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BBQ Holdings, Inc. Reports Results for First Quarter 2022

·18-min read
BBQ Holdings, Inc.
BBQ Holdings, Inc.

MINNEAPOLIS, May 10, 2022 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global franchisor, owner and operator of restaurants, today reported financial results for the first fiscal quarter ended April 3, 2022.

First Quarter Highlights:

First Quarter

(dollars in thousands, except per share data)

2022

2021

2020

2019

Total revenue

$

64,184

$

37,319

$

23,855

$

14,193

Net income (loss)

$

767

$

799

$

13,707

$

82

Earnings (loss) per diluted share

$

0.07

$

0.08

$

1.49

$

0.01

Adjusted net income (loss)

$

1,138

$

811

$

(484

)

$

489

Adjusted earnings (loss) per diluted share

$

0.11

$

0.09

$

(0.05

)

$

0.05

Cash EBITDA

$

3,748

$

3,220

$

(457

)

$

1,030

Restaurant-level margins

6.4

%

9.1

%

(1.9

)%

(1.7

)%

Prime costs

64.3

%

60.4

%

69.9

%

71.0

%

Free cash flow

$

3,026

$

2,529

$

(1,406

)

$

809


First Quarter Same Store Sales

2022 vs. 2021

2022 vs. 2020

2022 vs. 2019

Famous Dave's Company-owned

7.9

%

22.6 %

12.6 %

Famous Dave's Franchise-operated*

8.6

%

21.3 %

5.6 %

Granite City**

24.1

%

21.4 %

(1.7)%

Village Inn Company-owned**

19.1

%

8.8 %

(8.0)%

Village Inn Franchise-operated*

19.9

%

NA%

NA%

Bakers Square**

17.0

%

(12.5)%

(17.7)%

Clark Crew

5.0

%

5.8 %

NA%

Real Urban BBQ**

11.0

%

NA%

NA%

Tahoe Joe's**

6.0

%

NA%

NA%

* as reported by franchisees
** includes sales under prior ownership
*** it is our policy to include in our same store net sales base, restaurants that have been open for 12 months under our company’s ownership


Subsequent Events:

On April 11, 2022, we closed the purchase of the Barrio Queen Restaurant Business. The purchase price of approximately $28.5 million was funded with cash and debt. See 8-K filed with the SEC on March 14, 2022 for additional information regarding this acquisition, including the Asset Purchase Agreement.

On November 23, 2021, the Company, entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. The Credit Agreement had a five-year term and provided for up to a $5.0 million revolving line of credit and a $15.0 million term loan. On April 11, 2022 (the “First Amendment Date”), the Company amended the Credit Agreement (the “Amended Credit Agreement”), increasing the revolving line of credit to $25.0 million and the term loan to $25.0 million. The Amended Credit Agreement as well as additional information can be seen in the 8-K filed by the Company on April 13, 2022.

Current and Projected (“PF”) Portfolio:

FAMOUS
DAVE’S

VILLAGE
INN

GRANITE
CITY

BAKERS
SQUARE

REAL
URBAN
BBQ

CLARK
CREW BBQ

TAHOE
JOE’S

BARRIO
QUEEN

BAR
CONCEPTS

TOTAL

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

2022 Q1

2022 PF

Corporate Locations

40

43

22

22

18

18

14

31

2

2

1

1

4

4

7

3

4

104

132

Brick & Mortar

31

33

21

21

17

17

11

11

2

2

1

1

4

4

7

3

4

90

100

Dual Concept

1

1

1

1

1

1

3

3

Ghost Kitchens

8

9

3

20

11

29

Franchise/License Locations

104

105

103

105

4

24

211

234

Brick & Mortar

85

85

103

105

188

190

Dual Concept

1

0

1

Ghost Kitchens

19

19

4

24

23

43

Total Locations

144

148

125

127

18

18

18

55

2

2

1

1

4

4

7

3

4

315

366

Growth Plan

New line serve / drive thru and Ghost locations

New trendy breakfast prototype

Dual concept with new breakfast brand

Sell pies in retail, kiosk and other restaurants

New line serve locations and CPGs

CPGs

Dual Concept with FDs

Franchise and Corporate

Corporate

# Opening in 2022

Q1: 3

Q1: 1

n/a

Q1: 1

n/a

n/a

Q1: -

n/a

Q1: -

Total:

47

Q2: 1

Q2: 1

Q2: 5

Q2: -

Q2: 1

Q3: 1

Q3: 1

Q3: 25

Q3: -

Q3: -

Q4: 1

Q4: 2

Q4: 3

Q4: 1

Q4: -

Filling Latent Capacity:

  • Dual concept Granite City/Village Inn opened in Maple Grove, MN in March 2022.

  • Famous Dave’s ghost kitchen opened in Granite City in Fargo, ND in April 2022.

Organic Unit Growth:

  • Famous Dave’s Drive thru in Salt Lake City, UT opened in March 2022.

  • Famous Dave’s franchisee opened an additional restaurant in Grand Forks, ND in April 2022.

  • Famous Dave’s franchisee opened an additional restaurant in the United Arab Emirates in February 2022.

  • New Village Inn prototype expected to open in Omaha, NE in the third quarter of 2022.

Mergers and Acquisitions:

  • Closed the purchase of Barrio Queen in April 2022.

  • Closed the purchase of three bar-centric company-owned locations in March 2022.

  • Signed an asset purchase agreement for an additional bar-centric location in April 2022.

Updated 2022 Guidance:

  • Net restaurant revenue of $280mm to $290mm

  • Net income and adjusted net income range from $12.5mm to $15.5mm

  • We expect to exhaust our deferred tax assets mid-2022

  • Diluted earnings per share and adjusted earnings per diluted share of $1.15 to $1.45

  • Cash EBITDA range from $23mm to $25mm

  • Free cash flow range from $13.5mm to $15.5mm

12-Month Pro Forma Guidance*:

  • Net restaurant revenue of $290mm to $310mm

  • Net income and adjusted net income range from $14.0mm to $17.0mm

  • Diluted earnings per share and adjusted earnings per diluted share of $1.30 to $1.60

  • Cash EBITDA range from $25.5mm to $27.5mm

  • Free cash flow range from $15.5mm to $17.5mm

*Projected results for the next 12 months inclusive of expected results of all completed acquisitions

Executive Comments

Jeff Crivello, CEO, commented, “The beginning of 2022 marked another successful quarter executing on our three core growth initiatives which include filling latent capacity of our current restaurants, organic unit growth, and building a diversified portfolio of food and beverage brands via accretive M&A.

The Company diversified into authentic Mexican cuisine with the Barrio Queen purchase, which closed in April 2022. Barrio Queen adds a vibrant, growing brand to our portfolio. We are excited to build on Barrio Queen’s success.

Despite a challenging inflationary environment, and acknowledge continued headwinds, we continue to deliver consistent results, and look forward to a successful 2022.”


Key Operating Metrics

Three Months Ended

April 3, 2022

April 4, 2021

Restaurant count:

Franchise-operated

211

100

Company-owned

104

47

Total

315

147

Same store net restaurant sales %:

Franchise-operated

8.6

%

16.0

%

Company-owned

14.5

%

17.7

%

Total

11.0

%

13.1

%

(in thousands, expect per share data)

System-wide restaurant sales(1)

$

158,731

$

87,040

Net income attributable to shareholders

$

767

$

799

Net income attributable to shareholders, per diluted share

$

0.07

$

0.08

Cash EBITDA(2)

$

3,748

$

3,220


(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) Cash EBITDA is a non-GAAP measure. 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.”

First Quarter 2022 Review

Total revenue for the first quarter of 2022 was $64.2 million, up 72.0% from the first quarter of 2021. The increase in year-over-year revenue was driven primarily by the acquisitions of the Village Inn and Bakers Square brands, four additional Famous Dave’s restaurants, and the Tahoe Joe’s Steakhouse brand and an increase in dine-in traffic across our brands.

Net income attributable to shareholders was approximately $767,000, or $0.07 per diluted share, in the first quarter of fiscal 2022 compared to an income of approximately $799,000, or $0.08 per diluted share, in the first quarter of fiscal 2021. This decrease in net income was mainly attributable to increased food and beverage costs and increased labor costs, as well as an impairment charge related to store closure of approximately $409,000. Cash EBITDA, a non-GAAP measure, increased $528,000 from $3.2 million in the first quarter of 2021 to $3.7 million in the first quarter of 2022. A reconciliation between cash EBITDA and its most directly comparable GAAP measure is included in the accompanying financial tables.

Restaurant-level operating margin as a percentage of restaurant net sales, a non-GAAP measure, was 6.4% for Company-owned restaurants in the first quarter of fiscal year 2022, compared to 9.1% in the first quarter of fiscal year 2021. This decrease in restaurant-level operating margin as a percentage of net restaurant sales was due primarily to increases in the cost of food and labor throughout 2021 and the first quarter of 2022. A reconciliation of restaurant sales to restaurant-level margin is included in the accompanying financial tables. General and administrative expenses for the quarter ended April 3, 2022, and April 4, 2021, represented approximately 8.2% and 10.8% of total revenues, respectively. This decrease in general and administrative expenses as a percentage of total revenues was due primarily to the larger increase in total revenue relative to the increase in general and administrative expenses.

About BBQ Holdings

BBQ Holdings, Inc. (NASDAQ: BBQ) is a national restaurant company engaged in franchising, ownership and operation of casual and fast dining restaurants. As of May 10, 2022, BBQ Holdings had multiple brands with over 100 Company-owned locations and over 200 franchised locations, including ghost kitchens operating out of the kitchen of another restaurant location or shared kitchen space. 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. Along with a wide variety of BBQ favorites served at their BBQ restaurants, BBQ Holdings also operates Granite City Food and Brewery restaurants which offer award winning craft beer and a made-from-scratch, chef driven menu featuring contemporary American cuisine. Village Inn and Bakers Square add a legendary Family Dining element to BBQ Holdings, with these concepts specializing in breakfast and pies. Tahoe Joe’s is known for their pellet-broiler cooked and smoked infused steak.

Non-GAAP Financial Measures

To supplement its condensed 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.

Cash EBITDA is net income plus asset impairment, estimated lease termination charges and other closing costs, depreciation and amortization, net interest expense, net (gain) loss on disposal of equipment, stock-based compensation, acquisition costs, pre-opening costs, severance, gain on debt forgiveness, gain on bargain purchase, provision (benefit) for income taxes, and non-cash rent.

Free cash flow is the Cash EBITDA less cash paid for property, equipment and leasehold improvements. Adjusted net income (loss) is net income plus asset impairment, estimated lease termination charges and other closing costs, less gain on debt forgiveness and gain on bargain purchase. Adjusted earnings per diluted share equals adjusted net income (loss) divided by the weighted average shares outstanding, assuming dilution.

Restaurant-level operating margins are equal to net restaurant sales, less restaurant-level food and beverage costs, labor and benefit costs, and operating expenses for Company-owned restaurants.

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, inflation, 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
jeff.crivello@bbq-holdings.com

BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

Three Months Ended

April 3, 2022

April 4, 2021

Revenue:

Restaurant sales, net

$

58,731

$

33,603

Franchise royalty and fee revenue

3,607

2,374

Franchisee national advertising fund contributions

490

328

Licensing and other revenue

1,356

1,014

Total revenue

64,184

37,319

Costs and expenses:

Food and beverage costs

18,357

10,057

Labor and benefits costs

19,386

10,254

Operating expenses

17,239

10,249

Depreciation and amortization expenses

2,423

1,552

General and administrative expenses

5,291

4,038

National advertising fund expenses

490

328

Asset impairment, estimated lease termination charges and other closing costs, net

409

12

Pre-opening expenses

65

28

Loss (gain) on disposal of property, net

44

(8

)

Total costs and expenses

63,704

36,510

Income from operations

480

809

Other income (expense):

Interest expense

(120

)

(54

)

Interest income

8

24

Gain on bargain purchase

38

Total other income (expense)

(74

)

(30

)

Income before income taxes

406

779

Income tax (expense) benefit

241

(82

)

Net income

647

697

Net (income) loss attributable to non-controlling interest

120

102

Net income attributable to shareholders

$

767

$

799

Income per common share:

Basic net income per share attributable to shareholders

$

0.07

$

0.09

Diluted net income per share attributable to shareholders

$

0.07

$

0.08

Weighted average shares outstanding - basic

10,552

9,208

Weighted average shares outstanding - diluted

10,649

9,501


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)

ASSETS

Current assets:

April 3, 2022

January 2, 2022

Cash and cash equivalents

$

35,431

$

40,309

Restricted cash

1,677

1,152

Accounts receivable, net of allowance for doubtful accounts of $301,000 and $270,000, respectively

3,188

5,476

Inventories

3,281

3,316

Prepaid expenses and other current assets

4,313

3,919

Total current assets

47,890

54,172

Property, equipment and leasehold improvements, net

39,748

39,943

Other assets:

Operating lease right-of-use assets

81,248

78,843

Goodwill

5,676

3,037

Intangible assets, net

23,714

23,444

Deferred tax asset, net

3,922

3,692

Other assets

1,493

1,292

Total assets

$

203,691

$

204,423

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

6,951

$

7,661

Current portion of operating lease liabilities

12,511

11,904

Current portion of long-term debt and finance lease liabilities

1,488

1,621

Accrued compensation and benefits

6,157

7,121

Gift card liability

8,809

11,257

Other current liabilities

8,752

8,510

Total current liabilities

44,668

48,074

Long-term liabilities:

Operating lease liabilities, less current portion

79,362

77,729

Finance lease liabilities, less current portion

292

79

Long-term debt, less current portion

12,819

13,197

Other liabilities

1,087

997

Total liabilities

138,228

140,076

Shareholders’ equity:

Common stock, $.01 par value, 100,000 shares authorized, 10,750 and 10,495 shares issued and outstanding at April 3, 2022 and January 2, 2022, respectively

108

105

Additional paid-in capital

22,248

21,782

Retained earnings

44,158

43,391

Total shareholders’ equity

66,514

65,278

Non-controlling interest

(1,051

)

(931

)

Total equity

65,463

64,347

Total liabilities and equity

$

203,691

$

204,423


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

Three Months Ended

April 3, 2022

April 4, 2021

Cash flows from operating activities:

Net income

$

647

$

697

Adjustments to reconcile net income to cash flows provided by operations:

Depreciation and amortization

2,423

1,552

Stock-based compensation

384

318

Net (gain) loss on disposal

44

(8

)

Asset impairment, estimated lease termination charges and other closing costs, net

409

12

Gain on bargain purchase

(38

)

Amortization of operating right-of-use assets

2,894

2,134

Deferred tax asset

(230

)

82

Other non-cash items

(6

)

186

Changes in operating assets and liabilities:

Accounts receivable, net

2,296

598

Prepaid expenses and other assets

(114

)

(1,197

)

Accounts payable

(710

)

1,635

Accrued compensation and benefits

(871

)

1,678

Lease liabilities

(3,258

)

(1,513

)

Gift card liability

(2,544

)

(1,563

)

Accrued and other liabilities

62

(425

)

Cash flows provided by operating activities

1,388

4,186

Cash flows from investing activities:

Purchases of property, equipment and leasehold improvements

(722

)

(691

)

Payments for acquired restaurants

(4,434

)

Payments received on note receivable

6

Cash flows provided by (used for) investing activities

(5,156

)

(685

)

Cash flows from financing activities:

Payments on long-term debt

(562

)

(519

)

Tax payments for restricted stock units and stock options exercised

(130

)

Proceeds from exercise of stock options

107

Cash flows provided by (used for) financing activities

(585

)

(519

)

Increase (decrease) in cash, cash equivalents and restricted cash

(4,353

)

2,982

Cash, cash equivalents and restricted cash, beginning of period

41,461

19,603

Cash, cash equivalents and restricted cash, end of period

$

37,108

$

22,585

Supplemental Disclosures

Cash paid for interest, net

$

107

$

116

Non-cash investing and financing activities:

Operating right-of-use assets acquired

4,533

Lease liabilities assumed pursuant to acquisitions

4,574

Gift card liability assumed pursuant to acquisitions

96

Inventory acquired pursuant to acquisitions

85


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

Three Months Ended

April 3, 2022

April 4, 2021

Food and beverage costs(1)

31.3

%

29.9

%

Labor and benefits costs(1)

33.0

%

30.5

%

Operating expenses(1)

29.3

%

30.5

%

Restaurant-level operating margin(1)(2)

6.4

%

9.1

%

Depreciation and amortization expenses(3)

3.8

%

4.2

%

General and administrative expenses(3)

8.2

%

10.8

%

Income (loss) from operations(3)

0.7

%

2.2

%

(1) As a percentage of restaurant sales, net
(2) Restaurant-level operating margins are equal to restaurant sales, net, less restaurant-level food and beverage costs, labor and benefit costs, and operating expenses.
(3) As a percentage of total revenue


BBQ HOLDINGS, INC. AND SUBSIDIARIES
RESTAURANT-LEVEL PROFIT AND RESTAURANT-LEVEL MARGIN (1)
NON-GAAP RECONCILIATION
(in thousands)

Three Months Ended

April 3, 2022

April 4, 2021

Restaurant sales, net

$

58,731

$

33,603

Restaurant operating costs(1)

54,982

30,560

Restaurant-level profit

$

3,749

$

3,043

Restaurant-level margin

6.4

%

9.1

%

(1) For company-owned restaurants.
(2) Restaurant operating costs consist of food and beverage costs, labor and benefits costs and operating expenses.


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

Three Months Ended

April 3, 2022

April 4, 2021

March 29, 2020

March 31, 2019

(dollars in thousands)

Net income

$

647

$

697

$

13,311

$

82

Asset impairment and estimated lease termination charges and other closing costs

409

12

173

407

Depreciation and amortization

2,423

1,552

1,045

264

Interest expense, net

112

30

76

17

Net loss (gain) on disposal of equipment

44

(8

)

(477

)

(6

)

Stock-based compensation

384

318

137

83

Acquisition costs

167

-

(62

)

163

Pre-opening costs

65

28

25

-

Severance

-

-

28

3

Gain on bargain purchase

(38

)

-

(14,364

)

-

Provision for income taxes

(241

)

82

(349

)

17

Non-cash rent

(224

)

509

-

-

Cash EBITDA

$

3,748

$

3,220

$

(457

)

$

1,030

Less cash paid for property, equipment and leasehold improvements

(722

)

(691

)

(949

)

(221

)

Free cash flow

$

3,026

$

2,529

$

(1,406

)

$

809


BBQ HOLDINGS, INC. AND SUBSIDIARIES
ADJUSTED NET INCOME (LOSS) AND EARNINGS (LOSS) PER DILUTED SHARE
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)

Three Months Ended

(dollars in thousands)

April 3, 2022

April 4, 2021

March 29, 2020

March 31, 2019

Net income (loss) attributable to shareholders

$

767

$

799

$

13,707

$

82

Asset impairment, estimated lease termination charges and other closing costs

409

12

173

407

Gain on bargain purchase

(38

)

(14,364

)

Adjusted net income (loss)

1,138

811

(484

)

489

Weighted average shares outstanding - diluted

10,649

9,501

9,202

9,189

Adjusted earnings (loss) per diluted share

$

0.11

$

0.09

$

(0.05

)

$

0.05