Jamba Inc. (JMBA)
Q2 2010 Earnings Call Transcript
August 17, 2010 5:00 pm ET
Karen Luey – SVP & CFO
James White – Chairman, President & CEO
Greg McKinley – Dougherty & Company
Scott Van Winkle – Canaccord
Danny Quintana – Quintana Associates
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Good afternoon, ladies and gentlemen, welcome to the Jamba’s second quarter 2010 earnings conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. This conference is being recorded today August 17, 2010.
I would now like to turn the conference over to Ms. Karen Luey, Chief Financial Officer. Please go ahead, ma’am.
Thank you, operator, good afternoon. With me on today’s call is James D. White, our Chairman, President and CEO.
During today’s call, I will review our second quarter financial results. James will follow with an update on our 2010 progress against plan, and then we will take questions.
I would like to remind all listeners that this call is being broadcast and recorded live over the Internet at jambajuice.com. The webcast is available on our Website and the replay will be available via telephone until September 9, 2010.
This conference call will include forward-looking statements within the meanings of the Securities law. These forward-looking statements will include discussions about the company’s strategic priorities and certain statements of our expectations and plans.
These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements that are contained in the company’s filings with the SEC, including the Risk Factors section in our most recent Form 10-Q. The company does not assume any obligation to publicly release any revisions to forward-looking statements discussed during the call.
With that said, I would like to turn it over to James.
Thank you, Karen, and welcome to our conference call. The second quarter was notable for Jamba in several important aspects. We recorded our fifth sequential quarter of improved comparable store sales posting a 90 basis point improvement in Q2 over our first quarter performance.
In our New York and Florida markets, comparable store sales were positive. Our efforts to transform the company are starting to share significant improvement. In addition to our comparable store sales performance, we’ve also delivered sequential quarter-to-quarter gains in store traffic.
We had other accomplishments. We signed an agreement for our first major international expansion of Jamba. Our Jamba branded consumer products went into distribution at Costco, Wal-Mart, Target, Safeway and many other retailers and a pilot test was initiated of Jamba food in 100 convenient stores.
Even more important than these accomplishments we continued to make solid progress in Q2 on key objectives. While Q2 EBITDA at the corporate and store levels were lower than a year ago.
It’s important to note that first, our net income improved by 6.7 million, 130% improvement over the same period last year, and secondly, we increased our marketing investment, which raised awareness and traffic and is hoping to drive the improvement in comp sales.
While we continue to face the challenges of a slowly recovering economy in an unexpected exceptionally cool summer in California where our concentration of stores is greatest, we feel very good about our fundamentals.
Our new business model, our growth drivers, our culture of discipline and continuous improvement, and the transformative vision guiding us in our transition to becoming a healthy lifestyle brand. Our strategies are sound, our focus is sharp and our strengthened management team gives us added depth that provides Jamba with given greater executional firepower.
With that brief overview, I will now ask Karen to take us through the financials and then I will return to provide details about our strategic initiatives and accomplishments, Karen.
Thank you, James. Our comments today together with the information in today’s press release or 10-Q filing should be utilized together to provide the most comprehensive understanding of our financial results.
For the quarter, our net income improved by $6.7 million to $1.6 million as compared to net loss of $5.1 million in the second quarter of the prior year. For the fifth consecutive quarter, our comparable store sales improved. It reflected 90 basis points sequential improvement over the first quarter and a decrease of 2.4% over Q2 of the last year. Our traffic also improved on a sequential basis and we expect this trend to continue into the third quarter as we maintain our marketing investment.
Our refranchising initiative plays a significant role in our strategic transformation and acceleration of our growth. It has taken a significant risk out of our business model and has also increased cash on the balance sheet. Financial liquidity provides allows us to reinvest in the business and to increase the pace of our transition to become a leading healthy active lifestyle brand.
Net cash proceeds from refranchising have totaled $12.8 million from the inception of the program to the end of the second quarter. This move to a more of a franchise organization impacts our business model in multiple places. The 69 locations we have refranchised from the inception of the program and to the end of the second quarter have had an impact on comparisons to the prior year.
During our discussion today, I will review an actual as well as an adjusted quarterly results for store EBITDA and consolidated EBITDA on retail stores. Our actual store level EBITDA margins decreased by $2.3 million year-over-year to $16.3 million. After adjusting for the impact of refranchising, store level EBITDA margins decreased by $1.6 million.