FAT BRANDS INC. REPORTS FISCAL FOURTH QUARTER AND FULL FISCAL YEAR 2023 FINANCIAL RESULTS
FAT Brands Inc. Reports Strong Fiscal Fourth Quarter and Full Fiscal Year 2023 Financial Results with Total Revenue Growth, New Store Openings, and Positive EBITDA. The company acquired Smokey Bones, expanding its portfolio to 18 brands with $2.5 billion in sales. Despite a decline in same-store sales, the company shows potential for significant EBITDA growth in the future.
Positive
Total revenue increased by 52.8% in the fiscal fourth quarter of 2023 compared to the same period in 2022.
System-wide sales grew by 16.5% in the fiscal fourth quarter of 2023.
The company opened 125 new restaurants in 2023, including 29 in the fourth quarter.
Adjusted EBITDA for the fiscal fourth quarter of 2023 was $27.0 million, a significant increase from $19.6 million in the same period in 2022.
Total revenue for the full fiscal year 2023 increased by 18.0% compared to fiscal 2022.
System-wide same-store sales growth was 0.8% in fiscal 2023 compared to fiscal 2022.
Adjusted EBITDA for the full fiscal year 2023 was $91.2 million, up from $88.8 million in fiscal 2022.
The financial results of FAT Brands Inc. indicate a substantial 52.8% increase in total revenue for the fourth quarter of 2023, driven by an increase in royalties, company-owned restaurant revenues and manufacturing facility revenues. This growth is particularly notable given the broader economic context where many industries face challenges. The reported system-wide sales growth of 16.5% for the same period suggests that the company's expansion strategy is translating into higher sales volumes.
However, the disclosed net loss of $26.2 million reflects ongoing financial pressures despite the growth in revenues. The adjusted EBITDA growth from $19.6 million to $27.0 million is a positive indicator of the company's operating performance, as it excludes non-recurring items and provides a clearer picture of the company's earnings from its core business activities. Investors may view the reduction in losses from operations year-over-year as a sign of improving operational efficiency.
From a financial perspective, the aggressive expansion, including the acquisition of Smokey Bones and the signing of over 225 development agreements, presents both opportunities for revenue growth and risks associated with integration and capital expenditure. The company's strategy to deleverage its balance sheet in the future is critical, as a high debt load can be a significant risk factor, especially in uncertain economic times.
The expansion of FAT Brands, especially the focus on the Twin Peaks brand, reflects a strategic move to capitalize on a franchise model that has shown resilience in the food industry. The reported increase of 33% in Twin Peaks lodges since its acquisition indicates a successful integration and popularity of the concept. The company's ability to sign 225 development agreements in 2023, with a pipeline of 1,100 units, demonstrates strong franchisee interest and potential for significant market penetration.
However, the slight decline in system-wide same-store sales by 0.6% could be a point of concern. This metric is often considered a key indicator of a brand's health and customer loyalty, as it measures the performance of existing outlets. A decline might imply that while the overall network is growing, individual store performance could be under pressure, potentially due to market saturation or competitive dynamics.
The company's strategy to potentially convert Smokey Bones locations into Twin Peaks lodges could accelerate growth but also requires careful market analysis to avoid cannibalization and ensure that brand positioning remains distinct and compelling to consumers.
The reported financial results of FAT Brands must be contextualized within the broader economic environment, which includes factors such as inflationary pressures, consumer spending habits and labor market conditions. The company's growth amidst these conditions could be indicative of strong brand equity and consumer demand for their offerings. The increased revenue from company-owned restaurants suggests that FAT Brands is benefiting from both organic growth and acquisitions.
However, the reported net interest expense of $33.3 million, which is part of the total other expense, signals a substantial financial burden that could affect the company's flexibility and profitability in the long term. Rising interest rates could further exacerbate this issue, making debt servicing more expensive and potentially hindering future expansion efforts.
The company's focus on deleveraging is a prudent approach in the current economic climate, where high debt levels can be particularly onerous. The ability to successfully manage debt and finance growth sustainably will be crucial for the company's long-term financial health and investor confidence.
03/07/2024 - 04:23 PM
Conference call and webcast today at 5:00 p.m. ET
LOS ANGELES, March 07, 2024 (GLOBE NEWSWIRE) -- FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT Brands” or the “Company”) today reported fiscal fourth quarter and full fiscal year 2023 financial results for the fiscal year ended December 31, 2023.
“With the acquisition of Smokey Bones early in the fourth quarter, we have grown the FAT Brands portfolio to 18 iconic restaurant brands with annualized system wide sales of $2.5 billion ,” said Andy Wiederhorn, Chairman of FAT Brands. “We opened 125 restaurants in 2023, including 29 in the fourth quarter. We are seeing strong franchisee interest in development opportunities, having signed more than 225 development agreements in 2023, bringing our total pipeline to 1,100 units. This represents the potential for over 50% EBITDA growth over the next several years.”
Ken Kuick, Co-Chief Executive Officer of FAT Brands, commented, “While franchise interest remains high across all of our brands, we continue to be focused on the expansion of Twin Peaks. This year we opened 14 new lodges and ended the year with 109 lodges, a 33% increase since acquiring the brand in 2021. Our growth pipeline includes 113 lodges and Smokey Bones’ healthy real estate portfolio provides us with the opportunity to convert locations into Twin Peaks lodges, with the potential to significantly accelerate the growth of the brand.”
Rob Rosen, Co-Chief Executive Officer of FAT Brands, concluded, “We believe there are significant opportunities on the horizon for FAT Brands. Our seasoned leadership and strong brand management platform allow us to efficiently integrate new brands while maintaining a healthy and evolving pipeline for organic growth. These strengths position us for continued growth in the future, which will help deleverage our balance sheet.”
Fiscal Fourth Quarter 2023 Highlights
Total revenue improved 52.8% to $158.6 million compared to $103.8 million in the fourth quarter of 2022 System-wide sales growth of 16.5% in the fiscal fourth quarter of 2023 compared to the prior year fiscal quarter System-wide same-store sales declined 0.6% in the fiscal fourth quarter of 2023 compared to the prior fiscal year 29 new store openings during the fiscal fourth quarter of 2023 Loss from operations of $3.1 million compared to $32.6 million in the fiscal fourth quarter of 2022 Net loss of $26.2 million , or $1.68 per diluted share, compared to $70.8 million , or $4.39 per diluted share, in the fiscal fourth quarter of 2022 Adjusted EBITDA(1) of $27.0 million compared to $19.6 million in the fiscal fourth quarter of 2022 Adjusted net loss( 1) of $17.3 million , or $1.15 per diluted share, compared to $43.0 million , or $2.70 per diluted share, in the fiscal fourth quarter of 2022 Fiscal Year 2023 Highlights
Total revenue increased 18.0% to $480.5 million compared to $407.2 million in fiscal 2022 System-wide sales growth of 6.9% compared to fiscal 2022 System-wide same-store sales growth of 0.8% in fiscal 2023 compared to fiscal 2022 125 new store openings during fiscal 2023 Income from operations of $22.3 million compared to loss from operations of $17.9 million in the fiscal quarter of 2022 Net loss of $90.1 million , or $5.85 per diluted share, compared to $126.2 million , or $8.06 per diluted share, in fiscal 2022 Adjusted EBITDA(1) of $91.2 million compared to $88.8 million in fiscal 2022 Adjusted net loss(1) of $56.5 million , or $3.83 per diluted share, compared to $80.9 million , or $5.32 per diluted share, in fiscal 2022 (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 Fourth Quarter 2023 Financial Results
Total revenue increased $54.8 million , or 52.8% , in the fiscal fourth quarter of 2023, to $158.6 million compared to $103.8 million in the same fiscal period of 2022, driven by a 10.4% increase in royalties, an 80.5% increase in company-owned restaurant revenues driven by new restaurant openings and the acquisition of Smokey Bones during the fourth quarter of 2023 and a 10.0% increase in revenues from our manufacturing facility.
Costs and expenses consist of general and administrative expense, cost of restaurant and factory revenues, depreciation and amortization, refranchising net losses and advertising fees. Costs and expenses increased $25.4 million , or 18.6% , in the fiscal fourth quarter of 2023 to $161.8 million compared to $136.4 million in the same fiscal period in the prior fiscal year.
General and administrative expense decreased $8.8 million , or 22.6% , in the fiscal fourth quarter of 2023 compared to the same fiscal period in the prior fiscal year, primarily due to a $16.6 million non-cash reserve on claimed Employee Retention Credits recorded during the fourth quarter of 2022 and the recognition of $3.4 million related to Employee Retention Credits during the fiscal fourth quarter of 2023, partially offset by the acquisition of Smokey Bones in the fourth quarter of 2023 and higher professional fees related to certain litigation matters.
Cost of restaurant and factory revenues was related to the operations of the company-owned restaurant locations and our dough factory and increased $43.4 million , or 70.3% , in the fiscal fourth quarter of 2023 to $105.1 million , compared to the prior year quarter, primarily due to the acquisition of Smokey Bones in the fourth quarter of 2023.
Depreciation and amortization increased $3.0 million , or 42.9% in the fiscal fourth quarter of 2023 compared to the same fiscal period in the prior fiscal year, primarily due to the acquisition of Smokey Bones in the fourth quarter of 2023 and depreciation of new property and equipment at company-owned restaurant locations.
Refranchising losses in the fiscal fourth quarter of 2023 and 2022 were $2.1 million and $3.1 million , respectively, and were comprised of restaurant costs and expenses, net of food sales.
Advertising expenses increased $2.2 million in the fiscal fourth quarter of 2023 compared to the prior fiscal year period. These expenses vary in relation to advertising revenues.
Total other expense, net for the fiscal fourth quarters of 2023 and 2022 was $31.9 million and $24.2 million , respectively, primarily comprised of net interest expense of $33.3 million and $25.6 million , respectively.
Adjusted net loss was $17.3 million , or $1.15 per diluted share, in the fiscal fourth quarter of 2023 compared to $43.0 million , or $2.70 per diluted share, in the fiscal fourth quarter of 2022.
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 fourth quarter 2023 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 Thursday, March 28, 2024, and can be accessed by dialing 1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The passcode is 10186678. 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, estimates of future EBITDA, the timing and performance of new store openings, future reductions in cost of capital and leverage ratio, 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 losses, 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:
ICRir-fatbrands@icrinc.com
Media Relations:
Erin Mandzikemandzik@fatbrands.com
FAT Brands Inc. Consolidated Statements of Operations
Fourteen Weeks Ended Fiscal Year Ended (In thousands, except share and per share data) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022 Revenue Royalties $ 24,869 $ 22,525 $ 94,036 $ 87,921 Restaurant sales 111,072 61,528 299,029 241,001 Advertising fees 10,510 9,589 39,490 37,997 Factory revenues 9,810 8,916 37,983 33,504 Franchise fees 937 943 4,979 3,706 Other revenue 1,438 313 4,940 3,095 Total revenue 158,636 103,814 480,457 407,224 Costs and expenses General and administrative expense 30,298 39,125 93,117 113,313 Cost of restaurant and factory revenues 105,130 61,726 282,887 221,627 Depreciation and amortization 9,914 6,939 31,131 27,015 Impairment of goodwill and other intangible assets 500 14,000 500 14,000 Refranchising loss 2,127 3,055 2,873 4,178 Acquisition costs — — — 383 Advertising fees 13,811 11,574 47,619 44,612 Total costs and expenses 161,780 136,419 458,127 425,128 (Loss) income from operations (3,144 ) (32,605 ) 22,330 (17,904 ) Other (expense) income, net Interest expense (28,925 ) (20,947 ) (99,342 ) (78,477 ) Interest expense related to preferred shares (4,417 ) (4,691 ) (18,189 ) (16,372 ) Net gain (loss) on extinguishment of debt 325 — (2,397 ) — Other (expense) income, net 1,096 1,456 1,233 5,375 Total other expense, net (31,921 ) (24,182 ) (118,695 ) (89,474 ) Loss before income tax provision (35,065 ) (56,787 ) (96,365 ) (107,378 ) Income tax provision (benefit) (8,827 ) 14,021 (6,255 ) 18,810 Net loss $ (26,238 ) $ (70,808 ) $ (90,110 ) $ (126,188 ) Net loss $ (26,238 ) $ (70,808 ) $ (90,110 ) $ (126,188 ) Dividends on preferred shares (1,832 ) (1,661 ) (7,007 ) (6,636 ) $ (28,070 ) $ (72,469 ) $ (97,117 ) $ (132,824 ) Basic and diluted loss per common share $ (1.68 ) $ (4.39 ) $ (5.85 ) $ (8.06 ) Basic and diluted weighted average shares outstanding 16,675,096 16,530,934 16,599,015 16,476,090 Cash dividends declared per common share $ 0.14 $ 0.14 $ 0.56 $ 0.54
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation
Fourteen Weeks Ended Fiscal Year Ended (In thousands) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022 Net loss $ (26,238 ) $ (70,808 ) $ (90,110 ) $ (126,188 ) Interest expense, net 33,342 25,638 117,531 94,849 Income tax provision (benefit) (8,827 ) 14,021 (6,255 ) 18,810 Depreciation and amortization 9,914 6,939 31,131 27,015 EBITDA 8,191 (24,210 ) 52,297 14,486 Bad debt expense (recovery) 2,868 17,793 (9,827 ) 23,736 Share-based compensation expenses 947 1,584 3,615 7,665 Non-cash lease expenses 535 808 1,766 2,478 Acquisition costs — — — 383 Refranchising loss 2,127 3,055 2,873 4,178 Litigation costs 8,832 4,788 28,280 18,958 Severance 341 — 1,377 526 Net loss related to advertising fund deficit 1,946 1,038 6,310 1,041 Net (gain) loss on extinguishment of debt (325 ) — 2,397 — Impairment losses 1,006 14,454 1,006 14,454 Pre-opening expenses 564 298 1,136 900 Adjusted EBITDA $ 27,032 $ 19,608 $ 91,230 $ 88,805
FAT Brands Inc. Adjusted Net Loss Reconciliation
Fourteen Weeks Ended Fiscal Year Ended (In thousands, except share and per share data) December 31, 2023 December 25, 2022 December 31, 2023 December 25, 2022 Net loss $ (26,238 ) $ (70,808 ) $ (90,110 ) $ (126,188 ) Refranchising loss 2,127 3,055 2,873 4,178 Acquisition costs — — — 383 Net (gain) loss on extinguishment of debt (325 ) — 2,397 — Impairment losses 1,006 14,454 1,006 14,454 Litigation costs 8,832 4,788 28,280 18,958 Severance 341 — 1,377 526 Tax adjustments, net (1) (3,016 ) 5,505 (2,332 ) 6,744 Adjusted net loss $ (17,273 ) $ (43,006 ) $ (56,509 ) $ (80,945 ) Net loss $ (26,238 ) $ (70,808 ) $ (90,110 ) $ (126,188 ) Dividends on preferred shares (1,832 ) (1,661 ) (7,007 ) (6,636 ) $ (28,070 ) $ (72,469 ) $ (97,117 ) $ (132,824 ) Adjusted net loss $ (17,273 ) $ (43,006 ) $ (56,509 ) $ (80,945 ) Dividends on preferred shares (1,832 ) (1,661 ) (7,007 ) (6,636 ) $ (19,105 ) $ (44,667 ) $ (63,516 ) $ (87,581 ) Loss per basic and diluted share $ (1.68 ) $ (4.38 ) $ (5.85 ) $ (8.06 ) Adjusted net loss per basic and diluted share $ (1.15 ) $ (2.70 ) $ (3.83 ) $ (5.32 ) Weighted average basic and diluted shares outstanding 16,675,096 16,530,934 16,599,015 16,476,090
(1) Reflects the tax impact of the adjustments using the effective tax rate for the respective periods.
What was the total revenue growth in the fiscal fourth quarter of 2023?
Total revenue increased by 52.8% in the fiscal fourth quarter of 2023 compared to the same period in 2022.
How many new restaurants did the company open in 2023?
The company opened 125 new restaurants in 2023, including 29 in the fourth quarter.
What was the adjusted EBITDA for the fiscal fourth quarter of 2023?
Adjusted EBITDA for the fiscal fourth quarter of 2023 was $27.0 million, a significant increase from $19.6 million in the same period in 2022.
What was the system-wide same-store sales growth in fiscal 2023?
System-wide same-store sales growth was 0.8% in fiscal 2023 compared to fiscal 2022.
How did the total revenue for the full fiscal year 2023 compare to fiscal 2022?
Total revenue for the full fiscal year 2023 increased by 18.0% compared to fiscal 2022.
