WebMr. I am pleased that we were able to efficiently monetize the Badcock consumer credit receivables. I just, I think, it would be very difficult to find something that that makes sense. Our financial performance in the fourth quarter was in line with the outlook we provided in November, stated Brian Kahn, Franchise Groups President and CEO. If you have an ad-blocker enabled you may be blocked from proceeding. He is also General Partner for Vintage Albany Acquisition LLC, General Partner of Vintage Albany Partners LP and Member of Caiman Capital GP LP. Management incentives are completely aligned with the rest of the shareholders as the CEO and the rest of the insiders own more than 30% of the company and are still buying more. In that context, management might rule that capital is to be much better deployed externally, seizing the opportunity. President, Chief Executive Officer & Director. The tax effect on the related non-GAAP adjustments was calculated based on an estimated annual non-GAAP effective tax rate of 25.8%. . On a journey from law to investing. Bloomberg Chief Washington Correspondent Joe Mathieu delivers insight and analysis on the latest headlines from the White House and Capitol Hill, including conversations with influential lawmakers and key figures in politics and policy. With some back of the paper math, deploying just slightly less than $200 million of the share buy-back package would bring shares outstanding down to 35 million, lowering them by roughly 15% and almost immediately pushing the dividend yield to 8.55%. Mr. Kahn founded and has served as the investment manager of Vintage and its predecessor, Kahn Capital Management, LLC, since 1998. A multi-layered approach to creating shareholder value has seen investors enjoy Franchise Group dominating the S&P 500 (SPY) while at the same time showering them with dividends. The rapidly degrading macroeconomic environment began taking its toll on some of the franchises with the most vulnerable business models, which ultimately translated itself into the bottom line and led to a disappointing downgrade in guidance. Sources: FactSet, Dow Jones, Stock Movers: Gainers, decliners and most actives market activity tables are a combination of NYSE, Nasdaq, NYSE American and NYSE Arca listings. The business generated $93.4 million in EBITDA for 2021 but has been struggling recently due to the complex macroeconomic environment and generated only $23.32 million in EBITDA for the past six months, being one of the most affected businesses. About Franchise Group, Inc.Franchise Group is an owner and operator of franchised and franchisable businesses that continually looks to grow its portfolio of brands while utilizing its operating and capital allocation philosophy to generate strong cash flow for its shareholders. Reconciliations of Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS to their respective most comparable GAAP measures, are included below under Non-GAAP Financial Measures and Key Metrics.. We expect organic growth in 2023 to drive increased EBITDA and cash flow.. Web Design by Jackrabbit. A multi-layered approach to creating shareholder value has seen investors enjoy the company delivering a five-fold market alpha while at the same time collecting extremely generous dividend distributions. The former was subsequently merged with Buddy's Home Furnishings in order to form the "The Franchise Group" we know today. But opting out of some of these cookies may have an effect on your browsing experience. Furthermore, its sheer size does not allow the conglomerate to delve into the companies with which Franchise Group does business. over $3.75M on May 11, 2022. In calculating GAAP and Non-GAAP EPS, the Company is currently using an effective tax rate of approximately 25.8%. Yeah, so we authorized, at our two Board meetings ago, we authorized a $500 million buyback over the next few years. In his capacity at Vintage, Mr. Laurence served as a director and/or committee member of various companies, including IEC Electronics, East Coast Welding & Fabrication, Buddys Home Furnishings, API Technologies and Liberty Tax. All rights reserved. Management defines and calculates Adjusted EBITDA as net income (loss) from continuing operations before interest, income taxes, depreciation and amortization adjusted for certain non-core or non-operational items related to executive severance and related costs, stock-based compensation, shareholder litigation costs, corporate governance costs, accrued judgments and settlements, net of estimated revenue, store closures, rebranding costs, acquisition costs, inventory fair value step up amortization and prepayment penalty on early debt repayment. $11.46K on September 15, 2020. I am not receiving compensation for it (other than from Seeking Alpha). From a reporting perspective, fiscal 2023 will include 52 weeks of operating results compared to fiscal 2022 which had 53 weeks of operating results creating a benefit of approximately $70 million in revenue and $11 million of Adjusted EBITDA. There is something about avoiding a "fixed" dividend and having it tied towards a performance goal that resonates extremely well with me. Source: FactSet, Markets Diary: Data on U.S. Overview page represent trading in all U.S. markets and updates until 8 p.m. See Closing Diaries table for 4 p.m. closing data. Our financial performance in the fourth quarter was in line with the outlook we provided in November, saidBrian Kahn, Franchise Groups president and CEO.Our franchising activity continued to accelerate across FRG in 2022. As a reminder, the company currently sells for $33.62 per share. While the growth aspect of the company remains largely subservient to M&A execution down the road, the dividend is still well supported by fundamentals, even when accounting for the downgraded guidance, which lowered EBITDA estimates to $390 million for this year. Mr. Mattes holds a Bachelor of Arts degree in Political Science from Colgate University. Change value during other periods is calculated as the difference between the last trade and the most recent settle. Brian emphasized this point during the first quarter earnings call, issuing equity to finance further M&A action is largely off the table. I wrote this article myself, and it expresses my own opinions. In the last 3 years at Franchise Group, Inc, Brian R. Kahn has sold an Mr. Kahn has also served as a director of Aarons, Inc., a leader in the sales and lease ownership and specialty retailing of residential furniture, consumer electronics, home appliances and accessories from 2014 until 2015, Integral Systems, Inc., a provider of products, systems and services for satellite command and control, telemetry and digital signal processing, data communications, enterprise network management and communications information assurance, from 2011 to 2012, and Babcock & Wilcox Enterprises, Inc. (Babcock & Wilcox), a global leader in energy and environmental technologies and services for the power and industrial markets, from 2018 to 2020. Franchise Group is a textbook example of a management team that has "skin in the game" and then some. WebBrian R. Kahn Managing Partner Mr. Kahn is the Managing Partner and founder of Vintage Capital Management (VCM) and its predecessor, Kahn Capital Management (KCM or I have no business relationship with any company whose stock is mentioned in this article. A real-time webcast of the conference call will be available on the Events page of Franchise Groups website at www.franchisegrp.com. This is exactly where the brilliance of the strategy the company is utilizing comes under the spotlight. Since establishing the Firm in 1998, Mr. Kahn has invested in and served in high-level operating and governance positions for several public and private companies in the defense, manufacturing, and consumers industries. Adjusted EBITDA is a financial measure that is not prepared in accordance with GAAP. Pet Supplies Plus - was one of the major and somewhat pricier acquisitions by the franchise conglomerate. Now, in practice, there are just not enough sellers at this price for the buy-back program to be able to have this sort of effect. in Economics from Harvard University. Company Ownership Structure (TIKR Terminal). In addition, Mr. Mattes has also led the expansion efforts of Huntington Learning Center, Cruise Planners and Fast-Fix Jewelry & Watch Repairs and has personally helped more than 1,500 individuals, partnerships and investment groups transition into franchise ownership both domestically and abroad since entering into franchising in 2003. FRG YTD Price Performance (Seeking Alpha). The business was envisioned as a one-stop shop for affordable furniture, mattresses, and appliances operating in the bottom value segment of the market. In the past Brian Randall Kahn occupied the position of Chairman for API Technologies Corp., Chairman of Buddy'S Home Furnishings, Chairman at Microsemi Corp. - Memory & Storage Solutions, Investment Manager at Caiman Partners LP, Investment Manager at Kahn Capital Management LLC and Member-Managers Board at Buddy's Newco LLC. (In thousands, except share count and per share data), Current installments of long-term obligations, net, Current installments of debt secured by accounts receivable, net, Long-term obligations, net, excluding current installments, Non-current debt secured by accounts receivable, net, Common stock, $0.01 par value per share, 180,000,000 and 180,000,000 shares authorized, 34,925,773 and 40,296,688 shares issued and outstanding at December31, 2022 and December25, 2021, respectively, Preferred stock, $0.01 par value per share, 20,000,000 and 20,000,000 shares authorized, 4,541,125 and 4,541,125 shares issued and outstanding at December31, 2022 and December25, 2021, respectively, Selling, general, and administrative expenses, Income (loss) from continuing operations before income taxes, Income (loss) from discontinued operations, net of tax. While we maintain a very bullish outlook on the company, as with any investment, the thesis itself carries its fair share of challenges. Although amortization of acquired intangible assets is excluded from these non-GAAP measures, it is important for investors to understand that such intangible assets support revenue generation. Franchise Group Inc. (NASDAQ:FRG) Q4 2022 Results Conference Call February 28, 2023 4:30 PM ET. What led to drop in income for Franchise Group in Q3? Given the density of the ownership structure, the initiative would significantly inflate the share price which would degrade its effectiveness. These cookies do not store any personal information. The series of successful acquisitions left the company in good relations with possible backers as well as a much better-looking balance sheet. Mr. Kahn received a B.A. Franchise Group chief executive officer Brian Kahn did not share publicly at the time what his plan was, should the deal move ahead. At the start of July, Kohls leaders said the negotiations were over, and Kohls would remain an independent business. Mr. Kahn graduated cum laude and holds a Bachelor of Arts degree in Economics from Harvard University. Reconciliation of Non-GAAP Net Income and EPSBelow are reconciliations of Net Income/(Loss) from continuing operations to Non-GAAP Net Income and Net Income/(Loss) from continuing operations per diluted share to Non-GAAP EPS for the three and twelve months ended December 31, 2022. Breaking it down by segment, American Freight brought in $216.3 million in revenue for the quarter with a net loss of $21.7 million. Management was able to move a $400 million receivable portfolio off their books to a third party while at the same time gaining close to $270 million through asset sale-leasebacks shortly after the acquisition. The Company does not provide a quantitative reconciliation of forward-looking, Non-GAAP financial measures such as forecasted Adjusted EBITDA or Non-GAAP EPS to the most directly comparable GAAP financial measures because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have significant impact on such calculations, and providing them may imply a degree of precision that would be confusing or potentially misleading. We finished the year with 259 new territories sold and a backlog across all brands of 482 locations. This leaves a somewhat negative impression when taking a look at the rapid rise in outstanding shares over the past couple of years, as potential investors might fear further dilution. The more obvious one is that the recession-headed economy has the capacity to cause plenty of headaches for a part of the more home improvement-oriented portfolio. So we haven't had an open window yet to speak of but, look, we will - we now have the ability to weigh, buying more of our existing businesses against buying other businesses that's not a tool that we've had in the toolbox before. ($ In thousands except share count and per share data), Net income (loss) from continuing operations / Net income (loss) from continuing operations per diluted share, Adjusted Net Income available to Common Stockholder, Non-cash amortization of debt issuance costs, Amortization of acquisition-related intangibles, Impact of diluted share count assuming non-GAAP net income, Total Adjustments to Net income (loss) from continuing operations, Non-GAAP Net Income from continuing operations / Non-GAAP diluted EPS from continuing operations, Non-GAAP diluted weighted average shares outstanding. Use of this website is subject to its Terms of Use | Privacy Policy | Your California Privacy Rights/Privacy Policy | Do Not Sell My Info/Cookie Policy. This is where management led by Brian Kahn steps in and realigns the acquiree to a much leaner franchisee business model that requires very little capital to maintain but still generates significant cash flow to the owner of the franchised brand. Learn More on Franchise Group's active insiders. Management seeks to rapidly restructure the acquiree and refranchise the now-owned corporate locations leading to an influx of cash which is directed to aggressively deleverage the company. Mary Serreze In This Article Mergers and The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its business or operations. The segment delivered $137.20 million in EBITDA for the last year and so far in the first six months of 2022 has generated $78.90 million in EBITDA. I am not receiving compensation for it (other than from Seeking Alpha). WebBrian Kahn works as a Board Member at Franchise Group, which is a Holding Companies & Conglomerates company with an estimated 9,119 employees; and founded in 2019. Company Participants. Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS are financial measures that are not prepared in accordance with GAAP. Prior to that Mr. Harvey served as Director of Franchise Operations for Aarons Inc. from March 2001 to June 2009. Mr. Kahn has served as Chairman of the Board of Buddys Home Furnishings, API Technologies Corporation, and White Electronic Designs Corporation Mr. Kahn has also served as a director of Aarons, Inc., Integral Systems, Inc., and Babcock & Wilcox Enterprises, Inc. Mr. Kahn received a B.A. Brian R. Kahn's largest purchase order was, The most recent transaction was a purchase order of, Franchise Group, Inc's most recent insider trade came on May 11, 2022 by Enter your email address below to get our daily insider buying and selling report. Mr. Kaminsky holds a Bachelors degree from the University of Michigan and a M.B.A. in Finance and Management from the Stern School of Business at New York University. We have it now, we're very excited about that and I don't think anybody knows our businesses better than we do, which is a good thing. The Vitamin Shop Overview (FRG August Investor Presentation). Investor Relations Contact:Andrew F. KaminskyEVP & Chief Administrative OfficerFranchise Group, Inc.akaminsky@franchisegrp.com(914) 939-5161, Top 3 things to know today Salesforce earnings, Tesla investor day, Fed officials rate outlook, Salesforce stock continues to rise amid earnings beat, layoffs, Elliott Management nominations, Congress sends Biden a measure to stop woke 401(k)s, Stocks moving in after hours: Okta, Snowflake, Tesla, Salesforce. Brian Randall Kahn is a businessperson who founded Kahn Capital Management LLC and Vintage Capital Management LLC and who has been at the head of 6 different companies. ET to discuss its business and financial results for the fiscal 2022 fourth quarter and full year. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. The $1.1B market cap has a $500mm buy-back program approved and in place while at the same time distributing 25% of EBITDA in terms of dividends to the shareholders resulting in a 7.43% yield. Brian R. Kahn usually trades in March, with the busiest year in 2020. They were able to recuperate around $670 million in less than six months after the transaction which were then mostly directed to deleveraging their balance sheet. For the full fiscal year 2022, total reported revenue for Franchise Group was $4.398 billion, up 35.1% from $3.255 billion in 2021. Presently, Mr. Kahn holds the position of President, Chief Executive Officer & Director at Franchise Group, Inc., President & Chief Executive Officer for Franchise Group Intermediate Holdco LLC (a subsidiary of Franchise Group, Inc.), Managing Partner at Vintage Capital Management LLC, Investment Manager at Vintage Albany Partners GP LLC and General Partner for Vintage Albany Partners LP (both are subsidiaries of Vintage Capital Management LLC) and Chairman & Chief Executive Officer for Spectrum Control, Inc. Mr. Harvey has served as Vice President of Franchise Operations of Franchise Group, Inc. since September 18, 2020. The company's management, led by Chief Executive Officer Brian Kahn, could pay a price of between $30 and $35 a share, the people said. Learn More on Brian Randall Kahn's trading history. Even after taking the downgraded guidance into consideration, the company is still selling at approximately 9.36x EV/EBITDA, 5.75x P/FCF, and an 8.25x P/E. We finished the year with 259 new territories sold and a backlog across all brands of 482 locations. Brian Kahn, president, chief executive officer and a director of Franchise Group, is also the founder and serves as investment manager of Vintage Capital Management. Mr. Laurence is also a director of non-profits Good Sports, Inc. and Beth Israel Deaconess Hospital Milton. Kahn has served as the Chief Executive Officer of Franchise Group since October 2, 2019. Furniture Today is the complete information source for the furniture industry featuring retailer and manufacturing news, plus product trends and market analysis. We are pleased to close the sale of the Badcock distribution centers and retire the balance of our acquisition term loan with the cash proceeds. The Vitamin Shoppe - was the first major step management took in building the franchise conglomerate we know today. Laurence also currently serves as the Executive Vice President of Franchise Group. 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