Nathan Famous : September 2023 Shareholders Letter

To Our Shareholders

On November 2, 2023, we reported results for the second quarter of our 2024 fiscal year that ended September 24, 2023.

For the thirteen-week period ended September 24, 2023 ("second quarter fiscal 2024"):

• Revenues were $38,744,000 as compared to $37,497,000 during the thirteen weeks ended September 25, 2022;
• Income from operations was $9,104,000 as compared to $9,914,000 during the thirteen weeks ended September 25, 2022;
• Adjusted EBITDA1, a non-GAAP financial measure, was $9,774,000 as compared to $10,323,000 during the thirteen weeks ended September 25, 2022;
• Income before provision for income taxes was $7,864,000 as compared to $8,085,000 during the thirteen weeks ended September 25, 2022;
• Net income was $5,711,000 as compared to $5,958,000 during the thirteen weeks ended September 25, 2022; and
• Earnings per diluted share was $1.40 per share as compared to $1.46 per share during the thirteen weeks ended September 25, 2022.

For the twenty-six weeks ended September 24, 2023 ("fiscal 2024"):

• Revenues were $80,729,000 as compared to $77,217,000 during the twenty-six weeks ended September 25, 2022;
• Income from operations was $20,567,000 as compared to $21,694,000 during the twenty-six weeks ended September 25, 2022;
• Adjusted EBITDA1, a non-GAAP financial measure, was $21,810,000 as compared to $22,388,000 during the twenty-six weeks ended September 25, 2022;
• Income before provision for income taxes was $17,996,000 as compared to $17,965,000 during the twenty-six weeks ended September 25, 2022;
• Net income was $13,099,000 as compared to $13,095,000 during the twenty-six weeks ended September 25, 2022; and
• Earnings per diluted share was $3.20 per share which was comparable to $3.20 per share during the twenty-six weeks ended September 25, 2022.

License royalties increased to $19,997,000 during the twenty-six weeks ended September 24, 2023, ("fiscal 2024 period"), as compared to $19,727,000 during the twenty-six weeks ended September 25, 2022. During the fiscal 2024 period, royalties earned under the retail agreement, including the foodservice program, with Smithfield Foods, Inc., increased 1% to $18,303,000 as compared to $18,105,000 of royalties earned during the twenty-six weeks ended September 25, 2022.

In the Branded Product Program, which features the sale of Nathan's hot dogs to the foodservice industry, sales increased by $3,321,000 to $48,522,000 during the fiscal 2024 period as compared to $45,201,000 during the twenty-six weeks ended September 25, 2022. The volume of hot dogs sold by the Company increased by 0.4%. Our average selling price, which is partially correlated to the beef markets, increased by approximately 7% compared to the prior year period. Income from operations decreased by $1,204,000 to $3,348,000 during the fiscal 2024 period as compared to $4,552,000 for the twenty-six weeks ended September 25, 2022, due to a 12% increase in the cost of beef and beef trimmings.

1 EBITDA and Adjusted EBITDA are non-GAAP financial measures. Please see the definitions of EBITDA and Adjusted EBITDA on page 2 of this letter and the reconciliation of EBITDA and Adjusted EBITDA to net income in the table at the end of this release.

Sales from Company-owned restaurants were $8,851,000 during the fiscal 2024 period as compared to $8,994,000 during the twenty-six weeks ended September 25, 2022. Sales were impacted by reduced traffic at our Coney Island locations as a result of unfavorable weather conditions during the summer season.

Revenues from franchise operations were $2,366,000 during the fiscal 2024 period as compared to $2,292,000 during the twenty-six weeks ended September 25, 2022. Total royalties were $2,128,000 during the fiscal 2024 period as compared to $1,956,000 during the twenty-six weeks ended September 25, 2022. The increase in franchise royalties during the fiscal 2024 period was primarily due to an increase in franchise restaurant sales of $1,892,000 to $36,433,000 as compared to $34,541,000 during the twenty-six weeks ended September 25, 2022.2 Total franchise fee income, including cancellation fees, was $238,000 during the fiscal 2024 period as compared to $336,000 during the twenty-six weeks ended September 25, 2022. Fourteen franchised locations opened during the fiscal 2024 period.

During the fiscal 2024 period, we recorded Advertising Fund revenue of $993,000 as compared to $1,003,000 during the twenty-six weeks ended September 25, 2022.

During the fiscal 2024 period, the Board of Directors declared and paid two quarterly cash dividends of $0.50 per share totaling $4,080,000.

Effective November 2, 2023, the Board of Directors declared its quarterly cash dividend of $0.50 per share payable on December 1, 2023 to shareholders of record at the close of business on November 20, 2023.

Certain Non-GAAP Financial Information:

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company is disclosing EBITDA, a non-GAAP financial measure which is defined as net income, excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company is also disclosing Adjusted EBITDA, a non-GAAP financial measure which is defined as EBITDA, excluding (i) the gain on disposal of property and equipment and (ii) share-based compensation that the Company believes will impact the comparability of its results of operations.

The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.

EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP. Please see the table at the end of this press release for a reconciliation of EBITDA and Adjusted EBITDA to net income.

2 Franchise restaurant sales are not revenues of the Company and are not included in the Company's Consolidated Financial Statements.

About Nathan's Famous

Nathan's is a Russell 2000 Company that currently distributes its products in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and nineteen foreign countries through its restaurant system, foodservice sales programs and product licensing activities. For additional information about Nathan's, please visit our website at www.nathansfamous.com.

Sincerely,

Eric Gatoff

Chief Executive Officer

Nathan's Famous, Inc. and Subsidiaries

(unaudited)

			Thirteen weeks ended				Twenty-six weeks ended
			Sept. 24, 2023			Sept. 25, 2022			Sept. 24, 2023			Sept. 25, 2022
Financial Highlights
Total revenues	$	38,744,000			$	37,497,000			$	80,729,000	$	77,217,000
Income from operations (a)	$	9,104,000			$	9,914,000			$	20,567,000	$	21,694,000
Net income	$	5,711,000			$	5,958,000			$	13,099,000	$	13,095,000
Income per share:
Basic	$	1.40			$	1.46			$	3.21		$	3.20
Diluted	$	1.40			$	1.46			$	3.20		$	3.20
Weighted-average shares used in
computing income per share:
Basic			4,080,000					4,083,000				4,080,000				4,098,000
Diluted			4,092,000					4,083,000				4,090,000				4,098,000
Select Segment Information
Revenues
Branded product program	$	23,352,000			$	22,030,000			$	48,522,000		$	45,201,000
Product licensing			8,339,000						8,413,000						19,997,000						19,727,000
Restaurant operations			6,484,000						6,470,000						11,217,000						11,286,000
Corporate (b)			569,000						584,000						993,000						1,003,000
Total revenues	$	38,744,000			$	37,497,000			$	80,729,000		$	77,217,000
Income from operations (c)
Branded product program	$	1,387,000			$	2,485,000			$	3,348,000		$	4,552,000
Product licensing			8,293,000						8,367,000						19,906,000						19,636,000
Restaurant operations			1,639,000						1,476,000					2,308,000						2,117,000
Corporate (d)			(2,215,000)				(2,414,000)				(4,995,000)				(4,611,000)
Income from operations (c)	$	9,104,000			$	9,914,000			$	20,567,000			$	21,694,000

1. Excludes interest expense, interest income, and other income, net.
2. Represents Advertising Fund revenue.
3. Excludes interest expense, interest income, and other income, net which are managed centrally at the corporate level, and, accordingly, such items are not presented by segment since they are excluded from the measure of profitability reviewed by the Chief Operating Decision Maker.
4. Consists principally of administrative expenses not allocated to the operating segments such as executive management, finance, information technology, legal, insurance, corporate office costs, incentive compensation, compliance costs and the operating results of the Advertising Fund.

Nathan's Famous, Inc. and Subsidiaries

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

		Thirteen weeks ended			Twenty-six weeks ended
	Sept. 24, 2023	Sept. 25, 2022	Sept. 24, 2023		Sept. 25, 2022
		(unaudited)						(unaudited)
EBITDA
Net income	$	5,711,000		$	5,958,000	$		13,099,000		$	13,095,000
Interest expense		1,413,000			1,943,000			2,827,000				3,887,000
Provision for income taxes		2,153,000			2,127,000			4,897,000				4,870,000
Depreciation and amortization		315,000			301,000			628,000				534,000
EBITDA	$	9,592,000		$	10,329,000	$		21,451,000			$	22,386,000
Adjusted EBITDA
EBITDA	$	9,592,000	$	10,329,000	$		21,451,000			$	22,386,000
Gain on disposal or property and
equipment		-			(14,000)			-			(14,000)
Share-based compensation		182,000			8,000			359,000				16,000
Adjusted EBITDA	$	9,774,000		$	10,323,000	$		21,810,000		$	22,388,000
	Nathan's Famous, Inc. and Subsidiaries
		Summary Balance Sheet Data
							Sept. 24, 2023	March 26, 2023
Assets									Unaudited
Current assets							$		54,507,000		$	47,361,000
Property and equipment, net of
accumulated depreciation									2,949,000				3,321,000
Operating lease assets									6,638,000			6,421,000
Goodwill and intangible assets									877,000				964,000
Deferred income taxes									467,000				375,000
Other assets									154,000				168,000
Total assets							$		65,592,000		$	58,610,000
Liabilities and Stockholders' Deficit
Current liabilities							$		14,460,000		$		16,709,000
Long-term debt, net of unamortized debt
issuance costs									79,232,000				79,048,000
Long-term operating lease liabilities									5,408,000				5,406,000
Other liabilities									783,000				737,000
Deferred franchise fees									1,080,000				1,272,000
Stockholders' deficit									(35,371,000)		(44,562,000)
Total liabilities and stockholders' deficit							$ 65,592,000	$	58,610,000