Q4 2023 BJs Restaurants Inc Earnings Call

Operator: Good afternoon. And welcome to the BJ's Restaurants 4th Quarter 2023 Earnings Release Conference Call. All participants will be in listen only mode, unless they need assistance.

Good afternoon, and welcome to the Bj's restaurants fourth quarter 2023 earnings release conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Operator: Please signal a conference specialist. Starkey, followed by After today's program, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone.

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Operator: Draw your question, star, then. Please note, this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.

Please note this event is being recorded.

I would now let's turn the conference over to Ronny Schirmer director of SEC reporting. Please go ahead.

Rana G. Schirmer: Thank you operator, good afternoon, everyone and welcome to our fiscal 2023 fourth quarter investment Mr Conference call and webcast. After the market closed today, we released our financial results for our fiscal 2023 fourth quarter you can view the full text of our earnings release on our website at Www Dot.

Rana G. Schirmer: Thank you, operator. Good afternoon, everyone, and welcome to our fiscal 2023 fourth quarter investment investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2023 fourth quarter. You can view the full text of our earnings release on our website at www.bjrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guaranteed future performance and that undue reliance should not be placed on such statements.

Rana G. Schirmer: D J as restaurants, dotcom I will begin by reminding you that our comments on the conference call today will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 investors are cautioned that forward looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements.

Rana G. Schirmer: These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. We will start today's call with prepared remarks from Greg Levin, our Chief Executive Officer and President, and Tom Hodek, our Chief Financial Officer, after which we will take your questions. And with that, I will turn the call over to Greg Levin. Thank you, Rana.

Rana G. Schirmer: These statements are based on management's current business and market expectations and our actual results could differ materially from those projections in the forward looking statements. We undertake no obligation to publicly update or revise any forward looking statements or to make any other forward looking statements whether as a result of new information.

Rana G. Schirmer: Future events or otherwise unless required to do so by the securities laws.

Rana G. Schirmer: Investors are referred to the full discussion of risks and uncertainties associated with forward looking statements contained in the company's filings with the Securities and Exchange Commission, we will start today's call with prepared remarks from Greg Levin, Our Chief Executive Officer, and President and Tom <unk>, Our Chief Financial Officer after which.

Rana G. Schirmer: We will take your questions and with that I will turn the call over to Greg Levin Greg.

Gregory S. Levin: BJ's delivered another quarter of positive, comparable restaurant sales and year-over-year margin expansion as we continue to benefit from the strategies we shared at our Investor Day in November. These strategies are focused on driving sales through our Familiar Made Brewhouse Fabulous culinary initiative, our people initiative around hospitality and a gold standard level of operational excellence, and a welcoming contemporary ambiance through our remodel initiative. Our overall strategy also encompasses margin expansion through productivity and cost-savings initiatives. Taken together, and with successes already evident on many of these fronts, we have established a solid foundation for future restaurant growth and enhancement of shareholder value. From a fourth-quarter sales perspective, comparable restaurant sales were positive 0.6%, which was our 11th consecutive quarter of beating the industry, as measured by BlackBox. We expanded our restaurant margins to 14.4%, representing an increase of 150 basis points from the prior year, and generated adjusted EBITDA of more than $27 million in the quarter.

Gregory S. Levin: Thank you Ron at Bj's delivered another quarter of positive comparable restaurant sales and year over year margin expansion as we continue to benefit from this strategy as we shared at our Investor Day in November.

Gregory S. Levin: These strategies are focused on driving sales through our familiar made brewhouse Fabulous culinary initiative, our people initiatives around hospitality and gold standard level of operational excellence and are welcoming contemporary ambiance to our remodel initiatives.

Gregory S. Levin: Our overall strategy also encompasses margin expansion through productivity and cost savings initiatives.

Gregory S. Levin: Taken together and with success is already evident in many of these fronts. We have established a solid foundation for future restaurant growth and enhancement of shareholder value.

Gregory S. Levin: From a fourth quarter sales perspective comparable restaurant sales were positive <unk>, 6%, which was which was our 11th consecutive quarter of beating the industry as measured by Black box, we expanded our restaurant margins to 14, 4%, representing an increase of 150 basis points from the prior year and generated.

Gregory S. Levin: Adjusted EBITDA of more than $27 million in the quarter.

Gregory S. Levin: Our margin improvement results compared to last year are even more impressive in that fiscal 2022 was a 53-week year and included $3.2 million related to a one-time gain in gift card breakage in the fourth quarter. Therefore, excluding these benefits from last year, our restaurant-level margins improved by 270 basis points, and adjusted EBITDA increased by approximately 40% year-over-year in the fourth quarter. For the fiscal 2023 full year, adjusted EBITDA increased to approximately $104 million, an increase of more than 30% on a reported basis and more than 40% from last year when adjusting for gift card breakage and the 53rd week that benefited fiscal 2022.

Gregory S. Levin: Our margin improvement results compared to last year are even more impressive in that fiscal 2022 was a 53 week year and included $3 2 million related to a one time gain in gift card breakage in the fourth quarter.

Gregory S. Levin: Therefore, excluding these benefits from last year, our restaurant level margins improved by 270 basis points and adjusted EBITDA increased by approximately 40% year over year in the fourth quarter.

Gregory S. Levin: For the fiscal 2023 full year adjusted EBITDA increased to approximately $104 million, an increase of more than 30% on a reported basis and more than 40% from last year when adjusting for gift card breakage, and the 50 <unk> week that benefited fiscal 2022.

Gregory S. Levin: While Tom will discuss this in more detail, the Margin Improvement Initiative that generated strong results in 2023 will continue to yield further benefits in 2024. We expect restaurant-level margins to expand again this year and increase from our fourth-quarter exit rate in the mid-14 percentage points and further close the gap to pre-pandemic levels, consistent with what we outlined in our Investor Day presentation in November. Our familiar-made brewhouse fabulous culinary strategy began this past July as we rolled out our smaller menu, removing some of the non-core menu items that added complexity.

Gregory S. Levin: While Tom will discuss this in more detail the margin improvement initiatives that generated strong results. In 2023, we will continue to yield further benefits in 2024, we expect restaurant level margins to expand again this year, an increase from our fourth quarter exit rate in the mid 14 percentages two percentage points.

Gregory S. Levin: Further closed the gap to pre pandemic levels consistent with what we outlined in our Investor day presentation in November.

Our familiar May brewhouse Fabulous culinary strategy began this past July as we rolled out our smaller menu removing some of the non core menu items that added complexity.

Gregory S. Levin: While it can be difficult to grow comp sales with fewer menu items in the short term, this is the right approach to move BJ's forward and allow for new menu innovation while improving execution and team member satisfaction. In this regard, our new Familiar Made Brewhouse fabulous items are moving the business forward. Our October Spooky Pazooki Dessert had the highest incident rate of any seasonal pazooki, and our Surf and Turf Combo increased our overall entree incidents and added approximately $300 to our weekly sales average during the promotion period.

Gregory S. Levin: While it can be difficult to grow comp sales with fewer menu items in the short term. This is the right approach to move <unk> forward and allow for new menu innovation, while improving execution and team member satisfaction.

Gregory S. Levin: In this regard our new familiar made brewhouse fabulous items are moving the business forward. Our October spooky <unk> dessert had the highest incident rate of any seasonal <unk> and our surf <unk> turf combo increased our overall entre incidents and added approximately $300 to our weekly sales average during the promotion period.

Gregory S. Levin: We shared with the investment community in November our three year culinary strategy, which includes upgrading 50% of our menu to have a more visual wow for our guests.

Gregory S. Levin: We shared with the investment community in November our three-year culinary strategy, which includes upgrading 50% of our menu to have a more visual wow for our guests, ongoing investment in our core workhorse items, and further innovation around 20% of our menu focused on value and price points. The changes we made to the menu are resonating with our team and workflow, allowing us to improve overall execution. In Q4, our team member retention improved for both hourly team members and managers compared to the prior year and is now better than pre-COVID levels, bringing added stability and less training time and costs to our business. In fact, our retention was better than our casual dining peers, which has created tremendous synergy in our restaurants, bench strength, and career advancement opportunities.

Gregory S. Levin: Ongoing investment in our core workhorse items and further innovation around 20% of our menu focus on value and price point.

Gregory S. Levin: The changes we made to the menu are resonating with our team and workflow, allowing us to improve overall execution in Q4, our team member retention improved for both hourly team members and managers compared to the prior year and are now better than pre COVID-19 levels, bringing added stability and less training time and cost to our business.

Gregory S. Levin: <unk>.

Gregory S. Levin: In fact, our retention was better than our casual dining peers, which has created tremendous synergy in our restaurants bench strength and career advancement opportunities.

Gregory S. Levin: This synergy has led to improved net promoter scores and, again, reduced training and overtime costs, helping to move our restaurant margins in the right direction. Through our research, we know that a key differentiator in full-service restaurants is ambiance. Guests want a contemporary, relevant atmosphere that complements our team members' gracious hospitality and BJ's delicious food. In fiscal 2023, we completed 36 remodels, and we expect to do at least 20 more this year.

Gregory S. Levin: This synergy has led to improved net promoter scores and again reduce training and overtime costs, helping to move our restaurant margins in the right direction.

Gregory S. Levin: Through our research, we know that a key differentiator and full service restaurants as ambiance guests want to contemporary relevant atmosphere that complements our team members' gracious hospitality and Bj's delicious food.

Gregory S. Levin: In fiscal 2023, we completed 36, Remodels and expect to do at least 20 Remodels this year.

Gregory S. Levin: We believe we have about 130 more restaurants that can use one aspect of our remodel program, and with several quarters of data in hand following other remodels, we know this approach helps drive sales and traffic. By the end of 2024, we expect half of our restaurants will either be remodeled or be our newer, lighter prototype. While the best way for us to continue our margin growth is by driving top-line sales, since every additional sales dollar leverages the fixed elements of our cost structure, we also laid out a plan last year to identify at least $25 million of floor-wall cost savings opportunities that will benefit our restaurant operating margins while maintaining our quality standards. We have now unlocked over $35 million of cost savings on an annualized basis as we reduce food, labor, and operating and occupancy costs.

Gregory S. Levin: We believe we have about 130 more restaurants that can use one aspect of our remodel program and with several quarters of data in hand. Following other remodels. We know this approach helps drive sales and traffic.

By the end of 2024, we expect half of our restaurants will either be remodeled or b, our newer lighter prototype.

Gregory S. Levin: Well the best way for Us to continue our margin growth is by driving topline sales. Since every additional sales dollar leverages the fixed elements of our cost structure. We also laid out a plan last year to identify at least $25 million of four wall cost savings opportunities that will benefit our restaurant operating margins while.

Gregory S. Levin: Entailing our quality standards.

Gregory S. Levin: We have now unlocked over $35 million of cost savings on an annualized basis, as we reduced food labor and operating and occupancy costs.

Gregory S. Levin: Going into fiscal 24, we expect to find additional savings that will further contribute to our initiatives to move restaurant level margins higher. We will also continue to open new restaurants in a balanced manner and make sure our portfolio is optimized to continue driving the best return for our shareholders. In 2023, we open five new restaurants, including the relocation of our Chandler, Arizona restaurant. Our restaurants open since 2021 are doing exceptionally well, with weekly sales averages of more than $130,000, or approximately 10% higher than our system average, with restaurant level margins in the mid to upper teens on an annual run rate average. Going into 2024, we plan to reduce the investment costs for new builds by approximately $1 million, which will bring down our investment costs to around $6.1 million net of landlord allowances. At the same time, we are working on further refining our prototype with the goal of reducing our investment costs by another $500,000.

Gregory S. Levin: Going into fiscal 'twenty, four we expect to find additional savings that will further contribute to our initiatives to move restaurant level margins higher.

Gregory S. Levin: We also continue to open new restaurants in a balanced manner and make sure. Our portfolio is optimized to continue driving the best returns for our shareholders.

Gregory S. Levin: In 2023, we opened five new restaurants, including the relocation of our Chandler, Arizona restaurants.

Gregory S. Levin: Our restaurants opened since 2021 are doing exceptionally well with weekly sales average of more than 130000 or approximately 10% higher than our system average with restaurant level margins in the mid to upper teens on an annual run rate average.

Gregory S. Levin: Going into 2024, we plan to reduce the investment cost for new builds by approximately $1 million, which will bring down our investment costs to around $6 $1 million net of landlord allowances.

At the same time, we are working on further refining our prototype with the goal of reducing our investment costs by another 500000.

Gregory S. Levin: Our long-term cadence in this business is to drive top-line sales in the 8% to 10% range through a combination of 5% plus unit growth and comparable restaurant sales in the low to mid-single digits. At the same time, we continue to expand margins through sales leverage and productivity and savings initiatives. Our continuous focus on optimizing the business and solid financial cadence generates significant free cash flow which we can translate into enhanced shareholder value. Based on our new restaurant performance, we know that BJ's is a welcome concept by guests throughout the US, and this gives us the opportunity to double our footprint over time.

Gregory S. Levin: Our long term cadence in this business is to drive topline sales in the 8% to 10% range through a combination of 5% plus unit growth and comparable restaurant sales in the low to mid single digits.

Gregory S. Levin: At the same time, we continue to expand margins through sales leverage and productivity and savings initiatives.

Gregory S. Levin: Our continuous focus on optimizing the business and solid financial cadence generate significant free cash flow, which we can translate into enhanced shareholder value.

Gregory S. Levin: Based on our new restaurant performance, we know that Bj's is a welcome concept by guests throughout the U S. And this provides us the opportunity to double our footprint over time however.

Gregory S. Levin: However, as we've always said, we are going to do it with the right quality and at the right investment cost to continue to drive strong new restaurant investment returns that maximize shareholder value. To that point, and as we continue to focus on reducing our investment costs in our new restaurants, we now plan to open three restaurants this year. We are targeting total CapEx in the $70 million range, net attendant improvement allowances, including remodeling at least 20 restaurants this year.

Gregory S. Levin: However, as we've always said, we're going to do it with the right quality and at the right investment cost to continue to drive strong new restaurant investment returns that maximizes shareholder value.

Gregory S. Levin: To that point and as we continue to focus on reducing our investment costs in our new restaurants, we now plan to open three restaurants. This year, we are targeting total capex in the $70 million range net of tenant improvement allowances, including remodeling at least 20 restaurants this year.

Gregory S. Levin: We expect to generate over $40 million of cash flow this year that we can use to enhance shareholder value through share repurchases or debt reductions. Our strong EBITDA growth and free cash flow profile will provide solid earnings growth for our shareholders as we are increasingly confident in our strategy to grow sales, expand margins, open new restaurants at the right pace, and return capital to our shareholders. To this point, as we announced today, our Board of Directors has approved an increase of $50 million to our share repurchase plan. Now, let me turn it over to Tom to provide a more detailed update on the quarter and current trends. Thanks, Greg, and good afternoon, everyone.

Gregory S. Levin: We expect to generate over $40 million of cash flow. This year that we can use to enhance shareholder value through share repurchases or debt reduction.

Gregory S. Levin: Our strong EBITDA growth and free cash flow profile will provide solid earnings growth for our shareholders. As we are increasingly confident in our strategy to grow sales expand margins open new restaurants at the right pace and return capital to our shareholders.

Gregory S. Levin: To this point as we announced today our board of Directors has approved an increase of $50 million to our share repurchase plan.

Gregory S. Levin: Now, let me turn it over to Tom to provide a more detailed update from the quarter and current trends Tom.

Tom: Thanks, Greg and good afternoon, everyone I.

Tom Hodek: I will provide details of the quarter and some forward-looking views. Please remember, this commentary is subject to the risks and uncertainties associated with forward-looking statements, as discussed in our filings with the SEC. For the fourth quarter, we generated sales of $324 million, which was 6% less than last year on a reported basis and 2% higher when removing the benefits of the 53rd week and the $3.2 million of gift card breakage from last year's results. On a comparable restaurant basis, Q4 sales increased by 0.6% over the prior year. From a weekly sales perspective, we averaged approximately $115,000 per restaurant.

Tom: I will provide details of the quarter and some forward looking views. Please remember this commentary is subject to the risks and uncertainties associated with forward looking statements as discussed in our filings with the SEC.

Tom: For the fourth quarter, we generated sales of $324 million, which was 6% less than last year on a reported basis and 2% higher when removing the benefits of the 50, <unk> week and the $3 $2 million of gift card breakage from last year's results.

Tom: On a comparable restaurant basis Q4 sales increased by <unk>, 6% over the prior year from a weekly sales perspective, we averaged approximately 115000 per restaurant.

Tom: Our strong and efficient restaurant execution as Greg just outlined in conjunction with our cost savings from our margin improvement initiatives helped bj's again improved margins in the quarter.

Tom Hodek: Our strong and efficient restaurant execution, as Greg just outlined, in conjunction with our cost savings from our margin improvement initiatives, helped BJ's again improve margins in the quarter. Our restaurant level cash flow margin was 14.4% in Q4, which was 150 basis points better than a year ago on a reported basis. When adjusting for gift card breakage in the 53rd week, our restaurant-level cash flow margin was nearly 300 basis points higher than last year, demonstrating again the benefits of our ongoing initiatives to drive sales and efficiency. As a result, our restaurant-level cash flow dollars continued to improve, and we were in line with 2019 Q4 levels. Adjusted EBITDA was $27.3 million and 8.4% of sales in the fourth quarter. Q4 EBITDA beat the prior year by $8 million with a margin that was 220 basis points higher when again excluding the gift card breakage benefit and the 53rd week from 2022. We reported net income of $8.1 million and diluted net income per share of $0.34 on a gap basis for the quarter, which were approximately twice the levels from a year ago, even before adjusting for gift card breakage in the 53rd week.

Tom: Our restaurant level cash flow margin was 14, 4% in Q4, which was 150 basis points better than a year ago on a reported basis.

When adjusting for gift card breakage, and the 50 <unk> week, our restaurant level cash flow margin was nearly 300 basis points higher than last year, demonstrating again, the benefits of our ongoing initiatives to drive sales and efficiencies.

Tom: As a result, our restaurant level cash flow dollars continued to improve and we were in line with 2019 Q4 levels.

Tom: Adjusted EBITDA was $27 3 million and eight 4% of sales in the fourth quarter Q.

Tom: Q4, EBITDA beat the prior year by $8 million with a margin that was 220 basis points higher when again, excluding the gift card breakage benefit and 50 <unk> week from 2022.

Tom: We reported net income of $8 1 million and diluted net income per share of <unk> 34 on a GAAP basis for the quarter, which were at approximately twice the levels from a year ago, even before adjusting for gift card breakage and the 50 <unk> week.

Tom: For more detail on sales trends overall casual dining industry sales as measured by Black box decelerated, starting in November and our sales patterns followed the industry.

Tom Hodek: For more detail on sales trends, overall casual dining industry sales, as measured by BlackBox, decelerated starting in November, and our sales patterns follow the industry. We made certain strategic decisions in Q4 to drive profitable sales, including changing our Veterans Day promotion, which benefited margins but weighed on November comp sales. We also reduced promotional spend for off-premise starting in November, which benefited margins at the expense of some off-premise sales. Our on-premise business remains our strongest, most profitable, and most differentiated channel, with comp sales up low single digits in the quarter. BJ's is an experiential brand, and as such, we intend to direct the majority of our focus on growing our on-premise business. This is where guests can experience the energy of our restaurants, which is elevated by our remodeling investments, along with our gold-standard level of service, great food served fresh from our kitchens, and innovative drinks prepared by our bartenders. We believe that driving a strong on-premise experience creates more affinity for the brand that, over time, will help drive the off-premise business. Late night is our best performing day part, with comp sales of positive low to mid-single digits in Q4. Our late night authority is an established core competitive advantage for BJ's.

Tom: We made certain strategic decisions in Q4 to drive profitable sales, including changing our veterans day promotion, which benefited margins, but weighed on November comp sales. We also reduced promotional spend for off premise starting in November which benefited margins at the expense of some off premise sales.

Tom: Our on premise business remains our strongest most profitable and most differentiated channel with comp sales up low single digits in the quarter.

Tom: Bj's as an experiential brand and as such we intend to direct the majority of our focus on growing our on premise business.

Tom: This is where guests can experience the energy of our restaurants, which is elevated by a remodeling investments along with our gold standard level of service great fruit food served fresh from our kitchens and innovative drinks prepared by our bar tenders.

Tom: We believe that driving a strong on premise experience creates more affinity for the brand that overtime will help drive the off premise business.

Tom: Late night is our best performing day part with comp sales are positive low to mid single digits in Q4 are.

Tom: Our late night authority is an established core competitive advantage for Bj's, we reinforced this day part by adding back more operating hours in 2023 and through our remodel program with a focus on the bar statement, while continuing to create and serve innovative and creative brewhouse Fabulous food and drinks.

Tom Hodek: We reinforced this day part by adding back more operating hours in 2023 and through our remodel program with a focus on the bar statement while continuing to create and serve innovative and creative Brewhouse Fabulous food and drinks. Moving to more recent trends, restaurant sales in the first six weeks of 2024 have been materially impacted by storms and winter weather, along with the continuation of a more cautious consumer. Each week has had some degree of inclement weather that has kept guests at home.

Tom: Moving to more recent trends restaurant sales in the first six weeks of 2024 have been materially impacted by storms and winter weather along with the continuation of a more cautious consumer.

Tom: Each week has had some degree of inclement weather that has kept guests at home.

Tom: The first six weeks' comp sales are down mid single digits in aggregate.

Tom Hodek: For the first six weeks, comp sales were down mid-single digits in aggregate. Looking ahead in the quarter, and assuming that the worst of the winter weather is behind us, we expect comp sales to improve, and full year comp sales to be in the negative low single digit area for Q1. Despite the challenging weather to start the year for the industry, we continued to beat the casual dining trends when compared to black box. In fact, our quarter-to-date comp sales were approximately 250 basis points ahead of the industry through the first couple weeks of February. Turning to margins, we realized additional cost savings in the fourth quarter. We have now eliminated more than $35 million of costs on an annualized basis, which is $10 million higher than our original target, allowing us to expand our restaurant-level margins to the mid-14% in Q4.

Tom: Looking ahead in the quarter and assuming that the worst of the winter weather is behind US, we expect comp sales to improve and full year comp sales in the negative low single digit area for Q1.

Despite the challenging weather to start the year for the industry. We continue to beat the casual dining trends when compared to black box.

Tom: In fact, our quarter to date comp sales is approximately 250 basis points ahead of the industry through the first couple weeks of February.

Tom: Turning to margins, we realized additional cost savings in the fourth quarter, we have now eliminated more than $35 million of costs on an annualized basis, which is $10 million higher than our original target, allowing us to expand our restaurant level margins to the mid 14% in Q4.

Tom Hodek: As a reminder, our fourth-quarter margins generally serve as a good proxy for our average margins throughout the year, and I would suggest using Q4 margins as a starting point for modeling full-year 2024 margins. We are encouraged by our continued progress in closing the gap to our 2019 restaurant margins of 16% and maintain our confidence in being able to meet and then surpass historical margin levels. Moving to expenses, our cost of sales was 25.5% in the quarter, which was 130 basis points favorable compared to a year ago and 40 basis points favorable compared to the prior quarter. Food costs were down about 1% quarter over quarter, with new meat program sourcing driving down costs and more than offsetting inflation on other items.

Tom: As a reminder, our fourth quarter margins generally serve as a good proxy for our average margin throughout the year and I would suggest using Q4 margins as a starting point for modeling full year 2020 for margins.

Tom: We are encouraged by our continued progress in closing the gap to our 2019 restaurant margins of 16% and maintain our confidence in being able to meet and then surpassed historical margin levels.

Tom: Moving to expenses our cost of sales was 25, 5% in the quarter, which was 130 basis points favorable compared to a year ago, and 40 basis points favorable compared to the prior quarter.

Tom: <unk> costs were down about 1% quarter over quarter with new meat program sourcing driving down costs and more than offsetting inflation on other items.

Tom Hodek: Food cost inflation was approximately 1% for the 2023 full-year period and would have been approximately 300 basis points higher without our savings initiative. Labor and benefits expenses were 36.5% of sales in the quarter, which was 30 basis points favorable compared to the fourth quarter of last year. We made further strides improving our labor efficiency, which is driven in part by our simplified menu that requires fewer kitchen prep hours. A number of the labor efficiency metrics we track, including items per labor hour, were better this quarter than pre-COVID levels, illustrating the high level our restaurant teams are operating at, as well as the effectiveness of our cost savings initiatives to date with respect to refining and optimizing our labor model. Occupancy and operating expenses were 23.6% of sales in the quarter, which was 10 basis points unfavorable compared to the fourth quarter of last year. We increased our marketing spend by 20 basis points from Q4 of last year to build additional awareness and drive traffic to our restaurants. GNA earned $21.7 million in the fourth quarter.

Tom: Food cost inflation was approximately 1% for the 2023 full year period, and would've been approximately 300 basis points higher without our savings initiatives.

Tom: Labor and benefits expenses were 36, 5% of sales in the quarter, which was 30 basis points favorable compared to the fourth quarter of last year.

Tom: We made further strides improving our labor efficiency, which were driven in part by our simplified menu that requires less kitchen prep hours.

Tom: A number of the labor efficiency metrics, we track, including items per labor hour were better this quarter than pre COVID-19 levels illustrating the high level. Our restaurant teams are operating at as well as the.

Tom: Effectiveness of our cost savings initiatives to date with respect to refining and optimizing our labor model.

Tom: Occupancy and operating expenses were 23, 6% of sales in the quarter, which was 10 basis points unfavorable compared to the fourth quarter of last year, we increased our marketing spend by 20 basis points from Q4 of last year to build additional awareness and drive traffic to our restaurants.

Tom: G&A was $21 7 million in the fourth quarter.

Tom Hodek: Included in G&A was more than $600,000 in deferred compensation expense linked to fund performance in our deferred compensation plan compared to a $100,000 benefit in Q3. As a reminder, this is a non-cash item and has an offsetting entry in the Other Income and Expense line in our P&L. We also had extraordinary legal expenses of approximately $800,000 in the fourth quarter.

Tom: Included in G&A was more than 600000 in deferred compensation expense linked to fund performance in our deferred compensation plan compared to $100000 benefit in Q3.

Tom: As a reminder, this is a noncash item and has an offsetting entry in the other income and expense line in our P&L.

Tom: We also had extraordinary legal expenses of approximately 800000 in the fourth quarter.

Tom Hodek: Combining these two items pushed our full-year GNA to 82 million, which was at the high end of our original guidance. Turning to the balance sheet, we ended the fourth quarter with net debt of $39 million, which was $9 million lower than the end of Q3 due to our growing free cash flow. We ended Q4 with a debt balance of $68 million and a cash balance of $29 million, each of which was up from the end of Q3. Also, during the quarter, we continued to return capital to our shareholders through our share repurchase program. These share repurchases reflect management's belief that BJ's shares represent fantastic value and are a sign of confidence in BJ's longer-term growth prospects. During the fourth quarter, we repurchased and retired approximately 263,000 shares of common stock at a cost of $6.7 million. Reflecting our strong and increasing operating cash flow, the Board of Directors has approved an expansion of the Share Repurchase Program by $50 million. As a result, we currently have approximately $61 million available under our authorized $550 million share repurchase program.

Tom: Combination of these two items pushed our full year G&A to $82 million, which was at the high end of our original guidance.

Tom: Turning to the balance sheet, we ended the fourth quarter with net debt of $30 $39 billion, which was $9 million lower than the end of Q3 due to our growing free cash flow.

Tom: We ended Q4 with a debt balance of $68 million and a cash balance of $29 million each of each of which was up from the end of Q3.

Tom: Also during the quarter, we continued to return capital to our shareholders through our share repurchase program.

Tom: These share repurchases reflect management's belief that BJ shares represent a fantastic value and our confidence in the bj's longer term growth prospects.

Tom: During the fourth quarter, we repurchased and retired approximately 263000 shares of common stock at a cost of $6 7 million.

Tom: Reflecting our strong and increasing operating cash flow. The board of directors has approved an expansion of the share repurchase program by $50 million.

Tom: As a result, we currently have approximately $61 million available under our authorized $550 million share repurchase program.

Tom Hodek: Total 2023 CapEx was $98 million after related asset proceeds. Included in CapEx was $5 million related to the timing of payments for 2022 projects. Excluding this $5 million related to 2022 projects, CapEx of $93 million was in our plan range, which includes the five new restaurants opened in 2023 and 36 restaurant remodels. Also, in the fourth quarter, we closed an underperforming restaurant, which required a non-cash write-off in the Loss on Disposals and Impairment of Asset line.

Tom: Total 2023, Capex was $98 million after related asset proceeds.

Tom: Included in Capex was $5 million related to the timing of payments for 2022 projects.

Tom: Excluding this $5 million related to 2022 projects Capex of $93 million was in our plan range, which includes the five new restaurants opened in 2023 and 36 restaurant Remodels.

Tom: Also in the fourth quarter, we closed an underperforming restaurant, which required a noncash write off in the losses in disposal loss on disposals and impairment of asset line.

Tom Hodek: As I said previously, we expect Q1 comp sales in the negative low single digits due in part to the impact of the wet winter weather through the first six months of the quarter. Factoring in recent trends and near-term expectations, we expect restaurant-level cash flow margins to be in the 13% to low 13% range in Q1, accounting for the de-leverage during the weather-impacted week. We do still expect to grow margins in Q1 year-over-year despite the top-line impact from weather. We then expect to continue expanding margins throughout the year as we grow sales through strategic initiatives and institutional progress on our margin improvement initiatives. Our goal is to close the gap to 2019 margins and finish the year with an exit rate approaching 16% for restaurant level cash flow margins. For 2024, we are expecting food cost inflation in the flat to low single digit area and labor inflation in the mid to upper single digits. For 2024, we are targeting GNA in the $82 to $84 million range.

Tom: As I said previously we expect Q1 comp sales and the negative low single digits due in part to the impact from the wet winter weather through the first six months of the quarter.

Tom: Factoring in recent trends and near term expectations, we expect restaurant level cash flow margins in the 13% to low 13% range in Q1 accounting for the deleverage during the weather impacted weeks, we do still expect to grow margins in Q1 year over year, despite the topline impact from weather.

We then expect to continue expanding margins throughout the year as we grow sales through strategic initiatives and the additional progress on our margin improvement initiatives. Our goal is to close the gap to 2019 margins and finished the year with an exit rate approaching 16% restaurant level cash flow margins for.

Tom: For 2024, we are expecting food cost inflation in the flat to low single digit area and labor inflation in the mid to upper single digits.

Tom: For 2024, we are targeting G&A in the $82 million to $84 million area.

Tom Hodek: We are limiting our planned CapEx spend to approximately $70 million net of tenant improvement allowances, which includes three new restaurants and 20 existing restaurant remodels. Consistent with the strategy outlined during our November Investor Day, we continue to take a disciplined approach to capital allocation and new restaurant growth relative to new restaurant costs, with our overall restaurant economics guiding the timing for accelerated growth and related capital expenditures. This approach serves BJ's, its guests, and shareholders well while also allowing us to use our growing cash flows to enhance shareholder value through additional share repurchases and debt reduction. Following our Brookfield, Wisconsin, opening scheduled for April, the two additional new restaurants planned for fiscal 2024 will be our new prototype, which is designed to cost approximately $1 million less to build than our recent new restaurants.

Tom: We are limiting our planned capex spend to approximately $70 million net of tenant improvement allowances, which includes three new restaurants, and 20 existing restaurant remodels.

Tom: Consistent with the strategy outlined during our November investment Investor Day, we continue to take a disciplined approach to capital allocation and new restaurant growth relative to new restaurant costs with our overall restaurant economics guiding the timing for accelerated growth and related capital expenditures.

Tom: This approach serves bj's its guests and shareholders well, while also allowing us to use our growing cash flows to enhance shareholder value through additional share repurchases and debt reduction.

Tom: Following our Brookfield, Wisconsin opening scheduled for April the two additional new restaurants planned for fiscal 2024 will be our new prototype, which designed to cost approximately $1 million less to build than our recent new restaurants.

Tom Hodek: In conclusion, with significant and improving cash flows from operations, expanding margins, and a healthy balance sheet, we have the financial flexibility to execute multiple initiatives to enhance shareholder value. We are focused on delivering value to shareholders through sales and productivity initiatives and on our disciplined approach to capital allocation, including for new restaurant openings and restaurant remodels, which both continue to generate strong economic returns. We have a clear path to sales and margin growth ahead, and our long-term strategy and strong consumer appeal for the BJ's concept position us well to continue building on our successes and enhancing shareholder value. Thank you for your time today, and we'll now open up the call to your questions. Operator? We will now begin the question and answer session. To ask a question, you may press the star, then 1 on your telephone keypad.

In conclusion with significant and improving cash flows from operations expanding margins and a healthy balance sheet, we have the financial flexibility to execute multiple initiatives to enhance shareholder value.

Tom: We are focused on delivering value to shareholders through sales and productivity initiatives and on our disciplined approach to capital allocation, including for new restaurant openings and restaurant Remodels, which both continued to generate strong economic returns.

Tom: We have a clear path to sales and margin growth ahead, and our long term strategy and strong consumer appeal for the Bj's concept position us well to continue building on our successes and enhancing shareholder value.

Speaker Change: Thank you for your time today, and we'll now open up the call to your questions operator.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Operator: I believe you're using a speaker. Please pick up your handset before pressing, draw your Press star, then 2. At this time, we will pause momentarily to assemble our office. Our first question today comes from Tyler Prowse with Stevens Inc. Please go ahead.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Speaker Change: Our first question today comes from Tyler <unk> with Stephens, Inc. Please go ahead.

Tyler: Hey, Thanks for taking the question could you. Please walk us through the same store sales components that include traffic mix and price and how should we think about price flowing through in fiscal year 'twenty four.

Unidentified Speaker: Hey, thanks for taking the question. Could you please walk us through the same store sales components that include traffic mix and price? And how should we think about price flowing through in fiscal year 24? Sure.

Speaker Change: Sure so in the fourth quarter, we had.

Unidentified Speaker: So in the fourth quarter, we had around 7% to 8% of pricing, and that's about what flowed through to check, a little bit less on check in the mid-7s. And, you know, traffic was down about 6%, so those are kind of the components that built up to the 0.6% of comp in Q4. Looking forward to 2024, we'll be taking less price. So if you think of the pricing carried in Q1, it's more in the 5% to 6% range after a lower pricing round in January, and we expect that to continue to come down as the year progresses. Great, thanks.

Speaker Change: Around 7% to 8% of pricing and Thats about what flowed through to check a little bit less on check in the mid sevens.

Speaker Change: No.

Speaker Change: Traffic was down about six so that those are kind of the components that built up to the 0.6% of of comp in Q4 looking forward to the 2024, we will be taking less price. So.

Speaker Change: If you think of the pricing carried in Q1, it's more in the 5% to 6% range after a lower.

Speaker Change: Pricing round in January and we expect that to continue to come down as the year progresses.

Speaker Change: Great. Thanks.

Gregory S. Levin: And Bia, yesterday you mentioned an opportunity to grow your brand awareness as you're about 12% unaided awareness versus your peers, who said about 20% to 40%. Can you talk a little bit more about what you're doing to close this gap and what we might see in 2024? Yeah, this is Greg.

Speaker Change: Investor Day, you mentioned an opportunity to grow your brand awareness as you are about 12% unaided awareness versus your peer set or about 20% to 40% can you talk a little bit more about what youre doing to close this gap and what we might see in 2024.

Gregory S. Levin: Great question. We will actually be increasing more on the media side, both on linear and connected TV in some specific markets. So last year, it was our first time going on television, actually, even in Southern California, in a few years.

Speaker Change: Yes. This is Greg great question, we will be actually increasing.

Gregory S. Levin: More on the media side, both on linear and connected television and some specific market. So last year. It really at the end of the third quarter was our first time going on TV actually even in southern California, and a few here in a few years. So we're going to end up having to fly two one in Q2.

Gregory S. Levin: So we're going to end up having two flights, one in Q2 and then one in the second half. Our flights will start more in the kind of April timeframe this year. And we've actually added in another market, as well, that will be more of the connected TV, which is Hulu and the streaming services versus linear TV. Very helpful.

Gregory S. Levin: And then one in the second half our fees will start more in the kind of April timeframe of this year and we've added actually added in other market as well that will be more on the connected TV, which is the Hulu and the streaming services versus linear TV.

Speaker Change: Very helpful. Thanks, and just one final follow up here.

Unidentified Speaker: Thanks. And just one final follow up here. I appreciate the unit growth guidance of three units in 2024. How should we be thinking about closures for the year? Yeah, we're probably looking somewhere in the one to two closures for the year, as we continue to look at leases that are expiring or continue to make sure we want to optimize our portfolio. We've said this before, I think you said on investor day that BJ's has been a concept that has never gone out and opened 30 restaurants and then three years later said we were closing 20 of the 30. We've got a really good list of assets, and the ones that we closed this year actually were coming to the end of their lease terms, or, in one case, it was one of our smaller restaurants. So as we continue to look towards next year, there are only a few that are coming towards the end of their lease terms. And as a result, I think it would be one to two that we would close. Very good. That's all for me.

Speaker Change: Appreciate the unit growth guidance of three units in that 2024, how should we be thinking about closures for the year.

Speaker Change: Yes.

Speaker Change: We're probably looking somewhere in the one to two.

Speaker Change: Closures for the year.

Speaker Change: As we continue to look at leases that are expiring or continue to make sure we want to optimize our portfolio and we've said this before I think we said at the Investor Day Bj's has been a concept that has never gone out and opened 30 restaurants and then three years later side. We're closing 20 of the 30, we've got a really good lift.

Speaker Change: Of assets and the ones that we've closed this year actually we are coming to the end of their lease terms or in one case with one of our smaller restaurants. So as we continue to look towards next year Theres only a few that are coming towards the end of their lease term and as a result, I think it would be one to two that we would close.

Speaker Change: Very good that's all for me. Thank you.

Unidentified Speaker: Thank you. Thank you. The next question is from Alex Slagle with Jeffreys, please go ahead. Hey, thanks. Hey, guys.

Speaker Change: Thank you.

Speaker Change: The next question is from Alex Slagle with Jefferies. Please go ahead.

Alexander Russell Slagle: Hey, Thanks, Hey, guys.

Alexander Russell Slagle: I want to dive in a little more to your capital allocation views and how you're weighing the various options at your disposal. Clearly, buyback is on the table with the new $50 million authorization, and it sounds like you're continuing to push ahead to maximize the new store return profile for accelerating growth a bit more. So I'm curious some of the things you're looking at on that front to continue to drive the new store build cost down and drive a more profitable, high-returning investment profile. Yeah, Alex.

Alexander Russell Slagle: And then dive in dive in a little more out of your capital allocation views and how you're weighing the various options at your disposal clearly buyback is on the table with the new $50 million authorization and it sounds like you are continuing to push ahead maximize that new store return profile for access.

Alexander Russell Slagle: <unk> growth a bit more so curious some of the things you're looking at.

Alexander Russell Slagle: On that front to continue to drive the new store build costs down and drive the more profitable higher returning investment profile.

Speaker Change: Yes, Alex.

Gregory S. Levin: So, first of all, going into this year, we had two restaurants. For one of the restaurants, the bid just came back high. Frankly, it was a lot more site work that we would have needed to do, and we decided to push that one for the time being. And then one of our other restaurants will be a newer prototype in the Arizona market, so that pushed it. And as we looked going into this year, maybe where the consumer is, we felt that instead of trying to move some forward from our real estate pipeline, we have a pretty full real estate pipeline, we would end up just letting those go into 2025, giving us a little bit more free cash flow going into this year to do our share repurchases or debt repurchases, or debt payments, I should say.

Alexander Russell Slagle: So first of all going into this year.

Alexander Russell Slagle: We had two restaurants, one in our restaurants to bed just came back high frankly, there's a lot more site work that we would have needed to do and.

Speaker Change: And we decided to push that one for the time being.

Speaker Change: He is one of our other restaurants.

Speaker Change: It will be one of our it will be a newer prototypes out in the Arizona market so that pushed it.

Speaker Change: And as we look going into this year, maybe where the consumer is felt that instead of trying to move some forward from our real estate pipeline, we have a pretty full real estate pipeline. We would end up just letting those go into 2025, giving us a little bit more free cash flow going into this year to do our share repurchases or debt.

Speaker Change: Purchases.

Speaker Change: Our debt payments I should say as we continue to look at our restaurants.

Gregory S. Levin: As we continue to look at our restaurants, we have different elevations in our restaurants. We still have a certain amount of rounded areas versus right angles and so forth that we believe, you know, can allow us to remove some additional costs. At the same time, one of the things that we've learned going through our, kind of, concept essence strategy for our business, understanding why guests come to us, that visual is so important for us. It's such a differentiator.

Speaker Change: We have different elevations in our restaurants, we still have certain amount of rounded areas versus right angles, and so forth that we believe can allow us to remove some additional cost at the same time one of the things that we've learned going through our kind of our concept essence strategy on our business understanding why guests come to us.

Speaker Change: That visual is so important for us is such a differentiator. So we wanted to make sure we hold to the bar statement, we want to make sure you're holding a certain portion of our line and have the very larger varied menu that play into it but there are some other elements that will allow us to reduce our costs and make sure that as we continue to build bj's forward we have.

Gregory S. Levin: So we want to make sure we hold to the bar statement. We want to make sure we hold to a certain portion of our line and have the very, larger varied menu that plays into it. But there are some other elements that will allow us to reduce our costs and make sure that as we continue to build BJ's forward, we have the right investment profile that generates the right return. Okay, and on the remodels, I'm curious if you think the next batch is going to be as high-returning as the 36 you did in 23, which were really good ones, I think. I believe we have some really good ones slated for this year, still some high-volume restaurants that, over time, have gotten tired. They're darker.

Speaker Change: The right investment profile that generate the right return.

Speaker Change: Okay and on the Remodels I'm curious if you think the next batch.

Speaker Change: We are going to be as high returning.

Speaker Change: 36, you did in 'twenty, three which we're really good ones.

Speaker Change: Yes.

Speaker Change: I believe we have some really good one slated for this year sell some high volume restaurants that over time have gotten tire they have their darker as we've said we want to really lightened them up.

Gregory S. Levin: As we said, we want to really lighten them up. So as we look through and go through our 20-plus, they are based on their sales volumes. There are still a lot of high sales volumes in there, as well as the age and, frankly, the cash flow that they're generating and the amount of life left on the lease. So I'm excited for those ones.

Speaker Change: So as we look through and go through our 20 plus they are based on their sales volumes that are still a lot of high sales volumes in there as well as the age and frankly.

Speaker Change: Cash flow that they are generating and the amount of life left on the lease so I'm excited for those ones and one of the things that we talked about before we have learned as we went through the remodel program.

Gregory S. Levin: And one of the things that we talked about before, we learned as we went through the remodel program that doing the bar statement and some of the other visual cues is more important versus just adding a booth remodel or expanding capacity that we've done in the past. So this gives us actually a little bit more of a targeted remodel that guests will see versus some of the remodels we did last year that are really around that dining room three area. I got it.

Speaker Change: That doing the bar statement and some of the other visual cues are more important versus just adding a booth remodel or expand capacity that we've done in the past. So this gives us actually a little bit more of a targeted remodel that guests will see versus some of the remodels. We did last year that are really around that dining room.

Speaker Change: Three area.

Speaker Change: Got it thanks appreciate it.

Alexander Russell Slagle: Thanks. I appreciate it. Thank you. The next question is from Brian Bittner with Oppenheimer. Please go ahead.

Speaker Change: Thank you.

Speaker Change: The next question is from Brian Bittner with Oppenheimer. Please go ahead.

Speaker Change: Thanks.

Brian John Bittner: Thanks. Hey guys, As we look back at Investor Day in November, you issued a long-term algorithm to grow your EBITDA by 12 to 15% annually over time. And as we look into 2024, it clearly seems like you have the margin momentum in your favor going into this year. But this algorithm on EBITDA is also predicated on low to mid-single-digit costs, which clearly are looking like there's just less visibility there. So when you kind of put together the puts and takes on 24, do you think it is positioned to be an algorithm year for EBITDA? Do you think we're safe thinking about the long term working in 2024? Yeah, I think, Brian, on that specifically, think about November Investor Day, and we said this, and that is, we need to drive sales, we need to improve margins, and that provides that opportunity to maximize or optimize new restaurant growth. And you're absolutely right.

Brian John Bittner: Hey, guys.

Brian John Bittner: As we look back at the Investor Day in November you did issue a long term algorithm to grow your EBITDA by 12% to 15% annually over time and as we look into 'twenty four it clearly seems like you have the margin momentum in your favor going into this year.

Brian John Bittner: But this algorithm on the on the EBITA. It's also predicated on low to mid single digit comps, which clearly.

Brian John Bittner: Are looking like there's just less visibility there. So when you kind of put together the puts and takes on 2004 do you think it is positioned to be an algorithm year for EBITDA do you think we're safe thinking about the long term working in 2024.

Speaker Change: Yes, I think.

Speaker Change: Brian on that specifically think about the November Investor Day, and we've said this and that is we need to drive sales, we need to improve margins and that provides that opportunity to maximize or optimize new restaurant growth.

Speaker Change: And Youre absolutely right I think the margin improvement initiative is working well for us.

Gregory S. Levin: I think the Margin Improvement Initiative is working well for us. We have more savings that are coming this year. But just frankly, the fact that we have seasoned team members operating better and supply chains have normalized, we're expecting margin expansion and expecting to keep our EBITDA going forward and growing year over year. As we start this year, we've seen the weather impact, and you know, as we look at the first part of January, there were some weeks where our comp sales have been, you know, low single digits positive, and there were weeks with the weather And as we look at the fourth quarter, we look into this and look at some of the consumer cadence, we've seen a little bit of a slowdown in the consumer. We've seen it at probably the lower income levels when we look at our consumer insights and guest information that we have, and that's brought back a little bit of less frequency for that consumer.

Speaker Change: Have more savings that are coming to share, but just frankly, the fact that we have seasoned team members are operating better.

Speaker Change: And supply chains of normalized well, we're expecting margin expansion are you expecting to keep our EBITDA going forward and growing year over year as we start this year.

We've seen the weather impact.

Speaker Change: As we look at the first part of January there has been some weeks for our comp sales have been low single digit positive and there has been weeks with the weather impacting us pretty hard where they've been mid single digits negative.

Speaker Change: And as we look at the fourth quarter, we look into this and look at some of the consumer cadence.

Speaker Change: A little bit of a slowdown in the consumer we've seen it at probably the lower income when we look at our consumer insights and guest information that we have.

Speaker Change: And Thats brought back a little bit of less frequency on that consumer so again looking at our cadence in our business.

Gregory S. Levin: So again, looking at our cadence in our business, sales plus margins to drive overall new restaurant growth for our earnings cadence, I feel very good about the business longer term. I think it's going to be a little bumpy here in this first quarter, but if things continue to move in the right direction in the second quarter, I think that sets us up to get back to single-digit comps and allows us to continue to optimize the opportunity to open new restaurants. Brian, I'll build on that too.

Speaker Change: Sales plus margins should drive overall, new restaurant growth for our earnings cadence I feel very good about the business longer term.

It's going to be a little bumpy here in this first quarter and if things continue to move in the right direction in the second quarter, I think that sets us up to get back to the single digit comps.

Speaker Change: And allows us to continue to optimize the opportunity to open new restaurants.

Speaker Change: And analysts specific.

Speaker Change: I'm, sorry, Brian I'll build on that too and in terms of the.

Tom Hodek: In terms of the algorithm and the growth rate, I do think, I mean, if we're starting from $104 million of EBITDA in 2023, the run rate margin that we're exiting is better than it was mid-year, and added on top of with, you know, the additional margin benefits we're expecting, and some sales growth too, I do think, in terms of the EBITDA growth you outlined, we do still expect to It's just going to get there a little differently. The earnings growth algorithm is really predicated on both comp sales growth as well as new restaurant growth. This year will be much more about margin and improvement, but it still puts us in a great place in terms of EBITDA growth. But, you know, as we're building through this year and continuing to build our pipeline and get new restaurant openings later, what the earnings growth looks like in 2025 and beyond will just have a little different complexion. Okay, thank you. Thanks, Brian. The next question is from Aisling Groninger with Piper Sandler. Please go ahead. Hey, good afternoon.

Brian John Bittner: The algorithm and the growth rate.

Brian John Bittner: I do think I mean.

Speaker Change: We're starting from a $104 million of EBITDA in 2023, the run rate margin that we're exiting is better than it was mid year and added on top of with the additional margin benefits were expecting and some sales growth too.

Speaker Change: I do think I mean in terms of the.

Speaker Change: EBITDA growth you outlined.

Speaker Change: We do still expect to still be in a very healthy place. There. It's just going to get there a little differently. The earnings growth algorithm really is predicated on both comp sales growth as well as new restaurant growth. This year will be much more on margin improvement, but it still puts us in a great place in terms of EBITDA growth, but as we are building through.

Speaker Change: This year and continuing to build our pipeline and getting new restaurant openings later, what what the earnings growth looks like in 2025 and beyond we will just have a little different complexion then.

Okay. Thank you.

Speaker Change: Thanks, Brian.

Speaker Change: The next question is from Ashwin <unk> with Piper Sandler. Please go ahead.

Ashwin: Hey, good afternoon, Thanks for taking my question.

Aisling Groninger: Thanks for taking my question. My question is about the remodel process. You said you're projecting 20 units this year, and I believe at investor day you're projecting around the same number as 2023, so kind of north of 30 units. I'm just wondering why you've decided to remodel less units in 2024 than you previously guided because you're getting a great sales lift from it. So just wondering if there's something, you know, impacting this, and why not accelerate the number of remodels? Yeah, actually. I'm not sure. I'm not sure we said we'd be remodeling the same amount, actually. I don't recall that.

Ashwin: My question is on their model process, you said youre projecting 20 units this year and I believe at the Investor Day, you were projecting around the same number as 2023, so kind of north of 30 units.

Ashwin: Just wondering why you've decided to remodel less units in 2024 then.

Ashwin: You previously guided because youre getting a great sales lift from it. So just wondering if there's something you know impacting.

Ashwin: Impacting this and why not accelerate the number of Remodels.

Speaker Change: Yes, actually I'm not sure.

Speaker Change: I'm not sure we said we'd be remodeling the same amount of tax.

Speaker Change: I don't recall that.

Gregory S. Levin: I recall that we would be talking about 20 plus at investor day. So there's actually been really no change to that. So as we went through our capital planning this year and went through everything, we did not adjust our remodel down.

Speaker Change: Recall that we wouldn't be talking about 20, plus at the Investor day. So there's actually been really no change to that.

Speaker Change: So as we went through our capital planning this year and went through everything we do not adjust our remodel is down.

Gregory S. Levin: So, Maybe I'm just remembering it differently, but I didn't think we were going to, I don't believe we ever said that we'd be doing 30 plus or 35 plus remodels the next year. And one of the reasons that it seems different from one year to the next is that we're concentrating this year more on the dining room and the bar area, which are bigger remodels. And if you think about on that investor day, we talked about three remodel plans, one to expand capacity, one kind of we call brewhouse theater a little bit, and then the other in the bar. And going into this year, we want to really focus on that brewhouse theater and the bar. So those ones are a little bit more expensive, but they're a better return.

Speaker Change: So.

Speaker Change: Maybe I'm just remembering it differently, but I didn't think we were going to I don't believe we ever said that we'd be doing 30, plus 35, plus remodels next year.

Speaker Change: And one of the reasons that if it seems different from one year to the next is we're concentrating this year more on the dining room and the bar area, which are bigger remodels and if you think about on that Investor day, we talked about three remodel plans when expand capacity when kind of we call Brewhouse theatre and a little bit and then the other in the bar and going into this.

Speaker Change: Here, we wanted to really focus on that Brewhouse theatre and the bar. So those ones are a little more expensive. They are a better return. So it could have been that versus what we did this year, where we had a lot of the smaller remodels, but I just don't remember, saying that we did 30 that we are going to be 30, plus Ashley I think the slide youre thinking about is where we.

Gregory S. Levin: So it could have been that versus what we did this year, where we had a lot of those smaller remodels. But I just don't remember saying that we did 30, that we were going to do 30 plus. Yeah.

Tom Hodek: Aisling, I think the slide you're thinking about is the one where we showed what we spent in 23 and expected to spend in 24, and to Greg's point, the complexion is just going to look a little different. We're going to have, the spend isn't going to be terribly different, but we're going to do less of them so we can focus on some of these more impactful remodels that raise the bar. And they are costly, more costly, but you see more sales pop from them as well. Now, thank you for that.

Speaker Change: Showed.

Speaker Change: What we spent in 'twenty three and expected to spend in 'twenty four and integrates point. It's the complexion is just going to look a little different we're going to have the spend isn't going to be terribly different but we're going to do less of them. So we can focus on some of these these more impactful remodels that do the bar and they are costly more costly, but youll see more sales pop from them as well.

Speaker Change: Thank you for that that's that's very helpful.

Aisling Groninger: That's very helpful. My other question is kind of just the health of the consumer. I know in your prepared remarks that you said the first six weeks are running down mid-single digits. I'm just wondering, is there a considerable difference in restaurant comp versus off-premise?

Speaker Change: Other questions on kind of just to help the consumer.

Speaker Change: I know in the prepared remarks, you said the first six weeks are running down mid single digits.

Speaker Change: Just wondering is there a considerable difference in restaurant comp versus off premise basically it's kind of is off premise hurting the quarter to date comp is it seems that didn't <unk>.

Gregory S. Levin: Basically, is off-premise hurting the quarter-to-date comp as it seems it did in the 4Q? Yeah, I think there tends to still be a little bit of that trend within the business, where the dining room, as we said, in the Q4 was low single digits positive, excuse me, versus off premise. Really looking at off-premise, I shouldn't say off-premise, but looking at the first quarter, weather has played a really impactful role in the overall comp sales. It's been hard to get a general read. Even going in to this weekend right now, we're expecting more rain to come through California over the holiday weekend.

Speaker Change: Yes, I think.

Speaker Change: <unk> tends to still be a little bit of that trend within the business.

Speaker Change: There the dining room.

Speaker Change: As we said in the Q4 was low single digit positive excuse me versus off premise.

Speaker Change: Really looking at.

Speaker Change: I shouldn't say off premise, but looking at the first quarter weather has played a really impactful.

Speaker Change: Impactful into the overall comp sales and its been hard to get a general read even going in to this weekend right now we're expecting more rain to come through California over the holiday weekend. So we've tried to put that into our guidance and be a little bit conservative as I said as we look through the quarter there were.

Gregory S. Levin: So we've tried to put that into our guidance and be a little bit conservative. As I said, as we looked through the quarter, there were weeks where we had positive comp sales, and then there were weeks that really shut down a lot of the U.S., and we had significant negative comp sales. But generally, as I look at our business, we've seen the dining room be healthier than the off-premise.

Speaker Change: There are weeks, where we had positive comp sales and then there are weeks that really shut down a lot of the U S and we had significant negative comp sales, but John as I look at our business, we've seen the dining room be healthier than the off premise some of the off premise as we mentioned as we decided to pull back on some of the marketing that goes in to.

Gregory S. Levin: Some of the off-premise, as we mentioned, is that we've decided to pull back on some of the marketing that goes in to drive 3PD. However, we've seen catering continue to grow. It's up in double digits and continues to grow in double digits. But generally, the 3PD sector has come down, and we're not willing right now to spend a lot of money to generate maybe more unprofitable sales that aren't as profitable as trying to drive the dining room. Yep, that makes sense. Thank you. Thank you for the call, Pat.

Speaker Change: Drive three PD, we've seen catering continue to grow it's up in double digits and continue to grow up in double digits, but generally the <unk> section.

Speaker Change: Or has come down and we're not willing right now to spend a lot of money to generate maybe more unprofitable sales that aren't as profitable as trying to drive the dining room.

Speaker Change: Yes that makes sense. Thank you. Thank you for the color I'll pass it back.

Aisling Groninger: Thanks, guys. The next question is from Jeffrey Bernstein with Barclays. Please go ahead. Thanks, guys. This is product on for Jeff. I just wanted to dig a little deeper on the 4Q comp. How would you characterize your performance versus internal expectations?

Speaker Change: Thanks Ashley.

Speaker Change: The next question is from Jeffrey Bernstein with Barclays. Please go ahead.

Jeffrey A. Bernstein: Thanks, guys. This is product on for Jeff.

Jeffrey A. Bernstein: I just wanted to dig a little deeper on the <unk> com, how would you characterize your performance versus internal expectation and really just can you parse out where you're seeing the greatest change in consumer behavior, perhaps within the more challenged income cohorts is it really more traffic related in terms of frequency.

Jeffrey A. Bernstein: And, you know, really just, can you parse out where you're seeing the greatest change in consumer behavior? Perhaps within the more, you know, challenged income cohorts, is it really more traffic-related in terms of frequency, or are you seeing more makeshift on the menu? Thanks, another follow-up. Yeah, go through the bath.

Jeffrey A. Bernstein: Or are you seeing more mix shift on the menu.

Jeffrey A. Bernstein: Sure.

Jeffrey A. Bernstein: Yes.

Jeffrey A. Bernstein: Ill.

Gregory S. Levin: I'm sure Tom can add color to this. Um, so... Coming out of October were strong comp sales for us in the industry, and we continue to outperform. We made some decisions in the quarter. I think Tom mentioned them in regards to how we want to handle Veterans Day and a couple of other areas doing less discounting and, as a result, offsetting more profitable sales but with less traffic. When we look at the guests coming into our restaurant, the guests are ordering pretty much the same things.

Speaker Change: Go through the passenger Tom can add color into this.

Speaker Change: So.

Speaker Change: Coming out of October were a strong comp sales for us in the industry and we continue to outperform we've made some decisions in the quarter I think Tom mentioned it in regards to how we wanted to handle veterans day and a couple of other areas doing less discounting and as a result, offsetting more profitable sales, but with less traffic when we look.

Speaker Change: The guests coming into our restaurant the guests are ordering pretty much. The same we're not seeing huge changes in since our mix within the dining room, we are seeing changes.

Gregory S. Levin: We're not seeing huge changes in instance or mix within the dining room. We are seeing changes, though, within off-premise. Off-premise, the incidents and mix are going negative. You're seeing consumers spend less off-premise than they were a year ago. So we've seen some of that change. And then, as I said before, we've seen, and we've also seen a little bit smaller party size year over year. So when we look at the size of the party coming in in Q4 of 23 versus Q4 of 22, it's a slightly smaller party. And when we look at the party data coming out of COVID, Our party size grew tremendously, I think there was a lot more celebratory, much more revenge dining, and we're starting to see it kind of normalize, still above 2019's levels, but normalizing versus coming down where it was. And as I mentioned earlier, we have seen less frequency among what we would consider kind of the lower income consumer that visits BJ's. I appreciate that. And maybe, Tom, just a quick one for you in terms of the COGS outlook: I appreciate the more stable inflation outlook in 2024. Can you just help us with the cadence through the year?

Within off premise off premise the incidents and mix are going negative you're seeing consumers spend less in off premise than where they were a year ago. So we've seen some of that change.

Speaker Change: Then as I said before we've seen and we've also seen a little bit smaller party size year over year. So when we look at the size of the party coming in in Q4 two.

Speaker Change: <unk> 23 versus Q4, 'twenty two it's a slightly smaller party and as we look at the party data coming out of Covid.

Speaker Change: Our party size grew tremendously I think theres a lot more celebratory much more revenge dining and we're starting to see it kind of normalized still about 2019 levels, but.

Speaker Change: Normalizing versus coming down where it was.

Speaker Change: And as I mentioned earlier, we have seen less frequency at what we would consider kind of the lower income consumer that visit bj's.

Speaker Change: I appreciate that and maybe Tom just a quick one for you in terms of the Cogs outlook I appreciate the more favorable inflation outlook. In 2024 can you just help us with the cadence through the year. It seems like there were a lot of inflation peaks and valleys throughout 2023, and I just wanted to make sure that we are.

Tom Hodek: It seems like there were a lot of inflation peaks and valleys throughout 2023, and I just want to make sure that we're not missing something big.

Speaker Change: We're not missing.

Missing something big Thank you.

Speaker Change: Sure.

Tom Hodek: On a sequential basis, we're not expecting much. If you think of past years where inflation has spiked in different times and in different categories, this year we're expecting a lot more stability through the year, partly because, you know, some of the items that usually have historically floated for us, like our fresh meats, we're now able to lock them in for some periods of time and take off some of those peaks and valleys. So I think that what we're starting the year with here, really where we ended Q4, is going to be pretty consistent through the year. I don't think we're going to see as much bounciness as, you know, we did through the years coming out of COVID, where you really saw it moving around. I got it. I appreciate that cover.

Tom: On a sequential basis, we're not expecting.

Tom: Much.

Tom: Past years, where inflation has spiked in different different times and in different categories. This year, we're expecting a lot more stability through the year, partly because some of the items that usually hits.

Tom: Floated for us like our fresh meats were now able to lock them in for some periods of time and take off some of those those peaks and valleys. So I think that what.

What we're starting the year with year really where we ended Q4 is going to be pretty consistent through the year I don't think we're going to see as much bounciness as we did through.

Tom: The year is coming out of Covid, where you really saw it moving around.

Speaker Change: Got it I appreciate that color thanks, guys.

Jeffrey A. Bernstein: Thanks, guys. Sure thing. The next question is from Sharon Zakvia with William Blair, please go ahead. I think, Greg, you said something in your comments about, you know, it's even harder to drive comps when you rationalize the menu and paraphrase, but did you see an impact in the fourth quarter or so far in 24? I know it's been weather-impacted, but what do you think the menu rationalization has done to sales? I know it's been good for margins. Yeah, I don't, I don't quite know the answer to that, Sharon.

Speaker Change: Sure thing.

Speaker Change: The next question is from Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia: Hey, good afternoon.

Sharon Zackfia: I think Greg you said something in your comments about <unk>.

It's even harder to drive comps when you rationalize the menu on paraphrasing, but did you see an impact in the fourth quarter or so far in 'twenty four I know, it's been weather impacted but what do you think the non euro asset rationalization has done.

Sharon Zackfia: Sales I know it's been good for margins.

Sharon Zackfia: Yes.

Speaker Change: Don't quite know the answer to that Sharon I, just know being in this business for a long time that adding helps for a long time, and then adding stops helping and you're set up with complexity.

Gregory S. Levin: I just know, having been in this business for a long time, that adding helps for a long time, and then adding stops helping, and you're set up with complexity. And that's where you see margins start to deteriorate and come down. When we went through our analysis, there was a reach and a frequency number, and you're trying to make sure you manage between both of those, meaning certain guests come in purely for a reach item, something that might not necessarily be core, and those are those marginal guests which are important to keep and make sure you've got substitutions for them.

And Thats why you see margins start to deteriorate and come down.

Speaker Change: We went through our analysis there is a reach and frequency number and you are trying to make sure you manage between both of those meeting certain guests come in purely for a reach item something that might not necessarily be core and those are those marginal guests which are important.

Speaker Change: To keep and make sure you've got substitution for them.

Gregory S. Levin: And at the same time, you've got the high-frequency items that really tend to drive your business. And, you know, we know after studying what we did prior to rolling it out that it wasn't a decision that we made to change that that's going to drive a higher PPA or per person average or better profitable items. We really looked to see what items that had that reach and frequency and made that adjustment. So I'm not sure I can point to anything.

Speaker Change: At the same time, when you get the high frequency items that really tend to drive your business and we know after studying what we did prior to rolling it out that it wasn't a decision that we made the change thats going to drive a higher PPA or per person average or better profitable items, we really look to see what are the items that had that.

Frequency to make that adjustment so.

Speaker Change: Not sure I can point to anything some of the data that we actually analyzed actually showed guests that bought an item and came X amount of times and bought a certain item that no longer was on the menu actually kept coming back. So the data tends to show that really rationalizing the menu didn't necessarily true.

Gregory S. Levin: Some of the data that we actually analyzed actually showed guests that bought an item and came X amount of times and bought a certain item that no longer was on the menu actually kept coming back. So the data tends to show that really rationalizing the menu didn't necessarily decrease sales per se, but I'm going on, you know, 30, 20 plus years of experience in this business, and in 20 plus years, adding always seems to add sales until it doesn't. And then you're like, hey, we've got to do something about this.

Speaker Change: <unk> sales per se.

Speaker Change: But I am going on 30 of 20 plus years of experience in this business and in 20 plus years, adding OE seems to add sales until it doesn't and then you're like Hey, we got to do something about this.

Speaker Change: Yes that does.

Speaker Change: Finally note that you're trying to allude to something that you had quantified that in the quarter. When you commented about that.

Sharon zakvia: I just didn't know if you were trying to allude to something that you had quantified in the quarter when you commented on that. I'm assuming most of those customers you don't have individual data for. I was just wondering if there was any way to use loyalty to try to stimulate people to come into the restaurants. That may have been confusing.

Speaker Change: Yes.

Speaker Change: Mike do you have I'm, assuming most of those customers you don't have individual data or I was just wondering if there was anybody is loyalty.

Mike: To stimulate.

Mike: And our people to come into the restaurants that may have been converting.

Gregory S. Levin: Yeah, we do. Our loyalty program is a robust program. We continue to grow the loyalty program. We know that, specifically, we talked about this at our Analyst Day, that we can drive frequency from a loyalty guest. If they come once every eight weeks, we can go out there, introduce and do some offers or other things to get them to come once every four weeks.

Mike: Yes.

Mike: We do our loyalty program.

Mike: It is a robust program we continue to grow the loyalty program, we know that specifically we talked about this at our analyst day that we can drive frequency from our loyalty guests if they come.

Mike: Once every eight weeks, we can go out there introduced induced them to offers or other things to get them to kind of once every four weeks. So the loyalty programs extremely important to us and we have leaned into that at different times, and we'll continue to lean into that throughout all of this year.

Gregory S. Levin: So the loyalty program is extremely important to us, and we have leaned into that at different times. And we'll continue to lean into that throughout all of this year. First quarter of this year, like I said, it's much more weather-related, and it's hard to get a read on the business outside of the weather. I hear you; I'm in the Arctic tundra of Chicago.

Mike: First quarter of this year like I said, it's much more weather related and it's hard to get a read on the business outside of the weather.

Speaker Change: Thank you Maria.

Speaker Change: Arctic Tundra, Chicago I guess.

Sharon zakvia: I guess the last question for me is, you talked about pulling back on some of the promotions in the fourth quarter that weighed on comps. Is there anything notable we should think about as you're looking for margins that might weigh on comps here as we think about 2024 going forward? No, there were just two real big areas.

Maria: You talked about pulling back on some of the promotions of our fourth quarter that weighed on comps is there anything notable we should think about as youre looking for margins.

Maria: That might.

The way our comps here as we think about 2024 going forward.

Maria: Now there are just.

Maria: Two real big areas as I said veterans day, we changed up our promotion.

Gregory S. Levin: As I said, Veterans Day, we changed up our promotion on Veterans Day. And we made a strategic decision just looking at the consumer, looking at what's going on in third-party delivery and off premise, that you can either continue to pay X plus every single year to hold sales at Y, or you've got to continue to figure out different ways to get yourself more noticeable on the carousel, and that's what we're working through on the off-premise. It's an important aspect of our business. We'd rather drive take-out, and that's a big chunk of what we're working on is how do we continue to drive the take-out aspect of the business and move people there versus maybe the third-party delivery side of the business, where, as I said, to keep up a $1.00 sale, you have to pay X amount more each year. Thank you. Welcome. The next question is from Todd Brooks with the Benchmark Company. Please go ahead.

Maria: On veterans day, and we made a strategic decision just looking at the consumer looking whats going on and third party delivery and off premise that you can either continue to pay X plus every single year to hold sales out why or you got to continue to figure out different ways to get yourself more node.

Maria: So Paul on the Carousel and Thats what were working through on the off premise, it's important aspects of our business, we'd rather drive right take out.

Maria: And Thats, a big chunk of what we're working on is how do we continue drive takeout aspect to move people there versus maybe in the third party delivery side of the business, where as I said to keep up at $1 sale, you have to pay X amount more each year.

Maria: Okay.

Speaker Change: Okay. Thank you.

Speaker Change: Welcome.

The next question is from Todd Brooks with the Benchmark company. Please go ahead.

Todd Brooks: Hey, thanks for taking my questions. First one, just on unit growth, three units this year working on. Beyond the $1 million you've gotten out of the prototype, another $500,000. As I'm hearing this, and we're really trying to get the prototype nailed down, does that weaken to 25? And do we need to start to think, if the returns get there, that 26 is more of that inflection year from a unit growth standpoint back to the up to the 5% that you've talked about? It probably plays in there just because, historically, the way we've built BJ's is we've gone from a much more newer, a much more measured cadence in our growth. So three, I think we'd have the ability to accelerate into the seven, eight plus range, but I don't think three is gonna move us up to meeting three this year or 12 or 13 the following year.

Todd Brooks: Hey, Thanks for taking my questions first one just on the unit growth profile.

Todd Brooks: Three units this year working on.

Todd Brooks: Sure.

Todd Brooks: Beyond the $1 million, you've gotten out of the prototype another $500000.

Todd Brooks: As I'm hearing this and we're really trying to get the prototype nailed down does that leak into 'twenty five and do we need to start to think if the returns get there. The 26 is more of that inflection year from a unit growth standpoint back to the up to the 5% that you've talked about.

Todd Brooks: Okay.

Todd Brooks: It probably plays in there just because.

Todd Brooks: Historically the way, we built bj's as we've gone from.

Todd Brooks: A much more a much more measured cadence and our growth.

Todd Brooks: Three I think we'd have the ability to accelerate into the seven eight plus range, but I don't think <unk> is going to move us up to it being three this year to 12 or 13 the following year.

Gregory S. Levin: And one thing I do wanna emphasize here, our new restaurants are actually generating solid returns for us. We talked about that. The sales are 130,000.

And one thing I do want to emphasize here, our new restaurants are actually generating solid returns for us we talked about that the sales are 130000.

Gregory S. Levin: Margins are in the upper teens from that perspective. We just know as we continue to build out the next 200 restaurants over time, the ability to continue to move that cost in the right direction is important to us. It allows us to optimize the restaurant both from an efficiency standpoint and also from a return on investment standpoint. Thanks, Greg. And Tom, one for you.

Todd Brooks: Margins are in the upper teens from that perspective, we just now as we continue to build out the next 200 restaurants over time.

Todd Brooks: The ability to continue to move that cost in the right direction is important to us and allows us to optimize the restaurant both from an efficiency standpoint, but also from a return on investment standpoint.

Speaker Change: Okay, Thanks, Greg and Tom one for you.

Talked about.

Tom Hodek: You talked about generating $35 million in annualized cost savings over the course of 2023. How much of that carries forward as incremental into 2024, helping to drive the margin story further? And as you're talking about the additional pool that you're attacking. I think your 25 went to 35. Are you working on another $10 million pool that you're attacking, or are we getting to really kind of marginal opportunities for further costs? Thanks, Todd, and good questions.

Speaker Change: Generating the $35 million in annualized cost saves over the course of 'twenty three.

Speaker Change: How much of that carries forward as incremental into 'twenty four helping to drive the margin story further and as Youre talking about the additional pool that youre attacking I think you are 25% to 35% are you working on another $10 million pool, youre attacking or are we getting to really kind of more.

Speaker Change: Marginal opportunities for further cost saves from here. Thanks.

Speaker Change: Thanks, Todd and good questions.

Tom Hodek: To handle your first question first, if you think of the $14.4 margin that we had in the fourth quarter, there still were cost savings realized during the quarter. So there was, for example, a couple of our sauces we found a new supplier for and reformulated. So that was, on an annualized basis, a couple million dollars of savings that rolled out mid-quarter. We made some changes on the janitorial side to bring it back in-house so we can give even a better service than going outside, and there were some cost savings there.

Speaker Change: It's handle your first question first.

Speaker Change: If you think of the 14 four margin that we had in the fourth quarter Theres still was cost savings.

Speaker Change: Realized during the quarter. So there was for example, a couple of our sources, we found a new supplier for re formulated so that was on an annualized basis, a couple of million dollars of savings that rolled out mid quarter. We we made some changes on the janitorial side to bring it back in house.

Speaker Change: Even a better service than going outside and there were some cost savings. There. So those were some some examples of mid quarter changes that werent fully in our our Q4 margins. So those types of benefits.

Tom Hodek: So those were some examples of mid-quarter changes that weren't fully reflected in our Q4 margins. So those types of benefits will have a bigger impact when they're in a full quarter and then a full year running through, because when we're talking about $35 million of cost savings, that's on an annualized basis. Some of those have been in for the full year, and many of them still were being realized as 2023 went on. And going to the second part of your question, we do still see some big opportunities for more cost savings. So if it's another $10 million or so, it's possible. We're looking at a number of things that are still million-dollar-plus types of savings opportunities. So the team is still very focused on this initiative. I know we've been talking about it for some time with you all, but we're still talking about it weekly and internally as well. So it's still finding some really nice savings. Some things just take a little longer to roll out to our system, and that's why we're seeing some of these ones that are still rolling out in Q1.

Speaker Change: We will be a bigger impact when it's a full quarter of that at a full year.

Speaker Change: Running through it because when we're talking $35 million of cost savings thats on an annualized basis. Some of those have been in for the full year. Many of them still were being realized as 2023 went on.

Speaker Change: And go into the second part of your question, we do still see some big opportunities for for more cost savings. So.

Speaker Change: If it's another $10 billion or so.

Speaker Change: It's possible there theres. Some we're looking at a number of things that are still.

Speaker Change: Plus type of savings opportunities. So the team is still very focused on this initiative I know we've been talking about it for some time with you all were still talking about it weekly and internally as well. So it's still finding some some really nice savings some things just take a little longer to rollout to our system and Thats where were seeing some of these these ones.

Speaker Change: That are still rolling out in Q1, but as we go through the year, there's still some others that.

Tom Hodek: But as we go through the year, there's still some others that I'm really excited about still being able to find even more savings this year. Great. Thanks, Tom.

I am really excited about still being able to find even more savings this year.

Speaker Change: Great. Thanks, Tom I appreciate it.

Todd Brooks: Thank you. The next question is from Nick Setyan with Wedbush Securities; please go ahead. Thanks.

Speaker Change: Thank you.

Speaker Change: The next question is from Nick <unk> with Wedbush Securities. Please go ahead.

Nick Setyan: I'm sorry if I missed this, but did you guys guide GNA for 24? And then what do you guys expect the marketing expense to be? And 24 as a percentage of sales. So we did talk about G&A being around $82 to $84 million for the full year. And then marketing will be somewhere around 2%. It'll be up a little slightly from this year, which I think was the higher end. But.

Nick: I'm sorry, if I missed this but did you guys guide G&A or 24, and then what do you guys expect marketing expense to be.

And 24 as a percentage of sales.

Speaker Change: So we did.

Nick: We did talk about G&A being around $82 million to $84 million for the full year, and then marketing will be somewhere around 2%. It will be apples looks slightly from this year, which I think it was upper ones.

Speaker Change: But.

Tom Hodek: We've talked about this at investor day, actually, I think, Nick, just in general. And that is, last year, we had to spend money on production and some other assets that we can use this year. So while marketing will be up a little bit from a percentage of sales standpoint, it'll be deployed differently because we have those assets already owned, which means we can deploy them in linear connected TV and social, digital, etc.

Speaker Change: We've talked about this at the Investor Day actually I think Nick just in general.

And that is last year, we had to spend money for production and some other assets that we can use this year. So while gene Wilder marketing will be up a little bit from a percentage of sales standpoint, it'll be deployed differently, because we have those assets already own which means we can deploy them and linear connected television and social digital.

Speaker Change: Et cetera.

Speaker Change: Got it and then.

Nick Setyan: And then, you know, especially now that, you know, Q1, you're talking about sort of 13, low 13 percent, you know, level margins. Tom, just kind of talk about the different line items in terms of where you expect leverage and how we get to sort of a 14 12, http://www.patreon.com. I would point to Q4 as being a good proxy for a full year. So coming out of this year, looking at kind of a mid-14s right now, we're expecting on the food cost line to see pretty moderate inflation, but we're expecting a little more on the labor side. So as we take pricing, I would expect to get a little leverage on the food cost side, being able to hold on the labor side, but I would look at Q4 as a good proxy as we work through the year.

Speaker Change: Now.

Speaker Change: Q1, youre talking about sort of <unk>, 13% margins can you maybe just.

Speaker Change: Tom just kind of talk about the different line items in terms of where you expect leverage.

Speaker Change: How we get to sort of a 14, 5% plus type of margin for the year.

Speaker Change: I would point to Q4 as being a good proxy for our full year, so coming out of this year looking at kind of a mid fourteens right now.

Speaker Change: We're expecting on the food cost line to see pretty moderate inflation, we're expecting a little more on the labor side. So as we take pricing I would expect to get a little leverage on the food cost side being.

Speaker Change: Being able to hold on the labor side, but I would look at Q4 is a good proxy as we worked through the year. Obviously, we had some deleverage and as we started Q1 here and that was part of the.

Nick Setyan: We did get some deleverage as we started Q1 here, and that was part of the Q1 guidance there. But yeah, if we think of our starting point, I think Q4 is a really good proxy to use. Okay, thank you. This concludes our question and answer session, and the conference is also now over. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: Q1 guidance, there, but yes, if we think of a store.

Speaker Change: <unk> point I think Q4 is it really a good proxy to.

To use.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you excuse me. This concludes our question and answer session and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: No.

Speaker Change: [music].