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NATH's Q2 Earnings and Revenues Improve Y/Y, Gross Margin Down
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Nathan's Famous, Inc. (NATH - Free Report) reported earnings per share (EPS) of $1.47 in the second quarter of fiscal 2025, which increased 5% from the year-ago EPS of $1.40.
NATH’s Revenues in Detail
Nathan's Famous registered revenues of $41.1 million in the fiscal second quarter, up 6.1% year over year.
Higher revenues from the majority of its segments drove the topline.
Shares of this company had closed nearly 1.7% lower at yesterday’s close.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Nathan's Famous’ Segment Details
Nathan's Famous derives revenues from five segments — Branded Products, Company-owned restaurants, License royalties, Franchise fees and royalties, and Advertising fund revenue.
For the quarter under review, Branded Products revenues were $24.5 million, up 5.1% from the year-ago quarter. During the second quarter of fiscal 2025, the volume of hot dogs sold in the Branded Product Program increased 4% year over year. Nathan's Famous average selling prices increased 1.4% year over year.
Revenues from Company-owned restaurants totaled $5.3 million, up 2.9% year over year. Restaurant sales were impacted by higher sales at NATH’s Coney Island locations resulting from an increase in its average check, offset by lower sales at its locations in Oceanside and Yonkers, NY.
Revenues from License royalties totaled $9.5 million, up 13.8% year over year. Total royalties earned on sales of hot dogs from Nathan's Famous’ license agreement with Smithfield Foods, Inc. at retail and foodservice, increased 14.5% year over year to $8.6 million for the second quarter of fiscal 2025. The uptick resulted from an 18% increase in retail volume which was partially offset by a 4% decrease in net selling price.
The foodservice business earned higher royalties of $39,000 as compared with the second quarter of fiscal 2024. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan's Famous’ products increased $64,000 during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 primarily due to higher royalties earned on sales of proprietary spices, franks-in-a-blanket, mozzarella sticks and other hors d’oeuvres.
Franchise fees and royalties generated revenues of $1.2 million in the fiscal second quarter, down 9.1% year over year. Total royalties were $1.1 in the second quarter fiscal 2025, down 7.1% year over year. Royalties earned under the Branded Menu Program were $248,000 in the second quarter of fiscal 2025, down 8.8% year over year.
Virtual kitchen royalties were $11,000 in the second quarter of fiscal 2025, down 38.9% year over year. Traditional franchise royalties were $807,000 in the fiscal second quarter, down 5.9% year over year. Franchise restaurant sales decreased 2.6% year over year to reach $18.7 million, primarily due to lower traffic at international locations and other seasonal entertainment venues.
Comparable domestic franchise sales (consisting of 59 Nathan's Famous’ outlets, excluding sales under the Branded Menu Program) were $14.9 million in the second quarter of fiscal 2025, down 2.1% year over year.
As of Sept. 29, 2024, 243 franchised locations, including domestic, international and Branded Menu Program units, were operating compared with 235 as of Sept. 24, 2023. Total franchise fee income was $108,000 in the second quarter of fiscal 2025, down 24.5% year over year. Domestic franchise fee income was $35,000 in the second quarter of fiscal 2025, up 25% year over year. International franchise fee income was $59,000 in the fiscal second quarter, down 1.7% year over year.
Advertising fund revenues were $0.6 million, down 1.6% from the year-ago quarter.
NATH’s Geographic Segment
Nathan’s Famous’ derives revenues from two geographic regions — United States and International.
Revenues from the United States were $40.5 million, up 8.1% year over year. International revenues were $0.6 million, down 50.4% year over year.
Nathan's Famous, Inc. Price, Consensus and EPS Surprise
Nathan’s Famous’ gross profit was $3.9 million (with a gross margin of 12.9%) during the second quarter of fiscal 2025, down 11.5% year over year. This compares with $4.4 million (with a gross margin of 15.3%) during the second quarter of fiscal 2024.
NATH’s Adjusted Operating Expenses Analysis
Restaurant operating expenses increased 3.7% to $1.4 million, while general and administrative expenses increased 0.7% to $3.3 million.
Nathan’s Famous’ Profitability
Operating profit totaled $9.6 million, which increased 5.8% from the prior-year quarter.
In the second quarter of fiscal 2025, Nathan’s Famous’ net income was $6 million, up 5.6% from the year-ago quarter.
Adjusted EBITDA during the reported quarter was $10.4 million, up 5.9% from the year-ago quarter.
NATH’s Liquidity & Debt Management
Nathan’s Famous exited second-quarter fiscal 2025 with cash and cash equivalents of $31.2 million compared with $25.9 million at the fiscal first-quarter end. Total long-term debt (net of unamortized debt issuance costs) at the end of second-quarter fiscal 2025 was $59.6 million compared with $61.5 million at the fiscal first-quarter end.
Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2025 was $14.8 million compared with $11.4 million a year ago.
Our Take
Nathan’s Famous exited the second quarter of fiscal 2025 with solid top-line and bottom-line results. Strength in the majority of the segments and robust revenues from the United States were also encouraging. The uptick in Domestic franchise fee income was promising.
However, a decline in Franchise fees and royalties during the reported quarter was disappointing. The decline in Franchise restaurant sales and Comparable domestic franchise sales was also discouraging. Royalties earned under the Branded Menu Program and Virtual kitchen royalties also declined during the reported quarter. International franchise fee incomes also decreased during the quarter, further raising our concerns. During the reported quarter, the gross margin contracted, which do not bode well.
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NATH's Q2 Earnings and Revenues Improve Y/Y, Gross Margin Down
Nathan's Famous, Inc. (NATH - Free Report) reported earnings per share (EPS) of $1.47 in the second quarter of fiscal 2025, which increased 5% from the year-ago EPS of $1.40.
NATH’s Revenues in Detail
Nathan's Famous registered revenues of $41.1 million in the fiscal second quarter, up 6.1% year over year.
Higher revenues from the majority of its segments drove the topline.
Shares of this company had closed nearly 1.7% lower at yesterday’s close.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Nathan's Famous’ Segment Details
Nathan's Famous derives revenues from five segments — Branded Products, Company-owned restaurants, License royalties, Franchise fees and royalties, and Advertising fund revenue.
For the quarter under review, Branded Products revenues were $24.5 million, up 5.1% from the year-ago quarter. During the second quarter of fiscal 2025, the volume of hot dogs sold in the Branded Product Program increased 4% year over year. Nathan's Famous average selling prices increased 1.4% year over year.
Revenues from Company-owned restaurants totaled $5.3 million, up 2.9% year over year. Restaurant sales were impacted by higher sales at NATH’s Coney Island locations resulting from an increase in its average check, offset by lower sales at its locations in Oceanside and Yonkers, NY.
Revenues from License royalties totaled $9.5 million, up 13.8% year over year. Total royalties earned on sales of hot dogs from Nathan's Famous’ license agreement with Smithfield Foods, Inc. at retail and foodservice, increased 14.5% year over year to $8.6 million for the second quarter of fiscal 2025. The uptick resulted from an 18% increase in retail volume which was partially offset by a 4% decrease in net selling price.
The foodservice business earned higher royalties of $39,000 as compared with the second quarter of fiscal 2024. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan's Famous’ products increased $64,000 during the second quarter of fiscal 2025 compared with the second quarter of fiscal 2024 primarily due to higher royalties earned on sales of proprietary spices, franks-in-a-blanket, mozzarella sticks and other hors d’oeuvres.
Franchise fees and royalties generated revenues of $1.2 million in the fiscal second quarter, down 9.1% year over year. Total royalties were $1.1 in the second quarter fiscal 2025, down 7.1% year over year. Royalties earned under the Branded Menu Program were $248,000 in the second quarter of fiscal 2025, down 8.8% year over year.
Virtual kitchen royalties were $11,000 in the second quarter of fiscal 2025, down 38.9% year over year. Traditional franchise royalties were $807,000 in the fiscal second quarter, down 5.9% year over year. Franchise restaurant sales decreased 2.6% year over year to reach $18.7 million, primarily due to lower traffic at international locations and other seasonal entertainment venues.
Comparable domestic franchise sales (consisting of 59 Nathan's Famous’ outlets, excluding sales under the Branded Menu Program) were $14.9 million in the second quarter of fiscal 2025, down 2.1% year over year.
As of Sept. 29, 2024, 243 franchised locations, including domestic, international and Branded Menu Program units, were operating compared with 235 as of Sept. 24, 2023. Total franchise fee income was $108,000 in the second quarter of fiscal 2025, down 24.5% year over year. Domestic franchise fee income was $35,000 in the second quarter of fiscal 2025, up 25% year over year. International franchise fee income was $59,000 in the fiscal second quarter, down 1.7% year over year.
Advertising fund revenues were $0.6 million, down 1.6% from the year-ago quarter.
NATH’s Geographic Segment
Nathan’s Famous’ derives revenues from two geographic regions — United States and International.
Revenues from the United States were $40.5 million, up 8.1% year over year. International revenues were $0.6 million, down 50.4% year over year.
Nathan's Famous, Inc. Price, Consensus and EPS Surprise
Nathan's Famous, Inc. price-consensus-eps-surprise-chart | Nathan's Famous, Inc. Quote
Nathan’s Famous’ Gross Margin
Nathan’s Famous’ gross profit was $3.9 million (with a gross margin of 12.9%) during the second quarter of fiscal 2025, down 11.5% year over year. This compares with $4.4 million (with a gross margin of 15.3%) during the second quarter of fiscal 2024.
NATH’s Adjusted Operating Expenses Analysis
Restaurant operating expenses increased 3.7% to $1.4 million, while general and administrative expenses increased 0.7% to $3.3 million.
Nathan’s Famous’ Profitability
Operating profit totaled $9.6 million, which increased 5.8% from the prior-year quarter.
In the second quarter of fiscal 2025, Nathan’s Famous’ net income was $6 million, up 5.6% from the year-ago quarter.
Adjusted EBITDA during the reported quarter was $10.4 million, up 5.9% from the year-ago quarter.
NATH’s Liquidity & Debt Management
Nathan’s Famous exited second-quarter fiscal 2025 with cash and cash equivalents of $31.2 million compared with $25.9 million at the fiscal first-quarter end. Total long-term debt (net of unamortized debt issuance costs) at the end of second-quarter fiscal 2025 was $59.6 million compared with $61.5 million at the fiscal first-quarter end.
Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2025 was $14.8 million compared with $11.4 million a year ago.
Our Take
Nathan’s Famous exited the second quarter of fiscal 2025 with solid top-line and bottom-line results. Strength in the majority of the segments and robust revenues from the United States were also encouraging. The uptick in Domestic franchise fee income was promising.
However, a decline in Franchise fees and royalties during the reported quarter was disappointing. The decline in Franchise restaurant sales and Comparable domestic franchise sales was also discouraging. Royalties earned under the Branded Menu Program and Virtual kitchen royalties also declined during the reported quarter. International franchise fee incomes also decreased during the quarter, further raising our concerns. During the reported quarter, the gross margin contracted, which do not bode well.