Should investors worry about FAT's Q3 surprise?

**FAT Brands' Q4 2024 financial results present a mixed picture, with both challenges and strategic initiatives offering insights for investors.** Here's an analysis to consider:

1. **Revenue Decline in Q4**: The most notable concern is the 8.4% decrease in total revenue to $145.3 million compared to the previous year. This drop, coupled with a net loss of $67.4 million, indicates immediate financial strain.

2. **Strategic Moves and Growth Prospects**: Despite the revenue decline, FAT Brands has spun off Twin Hospitality Group, signaling a strategic move to unlock value and reduce debt. The company also plans significant expansion, aiming to open over 100 new restaurants in 2025, suggesting confidence in long-term growth.
3. **Historical Performance and Outlook**: FAT Brands reported a 23.4% increase in total revenue for the full fiscal year 2024, reaching $592.7 million, which is a positive indicator. The company's development pipeline includes plans for approximately 1,000 additional locations, expected to generate substantial incremental adjusted EBITDA.
4. **Financial Health and Liquidity**: FAT Brands faces liquidity concerns, with a negative free cash flow yield of -144% and a current ratio of 0.3, which could be critical for the company's survival. The extension of its securitization facility to 2025 is a strategic move to manage debt and financial covenants.
5. **Market Sentiment and Valuation**: The company's stock has shown resilience with a modest increase in aftermarket trading after the earnings release. However, the consensus rating is a "Strong Sell," which could reflect broader market skepticism about the company's short-term prospects.

**Investors should weigh these factors carefully.** While the company's strategic moves and long-term growth plans are encouraging, the immediate revenue decline and financial challenges are significant concerns. The decision to worry depends on individual risk tolerance, investment horizon, and confidence in FAT Brands' ability to execute its strategic plans successfully. Investors should monitor the company's progress on its growth initiatives and financial improvements closely.