Nathan's Famous, Inc. Reports First Quarter Results and Declares Quarterly Cash Dividend of $0.45 Per Share

Rhea-AI Summary

Nathan's Famous, Inc. (NASDAQ:NATH) reported a robust performance for its first fiscal quarter ending June 26, 2022. Revenues surged to $39.72 million, a significant rise from $31.32 million in the previous year. Income from operations also increased to $11.78 million compared to $10.70 million in Q1 2022. Net income rose to $7.14 million, translating to earnings per diluted share of $1.74, up from $1.40. License royalties grew to $11.31 million, driven largely by a 29% increase in hot dog sales to foodservice customers, despite challenges from commodity inflation.

Positive

• Revenues increased by 27% to $39.72 million vs $31.32 million YoY.
• Net income rose by 24% to $7.14 million, compared to $5.76 million YoY.
• Earnings per diluted share improved to $1.74, up from $1.40 YoY.
• Branded Product Program sales grew by approximately $7.18 million to $23.17 million, a 45% increase from previous year.
• License royalties increased to $11.31 million, up from $10.68 million YoY.

Negative

• Income from operations slightly decreased to $2.07 million in Branded Product Program due to commodity inflation.

JERICHO, N.Y., Aug. 05, 2022 (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 26, 2022.

For the thirteen-week period ended June 26, 2022 (“first quarter fiscal 2023”):

• Revenues were $39,720,000, as compared to $31,319,000 during the thirteen weeks ended June 27, 2021;
• Income from operations was $11,780,000, as compared to $10,702,000 during the thirteen weeks ended June 27, 2021;
• Adjusted EBITDA¹, a non-GAAP financial measure, was $12,065,000, as compared to $11,061,000 during the thirteen weeks ended June 27, 2021;
• Income before provision for income taxes was $9,880,000, as compared to $8,104,000 during the thirteen weeks ended June 27, 2021;
• Net income was $7,137,000, as compared to $5,763,000 during the thirteen weeks ended June 27, 2021; and
• Earnings per diluted share was $1.74 per share, as compared to $1.40 per share during the thirteen weeks ended June 27, 2021.

The Company also reported the following:                         

• License royalties increased to $11,314,000 during the first quarter fiscal 2023, as compared to $10,682,000 during the thirteen weeks ended June 27, 2021. During the first quarter fiscal 2023, royalties earned under the retail agreement, including the foodservice program, with John Morrell & Co., increased 6% to $10,450,000, as compared to $9,880,000 of royalties earned during the thirteen weeks ended June 27, 2021.
• In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, sales increased by approximately $7,175,000 to $23,171,000 during the first quarter fiscal 2023, as compared to $15,996,000 for the thirteen weeks ended June 27, 2021. The volume of hot dogs sold by the Company increased by 29%. As the economy continues to reopen and travel continues to increase, our Branded Product Program customers, including professional sports arenas, amusement parks, shopping malls and movie theaters have experienced stronger attendance contributing to an increase in sales over the prior year comparable period. Our average selling price, which is partially correlated to the beef markets, increased by approximately 14% compared to the prior year period. Income from operations decreased by approximately $187,000 to $2,067,000 during the first quarter fiscal 2023, as compared to $2,254,000 for the thirteen weeks ended June 27, 2021, due to unprecedented commodity inflation in beef and beef trimmings.
• Sales from Company-operated restaurants were $3,723,000 during the first quarter fiscal 2023 compared to $3,329,000 during the thirteen weeks ended June 27, 2021. The increase was primarily due to an increase in customer traffic especially at our two Coney Island locations.
• Revenues from franchise operations were $1,093,000 during the first quarter fiscal 2023 compared to $907,000 during the thirteen weeks ended June 27, 2021. Total royalties were $901,000 in the first quarter fiscal 2023 period as compared to $800,000 during the thirteen weeks ended June 27, 2021. Total franchise fee income was $192,000 during the first quarter fiscal 2023 as compared to $107,000 during the thirteen weeks ended June 27, 2021. The increase in franchise fees and royalties during the first quarter fiscal 2023 was primarily due to an increase in franchise restaurant sales of $2,961,000 to $15,946,000 as compared to $12,985,000 for the thirteen weeks ended June 27, 2021.² Three new franchised outlets opened during the first quarter fiscal 2023.
• During the first quarter fiscal 2023, we recorded Advertising Fund revenue and expense in the amount of $419,000 as compared to $405,000 during the thirteen weeks ended June 27, 2021.
• The Company repurchased 20,370 shares of its common stock for $1,070,000 during the first quarter fiscal 2023 pursuant to a 10b5-1 plan.
• On June 24, 2022, we paid the $0.45 per share regular cash dividend that was declared by the Board of Directors on June 10, 2022 to shareholders of record at the close of business on June 20, 2022. 
• Effective August 5, 2022, the Board of Directors declared its quarterly cash dividend of $0.45 per share payable on September 2, 2022 to shareholders of record at the close of business on August 22, 2022.        

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 (i) stock-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 sixteen 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.

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 the COVID-19 pandemic; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with John Morrell & Co.; the impact of our debt service and repayment obligations under the 2025 Notes, 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 the supply of cattle and the impact of weather 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.

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.

Nathan's Famous, Inc. and Subsidiaries
(unaudited)

				Thirteen weeks ended
		June 26, 2022					June 27, 2021
Financial Highlights
Total revenues		$ 39,720,000					$ 31,319,000
Income from operations (a)			$ 11,780,000				$ 10,702,000
Income before provision for income taxes		$ 9,880,000					$ 8,104,000
Net income		$ 7,137,000					$ 5,763,000
Income per share:
Basic		$ 1.74					$ 1.40
Diluted		$ 1.74					$ 1.40
Weighted-average shares used in computing income per share:
Basic		4,113,000					4,115,000
Diluted		4,113,000					4,115,000

Select Segment Information

Revenues
Branded product program	$23,171,000		$15,996,000
Product licensing	11,314,000		10,682,000
Restaurant operations	4,816,000		4,236,000
Corporate (b)	419,000		405,000
Revenues	$ 39,720,000		$ 31,319,000
Income from operations (c)
Branded product program	$2,067,000		$2,254,000
Product licensing	11,269,000		10,637,000
Restaurant operations	641,000		(2,000)
Corporate (d)	(2,197,000)		(2,187,000)
Income from operations (c)	$ 11,780,000		$ 10,702,000

1. Excludes interest expense, interest income, and other income, net.
2. Represents Advertising Fund revenue.
3. Excludes interest expense, interest 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.
4. 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 and compliance costs and Advertising Fund expense.

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(unaudited)

	Thirteen weeks ended
	June 26, 2022					June 27, 2021
EBITDA
Net Income	$ 7,137,000					$ 5,763,000
Interest Expense	1,944,000					2,650,000
Provision for income taxes	2,743,000					2,341,000
Depreciation and amortization	233,000					278,000
EBITDA	$ 12,057,000					$ 11,032,000
Adjusted EBITDA
EBITDA	$ 12,057,000					$ 11,032,000
Stock-based compensation	8,000					29,000
Adjusted EBITDA	$ 12,065,000					$ 11,061,000

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

FAQ

What were Nathan's Famous's revenues for Q1 2023?

Nathan's Famous reported revenues of $39.72 million for the first quarter of fiscal 2023.

How did Nathan's Famous's net income change in Q1 2023?

Net income for Nathan's Famous in Q1 2023 was $7.14 million, an increase from $5.76 million in the same period last year.

What earnings per share did Nathan's Famous report for Q1 2023?

Nathan's Famous reported earnings per diluted share of $1.74 for the first quarter of fiscal 2023.

How did the Branded Product Program perform in Q1 2023 for Nathan's Famous?

Sales from the Branded Product Program increased by approximately $7.18 million to $23.17 million during Q1 2023.

What is the outlook for Nathan's Famous following their Q1 2023 results?

While Nathan's Famous experienced strong revenue growth, they also faced challenges from commodity inflation impacting their income from operations.