FAT Brands Inc Q3 2023 Earnings Call Transcript

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

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : Good afternoon. Thanks for taking my questions.

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : So Andy, I wanted to start out about the quarter -- as your expectations going into the quarter -- do the quarter results meet your expectations? Were they better or worse? And if they were better or worse, what drove the above or below where your expectations were for the quarter?

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : Okay, great. Thanks for that. And I wanted to talk about same-store sales for a moment, if we could, year-to-date, I think you said they were up 1.3%, but that's down from the first quarter when same-store sales were 4.3% positive. So just wondering maybe you just give us what that was driving same-store sales? And how they were just for the third quarter? And any color there would be appreciated.

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : Okay. And on that store openings, I know, I think at the beginning of the year you were using the 150 to 175 range and I think in the transcript for the second quarter, you said 175 now you're at 150. Outside of just timing of openings or anything behind that going back to those the low end of that range. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 26, 2023 / 8:30PM, FAT.OQ - Q3 2023 FAT Brands Inc Earnings Call

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : Don't I know that. (laughter) The preferred -- I'll ask the question that I ask every quarter. You have the roughly $90 million that was due to be repaid and you haven't yet have any movements or anything new on the preferred that needs to be repaid.

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : Okay. And then year-to-date, the adjusted EBITDA is about $64 million, for all of 2022 was about $89 million, which suggests you need about $25 million in the fourth quarter just to stay flat. That possibly -- do you think you can exceed what you did in 2022?

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : Great. What more if I may -- I don't know if you guys could give what the quarter-end outstanding debt was in unrestricted cash?

Question: Joe Gomes - Noble Financial Capital Markets - Analyst : Great. Thanks, guys. Appreciate it. Great quarter,

Question: Alton Stump - Loop Capital - Analyst : Great. Thank you. Good afternoon, gentlemen. Just wanted to touch on the last question or last couple questions, obviously, I'm new in openings, you know, brought guidance down a little bit. I presume -- since of all that is just delays that seem to be impacting everyone right now in industry and there's no concern about underlying demand to build stores?

Question: Alton Stump - Loop Capital - Analyst : That makes sense, thanks for that color, Andy. And then just on the promotional environment, obviously, commodities coming off of huge highs over the last 18-plus months seemed somewhat moderating. How much pricing do you feel -- you, actually, guys own 18 brands now, so I'm sure everyone is different. But how is -- do you view the overall? What kind of pricing promotional environment that you are seeing on average in your brands?

Question: Alton Stump - Loop Capital - Analyst : That makes sense, thanks for that. And then -- just last question, I'll hop back in the queue -- congrats certainly on the Smokey Bones deal you've done. As you've mentioned, it's now only your second casual chain along with Twin Peaks, I guess should we be reading that this may potentially mean that you could look at other casual dining options down the road? Or is this just a case of very good assets came up at right price for you?

Question: Alton Stump - Loop Capital - Analyst : [Gryphics] -- I meant to say polished casual, so thank you for correcting that. Thank you so much Andy, I appreciate that. I'll hop back in the queue.

Question: Roger Lipton - Lipton Financial Services - Analyst : Yes, hi, Andy and Ken. So, the Smokey Bones deal closed on October 1.

Question: Roger Lipton - Lipton Financial Services - Analyst : Of the new quarter. So, it's not obviously reflected in your results at all. So as of this quarter, you're now operating 61 company stores, I presume.

Question: Roger Lipton - Lipton Financial Services - Analyst : Okay. So, it's obviously going to take us some time to restructure that portfolio in terms of how many you want to retain for the company? How many you want to sell to existing franchisees of other concepts? And how many might be convertible or conversion candidates? So, how would you guess that's that going to affect the fourth quarter in cash flow.

Question: Roger Lipton - Lipton Financial Services - Analyst : So is your hope -- so is it realistic to hope that Smokey Bones group of stores will not hurt the fourth quarter? Is that reasonable enough?

Question: Roger Lipton - Lipton Financial Services - Analyst : Okay. Okay.

Question: Roger Lipton - Lipton Financial Services - Analyst : Do you expect the $10 million incremental EBITDA will be in effect essentially already in the fourth quarter? In the next 12 months? Is it realistic to think that it will be up?

Question: Roger Lipton - Lipton Financial Services - Analyst : Okay. That's helpful. As far as the co-branding and co-branding activity, which you made quite a bit of reference to in recent months. Can you give us any -- even if it's only anecdotal -- descriptions of how locations do when a second brand is added? Or even if a new locations open with two brands rather than one. And you have (multiple speakers) --

Question: Roger Lipton - Lipton Financial Services - Analyst : Right. And presumably the franchisees weren't born yesterday in terms of their inclination to do this, nobody is forcing them, so the fact that they're stepping up speaks pretty well I guess of the prospect.

Question: Roger Lipton - Lipton Financial Services - Analyst : Right. And relative to the productivity of the dough facility in Georgia, you've made some good progress there with supposedly 40% to 45% run rate. What would you guess you can do there in terms of percentage of capacity in '24? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 26, 2023 / 8:30PM, FAT.OQ - Q3 2023 FAT Brands Inc Earnings Call

Question: Roger Lipton - Lipton Financial Services - Analyst : Okay. Lastly, for the moment, can you give us any rough guidance in terms of the timing of the IPO for Twin Peaks?

Question: Roger Lipton - Lipton Financial Services - Analyst : Right. And just to clarify, the $218 million of securitized bonds, I guess you call them on your balance sheet, so you can pick your spots -- but I just want to make sure I understand -- you can pick your spot in terms of selling them and the price in the marketplace. So, you will be able to get $218 million for interest rates or higher, obviously, a great deal higher now than when those securitized were created. Is that correct?

Question: Roger Lipton - Lipton Financial Services - Analyst : Right, got it. I will clarify that because I was in my mind, I was thinking you might only be worth $160 million or $170 million, but the --

Question: Roger Lipton - Lipton Financial Services - Analyst : Very helpful and liquidity is good. Thanks, Andy.