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FAT Brands Inc - Ordinary Shares (FAT) Q2 Earnings call transcript Jul 31, 2024

AInvestThursday, Aug 1, 2024 4:24 pm ET
2min read

FAT Brands Inc. reported a robust second-quarter performance, showcasing a 42.4% increase in total revenue to $152 million, driven by the acquisition of Smoky Bones and new restaurant openings. The company's system-wide sales grew by 7.3% to $614.7 million, underpinning its strong financial health and strategic expansion plans.

Strategic Priorities and Financial Highlights

Andrew Wiederhorn, FAT Brands' Chairman of the Board, began the earnings call by expressing gratitude to the company's dedicated employees and franchisees for their relentless commitment to growth. He highlighted key financial metrics, including a 7.3% increase in system-wide sales and a 30.8% increase in adjusted EBITDA when considering the impact of employee retention tax credits.

Wiederhorn emphasized the company's strategic priorities, focusing on organic growth, growth through acquisitions, and leveraging its Georgia-based manufacturing facility. He highlighted FAT Brands' expansion into new markets and strategic partnerships, such as the opening of a Roundtable Pizza location at Stanford University and a co-branded Fatburger and Roundtable Pizza restaurant in Utah.

Organic Growth and Strategic Expansion

Organic growth has been a significant focus for FAT Brands, with the company expanding its footprint by opening 24 new locations in the second quarter. This expansion is expected to continue, with plans to open 120 new units in total for the year, demonstrating the company's commitment to sustainable growth and diversification.

The acquisition of Smoky Bones has been a strategic move to fuel Twin Peaks' growth through conversions, with the first conversion expected to take place in Lakeland, Florida, in the fall. This acquisition is part of FAT Brands' broader strategy to expand its polished casual segment, particularly within the Twin Peaks and Smoky Bones brands, which are experiencing significant growth.

Financial Challenges and Future Outlook

Despite the strong financial performance, FAT Brands faced challenges, including increased costs and expenses. However, the company remains optimistic about the future, with plans to refinance Twin Peaks securitization debt prior to an IPO or alternative transaction to reduce leverage and build new restaurants. The company also intends to leverage its Georgia-based manufacturing facility to boost utilization and expand its product offerings across its portfolio.

Analysts' Questions and Management's Responses

During the Q&A session, analysts delved into various topics, including revenue growth, store openings, and acquisition opportunities. Management provided insights into the company's strategic plans, including a focus on organic growth, strategic acquisitions, and leveraging its manufacturing facility to drive efficiency and scale.

Conclusion

FAT Brands' second-quarter earnings call showcased the company's robust financial performance, strategic expansion plans, and commitment to growth and innovation. With a focus on organic growth, strategic acquisitions, and leveraging its manufacturing facility, FAT Brands is poised for continued success in the competitive foodservice industry. As the company moves forward, it will be interesting to see how it executes its strategic plans and navigates the evolving market dynamics.

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