Tasty Brands, LP – Q3 2021 Portfolio Performance Update
November 30, 2021 | Tasty Brands, LP
Tasty Brands, LP (the “Company”), an affiliate of Los Angeles-based private equity firm Triton Pacific Capital Partners, reported its financial results for the third quarter ending October 6, 2021 and provided a letter to its shareholders outlining the results.
Highlights for the third quarter of 2021 versus the third quarter of 2020 include:
• Total restaurant sales increased 33.9% to $50.9 million compared to $38.1 million in the third quarter of 2020. On a year-to-date basis, total restaurant sales of $175.7 million are +43.6% to total restaurant sales of $122.4 million in the prior year period.
• Adjusted restaurant-level EBITDA1 increased to $5.4 million from $3.3 million in the prior year quarter. Year-to-date adjusted restaurant-level EBITDA of $21.2 million compares to $10.1 million in the prior year, a +109.2% change.
• Adjusted income from operations2 increased to $2.7 million from $1.4 million in the prior year quarter, and increased +218% on a year-to-date basis, with $13.1 million in 2021 compared to $4.1 million in the prior year.
• Loan-to-value for consolidated restaurant operations was 14.3%3
Management Commentary
Q3 marked a strong quarter for Tasty Brands, LP as financial results surpassed 2021 performance for the same period and its investments in both Burger King and Pizza Hut franchisees continue to execute their respective operational and growth strategies. The continued success and financial performance of the business has been underpinned by the investments made to support off-premise dining, strategic restaurant remodels and new store development, as well as an acute focus on operational metrics and customer satisfaction. The reemergence of dining rooms has led to incremental sales for many of our dine-in focused assets, while the carry-out, delivery and drive-thru channels continue to sustain growth from pre-COVID levels. The investments in restaurant remodels, relocations and new store development are on track to hit return targets which create long-term value for Tasty Brands.
Several accomplishments and updates across the Tasty Brands portfolio to highlight for the quarter include:
• Tasty King asset actions completed during the quarter are exceeding underwriting expectations and return targets. Of note were the very strong openings of a new Burger King restaurant in Clinton, Missouri and a scraped and rebuilt store in Newton, Iowa.
• Tasty Brands’ sales growth at portfolio companies have outperformed other franchisees in their respective DMAs during every period of 2021 through the third quarter.
• Tasty Hut built a new restaurant in Abingdon, Virginia, and preliminary financial results significantly exceeded budget. Average weekly sales are currently running at $25,000+, which implies $1.3 million annualized, a very high volume for Pizza Hut.
• A strategic add-on investment is under contract and at an advanced stage for Tasty Hut – a 26-store acquisition that extends the Pizza Hut footprint to another three states.
Third Quarter 2021 Financial Results
As of October 6, 2021, the Company owned 229 restaurants, including 67 Burger King and 162 Pizza Hut locations.
Total restaurant revenue increased 33.9% to $50.9 million in the third quarter of 2021, compared to $38.1 million in the third quarter of 2020. On a year-to-date basis, restaurant revenue of $175.7 million compares favorably to $122.4 million for the same period in 2020 – a +43.6% change.
Adjusted restaurant-level EBITDA1 increased to $5.4 million in the third quarter of 2021 from $3.3 million in the prior year period. Adjusted restaurant-level EBITDA margin was 10.5% of restaurant sales, an increase of 191 basis points from the third quarter of 2020, primarily driven by sales leverage. Despite inflationary pressures within the industry, the Company was able to drive sales growth through strategic menu price increases and a focus on tactics to maintain top-line and margin performance.
Adjusted income from operations was $2.7 million for the quarter, compared to $1.4 million in the prior year period, reflecting 5.3% of total restaurant sales. Administrative general and administrative expenses were higher by $0.85 million.
Distribution Update
The Company declared a quarterly distribution for Q3 2021 of $0.4375 per share.
About Tasty Brands, LP
Tasty Brands, LP is a multi-brand restaurant franchisee within the quick service restaurant industry. Tasty Brands’ portfolio companies include Tasty Hut, LLC, a Pizza Hut franchisee and Tasty King, LLC, a Burger King franchisee. Portfolio companies operate multiple Pizza Hut and Burger King restaurants across multiple states all over the US. Some of the statements in this press release may contain forward-looking statements or statements of future expectations based on currently available information. Such statements are naturally subject to risks and uncertainties. Factors such as the development of general economic conditions, future market conditions, consumer preferences for the chain restaurant industry generally and our portfolio company brands specifically, unusual catastrophic loss events such as the current COVID-19 coronavirus pandemic and related government, private sector, and individual consumer responsive actions, changes in the capital markets and other circumstances may cause the actual events or results to be materially different from those anticipated by such statements. Tasty does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such statements. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements made herein speak only as of the date of this press release and Tasty undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
About Triton Pacific
Triton Pacific, founded in 2001, is a private equity firm offering income and growth investment programs to accredited investors. The firm focuses on investing in established companies across multiple sectors that exhibit attractive fundamentals.
For more information contact Tasty@TritonPacific.com
1 Adjusted restaurant-level EBITDA is a non-GAAP financial measure and represents earnings from operations as adjusted to exclude general and administrative expenses, depreciation and amortization, impairment and other non-recurring lease charges, restaurant-level integration costs, pre-opening costs and any non-cash items.
2 Adjusted income from operations is a non-GAAP financial measure and represents adjusted restaurant-level EBITDA less administrative G&A and interest expense. This calculation does not include corporate G&A expense.
3 Loan-to-value represents net debt (total portfolio company debt – portfolio company balance sheet cash – Tasty Brands cash) to enterprise value (based on most recent quarterly valuations). Does not consider Propco investment.
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