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BBQ Holdings, Inc. Reports Results For Fourth Quarter And Fiscal Year 2019 And Acquisition Of Granite City Food & Brewery Restaurants

By: BBQ Holdings, Inc. |  1,023 Shares     221 Reads

MINNEAPOLIS, March 27, 2020 // GLOBE NEWSWIRE // - BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global owner and operator of restaurants today reported financial results for the fourth fiscal quarter and year ended December 29, 2019.

On March 9, 2020, the acquisition of the assets of Granite City Food & Brewery became official and BBQ Holdings now owns and operates 18 Granite City restaurants in 10 states. The price for the assets purchased was $3,650,000 plus assumed liabilities.

Fourth Quarter 2019 Highlights:

• Company-owned same store net sales increased 4.7%, driven by a 6.4% increase in To-Go same store net sales and a 26.0% increase in Catering, marking nine of the ten prior quarters experiencing positive comparable sales.
• Franchise-operated same store net sales increased 0.4% year-over-year.
• Achieved 54% of restaurant sales, net in growing off-premise lines of business and 46% dine-in.
• Net loss of $1.8 million, driven by acquisition and pre-opening costs.
• Formed a subsidiary with Clark Championship Products LLC with an exclusive license to sell Clark Crew BBQ sauces, rubs and other consumer packaged goods, and opened the first Clark Crew BBQ restaurant in Oklahoma City, Oklahoma.
• Opened a 3,000 square foot Famous Dave’s restaurant in Minneapolis, Minnesota.

Full Year 2019 Highlights 2019:

• Company-owned same store net sales increased 2.0%, driven by a 6.9% increase in To-Go same store net sales and a 13.7% increase in Catering.
• Franchise-operated same store net sales increased 1.0% year-over-year.
• 51% of net restaurant revenue was generated from off-premise sales with 49% from dine-in sales.
• Net loss of $649,000, driven by acquisition and pre-opening costs.
• Adjusted EBITDA of $3.8 million.
• Approximately 167,178 signups for our loyalty app since it was launched in December 2018, which generated $4.6 million of system-wide sales in 2019.
• Reacquired 17 Famous Dave’s franchise stores

Executive Comments

Jeff Crivello, CEO, commented, “The fourth quarter and full year 2019 was focused on moving our growth initiatives forward. We expect a twelve-month transition period to make all necessary improvements to the Famous Dave’s restaurants that we reacquired. In December, we opened the first Clark Crew BBQ in Oklahoma City, which is seeing an enormous amount of demand. Also in December, we opened a 3,000 sqft, bar-centric Famous Dave’s in Uptown Minneapolis, which is tracking toward our goals.

Our company-owned restaurants have generated positive comparable sales for nine of the last ten quarters, a statistic that separates us from almost every other multi-location restaurant operator within our industry, and our franchisees have sustained their positive comparable sales trend for this year.

Subsequently, we closed on the acquisition of eighteen Granite City Food and Brewery locations and one Real Urban BBQ.

The effect of the Coronavirus on our business, and restaurant industry will be drastic, but we have taken operational and financial measures to help navigate through the next few difficult months. The ultimate financial impairment is unknown without knowing the duration of the forced dining room closures. We remain committed to our Famous guests and staff members that we will get through this tough period.”

Key Operating Metrics

		Three Months Ended										Year Ended
		December 29, 2019				December 30, 2018						December 29, 2019				December 30, 2018
Restaurant count:
Franchise-operated			96				127					96				127
Company-owned			32				17					32				17
Total			128				144					128				144
Same store net restaurant sales %:
Franchise-operated, domestic			0.7		%		(1.0	)	%			1.2		%		(1.9	)	%
Franchise-operated, international(1)			(9.9	)	%		(25.8	)	%			(7.3	)	%		(12.0	)	%
Franchise-operated total			0.4		%		(1.8	)	%			1.0		%		(2.9	)	%
Company-owned			4.7		%		2.2		%			2.0		%		2.7		%
Total			0.9		%		(1.3	)	%			1.1		%		(1.5	)	%
(in thousands, expect per share data)
System-wide restaurant sales(2)		$	76,940			$	83,412				$	333,695			$	358,073
Net income attributable to shareholders		$	(1,788	)		$	1,070				$	(649	)		$	4,862
Adjusted net income attributable to shareholders(3)			(729	)			1,138					1,410				5,304
Net (loss) income attributable to shareholders, per diluted share		$	(0.20	)		$	0.12				$	(0.07	)		$	0.57
Adjusted net income attributable to shareholders, per diluted share(3)			(0.08	)			0.13					0.15				0.62
Adjusted EBITDA(3)		$	(754	)		$	1,226				$	3,751			$	7,736

⁽¹⁾ International franchise comparable sales declines are primarily related to Puerto Rico, which closed as a result of effects of the hurricanes.
⁽²⁾ 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.
⁽³⁾ 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.”

Fourth Quarter 2019 Review

Total revenue for the fourth quarter of 2019 was $23.3 million, up 73.2% from the fourth quarter of 2018. The increase in year-over-year restaurant net sales for the quarter ended December 29, 2019 was driven primarily by the acquisition of Famous Dave’s stores in Colorado, Michigan, Ohio, Wisconsin, Indiana, Kentucky, Iowa, and Arizona and a 4.7% increase in company-owned same store net sales.

On a weighted basis, same store net sales for our To-Go and Catering lines of business increased 6.4% and 26.0%, respectively, in the fourth quarter of fiscal 2019 as compared to the prior year period, partially offset by a decline net sales, while To Go and Catering represented 36% and 18% of restaurant net sales, respectively.

Restaurant-level operating margin, as a percentage of restaurant net sales, for Company-owned restaurants was (3.1)% in the fourth quarter of fiscal 2019 compared to (2.9)% in the fourth quarter of fiscal 2018. This decline in restaurant-level operating margin was primarily a result of acquisitions of new stores in 2019.

General and administrative expenses for the quarter ended December 29, 2019 and December 30, 2018 represented approximately 14.8% and 15.4% of total revenues, respectively. While as a percentage of revenues general and administrative expenses decreased year over year, we incurred additional expenditures for acquisition costs and ongoing oversight of our new restaurants.

Net loss attributable to shareholders was approximately $1.8 million, or $0.20 per share, in the fourth quarter of fiscal 2019 compared to net income attributable to shareholders of approximately $1.1 million, or $0.12 per share, in the fourth quarter of fiscal 2018. Adjusted net loss attributable to shareholders, a non-GAAP measure, was approximately $729,000, or $0.08 per share, compared to adjusted net income attributable to shareholders of approximately $1.1 million, or $0.12 per diluted share, in the fourth quarter of fiscal 2018. A reconciliation between adjusted net income attributable to shareholders and its most directly comparable GAAP measure is included in the accompanying financial tables.

Fiscal Year 2019 Review

Total revenue for fiscal year 2019 was $82.3 million, up 49.9% from fiscal year 2018. The increase in year-over-year restaurant net sales for the year ended December 29, 2019 was driven primarily by the acquisition of Famous Dave’s stores in Colorado, Michigan, Ohio, Wisconsin, Indiana, Kentucky, Iowa, and Arizona and an increase in company-owned same store net sales of 2.0%, partially offset by corporate restaurant closures.

On a weighted basis, same store net sales for our To-Go and Catering lines of business increased 6.9% and 13.7%, respectively, in fiscal 2019 as compared to fiscal 2018, partially offset by a decline in our Dine In line of business of 4.3%. During fiscal 2019, Dine In represented approximately 49% of our total restaurant net sales, while To Go and Catering represented 36% and 15% of restaurant net sales, respectively.

Restaurant-level operating margin, as a percentage of restaurant net sales, for Company-owned restaurants was (0.1)% in fiscal 2019 compared to 1.3% in fiscal 2018. This decline in restaurant-level operating margin in 2019 was primarily a result of the acquisitions of new restaurants which our company committed additional expenditures in order to improve operations.

General and administrative expenses for the fiscal years ended December 29, 2019 and December 30, 2018 represented approximately 13.4% and 14.6% of total revenues, respectively. While as a percentage of revenues general and administrative expenses decreased year over year, we incurred additional expenditures for acquisition costs and ongoing oversight of our new restaurants.

Net loss attributable to shareholders was approximately $649,000, or $0.07 per share, in fiscal 2019 compared to net income attributable to shareholders of approximately $4.9 million, or $0.56 per diluted share, in fiscal 2018. Adjusted net income attributable to shareholders, a non-GAAP measure, was approximately $1.4 million, or $0.15 per diluted share, compared to adjusted net income attributable to shareholders of approximately $5.3 million, or $0.62 per diluted share, in fiscal 2018. 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 March 27, 2020, BBQ Holdings had four brands with 139 overall locations in 28 states and three countries, including 48 company-owned and 91 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

Peter Seltzberg
Darrow Associates, Inc.
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								Year Ended
	December 29, 2019				December 30, 2018				December 29, 2019				December 30, 2018
Revenue:
Restaurant sales, net	$	19,952			$	9,480			$	67,278			$	38,051
Franchise royalty and fee revenue		2,566				3,248				12,126				13,871
Franchisee national advertising fund contributions		341				437				1,616				1,932
Licensing and other revenue		410				268				1,249				1,034
Total revenue		23,269				13,433				82,269				54,888
Costs and expenses:
Food and beverage costs		6,473				3,066				21,541				11,973
Labor and benefits costs		7,312				3,505				24,565				13,663
Operating expenses		6,780				3,186				21,269				11,932
Depreciation and amortization expenses		876				281				2,231				1,264
General and administrative expenses		3,445				2,066				10,992				7,988
National advertising fund expenses		341				437				1,616				1,932
Asset impairment, estimated lease termination charges and other closing costs, net		578				2				1,296				145
Pre-opening expenses		366				—				460				—
(Gain) loss on disposal of property and bargain purchases, net		100				—				(74	)			29
Total costs and expenses		26,271				12,543				83,896				48,926
(Loss) income from operations		(3,002	)			890				(1,627	)			5,962
Other income (expense):
Interest expense		(102	)			(71	)			(494	)			(493	)
Interest income		101				43				215				122
Total other expense		(1	)			(28	)			(279	)			(371	)
(Loss) income before income taxes		(3,003	)			862				(1,906	)			5,591
Income tax benefit (expense)		684				208				659				(729	)
Net (loss) income		(2,319	)			1,070				(1,247	)			4,862
Less: Net loss attributable to non-controlling interest		531				—				598				—
Net (loss) income attributable to shareholders	$	(1,788	)		$	1,070			$	(649	)		$	4,862
Basic net (loss) income per share attributable to shareholders	$	(0.20	)		$	0.12			$	(0.07	)		$	0.57
Diluted net (loss) income per share attributable to shareholders	$	(0.20	)		$	0.12			$	(0.07	)		$	0.56
Weighted average shares outstanding - basic		9,117				9,092				9,099				8,599
Weighted average shares outstanding - diluted		9,117				9,098				9,099				8,624

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

		Three Months Ended							Year Ended
		December 29, 2019			December 30, 2018				December 29, 2019			December 30, 2018
Food and beverage costs(1)		32.4		%	32.3		%		32.0		%	31.5	%
Labor and benefits costs(1)		36.6		%	37.0		%		36.5		%	35.9	%
Operating expenses(1)		34.0		%	33.6		%		31.6		%	31.4	%
Restaurant level operating margin(1)(3)		(3.1	)	%	(2.9	)	%		(0.1	)	%	1.3	%
Depreciation and amortization expenses(2)		3.8		%	2.1		%		2.7		%	2.3	%
General and administrative expenses(2)		14.8		%	15.4		%		13.4		%	14.6	%
(Loss) income from operations(2)		(12.9	)	%	6.6		%		(2.0	)	%	10.9	%

⁽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:		December 29, 2019				December 30, 2018
Cash and cash equivalents		$	5,325			$	11,598
Restricted cash			761				842
Accounts receivable, net of allowance for doubtful accounts of $132,000 and $192,000, respectively			4,379				4,300
Inventories			1,346				722
Prepaid income taxes and income taxes receivable			264				377
Prepaid expenses and other current assets			1,356				1,363
Assets held for sale			2,842				—
Total current assets			16,273				19,202
Property, equipment and leasehold improvements, net			19,756				10,385
Other assets:
Operating lease right-of-use assets			25,962				—
Goodwill			640				61
Intangible assets, net			2,213				1,428
Deferred tax asset, net			6,646				5,747
Other assets			1,591				1,533
		$	73,081			$	38,356
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	3,967			$	3,765
Current portion of lease liabilities			4,230				—
Current portion of long-term debt and financing lease obligations			616				1,369
Accrued compensation and benefits			2,694				808
Other current liabilities			4,975				2,970
Total current liabilities			16,482				8,912
Long-term liabilities:
Lease liabilities, less current portion			26,957				—
Long-term debt, less current portion			6,258				2,411
Other liabilities			1,610				4,492
Total liabilities			51,307				15,815
Shareholders’ equity:
Common stock, $.01 par value, 100,000 shares authorized, 9,272 and 9,085 shares issued and outstanding at December 29, 2019 and December 30, 2018, respectively			93				91
Additional paid-in capital			7,856				7,375
Retained earnings			14,423				15,075
Total shareholders’ equity			22,372				22,541
Non-controlling interest			(598	)			—
Total equity			21,774				22,541
		$	73,081			$	38,356

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

		Year Ended
		December 29, 2019				December 30, 2018
Cash flows from operating activities:
Net (loss) income		$	(1,247	)		$	4,862
Adjustments to reconcile net income to cash flows provided by operations:
Depreciation and amortization			2,231				1,264
Stock-based compensation			463				278
Net (gain) loss on disposal of property and bargain purchases			(74	)			29
Asset impairment, estimated lease termination charges and other closing costs (gain), net			1,273				(46	)
Bad debts recovery			239				(30	)
Deferred income taxes			(688	)			639
Other non-cash items			291				(515	)
Changes in operating assets and liabilities:
Accounts receivable, net			(1,582	)			(225	)
Other assets			(449	)			(389	)
Accounts payable			258				(600	)
Accrued and other liabilities			1,867				(1,390	)
Cash flows provided by operating activities			2,582				3,877
Cash flows from investing activities:
Proceeds from the sale of assets			33				1,187
Purchases of property, equipment and leasehold improvements			(6,755	)			(953	)
Payments for acquired restaurants			(6,188	)			(229	)
Advances on notes receivable			(150	)			(750	)
Purchases of held to maturity securities			—				(6,995	)
Maturity of held to maturity securities			—				6,995
Payments received on note receivable			31				—
Cash flows used for investing activities			(13,029	)			(745	)
Cash flows from financing activities:
Proceeds from long-term debt			4,300				—
Payments for debt issuance costs			(54	)			—
Payments on long-term debt and financing lease obligations			(175	)			(6,758	)
Proceeds from sale of common stock, net of offering costs			—				5,120
Proceeds from exercise of stock options			22				520
Cash provided by (used for) financing activities			4,093				(1,118	)
(Decrease) increase in cash, cash equivalents and restricted cash			(6,354	)			2,014
Cash, cash equivalents and restricted cash, beginning of period			12,440				10,426
Cash, cash equivalents and restricted cash, end of period		$	6,086			$	12,440

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

		Three Months Ended										Year Ended
(dollars in thousands)		December 29, 2019				December 30, 2018						December 29, 2019				December 30, 2018
Net income attributable to shareholders		$	(1,788	)		$	1,070					(649	)			4,862
Asset impairment and estimated lease termination charges and other closing costs			578				2					1,296				145
Net gain on disposal of equipment			100				—					(74	)			29
Stock-based compensation			109				53					463				278
Acquisition costs			301				—					1,071				—
Pre-opening costs			284				—					378				—
Severance			—				—					13				58
Tax adjustment			(312	)			13					(1,088	)			(68	)
Adjusted net income		$	(729	)		$	1,138				$	1,410			$	5,304
Basic adjusted net income per common share		$	(0.08	)		$	0.13				$	0.15			$	0.62
Diluted adjusted net income per common share		$	(0.08	)		$	0.13				$	0.15			$	0.62
Weighted average common share outstanding - basic			9,117				9,092					9,099				8,599
Weighted average common share outstanding - diluted			9,117				9,098					9,099				8,624
Net income		$	(2,319	)		$	1,070				$	(1,247	)		$	4,862
Asset impairment and estimated lease termination charges and other closing costs			578				2					1,296				145
Depreciation and amortization			876				281					2,231				1,264
Interest expense, net			1				28					279				371
Net (gain) loss on disposal of equipment			100				—					(74	)			29
Stock-based compensation			109				53					463				278
Acquisition costs			301				—					1,071				—
Pre-opening costs			284				—					378				—
Severance			—				—					13				58
Provision for income taxes			(684	)			(208	)				(659	)			729
Adjusted EBITDA		$	(754	)		$	1,226				$	3,751			$	7,736

Source: BBQ Holdings, Inc

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