FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported fourth quarter and full
year 2022 financial results for the fiscal year ended
December 25, 2022.
Andy Wiederhorn, President and CEO of FAT
Brands, commented, “The fourth quarter marked yet another strong
performance for FAT Brands, as evidenced by our robust unit
development and profitable revenue growth. After a very active
acquisition strategy in 2021, I am particularly pleased with the
momentum of our organic growth strategy during 2022.”
“With over 140 store openings during 2022, we
achieved a new milestone for FAT Brands, including 44 that opened
in the fourth quarter. We plan to continue this robust unit growth
with between 150 and 175 units slated to open in 2023. We are
seeing strong new franchisee activity as well as continued demand
from existing franchise partners to develop other brands within our
portfolio, which is very encouraging as we look beyond our current
unit development pipeline of over 1,000 locations representing 60%
EBITDA growth over the next several years.”
“We are extremely impressed with how our 2021
acquisitions have seamlessly fit into our portfolio and the demand
we are experiencing for them from our franchisee base. In addition
to our organic growth momentum, we will lean into the expansion of
our high-growth brands, particularly our sports lodge category, and
continue to expand our factory business.”
“We also continue to work on reducing our cost
of capital and are pursuing strategies to significantly reduce our
leverage ratio over the next 24 to 36 months.”
Fiscal Fourth
Quarter 2022
Highlights
- Total revenue
improved 39.9% to $103.8 million compared to $74.2 million in the
fourth quarter of 2021
- System-wide sales
growth of 22.1% in the fourth quarter of 2022 compared to the prior
year quarter
- Year-to-date system-wide same-store
sales growth of 2.7% in the fourth quarter of 2022 compared to the
prior year
- 44 new store openings during the
fourth quarter of 2022 and over 140 openings during the year
- Net loss of $70.8
million, or $4.29 per diluted share, compared to $19.6 million, or
$1.38 per diluted share, in the fourth quarter of 2021
- Adjusted EBITDA(1) of $19.6
million compared to $10.4 million in the fourth quarter of
2021
- Adjusted net loss(1) of $43.0
million, or $2.60 per diluted share, compared to $16.5 million, or
$1.16 per diluted share, in the fourth quarter of 2021
Fiscal Year 2022 Highlights
- Total revenue
increased 242.5% to $407.2 million compared to $118.9 million in
2021
- System-wide sales
growth of 108.0% compared to 2021
- Year-to-date system-wide same-store
sales growth of 6.0% in 2022 compared to 2021
- Over 140 new store openings during
2022
- Net loss of $126.2
million, or $7.66 per diluted share, compared to $31.6 million, or
$2.15 per diluted share, in 2021
- Adjusted EBITDA(1) of $88.8
million compared to $21.1 million 2021
- Adjusted net loss(1) of $80.9
million, or $4.91 per diluted share, compared to $20.6 million, or
$1.41 per diluted share, in 2021
(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
2022 Financial Results
Total revenue increased $29.6 million, or 39.9%,
in the fourth quarter of 2022, to $103.8 million compared to $74.2
million in the same period of 2021. The increase reflects revenue
from the acquisition of Twin Peaks in October 2021, the
acquisitions of Fazoli's and Native Grill & Wings in December
2021 (collectively, the "2021 Acquisitions") and the continuing
recovery from the negative effects of the COVID-19 pandemic on
royalties from restaurant sales.
Costs and expenses increased $59.5 million, or
77.3%, in the fourth quarter of 2022 to $136.4 million compared to
$77.0 million in the same period in the prior year, primarily due
to the 2021 Acquisitions.
General and administrative expense increased
$17.6 million, or 81.4%, in the fourth quarter of 2022 compared to
the same period in the prior year, primarily due to the 2021
Acquisitions, increased compensation costs, professional fees
related to pending litigation and government investigations, and
travel, reflecting the significant expansion of the
organization.
Cost of restaurant and factory revenues totaled
$61.7 million in the fourth quarter of 2022 and was related to the
operations of the company-owned restaurant locations and our dough
factory associated with the 2021 Acquisitions.
Depreciation and amortization increased $1.6
million, or 30.6% in the fourth quarter of 2022 compared to the
same period in the prior year, primarily due to depreciation of
company-owned restaurant property and equipment and amortizing
intangible assets related to the 2021 Acquisitions.
Refranchising losses in the fourth quarter of
2022 were $3.1 million and were comprised of restaurant costs and
expenses, net of food sales. Refranchising losses in the fourth
quarter of 2021 were $1.0 million and were comprised of $2.1
million restaurant operating costs, net of food sales, partially
offset by $1.1 million in net gains related to refranchised
restaurants.
Advertising expenses increased $1.6 million in
the fourth quarter of 2022 compared to the prior year period. These
expenses vary in relation to advertising revenues and reflect
advertising expenses related to the 2021 Acquisitions and the
increase in customer activity as the recovery from COVID
continues.
Total other expense, net for the fourth quarters
of 2022 and 2021 was $24.2 million and $17.1 million, respectively,
primarily comprised of net interest expense of $25.6 million and
$16.4 million, respectively.
Adjusted net loss was $43.0 million, or $2.60
per diluted share, in the fourth quarter of 2022 compared to $16.5
million, or $1.16 per diluted share, in the fourth quarter of
2021.
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. For
2022, the comparable store base does not include concepts acquired
during the fourth quarter of 2021.
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 2022 financial results
today at 5:00 PM ET. Hosting the conference call and webcast will
be Andy Wiederhorn, President and Chief Executive Officer, and Ken
Kuick, Chief Financial Officer.
The conference call can be accessed live over
the phone by dialing 1-877-704-4453 from the U.S. or 1-201-389-0920
internationally. A replay will be available after the call until
Wednesday, March 1, 2023, and can be accessed by dialing
1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The
passcode is 13735781. 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
17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab
Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, 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, our pipeline of new store
locations, and the recovery of our business from the COVID-19
pandemic. 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 income (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
gain or 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
|
|
Thirteen Weeks Ended |
|
Fifty-Two Weeks Ended |
(In thousands) |
|
December 25, 2022 |
|
December 26, 2021 |
|
December 25, 2022 |
|
December 26, 2021 |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Royalties |
|
$ |
22,525 |
|
|
$ |
17,858 |
|
|
$ |
87,921 |
|
|
$ |
42,658 |
|
Restaurant sales |
|
|
61,528 |
|
|
|
37,451 |
|
|
|
241,001 |
|
|
|
41,563 |
|
Advertising fees |
|
|
9,589 |
|
|
|
8,685 |
|
|
|
37,997 |
|
|
|
16,728 |
|
Factory revenues |
|
|
8,916 |
|
|
|
7,990 |
|
|
|
33,504 |
|
|
|
13,470 |
|
Franchise fees |
|
|
943 |
|
|
|
1,914 |
|
|
|
3,706 |
|
|
|
4,023 |
|
Management fees and other income |
|
|
313 |
|
|
|
291 |
|
|
|
3,095 |
|
|
|
439 |
|
Total revenue |
|
|
103,814 |
|
|
|
74,189 |
|
|
|
407,224 |
|
|
|
118,881 |
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
General and administrative expense |
|
|
39,125 |
|
|
|
21,563 |
|
|
|
113,313 |
|
|
|
41,775 |
|
Cost of restaurant and factory revenues |
|
|
61,726 |
|
|
|
36,865 |
|
|
|
221,627 |
|
|
|
44,242 |
|
Depreciation and amortization |
|
|
6,939 |
|
|
|
5,313 |
|
|
|
27,015 |
|
|
|
8,474 |
|
Impairment of goodwill and other intangible assets |
|
|
14,000 |
|
|
|
1,037 |
|
|
|
14,000 |
|
|
|
1,037 |
|
Refranchising loss |
|
|
3,055 |
|
|
|
992 |
|
|
|
4,178 |
|
|
|
314 |
|
Acquisition costs |
|
|
— |
|
|
|
1,257 |
|
|
|
383 |
|
|
|
4,242 |
|
Advertising fees |
|
|
11,574 |
|
|
|
9,930 |
|
|
|
44,612 |
|
|
|
17,973 |
|
Total costs and expenses |
|
|
136,419 |
|
|
|
76,957 |
|
|
|
425,128 |
|
|
|
118,057 |
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
(32,605 |
) |
|
|
(2,768 |
) |
|
|
(17,904 |
) |
|
|
824 |
|
|
|
|
|
|
|
|
|
|
Other (expense) income,
net |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(20,947 |
) |
|
|
(14,925 |
) |
|
|
(78,477 |
) |
|
|
(26,864 |
) |
Interest expense related to preferred shares |
|
|
(4,691 |
) |
|
|
(1,468 |
) |
|
|
(16,372 |
) |
|
|
(2,193 |
) |
Net loss on extinguishment of debt |
|
|
— |
|
|
|
(1,219 |
) |
|
|
— |
|
|
|
(7,637 |
) |
Other income, net |
|
|
1,456 |
|
|
|
543 |
|
|
|
5,375 |
|
|
|
750 |
|
Total other expense, net |
|
|
(24,182 |
) |
|
|
(17,069 |
) |
|
|
(89,474 |
) |
|
|
(35,944 |
) |
|
|
|
|
|
|
|
|
|
Loss before income tax |
|
|
(56,787 |
) |
|
|
(19,837 |
) |
|
|
(107,378 |
) |
|
|
(35,120 |
) |
|
|
|
|
|
|
|
|
|
Income tax provision
(benefit) |
|
|
14,021 |
|
|
|
(234 |
) |
|
|
18,810 |
|
|
|
(3,537 |
) |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(70,808 |
) |
|
$ |
(19,603 |
) |
|
$ |
(126,188 |
) |
|
$ |
(31,583 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per
common share |
|
$ |
(4.29 |
) |
|
$ |
(1.38 |
) |
|
$ |
(7.66 |
) |
|
$ |
(2.15 |
) |
Basic and diluted weighted
average shares outstanding |
|
|
16,530,934 |
|
|
|
14,203,887 |
|
|
|
16,476,090 |
|
|
|
14,656,880 |
|
Cash dividends declared per
common share |
|
$ |
0.14 |
|
|
$ |
0.13 |
|
|
$ |
0.54 |
|
|
$ |
0.52 |
|
FAT Brands Inc. Consolidated EBITDA and Adjusted
EBITDA Reconciliation
|
Thirteen Weeks Ended |
|
Fifty-Two Weeks Ended |
(In thousands) |
December 25, 2022 |
|
December 26, 2021 |
|
December 25, 2022 |
|
December 26, 2021 |
|
|
|
|
|
|
|
|
Net loss |
$ |
(70,808 |
) |
|
$ |
(19,603 |
) |
|
$ |
(126,188 |
) |
|
$ |
(31,583 |
) |
Interest expense, net |
|
25,638 |
|
|
|
16,393 |
|
|
|
94,849 |
|
|
|
29,057 |
|
Income tax provision (benefit) |
|
14,021 |
|
|
|
(234 |
) |
|
|
18,810 |
|
|
|
(3,537 |
) |
Depreciation and amortization |
|
6,939 |
|
|
|
5,313 |
|
|
|
27,015 |
|
|
|
8,474 |
|
EBITDA |
|
(24,210 |
) |
|
|
1,869 |
|
|
|
14,486 |
|
|
|
2,411 |
|
Bad debt expense |
|
17,793 |
|
|
|
1,340 |
|
|
|
23,736 |
|
|
|
1,565 |
|
Share-based compensation expenses |
|
1,584 |
|
|
|
1,154 |
|
|
|
7,665 |
|
|
|
1,642 |
|
Non-cash lease expenses |
|
808 |
|
|
|
201 |
|
|
|
2,478 |
|
|
|
640 |
|
Acquisition costs |
|
— |
|
|
|
974 |
|
|
|
383 |
|
|
|
4,242 |
|
Refranchising loss |
|
3,055 |
|
|
|
992 |
|
|
|
4,178 |
|
|
|
314 |
|
Litigation costs |
|
4,788 |
|
|
|
394 |
|
|
|
18,958 |
|
|
|
394 |
|
Severance |
|
— |
|
|
|
— |
|
|
|
526 |
|
|
|
— |
|
Net loss related to advertising fund deficit |
|
1,038 |
|
|
|
1,245 |
|
|
|
1,041 |
|
|
|
1,245 |
|
Net loss on extinguishment of debt |
|
— |
|
|
|
1,219 |
|
|
|
— |
|
|
|
7,637 |
|
Impairment losses |
|
14,454 |
|
|
|
1,037 |
|
|
|
14,454 |
|
|
|
1,037 |
|
Pre-opening expenses |
|
298 |
|
|
|
— |
|
|
|
900 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
19,608 |
|
|
$ |
10,425 |
|
|
$ |
88,805 |
|
|
$ |
21,127 |
|
FAT Brands Inc. Adjusted Net Loss
Reconciliation
|
Thirteen Weeks Ended |
|
Fifty-Two Weeks Ended |
(In thousands, except share
and per share data) |
December 25, 2022 |
|
December 26, 2021 |
|
December 25, 2022 |
|
December 26, 2021 |
|
|
|
|
|
|
|
|
Net loss |
$ |
(70,808 |
) |
|
$ |
(19,603 |
) |
|
$ |
(126,188 |
) |
|
$ |
(31,583 |
) |
Refranchising loss |
|
3,055 |
|
|
|
992 |
|
|
|
4,178 |
|
|
|
314 |
|
Acquisition costs |
|
— |
|
|
|
974 |
|
|
|
383 |
|
|
|
4,242 |
|
Net loss on extinguishment of debt |
|
— |
|
|
|
1,219 |
|
|
|
— |
|
|
|
7,637 |
|
Impairment losses |
|
14,454 |
|
|
|
— |
|
|
|
14,454 |
|
|
|
— |
|
Litigation costs |
|
4,788 |
|
|
|
— |
|
|
|
18,958 |
|
|
|
— |
|
Severance |
|
— |
|
|
|
— |
|
|
|
526 |
|
|
|
— |
|
Tax adjustments, net (1) |
|
5,505 |
|
|
|
(38 |
) |
|
|
6,744 |
|
|
|
(1,228 |
) |
Adjusted net loss |
$ |
(43,006 |
) |
|
$ |
(16,456 |
) |
|
$ |
(80,945 |
) |
|
$ |
(20,618 |
) |
|
|
|
|
|
|
|
|
Loss per basic and diluted
share |
$ |
(4.29 |
) |
|
$ |
(1.38 |
) |
|
$ |
(7.66 |
) |
|
$ |
(2.15 |
) |
Adjusted loss per basic and
diluted share |
$ |
(2.60 |
) |
|
$ |
(1.16 |
) |
|
$ |
(4.91 |
) |
|
$ |
(1.41 |
) |
|
|
|
|
|
|
|
|
Weighted average basic and
diluted shares outstanding |
|
16,530,934 |
|
|
|
14,203,887 |
|
|
|
16,476,090 |
|
|
|
14,656,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Reflects the tax impact of the adjustments using the
effective tax rate for the respective periods.
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