FAT Brands Inc. Reports Fiscal Fourth Quarter and Fiscal Year 2018 Financial Results

Full Year 2018 – System-wide sales growth of 111.6% y/y – United States sales growth of 127.9% – Canada sales growth of 16.1% – Other International(2) sales growth of 182.0%

FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) yesterday reported fiscal fourth quarter and fiscal year 2018 financial results for the 13-week and 52-week periods ending December 30, 2018.

Andy Wiederhorn, President and CEO of FAT Brands, commented, “2018 was our first full year operating with our management platform, which was designed to seamlessly scale with new brand acquisitions. We demonstrated its capability through the smooth integration of both Hurricane Grill & Wings and Yalla Mediterranean into our system. We continue to seek synergistic acquisition opportunities that meet our criteria, where we can leverage our platform to drive efficiencies and growth.”

Because 2018 was our initial full year of operation, comparative information is not available for the fourth quarter of, or the entirety of, fiscal 2017.

Fiscal Fourth Quarter 2018 Highlights

  • Total revenues of $5.0 million(1)
    • System-wide sales growth of 51.1% y/y
      • United States sales growth of 65.1%
      • Canada sales growth of 8.0%
      • Other International(2) sales growth of 33.6%
    • System-wide same store sales growth of (2.0)% y/y
      • United States same-store sales growth of 0.1%
      • Canada same-store sales growth of 3.5%
      • Other International(2) same-store sales growth of (16.0)%
    • 4 new franchised store openings
      • Ending store count: 334 franchised stores, 7 company owned stores
  • Net loss of $2.7 million, or ($0.23) per share on a fully diluted basis
  • EBITDA(3) of ($467,000)
  • Adjusted EBITDA(3) of $596,000, excluding legal and accounting fees related to acquisitions and other non-recurring legal fees

Fiscal Year 2018 Highlights

  • Total revenues of $18.4 million(1)
    • System-wide sales growth of 111.6% y/y
      • United States sales growth of 127.9%
      • Canada sales growth of 16.1%
      • Other International(2) sales growth of 182.0%
    • System-wide same store sales growth of 2.2% y/y
      • United States same-store sales growth of 1.8%
      • Canada same-store sales growth of 7.8%
      • Other International(2) same-store sales growth of 0.8%
    • 13 new franchised store openings
      • Ending store count: 334 franchised stores, 7 company owned stores
  • Net loss of $1.8 million, or ($0.17) per share on a fully diluted basis
  • EBITDA(3) of $3.1 million
  • Adjusted EBITDA(3) of $4.5 million, excluding legal and accounting fees related to acquisitions and non-recurring legal fees
   

(1)

  In the first quarter of 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which changed the timing of recognition of franchise fees, including development fees, territory fees, renewal and transfer fees. Adoption of ASU 2014-09 also changed the reporting of advertising fund contributions and related expenditures. Please see the “Adoption of New Accounting Guidance” section below for additional information.

(2)

Excludes Canada, includes Puerto Rico

(3)

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.
 

Events in the Quarter

On December 4, 2018, FAT Brands announced the acquisition of Yalla Mediterranean, a Los Angeles-based chain of seven restaurants located in California that specializes in authentic, healthful Mediterranean cuisine and environmentally-friendly operations. The Company intends to sell the seven restaurants to franchisees and grow the brand as a franchised concept within its expanding portfolio of brands. The purchase price at the time of the acquisition was valued at $3.5 million, representing the fair market value of the future consideration, payable to the seller through a combination of a portion of future royalty revenue generated from the future franchises and a portion of the proceeds from the sale of the original seven restaurants to franchisees.

Quarterly Dividend

Subsequent to the end of the fourth quarter, the Company’s Board of Directors approved the payment of a quarterly stock dividend equal to 2.13% on its common stock, representing an amount equal to $0.12 per share of common stock based on the closing price as of February 6, 2019. The dividend was paid on February 28, 2019 to shareholders of record as of the close of business on February 19, 2019. The Company issued 245,376 shares of common stock at a value of $5.64 per share (plus cash in lieu of fractional shares) in satisfaction of the dividend payable.

About FAT (Fresh. Authentic. Tasty.) Brands

FAT Brands (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 seven restaurant brands, Fatburger, Buffalo’s Cafe, Buffalo’s Express, Hurricane Grill & Wings, Yalla Mediterranean, and Ponderosa and Bonanza Steakhouses, that have over 340 locations open and more than 300 under development in 32 countries.

 

FAT Brands Inc. Consolidated Statements of Operations Data

       

13 weeks ended
December 30, 2018

52 weeks ended
December 30, 2018

 
(in thousands)
 
Revenues
Royalties $ 3,295 $ 12,097
Franchise fees 95 2,136
Store opening fees 148 352
Advertising fees 918 3,182
Other income   554     600  
Total revenues 5,010 18,367
 
General and administrative expenses   4,613     14,131  
 
Income from operations   397     4,236  
 
Other expense
Interest expense, net (2,828 ) (4,770 )
Depreciation and amortization (165 ) (358 )
Other expense (1)   (864 )   (1,181 )
Other expense   (3,857 )   (6,309 )
 
Loss before income tax benefit (3,460 ) (2,073 )
 
Income tax benefit $ (770 ) $ (275 )
 
Net loss $ (2,690 ) $ (1,798 )
Basic and Diluted Loss per Share $ (0.23 ) $ (0.17 )
 
    (1)   Includes Acquisition Costs and Non-recurring Legal Costs related to a terminated financing.
 
 

Consolidated Balance Sheet for FAT Brands Inc.

   
As of December 30, 2018
 
(in thousands)
 
Cash $ 653
Total assets $ 57,960
Total liabilities $ 52,221
Total stockholders’ equity $ 5,739
 
       

FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation

 

13 weeks ended
December 30, 2018

52 weeks ended
December 30, 2018

 
(in thousands)
 
Net loss $ (2,690 ) $ (1,798 )
Interest expense, net 2,828 4,770
Income tax benefit (770 ) (275 )
Depreciation and amortization expense   165     358  
EBITDA $ (467 ) $ 3,055
Acquisition Costs and Non-recurring Legal Costs (2)   1,063     1,408  
Adjusted EBITDA $ 596   $ 4,463  
 
    (2)   Includes Acquisition Costs and Non-recurring Legal Costs related to a terminated financing and certain litigation