RRGB - Earnings call transcript Q1 2022 | Red Robin Gourmet Burgers, Inc.

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Operator

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers, Inc.

First Quarter 2022 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. to discussion uncertainties SEC found subject the described filings. are harbor safe in therefore, risks as and in And the company's

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

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

Paul Murphy

today. and review for our outlook our Chief business joined with you Lynn by Thank our on detail our results after initiatives. will with provide being general for ongoing in Financial update Hello. who quarter commentary I am along Officer, some an financial update I first us fiscal Schweinfurth,

are while at economy off-premise by levels. characterized Let the are by that sales This now dine-in to fully pleased more reopened. improving than sales we double begin expressing has dollars momentum hold how sales led me continuing is to positive our pre-pandemic

inflationary the supply and even such more true suited by moments demographic been momentum value about a We pent-up will multigenerational This all across and address as environment closely. line as the chain for Ukraine is despite Because in further continuing top has brand pressures and friends continuing monitor are But situation impacted economic is macroeconomic at global continue at well persist, are family consumer to connection experience this the point, an that and related to challenges. we to diverse our of we navigating headwinds. the affordable demand.

the shelf promotions conditions we as added proven that if on needed. product were at can record are have LTO value-oriented craveable change, to promotions be Our selling levels. And

staffing has are are members. maintained on we incremental profitability. and demand and management capitalize attracting best levels who have sales we and restaurant net dine-in team to for able dine-in also the focused on staffing, quality As opportunity increased, grow By improving our GM retaining

also advantage We rising and cost-effective is this staffing deploying targeted is record to and marketing support targeted are driving increased expenditure Most of of because digital engagement take levels. is levels. more it importantly,

As our highlighting value bottomless. well as part as we Whiskey experience, LTO for around and support, barbecue while new backyard of website message our begin our this to will ordering awareness build successful app River

local addition, markets offering. this we'll media product to around build In running be Donatos in new selected awareness

quarter rose XX.X% guests In fiscal sales challenges. lesser rose terms offset revenue pricing XXXX. higher growth to first fiscal and fifth to more restaurant mix X.X% comfortable partially period, date, revenue compared to as a rose driven compared by to by higher compared traffic Sales primarily out, extent, staffing XXXX comparable and to dining felt XXXX Comparable for our was X.X% trends XXXX and the preliminary compared QX restaurant XXXX. the to during of

that team throughput staffing number which experience, have prioritizes consistent we to restaurants our properly, satisfaction retention. few our guest X As leads supports staffed own in the and higher When members more quality a deliver emphasized It their quarters, satisfaction, are over a higher we past remains higher sales. also priority. and manner

and team progress retaining members. We are in making hiring

number above we to year. the more to reduce operating by to While have period, the our been it as where of levels we retention, close improved end be, requirements, to of have target. to fiscal last need we compare relates had are of to able that we If restaurants to we deliver par QX able our particularly levels ourselves in fifth hours of were staffing staffing early. individual XX% as we our And than QX staffing not in restaurant

And a Importantly, level. positions, of team staffing more the particularly addressing running and the staffing restaurant and par One, GM latter implementing three wages, The at we improvement restaurant to are key the are and remain expect to we members, is plan overall we are execution people regards and focused leadership, correlated flexibility. scheduling full tool accelerate connecting at our accommodating This to local as the scheduling improved team members, flexibility, scheduling is and staffed we are with in shifts. is provide management to areas. in we the we needs relevant Two, competitive. approach executing with with because on action because process highly training three, great scheduling level of quality also former.

also outsourced are organization flow driving utilizing through We challenging various means, quality locations. staffing including applicant more support to an

improve on further talent, workforce we Of proposition. talent that raising engagement member also so market. attract competitiveness team course, we can the but retain only must requires This not our value given of bar the the

Our improve relationships. can and important intention that dialogue in with further these members we team two to is so way remain active our

time and is guests menu Robins And that items. through food elevate are a love. mainstream offer on variety Our we centered offerings continuing and to Red other of Gourmet Burgers highly successful differentiate favorites limited

that LTO for On continuation do complexity drive what our what was than QX helping because menu. the featured and us we with implemented our broaden are not a guests. menu we year. In last we LTO the began ever pre-pandemic, getting intention This emerge margin our have we related a also even LTOs only attention scaled-down of incremental ensures but and in menu before. from PPA, already attachment. as offerings keep lineup not add a that QX Recall This pandemic, no operational the note, to fresh fact, exciting is more having

that Whiskey our Mozzarella the River playful LTO featuring and all Cheesy of bottomless our menu best fun improve to the our Backyard and believe execution hit which have elements promotion will our training been of ever experience LTO QX than of time. This includes we our of featuring third members. beverages. This we and tailored total barbecue to service have pandemic LTOs record upon we which on by This onset time commitment exceptional delivering Smokehouse Sticks. sales. approach Our program, to consecutive performing guest occasion value as Sunset delivering staffing, since Fondue levels is in welcome steak Ice the more team through Bacon than experience our guests and our entails experience guest cheese quality our has March, for execution. is Having an Brisket that and among outstanding Cocktail. more lineup, based Burger further ever levers and hospitality Providing and are is Burger Tequila focused Cheese been of Since and guest important we those

Our emphasis execution is on improving operating producing and metrics sales momentum.

modifications past accuracy we floor to we are year-end. and plan modifications efficiency discussed quarters, and the process As have improve and intend several implementing minor to off-premises over complete these by

also are of opportunities and simpler, better execution ticket make to house time reduce our occasion. times which heart the enable We and guest will evaluating to cater to us

at this sales continue were this and Pizza of million locations. support and approximately $X high-quality our drive growth continuing to Beginning foundation, reached consistent Donatos is growth restaurants Turning had in exceeding supported more Pizza, to growth. QX serving additional a profitable expectations. than is product platforms to designed multiple Robin Restaurant that outperform offenses are long-term the vehicle we We the during QX, Donatos marketing serving which by to rest XXX Red and with to is certain dine-in QX. hone similar Donatos our system.

that did For restaurants that by Donatos, had X% yet over not have Donatos. restaurant revenue grew comparable more restaurants than

checks those were did guest on the have higher not $XX Additionally, that pizza. over include Donatos included Pizza average than

which members, one that that more we Donatos in among visit restaurants QX our and QX, visit XX pacing be in while will remaining restaurants completed loyalty rollout this Donatos with will We adding are be Recall per also higher most the see year, approximately implemented XXXX. XXX our frequency drives year. of

will rollout we million. generate Therefore, at we confident the end to least expect XXXX secured. company we in $XX By meet $XX been the of profitability be has equipment of that of at annual and sales of All Donatos schedule. our million are installed pizza that least will kitchen

enhance catering growth, also long-term to there to Red we transactions believe is runway leverage continue to and drive delivery. experience the through we While Robin incremental dine-in more Donatos

some an Let have seamless me frequency, and beyond. a traffic key make of we rolled these brand, now to our digital ecosystem turn drive to ongoing that on the new integrated our digital to now we'll and with exciting I basis assets being features am out initiatives. We them remainder check. year for pleased the strategy view as digital over an enhancements and and

incremental enhancements Award efforts we digital user-friendly Android In integrated ecosystem. launched that check. Recall our launched online this towards experience are was our enhanced Choice and we and traffic are of that and top and in We was traction. with to a Webby validates guest We them website and with website digital our to newly recognition enhance and within loyalty platform. a a and frequency, iOS soft integrated our presentation, geared People's view the continuing honored external driving for category late nominees. ordering accomplishment five big one nominated mobile new that that March, navigation QX, as We our apps were seamless

In are is ability our a our vastly online and has Royalty related an based in but come, out levels conversion. note, support send upon segmentation, improve an experience of there's engagement all-time our for messaging online which offer Notably, and We further XXX,XXX XXX,XXX X These automated of and increased website of interaction our we platform, personalized to and elevate XX.X capabilities. expect have payment guest-facing downloads see in had already implemented end to period, marketing in year, grew royalty over options. have end by increases have which new our purchase as is reflected new X.X we both as waitlist roughly improved with since fiscal to XXXX. On of the ordering This spite with notifications. fifth history, we our limited integrated push and enhancements since of Robin of our enhancements, resulting members, Red additional of are campaign rating as major offers support, add via the releases still members app X. and such downloads. marketing million our generating high app communication this And average more achieved smarter

a which new utilizes dine-in, optimized curbside last The improving configuration. to execution, efficiency. layout year, restaurant, development. restaurant off-premises geared towards are enhancements enhances high-volume the prototype In design new kitchen we QX Turning while opened our relocated and

sales of million $X We are deliver highly encouraged this by on is full in the restaurant, track year. first which over of performance to its

where markets pipeline of we have real year, new enhanced growth resuming for and a performance brand designs estate targeting developing our modest restaurant next financial leveraging and are strong high-return combination prototype operations a recognition. We quality and beginning

In new by addition to to company development, X XXXX. we franchise restaurants are open that encouraged poised also are

our of We restaurant which reestablishing refresh with elements are program, year. of work prototype our testing this scope our includes new also

be will year. begin the to system beginning plan this Our out next rolling to

Finally, issued for recently at sustainability our review to you at our our commitment on And environmental blueprint you it we part Robin's I sustainability as be Relations ir.redrobin.com. to encourage Investor to and which convenience. that can of we Red reporting. aware website your first outlines to and wanted better Report, business found make journey report sustainability governance

products first step people, this and goals path and next set progressing just where to go we our the clear sustainability, course, place. is for have across we Of on

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

Lynn Schweinfurth

improving incremental our our you, creating and sales off-premise value in continued for confident shareholders. sales dedicated Thank I our strategy, future, dine-in our of channels given business together Paul. execution remain trajectory,

revenues higher increase operating restaurant Turning XXXX comparable to in rooms first first capacity. The XX.X% was dining driven quarter compared at primarily results. quarter by to our

COVID-XX mentioned, As as seen the momentum the emerges pandemic. from in sales Paul positive have QX country we

made revenues increased of sales positive to pre-pandemic in at marking in than quarter the X.X% dollars first demonstrating same lasting pre-pandemic period off-premises off-premises the double full sales. Our to restaurant restaurant the XXXX. delivered quarter our our eighth comparable of consecutive full levels, improvements since more compared channel sales quarter revenues comparable XXXX, We

provided total activities represented was $X.X $XX.X delivery activities represented cash third-party while used represented and percentage activities sales, operating financing in represented catering and provided million X%. million, by cash Delivery off-premise to-go cash of net investing million. $XX.X by XX.X%, Full X.X% Red was was a Robin As XX%, year

we first of approximately were approximately the paid to during pandemic. we the $X.X million, representing defer payroll quarter, taxes, half During COVID-XX the able

over the our quarter pay approximately long-term under including financial which and plan. in continue ended intend strategic available completed borrowing XXXX. in and $XX.X capacity bottom the We and our revolving and execute will to dedicating a investments next sales technology million to restaurant maintaining growth of remaining manage We with equivalents while We ecosystem effectively the our pursue of credit. system, forward, $X.X balance profitable of X-year quarters restaurant our development. line new flexibility credit our We and going line Donatos to that and million cash to initiatives restaurants flow strategic gives several approximately are flexibility digital in new free early balance infrastructure, will our liquidity us the agreement, to of to reinvesting cash ongoing including adding generate cash

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

XX.X% revenue 'XX following. XXXX, to percentage revenue was improvement by First X.X lapping an the company XX%, compared COVID-XX our due by quarter $XX.X the revenue year year of Cost Restaurant of inflation staffing from basis impacted primarily Restaurant and sales partially labor as offset operating driven prior aggressively Labor a costs, by QX inflation, Other by mix, million, higher goods decreased and to favorable increased by by driven commodity favorable offset operating driven partially mix a increased pandemic. percentage basis points, by increased more to pricing. XXX in sold of points, ago, total driven basis pricing operating by QX million points points by expenses sales a restaurants decrease XXX by driven with basis by costs lower offset menu and basis XXX XXXX level capacities sales and shift profit by counts, up restaurant $XX.X of increased discounting. costs primarily sales lower XXX leverage, $XXX.X that compared leverage. increased primarily points, guest to million, increased driven points primarily primarily decreased for occupancy off-premises and XX was sales costs maintenance quarter. outsourcing. And the supply due by leverage. pricing Effective by driven by partially by costs X.X% and primarily

Given modest commodity flexibility and if our relatively or ongoing believe to take increases lagged additional in price we have that to have the line needed price pressures. been pre-pandemic mitigate inflationary industry, we labor

innovation by we and our staying specific leveraging featuring to beverages products on forward, committed Gourmet and our backyard on which our to items ordering Looking expect are value Cheesy our higher with higher lineup, menu other and recent current success appetizers, add-on barbecue promise bottomless LTO the recipes Fondue Scorpion checks driving Bacon new digital appeal and enhancements, drive focuses propositions. checks Building that Burger, creative Burger to margins. such as core while guest our segments

$X.X the our expenses million increases of at higher-priced manager training our million, increase occasion. promotions $XX year implement guests and a marketing million, stock-based an compensation by General versus costs. While value and were to $X.X great driven restaurants, have increase spend. increased ready million, represent offer we and effectiveness, higher that merit were year of these by primarily compels proven prior costs versus dine-in an prior administrative the with offerings increased the Selling $X items driven also that expense,

assets, for agreement purchasing $X.X COVID-XX-related of $X team closures, recognized and our million, related time including million and costs restaurant sick we related protective litigation of to with personal restaurant other financing costs new for including million to quarter, associated members. credit million COVID-XX-related to other our million charges $X.X equipment the $X.X million the impairment related During contingencies, long-lived $X.X to $X.X related

to a million the million X-year credit. geopolitical adjusted to low First to first per agreement in gives compared was others of inflation EBITDA space refer in of today like casual of as impacting our invest company to term inflation that the quarter-end, prolonged and commodity million A was credit call. you all we X, At strategically the million credit loss The earnings reaffirmed prior a long-term agreement On was Red to XXXX. QX for compared impact $XXX million. commodity Despite value of with and and outstanding full provides their for EBITDA conference events revolving $X.XX before availability $XX XXXX. $XX million our supply macroeconomic as dining the are per was adjusted guidance, and $XX.X EBITDA delivering debt release environment is our a The of of quarter our in during credit share create product. pressure remainder and Robin to adjusted loan the including diluted our the agreement. facing shareholders. $XX its our QX updating Due and for disruptions company, team. loss in our issued balance new the impact from adjusted we $XXX of million. QX guidance $X.XX diluted double-digit this year. share sincere on million The quarter, March shortly challenges, replaced the adjusted new $XX us Please flexibility in fiscal XXXX chain business new the XXXX line agreement $XXX.X continued to entire these big to thank

of and operating making our We improved on performance. restaurants meaningful are drive progress the which increasing will through capacity dining staffing, financial

to growth restaurant team the innovation, development. back new provide initiatives to Donatos and proposition We profitability over call are will differentiated including and that, years platforms quality With strategic turn for menu come, incremental also that executing a Paul. will the digital I in value member

Paul Murphy

you, Thank Lynn.

pleased are sales. Dine-in are our and are maintaining our sales arms current the we and off-premise We returning, business with have our around momentum.

certainly in pivot market strategic to be share the drive can behavior. consumer there and should have changes initiatives and We frequency

heard we Lynn XXXX As consistent pressures guest properly maintaining EBITDA make so staffed we to have say, Red through quality while and are memorable experience, our we on moments promise navigating This are deliver why serve brand Robins and guidance we ensuring fun the industry. the focused anonymous inflationary with you great over connecting When a is our our family, we food. adjusted friends challenging guests. are that pulled

always do and has find eager we growth, what of Our team in passion why are shareholder for they efforts incredible greatly are behalf. profitability Robin to Red the always all demonstrated for ways on top with do to better and long-term even I'm line pursuit now on They and applaud open value. let call do our so And so why future our and their optimistic questions. that, an us

Operator

[Operator Instructions] And first with proceed Please Jefferies. Alex from with of your the our line question. question comes Slagle

Alex Slagle

All the Lynn, Paul, thanks. right, progress. congrats on

Paul Murphy

Alex. you, Thank

Lynn Schweinfurth

Thanks, Alex.

Paul Murphy

How are you doing?

Alex Slagle

Pretty Good. so. season over, day-to-day. earnings was think We is This but not

So how Or if check at you're or kind in sounds we look consumers not or I managing consumer. can any wanted just the anything of the start changes at member? anything. to it of really are start member to that a you're seeing dig just to And like in changes the more I into using seeing versus little wanted rewards all even non-rewards there? brand on behaviors

Paul Murphy

Alex, the business not still mentioned mentioned We've seeing see as point, off-premises that I holding. is this Well, we're We at remarks, my in it. that.

decline seen haven't there. dine-in build we of this consistent kind any sales. We're the really of seeing So

burger, a strongly. think have I Our and to beverage beverage is -- main are And they row the in this it's category and there's if we some that there's do PPA is continue it's All a the start that very are think does in we set when segment, take not we're menu, all. if reduced rate but pricing. things casual dining shake. our the -- perform and only that said, versus off a see record I third start basically and PPA. the to kind be quite premium the those a that of LTOs, being to of continuing accelerate. more mean high lower the of a it, against a is one a the change seeing our extremely what ready nonalcoholic an honestly, to quite And into that we're at test back are consumer together, And off just an honestly, have alcoholic appetizer, going we in look I half at we back segment but rest shelf, we'll take

bottomless still think I So very is a it. strong conjunction of aspect value our proposition the in with

the And for whole I'd last is business, So thing think and the our now with public fruit digital members the ecosystem bearing general to that think us. set up. I add able well to bring I we're we're on the royalty both is bear

So year. balance in place basically meet our going feel be any we're of like and good the to we that a able come the to we're way challenges

Alex Slagle

that like sense. the average changes for or Makes it pre-COVID, ticket or What's dine-in front? PPA similar now is versus on any

Lynn Schweinfurth

quite mean PPA has up I Yes. overall bit. gone a certainly

pricing data As we as about to I think up mentioned, XXXX point. compared XX% a is

pricing and we're of PPA So seeing restaurants items magnitude in addition that premium-priced being have been within by our driven we because more in promoting our to mix marketing.

Alex Slagle

guest on refine And now just on dining recent and model bit sort you and expanded any capacity further to see could metrics wonder to comment opportunities up is a more? fallen if I operations, room the you of if that Okay.

Paul Murphy

in And overall of continues terms capacity in to not that making that to dine-in business. more that's as, business, obviously, the standpoint, --just off-premises. Well, We're improve, were in I seeing we're frank, do not some improvements we're But see we a just restaurants. the think is think opportunity I theoretically, from that believe that Alex. of expansion our where the there's still I we're we to inside offset I mean, the or a We're improving room. tied to staffing be as metric dine-in on of XXXX.

more dine-in that And think fortunately, channel. most growth for there. business so the profitable our is And there's room I actually

is have in So we we for think us. a coming channel that profitable the very most growth forward

Alex Slagle

Great. Thanks.

Operator

with question comes next Vaccaro our line the question. Brian And James. with Please of your from Raymond proceed

Brian Vaccaro

just or guide I expectations your raise expectations. perhaps to I what you some commodity takes you think Did inflation the ask your updated I the on guidance. be guide? lines some evening. that more good offset help maintained were And in embedded cost Or EBITDA curious that and maybe EBITDA initiatives? were little raised would savings were was puts your great. there? to Just And there there a Thanks, you've prior wanted sales incremental the that offsets and your moved color about

Lynn Schweinfurth

Yes. I some by say, we we did associated the would a our standpoint But low seeing great commodity meaningful with the to trending a in of expectations then digits from adjust perspective, Sales, a extent, did actually sales, we digits expectations. not little from for cost cost which to we updated big take But from adjust single but down offset line labor bit. did high a a all amount. increased transactions the and that double year. was expenses item, that we're

Brian Vaccaro

what terms it's also does in moving you SG&A assume help G&A? something costs in million million. selling you do rest that us, little to be to Could expect just just costs It's a I a of in spread year? And fairly little Okay. the on on $XXX always selling to versus the been guidance, And quarters. of the bit the the recent of check want year, with around you rest $XXX evenly

the terms to line wanted that sure on of page make same all Just item. we're forecasting in

Lynn Schweinfurth

Omicron also and bit were terms as We restaurants. a in a first little for marketing were you result thank question. of staffing our quarter. the of expenses the bit lower selling we in was That No, little less the Yes.

will The from a and quarters cadence X X year. probably G&A. balance the G&A go little and timing see and million to third corresponds in will GM this number be be our to expectations. based fourth the a up $XX G&A, say, the that $XX in million go will more actual we to quarter current which the So number on our in higher And then will then for conference quarter, of expect anywhere from, up

Brian Vaccaro

the quarter volumes? is of helpful. Okay. that degree I That's quick what improved And operating first guess I sales mentioned the then Paul, you hours And versus that constraining ones, on I the the you've very fourth still help recent degree in to that labor could front. think if seen? you could, X quantify improvement quarter. your

Lynn Schweinfurth

I in a on hours quite that I'll one. jump improved our bit. certainly by we mean, operating have

that we didn't on first quarter will in impact have to as much So impact a fourth meaningful expect go-forward a don't compared that, and have basis, it this quarter.

Brian Vaccaro

for on me wage last then And inflation. one Okay.

your Sorry side if continue what supply inflation starting of pressures in was as And hourly it, to moderate on missed the wage first seems maybe year-on-year to specifically the but the to wage improve? I labor quarter? are

Lynn Schweinfurth

inflation better. X right not would the the Our being into to year. do getting We should and XX% quarters was quarter. go prior saw the say in for in roughly first first second a quarter little that X when inflation year-over-year I seeing continue now, expect bit we but the or down quarter, then in it we're wages rise worse more consistent, necessarily getting

Brian Vaccaro

of stabilizing then sort got some... and But you

Paul Murphy

to a That's it, characterize Brian. way good

Brian Vaccaro

Stabilizing.

will somewhere ballpark? for high maybe the your single it year, year-on-year And would inflation digits, maybe in be -- the Okay. wage

Paul Murphy

yes. correct, That's

Lynn Schweinfurth

Yes.

Brian Vaccaro

Thank you, great. on. Okay, I pass it

Operator

the you time. this of lines Thank end your which for conference, today's the question-and-answer reached participation. at disconnect also have you we concludes session may your And and

Red Robin Gourmet Burgers (RRGB) 27 May 222022 Q1 Earnings call transcript