Tasty Brands, LP (the “Company”), an affiliate of Los Angeles-based private equity firm Triton Pacific Capital Partners, reported its financial results for the second quarter ending July 14, 2021 and provided a letter to its shareholders outlining the results.

Highlights for the Second Quarter 2021 versus the Second Quarter 2020 include:

Total restaurant sales increased 35.5% to $52.8 million compared to $39.0 million in the Second Quarter of 2020. On a year-to-date basis, total restaurant sales of $124.7 million are +47.9% to total restaurants sales of $84.3 million in the prior year period.
Adjusted Restaurant-Level EBITDA1 increased to $5.7 million from $4.2 million in the prior year quarter. Year-to-date Adjusted Restaurant-Level EBITDA of $15.8 million compares to $6.6 million in the prior year, a +139% change.
Adjusted Income from Operations2 increased to $3.5 million from $2.4 million in the prior year quarter, and increased +293% on a year-to-date basis, with $10.4 million in 2021 compared to $2.7 million in the prior year.
Loan-to-Value for consolidated restaurant operations was 7%3

Management Commentary

Tasty Brands, LP sustained its strong Q1 performance through the second quarter of 2021. Financial results, as highlighted below, continue to track ahead of the 2021 budget. Tasty Brands’ leadership did an excellent job driving sustained top-line sales while managing food cost, labor, and other restaurant-level expenses through the quarter. With inflationary pressures becoming visible across the U.S. economy, Tasty Brands’ portfolio companies undertook detailed pricing analysis which is expected to result in targeted price increases implemented in Q3, demonstrating the ability of QSR businesses to manage well relative to other businesses in an inflationary environment. The strong first-half results for Tasty Brands indicates positive momentum across our businesses, supported by robust operational performance, investment in local store marketing, and the completion of strategic asset actions.

There are several accomplishments and updates across the Tasty Brands portfolio to highlight:

Portfolio companies have taken steps to further build sales, including, expanded hours of operation in many restaurants towards pre-pandemic levels which has led to an increase in breakfast and late-night sales for the Burger King business. Within Tasty Brands’ Pizza Hut business, re-opening of dining rooms in many markets has resulted on the continued momentum in sales compared to pre-pandemic levels.
Tasty Brands’ sales growth at portfolio companies during Q2 outperformed other franchisees in their respective DMAs
Asset actions completed through Q2 are having a very significant positive impact on performance.
Attractive add-on acquisition opportunities have been identified for both Tasty Hut and Tasty King with strong momentum on multiple transactions that are expected to occur during the 2nd half of 2021.

Second Quarter 2021 Financial Results

As of July 14, 2021, the Company owned 227 restaurants, including 66 Burger King and 161 Pizza Hut locations.

Total restaurant revenue increased 35.5% to $52.8 million in the second quarter of 2021, compared to $39.0 million in the second quarter of 2020. On a year-to-date basis, 2021 restaurant revenue of $124.7 million compares to $84.3 million for the same period in 2020 - a +47.9% change.

Adjusted Restaurant-Level EBITDA1 increased to $5.7 million in the second quarter of 2021 from $4.2 million in the prior year period. Adjusted Restaurant-Level EBITDA margin was 10.7% of restaurant sales and decreased 14 basis points from the second quarter of 2020, primarily driven by increased labor expense due to inflationary pressures present in the broader industry. The Company demonstrated its ability to continue rationalizing ongoing expenses through improved management of promotional and discounting activity, optimized restaurant labor scheduling, despite challenges to labor availability, and managing other restaurant-related operating expenses. The availability of labor remains a challenge for our industry, and while we believe it has not impacted our sales, it has necessitated that we remain flexible as it relates to operating hours and staffing levels.

Adjusted Income from Operations was $3.5 million for the quarter, compared to $2.4 million in the prior year period, reflecting a margin of 6.6% of total restaurant sales. Administrative general and administrative expenses were higher by $0.4 million but at 3.1% of revenue, flat to the second quarter 2020.

Distribution Update

The Company declared a quarterly distribution for Q2 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 across 10 states currently and employing more than ~3,900 employees. 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 for accredited investors. The firm focuses on investing in established companies across multiple sectors that exhibit attractive fundamentals.

Footnotes:

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).