GlobeNewswire Inc | Aug 12, 2020 04:18PM EDT

August 12, 2020

MINNEAPOLIS, Aug. 12, 2020 (GLOBE NEWSWIRE) -- BBQ Holdings, Inc. (NASDAQ: BBQ) (the Company), an innovating global owner and operator of restaurants, today reported financial results for the second fiscal quarter ended June 28, 2020. Note: The second quarter results were affected by the COVID-19 pandemic as well as federal and state level mandates requiring restaurants to limit or eliminate in-store dining.

Second Quarter 2020 Highlights:

-- Company-owned Famous Daves second quarter same store net sales decreased 22.9% compared to second quarter 2019. -- Franchise-operated same store net sales decreased 31.5%. -- Same store to-go sales increased 106.0% at Company-owned Famous Daves restaurants. -- Granite City second quarter same store net sales decreased 65.5% compared to second quarter 2019, however, Granite City same store sales grew from $0.9 million in the month of April 2020 to $3.4 million in the month of June 2020 as dine-in restrictions have eased. -- Net loss of $6.3 million, driven by reduced sales due to COVID-related restrictions and a one-time impairment charge of $4.8 million. -- Adjusted EBITDA, a non-GAAP measure was ($1.1) million. -- Same store sales at our Famous Daves restaurants decreased 7.4% while same store sales at our Granite City restaurants decreased 33% during the four weeks ended July 26, 2020 compared to the same four week period in 2019. -- Entered into two franchise agreements with existing franchisee, PDX Partners, to offer Famous Daves food via delivery service providers and take-out in their Johnny Carinos locations in Downey, CA and Modesto, CA. -- Entered into a franchising agreement with a new franchisee, DCI Colorado Springs #2, Inc. to co-brand their Texas T-Bone Steakhouse in Colorado Springs, CO with Famous Daves.

Executive Comments

Jeff Crivello, CEO, commented, The quarter has been challenging with the continual changes in state and local dining restrictions. I am proud of how our team has worked to navigate these changes in a quick and responsible manner for our guests and our shareholders. Famous Daves stores have been performing well through the numerous changes and have continued to increase our to-go business through strong social media marketing as well as the use of our delivery service providers. We are hopeful that dine-in sales at the Famous Daves stores will provide incremental sales as restrictions are lifted and override catering sales which are slowly coming back. Granite City Food & Brewery is a concept that relies much more heavily on dine-in sales and the initial to-go-only restrictions severely hampered sales at these locations. The Granite City brand has seen a significant increase in sales as dine-in restrictions have lifted and we believe that the uptick in sales will continue so long as restrictions continue to ease. In most of the locations in which we operate, we are able to operate at 50% legal capacity. While we have been prudent in managing our cash as the stores reopen, we continue to be concerned about the future direction of the Covid-19 pandemic and will, therefore, continue to manage our cash appropriately. We are very pleased to see the resiliency of Famous Daves during this pandemic and that other restaurant groups are looking to team with us based on our recently executed franchise agreements.

Key Operating Metrics

Three Months Ended Six Months Ended June28,2020 June30,2019 June28,2020 June30,2019 Restaurant count: Franchise-operated 95 107 95 107 Company-owned 50 29 50 29 Total 145 136 145 136 Same store net restaurant sales %:Franchise-operated, (31.0) % 0.7 % (22.3) % 0.7 % domesticFranchise-operated, (54.4) % (5.8) % (37.9) % (9.4) % internationalFranchise-operated (31.5) % 0.5 % (22.7) % 0.5 % totalCompany-owned (22.9) % 0.6 % (11.5) % 2.6 % Total (30.0) % 0.5 % (20.6) % 1.0 % (in thousands,expect per share data) System-widerestaurant sales^ $ 66,753 $ 90,623 $ 136,666 $ 173,363 (1) Net incomeattributable to $ (6,252) $ 1,040 $ 7,455 $ 1,122 shareholdersAdjusted net incomeattributable to (1,902) 1,426 (3,740) 2,061 shareholders^(2) Net (loss) incomeattributable to $ (0.68) $ 0.11 $ 0.82 $ 0.12 shareholders, perdiluted shareAdjusted net incomeattributable to (0.21) 0.15 (0.41) 0.22 shareholders, perdiluted share^(2) Adjusted EBITDA^(2) $ (1,070) $ 2,446 $ (1,527) $ 3,477

System-wide restaurant sales include sales for all Company-owned and^ franchise-operated restaurants, as reported by franchisees. Restaurant(1) sales for franchise-operated restaurants are not revenues of the Company and are not included in the Company?s consolidated financial statements. Adjusted net income (loss) from continuing operations and adjusted EBITDA^ are non-GAAP measures. A reconciliation of all non-GAAP measures to the(2) most directly comparable GAAP measure is included in the accompanying financial tables. See ?Non-GAAP Reconciliation.?

Second Quarter 2020 Review

Total revenue for the second quarter of 2020 was $27.1 million, up 28.2% from the second quarter of 2019. The increase in year-over-year restaurant net sales for the quarter ended June 28, 2020 was driven primarily by the addition of 18 Granite City restaurants and a Clark Crew BBQ and Real Urban Barbecue restaurant.

On a weighted basis, Company-owned Famous Daves same-store net sales for our to-go line of business increased 106.0% in the second quarter of fiscal 2020 as compared to the prior year period, offset by a decrease in of 77.8% in net catering sales and 86.8% in dine-in sales due to federal, state and local mandates prohibiting large group gatherings and in-store dining in an attempt to reduce the spread of COVID-19.

Restaurant-level operating margin, as a percentage of restaurant net sales, for Company-owned restaurants was 0.4 in the second quarter of fiscal 2020 compared to 3.4% in the second quarter of fiscal 2019. This decline in restaurant-level operating margin was primarily a result of acquisitions of new stores and the decline in same store sales in the second quarter of 2020.

General and administrative expenses for the quarter ended June 28, 2020 and June 30, 2019 represented approximately 14.0% and 11.3% of total revenues, respectively. The increase in general and administrative expenses as a percentage of revenue in the second quarter of 2020 was due primarily to the decrease in sale as a result of COVID-19 as well as the integration of the operations of the 18 Granite City restaurants we acquired in March 2020.

Net loss attributable to shareholders was approximately $6.3 million, or $0.68 per share, in the second quarter of fiscal 2020 compared to net income of 1.0 million, or $0.11 per share, in the second quarter of fiscal 2019. Adjusted net loss attributable to shareholders, a non-GAAP measure, was approximately $3.3 million, or $0.36 per share, compared to adjusted net income attributable to shareholders of approximately $1.4 million, or $0.16 per share, in the second quarter of fiscal 2019. A reconciliation between adjusted net income attributable to shareholders and its most directly comparable GAAP measure is included in the accompanying financial tables.

About BBQ Holdings

BBQ Holdings, Inc. (NASDAQ: BBQ) BBQ Holdings is a national restaurant company engaged in the ownership and operation of casual and fast dining restaurants. As of August 12, 2020, BBQ Holdings had four brands with 145 overall locations in 33 states and three countries, including 50 company-owned and 95 franchise-operated restaurants. While BBQ Holdings continues to diversify its ownership in the restaurant community, it was founded with the principle of combining the art and science of barbecue to serve up the very best of the best to barbecue lovers everywhere. BBQ Holdings, through partnerships, has extended Travis Clarks award-winning line of barbecue sauces, rubs and seasonings into the retail market. Along with a wide variety of BBQ favorites served at their BBQ restaurants, BBQ Holdings newest addition, Granite City Food and Brewery, offers award winning craft beer and a made-from-scratch, chef driven menu featuring contemporary American cuisine.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company uses non-GAAP measures including those indicated below. These non-GAAP measures exclude significant expenses and income that are required by GAAP to be recorded in the Companys consolidated financial statements and are subject to inherent limitations. By providing non-GAAP measures, together with a reconciliation to the most comparable GAAP measure, the Company believes that it is enhancing investors understanding of the Companys business and results of operations. These measures are not intended to be considered in isolation of, as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures presented may be different from the measures used by other companies. The Company urges investors to review the reconciliation of its non-GAAP measures to the most directly comparable GAAP measure, included in the accompanying financial tables.

Adjusted net income attributable to shareholders is net income attributable to shareholders, plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs, and the related tax impact. This number is divided by the weighted-average number of diluted shares of common stock outstanding during each period presented to arrive at adjusted net income, per share. Adjusted EBITDA is net income (loss), plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs and provision (benefit) for income taxes.

Forward-Looking Statements

Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Companys restaurant openings, the timing of refreshes and the timing or success of refranchising plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the Companys actual results to differ materially from expected results. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from the Companys expectation include the impact of the COVID-19 virus pandemic, financial performance, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the Companys SEC reports.

Contact: Jeff Crivello ? Chief Executive Officer 952-294-1300 Darrow Associates, Inc. Peter Seltzberg ? Managing Director 516-419-9915 pseltzberg@darrowir.com

BBQ HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data)(Unaudited)

Three Months Ended Six Months Ended June28,2020 June30,2019 June28,2020 June30,2019 Revenue: Restaurant $ 24,306 $ 16,898 $ 44,624 $ 27,212 sales, netFranchiseroyalty and fee 1,951 3,447 4,475 6,651 revenueFranchiseenationaladvertising 242 471 524 880 fundcontributionsLicensing and 580 312 926 578 other revenueTotal revenue 27,079 21,128 50,549 35,321 Costs and expenses:Food and 7,717 5,325 14,471 8,685 beverage costsLabor and 8,066 5,819 15,787 9,776 benefits costsOperating 8,421 5,187 14,662 8,356 expensesDepreciationand 1,378 515 2,423 779 amortizationexpensesGeneral andadministrative 3,803 2,377 6,835 4,894 expensesNationaladvertising 242 471 524 880 fund expensesAssetimpairment,estimated leasetermination 4,779 97 4,952 504 charges andother closingcosts, netPre-opening 2 ? 27 ? expensesGain ondisposal of (100 ) (140 ) (577 ) (146 ) property, netTotal costs and 34,308 19,651 59,104 33,728 expenses (Loss) income (7,229 ) 1,477 (8,555 ) 1,593 from operations Other income (expense):Interest (330 ) (288 ) (540 ) (359 ) expenseInterest income 152 33 286 87 Gain on bargain (689 ) ? 13,675 ? purchaseTotal other(expense) (867 ) (255 ) 13,421 (272 ) income (Loss) incomebefore income (8,096 ) 1,222 4,866 1,321 taxes Income taxbenefit 1,897 (182 ) 2,246 (199 ) (expense) Net (loss) (6,199 ) 1,040 7,112 1,122 incomeNet (income)lossattributable to (53 ) ? 343 ? non-controllinginterestNet (loss)income $ (6,252 ) $ 1,040 $ 7,455 $ 1,122 attributable toshareholders (Loss) incomeper common share:Basic net(loss) incomeper share $ (0.68 ) $ 0.11 $ 0.82 $ 0.12 attributable toshareholdersDiluted net(loss) incomeper share $ (0.68 ) $ 0.11 $ 0.82 $ 0.12 attributable toshareholdersWeightedaverage shares 9,138 9,093 9,132 9,089 outstanding-basicWeightedaverage shares 9,138 9,278 9,132 9,191 outstanding-diluted

BBQ HOLDINGS, INC. AND SUBSIDIARIESOPERATING RESULTS(unaudited)

Three Months Ended Six Months Ended June28,2020 June30,2019 June28,2020 June30,2019 Food andbeverage costs 31.7 % 31.5 % 32.4 % 31.9 % ^(1)Labor andbenefits costs 33.2 % 34.4 % 35.4 % 35.9 % ^(1)Operating 34.6 % 30.7 % 32.9 % 30.7 % expenses^(1)Restaurantleveloperating 0.4 % 3.4 % (0.7) % 1.5 % margin^(1)(3)

Depreciationand 5.1 % 2.4 % 4.8 % 2.2 % amortizationexpenses^(2)General andadministrative 14.0 % 11.3 % 13.5 % 13.9 % expenses^(2)(Loss) incomefrom (26.7) % 7.0 % (16.9) % 4.5 % operations^(2)

^ As a percentage of restaurant sales, net(1)^ As a percentage of total revenue(2)^ Restaurant level margins are equal to restaurant sales, net, less(3) restaurant level food and beverage costs, labor and benefit costs, and operating expenses.



BBQ HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except per share data)(unaudited)

ASSETS Current assets: June28,2020 December29, 2019Cash and cash equivalents $ 19,919 $ 5,325 Restricted cash 758 761 Accounts receivable, net of allowance fordoubtful accounts of $137,000 and $132,000, 4,619 4,379 respectivelyInventories 2,596 1,346 Prepaid income taxes and income taxes receivable 285 264 Prepaid expenses and other current assets 1,503 1,356 Assets held for sale 3,911 2,842 Total current assets 33,591 16,273 Property, equipment and leasehold improvements, 33,645 19,756 net Other assets: Operating lease right-of-use assets 66,540 25,962 Goodwill 651 640 Intangible assets, net 10,231 2,213 Deferred tax asset, net 4,061 6,646 Other assets 1,670 1,591 $ 150,389 $ 73,081 LIABILITIES AND SHAREHOLDERS? EQUITY Current liabilities: Accounts payable $ 6,259 $ 3,967 Current portion of lease liabilities 6,068 4,230 Current portion of long-term debt 8,854 616 Accrued compensation and benefits 2,341 2,694 Other current liabilities 8,798 4,975 Total current liabilities 32,320 16,482 Long-term liabilities: Lease liabilities, less current portion 67,598 26,957 Long-term debt, less current portion 20,037 6,258 Other liabilities 1,300 1,610 Total liabilities 121,255 51,307 Shareholders? equity: Common stock, $.01 par value, 100,000 sharesauthorized, 9,282 and 9,272 shares issued and 93 93 outstanding at June28,2020 and December29,2019, respectivelyAdditional paid-in capital 8,104 7,856 Retained earnings 21,878 14,423 Total shareholders? equity 30,075 22,372 Non-controlling interest (941 ) (598 )Total equity 29,134 21,774 $ 150,389 $ 73,081

BBQ HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)

Six Months Ended June28,2020 June30,2019Cash flows from operating activities: Net income $ 7,112 $ 1,122 Adjustments to reconcile net income to cash flows provided by operations:Depreciation and amortization 2,423 779 Stock-based compensation 248 223 Net gain on disposal (577 ) (146 )Asset impairment, estimated lease termination 4,710 469 charges and other closing costs, netGain on bargain purchase (13,675 ) ? Deferred income taxes (2,295 ) (6 )Other non-cash items 547 43 Changes in operating assets and liabilities: Accounts receivable, net (240 ) (422 )Other assets (1,991 ) (411 )Accounts payable 2,292 321 Accrued and other liabilities 964 481 Cash flows (used for) provided by operating (482 ) 2,453 activities Cash flows from investing activities: Proceeds from the sale of assets ? 6 Purchases of property, equipment and leasehold (2,000 ) (1,242 )improvementsPayments for acquired restaurants (4,952 ) (4,265 )Advances on notes receivable ? (150 )Payments received on note receivable 12 8 Cash flows used for investing activities (6,940 ) (5,643 ) Cash flows from financing activities: Proceeds from long-term debt 22,058 ? Payments for debt issuance costs (45 ) (54 )Payments on long-term debt ? (176 )Cash provided by (used for) financing 22,013 (230 )activities Increase (decrease) in cash, cash equivalents 14,591 (3,420 )and restricted cashCash, cash equivalents and restricted cash, 6,086 12,440 beginning ofperiodCash, cash equivalents and restricted cash, end $ 20,677 $ 9,020 ofperiod

BBQ HOLDINGS, INC. AND SUBSIDIARIESNON-GAAP RECONCILIATION(in thousands, except per share data)(unaudited)

Three Months Ended Six Months Ended(dollars in June28,2020 June30,2019 June28,2020 June30,2019thousands)Net incomeattributable $ (6,252 ) $ 1,040 7,455 1,122 toshareholdersAssetimpairmentandestimatedlease 4,779 97 4,952 504 terminationcharges andotherclosingcostsNet gain ondisposal of (100 ) (140 ) (577 ) (146 )equipmentStock-based 111 140 248 223 compensationAcquisition (13 ) 357 (75 ) 521 costsPre-opening 2 - 27 - costsSeverance 2 ? 30 3 Gain onbargain 689 ? (13,675 ) ? purchaseTax (1,120 ) (68 ) (2,125 ) (166 )adjustmentAdjusted net $ (1,902 ) $ 1,426 $ (3,740 ) $ 2,061 incomeBasicadjusted net $ (0.21 ) $ 0.16 $ (0.41 ) $ 0.23 income percommon shareDilutedadjusted net $ (0.21 ) $ 0.15 $ (0.41 ) $ 0.22 income percommon share Weightedaveragecommon share 9,138 9,093 9,132 9,089 outstanding- basicWeightedaveragecommon share 9,138 9,278 9,132 9,191 outstanding- diluted Net income $ (6,199 ) $ 1,040 $ 7,112 $ 1,122 Assetimpairmentandestimatedlease 4,779 97 4,952 504 terminationcharges andotherclosingcostsDepreciationand 1,378 515 2,423 779 amortizationInterest 178 255 254 272 expense, netNet (gain)loss on (100 ) (140 ) (577 ) (146 )disposal ofequipmentStock-based 111 140 248 223 compensationAcquisition (13 ) 357 (75 ) 521 costsPre-opening 2 ? 27 ? costsSeverance 2 ? 30 3 Gain onbargain 689 ? (13,675 ) ? purchaseProvisionfor income (1,897 ) 182 (2,246 ) 199 taxesAdjusted $ (1,070 ) $ 2,446 $ (1,527 ) $ 3,477 EBITDA