Business Context and Reporting Period
Company: Good Times Restaurants Inc. (GTIM)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter ended April 1, 2025 (13 weeks) and Year-to-Date (27 weeks)
Business Overview: The Company operates two restaurant concepts: Bad Daddy's Burger Bar (full-service) and Good Times Burgers & Frozen Custard (drive-thru quick-service). As of April 1, 2025, the Company operated or franchised 40 Bad Daddy's locations and 30 Good Times locations.
Key Financial Metrics
| Metric (in thousands) | Q2 2025 (13 Weeks) | Q2 2024 (13 Weeks) | YTD 2025 (27 Weeks) | YTD 2024 (26 Weeks) |
|---|---|---|---|---|
| Total Net Revenues | $34,279 | $35,448 | $70,612 | $68,605 |
| Net (Loss) Income | $(627) | $680 | $(453) | $197 |
| Net (Loss) Income Attributable to Common Shareholders | $(624) | $618 | $(460) | $62 |
| Adjusted EBITDA | $1,021 | $1,458 | $2,231 | $1,968 |
| Operating Cash Flow (YTD) | $196 | $1,515 | $196 | $1,515 |
| Cash and Cash Equivalents (End of Period) | $2,712 | $4,000 | $2,712 | $4,000 |
| Total Debt (Current + Long-Term) | $2,605 | $872 | $2,605 | $872 |
| Working Capital | $(9,504) | $(9,130) | $(9,504) | $(9,130) |
Note: Working capital deficit is primarily driven by the classification of short-term operating lease liabilities.
Material Changes vs. Prior Period
- Revenue Decline (Quarterly): Net revenues decreased 3.3% to $34.3 million. Bad Daddy's sales dropped 6.0% due to reduced traffic and a negative mix shift from smashed patty burgers, partially offset by a 4.7% menu price increase. Good Times sales increased 4.7% driven by the acquisition of three franchise-owned restaurants.
- Profitability Reversal: The Company reported a net loss of $0.62 million for the quarter, compared to net income of $0.68 million in the prior year quarter. This was primarily driven by a $0.49 million impairment charge on long-lived assets and lease right-of-use assets for underperforming locations.
- Cost Pressures: Food and packaging costs rose as a percentage of sales for both brands due to higher ground beef prices. Payroll costs increased for Good Times due to wage inflation in Colorado and lower productivity.
- Debt Increase: Long-term debt increased significantly as the Company borrowed $2.25 million against its Cadence Credit Facility to fund acquisitions and working capital.
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 competitor pricing may limit this ability.
- Asset Impairment: The $0.49 million impairment charge relates to restaurants generating insufficient income to cover rent, which the Company believes are probable to close at the end of their lease terms.
- Litigation: A favorable appellate court ruling in the White Winston case reversed a previous $0.33 million reserve. A special master recommended damages of $3.83 million plus interest for the Company, though a final judgment has not been entered.
- Share Repurchases: The Company repurchased 54,835 shares in the quarter. Approximately $2.05 million remains available under the current $7.0 million authorization.
- Liquidity: The Company maintains a working capital deficit but expects sufficient capital to meet needs via existing cash and the Cadence Credit Facility, which has $5.74 million in committed availability.
Investor Verification Checklist
- Impairment Specifics: Verify the number of locations identified for closure and the specific lease terms associated with the $0.49 million impairment charge.
- Debt Covenants: Confirm compliance with the Cadence Credit Facility covenants, specifically the minimum fixed charge coverage ratio and leverage ratios, given the increased debt load.
- Same-Store Sales Trends: Monitor the sustainability of the 3.7% (Bad Daddy's) and 3.6% (Good Times) same-store sales declines in the face of inflation and weather impacts.
- Litigation Recovery: Track the final judgment on the White Winston counterclaim to determine if the $3.83 million recommended recovery will be realized.
- Food Cost Volatility: Assess the impact of ground beef price volatility on future margins, as the Company notes these costs are at or near record highs.