8-K: BurgerFi International Reports Mixed Q1 2024 Results Amidst Challenging Consumer Environment

BurgerFi International experienced a revenue decline in the first quarter of 2024, with same-store sales decreases at both BurgerFi and Anthony's brands, but showed some sequential improvement through the quarter.

Summary

• BurgerFi International reported a total revenue of $42.9 million for the first quarter of 2024, a decrease from $45.7 million in the same period last year.
• Systemwide sales decreased to $66.0 million, down from $73.4 million in the prior year.
• Same-store sales declined by 2% at Anthony's and by 13% at BurgerFi compared to the prior period.
• The company experienced a net loss of $6.5 million, or $(0.24) per diluted share, which is an improvement from a net loss of $9.2 million, or $(0.39) per diluted share, in the prior year.
• Adjusted EBITDA was $0.3 million, a decrease from $2.6 million in the first quarter of 2023.
• The company opened one franchised BurgerFi location and one corporate-owned flagship BurgerFi restaurant in New York City during the quarter.
• The company closed two corporate-owned and six franchise BurgerFi locations during the quarter.
• Management is maintaining its outlook for the fiscal year 2024, with annual revenues projected between $170-$180 million and adjusted EBITDA of $7 to $9 million.

Sentiment

Score: 4

Explanation: The document presents a mixed picture with some positive developments like reduced net loss and new store openings, but the overall tone is negative due to significant declines in revenue, sales, and EBITDA. The company is facing challenges and is trending to the low end of its outlook.

Positives

• Net loss decreased to $6.5 million from $9.2 million in the prior year, indicating improved cost management.
• Hourly turnover declined significantly from the previous quarter, with both brands performing within industry benchmarks.
• Management turnover improved from the sequential quarter, with Anthony's performing within industry benchmarks and BurgerFi approaching industry benchmarks.
• The company opened a new flagship BurgerFi restaurant in New York City, showcasing a new 'Better Burger Lab' experience.
• The company is rolling out new inventory control systems for both brands and a new point-of-sale platform for Anthony's, which are expected to improve operational efficiencies.
• The company saw a sequential improvement through the quarter, with a more substantive recovery in March at both brands, outside of Florida.

Negatives

• Total revenue decreased by 6% to $42.9 million compared to $45.7 million in the prior year.
• Systemwide sales decreased by 10% to $66.0 million compared to $73.4 million in the prior year.
• Same-store sales decreased by 2% at Anthony's and 13% at BurgerFi.
• Adjusted EBITDA decreased to $0.3 million from $2.6 million in the prior year.
• Restaurant-level operating expenses increased as a percentage of sales for both brands due to higher labor rates and lower sales leverage.
• The company closed two corporate-owned and six franchise BurgerFi locations during the quarter.

Risks

• The company experienced a softening in revenue and profitability due to a challenging consumer environment and unfavorable weather in key markets.
• The company is facing challenges with same-store sales declines at both BurgerFi and Anthony's brands.
• Increased restaurant-level operating expenses, particularly labor costs, are impacting profitability.
• The company is trending to the low end of its 2024 revenue outlook.
• The company is reliant on its credit agreement and must remain compliant with financial covenants.
• The company must successfully realize the expected benefits of the acquisition of Anthony's.
• The company must meet the continued listing requirements of Nasdaq.

Future Outlook

Management is maintaining its outlook for fiscal year 2024, projecting annual revenues of $170-$180 million, low-single digit same-store sales growth for corporate-owned locations, 10-15 new restaurants, and adjusted EBITDA of $7 to $9 million.

Management Comments

• Carl Bachmann, CEO, stated that the company had a difficult start to the year but does not view the performance as indicative of the brands' long-term potential.
• Bachmann noted a sequential improvement through the quarter, with a more substantive recovery in March.
• Bachmann emphasized the company's focus on driving revenue growth and enhancing operational efficiencies.
• Christopher Jones, CFO, mentioned the rollout of new inventory control systems and a new point-of-sale platform for Anthony's, which are expected to improve operations.

Industry Context

The report indicates that BurgerFi is experiencing similar challenges to its industry peers, including a softening in revenue and profitability due to a challenging consumer environment. The company is also facing headwinds from unfavorable weather in key markets. The focus on digital channels and operational efficiencies aligns with broader industry trends.

Comparison to Industry Standards

• The document mentions that hourly turnover at both Anthony's and BurgerFi is within industry benchmarks, suggesting the company is performing adequately in this area compared to its peers.
• Management turnover at Anthony's is within industry benchmarks, while BurgerFi is approaching industry benchmarks, indicating a need for improvement in this area.
• The company's same-store sales declines are concerning, as many competitors are experiencing growth or stability in this metric. For example, companies like Chipotle and Domino's have reported positive same-store sales growth in recent quarters.
• The adjusted EBITDA of $0.3 million is significantly lower than the $2.6 million reported in the same quarter last year, indicating a need for improvement in profitability. Companies like Shake Shack have reported higher EBITDA margins, suggesting BurgerFi is underperforming in this area.
• The company's focus on digital channels aligns with industry trends, but the 32% digital channel share of systemwide sales is not particularly high compared to some competitors who have a higher percentage of sales through digital channels.

Stakeholder Impact

• Shareholders may be concerned about the decline in revenue, sales, and profitability.
• Employees may be affected by the company's efforts to streamline operations and improve efficiencies.
• Customers may experience changes in service and offerings as the company implements new systems and strategies.
• Franchisees may be impacted by the company's performance and decisions regarding store closures and development.

Next Steps

• The company will continue to roll out new inventory control systems for both brands.
• The company will continue to roll out a new point-of-sale platform for Anthony's.
• The company will focus on driving revenue growth and enhancing operational efficiencies.
• The company will continue to monitor and improve same-store sales performance.
• The company will continue to execute on its five key strategic priorities implemented since last July.
• The company will hold a conference call on May 15, 2024, to discuss the results.

Key Dates

Keywords

BurgerFi, Anthony's, restaurant, fast-casual, same-store sales, EBITDA, revenue, franchise, net loss, financial results