FAT Brands Inc. Reports Fiscal First Quarter 2019 Financial Results

FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) today reported fiscal first quarter 2019 financial results for the 13-week period ending March 31, 2019.

Andy Wiederhorn, President and CEO of FAT Brands, commented, “Results in the first quarter reflect continued strength of the Fatburger brand and improvements at the Hurricane brand, offset by softness at Ponderosa and Bonanza Steakhouses. During the quarter, we continued to execute our key strategic initiatives to drive same-store sales growth across our brands: third-party delivery, a remodel program, menu innovation including our preferred partnership with the provider of Impossible Burger, which we now offer in nearly all of our brands, and cross-selling brands to existing franchisees.”

Wiederhorn continued, “Our pipeline for acquisitions remains robust, and we continue to seek synergistic opportunities where we can leverage our platform to drive efficiencies and growth. We are in the final stages of evaluating several acquisitions and expect to be able to announce an acquisition during the second quarter of this year.”

Fiscal First Quarter 2019 Highlights

  • Total revenues of $4.9 million, up 35.9% from $3.6 million in the first quarter of 2018. Excluding advertising revenues, revenues grew 30.4% from $3.0 million in first quarter of 2018 to $3.9 million in first quarter of 2019.
    • System-wide sales growth of 26.4% y/y
      • United States sales growth of 39.7% y/y
      • Canada sales growth of 5.7% y/y
      • Other International(1) sales growth of (5.5%) y/y
    • System-wide same store sales growth of (1.3%) y/y
      • Fatburger worldwide same store sales growth of 1.8% y/y, and 2.9% y/y in North America
      • Buffalo’s Cafe worldwide same store sales growth of 2.9% y/y
      • Hurricane worldwide same store sales growth of 4.2% y/y
      • Ponderosa/Bonanza worldwide same store sales growth of (6.6%) y/y, and (5.5%) y/y excluding Puerto Rico
      • United States same-store sales growth of (0.4%) y/y
      • Canada same-store sales growth of 5.1% y/y
      • Other International(1) same-store sales growth of (9.1%) y/y
    • 5 new franchised store openings
      • Ending store count: 334 franchised stores, 7 company-managed stores
  • Net loss of $710,000 or $0.06 per share on a basic and fully diluted basis, as compared to net income of $509,000 or $0.05 per share on a basic and fully diluted basis in the first quarter of 2018
  • EBITDA(2) of $820,000, as compared to $940,000 in the first quarter of 2018
  • Adjusted EBITDA(2) of $1.5 million as compared to $1.1 million in the first quarter of 2018. The reconciliation of EBITDA to Adjusted EBITDA can be found in the accompanying financial tables.
     

(1)

  Excludes Canada, includes Puerto Rico

(2)

  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 January 29, 2019, the Company entered into a new loan agreement borrowing $20.0 million from The Lion Fund, L.P. and the Lion Fund II, L.P. and utilized the proceeds to repay the existing $16.0 million term loan from FB Lending, LLC plus accrued interest and fees, as well as to provide additional general working capital to the Company.

On February 7, 2019, 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.

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 for at least one full fiscal year. 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. Thus, we do not include stores in the comparable base until they have been open 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. 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.

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 300 locations open and more than 200 under development around the world.

 
FAT Brands Inc. Consolidated Statements of Operations Data
(Unaudited)
         
   

13 weeks ended
March 31, 2019

 

13 weeks ended
April 1, 2018

         
(in thousands)        
         
Revenues        
Royalties   $ 3,463     $ 2,572  
Franchise fees     313       399  
Store opening fees     105        
Advertising fees     976       596  
Other income     16       18  
Total revenues     4,873       3,585  
         
Costs and expenses        
General and administrative costs     2,583       2,048  
Advertising expenses     976       596  
Refranchising restaurant costs and expenses, net of revenue    

518

     

 
Costs and expenses     4,077       2,644  
         
Income from operations     796       941  
         
Other expense        
Interest expense, net     (2,117 )     (214 )
Depreciation and amortization     (131 )     (33 )
Other income (expense)     24       (1 )
Other expense, net     (2,224 )     (248 )
         
(Loss) income before income tax expense (benefit)     (1,428 )     693  
         
Income tax expense (benefit)   $ (718 )   $ 184  
         
Net income (loss)   $ (710 )   $ 509  
Basic and Diluted Income (Loss) per Share   $ (0.06 )   $ 0.05  
                 
 
Consolidated Balance Sheet for FAT Brands Inc.
(Unaudited)
     
    As of March 31, 2019
       
(in thousands)      
       
Cash   $ 690
Total assets   $ 60,389
Total liabilities   $ 55,191
Total stockholders’ equity   $ 5,198
       
 
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation
(Unaudited)
         
   

13 weeks ended
March 31, 2019

 

13 weeks ended
April 1, 2018

         
(in thousands)        
         
Net income (loss)   $ (710 )   $ 509
Interest expense, net     2,117       214
Income tax expense (benefit)     (718 )     184
Depreciation and amortization expense     131       33
EBITDA   $ 820     $ 940
Share-based compensation expenses     81       125
Non-cash lease expenses (1)     25      
Acquisition costs     77      
Refranchising restaurant costs and expenses, net of revenue     518      
Adjusted EBITDA   $ 1,521     $ 1,065
         
         

(1) Included non-cash portion of lease expenses