Good Times Restaurants Reports Q3 Results

DENVER–(hospitalitybusinessnews.com)–Good Times Restaurants Inc., operator of Good Times Burgers & Frozen Custard, a regional quick service restaurant chain focused on fresh, high quality, all natural products and Bad Daddy’s Burger Bar, a full service, upscale concept today announced its preliminary unaudited financial results for the third fiscal quarter ended June 30, 2016.

Key highlights of the Company’s financial results include:

  • Same store sales for company-owned Bad Daddy’s restaurants increased 3.6% for the quarter and increased 3.8% for the year
  • Same store sales for company-owned Good Times restaurants decreased 2.0% for the quarter and increased 0.8% for the year on top of last year’s increase of 4.8% for the quarter and 6.9% for the year
  • Total revenues increased 40% to $18,066,000 for the quarter and increased 60% to $47,222,000 for the year
  • The Company opened one new Bad Daddy’s restaurant during the quarter for a total of five new restaurants opened since the beginning of the fiscal year
  • Sales for the company-owned Good Times restaurants for the quarter were $7,715,000 and Restaurant Level Operating Profit (a non-GAAP measure) was $1,508,000 or 19.5% as a percent of sales *
  • Sales for the Bad Daddy’s restaurants for the quarter were $10,164,000 and Restaurant Level Operating Profit (a non-GAAP measure) was $1,889,000 or 18.6% as a percent of sales *
  • Adjusted EBITDA (a non-GAAP measure) for the quarter increased 21% to $1,432,000 from $1,188,000 and increased 41% to $2,317,000 from $1,641,000 for the year*
  • The Company ended the quarter with $7.2 million in cash

*For a reconciliation of restaurant level operating profit and Adjusted EBITDA to the most directly comparable financial measures presented in accordance with GAAP and a discussion of why the Company considers them useful, see the financial information schedules accompanying this release.

Boyd Hoback, President & CEO said, “We are very pleased with our continued sales growth at Bad Daddy’s and have several initiatives in place to resume our same store sales growth at Good Times. This is our first quarter in 23 quarters that we have not had positive same store sales at Good Times, reflecting the impact of the intense discounting and value pricing environment. We plan to open our sixth new Bad Daddy’s this year on September 2, 2016 and are excited about our accelerated growth plan for fiscal 2017.”

The Company also announced that it is changing its fiscal year end to a 52/53-week year ending on the last Tuesday of September consisting of four 13-week quarters. This results in a change in the 2016 fiscal year end from September 30, 2016 to September 27, 2016. Fiscal year 2017 will be 52 weeks long and will end on September 26, 2017.

2016 guidance:

The Company currently anticipates the following for fiscal 2016:

  • Total revenues of approximately $64.3 million to $64.5 million including an approximately $550,000 negative impact from the change in the fiscal year from September 30 to September 27
  • Total revenue estimates assume same store sales for the balance of the year of approximately -1% to -2% for Good Times and +1% to +2% for Bad Daddy’s
  • General and administrative expenses of approximately $6.2 million to $6.3 million, including approximately $725,000 of non-cash equity compensation expense
  • The opening of 1 new Bad Daddy’s restaurant in September 2016
  • Total Adjusted EBITDA* of approximately $3.3 including an approximately $150,000 negative impact from the change in the fiscal year
  • Restaurant pre-opening expenses of approximately $1.8 million
  • Capital expenditures (net of tenant improvement allowances) of approximately $5.5 million to $6.5 million

Preliminary 2017 outlook:

The Company provides the following preliminary guidance for fiscal 2017:

  • Total revenues of approximately $80 million to $84 million with a year end revenue run rate of approximately $94 million to $98 million
  • Total revenue estimates assume same store sales of approximately +1% to +2% for Good Times ranging from -1% to +1% in Q1 and Q2 and +3% to +3.5% in Q3 and Q4 and +1% to +2% for Bad Daddy’s
  • General and administrative expenses of approximately $7.0 million to $7.2 million, including approximately $900,000 of non-cash equity compensation expense
  • The opening of 9 to 11 new Bad Daddy’s restaurants (including 2 joint venture units) and 1 new Good Times restaurant
  • Total Adjusted EBITDA* of approximately $4.5 million to $5.0 million
  • Restaurant pre-opening expenses of approximately $3.5 million
  • Capital expenditures (net of tenant improvement allowances) of approximately $14.1 million including approximately $1.8 million related to fiscal 2018 development

GTIM owns, operates, franchises and licenses 18 Bad Daddy’s Burger Bar restaurants through its wholly-owned subsidiaries. Bad Daddy’s Burger Bar is a full service, upscale, “small box” restaurant concept featuring a chef driven menu of gourmet signature burgers, chopped salads, appetizers and sandwiches with a full bar and a focus on a selection of craft microbrew beers in a high energy atmosphere that appeals to a broad consumer base.

Good Times Restaurants Inc.
Unaudited Supplemental Information
(In thousands, except per share amounts)

Three Months Ended
June 30,
Nine Months Ended
June 30,
Statement of Operations 2016 2015 2016 2015
Net revenues:
Restaurant sales $ 17,879 $ 12,772 $ 46,676 $ 29,165
Franchise revenues 187 165 546 342
Total net revenues 18,066 12,937 47,222 29,507
Restaurant Operating Costs:
Food and packaging costs 5,563 4,137 14,853 9,760
Payroll and other employee benefit costs 6,064 4,107 16,230 9,553
Restaurant occupancy costs 1,309 908 3,603 2,314
Other restaurant operating costs 1,546 1,071 4,129 2,361
Royalty expense 0 24 0 122
New store preopening costs 127 156 1,428 578
Depreciation and amortization 584 351 1,592 813
Total restaurant operating costs 15,193 10,754 41,835 25,501
General and administrative costs 1,585 1,131 4,701 2,926
Advertising costs 419 327 1,137 848
Acquisition costs 0 365 0 562
Franchise costs 28 32 82 85
Gain on restaurant asset sale (7 ) (7 ) (19 ) (19 )
Income (loss) from operations 848 355 (514 ) (396 )
Other income (expense):
Interest income (expense), net (24 ) (21 ) (90 ) (22 )
Other expense (1 ) (2 ) (1 ) (5 )
Affiliate investment loss 0 (18 ) 0 (5 )
Total other income (expense), net (25 ) (41 ) (91 ) (32 )
Net income (loss) 823 294 (605 ) (428 )
Net loss attributable to non-controlling interests (276 ) (188 ) (645 ) (311 )
Net income (loss) attributable to Good Times Restaurants Inc. $ 547 $ 106 ($1,250 ) ($739 )
Basic earnings (loss) per share $ 0.04 $ 0.01 $ (0.10 ) $ (0.07 )
Diluted earnings per share 0.04 0.01 N/A N/A
Basic weighted average common shares outstanding 12,271 11,144 12,265 9,924
Diluted weighted average common shares outstanding 12,544 11,535 N/A N/A

Good Times Restaurants Inc.
Unaudited Supplemental Information
(In thousands)

June 30, September 30,
Balance Sheet Data

2016

2015

Cash & cash equivalents $ 7,214 $ 13,809
Current assets 8,958 14,728
Property and equipment, net 18,931 14,222
Other assets 19,254 19,278
Total assets 47,143 48,228

Current liabilities, including capital lease obligations and long-term debt due within one year

5,049 7,258
Long-term debt due after one year 962 1,093
Capital lease obligations due after one year 1 11
Other liabilities 3,696 1,609
Total liabilities 9,708 9,971
Stockholders’ equity 37,435 38,257

Supplemental Information:

Good Times Burgers & Frozen Custard Bad Daddy’s Burger Bar
Three Months Ended
June 30,
Nine Months Ended
June 30,
Three Months Ended
June 30,
Nine Months Ended
June 30,
2016 2015 2016 2015 2016 2015 2016 2015
Restaurant Sales (in thousands) $ 7,715 $ 7,672 $ 21,362 $ 20,805 $ 10,164 $ 5,100 $ 25,314 $ 8,360
Restaurants open during period 1 2 1 5 1
Restaurants acquired on May 7, 2015 7 7
Restaurants open at period end 27 27 27 27 15 10 15 10
Restaurant operating weeks 351.0 339.4 1,056.9 1,008.3 194.6 94.0 514.9 158.0

Average weekly sales per restaurant
(in thousands)

$ 22.0 $ 22.6 $ 20.2 $ 20.6 $ 52.2 $ 54.3 $ 49.2 $ 52.9

Reconciliation of Non-GAAP Measurements to US GAAP Results

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income from Operations
(In thousands, except percentage data)

Good Times Burgers & Frozen Custard Bad Daddy’s Burger Bar Good Times Restaurants Inc.
Three Months
Ended June 30,
Three Months
Ended June 30,
Three Months
Ended June 30,

2016

2015

2016

2015

2016

2015

Restaurant Sales $ 7,715 100.0 % $ 7,672 100.0 % $ 10,164 100.0 % $ 5,100 100.0 % $ 17,879 $ 12,772

Restaurant Operating Costs (exclusive
of depreciation and amortization
shown separately below):

Food and packaging costs 2,480 32.1 % 2,522 32.9 % 3,083 30.3 % 1,615 31.7 % 5,563 4,137

Payroll and other employee benefit
costs

2,443 31.7 % 2,347 30.6 % 3,621 35.6 % 1,760 34.5 % 6,064 4,107
Restaurant occupancy costs 676 8.8 % 640 8.3 % 633 6.2 % 268 5.3 % 1,309 908
Other restaurant operating costs 608 7.9 % 598 7.8 % 938 9.2 % 473 9.3 % 1,546 1,071

Restaurant-level operating
profit

1,508 19.5 % 1,565 20.4 % 1,889 18.6 % 984 19.3 % 3,397 2,549

Franchise royalty income and
expense, net

187 141
Deduct – Other operating:
Depreciation and amortization 584 351
General and administrative 1,585 1,131
Advertising costs 419 327
Acquisition costs 0 365
Franchise costs 28 32
Gain on restaurant asset sale (7 ) (7 )
Preopening costs 127 156
Total other operating 2,736 2,355
Income from Operations $ 848 $ 335

Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues, as opposed to total revenues.

Reconciliation of Non-GAAP Measurements to US GAAP Results

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income from Operations
(In thousands, except percentage data)

Good Times Burgers & Frozen Custard Bad Daddy’s Burger Bar Good Times Restaurants Inc.
Nine Months Ended June 30, Nine Months Ended June 30, Nine Months Ended June 30,

2016

2015

2016

2015

2016

2015

Restaurant Sales $ 21,362 100.0 % $ 20,805 100.0 % $ 25,314 100.0 % $ 8,360 100.0 % $ 46,676 $ 29,165

Restaurant Operating Costs (exclusive
of depreciation and amortization shown
separately below):

Food and packaging costs 6,917 32.4 % 7,102 34.1 % 7,936 31.4 % 2,658 31.8 % 14,853 9,760

Payroll and other employee benefit
costs

7,026 32.9 % 6,520 31.3 % 9,204 36.4 % 3,033 36.3 % 16,230 9,553
Restaurant occupancy costs 2,025 9.5 % 1,842 8.9 % 1,578 6.2 % 472 5.6 % 3,603 2,314
Other restaurant operating costs 1,734 8.1 % 1,625 7.8 % 2,395 9.5 % 736 8.8 % 4,129 2,361
Restaurant-level operating profit $ 3,660 17.1 % $ 3,716 17.9 % $ 4,201 16.6 % $ 1,461 17.5 % $ 7,861 $ 5,177

Franchise royalty income and expense,
net

546 220
Deduct – Other operating:
Depreciation and amortization 1,592 813
General and administrative 4,701 2,926
Advertising costs 1,137 848
Acquisition costs 0 562
Franchise costs 82 85
Gain on restaurant asset sale (19 ) (19 )
Preopening costs 1,428 578
Total other operating 8,921 5,793
Loss from Operations $ (514 ) $ (396 )

Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues, as opposed to total revenues.

The Company believes that restaurant-level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. The Company defines restaurant-level operating profit to be restaurant revenues minus restaurant-level operating costs, excluding restaurant closures and impairment costs. The measure includes restaurant level occupancy costs, which include fixed rents, percentage rents, common area maintenance charges, real estate and personal property taxes, general liability insurance and other property costs, but excludes depreciation. The measure excludes depreciation and amortization expense, substantially all of which is related to restaurant level assets, because such expenses represent historical sunk costs which do not reflect current cash outlay for the restaurants. The measure also excludes selling, general and administrative costs, and therefore excludes occupancy costs associated with selling, general and administrative functions, and pre-opening costs. The Company excludes restaurant closure costs as they do not represent a component of the efficiency of continuing operations. Restaurant impairment costs are excluded, because, similar to depreciation and amortization, they represent a non-cash charge for the Company’s investment in its restaurants and not a component of the efficiency of restaurant operations. Restaurant-level operating profit is not a measurement determined in accordance with generally accepted accounting principles (“GAAP”) and should not be considered in isolation, or as an alternative, to income from operations or net income as indicators of financial performance. Restaurant-level operating profit as presented may not be comparable to other similarly titled measures of other companies. The tables above set forth certain unaudited information for the three months and nine months ended June 30, 2016 and June 30, 2015, expressed as a percentage of restaurant revenues.

Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA
(In thousands)

Good Times Restaurants Inc.

Three Months Ended
June 30,
Nine Months Ended
June 30,

2016

2015

2016

2015

Net income (loss) as reported $ 547 $ 106 ($1,250 ) ($739 )
Adjustments to net income (loss):
Depreciation and amortization 558 335 1,506 829
Interest expense, net 24 21 90 22
EBITDA 1,129 462 346 112
Preopening expense 127 156 1,428 578
Non-cash stock based compensation 177 165 532 317
Non-recurring acquisition costs 0 365 0 562
GAAP rent in excess of cash rent 6 47 30 91
Non-cash disposal of assets (7 ) (7 ) (19 ) (19 )
Adjusted EBITDA $ 1,432 $ 1,188 $ 2,317 $ 1,641
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