FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT
Brands” or the “Company”) today reported fiscal second quarter 2021
financial results for the 13-week period ending June 27, 2021.
Andy Wiederhorn, President and CEO of FAT
Brands, commented, “We want to thank our franchise partners and
employees who have continued to deliver exceptional results as we
emerge from the difficult operating environment of the past
year.”
“This is an historic time for FAT Brands as we
successfully closed the acquisition of Global Franchise Group for
$442.5 million, the largest deal we have completed to date. This
acquisition marks a further diversification of our restaurant
portfolio by introducing five new restaurant concepts in new
restaurant segments and categories and expanding our store base
from approximately 700 to more than 2,000 units worldwide. We are
particularly excited about the accretive synergies we foresee in
integrating these restaurants with our strong platform. Based on
current projections and assumptions, including realization of
expected synergies and return to pre-COVID restaurant sales, we
expect company-wide EBITDA to rise by approximately $40 million to
$55-$60 million.”
“The second quarter marked a further progression
in sales improvements and we saw excellent results, particularly
from Johnny Rockets, Hurricane and Fatburger. We are very excited
for the second half of this year where we expect a continued uptick
in sales as the country eases back towards pre-COVID normalcy with
the lifting of restrictions and growing vaccine distribution. With
the newly added five restaurant concepts, we anticipate unit growth
to accelerate over the coming months with plans to open 32
additional stores under our legacy brands by the end of the year
and approximately an additional 50 units including Global Franchise
Group.”
Fiscal Second Quarter 2021
Highlights
|
● |
Total
revenue improved 167% to $8.3 million compared to $3.1 million the
second quarter of 2020 |
|
|
|
|
|
|
|
|
○ |
System-wide sales growth of 201.9% Q2 2021/Q2 2020 and 44.5% Q2
2021/Q2 2019 |
|
|
|
|
■ |
United States sales growth of 182.2% Q2 2021/Q2 2020 and 40.8% Q2
2021/Q2 2019 |
|
|
|
|
■ |
Rest of world sales growth of 269.8% Q2 2021/Q2 2020 and 55.0% Q2
2021/Q2 2019 |
|
|
○ |
System-wide same-store sales growth of 55.3% Q2 2021/Q2 2020 |
|
|
|
|
■ |
United States same-store sales growth of 54.6% Q2 2021/Q2 2020 |
|
|
|
|
■ |
Rest of world sales growth of 57.6% Q2 2021/Q2 2020 |
|
|
○ |
10 new franchised store openings during the second quarter of
2021 |
|
|
|
|
■ |
Store count as of June 27, 2021: 628 stores system-wide plus 32
locations to open in 2021 |
|
● |
Net loss of $5.9 million or $0.48 per diluted share compared to net
loss of $4.3 million or $0.36 per diluted share in the second
quarter of 2020 |
|
● |
Adjusted net loss (1) of $1.1 million, or $0.09 per diluted share,
compared to an adjusted net loss of $3.4 million, or $0.28 per
diluted share in the second quarter of 2020. |
|
● |
EBITDA(1) loss of $4.9 million compared to an EBITDA loss of $4.3
million in the second quarter of 2020 |
|
● |
Adjusted EBITDA(1) of $2.1 million compared to an adjusted EBITDA
loss of $0.4 million in the second quarter of 2020. |
(1) EBITDA, Adjusted EBITDA and adjusted net loss are non-GAAP
measures defined below, under “Non-GAAP Measures”. Reconciliation
of GAAP net income to EBITDA, adjusted EBITDA and adjusted net loss
are included in the accompanying financial tables.
Summary of Second Quarter 2021 Financial
Results
Total revenue was $8.3 million in the second
quarter of 2021 compared to $3.1 million in the second quarter of
2020, reflecting revenue from Johnny Rockets, which was acquired
during the third quarter of 2020, and the recovery from the
negative effects of the COVID-19 pandemic on royalties from
restaurant sales.
Costs and expenses decreased to $6.2 million in
the second quarter of 2021 compared to $8.9 million in the second
quarter of 2020. General and administrative expenses increased $1.4
million primarily due to higher compensation as we filled out the
management team and increased professional fees.
Advertising expense increased to $1.4 million in
the second quarter of 2021 compared to $0.6 million in the second
quarter of 2020, reflecting advertising expenses from Johnny
Rockets and the increase in customer activity as the recovery from
recovery from COVID continues.
Refranchising gains of $0.9 million in the
second quarter consisted of $1.1 million in net gains related to
refranchised restaurants, partially offset by restaurant operating
costs, net of food sales of $0.2 million. Refranchising losses of
$1.0 million in the second quarter of 2020 were comprised of
restaurant operating costs, net of food sales.
Other expense of $10.0 million in the second quarter of 2021 was
comprised primarily of interest expense of $2.7 million and a $6.4
million net loss on the extinguishment of debt. Other income of
$0.5 million in the second quarter of 2020 consisted primarily of a
$1.3 million decrease in fair value of derivative liability
relating to the conversion feature of Series A Preferred Stock,
partially offset by net interest expense of $0.8 million.
Adjusted net loss was $1.1 million, or $0.09 per
diluted share, in the second quarter of 2021 compared to adjusted
net loss of $3.4 million, or $0.28 per diluted share, in the second
quarter of 2020.
Recent Events and Liquidity
On July 22, 2021, the Company completed the
acquisition of Global Franchise Group for $442.5 million from
Serruya Private Equity and Lion Capital. As a result of the
acquisition, FAT Brands has gained five new restaurant concepts –
Round Table Pizza®, Great American Cookies®, Hot Dog on a Stick®,
Marble Slab Creamery® and Pretzelmaker®. The transaction was funded
with cash and stock, including $350 million in cash from newly
issued notes and cash on hand, $67.5 million in Series B preferred
stock and $25 million in common stock.
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
and in the FAT Brands system for at least one full fiscal year. For
stores that were temporarily closed, sales in the current and prior
period are adjusted accordingly. 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. Additionally, when we
acquire a brand, it may take several months to integrate fully each
location of said brand into the FAT Brands platform. Thus, we do
not include stores in the comparable base until they have been open
and in the FAT Brands system for at least one full fiscal year. For
2020, the comparable store base does not include Elevation Burger
and Johnny Rockets stores as we did not own the brands for the full
year of 2019. For 2021, the comparable store base includes
Elevation Burger as we owned the brand for the full year of
2020.
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 only when the brand is owned by FAT Brands. 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.
Conference Call and Webcast
FAT Brands will host a conference call and
webcast to discuss its fiscal second quarter 2021 financial results
today at 5:00 PM ET. Hosting the conference call and webcast will
be Andy Wiederhorn, President and Chief Executive Officer, and Ken
Kuick, Chief Financial Officer.
The conference call can be accessed live over
the phone by dialing 1-800-231-0316. A replay will be available
after the call until Thursday, August 12, 2021, and can be accessed
by dialing 1-844-512-2921. The passcode is 8072033. The webcast
will be available at www.fatbrands.com under the “Investors”
section and will be archived on the site shortly after the call has
concluded.
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 fourteen restaurant brands:
Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets,
Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe &
Express, Hurricane Grill & Wings, Pretzelmaker, Elevation
Burger, Yalla Mediterranean, Ponderosa and Bonanza Steakhouses and
franchises approximately 2,000 units worldwide. For more
information, please visit www.fatbrands.com.
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements relating to the future
financial and operating results of the Company, including estimates
of annual EBITDA, our ability to integrate the Global Franchise
Group brands and conduct future accretive acquisitions, our
pipeline of new store locations, and the recovery of our business
from the current novel coronavirus pandemic (“COVID-19”), including
our revenue performance and reopening of special venues.
Forward-looking statements generally use words such as “expect,”
“foresee,” “anticipate,” “believe,” “project,” “should,”
“estimate,” “will,” “plans,” “forecast,” and similar expressions,
and reflect our expectations concerning the future. It is possible
that our future performance may differ materially from current
expectations expressed in these forward-looking statements.
Forward-looking statements are subject to significant business,
economic and competitive risks, uncertainties and contingencies
including, but not limited to, uncertainties surrounding the
severity, duration and effects of the COVID-19 pandemic and the
effects of the Delta variant of COVID-19, many of which are
difficult to predict and beyond our control, which could cause our
actual results to differ materially from the results expressed or
implied in such forward-looking statements. We refer you to the
documents we file from time to time with the Securities and
Exchange Commission, such as our reports on Form 10-K, Form 10-Q
and Form 8-K, for a discussion of these and other risks and
uncertainties that could cause our actual results to differ
materially from our current expectations and from the
forward-looking statements contained in this press release. We
undertake no obligation to update any forward-looking statements to
reflect events or circumstances occurring after the date of this
press release.
Non-GAAP Measures
(Unaudited)
This press release includes the non-GAAP
financial measure of EBITDA and Adjusted EBITDA.
EBITDA is defined as earnings before interest,
taxes, depreciation and amortization. We use the term EBITDA, as
opposed to income from operations, as it is widely used by
analysts, investors and other interested parties to evaluate
companies in our industry. We believe that EBITDA is an appropriate
measure of operating performance because it eliminates the impact
of expenses that do not relate to business performance. EBITDA is
not a measure of our financial performance or liquidity that is
determined in accordance with generally accepted accounting
principles (“GAAP”), and should not be considered as an alternative
to net income (loss) as a measure of financial performance or cash
flows from operations as measures of liquidity, or any other
performance measure derived in accordance with GAAP.
Adjusted EBITDA is defined as EBITDA (as defined
above), excluding expenses related to acquisitions, refranchising
gain or losses, impairment charges, and certain non-recurring or
non-cash items that the Company does not believe directly reflect
its core operations and may not be indicative of the Company’s
recurring business operations.
Adjusted net loss is a supplemental measure of
financial performance that is not required by or presented in
accordance with GAAP. Adjusted net loss is defined as net loss plus
the impact of adjustments and the tax effects of such adjustments.
Adjusted net loss is presented because we believe it helps convey
supplemental information to investors regarding our performance,
excluding the impact of special items that affect the comparability
of results in past quarters to expected results in future quarters.
Adjusted net loss as presented may not be comparable to other
similarly titled measures of other companies, and our presentation
of adjusted net loss should not be construed as an inference that
our future results will be unaffected by excluded or unusual items.
Our management uses this non-GAAP financial measure to analyze
changes in our underlying business from quarter to quarter based on
comparable financial results.
Reconciliations of net loss attributable to FAT
Brands Inc. presented in accordance with GAAP to EBITDA, adjusted
EBITDA and adjusted net loss are set forth in the tables below.
Investor Relations:
ICRLynne
CollierIR-FATBrands@icrinc.com646-430-2216
Media Relations:
JConnellyErin
Mandzikemandzik@jconnelly.com862-246-9911
###
FAT Brands Inc. Consolidated
Statements of Operations
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
|
|
June 27, 2021 |
|
|
June 28, 2020 |
|
|
June 27, 2021 |
|
|
June 28, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
$ |
6,161 |
|
|
$ |
2,213 |
|
|
$ |
11,057 |
|
|
$ |
5,522 |
|
Franchise fees |
|
|
482 |
|
|
|
273 |
|
|
|
1,022 |
|
|
|
449 |
|
Advertising fees |
|
|
1,370 |
|
|
|
613 |
|
|
|
2,560 |
|
|
|
1,544 |
|
Restaurant sales |
|
|
234 |
|
|
|
- |
|
|
|
234 |
|
|
|
- |
|
Management fees and other income |
|
|
35 |
|
|
|
8 |
|
|
|
58 |
|
|
|
15 |
|
Total revenue |
|
|
8,282 |
|
|
|
3,107 |
|
|
|
14,931 |
|
|
|
7,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense |
|
|
5,483 |
|
|
|
4,104 |
|
|
|
10,408 |
|
|
|
7,636 |
|
Restaurant operating expenses |
|
|
244 |
|
|
|
- |
|
|
|
244 |
|
|
|
- |
|
Impairment of assets |
|
|
- |
|
|
|
3,174 |
|
|
|
- |
|
|
|
3,174 |
|
Refranchising (gain) loss |
|
|
(856 |
) |
|
|
1,006 |
|
|
|
(429 |
) |
|
|
1,544 |
|
Advertising expense |
|
|
1,367 |
|
|
|
613 |
|
|
|
2,560 |
|
|
|
1,544 |
|
Total costs and expenses |
|
|
6,238 |
|
|
|
8,897 |
|
|
|
12,783 |
|
|
|
13,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from
operations |
|
|
2,044 |
|
|
|
(5,790 |
) |
|
|
2,148 |
|
|
|
(6,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense),
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(2,406 |
) |
|
|
(289 |
) |
|
|
(4,866 |
) |
|
|
(1,911 |
) |
Interest expense related to preferred shares |
|
|
(264 |
) |
|
|
(476 |
) |
|
|
(552 |
) |
|
|
(928 |
) |
Net loss on extinguishment of debt |
|
|
(6,405 |
) |
|
|
- |
|
|
|
(6,405 |
) |
|
|
- |
|
Change in fair value of derivative liability |
|
|
- |
|
|
|
1,264 |
|
|
|
- |
|
|
|
1,264 |
|
Other expense, net |
|
|
(892 |
) |
|
|
(49 |
) |
|
|
(809 |
) |
|
|
(64 |
) |
Total other (expense) income, net |
|
|
(9,967 |
) |
|
|
450 |
|
|
|
(12,632 |
) |
|
|
(1,639 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
expense |
|
|
(7,923 |
) |
|
|
(5,340 |
) |
|
|
(10,484 |
) |
|
|
(8,007 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
(1,992 |
) |
|
|
(1,089 |
) |
|
|
(2,121 |
) |
|
|
(1,386 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(5,931 |
) |
|
|
(4,251 |
) |
|
|
(8,363 |
) |
|
|
(6,621 |
) |
Less: Net loss attributable to
noncontrolling interest |
|
|
(5 |
) |
|
|
- |
|
|
|
(5 |
) |
|
|
- |
|
Net loss attributable to FAT
Brands Inc. |
|
$ |
(5,926 |
) |
|
$ |
(4,251 |
) |
|
$ |
(8,358 |
) |
|
$ |
(6,621 |
) |
Basic and diluted loss per
share |
|
$ |
(0.48 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.69 |
) |
|
$ |
(0.56 |
) |
Basic and diluted weighted
average shares outstanding |
|
|
12,275,370 |
|
|
|
11,886,182 |
|
|
|
12,122,938 |
|
|
|
11,877,507 |
|
Cash dividends declared per
common share |
|
$ |
0.26 |
|
|
$ |
- |
|
|
$ |
0.26 |
|
|
$ |
- |
|
FAT Brands Inc. Consolidated Balance Sheet as of June
27, 2021
|
|
As of June 27, 2021 |
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
Cash and restricted cash |
|
$ |
54,020 |
|
Total assets |
|
$ |
169,168 |
|
Total liabilities |
|
$ |
214,323 |
|
Total stockholders’
deficit |
|
$ |
(45,155 |
) |
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA
Reconciliation
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
|
|
June 27, 2021 |
|
|
June 28, 2020 |
|
|
June 27, 2021 |
|
|
June 28, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to FAT
Brands Inc. |
|
$ |
(5,926 |
) |
|
$ |
(4,251 |
) |
|
$ |
(8,358 |
) |
|
$ |
(6,621 |
) |
Interest expense, net |
|
|
2,670 |
|
|
|
765 |
|
|
|
5,418 |
|
|
|
2,839 |
|
Income tax benefit |
|
|
(1,992 |
) |
|
|
(1,089 |
) |
|
|
(2,121 |
) |
|
|
(1,386 |
) |
Depreciation and amortization expense |
|
|
386 |
|
|
|
268 |
|
|
|
784 |
|
|
|
500 |
|
EBITDA |
|
|
(4,862 |
) |
|
|
(4,307 |
) |
|
|
(4,277 |
) |
|
|
(4,668 |
) |
Provision for bad debts |
|
|
23 |
|
|
|
907 |
|
|
|
23 |
|
|
|
1,069 |
|
Share-based compensation expenses |
|
|
193 |
|
|
|
1 |
|
|
|
230 |
|
|
|
16 |
|
Non-cash lease expenses (1) |
|
|
271 |
|
|
|
42 |
|
|
|
312 |
|
|
|
83 |
|
Acquisition costs |
|
|
917 |
|
|
|
80 |
|
|
|
932 |
|
|
|
130 |
|
Refranchising (gain) loss |
|
|
(856 |
) |
|
|
1,006 |
|
|
|
(429 |
) |
|
|
1,544 |
|
Net loss on extinguishment of debt |
|
|
6,405 |
|
|
|
- |
|
|
|
6,405 |
|
|
|
- |
|
Impairment loss |
|
|
- |
|
|
|
3,174 |
|
|
|
- |
|
|
|
3,174 |
|
Change in fair value - derivative liability |
|
|
- |
|
|
|
(1,264 |
) |
|
|
- |
|
|
|
(1,264 |
) |
Adjusted EBITDA |
|
$ |
2,091 |
|
|
$ |
(361 |
) |
|
$ |
3,196 |
|
|
$ |
84 |
|
|
(1 |
) |
Included non-cash lease expenses
related to new lease accounting standards |
FAT Brands Inc. Adjusted Net Loss
Reconciliation
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
|
|
June 27, 2021 |
|
|
June 28, 2020 |
|
|
June 27, 2021 |
|
|
June 28, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to FAT
Brands Inc. |
|
$ |
(5,926 |
) |
|
$ |
(4,251 |
) |
|
$ |
(8,358 |
) |
|
$ |
(6,621 |
) |
Refranchising (gain) loss |
|
|
(856 |
) |
|
|
1,006 |
|
|
|
(429 |
) |
|
|
1,544 |
|
Acquisition costs |
|
|
917 |
|
|
|
80 |
|
|
|
932 |
|
|
|
130 |
|
Net loss on extinguishment of debt |
|
|
6,405 |
|
|
|
- |
|
|
|
6,405 |
|
|
|
- |
|
Tax adjustments, net (1) |
|
|
(1,626 |
) |
|
|
(221 |
) |
|
|
(1,398 |
) |
|
|
(290 |
) |
Adjusted net loss attributable
to FAT Brands Inc. |
|
$ |
(1,086 |
) |
|
$ |
(3,386 |
) |
|
$ |
(2,848 |
) |
|
$ |
(5,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per basic and diluted
share |
|
$ |
(0.48 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.69 |
) |
|
$ |
(0.56 |
) |
Adjusted loss per basic and
diluted share |
|
$ |
(0.09 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.23 |
) |
|
$ |
(0.44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic and
diluted shares outstanding |
|
|
12,275,370 |
|
|
|
11,886,182 |
|
|
|
12,122,938 |
|
|
|
11,877,507 |
|
(1 |
) |
Reflects the tax impact of the
adjustments using the effective tax rate for the respective
periods |
FAT Brands (NASDAQ:FATBP)
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FAT Brands (NASDAQ:FATBP)
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From Oct 2023 to Oct 2024