# EDGAR Filing Document

**Accession Number:** 0001528930
**File Stem:** 0001171843-23-001255
**Filing Date:** 2023-2
**Character Count:** 40994
**Document Hash:** 3b2ffb6a74536e2d8c44f6d255194ba6
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001171843-23-001255.hdr.sgml**: 20230228

**ACCESSION NUMBER**: 0001171843-23-001255

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230228

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230228

**DATE AS OF CHANGE**: 20230228

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Franchise Group, Inc.
- **CENTRAL INDEX KEY:** 0001528930
- **STANDARD INDUSTRIAL CLASSIFICATION:** PATENT OWNERS & LESSORS [6794]
- **IRS NUMBER:** 273561876
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-35588
- **FILM NUMBER:** 23685139

**BUSINESS ADDRESS:**
- **STREET 1:** 109 INNOVATION COURT
- **STREET 2:** SUITE J
- **CITY:** DELAWARE
- **STATE:** OH
- **ZIP:** 43015
- **BUSINESS PHONE:** 508-630-4426

**MAIL ADDRESS:**
- **STREET 1:** 109 INNOVATION COURT
- **STREET 2:** SUITE J
- **CITY:** DELAWARE
- **STATE:** OH
- **ZIP:** 43015

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Liberty Tax, Inc.
- **DATE OF NAME CHANGE:** 20140714

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** JTH Holding, Inc.
- **DATE OF NAME CHANGE:** 20110830

?xml version="1.0" encoding="utf-8"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 8-K** 

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**Date of Report (Date of earliest event reported): February 28, 2023**

**Franchise Group, Inc.**

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-35588** | **27-3561876** |
| (State or Other Jurisdiction of<br> Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |

---

**109 Innovation Court, Suite J**

**Delaware, Ohio 43015**

(Address of Principal Executive Offices) (Zip Code)

**(740) 363-2222**

(Registrant's telephone number, including area code)

**n/a**

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which <br> registered |
| Common Stock, par value $0.01 per share | FRG | Nasdaq Global Market |
| 7.50% Series A Cumulative Perpetual Preferred Stock, par value $0.01 per share and liquidation preference of $25.00 per share | FRGAP | Nasdaq Global Market |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

---

| | |
|:---|:---|
| **Item 2.02.** | **Results of Operations and Financial Condition.** |

---

On February 28, 2023, Franchise Group, Inc. (the "Company") issued a press release regarding its financial results for the fiscal year ended December 31, 2022. A copy of the release is being furnished as Exhibit 99.1 hereto and incorporated herein by reference. In addition, on February 28, 2023 at 4:30 p.m. Eastern Time, the Company will hold a teleconference for analysts, institutional investors and stockholders to discuss results for the fourth quarter of the fiscal year ended December 31, 2022.

The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished to the Securities and Exchange Commission (the "SEC") pursuant to Item 2.02 of Form 8-K and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of the Company's filings with the SEC under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

---

| | |
|:---|:---|
| **Item 9.01.** | **Financial Statements and Exhibits.** |

---

***(d) Exhibits***

[99.1](exh_991.htm) [Press Release dated February 28, 2023.](exh_991.htm)

104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **FRANCHISE GROUP, INC.** | **FRANCHISE GROUP, INC.** |
| Date: February 28, 2023 | By: | /s/ Eric Seeton |
|  |  | Eric Seeton |
|  |  | Chief Financial Officer |

---

## Exhibit 99.1

**EXHIBIT 99.1**

**Franchise Group, Inc. Announces Fourth Quarter and Full Fiscal Year 2022 Financial Results**

DELAWARE, Ohio, Feb. 28, 2023 (GLOBE NEWSWIRE) -- Franchise Group, Inc. (NASDAQ: FRG) ("Franchise Group," "FRG" or the "Company") today announced the financial results for its fiscal fourth quarter and fiscal year ended December 31, 2022. For the fourth quarter of fiscal 2022, total reported revenue for Franchise Group was approximately $1.1 billion, net loss from continuing operations was approximately $0.7 million or $0.08 per fully diluted share, Adjusted EBITDA was approximately $65.3 million and Non-GAAP EPS was $0.47 per share. For the full fiscal year 2022, total reported revenue for Franchise Group was approximately $4.4 billion, net loss from continuing operations was approximately $68.6 million or $1.96 per fully diluted share, Adjusted EBITDA was approximately $354.0 million and Non-GAAP EPS was $3.63 per share.

On December 31, 2022, total cash on hand was approximately $80.8 million and outstanding term debt was approximately $1.1 billion. During the fourth quarter of fiscal 2022, the Company repurchased approximately 3.7 million shares of its common stock for approximately $95 million bringing total purchases under FRG's buyback plan to 5.9 million shares. FRG finished fiscal 2022 with approximately 34.9 million shares outstanding, a reduction of shares outstanding of approximately 15% from the beginning of the fiscal year.

"Our financial performance in the fourth quarter was in line with the outlook we provided in November," stated Brian Kahn, Franchise Group's President and CEO. "Our franchising activity continued to accelerate across FRG in 2022. We finished the year with 259 new territories sold and a backlog across all brands of 482 locations. We expect organic growth in 2023 to drive increased EBITDA and cash flow."

The Company currently has six reportable segments: American Freight; The Vitamin Shoppe; Pet Supplies Plus; Buddy's; Sylvan; and Badcock. The following table summarizes Revenue, Adjusted EBITDA, and Net Income/(Loss) for each of these segments. Reconciliations of Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS to their respective most comparable GAAP measures, are included below under "Non-GAAP Financial Measures and Key Metrics."

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **For the Three Months Ended** | **For the Three Months Ended** | **For the Three Months Ended** | **For the Twelve Months Ended** | **For the Twelve Months Ended** | **For the Twelve Months Ended** |
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
|  |<br>**Revenue** | **Adjusted**<br>**EBITDA** | **Net**<br>**Income/(Loss)** |<br>**Revenue** | **Adjusted**<br>**EBITDA** | **Net**<br>**Income/(Loss)** |
|  | ***(In thousands)*** | ***(In thousands)*** | ***(In thousands)*** | ***(In thousands)*** | ***(In thousands)*** | ***(In thousands)*** |
| American Freight | $216328 | $(14732) | $(21724) | $883484 | $3711 | $(103426) |
| Vitamin Shoppe | 292820 | 23520 | 4030 | 1206824 | 134918 | 57060 |
| Pet Supplies Plus | 361752 | 36195 | 14126 | 1288724 | 114705 | 43806 |
| Buddy's | 14533 | 3867 | 1393 | 57407 | 15824 | 6439 |
| Sylvan Learning | 11236 | 4069 | 525 | 42336 | 13901 | 1127 |
| Badcock | 219222 | 16279 | (38599) | 919057 | 83845 | (38064) |
| Corporate | - | (3945) | 39539 | - | (12866) | (35515) |
| Total | $1115890 | $65253 | $(710) | $4397832 | $354038 | $(68573) |

---

**Outlook** For fiscal 2023, FRG expects to generate revenue of approximately $4.4 billion, net loss of approximately $1.4 million or $0.04 per share, Adjusted EBITDA of approximately $355 million and Non-GAAP EPS of approximately $2.90. From a reporting perspective, fiscal 2023 will include 52 weeks of operating results compared to fiscal 2022 which had 53 weeks of operating results creating a benefit of approximately $70 million in revenue and $11 million of Adjusted EBITDA. In calculating EPS, the Company is using approximately 34.9 million weighted average shares outstanding. Non-GAAP EPS is calculated by adding the tax effected impact of adjustments to EBITDA to net income on a per share basis. In calculating GAAP and Non-GAAP EPS, the Company is currently using an effective tax rate of approximately 25.8%.

The Company does not provide a quantitative reconciliation of forward-looking, Non-GAAP financial measures such as forecasted Adjusted EBITDA or Non-GAAP EPS to the most directly comparable GAAP financial measures because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have significant impact on such calculations, and providing them may imply a degree of precision that would be confusing or potentially misleading. Estimates exclude potential acquisitions, divestitures or refranchising activities. See "Non-GAAP Financial Measures and Key Metrics."

**Conference Call Information** Franchise Group will conduct a conference call on February 28<sup>th</sup> at 4:30 P.M. ET to discuss its business and financial results for the fiscal 2022 fourth quarter and full year. A real-time webcast of the conference call will be available on the Events page of Franchise Group's website at www.franchisegrp.com. The conference call can also be accessed live via telephone at (833) 630-1956. Participants should ask to be joined to the Franchise Group Inc. call. Please dial in 5-10 minutes prior to the scheduled start time.

**About Franchise Group, Inc.**

Franchise Group is an owner and operator of franchised and franchisable businesses that continually looks to grow its portfolio of brands while utilizing its operating and capital allocation philosophy to generate strong cash flow for its shareholders. Franchise Group's business lines include Pet Supplies Plus, American Freight, The Vitamin Shoppe, Badcock Home Furniture & more, Buddy's Home Furnishings, Sylvan Learning and Wag N Wash. On a combined basis, Franchise Group currently operates over 3,000 locations predominantly located in the U.S. that are either Company-run or operated pursuant to franchising and dealer agreements.

---

| | | |
|:---|:---|:---|
| **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** |
| Consolidated Balance Sheets | Consolidated Balance Sheets | Consolidated Balance Sheets |
| **(In thousands, except share count and per share data)** | **December 31, 2022** | **December 25, 2021** |
| **Assets** | **(Audited)** | **(Audited)** |
| Current assets: |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $80783 | $292714 |
| &nbsp;&nbsp;Current receivables, net | 170162 | 118698 |
| &nbsp;&nbsp;Current securitized receivables, net | 292913 | 369567 |
| &nbsp;&nbsp;Inventories, net | 736841 | 673170 |
| &nbsp;&nbsp;Current assets held for sale | 8528 |  |
| &nbsp;&nbsp;Other current assets | 27272 | 24063 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 1316499 | 1478212 |
| &nbsp;&nbsp;Property, plant, and equipment, net | 223718 | 449886 |
| &nbsp;&nbsp;Non-current receivables, net | 11735 | 11755 |
| &nbsp;&nbsp;Non-current securitized receivables, net | 39527 | 47252 |
| &nbsp;&nbsp;Goodwill | 737402 | 806536 |
| &nbsp;&nbsp;Intangible assets, net | 116799 | 127951 |
| &nbsp;&nbsp;Tradenames | 222703 | 222687 |
| &nbsp;&nbsp;Operating lease right-of-use assets | 890949 | 714741 |
| &nbsp;&nbsp;Investment in equity securities | 11587 | 35249 |
| &nbsp;&nbsp;Other non-current assets | 59493 | 18902 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $3630412 | $3913171 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;Current installments of long-term obligations, net | $6935 | $183924 |
| &nbsp;&nbsp;Current installments of debt secured by accounts receivable, net | 340021 | 302246 |
| &nbsp;&nbsp;Current operating lease liabilities | 179519 | 173101 |
| &nbsp;&nbsp;Accounts payable and accrued expenses | 376895 | 410552 |
| &nbsp;&nbsp;Other current liabilities | 40541 | 50833 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 943911 | 1120656 |
| &nbsp;&nbsp;Long-term obligations, net, excluding current installments | 1374479 | 1278469 |
| &nbsp;&nbsp;Non-current debt secured by accounts receivable, net | 107448 | 105256 |
| &nbsp;&nbsp;Non-current operating lease liabilities | 720474 | 557071 |
| &nbsp;&nbsp;Other non-current liabilities | 62720 | 88888 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 3209032 | 3150340 |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;Common stock, $0.01 par value per share, 180,000,000 and 180,000,000 shares authorized, 34,925,773 and 40,296,688 shares issued and outstanding at December 31, 2022 and December 25, 2021, respectively | 349 | 403 |
| &nbsp;&nbsp;Preferred stock, $0.01 par value per share, 20,000,000 and 20,000,000 shares authorized, 4,541,125 and 4,541,125 shares issued and outstanding at December 31, 2022 and December 25, 2021, respectively | 45 | 45 |
| &nbsp;&nbsp;Additional paid-in capital | 311069 | 475396 |
| &nbsp;&nbsp;Retained earnings | 109917 | 286987 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total equity | 421380 | 762831 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and equity | $3630412 | $3913171 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** |
| Consolidated Statements of Operations | Consolidated Statements of Operations | Consolidated Statements of Operations | Consolidated Statements of Operations | Consolidated Statements of Operations |
|  | **Three Months Ended** | **Three Months Ended** | **Twelve Months Ended** | **Twelve Months Ended** |
| **(In thousands, except share count and per share data)** | **December 31, 2022** | **December 25, 2021** | **December 31, 2022** | **December 25, 2021** |
|  | **(Unaudited)** | **(Unaudited)** | **(Audited)** | **(Audited)** |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;Product | $978231 | $840278 | $3832291 | $3012471 |
| &nbsp;&nbsp;Service and other | 130295 | 94445 | 535961 | 209103 |
| &nbsp;&nbsp;Rental | 7363 | 7553 | 29580 | 33630 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 1115889 | 942276 | 4397832 | 3255204 |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;Cost of revenue: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Product | 663600 | 545068 | 2485934 | 1892741 |
| &nbsp;&nbsp;&nbsp;&nbsp;Service and other | 10067 | 6430 | 36340 | 16506 |
| &nbsp;&nbsp;&nbsp;&nbsp;Rental | 2831 | 2683 | 11070 | 11552 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenue | 676498 | 554181 | 2533344 | 1920799 |
| &nbsp;&nbsp;Selling, general, and administrative expenses | 399648 | 327638 | 1573281 | 1108054 |
| &nbsp;&nbsp;Goodwill impairment | - | - | 70000 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 1076146 | 881819 | 4176625 | 3028853 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income from operations | 39743 | 60457 | 221207 | 226351 |
| Other (income) expense: |  |  |  |  |
| &nbsp;&nbsp;Bargain purchase gain |  | 132559 | 3514 | 132559 |
| &nbsp;&nbsp;Gain on sale-leaseback transactions, net | 547 |  | 59772 |  |
| &nbsp;&nbsp;Other, net | (1528) | (17552) | (21929) | (67368) |
| &nbsp;&nbsp;Interest expense, net | (97580) | (41620) | (339982) | (133114) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) from continuing operations before income taxes | (58818) | 133844 | (77418) | 158428 |
| &nbsp;&nbsp;Income tax expense (benefit) | (58108) | (17938) | (8845) | (33538) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) from continuing operations | (710) | 151782 | (68573) | 191966 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) from discontinued operations, net of tax | - | (4613) | - | 171822 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) attributable to Franchise Group, Inc. | $(710) | $147169 | $(68573) | $363788 |
| Amounts attributable to Franchise Group, Inc.: |  |  |  |  |
| &nbsp;&nbsp;Net income (loss) from continuing operations | $(710) | $151782 | $(68573) | $191966 |
| &nbsp;&nbsp;Net income (loss) from discontinued operations: | - | (4613) | - | 171822 |
| &nbsp;&nbsp;Net income (loss) attributable to Franchise Group, Inc. | $(710) | $147169 | $(68573) | $363788 |
| Income (loss) per share from continuing operations |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $(0.08) | $3.71 | $(1.96) | $4.56 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | (0.08) | 3.64 | (1.96) | 4.48 |
| Net income (loss) per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $(0.08) | $3.60 | $(1.96) | $8.83 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | (0.08) | 3.53 | (1.96) | 8.67 |
| Weighted-average shares outstanding: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | 37147507 | 40284349 | 39309855 | 40199681 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | 37147507 | 41081519 | 39309855 | 40964182 |

---

---

| | | |
|:---|:---|:---|
| **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** | **FRANCHISE GROUP, INC. AND SUBSIDIARIES** |
| Consolidated Statements of Cash Flows | Consolidated Statements of Cash Flows | Consolidated Statements of Cash Flows |
|  | **Twelve Months Ended** | **Twelve Months Ended** |
| **(In thousands)** | **December 31, 2022** | **December 25, 2021** |
|  | **(Audited)** | **(Audited)** |
| **Operating Activities** |  |  |
| &nbsp;&nbsp;Net income (loss) | $(68573) | $363788 |
| &nbsp;&nbsp;Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for doubtful accounts for accounts receivable | 136978 | 8878 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment | 70000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation, amortization, and impairment charges | 85363 | 72765 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred financing costs | 17327 | 48552 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of secured debt discount | 103207 | 4413 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 15082 | 13696 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale-leaseback, bargain purchases, and sales of Company-owned stores, net | (66078) | (137747) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepayment penalty for early debt extinguishment |  | 36726 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on divestiture of Liberty Tax |  | (188092) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of investment | 23662 | 31773 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (74208) | 709 |
| &nbsp;&nbsp;Other, net | 577 | 1749 |
| &nbsp;&nbsp;Change in |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts, notes, and interest receivable | (58814) | (10396) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securitized accounts receivable | (50359) | (8147) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes receivable | 4117 | (20191) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | (3804) | 12939 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest payable for secured debt | (70667) | 3089 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accured expenses | (29177) | (12215) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | (64663) | (121393) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | (7396) | 5073 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided (used in) operating activities | (37426) | 105969 |
| **Investing Activities** |  |  |
| &nbsp;&nbsp;Purchases of property, plant, and equipment | (53984) | (48045) |
| &nbsp;&nbsp;Proceeds from sale of property, plant, and equipment | 273605 | 12872 |
| &nbsp;&nbsp;Acquisition of business, net of cash and restricted cash acquired | (3843) | (1063811) |
| &nbsp;&nbsp;Divestituture of business, net of cash and restricted cash sold |  | 179471 |
| &nbsp;&nbsp;Issuance of operating loans to franchisees |  | (17749) |
| &nbsp;&nbsp;Payments received on operating loans to franchisees | - | 23103 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) investing activities | 215778 | (914159) |
| **Financing Activities** |  |  |
| &nbsp;&nbsp;Dividends paid | (111728) | (67234) |
| &nbsp;&nbsp;Issuance of long-term debt and other obligations | 439000 | 1901724 |
| &nbsp;&nbsp;Repayment of long-term debt and other obligations | (541406) | (1261455) |
| &nbsp;&nbsp;Proceeds from secured debt obligations | 382133 | 400000 |
| &nbsp;&nbsp;Repayment of secured debt obligations | (374706) |  |
| &nbsp;&nbsp;Issuance of common stock |  |  |
| &nbsp;&nbsp;Issuance of preferred stock |  | 79542 |
| &nbsp;&nbsp;Payments for repurchase of common stock | (172455) |  |
| &nbsp;&nbsp;Principal payments of finance lease obligations | (2673) |  |
| &nbsp;&nbsp;Payment for debt issue costs and prepayment penalty on extinguishment | (1339) | (102652) |
| &nbsp;&nbsp;Cash paid for taxes on exercises/vesting of stock-based compensation | (7010) | (191) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | (390184) | 949734 |
| &nbsp;&nbsp;Effect of exchange rate changes on cash, net | - | 36 |
| &nbsp;&nbsp;Net increase in cash and cash equivalents and restricted cash | (211832) | 141580 |
| &nbsp;&nbsp;Cash, cash equivalents and restricted cash at beginning of year | 293082 | 151502 |
| &nbsp;&nbsp;Cash, cash equivalents and restricted cash at end of year | $81250 | $293082 |
| &nbsp;&nbsp;**Supplemental Cash Flow Disclosure** |  |  |
| &nbsp;&nbsp;Cash paid for taxes, net of refunds | $65796 | $42154 |
| &nbsp;&nbsp;Cash paid for interest | 81158 | 91623 |
| &nbsp;&nbsp;Cash paid for interest on secured debt | 91994 |  |
| &nbsp;&nbsp;Accrued capital expenditures | 3401 | 3445 |
| &nbsp;&nbsp;Non-cash proceeds from divestiture of Liberty Tax |  | 74073 |
| &nbsp;&nbsp;Deferred financing costs from issuance of common stock |  |  |
| &nbsp;&nbsp;Capital expenditures funded by finance lease liabilities | 7333 | 756 |
| &nbsp;&nbsp;Tax receivable agreement included in other long-term liabilities |  | 504 |

---

**Non-GAAP Financial Measures and Key Metrics**

Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS are financial measures that are not prepared in accordance with GAAP. Management believes the presentation of these measures is useful to investors as supplemental measures in evaluating the aggregate performance of the Company's operating businesses and in comparing its results from period to period because they exclude items that the Company does not believe are reflective of its core or ongoing operating results. These measures are used by management to evaluate the Company's performance and make resource allocation decisions each period. These metrics are also used in the determination of executive management's compensation. Adjusted EBITDA, Non-GAAP Net Income and Non-GAAP EPS should not be considered in isolation or as a substitute for net income or other income statement information prepared in accordance with GAAP and our presentation of these non-GAAP measures may not be comparable to similarly titled measures used by other companies.

Management defines and calculates Adjusted EBITDA as net income (loss) from continuing operations before interest, income taxes, depreciation and amortization adjusted for certain non-core or non-operational items related to executive severance and related costs, stock-based compensation, shareholder litigation costs, corporate governance costs, accrued judgments and settlements, net of estimated revenue, store closures, rebranding costs, acquisition costs, inventory fair value step up amortization and prepayment penalty on early debt repayment. Adjusted EBITDA is a financial measure that is not prepared in accordance with GAAP.

Management defines and calculates Non-GAAP Net Income and Non-GAAP EPS as net income (loss) and net income (loss) per diluted share from continuing operations adjusted for non-core or non-operational items related to executive severance and related costs, stock-based compensation, non-cash executive compensation expense, shareholder litigation costs, prepayment penalties on early debt repayment, non-cash amortization of debt issuance costs, store closures, the Badcock segment's in-house financing operations, rebranding costs, acquisition costs, inventory fair value step up amortization, and amortization of acquired intangible assets. Although amortization of acquired intangible assets is excluded from these non-GAAP measures, it is important for investors to understand that such intangible assets support revenue generation. Management excludes amortization of intangible assets because these are non-cash amounts for which the amount and frequency are significantly impacted by the timing and size of our acquisitions, which vary from period to periods and across companies. The tax effect on the related non-GAAP adjustments was calculated based on an estimated annual non-GAAP effective tax rate of 25.8%.

**Reconciliation of Adjusted EBITDA**

Below are reconciliations of Net Income/(Loss) from continuing operations to Adjusted EBITDA for the three and twelve months ended December 31, 2022.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **For the Three Months Ended December 31, 2022** | **For the Three Months Ended December 31, 2022** | **For the Three Months Ended December 31, 2022** | **For the Three Months Ended December 31, 2022** | **For the Three Months Ended December 31, 2022** | **For the Three Months Ended December 31, 2022** | **For the Three Months Ended December 31, 2022** | **For the Three Months Ended December 31, 2022** |
| **December 31, 2022**<br>**($ In thousands)** | **Buddy's** | **Pet Supplies Plus** | **American Freight** | **Vitamin Shoppe** | **Sylvan** | **Badcock** | **Corporate** | **Total** |
| Net income (loss) from continuing operations | $1393 | $14126 | $(21724) | $4030 | $525 | $(38599) | $39539 | $(710) |
| &nbsp;&nbsp;Add back: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | 1221 | 7054 | 11388 | 9523 | 1073 | 66413 | 907 | 97579 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax expense (benefit) | 484 | 4907 | (7527) | 1400 | 250 | (10742) | (46879) | (58107) |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization charges | 769 | 5801 | 2964 | 7748 | 1902 | 1293 | - | 20477 |
| &nbsp;&nbsp;Total Adjustments | 2474 | 17762 | 6825 | 18671 | 3225 | 56964 | (45972) | 59949 |
| EBITDA | **3867** | **31888** | **(14899)** | **22701** | **3750** | **18365** | **(6433)** | **59239** |
| &nbsp;&nbsp;Adjustments to EBITDA |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive severance and related costs |  | 220 | 797 |  |  | 19 |  | 1036 |
| &nbsp;&nbsp;&nbsp;&nbsp;Litigation costs and settlements |  |  | 5 | 215 | 380 |  |  | 600 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based and long term executive compensation |  | 2049 | (1016) |  | (61) |  | 935 | 1907 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate compliance costs |  |  |  |  |  |  | 28 | 28 |
| &nbsp;&nbsp;&nbsp;&nbsp;Store closures |  | 66 | 37 |  |  |  |  | 103 |
| &nbsp;&nbsp;&nbsp;&nbsp;Securitized accounts receivable interest income |  |  |  |  |  | (39109) |  | (39109) |
| &nbsp;&nbsp;&nbsp;&nbsp;Securitized accounts receivable bad debt reserve |  |  |  |  |  | 42447 |  | 42447 |
| &nbsp;&nbsp;&nbsp;&nbsp;W.S. Badcock financing operations |  |  |  |  |  | (3255) |  | (3255) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepayment penalty on early debt repayment |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Right-of-use asset and long-term asset impairment |  | 1598 | 277 | 604 |  | 205 |  | 2684 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Integration costs |  | 345 | 67 |  |  | (3458) |  | (3046) |
| &nbsp;&nbsp;&nbsp;&nbsp;Divestiture costs |  |  |  |  |  | 1065 |  | 1065 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition costs |  | 29 |  |  |  |  |  | 29 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on investment in equity securities |  |  |  |  |  |  | 1525 | 1525 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition bargain purchase gain |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale-leaseback and owned properties, net | - | - | - | - | - | - | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Adjustments to EBITDA | - | 4307 | 167 | 819 | 319 | (2086) | 2488 | 6014 |
| Adjusted EBITDA | $**3867** | $**36195** | $**(14732)** | $**23520** | $**4069** | $**16279** | $**(3945)** | $**65253** |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **For the Twelve Months Ended December 31, 2022** | **For the Twelve Months Ended December 31, 2022** | **For the Twelve Months Ended December 31, 2022** | **For the Twelve Months Ended December 31, 2022** | **For the Twelve Months Ended December 31, 2022** | **For the Twelve Months Ended December 31, 2022** | **For the Twelve Months Ended December 31, 2022** | **For the Twelve Months Ended December 31, 2022** |
| **December 31, 2022**<br>**($ In thousands)** | **Buddy's** | **Pet Supplies Plus** | **American Freight** | **Vitamin Shoppe** | **Sylvan** | **Badcock** | **Corporate** | **Total** |
| Net income (loss) from continuing operations | $6439 | $43806 | $(103426) | $57060 | $1127 | $(38064) | $(35515) | $(68573) |
| &nbsp;&nbsp;Add back: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | 3844 | 22206 | 35494 | 29909 | 3391 | 243046 | 2092 | 339982 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax expense (benefit) | 2237 | 15216 | (11592) | 19820 | 792 | (12592) | (22726) | (8845) |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization charges | 3040 | 23280 | 10798 | 28836 | 7974 | 8014 | - | 81942 |
| &nbsp;&nbsp;Total Adjustments | 9121 | 60702 | 34700 | 78565 | 12157 | 238468 | (20634) | 413079 |
| EBITDA | **15560** | **104508** | **(68726)** | **135625** | **13284** | **200404** | **(56149)** | **344506** |
| &nbsp;&nbsp;Adjustments to EBITDA |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive severance and related costs |  | 409 | 797 |  |  | 684 |  | 1890 |
| &nbsp;&nbsp;&nbsp;&nbsp;Litigation costs and settlements | 55 |  | 868 | 962 | 380 |  | (1739) | 526 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based and long term executive compensation | 209 | 6936 | (816) |  | 219 |  | 14874 | 21422 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate compliance costs |  |  |  |  |  |  | 608 | 608 |
| &nbsp;&nbsp;&nbsp;&nbsp;Store closures |  | 402 | 366 |  |  |  | 575 | 1342 |
| &nbsp;&nbsp;&nbsp;&nbsp;Securitized accounts receivable interest income |  |  |  |  |  | (192920) |  | (192920) |
| &nbsp;&nbsp;&nbsp;&nbsp;Securitized accounts receivable bad debt reserve |  |  |  |  |  | 144402 |  | 144402 |
| &nbsp;&nbsp;&nbsp;&nbsp;W.S. Badcock financing operations |  |  |  |  |  | (7841) |  | (7841) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepayment penalty on early debt repayment |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Right-of-use asset and long-term asset impairment |  | 1598 | 1014 | 604 |  | 205 |  | 3422 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment |  |  | 70000 |  |  |  |  | 70000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Integration costs |  | 675 | 194 |  | 18 | (3161) |  | (2274) |
| &nbsp;&nbsp;&nbsp;&nbsp;Divestiture costs |  |  |  |  |  | 4079 |  | 4079 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition costs |  | 177 | 14 |  |  | 782 | 5294 | 6267 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on investment in equity securities |  |  |  |  |  |  | 23671 | 23671 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition bargain purchase gain |  |  |  |  |  | (3514) |  | (3514) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale-leaseback and owned properties, net | - | - | - | (2273) | - | (59275) | - | (61548) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Adjustments to EBITDA | 264 | 10197 | 72437 | (707) | 617 | (116559) | 43283 | 9532 |
| Adjusted EBITDA | $**15824** | $**114705** | $**3711** | $**134918** | $**13901** | $**83845** | $**(12866)** | $**354038** |

---

**Reconciliation of Non-GAAP Net Income and EPS** Below are reconciliations of Net Income/(Loss) from continuing operations to Non-GAAP Net Income and Net Income/(Loss) from continuing operations per diluted share to Non-GAAP EPS for the three and twelve months ended December 31, 2022.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **For the Three Months Ended** | **For the Three Months Ended** | **For the Twelve Months Ended** | **For the Twelve Months Ended** |
| <br>**($ In thousands except share count and per share data)** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| Net income (loss) from continuing operations / Net income (loss) from continuing operations per diluted share | $(710) | (0.02) | $(68573) | $(1.74) |
| Less: Preferred dividend declared | (2129) | (0.06) | (8514) | (0.22) |
| Adjusted Net Income available to Common Stockholder | (2839) | (0.08) | (77087) | (1.96) |
| &nbsp;&nbsp;Add back: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive severance and related costs | 1036 | 0.03 | 1890 | 0.05 |
| &nbsp;&nbsp;&nbsp;&nbsp;Litigation costs and settlements | 600 | 0.02 | 526 | 0.01 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based and long term executive compensation | 1907 | 0.05 | 21422 | 0.55 |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate compliance costs | 28 |  | 608 | 0.02 |
| &nbsp;&nbsp;&nbsp;&nbsp;Store closures | 103 |  | 1342 | 0.03 |
| &nbsp;&nbsp;&nbsp;&nbsp;Securitized accounts receivable interest income | (39109) | (1.05) | (192920) | (4.91) |
| &nbsp;&nbsp;&nbsp;&nbsp;Securitized accounts receivable bad debt reserve | 42447 | 1.14 | 144402 | 3.68 |
| &nbsp;&nbsp;&nbsp;&nbsp;W.S. Badcock financing operations | (3255) | (0.09) | (7841) | (0.20) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepayment penalty on early debt repayment |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Right-of-use asset and long-term asset impairment | 2684 | 0.07 | 3422 | 0.09 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment |  |  | 70000 | 1.78 |
| &nbsp;&nbsp;&nbsp;&nbsp;Integration costs | (3046) | (0.08) | (2274) | (0.06) |
| &nbsp;&nbsp;&nbsp;&nbsp;Divestiture costs | 1065 | 0.03 | 4079 | 0.10 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition costs | 29 |  | 6267 | 0.16 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on investment in equity securities | 1525 | 0.04 | 23671 | 0.60 |
| &nbsp;&nbsp;&nbsp;&nbsp;Acquisition bargain purchase gain |  |  | (3514) | (0.09) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on sale-leaseback and owned properties, net | - | - | (61548) | (1.57) |
| &nbsp;&nbsp;Adjustments to EBITDA | 6014 | 0.16 | 9532 | 0.24 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-cash amortization of debt issuance costs | 2258 | 0.06 | 17327 | 0.44 |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of acquisition-related intangibles | 4137 | 0.11 | 16898 | 0.43 |
| &nbsp;&nbsp;&nbsp;&nbsp;Securitized receivables interest expense | 64405 | 1.74 | 227962 | 5.80 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax impact | (56522) | (1.52) | (52003) | (1.32) |
| &nbsp;&nbsp;&nbsp;&nbsp;Impact of diluted share count assuming non-GAAP net income | - | - | - | - |
| &nbsp;&nbsp;Total Adjustments to Net income (loss) from continuing operations | 20293 | 0.55 | 219716 | 5.59 |
| Non-GAAP Net Income from continuing operations / Non-GAAP diluted EPS from continuing operations | $**17454** | $**0.47** | $**142629** | $**3.63** |
| Basic weighted average shares |  | 37147507 |  | 39309855 |
| Non-GAAP diluted weighted average shares outstanding |  | 37147507 |  | 39309855 |

---

**Forward-Looking Statements** This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, projections, predictions, expectations, or beliefs about future events or results and are not statements of historical fact. Such statements may include statements regarding the Company's results of operation and financial condition, the Company's stock repurchase program, including whether the Company will continue purchasing stock thereunder and the timing and amount thereof and its expectations and outlook for fiscal 2023. Such forward-looking statements are based on various assumptions as of the time they are made, and are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are often accompanied by words that convey projected future events or outcomes such as "expect," "believe," "estimate," "plan," "project," "anticipate," "intend," "will," "may," "view," "opportunity," "potential," or words of similar meaning or other statements concerning opinions or judgment of the Company or its management about future events. Although the Company believes that its expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from any projected future results, performance or achievements expressed or implied by such forward-looking statements. Actual future results, performance or achievements may differ materially from historical results or those anticipated depending on a variety of factors, many of which are beyond the control of the Company. The Company refers you to the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's Form 10-K for the fiscal year ended December 31, 2022, and comparable sections of the Company's Quarterly Reports on Form 10-Q and other filings, which have been filed with the SEC and are available on the SEC's website at www.sec.gov. All of the forward-looking statements made in this press release are expressly qualified by the cautionary statements contained or referred to herein. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its business or operations. Readers are cautioned not to rely on the forward-looking statements contained in this press release. Forward-looking statements speak only as of the date they are made and the Company does not undertake any obligation to update, revise or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.

**Investor Relations Contact:**

Andrew F. Kaminsky

EVP & Chief Administrative Officer

Franchise Group, Inc.

akaminsky@franchisegrp.com

(914) 939-5161