Happy Belly Food Group Inc., a leading consolidator of emerging food brands announced Thursday its interim financial results and corporate update for the quarter ended September 30.
“I am happy to see the progress that our management team, alongside our brand partners and franchisees achieved in Q3. Our third quarter results demonstrate the strength of our brands and the power in creating what is quickly becoming the leading consolidator of emerging brands in Canada,” said Sean Black, Chief Executive Officer of Happy Belly.
“With our 10th consecutive record setting quarter in total revenues, you can see our commitment to creating value for our shareholders as we continue to execute our strategy. We are delivering organic and inorganic growth across the company’s operations meanwhile staying financially disciplined. Our accretive M&A strategy included the acquisition of IQ Foods in September 2024, which included four restaurants located in the downtown core of Toronto, Ontario.
“In Q3 2024, we once again achieved record revenues and positive EBITDA for BOTH our QSR and CPG segments. Each quarter has resulted in significant QoQ momentum while continuing to accelerate our growth, improve operations within our businesses and deliver strong and consistent results for our shareholders. We are very focused on delivering more organic growth in Q4 2024 and throughout 2025.”
Its brands include Holy Crap Cereal, Heal Wellness, Lumberheads, Lettuce Love Cafe, Joey Turks Island Grill, PIRHO, Rosie’s Burgers, Yolks, Via Cibo. It also has IQ Foods and Salus Fresh Foods.
“We’ve been active and very happy with where we’re at,” said Black. “It’s been a few years we’ve been working towards this. Now we’re finally at a point where we’re getting more known. So it’s a little easier with landlords, a little easier with M&A (mergers and acquisitions) as you build a bit of a track record in the industry.”
Happy Belly continues to grow its portfolio
By the end of the year, Black said the company anticipates having about 50 restaurants open. It has about 40 stores open currently.
“We have 421 contractually committed deals with our brands. When someone says what’s the potential. That’s the key here for us to continue to deliver on that growth,” he said. “It’s a maximum 10-year timeline.
“The first one that’s probably going to be 50 stores will be Heal Wellness . . . I’m trying to build a diversified portfolio for real estate access . . . We’re looking for brands that are emerging. We’re going to open net new units in every single brand in our portfolio this year. That’s key. Everyone of them is experiencing growth. Different levels of growth. We’re seeing significant same store sales across the board.
Black said the company will have 10 to 15 brands in the near future.
“We have an appetite for M&A.”
Financial Highlights
- System sales across QSR brands increased 488% in Q3 2024 to $8.52M versus $1.45M in Q3 2023 and increased 13% versus $7.55M in the prior quarter. The increase is attributed to the organic growth with baseline restaurants and the increase in restaurant count from 10 in Q3 2023 to 35 opened as at Q3 2024;
- Total revenues increased 69% in Q3 2024 to $2.54M versus $1.51M in Q3 2023. Furthermore, quarter over quarter total revenues increased by 10.4%. The significant growth was primarily driven by organic product sales growth in both the Quick Service Restaurants (QSR) and Consumer Product Goods (CPG) segments of the business, combined with new franchise fees and royalties collected on franchised restaurants;
- Total product sales from both the QSR and CPG segments increased 26% to $1.87M in Q3 2024 as compared to $1.48M in Q3 2023. Both segments continued to be profitable once again this quarter. QSR EBITDA reached $0.68M versus $0.28M in 2023, representing an increase of 36%. CPG EBITDA reached $0.11M versus $0.05M in 2023, representing an increase of 120%;
- Normalized adjusted EBITDA increased 265% during the quarter to reach $198,219, as compared to a normalized adjusted EBITDA loss of ($119,820) in Q3 2023. Furthermore, Q3 2024 resulted in a net comprehensive gain of $39,391 (adjusted for non cash expenses) versus a net comprehensive loss ($320,218) in Q3 2023 and a net comprehensive loss ($311,721) in the prior quarter. It is also the first quarter in Company’s history to achieve a net comprehensive gain from cash operating activities;
- The Company continues to maintain a healthy net working capital position of 3.59M in Q3 2024 as compared to $0.80M in Q4 2023 and $1.80M in Q3 2023. Total cash and cash equivalents were $3.64M in Q3 2024 driven by two non-brokered private placements completed in 2024 ($3M combined) through the issuance of convertible debentures. The closing of the private placements strengthens our balance sheet and provides us the ability to accelerate our growth strategy and executing material M&A opportunities with strong positive cash flow, when the opportunity presents itself;
- 4 net new restaurant openings during Q3 2024 and 4 via acquisition (IQ Foods Co.). The Heal Lifestyle brand opened three locations in Sherwood Park, AB (July 20, 2024), West Abbotsford, BC (August 9, 2024) and Toronto, ON (September 3, 2024). The Joey Turks Island Grill brand opened one location in Scarborough, ON (August 15, 2024).
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