Jamba's (JMBA) CEO James White on Q2 2014 Results - Earnings Call Transcript

| About: Jamba, Inc. (JMBA)
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Jamba (NASDAQ:JMBA) Q2 2014 Earnings Call August 4, 2014 5:00 PM ET


Karen L. Luey - Chief Financial Officer, Principal Accounting Officer, Chief Administrative Officer, Executive Vice President and Secretary

James D. White - Chairman of the Board, Chief Executive Officer and President


Gregory J. McKinley - Dougherty & Company LLC, Research Division

Alex J. Fuhrman - Craig-Hallum Capital Group LLC, Research Division

Mark Sigal - Canaccord Genuity, Research Division


Greetings, and welcome to the Jamba, Inc. Second Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Karen Luey, Executive Vice President and Chief Financial Officer. Thank you. You may begin.

Karen L. Luey

Thank you, operator, and good afternoon. With me on today's call is James D. White, our President, Chairman and CEO. During today's call, I will review our second quarter financial results. James will follow with the business update. We will then open up the call for questions.

I would like to remind all listeners that the call is being broadcast and recorded live over the Internet at jambajuice.com. The webcast is available on our website, and a replay will be available via telephone until August 25, 2014.

This conference call will include forward-looking statements within the meanings of the securities law. These forward-looking statements will include things about the company's strategic priorities and certain statements of our expectation and plans.

Forward-looking statements are subject to risks and uncertainties that could cause our results to differ materially from the forward-looking statements that are contained in our company's filings with the SEC, including the Risk Factors section in our Form 10-K. The company does not assume any obligation to publicly release any revision to the forward-looking statements discussed during the call.

In addition, on this call, we will refer to certain non-GAAP financial measures to help understand the company's financial performance and to supplement the financial results that we provide in accordance with GAAP. The company has provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP counterparts in our earnings release filed with the SEC earlier today and available on our website at www.jambajuice.com, in our Investor Relations area.

With that said, I would like to turn it over to James.

James D. White

Thank you, Karen, and welcome to our call. The second quarter marked a significant milestone for Jamba with our juice and whole food blending platform now open in more than 500 stores. I will begin by giving an overview of the quarter, and then we'll spend some time talking about some of the exciting work we're doing here at Jamba.

For the second quarter of 2014, company-owned comparable store sales increased 2.5%, once again, outpacing most of our competitive set. Franchise comparable store sales gained 2%, and system-wide, it was 2.2%. These increases only partially capture the impact of juicing since our major expansion of our juice initiative was in June. Net income and diluted earnings per share for the quarter were flat compared with prior year period.

Excluding the onetime investments associated with the juice launch, diluted EPS increased 22.2%. All of us here at Jamba are focused on building shareholder value and have been pursuing growth in cost savings initiatives that we believe will position Jamba for enhanced value creation.

Let me now highlight some of the quarterly accomplishments, as well as the growth drivers for the future, beginning with the rollout of our juice and whole food blending platform.

As I said in our Q1 conference call, this platform rollout is Jamba's top priority for the year. And the initial results have added to our confidence. During the quarter, we expanded juicing to 120 company-owned stores, 256 franchise stores, adding to the 132 store base that we had at the end of Q1. We believe this initiative is our most significant platform launch in company history and we'll accelerate our growth for years to come.

In fact, even though we're still in the very early stages of this national expansion, we are very pleased with the marketplace excitement and consumer acceptance generated by this initiative. The 300- to 400-basis-point improvement in same-store sales that we experienced in pilot stores with juice seems to be holding in the expanded markets. And we are estimating an ongoing incrementality of 60% to 70%. We are so confident in the success of our juice and whole food blending platform that we intend to expand the platform system-wide by early 2015.

At the same time, we're squarely focused on our global development through the newly launched franchise recruiting initiative. Last month, we launched our expanded franchise recruiting development program, which focuses on store development in new and existing markets and offers multiple incentives that are very attractive to franchisees in key markets. We are confident that this program will help us to double our annual store openings with the target of adding 500 units in the next 5 years, starting in 2015.

This quarter, our global growth continued with franchisees opening 19 units in the U.S. and international markets, putting the company on track to reach the annual target of 60 to 80 new units globally. Powering our unit growth through the franchise recruiting initiative enables us to accelerate our progress as we move towards an asset-light model.

We expect this move to result in 80%-plus franchise the company-owned model within 18 months. We'll have more to share on this in the near future. As we move towards an asset-light model, we are going to have a more flexible and significantly lower cost structure. Karen will elaborate in her remarks, but I want to highlight that our organizational redesign and restructuring work is also progressing and will have broad impact by making Jamba faster and more flexible, enhancing our focus on growth initiatives and driving down our G&A expenses, while building significant capabilities in areas like the supply chain and marketing, in particular in the digital and social media areas. We anticipate that additional cost and productivity initiatives across the enterprise will reduce G&A by 10% to 20%, as we continue to move aggressively towards our asset-light model.

We are also excited about some other growth initiatives that will drive value. I will start with our new ready-to-drink cold press juices, which we are looking forward to launching later in this year. These juices will offer consumers the great taste, texture and flavor of fresh squeezed made-to-order juices in convenient 12-ounce bottles.

While it's too early to provide details about our line of ready-to-drink juices, we believe there will be significant consumer acceptance and demand.

Ready-to-drink juices offer the opportunity for significant incremental sales in Jamba stores. We expect that one of our other growth initiatives will drive additional gains. JambaGO is close to getting a go-ahead for installations of hundreds of units with a national partner. We continue to be excited about JambaGO because many of the units that have already been installed have exceeded our expectations. We believe the benefit of this rollout, along with other growth initiatives, will become evident in our results over the next few quarters.

Before I turn the call over to Karen, I want to highlight some of the important demand creation technology solutions that we've launched here at Jamba.

I'm pleased to report that Jamba is scoring high marks and great acceptance with consumers. Membership enrollment and our Jamba Insider Rewards loyalty program is outpacing other industry leaders. Our new Jamba Insider Rewards Customer Loyalty program, which allows users to earn discounts and rewards with a touchscreen phone entry rocketed from 500,000 new members in Q1 to 1 million by mid-July.

And we're targeting 2 million members by early next year. We expect to enroll up to 100,000 new members as a result of special sign-ups this week in our free juice giveaway. The rewards program is especially important because it provides us with deeper insights into consumers' wants and needs, and it enables us to optimize our targeted offers. It is an important tool to grow our brand and customer loyalty.

We also saw significant traction with the ISIS mobile wallet. Consumers use the ISIS mobile wallet for our free smoothie and juice promotion. Redemptions grew from 270,000 at the end of Q1 to more than 700,000 by the end of Q2. By mid-July, we maxed out that promotion at 1 million.

Our social media efforts are also strengthening. The June to July period marked the first time that Jamba scored in the top ranks of companies on Facebook for new fans and fan engagement. We scored as high as #5 for total fan interactions, ahead of companies like McDonald's, Nike, PepsiCo and Starbucks, and #17 on the additions of new fans.

Online viewing at Jamba videos also reached a milestone, with 1 million views of our 43 videos through July. Our aided brand awareness remain above 50% mark in the fourth consecutive quarter at that level, so the brand continues to strengthen.

In addition to our tech marketing, our Blend in The Good advertising campaign was launched on radio last month. We also, last month, launched a national promotion with Groupon in mid-July. These are just a few examples of high-impact marketing efforts that will drive growth and value for the brand.

With that, let me turn the call over to Karen for more detail on our performance in the second quarter.

Karen L. Luey

Thank you, James. We continue to make progress during the quarter, implementing our growth and cost-saving initiative and accelerated the rollout our fresh juice platform to over 500 stores systemwide. This resulted in onetime investments for the second quarter that included sampling, labor training, operational audit and totaled approximately $1.4 million. As a result, my comments will include both GAAP and pro forma results.

On an as reported basis, our net income and diluted earnings per share were flat compared to the prior year. However, on a non-GAAP basis, excluding the onetime costs related to our juice launch, our pro forma second quarter results show an increase in net income of $1.4 million to $7.7 million and a corresponding increase in diluted earnings per share of $0.08 to $0.44 per share over the same prior year quarter.

Our operating margin improved by 60 basis points to 10.3% for the second quarter, and our store level margin was 22.9%. On a non-GAAP basis, excluding the onetime charges related to the juice launch, our pro forma operating margin increased by 260 basis points to 12.4%, and pro forma store level margins increased by 30 basis points to 24.5%. We ended the quarter with over $32 million in cash and no debt on the balance sheet.

The early results on juice for the second quarter are very positive and consistent with what we have seen in the pilot stores since the rollout began over a year ago. For example, we continue to see a 300- to 400-basis-point improvement in the same-store sales over stores that do not have the juice platform. We believe one of the factors driving the success of the juice platform is a comprehensive marketing plan that utilizes a number of marketing channels and venues to drive awareness outside of our 4 walls. We will be able to provide more financial visibility during our third quarter call.

We also continue to make progress to move to a more asset-light model through our refranchising initiative, which is designed to accelerate growth domestically, as James just discussed.

During the quarter, we sold 4 stores, along with the commitment to open 12 new stores in the market. And on a year-to-date basis, we have refranchised 8 stores. We have added 22 development commitments through our refranchising initiative. We anticipate that this strategy, coupled with our franchise recruiting campaign, will significantly accelerate our domestic store growth and our move to an 80%-plus franchise to company-owned store business model.

And as a result of our refranchising initiative, the number of company-owned stores at the end of the second quarter was 258, compared to 295 at the end of the second quarter of 2013. This decrease in the number of company stores is the primary reason company store revenue for the second quarter decreased 7.5%, or $4.7 million, to $58.6 million. We reflected increases in same-store sales for company of 2.5%, franchise of 2% and system-wide of 2.2%.

Same-store sales from our company stores in California reflected increases of 3.6%. Of the company store increase, average ticket was higher by 410 basis points and traffic decreased by 160 basis points. We believe the decrease in traffic is primarily a result of the reduced promotional activity during the year, as compared to 2013.

As we focused on more high-impact target marketing to build brand loyalty, we reduced promotional discounts as a percent of total sales by approximately 240 basis points during the quarter.

And as we continue our shift to an asset-light business model, franchise and other revenue for the second quarter increased by 24.6% to $5.6 million, compared to $4.5 million from the same prior year quarter. This was attributable to the increase in royalties related to the increase in the number of global franchise stores and in the opening of 9 new franchise locations during the quarter. At the end of the second quarter of 2014, we had 599 global franchise locations as compared to 534 at the end of the second quarter 2013.

New York City plays an important strategic role in our business, as there is a huge consumer demand for our product in this geography, which we must weigh against the high occupancy rent structure.

Our strategy in New York City continues to focus on the significant franchise growth opportunities in the Northeast, including small format locations.

With respect to company-owned New York City locations, we continue to drive the top line with the introduction of our successful juice platform, and we'll continue to refresh our company store portfolio. We have also been successful in closing locations at natural lease expiration without incurring significant cash outlays.

We plan to continue to move down this path throughout the next 12 to 18 months, and we'll keep you informed of our progress throughout the year.

JambaGO revenue was $1 million, compared to less than $0.1 million in the prior year same quarter. We are pleased with our progress on JambaGO, and revenue on a machine unit basis is trending about 10% above the guidance that we gave at the beginning of the year. CPG revenue was $0.4 million, as we start to revamp our business model back to a licensed structure.

With respect to our cost savings and productivity programs, we continue to attack this on several fronts. We have made significant progress on our major supply chain initiatives, which we expect will yield savings of 200 to 300 basis points by driving down product costs in the areas of distribution and commodities. These efforts are on track and we expect to see savings start to flow in the second half of the year as we realize the opportunities.

Importantly, they will serve to offset the higher COGS associated with juicing fresh produce. We also continue to make progress on reducing general and administrative expenses. On an as-reported basis, G&A decreased by $0.7 million for the quarter. And on a year-to-date basis, G&A was reduced by $1.5 million as compared to the prior year period.

On a non-GAAP pro forma basis, G&A for the quarter decreased by $1 million, primarily as a result of reductions in professional fees and compensation-related charges. We believe there is more room to bring down G&A, as we continue our transition to an asset-light model and rightsize our cost structure to be more consistent with our new business profile, as well as pursue other productivity enhancements.

Our effective tax rate for the quarter was 3.4%, and we are expecting a full year effective tax rate of somewhere between 2% to 3%. The primary components of our tax expense are alternative minimum tax and foreign withholding taxes.

We continue to have a full valuation allowance against our deferred tax assets. And based on the pretax income recognized in the recent years, we will begin to evaluate the need for a valuation allowance in the future. Our cumulative federal net operating loss at the end of fiscal 2013 was approximately $115 million.

We continue to reinvest in our core business and our guidance for fiscal 2014 capital expenditures is currently a range of $12 million to $13 million and includes the capital required for our juice platform, maintenance capital and information technology investments.

With that said, I will now turn the call back to James.

James D. White

Thank you, Karen. And as you know, our juice expansion is the most significant platform launch in company history. So I wanted to spend just another moment to outline why we're so excited about this opportunity.

This is a multifaceted initiative that focuses on delighting consumers with the best tasting, freshest premium juices and whole food blended beverages, raising our level of service with team members who are more knowledgeable, welcoming juice enthusiasts; provides our franchisees with incremental support to achieve best practices in all their stores; and investing solidly in high-impact marketing efforts.

In California, where we have the largest concentration of stores with juice, our same-store sales for the quarter were up 3.6%. Our overall juice sales were up 180% since the June launch. All dayparts benefited from juice. Lunches the high selling daypart with a 29.9% share. Breakfast and afternoon dayparts are also strong with 26.8% and 24.2% shares, respectively.

As I mentioned earlier, our cold press ready-to-drink juices will extend our success within the overall juice opportunity. We expect that ready-to-drink juices will offer the opportunity for significant incremental sales in Jamba stores. Look for more details that come on ready-to-drink juices in the next few months.

Jamba will be also, this week, hosting a systemwide juice sampling, a free juice giveaway in almost 600 Jamba stores on August 6, supported with a broad, integrated PR marketing communication campaign that will include bounce back coupons and Jamba contributions to local school gardening programs.

We're also excited about this event and look forward to sharing the reaction to it on our next call. While we are only one month into the third quarter, the initial results are positive and indicate that we're off to a strong start, up 6% to 7% on a comparable basis. And with the full impact of juice to be captured in the third and fourth quarters, we are confident that we can deliver positive company-owned comparable store sales growth of 2% to 4% for the year.

So with that, let me summarize and reiterate that I'm very confident about Jamba's future. Juice and whole food blending will accelerate our sales growth. Our newly-launched franchise recruiting initiative will power our unit growth. Acceleration of our asset-light model will result in an 80% franchise to company-owned model within 18 months, including our ongoing refranchise that we foresee additional cost and productivity initiatives that will reduce G&A by 10% to 20%. And finally, our other growth initiatives will drive more gains.

So I'm very excited about Jamba's future, and we are working hard to execute on our strategic growth initiatives. We are also appreciative to the feedback and perspective we've received from our shareholders.

We are aligned in our goal of creating significant value for Jamba shareholders. And before I conclude, I'd like to welcome our new partners and thank all of our Jamba team members and franchise operators across the system for their continuing efforts and commitment to building the company and the brand and delivering outstanding service to our customers. Thank you. And I'll turn the call back to the operator.

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of Greg McKinley with Dougherty.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

James and Karen, I wondered if we could talk a little bit about this 80% franchising company-owned ratio you're targeting and how you view that within the timing and extent of G&A cost reductions to the extent that, that's accomplished within 18 months. It seems like that'll be combined either strong, new franchise store development and probably also, additional refranchising transactions. So I'm wondering if you could sort of talk about how each of those factors get you to the 80%, and then what needs to happen with G&A as that occurs?

James D. White

Thanks for the question, Greg. I guess, the context point I'd start with is we sit with 70% of our store portfolio is franchised today. So there's another 10 points of movement towards the asset-light model that we'd see over that 18-month period of time. If you add to that, the expectation we have for the balance of this year, from a store development perspective, and you assume that we'll be successful in growing our domestic unit growth to 80, to about 100, and then we will continue with the refranchising work that we've done over time, that moves us pretty comfortably to 80% plus in terms of the go-forward model. And as we stated in the call, we expect to reduce the G&A by 10% to 20% over that same timeframe.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

And so just point of clarification, you expect for this year to open 80 to 100 new franchise locations?

James D. White

2015. The program we've announced a couple of weeks ago, the franchise development initiatives that we announced 2 weeks ago.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. So that's for next year, 80 to 100 new ones. Okay. And then, within G&A, what are the areas where you see opportunity?

James D. White

Really more to come on the specifics. And we expect to be able to update you in a couple of months here in terms of the specifics. But we've got very significant pieces of work that have been under way, that you'll see us start to action over time as we move through the strategy.

Karen L. Luey

And again, added to that, Greg, would be the reduction you currently have seen in G&A on a year-to-date basis. We've been able to take $1.5 million out of our G&A in 2014 to the second quarter. So we're going to continue along those lines as well.


[Operator Instructions] Our next question comes from line of Alex Fuhrman with Craig-Hallum.

Alex J. Fuhrman - Craig-Hallum Capital Group LLC, Research Division

So I wanted to talk a little bit about the New York City opportunity that you mentioned. As far as closing stores over the next 12 to 18 months, how many of those leases that you're in, will experience natural expirations? And can you try to give us a sense of exactly what it is that's going wrong in those stores and how big the losses? Just kind of trying to frame up the opportunity of getting out of some of those stores. And then thinking more broadly about the New York City market, in particular, Brooklyn and Queens, where you don't have a presence, is there a lot of interest in operating that market on the franchisee side and potentially, anyone who might be willing to even operate, maybe a few of those Manhattan locations as they build out the rest of the city. Is that an option as well?

James D. White

So Alex, I'd make a couple of points. And I'll actually start with where you ended your question. We think there is tremendous consumer demand for this brand in the New York City, New Jersey marketplace. And we view as critical to our strategy in the Northeast, significant franchise growth opportunities in both the New York City and New Jersey geographies. That will be actually one of our first stops, is to build out our franchise opportunities in those markets, as we launch our road show to build the brand. As it relates to the store portfolio in New York City, we've got 16 locations in the Metro area, and we have 7 natural lease expirations over the course of the next 2 years. There's 3, which is about 20% of the store locations, in 14 that will naturally expire. And there's another 4 that expire in 2015. And as we think about the drag on our overall profitability in that marketplace, this takes away a significant portion of that number, if not all of it. Karen?

Karen L. Luey

And I just want to add to that, Alex, as we look at our fresh juice platform, we currently have that in 2 of our Manhattan locations today and we'll be extending that juice platform out in the middle of Q3 to additional 5 to 6 stores in New York City. So that will continue to bolster the top line, which will then flow through down to the store level margin line.

James D. White

And as we've said previously, we actually view New York City as one of the most attractive premium juice markets, and we expect to play a critical leadership role in that marketplace in premium juice.


Our next question comes from the line of Mark Sigal with Canaccord Genuity.

Mark Sigal - Canaccord Genuity, Research Division

James, I think if I understood your commentary correctly, you talked about the potential that accelerate the juice store rollout even further by early 2015. So you're over 500 now. Can you talk about what the expectations are for the back half of the year? Are things just going more smoothly than you thought and you want to step on the gas here?

James D. White

Well, really, as we build out this fresh supply chain, I mean, that's been one of the biggest hurdles to further accelerating the premium juice rollout. We love the results that we've seen to date, and we have about 200 more locations that sit in the possibility. Set and encompassing that are 2 or 3 big markets that we don't have the full expanded portfolio. And we're working as hard as we can from the supply chain perspective to lay in the right supply chain to allow us to accelerate into a few key markets and some additional nontraditional outlets that we think would be prime for the platform. So think about it as the next 6 to 9 months that we'd add up to about a couple of hundred additional locations with this platform.

Mark Sigal - Canaccord Genuity, Research Division

Okay, great, that's helpful. And then, Karen, on the COGS line, it looks like you guys have been quick to realize some significant gains there. I just want to be clear. That doesn't reflect the 200 to 300 basis points that you guys are expecting to realize beginning later this year, correct?

Karen L. Luey

Let me -- Mark, can you say that again? I'm not sure I understood your question.

Mark Sigal - Canaccord Genuity, Research Division

Yes. Just looking at the COGS line on an adjusted basis. It looks like you guys have significantly driven ahead of us in terms of gains you're seeing on the margin side. So I'm wondering, is there any reflection in there on the margin enhancement program or is that all back half weighted?

Karen L. Luey

There was a little bit reflected in the second quarter. But primarily, you're going to see the impact of that in the second half. And just to point out as well, we really only had 1 month of the fresh juice produce numbers in our COGS numbers for -- on the second quarter. We'll get the impact of the fresh juice COGS in Q3 and beyond. So the savings that we're going to realize in the second half will more than offset the increase in cost of goods with respect to our fresh produce distribution that we set up.

Mark Sigal - Canaccord Genuity, Research Division

Okay, great. And then, James, it looks like Starbucks has come out with or is piloting a competing yogurt-based smoothie. Can you talk about how you feel you're differentiated? Clearly, you guys have a head start on them from a timing standpoint, but just curious as to your thoughts there?

James D. White

Well, if we look, whether a Starbucks or McDonald's or any of the other folks that have, over time, launched smoothies, maybe everybody has a smoothie. What we pride ourselves in is, on a handcrafted basis, customizable, there's nobody that gives us any major concern in either the smoothie or the juice spaces we move for. We're just really warming up. Starbucks has been in this space for 4, 5 years and, they've underperformed pretty significantly. The Jamba offering and we expect it nothing will change there. We believe we have a clear competitive advantage. We're structured to do cold-blended beverages, and we've done them at the highest level for many, many years. And we're only building momentum around this fresh juice platform and capability in our stores. So we're pretty confident with where we'd line up versus any competitor in the space.


[Operator Instructions] Our next question is a follow-up from the line of Greg McKinley with Dougherty.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

So you rolled out 220 [ph] additional company-owned stores during the quarter. Where does that bring you from a company-owned standpoint at the end of the quarter?

Karen L. Luey

Greg, so that brings us -- when you look at the total of the universe of 500 store, systemwide stores, it's about 50% company and 50% franchised.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. And what's been the feedback from the franchise community thus far? Has it been similarly positive to what you're experiencing corporate stores or how have they responded?

James D. White

Very positive. I mean, it's a game changer for the system. It's evidenced by the early sign up and alignment and just as one anecdotal piece of feedback, one of our key franchise partners in the Southern California marketplace actually has the leading performing set of stores in the system. It's a great adoption and just wonderful focus.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

And then -- okay. And then in terms of the expenses that you're calling out, is it fair for us to look at those as completely nonrecurring? Or is that something that will sort of stabilize over a period of time when you talk about the sampling and the training, et cetera?

James D. White

Yes, I'd view them as totally onetime expenses related to the launch. The investment we've made around the launch.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. And then, I guess, my last question on that is, operationally, how do you feel like the stores handled it? Are there -- do you feel like you've worked out any bumps in the road in terms of, whether it's customer service times or spoilage cost with the fresh produce, or any extra labor needed to support that product. Any comments there?

James D. White

Yes, I think the deliberate pace with which we launched the platform over time has allowed us to really refine the various executional elements of the program, from waste, to ordering, to putting the fresh supply chain in place. One of the things, on the positive side, that we're seeing, as we fully implement this program, we're actually seeing our customer satisfaction go up in some of the places where we're doing the best job with juice, and as you might expect, the higher the velocity of our juice performance, actually, the more proficient we become at executing the platform. So we're -- early innings, we're a couple of months in to the platforming being broadly expanded, but we're seeing good, steady progress and we're excited about how the organization is executing.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

And in your comments, you said you thought maybe 70% to -- what, 60% to 70% incremental, which I'm interpreting as a new transaction as opposed to a trading from a smoothie to a juice sale. That seems higher than maybe what your commentary is in the past been. Is that survey-based or customer -- somehow measuring a greater degree of incrementality than what you've previously attributed?

James D. White

As we continue to refine the set of our best practices and the more we get outside of the 4 walls of our shops. From a marketing perspective, we're seeing this juice platform in the consumer to be either a different consumer or a different occasion or both.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay, great. And then just last question, but it's happened in the last couple of quarters. Receivables are a little bit higher then or they have been trending at, and if we go back 3, 6 months, 9 months rather. Is that a timing issue with how cash gets converted during the quarter or how should I think of that?

Karen L. Luey

It's probably more a function of higher revenue from franchisees, therefore, higher royalties. And it's probably also a function of having more franchisees or franchise stores in the system than prior quarters.


We have no further questions in queue at this time. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

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