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BBQ Holdings, Inc. Reports Results for Second Quarter of Fiscal Year 2020

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BBQ Holdings, Inc. (NASDAQ: BBQ) reported its Q2 2020 results impacted by COVID-19 restrictions. Total revenue was $27.1 million, a 28.2% increase year-over-year, primarily due to new restaurant additions. Company-owned Famous Dave's same-store net sales fell 22.9%, while franchise-operated sales decreased by 31.5%. The net loss reached $6.3 million, driven by lower sales and a $4.8 million impairment charge. Same-store to-go sales soared by 106.0%. Management remains cautious about future COVID-19 impacts but optimistic about recovery as restrictions ease.

Positive
  • Total revenue increased by 28.2% to $27.1 million due to new restaurant openings.
  • Same-store to-go sales for Famous Dave's jumped 106.0%.
  • Granite City saw a sales increase from $0.9 million in April to $3.4 million in June as dine-in restrictions eased.
Negative
  • Net loss of $6.3 million, compared to a profit of $1 million in Q2 2019.
  • Company-owned Famous Dave's same-store net sales decreased by 22.9%.
  • Granite City same-store net sales plummeted by 65.5% compared to Q2 2019.

MINNEAPOLIS, Aug. 12, 2020 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global owner and operator of restaurants, today reported financial results for the second fiscal quarter ended June 28, 2020.  Note: The second quarter results were affected by the COVID-19 pandemic as well as federal and state level mandates requiring restaurants to limit or eliminate in-store dining.

Second Quarter 2020 Highlights:

  • Company-owned Famous Dave’s second quarter same store net sales decreased 22.9% compared to second quarter 2019.
  • Franchise-operated same store net sales decreased 31.5%.
  • Same store to-go sales increased 106.0% at Company-owned Famous Dave’s restaurants.
  • Granite City second quarter same store net sales decreased 65.5% compared to second quarter 2019, however, Granite City same store sales grew from $0.9 million in the month of April 2020 to $3.4 million in the month of June 2020 as dine-in restrictions have eased.
  • Net loss of $6.3 million, driven by reduced sales due to COVID-related restrictions and a one-time impairment charge of $4.8 million.
  • Adjusted EBITDA, a non-GAAP measure was ($1.1) million.
  • Same store sales at our Famous Dave’s restaurants decreased 7.4% while same store sales at our Granite City restaurants decreased 33% during the four weeks ended July 26, 2020 compared to the same four week period in 2019.
  • Entered into two franchise agreements with existing franchisee, PDX Partners, to offer Famous Dave’s food via delivery service providers and take-out in their Johnny Carino’s locations in Downey, CA and Modesto, CA.
  • Entered into a franchising agreement with a new franchisee, DCI Colorado Springs #2, Inc. to co-brand their Texas T-Bone Steakhouse in Colorado Springs, CO with Famous Dave’s.

Executive Comments

Jeff Crivello, CEO, commented, “The quarter has been challenging with the continual changes in state and local dining restrictions.  I am proud of how our team has worked to navigate these changes in a quick and responsible manner for our guests and our shareholders.  Famous Dave’s stores have been performing well through the numerous changes and have continued to increase our to-go business through strong social media marketing as well as the use of our delivery service providers.  We are hopeful that dine-in sales at the Famous Dave’s stores will provide incremental sales as restrictions are lifted and override catering sales which are slowly coming back.  Granite City Food & Brewery is a concept that relies much more heavily on dine-in sales and the initial to-go-only restrictions severely hampered sales at these locations.  The Granite City brand has seen a significant increase in sales as dine-in restrictions have lifted and we believe that the uptick in sales will continue so long as restrictions continue to ease.  In most of the locations in which we operate, we are able to operate at 50% legal capacity.  While we have been prudent in managing our cash as the stores reopen, we continue to be concerned about the future direction of the Covid-19 pandemic and will, therefore, continue to manage our cash appropriately.  We are very pleased to see the resiliency of Famous Dave’s during this pandemic and that other restaurant groups are looking to team with us based on our recently executed franchise agreements.”

Key Operating Metrics

         
  Three Months Ended    Six Months Ended 
  June 28, 2020  June 30, 2019    June 28, 2020  June 30, 2019
 
Restaurant count:                 
Franchise-operated  95    107     95    107  
Company-owned  50    29     50    29  
Total  145    136     145    136  
Same store net restaurant sales %:                 
Franchise-operated, domestic  (31.0)%   0.7%    (22.3)%   0.7% 
Franchise-operated, international  (54.4)%   (5.8)%    (37.9)%   (9.4)% 
Franchise-operated total  (31.5)%   0.5%    (22.7)%   0.5% 
Company-owned  (22.9)%   0.6%    (11.5)%   2.6% 
Total  (30.0)%   0.5%    (20.6)%   1.0% 
                  
(in thousands, expect per share data)                 
                  
System-wide restaurant sales(1) $66,753   $90,623    $136,666   $173,363  
                  
Net income attributable to shareholders $(6,252)   $1,040    $7,455   $1,122  
Adjusted net income attributable to shareholders(2)  (1,902)    1,426     (3,740)    2,061  
                  
Net (loss) income attributable to shareholders, per diluted share $(0.68)   $0.11    $0.82   $0.12  
Adjusted net income attributable to shareholders, per diluted share(2)  (0.21)    0.15     (0.41)    0.22  
                  
Adjusted EBITDA(2) $(1,070)   $2,446    $(1,527)   $3,477  


(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)Adjusted net income (loss) from continuing operations and adjusted EBITDA are non-GAAP measures. 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.”

Second Quarter 2020 Review

Total revenue for the second quarter of 2020 was $27.1 million, up 28.2% from the second quarter of 2019. The increase in year-over-year restaurant net sales for the quarter ended June 28, 2020 was driven primarily by the addition of 18 Granite City restaurants and a Clark Crew BBQ and Real Urban Barbecue restaurant. 

On a weighted basis, Company-owned Famous Dave’s same-store net sales for our to-go line of business increased 106.0% in the second quarter of fiscal 2020 as compared to the prior year period, offset by a decrease in of 77.8% in net catering sales and 86.8% in dine-in sales due to federal, state and local mandates prohibiting large group gatherings and in-store dining in an attempt to reduce the spread of  COVID-19.   

Restaurant-level operating margin, as a percentage of restaurant net sales, for Company-owned restaurants was 0.4 in the second quarter of fiscal 2020 compared to 3.4% in the second quarter of fiscal 2019. This decline in restaurant-level operating margin was primarily a result of acquisitions of new stores and the decline in same store sales in the second quarter of 2020.

General and administrative expenses for the quarter ended June 28, 2020 and June 30, 2019 represented approximately 14.0% and 11.3% of total revenues, respectively. The increase in general and administrative expenses as a percentage of revenue in the second quarter of 2020 was due primarily to the decrease in sale as a result of COVID-19 as well as the integration of the operations of the 18 Granite City restaurants we acquired in March 2020.

Net loss attributable to shareholders was approximately $6.3 million, or $0.68 per share, in the second quarter of fiscal 2020 compared to net income of 1.0 million, or $0.11 per share, in the second quarter of fiscal 2019.  Adjusted net loss attributable to shareholders, a non-GAAP measure, was approximately $3.3 million, or $0.36 per share, compared to adjusted net income attributable to shareholders of approximately $1.4 million, or $0.16 per share, in the second quarter of fiscal 2019. A reconciliation between adjusted net income attributable to shareholders and its most directly comparable GAAP measure is included in the accompanying financial tables.

About BBQ Holdings

BBQ Holdings, Inc. (NASDAQ: BBQ) BBQ Holdings is a national restaurant company engaged in the ownership and operation of casual and fast dining restaurants.  As of August 12, 2020, BBQ Holdings had four brands with 145 overall locations in 33 states and three countries, including 50 company-owned and 95 franchise-operated restaurants. 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. BBQ Holdings, through partnerships, has extended Travis Clark’s award-winning line of barbecue sauces, rubs and seasonings into the retail market. Along with a wide variety of BBQ favorites served at their BBQ restaurants, BBQ Holdings newest addition, Granite City Food and Brewery, offers award winning craft beer and a made-from-scratch, chef driven menu featuring contemporary American cuisine. 

Non-GAAP Financial Measures

To supplement its 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.

Adjusted net income attributable to shareholders is net income attributable to shareholders, plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs, and the related tax impact. This number is divided by the weighted-average number of diluted shares of common stock outstanding during each period presented to arrive at adjusted net income, per share. Adjusted EBITDA is net income (loss), plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs and provision (benefit) for income taxes.

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, 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 Officer
 952-294-1300
  
 Darrow Associates, Inc.
 Peter Seltzberg – Managing Director
 516-419-9915
 pseltzberg@darrowir.com 


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
(Unaudited)

             
 Three Months Ended Six Months Ended 
 June 28, 2020 June 30, 2019 June 28, 2020 June 30, 2019 
Revenue:            
Restaurant sales, net$ 24,306  $ 16,898  $ 44,624  $ 27,212  
Franchise royalty and fee revenue  1,951    3,447    4,475    6,651  
Franchisee national advertising fund contributions  242    471    524    880  
Licensing and other revenue  580    312    926    578  
Total revenue  27,079    21,128    50,549    35,321  
             
Costs and expenses:            
Food and beverage costs  7,717    5,325    14,471    8,685  
Labor and benefits costs  8,066    5,819    15,787    9,776  
Operating expenses  8,421    5,187    14,662    8,356  
Depreciation and amortization expenses  1,378    515    2,423    779  
General and administrative expenses  3,803    2,377    6,835    4,894  
National advertising fund expenses  242    471    524    880  
Asset impairment, estimated lease termination charges and other closing costs, net  4,779    97    4,952    504  
Pre-opening expenses  2    —    27    —  
Gain on disposal of property, net  (100)   (140)   (577)   (146) 
Total costs and expenses  34,308    19,651    59,104    33,728  
             
(Loss) income from operations  (7,229)   1,477    (8,555)   1,593  
             
Other income (expense):            
Interest expense  (330)   (288)   (540)   (359) 
Interest income  152    33    286    87  
Gain on bargain purchase  (689)   —    13,675    —  
Total other (expense) income  (867)   (255)   13,421    (272) 
             
(Loss) income before income taxes  (8,096)   1,222    4,866    1,321  
             
Income tax benefit (expense)  1,897    (182)   2,246    (199) 
             
Net (loss) income   (6,199)   1,040    7,112    1,122  
Net (income) loss attributable to non-controlling interest  (53)   —    343    —  
Net (loss) income attributable to shareholders$ (6,252) $ 1,040  $ 7,455  $ 1,122  
             
             
(Loss) income per common share:            
Basic net (loss) income per share attributable to shareholders$ (0.68) $ 0.11  $ 0.82  $ 0.12  
Diluted net (loss) income per share attributable to shareholders$ (0.68) $ 0.11  $ 0.82  $ 0.12  
Weighted average shares outstanding - basic  9,138    9,093    9,132    9,089  
Weighted average shares outstanding - diluted  9,138    9,278    9,132    9,191  


BBQ HOLDINGS, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)

               
  Three Months Ended  Six Months Ended 
  June 28, 2020  June 30, 2019   June 28, 2020  June 30, 2019  
Food and beverage costs(1) 31.7%  31.5%  32.4%  31.9% 
Labor and benefits costs(1) 33.2%  34.4%  35.4%  35.9% 
Operating expenses(1) 34.6%  30.7%  32.9%  30.7% 
Restaurant level operating margin(1)(3)  0.4%  3.4%  (0.7)%  1.5% 
Depreciation and amortization expenses(2) 5.1%  2.4%  4.8%  2.2% 
General and administrative expenses(2) 14.0%  11.3%  13.5%  13.9% 
(Loss) income from operations(2) (26.7)%  7.0%  (16.9)%  4.5% 


(1)As a percentage of restaurant sales, net
(2)As a percentage of total revenue
(3)Restaurant level margins are equal to restaurant sales, net, less restaurant level food and beverage costs, labor and benefit costs, and operating expenses.



BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)

       
ASSETS      
Current assets:  June 28, 2020 December 29, 2019
Cash and cash equivalents $ 19,919  $ 5,325 
Restricted cash   758    761 
Accounts receivable, net of allowance for doubtful accounts of $137,000 and $132,000, respectively   4,619    4,379 
Inventories   2,596    1,346 
Prepaid income taxes and income taxes receivable   285    264 
Prepaid expenses and other current assets   1,503    1,356 
Assets held for sale   3,911    2,842 
Total current assets    33,591    16,273 
       
Property, equipment and leasehold improvements, net   33,645    19,756 
       
Other assets:      
Operating lease right-of-use assets   66,540    25,962 
Goodwill   651    640 
Intangible assets, net   10,231    2,213 
Deferred tax asset, net   4,061    6,646 
Other assets   1,670    1,591 
  $ 150,389  $ 73,081 
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
       
Current liabilities:       
Accounts payable $ 6,259  $ 3,967 
Current portion of lease liabilities   6,068    4,230 
Current portion of long-term debt   8,854    616 
Accrued compensation and benefits   2,341    2,694 
Other current liabilities   8,798    4,975 
Total current liabilities   32,320    16,482 
       
Long-term liabilities:      
Lease liabilities, less current portion   67,598    26,957 
Long-term debt, less current portion   20,037    6,258 
Other liabilities   1,300    1,610 
Total liabilities   121,255    51,307 
       
Shareholders’ equity:       
Common stock, $.01 par value, 100,000 shares authorized, 9,282 and 9,272 shares issued and outstanding at June 28, 2020 and December 29, 2019, respectively   93    93 
Additional paid-in capital   8,104    7,856 
Retained earnings   21,878    14,423 
Total shareholders’ equity   30,075    22,372 
Non-controlling interest   (941)   (598)
Total equity   29,134    21,774 
  $ 150,389  $ 73,081 


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
(unaudited)

       
  Six Months Ended
  June 28, 2020 June 30, 2019
Cash flows from operating activities:      
Net income $ 7,112  $ 1,122 
Adjustments to reconcile net income to cash flows provided by operations:      
Depreciation and amortization   2,423    779 
Stock-based compensation   248    223 
Net gain on disposal   (577)   (146)
Asset impairment, estimated lease termination charges and other closing costs, net   4,710    469 
Gain on bargain purchase   (13,675)   — 
Deferred income taxes   (2,295)   (6)
Other non-cash items   547    43 
Changes in operating assets and liabilities:      
Accounts receivable, net   (240)   (422)
Other assets   (1,991)   (411)
Accounts payable   2,292    321 
Accrued and other liabilities   964    481 
Cash flows (used for) provided by operating activities   (482)   2,453 
       
Cash flows from investing activities:      
Proceeds from the sale of assets   —    6 
Purchases of property, equipment and leasehold improvements   (2,000)   (1,242)
Payments for acquired restaurants   (4,952)   (4,265)
Advances on notes receivable   —    (150)
Payments received on note receivable   12    8 
Cash flows used for investing activities   (6,940)   (5,643)
       
Cash flows from financing activities:      
Proceeds from long-term debt   22,058    — 
Payments for debt issuance costs   (45)   (54)
Payments on long-term debt   —    (176)
Cash provided by (used for) financing activities   22,013    (230)
       
Increase (decrease) in cash, cash equivalents and restricted cash   14,591    (3,420)
Cash, cash equivalents and restricted cash, beginning of period   6,086    12,440 
Cash, cash equivalents and restricted cash, end of period $ 20,677  $ 9,020 



BBQ HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)

              
  Three Months Ended   Six Months Ended
(dollars in thousands) June 28, 2020 June 30, 2019   June 28, 2020  June 30, 2019
Net income attributable to shareholders $ (6,252) $ 1,040     7,455    1,122 
Asset impairment and estimated lease termination charges and other closing costs   4,779    97     4,952    504 
Net gain on disposal of equipment   (100)   (140)    (577)   (146)
Stock-based compensation   111    140     248    223 
Acquisition costs   (13)   357     (75)   521 
Pre-opening costs   2    -     27    - 
Severance   2    —     30    3 
Gain on bargain purchase   689    —     (13,675)   — 
Tax adjustment   (1,120)   (68)    (2,125)   (166)
Adjusted net income $ (1,902) $ 1,426   $ (3,740) $ 2,061 
Basic adjusted net income per common share $ (0.21) $ 0.16   $ (0.41) $ 0.23 
Diluted adjusted net income per common share $ (0.21) $ 0.15   $ (0.41) $ 0.22 
              
Weighted average common share outstanding - basic   9,138    9,093     9,132    9,089 
Weighted average common share outstanding - diluted   9,138    9,278     9,132    9,191 
              
Net income $ (6,199) $ 1,040   $ 7,112  $ 1,122 
Asset impairment and estimated lease termination charges and other closing costs   4,779    97     4,952    504 
Depreciation and amortization   1,378    515     2,423    779 
Interest expense, net   178    255     254    272 
Net (gain) loss on disposal of equipment   (100)   (140)    (577)   (146)
Stock-based compensation   111    140     248    223 
Acquisition costs   (13)   357     (75)   521 
Pre-opening costs   2    —     27    — 
Severance   2    —     30    3 
Gain on bargain purchase   689    —     (13,675)   — 
Provision for income taxes   (1,897)   182     (2,246)   199 
Adjusted EBITDA $ (1,070) $ 2,446   $ (1,527) $ 3,477 

 


FAQ

What were BBQ Holdings' Q2 2020 earnings results?

BBQ Holdings reported a net loss of $6.3 million for Q2 2020, with total revenue at $27.1 million.

How did COVID-19 impact BBQ Holdings' sales?

The COVID-19 pandemic led to a significant decline in in-store sales, with same-store net sales for Famous Dave's dropping 22.9%.

What is the outlook for BBQ Holdings post-COVID restrictions?

Management expresses cautious optimism as dine-in sales are anticipated to improve as restrictions ease.

What contributed to BBQ Holdings' increase in revenue in Q2 2020?

The increase was primarily driven by the addition of new Granite City restaurants and robust to-go sales.

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