The Second Cup Ltd. (“Second Cup” or the “Company”) (TSX: SCU) today reported financial results for the third quarter ended September 28, 2019.

Highlights

• Adjusted EBITDA was $785,000 in the quarter, compared with $880,000 last year.
• Adjusted Net Loss was $62,000 or $0.0 per share compared with Adjusted Net Income of $432,000 or $0.03 per share in the prior year.
• Same store sales were -2.9% compared to flat (0.0%) in Q2 2019.

Third Quarter 2019

EBITDA, after adjusting for non-recurring items, was $785,000 in the quarter compared with $880,000 last year. Net Loss was $62,000 or $0.0 per share after adjusting for non-recurring items and the non-cash loss due to a reduction in value of the National Access Cannabis (NAC) warrants offset by the amortized income related to the NAC alliance.

Positioning Second Cup to deliver on its plan to achieve sustainable growth as well as create bench strength for future acquisitions required management changes in Q3. The restructuring necessary for the future as well as slower-than-expected same store sales negatively affected the operating results of the Quarter.

Steven Pelton, who assumed the role of President and CEO in June, said, “I am confident in the team we now have in place to drive positive change in the experience for the Second Cup Customers and Franchisees. These experiences are foundational for the future of the Second Cup business.” Q3 also saw the continued focus on three key initiatives for the Company: strategic acquisitions, retail cannabis locations and growth of the Second Cup brand through non-traditional sites.

In a separate release, the Company announced a new operating structure to support the broader focus on acquiring coffee and food brands that are strategically and culturally aligned with the Second Cup business. The Company will change its name to Aegis Brands Inc. (“Aegis”), which will own and operate the existing Second Cup Coffee Co. specialty coffee business as part of a portfolio of brands. “We created Aegis with the vision of building a portfolio of amazing brands that can grow and flourish with access to the resources and expertise that we’ve developed over 40 years in the Canadian foodservice industry. We are committed to letting each company under the Aegis umbrella operate as an independent brand, and to working with them to provide shared expertise – and shared services – to help them thrive,” said Pelton. The name change is subject to shareholder and TSX approval.  The Company expects to seek shareholder approval for the Aegis name change at its 2020 annual general meeting of shareholders.

Q1 of 2020 will see the opening of two new cannabis retail stores in Calgary, which will be owned and operated through the joint venture between National Access Cannabis and the Company (Aegis).  The Company confirmed that it will continue to evaluate the best opportunities for all real estate under lease.  “Ontario is a great opportunity for a retail cannabis partnership to flourish.  We believe location and service is key to winning when this market opens up, and we are well positioned for future success in this province,” said Pelton.

Expanding the Second Cup brand’s growth in non-traditional locations also continues to be a focus. Market tests in new non-traditional venues are underway while Second Cup creates new partnerships with non-traditional landlords and operators. New growth in 2020 will be heavily weighted in non-traditional locations.