Q2 2025 FAT Brands Inc Earnings Call
Please note that this conference is being recorded today July 32025.
Operator: On the call from FAT Brands are Chairman of the Board, Andy Wiederhorn, and Co-Chief Executive Officer and Chief Financial Officer, Ken Kuick. This afternoon, the company released its Q2 2025 financial results. Please refer to the earnings release and earnings supplement, both of which are available in the investors section of the company's website at www.fatbrands.com. Each contain additional details about the quarter, which closed on 29 June 2025. Before we begin, I must remind everyone that part of the discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. Actual results may differ materially from those indicated by these forward-looking statements due to a number of risks and uncertainties.
On the call from Fat brands are chairman of the board, Andy Wheater Horn, and co Chief Executive Officer, and Chief Financial Officer, Ken <unk>.
This afternoon. The company released its second quarter 2025 financial results. Please refer to the earnings release and earnings supplement both of which are available in the investors section of the company's website at www Dot fat brands Dot com.
Each contain additional details about the quarter, which closed on June 29 2025.
Before we begin I must remind everyone that part of the discussion today will include forward looking statements. These forward looking statements are not guarantees of future performance and therefore undue reliance should not be placed upon them actual results may differ materially from those indicated by these forward looking statements due to a number of risks.
<unk> and uncertainties.
The company does not undertake to update these forward looking statements at a later date.
Operator: The company does not undertake to update these forward-looking statements at a later date. For a more detailed discussion of the risks that could impact future operating results and financial condition, please see today's earnings release and recent SEC filings. During today's call, the company will also discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in today's earnings release. I would now like to turn the call over to Andy Wiederhorn, Chairman of the Board. Thank you.
For a more detailed discussion of the risks that could impact future operating results and financial condition. Please see today's earnings release and recent SEC filings.
During today's call. The company will also discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP.
Reconciliations to comparable GAAP measures are available in today's earnings release.
I would now like to turn the call over to Andy leader Horn Chairman of the board. Thank you.
Thank you operator, and good afternoon, everyone.
Before we begin I want to address major news that came out yesterday.
Andy Wiederhorn: Thank you, operator, and good afternoon, everyone. Before we begin, I want to address major news that came out yesterday. The U.S. Department of Justice has dropped all charges against me, FAT Brands, William Amon, and Rebecca Hershinger. I'm grateful to the U.S. Attorney's office for taking a fresh look at this case and to the attorneys who worked tirelessly on my behalf and on behalf of the other defendants. I have always maintained my innocence and the innocence of the other defendants. Additionally, I want to alert you that we have reached a settlement with all of the parties in the Delaware derivative cases named Harris I and Harris II that were filed in 2021 and 2022. While the settlement is subject to court approval, I'm optimistic that since all parties have reached an agreement, the court will look favorably on the settlement.
The US Department of Justice has dropped all charges against me sovereigns, William Ayman and Rebecca Hershey.
I'm grateful to the city's office, we're taking a fresh look at this case and to the attorneys who worked tirelessly on my behalf and on behalf of the other defendants.
I have always maintained my innocence.
On the other defendants.
Additionally.
Want to alert you that we have reached a settlement with all the parties in the Delaware derivative cases named Harris, one adheres to that were filed in 2021 and 2022.
While the settlement is subject to court approval I'm optimistic that since all parties have reached an agreement.
Well look favorably on the settlement, we will issue a separate press release on this matter once filed with the court very shortly.
Andy Wiederhorn: We will issue a separate press release on this matter once filed with the court very shortly. Now, with that matter behind us, I would like to acknowledge the outstanding work of our team and franchise partners across the FAT Brands portfolio. Their focus on excellence is driving our momentum, and I couldn't be more optimistic about what lies ahead for FAT Brands. I am particularly proud to share that we have been recognized on TIME and Statista's best midsize company list for the second consecutive year, underscoring the strength of our business model and culture. Additionally, 10 of our brands earned spots on Technomic's prestigious Top 500 list, with Twin Peaks securing an impressive position in the top 100 largest restaurant chains by annual system sales in the United States.
Now with that matter behind us.
I'd like to acknowledge the outstanding work of our team and franchise partners across the fat brands portfolio. Their focus on excellence is driving our momentum and I couldn't be more optimistic about what lies ahead for fabry.
I am, particularly proud to share that we have been recognized on time instant Houston's best mid sized company list for the second consecutive year underscoring the strength of our business model and culture.
Additionally, 10 of our brands earned spots on technomic prestigious top 500 list with twin peaks security and an impressive position in the top 100 largest restaurant chains biannual system sales in United States.
Our global restaurant portfolio now spans approximately 2300 locations across 49 states in 35 countries, creating a diversified ecosystem that enables us to capture market share across multiple segments and dining occasions.
Andy Wiederhorn: Our global restaurant portfolio now spans approximately 2,300 locations across 49 states and 35 countries, creating a diversified ecosystem that enables us to capture market share across multiple segments and dining occasions. With 80% of our units in domestic markets and 20% in international markets, we've built a balanced geographic footprint supported by more than 730 franchise partners. Over 250 of these franchise partners operate multiple locations ranging from 2 to 75 units, with no single partner representing an outsized portion of our portfolio. Our structure both mitigates concentration risk and positions us for continued expansion. Within this framework, we continue to invest in brand-level leadership that supports long-term growth. In May, Kim Boerema joined as CEO Twin Hospitality Group and our high-growth polished casual dining sports bar brand.
With 80% of our units in domestic markets and 20% in international markets. We've built a balanced geographic footprint supported by more than 730 franchise partners over.
Over 250 of these franchise partners operate multiple locations ranging from 2% to 75 units with no single partner, representing an outsized portion of our portfolio our structure, both mitigates concentration risk and positions us for continued expansion.
Within this framework, we continue to invest in brand level leadership that supports long term growth.
In May Kim Marina joined as CEO twin hospitality.
Group and our high growth polished casual dining sportswear brand.
With over three decades of restaurant industry experienced Kim brings an exceptional track record of scaling concepts. Most recently tripling Perry's pizzeria and Taphouse from 10 to 30 units in just two and a half years.
Andy Wiederhorn: With over 3 decades of restaurant industry experience, Kim brings an exceptional track record of scaling concepts, most recently tripling Parry's Pizzeria & Taphouse from 10 to 30 units in just 2 and a half years. His distinguished career includes serving as COO of California Pizza Kitchen and regional vice president at Texas Roadhouse, where he oversaw 125 locations across 22 states. In his first 2 months, Kim has already made significant strides by focusing on 3 strategic priorities: enhancing operations, improving corporate store restaurant-level margins, and driving unit development. With a robust pipeline of approximately 100 new lodges and Kim's proven expertise, we are confident in Twin Peaks' next chapter of growth. I also want to express our sincere gratitude to Ken Kuick for his exemplary leadership during this transition. Ken continues to serve as Chief Financial Officer of Twin Hospitality Group.
His distinguished career includes serving as CFO of California, Pizza kitchen, and regional Vice President of Texas, Roadhouse, where he oversaw a 125 locations across 22 states.
In his first two months Kim has already made significant strides by focusing on three strategic priorities enhancing operations, improving corporate store restaurant level margins and driving unit development.
With a robust pipeline of approximately 100, new lodges in Kim's proven expertise we are confident in twin peaks next chapter of growth.
I also want to express our sincere gratitude to Ken queuing for his exemplary leadership. During this transition can continues to serve as chief financial officer of twin Hospitality group.
Regarding twin peaks capital structure.
Andy Wiederhorn: Regarding Twin Peaks' capital structure, market volatility has extended our original timeline, but we continue to move forward with a planned $75 to $100 million equity raise and will provide further updates as appropriate. Following today's call, we invite you to join Twin Hospitality Group's Q2 earnings discussion at 5:15 PM Eastern Time, with details available in their earnings release published earlier today. We continue to take decisive steps to strengthen our financial position. Our indenture-related dividend pause remains in effect until we reach the $25 million principal reduction threshold, preserving $35 to $40 million annually in cash flow. Plus, we will save at least another $30 million per year with the dismissal of the DOJ cases and the derivative matters. Additionally, we've implemented over $5 million in annual SG&A reductions while identifying another $5 million or so of further cost optimization opportunities.
Market volatility has extended our original timeline, but we continue to move forward with a planned $75 million to $100 million equity raise and will provide further updates as appropriate.
All in today's call. We invite you to join twin hospitality groups Q2 earnings discussion at 515 am Eastern time with details available in the earnings release published earlier today.
We continue to take decisive steps to strengthen our financial position.
Our indenture related dividend pause remains in effect until we reach the $25 million principal reduction threshold preserving $35 million to $40 million annually in cash flow.
Thus, we will save at least another $30 million per year with the dismissal of the Doj cases, and the derivative matters.
Additionally, we've implemented over $5 million in annual SG&A reductions, while identifying another $5 million or so of further cost optimization opportunities.
In parallel we're actively working towards refinancing our three remaining securitization silos well ahead of the July 2026 anticipated repayment date.
Andy Wiederhorn: In parallel, we're actively working towards refinancing our 3 remaining securitization silos well ahead of their July 2026 anticipated repayment date. These combined actions position us to achieve cash flow positive status in the coming quarters while continuing our strategic de-leveraging efforts. Turning to our Q2 performance, which Ken will elaborate on shortly, our results of $146.8 million in revenue and $592.2 million in systemwide sales reflect the current challenging operating environment. Despite this, we achieved adjusted EBITDA of $15.7 million in the quarter, which is comparable with last year's quarter. We remain focused on the strategic initiatives that will drive long-term value creation. Domestic systemwide sales outperformed international for the quarter. However, we are seeing encouraging signs internationally, particularly with our Fatburger locations in Canada, which represent about 1/3 of the Fatburger system and are benefiting from favorable exchange rate movements.
These combined actions position us to achieve cash flow positive status in the coming quarters, while continuing our strategic deleveraging efforts.
Turning to our second quarter performance, which Ken will elaborate on shortly our results of $146 8 million in revenue and $592 2 million system wide sales reflect the current challenging operating environment and despite this we achieved adjusted EBITDA of $15 $7 million in the quarter, which is comparable with last year's quarter.
We remain focused on the strategic initiatives that will drive long term value creation.
Domestic system wide sales outperformed international for the quarter. However, we are seeing encouraging signs internationally, particularly with our fabric relocations in Canada, which represent about one third of the fabric of their system and are benefiting from favorable exchange rate movements.
Our diversified portfolio strategy is paying dividends, particularly in our snacks segment, where great American cookies and marble slab creamery demonstrate consistent strength.
Andy Wiederhorn: Our diversified portfolio strategy is paying dividends, particularly in our snacks segment, where Great American Cookies and Marble Slab Creamery demonstrate consistent strength. Digital innovation is accelerating this success. Great American Cookies' digital mix now represents 25% of sales, up three percentage points from Q1, with loyalty members spending 40% more than non-members. Round Table Pizza's digital metrics are equally compelling, with 21% loyalty sales growth and 18% higher customer engagement. Looking ahead, our growth strategy remains anchored by three strategic pillars: driving organic expansion through strategic market penetration, evaluating targeted acquisitions to further diversify our brand portfolio, and increasing our manufacturing capacity with an emphasis on cookie dough production and dry mix capabilities. Our organic growth strategy is anchored by a robust development pipeline of approximately 1,000 locations that franchisees have already paid for and committed to open over the next five to seven years.
Digital innovation is accelerating the success, Great American cookies digital mix now represents 25% of sales up three percentage points from Q1.
With loyalty members spending 40% more than nonmembers.
Round table pizza digital metrics are equally compelling with 21% royalty sales growth and 18% higher customer engagement.
Looking ahead, our gross strategy remains anchored by three strategic pillars, driving organic expansion through strategic market penetration.
<unk> targeted acquisitions to further dive.
<unk>, our brand portfolio and.
And increasing our manufacturing capacity with an emphasis on cookie dough production and dry mix capabilities.
Our organic growth strategy is anchored by a robust development pipeline of approximately 1000 locations that franchisees have already paid for and committed to open over the next five to seven years. This pipeline continues to expand with 120, New development agreement signed year to date, demonstrating sustained demand across our portfolio and reinforcing our long.
Andy Wiederhorn: This pipeline continues to expand, with 120 new development agreements signed year to date, demonstrating sustained demand across our portfolio and reinforcing our long-term growth outlook. Once operational, these units are expected to generate $50 to $60 million in incremental earnings without the capital costs typically associated with acquiring new brands. Momentum remains strong. In Q2 alone, we opened 18 new locations, including three co-branded Marble Slab Creamery and Great American Cookies stores, as well as three standalone Marble Slab Creamery units. We remain on track to meet our goal of opening 100 new locations in 2025, led by seven high-growth brands: Fatburger, Johnny Rockets, Fazoli's, Round Table Pizza, Twin Peaks, Marble Slab Creamery, and Great American Cookies. In Florida, we've signed a new development deal with an existing franchisee to open 40 additional Fatburger locations over the next decade, including expansion into the Jacksonville market.
Term growth outlook once operational these units are expected to generate $50 million to $60 million in incremental earnings without the capital costs typically associated with acquiring new brands.
<unk> remained strong in Q2 alone we opened 18, new locations, including three co branded Marvel side primary and Great American Cookie source as well as three standalone marble slab creamery units.
We remain on track to meet our goal of opening 100, new locations in 2025 led by seven high growth brands that Burger Johnny Rockets, there's always round table pizza twin peaks marble slab creamery and great American cookies.
Florida, we signed a new development deal with an existing franchisees to open 40 additional fabrics locations over the next decade, including expansion into the Jacksonville market.
This will grow our total presence in the state to approximately 50 fabric of their locations.
Andy Wiederhorn: This will grow our total presence in the state to approximately 50 Fatburger locations. Since re-entering Florida 2 years ago after a 20-year absence, Fatburger has seen strong demand, particularly at our Riverview and Celebration locations, which have exceeded expectations. Additionally, our first restaurant in the Jacksonville area is slated to open later this year, further establishing Fatburger as a key player in Florida's competitive burger market. Round Table Pizza continues its Texas expansion, recently opening in San Marcos with a key franchisee targeting 100 locations in Texas across FAT Brands concepts, including Fatburger, Round Table Pizza, and Johnny Rockets within the next 5 years. Our international expansion also continues to gain momentum. Fazoli's recently achieved a significant milestone with its first international location in Calgary, Alberta, the beginning of a 20-unit expansion across Canada over 9 years with a franchise partner who already successfully operates Fatburger locations.
Since reentering, Florida, two years ago after a 20 year absence.
<unk> seen strong demand, particularly at our river view and celebration locations, which have exceeded expectations. Additionally, our first restaurant in the Jacksonville area slated to open later this year further establishing <unk> as a key player in Florida as competitive Burger market.
Roundtable Pizza continues its Texas expansion recently opening in San Marcos with a key franchisee targeting 100 locations in Texas across that brands concepts, including fabric or round table pizza and Johnny rockets within the next five years.
Our international expansion also continues to gain momentum.
There's always recently achieved a significant milestone.
With its first international location in Calgary, Alberta at the beginning of the 20 unit expansion across Canada over nine years with a franchise partner, who already successfully operate stop of their locations.
And we're not just expanding our footprint. We're also enhancing the guest experience through innovation and menu development at.
Andy Wiederhorn: We're not just expanding our footprint, we're also enhancing the guest experience through innovation and menu development. At Marble Slab Creamery, what began as a limited test of the Dubai Chocolate Sundae has evolved into a successful rollout across approximately 50 locations, with the indulgent flavor now extended through year-end due to the overwhelming customer response. On the beverage front, Pretzelmaker recently launched Frosted Lemonades, a refreshing twist on their signature beverage that's quickly becoming a customer favorite. Beyond new store development, we are investing in our existing locations through our newly launched store refresh program, which will revitalize 5% of our portfolio this year with plans to double that pace to 10% in 2026. I'm particularly proud that our brands continue to receive prestigious industry recognition.
Marble slab creamery, what began as a limited test of the Dubai Chocolate Sundae has evolved into a successful rollout across approximately 50 locations with your indulgence flavor now extended through year end due to the overwhelming customer response.
On the beverage front pretzel make our recently launched frosty eliminates a refreshing twist on their signature beverage that is quickly becoming a customer favorite.
Beyond New store development, we are investing in our existing locations through our newly launched store refresh program, which will revitalize 5% of our portfolio. This year with plans to double that pace to 10% in 2026.
Im, particularly proud that our brands continue to receive prestigious industry recognition Tapper, who was recently named by Yelp as one of the top 25 Burger chains in the U S. While there's always earned the number 12 spot on the fast casual movers and Shakers 2025 list ranking that evaluates growth reputation customer sentiment and sales volume.
Andy Wiederhorn: Fatburger was recently named by Yelp as one of the top 25 burger chains in the US, while Fazoli's earned the 12 spot on the Fast Casual Movers and Shakers 2025 list, a ranking that evaluates growth, reputation, customer sentiment, and sales volume. Additionally, Marble Slab Creamery was once again named to USA Today's 10 Best list for best dessert or treat chain. We also continue to advance our balance sheet strengthening initiatives. In April, we successfully amended our Fazoli's securitization, securing improved terms that enhance our financial flexibility. The revised agreement extends both call and repayment dates while easing certain covenant requirements. The new structure also enables the sale of company-operated locations to franchisees, creating an opportunity to refranchise our entire 57-unit corporate Fazoli's portfolio, a move that would substantially reduce our corporate-owned footprint while delivering approximately two and a half million in annual overhead savings.
Additionally, marble slab creamery was once again named to USA Today's 10 best list for best dessert or treat chain.
We also continue to advance our balance sheet strengthening initiatives in April we successfully amended our all these securitization security improved terms and enhance our financial flexibility. The revised agreement extends both calling repayment dates while easing certain covenant requirements.
New structure also enables the sale of company operated locations to franchisees.
Creating an opportunity to re franchise, our entire 57 unit corporate there's always portfolio move that would substantially reduce our corporate owned footprint while delivering.
Proximately, two and a half million in annual overhead savings.
Should we proceed with this Refranchising initiative, we would maintain direct ownership of only about 33 Hot dog on a stick corporate locations within our 'twenty 300 unit system positioning us to return to nearly a 100% franchise operating model structure that optimizes capital efficiency and operational focus this is.
Andy Wiederhorn: Should we proceed with this refranchising initiative, we would maintain direct ownership of only about 33 Hot Dog on a Stick corporate locations within our 2,300-unit system, positioning us to return to nearly a 100% franchise operating model, a structure that optimizes capital efficiency and operational focus. This, of course, excludes Twin Peaks and Smokey Bones, which now operate as a separate public company, despite being consolidated into Fat's financials due to our significant ownership percentage. Now, turning to our growth by acquisition strategy. We are prioritizing value creation and de-leveraging our balance sheet while navigating the elevated capital cost environment. We remain actively engaged in evaluating strategic opportunities that align with these core objectives and will share updates as appropriate.
Of course excludes twin peaks in Smokey bones, which now operate as a separate public company, despite being consolidated into fats financials due to our significant ownership percentage.
Now turning to our growth by acquisition strategy, we are prioritizing value creation and deleveraging our balance sheet, while navigating the elevated capital cost environment.
We remain actively engaged in evaluating strategic opportunities that align with these core objectives, and we'll share updates as appropriate.
Our Georgia production facility represents one of our key strategic advantages generating impressive financial performance with $10 3 million in the second quarter sales of $3 8 million in adjusted EBITDA, resulting in an attractive 37% margin.
Andy Wiederhorn: Our Georgia production facility represents one of our key strategic advantages, generating impressive financial performance with $10.3 million in Q2 sales and $3.8 million in adjusted EBITDA, resulting in an attractive 37% margin. Currently operating at just 45% capacity, our cookie dough manufacturing facility represents significant growth opportunity. With modest capital investment to expand mixing equipment, we can nearly double production capacity. The facility sits on 4 acres while currently utilizing only half an acre, providing ample room for future expansion. We are also continuing to build out a third-party strategic partnership with a national restaurant entertainment chain to launch the Great American Cookies brand virtually. We look forward to sharing further details on this shortly. Before concluding, I'd like to highlight the meaningful impact of the FAT Brands Foundation, which has awarded 21 grants in 2025.
Currently operating at just 45% capacity, our cookie dough manufacturing facility represents significant growth opportunity with modest capital investment to expand mixing equipment, we can nearly double production capacity.
The facility sits on four acres, while currently utilizing only half neighborhood, providing ample room for future expansion.
We are also continuing to build out a third party strategic partnership with a national restaurant Entertainment chain to launch the Great American cookies brand virtually we look forward to sharing further details on this shortly.
Before concluding I'd like to highlight the meaningful impact of the Fat brands Foundation, which he has awarded 21 grants in 2025.
I'm pleased to share that president Jessica we don't run an director Gen. Johnston were recently recognized at the Los Angeles business Journal's Women's leadership Symposium in awards for their leadership and commitment to the foundation.
Andy Wiederhorn: I'm pleased to share that President Jessica Wiederhorn and Director Jenn Johnston were recently recognized at the Los Angeles Business Journal's Women's Leadership Symposium and Awards for their leadership and commitment to the foundation. The foundation also recently participated in Twin Peaks Restaurants' annual conference for the first time, surpassing its fundraising goals through donations and a successful raffle. These funds will support nonprofits helping families and communities thrive. As we move forward, we remain confident in the resilience of our brands and the momentum we have built. Our efforts are centered on expanding our core business, enhancing efficiencies across our production facility, and reinforcing our financial foundation through disciplined debt reduction, all of which support our path towards long-term success. With that, I would like to hand it over to Ken to discuss our financial highlights from Q2 2025.
Foundation also recently participated in twin peaks restaurants annual conference for the first time, surpassing its fundraising go through donations and a successful raffle. These funds will support nonprofits, helping families and communities thrive.
As we move forward, we remain confident in the resilience of our brands and the momentum we have built our efforts are centered on expanding our core business enhancing efficiencies across our production facility in reinforcing our financial foundation through disciplined debt reduction all of which support our path towards long term success with that I would like to hand, it over to Ken to discuss our financial highlights.
From the second quarter of 2025.
Thanks, Andy.
Onto our second quarter results total revenues were $146 $8 million.
Ken Kuick: Thanks, Andy. Moving on to our Q2 results, total revenues were $146.8 million, a 3.4% decrease from $152 million in last year's quarter. This was driven by the closure of five underperforming Smokey Bones locations, the temporary closure of one Smokey Bones location for conversion into a Twin Peaks lodge, and lower same-store sales, partially offset by revenues generated by our new Twin Peaks lodges. Turning to costs and expenses, general and administrative expense increased $14.8 million to $44.4 million in the quarter from $29.6 million in the year-ago quarter, primarily due to $12.6 million of non-cash share-based compensation expense related to the public listing of Twin Hospitality Group earlier this year, and the recognition of $2.1 million in employee retention tax credits recognized during the Q2 of last year.
Three 4% decrease from $152 million in last year's quarter.
This was driven by the closure of five underperforming Smokey bones locations.
Temporary closure of one Smokey bones location for conversion into a twin peaks lodge and lower same store sales, partially offset by revenues generated by our new twin peaks lodges.
Turning to costs and expenses general and administrative expense increased $14 8 million to $44 $4 million in the quarter from $29 $6 million in the year ago quarter.
Primarily due to $12 6 million of noncash share based compensation expense related to the public listing of twin hospitality group earlier this year.
The recognition of $2 $1 million and employee retention tax credits recognized during the second quarter of last year.
Cost of restaurant in factory revenues decreased to $98 $1 million in the quarter.
Ken Kuick: Cost of restaurant and factory revenues decreased to $98.1 million in the quarter, compared to $100.1 million, primarily driven by the closure of underperforming Smokey Bones locations, the closure of the Smokey Bones location for conversion, and lower same-store sales, partially offset by wage and food cost inflation. Advertising expense varies in relation to advertising revenues and decreased to $11.5 million in the quarter from $14.7 million in the year-ago period. Total other expense net, which consisted primarily of interest expense, was $39.4 million in the quarter, compared to $34.8 million in last year's quarter. Net loss attributable to FAT Brands was $54.2 million, or $3.17 per diluted share, compared to a net loss of $39.4 million, or $2.43 per diluted share in the prior year quarter.
Prior to 100.1 million.
Primarily driven by the closure of underperforming Smokey bones locations.
Most of the Smokey bones location for conversion and lower same store sales, partially offset by wage and food cost inflation.
Advertising expense varies in relation to advertising revenues and decreased to $11 $5 million in the quarter from $14 $7 million in the year ago period.
Total other expense net which consisted primarily of interest expense was $39 $4 million in the quarter compared to $34 $8 million in last year's quarter.
Net loss attributable to fat brands was $54 2 million or $3 17 per diluted share compared to a net loss of $39 4 million or $2 43 per diluted share in the prior year quarter.
And on an as adjusted basis, our net loss attributable to fat brands was $49 million or $2 88 per diluted share compared to $39 million or $1 93 per diluted share in the prior year quarter.
Ken Kuick: On an as adjusted basis, our net loss attributable to FAT Brands was $49 million, or $2.88 per diluted share, compared to $30.9 million, or $1.93 per diluted share in the prior year quarter. Lastly, adjusted EBITDA for the quarter remained flat at $15.7 million. With that, operator, please open the line for questions.
And lastly, adjusted EBITDA for the quarter remained flat at $15 $7 million.
And with that operator, please open the line for questions.
Thank you.
We'll now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Kim.
Operator: Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question is from Joe Gomes from Noble Capital Markets. Please go ahead.
Press Star two if you would like to remove your question from thank you for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
Please poll for questions.
Yeah.
The first question is from Joe Gomes from Noble capital. Please go ahead.
Yeah.
Good afternoon, Thanks for taking my questions.
Joe Gomes: Good afternoon. Thanks for taking my questions.
Hi, Joe.
Andy Wiederhorn: Hi, Joe.
So.
Congrats on last night's announcement with a D O J.
Joe Gomes: Congrats on last night's announcement with the DOJ. Related, there was an SEC civil action filed at the same time. Any update on whether that goes away also? Relatedly, Andy, you talked about the elimination of roughly $30 million a year of litigation costs.
<unk> related there was an SEC civil action filed at the same time.
Any update on whether that goes away also and then read lately and you talked about you know the elimination of roughly $30 million a year litigation costs.
Are you going to be able to recover any of the past cost from your insurance companies.
Joe Gomes: Are you going to be able to recover any of the past costs from your insurance companies?
So we are hopeful that the SEC investigation.
Andy Wiederhorn: We're hopeful that the SEC investigation or civil case goes away following the DOJ case. We can't report anything on that or comment anything about that today. With respect to the legal fees, which in total over the last 3 and a half years are $70 something million, we did file with our insurance company and there is a settlement that is connected to the derivative case settlement. We've recovered, or we will recover the policy limits of that, as part of that settlement.
Or a case civil case goes away following the Doj case.
But we can't report anything on that or comment anything about that today.
With respect to the legal fees, which in total over the last three.
Three and a half years or 70 something million dollars.
We did file with our insurance company and there is a settlement. That's a that is connected to the derivative case settlement. So we've recovered or we will recover the policy limits of that.
As part of that settlement.
Okay great.
[laughter] pardon me and then one of the.
Joe Gomes: Okay, great. Pardon me. One of the big variances in our model was the increase in G&A costs, and you explained that was for share-based comp. Is that kind of like a 1 Q event? Should we expect G&A costs to go back down? I think they've been running roughly around 25% of revenue this Q.
Big variances.
Our model was the increase in G&A costs, and you explained that that was for.
Share based comp.
Is that kind of like a one quarter event, you know should we expect G&A costs to go back down I think they've been running roughly around 25% of revenue.
Yes, it absolutely goes down it it hasn't ramped.
Andy Wiederhorn: Yes. It absolutely goes down.
Sorry, Chad I'm, sorry, I should let you finish it absolutely goes down it's a onetime event that's fine too.
Joe Gomes: 2% of revs.
Andy Wiederhorn: Sorry, Joe. I'm sorry. I should let you finish. It absolutely goes down. It's a one-time event that's tied to the.
Two the twin peaks.
The twin peaks spinoff.
Andy Wiederhorn: Go ahead.
Andy Wiederhorn: to the Twin Peaks spinoff.
Okay, just wanted to make sure that I thought I thought so, but I just wanted to make sure.
Joe Gomes: Okay. Just wanted to make sure that I thought so, but I just wanted to just make sure. You talked about the manufacturing facility, the new contract. You also talked about that, I think, last quarter. Can you give us a little timing of when you think that might be fully rolled out and we can start to see the benefits of it?
<unk>.
And then you talked about the <unk>.
The manufacturing facility and a new contract, but you also talked about that I think last quarter, you kind of can you give us a little timing when do you think that might be fully rolled out and we can start to see the benefits of it.
Yeah. So it's in our it's in production now it's not quite fully rolled out it'll be announced very shortly.
Andy Wiederhorn: Yeah. It's in production now. It's not quite fully rolled out. It'll be announced very shortly. Sometime, I expect in the next 30 to 60 days, it'll be completely out there. There's sort of different versions of it with different operators, different restaurant companies. I think you'll see an announcement in maybe 3 weeks or so about it, or maybe 4, but there's two different paths we're going down to accelerate the manufacturing business. One is more virtual and one is with a direct very large operator, 400 unit operator. It's really going to be helpful for the factory, for cookie dough production, all of that.
Sometime I expect in the next 30 to 60 days it'll be completely out there.
<unk>.
And there's sort of different versions of it with different operators different restaurant companies and so.
You'll see an announcement in maybe three weeks or so about it maybe before but there's two different paths, we're going down to accelerate the manufacturing business and one is more virtual and one is the direct very large operator 400 unit operator, so it's gonna be it's really going to be helpful.
For the factory Cookie dough production on all of that.
Okay, and one more for me.
Cisco reported.
Joe Gomes: Okay, one more from me. Sysco reported, they were talking about improved restaurant industry traffic improved through the quarter, for their food service segment. Momentum continued in July. Wingstop reported this morning, and they beat expectations. Just wondering, are you starting to see some of this at your locations across the chains?
They were talking about improved restaurant industry traffic.
Through the quarter.
For their foodservice segment momentum.
Continued in July Wingstop reported.
This morning, and they beat expectations. Just wondering are you starting to see some of this at your locations across the chain.
So it's different in the brand categories and so like the snack brands cookies ice cream pretzels things like that are doing.
Andy Wiederhorn: It's different in the brand categories. Like the snack brands, cookies, ice cream, pretzels, things like that, are doing significantly better. You're seeing QSR brands be as beaten up as McDonald's or some of the Yum! Brands. Burger King, where you're seeing, like Fazoli's has had a tougher road here with sales in the last couple of quarters. On the polished casual side is getting better and better. We're optimistic, honestly, that we get through this consumer confidence push here as we get over the summer, and that things will continue to improve. We are seeing things, they're off less and less.
Significantly better.
You're seeing Q S. Our skus, our brand b as beaten up as Mcdonald's or some of Yum brands, So Burger King where youre seeing like there's always has had a tougher.
Road here with sales in the last couple of quarters and then on the on the.
Polished casual side is getting better and better and better and so we're optimistic honestly that we get through this consumer confidence push here as we get over the summer and that things will continue to improve we are seeing things, they're off less and less.
Okay, great. Thanks, Andy I appreciate it I'll get back in queue.
Joe Gomes: Okay, great. Thanks, Andy. I appreciate it. I will get back in queue.
Thank you Joe Okay.
Okay.
The next question is from Roger I Lipton from Lipton Financial services. Please go ahead.
Andy Wiederhorn: Thank you, Joe Gomes. Okay.
Operator: The next question is from Roger Lipton from Lipton Financial Services. Please go ahead.
Yeah, Hi, Andrew.
Greg Congratulations on the illegal.
Roger Lipton: Yeah. Hi, Andrew. First, congratulations on the legal progress.
Progress is listening I understood understatement sure.
Andy Wiederhorn: Thank you.
Roger Lipton: Progress being an understatement, for sure. Even though your organization has done an admirable job of not getting too distracted by it's got to be a great source of new focus for everybody, I'm sure.
And.
Even though your organization has done an admirable job of not getting too distracted by it it's got to be a great source of new focus for everybody I'm sure.
Hum.
Generally yes.
Yeah.
Andy Wiederhorn: Absolutely.
You indicated that you're going to have a.
Roger Lipton: Generally, you indicated that you're going to have working your way to a positive cash flow. Sounds like within 3, 4, 5 quarters from now. That's my estimate, not yours. It's a rough guesstimate. What's the current liquidity situation? You've generally given us a quarterly update on your financial flexibility in terms of money you can draw upon if necessary, just to bridge this remaining period.
Working your way to a positive cash flow it sounds like within three four or five quarters from now that's my estimate not yours.
Rough guesstimate, but what's the current liquidity situation you would generally give us a quarterly update on Europe.
Your financial flexibility in terms of.
In terms of money you can draw upon if necessary to bridge this remaining period.
Yeah, we continue to sit on them.
I'll have somewhere between 130 and $150 million of retained notes.
Andy Wiederhorn: We continue to sit on a pile of somewhere between $130 and $150 million of retained notes. Those are bonds that we originally issued that we haven't yet sold. We've drawn upon those, either financing those or selling those from time to time for liquidity. That's generally our path for liquidity. We do have things like an ATM in place at FAT that we can use, but given that we think the stock's undervalued, we haven't done much of that at all. Our focus right now is to, we want to continue to look at G&A and see if there's anywhere else to have savings across all the brands. We've identified $5 million we put in place. There's another $5 million I think we can get accomplished here between now and the end of the year.
Your bonds that we originally issued that we haven't yet sold so we've drawn upon those either finance he knows or selling those from time to time for liquidity. So that's that's generally our path for liquidity and we do have things like an ATM in place in fact that we can use but given that we think the stock's undervalued, we haven't done much of that at all.
You know are our focus right now is.
Two we want to continue to look at G&A and see if there's any anywhere else to have savings across all the brands in there.
We've identified $5 million, we put in place there's another $5 million I think we can get accomplished here over the between now and the end of the year and then.
There is the rapid acceleration of the smoke Smokey bones portfolio and that is identifying the stores that are going to be converted and getting them under that conversion process, whether it's with franchise partners or corporate and then also the stores that are not gonna be converted and not can remain open is the smoking ban.
Andy Wiederhorn: There is the rapid acceleration of the Smokey Bones portfolio, and that is identifying the stores that are going to be converted and getting them under that conversion process, whether it's with franchise partners or corporate, and then also the stores that are not going to be converted and not going to remain open as a Smokey Bones because the leases might mature. We want to accelerate that. We really want that process to be accelerated. It just wasn't moving at the pace it needed to move at with the prior management team, and that's going to change here very rapidly under Kim's leadership, and we're going to help him do whatever we need to do to do that, so that that's not dragging down the Twin Peaks business.
Because the leases might mature.
We want to accelerate that we really want that process to be accelerated just wasn't moving at the pace it needed to move that with the prior management team and it's going to and that's going to change here very rapidly under Kim's leadership, and we're going to help them do whatever we need to do to to do that so that that's dragging down between peaks business.
And there's some smokey bones that are very profitable that will keep us smokey bones and weather.
Andy Wiederhorn: There are some Smokey Bones that are very profitable that we'll keep as Smokey Bones, and whether we keep that as a subsidiary of Twin Peaks or not, we'll decide later. There's plenty of stores that are cash flowing just fine. It's just that the ones that are going to be converted and are not great as a Smokey Bones today, we need to deal with now. We can't wait.
Whether we keep that as a subsidiary of twin peaks or not will decide later, but there's plenty of stores that are casually just fine. It's just that you know the ones that are going to be converted and are not not greatest smokey bones today, we need to deal with now we can't wait.
Right Okay.
Can't really can't emphasize enough that the you know the <unk>.
Roger Lipton: Right.
Savings on the legal expense and professional side, that's just significant cash and if you take that cash and you take the savings from the.
Andy Wiederhorn: I can't emphasize enough the savings on the legal expense and professional side. That's just significant cash. If you take that cash and you take the savings from the dividends that we've temporarily paused, then you're already in the $70 to $75 million a year range. That's a huge savings. There's a few other things we're trying to negotiate for. We'll see if we get them.
It ends that we've temporarily paused then you know you're already in the $70 million to $75 million a year range. So that's a huge savings and you know there's a few other things where we're trying to negotiate but we'll see if we get them and that's a that's it.
If you're talking about.
Okay. Thank you.
Roger Lipton: Right.
Andy Wiederhorn: $75 million.
And you talked about refreshing a 5% of of the.
Roger Lipton: Okay. Thank you. You talked about refreshing 5% of the system. Which brands are the priority in terms of beginning to refresh them?
System.
Which brands are the priority in terms of in terms of getting to.
To refresh them.
Well. So these are these are not company owned stores right. These are all franchise locations I understand I understand it it depends on you know just by unit Count you have 400 round table Pizza is and then you have three or 400 ice cream in three or 400, cookie restaurants, and so on so it's really diverse its spread out its not just one.
Andy Wiederhorn: Well, these are not company-owned stores, right? These are all franchise locations.
Roger Lipton: I understand.
Andy Wiederhorn: It depends. Just by unit count, you have 400 Round Table Pizza, and then you have 300 or 400 ice cream and 300 or 400 cookie restaurants and so on. It's really diverse. It's spread out. It's not just one brand. It's targeted by brand and by market.
<unk>, it's a you know it's targeted by brand and by market.
But when.
Presumably you've got enough.
Roger Lipton: Right. Presumably, you've got enough profitable franchisees who have the capital to do that. It obviously takes money. I would assume you've got an adequate number of prosperous franchisees who can afford to reinvest and refresh their brands.
Profitable franchisees, who have the capital to do that obviously it takes money.
And.
So I would I would assume you've got an adequate number of prosperous franchisees, who can afford to reinvest in refresh there.
They are the brands.
I mean, I think it's like like someone we all know who says often you'd like to see interest rates lower so would we if interest rates were lower that's going to accelerate.
Andy Wiederhorn: Yeah, I think it's like someone we all know who says often you'd like to see interest rates lower. Would we. If interest rates were lower, that's going to accelerate development. It's going to accelerate remodels. Franchisees are committed. They're continuing to build more stores. They're continuing to buy the rights to build more stores. They're very positive about things in general, but you have different ebbs and flows of the labor market in California or cost of doing business in California, and then the actual cost of a remodel and the cost of equipment and supplies.
Development, it's going to accelerate remodels.
And our franchisees are committed to continuing to build more stores, they're continuing to buy the rights to build more stores.
They're very positive about things in general, but you know you have different ebbs and flows of the labor market in California or cost of doing business in California and then.
The cost of the actual cost of a remodel in the cost of our equipment and supplies.
I'm sure that once.
The current balance sheet is deleveraged somewhat you'll.
Roger Lipton: I'm sure that once the current balance sheet is deleveraged somewhat, you'll have an adequately creative way to step up and give your franchisees some help in terms of financing those renovations. Because too many brands have ignored that possibility. They've bought back billions of dollars worth of stock to enhance their stock options rather than give their franchisees a little help. I picture you doing something more productive for your franchisees. Lastly, which of your brands have the strongest sales trends?
But adequately creative way to step up and give you a franchisee with some help in terms of financing those those renovations.
He gets too much too many too many brands to ignore that possibility that they've bought back billions worth billions of dollars worth of stock.
And hence the stock options rather than give their franchise will help but I don't think that you're doing I think she had done something more productive for your franchisees.
Lastly, what which of which of your brands, having the strongest sales trends.
Well again, you have seen in the snack brands very positive sales momentum and then I.
Andy Wiederhorn: Well, again, you're seeing in the snack brands very positive sales momentum. You're actually seeing things improve. Round Table Pizza has been very strong. I wouldn't say hitting the ball out of the park, but very strong given its competitive landscape and the competitors it's up against. We don't report brand by brand or by segment, I'm not going to go into the specific numbers of each brand. Where we've seen the most trauma has really been in the QSR space, which is consistent with most other QSR players. At the other end of the spectrum, in sports bars and stuff, there's just an increased consumer sentiment to want to get back into the restaurants and sports.
You're actually seeing things improve roundtable pizza has been very strong and not not I wouldn't say hitting the ball out of the park, but very strong given its its competitors and competitive landscape. The competitors. It's because we don't report brand by brand or by segment. So I'm not going to go into the specific numbers of each brand.
Where do you see we've seen the most.
Trauma has really been in the <unk> space, which is consistent with most other key with our players and at the other end of the spectrum and in sports bars and stuff. There's just the increased consumer sentiment to want to get back into the restaurants in the summer of course is not the greatest sports time, and so we're looking forward to football starting up in August.
Andy Wiederhorn: The summer, of course, is not the greatest sports time, and so we're looking forward to football starting up in August and away we go into the fall and expect some really good numbers there.
And the way we go into the fall and expect some some really good numbers there.
Okay, well, that's all I've got right now thank you so much.
Thank you.
Roger Lipton: Great. Okay. Well, that's all I've got right now. Thank you so much.
There are no further questions at this time I would like to turn the floor back over to Andy later Horn for closing comments.
Andy Wiederhorn: Thank you.
Operator: There are no further questions at this time. I would like to turn the floor back over to Andy Wiederhorn for closing comments.
Thank you operator, and I want to thank everyone for joining us and invite you to the twin peaks call. If you are interested.
Andy Wiederhorn: Thank you, operator. I want to thank everyone for joining us and invite you to the Twin Peaks call if you are interested. This concludes today's call.
This concludes today's call.
Thank you the state. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Operator: Great. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.