Market Overview

Good Times Restaurants Reports Q3 Results

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Total Revenues Increase 20%
Consolidated Net
Income Increases to $304,000

Initial Fiscal 2019
Guidance Provided

Conference Call Thursday, August 9, 2018, at 3:00 p.m. MT/5:00 p.m. ET

Good
Times Restaurants Inc.
(NASDAQ:GTIM), 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 26, 2018.

Key highlights of the Company's financial results include:

  • Same store sales for company-owned Good Times restaurants increased
    3.8% for the quarter on top of last year's increase of 3.7%. Year to
    date, same store sales increased 4.9% versus last year's increase of
    1.2%
  • Bad Daddy's same store sales increased 0.5% during the quarter over
    the prior year's increase of 0.1%. Year to date, same store sales
    increased 0.5% versus last year's increase of 1.7%. Same store sales
    exclude the weeks during which the original Bad Daddy's in Charlotte,
    NC was closed for remodeling. Total revenues increased 20% to
    $26,175,000 for the quarter
  • The Company opened two new Bad Daddy's restaurants during the quarter
    for a total of five new restaurants opened through the third quarter
    of 2018. Subsequent to the end of the quarter, the Company opened an
    additional two restaurants and expects to open two more before the end
    of the fiscal year for a total of nine new restaurants in fiscal 2018
  • Sales for the Bad Daddy's restaurants for the quarter increased 37%
    versus last year to $17,765,000
  • Restaurant Level Operating Profit (a non-GAAP measure) increased 26.8%
    to $4,779,000 (18.4% as a percent of sales) from $3,770,000 (17.5% as
    a percent of sales)*
  • Adjusted EBITDA (a non-GAAP measure) for the quarter increased 36.6%
    to $1,907,000 from $1,396,000 last year*
  • The Company ended the quarter with $3.2 million in cash and $5.1
    million of long-term debt

Boyd Hoback, President & CEO, said, "We are very pleased with our
continued growth in same store sales at both brands as well as our
improved operating margins. Our class of 2018 Bad Daddy's openings have
been very strong on average and we anticipate they will be settling into
a sales trend post-honeymoon at or above our system average. We are now
operating in seven different metropolitan areas and are on track to
enter three to four additional new areas in fiscal 2019, as we continue
our expansion focused primarily on the Southeast."

Regarding initial fiscal 2019 guidance, Ryan Zink, Chief Financial
Officer, commented, "The strength of our new Bad Daddy's restaurants
opened during the 2018 fiscal year has generated cash for development
which has limited our need to incur any significant incremental debt,
and that has created a strong foundation on which to continue
development in 2019. With this growth, we expect Adjusted EBITDA of
between $7.6 and $8.1 million for the 2019 fiscal year, with an
estimated run rate at the end of the fiscal year that approaches $10
million, consistent with our prior commentary projecting continued 40%
annual growth in our Adjusted EBITDA."

Fiscal 2018 Outlook:

The Company provided the following guidance for fiscal 2018:

  • Total revenues of approximately $99 million to $100 million with a
    year-end revenue run rate of approximately $110 million
  • Total revenue estimates assume same store sales of approximately +1%
    for Good Times and flat to slightly positive for Bad Daddy's in Q4
  • General and administrative expenses of approximately $7.9 million,
    including approximately $500,000 of non-cash equity compensation
    expense
  • The opening of a total of 4 new Bad Daddy's restaurants (including 1
    joint venture unit) in Q4, for a total of 9 new restaurants during the
    full fiscal year
  • Total Adjusted EBITDA* of approximately $5.4 million to $5.6 million
  • Restaurant pre-opening expenses of approximately $2.7 million
  • Capital expenditures (net of tenant improvement allowances and
    sale-leaseback proceeds) of approximately $8.5 to $9.0 million
    including approximately $0.6 million related to fiscal 2019 development
  • Fiscal year-end long term debt of approximately $9.0 to $9.5 million

Fiscal 2019 Outlook:

The Company provided the following initial guidance for fiscal 2019:

  • Total revenues of approximately $120 million to $123 million with a
    year-end revenue run rate of approximately $130 million
  • Total revenue estimates assume same store sales of approximately +2%
    for Good Times, excluding Q2 where we project flat comparable sales,
    and assumes +1% for Bad Daddy's
  • General and administrative expenses of approximately $8.7 to $9.0
    million, including approximately $600,000 of non-cash equity
    compensation expense
  • The opening of a total of 7 - 9 new company-owned Bad Daddy's
    restaurants
  • Total Adjusted EBITDA* of approximately $7.6 million to $8.1 million
  • Restaurant pre-opening expenses of approximately $2.5 million to $3.0
    million
  • Capital expenditures (net of tenant improvement allowances) of
    approximately $11.0 – $11.5 million
  • Fiscal year-end long term debt of approximately $13.0 - $13.5 million

*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.

Conference Call: Management will host a conference call to
discuss its third quarter 2018 financial results on Thursday, August 9,
2018 at 3:00 p.m. MT/5:00 p.m. ET. Hosting the call will be Boyd Hoback,
President and Chief Executive Officer, and Ryan Zink, Chief Financial
Officer.

The conference call can be accessed live over the phone by dialing (888)
339-0806 and requesting the Good Times Restaurants (GTIM) call. The
conference call will also be webcast live from the Company's corporate
website www.goodtimesburgers.com
under the Investor section. An archive of the webcast will be available
at the same location on the corporate website shortly after the call has
concluded.

About Good Times Restaurants Inc.: Good Times Restaurants Inc.
(GTIM) operates Good Times Burgers & Frozen Custard, a regional chain of
quick service restaurants located primarily in Colorado, through its
wholly-owned subsidiary, Good Times Drive Thru Inc. Good Times provides
a menu of high quality all-natural hamburgers, 100% all-natural chicken
tenderloins, fresh frozen custard, natural cut fries, fresh lemonades
and other unique offerings. Good Times currently operates and franchises
a total of 36 restaurants.

GTIM also owns, operates, franchises and licenses 31 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 Forward Looking Statements: This press release
contains forward-looking statements within the meaning of federal
securities laws. The words "intend," "may," "believe," "will," "should,"
"anticipate," "expect," "seek" and similar expressions are intended to
identify forward-looking statements. These statements involve known and
unknown risks, which may cause the Company's actual results to differ
materially from results expressed or implied by the forward-looking
statements. These risks include such factors as the uncertain nature of
current restaurant development plans and the ability to implement those
plans and integrate new restaurants, delays in developing and opening
new restaurants because of weather, local permitting or other reasons,
increased competition, cost increases or shortages in raw food products,
and other matters discussed under the "Risk Factors" section of Good
Times' Annual Report on Form 10-K for the fiscal year ended September
26, 2017 filed with the SEC. Although Good Times may from time to time
voluntarily update its forward-looking statements, it disclaims any
commitment to do so except as required by securities laws.

 
Good Times Restaurants Inc.
Unaudited Supplemental Information

(In thousands, except per share amounts)

 
    Third Quarter     Year to Date
Statement of Operations 2018     2017 2018     2017
Net revenues:
Restaurant sales $ 25,990 $ 21,518 $ 71,929 $ 55,981
Franchise Revenues   185     184     515     515  
Total net revenues 26,175 21,702 72,444 56,496
 
Restaurant Operating Costs:
Food and packaging costs 7,833 6,822 22,154 17,591
Payroll and other employee benefit costs 9,155 7,546 26,076 20,216
Restaurant occupancy costs 1,850 1,484 5,278 4,207
Other restaurant operating costs 2,373 1,896 6,626 5,003
New store preopening costs 610 819 1,683 1,737
Depreciation and amortization   937     753     2,665     2,086  
Total restaurant operating costs 22,758 19,320 64,482 50,840
 
General and administrative costs 2,069 1,831 5,884 5,222
Advertising costs 565 514 1,587 1,357
Franchise costs 11 28 32 80
Asset Impairment Costs 0 0 72 0
Loss (gain) on restaurant asset sale   (9 )   (6 )   (26 )   (17 )
Income (loss) from operations 781 15 413 (986 )
 
Other income (expense):
Interest income (expense), net (96 ) (49 ) (270 ) (105 )
Other income (expense), net   0     (1 )   0     (1 )
Total other income (expense), net   (96 )   (50 )   (270 )   (106 )
 
Net Income (loss): $ 685 ($35 ) $ 143 ($1,092 )
Income attributable to non-controlling interest   (381 )   (212 )   (853 )   (499 )

Net income (loss) attributable to Good Times Restaurants Inc.

$ 304     ($247 )   ($710 )   ($1,591 )
 
Basic and diluted income (loss) per share $ 0.02 ($0.02 ) ($0.06 ) ($0.13 )
 

Weighted average common shares outstanding - basic

12,468,326 12,301,007 12,460,467 12,296,793

Weighted average common shares outstanding - diluted

12,665,172 N/A N/A N/A
 
 
Good Times Restaurants Inc.
Unaudited Supplemental Information

($ in thousands)

 
        Jun. 26, 2018     Sep. 26, 2017
Balance Sheet Data:
Cash & cash equivalents 3,186 4,337
Current assets 5,120 6,066
Property and Equipment, net 33,113 29,560
Other assets 19,359 19,397
Total assets $ 57,592 $ 55,153
 

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

7,944 6,916
Long-term debt due after one year 5,126 5,339
Other liabilities 7,204 5,614
Total liabilities $ 20,274 $ 17,869
Stockholders' equity $ 37,318 $ 37,284
 
 
    Good Times Burgers & Frozen Custard     Bad Daddy's Burger Bar
Third Quarter     Year to Date Third Quarter     Year to Date
2018     2017 2018     2017 2018     2017 2018     2017
 
Restaurant sales $ 8,225 $ 8,546 $ 23,223 $ 22,310 $ 17,765 $ 12,972 $ 48,706 $ 33,671
Restaurants open during period 0 0 0 1 2 3 5 5
Restaurants closed during period 1 0 2 0
Restaurants open at period end 26 28 26 28 27 21 27 21
Restaurant operating weeks 342.0 364.0 1,062.0 1,068.3 337.6 249.6 970.4 690.9
Average weekly sales per restaurant $ 24.0 $ 23.5 $ 21.9 $ 20.9 $ 52.6 $ 52.0 $ 50.2 $ 48.7
 
 

Reconciliation of Non-GAAP Measurements
to US GAAP Results

 

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to
Loss from Operations

(In thousands, except percentage data)

 
    Good Times Burgers &
Frozen Custard
    Bad Daddy's
Burger Bar
    Good Times
Restaurants Inc.

Fiscal Third Quarter

2018     2017 2018     2017 2018   2017
 
Restaurant sales $ 8,225   100.0 % $ 8,546   100.0 % $ 17,765   100.0 % $ 12,972   100.0 % $ 25,990 $ 21,518
Restaurant operating costs (exclusive of
depreciation and
amortization shown
separately below):
Food and packaging costs 2,654 32.3 % 2,792 32.7 % 5,179 29.2 % 4,030 31.1 % 7,833 6,822
Payroll and other employee benefit costs 2,716 33.0 % 2,846 33.3 % 6,439 36.2 % 4,700 36.2 % 9,155 7,546
Restaurant occupancy costs 694 8.4 % 693 8.1 % 1,156 6.5 % 791 6.1 % 1,850 1,484
Other restaurant operating costs   648 7.9 %   680 8.0 %   1,725 9.7 %   1,216 9.4 %   2,373     1,896  
Restaurant-level operating profit $ 1,513 18.4 % $ 1,535 18.0 % 3,266 18.4 % $ 2,235 17.2 % 4,779 3,770
 
Franchise royalty income, net 185 184
 
Deduct - other operating:
Depreciation and amortization 937 753
General and administrative 2,069 1,831
Advertising costs 565 514
Franchise costs 11 28
Loss (gain) on restaurant asset sale (9 ) (6 )
Preopening costs   610     819  
Total other operating   4,183     3,939  
 
Income (loss) from operations $ 781   $ 15  
 

Certain percentage amounts in the table above do not total due
to rounding.

 

Reconciliation of Non-GAAP Measurements
to US GAAP Results

 

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to
Loss from Operations

(In thousands, except percentage data)

 

 
    Good Times Burgers &
Frozen Custard
    Bad Daddy's
Burger Bar
    Good Times
Restaurants Inc.

Year to Date

2018     2017 2018     2017 2018     2017
 
Restaurant sales $ 23,223   100.0 % $ 22,310   100.0 % $ 48,706   100.0 % $ 33,671   100.0 % $ 71,929 $ 55,981
Restaurant operating costs (exclusive of
depreciation and
amortization shown
separately below):
Food and packaging costs 7,615 32.8 % 7,191 32.2 % 14,539 29.9 % 10,400 30.9 % 22,154 17,591
Payroll and other employee benefit costs 8,074 34.8 % 7,706 34.5 % 18,002 37.0 % 12,510 37.2 % 26,076 20,216
Restaurant occupancy costs 2,164 9.3 % 2,075 9.3 % 3,114 6.4 % 2,132 6.3 % 5,278 4,207
Other restaurant operating costs   1,891 8.1 %   1,833 8.2 %   4,735 9.7 %   3,170 9.4 %   6,626     5,003  
Restaurant-level operating profit 3,479 15.0 % $ 3,505 15.7 % 8,316 17.1 % $ 5,459 16.2 % 11,795 8,964
 
Franchise royalty income, net 515 515
 
Deduct - Other operating:
Depreciation and amortization 2,665 2,086
General and administrative 5,884 5,222
Advertising costs 1,587 1,357
Franchise costs 32 80
Loss (gain) on restaurant asset sale (26 ) (17 )
Asset impairment charge 72 0
Preopening costs   1,683     1,737  
Total other operating   11,897     10,465  
 
Income (loss) from operations $ 413   $ (986 )
 

Certain percentage amounts in the table above do not total due
to rounding.

 

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 fiscal third quarters and year to date for fiscal 2018 and fiscal
2017, expressed as a percentage of total revenues, except for the
components of restaurant operating costs, which are expressed as a
percentage of restaurant revenues.

Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA

(In thousands)

 
Good Times Restaurants Inc.
    Third Quarter     Year to Date
2018     2017 2018     2017
 
Net income (loss) as reported $ 304 ($247 ) ($710 ) ($1,591 )
 
Adjustments to net income (loss):
Depreciation and amortization 897 727 2,550 2,001
Interest expense, net   97     50     272     108  
EBITDA $ 1,298 $ 530 $ 2,112 $ 518
Preopening costs 565 685 1,541 1,400
Non-cash stock-based compensation 88 205 303 609
GAAP rent in excess of cash rent (35 ) (18 ) (51 ) (34 )
Non-cash disposal of assets   (9 )   (6 )   (26 )   (17 )
Asset impairment charge   0     0     72     0  
Adjusted EBITDA $ 1,907   $ 1,396   $ 3,951   $ 2,476  
 

Adjusted EBITDA is a supplemental measure of operating performance that
does not represent and should not be considered as an alternative to net
income or cash flow from operations, as determined by GAAP, and our
calculation thereof may not be comparable to that reported by other
companies. This measure is presented because we believe that investors'
understanding of our performance is enhanced by including this non-GAAP
financial measure as a reasonable basis for evaluating our ongoing
results of operations.

Adjusted EBITDA is calculated as net income before interest expense,
provision for income taxes and depreciation and amortization and further
adjustments to reflect the additions and eliminations presented in the
table above.

Adjusted EBITDA is presented because: (i) we believe it is a useful
measure for investors to assess the operating performance of our
business without the effect of non-cash charges such as depreciation and
amortization expenses and asset disposals, closure costs and restaurant
impairments and (ii) we use adjusted EBITDA internally as a benchmark
for certain of our cash incentive plans and to evaluate our operating
performance or compare our performance to that of our competitors. The
use of adjusted EBITDA as a performance measure permits a comparative
assessment of our operating performance relative to our performance
based on our GAAP results, while isolating the effects of some items
that vary from period to period without any correlation to core
operating performance or that vary widely among similar companies.
Companies within our industry exhibit significant variations with
respect to capital structures and cost of capital (which affect interest
expense and income tax rates) and differences in book depreciation of
property, plant and equipment (which affect relative depreciation
expense), including significant differences in the depreciable lives of
similar assets among various companies. Our management believes that
adjusted EBITDA facilitates company-to-company comparisons within our
industry by eliminating some of these foregoing variations. Adjusted
EBITDA as presented may not be comparable to other similarly-titled
measures of other companies, and our presentation of adjusted EBITDA
should not be construed as an inference that our future results will be
unaffected by excluded or unusual items.

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