Q1 2021 Burgerfi International Inc Earnings Call
Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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Good morning, everyone and thank you for participating in today's conference call to discuss the fragrance nice financial results for the first quarter ended March 31, 'twenty 'twenty 1.
Joining us today I forget if I C E O who the other me as CFO like Robin of Itch, and the company's external Investor Relations Representative Cody Cree following the remarks, we'll open the call for your questions. That's part of the golfer that I would like to turn the call over to Mr. Qi.
He reads the Companys Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward looking statements Cody. Please go ahead.
Thanks, Joel This conference call May contain forward looking statements is declined in the private Securities Litigation Reform Act of 1995, including statements relating to bird price estimates of its future business outlook.
Respects or financial results forward looking statements generally can be identified by words, such as anticipates believes estimates expects intends plans predicts projects will be will continue will likely result in similar expressions. These forward looking statements are based on current expert.
Patients in the assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward looking statements.
Actors that could cause or contribute to such differences include but are not limited to those discussed in our annual report on form 10-K for the year ended December 31, 2020, and those discussed in other documents, we file with the Securities and Exchange Commission, we undertake no obligation to revise the publicly released.
The results of any revision to these forward looking statements, except as required by law given these risks and uncertainties readers are cautioned not to place undue reliance on such forward looking statements.
Also the following discussion may contain non-GAAP financial measures for a discussion of reconciliation of these non-GAAP financial measures. Please see our earnings releases for the first quarter 2021, and fourth quarter 2020, and full year 2020.
I'd like to remind everyone that this call will be available via telephone replay for 2 weeks starting today.
Webcast replay will also be available the.
A link provided in today's press release as well as on the company's website at Burger 5 Dot Com now I would like to turn the call over to the CEO of Burger Foglio Ramirez <unk> over to you.
Thank you Cody and good morning, everyone.
We're happy you all can join us today.
Today I'll start with a brief history and overview of Burger Fi and then highlight some of our first quarter 2021 successes.
From there I'll turn it over to our CFO, Mike to walk through our financials and then return to discuss our go forward strategy and growth opportunities.
We're also going to discuss some brief fourth quarter and full year 2020 highlights.
Since it is our first call subsequent to completing our business combination to go public in December of last year with that I'm going to start us off with a quick history of our business since it's our first earnings call as a public company and many of our listeners may be new to our story.
The first Burger Fi restaurant opened 10 years ago outside of Fort Lauderdale, Florida, and the town called Lauderdale by the C and the success was immediate.
Loved our food the core ambiance and the overall energy of our brand our mission statement of redefining the way the world needs Burgers and enriching lives through the best Burger experience is now even more relevant than ever building on our great tasting food and navigating the experiences faced by our.
Guests in the current challenging environment.
We offer the highest quality ingredients and premium Burger experience on an exceptionally clean eco friendly restaurant prepared and served by a highly energetic and motivated team.
We have grown to approximately 120 company on franchise owned restaurants in 22 states 2 countries in Puerto Rico, I am proud to say than our home state of Florida. We believe we are the premier better Burger chain with over 50 locations, which is over 3 times larger than our nearest competitor.
Across all of our locations we place an emphasis on design that no 1 else or on the industry comes close to our dining rooms feature all natural wood walls made out of number 2 southern pine lumber 1 of the most renewable wood sources on the planet. Similarly, our tables and chairs are made out of recycled materials for.
For example, the Navy 111 chairs on our restaurants are made from upcycle Coca Cola bottles and on a parallel communal tables are made of compressed recycled wood from shipping pallets.
In addition, all of our lighting and fans of our energy efficient with very low electricity usage. All of these features and more contribute to our trendy and modern atmosphere. The consumers have come to love.
I always like to say that our restaurants have such a great design you can take a day the Burger 5.
Just like the attention of detail on design, we place a huge emphasis on the food we serve we use the 100% American Angus beef naturally raised and harvested part of the NIH program that stands for no antibiotics ever the.
The beef has never given steroids hormones antibiotics chemicals or additives by feed or by injection, it's you're mainly raised vegetarian grass fed and of course never frozen.
The standard is consistent across all of our meat based burgers from the signature Burger by Cheeseburger. The my favorite of the premium Wagyu CEO Burger.
In addition to our beef we offer a great diversified menu the caters to nearly everyone's unique taste preference I firmly believe we have the best onion rings in the industry, which are cut from Spanish colossal onions, and then hand breaded in beer battered. We also offer French fries and a refresh on hand cut from Idaho Burbank potatoes in our.
Once on.
All natural cage free chicken premium frozen custard and concrete that we believe are far superior than standard ice cream and local craft beer and wine in select locations.
Additionally, we were the first better Burger chain to introduce beyond burgers plant based Patty to our customers and we also have a vegetarian Patty option. The award winning Veggie Fi that's made up of 15, all natural ingredients, including crispy quinoa and fresh cut vegetables the.
This is truly a menu that garners awards.
To that point, we were recently named the top better Burger fast casual chain in USA. Today's 2021, 10, best Reader's Choice survey and as of yesterday, I'm happy and proud to announce we were named the number 1 brand of the year and fast Casuals top 100, movers and shakers in 2020.1.
The numerous awards that we've received are a testament to our focus on innovation and customer engagement, 1 powerful way, we stay engaged with our local loyal customer base is through limited time offers some of which allow us to test new products that could potentially become permanent menu additions.
Recent examples of our limited time offers include our February try 5 promotion to celebrate our 10th anniversary, which was the $10 cheeseburger beer and fries deal and we just announced our new dunked grew shake through a collaboration with general Mills, which will be starving until June 13th at our New York City and Miami location.
The dunkerley shake mixes, our decadent and cleaning classic vanilla shake with the popular Ninety's cookie snack dungarees.
We're excited to bring this blast from the past or guests and hope they can reminisce with this nostalgic treat.
Another example of our limited time offerings of 1 of my favorites is the nationwide success that we had with our spicy chicken sandwich last fall with the success of the spicy chicken, we realized that our customers were craving spice and we got the work in our World class commentary North Palm Beach to create of 1 of a kind spicy.
Berger sensation, which we call the swag Burger as in spicy Wagyu Angus Burger launched in March our Swag Burger featured 5 spicy ingredients of double wagyu and brisket blend Burger with chart Jalapenos cash.
Candy Ghost Pepper Bacon the pack the heap suite domain of relative to add a bit of sweet habanero pepper, Jack cheese and of Hot steak sauce, we had a lot of fun, playing with the ingredients and texture and I'm happy to report the the swag Burger has been so successful we're extending at this limited time offering through at least June of this year.
These limited time offers showcase our ability to create iconic offerings and show how we are truly redefining the burger experience.
I would like to thank our team for their dedication and hard work, especially since it has been a challenging time as everyone continues to navigate through the pandemic.
We've always invested in our people with World class training and development to deliver our brand promise and instill our purpose and beliefs.
But I think these past 14 months have showed that when you invest in people great things happen.
It is our extraordinary team that helped us expand our footprint with 11, new restaurant openings in 2020 and opened our first drive thru location in Kentucky, and Nevada. We also had a team that was adaptable as our digital orders became a larger portion of our mix with over $1.6 million delivery and Burger Fi App order.
In 2020 accounting for more than 30% of our system wide revenue last year.
While the disruptions from COVID-19 continue to impact us we have seen sequential improvements in each quarter since the startup of pandemic as we pivoted and adapted to increased digital orders.
Overall, I'm extremely proud of our progress and our prospects for growth.
In addition to adding new restaurants, and introducing drive through locations. We became 1 of the first better Burger chains to expand with not 1 but 2 ghost kitchen partners reef technologies on epic kitchens, and we're now up to 9 locations in 6 cities I'll discuss our partnerships with the ghost kitchens in more detail later.
But first I'll turn the call over to our new CFO, Mike <unk>, who will provide additional commentary on our performance for the first quarter as well as select fourth quarter results and full year 2020 results.
As a reminder, Mike officially joined as the CFO on May 3rd he comes to US with over 25 years of executive level financial leadership experience, having recently served as Chief Accounting Officer of Tech data Corporation as well as office depot.
Part of those roles he held the CFO role at Mayor's jewelers for over 9 years and was the VP of finance for Claire stores during their period of rapid expansion.
As we continue to accelerate our growth strategy Michael's leadership skills extensive experience in the specialty retail sector, managing the financial process and growth of large public companies adds significant value to our organization, Mike I'd now like to turn over the called the U.
Thank you Julio for that introduction and good morning, everyone.
I will first provide a quick summary of our fourth quarter on full year 2020 results and then go into our first quarter results.
Our fourth quarter revenue improved 12% to $9.8 million compared to $8.7 million in the year ago for the full year, our revenue increased slightly to $34.3 million compared to $33.6 million from 2019 the.
The increase in both the quarter and the full year result is primarily attributable to the increase in store count partially offset by a decline in same store sales of the company owned restaurants, driven by the effects of the pandemic related restaurant closures.
System wide sales in the fourth quarter were $34.6 million compared to $37.3 million in the year ago quarter and for the full year systemwide sales were $129.3 million compared to $145.8 million in 2019.
The decrease for both periods was primarily attributable to the impacts of COVID-19.
Delivery and digital sales were up over 80% year over year in the fourth quarter as our investments in digital platforms and our Swift response to the current market challenges drove delivery sales growth.
Adjusted EBITDA in the fourth quarter increased 19%.
The $1.2 million compared to $1 million in the year ago quarter for.
For the full year, adjusted EBITDA was $2.2 million compared to $4.1 million in the prior year.
The decline for the full year was primarily due to the increase in restaurant level operating expenses and brand development costs.
Now, let's turn our attention towards the first quarter results.
Our first quarter total revenue increased 32% to $11 million compared to $8.3 million in the year ago quarter.
New restaurant openings and same store sales increase supported by our digital channel sales continued to drive sequential improvement in system wide sales for the first quarter in fact corporate owned restaurants delivered an 11% increase in same store sales during the first quarter.
System wide sales in the first quarter increased 19% to $39.8 million compared to $33.5 million in the year ago quarter <expletive>.
Digital channel sales were up 98% year over year in the first quarter as our investments in digital platforms and our Swift response to the current market challenges drove delivery sales growth.
As Julio will discuss later.
We plan to continue to invest in technology with the goal of delivering a more frictionless omni channel experience to drive guest satisfaction and sales.
Restaurant level operating expenses for the first quarter were $7.4 million compared to $5.3 million in the year ago quarter.
Our restaurant level operating margin was 13, 5% compared to 13, 6% in the first quarter of 2020.
The slight margin decline was primarily a result of a higher percentage of our business being supported by third party delivery service partners.
Net loss attributable to controlling interest in common shareholders in the first quarter was $8.2 million, which compares to net income attributable to controlling interest in common shareholders of $800000 in the year ago quarter. The.
The additional income generated by higher sales in the quarter was more than offset by the noncash loss on change in the value of warrant liabilities.
And the valuation allowance in relation to the company's deferred tax assets, along with higher depreciation and amortization expense as a result of our business combination in December 2020.
Additionally, we had higher noncash share based compensation expense and additional expenses associated with being a public company.
Adjusted EBITDA in the first quarter was 700000 compared to $1.1 million in the year ago quarter. The.
The decline is associated with the aforementioned costs of being a public company.
Along with some of the foundational investments to support our future growth initiatives.
Moving on to the balance sheet.
Our unrestricted cash balance at March 31, 21 was $34.7 million compared.
Compared to $37.2 million.
At December 31, 2020.
During the first quarter, we repaid and terminated the revolving line of credit of $3 million.
Moving onto our outlook, we remain optimistic about our short term and long term prospects. In fact, we plan on opening approximately 30 company and franchise operated restaurants in 2021.
We also expect to open 15 to 20, new Ghost kitchens this year.
Additionally, we expect to have capital expenditures of approximately $15 million for 2021, primarily to support new restaurant construction of company owned stores.
Now I'll send it back to Julio to discuss our growth plan and strategic initiatives going forward the William Thank.
Thank you Mike I'm proud of what our team was able to accomplish in the results we reported in our first full quarter as a public company.
Already being about halfway through the second quarter, we're very pleased with our quarter to date sales performance as we continue to see our momentum growth from that experienced in the first quarter. Our organization is well aligned on our mission and we're doing an excellent job capitalizing on the opportunities at hand.
Now I'd like to talk about our strategic vision and the growth plans for our brand.
Our first priority is the guest experience, we have redefined our thinking around the customer experience as our industry of shifted dramatically to more off premise and digital dining experiences due to the pandemic.
We have optimized our digital and seamless ordering solutions, so that our guests can choose where and when they want the have the burger find meal.
Guests can order pickup and delivery through our Burger find mobile App order through our website or order from the largest third party delivery providers in the marketplace.
Additionally to grow our brand outside of our existing markets, we've partnered with reef technology, and epic kitchens, which of developed ecosystems in the form of delivery only ghost kitchens in various markets across the U S.
We're using these kitchens to get our foot in the door in certain markets, where we don't have of physical brick and mortar presence.
As well as providing added visibility and awareness in markets, where we currently are growing.
We're also able to test out new growth opportunities, while building brand recognition and integrity without the large upfront fixed cost of opening of new restaurants.
We currently are of 9 ghost kitchens across the U S. All of which are helping us understand how we can build our brand in unique ways outside of our core strategy of company owned and franchise restaurants.
Another way, we are looking to improve our guest experience is through continued refinement of our omni channel experience.
With Henry Gonzales of a new Chief marketing Officer, and Karl Good you recently named as our New Chief Technology Officer, We're working on a more consumer focused on data driven approach to drive engagement, among our guests and ultimately increase sales and profitability.
Karl will be focused on building out our loyalty and delivery features as well as our payment capabilities.
By leveraging upgraded technology and innovative multi channel services. We are excited to provide our customers with the experience of choosing when and where they want the order.
Linking upgraded technology with our refined consumer focused marketing, we're confident that 2021 will be a year, where we increase our brand recognition and further improve our customer experience.
Now to go more in depth on our U S expansion plans, where we're accelerating our growth in both company owned and franchise restaurants.
In 2020, despite the pandemic, we opened 11 new locations. We also opened our first drive thru in Kentucky, and then at the beginning of this year in 2020..1 we opened the drive thru in Nevada, we're looking for ways to retrofit some of our existing locations to expand our drive thru offerings. We believe that we will be the first to deliver high quality.
The better for you food in a modern drive thru format at scale.
I would encourage you all to go to our Investor Relations website to get a firsthand look of our drive through prototype, which is now a reality in Kentucky and Nevada via the video posted in the presentations section.
During the first quarter, we opened 4 new restaurants, plus 1 in April and we currently have 21 restaurants in various stages of development. The most ever at 1 point in time in the history of our brand.
Now that we have the capital from our business combination, we're excited to accelerate our growth across our existing markets and expand into new markets with our goal to open approximately 30, New company and franchise operated restaurants and add 15 to 20 ghost kitchens by the end of 2021.
To dive deeper into markets, we're very proud of our dominant presence in Florida, where we are the leader in the fast casual better Burger category and currently have over 50 locations.
With Florida as our cornerstone we've also been able to develop a strong presence in many states across the southeast.
As we grow our strategy is to develop and build the clusters of company owned restaurants in cities, we feel we have great potential.
Our cluster strategy is to open 2 to 3 company owned locations in selective markets, such as Jacksonville, Tampa, Atlanta, and Nashville, along with franchise restaurant expansion.
As we open company owned restaurants in those regions, we will use them of the base to support our franchisees leveraging corporate support to provide better training region specific marketing, while showing that we have skin in the game.
From the southeast we want to work our way up to the eastern Seaboard, we already operate in the Carolinas in the suburbs of Washington D C Philadelphia, and New York, So by moving up the Seaboard, we can connect our south eastern stores to that region, creating a very strong brand presence along the east coast.
As for other U S opportunities, we intend to pursue appropriate multi unit franchise deals in markets like the southwest and Midwest U S. But only if they meet our rigorous criteria, we want potential Fred franchise partners in these markets to be well capitalized have restaurant or retail experience deep knowledge of the geography they knew.
Business in <unk>.
B of good cultural fit for our company and our team.
Addressing our international opportunities, we already have high performing locations in Puerto Rico with plans to open more we're also in conversations with potential franchise partners in Latin America, where he spent over 10 years in the region and believe there's great opportunities.
We continue to operate 2 locations in Kuwait and early this year, we signed a multiunit deal. The opened 6 locations in the Eastern province of the Kingdom of Saudi Arabia with food services LLC a great partner. The first restaurant is expected to open in the fourth quarter of 2021 on.
Our partner in Saudi Arabia was very attracted to the quality of our food given the strong demand for our better Burger concept in the region and we look forward to seeing what the future holds for our brand in that part of the world.
Part of our overall strategy domestically and internationally is ensuring that we're attracting and hiring top tier talent as.
As we continue our accelerated growth journey I'm very excited about the outstanding management team that we have assembled with the additions of Jim Esposito, Our Chief operating Officer, Henry Gonzales, Our Chief Marketing Officer Carl.
The call. Good you, our Chief Technology Officer, Henry Jim are both industry veterans with over 25 years of experience with multiple brands in the restaurant and foodservice industry, while Karl as the technology leader coming to us from Macy's. These 3 new hires together with Mike as our new CFO has joined the talented team of homegrown <unk>.
It is such a chef Paul Griffin, the originator of our best in class menu.
In addition, the great management, we've also attracted well known talent to our board of directors in February we announced the Martha Stewart 1 of the most recognizable cultural icons and food entrepreneurs joined our board. She leads our product and innovation Committee and we look forward of her contributions as she leverages our extensive <unk>.
Culinary and lifestyle industry expertise with us.
Overall this was a great time to be at the helm of Burger Phi we have of differentiated strong brand with the menu that our customers crave across the globe. We believe we have the capital and strong leadership team in place to aggressively pursue our expansion strategy, while maintaining the quality and culture that makes our restaurants.
The best Burger experience on the planet.
We look forward to sharing our progress with you along this journey.
Hope you all stay safe and healthy during these unprecedented times.
Operator, we're now ready for Q&A.
Thank you Sir task of.
And you will need the press star 1 on your telephone.
Let's try your question press the pound key.
And by while we compile the Q&A of us there.
And our first question comes from Howard Penney with <unk>. Please proceed thank you.
Alright. Thank you so much for the question I was hoping you could share some early learnings on that ghost kitchens.
Yes, it's a great great question and we're proud to say we were among the first to get into the ghost kitchens, and we have we participate with 2 reef kitchens out of Miami, Florida, and epic out of Chicago.
First of all let me just say that the definitely innovate a lot of attention a lot of interest on part of guests.
We've had good experiences and great conversation with the reef lately and that's why 1 of the comments, we mentioned we're going to grow with them I think what it's taught me is that the digital world is it's a whole new ballgame people can see your brand without having a physical restaurants, there and know your brand and so.
1 of the things we redirected slightly is to try not only to go into areas, where the where our brand is not currently in but brand is actually what we do have restaurants to see if it in fact helps to create brand our brand awareness in markets. For example, like Atlanta, where we have 5 brick and mortar.
By adding ghost kitchens that can help to create a bigger presence. So that's a new that's a new thing that we're doing and we're hopeful that that will be a very successful tactic for us and so we will be doing that on a few cities that we operate in so we've got that we're working very very closely with grief epic and Chicago is a little bit different.
And that they are truly.
They are really a building.
Building.
Think of something in an urban area, where nobody knows where it is.
And the bottom line is in Chicago, We've had great success with the first restaurant there as we did in Miami with reef and so we're having great conversations with them about doing additional concepts as well. So it's a relationship right. We're both learning it's still early we've only been at it less than a year and so but we're excited about the opportunities that are very.
Both are both of our excellent companies reef is a technology company getting into restaurants.
<unk> is a restaurant company getting into the technology, but the both add tremendous value to us and we're going to continue to work with them and expand our work, particularly in urban areas and markets.
Are you putting dollars to work on the marketplaces to promote them on the different.
Delivery providers of how are you promoting the brands. We are the it's a joint effort both of us of putting marketing dollars at this point and again, we're learning very quickly in evaluating the performance as we do it. So again, it's early days and many of these many of these reef kitchens in particular of been only a few months. So it's a little too early to proclaim total <unk>.
But we're excited enough that we want to do more with them, let's put it that way powered it for Mike just to add to that given that the east coast kitchens are a lot of them are in urban centers as the effects of the endemic of side and people return to work in major cities.
Is really where these ghost kitchens are well positioned to to penetrate the marketplace given the some of the major cities haven't really gone back to work in the urban centers. We think the best is yet to come.
And it's also expanding our reach and brand awareness.
And besides the regular social media advertising. So again, we're very excited about the opportunity and we have great relationships with them.
And you said I think he said I didn't catch the number the number of leases you have the sign for this year or under construction I forget how you phrased it but I didn't catch that from where.
We have 21 locations currently under various stages of development all of those are designed for them on the kitchen I'm talking about the kitchen for the restaurant yeah. The restaurants, sorry, okay. So we of 21 leases signed and under different stages of development, we have for opened.
Year to date and then the number more on the pipeline for later in the year.
Awesome and just lastly would you be willing to share of the $15 million in Capex. This year, what youll cover from the cash flow.
And that's it for me Thank you again.
Thanks.
I would say given given the size of the company in comparison to the investments, we're making in the new stores.
We expect most of that debt capital to come.
Through.
Through the the cash that we have on the balance sheet. The company, we do expect to be cash flow positive for the year, but the magnitude of the investments will far outweigh.
Yeah, Okay perfect. Thank you.
Thank you at this time this concludes our question and answer session.
I would now like to turn the call back over to Mr and Mrs.
The closing remarks.
Thank you joelle, we'd like to thank everyone for listening to today's call. We look forward to speaking with you. When we report our second quarter results in August and again, Thank you very much for joining us today.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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