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Jamba, Inc. (NASDAQ:JMBA)

Wedbush 14th Annual California Dreamin' Consumer Conference Transcript

December 10, 2013 10:20 AM ET

Executives

James White - Chief Executive Officer

Analysts

Kurt Frederick - Wedbush

Kurt Frederick - Wedbush

Hi, everyone. It started momentarily but our next company is Jamba here. Today presenting for the company is going to be the CEO, James White and here he is.

James White

Thanks, Kurt. Good morning. For those of you that are new to the story, I’ll go through a series of slides and for those of you that I know, good to see you today. Again the Safe Harbor statement, I have got the presentation today, if there are any forward-looking comments.

I’ll walk through an overview of the company, the vision and our focus. I will spend time talking about our future and then provide some closing comments around our 2014 guidance and a summary, and I will spend a little bit bulk of the time talking about our future and how we see the key initiatives that will be the drivers for the future growth of the company.

In terms of the focus of Jamba, we have been focused over the course of the last five years on building a globally recognized a healthy lifestyle brand. We see significant wide space opportunity in this health and wellbeing space, and where Jamba has arrived both to play and win that space.

We have been focused on strengthening total brand value, which for us is around really two dimensions, brand building and what we would talk about is total innovation. We are working on accelerating our overall growth, really strengthening the underline infrastructure and business model and we are squarely focused on building a $1 billion lifestyle brand.

And the final point I would make is we are very focus is our top priority on capitalizing this whole food blending and juicing trends that is happening and that will be one of the critical catalyst as we strengthen our core juice and smoothies business on a go-forward basis.

In terms of the brand founded in 1990, we were founded by a cyclist called Kirk Perron that really built the company that replenished himself after cycling and we have really stayed on that same history trajectory over the time.

Jamba was founded to inspire and simply healthy living and we have seen no need to do anything but strengthen that core vision for the company over the course of my tenure at the company.

A couple of headlines that I think are important, we have over a hundred million folks that come to our shops on an annual basis. We have 840 plus locations globally. The average unit volume for Jamba is twice that of our nearest competitor. So if you think of our competitors being a close into of the category of Smoothie King or Robecks, they have average unit volumes of less of than half of Jamba’s.

High brand awareness and great consumer affinity around a specially healthy and wellbeing, to mention is we have got 1.7 million Facebook fans, over a million Jamba insiders and our system-wide sells are about a half billion.

So a couple of other points that I will make in terms of our credentials in health and wellness space, we are the number one top among Smoothie brand and we are always in the top 10 brands if you include CPG brands, restaurants and retailers. We would have been tied for fourth in the very last to innovate quarterly health and wellness monitor with lean cuisine and whole foods.

In terms of the Jamba footprint, again we are heavily skewed to the West Coast. We have 800 plus locations. Domestically about 840, on a global basis we would have a presence either with physical stores which are in about 30 locations today or some of the other growth vehicles for the brand we have presence, which will include Jamba Stations or JambaGo.

In terms of the story, I’d said, just a little bit of context, again I took over a CEO in 2008 and I’ll take it through quickly the growth and transformation story of the company. So if you just summarize kind of where I found the brand as I joined the company, iconic brand with significant business challenges. If we go back to 2008 we were the leader in the specialty beverage business, had shifting priorities with that management team, misaligned growth strategies, the long and the short as we have same-store sales that were down 8% in 2008 and we had a net loss of almost $150 million.

If you fast-forward and look at what we have done in terms of turning around and transforming the company, we aligned the company around a very clear-headed strategic roadmap to build the company. We had a capital infusion that allowed us to clean up our balance sheet and really work on growing the company.

We shifted to what I would describe as an asset-light approach, we started that by re-franchising about 170 company locations, as context when I joined the company 70% of the locations would have been company owned, 30% franchise.

As we stand today, we are about 40% company-owned, 50% franchise, as I look forward to 2014 will be more like 30% company, 70% franchise and really allows us to focus on what we think we do best as a management team, which is all about brand building and innovation.

Significant work over the course of time around our menu, making it significantly healthier, we have added food components like our steel-cut oatmeal platform and even as I look forward today, we have done significant innovation around core smoothies offering adding fruit and vegetable and all fruit options, which has given us significant assets to new consumers in that healthier smoothie juice base.

We have added an international business and I will talk more about that later. But the headline across -- the turnaround here is for Jamba as we build the pipeline with three markets, 320 locations, I’ll update that in a moment.

We have commercialized 10 CPG products over time, some of you that heard from a venture earlier that will be one of our premier licensed partners and we’ve build just an outstanding management team.

As it relates to the management team, we have got a team position to really coming out of the turnaround to significantly grow this business, including our new venture areas moving forward, significant CPG, restaurant and retail experience both from a startup and turnaround and growth perspective.

So stepping back, here is the context of our results over time and if there is a critical message that have you to take away, we are on a three-year trend that significantly improve the overall financials of the company.

From the same-store sales perspective, we have delivered two and a half years of positive same-store sales performance. We have projected we will finish 2013 flat to slightly up which will put us on three consecutive years of positive trends.

Store level margins are up 400 to 600 basis points. We have taken a slight step back this year, but from an overall profitability perspective we move from $149 million almost $150 million loss, the profitability year ago and we will at least double last year’s performance as we close this year. Here is the way we think about finishing up ‘13 against flat to slightly positive same-store sales. We’ll deliver store level margins in the 16% to 17% range.

We will achieve operating -- income from operations of 1% to 2% plus CPG revenue of $3 million. We will finish with 60 to 80 new locations on a global basis in 1500 plus locations served from a JambaGO perspective.

As it relates to our approach to both the turnaround and the transformation, we have done the financial turnaround of the company, the strategic turnaround and laid out a road map. We are in what we think about as a BLEND Plan 3.0 which is all about accelerated profitable growth.

Here the components of that road map, it really guides our work. Brand building and total innovation significantly revamped the overall product offering to have more better for you, smoothies and juice offerings, I will talk more about juice in a moment. We have had food components like our steel-cut oatmeal. We have added Wellness Bowls and many more premium juices.

From a lifestyle engagement and a brand building perspective, we launched a year ago our healthy living council which is some of the most critically recognized registered dieticians. We have added celebrity sports folks that help us both engage consumers and represent the brand from Venus Williams, which was our first spokesperson. She is also a Jamba franchisee in the DC market.

Vernon Davis of the 49ers’ joined us earlier this year as a new franchisee. Summer Sanders, the Olympic swimmer, is a spokesperson for us and then Jake Steinfeld, Body by Jake, who some of you might know who have been the person that created the personal trend in many, many years ago and he will be a central figure as we work on our premium juice platform and significant relationships like the National PTA, the National Gardening Association, the critical theme is that all the work that we are doing in the ways we link up with consumers is really all about our health and well being and give a consumers really credible information from credible sources or from an aspiration perspective folks that they would look to as they think about their overall health and wellbeing.

From a growth perspective, so this is critical initiative number one, so except this, if you think about Jamba sitting with 840 locations, the full potential for this brand on a global basis is over 4,000 locations and that breaks out in a couple of different ways. From an international perspective, there is potential for 1500 Jamba locations and you will see us in seven to nine countries by 2015, the context around international as we have grimaced for four international markets today. South Korea, the Philippines, Canada, and we will open our first location in Mexico early in 2014.

We expect to close one additional deal either late this year or early next year and you will see us at two to three new markets this year. The pipeline already committed to for the four markets I mentioned are 400 locations, 200 in South Korea, 40 in the Philippines, 80 in Canada and another 80 in Mexico. And again, we think the full potential is about 1,500 we have actually upped our guidance for international by 500 locations earlier this year.

The context I had said is we have 50 -- we will open our 50th international location before the close of this year. We had zero two years ago. We will open international locations 100 by a year from now and if you look to the end of ‘16, we will have 200 to 300 international locations that will be the number two smoothier juice chain globally to Jamba.

So that 300 locations at the Jamba average unit volumes would be the number two player as we get to ‘16. So we are absolutely thrilled with the growth potential internationally and that will be one of the critical drivers. We are also very excited about the domestic opportunity for us to grow in the 40 to 50 location range kind of filling out both our traditional and non-traditional growth prospects.

As it relates to the critical drivers for domestic growth, we are making significant investments to refresh and reposition the Jamba brand with the center piece of really over repositioning. What we are doing around our premium juice offering, we have invested in about 50 of our company-owned stores to -- 50 of our company-owned stores to date.

And I will talk a little bit more about premium juice in a moment that we’ve revamped and contemporarized the look and feel of our stores. And again the center piece of this work is really all about positioning us to address that growing consumer need around the whole food blended and juiced in the form of vegetables and more fruit.

From a local development perspective domestically, we announced a year ago that we would add a 100 locations in the state of California, our home state. We are 90% complete in terms of those development agreements. So we have added from 400 plus locations that we have in the state of California. You will see us add another 100 locations in that market place.

I have heard some of you asked earlier this morning why would you add locations in your already strongest state. Again as we think about the health and wellness trend is to buy coastal trend, we have a significant advantage in the state of California. The emerging premium juice customers is going to emerge.

There we have a dominant platform and a dominant lead in that space. And this will only distance the advantages that we see in that market place. We are also evolving and bringing innovation to our store footprint and design. We added our first drive through which is performing very successfully in the Las Vegas marketplace but you will see more on the drive through front upcoming.

In terms of the most critical priority for this company is the expansion of this fresh premium juice platform. We are adding ingredients that are fresh blended or juiced like kale, beets, carrots, pineapple and we think this gives us the best opportunity to brand just really high quality whole blended fruits and vegetables to a consumer that is well beyond the next stage. There are hundreds of this juice bars going up across the country.

If I head you to look forward about three years, we expected that market place. We get significantly rationalize with our scale and supply chain and expertise in this space. We fully expect to be -- to play rationalizing that category that will start in California with all the shops that have popped up. We’re really bullish on the prospects here. A couple of the early metrics, we’ve opened up 50 of these locations are refreshed to re-brand it.

50 locations of the metrics of 200 to 300 basis point improvement versus control and as we work this across time, it’s about 80% incremental. So we’re thrilled. This is the single most important platform we’ve introduced in my tenure at Jamba. You will see us go from the 50 location basis today to several hundred as we move into 2014 but we couldn’t be more excited about what we see here.

The critical thing from a consumer perspective is this is a consumer that as this becomes a critical part of their diets is a more habitual, more routine consumer. So when you have snow outside like today, if this is the part of your diet and you got to come and get the beet or the kale drink as one of your meal solutions, this is just a fantastic option. And it’s a very different consumer engagement for the brand from a loyalty perspective.

JambaGO which is another critical part of the asset light growth strategy for the company. We started this concept, focus primarily on K-12 schools. We had a significant milestone as we landed the deal to go into over a 1,000 target cafes. So we sit today with about 1,800 locations. The way they think about the math on JambaGo, in view, this is the traditional blade and razor model by one of our former Gillette guy.

So the kinds of things that I get most excited about our business is that our asset light and it literally have an annuity stream off of these businesses. So if you think about the 1,800 locations, the revenues about $2000 per location and that flows through to about 60% to 70%. We anticipate that we will add another 1,000 locations as we look to 2014 but this is a great business to place your strength. It makes the brand more accessible to consumers.

So you’ll see us look for surgically other big partners and important channels but school always be the anchor of what we do in this space. And it gives us a two-fold benefit. It’s a good business but it also give us a future annuity extremist we expose new consumers to the brand at a very young age and address, we think critically important need in our school for healthier foods and beverages.

Technology, we’re leveraging hard technology to transform the customer experience in the brand. I would make three critical points on initiatives that are happening in the technology space. One, we have taken a significant step ahead in the mobile payment space that we’ve hired over the last two years with Google Wallet, with PayPal and their wallet. But at the centre piece from a mobile payment perspective is the work we are doing with ISIS.

In ISIS what we love is the ecosystem they put together that includes the Verizon, AT&T, T-Mobile, American Express and a number of the big banks. And this is a tap and pay apparatus, where literally you go into the Jamba, we have the terminal, you take your smartphone, ISIS enable, you tap and literally pay, which dramatically changes the consumer experience.

I’ll get to a significant promotion that we’re doing with ISIS which I think is an indication of the scale in which you will see us bring to the marketplace differently from our marketing perspective.

There is really two other really important pieces from the technology perspective. We will rollout nationally with Spendgo as our loyalty partner and that will give us an opportunity to target very surgically our guess work, we are thrilled about that. And the final technology piece that I’ve mentioned is a pay ahead work we are doing with PayPal.

So we’ve launched here in New York City and San Francisco, great earlier returns. There is a PayPal mobile app that allows you to call ahead and you show up and pickup your Jamba. But technology will play a significant role in how we move as the brand shows up on a go-forward basis.

I wanted to spend just a bit of time setting the context on what we’re really excited about, as it relates to the ISIS promotion. We announced a few weeks ago that we will give away 1 million free juices or smoothies as you tap and pay. And the way that promotion works, literally, if you have the ISIS application in the right handset, you could come in every single day and tap and pay and get a juice or a smoothie free.

And we’ve used this various media touch points to announce this new technology we offer at Jamba. The voice -- and we haven’t seen the results come through yet, but we’ve been on T.V, radio and it is just been really phenomenally early adoption we’re seeing with the new technology. But this will be a technology -- will be a critical drivers as e move the brand into the future and this is an exciting promotion moving forward.

Again, our business model is strong, so the strength of the brand has never been higher. Significant work around menu innovation, improving store economics as I showed earlier over the course of two to three years, we’re up 400 to 500 basis points from an overall store margin perspective. The development pipeline from a franchising perspective both domestically and internationally has never been stronger.

I didn’t spent much time talking about our CPG presence. But we’ve got a nice portfolio, they are really anchored by the work that we’ve done with the Inventure Group and the Jumbo Smoothie Kits. There and really it’s a purchase cycle is the way we think about the business model.

So, I will close with our guidance for 2014. 2% to 4% same-store sales growth, which again would put us at four years of same-store sales growth and there are not many folks in the space we play and that would be able to stand before you and give that indication. The store level margins will be up 200 to 300 basis points at 18% to 19%.

Income from operations in the 2% to 3% range, and will add about a 1,000 JambaGO locations. So in summary, we have an exceptional brand franchise in high growth own sector categories. We have a strategy that is focused on accelerating growth. But equally we’ve got a very discipline cost and productivity set of initiatives.

One of the things that I haven’t mentioned is a piece of work that we launched earlier this year with Deloitte to work on finding productivity savings in our supply chain and system wide we stated earlier. We’ll take 200 to 300 basis points out of our cost structure, the way we think about the G&A structure for next years will be roughly flat.

And the assumption is that we will pay a full bonus, so if you think about that really significant improvement from a profitability perspective. If you think about this business prospectively, we will play with roughly the same G&A because we’ve configured this business to be asset like, things like international and JambaGO don’t require more assets as we grow those businesses going forward.

The final two points I have made, we’ve got a talented and a very disciplined management team that for the most part has been together for two or three years, and we got really good confidence in the future prospects for this company, few about to work around premium juice. The great success we’re having with JambaGO in the significant prospects that we’ve seen in international.

So with that, I will open it up and see if there are questions.

Question-and-Answer Session

Unidentified Analyst

(Inaudible)

James White

I guess there are two things that we like most, is we’ve got the biggest platform to work from and the most experienced. We’ve been doing this for 20 years. So, Jamba Juice started out as a Juice Club, so it’s no mistake that juice is in our name. We spent a number of years maybe getting away from the Jamba history. But from a perspective of supply chain expertise, this is not new work for the people that work inside of Jamba. We’ve got loads of advantages that give me a lot of confidence that we win in this space on a go-forward basis. Did I answer your question?

Unidentified Analyst

(Inaudible)

James White

No, you would be able to -- so in 50 locations today, you can experience the expanded juice offering and the smoothie concept. I’m sorry that I wasn’t clear. As we get into 2014, you’ll see most of our system have some expanded components of the premium juice offering moving forward. So we won’t make a juice, we will give it convenient. Sure.

Unidentified Analyst

(Inaudible)

James White

No -- great question and let me try to tease a part of the question, so that we’re clear. So the 4,200 locations that we see globally are traditional and non-traditional outlets, so read that as it excludes JambaGO. So JambaGO will build its own universal source, starting with 1,800 as it stands today, add another 1,000 next year.

So the way we see the portfolio growing, it will be a roughly an equal balance between traditional storefront locations and non-traditional locations that might include airports, colleges and universities, inside businesses like healthcare facilities where there is not a lot of healthy food happening in those places. They are all great venues for this brand. And we see a pretty steady path of 60 to 80 today and that will start to really pick-up as the international explodes moving forward.

Unidentified Analyst

International unit customer, AUV, that you see and as it gets closer to that 4,000 number, do you expect that you will be able to manage or kind of change your outlook?

James White

I think the AUV is across the system, will change driven by the innovation pipeline that we’re building. So, if I give you a context from the time I started, the AUVs were about 600. The AUVs today are north of 720, and you’ll see us continue, especially with what we see the prospects to be with our premium juice portfolio, that will continue to increment moving forward. You will also see as we move outside of the west coast, those AUVs will come up as this brand becomes more known, as we put more pressure against the consumer.

Unidentified Analyst

(Inaudible)

James White

We have the map that has about 10 to 15 countries and we really haven’t disclosed those in total. But there is certainly a heavy concentration on the Asia Pac region and then, Latin and Southern America will be -- where you would see us more naturally pick-off opportunities on a go-forward basis. If there are no other questions, thanks and we look forward to seeing you in the New Year. Thank you.

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