FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported financial results for the
fiscal second quarter ended June 30, 2024.
“Over the last three years, we have grown the
FAT Brands portfolio to 18 iconic restaurant brands with
approximately 2,300 units across 40 countries and 49 U.S. states,”
said Andy Wiederhorn, Chairman of FAT Brands. “We have opened 45
restaurants year to date, including 24 that opened during the
second quarter, and plan to open over 120 new restaurants in 2024.
We are seeing strong new franchisee activity as well as continued
demand from existing franchise partners to develop other brands
within our portfolio and 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, “We have signed over 180 development deals year
to date, compared to 226 deals for the entirety of 2023, bringing
our current pipeline to approximately 1,100 locations.” Kuick
continued, “Continuing in 2024 is our focus on the expansion of
Twin Peaks. We opened four new lodges during the first half of 2024
and plan to open another 12 to 15 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 Second
Quarter 2024
Highlights
- Total revenue
improved 42.4% to $152.0 million compared to $106.8 million in the
fiscal second quarter of 2023
- System-wide
sales growth of 8.6% in the fiscal second quarter of 2024 compared
to the prior year fiscal quarter
- Year-to-date
system-wide same-store sales declined of 1.6% in the fiscal second
quarter of 2024 compared to the prior year
- 24 new store
openings during the fiscal second quarter of 2024
- Net loss of
$39.4 million, or $2.43 per diluted share, compared to $7.1
million, or $0.53 per diluted share, in the fiscal second quarter
of 2023
- EBITDA(1) of $6.8
million compared to $25.6 million in the fiscal second quarter of
2023
- Adjusted
EBITDA(1) of $15.7 million compared to $23.1 million in the fiscal
second quarter of 2023
- Adjusted net
loss(1) of $30.9 million, or $1.93 per diluted share, compared to
adjusted net income(1) of $3.0 million, or
$0.08 per diluted share, in the fiscal second quarter of
2023
(1) EBITDA, adjusted EBITDA and adjusted net
(loss) income are non-GAAP measures defined below, under “Non- GAAP
Measures”. Reconciliation of GAAP net loss to EBITDA, adjusted
EBITDA and adjusted net (loss) income are included in the
accompanying financial tables.
Summary of
Fiscal Second
Quarter 2024
Financial Results
Total revenue increased $45.2 million, or 42.4%,
in the second quarter of 2024 to $152.0 million compared to $106.8
million in the same period of 2023, driven by the acquisition of
Smokey Bones in September 2023 and revenues from new restaurant
openings.
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 $66.4 million, or
75.2%, in the second quarter of 2024 to $154.7 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 $19.6 million, or
197.2%, in the second quarter of 2024 compared to $9.9 million in
the same period in the prior year, primarily due to the acquisition
of Smokey Bones in September 2023 and the recognition of$12.7
million in Employee Retention Credits during the second quarter of
fiscal year 2023, partially offset by the recognition of$2.1
million in Employee Retention Credits during the second quarter of
fiscal year 2024.
Cost of restaurant and factory revenues was
related to the operations of the company-owned restaurant locations
and dough factory and increased $40.6 million, or 68.3%, in the
second quarter of 2024, primarily due to the acquisition of Smokey
Bones in September 2023 and higher company-owned restaurant
sales.
Depreciation and amortization increased $3.2
million, or 45.1% in the second 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 second quarter of
2024 of $0.2 million was comprised of $0.5 million in net loss
related to the sale or closure of refranchised restaurants, offset
by $0.3 million in restaurant food sales, net of operating costs.
Refranchising net loss in the second quarter of 2023 of $0.2
million was comprised of $0.2 million in restaurant operating
costs, net of food sales.
Advertising expenses increased $3.0 million in
the second quarter of 2024 compared to the prior year period,
primarily due to the acquisition of Smokey Bones in September 2023.
Additionally, these expenses vary in relation to advertising
revenues.
Total other expense, net, for the second quarter
of 2024 and 2023 was $34.8 million and $24.2 million, respectively,
which is inclusive of interest expense of $34.0 million and $24.3
million, respectively. This increase is primarily due to new debt
issuances.
Adjusted net loss(1) of $30.9 million, or $1.93 per diluted
share, compared to adjusted net income(1) of $3.0 million, or $0.08
per diluted share, in the fiscal second 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 second 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, August 21, 2024, and can be accessed by dialing
1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The
passcode is 10189773. 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) income.
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) income is a supplemental
measure of financial performance that is not required by or
presented in accordance with GAAP. Adjusted net (loss) income is
defined as net (loss) income plus the impact of adjustments and the
tax effects of such adjustments. Adjusted net (loss) income 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) income 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 Mandzik emandzik@fatbrands.com 860-212-6509
FAT Brands
Inc. Consolidated
Statements of
Operations
Thirteen Weeks
Ended
Twenty-Six Weeks Ended
(In thousands, except share and
per share data) |
June 30, 2024 |
June 25, 2023 |
June 30, 2024 |
|
June 25, 2023 |
|
|
|
|
|
|
Revenue |
|
|
|
|
|
Royalties |
$
23,318 |
$
22,751 |
$
45,265 |
$ |
45,236 |
Restaurant sales |
107,410 |
62,778 |
213,348 |
|
125,379 |
Advertising fees |
10,065 |
9,668 |
19,861 |
|
19,019 |
Factory revenues |
9,636 |
9,686 |
19,110 |
|
18,851 |
Franchise fees |
1,113 |
763 |
2,594 |
|
1,565 |
Other revenue |
498 |
1,118 |
3,829 |
|
2,405 |
Total revenue |
152,040 |
106,764 |
304,007 |
|
212,455 |
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
General and administrative expense |
29,558 |
9,947 |
59,563 |
|
38,362 |
Cost of restaurant and factory revenues |
100,113 |
59,502 |
199,163 |
|
118,589 |
Depreciation and amortization |
10,246 |
7,061 |
20,440 |
|
14,177 |
Refranchising loss |
175 |
179 |
1,683 |
|
338 |
Advertising fees |
14,651 |
11,610 |
27,243 |
|
22,137 |
Total costs and expenses |
154,743 |
88,299 |
308,092 |
|
193,603 |
|
|
|
|
|
|
(Loss) income from
operations |
(2,703) |
18,465 |
(4,085) |
|
18,852 |
|
|
|
|
|
|
Other (expense) income, net |
|
|
|
|
|
Interest expense |
(29,586) |
(20,008) |
(59,209) |
|
(45,098) |
Interest expense related to preferred shares |
(4,417) |
(4,311) |
(8,835) |
|
(9,354) |
Net gain on extinguishment of debt |
— |
— |
427 |
|
— |
Other (expense) income, net |
(752) |
109 |
(548) |
|
265 |
Total other expense, net |
(34,755) |
(24,210) |
(68,165) |
|
(54,187) |
|
|
|
|
|
|
Loss before income tax
provision |
(37,458) |
(5,745) |
(72,250) |
|
(35,335) |
|
|
|
|
|
|
Income tax provision |
(1,901) |
(1,346) |
(5,425) |
|
(3,882) |
|
|
|
|
|
|
Net loss |
$
(39,359) |
$
(7,091) |
$
(77,675) |
$ |
(39,217) |
|
|
|
|
|
|
Net loss |
$
(39,359) |
$
(7,091) |
$
(77,675) |
$ |
(39,217) |
Dividends on preferred
shares |
(1,920) |
(1,615) |
(3,801) |
|
(3,381) |
|
$
(41,279) |
$
(8,706) |
$
(81,476) |
$ |
(42,598) |
|
|
|
|
|
|
Basic and diluted loss per common
share |
$
(2.43) |
$
(0.53) |
$
(4.80) |
$ |
(2.58) |
Basic and diluted weighted
average shares |
|
|
|
|
|
outstanding |
17,007,352 |
16,522,379
16,977,376 |
16,521,590 |
Cash dividends declared per
common share |
$
0.14 |
$
0.14
$
0.28 |
$
0.28 |
FAT Brands
Inc. Consolidated
EBITDA and
Adjusted EBITDA
Reconciliation
Thirteen Weeks
Ended
Twenty-Six Weeks Ended
(In thousands) |
June 30, 2024 |
June 25, 2023 |
June 30, 2024 |
June 25, 2023 |
Net loss |
$
(39,359) |
$
(7,091) |
$
(77,675) |
$
(39,217) |
Interest expense, net |
34,003 |
24,319 |
68,044 |
54,452 |
Income tax provision |
1,901 |
1,346 |
5,425 |
3,882 |
Depreciation and amortization |
10,246 |
7,061 |
20,440 |
14,177 |
EBITDA |
6,791 |
25,635 |
16,234 |
33,294 |
Bad debt expense |
(1,729) |
(13,106) |
(1,561) |
(12,071) |
Share-based compensation expenses |
677 |
477 |
1,422 |
1,572 |
Non-cash lease expenses |
758 |
293 |
1,388 |
674 |
Refranchising loss |
175 |
179 |
1,683 |
338 |
Litigation costs |
7,852 |
6,924 |
11,660 |
14,668 |
Severance |
19 |
1,036 |
41 |
1,036 |
Net loss related to advertising fund deficit |
1,140 |
1,688 |
3,422 |
2,773 |
Net gain on extinguishment of debt |
— |
— |
(427) |
— |
Pre-opening expenses |
63 |
11 |
91 |
40 |
Adjusted EBITDA |
$
15,747 |
$
23,137 |
$
33,953 |
$
42,325 |
FAT Brands
Inc. Adjusted
Net (Loss)
Income Reconciliation
Thirteen Weeks
Ended
Twenty-Six Weeks Ended
(In thousands, except share and
per share data) |
June 30, 2024 |
June 25, 2023 |
June 30, 2024 |
June 25, 2023 |
Net loss |
$
(39,359) |
$
(7,091) |
$ (77,675) |
$
(39,217) |
Refranchising loss |
175 |
179 |
1,683 |
338 |
Net gain on extinguishment of debt |
— |
— |
(427) |
— |
Litigation costs |
7,852 |
6,924 |
11,660 |
14,668 |
Severance |
19 |
1,036 |
41 |
1,036 |
Tax adjustments, net (1) |
408 |
1,907 |
973 |
1,762 |
Adjusted net (loss) income |
$
(30,904) |
$
2,955 |
$ (63,745) |
$
(21,413) |
|
|
|
|
|
Net loss |
$
(39,359) |
$
(7,091) |
$ (77,675) |
$
(39,217) |
Dividends on preferred
shares |
(1,920) |
(1,615) |
(3,801) |
(3,381) |
|
$
(41,279) |
$
(8,706) |
$ (81,476) |
$
(42,598) |
|
|
|
|
|
Adjusted net (loss) income |
$
(30,904) |
$
2,955 |
$ (63,745) |
$
(21,413) |
Dividends on preferred
shares |
(1,920) |
(1,615) |
(3,801) |
(3,381) |
|
$
(32,824) |
$
1,340 |
$ (67,546) |
$
(24,794) |
|
|
|
|
|
Loss per basic and diluted
share |
$
(2.43) |
$
(0.53) |
$
(4.80) |
$
(2.58) |
Adjusted net (loss) income per basic and diluted share |
$
(1.93) |
$
0.08 |
$
(3.98) |
$
(1.50) |
|
|
|
|
|
Weighted average basic and diluted shares outstanding |
17,007,352 |
16,522,379 |
16,977,376 |
16,521,590 |
(1) Reflects the tax impact of the adjustments using the
effective tax rate for the respective periods.
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