RRGB - Earnings call transcript Q3 2021 | Red Robin Gourmet Burgers, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers, Incorporated Third Quarter 2021 Earnings Call. Please note that today’s call is being recorded.

During today’s conference call, management will be making forward-looking statements about the company’s business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management’s beliefs and predictions as of today, and therefore are subject to risks and uncertainties as described in the Safe Harbor discussion found in the company’s SEC filings.

During today’s conference call, management will also discuss non-GAAP financial measures. that not are accordance alternative intended the operating are accounting generally measure measures company’s but useful. principles, to performance non-GAAP prepared with in accepted of These be may illustrate an reconciliation GAAP can comparable the most earnings in measures financial to be measures A the of directly the found release. non-GAAP at posted its has XXXX company third quarter earnings ir.redrobin.com. release The fiscal on its website

Robin’s turn CEO, like I to the call to would Murphy. Paul Red Now, over

Paul Murphy

joined in am Lynn being review with my Hello Chief us Officer, Schweinfurth, opening everyone, and you Financial I our thank our for today. third detail remarks. by who will quarter results after

that begin our long-term success. position me business sales on us most recent our trends making before initiatives and Let progress will with an strategic update discussion for providing the our are we

softer than challenges. continued and expected we Delta the due staffing COVID-XX the spread sales Although, were of variant to

the in percentage period impact trends of a opportunity to for X the XXXX rest our the We comparable a the restaurant are the seeing of the We growth XXXX. this fourth are of optimistic continuation inclusive We growth fiscal X the quarter. to storms there’s first in quarter, to negative Halloween in and even more of last we experienced about compared of West positive momentum X% including on shift. quarter trajectory versus the that with Coast period X% sales the revenue point believe upside through third of

the As headwinds industry. staffing we that our face address

to comp member exclusions impact a due seating and hours team staffing that XXXX. to sales to challenges X.X% reduced estimate and in we compared capacity QX, our quarterly During resulted limited

prioritizing the the our sales. guest and impacts and short-term for a and prioritize retention brand. a that the our team future reduced seating to supporting critical satisfaction success hours most considerations We decision for our workload quality are two While members experience capacity believe of

levels with restaurant the quarter XX% are and each needed. that or XXXX. is quartile staffed, one staffing a members each our trained well the And above which priority, ensuring optimally effectively the to for and executing Importantly, why we sales managed, we is below are ended one top restaurant of for retained. number are levels our Staffing restaurants is team that at plan prescriptive committed

also are talent our our pool. General for removing policies training obstacles We programs our wage increasing Managers and and improving

Turning supply now chain. to

meet standards. the through product continue are improvement we our As entered in availability manage and to fourth we’ve the additional quarter, needs we of quality product our actively high substitutes that suppliers seeing approved and

also are season. heading supplies to possible additional shortages where We ordering avoid into holiday the

Finally, including we are continue for position and XXXX, our proactively of securing well the suppliers our ourselves rollout Donatos. to contracts equipment to managing

to take accelerate like during we’ll QX how future Donatos QX. Beginning I’d to XX provide we with Pizza, in our strategy growth. an steps continue and business complete and update Now, to another we on added our XX locations approximately

increase in system-wide generated an at progress continued restaurants. XXX in which in marketing bring will Donatos approximately Donatos support $X.X restaurants. Overall, the rolling was aided quarter, million total our sales Our to of out by certain

quarter to compared Donatos of growth XXXX. Our full restaurant comparable for offered restaurants and experienced revenue experience had disruptions not chain X.X% the supply did

brand first revenue prior to in that growth comparable continuing Company-owned incremental of XXXX pizza year generate the restaurants pleased annual completed affinity we believe supply the of $XX Donatos the company X.X% Donatos restaurants $XX are XXXX. chain We profitability in with Recall by been that more compared have will with up XXXX in impacts. than million end more in sales serving sales operations restaurant grow of grows, as restaurants quarter, Pizza than beyond that of to third XXX XXXX without million and to are mature

XX.X%, our of dining of which believe mix due for the well-positioned The to value sales that off-premise offerings. an Red is take to of critical that sustained sales XX%. increase this have building we levels to to accuracy the and why maintaining experience Robin impacting than and without which elevation six occasions, of off-premise is habits proposition improve represents approximately pre-pandemic to we enhance advantage modifications We off-premises doubled quarter consecutive shift customer menu channel, orders off-premises continue space to our we in efficiency toward is more QX, During business. the

track reconfiguration these efforts to XXXX. complete in on are We

advancing have loyalty seamless experience, leveraged digital an by new digital the XXXX time mark to website led QX. and strategy we personalized capabilities an purchase million segmentation with our reach to we new our iOS ecosystem engagement high levels In XX the campaign new Android, through powered capabilities. our important our punch date, time. with a launch apps, are all the We will surpassing and our a for progress creating making loyalty loyalty enhance In new a in history. proven milestone guest. loyalty loyalty player guests space for quarter, platform significant to new more and This brand restaurant also of first connect the mobile last member new platform messaging our upcoming based for guest of and in two QX, communication the meaningfully upon their integrated In

high to in our by consumer new launch a are also and online the relevant traffic meaningful early and an compared integrated awareness to continue the expected and ordering initial in generate the QX to drove to transition for following XXXX suggested come. be pleased more There us experience check. we our our offering to ongoing allows which and continue while website learnings. designed digital in new to target years will superior I messaging the upsell leverage segments. digital strategic incremental and Digital guest traffic years innovations guest capabilities. order months improvements and Our both solve begin launch of geography trial the be current specific experience experience conversion marketing, drive drive is with incremental to and Marketing with app and frequency, QX, marketing higher to to improved

more relevant are of messaging with cost the items. menu digital. will reaching key efficient fourth messaging marketing bulk investment and limited feature consumers In quarter, We A is also of we our in effective. more offer the time our remain that nimble our with marketing is new

X on Our guests offer outperformed received sticks QX number In have the new lovers our outperforming permanent limited appetizer which the menu. one while on lineup earned our so cheese was our a cheese become is Burger, time off Fondue that the new limited Bacon Scorpion Burger, to expectations sales Mozzarella selling well start. a the It which offer burger, time Cheesy our features more place by great than by QX, is menu. expectations times, are

brands of incremental are another off-premise virtual yet digital sales. and Our driver

We platforms. have three differentiated all across available brands delivery system-wide and

business. generated in to highly are our $X.X million During which incremental sales, they QX,

continue We to off-premise kitchen execution that in operational with be pleased was we highlight In restaurant domain are brands our design opening layout a distinctive, QX, while closed enhancements curbside volume an to dine-in, our capacity prototype due that efficiency. utilizes to high optimized products, that XXXX. and new restaurant without relocated enhances imminent configuration improve and with high This adding quality maximizing complexity. these kitchen fully

a new Red in that create modest pipeline connecting our XXXX. growth are year, fun leading open real for guests. will be we choice this for and estate family, as we’ll memorable when beginning enhanced viewed brand another based prototype We know upon friends, by Next restaurant promise resuming developing upholding moments design a and Robin

underway, challenges which certainly an other we and macroeconomic the expand in guest market hindered variant to share us While provide and build Delta with short-term, the recovery strategic momentum several opportunity initiatives both our frequency. our have

quarter review Lynn call over Let third turn me results. our now the to to

Lynn Schweinfurth

Paul. you, Thank

our QX incremental certainly and variant channels continued sales improving I together meaningful future. supply shareholder impacted Delta This execution confident will value. strategy our our our and is were While results dine-in am trajectory, sales long-term of and business staffing in drive industry off-premises chain dedicated the challenges, by because

results. rooms quarter capacities sales at quarter our the total sales X.X% primarily at XX%, XX.X% operating comparable third The to the increasing in was by comparable of compared than quarter trajectory of the consecutive mix increase XXXX XX.X% more respectively. our double up to was levels revenue in driven with dining restaurant and Turning restaurant quarter. revenues XXXX that delivered third XXXX third food approximately and off-premises and sixth of XX.X% sales to beverage through improved quarter comprising of pre-pandemic XX.X% We compared a

dollars are sales able third Importantly, off-premises same million. XXXX approximately as level we in quarter have retain XXXX been to the of $XX

pursue revolving and our the $XX cash of capacity in million manage our $XX.X our million. end million, XX.X% the We our and used a a while Year-to-date, sales, over flow have and on the net available of intend to represented year. operating includes effectively $XX.X to of $XX bottom off-premises flexibility activities in the third-party second $XX.X quarters to-go the to that credit XXXX, down in Robin line cash was facility. quarter million of by forward. to back balance used to provided We represented profitable to strategic and borrowing catering approximately generate million, of line the the As million impact growth while to we investments was will of total under initiatives sales our revolving activities our equivalents cash cash delivery delevering waiting was ended $XX including X.X%. intentionally line cash reduction financing of debt Delivery X.X% activities percentage maintaining investing liquidity dedicate while credit sheet term half which represented capacity credit, paid cash continue free with of amendment several next Red represented and XXXX discretionary Since going pursuant XX.X%,

XX.X% specifics partially in average check. by third guest resulted XXXX restaurant from in The X.X% mix, traffic offset the XX.X% pricing of to increase higher discounts. XX.X%, an revenues the a in guest and from quarter. average X.X% some a QX X.X% menu comparable and increase increased increase guest decrease increase driven to in turning an Now increase related fiscal in by check

restaurants. to restaurants basis sales occupancy and of points, and outsourced other XX operating Restaurant to Total by prior due ago, costs total compared $XX increased $X.X one X.X% the revenues mix, unprofitable Other at by higher offset quarter a decreased overtime capacities company rebates, decreased operating janitorial by the closures and $XXX.X increased by leverage COVID-XX leverage, profit sales favorable points by inflation. increased training Third in driven increased and maintenance due lease waste pandemic. following. management costs including operating restaurant decreased shifts, level sales was XX primarily revenue staffing menu from partially janitorial driven staffing primarily mix partially restructured driven costs of year favorable mix percentage rates, and up million by same expenses. of lower percentage basis by by were driven company year hiring higher offset basis by and partially revenue transitory incurred temporarily primarily by supplies, and in by primarily increased expenses our offset by lapping commodity XX staffing driven to to in by payments. of lower revenues due lower XXXX, period restaurant by basis compared points, points, wage challenges, pay. hiring XX.X% compensation XX.X%, And bonuses, decreased improvement pricing. million, and time sold XXX costs, and pricing, by costs costs XXXX. to QX sales utilities million of primarily $XX.X driven lower primarily by Cost and an to counts, to off-premises Labor decreased challenges million, and primarily a goods costs operating XXXX, points, guest as Restaurant the X.X and impacted due costs labor

the fourth but the said beginning pricing additional I As the expected for quarter X.X% since in pricing earlier, taken X.X% third year. price effective was with we have of increase X.X% effective at an quarter, full the of

of an in professional $XX.X we believe additional beyond costs Given are have take year experiencing, $X.X extending General have retention price the $XX.X and sales inflationary price reductions modest million, costs mitigate prior including million lagged million, pressures our line wage training digital increased At $XX.X million XXX room hiring and revenue the to operating driven and in services increased General wage off-premises was fiscal that hiring, commodity and points front to and increase quarter. fees in costs were $XX.X The hour higher that supplies costs XXXX. rates due decrease quarter, emphasis historical mix. Selling lower percentage XXXX an Restaurant volumes were the costs been travel we relatively both was janitorial hourly and by XXXX, by mix, level were earlier. by of end driven in delivery XXXX, expenses as administrative costs Paul third of and million, a of on and XXXX the merit administrative and increases prior profit versus of partially spent. $X.X of basis lower third-party house higher the decrease the restaurant than higher mid-single-digits a we that media ongoing increases technology temporary industry, third with primarily versus versus in year increases expenses. or offset to versus salary lapping the our XXXX due in million. addressed increase were to and driven by

These closures, included team sick costs, team pandemic. million other we quarter, restaurant contingencies. including $X.X purchasing $X.X and guests of members and $X.X members to protective our recognized related restaurant equipment COVID-XX related COVID-XX for the million our personal emergency million, During related triggered the million $X.X restaurant providing to primarily litigation for to and charges pay charges by

and strategy. were follows: XXXX letters to selling credit for Third outstanding implement of Delta November in and million Guidance $XXX is million was end, $X.X commodity company credit as amended and QX million, investment and million to of QX anticipates costs debt and administrative fourth to uncertainty XXX XXXX. restaurants including flexibility million, continued third adjusted capital; facility quarter guest balance expansion adjusted approximately facility in general $X.XX. refinancing share in our adjusted $X.X for was response capital loss The restaurants XXXX quarter in solutions Donatos’ industry its million and around systems diluted XXXX fiscal of and company the its loss $XX.X compared EBITDA the EBITDA an continue loss was in well the quarter diluted Adjusted to was as as as on chain share adjusted labor supply COVID-XX million for $X.XX loss and operational XXXX. XX business outstanding enhancements. expenditures our $X.X $X.XX as diluted our million XXXX. compared QX current including quarter; $XX credit $XXX.X $XXX of additional to of Digital our off-premises share the of to inflation, and obtain X, approximately between technology Mid-single-digit in for In continued challenges variant, was $XX to million. restaurants, to maintaining the execution adjusted wage impact EBITDA At

Robin they Before our I’d significant Red conclude, the has despite generating, for I like COVID-XX business. thank to our results are entire brought to the team challenges

all Paul. in are value these meet back that, We of long-term With I our our will and confident the to turn over challenges ability to for deliver call stakeholders.

Paul Murphy

place. is increasing growth we Thank you, long-term which firmly can retention upon remains near-term, Lynn. drivers build guest create and foundation contending time, in same which the at But value focused long-term. The through experience, pressures. remain shareholder and quality In with the for continuing staffing drive inflationary are profitability the and we the underlying on we the delivering growth other highest and and costs will business recovery

goes and these for I am we why us behalf. I unusual for they the without blessed strategy better up for cannot a rather open with during I a our accomplishments for ahead. even that our brand. are think their to enough on now do They that, who days all Red questions. bullish on us that Robin. And have with let times passion great them call And are it have position enabling business team, certainly this great in execute us stepped saying thank

Operator

Our question. session. Jefferies. state [Operator Alex Instructions] with we’ll Thank time, you. Please from be at question comes Slagle your conducting our And first question-and-answer this

Alex Slagle

Hey, How doing thank you Paul, you. Lynn?

Lynn Schweinfurth

Alex. Hi,

Paul Murphy

are how Alex, Hey, you today?

Alex Slagle

Very good.

Paul Murphy

Good.

Alex Slagle

on It’s to acceleration specific like some wanted first the to is marketing. how growth like or trends versus granularity now brands us October. outperforming. I a in the dig into sales relative benchmarks initiatives give peer significant into kind much you same-store the and Donatos of September improved jump virtual and and staffing the actually Maybe,

coming where you the maybe see piece those acceleration bit, of kind little a out Just from.

Paul Murphy

I Alex, a combination. think Well, it’s

I our from a actually that improve staffing also seen improving came having has begun the think all open into and really us and that. of quarter third to slow staffing, certainly But down turnover fourth allowed from been that has that standpoint channels of to capacity we’ve has also we as business out quarter. the

QX, QX The the mark in as that into mentioned, – So LTOs that’s our with also. really staffing performing I and are be helping seem done extremely our obviously hitting customers. efforts to well hitting we’ve

digital level did direct – different with segmentation refined seems of of to in there. a work is the with messaging more marketing think digital and comfortability target the real I really in just the we The on the and that I more that in our think pivot XXXX, XXXX, segments marketplace.

be of big just it’s balance happy think and it three. we’re I staffing a to a part been that continues I So report But disingenuous better. of I didn’t that all has say get if would to that

why, that’s certainly felt move and those like quarter. could grow bullish were as results through we So we the fourth said we we

Alex Slagle

effective much terms about of want? guess, you get the I like and it. What’s the capacity start level? more third that do hiring of the now and the versus you you seem where does What just to look maybe confident on have to maybe Got how do staffing quarter that. in

Lynn Schweinfurth

better XXth our I earlier, or percentile than XXXX mentioned think, XX restaurants we of staffing. are our or at top

really has opportunity been our so And quarter. bottom the

say, running And is capacity and roughly our impact I’d has our that between XX%. XX% So capacity.

Alex Slagle

the like sounds you it added quarter. some it. final pricing. cadence, October. of PXX guess, was color or in at sales, around just on that same-store during the price some period the then third through point it the X.X% Maybe end I Got And on

Lynn Schweinfurth

took our of Yes. the the XX, price incremental at the correct, beginning quarter. of We beginning Period fourth at

X.X% all you So pricing that’ll above X.X% quarters third carried our we of together, quarter bring that the for Once us full quarter. a year. little the throughout blend to

I of the pricing of the quarter. beginning we’re note prior fourth specifically the think X.X% thing said other X.X%. at is And off rolling I the year of

Alex Slagle

quarter? think what the know, give exiting evolve. like And it us I quarter, to restaurant how what look going level for some fourth or to to that’s the the did margin Okay. how about sense was Just

Lynn Schweinfurth

sales did that we’ve Yes. dine-in the Well, I that seasonality will say follow some seen past. our in

Period standpoint. a lowest XX our seasonal on period is from So

the expected. down actually in So was quarter, but margins throughout went that something we

So happen. fourth will the as we go the opposite through quarter

So margins should get quarter. better through the fourth

Alex Slagle

Yes, higher pieces just trying the to it. Got the balancing then I and through on incremental the assume of commodities Maybe be you commodity that think there. and you’ll and labor. coming comment kind pricings visibility could on, with,

Lynn Schweinfurth

Yes. I wage – We inflation. mid-single think saw digit

from In little a fact, commodity we a digit X% in plus at at quarter. then X% And inflation for the mid-single it the wages standpoint, probably bit was about quarter. third about almost were third in

the Now taken to account favorable pricing. that we with year very started

year So through inflation of then mid-single inflation, we’ll it early from guidance year back increasing the part benefited and digit the see when year. full provided of we of the the the half

Alex Slagle

Great. it Thanks. pass I along.

Operator

Thank you.

next James. Please with Raymond Brian comes question. Our your from Vaccaro question state

Brian Vaccaro

average wanted cadence back maybe Yes. and I to good you evening. the weekly sales saw in that back and average and perhaps Thanks, how could or the quarter October the provide as through the October through a on appreciate But comparison we and weekly same-store level XXXX. you monthly dollars some where sales to trended I circle context sales were where on well. are set just AWS

Lynn Schweinfurth

Yes.

started – kind level quarter tended trended yes, We then and quarter. in started As PX the average with down me let and about XX,XXX I the or at sales get, in in at through that or weekly highest XX,XXX of ramp PXX. the XX,XXX to down seasonality mentioned

Brian Vaccaro

is Okay. where PXX ballpark in color is… And or any that then PXX it of XX on

Lynn Schweinfurth

as Yes. the It upward. starts starts to I bit to entire a earlier, go up, little quarter trend mentioned

Brian Vaccaro

expect on to tie you And outlook outlook? Thank for and be on that. – you make the year you for inflation page. what the commodity just to Okay. give your where commodity all specifically Could sure XQ into we’re That’s just helpful. just annual inflation us wage that same to

Lynn Schweinfurth

Sure. X%. should Fourth inflation quarter X% commodity And and should around then between inflation the XX%. be be quarter wage in fourth

Brian Vaccaro

allocate that OpEx by Okay. And cost labor temporary million, us that between help you can chance? the sort of other you the and noted $X.X

Lynn Schweinfurth

the Yes. I labor I – is did majority hit line item. the what would say

Brian Vaccaro

that, it the the Could up of given that, OpEx moved OpEx line, like walk million and saw line? guess other looked I kind million. sequentially pressures other takes through quite you that $X Okay. $X cost so, the it a of or $X.X puts that bit in million, you

Lynn Schweinfurth

Yes.

off-premise I higher think certainly were sales in there current the quarter.

sales. actually in So we up of terms that bit off-premise ramped little a

costs that that item. impacted that talked the recognized the So within line a while And was did the certainly labor fall we majority expenses about There in other we commission to the piece operating line then item. transitory expenses. of

some our awards. included So hiring that of

Brian Vaccaro

capacity last put And reduce facility the the – facility? down terms was Okay. then the to? that Or one amendment. credit for the reduction us me new remind it reduce to capacity, is that where you of did into Can on on in

Lynn Schweinfurth

revolving revolver a – to million. so loan revolver. $XXX term reduced The – The the a Yes. and there’s

Brian Vaccaro

right. Great. much. Thanks All very

Paul Murphy

Thanks, Brian.

Operator

that may you for great this you. conclude further all parties Thank at gentlemen, and today’s does are day. Thank and now call. no attending there Have time. a Ladies questions And disconnect.

Red Robin Gourmet Burgers (RRGB) 11 Nov 212021 Q3 Earnings call transcript