Fiesta Restaurant Group, Inc. Reports Second Quarter 2023 Results

Second Quarter 2023 Comparable Restaurant Sales Growth of 9.6% vs. Second Quarter 2022

Aug 7, 2023 - 10:21

Fiesta Restaurant Group, Inc. (NASDAQ: FRGI), parent company of the Pollo Tropical restaurant brand, today reported results for the 13-week second quarter, which ended on July 2, 2023 and provided a business update related to current operations.

As announced separately today, the Company has entered into a definitive agreement to be acquired by affiliates of Garnett Station Partners for $8.50 per share in cash. Please see our press release and 8-K filed today for additional details.

Fiesta President and Chief Executive Officer Dirk Montgomery said, "Our focus on building traffic resulted in year-over-year comparable transaction growth of 3.6% and comparable sales growth of 9.6%. The growth initiatives we shared previously have improved our traffic growth, which continued into July with comparable transaction growth of 3.9%.”

Montgomery added, “We delivered across all four of our previously identified key initiatives – all of which are aimed at creating growth across our business by increasing traffic and driving margin expansion. As a reminder, the initiatives are: 1) Building operations excellence; 2) Creating a great guest experience across all channels; 3) Enhancing the Pollo Tropical brand; and 4) Developing great teams. As a result of those initiatives, we made progress compared to the first quarter in key metrics including improved speed of service, higher guest satisfaction and reduced hourly and management turnover. We have also seen the impact of G&A expense efficiency initiatives, which resulted in our second quarter G&A expense coming in well below the second quarter of 2022 and the first quarter of 2023. We are making real progress toward our targeted G&A expense run rate of 8.5% to 9.0% of restaurant sales and expect that progress to continue over the remainder of 2023.”

Montgomery continued, "Second quarter 2023 income from operations was $4.1 million and 3.9% of restaurant sales compared to a loss from operations in the second quarter 2022 of $(5.3) million and (5.4%) of restaurant sales. The increase in income from operations was primarily driven by increased restaurant sales and higher Restaurant-level Operating Profit compared to the second quarter 2022. Second quarter Restaurant-level Operating Profit(1), a non-GAAP financial measure, increased 20% from the first quarter of 2022 and was well above the second quarter of 2022, driven by our comparable restaurant sales growth and margin improvement actions.”

Montgomery further commented, “Second quarter Restaurant-level Operating Profit Margins improved to 19.3%, reflecting our strong comparable transaction growth and phased pricing actions in 2022 and March 2023. Second quarter 2023 margins benefitted from lower than expected advertising expense due to timing shifts. We expect second half 2023 advertising expense to be above the second quarter 2023 levels with full year 2023 advertising expense as a percentage of sales of 3.5%. In addition, second quarter workers compensation expense was below historic run rates and is expected to trend back to historic levels. After taking into account those favorable items in the second quarter, we are pleased that our Restaurant-level Operating Margin exceeded our targeted level of 18% or more, and we will continue to target Restaurant-level Operating Profit Margins of 18.0% or greater through ongoing transaction growth and margin improvement initiatives."

Montgomery concluded, "We are proud of our progress in the second quarter, and will continue to focus on driving traffic and margins during the remainder of 2023."

_____________________________

  1. Formerly Restaurant-level Adjusted EBITDA. See non-GAAP reconciliation table below.

Second Quarter 2023 Financial Summary

  • Total revenues increased 8.5% to $106.8 million in the second quarter of 2023 from $98.5 million in the second quarter of 2022;
  • Comparable restaurant sales at Pollo Tropical increased 9.6% in the second quarter of 2023 compared to the second quarter of 2022;
  • Net income of $3.9 million, or $0.15 per diluted share, in the second quarter of 2023, compared to net loss of $(6.2) million, or $(0.25) per diluted share, in the second quarter of 2022;
  • Net income from continuing operations of $3.8 million, or $0.15 per diluted share, in the second quarter of 2023, compared to net loss from continuing operations of $(6.5) million, or $(0.26) per diluted share, in the second quarter of 2022;
  • Adjusted net income (a non-GAAP financial measure) of $4.9 million, or $0.19 per diluted share, in the second quarter of 2023, compared to adjusted net loss of $(3.3) million, or $(0.14) per diluted share, in the second quarter of 2022 (see non-GAAP reconciliation table below);
  • Consolidated Adjusted EBITDA (a non-GAAP financial measure) of $11.1 million in the second quarter of 2023 compared to $5.7 million in the second quarter of 2022 (see non-GAAP reconciliation table below);
  • Income from Operations of $4.1 million, or 3.9% of restaurant sales, in the second quarter of 2023 compared to a loss from operations of $(5.3) million, or (5.4)% of restaurant sales, in the second quarter of 2022; and
  • Restaurant-level Operating Profit (formerly Restaurant-level Adjusted EBITDA, a non-GAAP financial measure) of $20.6 million, or 19.3% of Pollo Tropical restaurant sales, in the second quarter of 2023 compared to $14.9 million, or 15.2% of Pollo Tropical restaurant sales, in the second quarter of 2022 (see non-GAAP reconciliation table below).

Second Quarter and July 2023 Comparable Restaurant Statistics to Second Quarter and July 2022

 

Fiscal
April

Fiscal
May

Fiscal
June

Second

Quarter 2023

Fiscal

July

Sales

7.3

%

11.6

%

9.7

%

9.6

%

9.3

%

Transactions

1.1

%

5.1

%

4.5

%

3.6

%

3.9

%

Net impact of product
channel mix and pricing

6.2

%

6.5

%

5.2

%

6.0

%

5.4

%

  • April 2023 comparable restaurant sales vs. 2022 were negatively impacted by the effects of severe rainstorms and flooding in South Florida. After adjusting for the impact of the severe weather event, we estimate that April 2023 comparable restaurant sales would have been higher by approximately 80 basis points.

Cash and Liquidity

Excluding $3.6 million in restricted cash, our cash balance increased from $30.1 million at April 2, 2023 to $34.7 million at July 2, 2023 primarily due to an increase in Consolidated Adjusted EBITDA and the receipt of insurance proceeds related to the Texas winter storm in 2021 for Taco Cabana. We expect to continue to generate positive operating cash flows and increase our cash balance through the balance of the year through traffic growth and margin improvement.

Second Quarter Pollo Tropical Results

Total Pollo Tropical restaurant sales increased 8.8% to $106.6 million in the second quarter of 2023 compared to $98.0 million in the second quarter of 2022 primarily due to a comparable restaurant sales increase of 9.6%. The increase in comparable restaurant sales resulted from a net impact of pricing and product/channel mix of 6.0% and an increase in comparable restaurant transactions of 3.6%. The increase in pricing and product/channel mix was driven primarily by menu price increases of 9.9% and increases in dine-in and delivery average check. Pollo Tropical dine-in and counter take-out comparable restaurant sales increased from the second quarter of 2022 to the second quarter of 2023 driven primarily by increased transactions as more customers continue to move back to dine-in. Delivery growth continued to be strong in the second quarter of 2023, with 20.7% comparable restaurant sales growth vs. the second quarter of 2022 and average check growth of 5.3% vs. the second quarter of 2022.

 

 

 

 

Comparable Restaurant Sales Mix by Channel - Pollo Tropical

Channel

 

Second Quarter
2023

 

% of Total

 

Second Quarter
2022

 

% of Total

($ in thousands)

 

 

 

 

 

 

 

 

Counter

 

$

33,904

 

32

%

 

$

29,672

 

31

%

Drive-thru

 

 

53,894

 

52

%

 

 

50,972

 

54

%

Delivery

 

 

12,456

 

12

%

 

 

10,316

 

11

%

Online

 

 

3,106

 

3

%

 

 

3,295

 

3

%

Catering

 

 

1,208

 

1

%

 

 

1,121

 

1

%

Total

 

$

104,568

 

100

%

 

$

95,376

 

100

%

Net income increased to $3.9 million in the second quarter of 2023 from net loss of $(6.2) million in the second quarter of 2022. This was primarily due to higher restaurant sales, timing in advertising expense, and higher Restaurant-level Operating Profit. Full year 2023 advertising expense is targeted to be approximately 3.5% of restaurant sales. In addition, second quarter 2023 workers compensation expense as a percentage of sales was approximately 40 basis points below 2022 and first quarter 2023 historical run rates. We expect future claims to trend toward historical levels. Consolidated Adjusted EBITDA (a non-GAAP financial measure) increased to $11.1 million in the second quarter of 2023 from $5.7 million in the second quarter of 2022. The increase was primarily due to the impact of higher restaurant sales partially offset by higher insurance costs, as well as higher commodity costs within cost of sales.

Pricing action has been taken to offset labor, food and operating cost increases and regain margins. In order to minimize sales traffic risk, we have taken a phased approach to menu price increases and are also targeting lower pricing increases on menu items purchased by value-conscious customers, including our Pollo Time!TM promotional items. Price increases taken include a 5.0% increase in March 2022, a 1.4% increase in June 2022, a 4.0% increase in September 2022, and a 5.0% increase in March 2023. As a result of the phased approach to menu price increases, margin improvement has been trailing the impact of cost increases, with improved year over year margin improvement expected to continue compared to 2022, barring unforeseen changes in our cost structure and operating environment. Cost of sales margins improved year over year due to menu price increases, the impact of higher restaurant sales, and reduced commodity costs as a result of non-recurring additional chicken costs in 2022 related to utilizing a back-up supplier from May 2022 to early July 2022 due to a short-term capacity disruption experienced by our primary chicken supplier.

Income from Operations of $4.1 million, or 3.9% of restaurant sales, in the second quarter of 2023 increased compared to loss from operations of $(5.3) million, or (5.4)% of restaurant sales, in the second quarter of 2022. Restaurant-level Operating Profit (a non-GAAP financial measure) as a percentage of restaurant sales increased, with second quarter Restaurant-level Operating Profit as a percentage of restaurant sales of 19.3% in the second quarter of 2023 compared to 15.2% in the second quarter of 2022 (see non-GAAP reconciliation table below).

General and Administrative expenses were $10.7 million for the second quarter of 2023 and $12.8 million for the second quarter of 2022 and, as a percentage of total revenues decreased to 10.0% in the second quarter of 2023 from 13.0% in the second quarter of 2022 due primarily to lower employee and other support costs, as well as lower professional fees and legal costs, coupled with higher total revenue. General and administrative expenses for the second quarter of 2023 included $0.4 million in non-recurring expenses comprised of $0.3 million of professional fees and $0.2 million of general and administrative efficiency initiative costs. General and administrative expenses for the second quarter of 2022 included $1.7 million in non-recurring expenses comprised of $1.2 million of professional fees, $0.3 million of digital platform costs, and $0.2 million of general and administrative efficiency initiative costs.

Refresh and Remodel Status and Results

Our refresh/remodel program is generating a sales lift in comparison to Pollo Tropical local market unit restaurant sales trends. Sales lift on refreshed units is based on sales in the respective units for the 4-weeks prior to the commencement of the project compared to the sales after reopening the unit for full operations, excluding units with non-recurring events impacting the comparability of the unit's respective results. Through the second quarter of 2023, 40 refreshes and remodels have been completed.

Restaurant Portfolio

As of July 2, 2023, there were 134 Company-owned Pollo Tropical restaurants, and 28 franchised Pollo Tropical restaurants in the U.S., Puerto Rico, Panama, Guyana, and the Bahamas.

About Fiesta Restaurant Group, Inc.

Fiesta Restaurant Group, Inc., owns, operates and franchises the Pollo Tropical restaurant brand. The brand features fresh-made cooking, offering distinct and unique flavors with broad appeal at a compelling value through dine-in service, drive-thru service and catering.

FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JULY 2, 2023 AND JULY 3, 2022

(In thousands, except share and per share data)

(Unaudited)




 

 

Three Months Ended (a)

 

Six Months Ended (a)

 

July 2, 2023

 

July 3, 2022

 

July 2, 2023

 

July 3, 2022

Revenues:

 

 

 

 

 

 

 

Restaurant sales

$

106,637

 

 

$

98,023

 

 

$

209,701

 

 

$

193,223

 

Franchise royalty revenues and fees

 

206

 

 

 

464

 

 

 

513

 

 

 

873

 

Total revenues

 

106,843

 

 

 

98,487

 

 

 

210,214

 

 

 

194,096

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales

 

32,568

 

 

 

32,580

 

 

 

65,180

 

 

 

63,327

 

Restaurant wages and related expenses (b)

 

25,878

 

 

 

24,583

 

 

 

52,268

 

 

 

48,157

 

Restaurant rent expense

 

6,110

 

 

 

5,976

 

 

 

12,191

 

 

 

12,003

 

Other restaurant operating expenses

 

18,410

 

 

 

16,755

 

 

 

36,034

 

 

 

33,405

 

Advertising expense

 

3,116

 

 

 

3,245

 

 

 

6,312

 

 

 

6,109

 

General and administrative expenses (b)(c)

 

10,729

 

 

 

12,791

 

 

 

23,912

 

 

 

25,133

 

Depreciation and amortization

 

4,822

 

 

 

5,232

 

 

 

9,214

 

 

 

10,346

 

Impairment and other lease charges (recoveries) (d)

 

685

 

 

 

2,110

 

 

 

2,941

 

 

 

1,408

 

Closed restaurant rent, net of sublease income (e)

 

238

 

 

 

401

 

 

 

(46

)

 

 

781

 

Other expense (income), net (f)

 

157

 

 

 

83

 

 

 

172

 

 

 

134

 

Total operating expenses

 

102,713

 

 

 

103,756

 

 

 

208,178

 

 

 

200,803

 

Income (loss) from operations

 

4,130

 

 

 

(5,269

)

 

 

2,036

 

 

 

(6,707

)

Interest expense (income), net

 

(81

)

 

 

85

 

 

 

2

 

 

 

170

 

Income (loss) from continuing operations before taxes

 

4,211

 

 

 

(5,354

)

 

 

2,034

 

 

 

(6,877

)

Provision for income taxes

 

382

 

 

 

1,134

 

 

 

349

 

 

 

912

 

Income (loss) from continuing operations

 

3,829

 

 

 

(6,488

)

 

 

1,685

 

 

 

(7,789

)

Income from discontinued operations, net of tax

 

30

 

 

 

267

 

 

 

265

 

 

 

212

 

Net income (loss)

$

3,859

 

 

$

(6,221

)

 

$

1,950

 

 

$

(7,577

)

Earnings (loss) per common share:

 

 

 

 

 

 

 

Continuing operations – basic

$

0.15

 

 

$

(0.26

)

 

$

0.06

 

 

$

(0.31

)

Discontinued operations – basic

 

 

 

 

0.01

 

 

 

0.01

 

 

 

0.01

 

Basic

$

0.15

 

 

$

(0.25

)

 

$

0.07

 

 

$

(0.30

)

 

 

 

 

 

 

 

 

Continuing operations – diluted

$

0.15

 

 

$

(0.26

)

 

$

0.06

 

 

$

(0.31

)

Discontinued operations – diluted

 

 

 

 

0.01

 

 

 

0.01

 

 

 

0.01

 

Diluted

$

0.15

 

 

$

(0.25

)

 

$

0.07

 

 

$

(0.30

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

25,566,740

 

 

 

24,946,674

 

 

 

25,493,415

 

 

 

24,889,650

 

Diluted

 

25,566,740

 

 

 

24,946,674

 

 

 

25,493,415

 

 

 

24,889,650

 

(a) The Company uses a 52- or 53-week fiscal year that ends on the Sunday closest to December 31. The three- and six-month periods ended July 2, 2023 and July 3, 2022 each included 13 and 26 weeks, respectively.

(b) Restaurant wages and related expenses include stock-based compensation of $0 and $6 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $4 and $13 for the six months ended July 2, 2023 and July 3, 2022, respectively. General and administrative expenses include stock-based compensation expense of $638 and $1,388 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $1,233 and $2,011 for the six months ended July 2, 2023 and July 3, 2022, respectively.

(c) See notes (e), (f), (g) and (h) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."

(d) See note (b) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."

(e) See note (c) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."

(f) See note (d) to the reconciliation of net income (loss) to adjusted net income (loss) in the tables titled "Supplemental Non-GAAP Information."

FIESTA RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)




 

 

July 2, 2023

 

January 1, 2023

Assets

 

 

 

Cash

$

34,747

 

$

32,167

Other current assets

 

21,745

 

 

20,524

Property and equipment, net

 

87,018

 

 

87,106

Operating lease right-of-use assets

 

143,861

 

 

146,681

Goodwill

 

56,307

 

 

56,307

Other assets

 

5,186

 

 

5,906

Total assets

$

348,864

 

$

348,691

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current portion of long-term debt

$

40

 

$

62

Other current liabilities

 

40,912

 

 

40,240

Long-term debt, net of current portion

 

347

 

 

367

Operating lease liabilities

 

152,613

 

 

155,355

Deferred tax liabilities

 

16

 

 

202

Other non-current liabilities

 

7,072

 

 

7,208

Total liabilities

 

201,000

 

 

203,434

Stockholders' equity

 

147,864

 

 

145,257

Total liabilities and stockholders' equity

$

348,864

 

$

348,691

FIESTA RESTAURANT GROUP, INC.

Supplemental Information

The following table sets forth certain unaudited supplemental financial and other data for the periods indicated

(In thousands, except percentages):




 

 

(Unaudited)

 

(Unaudited)

 

Three Months Ended

 

Six Months Ended

 

July 2, 2023

 

July 3, 2022

 

July 2, 2023

 

July 3, 2022

Revenues:

 

 

 

 

 

 

 

Pollo Tropical

$

106,843

 

 

$

98,487

 

 

$

210,214

 

 

$

194,096

 

 

 

 

 

 

 

 

 

Change in comparable restaurant sales (a):

 

 

 

 

 

 

 

Pollo Tropical

 

9.6

%

 

 

8.4

%

 

 

9.7

%

 

 

8.2

%

 

 

 

 

 

 

 

 

Average sales per Company-owned restaurant:

 

 

 

 

 

 

 

Pollo Tropical

 

 

 

 

 

 

 

Comparable restaurants (b)

$

797

 

 

$

715

 

 

$

1,557

 

 

$

1,408

 

Non-comparable restaurants (c)

 

749

 

 

 

439

 

 

 

1,114

 

 

 

932

 

Total Company-owned (d)

 

796

 

 

 

710

 

 

 

1,548

 

 

 

1,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before taxes

$

4,211

 

 

$

(5,354

)

 

$

2,034

 

 

$

(6,877

)

 

 

 

 

 

 

 

 

Consolidated Adjusted EBITDA (e)

$

11,081

 

 

$

5,656

 

 

$

17,607

 

 

$

10,948

 

 

 

 

 

 

 

 

 

Restaurant-level Operating Profit (e):

$

20,555

 

 

$

14,890

 

 

$

37,720

 

 

$

30,235

 

(a) Restaurants are included in comparable restaurant sales after they have been open for 18 months or longer. Restaurants are excluded from comparable restaurant sales for any fiscal month in which the restaurant was closed for more than five days. Comparable restaurant sales are compared to the same period in the prior year.

(b) Comparable restaurants are restaurants that have been open for 18 months or longer. Average sales for comparable Company-owned restaurants are derived by dividing comparable restaurant sales for such period by the average number of comparable restaurants for such period.

(c) Non-comparable restaurants are restaurants that have been open for less than 18 months, or that were temporarily closed during the period. Average sales for new Company-owned restaurants are derived by dividing new restaurant sales for such period by the average number of new restaurants for such period.

(d) Average sales for total Company-owned restaurants are derived by dividing restaurant sales for such period by the average number of open restaurants for such period.

(e) Consolidated Adjusted EBITDA and Restaurant-level Operating Profit (formerly Restaurant-level Adjusted EBITDA), are non-GAAP financial measures. Please see the reconciliation from net income (loss) to Consolidated Adjusted EBITDA and Restaurant-level Operating Profit in the table titled "Supplemental Non-GAAP Information."

FIESTA RESTAURANT GROUP, INC.

Supplemental Information

The following table sets forth certain unaudited supplemental data for the periods indicated:




 

 

Three Months Ended

 

Six Months Ended

 

July 2, 2023

 

July 3, 2022

 

July 2, 2023

 

July 3, 2022

Company-owned restaurant openings:

 

 

 

 

 

 

 

Pollo Tropical

 

 

 

 

 

 

 

 

 

 

 

 

 

Company-owned restaurant closings:

 

 

 

 

 

 

 

Pollo Tropical

(3

)

 

 

(3

)

 

 

 

 

 

 

 

 

 

Number of Company-owned restaurants:

 

 

 

 

 

 

 

Pollo Tropical

134

 

 

138

 

134

 

 

138

 

 

 

 

 

 

 

 

Number of franchised restaurants:

 

 

 

 

 

 

 

Pollo Tropical

28

 

 

29

 

28

 

 

29

 

 

 

 

 

 

 

 

Total number of restaurants:

 

 

 

 

 

 

 

Pollo Tropical

162

 

 

167

 

162

 

 

167

FIESTA RESTAURANT GROUP, INC.

Supplemental Information

The following table sets forth certain unaudited supplemental financial and other data for the periods indicated

(In thousands, except percentages):


 

 

Three Months Ended

 

July 2, 2023

 

July 3, 2022

 

 

(a)

 

 

(a)

Restaurant sales

$

106,637

 

 

 

$

98,023

 

Cost of sales

 

32,568

 

30.5

%

 

 

32,580

33.2

%

Restaurant wages and related expenses

 

25,878

 

24.3

%

 

 

24,583

25.1

%

Restaurant rent expense

 

6,110

 

5.7

%

 

 

5,976

6.1

%

Other restaurant operating expenses

 

18,410

 

17.3

%

 

 

16,755

17.1

%

Advertising expense

 

3,116

 

2.9

%

 

 

3,245

3.3

%

Depreciation and amortization

 

4,822

 

4.5

%

 

 

5,232

5.3

%

Impairment and other lease charges (recoveries)

 

685

 

0.6

%

 

 

2,110

2.2

%

Closed restaurant rent expense, net of sublease income

 

238

 

0.2

%

 

 

401

0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

July 2, 2023

 

July 3, 2022

 

 

(a)

 

 

(a)

Restaurant sales

$

209,701

 

 

 

$

193,223

 

Cost of sales

 

65,180

 

31.1

%

 

 

63,327

32.8

%

Restaurant wages and related expenses

 

52,268

 

24.9

%

 

 

48,157

24.9

%

Restaurant rent expense

 

12,191

 

5.8

%

 

 

12,003

6.2

%

Other restaurant operating expenses

 

36,034

 

17.2

%

 

 

33,405

17.3

%

Advertising expense

 

6,312

 

3.0

%

 

 

6,109

3.2

%

Depreciation and amortization

 

9,214

 

4.4

%

 

 

10,346

5.4

%

Impairment and other lease charges (recoveries)

 

2,941

 

1.4

%

 

 

1,408

0.7

%

Closed restaurant rent expense, net of sublease income

 

(46

)

%

 

 

781

0.4

%

(a) Percent of restaurant sales.

FIESTA RESTAURANT GROUP, INC.

Supplemental Non-GAAP Information

The following table sets forth certain unaudited supplemental financial data for the periods indicated

(In thousands):

Consolidated Adjusted EBITDA and margin and Restaurant-level Operating Profit (formerly Restaurant-level Adjusted EBITDA), and margin are non-GAAP financial measures. Consolidated Adjusted EBITDA is defined as earnings (loss) before interest expense (income), net, income taxes, depreciation and amortization, impairment and other lease charges (recoveries), goodwill impairment, closed restaurant rent expense, net of sublease income, stock-based compensation expense, other expense (income), net, and certain significant items that are related to strategic changes and/or are not related to the ongoing operation of our restaurants as set forth in the reconciliation table below. Restaurant-level Operating Profit is defined as Consolidated Adjusted EBITDA excluding franchise royalty revenues and fees, pre-opening costs and general and administrative expenses (including corporate-level general and administrative expenses).

Consolidated Adjusted EBITDA is the primary measure of profit or loss used by our chief operating decision maker for purposes of assessing performance. In addition, management believes that Consolidated Adjusted EBITDA and Restaurant-level Operating Profit, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of net income (loss) to Consolidated Adjusted EBITDA and Restaurant-level Operating Profit (i) provide useful information about our operating performance and period-over-period changes, (ii) provide additional information that is useful for evaluating the operating performance of our business, and (iii) permit investors to gain an understanding of the factors and trends affecting our ongoing earnings, from which capital investments are made and debt is serviced. However, such measures are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies.

 

Three Months Ended

 

Six Months Ended

 

July 2, 2023

 

July 3, 2022

 

July 2, 2023

 

July 3, 2022

Net income (loss)

$

3,859

 

 

$

(6,221

)

 

$

1,950

 

 

$

(7,577

)

Income from discontinued operations, net of tax

 

(30

)

 

 

(267

)

 

 

(265

)

 

 

(212

)

Provision for income taxes

 

382

 

 

 

1,134

 

 

 

349

 

 

 

912

 

Income (loss) from continuing operations before taxes

 

4,211

 

 

 

(5,354

)

 

 

2,034

 

 

 

(6,877

)

Add:

 

 

 

 

 

 

 

Non-general and administrative adjustments:

 

 

 

 

 

 

 

Depreciation and amortization

 

4,822

 

 

 

5,232

 

 

 

9,214

 

 

 

10,346

 

Impairment and other lease charges (recoveries)

 

685

 

 

 

2,110

 

 

 

2,941

 

 

 

1,408

 

Interest expense (income), net

 

(81

)

 

 

85

 

 

 

2

 

 

 

170

 

Closed restaurant rent expense, net of sublease income

 

238

 

 

 

401

 

 

 

(46

)

 

 

781

 

Other expense (income), net

 

157

 

 

 

83

 

 

 

172

 

 

 

134

 

Stock-based compensation expense

 

 

 

 

6

 

 

 

4

 

 

 

13

 

Total non-general and administrative adjustments

 

5,821

 

 

 

7,917

 

 

 

12,287

 

 

 

12,852

 

General and administrative adjustments:

 

 

 

 

 

 

 

Stock-based compensation expense

 

638

 

 

 

1,388

 

 

 

1,233

 

 

 

2,011

 

Non-recurring professional fees(a)

 

255

 

 

 

1,197

 

 

 

420

 

 

 

1,902

 

G&A efficiency initiatives(b)

 

156

 

 

 

193

 

 

 

825

 

 

 

454

 

Restructuring costs(c)

 

 

 

 

 

 

 

717

 

 

 

 

Digital costs(d)

 

 

 

 

315

 

 

 

91

 

 

 

606

 

Total general and administrative adjustments

 

1,049

 

 

 

3,093

 

 

 

3,286

 

 

 

4,973

 

Consolidated Adjusted EBITDA

$

11,081

 

 

$

5,656

 

 

$

17,607

 

 

$

10,948

 

Total revenues

$

106,843

 

 

$

98,487

 

 

$

210,214

 

 

$

194,096

 

Net income (loss) as a percentage of total revenues

 

3.6

%

 

 

(6.3

)%

 

 

0.9

%

 

 

(3.9

)%

Consolidated Adjusted EBITDA as a percentage of total
revenues

 

10.4

%

 

 

5.7

%

 

 

8.4

%

 

 

5.6

%

(a) Non-recurring professional fees consist of costs related to growth initiatives.

(b) G&A efficiency initiatives consist of non-recurring retention bonus costs and costs related to the acceleration and write-off of costs related to accounting system implementation.

(c) Restructuring costs for the six months ended July 2, 2023 include severance costs related to the departure of a former executive, CEO search firm fees, and eliminated positions related to the accounting outsourcing.

(d) Digital costs for the six months ended July 2, 2023 and the three and six months ended July 3, 2022 include costs related to enhancing the digital experience for our customers.

 

Three Months Ended

 

Six Months Ended

 

July 2, 2023

 

July 3, 2022

 

July 2, 2023

 

July 3, 2022

Income (loss) from operations

$

4,130

 

 

$

(5,269

)

 

$

2,036

 

 

$

(6,707

)

Add:

 

 

 

 

 

 

 

Non-general and administrative adjustments:

 

 

 

 

 

 

 

Depreciation and amortization

 

4,822

 

 

 

5,232

 

 

 

9,214

 

 

 

10,346

 

Impairment and other lease charges (recoveries)

 

685

 

 

 

2,110

 

 

 

2,941

 

 

 

1,408

 

Closed restaurant rent expense, net of sublease income

 

238

 

 

 

401

 

 

 

(46

)

 

 

781

 

Other expense (income), net

 

157

 

 

 

83

 

 

 

172

 

 

 

134

 

Stock-based compensation expense

 

 

 

 

6

 

 

 

4

 

 

 

13

 

Total non-general and administrative adjustments

 

5,902

 

 

 

7,832

 

 

 

12,285

 

 

 

12,682

 

General and administrative adjustments:

 

 

 

 

 

 

 

Stock-based compensation expense

 

638

 

 

 

1,388

 

 

 

1,233

 

 

 

2,011

 

Non-recurring professional fees

 

255

 

 

 

1,197

 

 

 

420

 

 

 

1,902

 

G&A efficiency initiatives

 

156

 

 

 

193

 

 

 

825

 

 

 

454

 

Restructuring costs

 

 

 

 

 

 

 

717

 

 

 

 

Digital costs

 

 

 

 

315

 

 

 

91

 

 

 

606

 

Total general and administrative adjustments

 

1,049

 

 

 

3,093

 

 

 

3,286

 

 

 

4,973

 

Consolidated Adjusted EBITDA

$

11,081

 

 

$

5,656

 

 

$

17,607

 

 

$

10,948

 

Restaurant-level adjustments:

 

 

 

 

 

 

 

Add: Other general and administrative expense(a)

 

9,680

 

 

 

9,698

 

 

 

20,626

 

 

 

20,160

 

Less: Franchise royalty revenue and fees

 

206

 

 

 

464

 

 

 

513

 

 

 

873

 

Restaurant-level Operating Profit

$

20,555

 

 

$

14,890

 

 

$

37,720

 

 

$

30,235

 

Restaurant sales

$

106,637

 

 

$

98,023

 

 

$

209,701

 

 

$

193,223

 

Income (loss) from operations as a percentage of restaurant
sales

 

3.9

%

 

 

(5.4

)%

 

 

1.0

%

 

 

(3.5

)%

Restaurant-level Operating Profit as a percentage of
restaurant sales

 

19.3

%

 

 

15.2

%

 

 

18.0

%

 

 

15.6

%

(a) Excludes general and administrative adjustments above.

FIESTA RESTAURANT GROUP, INC.

Supplemental Non-GAAP Information

The following table sets forth certain unaudited supplemental financial data for the periods indicated

(In thousands of dollars, except per share amounts):

Adjusted net income (loss) and related adjusted diluted earnings (loss) per share are non-GAAP financial measures. Adjusted net income (loss) is defined as net income (loss) before discontinued operations, impairment and other lease charges (recoveries), goodwill impairment, closed restaurant rent expense, net of sublease income, other expense (income), net, and other significant items that are related to strategic changes and/or are not related to the ongoing operation of our restaurants. Management believes that adjusted net income (loss) and related adjusted earnings (loss) per diluted share, when viewed with our results of operations calculated in accordance with GAAP (i) provide useful information about our operating performance and period-over-period growth, (ii) provide additional information that is useful for evaluating the operating performance of our business, and (iii) permit investors to gain an understanding of the factors and trends affecting our ongoing earnings, from which capital investments are made and debt is serviced. However, such measures are not measures of financial performance or liquidity under GAAP and, accordingly should not be considered as alternatives to net income or net income per share as indicators of operating performance or liquidity. Also, these measures may not be comparable to similarly titled captions of other companies.

 

 

(Unaudited)

 

 

Three Months Ended

 

 

July 2, 2023

 

July 3, 2022

 

 

Income
Before
Income
Taxes

 

Provision
For Income
Taxes (a)

 

Net
Income

 

Diluted
EPS

 

Loss
Before
Income
Taxes

 

Provision
For Income
Taxes (a)

 

Net
Loss

 

Diluted
EPS

Reported - GAAP Net income (loss)

 

 

 

 

 

$

3,859

 

 

$

0.15

 

 

 

 

 

 

$

(6,221

)

 

$

(0.25

)

Income from discontinued operations, net of tax

 

 

 

 

 

 

(30

)

 

 

 

 

 

 

 

 

 

(267

)

 

 

(0.01

)

Income (loss) from continuing operations

 

$

4,211

 

 

$

382

 

 

$

3,829

 

 

$

0.15

 

 

$

(5,354

)

 

$

1,134

 

$

(6,488

)

 

$

(0.26

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-general and administrative expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment and other lease charges (recoveries) (b)

 

 

685

 

 

 

171

 

 

 

514

 

 

 

0.02

 

 

 

2,110

 

 

 

526

 

 

1,584

 

 

 

0.06

 

Closed restaurant rent expense, net of sublease income (c)

 

 

238

 

 

 

59

 

 

 

179

 

 

 

0.01

 

 

 

401

 

 

 

100

 

 

301

 

 

 

0.01

 

Other expense (income), net (d)

 

 

157

 

 

 

39

 

 

 

118

 

 

 

 

 

 

83

 

 

 

21

 

 

62

 

 

 

 

Total non-general and administrative expense

 

 

1,080

 

 

 

269

 

 

 

811

 

 

 

0.03

 

 

 

2,594

 

 

 

647

 

 

1,947

 

 

 

0.07

 

General and administrative expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-recurring professional fees (e)

 

 

255

 

 

 

64

 

 

 

191

 

 

 

0.01

 

 

 

1,197

 

 

 

298

 

 

899

 

 

 

0.04

 

G&A efficiency initiatives (f)

 

 

156

 

 

 

39

 

 

 

117

 

 

 

 

 

 

193

 

 

 

48

 

 

145

 

 

 

 

Digital costs (h)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

315

 

 

 

79

 

 

236

 

 

 

0.01

 

Total general and administrative expense

 

 

411

 

 

 

103

 

 

 

308

 

 

 

0.01

 

 

 

1,705

 

 

 

425

 

 

1,280

 

 

 

0.05

 

Adjusted - Non-GAAP

 

$

5,702

 

 

$

754

 

 

$

4,948

 

 

$

0.19

 

 

$

(1,055

)

 

$

2,206

 

$

(3,261

)

 

$

(0.14

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

Six months ended

 

 

July 2, 2023

 

July 3, 2022

 

 

Income
Before
Income
Taxes

 

Provision
For Income
Taxes (a)

 

Net
Income

 

Diluted
EPS

 

Loss
Before
Income
Taxes

 

Provision
For Income
Taxes (a)

 

Net
Loss

 

Diluted
EPS

Reported - GAAP Net income (loss)

 

 

 

 

 

$

1,950

 

 

$

0.07

 

 

 

 

 

 

$

(7,577

)

 

$

(0.30

)

Income from discontinued operations, net of tax

 

 

 

 

 

 

(265

)

 

 

(0.01

)

 

 

 

 

 

 

(212

)

 

 

(0.01

)

Income (loss) from continuing operations

 

$

2,034

 

M

$

349

 

 

$

1,685

 

 

$

0.06

 

 

$

(6,877

)

 

$

912

 

$

(7,789

)

 

$

(0.31

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-general and administrative expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment and other lease charges (recoveries) (b)

 

 

2,941

 

 

 

733

 

 

 

2,208

 

 

 

0.08

 

 

 

1,408

 

 

 

351

 

 

1,057

 

 

 

0.04

 

Closed restaurant rent expense, net of sublease income (c)

 

 

(46

)

 

 

(11

)

 

 

(35

)

 

 

 

 

 

781

 

 

 

195

 

 

586

 

 

 

0.02

 

Other expense (income), net (d)

 

 

172

 

 

 

43

 

 

 

129

 

 

 

0.01

 

 

 

134

 

 

 

33

 

 

101

 

 

 

0.01

 

Total non-general and administrative expense

 

 

3,067

 

 

 

765

 

 

 

2,302

 

 

 

0.09

 

0

 

2,323

 

 

 

579

 

 

1,744

 

 

 

0.07

 

General and administrative expense adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-recurring professional fees (e)

 

 

420

 

 

 

105

 

 

 

315

 

 

 

0.02

 

 

 

1,902

 

 

 

474

 

 

1,428

 

 

 

0.06

 

G&A efficiency initiatives (f)

 

 

825

 

 

 

206

 

 

 

619

 

 

 

0.02

 

 

 

454

 

 

 

113

 

 

341

 

 

 

0.01

 

Restructuring costs (g)

 

 

717

 

 

 

179

 

 

 

538

 

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

Digital costs (h)

 

 

91

 

 

 

23

 

 

 

68

 

 

 

 

 

 

606

 

 

 

151

 

 

455

 

 

 

0.02

 

Total general and administrative expense

 

 

2,053

 

 

 

513

 

 

 

1,540

 

 

 

0.06

 

 

 

2,962

 

 

 

738

 

 

2,224

 

 

 

0.09

 

Adjusted - Non-GAAP

 

 

7,154

 

 

 

1,627

 

 

 

5,527

 

 

 

0.21

 

 

 

(1,592

)

 

 

2,229

 

 

(3,821

)

 

 

(0.15

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) The provision for (benefit from) income taxes related to the adjustments was calculated using the Company's combined federal statutory and estimated state rate of 24.9% for both periods ending July 2, 2023 and July 3, 2022.

(b) Impairment and other lease charges (recoveries) for the three and six months ended July 2, 2023 consist of impairment charges of $1.4 million and other lease charges from lease terminations of $1.5 million. The impairment charges for the three and six months ended July 2, 2023 relate to the impairment of assets from four Pollo Tropical restaurants. Impairment and other lease charges (recoveries) for the three and six months ended July 3, 2022 consist of impairment charges of $2.2 million and, for the six months ended July 3, 2022, gains from lease terminations of $(0.7) million.

(c) Closed restaurant rent expense, net of sublease income, for the three months ended July 2, 2023 consists of closed restaurant lease costs of $2.0 million, net of sublease income of $(1.8) million. Closed restaurant rent expense, net of sublease income, for the three months ended July 3, 2022 consists of closed restaurant lease costs of $2.1 million, net of sublease income of $(1.7) million. Closed restaurant rent expense, net of sublease income, for the six months ended July 2, 2023 consists of closed restaurant lease costs of $4.1 million, net of sublease income of $(4.1) million. Closed restaurant rent expense, net of sublease income, for the six months ended July 3, 2022 consists of closed restaurant lease costs of $4.3 million, net of sublease income of $(3.6) million.

(d) Other expense (income), net, for the three and six months ended July 2, 2023 and July 3, 2022 primarily consists of closed restaurant related costs.

(e) Non-recurring professional fees consist of costs related to growth initiatives.

(f) G&A efficiency initiatives consist of non-recurring retention bonus costs and costs related to the acceleration and write-off of costs related to accounting system implementation.

(g) Restructuring costs for the six months ended July 2, 2023 include severance costs related to the departure of a former executive, CEO search firm fees, and the eliminated positions related to the accounting outsourcing.

(h) Digital costs for the three and six months ended July 2, 2023 and July 3, 2022, include costs related to enhancing the digital experience for our customers.