Q4 2016 Real-Time Call Brief

Highlights

Coupled with our physical relocation and our transition to an asset light franchise model, we also leased up more than 90% of leadership and support organization.

During the year, we identified that we do not have the proper visibility to month-to-month store level P&L performance for company owned stores and as a result we failed quickly see or react the deviation and labor management and other operating expenses which had a negative impact with 250 to 300 basis points in 2016.

As our expectation the company store level margins will improve between 300 and 400 basis points in 2017 to a full year target of 11% to 12%.

Our partnership with Harley opens the door with significant increase in social engagement, which is up 231%.

In 2016, we opened 75 gross new stores, 56 domestic and 19 international.

This result is significantly below our previous communicated target of approximately 95 gross new opens.

During 2016, we opened 2 new dry food stores continue to see significant upside in this format.

Five dry food stores in our system today have generated sales with index of 210% of our standard predictive model by providing new and more convenient access to our guest.

Our updated guidance for 2016 is total revenue to meet or exceed our prior guidance of approximately $78 million.

Non-GAAP adjusted G&A of $23.3 million to $23.8 million versus our prior guidance of approximately $22.5 million.

Non-GAAP adjusted EBITDA that needs or exceeds our prior guidance of approximately $10.5 million.

Moving onto liquidity, we ended the year at $7.1 million in cash and cash equivalents, down from $14.3 million at the end of the third quarter.

The use of cash results primarily from the transition of support center Frisco of $2.8 million.

Our 2016 full year system-wide comp sales was relatively flat reported down 0.2%.

Fourth quarter 2016, system-wide comp sales decreased 2.2%, which is better than our prior expectations and exceeded the net track fast-casual benchmark for the third consecutive quarter.

69% of our domestic store base is in California, Arizona, Idaho, Novato, Oregon and Washington.

Total revenue up $75 million to $77 million versus our prior guidance of $78 million to $80 million.

Since our previous guidance, we made decision to close the innovation store in Pasadena and refranchised through franchise the Emeryville store.

These two changes drove approximately $2 million of the reduction in guidance.

We now expect annual system-wide comp sales that are flat to slightly positive.

This is reduce from our prior guidance of an increase of 2% to 4% and only reflects the reduction contribution of Q1.

The new store openings in the range of 65 to 75 gross and 25 to 35 openings net of closures.

This is compared to our prior guidance of approximately 110 gross and 65 net of closures.

Non-GAAP adjusted G&A of approximately $21 million exiting 2017 with a run rate of no more than $20 million, which in line with our prior guidance.

We now expect non-GAAP G&A EBITDA in the range of $13 million to $15 million versus our prior guidance of $14 million to $16 million.

We expect capital expenditures in the range of $3 million to $4 million.

The key factors in non-GAAP adjusted EBITDA from '16 to the midpoint of '17 guidance are anticipated as follows; approximately $2 million of sales growth due to comp sales new stores, closures refranching activities.

Approximately $1.1 million benefit from reduced G&A expense, approximately 1.6% benefit from the combination of cost inflation and deflation operating efficiency expectation increased gift card and reduced franchise and other operating expense.

This is primarily offset by an estimated $1.2 million reduction in JambaGo contribution.