BBQ Holdings, Inc. Reports Results for Third Quarter 2021

Company Reaffirms Revenue and Increases Earnings Guidance for Fiscal Year 2021


MINNEAPOLIS, Nov. 10, 2021 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating global franchisor, owner and operator of restaurants, today reported financial results for the third fiscal quarter ended October 3, 2021.

Third Quarter 2021 Highlights:

Financial:

  • Total revenue of $55.4 million vs. $35.5 million in the third quarter of 2020.
  • Net income of $4.8 million vs. $0.3 million in the third quarter of 2020.
  • Adjusted EBITDA, a non-GAAP measure, was $4.4 million vs. $2.0 million in the third quarter of 2020.
  • Combined brands restaurant-level margins of 8.6% vs 3.4% last year.
  • Prime costs were 62.6% of sales vs. 67.8% third quarter 2019.
 Third Quarter Same Store Sales
 2021 vs. 2020
 2021 vs. 2019
Famous Dave's Company-owned19.3% 12.4%
Famous Dave's Franchise-operated*18.0% 6.9%
Granite City31.4% (0.5)%
Village Inn Company-owned**37.0% (8.1)%
Village Inn Franchise-operated*48.2% NA%
Bakers Square**32.4% (20.2)%
      
* as reported by franchisees     
** includes sales under prior ownership     

Executive Comments

Jeff Crivello, CEO, commented, “This was a quarter of strong execution for BBQ Holdings, as our growth strategies continue to deliver positive top and bottom-line results, including a steady improvement in same store sales and solid free cash flow. Management is focused on executing against our three core growth initiatives, including accretive M&A, opening new units, and filling the latent capacity of our current restaurants. During the third quarter, we completed the highly accretive acquisition of Village Inn and Bakers Square. Subsequent to the end of the quarter, we also acquired Tahoe Joe’s. Our goal now is to reinvigorate these brands and drive consistent unit-level improvements as we have at Famous Dave’s and other brands. In addition, the month of October also brought the opening of the first Famous Dave’s Quick Que in Minnesota. We are excited to continue to rollout this quick service format, providing a new, efficient way for our guests to experience Famous Dave’s. Finally, we launched a virtual burger concept during the quarter, $5 Burgers, providing incremental revenue in the Famous Dave’s system.”

Growth:

  • Purchased Village Inn, 109 franchise and 21 corporate restaurants, and 11 Bakers Square corporate restaurants in July 2021.
  • Purchased five Tahoe Joe’s Steakhouses in October 2021.
  • Purchased four Famous Dave’s franchise restaurants in Tennessee and Kentucky in July 2021.
  • Famous Dave’s franchisees opened line-serve restaurants in Las Vegas, NV in August 2021 and Coon Rapids, MN in October 2021.
  • Opened a Real Urban Barbeque restaurant in Chicago, IL in October 2021.
  • Famous Dave’s Drive thru in Salt Lake City, UT expected to open in December 2021.
  • Dual concept Granite City/Village Inn expected to open in January 2022.
  • New Village Inn prototype expected to open in Omaha, NE early Q1 2022.

Updated 2021 Guidance:

Based on the results to date through the third quarter 2021, and including the uncertainty related to COVID-19, the Company has updated its 2021 guidance as follows:

  • Net Revenue remains at $183 -$188mm
  • Increased Net Income range from $20.6 - $21.0mm to $22.5 - $23.0mm
  • Increased Cash EBITDA range from $14.5 - $15.0mm to $16.5 - $17.0mm
Key Operating Metrics                
  Three Months Ended Nine Months Ended
  October 3, 2021 September 27, 2020 October 3, 2021
 September 27, 2020
Restaurant count:                
Franchise-operated  213   98   213   98 
Company-owned  83   49   83   49 
Total  296   147   296   147 
Same store net restaurant sales %:                
Franchise-operated  18.0%  (10.0)%  25.6%  (18.3)%
Company-owned  24.0%  (4.6)%  36.3%  (9.9)%
Total  20.4%  (8.7)%  29.3%  (16.7)%
                 
(in thousands, expect per share data)                
                 
System-wide restaurant sales(1) $141,125  $84,434  $335,421  $222,374 
                 
Net income attributable to shareholders $4,834  $328  $21,419  $7,783 
                 
Net income attributable to shareholders, per diluted share $0.46  $0.04  $2.20  $0.85 
                 
Adjusted EBITDA(2) $4,425  $1,995  $12,649  $2,915 
_________________________                

(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 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.”

Third Quarter 2021 Review

Total revenue for the third quarter of 2021 was $55.4 million, up 56.0% from the third quarter of 2020. The increase in year-over-year restaurant net sales for the quarter ended October 3, 2021 was driven primarily by the easing of dining restrictions in the third quarter of 2021 and the acquisition of the Village Inn and Bakers Square brands.  

Net income attributable to shareholders was approximately $4.8 million, or $0.46 per diluted share, in the third quarter of fiscal 2021 compared to $328,000, or $0.04 per diluted share, in the third quarter of fiscal 2020. Adjusted EBITDA, a non-GAAP measure, was approximately $4.4 million, compared to adjusted EBITDA of approximately $2.0 million in the third quarter of fiscal 2020. A reconciliation between adjusted 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 8.6% for Company-owned restaurants in the third quarter of fiscal 2021 compared to 3.4% in the third quarter of fiscal 2020. This increase in restaurant-level operating margin as a percentage of net restaurant sales was due primarily to leverage on our fixed operating costs from the increased revenue resulting from the easing of dine-in restrictions and restrictions on large gatherings which were put in place in 2020 due to COVID-19 concerns. A reconciliation of restaurant sales to restaurant-level margin is included in the accompanying financial tables. General and administrative expenses for the quarter ended October 3, 2021 and September 27, 2020 represented approximately 9.2% and 8.8% of total revenues, respectively. The increase in general and administrative expenses as a percentage of revenue in the third quarter of 2021 was due primarily to acquisition-related expenses incurred as we incorporated the Village Inn and Bakers Square brands into our portfolio.

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 November 10, 2021, BBQ Holdings had seven brands with 303 locations in three countries including 89 Company owned locations and 214 franchised locations. In addition to these locations, the Company opened eight Company-owned Famous Dave’s ghost kitchens operating within its Granite City locations, and 20 Famous Dave’s franchisee ghost kitchens operating out of the kitchen of another restaurant location or a 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, the Company’s newest addition, 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.

Adjusted EBITDA is net income plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, interest expense, net, depreciation and amortization, net (gain) loss on disposal of equipment, stock-based compensation, acquisition costs, pre-opening costs, severance, gain on debt forgiveness, gain on bargain purchase, COVID-19-related expense and provision (benefit) for income taxes.

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

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
  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 Nine Months Ended
 October 3, 2021 September 27, 2020 October 3, 2021    September 27, 2020
Revenue:           
Restaurant sales, net$50,374  $32,559  $125,182  $78,251 
Franchise royalty and fee revenue 3,329   2,153   8,649   6,628 
Franchisee national advertising fund contributions 461   302   1,210   826 
Licensing and other revenue 1,219   497   3,181   1,423 
Total revenue 55,383   35,511   138,222   87,128 
            
Costs and expenses:           
Food and beverage costs 14,731   9,735   36,720   24,206 
Labor and benefits costs 16,805   11,189   39,488   26,976 
Operating expenses 14,512   10,521   36,355   26,251 
Depreciation and amortization expenses 1,940   1,397   4,925   3,820 
General and administrative expenses 5,109   3,138   13,691   9,973 
National advertising fund expenses 461   302   1,210   826 
Asset impairment, estimated lease termination charges and other closing costs, net 69   (138)  106   4,814 
Pre-opening expenses 63   (120)  183   (93)
(Gain) loss on disposal of property, net (1)  (530)  134   (1,107)
Total costs and expenses 53,689   35,494   132,812   95,666 
            
Income (loss) from operations 1,694   17   5,410   (8,538)
            
Other income (expense):           
Interest expense (124)  (326)  (439)  (866)
Interest income 49   94   147   380 
Gain on forgiveness of debt       14,109    
Gain on bargain purchase 3,203      3,203   13,675 
Total other income (expense)  3,128   (232)  17,020   13,189 
            
Income (loss) before income taxes 4,822   (215)  22,430   4,651 
            
Income tax (expense) benefit  (36)  273   (517)  2,519 
            
Net income 4,786   58   21,913   7,170 
Net (income) loss attributable to non-controlling interest 48   270   (494)  613 
Net income attributable to shareholders$4,834  $328  $21,419  $7,783 
            
            
Income per common share:           
Basic net income per share attributable to shareholders$0.47  $0.04  $2.23  $0.85 
Diluted net income per share attributable to shareholders$0.46  $0.04  $2.20  $0.85 
Weighted average shares outstanding - basic 10,345   9,151   9,619   9,138 
Weighted average shares outstanding - diluted 10,482   9,158   9,737   9,145 


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
       
ASSETS      
Current assets:  October 3, 2021    January 3, 2021
Cash and cash equivalents $28,977  $18,101 
Restricted cash  1,146   1,502 
Accounts receivable, net of allowance for doubtful accounts of $262,000 and $132,000, respectively  4,900   4,823 
Inventories  2,949   2,271 
Prepaid expenses and other current assets  2,367   1,252 
Assets held for sale  1,024   1,070 
Total current assets   41,363   29,019 
       
Property, equipment and leasehold improvements, net  39,174   32,389 
       
Other assets:      
Operating lease right-of-use assets  78,581   61,634 
Goodwill  1,071   601 
Intangible assets, net  23,231   9,967 
Deferred tax asset, net  3,382   4,934 
Other assets  1,129   1,724 
Total assets $187,931  $140,268 
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
       
Current liabilities:       
Accounts payable $7,092  $6,385 
Current portion of lease liabilities  10,624   6,185 
Current portion of long-term debt  2,192   2,111 
Accrued compensation and benefits  7,929   2,390 
Other current liabilities  12,014   9,766 
Total current liabilities  39,851   26,837 
       
Long-term liabilities:      
Lease liabilities, less current portion  78,470   63,105 
Long-term debt, less current portion  6,578   22,169 
Other liabilities  1,458   1,224 
Total liabilities  126,357   113,335 
       
Shareholders’ equity:       
Common stock, $.01 par value, 100,000 shares authorized, 10,495 and 9,307 shares issued and outstanding at October 3, 2021 and January 3, 2021, respectively  105   93 
Additional paid-in capital  21,464   8,748 
Retained earnings  40,789   19,370 
Total shareholders’ equity  62,358   28,211 
Non-controlling interest  (784)  (1,278)
Total equity  61,574   26,933 
Total liabilities and equity $187,931  $140,268 


BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
       
  Nine Months Ended
     October 3, 2021    September 27, 2020
Cash flows from operating activities:      
Net income $21,913  $7,170 
Adjustments to reconcile net income to cash flows provided by operations:      
Depreciation and amortization  4,925   3,820 
Stock-based compensation  932   422 
Net loss (gain) on disposal  134   (1,080)
Asset impairment, estimated lease termination charges and other closing costs, net     4,788 
Gain on forgiveness of debt  (14,109)   
Gain on bargain purchase  (3,203)  (13,675)
Amortization of operating right-of-use assets  5,194   5,818 
Deferred tax asset  441   (2,569)
Other non-cash items  (49)  488 
Changes in operating assets and liabilities:      
Accounts receivable, net  (126)  494 
Prepaid expenses and other assets  (1,368)  102 
Accounts payable  707   985 
Accrued compensation  4,445   (408)
Lease liabilities  (5,000)  (5,067)
Accrued and other liabilities  505   (641)
Cash flows provided by operating activities  15,341   647 
       
Cash flows from investing activities:      
Proceeds from the sale of assets     27 
Purchases of property, equipment and leasehold improvements  (2,416)  (2,671)
Payments for acquired restaurants  (14,548)  (4,952)
Transfer from HFS  46    
Payments received on note receivable  779   24 
Cash flows used for investing activities  (16,139)  (7,572)
       
Cash flows from financing activities:      
Proceeds from long-term debt     22,058 
Payments for debt issuance costs     (45)
Payments on long-term debt  (1,572)  (664)
Proceeds from sale of common stock, net of offering costs  12,445    
Proceeds from exercise of stock options  445    
Cash provided by financing activities  11,318   21,349 
       
Increase in cash, cash equivalents and restricted cash  10,520   14,424 
Cash, cash equivalents and restricted cash, beginning of period  19,603   6,086 
Cash, cash equivalents and restricted cash, end of period $30,123  $20,510 
       
Supplemental Disclosures      
Cash paid for interest, net $769  $829 
Cash paid for income taxes, net      
       
Non-cash investing and financing activities:      
Operating right-of-use assets acquired  19,339   51,682 
Lease liabilities assumed pursuant to acquisitions  21,830   51,682 
Gift card liability assumed pursuant to acquisitions  1,202   3,923 


BBQ HOLDINGS, INC. AND SUBSIDIARIES
OPERATING RESULTS
(unaudited)
             
  Three Months Ended Nine Months Ended
  October 3, 2021     September 27, 2020        October 3, 2021     September 27, 2020    
Food and beverage costs(1) 29.2% 29.9% 29.3% 30.9%
Labor and benefits costs(1) 33.4% 34.4% 31.5% 34.5%
Operating expenses(1) 28.8% 32.3% 29.0% 33.5%
Restaurant-level operating margin(1)(2)   8.6% 3.4% 10.1% 1.0%
Depreciation and amortization expenses(3) 3.5% 3.9% 3.6% 4.4%
General and administrative expenses(3) 9.2% 8.8% 9.9% 11.4%
Income (loss) from operations(3) 3.1% 0.0% 3.9% (9.8)%
________________________            

(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 expense.
(3)   As a percentage of total revenue


BBQ HOLDINGS, INC. AND SUBSIDIARIES
RESTAURANT-LEVEL PROFIT AND RESTAURANT-LEVEL MARGIN
NON-GAAP RECONCILIATION
(in thousands)
                
 Three Months Ended Nine Months Ended
 October 3, 2021 September 27, 2020 October 3, 2021     September 27, 2020
Restaurant sales, net$50,374  $32,559  $125,182  $78,251 
Restaurant operating costs (1) 46,048   31,445   112,563   77,433 
Restaurant-level profit$4,326  $1,114  $12,619  $818 
Restaurant-level margin 8.6%  3.4%  10.1%  1.0%
  ________________________               

(1)   Restaurant operating cost consist of food and beverage cost, labor and benefits costs and operating expenses.


BBQ HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(in thousands, except per share data)
(unaudited)
             
  Three Months Ended Nine Months Ended
(dollars in thousands) October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020
Net income $4,786  $58  $21,913  $7,170 
Asset impairment and estimated lease termination charges and other closing costs  69   (138)  106   4,814 
Depreciation and amortization  1,940   1,397   4,925   3,820 
Interest expense, net  75   232   292   486 
Net (gain) loss on disposal of equipment  (1)  (530)  134   (1,107)
Stock-based compensation  294   174   932   422 
Acquisition costs  366   29   550   (46)
Pre-opening costs  63   (120)  183   (93)
Severance     21      52 
Gain on debt forgiveness        (14,109)   
Gain on bargain purchase  (3,203)     (3,203)  (13,675)
Provision for income taxes  36   (273)  517   (2,519)
COVID-19-related expense     1,145   409   3,591 
Adjusted EBITDA $4,425  $1,995  $12,649  $2,915 

(1)   COVID-19 expenses consisted primarily of cleaning and sanitation supplies, payments to employees for unemployment related costs, inventory waste, rent and rent-related costs for limited-operations restaurants from the day that the restaurant dining room partially or fully closed.

  Nine Months Ended
  October 3, 2021 September 27, 2020
(dollars in thousands)      
Net income $21,913  $7,170 
Asset impairment and estimated lease termination charges and other closing costs  106   4,814 
Depreciation and amortization  4,925   3,820 
Interest expense, net  292   486 
Net (gain) loss on disposal of equipment  134   (1,107)
Stock-based compensation  932   422 
Acquisition costs  550   (46)
Pre-opening costs  183   (93)
Severance  -   52 
Gain on debt forgiveness  (14,109)  - 
Gain on bargain purchase  (3,203)  (13,675)
Provision for income taxes  517   (2,519)
Non-Cash Rent  660   1,540 
Cash EBITDA $12,900  $864 

A presentation accompanying this announcement is available at: https://www.globenewswire.com/NewsRoom/AttachmentNg/17a0cc25-b1e9-4157-8f49-2310e2b70624 



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BBQH Investor Presentation 11.8.21_v8 Final