Good Times Restaurants Inc. Q2 2023 Earnings Call

[noise] [music].

Good afternoon, ladies and gentlemen.

Welcome to the good times restaurant, physical 2023 second quarter earnings call.

I know everyone should have access to the company's earnings release, which is available in the investors section of the company's web site.

A reminder, a part of today's discussion will include forward looking statements within the meaning of the federal Securities laws. These forward looking statements are not guarantee of future performance and therefore, you should not put an undue reliance on them.

Statements involving known and unknown risks, which may cause the company's actual results to differ materially from.

Expressed or implied by the forward looking statements such risks and uncertainties include among other things the market price of the company's stock prevailing from time to time.

Other investment opportunities presented to the company the company's financial performance and it's cash flows from operations in general economic conditions, which could adversely affect the company's results of operations in cash flows. These risk also include such factors as the disruption to our business from the COVID-19 pandemic and the impact.

Pandemic on our results of operations natural condition and prospects, which may vary depending on the duration and extent of the pandemic.

A federal state and local governmental actions and customer behavior in response to the pandemic.

And duration of staffing constraints and wage increases for employees.

Restaurants, the impact of supply chain constraints.

Inflationary environment and the uncertain nature of current restaurant development plans and the ability to <unk>, those plans and integrate new stroke restaurants.

Developing an opening new restaurants, because of weather local permitting or other reasons increased competition cost increases or shortages and raw food products and other matters discussed under the risk factor section of good times. The annual report a Form 10-K for the fiscal year ended September 27th 2022 filed with the.

<unk> and other filings with the SEC during today's call. The company will discuss non-GAAP measures, which they believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with gap and I can see.

Filiation to comparable GAAP measures available in our earnings release, and now I'd like to turn the call over to Ryan. Please go ahead Sir.

Thank you David and thank you all for joining us on the call today.

Mentioned, everyone should now have access to our second quarter earnings release, and our 10-Q filing.

It is exciting for us to again report growth in same store sales at both brands this quarter and additionally to be able to report traffic increases compared to the prior year It bad daddies.

We are also pleased to report improvement in restaurant level margin this quarter compared to the prior year.

Driven by improved food costs bad Daddies and continued strong labor productivity good times.

As both of our brands have meaningful seasonality the March quarter generally reflects the lowest restaurant margins of the year and we expect both brands to have sequential improvement in the June quarter, as we leverage higher average weekly sales.

This is particularly noticeable at good times, where the concentration of our restaurants in Colorado results in weather driven seasonality.

Greater than we find it bad daddies with greater geographic diversity.

We have continued to prioritize product quality hospitality and service and reinvestment into our facilities, including addressing longterm deferred maintenance items.

This was about the continuing to improve our existing operations will translate into strong longterm financial returns compared with aggressive unit level growth at the cost of differing repairs on existing restaurants or compromising on the guest experience, which.

Which may generate initially strong, but short lived financial benefits.

Nevertheless, we've begun construction on our new bad Daddy's restaurant in Madison, Alabama, which is greater Huntsville.

And we expect to open late this fiscal year we.

We also completed our remodel of the Greenville, South Carolina Bad Daddies in early April and it has reopened a stronger sale some prior to closure.

We treated this remodel in Rio.

Like a new unit, we retain team members by having them work shifts and our other Greenfield bad Daddies hired additional employees and retrained all of our hourly team members working in the restaurant, whether new or returning and our typical <unk> training program and have reflected those and other typical opening costs as such in our financials.

Further as we discussed last quarter, we purchase the interest in five bad Daddy's in North and South Carolina.

Previously held by affiliates of the concepts original founder and we could not be more pleased with the continued strong results from this portfolio of restaurants.

We purchase interests, which range from approximately 25% to 75 per cent ownership and individual restaurants from these partners.

And continued to see this acquisition is incremental to earnings and free cash flow.

At good times, we have continued to see strong sales and we continue to make investments in the form of <unk>.

Creating signage of which we expect to have approximately half of our system completed by the end of this fiscal year.

As we have shifted from a speed at all costs model to one where we are balancing the need for speed a price of entry in the queue ISR space with.

With improved friendliness and higher quality levels through improved product holding targets and procedures refinements, who are <unk> Burger cooking procedures.

And elimination of one of our fried potato products, we expect to both benefit speed and quality.

We also have a plan to replace the menu menu panels and are few restaurants with dining rooms, and at our walk up ordering windows at our double drive throughs with digital menus similar to what has already been completed and the drive through.

This will serve to further communicate a modern and contemporary brand and eliminate one key element that currently communicates outdated and antiquated.

Finally, we've balances investments in programs with returning cash to shareholders in the form of our share repurchase program.

We purchased approximately 167000 shares this quarter.

As this program is executed under the Safe Harbor rules or purchase volume is limited by those rules and the most significant of which is related to trading volume and.

So we expect that due to increasingly limited float and reduce trading volume for a repurchases to be of similar or lesser shares in future quarters.

I'll now pass it over to Matthew to review this quarter's results.

Thank you Ryan it's a pleasure to be on the call today.

Total revenues increased 3.5% to $34.8 million for the quarter.

Total restaurant sales increased $1.2 million to $34.6 million for the quarter.

Total restaurant sales for bed that is restaurants increased zero point $9 million to $26 $3 million for the quarter.

Those were positively impacted you the stronger customer traffic as well as increased menu prices. The average menu price increase was approximately 3.4%.

Same store sales increased 4.6 per cent during the quarter with 39 bad Daddy's an account based at the end of the quarter.

Cost of sales at Baghdad, with 36% for the quarter 70 basis point decrease from last year's quarter.

And high food and packaging cost as being through inflationary and supply chain pressures, but hopefully we've rounded the corner and will continue to see improvement throughout the year.

Baghdad is labor cost increase by 30 basis points compared to the prior year quarter to 34.7% for the quarter.

The increase as a percentage of sales reflect higher wage rates.

Fancy costs at Baghdad's decreased 20 basis points, 264%.

Baghdad is other operating cost increased by 10 basis points compared to the prior year quarter to 14.5% for the quarter.

<unk> increase is primarily due to a higher increase delivery charges and restaurant supply cost.

Overall restaurant level operating profit and non-GAAP measure for bad Daddies was approximately $3.6 million for the quarter for 13.8% of sales compared to $3.4 million or 13.3% last year.

Client is primarily due to the increased cost of labor and other restaurant operating cost.

Restaurant sales that good times were $8.2 million, an increase of zero point $3 million. The average menu price increase for the quarter was approximately 10.5% over the same prior year quarter.

I'm store sales increased 7.6% for the quarter.

Food and packaging cost for good times were 31.6% for the quarter, an increase of 20 basis points compared to last year's quarter again, the result of inflationary pressures on food and packaging materials.

Total labor costs for good times decreased to 34.6% from 35.6% for the quarter last year due to increased productivity.

Occupancy cost at good times were 8.9% an increase of 10 basis points from the prior year quarter.

Good times other operating costs were 12.3% for the quarter, a decrease of 30 basis points due primarily to slight reductions in repair and maintenance and utility expenses.

Good times restaurant level operating profit increased by zero point $1 million for the quarter to $1.0 million as a percent of sales restaurant level operating profit increased by 110 basis points versus last year, the 12.5% due primarily to higher sales and the improvements in labor and other operating.

Cost previously discussed.

Combined general and administrative expenses were $2.3 million during the quarter or $6, 6% as a percentage of total revenues.

Presents a decrease of zero point $3 million versus the prior year quarter due primarily to decrease professional service fees.

We expect G&A costs to run approximately 727.5% of sales.

Our net income too common shareholders for the quarter was $10.6 million or income of 90 cents per share versus a net loss to comments shareholders of $2.2 million or a loss of 17 cents per share in the second quarter last year approximately $995 million of income was it.

<unk> to the release of 100% of our valuation allowance this quarter historically going against our state and federal deferred income taxes.

<unk> EBITDA for the quarter was $1.5 million compared to zero point $8 million for the second quarter of 2022.

And we finished the quarter with $5.4 million in cash and no longterm debt.

Thank you back to you Ryan.

Thank you Matthew.

I'm impressed with the improvements we've made versus the prior year in particular with good times, where a combination of both sales and strong controls have enabled us to improve unit level economics. In spite of the intense labor pressures that had been driven by a combination of market forces.

And regulatory action, where in the city and county of Denver, We saw the statutory minimum wage rate increased by 8% on January 1st.

We expect the financial results to continue to improve on a year over year basis.

With that that David will open the call for questions.

Thank you at this time, if you'd like to ask a question Press Star then the number one on your telephone keypad. Once again press star one to ask a question will pause for just a moment to compile the Q&A roster.

There are no questions at this time I'll now turn the call back over to you Ryan for any additional or closing remarks.

We have an amazing team of leaders in our restaurants and are multi unit management roles and in our support center capabilities.

All who are backed by Ming equally incredible group of team members that are all lined with our brands respective brand promises and.

And to share a passion for excellence and executing their specific roles, which enable us to truly connect with and delight our guests.

At both brands.

With that we will conclude today's call. Thank you all for joining us today.

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

Okay.

This includes today.