Q3 2022 Good Times Restaurants Inc Earnings Call
competition, cost increases or shortages in raw food products, supply chain and inflationary factors due to the unknown impacts of the war in Ukraine, and other matters discussed under the Risk Factors section of Good Times Annual Report on Form 10-K for the fiscal year ended September 28, 2021, filed with the SEC and other filings with the SEC.
During today's call, the company will discuss non-GAAP measures which they believe can be useful in evaluating our performance.
The 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 measures available in our earnings release.
And now I would like to turn the call over to Ryan. Please go ahead, sir.
Thank you, Josh. Thank you all for joining us on the call today.
As mentioned, you should have access to our earnings release and 10Q filing.
As we discussed last quarter, our results for this third fiscal quarter continue to reflect the inflationary pressures that are impacting the businesses nationwide.
Our focus throughout this time period at both brands has been to pay wages sufficient to staff or restaurants, focus on the development of our people, and maintain high levels of product quality, hospitality, and well-maintained facilities to deliver an outstanding overall guest experience.
The results have been the return of positive same-store sales at good times and a continuance of positive same-store sales at bad daddies where we have been beating the black box intelligence benchmark for casual dining.
Average weekly sales at Bad Daddies this quarter were $52,300, up from $50,400 the same quarter in 2021, and up from $49,100 in the same quarter of 2019.
Similarly, average weekly sales at good times this quarter were $30,400, up from $29,800 in 2021 and up from $24,000 in 2019. This represents an all-time high for any quarter.
We saw cost pressures across the restaurant P&L driven by high product costs, partially offset by a 6.8% year over year menu price increase at bad dabbies.
and an 8.2% year-over-year menu price increase at good times.
In addition to significant product and wage cost increases,
We've also experienced higher other restaurant operating costs due primarily to our investment in technology to expand digital orders.
We continue to experience high levels of orders coming through third-party delivery aggregators at Bad Daddies, and we have seen increased volume of delivery orders at good times, as we have more aggressively pursued that channel of the business.
Protein costs, namely beef and bacon, have shown some price stability from last quarter. And we've seen improvement in the pricing of chicken wings.
The chicken breast, which is our main chicken product of both concepts, continues to remain at stubbornly high levels.
When we look at competitors specific to bad daddies,
specifically boutique burger concepts with chef-inspired menus, we believe we've taken less price increase in our markets compared to those competitors.
Whereas pre-pandemic, we were generally the highest priced among any chef-driven craft burger concept.
We're now just above the median among that same group.
As mentioned last quarter, this has been a strategic decision, and we believe that this has paid off in stronger multi-year sales performance with seasonally adjusted same store AUVs near all-time highs.
And as I mentioned last quarter, over 20% of our restaurants at Bad Daddy's with a full year of operating history exceeding $3 million volumes.
and two restaurants continuing to exceed $4 million annual volumes on a last 12 month basis.
We continue to thoughtfully develop a pipeline for unit growth at Bad Daddies with our expectation that any new unit development will be focused in the Carolinas and Alabama. We have one lease in the final phase of negotiation that we expect to open in fiscal 2023 and other potential sites at various stages of negotiation.
New restaurants will be based on a combination of pipeline development, cash flow generated by the business and other investment decisions affecting the use of cash.
Our image remodel prototype at good times, the restaurant in the Denver metro area continues to progress, and we've approved two more units for remodels given the long lead time to get these remodels through the planning and building permitting processes with the local municipalities in the greater Denver area.
We hope to have this first remodel project complete early in the 2023 calendar year, and the other two during the second or third quarter of 2023.
As mentioned during last quarter's call, we're refitting existing drive-throughs with new signage and digital menu boards.
important merchandising assets that we haven't updated in many years.
We have eight digital menu boards now installed and operating and currently expect
to complete all locations by early of fiscal 2023.
Additionally, we have new signage designed and in process for installation at eight restaurants that we expect to complete before the end of fiscal 2022 and expect to complete all of our signage replacements in fiscal 2023.
To improve our ability to accurately track speed and report it consistently system-wide, we're in the process of installing new lane timer systems in all of our Good Times restaurants, which will be completed before the end of the fiscal year and will provide a single source of timing data.
We're similarly thrilled with the results in the eight locations that are currently up and running. And the ability for managers of these restaurants to view their real-time performance against their peers in the market has instilled a new spirit of friendly competition among them.
As previously announced.
program of $5 million. As of June 28, 2022, the company has purchased...
Approximately 169,000 shares of its common stock under the repurchase plan, leaving $4.4 million dollars...
Still available for use for repurchases under the plan.
Though this quarter represents the continuation of a challenging year from a financial performance standpoint, we continue to believe in the strength of both of our brands as we manage both businesses for the long term.
We believe that the final quarter of this fiscal year will continue to show pressure on restaurant level margins.
with food and labor cost percentages that are higher than our long-term target.
We're committed to thoughtful, well-planned adjustments to improve profitability and control costs.
and remain confident in the long-term potential of our brand.
despite the magnitude of the current inflationary environment we're experiencing.
With that, I will pass it over to Matthew to review this quarter's results.
Thank you, Ryan.
Total revenues increased 7.5% to 36.5 million for the quarter compared to the prior year quarter.
Total restaurant sales for Bad Daddy's restaurants increased 2.8 million to 27.1 million for the quarter.
The increase in sales was due to higher demand for dine-in restaurant occasions, as well as a continued strength in delivering online orders, along with an additional 36 restaurant weeks associated with two new restaurants that opened in the third and fourth quarters of 2021, and the purchase of the Greenville, South Carolina Bad Daddy's Restaurant.
Same store sales increased 5.3% during the quarter with 38 bad daddies in the comp base at the end of the quarter. Until next time
Cost of sales at Bad Daddy's were 32.5% for the quarter, a 280 basis point increase from last year's quarter, the result of significantly higher food and packaging costs as seen through inflationary and supply chain pressure.
Bad Daddy's labor costs decreased by 10 basis points compared to the prior quarter to 34.2% for the quarter. The slight decrease as a percentage of sales reflects improved productivity, mostly offset by a significant increase in hourly wage rates. Among same stores, back of house hourly wage rates increased from $13.96 in the prior year quarter to $15.64 in the current year quarter, which is a 12% increase.
Occupancy costs at Bad Daddy's increased 10 basis points to 6.2%. Denominable increases due to lease costs associated with newly opened restaurants toward the end of fiscal 21, lease costs associated with a restaurant acquired from a former franchisee, and increased real property tax assessments.
The other operating costs were 13.8% for the quarter, which is an increase of 180 basis points, primarily due to higher increased spending on restaurant technology and repair maintenance expenses.
Overall, restaurant-level operating profit, a non-GAAP measure for bad daddies, was approximately $3.6 million for the quarter, or 13.3% of sales, compared to $4.3 million, or 17.8% last year. The decline is primarily due to the increased cost of sales and other restaurant operating costs. For more information, visit www.fema.gov
Restaurant sales at good times were 9.1 million, a decrease of 0.2 million driven by the closure of one restaurant at the end of March, mostly offset by the 1.6% same store sales.
Food and packaging costs for good times were 32.3% for the quarter. That's an increase of 290 basis points compared to last year's quarter, again the result of significant inflationary pressures on food and packaging material.
Total labor costs for good times increased to 33% up from 31% for the quarter last year. That's due primarily to higher wage rates to attract qualified employees in the Denver metro area partially offset by increases in unit level productivity.
The average hourly wage rate at good times was $17.28 during the current year quarter compared to $15.02 in the prior year quarter. That's more than a 15% increase.
Occupancy costs at good times were 7.7%, which is an increase of 20 basis points.
Good times other operating costs were 11.1% for the quarter, an increase of 260 basis points due primarily to additional delivery service charges accompanying a higher mix of delivery sales and higher repair and maintenance expenses during the quarter.
The Good Times restaurant level operating profit decreased by 0.8 million for the quarter to 1.4 million.
As a percent of sales, restaurant level operating profit decreased by 770 basis points versus last year to 15.9% due primarily to higher costs that we previously discussed.
Combined general and administrative expenses were $2.4 million during the quarter, or 6.5%, as a percent of total revenues.
This represents a decrease of 0.1 million versus the prior year quarter.
GNA expenses decreased versus the prior year due to decreased legal and professional services and was offset by increased costs in recruiting and training, travel, and insurance costs.
We recorded impairment of long-lived assets of 0.3 million during the quarter for the impairment of one GoodTimes restaurant.
No impairment costs were recorded in the prior year quarter.
Our net income to common shareholders for the quarter was 0.5 million, or 4 cents per share, versus income to common shareholders of 13.6 million, or $1.07 per share in the third quarter last year. For the year-to-date period, our net loss to common shareholders was 1.4 million, or a loss of 11 cents per share, versus income of 15.5 million, or $1.22 per share in the prior year-to-date period.
Last year's income included a gain of approximately $11.8 million on debt extinguishment.
Adjusted EBITDA for the quarter was 1.7 million compared to 3.1 million for the third quarter of 2021. For the year-to-date period, our Adjusted EBITDA was 4 million versus Adjusted EBITDA 7.2 million for the same period in fiscal 2021.
We finished the quarter with $9.7 million in cash and zero debt.
And with that, I will hand it back to you, Ryan.
Thank you, Matthew, for the review of our financials for the quarter.
And with that, Josh, we can open the call for questions, please.
At this time, I would like to remind everyone, if you would like to ask a question, please press star followed by the number 1 on your telephone keypad.
We'll pause for just a moment to compile any questions.
Your first question comes from the line of Brian London. Your line is open.
Hey guys, yeah the course is impressive to me given the environment.
I was just wondering if you guys could...
maybe provide some guidance on seasonality going forward. I'm having a tough time kind of getting a beat on it, given the pandemic over the past few years.
You know, the mix of bad daddies in with good times.
Certainly. I mean, I think it's a really thoughtful question.
because our business, particularly at good times, but also bad daddies, has followed a similar seasonal pattern. And that's been somewhat changed over the past couple of years as the pandemic has affected customer behavior. I think what we're seeing is a return to the level of seasonality that we had prior to the pandemic where typically between December and February in particular,
but maybe also in November . Sales tend to decline and that tends to be the lowest indexing period. And the summer months really beginning in March, the spring and summer months I should say, beginning in March and extending through, say, mid-August tend to be some of the higher indexing months. I would say that July , despite being in the middle of summer, tends to index a little more softly than the other.
we're anticipating highly, we do have a couple of more traditional mall restaurants, particularly at Bad Daddy's, and I think that's where we would see any pop, if you will. The short answer is we don't know. We're certainly hoping that's the case. But I think that's a question in light of how consumer behaviors have changed, and is there going to be a return to some of the more normal patterns we see with holiday shopping? Yes.
I know that's a long-winded way to say I don't really know. I'd say I think what we're hoping it is, but we'll have to wait and see.
Okay, yeah, I appreciate the candidness. Thanks again.
You're welcome. Thank you.
As a reminder, if you would like to ask a question at this time, please press star, followed by the number 1 on your telephone keypad.
We'll pause for just a moment to compile any remaining questions.
There are no further questions at this time. I'd like to turn the call back to Ryan.
Thank you, Josh.
Though our performance this year continues to be impacted by severe cost pressures, we expect those pressures to have similar impact at least through the end of the fiscal year. Our focus, along with the focus of our operators and their teams, is to concentrate on running great restaurants, delighting customers, and providing our guests with memorable experiences.
through great suit of both of our unique concepts.
both of our unique concepts.
I want to express my sincere thanks and appreciation for the entire team of people who all work exceptionally hard to execute both of our brands.
With that, we'll conclude today's call. I thank you all for joining us today.
This concludes today's conference call.
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We expect those pressures to similar Act lease the end of the fiscal year are focus long, the focus of our operatated the theirthirteen con TR running restaurants, the lighting cotomers and provviding est memberal member able experienes cour both thir eight concept as want exressed year. Thank preation for the ent people all were ceptionally cour both of our brands. With that will concluded to days call, I think you all for joining day uded con St.