FAT Brands Inc. Q4 FY2024 earnings call

• Spin-off of Twin Hospitality Group, Inc. (TWNP) in January 2025, with TWNP trading on NASDAQ under ticker TWNP. FAT retained shares and distributed 5% to shareholders, creating value and growth opportunity for Twin Peaks.
• Organic growth initiatives: Opened 92 new restaurants in 2024, plan to open over 100 in 2025 with strong growth expected in brands like Great American Cookies, Marble Slab Creamery, etc. Co-branding continues to drive growth, e.g., Great American Cookies and Marble Slab Creamery have over 160 co-branded locations.
• International expansion: Johnny Rockets has over 55% of global footprint in international locations, opened 11 new international locations in 2024. Non-traditional venues like theme parks and casinos are growth avenues, e.g., Hurricane Grill & Wings at Six Flags Great Escape Lodge.
• Manufacturing operations: Georgia facility has significant growth potential, operating at 40% capacity with room to increase utilization to 60%-70% to enhance value.
• Community support: FAT Brands Foundation increased giving by 36% in 2024, provided 70 grants across 17 states, and responded to LA wildfires with food truck meals, free pizzas, etc.

Total revenue in the fourth quarter of 2024 was $145.3 million, a decrease of 8.4% compared to $158.6 million in the prior year quarter. System-wide sales were $580.2 million for the 2024 fourth quarter, representing a 7.4% decrease from the prior year quarter due to an incremental operating week in the prior year. In 2024, total revenue increased 23.4% to $592.7 million and system-wide sales increased 3.1% to $2.4 billion. The company's manufacturing facility in Georgia generates approximately $38 million in annual sales from franchisees with a profit of about $15 million (40% margin), operating at 40% capacity with room for expansion.

• Committed to raising equity at Twin Hospitality and reducing debt by $75 million or more in 2025, including a minimum of $25 million by late April. Expect to complete debt reduction to pay Q1 dividend as usual.
• Focus on deleveraging balance sheet while executing on organic growth opportunities. The public listing of Twin Hospitality creates value with FAT owning over $900 million in TWNP shares and shedding over $400 million of Twin Hospitality's debt.
• Plan to refinance remaining three securitization silos in the second half of 2025 as market permits.

• Litigation risks: Hopeful bulk of litigation gets resolved in 2025, but uncertain timeline. Also, potential recovery of legal fees from insurance carriers is not guaranteed.
• Store opening delays: Slight delay in store openings in 2025 due to franchisee financing, construction delays, and lenders being slower/choosier.
• Market fluctuations: Impact on liquidity and ability to raise equity or refinance debt as markets may fluctuate.

Q: Was there an operating or EBITDA loss from Smokey Bones stores closed, and can it be quantified?

A: It is a fair assumption there was an operating loss, and it was about $2.6 million for the full year.

Q: Thoughts on litigation and cash cost out of pocket going forward?

A: Hopeful bulk of litigation gets resolved in 2025, with optimism of settlement with insurance carriers to recover legal fees, likely in Q2.

Q: Current liquidity status and how it's maintained?

A: Maintain an available-for-sale portfolio of bonds ($150 million), have an ATM for equity issuance, and anticipate raising equity at Twin Peaks level to reduce debt and generate liquidity.

Q: Why were there fewer store openings in 2024 than expected, and outlook for 2025?

A: Slippage into 2025 due to franchisee financing, construction delays, but pipeline is solid with 250 signed stores in 2024, optimistic to open over 100 in 2025.

Q: M&A pipeline and focus?

A: Focus on deleveraging and organic growth currently, with some strategic targets but timing depends on markets; prefer organic growth over adding leverage as it's free EBITDA.

Q: Timetable for disposing of Smokey Bones locations?

A: Majority to be disposed of in 2025-2026, with some stragglers, dealing with complicated leases but have a solid line of sight, with 30 expected conversions out of 61 originally.