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Fat Brands, Inc (FAT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue of $146.8M declined 3.4% YoY; slight beat vs S&P Global consensus ($146.6M) while EPS missed (Primary EPS actual -$2.88 vs -$2.18 consensus). Adjusted EBITDA held flat YoY at $15.7M; reported EBITDA negative due to higher interest and one-time share-based comp *.
  • Management advanced liquidity initiatives: bondholder agreement to convert amortizing bonds to interest-only ($30–$40M annual cash flow savings) and continued dividend pause preserving $36–$40M annually; refinancing work underway ahead of July 2026 maturities .
  • Legal overhang reduced: DOJ dropped all charges against the Chairman; proposed settlement of Delaware derivative cases announced, pending court approval—potentially lowering litigation expense run-rate and improving investor perception .
  • Operating cadence steady: 18 new openings in Q2; robust pipeline ~1,000 signed deals; digital/loyalty traction strong in snacks segment (cookies/ice cream) and Round Table Pizza—near-term catalysts include manufacturing partnerships (30–60 day rollout) .
  • Near-term stock narrative catalyst: de-risking from legal resolution plus demonstrable cash cost savings; watch execution on securitization refinancings and Twin Hospitality equity raise pacing .

What Went Well and What Went Wrong

What Went Well

  • Pipeline and development: 18 openings; tracking to >100 openings in 2025; Florida development agreement for 40 Fatburger units grows state presence to ~50 .
  • Digital/loyalty momentum: Great American Cookies digital mix at 25% of sales; loyalty spend +40%; Round Table Pizza loyalty-driven sales +21% and engagement +18% .
  • Manufacturing economics: Georgia facility delivered $10.3M sales and $3.8M adjusted EBITDA (37% margin) at ~45% utilization; capacity expansion possible with modest capex .

What Went Wrong

  • Top-line softness: System-wide sales -3.7%, SSS -3.9%; QSR brands (e.g., Fazoli’s) cited as challenged; international lagged domestic (though Canada Fatburger improving) .
  • Profitability pressure: Net loss widened to $54.2M (vs $39.4M YoY); reported EBITDA negative (-$6.0M) driven by higher interest and one-time share-based comp tied to Twin Hospitality listing .
  • Elevated G&A: +50% YoY to $44.4M largely from $12.6M non-cash share-based comp; management characterized as one-time tied to spin-off .

Financial Results

Q2 2025 Results vs Consensus (S&P Global)

MetricConsensusActualDelta
Revenue ($USD)$146.6M*$146.836M +$0.236M (beat)
Primary EPS ($)-$2.18*-$2.88*-$0.70 (miss)
EBITDA ($USD)$14.2M*-$7.168M*-$21.368M (miss)

Values with an asterisk are retrieved from S&P Global.

Quarterly Trend (S&P Global fundamentals; oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenues ($USD)$143.881M*$140.953M*$145.598M*
Net Income ($USD)-$67.417M*-$45.969M*-$54.188M*
Diluted EPS - Continuing Ops ($)-$4.06*-$2.73*-$3.17*
EBITDA ($USD)$0.950M*$1.825M*-$7.168M*
Gross Profit ($USD)$36.279M*$34.846M*$37.238M*
Gross Margin (%)24.97%*24.54%*25.36%*
EBIT ($USD)-$9.402M*-$8.566M*-$15.550M*
EBIT Margin (%)-6.47%*-6.03%*-10.59%*
Net Income Margin (%)-46.40%*-32.37%*-36.90%*

Values retrieved from S&P Global.

Q2 2025 vs Q2 2024 (reported)

MetricQ2 2024Q2 2025YoY Change
Total Revenue ($USD)$152.0M $146.8M -3.4%
Net Loss ($USD)-$39.4M -$54.2M -$14.8M
Diluted Loss/Share ($)-$2.43 -$3.17 -$0.74
EBITDA ($USD)$6.8M -$6.0M -$12.8M
Adjusted EBITDA ($USD)$15.7M $15.7M 0.0%
Adjusted Loss/Share ($)-$1.93 -$2.88 -$0.95
System-wide Sales ($USD)$614.7M $592.2M -3.7%
Same-Store Sales (%)—-3.9% n/a

Segment Revenue Breakdown (Q2 2025 vs Q2 2024)

Revenue Line ($USD ‘000)Q2 2024Q2 2025
Royalties$23,318 $22,169
Restaurant Sales$107,410 $102,388
Advertising Fees$10,065 $9,667
Factory Revenues$9,636 $10,250
Franchise Fees$1,113 $1,124
Other Revenue$498 $1,238
Total Revenue$152,040 $146,836

KPIs

KPIQ2 2025Commentary
System-wide Sales ($USD)$592.2M -3.7% YoY
System-wide SSS (%)-3.9% Snacks segment strong; QSR challenged
New Store Openings18 Tracking to >100 in 2025
Digital Mix (Cookies)25% of sales Loyalty spend +40%
Round Table Loyalty+21% sales; +18% engagement Ongoing digital traction

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
New OpeningsFY 2025“>100 openings” “On track for >100” Maintained
Manufacturing PartnershipsNear-termExecute first 3rd-party contract in Q2’25 Rollout in 30–60 days; multiple paths (virtual and direct) Raised granularity (timing clarified)
Factory UtilizationNear-termTarget 60–70% utilization 45% utilized; expansion planned Maintained (progress update)
Dividend PolicyUntil $25M principal reductionPause common dividend; accrue Series B preferred Pause remains; preserves $36–$40M/yr Maintained
Bond StructureOngoingTarget refinancings; Twin Hospitality equity raise $75–$100M Bondholder agreement converting amortizing to interest-only ($30–$40M annual savings) Raised (additional savings)
Cash Flow Outlook“Coming quarters”Push to cash flow positive “Positioned to achieve cash flow positive status in coming quarters” Maintained (confidence reaffirmed)
Refranchising (Fazoli’s)2025–2026Plan to refranchise 57 corp. units Amended securitization enables refranchising; ~$2.5M overhead savings Maintained (execution path)

Earnings Call Themes & Trends

TopicQ4 2024 (2Q prior)Q1 2025 (prior)Q2 2025 (current)Trend
Legal/regulatoryExpect resolution and insurance recovery in Q2 Indicated litigation nearing resolution DOJ dismissed charges; derivative case settlement pending court approval Improving
Manufacturing utilization40% capacity; aim 60–70%; strategic sale optional later Expect 3rd-party contract in Q2; target 60–70% $10.3M sales; $3.8M adj. EBITDA (37% margin); expansion possible; rollout 30–60 days Improving
Twin Hospitality equity raiseCommitted $75–$100M; $25M by late April Timing affected by market volatility; still targeting 12 months Continuing plan; market-dependent Stable but delayed
Smokey Bones conversions30 of ~60 targeted; 24-month horizon Conversions ongoing; closures impacting sales Acceleration under new leadership; prioritize conversions and closures Accelerating
Consumer/valueWeather/macro mixed; QSR pressured Emphasis on value proposition over discounting Snacks strong; QSR pressured; optimism into fall sports Mixed but stabilizing
Digital/loyaltyBuilding integrations across brands Round Table digital +5% seq. from Q4; cookies/cream app lifts sales +8% Cookies digital 25%; loyalty +40%; Round Table loyalty +21% Improving

Management Commentary

  • “Backed by a robust pipeline of roughly 1,000 signed deals, we opened 18 new locations during the second quarter…well positioned to meet our goal of more than 100 restaurant openings this year.” — Andy Wiederhorn
  • “We…secured a bondholder agreement to convert amortizing bonds to interest-only, which will generate an additional $30 to $40 million in annual cash flow savings…position us to achieve cash flow positive status in the coming quarters.” — Ken Kuick
  • “Our diversified portfolio strategy is paying dividends, led by a strong performance in our snacks segment…digital sales now account for 25%…Round Table Pizza is experiencing 21% loyalty-driven sales growth and 18% higher customer engagement.” — Andy Wiederhorn
  • “We are actively pursuing strategic partnerships that broaden our brand reach and strengthen our manufacturing capabilities.” — Taylor Wiederhorn
  • “Our Georgia production facility…$10.3 million in second quarter sales and $3.8 million in adjusted EBITDA, resulting in an attractive 37% margin.” — Andy Wiederhorn
  • “The U.S. Department of Justice has dropped all charges…” — Company press release

Q&A Highlights

  • G&A spike clarified: ~$12.6M non-cash share-based comp tied to Twin Hospitality listing; characterized as one-time; expected to decline .
  • Manufacturing rollout timing: new third-party/virtual partnerships “in production now,” full rollout expected in 30–60 days; multi-operator paths to accelerate factory volumes .
  • Traffic trends: snack brands (cookies/ice cream/pretzels) doing “significantly better”; QSR challenged; polished casual improving; optimism into fall sports .
  • Liquidity: $130–$150M of retained notes for potential sale/financing; ATM available though underused given perceived undervaluation .
  • Smokey Bones conversions: accelerate identification and conversion/closure processes under new leadership to avoid dragging on Twin Peaks performance .

Estimates Context

  • Coverage remains limited (2 estimates for revenue and EPS). Q2 2025 printed a modest revenue beat and a significant EPS/EBITDA miss relative to consensus (Primary EPS -$2.88 vs -$2.18; EBITDA -$7.2M vs $14.2M). Adjusted EBITDA was flat YoY at $15.7M, highlighting the importance of non-GAAP adjustments in this name .
  • Post-quarter estimate resets likely skew toward lower EPS/EBITDA given negative reported EBITDA and higher interest expense; watch for revisions tied to legal cost reductions, bond conversion savings, and manufacturing ramp.

Values with an asterisk are retrieved from S&P Global.

Q2 2025 S&P Global Consensus vs Actual

MetricConsensusActual
Revenue ($USD)$146.6M*$146.836M
Primary EPS ($)-$2.18*-$2.88*
EBITDA ($USD)$14.2M*-$7.168M*
# of Estimates (Revenue / EPS)2 / 2*—

Key Takeaways for Investors

  • Execution focus: Watch 30–60 day manufacturing partnership rollout and magnitude of factory utilization lift; high incremental margin with potential strategic optionality longer-term .
  • Deleveraging pathway: Bond conversion ($30–$40M savings) plus dividend pause ($36–$40M) create meaningful cash flow runway; securitization refinancings ahead of July 2026 are critical milestones .
  • Legal de-risking: DOJ dismissal and proposed derivative settlement reduce overhang; monitor impact on G&A/litigation expense run-rate and insurance recoveries .
  • Segment mix: Snacks/digital and Round Table loyalty are relative strengths; QSR exposure remains a headwind—position for mix resiliency while conversions address underperformers .
  • Twin Hospitality equity raise timing: Market-dependent; any slippage extends deleveraging timeline—track quarterly updates and any structure modifications .
  • Non-GAAP vs GAAP: Adjusted EBITDA stability contrasts with negative reported EBITDA; expect investor focus on cash metrics as cost-saving measures accrue .
  • Development catalyst: >100 openings in 2025 sustains royalty base; Florida Fatburger expansion and international deals (e.g., Canada, France) broaden geographic diversity .

Notes:

  • Non-GAAP measures include EBITDA, Adjusted EBITDA, and Adjusted Net Loss; reconciliations provided in the company’s materials .
  • Values marked with an asterisk are retrieved from S&P Global.