SPoT Coffee (Canada) Ltd.
TSX VENTURE : SPP

SPoT Coffee (Canada) Ltd.

April 18, 2013 17:20 ET

SPoT Coffee 2012 Results: 22% Increase in Sales & 18% Increase in Gross Profit

TORONTO, ONTARIO--(Marketwired - April 18, 2013) - SPOT COFFEE (CANADA) LTD. (TSX VENTURE:SPP) ("SPoT" or the "Company") released its audited financial results for the Company's fiscal year ended December 31, 2012. Complete financial statements and Management's Discussion and Analysis have been filed for public review at www.sedar.com and are available on the Company's website at www.spotcoffee.com. All dollar values expressed in Canadian dollars unless otherwise stated.

Year End 2012 Highlights

  • System-wide revenue increase of 22% to $7,739,856
  • Reported revenue increase of 20% to $6,818,829
  • Gross profit increase of 18% to $4,505,660
  • Café-level EBITDA of $762,819
  • Same-store-sales of mature cafés (operating more than 2 years) increase of 7%
  • Gross margins remained steady at 66% compared to 2011

SPoT Will Benefit From the Following Key Factors During 2013

  1. New café locations
  2. New major sales and distribution agreement with American Natural and further growth in commercial accounts
  3. Implementation of yearly fixed operational cost savings of $240,000
  4. Benefit of full year of operation for cafés seven (SPoT Hertel), eight (SPoT Transit) nine (SPoT Park Place) and ten (Saratoga Springs)
  5. Continued growth in same-store sales of mature cafés
  6. Expansion of the corporate catering program
  7. Stabilizing commodity prices (coffee, wheat and grains)
  8. Increased brand awareness

On November 29th 2012, the Company opened its ninth café, SPoT Coffee Park Place, which is situated in a Concord Adex development in North York, Ontario. The development currently contains more than 1,100 units across 5 condo towers with 15 additional towers to be built in the coming years. The café operated for one month in 2012; accordingly its operational results did not significantly contribute to the overall results of the portfolio. Management is closely monitoring the performance of Park Place in relation to the portfolio of the Company's cafés. SPoT Saratoga Springs, an ideally situated café in a quaint historical community in close proximity to state parks, historical museums, opened on February 6th, 2013. SPoT Saratoga Springs expands SPoT's current footprint east toward the Hudson River and brings the total number of operating cafés to ten. Sales at SPoT Saratoga Springs have been strong relative to the early performance of other cafés within the portfolio and management expects this strength to continue as the café matures.

The Company's previously announced 11th, 12th and 13th cafés are under development and the Company continues to identify opportunities for additional leases. New corporate locations will be consistent with the Company's geographic and demographic criteria as SPoT remains focused on strategic café growth across New York State. To fund café expansion the Company is currently in dialogue with strategic investors with strong track records in the "quick and casual" hospitality industry. Additionally, as an alternative to issuing equity or additional debentures supported by the current café portfolio, the Company is also exploring the sale under license of select cafés to finance the development of its 2013 café expansion. The Company is presently in due diligence with select café purchasers also from the restaurant and hospitality industries.

In the months since the end of fiscal year 2012 the Company entered into an exclusive distribution agreement with American Natural Operations LLC and its affiliates ("American Natural") to supply its award winning premium roasted gourmet coffee beans in and around Pittsburgh, Pennsylvania. Initial annual sales of roasted coffee beans by SPoT to American Natural are estimated at 40,000 lbs and will more than double the locations in which SPoT Coffee is served in. Additionally, SPoT Coffee management has taken strong actions to help propel the Company to profitability and enhance shareholder value. SPoT has finished a management realignment and internal efficiency audit which focused on cost savings and the preparation for future growth, allowing the Company to realize cost savings of up to $240,000 or 52% of the 2012 corporate net loss on a cash basis.

"We are extremely pleased with the 2012 full year financial results. The Company had significant growth in top-line revenue and café EBITDA while controlling labour costs and maintaining gross margins," said Mr. Anton Ayoub, President of SPoT Coffee, commenting on the third quarter results. "During Q1 2013, the residents of Saratoga Springs, New York, welcomed SPoT's tenth location to their community. Additionally, SPoT commenced its first major coffee sales and distribution agreement with American Natural as well as a management realignment estimated to save the Company $240,000 in 2013. With all of this positive momentum, we plan to realize profitability at the corporate level sooner than initially anticipated."

2012 Financial Highlights

  • Reported revenue for 2012 increased 20% to $6,818,829 from $5,697,288 compared to 2011. SPoT's system-wide sales revenue (without excluding working interest earnings from partnerships) for 2012 was $7,739,856, which represents an increase of 22% compared to the system-wide sales revenue of $6,367,234 for 2011. For SPoT cafés open for two years or longer, the same-store sales increased on average 7% for each café this year when compared to 2011 highlighting the continued performance strength of seasoned café portfolio.

  • Gross profit (measured as revenue less cost of sales) increased 18% to $4,505,660 from $3,810,369 when compared to 2011. SPoT's gross margin percentage (measured as gross profit over revenue) came in at 66% of revenue for 2012, in-line with 2011 numbers.

  • Costs of sales increased 23% to $2,313,169 as compared to $1,887,019 for 2011. The Company's increase in cost of sales this year reflects initial costs to stock new cafés then optimize food purchases and waste controls. The 23% increase this year is in-line with the sales increase while the Company maintained gross margins consistent with 2011.

  • The Company achieved positive Café-level EBITDA of $762,819, representing 10% of total Café-level sales, for the year ended December 31, 2012. The Company had negative Company- wide EBITDA of $478,744 for the year ended December 31, 2012. The Company-wide EBITDA reflects centralized and fixed operating and head office costs, the employment of highly qualified senior management and operating personnel at the head office level consistent with SPoT's overall development and future expansion. As SPoT continues to open new cafés, the Company expects to benefit from a larger revenue base and increasing economies of scale offsetting the Company's current investment into fixed centralized operating and head office costs.

  • The Company reported consolidated net loss of $1,442,669 for the year ended December 31, 2012. The key drivers behind the net loss in 2012 include a $234,468 non-cash stock-based compensation expense, a 49% increase in depreciation which is also a non-cash expense, a 34% increase in salaries and wages, a 98% increase in travel and a 16% increase in occupancy costs driven by the expansion of the Company's operations. SPoT has recently finished a management realignment which focused on cost savings of $15,000 to $20,000 per month for the entire 2013 calendar year. SPoT remained focused on operational execution and expense control during the year of 2012 and believes the continued growth of the Company will offset investments made to centralized overhead costs.

About SPoT Coffee

SPoT Coffee trades on the TSX Venture Exchange under the symbol SPP. SPoT designs, builds and operates community oriented cafés that provide its customers with the highest quality service, signature made-to-order meals and the world's finest in-house roasted gourmet coffee. Each SPoT café is distinctively designed to suit their local neighborhoods, creating warm and friendly gathering places for the community. SPoT's commercial business focuses on retail stores, business accounts and third party resellers such as universities and hospitals.

Forward-Looking Statements

Except for statements of historical fact relating to the Corporation, certain information contained herein constitutes forward-looking statements. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Except as required by applicable securities requirements, the Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of the release.

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