Second Quarter 2022 Comparable Restaurant Sales
Growth Accelerated above First Quarter 2022 to 8.4% vs. 2021
June and July 2022 Comparable Restaurant Sales
at or above 10.0% vs. 2021
Four Consecutive Quarters of Comparable
Restaurant Sales Growth above 2019
Fiesta Restaurant Group, Inc. ("Fiesta" or the "Company")
(NASDAQ: FRGI), parent company of the Pollo Tropical® restaurant
brand, today reported results for the 13-week second quarter, which
ended on July 3, 2022, and provided a business update related to
current operations.
Fiesta President and Chief Executive Officer Richard Stockinger
said, "We are very encouraged by our sequential sales growth
throughout the second quarter that continued to accelerate into the
third quarter with June and July comp sales at or above 10.0%(1).
Importantly, as a direct result of the actions we shared last
quarter to improve staffing and offer value-focused promotions and
menu innovation, recent year-over-year traffic trends(2) have
improved by approximately 340 basis points compared to first
quarter traffic results of -7.0%, with select markets generating
positive traffic growth. Like most in our industry, inflation
headwinds challenged our anticipated recovery in restaurant margins
during the second quarter and we will continue taking action to
address cost pressures. We expect our margins to improve
meaningfully in the third quarter and are targeting
Restaurant-level Adjusted EBITDA margins of 18.0% to 20.0% as our
sales growth and labor optimization initiatives increasingly gain
momentum.”
Stockinger continued, "Second quarter 2022 Restaurant-level
Adjusted EBITDA margin, a non-GAAP financial measure(3), was 15.2%,
including approximately $1.0 million(4) in non-recurring expenses
related primarily to short term supply disruptions caused by plant
damage to a key chicken supplier which adversely impacted
Restaurant-level Adjusted EBITDA margins by 100 basis points. In
addition to increased inflation pressures, we also proactively
invested in expanded labor hours to improve staffing levels, which
showed positive sales results that were only partially realized
during the second quarter. We expect margins to improve measurably
in the third quarter driven by our accelerating traffic trends from
improved staffing, effective value-focused promotions, menu
innovation and prudent pricing action of 4.0% to 6.0% that we plan
to take in September."
Stockinger added, "When compared to the second quarter of 2021,
our Restaurant-level Adjusted EBITDA margins declined during the
second quarter of 2022 primarily due to food cost, labor and other
operating expense increases including utilities and insurance.
Second quarter 2022 net loss from continuing operations was $6.5
million compared to income from continuing operations in the second
quarter of 2021 of $2.7 million."
Stockinger further commented, "We continued to make significant
progress during the second quarter on the brand’s previously
communicated key growth initiatives. We made great strides in
enhancing our digital platform with the ongoing rollout of our
digital drive thru technology with five units targeted for
completion by the end of August and 8-10 units by year end. All
dining rooms now allow access to the “Kiosk in Hand” QR code
feature to enable customers to order online in the restaurant. We
also made progress on improving kitchen and drive thru productivity
in high volume units, with our first kitchen retrofit unit
completed this week and additional retrofits being identified as
part of our ongoing remodel plans. Our refresh/remodel program
continues to exceed initial sales growth expectations. The
refreshes completed to date have generated a sales lift(5) of
approximately +3.8% to +5.6% when comparing the sales trend of each
unit before and after the refresh to a control group of other Pollo
units in each refresh unit's local market. Finally, our investments
in restaurant general manager leadership training and retention are
already showing very positive results through improved execution
and reduced turnover. As we realize the full impact of our growth
initiatives, we expect them to contribute meaningfully to sales
momentum."
Stockinger concluded, "We are encouraged by our continued strong
sales momentum thus far in 2022, and are intensely focused on
driving ongoing traffic growth across all channels while also
taking action to improve margins. In addition, G&A expense
reduction plans are being implemented which we expect will result
in a reduction in expense levels in the second half of this year,
and an ultimate reduction in G&A to the targeted range of 8.5%
to 9.0% of restaurant sales. Most importantly, we will continue to
drive growth by further implementation of our key initiatives to
enhance customer experience across all service channels."
_____________________________
(1)
Comparable restaurant sales results are
not adjusted for the impact of named storms.
(2)
Recent trends represent preliminary
traffic results for the trailing 21-day period ended August 10,
2022.
(3)
See non-GAAP discussion below.
(4)
See discussion below on non-recurring
costs from chicken supply issue and labor.
(5)
Sales lift on refreshed units based on
sales in the respective units for 4-weeks prior to the commencement
of the project compared to the sales after reopening the unit for
full operations, excluding units with non-recurring events
impacting the comparability of the unit's respective results.
Second Quarter 2022 Financial Summary
- Total revenues from continuing operations increased 8.0% to
$98.5 million in the second quarter of 2022 from $91.2 million in
the second quarter of 2021;
- Comparable restaurant sales at Pollo Tropical increased 8.4% in
the second quarter of 2022 compared to the second quarter of
2021;
- Net loss of $(6.2) million, or $(0.25) per diluted share, in
the second quarter of 2022, compared to net loss of $(0.1) million,
or $0.00 per diluted share, in the second quarter of 2021;
- Net loss from continuing operations of $(6.5) million, or
$(0.26) per diluted share, in the second quarter of 2022, compared
to net income from continuing operations of $2.7 million, or $0.11
per diluted share, in the second quarter of 2021;
- Adjusted net loss (a non-GAAP financial measure) of $(2.1)
million, or $(0.09) per diluted share, in the second quarter of
2022, compared to adjusted net income of $3.4 million, or $0.13 per
diluted share, in the second quarter of 2021 (see non-GAAP
reconciliation table below);
- Consolidated Adjusted EBITDA (a non-GAAP financial measure) of
$5.7 million in the second quarter of 2022 compared to $9.1 million
in the second quarter of 2021 (see non-GAAP reconciliation table
below); and
- Restaurant-level Adjusted EBITDA (a non-GAAP financial measure)
of $14.9 million, or 15.2% of Pollo Tropical restaurant sales, in
the second quarter of 2022 compared to $18.4 million, or 20.3% of
Pollo Tropical restaurant sales, in the second quarter of 2021 (see
non-GAAP reconciliation table below).
Second Quarter 2022 Comparable Restaurant Sales
Fiscal April
Fiscal May
Fiscal June
Second Quarter
2022
Fiscal July
2022 vs. 2021
7.1%
7.6%
10.8%
8.4%
10.0%
- Second quarter 2022 comparable restaurant sales vs 2021 were
negatively impacted by remodels and refreshes that temporarily
closed dine-in and counter take-out operations. We estimate that
these temporary dine-in closures negatively impacted comparable
restaurant sales by approximately 40 basis points in the second
quarter of 2022.
- Second quarter 2022 comparable restaurant sales were negatively
impacted by the timing of the Easter holiday. After adjusting for
the impact of the holiday timing, second quarter 2022 comparable
restaurant sales would have been approximately 30 basis points
higher.
- Second quarter 2022 comparable restaurant sales benefited from
the timing of the Fourth of July holiday. After adjusting for the
impact of the holiday timing, second quarter 2022 comparable
restaurant sales would have been approximately 15 basis points
lower.
Cash and Liquidity
Excluding $3.6 million in restricted cash, our cash balance
increased from $37.1 million at April 3, 2022 to $39.3 million at
July 3, 2022. Capital expenditures in the second quarter of 2022
were $4.6 million.
Second Quarter and July 2022 Pollo Tropical Results
Total Pollo Tropical restaurant sales increased 8.0% to $98.0
million in the second quarter of 2022 compared to $90.8 million in
the second quarter of 2021 primarily due to a comparable restaurant
sales increase of 8.4%. The increase in comparable restaurant sales
resulted from a net impact of product/channel mix and pricing of
15.1% and a decrease in comparable restaurant transactions of 6.7%.
The increase in product/channel mix and pricing was driven
primarily by menu price increases of 14.4% and mix-shift increases
to dine-in, and delivery higher check average channels. Mix
favorability from higher check new items and limited time offers
including Family Bundle Packages and Churasco and increased add-on
sales, including avocado slices also had a positive impact on mix.
Pollo Tropical dine-in and counter take-out comparable restaurant
sales increased 25.1% from the second quarter of 2021 to the second
quarter of 2022 due primarily to the negative impact of the
COVID-19 pandemic on dine-in traffic and closures of our dining
rooms during a portion of the second quarter of 2021. Digital
channel sales (delivery/online) growth continued to be strong in
the second quarter of 2022, with 14.9% comparable restaurant sales
growth vs. 2021.
Staffing improvement and value-focused promotions and menu
innovation are driving accelerating traffic improvement, with
recent comparable transactions trends in late July/early August of
approximately -3.0% to -4.0% vs. 2021, an improvement from first
quarter 2022 traffic levels of -7.0%. The recent traffic
improvement has been seen across multiple markets including our key
Miami-Dade market, which improved comparable restaurant sales 540
basis points and traffic 680 basis points in July 2022, as compared
to the first quarter 2022. Orlando and West Palm markets improved
comparable restaurant sales 410 basis points in July 2022 compared
to the first quarter of 2022.
Comparable Restaurant Sales
Mix by Channel - Pollo Tropical
Channel
Second Quarter 2022
% of Total
Second Quarter
2021
% of Total
($ in thousands)
Counter(1)
$
30,201
31
%
$
24,133
27
%
Drive-thru
52,018
54
%
52,431
59
%
Delivery
10,516
11
%
8,975
10
%
Online
3,340
3
%
3,080
3
%
Catering
1,127
1
%
1,052
1
%
Total
$
97,202
100
%
$
89,671
100
%
(1) Counter sales include dine-in and
counter take-out sales, which represented 49% of restaurant sales
in 2019.
Consolidated Adjusted EBITDA (a non-GAAP financial measure)
decreased to $5.7 million in the second quarter of 2022 from $9.1
million in the second quarter of 2021. The decrease was primarily
due to higher labor, repair and maintenance, utilities, insurance
costs, general and administrative costs and delivery fee expense,
and commodity costs and sales mix within costs of sales, partially
offset by the impact of higher restaurant sales. Higher labor costs
were driven primarily by hourly wage rate increases, and additional
overtime and training. We believe these labor cost increases for
overtime and staff related incentives are short-term in nature.
Higher commodity costs were partially due to non-recurring
additional chicken costs of approximately $0.9 million as a result
of utilizing a back-up supplier from May to early July 2022 due to
a short-term capacity disruption experienced by our primary
supplier.
Pricing action has been taken to offset labor, food and
operating cost increases. In order to minimize sales traffic risk,
we have taken a phased approach to menu price increases, and also
targeting lower pricing increases on menu items purchased by
value-conscious customers including our "Pollo Time" promotional
items. Price increases taken in 2022 include a 5.0% increase in
March 2022 and a 1.4% increase in June 2022. Additional pricing
action is currently planned for September 2022.
Restaurant-level Adjusted EBITDA (a non-GAAP financial measure)
as a percentage of restaurant sales decreased, with second quarter
Restaurant-level Adjusted EBITDA as a percentage of restaurant
sales of 15.2% in 2022 compared to 20.3% in 2021 (see non-GAAP
reconciliation table below).
General and Administrative expenses were $12.8 million for the
second quarter of 2022 and $11.1 million for the second quarter of
2021. General and administrative costs for the second quarter of
2022 included $1.7 million in non-recurring expenses comprised of
$1.2 million of professional fees, $0.3 million digital platform
costs, and $0.2 million of general and administrative efficiency
initiative costs. General and administrative expenses for the
second quarter of 2021 included $0.3 million related to
non-recurring digital platform costs. The remainder of the increase
was driven by higher employee and other support costs. We have
finalized plans to reduce G&A expenses to a targeted range of
8.5% to 9.0% of current restaurant sales on a run rate basis during
2022, with expected implementation in the second half of the
year.
Comparable Restaurant Average
Weekly Sales - Pollo Tropical
Period
April
May
June
2022
$56,189
$54,509
$54,442
2021
$52,448
$50,681
$49,117
Refresh and Remodel Status and Results
We are taking a disciplined approach to testing upgraded/updated
restaurant design elements and operating platform improvements as
we refurbish existing units. We developed the new unit design and
operational improvements based on consumer research and engineering
studies from a leading restaurant engineering firm, and we have
received very positive customer feedback on the first remodeled
unit. We are targeting completion of 20 to 30 refresh/remodels in
2022. Through the second quarter of 2022, 17 refreshes and 5
remodels have been completed.
For refurbishments of existing units, we are implementing two
levels of investment and scope:
- Refreshes include updated exterior colors and attractive design
elements and interior upgrades including more attractive and
updated colors, new dining room furniture, bathrooms, limited patio
upgrades and other customer facing upgrades. Targeted average
investment for refreshes is expected to average approximately
$275,000, and the majority of our refurbishments will be refreshes.
Average investment per refresh completed to date has been in line
with targeted levels.
- Remodels include updated exterior colors and attractive design
elements and interior upgrades including updated colors, more
comprehensive interior updates including new dining room furniture,
kitchen retrofits, more extensive consumer facing dining room
updates, and more extensive patio upgrades. Targeted average
investment for remodels is expected to average approximately
$560,000, and the majority of remodels will be targeted at units
with above average annual sales. Average investment per remodel to
date is in line with the targeted investment level.
Our refresh/remodel program continues to exceed initial sales
growth expectations. The refreshes completed to date have generated
a sales lift of +3.8% to +5.6% when comparing the sales trend of
each unit before and after the refresh to a control group of other
Pollo units in each refresh unit’s local market.
Restaurant Portfolio
As of July 3, 2022, there were 138 Company-owned Pollo Tropical
restaurants, and 29 franchised Pollo Tropical restaurants in the
U.S., the U.S. Virgin Islands, Puerto Rico, Panama, Guyana, Ecuador
and the Bahamas.
Investor Conference Call Today
We will host a conference call at 4:30 p.m. ET today. The
conference call can be accessed live over the phone by dialing
631-891-4304. A replay will be available after the call until
Thursday, August 18, 2022 and can be accessed by dialing
412-317-6671. The passcode is 10019749. The conference call will
also be webcast live and archived on the corporate website at
www.frgi.com, under the "Investor Relations" section. A replay of
the webcast will be available through the corporate website shortly
after the call has concluded.
About Fiesta Restaurant Group, Inc.
Fiesta Restaurant Group, Inc., owns, operates and franchises the
Pollo Tropical® restaurant brand and prior to August 16, 2021,
owned, operated, and franchised the Taco Cabana® restaurant brand.
The brands specialize in the operation of fast casual/quick service
restaurants that offer distinct and unique flavors with broad
appeal at a compelling value. The brands feature fresh-made
cooking, drive-thru service and catering. For more information
about Fiesta Restaurant Group, Inc., visit the corporate website at
www.frgi.com.
Forward Looking Statements
Certain statements contained in this news release and in our
public disclosures, whether written, oral or otherwise made,
relating to future events or future performance, including any
discussion, express or implied regarding our anticipated growth,
plans, objectives and the impact of our initiatives, including our
efforts to reduce general and administrative expenses, our
investments in strategic and sales building initiatives, including
those relating to operations improvements, unit remodels and
refreshes, digital initiatives, planned price increases, and drive
thru improvements on future sales, margins, earnings and liquidity,
contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These statements
are often identified by the words "may," "might," "believes,"
"thinks," "anticipates," "plans," "positioned," "target,"
"continue," "expects," "look to," "intends" and other similar
expressions, whether in the negative or the affirmative, that are
not statements of historical fact. These forward-looking statements
are not guarantees of future performance and involve certain risks,
uncertainties, and assumptions that are difficult to predict, and
you should not place undue reliance on our forward-looking
statements. Our actual results and timing of certain events could
differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not
limited to, those discussed from time to time in our reports filed
with the Securities and Exchange Commission, including our Annual
Report on Form 10-K and our quarterly reports on Form 10-Q. All
forward-looking statements and the internal projections and beliefs
upon which we base our expectations included in this release are
made only as of the date of this release and may change. While we
may elect to update forward-looking statements at some point in the
future, we expressly disclaim any obligation to update any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
FIESTA RESTAURANT GROUP,
INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JULY 3, 2022 AND JULY 4, 2021
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended (a)
Six Months Ended (a)
July 3, 2022
July 4, 2021
July 3, 2022
July 4, 2021
Revenues:
Restaurant sales
$
98,023
$
90,764
$
193,223
$
178,604
Franchise royalty revenues and fees
464
391
873
766
Total revenues
98,487
91,155
194,096
179,370
Costs and expenses:
Cost of sales
32,580
27,558
63,327
54,859
Restaurant wages and related expenses
(b)
24,583
21,901
48,157
42,240
Restaurant rent expense
5,976
5,824
12,003
11,701
Other restaurant operating expenses
16,755
14,215
33,405
27,520
Advertising expense
3,245
2,898
6,109
5,273
General and administrative expenses
(b)(c)
12,791
11,050
25,133
21,716
Depreciation and amortization
5,232
4,875
10,346
9,963
Impairment and other lease charges
(recoveries) (d)
2,110
(202
)
1,408
(254
)
Closed restaurant rent, net of sublease
income (e)
401
966
781
1,716
Other expense (income), net (f)
83
170
134
293
Total operating expenses
103,756
89,255
200,803
175,027
Income (loss) from operations
(5,269
)
1,900
(6,707
)
4,343
Interest expense
85
61
170
122
Income (loss) from continuing operations
before income taxes
(5,354
)
1,839
(6,877
)
4,221
Provision for (benefit from) income taxes
(g)
1,134
(841
)
912
2,236
Income (loss) from continuing
operations
(6,488
)
2,680
(7,789
)
1,985
Income (loss) from discontinued
operations, net of tax
267
(2,763
)
212
(4,157
)
Net loss
$
(6,221
)
$
(83
)
$
(7,577
)
$
(2,172
)
Earnings (loss) per common share:
Continuing operations – basic
$
(0.26
)
$
0.11
$
(0.31
)
$
0.07
Discontinued operations – basic
0.01
(0.11
)
0.01
(0.16
)
Basic
$
(0.25
)
$
—
$
(0.30
)
$
(0.09
)
Continuing operations – diluted
$
(0.26
)
$
0.11
$
(0.31
)
$
0.07
Discontinued operations – diluted
0.01
(0.11
)
0.01
(0.16
)
Diluted
$
(0.25
)
$
—
$
(0.30
)
$
(0.09
)
Weighted average common shares
outstanding:
Basic
24,946,674
25,496,038
24,889,650
25,410,123
Diluted
24,946,674
25,496,038
24,889,650
25,410,783
(a)
The Company uses a 52- or 53-week fiscal
year that ends on the Sunday closest to December 31. The three- and
six-month periods ended July 3, 2022 and July 4, 2021 each included
13 and 26 weeks, respectively.
(b)
Restaurant wages and related expenses
include stock-based compensation of $6 and $15 for the three months
ended July 3, 2022 and July 4, 2021, respectively, and $13 and $31
for the six months ended July 3, 2022 and July 4, 2021,
respectively. General and administrative expenses include
stock-based compensation expense of $1,388 and $1,046 for the three
months ended July 3, 2022 and July 4, 2021, respectively, and
$2,011 and $2,040 for the six months ended July 3, 2022 and July 4,
2021, respectively.
(c)
See notes (f), (g), (h) and (i) to the
reconciliation of net income (loss) to adjusted net income (loss)
in the tables titled "Supplemental Non-GAAP Information."
(d)
See note (c) to the reconciliation of net
income (loss) to adjusted net income (loss) in the tables titled
"Supplemental Non-GAAP Information."
(e)
See note (d) to the reconciliation of net
income (loss) to adjusted net income (loss) in the tables titled
"Supplemental Non-GAAP Information."
(f)
See note (e) to the reconciliation of net
income (loss) to adjusted net income (loss) in the tables titled
"Supplemental Non-GAAP Information."
(g)
See notes (a) and (b) to the
reconciliation of net income (loss) to adjusted net income (loss)
in the tables titled "Supplemental Non-GAAP Information."
FIESTA RESTAURANT GROUP,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands) (Unaudited)
July 3, 2022
January 2, 2022
Assets
Cash
$
39,262
$
36,797
Other current assets
22,633
22,245
Property and equipment, net
85,506
89,884
Operating lease right-of-use assets
150,423
154,127
Goodwill
56,307
56,307
Deferred income taxes
175
—
Other assets
6,385
7,753
Total assets
$
360,691
$
367,113
Liabilities and Stockholders'
Equity
Current portion of long-term debt
$
69
$
63
Other current liabilities
44,607
40,479
Long-term debt, net of current portion
397
438
Operating lease liabilities
158,876
163,270
Deferred tax liabilities
—
229
Other non-current liabilities
7,669
7,763
Total liabilities
211,618
212,242
Stockholders' equity
149,073
154,871
Total liabilities and stockholders'
equity
$
360,691
$
367,113
FIESTA RESTAURANT GROUP,
INC. Supplemental Information The following table
sets forth certain unaudited supplemental financial and other data
for the periods indicated (In thousands, except
percentages):
(Unaudited)
(Unaudited)
Three Months Ended
Six Months Ended
July 3, 2022
July 4, 2021
July 3, 2022
July 4, 2021
Revenues:
Pollo Tropical
$
98,487
$
91,155
$
194,096
$
179,370
Change in comparable restaurant sales
(a):
Pollo Tropical
8.4
%
43.5
%
8.2
%
21.1
%
Average sales per Company-owned
restaurant:
Pollo Tropical
Comparable restaurants (b)
$
715
$
662
$
1,408
$
1,304
Non-comparable restaurants (c)
439
418
932
760
Total Company-owned (d)
710
658
1,400
1,294
Income (loss) from continuing operations
before income taxes
$
(5,354
)
$
1,839
$
(6,877
)
$
4,221
Consolidated Adjusted EBITDA (e)
$
5,656
$
9,123
$
10,948
$
18,801
Restaurant-level Adjusted EBITDA (e):
$
14,890
$
18,383
$
30,235
$
37,042
(a)
Restaurants are included in comparable
restaurant sales after they have been open for 18 months or longer.
Restaurants are excluded from comparable restaurant sales for any
fiscal month in which the restaurant was closed for more than five
days. Comparable restaurant sales are compared to the same period
in the prior year.
(b)
Comparable restaurants are restaurants
that have been open for 18 months or longer. Average sales for
comparable Company-owned restaurants are derived by dividing
comparable restaurant sales for such period by the average number
of comparable restaurants for such period.
(c)
Non-comparable restaurants are restaurants
that have been open for less than 18 months, or that were
temporarily closed during the period. Average sales for new
Company-owned restaurants are derived by dividing new restaurant
sales for such period by the average number of new restaurants for
such period.
(d)
Average sales for total Company-owned
restaurants are derived by dividing restaurant sales for such
period by the average number of open restaurants for such
period.
(e)
Consolidated Adjusted EBITDA and
Restaurant-level Adjusted EBITDA are non-GAAP financial measures.
Please see the reconciliation from net income (loss) to
Consolidated Adjusted EBITDA and Restaurant-level Adjusted EBITDA
in the table titled "Supplemental Non-GAAP Information."
FIESTA RESTAURANT GROUP,
INC. Supplemental Information The following table
sets forth certain unaudited supplemental data for the periods
indicated:
Three Months Ended
Six Months Ended
July 3, 2022
July 4, 2021
July 3, 2022
July 4, 2021
Company-owned restaurant openings:
Pollo Tropical
—
—
—
—
Company-owned restaurant closings:
Pollo Tropical
—
—
—
—
Number of Company-owned restaurants:
Pollo Tropical
138
138
138
138
Taco Cabana
—
142
—
142
Total Company-owned restaurants
138
280
138
280
Number of franchised restaurants:
Pollo Tropical
29
29
29
29
Taco Cabana
—
6
—
6
Total franchised restaurants
29
35
29
35
Total number of restaurants:
Pollo Tropical
167
167
167
167
Taco Cabana
—
148
—
148
Total restaurants
167
315
167
315
FIESTA RESTAURANT GROUP,
INC. Supplemental Information The following table
sets forth certain unaudited supplemental financial and other data
for the periods indicated (In thousands, except
percentages):
Three Months Ended
July 3, 2022
July 4, 2021
(a)
(a)
Restaurant sales
$
98,023
$
90,764
Cost of sales
32,580
33.2
%
27,558
30.4
%
Restaurant wages and related expenses
24,583
25.1
%
21,901
24.1
%
Restaurant rent expense
5,976
6.1
%
5,824
6.4
%
Other restaurant operating expenses
16,755
17.1
%
14,215
15.7
%
Advertising expense
3,245
3.3
%
2,898
3.2
%
Depreciation and amortization
5,232
5.3
%
4,875
5.4
%
Impairment and other lease charges
(recoveries)
2,110
2.2
%
(202
)
(0.2
) %
Closed restaurant rent expense, net of
sublease income
401
0.4
%
966
1.1
%
Six Months Ended
July 3, 2022
July 4, 2021
(a)
(a)
Restaurant sales
$
193,223
$
178,604
Cost of sales
63,327
32.8
%
54,859
30.7
%
Restaurant wages and related expenses
48,157
24.9
%
42,240
23.7
%
Restaurant rent expense
12,003
6.2
%
11,701
6.6
%
Other restaurant operating expenses
33,405
17.3
%
27,520
15.4
%
Advertising expense
6,109
3.2
%
5,273
3.0
%
Depreciation and amortization
10,346
5.4
%
9,963
5.6
%
Impairment and other lease charges
1,408
0.7
%
(254
)
(0.1
) %
Closed restaurant rent expense, net of
sublease income
781
0.4
%
1,716
1.0
%
(a) Percent of restaurant sales.
FIESTA RESTAURANT GROUP, INC.
Supplemental Non-GAAP Information The following table
sets forth certain unaudited supplemental financial data for the
periods indicated (In thousands):
Consolidated Adjusted EBITDA and margin and Restaurant-level
Adjusted EBITDA and margin are non-GAAP financial measures.
Consolidated Adjusted EBITDA is defined as earnings (loss) before
interest expense, income taxes, depreciation and amortization,
impairment and other lease charges (recoveries), goodwill
impairment, closed restaurant rent expense, net of sublease income,
stock-based compensation expense, other expense (income), net, and
certain significant items that are related to strategic changes
and/or are not related to the ongoing operation of our restaurants
as set forth in the reconciliation table below. Restaurant-level
Adjusted EBITDA is defined as Consolidated Adjusted EBITDA
excluding franchise royalty revenues and fees, pre-opening costs
and general and administrative expenses (including corporate-level
general and administrative expenses).
Consolidated Adjusted EBITDA is the primary measure of profit or
loss used by our chief operating decision maker for purposes of
assessing performance. In addition, management believes that
Consolidated Adjusted EBITDA and Restaurant-level Adjusted EBITDA,
when viewed with our results of operations calculated in accordance
with GAAP and our reconciliation of net income (loss) to
Consolidated Adjusted EBITDA and Restaurant-level Adjusted EBITDA
(i) provide useful information about our operating performance and
period-over-period changes, (ii) provide additional information
that is useful for evaluating the operating performance of our
business, and (iii) permit investors to gain an understanding of
the factors and trends affecting our ongoing earnings, from which
capital investments are made and debt is serviced. However, such
measures are not measures of financial performance or liquidity
under GAAP and, accordingly, should not be considered as
alternatives to net income or cash flow from operating activities
as indicators of operating performance or liquidity. Also, these
measures may not be comparable to similarly titled captions of
other companies.
Three Months Ended
Six Months Ended
July 3, 2022
July 4, 2021
July 3, 2022
July 4, 2021
Net loss
$
(6,221
)
$
(83
)
$
(7,577
)
$
(2,172
)
Loss (income) from discontinued
operations, net of tax
(267
)
2,763
(212
)
4,157
Provision for (benefit from) income
taxes
1,134
(841
)
912
2,236
Income (loss) from continuing operations
before taxes
(5,354
)
1,839
(6,877
)
4,221
Add:
Non-general and administrative
adjustments:
Depreciation and amortization
5,232
4,875
10,346
9,963
Impairment and other lease charges
(recoveries)
2,110
(202
)
1,408
(254
)
Interest expense
85
61
170
122
Closed restaurant rent expense, net of
sublease income
401
966
781
1,716
Other expense (income), net
83
170
134
293
Stock-based compensation expense
6
15
13
31
Total non-general and administrative
adjustments
7,917
5,885
12,852
11,871
General and administrative
adjustments:
Stock-based compensation expense
1,388
1,046
2,011
2,040
Non-recurring professional fees
1,197
—
1,902
—
G&A efficiency initiatives
193
—
454
—
Digital costs
315
335
606
651
Total general and administrative
adjustments
3,093
1,399
4,973
2,709
Consolidated Adjusted EBITDA
$
5,656
$
9,123
$
10,948
$
18,801
Consolidated Adjusted EBITDA as a
percentage of total revenues
5.7
%
10.0
%
5.6
%
10.5
%
Restaurant-level adjustments:
Add: Other general and administrative
expense(a)
$
9,698
$
9,651
20,160
19,007
Less: Franchise royalty revenue and
fees
464
391
873
766
Restaurant-level Adjusted EBITDA
$
14,890
$
18,383
$
30,235
$
37,042
Restaurant-level Adjusted EBITDA as a
percentage of restaurant sales
15.2
%
20.3
%
15.6
%
20.7
%
(a) Excludes general and administrative
adjustments above.
FIESTA RESTAURANT GROUP, INC.
Supplemental Non-GAAP Information The following table
sets forth certain unaudited supplemental financial data for the
periods indicated (In thousands of dollars, except per share
amounts):
Adjusted net income and related adjusted diluted earnings per
share are non-GAAP financial measures. Adjusted net income is
defined as net income (loss) before discontinued operations,
impairment and other lease charges (recoveries), goodwill
impairment, closed restaurant rent expense, net of sublease income,
other expense (income), net, and other significant items that are
related to strategic changes and/or are not related to the ongoing
operation of our restaurants. Management believes that adjusted net
income and related adjusted earnings per diluted share, when viewed
with our results of operations calculated in accordance with GAAP
(i) provide useful information about our operating performance and
period-over-period growth, (ii) provide additional information that
is useful for evaluating the operating performance of our business,
and (iii) permit investors to gain an understanding of the factors
and trends affecting our ongoing earnings, from which capital
investments are made and debt is serviced. However, such measures
are not measures of financial performance or liquidity under GAAP
and, accordingly should not be considered as alternatives to net
income or net income per share as indicators of operating
performance or liquidity. Also, these measures may not be
comparable to similarly titled captions of other companies.
(Unaudited)
Three Months Ended
July 3, 2022
July 4, 2021
Loss Before Income
Taxes
Provision For Income Taxes
(a)
Net Loss
Diluted EPS
Income Before Income
Taxes
Benefit From Income Taxes
(a)
Net Income (Loss)
Diluted EPS
Reported - GAAP Net income (loss)
$
(6,221
)
$
(0.25
)
$
(83
)
$
—
Loss (income) from discontinued
operations, net of tax
(267
)
(0.01
)
2,763
0.11
Income (loss) from continuing
operations
$
(5,354
)
$
1,134
$
(6,488
)
$
(0.26
)
$
1,839
$
(841
)
$
2,680
$
0.11
Adjustments:
Non-general and administrative expense
adjustments:
Deferred tax asset valuation allowance
(b)
—
(1,132
)
1,132
0.05
—
255
(255
)
(0.01
)
Impairment and other lease charges
(recoveries) (c)
2,110
526
1,584
0.06
(202
)
(50
)
(152
)
(0.01
)
Closed restaurant rent expense, net of
sublease income (d)
401
100
301
0.01
966
241
725
0.03
Other expense (income), net (e)
83
21
62
—
170
42
128
0.01
Total non-general and administrative
expense
2,594
(485
)
3,079
0.12
934
488
446
0.02
General and administrative expense
adjustments:
Non-recurring professional fees (f)
1,197
298
899
0.04
—
—
—
—
G&A efficiency initiatives (g)
193
48
145
—
—
—
—
—
Restructuring costs and retention bonuses
(h)
—
—
—
—
18
4
14
—
Digital costs (i)
315
79
236
0.01
335
84
251
0.01
Total general and administrative
expense
1,705
425
1,280
0.05
353
88
265
0.01
Adjusted - Non-GAAP
$
(1,055
)
$
1,074
$
(2,129
)
$
(0.09
)
$
3,126
$
(265
)
$
3,391
$
0.13
(Unaudited)
Six Months Ended
July 3, 2022
July 4, 2021
Loss Before Income
Taxes
Provision For Income Taxes
(a)
Net Loss
Diluted EPS
Income Before Income
Taxes
Provision For Income Taxes
(a)
Net Income (Loss)
Diluted EPS
Reported - GAAP Net income (loss)
$
(7,577
)
$
(0.30
)
$
(2,172
)
$
(0.09
)
Loss (income) from discontinued
operations, net of tax
(212
)
(0.01
)
4,157
0.16
Income (loss) from continuing
operations
$
(6,877
)
$
912
$
(7,789
)
$
(0.31
)
$
4,221
$
2,236
$
1,985
$
0.07
Adjustments:
Non-general and administrative expense
adjustments:
Income tax due to tax law change (a)
—
—
—
—
—
(563
)
563
0.02
Deferred tax asset valuation allowance
(b)
—
(1,252
)
1,252
0.05
—
(376
)
376
0.01
Impairment and other lease charges (c)
1,408
351
1,057
0.04
(254
)
(63
)
(191
)
(0.01
)
Closed restaurant rent expense, net of
sublease income (d)
781
195
586
0.02
1,716
428
1,288
0.05
Other expense (income), net (e)
134
33
101
0.01
293
73
220
0.01
Total non-general and administrative
expense
2,323
(673
)
2,996
0.12
1,755
(501
)
2,256
0.09
General and administrative expense
adjustments:
Non-recurring professional fees (f)
1,902
474
1,428
0.06
—
—
—
—
G&A efficiency initiatives (g)
454
113
341
0.01
—
—
—
—
Restructuring costs and retention bonuses
(h)
—
—
—
—
18
4
14
—
Digital costs (i)
606
151
455
0.02
651
162
489
0.02
Total general and administrative
expense
2,962
738
2,224
0.09
669
166
503
0.02
Adjusted - Non-GAAP
$
(1,592
)
$
977
$
(2,569
)
$
(0.10
)
$
6,645
$
1,901
$
4,744
$
0.19
(a)
The provision for (benefit from) income
taxes related to the adjustments was calculated using the Company's
combined federal statutory and estimated state rate of 24.9% and
25.0% for the periods ending July 3, 2022 and July 4, 2021,
respectively. In the three months ended April 4, 2021, we recorded
an out-of-period adjustment totaling $1.5 million related to tax
depreciation on certain assets placed into service several years
prior to the formation of Fiesta in 2011, of which $0.6 million is
attributable to a change in tax rates as a result of the Tax Cuts
and Jobs Act of 2017.
(b)
We recorded adjustments totaling $1.1
million and $1.3 million for the three and six months ended July 3,
2022, respectively, to our valuation allowance against deferred
income tax assets primarily related to changes in our deferred
income tax assets and the expected timing of the reversal of these
temporary differences. We recorded adjustments totaling $(0.3)
million and $0.4 million to our valuation allowance for the three
and six months ended July 4, 2021, respectively, primarily related
to changes in our deferred income tax assets and the expected
timing of the reversal of the temporary differences, which included
a $0.9 million increase to our valuation allowance as a result of
changes in our net deferred tax liabilities related to the
out-of-period adjustment in the first quarter of 2021.
(c)
Impairment and other lease charges
(recoveries) for the three and six months ended July 3, 2022
consist of impairment charges of $2.2 million and, for the six
months ended July 3, 2022, gains from lease terminations of $(0.7)
million. The impairment charges for the three and six months ended
July 3, 2022 relate to the impairment of assets from four Pollo
Tropical restaurants. Impairment and other lease charges
(recoveries) for the three and six months ended July 4, 2021
primarily relate to gains from lease terminations.
(d)
Closed restaurant rent expense, net of
sublease income, for the three and six months ended July 3, 2022
primarily consists of closed restaurant lease costs of $2.1 million
and $4.3 million, respectively, partially offset by sublease income
of $(1.7) million and $(3.6) million, respectively. Closed
restaurant rent expense, net of sublease income, for the three and
six months ended July 4, 2021 primarily consists of closed
restaurant lease costs of $2.3 million and $4.6 million,
respectively, partially offset by sublease income of $(1.3) million
and $(2.9) million, respectively.
(e)
Other expense (income), net, for the three
and six months ended July 3, 2022 primarily consists of closed
restaurant related costs. Other expense (income), net, for the
three and six months ended July 4, 2021 primarily consists of costs
for the removal, transfer, and storage of equipment from closed
restaurants and other closed restaurant related costs.
(f)
Non-recurring professional fees consist of
costs related to growth initiatives.
(g)
G&A efficiency initiatives consist of
non-recurring retention bonus costs.
(h)
Restructuring costs and retention bonuses
for the three and six months ended July 4, 2021 include severance
costs related to the disposition of Taco Cabana.
(i)
Digital costs for the three and six months
ended July 3, 2022 and July 4, 2021, include costs related to
enhancing the digital experience for our customers.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220811005669/en/
Investor Relations: Raphael Gross 203-682-8253
investors@FRGI.com
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