FAT Brands Results

Fat Brands Inc. Reports Fiscal Second Quarter 2019 Financial Results

FAT Brands

FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ:FAT) reported fiscal second quarter 2019 financial results for the 13-week period ending June 30, 2019.

Andy Wiederhorn, President and CEO of FAT Brands, commented, “We are pleased to report that the considerable growth in revenues was matched by an equally robust increase in adjusted EBTDA and that we leveraged our G&A expenses on our expanded top-line.”

Wiederhorn continued, “We are also excited to have closed on our acquisition of Elevation Burger in June. The brand is well-aligned with our own commitment to fresh, authentic, tasty food and we are confident that it has considerable opportunity to expand domestically and internationally with its organic, free-range, grass-fed offerings. Elevation Burger reflects another synergistic opportunity for our unique FAT platform, which is designed to drive efficiencies and growth, and we look forward to pursuing additional transactions over time.”

Fiscal Second Quarter 2019 Highlights

  • Total revenues of $5.9 million, up 50.8% from $3.9 million in the second quarter of 2018. Excluding advertising revenues, revenues grew 48.4% to $4.9 million from $3.3 million in the second quarter of 2018.
  • System-wide sales growth of 26.3% y/y and 26.8% year-to-date
    • United States sales growth of 37.4% y/y and 38.8% year-to-date
    • Canada sales growth of 1.9% y/y and 4.9% year-to-date
    • Other International(1) sales growth of 2.4% y/y and (1.1%) year-to-date
  • System-wide same-store sales growth of (0.9%) y/y and (0.9)% year-to-date
    • Fatburger worldwide same-store sales growth of (1.7%) y/y, and (0.6%) y/y in North America
    • Fatburger worldwide same-store sales growth of 0.4% year-to-date, and 1.5% year-to-date in North America
    • Buffalo’s Cafe worldwide same-store sales growth of 0.8% y/y and 1.8% year-to-date
    • Hurricane Grill & Wings same-store sales growth of 4.9% y/y and 4.8% year-to-date
    • Ponderosa/Bonanza worldwide same-store sales growth of (2.7%) y/y and (4.5%) year-to-date
    • United States same-store sales growth of 0.7% y/y and 0.4% year-to-date
    • Canada same-store sales growth of (0.0%) y/y and 2.4% year-to-date
    • Other International(1) sales growth of (9.0%) y/y and (9.1%) year-to-date
  • Eight new franchised store openings
    • Ending store count: 386 stores system-wide
  • Net loss of $508,000 or $0.04 per share on a basic and fully diluted basis, as compared to net income of $373,000 or $0.04 per share on a basic and fully diluted basis in the second quarter of 2018
  • EBITDA(2) of $2.2 million as compared to $825,000 in the second quarter of 2018
  • Adjusted EBITDA(2) of $2.0 million as compared to $945,000 in the second quarter of 2018. The reconciliation of EBITDA to Adjusted EBITDA can be found in the accompanying financial tables.

(1)

 

Excludes Canada includes Puerto Rico. Puerto Rico is negatively impacted due to Hurricane Maria.

(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.

Recent Events

On June 3, 2019, the Company announced an offering of up to $30,000,000 of non-convertible preferred stock and common stock purchase warrants (the “Offering”). The Offering is being conducted on a “best efforts” basis pursuant to Regulation A of Section 3(6) of the Securities Act of 1933, as amended for Tier 2 Offerings and available to retail and institutional investors. The Company will offer up to 1,200,000 shares of 8.25% Series B Cumulative Preferred Stock (the “Series B Preferred Stock”) and warrants (the “Warrants”) initially exercisable to purchase an aggregate of 720,000 shares of Common Stock (NASDAQ: FAT). Each share of Series B Preferred Stock will be accompanied by a Warrant to purchase 0.60 shares of Common Stock at an exercise price of $8.50 per share. The shares of Series B Preferred Stock and accompanying Warrants are being offered at $25.00, for an aggregate offering amount of up to $30,000,000. Each Warrant will be immediately exercisable, and will expire on the five year anniversary of the date of issuance. The Offering will close on a rolling basis, subject to customary closing conditions, commencing upon qualification from the SEC.

On June 19, 2019 the Company successfully completed the acquisition of Elevation Burger for $10 million which was funded through a combination of sellers’ notes and cash. Delivering authentic, sustainably prepared food, Elevation Burger offers grass-fed, free-range options that are better for consumers and for the environment.

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 eight restaurant brands: Fatburger, Buffalo’s Cafe, Buffalo’s Express, Hurricane Grill & Wings, Elevation Burger, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses, and franchises over 400 units worldwide.

FAT Brands Inc. Consolidated Statements of Operations Data            
                 
                 
                 
    13 weeks ended

June 30, 2019

  13 weeks ended

July 1, 2018

  26 weeks ended

June 30, 2019

  26 weeks ended

July 1, 2018

                 
(in thousands)                
                 
Revenues                
Royalties  

$

3,663

 

$

2,860

 

$

7,127

 

$

5,432

Franchise fees  

 

994

 

 

299

 

 

1,306

 

 

698

Store opening fees  

 

184

 

 

105

 

 

289

 

 

105

Advertising fees  

 

1,031

 

 

630

 

 

2,008

 

 

1,226

Management fees and other income  

 

23

 

 

14

 

 

38

 

 

32

Total revenues  

 

5,895

 

 

3,908

 

 

10,768

 

 

7,493

                 
Costs and expenses                
General and administrative expenses  

 

2,959

 

 

2,451

 

 

5,542

 

 

4,499

Advertising expenses  

 

1,031

 

 

630

 

 

2,008

 

 

1,226

Refranchising restaurant costs and expenses, net of revenue  

 

503

 

 

-

 

 

1,021

 

 

-

   

 

4,493

 

 

3,081

 

 

8,571

 

 

5,725

                 
Income from operations  

 

1,402

 

 

827

 

 

2,197

 

 

1,768

                 
Other expense                
Interest expense, net  

 

(1,265)

 

 

(300)

 

 

(3,382)

 

 

(514)

Depreciation and amortization  

 

(147)

 

 

(40)

 

 

(278)

 

 

(73)

Other income (expense)  

 

846

 

 

(2)

 

 

870

 

 

(3)

Other expense, net  

 

(566)

 

 

(342)

 

 

(2,790)

 

 

(590)

                 
Income (loss) before income tax expense  

 

836

 

 

485

 

 

(593)

 

 

1,178

                 
Income tax expense  

$

1,344

 

$

112

 

$

625

 

$

296

                 
Net income (loss)  

$

(508)

 

$

373

 

$

(1,218)

 

$

882

Basic and diluted income (loss) per share  

$

(0.04)

 

$

0.04

 

$

(0.10)

 

$

0.09

Consolidated Balance Sheet for FAT Brands Inc. as of June 30, 2019
       
       
       
  As of June 30, 2019    
       
(in thousands)      
       
Cash

$

540

   
Total assets

$

78,188

   
Total liabilities

$

73,330

   
Total stockholders' equity

$

4,858

   
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation          
                 
    13 weeks ended

June 30, 2019

  13 weeks ended

July 1, 2018

  26 weeks ended

June 30, 2019

  26 weeks ended

July 1, 2018

                 
(in thousands)                
                 
Net income (loss)  

$

(508)

 

$

373

 

$

(1,218)

 

$

882

Interest expense, net  

 

1,265

 

 

300

 

 

3,382

 

 

514

Income tax expense  

 

1,344

 

 

112

 

 

625

 

 

296

Depreciation and amortization expense  

 

147

 

 

40

 

 

278

 

 

73

EBITDA  

$

2,248

 

$

825

 

$

3,067

 

$

1,765

Stock based compensation expenses  

 

78

 

 

120

 

 

159

 

 

245

Non-cash lease expenses (1)  

 

64

 

 

-

 

 

124

 

 

-

Acquisition costs  

 

120

 

 

-

 

 

197

 

 

-

Refranchising restaurant costs and expense, net of revenue  

 

503

 

 

-

 

 

1,021

 

 

-

Gain of sale of refranchised restaurants  

 

(970)

 

 

-

 

 

(970)

 

 

-

Adjusted EBITDA  

$

2,043

 

$

945

 

$

3,598

 

$

2,010

                 
                 
(1) Included non-cash lease expense costs related to new lease accounting standards



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