FAT Brands Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the FAT Brands Incorporated First Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. Please note that this conference is being recorded today, May 5, 2022. On the call today from FAT Brands are President and Chief Executive Officer Andy Riederhorn and Chief Financial Officer Ken Craig. By now, everyone should have access to the earnings release, which can be found on our investor relations website at ir.fatbrands.com in the press release section. Before we begin, I need to remind everyone that part of our 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 this forward-looking statement due to a number of risks and uncertainties. The statement is due to a number of risks and uncertainties. The company does not undertake to update this forward-looking statement at a later date. For a more detailed discussion of the risks that could impact future operating results and financial conditions, please see today's Earnings Press release and our recent SEC filings. During today's call, the company may 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 nor as a substitute for results prepared in accordance with GAAP. Reconcilations to comparable GAAP measures are available in today's earnings release. I would now like to turn the call over to Andy Wiederhorn, President and Chief Executive Officer.

Thank you, operator. Good evening, everyone. Thank you all for joining us on the call today.

We are excited to be here on our first earnings call for fiscal 2022. This afternoon, we made our first quarter 2022 financial results publicly available. Please refer to the earnings release and our earnings supplement, both of which are available in the investor section of our website at www.fatbrands.com. Each contained additional details about the first quarter, which closed on March 27th. The first quarter was an excellent start to 2022 for Fat Brands, and I would like to thank our whole team for their impressive execution as we continue to grow this business. Fat Brands is truly differentiated because we have a scalable platform that affords us the opportunity to synergistically incorporate new concepts with minimal incremental corporate overhead costs. We also have a long runway for organic growth, highlighted by 27 store openings in the first quarter and 34 year-to-date on our way to well over 100 by the end of this year. In addition, we have a huge pipeline of more than 860 additional locations to be built, providing us with the potential of approximately 33% additional unit growth and 50 to 55% additional EBITDA growth. In other words, another $50 million of incremental EBITDA over the next few years. Today, I am particularly excited to talk to you about our strong brand performance, organic growth, synergies from our acquisition strategy in 2021, potential further acquisitions in 2022, and planned balance sheet and refinancing strategies for 2022. In the first quarter, our strong momentum exiting 2021 continued as our franchise partners and company-owned restaurants continued to report impressive sales. In the first quarter, many of our restaurants produced sales that were in line or above pre-pandemic levels, despite modest headwinds from winter weather and the presence of Omicron in January. This speaks to the strength of our portfolio of brands and the hard work and dedication of our franchise partners and employees. We believe this is just the beginning, and we expect a strong performance to continue throughout the year. In addition, I would like to highlight that this quarter marks the first quarter that includes all of our acquisition activities from 2021, allowing for a better view into our revenue run rate growth. While we continue to look for tuck-in acquisitions, we primarily view 2022 as a year to absorb the M&A activity from last year, and we are excited about the synergies and growth they are already delivering. Our legacy Fat Brands portfolio of brands owned for all of 2021, like Fatburger, Johnny Rockets, Hurricane Grill, and Wings, saw an increase in system-wide sales of 15.8% over the first quarter of 2021. If we include the brands acquired in 2021, essentially showing how our portfolio is doing, system-wide sales increased 13.5% compared to Q1 of 2021. For the first quarter of 2022, same-store sales, which only includes those brands owned for all of fiscal 2021, increased 16.8% over Q1 2021, driven by an increase of 40.1% at Johnny Rockets and 9.1% at Hurricane Girl and Wings. We are pleased that international same-store sales increased 24.1% over the same period. If we include recently acquired concepts in calculating comparable same-store sales, we would have seen an increase of 11.8% for the portfolio compared to Q1 of 2021. Our top-performing acquired brands were Twin Peaks and Roundtable Pizza, which saw an increase in comparable same-store sales versus Q1 of 2021 of 24.4% and 7% respectively. In total, comparable same-store sales for the brands acquired in 2021 increased 10.2% versus Q1 of 2021. Most notably, Twin Peaks had outstanding performance with March marking the 14th consecutive month of positive same-store sales post-COVID versus 2019. Twin Peaks same-store sales have significantly exceeded the NAPTRAC industry averages consistently over the last 19 months. It's also worth noting that even with the reopening of dining rooms, Delivery sales are showing resilience facilitated by the rollout of Ollo, Captain, which is formerly known as Hunger, both of which are online ordering providers, and Chow Lee, which is a third party and online aggregator into our POS systems across our portfolio. Turning now to our organic growth strategy, new construction and franchise sales continue to outperform and maintain the momentum we saw in 2021. There were 27 new store openings across the portfolio in the first quarter of 2022, and 34th year to date, with over additional 80 locations of new stores expected to open this year. We continue to build on our growing development pipeline of over 860 locations throughout the world that have signed and paid for agreements in place. So far this year, our development team has signed 44 deals representing commitments to build 139 new locations across various brands throughout the world. As we've integrated new brands into the Phat family, we continue to see robust demand from our existing and new franchise partners to develop a variety of other brands in our portfolio as well. In addition, we are also expanding our footprint in non-traditional locations, having just completed the first opening of Phat Burger at the Six Flags Great Adventure in Jackson, New Jersey, as well as in the 2020 launched largest cruise ship in the world owned by Royal Caribbean, the Wonder of the Seas. Also, we have upcoming Johnny Rockets and Fatburger locations in the Las Vegas Convention Center, the Excalibur and Venetian Casinos in Las Vegas, the Soaring Eagle Casino in Michigan, the Louisiana State University Stadium, Reagan National Airport, Bangalore Airport, and the hotel in Capitol Park, Washington, D.C. as well. In addition, we have new international locations such as Paris, Mexico City, Morocco, and the Democratic Republic of Congo all coming soon. Our factory in Georgia has been able to mitigate the supply chain headwinds faced in recent months and reported Q1 sales of $8.2 million. The factory now supplies nearly 1,000 of our locations throughout the country and is only running at approximately 30% capacity, with therefore tremendous growth opportunity. A quick comment here on the inflation and supply chain pressures our industry continues to face. We have strongly encouraged our franchisees to take price and maintain their margins in order to keep the businesses healthy. Additionally, we continue to coach our franchisees with every tool at our disposal on how to navigate the supply chain and current economic environment to continue delivering strong results. Equally important to our organic growth strategy is our second pillar of growth, which is our acquisition strategy. We have a disciplined and selective approach to evaluate potential targets with a focus on brands with a proven track record of long-term sustainable and profitable operating performance. In 2021, we were very active acquiring eight new restaurant concepts with five brands coming through the global franchise group acquisition. Also in the fourth quarter, we acquired three additional brands, which include Twin Peaks, Fazoli's and Native Grill and Wings. We are capable of this activity because we have a robust management and systems platform that supports the expansion of our existing brands while enabling the creative acquisition strategy and efficient integration of additional restaurant concepts. As I mentioned before on the transaction front, our primary goal to start this year is to digest these acquisitions and to identify and capitalize on potential synergies. That being said, there are strategic acquisition candidates we expect to capitalize on in 2022 that are additive and fit within our current operations and give us the chance to expand our factory business through tuck-in acquisitions. Moving forward, we expect to fund future acquisitions with a combination of cash on hand proceeds from securitization vehicles, and potentially tapping the equity capital markets. I want to quickly highlight two of our most recent acquisitions, Twin Peaks and Fazoli's, both of which closed in the fourth quarter. Today, we are very pleased with the assimilation of both brands, and we are already experiencing significant synergies given our existing infrastructure and purchasing power. Twin Peaks, which we acquired on October 1 of 2021, is seeing record sales growth and industry-leading AUVs in the range of $5 to $6.5 million. Also of note, Twin Peaks same-store sales are among the highest in the polished casual dining category according to the NAPTRAC industry benchmark. I believe we can grow this brand globally at a rapid pace, and we are pleased to report that three new area development agreements have been signed thus far in 2022. We continue to expect Twin Peaks to contribute between $25 and $30 million of EBITDA in 2022. On December 16, 2021, we completed the acquisition of Fazoli's, which is today a 217 store brand from Sentinel Capital Partners for $130 million. The brand's performance here in 2022 has been in line with our expectations, and we look forward to the increased royalties in successfully executing their new unit opening plan. Bozzoli's has a 117 new store development pipeline, which is part of our 860 unit overall pipeline. Diving in, a bit on the synergies. We see significant opportunities to generate savings for our franchise partners, given our substantial purchasing power of more than $600 million per year in food, beverage, and paper costs, as well as cross-selling opportunities between our now 17-brand portfolio. On the balance sheet side of things, we are actively pursuing the rating and refinancing of our different securitization facilities, beginning with our FAT 2021 and FGFG 2021 securitization trusts. We will turn our attention to the other two securitization trusts later in the year. In addition, we are working with our bankers on the planned redemption of $135 million of our Series B preferred stock from the sellers of Twin Peaks and Global Franchise Group over Q2 and Q3, respectively. The securitization refinancing and the preferred stock redemption will each provide substantial savings from a free cash flow perspective to the company, including a lower cost of capital, and it is a top priority for us. Turning now to our outlook for fat brands for 2022, we are reiterating our expectations that system-wide sales in fat will rise to over 2.2 billion. This should bring our normalized post-COVID EBITDA to an annualized run rate of between 90 and $95 million by the end of 2022. With 15.1 million of adjusted EBITDA in Q1, a big jump from our adjusted EBITDA of 10.4 million in the fourth quarter of 2021. We are well on our way to the $22 to $25 million quarterly runway we expect to achieve by the end of this year. With regard to the pending government investigations, I reiterate the comments I made on our fourth quarter 2021 earnings call in March of this year regarding the investigations. There is nothing new to add at this time, and I reiterate that FAT Brands has been told that it is not a target of the investigation. It remains business as usual here at FAT. I look forward to putting these legal matters behind us and continuing to grow our amazing portfolio of brands. Our team of more than 20 senior managing members are working tirelessly to move the needle forward and operate our brands with wind at their back. Most recently, we added a new chief information officer, Michael Chichua, which will really ready us for moving forward the technology effort across our brands. With that, I would like to hand it over to Ken Kiewik to talk about our financial highlights from the quarter.