Biglari Holdings Inc. (BH-A)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 showed resilient operating performance masked by investment partnership losses: pre-tax operating earnings rose to $9.99M, but net loss was $(33.28)M as The Lion Fund partnerships posted $(49.59)M losses; EPS was $(126.40) for Class A and $(25.28) for Class B .
• Restaurants delivered higher revenue and steady profitability (EBT $3.31M) with same-store sales +3.9%, while insurance underwriting was modestly profitable and oil & gas EBT expanded sharply on asset sales; brand licensing remained a small loss .
• Material weaknesses in internal controls were disclosed, marking a deterioration versus prior quarters’ “effective” controls; remediation is ongoing .
• Credit quality strengthened: AM Best affirmed/exited review on First Guard and Southern Pioneer and assigned A (Excellent) FSR/“a+” ICR to Biglari Reinsurance with stable outlooks, enhancing insurance group positioning .
• No formal guidance or consensus estimates were available; the stock narrative is driven by investment partnership mark-to-market volatility and continued monetization of oil & gas assets .

What Went Well and What Went Wrong

What Went Well

• Restaurant operations revenue increased to $64.35M and delivered EBT of $3.31M; Steak n Shake same-store sales rose 3.9% despite traffic pressure .
• Oil & gas delivered $10.65M EBT, led by Abraxas’ $9.32M gain on selling undeveloped reserves; Southern Oil revenue rose 10.9% YoY after well repairs .
• Insurance maintained profitability: First Guard underwriting gain improved YoY ($1.215M), while consolidated insurance EBT was $1.54M; AM Best rated Biglari Re and upgraded Southern Pioneer to A (Excellent) with stable outlooks .

Quotes:

• “We do not regard the quarterly or annual fluctuations in our investments to be meaningful.” (press release commentary on separating operating earnings from investment volatility) .
• “The increase [in cost of food] was primarily due to Steak n Shake changing its frying oil to 100% beef tallow.” (operational choice impacting margins) .
• “Southern Oil repaired several nonperforming wells throughout 2024.” (operational improvement supporting revenue) .

What Went Wrong

• Consolidated net loss of $(33.28)M driven by $(49.59)M investment partnership losses; investment volatility remains a headline driver of GAAP results .
• Restaurant cost of food and labor ratios rose (30.0% and 32.3% of net sales), reflecting beef tallow change and increased staffing; contribution to net earnings fell YoY to $2.19M .
• Internal controls: management disclosed material weaknesses and ineffective disclosure controls at quarter-end, increasing financial reporting risk until remediation is complete .

Financial Results

Restaurant cost structure KPIs (company-operated):

Segment breakdown – Q1 2025 vs Q1 2024:

Additional KPIs:

Guidance Changes

Earnings Call Themes & Trends

Note: No Q1 2025 earnings call transcript found.

Management Commentary

Prepared remarks themes:

• Separation of operating performance from investment volatility to assess core business results .
• Operational change to beef tallow frying oil increased food cost ratio, an intentional quality choice .
• Continued asset monetization in oil & gas (undeveloped reserves), with potential royalty participation without exploration funding .

Selected quotes:

• “We do not regard the quarterly or annual fluctuations in our investments to be meaningful.”
• “Steak n Shake’s same-store sales increased 3.9% but customer traffic declined at its company-operated units during the first quarter of 2025.”
• “Abraxas Petroleum recorded gains of $9,323... as result of selling undeveloped reserves... may receive future royalties.”

Q&A Highlights

• No Q1 2025 earnings call or Q&A transcript was available in the filings catalog, so no management Q&A clarifications to report .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue was not available; thus no beat/miss comparison can be made. Actuals: Revenue $95.04M; EPS $(126.40) (Class A) .
• Given lack of coverage, near-term estimate revisions are unlikely to anchor the stock; narrative remains tied to investment partnership marks and asset sale cadence .

Key Takeaways for Investors

• Core operating businesses improved YoY with higher consolidated revenue and strong oil & gas EBT; however, reported net results are dominated by investment partnership mark-to-market volatility—expect continued headline swings unrelated to operating trends .
• Restaurants are stabilizing with positive SSS, but labor inflation and product changes (beef tallow) are lifting cost ratios; monitor margin trajectory and traffic trends through 2025 .
• Insurance remains profitable; AM Best actions (A ratings and upgrade) strengthen the insurance group’s resilience and capital flexibility—positive for underwriting stability and potential growth .
• Oil & gas monetization continues to be an EPS/EBT swing factor via gains on undeveloped reserves and royalties, reducing capex intensity while sustaining profitability; watch commodity price sensitivity and depletion rates .
• Internal control material weaknesses introduce reporting risk until remediation is validated; factor governance and control remediation progress into risk premium and position sizing .
• Absence of formal guidance and consensus estimates means the stock will trade on realized results and partnership performance; catalysts include further asset sales, rating actions, and restaurant traffic/margin trends .
• For trading, headline GAAP prints may misrepresent operating momentum; focus on segment EBT and cash flows, particularly oil & gas and restaurant cost metrics, while hedging for investment partnership volatility .