- Earnings call transcript Q3 2022

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Operator

Good afternoon, everyone, and welcome to the Red Robin Gourmet Burgers, Inc., Third Quarter 2020 Earnings Call. This conference is being recorded.

During management's presentation and in response to your questions, they 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. Management will also discuss non-GAAP financial measures as part of today's conference call. 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 new like I to the call to would G.J. CEO, Red Hart. Now, over

G.J. Hart

assuming outlook. is for I'm Lynn joining September. role Red what financial of our optimism us in fiscal very CEO Hello, Lynn and around me providing remarks, to since excited Schweinfurth, Financial this With brand opening third as thank will has After the the Officer. you and and achieve my here Chief early Robin can today. be our quarter some grown only results review

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demonstrated been the with Executive with more as CEO Taco starting restaurants guests. brand our experience of almost over building Chairman restaurants, and as CEO a background, him business than than many to thank He's years. for his the on predecessor, a business, me the restaurant for that four more the behalf and always visiting company am Robin members Torchy's five insights can team have California as encountered, an for Kitchen going on and and restaurant much seven delivering of impressed While of our Texas decade and On at I while forward approximately a the equities the the Roadhouse already that, a I've and I Paul call. for learning into over years, have to as Robin years deeper as And successful yet to CEO values benefiting also for met, also years, was pandemic, I of for brand I both digging prior of a for listening to know in culture, a to President Pizza Having as the look and years. Board took this ultimately long-term drive to companies, being public Through I through growth both the personal do at the restaurant same made months I commitment I've believe focused on XX have industry People his shareholder to have growth My and decades. by inside I not and have of My served us the you the special more key with I ahead. profitable urgently most gained and past have company spent is I leveraging Robin. quickly team, promise, as been I building meeting through last and probably many meeting forward. over Red my people initial been understanding I priority fan perspective. at over the here way the successfully public. recently the building those and I've so in brand intend adviser Murphy, the from serving is in platforms coming organization, center. a grateful can. be heightened culture attention others, really eight private worked weeks those want the iconic next several note, and extraordinary value. my and that ability key and team I of that, speaking appreciation contributions as I a Red and I for and experiences that to the to March, continue always navigated will the three relevant and to support this of big to Red By

this focus New and execution service will we our among pursuing great operators. restaurant with being optimizing meal. enjoy the our the initiatives guests some friends environment others, capture a new be of and menu food Red with opportunities built include, improving service management structure model, to strengthening Robin with the an to are what maniacal that Red connecting allows operations-driven playful over is upon. on a quality After quality, was and Robin brand to all, creating items that a

effectiveness also improve we are our we operate how overall. looking for can We and at the business how efficiency

base. Our spending restaurant on capital intention prioritize is our refreshing to

like to I'd business. current on state the thoughts provide of the some Now, opening

category are in there believe Importantly, traffic QX when our and this. sales peers reasons improved comparing several we traffic own sales to relative trends outperformed. We and for

higher a First, offerings with limited-time proven our check new popular extremely generating product average. guests, have

is our sales specific about is our readiness virtual gourmet by portions brand. value restaurants. these new $XX balanced growth by deal that dayparts, drinks. as and We sides third are includes driving incremental sales that increased profitable our bottomless have in value and value which driven and These the meal ahead currently signature field XXXX plan category. other our prices, everyday margaritas driving are talented our featured and other initiatives Several and promotions, including initiatives continues affordable compelling are complemented catering engagement a around with the traffic testing recently We sentiment and storefronts. such and everyday positive team, launched levels, well catering above Catering for of $X.XX that offers exceeds generous of Hour, Happy

offering continues expectations. to our Pizza exceed Donatos Our

Donatos gap and and widening between the We it. with those incremental are restaurants those is driving sales without

XXXX. X% was in In by X% fact, restaurants QX. QX restaurants in approximately non-Donatos with Donatos outperformed XX.X% versus and from up approximately That

stand at which Apple on the has guest and one currently high includes We app is million mobile and traffic itself an earned digital new app and loyalty website, Android. platform downloads, Our experience, ratings a check. and frequency, driving app enhanced

to with Red now of integration Royalty guests. XXX,XXX the improvement into resulted ordering over an our XXXX. Additionally, of end of the as XX members since best-ever app Royalty membership online end, platform and members of million and our is grow engagement of quarter levels the experience continues has in Robin

our let's operational execution. talk Now, about

While at making dining. progress and areas for we incremental our to casual improvements in below are of satisfaction satisfaction, hiring remain guest best-in-class in retention, scores leading guest levels

very the will important managers. HotSchedules greater which Our gives platform team implementation back to scheduling to of time flexibility, and members is provide the

success. will focus remain up Our for on our members general managers and team setting

that quarter and beyond. and higher in will improve fourth doing restaurant what While were expected, operating provide this. than are the will costs address do commodity margins detail Lynn to summarizing other more we believe we

and internal and We refresh projects are a we in that touches program piloting handful complete also QX. elements of external will a

forward the We to upcoming outlook the our look will guests member then ICR North strategy, Conference January. work. in scope sharing collect Star and refine I go-forward and and and at vision the track initiatives of our new team XXXX results to feedback including

Red to continuing welcoming the the like to I'd Lastly, forward moving sincerely their organization. me thank Robin team efforts for and for in

the to turn over review QX results. Now Lynn I'll our to call

Lynn Schweinfurth

G.J. you, Thank

casual to restaurant Compared revenues to compared surpassing Box quarter quarter sales results, traffic both measured by our comparable grew dining and as the comparable in XXXX, third segment X.X% since we third Intelligence. increased our third the of in XXXX channel delivered by higher revenues restaurant For quarter, comparable off-premises sales. quarter our at pre-pandemic revenues sustainability levels, X.X%, our XXXX. of third double pre-pandemic more consecutive full positive sales sales quarter XXth off-premises consecutive restaurant marking of versus the dollars the than We Black demonstrating

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

in million During restaurant of the quarter, the Northwest our to sale related in a we final proceeds received market. Pacific $X.X

We under approximately the will appropriate $XX to cash is this site million and area replacing are ended and and pleased of credit. liquidity. capacity our cash revolving available including pursue an trade restaurant equivalents We the and borrowing quarter the in with line with million, our identified $XX boost liquidity of opportunistically if when

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

mix by $XX.X million, million, basis traffic. XX costs category administrative lower approximately partially commodity $X.X conference, million, and wage as rate General sales by revenue partially increase lower offset partially by points, driven card by QX. increases, due company XX compared shift. by X% of driven restaurant fees shift by was versus offset restaurant and offset driven of total to QX. lower by Commodity menu increased primarily was from by operating Wage by and a Other to increased leverage, increased merit lower and a decreased basis our revenue increase stock-based primarily sold corporate offset XX.X%, costs goods quarter mix increases increase basis and in an and offset by decreased an operating million, primarily expense XX% points, primarily revenue spend. prior leverage. the versus supplies $XXX.X compensation increased increased advertising of partially of costs, basis office ago, leadership inflation the traffic. favorable utilities XXX offset XX is decreased approximately basis prior timing menu marketing driven shifts, compensation annual year pricing lower the off-premise leverage, was shift, a XXXX, an pricing points, costs driven to $XX.X Cost by incentive and up million, $XX.X Restaurant-level costs. by in year costs, primarily by X.X% management lower sales Labor partially expenses partially $XX.X rate by by by favorable driven and inflation. inflation, mix primarily were Third occupancy by driven increased points, of $X.X sales by Selling hiring favorable were credit expenses in million, year costs inflation increased hiring XXX and profit driven percentage of primarily declining million points following: pricing by

including partially the of million, of transition, million COVID-XX to related in to litigation in $X other costs $X.X termination costs, restaurant $X.X recognized corporate for million $X.X $X.X related related costs, and million closed million closures, quarter, locations, million contingencies to executive $X.X million $X.X lease and costs. in gain of impairment sale we to other related to previously related $X.X million the gains by the to in During offset a $X.X a gains related million long-lived restaurant million sublease assets, financing office related $X.X

Third in faced diluted compared million. was The our $X.X quarter adjusted as was $X.X to million XXXX. EBITDA million of EBITDA compared pressure QX $X.XX our QX adjusted outstanding balance the adjusted credit loss principal XXXX. under share to At commodity diluted loss $X quarter per credit as adjusted of QX in million $X.XX of and share agreement letters quarter. $XXX were was outstanding during end, company higher-than-expected inflation per

begun decline, costs quarter, we have fourth shared quarter. beginning of the to While at a entered distribution last new as into the contract these

a As be a QX. or result, at percent expecting as than sales QX of to higher sales of are restaurant slightly we cost

credit net inflation to while retaining discounts rates and our maintenance as of prices third with repair we operating and third to restaurant proposition. other was X.X% a to supplies associated quarter in card higher higher-than-expected strong the in expenses, addition, and increase than related fees strategically were quarter Pricing mitigate usage. higher In expectations, higher costs continued utility higher the record primarily usage, value

As the a percentage we result pricing of of higher additional will approximately points in implement starting operating quarter fourth November. costs, X.X during

the restaurant stabilized to margins expect quarter guidance that our investments, lower in we that staffing, lower our related higher re-implement we sequentially in and we will as janitorial and internal cleaning earnings price, and incremental Importantly, utility fourth which costs improve have as updated and to XXXX. enter XXXX our other release margins to usage we maintenance costs now published provided improve as for today. have us strategic operating to Due services was we enable commodity

dedication, my Todd for Red to With As an a sidelines help call, joins over to brand through the that, conference as get has like this will ensure challenging at smooth I optimism interested call the that time. share their a on to the he to from us with collaboration G.J. I transition. team very to is potential be will look rooting the do back my and forward and brand G.J.'s enthusiast. shareholder and partnering colleagues I friends I'd to what turn this last Robin enabled and energy thank management as

G.J. Hart

Thank Lynn. you,

Before leadership conclude to we place the take taking here wanted Red with questions, changes your Robin. prepared my I remarks at

As from we has XXXX. decided earlier Red press to the at in this Robin week, our announced Lynn release of end retire

years, has four us most spearheading served finance organization nearly she history. Robin's through some periods Red challenging the of For our well, of

CFO, to wealth of Hopdoddy leadership to end join and a with and a Prime as very her eager challenges best welcomed served Steakhouse, brings for for Burger Finance that most who our Carrabba's Brands. served week. the thank the Lynn division management to will recently, as new us. Red Wilson, the held while here we responsibilities Robin. aspirations for the EVP Most a for and Robin, of commitment her and outside her of and I and start transition through CEO credit President, will Italian Vice also facility. continue the Paul a wish and experience the and role new has During pursues and Todd CFO her years to we him Bar. year who of he Jamba spending Grill Investor her financial she we Red Todd Murphy, at pandemic Bloomin' play next are XX the Fleming's to as Relations dealt at role in Juice CFO He notably, tenure, her Lynn of established new want her dedication, in

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we I assured focused working sharing restaurants the are support at and consistent and be brand Please our achieve experience said in everyone squarely for our forward And accelerating delivering with are high to look earlier, for to we Thank promise how in on guests. that Together and our delivery open our in interest that I am call working an your this you. center questions. pursuit on January Star, will be of exceptional for urgently ensuring will fulfilling the our North themselves, now, standard, As restaurant excited we goal. within this we I'm Robin. of you thank and Red I

Operator

you. Thank

The the first ahead. Please question-and-answer Alex [Operator now comes with Slagle session. begin question Jefferies. Instructions] go We will from

Alex Slagle

afternoon. the Thank wishes you your seat. for call Good miss and we'll best on G.J., Hi, sure. great to you. chapter, you Lynn, this have next in on

Lynn Schweinfurth

Thank that. appreciate I you.

G.J. Hart

hear to from Good you, Alex.

Alex Slagle

current play guess I dining and of learnings your strategy very I'd couple at macro Robin think past experience, experience with that current on casual at to backdrop the past more new hear Red leading all of role little any G.J., your should resonate a And a approach you your your views perhaps as different from some deeper and the you Yes. how Robin. organizations love Red in other into the that and dig just situations, segment and

G.J. Hart

weeks, say, almost just been Sure. eight Well, -- even on let me first, I've weeks. here not eight

So, I am ton. still a learning

the honest, believe has five the much can far been we expectations our expecting So thus may the reason, and the Look, think the guest back and over similar. at core some Robin time, things over different, look And is guests slipped it's iconic very They core be look expect think completely. of think that at whatever an changed and they the things. -- are decades. that look And do. Red Robin, brand this I for guests today, what believed I or but away at I they heyday, for very, or if have you those what of it's same what you I Red to if I've years, vanished in look you

long a taking Robin, as a higher of we're do nature look at So, level fun, the playful long at taking example. a execute we back at and Red that look what an bring can to

we very there that or a be have average. or gourmet all challenging can on out want we best than is really the it are building average we burgers very, is better it burger ourselves, I'm just have producing are team, Or we challenging that that We We every and proud the be. of? gourmet to

So, do really we We job burgers are can improve a challenging great our today, the when upon but I that. norm. prepared think

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to need on. items And We and three so menu some And we to some potentially take entries we done I have the us work of can menu allow put some in some that. items have expand we itself back total. we've to room think the off relative that on

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do we're and decision And the I managers. a suffer complement past, would some improve decisions to at to the And of that we an salaried was know about restaurant a you the hourly our perspective, going execution rest major how tell The all we a bussers that, to I job from. so, from two out suffered associate Management candidly, continues From good taking that. to we do from relative want this of one. managers and the of today. has job looking company great do shakes.

affected definitely ability things I at high level. those a execute have to think the

responsibilities at within a that teams covered that And long having do five the within brand shifts the have or by strengthen so to XX restaurant, volume better and we a the the can specific help on at the restaurant salaried on look four shifts, what instead And and that we're taking depending is they that two execute see I the manager manager. against volume, specifically so, of kitchen how depending look going we mean promise. cover management can

those going think what and good result can I do things forward. will we learnings in some

allow going expect. have things execute sales we're that guests our like and So, will and and throughput that, better us to a to give it's at that at the they restaurant what grow allow level, look thus teams a management take higher

that's just So -- we're at right now. looking a just Again, that things early. few it's

much you more it to at insight. got little a So, least but I've do, gives

Alex Slagle

Yes. and lot is changed could But help actually a maybe didn't G&A, a to revenue a maybe with the that. couple That's lower EBITDA lower, you clarity more questions. in but shortfall a Lynn, other answered the outlook's guidance, and very like implied my that. or a on Is the seem It outlook touch whole of inflation what pricing the utilities? slightly on maybe the outlook Just drove lower. commodities due little helpful or

Lynn Schweinfurth

is improve Yes, and commodities but experienced costs and move to fourth of than we looking were change quarter, costs as then operating majority other that those really third higher expected. in of the the some the we through they we quarter

Alex Slagle

company the G.J., is the views Okay. And like? or out what strong again, of thoughts mean, Donatos on to I you this pace And look now. know have XXX any goal results XXXX initial of could I And guess rollout -- your the for year. and this updated units if to rollout get program. XX the really I on thoughts on don't maybe coming Donatos,

G.J. Hart

make a restaurant this deferred Clearly, Donatos, it need to we our we that's for a this, little at we priority. our do existing early We to me so you give base. are to work you that expand have I to priority capital. tell do refreshes, will existing continue will restaurant some a to to bit to how need too but having that want fast too with great exactly we'll getting success we Yes, some I going say to do as think base. will that to we it's it. we point, it's But can tell that little sense, maintenance allocate be But tell. some as early though, on do

Alex Slagle

Make Thank you. sense I’ll on. and it pass helpful.

G.J. Hart

Alex. Thanks

Operator

Instructions.] The comes question Todd ahead. go next Brooks [Operator Benchmark Company. with from Please

Todd Brooks

thanks wishes best as steps G.J., welcome aboard taking well. for for on Hey again, my and you next question. Lynn,

Lynn Schweinfurth

Thank you.

Todd Brooks

deferred about A that want to a do saw million questions And base. looking G.J., to what's from maintenance need to Is in work tackle a where you couple the claim or in prioritize real base it of -- of you having the to you're capex talked base existing just standpoint the on up QX. what capital on be that here. maybe a few guided you that you sort existing there about I could was identified to of from? think get what want communicate grow may

G.J. Hart

No. we that haven't done Again, yet. Todd, all work

done our to needs deferred and maintenance our to operators understand maintenance assessment done. We be teams with an have what

So, we're prioritize to that. looking

companies care these through we we're that back and many need As the taking make pandemic some of to cut facilities. that clearly sure spending, of

we'll that little do to of a but as plan, So, tell share capital it's early bit how exactly that it. we you allocate, get we'll as much soon

Todd Brooks

the pieces just we for cost get of secondly, the the Okay, where level staffing, Robin as that looking a labor couple maybe I much guess importance and signature in including how identified? for want wins to improved XXXX? you items, if side don't margins, the year on you restaurant programs of profitability to key maybe costs XXXX get to more level. Red investment you're on quality trying to Hearing investing at profit at model restaurant be, to improved I put cost quick versus additional and about restaurant-level recovery know your food And then of and we're initiatives salaried the Is great. food does managers. what look looking it operating to cement as fiscal like to as you've far trying an that the as harvest I'm together out and in

G.J. Hart

ramifications investment as -- them we going what testing and and/or -- go of listen, without understanding to dollars to these are. we're the into not initiatives some Well, not

as the If significant how in management employees of there the on the hire train in complement in we're there you take, restaurants, of is an employees, currently the example, spending. my amount be significant, we terms will opinion, improvement how we overtime that turnover

So, investment. by will all the the offset -- be investment those factors additional

you're paying management to on more when believe teams In our that to we be to grow that. addition, present with floor when I attention be and we're to and to teams going open, and the continue coach allowing guests learn sales. all work then our will you're them We're

So, we'll share investment there's and and that just look pure will believe will it's information go not a those returns at we be, of return, dollars. we definitely what forward. We some as

the correct of where we've my So, it's -- this into of direction going brand to to some things have get those I believe the opinion. from a are been in year. also we're We for these of recognize environment. we to decisions investment some I past, that back wouldn't say in the that that it's we a economic necessary wanted total challenging all in But

Todd Brooks

if the don't I'll know hop get that. you're to trying stabilization now if figure your franchise-driven, you and level, back it base. being do looking and -- of to love the Okay, beyond as a still brand you I corporate-owned after final beyond higher-level And to see queue on is extent, one know there would an that great. obviously, got model opinion at but thoughts And franchisee Just looking a out? Thanks. of this, but question. just kind then And in I a don't large growth, we've you're that formulate to corporate-driven, future

G.J. Hart

Sure. No problem.

it's changes success, these So, and franchise well. And of a -- of great a We combination I believe have that have partners. as as group we both. we it's excited think get of make they'll a little -- bit some I

growth before to they so, grow have the their start a we to invest that, get lot path work we of on the to side. prior to want do on And But and company units. may

we'll we and The start about opened from doing the some those new get new just talked of out I deferred unit maintenance backlog year some then As of those of of thinking refresh, restaurants. some units. one is things lot we've want learn the a well. do and testing, that needs We of to way extremely opening have about a this

some good there, what like we like our what a but prototype in future? future, the future. work have What's menu the learnings of there's in of like kitchen lot does so, look does the look look And do the the to around

lot where our early I side. whole or on are in to the partners, that it. franchise start I've tell shared of we can excited So, franchise about you will they're with shared excited -- far, it do pretty before about future first just I've significant And we talking I all, have things like think my we say so they go I company with that growth a them. with of the can and work conversations some you here seems early the the about

Todd Brooks

I'll Okay, great. hop in back queue. Thanks.

Operator

this no the conference questions, session and today's As are further call. question-and-answer concludes there

You participating may your a disconnect and for Thank have you lines. pleasant day.

Red Robin Gourmet Burgers (RRGB) 3 Nov 222022 Q3 Earnings call transcript