FAT - Earnings call transcript Q2 2020

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the FAT Brands Inc.

Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, August 6, 2020.

On the call today from FAT Brands are President and Chief Executive Officer, Andy Wiederhorn; and Chief Financial Officer, Rebecca Hershinger. to to call begin. like DeSimone to now ICR of would turn over the Ashley I

Ashley DeSimone

release, found Thank By at have earnings now, operator, ir.fatbrands.com everyone can you, and release should access good in the to section. Relations our Investor on afternoon, press everyone. which website be our

them. be of remind to risks reliance Before forward-looking those statements forward-looking not statements statements. to part The upon Actual forward-looking future and our materially by undue everyone indicated placed guarantees therefore, performance, we not begin, from does I date. discussion these results may a differ statements these forward-looking of should later at undertake These company are and due to update that need of a today include not number will uncertainties.

the detailed release today’s see risks could more conditions, and filings. impact earnings results a discussion SEC future financial recent that operating For please and our of

discuss useful The it company a which non-GAAP nor the measures, call, as this of considered presentation evaluating today’s in not in additional information isolation may During be financial should be its can believes results in for I earnings in substitute Andy to now to GAAP. and call Andy? Wiederhorn, would the to over today’s like turn release. are measures President accordance comparable GAAP Reconciliations CEO. prepared available with performance.

Andy Wiederhorn

thank quarter second Ashley. staying our safe are publicly all all Thank This the afternoon, for we I results and made you, you hope call available. you and everyone, Good joining today. us on financial afternoon, healthy.

give Q&A. use to business to the and since update our which details investor and our then want quarter, closed at available the I July discuss of in second press our the So website This June please through corporate XX. is refer contain and both pandemic Invest this to the our is beginning on the earnings which release pandemic, third supplement, our go and conference revisit quarter, and www.fatbrands.com, call section about you time strategy briefly of to

are experiencing, takeout, at consistent capacities results recent shift favors dining. has as behavior, and whole industry varying is system-wide company sales to-go allow. their locations as with industry and operating certain The a at more which consumer a in in Our also seen including outdoor open the localities what uptick muted

discussed of As ordering X with delivery brands, across in calls, enterprise early place we were in we’ve platforms. previous and of online our we delivery, adopters all for agreements have major

loans, serving distancing to guidance and measures or this our this as landscape, the navigate environment to rent concessions, recovery and challenging, new comfort that finally, While partners, social brands managing menu PPP extremely regulations; this successfully and before, negotiating simplified in social and options; securing and local, and is disaster we’ve equipment practices have a and guests franchisees employees; PPE or to operating and redesigned, the deferrals sanitation with to safety, our rooms. chain, includes dining through providing supply provide and strategy supplies procuring to behind procedures other and highlighted distancing been within on leadership the and position federal state align enhance

weather our with which can are tirelessly. franchisees closely work to to as they and possible the continue We optimally ensure are doing empowered they storm,

reopenings sales of Fatburger, over shelter-in-place sorry, end Buffalo’s stronger Wings. bolstered easing We and by the mid-May across up and performance to -- move July, country, reflects of mid-day & This seen we uplift as an at the actually. Hurricane XX% have time from in the orders period, Café phased Grill that

openings. strong on teams new year. rest assist -- very consist pipeline our chain the continue our in operations development, robust areas to While to teams opening for we training remain of It’s the construction for store continue new to relating franchisees all anticipate pandemic, of supply managing through a our stores and focused the and year

give me about today a development in year a you overview ago. as our comparison pipeline quick to of Let

XX, total We total, quarter, a plan franchisees XXXX additional X with the XX we to stores locations. with end bringing slated XX by this year. second the new locations, XXXX year-to-date new opened During XX and compares an in end the new open to stores the opened of of to when

So sessions limitation ability pandemic, despite been our person. the possible. the opening training of training to strong and have many has teams needs virtual remained pandemic in across that development has others our the effects conducted The training strategy. industries, pillar vectoring of and of pipeline the to elements key stores organic our be of meant into extent in the our multiple Like team has a the growth to operations, new travel primary for done virtual

Total decreased revenue in now $X.X quarter. second XXXX. quarter $X.X the second the million million from to Turning to of

sales of decreased system-wide XX% reflecting the business. pandemic Our the our year-over-year, impact on

year. charge XX% Bonanza expenses $X.X and quarter and Like in cost this Bonanza Ponderosa revenue, system-wide million Excluding the impairment of with million related were the and effects Cost brands. year-over-year. and expenses brands, to a Ponderosa last and goodwill the compared to have sales our reflects decreased in trademark pandemic increase million $X.X $X.X Steakhouses

a a from cost really, cost related debt $X.X to closed million, for $X held have is million million that the for the $X.X close. franchisees or not $X.X provision out goodwill bad It subtract if actual $XXX,XXX sale impairment. So also will restaurants refranchising million the and we -- reflects loss

cumulative portion capital successfully Shifting from preferred make B our Series we ourselves capital operating $XX in to And true the This another progress the also all, which company quarter second a of our nearly underwritten lower the XXXX. began growth stock Series into preferred for the million Burger, approximately The which structure. and All I’d depreciation away like $X In in these addition, of in of thereon in as we an we on resulted also and owned that quarter, or as EBITDA XXXX. of $XXX,XXX million is in opportunities. acquired expense from the our of liquidity exchange resources. compares adjusted June G&A believe and which profit the gross continue financing higher of confidence loss related in future the accrued NASDAQ well million to note transactions the warrants, B Series and of raised, of A-X activities from raised by of of the million B into $X.X the affiliates, Elevation effect additional we A XX, amortization position both close trading total a stock milestone us of costs includes following of performance, as EBITDA quarter a combined revenue simplified Series for stock, includes in proceeds equity, adjusted These of exchange X.XX% to B. a quarter. sale and full of to July the dividends and on million Series $X demonstrates $X for in which Series an our represent company. sense insiders we

repurchased therefore, XXX,XXX also significantly We warrants. in price of reducing the of issued with the outstanding XXXX strike $X.XX financing, warrants number connection our company’s

opportunistic the drive achieved are While in currently due we our progress are the we in through are positioned ahead. organically to stronger challenging we we well strategies time years and to and working our executed acquisitions both growth year-to-date, and and have a through today company a industry,

time. fact, at In opportunities we acquisition are are there several currently this considering

about industry are uncertain, remains the take platform COVID-XX on future, and we duration excited and of the impact and these positioned well advantage severity of ultimate the very to the of just are While our we opportunities.

our and an all my have we of employees during again, thank remain the done these opportunities line once especially to excited open adapting industry the call operator, open extend as in meet rising the I’d I’m the participate job your that, recovery heartfelt very our you outstanding and partners questions, front period. Before faces. of for partners challenges franchise unprecedented for questions. please for of the team we they in our to in and and times our their With industry’s proud like to, members, as team us,

Operator

Gomes the question [Operator is NOBLE from Capital. line first of Joe from Our Instructions]

Joe Gomes

as coaster seem see on here been of to we on question again. hot areas roller certain become there’s Quick a here the spots -- ride COVID somewhat

how and like these in some if wondering impacting, mean guys, spots of I Texas hot places you that Just it is Florida. Georgia, has, rolling

Andy Wiederhorn

in Yes. had out it of million had We they’re weekly to sales ago, answer $X is, in where X, then The $X.X off in those Good peaked X we very markets, around little And weekly effect. weeks short million. a recovery question. bigger sales. about to jump

just peak dining recovery, You can supplement, off rooms That’s but in chart closing website. on X%, little is California again. by earnings it’s a that’s But right? bit, a posted also X% the that exacerbated the of see X%, our which our

from delivery and I So mean there’s to and XX% a XX% to-go our went to-go delivery. modest there. business effect delivery

not have you’re very, again, come closed rooms Grill Coast delivery. a but that brands, with. dining they the have that you East the They’re that way to where porches been uptick strong California, huge start with. amount using in Wings, in & already So already incremental Buffalo’s outdoor resilient Cafe dining and The getting built Hurricane very certainly

those beaches or very and with outdoor fake have that sand a fortunate So of they we’re or beaches outdoor bar the kind porches. screen

Game ready. readying Thrones’ is the to saying also and want the be using "Winter the that are coming." winter of franchisees We We for them

would the this be the they way plastic encouraging order continues to X. dining have order try that might October we’re that to stuff the them need so awfully hard or side some if to because all walls it if place room order heaters, and And on you it their tents in get in

Joe Gomes

Right.

little the today? Bonanza you now are provide just And Okay. can us Where on brands. update Ponderosa those more and we right with bit a

Andy Wiederhorn

Yes.

now, the don’t they been so what Bonanza and half completely some of in to closed the to-go. closures So dining the have either outdoor really that the about dining on across a they delivery right have lot indoor the states do Midwest guidelines. have and closed, rooms, of have with and are fence rooms our just kind, That’s temporary about system or Ponderosa restaurants

change been June. through end brand our this of through the July, than sales in the $XX and the total that’s it’s comes not out hit half like the more million from the So Bonanza. sales end of here. million of of is our Ponderosa of year-to-date course, drop But end system-wide through July, hardest through of and, -- of in $XX And

the have goodwill there. bit Fatburger, or significant happened resilient. drop what’s decided there. revenue very few also of [indiscernible] strong. we’ve make an amount XX% closures rest of Buffalo little mean I had just They very, really that size up in there. impairment to take had on But a So with the a quite base. hence, are it Elevation of brands. and Burger And brands been of the we Hurricane brand The we’ve right to a And

than more difficult little in up Ponderosas still The also the Midwest. are half a Puerto the XX And closures. it’s of Rico, closures there. there’s So closed in they and temporary Rico, Puerto make

Joe Gomes

And once the XX Okay. think Is XX mentioned probably you’ve that guessing permanently of anywhere I in come we what past, to looking closed still you’re you this. you’d have for? out from were that

Andy Wiederhorn

ordinary that that or again, or will up March that’s is lease the Yes, March targeted from, generally no And think XX And the We forward. we’ve something like XX stores. is lower-performing have closing there. other resulting pandemic, course about X say, or right. that permanently like permanently your pandemic-related, closed let’s those are not all reasons there in from the that, that’s

that not So if small smaller that’s count of their that’s because revenue the than would it’s that same contribution out but XXX a to the even is a not generally percentage. contributor restaurants, be -- as unit you XX they closed percentage,

Joe Gomes

Right.

quarter, And you in we burn improvement still are? to that? quarter. cash think I forward? talked per you seeing about Are do million think that Is the in we some last million about going that $X where What the Okay. $X

Andy Wiederhorn

significantly better, No. It’s significantly better.

negative We’re flow just in breakeven a revenues. or not situation. at spot It’s total a cash positive terms of today different all. at It’s

-- burning not much did rebounded. may as we significantly throwing it’s be excess before, off as not We’re we but

Joe Gomes

good news. That’s

Andy Wiederhorn

and a into disaster. for And that there June. then April And started everybody continued May was were in reopenings

a are and line. even Bonanza, It ways beaten bottom go. quickly. cash -- Ponderosa Hurricane, certainly it Burger, badly we’re Fatburger, has all downside contributors not Buffalo’s burning that. But it and very XX% had to the by up real Elevation of has back Café But a So maybe bounced we’ve revenues significant anymore. -- and to

Operator

the a Gregory question And investor. the is private next of from line Instructions] Fortunoff, [Operator

Gregory Fortunoff

Andy, what’s position? current the cash

Andy Wiederhorn

$X over million. little A

Gregory Fortunoff

Okay.

monthly an have Can you sorry, does believe. you payment, quarter, basis amount every I what quarterly on So a -- that I’m interest -- to basis?

Andy Wiederhorn

Yes.

about payment interest the is a quarter. $XXX,XXX So

like We debt coverage -- mean have I our service Xx. is

things. our all We those have servicing flow. We our and plenty of cover debt and cash cover dividends

Gregory Fortunoff

XX% a run are a as in the Where great. that you you of improvement XXXX XXX? That’s let’s rate your like In we said the So rate is Okay. now? run say saw sales. presentation, XXX. What is percentage

Andy Wiederhorn

if off which but a -- year-to-date, But it basis, all question, So across you about not look you so year-to-date, brand on XX%. different it’s your very at look is if weekly by brands, we’re brand.

or off the low XXs high very in We’re XXs. somewhere

So is it’s right weekly brand significantly & like is off up gotten better. it. a Grill XX-point Cafe It’s now. That’s The swing Wings off really flat, maybe is like the hit. on year-to-date. still is off from Buffalo’s almost right XX% Hurricane XX% now. X.X% big X.X%. a Ponderosa That’s like basis. Fatburger

Gregory Fortunoff

Okay. you. is just question Last do what

Andy Wiederhorn

system. royalty dollar that It royalty Buffalo’s to Bonanza, Hurricane, Cafe. and just emphasize royalties average, have a rate. not on lower And Fatburger, -- They the part -- the was are to that, of equal Greg. Ponderosa it’s

are off XX%. even if are sales mean that doesn’t So revenues off XX%,

Gregory Fortunoff

Okay.

you stay do think let’s So have a on with you stays now, COVID. Like, are. do say we you ball, you’re mean get don’t the Or have are it’s continued to think thinking I trends doesn’t what it second improvement? you the you going going don’t about obviously, it But worse, like seeing assuming crystal know this? we where what to half? happen based

Andy Wiederhorn

Yes.

stores, $X it’s the our more I think which we because and -- $X the A -- revenues restaurants in XX,XXX now XX Greg, about to One between key still takeaways by end another will there and another times several. so XX. are drive open incrementally year, million royalties. the of is almost than little million, have

So a significant additional right bump there. that’s revenues. That’s

new go want don’t my back of people franchises I I I strong buying A get work, sales Second, looking are was a want to way to had development business. we’ve franchise -- activity. lot before, at where own as maybe to to

interesting. that’s So

don’t really anything bounced that. are any for have there casual see sharply, changing brands, there’s brands closures. I that think other dining don’t some of further us The unless so the back I And hoping

think go we’re hoping will the though probably other that it I slow. we here, direction be even

worry like certainly on But the the have dining the thing issue. prepared that only sure outdoor winter. we’ve winter issue. I that rooms California the about you East and don’t for So is that making have weather those Places Coast,

earlier completed the need last that. that we month. positioned, we’ve gotten stock preferred So we’re set or make for month well our to up having of And offering sure really in end

but the in like which financing. We’re the the X and low-cost, near advantage being storm, very are feature presented don’t that our brands think turnaround that’s of use put those securitization facility, of into It’s valuations acquisition is going are right there’s a healthy the with lifting well long-term plenty the at future look And are and liquidity. just heavy take that opportunities huge feature we prepared we’re to to where now, now that. as right There great deals. to key acquisitions portfolio, situation I We weather I we’ll us, can that And you not being time we opportunities have us. there the need to ample of accordion presented lower, to that opportunities think take and or know of an advantage now. make can -- accordion our opportunistic expandable, are -- long-term and X

Gregory Fortunoff

heard just sure And I to want I Okay. this right. make

improvement and there cash in no actual no cutting So No improvement, is more expected loss. the between as levels expenses today, stand same we revenue, loss.

forward. be to little a the going flat cash You’re to on up going

Andy Wiederhorn

Right.

million were that We’re the we $X not before. quarter at burning million a to cash $X rate

that sell something a that’s We different let guys And and competitive things happening. delivery losses. franchisors I brands. But be concepts X we’re restaurants or other are other And have, our advantage or change virtual as the franchisees only suffering brands closed assuming don’t a to-go that. there same, can forecast and do that don’t on other for brands. promoting could the stay rooms always see I own platform, can’t across our also we whatever. all We’re mean dining not if our

sleep a have We very up it. rooms Bonanza, guests the food all-you-can-eat mitigate adapted way is Ponderosa adapted the revenue. rather having dining only in for buffets the states over where server it’s we the are. the But dining on That’s in like has It’s drop once we salad the scoop to help it’s order open. the again. So and within but all know rooms really entrée have their service But self-serve. open style. and not being another issue, comfortable discussed I’m I brands the losing bar they to not the than whether Ponderosa well -- we let problems any well. the itself about other feel

So feel also like we’re opportunistic. through positioned to get this well I be really and

Gregory Fortunoff

of what But say, where a versus months cash just Okay. view there. of burn, your of couple "Oh from cash a might previous point your someone God, my there’s like is of --

Andy Wiederhorn

room. -- of Plenty runway plenty of

Gregory Fortunoff

Plenty, right.

go So in amount have if if with -- next here to a the bank going today. we same quarter, you’re cash have end the today, you spot what of the similar to we

Andy Wiederhorn

Correct.

Gregory Fortunoff

Okay. be navigating but hopefully, job the messy last this That’s Thanks, it. this Good time, ridiculous quarter. will Andy.

Andy Wiederhorn

I guys hope I so. And hope of lot power. a you

Operator

go to there’s looks you [Operator again it closing to Instructions] or questions. other And comments? want like no Did prompt

Andy Wiederhorn

we the you time discussion everybody thank in just all for like Thank the And No, we’ll to to to you in out close earnings with to near comes and here talk now. us exciting to stuff. again, asking else reach taking our I and and with more think I’d questions, anything participate second feel if future can quarter free mind.

Operator

call for and today. now conference you can thank participation, your your the you conclude will lines. We That disconnect for

FAT Brands (FAT) 8 Aug 202020 Q2 Earnings call transcript