Financial Data and Key Metrics Changes - Total revenue increased by 42.4% to $152 million compared to $106.8 million in the prior year quarter, driven by the acquisition of Smoky Bones [4][22] - Adjusted EBITDA was $15.7 million, down from $23.1 million in the same quarter last year, but increased by 30.8% when excluding employee retention tax credits [5][25] - Net loss was $39.4 million or $2.43 per diluted share, compared to a net loss of $7.1 million or $0.53 per diluted share in the prior year quarter [23][24] Business Line Data and Key Metrics Changes - System-wide sales grew to $614.7 million, a 7.3% increase compared to the prior year quarter [4] - The franchisee base consisted of approximately 790 franchisees operating around 2,100 restaurants, with 24 new locations opened in Q2 2024 [7] - Twin Peaks is the fastest-growing concept with average unit volumes at company-operated locations of $6 million, with some locations in Florida generating sales between $9 million and $12 million [9] Market Data and Key Metrics Changes - Round Table Pizza opened a second location in San Antonio, Texas, as part of a strategic partnership to establish 40 locations across the state [12] - Fazoli's brand opened its second location in Tampa, Florida, bringing its total presence in the state to six restaurants [12] - Same-store sales were down only 1.6%, maintaining flat performance sequentially versus the first quarter [33] Company Strategy and Development Direction - The company aims to open 120 new units in total for the year, comparable to the number of new stores opened in 2023 [7] - The development pipeline includes over 1,100 additional units slated to open in the coming years, potentially generating $50 million to $60 million in incremental adjusted EBITDA [8] - The company is assessing several new potential acquisitions to add strategic value, focusing on scalable and synergistic brands [18][19] Management's Comments on Operating Environment and Future Outlook - Management noted that the refinancing of Twin Peaks and the potential public listing could significantly reduce debt and interest expenses [27][28] - The company is optimistic about the second half of the year, particularly for the polished casual segment, as they anticipate improved performance post-summer [36] - Management highlighted that they are seeing more acquisition opportunities with reasonable seller expectations in the current market [31] Other Important Information - The company was recognized on Time Magazine's and Statista's America's best midsized companies of 2024 list, factoring in revenue growth, employee satisfaction, and sustainability transparency [6] - The Georgia-based manufacturing facility contributed $3.8 million to adjusted EBITDA, with plans for expansion to boost capacity [19][20] - The FAT Brand Foundation made 36 grants through June, surpassing the total number of grants awarded in the full year of 2023 [21] Q&A Session Summary Question: When will revenue growth exceed expense growth? - Management indicated that several factors contribute to the net loss, including interest expense and tax credits, and they expect refinancing and new store builds to help improve the situation [26][27] Question: What caused the slowdown in store openings? - Management noted that franchisees have been slower in execution but are on track to meet the annual target of 120 new openings [29] Question: Are there new acquisition opportunities? - Management confirmed that they are seeing more deals than ever and sellers are more open to reasonable pricing [31] Question: What factors contributed to maintaining same-store sales? - Management highlighted strong performance in the burger, fast casual, and snack segments, with specific brands like Ponderosa and Bonanza Steakhouse showing mid to high single-digit growth [34][35] Question: How is the conversion of Smoky Bones to Twin Peaks progressing? - Management expressed confidence in the conversion process, with the first location expected to be operational in under nine months [38][39]
FAT Brands(FAT) - 2024 Q2 - Earnings Call Transcript