Famous Dave's of America, Inc. (NASDAQ: DAVE), an innovating owner
and operator of barbeque restaurants, globally, today reported
financial results for the first fiscal quarter ended March 31,
2019.
First Quarter 2019
Highlights:
- Company-owned comparable sales
increased 1.3%, driven by increases in To-Go of 10.2% and 12.6% in
Catering.
- Domestic franchise-operated
comparable sales were flat year-over-year. Franchise-operated
system, including international units, declined by 1.0%.
- Invested $4.2 million, representing
3.0x pro forma TTM EBITDA to reacquire four Famous Dave’s
restaurants in Colorado.
- Approximately 63,000 downloads of
our loyalty app since launched in December 2018.
Highlights Subsequent to the First Quarter
2019:
- Invested $132,000, representing
0.4x pro forma TTM EBITDA to reacquire six Famous Dave’s
restaurants in Wisconsin, Michigan and Ohio.
- Launched 2,300 square foot
small-format restaurant in Tucson, Arizona through a Famous Dave’s
franchisee.
- Initiated $200,000 in comprehensive
remodeling of Westbury, New York restaurant with an expected
payback of two years.
Executive Comments
Jeff Crivello, CEO, commented, “Our commitment
to re-evaluate and prudently invest in our restaurant portfolio and
branding value remained a top priority during the first quarter of
2019. We completed the reacquisition of four stores in the Colorado
market before the end of the quarter and reacquired six stores in
Michigan, Wisconsin and Ohio subsequent to the end of the quarter.
We intend to strategically refresh the stores in these markets and
believe that higher efficiencies at these locations will result in
higher cash flows from previous levels while under franchise
ownership. We are also in the midst of refreshing two other stores
in our Company-owned portfolio and expect those to be completed
this summer. The turnaround strategy that we planned in 2017, and
are now executing, is well-underway and we’re working on numerous
initiatives to boost the financial performance of our Company-owned
and franchise-operated stores to build a valuable portfolio of
highly-performing restaurant properties. Investments we’ve made and
continue to make in this multi-year turnaround should begin to
deliver more significant financial improvements later this
year.”
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Key
Operating Metrics |
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Three Months Ended |
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March 31, 2019 |
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April 1, 2018 |
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Restaurant count: |
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Franchise-operated |
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117 |
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136 |
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Company-owned |
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21 |
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16 |
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Total |
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138 |
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152 |
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Comparable restaurant sales
%: |
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Franchise-operated, domestic |
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— |
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% |
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(1.6 |
) |
% |
Franchise-operated, international(1) |
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(28.0 |
) |
% |
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(1.8 |
) |
% |
Franchise-operated total |
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(1.0 |
) |
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(1.6 |
) |
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Company-owned |
|
1.3 |
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% |
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5.2 |
|
% |
Total |
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(0.7 |
) |
% |
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|
(0.9 |
) |
% |
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(in thousands, expect per
share data) |
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System-wide restaurant
sales(2) |
$ |
82,739 |
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$ |
87,166 |
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Net income (loss) |
$ |
82 |
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$ |
998 |
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Adjusted net income
(loss)(3) |
|
620 |
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|
954 |
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Net income (loss), per
share |
$ |
0.01 |
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$ |
0.13 |
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Adjusted net income (loss),
per share(3) |
|
0.07 |
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0.13 |
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Adjusted EBITDA(3) |
$ |
1,030 |
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$ |
1,794 |
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(1) |
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International franchise comparable sales declines are primarily
related to Puerto Rico, which is still yet to recover from the
effects of recent hurricanes. |
(2) |
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System-wide restaurant sales include sales for all Company-owned
and franchise-operated restaurants, as reported by franchisees.
Restaurant sales for franchise-operated restaurants are not
revenues of the Company and are not included in the Company’s
consolidated financial statements. |
(3) |
|
Adjusted net income (loss) from continuing operations and adjusted
EBITDA are non-GAAP measures. A reconciliation of all non-GAAP
measures to the most directly comparable GAAP measure is included
in the accompanying financial tables. See “Non-GAAP
Reconciliation.” |
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First Quarter 2019 Review
Total revenue for the first quarter of 2019 was
$14.2 million, up 10.5% from the first quarter of 2018. The
increase in year-over-year restaurant sales, net for the three
months ended March 31, 2019 was driven primarily by the
acquisition of four Famous Dave’s stores in Colorado and a
comparable sales increase of 1.3%. These increases were partially
offset by a 1.1% decline in franchise-operated comparable sales for
the quarter and the net closure of 13 franchise-operated
restaurants since April 1, 2018.
Comparable sales for our To-Go and Catering
lines of business increased 10.2% and 12.6% in the first quarter of
fiscal 2019, respectively, partially offset by a decline in Dine In
of 5.6%. During the first quarter of fiscal 2019, Dine In
represented approximately 53% of our total restaurant sales, net,
while To Go and Catering represented 39% and 8% of restaurant
sales, net, respectively.
Restaurant-level operating margin, as a
percentage of restaurant sales, net, for Company-owned restaurants
was (1.7%) compared to (0.5%) in the first quarter of fiscal 2018.
This decline in restaurant-level operating margin was primarily a
result of new initiatives tested in our corporate stores, including
our comprehensive new menu that was rolled out in October 2018. We
believe that further training and operational efficiency
surrounding the new menu will improve food costs and labor as a
percentage of restaurant sales, net, throughout the remainder of
fiscal 2019.
General and administrative expenses for the
three months ended March 31, 2019 and April 1, 2018 represented
approximately 17.7% and 14.6% of total revenues, respectively. The
increase to general and administrative expenses primarily related
to one-time savings in the prior year that did not recur during the
three months ended March 31, 2019 and acquisition costs incurred
related to our completed and pending acquisitions.
Net income was approximately $82,000, or $0.01
per share, in the first quarter of fiscal 2019 compared to net
income of approximately $998,000, or $0.13 per share, in the first
quarter of fiscal 2018. Adjusted net income, a non-GAAP
measure, was approximately $620,000, or $0.07 per share, compared
to adjusted net income of approximately $954,000, or $0.13 per
share, in the first quarter of fiscal 2018. A reconciliation
between adjusted net income and its most directly comparable GAAP
measure is included in the accompanying financial tables.
About Famous Dave’s
Famous Dave’s develops, owns, operates and
franchises barbeque restaurants. Its menu features award-winning
barbequed and grilled meats, a selection of salads, sandwiches,
side items, and made-from-scratch desserts. As of May 13, 2019, the
Company owns 27 locations and franchises an additional 109
restaurants in 33 states, the Commonwealth of Puerto Rico, Canada,
and United Arab Emirates.
Non-GAAP Financial Measures
To supplement its consolidated financial
statements, which are prepared and presented in accordance with
accounting principles generally accepted in the United States
(“GAAP”), the Company uses non-GAAP measures including those
indicated below. These non-GAAP measures exclude significant
expenses and income that are required by GAAP to be recorded in the
Company’s consolidated financial statements and are subject to
inherent limitations. By providing non-GAAP measures, together with
a reconciliation to the most comparable GAAP measure, the Company
believes that it is enhancing investors’ understanding of the
Company’s business and results of operations. These measures are
not intended to be considered in isolation of, as substitutes for,
or superior to, financial measures prepared and presented in
accordance with GAAP. The non-GAAP measures presented may be
different from the measures used by other companies. The Company
urges investors to review the reconciliation of its non-GAAP
measures to the most directly comparable GAAP measure, included in
the accompanying financial tables.
Adjusted net income (loss) is net income (loss),
plus asset impairment, estimated lease termination charges and
other closing costs, settlement agreements, net (loss) gain on
disposal of equipment, stock-based compensation, severance,
acquisition costs, and the related tax impact. This number is
divided by the weighted-average number of basic shares of common
stock outstanding during each period presented to arrive at
adjusted net income (loss), per share. Adjusted EBITDA is net
income (loss), plus asset impairment, estimated lease termination
charges and other closing costs, settlement agreements,
depreciation and amortization, interest expense, net, net (loss)
gain on disposal of equipment, stock-based compensation, severance,
acquisition costs and provision (benefit) for income taxes.
Forward-Looking Statements
Statements in this press release that are not
strictly historical, including but not limited to statements
regarding the timing of the Company’s restaurant openings and the
timing or success of refranchising plans, are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve known
and unknown risks, which may cause the Company’s actual results to
differ materially from expected results. Although the Company
believes the expectations reflected in any forward-looking
statements are based on reasonable assumptions, it can give no
assurance that its expectation will be attained. Factors that could
cause actual results to differ materially from Famous Dave’s
expectation include financial performance, restaurant industry
conditions, execution of restaurant development and construction
programs, franchisee performance, changes in local or national
economic conditions, availability of financing, governmental
approvals and other risks detailed from time to time in the
Company’s SEC reports.
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Contact: |
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Jeff Crivello – Chief Executive Officer |
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952-294-1300 |
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Darrow Associates, Inc. |
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Peter Seltzberg – Managing Director |
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516-419-9915 |
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pseltzberg@darrowir.com |
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FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except per share data) |
(Unaudited) |
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Three Months Ended |
|
March 31, 2019 |
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April 1, 2018 |
Revenue: |
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Restaurant sales, net |
$ |
10,314 |
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$ |
8,713 |
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Franchise royalty and fee revenue |
|
3,204 |
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3,408 |
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Franchisee national advertising fund contributions |
|
409 |
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|
469 |
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Licensing and other revenue |
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266 |
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254 |
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Total revenue |
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14,193 |
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12,844 |
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Costs and
expenses: |
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Food and beverage costs |
|
3,360 |
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|
2,717 |
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Labor and benefits costs |
|
3,957 |
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|
3,196 |
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Operating expenses |
|
3,169 |
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|
2,841 |
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Depreciation and amortization expenses |
|
264 |
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|
393 |
|
General and administrative expenses |
|
2,517 |
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|
1,874 |
|
National advertising fund expenses |
|
409 |
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|
469 |
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Asset impairment, estimated lease termination charges and other
closing costs, net |
|
407 |
|
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|
(104 |
) |
Net loss on disposal of property |
|
(6 |
) |
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|
(1 |
) |
Total costs and expenses |
|
14,077 |
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|
11,385 |
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Income from
operations |
|
116 |
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|
1,459 |
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Other income
(expense): |
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Interest expense |
|
(71 |
) |
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|
(145 |
) |
Interest income |
|
54 |
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|
5 |
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Total other expense |
|
(17 |
) |
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(140 |
) |
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Income before income
taxes |
|
99 |
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|
1,319 |
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Income tax
expense |
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(17 |
) |
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|
(321 |
) |
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Net
income |
$ |
82 |
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|
$ |
998 |
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Basic net income per
share |
$ |
0.01 |
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$ |
0.13 |
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Diluted net income per
share |
$ |
0.01 |
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$ |
0.13 |
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Weighted average
shares outstanding - basic |
|
9,085 |
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|
7,407 |
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Weighted average
shares outstanding - diluted |
|
9,189 |
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|
7,407 |
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FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES |
OPERATING RESULTS |
(unaudited) |
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Three Months Ended |
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March 31, 2019 |
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April 1, 2018 |
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Food and beverage costs(1) |
32.6 |
|
% |
|
31.2 |
|
% |
Labor and benefits
costs(1) |
38.4 |
|
% |
|
36.7 |
|
% |
Operating expenses(1) |
30.7 |
|
% |
|
32.6 |
|
% |
Restaurant level operating margin(1)(3) |
(1.7 |
) |
% |
|
(0.5 |
) |
% |
Depreciation and amortization
expenses(2) |
1.9 |
|
% |
|
3.1 |
|
% |
General and administrative
expenses(2) |
17.7 |
|
% |
|
14.6 |
|
% |
Net income(2) |
0.8 |
|
% |
|
11.4 |
|
% |
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(1) |
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As a percentage of restaurant sales, net |
(2) |
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As a percentage of total revenue |
(3) |
|
Restaurant level margins are equal to restaurant sales, net, less
restaurant level food and beverage costs, labor and benefit costs,
and operating expenses. |
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FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(in thousands, except per share data) |
(unaudited) |
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ASSETS |
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Current
assets: |
March 31, 2019 |
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December 30, 2018 |
|
Cash and cash equivalents |
$ |
8,868 |
|
|
$ |
11,598 |
|
Restricted cash |
|
840 |
|
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|
842 |
|
Accounts receivable, net of allowance for doubtful accounts of
$202,000 and $192,000, respectively |
|
3,194 |
|
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|
4,300 |
|
Inventories |
|
843 |
|
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|
722 |
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Prepaid income taxes and income taxes receivable |
|
377 |
|
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|
377 |
|
Prepaid expenses and other current assets |
|
1,102 |
|
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|
1,363 |
|
Total current
assets |
|
15,224 |
|
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|
19,202 |
|
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Property, equipment and leasehold
improvements, net |
|
11,114 |
|
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|
10,385 |
|
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Other
assets: |
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Operating lease right-of-use assets |
|
16,338 |
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|
— |
|
Goodwill |
|
1,104 |
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|
61 |
|
Intangible assets, net |
|
3,452 |
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|
1,428 |
|
Deferred tax asset, net |
|
5,753 |
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|
5,747 |
|
Other assets |
|
1,687 |
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|
1,533 |
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$ |
54,672 |
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$ |
38,356 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current
liabilities: |
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Accounts payable |
$ |
3,772 |
|
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$ |
3,765 |
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Current portion of lease liabilities |
|
1,927 |
|
|
|
— |
|
Current portion of long-term debt and financing lease
obligations |
|
164 |
|
|
|
1,369 |
|
Accrued compensation and benefits |
|
1,188 |
|
|
|
808 |
|
Other current liabilities |
|
3,043 |
|
|
|
2,970 |
|
Total current liabilities |
|
10,094 |
|
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|
8,912 |
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Long-term
liabilities: |
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Lease liabilities, less current portion |
|
16,908 |
|
|
|
— |
|
Long-term debt, less current portion |
|
2,358 |
|
|
|
2,411 |
|
Other liabilities |
|
2,630 |
|
|
|
4,492 |
|
Total liabilities |
|
31,990 |
|
|
|
15,815 |
|
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Shareholders’
equity: |
|
|
|
|
|
|
|
Common stock, $.01 par value, 100,000 shares authorized, 9,274 and
9,085 shares issued and outstanding at March 31, 2019 and
December 30, 2018, respectively |
|
93 |
|
|
|
91 |
|
Additional paid-in capital |
|
7,456 |
|
|
|
7,375 |
|
Retained earnings |
|
15,133 |
|
|
|
15,075 |
|
Total shareholders’
equity |
|
22,682 |
|
|
|
22,541 |
|
|
$ |
54,672 |
|
|
$ |
38,356 |
|
|
|
|
|
|
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FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands) |
(unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, 2019 |
|
April 1, 2018 |
Cash flows from
operating activities: |
|
|
|
|
|
Net income |
$ |
82 |
|
|
$ |
998 |
|
Adjustments to reconcile net income to cash flows provided by
operations: |
|
|
|
|
|
Depreciation and amortization |
|
264 |
|
|
|
393 |
|
Stock-based compensation |
|
83 |
|
|
|
47 |
|
Net gain on disposal of property |
|
(6 |
) |
|
|
(1 |
) |
Asset impairment and estimated lease termination charges
(gain) |
|
386 |
|
|
|
(185 |
) |
Bad debts expense (recovery) |
|
21 |
|
|
|
(147 |
) |
Other non-cash items |
|
33 |
|
|
|
(149 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable, net |
|
743 |
|
|
|
61 |
|
Other assets |
|
53 |
|
|
|
6 |
|
Accounts payable |
|
(9 |
) |
|
|
32 |
|
Accrued and other liabilities |
|
(24 |
) |
|
|
(879 |
) |
Cash flows provided by operating activities |
|
1,626 |
|
|
|
176 |
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
Proceeds from the sale of assets |
|
6 |
|
|
|
1 |
|
Purchases of property, equipment and leasehold improvements |
|
(221 |
) |
|
|
(41 |
) |
Payments for acquired restaurants |
|
(3,841 |
) |
|
|
— |
|
Advances on notes receivable |
|
(150 |
) |
|
|
(458 |
) |
Cash flows used for investing activities |
|
(4,206 |
) |
|
|
(498 |
) |
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
Payments for debt issuance costs |
|
(15 |
) |
|
|
— |
|
Payments on long-term debt and financing lease obligations |
|
(137 |
) |
|
|
(320 |
) |
Proceeds from exercise of stock options |
|
— |
|
|
|
389 |
|
Cash flows (used for) provided by financing activities |
|
(152 |
) |
|
|
69 |
|
|
|
|
|
|
|
Decrease in cash, cash
equivalents and restricted cash |
|
(2,732 |
) |
|
|
(253 |
) |
Cash, cash equivalents
and restricted cash, beginning of period |
|
12,440 |
|
|
|
10,426 |
|
Cash, cash equivalents
and restricted cash, end of period |
$ |
9,708 |
|
|
$ |
10,173 |
|
|
|
|
|
|
|
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FAMOUS DAVE’S OF AMERICA, INC. AND
SUBSIDIARIES |
NON-GAAP RECONCILIATION |
(in thousands, except per share data) |
(unaudited) |
|
|
|
|
|
|
|
|
Three Months Ended |
(dollars in thousands) |
|
March 31, 2019 |
|
|
April 1, 2018 |
Net income |
|
82 |
|
|
|
998 |
|
Asset impairment and estimated
lease termination charges and other closing costs |
|
407 |
|
|
|
(104 |
) |
Net gain on disposal of
equipment |
|
(6 |
) |
|
|
(1 |
) |
Stock-based compensation |
|
83 |
|
|
|
47 |
|
Acquisition costs |
|
163 |
|
|
|
— |
|
Severance |
|
3 |
|
|
|
— |
|
Tax adjustment |
|
(112 |
) |
|
|
14 |
|
Adjusted net income |
$ |
620 |
|
|
$ |
954 |
|
Basic adjusted net income per
common share |
$ |
0.07 |
|
|
$ |
0.13 |
|
Diluted adjusted net income
per common share |
$ |
0.07 |
|
|
$ |
0.13 |
|
|
|
|
|
|
|
Weighted average common share
outstanding - basic |
|
9,085 |
|
|
|
7,407 |
|
Weighted average common share
outstanding - diluted |
|
9,189 |
|
|
|
7,407 |
|
|
|
|
|
|
|
Net income |
$ |
82 |
|
|
$ |
998 |
|
Asset impairment and estimated
lease termination charges and other closing costs |
|
407 |
|
|
|
(104 |
) |
Depreciation and
amortization |
|
264 |
|
|
|
393 |
|
Interest expense, net |
|
17 |
|
|
|
140 |
|
Net gain on disposal of
equipment |
|
(6 |
) |
|
|
(1 |
) |
Stock-based compensation |
|
83 |
|
|
|
47 |
|
Acquisition costs |
|
163 |
|
|
|
— |
|
Severance |
|
3 |
|
|
|
— |
|
Provision for income
taxes |
|
17 |
|
|
|
321 |
|
Adjusted EBITDA |
$ |
1,030 |
|
|
$ |
1,794 |
|
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