Fast-casual restaurants are booming as they cater food according to the preferences of health-conscious consumers. A great player in this industry is Habit Restaurants Inc. (HABT, Financial).
The company has posted excellent quarterly results, including a 24.68% increase in revenue. During the third quarter, it has opened seven new company-operated Habit Burger Grills and finished the quarter with 124 company-operated locations and four franchised or licensed locations. Recently, Habit Grill announced preliminary unaudited financial results for its fiscal fourth quarter ended Dec. 29, 2015.
Founded in 1969, the Habit Burger Grill is specialized in preparing fresh, made-to-order char-grilled burgers and sandwiches featuring USDA choice tri-tip steak, grilled chicken and sushi-grade albacore tuna cooked over an open flame. Further, it offers salads, sides, shakes, and malts. The company operates a variety of restaurant formats, including end-cap, free-standing, inline and drive-thru, primarily within suburban shopping centers and retail settings. As of December 2015, the company has 142 units located in California, Arizona, Utah, Idaho, New Jersey, Florida, Nevada, Virginia, and Washington.
Strong third-quarter results
On Nov. 4, 2015, Habit Grill reported financial results for its third quarter ended Sept. 29, 2015. The company’s total revenue increased 24.68% to $58.6 million compared to $47 million for the prior year period. Habit Grill’s company-operated comparable restaurant sales increased 2.9% for the reported quarter.
The company’s net income was $2.2 million compared to $2.1 million in the third quarter of 2014. Adjusted fully distributed pro forma net income was $1.7 million, or 6 cents per fully distributed weighted average share, compared with $1.2 million, or 5 cents per share for the comparable prior year period. Further, adjusted EBITDA was $6.8 million compared to $5.8 million in the prior year period.
The company ended the quarter with cash and cash equivalents of $51.76 million. The total debt at the end of the quarter remained almost flat at $2.45 million.
Preliminary fourth quarter results
For the preliminary fourth quarter, Habit Grill’s total revenue was approximately $60.6 million. Company-operated comparable restaurant sales increased 3.3% and Habit Grill expects its adjusted fully distributed pro forma net income per fully distributed weighted average share to be approximately 4 cents.
Projections for fiscal 2015
For fiscal 2015, Habit Grill expects its total revenue and restaurant contribution margin in the range of $228 million to $229 million and 21.3% to 21.6%. Company-operated comparable restaurant sales growth are expected to be approximately 6% for the full year 2015. General and administrative expenses and capital expenditures are expected to be in the range of $23 million to $23.5 million and $27 million to $29 million. Further, the company expects to open 26 to 28 company-operated restaurants and three to five franchised or licensed restaurants. For 2016, it expects to open 30 to 32 company-operated restaurants.
Growth and management
Habit Grill has a proven history of unit, revenue, and adjusted EBITDA growth. From 2009 to 2014, units grew at a CAGR of 33%, revenue at a CAGR of 44%, and adjusted EBITDA at a CAGR of 62%. The company’s key drivers of growth are:
- Diversity of site demographics.
- “Gender neutral” competitive advantage.
- Format flexibility.
Further, Habit Grill expects that quality combined with environment and hospitality will create greater customer value.
On Sept. 28, 2015, the company announced Joseph J. Kadow to its board of directors. Kadow has strong experience on legal, communication, and government relations. Further, he is also a 20-year veteran of the restaurant industry. This will help Habit Grill to expand its wings in this competitive industry.
(Source: Company website)
On a concluding note
Overall, Habit Grill is a rock-solid company with attractive unit growth and financial metrics, strong management team, multi-pronged growth strategy with white space opportunities, and differentiated brand and culture. Further, it has reported 47 consecutive quarters of comparable sales growth.
Restaurant stocks are booming and with the recent quarterly release, the company is aiming for a better future and is all set to deliver a healthy menu to its investors. It is expected to create greater shareholder returns.
Disclosure: I do not hold any position in the company.
