Nathan's Famous, Inc. Reports First Quarter Results

Rhea-AI Summary

Nathan's Famous, Inc. (NASDAQ:NATH) reported strong first quarter fiscal 2025 results, with revenues increasing to $44,767,000 from $41,985,000 in the same period last year. The company's net income rose to $9,277,000, or $2.27 per diluted share, compared to $7,388,000, or $1.81 per share, in the previous year. Key highlights include:

- License royalties increased to $12,921,000
- Branded Product Program sales grew by $976,000 to $26,146,000
- Company-owned restaurant sales rose to $4,199,000
- The company refinanced its Senior Secured Notes with a new $60 million unsecured term loan and $10 million revolving credit facility
- A quarterly cash dividend of $0.50 per share was declared

Positive

• Revenues increased by 6.6% to $44,767,000 compared to the same period last year
• Net income grew by 25.6% to $9,277,000
• Earnings per diluted share increased by 25.4% to $2.27
• License royalties from Smithfield Foods increased by 11% to $12,010,000
• Branded Product Program sales increased by $976,000 to $26,146,000
• Company-owned restaurant sales grew to $4,199,000 from $3,658,000
• Franchise restaurant sales increased by $390,000 to $17,653,000

Negative

• Average selling price in the Branded Product Program increased by 3.5%, potentially impacting sales volume
• Franchise fee income slightly decreased to $92,000 from $95,000 in the previous year

Insights

Financial Analyst

Nathan's Famous reported strong Q1 FY2025 results, with notable improvements across key financial metrics. Revenues increased by 6.6% to $44.77 million, while net income surged by 25.6% to $9.28 million. The company's performance was driven by growth in multiple segments:

• License royalties up 10.8% to $12.92 million
• Branded Product Program sales increased by $976,000 to $26.15 million
• Company-owned restaurant sales rose to $4.20 million from $3.66 million

The refinancing of $60 million Senior Secured Notes with an unsecured term loan and revolving credit facility suggests improved financial flexibility. The consistent $0.50 quarterly dividend signals confidence in sustained cash flow. Overall, these results indicate robust operational performance and prudent financial management.

Market Research Analyst

Nathan's Famous' Q1 results reflect positive market trends in the quick-service restaurant sector. The 11% increase in royalties from Smithfield Foods indicates strong retail and foodservice demand for Nathan's products. The 3.5% rise in average selling price in the Branded Product Program, despite volatile beef markets, suggests pricing power and brand strength.

The growth in company-owned restaurant sales, driven by higher average checks and increased traffic, particularly at Coney Island locations, points to successful menu strategies and favorable consumer spending patterns. The slight increase in franchise restaurant sales to $17.65 million and the opening of three new franchised locations demonstrate continued expansion and brand appeal.

These trends indicate Nathan's Famous is effectively navigating post-pandemic recovery and inflationary pressures, positioning itself well in the competitive fast-food landscape.

Refinances Senior Secured Notes With A New Unsecured $60 Million Term Loan Facility and $10 Million Revolving Credit Facility and
Declares Quarterly Cash Dividend Of $0.50 Per Share

JERICHO, N.Y., Aug. 08, 2024 (GLOBE NEWSWIRE) -- Nathan's Famous, Inc. (“Nathan’s”, the “Company”, “we”, “us” or “our”) (NASDAQ:NATH) today reported results for its first fiscal quarter ended June 30, 2024.

For the thirteen-week period ended June 30, 2024 (“first quarter fiscal 2025”):

• Revenues were $44,767,000 as compared to $41,985,000 during the thirteen weeks ended June 25, 2023;
• Income from operations was $13,745,000 as compared to $11,463,000 during the thirteen weeks ended June 25, 2023;
• Adjusted EBITDA¹, a non-GAAP financial measure, was $14,281,000 as compared to $12,036,000 during the thirteen weeks ended June 25, 2023;
• Income before provision for income taxes was $12,784,000 as compared to $10,132,000 during the thirteen weeks ended June 25, 2023;
• Net income was $9,277,000 as compared to $7,388,000 during the thirteen weeks ended June 25, 2023; and
• Earnings per diluted share was $2.27 per share as compared to $1.81 per share during the thirteen weeks ended June 25, 2023.

The Company also reported the following:

• License royalties increased to $12,921,000 during the first quarter fiscal 2025 as compared to $11,658,000 during the thirteen weeks ended June 25, 2023. During the first quarter fiscal 2025, royalties earned under the retail agreement, including the foodservice program, from Smithfield Foods, Inc., increased 11% to $12,010,000 as compared to $10,796,000 of royalties earned during the thirteen weeks ended June 25, 2023.
• In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, sales increased by $976,000 to $26,146,000 during the first quarter fiscal 2025 as compared to $25,170,000 during the thirteen weeks ended June 25, 2023. Our average selling price, which is partially correlated to the beef markets, increased by approximately 3.5% as compared to the prior year period. Income from operations increased by $539,000 to $2,500,000 during the first quarter fiscal 2025 as compared to $1,961,000 for the thirteen weeks ended June 25, 2023.
• Sales from Company-owned restaurants were $4,199,000 during the first quarter fiscal 2025 as compared to $3,658,000 during the thirteen weeks ended June 25, 2023. Sales were positively impacted by an increase in our average check as well as higher traffic, especially at our two Coney Island locations, due to favorable weather conditions.
• Revenues from franchise operations were $1,073,000 during the first quarter fiscal 2025 as compared to $1,075,000 during the thirteen weeks ended June 25, 2023. Total royalties were $981,000 in the first quarter fiscal 2025 period as compared to $980,000 during the thirteen weeks ended June 25, 2023. Franchise restaurant sales increased by $390,000 to $17,653,000 as compared to $17,263,000 for the thirteen weeks ended June 25, 2023.² Total franchise fee income, including cancellation fees, was $92,000 during the first quarter fiscal 2025 as compared to $95,000 during the thirteen weeks ended June 25, 2023. Three franchised locations opened during the first quarter fiscal 2025.
• During the first quarter fiscal 2025, the Company recorded Advertising Fund revenue and expense in the amount of $428,000 as compared to $424,000 during the thirteen weeks ended June 25, 2023.
• On July 2, 2024, the Company paid the $0.50 per share regular cash dividend that was declared by the Board of Directors on June 12, 2024 to shareholders of record at the close of business on June 24, 2024.
  
• On July 10, 2024, the Company entered into a five-year unsecured Credit Agreement which provides for a term loan facility of $60,000,000 and a revolving credit facility of up to $10,000,000. The Company used the $60,000,000 of term loan borrowings to refinance and redeem its $60,000,000 of outstanding Senior Secured Notes due in 2025. The Credit Agreement matures on July 10, 2029.
  
• Effective August 8, 2024, the Board of Directors declared its second quarterly cash dividend of $0.50 per share payable on September 6, 2024 to shareholders of record at the close of business on August 26, 2024.

Certain Non-GAAP Financial Information:

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company is disclosing EBITDA, a non-GAAP financial measure which is defined as net income, excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company is also disclosing Adjusted EBITDA, a non-GAAP financial measure which is defined as EBITDA, excluding share-based compensation that the Company believes will impact the comparability of its results of operations.

The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.

EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP. Please see the table at the end of this press release for a reconciliation of EBITDA and Adjusted EBITDA to net income.

About Nathan’s Famous

Nathan’s is a Russell 2000 Company that currently distributes its products in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and eighteen foreign countries through its restaurant system, foodservice sales programs and product licensing activities. For additional information about Nathan’s please visit our website at www.nathansfamous.com.

__________________________

¹ EBITDA and Adjusted EBITDA are non-GAAP financial measures. Please see the definitions of EBITDA and Adjusted EBITDA on page 2 of this release and the reconciliation of EBITDA and Adjusted EBITDA to net income in the table at the end of this release.

² Franchise restaurant sales are not revenues of the Company and are not included in the Company’s Consolidated Financial Statements.

Except for historical information contained in this news release, the matters discussed are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, and similar expressions identify forward-looking statements, which are based on the current belief of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially include but are not limited to: the impact of disease epidemics such as the COVID-19 pandemic; increases in the cost of food and paper products; the impact of price increases on customer visits; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under our debt instruments, including the effect on our ability to fund working capital, operations and make new investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on sales at our restaurants particularly during the summer months), and change in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employee” or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness, such as bovine spongiform encephalopathy, BSE and e coli; and the risk factors reported from time to time in the Company’s SEC reports. The Company does not undertake any obligation to update such forward-looking statements.

COMPANY	Robert Steinberg, Vice President - Finance and CFO
CONTACT:	(516) 338-8500 ext. 229

Nathan's Famous, Inc. and Subsidiaries (unaudited)
		Thirteen weeks ended
		June 30, 2024				June 25, 2023
Financial Highlights
Total revenues		$	44,767,000			$	41,985,000
Income from operations (a)		$	13,745,000			$	11,463,000
Income before provision for income taxes		$	12,784,000			$	10,132,000
Net income		$	9,277,000			$	7,388,000
Net income per share:
Basic		$	2.27			$	1.81
Diluted		$	2.27			$	1.81
Weighted-average shares used in
computing net income per share:
Basic			4,085,000				4,080,000
Diluted			4,089,000				4,088,000

Select Segment Information
Revenues
Branded product program		$	26,146,000			$	25,170,000
Product licensing			12,921,000				11,658,000
Restaurant operations			5,272,000				4,733,000
Corporate (b)			428,000				424,000
Revenues		$	44,767,000			$	41,985,000
Income from operations (c)
Branded product program		$	2,500,000			$	1,961,000
Product licensing			12,875,000				11,613,000
Restaurant operations			1,046,000				669,000
Corporate (d)			(2,676,000	)			(2,780,000	)
Income from operations (c)		$	13,745,000			$	11,463,000

(a)		Excludes interest expense, interest and dividend income, and other income, net.
(b)		Represents Advertising Fund revenue.
(c)		Excludes interest expense, interest and dividend income and other income, net which are managed centrally at the corporate level, and, accordingly, such items are not presented by segment since they are excluded from the measure of profitability reviewed by the Chief Operating Decision Maker.
(d)		Consists principally of administrative expenses not allocated to the operating segments such as executive management, finance, information technology, legal, insurance, corporate office costs, incentive compensation, compliance costs and the operating results of the Advertising Fund.

Nathan's Famous, Inc. and Subsidiaries Reconciliation of Net Income to EBITDA and Adjusted EBITDA (unaudited)
		Thirteen weeks ended
		June 30, 2024				June 25, 2023
EBITDA
Net Income		$	9,277,000			$	7,388,000
Interest Expense			1,060,000				1,414,000
Provision for income taxes			3,507,000				2,744,000
Depreciation and amortization			249,000				313,000
EBITDA		$	14,093,000			$	11,859,000
Adjusted EBITDA
EBITDA		$	14,093,000			$	11,859,000
Share-based compensation			188,000				177,000
Adjusted EBITDA		$	14,281,000			$	12,036,000

FAQ

What were Nathan's Famous (NATH) earnings per share in Q1 2025?

Nathan's Famous (NATH) reported earnings of $2.27 per diluted share for the first quarter of fiscal 2025, compared to $1.81 per share in the same period last year.

How much did Nathan's Famous (NATH) revenue increase in Q1 2025?

Nathan's Famous (NATH) revenue increased to $44,767,000 in Q1 2025, up from $41,985,000 in the same period last year, representing a 6.6% increase.

Did Nathan's Famous (NATH) declare a dividend for Q1 2025?

Yes, Nathan's Famous (NATH) declared a quarterly cash dividend of $0.50 per share, payable on September 6, 2024, to shareholders of record as of August 26, 2024.

How did Nathan's Famous (NATH) perform in its Branded Product Program for Q1 2025?

Nathan's Famous (NATH) Branded Product Program sales increased by $976,000 to $26,146,000 in Q1 2025, with an average selling price increase of approximately 3.5% compared to the prior year period.