NATH's Q2 Earnings and Revenues Improve Y/Y, Gross Margin Down

Core Viewpoint - Nathan's Famous, Inc. reported solid financial results for the second quarter of fiscal 2025, with increases in earnings per share and revenues, although some segments experienced declines in franchise fees and royalties [1][18]. Revenue Summary - Nathan's Famous registered revenues of $41.1 million in the fiscal second quarter, up 6.1% year over year [2]. - Revenues from the United States were $40.5 million, an increase of 8.1% year over year, while international revenues were $0.6 million, down 50.4% year over year [13]. Segment Performance - Branded Products revenues were $24.5 million, up 5.1% from the year-ago quarter, with a 4% increase in hot dog sales volume and a 1.4% increase in average selling prices [4]. - Company-owned restaurants generated $5.3 million, up 2.9% year over year, driven by higher sales at Coney Island locations [5]. - License royalties totaled $9.5 million, up 13.8% year over year, with royalties from hot dog sales increasing 14.5% to $8.6 million [6]. - Franchise fees and royalties generated $1.2 million, down 9.1% year over year, with total royalties at $1.1 million, down 7.1% [8]. - Virtual kitchen royalties were $11,000, down 38.9% year over year, and traditional franchise royalties were $807,000, down 5.9% [9]. Profitability Metrics - Operating profit totaled $9.6 million, an increase of 5.8% from the prior-year quarter, while net income was $6 million, up 5.6% [16]. - Adjusted EBITDA for the quarter was $10.4 million, up 5.9% year over year [16]. Cost and Margin Analysis - Gross profit was $3.9 million with a gross margin of 12.9%, down from $4.4 million and 15.3% in the prior year [14]. - Restaurant operating expenses increased 3.7% to $1.4 million, while general and administrative expenses rose 0.7% to $3.3 million [15]. Liquidity and Cash Flow - The company exited the second quarter with cash and cash equivalents of $31.2 million, up from $25.9 million at the end of the first quarter [16]. - Cumulative net cash provided by operating activities was $14.8 million, compared to $11.4 million a year ago [17].