Earnings call transcript Q1 2023

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Operator

Good afternoon, and welcome to the Fiesta Restaurant Incorporated First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Raphael Gross, ICR. ahead. go Please

Raphael Gross

Fiesta was operator. first XXXX quarter Thank after Restaurant the release issued market earnings you, Group's closed today.

not company's the If found have already it it, you can on the Relations website, Investor under www.frgi.com, section. accessed be

of the inform position forward-looking Before that business call, plans limitation, statements operations, various that include, during make and on based regarding you are we without will like management not projected company company's historical budget, the financial costs I'd objectives statements begin, and results future for to and the operations. information. future strategy, statements These and of

measures to which non-GAAP discussion call, be that outcomes can cause in differ to from from should is give company's Actual statements be actual these and those company in such that its materially substitute accordance performance. results implied Please isolation by as release. for in the be the earnings in expressed measures assurance can reconciliation and SEC factors can such that statements with forward-looking the filings. be materially the note a could differ no today's not found will company's to useful forward-looking information or conference will results a forward-looking may company of considered Any believes comparable prepared in GAAP evaluating certain financial be available prove GAAP, or statements, discussed, Important the during correct.

Chief and Officer, the Accounting On Tyler today me Acting Chief Dirk call with Financial Chief Officer, are Officer and Executive Montgomery; Yoesting.

the to turn over I'll now call And Dirk.

Dirk Montgomery

we for the results, before XXXX. remainder of a the plans will the thoughts our call growth support. our financial be questions. afternoon. other participants to thank for covering like three update our then the on their overview A and update provide Raphael. and open business for and today this I'd of investors status Tyler you, first Thank topics strategic the on call initiatives I'll quarterly continued all of

progress key First, here a first of all across focus. first our summary, are continued quarter we quarter. the In areas highlights from had measurable strong with

momentum to an Our our of efforts quarter of over restaurant with momentum X.X%. X% generated positive the transaction build traffic as growth and sales continued increase gained strong comparable comparable we

level with monthly We grew pleased markets. our profit growth on positive meaningful all of company transaction restaurant key quarter both We particularly the and positive and strategic and transactions comparable comparable total acceleration also Florida to progress in quarterly margins priorities. our of with throughout in South our were March X.X% the key made

levels, impact in of positive versus experienced in X.X% growth increased of four We contributed and basis flooding Florida. year-over-year rainstorms April inclusive five also thoughtful trends traffic shared years. the months staffing XXXX, the XX through for April points operations promotions traffic of initiatives growth with consecutive pricing to we combined South improved the to execution and time previously, including We successful negative first of due positive believe approximately over in severe

highest team quarter are April the levels levels increased in hourly efforts in working. XXXX These last turnover of staffing improved demonstrated first of the levels along year, our retention quarter reduction while fourth to versus Hourly a staffing XXXX, results with in rates. the

a leadership quarter. our guest and prior leadership service satisfaction in commitment retention operations As of is leadership speed quarter the and the for stability believe fourth first to to contributing greater compared quarters, and catalyst in that higher development we mentioned versus higher we XXXX, was faster to levels scores effectiveness

that competitive pricing and expand us supported are maintaining growth grounded contributing risk. to the strategies pricing while to our allow that pricing marketing action of we perceptions additional pricing, revenue and momentum. innovation X% confidence value The by action was took and margins in promotion Our March mitigating insights would traffic benchmarks

promotion increases offers, high-value value price lower limited pairing solidify time affordable Time by check-accretive, combined Family innovation. time like proposition approach Pollo fewer execution. allow and menu items longer In our offering impactful barbell on our and on or windows across we and quarter the to LTOs, with maintaining quality items that first our also are are for and higher throughout of more Meals We more and XXXX, consistent focusing

First check versus quarter higher and were speed fourth accretion non-promoted promoted improved sales the promotion versus XXXX first item the encouraging of per continued of results with items. service and in quarter quarter

we increasingly aiming promotions, and of item to we transactions higher share to In limited increasing test-and-learn customers' targeted visit and addition growth our to new through profit prepared activity this marketing against – food each Overall, profitable our increase frequency highly traffic. target and – promotion goals. utilizing building purchases incremental will We're are time at approach, drive customers. continue new increasing channel acquiring disciplined doing a promotions by targeted to evaluating traffic highly

that build share revenue seeing clearly pricing perceptions based activity value the realized Pollo The traffic back our trends. coordinated comp for menu gains be we our fast quarter, helping is to casual above are continue compared win We traffic trends Florida and peer balance And Knapp-Track innovation, analytic-based on and to first efforts group. traffic. to promotional to

to Turning progress our on margins.

driven For growth sales growth actions. operating enhancement financial margin we consecutive year-over-year by restaurant-level quarter, our the comparable profit, third a and in generated measure, non-GAAP restaurant

compared level by and was primarily by first sales operating the impairments impact partially compared sales. $X.X operations charges, driven net the from loss offset the in restaurant from operations $X.X first operations profit of restaurant higher of million of of restaurant loss and quarter X% The of million lease sales growth first increase XXXX. in in The to from other a X.X% XXXX the XXXX to quarter was and quarter restaurant and loss of

the first basis by quarter XXXX margins XX.X% above points, last and fourth XX of XXXX restaurant-level operating quarter increased both respectively. First of the XX and of year quarter

provide growth profit growth XX% and see greater margin our meaningfully margin increased quarter expect of compared margin toward Tyler price through in beginning restaurant-level we with Additionally, the and the margin operational our pleased improvement and transaction the implement continued we first operating expense Overall, excellence X% initiatives. will ongoing following to margin as quarter March fully and and in which growth our we traffic or on of details additional were of we both of as run growth initiatives. sales part rates progress targeted his our accelerate update. our increase trends to margin to expect financial first

on Now I'll the of update initiatives. brief provide a strategic our growth status

great pillars, we building experience at great the reconfirmed expand improve effectiveness across to focus Tropical appointment excellence recent enhancing three, expansion. build teams. priorities aimed four, guest operations operations. on the across following on efforts creating and all my to transaction like CEO, our Pollo channels; the brand; our growth a I'd improving four and identified operations four Following all One, margin have two, to excellence; we've developing to our of and areas

elements First, to simplify raise the time times enhance progress second, the while our XXXX first approximately key metrics: experience of of real first in to drive-thru quarter XX% made areas consistency fundamentals; in the improved average. model support. the across key quarter those of execution focus to refocusing and We service the experience; by speed compared last on operating fourth, the peak third, following maintaining reflected by the compared cross-functional improve customer in operations of debt continue and the quarter year productivity; fourth

XXXX Scores compared to Promoter measured XX% Guest satisfaction first in average. quarter increased the the as Net by

addition, the since March April scores In highest were NPS XXXX. monthly and

the well stability to members driver down execution turnover turnover first noted, the satisfaction. As the level and XXXX improved quarter with first of XXXX of the restaurant and turnover below XXXX, our quarter of Hourly was compared XX% reached XXXX. average first team a before lowest in management guest quarter is since quarterly

move organization and and to As forward, reevaluating processes continue we improve structure to we effectiveness are going efficiency. our

consolidation consumer into positive a insights, digital seen of focused impact already have more streamlined resources and marketing of organization. our We the and marketing

traffic, to As we marketing key going to and we a execution strategy of more goal expect to marketing be align contributor growth the function forward. profitable the closely accelerating growing

processes improve In execution. addition, operations are we above-restaurant optimizing on working and to organization also our

a improving growth quarter shorter momentum the is In conclusion, positive focused entered on high-impact of with list and our traffic opportunities. we and team second and aligned margins,

result, positive the to look confident we our our the prospects this during great to year. potential about balance a our of the As forward and brand unlock and has feel accelerating traction extremely ability clearly

Now financial update. detailed more provide Tyler a will

Tyler Yoesting

Overall, results which transactions. quarter Dirk. financial excited the were We comparable margins. see with improving we're X% also quarter in while pleased XXXX, restaurant comparable first for increase with very in strong our X.X% transactions the growing Thanks, included a versus growth sales to and sales of

flooding April we clearly is which in improvement continued inclusive quarter and our approximately X.X%, sales most versus of by the and rainstorms to encouraging estimate comparable The sales into sales negative our of severe Florida, comparable first XX comparable transaction transaction restaurant see in were X.X% impact on of strong South trend news with comparable performance through We points. growth continued of which reduced in basis and positive April. the XXXX trends, restaurant continued

restaurant to quarter first driven in Regarding of XXXX the revenues XXXX, total sales increased the transaction million the and $XX.X first in quarter from $XXX.X increases. sales million performance, of by X.X% comparable

product to the of an First improvement pricing X%. of from channel compared quarter increase comparable XXXX and in X.X% mix in net transactions resulted restaurant impact of increase and an

compared First mix XXXX. average XX% menu to increases and impact and check positive driven by of pricing in quarter quarter dine-in XXXX and increases mix was price delivery first

compares was of to or share. loss $X.XX first loss First quarter $X.X million That the net quarter of $X.XX XXXX $X.X net share. per or diluted per diluted XXXX million

to quarter $X.XX of earnings income from share or for $X.XX per compared share, non-GAAP was adjusted loss million first table $X.X an in consolidated per $X.X details. see the Please On or our more basis, first of XXXX. reconciliation diluted adjusted net an million in net operations released XXXX quarter the continuing diluted

XXXX. grew EBITDA, to adjusted and total million in of Consolidated compared X.X% $X.X financial of non-GAAP total a revenue $X.X X.X% XXXX in measure revenue million and to

million or restaurant compared a first Loss from operations from quarter or of in X% the million was quarter XXXX. $X.X sales sales to $X.X the of XXXX, in first of loss restaurant operations of X.X% of

financial restaurant level in XXXX. profit to XX.X% a XXXX margin, formally Turning in to EBIDA compared level was restaurant level XX.X% operating adjusted and margin restaurant results, non-GAAP measure

Restaurant XXXX, the growth point to transaction as driven higher costs. compared XX pricing costs partially as profit to higher level growth were We labor quarter XXXX, and margins over well our compared offset margin primarily XXXX. quarter basis of quarter to due pleased increased operating during the by improvement in impact by insurance fourth our restaurant the with higher first and sales the

March after improvement Margin in price most increase. significant a was X%

mix. in trends increases Regarding of and by XXXX compared and sales to of decreased due higher XX.X% cost sales offset the first quarter impact to primarily first price key restaurant a XX.X% menu as of in partially of impact restaurant a sales to percentage negative categories, XXXX, quarter expense of the sales

net the of higher percentage a partially sales increased as by in XXXX, primarily in driven wages of in XXXX to restaurant quarter operating impact from hours, with rates staffing Restaurant stabilization XX.X% the of sales. XX.X% higher first by offset increased wage

restaurant percentage primarily decreased on sales Other expenses operating expense as of utility impact offset of quarter costs. insurance and fee in the higher compared restaurant sales first property to by to casualty costs delivery the XXXX, partially higher due a and restaurant

of first expenses General increased million to for quarter the revenues decreased And of percentage XX.X% first $XX.X XXXX from the and of for million XXXX in the in of administrative $XX.X XX.X% of first as XXXX. quarter XXXX. a the quarter total quarter from first

costs, and and $X.X expenses the million consisted of related contract to implementation accelerated general $X.X restructuring $X.X system. in G&A efficiency $X.X charges digital the included non-recurring costs million quarter expenses prior which first of of of million comprised related initiative of XXXX deferred million to costs, million fees accounting service costs. and primarily of platform administrative professional of $X.X for

of of of million G&A and the $X.X million XXXX G&A initiative costs million of expenses first of for non-recurring $X.X digital professional in costs. efficiency expenses $X.X million quarter platform included fees, comprised $X.X

of to of related of $XX.X $X.X insurance cash. million partially prepayment In the restricted timing due due balance cash capital of cash of turning to $X.X the was our annual Now million, first million to the quarter decrease to The XXXX, primarily flow payments including working decreased XXXX comments. from total quarter fourth the premiums.

the in million. expenditures Capital quarter of XXXX first $X were

through to growth the expect balance positive the cash cash of flows traffic generate operating and year through our We increase margin balance improvement. and balance –

we as on have quarter capacity sheet of liquidity. have In final million continue XXXX related XXXX, settlement undrawn In we winter insurance hurricanes executed storm and of insurance no $XX claim to settled. XXXX quarter. Cabana to for the related balance to in million, source the filed an claim the receive receive revolver debt Taco our we Further, in $X and an proceeds a additional first we expect impacts which of expect addition, the the once second to to on

to restaurant our generate program performance, continues comparison consistent sales Pollo refresh/remodel lift investment to sales unit local Regarding trends. a market Tropical in

XX completed for the we in XX first have end having completed and We refreshes through are refreshes targeting and quarter, XX the the XXXX and remodels quarter. first of to remodels for

a with comments for our XXXX. remainder few close I'll of outlook the on

April. continued are We encouraged momentum sales in our into XXXX by that

We very growth objectives impact achieving through realized the four will growth are continue which the as key focused our to build momentum on expect our we initiatives. full we sales themes, of those benefits

quarter year labor we material and as the play year. and quarter the commodities no in our full key the first trends, of the contracted balance the completed increases cost we in stable year food wage hourly the balance wage compared the rate first costs, expect Regarding increases with for are of to

X% offset the XXXX. in more XXXX XXXX annual increases pricing labor we food in The took costs and than of should compared expected in that March, costs to

XX% to transaction a growth expect quarter through first combination operating operating XXXX margins margins and to the of are improve continuing of run unforeseen in any on profit We and cost XXXX in action, continue basis restaurant environment. additional rate changes the level pricing structure our above of targeting year the barring and for balance

versus G&A as our G&A to accounting downsizing XXXX service including driven to expense of renegotiations, ongoing from vendor Center expense in X.X% completed of in XXXX decline the the contribute meaningfully processes of the to outsourcing restaurant February reduction well but sales. both to not the first which reduction expect will XXXX, transaction targeted quarter Service by We as efforts of of to efficiency and Dallas space, from XXXX, X% range ultimate office limited

million Regarding in capital $XX year capital $XX of million. full the be expenditures expenditures, we to range XXXX project to

on strong well our we closing, of initiatives. margin we and continue ongoing growth strategic demonstrated the in as the as to first as growth which sales build expect In quarter, transaction improvement we momentum

for you Operator? now the Thank questions. listening, call we and open will up for

Operator

question-and-answer Instructions] Please the of begin from Hutton. Reilly The now Edward go will session. question ahead. We [Operator comes first EF

Edward Reilly

on Congrats a great guys. Hey quarter.

you reduction look to of throughout QX the of Just back QX the G&A year? through year? could me maybe wondering half you cadence a like come reduction the the or take more the expect if do Should in

Dirk Montgomery

year through a ongoing the the reduction of expect should reduction space and and continued February. Yes, should QX the continued and balance completion outsourcing in of we do see through That initiative in office of in the the improvement remaining QX with year. the the improvement our then see

Edward Reilly

repurchasing And anticipated or units? new and a could if Okay. you bit balance, little weigh the maybe capital with talk increase allocation you cash wonder shares out how about building in

Dirk Montgomery

Sure.

on So remodels our other going primarily and capital priorities and and this are expenditure required to year be maintenance investments. technology refreshes

for plans unit Going units forward, pipeline Florida. in right the new new state working we potential developing are a – new units in of now

are opportunity, the in AUV unit Florida of openings higher we high for state the very and XXXX re-commencement targeting in XXXX, attractive so new units. And of

of evaluating shares program Directors on on do Eddie, ideas and a evaluate improve Our shareholder number We have basis, value. a continue value. to authorized is shareholder our Board opportunities drive to to of left repurchase existing small they regular

Edward Reilly

the then me. year? for you've this menu last items And added Looks coconut to being added one new Any shrimp menu. Okay. like

Dirk Montgomery

time and it's – was above time limited The is offer. for time offer, offers. performed has sales But limited a per our as definitely the – shrimp coconut average a well. are have add average has still per actually very day store being been did per it – offered We and – it been limited

over planning check and to weeks. the move did well it was But in check a it do different items. coming LTO the we average accretive of non-promoted So terms compared to are to

Edward Reilly

Great. you. Okay. Thank

Dirk Montgomery

you. Thank

Operator

concluded. concludes question-and-answer And today's now Thank for our session. This attending is the presentation. you conference

You may now disconnect.

Fiesta Restaurant (FRGI) 10 May 232023 Q1 Earnings call transcript