FAT - Earnings call transcript Q2 2024

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Operator

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

Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, July 31, 2024.

On the call FAT Brand, our Chairman of the Board, Andy Wiederhorn, and Co-Chief Executive Officer and Chief Financial Officer, Ken Kuick. made quarter company publicly financial the available. afternoon, its XXXX second results This the earnings the release which refer about earnings Please to quarter. and www.fatbrands.com. Each additional in Investors the first at are the supplement, section website of company's contain details available of both begin, remind before today part discussion everyone of we But include forward-looking that the will statements. I must These not be should therefore, undue forward-looking statements reliance are not upon guarantees them. of future performance, and placed of due risks from materially those by to differ a statements number uncertainties. may results Actual and these indicated forward-looking The these later company to statements forward-looking update does not undertake at a date.

detailed could and more condition, lease results a please discussion future financial filings. SEC For of the that and release and impact risks see earnings today's operating

for in the discuss as presentation will also substitute The are with Reconciliations of call, Wiederhorn, Chairman should to which measures to of non-GAAP prepared GAAP like this to today's now additional I Andy turn comparable today's be would accordance company the the results nor its be isolation Board. evaluating considered in release. I information over performance. metrics, call the During useful in not GAAP. a available financial in believe can earnings

Andrew Wiederhorn

I'd operator. our members, our begin our behind and by like thanking team strong across unwavering all brand the dedicated of employees commitment Their forces driving to franchisees portfolio. and you, are Thank execution continued growth.

year prior X.X% grew million the to quarter. System-wide grew XX.X% Smoky XXXX. $XXX.X when revenue in Total to to of in quarter, briefly let's prior second the September compared highlights our of million, discuss to million the First, a the compared Bones driven sales acquisition $XXX.X quarter. for financial $XXX increase by year

tax quarter. in actually increased basis, million EBITDA was compared received $X.X year's million. in $XX.X of employee credits EBITDA XXXX, XXXX. $X.X and of adjusted at XX.X% we note in of QX that an million on apples-to-apples of to difference $XX.X retention in a versus to or last year, important our million ERT QX EBITDA to Turning Adjusted It's million of QX $XX.X fees $XX.X this adjusted profitability. look you million same

efficient several follow last portfolio boasting throughout growth, together our the platform. The other spot allow designed our in our satisfaction current month, may acquire. of list to America's brands our brands midsized of excellence and recognized rapid and companies Magazine's and enable has growth, revenue management that were of significant form expansion, of and Over the comprehensive experienced XXXX continued growth, list. The commitment robust brands an to systems to our continued for best to a we FAT was and sustainability support XX expansion which strategy, transparency. factored for not have to Statista's cornerstone and but a years, this we incorporation infrastructure also Time only new diverse and This Brands accretive employee we sustain on implemented

by consumer also accolades brands over treat It recognized Marble including Choice Readers' highest brands ranks grossing XX which for top many brands. list XXX the Technomics receiving casual for and Slab the Awards fast other our the and in highest Ignite in the XXXX, XXXX achieved Best spot brands XX always has being Our to Technomic top score dessert amongst TODAY's USA a and on Creamery value category. of restaurant U.S. named the list the been quarter,

me strategic priorities. let updates our of on X each some Now provide

First, organic growth.

construction. base XX, including XXX restaurants operate franchisee consisted June under X,XXX XXXX, franchisees aggregate our of As who approximately of in approximately restaurants, of

year-to-date only locations, XX and stores confidence within substantial of and approximately brands restaurants generate an a $XX we footprint bringing EBITDA, new can operate anticipate investment own directly indicator reduce through across year, and second also our for adjusted franchisees own diversification the brands X is agreements amount franchisees also development Both our they July established operate, which and this XX new comparable new actively We the currently in $XX units of approximately million in XXX and We openings to total XX to health strong within not opening by the of by which quarter, overall pipeline additional are opening provides in portfolio. our is to our organically total alike but we opportunity signing new to units. for brands. In This XXXX. incremental XXX units ongoing new opened leverage. corporate million our expanded other

which but million, $X up sales in Peaks locations, the when Florida, between currently Peaks locations As growth million. is segment, concept within and polished Smoky part generate locations, market our volumes Twin we consists at we currently million brands. our $X casual locations years this Bones company-operated ago. unit our fastest-growing Peaks with prioritizing and accelerated particularly of XXX some at from X.X locations of average acquired are pipeline, Twin of $XX Twin key XX brand operates

the This the Peaks in of growth in in since plan will count new our opened by we During back equate approximately Florida. to our restaurant open of total we location year acquisition that weighted XX XX Mill, Twin ending XXXX when approximately Carolina, we XXX unit in to a Most state. XX%. development July, with the to half quarter, our opened lodge And is to XXXX lodges. fourth Naples, in South a Fort pipeline a

mix and between XXX new to X total the driving XX% Peaks locations of pipeline sales restaurants potentially for account. additional these system-wide and the billion franchise years, The restaurants, $X count. increase opening unit the Over of next XX% units by Twin around to calls XXX development the of will

smoky we QX bones know, year. purchased of you in last As

through Smoky to the conversions, Smoky Smoky once to Bones Bones our is it Lakeland, time to will restoring complete growth in to Florida. while count fall, fuel first Our Peaks Peaks Twin use unit XXX intention had. brand the This Twin over we still Bones conversion

of later XXXX to place to any and an other year, shareholders. proceeds is the with diligently and We sheet conditions this balance factors, opportunity deleverage transaction. we alternative transaction successful new the expedite an throughout to market a to the use occurring fat subject majority to for size as additional monetize take XXXX. In restaurants. several view are working We the the conversions expect We to plan build of transaction business or benefit IPO and

We planning an securitization are also to transaction. Twin other our debt to prior Peak refinance or IPO

commitment of San other opening part state roundtable development segments. in Brame Looking the roundtable brands, partnership notably substantial presence this to of This location its is a Antonio. potential Brand's new to in with Brame Pizza with broader our we the In a see Pizza market. XX location strengthened May, of in second marks strategic growth the across beginning the this establish San underscoring Antonio locations Texas

opening -- to the footprint with our Arizona, Our of Fazoli's gain launching to also there's location, in also total continues in Phoenix be our strategy. the area. state in We've a the bringing our of in Tampa key second momentum part third Greater only restaurants. our location brand bolstered to presence Florida continues recent X Co-branding

momentum, launch XX debut remarkable of to our first announce in thrilled currently Utah. appear roundtable interest model over this was our from building its expansion The the under we've evident last development. this pairing Following and into with success we're Texas. And of on seen the concept locations pizza in new co-branded year,

unit the Fatburger in first roundtable to Utah newly Pizza and Hut in X franchised Our next announced restaurants XX bring over with co-branded deal open the set years, will XXXX.

an price to with Slab same ice the brand sales Creamery nationalized as of high-quality of an a X.X% We operate month affordable currently day key pillar its day. cream a where cream small price foothold that off have with in Bones of or signature last menu promotion day, just to Day in year. their And reinforce platter the ice cream inception. XXXX. To with small comparables Both on ice another since Similarly, at Smoky ice cheeseburger brand spaghetti saw their the July, launched purchase nostalgic secure Bake purchase strong continued of we cakes Hamburger Pizza National point in cup for offered our XXX. items and cup large celebrate free $X time Georgia, offering over and cream The same-store providing celebrated beverage. XXX promotions when we a National at cream commitment Marble offer, from our up the on

brands casinos with and such on kids, visibility items to customers only offerings Fatburger menu time initiatives limited represent creation, brand introduced a announced keep demonstrate Buffalo's and in as fresh and revenue This stick fries. universities hand-stamp a lemonade These cruise ongoing Pretzelbites type launching Hot lemonade. diversifies cheetos lines, our venues, watermelon innovate as Strips patch key a Dog our RedHot new And Our high-volume offering. portfolio but with Express excite expansion its Hot debuted across current engaging Frank's exciting continue to not Nashville consumer of Hot and Chicken amusement sour parks, increases area also collaboration efforts and streams of partnerships. unique our and latest and Pretzelmaker growth. aligned new locations. airports, a with our preferences. Nontraditional Nashville

we Stanford XXth we coming newly Utopia quarter, In roundtable roundtable ships, Johnny further in launched Royal on in and the iconic by our Pizza on brand During their opening the opened campus Caribbean July, a Rockets University also our union have at plans months. on location build with their partnership location expanded student to the [indiscernible]

through growth our to second on acquisitions. Moving pillar, strategic

strategic significant leverage and sandwich both existing targeted synergistic to several we House brings to Twin out acquisition brands. When us to We organization and potential existing that must boost we is round value Toll scalable third how salad Nestle priority, possible, Bones our platform similar strategic that leveraging also by our We're utilization. manufacturing the evaluating portfolio, our other add our Peaks ensure when within our such fuel manufacturing our Chip manufacturing could and facility. to which Smoky as coffee our categories are Georgia-based new facilities targets, to capacity, at or looking to growth at assessing acquisitions Cafe brand

Pretzel produces portfolio which facility, demonstrated do brands Cookie QX. in mix performance manufacturing Our for strong and our

of quarter, $X.X at constant year's XX%, plant equipment utilization an capacity. $X.X X acquisition a quarter. improved relatively could sales additional factory for demand double While additional should million XX% to The our million in current currently over what to absorb, nearly investment modest its ago beyond the years from at last $X.X million remained has EBITDA, adjusted contributed the increase X.X% we could materialize

grants, complete Recently, by offerings, enhancing dessert and site of restaurants. X.X real to on like at growth boost opportunity I'd in casual and the We incredible for strides made factory I'd at with our of facility dining items of organizations. XX foundation, the selling nearly giving. our you foundation mention have of and rollout number added portfolio estate its To were for awarded polished impactful Fazoli's to future. FAT segments June, plans expanded significant within the a we across foundation also This have locations grant year upon. in the on in the has many surpassed leveraged full we update which and can the the make be utilization, presents already have to our business. acres a continues brands casual cookies growth grants to the work The the our minute. our brand's supporting Through like nonprofit that unused they dessert XXXX, foundation. products other remaining made

category the share the nonprofit We [indiscernible] also Foundation's Business Year was the corporate recognition founding and gained the member Journal emerging named annual its Wiederhorn, are honored of and FAT Angeles to awards. Jessica Brand in Los recently also LA citizenship business President nonprofit Foundation at by Executive from

for To growth. Brands conclude FAT itself to significant remarks, position continues my

platform Our and delivering for team leadership our allows efficient across experiences on integration that a new positioned robust we're portfolio, business dining the with is brands. adaptable authentic uniquely management exceptional brand seasoned built of and

come. We to pipeline like today that, Ken strong expanding participation promises hand over our With interest and to your your years ongoing FAT from second growth Our to it in the and sincerely to for discuss Brands. appreciate development quarter. sustained highlights financial I'd

Kenneth Kuick

$X.X $XX.X loss of on prior a year our of diluted respectively, the in net million of higher expense revenues lastly, million. And and the million was from ago million compared $X.X and of XXXX, million XX.X% of acquisition to to the million quarter. to due to equipment. Advertising the restaurant I'd the of year Bones $X.X tax $XX.X Bones compared other of million that, adjusted a expense XXXX. million to Included Bones $X.XX the million from property of an quarter the XXXX, ago was million of Andy. or million $X.X EBITDA like of please advertising is performance. prior Costs versus diluted share revenues million offset quarter of factory the the or Net in million and $X.XX quarter year tax compared million Bones the period, And year partially recognition $XX.X retention in XXXX. Cost second XXXX credits income $XXX due driven to company-owned XXXX and difference in was open or with in million in Andy in as by Total of mentioned, primarily $XX.X new the $XX.X XXXX revenues the million million of acquisition questions. as credits diluted credits new $XX.X diluted increased $XX.X million to $XX.X restaurant acquisition million million per or expense XX.X% $X.X in respectively. to loss of the to $XX.X million, increased administrative the retention expenses XXXX per by of share net period. And million in million quarter. restaurant received inclusive adjusted the increased Smoky year the review and second cost share, the recognition openings. second retention net varies second increased of to $XX.X year the quarter $XX.X expenses, Smoky $X.XX Total in second million was in Thanks, and line to fourth Smoky increased of compared $X employee expense now quarter to $X.X to Again, primarily along million quarter. and from compared our $XX.X $XX.X $XX per in revenues $XXX.X $XX.X second and interest Smoky million was tax the $XX.X And prior the million, or basis, during the increased quarter employee general to $X.X due million and or quarter the quarter, second per in $XX.X and $XX.X sales. of employee Depreciation during we which $X.XX in to loss XXX.X% $XX.X depreciation expense and relation with primarily restaurant for amortization year and from share, quarter. for the And prior EBITDA quarter company-owned in acquisition, Kaylee, and ago in million quarter. for quarterly net

Operator

Joe [Operator with Gomes Capital. first Noble Instructions] Your comes from question

Joseph Gomes

the I So up grew the up quarterly similar to the when to expense revenues retention first see flex we understand kind But quarter. in they somewhat faster the due of theme with that than more. exceed credits. did a a will quarter, and even is here start first growth do even where were were that of they and tax the think quarter, in nicely, revenue but we'll at a on of part growth the And basis. second rate expenses

Andrew Wiederhorn

Sure.

or difference X to reconcile really There's to have QX from the ago you QX adjusted in or X loss XXXX. think I components. a net year net loss

One of is interest expense. them

is them the of One credits. tax

and them's the it have put some longer Smoky Bones One sold stores the and that bit acquisition you Fazoli's little Table all together and that and gets income. basically. losses income depreciation Pizza difference $XX where Table Round that then difference a were to no of And to Round net you own some you that have corporate between from million from

hopefully, Brands reduce the to of of equity peel public company Peaks some in an platform the of see total. interest create Peaks, that also off expense listing that and Twin we Twin that of raise As FAT opportunity refinancing and will the will

key $XXX number. at to driver a substantially raise approximately be going debt million sits reduce debt And Peak that of Twin because to with so equity that that's will affect

get builds The and many year pipeline that opened. between units incremental second course, store $XX somewhere the which $X how of million depending is, a brand million thing of and adds royalties, of new on

So final legal be it. of here months finally, that to are things. course, and to -- the of I expense those the touch end has somewhere, think XX now, will from then maybe X And that's XX

Joseph Gomes

Okay. you the store And talked -- development here. about new

to has fell to short of of up expectations? openings projected the quarter. to I that XX-some-odd caused to of stores you store the seem the here stores going So still that you going XX-some-odd can project to open, year for think was I And particular in down had come rate first that that obviously, in you're quarter, our second think open on from call, XXX-ish you quarter full anything slow you're think in second -- you kind we the the initial it

Andrew Wiederhorn

have there's the it. whatever where just mean generally are those we XX that couple multiunit the I lot have need they contribute a much to end opening XX track so a scheduled a feet or operators XX is But little done, that's of year very for So open just dates just or those stores, applying. whether franchisees get international, financing to remaining a things they're in and they little they're repeat to to track stores on assistance slower you that don't are dragging things that of their of One of bit, on their corporate. from open. XX-something through

about dates, pretty to you in we want but never stores. good December So be these opening feel new

lot and want open really many get to we So we we as have can them as an awful before scheduled. Thanksgiving,

pretty we it. good about So feel

Joseph Gomes

Okay. in queue. And jump for X back more then me, I'll

ups M&A first Are these same you here? I open opportunities downs and on price been of opportunities talked looking same people -- started have come new assessing opportunities more you the speak, call. you that consolidator an and the of thing a and come be to or about like maybe some wondering You the opening, has some restaurant percolate. mentioned there's was maybe little if You to somebody of are that quarter to the about so a still bit seen here in to industry. in recently

Andrew Wiederhorn

Definitely, ever last deals right the and sellers and latter, we're than expectations. with we're seeing we certainly did year, more seeing now than reasonable

the hard cash that to are opportunity to and so to to it a sort just in similar out the versus hold around I from to stuff this there's where an think Smoky was environment And -- range where like to is flow make we people acquisitions there. create Xx trying want pricing in Xx Bones still They our XXx trend and there to We opportunities, EBITDA that. the we rate could interest that see delevering of Xx leverage justify are see lower it's as for meaning us, X flow rate today. some and election behind at won't are out from opportunities consumer well. cash standpoint, this that think But much think, rate M&A would a than I standpoint, a pure cut momentum add behind I that

interesting that's add as and So the an our scale. sheet delever us opportunity way for balance to a to

Operator

Alton Your Capital. with next question comes from Stump Loop

Alton Stump

probably the has XX be obviously, almost out concepts. that different the earnings, with on I that the and versus the sales there just only your out guys down own, X.X%, only X in being there you read stacks come if kept versus all XQ news the first unchanged out one, going want on I'm all actually ask held sequentially basis to first those X quarter. Clearly, sure first you flat quarter. a same-store set not negative to off to have guys for it

overall things very of in portfolio stack hold that you of for was flat a quarter each enabled concept. was your your service that to you sort But a for to handful challenging industry. different trend of think quick obviously outperformers any on in what got going there key lot the You've

Andrew Wiederhorn

off, QSR are that top And -- has very solid. Casual we've The we what segment off well. side Yes. your has where segment other seen been traffic line sales been where very stores your have in bucket. Fast see company-owned has people very segment have is -- been off, the the burger sales as seen, your which on The and -- things, are is solid snack solid. you of

go. you So that and it anywhere just affects doesn't consumer to harder have

drive you've to opportunities, that focus losing you're trying driving where so and try focus you're traffic money. to on And value sure actually on and sales and make to got profitable value you're not frequency more cannibalizing

there. on So we've definitely we've it but been focused that, seen

also pushback. kind the burgers their how and and an price. pretty see you've well, $XX have it's steakhouse be and it's interesting average pain Ponderosa/Bonanza, single buffet example, consistently brands got high proposition value that's digits. snack of are sure in checks all mid- good just eat So you and other doing thresholds the higher our a can to And you been We've to casual were how steak I'm can up low a where of fast value pretty eat brands seen, for a brands at can

see We've they those casual strongly little than less past started lot are were sales to we bit just in So up the segment, a and year. off Same-store the seen nice. is a off as

weeks, recovery parts we go again. The had to as better to watch actually that not segment. it's do home and the -- of football after here. a people. sports days don't better sports lot good There's to in then segments dog time at and they change. those also we've People in or should as of in anticipate of the drive and few it And everything people be much next great drive the sports out the bars we Olympics be So back get and don't over very that we'll summer a that into Olympics the getting

polished about think -- But we the we segment. are that's for of I optimistic the So year half casual the second solution. do the now pretty

Alton Stump

obviously you Smoky color. of back with just great then Peak. the conversion I'll queue, your I Great. follow-up guess That's first Bones to X just hop underway and Twin now are in other but And

just that the this course year that have you couple of period. back so sort half the understand. So next of could anything you but help into how you And to yet gone the far? year to that process, But of accelerate it's conversion look learned not also early. of mentioned, as over I has as stand you

Robert Rosen

and of restaurants base, the second-generation , of [indiscernible] our team pros are restaurants are Joe today XX% Well, at Yes. CEO existed units. second-generation probably that his conversions restaurant Twin Peaks

very, X on and This be months. up will in to it very Florida and So Lakeland, running do quickly focused how efficiently. location under

in to we're of base our the So already even Bones When we year, with Smoky last stores happy have X purchased franchisee and company-owned corporate -- picked QX new development. very that. open of buildings for had with we XXXX franchisees building or most lease Same new already or X thing bought stores, had We land corporate. out locations. or stores under construction or

So the Bones the really all because -- conversions the timing XX of full money of already these up And they they a of all lot a event had open. the Smoky remember, open. played is XX everybody could to stores and stores XX with take just

from So on conversion $X.X of store. $X.X $X -- build million million, be it brand-new a a anywhere can a million to to store

cash for many so only to a at a write corporate. purpose year, franchisee and flow planned time in their so ask given with can that you a they checks And same and

So next we here Twin brands good with see growth now, certainly We're momentum. of the right unit unit for the growth get for the high planned valuations and the you that biggest When multiple about high years. Peaks the expansion brands has excited X it. feel it's the part and best

schedule build open to FAT the on in them. having So and does another X,XXX for pipeline X,XXX by the Brands restaurants paid franchisees

some franchise And over the that well. refinance still see feel savings that us there next on a should stuff of executing really we'll our we see as really being unit unit we growth growth we're securitization XX here. months, high like course, get having think the we as of transactions different So behind

Operator

to our for Andy question-and-answer like any turn concludes I over This closing session. remarks. conference to the would

Andrew Wiederhorn

I the just call conference our talk about you at joining earnings [indiscernible] QX today, look hopefully you some very updating you and on of exciting and for forward further to to time. thank want all operator. Thank we much, to that FAT Brand's

Operator

presentation. for today's The concluded. conference you Thank attending has now

now may You disconnect.

FAT Brands (FAT) 31 Jul 242024 Q2 Earnings call transcript