Q4 2020 Good Times Restaurants Inc Earnings Call
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Good afternoon, ladies and gentlemen, welcome to the good time restaurants, Inc. fiscal 2024th current fourth 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 at <unk>.
As a reminder of 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 and therefore, you should not put undue reliance on them the.
These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect and therefore investors should not place undue reliance on them and the company undertakes no obligation to update the statements to reflect the events or circumstances that might arise. After this call.
The company refers you to the recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions, including risks related to the kind of at 19 pandemic.
Lastly, during today's call the company will discuss non-GAAP measures, which they believe can be useful in evaluating our performance presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliation to comparable GAAP measure it's available in the earnings.
Really yes, and now I would like to turn the call over the Ryan. Please go ahead Sir.
Thank you Matt.
Thank you all for joining us on the call today.
It's all of the are aware of the co. Good 19 pandemic continues to be an unpredictable and from medical challenge for the country and in particular for the casual dining segment of the restaurant industry.
I'm proud of the efforts and the performance of the leadership and the team members here at good times its.
We've adapted to the dynamic environment, the we find the restaurants now operating assets.
Good good times business, which much like the rest of the industry saw an immediate contraction of the sales in March and the early April so.
Well the traffic bounce back throughout the remainder of our fiscal year assets customers began to view of the drive through the the safer way to experience restaurant dining.
To that end, we reported 10 per se comps for the quarter, the nearly 8% comps for the year at good times.
In addition, we've seen as evidenced by the 15% comps in October and the 22% comps in our fiscal November the we reported on our earnings release.
The the strength in sales has been maintained into the first quarter fiscal 2021.
We further believe that the focus weve placed on the speed of our drive thru has resulted in the repeat repeat business the formally lapsed or even the first time users of the brand as they know that even with the longest stack of cars on the drive through our customers can rely on us to provide quick accurate service.
We concluded the fiscal year with all of the dining rooms in our bad Daddys reopened though at various levels of occupancy limitations. We posted the same store sales declines of 12% for the quarter and 17.7 per cent for the year.
The largest decline having been during the fiscal third quarter.
We approached flat comps in November, but with the closing of dining rooms on Colorado late November and they generally increased awareness of the virus nationwide. We saw the same store sales declines of approximately 8% during the fiscal month of November.
We believe that our product selection with the.
Bold flavors and Burger builds that you just can't find anywhere else along with our commitment to scratch cooking and high quality ingredients has aided us in retaining a significant portion of our pre pandemic sales.
Or many of was the initially reduced drilling our first round of dining room closures, but we strategically added back existing and even added some new items to the menu with the focus on those items that we could of fit efficiently execute on our kitchens, but.
But it still represented our bad Daddy's brand very well.
We continue to operate our dining rooms at bad Daddy's in Oklahoma and in the southeast part of the country, where we have not yet seen new restrictions on indoor dining.
On Colorado, However, we closed our dining rooms, the bad Daddy's. The November in response to new restrictions placed upon us by the state but of continue to offer on premise dining at our existing patios and in select locations in expanded outdoor dining beyond those existing patios.
Although most of our bad Daddys patios already were either partially or fully covered and have either electric or gas heating. We have made investments to improve heating and provide when protection where possible to expand the range of weather conditions in the <unk> outdoor dining is comfortable the practical for our guests.
In addition, we've seen that the restrictions on indoor dining that's resulted in the increase traffic that are good times drive throughs.
Throughout the pandemic to keep our employees the guess safe we've implemented stringent practices to ensure that the employees who have the actual or suspected exposure to the virus do not work in the other restaurants and the those that are exhibiting symptoms of the illness of any sort of do not work to.
To that end, we have programs in place to provide for paid leave for all employees, who have been exposed or currently exhibiting symptoms of COVID-19.
Some of these programs in place since the early in the pandemic.
We launched the virtual brand that mom is chicken in November and the limited number of locations.
This virtual brand is executed out of the existing kitchen, we have in some bad daddys restaurants, and it has been designed to leverage the coronary strength that has been developed in bad Daddys.
While many companies are launching virtual brands, we envision the bad Mama's as an extension of bad Daddy's focusing on our chicken wings on tenders products that we already make the merchandising them separately under chicken brand in order to create a concept of people think of when they are specifically looking for chicken.
We believe that the final product the when you deliver to our customers is differentiated from many of the other virtual chicken concept. It's just like bad Daddys, we use fresh jumbo wings and fresh chicken tenders the bad moments.
We have two leases that were executed back in fiscal 2019 related to expected bad Daddy's locations.
We worked with landlords in the early fiscal 2020, even before the pandemic emerged to delay construction as we work to rebuild our balance sheet.
We expect during fiscal 2021 to complete construction on the location in Marietta, Georgia. The we had previously started.
Andrew commence and complete construction on the location in Montgomery, Alabama.
We have modified the plans for both of these locations to better support our off premises business through a dedicated Kurds curbside entryway index.
And expect to additionally, deliver enhanced customer facing and in restaurant order management technology at these locations.
We also expect to begin searching for locations on existing markets of the south east to target for fiscal 2022 development.
As indicated in our press release, we expect development to be at a more modest pace out of existing cash flow to maintain a strong balance sheet and to ensure our operation teams are not unduly stressed and lose focus on excellent operations in our existing restaurants.
Let's review this quarters results.
Bad Daddys restaurant sales during the quarter were $19.3 million compared to $20 million during last years fourth quarter.
We had approximately 49 more store weeks this quarter versus the same quarter last year offset by reduced traffic the company enclosed and reduced capacity dining rooms associated with the COVID-19 pandemic.
33, bad Daddys, where on the current base at the end of the quarter.
Cost of sales at bad Daddys were 27.0 per cent for the quarter. The 230 basis point decrease from last year's quarter. The result of higher average menu pricing associated with a greater share of sales through our third party delivery services.
Reduced waste associated with menu optimization.
Yeah, the generally favorable commodity price.
Bad Daddys labor costs decreased by approximately 480 points basis points compared to the prior year quarter, the 33.7 per cent for the quarter.
This year over year decrease is primarily due to reduced front of house staffing levels accompanying limits of the occupancy of dining rooms improved back of house productivity.
And the reduction of management staffing levels from an average of five managers per restaurant to four managers per restaurant.
Overall restaurant level operating profit a non-GAAP measure for bad Daddys was $3.3 million for the quarter were 17.1 per cent of sales compared to $2.7 million or 13.3% last year.
This is due to improvements in cost of sales of labor, partially offset by the sales de leverage of fixed cost and increased delivery Commission the company a higher mix of delivery sales.
Restaurants at good times increased to $9 million driven by strong positive comparable sales during the quarter.
Food and packaging costs for good times were 31.1 per cent for the quarter decreased the of 10 basis points compared to last years quarter.
Good times had slightly elevated commodity cost offset by higher menu pricing and improvements in product waste.
Total labor costs for the good times decreased to 31.8% from 35.9% of sales for the quarter last year.
This is the result of leveraging increased sales are focused on staffing for volume and our speed of execution, which has improved labor productivity.
Good times restaurant operating profit increased by zero point $5 million for the quarter.
As a percentage of sales the restaurant level operating profit increased by 480 basis points versus last year to 20.0%.
Due primarily to higher sales the company by lower cost of sales lower cost of labor and.
And partially offset by higher costs associated with delivery commissions.
General and administrative expenses were $1.6 million during the quarter of 5.5 per cent the percentage of total revenues the.
This represents a decrease of $1.4 million versus the prior year quarter, and the 490 basis point decrease on the percentage of sales basis.
G.N.A. expenses for the last years quarter included zero point $7 million of severance costs and approximately zero point $3 million of.
Non cash stock compensation costs, that's the.
See other with the separation of the former CEO.
Additionally, this quarters <unk> expenses decreased due to the larger span of controls at bad Daddys Laura.
Lower mandatory training costs.
As well as reduced restaurant support center staffing compared to the prior year.
We recorded the impairment of long lived assets of approximately zero point $3 million related to one good times restaurant in a remote suburban market of Denver.
Our net income for the quarter was $1.5 million versus the loss of $4.2 million on the fourth quarter last year.
Despite significantly lower sales at bad Daddys incremental sales at good times improvements in operating efficiencies at both brands.
And the comparison against non recurring severance costs in the prior year allowed us to deliver significantly better bottom line results.
For the year, our net loss was $13.9 million, primarily driven by $15.6 million of goodwill and long lived asset impairments.
Adjusted EBITDA for the year with $7.6 million compared to $5.4 million in fiscal 2019.
We finished the year with $11.5 million in cash and $5.5 million outstanding on our credit facility with cadence Bank and 11.7 million in outstanding Paycheck protection loans program loans.
Subsequent to the end of the year, we closed the one good times restaurant. The previously had impairment charges recorded against it.
That restaurant has been a marginal performer free years, we're in the process of subleasing it to an unrelated party.
We provided guidance for the first quarter of fiscal 2021.
With net income expected to be between zero point $4 million zero point $6 million.
The adjusted EBITDA of.
$1.5 million to $1.7 million.
Our sales for the quarter at good times have been strong solidly double digit and our sales of remain similarly strong in December.
Sales were in the mid this.
Mid to high single digit negative range of bad Daddys and the softened a bit in December as the full impact of Colorado dining room locations dining room closures have been realized and just traffic in general has not seasonally increased due to a reduction in holiday shopping the bricks and mortar shops.
Despite softer same store sales in the October November we believe the bad Daddy's has continued to outperform the casual dining segment as measured by Knapp track and Black box intelligence.
We began the year with the shift from growth to retrenchment.
Found ourselves six months ended the year with the emergence of a pandemic the punch of us into an existential crisis.
But with the combination of agility hard work Heres The act funding and two strong concepts that resonate with other customers.
We found ourselves at the end of the fiscal year in a position to weather a challenging fall and winter comply.
Complete two new restaurants, originally committed to and 2019.
And begin thinking about future growth.
At the same time, we remain firmly committed to fiscal discipline and the strong balance sheet the.
The culture that drives the accountability and ownership of the result at all levels.
A team that embraces innovation.
And ultimately great restaurants that are the outcome of genuine hospitality and operations excellence.
With that Matt will open the call for questions.
We will now begin the question and answer session to ask the question you May Press Star then one on your touched on so if you are using the speakerphone. Please pick up your handset before pressing the keys if at any time of question. That's been interest and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question comes from Walter Morris with the Bearable growth. Please go ahead.
Thank you Oh.
Let me congratulate the your Rhianna on a change for this [laughter] exceptional for pharma answers.
No doubt you are performing the way above the industry standards are so good.
Graduations are great performance.
The specific question a couple of at least to start.
You're doing an incredible job on Gionee with Gionee levels.
Roughly half of prior year level in the September quarter, how is that been accomplished and to what extent is that sustainable going forward.
All show up with the expected.
The two of those stores and fiscal 21, what kind of Capex budget are we looking at.
I am 21 compared to expected.
Cash flow from the operating the business.
That's certainly so well Walter Thank you first for the the.
The congratulatory words I definitely appreciate it.
As as it relates to DNA, you know I would first highlight that the last years quarter did any of you know have the.
On a separation cost associated with our former CEO and so those were non recurring cost in the from the former year.
I would say that our G.N.A. load right now we expect we expect the little bit of additional gionee spend.
And you know I wouldn't look at our nominal DNA dollars for this quarter and I think on a quarterly basis, you know, we might see a little bit of accretion from that.
But the we don't expect a.
You know significant a large the increases in G.N.A. I would say, we do expect to invest in.
A new human resource management system, we expect to which our current one is very antiquated.
We expect to invest in some new operations management operations performance measurement systems.
And the other thing I would highlight is we did make a couple of higher level of new hires we did hire a director of technology, who who also serves as the innovation leader for the whole company, we made that higher late in the quarter and the way. Additionally, hired a an assistant controller share.
Certainly after the beginning of the first quarter. So there's a little bit of increased DNA spend that we can expect.
But I think as it compares to our former levels of GE and they I don't think were immediately going back to that and the and I would also comment that as it relates to.
Kind of the next two restaurants, we probably don't need additional multi unit management for that however.
Kind of once we add a once we get the 2022 our spans of controls will be at a point, where we'll have to start making that decision.
Now as it relates to your second question, which was related to Capex.
We haven't provided guidance for the full fiscal year and I'm I'm reluctant to do so.
On this call just the as a as highlighted in the release, there's just so much uncertainty still that the that is out there. However, I would say you know we we expect during the first quarter that our EBITDA will be.
You know in the $1.5 million range.
And I think from a capex the end and we would expect I think particularly later in the the spring and summer we would certainly hope that the.
The pandemic would be easing and some of the restrictions would be easing by late spring and throughout the summer.
And so I'd say from that we're confident in being able to continue with these projects.
I would say, we have the probably about $1.7 million to $1.8 million worth of capital expenditures associated with these two stores that.
We did begin the Mariana location of last year, and so we already have some existing capex related to that.
[noise] excellent. Thank you again great results.
Thank you again Walker.
This concludes our question and answer session I'd like to turn the conference back over to Ryan for any closing remarks.
Thank you again that the.
Then she was the results are the direct result of the higher level of collaboration and team work by the team the Weve achieved in the past.
And as always I want to thank the leaders within good times for their strong leadership and the entire team a weather leaders or individual contributors.
For their strength through the adversity.
Sharing of meal with others is nearly as old as human society itself. The Miss pandemic that will not eliminate our physical need to eat nor is it going to destroy the emotional desire to socialize with others over on meal.
Our vision for our company to develop and grow concepts that provide people with the way to satisfy their physical need for food, but more of them that to satisfy and enhance the emotional fulfillment. The so often the companies the meal I'm excited and confident in the future for restaurants in general, but especially for our concepts from.
Good times and for bad Daddys.
With that we'll conclude today's call. Thank you all for joining us today and I wish you safe and healthy wish you a health and safety and this time of the pandemic. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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