FAT Brands, Inc. (NASDAQ:FAT) Q2 2023 Earnings Conference Call August 3, 2023 4:30 PM ET

Company Participants

Andrew Wiederhorn - Founder and Chairman of the Board

Kenneth Kuick - CFO and Co CEO

Conference Call Participants

Joseph Gomes - Noble Capital

Alton Stump - Loop Capital

Roger Lipton - Lipton Financial

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the FAT Brands Inc. Second Quarter 2023 Earnings Conference Call. At this time, all participants have been placed on mode. Please note that this conference is being recorded today, August 3, 2023. On the call from FAT Brands are Chairman of the Board; Andy Wiederhorn; and Co-Chief Executive Officer and Chief Financial Officer, Ken Kuick.

This afternoon, the company made its second quarter 2023 financial results publicly available. Please refer to the earnings release and earnings supplement, both of which are available in the Investors section of our website at www.fatbrands.com. Each contain additional details about the second quarter, which closed on June 25, 2023, but before we begin, I must remind everyone that part of the discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them.

Actual results may differ materially from those indicated by these forward-looking statements due to a number of risks and uncertainties. The company does not undertake to update these forward-looking statements at a later date. For a more detailed discussion of the risks that could impact future operating results and financial condition, please see today's earnings release and recent SEC filings. During today's call, the company will discuss non-GAAP financial measures, which it believes can be useful in evaluating its performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in today's earnings release.

I would now like to turn the call over to Mr. Andy Wiederhorn, Chairman of the Board.

Andrew Wiederhorn

Thank you, operator, and hello, everyone, and thank you all for joining us on the call today. Let me begin by thanking our teams, our franchisees and our employees for their hard work as we continue to grow FAT Brand. Total revenue grew $4 million in the second quarter of 2023 to $106.8 million compared to $102.8 million in the prior year second quarter. The increase was driven by a 5% increase in royalties a 4.6% increase in company-owned restaurant revenues and a 13% increase in revenues from our manufacturing facility. System-wide sales grew to $572.7 million, a 1.7% increase when compared to the prior-year quarter. Turning to profitability. Our second-quarter adjusted EBITDA was $23.1 million compared to $29.5 million in last year's quarter. Last year's adjusted EBITDA included a $10.1 million benefit related to employee retention credits. Excluding the impact of this benefit, adjusted EBITDA increased $3.7 million or 19% from the $19.4 million in Q2 of 2022. During the second quarter, we continued to focus on our organic growth strategy, opening 25 new units, bringing our year-to-date openings to 66 locations.