My top pick for the rest of 2022, busted initial public offering BurgerFi International (BFI) , is off to a great start. Not really. It is down 26% in the seven weeks since my piece on the quality burger name was published. This week, I doubled down, went back into the dumpster and scooped up more BurgerFi shares, putting my average cost at $3.59. BFI closed Tuesday at $3.14.
I want to be clear on what this idea is, and what it is not. It is a speculative buy of a busted IPO that is down 45% year to date. It is a relatively small position due to the speculative nature of buying a newly public restaurant chain in growth mode that is not yet profitable and is operating in a difficult environment due to rising input and labor costs. It is the restaurant sector's third-worst performer year to date behind Carrols Restaurant Group (TAST) (down 49%) and Cannae Holdings (CNNE) (down 46%).
BurgerFi is not my typical value play. It is not a sure thing. It is not "for widows and orphans" quality. It is not covered by many analysts. Indeed, I see just one analyst covering BFI on some sources and none on others.
On Monday, BurgerFi reported first-quarter results. Its revenue of $44.9 million was up 311% year over year, though that increase was due primarily to the revenue contribution of $32.5 million by recently acquired Anthony's Coal Fired Pizza & Wings. Anthony's same-store sales were up 13%. BurgerFi's same-store sales decreased 5%, which was disappointing. Adjusted EBITDA of $2.3 million was significantly better than last year's $700,000.
BurgerFi opened six stores during the quarter, three company-owned and three franchises. BurgerFi expects to open another 15 to 20 locations during the rest of 2022, most of which will be franchises. Company guidance for 2022 included revenue expectations of $180 millon to $190 million, with mid-single-digit percentage revenue growth, and adjusted EBITDA of $12 million to $14 million. Cap-ex is expected to be $3 million to $4 million; the company ended the quarter with $13.3 million in cash and $60 million in debt.
The acquisition of Anthony's has been a winner so far, but we need to see progress with the BurgerFi brand. Investors, especially the growth crowd, have all but given up on the stock over the past year (it's down 69% over that period), so expectations are small.
Call it "double-down dumpster diving," but just understand that it remains a speculative call.
