Q3 2022 Texas Roadhouse Inc Earnings Call

<unk> call is being recorded.

All participants are now in a listen only mode.

After the Speakers' remarks, there will be a question and answer session at that time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.

Should anyone need assistance at any time during the conference. Please press star zero and an operator will assist you.

I would now like to introduce Tonya Robinson, the Chief Financial Officer of Texas Roadhouse, you May begin your conference.

Thank you Josh and good evening, everyone by now you should have access to our earnings release for the third quarter ended September 27, 2022, and May also be found on our website at Texas Roadhouse Dot com in the investors section.

Before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion.

Of the relevant factors that could cause actual results to differ materially from those forward looking statements.

In addition, we may refer to non-GAAP measures if applicable reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release.

On the call with me today is Gerry Morgan Chief Executive Officer of Texas Roadhouse. Following our remarks, we will open the call for questions now I'd like to turn the call over to Gerry.

Thanks, Tonya and good evening, we are proud of our third quarter results, which were highlighted by strong top line performance driven by the hard work of our operators, we were especially pleased to see sales growth accelerate month to month, resulting in an eight 2% comparable sales growth.

For the full quarter. This top line momentum helped generate strong growth in restaurant margin dollars, leading to nearly 24% earnings per share growth.

These results were achieved in spite of the continued impact of cost pressures throughout the business.

Our August and September periods benefited from strong guest demand, resulting in increased quarterly dine in traffic compared to both 2019 and 2021 weekly.

Weekly to go volumes also remained healthy throughout the quarter at over $16000 per restaurant.

During the third quarter, we completed our semi annual review of menu pricing for both Texas Roadhouse and Bubbas 33.

Based on our discussions with our operators, we recently implemented a 2.9% price increase taking menu pricing is never an easy decision for US. However, we are confident that our commitment to protecting our value proposition will continue to build long term.

<unk> ships with our guests, which we have done for nearly 30 years.

Moving on to development, we remain encouraged by the performance of our newest restaurants, including Texas Roadhouse openings in smaller towns. This performance confirms our belief that we still have significant growth opportunities for many years to come.

As we sit here today, we believe the Texas Roadhouse concept has the potential to grow to as many as 900 domestic restaurants from its current size of just over 600.

We are on track to open 23, Texas Roadhouse and Bubbas locations in 2022 with 14 opened so far this year and our international franchise partners have opened six Texas Roadhouse restaurants, with one or two more expected by year end we are all.

So pleased that our fifth jaggers location opened in October .

For 2023, our development pipeline remains strong and we are targeting approximately 30, Texas roadhouse and bubbas openings as well as three jaggers. Additionally.

Additionally, we have a tentative agreement with one of our domestic franchisees to acquire eight restaurants at the beginning of next year. We also expect our franchise partners to open 12 international and domestic locations in 2023, including three jaggers.

As we look to next year, our strong financial position allows us to invest in our restaurants focus on our people development and provide the infrastructure needed to support operational excellence. We will continue with this tried and true approach which has.

It's proven to be a consistent builder of shareholder value.

Finally over the past month as part of our annual fall tour I had the opportunity to see our managing partners. It was great to meet face to face and listen learn and take action on their feedback to better support their restaurants.

Their passion along with their commitment to our operating principles will continue to push us forward to even greater successes in the future.

Now Tonya will provide a financial update.

Thanks, Gary for the third quarter of 2022 net income increased 18, 5% to $62 3 million and diluted earnings per share, which includes a benefit from share repurchases increased by 23, 7% to 93 cents.

The growth of 14, 3% versus last year was primarily driven by a seven 9% increase in average unit volume and store week growth of six 1%.

For the quarter comparable restaurant sales increased eight 2% driven by seven points, 7% average check growth.

Guest traffic was up by a half a point overall with dining room traffic up three 3%. We continue to see positive mix driven by year over year improvement in the percentage of guests choosing to dine in as well as dining guests continuing to order higher priced entrees.

Our restaurants are averaged over 129000 in weekly sales in the third quarter and to go represented approximately 16300 or 12, 6% of these total weekly sales.

Sales volumes were consistent throughout the third quarter with a percentage increasing slightly in the back half of the quarter.

By month comparable sales grew three 9% nine 9% and 10, 4% for our July August and September periods, respectively.

Our sales momentum has continued into the fourth quarter for the first four weeks of the quarter weekly sales averaged a 130000 with comparable sales up eight 3% as compared to the same period in 2021.

Whereas the third quarter restaurant margin dollars grew 12, 5%.

52 million and were 15, 4% as a percentage of total sales down 26 basis points as compared to last year.

Restaurant margin benefited from a $6 $6 million adjustment to other sales related to a change in our historical gift card breakage assumption as a reminder, in the third quarter of 2021, we had a similar benefit in other sales of $4 8 million.

Food and beverage costs as a percentage of total sales were 34, 7% for the third quarter up nine basis points compared to 2021. This increase was primarily due to commodity inflation of eight 8% in the quarter, mostly offset by the benefit of menu pricing with roughly 70% of our fourth quarter commodity.

Basket secured with fixed prices, we have lowered our full year commodity inflation expectation to approximately 10, 5%.

Looking ahead to next year, we are projecting commodity inflation of 5% to 6%.

Currently expect the first quarter of 2023 will be impacted by higher inflation as we lap easier comparisons and will moderate as we move through the remainder of the year.

While our guidance assumes that the cost of many of the items in our commodity basket will remain elevated in most of our inflation next year will be driven by higher beef cost.

Labor as a percentage of total sales increased 24 basis points to 33, 5% as compared to the third quarter of 2021, while labor dollars per store week increased eight 6%.

This increase in labor dollars per store week was driven by wage and other labor inflation of seven 7% and growth in hours of one 8%. These increases were partially offset by lapping a $2 $6 million adjustment to our quarterly reserve for Workers' comp and group health insurance.

Based on current trends, we continue to expect approximately 8% of wage and other inflation for the full year for.

For 2023, we are forecasting wage and other inflation of 5% to 6% with upcoming state mandated increases representing nearly 2% of the increase.

Other operating costs were 14, 8% of sales, which was flat as compared to the third quarter of 2021, the year over year benefit of sales leverage was offset by a continuation of the higher cost that we're seeing in areas such as utilities credit card charges and repair and maintenance expense.

Other operating also benefited from the impact of adjustments to our quarterly reserve for general liability insurance.

These adjustments include a $4 $4 million benefit this year compared to a $3 $2 million benefit last year.

Moving below restaurant margin G&A for the third quarter grew year over year by three 8%, but came in at four 3% of revenue. The primary drivers of the increase year over year G&A spend we're at $4 $1 million increase in cash and equity compensation and it's $2 million increase in meetings and travel expense.

These increases were partially offset by a $2 $5 million adjustment to the cost of our managing partner conference held in the second quarter and the effect of lapping the approximately $3 million expense for the abbreviated conference that we held in the third quarter of last year.

Our effective tax rate was 15, 2% for the third quarter and we continue to expect that our full year 'twenty two tax rate will be approximately 14%.

Assuming no changes to the tax code, we would expect an income tax rate of approximately 15% for 2023.

With regards to cash flow, we ended the third quarter with $185 million of class, which is about $5 million from the end of the second quarter cash flow from operations was 96 million and was offset by $65 million of capital expenditures and $31 million of dividend payment.

You need to expect full year 2022 capital expenditures will be approximately $230 million increasing to approximately $265 million for 2023.

Now I'll turn the call back over to Jerry for final comments.

Thanks, Tanya before I turn the call over for questions.

The Florida Native I want to offer my sincere condolences to everyone impacted by the devastation of hurricane and thankfully, our restaurants suffered minimal damage and because of the resilience of our Roadies, we were able to quickly reopen and serve our communities.

I also want to thank Andy's outreach, our employee funded assistance program for providing much needed financial aid to our impacted Roadies I am so proud to be the head coach of such a people first company that truly values its employees and provide service with heart to our communities and.

Times of need operator, please open the line for questions.

At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.

Your first question comes from the line of Brian Bittner with Oppenheimer. Your line is open.

Great. Thanks for taking the question Tonya as it relates to 2023 are you able to talk about the percent of the food basket that you currently have locked. So we can just better understand what type of visibility you have into the 5% to 6% commodity outlook or maybe any other.

The assumptions that you have that's underpinning our commodity outlook for next year, and then I have a follow up.

Sure, Brian we don't want to disclose any type of data around what we have locked at this point I'll tell you. We don't have just because it's so early you know we're still in discussions with vendors and suppliers and you know we'll wait until February to give you an update on where we are from that perspective.

Tell you those things really haven't changed a whole lot from what we've been talking about all year just in the fact that it is tougher to kind of lock up those prices.

Particularly particularly on beef and you know those contracts tend to be a little bit shorter maybe than what we've seen you know pre COVID-19, so that really hasn't changed but we're still really working on that that ended the basket and overall you know just any other information I can give you you know I'd say.

Third in the in the scripted section we are most of the inflation that we're guiding to in that 5% to 6% is driven by beef and the rest of the basket you know saw some pretty decent inflation in 2020 to them and so while we still think costs will go up on those items, it's just not as much of it.

Driver is what that beef and beef was one of the better performing items for us in the basket in 'twenty. Two so we saw some softness on the beef cost in Q4, just as everyone's read with the kind of you know a culling of herds and things like that and we think that we're gonna you know maybe see some of that.

That you know coming back in 'twenty three as far as you know affecting what supply looks like along with just drought situations and that impact. So we have that built into that 5% to 6% to some degree of just expecting supply to make things a little more difficult and supply constraints and things like that.

Well. Thank you I appreciate the first look in the 2023 from you and just as it relates to pricing.

I think the 2.9% price that you just took in October I think that replaces 4.2% that falls off in November . So I think you'll have about 6% pricing in place until April . So just confirm that if you could and the question is how should we think about the pricing strategy.

For the full year of <unk> 23 in response to this kind of 5% to 6% commodity inflation. Just so we all as analysts can better understand how to think about your cogs margin trends for next year.

Sure. So yeah in Q4 this year it'll be pricing will come in at about six 3% and you're right you're going to have just a little bit of impact from that 4.1 that rolls off in November .

And then at that point, you'll just be looking at the 3.2% that we took in April of this year, along with that 2.9% that we just did so for Q1 that puts you at about five 9%.

And then it kind of goes down from there assuming no additional pricing throughout 'twenty, three and really Brian you know I'll just kind of tell you start that conversation as you know we're going to continue to do he looks at pricing well do you want again, probably starting in March as.

As we come upon that April pricing falling off them and you can continue to do a later you why we feel like that just gives us more visibility and ability to react as kind of what's going on out there in the environment. So that feels you know kind of like what we want to do but I'll tell you you know the goal isn't necessary necessarily to ops.

<unk> inflation, and we want to make sure that we're really again thinking that that value proposition as we usually do so that's really going to be the more of a focus for US then you know trying to increase our margins on a short term basis.

Okay. Thank you.

Yeah.

Your next question comes from the line of Eric Gonzalez with Keybanc. Your line is open.

Just maybe a big picture question on the margins in light of the full year inflation outlook, which seems to have improved relative to where we were earlier in the year I'm just wondering how youre thinking about the margin potential there.

Obviously, some opposing forces between sales and cost, but if you think you can get back to that 17% plus restaurant margin next year and what might the assumptions the entre of deflation and sales next year. Thanks.

Mhm.

Yeah, Eric I think with the guidance. We gave is you know commodities and labor you know under that scenario and with the amount of pricing that we you know well have in the menu a lot depends on what we've taken 23, especially in April as far as you know what lets you get there, but it can be tough to get back to 17 to 18 next year.

It feels like you know, where we're ending this year feels really good, especially when we think about where we started out this year as far as all of the uncertainty we had on the commodity basket. So we were pleased to see things entering that way, but I think you know outside of margin percents, we feel like we can put up a really good year next year of <unk>.

Strong margin dollar growth and then store week growth, which is so important for us so from that point of view, we feel pretty good about it.

Thanks for that just real quick on the.

Maybe on building cost you know some of your peers are calling out delays in permitting construction and I'm, just wondering has gotten better or worse over the last three or four months and maybe if you could talk about how much inflation youre seeing on the on the construction side year over year.

Yeah, I would say that you know overall, it's holding right now it's still a little bit of delays, we're definitely getting some pipe timelines on some things, but we're getting it done.

I think for as far as the material cost has been holding labor.

Labour Stills continues to be probably the bigger challenge even for our partners out there, but we feel good about it I don't see it really escalating at this time, but we're getting it done with the numbers that we're baking in for the for the IRR in and moving forward. So right now just a little bit on the delay side on equipment.

It's really staying very focused on being able to get it done.

Right now just a little longer than typical but we're going.

Yeah.

Sounds good thanks.

Okay.

Your next question comes from the line of Jared Garber with Goldman Sachs. Your line is open.

Great. Thanks for that thanks for the time today.

Jerry can you help talk about consumer demand a little bit you noted strong trends throughout the quarter positive traffic, which is certainly encouraging to see but we continue to hear and see incremental pressures on the consumers. It seems like you guys are bucking the trend a little bit with some of the commentary around consumers are trading up to higher priced.

Items.

If you could just help frame what youre seeing on a consumer basis for us that'd be really helpful. Thanks.

Yeah, I think you know with the 50 basis points of mix that we saw that's in the check number I mean, not felt really good that we continue to see the consumer you know staying up into those items that they had traded up to in 'twenty one.

I don't really see anything coming back obviously, it's always a little too soon to think about pricing and the flow through it seems good right now we aren't seeing anything that you know raises any red flags. So that's definitely a positive you know you might you could say, there's a little bit on alcohol, but you know who knows what really drives that its really nothing too significant.

And overall feel good I think that helps the consumer feels good demand continues to be strong for our brands and we're seeing good traffic growth across all day parts and days of the week. So from that standpoint, all good from our perspective I mean, if you look at July August to September it's a very positive trend.

For us, which is extremely exciting going into the fourth quarter.

Great and then I guess just following that.

How are you thinking about that demand curve bending.

And for next year.

I think for US it's still you know moving forward well, it's focused on driving topline sales and feeling like we have a lot of opportunity to do so and if you go transaction stays very sticky and it looks like its holding them along with those dining room sales going up so you know that normal seasonality seem to have.

Back in play that we talked about in July .

So we're expecting a very great holiday season, I'm heading into the fourth quarter and then you know high gift card sales heading into the new year, a lot of redemptions from that perspective, which are always great thing. So I think you know overall, we would say we feel very confident in our ability to continue to drive sales in a positive way.

Great. Thank you.

Hmm.

Your next question comes from the line of Brian Harbor with Morgan Stanley . Your line is open.

Yes. Thank you maybe just another one on commodities it sounds like.

What you were talking about I was just kind of a timing issue, where there was some more beef pressure expected in the fourth quarter, but that sounds like it's just getting delayed I guess the question is.

Is there any reason some of that pressure wouldn't materialize in 'twenty, two or you know why how has the timing changed for some of those expectations.

Brian are you talking about beef, specifically or just the overall basket.

The overall basket, but it sounds like beef is kind of the main driver of that within the basket right.

Right. So you know I would tell you we saw some softening you know we did see some softening in Q3 Q4 on those because they think for a lot of different reasons that you know that kind of played out I think right now you know beef inflation across the quarter and the cadence for the year on that it's pretty consistent there.

There isn't anything that's really driving it you know theres not much volatility there that we are assuming right now so some of that is just the timing of what we did in 'twenty two how we're lapping that.

The rest of the basket you didn't really see those prices tick up until Q2 into Q3 I'm you know on some of those grocery items, particularly like Brad mix oil things like that and so that's why it is a little heavier on the inflation number in Q1 as we lap that and then as we said on the call.

Paul I, just moderates from down from there. So that's kind of the way we're looking at it right now now Theres a lot of things that could change that obviously, you know we could see supply change faster.

Any changes in demand one way or another but it had an impact.

But right now we're kind of assuming a steady course from a demand perspective, and then just trying to estimate kind of what we think that supply does based on cows and calculate out for slaughter and and things like that.

Okay.

Makes sense. Thank you and then Tony maybe just on G&A are there any you know what do you expect <unk> to kind of be similar to what we've been seeing anything unique in there and if if I were to think about 'twenty. Three do you think it'll kind of look similar as a percent of sales.

That's our expectation right now you know we focus on keeping G&A growth on a dollar basis.

Less than revenue growth and then you know I'm keeping it pretty inline from them as a percentage of revenue. So that's going to continue to be our focus on that line nothing that I would call out.

In either Q4 now in heading into 'twenty. Three you know we will be having our managing partner conference in Q2, and that's what our 30th 30th years celebration. So it is a biggie.

Excited about that so you know as we continue to get back into the rhythm of those conferences the costs on that would be a bit elevated compared to what it was in 'twenty. Two so outside of that though those are really be the bigger things I would call out.

Okay, great. Thank you.

Mhm.

Your next question comes from the line of Jake Bartlett with Truest Securities. Your line is open.

Great. Thanks for taking the question first of all I wanted to start and then I had a follow up I wanted to start with with the beef again, just one other question on that and we see toys box beef down year over year currently.

Would have thought that that would kind of you know it takes a little time for you to agent and flow through the system. So I would've thought you would've seen actually maybe even beef deflation now or starting the beginning of the year. So.

Is your expectation for higher overall inflation a function of the non beef stuff items really in the first quarter of 'twenty three.

Or is there any other nuances to how you purchase beef.

Missing here just by looking at the commodity market.

Sure I'll tell you we have seen some beef deflation, but I think Q3 and Q4, we saw a little bit of a overall beef deflation that kind of helps with that you know the overall commodity basket because you were continuing to see those other non beef items escalate at that and so that was really positive we're not assuming.

Any of that you know kind of softness if you will heading into Q1, you know based on what we're lapping in the way we are buying now that could change a little bit as we can see need to lock up you know any anything and you see what to play out kind of the play in the market is going to be you know again for that supply and for demand.

And we'll just continue to kind of see how that goes. So again. This is just a first glance. It is early days and we will be continuing to tweak. These numbers as we get you know kind of into into the year.

Great and then and then my other question was on the labor inflation guidance, the 5% to 6% you talked about 2% of it being from just from mandated minimum wage increases, but you know when you think about.

Other concept this morning talked about amplification for mild or moderate recession in the U S and I'm trying to think about that kind of 5% to 6% labor inflation in that kind of environment.

So one just you know how confident or what kind of I don't know if.

Do you have could have visibility, but you know how do you get to that kind of such a high.

Age inflation estimate and then the other part of that is it seems like in 2022 and even even in 'twenty. One there was no exit there's abnormal cost training turnover was very high this training and productivity.

Productivity was low because of all the new people, but are there some offsets to the wage inflation that you're expecting in 'twenty three.

So just kind of just start with that first part of the question you know I'll tell you when we think about that 5% to 6% as we as we said that 2% to near the state mandated some of that is just driven by these higher CPI States. You know there are states that are based on CPI increases and so with the increase that we've seen in CPI.

It's driving some pretty high wage rate increases in those states and you have other states like Michigan, who are making some pretty significant changes to their wage structure and so that all kind of builds up that number normally would be in the 115%. So that is a bit more than what it usually would be.

The remainder you know, it's it's not just wages for us its wages and other inflation so benefits come into play and so as we continue to look for ways to retain and attract talent, we're expanding benefits and improving knows them and then also you know just as we're thinking about how we continue to retain.

Great talent at the volumes that we're running and that maybe it makes it a little bit different for us because we are running in such a large volume staffing is critical so we're our expectation you know even if there were some type of recession or slowdown we feel like we're very well positioned to kind of meet that challenge. We would continue to need to be staffed we could see.

We continue to drive sales and because of our value proposition and then just the demand that we see for our product.

Thank you very much.

Mhm.

Your next question comes from the line of Peter Saleh with B T. I G. Your line is open.

Great. Thank you I was going to ask a question on beef, but I think that's been beaten to death here. So let me ask on labor here Ah Tony can you give us a sense on the labor availability, how that's progressed through the year, how do you feel about that today and how has turnover been oh.

Among the staff over the past couple of quarters.

Yeah, I'll answer that for you. It's a it has continued to be easier and better and I guess more applicant flow throughout the summer. So that is exciting we really have gotten to a point, where we feel very comfortable with our staffing and again, we're going to continue to pad that in and add some superstars and we get.

The chance and and so what was the other part of it.

Just on turnover, our turnover I'm sorry, yes.

Yeah. It actually has on management, an hourly we've definitely seen through the summer it really settle and redo. So I think we've done a better job of connecting and really painting. The picture of where the company is going in and I think people are starting to settle into the routine going into the fall back to school all of that in and they're settling.

And so I definitely see us being staffed completely maybe still a little bit of a challenge in the back of the house, but overall management very solid our leisure there and with the reduction of turnover, we feel very good about that having a little bit more of an experienced workforce out there running the shifts so.

Positive sign there for sure.

Okay. Good to hear how about the hour the labor hour growth rate going forward, how should we expect you guys to grow that given what we're seeing right now on traffic.

I think right now you continue to see it a bit elevated above traffic growth just like we saw this year or this quarter and you know as we continue to you know get fully staffed and end demand based on the volumes that we're seeing so you know I think you see that from a little bit of I would expect it to start kind of <unk>.

Getting a little bit more back to normal in 2023, potentially and that would kind of be our application, but you know we were always just making sure. Our operators know you know to staff for the sales they have adopted the sales they want and make sure they're just making the right call on that so we'll see how that plays out.

Thank you very much.

Mhm.

Your next question comes from the line of David Tarantino with Baird. Your line is open.

Hi, good afternoon, congratulations on a strong sales performance.

I have a couple of maybe.

Thank you.

Youre welcome.

Question finally, a clarification on your G&A.

For the third quarter I think you mentioned that you've got a credit for the manager conference in there. So I guess, what's the.

Is it right to think that the the underlying G&A was around.

Around $45 million and is that what you expect going forward in the fourth quarter.

Youre right, David that $2 5 million credit you know what it would have brought that number down a little bit. So you have to adjust for that as you're thinking about what Q4 is going to look like yeah.

Okay, Great. Thank you and then my my real question is about your unit level returns and.

Current environment I know you've seen some.

Increases in restaurant profit dollars per week in your model, but I think there's also been some cost increases. So I was wondering if you could.

Maybe just level set us on kind of where the return profile is and then maybe on Texas Roadhouse, and Alibaba is and how close or how much margin you have relative to your targets.

On that on that metric.

Sure. So on the rest on the IRR as you know we're targeting targeting mid teen returns for both concepts.

And you know, we we do take into consideration a little of the current environment as far as what we're seeing happening from a cost perspective, we look at sales in the area around where that restaurants can it be as kind of a guideline for what sales. We think we can do them and if we.

You get a lot of input from the market partner for.

For that restaurant, because they really understand that area and know what they can do from a sales perspective. So all those things kind of go into play. We also look at the TC out what the restaurant margins are we call. It total controllable income at a store level. When we look at you see ice put stores in and around that area too. So we can get a feel for hair, we being reasonable.

Our expectation of the GCI that store can run them and it depends David really Theres no set number because it just depends on where they're located what their wages look like that's really the bigger variable is labor percentages commodities, United stay pretty similar across the country.

It's really more labor rent things like that that that may get you know kind of knew that but overall the returns look really good and Brighthouse has been running you know you've got roadhouse restaurants on a look back you know after 18 months that are well above 15%.

On a return perspective, but it continues to be a solid number.

But they're working on a lot of profitability on that side of the business and so weird. So you know the returns are good we're able to approve sites to open them, but we're hoping to see a little more profitability improvement at those restaurants.

That's very helpful. Thank you.

Sure.

Your next question comes from the line of Chris <unk> with Stifel. Your line is open.

Great. Thanks. This is Patrick on for Chris Tony I wanted to have just quickly follow up on the on what you just said and I was curious if you could break out how much of the 2023 Capex development guidance will be.

Did you allocate the new your units versus maintenance.

Maintenance spending and then are there any opportunities to value engineer. The roadhouse prototypes at this point to help improve the returns you just talked about.

Sure and I'm kind of a pension numbers right now Patrick to try to give you that breakdown because typically on stores you know capex maintenance. We are estimating you know anywhere from 130 to 140000 per store for the year, it's kind of a number we expect to hit and that includes doing bump outs and.

You know cooler bump outs and and all of that Capex at existing restaurants than we do you have a number in there for relocation. So we do have a fair number of relocations that are expected also in.

In 2023, overall and not that she's 65 about 150 million of it is allocated for new stores and based on the.

Opening approximately 30, new have carryover right from one year to the next set you know from what you're opening last year versus what you are opening you know in the even in 'twenty four will play a part.

And then about 30 minutes and reload.

It's kind of how that looks so without leaves what about $80 million of savages for normal.

Maintenance capex at existing restaurants.

That's really helpful. Thank you and then I wonder as to about traffic relative to 19. It looks like if my math is right you're up about a little shy of 13% to 2019 and <unk> and traffic can you help us understand how that looks sequentially from <unk> relative to pre COVID-19 levels and how much of that.

Improvement was sequentially quarter over quarter.

I don't have Q2 it in front of me right now hold on one second let me see if I can get to that number.

So Q2 from a same store sales perspective. This is all in sales on a three year stack was 30 about 30%.

For 'twenty to Q2, 'twenty two versus 19, and then obviously for Q3 three we came in at about 32%.

On St on all in sales on traffic that number came in at about 10 and 11, respectively for Q2 Q3.

Got it. Thank you that's helpful. And then just lastly, Jerry I know you mentioned, the managing partner conference and.

You know potential operational efficiencies that youre going there I was just curious.

If you uncovered anything noteworthy that was.

But it would help efficiency in the stores that you guys are thinking about implementing on the back end of that.

Well I think you're probably talking about our fall tour that we did we just out visiting with all the operators over the last five weeks.

The biggest thing is we are operating very well and we've got to continue to work on getting them equipment and product in a timely manner. So they can do their job and and Oh and I think the biggest thing we learned is how to help them behind the scenes, whether it would be just with our big vendor partnerships.

We're really happy with our food and our service and our community partnership and the maintenance of our facilities. It's a matter of it our volume it's a matter of getting them the food the equipment and the supplies that they need on a timely manner. So that they can open and operate their businesses. So what we heard loud and clear.

Or is that we need we need more of all that in and which is an exciting thing for us but fall tour to me is a great opportunity to meet with every managing partner out there to really discuss what were foundational Lee what we're trying to accomplish and then how can we help them our company's turning 30 years old we're very.

Excited about that we are having tremendous results and I think it's because we are fundamentally sound and what we're trying to be in and that is the best operators in the industry. So I'm very proud of the group and what they've accomplished and will continue to challenge us all to be the best at what we do.

Great. Thanks, guys.

Thank you.

Your next question comes from the line of David Palmer with Evercore ISI. Your line is open.

Thanks and congrats.

Question on the cost one one more time, a little last quarter. I think you were thinking 9% inflation in the back half and and it seems you were close to that in the night and in the third quarter. So I mean, I guess inflation would be more like the 4% to 5% range and <unk> I'm wondering if you know if that's right.

Is that easing beef or is it a mixture of things and what what would be those things that are perhaps coming down we're starting to come down in <unk>.

Part of it yes, it would be an easing of beef youre seeing some on other proteins, which are a big part of the basket to you're starting to see some of that occurring and you know it's interesting because the inflation in 'twenty two.

Just such a.

All over you know the basket it wasn't really highlight it on one particular item in the basket. So youre seeing a little bit of help kind of all across the board again and as you kind of see some of that softening occurring so some on beef, but you know a lot on some other some other protein items and and some of the other non protein items in the basket.

Yeah.

And you hear about there that that's about where we would I would expect you know David as you're thinking about you know 10, 5% and for the year. Obviously, you can kind of back into what that might be for Q4 and it is it's going to be.

A lower number than what we saw that this quarter.

Yeah.

I guess the other thing I was going to ask you about was the these buying of units from franchisees. The second year, you've been able to do it is it is it all completely random and the timing of this it feels like you have the right to buy them at predetermined prices and I'm wondering if this might be the gift that keeps on giving where.

You see more of these coming due and you have the right to buy them in and you can you can see the benefit coming up in the coming years and I'm also curious if you could share what sort of prices you pay for these I mean is this.

Very accretive thanks.

Sure there really isn't.

Have a predetermined formula it's included in our franchise agreements that historically, we don't use that we really just had to do a negotiated deal based on where those stores are from an EBITDA perspective, you know sales perspective looking at them from you know how the shape of the building and the assets are.

And the management teams and just a lot of different things come into play as we're evaluating those stores. So I'm really you know we like to do them at the beginning of the year because it's just a nice clean cut off that's probably more of a driver of the timing than anything else.

And you know we've been talking with them and we're always talking with our franchise partners honestly, we're already catching up on just how things are going you know in what they need from us.

And then some you know we start down the path of having that conversation about you know if it fits the right time for them.

And their owners to consider you know that buyback. So we've been lucky to get two of those deals a deal done at the beginning of each year that feels like a really good pace and we think we do have some continued opportunity.

For the next couple of years to continue to do that but it is a negotiation and and you know our franchise partners you know they've been great partners continue to be great partners and so we definitely wanted to be a win win situation and overall you know from a.

It is very accretive it adds about one and a half one to one 5% from a store week growth perspective is what this deal will add so eight restaurants.

And then it's very accretive to the bottom line.

So I don't really want to talk too much about multiples or purchase prices as we continue to gain some negotiations but I.

I feel again like it's a really good deal for both parties.

Thank you.

Mhm.

Your next question comes from the line of Jeffrey Bernstein with Barclays. Your line is open.

Yeah.

Great. Thank you.

First question was just on the sequential comp trends that seems like you guys are.

Improvement through the third quarter.

At least based on the absolute numbers I'm, just wondering whether you think that theres any kind of masking of slowing macro within their I know this is the October comp in the 8% range eased I guess from the September and the 10.

I'm just wondering if you think that's compares or maybe a return to some seasonal patterns just trying to get a sense for do you think there is any underlying softness at all and what initiatives might you implement if trends were to slow whether it's this quarter or going into 'twenty three.

Yeah, I think that you.

Maybe it would just ticked down a hair for September but it was comparable to August so as we head into November and gift card sales in the season.

You know it looks like so far we're trending holding very very well and we expect that will continue but we will put a big push on gift card sales, which really creates a lot of fun as we get into the holidays in and see how things go from there, but as of right now it looks like we'll probably I think we're going to be close to that same 8% to 10% and have.

That momentum going into the holidays and running from there. So it could change, but we're we're prepared right now to keep executing and doing what the consumer wants and I think they'll reward us for it.

And Jeff I'll tell you too when you go back and you know we kind of looked at the October number for that reason like is there anything there I think it's really just four weeks, it's too much to it you can't read a whole lot into it but I'll tell you and you go back and look at 2019 cadence you see the same pattern as far as July soft August September tend to be you know a little higher than.

October tends to be a little softer so that gave me some confidence and along with just the performance of mix and things like that to say hey, it doesn't feel like it overall softening I think it's just seasonality.

And we feel really good as Jerry said about heading into the holiday season.

Got it and if you were to see softening in coming months or quarters is there a different approach you would take or how would you go about addressing that as you were trying to meet the you know the customer who is feeling a little bit more pinch I don't know if there's any specific initiatives you might implement or whether you're kind of stick with what is tried and true.

Well I think I think we will continue if we needed to press harder on our early dine timeline or even our wild West Wednesday, We've got a couple of things that we could do a press on a little bit harder if we needed to get out there that really screams that value with our early dine in or a wild west Wednesday would be the two.

Two key components that we could be a little more aggressive on.

Yeah, I think we definitely would want to take a look at what was driving it.

It was something we were doing that we had some impact or if it was just an overall softening and then at that point we know.

What we know and keep doing what we do and just work through that.

Got unless they can you just clarify I think you said expect six 3% pricing in the fourth quarter I just wanted to confirm what it was in the third quarter.

Inflation were to play out as you expect into early 'twenty three would you be inclined to not take incremental pricing April to maintain that value message. If we were going into a slowdown just trying to again clarify if there's inflation played out as you thought whether we would see no real increase in that April window. Thank you.

Yes, I mean like you said, we'll continue to look at what the environment looks like in February and March and talk to our operators in and see what's right for the business I think we've always been inclined to look at those two pricing opportunities and see what's the right thing for the consumer and the right thing for the business. So a little early right now for us.

We'll follow our process will start really investigating in February and March to make that April decision based on the environment. There will be working in at that time and it's key.

Q3 was about seven 2% on pricing jazz and and obviously that Q4 at about $6 three I think where the numbers you're asking for too.

Great. Thank you.

Thank you.

Your next question comes from the line of Jeff Farmer with Gordon Haskett. Your line is open.

Oh, Thanks, Mcdonald's touched on this today for the fast food segment, but do you expect your casual dining peers remain rational from a I guess sort of discounting or promotion perspective, given the elevated inflation backdrop.

I truly don't know I mean, I think you know you hear if im saying they wanted to stay away from discounting. That's just my speculation we don't really follow in a whole lot as far as what others are doing from that perspective, I can see where it would be easy to kind of fall back on that discounting. If you were you know in their shoes.

To drive sales.

You you know Jeff from US, we stay away from that discounting and things like that so it's not really something we then follow from a competitive standpoint too much.

Okay, and then not to harp on the guidance too much but another interesting question came up on their call earlier today, which was sort of juxtaposing the business or <unk> versus 'twenty two 2022 in 2023.

You guys did fairly well in casual dining you know had a hard time someone in a recession, but you guys outperformed if we theoretically go into a recession in the U S.

How should we think about the performance through the lens of what happened to the roadhouse business and Oh wait Oh nine if we were to go into a recession next year.

I think the way we would think of it as you know we came in you know eight or nine you know we had negative traffic.

Remembering back to that point I think we came in a little later with that we were able to hold on to topic, a little bit longer I think again speaking to the value that we have in the menu is really the benefit there and then coming out maybe came out a little bit earlier and the big thing for US that we focus on is the fact that following that we generated 10 years of positive traffic growth. So.

We know that that consistency is what so important so really maybe it's more about the things we wouldn't you as far as taking labor off the floor cheapening. The experience we're going to continue to give the guests a great experience. We know that's what that's what matters I think just from my viewpoint. There. It's a little different when you look back to or I don't know nine because of weather.

Where the labor market is and you know, we really arent seeing the same labor market today. So it'll be interesting you know if that does play out just how it how that kind of works and what the impact is you know maybe you see cost come down even asking me you know as demand is coming down a little bit, but you know I think overall.

We can totally can and give the guest a great experience and that's the kind of the way we would be we would enter into it yeah. I think the key component for US is if we have to adjust to the volume we are prepared and ready, but the delivery on the experience for whatever the consumer is coming in the door is got to be that's where we were.

Rewarded for 10 years after that we didn't change portion sizes, we didn't lose our focus on the food or the service or the experience and through tough times, you make adjustments, but you still deliver on your promise and that's what led us into a great 10 year run and if that were to happen. We would expect the same focus from our op.

<unk> and the same commitment from our company.

Helpful. Thank you both.

Thank you.

Your next question comes from the line of Lauren Silberman with Credit Suisse. Your line is open.

Thank you I wanted to ask another one on comp and the acceleration through the quarter and into October I guess, what's your sense of how much is driven by underlying industry improvement relative to share gains just given the value proposition any sense, you're getting the benefit of some trade down from higher cost restaurants.

Okay.

One area, we could be I wouldn't have you know, we don't kind of look at it in that way, but there's certainly that that opportunity I think some of it too is just to go to it continues to be strong.

So even with the dining room guests coming back in on a more frequent basis. We're still seeing you know to go I'm holding in above 16000, a week. So that's that I think it means a lot and so I think we picked up a lot of guests in 2020, one who didn't know us.

Until then and I think we're holding onto those gas so could be some share I don't know, how we would necessarily prove that out or see that but on you know I think it speaks to also that youre seeing that gap's kind of trade up into some of those higher items and hold on their in 'twenty, one and continue to do that in 'twenty, two maybe that speaks to some trade down.

You know from a higher guest check but.

Overall I just think you know, it's the consistency again of what we offer and keeping the gas coming in the door.

Great. Thank you for that Gary I think you might have mentioned the potential you guys now see the potential for 900 wrote houses over time, I think historically, you've talked closer to seven to 800 in the past I just want to confirm is this an increase from what you've communicated historically and if so can you just talk about where you're seeing some of those incremental growth opportunities.

Yeah, absolutely. We are we do believe that we change that number because we do see the upside on that because of the success and some of the smaller communities that we've been able to go in really allowed us to up that number and then it is really exciting to see some of the areas that we would typically probably.

Mahler communities and we're having tremendous success. So we're going to continue to define a good spot for us soon which when we look at the landscape that means that we have the opportunity. If we continue to do it right and all the world works with US we think that we can get to that number.

Thank you very much.

Thank you.

Your next question comes from the line of Dennis Geiger with UBS. Your line is open.

Great. Thank you.

Just another one sort of on the broader big category and Tom Youre. Jerry If you. If you have sort of a view that the brand is clearly seeing tremendous success, presumably taking share within the category, but curious if you have a sense of if you've done work on sort of broader steak category demand I know you've spoken to this before but as the strength seemingly across the <unk>.

<unk> surprised you the date the demand there from the consumer and just as far as how you think about that going forward. If it is part of the equation for you thinking about the category.

Well I mean, I don't I I know the other competitors are having some success also they're maybe not doing the volume that we're doing so that to me tells me maybe whatever we're doing works a little better from a value standpoint, so staying focused on that piece of it our offerings are.

Consistency our disciplines to the routines of the of the experience I think will all help drive that do you mean, our foods made from scratch and we put a lot of time and effort into it and I think it really plays out in the taste buds arc of our consumers. So we're winning that battle and I think we will continue to win it.

We fight for it but you know people are probing and a stake of potatoes, and a salad low debt potato by the way that's the way you win the game.

Absolutely.

One more just on <unk>.

On capacity levels and kind of maybe the biggest opportunities.

To increase traffic, maybe it's the days of the week, maybe it's an hours of the day I think you spoke to strength across days of the week across hours.

Just curious about sort of the biggest traffic opportunities, perhaps maybe its bump outs.

Maybe it has plenty of capacity across all of those opportunities, but I'm curious if you could just kind of touch on on that as we think about the strength you've seen over the last couple of years. Thank you.

Sure. Yeah. It's you know continues to be the same story of the stores that have this stronger sales are the ones that continue to drive strong traffic.

And so you know I think we continue to have the ability on the traffic side of things across the company I don't know that anyone would say anyone has hit capacity or our it doesn't have that ability I know every operator will tell you. They have the ability to continue to drive traffic and and they find those ways through a lot of different avenues, whether it's you know guest management systems and.

Hi, there its seating and you know Katy yes in the back of the house potentially.

We're thinking about you know that concerning to you know rollout to stores and in technology. Overall, I think helps them from that standpoint, the way theyre doing to go and managing that in the kitchen.

But I think overall you mentioned all of the things I would mentioned whether its bump outs, adding seats. Obviously is a great way to go and you know you see strength on the weekends I think he's still can you know that is always our busiest time and I think you continue to see opportunity as Jerry mentioned it earlier in the day part you have stores opening a little.

Earlier in some cases, because theres lines out the door. So I still feel very confident there's a lot of ways to continue to drive traffic and I think our operators are going to continue to figure that out yeah, and I would you know Monday Tuesday Wednesday, we know that we have room to grow which is exciting I think the early part of the business like Tanya meant.

<unk> was our three to $5 30, that's a segment that we can continue to focus on and get folks to come in a little earlier.

Our legendary hours from $5 30 to 830 or are very very busy which is awesome, but we can also focus on at a 30% to 10, and you know and help us help maintain or get folks in a little bit later and those are those are great opportunities for us as well as even Saturday lunch, our Saturday lunches I think is an area that can can.

<unk> two it's really strong, but there are definitely segments of the business, we run nine or 10 shifts there are hours in there that we can we can work on the capacity side, but the bump outs all of the other things that we do this the more seats available help us too.

And we're continuing to invest in that are relocations or bigger restaurants, which are really serving the community at a higher level. So we're excited about the relocations when we get an opportunity to build a bigger store with more seating that that shows us that we can continue to grow the sales at the level we're at.

Great color thanks, guys.

Thank you.

Your next question comes from the line of Joshua Long with Stephens. Your line is open.

Great. Thank you for taking my question, we've touched on a couple of different points in the call, but I was curious if you could talk about how you think about protecting the overall value proposition outside of just the menu price.

Culture your legendary service, that's a huge part of what keeps guests coming back to that and so curious if there are aspects or areas, where you're investing in that culture that experience for your team members above and beyond just some of the.

Labor inflation that we talked about.

Well I mean, I think we got to create an environment that people want to wear our uniform and our logo and that means that we have to for our employees. It's about being a people first company and really focusing on that and and really trying to create a mentality or a mindset that that.

People believe in what we're doing and how we're doing it we're making our food from scratch, we're committed to a high level of hospitality and partnership.

One of our M. P's are are bought into the business and I think that level of of community us going out and doing a fall tour traveling around to every region in every state talking to our partners and listening and hearing that as a part of our culture. It's a part of us being aware of what their needs are and what.

What how can we help them accomplish running their business at the very high level. So I think part of our culture is about being committed to helping each level be successful there'd be an hourly employee management part or a partner how do we help everybody our folks here at the support center, knowing the role and how.

We execute and how we take care of our partners. That's a big part of our culture always will be.

That's very helpful and one quick follow up in terms of the Capex split out that was offered earlier very helpful. As you think about the current environment and work construction cost inflation is and just the unit pipelines and some of the delays that we've heard about across the industry is that an opportunity to perhaps lean into some of the the maintenance piece or some of those bump.

Or just how.

How nimble can you be or how efficient are you thinking about being in terms of some of those capex.

Dollar deployment on a go forward basis outside of just opening new units.

Well, we go through a pretty extensive process to budget.

And it really is more about making sure that we know the projects that are coming up and we're working with our regional facility managers and our our market partners to get them what they need. So you know our goal is really to make sure that we're maintaining those assets. That's the number one focus it's not as much about you know we only have a certain amount of money to spend it's more about.

What do we need to spend it because we know when we take care of the assets, we can drive sales.

It is it does help a lot. So that's really what we're focused on when we think about that Capex I think you know.

Even in times of inflation, we don't necessarily want to slow that down.

We want to continue to push and make sure we're taking care of everything and if we see some opportunity from a cost perspective to jump on a few more things you know well certainly you know try to do that but right now I think we're living in a little bit of an inflationary environment, we expect costs in 'twenty three to be.

Somewhat similar to what they were this year and I think we're just going to be living with that inflationary environment for a little while.

But it's not going up.

So yeah.

Great. Thank you so much.

Thank you.

Your next question comes from the line of Jim Sanderson with Northcoast Research. Your line is open.

Hey, Thanks for the question and congratulations on a great quarter I just wanted to follow up on the menu pricing I think if I understand your process correctly, you've gone through and talk to your partners throughout the country to come up with that 2.9% menu price increase for late October how does that position you relative to your peers did you go through a process of reviewing.

How other.

Steakhouses in trade areas were taking price up does that keep you.

A little bit lagging or ahead of the game with respect to competitors.

Yeah, I think it's a clear component of where we want to be positioned so do we know where we stand or stacked against our competitors' absolutely and when we look at our pricing structure and how we do things and how we played our food it's an important component that drives the value.

<unk> as well as the presentation. So yeah. We go through an extensive process of making sure we know where our gap is and what we have and in our offering and we feel very good about that process.

And is the way to think of it that youre.

Trending and stuff with your competitors, who are maybe holding back a little bit just trying to get a sense of positioning.

I don't know exactly what they're taking and doing I just know that we're very comfortable with where we're at.

Robin worried about that gap, especially like Jerry said on certain menu items I think that that's where we really keep our focus and that value is on the menu because we don't do that discounting off menu. That's something you know that definitely you know important to our process.

Just a quick follow up on the purchase of the eight franchise units is there anything to call out regarding maybe unusually strong average weekly sales are exceptional store margin anything.

Might impact the.

Corporate averages going forward.

And Theres always a little bit of savings from a cost perspective, you know as they come into the company.

No just from you know sheer volume.

Whether it's insurance just different things like that but.

Overall, it's a good strong group of restaurants pretty on average with what we see from a company perspective.

From a sales perspective.

And we always expect that we're going to have a little bit of savings you know just again from being a large company like we are able to get a little bit from that perspective.

Understood. Thank you very much.

Your next question comes from the line up of Sara Senatore with Bank of America. Your line is open hi, Thank you and thanks for staying late for this I just wanted to ask a question about the three concept Bovis jaggers in Texas I know the former two are are not big honor.

Relative basis, but given that you have a lens across kind of different models.

SaaS casual if you will versus casual dining and different customer bases. I was wondering if you are seeing anything different you know whether it's the around the price point or the type of customer or the frequency.

As you compare across to them with acknowledging that you have a much bigger sample for Texas thing to do for the others. Thanks.

Well, the Texas Roadhouse as a dinner concept has has that customer I think bubbas, probably shares some of that where a lunch and dinner and burgers and pizza. So you know a little bit of a country theme versus a rock 'n' roll theme in the energy the energy and both concepts are very well and and so I.

We're seeing success in sales and profits in both bubbles and Jaguar, Doug Jaggers, we've only got five stores up and running we just opened our most recent one a month and a half ago and we're very pleased with what it's doing so you know and it's a fast food USR side, but you know the food where we're very pleased.

All three concepts of the food that we're serving and the hospitality that we're trying to create the experience. So you know all three are a little bit different Bubba is just.

It's an exciting concept, it's fun, it's energetic pizza burgers and wings all of the offerings that we have that that makes it very different but it and it's got a different vibe. So it's fun, absolutely fun and Jaggers man. It just just breaking good.

Yes.

Okay. Thank you that's a that's noted but just and then in terms of the current environment.

You know again, it sounds like you're sort of seeing strength across all three as opposed to kind of different consumption patterns depending on the.

The day parts or the.

The segment that Youre addressing like you said, you know kind of <unk> fast casual versus full service.

Yeah, I mean roadhouse in Nevada, it's both generating traffic growth.

That's really good to see but it has a little less pricing in the menu then than roadhouse does so comps are a little lower because of that but from a traffic perspective looks really good jaggers.

It's really early days, we are seeing good success and we have four restaurants. So.

I'm learning a lot on that concept and seeing some really good success in consumer uptake on that it's a lower average check obviously drive through that makes it a bit different but where we're seeing some good uptake from you know the consumers really its resonating with them and I think as Jerry said, it's the theory.

The food is phenomenal.

Got it right there at good prices.

Working.

That makes a lot of sense. Thank you very much.

Thank you.

Your next question comes from the line of Andrew <unk> with BMO capital markets. Your line is open.

Great. Thank you and thanks for squeezing me in I'll lump two questions together here. The first is on the pricing conversations that you're having with your partners did you note any.

Change in the tenor of those conversations this time, given kind of the dialogue around the consumer environment is less inflation that you're facing.

Versus the prior several maybe rounds of those.

Those pricing conversations with your more variance maybe in the feedback with the first question and then the second question is just on the value proposition, which obviously, you're very comfortable with and.

The trends are very strong, but I guess, if we were to go into an environment, where we saw a lot of deflation or the funeral weight food at home excuse me.

Environment.

Much more value oriented would that kind of changed the way that you think about it or how would you go about preserving the value equation do you see that as a risk at all thanks.

Well I'll tell you Andrew on the second the last question, we haven't seen that necessarily historically, you know food away from home has varied over the years and and you don't necessarily see you know a lot one way or the other from that I don't think and maybe that's because we're a steakhouse, which kind of are.

Elevates you know peoples expectations in what Theyre coming out for they want it they want it come out and have that great experience have that big stake in and all of that so it does it play as much in part for them when they see value.

In food at home.

I don't know for sure, but that that could be some of it. So I would say that's kind of the way that's kind of the way I would see it from that perspective, and then the first part of your question you were talking about pricing and I would tell you you know we took less pricing than what's rolling off I think that speaks to the operators you know being comfortable with.

Know, how things are looking and versus you know a year ago. When we were facing some pretty big uncertainty from the inflation standpoint, particularly on the commodity side.

And labor continuing to go up in all of those things. So I think overall they do you feel you know and the tone was very good. Thank.

They do feel good about their ability to drive to drive top line traffic.

Okay.

Oh great.

Yeah.

Your next question comes from the line of Brian Vaccaro with Raymond James Your line is open.

Hey, Thank you just two quick ones for me.

I just wanted to circle back on sales you, obviously saw a nice acceleration in the three year trend over the last three months as you think about Q4, Tanya is there anything unusual or calendar shifts et cetera, we should be mindful of or is that a reasonable run rate to think about working through our fourth quarter assumptions.

There really isn't anything from a calendar shift I think for Christmas shifts from on a Friday Saturday to a Saturday Sunday.

It's still kind of that weekend event. So you know there could be some positive benefit you know maybe a little bit because you lose Friday, but we're not really thinking so halloween going from a Sunday to a Monday could be slightly positive, but you know we're not really building a whole lot and from that perspective. So I don't think Theres anything you know we are lapping kind of the <unk>.

<unk> impact from last year, So we think that could be a positive for.

For the rest of this quarter. So as we head into you know January February that's really all I can think you mentioned Brian .

Okay, great and on the other Opex line, you're digesting some very high inflation in that line. This year and last I'm curious there is there are certain costs in that line that are starting to plateau and if you think about 2003 did you see inflation in that line flatten out if not potentially turned deflationary.

Given how unusually high they've been in recent years.

Okay.

I mean, I think that's always possible I think you know some of the items you are seeing in their utilities. They just tend to be you know they they tend to rise pretty big waves of volatility. So we will see kind of how that plays out some of that.

Positive performance on the other operating line is Max debate because of that benefit that we had the benefit from that G. L. Insurance reserve is masking some of the inflation is what I mean to say so we are still seeing continued inflation on credit card charges. That's more just usage on credit cards the types of pay.

<unk> that are getting processed.

Utilities repairs and maintenance, maybe there is some opportunity as suppliers get a little bit easier and.

It's easier to get a hold of equipment, maybe we'd see a little less on the R&M side, we'll see so.

I would like to hope, so, but I think it might be too early to say.

Okay alright, thank you.

Thank you.

There are no further questions I'll turn the call back to MS. Tonya Robinson for closing remarks.

Alright, Thanks, Scott Thanks, everybody for being on the call Tonight. If you have any other questions don't hesitate to reach out and everybody have a good evening. Thank you. Thank you. Thank you.

This concludes today's conference call you may now disconnect.

[music].

Yeah.

[music].

Yeah.

Yeah.

[music].

Yeah.

[music].

Okay.

[music].