Nathan's Famous, Inc. Reports Third Quarter Results and Increases its Quarterly Cash Dividend to $0.50 Per Share

By: Nathan's Famous Inc via GlobeNewswire

February 02, 2023 at 08:30 AM EST

JERICHO, N.Y., Feb. 02, 2023 (GLOBE NEWSWIRE) -- Nathan's Famous, Inc. (“Nathan’s”, the “Company”, “we”, “us” or “our”) (NASDAQ: NATH) today reported results for its third fiscal quarter ended December 25, 2022.

For the fiscal quarter ended December 25, 2022:

Revenues increased by 1% to $26,154,000 as compared to $25,913,000 during the thirteen weeks ended December 26, 2021;
Income from operations was $6,332,000 as compared to $5,613,000 during the thirteen weeks ended December 26, 2021;
Adjusted EBITDA¹, a non-GAAP financial measure, was $6,899,000 as compared to $5,907,000 during the thirteen weeks ended December 26, 2021;
Income before provision for income taxes was $4,486,000 as compared to $2,990,000 during the thirteen weeks ended December 26, 2021;
Net income was $3,263,000 as compared to $2,130,000 during the thirteen weeks ended December 26, 2021; and
Earnings per diluted share was $0.79 per share as compared to $0.52 per share during the thirteen weeks ended December 26, 2021.

For the thirty-nine weeks ended December 25, 2022:

Revenues increased by 15% to $103,371,000 as compared to $90,110,000 during the thirty-nine weeks ended December 26, 2021;
Income from operations was $28,026,000 as compared to $23,754,000 during the thirty-nine weeks ended December 26, 2021;
Adjusted EBITDA¹, a non-GAAP financial measure, was $29,287,000 as compared to $24,739,000 during the thirty-nine weeks ended December 26, 2021;
Income before provision for income taxes was $22,451,000 as compared to $15,915,000 during the thirty-nine weeks ended December 26, 2021;
Net income was $16,358,000 as compared to $11,438,000 during the thirty-nine weeks ended December 26, 2021; and
Earnings per diluted share was $3.99 per share as compared to $2.78 per share during the thirty-nine weeks ended December 26, 2021.

The Company also reported the following:

During the fiscal 2023 period, the Board of Directors declared three quarterly cash dividends of $0.45 per share totaling $5,524,000.
Effective February 2, 2023, the Board of Directors increased the quarterly cash dividend by 11% and declared a quarterly cash dividend of $0.50 per share payable on March 3, 2023 to shareholders of record at the close of business on February 21, 2023.
License royalties were $26,064,000 during the thirty-nine weeks ended December 25, 2022, (“fiscal 2023 period”) as compared to $24,218,000 during the thirty-nine weeks ended December 26, 2021. During the fiscal 2023 period, royalties earned under the retail agreement, including the foodservice program, from Smithfield Foods, Inc., increased 6% to $23,594,000 as compared to $22,161,000 of royalties earned during the thirty-nine weeks ended December 26, 2021.
In the Branded Product Program, which features the sale of Nathan’s hot dogs to the foodservice industry, sales increased by approximately $9,902,000 to $61,862,000 during the fiscal 2023 period as compared to $51,960,000 during the thirty-nine weeks ended December 26, 2021. The volume of hot dogs sold by the Company increased by approximately 14%. Our average selling price, which is partially correlated to the beef markets, increased by approximately 5% compared to the prior year period. Income from operations increased by approximately $1,907,000 to $7,003,000 during the fiscal 2023 period as compared to $5,096,000 for the thirty-nine weeks ended December 26, 2021. Our Branded Product Program customers, including professional sports arenas, amusement parks, shopping malls and movie theaters have experienced stronger attendance contributing to an increase in sales over the prior year comparable period.
Sales from Company-operated restaurants were $10,673,000 during the fiscal 2023 period compared to $9,502,000 during the thirty-nine weeks ended December 26, 2021. The increase was primarily due to an increase in customer traffic especially at our two Coney Island locations.
Revenues from franchise operations were $3,268,000 during the fiscal 2023 period as compared to $2,993,000 during the thirty-nine weeks ended December 26, 2021. Total royalties were $2,785,000 during the fiscal 2023 period as compared to $2,581,000 during the thirty-nine weeks ended December 26, 2021. Total franchise fee income was $483,000 during the fiscal 2023 period as compared to $412,000 during the thirty-nine weeks ended December 26, 2021. The increase in franchise fees and royalties during the fiscal 2023 period was primarily due to an increase in franchise restaurant sales of $8,392,000 to $49,302,000 as compared to $40,910,000 for the thirty-nine weeks ended December 26, 2021.² Six new franchised outlets and two Branded Menu Program units opened during the fiscal 2023 period.
During the fiscal 2023 period, we recorded Advertising Fund revenue of $1,504,000 and Advertising Fund expense of $1,679,000.
During the fiscal 2023 period, the Company repurchased 35,434 shares of its common stock for $1,892,000 pursuant to a 10b5-1 plan which expired on September 13, 2022.

Certain Non-GAAP Financial Information:

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company is disclosing EBITDA, a non-GAAP financial measure which is defined as net income, excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company is also disclosing Adjusted EBITDA, a non-GAAP financial measure which is defined as EBITDA, excluding (i) the loss on disposal of property and equipment and (ii) stock-based compensation that the Company believes will impact the comparability of its results of operations.

The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.

EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP. Please see the table at the end of this press release for a reconciliation of EBITDA and Adjusted EBITDA to net income.

About Nathan’s Famous

Nathan’s is a Russell 2000 Company that currently distributes its products in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and sixteen foreign countries through its restaurant system, foodservice sales programs and product licensing activities. For additional information about Nathan’s please visit our website at www.nathansfamous.com.

Except for historical information contained in this news release, the matters discussed are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, and similar expressions identify forward-looking statements, which are based on the current belief of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially include but are not limited to: the impact of the COVID-19 pandemic; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with John Morrell & Co., a wholly-owned subsidiary of Smithfield Foods, Inc.; the impact of our debt service and repayment obligations under the 2025 Notes, including the effect on our ability to fund working capital, operations and make new investments; economic (including inflationary pressures like those currently being experienced); weather (including the impact on the supply of cattle and the impact on sales at our restaurants particularly during the summer months), and changes in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectability of receivables; changes in consumer tastes; the continued viability of Coney Island as a destination location for visitors; the ability to attract franchisees; the impact of the minimum wage legislation on labor costs in New York State or other changes in labor laws, including regulations which could render a franchisor as a “joint employee” or the impact of our union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the future effects of any food borne illness, such as bovine spongiform encephalopathy, BSE and e coli; and the risk factors reported from time to time in the Company’s SEC reports. The Company does not undertake any obligation to update such forward-looking statements.

_______________
¹ EBITDA and Adjusted EBITDA are non-GAAP financial measures. Please see the definitions of EBITDA and Adjusted EBITDA on page 3 of this release and the reconciliation of EBITDA and Adjusted EBITDA to net income in the table at the end of this release.
² Franchise restaurant sales are not revenues of the Company and are not included in the Company’s Consolidated Financial Statements.

Nathan's Famous, Inc. and Subsidiaries

(unaudited)

	Thirteen weeks ended						Thirty-nine weeks ended
		Dec. 25, 2022			Dec. 26, 2021			Dec. 25, 2022			Dec. 26, 2021
Financial Highlights

Total revenues	$	26,154,000		$	25,913,000		$	103,371,000		$	90,110,000

Income from operations (a)	$	6,332,000		$	5,613,000		$	28,026,000		$	23,754,000

Net income	$	3,263,000		$	2,130,000		$	16,358,000		$	11,438,000

Income per share:
Basic	$	0.80		$	0.52		$	4.00		$	2.78
Diluted	$	0.79		$	0.52		$	3.99		$	2.78

Weighted-average shares used in computing income per share:
Basic		4,080,000			4,115,000			4,092,000			4,115,000
Diluted		4,116,000			4,115,000			4,104,000			4,115,000

Select Segment Information

Revenues
Branded product program	$	16,661,000		$	16,901,000		$	61,862,000		$	51,960,000
Product licensing		6,337,000			5,878,000			26,064,000			24,218,000
Restaurant operations		2,655,000			2,655,000			13,941,000			12,495,000
Corporate (b)		501,000			479,000			1,504,000			1,437,000
Total Revenues	$	26,154,000		$	25,913,000		$	103,371,000		$	90,110,000

Income from operations (c)
Branded product program	$	2,451,000		$	1,681,000		$	7,003,000		$	5,096,000
Product licensing		6,292,000			5,832,000			25,928,000			24,081,000
Restaurant operations		(238,000	)		(69,000	)		1,879,000			623,000
Corporate (d)		(2,173,000	)		(1,831,000	)		(6,784,000	)		(6,046,000	)
Income from operations (c)	$	6,332,000		$	5,613,000		$	28,026,000		$	23,754,000

Excludes interest expense, interest income, and other income (expense), net.
Represents Advertising Fund revenue.
Excludes interest expense, interest income and other income (expense), net which are managed centrally at the corporate level, and, accordingly, such items are not presented by segment since they are excluded from the measure of profitability reviewed by the Chief Operating Decision Maker.
Consists principally of administrative expenses not allocated to the operating segments such as executive management, finance, information technology, legal, insurance, corporate office costs, incentive compensation, compliance costs and the operating results of the advertising fund.

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(unaudited)

	Thirteen weeks ended				Thirty-nine weeks ended
		Dec. 25, 2022		Dec. 26, 2021		Dec. 25, 2022		Dec. 26, 2021

EBITDA
Net Income	$	3,263,000	$	2,130,000	$	16,358,000	$	11,438,000

Interest Expense		1,944,000		2,650,000		5,831,000		7,951,000

Provision for income taxes		1,223,000		860,000		6,093,000		4,477,000

Depreciation and amortization		303,000		259,000		837,000		807,000

EBITDA	$	6,733,000	$	5,899,000	$	29,119,000	$	24,673,000


Adjusted EBITDA
EBITDA	$	6,733,000	$	5,899,000	$	29,119,000	$	24,673,000

Loss on disposal of property and equipment		101,000		-		87,000		-

Share-based compensation		65,000		8,000		81,000		66,000

Adjusted EBITDA	$	6,899,000	$	5,907,000	$	29,287,000	$	24,739,000