Release
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The Company’s adjusted net loss1 was
“Despite a decline in same store sales, we are seeing favourable trends in several areas of the business,” stated
Operating Results for the Third Quarter of 2018
Sales increased 1.5% to
Gross profit remained consistent at
Selling, general and administration expenses (“SG&A”) increased by
Loss from operating activities was
Adjusted EBITDA1, which excludes non-cash or other items in the current and prior periods, was negative
At the end of the quarter, the Company had cash amounting to
Net loss was
Fully diluted loss per common share was
Operating Results Year-to-date:
Sales decreased by 5.7% to
Gross profit decreased by 7.0% to
SG&A increased to
Loss from operating activities was
Adjusted EBITDA1, which excludes non-cash or other items in the current and prior year periods, was negative
Net loss was
Fully diluted loss per common share was
Note:
This release should be read in conjunction with the Company’s Management’s Discussion and Analysis and its unaudited condensed interim consolidated financial statements as at and for the three and nine months ended
Condensed Consolidated Financial Data (UNAUDITED)
(Canadian dollars, in thousands, except per share information)
| For the three months ended | For the nine months ended | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Sales | $ | 43,656 | $ | 42,997 | $ | 129,609 | $ | 137,353 | |||||||
| Gross profit | 18,381 | 18,372 | 58,416 | 62,759 | |||||||||||
| SG&A expenses | 29,119 | 27,035 | 84,865 | 79,004 | |||||||||||
| Operating loss | (10,738 | ) | (8,663 | ) | (26,449 | ) | (16,245 | ) | |||||||
| Net loss | $ | (9,061 | ) | $ | (6,485 | ) | $ | (20,261 | ) | $ | (12,410 | ) | |||
| Adjusted SG&A1 | $ | 26,956 | $ | 24,403 | $ | 76,716 | $ | 75,872 | |||||||
| Adjusted operating loss1 | (8,575 | ) | (6,031 | ) | (18,300 | ) | (13,113 | ) | |||||||
| Adjusted EBITDA1 | (6,248 | ) | (2,887 | ) | (12,212 | ) | (3,578 | ) | |||||||
| Adjusted net loss1 | $ | (7,383 | ) | $ | (4,502 | ) | $ | (14,114 | ) | $ | (9,851 | ) | |||
| Fully diluted loss per common share | $ | (0.35 | ) | $ | (0.25 | ) | $ | (0.78 | ) | $ | (0.48 | ) | |||
| Adjusted fully diluted loss per common share1 | $ | (0.28 | ) | $ | (0.17 | ) | $ | (0.55 | ) | $ | (0.38 | ) | |||
| Gross profit as a percentage of sales | 42.1 | % | 42.7 | % | 45.1 | % | 45.7 | % | |||||||
| SG&A as a percentage of sales | 66.7 | % | 62.9 | % | 65.5 | % | 57.5 | % | |||||||
| Number of stores at end of period | 238 | 236 | 238 | 236 | |||||||||||
| Comparable sales decline for the period | (4.7 | %) | (6.8 | %) | (8.8 | %) | (4.5 | %) | |||||||
| Cash used in operating activities | $ | (18,037 | ) | $ | (16,134 | ) | $ | (37,581 | ) | $ | (19,976 | ) | |||
| Cash used in investing activities | (2,880 | ) | (3,498 | ) | (7,271 | ) | (9,295 | ) | |||||||
| Cash, end of period | $ | 18,714 | $ | 36,865 | $ | 18,714 | $ | 36,865 | |||||||
_________________________
1 Please refer to “Definition and reconciliation of non-IFRS financial measures” in this press release.
Conference Call Information:
A conference call to discuss the third quarter fiscal 2018 financial results is scheduled for today,
Use of Non-IFRS Financial Information:
This press release includes “non-IFRS measures” defined as including: 1) Adjusted EBITDA, 2) Adjusted results from operating activities, 3) Adjusted selling, general and administration expenses, 4) Adjusted net loss, and 5) Adjusted fully diluted income (loss) per share. These non-IFRS measures are not defined by and in accordance with IFRS and may differ from similar measures reported by other companies. We believe that these non-IFRS measures provide investors with useful information with respect to our historical operations. We present these non-IFRS measures as supplemental performance measures because we believe they facilitate a comparative assessment of our operating performance relative to our performance based on our results under IFRS, while isolating the effects of some items that vary from period-to-period. Specifically, these non-IFRS measures allow for an assessment of our operating performance, including new store costs, without the effect of non-cash charges of the period or other one-time charges, such as depreciation, amortization, finance costs, deferred rent, non-cash compensation expense, costs related to onerous contracts or contracts where we expect the costs of the obligations to exceed the economic benefit, gain (loss) on derivative financial instruments, loss on disposal of property and equipment, impairment of property and equipment, and certain non-recurring expenses. These measures also function as benchmarks to evaluate our operating performance. These measures are not measurements of our financial performance under IFRS and should not be considered in isolation or as alternatives to net income, net cash provided by operating, investing or financing activities or any other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with IFRS. We understand that although these measures are frequently used by securities analysts, lenders and others in their evaluation of companies, they have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are that;
- these non-IFRS measures do not reflect changes in, or cash requirements for, our working capital needs, and
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.
Because of these limitations, these non-IFRS measures should not be considered as discretionary cash available to us to reinvest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.
Cautionary Forward-Looking Statements
Certain material presented in this press release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and other words of similar meaning. These forward-looking statements address various matters including management’s beliefs about the Company’s prospects, management’s turn-around strategy, plans for investment in marketing initiatives, changes to product offerings and assortment, and strategic plans. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to risks and uncertainties including: the Company’s ability to implement its strategy, the Company’s ability to maintain and enhance its brand image, particularly in new markets; the Company’s ability to compete in the specialty tea and beverage category; the Company’s ability to expand and improve its operations; changes in the Company’s executive management team; levels of foot traffic in locations in which the Company’s stores are located; changes in consumer trends and preferences; fluctuations in foreign currency exchange rates; general economic conditions and consumer confidence; minimum wage laws; the importance of the Company’s first fiscal quarter to results of operations for the entire fiscal year; and other risks set forth in the Company’s Quarterly Report on Form 10-Q and Annual Report on Form 10-K . If one or more of these risks or uncertainties materialize, or if any of the Company’s assumptions prove incorrect, the Company’s actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this release speaks only as of the date on which the Company makes it. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.
Definition and Reconciliation of Non-IFRS Financial Measures
This press release includes references to certain non-IFRS financial measures as described below. These non-IFRS measures to not have any standardized meanings prescribed by International Financial Reporting Standards (IFRS) and are therefore unlikely to be comparable to similar measures prescribed by other companies. Accordingly, they should not be considered in isoloation. The terms and definitions fo the non-IFRS measures used in this press release and a reconciliation of each non-IFRS measure to the most directly comparable IFRS measure are provided below.
| Reconciliation of Reported Results to Non-IFRS results - Adjusted EBITDA | |||||||||||||||
| Unaudited and in thousands of Canadian dollars | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net loss | $ | (9,061 | ) | $ | (6,485 | ) | $ | (20,261 | ) | $ | (12,410 | ) | |||
| Finance costs | 80 | 327 | 237 | 615 | |||||||||||
| Finance income | (122 | ) | (149 | ) | (574 | ) | (420 | ) | |||||||
| Depreciation and amortization | 2,162 | 2,632 | 6,098 | 7,564 | |||||||||||
| Loss on disposal of property and equipment | — | 18 | 14 | 48 | |||||||||||
| Recovery of income tax | (1,635 | ) | (2,356 | ) | (5,851 | ) | (4,030 | ) | |||||||
| EBITDA | $ | (8,576 | ) | $ | (6,013 | ) | $ | (20,337 | ) | $ | (8,633 | ) | |||
| Additional adjustments : | |||||||||||||||
| Stock-based compensation expense (reversal) (a) | 91 | 362 | (7 | ) | 1,738 | ||||||||||
| Executive separation costs related to salary (b) | 123 | 1,070 | 840 | 1,882 | |||||||||||
| Impairment of property and equipment (c) | 725 | 2,658 | 3,285 | 4,971 | |||||||||||
| Impact of onerous contracts (d) | 1,288 | (1,138 | ) | 486 | (3,913 | ) | |||||||||
| Deferred rent (e) | 74 | 174 | (17 | ) | 377 | ||||||||||
| Strategic review and proxy contest costs (f) | 27 | — | 3,538 | — | |||||||||||
| Adjusted EBITDA | $ | (6,248 | ) | $ | (2,887 | ) | $ | (12,212 | ) | $ | (3,578 | ) | |||
_________________________
| (a) | Represents non-cash stock-based compensation expense (reversal). | |
| (b) | Executive separation costs related to salary represent salary owed to former executives as part of their separation of employment from the Company. | |
| (c) | Represents costs related to impairment of property and equipment for stores. | |
| (d) | Represents provisions, non-cash reversals and utilization related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract. | |
| (e) | Represents the extent to which our annual rent expense has been above or below its cash rent payments. | |
| (f) | Represents costs related to a corporate strategic review process as well as costs related to the proxy contest which culminated at the Company’s annual meeting held on |
| Reconciliation of Reported Results to Non-IFRS Results - Adjusted Results from Operating Activities | |||||||||||||||
| Unaudited and in thousands of Canadian dollars | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Results from operating activities | $ | (10,738 | ) | $ | (8,663 | ) | $ | (26,449 | ) | $ | (16,245 | ) | |||
| Executive separation costs (a) | 123 | 1,112 | 840 | 2,074 | |||||||||||
| Impairment of property and equipment (b) | 725 | 2,658 | 3,285 | 4,971 | |||||||||||
| Impact of onerous contracts (c) | 1,288 | (1,138 | ) | 486 | (3,913 | ) | |||||||||
| Strategic review and proxy contest costs (d) | 27 | — | 3,538 | — | |||||||||||
| Adjusted results from operating activities | $ | (8,575 | ) | $ | (6,031 | ) | $ | (18,300 | ) | $ | (13,113 | ) | |||
_________________________
| (a) | Executive separation costs represent mainly salary owed to the former executives as part of their separation of employment from the Company. The three and nine-month periods ended |
|
| (b) | Represents costs related to impairment of property and equipment for stores. | |
| (c) | Represents provisions, non-cash reversals and utilization related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract. | |
| (d) | Represents costs related to a corporate strategic review process as well as costs related to the proxy contest which culminated at the Company’s annual meeting held on |
| Reconciliation of Reported Results to Non-IFRS Results - Adjusted Selling, General and Administration Expenses | |||||||||||||||
| Unaudited and in thousands of Canadian dollars | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| 2018 |
2017 |
2018 | 2017 | ||||||||||||
| Selling, general and administration expenses | $ | 29,119 | $ | 27,035 | $ | 84,865 | $ | 79,004 | |||||||
| Executive separation costs (a) | (123 | ) | (1,112 | ) | (840 | ) | (2,074 | ) | |||||||
| Impairment of property and equipment (b) | (725 | ) | (2,658 | ) | (3,285 | ) | (4,971 | ) | |||||||
| Impact of onerous contracts (c) | (1,288 | ) | 1,138 | (486 | ) | 3,913 | |||||||||
| Strategic review and proxy contest costs (d) | (27 | ) | — | (3,538 | ) | — | |||||||||
| Adjusted selling, general and administration expenses | $ | 26,956 | $ | 24,403 | $ | 76,716 | $ | 75,872 | |||||||
_________________________
| (a) | Executive separation costs represent mainly salary owed to the former executives as part of their separation of employment from the Company. The three and nine-month periods ended |
|
| (b) | Represents costs related to impairment of property and equipment for stores. | |
| (c) | Represents provisions, non-cash reversals and utilization related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract. | |
| (d) | Represents costs related to a corporate strategic review process as well as costs related to the proxy contest which culminated at the Company’s annual meeting held on |
| Reconciliation of Reported Results to Non-IFRS Results - Adjusted Net Loss | |||||||||||||||
| Unaudited and in thousands of Canadian dollars | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net loss | $ | (9,061 | ) | $ | (6,485 | ) | $ | (20,261 | ) | $ | (12,410 | ) | |||
| Executive separation costs (a) | 123 | 1,112 | 840 | 2,074 | |||||||||||
| Impairment of property and equipment (b) | 725 | 2,658 | 3,285 | 4,971 | |||||||||||
| Impact of onerous contracts (c) | 1,348 | (831 | ) | 663 | (3,355 | ) | |||||||||
| Strategic review and proxy contest costs (d) | 27 | — | 3,538 | — | |||||||||||
| Income tax expense adjustment (e) | (545 | ) | (956 | ) | (2,179 | ) | (1,131 | ) | |||||||
| Adjusted net loss | $ | (7,383 | ) | $ | (4,502 | ) | $ | (14,114 | ) | $ | (9,851 | ) | |||
_________________________
| (a) | Executive separation costs represent mainly salary owed to the former executives as part of their separation of employment from the Company. The three and nine-month periods ended |
|
| (b) | Represents costs related to impairment of property and equipment for stores. | |
| (c) | Represents provisions, non-cash reversals, utilization and the accretion expense related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract. The accretion expense on provisions for onerous contracts is included in Finance costs on the Consolidated Statement of Comprehensive Income (Loss) for the three months and nine months ended |
|
| (d) | Represents costs related to a corporate strategic review process as well as costs related to the proxy contest which culminated at the Company’s annual meeting held on |
|
| (e) | Removes the income tax impact of items referenced in notes (a), (b), (c) and (d). |
| Reconciliation of Fully Diluted Net Loss Per Share, As Reported to Adjusted Fully Diluted Net Loss Per Share | |||||||||||||||
| | |||||||||||||||
| Unaudited and in thousands of Canadian dollars, except per share information | |||||||||||||||
| For the three months ended | For the nine months ended | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Weighted average number of shares outstanding, fully diluted | 25,992,339 | 25,890,090 | 25,862,086 | 25,659,164 | |||||||||||
| Net loss | $ | (9,061 | ) | $ | (6,485 | ) | $ | (20,261 | ) | $ | (12,410 | ) | |||
| Adjusted Net loss | $ | (7,383 | ) | $ | (4,502 | ) | $ | (14,114 | ) | $ | (9,851 | ) | |||
| Net loss per share, fully diluted | $ | (0.35 | ) | $ | (0.25 | ) | $ | (0.78 | ) | $ | (0.48 | ) | |||
| Adjusted net loss per share, fully diluted | $ | (0.28 | ) | $ | (0.17 | ) | $ | (0.55 | ) | $ | (0.38 | ) | |||
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Investor Contact
514-731-0000
investors@davidstea.com
Media Contact
PELICAN Public Relations
514-845-8763
media@rppelican.ca
