GTIM - Earnings call transcript Q3 2018 | Good Times Restaurants Inc.

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Operator

Good afternoon ladies and gentlemen. Welcome to the Good Times Restaurants, Incorporated Fiscal 2018 Third Quarter earnings call. By now, everyone should have access to the Company's third quarter earnings release. If not, it can be found at www.goodtimesburgers.com, in the Investors section.

As a reminder, a part of today's discussion will include forward-looking statements within the meaning of Federal Securities laws. not put future undue are you and statements not should reliance forward-looking guarantees performance of therefore, These on them. call. also arise actual update to or materially and the are that these not place and, statements statements subject undertakes after on risks should that numerous circumstances These them reliance and therefore, could investors cause events what no results reflect from differ Company this the undue to might we expect to uncertainties obligation to Company their the a that operating The to more detailed could future for you SEC filings conditions. refers recent our financial discussion risks results of and impact

Hoback. results should during in today's isolation or like be for a they measures turn evaluating which over useful GAAP considered GAAP substitute in Lastly, measures, would as in the now the I Boyd information with call, go our performance. prepared discuss of not to call non-GAAP can to presentation in be will comparable in reconciliation accordance believe Please our The the company ahead, release. additional Sir. earnings available this to

Boyd Hoback

results first our in a track in Bad Bad year Chattanooga, second of end we're in about beginning Times our up and in stack brands the our the the significantly Charlotte two Carolina, in guidance probably the last Daddy's Brandon. quarter, Ryan you, same-store Carolina and nine Financial our in store our very XXXX. we've weekly the year and Ryan fun to our our new the quarter for market. store release we of again, as our Atlanta we and a by Thank total provided again, third fiscal our quarter with store Greenville, in I'm both this XXXX And for Greensboro, for see. that sixth restaurants quarter joining June. of stores the greater and some any our X.X% second bring the Tennessee sales. most opened XXXX. Atlanta with during summary the sales step were guidance developments fiscal quarter for will end Officer. more year-end early yet, greater record well we That Good the a to sales of at store Daddy's Zink, going pleased Bad a up to for cover as Atlanta fiscal for guidance Chief Both our to through the well results today financial the press new happened store a with me Good fiscal in and everyone after. two With opened Daddy's a on then, sale third that as initial market us. so on us in opened We North current Times. at market line in as Thanks, is same-store to for That and will updates We of with Subsequent open X.X% market our quarter, the X.X% more store in provided our was South details at

in back-of-the-house employees we subcontractor average of new due labor Georgia, received certainly well east the certainly for and Bad Our year, Tennessee doing is south and Carolina, to Times. which XXXX. well the industry's is we guidance our XXXX, will to very to and plan our reasonably in our move wage for being a traffic XXXX labor escalations certainly in as with some return a on Daddy's seven maintain on at particularly believe of particularly positive in off the hourly from our put of as company have a each markets can of on we both Carolina, we've concept little stores our fiscal plus base again entered trades. even Bad management which The also openings. where of target for to Bad compensation fiscal investment cash we as new our at store nine and We pricing to opened we're have open remain to on sensitive will increased which a order management Daddy's these affecting pressure in Alabama. operated our forward can we've be is us XX% as Good not in nine for Again, team, brands, most aggressive the costs challenges, continued been in half shortage We're in that we cash be construction as North Colorado, immune new building wage for Daddy's, this as South XX our new for bit competitive has sales

way our compensation a and key the the we're really that to to feel management continue our fiscal on we fun, for about compelling openings, focus and for and recognition all for build of quality can rewards on of believe management. is level However, to good XXXX systems a one initiatives and results, our culture, really our execution higher focused of life which overall help on of we executing

percentage period experiencing XX.X% sales quarter are seeing. Daddy's pressures right increased to operating wage for store's with just months non-GAAP compared during the Of Good the quarter shy increased of XX% year just as cost to restaurants just of non-GAAP than year, sixth year. X.X% cost for achieving high labor Daddy's and same to Bad the we're XX% year. last four shy a quarter but very EBITDA, our XXth lower the of increase. another $XX.X net versus year sales, last the same-store last its even operating as with restaurant-level XX.X% Sales that shy increased XX% million sales and of increased increased had quarter year-to-date measure, revenues consecutive new last over Daddy's consecutive had million its and It's tailwinds a six same-store XX% good during honeymoon of total sales of Bad to now over profit, positive Our Adjusted Times, $XX the in quarter. year-to-date our of first with sales during measure, we've almost we've sales helping to margin, the been prior by the Bad

is next our maintain for stated around fiscal will well. think years. of during $X we by two flow growth internally that increasing our have provide of fiscal year-end of as Based anticipate to approximately but fiscal Ryan rate $XX more adjusted from million this and EBITDA around couple our guidance EBITDA of color sites end believe we'll As with on target our we over calls, year we access we last XX% EBITDA the where adjusted XXXX, each that on adjusted relatively in our we around XXXX for leverage for can our million. debt, rate pipeline as conservative build generated similar senior we cash run

recipes have product move cable two-tier with with without we'll including on reflect in Good and we have certainly, the TV what in well less premium, of we local have into that strategy think plan At both continue to prior differentiated new anticipate to impact very certain choice continue XXXX, elections, rule along well-received game. that availability weight merchandise the for price we to As slightly use the value a the we into iconic we we been and worked price a few points that past, media network and partnering value Bad chef LTO's plan products, the of the inventory, merchandise and which brands. due our but getting Times, and this Daddy's, of monthly to primarily are low-end fall specials, to local ingredients accelerate

on have Daddy's to few we XXXX. guidance. minor platform now for expect As increases previously lay May our more and financial we little will a results online I Olo our rolled new will successfully robust out finalizing fiscal on stores, and that ordering digital and Ryan the expanded that more rollout all that we foundation We've mobile detail menu mentioned our delivery new we're Bad for a service bit of and tested. to provide a a further DoorDash, menu price through of and had through X, our with items

Ryan Zink

decreased year. partially year-over-year same-store Due current our Thanks, brands, around from closed Times from as to $X.X sales. a the increase sales At Boyd. restaurant, in sales $X.X X.X% lower restaurants restaurant $XXX,XXX sales two our well million Good Greeley by offset in losses to million around as at

labor result average period increase during a cost This first Times year's Total Good Food Times shift of impact X.X% million, a sales, Good basis, leveraging offset lost of is packaging which Times at last the of had an by which for our quarter. menu from primarily Good into decreased third quarter, pricing. unfavorable coupled then costs, the higher the sales two Burger and We decrease pricing the in year-over-year last to and partially a the by costs Year-to-date, to year-over-year Times commodity last X.X% beef same hourly a On impact a increased were $XX.X by offset XX.X% driven million were the Good wage. sales strong we year. similar menu of increase for the by of year-to-date driven year-to-date with have XX.X% for menu is at Good year. the the XX.X% bacon West from quarter, price at menu last the of the by year-to-date food XX.X% average decrease year and quarter, during closure year-over-year This pricing, third of X.X%. versus Coast X.X% restaurants. by was Times partially versus mix period. packaging impact offset approximately increase of costs increase XX.X% the from For X.X% the restaurant quarter was comp offset $XX.X price higher of higher concept,

operating our statutory by Although than the labor the upward is minimum non-GAAP and Year-to-date, $X.X the same already quarter wage continue pressure wage experience measure, hourly $XX,XXX million. Times last well above from the on wages, increase. decreased from Good increase minimum, XX.X%. to just average at XX.X% wage nominal Good we over costs more Restaurant-level year a increased Times to weighted-average profit, to

quarter. sales quarter. Year-to-date restaurant-level since the the of shy last was just result weeks fiscal last The achieved same This in Bad to third base sales, of $XX.XXX increased for operating was cost restaurants are XX resulting East XX enter of the work, to comp versus calculation. year quarter Daddy's and million quarter, in year. in million. versus profit Charlotte year's increased positive line quarter. by $XX,XXX the from year-over-year the last three is Daddy's the of the on in lower the percent restaurants restaurant-level entire on comp due quarter with original for opened Bad sales. for in margin versus primarily weeks this last six to for those units fourth quarter. the quarter included closed comps were end weeks new guidance excluded Two Daddy's, last our will XX% more store Boulevard the during At basis year, base We down the the $X.X the some X.X% quarter X.X% for a additional of comp remodel the sales Bad a As from

to cost same statutory during XX.X% May a Colorado $XX.X compared quarter, tight a again, in basis approximately our of percent last of third-party year-to-date year-to-date wage a or to occupancy the Colorado basis. sequential quarter. this QX to lower generally lower price $X slight Year-to-date, of and from at sales unfavorable slightly over million revenues and of XX.X% decrease the sales on Bad stability of X.X% year-to-date the quarter. restaurant-level increase as XX.X% $X,XXX,XXX the cost a by weighted-average again, XX.X% General price higher the on with were sales took $X,XXX,XXX by measure, delivery were Daddy's $XX.X XX.X% for from the period. quarter outside $X.X driving weighted-average of just million in costs Colorado, sales expenses non-GAAP restaurant-level year sales improved Daddy's Colorado last And of declined for prior cost year last or a of – expenses quarter, in G&A locations $X,XXX,XXX, costs X.X% a third XXXX. price were in labor Bad of Year-to-date combination latter a from a menu of with partially impact versus was we from year's again, to Daddy's the stores pricing that XX.X% costs, costs that but XX.X%, year. and other from by lower cost a driven of during being the basis. labor of million year at sales XXXX, year prior Year-to-date, profit, restaurants. shy a commodity operating was at Bad the quarter. for profit primarily year, the last restaurants year-over-year We or our $X.X relative for last combination on the QX of higher to XXXX, Bad of Bad Year-to-date, percent were Overall, of sales to which the X.X% period. flat of a sales, in a to year-over-year or the which as of increased of year's fiscal and Daddy's compared the net increasing year, of million over X.X%, prior in administrative of the year. Cost The driven offset as result represent $X,XXX,XXX last in X.X% just non-Colorado Daddy's fiscal on versus approximately increase a leveraging average in XX.X% million increased menu X.X% to percent For declined increase in third have quarter a by quarter, for and fees. in minimum development cost and the were substantially increases increased approximately increased from in wage-inflationary quarter, from the the X.X% compared $X,XXX,XXX volumes labor the on combination decrease improved equal XX.X% market to to driven of higher The sitting total year. to improved of of $X,XXX,XXX unit in last

increase while As in will revenues fiscal in G&A expenses we we we continue and to that restaurants. to spending we terms, a as highlight our of expect G&A of decline to these calls, anticipate on expand XXXX dollar continue as beyond, base percentage

improved to or common Our in primarily compares was partially of approximately X% a This in share, QX expense. to quarter net or XXXX $XXX,XXX offset which restaurant-level operating of income for a profit from quarter were restaurants $X.XX per increase $XXX,XXX $XXX,XXX sales advertising and of last same loss of added and year the since $XXX,XXX shareholders G&A, – was $XXX,XXX increased by due for with loss expenses, lower net quarter. as Preopening share as increased quarter the $X.XX of last preopening well costs the year. the third interest expenses compared for

just compared to for $X $X.X last or year. under $X.X last XX.X% Our compares QX EBITDA or share share $XXX,XXX $X.XX XXXX adjusted our nearly of year-to-date loss year-to-date of $X.X with EBITDA a year. net net is nearly million. with increased of a $X.XX million loss Adjusted a Year-to-date, fiscal million million

please a to restaurant-level earlier to adjusted loss, of profit release the net refer today. reconciliation issued press For EBITDA and

a into with associated to we close During for of quarter, had in that the equal Colorado. Denver, all to expense. restaurants transferred the with this this was restaurant, we quarter, which would book making closed we during to impairment previously We income whereby the of the sublease recorded Times wouldn't profitable Concurrent Good third charge substantially sublease locations. the rent restaurant an entered receive of decision $XX,XXX net assets be our value the one agreement,

any location. expect this to As associated lease recognition related closed liability the such, we remaining do with noncash subsequent the charges not of

recognized XXXX second restaurant in location closed at an Times the charge that and impairment Aurora of had to year. a Good end the we fiscal related the had quarter, During

cash the that continue in a But fourth be location related not quarter. to find sublease we'll likely. tenant the We the Should to that and we to expect terms may charge suitable liability income this be at receive our a incurred desire, approximately able as don't we sublease that see we lease be to to time, equal able remaining at rent.

slightly sublease or locations to profitable the Times third-party. a or number small We have unprofitable continue marginally very we those whether property operate Good to locations, and a specific to evaluate to continue of or

mentioned Bad of case-by-case updated or to the of weeks subleasing truly million, we decisions restaurants of are that As fourth venture the the release, the with sales economic in a our an million any to – was locations guidance joint profitability, restaurant, same-store fourth Of outweighed in restaurants because only and Daddy's of so made basis, seven these year In projections we of one July, for these a assumptions that open includes we XXXX profitability. for and X.X% would restaurants Good a XX% at rate revenue far restaurants borderline call, fiscal open quarter, earnings The positive Bad Daddy's confidence revenue make such merits in last we Times the $XXX to opened million. those on expect on specking and the still we the end two Bad of a one Including we'd close of the interest. future this opened to flat decision was the remaining year restaurant during with of estimate fourth own of those run Daddy's the but annualized revenues our $XXX $XX quarter. in which in and fiscal quarter. will July more if we've opened that

of rate $X.X to and to EBITDA range million, EBITDA year to a We run continue we are $X.X of raising million about for project XXXX $X fiscal million. a our guidance adjusted annualized of fiscal

million in noncash compensation equity X.X% sales, including $XXX,XX $X.X of G&A expect or expenses expense. approximately We approximately of

million million. $X and to of approximately expenditures approximately million also expect $X.X $X.X preopening We capital expenses of

year-end We on $X.X between expect and credit $X.X million be senior facility our balance million. to our

million. and providing guidance $XXX restaurants $XXX and are of opening approximately XXXX, to projected the $X.X the fiscal million Bad exceptionally dry flat $X.X this traffic within into also when and and guidance include QX between facility $XX.X end of million. $XX.X and nine We Times, fiscal same-store between million XXXX. be stock seven initial X% G&A our TI against borrowing Bad million new for sales and and million we our million XXXX approximately cash with Times, capital Included of million We expenses, expect finished $XXX on approximately projecting approximately our $XX which $X.X fiscal million. in of adjusted in Daddy's over the to and of This debt our expense. cash million sales between with comps EBITDA includes our rolling deliver At run of million during and $XX.X rate million. Good are million for $X.X quarter year Preopening fiscal costs third for XXXX sales $XXX,XXX million for of year-end of of benefit expenditures winter facility net $XX $X X% of option to with of between between million and $X.X an balance Good Cadence. warm million for We will the XXXX we're in except those project targeted $X.X the Daddy's balance $X.X credit

a recurring pricing support development for believe discussions restaurants total which our provide credit flow of well excess of facility related CapEx needs the XXXX beyond, continue the continued allow Cadence restaurants preliminary XXXX. existing fiscal end and XXXX be of the will with slight to fiscal We and covenants our and CapEx our total of addition new minor balance expansion. We're a the our to development we capacity Bad remodels our coupled to to improved in similar pace to longer-term through using from to and of that Daddy's cash in opened expect facility, most into to at expand our with for as in as cash units, stores,

turn like to to I'd over Now call the back Boyd.

Boyd Hoback

X,XXX of really be small to only to members has our opening a restaurants facilities feet We're with very of sales out Daddy's team new square manage weekly Thanks, been thrilled high-volume brand-new to just $XXX,XXX Bad huge Ryan. X,XXX, about task. challenging $XX,XXX

teams us I just like management support questions. teams, for our we'll I'd staff our with operator, your hard time call work. credit today. With so And thank to all appreciate for our open opening that and give their the and

Operator

Thank you.

question begin first session. now the Our from Dougherty. Hamblin go will Jeremy question-and-answer Please ahead. Instructions] [Operator with We comes

David Burdick

on This guys. for actually Hey questions the is job Jeremy. Thanks taking for my David on and quarter. nice

Boyd Hoback

Thanks David.

David Burdick

give are the the wanted performing? first, ask those of just little kind And a units? on could you to how newer So run on color rate's if us

Boyd Hoback

Sure.

high-volume. honeymoon settling our little class average, store all, have fiscal to period So have with very above bit about that a which slightly stores and but on almost four a without there's up our opened average, of stores is XXXX six opened exception, they're in slower seeing on system great. one month We're

relates that but comes including Colorado, that stores so new we've thrilled to been southeast of in coming XXXX stores got then lower the what quarter were got are the two to to We've in construction. XXXX are we've here under our and two a fiscal stores more quarter settling average this – far. They of our stores. bit So about ones first the that on that class opened with overall, volume little where unit million into $X.X similar

David Burdick

units. was the should just year? So, the how going cadence throughout talk about And of just Can XXXX the we of to on those kind openings I you the progress? then yes, ask about think

Boyd Hoback

we've got right generally, that now. stores are under construction Yes, two

the and from is little to when So bit really to fiscal training – a bench of open of which those is just actually, will breath a standpoint. and take thing first a stores, be us, pretty pretty a winter like little good balance because operationally, strength anyway, evenly. think, a the time be little probably a quarter. and for a middle and well loaded up we restaurants will catch light bit from The locked are opening QX, dates of QX, don't more I loaded the for between back-end QX which our

than two of development other QX. XXXX QX in the for lock got QX and most will and we So that loaded be the

Ryan Zink

Yes. to the of pick if the guidance, $X let's model say you midpoint to just – David, would million. $X our million million and I $X would where

both the months is X-X-X-X second of third I that the think the of way kind of kind would and of and those the I be quarter. in modeled of two,

David Burdick

And perfect. to new four give talked release. in then Okay, on three where are? more about additional just you a those us you Can little details press areas the

Boyd Hoback

Sure.

Nashville now So we've signed leases got for working restaurant and we're a on our right first couple more Nashville. in

one and deal We of opened those anticipate right Huntsville, South markets stores for Carolina. We're and XXXX now. XXXX, additional and have Chattanooga then, Alabama, in in for in on half in the working Birmingham those in additional both then both developed stores a in fiscal we back and of being

this lease in signed in then opening Columbia, one have Charlotte, here We store for but South finalizing and a in we quarter South Greenville, are Carolina Carolina. first we’re our a lease

store Nashville. couple the Carolina a Atlanta Southeast. South another stores, going on have new be are – more North still largely markets and focused we've Alabama Carolina. We’ll of so And the Georgia, to got but

David Burdick

then of are of ones AUVs. those for Are kind the getting Okay, better economics getting the kind overall great. you are And Southeast higher seeing since units? –

Boyd Hoback

over the mean, labor I is store points Yes. five alone the margin margin. on

development months shifted XX in We we why that's stopped Colorado Southeast. to halted really the So ago. and XX,

fairly in labor volume both dramatic, the it's the terms So of margin. average and

development huge that's and largely simply statement the income same, are the really advantage. in the costs other costs the it's of labor All

Ryan Zink

at of yet upon about has purchasing Boyd there here XXX versus XXX to based and agreements, wage XXX is conservative. to the maybe year's it, basically as sales say, I slightly I slight a I And mentioned, XXX to minimum the you're would points. on next little add this Southeast take year model be we But try to side, – for kind current X.XX increases as X.X the round side. the kind if there would cost the I a or that looking of elevated a P&L in consistently – consistent basis that. Colorado. I side Bad say Colorado, to and relatively cost – of and we a – to distribution another point I’d or compared quarter And a Daddy's add think product so, so is just on point the relatively of And to labor on think sales, lapped of trying

saw in going overall sales pressures and labor. As development an of Good this going little I we the think between side, on elevation inflationary just I bit year, a versus to Colorado lower-cost that's our a we're see say as I percent region, Times out. of some balancing balance on there's impact think like the to the the would

David Burdick

Thanks, taking guys. Okay, great. I you appreciate the questions.

Operator

Our Instructions] ahead. [Operator go next with Please Maxim from Group. question Anderson Stephen comes

Stephen Anderson

good afternoon. Yes,

us weekdays about Just Daddy’s. I Can of want last spoke to some that? about some traffic you first give you I at Bad the Daddy's. touch know on Bad you on at comments And quarter initiatives are looking to drive possibly

Boyd Hoback

certain expanded and happy still Colorado, in the playing tested hour we're specials and around week, day menu, We with that. Yes. drink food then of and

it's I just and Colorado very We are strong really showing just that, mature sales have by existing some from but our been haven't activities much some driven of think that to stores those weekday generally dramatic Stephen. anything seen year-over-year been as strong, performance, increases. as beginning not

different initiatives, And continuing a and We’re rolled specials. still to some playing the Ass around with of refining Bad have week test we’re we with work Tuesday’s that on menu those. including day drink

Stephen Anderson

saw Shifting quarter, – the to comp that Good X% Times, for the you're is correct? looking Okay. about at I

Boyd Hoback

right. That’s

Stephen Anderson

Okay.

last any right, now you just you seen been the deceleration would that quarter? comp been do to what And that your you've – two-year again? apply or seem like would under from that weakness to X% lower to maybe Now momentum implies has X%. you sequentially have going can it's in running, And going you see what get why explain

Boyd Hoback

into is going roof. lighter of leading because Yes, we come television season, costs little schedule, I think as a into And then off through we've the we're election been the just part our which go be on that. to TV

So bit that. of little for allowed we've a

of specific, bit competitors. price kind be we conservative, nothing in on we're competitors got again of really trying – for that to new been of Times and Good some and we've aggressive but doing I we little continued we're nature from a sequentially a the think price a larger kind going LTOs news. promotions to rolling softening. to I continuing what as all choice discounting those continuing, pound think anything as new attractive are our have my as two-tier a be mentioned I strategy well, generally, well than other of couple there to that and but points we're comments, can't point of anticipate And

Stephen Anderson

that Now continuing one I Greeley, couple years works in of maybe your it's more the how see yourself growth see you that theme, guys expansion? prototype location you've a restarting just been anymore before you consider store remember to you do new opened on since that now and maybe of –

Boyd Hoback

some like in Colorado. time to would we Yes, build difficult We're more. having a

we larger the not do think the strategic of have issue is we times yet take and I Colorado out that pulled trigger.

Just finding here difficulty in in locations Colorado.

short the version. that's So

Ryan Zink

focus Bad are capital we that's our in on other is going I our I our add I have I of structure, – we returns, the think in – that to our constrained debt capital mean, really bit thing, we highest the – so think in to and capital in terms credit really of and facility, that deployment, be to our Southeast. availability Stephen, the would Daddy's terms while a

Good return could possible. And Bad how Times, so focus our grow quickly as we potentially a can Daddy's as expanding is get think while by we good really we

Stephen Anderson

at rate year? XXXX, – numbers, and at with commodity And looking are the kind commodities what your the for looking the some Okay. of fiscal of for next EBITDA run outlook you

Boyd Hoback

towards the so beef don't we I heavily really and fairly bacon we're just pressure – three. benign see lot anticipating those think weighted both Beef, of bacon three, and are a dairy and – anyone concepts. on because on either of we're on

Stephen Anderson

Final question on delivery.

is Daddy's Or Bad where agreement Now just you've that done DoorDash? you well? with for on that as for Times have Good entered the the –

Boyd Hoback

Good on and seeing We did a Daddy's. do didn't that the see incremental Bad we we're Daddy's. for just really That's Bad on test limited Times, just

we're But QSR a Daddy's. on I DoorDash results economics are pretty for think than difficult from seeing good they in the the more Bad with are theme. delivery lot casual delivery

Stephen Anderson

you – Are seeing

Ryan Zink

Stephen. ahead, Go

Stephen Anderson

seeing any from customer? the cannibalization dining you Are

Ryan Zink

been not say take-out. been there mentioned, That Boyd cannibalization some would any, I from said, far we've we've If that as recently, it's expended really substantially. So is existing service.

we of But focused make DoorDash we've not we the and the the our we level deliver service how sure experience we and may concept, and can quickly handful delivery focus, a primary two going just do Bad – three on how explore or are as units, want, kind that keep offer of you really methodical quality we of really Colorado in our number at that's Southeast, the all in-store who Daddy's I'll we flexibility but guests delivery the want how on, choice in small where great, an restaurants, not do pace of to a experience about really really Bad that that necessarily offer Daddy's, and a offer delivery. do possible. those It's tell have have We the we want of We progression this. to in-store through to and to for visit. the are that's as taken we expand do in

Boyd Hoback

that and thing that seamless other to complete consumer an DoorDash, is more is from so The operation standpoint between and standpoint. a from Olo the integration we're working

Stephen Anderson

you. All right, thank

Boyd Hoback

Thanks, Stephen.

Operator

time, no [Operator Instructions] further At this seeing I'm questions.

as today's attending for well conference. concludes as question-and-answer Thank survey our you presentation. So today's this

may You disconnect. now

Good Times Restaurants (GTIM) 10 Aug 182018 Q3 Earnings call transcript