Q2 2024 BJ's Restaurants Inc Earnings Call

Good day and welcome to the BJ's Restaurants Inc. second quarter 2024 earnings release conference call. All participants will be in a listen-only mode.

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After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2.

Please note that this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.

Rana Schirmer, Aisling Grueninger, and BJ's Restaurants Inc.

Rana Schirmer: Thank you, Operator. Good afternoon, everyone, and welcome to our Fiscal 2024 Second Quarter Investor Call and Webcast. After the market closed today, we released our financial results for the Fiscal 2024 Second Quarter. You can view the full text of our earnings release on our website at www.bjrestaurants.com.

Rana Schirmer: Thank you, Operator. Good afternoon, everyone, and welcome to our Fiscal 2024 Second Quarter Investor Call and Webcast. After the market closed today, we released our financial results for our Fiscal 2024 Second 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 guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ.

Rana Schirmer: 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 guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projected in the forward-looking statements.

Rana Schirmer: 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 Hodick, our Chief Financial Officer, after which we will take your questions. And with that, I will turn the call over to Greg Levin. [inaudible]

Rana Schirmer: [inaudible]

Rana 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.

Gregory S. Levin: BJ's delivered another quarter of restaurant-level margin growth and adjusted EBITDA growth of 13% over the same period last year. These solid results, again, highlight the benefits of the strategies we shared at our Investor Day in November.

Speaker Change: We will start today's call with prepared remarks from Greg Levin, our Chief Executive Officer and President, and Tom Houdek, our Chief Financial Officer, after which we will take your questions. And with that, I will turn the call over to Greg Levin. Greg? Thank you.

Gregory S. Levin: Our approach focuses on driving sales through our familiar Made Brewhouse Fabulous culinary initiative, increasing and enhancing our brand awareness, improving our operational excellence through our people initiative centered on our gracious hospitality, and enhancing our ambiance through our remodel initiative. Additionally, our holistic top-line approach to driving sales is complemented by our margin expansion initiative through productivity and cost savings enhancement. These strategies are working and continue to establish a solid foundation for financial and restaurant growth and enhancement of shareholder value. We finished the quarter with total sales of $349.9 million, while comp sales were slightly negative at 0.6%.

Gregory S. Levin: Thank you, Rana. BJ's delivered another quarter of restaurant-level margin growth and adjusted EBITDA growth of 13% over the same period last year. These solid results, again, highlight the benefits of the strategies we shared at our Investor Day in November .

Gregory S. Levin: Our approach focuses on driving sales through our familiar Made Brewhouse Fabulous culinary initiative, increasing and enhancing our brand awareness,

Gregory S. Levin: Improving our operational excellence through our people initiative centered on our gracious hospitality and enhancing our ambiance through our remodel initiative.

Gregory S. Levin: Additionally, our holistic top-line approach to driving sales is complemented with our margin expansion initiative through productivity and cost savings enhancements.

Gregory S. Levin: These strategies are working and continue to establish a solid foundation for financial and restaurant growth and enhancement of shareholder value.

Gregory S. Levin: We finished the quarter with total sales of $349.9 million, while comp sales were slightly negative at 0.6%.

Gregory S. Levin: However, throughout the quarter, we saw month-over-month improvement in comp sales, driven by guest affinity for the BJ's concept and choosing BJ's to celebrate important moments like Mother's Day, Father's Day, and graduations. Reflecting this strong guest affinity for the BJ's concept, 107 restaurants broke either daily or weekly sales records in Q2. Furthermore, our restaurant margins continued to expand and rose to 15.5%, representing an increase of 100 basis points from the prior year.

Gregory S. Levin: However, throughout the quarter we saw month-over-month improvement in comp sales driven by guests affinity for the BJ's concept and choosing BJ's to celebrate important moments like Mother's Day, Father's Day, and graduations.

Gregory S. Levin: Reflecting this strong guest affinity to the BJ's concept, 107 restaurants broke either daily or weekly sales records in Q2.

Gregory S. Levin: Furthermore, our restaurant margins continued to expand and rose to 15.5%, representing an increase of 100 basis points from the prior year.

Gregory S. Levin: Our restaurant level cash flow per operating week was approximately $19,200, just slightly behind fiscal 2019's restaurant level cash flow per week of $19,300. So while percentage margins were still behind 2019's levels, we closed the gap on the dollars per restaurant week. Adjusted EBITDA in the quarter rose to $36.1 million, an increase of $4.3 million, or 13% higher than the prior year.

Gregory S. Levin: A restaurant level cash flow per operating week was approximately $19,200, just slightly behind fiscal 2019's restaurant level cash flow per week of $19,300.

Gregory S. Levin: So, while percentage margins were still behind 2019's levels, we closed the gap on the dollars per restaurant week.

Gregory S. Levin: Adjusted EBITDA in the quarter rose to $36.1 million and increased to $4.3 million, or 13% higher than prior year.

Gregory S. Levin: Our team has done an amazing job focusing on driving throughput in our restaurants this past quarter as we rolled out the second phase of our Gracious Hospitality People Initiative. If you recall, the first part of this initiative focused on new server scripting and was launched last year. In April, we initiated our enhanced service model, which balances the number of tables per server, food runners, and quality fast expediter positions in our restaurants.

Speaker Change: Our team has done an amazing job focusing on driving throughput in our restaurants this past quarter as we rolled out the second phase of our Gracious Hospitality People Initiative. If you recall, the first part of this initiative focused on new server scripting and was launched last year.

Speaker Change: In April , we initiated our enhanced service model, which balances the number of tables per server, food runners, and quality fast expediter positions in our restaurants.

Gregory S. Levin: These changes allow servers to get to our guests sooner, so we can get orders into the kitchen and the bar faster. It also frees up our managers so that they have more time to be in the dining room to ensure we are delivering the gold standard level of operational excellence for our guests, and it elevates table turnover, which in essence expands the capacity of our existing platform. The goals of these changes are to improve our pace and throughput in our restaurants and further improve our already high standards of service and hospitality.

Speaker Change: These changes allow servers to get to our guests sooner so we can get orders into the kitchen and the bar faster. It also frees up our managers so that they have more time to be in the dining room to ensure we are delivering the gold standard level of operational excellence for our guests.

Speaker Change: And it elevates table turnover, which in essence expands the capacity of our existing platform.

Speaker Change: The goals of these changes are to improve our pace and throughput in our restaurants and further improve our already high standards of service and hospitality.

Gregory S. Levin: Based on our consumer research, we know that pace and throughput is another opportunity for us that will drive top-line sales. In addition to enhancing our service model, we are also evaluating and testing other technological enhancements that will help us further improve throughput in our restaurants. These include changes to the way our kitchen display system informs our team when to fire or begin cooking an item, as well as changes to our server tablets that can inform our team members where the guest is during their dining experience at BJ's.

Speaker Change: Based on our consumer research, we know that pace and throughput is another opportunity for us that will drive top line sales.

Speaker Change: In addition to enhancing our service model, we are also evaluating and testing other technological enhancements that will help us further improve throughput in our restaurants.

Speaker Change: These include changes to the way our kitchen display system informs our team when to fire or begin cooking an item, to changes to our server tablets that can inform our team members where the guest is during their dining experience with BJ's.

Gregory S. Levin: I want to thank our team members for diligently implementing these service model changes. It was a large undertaking, and our teams executed it flawlessly, knowing that these changes deliver a better guest experience, which ultimately continues to drive top-line sales. Our next Gracious Hospitality phase will be new hourly training for all restaurants, and that is expected to roll out later in Q3 and in Q4. This will include additional side-by-side training for all new hourly team members.

Speaker Change: I want to thank our team members for diligently implementing these service model changes. It was a large undertaking and our teams executed it flawlessly, knowing that these changes deliver a better guest experience, which ultimately continues to drive top-line sales.

Speaker Change: Our next Gracious Hospitality phase will be new hourly training for all restaurants, and that is expected to roll out later in Q3 and in Q4. This will include additional side-by-side training for all new hourly team members.

Gregory S. Levin: Overall, we continue to expect these initiatives to take the better part of Q3 and Q4 of this year and have a slight impact on training labor for these quarters. These investments in our team are critical elements to driving top-line sales since every additional sales dollar leverages the six elements of our restaurant's cost structure. As we've said on previous occasions, the best way for us to improve our restaurant-level cash flow is by driving sales, and we have a proven playbook and strategies that are helping us meet this goal.

Speaker Change: Overall, we continue to expect these initiatives to take the better part of Q3 and Q4 of this year and have a slight impact on training labor for these quarters.

Speaker Change: These investments in our team are critical elements to driving top-line sales since every additional sales dollar leverages the six elements of our restaurant's cost structure.

Speaker Change: As we've said on past occasions, the best way for us to improve our restaurant level cash flow is by driving sales, and we have a proven playbook and strategies that are helping us meet this goal.

Gregory S. Levin: We also continue to execute against our remodel initiative that is similarly driving improved sales and traffic. We have now completed 19 remodels year-to-date, and we expect to do approximately five more this year. By the end of this year, we will have remodeled approximately 70 restaurants since we began this initiative. We will finish fiscal 2024 with approximately half of our restaurants either recently remodeled or one of our newer prototypes. With the success of our remodel initiatives, we have been effectively and prudently deploying capital.

Speaker Change: We also continue to execute against our remodel initiative that is similarly driving improved sales and traffic.

Speaker Change: We have now COVID-19 remodels year-to-date, and we expect to do approximately five more this year.

Speaker Change: By the end of this year, we will have remodeled approximately 70 restaurants since we began this initiative.

Speaker Change: We will finish fiscal 2024 with approximately half of our restaurants either recently remodeled or one of our newer prototypes.

Speaker Change: With the success of our remodel initiatives, we have been effectively and prudently deploying capital. To date, we have opened one new restaurant in Brookfield, Wisconsin, and we expect to open our next two restaurants in August and September of this year.

Gregory S. Levin: To date, we have opened one new restaurant in Brookfield, Wisconsin, and we expect to open our next two restaurants in August and September of this year. Both new restaurants will feature our new prototype that will cost approximately $1,000,000 less to build, bringing the investment cost down to around $6,000,000 on average, and that's net of landlord allowances. This new prototype also provides greater operating efficiencies and higher and faster returns while incorporating our learnings from our remodel initiative, which includes lighter colors and a more contemporary bar featuring a 130-inch television as the focal point.

Speaker Change: Both new restaurants will feature our new prototype that will cost approximately $1 million less to build, bringing the investment cost down to around $6 million on average, and that's net of landlord allowances.

Speaker Change: This new prototype also provides greater operating efficiencies and higher and faster returns while incorporating our learnings from our remodel initiative, which includes lighter colors and a more contemporary bar featuring the 130-inch television as the focal point.

Gregory S. Levin: Our long-term model for our business continues to be to drive top-line sales in this 8-10% range through a combination of 5-plus percent unit growth and comparable restaurant sales in the low to mid-single digits. However, as we've communicated previously, we are going to do so with the right quality and at the right investment cost to continue to drive strong new restaurant investment returns that deliver shareholder value. At the same time, we continue to expand margins through sales leverage and productivity and savings initiatives.

Speaker Change: Our long-term model for our business continues to be to drive top-line sales in this 8 to 10 percent range through a combination of 5 plus percent unit growth and comparable restaurant sales in the low to mid-single digits.

Speaker Change: However, as we've communicated previously, we are going to do so with the right quality and at the right investment cost to continue to drive strong new restaurant investment returns that deliver shareholder value.

Speaker Change: 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 our solid financial cadence results in significant free cash flow, which we will translate into enhanced shareholder value over the medium and longer term. Now, I turn it over to Tom to provide a more detailed update for the quarter and the current trends.

Speaker Change: Our continuous focus on optimizing the business and our solid financial cadence results in significant free cash flow which we will translate into enhanced shareholder value over the medium and longer term.

Speaker Change: Now, let me turn it over to Tom to provide a more detailed update for the quarter and the current trends. Tom?

Unknown Attendee: Thanks, Greg. And good afternoon, everyone.

Thomas A. Houdek: Thanks Greg and good afternoon everyone. 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.

Unknown Attendee: 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 second quarter, we generated sales of $350 million, which was slightly higher than last year. However, on a comparable restaurant basis, Q2 sales decreased by 0.6%. From a weekly sales perspective, we average more than $124,000 per restaurant. Our strong and efficient restaurant execution, as Greg just outlined, in conjunction with cost savings from our margin improvement initiatives, helped BJ's improve margins in the quarter.

Thomas A. Houdek: For the second quarter, we generated sales of $350 million, which was slightly higher than last year. On a comparable restaurant basis, Q2 sales decreased by 0.6%. From a weekly sales perspective, we averaged more than $124,000 per restaurant.

Thomas A. Houdek: Our strong and efficient restaurant execution, as Greg just outlined, in conjunction with cost savings from our margin improvement initiatives, helped BJ's again improve margins in the quarter.

Unknown Attendee: Our restaurant-level cash flow margin was 15.5% in Q2, which was 100 basis points better than a year ago, demonstrating, again, the benefits of our ongoing initiatives to drive efficiencies and the solid foundation we have built for continued growth. Adjusted EBITDA was $36.1 million and 10.3% of sales in our second quarter. Q2 EBITDA grew by 13% year over year and beat the prior year by more than $4 million with a margin that was 120 basis points higher.

Gregory S. Levin: Our restaurant-level cash flow margin was 15.5% in Q2, which was 100 basis points better than a year ago, demonstrating again the benefits of our ongoing initiatives to drive efficiencies and the solid foundation we have built for continued growth.

Gregory S. Levin: Adjusted EBITDA was $36.1 million and 10.3% of sales in our second quarter.

Gregory S. Levin: Q2 EBITDA grew by 13% year over year and beat the prior year by more than $4 million with a margin that was 120 basis points higher.

Unknown Attendee: We reported net income of $17.2 million and diluted net income per share of $0.72 on a gap basis for the quarter, which were each up more than 40% from a year ago. As Greg mentioned, our comparable restaurant sales improved sequentially through the quarter and finished with a modestly positive comp in June. During the quarter, we set a new weekly sales average record of more than $141,000 across our system in the week that included Mother's Day.

Gregory S. Levin: We reported net income of $17.2 million and diluted net income per share of $0.72 on a gap basis for the quarter, which were each up more than 40% from a year ago.

Gregory S. Levin: As Greg mentioned, our comparable restaurant sales improved sequentially through the quarter and finished with a modestly positive comp in June . During the quarter, we set a new weekly sales average record at more than 141,000 across our system in the week that included Mother's Day.

Unknown Attendee: Also, as we mentioned last quarter, we have been scaling back the degree of menu pricing compared to last year. In May, we only took a small pricing round of approximately 40 basis points, which was more than 200 basis points lower than our Q2 2023 pricing round, leading to a comp headwind in the quarter as we lapped last year's elevated pricing round. The foundation we are building is allowing us to take a more balanced pricing approach to maintaining our traffic driving value while adding appropriate menu pricing to deliver profit dollar growth. Our check growth moderated to the mid-2% area in Q2 compared with the mid-4% check growth in Q1.

Speaker Change: Also, we mentioned last quarter, we have been scaling back the degree of menu pricing compared to last year.

Speaker Change: In May, we only took a small pricing round of approximately 40 basis points, which was more than 200 basis points lower than our Q2 2023 pricing round, leading to a comp headwind in the quarter as we lapped last year's elevated pricing round.

Speaker Change: The foundation we are building is allowing us to take a more balanced pricing approach to maintaining our traffic driving value with adding appropriate money to deliver profit dollar growth.

Speaker Change: Our check growth moderated to the mid 2% area in Q2 compared with the mid 4% check growth in Q1. This was driven by our carried menu pricing in the mid 3% area in Q2 down from the mid 5% area in Q1.

Unknown Attendee: This was driven by our carry menu pricing in the mid-3% area in Q2, down from the mid-5% area in Q1. Moving to expenses, our cost of sales was 25.7% in the quarter, which was 20 basis points favorable compared to a year ago and 50 basis points unfavorable compared to the prior quarter. Food costs increased by more than 2% quarter over quarter, driven by inflation on key items such as bone-in chicken wings and avocados.

Speaker Change: Moving to expenses, our cost of sales was 25.7% in the quarter, which was 20 basis points favorable compared to a year ago, and 50 basis points unfavorable compared to the prior quarter.

Speaker Change: Food costs increased by more than 2% quarter over quarter, driven by inflation on key items such as bone-in chicken wings and avocados.

Unknown Attendee: Labor and benefits expenses were 36.1% of sales in the quarter, which was 10 basis points favorable compared to the second quarter of last year. We achieved these gains while introducing a new service model to provide guests with an even better restaurant experience, as Greg just outlined. This rollout added one-time costs related to training and extra scheduled labor, which impacted margins by approximately 20 basis points in the quarter.

Gregory S. Levin: Labor and benefits expenses were 36.1% of sales in the quarter, which was 10 basis points favorable compared to the second quarter of last year. We achieved these gains while introducing a new service model to provide guests with an even better restaurant experience, as Greg just outlined.

Gregory S. Levin: This rollout added one-time costs related to the training and extra scheduled labor, which impacted margins by approximately 20 basis points in the quarter.

Unknown Attendee: Occupancy and operating expenses were 22.7% of sales in the quarter, which was 70 basis points favorable compared to the second quarter of last year. We continue to achieve strong efficiency gains over the prior year from our cost savings initiative and expect further improvements in the second half. GNA was $20.6 million in the second quarter, in line with our expectations. Turning to the balance sheet, we ended the second quarter with net debt of $47.3 million, comprised of a debt balance of $63.5 million, less cash and equivalents of $16.2 million. During the quarter, we repurchased and retired approximately 255,000 shares of common stock at a cost of $8.8 million. We currently have approximately $52 million available under our share repurchase program.

Gregory S. Levin: Occupancy and operating expenses were 22.7% of sales in the quarter, which was 70 basis points favorable compared to second quarter of last year.

Speaker Change: We continue to achieve strong efficiency gains over the prior year from our cost savings initiative and expect further improvements in the second half.

Speaker Change: G&A was $20.6 million in the second quarter, in line with our expectations.

Speaker Change: Turning to the balance sheet, we ended the second quarter with net debt of $47.3 million, comprised of a debt balance of $63.5 million, less cash and equivalents of $16.2 million.

Speaker Change: During the quarter, we repurchased and retired approximately 255,000 shares of common stock at a cost of $8.8 million. We currently have approximately $52 million available under our share repurchase program.

Unknown Attendee: Moving to more recent trends, comparable restaurant sales started the quarter modestly positive. Our sales building initiatives, including recent promotions, have been successful at driving incremental traffic, as illustrated by our traffic performance far exceeding the black box casual dining index in early Q3. Dollar profit growth is our top success criterion for any promotion. We are very encouraged by the incremental profit flow through we have been able to generate with recent promotions, including our Pazooki Pass.

Speaker Change: Moving to more recent trends, comparable restaurant sales started the quarter modestly positive.

Speaker Change: Our sales building initiatives, including recent promotions, have been successful at driving incremental traffic, as illustrated by our traffic performance far exceeding the black box casual dining index in early Q3.

Speaker Change: Dollar profit growth is our top success criteria for any promotion. We are very encouraged by the incremental profit flow-through we have been able to generate with recent promotions including our Pazooki Pass.

Unknown Attendee: Looking ahead and assuming recent trends continue, we expect Q3 top sales to be in the 1-2% range, taking into account recent check-in traffic trends and anticipating a regular seasonal pattern. As a reminder, our third quarter tends to be our lowest sales quarter of the year due to seasonality.

Speaker Change: Looking ahead and assuming recent trends continue, we expect Q3 top sales in the 1-2% range, taking into account recent check-in traffic trends and anticipating a regular seasonal pattern. As a reminder, our third quarter tends to be our lowest sales quarter of the year due to seasonality.

Unknown Attendee: Factoring in recent trends and expectations for Q3 comp sales, we expect restaurant-level cash flow margin to be in the mid-12% area as we continue to expand our margins over the prior year. This guidance includes a higher level of marketing investment to build additional brand awareness and drive traffic to our restaurants, as we noted in last year's Investor Day presentation. As a percentage of sales, marketing costs will be approximately 50 to 70 basis points higher than in Q3 of 2023.

Speaker Change: Factoring in recent trends and expectations for Q3 comp sales, we expect restaurant level cash flow margin to be in the mid 12% area as we continue to expand our margins over the prior year.

Speaker Change: This guidance incorporates a higher level of marketing investment to build additional brand awareness and drive traffic to our restaurants, as we noted in last year's Investor Day presentation.

Speaker Change: As a percentage of sales, marketing costs will be approximately 50 to 70 basis points higher than Q3 of 2023.

Unknown Attendee: Also, food cost inflation has stepped up on certain items recently, which is reflected in our third quarter guidance. We expect GNA to remain in the $20 million area for Q3. GNA continues to track toward the higher end of our original full year guidance range of $82 to $84 million. However, when removing approximately $2 million of extraordinary GNA expenses from Q1, which were previously discussed, which were previously discussed.

Speaker Change: Also, food cost inflation has stepped up on certain items recently, which is reflected in our third quarter guidance.

Speaker Change: We expect GNA to remain in the $20 million area for Q3.

Speaker Change: G&A continues to track toward the higher end of our original full year guidance range of $82 to $84 million and to the lower end of the guidance range when removing approximately $2 million of extraordinary G&A expenses from Q1, which were previously discussed.

Unknown Attendee: Much like Q1 and Q2, as well as our guidance for Q3, we expect margins to continue to expand in Q4 year over year as we grow sales through the strategic initiatives we've outlined and make additional progress on our margin improvement initiatives. In terms of cost savings, our new disposables distributor will be fully rolled out by the fourth quarter. We're also testing a tool for our restaurant operators that uses our AI-based sales forecast at each restaurant and generates a tailored labor schedule down to the hour and day based on expected demand and other criteria that we set.

Speaker Change: Much like Q1 and Q2, as well as our guidance for Q3, we expect margins to continue to expand in Q4 year-over-year as we grow sales through the strategic initiatives we've outlined and make additional progress on our margin improvement initiatives.

Speaker Change: In terms of cost savings, our new disposables distributor will be fully rolled out by the fourth quarter.

Speaker Change: We are also testing a tool for our restaurant operators that uses our AI-based sales forecast at each restaurant and generates a tailored labor schedule down to the hour and day based on expected demand and other criteria that we set.

Unknown Attendee: The early results are encouraging, and we expect to expand the usage of the tool by the fourth quarter and drive additional labor efficiency. Our goal remains to close the gap to 2019 margins by year end. In conclusion, with significant cash flow from operations, expanding margins, and a healthy balance sheet, BJ's has the financial flexibility to execute multiple initiatives to enhance shareholder value. Specifically, we are focused on delivering value to shareholders through sales and productivity initiatives and through our disciplined approach to capital allocation, including new restaurant openings and restaurant remodels, which both continue to generate strong economic returns, as well as our share repurchase activities.

Speaker Change: The early results are encouraging and we expect to expand the usage of the tool by the fourth quarter and drive additional labor efficiencies.

Speaker Change: Our goal remains to close the gap to 2019 margins by year end.

Speaker Change: In conclusion, with significant cash flow from operations, expanding margins and a healthy balance sheet, BJ's has the financial flexibility to execute multiple initiatives to enhance shareholder value.

Speaker Change: Specifically, we are focused on delivering value to shareholders through sales and productivity initiatives and through our disciplined approach to capital allocation, including new restaurant openings and restaurant remodels, which both continue to generate strong economic returns, as well as our share repurchase activity.

Unknown Attendee: We have a clear path to sales and margin growth ahead, and our long-term strategy and the 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 the call to your questions. Operator? Thank you.

Speaker Change: We have a clear path to sales and margin growth ahead, and our long-term strategy and the strong consumer appeal for the BJ's concept positions us well to continue building on our successes in enhancing shareholder value. Thank you for your time today, and we'll now open the call to your questions. Operator?

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. At this time, we will pause momentarily for the first question. And our first question today will come from Alex Slagle with Jefferies. Please go ahead.

Speaker Change: Thank you. And we will now begin the question and answer session. If you would like to ask a question, you may press star then 1 on your touchtone phone.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. And at this time, we will pause momentarily for the first question.

Speaker Change: And our first question today will come from Alex Slagle with Jefferies. Please go ahead.

Gregory S. Levin: All right, guys, thanks. I want to see if you could talk more about what you experienced during the May and June holidays, both in terms of consumer demand and the sturdiness of that special occasion dining piece, and then also just your experience driving throughput. I mean, I guess it's the early stages as you were rolling out the elements of the new service model, just any early learnings from what you saw there during those Mother's Day and Father's Day graduation periods.

Alexander Russell Slagle: All right, hey guys, thanks.

Alexander Russell Slagle: I wanted to see if you could talk more about what you experienced through the May and June holidays, both in terms of consumer demand and the sturdiness of that special occasion.

Speaker Change: dining piece, and then also just your experience driving throughput. I mean, I guess it's early stages as you were rolling out the elements of the new service model, just any early learnings from what you saw there during those Mother's Day, Father's Day graduation periods.

Gregory S. Levin: Yeah, good question there, Alex. I think first off, as we've kind of mentioned in the call, we saw improving trends throughout the quarter coming out of April into May and June. I would tend to say that around the holidays specifically, there was definitely demand within our restaurants, driving traffic and average checks as consumers came out to celebrate at BJ's. So Mother's Day, Father's Day, and graduation weekends were strong for us. We mentioned setting those records, and as Tom mentioned as well, we did over 140,000. I think it was 141,000 weekly sales average.

Speaker Change: Yeah, good question there, Alex.

Speaker Change: I think first off, as we've kind of mentioned in the call, we saw improving trends throughout the quarter coming out of April into May and June . I would tend to say that around the holidays specifically,

Speaker Change: There was definitely demand within our restaurants, driving traffic and average check as consumers came out to celebrate at BJ's, so Mother's Day, Father's Day, graduation weekends were strong for us.

Speaker Change: We mentioned setting those records, and as Tom mentioned as well, we did over 140,000, I think it was 141,000 weekly sales average.

Gregory S. Levin: So when there is, and we said this before, when there is a reason to dine out for a celebratory event, consumers come out. They want to go out and celebrate. There's an emotional attachment to coming to sit down in restaurants, and I think BJ's, and I know BJ's provides that for many, many consumers, and that's why we saw it in our business there. We're, in regards to the second part of your question, we're at the very beginning.

Speaker Change: So when there is, and we said this before, when there is a reason to dine out for a celebratory event,

Speaker Change: Consumers come out. They want to go out and celebrate. There's emotional attachment to coming to sit down in restaurants. And I think BJ's, and I know BJ's provides that for many, many consumers, and that's why we saw it in our business there.

Gregory S. Levin: We had those inefficiencies that we had to go through. You think you understand our restaurants and the size of our restaurants. To put more servers on the floor required more hiring that we had to do. And in one sense, it ends up with sometimes more people in the kitchen running and grabbing food and working those transitions out. But what we do know is when we get to our guests sooner, and we get that first order in sooner, our next promoter scores go up, and they have a better dining experience with us.

Speaker Change: In regards to your second part of your question,

Speaker Change: We're at the very beginning.

Speaker Change: We had those inefficiencies that we had to go through, I think you understand our restaurants.

Speaker Change: To put more servers on the floor required more hiring that we had to do, and in one sense it ends up with sometimes more people in the kitchen running and grabbing food and working those transitions out.

Speaker Change: What we do know is when we get to our guests sooner, and we get that first order in sooner, our net promoter scores go up, they have a better dining experience with us.

Gregory S. Levin: And that's one of the main reasons for having more servers on there. We know if we get their food in faster, obviously, the entire experience should be faster. I would tend to say on this specific initiative; we are probably in the second or maybe the top of the third inning; there's still a lot more for us to do. A lot of it comes down to the teams getting even more and more mature in this process and getting their sea legs under them.

Speaker Change: And that's one of the main reasons for having more servers on there. We know if we get their food in faster, obviously the entire experience...

Speaker Change: should be faster.

Speaker Change: I would tend to say on this specific initiative...

Speaker Change: We are probably in the second.

Speaker Change: or maybe the top of the third inning. There's still a lot more for us to do. A lot of it comes down to the teams getting even more and more mature in this process and getting their sea legs under them. And then we continue to now monitor it.

Gregory S. Levin: And then we continue to monitor it in regards to, as we call it, fire first reports and other things to see how we're doing on that productivity. I think myself and our operations team are excited about this because it really unlocks the throughput in our restaurants that makes us more productive; it gets us thinking about how we can turn the tables at a speed that makes sense for our team members and for our guests. So we're going to continue down that path.

Speaker Change: I'm going to be talking about the fire first reports and other things to see how we're doing on that productivity. I think myself and our operations team are excited about this because it really unlocks

Speaker Change: The throughput in our restaurants that makes us more productive. It gets us thinking about how we can turn the tables at a speed that makes sense for our team members, and for our guests. So we're going to continue down that path.

Gregory S. Levin: Great. And just a question on the 3Q, Seamstress's Sales Outlook, and maybe the quarter to date. Are there any dynamics with the calendar shift, like the Fourth of July holiday moving around and then potential dynamics that play out with the Olympics and elections and things like that that you're looking out for?

Speaker Change: Great. And just a question on the 3Q, Seamstress Sales Outlook, and maybe the quarter-to-date. Are there any dynamics with the calendar shift, like 4th of July holiday moving around, and then potential dynamics that play with the Olympics and elections and things like that, that you're looking out for?

Gregory S. Levin: Yeah, look, I'll give you my perspective on this. Where we are right now, as Tom mentioned, the one to 2% seems to be our regional guidance.

Speaker Change: Yeah, look, I'll give you like my perspective on this.

Gregory S. Levin: The calendar itself is not a great calendar, in the sense that July 4th is moved to a Friday, so it moves a little bit into the weekend. We had the hurricanes kind of in our numbers there. Obviously, as you go through the quarter, it becomes less impactful. At the same time, and we've said this before, conventions, political conventions, are not great for dining out. A certain number of consumers always want to see certain people speak at conventions.

Speaker Change: Where we are right now, as Tom mentioned, the 1-2% seems to be our reasonable guidance.

Speaker Change: The calendar itself is not a great calendar.

Speaker Change: In the sunset, you got a July 4th move to Friday, so it moves a little bit into the weekend. We had the hurricanes kind of in our numbers there. Obviously, as you go through the quarter, it becomes less impactful.

Speaker Change: At the same time, and we've said this before, political conventions are not great for dining out. A certain amount of consumers always want to see certain people speak at conventions, so those become challenging times during the middle of the week. And the Olympics, usually opening and closing ceremonies,

Gregory S. Levin: So it becomes challenging times during the middle of the week. And the Olympics, usually the opening and closing ceremonies, are more challenging days overall. For us, as again, I think people are really interested in seeing what the fashion is of the different countries walking into the opening ceremonies and what the fashion is at the closing.

Speaker Change: are more challenging days overall.

Speaker Change: For us, as again, I think people are really interested in seeing what the fashion is of the different countries walking into opening ceremonies and what the fashion is on the closing.

Gregory S. Levin: But I think you take those out and look at the underlying consumer, and it's pretty consistent with what we saw in Q1. The lower end consumer, year over year, like kind of at that 50,000 range, has kind of reduced their purchasing. We continue to see that aspect of it. But looking to Q2 versus Q1, and even to Q3, we're not seeing any real change in the consumer. We just have to be wary of the calendar.

Gregory S. Levin: Got it. Thank you. Good luck.

Speaker Change: But I think you take those out and look at the underlying consumer, it's pretty consistent with what we saw in Q1, the lower end consumer year over year, like kind of at that $50,000 range, has kind of reduced their purchasing, we continue to see that aspect of it, but

Speaker Change: Looking to Q2 versus Q1 as we go on even to Q3. We're not seeing any real change in the consumer. We just have to be wary of the calendar.

Gregory S. Levin: And our next question will come from Jeffrey Bernstein with Barclays. Please go ahead.

Speaker Change: Got it. Thank you. Good luck.

Speaker Change: Thank you.

Speaker Change: And our next question will come from Jeffrey Bernstein with Barclays. Please go ahead.

Gregory S. Levin: Great, thank you very much. I have two questions. The first one just following up from a comp perspective. It does look like, I guess you're saying in July, you were modestly positive, and you're assuming a one to two for the full quarter, so seemingly a little bit of an uptick. I'm just wondering if you could talk about the industry backdrop behind that, because it does seem like peers are being more aggressive with value offers, and it does seem like broader industry trends are slowing.

Jeffrey Andrew Bernstein: Great, thank you very much. Two questions. The first one just following up from a comp perspective, because it does look like I guess you're saying in July you were modestly positive and you're assuming a one to two for the full quarter, so seemingly a little bit of an uptick.

Speaker Change: I'm just wondering if you could talk about maybe the industry backdrop behind that because it does seem like peers are being more aggressive with value offers.

Gregory S. Levin: So just wondering how you think about the outlook for the rest of the quarter. And within that, just California in particular, we've now heard from a variety of restaurants that they've actually seen a pretty significant pullback in California, maybe consumers being more cautious after seeing all these price increases that maybe some of the fast food chains have been taking. So I'm wondering if you've seen any change in your California performance in recent months relative to the rest of the country, and then I had one follow-up.

Speaker Change: And it does seem like broader industry trends are slowing, so just wondering how you think about the outlook for the rest of the quarter.

Speaker Change: And within that, just California in particular, we've now heard from...

Speaker Change: A variety of restaurants that they've actually seen a pretty significant pullback in California. Maybe consumer being more cautious after seeing all these price increases that maybe some of the fast food chains have been taking. So I'm wondering if you've seen any change in your California performance in recent months relative to the rest of the country. And then I had one follow-up.

Gregory S. Levin: There's a lot there, so I'll take some of that. [inaudible] it seemed expensive, maybe you pull back from another, and I think that initially played into consumers, and they had to adjust to it. I also believe, and this is something that doesn't get talked about as much California, and I find this weird being a Californian by the way, California in 2023 had what they called historic reigns, even though we felt like they were delayed until September of 2023.

Speaker Change: Jeff, I'll take, there's a lot there, so I'll take some of that. I think Tom can probably provide a little bit more detail on maybe how we're thinking about

Jeff: Comp Sales through the Quarter as well. When you take a step back on California, I think California did take a step back in April .

Jeff: Slowly moving itself back. There's two things that I think played in April for the consumer I think you mentioned one of them and that is the California minimum wage

Thomas A. Houdek: Put Stickershock across all consumers.

Thomas A. Houdek: Whether you're in Casual Dining or QSR Fast Casual.

Thomas A. Houdek: The fact of the matter is there are different dining occasions, and if you went to one place and said, wow, that seemed expensive, maybe you pull back from another. And I think that initially played into consumers, and they had to adjust to it.

Thomas A. Houdek: I also believe, and this is something that doesn't get talked about as much,

Speaker Change: California, and I find this weird being a Californian, by the way, California in 2023 had what they call historic rains, even though we have the felt like the same rains in 2024. And as a result, everybody, tax returns.

Gregory S. Levin: So, this year, everybody in California had to file their taxes in April, where they didn't last year. That, on top of maybe the minimum increase, could have impacted California consumers early on. And a little bit of that goes into our thinking about how comp sales will play out this quarter. Because in California, most people have now already paid their taxes, and September might not be as much of a drag as it would have been a year ago.

Speaker Change: We're delayed until September of 2023.

Speaker Change: So, this year, everybody in California had to file their taxes in April , where they didn't last year. That, on top of maybe the minimum increase, could have impacted California consumers early on. And a little bit of that goes into our thinking about how comp sales will play out through this quarter.

Speaker Change: because in California most people have now already paid their their taxes and September might not be a drag as it would have been a year ago.

Gregory S. Levin: So that comes into our overall cadence in our business, and then we continue to monitor the landscape and the value. I think the issue with value that we face and that becomes, I think, more challenging in regards to driving comp sales is not necessarily value per se, but it's the amount of media and marketing dollars that people are spending to tell that message. So you're fighting for your voice to be heard out there with the consumers.

Speaker Change: So that comes into our overall cadence in our business.

Speaker Change: , and then we continue to monitor the landscape and the value. I think the issue with value that we face and becomes, I think, more challenging in regards to driving comp sales is not necessarily value per se, but it's the amount of

Speaker Change: Media and marketing dollars that people are spending to tell that message.

Gregory S. Levin: It's one of the reasons why, as we look at this quarter, we're going to be increasing that marketing spend just versus quarter over quarter from a year ago. We need to be heard from the consumer standpoint to make sure they continue to come to our restaurant so we can leverage that additional sales. It was actually part of our plan all along. It was to step up in Q3, but it's probably worth about 20 to 30 bits more than what we were thinking before as we enter this quarter.

Speaker Change: So you're fighting for your voice to be heard out there with the consumers. It's one of the reasons as we look at this quarter that we're going to be increasing that marketing spend versus quarter over quarter from a year ago.

Speaker Change: We need to be heard from the consumer standpoint to make sure they continue to come to our restaurants so we can leverage that additional sales.

Speaker Change: It was part of actually our plan all along.

Speaker Change: It was to step up in Q3, but it's probably worth about 20 to 30 bips more than what we were thinking before as we enter this quarter.

Gregory S. Levin: I'm Tom. I don't know if you have anything to add. Jeff, you

Unknown Attendee: Yeah, Jeff, you asked specifically about California, and we're not seeing any different trends. We've been stronger in California, so we're lapping that, but as we look across the dynamics in our markets, there's nothing noteworthy about California. If we look to black box, we're used to outpacing the industry on home turf, so there's nothing really to report. And one other thing, Greg mentioned a lot of the moving parts in California. Gas prices have come down a bit too, so when you think of just money, disposable income in the consumer's pockets, I think we're seeing that tailwind coming here too.

Speaker Change: I'm Tom, I don't know if you have anything to add.

Speaker Change: Jeff, you asked specifically around California and we're

Jeff: We're not seeing any different trends. We've been stronger in California, so we're lapping that. But as we look across the dynamics in our markets, there's nothing noteworthy in California. If we look to black box, we're used to outpacing the industry in the home turf, so nothing really to report. And one other thing, Greg mentioned a lot of the moving parts in California. Gas prices have come down a bit too. So when you think of just money, disposable income in the consumer's pockets, I think we're seeing that tailwind coming in here too.

Unknown Attendee: Understandable. And my follow-up is just on the unit opening side.

Speaker Change: Understood. And my follow-up is just on the unit opening side. I think you mentioned you did one this year. So far, you'll do another two, so that'll get you to three for this year. But I know, Greg, you mentioned the long-term algorithm.

Speaker Change: And the ideal scenario would be to get to mid-single-digit unit growth and with remodels presumably at...

Gregory S. Levin: I guess you're saying half the system will be at the new prototype by the end of the year, so I'm just wondering how you think about...

Gregory S. Levin: I think you mentioned you did one this year. So far, you'll do another two. So that should have three for this year. But I know, Greg, you mentioned the long-term algorithm.

Speaker Change: 2025. I know you haven't given formal guidance yet, but presumably you have some line of sight into openings for next year, whether next year is a year of a big uptick from the three to get you anywhere close to that kind of 5%, which presumably you'd need 10 or more. So any thoughts around the...

Gregory S. Levin: The ideal scenario would be to get to mid-single-digit unit growth, and with remodels presumably at, I guess you're saying half the system will be at the new prototype by the end of the year. So I'm just wondering how you think about 2025. I know you haven't given formal guidance yet, but presumably you have some line of sight into openings for next year, whether next year is a year of a big uptick from the three to get you anywhere close to that kind of 5%, which presumably you'd need 10 or more. So any thoughts around the unit growth outlook into 2025 or when you think you'd get to that kind of 5% level? Thank you.

Speaker Change: The Unit Growth Outlook, looking into 25 or when you think you'd get to that kind of 5% level. Thank you.

Gregory S. Levin: Yeah, great question. So we continue to build our pipeline. We said one thing consistently at BJ's, getting back to 5% where we want to go was never going to be a, you know, a step forward just because we want to make sure we do it with quality. So getting to, think about it being 10, 11, 12 restaurants. We, our goal would be to stair step that. We'd have to move to five and then to seven and eight and kind of move ourselves into that direction to make sure that we're bringing in the right quality in regards to people so that we can execute at that gold standard level that we talk about.

Speaker Change: Yeah, great question. So we continue to build our pipeline.

Speaker Change: We've said one thing consistently at BJ's.

Speaker Change: Getting back to five percent.

Speaker Change: where we want to go was never going to be a, you know, a one step forward, just because we want to make sure we do it with quality. So getting to think about it being 10, 11, 12 restaurants.

Speaker Change: Our goal would be to stair-step that. We'd have to move to five and then to seven to eight and kind of move ourselves into that direction to make sure that we're bringing in the right quality in regards to people so that we can execute at that gold standard level that we talk about.

Gregory S. Levin: So as we continue to build our pipeline, we'll evaluate where we want to go for next year. We want to make sure that the two new prototype restaurants that we're doing right now also hit their returns. So when we get into really September, I guess the end of this quarter, in October, we'll have more of our plan put together, and we'll kind of give a broader range from there. That plan then goes to the board for board approval.

Speaker Change: So, as we continue to build our pipeline, we'll evaluate where we want to go for next year. We want to make sure that the two new prototype restaurants that we're doing right now as well hit their returns.

Speaker Change: So when we get into really the September , I guess the end of this quarter, in October , we'll have more of our plan put together and we'll kind of give a broader range from there. That plan then goes to the board for the board approval.

Gregory S. Levin: So we're kind of working through that way, but we continue to build that pipeline. But I think for us to get to the 5% growth, it wouldn't have been a 2025 year, even to begin with, as we want to continue to step it up, especially coming off of our current run rate of three.

Speaker Change: So, we're kind of working it through that way, but we continue to build that pipeline. But I think for us to get to the 5% growth, it wouldn't have been a 20-25 year even to begin with, as we want to continue to step it up, especially coming off of our current run rate of three.

Gregory S. Levin: Understandable, but it seems like you're on the path to at least an absolute number greater than three next year if you're even heading anywhere towards that, you know, like you said, stair step.

Speaker Change: Understood, but it seems like you're on the path to at least absolute number to be greater than three next year, if you're even heading anywhere towards that, you know, like you said, stair step.

Gregory S. Levin: That's right now within our plan, but we continue to evaluate that. We continue to evaluate that against remodels because it comes down to the fact that we've got this ability to use our cash flow in numerous ways. One, remodels, obviously building restaurants and to enhance shareholder value. So ultimately, as remodels come down, as we mentioned over time, that additional capital can then be funneled into trying to stair step up restaurant growth with the right quality. Or if we, in the short term, had to do it more in share repurchases, that's what we would do as well.

Speaker Change: That's right now within our plans.

Speaker Change: But we continue to evaluate that. We continue to evaluate that it's remodels, because it comes down to the fact that we've got this ability to use our cash flow in numerous ways. One, remodels, obviously, building restaurants and to enhance shareholder value.

Speaker Change: So, ultimately, as remodels come down, as we have mentioned over time, that additional capital can be funneled into trying to stair-step up restaurant growth with the right quality, or if we, in the short term, had to do it more in share repurchases, that's what we would do as well.

Gregory S. Levin: And our next question will come from Todd Brooks with The Benchmark Company. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: You're welcome.

Speaker Change: And our next question will come from Todd Brooks with The Benchmark Company. Please go ahead.

Unknown Attendee: Hey, thanks for taking my questions. Just two quick questions, if I may. One, Tom, you talked about closing the gap to 2019 restaurant level margin levels by year end. Can you just elaborate on what you're meaning there? I know Q4 of 19, I think was a 16% margin quarter for you. Can you kind of put a framework around this so that we don't get too far over our skis for the magnitude of restaurant-level margin recovery you're looking for in that quarter?

Todd Morrison Brooks: Hey, thanks for taking my questions. Just two quick questions if I may. One, Tom, you talked about closing the gap to 2019 restaurant level margin.

Todd Morrison Brooks: levels by year end. Can you elaborate on what you're meaning there? I know Q4 of 19 I think was a 16% margin quarter for you.

Speaker Change: Can you kind of put a framework around this so that we don't get too far over our skis for the magnitude of restaurant level margin recovery you're looking for in that quarter?

Unknown Attendee: And, you know, we would give more specific guidance for Q3, but as we look forward into Q4, I mean, there's going to be, you know, we need to see what the backdrop is at that point. But, you know, we want to, if we look at last year and where we want to grow it to, we definitely want to see year-over-year improvement continue. So, you know, is it all the way back up to 16 percent?

Speaker Change: Sure.

Speaker Change: And, you know, we would give more specific guidance for Q3, but as we look forward into Q4, I mean, there's going to be, you know, we need to see what the backdrop is at that point, but, you know, we want to, if we look at last year,

Speaker Change: and where we want to grow it to, we definitely want to see year-over-year improvement continue.

Speaker Change: Is it all the way back up to 16%? We have to see what the backdrop is. We want to keep continuing to close that gap and get as close to that number as we can. So we're not giving a more specific number to guide to at this point, but

Unknown Attendee: We have to see what the backdrop is, but we want to keep continuing to close that gap and get as close to that number as we can. So we're not giving a more specific number to guide to at this point. But, you know, given the backdrop, given what we see in both our margin improvement initiatives and what we're able to have a line of sight on for margin improvement, as well as the initiatives we have to grow top line, we do still see that path to getting, you know, definitely above last year and then something closer to where we were in 2019.

Speaker Change: Given the backdrop, given what we see in both our margin improvement initiatives and what we're able to have line of sight on for margin improvement, as well as the initiatives we have to grow top line, we do

Speaker Change: still see that path to getting, you know, definitely above last year and then something closer to to where we were in 19.

Gregory S. Levin: Yeah, I think, Todd, the big wildcard that we continue to look at is really on the commodity side.

Speaker Change: Yeah, I think, Todd, the big wildcard that we continue to look at is really on the commodity side.

Speaker Change: Even as we go into this third quarter, commodities are inflating more than we would have expected originally.

Speaker Change: That was kind of in our guidance here, as well as the additional marketing that we talked about. Depending on how those commodities play in, I think it's a big wild card there in regards to the difference on the margins in the fourth quarter. But as Tom said, we continue to make improvements on our margins and keep moving forward.

Gregory S. Levin: Great My second question, Greg, you were talking about the throughput initiative and kind of the second, third inning and so on. Can we talk about where you stand now on table turns at peak periods relative to before you started the initiative, and then when you look to the end of the road after all the work is done with this initiative, just can you frame up a magnitude for us of how much you would look for table turns to be improving from it?

Speaker Change: Great. My second question, Greg, you were talking about the throughput initiative and

Speaker Change: and a second third inning and in in the process can we talk to maybe where

Speaker Change: You stand now on table turns at peak periods relative to before you started the initiative. And then when you look to the end of the road after all the work is done with this initiative, just can you frame up a magnitude for us of how much you would look for table turns to be improving from it? Thanks.

Gregory S. Levin: Yeah, that's a great question. I actually don't have our table turn information in front of me, especially during the peak period. What I would tell you is our goal is really not so much in the peak period, but it's to expand the shoulders so that you know that you go to BJ's, and it's not an hour and a half dinner experience when you get there at eight o'clock thinking I'm coming home at 9:30, but that we can reduce that down into kind of somewhere in the 45 minutes, give or take a little bit. We know some of One is to pay at the table.

Speaker Change: Yeah, that's a great question. I actually don't have our table turn information in front of us in front of me, especially at the peak period.

Speaker Change: What I would tell you is our goal is really...

Speaker Change: Not so much on the peak period, but it's to expand the shoulders so that you know that you go to BJ's and it's not an hour and five dinner experience when you get there at eight o'clock thinking I'm coming home at 930. But that we can reduce that down into kind of

Gregory S. Levin: We know in a couple of restaurants we're putting down a device, and we know people that use the QR code save anywhere from seven to ten minutes on the experience. We know when our servers get to our guests sooner, summers in that four-minute time. We're also saving summers in the three to four minutes. And then we're also, as I said, looking at our kitchen display system and where things are lined up for firing within the kitchen so that all the food comes out there at the same time.

Speaker Change: Somewhere in the 45 minutes give or take a little bit. We know some of the areas that we have an opportunity on, believe it or not, and I think people understand this, one is pay at the table.

Speaker Change: We know in a couple of restaurants they're putting down a device, and we know people that use the QR code, they save anywhere from 7 to 10 minutes on the experience.

Speaker Change: We know when our servers get to our guests sooner, summers in that four minute time, we're also saving summers in the three to four minutes.

Speaker Change: And then we're also, as I said, looking at our kitchen display system and where things are lined up for firing within the kitchen so that all the food comes out there at the same time. There's a couple areas there that are some big unlocks that are actually going to take one to two to three minutes.

Gregory S. Levin: There's a couple areas there that are some big unlocks that are actually gonna take one to two to three minutes off of that. So we're tending to look at that overall cook time and try and move that down versus purely on the table turns. I'm looking at table turns directly at peak meal periods. We know some of the changes that we made. We made them specifically for Mother's Day and Father's Day because we knew how the guests would come in from the prior there.

Speaker Change: [inaudible]

Speaker Change: at peak meal periods. We know some of the changes that we made. We made specifically for Mother's Day and Father's Day because we knew how the guests would come in.

Gregory S. Levin: And as I said, not only were we able to grow average check on those days, which is great, but we grew traffic, significant traffic on those days by making a couple adjustments. And that's what we want to continue to kind of follow through here over the next couple months before we roll these out.

Speaker Change: from the prior there. And as I said, not only were able to grow average check on those days, which is great, we grew traffic, significant traffic on those days by making a couple adjustments. And that's what we want to continue to kind of follow through here over the next couple months before we roll these out.

Gregory S. Levin: Okay, that's great. Thanks. I'll jump back in the queue.

Unknown Attendee: And our next question will come from Nick Setyan with Redbush Securities. Please go ahead.

Speaker Change: Okay, that's great. Thanks. I'll jump back in queue.

Speaker Change: And our next question will come from Nick Setyan with Redbush Securities. Please go ahead.

Unknown Attendee: Thanks guys. So I just kind of want to walk through the Q3 and Q4 menu pricing expectations.

Nerses Setyan: Thanks guys. So, just kind of want to walk through Q3 and Q4 menu pricing expectations.

Unknown Attendee: So, the... We'll have another round of pricing in late September of about 90 bps, and that's rolling over, you know, something in the 2% area from a year ago. So as we walk through, Q3 will be, you know, in the mid or call it the low 3% area, and then in Q4, we'll be carrying a kind of mid 2%. Page PAGE of NUMPAGES www.verbalink

Nerses Setyan: Sure.

Speaker Change: So, the...

Speaker Change: We'll have another round of pricing in late September of about 90 bips, and that's rolling over, you know, something in the 2% area from a year ago.

Speaker Change: So as we walk through Q3, we'll be in the mid or call it low 3% area, and then in Q4, we'll be carrying a kind of mid 2%.

Unknown Attendee: Hey, Nick, the other thing, just the bigger picture is, and we've seen this throughout this year, is the way our shift in our business is happening as well; there's a little bit of a negative mix shift or drag on our total pricing. And the reason for that is we're seeing improved traffic and sales trends at late night, maybe a little bit in the mid-afternoon, and that ends up with a lower average check than what we're seeing on the dinner side of things.

Speaker Change: The timing works in terms of rolling on and rolling off pricing.

Speaker Change: Hey Nick, the other thing just bigger picture is and we've seen this throughout this year

Nerses Setyan: is the way our shift in our business is happening as well.

Nerses Setyan: There's a little bit of a negative mix shift or drag on our total pricing and the reason for that is we're seeing Improved traffic and sales trends at late night. Maybe a little bit in the mid afternoon and that ends up with a lower average check

Unknown Attendee: And so we start to look at that; we've seen a little bit of a kind of, you know, 50 bits or something, even a little bit more on times on average check, and we would expect that to continue this year.

Nerses Setyan: Gregory Levin, Thomas Houdek, Gregory Levin

Unknown Attendee: Got it. So there's 40 to 60 bits uptake in terms of year-over-year, you know, marketing spend. Does that continue into Q4 as well? Are we expecting an elevated level of marketing in Q4 versus 2030 Q4?

Speaker Change: Got it. So there's 40 to 60 bits uptick in terms of year-over-year, you know, marketing spend. Does that continue into Q4 as well? Are we expecting elevated level of marketing in Q4 versus 2030 Q4?

Unknown Attendee: It balances out more in Q4. It'll still be a little bit up, but nothing like Q3 year over year.

Speaker Change: It balances out more in Q4. It'll still be a little bit up, but nothing like Q3 year over year.

Unknown Attendee: The COGS inflation commentary, I mean, is that just mainly cheese? What else is going on?

Speaker Change: The COGS inflation commentary, I mean, is that just mainly cheese? What else is going on?

Unknown Attendee: Right now, the two big ones are bone-in chicken wings and avocados. So those are the two that, as you know, a lot of our food is fixed for the year or for the quarter. There's certain, you know, produce, and some of our raw meats that float to market. So those are the two that we've seen step up to a degree. We will also be, as we step into Q3, we've got a new meat contract, so if we look year over year, we're still seeing some really nice savings in red meat, but we have contracts that we are able to fix that for some periods of time, but we'll see that resetting in a month or so, so we'll see a little tick up there as well.

Speaker Change: Right now the two big ones are bone-in chicken wings and avocados.

Speaker Change: So those are the two that, because as you know, a lot of our.

Speaker Change: A lot of our food is fixed for the year or for the quarter. There's certain, you know, produce and some of our raw meats float to market. So those are two that we've seen step up to a degree.

Speaker Change: We will also be, as we step into Q3, we've got a new meat contract, so if we look year over year, we're still seeing some really nice savings in red meat, but we have contracts that we are able to fix that for some periods of time, but we'll see that resetting in a month or so, so we'll see a little tick up there as well.

Gregory S. Levin: And then I guess in terms of just just labor, it sounds like maybe a little bit less leverage than we were expecting going into this quarter. Is that simply just the spending around, you know, the labor training investment? Yeah, I mean, Tom mentioned it.

Speaker Change: Okay and then I guess like in terms of just just labor it sounds like maybe a little bit less leverage than we were expecting going into this quarter is that simply just the the spending around you know the labor training investments?

Gregory S. Levin: Yeah, I mean, Tom mentioned 20 to 30 bips of labor improvement that was lost in kind of the inefficiencies of the new system. I would tend to tell you that the numbers for inefficiency are looking significantly better here in P7, which is July for us from that standpoint. But we want to make sure, again, we're taking care of the guests and driving top-line sales. This is the system that we're putting in place; we've never put it in place for labor savings.

Speaker Change: Yeah, I mean, Tom mentioned it, 20 to 30 bips.

Speaker Change: of Labor Improvement that was lost in the inefficiencies of the new system. I would tend to tell you that the numbers for inefficiency are looking significantly better here in P7, which is July for us.

Speaker Change: from that standpoint but we want to make sure again we're taking care of the guests driving top-line sales this is the the system that we're putting in place was never put in place for labor savings

Gregory S. Levin: So you've never heard us come on the call and say we're making X, Y, and Z, and it's going to save X dollars. This is about driving throughput, driving top-line sales, and continuing to improve on gracious hospitality and our gold standard level of operational excellence. I think if they get their sea legs under them, we'll continue to get that. As we go into Q3 and Q4, we do now start to lap the smaller menu because, if you remember, the smaller menu rolled out in July of a year ago.

Speaker Change: So you never heard us come on the call and say we're making X, Y, and Z and it's going to save X dollars. This is about driving throughput, driving top line sales, getting, continuing to improve on gracious hospitality and our gold standard level of operational excellence.

Speaker Change: I think if they get their sea legs under them, we'll continue to get that. As we go into Q3 and Q4, we do now start to lap the smaller menu, because if you remember, the smaller menu rolled out in July of a year ago.

Gregory S. Levin: So some of the benefits that we were getting there with less prep, etc., we lost year over year. But, generally speaking, we continue to see what I would call improvements in our productivity measures around labor. And we want to make sure, again, that we're doing it at the right level that's driving improved guest service and hospitality.

Speaker Change: So some of the benefits that we were getting there with less prep, et cetera, we lapped year over year, but...

Speaker Change: Generally speaking, we continue to see what I would call improvements in our productivity measures around labor, and we want to make sure, again, we're doing it at the right level that's driving improved guest service and hospitality.

Unknown Attendee: And our next question will come from Sharon Zackfia with William Blair. Please go ahead. Hi, good afternoon.

Speaker Change: Thank you very much.

Speaker Change: You're welcome.

Speaker Change: And our next question will come from Sharon Zackfia with William Blair. Please go ahead.

Unknown Attendee: Hi, good afternoon. Can you talk about the labor environment? I know in California, you were worried that you might see an uptick in your labor costs, even though you're not directly, you know, impacted by the FAST Act. And I'm also curious, just kind of across the country, are you seeing better quality labor? You know, I know there's increased labor availability, but I'm wondering about the quality of the labor that you're getting.

Sharon Zackfia: Hi, good afternoon. Can you talk about the labor environment? I know in California you were worried.

Sharon Zackfia: that you might see an uptick in your labor costs, even though you're not directly impacted by the FAST Act.

Speaker Change: And I'm also curious, just kind of in the broader country, are you seeing better quality labor? You know, I know there's increased labor availability, but I'm wondering about the quality of the labor that you're getting.

Unknown Attendee: Sure. I'll take that one, Sharon.

Speaker Change: Sure.

Unknown Attendee: And yeah, we mentioned this last quarter. We didn't mention it this quarter, so I can bring it up now. We continue to measure our California labor to see our retention rates to make sure with the California FAST Act, where the minimum wage stepped up, and other types of restaurant companies to see if we've seen any change in either our turnover rates or wages, anything like that. And happy to report, still no.

Speaker Change: I'll take that one Sharon and yeah we mentioned this last quarter we didn't mention it this quarter so I can bring it up now we continue to measure our California labor to see our retention rates to make sure with the California FAST Act where no minimum wage stepped up in

Speaker Change: and other types of restaurant companies to see if we've seen any change in either our turnover rates or wages, anything like that. And happy to report still no, we're still, as we track it, looking year over year and back to even 19 levels, both California and the rest of the system are still in a better place than we were in 2019, as well as last year.

Unknown Attendee: As we track it, looking year over year and back to even 19 levels, both California and the rest of the system are still in a better place than we were in 2019, as well as last year. And in terms of wage growth, we did talk about food cost inflation. We're actually in a...

Speaker Change: And in terms of wage growth, you know, we did talk about the food cost inflation.

Unknown Attendee: I didn't mention on the hourly side, but we're still sitting in kind of that 3% to 4% range, and that's consistent with Q1. So we saw very little wage inflation from Q1 into Q2. So all the signs pointing to this have worked for us as we've given some increased... wages to certain elements of a restaurant, but it's balanced out. And we have really great retention rates, and to your point on quality, the longer team members are with us, the better execution we see.

Speaker Change: [inaudible]

Speaker Change: given, you know, some increased

Speaker Change: Yeah, um...

Speaker Change: wages to some certain elements of a restaurant, but it's it's balanced out and we have a, you know, really great retention rates. And to your point on quality, the longer team members are with us, the better execution we see.

Unknown Attendee: And that's the case. So we have fewer reasons to be hiring all the time. But yeah, I think the pool out there is stronger, but we're able to retain our team members more. So it is, I would say, as good of a hiring environment as we've seen in the recent past.

Speaker Change: And that's, that's the case. So we have less reasons to be hiring all the time. But yeah, I think the pool out there is stronger, but we're able to retain our team members more. So it is, I would say, as good of a labor hiring environment as we've seen in the recent past.

Gregory S. Levin: And then Greg, just a question. I know you haven't committed to when you're going to re-accelerate growth, but how far in advance of that acceleration do you have to start building the management pipeline?

Gregory S. Levin: And then Greg, just a question. I know you haven't committed to when you're going to re-accelerate growth, but how far in advance of acceleration do you have to start building the management pipeline?

Gregory S. Levin: Yeah, somewhere in the 12 month timeframe. You really have to look at it.

Speaker Change: Yeah.

Gregory S. Levin: It's the challenge in the pipeline is a little bit different. And Sharon, your perfect example of being out there in Illinois or in the Chicago market, that's going to be more challenging to build that manager pipeline. So we want to be more ahead of that in a 12 month timeframe. So the team really understands BJ's trying to find somebody to move to a new market or satellite market is always more difficult.

Gregory S. Levin: somewhere's in the 12-month time frame

Gregory S. Levin: You really have to look at it.

Sharon: The challenge on the pipeline is a little bit different, and Sharon, your perfect example being out there in Illinois or in the Chicago market.

Sharon: That's going to be more challenging to build that manager pipeline, so we want to be more ahead of that in a 12-month time frame, so the team really understands BJ's, trying to find somebody to move to a new market or satellite market is always more difficult, and we'd love to build that in.

Gregory S. Levin: We'd love to build that in building restaurants in Texas, California, Arizona, some of those markets, but the pipeline timeframes are a little bit shorter. So on average, and I know this isn't really an average, you're looking at somewhere in the minimum of six months, but more likely you want to be about 12 months out.

Sharon: Building restaurants in Texas, California, Arizona, some of those markets, the pipeline timeframe is a little bit shorter.

Sharon: So on average, and I know this isn't really an average, you're looking at somewhere in the minimum of six months, but more likely you want to be about 12 months out.

Unknown Attendee: Okay, and then last question for me, there was kind of a big jump in other income in the quarter. Was there something unusual about it? You know, what was this $2 million sequential increase? Yeah, there was an out of period.

Speaker Change: Okay, and then last question for me. There was kind of a big jump in other income in the quarter. Was there something unusual in there? You know, what was kind of this $2 million sequential increase?

Unknown Attendee: Yeah, there was an out-of-period release that we had of some accrual related to tax credits, so yeah, we'll outline it with more detail in the queue, but that's just an out-of-period benefit there.

Speaker Change: Yeah, there was an out of period release that we had of some accrual related to tax credits. So, yeah, we'll outline it with more detail in the queue. But that's, yeah, just out of period benefit there.

Unknown Attendee: And our next question will come from John Tower with Citigroup. Please go ahead.

Speaker Change: Okay, thank you.

Speaker Change: You're welcome.

Unknown Attendee: Hey, this is Karen Wolfhouse on for John this evening. Just two for me. One, it looks like mix is still running a little bit negative. Is that still really being attributed to just the shift in day parts of late night coming back? Or is there something new coming into that in terms of check management? And then just the Suzuki promo, how should we think about the accounting behind that? The kind of giveaway of free Suzuki is going to be reflected in that spike in advertising spending? Or would it be showing up more on a sales call as part of a sales cost of sales dynamic?

Speaker Change: And our next question will come from John Tower with Citigroup. Please go ahead.

Unknown Attendee: Thanks.

Speaker Change: Hey, this is Karen Wolfhouse on for John this evening.

Karen Wilkhouse: Just two for me, one, it looks like NICS is still running a little bit negative. Is that still really being attributed to just shift in day parts with late night coming back? Or is there something new coming into that in terms of check management?

Karen Wilkhouse: And then just the Pazuki promo, how should we think about the accounting behind that? Is the kind of giveaway of free Pazuki is going to be reflected in that spike in advertising spending? Or would it be showing up more on like a sales cost as part of like a sales cost of sales dynamic? Thanks.

Unknown Attendee: Sure. So on the check side, so we actually saw the dynamic we saw in Q1, you know, pricing to check, we saw that that gap shrink in Q2. We are still seeing better comp dynamics in our late night day part, and there's about a $10 average check difference, you know, lower in late night, so great that we're growing the traffic, but there is, you know, some check headwind to that as it averages in.

Karen Wilkhouse: Sure.

Speaker Change: So on the on the check side, so we actually, you know, the dynamic we saw in Q1, you know, pricing to check, we saw that that gap shrink into Q2, we are still seeing

Speaker Change: Bettered.

Gregory S. Levin: absolute.com dynamics in our late night day part. And there's about a $10 average check difference, you know, lower than late nights. So great that we're growing the traffic, but there is, you know, some check headwind to that as it averages in.

Unknown Attendee: The other piece is alcohol, where, you know, we check it year over year, as well as back in 19, and we continue to see some headwinds in terms of what we sold last year, but more kind of normalizing back to 2019 levels than anything else.

Speaker Change: The other piece is alcohol. We check it year over year, as well as back in 2019, and we continue to see some headwind in terms of what we sold last year, but more kind of normalizing back to 2019 levels.

Unknown Attendee: So those are the two main pieces that are the delta between our check growth and the pricing. And to your second question, the Pazooki promo, so, you know, there is a modest amount of sales income we take when the membership is paid for for the month, but then going forward, it is just the cost of sales. So the idea is, and we're seeing this, that most people, when these are used, they'll come in, and they'll spend on whatever they want to eat, plus they'll get their Pazooki for free.

Speaker Change: So those are the two main pieces that are the delta between our check growth and the pricing.

Speaker Change: And to your second question, the Pazooki promo, so, you know, there is a modest amount of sales income we take when the membership is paid for for the month, but then going forward, it is just cost of sales. So the idea is, and we're seeing this, that most, when these are used, they'll come in and they'll spend on whatever they want to eat plus they'll get their Pazooki for free. So we'll, you know, have the sales for the rest of their meal, then they'll have the, you know, we'll have the cost.

Unknown Attendee: So we'll, you know, have the sales for the rest of their meal, then they'll have the cost, you know, we'll have the cost associated with the Pazooki that gets added to their check. So, you know, we'll see the incremental sales off of the whole check that they spend, but then the Pazooki just will flow through as a cost of sales.

Speaker Change: Associated with the Pazookie that gets added to their check, so we'll see the incremental sales off of the whole check that they spend, but then the Pazookie just will flow through as cost of sales.

Gregory S. Levin: So, Karen, to that point, it's a great question. That type of promotion drives traffic into our restaurants, and as Tom mentioned, they end up with a free pizzucchi with their meal, so it's a lower average check. So when you start to think about that mix, that mix would probably be, you know, would continue to be negative in Q3, like it was in Q1 or Q2. But we get that increasing frequency and increasing gas to drive overall throughput in our restaurant.

Speaker Change: So, Karen, to that point, it's a great question. That is, that type of promo drives traffic into our restaurants, and as Tom mentioned, they end up with a free pizzucchi on their meal, so it's a lower average check.

Speaker Change: So we start to think about that mix. That mix would probably be, you know, would continue to be negative in Q3 like it was in Q1 or Q2.

Speaker Change: But we get that increasing frequency and increasing gas to drive overall throughput in our restaurant.

Unknown Attendee: Okay, cool. That's everything on everything for me.

Unknown Attendee: And our next question will come from Andrew Wolf with Loop Capital Markets. Please go ahead.

Speaker Change: Okay cool that's everything on everything for me

Speaker Change: Great, thank you. Thanks. And our next question will come from Andrew Wolf with Loop Capital Markets. Please go ahead.

Unknown Attendee: Thanks. I'm actually with Cell King.

Andrew Wolf: Thanks, I'm actually with Sale King. I wanted to ask about the

Unknown Attendee: I wanted to ask about the increased marketing spend, the sequential increase, and just tie that into what you called out and discussed at the investor day. Shea Fitzgerald, the plans you talked about at the investor day, both in the amount, about the same, or do. And secondly, the nature of it, if I recall back then, it was going to be a lot of digital marketing and create trial. And I'm just wanting to check to see basically what I'm getting at is, you know, is it higher or is the nature of the spending a little different, given the promotional environment, the amount of spending that maybe competitors are putting out there in marketing as well. So I'm just trying to get a handle on the nature of the spending and the amount.

Andrew Wolf: increase marketing spend the sequential increase and just tie that into what you called out and discussed at the investor day just to see if it

Andrew Wolf: with the plans you talked about at the investor day, both in the amount about the same or

Andrew Wolf: And secondly, the nature of it, if I recall back then, it was...

Speaker Change: going to be a lot of digital marketing and create trial and I've just wanted to check to see basically what I'm getting at is

Speaker Change: Is it higher or is the nature of the spending a little different given the promotional environment and the amount of spending that maybe competitors are putting out there in marketing as well? So I'm just trying to get to the nature of the spending and the amount.

Gregory S. Levin: Yeah, so Andrew, great question. And yeah, I'd probably say it could be a tad of all the above.

Speaker Change: Yeah, so Andrew, great question.

Speaker Change: And yeah, I'd probably say it could be a tad of all the above. It's the same channels in the sense of where we were from TV, connected TV, and digital.

Speaker Change: If you think about also the, and yesterday, we talked about this word of making pizzicchi a household name, our dessert there.

Speaker Change: So we've got additional funding going around our Pazucki path that goes into Q3 because we're trying to build on that on the Pazucki brand and ubiquity that we have in that so that provides top-of-mind awareness.

Gregory S. Levin: It's the same channels in the sense of where we were from TV, connected TV, and digital. If you think about also investor day, we talked about this word of making Pazookie a household name, our dessert there. So we've got additional funding going around our Pazookie path that goes into Q3, because we're trying to build on that, on the Pazookie brand and ubiquity that we have in that. So that provides top of mind awareness for BJ's.

Gregory S. Levin: And then as we looked at it as well, we also looked at a couple other markets that we decided to kind of add in there. So there's a little bit of an expansion of one additional market and a couple additional digital areas or different digital markets that we have from year over year. So that plays into it.

Speaker Change: for BJ's. And then as we looked at it as well, we also got a couple other markets that we decided to kind of add in there. So there's a little bit of an expansion of one additional market and a couple additional digital areas or different digital markets.

Speaker Change: that we have from year over year. So that plays into it. But a lot of this was actually kind of in our plans to begin with.

Gregory S. Levin: But a lot of this was actually kind of in our plans to begin with. And then as we think about it, because we're still kind of crafting some of the communication there, the question will be where that communication is going to be. Some will be on the Pazookie path and the Pazookie ubiquity that we talked about. Others will be more price point specific on some of the great value that we already have in our business, whether it's some of the everyday value or daily brewhouse specials.

Speaker Change: and then as we think about it because we're still kind of crafting some of the communication there, the question will be where that communication is going to be. Some will be on the on the Paziki pass and the Paziki ubiquity that we talked about. Others will be more price point specific on some of the great value that we already have in our business.

Gregory S. Levin: I think in today's environment, you're seeing that price point is very, very important. So instead of it being more of a branding-type commercial, which we would use the Pazookie per se, it would be a little bit more price point specific around daily brewhouse specials or some of our everyday value menu items that we have.

Speaker Change: You whether it's some of the everyday value or daily brewhouse specials.

Speaker Change: I think in today's environment, you're seeing that price point be very, very important. So instead of it being more of a branding type commercial, which we would use at Pazooki per se, it would be a little bit more price point specific around Davey Brewhouse specials or some of our everyday value menu items that we have.

Gregory S. Levin: Got it. And is the latter maybe a bit of a change or added? [inaudible] Yeah, yeah, probably. I mean,

Speaker Change: Got it. And is the latter maybe a bit of a change or adaptation to the...

Gregory S. Levin: Yeah, probably. I mean, the reason I say that somewhat reluctantly is we don't necessarily plan what the exact message is going to be a year out because we have different things that we kind of look at. But I think based on the kind of consumer environment, as I mentioned earlier, seeing, obviously, a lot of media being spent to drive awareness, most of it is around a value play. We're not going to be doing a crazy deep BOGO value play or something like that out there. But it's probably around a little bit more price certainty on some of the menu items that we have in our restaurants.

Speaker Change: What's going on, you know, more price points than you might have planned earlier.

Speaker Change: Yeah, probably. I mean, the reason I say that somewhat hesitantly is we don't necessarily plan what the exact message is going to be a year out because we have different things that we kind of look at.

Speaker Change: But I think based on the kind of consumer environment, as I mentioned earlier, seeing, obviously, a lot of media being spent to drive awareness.

Speaker Change: Most of it is around a value play, we're not going to be doing a crazy deep BOGO value play or something like that out there, but it's probably around a little bit more price certainty on some of the menu items that we have in our restaurants.

Speaker Change: Got it. Thank you.

Operator: And this will conclude our question and answer session. Also, also ending today's call, we'd like to thank you for attending today's presentation. And at this time, you may now disconnect.

Speaker Change #100: You're welcome.

Speaker Change #101: And this will conclude our question and answer session. Also concluding our today's call, we'd like to thank you for attending today's presentation and at this time you may now disconnect.

Speaker Change #101: Thank you, everyone. Thank you.

Speaker Change #101: [inaudible]