Sadot Group Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 8 speakers on the call.

Operator

Good afternoon and welcome to the MuscleMaker Inc. Q1 2023 Earnings Call. Today's call is being recorded and all participants will be in listen only mode. After management's prepared remarks, we will open the call to questions from analysts. At this time, for opening remarks and introductions, I would like to turn the call over to Frank Bouboulila, MuscleMaker, Inc.

Operator

Investor Relations contact.

Speaker 1

Thank you, operator, and welcome everyone to MuscleMaker, Inc. 1st quarter 2023 earnings call and webcast. Before we get started, we would like to state that this call may include forward looking statements Pursuant to the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995.

Speaker 1

To the extent that the information presented on this call discusses financial projections, information or expectations about business plans, results of operations, Products or markets or otherwise made statements about future events, such statements may be forward looking. Such forward looking statements can be identified by the use of the words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans and proposes. Although management believes that the expectations These forward looking statements are based on reasonable assumptions. There are a number of risks and uncertainties that could cause actual results to differ materially from Such forward looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading Risk Factors and elsewhere in documents that MuscleMaker, Inc.

Speaker 1

Files from time to time with the SEC. Forward looking statements speak only as of the date of the document in which they are contained and MuscleMaker, Inc. Does not I undertake any duty to update any forward looking statements except as may be required by law. For this call, all numbers and percentages disclosed have been rounded. On this call, we will refer to Musclemaker Inc.

Speaker 1

As MMI. With me on the call today are MMI's Chief Executive Officer, Michael Roper And Chief Financial Officer, Jennifer Black. Michael and Jennifer will be presenting prepared remarks related to MMI's financials filed on May 10, 2023 and those documents may be found on MMI's website, Newswire feeds and on the SEC's website Links from the MMI IR pages at www.musselmakerinc.com. At this point, I would like to turn the call over to MMI's CEO, Michael Roper. Michael?

Speaker 2

Thanks, Frank. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that Q1 was a strong continuation of Q4 and marked the 1st full Order of MMI's significant pivot towards a diversified global food organization through the creation of our wholly owned subsidiary, Sadat LLC. As you may recall, in late 2022, we began a transformation from a U. S.-centric restaurant business into a global food focused organization with 2 distinct business units, Sadat LLC and the MMI Restaurant Group.

Speaker 2

Our first business Unit, Sadat LLC, is our newly formed international agri commodities subsidiary specializing in the trading and shipping of food and feed commodities such as soybean meal, Wheat and corn. Today, Sadat is our largest operating unit and has been instrumental in our performance for this quarter. This pivot into a new business and operations was done with a long term strategic view of the opportunities In the global food supply chain. Instead of only focusing on food, retail or restaurants, we broadened our view and saw that there Increasing need for companies that can build and operate sustainable supply chains and can take part in providing food security to global communities. Along with vast financial opportunities, this creates social and environmental values and correlates with our long term values of providing food that is healthy and fresh around the globe.

Speaker 2

Our second business unit, the MMI Restaurant Group is our legacy business, which includes 50 plus restaurant units across 2 fast casual concepts, PokeMoto and Muscle Maker Grill, With PokeMoto being a high growth restaurant brand, the restaurant also includes the subscription based fresh meal prep service, SuperFit Foods with 30 plus points of distribution. So let me take a couple of minutes here and discuss some of the Q1 highlights. I'm pleased to announce that MMI achieved top line revenue of $213,000,000 for the Q1 of 2023. This revenue announcement marks the accomplishment of 5 consecutive months above $50,000,000 in revenue per month for the company and demonstrates the continued performance of Sadat with the total revenue since inception in November of 2022 of over $361,000,000 Overall, our first quarter non GAAP adjusted EBITDA Was $2,400,000 in 2023 compared to a $1,500,000 non GAAP adjusted EBITDA loss in the Q1 of 2022. The $3,900,000 increase is primarily attributable to the net income generated by Sadat as we continue to execute against our new business plan.

Speaker 2

This excludes the non cash charges required under GAAP to account for the issuance of shares to Agia, the company providing consulting and operations support to Sadat. And I'll share more about Agia in a moment. We seek Q1's results along with other strategic actions as a foundation for our future growth And diversification within the global food supply chain. In addition, we announced in the Q2 that we've instituted a share repurchase program. Regarding Agia, as disclosed in an 8 ks filing on November 18, 2022, MMI and its wholly owned subsidiary, Sadat, LLC entered into a service agreement whereby Sadat engaged Agia to perform services related to the purchase and sale of physical food commodities.

Speaker 2

The service agreement allows Agia to nominate up to 8 Board Directors, 1 upon signing the service agreement And an additional 7 nominations upon Sadat generating specific net income targets. 2 directors at 3,300,000 2 more at $6,600,000 and the final 3 at $9,900,000 Since inception and through March 31, 2023, Sadat has generated approximately $8,700,000 in net income. As Sadat crossed the second threshold of $6,600,000 in net income, Agian nominated and MMI accepted 2 new Board Directors, Marvin Yao and Paul Stanson. Both of these new Board Directors bring industry specific knowledge and a wealth of experience. As of today, MMI has added 5 of The possible 8 new Agia nominated Board Directors.

Speaker 2

We believe the agreement with Agia has been intelligent and accretive investment in the strategic future of our company. We are confident that Agia will continue to provide valuable insight and expertise as we grow our global food organization. We are committed to the execution of our strategic vision and to Capitalize on the opportunities presented by the global food market. MMI's success this quarter is a testament to the hard work and dedication of our team and we look forward to building on this momentum as we move forward. Now I'd like to turn the call over to our CFO, Jennifer Black, to review the financial performance of the company for the Q1 of 2023.

Speaker 2

Jennifer?

Speaker 3

Thanks, Mike, and thank you to everyone joining us here today. Before I begin, I would like to note that our financial results for the quarter ended March 31, 2023, on Form 10 Q were filed with the SEC on May 10 and in a press release that same date. With that, I'd like to give an overview of the financials for the Q1 of 2023. For the quarter ended March 31, 2023, our company wide revenues significantly increased and totaled $213,000,000 compared to $3,000,000 for the prior quarter ended March 31, 2022. Of the $213,000,000 revenue increase, 210,000,000 was primarily due to the commodity sales revenue generated by Sadat and its servicing agreement with Agia.

Speaker 3

Sadat completed 19 transactions in Q1 with the average revenue per transaction of $11,100,000 and an average cost of goods sold per transaction of $10,800,000 These 19 transactions were completed throughout 11 different countries. The NMI Restaurant Business Unit generated total revenue of $3,000,000 This consisted of $2,700,000 From company owned and operated locations and $300,000 in royalty fees collected from both Muscle Maker Grill in Pokimoto franchise locations for the quarter ended March 31, 2023. Company owned and Operating location revenue decreased due to closing of underperforming and nonprofitable Muscle Maker Grill restaurants, While royalty revenue increased by 36.5 percent as the company continues to focus its restaurant business unit strategy on franchising the Pokimoto concept. As of today, the company has over 45 additional Pokimoto franchise agreements sold, but not yet open. The increase in franchise royalties is due to an increase in PokeMoto franchisees and a closure of 1 MuscleMaker Girl franchise.

Speaker 3

Overall, our Q1 non GAAP adjusted EBITDA was $2,400,000 In 2023, compared to a $1,500,000 non GAAP adjusted EBITDA loss in the Q1 of 2022. The $3,900,000 increase is primarily due to the net income generated by Sadat as we continue to execute against our new business plan. Our Sadat subsidiary generated a net income of $4,300,000 while our MMI Restaurant brands generated a net loss of $406,000 for the Q1. Adjusted EBITDA excludes non cash charges required under GAAP to account for the issuance of shares to Agia and the gain related to the issuance of these shares, which we feel is an intelligent and accretive investment in the strategic future of our company. The issuance of the common shares to Akia for the stock based consulting agreement was the most significant change in our in the Q1 of 2023 compared to the same period in 2022.

Speaker 3

The stock based consulting expense of $3,400,000 For the quarter ended March 31, 2023, is a result of common stock to be issued as consulting fee to Agia for the Sadat net income performance. Based on the servicing agreement with Akia, the stock based consulting fees are calculated at approximately 80% of the net income generated by As of March 31, 2023, we had a cash balance of $6,400,000 and a working capital surplus of $6,400,000 The cash decrease in the Q1 of 2023 Was due primarily to Sadat Offering Terms on the commodity trade transactions to generate higher margin on these trades. In addition, the company deployed capital into smaller such trades, which tend to generate higher margins. The company has over $4,000,000 in receivables that are due in less than 60 days. With that, I'd like to turn the call back over to Michael Roper.

Speaker 2

Thanks for the financial review, Jennifer. We're excited to report that our new diversification strategy and company pivot towards a diversified global food organization is starting to bear fruit. We firmly believe that adding our Sadat subsidiary has created significant value for the company. We are very pleased with Sadat's Performance to date and our diversification strategy into the agri commodity space. We've spoken a lot about Sadat and its impact on the overall company.

Speaker 2

Let me say a few words about our restaurant unit. As we've mentioned previously, we are focusing our strategy on growing the PokeMoto franchise business, while also optimizing our other restaurant Concepts, which could include closing underperforming locations or investigating other strategic alternatives. We currently have over 40 5 PokeMoto franchise agreements sold, but not yet open and also have recently launched a new dual concept unit that combines our PokeMoto brand With our Muscle Maker Grill concept under the same roof. This leverages our existing infrastructure, reducing our overall costs while offering a wide variety of options for consumers, while potentially turning a negative impact location into a positive impact location. More to come on these types of initiatives.

Speaker 2

Investors may notice that our public company brand profile and investor communications have started to shift this quarter and will continue in the current quarter to better The growth story around Sanat and focus on performance from that business unit. We believe there is an ability to become more vertically integrated with The goal of generating higher contribution margins and further diversification. These are opportunities we'll explore as we move forward. It should be noted that the agri commodity business is slightly seasonal during the U. S.

Speaker 2

Winter months, so our last two quarters are a good indication of baselines for us to grow upon. Investors may also notice a growing disparity in the operating results between the two business units. However, management is committed to focusing our resources on the path that will create the most value for shareholders moving forward. In summary, we're extremely pleased with MMI's performance this quarter, fueled by Sadat and our new diversification strategy. We're confident in our strategy and look forward to continuing growth in the months years to come.

Speaker 2

With that, let's open the call to questions from the analysts.

Operator

We'll take our first question from Aaron Grey with Alliance Global Partners. Erin, if you go ahead, please.

Speaker 4

Can you guys hear me okay?

Operator

We can, yes.

Speaker 4

All right, great. Good evening and thank you for the question. So first question for me, just nice to see the revenue for the Q4 Sadat, just on the margin side, so came in a bit lower 2.2% versus the 3%. Could you offer a little bit more color in terms of And maybe the reasoning for that margin coming in a bit and also Jennifer, I think you spoke to potentially giving some terms to help improve that margin. So Further color in terms of that impact that it might have had would be helpful.

Speaker 4

Thanks.

Speaker 2

Okay. Hey, Aaron, it's Mike. How are you doing?

Speaker 5

Good, good.

Speaker 2

So, yes, so a couple of things that are in there. So first off, why did the margin come in a little bit lighter than it did In the previous quarter, one thing to consider, it's more than just the margins on the given trades. So the trades themselves came Within the industry standards and kind of what we expected, just remember that the net income is also taking into effect The overhead costs of MMI that are attributable directly to Sadat, right, so like increased audit fees and all that kind of stuff kind of play into this Q1 as well as long as some of those costs that Agia has as we build that team out. So that's why you see some of the margins A little bit slightly lower because we had some of those higher costs in those areas. And then do you have something, Jennifer?

Speaker 3

Yes. When it comes The way to increase margins, it's we're now offering terms to some of our buyers where we may do it where the profit is extended 60 to 90 day terms just to give us any additional edge we can have on margins.

Speaker 4

Okay. Yes, just to follow-up on that quickly. If I'm just thinking about just straight margin just off of the Sadat revenue and commodity So would that have been you're saying that would have also included some corporate expense within that?

Speaker 3

So if you look at the commodity operating There's labor in there and then there's other what's called other commodity operating expenses. Those are To pay the traders, to pay the office expense, general operational expenses to get those trades done is in that line.

Speaker 4

Okay. Thanks for that. And then on the working capital needs kind of going forward, right? So it sounds like these terms you're offering kind of changed up what we had seen in 4Q with the business. So how do you think about working capital needs as you potentially offer more terms To your customers.

Speaker 2

Yes. Look, I always view all this as really a cash flow scenario, right? And so one way to look at it is, We've got plenty of cash on hand to take care of all of our operational needs here for the short term. And then we also have, as We indicated a little over $4,000,000 coming in here in the next well, it was 60 days, a little bit less than that now, right, as each day moves on. We started receiving some of that capital today as a matter of fact, right, in some of those deposits.

Speaker 2

So we're not really too concerned about needing some of that to execute our business plan at this stage.

Speaker 4

Okay, great. Thanks for that help. That's helpful. On the top line, you mentioned some seasonality in the winter months. Give off some further color if you could in terms of what you expect now going to the summer.

Speaker 4

So it sounds like that will be a benefit. And then if you could provide some more color just in terms of The clientele, how diversified you are and how you might be looking to increase that diversibility, I think that'd be helpful to get better color on the Synapt business. Thanks.

Speaker 2

Okay. Yes. So a couple of things in there and I'll let Jennifer talk about some of the clientele and the products and things with some stats in there. But when you start thinking about the revenue, just in general, there is a seasonality component to this, right? And that's really where your clientele is and the Commodities you're trading whether you're in the Northern Hemisphere or the Southern Hemisphere, all kinds of different factors that play in there.

Speaker 2

In the beginning of the year, you also have Which has affected us at the beginning of this quarter. You also have like New Year's, right, that in different parts of the world, as you know, it extends a lot longer than it is just here in the United States. And so All that kind of plays into the seasonality role that's there. One thing to kind of look at and that I'd like to really kind of view this as we've had 5 consecutive months Now since really since inception that we've had $50 plus 1,000,000 in revenue and some months going as high as 90,000,000 Right. And so we think that's a pretty good range to think about as we move forward, as kind of our maintain area, if you want to say, right.

Speaker 2

But look, we're trying to expand this Right and expand the revenue. And some of the ways to do that is through diversifying our operations and we can do that by adding and I like to call it horizontal Integration, you can do that by adding additional trade lines or traders, different clientele that they have across different countries and product types. And so You can start to level out, if you want to say, the seasonality factors as you move forward, as you increase the different commodities in different areas in the world that you're trading So really it's kind of like if I went and started trading in both hemispheres, I'd be able to reduce some of that seasonality. If we expanded our commodities into things like pulses and peas or different commodities that we aren't trading today, you can start Leveling out that fluctuation, I guess, is one way to view it. Do you want to talk about the Yes.

Speaker 3

Absolutely. So if you take We'll take quarter 1 for example. We completed 19 different trade transactions and of those transactions that consisted of 9 different products From 4 different suppliers and we sold those to 15 different buyers throughout 11 countries. Do that, That's what I'm asking. Sorry.

Speaker 3

But because of that, as we are able to expand and we're able to use different buyers, different products, We have different suppliers in more countries, then that seasonality or that focus, it just expands and it gives you more a little bit more leverage on that. In this last quarter, we also shipped multiple types of grains, both human and for animal consumption. The majority focused on wheat, Corn, soybeans, we either get some palm oils and rice. And so we only had a few different areas that we focused on in Q1. And so as we

Speaker 2

And I do think it's important to mention that the Agia team that we're working with, they've got a huge Level of experience and knowledge that they're bringing to this equation. And that's allowed us to get over the hump of some of these initial Startup inefficiencies, if you want to say, and allow us to hit the ground running and running pretty hard. And so it's really good that we've got that experience that's out there and the know how. And it also allows us to grow, right? They've got more experience in different commodity areas, for example.

Speaker 2

They've got more experience in some of the vertical integration stuff of farming and shipping and All the other things in between, right. So as we expand this business and bring on these other revenue sources, they'll be able to expand right with us without having to have some of those inefficiencies when you start up these businesses. We are going to be bringing in some additional, I'll just say personnel. Really, it's more like traders and those traders come with their Clientele and their own sources of product. And so it's kind of like bringing their I'm using old fashioned term, their Rolodex, right?

Speaker 2

I don't know if everybody even knows what that is on the call, right? But They bring their list of contacts, their LinkedIn file, I guess now, right? And so you're able to start expanding your commodity trades and all that. We're taking a look at Some of these additional capabilities, specifically in like North America, probably the next area that we start to pull stuff in. So hope that answers your question, Aaron.

Speaker 4

No, that's helpful. Appreciate the detail and I'll go ahead and jump back in the queue.

Operator

Thanks, Aaron. Thanks, Michael. Thanks, Jennifer. We're going to take the next Question from Tom Kerr with Zacks Research. Tom, if you want to ask questions.

Speaker 4

Sounds good. Can you guys hear me?

Operator

We can. Yes. Thank you.

Speaker 5

All right. Just one quick follow-up on the Sadat business and other few, Pokamoto, but I just wanted to beat the dead horse again on the revenue line. You said that the $90,000,000 is a monthly base that you're trying to achieve, but there's still lumpiness. So does that be $270,000,000 a quarter, but it might be $200,000,000 1 quarter, it might be $350,000,000 But you're sticking to $90,000,000 as an average Monthly base, if I heard that right?

Speaker 2

Well, we don't like to really provide guidance on that per se, but just in the general discussions, I think it's safe to say that We've achieved at least $50,000,000 per month, right, since inception and we've had a couple of months as high as a little over the Right. So I know that's a pretty wide range and it can fluctuate like that depending on the quarter and the season that you're in. But somewhere in that range is what we're I think to have as a base and then we'll start growing off of that by adding all these different verticals into the equation.

Speaker 5

Okay. Just following up on that, so there's not an extreme lumpiness. There might be a little bit up and down, but it's not where you'd see. 210 last quarter, 150 next quarter, 350 in the 3rd quarter, or anything

Speaker 4

like that.

Speaker 2

I'm not sure I have enough Experience in history since we started this to really dictate how it looks for the rest of the year. But I think it's pretty safe Say you'll be in that range, right? And yes, it will be a little bit lumpy depending on the season, but we'll kind of wash that out as we kind of move forward.

Speaker 6

All right. That helps

Speaker 5

a little bit. Quickly on the PokeMoto, there's 45 that are Expected to be open, do you have a time frame on that is the first part question. How many will be open and operating by the end of the year? Or should you do that even by quarter? And then second part of that is any headwinds that in these openings, is inflation a problem, labor, real estate, Anything like that, that might slow down these openings.

Speaker 2

Okay. Yes, let me kind of go into that a little bit. So, PokeMoto is part of our restaurant division. As you guys know, we have MuscleMaker Grill Restaurants, PokeMoto Restaurants and SuperFit Foods. PokeMoto is what we're focusing on.

Speaker 2

That's all of our strategy and our growth on the restaurant As you mentioned, we've got right now today, we have roughly it's actually a little bit more than 45 locations or agreements that have been sold, But haven't been opened yet. As a matter of fact, we just sold 4 more locations here in the last couple of weeks. We sold a 3 pack in Houston about a week ago, Which adds to that market. And then we also sold our first franchise agreement out of Alabama in Mobile, I think it was, That we sold as well. So we're expanding into more states there.

Speaker 2

So a lot of growth that's happening in PokeMoto. There are fluctuations From when you sell a location to when it actually opens. And that is totally strictly dependent upon the individual franchisee and the real estate availability in their Some franchisees will already have a location lined up. They've already negotiated the lease. They're ready to go.

Speaker 2

So when they sign the franchise agreement, they're off and running and you can open that in 2 to 4 months, right? You get them through their training and ordering their equipment and they build out and they're up and running, right? Other franchisees will wait So start looking for real estate until they sign the agreement. Obviously, that will take a little bit longer. In those instances, on average, it's somewhere between 6 9 months they open.

Speaker 2

Could be sooner, could be later. Again, it all depends on the negotiations with landlords and availability of space that's there. For 2023, We are projecting based on what we know of franchisees who have locations or close to having locations, we're projecting to open up between now and the end of the year Somewhere between 5020 locations between now and the end of the year, we're pretty confident in those numbers. Could grow depending on how some of these landlords come in. Now you're also signing up franchisees along the way.

Speaker 2

So as those are opening, you're also going to refilling your pipeline, right? And so We'll continue to have a pipeline for openings as we move forward on this. And again, if somebody signs like the 3 pack in Houston, they're not going to open all 3 at the same time. They'll open them, they'll stagger them over a couple of years, right, or even sooner than that if they're comfortable. But usually, it's over a couple of years for that amount of stores.

Speaker 2

So you do have that that's in there. Now you asked about inflation and all that kind of stuff and headwinds. It's interesting. My experience in Franchising is you'll sell franchises when the economy is great, right? Because people will be like, okay, I'll buy a franchise, I can invest in a business.

Speaker 2

But you won't sell as many As you will when the economy glitches. And that sounds weird, okay, but when layoffs start in the economy, a lot of times people look So how do I create a job? I just got laid off somewhere. There's not a lot of hiring going on. I'm worried about what I'm going to do and they get angry.

Speaker 2

I'm never going to work for someone again. I'm going to do all this. And so A lot of times it actually starts shifting in the franchise sales. I know that sounds a little bit opposite of what you would think, but that's been my experience in the past. We're starting to see that a little bit now, okay.

Speaker 2

As the economy glitches, our leads are still coming in, but as layoffs are starting to occur, We are starting to see some acceleration in franchise signings over the last 30 to 45 days. That might be a glitch, a one off, I don't know, but that's been kind of my experience as you move forward. You do have some concern out there from franchisees in general. As the interest rates go up, a lot of these guys will finance the build out, Right. And so as interest rate goes up, then obviously affects their costs, right, to build out a location.

Speaker 2

So That does become a little bit problematic as interest rates get too high. So you're always going across this. Now I think you did you also ask me, Tom, about just In general, how like inflation and food costs and all that is facing on it or am I reading into that too much?

Speaker 5

That's just the general input into whether it's Affecting these openings that have already been signed or

Speaker 7

is it

Speaker 5

just all part of it, Duane?

Speaker 2

Yes, I don't think it's really I mean, like I said, we've already got 15 to 20 that we got pretty much on the books, we're really confident in those. Those are people that have either most of them have already got their funding. They're already in some kind of a process with opening up Construction or finalizing off their negotiations with the landlords. So we're pretty confident in those for coming across. And so we haven't seen Really anything slowing that down per se, but again, if interest rates go through the roof or whatever, then that could be a problem, but not anticipating that happening right now.

Speaker 5

Great. That's helpful. I'll get back in the queue.

Operator

Thank you, Tom. Thanks, Mike. We'll go ahead and take the Question from Rob Goldman with Goldman Small Cap Research.

Speaker 6

Hello. Can you hear me?

Speaker 7

Yes.

Speaker 6

Great. Thank you. Great job on the quarter. A couple of questions on Sadat and one on MMI. With respect to Sadat during the quarter, Was there any notable concentration of business in specific food or commodity or geography?

Speaker 6

I know Jennifer went through some of those numbers, but I didn't know if there was Have you concentration in one particular segment there?

Speaker 3

So when you actually look at that, like Like I said, we were in 11 different countries and stuff like that. It wasn't there wasn't 2 countries where all of it went to. It was pretty Evenly spread amongst the different countries that we worked in and same with the suppliers and the buyers. There weren't just it wasn't one buyer or one supplier that made up the bulk of it. It was pretty spread evenly between those.

Speaker 6

Okay. So perhaps then given this albeit Short experience, the ability to reduce some of the variability in revenue Might be then some of these initiatives that Michael mentioned earlier, whether it be the product side or geography, I guess, Kind of making that flat, so to speak, what would be a combination of both or are you leaning more towards growth in a product line first And geography second or is it just too early to give us that information?

Speaker 3

I think it's actually going to be a combination. Looking to expand, when you expand the traders and you add traders, those are adding different commodities, different areas, different Countries is adding all of it. And so when picking up new products that we are buying and selling and going into new geographical areas, I think that combined will actually level it out. Did I answer your question?

Speaker 6

Yes. And then on the legacy business, What type of metrics does Grille plan to use for some of the combination Muscle Maker Grill, PokeMoto locations to be considered a success. And is there a number that you have in mind that you plan to open this year and next year?

Speaker 2

Yes. So let me jump in here. The I guess the way to look at it, the way I look at these dual concepts, right, and just serving us on the same page, what this means is we take an existing MuscleMaker Grill restaurant, Like we just did this in Fort Sill, in Lawton, Oklahoma. It was a Muscle Maker Grill restaurant. And so then we add a PokeMoto to it, Right.

Speaker 2

So it's 2 restaurants running under the same roof. You get to leverage the same manager, you get to leverage the same Facilities like freezers and coolers and all that kind of stuff. So, you get not a lot of the product per se a little bit, but you get to leverage those type of things, right, which It gives you better efficiencies and helps reduce your costs. So the first thing that we did, we just launched this first one about 30 to 45 days ago. And the numbers we're seeing are very impressive so far.

Speaker 2

I mean, we literally are, at this stage, probably 3 to 4 times the revenue at the PokeMoto than we had at the MuscleMaker, right, which is significant. We're looking at revenue. We are looking at overall blended food costs. Really, it's trying to take locations that are underperforming And get them to be performing, for lack of better definition, right? So that's our first measurement, right, to get these things at least to breakeven and then start making money afterwards.

Speaker 2

And so Again, only being 45 days into it. We don't have a whole lot of data behind it yet, but so far it looks pretty encouraging from that. So we'll be looking at the standard Revenue and food costs and labor costs and the bottom line on these. Then from you also asked about how many we're thinking of doing here. We have our second one opening up here soon, if not this week, then next week.

Speaker 2

We're just literally waiting for our final inspection basically and it shifts around A little bit, but in Chelsea, New York, right. So we'll have that in the Chelsea area for anybody that might be up there. And then we've got a couple other ones that we're contemplating on a couple other basis that we have locations. And so that will be kind of how we start addressing the legacy business. As we mentioned earlier, we're looking at each one of the different locations.

Speaker 2

We're trying to figure out if there's underperforming locations, can we close it Or what can we do to make it performing? And this is one of those ways of looking at it. So we're aggressively trying to analyze some of that legacy business.

Speaker 6

Okay, great. Thank you.

Operator

Perfect. Thank you, Rob. I guess we'll go ahead and move on to Mr. William Greg Ozzese, hopefully I pronounced that right, Mr. William, will take your questions now.

Operator

And you are with Greenridge global IC. Do you have any questions for us?

Speaker 7

Yes. Just on the On the restaurant business, what is the plan, I guess, near term and then after Agia effectively takes control of the Board of that business in general. You mentioned strategic alternatives, but is that something where you might sell all of them off or part of it or is that best in some way? What is their

Speaker 2

Yes. So I was having a little bit of trouble hearing you, but I think I got it. You're asking about what is the plan for the restaurant business Moving forward just in general. So the way to look at it, there's 3 segments that are in there. You've got Muscle Maker Grill, you've got Super Fit Foods and you have PokeMoto.

Speaker 2

PokeMoto is what we're focusing on. We're trying our strategy there is to grow PokeModels with franchising. And I keep mentioning franchising over and over again, because we are taking a look at Our legacy business when it comes to corporately owned and operated locations, in a lot of those instances, those are underperforming And some of them are old locations that have been around for a long time. And so we're taking a look at those to see whether or not we should close them. Or if not, if leases don't allow us to do that or it just doesn't make sense, because that is an issue to consider, Then we look at making it a dual location or even in some cases a complete conversion.

Speaker 2

So we're going through that from the MuscleMaker Grill locations 1 at a time trying to figure out how we can optimize those. Now we do talk about strategic alternatives or initiatives that are out there. And Look, we can take a look at that's really more of a longer term thing. Is there a way for us to eventually, if the business warrants it, to Spin off the restaurants or a portion of the restaurants. Again, we're still looking at all that stuff, but our immediate fix now is to sit there and try to get these locations Profitable and or if we can't, to close them down and cut some costs from that perspective.

Speaker 2

So we're taking a look to cut costs in that area, That side of the business allows us to focus on just on Fujimoto itself and then also the Sabot business.

Speaker 7

Okay. And then on the cash that's being generated now from Sadat, what is the plan for that cash? And do you guys foresee any need to go back to the market To raise more money?

Speaker 2

Yes. So right now, we're not going back to the markets to raise money. We don't need that. Today, we're able to execute our business plan. The cash that's being generated out of Sadat, what we're really doing is taking a look at it from a strategic That money is going to get reinvested in Sadat in one capacity or another.

Speaker 2

So we've got a share buyback program that we announced, so some of the cash can go towards that. We do want to be hiring in some additional trade personnel. As we mentioned earlier, that's kind of the horizontal integration of the business, right? As we add more of those trade They bring in their clients or their Rolodex, whatever it might be, for that to come in. So we take a look at that as well.

Speaker 3

We're also using Some of that money, that cash in there to give additional terms, to give ourselves a little bit of leeway so we can offer terms to our customers to kind of build our margin. And we're using the cash that way to reinvest in Sadat.

Speaker 2

Yes. Now when I do say we're not going back To raise capital or whatever, we are opportunistic, right. So as you look at the vertical integration stuff that's out there and some opportunities that could require You know us to maybe take on some debt or something like that to acquire some of these things. But again, we're analyzing all that stuff as we speak and It's a little bit early for us to talk through more than just that at this stage.

Speaker 7

Okay. And last question is, you mentioned adding the traders for SADAT. What how much how many traders do they have now? And then how many are you looking to add just to get a sense of how fast the revenue might grow?

Speaker 2

Yes. Well, I think a good way of looking at it is how many people are in Agia, because a lot of these guys aren't just pure traders, Right. They do other facets of the business as well and We

Speaker 3

have roughly 20 people on the Agia consulting team. They consist Traders, operational people.

Speaker 7

And is there any like number you're looking to add

Speaker 2

I don't think I have an exact number. And again, I'm oversimplifying by saying add the trader. So it's more than just one person. Sometimes you're making a partnership or an agreement with a trading company Whatever to do stuff. So it's a little bit of a gray area to answer, I guess, right, directly.

Speaker 2

So it's not one to 1, It's really more of looking at the different businesses that are out there to do it.

Speaker 7

Okay. All right. Thank you.

Operator

Thank you, William. And I think we have run out of time today. That's all the time we have. Let's Go ahead and wrap up the Q and A. Thank you everyone for your questions.

Operator

Mr. Roper, do you have any final comments?

Speaker 5

Yes. Look, just in

Speaker 2

closing, I do want to thank all of our shareholders and stakeholders for their support and supporting our initiatives that are out I know we've done a major pivot and there could be a lot of questions that are there and we're doing our best to get the narrative out there of exactly kind of what we're doing and we do feel that The message is getting better and people understanding kind of what's happening here on things. So I do appreciate the patience. And I do want to thank our employees for everything they do. I do think we've got an incredible team, not only at MMI, but also at AGEA who are working with us. We're working really well together.

Speaker 2

And between the 2 that really who deserve all the credit for our success so far and as part of being part of what we built and we're going to continue to build here and move forward. With that, I'd just like to thank everybody. And one last final thing, go Blackhawks. They got first in the draft and get you get Conor Bedard.

Operator

Wonderful. Thank you all for joining. We'll go ahead and conclude the call.

Speaker 2

Thank you.

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Earnings Conference Call
Sadot Group Q1 2023
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