FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported financial results for the
fiscal second quarter ended June 25, 2023.
Andy Wiederhorn, Chairman of FAT Brands,
commented, “In the last several years, we grew the FAT Brands
portfolio to 17 iconic restaurant brands with approximately 2,300
units and annual system-wide sales of $2.2 billion. Year to date,
we have opened 66 restaurants, including 25 that opened in the
second quarter, and remain on track to open 175 new restaurants in
2023, representing 25% unit expansion year over year. We are seeing
strong new franchisee activity as well as continued demand from
existing franchise partners to develop other brands within our
portfolio. So far in 2023, we have signed over 150 new franchise
development deals bringing our total pipeline to over 1,100 signed
agreements. This represents over 50% EBITDA growth over the next
several years.”
“While franchise interest remains high across
all of our brands, we are especially focused on the expansion of
Twin Peaks. In 2023, we plan to open 18 to 20 new lodges, of which
eight have opened so far, including our 100th location. We expect
to end 2023 with approximately 115 lodges, a nearly 40 percent
increase in unit count since our acquisition of the brand. As we
previously announced, we intend to take Twin Peaks public in 2024,
subject to market conditions.”
“Over the long term, we believe the
opportunities for FAT Brands are considerable and we are well
positioned for growth. We have a seasoned leadership team, coupled
with a strong platform capable of seamlessly and cost-effectively
integrating new brands. Additionally, our healthy and growing
development pipeline will fuel organic growth for many years to
come and will naturally deleverage our balance sheet.”
Fiscal Second
Quarter 2023
Highlights
- Total revenue
improved 4% to $106.8 million compared to $102.8 million in the
fiscal second quarter of 2022
- System-wide sales
growth of 1.7% in the fiscal second quarter of 2023 compared to the
prior year fiscal quarter
- Year-to-date system-wide same-store
sales growth of 1.9% in the fiscal second quarter of 2023 compared
to the prior year
- 25 new store openings during the
fiscal second quarter of 2023
- Net loss of $7.1 million, or $0.53 per
diluted share, compared to $8.2 million, or $0.60 per diluted
share, in the fiscal second quarter of 2022
- Adjusted EBITDA(1) of $23.1
million compared to $29.5 million in the fiscal second quarter of
2022
- Adjusted net income(1) of $3.0
million, or $0.08 per diluted share, compared to adjusted net loss
of $3.1 million, or $0.29 per diluted share, in the fiscal second
quarter of 2022
(1) EBITDA, Adjusted EBITDA and
adjusted net income (loss) are non-GAAP measures defined below,
under “Non-GAAP Measures”. Reconciliation of GAAP net loss to
EBITDA, adjusted EBITDA and adjusted net income (loss) are included
in the accompanying financial tables.
Summary of Fiscal
Second Quarter
2023 Financial Results
Total revenue increased $4.0 million, or 3.9%,
in the second quarter of 2023 to $106.8 million compared to $102.8
million in the same period of 2022, driven by a 5.0% increase in
royalties, a 4.6% increase in company-owned restaurant revenues and
a 13.0% increase in revenues from our manufacturing facility.
Costs and expenses remained largely unchanged in
the second quarter, decreasing 1.4% in the second quarter of 2023
compared to the same period in the prior year.
General and administrative expense decreased
$10.9 million, or 52.3%, in the second quarter of 2023 compared to
the same period in the prior year, primarily due to the reversal of
$12.7 million in reserves related to Employee Retention Credits
during the second quarter of 2023, partially offset by higher
professional fees related to certain litigation matters.
Cost of restaurant and factory revenues
increased $9.7 million, or 19%, in the second quarter of 2023
compared to the same period in the prior year, primarily due to the
recognition of $10.1 million in Employee Retention Credits during
the second quarter of 2022.
Depreciation and amortization increased $0.4
million, or 5% in the second quarter of 2023 compared to the same
period in the prior year, primarily due to depreciation of new
property and equipment at company-owned restaurant locations.
Advertising expenses in the second quarter of
2023 were $11.6 million in both the second quarter of 2023 and
2022. These expenses vary in relation to advertising revenues.
Total other expense, net, for the second quarter
of 2023 and 2022 was $24.2 million and $21.6 million, respectively,
which is inclusive of interest expense of $24.3 million and $23.7
million, respectively.
Adjusted net income(1) of $3.0 million, or
$0.08 per diluted share, compared to adjusted net loss of $3.1
million, or $0.29 per diluted share, in the fiscal second quarter
of 2022.
Key Financial Definitions
New store openings - The number of new
store openings reflects the number of stores opened during a
particular reporting period. The total number of new stores per
reporting period and the timing of stores openings has, and will
continue to have, an impact on our results.
Same-store sales growth - Same-store sales
growth reflects the change in year-over-year sales for the
comparable store base, which we define as the number of stores open
and in the FAT Brands system for at least one full fiscal year. For
stores that were temporarily closed, sales in the current and prior
period are adjusted accordingly. Given our focused marketing
efforts and public excitement surrounding each opening, new stores
often experience an initial start-up period with considerably
higher than average sales volumes, which subsequently decrease to
stabilized levels after three to six months. Additionally, when we
acquire a brand, it may take several months to integrate fully each
location of said brand into the FAT Brands platform. Thus, we do
not include stores in the comparable base until they have been open
and in the FAT Brands system for at least one full fiscal year.
System-wide sales growth - System wide
sales growth reflects the percentage change in sales in any given
fiscal period compared to the prior fiscal period for all stores in
that brand only when the brand is owned by FAT Brands. Because
of acquisitions, new store openings and store closures, the stores
open throughout both fiscal periods being compared may be different
from period to period.
Conference Call and Webcast
FAT Brands will host a conference call and
webcast to discuss its fiscal second quarter 2023 financial results
today at 4:30 PM ET. Hosting the conference call and webcast will
be Andy Wiederhorn, Chairman of the Board, and Ken Kuick, Co-Chief
Executive Officer and Chief Financial Officer.
The conference call can be accessed live over
the phone by dialing 1-844-826-3035 from the U.S. or 1-412-317-5195
internationally. A replay will be available after the call until
Thursday, August 24, 2023, and can be accessed by dialing
1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The
passcode is 10179911. The webcast will be available
at www.fatbrands.com under the “Investors” section and will be
archived on the site shortly after the call has concluded.
About FAT (Fresh. Authentic. Tasty.)
Brands
FAT Brands (NASDAQ: FAT) is a leading global
franchising company that strategically acquires, markets, and
develops fast casual, quick-service, casual dining, and polished
casual dining concepts around the world. The Company currently owns
17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab
Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American
Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express,
Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native
Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza
Steakhouses and franchises and owns approximately 2,300 units
worldwide. For more information, please visit
www.fatbrands.com.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements relating to the future
financial and operating results of the Company, estimates of future
EBITDA, the timing and performance of new store openings, future
reductions in cost of capital and leverage ratio, our ability to
conduct future accretive acquisitions and our pipeline of new store
locations. Forward-looking statements generally use words such as
“expect,” “foresee,” “anticipate,” “believe,” “project,” “should,”
“estimate,” “will,” “plans,” “forecast,” and similar expressions,
and reflect our expectations concerning the future. Forward-looking
statements are subject to significant business, economic and
competitive risks, uncertainties and contingencies, many of which
are difficult to predict and beyond our control, which could cause
our actual results to differ materially from the results expressed
or implied in such forward-looking statements. We refer you to the
documents that we file from time to time with the Securities and
Exchange Commission, such as our reports on Form 10-K, Form 10-Q
and Form 8-K, for a discussion of these and other risks and
uncertainties that could cause our actual results to differ
materially from our current expectations and from the
forward-looking statements contained in this press release. We
undertake no obligation to update any forward-looking
statements to reflect events or circumstances occurring after
the date of this press release.
Non-GAAP Measures
(Unaudited)
This press release includes the non-GAAP
financial measures of EBITDA, adjusted EBITDA and adjusted net
loss.
EBITDA is defined as earnings before interest,
taxes, and depreciation and amortization. We use the term EBITDA,
as opposed to income from operations, as it is widely used by
analysts, investors, and other interested parties to evaluate
companies in our industry. We believe that EBITDA is an appropriate
measure of operating performance because it eliminates the impact
of expenses that do not relate to business performance. EBITDA is
not a measure of our financial performance or liquidity that is
determined in accordance with generally accepted accounting
principles (“GAAP”), and should not be considered as an alternative
to net loss as a measure of financial performance or cash flows
from operations as measures of liquidity, or any other performance
measure derived in accordance with GAAP.
Adjusted EBITDA is defined as EBITDA (as defined
above), excluding expenses related to acquisitions, refranchising
loss, impairment charges, and certain non-recurring or non-cash
items that the Company does not believe directly reflect its core
operations and may not be indicative of the Company’s recurring
business operations.
Adjusted net loss is a supplemental measure of
financial performance that is not required by or presented in
accordance with GAAP. Adjusted net loss is defined as net loss plus
the impact of adjustments and the tax effects of such adjustments.
Adjusted net loss is presented because we believe it helps convey
supplemental information to investors regarding our performance,
excluding the impact of special items that affect the comparability
of results in past quarters to expected results in future quarters.
Adjusted net loss as presented may not be comparable to other
similarly titled measures of other companies, and our presentation
of adjusted net loss should not be construed as an inference that
our future results will be unaffected by excluded or unusual items.
Our management uses this non-GAAP financial measure to analyze
changes in our underlying business from quarter to quarter based on
comparable financial results.
Reconciliations of net loss presented in
accordance with GAAP to EBITDA, adjusted EBITDA and adjusted net
loss are set forth in the tables below.
Investor Relations:
ICRMichelle
Michalskiir-fatbrands@icrinc.com646-277-1224
Media Relations:
Erin
Mandzikemandzik@fatbrands.com860-212-6509
FAT Brands Inc. Consolidated Statements of
Operations
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
(In thousands) |
|
June 25, 2023 |
|
|
June 26, 2022 |
|
|
June 25, 2023 |
|
|
June 26, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
$ |
22,751 |
|
|
$ |
21,665 |
|
|
$ |
45,236 |
|
|
$ |
42,563 |
|
Restaurant sales |
|
|
62,778 |
|
|
|
60,044 |
|
|
|
125,379 |
|
|
|
118,121 |
|
Advertising fees |
|
|
9,668 |
|
|
|
9,568 |
|
|
|
19,019 |
|
|
|
18,929 |
|
Factory revenues |
|
|
9,686 |
|
|
|
8,570 |
|
|
|
18,851 |
|
|
|
16,749 |
|
Franchise fees |
|
|
763 |
|
|
|
1,295 |
|
|
|
1,565 |
|
|
|
2,009 |
|
Other revenue |
|
|
1,118 |
|
|
|
1,643 |
|
|
|
2,405 |
|
|
|
1,817 |
|
Total revenue |
|
|
106,764 |
|
|
|
102,785 |
|
|
|
212,455 |
|
|
|
200,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
|
9,947 |
|
|
|
20,841 |
|
|
|
38,362 |
|
|
|
45,437 |
|
Cost of restaurant and factory revenues |
|
|
59,502 |
|
|
|
49,846 |
|
|
|
118,589 |
|
|
|
104,644 |
|
Depreciation and amortization |
|
|
7,061 |
|
|
|
6,711 |
|
|
|
14,177 |
|
|
|
13,181 |
|
Refranchising loss |
|
|
179 |
|
|
|
453 |
|
|
|
338 |
|
|
|
1,001 |
|
Acquisition costs |
|
|
— |
|
|
|
135 |
|
|
|
— |
|
|
|
383 |
|
Advertising fees |
|
|
11,610 |
|
|
|
11,596 |
|
|
|
22,137 |
|
|
|
21,853 |
|
Total costs and expenses |
|
|
88,299 |
|
|
|
89,582 |
|
|
|
193,603 |
|
|
|
186,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
|
18,465 |
|
|
|
13,203 |
|
|
|
18,852 |
|
|
|
13,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(expense) income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(20,008 |
) |
|
|
(18,998 |
) |
|
|
(45,098 |
) |
|
|
(38,026 |
) |
Interest expense related to preferred shares |
|
|
(4,311 |
) |
|
|
(4,715 |
) |
|
|
(9,354 |
) |
|
|
(6,714 |
) |
Other income, net |
|
|
109 |
|
|
|
2,071 |
|
|
|
265 |
|
|
|
3,381 |
|
Total other expense, net |
|
|
(24,210 |
) |
|
|
(21,642 |
) |
|
|
(54,187 |
) |
|
|
(41,359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before
income tax provision (benefit) |
|
|
(5,745 |
) |
|
|
(8,439 |
) |
|
|
(35,335 |
) |
|
|
(27,670 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
provision (benefit) |
|
|
1,346 |
|
|
|
(251 |
) |
|
|
3,882 |
|
|
|
4,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(7,091 |
) |
|
$ |
(8,188 |
) |
|
$ |
(39,217 |
) |
|
$ |
(31,943 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(7,091 |
) |
|
$ |
(8,188 |
) |
|
$ |
(39,217 |
) |
|
$ |
(31,943 |
) |
Dividends on
preferred shares |
|
|
(1,615 |
) |
|
|
(1,661 |
) |
|
|
(3,381 |
) |
|
|
(3,314 |
) |
|
|
$ |
(8,706 |
) |
|
$ |
(9,849 |
) |
|
$ |
(42,598 |
) |
|
$ |
(35,257 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted loss per common share |
|
$ |
(0.53 |
) |
|
$ |
(0.60 |
) |
|
$ |
(2.58 |
) |
|
$ |
(2.15 |
) |
Basic and diluted weighted average shares outstanding |
|
|
16,522,379 |
|
|
|
16,405,108 |
|
|
|
16,521,590 |
|
|
|
16,396,896 |
|
Cash
dividends declared per common share |
|
$ |
0.14 |
|
|
$ |
0.13 |
|
|
$ |
0.28 |
|
|
$ |
0.26 |
|
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA
Reconciliation
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
(In thousands) |
|
June 25, 2023 |
|
|
June 26, 2022 |
|
|
June 25, 2023 |
|
|
June 26, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,091 |
) |
|
$ |
(8,188 |
) |
|
$ |
(39,217 |
) |
|
$ |
(31,943 |
) |
Interest
expense, net |
|
|
24,319 |
|
|
|
23,713 |
|
|
|
54,452 |
|
|
|
44,740 |
|
Income tax
provision (benefit) |
|
|
1,346 |
|
|
|
(251 |
) |
|
|
3,882 |
|
|
|
4,273 |
|
Depreciation
and amortization |
|
|
7,061 |
|
|
|
6,711 |
|
|
|
14,177 |
|
|
|
13,181 |
|
EBITDA |
|
|
25,635 |
|
|
|
21,985 |
|
|
|
33,294 |
|
|
|
30,251 |
|
Bad debt
expense |
|
|
(13,106 |
) |
|
|
239 |
|
|
|
(12,071 |
) |
|
|
423 |
|
Share-based
compensation expenses |
|
|
477 |
|
|
|
1,934 |
|
|
|
1,572 |
|
|
|
4,046 |
|
Non-cash
lease expenses |
|
|
293 |
|
|
|
457 |
|
|
|
674 |
|
|
|
741 |
|
Acquisition
costs |
|
|
— |
|
|
|
134 |
|
|
|
— |
|
|
|
383 |
|
Refranchising loss |
|
|
179 |
|
|
|
453 |
|
|
|
338 |
|
|
|
1,001 |
|
Litigation
costs |
|
|
6,924 |
|
|
|
4,308 |
|
|
|
14,668 |
|
|
|
7,264 |
|
Severance |
|
|
1,036 |
|
|
|
— |
|
|
|
1,036 |
|
|
|
526 |
|
Net loss
related to advertising fund deficit |
|
|
1,688 |
|
|
|
— |
|
|
|
2,773 |
|
|
|
10 |
|
Pre-opening
expenses |
|
|
11 |
|
|
|
— |
|
|
|
40 |
|
|
|
— |
|
Adjusted
EBITDA |
|
$ |
23,137 |
|
|
$ |
29,510 |
|
|
$ |
42,325 |
|
|
$ |
44,645 |
|
FAT Brands Inc. Adjusted Net Income
(Loss)
Reconciliation
|
Thirteen Weeks
Ended |
|
Twenty-Six Weeks
Ended |
(In thousands, except share and per share
data) |
June 25, 2023 |
|
June 26, 2022 |
|
June 25, 2023 |
|
June 26, 2022 |
|
|
|
|
|
|
|
|
Net loss |
$
(7,091) |
|
$
(8,188) |
|
$
(39,217) |
|
$
(31,943) |
Refranchising loss |
179 |
|
453 |
|
338 |
|
1,001 |
Acquisition costs |
— |
|
134 |
|
— |
|
383 |
Litigation costs |
6,924 |
|
4,308 |
|
14,668 |
|
7,264 |
Severance |
1,036 |
|
— |
|
1,036 |
|
526 |
Tax adjustments, net (1) |
1,907 |
|
146 |
|
1,762 |
|
(1,417) |
Adjusted net income (loss) |
$ 2,955 |
|
$ (3,147) |
|
$ (21,413) |
|
$ (24,186) |
|
|
|
|
|
|
|
|
Net loss |
$
(7,091) |
|
$
(8,188) |
|
$
(39,217) |
|
$
(31,943) |
Dividends on preferred shares |
(1,615) |
|
(1,661) |
|
(3,381) |
|
(3,314) |
|
$ (8,706) |
|
$ (9,849) |
|
$ (42,598) |
|
$ (35,257) |
|
|
|
|
|
|
|
|
Adjusted net income (loss) |
$
2,955 |
|
$
(3,147) |
|
$
(21,413) |
|
$
(24,186) |
Dividends on preferred shares |
(1,615) |
|
(1,661) |
|
(3,381) |
|
(3,314) |
|
$ 1,340 |
|
$ (4,808) |
|
$ (24,794) |
|
$ (27,500) |
|
|
|
|
|
|
|
|
Loss per basic and diluted share |
$
(0.53) |
|
$
(0.60) |
|
$
(2.58) |
|
$
(2.15) |
Adjusted net income (loss) per basic and diluted share |
$ 0.08 |
|
$
(0.29) |
|
$
(1.50) |
|
$
(1.68) |
|
|
|
|
|
|
|
|
Weighted average basic and diluted shares outstanding |
16,522,379 |
|
16,405,108 |
|
16,521,590 |
|
16,396,896 |
(1) Reflects the tax impact of the adjustments using the
effective tax rate for the respective periods.
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