Biglari Holdings, Inc. :BH-US: Earnings Analysis: Q2, 2017 By the Numbers : August 9, 2017

Biglari Holdings, Inc. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Biglari Holdings, Inc. – Denny’s Corporation, Texas Roadhouse, Inc., Buffalo Wild Wings, Inc. and Diversified Restaurant Holdings, Inc. (DENN-US, TXRH-US, BWLD-US and SAUC-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 212.95 million, Net Earnings of USD 21.13 million.
  • Gross margins narrowed from 20.22% to 16.23% compared to the same period last year, operating (EBITDA) margins now 3.91% from 7.67%.
  • Year-on-year change in operating cash flow of -72.66% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 212.95 203.39 205.99 216.73 219.11
Revenue Growth (%YOY) -2.81 -2.33 -4.29 -0.78 -1.28
Earnings (mil) 21.13 -15.82 70.9 -60.13 37.52
Earnings Growth (%YOY) -43.69 -130.92 301.71 -746.69 144196.15
Net Margin (%) 9.92 -7.78 34.42 -27.74 17.12
EPS 17.17 -12.82 34.3 -49.48 30.57
Return on Equity (%) 4.02 -3.02 14.28 -12.2 7.38
Return on Assets (%) 7.93 -5.87 26.99 -22.79 13.75

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Market Share Versus Profits

Revenues History
Earnings History

BH-US‘s change in revenue this period compared to the same period last year of -2.81% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that BH-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.70% and earnings by 233.53% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 20.22% to 16.23%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 7.67% to 3.91% in this time frame. For comparison, gross margins were 16.70% and EBITDA margins were 4.96% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

BH-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to -1.97 days from 0.51 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

BH-US‘s change in operating cash flow of -72.66% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 5.23% to 1.36% and (2) one-time items that contributed to a decrease in pretax margins from 26.05% to 16.46%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Biglari Holdings, Inc.

Company Profile

Biglari Holdings Inc. operates as a holding company owning subsidiaries those are engaged in a number of diverse business activities, including media, property and casualty insurance, and restaurants. The company was founded by Sardar Biglari in 2008 and is headquartered in San Antonio, TX.

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