FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported fiscal fourth quarter and
full fiscal year 2023 financial results for the fiscal year ended
December 31, 2023.
“With the acquisition of Smokey Bones early in
the fourth quarter, we have grown the FAT Brands portfolio to 18
iconic restaurant brands with annualized system wide sales of $2.5
billion,” said Andy Wiederhorn, Chairman of FAT Brands. “We opened
125 restaurants in 2023, including 29 in the fourth quarter. We are
seeing strong franchisee interest in development opportunities,
having signed more than 225 development agreements in 2023,
bringing our total pipeline to 1,100 units. This represents the
potential for over 50% EBITDA growth over the next several
years.”
Ken Kuick, Co-Chief Executive Officer of FAT
Brands, commented, “While franchise interest remains high across
all of our brands, we continue to be focused on the expansion of
Twin Peaks. This year we opened 14 new lodges and ended the year
with 109 lodges, a 33% increase since acquiring the brand in 2021.
Our growth pipeline includes 113 lodges and Smokey Bones’ healthy
real estate portfolio provides us with the opportunity to convert
locations into Twin Peaks lodges, with the potential to
significantly accelerate the growth of the brand.”
Rob Rosen, Co-Chief Executive Officer of FAT
Brands, concluded, “We believe there are significant opportunities
on the horizon for FAT Brands. Our seasoned leadership and strong
brand management platform allow us to efficiently integrate new
brands while maintaining a healthy and evolving pipeline for
organic growth. These strengths position us for continued growth in
the future, which will help deleverage our balance sheet.”
Fiscal Fourth
Quarter 2023
Highlights
- Total revenue
improved 52.8% to $158.6 million compared to $103.8 million in the
fourth quarter of 2022
- System-wide sales
growth of 16.5% in the fiscal fourth quarter of 2023 compared to
the prior year fiscal quarter
- System-wide same-store sales
declined 0.6% in the fiscal fourth quarter of 2023 compared to the
prior fiscal year
- 29 new store openings during the
fiscal fourth quarter of 2023
- Loss from
operations of $3.1 million compared to $32.6 million in the fiscal
fourth quarter of 2022
- Net loss of $26.2 million, or $1.68
per diluted share, compared to $70.8 million, or $4.39 per diluted
share, in the fiscal fourth quarter of 2022
- Adjusted EBITDA(1) of $27.0
million compared to $19.6 million in the fiscal fourth quarter of
2022
- Adjusted net loss(1) of $17.3
million, or $1.15 per diluted share, compared to $43.0 million, or
$2.70 per diluted share, in the fiscal fourth quarter of 2022
Fiscal Year
2023 Highlights
- Total revenue
increased 18.0% to $480.5 million compared to $407.2 million in
fiscal 2022
- System-wide sales
growth of 6.9% compared to fiscal 2022
- System-wide same-store sales growth
of 0.8% in fiscal 2023 compared to fiscal 2022
- 125 new store openings during
fiscal 2023
- Income from
operations of $22.3 million compared to loss from operations of
$17.9 million in the fiscal quarter of 2022
- Net loss of $90.1 million, or $5.85
per diluted share, compared to $126.2 million, or $8.06 per diluted
share, in fiscal 2022
- Adjusted EBITDA(1) of $91.2
million compared to $88.8 million in fiscal 2022
- Adjusted net loss(1) of $56.5
million, or $3.83 per diluted share, compared to $80.9 million, or
$5.32 per diluted share, in fiscal 2022
(1) EBITDA, adjusted EBITDA and adjusted
net loss are non-GAAP measures defined below, under “Non-GAAP
Measures”. Reconciliation of GAAP net loss to EBITDA, adjusted
EBITDA and adjusted net loss are included in the accompanying
financial tables.
Summary of
Fourth Quarter
2023 Financial Results
Total revenue increased $54.8 million, or 52.8%,
in the fiscal fourth quarter of 2023, to $158.6 million compared to
$103.8 million in the same fiscal period of 2022, driven by a 10.4%
increase in royalties, an 80.5% increase in company-owned
restaurant revenues driven by new restaurant openings and the
acquisition of Smokey Bones during the fourth quarter of 2023 and a
10.0% increase in revenues from our manufacturing facility.
Costs and expenses consist of general and
administrative expense, cost of restaurant and factory revenues,
depreciation and amortization, refranchising net losses and
advertising fees. Costs and expenses increased $25.4 million, or
18.6%, in the fiscal fourth quarter of 2023 to $161.8 million
compared to $136.4 million in the same fiscal period in the prior
fiscal year.
General and administrative expense decreased
$8.8 million, or 22.6%, in the fiscal fourth quarter of 2023
compared to the same fiscal period in the prior fiscal year,
primarily due to a $16.6 million non-cash reserve on claimed
Employee Retention Credits recorded during the fourth quarter of
2022 and the recognition of $3.4 million related to Employee
Retention Credits during the fiscal fourth quarter of 2023,
partially offset by the acquisition of Smokey Bones in the fourth
quarter of 2023 and higher professional fees related to certain
litigation matters.
Cost of restaurant and factory revenues was
related to the operations of the company-owned restaurant locations
and our dough factory and increased $43.4 million, or 70.3%, in the
fiscal fourth quarter of 2023 to $105.1 million, compared to the
prior year quarter, primarily due to the acquisition of Smokey
Bones in the fourth quarter of 2023.
Depreciation and amortization increased $3.0
million, or 42.9% in the fiscal fourth quarter of 2023 compared to
the same fiscal period in the prior fiscal year, primarily due to
the acquisition of Smokey Bones in the fourth quarter of 2023 and
depreciation of new property and equipment at company-owned
restaurant locations.
Refranchising losses in the fiscal fourth
quarter of 2023 and 2022 were $2.1 million and $3.1 million,
respectively, and were comprised of restaurant costs and expenses,
net of food sales.
Advertising expenses increased $2.2 million in
the fiscal fourth quarter of 2023 compared to the prior fiscal year
period. These expenses vary in relation to advertising
revenues.
Total other expense, net for the fiscal fourth
quarters of 2023 and 2022 was $31.9 million and $24.2 million,
respectively, primarily comprised of net interest expense of $33.3
million and $25.6 million, respectively.
Adjusted net loss was $17.3 million, or $1.15
per diluted share, in the fiscal fourth quarter of 2023 compared to
$43.0 million, or $2.70 per diluted share, in the fiscal fourth
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 fourth quarter 2023 financial results
today at 5:00 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, March 28, 2024, and can be accessed by dialing
1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The
passcode is 10186678. 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
18 restaurant brands: Round Table Pizza, Fatburger, Marble Slab
Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Smokey Bones, 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
losses, 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
|
|
Fourteen Weeks Ended |
|
|
Fiscal Year Ended |
|
(In thousands, except share and per share data) |
|
December 31, 2023 |
|
|
December 25, 2022 |
|
|
December 31, 2023 |
|
|
December 25, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
$ |
24,869 |
|
|
$ |
22,525 |
|
|
$ |
94,036 |
|
|
$ |
87,921 |
|
Restaurant sales |
|
|
111,072 |
|
|
|
61,528 |
|
|
|
299,029 |
|
|
|
241,001 |
|
Advertising fees |
|
|
10,510 |
|
|
|
9,589 |
|
|
|
39,490 |
|
|
|
37,997 |
|
Factory revenues |
|
|
9,810 |
|
|
|
8,916 |
|
|
|
37,983 |
|
|
|
33,504 |
|
Franchise fees |
|
|
937 |
|
|
|
943 |
|
|
|
4,979 |
|
|
|
3,706 |
|
Other revenue |
|
|
1,438 |
|
|
|
313 |
|
|
|
4,940 |
|
|
|
3,095 |
|
Total revenue |
|
|
158,636 |
|
|
|
103,814 |
|
|
|
480,457 |
|
|
|
407,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
|
30,298 |
|
|
|
39,125 |
|
|
|
93,117 |
|
|
|
113,313 |
|
Cost of restaurant and factory revenues |
|
|
105,130 |
|
|
|
61,726 |
|
|
|
282,887 |
|
|
|
221,627 |
|
Depreciation and amortization |
|
|
9,914 |
|
|
|
6,939 |
|
|
|
31,131 |
|
|
|
27,015 |
|
Impairment of goodwill and other intangible assets |
|
|
500 |
|
|
|
14,000 |
|
|
|
500 |
|
|
|
14,000 |
|
Refranchising loss |
|
|
2,127 |
|
|
|
3,055 |
|
|
|
2,873 |
|
|
|
4,178 |
|
Acquisition costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
383 |
|
Advertising fees |
|
|
13,811 |
|
|
|
11,574 |
|
|
|
47,619 |
|
|
|
44,612 |
|
Total costs and expenses |
|
|
161,780 |
|
|
|
136,419 |
|
|
|
458,127 |
|
|
|
425,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations |
|
|
(3,144 |
) |
|
|
(32,605 |
) |
|
|
22,330 |
|
|
|
(17,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(28,925 |
) |
|
|
(20,947 |
) |
|
|
(99,342 |
) |
|
|
(78,477 |
) |
Interest expense related to preferred shares |
|
|
(4,417 |
) |
|
|
(4,691 |
) |
|
|
(18,189 |
) |
|
|
(16,372 |
) |
Net gain (loss) on extinguishment of debt |
|
|
325 |
|
|
|
— |
|
|
|
(2,397 |
) |
|
|
— |
|
Other (expense) income, net |
|
|
1,096 |
|
|
|
1,456 |
|
|
|
1,233 |
|
|
|
5,375 |
|
Total other expense, net |
|
|
(31,921 |
) |
|
|
(24,182 |
) |
|
|
(118,695 |
) |
|
|
(89,474 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax provision |
|
|
(35,065 |
) |
|
|
(56,787 |
) |
|
|
(96,365 |
) |
|
|
(107,378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit) |
|
|
(8,827 |
) |
|
|
14,021 |
|
|
|
(6,255 |
) |
|
|
18,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(26,238 |
) |
|
$ |
(70,808 |
) |
|
$ |
(90,110 |
) |
|
$ |
(126,188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(26,238 |
) |
|
$ |
(70,808 |
) |
|
$ |
(90,110 |
) |
|
$ |
(126,188 |
) |
Dividends on preferred shares |
|
|
(1,832 |
) |
|
|
(1,661 |
) |
|
|
(7,007 |
) |
|
|
(6,636 |
) |
|
|
$ |
(28,070 |
) |
|
$ |
(72,469 |
) |
|
$ |
(97,117 |
) |
|
$ |
(132,824 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
$ |
(1.68 |
) |
|
$ |
(4.39 |
) |
|
$ |
(5.85 |
) |
|
$ |
(8.06 |
) |
Basic and diluted weighted average shares outstanding |
|
|
16,675,096 |
|
|
|
16,530,934 |
|
|
|
16,599,015 |
|
|
|
16,476,090 |
|
Cash dividends declared per common share |
|
$ |
0.14 |
|
|
$ |
0.14 |
|
|
$ |
0.56 |
|
|
$ |
0.54 |
|
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA
Reconciliation
|
|
Fourteen Weeks Ended |
|
|
Fiscal Year Ended |
|
(In thousands) |
|
December 31, 2023 |
|
|
December 25, 2022 |
|
|
December 31, 2023 |
|
|
December 25, 2022 |
|
Net loss |
|
$ |
(26,238 |
) |
|
$ |
(70,808 |
) |
|
$ |
(90,110 |
) |
|
$ |
(126,188 |
) |
Interest expense, net |
|
|
33,342 |
|
|
|
25,638 |
|
|
|
117,531 |
|
|
|
94,849 |
|
Income tax provision (benefit) |
|
|
(8,827 |
) |
|
|
14,021 |
|
|
|
(6,255 |
) |
|
|
18,810 |
|
Depreciation and amortization |
|
|
9,914 |
|
|
|
6,939 |
|
|
|
31,131 |
|
|
|
27,015 |
|
EBITDA |
|
|
8,191 |
|
|
|
(24,210 |
) |
|
|
52,297 |
|
|
|
14,486 |
|
Bad debt expense (recovery) |
|
|
2,868 |
|
|
|
17,793 |
|
|
|
(9,827 |
) |
|
|
23,736 |
|
Share-based compensation expenses |
|
|
947 |
|
|
|
1,584 |
|
|
|
3,615 |
|
|
|
7,665 |
|
Non-cash lease expenses |
|
|
535 |
|
|
|
808 |
|
|
|
1,766 |
|
|
|
2,478 |
|
Acquisition costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
383 |
|
Refranchising loss |
|
|
2,127 |
|
|
|
3,055 |
|
|
|
2,873 |
|
|
|
4,178 |
|
Litigation costs |
|
|
8,832 |
|
|
|
4,788 |
|
|
|
28,280 |
|
|
|
18,958 |
|
Severance |
|
|
341 |
|
|
|
— |
|
|
|
1,377 |
|
|
|
526 |
|
Net loss related to advertising fund deficit |
|
|
1,946 |
|
|
|
1,038 |
|
|
|
6,310 |
|
|
|
1,041 |
|
Net (gain) loss on extinguishment of debt |
|
|
(325 |
) |
|
|
— |
|
|
|
2,397 |
|
|
|
— |
|
Impairment losses |
|
|
1,006 |
|
|
|
14,454 |
|
|
|
1,006 |
|
|
|
14,454 |
|
Pre-opening expenses |
|
|
564 |
|
|
|
298 |
|
|
|
1,136 |
|
|
|
900 |
|
Adjusted EBITDA |
|
$ |
27,032 |
|
|
$ |
19,608 |
|
|
$ |
91,230 |
|
|
$ |
88,805 |
|
FAT Brands Inc. Adjusted Net
Loss Reconciliation
|
|
Fourteen Weeks Ended |
|
|
Fiscal Year Ended |
|
(In thousands, except share and per share data) |
|
December 31, 2023 |
|
|
December 25, 2022 |
|
|
December 31, 2023 |
|
|
December 25, 2022 |
|
Net loss |
|
$ |
(26,238 |
) |
|
$ |
(70,808 |
) |
|
$ |
(90,110 |
) |
|
$ |
(126,188 |
) |
Refranchising loss |
|
|
2,127 |
|
|
|
3,055 |
|
|
|
2,873 |
|
|
|
4,178 |
|
Acquisition costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
383 |
|
Net (gain) loss on extinguishment of debt |
|
|
(325 |
) |
|
|
— |
|
|
|
2,397 |
|
|
|
— |
|
Impairment losses |
|
|
1,006 |
|
|
|
14,454 |
|
|
|
1,006 |
|
|
|
14,454 |
|
Litigation costs |
|
|
8,832 |
|
|
|
4,788 |
|
|
|
28,280 |
|
|
|
18,958 |
|
Severance |
|
|
341 |
|
|
|
— |
|
|
|
1,377 |
|
|
|
526 |
|
Tax adjustments, net (1) |
|
|
(3,016 |
) |
|
|
5,505 |
|
|
|
(2,332 |
) |
|
|
6,744 |
|
Adjusted net loss |
|
$ |
(17,273 |
) |
|
$ |
(43,006 |
) |
|
$ |
(56,509 |
) |
|
$ |
(80,945 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(26,238 |
) |
|
$ |
(70,808 |
) |
|
$ |
(90,110 |
) |
|
$ |
(126,188 |
) |
Dividends on preferred shares |
|
|
(1,832 |
) |
|
|
(1,661 |
) |
|
|
(7,007 |
) |
|
|
(6,636 |
) |
|
|
$ |
(28,070 |
) |
|
$ |
(72,469 |
) |
|
$ |
(97,117 |
) |
|
$ |
(132,824 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss |
|
$ |
(17,273 |
) |
|
$ |
(43,006 |
) |
|
$ |
(56,509 |
) |
|
$ |
(80,945 |
) |
Dividends on preferred shares |
|
|
(1,832 |
) |
|
|
(1,661 |
) |
|
|
(7,007 |
) |
|
|
(6,636 |
) |
|
|
$ |
(19,105 |
) |
|
$ |
(44,667 |
) |
|
$ |
(63,516 |
) |
|
$ |
(87,581 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per basic and diluted share |
|
$ |
(1.68 |
) |
|
$ |
(4.38 |
) |
|
$ |
(5.85 |
) |
|
$ |
(8.06 |
) |
Adjusted net loss per basic and diluted share |
|
$ |
(1.15 |
) |
|
$ |
(2.70 |
) |
|
$ |
(3.83 |
) |
|
$ |
(5.32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic and diluted shares outstanding |
|
|
16,675,096 |
|
|
|
16,530,934 |
|
|
|
16,599,015 |
|
|
|
16,476,090 |
|
(1) Reflects the tax impact of the adjustments using the
effective tax rate for the respective periods.
FAT Brands (NASDAQ:FAT)
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