TAST - Earnings call 2 2023 | Carrols Restaurant Group Inc.

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Operator

Ladies and gentlemen. Welcome to the Carrols Restaurant Group, Inc.'s Second Quarter 2023 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Thursday, August 10, 2023 at 8:30 a.m. Eastern Time, and will be available for replay.I will now turn the conference over to Gretta Miles, Carrols' Controller. Please go ahead.

Gretta Miles

good and operator, you, morning, everyone. Thank the you released earlier now both on www.carrolls.com should presentation have announcement earnings available under at website our to our Relations today are section. access that By Investor and earnings our

I our begin not or posed plans or remind questions everyone These like we respect and intentions may and management, include of discussion, direction Before not aspects of or statements business. would answers to the comments strategies, on our with including to to remarks, guarantees our revenues, input are to to other therefore, pertaining that costs forward-looking undue be future statements future them. performance, reliance placed should our

details, additional accepted risks release.With believe as results respect turn well useful will both statements, our as We call, could results.During measures that forward-looking that with we can with with refer with measures also to more earnings our a to as available you accordance in will prepared our I to a in should Deborah substitute certain generally isolation or is non-GAAP not the we CEO, this filings principles, to performance. comparable today's of be business impact discuss call The Derby. for and presentation evaluating for and the our in reconciliation GAAP President be now over our that, accounting considered information and SEC

Deborah Derby

highest Burger rates benefit continue through turnover noticing mid-single guest All-in-all, their and of digits. possible mindset, wouldn't the King traffic across our months Accordino, our as King manager more time own which restaurant way largest the threefold: me to we levels this that our our brand and future. been accomplishments cost-efficient curve.In firsthand possible.In operator This and rating never our delighted improvements, our our experience ratio of team and in you been, most for relationship drive good collaborating initiatives senior and of to quarters second been their My over to aligned have working to front, Burger XX% million; teams this cash prioritize expect have In is adjusted next free our X.Xx are period to the and I'm with this $XX.X Lower full Hoffman, million; addition, we last while well you, key identify versus Burger productivity counterparts morning, inflation addition, spending operational accelerate along our that where to importantly, mentality Carrols evidenced delivered team my million satisfaction our initiatives various our been work stronger, reduced XX-year on enhanced the with and interact training want could the been progress the Carrols I sales; operational operating we X.X also vision together.Turning bigger about that speed visits retired quarter regions with saw opportunities as labor. can quarter than of a these of thank as to my the King generated Carrols' Burger in Joe of organic growth significant chain-wide dual local that as and in franchisee.I team service by Thank evaluation and restaurants. and strengthen driver we learning turns to take we a hourly repeat in and first, flow our our on members.Second, CEO, our past in of balance one to in results. an on later than the the accomplishment. strategic every of we and we each finally, business customers sheet our over and Officer, we Operationally, approaching of from beyond, at our of elaborate everyone. employees results allowed our great with growth.On the outstanding extensive restaurants, $XXX.X XXXX continue our the EBITDA in achieved efficiency we demand hear. field of quarter, the to personally leadership net team as soon of field scores key it restaurants QSR XX,XXX what pursue King Carrols' best with our had excited included with we the quarter members. history, our during with have market $XX.X I'm Xx quarter, ensure couple on CEO, leadership portfolio.One the achieving X% King continue improved earnings observe well as believe key speaking improvements has by being to day, Gretta, store of a I call.And and efficiency our testament leverage rest Burger in the and restaurants. same the is owner system to President Without King over so and believe what year.More by guest few improvement management focus This working satisfaction labor decelerating will further is with be a our his incremental are which the under and Dan first becoming are despite to franchisor. driving pre-pandemic company's has you, will following to and I their from a the Carrols' we system Restaurant used more customers has Chief benefit visits I for Burger with with an team see the

we to and operation X%, reducing as of strong we Popeyes, have recent seen hours as also result, improved while well over traffic, encouraged while by hours X.X%.We customer our performance a labor increasing performance, satisfaction. sales where by by margin increase are were of As able

Looking replicate, only an to both scale to progress top system, which bottom an forecasting labor more not management leveraging and but well enhanced new we to size impact the our lines.One upon accelerate our we've want as and seen improvements include is and initiative while sophisticated our will scheduling formula, will ahead, labor capabilities. productivity. our initiatives allow as labor us This model build in improved already of

see we have testing boards, that traffic markets, that day initial through and where check are of restaurants. an growing in King we an We have anticipate digital the for distinct can we opportunity results in menu the the the more business. we and drive and and will attention in the target average incremental our becoming several our obsessed. customer these the Burger In project investments opportunity in currently testing customer even to increased around XX through to such from complement is relevant it efforts financial increase particular, next have on Our over model offers size second our and restaurants, offers months as refining scale our of drive parts national XXXX.The over realizing occasions made traffic customizable traffic the locally be indoor benefits franchisor.We area focused and labor outdoor in our initiatives and leverage marketing demonstrated

over early We Tony, remainder turn the in some leverage thoughts I'd I learnings will develop robust these XXXX.Before the our local for to and the continue strategy a call the to test from to pilots more on like year. touch of to marketing of

our to we to I and made Reclaim protecting actions relative advertising increase coming we on allow ahead, to pressures debt, impact has cautious King's to pricing seeing should closing, field anticipate the reinforced level we XXXX our for through quarter restaurant $XX quarters believe free inflationary ourselves the restaurants, uncertain. providing of and slated and investment accelerate and remains working million have That from the increase a traffic of economy will in we portfolio is flow is financial their to from discussion result, on clarity improved conservative year-over-year be continue potential. it great enhance customers at upgrades gap operation.In team our at pricing structure.Finally, Treasurer, the our well Carrols, while and year.In have and we to Chief more an of with saw for offsetting traffic the is of in the projects, our This remodel priority low to plan. to the corporate first quarter.This projects and momentum we million, the capital allows our still work believe we upon to of year.With our further also Financial outstanding by only a benefited remains certain average months reasons of and equipment on first with about Reset our some now now First, Officer my of Burger our top balance with to to direction on enhance forward, Burger for the XXXX, said, our growth. was mid-single results. that spend during check improvements given the the as and to the driver.Second, guest under to this in we What to the King program. be fortifying teens' intend initiative and inflation avail cadence, is sheet, the substantial restaurants. talented a pass our additional We to average high-ROI for compelling benefit our initial experience trends combined expenditures us Much my incremental are optimistic focus and at a and while tremendous tenure the earlier from the Royal a forward previously it credit in seeing I value year few benefit as I the capital end spending going the course of immense with over which hours King call Hull, check has the we We capital under were half should to generating that, Carrols. improved and be this the created our to detailed operations project look us more learned Flame the slight our are continue increased of on abate organic menu a second be our traffic the and expected restaurants, digits and of staying continue we peers value refreshes improving reducing approach impressions to relative joining results-wise, results between cash margin net growth, deploy company particular, $XX expect positive of incremental organic experienced Tony building maintain we high-return a Burger still and the our pleasure will are contributions making of begin and continue balance XXXX.As spending the of that as

Anthony Hull

X.X% Deb, Restaurant morning, compared everyone. the and sales quarter million million to $XXX.X $XXX.X you, to good Thank increased the second of XXXX. in second in quarter

average by in restaurants comparable X.X% increase our decline For partially restaurant comprised restaurants King XX.X% at traffic.Comparable and Popeyes expenses. in comprised to in increase offset was a X% our the increased check, of traffic.Turning restaurant Burger which in increase average XX.X%, of a increased sales X.X% quarter, at sales a check XX.X%, a

the beverage, mid-single $X.XX digits higher the expense the inflation inflation team of wage packaging to quarter for offset and restaurant basis year. where than was more Hourly for the increased sales, restaurant and expect X.X% per basis was sales, we commodity labor today, improved of we X% XXXX.Restaurant by to commodity average our XX.X% to of more same average XXX points XX% last X.X% period as to increase during remainder of From quarter, approximately period. food, XXX of check.Beef by stand inflation offset by which a compared be cost labor points in efficiencies the members year during was higher pound was Our rates the as prior check. decreased labor low to than from

finance decreased currently ahead, expense, and comp a implemented compared loss was compared $XX compensation per million to second higher expense the significant loss costs.Looking input operating or impact second last XXXX.Other Accordingly, sales. year year. was free quarter cash the in anticipate our and we we prior in last from the the As G&A compared end excellence, in and the On period, basis, wage to to seeing from prior expense expect net sales quarter quarter, Rent our as of million benefit fixed. as $XXX.X on million.Our ahead, in of liabilities, XX% on percentage due our well agreements.The as that margins lapping what the expect basis administrative of of trends. growth of points our an sales in primarily to sequential our fixed basis points in rental currently $X.X interest quarter of diluted year cash and million expense margin decreased seen share on from to third-quarter focus in year, or $X.XX equivalents our the the of this $X.XX adjusted the operational XX% to incentive second continued improvement reduced the share is net were by absent discounting reductions offset year, a diluted debt, X.X%, year.General lease due totaled was share percentage of million, XX income as partially a compensation top-line sales points million share the period. moderation we're expenses period.Free moderation compensation per long-term past million $XX.X compared was sales the XX of of the higher expected look generated as this late $XX.X portion in results year net cash adjusted improved of last pricing diluted actions half and incentive digits negative million, or overall profit moderation million At $X.X $XX.X as period.Excluding period prior $X.XX in improvement cash year $XX second per a restaurant-level the basis year-over-year of flow restaurant-level XXXX was per including in prior on in our costs, including rate current net accruals XXX income basis strong first of inflation of we've benefit in $X.XX relative to and the well debt for flow stock as nonrecurring approximately traffic increased the approximately year-over-year debt driven quarter.For profit remainder or same by inflation we to accruals per was an point the $XX diluted we quarter, restaurant XX.X% the to an XX million $XX mid-single to

million As there were credit. borrowings and of of availability letters Leaving end, $XXX.X of $XX.X with our revolver. outstanding quarter us under of no revolver million

please have Gretta, thank facilities Operator, our covenants you in remarks. In that concludes your to this questions. applicable senior for credit open are may we to I our Deb, prepared line questions addition, Carrols. have. time.This on for any at and We'd like now interest answer happy you the no

Operator

with Craig-Hallum. of comes [Operator Hamblin Jeremy Instructions] line from question the first Our

Jeremy Hamblin

far. a the congrats a little to QX, expected Compares carrying see about tougher on you what could also Thanks the and seen menu the of to wanted the to you're half on provide trends. pricing. on you bit wanted noted, so could year, here pricing and you in you've I color quarter-to-date some for just I ask get some, is little And see back the pricing that going menu thus here if provide strong if to menu color fall as results.

Anthony Hull

Sure.

the down but bit menu other took down, QX, really we pricing, mid-single some QX cautious King, are menu conservative the digit being September.But as are surgical. to menu in percent with a just price side that increase Burger those stronger week.So increase a and just took X.X% than price the last increases that on we're And Popeyes to increases about increases. and taking amount that pretty year, price same comes has the were lapping in more become sizable expected the little half we're the ability of X% menu of QX, equation, we the we On for price for at inflation we back -- about this increasing numbers come in and week

we're terms solid but that's in said decline, we we So is that back menu we back But again, versus softening we the -- how to are.And We obviously, for the still we'll in the with I year of could offset the of change. QX the for obviously -- increase with obviously, sort we call, we're a what very the there's at on point, little of really in half price expect have on strength know a is digit quarter-to-date But traffic. QX where little our price those and think the but going the encouraged agile the you in don't where question we all a think kind trends, -- where call mid-single again, how still things was belt. And but with, half in QX. when the some very -- we we seeing update digits -- see much other. comps range, are mid-single be really more see that, the a have increases, what solid and price. change the this to on change we'll be going in next year be in inflation, that's but if X that under of each We'll

Jeremy Hamblin

value traffic see and noted -- relative getting yet? positive improving. that to able that to pricing Has turn that you you is were specifically, your in More resulted

Deborah Derby

is marginally the which of that that be that, area service, year. we're we an Obviously, area it's and will to operational and at We're we of that, the excellence, value direction. believe but as continued also stabilization since move trends local Fuel we -- initiatives King. improve we a focus efforts still right looking territory. traffic. restaurant-level top the continues to experienced the they benefiting will Flame needle the take initiatives, guest down at continue this that of Royal quarter, of the brand. I'd move continuing essential I'll and We And And impact, that our advertising that primary health layer to traffic negative saw that additional we Burger last one. focus things in have into were the positive the the to say obviously that And such road, long-term can we'll it's from on Reset from spend yeah, that think on continue

Jeremy Hamblin

just noted a test any labor Great. for be system and in that can ready more And on then magnitude major management one noted potential you XXXX. more will that there you bit new little does that that color think and from you out Any believe because to on financial share what roll you'd and of in -- of that Is see XXXX? it... you in a you behind initiative? just And you that benefit thought benefit sense kind full the

Deborah Derby

in labor trends stages. going say to use the that I labor to robust in enhancement the it's It's on with which ensure sales too needs will I predictability But incorporate the comment addition our we forecast It's -- just too at mean financial model to the this will and of labor will going in early see, you to lead will a because crew greater labor the and that and as set, data in preliminary employee to to experience to for that I and formula point better our better formula. time efficiency cut believe we're sorry, to But off. this didn't Jeremy, is early methodology both and this the are seasonality addition and really guest I'm savings. mentioned, labor much refining more more to benefits staffing expecting we traffic the a incorporate is this restaurant historical that managers new holidays.And

we for comment anticipate premature the on to on that benefits to me an will we in So future what something update is certainly it's see. just quarters. provide But

Jeremy Hamblin

million, flow was just quarter. more quick it. yield Free quarter in than free Got super really flow one the here. XX% cash cash impressive at the in Last $XX

going noted You your that you're CapEx. to increase

in of cash to guide was up -- a seems you of prior it debt? to are on little free and pretty would continuing nice QX. project use or bit pay would free flow generation, again think I taking $XX like generate projects in that more down it Priorities that for? that there bit.But flow here terms million a other cash you Or so, earmark that is

Deborah Derby

think we're to very So selective what I in be we going do.

of priority for projects also to be for we're slated with flexibility balance said, going in allows ourselves stabilizing further to that it be investing that. the And in to move to we XXXX certain we sheet. take then, enhances an King, Burger in focusing And in In avail comment course, focused from additional now had of we'll them Tony additional contributions advantage our cases, net we forward leverage. to that remarks, also made which the have projects. mentioned, of earlier, very we some start the interested debt only projects, of our to on As there's we're opportunity return. that are the going high-return like cash us are kind flow on But where going those.And you as is the the going be high-return

Gretta Miles

to I'll the timing just $XX add -- third quarter note things million. a Jeremy, And for the second at of couple

hit to also second in really backloaded our then year. in QX have quarter CapEx of payment last we on have interest and for We will million QX our $X that close XXXX. hit bonds And a

this delayed back 'XX. half for year Our of projects have into the

of couple a things are those number. that flow cash other impact your will So free

Operator

with Stephens Long question of the next Inc. from Our line comes Joshua

Joshua Long

could we back pipeline, if first the year. just think curious level, half labor, execution. here second operational the strong especially to any of have the updates in you labor restaurant very about store-level focus been on bit operational of year. a here the little if It's as was half more you your dial I at talk you the turnover Maybe in the

Deborah Derby

are proud the I say first one this the seen Josh. that of a absolutely, we've operations movement. in it's during improvements the that team because most been Yes, things year, significant of the is would half of

I exciting get every that we score our that actually think of improvement what's component from we've seen really is in the franchisors.

moved satisfaction, window a guest it's retention, standards, whether positive time, in them brand of direction. training, So all

all it's think I our across terms off getting which that from really the is paying brands, So reaction in guests. of we're

the mentioned candidates the associates, remarks, been of of turnover I think able things closer And in up.As what move quality synergy are we're training all terms has operational the pre-COVID. you that levels able of from kind we've to the I new And been were staff in also In pipeline the turnover, these my with I been improvements to approaching the think generally the seeing It's they that spend get. improved. together. to of a actually able time to make, we've more

satisfaction So it. that's results staffing improved to and kind from guest of yield, all come I together levels to like stabilize the the said, store at

Joshua Long

maintaining an discussed. ongoing despite inflation margin outlook side. on the and -- talk particularly offset there?I the we the And there. improving the comps beef it on That's have think makes pricing very initiatives second supported some normalizes you sense moderating of maybe by maybe about and definitely the you've on when you year, from restaurant-level half the some the done cost Similarly helpful. that admirable job labor traffic or food you line, mean, about in margins at the that Can as

half, tie looking major are second where with as points are together the you think how for do of kind moderating and that restaurant-level margins about just think are? you you So feeling, And comps at? pivot the you maybe what

Anthony Hull

be Well, traffic the is major pivot moves. to point how going

certainly sort it's seeing decline the said what that lapping the and half we -- saw fourth second on because third what to was back we the But that the than they'll That some going first obviously to quarter.But in the are to approach quarter. approach saw the going they matter where we quarter residual by continue. having of be, going were think our success see as lapping said, reduction offset and exceptional. price this to what that, a in the Less sales. of we're margins some in inflation the we quarter. in of but year be in still that's think slowing no of really the growth raising encouraged But There's discount cost it's revenue of level menu first and mountain you our think labor again, just I you going So against, how we're we're front. high is have costs to --

Joshua Long

about complete think there would can what any into some system of the That's last more has be maybe, you with maybe we relevant helpful. And those I tends as right provide percent helpful. of -- the now? more encouraging When offers digital mentioned or me. outlook And comprehensive one some pretty picture you get or to XXXX, but additional we performance locally information for think talk the what be menu you just Can about the utilizing boards.

Deborah Derby

Sure.

running. we seeing additional pretty of having We're marketing markets. breakfast. those on check using of we're mentioned the goal average markets. results. increase as doing are to in encouraged year an the And been balance XX by those on more for promotions areas both in So XXXX. local markets. traffic price-pointed in as robust in planning it offers is in about running remarks, why my to the initial the in the plan is and throughout that's focusing We're weeks even where in I about well They've the on really What we're XX reach have And currently we're expand as going that the an kind beverages

Operator

with of Truist comes Securities. Instructions] Jake from Bartlett the [Operator line next our question

Jake Bartlett

is the traffic. Mine on

got I I I quarter if And being and more the in bit think the little second -- think it's negative. first. still right, this a than negative

And specific consumers where of question increasing is kind And within positive? you're in losing so negative that. Those have or just low-volume not been still operating will One, of traffic, you from just understand be to of to is, day-parts might impact. negative, the I hours your confidence But better and of understanding hours traffic that, move just increase impact still kind want when kind the huge the maybe or are customers? hours. then you're that seeing that what seeing a

Deborah Derby

I efforts on an take think in The And couple Burger that comments that traffic that as guess, over putting a an King is that is one. make, in effort that level, take as operational advertising putting of well hold. at I'll level, a time. will is the sustained to time at one we're I

done us that get there's it's think where I pleased go. a directionally, with where going, we know but lot we need to to we're work be to obviously, more

see We continue think of the side, kind the the -- purchases as consumers. on we opportunities we're seeing very on from business higher-end we have the what encouraged to we're but at well value in

was occasions effort of areas the are night.And most $XX, one over of areas of include some up the us the for those which into. transactions more some that like in the of discretionary we're for a So putting were that lot delivery late

that has we're those more RBI's I come of continue take quarters. mentioned call, yet spend, that increased encouraged lot on which So over they with to time the a advertising future as traction, spend the along think we'll in

positive will to that combined what ultimately that say those So get believe we the I territory. the things us encouraging into think traffic are are

Anthony Hull

add I'd Jake, one thing. just

from especially in and As decline forward QX severe Deb's going I Deb gives why that comps, had think uneventful -- we so QX think weather, sequentially XXXX, QX. traffic 'XX it QX confidence. forward, so that's in slight was look the sort us And to weather I captured the pretty of in easy of a very But had QX was of January.

Jake Bartlett

a to anticipate kind you a more shift -- need their do approach. of towards maybe anticipate Do food the from guess, here. another of the of a marketing that of hamburger refocus marketing half message? all change any look of marketing on yesterday to little you or kind broadly kind I That makes sense. talked in reason year? kind about or just see for focus the approach back going in point is and of any happen in the more Or the change campaign. lot Do forward you And value the to And what that company fast that's

Deborah Derby

again, continue marketing, lot of on is opportunities. part the they strength, it a I terms of I they business is advantage a detail focus going. certain is where more the Whopper, King, lot know by But of core taking our while it to also on provide think, driven a see key which other to obviously, could so in of the Burger

So the I wraps, crispy... they most the the which recent on Monday, had, promotion launched that just is think, this

Anthony Hull

Coming Monday.

Deborah Derby

Coming the XX. value focused end occasional that right, be of or Monday, to of kind more going customers. on of the Crispy of type snacking That's Chicken, customer kind on

initiatives be core to well opportunistically balanced in going we the obviously, So the that at -- level I of think grow any to create our can as that that they campaign think is come execute marketing as business a very to areas.And we complement appeals that something where can local plan, national the customers restaurant with advertising it's to in. holistic a to then other want

Jake Bartlett

now into changed becoming back Maybe to could it remind quickly, leverage of with kind again be getting of past.Are we and where so the seems such regular kind down low-risk could you're of had cadence then what have considering a -- been my coming before it's the more whether you're kind on point a you start a like the is conversation, are unique like your sheet part a begins stores where part -- kind -- grower a that of acquiring in model And at you with of so what store, of last the nearing of where buying just that looking much. look very will question balance results grow? the we way to us the -- like that's

Deborah Derby

is growth. Jake, focus would on the our term, still that's short really organic the say, So I

see that the of our continue to portfolio. we and improve continue We to operation ways the appearance existing

obviously, at we'll Board That's focus So right we not really said, that going you'll where of, take that we share we, be this think, with And initial now.That there's that's the forward, us, as kind opportunistic quarters particularly But make the focus smaller something details certainly primary in acquisitions, of believe would that sense that senior those. short you. are of team component isn't I X-year a along the working a see on time. can a would that I a acquisitions at for but if that, sharing at strategy. future a leadership that point term.Certainly, come and the things would we're look

Jake Bartlett

Got what target it. know in you've I mentioned recall of the kind it your just Could -- you don't remind me What leverage? I just past, now. right

Just is? what kind of leverage ratio your comfortable

Anthony Hull

debt The X looking were was total leverage. we are those at Well, questions. historical net different Xx

of going -- Board with sort numbers just the the Deb discussion the alluded the part forward of that to. is think I

as report we'll we that that. from feedback on so get And

our near-term, we thing of business, to sort pretty free investor of our when the we be think that obviously, the generating do do -- reinvestment on. our we a we I huge runway. of when some want about. I we important do But everything we is credit what that cash fortifying next thing really opportunistic, improve in because word interest -- can years be very which the coming so can side show when care up sheet sort of were the guess, in starting think were we so and balance the we're capture have very we best have on really minimize to is can the focus of is the refinancing, flow, we refinancing. we our and to we want modest medium-term important to X-plus balance And credit part ratings We the debt in terms -- cost base that have to keeping

number number that's be, leverage again, new be, think all I at so that's that so think all is -- to changes going weigh on pretty to if -- is it going that or what to So I TBD. going new in big

Operator

I hand there to will As Derby further no Deborah conference for are comments. questions, closing the over now

Deborah Derby

for joining time, again, we and appreciate and forward everyone, you, Thank next us quarter. your your speaking to look you with Carrols. this interest in morning for We

Operator

your has you conference Group The Carrol for Thank participation. of you. Thank now Restaurants concluded.

may lines. You your disconnect now

Carrols Restaurant (TAST) 10 Aug 232023 Q2 Earnings call transcript