PART I Business The company operates and franchises Twin Peaks and Smokey Bones restaurants, with a key strategy of converting Smokey Bones locations to accelerate growth Restaurant Footprint and Sales (as of Dec 29, 2024) | Category | Count / Amount | | :--- | :--- | | Total Restaurants | 170 | | - Domestic Franchised Twin Peaks | 74 | | - International Franchised Twin Peaks | 7 | | - Domestic Company-Owned Twin Peaks | 34 | | - Domestic Company-Owned Smokey Bones | 55 | | System-Wide Sales (Fiscal 2024) | $731.6 million | | - Twin Peaks Sales | $573.4 million | | - Smokey Bones Sales | $158.2 million | - The company has a significant growth pipeline with over 100 signed agreements for new franchised units as of December 29, 202417 - A core growth strategy is the conversion of about half of the 60 acquired Smokey Bones restaurants into new Twin Peaks locations, expected to be faster and cheaper than new builds2324 Our Concepts The company operates two distinct restaurant concepts: the sports lodge-themed Twin Peaks and the meat-centric Smokey Bones - Twin Peaks utilizes a "barbell" pricing model, offering both entry-level and premium options to appeal to a wide range of guest preferences and budgets1927 - Smokey Bones is a full-service restaurant concept focused on fire-grilled and house-smoked meats, offering dine-in, pick-up, delivery, and catering services2021 Our Competitive Strengths Key strengths include the differentiated Twin Peaks brand, an asset-light franchise model, and attractive unit economics - Twin Peaks achieves industry-leading guest satisfaction, with intent-to-return scores of 95%, higher than the casual dining segment average26 - The company targets a three-year payback period for its Twin Peaks restaurants, an attractive investment opportunity for franchisees35 - A significant portion of Twin Peaks restaurants (79.1%) were successfully converted from existing buildings, demonstrating a key real estate strategy37 Our Growth Strategy The growth strategy focuses on expanding the Twin Peaks brand through franchising, driving comparable sales, and exploring acquisitions - The company sees long-term potential for over 650 Twin Peaks restaurants in the U.S. and 250 internationally39 - As of December 29, 2024, there is a domestic development pipeline of over 100 commitments for new franchised Twin Peaks restaurants40 - The Twin Peaks National Marketing Fund, funded by a 2.5% gross sales contribution, collected over $13.4 million in 2024 to drive brand awareness4547 Human Capital and Technology The company fosters a culture to attract and retain talent while leveraging a standardized technology stack for operational efficiency - As of December 29, 2024, the company had approximately 5,300 employees, with the majority working in its restaurant locations83 - The company utilizes a standardized technology stack across its restaurants, including the NCR Aloha POS system and various business intelligence systems84 Government Regulation The business is subject to extensive regulations covering franchising, alcoholic beverage sales, food safety, and employment practices - Franchising activities are subject to FTC rules and state laws that regulate the offer and sale of franchises99 - The company is subject to "dram shop" statutes, which can impose liability for serving intoxicated individuals103 - The company must comply with the PPACA, which requires chain restaurants to publish calorie information on menus104 Risk Factors The company faces operational, financial, and regulatory risks, including reliance on franchisees, substantial debt, and concentrated voting control - A significant risk is the reliance on franchisees, as a substantial portion of revenue comes from royalties and is tied to their performance120121 - The company has significant outstanding indebtedness under the Twin Securitization Notes, exposing it to default risk115184 - A dual-class stock structure concentrates approximately 98.6% of the total voting power with FAT Brands, limiting other stockholder influence115218219 - The historical franchise commitment-to-opening conversion rate for Twin Peaks has been approximately 66% over the past five years138 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None288 Cybersecurity A dedicated team manages a cybersecurity program overseen by the Board of Directors, with no material incidents reported to date - The Board of Directors oversees the company's cybersecurity strategy and risk assessment, with the VP of Information Technology leading execution294 - The risk management process includes identifying critical systems, network segmentation, access controls, and regular third-party assessments290292295 - As of the report date, the company is not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect its business293 Properties The company operates its corporate headquarters and all company-owned restaurants from leased facilities across the United States - The company operates 34 company-owned Twin Peaks restaurants in eight states and 55 company-owned Smokey Bones restaurants in 16 states297298 - All company-owned restaurants and the corporate headquarters are located in leased facilities296297298 Legal Proceedings The company is involved in ordinary course legal actions, none of which are expected to have a material adverse effect - The company is subject to ordinary course litigation but does not expect the outcome to have a material adverse effect on its financials300 Mine Safety Disclosures This item is not applicable to the company - Not applicable301 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A stock trades on Nasdaq, while it does not anticipate paying dividends in the foreseeable future - Class A Common Stock trades on Nasdaq under the symbol "TWNP"; Class B Common Stock is not publicly traded304 - The company does not expect to pay dividends in the foreseeable future, retaining funds for growth and debt repayment306 Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew 53.2% in fiscal 2024 driven by the Smokey Bones acquisition, but higher costs and interest expense led to a wider net loss Fiscal Year 2024 vs. 2023 Financial Highlights | Metric | FY 2024 ($ in millions) | FY 2023 ($ in millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $353.8 | $230.9 | +53.2% | | - Company-owned Restaurant Sales | $320.2 | $199.4 | +60.6% | | - Franchise Revenue | $33.6 | $31.5 | +6.6% | | (Loss) from Operations | ($8.3) | $12.9 | N/A | | Net Loss | ($48.2) | ($13.8) | +248.6% | - The acquisition of Smokey Bones was the primary driver of revenue growth, contributing an additional $115.5 million in revenue for fiscal 2024322 - In November 2024, the company issued $416.7 million in new Twin Securitization Notes to redeem prior notes, resulting in a $2.4 million loss on extinguishment of debt344345 Results of Operations Revenue grew 53.2% in fiscal 2024, but higher costs from the expanded restaurant portfolio led to an operating loss of $8.3 million - Company-owned restaurant sales increased by $120.8 million (60.6%), with the Smokey Bones acquisition accounting for $115.5 million of this increase323 - General and administrative expenses increased by $14.0 million (72.6%), with the Smokey Bones acquisition responsible for $12.1 million of the rise331 - Other expense, net, increased to $48.2 million from $27.0 million, primarily due to higher interest expense and a $2.4 million loss on debt extinguishment333 Liquidity and Capital Resources The company refinanced its debt in November 2024 and ended the year with $25.9 million in cash and restricted cash Cash Flow Summary (in millions) | Activity | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $ (15.0) | $ 6.1 | | Net cash used in investing activities | $ (20.5) | $ (14.6) | | Net cash provided by financing activities | $ 37.3 | $ 15.7 | | Net increase (decrease) in cash | $ 1.8 | $ 7.2 | - In November 2024, the company issued $416.7 million in new Twin Securitization Notes with a weighted average interest rate of 9.50% to refinance its debt345 - The company believes it will be in compliance with its debt covenants and has sufficient cash sources for its liquidity needs over the next twelve months346 Quantitative and Qualitative Disclosures about Market Risk This item is not applicable to the company - Not applicable369 Financial Statements and Supplementary Data This section refers to Item 15 of Part IV for the company's financial statements and supplementary data - The full financial statements are located in Item 15 of Part IV370 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None371 Controls and Procedures Management concluded its disclosure controls and procedures were effective, but an auditor attestation on internal control is not yet required - Management concluded that disclosure controls and procedures were effective as of December 29, 2024372 - The report does not include a management assessment or auditor attestation on internal control over financial reporting, as permitted for newly public companies373 Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fourth fiscal quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in Q4 2024376 PART III Directors, Executive Officers and Corporate Governance The company is led by an experienced executive team and a board with three standing committees, with some governance overlap with FAT Brands - The executive team includes Joseph Hummel (CEO), Kenneth J. Kuick (CFO), Clay C. Mingus (CLO), and other key officers380 - The Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee398400404405 - There is an overlap in governance, with two directors and the CFO also holding positions at the parent company, FAT Brands Inc394 Executive Compensation Named executive officer compensation consists of salary and non-equity incentives, while directors receive cash and equity awards 2024 Summary Compensation Table | Name and Principal Position | Salary ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Joseph Hummel, CEO | 350,000 | 350,000 | 9,903 | 709,903 | | Clay C. Mingus, CLO | 311,318 | 124,527 | 21,839 | 457,684 | | Michael Locey, CDO | 269,809 | 107,923 | 20,519 | 398,251 | - Non-employee directors are compensated with $100,000 in cash annually and an annual grant of stock options to acquire 10,000 shares of Class A Common Stock416 - As of December 29, 2024, there were no outstanding equity awards for shares of Twin Hospitality Group Inc412 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters FAT Brands Inc. is the principal stockholder, controlling 98.6% of the total voting power - FAT Brands Inc. holds 94.4% of Class A Common Stock and 100% of Class B Common Stock, controlling 98.6% of the total voting power as of February 24, 2025422 - All directors and executive officers as a group own less than 1% of the company's stock and voting power422 - The company has two equity compensation plans with a combined total of 5,742,346 shares authorized for issuance425426 Certain Relationships and Related Transactions, and Director Independence The company has significant related party transactions with its majority stockholder, FAT Brands, governed by several key agreements - The Master Separation and Distribution Agreement grants FAT Brands registration rights and an anti-dilution option to maintain at least 80.1% ownership432435438446 - The company and FAT Brands have cross-indemnification agreements allocating liabilities between the two entities439 - The Tax Matters Agreement governs tax liabilities, generally requiring the company to make tax-sharing payments to FAT Brands449451 Principal Accountant Fees and Services The company engaged Macias Gini & O'Connell LLP as its auditor for fiscal 2024, replacing the prior year's firm Accountant Fees (in thousands) | Fee Type | December 29, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Audit fees | $120.7 | $604.0 | | Audit related fees | $0 | $319.0 | | Other fees | $0 | $0 | - The company changed its principal accountant from CohnReznick LLP (for FY 2023) to Macias Gini & O'Connell LLP (for FY 2024)460 PART IV Exhibits, and Financial Statement Schedules This section contains the company's audited consolidated financial statements and a list of exhibits filed with the 10-K Consolidated Financial Statements The audited financial statements show a net loss of $48.2 million for fiscal 2024 on total assets of $542.4 million Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 29, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $542,446 | $565,582 | | Total Liabilities | $627,055 | $581,093 | | Total Stockholders' Deficit | ($84,609) | ($15,511) | Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Total Revenue | $353,801 | $230,867 | | (Loss) from Operations | ($8,330) | $12,940 | | Net Loss | ($48,170) | ($13,840) | - Subsequent to the fiscal year-end, on January 29, 2025, the company completed its spin-off from FAT Brands and became an independent publicly traded company590612 Form 10-K Summary This item is noted as 'None' in the report - None614
Twin Hospitality Group Inc-A(TWNP) - 2024 Q4 - Annual Report