FAT Brands(US:FAT)2024-10-31 02:40Financial Performance - Total revenue grew 31.1% to $143.4 million, up from $109.4 million in the same quarter last year, primarily driven by the acquisition of Smokey Bones [8][39] - Adjusted EBITDA was $14.1 million, compared to $21.9 million in the corresponding quarter last year [8][43] - Net loss was $44.8 million or $2.74 per diluted share, compared to a net loss of $24.7 million or $1.59 per diluted share in the prior year quarter [43] Business Line Performance - System-wide sales increased to $600.7 million in Q3, marking a 6.4% increase year-over-year [8] - Twin Peaks locations achieved average unit volumes of approximately $6 million annually, with select high-performing markets seeing AUVs in the $9 million to $14 million range [12][13] - The acquisition of Smokey Bones is expected to convert approximately 30 locations into Twin Peaks, enhancing sales significantly [14][15] Market Performance - The company opened 22 new units during the quarter, bringing year-to-date openings to 62 units, with plans for approximately 40 additional units in Q4 [10] - The development pipeline includes signed agreements to open approximately 1,000 new units in the coming years, projected to contribute $50 million to $60 million to annual adjusted EBITDA [11] Company Strategy and Industry Competition - The company focuses on organic growth, acquisitions, and increasing production at its Georgia-based manufacturing facility [9] - Emphasis on digital marketing initiatives and enhancing guest experience to drive growth [12] - The company is exploring co-branding opportunities, such as the Great American Cookies and Marble Slab Ice Cream initiative, which has expanded significantly [22][24] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the conversion of Smokey Bones locations to Twin Peaks, noting significant sales increases [46] - The company is focused on improving cash flow and plans to refinance debt to enhance financial stability [92][93] - Management highlighted the importance of guest experience in driving traffic and sales, especially in the current economic climate [80] Other Important Information - The FAT Brands Foundation awarded over 50 grants through September, surpassing the previous year's total [35] - The company is in the process of refinancing Twin Peaks' securitization debt and plans to use proceeds from a potential IPO to reduce leverage and fund new restaurant construction [20][21] Q&A Session Summary Question: How has the conversion of Smokey Bones to Twin Peaks gone so far? - Management reported strong performance, with sales increasing from $3.6 million to $8.3 million post-conversion, exceeding expectations [46] Question: What is the performance of Twin Peaks compared to other brands? - Twin Peaks has shown outstanding same-store sales and overall system-wide sales have increased significantly due to unit growth [50] Question: What is the outlook for the operating loss and royalty revenues? - Management acknowledged challenges with Smokey Bones and company-owned stores but noted positive trends in other brands [55][56] Question: What is the status of the manufacturing facility's revenue? - Management indicated ongoing efforts to increase utilization through third-party customers and a national test for cookie production [60][62] Question: What are the plans for refinancing debt? - Management is focused on refinancing Twin Peaks debt and addressing other debt facilities, with expectations for significant cash flow improvements in the next 12 months [63][68]