Papa Murphy's Holdings, Inc. (NASDAQ:FRSH) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 05:00 am ET

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Papa Murphy's Holdings, Inc. (NASDAQ:FRSH) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good afternoon, and welcome to today's Papa Murphy's Holdings, Inc. Third Quarter 2018 Earnings Conference Call. All participants are now in a listen-only mode. After the presenters' remarks, there will be a question-and-answer session. As a reminder, this call is being recorded.

I would now like to introduce Nik Rupp, CFO. You may begin your conference.

Executive
Nik Rupp

Thank you, Hector. Good afternoon, everyone, and welcome to our third quarter earnings call.

(Forward-Looking Cautionary Statements)

Today's discussion also includes non-GAAP financial measures that we believe may be important to investors as metrics to assess the operating performance of our business. Our earnings release contains reconciliations of non-GAAP measures to the most directly comparable GAAP financial measures in accordance with SEC rules. And the release and reconciliations can be found on the Company's corporate website at investors.papamurphys.com.

Here with me this afternoon is Weldon Spangler, our CEO. Weldon will provide high-level remarks on the quarter and an update on the progress we are making against our turnaround plan. I will then review our third quarter financial results in detail as well as our updated outlook for the full year before Weldon provides some brief closing remarks and we open the call up for your questions.

With that, I'd like to turn it over to Weldon.

Executive
Weldon Spangler

Thank you, Nik. Good afternoon, everyone, and thank you all for joining us today. I'm going to begin today's call with a high-level review of the quarter, followed by a progress update on our key strategies that are returning the system to profitable and sustainable growth. I will also briefly touch on our recent refinancing and discuss the steps we're taking to maximize long-term value for all of our stockholders.

Results in the third quarter included a system-wide comparable store sales decline of 2.1% compared to the prior year's third quarter and adjusted EBITDA of $4.7 million. While the third quarter same-store sales percentage was still negative, the result represented our best percentage change in same-store sales in 12 quarters. We're also pleased to note that sales trends have continued to improve and are currently tracking slightly positive through the first five weeks of the fourth quarter, though we are maintaining a conservative outlook for the balance of the quarter.

The comp sales improvement continues to be driven by the adoption of key marketing messages as well as by progress on our strategic initiatives. During the quarter, we saw an increasing number of markets comp positively, 39 domestic DMAs in total, up from 31, which demonstrated comp growth in the second quarter. These DMAs have fully adopted marketing initiatives with a low, broad and consistent value message have gone all-in on these initiatives and have synchronized all marketing channels to drive traffic to the stores.

Markets that have activated everything from digital communications to in-store signage and scripted crew member messaging are seeing the greatest transaction sales lift while protecting profitability. We believe that as these markets continue to demonstrate significant success, with some DMAs comping as much as