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FAT BRANDS INC. REPORTS FIRST QUARTER 2024 FINANCIAL RESULTS

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FAT Brands Inc. reported strong financial results for the first quarter of 2024, showing total revenue improvement of 43.8% to $152.0 million. The company signed over 150 development deals, increasing its pipeline to over 1,200 locations. Despite a net loss of $38.3 million, FAT Brands remains focused on expanding its brands and creating long-term value for stakeholders.

FAT Brands Inc. ha riportato ottimi risultati finanziari per il primo trimestre del 2024, con un aumento del fatturato totale del 43,8% raggiungendo i 152,0 milioni di dollari. L'azienda ha firmato oltre 150 accordi di sviluppo, portando il suo portfolio a più di 1.200 sedi. Nonostante una perdita netta di 38,3 milioni di dollari, FAT Brands continua a concentrarsi sull'espansione dei suoi marchi e sulla creazione di valore a lungo termine per gli stakeholder.
FAT Brands Inc. reportó resultados financieros sólidos para el primer trimestre de 2024, con un aumento en la facturación total del 43,8%, alcanzando los $152,0 millones. La compañía firmó más de 150 acuerdos de desarrollo, incrementando su cartera a más de 1.200 ubicaciones. A pesar de una pérdida neta de $38,3 millones, FAT Brands sigue enfocada en expandir sus marcas y en crear valor a largo plazo para los accionistas.
FAT Brands Inc.는 2024년 첫 분기에 강력한 재무 결과를 보고했으며, 총수익이 43.8% 증가하여 1억 5,200만 달러를 기록했습니다. 회사는 150개 이상의 개발 계약을 체결했고, 그 결과 위치 수가 1,200개 이상으로 늘어났습니다. 3천 8백 3십만 달러의 순손실에도 불구하고 FAT Brands는 브랜드 확장과 이해관계자를 위한 장기 가치 창출에 집중하고 있습니다.
FAT Brands Inc. a présenté d'excellents résultats financiers pour le premier trimestre 2024, avec une augmentation de 43,8% de son chiffre d'affaires total à 152,0 millions de dollars. La société a signé plus de 150 contrats de développement, portant son portefeuille à plus de 1 200 emplacements. Malgré une perte nette de 38,3 millions de dollars, FAT Brands reste concentrée sur l'expansion de ses marques et la création de valeur à long terme pour ses actionnaires.
FAT Brands Inc. verzeichnete starke Finanzergebnisse für das erste Quartal 2024 mit einem Gesamterlösanstieg von 43,8% auf 152,0 Millionen Dollar. Das Unternehmen unterzeichnete über 150 Entwicklungsverträge und erhöhte seine Standortzahl auf über 1.200. Trotz eines Nettoverlusts von 38,3 Millionen Dollar bleibt FAT Brands auf die Expansion seiner Marken und die Schaffung langfristiger Werte für die Stakeholder konzentriert.
Positive
  • Total revenue increased 43.8% to $152.0 million in Q1 2024 compared to $105.7 million in Q1 2023.

  • Over 150 development deals were signed, expanding the company's pipeline to over 1,200 locations.

  • Strong focus on expanding Twin Peaks brand, with plans to open 15 to 20 new lodges in 2024.

Negative
  • Net loss of $38.3 million in Q1 2024, compared to $32.1 million in Q1 2023.

  • Year-to-date system-wide same-store sales declined by 4.0% in Q1 2024.

  • Adjusted net loss of $32.9 million in Q1 2024, compared to adjusted net loss of $23.5 million in Q1 2023.

Insights

The reported 43.8%> increase in total revenue for FAT Brands Inc. is a strong indicator of growth, particularly noting the acquisition of Smokey Bones. However, the company's net loss widening from $32.1 million> to $38.3 million> year-over-year raises concerns about profitability and operational efficiency. Investors should be cognizant of the debt levels, as the interest expense has also risen, likely due to new debt offerings, which could impact future cash flows and financial stability. The strategic expansion and development deals, including the addition of Twin Peaks lodges, signify aggressive growth strategies, but the efficacy of these expansions in terms of revenue contribution and cost control will be pivotal.

FAT Brands' system-wide sales growth of 4.8%> juxtaposed with a same-store sales decline of 4.0%> suggests a more complex market positioning. The growth appears to be driven by new stores and acquisitions rather than organic growth at existing locations, which may point to market saturation or competitive pressures. Investors should consider consumer trends and market dynamics, as the sustained success of the aggressive expansion relies heavily on consumer reception and the ability to differentiate in a crowded market.

The increase in total other expense, net, primarily due to higher interest expenses, reflects the company's leveraged position, with new debt offerings raising potential concerns over long-term debt sustainability. Equity stakeholders may experience dilution or decreased earnings per share if the company opts to raise capital through equity financing to manage its debt. This financial structure could affect investor confidence and stock market performance, with investors seeking assurance that the debt will be used to generate returns that exceed the cost of capital.

Conference call and webcast today at 5:00 p.m. ET

LOS ANGELES, May 01, 2024 (GLOBE NEWSWIRE) -- FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT Brands” or the “Company”) today reported financial results for the fiscal first quarter ended March 31, 2024.

“Over the last three years, we have expanded our footprint 10-fold by strategically building a diverse portfolio that now includes 18 iconic concepts spanning over 2,300 locations worldwide, across more than 40 countries and 49 U.S. states,” said Andy Wiederhorn, Chairman of FAT Brands. “Our franchise interest remains high across all brands, as evidenced by the participation and units sold at our biannual FAT Brands Summit held in April. During the first quarter, we finalized a strategic development deal for 40 co-branded Round Table Pizza and Fatburger locations and continue to see heightened interest from our franchise partners, who are eager to explore additional co-branding opportunities that leverage synergies within our brand offerings.”

Ken Kuick, Co-Chief Executive Officer of FAT Brands, commented, “During the first quarter, we signed over 150 development deals, increasing our pipeline to over 1,200 locations.” Kuick continued, “Continuing in 2024 is our focus on the expansion of Twin Peaks. We opened three new lodges during the first quarter, and plan to open 15 to 20 new Twin Peaks lodges in 2024, ending the year with approximately 125 lodges. Additionally, our first conversion of a Smokey Bones location is officially underway. We see this as the first of many sites we will use to fuel Twin Peaks’ fast-paced growth.”

Rob Rosen, Co-Chief Executive Officer of FAT Brands, concluded, “Opportunities in 2024 are abundant. Our long-term strategy is to create value through the organic expansion of our existing brands, acquire additional brands that strategically complement our portfolio, realize value from strategic divestments when appropriate to manage outstanding debt, and ultimately increase long-term value for our stakeholders.”

Fiscal First Quarter 2024 Highlights

  • Total revenue improved 43.8% to $152.0 million compared to $105.7 million in the fiscal first quarter of 2023
    • System-wide sales growth of 4.8% in the fiscal first quarter of 2024 compared to the prior year fiscal quarter
    • Year-to-date system-wide same-store sales declined of 4.0% in the fiscal first quarter of 2024 compared to the prior year
    • 16 new store openings during the fiscal first quarter of 2024
  • Net loss of $38.3 million, or $2.37 per diluted share, compared to $32.1 million, or $2.05 per diluted share, in the fiscal first quarter of 2023
  • EBITDA(1) of $9.4 million compared to $7.7 million in the fiscal first quarter of 2023
  • Adjusted EBITDA(1) of $18.2 million compared to $19.2 million in the fiscal first quarter of 2023
  • Adjusted net loss(1) of $32.9 million, or $2.05 per diluted share, compared to adjusted net loss of $23.5 million, or $1.53 per diluted share, in the fiscal first quarter of 2023

(1)   EBITDA, adjusted EBITDA and adjusted net loss are non-GAAP measures defined below, under “Non-GAAP Measures”. Reconciliation of GAAP net loss to EBITDA, adjusted EBITDA and adjusted net loss are included in the accompanying financial tables.

Summary of Fiscal First Quarter 2024 Financial Results

Total revenue increased $46.3 million, or 43.8%, in the first quarter of 2024 to $152.0 million compared to $105.7 million in the same period of 2023, driven by the acquisition of Smokey Bones in September 2023.

Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, depreciation and amortization, refranchising net loss and advertising fees. Costs and expenses increased $48.0 million, or 45.6%, in the first quarter of 2024 to $153.3 million compared to the same period in the prior year, primarily due to the acquisition of Smokey Bones in September 2023 and increased activity from Company-owned restaurants and the Company's factory.

General and administrative expense increased $1.6 million, or 5.6%, in the first quarter of 2024 compared to $28.4 million in the same period in the prior year, primarily due to the acquisition of Smokey Bones in September 2023.

Cost of restaurant and factory revenues was related to the operations of the company-owned restaurant locations and dough factory and increased $40.0 million, or 67.6%, in the first quarter of 2024, primarily due to the acquisition of Smokey Bones in September 2023 and higher company-owned restaurant and factory sales.

Depreciation and amortization increased $3.1 million, or 43.3% in the first quarter of 2024 compared to the same period in the prior year, primarily due to the acquisition of Smokey Bones in September 2023 and depreciation of new property and equipment at company-owned restaurant locations.

Refranchising net loss in the first quarter of 2024 of $1.5 million was comprised of $1.0 million in restaurant operating costs, net of food sales, and $0.5 million in net loss related to the sale or closure of refranchised restaurants. Refranchising net loss in the first quarter of 2023 of $0.2 million was comprised of $0.1 million in net gains related to the sale or closure of refranchised restaurants, offset by $0.3 million in restaurant operating costs, net of food sales.

Advertising expenses increased $2.1 million in the first quarter of 2024 compared to the prior year period. These expenses vary in relation to advertising revenues.

Total other expense, net, for the first quarter of 2024 and 2023 was $33.4 million and $30.0 million, respectively, which is inclusive of interest expense of $34.0 million and $30.1 million, respectively. This increase is primarily due to new debt offerings which occurred in the second half of fiscal year 2022 and first three quarters of 2023. Total other expense, net for the first quarter of 2024 also consisted of a $0.4 million net loss on the extinguishment of debt.

Adjusted net loss(1) of $32.9 million, or $2.05 per diluted share, compared to adjusted net loss of $23.5 million, or $1.53 per diluted share, in the fiscal first quarter of 2023.

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.

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 first quarter 2024 financial results today at 5:00 PM ET. Hosting the conference call and webcast will be Andy Wiederhorn, Chairman of the Board, and Ken Kuick, Co-Chief Executive Officer and Chief Financial Officer.

The conference call can be accessed live over the phone by dialing 1-844-826-3035 from the U.S. or 1-412-317-5195 internationally. A replay will be available after the call until Wednesday, May 22, 2024, and can be accessed by dialing 1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The passcode is 10187929. 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, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 18 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Smokey Bones, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses and franchises and owns approximately 2,300 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, the timing and performance of new store openings, our ability to conduct future accretive acquisitions and our pipeline of new store locations. 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. Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, 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 that 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 measures of EBITDA, adjusted EBITDA and adjusted net loss.

EBITDA is defined as earnings before interest, taxes, and 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 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 loss, 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 presented in accordance with GAAP to EBITDA, adjusted EBITDA and adjusted net loss are set forth in the tables below.

Investor Relations:

ICR
Michelle Michalski
ir-fatbrands@icrinc.com
646-277-1224

Media Relations:

Erin Mandzik
emandzik@fatbrands.com
860-212-6509

FAT Brands Inc. Consolidated Statements of Operations

  Thirteen Weeks Ended 
(In thousands, except share and per share data) March 31, 2024  March 26, 2023 
       
Revenue        
Royalties $21,947  $22,485 
Restaurant sales  105,938   62,601 
Advertising fees  9,796   9,351 
Factory revenues  9,474   9,165 
Franchise fees  1,481   802 
Other revenue  3,331   1,287 
Total revenue  151,967   105,691 
         
Costs and expenses        
General and administrative expense  30,005   28,415 
Cost of restaurant and factory revenues  99,050   59,087 
Depreciation and amortization  10,194   7,116 
Refranchising loss  1,508   159 
Advertising fees  12,592   10,527 
Total costs and expenses  153,349   105,304 
         
(Loss) income from operations  (1,382)  387 
         
Other (expense) income, net        
Interest expense  (29,623)  (25,090)
Interest expense related to preferred shares  (4,418)  (5,043)
Net gain on extinguishment of debt  427    
Other income, net  204   156 
Total other expense, net  (33,410)  (29,977)
         
Loss before income tax provision  (34,792)  (29,590)
         
Income tax provision  (3,524)  (2,536)
         
Net loss $(38,316) $(32,126)
         
Net loss $(38,316) $(32,126)
Dividends on preferred shares  (1,881)  (1,755)
  $(40,197) $(33,881)
         
Basic and diluted loss per common share $(2.37) $(2.05)
Basic and diluted weighted average shares outstanding  16,947,400   16,487,119 
Cash dividends declared per common share $0.14  $0.14 


FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation

  Thirteen Weeks Ended 
(In thousands) March 31, 2024  March 26, 2023 
Net loss $(38,316) $(32,126)
Interest expense, net  34,041   30,133 
Income tax provision  3,524   2,536 
Depreciation and amortization  10,194   7,116 
EBITDA  9,443   7,659 
Bad debt expense  168   1,035 
Share-based compensation expenses  745   1,095 
Non-cash lease expenses  630   381 
Refranchising loss  1,508   159 
Litigation costs  3,807   7,744 
Severance  22    
Net loss related to advertising fund deficit  2,282   1,085 
Net gain on extinguishment of debt  (427)   
Pre-opening expenses  28   29 
Adjusted EBITDA $18,207  $19,187 


FAT Brands Inc. Adjusted Net Loss Reconciliation

  Thirteen Weeks Ended 
(In thousands, except share and per share data) March 31, 2024  March 26, 2023 
       
Net loss $(38,316) $(32,126)
Refranchising loss  1,508   159 
Net gain on extinguishment of debt  (427)   
Litigation costs  3,807   7,744 
Severance  22    
Tax adjustments, net (1)  497   677 
Adjusted net loss $(32,909) $(23,546)
         
Net loss $(38,316) $(32,126)
Dividends on preferred shares  (1,881)  (1,755)
  $(40,197) $(33,881)
         
Adjusted net loss $(32,908) $(23,546)
Dividends on preferred shares  (1,881)  (1,755)
  $(34,789) $(25,301)
         
Loss per basic and diluted share $(2.37) $(2.05)
Adjusted net loss per basic and diluted share $(2.05) $(1.53)
         
Weighted average basic and diluted shares outstanding  16,947,400   16,487,119 

(1) Reflects the tax impact of the adjustments using the effective tax rate for the respective periods.


FAQ

How much did total revenue increase in the first quarter of 2024?

Total revenue increased by 43.8% to $152.0 million in Q1 2024.

How many development deals were signed during the first quarter of 2024?

Over 150 development deals were signed, expanding the pipeline to over 1,200 locations.

What was the net loss in the first quarter of 2024?

The net loss was $38.3 million in Q1 2024.

What was the adjusted net loss in the first quarter of 2024?

The adjusted net loss was $32.9 million in Q1 2024.

FAT Brands Inc.

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