Potbelly Corporation Q1 2023 Earnings Call
Good afternoon, everyone and welcome to Potbelly corporations first quarter 'twenty twenty-three earnings conference call.
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Please note this event is being recorded.
I would now like to turn the conference over to MS. Odia Dixon Potbelly Senior Vice President and Chief Legal Officer. Please go ahead.
Good afternoon, everyone and welcome to our first quarter 2023 earnings call.
Our presenters today are Bob Wright, our President and Chief Executive Officer.
Steve <unk>, our senior Vice President and Chief Financial Officer.
Please note that we have provided a set of Powerpoint slides that will accompany our prepared remarks.
You may access these slides on the Investor Relations section of our website.
After our prepared remarks, well open the call for your questions.
I'd like to call your attention to our cautionary statements on slide two.
That certain comments made in this call will contain forward looking statements regarding future events or the future financial performance of the company.
Any such statements, including our outlook for 2023 or any other future periods should be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date.
Well, we're looking statements involve significant risks and uncertainties and events or results could differ materially from those presented due to a number of risks and uncertainties.
Additional detailed information concerning these risks regarding our business.
The factors that could cause actual results to differ materially from the forward looking statements and other information that will be given today.
Can be found in our Form 10-K under the headings risk factors and M DNA and in our subsequent filings with the Securities and Exchange Commission, which are available at SEC Gov.
During the call. There will also be a discussion of some items that do not conform to U S generally accepted accounting principles or GAAP.
Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures.
<unk> in the appendix today, that's the presentation and press release issued this afternoon.
Both of which are available in the investors tab of our website.
I'll now turn the call over to Bob.
Thank you Lydia good afternoon, and thank you for joining our call today before we get into this quarter's results I would like to begin by thanking our potbelly team for their hard work and commitment to our unique brand potbelly employees are instrumental in providing a differentiated and welcoming environment for each of our customers I am so proud of our team.
From our frontline associates to our support center employees. It is the continued efforts of our people that drove our success in the period.
I'll begin on slide three with a high level overview of the first quarter.
I'm, particularly proud of our results. Despite continued economic uncertainty and the return of typical first quarter seasonality, we enjoyed strength in traffic across our portfolio, notably exceeding pre pandemic traffic levels as a company.
Traffic was supported by further recovery in our CBD shops, which continue to serve as a tailwind for our business strengthen airport shops as well as strong engagement with our digital marketing promotions.
Marketing was a major contributor to our traffic and sales performance, notably the implementation of targeted digital advertising special offerings and growth in our perks loyalty program.
We also enjoyed success with our limited time only menu items digital only promotions this quarter, which I will speak to in greater detail shortly.
We continue to make progress and achieved important milestones towards our franchise focused development goals in the quarter.
With agreements for 30, new shops, we also signed our first Refranchising deal for eight shops in New York City.
In line with our previously stated Refranchising strategy, Our New York City agreement was accompanied by a 13 shop S. P. A a or shop development area agreement to further establish our brand in the market.
We're very excited by our franchise momentum to date as well as the health of our pipeline.
We also continue to see the benefits of an ever sharper operational focus on the fundamentals, which resulted in a notable improvement in associate and manager staffing and turnover.
Leading to increased throughput and customer satisfaction scores.
Finally, we expanded P D K oar potbelly digital kitchen implementation into 12 additional locations during the quarter and continue to see the improvements in our associate experience is driven by their ability to more easily handle the growing digital business coming through our second production line.
And improvements in our customer experience is driven by orders ready on time accuracy and food quality scores.
Additionally, we were able to capture labor efficiency with these improvements and finally the digital in line order taking function of PDK is unlocking additional throughput where we previously had capacity constraints during peak periods.
I'd like to turn to slide four to provide a high level overview of our financial successes in the quarter performance metrics included.
Orderly revenue was $118 $3 million and au vs were $23881 driven by robust customer traffic in the period.
<unk> level margins for the quarter grew to 12%, a 700 basis point improvement year over year.
Same store sales grew by 22, 2% driven by aforementioned exceptional strength in traffic.
And lastly, we reported adjusted EBITDA for the quarter of $5 $6 million, an increase of $7.8 million year over year.
Turning to slide five I'll walk you through our digital marketing successes for the first quarter. We enjoyed another outstanding quarter of performance with our digital efforts, 39% of sales were attributed to digital channels meaningfully contributing to our U V revenue expansion in the period.
Additionally, our strategic marketing focus continue to support traffic driven sales growth in the period, we launched our digital only meatball madness campaigns as well as fan favorite L. T OS, including the coupon on sandwich at our Red Velvet Cookie.
We were excited to announce the return of the Potbelly underground menu and promoted three unique meatball sandwiches, you can't find on a regular menu.
The promotion drove customer excitement and perks engagement supported traffic growth overall, our marketing and L. T OS continue to drive traffic value and excitement for our customers.
And we remain keenly focused on food and marketing innovation to further expand these promotional efforts in the coming quarters.
With that I'll now turn the call over to Steve to detail, our financial performance for the first quarter Steve.
Yeah.
Thank you Bob Good afternoon, everyone. Please turn to slide six of the presentation, where I highlight our <unk> and same store sales momentum over the trailing four quarters.
Our au visa of $23881 and same store sales of 22, 2% improved significantly compared to the first quarter of 2022.
While the industry enjoyed the benefits of favorable weather in Q1. Our performance was primarily the result of strong customer demand continued recovery across our shop portfolio, particularly within CBD in airport locations operations execution and success of our enhanced marketing programs.
Majority of our same store sales was attributable to traffic expansion versus average check increases.
Our performance improved each period of quarter, one and continued to build through April .
Preliminarily, our pay for performance registered weekly <unk> of around $25900 and same store sales were approximately 15% reinforcing our customers' continued demand for our brand.
Turning to slide seven I'll walk you through our income statement and specific financial metrics for the first quarter compared to the prior year period.
Our results met or surpassed key previously stated guidance metrics for the quarter.
During the first quarter, we reached total revenues of $118 3 million, a 20% increase compared to the prior year as we saw demand momentum from our marketing activities and operations driven customer satisfaction, along with continued recovery in CBD locations and previously implemented price increases.
We reported a net loss of $1.3 million for the quarter, a $6 6 million dollar improvement versus the prior year period.
Adjusted net income was zero point $6 million compared to an adjusted net loss of $4 $4 million in the first quarter of 2022.
First quarter adjusted EBITDA was $5 6 million a significant increase over the prior year by $7 $8 million with a margin that was 700 basis points higher.
The increase in adjusted EBITDA resulted from topline leverage continued improvement in labor and input costs.
And disciplined G&A spending.
G&A remained below our target of approximately 9% of total revenues at eight 4% on $10.0 million are spent.
This is a 30 basis point improvement over last year as we thoughtfully invest in supporting our growth while also benefiting from top line leverage.
Food beverage and packaging costs or F. N P were $32 $6 million or 27, 9% of shop sales, a 10 basis point improvement versus a year ago and a highly inflationary environment.
Proteins bread and paper plastic products.
The largest input cost increases.
Labor expenses were $36 $5 million or 31, 2% of sales.
290 basis point benefit compared to the year ago period. This improvement is attributed to topline leverage along with continued optimization of our hours based labor guide at other labor saving initiatives like PDK.
We continue to see wage rates moderate and expect this to continue to normalize as we move through the year.
Other operating expenses were $25 million or 17, 5% of sales a 110 basis point improvement versus last year a.
A year over year dollar increase is due to expenses that are variable with sales such as third party delivery and credit card fees were offset by sales leverage.
Top level margins were 12.0% an increase of 700 basis points versus the year ago period, driven by top line leverage as previously mentioned cost discipline and abating inflationary pressures.
This continued margin expansion as encouraging as you recall, our previously implemented price increases were designed to help mitigate the impact of outsized inflation last year we.
We have seen further signs of inflation improvement as the first quarter was slightly favorable to our expectations.
As a result, we are maintaining our stance on implementing only modest price increases enough to just offset any rise in input costs, which.
Which we still see in the mid single digits. This discipline is in service to our focus on keeping traffic strong by providing a superior price to quality value relationship to our customers.
Now turning to slide eight.
I'd like to discuss the breakdown of sales by the various channels in shop digital and drive through our.
Our digital business increased its contribution to total <unk> now accounting for 39%.
<unk> strengthened our digital channels is the direct result of our improved App interface and dedicated efforts increased perks loyalty program member acquisition and engagement through targeted offerings in advertisements.
Additionally, we saw an uptick in delivery sales this quarter, which also contributed to the digital channel step up.
While we were pleased with digital's performance and view it to be a key part of our growth we remain focused on keeping a high quality differentiated in shop dining experience for our customers.
For the second quarter, we are expecting average unit volumes between $25250 and $25750 to reflect second quarter seasonal tailwind same store sales between 10.0% and 12.0%.
Top level margin between 12, 7% and 14, 2% and adjusted EBITDA between $6.0 million at $7.0 million.
For the full year 2023, our outlook remains unchanged for record level <unk> same store sales growth in the high single digits to low double digit growth and shop level margins in the low teens.
With that I'll pass the call back over to Bob.
Thank you Steve now on Slide 10, I would like to update you on our franchise growth acceleration initiative.
New shop development continues to escalate as we further emphasize our franchise focus and build the organization's capability to support growth.
We have a highly active in fluid pipeline of qualified potbelly franchisee candidates from initial leads all the way to a regularly scheduled discovery days.
We continue to invest in our franchise lead generation sales team and franchising systems we've.
We've made great progress with our franchising efforts signing agreements for an additional 30 shops in the first quarter with 81, new shop commitments signed since the first franchising announcement finalized in 2022.
In addition to these 81 new shop commitments, we were excited to announce our first refranchising deal of eight shops in New York City.
Further we have deepened our presence in Florida.
And subsequent to quarter end announced an agreement for 16, new shops in Broward County, and Gainesville.
This increased penetration in Florida serves as another proof point to the substantial white space for additional growth that is still available to potential franchisees across the U S.
Highly encouraged by our progress and look forward to sharing more updates. This year is more S. T E as our shop development area agreements are finalized.
I'll conclude today on slide 11, where I'd like to remind you of our 2024 growth targets.
Our strong brand value marketing expansion and continued execution of our five pillar strategy is creating some exciting momentum.
We're already approaching and have at times paced above our goal of $1.3 million in Evs.
Our shop level margin target remains 16%, which will be driven by portfolio wide <unk> gross leverage operational efficiencies and cost discipline actions some of which are already in motion.
And lastly, we are working to achieve a franchise unit growth rate of at least 10% through our shop development area agreements.
As we accelerate towards our long term target of 2000 shops that.
And our shift to a primarily franchise owned system.
I remain excited by and confident in our progress and pipeline thus far.
Bellies unique brand and shop experience with proven business fundamentals and an experienced team is the foundation of our ability to achieve these goals and our pipeline of franchisees accurately reflects just that.
We also have plans to re franchise approximately 25% of our company owned units in conjunction with certain S. T E as in those re franchise markets.
As I mentioned earlier, we look forward to announcing new re franchise deals and new development deals as they are finalized.
To summarize the first quarter was an excellent kick off to 2023 with strong momentum notable traffic growth healthy return on investment in our marketing programs continued operational improvements and development success.
We look forward to sharing our journey with all of you as we progress further into 2023 with that I'll now turn the call back over to the operator to address your questions operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys 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 Matt Curtis with William Blair. Please go ahead.
Yeah.
Hi, good afternoon.
No guys I'd like to start off with maybe a bigger picture question. I was wondering if you could talk about the competitive landscape right. Now I mean, we just got out of that period, where there've been a lot of closures across the restaurant industry.
Physically I guess I'm wondering how you've revamped and other things you've done like a tech stack.
Maybe it helps you reposition yourself to take advantage of.
The new normal.
Yeah, Thanks, Matt you.
You know it it is a different time and I think depending on the data that you look at Ah Theres been.
I've been using is a bit of a generational reset in the number of restaurants. The pandemic was very hard on a lot of restaurant operators and unfortunately, even a lot of the independents.
So the the share gains that we talk about and the emphasis you've heard us put on traffic.
It's something that we see as really important in an environment like this for us to be able to not only do that in Q1 as well as we have but but continue to do that throughout the.
The coming future. So some things that we we believe we're working really hard for US as you mentioned two of them the menu.
Reset the value relationship that we had with the customer ahead of the hyper inflation over the last couple of years and it allowed us to be very judicious with the price increases that we took to try to offset that inflation, but not try to use those price increases to drive our margins. We think margins are much healthier one gained with traffic growth and <unk>.
Top line leverage.
We also implemented a lot of the innovation that we've talked about in the last two quarters, whether it's the new products that we've rolled out the L. T. OS we're very excited about the return of the underground menu and then of course, the promotional activity that supports it.
<unk> been working well for us on a number of fronts, the app and the web.
39% of our business coming through those digital channels literally our customers are voting with their wallets and using those channels to access the brand in ways that they never did before to see that kind of growth in mix, even while growing the top line. The way we have been over the last four five quarters, we're very excited about it.
In addition to that digital access in the E Commerce solutions.
The digital advertising efforts and the promotional activity through our perks loyalty program.
And direct promotional activity through our broader digital channels are working really hard for us. So.
We think it's important that we have high expectations for maintaining traffic growth for potbelly and doing so at a rate that's faster than fast casual competition and.
And we think because we've we've still got room to invest in similar channels again through the digital channels as well as the menu innovation. That's ahead of us the sharpening of our operations that we talked about in our prepared remarks, and then finally the unit growth that gives us broader penetration in the marketplace. There's there's reason for us to be optimistic about the future.
Sure.
Okay great.
Yeah, maybe sticking with that same I mean now that.
Youre getting a little bit more time under your belt after having made the bulk of those investments.
Actual channels.
Do you believe.
But this is really increased your visibility on sales going forward.
Is this something you are still.
Basically get uncomfortable with it's still a work in progress.
Well I mean, I think we're comfortable with the guidance that we provided on sales going forward and I you know I think as we continue to get more clear on where will be the remainder of this year. We'll continue to sharpen that guidance you saw its tightened our guidance range on our sales volume this quarter versus last quarter for <unk>.
Examples so I do believe we're getting sharper there.
But you know we've talked about these investments in the past where we are.
Frankly, we were real Sticklers for what the returns are on the investments that we make the.
The methodology that we use whether it's the digital channels that we're investing in or PDK that we invest in or or other investments that we're making in the shops or are people. We're looking for that pre post net of control lift in volume or profitability.
That ensures that we're getting a return on that investment. So an example, if you look at our less than 3% of our topline sales it's invested in digital advertising.
We've been moving that very steadily but very slowly over the last year or so we believe that.
We believe that if you get to the industry standard of four 5% and.
And we can continue to prove the returns that we've been proving to ourselves as we've taken those steps in digital advertising investments well, then we think theres some sure theres some predictability in and how much more sales we can drive with these assets that we have in place.
And I want you to know we're not resting on our laurels when it comes to the digital channels either.
This is a perpetual development pipeline under Jeff Douglas, our CIO and David Daniels, our CMO partnering together on the digital development path and what comes next in those digital channels. So that they can work harder for us too so.
I do think that that diligence around testing gives us some pretty clear insight to at least what our internal expectations are on growth.
Okay, great to hear that.
Shifting gears looking at the labor environment for through for a little while it seems like Youre seeing additional improvement or Steve you mentioned, some moderate wage pressures that you expect to continue for the rest of the year.
But are you actually seeing better application flow I mean is it you is it getting easier for me to actually source new employees.
Yes, I think Steve and I can tag team on that Matt I'll start with the quality and the quantity of staffing, where we're really enjoying a much much better days than we were.
Certainly through the pandemic and even last year, so our applicant flow was stronger.
Our turnover is still below the industry standard we've been able to fully staff our shops and we as we've told you before we staff for projected sales needs. So we're staffing against what we believe summer sales will be and making sure that we're prepared to handle that I'm very pleased with.
With Adam noises work in this area at the management level, the associate level and.
And again with the quality of our associates, there's also investments being made in their training.
We've shared many times now I think about two or three quarters about the digital tipping and its benefit to our associates and our shift leads.
So on a number of fronts, where we're just really pleased with that this is a this is a very important part of the potbelly experience.
Whether you're talking about value friendliness, the brand differentiation that comes to life, We love to talk about our digital channels, but the reality is more than half of our customers are still experiencing potbelly in shop, and so how we bring that to life with our associates is critical to us and where we're really happy with where we stand today and think its stable going forward.
Okay.
I'll just add on that to.
To kind of sharpen the point of what we're seeing and what we expect to see for us. It looks like labor really kind of peaked early last year and well while the rates are still high relative to history. The increases in in our labor rates have really moderated and.
And we came in better than we thought we would for the quarter that certainly helped us in terms of margins and as we look ahead for the full year, we still expect to be kind of in the mid single digits on labor inflation, but.
It's kind of trending toward the lower side of that asked me look ahead into.
Part of the way through Q2, and as we can see down into the back half of the year. So.
For all the reasons Bob described we have.
Some pretty good line of sight into things in it.
It's certainly a different world than it was about a year ago for us.
Okay, great. So, let's turn it over I guess trimmed it down and staffing also ramping up as you get into this.
That's the seasonal seasonally higher volumes you typically see during the summer.
I mean, what improvement do you expect to see.
Perhaps on throughput and how much of a boost can cannot give to your top line.
Yeah.
We havent quantified that and we won't offer that publicly but I can tell you. We are very pleased with the efforts and the results that we're getting in throughput.
Measure that the way, we measure it anyways entrees per half hour.
And we're measuring that daily we know where the records are in each of our shops, we know where we can unlock more in fact, the ops team with both company and franchise operators all the way to the GM level, we're doing throughput workshops earlier this week.
To sharpen our focus on on throughput, it's a big part of getting the most labor leverage that we can.
And the more business that we have the more we can stretch those lines in and get the throughput that we're looking for back to some record levels and many shops. We did indicate and this is a small part of it because you know we only have about 40 P. D case that had been installed what we discussed previously would be about 100 by the end of this.
Year.
But in those capacity constrained shops, we're seeing another gear throughput unlock with PDK because PDK includes a digital ordering tablet that allows us to go deeper and in line with our traditional customers and you know we've got lines back to the doors the way they were with potbelly before the pandemic.
And that.
That really creates a lot of efficiency and throughput and we were very very pleased with what that means for those PDK shops, especially I won't say high volume. It's capacity constrained you can have a mid volume shop. That's got you know a significant amount of lunch business or certain days of the week, where dinner is is very very strong.
And that's in line order taker solution is helping us a great deal.
Yeah, and Matt Bob Bob mentioned earlier in the in their prepared remarks about our traffic.
Versus 19, we'd look at traffic a couple of ways, but lets you know, we often think about it on an entree basis and this is the second quarter.
In a row, where we've seen higher average unit entrees than we had in 2019.
The the capacity for us to kind of handle that volume is in place and as Bob described things like.
With PDK, we get we get better and better at it and as we expect to drive even more traffic and Thats part of our strategy we.
We want to make sure that we've got the productivity foundation in place to handle that throughput.
Okay, and it does sound like Youre seeing a wide variety of benefits at the locations that have PDK, but am I correct in that.
Saying that youre not prepared to share any.
Any quantitative metrics around that just yet.
Not quite yet the.
You know the.
The areas that I spoke about in the prepared remarks are all quantitatively again.
Again pre post net of control.
Better than the control group and in with a measure of a difference that we're really comfortable that PDK is the variable thats, making the difference and that is in orders ready on time order accuracy, it's actually affecting quality of food scores because of those things where not only ready on top.
But we're not ready to early.
It's the associate.
The associate experience in those PDK shops is significantly different and improved.
Not only are they enjoying a much easier time of managing all of that digital business. The system feeds those orders to our associates in the proper order and its smart enough to know that a very large order needs to get fed to them sooner than a small order even if they both need to be delivered at the same time. So it's doing all of that sorting and all of that.
<unk>. It has also given us the chance to give our customers a little more clarity if if there's a massive amount of digital business going through the backline and it's happening in a lot of shops, it'll it'll give the customer a variable response to their estimated order ready on time.
And how long that will take so the customer has a very good sense of where they are.
It is because of the efficiency on the backline, we have successfully remove some labor out of those PDK shops. It makes the return on investment very solid for US we haven't released that number yet, but we will in the future and then as I said those capacity constrained shops are seeing provable.
Left in overall traffic coming through the frontline, which is very exciting for us.
Okay sounds great.
Lastly from me I guess.
Could we talk about pricing for a moment.
It sounds based on I think Steve you said that.
Or indicated is essentially that you're open to taking pricing if necessary to the bone.
Once a year.
Hum.
So a do you have any concrete plans to take price later this year, if so how much.
And basically could you just walk us through what your price benefit by quarter is going to look like.
For the remainder of 2023.
Yeah.
Yeah sure look I think again like I mentioned in my prior comment it's a different year. This year than it was last year as we've seen inflation come down.
We still want to make sure that we stick to our strategy of only taking price as necessary to outrun cost and says we've seen the costs start to come down or our need to take price.
Also mitigated quite a bit.
Yeah, we we expect to take price overall.
They have the flexibility to take it.
In the low single digits and I would argue we'd be sort of on the low end of that as we've kind of seen.
Inflation come in the way the way it has been we did take one pricing action.
Already this year.
At about one 5% and that's about how we see the year going may be even lower than that for us.
And in terms of the price benefit like I said for.
The full year, we aim to be about where are we where we see inflation going so we want to be close to zero in terms of a pricing benefit.
To offset inflation, we may be a little higher than that.
And first quarter, because we have some carryforward from last year.
In terms of the price increases, but that benefit will step down through the year, so as we'd like.
Like I said closer to closer to your kind of love neutral maybe slightly positive.
Overall.
Okay. So basically you would be.
All else equal you would expect to exit the year with a very low single digit.
Number two.
The price or effectively zero, yes.
Yes, okay.
Well in terms of benefit in terms of the benefit on the margin side. It's like I said, we just want to basically outrun the inflation so the.
Pricing benefit to two margin would be barely at zero to barely positive for the year.
Okay understood.
Great. Thanks, a lot guys and congratulations on the continued momentum.
Yes, Thank you Matt Thanks, Matt.
With that I'd like to hand, the call over to Lisa Fortuno of Alpha IR for a few additional questions Lisa.
Thank you operator, as we have done in previous earnings calls, we have offered our investors the opportunity to complement William Blair's very thoughtful questions.
First question do you expect to be readmitted to the Russell 2000 index.
I'll I'll take this yeah listen.
Performance that we've seen in the stock price in the last quarter, even in even in the prior two quarters has really pushed up.
The market cap to a point, where we are from all indications, we expect to be readmitted into the Russell two K a.
Sure.
Welcome kind of event for us as we've been out of it during COVID-19.
And our situation now in terms of what we've been able to understand the cutoff might be.
Our market cap puts us well beyond that so.
We're we're looking forward to kind of getting formal word on it.
But it's a nice milestone for us as we continue to recover and grow out of Covid.
Next question can you describe any efforts to gain access to non traditional locations such as airports.
Yeah. Thanks, Thanks, Lisa I think one of my prepared remarks was that we've been making investments in lead generation.
And our sales team and in the franchising systems that have been driving that we've mentioned before.
We really enjoy some very high volumes and in some of the airport locations that we're in.
And we think that you know not just airports, but non traditional in general hold a lot of promise one of the great things about the potbelly brand as we already we already.
We have great success in suburban locations drive through locations urban airports Milton in in you know in our CBD is of course.
And so we feel that we've got the flexibility to go into a lot of these locations and non traditional that we don't currently have a presence in so.
We have put some of our G&A, where our mouth is here I mentioned the sales team just in the last quarter, we've added it a.
A director of non traditional sales who does this type of work we've got another leader on our team who has expanded their responsibilities and will be personally responsible for airports and other types of non traditional require rfps.
Sharp leaders are experienced in this space and know how to put the potbelly best foot forward.
We've also added a traditional sales leader as well as some franchise recruitment support and sales specialist support that's where that lead generation.
Vetting and generation comes from so.
Nothing to announce today on non trad, but in addition to all of the traditional development work that we're doing we actually think this is a very ripe area for additional unit growth for the brand.
Yeah.
Thanks. Our next question can you provide more color on how you expect the top line traffic and same store sales to unfold throughout the year.
Yeah, I'll kick that off and then we can oh, we can kind of break it out for you a little bit look I think this is similar to the question that Matt asked as you know in a macro sense.
And in this space and fast casual restaurants in general there are some macro tailwind. So theres been a lot of share donated with closed restaurants and our expectation internally is to is to take advantage of that restaurant demand and drive the business.
Ops is always essential.
Middle pillar of our five pillar strategy to create experiences that bring customers back.
And that includes the speed throughput taken advantage of those lines when we have our customers back in our shops.
You know we're not at all.
Unclear about how much leverage we see in the future and marketing, it's an investment in digital marketing it's in the channels themselves. It's an investment in the E.
E Commerce of the web and the App and a frictionless experience, we can keep expanding on for our customers and of course, you'll focus on value with our promotions and digital promotions. So those are those are the drivers I mean, we've been transparent about our strategy and what are what our strategy can do to drive that.
We've we've offered guidance on where we think the same store sales will be this quarter.
We're still going to be in record territory for au vs and as we mentioned in the remarks, you know I know, we said our 2024 goal would be $1 3 million and there've been many times already we've been pacing at that number so.
We look.
Top line growth and traffic driven growth is always the healthiest way to grow the restaurant space and so rest assured we're focused on it.
Yeah, I would just I would just add to that.
We've been careful right with with pricing.
We just had the conversation with Matt about what we have for this year, we know that we want to protect demand. So we think about that very carefully which is why you know our price increases will be fairly modest this year.
Secondly, we continue to increase.
Not just our marketing activities, but our spend on marketing as we know our peers spend up to four 5% of our sales and marketing were not there yet.
Which is great because we're driving record sales and continuing to drive traffic growth and taking share and still have more.
More marketing dollars that we could spend as long as we continue to prove out their effectiveness. So that gives us a lot of confidence even in a bit of uncertainty as it relates to the economy, which we all just have to be mindful of but we feel like we've got some control over our destiny as it relates to being able to kind of help support traffic throughout the year.
If you look at the first quarter EBITDA, adjusted EBITDA and second quarter guidance.
Should we double the first half to get to the second half and therefore kind of extrapolate on that for the full year expectations.
Yeah, I don't think it's quite it's quite that simple.
Ultimately as we as we look at our.
Look at our performance throughout the year, you know quarter, one typically is a lower volume quarter.
In terms of seasonality, so we expect to be.
Following that seasonality curve, a little more closely this year than we have in past years. So we would expect our our volumes could build.
Throughout the year.
As well.
To remind folks there.
This quarter's is is also carrying a little bit more cost.
In terms of an additional payroll cycle.
Bonus and those kinds of things, which I felt like crude for obviously, but kind of hit us harder in this quarter.
Then as we as we think about some.
Some of the initiatives that we have in place to help improve shop margin even further.
And we and we work to expand shop margin.
We expect the EBITDA profile to also change so it's not quite as simple as just doing.
The straight math and extrapolating out from this quarter.
Thank you and that was the last submitted questions. So I'll now turn the call back to Bob for closing comments.
Thank you Lisa and thank you to Matt and our investors that submitted those questions. We appreciate it. Thank you all again for your time. This afternoon, hopefully you hear from US we remain very excited by the direction and the growth of our company. This year and we're highly confident in our ability to further execute against our goals and ultimately drive shareholder returns.
We look forward to sharing our progress with you when we talk again soon thank you.
That does conclude today's conference. Thank you for attending today's presentation you may now disconnect.
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