Market Overview

Good Times Restaurants Reports Q1 Results

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Total Revenues increased 11% to $25.4 million in Q1
Company
announces buyout of JV partners
Company reaffirms fiscal 2019
guidance
Conference Call Thursday, February 7, 2019, at 3:00 p.m.
MST/5:00 p.m. EST

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 first fiscal quarter
ended December 25, 2018.

Key highlights of the Company's financial results include:

  • Total revenues increased 11% to $25,370,000 for the quarter
  • Total Restaurant Sales for Bad Daddy's restaurants increased 21.8% to
    $18,250,000 and Bad Daddy's Restaurant Level Operating Profit* (a
    non-GAAP measure) was $2,738,000 or 15.0% as a percent of sales
  • Same store sales for company-owned Bad Daddy's restaurants increased
    0.2% for the quarter on top of last year's increase of 0.7%
  • The Company opened one new Bad Daddy's restaurant during the quarter
  • Total Restaurant Sales for Good Times restaurants were $6,897,000 and
    Good Times Restaurant Level Operating Profit* (a non-GAAP measure) was
    $785,000 or 11.4% as a percent of sales
  • Net Loss Attributable to Common Shareholders was $1.1 million for the
    quarter
  • Adjusted EBITDA* (a non-GAAP measure) for the quarter was $767,000
  • The Company ended the quarter with $2.4 million in cash and $10.2
    million drawn against its senior credit facility
  • Subsequent to the end of the quarter the Company announced that it has
    purchased the non-controlling interests in three existing Bad Daddy's
    restaurants in the Raleigh, NC market

Boyd Hoback, President & CEO, said, "During our first quarter, while we
continued to post favorable same store sales results for Bad Daddy's,
our Good Times same store sales were significantly impacted by more
inclement weather compared to the prior year and were down 5.2% during
the quarter. Two Bad Daddy's restaurants that were opened at the very
end of fiscal 2018 and the one opened during the quarter have had slower
starts as compared to the bigger honeymoon periods we experienced on new
stores in fiscal 2018. However, subsequent to the end of the quarter we
opened our fourth store in the Raleigh, NC market which has again
experienced significantly above average weekly sales during its first
four weeks. We are also reporting the purchase of the non-controlling
interests in the other three restaurants in the Raleigh market, which is
our highest average unit sales market in the system. We paid
approximately $3 million for the trailing twelve-month cash flow of
approximately $600,000 and we believe we can improve that cash flow
stream by an additional 25% with more control over the restaurants by
the end of the fiscal year, which would equate to an effective multiple
of approximately four times cash flow."

Commenting on the Company's earnings guidance, Ryan Zink, Chief
Financial Officer, stated, "We are generally reaffirming our guidance,
which calls for Adjusted EBITDA of approximately $6.0 to $6.5 million
and the opening of five new Bad Daddy's restaurants for the 2019 fiscal
year. Due to the acquisition of the Raleigh-area non-controlling
interests, our expected total capital expenditures and end-of-year
balance on our credit facility have each increased by approximately $3
million."

Fiscal 2019 Outlook:

The Company reiterated its guidance for fiscal 2019:

  • Total revenues of approximately $112 million to $114 million with a
    year-end revenue run rate of approximately $120 million
  • Total revenue estimates assume same store sales of approximately -3%
    to -4% for the year for Good Times. We expect same store sales of +1%
    to +2% for the year for Bad Daddy's
  • General and administrative expenses of approximately $8.4 million to
    $8.6 million, including approximately $500,000 of non-cash equity
    compensation expense
  • The opening of 5 new Bad Daddy's restaurants
  • Net loss of approximately $1.0 million including pre-opening expenses
    of approximately $1.7 million
  • Total Adjusted EBITDA* of approximately $6.0 million to $6.5 million
  • Capital expenditures (net of tenant improvement allowances) of
    approximately $10.0 to $10.5, $3 million associated with the
    acquisition of the Raleigh joint venture non-controlling interests,
    and $7.0 – 7.5 million other capital expenditures, including
    approximately $0.6 million related to fiscal 2020 development
  • Fiscal year-end long-term debt of approximately $13.5 to $14.0 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 first quarter 2019 financial results on Thursday, February 7
at 3:00 p.m. MST/5:00 p.m. EST. 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) owns, operates, franchises and licenses 35 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. Additionally, through its wholly-owned
subsidiaries, Good Times Restaurants Inc. operates and franchises a
regional quick service restaurant chain consisting of 35 Good Times
Burgers & Frozen Custard restaurants, located primarily in Colorado.

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
25, 2018 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)

 
Fiscal First Quarter
Statement of Operations 2019       2018
Net revenues:
Restaurant sales $ 25,147 $ 22,597
Franchise revenues   223     251  
Total net revenues 25,370 22,848
 
Restaurant Operating Costs:
Food and packaging costs 7,523 7,203
Payroll and other employee benefit costs 9,553 8,279
Restaurant occupancy costs 1,965 1,640
Other restaurant operating costs 2,583 2,116
Preopening costs 627 577
Depreciation and amortization   1,034     846  
Total restaurant operating costs 23,285 20,661
 
General and administrative costs 2,061 1,917
Advertising costs 628 595
Franchise costs 7 10
Gain on disposal of restaurants and equipment   (30 )   (8 )
Loss from operations (581 ) (327 )
 
Other expense:
Interest expense, net (160 ) (83 )
Other expenses   (1 )   -  
Total other expense, net   (161 )   (83 )
Net loss (742 ) (410 )
Income attributable to non-controlling interests   (309 )   (173 )
Net loss attributable to common shareholders $ (1,051 ) $ (583 )
 
Basic and diluted loss per share ($0.08 ) ($0.05 )
 
Basic and diluted weighted average common shares
outstanding
12,505 12,445
 
         

Good Times Restaurants Inc.

Unaudited Supplemental Information

(In thousands)

 
December 25,
2018
September 25,

2018

Balance Sheet Data
Cash & cash equivalents $ 2,447 $ 3,477
 
Current assets 5,197 6,381
Property and Equipment, net 36,302 35,245
Other assets   19,333   19,324
Total assets $ 60,832 $ 60,950
 

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

$ 6,419 $ 8,335
Long-term debt due after one year 10,217 7,472
Other liabilities   8,080   7,922
Total liabilities   24,716   23,729
 
Stockholders' equity $ 36,116 $ 37,221
 

Supplemental Information (Company Operated Restaurants):

 
    Good Times Burgers &
Frozen Custard
    Bad Daddy's
Burger Bar
Fiscal First Quarter
2019     2018 2019     2018
Restaurant Sales (in thousands) $ 6,897 $ 7,610 $ 18,250 $ 14,987
Restaurants opened during period - - 1 2
Restaurants closed during period - - - -
Restaurants open at period end 26 28 32 24
 
Restaurant operating weeks 338.0 364.0 423.3 309.6
 

Average weekly sales per restaurant (in thousands)

$ 20.4 $ 20.9 $ 43.1 $ 48.4
 
 

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)

       
Bad Daddy's Burger Bar   Good Times Burgers &
Frozen Custard
  Good Times
Restaurants Inc.
Fiscal Quarter Ended
December 25, 2018     December 26, 2017     December 25, 2018     December 26, 2017    

Dec. 25,
2018

    Dec. 26,
2017
Restaurant Sales $ 18,250     100.0 % $ 14,987     100.0 % $ 6,897     100.0 % $ 7,610     100.0 % $ 25,147 $ 22,597
Restaurant Operating Costs (exclusive of depreciation and
amortization
shown separately
below):
Food and packaging costs 5,269 28.9 % 4,633 30.9 % 2,254 32.7 % 2,570 33.8 % 7,523 7,203
Payroll and other employee
benefit costs
6,982 38.3 % 5,594 37.3 % 2,571 37.3 % 2,685 35.3 % 9,553 8,279
Restaurant occupancy costs 1,277 7.0 % 939 6.3 % 688 10.0 % 701 9.2 % 1,965 1,640
Other restaurant operating costs   1,984 10.9 %   1,467 9.8 % 599 8.7 %   649 8.5 %   2,583     2,116  
Restaurant-level operating profit 2,738 15.0 % $ 2,354 15.7 % 785 11.4 % $ 1,005 13.2 % 3,523 3,359
 
Franchise advertising
contributions and net royalty
income
223 251
Deduct - Other operating:
Depreciation and amortization 1,034 846
General and administrative 2,061 1,917
Advertising costs 628 595
Franchise costs 7 10
Gain on restaurant asset sale (30 ) (8 )
Preopening costs   627     577  
Total other operating   4,327     3,937  
 
Loss from Operations $ (581 ) $ (327 )

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 fiscal first quarters for fiscal 2019 and fiscal 2018, 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.

Fiscal First Quarter
2019       2018
Net loss as reported (1,051 ) ($583 )
 
Adjustments to net loss:
Depreciation and amortization 993 809
Interest expense   160     84  
EBITDA $ 102 $ 310
Preopening costs 605 485
Non-cash stock-based compensation 112 118
GAAP rent-cash rent difference (43 ) (28 )
Non-cash gain on disposal of assets   (9 )   (8 )
Adjusted EBITDA $ 767   $ 877  
 

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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