2015 Revenue Up 42% YOY; Company Poised for Restaurant Expansion in 2016

2015 Revenue Up 42% YoY; 4Q15 Revenue Up 47% YoY.HOTR reported $12.7 million in total revenues in 4Q15, a 47% increase YoY as compared to $8.6 million in 4Q14. 2015 revenue increased by 42% YoY to $42.4 million as compared to $29.8 million in 2014. Adjusted EBITDA was a loss of $380 thousand in 4Q15, a 71% YoY increase compared to a loss of $1.3 million in 4Q15 and annual adjusted EBITDA improved by 22%YoY to a loss of $2.7 million in FY2015 compared a loss of $3.3 million in 2014. The company also reported a net loss from continuing operations (which includes a one-time asset impairment charge of $4.5million related to administrative period in Australia) of $10 million or a loss of $0.86 per share in FY2015, compared to $5.7 million, or $0.87 per share in FY2014.

For 2015, the majority of revenue growth was attributable to acquisitions, which led to most of the growth in HOTR’s system wide store count from 26 to 62 stores in 2015. Revenue growth in 4Q15 was due primarily to a combination of expansion from acquisitions and increases in same store sales. Same store sales growth from HOTR’s better burger segment was particularly strong at 9.1%.

For 2016, we expect revenues to continue to increase with the Company shifting its focus from acquisitions to organic growth. The Company signed a letter of intent and entered into a financial partnership to open 10 little Big Burger stores in Seattle, WA. In addition, the Company also signed a franchisee deal to open 8 BGR- the burger joint locations in Washington, Baltimore, D.C. Market and 5 locations in Salt Lake City. With the successful completion of acquisitions and the integration of BGR The Burger Joint, BT’s Burger Joint, and Little Big Burger in 2015, we believe that HOTR will show improved EBITDA and lower net losses in 2016.

Revenues from the Company’s Better Burger Group increased 339% YOY. This strong performance is attributable to both growth in store count and increased same store sales. Company owned restaurants increased from six locations at the end of 2014 to twenty-seven locations in 2015. With the company opening up new stores in 2016, we believe that the better burger model will continue to grow in the restaurant industry with rapid growth of fast-casual restaurants and in addition to the company adding more franchisee deals to its better burger model.

HOTR is in the process of raising non-dilutive capital to fund expansion and reduce interest costs. The Company has several strategic initiatives to provide non-dilutive capital to support its operations and also refinance its existing high interest rates on notes payable and convertible debts. To support this initiative, the Company retained their existing UK investment bank for an up to £10 million bond offering of 7.5% interest only bonds. This is expected to close in 2Q16. In addition, the Company also entered into a letter of intent with a U.S. investment bank for up to $10 million in capital under the U.S. Government's EB-5 program. The Company has received approval for several potential sites for new restaurants in certain qualified geographic regions and are expected to complete their first EB-5 funding transaction in mid-2016. Finally, HOTR entered into a letter of intent directly with a U.S. investor to fully fund the opening of up to ten Little Big Burger restaurants in the Seattle area.

We are valuing HOTR using a 0.85x EV/Sales multiple applied to our 2016 sales estimate of $59.05 million. This derives a target price of $2.02. A 0.85x EV/Sales multiple values HOTR near the low-end of its peer group and we believe that a discount is appropriate, given that HOTR is a smaller company relative to the majority of its comps, and the fact that the Company is just beginning to generate positive EBITDA.

Auditor: Cherry Bekaert LLP

Legal: Libertas Law Group, Inc.

Transfer Agent: Securities Transfer Corp.

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Company Contact Info:

Chanticleer Holdings, Inc.
7621 Little Ave – Suite 414
Charlotte, NC 28226
Tel: 704-366-5122

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1017 Maitland Center Commons Blvd.
Maitland, FL 32751
(407) 644-4256
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