CARROLS RESTAURANT GROUP, INC. - QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - FOR THE QUARTER ENDED MARCH 31, 2024
CARROLS RESTAURANT GROUP, INC. - QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - FOR THE QUARTER ENDED MARCH 31, 2024
Carrols Restaurant Group, Inc. reported a net loss of $1.7 million for the quarter ended March 31, 2024, with total revenue of $129.3 million. The company’s total assets were $249.8 million, and total liabilities were $104.7 million. The balance sheet showed a net loss per share of $0.08. The company’s cash and cash equivalents were $10.7 million, and total debt was $104.7 million.
Overview of Company’s Financial Performance
The company owns and operates over 1000 Burger King and 60 Popeyes restaurants. Restaurant sales for the first quarter of 2024 increased to $452.2 million compared to $445.2 million in the first quarter of 2023, an increase of $7 million or 1.6%.
Comparable restaurant sales increased 2.5% compared to the first quarter of 2023. This was driven by a 4.6% increase in average check, partially offset by a 2% decrease in customer traffic.
Key financial measures improved in the first quarter of 2024 compared to the first quarter of 2023:
Adjusted Restaurant-Level EBITDA increased by $4.2 million or 7.7% to $58.7 million. As a percentage of restaurant sales, Adjusted Restaurant-Level EBITDA margin increased from 12.2% to 13.0%.
Adjusted EBITDA increased by $4.7 million to $35.4 million. As a percentage of restaurant sales, Adjusted EBITDA margin increased from 6.9% to 7.8%.
Net income was $3.7 million or $0.06 per diluted share, compared to $0.9 million or $0.01 per diluted share in the prior year period.
Revenue and Profit Trends
| Financial Measure | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Restaurant Sales | $452.2 million | $445.2 million | +$7.0 million |
| Adjusted Restaurant-Level EBITDA | $58.7 million | $54.5 million | +$4.2 million |
| Adjusted Restaurant-Level EBITDA Margin | 13.0% | 12.2% | +0.8 pts |
| Adjusted EBITDA | $35.4 million | $30.7 million | +$4.7 million |
| Adjusted EBITDA Margin | 7.8% | 6.9% | +0.9 pts |
| Net Income | $3.7 million | $0.9 million | +$2.8 million |
The company saw improved profitability in the first quarter of 2024 driven by:
- Menu price increases at Burger King restaurants which helped offset inflationary pressures on food costs
- Leverage from higher restaurant sales volumes decreased restaurant rent expense as a percentage of sales
- Lower interest expense due to debt repayments in 2023
These improvements were partially offset by higher labor costs, repairs and maintenance costs, insurance costs, and costs associated with the pending merger agreement.
Strengths and Weaknesses
Strengths
- Strong comparable restaurant sales growth of 2.5%
- Burger King and Popeyes are well-known national brands
- Agreements with BKC for “Reclaim the Flame” investments in 2023-2024 to drive sales growth and profitability
- Solid liquidity position and cash flow generation
Weaknesses
- Traffic declined 2% showing some consumer weakness
- Labor inflation and wage rate pressure is a challenge in many states
- Higher costs for repairs, maintenance, insurance, and IT systems
- Pending merger agreement limits certain flexibility until deal closes
Future Outlook
The company expects the following business trends for the remainder of 2024:
- Comparable restaurant sales growth of 2-3%
- 10-15 new Burger King restaurant openings
- 35-40 Burger King remodels as part of the BKC investment agreements
- Adjusted EBITDA growth of 10-15% compared to 2023
- Continued focus on off-premise channels like drive-thru and delivery
The pending merger agreement with Restaurant Brands International is expected to close in Q2 2024. This will result in the company becoming privately-held upon close.
The investments from BKC in 2023-2024 for advertising, restaurant technology, remodels, and new restaurant development are expected to accelerate sales growth and profitability for the Burger King brand.
The company plans to continue evaluating its capital expenditures to balance investing for growth while also managing liquidity and cash flows. This will include opening new restaurants, remodeling existing restaurants, and making other enhancements across its restaurant portfolio.
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