Fat Brands ((FAT)) has held its Q4 earnings call. Read on for the main highlights of the call.
In the recent earnings call, Fat Brands presented a mixed sentiment, highlighting strategic advancements such as the Twin Hospitality spin-off and revenue growth for the fiscal year. However, challenges like decreased quarterly revenue, increased net loss, and performance issues with Smokey Bones were also discussed. Despite these hurdles, the company remains optimistic about its growth prospects.
Twin Hospitality Group Spin-off
The spin-off of Twin Hospitality Group, which includes Twin Peaks and Smokey Bones restaurants, was a significant highlight. Fat Brands distributed 5% of Twin Hospitality’s Class A Common Stock to shareholders, amounting to a $50 million dividend. This move is aimed at unlocking the value of Twin Peaks and reducing debt.
Increase in Total Revenue for 2024
Fat Brands reported a 23.4% increase in total revenue for 2024, reaching $592.7 million. System-wide sales also saw a rise of 3.1% to $2.4 billion, indicating a positive trajectory in the company’s financial performance.
Expansion and New Openings
The company opened 92 new restaurants in 2024 and plans to open over 100 new locations in 2025. The development pipeline is robust, with signed agreements for approximately 1,000 additional locations, showcasing Fat Brands’ commitment to expansion.
International and Non-Traditional Venue Growth
International growth is a key focus, with Johnny Rockets’ international locations making up over 55% of the brand’s footprint. Significant growth has been observed in Brazil and Mexico, along with new openings in non-traditional venues like theme parks and casinos.
FAT Brands Foundation Growth
The FAT Brands Foundation increased its giving by 36% in 2024, providing approximately $325,000 in grants across 17 states plus Washington, D.C., reflecting the company’s commitment to social responsibility.
Quarterly Revenue Decrease
Despite annual growth, Fat Brands experienced an 8.4% decrease in total revenue for the fourth quarter, down to $145.3 million. This decline was attributed to an incremental operating week in the prior year.
Net Loss Increase
The company reported a net loss of $67.4 million for the fourth quarter, a significant increase from the $26.2 million net loss in the previous year, highlighting ongoing financial challenges.
Smokey Bones Performance Issues
Performance issues at Smokey Bones led to non-cash goodwill and other intangible asset impairments, resulting in a $30.6 million charge, further impacting the company’s financials.
Decreased Same-Store Sales
Lower same-store sales were reported, alongside the closure of Smokey Bones locations for conversion into Twin Peaks lodges, indicating strategic shifts within the company.
Forward-Looking Guidance
Looking ahead, Fat Brands is focused on reducing debt by at least $75 million in 2025, with a $25 million reduction planned by late April. The company aims to become almost 100% franchised and continues to explore strategic acquisitions. With a pipeline of 1,000 new units, Fat Brands expects to generate $50 million in incremental annual adjusted EBITDA.
In summary, Fat Brands’ earnings call reflected a blend of optimism and challenges. While strategic initiatives like the Twin Hospitality spin-off and revenue growth are promising, the company faces significant financial hurdles. Nevertheless, with plans for expansion and debt reduction, Fat Brands is positioning itself for future growth.