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BBQ Holdings, Inc. Reports Results for Third Quarter 2021

November 10, 2021 at 4:05 PM EST
Company Reaffirms Revenue and Increases Earnings Guidance for Fiscal Year 2021

MINNEAPOLIS, Nov. 10, 2021 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global franchisor, owner and operator of restaurants, today reported financial results for the third fiscal quarter ended October 3, 2021.

Third Quarter 2021 Highlights:

Financial:

  • Total revenue of $55.4 million vs. $35.5 million in the third quarter of 2020.
  • Net income of $4.8 million vs. $0.3 million in the third quarter of 2020.
  • Adjusted EBITDA, a non-GAAP measure, was $4.4 million vs. $2.0 million in the third quarter of 2020.
  • Combined brands restaurant-level margins of 8.6% vs 3.4% last year.
  • Prime costs were 62.6% of sales vs. 67.8% third quarter 2019.
  Third Quarter Same Store Sales
  2021 vs. 2020
  2021 vs. 2019
Famous Dave's Company-owned 19.3 %   12.4 %
Famous Dave's Franchise-operated* 18.0 %   6.9 %
Granite City 31.4 %   (0.5 )%
Village Inn Company-owned** 37.0 %   (8.1 )%
Village Inn Franchise-operated* 48.2 %   NA %
Bakers Square** 32.4 %   (20.2 )%
           
* as reported by franchisees          
** includes sales under prior ownership          

Executive Comments

Jeff Crivello, CEO, commented, “This was a quarter of strong execution for BBQ Holdings, as our growth strategies continue to deliver positive top and bottom-line results, including a steady improvement in same store sales and solid free cash flow. Management is focused on executing against our three core growth initiatives, including accretive M&A, opening new units, and filling the latent capacity of our current restaurants. During the third quarter, we completed the highly accretive acquisition of Village Inn and Bakers Square. Subsequent to the end of the quarter, we also acquired Tahoe Joe’s. Our goal now is to reinvigorate these brands and drive consistent unit-level improvements as we have at Famous Dave’s and other brands. In addition, the month of October also brought the opening of the first Famous Dave’s Quick Que in Minnesota. We are excited to continue to rollout this quick service format, providing a new, efficient way for our guests to experience Famous Dave’s. Finally, we launched a virtual burger concept during the quarter, $5 Burgers, providing incremental revenue in the Famous Dave’s system.”

Growth:

  • Purchased Village Inn, 109 franchise and 21 corporate restaurants, and 11 Bakers Square corporate restaurants in July 2021.
  • Purchased five Tahoe Joe’s Steakhouses in October 2021.
  • Purchased four Famous Dave’s franchise restaurants in Tennessee and Kentucky in July 2021.
  • Famous Dave’s franchisees opened line-serve restaurants in Las Vegas, NV in August 2021 and Coon Rapids, MN in October 2021.
  • Opened a Real Urban Barbeque restaurant in Chicago, IL in October 2021.
  • Famous Dave’s Drive thru in Salt Lake City, UT expected to open in December 2021.
  • Dual concept Granite City/Village Inn expected to open in January 2022.
  • New Village Inn prototype expected to open in Omaha, NE early Q1 2022.

Updated 2021 Guidance:

Based on the results to date through the third quarter 2021, and including the uncertainty related to COVID-19, the Company has updated its 2021 guidance as follows:

  • Net Revenue remains at $183 -$188mm
  • Increased Net Income range from $20.6 - $21.0mm to $22.5 - $23.0mm
  • Increased Cash EBITDA range from $14.5 - $15.0mm to $16.5 - $17.0mm
Key Operating Metrics                                
    Three Months Ended   Nine Months Ended
    October 3, 2021   September 27, 2020   October 3, 2021
  September 27, 2020
Restaurant count:                                
Franchise-operated     213       98       213       98  
Company-owned     83       49       83       49  
Total     296       147       296       147  
Same store net restaurant sales %:                                
Franchise-operated     18.0 %     (10.0 )%     25.6 %     (18.3 )%
Company-owned     24.0 %     (4.6 )%     36.3 %     (9.9 )%
Total     20.4 %     (8.7 )%     29.3 %     (16.7 )%
                                 
(in thousands, expect per share data)                                
                                 
System-wide restaurant sales(1)   $ 141,125     $ 84,434     $ 335,421     $ 222,374  
                                 
Net income attributable to shareholders   $ 4,834     $ 328     $ 21,419     $ 7,783  
                                 
Net income attributable to shareholders, per diluted share   $ 0.46     $ 0.04     $ 2.20     $ 0.85  
                                 
Adjusted EBITDA(2)   $ 4,425     $ 1,995     $ 12,649     $ 2,915  
_________________________                                

(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)   Adjusted 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.”

Third Quarter 2021 Review

Total revenue for the third quarter of 2021 was $55.4 million, up 56.0% from the third quarter of 2020. The increase in year-over-year restaurant net sales for the quarter ended October 3, 2021 was driven primarily by the easing of dining restrictions in the third quarter of 2021 and the acquisition of the Village Inn and Bakers Square brands.  

Net income attributable to shareholders was approximately $4.8 million, or $0.46 per diluted share, in the third quarter of fiscal 2021 compared to $328,000, or $0.04 per diluted share, in the third quarter of fiscal 2020. Adjusted EBITDA, a non-GAAP measure, was approximately $4.4 million, compared to adjusted EBITDA of approximately $2.0 million in the third quarter of fiscal 2020. A reconciliation between adjusted 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 8.6% for Company-owned restaurants in the third quarter of fiscal 2021 compared to 3.4% in the third quarter of fiscal 2020. This increase in restaurant-level operating margin as a percentage of net restaurant sales was due primarily to leverage on our fixed operating costs from the increased revenue resulting from the easing of dine-in restrictions and restrictions on large gatherings which were put in place in 2020 due to COVID-19 concerns. A reconciliation of restaurant sales to restaurant-level margin is included in the accompanying financial tables. General and administrative expenses for the quarter ended October 3, 2021 and September 27, 2020 represented approximately 9.2% and 8.8% of total revenues, respectively. The increase in general and administrative expenses as a percentage of revenue in the third quarter of 2021 was due primarily to acquisition-related expenses incurred as we incorporated the Village Inn and Bakers Square brands into our portfolio.

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 November 10, 2021, BBQ Holdings had seven brands with 303 locations in three countries including 89 Company owned locations and 214 franchised locations. In addition to these locations, the Company opened eight Company-owned Famous Dave’s ghost kitchens operating within its Granite City locations, and 20 Famous Dave’s franchisee ghost kitchens operating out of the kitchen of another restaurant location or a 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, the Company’s newest addition, 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.

Adjusted EBITDA is net income plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, interest expense, net, depreciation and amortization, net (gain) loss on disposal of equipment, stock-based compensation, acquisition costs, pre-opening costs, severance, gain on debt forgiveness, gain on bargain purchase, COVID-19-related expense and provision (benefit) for income taxes.

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

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, 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   Nine Months Ended
  October 3, 2021   September 27, 2020   October 3, 2021      September 27, 2020
Revenue:                      
Restaurant sales, net $ 50,374     $ 32,559     $ 125,182     $ 78,251  
Franchise royalty and fee revenue   3,329       2,153       8,649       6,628  
Franchisee national advertising fund contributions   461       302       1,210       826  
Licensing and other revenue   1,219       497       3,181       1,423  
Total revenue   55,383       35,511       138,222       87,128  
                       
Costs and expenses:                      
Food and beverage costs   14,731       9,735       36,720       24,206  
Labor and benefits costs   16,805       11,189       39,488       26,976  
Operating expenses   14,512       10,521       36,355       26,251  
Depreciation and amortization expenses   1,940       1,397       4,925       3,820  
General and administrative expenses   5,109       3,138       13,691       9,973  
National advertising fund expenses   461       302       1,210       826  
Asset impairment, estimated lease termination charges and other closing costs, net   69       (138 )     106       4,814  
Pre-opening expenses   63       (120 )     183       (93 )
(Gain) loss on disposal of property, net   (1 )     (530 )     134       (1,107 )
Total costs and expenses   53,689       35,494       132,812       95,666  
                       
Income (loss) from operations   1,694       17       5,410       (8,538 )
                       
Other income (expense):                      
Interest expense   (124 )     (326 )     (439 )     (866 )
Interest income   49       94       147       380  
Gain on forgiveness of debt               14,109        
Gain on bargain purchase   3,203             3,203       13,675  
Total other income (expense)   3,128       (232 )     17,020       13,189  
                       
Income (loss) before income taxes   4,822       (215 )     22,430       4,651  
                       
Income tax (expense) benefit   (36 )     273       (517 )     2,519  
                       
Net income   4,786       58       21,913       7,170  
Net (income) loss attributable to non-controlling interest   48       270       (494 )     613  
Net income attributable to shareholders $ 4,834     $ 328     $ 21,419     $ 7,783  
                       
                       
Income per common share:                      
Basic net income per share attributable to shareholders $ 0.47     $ 0.04     $ 2.23     $ 0.85  
Diluted net income per share attributable to shareholders $ 0.46     $ 0.04     $ 2.20     $ 0.85  
Weighted average shares outstanding - basic   10,345       9,151       9,619       9,138  
Weighted average shares outstanding - diluted   10,482       9,158       9,737       9,145  


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
             
ASSETS            
Current assets:   October 3, 2021      January 3, 2021
Cash and cash equivalents   $ 28,977     $ 18,101  
Restricted cash     1,146       1,502  
Accounts receivable, net of allowance for doubtful accounts of $262,000 and $132,000, respectively     4,900       4,823  
Inventories     2,949       2,271  
Prepaid expenses and other current assets     2,367       1,252  
Assets held for sale     1,024       1,070  
Total current assets     41,363       29,019  
             
Property, equipment and leasehold improvements, net     39,174       32,389  
             
Other assets:            
Operating lease right-of-use assets     78,581       61,634  
Goodwill     1,071       601  
Intangible assets, net     23,231       9,967  
Deferred tax asset, net     3,382       4,934  
Other assets     1,129       1,724  
Total assets   $ 187,931     $ 140,268  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
             
Current liabilities:            
Accounts payable   $ 7,092     $ 6,385  
Current portion of lease liabilities     10,624       6,185  
Current portion of long-term debt     2,192       2,111  
Accrued compensation and benefits     7,929       2,390  
Other current liabilities     12,014       9,766  
Total current liabilities     39,851       26,837  
             
Long-term liabilities:            
Lease liabilities, less current portion     78,470       63,105  
Long-term debt, less current portion     6,578       22,169  
Other liabilities     1,458       1,224  
Total liabilities     126,357       113,335  
             
Shareholders’ equity:            
Common stock, $.01 par value, 100,000 shares authorized, 10,495 and 9,307 shares issued and outstanding at October 3, 2021 and January 3, 2021, respectively     105       93  
Additional paid-in capital     21,464       8,748  
Retained earnings     40,789       19,370  
Total shareholders’ equity     62,358       28,211  
Non-controlling interest     (784 )     (1,278 )
Total equity     61,574       26,933  
Total liabilities and equity   $ 187,931     $ 140,268  


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
             
    Nine Months Ended
       October 3, 2021      September 27, 2020
Cash flows from operating activities:            
Net income   $ 21,913     $ 7,170  
Adjustments to reconcile net income to cash flows provided by operations:            
Depreciation and amortization     4,925       3,820  
Stock-based compensation     932       422  
Net loss (gain) on disposal     134       (1,080 )
Asset impairment, estimated lease termination charges and other closing costs, net           4,788  
Gain on forgiveness of debt     (14,109 )      
Gain on bargain purchase     (3,203 )     (13,675 )
Amortization of operating right-of-use assets     5,194       5,818  
Deferred tax asset     441       (2,569 )
Other non-cash items     (49 )     488  
Changes in operating assets and liabilities:            
Accounts receivable, net     (126 )     494  
Prepaid expenses and other assets     (1,368 )     102  
Accounts payable     707       985  
Accrued compensation     4,445       (408 )
Lease liabilities     (5,000 )     (5,067 )
Accrued and other liabilities     505       (641 )
Cash flows provided by operating activities     15,341       647  
             
Cash flows from investing activities:            
Proceeds from the sale of assets           27  
Purchases of property, equipment and leasehold improvements     (2,416 )     (2,671 )
Payments for acquired restaurants     (14,548 )     (4,952 )
Transfer from HFS     46        
Payments received on note receivable     779       24  
Cash flows used for investing activities     (16,139 )     (7,572 )
             
Cash flows from financing activities:            
Proceeds from long-term debt           22,058  
Payments for debt issuance costs           (45 )
Payments on long-term debt     (1,572 )     (664 )
Proceeds from sale of common stock, net of offering costs     12,445        
Proceeds from exercise of stock options     445        
Cash provided by financing activities     11,318       21,349  
             
Increase in cash, cash equivalents and restricted cash     10,520       14,424  
Cash, cash equivalents and restricted cash, beginning of period     19,603       6,086  
Cash, cash equivalents and restricted cash, end of period   $ 30,123     $ 20,510  
             
Supplemental Disclosures            
Cash paid for interest, net   $ 769     $ 829  
Cash paid for income taxes, net            
             
Non-cash investing and financing activities:            
Operating right-of-use assets acquired     19,339       51,682  
Lease liabilities assumed pursuant to acquisitions     21,830       51,682  
Gift card liability assumed pursuant to acquisitions     1,202       3,923  


BBQ HOLDINGS, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)
                         
    Three Months Ended   Nine Months Ended
    October 3, 2021       September 27, 2020          October 3, 2021       September 27, 2020    
Food and beverage costs(1)   29.2 %   29.9 %   29.3 %   30.9 %
Labor and benefits costs(1)   33.4 %   34.4 %   31.5 %   34.5 %
Operating expenses(1)   28.8 %   32.3 %   29.0 %   33.5 %
Restaurant-level operating margin(1)(2)     8.6 %   3.4 %   10.1 %   1.0 %
Depreciation and amortization expenses(3)   3.5 %   3.9 %   3.6 %   4.4 %
General and administrative expenses(3)   9.2 %   8.8 %   9.9 %   11.4 %
Income (loss) from operations(3)   3.1 %   0.0 %   3.9 %   (9.8 )%
________________________                        

(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 expense.
(3)   As a percentage of total revenue


BBQ HOLDINGS, INC. AND SUBSIDIARIES
RESTAURANT-LEVEL PROFIT AND RESTAURANT-LEVEL MARGIN
NON-GAAP RECONCILIATION
(in thousands)
                               
  Three Months Ended   Nine Months Ended
  October 3, 2021   September 27, 2020   October 3, 2021       September 27, 2020
Restaurant sales, net $ 50,374     $ 32,559     $ 125,182     $ 78,251  
Restaurant operating costs (1)   46,048       31,445       112,563       77,433  
Restaurant-level profit $ 4,326     $ 1,114     $ 12,619     $ 818  
Restaurant-level margin   8.6 %     3.4 %     10.1 %     1.0 %
  ________________________                              

(1)   Restaurant operating cost consist of food and beverage cost, labor and benefits costs and operating expenses.


BBQ HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)
                         
    Three Months Ended   Nine Months Ended
(dollars in thousands)   October 3, 2021   September 27, 2020   October 3, 2021   September 27, 2020
Net income   $ 4,786     $ 58     $ 21,913     $ 7,170  
Asset impairment and estimated lease termination charges and other closing costs     69       (138 )     106       4,814  
Depreciation and amortization     1,940       1,397       4,925       3,820  
Interest expense, net     75       232       292       486  
Net (gain) loss on disposal of equipment     (1 )     (530 )     134       (1,107 )
Stock-based compensation     294       174       932       422  
Acquisition costs     366       29       550       (46 )
Pre-opening costs     63       (120 )     183       (93 )
Severance           21             52  
Gain on debt forgiveness                 (14,109 )      
Gain on bargain purchase     (3,203 )           (3,203 )     (13,675 )
Provision for income taxes     36       (273 )     517       (2,519 )
COVID-19-related expense           1,145       409       3,591  
Adjusted EBITDA   $ 4,425     $ 1,995     $ 12,649     $ 2,915  

(1)   COVID-19 expenses consisted primarily of cleaning and sanitation supplies, payments to employees for unemployment related costs, inventory waste, rent and rent-related costs for limited-operations restaurants from the day that the restaurant dining room partially or fully closed.

    Nine Months Ended
    October 3, 2021   September 27, 2020
(dollars in thousands)            
Net income   $ 21,913     $ 7,170  
Asset impairment and estimated lease termination charges and other closing costs     106       4,814  
Depreciation and amortization     4,925       3,820  
Interest expense, net     292       486  
Net (gain) loss on disposal of equipment     134       (1,107 )
Stock-based compensation     932       422  
Acquisition costs     550       (46 )
Pre-opening costs     183       (93 )
Severance     -       52  
Gain on debt forgiveness     (14,109 )     -  
Gain on bargain purchase     (3,203 )     (13,675 )
Provision for income taxes     517       (2,519 )
Non-Cash Rent     660       1,540  
Cash EBITDA   $ 12,900     $ 864  

A presentation accompanying this announcement is available at: https://www.globenewswire.com/NewsRoom/AttachmentNg/17a0cc25-b1e9-4157-8f49-2310e2b70624 


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Source: BBQ Holdings, Inc.