BBQ Holdings, Inc. Reports Results for Third Quarter of Fiscal Year 2020
MINNEAPOLIS, Nov. 10, 2020 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global owner and operator of restaurants, today reported financial results for the third fiscal quarter ended September 27, 2020. Note: The third quarter results were affected by the COVID-19 pandemic as well as federal and state level mandates requiring restaurants to limit or eliminate in-store dining.
Third Quarter 2020 Highlights:
Net income of $328,000, driven in part by a gain on a renegotiated leased asset of $630,000.
Adjusted EBITDA, a non-GAAP measure was $2.0 million which includes a $1.1 million COVID-related expense addback.
Company-owned Famous Dave’s third quarter same store net sales decreased 4.6% compared to third quarter 2019.
Franchise-operated same store net sales decreased 10.0%.
Granite City third quarter same store net sales decreased 25.9% compared to third quarter 2019.
Same store sales at our Famous Dave’s restaurants increased 2.0% while same store sales at our Granite City restaurants decreased 23.8% during the four weeks ended October 25, 2020 compared to the same four-week period in 2019.
Entered into a 25-unit development agreement with Bluestone Hospitality Group to open Famous Dave’s ghost kitchens and dual restaurant concepts with the Johnny Carino’s Italian brand.
Executive Comments
Jeff Crivello, CEO, commented, “We continue to allocate much of our time and resources to COVID-19 related regulations. With restaurants in 19 states, this is not an easy task. Nonetheless, we are pleased to return to positive EBITDA during the quarter. The team captured many wins during the quarter including signing of a 25-unit ghost kitchen development agreement with Bluestone Hospitality Group. Additionally, we are seeing success in the recent opening of a Famous Dave’s ghost kitchen within the St. Cloud Granite City Food & Brewery. To drive add-on revenues, we will be repeating this process in six more Granite City locations by the end of the first quarter 2021. The recent opening of the Texas T-Bone and Famous Dave’s dual concept has been very successful, and we hope to expand that concept as well. On the technical side, we launched our new website to make the ordering process even more seamless to our patrons. Finally, we our beginning the roll-out of our Symphony POS system which we feel will enhance the customer experience of our loyalty promotions as well as simplify our overall internal operating systems. It has been a busy quarter, but we feel the entrepreneurial spirit of BBQ Holdings is hitting on all cylinders, and we expect to continue driving sales in a variety of ways as we adapt to the ever-changing consumer.”
Key Operating Metrics
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2020 | September 29, 2019 | September 27, 2020 | September 29, 2019 | |||||||||||||
Restaurant count: | ||||||||||||||||
Franchise-operated | 95 | 96 | 95 | 96 | ||||||||||||
Company-owned | 49 | 32 | 49 | 32 | ||||||||||||
Total | 144 | 128 | 144 | 128 | ||||||||||||
Same store net restaurant sales %: | ||||||||||||||||
Franchise-operated | (10.0 | )% | 2.1 | % | (18.3 | )% | 1.2 | % | ||||||||
Company-owned | (4.6 | )% | 0.4 | % | (9.9 | )% | 1.0 | % | ||||||||
Total | (30.0 | )% | 1.9 | % | (20.6 | )% | 1.2 | % | ||||||||
(in thousands, expect per share data) | ||||||||||||||||
System-wide restaurant sales(1) | $ | 82,482 | $ | 75,907 | $ | 214,803 | $ | 215,386 | ||||||||
Net income attributable to shareholders | $ | 328 | $ | 17 | $ | 7,783 | $ | 1,139 | ||||||||
Adjusted net income attributable to shareholders(2) | 480 | 166 | (4,039 | ) | 2,874 | |||||||||||
Net income attributable to shareholders, per diluted share | $ | 0.04 | $ | 0.00 | $ | 0.85 | $ | 0.13 | ||||||||
Adjusted net income attributable to shareholders, per diluted share(2) | 0.05 | 0.02 | (0.44 | ) | 0.31 | |||||||||||
Adjusted EBITDA(2) | $ | 1,995 | $ | 1,028 | $ | 2,915 | $ | 4,505 | ||||||||
(1) | System-wide restaurant sales include sales for all Company-owned and franchise-operated restaurants, as reported by franchisees. Restaurant sales for franchise-operated restaurants are not revenues of the Company and are not included in the Company’s consolidated financial statements. | |
(2) | Adjusted net income (loss) from continuing operations and adjusted EBITDA are non-GAAP measures. A reconciliation of all non-GAAP measures to the most directly comparable GAAP measure is included in the accompanying financial tables. See “Non-GAAP Reconciliation.” |
Third Quarter 2020 Review
Total revenue for the third quarter of 2020 was $35.5 million, up 47.9% from the third quarter of 2019. The increase in year-over-year restaurant net sales for the quarter ended September 27, 2020 was driven primarily by the addition of 18 Granite City restaurants, a Clark Crew BBQ and a Real Urban Barbecue restaurant.
On a weighted basis, Company-owned Famous Dave’s same-store net sales for our to-go line of business increased 73.3% in the third quarter of fiscal 2020 as compared to the prior year period, offset by a decrease of 55.0% in net catering sales and 33.4% in dine-in sales due to federal, state and local mandates prohibiting large group gatherings and in-store dining in an attempt to reduce the spread of COVID-19.
Restaurant-level operating margin, as a percentage of restaurant net sales, for Company-owned restaurants was 3.4% in the third quarter of fiscal 2020 compared to 0.6% in the third quarter of fiscal 2019. This increase in restaurant-level operating margin was primarily a result of the reduction of labor and food costs as our restaurant operators adjusted to the increase in to-go sales and reduction of dine-in customers as a result of COVID-19 concerns.
General and administrative expenses for the quarter ended September 27, 2020 and September 29, 2019 represented approximately 8.8% and 11.0% of total revenues, respectively. The decrease in general and administrative expenses as a percentage of revenue in the third quarter of 2020 was due in part to the increase in the revenue base with the addition of 20 locations during 2020.
Net income attributable to shareholders was approximately $328,000, or $0.04 per share, in the third quarter of fiscal 2020 compared to net income of $17,000, or $0.00 per share, in the third quarter of fiscal 2019. Adjusted net income attributable to shareholders, a non-GAAP measure, was approximately $480,000, or $0.05 per share, compared to adjusted net income attributable to shareholders of approximately $166,000, or $0.02 per share, in the third quarter of fiscal 2019. A reconciliation between adjusted net income attributable to shareholders and its most directly comparable GAAP measure is included in the accompanying financial tables.
About BBQ Holdings
BBQ Holdings, Inc. (NASDAQ: BBQ) BBQ Holdings is a national restaurant company engaged in the ownership and operation of casual and fast dining restaurants. As of November 10, 2020, BBQ Holdings had four brands with 146 overall locations in 31 states and three countries, including 48 company-owned and 98 franchise-operated restaurants. While BBQ Holdings continues to diversify its ownership in the restaurant community, it was founded with the principle of combining the “art and science” of barbecue to serve up the very best of the best to barbecue lovers everywhere. BBQ Holdings, through partnerships, has extended Travis Clark’s award-winning line of barbecue sauces, rubs and seasonings into the retail market. Along with a wide variety of BBQ favorites served at their BBQ restaurants, BBQ Holdings newest addition, Granite City Food and Brewery, offers award winning craft beer and a made-from-scratch, chef driven menu featuring contemporary American cuisine.
Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses non-GAAP measures including those indicated below. These non-GAAP measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s consolidated financial statements and are subject to inherent limitations. By providing non-GAAP measures, together with a reconciliation to the most comparable GAAP measure, the Company believes that it is enhancing investors’ understanding of the Company’s business and results of operations. These measures are not intended to be considered in isolation of, as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures presented may be different from the measures used by other companies. The Company urges investors to review the reconciliation of its non-GAAP measures to the most directly comparable GAAP measure, included in the accompanying financial tables.
Adjusted net income attributable to shareholders is net income attributable to shareholders, plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs, and the related tax impact. This number is divided by the weighted-average number of diluted shares of common stock outstanding during each period presented to arrive at adjusted net income, per share. Adjusted EBITDA is net income (loss), plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs and provision (benefit) for income taxes.
Forward-Looking Statements
Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Company’s restaurant openings, the timing of refreshes and the timing or success of refranchising plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from expected results. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from the Company’s expectation include the impact of the COVID-19 virus pandemic, financial performance, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the Company’s SEC reports.
Contact: | Jeff Crivello – Chief Executive Officer | |
952-294-1300 | ||
Darrow Associates, Inc. | ||
Peter Seltzberg – Managing Director | ||
516-419-9915 | ||
pseltzberg@darrowir.com |
BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2020 | September 29, 2019 | September 27, 2020 | September 29, 2019 | |||||||||||||
Revenue: | ||||||||||||||||
Restaurant sales, net | $ | 32,559 | $ | 20,451 | $ | 78,251 | $ | 48,267 | ||||||||
Franchise royalty and fee revenue | 2,153 | 2,909 | 6,628 | 9,560 | ||||||||||||
Franchisee national advertising fund contributions | 302 | 395 | 826 | 1,275 | ||||||||||||
Licensing and other revenue | 497 | 261 | 1,423 | 839 | ||||||||||||
Total revenue | 35,511 | 24,016 | 87,128 | 59,941 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Food and beverage costs | 9,735 | 6,383 | 24,206 | 15,068 | ||||||||||||
Labor and benefits costs | 11,189 | 7,477 | 26,976 | 17,253 | ||||||||||||
Operating expenses | 10,521 | 6,470 | 26,251 | 15,430 | ||||||||||||
Depreciation and amortization expenses | 1,397 | 576 | 3,820 | 1,355 | ||||||||||||
General and administrative expenses | 3,138 | 2,653 | 9,973 | 7,547 | ||||||||||||
National advertising fund expenses | 302 | 395 | 826 | 1,275 | ||||||||||||
Asset impairment, estimated lease termination charges and other closing costs, net | (138 | ) | 214 | 4,814 | 718 | |||||||||||
Pre-opening expenses | (120 | ) | 94 | (93 | ) | 94 | ||||||||||
Gain on disposal of property, net | (530 | ) | (28 | ) | (1,107 | ) | (174 | ) | ||||||||
Total costs and expenses | 35,494 | 24,234 | 95,666 | 58,566 | ||||||||||||
Income (loss) from operations | 17 | (218 | ) | (8,538 | ) | 1,375 | ||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (326 | ) | (33 | ) | (866 | ) | (392 | ) | ||||||||
Interest income | 94 | 27 | 380 | 114 | ||||||||||||
Gain on bargain purchase | — | — | 13,675 | — | ||||||||||||
Total other (expense) income | (232 | ) | (6 | ) | 13,189 | (278 | ) | |||||||||
(Loss) income before income taxes | (215 | ) | (224 | ) | 4,651 | 1,097 | ||||||||||
Income tax benefit (expense) | 273 | 174 | 2,519 | (25 | ) | |||||||||||
Net income (loss) | 58 | (50 | ) | 7,170 | 1,072 | |||||||||||
Net loss attributable to non-controlling interest | 270 | 67 | 613 | 67 | ||||||||||||
Net income attributable to shareholders | $ | 328 | $ | 17 | $ | 7,783 | $ | 1,139 | ||||||||
Income per common share: | ||||||||||||||||
Basic net income per share attributable to shareholders | $ | 0.04 | $ | 0.00 | $ | 0.85 | $ | 0.13 | ||||||||
Diluted net income per share attributable to shareholders | $ | 0.04 | $ | 0.00 | $ | 0.85 | $ | 0.12 | ||||||||
Weighted average shares outstanding - basic | 9,151 | 9,105 | 9,138 | 9,095 | ||||||||||||
Weighted average shares outstanding - diluted | 9,158 | 9,279 | 9,145 | 9,193 | ||||||||||||
BBQ HOLDINGS, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 27, 2020 | September 29, 2019 | September 27, 2020 | September 29, 2019 | |||||||||
Food and beverage costs(1) | 29.9 | % | 31.2 | % | 30.9 | % | 31.2 | % | ||||
Labor and benefits costs(1) | 34.4 | % | 36.6 | % | 34.5 | % | 35.7 | % | ||||
Operating expenses(1) | 32.3 | % | 31.6 | % | 33.5 | % | 32.0 | % | ||||
Restaurant level operating margin(1)(3) | 3.4 | % | 0.6 | % | 1.0 | % | 1.1 | % | ||||
Depreciation and amortization expenses(2) | 3.9 | % | 2.4 | % | 4.4 | % | 2.3 | % | ||||
General and administrative expenses(2) | 8.8 | % | 11.0 | % | 11.4 | % | 12.6 | % | ||||
(Loss) income from operations(2) | 0.0 | % | (0.9 | )% | (9.8 | )% | 2.3 | % | ||||
(1) | As a percentage of restaurant sales, net | |
(2) | As a percentage of total revenue | |
(3) | Restaurant level margins are equal to restaurant sales, net, less restaurant level food and beverage costs, labor and benefit costs, and operating expenses. |
BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
ASSETS | ||||||||
Current assets: | September 27, 2020 | December 29, 2019 | ||||||
Cash and cash equivalents | $ | 19,551 | $ | 5,325 | ||||
Restricted cash | 959 | 761 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $176,000 and $132,000, respectively | 3,885 | 4,379 | ||||||
Inventories | 2,490 | 1,346 | ||||||
Prepaid income taxes and income taxes receivable | 285 | 264 | ||||||
Prepaid expenses and other current assets | 638 | 1,356 | ||||||
Assets held for sale | 3,911 | 2,842 | ||||||
Total current assets | 31,719 | 16,273 | ||||||
Property, equipment and leasehold improvements, net | 33,131 | 19,756 | ||||||
Other assets: | ||||||||
Operating lease right-of-use assets | 64,833 | 25,962 | ||||||
Goodwill | 651 | 640 | ||||||
Intangible assets, net | 10,117 | 2,213 | ||||||
Deferred tax asset, net | 4,264 | 6,646 | ||||||
Other assets | 1,691 | 1,591 | ||||||
$ | 146,406 | $ | 73,081 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 4,952 | $ | 3,967 | ||||
Current portion of lease liabilities | 6,459 | 4,230 | ||||||
Current portion of long-term debt | 2,749 | 616 | ||||||
Accrued compensation and benefits | 2,225 | 2,694 | ||||||
Other current liabilities | 8,467 | 4,975 | ||||||
Total current liabilities | 24,852 | 16,482 | ||||||
Long-term liabilities: | ||||||||
Lease liabilities, less current portion | 65,319 | 26,957 | ||||||
Long-term debt, less current portion | 25,483 | 6,258 | ||||||
Other liabilities | 1,386 | 1,610 | ||||||
Total liabilities | 117,040 | 51,307 | ||||||
Shareholders’ equity: | ||||||||
Common stock, $.01 par value, 100,000 shares authorized, 9,284 and 9,272 shares issued and outstanding at September 27, 2020 and December 29, 2019, respectively | 93 | 93 | ||||||
Additional paid-in capital | 8,278 | 7,856 | ||||||
Retained earnings | 22,206 | 14,423 | ||||||
Total shareholders’ equity | 30,577 | 22,372 | ||||||
Non-controlling interest | (1,211 | ) | (598 | ) | ||||
Total equity | 29,366 | 21,774 | ||||||
$ | 146,406 | $ | 73,081 | |||||
BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended | ||||||||
September 27, 2020 | September 29, 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 7,170 | $ | 1,072 | ||||
Adjustments to reconcile net income to cash flows provided by operations: | ||||||||
Depreciation and amortization | 3,820 | 1,355 | ||||||
Stock-based compensation | 422 | 354 | ||||||
Net gain on disposal | (1,080 | ) | (174 | ) | ||||
Asset impairment, estimated lease termination charges and other closing costs, net | 4,788 | 660 | ||||||
Gain on bargain purchase | (13,675 | ) | — | |||||
Deferred income taxes | (2,569 | ) | 36 | |||||
Other non-cash items | 488 | 213 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 494 | (495 | ) | |||||
Other assets | (867 | ) | (580 | ) | ||||
Accounts payable | 985 | 1,371 | ||||||
Accrued and other liabilities | 671 | (356 | ) | |||||
Cash flows provided by operating activities | 647 | 3,456 | ||||||
Cash flows from investing activities: | ||||||||
Proceeds from the sale of assets | 27 | 33 | ||||||
Purchases of property, equipment and leasehold improvements | (2,671 | ) | (3,792 | ) | ||||
Payments for acquired restaurants | (4,952 | ) | (6,188 | ) | ||||
Advances on notes receivable | — | (150 | ) | |||||
Payments received on note receivable | 24 | 20 | ||||||
Cash flows used for investing activities | (7,572 | ) | (10,077 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from long-term debt | 22,058 | — | ||||||
Payments for debt issuance costs | (45 | ) | (54 | ) | ||||
Payments on long-term debt | (664 | ) | (176 | ) | ||||
Cash provided by (used for) financing activities | 21,349 | (230 | ) | |||||
Increase (decrease) in cash, cash equivalents and restricted cash | 14,424 | (6,851 | ) | |||||
Cash, cash equivalents and restricted cash, beginning of period | 6,086 | 12,440 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 20,510 | $ | 5,589 | ||||
BBQ HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
(dollars in thousands) | September 27, 2020 | September 29, 2019 | September 27, 2020 | September 29, 2019 | ||||||||||||
Net income attributable to shareholders | $ | 328 | $ | 17 | 7,783 | 1,139 | ||||||||||
Asset impairment and estimated lease termination charges and other closing costs | (138 | ) | 214 | 4,814 | 718 | |||||||||||
Net gain on disposal of equipment | (530 | ) | (28 | ) | (1,107 | ) | (174 | ) | ||||||||
Stock-based compensation | 174 | 131 | 422 | 354 | ||||||||||||
Acquisition costs | 29 | 249 | (46 | ) | 770 | |||||||||||
Pre-opening costs | (120 | ) | 94 | (93 | ) | 94 | ||||||||||
Severance | 21 | 10 | 52 | 13 | ||||||||||||
Gain on bargain purchase | — | — | (13,675 | ) | — | |||||||||||
Tax adjustment | 716 | (521 | ) | (2,189 | ) | (40 | ) | |||||||||
Adjusted net income (loss) | $ | 480 | $ | 166 | $ | (4,039 | ) | $ | 2,874 | |||||||
Basic adjusted net income (loss) per common share | $ | 0.05 | $ | 0.02 | $ | (0.44 | ) | $ | 0.32 | |||||||
Diluted adjusted net income (loss) per common share | $ | 0.05 | $ | 0.02 | $ | (0.44 | ) | $ | 0.31 | |||||||
Weighted average common share outstanding - basic | 9,151 | 9,105 | 9,138 | 9,095 | ||||||||||||
Weighted average common share outstanding - diluted | 9,158 | 9,279 | 9,145 | 9,193 | ||||||||||||
Net income (loss) | $ | 58 | $ | (50 | ) | $ | 7,170 | $ | 1,072 | |||||||
Asset impairment and estimated lease termination charges and other closing costs | (138 | ) | 214 | 4,814 | 718 | |||||||||||
Depreciation and amortization | 1,397 | 576 | 3,820 | 1,355 | ||||||||||||
Interest expense, net | 232 | 6 | 486 | 278 | ||||||||||||
Net gain on disposal of equipment | (530 | ) | (28 | ) | (1,107 | ) | (174 | ) | ||||||||
Stock-based compensation | 174 | 131 | 422 | 354 | ||||||||||||
Acquisition costs | 29 | 249 | (46 | ) | 770 | |||||||||||
Pre-opening costs | (120 | ) | 94 | (93 | ) | 94 | ||||||||||
Severance | 21 | 10 | 52 | 13 | ||||||||||||
Gain on bargain purchase | — | — | (13,675 | ) | — | |||||||||||
Provision for income taxes | (273 | ) | (174 | ) | (2,519 | ) | 25 | |||||||||
COVID-19-related expense | 1,145 | — | 3,591 | — | ||||||||||||
Adjusted EBITDA | $ | 1,995 | $ | 1,028 | $ | 2,915 | $ | 4,505 | ||||||||
