Fat Brands, Inc Q1 FY2024 earnings call

Organic Growth

• Continued development momentum with 16 new units opened in Q1, with 44 expected this quarter and a projection of 125-150 new units in 2024.
• Hosted FAT Brands Franchise Summit in Las Vegas, resulting in signed or planned development deals for over 100 new restaurants, with a pipeline of over 1,100 additional units.

Polished Casual Segment (Twin Peaks and Smokey Bones)

• Twin Peaks: Industry-leading average unit volumes around $6 million, with 3 new lodges opened in Q1, planning to open 15-18 in 2024, and over 125 new franchise deals signed for the next 5 years.
• Smokey Bones: Acquisition in Q4 2023, expected to increase annual adjusted EBITDA by ~$10 million, with over half of 61 existing locations to be converted to Twin Peaks.

International Expansion

• Fazoli's signed a development deal for 25 locations in Canada over 10 years, with first units expected in 2025.
• Marble Sub Creamery signed a deal for 40 new locations in Canada over 10 years, with first locations slated to open by end of 2024.
• Round Table Pizza signed new development deals in Oklahoma and Arkansas.

Co-Branding and Nontraditional Units

• Grand opening of first West Coast Johnny Rockets and Hurricane Wings co-branded restaurant, and new development yield for 40 Fatburger locations in Northern California inside Round Table Pizza locations.
• Continued success in nontraditional units like airports, cruise lines, etc.

Manufacturing Facility

• Georgia-based manufacturing facility generated $9.5 million in sales in Q1, a 3.4% increase, with utilization at ~45% and potential to double output with $1.5 million capital expenditure.

FAT Brands Foundation

• Hosted giving back event at Summit, delivered $10,000 grant, raised over $75,000, with FAT Brands donating an additional $50,000.

Total revenue in the first quarter grew 43.8% to $152 million compared to $105.7 million in the prior year quarter. System-wide sales in the first quarter grew $581.8 million, a 4.8% increase from the prior year quarter. First quarter EBITDA was $9.4 million compared to $7.7 million in the first quarter of 2023. Adjusted EBITDA was $18.2 million compared to $19.2 million in last year's first quarter. Our manufacturing facility generated $9.5 million in sales in the first quarter, a 3.4% increase over the prior year, and contributed $3.7 million to adjusted EBITDA.

Unit Growth

• Project to open 125-150 new units in 2024, with 15-18 Twin Peaks planned for 2024 and accelerated growth in 2025-2026.

Manufacturing Utilization

• Potential to double factory output capability with $1.5 million capital expenditure if demand exists.

Twin Peaks Expansion

• Anticipate accelerated opening of Twin Peaks units in 2025-2026, with conversions expected to take ~120 days.

Uncertainties

• Actual results may differ materially from forward-looking statements due to a number of risks and uncertainties, including market conditions, franchisee development progress, and integration of acquisitions.

Q: Could you update on factory utilization and Twin Peaks conversion timing?

A: Utilization is roughly 45% today, can double capacity with $1.5 million investment. Twin Peaks conversions take ~120 days once construction starts.

Q: On same-store sales drop and Twin Peaks IPO?

A: Same-store sales affected by weather in January, with segments varying; working diligently on Twin Peaks IPO, expect to be on file soon, with Smokey Bones audit expected to be completed by end of week.