GTIM

Good Times Restaurants Inc. (GTIM) - 10-Q Summary

Business Context and Reporting Period

This filing covers the quarterly period ended July 1, 2025 (13 weeks) and the year-to-date period (40 weeks). Good Times Restaurants Inc. operates two primary brands: Bad Daddy's Burger Bar (full-service) and Good Times Burgers & Frozen Custard (quick-service drive-thru). As of July 1, 2025, the company operated or franchised 40 Bad Daddy's locations and 30 Good Times locations.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Q3 2025 revenues decreased 2.4% year-over-year to $37.0M. Bad Daddy's sales dropped 2.9% and Good Times sales dropped 1.2%, primarily driven by reduced customer traffic and the closure of one unit of each brand in the prior year's fourth quarter.
• Same-Store Sales: Bad Daddy's same-store sales decreased 1.4%, while Good Times same-store sales decreased 9.0% due to traffic declines.
• Cost Pressures: Payroll costs as a percentage of sales increased for both brands (Bad Daddy's to 34.3%, Good Times to 34.2%) due to wage inflation and decreased labor productivity from lower sales volumes. Food costs for Good Times rose to 31.5% of sales due to higher beef and egg prices.
• Impairment Charges: The company recorded $494,000 in asset impairments YTD 2025, primarily related to lease right-of-use assets for underperforming restaurants, compared to $199,000 in the prior year.
• Legal Recovery: The company secured a final judgment awarding $3.83 million plus interest in a lawsuit against White Winston Select Asset Funds, LLC. This was recognized as a gain in the period, though collection is not guaranteed pending potential appeals.

Guidance, Outlook, and Risks

• Outlook: Management anticipates continued inflationary pressure on ground beef and labor costs. They plan to manage profitability through menu price increases but note that consumer sensitivity and competitive pricing may limit this ability.
• Liquidity: The company maintains a working capital deficit of $8.5M, largely due to the classification of short-term lease liabilities. Management believes existing cash and the $6.0M available under the Cadence Credit Facility are sufficient to meet needs for fiscal 2025.
• Capital Allocation: The company continues a share repurchase program with approximately $2.0M remaining authorized. They also acquired two Good Times restaurants from franchisees in Q1 2025.
• Risks: Key risks include the inability to pass on inflation costs to consumers, reduced customer traffic, and the uncertainty of collecting the $3.8M legal judgment if the plaintiffs appeal the final damages award.

Investor Verification Checklist

• Legal Judgment Collection: Verify the status of the $3.83M judgment against White Winston Select Asset Funds, LLC, including the likelihood of collection given the plaintiffs' right to appeal until August 29, 2025.
• Same-Store Sales Trend: Monitor the 9.0% decline in Good Times same-store sales to determine if it is a temporary traffic issue or a structural decline in the quick-service segment.
• Debt Covenants: Confirm continued compliance with the Cadence Credit Facility covenants, specifically the minimum fixed charge coverage ratio and leverage ratios, given the increase in interest rates (weighted average 7.41%).
• Impairment Scope: Assess if the $494k impairment charge indicates a broader trend of underperforming locations that may require further write-downs or closures.
• Working Capital: Review the sustainability of the $8.5M working capital deficit and the reliance on the credit facility for liquidity.