Fat Brands, Inc 8-K, filed May 8, 2023
Fat Brands, Inc (FATAQ)
8-K
2023-05-08
For: 2023-05-08
View Original
Added on
April 12, 2026
About this 8-K
Fat Brands, Inc filed this 8-K on May 8, 2023.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 2023
FAT Brands Inc.
(Exact name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||
(Address of Principal Executive Offices) | (Zip Code) | ||||||||||
Registrant’s Telephone Number, Including Area Code: (310 ) 319-1850
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On May 8, 2023, FAT Brands Inc. (the “Company”) issued a press release announcing its financial results for the thirteen- week period ended March 26, 2023. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
The Company also hosted a conference call on May 8, 2023 in which the financial results were discussed. A replay is available until Monday, May 29, 2023 and can be accessed by dialing 1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The passcode is 24335100.
The webcast is available at www.fatbrands.com under the “Investors” section.
Item 7.01 Regulation FD Disclosure.
On May 8, 2023, the Company provided supplemental financial information to be used in its earnings presentation for the thirteen-week period ended March 26, 2023 on its website at https://ir.fatbrands.com/events-and-presentations/default.aspx. A copy of the earning supplement is furnished as Exhibit 99.2 hereto and is incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 and 7.01, including Exhibit 99.1 and Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information may be incorporated by reference in another filing under the Securities and Exchange Act of 1934 or the Securities Act of 1933 only if, and to the extent that, such subsequent filing specifically references such information.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FAT Brands Inc. | |||||
| Date: May 8, 2023 | /s/ Kenneth J. Kuick | ||||
| Kenneth J. Kuick | |||||
| Chief Financial Officer | |||||
Exhibit 99.1
FAT BRANDS INC. REPORTS FIRST QUARTER 2023 FINANCIAL RESULTS
Conference call and webcast today at 4:30 p.m. ET
LOS ANGELES (May 8, 2023) – FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT) (“FAT Brands” or the “Company”) today reported financial results for the fiscal first quarter ended March 26, 2023.
Andy Wiederhorn, Chairman of FAT Brands, commented, “I am proud of the Company we have created and the team we have assembled and look forward to working alongside Ken and Rob in their new positions as Co-Chief Executive Officers. Over the last few years, Ken and Rob have played key roles in the accelerated growth of the FAT Brands portfolio comprised of 17 iconic restaurant brands with over 2,300 units and systemwide sales of $2.2 billion annually.”
“Organic growth at FAT Brands remains strong. We opened 41 new units during the first quarter and plan to open 45 additional units in the second quarter. For the full year, we expect to open 175 new units representing over 25% growth from last year. Our pipeline is robust with development agreements for more than 1,000 new locations, including high-growth brands like Twin Peaks. We are also increasing the utilization of our manufacturing facility by raising production levels of cookie dough to serve our brands’ needs.”
“Over the long term, we intend to create value through organic growth, acquiring additional brands that are strategic to our portfolio make-up and debt management, all while providing shareholders with a consistent dividend.”
Fiscal First Quarter 2023 Highlights
•Total revenue improved 8.5% to $105.7 million compared to $97.4 million in the fiscal first quarter of 2022
◦System-wide sales growth of 9.9% in the fiscal first quarter of 2023 compared to the prior year fiscal quarter
◦Year-to-date system-wide same-store sales growth of 4.3% in the fiscal first quarter of 2023 compared to the prior year
◦41 new store openings during the fiscal first quarter of 2023
•Net loss of $32.1 million, or $1.95 per diluted share, compared to $23.8 million, or $1.45 per diluted share, in the fiscal first quarter of 2022
•Adjusted EBITDA(1) of $19.2 million compared to $15.1 million in the fiscal first quarter of 2022
•Adjusted net loss(1) of $23.5 million, or $1.43 per diluted share, compared to $18.5 million, or $1.13 per diluted share, in the fiscal first quarter of 2022
(1)EBITDA, Adjusted EBITDA and adjusted net loss are non-GAAP measures defined below, under “Non-GAAP Measures”. Reconciliation of GAAP net loss to EBITDA, adjusted EBITDA and adjusted net loss are included in the accompanying financial tables.
Summary of Fiscal First Quarter 2023 Financial Results
Total revenue increased $8.3 million, or 8.5%, in the first quarter of 2023, to $105.7 million compared to $97.4 million in the same period of 2022, driven by increased same-store sales and revenues from new restaurant openings.
Costs and expenses increased $8.4 million, or 8.7%, in the first quarter of 2023 to $105.3 million compared to $96.9 million in the same period in the prior year, primarily due to increased activity from company-owned restaurants and the Company's factory, as well as professional fees related to certain litigation matters.
General and administrative expense increased $3.7 million, or 14.8%, in the first quarter of 2023 compared to the same period in the prior year, primarily due to increased professional fees related to pending litigation and government investigations.
Cost of restaurant and factory revenues increased $4.3 million, or 7.8%, in the first quarter of 2023, primarily due to higher company-owned restaurant and dough factory revenues.
Depreciation and amortization increased $0.6 million, or 8.5%, in the first quarter of 2023 compared to the same period in the prior year, primarily due to depreciation of new company-owned restaurant property and equipment.
Refranchising net loss in the first quarter of 2023 of $0.2 million was comprised of $0.1 million in net gains related to the sale or closure of refranchised restaurants, offset by $0.3 million in restaurant operating costs, net of food sales.
Advertising expenses increased $0.3 million in the first quarter of 2023 compared to the prior year period. These expenses vary in relation to advertising revenues.
Total other expense, net for the first quarters of 2023 and 2022 was $30.0 million and $19.7 million, respectively, primarily comprised of net interest expense of $30.1 million and $21.0 million, respectively.
Adjusted net loss was $23.5 million, or $1.43 per diluted share, in the first quarter of 2023 compared to $18.5 million, or $1.13 per diluted share, in the first quarter of 2022.
Key Financial Definitions
New store openings - The number of new store openings reflects the number of stores opened during a particular reporting period. The total number of new stores per reporting period and the timing of stores openings has, and will continue to have, an impact on our results.
Same-store sales growth - Same-store sales growth reflects the change in year-over-year sales for the comparable store base, which we define as the number of stores open and in the FAT Brands system for at least one full fiscal year. For stores that were temporarily closed, sales in the current and prior period are adjusted accordingly. Given our focused marketing efforts and public excitement surrounding each opening, new stores often experience an initial start-up period with considerably higher than average sales volumes, which subsequently decrease to stabilized levels after three to six months. Additionally, when we acquire a brand, it may take several months to integrate fully each location of said brand into the FAT Brands platform. Thus, we do not include stores in the comparable base until they have been open and in the FAT Brands system for at least one full fiscal year.
System-wide sales growth - System wide sales growth reflects the percentage change in sales in any given fiscal period compared to the prior fiscal period for all stores in that brand only when the brand is owned by FAT Brands. Because of acquisitions, new store openings and store closures, the stores open throughout both fiscal periods being compared may be different from period to period.
Conference Call and Webcast
FAT Brands will host a conference call and webcast to discuss its fiscal first quarter 2023 financial results today at 4:30 PM ET. Hosting the conference call and webcast will be Andy Wiederhorn, Chairman of the Board, and Ken Kuick, Co-Chief Executive Officer and Chief Financial Officer.
The conference call can be accessed live over the phone by dialing 1-888-886-7786 from the U.S. or 1-416-764-8658 internationally. A replay will be available after the call until Monday, May 29, 2023, and can be accessed by dialing 1-844-512-2921 from the U.S. or 1-412-317-6671 internationally. The passcode is 24335100. The webcast will be available at www.fatbrands.com under the “Investors” section and will be archived on the site shortly after the call has concluded.
About FAT (Fresh. Authentic. Tasty.) Brands
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets, and develops fast casual, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses and franchises and owns approximately 2,300 units worldwide. For more information, please visit www.fatbrands.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the future financial and operating results of the Company, estimates of future EBITDA, the timing and performance of new store openings, future reductions in cost of capital and leverage ratio, our ability to conduct future accretive acquisitions, our pipeline of new store locations, and the recovery of our business from the COVID-19 pandemic. Forward-looking statements generally use words such as “expect,” “foresee,” “anticipate,” “believe,” “project,” “should,” “estimate,” “will,” “plans,” “forecast,” and similar expressions, and reflect our expectations concerning the future. Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are difficult to predict and beyond our control, which could cause our actual results to differ materially from the results expressed or implied in such forward-looking statements. We refer you to the documents that we file from time to time with the Securities and Exchange Commission, such as our reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause our actual results to differ materially from our current expectations and from the forward-looking statements contained in this press release. We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this press release.
Non-GAAP Measures (Unaudited)
This press release includes the non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted net loss.
EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. We use the term EBITDA, as opposed to income from operations, as it is widely used by analysts, investors, and other interested parties to evaluate companies in our industry. We believe that EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance. EBITDA is not a measure of our financial performance or liquidity that is determined in accordance with generally accepted accounting principles (“GAAP”), and should not be considered as an alternative to net loss as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP.
Adjusted EBITDA is defined as EBITDA (as defined above), excluding expenses related to acquisitions, refranchising gain or losses, impairment charges, and certain non-recurring or non-cash items that the Company does not believe directly reflect its core operations and may not be indicative of the Company’s recurring business operations.
Adjusted net loss is a supplemental measure of financial performance that is not required by or presented in accordance with GAAP. Adjusted net loss is defined as net loss plus the impact of adjustments and the tax effects of such adjustments. Adjusted net loss is presented because we believe it helps convey supplemental information to investors regarding our performance, excluding the impact of special items that affect the comparability of results in past quarters to expected results in future quarters. Adjusted net loss as presented may not be comparable to other similarly titled measures of other companies, and our presentation of adjusted net loss should not be construed as an inference that our future results will be unaffected by excluded or unusual items. Our management uses this non-GAAP financial measure to analyze changes in our underlying business from quarter to quarter based on comparable financial results.
Reconciliations of net loss presented in accordance with GAAP to EBITDA, adjusted EBITDA and adjusted net loss are set forth in the tables below.
Investor Relations:
ICR
Michelle Michalski
ir-fatbrands@icrinc.com
646-277-1224
Media Relations:
Erin Mandzik
emandzik@fatbrands.com
860-212-6509
FAT Brands Inc. Consolidated Statements of Operations
| Thirteen Weeks Ended | ||||||||||||||
| (In thousands) | March 26, 2023 | March 27, 2022 | ||||||||||||
| Revenue | ||||||||||||||
| Royalties | $ | 22,485 | $ | 20,898 | ||||||||||
| Restaurant sales | 62,601 | 58,077 | ||||||||||||
| Advertising fees | 9,351 | 9,361 | ||||||||||||
| Factory revenues | 9,165 | 8,179 | ||||||||||||
| Franchise fees | 802 | 714 | ||||||||||||
| Other revenue | 1,287 | 174 | ||||||||||||
| Total revenue | 105,691 | 97,403 | ||||||||||||
| Costs and expenses | ||||||||||||||
| General and administrative expense | 28,415 | 24,753 | ||||||||||||
| Cost of restaurant and factory revenues | 59,087 | 54,799 | ||||||||||||
| Depreciation and amortization | 7,116 | 6,561 | ||||||||||||
| Refranchising loss | 159 | 548 | ||||||||||||
| Advertising fees | 10,527 | 10,257 | ||||||||||||
| Total costs and expenses | 105,304 | 96,918 | ||||||||||||
| Income from operations | 387 | 485 | ||||||||||||
| Other (expense) income, net | ||||||||||||||
| Interest expense | (25,090) | (19,027) | ||||||||||||
| Interest expense related to preferred shares | (5,043) | (1,999) | ||||||||||||
| Other income, net | 156 | 1,310 | ||||||||||||
| Total other expense, net | (29,977) | (19,716) | ||||||||||||
| Loss before income tax provision | (29,590) | (19,231) | ||||||||||||
| Income tax provision | 2,536 | 4,524 | ||||||||||||
| Net loss | $ | (32,126) | $ | (23,755) | ||||||||||
| Basic and diluted loss per common share | $ | (1.95) | $ | (1.45) | ||||||||||
| Basic and diluted weighted average shares outstanding | 16,487,119 | 16,388,471 | ||||||||||||
| Cash dividends declared per common share | $ | 0.14 | $ | 0.13 | ||||||||||
FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation
| Thirteen Weeks Ended | |||||||||||
| (In thousands) | March 26, 2023 | March 27, 2022 | |||||||||
| Net loss | $ | (32,126) | $ | (23,755) | |||||||
| Interest expense, net | 30,133 | 21,026 | |||||||||
| Income tax provision | 2,536 | 4,524 | |||||||||
| Depreciation and amortization | 7,116 | 6,470 | |||||||||
| EBITDA | 7,659 | 8,265 | |||||||||
| Bad debt expense | 1,035 | 185 | |||||||||
| Share-based compensation expenses | 1,095 | 2,112 | |||||||||
| Non-cash lease expenses | 381 | 284 | |||||||||
| Acquisition costs | — | 248 | |||||||||
| Refranchising loss | 159 | 548 | |||||||||
| Litigation costs | 7,744 | 2,956 | |||||||||
| Severance | — | 526 | |||||||||
| Net loss related to advertising fund deficit | 1,085 | 10 | |||||||||
| Pre-opening expenses | 29 | — | |||||||||
| Adjusted EBITDA | $ | 19,187 | $ | 15,134 | |||||||
FAT Brands Inc. Adjusted Net Loss Reconciliation
| Thirteen Weeks Ended | |||||||||||
| (In thousands, except share and per share data) | March 26, 2023 | March 27, 2022 | |||||||||
| Net loss | $ | (32,126) | $ | (23,755) | |||||||
| Refranchising loss | 159 | 548 | |||||||||
| Acquisition costs | — | 248 | |||||||||
| Litigation costs | 7,744 | 2,956 | |||||||||
| Severance | — | 526 | |||||||||
| Tax adjustments, net (1) | 677 | 1,006 | |||||||||
| Adjusted net loss | $ | (23,546) | $ | (18,471) | |||||||
| Loss per basic and diluted share | $ | (1.95) | $ | (1.45) | |||||||
| Adjusted loss per basic and diluted share | $ | (1.43) | $ | (1.13) | |||||||
| Weighted average basic and diluted shares outstanding | 16,487,119 | 16,388,471 | |||||||||
(1) Reflects the tax impact of the adjustments using the effective tax rate for the respective periods.
Q1 2023 EARNINGS SUPPLEMENT MAY 8, 2023
LEGAL DISCLAIMER This Earnings Supplement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the future financial performance and growth of the Company, the Company’s ability to open stores in the development pipeline, and the Company’s ability to conduct future accretive and successful acquisitions and integrate acquired brands. Forward-looking statements reflect the Company’s expectations concerning the future and are subject to significant business, economic and competitive risks, uncertainties and contingencies including, but not limited to, uncertainties surrounding the severity, duration and effects of the COVID-19 pandemic. These risks, uncertainties and contingencies are difficult to predict and beyond our control, and could cause our actual results to differ materially from those expressed or implied in such forward-looking statements. We refer you to the documents that we file from time to time with the Securities and Exchange Commission, including our reports on Form 10-K, Form 10-Q and Form 8-K, for a discussion of these and other risks and uncertainties that could cause our actual results to differ materially from our current expectations and from the forward-looking statements contained in this Earnings Supplement. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this Earnings Supplement. 2
Q1 2023 HIGHLIGHTS 3 9.9% Sales Growth (1) Q1 2023 v Q1 2022 System-Wide 4.3% SSS Growth (2) Q1 2023 v Q1 2022 System-Wide 41 New Store Openings Q1 2023 (3) $105.7mm Total Revenue Q1 2023 $19.2mm Adj. EBITDA (4) Q1 2023 $555.0mm System-Wide Sales Q1 2023 (1) System-wide sales growth reflects the percentage change in sales in any given fiscal period compared to the prior fiscal period for all stores in that brand only when the brand is owned by FAT Brands. Because of acquisitions, new store openings and store closures, the stores open throughout both fiscal periods being compared may be different from period to period. (2) Same-store sales growth reflects the change in year-over-year sales for the comparable store base, which we define as the number of stores open and in the FAT Brands system for at least one full fiscal year. For stores that were temporarily closed, sales in the current and prior period are adjusted accordingly. Given our focused marketing efforts and public excitement surrounding each opening, new stores often experience an initial start-up period with considerably higher than average sales volumes, which subsequently decrease to stabilized levels after three to six months. Additionally, when we acquire a brand, it may take several months to integrate fully each location of said brand into the FAT Brands platform. Thus, we do not include stores in the comparable base until they have been open and in the FAT Brands system for at least one full fiscal year. (3) New store openings reflects the number of stores opened during a particular reporting period. The total number of new stores per reporting period and the timing of store openings has, and will continue to have, an impact on our results. (4) EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We use the term EBITDA, as opposed to income from operations, as it is widely used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance. EBITDA is not a measure of our financial performance or liquidity that is determined in accordance with generally accepted accounting principles (“GAAP”), and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. Adjusted EBITDA is defined as EBITDA (as defined above), excluding expenses related to acquisitions, refranchising gain or losses, impairment charges, and certain non-recurring or non-cash items that the Company does not believe directly reflect its core operations and may not be indicative of the Company’s recurring business operations. A reconciliation of net income presented in accordance with GAAP to EBITDA and adjusted EBITDA is set forth in the Appendix.
Q1 2023 VS. Q1 2022 4 (1) EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We use the term EBITDA, as opposed to income from operations, as it is widely used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance. EBITDA is not a measure of our financial performance or liquidity that is determined in accordance with generally accepted accounting principles (“GAAP”), and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. Adjusted EBITDA is defined as EBITDA (as defined above), excluding expenses related to acquisitions, refranchising gain or losses, impairment charges, and certain non-recurring or non-cash items that the Company does not believe directly reflect its core operations and may not be indicative of the Company’s recurring business operations. A reconciliation of net income presented in accordance with GAAP to EBITDA and adjusted EBITDA is set forth in the Appendix. Royalties $20.9mm $22.5mm Q1 2022 Q1 2023 Systemwide Sales Revenue $97.4mm $105.7mm Q1 2022 Q1 2023 Adj. EBITDA (1) $15.1mm $19.2mm Q1 2022 Q1 2023 $504.9mm $555.0mm Q1 2022 Q1 2023
2023 STRATEGIC FOCUS 5 Accelerate Build-Out of 1,000+ Unit New Store Pipeline $60mm of Potential EBITDA Growth Drive Adj. EBITDA Growth ~$10mm p.a. Incremental Growth from New Stores ~$5mm from Factory Maintain Strong Liquidity Continue to Build Net Asset Value for Future Liquidity (Debt Reduction) Event Grow Factory Production to Utilize ~60% Excess Capacity via Expanded Organic Channels & 3rd Party Dough & Mix Manufacturing Realize Purchasing Savings from ~$600mm in Purchasing Power Effectively Reducing Costs
APPENDIX
DEFINITIONS “EBITDA,” a non-GAAP measure, defined as earnings before interest, taxes, depreciation and amortization. We use the term EBITDA, as opposed to income from operations, as it is widely used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance. EBITDA is not a measure of our financial performance or liquidity that is determined in accordance with generally accepted accounting principles (“GAAP”) and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash flows from operations as measures of liquidity, or any other performance measure derived in accordance with GAAP. A reconciliation of net income presented in accordance with GAAP to EBITDA and adjusted EBITDA is set forth in the Appendix. “Adjusted EBITDA,” a non-GAAP measure, defined as EBITDA (as defined above), excluding expenses related to acquisitions, refranchising gain or losses, impairment charges, and certain non-recurring or non-cash items that the Company does not believe directly reflect its core operations and may not be indicative of the Company’s recurring business operations. A reconciliation of net income presented in accordance with GAAP to EBITDA and adjusted EBITDA is set forth in the Appendix. “Adjusted net loss,” a non-GAAP measure, defined as net loss plus the impact of adjustments and the tax effects of such adjustments. Adjusted net loss is presented because we believe it helps convey supplemental information to investors regarding our performance, excluding the impact of special items that affect the comparability of results in past quarters to expected results in future quarters. Adjusted net loss as presented may not be comparable to other similarly titled measures of other companies, and our presentation of adjusted net loss should not be construed as an inference that our future results will be unaffected by excluded or unusual items. Our management uses this non- GAAP financial measure to analyze changes in our underlying business from quarter to quarter based on comparable financial results. Reconciliations of net loss attributable to FAT Brands Inc. presented in accordance with GAAP to EBITDA, adjusted EBITDA and adjusted net loss are set forth in the Appendix. “Same-store sales growth” or “SSS” a non-GAAP measure, reflects the change in year-over-year sales for the comparable store base, which we define as the number of stores open and in the FAT Brands system for at least one full fiscal year. For stores that were temporarily closed, sales in the current and prior period are adjusted accordingly. Given our focused marketing efforts and public excitement surrounding each opening, new stores often experience an initial start-up period with considerably higher than average sales volumes, which subsequently decrease to stabilized levels after three to six months. Additionally, when we acquire a brand, it may take several months to integrate fully each location of said brand into the FAT Brands platform. Thus, we do not include stores in the comparable base until they have been open and in the FAT Brands system for at least one full fiscal year. “System-wide sales growth,” a non-GAAP measure, reflects the percentage change in sales in any given fiscal period compared to the prior fiscal period for all stores in that brand only when the brand is owned by FAT Brands. Because of acquisitions, new store openings and store closures, the stores open throughout both fiscal periods being compared may be different from period to period. I
CONSOLIDATED STATEMENT OF OPERATIONS II FAT Brands Inc. Consolidated Statements of Operations Thirteen Weeks Ended (In thousands) March 26, 2023 March 27, 2022 Revenue Royalties $ 22,485 $ 20,898 Restaurant sales 62,601 58,077 Advertising fees 9,351 9,361 Factory revenues 9,165 8,179 Franchise fees 802 714 Other revenue 1,287 174 Total revenue 105,691 97,403 Costs and expenses General and administrative expense 28,415 24,753 Cost of restaurant and factory revenues 59,087 54,799 Depreciation and amortization 7,116 6,561 Refranchising loss 159 548 Advertising fees 10,527 10,257 Total costs and expenses 105,304 96,918 Income from operations 387 485 Other (expense) income, net Interest expense (25,090) (19,027) Interest expense related to preferred shares (5,043) (1,999) Other income, net 156 1,310 Total other expense, net (29,977) (19,716) Loss before income tax provision (29,590) (19,231) Income tax provision 2,536 4,524 Net loss $ (32,126) $ (23,755) Basic and diluted loss per common share $ (1.95) $ (1.45) Basic and diluted weighted average shares outstanding 16,487,119 16,388,471 Cash dividends declared per common share $ 0.14 $ 0.13
CONSOLIDATED EBITDA & ADJ. EBITDA RECONCILIATION IV FAT Brands Inc. Consolidated EBITDA and Adjusted EBITDA Reconciliation Thirteen Weeks Ended (In thousands) March 26, 2023 March 27, 2022 Net loss $ (32,126) $ (23,755) Interest expense, net 30,133 21,026 Income tax provision 2,536 4,524 Depreciation and amortization 7,116 6,470 EBITDA 7,659 8,265 Bad debt expense 1,035 185 Share-based compensation expenses 1,095 2,112 Non-cash lease expenses 381 284 Acquisition costs — 248 Refranchising loss 159 548 Litigation costs 7,744 2,956 Severance — 526 Net loss related to advertising fund deficit 1,085 10 Pre-opening expenses 29 — Adjusted EBITDA $ 19,187 $ 15,134
ADJUSTED NET LOSS RECONCILIATION V FAT Brands Inc. Adjusted Net Loss Reconciliation Thirteen Weeks Ended (In thousands, except share and per share data) March 26, 2023 March 27, 2022 Net loss $ (32,126) $ (23,755) Refranchising loss 159 548 Acquisition costs — 248 Litigation costs 7,744 2,956 Severance — 526 Tax adjustments, net (1) 677 1,006 Adjusted net loss $ (23,546) $ (18,471) Loss per basic and diluted share $ (1.95) $ (1.45) Adjusted loss per basic and diluted share $ (1.43) $ (1.13) Weighted average basic and diluted shares outstanding 16,487,119 16,388,471 (1) Reflects the tax impact of the adjustments using the effective tax rate for the respective periods.
CONTACT INVESTOR RELATIONS: MEDIA RELATIONS: ICR MICHELLE MICHALSKI IR-FATBRANDS@ICRINC.COM 646-277-1224 FAT BRANDS ERIN MANDZIK EMANDZIK@FATBRANDS.COM 860-212-6509