BBQ - BBQ Holdings Inc. Reports Results for Fourth Quarter and Fiscal Year 2021; Announces Acquisition of Barrio Queen Corporate Name Change and Provides 2022 Guidance

MINNEAPOLIS, March 14, 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 fourth quarter and fiscal year ended January 2, 2022.

Fourth Quarter Highlights:

Fiscal Year Highlights:

Subsequent Events:

On March 10, 2022, we executed an Asset Purchase Agreement for substantially all the assets related to the fast-growing Barrio Queen restaurant group, and we expect to close the transaction within 45 days. Barrio Queen is known for their authentic Mexican fine dining in Phoenix, Arizona. There are currently seven operating restaurants and a lease signed for an eighth with a target opening date of December 2022. The purchase price of $28.0 million will be funded with cash and debt.   Further details of the transaction will be made public upon closing.

On March 11, 2022, we closed the purchase of three bar-centric locations. The purchase price of $4.5 million was funded with cash at a multiple of 3.25 times 2021 store-level EBITDA.

Current and Projected (“PF”) Portfolio:

Filling Latent Capacity :

• Dual concept Granite City/Village Inn opened in Maple Grove, MN in March 2022.
• Famous Dave’s ghost kitchen to open in Granite City in Fargo, ND in March 2022.

Organic Unit Growth:

• Famous Dave’s franchisee opened a line-serve restaurant in 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 opened in March 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 second quarter of 2022.
  

Mergers and Acquisitions:

• Purchased Tahoe Joe’s Steakhouse brand in October 2021.
• Signed an Asset Purchase Agreement to acquire Barrio Queen in March 2022.
• Closed the purchase of three bar-centric company-owned locations in March 2022.
  

2022 Guidance:

• Net restaurant revenue of $265mm to $280mm
• 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 Run Rate Guidance:

• Net restaurant revenue of $280mm to $295mm
• 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***
  

*** assumes completion of Barrio Queen and Bar Concepts acquisitions

Executive Comments

Jeff Crivello, CEO, commented, “The fourth quarter of 2021 marked another successful quarter of strong operational execution and company growth. We continue to successfully execute our three core growth initiatives which include filling latent capacity of our current restaurants, organic unit growth, and build a diversified portfolio of food and beverage brands via accretive M&A.

In December 2021 and January 2022, we experienced a traffic decline associated with the Omicron variant of COVID-19. However, as case counts have declined, we have seen rebounds in both dine-in traffic and catering sales in February and March of 2022.

As we have continued to diversify our portfolio of restaurant brands, we will be changing the name of our parent company from BBQ Holdings, Inc. to Famous Hospitality, Inc.”

Key Operating Metrics

⁽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.”

Fourth Quarter and Fiscal Year 2021 Review

Total revenue for the fourth quarter of 2021 was $68.4 million, up 99.6% from the fourth quarter of 2020. Total revenue for fiscal year 2021 was $206.4 million, up 70.3% from fiscal year 2020. 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, as well as the reduction of dining restrictions in 2021 compared to 2020.

Net income attributable to shareholders was approximately $2.6 million, or $0.25 per diluted share, in the fourth quarter of fiscal 2021 compared to a loss of approximately $2.8 million, or $0.31 per diluted share, in the fourth quarter of fiscal 2020. Fiscal year 2021 net income was $24.0 million compared to $4.9 million in fiscal year 2020. This increase in net income was mainly attributable to a gain on forgiveness of debt and a gain on bargain purchase.   Additionally, the increase in net income was also driven by (i) an increase in same store sales, (ii) sales from the acquisitions of the Village Inn and Bakers Square brands, four additional Famous Dave’s restaurants, and the Tahoe Joe’s Steakhouse brand, (iii) improvements in restaurant-level margins and (iv) improvements in general and administrative expense efficiency.   Cash EBITDA, a non-GAAP measure, increased $4.5 million from $0.1 million in the fourth quarter of 2020 to $4.6 million in the fourth quarter of 2021. Cash EBITDA for fiscal year 2021 was $17.5 million, an increase of $16.5 million over fiscal year 2020. 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 7.6% and 9.3% for Company-owned restaurants in the fourth quarter and fiscal year 2021, respectively, compared to 2.1% and 1.3% in the fourth quarter and fiscal year 2020, respectively. 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 reduction of dine-in restrictions and restrictions on large gatherings which were put in place in 2020 due to COVID-19 concerns, as well as the acquisition of the Village Inn and Bakers Square brands, four additional Famous Dave’s restaurants, and the Tahoe Joe’s Steakhouse brand. A reconciliation of restaurant sales to restaurant-level margin is included in the accompanying financial tables. General and administrative expenses for the quarter ended January 2, 2022, and January 3, 2021 represented approximately 8.3% and 12.8% of total revenues, respectively. General and administrative expenses for fiscal year 2021 and fiscal year 2020 represented approximately 9.3% and 11.9% of total revenues, respectively. While general and administrative expenses increased in fiscal year 2021 compared to fiscal year 2020, such expenses decrease as a percentage of revenue in 2021 due primarily to the increase in total revenue.

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 March 14, 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 cost, 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, 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.

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

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

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

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

⁽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 (1)
NON-GAAP RECONCILIATION
(in thousands)

(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)

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)

A presentation accompanying this announcement is available at: https://www.globenewswire.com/NewsRoom/AttachmentNg/1a29f163-d269-424b-87c1-2f433536eaa0