TAST - Earnings call 3 2023 | Carrols Restaurant Group Inc.

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Operator

Welcome to the Carrols Restaurant Group, Inc.'s Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, Thursday, November 9, 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 and Assistant Treasurer. Thank you. Please go ahead.

Gretta Miles

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

with respect forward-looking well refer could our risks as you impact to that our as also and the to both results. SEC business with statements We details, filings for more

President be non-GAAP During that information our The today's with presentation measures of accepted turn in GAAP as earnings CEO, results accounting comparable we believe a not in discuss to with reconciliation available to is Derby. we additional measures that, evaluating will be in generally over our call useful I a substitute performance. considered Deborah will release. With call, prepared the this principles, now and for isolation accordance and our or certain can should

Deborah Derby

Gretta, you, and Thank good morning, everyone.

restaurants, only We anticipated are King thrilled saw growth comparable also sales achieved quarter not year. of with the growth at this we for earlier our Burger we results positive as X.X% our third than traffic

outperformed expectations. BK with In addition, significantly Crispy launches, Royal had Wraps, recent such product which the traction great we as

KPIs in margins for in to prior period as XX% net guest providing basis flow million our franchisor, including Our an saw customer of improvements measured new a free a over to the a X.Xx. and point was on experience, excellent Equally team increase strong compared top we restaurant-level guests XXX our drove focused ratio reduction basis returning by and important, all EBITDA year quarter growth our continue cash in remain members $XX our generation the expansion a to and line in in with leverage satisfaction.

result, XX in cusp to talent see across X,XXX are To our A-level such achieving system and field the to than of our over in a less franchisor period operation under on and our work Burger we As scoring Together, months. by portfolio of such about X% a hours progress labor of restaurants testament our operator time to King a by while year members. short the X%, real the is us prior of period. restaurant hours of increase hard operational compared improvements team our allowed reducing status

to efficiency We team continue turnover in to our X%, manager wage and hourly inflation from approximately efficiencies stable labor with see enhanced productivity operational decelerating members. remaining and

efforts them Carrols' These customer and work without are and Our extended as our our chicken are progress of our the success been wings have thank U.S. strong in food more restaurants continued chain improved dedication to which in for at our to fast also Popeyes satisfaction not The second to personally possible growth Similar and hard their and I Popeyes part commitments. we largest the Spicy our comparable of profitability. King than would Sweet results seeing now restaurants, improvements members, introduction well. quarter sales operational drive Burger both helped restaurants, 'N scores the XX,XXX of the and in want quarterly team continuing

we points. contributing major seen and and has mobile, believe year-over-year delivery areas, increase. X There of to is increase are XX% Our a now also digital which including substantial overall our approaching basis of business, growth sales, XXX this are

groups, have and and the of marketing BK amplified both seen the sales, including the mobile consumer, Wraps, improvements including younger We've in by board comp tech generally savvy. across Crispy across Royal check. demographic more and franchisor, successful our average delivery is to terms which relevance product launches the Burger First, King's traffic

dinner King's business, relatively of digital increased X to our hours vast at and self-order momentum drive process performance, late-night aided we program. continues being this we from be our the by XXX Royal strong the that investment in the further our continuing referenced next with out delivery to Second, latter are the seeing are of of the I by To benefit majority our operations with of earlier. over funded approximately months, kiosks rolling Burger Reset in restaurants

adoption we're early in that thus testing results the they still by the have process, seen is King encouraged Burger and While far.

expanded XXXX. spending In talked opportunity Burger plans reaching value incremental that continue our business. I to like and for promotions increase average approximately addition, the King day touch These an also see restaurants. towards XX% as on last local our we capital now of in parts drive initiatives check about increased I recently where to look we quarter, our we would traffic

in strategy, organically We of about finalizing that but growth on Burger reinvestment the growth, in to organic term, order sales profitable to near we focused through primarily our continue XX accelerate to are plan in remain XXXX, still we King restaurants. In in our remodel the and process driving restaurants.

our such will our it portfolio Sizzle return leveraging our avail capital restaurant named and our guest economic drive-thru convention. invest was program. the to believe our rate overall investment. Burger King's latest the cumulatively signature earnings time believe unveiled of mid-teen at that format through XXXX well modernization in While Flame only robust reap are remodels the our XXXX accelerate this an hurdle October pickup from image will we to as to our threshold. Similar to digital with somewhat in opportune we increase through King improvement, the will as XXXX from contributions we remodels continue expenditures design the Sizzle that meet ourselves will updated elements. franchisee remodels, we experience Burger the the The along will We Reclaim with franchisor and meaningfully our able of enhance meaningful new benefits for benefits be profile makes with levels, assistance

in first which We are entire excited King just in to weeks North the Burger restaurant of opened Carolina. Marion, have system, couple Sizzle ago a ground-up the

For approximately to Burger XXXX, of we and new remodels half improved King in image. our be are planning for this

quarter add delighted to string excellent of to are another the We great a XXXX. quarter of since beginning

fourth aided a year strong finish digits, the For we accelerating at the in sales quarter, traffic comparable expect to our King mid-single with restaurants Burger by growth. the

regular in for confidence Board's the have dividend. strong flow on and an share based profile, declared outlook our business per cash the initial quarterly $X.XX they Finally,

momentum drive positive traffic beyond, focused while and year to we look to we remain incremental we continuing this XXXX As and achieved growth maintaining EBITDA. on the

pass believe As Carrols forward to of have a Financial to Hull, committed great will company, the building I is Treasurer, said our with surface detailed call immense more for the and potential on each I Officer have these in now and our members. previous Chief results. We discussion the talented team financial only achievements over our scratched we of forward. With going and that, Tony quarters, look of a

Anthony Hull

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

of sales a For X.X% X.X% traffic. King our increased at the comparable Burger increase a restaurant comprised and average X.X% in check quarter, increase in restaurants

third anticipated, benefit lower began moderated our This from with in sequential our quarter that we average as saw in discounting reduced a we step in pricing and down comparable As check the XXXX. in improvements restaurant partially increase in restaurant restaurant and of was X.X% saw sales in traffic. a check offset by an comprised at increase traffic. Popeyes to we that average the our XX.X%, sales Comparable increased X.X%

Turning to expenses.

the was margin points XX quarter. which a improvement about increase of XX.X% a of basis which we point same points X.X%. during pound cost that benefit that new period and quarter, points was us vendor from sales inflation X.X% It quarter product Our XX quarter basis commodity was responsible per the retroactive $X.XX years. Beef fourth to packaging the quarter, the to food, agreement third by of of basis thereafter XXX to improved fell and beverage important continue to point restaurant This XXXX. the year. out per basis beginning to about a number in in will as of is XXXX the for the This benefited rebates, was improved approximately last in from of for XXX

more our on to today, team XXX we stand normally for as QX, the inflation the than members offset rates quarter wage labor in of costs and we restaurant in decreased see during prior the labor we check. pound. for be increased the digits higher commodity efficiencies to beef was Hourly by are decline by hovering the labor average X.X% and compared period. to points basis year XX.X% sales inflation around currently As expect where $X.XX remainder XXXX. Restaurant From expense single low of per

As XXXX. wage mid-single we remainder for the look ahead, we in the inflation expect of digits

of Adjusted period. X%. year period. came increased points an than decreased double as to increase $XX.X prior basis the Rent Adjusted Our to prior accruals more administrative a due XX.X% XXX% compensation at restaurant XX to XX operating were of year percentage year in to quarter third compared prior prior a the margin the basis percentage in to of incentive increase of compared a the EBITDA sales expenses of expense sales and sales. the period. in period, million in basis General XX increased as of points $XX.X X.X%, million XXXX on EBITDA sales year-over-year year-over-year decreased points expense that absent year

of fourth $XXX the and we and achieving EBITDA million $XXX end the near million $XX to quarter. of of This the adjusted for between we anticipate million adjusted in million between As $XX equates year, EBITDA XXXX.

prior share quarter, loss million, On per compared net million quarter third the our net basis, to per million the income $XX.X $XX diluted diluted was million per million period of $X.XX third income adjusted cash $X.X period. diluted net share of or in per the prior third quarter flow adjusted or For $X.XX was $X.XX million compared to $XX.X an the share of year or in an in period. Free same compared improvement $X.XX the $X.X or net year. flow last in free the was loss a year share significant $XX cash diluted share to per

the in portion, including Over free equivalents quarter, cash robust months, XX was cash indicates over price. and third million and a This the flow cash At current past cash flow liabilities $XX fees free the generated of end $XXX $XX million. of given we've debt, current long-term finance the totaled yield, stock our million.

XX% our debt on Our debt remains was rate fixed. as quarter past overall X.X%, interest this our approximately of

$XX there covenants revolver quarter of million were with $XXX revolver. currently availability million applicable As and no our facility this credit, We time. of on under end, borrowings of our letters senior credit outsetting no at us of leaving have

may December on Directors ago, per concludes answer now you shareholders of paid In XX, questions to Deb, share. Carrols. initial authorized Deb our as XX, and of I November dividend of Gretta to dividend interest happy our Operator, for open addition, in declared like XXXX, your $X.XX has mentioned of prepared any remarks. line record that to few an Board you will XXXX. This have. We'd This thank questions. again a are for please the minutes and quarterly be

Operator

from [Operator first question Stephens. Instructions] Today's coming Joshua Long of is

Joshua Long

level, X Burger just together consumer, those that together of you core put the all what overall a could the when your Just competitive as rather. could the efforts that coming the great brand what environment about you've about store and But this curious been quarter. operational the talk work somewhat still of dynamics challenging seen and COVID has come bit in environment. or kind think otherwise all of be trend versus through pre-COVID those there's you if at of little normalization done period a curious -- I saw ongoing how King know out the operating you that

Deborah Derby

of I guess a would say, that Joshua, I couple things.

guest are part to As a business the you improvements continue key think we're is we operational incremental and seeing a driver that customer satisfaction. mentioned, satisfaction growth. to what And traffic the we of with repeat key believe

as really expected done in good positive the that sooner reasons they've has also that's earlier And promotions to. franchisor we we've than to think the we has brand overall believe so continued year, job well we otherwise the marketing that done support with got one that and traffic performance. the see our I of as had our and a to --

Joshua Long

traffic for the Burger And for of there mid-single It great broadly. kind quarter. just as a still there we and the maybe pushes the go kind well your mid-single-digit inflation, pulls influence of can the of at Obviously, about that your some think and it. some growth, could supported you digit brand terms pushes results like see lot -- sales affordability any positioned way. Great. sees talk when seems you it of is for team and either core there's of by pulls of guide But that through rest as we just pushes momentum, about interest but King, Obviously, the as pulls this consumer, comp your in year? curious,

Anthony Hull

$XX Well, the expect planning saving Burger up sort to by I'd the comp that that's spending would Yang quarter. quarter. We say the traffic announced additional fourth King their be positive of been that incremental incremental. on that doing the And in million be bolstered is is Ying we for, and they've for call, they continue of the about to that a going think fourth the on it

help that bolster think traffic. that I -- bolster So would will really

of piece discounting prices, our down of other it we're not quarter, we it the because raise envelope to last coming on lower lapping that. pushing is check average side ability is, as and The we're said the

X in So the the of growth driving quarter. the comp kind things those are fourth that mid-single-digit are

Deborah Derby

would only trade what I see of we in earlier be continue that guess to occurring. And talked the we down the the thing just is to that Tony what with about to some trends said add I quarters believe same we

that we to our potentially will believe environments, some as economic so have continue more challenging And absolutely we business. sustain

Joshua Long

one And more Great. I could. then if

would new a in format, was the terms be that overall if maybe arriving into flexibility Curious and of remodels in you strength certainly the there the just image system. elements just just how driving that the there the don't XX% brand trade think certain store discussion new make system. I the and is think trying opportunity of XX% of of that bringing just on kind system. sense, that's about at that exciting under areas just but store there's the And Maybe number? contextualize or format to of

Deborah Derby

Right.

building there, obviously, the with some existing So in site that's a of it lot on cases depends, remodels. and the

format, if of it at into because take not that features we're that to sites to image makes put the -- the to So us sense able that. to some going advantage will with it But allow Sizzle the excited do pretty of economically to want all be offers. most absolutely we're modern unfortunately, more of

it. and where it's the we kind At out But sit very always we would determination, it. So much a gave be number our that's do half. of we in we point going this of site-by-site where can approximately that's if XXXX, put to preference

Operator

Jeremy Hamblin of The Craig-Hallum. next from question is coming

Jeremy Hamblin

then of on the stands as momentum I business. and in follow here enter the to about Congratulations think kind forward, backdrop XXXX. how about strong the around QX wanted competitive the as how and a we XXXX? of here look we to up macro, menu of pricing and overall just thoughts reminder the set might on in menu just where pricing you pricing And for breakpoints think

Anthony Hull

had dropping September. what drop in sort accumulation done -- drop is of off. big price net of months what's QX and We of we've just increase which the The off a big a is over previous XX pricing, one mid-single-digit

us gets that sort this of to So year.

pre-COVID. next at we're year, -- were think price of of going of percentage we're modest, we're increases which and we're in about of we'll more and increases. sort terms -- what frequency normal I pretty to levels, -- a for cadence That's increases, very obviously, type cadence, think pre-COVID it, I move on price cautious very

next is we're year. that's that's expectation do how our So going the -- to way it

Jeremy Hamblin

Got it.

historically, to think correct? I in the So like that's X% range, X% more been

Anthony Hull

Yes.

Jeremy Hamblin

story time a just of of I kind get then really bit oftentimes, product have new BK as but here part been to sense success the of Royal pipeline, visibility a ahead see, are of but the to it products wraps. frame, on you expectations traffic guys for, wanted be additional the new Got congrats that of turnaround we big XXXX? could to hadn't a kind it. that August that think And here little there Crispy -- on drivers until Wanted on are

Deborah Derby

I Jeremy, exists, almost Crispy a already what that up mean wasn't product. it guess was about awesome basically the putting wraps a Royal thought what that and it sandwich is the I'd that say taking and chopping one, we're were in that Sandwich, they it a new I on I wrap.

you're From of kind it yes, significant a format. a is, that something well, that the help standpoint, So putting in of was launch have you and an using that with the beauty new already that. operational of

I think the at think our times. on continues forward, they'll unveil and new I franchisors BK opportunities them going in to work appropriate

Jeremy Hamblin

one ask wanted the And then I initial here. dividend. Got Congrats it. dividend on to on the

those should broader this capital which thinking share you is $X over in is targeted? a investors, we In kind the is of not sense Board thinking that, then ratio free the company company the open a management there flow payout just -- to if of up But down going being kind how a to a terms of of plan would get a coupled dividend, the And or a of rule is balance mean road, allocation I well is that's terms thumb? I our of think, kind ratio a additional about potential having of wanted of how and kind the generation the and cash there's X? whether about set consider by I math. for the do that tremendous tension to buybacks share of year, with

Deborah Derby

of obviously, growth a drove obviously way business, I continue of I what to guess dividend to to we I that's kind next then as are we to just approach, guiding the the confidence the of a with into would look go X Board's our really year, strength the and capital perspective, is it in from down at principles is those the an And capital move And return allocation overall pay continue as kind that. just of and expression we a say, organic forward. shareholders. momentum debt, and business of X-pronged within which think finding kind

Jeremy Hamblin

quickly, one I if could Last Great. in. sneak this

XXXX, As next of the a baseline looking kind that at we Tony, is the same-store ahead, to we what's on there what needed lever at sales you'd number? -- rent to your of to Is to and that lever year? costs, look look looking X% X%? occupancy kind at we level Are be

Anthony Hull

We things Yes. grow of to continue next There remarks year, for next the are highest that's to looking we we're lot at. EBITDA and ins that probably those not in outs a expect in year. our of so priority prepared said

out that's terms into that leverage on -- get So we when I think into be will it COGS, labor XXXX. we'll further basically get whatever falls will it in that But of have leverage of to or we'll where on be.

Operator

[Operator of The is Jake Bartlett next question Securities. Truist Instructions] coming from

Jake Bartlett

first is mid-single-digit question Tony, quarter, but for guidance you price. fourth comps my positive gave mid-single-digit the also in on --

that So implies I there sounds it specific traffic. maybe to little just flat a like more want get because

pieces of quarter? So there fourth any could in comp quarter? detail price menu the Tony, And level of you -- on was the then, what exact us the in the the the third give

Anthony Hull

Sure.

price there's And specific in X%. we to So increase was beyond our all do be given not and expect mid-single view expect pluses sort We're the detail QX. momentum quarter traffic, of to on to right the continue lot we but increase have we menu minuses, of giving is third traffic the but in a digit, and now positive. advertising

Jake Bartlett

the kind of in a that what's outlook Burger predicated kind much as already coming how contribution ahead trying supplemental you're the of aspirational of seeing? on current or is of Just marketing, Okay. what is seeing get to kind you're to what King? trends? that Or that sense with And is from

Deborah Derby

think, I X Jake, things. it's

that Burger kind the obviously, King, the we that traffic. past over one, is we're improvements the the it's it's repeat believe that of incremental several made year increased spend think marketing we've traffic from again operational that to this but months also that I anticipating key and

positive. those to optimistic all think I what the continuing traffic make So us about be together is

Jake Bartlett

for significant system. the the across you. And it's free a rollout, kiosk then rollout kind pretty of I Great. guess

for I in So expect that about 'XX? or traffic? are driver pretty going But you kiosk guess, to excited of in a be mean, the real check you terms a high. to it that's drive ROI, Is do? do of I to potential the sales what

Deborah Derby

kiosks we're an about we average have excited rolling So seen implemented already from we're I think check. on early expecting out. Obviously, we've it. see some stage that in it based to that the in in But are others increase what very of their

mean, people because optimistic to So and country, just that's do it of a they we're we one. to in can potentially think that's more I it. just also on actually faster, pretty about areas what that a interact than be from And kiosk guest person the with like like how certain satisfaction, just the

possibility track labor we things But good, just want you that's time, X those realized we're There's on to And prove things of how in do are go taking as well, that. further. down the I see concept. think point that out said, obviously like then if depending hoping the with along then the this we'll we at I road it So on initial far kind plan efficiencies pilot. when the always of to the

Jake Bartlett

last on the And Great. question then is remodel.

comment opening expect in a or you're lift you of or expected, XX helpful. whether going How just to done so would to you're be do seeing, And you on of have next sales year. than you or the better many that wondering worse lift, you're I'm kind much can do how 'XX? do And

Deborah Derby

XXXX. half got about in amount XXXX, did late we say So a in we start would that but I

work lot of in the a of So underway the second half year. got the

few end just Marion those opened them, that drift openings the of last Bennington, So beginning the and had the of XXXX. on of few and we think based actually of have last I just opened opened mean it Sizzle weeks, the had in quarter But they've week, into terms of I on really opened first the will that last actually week. in a was literally, the we Vermont lot

those. we've pleased but really the soft just very we're openings it, on been seeing So with

Operator

Research. Wightman question Wolfe of next from is The coming Fred

Frederick Wightman

outlook October did for XQ, comp comp number? an give guys mid-single-digit you The

Anthony Hull

No.

Frederick Wightman

you? Can

Anthony Hull

a I quarterly number. mean gave you we

definitely consistent gave. that, mid-single-digit that with we it's So

Frederick Wightman

on that quarter. a benefit benefit, exactly the point vendor then Great. Okay. said ongoing basis. is point as just new What basis basis that? is agreement, I what think you on you XX think, out XX A And called I in an the

Anthony Hull

an was. benefit I from of think their Burger deal incremental of the incremental it and the was, the King went improved going And negotiated ad that there large August, then to vendors dollars one franchisees. were that the with of at dollars that to fund end there were

happy So for of that. with unexpected next we're was the an It kind really benefit XX for and the year years.

So I deal. job think that fantastic renegotiating a they on did

Operator

Thank floor like turn over you. time, closing At Deborah to to this I would the for back comments. Derby

Deborah Derby

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

Operator

thank your This concludes participation. today's gentlemen, you event. for and Ladies

your disconnect at the webcast rest may You time, walk and the this of lines off enjoy and day. your

Carrols Restaurant (TAST) 9 Nov 232023 Q3 Earnings call transcript