Q4 2023 Red Robin Gourmet Burgers Inc Earnings Call

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Operator: Good afternoon, everyone, and welcome to the Red Ribbon, Red Robin Gourmet Burger, Inc. fourth quarter, 2023 earnings conference. This conference is being recorded during management's presentation and in response to your questions. They will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore are subject to risk and uncertainties as described in the company's SEC filings. [inaudible] These non-GAAP measures are not prepared in accordance with generally accepted accounts but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings section.

Good afternoon, everyone and welcome to the Red Robin.

Red Robin Gourmet Bogo incorporated fourth quarter 2023 earnings call. This conference is being recorded.

During management's presentation and in response to your questions people to be making forward looking statements about the company's business outlook and expectations.

These forward looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore are subject to risks and uncertainties as described in the company's SEC filings.

Management will also discuss non-GAAP financial measures as part of today's conference call.

These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that maybe useful reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can.

Can be found in the earnings release.

Operator: The company has posted its 4th quarter 2023 earnings release on its website at ir.redrobin.com. Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Mr. Gaurav Gupta. GCHI.

Speaker Change: The company has posted its fourth quarter 2023 earnings release on its website at IR Dot Red Robin Dot Com now I would like to turn the call over to Red Robin's, President and Chief Executive Officer G. J Hart.

Gerard J. Hart: Good afternoon, everyone, and thank you all for joining us today and your interest in Red Robin. 2023 marked the first year of our North Star Plan and was a successful transformational year for our iconic, Operationally, we made the necessary investments in what we serve and how we serve it to ensure that every guest experience at Red Robin is a memorable one, and we are seeing early signs of traction from these initiatives. Financially, we made substantial progress by delivering a 1.6% increase in comparable restaurant sales, and a 33% increase in adjusted EBITDA. We strengthened our balance sheet supported by two sale-leaseback transactions, ultimately reducing our long-term debt by almost $25 million. I'd like to extend my heartfelt thank you to all of our more than 20,000 team members around the country. The success of Red Robin in 2023 and in the future is due to your efforts and all of us working towards the same goals, all in this together.

Speaker Change: Good afternoon, everyone and thank you all for joining us today and your interest in Red Robin.

Speaker Change: 2023 marked the first year of our Northstar plan and was a successful transformational year for our iconic brand.

Speaker Change: Operationally, we made the necessary investments in what we serve and how we serve it to ensure that every guest experience at Red Robin is a memorable one and we are seeing early signs of traction from these initiatives.

Speaker Change: Financially, we made substantial progress by delivering one 6% increase in comparable restaurant sales.

Speaker Change: A 33% increase in adjusted EBITDA.

Speaker Change: And we strengthened our balance sheet supported by two sale leaseback transactions ultimate route reducing our long term debt by almost $25 million.

Speaker Change: I'd like to extend my heartfelt. Thank you to all of our more than 20000 team members around the country with.

Speaker Change: The success of Red Robin in 2023 and in the future is due to your efforts and all of US working towards the same goals all in this together.

Speaker Change: Before I dive into our plans for 2024.

Gerard J. Hart: I want to take a look back at what we accomplished in 2023 through the framework of our North Star program. First, we transformed into an operations-focused restaurant. Our achievements rest on the success of our managing partners and restaurant leadership team. During the second quarter of 2023, we revamped our market partner compensation program for multi-unit operators. Through this program, they now see themselves as owners of the restaurant they oversee and are rewarded based on their profits.

Speaker Change: I want to take a look back at what we accomplished in 2023 through the framework of our North Star plan.

Speaker Change: First we transformed into an operations focused restaurant company.

Speaker Change: Our achievements rests on the success of our managing partners and restaurant leadership teams.

Speaker Change: During the second quarter of 2023, we revamped our market partner compensation program for multi unit operators.

Speaker Change: Through this program they now see themselves as owners of the restaurants, they oversee and are rewarded based on their profits.

Gerard J. Hart: Said another way, our restaurant leaders are now incentivized to deliver strong financial results like never before, with unlimited upside earnings potential for themselves. We believe this has not only helped to recruit and retain the best talent available but also made the Red Robin experience come to life for both our guests and our team. The multi-unit rollout has gone exceedingly well and has informed the launch of our single unit operator program to start in 2022.

Speaker Change: Said another way our restaurant leaders are now incentivized to deliver strong financial results like never before with unlimited upside earnings potential for themselves.

Speaker Change: We believe this has not only helped to recruit and retain the best talent available, but also made the red Robin experience come to life for both our guests and our team members.

Speaker Change: The multi unit rollout has gone exceedingly well.

Speaker Change: And has informed the launch of our single unit operator program to start 2024.

Gerard J. Hart: The initial feedback has been positive, and we are thrilled to align the entire organization around a unified goal of driving traffic and ultimately profit dollars. One of the many signals we are monitoring is management tone turnover, which improved by 5% in 2023 as compared to 2020. We believe this is a reflection of our team's belief in the direction of the company under the North Star Plan and the attractiveness of the partner. Second, we elevated the guest experience. During the year, we made substantial investments and upgrades to the guest... On the labor front, it was a busy year with the return to an industry best practice staffing model, giving servers fewer tables, adding backbusters and a dedicated expo, and bringing back more than 250 dedicated kitchens.

Speaker Change: The initial feedback has been positive and we are thrilled to align the entire organization around a unified goal of driving traffic and ultimately profit dollars.

Speaker Change: Okay.

Speaker Change: One of the many signals we are monitoring is management turnover, which has improved by 5% in 2023 as compared to 2022.

Speaker Change: We believe this is a reflection of our team's belief in the direction of the company under the North Star plan.

Speaker Change: And the attractiveness of the partner program.

Speaker Change: Second we elevated the guest experience during.

Speaker Change: During the year, we made substantial investments in upgrades to the guest experience.

Speaker Change: On the labor front it was a busy year with the return to an industry best practice staffing model, giving servers fewer tables, adding back boxers and a dedicated expo and bringing back more than 250 dedicated kitchen managers.

Gerard J. Hart: These investments have led to fewer false weights, increased cleanliness ratings, improved wait times, and ultimately better hospitality on the food side of the equation. We were equally as busy as we rolled out Flattop Girls during the second quarter, which delivers a thicker, juicier, and more flavorful burger. We also enhanced our food presentation by moving from wax paper wrapping in a basket to showcasing our burgers on a beautiful new plate. Next

Speaker Change: These investments have led to fewer false weights.

Speaker Change: Increased cleanliness ratings improved wait times.

Speaker Change: And ultimately better hospitality.

Speaker Change: On the food side of the equation.

Speaker Change: We were equally as busy as we rolled out flat top girls during the second quarter.

Speaker Change: Which delivers a thicker juice here and more flavorful Burger.

We also enhanced our food presentation by moving from wax paper wrapping in a basket to showcasing our burgers and beautiful new plate Ware.

Next.

Gerard J. Hart: We unveiled new and improved recipes in October for each of our more than 20 gourmet burgers, now prepared with higher quality and more flavorful ingredients. And finally, we introduced new entrees, appetizers, beverages, and seasonal additions to delight our guests with new innovations. In total, we made enhancements to approximately 85% of our. In terms of drinks, we upgraded our bar menu to include higher quality brands that our guests know and love, while making quality upgrades to things like our margarita mix with fresh lime juice. We've accomplished a lot, and our guests are recognizing it. Part of our best practices, we regularly survey our loyalty, and we see a clearly favorable 52% indicated our burgers are better, in line with our third quarter. 54% agree our food quality has improved, increased from 46% at the end of the. 59% indicate that our service and hospitality have improved, up from 48%. Third, we have removed costs and complexities.

We unveiled new and improved recipes in October.

Speaker Change: For each of our more than 20, gourmet burgers now prepared with higher quality and more flavorful ingredients.

Speaker Change: And finally, we introduced new entrees appetizers beverages, and seasonal addition to delight our guests with new innovation in.

Speaker Change: In total we made enhancements to approximately 85% of our menu.

Speaker Change: In terms of drinks, we upgraded our bar menu to include higher quality brands that our guests know and love, while making quality upgrades to things like our Margarita mix with fresh lime juice and agave.

We've accomplished a lot in our guests are recognizing our efforts as part of our best practices. We regularly survey our loyalty database and.

Speaker Change: And we see a clearly favorable response.

Speaker Change: 52% indicated our burgers are better.

Speaker Change: In line with our third quarter measurements, 54% agree our food quality has improved increased from 46% at the end of the third quarter.

Speaker Change: 59% indicate that our service and hospitality have improved up from 48% at the end of the third quarter.

Speaker Change: Third we removed cost and complexity to help fund investments in guest experience, we continually identify and capture numerous non guest facing savings opportunities.

Gerard J. Hart: To help fund investments in the guest experience, we continually identify and capture numerous non-guest facing savings opportunities. These efforts have been centered around the fantastic work of our supply team, who have found smart savings levers and have been able to procure products from our vendors of the same or better quality at a lower cost. For example, in the fourth quarter, we changed from previously using a frozen pre-betted chicken breast to now freshly hand-battering in the restaurant.

Speaker Change: These efforts have been centered around the fantastic work of our supply chain team.

Speaker Change: Who have found smart saving levers and have been able to procure products from our vendors.

Speaker Change: The same or better quality at a lower cost.

Speaker Change: For example in the fourth quarter, we changed from previously using a frozen pre breaded chicken breasts to now freshly hand battering in the restaurants.

Gerard J. Hart: This change alone accounts for nearly $5 million in annual savings and delivers a tremendous quality, flavor, and healthful improvement for our community. This type of change illustrates how we think about cost savings as changes that are beneficial to both our guests and to Red Robin. Finally, as we've previously spoken, in July, we made decisions to discontinue the virtual brands that we added in 20. While this type of offering had a place at the time, multiple brands, products, and procedures created unnecessary complexity for our operation.

This change alone accounts for nearly $5 million annual savings and delivers a tremendous quality flavor and healthful improvement.

Speaker Change: For our guests.

Speaker Change: This type of change illustrates how we think about cost savings as changes that are beneficial to both our guests and to red Robin.

Speaker Change: Finally, as we've previously spoken in July we made decisions to discontinue the virtual brands that we added in 2020.

Speaker Change: While this type of offering had a place at the time multiple brands products and procedures created unnecessary complexity for our operators.

Gerard J. Hart: The economies of these virtual brands resulted in minimal profit but created a comparable restaurant sales headwind of 200 to 250 basis points until we pass the anniversary of the elimination in the third quarter of 2020. Fourth, we optimize guest engagement. In our ongoing efforts to reinvigorate the Red Robin brand and enhance our restaurant experience, we have proactively been elevating our marketing capability. Given the substantial digital traffic from our guests, we have and continue to rapidly improve our guest acquisition capabilities and capacity to target the right audience with timely and pertinent measures. We significantly increased the efficiency of our paid media strategy through more precise targeting, which we expect will be beneficial to our upcoming marketing program, which I'll speak to in just a moment.

Speaker Change: The economies of these virtual brands resulted in minimal profit, but creates a comparable restaurant sales headwind of 200 to 250 basis points until we pass the anniversary of the elimination in the third quarter of 2024.

Speaker Change: Fourth we optimized guest engagement in our ongoing efforts to reinvigorate the red Robin brand and enhance our restaurant experience, we have proactively been elevating our marketing capabilities.

Speaker Change: Given the substantial digital traffic from our guests, we have and continued to rapidly improve our guest acquisition capabilities and capacity to target the right audience with timely and pertinent message.

Speaker Change: We significantly increase the efficiency of our paid media strategy through more precise targeting which we expect will be beneficial to our upcoming marketing program, which I'll speak to in just a moment.

Gerard J. Hart: We have shifted towards more category-specific search strategies to capture the attention of guests seeking an experience like ours. Our investments in earned media and targeted social marketing initiatives have also positioned our brand in new consumer touchpoints, fostering engagements with guests eager to see Red Robin's resurgence and explore our latest menu offers. As an example of our commitment to social engagement, in October, we collaborated with Ari Automatics, a celebrity bartender and influencer, on our Burger-tini collaboration, which generated over 500,000 views in the first week alone. More recently, in partnership with Juicy Couture, we reimagined the iconic track suit to celebrate our juicier and more flavorful burgers. The social engagement response has been fantastic, with over 800,000 impressions to date and counting, and we quickly sold out of the track suits themselves.

Speaker Change: We have shifted towards more category specific search strategies to capture the attention of guests seeking an experience like ours.

Speaker Change: Our investments in earned media and targeted social marketing initiatives have also positioned our brand in new consumer touch points fostering engagements with guests eager to see red Robin's resurgence and explore our latest menu offerings.

Speaker Change: As an example to our commitment to focused social engagement.

Speaker Change: In October we collaborated with Ari automatics, a celebrity bartender an influencer on our Burger Teeny collaboration which generated over 500000 views in the first few days.

Speaker Change: More recently, a partnership with Juicy couture, we re imagine the iconic track suit to celebrate our juice area and more flavorful burgers, the social and gave the response has been fantastic with over 800000 impressions to date and counting and we quickly sold out of the tracksuits themselves.

Speaker Change: Yes.

Gerard J. Hart: Fifth, we drove growth in comparable restaurant revenue and profitability. We increased comparable restaurant revenue by 1.6% for the year. While we strive to drive growth in every quarter, the declines we experienced in the third and fourth quarter were not unexpected due to our intentional decision to remove the Extreme Deep Discounting marketing program. The business was executing when I started in the second half of 2020. Overall, we are on track relative to the expected cadence of the North Star.

Speaker Change: Fifth we drove growth in comparable restaurant revenue and profitability.

Speaker Change: We increased comparable restaurant revenue by one 6% for the year.

Speaker Change: While we strive to drive growth in every quarter. The declines we experienced in the third and fourth quarter were not unexpected due to our intentional decision to remove the extreme deep discounting marketing programs. The business was executing when I started in the second half of 2022.

Speaker Change: Overall, we are on track relative to the expected cadence of the North Star plan.

Gerard J. Hart: We've seen the tangible results of our work during 2020. As we drove an increase in comparable restaurant revenue, invested approximately $24 million back into the guest experience through food and labor, increased guest satisfaction scores across multiple measurement, flushed out the excessive discounting and virtual brands decisions of years past, captured our targeted cost savings, and delivered a 33% increase in Adjustments. 2024 will also be a transformational year, as well as ensuring that our guests are aware of the improvements that we've made to drive traffic back into our restaurants. Driven by the initiatives I will outline below, we fully intend to outpace the industry in traffic growth as we exit the year.

Speaker Change: <unk> seen the tangible results of our work during 2023 as we drove an increase in comparable restaurant revenue invested approximately $24 million back into the guest experience through food and labor increased guest satisfaction scores across multiple measurement tools flushed out the excessive.

Counting in virtual brands decisions of yours pass captured our targeted cost savings and delivered a 33% increase in adjusted EBITDA.

Speaker Change: 'twenty 'twenty four will also be a transformational year as well as ensuring that our guests are aware of the improvements that we've made to drive traffic back into our restaurants.

Speaker Change: Driven by the initiatives I will outline below we fully intend to outpace the industry on traffic growth as we exit the year.

Gerard J. Hart: Now let's talk about how we plan to get there and the pace you should expect. First, we're in the process of launching our new marketing program. Starting in March and into the second quarter, you will begin to see our new marketing platform showcasing the work we've been doing to improve the guest experience and remind our guests about some of the unique aspects of Red Robin. For over 54 years, Red Robin has had bottomless sides and other menu items but has not done a good job, historically, of telling people to ask.

Speaker Change: Now, let's talk about how we plan to get there and the cadence you should expect to see.

First we're in the process of launching our new marketing program.

Speaker Change: Starting in March and into the second quarter, you will begin to see our new marketing platform showcasing the work we've been doing to improve the guest experience and remind our guests about some of the unique aspects of red Robin for over 54 years Red Robin has had bottomless sides and other menu items, but has.

Speaker Change: <unk> done a good job historically of telling people that beginning in March that will change.

Gerard J. Hart: Beginning in March, that will change. On our menu, we have over 30 items that are bottomless, and we want to make sure our consumers know that, from our fan favorite steak fries to our freckled lemonade and all the way down to our root beer float. If you want another, the answer is yes. Additionally, guests can swap items between bottomless refills. For example, get broccoli with your burger and then fries with your milkshake.

Speaker Change: On our menu, we have over 30 items that our bottomless and we want to make sure our consumers know that.

Speaker Change: From our fan favorite steak fries to our freckled lemonade and all the way down to our root beer float if you want another the answer is yes.

Speaker Change: Additionally, guests can swap items between bottomless refills get broccoli with your Burger and then fries with your milkshake.

Gerard J. Hart: We want to ensure consumers know this core equity of Red Robin, a place for everyday value for your family. We're excited to utilize our marketing program to get this message out and expect to invest an incremental approximately $3 million in selling expenses to support the. Second, we plan to launch our new loyalty platform. The Red Robin Rewards Program is an exceptionally strong asset at our disposal with over 13 million loyalty members.

Speaker Change: We want to ensure consumers know this core equity of Red Robin.

Speaker Change: Place for everyday value for your family.

Speaker Change: We're excited to utilize our marketing program to get this message out and expect to invest an incremental approximately $3 million and selling expense to support this effort.

Speaker Change: Second we plan to launch our new loyalty platform.

Speaker Change: The Red Robin and rewards program is an exceptionally strong asset at our disposal with over 13 million loyalty members.

Gerard J. Hart: Historically, it has been more of a discount program rather than reward our guests for their loyalty to us. We intend to transform our loyalty program into a VIP-like experience, delivering more relevant messaging to our members, and ultimately, fostering a new generation of Red Robin ambassadors. We're excited to transition to a points-based program that makes it easier for our most loyal guests to earn rewards, giving them incentives to visit us more often. We expect to launch the new program in the middle of this year, and we look forward to sharing additional details throughout the year. Finally, we plan to continue removing costs and complexity to strengthen our financial model, in addition to the rollover benefit of approximately $8 million from initiatives started in 2023.

Historically it has been more of a discount program rather than rewarding our guests for their loyalty to us.

Speaker Change: We intend to transform our loyalty program into a VIP like experience delivering more relevant messaging to our members and ultimately fostering a new generation of Red Robin ambassadors.

Speaker Change: We're excited to transition to a points based program that makes it easier for our most loyal guests to earn rewards, giving them incentive to visit us more often.

Speaker Change: We expect to launch the new program in the middle of this year and we look forward to sharing additional details throughout the year.

Speaker Change: Finally, we plan to continue removing cost and complexity to strengthen our financial model.

Speaker Change: In addition to the rollover benefit of approximately $8 million from initiatives started in 2023.

Gerard J. Hart: We expect to generate an additional $11 million of cost savings from new initiatives we plan to launch in 2024 for a total of $19 million in targeted incremental cost savings. We continue to see opportunities in our supply chain, and we have launched initiatives to support our operators through upgrades to tools like theoretical food costs and hourly labor and overtime. With that, I will turn the call over to Todd to walk you through our financial performance for the quarter and year as well as our initial thoughts on 2024 guidance. Thank you, G.J., and good afternoon, everyone.

Speaker Change: We expect to generate an additional $11 million of cost savings from new initiatives. We plan to launch in 2024 for a total of $19 million in targeted incremental cost savings.

We continue to see opportunities in our supply chain and we have launched initiatives to support our operators through upgrades to tools like theoretical food cost and hourly labor and overtime management.

With that let me turn the call over to Todd to walk you through our financial performance for the quarter.

Todd: And year as well as our initial thoughts on 2020 for guidance.

Todd: Thank you Jay and good afternoon, everyone.

Todd Wilson: In the fourth quarter, total revenues were $309 million, an increase of approximately $19 million versus the fourth quarter of fiscal 2022. The increase in revenue was led by an additional operating week in the quarter, the 53rd week of our fiscal year. The additional week added approximately $24.5 million to restaurant revenue and was partially offset by a decrease in comparable restaurant revenue of 2.7%, driven by the removal of our previous deep discounting, marketing promotions, and elimination of virtual brands. Restaurant level operating profit as a percentage of restaurant revenue was 12.2%, an increase of approximately 90 basis points compared to the fourth quarter of 2022.

Todd: In the fourth quarter total revenues were $309 million, an increase of approximately $19 million versus the fourth quarter of fiscal 2022.

Todd: The increase in revenue was led by an additional operating week in the quarter. The 50 <unk> week of our fiscal year.

Todd: The additional week added approximately $24 $5 million to restaurant revenue and was partially offset by a decrease in comparable restaurant revenue of two 7% driven by the removal of our previous deep discounting marketing promotions and elimination of virtual brands.

Restaurant level operating profit as a percentage of restaurant revenue was 12, 2% an increase of approximately 90 basis points compared to the fourth quarter of 2022.

Todd Wilson: The improvement was driven by cost-saving initiatives and cost of goods and other operating expenses, menu price increases, and reduced discounting. Additionally, the inflation environment continues to improve. The rate of inflation across all major cost categories, including commodities, wages, and operating expenses, was in line with or reduced from levels experienced during the third quarter.

Todd: The improvement was driven by cost savings initiatives and cost of goods and other operating expenses.

Todd: Menu price increases and reduced discounting.

Todd: Additionally, the inflation environment continues to improve the rate of inflation across all major cost categories, including commodities wages and operating expenses was in line with or reduced from levels experienced during the third quarter.

Todd Wilson: General and administrative costs were approximately $22.7 million versus the prior year of $20.2 million. The increase is led by approximately $1.7 million due to a 13-week quarter this year versus a 12-week quarter last year and an increase in incentive compensation expense due to the company's improved performance in 2023. Selling expenses were approximately $12.1 million, a decrease versus the prior year of approximately $2.1 million, led by a strategic reduction in media spending on social and local channels.

Todd: General and administrative costs were approximately $22 $7 million versus the prior year of $22 million.

Todd: The increase was led by approximately $1 $7 million due to a 13 week quarter. This year versus a 12 week quarter last year.

Todd: And an increase in incentive compensation expense due to the company's improved performance in 2023.

Selling expenses were approximately $12 1 million a decrease versus the prior year of approximately $2 $1 million led by a strategic reduction in media spending on social and local channels.

Todd Wilson: Adjusted EBITDA was approximately $10.6 million compared to approximately $8.4 million in the fourth quarter of 2022. For the full 53-week fiscal year, adjusted EBITDA was $68.9 million, and approximately $66 million on a 52-week basis. As we have previously discussed, we are taking actions to strengthen our balance sheet, and in combination with gains and adjusted EBITDA, we'll look to use that improved credit profile to refinance our debt with more favorable terms over time. As a reminder, our term loan matures in 2027, so this is an opportunistic effort. While we are in the very early stages of this process, we have been pleased with the initial engagement from potential lenders and look to recent refinancings from others in the industry as markers for what may be possible.

Todd: Adjusted EBITDA was approximately $10 $6 million compared to approximately $8 $4 million in the fourth quarter of 2022.

Todd: For the full 53 week fiscal year, adjusted EBITDA was $68 9 million and.

Todd: And approximately $66 million on a 52 week basis.

Todd: As we have previously discussed we are taking actions to strengthen our balance sheet and in combination with gains in adjusted EBITDA. We will look to use that improved credit profile to refinance our debt with more favorable terms overtime.

Todd: As a reminder, our term loan matures in 2027. So this is an opportunistic effort.

Todd: While we are in the very early stages of this process. We've been pleased with the initial engagement from potential lenders and look to recent refinancings from others in the industry as markers for what may be possible.

Todd Wilson: Our sale-leaseback transactions are in support of this effort. Following our two successful transactions in 2023, we marketed a third tranche of owned properties, received multiple bids from investors, and have been working through diligence items with the winning bidder. I am pleased to share the diligence period is coming to a close, and we expect to complete this transaction in the first quarter. We expect the final transaction will include from 8 to 11 properties and generate gross proceeds of $20 to $26 million, with net proceeds used to repay debt. We ended the first quarter with approximately $23.6 million of cash and cash equivalents, $7.9 million of restricted cash, and $25 million available borrowing capacity under our revolving line of credit. At quarter end, our standing principal balance under our credit agreement was $189.1 million, unchanged from the end of the third quarter, and letters of credit outstanding were $7.7 million.

Todd: Our sale leaseback transactions are in support of this ever.

Todd: Following our two successful transactions in 2023, we marketed third tranche of owned properties received multiple bids from investors and had been working through diligence items with the winning bidder I.

Todd: I am pleased to share the diligence period is coming to a close and we expect to complete this transaction in the first quarter.

Todd: We expect the final transaction will include from eight to 11 properties and generate gross proceeds of $20 million to $26 million with net proceeds used to repay debt.

Todd: We ended the fourth quarter with approximately $23 $6 million of cash and cash equivalents $7 9 million of restricted cash and $25 million available borrowing capacity under our revolving line of credit.

Todd: At quarter end, our outstanding principal balance under our credit agreement was $189 $1 million unchanged from the end of the third quarter.

Todd: And letters of credit outstanding were $7 $7 million.

Todd Wilson: As a reminder, the 53rd week adds an additional payroll cycle to the fourth quarter. This has a short-term negative impact on our cash position at the end of 2023 that reverts as we move through 2024. Turning now, our guidance for 2024 is as follows: total revenue of $1.25 billion to $1.275 billion, including comparable restaurant revenue of a low single-digit percentage decline, restaurant level operating profit of 12.5% to 13.5% inclusive of investments in the guest experience and rent expenses related to the sale leaseback transaction, adjusted EBITDA of $60 million to $70 million, and capital expenditures of $25 million to $35 million.

Todd: As a reminder, the 50 <unk> week adds an additional payroll cycle to the fourth quarter.

Todd: This has a short term negative impact on our cash position at the end of 2023 that reverse as we move through 2024.

Todd: Turning now our guidance for 2024 is as follows.

Todd: Total revenue of 1.25 billion to $1 $2 75 billion.

Todd: <unk> comparable restaurant revenue of a low single digit percentage decline.

Todd: Restaurant level operating profit of 12, 5% to 13, 5% inclusive of investments in the guest experience and rent expenses related to the sale leaseback transactions.

Todd: Adjusted EBITDA of 60 million to $70 million.

Todd: And capital expenditures of 25 million to $35 million.

Todd Wilson: The $65 million midpoint of our adjusted EBITDA range represents a modest increase year over year when adjusting for the benefit of the 53rd week in 2023 and the additional rent we will incur in 2024 due to the sale-leaseback transaction. Additionally, compound annual growth of approximately 12 percent relative to 2022, the starting point of the North Star Plan, has added color to our 2024 financial guidance. We expect the following factors to influence our 2024 results. We will revert back to a 52-week fiscal year in 2024 as compared to 53 weeks in 2023. We expect this will result in an approximate $25 million reduction in restaurant sales and a $3 million reduction in adjusted EBITDA as compared to 2023. The sale leaseback transactions we completed in 2023 and the third tranche we expect to close during this first quarter will result in incremental rent expense of approximately $4 million in 2024 and a reduction of annualized interest of approximately five to six million dollars, driven by debt reduction. We anticipate inflation will return to more normal levels with inflation across our entire cost basket, including commodities, wages, and operating expenses, in a range of three to four percent. We expect total selling, general, and administrative expenses to be relatively unchanged as compared to 2023. As G.J.

Todd: The $65 million midpoint of our adjusted EBITDA range represents a modest increase year over year when adjusting for the benefit of the 50 <unk> week in 2023 and the additional rent we will incur in 2024 due to the sale leaseback transactions.

Todd: And compound annual growth of approximately 12% relative to 2022, the starting point of the North Star plan.

As added color for our 2024 financial guidance, we expect the following factors to influence our 2024 results.

Todd: We will revert back to a 52 week fiscal year in 2024 as compared to 53 weeks in 2023.

Todd: We expect this will result in an approximate $25 million reduction in restaurant sales and $3 million reduction in adjusted EBITDA as compared to 2023.

Todd: The sale leaseback transactions, we completed in 2023 and the third tranche, we expect to close during this first quarter will result in incremental rent expense of approximately $4 million in 2024.

Todd: And a reduction of annualized interest of approximately $5 million to $6 million driven by debt reduction.

Todd: We anticipate inflation will return to more normalized levels with inflation across our entire cost basket, including commodities wages and operating expenses in a range of 3% to 4%.

We expect total selling and general and administrative expenses to be relatively unchanged as compared to 2023.

Todd: As TJ mentioned earlier. This includes an increase of approximately $3 million and selling to support our marketing efforts.

Todd Wilson: As mentioned earlier, this includes an increase of approximately $3 million in selling to support our marketing efforts. We expect an offsetting reduction in G&A expenses. We have included in our guidance the impact of adverse weather to start the year. Due to this impact, along with the lack of the strong results we had in the first quarter of 2023, we expect results to be particularly challenged in the first quarter of 2024. Our confidence in the balance of the year is driven by the significant investments we made in 2023 to enhance the guest experience and the ongoing improvements in guest satisfaction in response to those investments, our anticipated return on the investments we expect to continue to make in 2024, and levers we generally control, including cost savings measures and menu price increases.

Todd: We expect an offsetting reduction in G&A expenses.

We have included in our guidance the impact of adverse weather to start the year.

Todd: Due to this impact along with the lap of the strong results. We had in the first quarter of 2023, we expect results will be particularly challenged in the first quarter of 2024.

Todd: Our confidence in the balance of the year is driven by the significant investments we made in 2023 to enhance the guest experience and the ongoing improvements in guest satisfaction in response to those investments.

Todd: Our anticipated return on the investments we expect to continue to make in 2024.

Todd: And levers, we generally control, including cost savings measures and menu price increases.

Todd Wilson: In summary, while we've made significant progress across all points of our North Star Plan, we are still at the start of year two of our multi-year comeback strategy. We remain on track to achieve our targets and are building this brand to be successful over the long term. With that, I will turn the call back over to G.J. Thank you, Todd.

Todd: In summary, while we've made significant progress across all points of our North Star plan. We are still at the start of year two of our multiyear comeback strategy.

Todd: We remain on track to achieve our targets and are building this brand to be successful over the long term.

Todd: With that I will turn the call back over to T. J. Thank you Todd.

Gerard J. Hart: The comeback journey of Red Robin and building a long-term sustainable and growing business takes some time. We have used the analogy of a baseball game to measure our progress. I believe that we are in the second inning of a nine-inning game.

Todd Morrison Brooks: The comeback journey of Red Robin and building, a long term sustainable and growing business takes some time.

Todd Morrison Brooks: We have used the analogy of a baseball game to measure our progress.

Todd Morrison Brooks: I believe that we were in the second inning of a nine inning game.

Operator: This assessment reflects the fantastic foundational progress we made during 2023 at the completion of the first inning and the remaining eight innings as the great opportunity we see ahead. Through our operations execution focus, increased marketing communication, the launch of our new loyalty program, and continued cost savings. We look forward to demonstrating further step change progress in 2024, as we bring guests back into our restaurants for moments of connection over craveable food that only Red Robin can provide. With that, we are now happy to open and take questions, Operator. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is busy. It may be necessary to pick up your handset before pressing the start button.

Todd Morrison Brooks: This assessment reflects the fantastic foundational progress we made during 2023 at completion of the first ending and the remaining eight earnings as the great opportunity we see ahead.

Todd Morrison Brooks: Through our operations execution focus increased marketing communication the launch of our new loyalty program and continued cost savings. We look forward to demonstrating further step change progress in 2024.

Speaker Change: As we bring back guests back into our restaurants for moments of connection over craveable food that only red Robin can provide with that we are now happy to open and take questions operator.

Thank you.

Speaker Change: We'll now be conducting a question and answer session.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad inflammation.

Speaker Change: Information tone will indicate your line is it the question queue.

Speaker Change: You May press Star two if you would like to remove your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please poll for questions.

Alexander Russell Slagle: One moment, please while we poll for questions. The first question comes from the line of Alex Slagle, "Chefs' Feast." For more information, please visit www.fema.gov.

Speaker Change: The first question comes from the line of Alex Slagle with Jefferies. Please go ahead.

Alexander Russell Slagle: Alright, hey guys. How are you doing? Doing well. So I'm just trying to think about some of the comments you were making towards the end, and 2024 is going to be year two on this path, and I guess initially we were sort of thinking a three-year path that doubled EBITDA margin, and I mean it's hard to expect a linear progression towards that target. Obviously, 2024 seems like an important year for customers to come in and start experiencing the improved food. Please It's not like you're going to sort of make cuts that reverse the guest experience improvements you've made, but does this outlook for 24 suggest we should think more like a four-year plan versus a three-year plan, or has the trajectory changed in your mind at all? I mean, there's been a lot of external dynamics as well, but just thoughts on that would be helpful.

Alexander Russell Slagle: Alright, Hey, guys, Hey, doing.

How are you doing.

Alexander Russell Slagle: Wow.

Alexander Russell Slagle: So just trying to think about some of the comments you were making towards the end in 2024, it is going to be year two on.

Alexander Russell Slagle: This path and I guess initially you were sort of thinking that three year path that doubling EBITDA margin I mean, it's hard to expect a linear progression towards that target obviously.

Alexander Russell Slagle: Four it seems like an important year for customers to come in and start experiencing the <unk>.

Alexander Russell Slagle: Food and.

Alexander Russell Slagle: For the first time.

Alexander Russell Slagle: Going to take a while to see that translate into traffic gains in flow through.

Alexander Russell Slagle: It's not like you can add.

Alexander Russell Slagle: Cut that reverse the guest experience improvements you've made but does this outlook for 24 suggests we should think more like a four year plan versus a three year plan or has the trajectory changed in your mind at all I mean, there's been a lot of external dynamics as well, but just thoughts on that.

Speaker Change: Would be helpful.

Todd Wilson: Hey, Alex's title, I'll start out with one of your comments. You know, we're really pleased with the improvements in the performance and the feedback from our guests. So, you know, we feel like those are the right investments. We're seeing the feedback from guests confirm that, so we feel really comfortable with that. You know, to your comment on traffic, yeah, I think we would agree. We don't expect a linear line.

Speaker Change: Hey, Alex this is Todd I'll start out of.

Todd: Two one of your comments, we're really pleased with the improvements in the performance and the feedback from our guests. So we feel like those are the right investments we're seeing the feedback from guests confirm that so we feel really comfortable with those investments.

Todd: To your comment on traffic I think we would agree we don't expect a linear line, we know that that builds over time and part of we've talked about this in the past, but part of how we're thinking about the markers of how do we know we're on the right track. We said hey, the first marker was improved guest satisfaction and we've seen that now what we're looking.

Gerard J. Hart: We know that that builds over time. And you know, part of, we've talked about this in the past, but part of how we're thinking about the markers of how we know we're on the right track, we said, hey, the first marker was improved guest satisfaction, and we've seen that. Now, what we're really looking for is sequential improvements in traffic, especially as we get into the second half of the year. You know, G.J.

Todd: <unk> four really is sequential improvements in traffic, especially as we get into the second half of the year G. J referenced that in his prepared remarks.

Todd Wilson: referenced that in his prepared remarks. But especially with, you know, the investments that we've made, one, responding to guests, and two, getting the marketing plussed up to really get that message out there. And then three, our loyalty program kicks in during the second half of the year. We are looking for that, not just sequential improvement. Q2 a little better than Q1, Q3 better than Q2, and so on. And so that's how we're thinking about it. You know, I don't know that I'd tell you we'd put a two, three, four, five-year timeline on it.

Todd: But especially with the.

Todd: The investments that we've made one resonating with guests to getting the marketing.

Todd: Plus up to really get that message out there and then three our loyalty program kicking in in the second half of the year.

Todd: We are looking for that just sequential improvement Q2, a little better than Q1 Q3, better than Q2, and so on and so that's how we're thinking about it.

Todd: I don't know that I'd tell you, we'd put out a 2345 year timeline on it it's really continuing to build the brand for the long term and we know that one step at a time gets us ultimately to where we want to be at the end of the journey.

Gerard J. Hart: You know, it's really continuing to build the brand for the long term, and we know that one step at a time gets us ultimately to where we want to be at the end of the day. Yeah, I would just say Alex, to Todd's last comment, to try to build this brand, this iconic brand, back into a sustainable business. I think we're doing all the right things to make that happen. And so I don't think I would say that it's necessarily a longer period of time. It just, it does take some time. It's just not going to happen.

Speaker Change: Yeah, and I would say.

Speaker Change: Say Alex.

Speaker Change: Todd's last comment to try to build this brand is iconic brand back to a sustainable business I think we're doing all the right bright pieces to make that happen.

Speaker Change: So I don't think I would say that its necessarily a longer period of time. It just it does take some time, it's just not going to happen overnight, but when I look at the progress that our team members have made in 2023 pretty amazing and so while we referenced kind of the second third inning in a baseball game, which I do the point there is that.

Gerard J. Hart: When I look at the progress our team members have made, pretty amazing. And so, you know, while we referenced kind of the second or third inning in a baseball game, which I do, the point there is that there's just so much upside as we get ourselves totally straightened out from.

Speaker Change: There's just so much upside for us as we get ourselves totally.

Speaker Change: Straightened out from some of the decisions of the past.

Alexander Russell Slagle: That's helpful. And I guess as you look at the performance, you look at sort of your top quartile or bottom quartile stores. And I mean, maybe even just anecdotally, but if you look at some of the key metrics, the comps, the traffic, the customer satisfaction scores, which I think you pointed out, and tenure of management and things like that. How did the metrics compare, you know, a year ago? Can you sort of point to some things that tell you about the progress? Yeah, Alex, when we talked about the quartiles and we look at that routinely, one of the things when we look back at last year, you know, there was progress in same-store sales across all four quartiles, right? All four quartiles posted positive same-store sales, you know, as groups.

Speaker Change: That's helpful and I guess as you look at the performance when you look at sort of your top quartile or bottom quartile stores.

Speaker Change: I mean, maybe even just anecdotally, but if you look at some of the key metrics.

Speaker Change: Comps the traffic the customer satisfaction scores, which I can point to in <unk>.

Speaker Change: Tenure of management and things like that how did the metrics compare.

Speaker Change: A year ago can you sort of point to some things that tell you about the progress.

Speaker Change: Yeah Alex.

Speaker Change: We've talked about the core titles when we look at that routinely.

Alexander Russell Slagle: One of the things when we look back at last year. There was progress in same store sales across all four core titles right. All four courthouse posted positive same store sales.

Alexander Russell Slagle: Groups, and so that was encouraging to see not only.

Todd Wilson: And so that was encouraging to see not only, you know, it's easy sometimes to focus on the fourth quartile, but not only were we able to improve those restaurants, but our top performers, which are fantastic, you know, financial restaurants, those were able to increase their same store sales as well. And so, you know, the sales performance, but also the restaurant profitability, again, that top quartile increased sales and increased profitability. Part of what we saw, we found. The fourth quartile increased sales, but we had to spend some money to do that. And that's not surprising to us. Frankly, we knew that would be the case because we knew they weren't staffed properly. We knew that in many cases, the food was not prepared to our standards.

Alexander Russell Slagle: Easy sometimes to focus on the fourth quartile, but not only were we able to improve those restaurants, but our top performers which are fantastic financial.

Alexander Russell Slagle: Restaurants, those were able to increase to increase their same store sales as well and so.

Alexander Russell Slagle: The sales performance, but also the restaurant profitability again that top quartile increased sales increased profitability part of what we saw we found this interesting the fourth quartile increase sales, but we had to spend some money to do that and that's not surprising to us frankly, we knew that would be the case, because we knew they weren't staffed.

Really we knew that in many cases, the food was not executed to our standards and so I think I'd say, it's progressing as we would expect and the encouraging piece to US is as we make the investments, yes, we know theres investments, but we start to see it pay off in sales even in those most challenged restaurants and so that's what gives us confidence going.

Todd Wilson: And so, you know, I think I'd say it's progressing as we would expect. And the encouraging piece for us is that as we make the investments, yes, we know there are investments, but we start to see them pay off in sales, even in those most challenged restaurants. And so that's what gives us confidence. Okay, just one quick follow-up on the, with all the menu work and the new entrees and apps and beverages, seasonal stuff, I guess I would have thought... Those would be more accretive to the check, and you'd sort of see that mix impact start to turn a little bit more positive, and just maybe any thoughts on why that mix is still negative or color on sort of the level of Yeah, I'm still Todd here, Alex.

Alexander Russell Slagle: Forward.

Speaker Change: Okay and just a.

Speaker Change: One quick follow up on that with all the menu work and the new entrees and apps and beverages seasonal stuff I guess I would have thought.

Speaker Change: Those would be more accretive to the check in and sort of see that that mix impact start.

Speaker Change: To turn a little bit more pause David just maybe any thoughts on why that mix is still negative or color on sort of level of trial with new items anything.

Speaker Change: Surprises, you or or do you want to sure.

Speaker Change: Yes.

Speaker Change: He still Todd here, Alex, but the texture Im sure. There is we've had really nice trial in a lot of our new appetizers as well as some of the new entrees, we added a ribs item at a more premium price point of shrimp item at a more premium price points and we've seen really good trial.

Todd Wilson: But the texture I'd share there is, you know, we've had really nice trials on a lot of our new appetizers, as well as some of the new entrees. We added a ribs item at a more premium price point, and shrimp item at a more premium price point. And we've seen really good trial and, you know, mix overall in those items. The offsetting factors, you know, it's, you know, interesting to watch the consumer behavior in this of, you know, as we've sold more appetizers, we have seen that somewhat offset by reductions in dessert. And so you see, you know, people just managing their overall check, which is not surprising to us there. And that's been happening for the past several quarters. So you know, that's the dynamic you see in the mix.

Speaker Change: And mix overall in those items the offsetting factors.

Speaker Change: It's.

Speaker Change: Kristin to watch the consumer behavior in this of as we sold more appetizers, we have seen that somewhat offset by by reductions and dessert mix and so you see people just managing their real world check, which is not surprising to us there and that's been happening for the past several quarters. So that's the.

Speaker Change: <unk> seen mix.

Speaker Change: As we do see some guests gravitating to the more.

Speaker Change: Premium priced option you know part of what you've seen through all of 2023 is some guests gravitating more toward tavern lineup are more value priced burgers, we think that actually positions us really well if there is a.

Speaker Change: You know a value we see a lot of what our competitors are doing value promotions and so we actually really like the barbell strategy, we've been employing that hey, if you want a more premium option. We have those options for you. But also if you are if you are looking for more value option. We have those options for you as well. So we think it actually positions us really well going into 2024.

Todd Wilson: And you know, as we do see some guests gravitating to the more premium priced options, part of what you've seen through all of 2023 is some guests gravitating more to our tavern line, our more value priced options. We think that actually positions us really well, if there is a value. We see a lot of what our competitors are doing with value promotions. And so we actually really like the barbell strategy we've been employing, that, hey, if you want a more premium option, we have those options for you. But also, if you were if you're looking for a more value option, we have those options for you as well.

Speaker Change: The last piece of that Alex is that.

Speaker Change: I'll, just remind you that although those menu items weren't put in place until the second week of October so it hasn't been very long at all and if you think about frequency.

Speaker Change: Brand.

Speaker Change: A lot of folks that haven't had the opportunity yet because they haven't been hit so so so we're still feeling very very hopeful and positive about where we position the brand as Todd pointed out the whole barbell menu strategy.

Speaker Change: Good point.

Speaker Change: That's helpful.

Speaker Change: Thanks, Alex.

Alexander Russell Slagle: Thank you.

Alexander Russell Slagle: The next question comes from the line of Todd Brooks with Benchmark Company. Please go ahead.

Todd Morrison Brooks: Hey, good evening guys. Thanks for taking my questions.

Gerard J. Hart: So we think it actually positions us really well going into 2020. The last piece of that, Alex, is that I'll just remind you that all those menu items weren't put in place until the second week, so it hasn't been very long at all. So we're still feeling very, very hopeful and positive.

Todd Morrison Brooks: Hey, Todd.

Todd Morrison Brooks: First I'd like to lead off we've talked in the past with some of the headwinds as far as not lapping.

Todd Morrison Brooks: The $10 Burger meal deal promotion and.

Alexander Russell Slagle: Exiting the virtual branch that you created.

Alexander Russell Slagle: Headwinds that you've been fighting against so it's probably been masking some internal evidence.

Alexander Russell Slagle: Thanks. That's helpful. Thanks, y'all. Thank you. The next question comes from the line of Todd Brooks with Benchmark.

Alexander Russell Slagle: Uh-huh traffic benefits from all the work that you did over.

Alexander Russell Slagle: Fiscal year 'twenty three I know, we've talked about some of the customer sentiment scores, but are there. Other examples you can point to that.

Todd Morrison Brooks: Hey, good evening guys. Thanks for taking my questions. Hey, Todd.

Todd Morrison Brooks: First, I'd like to lead off by saying that we've talked in the past about some of the headwinds as far as not lapping the $10 burger meal deal promotion and exiting the virtual brands that you created a headwind that you've been fighting against. So it's probably been masking some internal evidence of traffic benefits from all the work that you did over fiscal year 23. I know we talked about some of the customer sentiment scores, but are there other examples you can point to that give you real confidence that when the customer finally finds a visit to Red Robin and discovers the better service, better environment, better food experience, you are seeing anything from a frequency of visit standpoint or intent to repeat or anything else you can point to that kind of bolsters the case that the improvements are responding? Hey Todd, Todd here again.

Alexander Russell Slagle: They give you real confidence that when the customer finally finds a visit to red Robin and.

Alexander Russell Slagle: And discovers the better service better better environment better food experience that you are seeing anything from a frequency of visit standpoint, or intend to repeat or anything else you can point to that kind.

Alexander Russell Slagle: Kind of bolsters.

Alexander Russell Slagle: The case that.

Alexander Russell Slagle: The improvements are resonating.

Alexander Russell Slagle: Hey, Todd Todd here again.

Todd Morrison Brooks: Yeah, a few things come to mind, there one of the pieces that our marketing team has done a great job of this.

Todd Morrison Brooks: We were able to track our web traffic pretty well and this is really about more about new users, but over the past quarter.

Todd Morrison Brooks: Through the fourth quarter, especially on the heels of the menu rollout that G. J just mentioned in October.

Todd Morrison Brooks: The number of new guests coming to our website has increased substantially and so to us that's a very encouraging sign of bringing new users back to red Robin.

Todd Wilson: Yeah, a few things come to mind there. One of the things that our marketing team did a great job of with this, you know; we were able to track our web traffic pretty well. And this is really about more new users.

Todd Morrison Brooks: A lot of our marketing has been focused in new channels and so that's one of the markers we have been looking at in terms of.

Todd Wilson: But, you know, over the past quarter, through the fourth quarter, especially on the heels of the menu rollout that GJ just mentioned in October, the number of new guests coming to our website has increased substantially. So to us, that's a very encouraging sign of bringing new users back to Red Robin. You know, a lot of our marketing has been focused on new channels, and so that's one of the markers we've been looking at in terms of, you know, data points that tell us we're on the right track beyond, to your point, customer satisfaction. Yeah, I would just add Todd that in addition to what we're seeing, the scores are actually even higher from new guests coming in. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/policies/excellent.

Todd Morrison Brooks: In terms of data points that tells US we're on the right track beyond to your point the customer satisfaction.

Speaker Change: Yeah, and I would just add Todd that in.

Todd Morrison Brooks: In addition, what we're seeing is on the sentiment the scores are actually even higher from new guests coming into the restaurants and what they've been in the past so that's pretty encouraging that.

Alexander Russell Slagle: We're obviously striking a cord and we've seen them that repeat visits increase as well.

Alexander Russell Slagle: Excellent.

Speaker Change: Second question, you talked about the incremental $3 million and selling expenses to.

Alexander Russell Slagle: You really get out there and message.

Alexander Russell Slagle: The work that you've done on the brand over the course of 'twenty three.

Alexander Russell Slagle: Is there a place knowing that the.

Alexander Russell Slagle: The focus has been repositioned around local store marketing.

Alexander Russell Slagle: Digital platform marketing is there a place at all especially in denser markets for any more of maybe a mass channel overlay that.

Alexander Russell Slagle: Maybe it gets that message out in a way that you had a broader swath of people.

Todd Wilson: Second question, you talked about the incremental $3 million in selling expenses to really get out there and promote the work that you've done on the brand over the course of 23. Is there a place, knowing that the focus has been repositioned around local store marketing and digital platform marketing, is there a place at all, especially in dense markets, for any more of maybe a mass channel overlay that maybe gets that message out in a way that you hit a broader swath of people and really highlight the improvement in the brand and drive some traffic that way?

Alexander Russell Slagle: And really highlight the improvement in the brand and drive some traffic that way.

Speaker Change: Yeah, Todd we're I think we're thinking very much along similar channels part of the marketing push.

Speaker Change: The first stages of just kicked off and it'll really ramp up in Q2.

Speaker Change: But one of the.

Speaker Change: The pieces to the marketing plan is really a.

Speaker Change: Going on TV, we're going to test that in six of our core markets.

Speaker Change: To really very much to your point get that message out its still targeted right, where we're targeting certain channels certain times of day certain events.

Todd Wilson: Yeah, Todd, we're I think we're thinking very much along similar channels, part of the marketing push that, you know, the first stages have just kicked off, and it'll really ramp up in Q2. But one of the pieces to the marketing plan is really going on TV; we're going to test that in six of our core markets to, very much to your point, get that message out. But it's still targeted, right?

Speaker Change: But it's much more of a mass media type of approach that we think obviously there'll be other levers or layers as well, but we think going on television really does get the word out broadly and so part of our approach and that is to go to those six markets measure performance and that will then inform how we approach the second half of the year.

Todd Wilson: We're targeting certain channels, certain times of day, certain events. But it's much more of a mass media type of approach that we think, obviously, there'll be other levers or layers as well. But we think going on TV really does get the word out broadly.

Speaker Change: But it's very much along the lines of what you are talking about they're really pushing to get the word out and get people to come back in to experience. What we what we know by all the data is going to be a great experience.

Speaker Change: Okay, Great and one more and then I'll hop back in queue.

Speaker Change: If you look at where the street kind of went to for 24 restaurant level margins. We had we had the improvement north of 14%.

Todd Wilson: And so part of our approach, and that is to go to those six markets, measure performance, and that will then inform how we approach the second half of the year. But it's very much along the lines of what you're talking about; they're really pushing to get the word out and get people to come back in to experience what we know, based on all the data, is going to be a great, Okay, great. One more and then I'll hop back in the queue.

Speaker Change: My sense is we may have gotten a little bit over our tips relative to the reality of what it takes to improve and inflect margin, but is there anything.

Speaker Change: Incremental I mean, the commodity inflation outlook sounded good I know you've put a lot of the labor investment back into the model is there anything in 'twenty four that's kind of layered into that.

Todd Morrison Brooks: If you look at where the street kind of went to for 24 restaurant-level margins, we had an improvement north of 14 percent. My sense is we may have gotten a little bit over our tips relative to the reality of what it takes to improve and inflect margin, but is there anything, Incremental I mean, the commodity inflation outlook sounded good. I know you put a lot of labor investment back into the model. Is there anything in 24 that's kind of layered into that?

Speaker Change: That guidance that you provided that 12 five to 13.

Speaker Change: Percent restaurant level margin.

Speaker Change: Thanks.

Speaker Change: I think we laid out the big pieces and I think you just mentioned many of them. So I think we laid out the big pieces I think the piece that.

Speaker Change: Relative to the information that you or others had out there on us I think the piece that we layered in.

Speaker Change: Incremental to that is it really just the impact of what we saw to start the year. We were certainly impacted by the weather we've we've seen those.

Todd Wilson: That guidance that you provided, that 12.5% to 13.5% restaurant-level margin. Thanks. You know, I think we laid out the big pieces, and I think you just mentioned many of them. So I think we covered the big pieces. I think the piece that, you know, relative to the information that you or others had out there on us, I think the piece that we layered in that's perhaps incremental to that is really just the impact of what we saw to start the year. You know, we were certainly impacted by the weather.

Speaker Change: Comments from others in the industry certainly impacted by the weather to start the year and you know quite frankly, when we look back at 2023, we had a great first quarter of 2023 were up eight 6% comparable restaurant sales last year.

Speaker Change: And quite frankly, the heaviest hurdles January was the biggest hurdle February was the second biggest hurdle and then the hurdle so to speak isn't quite so severe and the rest of the quarter and the rest of the year, but I think when you put those really big hurdles.

Todd Wilson: We've seen those comments from others in the industry, certainly impacted by the weather to start the year. And, you know, quite frankly, when we look back at 2023, we had a great first quarter of 2023. We were up 8.6% on comparable restaurant sales last year.

Speaker Change: From P. One or from January and February on top of then the weather events of this year I think that's the piece that we're reacting to a little bit real time and that my sense is that the.

Speaker Change: The street numbers, probably didnt have that factor incorporated where we did how did that factor in.

Speaker Change: Okay do you want to speak too Todd I don't know in this forum.

Todd Wilson: And, you know, quite frankly, the heaviest hurdles, January was the biggest hurdle, February was the second biggest hurdle, and then the hurdle, so to speak, isn't quite so severe in the rest of the quarter and the rest of the year. But I think when you put those really big hurdles from P1 or from January and February on top of the weather events of this year, you know, I think that's the piece that we're reacting to a little bit in real time, and my sense is that the street numbers probably didn't have that factor incorporated where we did add that factor. Okay, do you want to speak to Todd? I don't know, in this forum, if you either want to talk about the quarter to date or knowing that you still have this is a 16 week quarter, for you guys, maybe frame up the expectation for the full quarter so that we're not trying to guess how much you can chase back against some easier comparisons as Q1 progresses. Yeah, yeah, it's a fair question, Todd.

Speaker Change: You either want to talk quarter to date or knowing that you still have this is a 16 week.

Todd Morrison Brooks: Were you guys, just maybe frame up.

Todd Morrison Brooks: The expectation for the full quarter. So that we're not trying to guess how much you can chase back against some easier compares as Q1 progress.

Speaker Change: Yeah, Yeah, It's a fair question, Todd and I think as we think about it I go right, where you went up we do have right, where we're somewhat unique and we have a 16 week first quarter that really we're only halfway through meaning we still got a really long way to go.

Speaker Change: I.

Speaker Change: The.

Speaker Change:

Speaker Change: Obviously weeks and months and even quarters can sometimes be volatile so I don't know that.

Speaker Change: We're ready to give you a number for Q1, but I think the way that we're thinking about it as part of the progression that we've seen through the first quarter. When we look at the January results and then the improvement as we get into Q to February we've seen a basically a 600 basis point improvement from January to February now those are still.

Todd Wilson: And I think as we think about it, you know, I go right where you went. We do have, right, we're somewhat unique, and we have a 16-week first quarter that we're only halfway through, meaning we've still got a really long way to go. You know, I think the, obviously, weeks and months and even quarters can sometimes be volatile. So, you know, I don't know that we're ready to give you a number for Q1, but I think the way that we're thinking about it is part of the progression that we've seen through the first quarter. When we look at the January results and then the improvement as we get into February, we've seen basically a 600 basis point improvement from January to February.

Speaker Change: The January was still a decline in same store sales as was February.

Speaker Change: But seeing that sequential improvement gives us confidence that it is a year over year lap that's driving our numbers. So far this year and seeing them approve gives us confidence in the balance of the quarter. So.

Speaker Change: I don't know that we're ready to put out a number yet on Q1.

Speaker Change: But it is one that obviously, it's been a headwind to start the year, but we're seeing the sequential improvement in the right direction.

Speaker Change: Okay perfect. Thanks, Todd.

Speaker Change: Thank you next question comes from the line of Andrew Wolf with C. L. King. Please go ahead.

Andrew Paul Wolf: Thank you good afternoon.

Andrew Paul Wolf: I wanted to piggyback on Todd's question on the comp.

Todd Wilson: Now, those are still, you know, January was still a decline in same-store sales, as was February, but seeing that sequential improvement gives us confidence that this is a year-over-year trend that's driving our numbers so far this year, and seeing them improve gives us confidence in the balance of the quarter. So, you know, I don't know that we're ready to put out a number yet on Q1, but it is one that, obviously, it's been a headwind to start the year, but we're seeing sequential improvement in the right direction. Okay, perfect. Thanks, Todd. Thank you. The next question comes from the line of Andrew Wolf. C.L. King

Andrew Paul Wolf: Kind of the cadence, but not in the quarter.

Andrew Paul Wolf: I think you wouldn't have called it out as particularly challenging.

Speaker Change: Not alone.

Speaker Change: If it wasn't going to be well below somewhat to well below trend well below guidance. So.

Speaker Change: I guess, what I want to get too as you know.

Speaker Change: The compares get.

Speaker Change: A lot easier in the second half.

Speaker Change: And obviously.

Speaker Change: The first quarter is going to be what it is but I'm certainly I'm going to model it below.

Speaker Change: Meaningfully below the guidance you put into the download single digits.

Speaker Change: So could you give I mean are you guys.

Speaker Change: Is it reasonable to expect your constant at least flatten out if not turn positive in the second half when you start to hit the easier comparisons that sort of how youre viewing the year like.

Andrew Paul Wolf: Please go ahead. Thank you. Good afternoon. I kind of wanted to piggyback on Todd's question about the... I mean, I think you wouldn't have called it out as particularly challenging. You're not alone.

Speaker Change: I know the first quarter is not in the books, yet, but you know.

Speaker Change: Certainly the.

Speaker Change: The first two months first two four week periods.

Speaker Change: In a tough spot.

Speaker Change: Yeah, India, you're spot on we do expect with what with what we've seen so far in the first quarter that I just referenced of February period, better than the January period, we are looking for that to continue.

Andrew Paul Wolf: If it wasn't going to be well below, you know, somewhat to well below trend, well below guidance. I guess what I want to get to is, you know, a lot easier in the second half. And obviously.

Todd Wilson: The first quarter is going to be what it is, but I'm going to model it meaningfully below the guidance you put in of look down low single digit. So could you give, I mean, are you guys... Is it reasonable to expect your comps to at least flatten out, if not turn positive? In the second half, when you start to hit the easier comparisons, that's sort of how you're viewing the year.

Speaker Change: That is both true for for same store sales as well as the traffic side of things I referenced that in the prepared remarks that especially on the traffic side.

Speaker Change: Marker is going to be each quarter better than the last so youre thinking about that the right way and we do see a track.

Speaker Change: That gets as positive as we move through the year.

Speaker Change: And kind of related to what I'm asking about when is your marketing incremental marketing going to really start to hit.

Todd Wilson: I know the first quarter's not in the books yet, but certainly the first two months, first two four-week periods, put you in a tough spot. Yeah, India. We do expect with what we've seen so far in the first quarter that I just referenced of, you know, our February period better than the January period. We are looking for that to continue. You know, that is both true for same store sales and the traffic side of things. I referenced that in the prepared remarks, that especially on the traffic side, the mark is going to be, you know, each quarter better than the last. So you're thinking about that the right way. And we do see a track that gets us positive as we move through the year. And, kind of related to what I'm asking about, when is your marketing? Incremental marketing is going to really start to hit, you know, the mediums you're going to use.

Speaker Change: The mediums youre going to use to use.

Speaker Change: Okay.

Speaker Change: I think we mentioned it will start in March.

Speaker Change: Hey.

Speaker Change: Again that and.

Speaker Change: It really goes into the second quarter.

Speaker Change: Really full full stop.

Speaker Change: Alright, and then a housekeeping I think.

Speaker Change: You mentioned.

Speaker Change: You had an extra payroll cycle, which hit your cash.

Speaker Change: Was that a meaningful number.

Speaker Change: Did it improve your liquidity position.

Speaker Change: Year end.

Speaker Change: And you know it was it was actually a headwind to our liquidity position, which is part of why I called it out.

Speaker Change: One painful for US is 17 or $18 million now admittedly, we had an extra week of revenue to help offset that but it was definitely a headwind to our liquidity. It's just a point in time headwind, though right. It quickly balances out, but just because we drew the line of the fiscal year and a week later we.

Todd Wilson: As I think we mentioned, it will start in March. Okay, begin that. It really goes into the second quarter, really, full, full All right, and then some housekeeping. I think you had an extra payroll cycle to shake your cash. Uh, was that a meaningful number? Did it improve your liquidity position? from Europe.

Speaker Change: Ended up carrying effectively seven payroll cycles in the quarter rather than a typical six.

Speaker Change: That's what I was asking for your liquidity position is.

Speaker Change: Somewhere 17 million plus or minus better than you ended the year exactly.

Todd Wilson: Andy, no, it was actually a headwind to our liquidity position, which is part of why I called it out, you know, one payroll for us is, you know, 17 or $18 million. Now, admittedly, we have an extra week of revenue to help offset that. But it was definitely a headwind to our liquidity. It's just a point in time headwind, though, right?

Speaker Change: Exactly yes.

Speaker Change: <unk>.

Speaker Change: It.

Speaker Change: Is is.

Speaker Change: Unusually.

Speaker Change: Depressed versus what we feel like it should have been so to speak if we were on a net normal 52 week calendar.

Speaker Change: Okay, and we will look at cash flow statement, but.

Speaker Change: Sort of backing into that there must be some other things in there they are in working capital or not.

Speaker Change: That seem to have hit the.

Speaker Change: Cash from operations.

Speaker Change: That might not repeat.

Todd Wilson: It quickly balances out, but just because we drew the line at the fiscal year end a week later, we ended up carrying effectively seven payroll cycles in the quarter, rather than a typical six.

Speaker Change: That's correct, yes that that was the big headwind that I'd call out on cash and again, that's just a timing aspect.

Speaker Change: But we can certainly talk through the cash flow statement.

Speaker Change: As you are able to digest it.

Speaker Change: Okay. Thank you that's it for me thank you.

Speaker Change: Thank you.

Speaker Change: Thank you ladies and gentlemen, we have reached the end of our question and answer session I would now like to turn the floor over to G. J Hart for closing comments.

Andrew Paul Wolf: So your liquidity position is somewhere $17 million plus or minus better than at the end of the year. Exactly. Yeah, it's unusually depressed versus what we feel like it should have been, so to speak, if we were on a normal 52 week. Okay, and we'll look at a cash flow statement, but sort of backing into that, there must be some other things in there in working capital that seem to have hit the cash from operation.

Speaker Change: Alright, well. Thank you all for joining US today, we look forward to our next report and.

Speaker Change: Again, we're excited about this come back and making it come to reality so take care. Thank you we'll talk soon.

Speaker Change: Okay.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Todd Wilson: That might not repeat. That's correct. Yeah, that was the big headwind that I'd call out on cash. And again, that's just the timing aspect.

Speaker Change: Sure.

Speaker Change: [music].

Todd Wilson: But we can certainly talk through the cash flow statement as you're able to digest that. Okay. Thank you. That's it for me.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Andrew Paul Wolf: Thank you. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to G.J. Hart for closing.

Speaker Change: Yes.

Speaker Change: [music].

Gerard J. Hart: All right, well, thank you all for joining us today. We look forward to our next report. And again, we're excited about this comeback and making it a reality.

Operator: Take care. Thank you. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yes.