FAT Brands Inc (FAT) Q2 2025 Earnings Call Highlights: Navigating Challenges and Capitalizing ...
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
FAT Brands Inc (NASDAQ:FAT) has been recognized on Time and Statista's best mid-sized company list for the second consecutive year.
The company has a diversified global restaurant portfolio with approximately 2,300 locations across 49 states and 35 countries.
FAT Brands Inc (NASDAQ:FAT) has a robust development pipeline with approximately 1,000 locations committed to open over the next 5 to 7 years.
The company is seeing strong performance in its snack segment, with Great American Cookies and Marble Slab Creamery showing consistent strength.
FAT Brands Inc (NASDAQ:FAT) has implemented over $5 million in annual SGNA reductions and identified further cost optimization opportunities.
Negative Points
Total revenues decreased by 3.4% to $146.8 million compared to the previous year's quarter.
The company reported a net loss attributable to FAT Brands of $54.2 million, an increase from the previous year's net loss.
General and administrative expenses increased significantly due to non-cash share-based compensation expenses.
Market volatility has delayed the planned $75 to $100 million equity raise for Twin Peaks.
The company is facing challenges in the QSR space, with brands like Fasoli's experiencing a tougher sales environment.
Q & A Highlights
Warning! GuruFocus has detected 8 Warning Signs with FAT.
Q: Can you provide an update on the SEC civil action following the DOJ case dismissal, and will you recover any past legal costs from insurance? A: We are hopeful that the SEC civil case will be dismissed following the DOJ case, but we cannot comment further at this time. Regarding legal fees, which totaled $70 million over the last 3.5 years, we have filed with our insurance company and will recover the policy limits as part of the derivative case settlement. - Andy Weiderhorn, Chairman of the Board.
Q: The increase in G&A costs was attributed to share-based compensation. Is this a one-time event, and should we expect G&A costs to decrease? A: Yes, the increase in G&A costs is a one-time event tied to the Twin Peaks spinoff, and costs will decrease moving forward. - Andy Weiderhorn, Chairman of the Board.
Q: Can you provide a timeline for the rollout of the new manufacturing contract and its expected benefits? A: The contract is currently in production and will be fully rolled out in the next 30 to 60 days. We expect to announce further details in about 3 to 4 weeks. The contract involves different operators and will significantly benefit our cookie dough production. - Andy Weiderhorn, Chairman of the Board.
Q: Are you seeing improved restaurant industry traffic similar to other companies like Cisco and Wingstop? A: The performance varies by brand category. Snack brands like cookies and ice cream are doing well, while QSR brands face challenges. However, the polished casual dining segment is improving, and we are optimistic about future consumer confidence. - Andy Weiderhorn, Chairman of the Board.
Q: What is the current liquidity situation, and how are you managing financial flexibility? A: We have $130 to $150 million in retained notes for liquidity, which we can finance or sell as needed. We also have an ATM in place but have not used it much due to undervaluation concerns. We are focusing on G&A savings and accelerating the Smokey Bones portfolio conversion to improve liquidity. - Andy Weiderhorn, Chairman of the Board.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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