These forward-looking statements are based on management's current expectations and are not guaranteed of future performance.

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》和聯邦證券法其他條款會議中的前瞻性陳述。這些前瞻性陳述是基於管理階層目前的預期，並不能保證未來的績效。

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.

實際結果可能與前瞻性陳述中表達或暗示的結果有重大差異。前瞻性陳述是在本次電話會議之日做出的，除非法律要求，否則 Franchise Group 不承擔更新或修改這些陳述的義務。請投資人不要過度依賴這些前瞻性陳述。

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 31, 2022, and other filings we make with the SEC.

有關可能導致 Franchise Group 的實際結果與前瞻性陳述中所示結果存在重大差異的這些及其他風險和不確定性的更詳細討論，請參閱我們截至 12 月 31 日的財政年度的 10-K 表格， 2022 年，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 PR 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 for investors for informational and comparative purposes. The non-GAAP financial measures the Company uses have limitations and may differ from those used by other companies.

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不同時期和公關公司之間的表現時會專注於這些指標。請參閱我們網站上的新聞和活動部分的收益發布，網址為franchisegrp.com，以了解非公認會計準則財務指標與公認會計準則財務指標的對帳情況。非GAAP 財務資訊不應被孤立地視為GAAP 財務資訊的替代品或優於GAAP 財務信息，但我們將其納入其中，是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，並且對投資者提供信息有用。和比較目的。本公司使用的非公認會計準則財務指標有其局限性，並且可能與其他公司使用的不同。

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

現在，我想把電話轉給布萊恩。布萊恩？

Thank you, Andrew, and good morning to our listeners and thank you for joining us. Before reviewing our first quarter results, I wanted to comment on the announcement this morning regarding the Company's execution of a definitive agreement to be acquired by a consortium led by our management team for $30 per common share in cash.

謝謝你，安德魯，我們的聽眾早安，謝謝您加入我們。在回顧我們第一季的業績之前，我想對今天早上發布的有關公司執行最終協議的公告發表評論，該協議將由我們的管理團隊領導的財團以每股普通股 30 美元的現金收購。

On March 20, we announced the receipt of an unsolicited non-binding proposal to acquire all of the outstanding shares of common stock of FRG for $30 per share in cash. This proposal was expressly conditioned on, among other things, management rolling over all of their equity interests in the Company. The third party bidder was B. Riley Financial Inc.

3 月 20 日，我們宣布收到一份主動提出的非約束性提案，將以每股 30 美元的現金收購 FRG 的所有已發行普通股。該提案明​​確的條件之一是管理層將其在公司的所有股權展期。第三方投標者是 B. Riley Financial Inc.。

In response to this proposal, our Board of Directors established a special committee comprised solely of independent directors. The special committee retained independent legal counsel and a financial advisor to explore the proposal and other strategic alternatives for FRG, and they ultimately determined that accepting this proposal was the best path forward for the public shareholders.

為了回應這項提議，我們的董事會成立了一個僅由獨立董事組成的特別委員會。特別委員會聘請了獨立法律顧問和財務顧問來探討該提案和 FRG 的其他策略選擇，他們最終確定接受該提案是公眾股東的最佳前進道路。

After conducting due diligence, B. Riley decided not to proceed on the terms of its original proposal, but was willing to provide financing to the consortium led by the management team for the transaction that was announced this morning. The key terms in the transaction are outlined in the press release the Company issued this morning and we anticipate filing an 8-K that will include more detailed information including a copy of the merger agreement. You can also find our transaction press release on our website.

經過盡職調查後，B. Riley 決定不再按照最初提案的條款進行，但願意為今天上午宣布的交易向管理團隊領導的財團提供融資。該公司今天上午發布的新聞稿中概述了交易的關鍵條款，我們預計將提交一份 8-K，其中將包含更詳細的信息，包括合併協議的副本。您也可以在我們的網站上找到我們的交易新聞稿。

As detailed in the press release, the consortium has agreed to pay $30 per share in cash for all of the public commons shares. The Company anticipates redeeming its outstanding preferred stock in connection with the closing or continuing to pay the preferred stock dividend through the redemption date. The merger agreement does not permit the continued payment of the common stock dividend, although as we will discuss in more detail as part of the review of the first quarter results, our credit agreements would not permit the dividend to be paid.

正如新聞稿中所詳述的那樣，該財團已同意以每股 30 美元的現金購買所有公共普通股。公司預計在交屋時贖回其已發行優先股，或在贖回日繼續支付優先股股利。合併協議不允許繼續支付普通股股息，儘管我們將在第一季業績審查中更詳細地討論，我們的信貸協議不允許支付股息。

The credit agreements permit dividends so long as the Company's leverage ratio remains below a specified level, and we are currently in excess of this level. While the special committee solicited alternative proposals following the receipt of the offer from B. Riley, the transaction also includes a 30-day go-shop period, which the Company intends to affirmatively solicit alternative acquisition proposals.

只要公司的槓桿率保持在指定水平以下，信貸協議就允許股息，而我們目前超過了這個水平。雖然特別委員會在收到 B. Riley 的要約後徵求了替代建議，但該交易還包括 30 天的考察期，公司打算在這段時間內積極徵求替代收購建議。

In addition, the closing of the transaction is conditioned upon the holders of a majority of our outstanding shares of common stock that are not held by the consortium or any of their affiliates or related parties voting in favor of the transaction. We expect the transaction to close in the second half of 2023.

此外，交易的完成取決於我們大部分已發行普通股（不屬於該財團或其任何附屬公司或關聯方持有）的持有人投票贊成該交易。我們預計交易將於 2023 年下半年完成。

Over the coming weeks and months, our public filings will provide a significant amount of additional information regarding the transaction and the Company. I would now like to review our first quarter results, but before I do so, I'd like to note that in light of the transaction announcement this morning, we will not be holding a question-and-answer session at the end of the call. I would like to remind you that we will be making many references to perform items throughout this call.

在未來幾週和幾個月內，我們的公開文件將提供有關交易和公司的大量附加資訊。我現在想回顧一下我們的第一季業績，但在此之前，我想指出，鑑於今天早上的交易公告，我們將不會在季度末舉行問答會議稱呼。我想提醒您，在整個通話過程中，我們將多次引用執行項目。

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 performer results will allow us to discuss and evaluate performance of the acquired businesses when a comparable period is not available due to the timing of the acquisition.

我們的新聞稿和文件可能涉及被收購企業在被 Franchise Group 收購之前的歷史財務表現。這些項目已進行調整，以在合理的範圍內與我們的財務日曆和會計政策保持一致。當由於收購時間而無法獲得可比較期間時，與績效結果的比較將使我們能夠討論和評估所收購業務的績效。

For the first quarter of 2023, Buddy's system-wide, same store sale comps were negative 3.5% with franchisee e-comps declining 3.0% and corporate stores declining 7.0%. In April Buddy's system-wide e-comps were down 7.8% with franchisee e-comps down 7.8% and corporate stores down 7.7%. Customer counts and average revenue per customer remain relatively flat compared to the fourth quarter of 2022.

2023 年第一季度，Buddy 的全系統同店銷售額年減 3.5%，其中加盟商電子銷售額下降 3.0%，企業門市下降 7.0%。 4 月份，Buddy 系統範圍內的電子促銷活動下降了 7.8%，其中加盟商電子促銷活動下降了 7.8%，企業商店下降了 7.7%。與 2022 年第四季相比，客戶數量和每位客戶的平均收入保持相對穩定。

In the first quarter, Buddy's signed agreements for 11 new franchise locations growing its backlog to 121 new franchise stores. Buddy's did not open any new stores in the quarter and ended the quarter with 338 total locations of which 302 are franchised. Badcock's system-wide comps were down 18.9% for the first quarter and were down 26.2% in April.

第一季度，Buddy's 簽署了 11 家新特許經營店的協議，將其積壓的新特許經營店數量增加到 121 家。 Buddy's 本季沒有開設任何新店，季度末共有 338 家門市，其中 302 家為特許經營店。 Badcock 的全系統比較第一季下降了 18.9%，四月下降了 26.2%。

Transaction comps were down 19.4% in the first quarter. Customer traffic was down approximately 15,000 customers to approximately 110,000 customers in the quarter. Average order values were nominally down less than 1% in the quarter to $1,159.

第一季交易比較下降 19.4%。本季客戶流量減少了約 15,000 名客戶，降至約 11 萬名客戶。本季平均訂單價值名義上下降了不到 1%，至 1,159 美元。

During the quarter, we sold $133.3 million of Badcock consumer accounts receivable for $109.7 million. The net proceeds were used to pay down our ABL. Badcock ended the quarter with 382 locations of which 317 are dealer locations. American Freight comps were down 4.1% in the first quarter. Comps were up 2.6% in January, down 2.1% in February and down 9.6% in March.

本季度，我們以 1.097 億美元的價格出售了 1.333 億美元的 Badcock 消費者應收帳款。所得淨收益用於支付我們的 ABL。截至本季末，Badcock 擁有 382 個網點，其中 317 個為經銷商網點。美國貨運公司第一季股價下跌 4.1%。 1 月年增 2.6%，2 月下降 2.1%，3 月下降 9.6%。

Comps in April were down 12.9%. Freight costs as a percentage of sales remained flat compared to the fourth quarter coming in at approximately 10.5% of revenue. Average store -- store average order values were up approximately $60 to $760 on increased in-store traffic of over 10% to approximately 260,000 customers in the quarter.

4 月年減 12.9%。貨運成本佔銷售額的比例與第四季持平，約為營收的 10.5%。商店平均訂單價值增加了約 60 美元至 760 美元，因為本季店內客流量增加了 10% 以上，達到約 26 萬名顧客。

In the first quarter, we sold three new franchise locations, opened two new franchise stores, and have a current backlog of 37 franchise locations. American Freight finished the quarter with 370 locations, which included 11 franchise stores. We continually review the carrying value of our assets to ensure they reflect fair value on our balance sheet.

第一季度，我們出售了三家新的特許經營店，開設了兩家新的特許經營店，目前積壓的特許經營店有 37 家。截至本季度，American Freight 擁有 370 個營業點，其中包括 11 家特許經營店。我們不斷審查資產的帳面價值，以確保它們反映我們資產負債表上的公允價值。

Due to the financial performance of American Freight this quarter, we took a $75 million non-cash impairment charge to the goodwill of American Freight, which is reflected in our GAAP operating results. Sylvan same center comps were up 0.1% in the quarter. Sylvan sold 9 new franchise in the first quarter and had a backlog of 23 centers at the end of the quarter, as well as 553 brick and mortar centers operating, which includes 5 corporate centers.

鑑於 American Freight 本季的財務表現，我們對 American Freight 的商譽提列了 7,500 萬美元的非現金減損費用，這反映在我們的 GAAP 營運業績中。本季 Sylvan 同一中心的業績成長了 0.1%。 Sylvan 在第一季出售了 9 個新的特許經營權，到季度末積壓了 23 個中心，以及 553 個實體中心正在運營，其中包括 5 個企業中心。

At PSP system-wide same store sales comps were up 5.9% in the first quarter. Franchise comps were up 7.1% in the quarter while corporate stores were up 4.1%. PSP transaction comps were down 1.5%. PSP store traffic was up 2.4% over 6.3 million customers and store average order values were up over 15% or $6 in the first quarter.

第一季 PSP 全系統同店銷售額年增 5.9%。本季特許經營店成長 7.1%，而企業商店成長 4.1%。 PSP 交易比較下降 1.5%。第一季度，PSP 商店客流量成長了 2.4%，超過 630 萬顧客，商店平均訂單價值增加了 15% 以上，即 6 美元。

In April PSP's system-wide comps were up 6.2% with franchisee comps up 7.7%, corporate stores up 4.4%. Freight costs declined from 4.6% of sales to 3.5% of sales in the first quarter. PSP continued to build its backlog with the sale of 21 new franchise locations in the quarter, bringing total backlog at PSP to 228 locations. PSP sold 6 wagon wash territories this quarter and currently has a backlog of 36 wagon wash stores.

4 月份，PSP 的全系統零售價上漲了 6.2%，其中特許經營店的零售價上漲了 7.7%，企業商店上漲了 4.4%。第一季貨運成本從佔銷售額的 4.6% 下降至 3.5%。 PSP 在本季出售了 21 家新特許經營店，並繼續累積積壓訂單，使 PSP 的積壓門市總數達到 228 家。 PSP 本季出售了 6 個貨車清洗區域，目前積壓了 36 個貨車清洗店。

During the first quarter, PSP also closed on the acquisition of 20 new locations from a competitor in bankruptcy and has already franchised 12 of these locations to existing franchisees. We expect to sell the balance of these stores to existing franchisees in the coming months. All of these locations will be rebranded under the PSP or wagon wash banners. Overall, PSP had 707 locations consisting of 234 corporate stores, 449 PSP franchise stores and 24 wagon wash franchise stores. Vitamin Shop overall comps were up 3.4% in the first quarter and were up 1.9% in April. Store traffic in the first quarter was up 2.9%.

第一季度，PSP 還完成了從破產競爭對手手中收購 20 家新門市，並已將其中 12 家門市特許經營給現有特許經營商。我們預計在未來幾個月內將這些商店的剩餘部分出售給現有的特許經營商。所有這些地點都將在 PSP 或貨車清洗橫幅下重新命名。總體而言，PSP 擁有 707 家商店，其中包括 234 家公司商店、449 家 PSP 特許經營店和 24 家旅行車清洗特許經營店。 Vitamin Shop 整體業績第一季成長 3.4%，4 月成長 1.9%。第一季商店客流量成長了 2.9%。

During the quarter, sports nutrition accounted for approximately 55.8% of overall sales compared to 48.9% in the first quarter of 2022. In the first quarter, direct to consumer accounted for approximately 25.7% of the business compared to 25.1% in the first quarter of 2022. Vitamin shops sold five new franchise locations in the quarter bringing backlog up to 59 stores. Vitamin Shop currently operates 699 brick-and-mortar locations, three of which are franchise.

本季度，運動營養品約佔總銷售額的55.8%，而2022 年第一季為48.9%。第一季度，直接面向消費者的業務約佔業務的25.7%，而2022 年第一季為25.1 %. 2022 年。維生素商店在本季出售了 5 家新的特許經營店，使積壓商店達到 59 家。 Vitamin Shop 目前經營 699 家實體店，其中 3 家為特許經營店。

On a consolidated basis for the first quarter of 2023, total reported revenue for Franchise Group was $1.105 billion. Net loss was $108.3 million or $3.16 per fully diluted share. Adjusted EBITDA was $66.0 million and non-GAAP earnings per share was $0.11. We are still in the process of transitioning consumer financing at Badcock from in-house to third-party partners and have excluded the non-core results of the finance business from adjusted EBITDA and non-GAAP earnings per share.

在 2023 年第一季的合併基礎上，Franchise Group 報告的總收入為 11.05 億美元。淨虧損為 1.083 億美元，即完全稀釋後每股虧損 3.16 美元。調整後 EBITDA 為 6,600 萬美元，非 GAAP 每股收益為 0.11 美元。我們仍在將 Badcock 的消費者融資從內部合作夥伴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 EBITDA 和非 GAAP 每股盈餘中排除。

While we can pro forma the income statement for consumer lending, the balance sheet continues to reflect securitization debt and accounts receivable despite most of the receivables having been sold to third parties. Once we discontinue originating customer loans, we believe the securitized receivables will be accounted for as a sale and the related assets and liabilities will no longer be reported on our balance sheet.

雖然我們可以編制消費貸款的損益表，但資產負債表繼續反映證券化債務和應收帳款，儘管大部分應收帳款已出售給第三方。一旦我們停止發放客戶貸款，我們相信證券化應收帳款將被視為銷售，相關資產和負債將不再在我們的資產負債表上報告。

In February, we closed on a 300 million add-on financing to our existing first lien term loan. The net proceeds were used to pay down our AVL credit facility and provide its capacity to continue to finance the Badcock business while we work towards an alternative solution. We ended the quarter with approximately $1.4 billion in gross outstanding term debt and cash of approximately $98.3 million.

2 月份，我們在現有第一筆留置權定期貸款的基礎上完成了 3 億美元的附加融資。所得淨收益用於償還我們的 AVL 信貸額度，並在我們努力尋找替代方案的同時，提供繼續為 Badcock 業務提供資金的能力。本季末，我們的未償定期債務總額約為 14 億美元，現金約為 9,830 萬美元。

At the end of the first quarter, we had approximately $363 million of availability on our ABL revolver and currently have approximately $300 million of remaining availability. As I noted earlier, management was unable to recommend that the board declare a regular quarterly common stock dividend this quarter due to restrictions in our credit agreements.

在第一季末，我們的 ABL 左輪手槍有大約 3.63 億美元的可用空間，目前還有大約 3 億美元的剩餘可用空間。正如我之前指出的，由於我們的信貸協議的限制，管理層無法建議董事會在本季度宣布定期發放普通股股息。

Our credit agreements permit, dividends so long as the Company's leverage ratio remains below a specified level, and we are currently in excess of this level. In light of today's announcements and our first quarter financial results, we are withdrawing our financial forecast for 2023 and we'll provide additional disclosures and upcoming proxy filings for your review and consideration.

我們的信貸協議允許，只要公司的槓桿率保持在指定水平以下，我們就可以派發股息，而我們目前超過了這個水平。根據今天的公告和我們第一季的財務業績，我們將撤回 2023 年的財務預測，我們將提供額外的披露資訊和即將提交的委託書供您審查和考慮。

I want to thank all of our shareholders and lenders for their support. We will issue updates as required over the coming months, and thank you. Operator, please conclude the call.

我要感謝所有股東和貸方的支持。我們將在未來幾個月內根據需要發布更新，謝謝。接線員，請結束通話。

This concludes today's presentation. Thank you for your attendance. You may now disconnect.

今天的演講到此結束。感謝您的出席。您現在可以斷開連線。