FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported financial results for the
fiscal first quarter ended March 31, 2024.
“Over the last three years, we have expanded our
footprint 10-fold by strategically building a diverse portfolio
that now includes 18 iconic concepts spanning over 2,300 locations
worldwide, across more than 40 countries and 49 U.S. states,” said
Andy Wiederhorn, Chairman of FAT Brands. “Our franchise interest
remains high across all brands, as evidenced by the participation
and units sold at our biannual FAT Brands Summit held in April.
During the first quarter, we finalized a strategic development deal
for 40 co-branded Round Table Pizza and Fatburger locations and
continue to see heightened interest from our franchise partners,
who are eager to explore additional co-branding opportunities that
leverage synergies within our brand offerings.”
Ken Kuick, Co-Chief Executive Officer of FAT
Brands, commented, “During the first quarter, we signed over 150
development deals, increasing our pipeline to over 1,200
locations.” Kuick continued, “Continuing in 2024 is our focus on
the expansion of Twin Peaks. We opened three new lodges during the
first quarter, and plan to open 15 to 20 new Twin Peaks lodges in
2024, ending the year with approximately 125 lodges. Additionally,
our first conversion of a Smokey Bones location is officially
underway. We see this as the first of many sites we will use to
fuel Twin Peaks’ fast-paced growth.”
Rob Rosen, Co-Chief Executive Officer of FAT
Brands, concluded, “Opportunities in 2024 are abundant. Our
long-term strategy is to create value through the organic expansion
of our existing brands, acquire additional brands that
strategically complement our portfolio, realize value from
strategic divestments when appropriate to manage outstanding debt,
and ultimately increase long-term value for our stakeholders.”
Fiscal First
Quarter 2024
Highlights
- Total revenue
improved 43.8% to $152.0 million compared to $105.7 million in the
fiscal first quarter of 2023
- System-wide sales
growth of 4.8% in the fiscal first quarter of 2024 compared to the
prior year fiscal quarter
- Year-to-date system-wide same-store
sales declined of 4.0% in the fiscal first quarter of 2024 compared
to the prior year
- 16 new store openings during the
fiscal first quarter of 2024
- Net loss of $38.3 million, or $2.37
per diluted share, compared to $32.1 million, or $2.05 per diluted
share, in the fiscal first quarter of 2023
- EBITDA(1) of $9.4 million compared to $7.7 million in the
fiscal first quarter of 2023
- Adjusted EBITDA(1) of $18.2
million compared to $19.2 million in the fiscal first quarter of
2023
- Adjusted net loss(1) of $32.9
million, or $2.05 per diluted share, compared to adjusted net loss
of $23.5 million, or $1.53 per diluted share, in the fiscal first
quarter of 2023
(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
Fiscal First Quarter
2024 Financial Results
Total revenue increased $46.3 million, or 43.8%,
in the first quarter of 2024 to $152.0 million compared to $105.7
million in the same period of 2023, driven by the acquisition of
Smokey Bones in September 2023.
Costs and expenses consist of general and
administrative expense, cost of restaurant and factory revenues,
depreciation and amortization, refranchising net loss and
advertising fees. Costs and expenses increased $48.0 million, or
45.6%, in the first quarter of 2024 to $153.3 million compared to
the same period in the prior year, primarily due to the acquisition
of Smokey Bones in September 2023 and increased activity from
Company-owned restaurants and the Company's factory.
General and administrative expense increased
$1.6 million, or 5.6%, in the first quarter of 2024 compared to
$28.4 million in the same period in the prior year, primarily due
to the acquisition of Smokey Bones in September 2023.
Cost of restaurant and factory revenues was
related to the operations of the company-owned restaurant locations
and dough factory and increased $40.0 million, or 67.6%, in the
first quarter of 2024, primarily due to the acquisition of Smokey
Bones in September 2023 and higher company-owned restaurant and
factory sales.
Depreciation and amortization increased $3.1
million, or 43.3% in the first quarter of 2024 compared to the same
period in the prior year, primarily due to the acquisition of
Smokey Bones in September 2023 and depreciation of new property and
equipment at company-owned restaurant locations.
Refranchising net loss in the first quarter of
2024 of $1.5 million was comprised of $1.0 million in restaurant
operating costs, net of food sales, and $0.5 million in net loss
related to the sale or closure of refranchised restaurants.
Refranchising net loss in the first quarter of 2023 of $0.2 million
was comprised of $0.1 million in net gains related to the sale or
closure of refranchised restaurants, offset by $0.3 million in
restaurant operating costs, net of food sales.
Advertising expenses increased $2.1 million in
the first quarter of 2024 compared to the prior year period. These
expenses vary in relation to advertising revenues.
Total other expense, net, for the first quarter
of 2024 and 2023 was $33.4 million and $30.0 million, respectively,
which is inclusive of interest expense of $34.0 million and $30.1
million, respectively. This increase is primarily due to new debt
offerings which occurred in the second half of fiscal year 2022 and
first three quarters of 2023. Total other expense, net for the
first quarter of 2024 also consisted of a $0.4 million net loss on
the extinguishment of debt.
Adjusted net loss(1) of $32.9 million, or
$2.05 per diluted share, compared to adjusted net loss of $23.5
million, or $1.53 per diluted share, in the fiscal first quarter of
2023.
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 first quarter 2024 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
Wednesday, May 22, 2024, and can be accessed by dialing
1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The
passcode is 10187929. 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, the timing and
performance of new store openings, 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.com
646-277-1224
Media Relations:
Erin Mandzikemandzik@fatbrands.com
860-212-6509
FAT Brands Inc. Consolidated Statements of
Operations
| |
|
Thirteen Weeks Ended |
|
| (In thousands, except share
and per share data) |
|
March 31, 2024 |
|
|
March 26, 2023 |
|
| |
|
|
|
|
|
|
| Revenue |
|
|
|
|
|
|
|
|
|
Royalties |
|
$ |
21,947 |
|
|
$ |
22,485 |
|
|
Restaurant sales |
|
|
105,938 |
|
|
|
62,601 |
|
|
Advertising fees |
|
|
9,796 |
|
|
|
9,351 |
|
|
Factory revenues |
|
|
9,474 |
|
|
|
9,165 |
|
|
Franchise fees |
|
|
1,481 |
|
|
|
802 |
|
|
Other revenue |
|
|
3,331 |
|
|
|
1,287 |
|
|
Total revenue |
|
|
151,967 |
|
|
|
105,691 |
|
| |
|
|
|
|
|
|
|
|
| Costs and expenses |
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
|
30,005 |
|
|
|
28,415 |
|
|
Cost of restaurant and factory revenues |
|
|
99,050 |
|
|
|
59,087 |
|
|
Depreciation and amortization |
|
|
10,194 |
|
|
|
7,116 |
|
|
Refranchising loss |
|
|
1,508 |
|
|
|
159 |
|
|
Advertising fees |
|
|
12,592 |
|
|
|
10,527 |
|
|
Total costs and expenses |
|
|
153,349 |
|
|
|
105,304 |
|
| |
|
|
|
|
|
|
|
|
| (Loss) income from
operations |
|
|
(1,382 |
) |
|
|
387 |
|
| |
|
|
|
|
|
|
|
|
| Other (expense) income,
net |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(29,623 |
) |
|
|
(25,090 |
) |
|
Interest expense related to preferred shares |
|
|
(4,418 |
) |
|
|
(5,043 |
) |
|
Net gain on extinguishment of debt |
|
|
427 |
|
|
|
— |
|
|
Other income, net |
|
|
204 |
|
|
|
156 |
|
|
Total other expense, net |
|
|
(33,410 |
) |
|
|
(29,977 |
) |
| |
|
|
|
|
|
|
|
|
| Loss before income tax
provision |
|
|
(34,792 |
) |
|
|
(29,590 |
) |
| |
|
|
|
|
|
|
|
|
| Income tax provision |
|
|
(3,524 |
) |
|
|
(2,536 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(38,316 |
) |
|
$ |
(32,126 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(38,316 |
) |
|
$ |
(32,126 |
) |
| Dividends on preferred
shares |
|
|
(1,881 |
) |
|
|
(1,755 |
) |
| |
|
$ |
(40,197 |
) |
|
$ |
(33,881 |
) |
| |
|
|
|
|
|
|
|
|
| Basic and diluted loss per
common share |
|
$ |
(2.37 |
) |
|
$ |
(2.05 |
) |
| Basic and diluted weighted
average shares outstanding |
|
|
16,947,400 |
|
|
|
16,487,119 |
|
| Cash dividends declared per
common share |
|
$ |
0.14 |
|
|
$ |
0.14 |
|
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA
Reconciliation
| |
|
Thirteen Weeks Ended |
|
| (In thousands) |
|
March 31, 2024 |
|
|
March 26, 2023 |
|
| Net loss |
|
$ |
(38,316 |
) |
|
$ |
(32,126 |
) |
|
Interest expense, net |
|
|
34,041 |
|
|
|
30,133 |
|
|
Income tax provision |
|
|
3,524 |
|
|
|
2,536 |
|
|
Depreciation and amortization |
|
|
10,194 |
|
|
|
7,116 |
|
| EBITDA |
|
|
9,443 |
|
|
|
7,659 |
|
|
Bad debt expense |
|
|
168 |
|
|
|
1,035 |
|
|
Share-based compensation expenses |
|
|
745 |
|
|
|
1,095 |
|
|
Non-cash lease expenses |
|
|
630 |
|
|
|
381 |
|
|
Refranchising loss |
|
|
1,508 |
|
|
|
159 |
|
|
Litigation costs |
|
|
3,807 |
|
|
|
7,744 |
|
|
Severance |
|
|
22 |
|
|
|
— |
|
|
Net loss related to advertising fund deficit |
|
|
2,282 |
|
|
|
1,085 |
|
|
Net gain on extinguishment of debt |
|
|
(427 |
) |
|
|
— |
|
|
Pre-opening expenses |
|
|
28 |
|
|
|
29 |
|
| Adjusted EBITDA |
|
$ |
18,207 |
|
|
$ |
19,187 |
|
FAT Brands Inc. Adjusted Net
Loss Reconciliation
| |
|
Thirteen Weeks Ended |
|
| (In thousands, except share
and per share data) |
|
March 31, 2024 |
|
|
March 26, 2023 |
|
| |
|
|
|
|
|
|
| Net loss |
|
$ |
(38,316 |
) |
|
$ |
(32,126 |
) |
|
Refranchising loss |
|
|
1,508 |
|
|
|
159 |
|
|
Net gain on extinguishment of debt |
|
|
(427 |
) |
|
|
— |
|
|
Litigation costs |
|
|
3,807 |
|
|
|
7,744 |
|
|
Severance |
|
|
22 |
|
|
|
— |
|
|
Tax adjustments, net (1) |
|
|
497 |
|
|
|
677 |
|
| Adjusted net loss |
|
$ |
(32,909 |
) |
|
$ |
(23,546 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(38,316 |
) |
|
$ |
(32,126 |
) |
| Dividends on preferred
shares |
|
|
(1,881 |
) |
|
|
(1,755 |
) |
| |
|
$ |
(40,197 |
) |
|
$ |
(33,881 |
) |
| |
|
|
|
|
|
|
|
|
| Adjusted net loss |
|
$ |
(32,908 |
) |
|
$ |
(23,546 |
) |
| Dividends on preferred
shares |
|
|
(1,881 |
) |
|
|
(1,755 |
) |
| |
|
$ |
(34,789 |
) |
|
$ |
(25,301 |
) |
| |
|
|
|
|
|
|
|
|
| Loss per basic and diluted
share |
|
$ |
(2.37 |
) |
|
$ |
(2.05 |
) |
| Adjusted net loss per basic
and diluted share |
|
$ |
(2.05 |
) |
|
$ |
(1.53 |
) |
| |
|
|
|
|
|
|
|
|
| Weighted average basic and
diluted shares outstanding |
|
|
16,947,400 |
|
|
|
16,487,119 |
|
(1) Reflects the tax impact of the adjustments using the
effective tax rate for the respective periods.
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