FAT Brands Inc. Q1 FY2025 earnings call

• Leadership changes: Rob Rosen transitioned to a consulting role, Taylor Wiederhorn was appointed co-CEO. Joe Hummel stepped down as CEO of Twin Hospitality Group, with Ken Kuick serving as interim CEO. - Spin-off of Twin Hospitality Group: In 2025, Twin Hospitality Group was spun off, distributed 5% of its Class A stock to shareholders, and retained remaining shares. - Twin Peaks growth: Opened two new lodges in the first quarter, with a strong growth trajectory. - Co-branding initiatives: Launched multiple co-branded and tri-branded models, including Roundtable Pizza and Marble Slab Creamery pairings, and accelerated co-branding plans for 2025. - International development: Fatburger announced partnerships to open 30 locations in France over three years, and Buffalo's Cafe fast-casual locations in France. - Balance sheet strengthening: Amended Fazoli's securitization for improved terms, and focus on refranchising Fazoli's restaurants. - Guest experience: Launched a remodeling initiative to refresh 5% of stores in 2025, increasing to 10% in 2026, and planned a portfolio-wide guest experience program. - Manufacturing: Georgia production facility had $8.8 million in first-quarter sales and $3.1 million in adjusted EBITDA, with aim to increase utilization to 60-70%.

Total revenues for the first quarter of 2025 were $142 million, a 6.5% decrease from the $152 million reported in the same period last year. System-wide sales stood at $571.1 million, down 1.8% compared to the previous year's quarter. Adjusted EBITDA for the quarter was $11.1 million, down from $18.2 million in the year-ago quarter. The casual dining segment delivered strong results with same-store sales increasing approximately 1.6%, driven by performance at Buffalo's Cafe and Ponderosa and Bonanza locations. The revenue contribution of each segment isn't explicitly broken down by percentage in the transcript, but overall these figures summarize the financial performance.

• Target to raise between $75 million and $100 million of equity in 2025, using 75% ($75 million) to reduce outstanding debt, aiming for Twin Hospitality to be cash flow positive excluding new corporate store development. - Anticipated to achieve full annual equity target raise over the next twelve months despite temporary timing adjustment due to volatile market conditions. - Focus on refinancing other securitization silos with an anticipated repayment date of July 2026. - Aim to bring FAT into a cash flow positive position over the coming quarters and further reduce leverage.

• Volatile market conditions impacting the near-term ability to raise equity at a reasonable price. - Risks associated with debt refinancing of securitization silos. - Uncertainties related to litigation expenses, though expecting litigation expenses to moderate in Q2. - Potential challenges in new store development due to high interest rates, construction costs, and tariffs.

Q: Could you provide a ballpark on the impact of increasing the cookie facility utilization to 60-70% on efficiency?

A: Our goal is to increase the facility's annual sales from about $15 million to $25 million, with momentum behind initial contracts leading to potential additional initiatives.

Q: What's the general sense of the consumer environment across brands and how much value focus will be needed?

A: The consumer is apprehensive with mixed confidence, value is about providing great food and experience to justify prices, and we'll continue driving traffic with different initiatives.

Q: How long will it take to raise the first tranche of equity, and any deadlines?

A: There's no immediate deadline, waiting for equity markets to stabilize; likely to occur in Q2 or Q3, with bondholders supportive and focus on refinancing remaining securitization silos.

Q: Estimate of year-to-year Smoky Bones negative impact in the quarter?

A: It's a couple million dollars per quarter.

Q: Idea on time frame to find a new full-time CEO?

A: Executive search is going well and should be completed within this quarter.

Q: Time frame for achieving $15 million of additional adjusted EBITDA from new stores and the factory?

A: Over the next couple of years is reasonable, given new store openings and incremental growth at the factory.