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YogaWorks, Inc. Reports Fourth Quarter and Full Year 2017 Financial Results and Initiates Fiscal 2018 Guidance

LOS ANGELES, April  02, 2018  (GLOBE NEWSWIRE) -- YogaWorks, Inc. (NASDAQ:YOGA) (the "Company"), one of the largest providers of high quality yoga instruction in the U.S., today announced financial results for the fourth quarter and full year ended December 31, 2017.

 

Rosanna McCollough, President and Chief Executive Officer of YogaWorks, stated, "We are pleased with our tremendous accomplishments in 2017, and to have once again delivered financial results that were in line with our expectation in the fourth quarter. We acquired and made great progress on integrating 13 studios during the quarter, and ended the year with 66 locations in nine regions.  During 2017, we brought our brand to the exciting new markets of Atlanta and Houston and increased our leadership position in our existing markets.  As we look ahead, we will continue to build on our momentum.  We remain committed to leveraging our robust pipeline of potential acquisitions and our unique position as the acquirer of choice within the fragmented industry, while also focusing on driving solid performance across our existing studios."

 

Results for the Fourth Quarter Ended December 31, 2017

 December 31, 2017December 31, 2016
GAAP Results(1)  
  Net revenue$14.5 million$13.2 million
  Net loss$11.8 million$2.7 million
   
Non-GAAP Results(2)  
  Studio Count at quarter end6649
  Adjusted EBITDA$(1.1) million$71 thousand
  Adjusted free cash flows$(227) thousand$371 thousand
  Studio-Level free cash flows$3.6 million$2.8 million
  Studio-Level EBITDA$2.7 million$2.5 million
  Adjusted net loss$3.5 million$2.6 million

(1) U.S. generally accepted accounting principles ("GAAP").
(2) Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flows, Studio-Level free cash flows and Adjusted net loss are non-GAAP measures. For reconciliations to GAAP net loss, see "Reconciliations of Non-GAAP Financial Measures" accompanying this press release.

For the fourth quarter ended December 31, 2017:      

 
  • Net revenue was $14.5 million, a 10.2% increase compared to $13.2 million in the fourth quarter of 2016. 
     
  • The Company acquired 13 studios during the fourth quarter for $5.6 million and ended the quarter with 66 studios in nine regional markets.
     
  • Adjusted EBITDA was $(1.1) million compared to adjusted EBITDA of $71,000 for the same quarter last year.
     
  • Adjusted net loss was $3.5 million compared to adjusted net loss of $2.6 million for the same period last year.
 

For a reconciliation of GAAP net loss to Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flows, Studio-Level free cash flows and Adjusted net loss, please see "Reconciliations of Non-GAAP Financial Measures" accompanying this press release.

 

Results for the Full Year Ended December 31, 2017

 December 31, 2017December 31, 2016
GAAP Results  
  Net revenue$54.5 million$55.1 million
  Net income loss$23.4 million$9.5 million
   
Non-GAAP Results(1)  
  Studio Count at quarter end6649
  Adjusted EBITDA$(1.2) million$1.7 million
  Adjusted free cash flows$60 thousand$950 thousand
  Studio-Level free cash flows$12.0 million$11.6 million
  Studio-Level EBITDA$10.7 million$12.4 million
  Adjusted net loss$11.7 million$9.1 million

(1) Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flows, Studio-Level free cash flows and Adjusted net loss are non-GAAP measures. For reconciliations to GAAP net loss, see "Reconciliations of Non-GAAP Financial Measures" accompanying this press release.

For the full year ended December 31, 2017:

 
  • Net revenue was $54.5 million, a 1.0% decrease compared to $55.1 million in 2016. 
     
  • The Company acquired 16 studios and opened one during fiscal 2017.
     
  • Adjusted EBITDA was $(1.2) million compared to adjusted EBITDA of $1.7 million last year.
     
  • Adjusted net loss was $11.7 million compared to adjusted net loss of $9.1 million for last year.
 

Balance Sheet and Cash Flow Highlights

 
  • Cash and cash equivalents were $22.1 million as of December 31, 2017, primarily as a result of the capital raised from the Company's initial public offering.
     
  • Cash provided by operating activities was $0.6 million for the year as compared to $0.8 million in fiscal 2016.
 

Guidance

 

Guidance for the first quarter and full year fiscal 2018 excludes potential acquisitions. 

 

For the first quarter of 2018, the Company expects net revenue between $14.8 million and $15.3 million and adjusted EBITDA between $(1.5) million and $(1.0) million. This compares to net revenue of $14.0 million and adjusted EBITDA of $841,000 for the first quarter of 2017.     

 

For fiscal 2018, the Company expects net revenue between $57.0 million and $59.0 million and adjusted EBITDA between $(4.0) million and $(3.0) million. This compares to net revenue of $54.5 million and adjusted EBITDA of $(1.2) million for 2017.    

 

Conference Call to Discuss Fourth Quarter Results

 

The Company will host a conference call and webcast to discuss its financial results for the fourth quarter ended December 31, 2017, today, April 2, 2018, beginning at 4:30 p.m. Eastern Time. Those interested in participating in the call are invited to dial 1-877-407-4018 (U.S.) or 1-201-689-8471 (international). A live webcast of the conference call will also be available online at www.yogaworks.com under the Investor Relations section and will remain available for 30 days following the live call. A replay will also be available two hours following the call through April 16, 2018, via telephone at 1-844-512-2921 (U.S.) and 1-412-317-6671 (international) by entering the replay pin 13677308.

 

About YogaWorks, Inc. 

 

YogaWorks, Inc. is one of the largest providers of high quality yoga instruction in the U.S, with 66 studios in nine markets including Los Angeles, Orange County, Northern California, New York City, Boston, Baltimore, the Washington D.C. area, Houston and Atlanta. YogaWorks strives to make yoga accessible to everybody and offers a wide range of class styles for people of all ages and abilities. Through its studios, the Company offers yoga classes, integrated fitness classes, workshops, teacher training programs and yoga-related retail merchandise. In addition to its studio locations, YogaWorks offers online instruction through its MyYogaWorks web platform, which provides subscribers with a highly curated catalog of over 1,000 yoga and meditation classes.

 

Forward-Looking Statements

 

This press release may include forward-looking statements that reflect the Company's current views about future events and financial performance. All statements other than statements of historical facts included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events are forward-looking statements.

 

These forward-looking statements are expressed in good faith and the Company believes there is a reasonable basis for them. However, there can be no assurance that the events, results or trends identified in these forward-looking statements will occur or be achieved. Investors should not place undue reliance on any of the Company's forward-looking statements because they are subject to a variety of risks and uncertainties. Factors that could cause results to differ from those reflected in the forward-looking statements are set forth in the Company's prior press releases and public filings with the Securities and Exchange Commission, which are available via the Company's website at www.yogaworks.com. The forward-looking statements in this press release speak only as of the date of this release and, except as required by law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

 

Contacts:
Investor Relations:
Jean Fontana, ICR, Inc.
646-277-1200
IR@yogaworks.com

 

 

 

YogaWorks, Inc.

 

Condensed Consolidated Balance Sheets (Unaudited)

  As of December 31, 
   2017   2016  
Assets     
Current assets     
Cash and cash equivalents $  22,095,216  $  1,912,421  
Inventories    1,212,608     948,194  
Prepaid expenses and other current assets    1,145,067     1,318,137  
Total current assets    24,452,891     4,178,752  
Property and equipment, net    10,418,203     8,552,674  
Intangible assets, net    22,142,275     25,654,823  
Goodwill    12,768,773     17,746,570  
Other non-current assets    1,224,179     1,015,079  
Total assets $  71,006,321  $  57,147,898  
      
Liabilities, Redeemable Preferred Stock and Stockholders' Equity (Deficit)     
Current liabilities     
Accounts payable and accrued expenses $  3,794,569  $  1,162,675  
Accrued compensation    1,947,134     1,504,034  
Current portion of long-term debt, net of debt issuance costs    —     418,750  
Deferred revenue    7,187,948     4,593,076  
Current portion of deferred rent    122,607     192,569  
Total current liabilities    13,052,258     7,871,104  
Deferred rent, net of current portion    3,418,886     2,471,734  
Deferred tax liability    —     59,536  
Convertible note due to related party    —     11,634,592  
Long-term debt, net of current portion and debt issuance costs    —     6,350,320  
Total liabilities    16,471,144     28,387,286  
Redeemable preferred stock, nil as of December 31, 2017;
  $0.001 par value; 10,000 shares authorized, issued and outstanding at
  December 31, 2016; Liquidation Preference of $61,392,824 at
  December 31, 2016 
    —     61,392,824  
      
Stockholders' equity (deficit)     
Common stock $0.001 par value; 50,000,000 shares authorized
  and 16,435,505 issued and 16,332,510 outstanding at December 31, 2017
  and 100,000 shares authorized and 74,559 shares issued and
  outstanding at December 31, 2016 
    16,333     75  
Additional paid-in capital    111,650,415     67,187  
Accumulated deficit    (57,131,571)    (32,699,474) 
Total stockholders' equity (deficit)    54,535,177     (32,632,212) 
Total liabilities, redeemable preferred stock, and stockholders' equity (deficit) $  71,006,321  $  57,147,898  
      

 

 

YogaWorks, Inc.

 

Condensed Consolidated Statements of Operations (Unaudited)

  Year Ended December 31, Quarter Ended December 31, 
   2017   2016   2017   2016  
Net revenues $  54,513,945  $  55,090,208  $  14,511,912  $  13,173,783  
Cost of revenues and operating expenses         
Cost of revenues    20,558,001     20,535,177     5,470,288     4,989,566  
Center operations    23,476,691     22,469,539     6,473,833     5,639,404  
General and administrative expenses    16,026,758     11,066,545     4,365,042     2,591,097  
Depreciation and amortization    8,896,002     8,893,093     2,365,413     2,235,532  
Goodwill impairment    7,488,399     —     7,488,399     —  
Asset impairment    206,543     —     206,543     —  
Total cost of revenues and operating expenses    76,652,394     62,964,354     26,369,518     15,455,599  
Loss from operations    (22,138,449)    (7,874,146)    (11,857,606)    (2,281,816) 
Interest expense, net    1,343,445     1,587,084     —     407,137  
Net loss before (benefit from) provision for income taxes    (23,481,894)    (9,461,230)    (11,857,606)    (2,688,953) 
(Benefit from) provision for income taxes    (45,540)    43,292     (76,614)    14,903  
Net loss    (23,436,354)    (9,504,522)    (11,780,992)    (2,703,856) 
          

 

 

YogaWorks, Inc.

 

Condensed Consolidated Statements of Cash Flows (Unaudited) 

  Year Ended December 31,  
   2017   2016   
Cash flows from operating activities      
Net loss $  (23,436,354) $  (9,504,522)  
Adjustments to reconcile net loss to net cash provided by
  operating activities:
      
Depreciation and amortization    8,896,002     8,893,093   
Goodwill impairment    7,488,399     —   
Asset impairment    206,543     —   
Deferred tax    (59,536)    36,508   
Paid-in-kind interest expense capitalized to convertible note    291,585     906,825   
Change in value of beneficial conversion feature    147,877     —   
Amortization of debt issuance cost    69,164     111,922   
Debt issuance cost written-off    318,016     —   
Stock-based compensation expense    2,582,783     23,443   
Changes in operating assets and liabilities, net of effects from acquisitions:      
Tenant improvement allowances received    625,000     1,558,576   
Inventories    (221,414)    167,508   
Prepaid expenses and other current assets  173,070     (923,305)  
Other non-current assets    (76,100)    (49,293)  
Accounts payable and accrued expenses  1,508,382     (376,810)  
Accrued compensation    443,100     291,889   
Deferred revenue  1,405,872     (649,881)  
Deferred rent and other non-current liabilities    252,190     276,217   
Net cash provided by operating activities    614,579     762,170   
Cash flows from investing activities      
Purchase of property, equipment, and intangible assets    (1,834,526)    (2,096,481)  
Cash paid for acquisitions, net of earnouts    (5,995,090)    —   
Net cash used in investing activities    (7,829,616)    (2,096,481)  
Cash flows from financing activities      
Principal payment on term loans    (6,956,250)    (543,750)  
Principal payment on convertible note    (3,300,403)    —   
Principal payment on subordinated notes    (200,000)    —   
Repurchase of shares to satisfy tax withholding    (428,803)    —   
Proceeds from issuance of common stock, net of underwriting discounts and
  offering costs
    35,083,288     17,877   
Proceeds from issuance of convertible note    3,200,000     —   
Net cash provided by (used in) financing activities    27,397,832     (525,873)  
Increase (decrease) in cash and cash equivalents    20,182,795     (1,860,184)  
Cash and cash equivalents, beginning of period    1,912,421     3,772,605   
Cash and cash equivalents, end of period $  22,095,216  $  1,912,421   
       

Reconciliations of Non-GAAP Financial Measures

 

This press release contains financial measures called Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss which are not calculated in accordance with GAAP. The Company uses these financial measures to understand and evaluate its business. Adjusted EBITDA is a supplemental measure of the operating performance of the core business operations. Studio-Level EBITDA is a supplemental measure of the operating performance of the studios. Adjusted free cash flow is a supplemental measure of the operating performance of the core business operations excluding deferred revenue. Studio-Level free cash flow is a supplemental measure of the operating performance of the studios excluding deferred revenue. Adjusted net loss is a supplemental measure of operating performance that is adjusted for certain non-recurring items that we do not believe directly reflect the core business operations. Accordingly, the Company believes Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss provide useful information to investors and others in understanding and evaluating the Company's operating results in the same manner as management and the Board. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

 

Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flow and Studio-Level free cash flow

 

The following table presents a reconciliation of Adjusted EBITDA and Studio-Level EBITDA to Net loss. In addition, Adjusted free cash flow and Studio-Level free cash flow are presented for each of the periods indicated:

  Year Ended December 31, Quarter Ended, December 31, 
   2017   2016   2017   2016  
(in thousands)                 
Net loss  $  (23,436) $  (9,504) $  (11,781) $  (2,704) 
Interest expense, net    1,343     1,587     —     407  
(Benefit from) provision for income taxes     (46)    43     (77)    14  
Depreciation and amortization    8,896     8,893     2,365     2,235  
Goodwill impairment    7,488     —     7,488     —  
Asset impairment    207     —     207     —  
Deferred rent(a)    252     276     158     (32) 
Stock-based compensation(b)    2,583     23     464     2  
Legal settlement(c)    902     —     —     —  
Severance(d)     87     225     —     124  
Executive recruiting(e)     131     56     52     —  
Professional fees(f)     308     —     55     —  
Great Hill Partners expense reimbursement fees(g)    75     100     —     25  
Adjusted EBITDA     (1,210)    1,699     (1,069)    71  
Change in deferred revenue(h)    1,270     (749)    842     300  
Adjusted free cash flow    60     950     (227)    371  
Other general and administrative expenses(i)     11,941     10,674     3,795     2,446  
Studio-Level free cash flow     12,001     11,624     3,568     2,817  
Change in deferred revenue(h)    (1,270)    749     (842)    (300) 
Studio-Level EBITDA  $  10,731  $  12,373  $  2,726  $  2,517  
          

(a) Reflects the extent to which our rent expense for the period has been above or below our cash rent payments.
(b) Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards and forfeitures.
(c) Legal settlement expense primarily related to the Wage Statement Claim with the state of California.
(d) Severance expenses incurred in the period related to the termination of studio and non-studio employees.
(e) Executive recruiting expenses incurred in connection with the recruitment and hiring of members of our management team.
(f) Professional fees related to accounting, tax and consulting services that were expensed in connection with our IPO and acquisitions.
(g) Represents expense reimbursement fees incurred in connection with our Expense Reimbursement Agreement with affiliates of Great Hill Equity Partners V, L.P. and Great Hill Investors, LLC (collectively, "Great Hill Partners"), which was terminated upon completion of our IPO.
(h) Represents change in deferred revenue that is reflected in the consolidated statements of operations, excluding the change in gift card liabilities.
(i) Represents general and administrative expenses that are corporate and regional expenses and not incurred by our studios, and which are primarily comprised of expenses related to (i) wages and benefits of corporate and regional employees, (ii) non-studio rent, utilities and maintenance, (iii) corporate and regional marketing and advertising, and (iv) corporate professional fees. Other general and administrative expenses exclude any general and administrative expenses related to deferred rent, stock-based compensation, legal settlement, severance, executive recruiting, professional fees, the Great Hill Partners expense reimbursement fees or any other general and administrative expenses that are included in the reconciliation of net loss to Adjusted EBITDA.

 

Adjusted Net Loss

 

The following table presents a reconciliation of Adjusted net loss to Net loss for each of the periods indicated:

  Year Ended December 31, Quarter Ended, December 31,
   2017   2016   2017   2016 
(in thousands)                
Net loss  $  (23,436) $  (9,504) $  (11,781) $  (2,704)
Goodwill impairment    7,488     —     7,488     — 
Asset impairment    207     —     207     — 
Stock-based compensation(a)    2,583     23     464     2 
Legal settlement(b)    902     —     —     — 
Severance(c)     87     225     —     124 
Executive recruiting(d)     131     56     52     — 
Professional fees(e)     308     —     55     — 
Great Hill Partners expense reimbursement fees(f)    75     100     —     25 
Adjusted net loss $  (11,655) $  (9,100) $  (3,515) $  (2,553)
         

(a) Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards and forfeitures.
(b) Legal settlement expense primarily related to the Wage Statement Claim with the state of California.
(c) Severance expenses incurred in the period related to the termination of studio and non-studio employees.
(d) Executive recruiting expenses incurred in connection with the recruitment and hiring of members of our management team.
(e) Professional fees related to accounting, tax and consulting services that were expensed in connection with our IPO and acquisitions.
(f) Represents expense reimbursement fees incurred in connection with our Expense Reimbursement Agreement with Great Hill Partners, which was terminated upon completion of our IPO.

 

 

                
            

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