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BBQ Holdings, Inc. Reports Results for First Quarter 2022

May 10, 2022 at 8:32 AM EDT

MINNEAPOLIS, May 10, 2022 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global franchisor, owner and operator of restaurants, today reported financial results for the first fiscal quarter ended April 3, 2022.

First Quarter Highlights:

                       
    First Quarter
(dollars in thousands, except per share data)     2022     2021     2020     2019  
Total revenue   $ 64,184   $ 37,319   $ 23,855   $ 14,193  
Net income (loss)   $ 767   $ 799   $ 13,707   $ 82  
Earnings (loss) per diluted share   $ 0.07   $ 0.08   $ 1.49   $ 0.01  
Adjusted net income (loss)   $ 1,138   $ 811   $ (484 ) $ 489  
Adjusted earnings (loss) per diluted share   $ 0.11   $ 0.09   $ (0.05 ) $ 0.05  
Cash EBITDA   $ 3,748   $ 3,220   $ (457 ) $ 1,030  
Restaurant-level margins     6.4 %   9.1 %   (1.9 )%   (1.7 )%
Prime costs     64.3 %   60.4 %   69.9 %   71.0 %
Free cash flow   $ 3,026   $ 2,529   $ (1,406 ) $ 809  


             
  First Quarter Same Store Sales
  2022 vs. 2021     2022 vs. 2020   2022 vs. 2019
Famous Dave's Company-owned 7.9 %   22.6 %   12.6 %
Famous Dave's Franchise-operated* 8.6 %   21.3 %   5.6 %
Granite City** 24.1 %   21.4 %   (1.7)%
Village Inn Company-owned** 19.1 %   8.8 %   (8.0)%
Village Inn Franchise-operated* 19.9 %   NA%   NA%
Bakers Square** 17.0 %   (12.5)%   (17.7)%
Clark Crew 5.0 %   5.8 %   NA%
Real Urban BBQ** 11.0 %   NA%   NA%
Tahoe Joe's** 6.0 %   NA%   NA%

* as reported by franchisees
** includes sales under prior ownership
*** it is our policy to include in our same store net sales base, restaurants that have been open for 12 months under our company’s ownership


Subsequent Events:

On April 11, 2022, we closed the purchase of the Barrio Queen Restaurant Business. The purchase price of approximately $28.5 million was funded with cash and debt. See 8-K filed with the SEC on March 14, 2022 for additional information regarding this acquisition, including the Asset Purchase Agreement.

On November 23, 2021, the Company, entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. The Credit Agreement had a five-year term and provided for up to a $5.0 million revolving line of credit and a $15.0 million term loan. On April 11, 2022 (the “First Amendment Date”), the Company amended the Credit Agreement (the “Amended Credit Agreement”), increasing the revolving line of credit to $25.0 million and the term loan to $25.0 million. The Amended Credit Agreement as well as additional information can be seen in the 8-K filed by the Company on April 13, 2022.

Current and Projected (“PF”) Portfolio:

  FAMOUS
DAVE’S
VILLAGE
INN
GRANITE
CITY
BAKERS
SQUARE
REAL
URBAN
BBQ
CLARK
CREW BBQ
TAHOE
JOE’S
BARRIO
QUEEN
BAR
CONCEPTS
TOTAL
  2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF 2022 Q1 2022 PF
Corporate Locations 40 43 22 22 18 18 14 31 2 2 1 1 4 4   7 3 4 104 132
Brick & Mortar 31 33 21 21 17 17 11 11 2 2 1 1 4 4   7 3 4 90 100
Dual Concept 1 1 1 1 1 1                         3 3
 Ghost Kitchens 8 9         3 20                     11 29
Franchise/License Locations 104 105 103 105     4 24                     211 234
Brick & Mortar 85 85 103 105                             188 190
Dual Concept   1                                 0 1
 Ghost Kitchens 19 19         4 24                     23 43
Total Locations 144 148 125 127 18 18 18 55 2 2 1 1 4 4   7 3 4 315 366
Growth Plan New line serve / drive thru and Ghost locations New trendy breakfast prototype Dual concept with new breakfast brand Sell pies in retail, kiosk and other restaurants New line serve locations and CPGs CPGs Dual Concept with FDs Franchise and Corporate Corporate  
# Opening in 2022   Q1: 3   Q1: 1   n/a   Q1: 1   n/a   n/a   Q1: -   n/a   Q1: - Total: 47
    Q2: 1   Q2: 1       Q2: 5           Q2: -       Q2: 1    
    Q3: 1   Q3: 1       Q3: 25           Q3: -       Q3: -    
    Q4: 1   Q4: 2       Q4: 3           Q4: 1       Q4: -    

Filling Latent Capacity:

  • Dual concept Granite City/Village Inn opened in Maple Grove, MN in March 2022.
  • Famous Dave’s ghost kitchen opened in Granite City in Fargo, ND in April 2022.

Organic Unit Growth:

  • Famous Dave’s Drive thru in Salt Lake City, UT opened in March 2022.
  • Famous Dave’s franchisee opened an additional restaurant in Grand Forks, ND in April 2022.
  • Famous Dave’s franchisee opened an additional restaurant in the United Arab Emirates in February 2022.
  • New Village Inn prototype expected to open in Omaha, NE in the third quarter of 2022.

Mergers and Acquisitions:

  • Closed the purchase of Barrio Queen in April 2022.
  • Closed the purchase of three bar-centric company-owned locations in March 2022.
  • Signed an asset purchase agreement for an additional bar-centric location in April 2022.

Updated 2022 Guidance:

  • Net restaurant revenue of $280mm to $290mm
  • Net income and adjusted net income range from $12.5mm to $15.5mm
  • We expect to exhaust our deferred tax assets mid-2022
  • Diluted earnings per share and adjusted earnings per diluted share of $1.15 to $1.45
  • Cash EBITDA range from $23mm to $25mm
  • Free cash flow range from $13.5mm to $15.5mm

12-Month Pro Forma Guidance*:

  • Net restaurant revenue of $290mm to $310mm
  • Net income and adjusted net income range from $14.0mm to $17.0mm
  • Diluted earnings per share and adjusted earnings per diluted share of $1.30 to $1.60
  • Cash EBITDA range from $25.5mm to $27.5mm
  • Free cash flow range from $15.5mm to $17.5mm

*Projected results for the next 12 months inclusive of expected results of all completed acquisitions

Executive Comments

Jeff Crivello, CEO, commented, “The beginning of 2022 marked another successful quarter executing on our three core growth initiatives which include filling latent capacity of our current restaurants, organic unit growth, and building a diversified portfolio of food and beverage brands via accretive M&A.

The Company diversified into authentic Mexican cuisine with the Barrio Queen purchase, which closed in April 2022. Barrio Queen adds a vibrant, growing brand to our portfolio. We are excited to build on Barrio Queen’s success.

Despite a challenging inflationary environment, and acknowledge continued headwinds, we continue to deliver consistent results, and look forward to a successful 2022.”


Key Operating Metrics

               
    Three Months Ended  
       April 3, 2022      April 4, 2021  
Restaurant count:              
Franchise-operated     211     100  
Company-owned     104     47  
Total     315     147  
Same store net restaurant sales %:                
Franchise-operated     8.6 %     16.0 %  
Company-owned     14.5 %     17.7 %  
Total     11.0 %     13.1 %  
               
(in thousands, expect per share data)                
               
System-wide restaurant sales(1)   $ 158,731   $ 87,040  
               
Net income attributable to shareholders   $ 767   $ 799  
               
Net income attributable to shareholders, per diluted share   $ 0.07   $ 0.08  
               
Cash EBITDA(2)   $ 3,748   $ 3,220  

 

(1) System-wide restaurant sales include sales for all Company-owned and franchise-operated restaurants, as reported by franchisees. Restaurant sales for franchise-operated restaurants are not revenues of the Company and are not included in the Company’s consolidated financial statements.
(2) Cash EBITDA is a non-GAAP measure. A reconciliation of all non-GAAP measures to the most directly comparable GAAP measure is included in the accompanying financial tables. See “Non-GAAP Reconciliation.”

First Quarter 2022 Review

Total revenue for the first quarter of 2022 was $64.2 million, up 72.0% from the first quarter of 2021. The increase in year-over-year revenue was driven primarily by the acquisitions of the Village Inn and Bakers Square brands, four additional Famous Dave’s restaurants, and the Tahoe Joe’s Steakhouse brand and an increase in dine-in traffic across our brands.  

Net income attributable to shareholders was approximately $767,000, or $0.07 per diluted share, in the first quarter of fiscal 2022 compared to an income of approximately $799,000, or $0.08 per diluted share, in the first quarter of fiscal 2021. This decrease in net income was mainly attributable to increased food and beverage costs and increased labor costs, as well as an impairment charge related to store closure of approximately $409,000. Cash EBITDA, a non-GAAP measure, increased $528,000 from $3.2 million in the first quarter of 2021 to $3.7 million in the first quarter of 2022. A reconciliation between cash EBITDA and its most directly comparable GAAP measure is included in the accompanying financial tables.

Restaurant-level operating margin as a percentage of restaurant net sales, a non-GAAP measure, was 6.4% for Company-owned restaurants in the first quarter of fiscal year 2022, compared to 9.1% in the first quarter of fiscal year 2021. This decrease in restaurant-level operating margin as a percentage of net restaurant sales was due primarily to increases in the cost of food and labor throughout 2021 and the first quarter of 2022. A reconciliation of restaurant sales to restaurant-level margin is included in the accompanying financial tables. General and administrative expenses for the quarter ended April 3, 2022, and April 4, 2021, represented approximately 8.2% and 10.8% of total revenues, respectively. This decrease in general and administrative expenses as a percentage of total revenues was due primarily to the larger increase in total revenue relative to the increase in general and administrative expenses.

About BBQ Holdings

BBQ Holdings, Inc. (NASDAQ: BBQ) is a national restaurant company engaged in franchising, ownership and operation of casual and fast dining restaurants. As of May 10, 2022, BBQ Holdings had multiple brands with over 100 Company-owned locations and over 200 franchised locations, including ghost kitchens operating out of the kitchen of another restaurant location or shared kitchen space. While BBQ Holdings continues to diversify its ownership in the restaurant community, it was founded with the principle of combining the “art and science” of barbecue to serve up the very best of the best to barbecue lovers everywhere. Along with a wide variety of BBQ favorites served at their BBQ restaurants, BBQ Holdings also operates Granite City Food and Brewery restaurants which offer award winning craft beer and a made-from-scratch, chef driven menu featuring contemporary American cuisine. Village Inn and Bakers Square add a legendary Family Dining element to BBQ Holdings, with these concepts specializing in breakfast and pies. Tahoe Joe’s is known for their pellet-broiler cooked and smoked infused steak.

Non-GAAP Financial Measures

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses non-GAAP measures including those indicated below. These non-GAAP measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s consolidated financial statements and are subject to inherent limitations. By providing non-GAAP measures, together with a reconciliation to the most comparable GAAP measure, the Company believes that it is enhancing investors’ understanding of the Company’s business and results of operations. These measures are not intended to be considered in isolation of, as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures presented may be different from the measures used by other companies. The Company urges investors to review the reconciliation of its non-GAAP measures to the most directly comparable GAAP measure, included in the accompanying financial tables.

Cash EBITDA is net income plus asset impairment, estimated lease termination charges and other closing costs, depreciation and amortization, net interest expense, net (gain) loss on disposal of equipment, stock-based compensation, acquisition costs, pre-opening costs, severance, gain on debt forgiveness, gain on bargain purchase, provision (benefit) for income taxes, and non-cash rent.

Free cash flow is the Cash EBITDA less cash paid for property, equipment and leasehold improvements. Adjusted net income (loss) is net income plus asset impairment, estimated lease termination charges and other closing costs, less gain on debt forgiveness and gain on bargain purchase. Adjusted earnings per diluted share equals adjusted net income (loss) divided by the weighted average shares outstanding, assuming dilution.

Restaurant-level operating margins are equal to net restaurant sales, less restaurant-level food and beverage costs, labor and benefit costs, and operating expenses for Company-owned restaurants.

Forward-Looking Statements

Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Company’s restaurant openings, the timing of refreshes and the timing or success of refranchising plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from expected results. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from the Company’s expectation include the impact of the COVID-19 virus pandemic, financial performance, inflation, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the Company’s SEC reports.

Contact:   
Jeff Crivello – Chief Executive Officer
jeff.crivello@bbq-holdings.com 

        

BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

               
    Three Months Ended  
    April 3, 2022      April 4, 2021  
Revenue:                
Restaurant sales, net   $ 58,731     $ 33,603    
Franchise royalty and fee revenue     3,607       2,374    
Franchisee national advertising fund contributions     490       328    
Licensing and other revenue     1,356       1,014    
Total revenue     64,184       37,319    
               
Costs and expenses:                
Food and beverage costs     18,357       10,057    
Labor and benefits costs     19,386       10,254    
Operating expenses     17,239       10,249    
Depreciation and amortization expenses     2,423       1,552    
General and administrative expenses     5,291       4,038    
National advertising fund expenses     490       328    
Asset impairment, estimated lease termination charges and other closing costs, net     409       12    
Pre-opening expenses     65       28    
Loss (gain) on disposal of property, net     44       (8 )  
Total costs and expenses     63,704       36,510    
               
Income from operations     480       809    
               
Other income (expense):                
Interest expense     (120 )     (54 )  
Interest income     8       24    
Gain on bargain purchase     38          
Total other income (expense)     (74 )     (30 )  
               
Income before income taxes     406       779    
               
Income tax (expense) benefit     241       (82 )  
               
Net income     647       697    
Net (income) loss attributable to non-controlling interest     120       102    
Net income attributable to shareholders   $ 767     $ 799    
               
               
Income per common share:                
Basic net income per share attributable to shareholders   $ 0.07     $ 0.09    
Diluted net income per share attributable to shareholders   $ 0.07     $ 0.08    
Weighted average shares outstanding - basic     10,552       9,208    
Weighted average shares outstanding - diluted     10,649       9,501    


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)

             
ASSETS            
Current assets:   April 3, 2022      January 2, 2022
Cash and cash equivalents   $ 35,431     $ 40,309  
Restricted cash     1,677       1,152  
Accounts receivable, net of allowance for doubtful accounts of $301,000 and $270,000, respectively     3,188       5,476  
Inventories     3,281       3,316  
Prepaid expenses and other current assets     4,313       3,919  
Total current assets     47,890       54,172  
             
Property, equipment and leasehold improvements, net     39,748       39,943  
             
Other assets:              
Operating lease right-of-use assets     81,248       78,843  
Goodwill     5,676       3,037  
Intangible assets, net     23,714       23,444  
Deferred tax asset, net     3,922       3,692  
Other assets     1,493       1,292  
Total assets   $ 203,691     $ 204,423  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY             
             
Current liabilities:              
Accounts payable   $ 6,951     $ 7,661  
Current portion of operating lease liabilities     12,511       11,904  
Current portion of long-term debt and finance lease liabilities     1,488       1,621  
Accrued compensation and benefits     6,157       7,121  
Gift card liability     8,809       11,257  
Other current liabilities     8,752       8,510  
Total current liabilities     44,668       48,074  
               
Long-term liabilities:              
Operating lease liabilities, less current portion     79,362       77,729  
Finance lease liabilities, less current portion     292       79  
Long-term debt, less current portion     12,819       13,197  
Other liabilities     1,087       997  
Total liabilities     138,228       140,076  
             
Shareholders’ equity:              
Common stock, $.01 par value, 100,000 shares authorized, 10,750 and 10,495 shares issued and outstanding at April 3, 2022 and January 2, 2022, respectively     108       105  
Additional paid-in capital     22,248       21,782  
Retained earnings     44,158       43,391  
Total shareholders’ equity     66,514       65,278  
Non-controlling interest     (1,051 )     (931 )
Total equity     65,463       64,347  
Total liabilities and equity   $ 203,691     $ 204,423  


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

             
    Three Months Ended
       April 3, 2022      April 4, 2021
Cash flows from operating activities:              
Net income   $ 647     $ 697  
Adjustments to reconcile net income to cash flows provided by operations:              
Depreciation and amortization     2,423       1,552  
Stock-based compensation     384       318  
Net (gain) loss on disposal     44       (8 )
Asset impairment, estimated lease termination charges and other closing costs, net     409       12  
Gain on bargain purchase     (38 )      
Amortization of operating right-of-use assets     2,894       2,134  
Deferred tax asset     (230 )     82  
Other non-cash items     (6 )     186  
Changes in operating assets and liabilities:            
Accounts receivable, net     2,296       598  
Prepaid expenses and other assets     (114 )     (1,197 )
Accounts payable     (710 )     1,635  
Accrued compensation and benefits     (871 )     1,678  
Lease liabilities     (3,258 )     (1,513 )
Gift card liability     (2,544 )     (1,563 )
Accrued and other liabilities     62       (425 )
Cash flows provided by operating activities     1,388       4,186  
Cash flows from investing activities:              
Purchases of property, equipment and leasehold improvements     (722 )     (691 )
Payments for acquired restaurants     (4,434 )      
Payments received on note receivable           6  
Cash flows provided by (used for) investing activities     (5,156 )     (685 )
Cash flows from financing activities:              
Payments on long-term debt     (562 )     (519 )
Tax payments for restricted stock units and stock options exercised     (130 )      
Proceeds from exercise of stock options     107        
Cash flows provided by (used for) financing activities     (585 )     (519 )
Increase (decrease) in cash, cash equivalents and restricted cash     (4,353 )     2,982  
Cash, cash equivalents and restricted cash, beginning of period     41,461       19,603  
Cash, cash equivalents and restricted cash, end of period   $ 37,108     $ 22,585  
             
Supplemental Disclosures            
Cash paid for interest, net   $ 107     $ 116  
             
Non-cash investing and financing activities:            
Operating right-of-use assets acquired     4,533        
Lease liabilities assumed pursuant to acquisitions     4,574        
Gift card liability assumed pursuant to acquisitions     96        
Inventory acquired pursuant to acquisitions     85        


BBQ HOLDINGS, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)

           
  Three Months Ended    
  April 3, 2022      April 4, 2021          
Food and beverage costs(1) 31.3 %   29.9 %    
Labor and benefits costs(1) 33.0 %   30.5 %    
Operating expenses(1) 29.3 %   30.5 %    
Restaurant-level operating margin(1)(2)   6.4 %   9.1 %    
Depreciation and amortization expenses(3) 3.8 %   4.2 %    
General and administrative expenses(3) 8.2 %   10.8 %    
Income (loss) from operations(3) 0.7 %   2.2 %    

(1) As a percentage of restaurant sales, net
(2) Restaurant-level operating margins are equal to restaurant sales, net, less restaurant-level food and beverage costs, labor and benefit costs, and operating expenses.
(3) As a percentage of total revenue


BBQ HOLDINGS, INC. AND SUBSIDIARIES
RESTAURANT-LEVEL PROFIT AND RESTAURANT-LEVEL MARGIN (1)
NON-GAAP RECONCILIATION
(in thousands)

                   
                   
      Three Months Ended  
      April 3, 2022        April 4, 2021  
Restaurant sales, net     $ 58,731     $ 33,603  
Restaurant operating costs(1)       54,982       30,560  
Restaurant-level profit     $ 3,749     $ 3,043  
Restaurant-level margin       6.4 %     9.1 %

(1) For company-owned restaurants.
(2) Restaurant operating costs consist of food and beverage costs, labor and benefits costs and operating expenses.


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CASH EBITDA AND FREE CASH FLOW
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)

                         
    Three Months Ended
    April 3, 2022      April 4, 2021   March 29, 2020   March 31, 2019
(dollars in thousands)                        
Net income   $ 647     $ 697     $ 13,311     $ 82  
Asset impairment and estimated lease termination charges and other closing costs     409       12       173       407  
Depreciation and amortization     2,423       1,552       1,045       264  
Interest expense, net     112       30       76       17  
Net loss (gain) on disposal of equipment     44       (8 )     (477 )     (6 )
Stock-based compensation     384       318       137       83  
Acquisition costs     167       -       (62 )     163  
Pre-opening costs     65       28       25       -  
Severance     -       -       28       3  
Gain on bargain purchase     (38 )     -       (14,364 )     -  
Provision for income taxes     (241 )     82       (349 )     17  
Non-cash rent     (224 )     509       -       -  
Cash EBITDA   $ 3,748     $ 3,220     $ (457 )   $ 1,030  
                         
Less cash paid for property, equipment and leasehold improvements     (722 )     (691 )     (949 )     (221 )
Free cash flow   $ 3,026     $ 2,529     $ (1,406 )   $ 809  


BBQ HOLDINGS, INC. AND SUBSIDIARIES
ADJUSTED NET INCOME (LOSS) AND EARNINGS (LOSS) PER DILUTED SHARE
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)

                         
    Three Months Ended
(dollars in thousands)      April 3, 2022      April 4, 2021   March 29, 2020   March 31, 2019
Net income (loss) attributable to shareholders   $ 767     $ 799   $ 13,707     $ 82
Asset impairment, estimated lease termination charges and other closing costs     409       12     173       407
Gain on bargain purchase     (38 )         (14,364 )    
Adjusted net income (loss)     1,138       811     (484 )     489
Weighted average shares outstanding - diluted     10,649       9,501     9,202       9,189
Adjusted earnings (loss) per diluted share   $ 0.11     $ 0.09   $ (0.05 )   $ 0.05

 


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Source: BBQ Holdings, Inc.