Q2 2020 Earnings Call
[music].
Good afternoon, ladies and gentlemen, welcome to the good times restaurants.
Fiscal 2022nd quarter earnings call.
By now everyone should have access to the Companys earnings release, which is available in the Investor section of the company's website.
As a reminder, part of today's discussion will include forward looking statements within the meaning of federal Securities laws.
These forward looking statements are not guarantees of future performance. Therefore, you should not put undue reliance.
These statements are also subject to numerous risks and uncertainties that could cause actual results could differ materially from what we expect and airport investors should not place undue reliance on them and the company undertakes no obligation to update these statements reflect the events or circumstances that might arise after this call.
The company refers you to their recent.
Filings for a more detailed discussion of risks that could impact our future operating results.
Natural conditions, including risks related to covert 19 pandemic.
Lastly, during today's call the company will discuss non-GAAP measures, which they believe can be useful in evaluating formats.
The patient this additional information should not be considered in isolation or as a substitute results prepared in accordance with job and reconciliation to comparable GAAP measures available in our earnings.
Please note this event is being recorded.
And now I would like to turn the conference over to Ryan. Please go ahead.
Thank you Chad.
I would like to thank you all for joining us on the call today.
Our earnings release contains a letter for me provided an update on our business.
Response to the cobot Nike in pandemic.
At the onset of this pandemic there was tremendous lack of visibility to what the future might hold we took immediate action to ensure survival.
Our actions included at the reduction of pay a ball management level team members.
<unk> reductions and pay for our senior leaders.
It also included initially reducing stopping at a restaurants to nearly doubled the bad daddys as we did not know whether or not to expect an increase in our off premise sales.
Our board members waived their fees, we requested longer payment terms from our vendors, which were almost universally granted.
We've had productive discussions with many of our landlord deferral work statement about.
We drew down our credit facility to provide immediate liquidity and what we could well what we believed would be a rapid cash burn environment.
We are fortunate to have two brands with different service models in times like these.
Portfolio of restaurants at some balance and resilience that's people shift dining behavior.
And although initially we saw sharp declines in our good times restaurant sales. We've recently seen a returned to positive comps and are encouraged by operating trends that are drive through concept, which is well positioned for a market already focused on convenient, but now with greater interest in social distancing and they service model with a quick limited in around.
Action with others.
At Bad Daddys, we closed our dining rooms as a result about state orders at our guest expectations.
Under delivering carry out model have grown sales from their 15000 per week at the outset pandemic to nearly 25000 per week at the end of April.
Restaurants doing in excess of $35000 per week exclusively in off premise business.
We set to open dining rooms in 10 company owned restaurants and are looking forward to opening the remaining ones in Colorado and North Carolina.
Franchisee in South Carolina has also reopened its dining room.
We have done that's all what the health and safety of our team members and our guests in mind.
I suspected there are definitely mixed feelings in the public domain about reopening, but we have found that our guests are comfortable because of the safety measures. We have put in place and are believed to be able to enjoy dining in a restaurant again.
We could not have done this without an amazing team all to make sacrifices of various sorts.
We applied for loans under the cares Alex Paycheck protection program and those loans were funded last week. This program is critical to restore play to our team members into rehire, employing says or sales increase and just we reopened dining rooms.
As a result, we're comfortable with a current liquidity position and whats very recent increases in sales trends are no longer and a significant net cash burn possession.
The focus of our good times brand is to continue to build on the momentum we have.
For continued focus on our speed of execution initiative combined with increased focus on a wholesome clean unhealthier parents, exemplified by our employees and increased care and maintenance of our facilities.
We continue to advertising via radio during Colorado stay at home order, although with reduced spending and partially attribute that to our sales resurgence that's restrictions of east.
At Bad Daddys, we successfully pivoted from our longer term strategy to survive and tactics, but some of our core strategy was never a bad.
Retaining high potential talent and developing our team members at all levels, our teams have grown tighter and close or even as we it's hard to physically increase or distance from one another.
We collectively of learn as much about our concept and our individual and combined capabilities.
As we reopened dining rooms, we're doing so with our prior strategy of assigning department ownership and accountability with even more stringent focused on health and safety.
Nevertheless, casual dining will be changed in the short run, but even in the long run some changes may persist with an increased focus on off premise, we're committed to maintaining a higher level of off premise execution than our competition and ensuring that our customers can experience our best regardless of whether that is through a dining experience.
Carry out order or by having bad daddys delivered to their door.
Let's review this quarter's results.
Bad Daddys restaurant sales during the quarter were $19.3 million compared to $20.4 million during last year's second quarter.
We had approximately 53 more store weeks this quarter versus the same quarter last year offset by the sharp decline in sales during the last three weeks of the quarter.
29, bad Daddys, one of the comp base at the end of the quarter.
Cost of sales at bad Daddys were 28.8% for the quarter. It 30 basis point increase from last year's second quarter.
Although we have thus far been successful one out of <unk> and avoiding product shortages pricing for proteins has been volatile and we would expect sequential increase it'd be from bacon costs during the next quarter.
Bad Daddys labor costs increased by approximately 50 basis points compared to the prior year quarter, just 38.1% in the current your quarter.
This year over year increase is primarily due to de leveraging the sales in the last three weeks for the quarter as we've made progress in our objective to improved labor cost prior to the cobot nitrogen pandemic.
Overall restaurant level operating profit a non-GAAP measure for bad Daddys was $2.4 million for the quarter or 12% 12.2% of sales.
Compared to $3.2 million or 15.8% last year.
This is due to a combination of higher mix of delivery sales.
Having increased delivered commissions and the deleveraging impact of lower sales associated with the code is 19 pandemic.
Restaurant sales at good times increased slightly to $6.7 million driven by the strong positive comparable sales during the first 11 rigs for the quarter offset by substantial declines in the last few weeks in the quarter.
Food and packaging costs for good times were 30.8% for the quarter as a percent of sales decrease of 110 basis points compared to last year's second quarter.
As we discussed last quarter. Good times has continued to benefit from improved menu pricing adjustments your custard lineup and improvements in product waste.
Similar to our comments on bad Daddys, we have so far aboard the product shortages, but expect volatility and higher protein costs in the third quarter.
Total labor costs for good times decreased to 37.7% from 39.0% for the quarter like last year.
This is the result of leveraging increased sales along with our focus on staffing for volume and our speed of execution focus which has improved labor productivity.
Good times restaurant level operating profit increased nearly $240000 for quarter as a percent of sales the restaurant level operating profit increased by 340 basis points versus last year to 10.5% due primarily to lower cost of sales and lower cost of labor, partially offset by the higher costs.
Delivered commissions.
General and administrative costs were $1.6 million during the quarter or 6.2% as a percent of total revenues.
This represents a decreases your point $4 million versus the prior year quarter, and the 140 basis point decrease as a percent of revenues.
This quarter's GNS expenses decreased due to us due to slightly larger spans of control that bad Daddys and lower manager training costs as well as reduced restaurant support center staffing.
We recorded significant impairments both have long lived assets and of goodwill related to our bad Daddys business, we evaluate both at least on an annual basis, but also when they're indicators for us to review.
The code at night team pandemic combined with the sustained decline in our stock price start during and subsequent to the ended the quarter represented such indications.
The restaurant asset impairments at bad Daddys related to restaurants, which already had below average cash flow and one evaluated in connection with the impacts of covered 19, we believe long term asset value would not be recovered.
Our assessment of goodwill attributable to bad Daddys. Similarly was then evaluated and why does the Companys total market capitalization are reduced unit growth.
And additionally, the uncertainties associated with the covert 19 pandemic.
Both of these charges are noncash have no impact on a cash position or future cash flows.
Although there are market risks, which factors significantly into this impairment charge. We continue to have great confidence in the bad Daddys concept and look to the growth of off premise sales during the pandemic as a demonstration of its strength.
I am optimistic, but we will deliver on our long term strategies. Despite the short term uncertainties related to cobot 19.
Our net loss for the quarter was $14.9 million versus a net loss of your point $5 million in the second quarter last year.
It's not lost is primarily driven by the long lived asset and goodwill impairments taken.
Our adjusted EBITDA for the quarter was zero point $8 million versus $1.1 million in the prior year quarter. This decline significantly influenced by events during the month of March.
We finished the quarter with $4.1 million in cash and $16.8 million drawn against our credit facility with cadence bank.
As mentioned in one of our recent SEC filings, we recently obtained approximately $11.6 million of additional cash through paycheck protection program loans.
In the earnings release, we withdrew our outlook due to the continued uncertainties around it so that 19 pandemic.
At this time, such uncertainties present, a reasonable estimate of results for the balance of the year.
Well the pandemic has affected our overall financial results and at Bad Daddys has caused us to make course corrections related to our strategies. Our entire organization is focused on <unk> operations excellence in fiscal discipline has served us well during this crisis and allowed us to be here today, certainly great food and genuine cost hot.
Fatality to customers of both of our brands.
With that operator, Chad well, we'll open the call for questions.
Certainly thank you Sir well now begin the question and answer session to ask the question you May Press Star then one on your telephone keypad, if you're using a speakerphone. Please pick up your hand said before question the keys.
Withdraw your question. Please press Star then too.
Once again pressing star then one will allow you to ask a question.
At this time, we'll pause momentarily to assemble our roster.
Once again pressing star then one.
You to ask a question.
At this time I'm showing no questions. So I'd like to turn conference back over to you ride for any concluding remark.
Thank you Chad I.
I cannot think our team members enough for their grit and determination during the past eight weeks, we've entered a storm unlike any of us it ever seen before.
And we've survived we look forward not just to surviving though the learning and adapting and ultimately thriving as we continue to provide great food and genuine hospitality to customers of both of our brands in a rapidly changing environment.
It is not any one individual but the collective team that has made it happen and we'll continue to do so I'm honored to work with each and every one of you.
We will now conclude todays call. Thank you all for joining us today.
<unk>.
And thank you Sir the conference has concluded you may now disconnect your lines take care.
[music].