Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FAT Brands Inc reported a significant increase in total revenue, up 43.8% to $152 million in Q1 2024, driven by strategic acquisitions and new restaurant openings.
- The company saw a system-wide sales growth of 4.8% in Q1, reaching $581.8 million, indicating strong performance across its brands.
- FAT Brands Inc continues to expand aggressively, with plans to open between 125 and 150 new units in 2024, potentially increasing by 20% from 2023.
- The acquisition of Smokey Bones is expected to contribute approximately $10 million to annual adjusted EBITDA, enhancing the company's financial strength.
- FAT Brands Inc is actively pursuing growth through acquisitions and strategic expansions, such as the planned conversion of Smokey Bones locations into Twin Peaks, which is expected to significantly increase the footprint and sales.
Negative Points
- Despite revenue growth, FAT Brands Inc reported a net loss of $38.3 million in Q1 2024, which is higher than the $32.1 million loss in the previous year.
- The company's adjusted EBITDA decreased to $18.2 million in Q1 2024 from $19.2 million in the same quarter last year, indicating some challenges in profitability.
- FAT Brands Inc is experiencing increased costs and expenses, which rose 45.6% in Q1, primarily due to the acquisition of Smokey Bones.
- The company's debt levels remain a concern, with significant interest expenses impacting financial stability.
- Operational challenges such as weather impacts and delays in new store openings could affect the company's ability to meet its growth targets.
Q & A Highlights
Q: Could you update us on the current utilization at your cookie factory and its potential growth over the course of the year?
A: Andrew Wiederhorn, Chairman of the Board, FAT Brands Inc: The utilization is currently at approximately 45%. We have the capacity to double this by making a small investment in equipment. We're also exploring third-party manufacturing relationships which could significantly utilize the remaining capacity by the end of the year.
Q: With the rapid growth of Twin Peaks, can you discuss the pace of new builds and conversions from Smokey Bones locations?
A: Andrew Wiederhorn, Chairman of the Board, FAT Brands Inc: For 2024, we aim to open 15 to 18 new Twin Peaks locations. The conversions from Smokey Bones will mostly occur in 2025 and 2026, potentially increasing to 20 to 25 units per year.
Q: How long does it take to convert a Smokey Bones location to a Twin Peaks restaurant?
A: Andrew Wiederhorn, Chairman of the Board, FAT Brands Inc: The first conversion is taking about 120 to 150 days. We anticipate future conversions will take around 120 days, which is significantly quicker than building new locations.
Q: Can you provide insight into the same-store sales trends and their impact by segment?
A: Andrew Wiederhorn, Chairman of the Board, FAT Brands Inc: Different segments are experiencing varying trends. For example, our snack brands are performing well, while our casual dining segments like Ponderosa and Bonanza are seeing a 5-6% increase, attributed to their value offerings.
Q: What are the plans for the IPO of Twin Peaks and the integration of Smokey Bones?
A: Andrew Wiederhorn, Chairman of the Board, FAT Brands Inc: We are preparing for a confidential IPO filing soon, which will include integrating Smokey Bones with Twin Peaks to facilitate conversions. We're finalizing the audited financials for Smokey Bones to proceed with the IPO.
Q: Regarding the conversions of Smokey Bones locations, will these be franchised or remain company-owned?
A: Andrew Wiederhorn, Chairman of the Board, FAT Brands Inc: About two-thirds to three-quarters of the converted locations will be franchised, depending on the geographic market and existing franchise territories. The rest will remain company-owned.
Q: What caused the lower number of new store openings in Q1, and what are the expectations for Q2?
A: Andrew Wiederhorn, Chairman of the Board, FAT Brands Inc: The slow pace in Q1 was largely due to severe weather impacting schedules. We anticipate opening around 44 new units in Q2 as conditions improve and delayed openings from Q1 are realized.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
