Fat Brands, Inc Q3 FY2024 earnings call

• Expanded brand portfolio to 18 concepts with a footprint of over 2,300 locations across more than 40 countries and 49 U.S. states/territories. - Strategic pillars: organic growth (opened 22 units in Q3, YTD 62, plan 40 in Q4), growth by acquisition (acquired Smokey Bones, focusing on converting Smokey Bones to Twin Peaks), and leveraging Georgia manufacturing facility (generating adjusted EBITDA). - Twin Peaks: 115 lodges, plan 19 new lodges in 2025 (7 conversions from Smokey Bones), corporate lodges have average unit volumes of ~$6M, select markets ~$9M-$14M. - Co-branding: Great American Cookies and Marble Slab Ice Cream co-branded, over 160 locations, new online ordering platform. - Menu innovation: Various brands added fall items, Pretzelmaker new shareable, Hot Dog on a Stick new lemonade. - FAT Brands Foundation: Over 50 grants awarded, new partnership with DonationScout.

Total revenue for the third quarter grew 31.1% to $143.4 million, up from $109.4 million in the same quarter last year. System-wide sales reached $600.7 million in Q3, a 6.4% year-over-year increase. Adjusted EBITDA was $14.1 million compared to $21.9 million in the corresponding quarter last year. Organic growth: 22 new units opened in Q3, with a year-to-date total of 62 units, and plan to open approximately 40 units in the full fourth quarter. The development pipeline has signed agreements for around 1,000 new units, projected to incrementally contribute $50 million to $60 million to annual adjusted EBITDA. Twin Peaks has 115 lodges, with plans to open 19 lodges in 2025, including 7 conversions from Smokey Bones. The Georgia-based manufacturing facility generated $3.5 million of adjusted EBITDA on $9.5 million in sales, operating at 40%-45% capacity.

• Plan to open approximately 40 units in the full fourth quarter, ending the year with over 100 new units. - Development pipeline has signed agreements for ~1,000 new units, projected to add $50M-$60M to annual adjusted EBITDA. - Twin Peaks plans 19 new lodges in 2025, including 7 conversions from Smokey Bones. - Expect to provide updates on Twin Peaks standalone public company process and debt refinancing.

• Smokey Bones corporate-owned sales down significantly, slow conversion rate affecting financial results. - Fazoli’s company-owned stores under pressure due to QSR space trends. - Manufacturing facility utilization still at 40%-45%, need to secure third-party customers. - Legal expenses and potential insurance recovery timing affecting cash flow.

Q: About the Smokey Bones to Twin Peaks conversion in Lakeland.

A: The first store was a huge success, sales went from $3.6 million to $8.3 million, conversion process timely but slightly higher cost than expected.

Q: Operating loss growth, royalty revenues down.

A: Attributed to Smokey Bones corporate sales decline, Fazoli’s company-owned store pressure in QSR space.

Q: Manufacturing facility utilization.

A: Testing third-party programs, expect to announce big rollout in Q1 2025.

Q: Debt refinancing.

A: Twin Peaks refinance in progress, Fazoli’s debt discussions ongoing, focus on deleveraging and monetizing Twin Peaks.

Q: Franchisee interest in development deals.

A: Spread across brands, Round Table Pizza, Fazoli’s, Twin Peaks, Cookies and Ice Cream, Fatburger popular.

Q: Sequential comps trend.

A: Improved, last week system down 0.1%, better than Q1-Q2.

Q: Sports bar segment troubles.

A: Twin Peaks not in same camp, focuses on guest experience and pricing.

Q: Twin Peaks conversion costs.

A: Save time and money, but conversion more expensive than expected due to deferred maintenance.

Q: Franchisee mix for Twin Peaks.

A: Mix of new and existing franchisees, existing franchisees taking on more territory.

Q: Cash flow breakeven.

A: Expect by end of 2025, with debt refinancing, preferred stock redemption, and legal expense resolution.