Quidditch Acquisition Inc.

Overview Key strengths Key risks Stable, recurring cash flow stream from franchise royalties. Revolving credit facility matures in the first quarter of 2023. Second-largest fast casual Mexican restaurant with a nationally recognized brand. Limited liquidity position and projected cash burn amid continued business weakness despite some recent improvement. Outsize debt service burden hinders cash generation. Catering business is recovering slowly amid ongoing pandemic headwinds. The company recently released its financial statements for fiscal year 2021, which were in line with our previous expectations for the fourth quarter. This is due to the slow recovery in its more profitable catering business and the location of its restaurants in dense urban areas, malls, universities, and airports, which have been slower to recover

...Quidditch Acquisition Inc.'s (doing business as Qdoba) capital structure remains unsustainable due to its insufficient cash generation and relatively high debt burden. The company recently released its financial statements for fiscal year 2021, which were in line with our previous expectations for the fourth quarter. Despite signs of an economic recovery, we believe the current environment presents risks that are unique to Qdoba. This is due to the slow recovery in its more profitable catering business and the location of its restaurants in dense urban areas, malls, universities, and airports, which have been slower to recover amid the coronavirus pandemic. Nevertheless, the company's operating trends have recently improved. Qdoba's systemwide same-store sales were up about 15% in the fourth quarter ended October 2021 (compared with an increase of 11% in fiscal year 2021), which represents a rebound from its recent negative trend during the pandemic. We believe the company's sales will...

Full Report