FAT Brands(FATBB) - 2024 Q4 - Annual Results

Report Overview FAT Brands Inc. announced its fiscal fourth quarter and full-year 2024 financial results, with management highlighting strategic growth and a shift towards a nearly 100% franchised model Introduction FAT Brands Inc. announced its fiscal fourth quarter and full-year 2024 financial results for the period ended December 29, 2024 - FAT Brands Inc. announced its fiscal fourth quarter and full-year 2024 financial results on February 27, 2025[2] Management Commentary Management highlighted 2024's success in store expansion and franchise agreements, projecting over 100 new restaurants in 2025, while completing the Twin Hospitality Group Inc. spin-off and focusing on synergy, cost reduction, and a nearly 100% franchised model - In 2024, the company successfully opened 92 new restaurants and signed over 250 new franchise agreements, increasing its development pipeline to 1,000 locations[3] - Over 100 new restaurants are projected to open in 2025[3] - The company completed the spin-off of Twin Hospitality Group Inc., aiming to create shareholder value and provide capital resources[3] - Strategic focus includes synergy and cost reduction, with plans to re-franchise 57 Fazoli's company-owned locations and ultimately retain only 33 Hot Dog on a Stick company-owned locations, achieving a nearly 100% franchised model[3] Financial Highlights The company's financial performance in fiscal Q4 and full-year 2024 showed a decline in revenue and profitability, primarily impacted by a shorter operating period and decreased same-store sales Fiscal Fourth Quarter 2024 Highlights In fiscal Q4 2024, total revenue decreased by 8.4% to $145.3 million, primarily due to an extra operating week in the prior year, while system same-store sales declined by 1.6%, net loss and adjusted net loss widened, and adjusted EBITDA decreased to $14.4 million Fiscal Fourth Quarter 2024 Financial Highlights (Year-over-Year) | Metric | Fiscal Q4 2024 | Fiscal Q4 2023 | Change | Notes | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $145.3 million | $158.6 million | -8.4% | 2023 included an extra operating week, contributing $11.3 million in revenue | | System-Wide Sales | Down 7.4% | - | - | 2023 included an extra operating week, contributing $44.8 million in sales | | System Same-Store Sales | -1.6% | - | - | | | New Store Openings | 30 | - | - | | | Operating Loss | $39.3 million | $3.1 million | Widened | | | Net Loss | $67.4 million | $26.2 million | Widened | | | Diluted Net Loss Per Share | $4.06 | $1.68 | Widened | | | Adjusted EBITDA | $14.4 million | $27.0 million | Decreased | 2023 included an extra operating week, contributing $1.9 million in Adjusted EBITDA | | Adjusted Net Loss | $29.9 million | $17.3 million | Widened | | | Diluted Adjusted Net Loss Per Share | $1.87 | $1.15 | Widened | | Full Fiscal Year 2024 Highlights For the full fiscal year 2024, total revenue increased by 23.4% to $592.7 million, but system same-store sales declined by 2.5%, operating results shifted from profit to loss, net loss and adjusted net loss significantly widened, and adjusted EBITDA decreased to $62.4 million Full Fiscal Year 2024 Financial Highlights (Year-over-Year) | Metric | Full Fiscal Year 2024 | Full Fiscal Year 2023 | Change | Notes | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $592.7 million | $480.5 million | +23.4% | 2023 included an extra operating week, contributing $11.3 million in revenue | | System-Wide Sales Growth | +3.1% | - | - | | | System Same-Store Sales | -2.5% | - | - | | | New Store Openings | 92 | - | - | | | Operating (Loss) Income | ($52.2) million | $22.3 million | Shifted from Profit to Loss | | | Net Loss | $189.8 million | $90.1 million | Widened | | | Diluted Net Loss Per Share | $11.60 | $5.85 | Widened | | | Adjusted EBITDA | $62.4 million | $91.2 million | Decreased | 2023 included an extra operating week, contributing $1.9 million in Adjusted EBITDA | | Adjusted Net Loss | $128.9 million | $56.5 million | Widened | | | Diluted Adjusted Net Loss Per Share | $8.02 | $3.83 | Widened | | Detailed Financial Performance A detailed analysis of fiscal Q4 2024 performance reveals revenue decline due to various factors, alongside comprehensive consolidated statements and reconciliations for EBITDA and adjusted net loss Fiscal Fourth Quarter 2024 Performance Analysis In fiscal Q4 2024, total revenue decreased by 8.4% due to an extra operating week in the prior year, declining same-store sales, and Smokey Bones store closures, while general and administrative expenses rose from closure costs, restaurant and factory revenue costs decreased with lower company-owned sales, advertising expenses fell due to reduced Smokey Bones advertising, and other net expenses increased from interest and debt extinguishment losses Revenue - Total revenue for fiscal Q4 2024 decreased by 8.4% to $145.3 million, primarily due to an extra operating week in the prior year (contributing $11.3 million in revenue), declining same-store sales, and the closure of two Smokey Bones locations[6] General and Administrative Expense - General and administrative expenses increased by $4.2 million (13.9%) in fiscal Q4 2024, primarily due to $5.0 million in Smokey Bones store closure costs[7] Cost of Restaurant and Factory Revenues - Cost of restaurant and factory revenues decreased by approximately $8.0 million (7.6%) to $97.2 million in fiscal Q4 2024, primarily due to lower company-owned restaurant sales[8] Advertising Expenses - Advertising expenses decreased by $2.0 million in fiscal Q4 2024 due to a slowdown in Smokey Bones advertising[9] Total Other Expense, Net - Total other expense, net, for fiscal Q4 2024 was $36.4 million, primarily comprising $34.7 million in net interest expense and $2.2 million in loss on extinguishment of debt[10] Consolidated Statements of Operations The consolidated statements of operations detail revenues, costs, expenses, and net loss for fiscal Q4 and full-year 2024 compared to 2023, showing a significant widening of net loss in both periods FAT Brands Inc. Consolidated Statements of Operations (Excerpt) | (Thousands of U.S. dollars, except per share data) | Thirteen Weeks Ended December 29, 2024 | Fourteen Weeks Ended December 31, 2023 | Fifty-Two Weeks Ended December 29, 2024 | Fifty-Three Weeks Ended December 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | | | | | | Royalty revenue | $22,416 | $24,869 | $90,035 | $94,036 | | Restaurant sales | 100,893 | 111,072 | 413,480 | 299,029 | | Advertising revenue | 9,903 | 10,510 | 39,473 | 39,490 | | Factory revenue | 9,351 | 9,810 | 37,949 | 37,983 | | Franchise fees | 1,317 | 937 | 6,487 | 4,979 | | Other revenue | 1,400 | 1,438 | 5,228 | 4,940 | | Total revenues | 145,280 | 158,636 | 592,652 | 480,457 | | Costs and expenses | | | | | | General and administrative expense | 34,521 | 30,298 | 128,564 | 93,117 | | Cost of restaurant and factory revenues | 97,176 | 105,130 | 393,131 | 282,887 | | Depreciation and amortization | 10,352 | 9,914 | 41,528 | 31,131 | | Impairment of goodwill and other intangible assets | 30,600 | 500 | 30,600 | 500 | | Loss on refranchising | 109 | 2,127 | 1,949 | 2,873 | | Advertising expense | 11,825 | 13,811 | 49,100 | 47,619 | | Total costs and expenses | 184,583 | 161,779 | 644,872 | 458,127 | | Operating (loss) income | (39,303) | (3,144) | (52,220) | 22,330 | | Other (expense) income, net | | | | | | Interest expense | (30,262) | (28,925) | (120,580) | (99,342) | | Interest expense related to preferred stock | (4,416) | (4,417) | (17,670) | (18,189) | | Net (loss) gain on extinguishment of debt | (2,226) | 325 | (1,798) | (2,397) | | Other (expense) income, net | 468 | 1,096 | (332) | 1,233 | | Total other expense, net | (36,436) | (31,921) | (140,380) | (118,695) | | Loss before income taxes | (75,739) | (35,065) | (192,600) | (96,365) | | Income tax benefit | (8,321) | (8,827) | (2,753) | (6,255) | | Net loss | ($67,418) | ($26,238) | ($189,847) | ($90,110) | | Preferred stock dividends | (2,043) | (1,832) | (7,779) | (7,007) | | Basic and diluted loss per common share | ($4.06) | ($1.68) | ($11.60) | ($5.85) | | Basic and diluted weighted-average common shares outstanding | 17,113,424 | 16,675,096 | 17,041,888 | 16,599,015 | | Cash dividends declared per common share | $0.14 | $0.14 | $0.56 | $0.56 | Consolidated EBITDA and Adjusted EBITDA Reconciliation This reconciliation table illustrates the calculation from net loss to EBITDA and Adjusted EBITDA, showing a significant decline in both EBITDA and Adjusted EBITDA for fiscal Q4 and full-year 2024 compared to 2023, reflecting deteriorating operating performance FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation (Excerpt) | (Thousands of U.S. dollars) | Thirteen Weeks Ended December 29, 2024 | Fourteen Weeks Ended December 31, 2023 | Fifty-Two Weeks Ended December 29, 2024 | Fifty-Three Weeks Ended December 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net loss | ($67,418) | ($26,238) | ($189,847) | ($90,110) | | Interest expense, net | 34,678 | 33,342 | 138,250 | 117,531 | | Income tax benefit | (8,321) | (8,827) | (2,753) | (6,255) | | Depreciation and amortization | 10,352 | 9,914 | 41,528 | 31,131 | | EBITDA | ($30,709) | $8,191 | ($12,822) | $52,297 | | Bad debt expense (recovery) | 242 | 2,868 | 1,029 | (9,827) | | Stock-based compensation expense | 369 | 947 | 2,330 | 3,615 | | Non-cash lease expense | (130) | 535 | 1,656 | 1,766 | | Store closure costs | 5,010 | — | 5,010 | — | | Loss on refranchising | 109 | 2,127 | 1,949 | 2,873 | | Litigation expenses | 4,184 | 8,832 | 22,018 | 28,280 | | Severance costs | — | 341 | 425 | 1,377 | | Net loss related to advertising fund deficit | 1,762 | 1,946 | 6,747 | 6,310 | | Net (loss) gain on extinguishment of debt | 2,224 | (325) | 1,798 | 2,397 | | Impairment loss | 30,600 | 1,006 | 30,600 | 1,006 | | Pre-opening expenses | 697 | 564 | 1,632 | 1,136 | | Adjusted EBITDA | $14,358 | $27,032 | $62,372 | $91,230 | Adjusted Net Loss Reconciliation This reconciliation table provides a detailed calculation from GAAP net loss to adjusted net loss, excluding the impact of special items, showing a significant widening of adjusted net loss for both fiscal Q4 and full-year 2024 compared to 2023 FAT Brands Inc. Adjusted Net Loss Reconciliation (Excerpt) | (Thousands of U.S. dollars, except per share data) | Thirteen Weeks Ended December 29, 2024 | Fourteen Weeks Ended December 31, 2023 | Fifty-Two Weeks Ended December 29, 2024 | Fifty-Three Weeks Ended December 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net loss | ($67,418) | ($26,238) | ($189,847) | ($90,110) | | Loss on refranchising | 109 | 2,127 | 1,949 | 2,873 | | Store closure costs | 5,010 | — | 5,010 | — | | Net (loss) gain on extinguishment of debt | 2,224 | (325) | 1,798 | 2,397 | | Impairment loss | 30,600 | 1,006 | 30,600 | 1,006 | | Litigation expenses | 4,184 | 8,832 | 22,018 | 28,280 | | Severance costs | — | 341 | 425 | 1,377 | | Tax adjustments, net (1) | (4,628) | (3,016) | (883) | (2,332) | | Adjusted Net Loss | ($29,919) | ($17,273) | ($128,930) | ($56,509) | | Preferred stock dividends | (2,043) | (1,832) | (7,779) | (7,007) | | Adjusted basic and diluted loss per share | ($1.87) | ($1.15) | ($8.02) | ($3.83) | | Weighted-average basic and diluted common shares outstanding | 17,113,424 | 16,675,096 | 17,041,888 | 16,599,015 | | (1) Reflects the tax impact of adjustments using the effective tax rate for the respective periods | | | | | Key Financial Definitions This section defines key financial metrics such as new store openings, same-store sales growth, and system-wide sales growth, crucial for understanding the company's operational performance New Store Openings New store openings reflect the number of stores opened within a specific reporting period, with their timing and quantity directly impacting company performance - New store openings reflect the number of stores opened within a specific reporting period, with their timing and quantity directly impacting company performance[11] Same-Store Sales Growth Same-store sales growth measures year-over-year sales changes on a comparable store basis, defined as stores operating within the FAT Brands system for at least one full fiscal year, with new stores typically stabilizing after 3-6 months - Same-store sales growth reflects year-over-year sales changes on a comparable store basis, defined as stores operating within the FAT Brands system for at least one full fiscal year[12] - New stores typically have higher initial sales and stabilize after 3-6 months[12] System-Wide Sales Growth System-wide sales growth reflects the percentage change in sales for all brand locations (FAT Brands-owned brands only) in a specific fiscal period compared to the prior period, irrespective of store count changes from acquisitions, new openings, or closures - System-wide sales growth reflects the percentage change in sales for all brand locations (FAT Brands-owned brands only) in a specific fiscal period compared to the prior period[14] - This metric does not account for differences in store count due to acquisitions, new openings, or closures[14] Non-GAAP Financial Measures This section provides definitions for non-GAAP financial measures, including EBITDA, Adjusted EBITDA, and Adjusted Net Loss, explaining their purpose and limitations in financial analysis Definition of EBITDA EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, widely used to assess operating performance by removing non-direct business expenses, but it is not a GAAP measure and should not replace net loss or operating cash flow - EBITDA is defined as earnings before interest, taxes, depreciation, and amortization[20] - EBITDA is widely used to assess a company's operating performance within its industry, as it eliminates the impact of expenses not directly related to business performance[20] - EBITDA is not a GAAP measure and should not be considered an alternative to net loss or operating cash flow[20] Definition of Adjusted EBITDA Adjusted EBITDA builds upon EBITDA by further excluding non-recurring or non-cash items such as acquisition-related expenses, refranchising losses, impairment charges, and other items deemed not reflective of core operations or ongoing business by the company - Adjusted EBITDA is calculated by excluding from EBITDA items such as acquisition-related expenses, refranchising losses, impairment charges, and other non-recurring or non-cash items that the company believes do not directly reflect its core operations or are not indicative of ongoing business[21] Definition of Adjusted Net Loss Adjusted net loss is a supplemental non-GAAP financial performance measure calculated by adding back adjustments and their tax impact to net loss, aiming to help investors understand company performance excluding special items for improved comparability across periods - Adjusted net loss is a supplemental non-GAAP financial performance measure calculated by adding back adjustments and their tax impact to net loss[22] - It aims to help investors understand company performance by excluding the impact of special items, thereby enhancing comparability of results across periods[22] Company Information & Disclosures This section provides essential company information, including a profile of FAT Brands, details on the earnings conference call, forward-looking statements, and investor and media contact information About FAT Brands FAT Brands is a leading global franchisor that strategically acquires, markets, and develops quick-service, fast-casual, casual dining, and polished casual dining concepts worldwide, currently owning 18 restaurant brands with approximately 2,300 units globally - FAT Brands is a leading global franchisor that strategically acquires, markets, and develops quick-service, fast-casual, casual dining, and polished casual dining concepts[17] - The company currently owns 18 restaurant brands with approximately 2,300 units globally[17] Conference Call and Webcast FAT Brands held a conference call and webcast on February 27, 2025, at 4:30 PM ET, to discuss fiscal Q4 2024 financial results, hosted by Chairman Andy Wiederhorn and Co-CEO & CFO Ken Kuick, with replay and webcast archives available on the company's website - FAT Brands held a conference call and webcast on February 27, 2025, at 4:30 PM ET, to discuss its fiscal Q4 2024 financial results[15] - The call was hosted by Chairman Andy Wiederhorn and Co-CEO & CFO Ken Kuick[15] - A replay and webcast archive are available on the company's website, www.fatbrands.com, under the "Investors" section[16] Forward-Looking Statements This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, concerning future financial and operating performance, EBITDA estimates, new store opening timelines, future reductions in capital costs and leverage, ability to make accretive acquisitions, and new store pipeline, which are subject to business, economic, and competitive risks, uncertainties, and contingencies that could cause actual results to differ materially from expectations - This press release contains forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, regarding the company's future financial and operating performance, EBITDA estimates, timing of new store openings, future reductions in capital costs and leverage, ability to make accretive acquisitions, and new store pipeline[18] - Forward-looking statements are subject to business, economic, and competitive risks, uncertainties, and contingencies that could cause actual results to differ materially from expectations[18] Investor and Media Relations Investor relations contact is Michelle Michalski of ICR, and media relations contact is Erin Mandzik - Investor Relations contact is Michelle Michalski of ICR (ir-fatbrands@icrinc.com, 646-277-1224)[24] - Media Relations contact is Erin Mandzik (emandzik@fatbrands.com, 860-212-6509)[24]