Fiesta Restaurant Group, Inc. Reports Second Quarter 2023 Results
Second Quarter 2023 Comparable Restaurant Sales Growth of 9.6% vs. Second Quarter 2022
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."
_____________________________
- 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 | Fiscal | Fiscal | 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 | 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 $98.0 million in the second quarter of 2022 primarily due to a comparable restaurant sales increase of 9.6%. The increase in comparable restaurant sales resulted from a net impact of pricing and product/channel mix of 6.0% and an increase in comparable restaurant transactions of 3.6%. The increase in pricing and product/channel mix was driven primarily by menu price increases of 9.9% and increases in dine-in and delivery average check. Pollo Tropical dine-in and counter take-out comparable restaurant sales increased from the second quarter of 2022 to the second quarter of 2023 driven primarily by increased transactions as more customers continue to move back to dine-in. Delivery growth continued to be strong in the second quarter of 2023, with 20.7% comparable restaurant sales growth vs. the second quarter of 2022 and average check growth of 5.3% vs. the second quarter of 2022.
|
| Comparable Restaurant Sales Mix by Channel - Pollo Tropical | ||||||||||
Channel |
| Second Quarter |
| % of Total |
| Second Quarter |
| % of Total | ||||
($ 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 |
| 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 |
| 3.9 | % |
|
| (5.4 | )% |
|
| 1.0 | % |
|
| (3.5 | )% |
Restaurant-level Operating Profit as a percentage of |
| 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 |
| Provision |
| Net |
| Diluted |
| Loss |
| Provision |
| Net |
| Diluted | |||||||||||||||
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 |
| Provision |
| Net |
| Diluted |
| Loss |
| Provision |
| Net |
| Diluted | |||||||||||||||
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.