FAT Brands Inc Q2 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joe Gomes - Noble Capital Markets - Analyst : Good afternoon. Congrats on the quarter.

Question: Joe Gomes - Noble Capital Markets - Analyst : The first question I wanted to ask -- in terms of the openings during the quarter, you did 25. The first-quarter call, you had said you were projecting 45. So just wanted to see what happened there. You've kept the full-year guide at that 175. We're just wondering what happened in the quarter that came in at 25, as opposed to the projected 45.

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay. And I'm just going to ask, I think last year, there was some supply chain issues with getting equipment and everything. Did that have any role in some of the slippage? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 03, 2023 / 8:30PM, FAT.OQ - Q2 2023 FAT Brands Inc Earnings Call

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay. One of the other goals, as you mentioned, is getting the utilization of the factory up, and you've done a commendable job with that. One of the things -- last year, you hired someone specifically to start going after third parties as opposed to in-house. Just wondering if you'd give us a little color as to how that effort is progressing.

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay. Thanks for that. And you mentioned the recent debt raise. Maybe give us a little color on your thoughts on the uses of some of that cash that was -- been raised. You didn't -- haven't mentioned anything about the preferreds that were up for redemption. I think there's roughly 90 million of that left. Any thought on maybe paying off those preferreds, or do you have other intentions for the cash that was raised?

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay. And then, notice going through the release, litigation costs have increased substantially. I think they're roughly running 7 million a quarter in the first two quarters of this year, which is kind of double what they were in 2022. Any expectations that those should start to come down? Have we seen the peak? Do we think they're going to go higher? Your best guess, Andy.

Question: Joe Gomes - Noble Capital Markets - Analyst : Okay, great. Thanks for that. I'll get back in queue if someone else has a couple questions.

Question: Alton Stump - Loop Capital Markets - Analyst : Great. Thanks, Andy and Ken, for taking my questions. I just wanted to ask you, I guess, first off, you mentioned, obviously, the opportunity to potentially convert assets that you would purchase into Twin Peaks models. Just given the current landscape, there's obviously been a lot of, of course, smaller players that have had to close their doors the last 12 weeks, months coming out of the pandemic. Any kind of ballpark number as to what percentage-ish of your future builds do you think, for Twin Peaks in particular, could come from conversions as opposed to having to build your own restaurants?

Question: Alton Stump - Loop Capital Markets - Analyst : Great. Thanks so much for that color. Very, very helpful. And I wanted to ask, just going back to Twin Peaks, obviously, it came out in early June with the plans for it to go public. I presume that the bulk of those potential proceeds would be used to pay down debt. Is that your main goal once this -- if it does go through at some point in 2024?

Question: Alton Stump - Loop Capital Markets - Analyst : Got it. Great. And then, the last thing -- and I'll hop back in the queue if anybody else has questions. But just -- of the overall competitive landscape, obviously, you guys have 17 brands. So I'm sure you're seeing a lot of different things in different markets. But given that we're coming off industry-high pricing over the last 18 months for good reason -- it had to be taken because of this four-year high inflation. But now that we're starting to get, it feels like, into a bit more moderate input cost inflation environment, how do you think your access will respond to that from a competitive standpoint?

Question: Alton Stump - Loop Capital Markets - Analyst : Got it. Great. Thanks so much. I appreciate your time.

Question: Roger Lipton - Lipton Financial Services - Analyst : Yes. Good afternoon. Just a couple of follow-up questions on Joe and the gentleman from Loop. What was the cash -- prior to raising the $105 million, what was this cash on the balance sheet as of the end of the quarter? Do you have that number, Andy?

Question: Roger Lipton - Lipton Financial Services - Analyst : Right. (multiple speakers)

Question: Roger Lipton - Lipton Financial Services - Analyst : Okay. And where in the financials do we see the $156 million of marketable securities?

Question: Roger Lipton - Lipton Financial Services - Analyst : The $156 million?

Question: Roger Lipton - Lipton Financial Services - Analyst : I see. So it won't show up in the cash or in the payable. It'll just be netted out to [zero], but it'll be shown in the footnote.

Question: Roger Lipton - Lipton Financial Services - Analyst : Got it. And relative to Twin Peaks, which is of great interest to everybody, has the size of the stores changed at all as the system builds out? The volumes are much higher. Are the stores getting any larger or not? And what kind of -- what is the -- I know the cost of building a store must vary a great deal depending on whether it's freshly built or a renovation. But what's the ballpark if you wanted to build a new Twin Peaks in a mall, for instance?

Question: Roger Lipton - Lipton Financial Services - Analyst : Right. And typically, if I'm a Twin Peaks franchisee, what am I thinking about investing as -- I'm acknowledging that it can vary a great deal. But what's it going to cost me, $5 million to build a store? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 03, 2023 / 8:30PM, FAT.OQ - Q2 2023 FAT Brands Inc Earnings Call

Question: Roger Lipton - Lipton Financial Services - Analyst : Right. (multiple speakers)

Question: Roger Lipton - Lipton Financial Services - Analyst : Well, there's a lineup for franchisees, and they're voting with their feet in terms of the expected returns. So I understand it can vary a great deal in terms of how the stores are financed. But they wouldn't be coming to these stores if the returns weren't outstanding. And I think (multiple speakers) --

Question: Roger Lipton - Lipton Financial Services - Analyst : Right. We'll look forward to that. Thanks very much.