Good Times Restaurants Inc. (GTIM) - 10-Q Summary
Business Context and Reporting Period
This filing covers the fiscal quarter ended December 31, 2024 (14 weeks), compared to the prior year quarter ended December 26, 2023 (13 weeks). Good Times Restaurants Inc. operates two primary brands: Bad Daddy's Burger Bar (full-service) and Good Times Burgers & Frozen Custard (drive-thru quick-service). As of period end, the company operated or franchised 40 Bad Daddy's locations and 30 Good Times locations.
Key Financial Metrics
| Metric (in thousands) | Q1 2025 (14 wks) | Q1 2024 (13 wks) |
|---|---|---|
| Total Net Revenues | $36,333 | $33,157 |
| Net Income (Loss) | $174 | $(483) |
| Net Income Attributable to Common Shareholders | $164 | $(556) |
| Diluted EPS | $0.02 | $(0.05) |
| Adjusted EBITDA | $1,209 | $510 |
| Cash and Cash Equivalents | $3,023 | $3,515 |
| Working Capital | $(9,223) | Not explicitly stated |
| Total Debt (Current + Long-Term) | $2,612 | Not explicitly stated |
Note: Working capital deficit is driven by short-term operating lease liabilities. Total debt includes $28k current and $2,584k long-term.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 9.6% ($3.18M), driven by an additional week in the current quarter, menu price increases (approx. 4.5% for Bad Daddy's, 3.9% for Good Times), and the acquisition of two Good Times restaurants from franchisees.
- Profitability Turnaround: The company reported a net income of $174k, reversing a net loss of $483k in the prior year. Operating income improved from a loss of $374k to a profit of $77k.
- Segment Performance:
- Bad Daddy's: Operating income improved significantly from a loss of $763k to a profit of $294k, aided by same-store sales growth of 1.5%.
- Good Times: Operating income declined from a profit of $389k to a loss of $217k, impacted by higher labor costs (36.7% of sales vs. 33.8% prior year) and pre-opening costs for acquired units.
- One-Time Income: Other income increased by $140k due to the termination of a management services agreement and lease negotiations with a former franchisee.
Outlook, Risks, and Management Commentary
- Liquidity: The company maintains a working capital deficit of $9.2M, primarily due to lease liabilities. Management believes existing cash and the $5.74M available under the Cadence Credit Facility are sufficient to meet fiscal 2025 needs.
- Capital Allocation: The Board authorized an additional $2.0M for share repurchases, bringing the total program authorization to $7.0M. Approximately $2.19M remains available. The company repurchased 59,125 shares during the quarter.
- Inflation and Costs: Management cites continued volatility in beef prices and upward pressure on wages (particularly in Colorado) as key risks. Menu price increases are being used to offset these costs, though consumer sensitivity remains a concern.
- Legal Contingency: The company is pursuing a counterclaim for damages exceeding $3M against White Winston Select Asset Funds following a favorable appellate ruling. A decision on damages is expected from the trial court after December 2024.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with the Cadence Credit Facility covenants, specifically the minimum fixed charge coverage and leverage ratios, given the recent increase in borrowings ($1.75M drawn in the quarter).
- Good Times Labor Costs: Monitor the trend of payroll costs as a percentage of sales for the Good Times segment, which rose to 36.7% and may impact future profitability if wage pressures persist.
- Legal Recovery: Track the status of the $3M+ counterclaim against White Winston Select Asset Funds to assess potential future non-operating income.
- Same-Store Sales: Confirm if the 1.5% same-store sales growth at Bad Daddy's is sustainable given the noted negative mix shift from smashed patty burgers and reduced holiday traffic days.