FAT
(Fresh. Authentic. Tasty.) Brands Inc.
(NASDAQ: FAT) (“FAT Brands” or the “Company”) today reported fourth
quarter and full year 2020 financial results for the fiscal year
ended December 27, 2020.
Andy Wiederhorn, President and CEO of FAT
Brands, commented, “We are proud of our franchise partners and
employees who have worked incredibly hard and shown impressive
versatility throughout this difficult year. We are very hopeful
that with the widespread availability of vaccines and accelerated
reopening plans in many locations, we will be able to put the
COVID-19 pandemic in the rear-view mirror.”
“The fourth quarter proved very productive at
FAT Brands and continued our strong rebound during the pandemic.
While the initial virus impacts were harsh, this marks another
report with improving successive quarterly improvements. Amongst
the improving results we have continued to develop our powerful
engine for organic growth. We had further new store openings, in
addition to more units under construction. We have a solid
development pipeline of new franchise locations. And as of today,
we have fully integrated Johnny Rockets with plans for the
reopening of special venues sometime during the second and third
quarters of this year.”
Wiederhorn continued, “We are very excited for
the year ahead as we continue our bounce back from the pandemic. In
2021, we will continue to pursue additional accretive acquisition
opportunities as well as organic growth of our existing
brands.”
“Our existing whole business securitization
facility, along with our publicly traded preferred stock and common
stock, give us many levers to pull to fund potential acquisitions,
reduce our cost of capital further, and drive shareholder
value.”
Fiscal Fourth Quarter 2020
Highlights
- Total revenues improved 24% to $6.5 million compared to the
fourth quarter of 2019
- Excluding revenues attributable to Johnny Rockets which was
acquired on September 21, 2020, revenues declined 19% compared to
the fourth quarter of 2019, showing sequential improvement compared
to a decline in the prior quarter of 39%
-
-
System-wide sales growth of 46.0% q/q
-
United States sales growth of 25.0% q/q
-
Rest of world sales growth of 119.7% q/q
-
System-wide same-store sales decline of 7.6% q/q
-
United States same-store sales decline of 8.4% q/q
-
Rest of world sales decline of 3.8% q/q
-
29 new franchised store openings during the fourth quarter 2020
-
Store count as of December 27, 2020: 679 stores system-wide
- Net Loss of $7.7 million or $0.64 per share on
a basic and fully diluted basis, as compared to net loss of $1.0
million or $0.08 per share on a basic and fully diluted basis in
the fourth quarter of 2019
- EBITDA(1) loss of $7.9 million as compared to EBITDA of
$726,000 in the fourth quarter of 2019
- Adjusted EBITDA(1) of $1.7 million as compared to $1.8 million
in the fourth quarter of 2019. Adjusted EBITDA excludes 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. The reconciliation of EBITDA to Adjusted EBITDA can be
found in the accompanying financial tables.
(1)EBITDA and Adjusted
EBITDA are non-GAAP measures defined below, under “Non-GAAP
Measures”. A reconciliation of GAAP net income to EBITDA and
adjusted EBITDA is included in the accompanying financial
tables.
Summary of Fourth Quarter 2020 Financial
Results
Total revenues were $6.5 million in the fourth
quarter of 2020 and as compared to $5.2 million in the fourth
quarter of 2019. Excluding Johnny Rockets which was acquired on
September 21, 2020 as well as advertising revenues, revenues were
$3.4 million, down from $4.3 million in the fourth quarter of 2019.
The revenue performance overwhelmingly reflects a decline in
royalty revenue related to the impact of COVID-19.
Costs and expenses increased to $14.4 million in
the fourth quarter of 2020 compared to $5.0 million in the fourth
quarter of 2019. These costs and expenses included an impairment
charge in 2020 of $5.4 million without comparable activity in the
prior year, advertising expenses of $2.9 million in 2020 compared
to $1.0 million in 2019 reflecting expenditures in excess of
collections recognized in the fourth quarter of 2020, and
refranchising losses of $2.0 million in 2020 and $1.1 million in
2019. Total general and administrative expenses were $4.3 million
in the fourth quarter of 2020 compared to $3.0 million in the prior
period. This increase of $1.3 million was attributed to increases
in occupancy costs and legal expenses, additional amortization
expense related to the intangible assets of Johnny Rockets, and bad
debt expenses related to the COVID-19 global pandemic marginally
offset by decreases in travel and entertainment expenses.
Other expense was $2.0 million in the fourth
quarter of 2020, compared to other expense of $900,000 in the
fourth quarter of 2019, and consisted primarily of net interest
expense of $1.6 million in 2020 compared to $1.2 million in the
prior period as well as $535,000 of expenses related to the
acquisition of Fog Cutter Capital Group Inc in the fourth quarter
of 2020 without comparable activity in 2019. The $400,000 increase
in net interest expense related primarily to the additional
interest expense associated with the $40 million of Series 2020-2
Fixed Rate Asset-Backed Notes sold in September 2020, the proceeds
of which were used to fund our acquisition of Johnny Rockets as
well as for general corporate purposes.
The combination of the aforementioned revenue
and expenses resulted in a net loss of $7.7 million in the fourth
quarter of 2020, compared to a net loss of $1.0 million in the
fourth quarter of 2019.
Recent Events and Liquidity
On December 24, 2020, the Company completed the
acquisition of Fog Cutter Capital Group Inc., a Delaware
corporation (“FCCG”), through the merger of FCCG with and into Fog
Cutter Acquisition, LLC, a Delaware limited liability company and
wholly-owned subsidiary of the Company. The acquisition of FCCG by
the Company (the “Merger”) was consummated
pursuant to an Agreement and Plan of Merger (the “Merger
Agreement”), dated December 10, 2020, by and among the Company,
FCCG, Merger Sub and Fog Cutter Holdings, LLC, a Delaware limited
liability company. The Company undertook the Merger primarily to
simplify its corporate structure and eliminate limitations that
restrict the Company’s ability to issue additional Common Stock for
acquisitions and capital raising. FCCG holds a substantial amount
of net operating loss carryforwards (“NOLs”), which could only be
made available to the Company as long as FCCG owned at least 80% of
FAT Brands. With the Merger, the NOLs will be held directly by the
Company, which will then have greater flexibility in managing its
capital structure. In addition, after the Merger, the Company will
no longer be required to compensate FCCG for utilizing its NOLs
under the Tax Sharing Agreement between the Company and FCCG.
During the fourth quarter of 2020, the Company
repurchased 232,663 warrants to purchase shares of the Company’s
common stock with an exercise price of $5.00 per share for
$420,000.
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
2020, the comparable store base does not include Elevation Burger
and Johnny Rockets stores as we did not own the brands for the full
year of 2019.
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 and full year 2020
financial results today at 5:00 PM ET. Hosting the conference call
and webcast will be Andy Wiederhorn, President and Chief Executive
Officer, and Rebecca Hershinger, Chief Financial Officer.
The conference call can be accessed live over the phone by
dialing 1-877-705-6003. A replay will be available after the call
until Thursday, April 1, 2021, and can be accessed by dialing
1-844-512-2921. The passcode is 13717932. 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 Inc. (NASDAQ: FAT) is a leading
global franchising company that strategically acquires, markets and
develops fast casual and casual dining restaurant concepts around
the world. The Company currently owns nine restaurant brands:
Fatburger, Johnny Rockets, Buffalo’s Cafe, Buffalo’s Express,
Hurricane Grill & Wings, Elevation Burger, Yalla Mediterranean
and Ponderosa and Bonanza Steakhouses, and franchises over 700
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, our future
acquisitions, and the effects on our business of the current novel
coronavirus pandemic (“COVID-19”). 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. It is possible that our future performance
may differ materially from current expectations expressed in these
forward-looking statements. Forward-looking statements are subject
to significant business, economic and competitive risks,
uncertainties and contingencies including, but not limited to,
uncertainties surrounding the severity, duration and effects of the
COVID-19 pandemic, 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 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 statement 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 measure of EBITDA and Adjusted EBITDA.
EBITDA is defined as earnings before interest,
taxes, 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.
A reconciliation of net income presented in
accordance with GAAP to EBITDA and adjusted EBITDA is set forth in
the tables below.
Investor Relations:
ICR
Ashley DeSimone
IR-FATBrands@icrinc.com
646-677-1827
Media Relations:
JConnelly
Erin Mandzik
emandzik@jconnelly.com
862-246-9911
###
FAT Brands Inc. Consolidated Statements of Operations
Data
|
|
13 weeks ended December 27, 2020 |
|
|
13 weeks ended December 29, 2019 |
|
|
52 weeks ended December 27, 2020 |
|
|
52 weeks ended December 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
$ |
4,742 |
|
|
$ |
3,831 |
|
|
$ |
13,420 |
|
|
$ |
14,895 |
|
Franchise fees |
|
|
559 |
|
|
|
855 |
|
|
|
1,130 |
|
|
|
3,433 |
|
Store opening fees |
|
|
— |
|
|
|
(399 |
) |
|
|
— |
|
|
|
— |
|
Advertising fees |
|
|
1,180 |
|
|
|
952 |
|
|
|
3,527 |
|
|
|
4,111 |
|
Management fees and other income |
|
|
18 |
|
|
|
13 |
|
|
|
41 |
|
|
|
66 |
|
Total revenues |
|
|
6,499 |
|
|
|
5,252 |
|
|
|
18,118 |
|
|
|
22,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
4,250 |
|
|
|
3,015 |
|
|
|
14,876 |
|
|
|
12,257 |
|
Impairment of goodwill and intangible assets |
|
|
5,368 |
|
|
|
— |
|
|
|
9,295 |
|
|
|
— |
|
Advertising expenses |
|
|
2,860 |
|
|
|
952 |
|
|
|
5,218 |
|
|
|
4,111 |
|
Refranchising loss |
|
|
1,958 |
|
|
|
1,070 |
|
|
|
3,827 |
|
|
|
219 |
|
Total costs and expenses |
|
|
14,436 |
|
|
|
5,037 |
|
|
|
33,216 |
|
|
|
16,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from
operations |
|
|
(7,937 |
) |
|
|
215 |
|
|
|
(15,098 |
) |
|
|
5,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(1,634 |
) |
|
|
(1,173 |
) |
|
|
(4,919 |
) |
|
|
(6,530 |
) |
Change in fair value of derivative liability |
|
|
— |
|
|
|
— |
|
|
|
887 |
|
|
|
— |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
(88 |
) |
|
|
— |
|
Gain on contingent consideration payable adjustment |
|
|
— |
|
|
|
— |
|
|
|
1,680 |
|
|
|
— |
|
Other (expense) income, net |
|
|
(384 |
) |
|
|
262 |
|
|
|
(1,011 |
) |
|
|
104 |
|
Total other expense, net |
|
|
(2,018 |
) |
|
|
(911 |
) |
|
|
(3,451 |
) |
|
|
(6,426 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
(benefit) expense |
|
|
(9,955 |
) |
|
|
(696 |
) |
|
|
(18,549 |
) |
|
|
(508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense |
|
|
(2,284 |
) |
|
|
257 |
|
|
|
(3,689 |
) |
|
|
510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,671 |
) |
|
$ |
(953 |
) |
|
$ |
(14,860 |
) |
|
$ |
(1,018 |
) |
Basic and diluted loss per
share |
|
$ |
(0.64 |
) |
|
$ |
(0.08 |
) |
|
$ |
(1.25 |
) |
|
$ |
(0.09 |
) |
Consolidated Balance Sheet for FAT Brands
Inc. as of December 27, 2020
|
|
As of December 27, 2020 |
|
|
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
Cash and restricted
cash |
|
$ |
7,211 |
|
Total assets |
|
$ |
121,144 |
|
Total liabilities |
|
$ |
163,027 |
|
Total stockholders’
deficit |
|
$ |
(41,883 |
) |
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA
Reconciliation
|
|
13 weeks ended December 27, 2020 |
|
|
13 weeks ended December 29, 2019 |
|
|
52 weeks ended December 27, 2020 |
|
|
52 weeks ended December 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,671 |
) |
|
$ |
(953 |
) |
|
$ |
(14,860 |
) |
|
$ |
(1,018 |
) |
Interest expense, net |
|
|
1,634 |
|
|
|
1,173 |
|
|
|
4,919 |
|
|
|
6,530 |
|
Income tax (benefit) expense |
|
|
(2,284 |
) |
|
|
257 |
|
|
|
(3,689 |
) |
|
|
510 |
|
Depreciation and amortization |
|
|
409 |
|
|
|
249 |
|
|
|
1,172 |
|
|
|
785 |
|
EBITDA |
|
$ |
(7,912 |
) |
|
$ |
726 |
|
|
$ |
(12,458 |
) |
|
$ |
6,807 |
|
Share-based compensation |
|
|
38 |
|
|
|
44 |
|
|
|
99 |
|
|
|
262 |
|
Non-cash lease expenses |
|
|
69 |
|
|
|
17 |
|
|
|
243 |
|
|
|
174 |
|
Acquisition costs |
|
|
535 |
|
|
|
(46 |
) |
|
|
1,168 |
|
|
|
201 |
|
Refranchising loss |
|
|
1,958 |
|
|
|
1,070 |
|
|
|
3,827 |
|
|
|
219 |
|
Impairment of goodwill and intangible assets |
|
|
5,368 |
|
|
|
— |
|
|
|
9,295 |
|
|
|
— |
|
Advertising expenditures exceeding collections |
|
|
1,680 |
|
|
|
— |
|
|
|
1,680 |
|
|
|
— |
|
Change in fair value of derivative liability |
|
|
— |
|
|
|
— |
|
|
|
(887 |
) |
|
|
— |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
88 |
|
|
|
— |
|
Gain on contingent consideration payable adjustment |
|
|
— |
|
|
|
— |
|
|
|
(1,680 |
) |
|
|
— |
|
Adjusted EBITDA |
|
$ |
1,736 |
|
|
$ |
1,811 |
|
|
$ |
1,375 |
|
|
$ |
7,663 |
|
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