Fat Brands, Inc Q4 FY2023 earnings call

• The company expanded to 18 concepts with over 2,300 locations across more than 40 countries and 49 states.
• In 2023, 125 new units were opened, with 29 in Q4, and 2024 projects at least 125 new units.
• Signed development deals for over 225 new franchise locations, with a development pipeline over 1,100 units.
• Milestones included Twin Peaks' 100th location, Great American Cookies' 400th location, and re-entries of brands like Fatburger in new markets.
• Acquired Smokey Bones in Q4 2023, which is expected to increase annual adjusted EBITDA by ~$10 million.
• Co-branding initiatives with incremental sales lift of 10%-20%, and new development deals in Texas.
• Manufacturing facility utilization increased to ~45% in 2023, with potential to double capacity.
• FAT Brands foundation awarded over $250,000 to 43 local nonprofits in 2023.

In 2023, FAT Brands grew total revenue over 18% to $480.5 million from $407.2 million in the prior year. System-wide sales increased 6.9% to $2.3 billion. Adjusted EBITDA ended 2023 at $91.2 million, a nearly 3% increase from $88.9 million in 2022. Fourth quarter total revenue grew 52.8% to $158.6 million. System-wide sales in the fourth quarter grew to $626.7 million, a 16.5% increase. The manufacturing facility generated $38 million in sales in 2023, a 13% increase over the prior year. Royalties increased 10.4%, company-owned restaurant revenues grew 80.5%, and manufacturing facility revenues rose 10%.

• Project to open at least 125 new units in 2024.
• Twin Peaks aims to open 100-plus restaurants in 2024, with over 125 new franchise deals signed for Twin Peaks.
• Plan to take Twin Peaks public, with timing subject to market conditions, potentially a Q3 event.
• Intend to refinance securitization facilities for Twin Peaks, Fazoli's, and Native Grill & Wings.
• Focus on strategic acquisitions that are EBITDA accretive and delevering events.

• Uncertainties related to legal matters, as indicated by the Wells notice and ongoing legal expenses.
• Deal environment where sellers' prices haven't aligned with the company's price tolerance due to interest rate and economic factors.
• Impact of commodity cost fluctuations and upcoming minimum wage increases in California.

Q: Could you talk about the Wells notice and litigation costs?

A: There's not much to disclose beyond public disclosures. Legal expenses are being pursued for reimbursement from insurance.

Q: Any growth opportunities in non-traditional locations?

A: Non-traditional locations are performing well, with openings in Great Wolf Lodge, Six Flags, Stanford University, and airports.

Q: Goals for refinancing securitizations?

A: Aiming to refinance to address amortization starting in 2025, take advantage of IPO proceeds for debt reduction, and align with Twin Peaks' potential public offering.

Q: Timing of Twin Peaks IPO?

A: Hoping for a Q3 event, with filing of S-1 on a confidential basis and then going through SEC process.

Q: Conversion possibilities of Smokey Bones to Twin Peaks?

A: A fair number of Smokey Bones stores are being considered for conversion, with negotiations ongoing.

Q: Tone of domestic business?

A: Business is solid, but commodity costs have come down, and there's traffic pushback on price increases due to consumer limits, with minimum wage increases in California affecting prices.