Revenue and net profit take a hit as a result of significant debt repayments
Fast food restaurant Nathan’s Famous Inc. (NASDAQ: NATH), which is celebrating its 100th anniversary, announced its financial results for Q4 FY16 and full year FY16 ended March 27th, 2016, on June 10th, 2016. Known for its signature hot dogs and seafood from Arthur Treacher’s, Nathan’s currently distributes its products in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and 11 foreign countries through its restaurant system, foodservice sales programs, and product licensing activities. In 2015, the Company sold over 550 million Nathan’s Famous hot dogs. Nathan’s Famous counts fast casual restaurants such as Fiesta Restaurant Group Inc. (NASDAQ: FRGI), Denny’s Corp. (NASDAQ: DENN), and Zoe’s Kitchen Inc. (NYSE: ZOES) as its competitors. Read more about its financial results below.
Q4 FY16 results
For Q4 FY16, Nathan’s Famous reported a record 51.2% growth in income from operations to $4.48 million, as compared to $2.96 million in the year-ago quarter. The Company’s adjusted EBITDA jumped 39.5% to $4.96 million, compared to $3.56 million in the comparable quarter last year. However, Nathan’s revenues in Q4 FY16 fell to $19.05 million from $20.34 million in the year-ago quarter. Net income also followed a downward trend to $0.50 million, as compared to $1.53 million in the year-ago quarter, owing to sizable debt repayments. Subsequently, earnings per diluted share were at $0.12 in Q4 FY16, as compared to $0.34 per share in the year-ago quarter.
Full year FY16 results
For the full year FY16, Nathan’s Famous reported a 25.1% growth in income from operations to $24.96 million, as compared to $19.95 million during FY15. The Company’s adjusted EBITDA jumped 20.7% to $27.15 million as compared to $22.49 million for the previous year. Revenues showed a slight uptick to $100.89 million in FY16 from $99.11 million in FY15. However, the Company’s net income took a knock, nose-diving to $6.09 million from $11.70 million in the previous year. As a consequence, earnings per diluted share declined to $1.37, as compared to $2.55 per share in FY15.
For the full year FY16, Nathan’s license royalties increased 10% to $19.81 million, as compared to $18.01 million in FY15. During FY16, the Company’s total royalties earned under the John Morrell & Co.’s agreement grew 11.6% to $17.97 million, versus $16.10 million of royalties earned during the previous year. The growth in license royalties is mainly due to significant organic growth in the Company’s consumer packaged hot dog business and promotional strategies.
During FY16, Nathan’s sales from the Branded Product Program, featuring sales of Nathan’s hot dogs to the foodservice industry, declined slightly to $58.54 million from $58.94 million in FY15. The decline is mainly due to a 4.6% increase in the volume of products sold, which was offset by lower average selling prices of 3.7% due to the impact of lower beef prices.
During FY16, Nathan’s sales from company-operated restaurants increased by 5% to $16.66 million from $15.87 million in the previous year, driven primarily from higher sales at both Coney Island locations.
On the other hand, Nathan’s revenues from franchise operations declined to $5.04 million in FY16, as compared to $5.58 million in FY15. The Company’s total franchise fee income also declined to $0.75 million during FY16 from $1.04 million in FY15, primarily due to lower international development fees.
New restaurant openings
Nathan’s opened 56 new franchised units during FY16, including 25 international locations, comprised of one each in Panama and Australia, 17 locations in Russia, two locations in Malaysia, one unit in Costa Rica, one unit in the Dominican Republic, and 22 Branded Menu Program outlets. Nathan’s also opened 36 new franchised units during FY16, including 17 Branded Menu Program outlets and 13 international locations.
During FY16, Nathan’s Board of Directors increased the Company’s authorization to purchase up to an additional 400,000 shares of its common stock. As of March 27th, 2016, a total of 290,874 shares were available for purchase under the buyback program, and the Company has purchased 5,096,757 shares of common stock for about $76.03 million. Also, Nathan’s has entered into a 10b5-1 plan with Mutual Securities Inc. (MSI), authorizing MSI to purchase the Company’s common stock.
Nathan’s stock stood at $42.26 at the close on Wednesday, June 15th, 2016, having reached a high of $42.94 and a low of $41.93 during the session. The stock’s average trading volume was at 16,069 for the day. The Company’s market cap was at $177.07 million as of Wednesday’s close.