Good Times Restaurants Reports Q42018 and Fiscal Year End Results

Total Revenues for Fiscal 2018 Increased 25% to $99 Million – Net Loss for the Year Narrowed to $1.0 Million

Good Times Restaurants Inc. (Nasdaq: GTIM), operator of Bad Daddy’s Burger Bar, a full-service, upscale burger bar concept, and Good Times Burgers & Frozen Custard, a regional quick-service restaurant chain focused on fresh, high-quality, all-natural products, today announced its preliminary unaudited financial results for the fourth fiscal quarter ended September 25, 2018.

Key highlights of the Company’s financial results vs prior year include:

  • Total revenues increased 19% to $26,796,000 for the quarter and increased 25% to $99,240,000 for the year, which reflects the addition of nine new Bad Daddy’s restaurants during the year
  • Same store sales for company-owned Good Times restaurants increased 0.5% for the quarter and increased 4.2% for the year on top of last year’s increases of 3.9% for the quarter and 2.1% for the year
  • Adjusted for the impact of Hurricane Florence, same store sales for company-owned Bad Daddy’s restaurants increased 0.7% for the quarter and 0.8% for the year on top of last year’s increases of 1.4% for the quarter and 1.6% for the year
  • The company opened five restaurants during the fiscal fourth quarter, bringing the total new restaurants opened during fiscal 2018 to nine
  • Income from Operations improved from a loss of $1,422,000 to income of $372,000 for the year, which includes the impact of $2,784,000 of new store preopening costs incurred in fiscal 2018
  • Restaurant Level Operating Profit (a non-GAAP measure) for Bad Daddy’s restaurants improved 50% to $3,136,000 in the fourth quarter from $2,081,000 in the fourth quarter last year*
  • Total Restaurant Level Operating Profit (a non-GAAP measure) increased 26% to $4,318,000 for the quarter and increased 30% to $16,111,000 for the year*
  • Net Loss Attributable to Common Shareholders for the year narrowed to $324,000 for the quarter and $1,034,000 for the full fiscal year
  • Adjusted EBITDA (a non-GAAP measure) for the quarter increased 38% to $1,805,000 and increased 52% to $5,758,000* for the fiscal year
  • The Company ended the year with $3.5 million in cash and $7.5 million of long term debt

Boyd Hoback, President & CEO, said, “We are very pleased with our results for the quarter and fiscal year, including our adjusted EBITDA that was slightly ahead of the upper end of our guidance for the fiscal year. Even though labor costs continue to be a pressure point on our operating margins, Bad Daddy’s Restaurant Level Operating Profit margin improved to 17% for the year from 15.8% last year.”

Commenting on fiscal 2019, Hoback added, “At the end of the fiscal year, we opened two new Bad Daddy’s restaurants, one in the Atlanta metro area and one in Greenville, South Carolina and subsequent to year end we’ve opened one additional restaurant in the Atlanta metro area with another restaurant scheduled to open on January 2, 2019 in the Raleigh metro area. During our first fiscal quarter of 2019, our Good Times and Bad Daddy’s sales have been negatively impacted by much more inclement weather compared to last year, including the loss of approximately 10 store days due to the snow storm in North Carolina. The new Atlanta & Greenville, South Carolina restaurants have had relatively softer openings than the high honeymoon sales we experienced in our fiscal 2017 and 2018 openings, so we’ve moderated our development schedule for the balance of the year as we fine tune our site selection model for accelerated growth in fiscal 2020. As a result, we expect our first fiscal 2019 quarter’s results to be negatively impacted which is reflected in our overall fiscal 2019 guidance.”

Fiscal 2019 Outlook:

The Company has updated its guidance for fiscal 2019 to reflect its adjusted development expectations:

  • Total revenues of approximately $112 million to $114 million with a year-end revenue run rate of approximately $120 million
  • Total revenue estimates assume same store sales of approximately -2% to -3% for the year for Good Times due to inclement weather in Q1 and Q2 compared to unseasonably warm weather in the prior year, and approximately +1 to +2% for Bad Daddy’s
  • General and administrative expenses of approximately $8.4 million to $8.6 million, including approximately $500,000 of non-cash equity compensation expense
  • The opening of 5 to 6 new Bad Daddy’s restaurants
  • Net loss of approximately $0.9 million, including preopening expenses of approximately $1.6 million
  • Total Adjusted EBITDA* of approximately $6.0 million to $6.5 million
  • Capital expenditures (net of tenant improvement allowances) of approximately $7.0 – $7.5 million including approximately $0.6 million related to fiscal 2020 development
  • Debt balance at the end of the year between $11.0 and $11.5 million

About Good Times Restaurants Inc.: Good Times Restaurants Inc. (GTIM) owns, operates, franchises and licenses 34 Bad Daddy’s Burger Bar restaurants through its wholly-owned subsidiaries. Bad Daddy’s Burger Bar is a full service, upscale, “small box” restaurant concept featuring a chef driven menu of gourmet signature burgers, chopped salads, appetizers and sandwiches with a full bar and a focus on a selection of craft microbrew beers in a high energy atmosphere that appeals to a broad consumer base. Additionally, through its wholly-owned subsidiaries, Good Times Restaurants Inc. operates and franchises a regional quick service restaurant chain consisting of 35 Good Times Burgers & Frozen Custard restaurants, located primarily in Colorado.

 
Good Times Restaurants Inc.
Unaudited Supplemental Information

(In thousands, except per share amounts)

 
    Fiscal Quarter Ended     Fiscal Year Ended
Sept. 25,     Sept. 26, Sept. 25,     Sept. 26,
Statement of Operations 2018 2017 2018 2017
Net revenues:
Restaurant sales $ 26,635 $ 22,414 $ 98,564 $ 78,395
Franchise revenues   161     170     676     685  
Total net revenues 26,796 22,584 99,240 79,080
 
Restaurant Operating Costs:
Food and packaging costs 8,102 7,309 30,256 24,900
Payroll and other employee benefit costs 9,577 8,058 35,653 28,274
Restaurant occupancy costs 1,983 1,552 7,261 5,759
Other restaurant operating costs 2,657 2,081 9,283 7,084
New store preopening costs 1,101 851 2,784 2,588
Depreciation and amortization   1,040     811     3,705     2,897  
Total restaurant operating costs 24,460 20,662 88,942 71,502
 
General and administrative costs 1,973 1,780 7,857 7,002
Advertising costs 404 337 1,991 1,694
Franchise costs 9 28 41 108
Asset impairment costs 219 72 219
Gain on disposal of restaurants and equipment   (9 )   (6 )   (35 )   (23 )
Income (loss) from operations (41 ) (436 ) 372 (1,422 )
 
Other income (expense):
Interest income (expense), net (118 ) (77 ) (388 ) (182 )
Other expense   (1 )       (1 )   (1 )
Total other expense   (119 )   (77 )   (389 )   (183 )
Net loss

($160

) ($513 )

 

($17

) ($1,605 )
Income attributable to non-controlling interest   (164 )   (151 )   (1,017 )   (650 )
Net loss attributable to Good Times Restaurants Inc.   (324 )   (664 )   (1,034 )   ($2,255 )
 
Basic and diluted loss per share ($0.03 ) ($0.05 ) ($0.08 ) ($0.18 )
 

Basic and diluted weighted average common shares outstanding

12,474 12,393 12,464 12,321
 
Good Times Restaurants Inc.
Unaudited Supplemental Information

(In thousands)

 
        Sept. 25,     Sept. 26,
Balance Sheet Data 2018 2017
Cash & cash equivalents $ 3,477 $ 4,337
Current assets 6,381 6,066
Property and Equipment, net 35,245 29,691
Other assets 19,324 19,397
Total assets $ 60,950 $ 55,153
 

Current liabilities, including capital lease obligations and long-term debt due within one year

$ 8,335 $ 6,916
Long-term debt due after one year 7,472 5,339
Other liabilities 7,922 5,614
Total liabilities $ 23,729 $ 17,869
Stockholders’ equity $ 37,221 $ 37,284
 

Supplemental Information:

    Company-Owned Restaurants
Bad Daddy’s Burger Bar   Good Times Burgers & Frozen Custard
Fiscal Quarter Ended   Fiscal Year Ended Fiscal Quarter Ended   Fiscal Year Ended
Sept. 25,
2018
  Sept. 26,
2017
Sept. 25,
2018
  Sept. 26,
2017
Sept. 25,
2018
  Sept. 26,
2017
Sept. 25,
2018
  Sept. 26,
2017
Restaurant Sales $ 18,723 $ 14,036 67,428 $ 47,706 $ 7,912 $ 8,378 31,136 $ 30,689
Average weekly sales per restaurant 51.0 50.6 50.3 49.3 22.5 23.0 21.9 21.4
 
Restaurant operating weeks 367 277.3 1,341 968.1 351 364 1,422 1,432
Restaurants open during period 5 1 9 6 0 0 0 1
Restaurants open at period end 31 22 31 22 26 28 26 28
 

Reconciliation of Non-GAAP Measurements to US GAAP Results

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income (Loss) from Operations

(In thousands, except percentage data)

 
    Bad Daddy’s Burger Bar   Good Times Burgers &
Frozen Custard
  Good Times
Restaurants Inc.
Fiscal Quarter Ended
Sept. 25, 2018   Sept. 26, 2017 Sept. 25, 2018   Sept. 26, 2017 Sept. 25,
2018
  Sept. 26,
2017
Restaurant Sales $ 18,723   100.0 % $ 14,036   100.0 % $ 7,912   100.0 % $ 8,378   100 % 26,635 $ 22,414

Restaurant Operating Costs (exclusive of depreciation and amortization shown separately below):

Food and packaging costs 5,510 29.4 % 4,507 32.1 % 2,592 32.8 % 2,802 33.4 % 8,102 7,309

Payroll and other employee benefit costs

6,858 36.6 % 5,215 37.2 % 2,719 34.4 % 2,843 33.9 % 9,577 8,058
Restaurant occupancy costs 1,236 6.6 % 855 6.1 % 747 9.4 % 697 8.3 % 1,983 1,552
Other restaurant operating costs   1,983 10.6 %   1,378 9.8 %   674 8.5 %   703 8.4 % 2,657     2,081  
Restaurant-level operating profit 3,136 16.8 % 2,081 14.8 % 1,180 15.0 % 1,333 15.9 % 4,316 3,414
 

Franchise royalty income and expense, net

161 170
Deduct – Other operating:
Depreciation and amortization 1,040 811
General and administrative 1,973 1,780
Advertising costs 404 337
Franchise costs 9 28

Gain on disposal of restaurants and equipment

(9 ) (6 )
Asset impairment costs 219
Preopening costs 1,101     851  
Total other operating 4,518     4,020  
 
Loss from Operations ($41 )   ($436 )

Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues, as opposed to total revenues.

Reconciliation of Non-GAAP Measurements to US GAAP Results

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income (Loss) from Operations

(In thousands, except percentage data)

 
    Bad Daddy’s Burger Bar   Good Times Burgers &
Frozen Custard
  Good Times
Restaurants Inc.
Fiscal Year Ended
Sept. 25, 2018   Sept. 26, 2017 Sept. 25, 2018   Sept. 26, 2017 Sept. 25,
2018
  Sept. 26,
2017
Restaurant Sales 67,428   100.0 % $ 47,706   100.0 % 31,136   100.0 % $ 30,689   100 % 98,564 $ 78,395

Restaurant Operating Costs (exclusive of depreciation and amortization shown separately below):

Food and packaging costs 20,048 29.7 % 14,906 31.2 % 10,208 32.8 % 9,994 32.6 % 30,256 24,900

Payroll and other employee benefit costs

24,861 36.9 % 17,726 37.2 % 10,792 34.7 % 10,548 34.4 % 35,653 28,274
Restaurant occupancy costs 4,348 6.4 % 2,987 6.3 % 2,913 9.4 % 2,772 9.0 % 7,261 5,759
Other restaurant operating costs 6,719 10.0 %   4,548 9.5 % 2,564 8.2 %   2,536 8.3 % 9,283     7,084  
Restaurant-level operating profit 11,452 17.0 % 7,539 15.8 % 4,659 15.0 % 4,839 15.8 % 16,111 12,378
 

Franchise royalty income and expense, net

676 685
Deduct – Other operating:
Depreciation and amortization 3,705 2,897
General and administrative 7,857 7,002
Advertising costs 1,991 1,694
Franchise costs 41 108

Gain on disposal of restaurants and equipment

(35 ) (23 )
Asset impairment costs 72 219
Preopening costs 2,784     2,588  
Total other operating 16,415     14,485  
 
Income (Loss) from Operations 372     ($1,422 )

Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues, as opposed to total revenues.

The Company believes that restaurant-level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. The Company defines restaurant-level operating profit to be restaurant revenues minus restaurant-level operating costs, excluding restaurant closures and impairment costs. The measure includes restaurant level occupancy costs, which include fixed rents, percentage rents, common area maintenance charges, real estate and personal property taxes, general liability insurance and other property costs, but excludes depreciation. The measure excludes depreciation and amortization expense, substantially all of which is related to restaurant level assets, because such expenses represent historical sunk costs which do not reflect current cash outlay for the restaurants. The measure also excludes selling, general and administrative costs, and therefore excludes occupancy costs associated with selling, general and administrative functions, and preopening costs. The Company excludes restaurant closure costs as they do not represent a component of the efficiency of continuing operations. Restaurant impairment costs are excluded, because, similar to depreciation and amortization, they represent a non-cash charge for the Company’s investment in its restaurants and not a component of the efficiency of restaurant operations. Restaurant-level operating profit is not a measurement determined in accordance with generally accepted accounting principles (“GAAP”) and should not be considered in isolation, or as an alternative, to income from operations or net income as indicators of financial performance. Restaurant-level operating profit as presented may not be comparable to other similarly titled measures of other companies. The tables above set forth certain unaudited information for the fiscal quarters and fiscal years ended September 25, 2018 and September 26, 2017, expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenues.

Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA

(In thousands)

Good Times Restaurants Inc.
    Fiscal Quarter Ended     Fiscal Year Ended
Sept. 25,     Sept. 26, Sept. 25,     Sept. 26,
2018 2017 2018 2017
Net loss as reported ($324 ) ($664 ) ($1,034 ) ($2,255 )
 
Adjustments to net loss:
Depreciation and amortization 977 774 3,528 2,776
Interest expense, net   118     77   391     185  
EBITDA 771 187 2,885 706
Asset impairment cost 219 72 219
Preopening expense 922 759 2,463 2,154
Non-cash stock-based compensation 114 139 417 748
GAAP rent – cash rent difference 7 7 (44 ) (27 )
Non-cash disposal of assets   (9 )   (6 ) (35 )   (23 )
Adjusted EBITDA $ 1,805   $ 1,305   5,758   $ 3,777