BBQ Holdings, Inc. Reports Results for First Quarter 2022
05/10/2022 - 08:32 AM
MINNEAPOLIS, May 10, 2022 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global franchisor, owner and operator of restaurants, today reported financial results for the first fiscal quarter ended April 3, 2022.
First Quarter Highlights:
First Quarter (dollars in thousands, except per share data) 2022 2021 2020 2019 Total revenue $ 64,184 $ 37,319 $ 23,855 $ 14,193 Net income (loss) $ 767 $ 799 $ 13,707 $ 82 Earnings (loss) per diluted share $ 0.07 $ 0.08 $ 1.49 $ 0.01 Adjusted net income (loss) $ 1,138 $ 811 $ (484 ) $ 489 Adjusted earnings (loss) per diluted share $ 0.11 $ 0.09 $ (0.05 ) $ 0.05 Cash EBITDA $ 3,748 $ 3,220 $ (457 ) $ 1,030 Restaurant-level margins 6.4 % 9.1 % (1.9 )% (1.7 )% Prime costs 64.3 % 60.4 % 69.9 % 71.0 % Free cash flow $ 3,026 $ 2,529 $ (1,406 ) $ 809
First Quarter Same Store Sales 2022 vs. 2021 2022 vs. 2020 2022 vs. 2019 Famous Dave's Company-owned 7.9 % 22.6 % 12.6 % Famous Dave's Franchise-operated* 8.6 % 21.3 % 5.6 % Granite City** 24.1 % 21.4 % (1.7)% Village Inn Company-owned** 19.1 % 8.8 % (8.0)% Village Inn Franchise-operated* 19.9 % NA% NA% Bakers Square** 17.0 % (12.5)% (17.7)% Clark Crew 5.0 % 5.8 % NA% Real Urban BBQ** 11.0 % NA% NA% Tahoe Joe's** 6.0 % NA% NA%
* as reported by franchisees ** includes sales under prior ownership *** it is our policy to include in our same store net sales base, restaurants that have been open for 12 months under our company’s ownership
Subsequent Events:
On April 11, 2022, we closed the purchase of the Barrio Queen Restaurant Business. The purchase price of approximately $28.5 million was funded with cash and debt. See 8-K filed with the SEC on March 14, 2022 for additional information regarding this acquisition, including the Asset Purchase Agreement.
On November 23, 2021, the Company, entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. The Credit Agreement had a five-year term and provided for up to a $5.0 million revolving line of credit and a $15.0 million term loan. On April 11, 2022 (the “First Amendment Date”), the Company amended the Credit Agreement (the “Amended Credit Agreement”), increasing the revolving line of credit to $25.0 million and the term loan to $25.0 million. The Amended Credit Agreement as well as additional information can be seen in the 8-K filed by the Company on April 13, 2022.
Current and Projected (“PF”) Portfolio:
FAMOUS DAVE’S VILLAGE INN GRANITE CITY BAKERS SQUARE REAL URBAN BBQ CLARK CREW BBQ TAHOE JOE’S BARRIO QUEEN BAR CONCEPTS TOTAL 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF Corporate Locations 40 43 22 22 18 18 14 31 2 2 1 1 4 4 7 3 4 104 132 Brick & Mortar 31 33 21 21 17 17 11 11 2 2 1 1 4 4 7 3 4 90 100 Dual Concept 1 1 1 1 1 1 3 3 Ghost Kitchens 8 9 3 20 11 29 Franchise/License Locations 104 105 103 105 4 24 211 234 Brick & Mortar 85 85 103 105 188 190 Dual Concept 1 0 1 Ghost Kitchens 19 19 4 24 23 43 Total Locations 144 148 125 127 18 18 18 55 2 2 1 1 4 4 7 3 4 315 366 Growth Plan New line serve / drive thru and Ghost locations New trendy breakfast prototype Dual concept with new breakfast brand Sell pies in retail, kiosk and other restaurants New line serve locations and CPGs CPGs Dual Concept with FDs Franchise and Corporate Corporate # Opening in 2022 Q1: 3 Q1: 1 n/a Q1: 1 n/a n/a Q1: - n/a Q1: - Total: 47 Q2: 1 Q2: 1 Q2: 5 Q2: - Q2: 1 Q3: 1 Q3: 1 Q3: 25 Q3: - Q3: - Q4: 1 Q4: 2 Q4: 3 Q4: 1 Q4: -
Filling Latent Capacity :
Dual concept Granite City/Village Inn opened in Maple Grove, MN in March 2022. Famous Dave’s ghost kitchen opened in Granite City in Fargo, ND in April 2022. Organic Unit Growth:
Famous Dave’s Drive thru in Salt Lake City, UT opened in March 2022. Famous Dave’s franchisee opened an additional restaurant in Grand Forks, ND in April 2022. Famous Dave’s franchisee opened an additional restaurant in the United Arab Emirates in February 2022. New Village Inn prototype expected to open in Omaha, NE in the third quarter of 2022. Mergers and Acquisitions:
Closed the purchase of Barrio Queen in April 2022. Closed the purchase of three bar-centric company-owned locations in March 2022. Signed an asset purchase agreement for an additional bar-centric location in April 2022. Updated 2022 Guidance:
Net restaurant revenue of $280mm to $290mm Net income and adjusted net income range from $12.5mm to $15.5mm We expect to exhaust our deferred tax assets mid-2022 Diluted earnings per share and adjusted earnings per diluted share of $1.15 to $1.45 Cash EBITDA range from $23mm to $25mm Free cash flow range from $13.5mm to $15.5mm 12-Month Pro Forma Guidance*:
Net restaurant revenue of $290mm to $310mm Net income and adjusted net income range from $14.0mm to $17.0mm Diluted earnings per share and adjusted earnings per diluted share of $1.30 to $1.60 Cash EBITDA range from $25.5mm to $27.5mm Free cash flow range from $15.5mm to $17.5mm *Projected results for the next 12 months inclusive of expected results of all completed acquisitions
Executive Comments
Jeff Crivello, CEO, commented, “The beginning of 2022 marked another successful quarter executing on our three core growth initiatives which include filling latent capacity of our current restaurants, organic unit growth, and building a diversified portfolio of food and beverage brands via accretive M&A.
The Company diversified into authentic Mexican cuisine with the Barrio Queen purchase, which closed in April 2022. Barrio Queen adds a vibrant, growing brand to our portfolio. We are excited to build on Barrio Queen’s success.
Despite a challenging inflationary environment, and acknowledge continued headwinds, we continue to deliver consistent results, and look forward to a successful 2022.”
Key Operating Metrics
Three Months Ended April 3, 2022 April 4, 2021 Restaurant count: Franchise-operated 211 100 Company-owned 104 47 Total 315 147 Same store net restaurant sales %: Franchise-operated 8.6 % 16.0 % Company-owned 14.5 % 17.7 % Total 11.0 % 13.1 % (in thousands, expect per share data) System-wide restaurant sales(1) $ 158,731 $ 87,040 Net income attributable to shareholders $ 767 $ 799 Net income attributable to shareholders, per diluted share $ 0.07 $ 0.08 Cash EBITDA(2) $ 3,748 $ 3,220
(1) System-wide restaurant sales include sales for all Company-owned and franchise-operated restaurants, as reported by franchisees. Restaurant sales for franchise-operated restaurants are not revenues of the Company and are not included in the Company’s consolidated financial statements. (2) Cash EBITDA is a non-GAAP measure. A reconciliation of all non-GAAP measures to the most directly comparable GAAP measure is included in the accompanying financial tables. See “Non-GAAP Reconciliation.”
First Quarter 2022 Review
Total revenue for the first quarter of 2022 was $64.2 million, up 72.0% from the first quarter of 2021. The increase in year-over-year revenue was driven primarily by the acquisitions of the Village Inn and Bakers Square brands, four additional Famous Dave’s restaurants, and the Tahoe Joe’s Steakhouse brand and an increase in dine-in traffic across our brands.
Net income attributable to shareholders was approximately $767,000, or $0.07 per diluted share, in the first quarter of fiscal 2022 compared to an income of approximately $799,000, or $0.08 per diluted share, in the first quarter of fiscal 2021. This decrease in net income was mainly attributable to increased food and beverage costs and increased labor costs, as well as an impairment charge related to store closure of approximately $409,000. Cash EBITDA, a non-GAAP measure, increased $528,000 from $3.2 million in the first quarter of 2021 to $3.7 million in the first quarter of 2022. A reconciliation between cash EBITDA and its most directly comparable GAAP measure is included in the accompanying financial tables.
Restaurant-level operating margin as a percentage of restaurant net sales, a non-GAAP measure, was 6.4% for Company-owned restaurants in the first quarter of fiscal year 2022, compared to 9.1% in the first quarter of fiscal year 2021. This decrease in restaurant-level operating margin as a percentage of net restaurant sales was due primarily to increases in the cost of food and labor throughout 2021 and the first quarter of 2022. A reconciliation of restaurant sales to restaurant-level margin is included in the accompanying financial tables. General and administrative expenses for the quarter ended April 3, 2022, and April 4, 2021, represented approximately 8.2% and 10.8% of total revenues, respectively. This decrease in general and administrative expenses as a percentage of total revenues was due primarily to the larger increase in total revenue relative to the increase in general and administrative expenses.
About BBQ Holdings
BBQ Holdings, Inc. (NASDAQ: BBQ) is a national restaurant company engaged in franchising, ownership and operation of casual and fast dining restaurants. As of May 10, 2022, BBQ Holdings had multiple brands with over 100 Company-owned locations and over 200 franchised locations, including ghost kitchens operating out of the kitchen of another restaurant location or shared kitchen space. While BBQ Holdings continues to diversify its ownership in the restaurant community, it was founded with the principle of combining the “art and science” of barbecue to serve up the very best of the best to barbecue lovers everywhere. Along with a wide variety of BBQ favorites served at their BBQ restaurants, BBQ Holdings also operates Granite City Food and Brewery restaurants which offer award winning craft beer and a made-from-scratch, chef driven menu featuring contemporary American cuisine. Village Inn and Bakers Square add a legendary Family Dining element to BBQ Holdings, with these concepts specializing in breakfast and pies. Tahoe Joe’s is known for their pellet-broiler cooked and smoked infused steak.
Non-GAAP Financial Measures
To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses non-GAAP measures including those indicated below. These non-GAAP measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s consolidated financial statements and are subject to inherent limitations. By providing non-GAAP measures, together with a reconciliation to the most comparable GAAP measure, the Company believes that it is enhancing investors’ understanding of the Company’s business and results of operations. These measures are not intended to be considered in isolation of, as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures presented may be different from the measures used by other companies. The Company urges investors to review the reconciliation of its non-GAAP measures to the most directly comparable GAAP measure, included in the accompanying financial tables.
Cash EBITDA is net income plus asset impairment, estimated lease termination charges and other closing costs, depreciation and amortization, net interest expense, net (gain) loss on disposal of equipment, stock-based compensation, acquisition costs, pre-opening costs, severance, gain on debt forgiveness, gain on bargain purchase, provision (benefit) for income taxes, and non-cash rent.
Free cash flow is the Cash EBITDA less cash paid for property, equipment and leasehold improvements. Adjusted net income (loss) is net income plus asset impairment, estimated lease termination charges and other closing costs, less gain on debt forgiveness and gain on bargain purchase. Adjusted earnings per diluted share equals adjusted net income (loss) divided by the weighted average shares outstanding, assuming dilution.
Restaurant-level operating margins are equal to net restaurant sales, less restaurant-level food and beverage costs, labor and benefit costs, and operating expenses for Company-owned restaurants.
Forward-Looking Statements
Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Company’s restaurant openings, the timing of refreshes and the timing or success of refranchising plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from expected results. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from the Company’s expectation include the impact of the COVID-19 virus pandemic, financial performance, inflation, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the Company’s SEC reports.
Contact: Jeff Crivello – Chief Executive Officerjeff.crivello@bbq-holdings.com
BBQ HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited)
Three Months Ended April 3, 2022 April 4, 2021 Revenue: Restaurant sales, net $ 58,731 $ 33,603 Franchise royalty and fee revenue 3,607 2,374 Franchisee national advertising fund contributions 490 328 Licensing and other revenue 1,356 1,014 Total revenue 64,184 37,319 Costs and expenses: Food and beverage costs 18,357 10,057 Labor and benefits costs 19,386 10,254 Operating expenses 17,239 10,249 Depreciation and amortization expenses 2,423 1,552 General and administrative expenses 5,291 4,038 National advertising fund expenses 490 328 Asset impairment, estimated lease termination charges and other closing costs, net 409 12 Pre-opening expenses 65 28 Loss (gain) on disposal of property, net 44 (8 ) Total costs and expenses 63,704 36,510 Income from operations 480 809 Other income (expense): Interest expense (120 ) (54 ) Interest income 8 24 Gain on bargain purchase 38 — Total other income (expense) (74 ) (30 ) Income before income taxes 406 779 Income tax (expense) benefit 241 (82 ) Net income 647 697 Net (income) loss attributable to non-controlling interest 120 102 Net income attributable to shareholders $ 767 $ 799 Income per common share: Basic net income per share attributable to shareholders $ 0.07 $ 0.09 Diluted net income per share attributable to shareholders $ 0.07 $ 0.08 Weighted average shares outstanding - basic 10,552 9,208 Weighted average shares outstanding - diluted 10,649 9,501
BBQ HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited)
ASSETS Current assets: April 3, 2022 January 2, 2022 Cash and cash equivalents $ 35,431 $ 40,309 Restricted cash 1,677 1,152 Accounts receivable, net of allowance for doubtful accounts of $301,000 and $270,000, respectively 3,188 5,476 Inventories 3,281 3,316 Prepaid expenses and other current assets 4,313 3,919 Total current assets 47,890 54,172 Property, equipment and leasehold improvements, net 39,748 39,943 Other assets: Operating lease right-of-use assets 81,248 78,843 Goodwill 5,676 3,037 Intangible assets, net 23,714 23,444 Deferred tax asset, net 3,922 3,692 Other assets 1,493 1,292 Total assets $ 203,691 $ 204,423 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 6,951 $ 7,661 Current portion of operating lease liabilities 12,511 11,904 Current portion of long-term debt and finance lease liabilities 1,488 1,621 Accrued compensation and benefits 6,157 7,121 Gift card liability 8,809 11,257 Other current liabilities 8,752 8,510 Total current liabilities 44,668 48,074 Long-term liabilities: Operating lease liabilities, less current portion 79,362 77,729 Finance lease liabilities, less current portion 292 79 Long-term debt, less current portion 12,819 13,197 Other liabilities 1,087 997 Total liabilities 138,228 140,076 Shareholders’ equity: Common stock, $.01 par value, 100,000 shares authorized, 10,750 and 10,495 shares issued and outstanding at April 3, 2022 and January 2, 2022, respectively 108 105 Additional paid-in capital 22,248 21,782 Retained earnings 44,158 43,391 Total shareholders’ equity 66,514 65,278 Non-controlling interest (1,051 ) (931 ) Total equity 65,463 64,347 Total liabilities and equity $ 203,691 $ 204,423
BBQ HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Three Months Ended April 3, 2022 April 4, 2021 Cash flows from operating activities: Net income $ 647 $ 697 Adjustments to reconcile net income to cash flows provided by operations: Depreciation and amortization 2,423 1,552 Stock-based compensation 384 318 Net (gain) loss on disposal 44 (8 ) Asset impairment, estimated lease termination charges and other closing costs, net 409 12 Gain on bargain purchase (38 ) — Amortization of operating right-of-use assets 2,894 2,134 Deferred tax asset (230 ) 82 Other non-cash items (6 ) 186 Changes in operating assets and liabilities: Accounts receivable, net 2,296 598 Prepaid expenses and other assets (114 ) (1,197 ) Accounts payable (710 ) 1,635 Accrued compensation and benefits (871 ) 1,678 Lease liabilities (3,258 ) (1,513 ) Gift card liability (2,544 ) (1,563 ) Accrued and other liabilities 62 (425 ) Cash flows provided by operating activities 1,388 4,186 Cash flows from investing activities: Purchases of property, equipment and leasehold improvements (722 ) (691 ) Payments for acquired restaurants (4,434 ) — Payments received on note receivable — 6 Cash flows provided by (used for) investing activities (5,156 ) (685 ) Cash flows from financing activities: Payments on long-term debt (562 ) (519 ) Tax payments for restricted stock units and stock options exercised (130 ) — Proceeds from exercise of stock options 107 — Cash flows provided by (used for) financing activities (585 ) (519 ) Increase (decrease) in cash, cash equivalents and restricted cash (4,353 ) 2,982 Cash, cash equivalents and restricted cash, beginning of period 41,461 19,603 Cash, cash equivalents and restricted cash, end of period $ 37,108 $ 22,585 Supplemental Disclosures Cash paid for interest, net $ 107 $ 116 Non-cash investing and financing activities: Operating right-of-use assets acquired 4,533 — Lease liabilities assumed pursuant to acquisitions 4,574 — Gift card liability assumed pursuant to acquisitions 96 — Inventory acquired pursuant to acquisitions 85 —
BBQ HOLDINGS, INC. AND SUBSIDIARIES OPERATING RESULTS (unaudited)
Three Months Ended April 3, 2022 April 4, 2021 Food and beverage costs(1) 31.3 % 29.9 % Labor and benefits costs(1) 33.0 % 30.5 % Operating expenses(1) 29.3 % 30.5 % Restaurant-level operating margin(1)(2) 6.4 % 9.1 % Depreciation and amortization expenses(3) 3.8 % 4.2 % General and administrative expenses(3) 8.2 % 10.8 % Income (loss) from operations(3) 0.7 % 2.2 %
(1) As a percentage of restaurant sales, net (2) Restaurant-level operating margins are equal to restaurant sales, net, less restaurant-level food and beverage costs, labor and benefit costs, and operating expenses. (3) As a percentage of total revenue
BBQ HOLDINGS, INC. AND SUBSIDIARIES RESTAURANT-LEVEL PROFIT AND RESTAURANT-LEVEL MARGIN (1) NON-GAAP RECONCILIATION (in thousands)
Three Months Ended April 3, 2022 April 4, 2021 Restaurant sales, net $ 58,731 $ 33,603 Restaurant operating costs(1) 54,982 30,560 Restaurant-level profit $ 3,749 $ 3,043 Restaurant-level margin 6.4 % 9.1 %
(1) For company-owned restaurants. (2) Restaurant operating costs consist of food and beverage costs, labor and benefits costs and operating expenses.
BBQ HOLDINGS, INC. AND SUBSIDIARIES CASH EBITDA AND FREE CASH FLOW NON-GAAP RECONCILIATION (in thousands, except per share data) (unaudited)
Three Months Ended April 3, 2022 April 4, 2021 March 29, 2020 March 31, 2019 (dollars in thousands) Net income $ 647 $ 697 $ 13,311 $ 82 Asset impairment and estimated lease termination charges and other closing costs 409 12 173 407 Depreciation and amortization 2,423 1,552 1,045 264 Interest expense, net 112 30 76 17 Net loss (gain) on disposal of equipment 44 (8 ) (477 ) (6 ) Stock-based compensation 384 318 137 83 Acquisition costs 167 - (62 ) 163 Pre-opening costs 65 28 25 - Severance - - 28 3 Gain on bargain purchase (38 ) - (14,364 ) - Provision for income taxes (241 ) 82 (349 ) 17 Non-cash rent (224 ) 509 - - Cash EBITDA $ 3,748 $ 3,220 $ (457 ) $ 1,030 Less cash paid for property, equipment and leasehold improvements (722 ) (691 ) (949 ) (221 ) Free cash flow $ 3,026 $ 2,529 $ (1,406 ) $ 809
BBQ HOLDINGS, INC. AND SUBSIDIARIES ADJUSTED NET INCOME (LOSS) AND EARNINGS (LOSS) PER DILUTED SHARE NON-GAAP RECONCILIATION (in thousands, except per share data) (unaudited)
Three Months Ended (dollars in thousands) April 3, 2022 April 4, 2021 March 29, 2020 March 31, 2019 Net income (loss) attributable to shareholders $ 767 $ 799 $ 13,707 $ 82 Asset impairment, estimated lease termination charges and other closing costs 409 12 173 407 Gain on bargain purchase (38 ) — (14,364 ) — Adjusted net income (loss) 1,138 811 (484 ) 489 Weighted average shares outstanding - diluted 10,649 9,501 9,202 9,189 Adjusted earnings (loss) per diluted share $ 0.11 $ 0.09 $ (0.05 ) $ 0.05