Papa Murphy's reports Q1 net earnings of US$819,000, up 15.2% from year-ago period as revenues rise 28.1% to US$25.1M

Nevin Barich

Nevin Barich

VANCOUVER, Washington , May 22, 2014 (press release) – Papa Murphy's Holdings, Inc. (FRSH) today announced financial results for its first quarter ended March 31, 2014.

Key highlights for the first quarter of 2014 compared to the first quarter of 2013 include:

Total revenues were $25.1 million compared to $19.6 million. Excluding $1.8 million of revenues in the first quarter of 2014 related to the re-sale of point of sale licenses to franchisees at cost, revenue increased 18.9%.

Domestic comparable store sales increased 3.3%, including an increase of 7.1% for domestic company-owned stores and 3.1% for domestic franchise stores.

Net income was $819,000 compared to $711,000.

Pro forma net income(1) increased 60.0% to $2.0 million, or $0.12 per diluted share from $1.2 million, or $0.07 per diluted share.

Adjusted EBITDA(1) increased 33.7% to $7.5 million from $5.6 million.

21 new Papa Murphy's stores opened system-wide, including 19 domestic franchise openings.
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(1) Pro forma net income and adjusted EBITDA are non-GAAP measures. For reconciliations of adjusted EBITDA and pro forma net income to GAAP net income and discussions of why we consider them useful, see the "Reconciliation of Non-GAAP Measures" accompanying this release.

Ken Calwell, President and Chief Executive Officer of Papa Murphy's Holdings, Inc., stated "We are pleased to begin fiscal 2014 with impressive increases in revenue and pro forma profitability. Our success continues to be driven by the collective hard work of our team and franchisees, as we continue to help busy parents and families solve the dinnertime dilemma of providing their family with a high-quality, home-cooked meal, at a great value."

Calwell added, "Following the success of our May IPO, we are excited about the opportunities ahead for Papa Murphy's. We have a unique business that has clearly resonated with our guests as demonstrated by the consistency with which they have rated us as their pizza chain of choice over the years, as well as the consistency of our same store sales growth which we again demonstrated in the first quarter. We have tremendous white space potential to grow our store base, including a substantial opportunity within our existing core markets. We also have a number of initiatives in place that we believe can continue to drive same store sales growth and improve store-level profitability across our system."

Initial Public Offering

On May 7, 2014, following the end the first quarter of 2014, the Company successfully completed an initial public offering ("IPO) of common shares at $11.00 per share. The Company issued 5,833,333 shares of common stock. Total net proceeds to Papa Murphy's from the offering after deducting underwriter discounts and commissions and estimated offering expenses were approximately $55.8 million. Net proceeds of the IPO were primarily used to pay down $55.5 million of existing debt.

Key Operating Metrics

We evaluate the performance of our business using a variety of operating and performance metrics. Below is a description of our key operating metrics:

Average Weekly Sales consists of the average weekly sales of domestic franchised and company-owned stores over a specified period of time and is calculated by dividing the total net sales of our system-wide stores for the relevant time period by the number of weeks these same stores were open in such time period.

Comparable Store Sales represents the change in year-over-year sales for domestic comparable stores. A comparable store is a store that has been open for at least 52 full weeks from the comparable date (the Tuesday following the opening date). As of the end of the first quarter of 2014 and 2013, there were 1,304 and 1,255 domestic comparable stores, respectively.

System-wide sales include net sales by all of our system-wide stores.

Adjusted EBITDA is defined as net income (loss) before interest expense, provision for (benefit from) income taxes and depreciation and amortization, with further adjustments to reflect the additions and eliminations of certain income statement items including non-cash charges, income and expenses that we consider not indicative of ongoing operations and certain other adjustments.

2014 Financial Outlook

Based on current information, Papa Murphy's Holdings, Inc. is introducing the following guidance for fiscal year 2014, which ends on December 29, 2014:

At least 105 new domestic franchise store openings

Domestic comparable store sales growth of at least 2.0%; Domestic comparable sales growth for the second quarter is expected to be below the anticipated annual rate

Total System-wide sales of at least $830 million

Conference Call

Papa Murphy's Holdings, Inc. will host a conference call to discuss the first quarter financial results on Thursday, May 22, 2014 at 5 PM Eastern Time.

The conference call can be accessed live over the phone by dialing 877-407-3982 or for international callers by dialing 201-493-6780. A replay will be available after the call and can be accessed by dialing 877-870-5176 or for international callers by dialing 858-384-5517; the passcode is 13582843. The replay will be available until Thursday, May 29, 2014. The conference call will also be webcast live from the Company's corporate website at investors.papamurphys.com, under the "Events & Presentations" page. An archive of the webcast will be available at this location shortly after the call has concluded.

About Papa Murphy's

Papa Murphy's is a franchisor and operator of the largest Take 'N' Bake pizza chain in the United States, selling uncooked pizzas that customers bake at home. The Company was founded in 1981 and currently operates over 1,400 franchised and corporate-owned fresh pizza stores in 38 States, Canada and United Arab Emirates. Papa Murphy's core purpose is to bring all families together through food people love with a goal to create fun, convenient and fulfilling family dinners. In addition to scratch-made pizzas, the Company offers a growing menu of grab 'n' go items, including salads, sides and desserts.

Industry Intelligence Editor's Note: This press release omits select charts and/or marketing language for editorial clarity. Click here to view the full report.

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