Good Times Restaurants Inc. — Q1 FY2024 Form 10-Q
Reporting period: Fiscal quarter ended December 26, 2023 (13 weeks), compared with the 13 weeks ended December 27, 2022. The company operates and franchises Bad Daddy’s Burger Bar and Good Times Burgers & Frozen Custard. Dollar amounts below are in millions unless otherwise stated.
Financial performance
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Total revenue | $33.132 | $33.394 | Down 0.8% |
| Operating income (loss) | $(0.374) | $0.107 | Declined $0.481 |
| Net income (loss) | $(0.483) | $0.095 | Declined $0.578 |
| Net loss attributable to common shareholders | $(0.556) | $(0.127) | Loss widened $0.429 |
| Loss per share, basic and diluted | $(0.05) | $(0.01) | — |
| Adjusted EBITDA (non-GAAP) | $0.347 | $0.674 | Down 48.5% |
- Restaurant sales were $32.946 million, down 0.7%; franchise revenue was $0.186 million, down $0.029 million.
- Bad Daddy’s revenue was $24.193 million, down about 4.1%; segment operating loss was $0.763 million versus a $0.007 million loss. Same-store sales fell 6.2%.
- Good Times revenue was $8.939 million, up about 9.4%; segment operating income was $0.389 million versus $0.114 million. Same-store sales increased 4.1%.
- Food and packaging costs improved to 31.3% of restaurant sales from 32.0%. Payroll and benefits worsened to 35.3% from 34.8%; occupancy costs rose to 7.6% from 7.4%; and other restaurant costs rose to 14.4% from 13.5%. Advertising increased to $1.092 million from $0.894 million.
Cash, liquidity, debt, and capital
- Cash was $3.515 million at quarter-end, down $0.667 million from September 26, 2023. Operating cash flow was negative $0.252 million; capital spending was $0.448 million.
- Management reported a working-capital deficit of $8.5 million, partly reflecting current lease liabilities, and said it expected sufficient capital for fiscal 2024 working capital and recurring capital expenditures.
- Cadence credit-facility borrowings were $1.25 million, with approximately $6.74 million of committed funds available. The facility has an $8 million maximum, matures April 20, 2028, and had an 8.45% weighted-average borrowing rate for the quarter. The company reported covenant compliance. The facility is secured by substantially all company and subsidiary assets.
- Operating lease liabilities totaled $47.104 million, including $5.902 million current. Shareholders’ equity was $32.082 million.
- The company repurchased 160,772 shares for $0.438 million during the quarter; approximately $1.343 million remained under its $5 million repurchase authorization.
Changes, outlook, and risks
- Revenue was nearly flat overall, but the mix shifted: Bad Daddy’s sales weakened while Good Times benefited from two restaurants acquired from franchisees in fiscal 2023, increased traffic, and pricing. Average menu prices were approximately 4.2% higher at Bad Daddy’s and 4.6% higher at Good Times year over year.
- Management expects general and administrative costs to be approximately 7%–8% of revenue for the balance of fiscal 2024. It gave no specific full-year revenue or earnings guidance.
- Management cited volatile commodity costs, anticipated increases in ground beef and other food costs in the second half of fiscal 2024, elevated packaging and utility costs, and wage pressure—particularly in Colorado. Pricing increases may not fully offset costs without affecting demand.
- Seasonality can weigh on sales in winter months, particularly at Good Times. Other stated risks include competition and discounting, traffic declines, and consumer response to menu pricing.
- A lawsuit concerning failed sale negotiations was dismissed at trial, but plaintiffs appealed. The company maintained a $0.332 million accrual; it warned that any additional liability above the accrual could materially affect results, liquidity, or financial condition. The appellate decision could be issued at any time.
- No long-lived asset or goodwill impairment was recorded. Management said disclosure controls were effective and reported no material change in internal controls.
Important facts for investors to verify
- Whether Bad Daddy’s traffic and same-store sales stabilize, and whether Good Times’ growth continues apart from acquired locations and price increases.
- Whether labor, food, packaging, and utility costs pressure margins further, and how much pricing customers will absorb.
- Cash generation and access to the Cadence facility, including covenant headroom and the effect of the substantial lease obligations.
- The outcome of the pending appeal and whether the existing litigation accrual remains adequate.
- The reported quarter-end share count versus the later cover-page count, and the company’s remaining authorization and pace of repurchases.
- Adjusted EBITDA is a non-GAAP measure; review its reconciliation and limitations alongside GAAP results and cash flows.