Freshii Inc.

Greetings and welcome to Freshie, Inc. Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Paul Hughes, General Counsel. Please go ahead.

Thank you and welcome to Freshie's third quarter 2021 earnings conference call. Joining me today is Matthew Koren, our founder, chairman, and chief executive officer, and Daniel Haroon, chief financial officer. Please note that remarks in this conference call may provide certain information regarding our expectations, future plans, and intentions. that may constitute forward-looking statements. I would refer you to our most recently filed management discussion and analysis, which includes a summary of the significant assumptions underlying such forward-looking statements and certain risks and factors that could affect our future performance and our ability to deliver on these forward-looking statements. The third quarter 2021 earnings release, the related financial statements and the management discussion and analysis are available on CDAR, as well as the investor relations section of Freshie's website at freshie.inc. All figures discussed on this conference call are in Canadian dollars unless otherwise noted. Following our prepared remarks, we will open the line for questions. As we will not be conducting any follow-up calls this morning, we encourage you to use this question period to ask us any questions you might have about our results or our business in general. At this time, I would like to turn the call over to our CEO, Matthew Korn.

Thanks, Paul. Good morning, everyone, and thanks for joining us today. In the third quarter of 2021, Freshie Restaurants saw a strong sales recovery with 10% same-store sales growth year over year. Our consumer packaged goods and direct-to-consumer divisions took significant strides forward as well as we continue our omni-channel platform. At the parent level, we maintained our healthy balance sheet with a cash position of $37.1 million Canadian dollars and zero debt as of September 26th of this year. The company repurchased $1.1 million in Class A shares through our NCIB in the quarter and continued deployment of the $1 million investment fund directly into our franchise restaurant division, which we plan to deploy to support the system through the end of the year to help in the acceleration of our recovery and growth coming out of the pandemic. I'd like to share some specific trends for our restaurant division first. Restaurant sales continued to recover with a 10% year-over-year increase in same-store sales. In addition to the sales recovery, the third quarter included continued strong performance of the Freshie mobile app, which posted a 79% increase in sales versus Q3 2020. While certain challenges remain for our set of downtown core locations in markets like Toronto, Chicago, and Calgary as examples, We are very pleased with our sales recovery more broadly, particularly in our suburban locations, which make up approximately 55% of our North American traditional restaurant network. These locations have recovered more than 90% of pre-pandemic levels on average as of Q3. We believe that a driver of these sales improvements continues to be Freshy's strong menu innovation. In Q3, the company had one of its best quarters in terms of menu innovation in years. Our delicious tacos limited-time offer was popular with our guests, and its premium price point and significant chips and hot queso add-on attachment drove both check and profitability. Our restaurant guests will be pleased to learn that we are making plans to integrate tacos back into the freshy menu in the near term. Along with the strong performance of tacos, Freshie's updated smoothie platform, making them available in two sizes and in a variety of new flavors, drove incremental smoothie mix in the quarter as well. In Q4, our most notable menu addition has been the recent relaunch of our evolved dinner plates platform. The dinner day part made up approximately 25% of sales in the third quarter, and we intend to continue to focus on making sure our menu has great tasting options for our guests at all times of the day. Our menu team continues their great work in the test kitchen, and we look forward to bringing more exciting menu innovation to our restaurants in the coming quarters. Next, freshie restaurants that have been temporarily closed as a result of the pandemic also continue to reopen in the third quarter. we finished Q3 with eight more stores open and operating than at the end of Q2 with a total of 372 active locations operating as at the end of the quarter. 12 locations remain temporarily closed with reopening dates expected in the coming periods. In addition to the reopenings, we also opened brand new locations in Q3 as Freshie continues to be an attractive brand for operators. As we discussed in our press release yesterday, Freshie has just signed the brand's largest ever multi-unit franchise deal. We're partnering with Level Hospitality, a group that operates a portfolio of hotels and restaurants in the U.S. to accelerate Freshie's growth in Texas through a planned 20 location expansion over the next six years. We already have a number of Freshie locations in the state and believe there is significant opportunity to become the health and wellness leader in Texas especially as migration to the state continues. Building our restaurant and development pipeline, particularly in Canada and the U.S., continues to be an area that we're focused on. In the coming months, we are scheduled to open flagship locations in the newly renovated LaGuardia Airport in New York and a prime location in the heart of Whistler Village in B.C. We believe that flagship locations like these are a great way to build brand awareness for both freshie guests and new franchise partners from around the world. Across our network, we continue to work with our franchise partners to navigate the ongoing COVID recovery period and make investments in the system from the million dollar franchise support fund we announced in the second quarter. In Q3, we targeted these funds primarily towards sales driving and profitability focused store level initiatives, particularly through marketing investment and operating cost offsets. In addition to ongoing focus on supporting our core restaurant business, Freshie's additional business line teams continue to dedicate significant effort to the growth of our omni-channel health and wellness divisions. We believe that each business line will benefit from the heightened awareness and relevance of the brand as a trusted source of all things health and wellness as we expand the consumer touch points with the Freshie brand. I will now share some specifics on our consumer packaged goods division. In the third quarter, Freshie's CPG division continued to expand its points of distribution and grow its retailer partner list. Notably, our two largest retail partners, carrying our broadest assortment of products in dedicated Freshie branded coolers, have reported revenue growth of more than 75% in Q3 of 2021 versus the year prior. This increase was partly attributed to strong performance of our snacking and beverage products. We've also continued to add our offering to the shelves of new retailers, such as Healthy Planet in Ontario and Whole Foods in British Columbia. In terms of CPG product innovation, Freshie was also active in the third quarter. we rolled out pumpkin spiced energy bites as a consumer package good limited time offer, tapping into the annual fall themed pumpkin spice trend. The pumpkin spice bites were made available in both Freshie restaurants as well as on our CPG retail partner shelves. In terms of our growing supplement gummy lineup, to go along with our apple cider vinegar gummies launched earlier in the year, Freshie CPG added buy-buy stress and a super mushroom gummy to the product set, with all gummies now available both in restaurant and online. We plan to make our expanded gummy lineup available through additional sales channels in the coming months. I will now share some specifics on our direct-to-consumer e-commerce division, where we have taken some significant steps recently. As announced last week, Freshie has completed the acquisition of the majority control of Natura Market. Natura Market is a rapidly growing online retailer that makes on-trend healthy products available at scale across Canada. The business, which had over $19 million in sales in the 12 months ended September 30th, 2021, and has no debt, has a strong logistics and supply chain system, and has developed impressive consumer loyalty during the company's five years of operation to date. Natura will make an immediate positive impact on our overall business revenue and significantly expands Freshie's presence and capability in the delivery and digital commerce spaces. The way people across The way people access health and wellness is evolving and the acquisition of Natura Market ensures that Freshie is well positioned to meet the next generation of our customers where they are at. We look forward to sharing additional details around our integration plans in the coming months and want to welcome Natura Market to the Freshie team. We have taken some significant strides forward as an omni-channel health and wellness brand. In the quarter, our restaurant division has seen ongoing sales and reopening recovery and a growing development pipeline. We've also completed the Natura market transaction and grown our better-for-you consumer packaged goods sales, product lineup, and reach. This is all made possible through the dedication of our franchise partners, retail partners, as well as our HQ and now Natura market team members, who I'd like to personally thank. As I always say, I'm so proud to work alongside all of the great partners in our network and our impressive HQ team every day. I'll now turn the call over to our CFO, Dan Haroun.