BT Brands Inc. Q1 2023 Earnings Call

Welcome to the BT brands Q1, 2023 earnings call our hosts for todays call is Kenneth Cramer.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

I would now like to turn the call over to your host.

Afirma you may begin.

Thank you Jen and with me.

On the call today is Gerry copper road and now we will Gary and I will both be available to take your questions. Following.

I'm relatively brief introductory remarks, as Jan indicated I'm I got from our Chief Financial Officer, and Chief operating officer of BT brand.

Thank everybody for joining us on today's P. T brands Investor call and before we dig into it that will just make the traditional cautionary note that.

We will be making some forward looking statements in today's call.

And everybody should be aware that actual results in the future may.

May differ and may differ significantly.

Since our.

We held a call with our annual earnings release, just a little over a month ago and although.

A month has transpired theres not a lot of significant changes I'm going to highlight a few things I'm not going to sit and read the press release, but I'm going to highlight some.

Some point that are of interest and then we will definitely look forward to taking your questions.

Basically during the quarter, we had a 48% increase in sales over the 2022 first quarter to $3 1 million and of course that was a very much an expected result, given the fact that we made three.

Our acquisitions last year, which were at least significant in terms of a relatively.

Small small base, we did end up with a loss for the quarter the loss attributable to common shareholders was $141000.02 a share.

And I would say our that was.

Below our expectation for the quarter, but not completely unexpected.

Third time traditionally has lost money in the first quarter and then really.

Second and third quarters being the most significant quarters and the fourth quarter again pulling down now with our acquisitions, we didn't really help ourselves in terms of the seasonality of the business are a R.

Pie in the Sky business, which is in a tourist location in woods hole, Massachusetts on Cape Cod is.

If anything even more seasonal that business has just begun to ramp up and are going into memorial day, it's going to be all hands on deck and we're gonna be a busy busy busy out there and that will make the next quarter I think significantly improved in the quarter. We just went through.

I would say as we look forward to the balance of the year certainly our expectation is to be profitable as a company for the year.

Not prepared to really put an exact number on that but we see improved results in in all of our locations are.

As we head to the balance of the year.

We ended the quarter with $6 9 million and total cash and short term investments and I think the significance of that is just the economy has slowed.

We've been careful and considering opportunities following our initial acquisition and if anything I think we are looking forward to see more opportunities and as we commented on the last call. Our plan is to look to do something that would be more significant.

And would have a more built in growth potential than the first three acquisition, which really were made on a rate of return on investment where we.

I felt the cash flow relative to our cash outlay would be certainly something greater than 30% as we get in there.

In the first quarter, which we had previously announced we completed the sale of our West St. Paul property.

We had close that store was an underperforming store and we decided to exit that location.

We sold it for $495000 and that was generated a pretax gain included in the operating results of $313000.

I think only a a comment that would make in addition to the actual sales result is that we do own the real estate Ah Ah under the DQ store and the remainder of our.

Burger time stores with the exception of one lease location and those stores are at a value that Oh was.

Stablish for quite some time ago. So you know you can take the numbers and I think 500000. It certainly representative in that low in terms of the value of each of those properties and we have I think a significant.

The asset in terms of the real estate that we have in.

Burger time, we did acquire.

Acquire in terms of a stock buyback.

Right at the beginning of the quarter.

We repurchased.

An additional.

150000 shares at $1 57, and that was a use of just over $250000 and if you recall at the end just prior to the end of the year with purchase.

65000 shares.

At the end of the quarter.

We don't have a formal buyback plan are in place and this was kind of a unique set of circumstances, where there's fears were offered to us and we decided to make the purchase.

We don't.

Anticipate an ongoing repurchase of stock, but would certainly look at things on an upper end as opportunities present themselves.

Just going to cover in terms of the business Theres kind of a about four points.

That relate to our performance in the quarter and one I've already touched on and I'm going to touch on the other do a we have been seasonal in the Burger time business and seasonal in the Pi business, which certainly puts us in a point, where we're at probably below break even.

And in terms of operating result during during that time period, but obviously, we'll use that time to hire people for the coming season, and I would say if anything I'd Burger time.

Because of the proliferation of drive throughs and customer acceptance of the drive through as a means of getting the meal.

Think that are that in the future may become less so.

But really what hurt us at Burger time was the weather in the Midwest, We had a very harsh winter I think in the Minneapolis area, where I am yeah. It was the third highest snowfall recorded and the snow keeps kept coming all winter long.

You know that hurts us on two fronts.

And I know some investors objected retailers are blaming result on the weather, but it is a reality, we obviously lose days of sale and when the roads are crummy in and it's snowing people don't go out and drive thru.

To get burgers are they certainly fewer of the people do so that that weather was also a significant factor.

And just to put a point on it the Burger time sales year over year were down 13, 2% over the prior year and I would attribute most of that decline during the quarter to a very very poor weather. So we had a seasonal we had the weather.

We had.

As many restaurants have commented we had also done.

On the challenges with labor and some ongoing inflation.

Which put some cost pressure on it I would say both of those if you want to look at them as a combined labor shortage and an inflation we've seen moderation in the labor markets have definitely improved we're seeing more applicants of higher quality employees and in all of our restaurant concepts.

We see a more stable workforce as we head through the balance of 2023 now people are at certainly higher wage rates were generally are in all locations are starting employees out in the $13 range and they very quickly moved to $15 an hour.

And that you know if you go back three or four years, that's up significantly from what we saw four years ago. When we were able to probably start people at $910 an hour or so, but we're weathering that impact and I think our margins are going to be pretty consistent with what.

What they had been in the past.

Place and that's been a factor it was a factor last year and certainly although we had only owned it for part of the year was a factor at a pie in the Sky, where eggs are a significant component to to our cost of sales and when I talk to people at Pi yesterday, we've seen a dozen.

Eggs back down below $2 again, and if anything I think we're going to see some very favorable cost comparisons in terms of our cost of.

Sales I think the law.

Last point I would touch on is are we certainly are.

In these businesses that we acquired there is a learning curve and that does take some time to completely understand the business.

The market transition employees to a new culture Ah that being the B T culture, and that's a that's a been true of all three acquisition.

The Pi acquisition that we retained the former owner as part of our team out there. He wasn't looking to retire a young man and he is part of the general management of the store and that certainly.

Has made that transat transition smooth.

You look at the other two acquisitions in terms of Cleveland and the beer garden there the owners really exited the same shortly after our purchase and that that does create additional challenges, where we really have to learn the business from the top and understand all of its nuances.

Particularly in the first quarter of.

That did impact our profit margins and our profitability and we expect that to.

To improve significantly as we have and now I think a solid managers in place in both of those locations.

And of course, because states, perhaps the obvious although it was certainly more a less of a increase than it was last year for the year as you've become a public company.

You know these conference calls are they don't happen for free you know we've got to pay for the cost of sending out a press releases and conference calls and NASDAQ fees.

The accountants is certainly a look they get compensated for their work in significant quarterly review work that's done as a public company. So we could have seen increases and we are last year did do some.

Some significant stock options for management and for long term employees and those create noncash charges.

Finally, just to before we head towards the questions I guess as everybody is aware we own a significant portion of another public company and that's Bagger Dave's, which it operates six locations.

I'm going to kind of repeat what I said on the last call, we see that as an outstanding opportunity for our company. In fact, it's one of the I think should be one of the highlights the opportunity is there that we've now center, probably four different the restaurant groups and restaurants consultants, although the tool the store.

And look at them and really everybody has come back with the same comments the stores are in excellent shape.

They are in excellent markets.

They represent an excellent opportunity and certainly there are challenges with the perception of the Bagger Dave's com.

Concept in those existing markets.

So I think as we look at the balance of this year, we're gonna take what we view as we didn't invest that much money, but the leasehold improvement.

We don't take this 8 million dollar investment.

And try and create a format, where we can get a decent return on that.

As you know the business has been operating the six doors had been with the G&A component over their operating at around breakeven.

And.

Just a slight negative cash flow and Oh, we're I think going to make some decision before.

Before the end of this quarter before June 30, if that's what we're going to do with those stores and either be in a position to test a new format or to implement.

Something larger and it could be something that we do on a wrong or it could be a a joint venture with another a restaurant operator.

Who sees the same opportunity that we see.

So that's kind of been a thumbnail that that's where the quarter is that there was certainly was a from an overall standpoint in terms of looking backwards at the performance are there wasn't a lot to get excited about in the quarter. It was a little bit disappointing overall as we look to the future.

Obviously the company is in a very strong financial position. We have the powder has been kept dry to go out and look for acquisitions and our I think our I think all of our shareholders are going to be served by what's served well by what's been a move slowly approach and.

And as we identify.

Opportunities are hopefully, we'll find something that.

Will you get us excited as a management group and will be something that will excite our shareholders and certainly Gary and I are both committed to obviously as shareholders of the company to generating a significant return and I would say as we look to that future we're highly comp.

And is that that objective will be achieved based on opportunities that we've got a chance to take a look at so Gary I don't know if you want to add anything before we turn it back to Jan to open it up for questions.

Yeah, Thanks, Ken one more.

Piece of information I guess on the Bagger Dave's is that we don't have any liability on any of those six leases. They were the previous owner. So we could cancel any of those leases but.

We're trying to extract value of the <unk>.

Roughly the $8 million that is put in those six stores and the company also has a million and a half dollars.

Plus or minus.

Cash and then we've also taken a position in a normal Romans and which we see.

Opportunities there that we can help facilitate and.

I see that as an opportunity as well and I'm currently running for their one board seat.

Against the prior management so I.

I guess, that's that we can open it up maybe for questioning.

Current management.

Yeah.

Yeah, Yeah yeah.

Well I think we're ready to take some questions.

Okay. Thank you if you would like to ask a question. Please press star one on your telephone keypad now you'll be placed into the queue. In the order received please be prepared to ask your question when prompted.

Once again, if you have a question. Please press star one on your phone now.

Yeah.

Once again Thats star one to ask a question.

And Mr. Berger. It appears there are no questions at this time.

Well I know who's on the call. So I know these are questioning people will give you one more chance of India.

[laughter] pardee homes, because I can see it on my screen.

Anybody have a question.

I could call on people could I do that Jim.

Just kidding.

Yes.

Alright, well, we appreciate that Gary and I, both the very much. Appreciate we think we've got an excellent base of shareholders, who are supportive and are in this for the right reasons, which is you know they're not in it for.

For short term trading type drop that our shareholders and I read it to get a significant long a long term return on their investment and we're committed to delivering that and I would say, we look forward to to reporting.

Our results to everybody at the end of the second quarter. So thank you. Thank you for your time today. Thank you Jen.

You're welcome and this does conclude today's conference call. Thank you for attending.

Okay.

Yeah.

The House has ended this call good.