FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported financial results for the
fiscal first quarter ended March 26, 2023.
Andy Wiederhorn, Chairman of FAT Brands,
commented, “I am proud of the Company we have created and the team
we have assembled and look forward to working alongside Ken and Rob
in their new positions as Co-Chief Executive Officers. Over the
last few years, Ken and Rob have played key roles in the
accelerated growth of the FAT Brands portfolio comprised of 17
iconic restaurant brands with over 2,300 units and systemwide sales
of $2.2 billion annually.”
“Organic growth at FAT Brands remains strong. We
opened 41 new units during the first quarter and plan to open 45
additional units in the second quarter. For the full year, we
expect to open 175 new units representing over 25% growth from last
year. Our pipeline is robust with development agreements for more
than 1,000 new locations, including high-growth brands like Twin
Peaks. We are also increasing the utilization of our manufacturing
facility by raising production levels of cookie dough to serve our
brands’ needs.”
“Over the long term, we intend to create value
through organic growth, acquiring additional brands that are
strategic to our portfolio make-up and debt management, all while
providing shareholders with a consistent dividend.”
Fiscal First
Quarter 2023
Highlights
- Total revenue
improved 8.5% to $105.7 million compared to $97.4 million in the
fiscal first quarter of 2022
- System-wide sales
growth of 9.9% in the fiscal first quarter of 2023 compared to the
prior year fiscal quarter
- Year-to-date system-wide same-store
sales growth of 4.3% in the fiscal first quarter of 2023 compared
to the prior year
- 41 new store openings during the
fiscal first quarter of 2023
- Net loss of $32.1
million, or $1.95 per diluted share, compared to $23.8 million, or
$1.45 per diluted share, in the fiscal first quarter of 2022
- Adjusted EBITDA(1) of $19.2
million compared to $15.1 million in the fiscal first quarter of
2022
- Adjusted net loss(1) of $23.5
million, or $1.43 per diluted share, compared to $18.5 million, or
$1.13 per diluted share, in the fiscal first quarter of 2022
(1) EBITDA, Adjusted EBITDA and adjusted
net loss are non-GAAP measures defined below, under “Non-GAAP
Measures”. Reconciliation of GAAP net loss to EBITDA, adjusted
EBITDA and adjusted net loss are included in the accompanying
financial tables.
Summary of Fiscal
First Quarter
2023 Financial Results
Total revenue increased $8.3 million, or 8.5%,
in the first quarter of 2023, to $105.7 million compared to $97.4
million in the same period of 2022, driven by increased same-store
sales and revenues from new restaurant openings.
Costs and expenses increased $8.4 million, or
8.7%, in the first quarter of 2023 to $105.3 million compared to
$96.9 million in the same period in the prior year, primarily due
to increased activity from company-owned restaurants and the
Company's factory, as well as professional fees related to certain
litigation matters.
General and administrative expense increased
$3.7 million, or 14.8%, in the first quarter of 2023 compared to
the same period in the prior year, primarily due to increased
professional fees related to pending litigation and government
investigations.
Cost of restaurant and factory revenues
increased $4.3 million, or 7.8%, in the first quarter of 2023,
primarily due to higher company-owned restaurant and dough factory
revenues.
Depreciation and amortization increased $0.6
million, or 8.5%, in the first quarter of 2023 compared to the same
period in the prior year, primarily due to depreciation of new
company-owned restaurant property and equipment.
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 $0.3 million in
the first quarter of 2023 compared to the prior year period. These
expenses vary in relation to advertising revenues.
Total other expense, net for the first quarters
of 2023 and 2022 was $30.0 million and $19.7 million, respectively,
primarily comprised of net interest expense of $30.1 million and
$21.0 million, respectively.
Adjusted net loss was $23.5 million, or $1.43
per diluted share, in the first quarter of 2023 compared to $18.5
million, or $1.13 per diluted share, in the first quarter of
2022.
Key Financial Definitions
New store openings - The number of new
store openings reflects the number of stores opened during a
particular reporting period. The total number of new stores per
reporting period and the timing of stores openings has, and will
continue to have, an impact on our results.
Same-store sales growth - Same-store sales
growth reflects the change in year-over-year sales for the
comparable store base, which we define as the number of stores open
and in the FAT Brands system for at least one full fiscal year. For
stores that were temporarily closed, sales in the current and prior
period are adjusted accordingly. Given our focused marketing
efforts and public excitement surrounding each opening, new stores
often experience an initial start-up period with considerably
higher than average sales volumes, which subsequently decrease to
stabilized levels after three to six months. Additionally, when we
acquire a brand, it may take several months to integrate fully each
location of said brand into the FAT Brands platform. Thus, we do
not include stores in the comparable base until they have been open
and in the FAT Brands system for at least one full fiscal year.
System-wide sales growth - System wide
sales growth reflects the percentage change in sales in any given
fiscal period compared to the prior fiscal period for all stores in
that brand only when the brand is owned by FAT Brands. Because
of acquisitions, new store openings and store closures, the stores
open throughout both fiscal periods being compared may be different
from period to period.
Conference Call and Webcast
FAT Brands will host a conference call and
webcast to discuss its fiscal first quarter 2023 financial results
today at 4:30 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 1-888-886-7786 from the U.S. or 1-416-764-8658
internationally. A replay will be available after the call until
Monday, May 29, 2023, and can be accessed by dialing 1-844-512-2921
from the U.S. or 1-412-317-6671 internationally. The passcode is
24335100. 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 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 |
|
(In thousands) |
|
March 26, 2023 |
|
|
March 27, 2022 |
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Royalties |
|
$ |
22,485 |
|
|
$ |
20,898 |
|
Restaurant sales |
|
|
62,601 |
|
|
|
58,077 |
|
Advertising fees |
|
|
9,351 |
|
|
|
9,361 |
|
Factory revenues |
|
|
9,165 |
|
|
|
8,179 |
|
Franchise fees |
|
|
802 |
|
|
|
714 |
|
Other revenue |
|
|
1,287 |
|
|
|
174 |
|
Total revenue |
|
|
105,691 |
|
|
|
97,403 |
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
General and administrative expense |
|
|
28,415 |
|
|
|
24,753 |
|
Cost of restaurant and factory revenues |
|
|
59,087 |
|
|
|
54,799 |
|
Depreciation and amortization |
|
|
7,116 |
|
|
|
6,561 |
|
Refranchising loss |
|
|
159 |
|
|
|
548 |
|
Advertising fees |
|
|
10,527 |
|
|
|
10,257 |
|
Total costs and expenses |
|
|
105,304 |
|
|
|
96,918 |
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
387 |
|
|
|
485 |
|
|
|
|
|
|
|
|
|
|
Other (expense) income, net |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(25,090 |
) |
|
|
(19,027 |
) |
Interest expense related to preferred shares |
|
|
(5,043 |
) |
|
|
(1,999 |
) |
Other income, net |
|
|
156 |
|
|
|
1,310 |
|
Total other expense, net |
|
|
(29,977 |
) |
|
|
(19,716 |
) |
|
|
|
|
|
|
|
|
|
Loss before income tax provision |
|
|
(29,590 |
) |
|
|
(19,231 |
) |
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
2,536 |
|
|
|
4,524 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(32,126 |
) |
|
$ |
(23,755 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
$ |
(1.95 |
) |
|
$ |
(1.45 |
) |
Basic and diluted weighted average shares outstanding |
|
|
16,487,119 |
|
|
|
16,388,471 |
|
Cash dividends declared per common share |
|
$ |
0.14 |
|
|
$ |
0.13 |
|
FAT Brands Inc. Consolidated EBITDA and
Adjusted EBITDA Reconciliation
|
|
Thirteen Weeks Ended |
|
(In thousands) |
|
March 26, 2023 |
|
|
March 27, 2022 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(32,126 |
) |
|
$ |
(23,755 |
) |
Interest expense, net |
|
|
30,133 |
|
|
|
21,026 |
|
Income tax provision |
|
|
2,536 |
|
|
|
4,524 |
|
Depreciation and amortization |
|
|
7,116 |
|
|
|
6,470 |
|
EBITDA |
|
|
7,659 |
|
|
|
8,265 |
|
Bad debt expense |
|
|
1,035 |
|
|
|
185 |
|
Share-based compensation expenses |
|
|
1,095 |
|
|
|
2,112 |
|
Non-cash lease expenses |
|
|
381 |
|
|
|
284 |
|
Acquisition costs |
|
|
— |
|
|
|
248 |
|
Refranchising loss |
|
|
159 |
|
|
|
548 |
|
Litigation costs |
|
|
7,744 |
|
|
|
2,956 |
|
Severance |
|
|
— |
|
|
|
526 |
|
Net loss related to advertising fund deficit |
|
|
1,085 |
|
|
|
10 |
|
Pre-opening expenses |
|
|
29 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
19,187 |
|
|
$ |
15,134 |
|
FAT Brands Inc. Adjusted Net Loss
Reconciliation
|
|
Thirteen Weeks Ended |
|
(In thousands, except share and per share data) |
|
March 26, 2023 |
|
|
March 27, 2022 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(32,126 |
) |
|
$ |
(23,755 |
) |
Refranchising loss |
|
|
159 |
|
|
|
548 |
|
Acquisition costs |
|
|
— |
|
|
|
248 |
|
Litigation costs |
|
|
7,744 |
|
|
|
2,956 |
|
Severance |
|
|
— |
|
|
|
526 |
|
Tax adjustments, net (1) |
|
|
677 |
|
|
|
1,006 |
|
Adjusted net loss |
|
$ |
(23,546 |
) |
|
$ |
(18,471 |
) |
|
|
|
|
|
|
|
|
|
Loss per basic and diluted share |
|
$ |
(1.95 |
) |
|
$ |
(1.45 |
) |
Adjusted loss per basic and diluted share |
|
$ |
(1.43 |
) |
|
$ |
(1.13 |
) |
|
|
|
|
|
|
|
|
|
Weighted average basic and diluted shares outstanding |
|
|
16,487,119 |
|
|
|
16,388,471 |
|
(1) Reflects the tax impact of the adjustments using the
effective tax rate for the respective periods.
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