Record quarterly revenue of $485.2 million, including comparable restaurant sales growth of 10.5%
Top-line strength helped deliver another quarter of improved profitability
SYRACUSE, N.Y., Aug. 10, 2023 (GLOBE NEWSWIRE) -- Carrols Restaurant Group, Inc. (“Carrols” or the “Company”) ( TAST), the largest BURGER KING® franchisee in the United States, today reported its financial results for the second quarter ended July 2, 2023.
Highlights for the Second Quarter of 2023 versus the Second Quarter of 2022 include:
- Total restaurant sales increased 9.8% to $485.2 million in the second quarter of 2023 compared to $441.9 million in the second quarter of 2022;
- Comparable restaurant sales for the Company’s Burger King® restaurants increased 10.4%;
- Comparable restaurant sales for the Company’s Popeyes® restaurants increased 11.6%;
- Adjusted EBITDA(1) totaled $44.3 million compared to $15.1 million in the prior year quarter;
- Adjusted Restaurant-Level EBITDA(1) totaled $67.8 million compared to $34.6 million in the prior year quarter;
- Net Income was $15.0 million, or $0.23 per diluted share, compared to a Net Loss of $26.5 million, or $0.52 per diluted share, in the prior year quarter;
- Adjusted Net Income(1) was $17.0 million, or $0.27 per diluted share, compared to Adjusted Net Loss of $8.9 million, or $0.18 per diluted share, in the prior year quarter; and
- Free Cash Flow(2) of $37.9 million compared to negative Free Cash Flow of $(5.7) million in the prior year quarter.
Management Commentary
Deborah Derby, President and Chief Executive Officer of Carrols, commented, “We had one of the best quarters in the Company’s 63-year history, as we achieved $485.2 million of restaurant sales; delivered Adjusted EBITDA of $44.3 million; generated free cash flow of $37.9 million; and reduced our net leverage ratio to 3.6 times. I’m also pleased to report that our Burger King restaurants are well on their way to achieving the highest possible operator rating as defined by our franchisor, which is a direct testament to the outstanding efforts of our field teams.”
Derby continued, “As we look ahead, we believe the combination of the work we have done to enhance the guest experience and the benefits from Burger King’s Royal Reset and Reclaim the Flame initiatives will continue to positively impact our traffic. Our top priorities remain fortifying our balance sheet, reducing our net debt, and staying the course on organic growth.”
Second Quarter 2023 Financial Results
Total restaurant sales were $485.2 million in the second quarter of 2023 compared to $441.9 million in the second quarter of 2022, both of which were 13-week periods.
Comparable restaurant sales for the Company’s Burger King restaurants increased 10.4% compared to a 2.8% increase in the prior year quarter.
Comparable restaurant sales for the Company’s Popeyes restaurants, which represented 5.0% of total restaurant sales in the second quarter of 2023, increased 11.6% compared to a 2.0% increase in the second quarter of 2022.
Adjusted Restaurant-Level EBITDA(1) was $67.8 million in the second quarter of 2023 compared to $34.6 million in the prior year period. Adjusted Restaurant-Level EBITDA margin improved to 14.0% of restaurant sales from 7.8% in the second quarter of 2022, primarily due to increased leverage from a higher average check.
General and administrative expenses increased to $24.6 million in the second quarter of 2023 from $20.8 million in the prior year period, including stock compensation expense of $1.0 million and $0.9 million, respectively. The increase in the second quarter of 2023 was primarily due to incentive compensation accruals which were absent in the prior year period.
Adjusted EBITDA(1) was $44.3 million in the second quarter of 2023 compared to $15.1 million in the second quarter of 2022. Due to the factors discussed above, Adjusted EBITDA margin increased to 9.1% of restaurant sales from 3.4% in the second quarter of 2022.
Income from operations was $23.2 million in the second quarter of 2023 compared to loss from operations of $25.0 million in the prior year quarter.
Interest expense increased to $7.7 million in the second quarter of 2023 from $7.6 million in the second quarter of 2022.
Net Income was $15.0 million in the second quarter of 2023, or $0.23 per diluted share, compared to a Net Loss of $26.5 million, or $0.52 per diluted share, in the prior year quarter. Net Income in the second quarter of 2023 included $2.7 million in impairment and other lease charges, $0.1 million in executive transition, litigation and other professional expenses, $1.3 million in other income and a $0.9 million decrease in the valuation allowance for deferred taxes. Among other items, Net Loss in the second quarter of 2022 included $18.2 million in impairment and other lease charges, $0.4 million in executive recruiting, litigation and other professional expenses and a $3.3 million increase in the valuation allowance for deferred taxes.
Adjusted Net Income(1) was $17.0 million in the second quarter of 2023, or $0.27 per diluted share, compared to an Adjusted Net Loss of $8.9 million, or $0.18 per diluted share, in the prior year quarter.
The Company had Free Cash Flow(2) in the second quarter of 2023 of $37.9 million compared to negative Free Cash Flow of $(5.7) million in the prior year period.
Balance Sheet Update
The Company ended the second quarter of 2023 with cash and cash equivalents of $40.9 million and long-term debt (including current portion) and finance lease liabilities of $476.8 million. There were no revolving credit borrowings outstanding and $10.5 million of letters of credit issued under the Company’s $215.0 million revolving credit facility, leaving $204.5 million of borrowing availability as of July 2, 2023. Including the cash balance, the Company had $245.4 million of available liquidity at the end of the second quarter of 2023.
Conference Call Today
Deborah M. Derby, President and Chief Executive Officer, Anthony E. Hull, Chief Financial Officer and Treasurer, and Gretta Miles, Controller and Assistant Treasurer, will host a conference call to discuss second quarter 2023 financial results at 8:30 a.m. (ET).
The conference call can be accessed live over the telephone by dialing 201-493-6779. A replay will be available three hours after the call and can be accessed by dialing 412-317-6671; the passcode is 13735443. The replay will be available until Thursday, August 24, 2023. Investors and interested parties may listen to a webcast of this conference call by visiting the Investor Relations page of the Company’s website located at www.carrols.com. The press release and related presentation slides will be accessible via the same website page prior to the scheduled call.
About the Company
Carrols is one of the largest restaurant franchisees in North America. It is the largest BURGER KING® franchisee in the United States, currently operating 1,019 BURGER KING® restaurants in 23 states as well as 62 POPEYES® restaurants in six states. Carrols has operated BURGER KING® restaurants since 1976 and POPEYES® restaurants since 2019. For more information, please visit the Company’s website at www.carrols.com.
Forward-Looking Statements
Except for the historical information contained in this news release, the matters addressed are forward-looking statements. Forward-looking statements, written, oral or otherwise made, represent Carrols’ expectation or belief concerning future events. Without limiting the foregoing, these statements are often identified by the words “may”, “might”, “believes”, “thinks”, “anticipates”, “plans”, “expects”, “intends” or similar expressions. In addition, expressions of our strategies, intentions, plans or guidance are also forward-looking statements. Such statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. You are cautioned not to place undue reliance on these forward-looking statements as there are important factors that could cause actual results to differ materially from those in forward-looking statements, many of which are beyond our control. Investors are referred to the full discussion of risks and uncertainties as included in Carrols’ filings with the Securities and Exchange Commission.
Footnotes
(1)Adjusted EBITDA, Adjusted Restaurant-Level EBITDA and Adjusted Net Income (Loss) are non-GAAP financial measures. Refer to the definitions and reconciliation of these measures to net income (loss) or to income (loss) from operations in the tables at the end of this release.
(2)Free Cash flow is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure in the tables at the end of this release.
Carrols Restaurant Group, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
| (unaudited) | |||||||||||||||
| Three Months Ended (a) | Six Months Ended (a) | ||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||
| Restaurant sales | $ | 485,223 | $ | 441,945 | 930,385 | 841,421 | |||||||||
| Costs and expenses: | |||||||||||||||
| Food, beverage and packaging costs | 136,683 | 140,175 | 262,126 | 263,232 | |||||||||||
| Restaurant wages and related expenses | 155,269 | 149,315 | 301,593 | 290,935 | |||||||||||
| Restaurant rent expense | 32,180 | 31,230 | 64,014 | 62,243 | |||||||||||
| Other restaurant operating expenses | 73,711 | 69,032 | 142,843 | 134,439 | |||||||||||
| Advertising expense | 19,578 | 17,641 | 37,476 | 33,605 | |||||||||||
| General and administrative expenses (b)(c) | 24,588 | 20,827 | 50,328 | 42,844 | |||||||||||
| Depreciation and amortization | 18,559 | 20,071 | 37,277 | 39,613 | |||||||||||
| Impairment and other lease charges | 2,749 | 18,176 | 4,089 | 18,672 | |||||||||||
| Other (income) expense, net (d) | (1,319 | ) | 439 | (2,825 | ) | 641 | |||||||||
| Total costs and expenses | 461,998 | 466,906 | 896,921 | 886,224 | |||||||||||
| Income (loss) from operations | 23,225 | (24,961 | ) | 33,464 | (44,803 | ) | |||||||||
| Interest expense | 7,667 | 7,636 | 15,900 | 15,072 | |||||||||||
| Income (loss) before income taxes | 15,558 | (32,597 | ) | 17,564 | (59,875 | ) | |||||||||
| Provision (benefit) from income taxes | 604 | (6,121 | ) | 1,746 | (12,130 | ) | |||||||||
| Net income (loss) | $ | 14,954 | $ | (26,476 | ) | $ | 15,818 | $ | (47,745 | ) | |||||
| Basic and diluted net income (loss) per share (e)(f) | $ | 0.23 | $ | (0.52 | ) | $ | 0.25 | $ | (0.94 | ) | |||||
| Basic weighted average common shares outstanding | 51,535 | 50,795 | 51,479 | 50,634 | |||||||||||
| Diluted weighted average common shares outstanding | 62,124 | 50,795 | 61,773 | 50,634 | |||||||||||
(a) The Company uses a 52 or 53 week fiscal year that ends on the Sunday closest to December 31. The three and six months ended July 2, 2023 and July 3, 2022 each included thirteen and twenty-six weeks, respectively.
(b) General and administrative expenses include certain executive transition, litigation and other professional expenses of $0.1 million and $0.9 million for the three and six months ended July 2, 2023, respectively, and $0.4 million and $2.3 million for the three and six months ended July 3, 2022, respectively.
(c) General and administrative expenses include stock-based compensation expense of $1.0 million and $0.9 million for the three months ended July 2, 2023 and July 3, 2022, respectively and $2.1 million and $2.9 million for the six months ended July 2, 2023 and July 3, 2022, respectively.
(d) The three months ended July 2, 2023 included other income, net, of $1.3 million, which was comprised of net gains from insurance recoveries of $0.9 million, a gain of $0.4 million from a sale leaseback transaction, a gain from condemnation of a property of $0.3 million and a loss on disposal of assets of $0.3 million. The six months ended July 2, 2023 included other income, net, of $2.8 million, which was comprised of net gains from insurance recoveries of $1.8 million, a gain of $0.8 million from the derecognition of a lease financing obligation associated with a prior sale leaseback transaction, a gain of $0.4 million from a sale leaseback transaction, a gain from condemnation of a property of $0.3 million and a loss on disposal of assets of $0.5 million. The three and six months ended July 3, 2022 included other expense, net, of $0.4 million and $0.6 million, respectively, which included a loss on disposal of assets of $0.5 million and $0.8 million, respectively.
(e) In periods presented with a loss, basic net income (loss) per share was computed without attributing any loss to preferred stock and non-vested restricted shares as losses are not allocated to participating securities under the two-class method.
(f) Diluted net income (loss) per share was computed including shares issuable for convertible preferred stock and non-vested shares and stock units unless their effect would have been anti-dilutive for the periods presented.
The following table sets forth certain unaudited supplemental financial and other data for the periods indicated (in thousands, except number of restaurants, percentages and average weekly sales per restaurant):
Carrols Restaurant Group, Inc.
Supplemental Information
| (unaudited) | |||||||||||||||
| Three Months Ended (a) | Six Months Ended (a) | ||||||||||||||
| July 2, 2023 | July 3, 2022 | July 2, 2023 | July 3, 2022 | ||||||||||||
| Revenue: | |||||||||||||||
| Burger King restaurant sales | $ | 461,119 | $ | 419,758 | $ | 883,056 | $ | 797,587 | |||||||
| Popeyes restaurant sales | 24,104 | 22,187 | 47,329 | 43,834 | |||||||||||
| Total revenue | $ | 485,223 | $ | 441,945 | $ | 930,385 | $ | 841,421 | |||||||
| Change in Comparable Burger King Restaurant Sales (b) | 10.4 | % | 2.8 | % | 11.0 | % | 2.2 | % | |||||||
| Change in Comparable Popeyes Restaurant Sales (b) | 11.6 | % | 2.0 | % | 10.6 | % | 2.1 | % | |||||||
| Average Weekly Sales per Burger King Restaurant (c) | $ | 34,955 | $ | 31,506 | $ | 33,355 | $ | 29,949 | |||||||
| Average Weekly Sales per Popeyes Restaurant (c) | $ | 29,874 | $ | 26,257 | $ | 28,674 | $ | 25,937 | |||||||
| Adjusted Restaurant-Level EBITDA (d) | $ | 67,806 | $ | 34,596 | $ | 122,337 | $ | 57,056 | |||||||
| Adjusted Restaurant-Level EBITDA margin (d) | 14.0 | % | 7.8 | % | 13.1 | % | 6.8 | % | |||||||
| Adjusted EBITDA (d) | $ | 44,324 | $ | 15,108 | $ | 75,010 | $ | 19,410 | |||||||
| Adjusted EBITDA margin (d) | 9.1 | % | 3.4 | % | 8.1 | % | 2.3 | % | |||||||
| Adjusted Net Income (Loss) (d) | $ | 17,009 | $ | (8,901 | ) | $ | 17,016 | $ | (25,967 | ) | |||||
| Adjusted Diluted Net Income (Loss) per share (d) | $ | 0.27 | $ | (0.18 | ) | $ | 0.28 | $ | (0.51 | ) | |||||
| Number of Burger King restaurants: | |||||||||||||||
| Restaurants at beginning of period | 1,019 | 1,026 | |||||||||||||
