10-Q: BT Brands Reports Narrowed Loss in Q1 2025, Sales Slightly Up

BT Brands, Inc. reports a reduced net loss for the first quarter of 2025, with a slight increase in sales compared to the same period last year.

Summary

• BT Brands, Inc. reported a net loss of $329,849 for the first quarter of 2025, compared to a net loss of $445,700 for the first quarter of 2024.
• Sales increased slightly to $3,231,073 from $3,190,147 in the same period last year.
• The company closed two locations, which contributed $507,458 in revenue and recorded an operating loss of approximately $94,000 in the first quarter of 2024.
• Restaurant-level EBITDA was $315,233 compared to $(15,672) in the prior year.
• As of March 30, 2025, the company had $3.8 million in cash and marketable securities.
• The company's 40.7% owned affiliate, Bagger Daves, had sales of $1,567,917 and a net loss of $339,136 for the thirteen weeks ending March 30, 2025.
• BT Brands' equity share in Bagger Daves' loss was approximately $134,300.
• The company entered into an agreement with NGI Corporation to settle $200,000 in loans, including accrued interest, through the purchase of 200,000 aluminum bottles at $1.00 per bottle.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company still reported a net loss, there were improvements in key financial metrics such as restaurant-level EBITDA and cost control. The company is also taking steps to manage its portfolio and explore new growth opportunities.

Positives

• The net loss decreased significantly compared to the same period last year.
• Restaurant-level EBITDA improved substantially, indicating better operational efficiency.
• Sales increased slightly despite the closure of two locations.
• Cost of sales decreased as a percentage of restaurant sales due to improved margins and cost-cutting measures.
• Labor costs decreased as a percentage of restaurant sales due to improved labor cost controls.
• The company is actively managing its portfolio by closing underperforming locations and seeking acquisitions.
• The company has implemented new initiatives for Burger Time in third-party delivery, which generally results in a higher check average.

Negatives

• The company still reported a net loss for the quarter.
• Two locations were closed, resulting in a decrease in overall revenue.
• The company's disclosure controls and procedures were deemed not effective at a reasonable assurance level.
• The company's equity investment in Bagger Daves contributed to a loss of $134,300.
• The first quarter is seasonally slower for BTND and PIE.

Risks

• Difficulties attracting food service workers and rapid inflation in the cost of input items.
• Intense competition in the restaurant industry.
• Potential impact of unforeseen public health matters and recently announced tariffs.
• The company's disclosure controls and procedures were deemed not effective at a reasonable assurance level.
• Dependence on a small number of suppliers and a single distribution company.

Future Outlook

The company expects new initiatives for Burger Time in third-party delivery to contribute to future sales growth. The company is also assessing alternatives for the Ham Lake location, including the sale of the property, which they believe would result in a gain on the sale of assets.

Management Comments

• The company is focused on cost-cutting measures and improving operational efficiency.
• The company is actively managing its restaurant portfolio by closing underperforming locations and seeking acquisitions.

Industry Context

The restaurant industry is facing challenges such as difficulties attracting food service workers, rapid inflation in input costs, and intense competition. Major companies are adopting technology and mobile delivery applications to compete for customers.

Comparison to Industry Standards

• It is difficult to compare BT Brands directly to industry standards without more specific information on comparable companies.
• However, the company's focus on quick-service restaurants and drive-through operations aligns with trends in the fast-food industry.
• The company's restaurant-level EBITDA of $315,233 suggests improved operational efficiency compared to the previous year, but further analysis is needed to benchmark against industry peers.
• Comparable companies in the quick-service restaurant industry include McDonald's, Restaurant Brands International (Burger King, Tim Hortons, Popeyes), and Wendy's.
• These companies typically have significantly greater resources and brand recognition than BT Brands.

Related Party Transactions

• As of March 30, 2025, our total investment in equity and loans to NGI is $484,000, which includes $180,000 in demand loans to NGI, of which $60,000 was advanced in the first quarter of 2025.
• Following the end of the first quarter, effective April 2, 2025, the notes were converted by BT Brands into the purchase of Disney-character aluminum bottles from NGIs B Water subsidiary on a dollar per bottle basis, aggregating approximately 200,000 bottles.
• As consideration for the purchase of bottles, BT Brands will be granted an option to purchase 10% of the fully-diluted equity of NGI or its B Water for $.01 per share.
• Until April 1, 2025, our CEO, Gary Copperud, served as Chairman of the board of directors of NGI. Our COO, Kenneth Brimmer, is a member of NGIs board and its CFO. Effective April 1, 2025, Gary Copperud resigned from the NGI board of directors. Mr. Brimmer continues as a Director and Chief Financial Officer of NGI.

Stakeholder Impact

• Shareholders may be concerned about the continued net losses, but encouraged by the improved operational efficiency and cost control.
• Employees may be affected by the closure of underperforming locations.
• Customers may benefit from the company's focus on providing value and quality food.
• Suppliers and creditors may be impacted by the company's financial performance and ability to meet its obligations.

Next Steps

• The company will continue to assess alternatives for the Ham Lake location, including the sale of the property.
• The terms of the option to purchase 10% of the fully-diluted equity of NGI or its B Water are expected to be finalized in the next 30 days.
• The Company is considering utilizing outside consultants as an extension of management, potentially to assist in the accounting for significant acquisitions.

Key Dates

Keywords

BT Brands, restaurant, financial results, Q1 2025, Bagger Daves, Burger Time, EBITDA, sales, net loss, NGI Corporation