Q1 2020 Earnings Call
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Yes.
Good afternoon, and welcome to the best a restaurant group Inc. first quarter Twentytwenty earnings Conference call.
Today's conference is being recorded.
At this time, all participants and I listen only mode.
Following our presentation, we'll conduct a question answer session.
Instructions will be provided for you at that time to queue up for questions.
I would now like to turn the call it over to Rafael gross managing director as I see our please go ahead.
Thank you operator, Yester restaurant groups first quarter 2020 earnings release.
Issued after the market close today, if you have not already access that it can be found on the company's website www Dot F. RG <unk> dot com under the Investor Relations section before we begin I like to inform you that during the call today. The company will make various statements that are not based on historical information.
These forward looking statements include without limitation statements regarding the company's future financial position and results of operations business strategy budget projected cost and plans and objectives of management for future operations actual outcomes and results may differ materially from what has expressed or forecasted and such.
Forward looking statements and the company can give no assurance that such forward looking statements will prove to be correct.
Certain factors that could cause actual results to differ materially from those expressed or implied by the forward looking statements can be found in the company's FCC filings. Please note that during today's conference call certain non-GAAP financial measures will be discussed, which the company believes can be useful in evaluating its performance and he discussed.
You have such information should not be considered in isolation orthos substitute for results prepared in accordance with gap and reconciliation to comparable GAAP measures is available in the earnings in the company's earnings release on the call today, our President and Chief Executive Officer, Rick stock Injure and Chief Financial Officer, Dirk Montgomery and.
Now I'll turn the call over to rich.
Thank you Jason.
The World is a much different place in July in school and up into a channels.
First of all designed all the indexes and other participants on the call today. So they can be supported.
During the cold it seems like it's.
I'll be covering these topics today.
Our key priorities during this crisis.
An update on their operational and other changes in response to the places.
On a brief updates on it so why wouldn't that.
Those core themselves.
Order will then provide a financially.
Our priorities moved the diamond prices have been and we'll continue to be involved.
Thank you said is to ensure that late.
Well one of our team members and.
Yes.
In the water basin, although brand and are confident.
Doing well.
I'm a shareholder.
Our vendor partners, our service provider mm and between to be a leader in our communities.
Well, it's hard to focus on mobile are.
While maximizing liquidity.
And developing embedded within the driver.
And maximize weibos.
We've been working to maximize efficiencies.
And operating flexibility.
Yes.
In order to set the cash availability.
Well needs second quarter, we'd be down like capacity worldwide capacity on a revolver.
Had a total cash style of 91 million.
No new models as it made sense.
Yep.
Do you ever needed our vendor partners.
Service providers enrollment.
And more flexible payment terms.
All of these actions.
By 21, Capex plans in half.
Not focusing only on necessary capital process.
We live in whole loans.
Our alone financial covenants at the end of the first quarter <unk>.
And we are actively working with our lenders to amend our loan financial covenants to avoid it.
There will provide more color on our liquidity management activities in a moment.
Now, what we know that finding new better ways to drive people would work.
We are developing a better business model designed to enable our customers enjoy your brand safely.
Wherever and however, they choose.
We have expanded then we'll continue to stand delivery options.
Creating more even on the dining options, including four you'll matching and to me Andrew.
And our rapidly moving curbside pickup capability to be basket and save it.
Well our cousins.
Additionally, we are in the final stages of making my restaurants ready for return to see design in activity.
Yes.
The conference that we will ultimately it's prices.
The company better position for future sales growth.
Mark 61.
We announced vehicles ball our design win season, there you can walk.
And Taco Cabana restaurants in Florida, and Texas inspected due to the told it might be indebtedness.
Since that time, you get into even making proactive changes designed to ensure the safety about yet.
And his team members, which is our top priority.
We have taken the bottling health savings preventive measures in response to cold it might be going down.
The heightened authentication procedures regarding restaurant planning with additional anything on high traffic areas in the restaurants.
We've stopped algorithms, which affected the feedback has been patients progress.
Including and it's why we are not going in and back if that's.
The increase in watching protocols for all restaurant team members.
All the customer facing employees many vendors in the restaurants are required to where it was.
Yes.
He is implemented a government employees and the cool consistent with the center for disease control, it's too soon.
The National Yes warm Association guidelines.
In closing so then salads are self service station.
And now providing sausage himself is in pre packaged contains.
We closed all self service organizations in Beverly Hills.
Rather margins in restaurants. This also business.
All border. So there are now inquiries.
Jerry L. packages.
And reduce restaurant operating hours in accordance with embedded state and local mandate.
Government bodies and before that would region koby might be restrictions were in the process of implementing the problem additional safety studies.
We've added dedicated dining area sensation team members and all that evolves, we continually continuously sanitize.
During open hours.
You're measuring the temperature of old restaurant employees maintenance services provided desired daily at the time they entered the restaurants.
Installing lexi glass ceiling that restaurant Mariner 10, driving sections of our restaurants.
Created the separately entry and exit to exit access points to ensure that get it gives us.
Modifying seat arrangements to ensure required to get it system.
Providing dry food customers with credit card processing devices outside of the drive two of our decision not exchanging credit card with our ventures.
Extending our credit card, but in terms of advertising to allow customers to insert required in devices development in their cars through the dry foods and.
And all that get us are required to wear masks apartments and any of our facilities.
We have also adjusted our operating model to better meet customers' needs. During this crisis.
Boost the in service and improve efficiency.
We've eliminated certain low mid scale the menu options on the east restaurant hours during periods of low sales.
Pandora in response to government mandated restrictions.
We've also adjusted staffing models to match shifting traffic and channel patterns of our guest and to improve efficiency.
Taking care of our people is a top priority.
Implemented the following actions to better support our restaurant team members during this crisis.
We've offered additional loan incentives during the prices of $1 per hour portfolio hourly employees.
And the special incentive for sources of items and then if you could say easier to serve our customers.
Additionally, management hourly employee health benefit programs with German recently announced.
The company made a significant donations to complete systems Foundation that the family Foundation.
I think into a city employees in.
Donations were in part I made possible by the extra restaurant group board of directors or grown this second quarter of these.
Supporting our community in showing our appreciation.
For service providers on the phone lines of the crisis has been and we'll always continue to be important.
And we are showing that supported through the following managements.
Both brands have been donating diligent who needs.
Two local hospitals versus dominions ancestry centers or the way exciting those that are working on the front lines of the pulled it might be players in more of the markets in which we offer.
All brand new the response to 50% for all medical personnel persons bonders, delivering and logistics providers as well as I noted that.
To provide a leading yields for school age children from 11 am can mean Monday to Friday.
Boulder brands are offering in two years.
To help our community members as a recognized frontline workers.
That deserve advancing in April quarter, without a doubt launched and nominate a local dealer social campaign that allows us and denominated in front of mind worker, who deserve the thanks.
Oil into social media dimensions to coordinating the donation on the arrows in the high.
The their opinions about heroes work locations, such as a hospital floor worthwhile.
Taco Cabana will also be launching a similar local dealer program during the second quarter.
Every day in each of our quarter Tropicana in Taco Cabana restaurants intake.
The.
What we began board underway in which our team members.
Representative of the broader communities we serve.
We are worthy to provide islands revenues and our guidance with more information about our culture.
And.
How.
Who are as a business put this in a strong position going forward.
In particular, we are proud of how our human capital investments when those reserves.
Opportunities.
When we special treatment of already.
Which in turn driving quality.
Productivity and innovation.
We are particularly the effect of 65%.
Although the deal the management team.
And the 77% of yield management team our minorities.
190% of our offices.
And 57 percentage of our offices.
Americans.
And 25% of our board of directors are women, which includes our checkers.
We believe that and quarterly top Im pleased that strongly contributed to our ability to serve I mentioned to each other in our communities during the unprecedented and difficult now.
We anticipate that this committee will enable our growth as we move forward towards together and in post Golden reward and everything to be more transparent about these efforts on our website in our reported given lower stakeholders additional insights into how we are driving long term value.
Regarding the impacts of gold at 99 and supply chain that depend benefit has not had a significant negative disruptive impact on our supply chain or access to later.
Although there could you know is showing that there will not be a significant impact on our supply chain axis of later in the DG.
We are actively monitoring our food suppliers to determine how they are managing their operations to mitigate supply growth.
And food safety years.
To ensure we mitigate potential supply availability risk we are building additional inventory that stock levels when appropriate.
We've also identified alternative supply sources into product categories, including but not limited to proteins.
Sanitation and safety supplies.
The deposits to respond to covert 19 buyers are constantly changing we'll continue to monitor the situation closely and implement additional measures as needed to ensure the safety of our team members and you guys.
I will highlight recent sales gains in our efforts to accelerated sales in the changing environment.
Gross total might mean Thomasville joined stabilize in late March to early April at both brands, having realized sequential sales improvement uniquely type ovarian since that time.
Hey, Bill Thomas sales were down 49% for quarters, Apoquel and 26% for Taco Cabana.
The Boulder brands, our sales have been improving every day and over the previous meetings.
Driven by strong diabetes care.
Kevin.
Overall sales reduced Taco Cabana top sales for the two vendor may 3rd I didn't seem to be down 18.6% growth.
Worldwide net sales for the two weeks ended May 30 that includes the down 37.3% driven by increased prices in daily deals.
Anecdotally sales trends, we estimate that we will generate roughly breakeven profitability.
Which we believe the ships substantiates the sustainable.
Provider for patients from which to rebuild bottom line as the economy, we would sellers.
Changes in the data collected.
Moving to a route rifle.
Linearity.
Got a alcohol sales have created in the opportunity because of event.
This change as revenues and lapsed customers to the brain and as being the driver in post cold period, driving sales growth at par alcohol mix as averaged just under 11% during the first quarter period.
Driven by the two dollar Margarita.
Andrew Galligan Margarita packages with $34 in 99 cents.
This led to a record setting day of TCM circuit in line with sales growth versus last year synchronized day of 24%.
In the quarter on account was up 61.5%.
We sold over 60000 alcoholic beverages.
We're working on at least in visit frequency to these new customers.
With these openings the purchase promotions.
Return visits and bounce back autos.
Organic sales more than doubled versus last year in the first quarter programs with penetration of moving from 2.6% of restaurant sales to 7.1% aggression on sales.
Yeah.
And Taco penetration of building from 2.5% of builds to 5.6% six.
The premise continues to be a big opportunity and we continue to improve our capability in this area as products.
During the first quarter significantly due the number of delivery service providers that offer our brands, including the addition of boots, Postmates and stable to supplement our previous and ongoing partnership with Jordache.
With the addition of club in Maine to active now add partnerships with all major dsps.
In addition to the expansion of additional DSP, we accepted delivery.
With our own delivery drivers.
That target to enable alcohol border deliveries.
We believe that the added benefit of home delivery with alcohol represent the big potential.
The incremental purchase occasions and will leverage the popular popularity of dry throughout all inclusive that currently believe in July the lines throughout the day at par.
We are continuing to work with our outlook.
The media digital strategies design and development company.
To significantly improve we get digital experience via our App at both brands.
Those enhancements will include the curbside pickup featured mobile payment features and the frictionless ordering experience. The goal with would go to market phase of June syphilis Apoquel in September the topic of them.
These improvements will provide lives less control over their interaction with our brands.
Features which we feel essential in involving landscape.
To better view.
Consumer buying at home preferences in April the company launch the podiatry entries in DC entering a new patents.
Quarterly pantry menus aimed at providing fresh.
High quality in home dining solutions had a great value.
For many years our team is 24 hours district marinated team that continues to cook at home with whole shipping. So $5 consists of our chicken products for $10.
Additional programs available for bulk purchase include marinated to access baby and trim.
In addition, the many reduced our famous ready to be white, rice, and blocking and larger sized packages that can speed up to 10 people.
The agenda $5.
Taco Cabana TV fan who is also designed to provide consumers with additional quality in home dining options at a value that include ready to cook items, such as a dozen proudest of 699 and qualified feeding stated repeatedly and CD chicken breasts that can be put on the bill minimum.
Yes.
We see pantry offered E options, including our popular see in ground at 539 per pound and trade chicken at 4.9%.
Due to pantry also includes large quantity analyses of our most populous lives, including we buy these relevant pessimism for $4, a 99 cents and shifting peso the eight nine month old importing sites to be paying people.
Sales of the pantry menu items have been building.
With more aggressive marketing and feel free to board recently commenced.
Product innovation and appealing we'll continue to be a priority at both brands.
As oil we recently brought back multiple fan favorite add on mainline, including TV providers in color than others, and coincidence or price at a value under $3.29.
Doing well since they were introduced.
Taco Cabana upcoming new product introductions include delicious tortoise, nextcity forward and reduce our clintonites.
In closing I want to express my appreciation for all our employees.
Especially our restaurant operations team members with related themselves that revenue to continue to serve our debt as well as my leadership team that we've been working around the clock response in the positive way to this crisis.
We are encouraged by the including sales trend, we're seeing week over week.
Recently, we were elected to prices has a stronger company.
Ready to continue market share gains and to continue to be a positive elements in our communities.
Now I'll turn it over two thirds to cover the financial highlights. Thank you Rachel good afternoon, everyone I'm going to provide an update on first quarter results and provide some commentary on our financial management strategies. During this period of economic uncertainty.
Total first quarter revenues decreased 11.5% from the prior year period, you already 46.7 million due primarily to the comparable restaurant sales declines at both brands and the impact of closing 19, underperforming Taco Cabana restaurants in the first quarter 2020.
We continue to make progress and off premise sales during the quarter consisting of online catering and delivery.
Our premise sales of Oregon doubled compared to last year's first quarter compared to prior year.
And our penetration is still well below our competitors at 71, 7.1% of player traffic out and 5.6% at Taco Cabana.
Our premise continues to be a huge opportunity for us, especially in times.
Consolidated net loss was 7.3 million were 29 cents per diluted share, including a 17 cents per diluted share negative impact from other items, including $3.2 million impairment charges and 1.2 million closed restaurant rent charges compared to net income of 2.3 million or eight cents per day.
I would share, including a five cents negative impact primarily from 1.1 million close restaurant charges in the first quarter of 2019.
On an adjusted basis, the net loss of 2.9 million or 11 cents per diluted share. This compared to adjusted net net income of 4.1 million or 15 cents per diluted share in the first quarter 2018.
Please see the non-GAAP reconciliation table in our earnings release for more details with that let us get your some of the significant accounting entries during the first quarter. We recorded a 4.3 million noncash impairment charge, primarily related to assets for three underperforming Claire Cao restaurants in two underperforming Taco Cabana.
Anna restaurants that we continue to operate which had an unfavorable impact on net income of 3.2 million or 13 cents per diluted share in the first quarter of 20 point.
Now turning to our individual brands that for a traffic our comparable restaurant sales decreased 7.3% compare to 2.6% decrease in the first quarter from last year.
This year decline consisted of an 8.3% decrease in comparable restaurant transactions, partially offset by 1.0% increase in average check inclusive of approximately 22% pricing.
Oil traffic how continues to gain market share as evidenced by the outperformance compared to black box on both the comparable sales and transaction basis for the quarter.
We have also experienced an estimated 35 basis point impact during the first quarter from new store cannibalization within our core South Florida market. However, we do redevelopment as a positive for the brand overall since it allows us to enhance the guest experience while growing our tertiary market.
Comparable restaurant sales per foot traffic count increase 0.6% during the first tenders for the first quarter 2020 building on the sales momentum in the fourth quarter.
Moving to deploy our brand has generated four consecutive months of positive comps through February 2020, before the impact of its over devices.
Capital expenditure budget for 2022, only necessary investments 2020 capital expenditure currently expected to be in a range of 20 million, just 25 million compared to previous estimates for 2020 of less than 40 million.
Working capital T.T. ever been improved as a result of Bender and landlord payment terms and pricing renegotiation.
Which are expected to improve your cash flow and 2025 10 to 15 minutes.
They they're very disciplined process in place for proving capital just I mean in bed, you're paying that's where tonight with you all projects and payments.
In early April Federal about 168 office can feel the personnel well terminated for large representing soda in your life salary savings for approximately approximately 9.3 million.
Which approximately 5.5 million is related to terminated employees. In addition, the salaries for all Vice President executives school reduce like 10% get 35% for at least one quarter.
We intend to market are 1500 properties for sale or sale, even back and forth property. You now are either in the letter and intense game or have contract signed up for sale. Although there can be no assurance that any sales or shall we expect transactions will be ultimately to consummate.
<unk> cash talented since the first week of April when we'd you're down on a revolver has actually increased from 76.3 million to 91.6 million as I've made six.
You mentioned to our sales trend is currently at break even profitability.
Our goal sits on capital expenditure increases cash flow from working capital efficiency and property sales.
The result of all here, you're pitching t. athletes on the weekend sales trends, we feel confident that we will have adequate liquidity to the end of 2020.
According to meet each other very good about our toppling amount on it continues to improve weekly.
Very focused on improving efficiency and we will continue to data up at the time in safety and well, we have our customers and team members.
We are confident that we will ultimately actively twice in the company better position for future sales and profits.
<unk> well now opened up the cause about strips upper air.
[laughter].
<unk> if people like ask a question <unk> passing style one on your telephone keypad.
She used against Speaker phone. Please make sure you function, it's turned off to allow your signature reach our equipment.
Again pastime I want to ask a question.
People know take our first question I don't know calling manner Piper Sandler things go ahead.
[laughter].
<unk>, Okay case I'm sure your your function F. turns off to Liar <unk>.
Good afternoon can you hear me okay.
[laughter] you have to chemical.
Oh, great. Thank you.
I wanted to ask a couple of questions just about the nature of the concept.
I'm thinking about the Taco Cabana improvement, specifically and could you talk a little bit about that being maybe more suburban in terms of locations and maybe more influenced by dinner pattern, both of which thing to be holding up in the marketplace.
Yeah.
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Seven days, a week regarding the or alcohol beverage promotion.
As we all over again.
And they're having to enjoying all the incoming bad again.
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Okay very very very helpful. Last question I mean, I was just kind of thinking back to.
At the beginning of this story, maybe you know as a public company and it was always.
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Level economics, we're strong and that was the basic premise.
There's a home court advantage for each brand. So could you talk somehow and let US understand you know before versus non core or by vintage or top gear versus bottom tier or are literally the cop trends in the performance across you know Paul concept across every single location I would love to just some understand some pushers impulse there. Thank you.
Oh sure.
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Do you get them to profitability Martin's are much higher.
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Show me the most improved.
Thank you for taking my question.
Thanks to call.
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After my turn to ask a telephone question <unk> passing style.
We have enough take her next question from Brian that Carol from Raymond James.
Collette.
Thanks, and good afternoon, I wanted I wanted to start on the sales performance at ploy, if we could and yeah. He wants seemed to play out a about as expected, but it seemed that April worse, and maybe a bit before starting to recover and and it seems to be lagging the broader industry recovery.
You were saying so I'm just curious to get your perspective on what they have a driven that maybe something regional or macros specific in south, Florida or something else that said straight highlighted.
Yeah.
She's on a four year old bases, blah, blah, blah, [laughter] and again within our market mentally nothing well leave with service system.
Keep in mind in South, Florida or.
And 25% of the <unk> poverty level or below I've movies. So that's good news right now.
So that's why we ever wish you hard on the lower cost lower price promotion.
Harder on things like the fancy, which we just need to lose that these prices are lower than the local grocery stores. So I I wouldn't say.
Mmm worse.
Local.
<unk>, we're not doing as well as lucrative service and one area also keep in mind aren't many you go out with them into it.
Service as much more enough.
Mhm on them.
Binding we've lost a lot of those people that are coming in.
Really for the platters.
And we have this about it as the binding restriction start to be removed or less and those people will come back.
Okay, that's helpful and and I get to a follow up on a rich could you give some perspective thinking about some of those dynamics. You just mentioned could you give such perspective on quarter today, how variable has it been if you compare south Florida to Orlando Tampa some of the other markets could you.
Give any perspective individual regions.
And I can give me a tall tall blind looks pretty good system on the sales decline.
And.
Not much difference if you look at northern Florida.
Central Florida, <unk> <unk> the range do them around 30, 32% you kind of workload here right now I'm working on on on the button.
<unk>.
Okay Alright.
I wanted to also the the quite a company called off premise I think you said it was 7.1% could you share what percent of that is delivery and could you also just give a little bit more on attraction that you've seen that spar with rubber eat I believe has has a pretty dominant share in south Florida in particular.
Mhm keep in mind, you just find on we really.
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Started rolling out when you've got to the mall to look for marketing.
Which is number two so we expect that and number two grow on <unk>.
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Or or roughly 60 or 70%.
You know off hundreds of dollars that's currently.
Given the conditions, we had hair again.
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The calendar year, there astronomer Mennonite I think we expected once things get back to normal that catering contribution will automatically important because we had great attraction at the end of it for a color.
Channel, we also status.
As rich said they are online sales shit increase dramatically launch said the bottle rocket you online and Apple supported by bottle rocket.
Mm.
All right that's great and then just last one for me on a G.N.A. cat, obviously very difficult decisions that you had to make but but in terms of determining cuts that you've made just curious if you could share and function you pared back and and just any other color on the permanent changes structural changes that.
You've made a either from a personnel or maybe from you know headquarters standpoint.
Still going with your three headquarters or or is there an opportunity every made the decision to pair that back perhaps.
Oh.
Okay.
The cost more.
And all functions and all occasionally obviously, our focus was floating around making sure that we maintain that support or you mean when needed to support operations and get Stacey that's taking activity any as we mentioned in the.
The.
Slowly someone in my spare time as.
Roughly 5.5 million or the estimated 9.1 million other gain your life savings.
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They were surveys are kind of the mixed in mentioned that the separation side when we need all the 525 million children. They would be viewed as more permanent and there were many direct <unk>.
Depend on the business right.
Brian.
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Lines from Governor Cuomo, Who's Gonna great job, stating your.
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<unk> basically what we do it before trying problems other method or better opportunities are we going to the world. So you're not you know we have no specific.
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Fishing too on the bottom line.
[laughter] understood certainly unprecedented times, a help everyone's well and stays healthy. Thank you again.
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I guess it saves question and answer session I have a noun x. trying to call back to the management.
<unk>.
Mm.
He he closes again, they just want to influence our team members.
Passion.
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Not only for people like this and support.
<unk> very good so.
Most important for people on Monday.
No David there's another saving normal to the human like <unk>.
And that's why I would say somebody else to.
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Look forward to keep them again next quarter.
[laughter] today's calls thank you for your participation ladies and attention you may now just kind of.
Yeah.
Oh.
[laughter].
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