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BBQ Holdings, Inc. Reports Results for Third Quarter of Fiscal Year 2020

November 10, 2020 at 4:30 PM EST

MINNEAPOLIS, Nov. 10, 2020 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global owner and operator of restaurants, today reported financial results for the third fiscal quarter ended September 27, 2020. Note: The third quarter results were affected by the COVID-19 pandemic as well as federal and state level mandates requiring restaurants to limit or eliminate in-store dining.

Third Quarter 2020 Highlights:

  • Net income of $328,000, driven in part by a gain on a renegotiated leased asset of $630,000.
  • Adjusted EBITDA, a non-GAAP measure was $2.0 million which includes a $1.1 million COVID-related expense addback.
  • Company-owned Famous Dave’s third quarter same store net sales decreased 4.6% compared to third quarter 2019.
  • Franchise-operated same store net sales decreased 10.0%.
  • Granite City third quarter same store net sales decreased 25.9% compared to third quarter 2019.
  • Same store sales at our Famous Dave’s restaurants increased 2.0% while same store sales at our Granite City restaurants decreased 23.8% during the four weeks ended October 25, 2020 compared to the same four-week period in 2019.
  • Entered into a 25-unit development agreement with Bluestone Hospitality Group to open Famous Dave’s ghost kitchens and dual restaurant concepts with the Johnny Carino’s Italian brand.

Executive Comments

Jeff Crivello, CEO, commented, “We continue to allocate much of our time and resources to COVID-19 related regulations. With restaurants in 19 states, this is not an easy task. Nonetheless, we are pleased to return to positive EBITDA during the quarter. The team captured many wins during the quarter including signing of a 25-unit ghost kitchen development agreement with Bluestone Hospitality Group. Additionally, we are seeing success in the recent opening of a Famous Dave’s ghost kitchen within the St. Cloud Granite City Food & Brewery. To drive add-on revenues, we will be repeating this process in six more Granite City locations by the end of the first quarter 2021. The recent opening of the Texas T-Bone and Famous Dave’s dual concept has been very successful, and we hope to expand that concept as well. On the technical side, we launched our new website to make the ordering process even more seamless to our patrons. Finally, we our beginning the roll-out of our Symphony POS system which we feel will enhance the customer experience of our loyalty promotions as well as simplify our overall internal operating systems. It has been a busy quarter, but we feel the entrepreneurial spirit of BBQ Holdings is hitting on all cylinders, and we expect to continue driving sales in a variety of ways as we adapt to the ever-changing consumer.”


Key Operating Metrics

                             
    Three Months Ended       Nine Months Ended
    September 27, 2020   September 29, 2019     September 27, 2020
    September 29, 2019
Restaurant count:                            
Franchise-operated     95       96       95       96  
Company-owned     49       32       49       32  
Total     144       128       144       128  
Same store net restaurant sales %:                            
Franchise-operated     (10.0 )%     2.1 %     (18.3 )%     1.2 %
Company-owned     (4.6 )%     0.4 %     (9.9 )%     1.0 %
Total     (30.0 )%     1.9 %     (20.6 )%     1.2 %
                             
(in thousands, expect per share data)                            
                             
System-wide restaurant sales(1)   $ 82,482     $ 75,907     $ 214,803     $ 215,386  
                             
Net income attributable to shareholders   $ 328     $ 17     $ 7,783     $ 1,139  
Adjusted net income attributable to shareholders(2)     480       166       (4,039 )     2,874  
                             
Net income attributable to shareholders, per diluted share   $ 0.04     $ 0.00     $ 0.85     $ 0.13  
Adjusted net income attributable to shareholders, per diluted share(2)     0.05       0.02       (0.44 )     0.31  
                             
Adjusted EBITDA(2)   $ 1,995     $ 1,028     $ 2,915     $ 4,505  


(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 net income (loss) from continuing operations and adjusted EBITDA are non-GAAP measures. 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 2020 Review

Total revenue for the third quarter of 2020 was $35.5 million, up 47.9% from the third quarter of 2019. The increase in year-over-year restaurant net sales for the quarter ended September 27, 2020 was driven primarily by the addition of 18 Granite City restaurants, a Clark Crew BBQ and a Real Urban Barbecue restaurant. 

On a weighted basis, Company-owned Famous Dave’s same-store net sales for our to-go line of business increased 73.3% in the third quarter of fiscal 2020 as compared to the prior year period, offset by a decrease of 55.0% in net catering sales and 33.4% in dine-in sales due to federal, state and local mandates prohibiting large group gatherings and in-store dining in an attempt to reduce the spread of COVID-19. 

Restaurant-level operating margin, as a percentage of restaurant net sales, for Company-owned restaurants was 3.4% in the third quarter of fiscal 2020 compared to 0.6% in the third quarter of fiscal 2019. This increase in restaurant-level operating margin was primarily a result of the reduction of labor and food costs as our restaurant operators adjusted to the increase in to-go sales and reduction of dine-in customers as a result of COVID-19 concerns.

General and administrative expenses for the quarter ended September 27, 2020 and September 29, 2019 represented approximately 8.8% and 11.0% of total revenues, respectively. The decrease in general and administrative expenses as a percentage of revenue in the third quarter of 2020 was due in part to the increase in the revenue base with the addition of 20 locations during 2020.

Net income attributable to shareholders was approximately $328,000, or $0.04 per share, in the third quarter of fiscal 2020 compared to net income of $17,000, or $0.00 per share, in the third quarter of fiscal 2019. Adjusted net income attributable to shareholders, a non-GAAP measure, was approximately $480,000, or $0.05 per share, compared to adjusted net income attributable to shareholders of approximately $166,000, or $0.02 per share, in the third quarter of fiscal 2019. A reconciliation between adjusted net income attributable to shareholders and its most directly comparable GAAP measure is included in the accompanying financial tables.

About BBQ Holdings

BBQ Holdings, Inc. (NASDAQ: BBQ) BBQ Holdings is a national restaurant company engaged in the ownership and operation of casual and fast dining restaurants. As of November 10, 2020, BBQ Holdings had four brands with 146 overall locations in 31 states and three countries, including 48 company-owned and 98 franchise-operated restaurants. 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. BBQ Holdings, through partnerships, has extended Travis Clark’s award-winning line of barbecue sauces, rubs and seasonings into the retail market. Along with a wide variety of BBQ favorites served at their BBQ restaurants, BBQ Holdings newest addition, Granite City Food and Brewery, offers award winning craft beer and a made-from-scratch, chef driven menu featuring contemporary American cuisine. 

Non-GAAP Financial Measures

To supplement its 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 net income attributable to shareholders is net income attributable to shareholders, plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs, and the related tax impact. This number is divided by the weighted-average number of diluted shares of common stock outstanding during each period presented to arrive at adjusted net income, per share. Adjusted EBITDA is net income (loss), plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs and provision (benefit) for income taxes.

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
    952-294-1300
     
    Darrow Associates, Inc.
    Peter Seltzberg – Managing Director
    516-419-9915
    pseltzberg@darrowir.com




BBQ HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
(Unaudited)

                         
  Three Months Ended   Nine Months Ended  
  September 27, 2020   September 29, 2019   September 27, 2020   September 29, 2019  
Revenue:                        
Restaurant sales, net $ 32,559     $ 20,451     $ 78,251     $ 48,267    
Franchise royalty and fee revenue   2,153       2,909       6,628       9,560    
Franchisee national advertising fund contributions   302       395       826       1,275    
Licensing and other revenue   497       261       1,423       839    
Total revenue   35,511       24,016       87,128       59,941    
                         
Costs and expenses:                        
Food and beverage costs   9,735       6,383       24,206       15,068    
Labor and benefits costs   11,189       7,477       26,976       17,253    
Operating expenses   10,521       6,470       26,251       15,430    
Depreciation and amortization expenses   1,397       576       3,820       1,355    
General and administrative expenses   3,138       2,653       9,973       7,547    
National advertising fund expenses   302       395       826       1,275    
Asset impairment, estimated lease termination charges and other closing costs, net   (138 )     214       4,814       718    
Pre-opening expenses   (120 )     94       (93 )     94    
Gain on disposal of property, net   (530 )     (28 )     (1,107 )     (174 )  
Total costs and expenses   35,494       24,234       95,666       58,566    
                         
Income (loss) from operations   17       (218 )     (8,538 )     1,375    
                         
Other income (expense):                        
Interest expense   (326 )     (33 )     (866 )     (392 )  
Interest income   94       27       380       114    
Gain on bargain purchase               13,675          
Total other (expense) income   (232 )     (6 )     13,189       (278 )  
                         
(Loss) income before income taxes   (215 )     (224 )     4,651       1,097    
                         
Income tax benefit (expense)   273       174       2,519       (25 )  
                         
Net income (loss)   58       (50 )     7,170       1,072    
Net loss attributable to non-controlling interest   270       67       613       67    
Net income attributable to shareholders $ 328     $ 17     $ 7,783     $ 1,139    
                         
                         
Income per common share:                        
Basic net income per share attributable to shareholders $ 0.04     $ 0.00     $ 0.85     $ 0.13    
Diluted net income per share attributable to shareholders $ 0.04     $ 0.00     $ 0.85     $ 0.12    
Weighted average shares outstanding - basic   9,151       9,105       9,138       9,095    
Weighted average shares outstanding - diluted   9,158       9,279       9,145       9,193    




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

                     
    Three Months Ended
    Nine Months Ended  
    September 27, 2020     September 29, 2019     September 27, 2020     September 29, 2019  
                         
Food and beverage costs(1)   29.9 %   31.2  %   30.9  %   31.2 %
Labor and benefits costs(1)   34.4 %   36.6  %   34.5  %   35.7 %
Operating expenses(1)   32.3 %   31.6  %   33.5  %   32.0 %
Restaurant level operating margin(1)(3)   3.4 %   0.6  %   1.0  %   1.1 %
Depreciation and amortization expenses(2)   3.9 %   2.4  %   4.4  %   2.3 %
General and administrative expenses(2)   8.8 %   11.0  %   11.4  %   12.6 %
(Loss) income from operations(2)   0.0 %   (0.9 )%   (9.8 )%   2.3 %


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




BBQ HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share data)
(unaudited)

             
ASSETS            
Current assets:   September 27, 2020   December 29, 2019
Cash and cash equivalents   $ 19,551     $ 5,325  
Restricted cash     959       761  
Accounts receivable, net of allowance for doubtful accounts of $176,000 and $132,000, respectively     3,885       4,379  
Inventories     2,490       1,346  
Prepaid income taxes and income taxes receivable     285       264  
Prepaid expenses and other current assets     638       1,356  
Assets held for sale     3,911       2,842  
Total current assets     31,719       16,273  
             
Property, equipment and leasehold improvements, net     33,131       19,756  
             
Other assets:            
Operating lease right-of-use assets     64,833       25,962  
Goodwill     651       640  
Intangible assets, net     10,117       2,213  
Deferred tax asset, net     4,264       6,646  
Other assets     1,691       1,591  
    $ 146,406     $ 73,081  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
             
Current liabilities:            
Accounts payable   $ 4,952     $ 3,967  
Current portion of lease liabilities     6,459       4,230  
Current portion of long-term debt     2,749       616  
Accrued compensation and benefits     2,225       2,694  
Other current liabilities     8,467       4,975  
Total current liabilities     24,852       16,482  
             
Long-term liabilities:            
Lease liabilities, less current portion     65,319       26,957  
Long-term debt, less current portion     25,483       6,258  
Other liabilities     1,386       1,610  
Total liabilities     117,040       51,307  
             
Shareholders’ equity:            
Common stock, $.01 par value, 100,000 shares authorized, 9,284 and 9,272 shares issued and outstanding at September 27, 2020 and December 29, 2019, respectively     93       93  
Additional paid-in capital     8,278       7,856  
Retained earnings     22,206       14,423  
Total shareholders’ equity     30,577       22,372  
Non-controlling interest     (1,211 )     (598 )
Total equity     29,366       21,774  
    $ 146,406     $ 73,081  



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

             
    Nine Months Ended
    September 27, 2020   September 29, 2019
Cash flows from operating activities:            
Net income   $ 7,170     $ 1,072  
Adjustments to reconcile net income to cash flows provided by operations:            
Depreciation and amortization     3,820       1,355  
Stock-based compensation     422       354  
Net gain on disposal     (1,080 )     (174 )
Asset impairment, estimated lease termination charges and other closing costs, net     4,788       660  
Gain on bargain purchase     (13,675 )      
Deferred income taxes     (2,569 )     36  
Other non-cash items     488       213  
Changes in operating assets and liabilities:            
Accounts receivable, net     494       (495 )
Other assets     (867 )     (580 )
Accounts payable     985       1,371  
Accrued and other liabilities     671       (356 )
Cash flows provided by operating activities     647       3,456  
             
Cash flows from investing activities:            
Proceeds from the sale of assets     27       33  
Purchases of property, equipment and leasehold improvements     (2,671 )     (3,792 )
Payments for acquired restaurants     (4,952 )     (6,188 )
Advances on notes receivable           (150 )
Payments received on note receivable     24       20  
Cash flows used for investing activities     (7,572 )     (10,077 )
             
Cash flows from financing activities:            
Proceeds from long-term debt     22,058        
Payments for debt issuance costs     (45 )     (54 )
Payments on long-term debt     (664 )     (176 )
Cash provided by (used for) financing activities     21,349       (230 )
             
Increase (decrease) in cash, cash equivalents and restricted cash     14,424       (6,851 )
Cash, cash equivalents and restricted cash, beginning of period     6,086       12,440  
Cash, cash equivalents and restricted cash, end of period   $ 20,510     $ 5,589  



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

                         
    Three Months Ended     Nine Months Ended
(dollars in thousands)   September 27, 2020   September 29, 2019     September 27, 2020     September 29, 2019
Net income attributable to shareholders   $ 328     $ 17       7,783       1,139  
Asset impairment and estimated lease termination charges and other closing costs     (138 )     214       4,814       718  
Net gain on disposal of equipment     (530 )     (28 )     (1,107 )     (174 )
Stock-based compensation     174       131       422       354  
Acquisition costs     29       249       (46 )     770  
Pre-opening costs     (120 )     94       (93 )     94  
Severance     21       10       52       13  
Gain on bargain purchase                 (13,675 )      
Tax adjustment     716       (521 )     (2,189 )     (40 )
Adjusted net income (loss)   $ 480     $ 166     $ (4,039 )   $ 2,874  
Basic adjusted net income (loss) per common share   $ 0.05     $ 0.02     $ (0.44 )   $ 0.32  
Diluted adjusted net income (loss) per common share   $ 0.05     $ 0.02     $ (0.44 )   $ 0.31  
                         
Weighted average common share outstanding - basic     9,151       9,105       9,138       9,095  
Weighted average common share outstanding - diluted     9,158       9,279       9,145       9,193  
                         
Net income (loss)   $ 58     $ (50 )   $ 7,170     $ 1,072  
Asset impairment and estimated lease termination charges and other closing costs     (138 )     214       4,814       718  
Depreciation and amortization     1,397       576       3,820       1,355  
Interest expense, net     232       6       486       278  
Net gain on disposal of equipment     (530 )     (28 )     (1,107 )     (174 )
Stock-based compensation     174       131       422       354  
Acquisition costs     29       249       (46 )     770  
Pre-opening costs     (120 )     94       (93 )     94  
Severance     21       10       52       13  
Gain on bargain purchase                 (13,675 )      
Provision for income taxes     (273 )     (174 )     (2,519 )     25  
COVID-19-related expense     1,145             3,591        
Adjusted EBITDA   $ 1,995     $ 1,028     $ 2,915     $ 4,505  

 


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Source: BBQ Holdings, Inc.