AP NEWS

YogaWorks, Inc. Reports Third Quarter 2018 Financial Results

November 14, 2018

LOS ANGELES, Nov. 14, 2018 (GLOBE NEWSWIRE) -- YogaWorks, Inc. (NASDAQ:YOGA) (the “Company”), one of the largest providers of high quality yoga instruction in the U.S., today announced financial results for the third quarter ended September 30, 2018.

Rosanna McCollough, President and Chief Executive Officer of YogaWorks, stated, “We are pleased to have delivered third quarter results that were in line with our expectations and to be maintaining our outlook for the year. Our first priority remains to stabilize our base business and we are making progress across multiple initiatives that we believe will drive healthier revenue growth at improved EBITDA margin rates. These actions include: (1) refinement of our overall promotional strategy, (2) enhancements to our product offering, (3) an updated marketing strategy, and (4) the optimization of our studio base. Once we believe we have achieved our objectives, we plan to resume our acquisition strategy and remain confident in our position as the acquirer of choice.”

Results for the third quarter ended September 30, 2018

September 30,2018 September 30,2017 --------------------------- ----------------- ----------------- GAAP Results(1) --------------------------- ----------------- ----------------- Net revenue $15.2 million $13.5 million --------------------------- ----------------- ----------------- Net income / (loss) $(13.9) million $(4.6) million --------------------------- ----------------- ----------------- Non-GAAP Results(2) --------------------------- ----------------- ----------------- Studio Count at quarter end 70 53 --------------------------- ----------------- ----------------- Adjusted EBITDA $(1.8) million $(432) thousand --------------------------- ----------------- ----------------- Adjusted free cash flow $(2.9) million $(443) thousand --------------------------- ----------------- ----------------- Studio-Level free cash flow $733 thousand $2.6 million --------------------------- ----------------- ----------------- Studio-Level EBITDA $1.8 million $2.6 million --------------------------- ----------------- ----------------- Adjusted net income/(loss) $(3.6) million $(3.1) million --------------------------- ----------------- -----------------

(1) U.S. Generally Accepted Accounting Principles (“GAAP”).

(2) Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flows, Studio-Level free cash flows and adjusted net loss are non-GAAP measures. For reconciliations to GAAP net loss, see “Reconciliations of Non-GAAP Financial Measures” accompanying this press release.

For the third quarter ended September 30, 2018:

-- Net revenue was $15.2 million, a 12% increase compared to $13.5 million in the third quarter of 2017. -- The Company ended the quarter with 70 studios in nine regional markets. -- Adjusted EBITDA was $(1.8) million compared to adjusted EBITDA of $(432) thousand for the same quarter last year. -- Adjusted net loss was $3.6 million compared to adjusted net loss of $3.1 million for the same period last year.

For a reconciliation of GAAP net loss to Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flows, Studio-Level free cash flows and Adjusted net loss, please see “Reconciliations of Non-GAAP Financial Measures” accompanying this press release.

Balance Sheet and Cash Flow Highlights

-- Cash and cash equivalents were $13.2 million as of September 30, 2018. -- Cash used in operating activities was $1.8 million for the third quarter ended September 30, 2018, as compared to cash provided by operating activities of $2.5 million for the third quarter ended September 30, 2017.

Guidance

For fiscal year 2018, the Company continues to expect net revenue between $59 million and $60 million and adjusted EBITDA between $(6.95) million and $(5.95) million. This compares to net revenue of $54.5 million and adjusted EBITDA of $(1.2) million for 2017.

Conference Call to Discuss Third Quarter Results

The Company will host a conference call and webcast to discuss its financial results for the third quarter ended September 30, 2018, today, November 14, 2018, beginning at 4:30 p.m. Eastern Time. Those interested in participating in the call are invited to dial 1-877-407-4018 (U.S.) or 1-201-689-8471 (international). A live webcast of the conference call will also be available online at www.yogaworks.com under the Investor Relations section and will remain available for 30 days following the live call. A replay will also be available two hours following the call through November 28, 2018, via telephone at 1-844-512-2921 (U.S.) and 1-412-317-6671 (international) by entering the replay pin 13682136.

About YogaWorks, Inc.

YogaWorks, Inc. is one of the largest providers of high quality yoga instruction in the U.S., with 70 studios in nine markets including Los Angeles, Orange County, Northern California, New York City, Boston, Baltimore, the Washington, D.C. area, Houston and Atlanta. YogaWorks strives to make yoga accessible to everybody and offers a wide range of class styles for people of all ages and abilities. Through its studios, the Company offers yoga classes, integrated fitness classes, workshops, teacher training programs and yoga-related retail merchandise. In addition to its studio locations, YogaWorks offers online instruction through its MyYogaWorks web platform, which provides subscribers with a highly curated catalog of over 1,100 yoga and meditation classes.

Forward-Looking Statements

This press release may include forward-looking statements that reflect the Company’s current views about future events and financial performance. All statements other than statements of historical facts included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events are forward-looking statements.

These forward-looking statements are expressed in good faith and the Company believes there is a reasonable basis for them. However, there can be no assurance that the events, results or trends identified in these forward-looking statements will occur or be achieved. Investors should not place undue reliance on any of the Company’s forward-looking statements because they are subject to a variety of risks and uncertainties. Factors that could cause results to differ from those reflected in the forward-looking statements are set forth in the Company’s prior press releases and public filings with the Securities and Exchange Commission, which are available via the Company’s website at www.yogaworks.com. The forward-looking statements in this press release speak only as of the date of this release and, except as required by law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Contacts: Investor Relations: Jean Fontana, ICR, Inc.646-277-1200 IR@yogaworks.com

YogaWorks, Inc. Condensed Consolidated Balance Sheets (Unaudited) As of As of September 30, December 31, 2018 2017 ------------- ------------- Assets Current assets Cash and cash equivalents $ 13,179,294 $ 22,095,216 Inventories 1,212,104 1,212,608 Prepaid expenses and other current assets 947,460 1,145,067 - ----------- - ----------- Total current assets 15,338,858 24,452,891 Property and equipment, net 9,150,733 10,418,203 Intangible assets, net 14,408,349 22,142,275 Goodwill 5,429,063 12,768,773 Other non-current assets 1,262,530 1,224,179 - ----------- - ----------- Total assets $ 45,589,533 $ 71,006,321 - ----------- - ----------- Liabilities and Stockholders’ Equity Current liabilities Accounts payable and accrued expenses $ 3,123,797 $ 3,794,569 Accrued compensation 1,203,241 1,947,134 Deferred revenue 6,387,875 7,187,948 Current portion of deferred rent 120,010 122,607 - ----------- - ----------- Total current liabilities 10,834,923 13,052,258 Deferred rent, net of current portion 3,540,956 3,418,886 Deferred tax liability 2,402 — - ----------- - ----------- Total liabilities 14,378,281 16,471,144 - ----------- - ----------- Commitments and Contingencies (Note 14) Stockholders’ equity Common stock $0.001 par value; 50,000,000 shares authorized, 16,620,284 issued and 16,477,675 outstanding at September 30, 2018 16,478 16,333 and 50,000,000 shares authorized, 16,435,505 issued and 16,332,510 outstanding at December 31, 2017 Additional paid in capital 112,837,218 111,650,415 Accumulated deficit (81,642,444 ) (57,131,571 ) - ----------- - ----------- Total stockholders’ equity 31,211,252 54,535,177 - ----------- - ----------- Total liabilities and stockholders’ equity $ 45,589,533 $ 71,006,321 - ----------- - -----------

YogaWorks, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September Nine Months Ended September 30, 30, ----------------------------- -------------------------------- 2018 2017 2018 2017 ------------- ------------ ------------- ------------- - Net revenues $ 15,150,692 $ 13,518,513 $ 45,550,867 $ 40,002,033 Cost of revenues and operating expenses Cost of revenues 6,212,640 5,153,324 17,892,463 15,087,713 Center operations 7,179,487 5,732,994 21,012,976 17,002,858 General and administrative expenses 4,158,868 4,556,887 12,617,813 11,661,716 Depreciation and amortization 1,874,008 2,161,126 6,471,036 6,530,589 Goodwill impairment 5,550,000 — 8,024,819 — Asset impairment 4,118,939 — 4,118,939 — - ----------- - ---------- - ----------- - ----------- - Total cost of revenues and operating 29,093,942 17,604,331 70,138,046 50,282,876 expenses - ----------- - ---------- - ----------- - ----------- - Loss from operations (13,943,250 ) (4,085,818 ) (24,587,179 ) (10,280,843 ) - ----------- - ---------- - ----------- - ----------- - Interest (income) expense, net (46,613 ) 532,939 (96,886 ) 1,343,445 - ----------- - ---------- - ----------- - ----------- - Net loss before provision (13,896,637 ) (4,618,757 ) (24,490,293 ) (11,624,288 ) for income taxes Provision for (benefit from) income taxes 2,667 (27,933 ) 20,580 31,074 - ----------- - ---------- - ----------- - ----------- - Net loss (13,899,304 ) (4,590,824 ) (24,510,873 ) (11,655,362 ) Less preferred rights dividend on redeemable — — — (995,743 ) preferred stock - ----------- ------------ - ----------- - ----------- - Net loss attributable to common $ (13,899,304 ) $ (4,590,824 ) $ (24,510,873 ) $ (12,651,105 ) stockholders - ----------- - ---------- - ----------- - ----------- -

YogaWorks, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, ------------------------------ 2018 2017 ------------- ------------- Cash flows from operating activities Net loss $ (24,510,873 ) $ (11,655,362 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 6,471,036 6,530,589 Goodwill impairment 8,024,819 — Asset impairment 4,118,939 — Deferred tax 2,402 13,906 Paid-in-kind interest expense capitalized to convertible note — 291,585 Beneficial conversion feature — 147,877 Amortization of debt issuance cost — 69,164 Debt issuance cost written-off — 318,016 Stock-based compensation expense 1,284,099 2,119,252 Changes to operating assets and liabilities, net of effects from acquisitions: Tenant improvement allowances received 47,530 — Inventories 4,470 47,575 Prepaid expenses and other current assets 197,607 656,902 Other non-current assets (919 ) (76,689 ) Accounts payable and accrued expenses (186,078 ) 2,707,751 Accrued compensation (743,893 ) (640 ) Deferred revenue (1,154,686 ) 391,885 Deferred rent and other non-current liabilities 71,943 94,085 - ----------- - ----------- Net cash (used in) provided by operating activities (6,373,604 ) 1,655,896 - ----------- - ----------- Cash flows from investing activities Purchases of property, equipment, and intangible assets (1,079,543 ) (958,602 ) Acquisition earnout and holdback payments (643,694 ) (445,400 ) Cash paid for acquisitions, net of earnouts (721,930 ) — - ----------- - ----------- Net cash used in investing activities (2,445,167 ) (1,404,002 ) - ----------- - ----------- Cash flows from financing activities Repurchase of shares to satisfy tax withholding (97,151 ) — Principal payment on term loans — (6,956,250 ) Principal payment on convertible note — (3,300,403 ) Principal payment on subordinated notes — (200,000 ) Proceeds from issuance of convertible note — 35,083,288 Proceeds from issuance of common stock — 3,200,000 - ----------- - ----------- Net cash (used in) provided by financing activities (97,151 ) 27,826,635 - ----------- - ----------- Increase (decrease) in cash and cash equivalents (8,915,922 ) 28,078,529 Cash and cash equivalents, beginning of period 22,095,216 1,912,421 - ----------- - ----------- Cash and cash equivalents, end of period $ 13,179,294 $ 29,990,950 - ----------- - ----------- Supplemental disclosure of cash flow information Cash paid during the period for: Interest paid $ — $ 516,694 - ----------- - ----------- Supplemental disclosure of non-cash activities Investing activities Purchase consideration liabilities related to acquisitions $ 159,000 $ — Financing activities Dividends on preferred redeemable stock accrued — 995,743 Paid-in-kind interest expense capitalized convertible note — 291,585 Purchase consideration liabilities related to acquisitions — 120,031 Conversion of convertible notes to equity — 11,825,774 Conversion of preferred redeemable stock to equity — 62,388,567 - ----------- - -----------

YogaWorks, Inc.

Reconciliations of Non-GAAP Financial Measures

This press release contains financial measures called Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss which are not calculated in accordance with GAAP. The Company uses these financial measures to understand and evaluate its business. Adjusted EBITDA is a supplemental measure of the operating performance of the core business operations. Studio-Level EBITDA is a supplemental measure of the operating performance of the studios. Adjusted free cash flow is a supplemental measure of the operating performance of the core business operations excluding deferred revenue. Studio-Level free cash flow is a supplemental measure of the operating performance of the studios excluding deferred revenue. Adjusted net loss is a supplemental measure of operating performance that is adjusted for certain non-recurring items that we do not believe directly reflect the core business operations. Accordingly, the Company believes Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flow, Studio-Level free cash flow and Adjusted net loss provide useful information to investors and others in understanding and evaluating the Company’s operating results in the same manner as management and the Board. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Adjusted EBITDA, Studio-Level EBITDA, Adjusted free cash flow and Studio-Level free cash flow

The following table presents a reconciliation of Adjusted EBITDA and Studio-Level EBITDA to Net loss. In addition, Adjusted free cash flow and Studio-Level free cash flow are presented for each of the periods indicated:

Three Months Ended Nine Months Ended September 30, September 30, --------------------- ---------------------- 2018 2017 2018 2017 --------- -------- --------- --------- (in thousands) (Unaudited) Net loss $ (13,899 ) $ (4,591 ) $ (24,511 ) $ (11,655 ) Interest (income) expense, net (47 ) 533 (97 ) 1,343 Provision for (benefit from) income taxes 3 (28 ) 21 31 Depreciation and amortization 1,874 2,161 6,471 6,531 Goodwill impairment 5,550 — 8,025 — Asset impairment 4,119 — 4,119 — Deferred rent(a) 36 (6 ) 72 94 Stock based compensation(b) 334 1,294 1,284 2,119 Legal settlement(c) 75 37 75 902 Severance(d) 108 2 176 87 Executive recruiting(e) 45 49 45 79 Professional fees(f) — 92 71 253 Great Hill Partners expense reimbursement fees(g) — 25 — 75 Studio closure expenses (h) 17 — 17 — Other 32 — 32 — - ------- - ------ - ------- - ------- Adjusted EBITDA (1,753 ) (432 ) (4,200 ) (141 ) Change in deferred revenue(i) (1,111 ) (11 ) (1,036 ) 531 - ------- - ------ - ------- - ------- Adjusted free cash flow (2,864 ) (443 ) (5,236 ) 390 Other general and administrative expenses(j) 3,597 3,059 10,967 8,147 - ------- - ------ - ------- - ------- Studio-Level free cash flow 733 2,616 5,731 8,537 Change in deferred revenue(i) 1,111 11 1,036 (531 ) - ------- - ------ - ------- - ------- Studio-Level EBITDA $ 1,844 $ 2,627 $ 6,767 $ 8,006 - ------- - ------ - ------- - -------

(a) Reflects the extent to which our rent expense for the period has been above or below our cash rent payments.(b) Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards and forfeitures.(c) Legal settlement expenses incurred in the period to settle claims.(d) Severance expenses incurred in the period related to the termination of studio and non-studio employees.(e) Executive recruiting expenses incurred in connection with the recruitment and hiring of members of our executive management team.(f) Professional fees related to certain accounting, tax and consulting services that were expensed in connection with our acquisitions.(g) Represents expense reimbursement fees incurred in connection with our Expense Reimbursement Agreement with affiliates of Great Hill Partners, which was terminated upon completion of our IPO.(h) Represents closure expenses of one Boston area studio that closed in the third quarter of 2018.(i) Represents change in deferred revenue that is reflected in the consolidated statements of operations, excluding the change in gift card liabilities and deferred revenue from acquisitions.(j) Represents general and administrative expenses that are corporate and regional expenses and not incurred by our studios, and which are primarily comprised of expenses related to (i) wages and benefits of corporate and regional employees, (ii) non-studio rent, utilities and maintenance, (iii) corporate and regional marketing and advertising, and (iv) corporate professional fees. Other general and administrative expenses exclude any general and administrative expenses related to deferred rent, stock-based compensation, legal settlement, severance, executive recruiting, professional fees, the Great Hill Partners expense reimbursement fees or any other general and administrative expenses that are included in the reconciliation of net loss to Adjusted EBITDA.

Adjusted net loss

The following table presents a reconciliation of Adjusted net loss to Net loss for each of the periods indicated:

Three Months Ended Nine Months Ended September 30, September 30, --------------------- ---------------------- 2018 2017 2018 2017 --------- -------- --------- --------- (in thousands) (Unaudited) Net loss $ (13,899 ) $ (4,591 ) $ (24,511 ) $ (11,655 ) Goodwill impairment 5,550 — 8,025 — Asset impairment 4,119 — 4,119 — Stock based compensation(a) 334 1,294 1,284 2,119 Legal settlement(b) 75 37 75 902 Severance(c) 108 2 176 87 Executive recruiting(d) 45 49 45 79 Professional fees(e) — 92 71 253 Great Hill Partners expense reimbursement fees(f) — 25 — 75 Studio closure expenses (g) 17 — 17 — Other 32 — 32 — - ------- - ------ - ------- - ------- Adjusted net loss $ (3,619 ) $ (3,092 ) $ (10,667 ) $ (8,140 ) - ------- - ------ - ------- - -------

(a) Non-cash charges related to equity-based compensation programs, which vary from period to period depending on timing of awards and forfeitures.(b) Legal settlement expenses incurred in the period to settle claims.(c) Severance expenses incurred in the period related to the termination of studio and non-studio employees.(d) Executive recruiting expenses incurred in connection with the recruitment and hiring of members of our executive management team.(e) Professional fees related to certain accounting, tax and consulting services that were expensed in connection with our acquisitions.(f) Represents expense reimbursement fees incurred in connection with our Expense Reimbursement Agreement with Great Hill Partners, which was terminated upon completion of our IPO.(g) Represents closure expenses of one Boston area studio that closed in the third quarter of 2018.

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