FAT Brands: Reports Q1-2022 Financial Results

Los Angeles / CA. (fbb) FAT Brands Inc., parent company of Fatburger, reported fiscal first quarter 2022 financial results for the 13-week period ending March 27, 2022.

Andy Wiederhorn, President and CEO of FAT Brands, commented, «We want to thank our franchise partners and employees for their efforts in delivering yet another strong quarter and further momentum for FAT Brands as we emerge from the challenging operating environment of the past year.»

«We are pleased to report a very strong start to 2022, following a transformative year for FAT Brands in 2021. Last year, we completed four acquisitions, adding eight new restaurant brands to our portfolio. We expect 2022 to be a year to digest those acquisitions while capitalizing on the synergies they present.»

«We have opened 34 restaurants year to date, including 27 during the first quarter, and anticipate continued organic growth momentum in 2022 and beyond with our unit development pipeline of more than 860 locations. We also are continuing to see strong new franchisee activity as well as demand from existing franchise partners to develop other brands within the FAT Brands portfolio.»

«The first quarter marked another very strong quarter of growth for FAT Brands, and this quarter represented the first time all of the acquisition activity of the past year has been reflected in our results. Revenues rose by 1,365 percent and adjusted Ebitda increased by USD 14.0 million over the first quarter in 2021. Our same-store sales, which includes only those brands owned for all of fiscal 2021, increased 16.8 percent.»

«We are reiterating our expectation that we will add approximately 120 new restaurants in 2022. Our organic growth plan coupled with our acquisition strategy is driving strong revenue and adjusted Ebitda growth.»

Fiscal First Quarter 2022 Highlights

  • Total revenue improved 1,365 percent to USD 97.4 million compared to USD 6.6 million the first quarter of 2021
    • System-wide sales growth of 341 percent in the first quarter of 2022 compared to the prior year quarter
    • System-wide same-store sales growth of 16.8 percent in the first quarter of 2022 compared to the prior year quarter
    • 27 new store openings during the first quarter of 2022 bringing our system-wide store count to 2,360 as of March 27, 2022
  • Net loss of USD 23.8 million or USD 1.45 per diluted share compared to USD 2.4 million or USD 0.20 per diluted share in the first quarter of 2021
  • Adjusted Ebitda of USD 15.1 million compared to USD 1.1 million in the first quarter of 2021
  • Adjusted net loss of USD 18.5 million, or USD 1.13 per diluted share, compared to USD 2.0 million, or USD 0.17 per diluted share in the first quarter of 2021

Summary of First Quarter 2022 Financial Results

Total revenue was USD 97.4 million in the first quarter of 2022 compared to USD 6.6 million in the first quarter of 2021, reflecting revenue from the acquisition of Global Franchise Group in July 2021, the acquisition of Twin Peaks in October 2021, the acquisition of Fazoli’s in December 2021 and the acquisition of Native Grill + Wings in December 2021 (collectively, the «2021 Acquisitions») and the continuing recovery from the negative effects of the Covid-19 pandemic on royalties from restaurant sales.

Costs and expenses increased to USD 96.9 million in the first quarter of 2022 compared to USD 6.6 million in the first quarter of 2021.

General and administrative expenses increased USD 26.1 million, primarily due to the 2021 Acquisitions and increased compensation costs, professional fees and travel, reflecting the significant expansion of the organization.

Cost of restaurant and factory revenues totaled USD 54.8 million in the first quarter of 2022 and were exclusively related to the 2021 Acquisitions. These costs relate to the operations of company owned restaurant locations and the dough factory operated by Global Franchise Group, which currently sells products exclusively to our brands.

Advertising expenses increased to USD 10.3 million in the first quarter of 2022 compared to USD 1.2 million in the first quarter of 2021. These expenses vary in relation to the advertising revenue and reflect advertising expenses related to the 2021 Acquisitions and the increase in customer activity as the recovery from Covid continues.

Other expense, net of USD 19.7 million in the first quarter of 2022 was comprised primarily of interest expense of USD 21.0 million.

Adjusted net loss was USD 18.5 million, or USD 1.13 per diluted share, in the first quarter of 2022 compared to USD 2.0 million, or USD 0.17 per diluted share, in the first quarter of 2021.

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. For 2022, the comparable store base does not include concepts acquired during fiscal 2021.

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.

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