During the first quarter of 2024, FAT Brands continued its journey toward profitability and revenue growth through continued acquisition and physical expansion. The company reported skyrocketing revenues of 43.8%, primarily attributable to the acquisition of Smokey Bones in Sept. 2023.
Despite a growing portfolio — which has expanded tenfold in three years — FAT Brands continues to struggle with profitability as the company reported a net loss of $38.3 million, attributable to increased costs and expenses associated with multiple brand acquisitions over the past several years, including Fazoli’s and Nestle Toll House Café in May 2022. FAT Brands chairman of the board, Andy Weiderhorn, noted that the upcoming (though seemingly delayed) Twin Peaks IPO would be used to tamp down the company’s debt to income ratio.
“We view an IPO, or any alternative transactions as opportunities to monetize the business, for the benefit of FAT shareholders,” Weiderhorn said during Wednesday’s earnings call. “Our priority is to use the proceeds from any transaction, to deleverage the balance sheet. We are also planning to refinance our Twin Peaks securitization debt prior to the IPO.”
Moving forward the strategy for FAT Brands seems to be much the same: continue to acquire brands and expand current brands in new territories, with the company looking at 125-150 net new store openings in 2024, which would be a 20% increase from 2023.
“We estimate this robust future unit growth will ultimately translate to approximately $50 million to $60 million of incremental adjusted EBITDA, which will enable us to naturally delever our balance sheet as we scale the business over time,” Weiderhorn said.
The next acquisition move for FAT Brands will be strategically considered as the next puzzle piece for FAT Brands’ growing portfolio. For example, the Nestle Toll House Cafe acquisition allowed the brand to begin selling cookies across FAT Brands concepts through the recently developed manufacturing facilities, and the Smokey Bones acquisition allowed Twin Peaks to expand through conversions of underperforming Smokey Bones restaurants.
Regarding the Twin Peaks IPO, the timeline is still uncertain:
“We hope to be on file very soon, and we will announce that we confidentially filed when we do file,” Weiderhorn assured analysts. “So everyone won't be in the dark don't know that at least we filed. It will be a confidential filing, but everyone will know. We have to, because we're putting Smokey Bones together with Twin Peaks in terms of one organizational entities so that when the stores are converted, it's easy inside the same entity.”
FAT Brands announced a same-store sales decline of 4% for the first quarter ended March 31, with total revenues of $152 million, compared to $105.7 million in the fiscal first quarter of 2023. Income net loss was $38.3 million or $2.37 earnings per share compared to $32.1 million, or $2.05 per diluted share, in the fiscal first quarter of 2023. FAT Brands reported 16 new store openings for the first quarter.
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