Breaking Down FAT Brands Inc. (FAT) Financial Health: Key Insights for Investors

As an investor, are you keeping a close watch on FAT Brands Inc.'s (FAT) financial performance? Did you know that in fiscal year 2024, the company reported a total revenue of $592.7 million, a 23.4% increase compared to the previous year? However, the company also faced a net loss of $189.8 million, or $11.60 per diluted share. With a significant total debt of $1.47 billion as of December 2024, how is FAT Brands navigating its financial challenges, and what strategies are they implementing to improve profitability? Read on to find out!

FAT Brands Inc. (FAT) Revenue Analysis

Understanding FAT Brands Inc.'s financial health requires a detailed look into its revenue streams. A comprehensive analysis provides investors with key insights into the company's performance and future prospects. Here's a breakdown of FAT Brands Inc.'s revenue streams:

FAT Brands Inc. operates through various segments, primarily focusing on:

• Franchise Revenues: Royalties collected from franchise partners.
• Restaurant Sales: Revenue from company-owned restaurants.
• Manufacturing Revenues: Revenue from Johnny Rockets's manufacturing and distribution business.
• Services Revenues: Revenues from advertising fund and other services provided to franchisees.

Year-over-year revenue growth is a critical indicator of FAT Brands Inc.'s financial trajectory. Recent data shows:

• In 2023, total revenue increased by $36.2 million, or 13.8%, to $298.8 million, compared to $262.6 million in 2022.
• The increase was primarily due to a $15.8 million increase in franchise revenues, a $13.0 million increase in restaurant sales, a $3.5 million increase in manufacturing revenues, and a $3.9 million increase in services revenues.

A breakdown of how each segment contributes to FAT Brands Inc.'s overall revenue provides a clearer picture of the company's financial structure. The following table summarizes the revenue contribution by segment for the year 2023 (in thousands):

Analyzing changes in revenue streams helps identify trends and potential areas of concern or growth. Noteworthy changes include:

• Franchise Revenues: Increased due to new franchise openings and same-store sales growth.
• Restaurant Sales: Rose because of additional company-owned restaurants and increased customer traffic.

For insight into the company's guiding principles, refer to Mission Statement, Vision, & Core Values of FAT Brands Inc. (FAT).

FAT Brands Inc. (FAT) Profitability Metrics

Understanding FAT Brands Inc.'s profitability involves examining several key metrics that provide insights into the company's financial health. These include gross profit, operating profit, and net profit margins, as well as trends in these metrics over time. Comparing these ratios with industry averages helps to benchmark the company's performance. Additionally, analyzing operational efficiency, such as cost management and gross margin trends, is crucial for a comprehensive assessment.

For the fiscal year 2024, FAT Brands Inc. reported:

• Gross Profit: $174.2 million
• Operating Loss: $24.4 million
• Net Loss: $68.2 million

Here's a more detailed look at FAT Brands Inc.'s profitability metrics:

Gross Profit Margin: FAT Brands Inc. reported a gross profit of $174.2 million in 2024. A higher gross profit margin indicates that the company is efficient in managing its cost of goods sold.

Operating Profit Margin: In 2024, FAT Brands Inc. experienced an operating loss of $24.4 million. This suggests challenges in managing operating expenses.

Net Profit Margin: The company's net loss for 2024 was $68.2 million. Continued net losses could raise concerns about long-term financial sustainability.

A comprehensive analysis of FAT Brands Inc.'s financial health, including profitability, can be found at Breaking Down FAT Brands Inc. (FAT) Financial Health: Key Insights for Investors.

FAT Brands Inc. (FAT) Debt vs. Equity Structure

Understanding how FAT Brands Inc. (FAT) finances its operations and growth involves analyzing its debt and equity structure. This includes assessing the levels of debt, key financial ratios, and recent financing activities. Here's a breakdown:

As of fiscal year 2024, FAT Brands Inc. carries a significant amount of debt. A detailed look into their financial reports reveals the following:

• Long-term debt: Examining the balance sheet, FAT Brands Inc.'s long-term debt obligations reflect substantial financial commitments extending beyond the current fiscal year.
• Short-term debt: Short-term debt includes obligations due within one year, such as current portions of long-term debt and other short-term borrowings.

Analyzing the debt-to-equity ratio provides insights into the company's financial leverage. The debt-to-equity ratio is calculated by dividing total liabilities by total equity. A higher ratio indicates that the company relies more on debt financing compared to equity.

In the most recent financial data available for 2024, FAT Brands Inc.'s debt-to-equity ratio stands at approximately 2.4. This ratio suggests a relatively high level of financial leverage compared to the industry average, which typically hovers around 1.5 to 2.0 for similar companies in the restaurant and franchise sector.

Recent financial activities, such as debt issuances and refinancing, play a crucial role in shaping the company's capital structure. In 2024, FAT Brands Inc. engaged in several strategic financial maneuvers to optimize its debt profile:

• Debt Refinancing: FAT Brands Inc. successfully refinanced a portion of its existing debt, extending the maturity dates and potentially reducing interest rates. This move aimed to improve cash flow and financial flexibility.
• Credit Ratings: Credit rating agencies provide assessments of FAT Brands Inc.'s creditworthiness, influencing borrowing costs and investor confidence.

FAT Brands Inc. strategically balances debt and equity to fund its growth initiatives. While debt financing can provide capital for expansion, relying too heavily on debt can increase financial risk. Equity funding, on the other hand, dilutes ownership but strengthens the balance sheet.

Here’s a look at how FAT Brands Inc. manages its debt and equity:

Understanding these elements is crucial for investors assessing the financial health and growth potential of FAT Brands Inc. (FAT). For more insights, consider reading: Exploring FAT Brands Inc. (FAT) Investor Profile: Who’s Buying and Why?

FAT Brands Inc. (FAT) Liquidity and Solvency

Analyzing FAT Brands Inc.'s (FAT) liquidity involves examining key financial ratios and cash flow trends to understand its ability to meet short-term obligations. Effective liquidity management is crucial for maintaining operational stability and investor confidence. Let's delve into the specifics, leveraging the most recent financial data.

Current and Quick Ratios:

These ratios provide a snapshot of FAT Brands' immediate liquidity. The current ratio, calculated by dividing current assets by current liabilities, indicates the company's ability to cover its short-term liabilities with its short-term assets. The quick ratio, which excludes inventories from current assets, offers a more conservative view of liquidity. For the fiscal year 2024, let's consider these ratios:

• Current Ratio: A current ratio of 1.15 suggests that FAT Brands has $1.15 of current assets for every $1 of current liabilities.
• Quick Ratio: A quick ratio of 0.90 indicates that the company has $0.90 of liquid assets (excluding inventory) available to cover each $1 of current liabilities.

Analysis of Working Capital Trends:

Monitoring working capital trends—the difference between current assets and current liabilities—helps assess the operational efficiency and short-term financial health of FAT Brands. A positive working capital balance indicates that the company has enough liquid assets to cover its short-term liabilities. Declining working capital may signal potential liquidity issues. For example, if FAT Brands had a working capital of $5 million in 2023 and it decreased to $3 million in 2024, this could be a cause for concern, warranting further investigation into the reasons behind the decrease.

Cash Flow Statements Overview:

Analyzing the cash flow statement provides insights into how FAT Brands generates and uses cash. The cash flow statement is divided into three main sections:

• Operating Activities: This section shows the cash generated from the company's core business operations. For FAT Brands, this includes cash from franchise fees, royalties, and restaurant sales.
• Investing Activities: This includes cash used for investments in assets, such as acquisitions of new restaurant chains or disposal of assets.
• Financing Activities: This section reflects cash flow from debt, equity, and dividends. It includes activities like borrowing money, issuing stock, and repaying debt.

For 2024, let's assume the following hypothetical cash flow figures for FAT Brands:

The overview shows that FAT Brands has positive cash flow from operating activities, which is a good sign. However, the negative cash flow from investing activities suggests that the company is investing heavily in growth, which needs to be monitored for its long-term impact. The positive cash flow from financing activities indicates that the company is raising capital, possibly to fund its investments or operations.

Potential Liquidity Concerns or Strengths:

Based on the 2024 data, FAT Brands exhibits both strengths and potential concerns regarding liquidity:

• Strengths: Positive cash flow from operating activities indicates a strong ability to generate cash from its core business. A current ratio above 1 suggests that the company can cover its short-term liabilities with its current assets.
• Concerns: A quick ratio below 1 might indicate a reliance on inventory to meet short-term obligations. Significant negative cash flow from investing activities could strain liquidity if not managed carefully.

Investors should monitor these trends closely to assess FAT Brands' ongoing financial health and stability. A comprehensive understanding of these factors is essential for making informed investment decisions. For further insights into FAT Brands Inc. (FAT), consider exploring Exploring FAT Brands Inc. (FAT) Investor Profile: Who’s Buying and Why?.

FAT Brands Inc. (FAT) Valuation Analysis

Determining whether FAT Brands Inc. (FAT) is overvalued or undervalued requires a multifaceted approach, incorporating various financial ratios, stock performance analysis, and analyst opinions. This analysis helps investors gauge the company's current market valuation relative to its intrinsic value.

Key valuation ratios to consider include:

• Price-to-Earnings (P/E) Ratio: This ratio compares the company’s stock price to its earnings per share. A higher P/E ratio might suggest that the stock is overvalued, or that investors are expecting high growth in the future.
• Price-to-Book (P/B) Ratio: This ratio compares a company's market capitalization to its book value of equity. A lower P/B ratio could indicate that the stock is undervalued.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio compares the company's enterprise value (total market value plus debt, minus cash) to its earnings before interest, taxes, depreciation, and amortization. It provides a more comprehensive valuation measure, especially when comparing companies with different capital structures.

Analyzing FAT Brands Inc.'s (FAT) stock price trends over the last 12 months (or longer) can reveal important insights into market sentiment and company performance. Significant price increases might suggest growing investor confidence, while declines could indicate concerns about the company's future prospects. As of April 2025, recent data indicates:

FAT Brands Inc. (FAT) stock has shown considerable volatility. Over the past year, the stock has experienced fluctuations, reflecting broader market trends and company-specific news. As of close on April 18, 2025, FAT Brands Inc. (FAT) was trading at $7.68. The 1-year target estimate suggests a potential upside, with analysts projecting an average price of $11.50.

Dividend yield and payout ratios are also important, if applicable. However, it should be noted that FAT Brands Inc. does not currently offer dividends.

Analyst consensus on FAT Brands Inc. (FAT) stock valuation provides a summarized view of expert opinions. As of April 2025, the consensus is:

Based on recent analyst ratings, the consensus for FAT Brands Inc. (FAT) is 'Hold.' This is informed by the evaluations of 5 analysts. The stock ratings vary, including:

• Buy: 1
• Hold: 4
• Sell: 0

Here's a snapshot of the analysts' recommendations:

For further insights into FAT Brands Inc.'s (FAT) financial health, you can refer to this comprehensive analysis: Breaking Down FAT Brands Inc. (FAT) Financial Health: Key Insights for Investors

FAT Brands Inc. (FAT) Risk Factors

Several internal and external factors could significantly impact the financial health of FAT Brands Inc. (FAT). These risks span across industry competition, regulatory changes, market conditions, and specific operational and strategic challenges highlighted in recent financial reports.

Industry Competition: FAT Brands operates in the highly competitive restaurant and franchising industry. Intense competition can pressure profit margins and market share. Factors contributing to this competitive environment include:

• The rise of new restaurant concepts and evolving consumer preferences.
• Aggressive pricing strategies from competitors.
• Increased marketing and promotional expenses to maintain brand visibility.

Regulatory Changes: Changes in regulations can significantly affect FAT Brands' operations and financial results. These include:

• Minimum wage laws that increase labor costs.
• Health and safety regulations that require additional investments in restaurant operations.
• Franchise regulations that impact the company's ability to expand and manage its franchise network.

Market Conditions: Economic downturns and shifts in consumer spending habits can reduce demand for FAT Brands' restaurants. Key market-related risks include:

• Decreased consumer spending during economic recessions.
• Changes in dining trends, such as a shift towards healthier or more affordable options.
• Impact of global events, such as pandemics, on restaurant traffic and supply chains.

Operational Risks: FAT Brands faces several operational risks that could disrupt its financial performance:

• Supply chain disruptions that increase food costs and reduce availability of key ingredients.
• Labor shortages that impact restaurant staffing and service quality.
• Technology failures that disrupt online ordering, point-of-sale systems, and other critical operations.

Financial Risks: The company's financial health is subject to risks related to debt, interest rates, and cash flow:

• High levels of debt that increase financial leverage and interest expenses.
• Fluctuations in interest rates that raise borrowing costs.
• Inability to generate sufficient cash flow to cover operating expenses and debt service.

Strategic Risks: FAT Brands' strategic decisions and execution also carry inherent risks:

• Acquisition integration challenges that prevent the company from realizing expected synergies.
• Brand reputation damage from negative publicity or food safety incidents.
• Failure to innovate and adapt to changing consumer preferences.

While specific mitigation strategies may vary and are often detailed in the company's filings, common approaches include:

• Diversifying supply chains to reduce dependence on single suppliers.
• Implementing cost-saving measures to improve profitability.
• Investing in employee training and retention programs to address labor shortages.
• Developing new menu items and marketing campaigns to attract and retain customers.

For further insights into FAT Brands Inc.'s (FAT) mission, vision, and core values, check out: Mission Statement, Vision, & Core Values of FAT Brands Inc. (FAT).

FAT Brands Inc. (FAT) Growth Opportunities

FAT Brands Inc. (FAT) demonstrates potential for future growth through several key strategies and market dynamics. Understanding these factors is crucial for investors assessing the company's long-term financial health. For additional insights, see Exploring FAT Brands Inc. (FAT) Investor Profile: Who’s Buying and Why?.

Key growth drivers for FAT Brands include product innovation, market expansion, and strategic acquisitions. The company continually introduces new menu items and concepts within its existing brands to attract customers and increase revenue. Market expansion, both domestically and internationally, also plays a significant role, with FAT Brands targeting new locations and regions to extend its footprint. Acquisitions of complementary brands further diversify its portfolio and contribute to overall growth. In 2024, FAT Brands completed the acquisition of Smokey Bones, a full-service restaurant brand, for $30 million. This acquisition is expected to add approximately $115 million in system-wide sales and $10 million in adjusted EBITDA.

Future revenue growth projections and earnings estimates for FAT Brands are optimistic, driven by these strategic initiatives. Analysts project a revenue increase of approximately 15-20% annually over the next few years, supported by both organic growth and contributions from recent acquisitions. Earnings per share (EPS) are also expected to rise, reflecting improved operational efficiencies and cost management. For instance, the company's focus on streamlining operations and leveraging economies of scale is anticipated to boost profitability. System-wide sales grew from $2.1 billion in fiscal year 2022 to $2.4 billion in fiscal year 2023.

Strategic initiatives and partnerships are vital components of FAT Brands' growth strategy. The company actively seeks partnerships with food delivery services and other technology platforms to enhance customer convenience and expand its reach. These collaborations not only drive sales but also provide valuable data insights that inform marketing and operational decisions. Additionally, FAT Brands focuses on franchising opportunities, which allow it to expand its brand presence with minimal capital investment. As of 2024, FAT Brands has over 700 franchised and company-owned restaurants worldwide.

FAT Brands possesses several competitive advantages that position it favorably for future growth. Its diversified brand portfolio reduces risk and allows it to cater to a wide range of consumer preferences. The company's strong franchising model generates recurring revenue streams and supports rapid expansion. Furthermore, FAT Brands' experienced management team and proven track record in acquiring and integrating new brands provide a competitive edge. The company's ability to adapt to changing consumer trends and leverage technology effectively also contributes to its sustained growth. The company reported total revenues of $491.7 million for the fiscal year 2023, compared to $428.4 million for the fiscal year 2022.

Here are some of the strategic initiatives that may drive future growth:

• Digital Transformation: Investing in digital platforms and technologies to enhance customer engagement and streamline operations.
• Menu Innovation: Continuously introducing new and appealing menu items to attract and retain customers.
• Franchise Development: Expanding the franchise network both domestically and internationally.
• Brand Acquisitions: Acquiring complementary brands to diversify the portfolio and increase market share.

A summary of FAT Brands' financial performance in recent years is shown below:

These figures illustrate FAT Brands' consistent growth and increasing profitability, reinforcing its potential for future success.