Good Times Restaurants Reports Q3 Results

Good Times Restaurants Inc. (Nasdaq: GTIM), operator of Bad Daddy’s Burger Bar, a full-service, upscale burger bar concept, and Good Times Burgers & Frozen Custard, a regional quick-service restaurant chain focused on fresh, high quality, all natural products, today announced its preliminary unaudited financial results for the third fiscal quarter ended June 25, 2019.

Key highlights of the Company’s financial results include:

• Total revenues increased 12% to $29.5 million for the quarter
• Total Restaurant Sales for Bad Daddy’s restaurants increased 18.7% to $21.1 million and Bad Daddy’s Restaurant Level Operating Profit* (a non-GAAP measure) was $3.4 million or 16.3% of sales
• Same store sales for company-owned Bad Daddy’s restaurants decreased 0.7% and for Good Times restaurants increased 2.8%
• Total Restaurant Sales for Good Times restaurants were $8.1 million and Good Times Restaurant Level Operating Profit* (a non-GAAP measure) was $1.5 million or 18.0% as a percent of sales
• Net Income Attributable to Common Shareholders was $540,000 for the quarter
• Adjusted EBITDA* (a non-GAAP measure) for the quarter was $2.1 million
• The Company ended the quarter with $2.6 million in cash and $11.2 million drawn against its senior credit facility

Boyd Hoback, President and CEO, said, “We’ve seen a strong turnaround in our Good Times sales trends once we returned to normal year over year weather patterns, which has accelerated subsequent to the end of the quarter. Bad Daddy’s same store sales were impacted by some competitive intrusion around two restaurants as well as minor remodeling of another restaurant. We have four additional Bad Daddy’s currently under construction in the Nashville, TN; Huntsville, AL; Charleston, SC; and Columbia, SC markets. We expect two of those to open prior to the end of fiscal 2019, and two to open shortly after the end of our fiscal year.”

Commenting on the Company’s earnings guidance, Ryan Zink, Chief Financial Officer, stated, “Our updated guidance for the year calls for Adjusted EBITDA of approximately $5.2 to $5.4 million, reflecting margin compression from wage inflation and delivery commissions on stronger-than expected delivery sales, coupled with reduced on-premise revenue expectations. We anticipate we will provide guidance for fiscal 2020 prior to the end of our fiscal year as we finalize our pace of growth, but we expect the development of at least five new Bad Daddy’s during fiscal 2020.”

Fiscal 2019 Outlook:

The Company updated its guidance for fiscal 2019 to reflect adjustments to expected store openings and unit volumes through the balance of the year:

• Total revenues of approximately $110 million
• Total revenue estimates assume same-store sales decreases of approximately 1% for the balance of the year for Bad Daddy’s
• General and administrative expenses of approximately $8.6 million including approximately $450,000 of non-cash equity compensation expense
• The opening of two additional Bad Daddy’s restaurants before the end of fiscal 2019
• Net loss of approximately $1.6 to $1.8 million, including approximately $1.7 million of pre-opening costs
• Total Adjusted EBITDA* between $5.2 and $5.4 million
• Capital expenditures (net of tenant improvement allowances) of approximately $6.9 to $7.2 million including approximately $2.0 million related to fiscal 2020 development, primarily two stores expected to open in October 2019. This does not include the use of approximately $3.0 million of cash in the previously disclosed acquisition of the non-controlling interest in three Bad Daddy’s restaurants.
• Fiscal year-end long-term debt of approximately $13.0 to $13.3 million

*For a reconciliation of restaurant level operating profit and Adjusted EBITDA to the most directly comparable financial measures presented in accordance with GAAP and a discussion of why the Company considers them useful, see the financial information schedules accompanying this release.

Conference Call: Management will host a conference call to discuss its third quarter 2019 financial results on Thursday, August 8, 2019 at 3:00 p.m. MT/5:00 p.m. ET. Hosting the call will be Boyd Hoback, President and Chief Executive Officer, and Ryan Zink, Chief Financial Officer.

The conference call can be accessed live over the phone by dialing [phone] and requesting the Good Times Restaurants (GTIM) call. The conference call will also be webcast live from the Company's corporate website www.goodtimesburgers.com. An archive of the webcast will be available at the same location on the corporate website shortly after the call has concluded.

About Good Times Restaurants Inc.: Good Times Restaurants Inc. (GTIM) owns, operates, franchises and licenses 35 Bad Daddy’s Burger Bar restaurants through its wholly-owned subsidiaries. Bad Daddy’s Burger Bar is a full service, upscale, “small box” restaurant concept featuring a chef-driven menu of gourmet signature burgers, chopped salads, appetizers and sandwiches with a full bar and a focus on a selection of craft microbrew beers in a high energy atmosphere that appeals to a broad consumer base. Additionally, through its wholly-owned subsidiaries, Good Times Restaurants Inc. operates and franchises a regional quick service restaurant chain consisting of 34 Good Times Burgers & Frozen Custard restaurants, located primarily in Colorado.

Good Times Forward-Looking Statements: This press release contains forward-looking statements within the meaning of federal securities laws. The words “intend,” “may,” “believe,” “will,” “should,” “anticipate,” “expect,” “seek” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from results expressed or implied by the forward-looking statements. These risks include such factors as the uncertain nature of current restaurant development plans and the ability to implement those plans and integrate new restaurants, delays in developing and opening new restaurants because of weather, local permitting or other reasons, increased competition, cost increases or shortages in raw food products, and other matters discussed under the Risk Factors section of Good Times’ Annual Report on Form 10-K for the fiscal year ended September 25, 2018 filed with the SEC. Although Good Times may from time to time voluntarily update its forward-looking statements, it disclaims any commitment to do so except as required by securities laws.

Good Times Restaurants Inc.
Unaudited Supplemental Information
(In thousands, except per share amounts)
		Fiscal Quarter Ended								Year-To-Date
Statement of Operations		June 25, 2019				June 26, 2018				June 25, 2019				June 26, 2018
Net revenues:
Restaurant sales		$	29,180			$	25,990			$	81,281			$	71,929
Franchise revenues			277				273				718				778
Total net revenues			29,457				26,263				81,999				72,707
Restaurant operating costs:
Food and packaging costs			8,529				7,833				23,955				22,154
Payroll and other employee benefit costs			10,677				9,155				30,458				26,076
Restaurant occupancy costs			2,091				1,850				6,221				5,278
Other restaurant operating costs			2,989				2,373				8,401				6,626
Preopening costs			129				610				949				1,683
Depreciation and amortization			1,104				937				3,227				2,665
Total restaurant operating costs			25,519				22,758				73,211				64,482
General and administrative costs			2,144				2,069				6,398				5,884
Advertising costs			666				653				1,841				1,850
Franchise costs			8				11				31				32
Asset impairment charge			-				-				-				72
Gain on disposal of restaurants and equipment			44				(9	)			5				(26	)
Income from operations			1,076				781				513				413
Other income (expense):
Interest income (expense), net			(202	)			(96	)			(561	)			(270	)
Other income			(1	)			-				(1	)			-
Total other income (expense), net			(203	)			(96	)			(562	)			(270	)
Net income (loss)			873				685				(49	)			143
Income attributable to non-controlling interests			(333	)			(381	)			(912	)			(853	)
Net income (loss) attributable to common shareholders		$	540			$	304			$	(961	)		$	(710	)
Basic and diluted income (loss) per share		$	0.04			$	0.02			$	(0.08	)		$	(0.06	)
Basic weighted average common shares outstanding			12,523				12,468				12,517				12,460
Diluted weighted average common shares outstanding			12,723				12,665				12,517				12,460

Good Times Restaurants Inc.
Unaudited Supplemental Information
(In thousands)
		June 25, 2019			September 25, 2018
Balance Sheet Data
Cash and cash equivalents		$	2,619		$	3,477
Current assets		$	4,560		$	6,381
Property and equipment, net			36,666			35,245
Other assets			19,330			19,324
Total assets		$	60,556		$	60,950
Current liabilities, including capital lease obligations and long-term debt due within one year		$	7,801		$	8,335
Long-term debt due after one year			11,150			7,472
Other liabilities			8,290			7,922
Total liabilities		$	27,241		$	23,729
Stockholders’ equity		$	33,315		$	37,221

		Bad Daddy’s Burger Bar						Good Times Burgers & Frozen Custard
		Fiscal Quarter Ended
		2019			2018			2019			2018
Restaurant sales (in thousands)		$	21,080		$	17,765		$	8,100		$	8,225
Restaurants opened during period			-			2			-			0
Restaurants closed during period			-			-			-			1
Restaurants open at period end			33			27			26			26
Restaurant operating weeks			429.0			337.6			338			342.0
Average weekly sales per restaurant (in thousands)		$	49.1		$	52.6		$	24.0		$	24.0

		Bad Daddy’s Burger Bar						Good Times Burgers & Frozen Custard
		Year-To-Date Period Ended
		2019			2018			2019			2018
Restaurant sales (in thousands)		$	59,714		$	48,706		$	21,567		$	23,223
Restaurants opened during period			2			5			-			0
Restaurants closed during period			-			-			-			2
Restaurants open at period end			33			27			26			26
Restaurant operating weeks			1,267.3			970.4			1,053.0			1,062.0
Average weekly sales per restaurant (in thousands)		$	47.1		$	50.2		$	20.5		$	21.9

Reconciliation of Non-GAAP Measurements to U.S. GAAP Results

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income from Operations
(In thousands, except percentage data)
		Bad Daddy’s Burger Bar												Good Times Burgers & Frozen Custard												Good Times Restaurants Inc.
		Fiscal Quarter Ended
		June 25, 2019						June 26, 2018						June 25, 2019						June 26, 2018						June 25, 2019			June 26, 2018
		$	21,080		100.0	%		$	17,765		100.0	%		$	8,100		100.0	%		$	8,225		100.0	%		$	29,180		$	25,990
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food and packaging costs			6,063		28.8	%			5,179		29.2	%			2,466		30.4	%			2,654		32.3	%			8,529			7,833
Payroll and benefits costs			7,851		37.2	%			6,439		36.2	%			2,826		34.9	%			2,716		33.0	%			10,677			9,155
Restaurant occupancy costs			1,391		6.6	%			1,156		6.5	%			700		8.6	%			694		8.4	%			2,091			1,850
Other restaurant operating costs			2,339		11.1	%			1,725		9.7	%			650		8.0	%			648		7.9	%			2,989			2,373
Restaurant-level operating profit		$	3,436		16.3	%			3,266		18.4	%		$	1,458		18.0	%		$	1,513		18.4	%		$	4,894			4,779
Franchise advertising contributions and net royalty income																											277			273
Deduct - Other operating:
Depreciation and amortization																											1,104			937
General and administrative																											2,144			2,069
Advertising costs																											666			653
Franchise costs																											8			11
Gain (Loss) on restaurant asset sale																											44			(9	)
Asset impairment charge																											-			-
Preopening costs																											129			610
Total other operating																											4,095			4,271
Income from operations																										$	1,076		$	781

Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues (as opposed to total revenues).

Reconciliation of Non-GAAP Measurements to U.S. GAAP Results

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income from Operations
(In thousands, except percentage data)
		Bad Daddy’s Burger Bar												Good Times Burgers & Frozen Custard												Good Times Restaurants Inc.
		Year-To-Date
		June 25, 2019						June 26, 2018						June 25, 2019						June 26, 2018						June 26, 2019			June 25, 2018
Restaurant sales		$	59,714		100.0	%		$	48,706		100.0	%		$	21,567		100.0	%		$	23,223		100.0	%		$	81,281		$	71,929
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Food and packaging costs			17,136		28.7	%			14,539		29.9	%			6,819		31.6	%			7,615		32.8	%			23,955			22,154
Payroll and other employee benefit costs			22,502		37.7	%			18,002		37.0	%			7,956		36.9	%			8,074		34.8	%			30,458			26,076
Restaurant occupancy costs			4,022		6.7	%			3,114		6.4	%			2,199		10.2	%			2,164		9.3	%			6,221			5,278
Other restaurant operating costs			6,560		11.0	%			4,735		9.7	%			1,841		8.5	%			1,891		8.1	%			8,401			6,626
Restaurant-level operating profit		$	9,494		15.9	%			8,316		17.1	%		$	2,752		12.8	%			3,479		15.0	%			12,246			11,795
Franchise royalty income, net																											718			778
Deduct - Other operating:
Depreciation and amortization																											3,227			2,665
General and administrative																											6,398			5,884
Advertising costs																											1,841			1,850
Franchise costs																											31			32
Gain (Loss) on restaurant asset sale																											5			(26	)
Asset impairment charge																											-			72
Preopening costs																											949			1,683
Total other operating																											12,451			12,160
Income from operations																										$	513		$	413

Certain percentage amounts in the table above do not total due to rounding as well as the fact that restaurant operating costs are expressed as a percentage of restaurant revenues (as opposed to total revenues).

The Company believes that restaurant-level operating profit is an important measure for management and investors because it is widely regarded in the restaurant industry as a useful metric by which to evaluate restaurant-level operating efficiency and performance. The Company defines restaurant-level operating profit to be restaurant revenues minus restaurant-level operating costs, excluding restaurant closures and impairment costs. The measure includes restaurant-level occupancy costs, which include fixed rents, percentage rents, common area maintenance charges, real estate and personal property taxes, general liability insurance and other property costs, but excludes depreciation. The measure excludes depreciation and amortization expense, substantially all of which is related to restaurant level assets, because such expenses represent historical sunk costs which do not reflect current cash outlay for the restaurants. The measure also excludes selling, general and administrative costs, and therefore excludes occupancy costs associated with selling, general and administrative functions, and pre-opening costs. The Company excludes restaurant closure costs as they do not represent a component of the efficiency of continuing operations. Restaurant impairment costs are excluded, because similar to depreciation and amortization, they represent a non-cash charge for the Company’s investment in its restaurants and not a component of the efficiency of restaurant operations. Restaurant-level operating profit is not a measurement determined in accordance with generally accepted accounting principles (“GAAP”) and should not be considered in isolation, or as an alternative, to income from operations or net income as indicators of financial performance. Restaurant-level operating profit as presented may not be comparable to other similarly titled measures of other companies. The tables above set forth certain unaudited information for the current and prior year fiscal quarters and year-to-date periods for fiscal 2019 and fiscal 2018, expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenues.

Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA
		Fiscal Quarter Ended								Year-to-Date
		June 25, 2019				June 26, 2018				June 25, 2019				June 26, 2018
Adjusted EBITDA:
Net Income (Loss), as reported		$	540			$	304			$	(961	)		$	(710	)
Depreciation and amortization			1,096				897				3,157				2,550
Interest expense, net			202				97				561				272
EBITDA			1,838			$	1,298				2,757			$	2,112
Preopening expense			128				565				928				1,541
Non-cash stock-based compensation			110				88				331				303
GAAP rent-cash cash difference			(44	)			(35	)			(50	)			(51	)
Gain (Loss) on disposal of assets			44				(9	)			5				(26	)
Asset impairment charge			-				0				-				72
Adjusted EBITDA		$	2,076			$	1,907			$	3,971			$	3,951

Adjusted EBITDA is a supplemental measure of operating performance that does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by GAAP, and our calculation thereof may not be comparable to that reported by other companies. This measure is presented because we believe that investors' understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for evaluating our ongoing results of operations.

Adjusted EBITDA is calculated as net income before interest expense, provision for income taxes and depreciation and amortization and further adjustments to reflect the additions and eliminations presented in the table above.

Adjusted EBITDA is presented because: (i) we believe it is a useful measure for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and asset disposals, closure costs and restaurant impairments, and (ii) we use adjusted EBITDA internally as a benchmark for certain of our cash incentive plans and to evaluate our operating performance or compare our performance to that of our competitors. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within our industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense and income tax rates) and differences in book depreciation of property, plant and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management believes that adjusted EBITDA facilitates company-to-company comparisons within our industry by eliminating some of these foregoing variations. Adjusted EBITDA, as presented, may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items.

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