GTIM - Earnings call transcript Q3 2019 | Good Times Restaurants Inc.

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Operator

Good afternoon, ladies and gentlemen. Welcome to the Good Times Restaurants Incorporated Fiscal 2019 Third Quarter Earnings Call. By now, everyone should have access to the company's first 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 security 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 can future for you SEC filings conditions. refers recent our financial discussion risks results of and impact

not today's call, or as considered substitute believe our available they in to in for Lastly, which a evaluating earnings accordance measures in GAAP results reconciliation company in should the performance. or The non-GAAP our this with release. be measures, be comparable of GAAP useful discuss isolation can presentation prepared will information additional

I go conference And now, turn Boyd sir. ahead, Hoback. the to over would like to Please

Boyd Hoback

Thank the provide hit financial call joining the our today. us detail Ryan Chief the will the for you, more quarter. on Financial financial Zink, on again couple of Officer, a for results I'll and Chuck, and highlights, then thanks

sales our restaurant a at For and increase Good Daddy's Bad our our by comp at comp that grew Times. X.X% XX%, quarter, third revenue included sales in X.X% decrease and in a

first during weather you quarters, – here know, know Times. at you are our Colorado Good two As dramatically during first by in our we may impacted the as

the of quarter continued mid-to-high the prior sales normal then the to Good moved to to single-digit last Times the to end period of have more to and we accelerate well. As month subsequent the as year, range in comps same-store weather

well the very continue from had store volume. continues we've also as we quarter, to which the stores. a some during will significantly X average store, stores Raleigh to third high-volume some of a market above be ongoing of Daddy's, the stores in some initial have at Bad in moderate but competitive X will trial, that those after as to cannibalization high-volume of be the opening it expect unit our at the a couple intrusion At anticipate cannibalization January, We it

innovation, stronger in Our are scores on guests summer compared southeast they not first Colorado positive and than then trends we sales menu high through broadcast and and continue continue for market on sales slightly new continued to our competitors. growing a in on very advertiser, each chef's implemented in cocktail whole. the while and and focus overall and very healthy are specials from through We digital promote so a We're our our media. execution store-level social ratings are our to monthly and to sites the review

each store. social feedback our continue In in service also addition we've guest walls sites review daily, help media identify receive improve survey to the and feedback from of daily instituted four and new within in to July the we tool to execution quality guest our opportunities to responses a

models stores, Bad XX% that at Raleigh rollout a all Daddy's. on in the we've quarter, delivery. for averaging completed higher Daddy's sales landed different market implemented the for DoorDash system-wide pricing We our over We of pricing total Bad our two DoorDash tested of XX% and And we've last delivery are off-premise menu. except model

wages real availability P&L, to well just challenge as by be cost in staff. increasing Colorado, the Labor driven statutory continues the to both in due increases the only of as our

restaurant-level Good profit and Our at at was Bad operating XX.X% XX.X% last quarter Daddy's Times.

of our to labor simplify nature scratch challenges the the line several the without our prep to working we're and on ongoing help compromising Daddy's, At functions initiatives and brand. cooking Bad back-of-the-house mitigate

of more completely overall long-term cost terms. significant of yield our of We with – the our contracts cost pretty continue We've bar of recently vendor completed cost and to in are key a will progress we negotiation both advantageous which of structure, to that going anticipate couple mix and good on also sales a make some forward. product our reengineered lower

improved continue and as some current allowing test equipment work capacity, of We through to hours quarter, and ticket for last manhours, some I to proteins our that times beyond will decreased consistency products kitchen the quality throughput while that guest our reduced new hopefully improve the and continue evaluate we'll for mentioned and and peak innovation project.

Tennessee; in targeted South is Carolina Murfreesboro, followed stores September then are Carolina; by open the and in dates four Summerville, in Alabama; Columbia, and October. next Huntsville, for then which Our for Charleston North South

XXXX thereafter – Montgomery, growth up development in Georgia Mid-Atlantic. into be company-owned by followed and Our initial new and Alabama existing will and markets Southeast in Atlanta, in fiscal the XXXX beginning move the to additional

a We other plan company-owned We've planned specific for for early targeting experience selective more development disclosure capitalized fiscal to requirements franchise to are initiate multi-unit registration that XXXX, a fiscal targeting few end. guidance in groups. markets our franchise provide and limited document we'll growth a – that XXXX. franchise very not completed and program And

we We that and to larger a other have of We'll yet. initiatives. prior do strategic not year updated the development end that this as couple of finalize fiscal that schedule

two sites, opening site on we've excited the remain now same we're our good about for track really hopefully, initiatives And refine got anticipate, feeding the we'll those. in that as the and of that next in with towards stores. be open. We more right continuing gravity pipeline restaurants some model shopping six off outlined entertainment, with high-volume we'll and last selection back We're dining to more the operating quarters. core we've Our destination-oriented

our bar our we've execution sales, currently. of grow innovation, new through culinary got products some and menu And continuing number elevation to pipeline and in is selective eliminations two a of same-store additional Number quality. testing the our of

our some functions. Thirdly, we're of I finding on labor as And of focusing back-of-the-house some through margin simplification improvement efficiencies. mentioned,

now market. And employee labor improving a challenge and we're Fourth, management back-of-the-house right rewards, enhanced the to improve implementing tools our and feedback key our huge recognition in retention. retention. our It's

against training a continue the team. We competitive Year. our both New hospitality into move as advantage, And of that we initiatives same-store heart to of as on the will our core we're and they lastly, particularly the the These believe differentiation continued fiscal continuing in the growth are of as embed rest XXXX. management into casual at genuine as sales brand, well

our now the on financial provide for for the and guidance Ryan of our quarter fiscal balance then XXXX. will Ryan? more detail performance

Ryan Zink

approximately lower sales weeks increase during We million At Boyd. more restaurant an during Thanks, the XX.X% Daddy's, the to end unit opened additional last fiscal quarter of due year, XXX same offset versus versus X quarter last store partially quarter year's this of units by $XX.X third overall $XX.X quarter. last an quarter, had million, volumes. since Bad average were third third year's the

the quarter, during restaurants joining prior restaurant continuing in the the sales guidance, with the trends two entire comp during into base base Bad X.X% our Daddy's the fourth those our Same-store declined quarter. were the included restaurants enter quarter comp base will below with generally additional fourth XX for quarter. quarter. the comp during One

previous by third of approximately XX quarter for sales Daddy's of the quarter XX the points year's a approximately points. sequentially decrease over Cost last basis basis and versus XX.X% of an increase quarter, were Bad

end it We costs, commodity gradual to changes decline year other expect sales the and of the our in trend of direction. now the the increase moderately to as cost that slightly between and

basis back-of-the-house unit top was to on front-of-house employees, Bad the year-over-year by Colorado, due the wage of deleveraging decreased the that year-over-year points compared up is XXX average lower of rate a year coupled Daddy's effect increasing increase statutory This the for approximately basis where to basis ago X% for labor on but by costs inflation increases increased with quarter. in points, quarter, volumes. XX to sequentially XX.X% the wage approximately wage

or sequential of in As slightly look we year, on of $X.X to a higher on pressure to the last and $XXX,XXX for we the the $X.X quarter, last compared expect profit, of Daddy's the over XX.X% year, the costs or third was a a year. sales compared balance million continue restaurant-level Overall, to for fourth quarter. measure, XX.X% increase net non-GAAP the quarter basis as Bad million back-of-the-house to

labor, the during sales the higher additionally restaurant to lower providers. a of and average of offset commissions delivery as The result other percentage of operating earned unit greater quarter the costs restaurants to by service of new sales due due and occupancy $XXX,XXX volumes impact by approximately and

At and closure additionally, a our of to million, Good remodels quarter, Times $X.X same-store offset much $XXX,XXX by restaurant brand, for of mostly was opened restaurant compared year full during planned sales decreased temporary restaurants sales. X.X% quarter. to by in approximately the That by last the increase fewer for one one the driven

closed. they're remodels figure excludes sales As the a in reminder, stores the fiscal during months which for closed same-store

last Food basis Times points. and versus menu the on well from and waste. of as a We've decrease packaging pricing, basis costs improved at XX.X% XXX year's third for were focus sequential kitchen as a Good XXX benefited quarter quarter, eliminating improved improvement of points

The from quarter and certain benefited also credits review. from adjustments pricing one-time resulting

for of third of without be the than to quarter the one-time fourth sales quarter expect higher cost items. the those We moderately benefit in

last same Total labor is of costs wage quarter increased at year. in The by minimum the elevated the year. from the labor average XX.X% result rate versus for to approximately last This the competitive during wage the and XX.X% market Colorado. increased quarter Good Times X% quarter

last Good year decreased $XX,XXX $X.X approximately Times at Restaurant-level quarter at operating million. by same from the profit

As XX.X%, margin the as by offset a improved last declined restaurant-level of primarily labor, of operating sales. of a to partially percent basis XX versus of cost cost sales, result year points higher by

the for quarter and X.X% The down General G&A the same leveraging and costs a aggregate of or number And compared attributable with percent of percent in additional G&A. are the of similar on Bad general of levels associated $X.X prior restaurants million sales managers greater $XX,XXX as the Daddy's year. sales, last quarter in costs for incremental sales to a hiring expenses result to as during X.X% is approximately year. administrative were training of from a new greater

depreciation versus in quarter This result the amount of restaurants. of the quarter last the lesser net third interest a for pre-opening net quarter, the new is increase income year. $XXX,XXX costs, and restaurant-level offset $XXX,XXX with and compared income by costs, greater net ago costs Our associated primarily of in costs to year advertising operating income and greater general was administrative profit costs, slight

$XXX,XXX, of were quarter quarter the $XXX,XXX XXXX. in same for the fiscal with compared expenses Pre-opening

Our $X In of to the guidance revenue increased we adjusted quarter XXXX, XXXX release, fiscal $XXX of rest with the third of updated fiscal approximately by for earnings just $XX,XXX million. EBITDA for the million. about revenues

balance the sales assumptions same-store sales. positive for includes We optimism the for Daddy's X% results negative with of The of on of quarter reflecting year, Times, comparable return the balance project Good estimate for to approximately Bad third our for revenue consistent our recent year. same-store the the sales

Bad X expect to September open We prior shortly our X and end fiscal Bad Daddy's of on to additional year XX the thereafter. Daddy's to then open

EBITDA the projecting million. in – million $X.X are $X.X range of to We EBITDA adjusted

facility our will mentioned, support fiscal cash existing $X.X million drawn beginning with needs we'll through $XX.X Cadence million We cash publishing new XXXX. from Boyd our year. to Bank. units flow of for initial As of our against quarter restaurants We facility and end XXXX third for finished our related with our our total recurring credit and existing be the CapEx prior the fiscal CapEx stores believe our the credit next to our $XX fiscal guidance million in and

I'll over With call the to back turn that, Boyd.

Boyd Hoback

that's on how of the but though Good the Ryan. we've lined and Daddy's didn't business. got about smaller Thanks, with But those plan X and Times developer it's part a be sales delays over staff Bad turning of and unfortunately, opening really to obviously XX resurgence to us, the period even We're to within go. stores that up, team management us that's certainly our about We landlord days. ready excited

these excited next stores. And so, X about we're

our standpoint As about view, we'll where development internally we particularly guidance, anticipate also be our some XXXX generated Daddy's be our longer-term I move to leverage into we we and capacity discussing cash and for XXXX. as Bad an think, talk from

any for questions. With that, I'll call the open

Operator

Will [Operator with Please Slabaugh first comes question go ahead. The Stephens Instructions] from Incorporated.

Niall Pratt

is Will. for This on guys. Niall actually Hi,

Daddy's? You a next I couple how bit little guys in more Bad spoke performing quarters? And the And they've over about regarding about upcoming newer I feel Raleigh the was wondering been color you so of there. openings around far, if markets? new get openings How unit particularly

Boyd Hoback

Sure.

It's that ones Raleigh. on projecting being last and It's we store, January well really in And store of then we're the doing to are opened performing in a market. I this in in those three store was and underperforming work mentioned, other continuing store. We've four grow. of standpoint, refine So, got our got the and we're coming year stores our well. extremely currently an with site our we've new site to the last fourth one from the model, continue up again, Atlanta,

Our and them. analysis confident about growing feel on $X.X them. We've target. a I competitive And we modeling than mentioned is, up the been good around quickly more target based bit these additional Colorado Short is doing, – right story the site really volumes a on million that Southeast got feel coming the little we characteristics, we've now.

now new run. actually million in our We top are or have Colorado, of $X thereabouts. doing stores out over volume Three stores

trending Raleigh And opened we – and in same so is in also that the direction. last one

to a in So, XXXX. say as we to continue of couple in clunkers had we dial

that being those. how Greenville, one think and of we've One Carolina. South of learned in Atlanta those avoid We those to being in

that hitting but as as stores got in our think target well. we've only move for be XXXX the six balance So, the pipeline, we we these not that we'll of forward, for

Niall Pratt

Thank Perfect. you.

if Just follow-up, may. another I

You with think delivery there, service so and mentioned you be? hoping far impactful what you can detail the are you've it was a fully And little could more what your expectations maybe, bit rolled And seen DoorDash. there? I give how forward? going for out

Boyd Hoback

I Yes. where certainly but where not, The higher think our structure. and with so be need there. with associated The overall has it rather news front labor Honestly, we – costs are we visits. we think that's things I alcohol delivery the We in component required, doesn't delivery, fees. the to gone the incidents it is the have business. cost would of dine-in don't the the good particularly in have the on have house, beverage mean

to going it's think to grow. we So, continue

particularly and on high We with in. got find to growing that. We a and continue grow XX% some pushback forward. anticipate We pushed it it as spikes it probably promotion, turn will and initial settles We XX% free from we on we trial be very delivery with move will menu. little when over price initially, up some then

moderated And add? some so, you Ryan, increase higher that anything costs. mitigate we want to to the XX% a price help to of

Ryan Zink

Niall, Ryan. is this

additionally, when markets is, that quite growing we I'd total, it And to rolled that is, rolled tended those And only haven't not total delivery, saw think, throughout that of I but couple Raleigh we was we business things out it did the out roll we wasn't yet. to we add – off-premise what as off-premise off-premise rolled mentioned, aggregate. to in grow stages. out we had as that faster But one, the out delivery. even of just a growing percent in

we that so, that think definitely are something customers And that's demanding.

of – of play couple mentioned, profitability segment. as that to to in Boyd the improve things we are working we're And need a improve that There that. on

convert them currently kind those aggregator if direct, sites, at cetera. One website. working of on our side, if having primary those are et directly And of using working say, of the kind order a delivery DoorDash which DoorDash they're we we And in we actively But any from, called, site our those, can cost and on available sit probably associated we DoorDash. we're through improve we who right exclusive on area marketplace can sites structure as significantly. of delivery that now, we're with the the convert is, are to can

Niall Pratt

from in That’s Perfect. me. Thank you.

Ryan Zink

Thanks, Niall.

Operator

comes ahead. question from Group. with Anderson go Stephen Maxim next The Please

Stephen Anderson

Steve Anderson. that's Okay,

or this bit Just decided And more have of going I know point, I maybe those those you to some past Bad target a you three you maybe sales wanted those Daddy's. locations. ways looking I locations? off writing to Have mentioned are Or still more three calls, underperforming you're follow-up. close And go on potentially a out little to into at assets? for

Boyd Hoback

nicely on Yes. negative so we up grow. sales, on It's it flow cash from one Creek not store. system. entire to our store one Cherry and No, out only And challenging those. the of continues that's they're they're we've the That's the we assets. the flow plan Colorado positive mid-teens impaired in and plus get-go running don't so And had in that still same-store cash certainly the have closing

so, of stores. And impairing those anticipate any don't we

Ryan Zink

yes, think even that still can these going volumes breakeven we've I Stephen, lower we was sales as states, the at the in recent ones of say, to of mentioned, wage at I some profitable lower Boyd or be opened levels. those minimum

said, actively profitable. other that be I as a And at do opportunity for Now well. think the to more have we those lower-volume that we're evaluate looking restaurants to little ways

Stephen Anderson

this With is something to the development you're are yet announce testing you program, fiscal any there's year? into those you'll on And be have to there to you Okay. next regard received – that? with or going mentioned, going geographies you your something LOIs received plan franchise specific

Boyd Hoback

to No, that. we anything announce on don't Yes. have

move year. We a like announce somewhat other distribution would company-owned forward to will efficiencies development that certainly standpoint into fiscal where as be is. next we And operating we our and to contiguous from, some just

lot of to so the and And continue really in means Mid-Atlantic. Upper as a Southeast Midwest and we that Midwest the develop

Stephen Anderson

watched trends? I you ask at specific And traffic wanted to and gave there Good are a jump over I promotions your Times. this that really in Okay. big sales if any

Boyd Hoback

No, any been promotions. there wasn't. having of There bullet fair product a really amount good there right silver news We've been out now. haven’t

our shifted more We been have to has efficient. creative from has done And radio. and well a that I cable advertising – we cost TV quite think

up – of last we're slightly lapping And so, flat year. kind as of we moved to out

in product has news. just not high single that digits combining news. running we're advertising, continue products, ongoing creative It's we only promotion. price hard brand And hard campaign, It's product not radio right really been soft good the but it's about it going it not now. to specific So, feel up single with in to the

Stephen Anderson

that probably to when with address say you was over regard to regard could too similar something in this longer do avoiding with this And to fluctuations – season. through political maybe But the next some because something how about ability term you'll advertising sure you if too. I are remind thinking advertising, last break that? lapping future you And calls. mean you'll Okay. I'm But the didn't your of have year year, political to of

Boyd Hoback

was impacted political’s What weren't hit year, September until honestly, we last meaningful, really last this weather. last year the that didn't off-air dramatically very Stephen. is when Well, went We year. the

factor that we track we were pretty pretty temperature. our weather gauge and and precipitation out we the track every trends is. what weather, stable. of day, definitively You And the the And can impact

So, X the in negative and last first trends second quarter – were first years. last sales quarter really year done we've the

So, trends. some to think bounce can normal of bumps. comparisons maintain We've big good we've back. those and to And weather weather we're I confident now, we got some right able had sales we're be the seeing and

here anticipating year QX this winter, in the last So, we fall bad significant that and was in over and assuming increases, lap most as extraordinarily again QX meaning we're decades. weather,

will And reflect better, that. that anticipate sales and our so, anticipate weather we be we will

Stephen Anderson

Okay.

back also going the the you compares some mentioned bar or like more that mean established sites? traffic of this maybe like these those and to more your competitors locations, upscale going grill space seeing you to think is broadly you space? you in at Or maybe a new you're competitive couple of can Finally, to intrusions. But going say Daddy's. I Bad some you saw think someone

Boyd Hoback

but a in even a next grill some X sales. that we whether and past the degree. people opens, our to guests we competitor, when bar then months, new see short-term, feel we around us, anticipate open normal in direct experienced trade try prior bounces restaurant the also it competitor to in it then it takes us, for and upscale, we'll casual back casual, anytime significant to for when we back. months, it have the but feel our new full-service we and and – pretty six it's competitor fast come But it about a for see It's No, to we areas typically about a open

of high-volume of Good back those are here very now. we've to stores. operator, stores what We've good we close three build concept, Lazy do, kind Dog these those had opened, example from come massive is and Colorado, good those in positive but on

Stephen Anderson

Alright. Thank you.

Boyd Hoback

Okay. Thanks, Stephen.

Operator

concluded. presentation. for now has you conference The today's Thank attending Instructions] [Operator

may You now disconnect.

Good Times Restaurants (GTIM) 10 Aug 192019 Q3 Earnings call transcript