FAT Brands Inc (FAT) Q4 2024 Earnings Call Highlights: Navigating Challenges and Capitalizing ...

GuruFocus News

Fri, Feb 28, 2025, 12:37 AM 4 min read

Total Revenue: Decreased 8.4% to $145.3 million compared to $158.6 million in the prior year quarter.
System-wide Sales: $580.2 million for the quarter, representing a 7.4% decrease from the last year's quarter.
Full Year Revenue: Increased 23.4% to $592.7 million.
Full Year System-wide Sales: Increased 3.1% to $2.4 billion.
Net Loss: $67.4 million or $4.06 per diluted share compared to a net loss of $26.2 million or $1.68 per share in the prior year quarter.
Adjusted Net Loss: $29.9 million or $1.87 per diluted share compared to $17.3 million or $1.15 per diluted share in the prior year quarter.
Adjusted EBITDA: $14.4 million compared to $27 million in the year ago quarter.
General and Administrative Expense: Increased to $34.5 million from $30.3 million in the year ago quarter.
Costs of Restaurant and Factory Revenues: Decreased to $97.2 million compared to $105.1 million.
Advertising Expense: Decreased to $11.8 million from $13.8 million in the year ago period.
Total Other Expense Net: $36.4 million compared to $31.9 million in last year's quarter.
New Restaurants Opened in 2024: 92 new restaurants.
Planned New Locations for 2025: Over 100 new locations.
Development Pipeline: Signed agreements for approximately 1,000 additional locations.

Warning! GuruFocus has detected 7 Warning Signs with FAT.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

FAT Brands Inc (NASDAQ:FAT) successfully spun out Twin Hospitality Group, enhancing transparency and allowing shareholders to directly participate in the growth of Twin Peaks.
The company plans to open over 100 new locations in 2025, building on the 92 new restaurants opened in 2024, indicating strong organic growth.
FAT Brands Inc (NASDAQ:FAT) has a robust development pipeline with signed agreements for approximately 1,000 additional locations, expected to generate significant incremental annual adjusted EBITDA.
Co-branding initiatives, such as Great American Cookies and Marble Slab Creamery, have been successful, with co-branded locations generating 10% to 20% higher incremental sales.
The company's manufacturing facility in Georgia presents significant growth potential, currently operating at only 40% capacity, with plans to increase utilization to 60% to 70%.

Negative Points

Total revenue decreased by 8.4% in the fourth quarter of 2024 compared to the prior year, primarily due to one less operating week.
The company reported a net loss of $67.4 million for the fourth quarter, significantly higher than the $26.2 million loss in the prior year quarter.
FAT Brands Inc (NASDAQ:FAT) recognized $30.6 million of non-cash, goodwill, and other intangible asset impairment due to a decline in restaurant performance.
General and administrative expenses increased due to store closure costs, impacting overall profitability.
The company faces challenges with franchisee financing and construction delays, causing slippage in the opening of new stores.

Q & A Highlights

Q: The Smokey Bones impairment loss and store closures seem to have impacted results. Can you quantify the operating loss from these restaurants? A: Kenneth Kuick, Co-CEO and CFO, confirmed that the operating loss from Smokey Bones was about $2.6 million for the full year.

Q: Litigation costs have dropped significantly. Can you provide any expectations on future litigation expenses and potential recoveries? A: Andrew Wiederhorn, Chairman of the Board, expressed hope that most litigation will be resolved this year, reducing legal expenses. They are also optimistic about reaching a settlement with insurance carriers to recover some legal fees, potentially by Q2.

Q: How is FAT Brands managing liquidity and cash flow for operational needs? A: Andrew Wiederhorn explained that FAT Brands maintains a portfolio of bonds available for sale, with approximately $150 million in available-for-sale securities. They also have an ATM-on-file for issuing preferred or common stock for liquidity purposes. Additionally, they plan to raise equity at Twin Peaks to reduce corporate debt and generate liquidity.

Q: With 92 openings in 2024, slightly below the expected 100+, what caused the delay, and how does the pipeline look for 2025? A: Andrew Wiederhorn noted that about 20% of the openings were delayed into 2025 due to franchisee financing and construction delays. However, the pipeline remains solid, with 250 incremental stores sold last year, and they are optimistic about opening more than 100 locations in 2025.

Q: Have any brands been particularly affected by consumer confidence and spending trends? A: Andrew Wiederhorn mentioned that the QSR sector, particularly Fazoli's, was impacted by price sensitivity and trade-downs in spending patterns. However, they have seen positive same-store sales in Round Table Pizza and a rebound in cookies and ice cream sales.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice

More Info