FAT Brands(FAT) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION (Unaudited) Item 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements for Q1 2025 reflect decreased revenue, a wider net loss, and an increased stockholders' deficit, influenced by the Twin Hospitality Group spin-off and legal challenges Condensed Consolidated Balance Sheets As of March 30, 2025, total assets decreased to $1.27 billion, total liabilities increased to $1.77 billion, and the stockholders' deficit widened to $499.5 million, with negative working capital of $233.5 million Condensed Consolidated Balance Sheet Data (in thousands USD) | Account | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Total Assets | $1,273,539 | $1,289,178 | | Cash | $12,150 | $23,383 | | Goodwill | $285,337 | $285,337 | | Other intangible assets, net | $591,783 | $595,689 | | Total Liabilities | $1,773,035 | $1,744,890 | | Total current liabilities | $316,594 | $298,316 | | Long-term debt, net | $1,216,805 | $1,208,997 | | Total stockholders' deficit | ($499,496) | ($455,712) | - The company reported negative working capital of $233.5 million as of March 30, 2025, including $91.8 million in redeemable preferred stock classified as a current liability[27] Condensed Consolidated Statements of Operations For Q1 2025, total revenue decreased to $142.0 million, loss from operations widened to $8.6 million, and net loss attributable to FAT Brands Inc. increased to $46.0 million, or $2.73 per share Condensed Consolidated Statements of Operations (in thousands USD, except per share data) | Metric | Thirteen Weeks Ended March 30, 2025 | Thirteen Weeks Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenue | $142,019 | $151,967 | | Loss from operations | ($8,566) | ($1,382) | | Net loss attributable to FAT Brands Inc. | ($45,969) | ($38,316) | | Basic and diluted loss per common share | ($2.73) | ($2.37) | - No cash dividends were declared per common share in Q1 2025, compared to $0.14 in Q1 2024[13] Condensed Consolidated Statements of Changes in Stockholders' Deficit The total stockholders' deficit increased from $455.7 million to $499.5 million in Q1 2025, primarily driven by a $46.3 million net loss, partially offset by stock issuances and share-based compensation - The net loss of $46.0 million was the main contributor to the increase in the accumulated deficit during Q1 2025[16] - The spin-off of Twin Hospitality Group Inc. created a non-controlling interest of $5.6 million on the balance sheet[16][121] Condensed Consolidated Statements of Cash Flows In Q1 2025, net cash used in operating activities improved to $13.2 million outflow, while net cash from financing activities decreased to $5.2 million, resulting in an $8.0 million decrease in cash and restricted cash to $59.3 million Consolidated Cash Flow Summary (in thousands USD) | Cash Flow Activity | Thirteen Weeks Ended March 30, 2025 | Thirteen Weeks Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($13,217) | ($28,401) | | Net cash used in investing activities | ($24) | ($8,046) | | Net cash provided by financing activities | $5,193 | $40,376 | | Net (decrease) increase in cash | ($8,048) | $3,929 | | Cash and restricted cash at end of period | $59,341 | $95,832 | Notes to Condensed Consolidated Financial Statements The notes detail liquidity risks from net losses and negative working capital, a complex $1.26 billion debt structure, significant redeemable preferred stock liabilities, ongoing government investigations and lawsuits, and the recent spin-off of Twin Hospitality Group Inc - The company has a history of net losses, an accumulated deficit of $499.5 million, and negative working capital of $233.5 million as of March 30, 2025, though management expects sufficient liquidity for the next twelve months[27] Total Debt Summary (in millions USD) | Debt Category | Face Value | Book Value | | :--- | :--- | :--- | | Total Securitized Debt | $1,278.2 | $1,250.8 | | Other Debt | $14.5 | $14.5 | | Total Debt | $1,292.7 | $1,265.3 | - Significant liabilities from redeemable preferred stock, totaling $91.8 million as of March 30, 2025, stem from GFG and Twin Peaks acquisitions, subject to put options and accruing interest[87][93][27] - The company and its former CEO face ongoing DOJ and SEC investigations regarding transactions, compensation, and loans, with the DOJ indicting the company in May 2024, alongside multiple derivative and class action lawsuits[101][102][103] - On January 29, 2025, the company completed the spin-off of Twin Hospitality Group Inc., retaining approximately 98.6% voting power and continuing to consolidate its financial statements[119][120][122] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 6.5% Q1 2025 revenue decrease to planned restaurant closures and notes a 10.1% rise in G&A expenses due to litigation, while expressing confidence in liquidity for the next twelve months despite negative operating cash flow - Total revenue decreased by $9.9 million (6.5%) in Q1 2025, primarily due to reduced restaurant revenue from planned closures for conversions[131] - General and administrative expenses increased by $3.0 million (10.1%) in Q1 2025, mainly due to higher professional fees for pending litigation[133] - Net cash used in operating activities improved to $13.2 million in Q1 2025 from $28.4 million in Q1 2024, primarily due to working capital changes[147] - Management expresses confidence in meeting liquidity needs for the next twelve months via cash on hand, operational cash flow, and capital market access, despite $91.8 million in liabilities from exercised Series B Preferred Stock put options[143] Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required for the current filing - Disclosure for this item is not required[153] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded the company's Disclosure Controls and Procedures were effective as of the end of the reporting period[154] - No material changes to internal control over financial reporting occurred during the quarter[155] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 13 of the condensed consolidated financial statements for details on material pending legal proceedings - The report refers to Note 13, Commitments and Contingencies, in the financial statements for a description of material pending legal proceedings[157] Item 1A. Risk Factors No material changes to risk factors have occurred since the Annual Report on Form 10-K filed on February 28, 2025 - No material changes in risk factors have occurred from those discussed in the Annual Report on Form 10-K filed on February 28, 2025[158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported[159] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[160] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[161] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the fiscal quarter ended March 30, 2025[162] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including agreements for the Twin Hospitality Group Inc. spin-off, a securitization amendment, and officer certifications - Key exhibits filed include agreements for the Twin Hospitality spin-off, an amendment to the Fazoli's/Native Securitization, and required officer certifications under the Sarbanes-Oxley Act[164]