BBQ Holdings, Inc. Reports Results For Third Quarter Of Fiscal 2019

Third Quarter Results

MINNEAPOLIS, Nov. 12, 2019 // GLOBE NEWSWIRE // - BBQ Holdings, Inc. (NASDAQ: BBQ) (the “Company”), an innovating owner and operator of barbeque restaurants, globally, today reported financial results for the third fiscal quarter ended September 29, 2019.

Third Quarter 2019 Highlights:

• Company-owned same store net sales increased 0.4%, driven by a 4.7% increase in To-Go same store net sales and a 12.7% increase in Catering, marking eight of the nine prior quarters experiencing positive comparable sales.

• Franchise-operated same store net sales increased 2.1% year-over-year.

• Reacquired five Famous Dave’s franchise stores.

• Achieved 53% of restaurant sales, net in growing off-premise lines of business and 47% dine-in.

• Net loss of $50,000, driven by acquisition and pre-opening costs.

• Adjusted EBITDA of $1.0 million.

• Generated $1.0 million of operating cash flows.

• Signed a lease on a 3,000 square foot bar-centric restaurant in the Uptown neighborhood of Minneapolis, which begins the execution of our small-box initiative in our Company-owned stores.

• Approximately 135,500 downloads of loyalty app since it was launched in December 2018, which generated $1.2 million of system-wide sales through the app in Q3.

Subsequent Highlights

Highlights subsequent to the Third Quarter of Fiscal 2019:

• Quarter-to-date as of November 10, 2019 company-owned comparable sales growth of 7.0%, driven by a 33.9% increase in catering sales and 10.0% increase in To-Go.

• Improved Dine-In traffic and sales driven by digital marketing initiatives and daily deals.

• Quarter-to-date as of November 3, 2019 franchise-operated comparable sales growth of 2.8%.

• Formed a subsidiary with Clark Championship Products LLC with an exclusive license to sell Clark Crew BBQ sauces, rubs, and other consumer packaged goods.

Executive Comments

Executive Comments

Jeff Crivello, CEO, commented, “Our financial results for the quarter reflect the investment and resources we have committed to reviving the Famous Dave’s brand and restaurant system performance. Our company-owned restaurants have generated positive comparable sales for eight of the last nine quarters, a statistic that separates us from almost every other multi-location restaurant operator within our industry, and our franchisees have sustained their positive comparable sales trend for this year. Highlighting the execution of our 2019 strategic plan includes the reinvestment of approximately $10 million into our system through reacquisition of franchise stores and capital expenditures to refresh and update our company-owned restaurants.

The small-format restaurant in Minneapolis and the inaugural Clark Crew BBQ restaurant in Oklahoma City are both on-track for a fourth quarter open.”

Key Operating Metrics

(1) International franchise comparable sales declines are primarily related to Puerto Rico, which did not recover from the effects of recent hurricanes. (2) System-wide restaurant sales include sales for all Company-owned and franchise-operated restaurants, as reported by franchisees. Restaurant sales for franchise-operated restaurants are not revenues of the Company and are not included in the Company’s consolidated financial statements.

(3) Adjusted net income (loss) from continuing operations and adjusted EBITDA are non-GAAP measures. A reconciliation of all non-GAAP measures to the most directly comparable GAAP measure is included in the accompanying financial tables. See “Non-GAAP Reconciliation.”

Third Quarter 2019 Review

Total revenue for the third quarter of 2019 was $23.7 million, up 68.3% from the third quarter of 2018. The increase in year-over-year restaurant sales, net for the three months ended September 29, 2019 was driven primarily by the acquisition of Famous Dave’s stores in Colorado, Michigan, Ohio, Wisconsin, Indiana, Kentucky, Iowa, and Arizona and a 2.1% increase in franchise-operated same store net sales, partially offset by franchise and corporate restaurant closures.

On a weighted basis, same store net sales for our To-Go and Catering lines of business increased 1.5% and 2.2%, respectively, in the third quarter of fiscal 2019 as compared to the prior year period, partially offset by a decline in our Dine In line of business of 3.3%. During the third quarter of fiscal 2019, Dine In represented approximately 47% of our total restaurant sales, net, while To Go and Catering represented 33% and 20% of restaurant sales, net, respectively.

Restaurant-level operating margin, as a percentage of restaurant sales, net, for Company-owned restaurants was 0.6% compared to 2.0% in the third quarter of fiscal 2018. This decline in restaurant-level operating margin was primarily a result of acquisitions of new stores in 2019, which we believe will stabilize over the remainder of fiscal 2019 and into the first quarter of fiscal 2020.

General and administrative expenses for the three months ended September 29, 2019 and September 30, 2018 represented approximately 11.2% and 13.8% of total revenues, respectively. The increase to general and administrative expenses primarily related to acquisition costs incurred related to our acquisitions and other transactions.

Net income attributable to shareholders was approximately $17,000, or $0.00 per share, in the third quarter of fiscal 2019 compared to net income attributable to shareholders of approximately $1.4 million, or $0.

15 per share, in the third quarter of fiscal 2018. Adjusted net income attributable to shareholders, a non-GAAP measure, was approximately $168,000, or $0.02 per share, compared to adjusted net income attributable to shareholders of approximately $1.

5 million, or $0.16 per share, in the third quarter of fiscal 2018. A reconciliation between adjusted net income attributable to shareholders and its most directly comparable GAAP measure is included in the accompanying financial tables.

BBQ Holdings is a holding company formed for the purposes of developing, owning and franchising the Famous Dave’s and Clark Crew BBQ restaurant brands. Its menus feature award-winning barbequed and grilled meats, a selection of salads, sandwiches, side items, and made-from-scratch desserts. As of November 12, 2019, the Company owns 32 Famous Dave’s locations and franchises an additional 96 Famous Dave’s restaurants in 32 states, Canada, and United Arab Emirates. The inaugural Clark Crew BBQ restaurant is opening in Oklahoma City, Oklahoma during the fourth quarter of 2019.

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses non-GAAP measures including those indicated below. These non-GAAP measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s consolidated financial statements and are subject to inherent limitations. By providing non-GAAP measures, together with a reconciliation to the most comparable GAAP measure, the Company believes that it is enhancing investors’ understanding of the Company’s business and results of operations.

These measures are not intended to be considered in isolation of, as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures presented may be different from the measures used by other companies. The Company urges investors to review the reconciliation of its non-GAAP measures to the most directly comparable GAAP measure, included in the accompanying financial tables.

Adjusted net income attributable to shareholders is net income attributable to shareholders, plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs, and the related tax impact. This number is divided by the weighted-average number of diluted shares of common stock outstanding during each period presented to arrive at adjusted net income, per share. Adjusted EBITDA is net income (loss), plus asset impairment, estimated lease termination charges and other closing costs, settlement agreements, depreciation and amortization, interest expense, net, net (loss) gain on disposal of equipment, stock-based compensation, severance, acquisition costs and provision (benefit) for income taxes.

Forward-Looking Statements

Statements in this press release that are not strictly historical, including but not limited to statements regarding the timing of the Company’s restaurant openings, the timing of refreshes and the timing or success of refranchising plans, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, which may cause the Company’s actual results to differ materially from expected results. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be attained. Factors that could cause actual results to differ materially from the Company’s expectation include financial performance, restaurant industry conditions, execution of restaurant development and construction programs, franchisee performance, changes in local or national economic conditions, availability of financing, governmental approvals and other risks detailed from time to time in the

BBQ HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (Unaudited)

(1) As a percentage of restaurant sales, net (2) As a percentage of total revenue (3) Restaurant level margins are equal to restaurant sales, net, less restaurant level food and beverage costs, labor and benefit costs, and operating expenses.

BBQ HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited)

BBQ HOLDINGS, INC. AND SUBSIDIARIES NON-GAAP RECONCILIATION (in thousands, except per share data) (unaudited)